Saturday, May 8, 2010

Right Back At Ya, “Warmists”

It’s snowing in Alberta in May. Which, of course, proves global warming is happening. Photo: Larry Wong/Canwest News Service

According to the Ottawa Citizen, more than 250 “prominent scientists”, including 11 Nobel laureates, are calling on people to cease personal political attacks and focus on the facts. For a moment, I welcomed the idea of ending the “politicizing” of climate change, and the personal attacks that come with not accepting the gospel of anthropogenic climate change.

And then I realized they didn’t mean an end to all political attacks. Just the ones directed at them.

So the 250 prominent scientists have turned around and called those who disagree with them “deniers”, a loaded term that is associative with those who disbelieve in the historical evidence of a holocaust against the Jews. Delightful company to be in, I’m sure.

“Recent assaults on climate science and, more disturbingly, on climate scientists by climate change deniers are typically by special interests or dogma, not by an honest effort to provide an alternative theory that credibly satisfies the evidence,” the scientists say in an open letter published the journal Science.

Special interests? What special interests? Who and what are these special interests they’re referring to? Speaking of dogma, using the term “special interests” is like invoking the catch-all bogeyman of rhetorical commentary.

Society, the letter says, has two choices. And only two, apparently. The first is to hide our heads in the sand and ignore that imminent devastation awaits our inaction. The second is to do precisely what they advise us not to do, which is to use guilt trips, distractions, and outright lies in order to encourage political influence to take action.

Two can play at the metaphor game, and if given the choice between the ostrich and chicken little, I’ll take the ostrich every time.

As for the 11 Nobel laureates, well, they’re members of the entire IPCC panel that shared in the 2007 prize with pop culture hero for a day, Al Gore, who has since become a little busy moving into a new mansion. The $8,875,000 gated villa on the beach with 1 1/2 acres, six fireplaces, five bedrooms, nine bathrooms, and 6,500 square feet of living space, has come from his considerable income in the climate change Armageddon speaking tour racket, and investment in “green” industries that he has used his political clout to get government to subsidize.

You can’t just break the public trust with a scandal like climategate, and then ask for an end to the “politicization” of science by telling the skeptics to shut up and stop being “deniers”. Where I come from, we call that elitism.

No, when you’ve earned the right to be trusted again, we’ll let you know. You could begin by accepting that there is no so-called consensus on climate change being attributable to mankind, that those who are skeptical of the so-called consensus are not deniers, and that the scientific community needs to work harder to provide evidence that the changes in climate are irrefutably linked to airborne hydrocarbon emissions caused by human beings.

Until that happens, right back at ya, “warmists”.

Webster Tarpley - World economies in depression

Click this link ....

Romania to cut wages and pensions

Romania is to cut wages and pensions in the public sector later this year to comply with an IMF-led rescue deal.

Romanian President Traian Basescu said the "programme to cut public expenses was inevitable".

Public sector wages will be cut by 25% and all salaries, including the minimum one, will be affected. Jobless benefits and pensions will be slashed by 15%.

Romania is the recipient of a 20bn-euro aid package from the IMF, the EU and the World Bank.

The country, as well as two other bailed-out states, Latvia and Hungary, have missed targets for cutting their deficits by significant margins.

'Fat man'

"This [cuts] plan was inevitable," Mr Basescu told a news conference.

"The state sector is like a fat man of 200 kg sitting on the back of a 50 kg little man who is the real economy."

He also said that as part of negotiations with the IMF the country had narrowly avoided an increase in VAT from 19% to 24% and a rise in the tax on profits and income to 20% from 16%.

Meanwhile, the IMF said on Thursday it would extend a mission in Romania for two more days.

The IMF has cut its forecast for Romania's economic growth to 0.8% for this year, after the economy contracted 7.1% in 2009.

Real unemployment at 17.1%

The government’s official underemployment number rose to 17.1% in May, reports WSJ:

The comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs. Though the rate is still 0.3 percentage point below its high of 17.4% in October, its continuing divergence from the official number (the “U-3″ unemployment measure) indicates the job market has a long way to go before growth in the economy translates into relief for workers.

John Williams: A Hyper-Inflationary Great Depression Is Coming

The Gold Report: John, last December you stated, "The U.S. economic and systemic crisis of the past of the past two years are just precursors to a great collapse," or what you call a "hyper-inflationary great depression." Is this prediction unique to the U.S., or do you feel that other economies face the same fate?

John Williams: The hyper-inflationary portion largely will be unique to the U.S. If the U.S. falls into a great depression, there's no way the rest of the world cannot have some negative economic impact.

TGR: How will the United States' decreased economic power impact global economies? Will the rest of the world survive?

JW: People will find to their happy surprise that they'll be able to survive. Most businesses are pretty creative. The thing is, the U.S. economic activity accounts for roughly half that of the globe. There's no way that the U.S. economy can turn down severely without there being an equivalent, at least a parallel downturn outside the U.S. with its major trading partners.

When I talk about a great depression in the United States, it is coincident with a hyper-inflation. We're already in the deepest and longest economic contraction seen since the Great Depression. If you look at the timing as set by the National Bureau of Economic Research, which is the arbiter of U.S. recessions, as to whether or not we have one, they've refused to call an end to this one, so far. But assuming you called an end to it back in the middle of 2009, it would still be the longest recession seen since the first down-leg of the Great Depression.

In terms of depth, year-to-year decline in the gross domestic product, or GDP, as reported in the third quarter of 2009, was the steepest annual decline ever reported in that series, which goes back to the late '40s on a quarterly basis. Other than for the shutdown of war production at the end of World War II, which usually is not counted as a normal business cycle, the full annual decline in 2009 GDP was the deepest since the Great Depression. There's strong evidence that we're going to see an intensified downturn ahead, but it won't become a great depression until a hyper-inflation kicks in. That is because hyper-inflation will be very disruptive to the normal flow of commerce and will take you to really low levels of activity that we haven't seen probably in the history of the Republic.

Let me define what I mean by depression and great depression, because there's no formal definition out there that matches the common expectation. Before World War II, economic downturns commonly were referred to as depressions. If you drew a graph of the level of activity in a depression over time, it would show a dip in the economy, and you'd go down and then up. The down part was referred to as recession and the up part as recovery. The Great Depression was one that was so severe that in the post-World War II era, those looking at economic cycles tried to come up with a euphemism for "depression." They didn't want to create the image of or remind people of the 1930s. Basically, they called economic downturns recessions, and most people think of a depression now as a severe recession.

I've talked with people in the Bureau of Economic Analysis and the National Bureau of Economic Research in terms of developing a formal depression definition. The traditional definition of recession-that of two consecutive quarters of inflation-adjusted contraction in GDP-still is a solid one, despite recent refinements. Although there's no official consensus on this, generally, a depression would be considered a recession where peak-to-trough contraction in the economy was more than 10%; a great depression would be a recession where the peak-to-trough contraction was more than 25%.

We're borderline depression in terms of where we're going to be here before I think the hyper-inflation kicks in. You've certainly seen depression-like numbers in things such as retail sales, industrial production and new orders for durable goods, where you're down more than 10% from peak-to-trough. In terms of housing, you're down more than 75%, and that certainly would be in the great depression category. With hyper-inflation, you have disruption to the normal flow of commerce and that will slow things down very remarkably from where we are now.

TGR: After a period of recession, isn't inflation considered a good sign?

JW: There are a couple of things that drive inflation. The one that you're describing is the relatively happy event where strong economic demand is exceeding production, and that's pushing prices higher, as well as interest rates. That's a relatively healthy circumstance. You can also have inflation, which is driven by factors other than strong economic activity. That's what we've been seeing in the last couple of years. It's been largely dominated by swings in oil prices. That hasn't been due really to oil demand, as much as it has been due to the value of the U.S. dollar. Oil is denominated in U.S. dollars. Big swings in the U.S. dollar get reflected in oil pricing. If the dollar weakens, oil rises. That's what you saw if you go back to the 1973-1975 recession, for example. That was an inflationary recession.

Indeed, the counterpart to what you were suggesting earlier about the strong demand and higher inflation is that usually in a recession you see low inflation. The '73 to '75 experience, however, was an inflationary recession because of the problem with oil prices. That's what we were seeing early in this cycle, where a weakening dollar rallied oil prices, and then the dollar reversed sharply and oil prices collapsed. We have passed through a brief period of shallow year-to-year deflation in the consumer price index, but, as oil prices bottomed out and headed higher since the end of 2009, we're now seeing higher inflation, again.

I'm looking at hyper-inflation, which is a rather drastic forecast. This has been in place as an ultimate fate for the system for a number of years. Back in the '70s, the then Big 10 accounting firms got together and approached the government and said, "Hey guys, you know you need to keep your books the way a big corporation does. You're the largest financial operator on earth." The government then, as well as today, operates on a cash basis with no accrual accounting and such. Yet, over a period of 30 years, the accountants and government put together generally accepted accounting principles, or GAAP, accounting for the federal government and introduced formal financial statements on that basis in 2002, which supplement the annual cash-based accounting.

If you look at those GAAP-based statements and include in the deficit the year-to-year change in the net present value of the unfunded liabilities for Social Security and Medicare, what you'll find is that the annual operating shortfall is running between $4 and $5 trillion; not $500 billion as we saw before the crisis or the $1.4 trillion that they announced for fiscal 2009. Now to put that into perspective, if the government wanted to balance its deficit on a GAAP basis for a year, and it seized all personal income and corporate profits, taxing everything 100%, it would still be in deficit. It can't raise taxes enough to contain this. On the other side, if it cut all government spending except for Social Security and Medicare, it still would be in deficit. With no political will to contain the spending, eventually the government meets its obligations by revving up the currency printing press.

TGR: With all this new paper money coming into the system, wouldn't we see a bigger bubble than we've ever seen prior to a hyper-inflationary great depression?

JW: No, in fact, it's a very unusual circumstance that we have now. Put yourself in Mr. Bernanke's situation-he had to prevent a collapse of the banking system. He was afraid of a severe deflation as was seen in the Great Depression, when a lot of banks went out of business. The depositors lost funds and the money supply just collapsed. He wanted to prevent a collapse of the money supply and keep the depository institutions afloat. Generally, that has happened. The FDIC expanded its coverage and everything that had to be done to keep the system from imploding was done. The effects eventually will be inflationary.

In the process, what Mr. Bernanke did was to expand the monetary base extraordinarily, more than doubling it over a period of a year. The monetary base is money currently in circulation plus bank reserves. If you go back to before September 2008, the bank reserves were in the $50 to $60 billion range. Where the currency was maybe $800 billion, we've gone over $2 trillion in total reserves. Most of that is in excess reserves and not required reserves that banks have to keep to support their deposits. Normally banks would take their excess reserves and lend them out into the regular stream of commerce, and in doing so, that would create money supply. Instead they're leaving the excess reserves on deposit with the Fed. Money supply and credit are now generally contracting. We're going to see an intensified downturn in the near future. I specialize in looking at leading indicators that have very successful track records in terms of predicting economic or financial turns. One such indicator is the broad money supply.

Whenever the broad money supply-adjusted for inflation-has turned negative year over year, the economy has gone into recession, or if it already was in a recession, the downturn intensified. It's happened four times before now, in modern reporting. You saw it in the terrible downturn of '73 to '75, the early '80s and again in the early '90s. In December of 2009, annual growth in real M3 turned negative. It's now at a record low in terms of decline, down more than 6% year over year. What that suggests is that in the immediate future you're going to see renewed downturn in economic activity.

In all the prior instances that I mentioned, this event led recessions, except for '73 to '75. That's when you had the oil spike and a recession that came from that. When the money supply turned down in that recession, the economy accelerated in its decline. We're going to see something along those lines, now, with about a six-month lead time. You're going to have negative economic growth this year. The implications for that are extraordinary, because the projections on the federal budget deficit, a number of the state deficits, and the solvency and stress tests for the banking system all were structured assuming positive economic growth in the 2% to 3% range for 2010. Instead it's going to be negative. Many states are going to be in greater difficulty than they thought. Most likely, you're going to have federal bailouts there. The banks are going to have more troubles. All this means more government support, more government spending, greater deficits and greater funding needs for the U.S. Treasury. We have a global market that already is increasingly reluctant to hold the dollars and U.S. Treasuries.

TGR: The U.S. dollar is still the reserve currency, and it's holding its value while the euro struggles. Wouldn't decoupling precede hyper-inflation?

JW: I don't know if it will decouple from being the reserve currency formally, but it will de facto. The reserve status is the reason the dollar didn't collapse per se a year and a half ago during the September '08 panic. The movement is already afoot, however, to try to relegate the dollar to some status other than a reserve currency. For example, OPEC purportedly is looking to price oil in something other than U.S. dollars. The pressure is there to change the status.

Again, if you start to see a great depreciation of the U.S. currency or a tremendous increase in lack of confidence in the soundness of the government's fiscal condition, there is a problem. You mentioned Greece, for example. The sovereign solvency issues there are minuscule compared to what we have with the United States, which is the elephant in the bathtub. The markets know it's there. The central bankers know it's there. Again, with the downturn in the economy, all the issues are going to be brought to a head. As they come to a head, there will be that effort to dump the dollar. I would expect that, indeed, it will be decoupled from its reserve status, although it could follow after the fact as opposed to before the fact.

TGR: Major economic indicators suggest significant improvement; even the IMF has stated that we've averted a global depression. What are you seeing that these governing bodies are not?

JW: What I'm using is a leading indicator of economic activity: year-to-year change in inflation-adjusted broad money supply. We're now seeing a very sharp year-over-year decline, which has not been seen since the 1990 recession. This indicator does not work always in the upside; it doesn't necessarily give you a signal for a rising economy. It is, however, basic. If you strangle liquidity you can always contract an economy. Deliberately or not, liquidity's being strangled. You're seeing very sharp declines in consumer credit, commercial and industrial loans and commercial paper outstanding.

You are getting happy news from governments, central banks, financial markets, Wall Street analysts and the popular media, which does tend to cater to Wall Street. Such is standard practice. Happy news is what sells and you don't want to discourage people. The Obama administration, interestingly, started talking-down the economy when it wanted to get its stimulus package in place. As soon as that was done, it started talking-up the economy. Everything was just fine and dandy again. This is the most extraordinary downturn most people living today have ever seen. In terms of modern economic reporting, which basically started after World War II, we've never had a downturn as long or as severe. Perversely, the extreme nature of the downturn actually has warped recent reporting of seasonally-adjusted data to the upside.

TGR: Earlier you mentioned that business around the world will survive in the event of a depression. Aren't there sustainable businesses in the U.S. as well? Won't an influx of printed currency and green-tech job creation offer some value? At some point, doesn't stimulus money become real cash producing real goods? Surely the economy would be viable at some level?

JW: Not without income growth. There's nothing there that you've described to me that is growing, aside from inflation. To have sustainable growth in the economy, you have to income growth, net of inflation. That is not happening, and there is nothing in existing government stimulus that will cause real income growth.

Beyond income issues, the problem with the hyper-inflation is that very quickly the use of cash will cease. Let me contrast our circumstance here with a very popularly followed hyper-inflation case that's now run its course in Zimbabwe. There you had probably the worst hyper-inflation that anyone's ever seen. After devaluation upon devaluation, they successively lopped the zeros off the bills. If you took a $2 bill that they first issued back in the '80s and then tried to come up with the equivalent of a $2 bill in the last form of the currency, it would be very difficult to do because it was so worthless. If you put a pile of those together to equal the original $2 bill, it would actually stretch from the earth to the Andromeda Galaxy. We're talking light years. There are not enough trees on earth to print them. Yet the Zimbabwe economy survived and functioned. They had a lot of problems, but they operated. The reason they functioned was because they had a back-up system, which was a black market in U.S. dollars. People switched out of the Zimbabwe dollar to U.S. dollars. They could live with that. In the U.S., we don't have a back-up system.

TGR: You mentioned in a recent interview with CNN that you're recommending individuals move into both cash and gold. With the euro and the dollar in jeopardy, where does that leave us?

JW: I don't like the euro. I don't think that's going to hold together, and I've thought so for some time. If it should break up and you have a new German currency, a new mark or something like that might be a strong one option. At the moment I like the Canadian dollar, the Australian dollar and the Swiss franc. For anyone living in the United States, rather than looking at the short-term volatility in the markets and trying to make money off of that, this is the time to batten down the hatches and to look to preserve your wealth and assets.

In terms of preserving the purchasing power of your assets, the best thing I can think of is physical gold. That's worked over the millennia. I'm not per se a gold bug. It just happens to be a circumstance in which it's the cleanest asset around for that. You don't need to put all your assets into gold, but hold some. Hold some silver. I'd look to get some assets out of the U.S. dollar and look to get some assets out of the U.S. When I say outside of the U.S. dollar, again, I look at the Canadian dollar, Australian dollar, Swiss franc in particular. I think they will tend to do particularly well, whereas the U.S. dollar is going to become effectively worthless.

As the dollar breaks down, you'll also likely see disruptions in supply chains, including shipments of food to grocery stores. People should consider maintaining stockpiles of basic goods needed for living, much as they would for a natural disaster. I sit on the Hayward fault in California. I have a supply of goods and basic necessities in case something terrible happens-natural or man-made-that will carry me for a couple of months. It may take that long for a barter system to evolve, which I think is what you're going to end up with; at least until a new currency system is reorganized and you get a government that's able to bring its fiscal house into order. No currency system in the U.S. is going to work unless the fiscal conditions that drove it into oblivion are also addressed.

On a global basis, where the dollar is the world's reserve currency, 80% of currency transactions involve the U.S. dollar. There's going to have to be an overhaul of the global currency system. To gain credibility with the public, the powers that be likely will design a system that has some kind of a tie to gold, but that's purely speculative.

TGR: From a personal investment point of view, you emphasized that this is a time to conserve assets, including gold and other currencies. How else can investors protect themselves?

JW: I like physical gold and silver. I look to gold as a primary hedge. If you can come out of this holding gold, you'll be in a position where you'll be able to take advantage of some extraordinary investment opportunities that will follow. With inflation, real estate is usually a pretty good bet. It tends to hold its value over time. There may be periods of illiquidity, though, and it's not portable. Neither of those limitations is an issue with gold. Maybe gold will become the black market to support U.S. economic activity. It certainly would be the area that people will try to transfer their assets to as time goes along.

You see people now as gold gets to a new high saying, "Oh my goodness, I bought at $200, and I can sell out at $1,100 making a good profit." What people don't realize is that they haven't made a real profit. What they've done is retained the purchasing power of the dollars that they invested in gold, and they've lost proportionately the purchasing power of the amounts left in dollar-denominated paper assets over the same time. Gold is a long-term wealth preserver. Again, where many people are used to an investment environment where they can buy a stock, make a quick profit and then sell, with gold you need to hold on for the long haul as an insurance policy, not as a quick investment.

TGR: Thank you very much for your time.

Walter J. "John" Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth's Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies. For more than 25 years he has been a private consulting economist and a specialist in government economic reporting. His analysis and commentary have been featured widely in the popular media both in the U.S. and globally. Mr. Williams provides insight and analysis on his website,

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Senate Votes For Wall Street; Megabanks To Remain Behemoths

A move to break up major Wall Street banks failed Thursday night by a vote of 61 to 33.

Three Republicans, Richard Shelby of Alabama, Tom Coburn of Oklahoma and John Ensign of Nevada, voted with 30 Democrats, including Senate Majority Leader Harry Reid of Nevada, in support of the provision. The author of the pending overall financial reform bill in the Senate, Banking Committee Chairman Christopher Dodd, voted against it. (See the full roll call.)

The amendment, sponsored by Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.), would have required megabanks to be broken down in size and capped so that their individual failure would not bring down the entire system.

Under Brown-Kaufman, no bank could hold more than 10 percent of the total amount of insured deposits, and a limit would have been placed on liabilities of a single bank to two percent of GDP.

In practice, the amendment required the six biggest banks -- Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley -- to significantly scale down their size. It was touted as a way to end Too Big To Fail.

Though top Obama administration officials have not publicly opposed the amendment, its leading economists have opposed ending Too Big To Fail simply by breaking up the nation's financial behemoths. Austan Goolsbee and Larry Summers have both fought back against this idea, as has Treasury Secretary Timothy Geithner.

"This is certainly a defeat for those who are concerned about the dangers of financial concentration in this country," Kaufman said in a statement after the vote. "Some causes are worth fighting for, and for me, the concern about the risks 'too big to fail' banks pose to the American economy and people is deep and profound given the economic tragedy millions of American have endured. I believe the debate itself -- though failing to gain a majority of votes -- has helped to change attitudes about the degree of financial concentration and power these megabanks now represent."

The banks owned by the four largest financial firms in the U.S. collectively account for about 45 percent of all assets in the U.S. banking system, according to a HuffPost analysis of Federal Deposit Insurance Corporation data.

Those four megabanks collectively hold about $7.4 trillion in assets, according to the most recent regulatory filings with the Federal Reserve. That's equal to about 52 percent of the nation's estimated total output last year.

The top 12 banks in the U.S. control half the country's deposits. By comparison, it took 25 banks to accomplish this feat in 2003 and 42 banks in 1998, according to a Jan. 4 research note by Jason M. Goldberg of Barclays Capital.

There are 23 bank-holding companies in the U.S. with more than $100 billion in assets, according to Federal Reserve data.

Richard W. Fisher, president and chief executive of the Federal Reserve Bank of Dallas, is among a group of at least three current regional Fed presidents that have called for the nation's megabanks to be broken up, joining Kansas City Fed president Thomas M. Hoenig and St. Louis Fed president James Bullard.

Fisher has suggested a ceiling on bank assets placed at $100 billion.

"In the past two decades, the biggest banks have grown significantly bigger," Fisher said last month. "The average size of U.S. banks relative to gross domestic product has risen threefold. The share of industry assets for the 10 largest banks climbed from almost 25 percent in 1990 to almost 60 percent in 2009."

Of course, size is not the only danger -- Lehman Brothers, whose crash rocked the financial system, would have been under the size caps proposed by the amendment. To that end, the Brown-Kaufman amendment limited the amount of leverage an institution can take at about 16-to-1. Hoenig has suggested a 15-to-1 ratio. Leverage is the use of debt to increase assets without a corresponding increase in capital.

The amendment began as a wild longshot, backed by the junior senator from Ohio, Brown, and a longtime aide to Joe Biden, Kaufman, appointed to keep his seat warm for two years until the 2010 election. That the amendment gained as much support as it did is an indication of the depth of the populist anger.

Sen. Mark Warner (D-Va.) and Dodd of Connecticut spoke against the amendment.

Sen. Judd Gregg (R-N.H.) was indignant. "I don't understand this Brown-Kaufman amendment. Basically, what it says is if you're're going to break them up? I mean, where does this stop? Do we take McDonald's on?"

"It really doesn't make any sense to me," he said.

After the vote, Kaufman defended the provision.

"I believe this idea was sound policy -- and I further believe that a mainstream consensus will continue to grow that these megabanks are too large, too complex and too internally conflicted to regulate successfully," he said, echoing a position voiced by regional Fed presidents, former top Fed officials, and former top bankers on Wall Street.

The Senate will resume voting on amendments to the legislation next week.

The 27 Democrats who voted against the amendment:

  • Akaka (D-HI)
  • Baucus (D-MT)
  • Bayh (D-IN)
  • Bennet (D-CO)
  • Carper (D-DE)
  • Conrad (D-ND)
  • Dodd (D-CT)
  • Feinstein (D-CA)
  • Gillibrand (D-NY)
  • Hagan (D-NC)
  • Inouye (D-HI)
  • Johnson (D-SD)
  • Kerry (D-MA)
  • Klobuchar (D-MN)
  • Kohl (D-WI)
  • Landrieu (D-LA)
  • Lautenberg (D-NJ)
  • McCaskill (D-MO)
  • Menendez (D-NJ)
  • Nelson (D-FL)
  • Nelson (D-NE)
  • Reed (D-RI)
  • Schumer (D-NY)
  • Shaheen (D-NH)
  • Tester (D-MT)
  • Udall (D-CO)
  • Warner (D-VA)

Bernanke's Biggest Bailout

May 03, 2010 "Information Clearing House" - -The right-wing think-tank, the American Enterprise Institute, is helping the Federal Reserve to develop a strategy to transfer $1.25 trillion in toxic mortgage-backed securities (MBS) and non performing loans onto the public's balance sheet. Although it's unknown whether Fed chair Ben Bernanke will act on the AEI's recommendations, it does show that the Fed's Quantitative Easing program (QE)--which moved the bulk of garbage assets from the banks to the Fed's balance sheet--poses long-term problems that will need to be addressed. Bernanke never intended to keep these assets any longer than necessary. Now he is actively exploring options for getting rid of them.

Ostensibly, the QE program was designed as the first leg in a two-step process to remove the bad paper from the banks balance sheets and then dump it on Fannie Mae and Freddie Mac as discreetly as possible. So far, Bernanke has been relatively successful in convincing people that he was buying the assets to increase lending, which was clearly never the objective. Quantitative Easing was a fraud from the get-go. Here's an excerpt from the AEI's web page by the eerily-named "Shadow Financial Regulatory Committee" which explains what's going on:

"Freddie and Fannie have been placed in conservatorship and the Treasury has confirmed that their debt is now guaranteed by the U.S. Government. This means that their debt is essentially identical to Treasury debt. The Treasury could simply issue Treasury debt to Freddie and Fannie with the offsetting accounting transaction being an IOU to the U.S. Treasury. Freddie and Fannie could then swap the acquired Treasury debt for MBS held by the Federal Reserve. This transaction would have several desirable features. It would place housing debt on the books of Freddie and Fannie where it belongs and remove the Fed from financing U.S. housing policy, which is appropriately a fiscal policy and not a monetary policy function. This would also help to re-establish Federal Reserve independence from the Treasury and fiscal policy. Finally, it would free the Fed to device strategies to reduce its balance sheet by engaging in more traditional asset sales in the much deeper Treasury market where the pricing impacts would be smaller and would accommodate a more rapid reduction in excess reserves." ("Mortgage Backed Securities in the Federal Reserve’s Portfolio" Shadow Statement No. 294, American Enterprise Institute)

So, there it is in black and white; the committee believes that the "transaction would have several desirable features. It would place housing debt on the books of Freddie and Fannie where it belongs and remove the Fed" from any further obligation. Naturally, the Fed will need an excuse to justify what-amounts-to another gigantic bailout. The AEI thinks that the fear of inflation will do the trick, and they are probably right. Expect the Fed to mobilize its allies in the media to launch a public relations campaign that focuses on the imminent threat of hyperinflation. That way--when Bernanke dumps more than a trillion dollars of toxic sludge into Uncle Sam's mortgage-recycling center--he'll only be performing his statutory duties to maintain price stability.

There's nothing fancy about the AEI's strategy; it's a pretty straightforward "no frills" ripoff. Bernanke buys the garbage from the banks and then transfers it to the GSE's. No muss, no fuss.

It's a shame that congress can't figure this stuff out. Bernanke is merely acting as one would expect. He's bent-over-backwards to save the banks from nationalization and to keep their political and financial power intact. He's also usurped congress's power over the purse-strings by initiating fiscal policy (in the purchasing of the toxic assets) which is well-beyond the Fed's mandate. Now he's putting the finishing touches on another giant bailout so he can clear the Fed's books and resume the arduous task of bubblemaking.

Is it really that hard for congress to figure out what's going on?

FDIC backing 8,000 banks with $13 trillion in assets and a negative deposit insurance fund. FDIC survey finds millions of U.S. households .....

The FDIC has a big problem on its hand. Some would say it is a too big to fail problem. The Federal Deposit Insurance Corporation looks over 8,000+ banks and protects the deposits at these banks. Yet this seemingly large number is merely a front for where the assets are congregated. The top 4 banks of Bank of America, JP Morgan Chase, Wells Fargo, and Citibank make up 55 percent of all banking assets. This number is absolutely large. FDIC backed institutions have $13 trillion in total assets. Even yesterday as Wall Street demonstrated the dangers of concentrated power in a few big investment banks, rumors were flying around that some of the bigger banks made sizeable gains in their trading portfolios. This brings up many questions for average Americans who are under the impression that their bank is actually keeping their money safe and sound instead of placing major bets on the stock market.

Yet the major bets will continue because during the news heavy day, what wasn’t reported through the mainstream media was how the too big to fail amendment failed in the Senate. Just take a look at the assets of the too big to fail:

Source: FDIC, Bank Financial Statements

The above must be changed yet Congress isn’t willing to move. What this means is that we will see more and more local regional bank failures as the commercial real estate bust continues to hit the economy. Yet people still need banking services and this provides an easy way for the bigger banks to actually get bigger. Think this isn’t the case?

“J.P. Morgan Chase said Wednesday that it will open 90 branches in California this year, adding 1,200 jobs and bringing its statewide network to 800 branches and 3,000 ATMs.

Chase (NYSE: JPM) said 35 of those branches will be in Northern California, 18 opening in the Bay Area.

“California is an important and growing market for Chase and we will continually invest in the people, facilities and technology needed to serve California consumers and businesses well,” said Pablo Sanchez, who manages Chase’s branch network in the western United States.”

So as the FDIC is busy on Fridays with closing banks, we have JP Morgan Chase opening up more banks in California. Even if the too big to fail banks are gouging Americans with credit card terms, restricting access to credit, and consolidating their power they are making large amounts of money through their investment banking units. We have already learned through the experience of this market that the government is unwilling or unable to shut down the bigger banks. As we have noted above, they are even getting bigger.

At the same time, the list of troubled institutions grows:

The FDIC has its hands full because we will have at least 1,000 bank failures ex-the too big to fail banks when this crisis is said and done. Even the troubled institutions of smaller banks have large amounts of assets:

At currently troubled banks labeled by the FDIC $402 billion is under their management. And as we saw last week with over $7 billion in costs for 7 failed banks, the FDIC fund is getting extremely close to requiring a government bailout. When everything is subject to a bailout, you take the infectious problems of the banks and toxic loans and transfer the risk to the entity doing the bailing out. That is why the U.S. markets are having such a volatile reaction to what is currently going on. If you think bringing on large amounts of debt is good for the country just look at Greece. Having too much debt is not a way forward in achieving prosperity.

As people in the middle class try to get by in this Great Recession, these banks that are essentially protected by the government through trillions in bailouts are also the largest players in the credit card markets:

So while bankruptcies are soaring for Americans, these banks have the ultimate get out of jail free card. For the average working class American they are being gouged by onerous fees and high rates all the while taxpayers are giving banks easy access to cheap money so they can go off and gamble in the stock market. Massive market volatility is not a sign of a healthy market. In fact, many of the biggest historical jumps and falls occurred during the Great Depression. The 1,000 intraday drop on the Dow was the largest on record.

Yet we have to ask, the FDIC has been a sign of stability for most Americans when they see the label on the bank door. Yet how can we feel confident when $13 trillion in assets are under control from the 8,000 banks and yet the actual insurance fund only has a few billion dollars (a number that is quickly approaching zero even after years of advanced premiums paid by member banks)? This number can be wiped out with two big Fridays. In reality, even one too big to fail bank would wipe out the FDIC completely. This has never been an issue of liquidity; this is an issue of solvency. The core of the problem is that many banks have too much debt that isn’t valued at what banks would like it to be valued at.

The FDIC conducted a recent survey and found that many U.S. households are underbanked:

A substantial percentage of lower-income households are unbanked. Nearly 20 percent of lower income U.S. households—almost 7 million households earning below $30,000 per year—do not currently have a bank account. Households with earnings below $30,000 account for at least 71 percent of unbanked households.

Not having enough money to feel they need an account is the most common reason why unbanked households are not participating in the mainstream financial system.

I’m not sure if this is even a surprise. I would also suspect that many people now just don’t trust the banking industry. The FDIC is going to be busy for a few years because the reality is, there are trillions in toxic assets that are overvalued on the balance sheet of banks. Commercial real estate will bring down many banks in the current year. Until we have serious change in the system, expect these kinds of massive raids on the market to continue while middle class Americans are caught in the battle.

It's NOT Too Late To Call Your Senator And Demand a Thorough Fed Audit

Even though a deal was supposedly reached yesterday for a watered-down version of a Fed audit, a source on the Hill tells me:

Do not be deceived that this Senate ‘deal’ is done, though. The amendment has not passed, and I have heard rumors that Geithner and Bernanke are still fighting this compromise quietly behind the scenes. If it does pass, Fed transparency reformers will be in a very strong position going into the conference committee, which will merge the Senate and House bills.
In addition, Ron Paul is urging everyone to call your Senator and urge that they vote in favor of a full audit of the Federal Reserve.

Indeed, Senator Sanders - who introduced the weakened version of the bill yesterday - himself says :

I support the legislation passed by the House of Representatives under the leadership of Congressmen Ron Paul and Alan Grayson.... My goal, as I conveyed to Congressmen Paul and Grayson when we talked on Friday, is to do everything that I can to pass this amendment in the Senate, and then to work with them for the strongest possible language in the final bill.

We can support Sanders, Paul and Grayson' effort to include strong language in the final bill by pressuring the Senate for a full audit. Indeed, if we don't keep the pressure on, Bernanke and Geithner will make sure that the legislation is gutted entirely.

You can find your Senator's phone number here.

For background, see this and this.

The IMF Destroys Iceland and Latvia

The International Monetary Fund operates primarily as a banker bailout machine. They cajole and tempt and confuse and threaten the leaders of governments worldwide to pay off the failed bets of the big bankers using the taxpayer funds of their countries. This has been going on a long time, at least since the early 1980s.

Thus, I am not in the teeniest bit surprised that the same thing is happening today in Iceland and Latvia.

This article by Michael Hudson has some of the details:

For the past decade Iceland has been a kind of controlled experiment, an extreme test case of neoliberal free-market ideology. ... Is there a limit, a point at which government will draw a line against taking on public responsibility for private debts beyond any reasonable capacity to pay without drastically slashing public spending on education, health care and other basic services? ...

The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings. Resentment is growing not only toward those who ran up these debts -- Iceland's bankrupt Kaupthing and Landsbanki with its Icesave accounts, and heavily debt-leveraged property owners and privatizers in the Baltics and Central Europe -- but also toward the neoliberal foreign advisors and creditors who pressured these governments to sell off the banks and public infrastructure to insiders.

This is the trick: replacing private debts with public obligations. Lots of people loaned money to banks and corporations in Iceland. They are now facing huge losses.

What is supposed to happen here is: they take their losses. There was no government guarantee. Why should someone with no relation to this business deal have to pay off their losses just because they happen to live in Iceland?

The government of Iceland may not actually have the money to pay this off. They would have to borrow it. When the IMF makes a "rescue loan" to a government, the money spends no time in Iceland or Latvia. It goes directly to the foreign creditors, in places like New York and London.

However, the debts remain, to be paid off by the taxpayers of Iceland. Taxes rise, which just makes a bad economic situation worse. Valuable and important services are cut -- precisely when they are most needed. Then, the IMF "advisors" come in and start to make a lot of demands.

For example, they may demand that the government sell off "public infrastructure" and the assets of failed banks (which still have considerable value) to pay off the loans which were used to bail out the bankers in New York and London. Who buys this "public infrastructure"?

Typically, it's the bankers in New York and London! Normally, at very good prices -- very, very good prices. Extraordinarily good prices.

Prices for assets in a crisis are normally very low. But, a government that can be coerced into bailing out the bankers can also usually be coerced into selling off state assets at values that no private owner would accept.

Hudson calls this "neoliberal free-market ideology." Of course, it has nothing to do with the principles of capitalism. You could call it a form of fascist imperialism. I think John Perkins, author of Confessions of an Economic Hit Man and The History of the American Empire, would agree with this terminology.

It is hard to tempt and cajole and confuse world leaders when you use unpleasant terms like "fascist imperialism." That's why these proposals are camouflaged with labels like "neoliberal free-market principles," when they have nothing to do with free-market principles.

It's not about "conservative" and "liberal." It's about us against the banker imperialists.

The IMF should be abolished.

Merkel blasts 'treacherous' banks in Greek crisis

BERLIN (AFP) – German Chancellor Angela Merkel on Thursday slammed "treacherous" practices by banks during the Greek crisis and said governments must crack down on speculators hunting profits in the turmoil.

Merkel, whose Christian Democrats face a tough re-election battle in Germany's most populous state Sunday, railed against gamblers on the financial markets who she said were exacerbating an already volatile situation.

"First the banks failed, forcing states to carry out rescue operations. They plunged the global economy over the precipice and we had to initiate recovery packages. Because of these packages, we have become indebted and now, they are speculating against these debts -- that is really very treacherous," she said.

"Governments must regain their supremacy over the markets, which they no longer have, and for that we need much stricter global rules," she added, at a debate on Europe organised by a public broadcaster.

Merkel said it was now up to the European Union member states to reassert their authority and shore up the financial rules governing the bloc.

"We must clearly demonstrate that in Europe we have the political power, each in his own country, of getting back on the track of the Stability and Growth Pact," she said.

"It is a fight of policy against the markets. That is how I see it personally but I am determined -- as are my colleagues, I am certain -- to win this fight and we will be victorious, I am sure."

Greece has seen its cost of borrowing soar as investors, fearing a default, have demanded greater risk premiums for their loans, which in turn has pushed the country's debt even higher.

Greece's cost of borrowing has also risen as traders made "short" bets that Greek bond prices would slide and bought complex financial instruments that rise in value in tandem with the default risk.

The German parliament is to vote Friday on unblocking some 22.4 billion euros (28.7 billion dollars) over three years in loans to Athens as part of a 110-billion-euro bail-out orchestrated by the European Union and the International Monetary Fund.

The rescue is deeply unpopular in Germany and Sunday's election in the western region of North Rhine-Westphalia could see voters punish Merkel's conservatives, who are fighting to maintain power there.

Ireland: Public sector union leader demands workers accept austerity

In his May Day address, Jack O’Connor, general secretary of Ireland’s SIPTU public sector union, demanded his members accept the four-year strike ban, pay freeze, massive redundancies and rationalisations agreed by the unions at the Labour Relations Commission in March.

Agreement was required, according to O’Connor, because of “the most serious problem that has confronted this country since the Second World War in terms of its capacity to compromise our economic sovereignty and independence.”

O’Connor made clear his concern that Ireland could face a fiscal crisis on the scale of that currently facing Greece. Referring to the onerous conditions being demanded of Greece by the International Monetary Fund (IMF) and the European Union (EU), O’Connor noted, “Even as we speak, a modern developed EU country and participant in the eurozone is negotiating the surrender of its economic independence to the IMF.”

O’Connor fully subscribes to the Fianna Fail government’s fiscal plan for slashing the public sector deficit, imposing the costs of the bailouts organised for Ireland’s criminal financial elite onto the working class. Should the deal be rejected, he threatened, “Make no mistake about it, the government will come back for more.”

O’Connor’s intervention was intended to stiffen the resolve of the entire trade union bureaucracy in the face of anger and opposition in the working class. His speech followed warnings from Irish Congress of Trade Unions (ICTU) leader David Begg that votes amongst union members on accepting the deal were “finely balanced.”

In addition to SIPTU, votes amongst senior public servant union ACHPS, and teachers’ union INTO have accepted the deal, while teachers’ union ASTI, civil servants’ union CPSU and the general Unite union have rejected it.

IMPACT officials helped negotiate the deal, but the union’s own executive rejected it as unenforceable.

Every aspect of the deal was predicated on there being “no currently unforeseen budgetary deterioration.” But only days before O’Connor made his speech, the European Commission ruled that the bailouts handed over to Anglo-Irish must be included on the state’s figures. This altered Ireland’s deficit to 14.3 percent of gross domestic product, compared to 12.5 percent a month earlier.

According to Eurostat, the commission’s statistical body, €4 billion injected into Anglo-Irish in 2009 had to be retrospectively included in deficit figures while the €18 billion intended for Anglo-Irish in 2010 was also likely to be included. The Eurostat decision was taken on the basis that there will be no return in the given year on the money handed over to Anglo-Irish. The bailout therefore should be counted as public spending.

Furthermore, despite having won praise on the international bond markets and credit agencies for its austerity measures, Ireland’s public finances are fragile. On April 28, the cost of 10-year borrowing by the government soared to over 5 percent, 2 percentage points above the German rate. The Irish economy continues to contract, having shrunk 12.5 percent since late 2007, and is expected to reduce further this year.

The votes on the agreement are being held as the impact of the financial crisis and recession on working people is assuming ever more serious proportions. At the same time, more details continually emerge of the speculative swindling endemic in Irish finance.

Quinn Insurance, already taken into administration, announced April 30 that more than 900 workers are to lose their jobs as part of a rescue plan being imposed by the company’s new administrators, accountants Grant Thornton. Some 37 percent of the company’s workforce, across nine locations in Britain and Ireland, will be laid off. Worst-hit areas are Blanchardstown, where 301 jobs will go, Cavan, location of the company headquarters, where 226 jobs will go, and Enniskillen in Northern Ireland, where 109 workers will be affected.

Quinn Insurance, the lynchpin of billionaire Sean Quinn’s business empire and source of much of his immense fortune, is to be sold off. The company, whose obligations outweigh its assets by €200 million due to Quinn’s speculative gambling on the property market, will be sold free of the €1.2 billion debt obligations placed upon it by other parts of Quinn’s operations. The debt will be transferred to the remainder of Quinn Group, whose survival must now be in serious doubt.

Some 5,221 people are employed by the remainder of Quinn Group, and a collapse would devastate Cavan and the surrounding area where three additional jobs are estimated to depend on every one job at Quinn Group. On April 27, 200 truckers staged a series of demonstrations around Dublin, protesting the impact of Quinn Insurance’s administration on their livelihoods.

Recent press reports have also drawn attention to another consequence of the collapse of the housing “bubble”. There are now 621 “ghost estates” in the Irish republic. Unoccupied, brand-new, isolated housing estates built over the last few years now litter the Irish countryside. They give a particularly graphic example of the deranged speculative frenzy that gripped the entire Irish financial elite during the building boom years of 2004-2008.

Figures of the numbers of houses built vary between 150,000 and 350,000, and a definite figure is not expected until later this year. But it may be that as much as 20 percent of Ireland’s entire housing stock is now empty. Many are in partially completed estates with no infrastructure or street lighting. There are suggestions that some of the estates, in a country with 100,000 people on housing waiting lists, might eventually be demolished.

County Leitrim alone saw 2,945 houses built between 2006 and 2009, a figure over four times in excess of the 590 needed to take up population growth. The miles of empty houses and mounting job losses translate into real terms the monstrous sums gambled and lost.

Irish Nationwide Building Society was one of the main players in the housing boom. In April, the company announced losses for 2009 of €2.5 billion, while its impaired loan book—the list of loans of which none or only a small fraction is likely ever to be repaid—amounted to €2.8 billion, up from €464 million the previous year. The company’s operating income was only €260 million, down from €374 million.

Like the now-nationalised and effectively bankrupt Anglo-Irish Bank, Irish Nationwide appears to have been run by its directors, particularly former chief executive Michael Fingleton, as a speculative war chest on behalf of himself and a small number of property developers. Only 30 borrowers account for €3.6 billion of the total €10.5 billion loaned by the building society. Of this, some €8.7 billion is due to be dumped in the National Asset Management Agency, Ireland’s state-run “bad bank” for toxic loans.

Fingleton’s successor, Gerry McGinn, has complained of “highly unusual lending”, a policy based on lending “until the music stops” and lending practices that were “well below standard”. McGinn also noted that “some pretty basic information on the paper trail” was absent from loan documentation.

One trick pulled by Irish Nationwide as its house of cards came crashing down in 2008 appears to have involved presenting interest payments owed to the building society as new loans. In this way, 66 percent of €490 million due from loans to customers was repackaged as new “phantom fund” loans.

Romania braces for austerity

A romanian worker fixes communications cables on a pole downtown Bucharest. Romania will slash wages in the public sector by 25 percent and pensions by 15 percent in order to meet IMF deficit target. -- PHOTO: AFP

BUCHAREST - ROMANIA braced on Friday for a wave of protests after the president unveiled austerity cuts in public sector wages and pensions to meet a deficit target set by the IMF and avoid a Greek emergency scenario.

'This programme to cut public expenses was inevitable,' President Traian Basescu said during a press conference on Thursday after a meeting with IMF and European Union representatives in Bucharest.

Wages in the public sector are to be cut by 25 per cent, Mr Basescu said, adding that 'all salaries, including the minimum one, will be affected.' Pensions will be slashed by 15 per cent, just like unemployment benefits.

These cuts should help Romania 'avoid an extremely difficult situation, generated not so much by what is going on in its own economy, as by developments in the region,' he said, in a reference to the Greek crisis.

Romania last year pledged to trim the bloated civil service and freeze public wages and pensions in exchange of a 20-billion-euro aid package from the IMF, the European Union and the World Bank. But with reforms slower than expected, the deficit threatened to balloon beyond the 5.9 per cent target set by international lenders.

Moreover, the IMF has reduced Romania's growth forecast for 2010 from 1.3 per cent to 0.8 per cent. In 2009, its economy contracted by 7.1 per cent. Mr Basescu said the government had chosen the 'bitter pill' of slashing public spending instead of raising taxes. The cuts will be effective from June. -- REUTERS, AFP

Florida Could Be Biggest Loser From Oil Slick

Florida has the longest coast in the southeastern United States with over 2,200 miles of beaches and tidal shoreline. Of all the gulf states Florida has the greatest potential for economic losses due to the expanding oil slick off the Louisiana coast.

The biggest economic sector at risk is Florida’s tourism industry which accounted for over $64 billion in 2009.

Florida has no personal income tax so its state and local governments obtain most of their revenue from sales and real estate taxes. That income could be drastically reduced by a drop in tourism and in real estate prices.

Click here for original article

In the following video scientists discuss how the spill will effect Florida’s coastline.

Town plans fee for trash cans left on curb too long

PLEASANT GROVE -- The town of Pleasant Grove plans to fine residents who leave their trash cans on the curb too long.

The Daily Herald reports the city council approved the new fee this week to help keep neighborhoods tidy. It states that leaving garbage cans on the curb for 48 hours after the garbage has been collected can result in a $50 fine.

The fine also can apply to residents with excessive weeds, illegal garage sale signs, and accumulation of junk. There is a $100 fine for dirt, rocks and other materials left in the road.

The paper says the city plans to hand out written warnings before issuing fines. The city says some residents are leaving their garbage cans out on the curb all week long.

The Warning

It doesn't take a great leap of faith to entertain the idea that the death of Sen. Paul Wellstone was no accident.

Besides the usual forms of coercion, bribes and blackmail, Wellstone's assassination sent a message, a warning, to all of Congress that going against the agenda and telling the truth about certain 'events' that mold policy could cost them their lives.

That warning has been taken to heart.

None in Congress dare to speak about the hidden facts.

It's called self-preservation.

Although it can't be verified, a guest on the Kevin Barrett radio show tells a story that fits right in with what many people have been saying for years.
US Senator Barbara Boxer: Wellstone assassination was "a warning"

Scholar-activist Four Arrows, co-author of American Assassination: The Strange Death of Senator Paul Wellstone, today revealed for the first time a reported conversation in which U.S. Senator Barbara Boxer (D-CA) confirmed that the Wellstone plane crash was an assassination, not an accident.

As Four Arrows recounted on today's edition of The Kevin Barrett Show (beginning somewhere around the 20 minute mark): a trusted friend of his, during a conversation with Sen. Boxer, was surprised when the Senator asked "are you a friend of Four Arrows?" The friend said yes. Boxer said "tell him he doesn't know how right he is. (The Wellstone assassination) was meant as a warning to all of us." Sen. Boxer went on to say that if asked, she would deny the statement.

Sen. Boxer, who other sources report has confidentially admitted that she knows 9/11 was an inside job, has publicly confirmed that she does not trust the 9/11 Commission version of events, specifically the official narrative of the alleged 9/11 hijackers. The following exchange took place between Senator Boxer and myself on Wisconsin Public Radio's program "Conversations with Kathleen Dunn" on December 5th, 2005 (click here for archive -- note that the text below is a summary, not a transcript):

Barrett: Senator Boxer, I’d like to thank you and Senator Feingold for hanging in there after 9/11...(Boxer: “You’re welcome.”) Now as you may know, Congressman Kurt Weldon has been screaming from the rooftops that we need a new 9/11 Able Danger investigation focusing on what US intelligence agencies knew about Mohammad Atta and when they knew it. Newsweek and other mainstream publications have written that Mohammad Atta was trained at the Foreign Officer’s school Maxwell Air Force Base in Alabama. And Daniel Hopsicker’s book Welcome to Terrorland makes it clear that Hoffman Aviation in Venice Florida, where the so-called hijackers trained, was actually a CIA drug import facility—it was a flight school in name only. Now Lt. Colonel Anthony Shaffer has blown the whistle—he says he and his colleagues in military intelligence identified Atta as a terrorist in 2000, but they were gagged and ordered to “forget they had ever heard of Atta.” Are you among the 245 senators and representatives who have signed Congressman Weldon’s letter demanding a Congressional investigation into what US authorities knew about Atta prior to the 9/11 attacks?

Senator Boxer: That isn’t what the 9/11 Commission Report said—but that doesn’t mean it isn’t true. I haven’t seen Congressman Weldon’s letter yet, but...we need to pursue the truth about 9/11 wherever it leads. The truth should be the only priority. And we need the truth. My main focus now, though, is to end the war in Iraq.

According to Four Arrows, Sen. Boxer and other high-visibility people know that if they cross certain lines, they and/or their families will be assassinated. He offered this as a possible explanation of the reluctance of various well-known people, including Noam Chomsky, to speak the truth about 9/11.

Near the end of the show, Four Arrows suggested a "white armband" campaign for the 10th anniversary of 9/11, proposing that on that day, all those who do not believe the official version of events should wear a white handkerchief tied around their arm.

Listen to my interview with Four Arrows by visiting the Kevin Barrett Show archives and clicking on the link for the Tuesday, May 4th show. (You'll have to mute the live stream first.) More information on the show, including links to Four Arrows' work, here. {source}

H/T Facts Not Faries

U.S. taxpayers could be bailing out European banks as debt crisis worsens

As the European debt crisis picks up steam and batters world markets, various reports are surfacing that the US taxpayer is on the hook for billion of dollars in bailout funds via the International Monetary Fund (IMF). The United States provides approximately 20% of IMF funding, which means the taxpayer could pay $8 billion to prop up Greek banks.

More precisely, it is being reported that taxpayer dollars will be utilized to rescue top European banks throughout the EU in order to contain their dangerous exposure to Greek debt. And if this contagion spreads to Portugal, Spain, Italy, and Ireland, as many believe, US taxpayers could be providing a whole lot more through additional IMF bailouts.

If confirmed, several critical questions arise.

For example, how will the U.S. afford a massive, intercontinental "Too Big to Fail" scheme? We're running $1.6 trillion deficits, mired in $13 trillion of debt, and floundering in 16.9% real unemployment. A record number of Americans are on food stamps, and record foreclosures are still battering the housing market.

Will we borrow more from China and Japan?

Will we raise taxes to fund the European bank bailout?

Will we just print the money out of thin air (at the Federal Reserve)?

And what if other nations around the globe begin to come under severe economic pressure as a result of the debt contagion? Will we be forced to bail out their banks as well?

Or, what if the debt contagion spreads here to America, and we're forced to consider yet another Wall St bailout to avert a total meltdown?

For now, readers should closely monitor the situation, ask the tough questions, and keep a watchful eye on the actions of the current Administration, Congress, and the Federal Reserve.

EU Is Collapsing Like Tower Of Babel

EU Is Collapsing Like Tower Of Babel 070510top

Paul Joseph Watson

Monument Securities Chief Economist Stephen Lewis says the chaos in Greece could lead to collapse of the European Union, bringing down with it the dangerous assumption that structures of global governance provide stability in times of financial peril, but the World Bank and IMF vultures will be waiting as ever to feed on the remains of a dying country.

Striking Greek workers and civil servants have violently protested their government’s acceptance of the terms of an EU-IMF bailout, which sacrifices their future prosperity in a trade off for an attempt at stabilizing the Euro zone as a whole, a damning indictment of how global governance, which was introduced under the justification of maintaining financial stability, has had the exact opposite effect, with the virulence of the contagion from Greece threatening to spread to Portugal, Spain and Italy.

“There can be little wonder that the bailout finds little favor with Greek popular opinion,” Lewis said. “It must be obvious to Greek citizens that its terms pay scant regard to their future prosperity, which is being sacrificed in an increasingly forlorn hope of preserving a stable currency for the use of citizens in other member-states.”

Europe’s debt crisis has seen the Euro single currency plunge against the U.S. dollar, while riots were also a contributing factor to yesterday’s alarming U.S. stock market plunge, which at one stage saw the Dow Jones shed almost 1000 points.

BNP Paribas are now predicting that the Euro will hit parity against the U.S. dollar within 12 months, a level not seen for eight years.

“While we have had one of the most bearish forecasts in the market, these previous projections now appear too moderate given the current developments,” states the BNP report.

Economist Lewis firmly lays the blame for the chaos on internationalists who conned European nations into surrendering their sovereignty to the European project under the delusion that the architecture they were trading for their national self-determination would protect their country from precisely the kind of strife now unfolding.

“The guilty men are the eurocrats who stubbornly refuse to recognise that their fanciful construction is collapsing like a Tower of Babel,” Lewis told CNBC.

Lewis also forecasts that the riots and the violence show no signs of abating, so long as the globalists insist on forcing Greece into bondage by implementing the draconian terms of the EU-IMF loan which has now been passed by Parliament.

“Since most Greeks appear to think their government’s debts were incurred in the first place as a result of the nefarious activities of a ruling elite, the chances of their settling down to fulfil the terms of the bailout seem remote at best,” he said.

As was first documented by investigative reporter Greg Palast, what is happening in Greece is a familiar blueprint for how the IMF and World Bank habitually pillage and take over national countries and their economies.

Palast uncovered World Bank documents explaining how the IMF and World Bank deliberately fan the flames of violence and social unrest by raising prices on food, oil and the cost of living, causing riots which then lead to a virtual collapse of society which they then swoop in to exploit.

“The IMF riot is painfully predictable,” Palast quotes former World Bank chief Joe Stiglitz. When a nation is, “down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up,” as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998.

Palast uncovered how the riots were “written into the plan” by the IMF and World Bank and that “social unrest” was required to cause a financial panic, allowing for global corporations to then be able to buy up infrastructure on the cheap.

“The IMF riots (and by riots I mean peaceful demonstrations dispersed by bullets, tanks and teargas) cause new panicked flights of capital and government bankruptcies,” writes Palast. “This economic arson has it’s bright side – for foreign corporations, who can then pick off remaining assets, such as the odd mining concession or port, at fire sale prices.”

Greek Crisis Turns Deadly Serious; Will the World’s Governments Learn from It?

This week, the financial crisis in Greece turned deadly serious. No longer are investors just losing boatloads of money. People are starting to lose their lives!

The latest bout of chaos struck on Wednesday during a general strike. Everyone from air traffic controllers to teachers left their posts. Tens of thousands of protestors hit the streets, hurling rocks and Molotov cocktails. Three people reportedly died in a fire that struck an Athens bank branch.

So what’s provoking the madness?

It’s the stiff austerity measures the rest of the European Union and the International Monetary Fund want Greece to enact. Officials are forcing Greece to slash public sector wages, freeze pensions and boost taxes before they’ll start disbursing the $143 billion in bailout money.

But Greek citizens are sick of bearing the brunt of the pain. They don’t want to see their wages, salaries, and standard of living collapse. And they’re stark raving mad, especially because the measures are being crammed down their throats at a time when unemployment is already running at a six-year high of 11.3 percent.

Borrow and Spend Madness Sparks a Greek Tragedy

I hate to see things come to this. At the same time, I believe there is a serious (and potentially valuable) lesson coming out of this mess — one that I hope governments elsewhere will learn!

You see, this terrible Greek tragedy stems from a simple fact: The country lived way beyond its means for far too long! Politicians borrowed and spent like mad, assuming the day of reckoning would never come.

Then on September 24, 2009, creditors decided they’d had enough. I don’t know why it was that day. I don’t think anyone does now — and I doubt anyone ever will. But that’s when Greek debt prices started declining and Greek bond yields started rising.

That was when creditors decided to FORCE the government to get its fiscal house in order. They didn’t do so with guns. They didn’t do so with bombs. They did so by picking up the phone and uttering a four letter word: “Sell.”

That simple move set in motion a process that eventually drove interest rates sky-high. And that has now turned a simmering economic problem into a major political and social crisis.

So what’s the lesson?

Don’t Wait for Disaster to Strike — Head It Off While You Still Can!

If Greece had tried to get its house in order BEFORE interest rates surged, it probably would have avoided the disaster unfolding before our eyes. If Greek officials had demonstrated a little foresight — a little proactive thinking and policymaking —they could have prevented a huge tragedy.

Will the rest of the world take the Greek crisis seriously?
Will the rest of the world take the Greek crisis seriously?

But instead, they chose the easy way out. And now they’re paying a huge price.

What I hope — in my heart of hearts — is that policymakers in Lisbon … Madrid … London … and most importantly, Washington, are listening. I hope they’re all sitting in front of their televisions and watching the chaos in Greece. I hope they’re going to learn their lesson and take PROACTIVE action to get their own fiscal houses in order.

What I fear is that they won’t.

Heck, not a day goes by without some television anchor or government official saying something like: “Look at the 10-year Treasury Note yield. If investors were worried about our debts or our deficits, they wouldn’t be buying our bonds at these low rates.”

But you know what?

They were saying the same thing in Athens … right up until September 24, 2009.

Until next time,


The Global Economic Crisis, The Great Depression of the XXI Century.

The following text is the Preface of The Global Economic Crisis. The Great Depression of the XXI Century, Michel Chossudovsky and Andrew Gavin Marshall (Editors), Montreal, Global Research, 2010, which is to be launched in late May.

Each of the authors in this timely collection digs beneath the gilded surface to reveal a complex web of deceit and media distortion which serves to conceal the workings of the global economic system and its devastating impacts on people's lives.

The complex causes as well as the devastating consequences of the economic crisis are carefully scrutinized with contributions from Ellen Brown, Tom Burghardt, Michel Chossudovsky, Richard C. Cook, Shamus Cooke, John Bellamy Foster, Michael Hudson, Tanya Cariina Hsu, Fred Magdoff, Andrew Gavin Marshall, James Petras, Peter Phillips, Peter Dale Scott, Bill Van Auken, Claudia von Werlhof and Mike Whitney.

Despite the diversity of viewpoints and perspectives presented within this volume, all of the contributors ultimately come to the same conclusion: humanity is at the crossroads of the most serious economic and social crisis in modern history.

For details on the book click here. The book can be ordered directly from Global Research

The Global Economic Crisis. The Great Depression of the XXI Century

Michel Chossudovsky and Andrew Gavin Marshall (Editors)

Montreal, Global Research Publishers. Centre for Research on Globalization (CRG), 2010.

ISBN 978-0-9737147-3-9 (416 pages)


In all major regions of the world, the economic recession is deep-seated, resulting in mass unemployment, the collapse of state social programs and the impoverishment of millions of people. The economic crisis is accompanied by a worldwide process of militarization, a "war without borders" led by the United States of America and its NATO allies. The conduct of the Pentagon’s "long war" is intimately related to the restructuring of the global economy.

We are not dealing with a narrowly defined economic crisis or recession. The global financial architecture sustains strategic and national security objectives. In turn, the U.S.-NATO military agenda serves to endorse a powerful business elite which relentlessly overshadows and undermines the functions of civilian government.

This book takes the reader through the corridors of the Federal Reserve and the Council on Foreign Relations, behind closed doors at the Bank for International Settlements, into the plush corporate boardrooms on Wall Street where far-reaching financial transactions are routinely undertaken from computer terminals linked up to major stock markets, at the touch of a mouse button.

Each of the authors in this collection digs beneath the gilded surface to reveal a complex web of deceit and media distortion which serves to conceal the workings of the global economic system and its devastating impacts on people’s lives. Our analysis focuses on the role of powerful economic and political actors in an environment wrought by corruption, financial manipulation and fraud.

Despite the diversity of viewpoints and perspectives presented within this volume, all of the contributors ultimately come to the same conclusion: humanity is at the crossroads of the most serious economic and social crisis in modern history.

The meltdown of financial markets in 2008-2009 was the result of institutionalized fraud and financial manipulation. The "bank bailouts" were implemented on the instructions of Wall Street, leading to the largest transfer of money wealth in recorded history, while simultaneously creating an insurmountable public debt.

With the worldwide deterioration of living standards and plummeting consumer spending, the entire structure of international commodity trade is potentially in jeopardy. The payments system of money transactions is in disarray. Following the collapse of employment, the payment of wages is disrupted, which in turn triggers a downfall in expenditures on necessary consumer goods and services. This dramatic plunge in purchasing power backfires on the productive system, resulting in a string of layoffs, plant closures and bankruptcies. Exacerbated by the freeze on credit, the decline in consumer demand contributes to the demobilization of human and material resources.

This process of economic decline is cumulative. All categories of the labor force are affected. Payments of wages are no longer implemented, credit is disrupted and capital investments are at a standstill. Meanwhile, in Western countries, the "social safety net" inherited from the welfare state, which protects the unemployed during an economic downturn, is also in jeopardy.

The Myth of Economic Recovery

The existence of a "Great Depression" on the scale of the 1930s, while often acknowledged, is overshadowed by an unbending consensus: "The economy is on the road to recovery".

While there is talk of an economic renewal, Wall Street commentators have persistently and intentionally overlooked the fact that the financial meltdown is not simply composed of one bubble – the housing real estate bubble – which has already burst. In fact, the crisis has many bubbles, all of which dwarf the housing bubble burst of 2008.

Although there is no fundamental disagreement among mainstream analysts on the occurrence of an economic recovery, there is heated debate as to when it will occur, whether in the next quarter, or in the third quarter of next year, etc. Already in early 2010, the "recovery" of the U.S. economy had been predicted and confirmed through a carefully worded barrage of media disinformation. Meanwhile, the social plight of increased unemployment in America has been scrupulously camouflaged. Economists view bankruptcy as a microeconomic phenomenon.

The media reports on bankruptcies, while revealing local-level realities affecting one or more factories, fail to provide an overall picture of what is happening at the national and international levels. When all these simultaneous plant closures in towns and cities across the land are added together, a very different picture emerges: entire sectors of a national economy are closing down.

Public opinion continues to be misled as to the causes and consequences of the economic crisis, not to mention the policy solutions. People are led to believe that the economy has a logic of its own which depends on the free interplay of market forces, and that powerful financial actors, who pull the strings in the corporate boardrooms, could not, under any circumstances, have willfully influenced the course of economic events.

The relentless and fraudulent appropriation of wealth is upheld as an integral part of "the American dream", as a means to spreading the benefits of economic growth. As conveyed by Michael Hudson, the myth becomes entrenched that "without wealth at the top, there would be nothing to trickle down." Such flawed logic of the business cycle overshadows an understanding of the structural and historical origins of the global economic crisis.

Financial Fraud

Media disinformation largely serves the interests of a handful of global banks and institutional speculators which use their command over financial and commodity markets to amass vast amounts of money wealth. The corridors of the state are controlled by the corporate establishment including the speculators. Meanwhile, the "bank bailouts", presented to the public as a requisite for economic recovery, have facilitated and legitimized a further process of appropriation of wealth.

Vast amounts of money wealth are acquired through market manipulation. Often referred to as "deregulation", the financial apparatus has developed sophisticated instruments of outright manipulation and deceit. With inside information and foreknowledge, major financial actors, using the instruments of speculative trade, have the ability to fiddle and rig market movements to their advantage, precipitate the collapse of a competitor and wreck havoc in the economies of developing countries. These tools of manipulation have become an integral part of the financial architecture; they are embedded in the system.

The Failure of Mainstream Economics

The economics profession, particularly in the universities, rarely addresses the actual "real world" functioning of markets. Theoretical constructs centered on mathematical models serve to represent an abstract, fictional world in which individuals are equal. There is no theoretical distinction between workers, consumers or corporations, all of which are referred to as "individual traders". No single individual has the power or ability to influence the market, nor can there be any conflict between workers and capitalists within this abstract world.

By failing to examine the interplay of powerful economic actors in the "real life" economy, the processes of market rigging, financial manipulation and fraud are overlooked. The concentration and centralization of economic decision-making, the role of the financial elites, the economic thinks tanks, the corporate boardrooms: none of these issues are examined in the universities’ economics programs. The theoretical construct is dysfunctional; it cannot be used to provide an understanding of the economic crisis.

Economic science is an ideological construct which serves to camouflage and justify the New World Order. A set of dogmatic postulates serves to uphold free market capitalism by denying the existence of social inequality and the profit-driven nature of the system is denied. The role of powerful economic actors and how these actors are able to influence the workings of financial and commodity markets is not a matter of concern for the discipline’s theoreticians. The powers of market manipulation which serve to appropriate vast amounts of money wealth are rarely addressed. And when they are acknowledged, they are considered to belong to the realm of sociology or political science.

This means that the policy and institutional framework behind this global economic system, which has been shaped in the course of the last thirty years, is rarely analyzed by mainstream economists. It follows that economics as a discipline, with some exceptions, has not provided the analysis required to comprehend the economic crisis. In fact, its main free market postulates deny the existence of a crisis. The focus of neoclassical economics is on equilibrium, disequilibrium and "market correction" or "adjustment" through the market mechanism, as a means to putting the economy back "onto the path of self-sustained growth".

Poverty and Social Inequality

The global political economy is a system that enriches the very few at the expense of the vast majority. The global economic crisis has contributed to widening social inequalities both within and between countries. Under global capitalism, mounting poverty is not the result of a scarcity or a lack of human and material resources. Quite the opposite holds true: the economic depression is marked by a process of disengagement of human resources and physical capital. People’s lives are destroyed. The economic crisis is deep-seated.

The structures of social inequality have, quite deliberately, been reinforced, leading not only to a generalized process of impoverishment but also to the demise of the middle and upper middle income groups.

Middle class consumerism, on which this unruly model of capitalist development is based, is also threatened. Bankruptcies have hit several of the most vibrant sectors of the consumer economy. The middle classes in the West have, for several decades, been subjected to the erosion of their material wealth. While the middle class exists in theory, it is a class built and sustained by household debt.

The wealthy rather than the middle class are rapidly becoming the consuming class, leading to the relentless growth of the luxury goods economy. Moreover, with the drying up of the middle class markets for manufactured goods, a central and decisive shift in the structure of economic growth has occurred. With the demise of the civilian economy, the development of America’s war economy, supported by a whopping near-trillion dollar defense budget, has reached new heights. As stock markets tumble and the recession unfolds, the advanced weapons industries, the military and national security contractors and the up-and-coming mercenary companies (among others) have experienced a thriving and booming growth of their various activities.

War and the Economic Crisis

War is inextricably linked to the impoverishment of people at home and around the world. Militarization and the economic crisis are intimately related. The provision of essential goods and services to meet basic human needs has been replaced by a profit-driven "killing machine" in support of America’s "Global War on Terror". The poor are made to fight the poor. Yet war enriches the upper class, which controls industry, the military, oil and banking. In a war economy, death is good for business, poverty is good for society, and power is good for politics. Western nations, particularly the United States, spend hundreds of billions of dollars a year to murder innocent people in far-away impoverished nations, while the people at home suffer the disparities of poverty, class, gender and racial divides.

An outright "economic war" resulting in unemployment, poverty and disease is carried out through the free market. People’s lives are in a freefall and their purchasing power is destroyed. In a very real sense, the last twenty years of global "free market" economy have resulted, through poverty and social destitution, in the lives of millions of people.

Rather than addressing an impending social catastrophe, Western governments, which serve the interests of the economic elites, have installed a "Big Brother" police state, with a mandate to confront and repress all forms of opposition and social dissent.

The economic and social crisis has by no means reached its climax and entire countries, including Greece and Iceland, are at risk. One need only look at the escalation of the Middle East Central Asian war and the U.S.-NATO threats to China, Russia and Iran to witness how war and the economy are intimately related.

Our Analysis in this Book

The contributors to this book reveal the intricacies of global banking and its insidious relationship to the military industrial complex and the oil conglomerates. The book presents an inter- disciplinary and multi-faceted approach, while also conveying an understanding of the historical and institutional dimensions. The complex relations of the economic crisis to war, empire and worldwide poverty are highlighted. This crisis has a truly global reach and repercussions that reverberate throughout all nations, across all societies.

In Part I, the overall causes of the global economic crisis as well as the failures of mainstream economics are laid out. Michel Chossudovsky focuses on the history of financial deregulation and speculation. Tanya Cariina Hsu analyzes the role of the American Empire and its relationship to the economic crisis. John Bellamy Foster and Fred Magdoff undertake a comprehensive review of the political economy of the crisis, explaining the central role of monetary policy. James Petras and Claudia von Werlhof provide a detailed review and critique of neoliberalism, focusing on the economic, political and social repercussions of the "free market" reforms. Shamus Cooke examines the central role of debt, both public and private.

Part II, which includes chapters by Michel Chossudovsky and Peter Phillips, analyzes the rising tide of poverty and social inequality resulting from the Great Depression.

With contributions by Michel Chossudovsky, Peter Dale Scott, Michael Hudson, Bill Van Auken, Tom Burghardt and Andrew Gavin Marshall, Part III examines the relationship between the economic crisis, National Security, the U.S.-NATO led war and world government. In this context, as conveyed by Peter Dale Scott, the economic crisis creates social conditions which favor the instatement of martial law.

The focus in Part IV is on the global monetary system, its evolution and its changing role. Andrew Gavin Marshall examines the history of central banking as well as various initiatives to create regional and global currency systems. Ellen Brown focuses on the creation of a global central bank and global currency through the Bank for International Settlements (BIS). Richard C. Cook examines the debt-based monetary system as a system of control and provides a framework for democratizing the monetary system.

Part V focuses on the working of the Shadow Banking System, which triggered the 2008 meltdown of financial markets. The chapters by Mike Whitney and Ellen Brown describe in detail how Wall Street’s Ponzi scheme was used to manipulate the market and transfer billions of dollars into the pockets of the banksters.

We are indebted to the authors for their carefully documented research, incisive analysis, and, foremost, for their unbending commitment to the truth: Tom Burghardt, Ellen Brown, Richard C. Cook, Shamus Cooke, John Bellamy Foster, Michael Hudson, Tanya Cariina Hsu, Fred Magdoff, James Petras, Peter Phillips, Peter Dale Scott, Mike Whitney, Bill Van Auken and Claudia von Werlhof, have provided, with utmost clarity, an understanding of the diverse and complex economic, social and political processes which are affecting the lives of millions of people around the world.

We owe a debt of gratitude to Maja Romano of Global Research Publishers, who relentlessly oversaw and coordinated the editing and production of this book, including the creative front page concept. We wish to thank Andréa Joseph for the careful typesetting of the manuscript and front page graphics. We also extend our thanks and appreciation to Isabelle Goulet, Julie Lévesque and Drew McKevitt for their support in the revision and copyediting of the manuscript.

Michel Chossudovsky and Andrew Gavin Marshall, Montreal and Vancouver, May 2010