Saturday, May 15, 2010

Exclusive: Waddell is mystery trader in market plunge

The final numbers of the day's trading is shown on a board on the floor of the New York Stock Exchange in New York May 6, 2010. REUTERS/Lucas Jackson

NEW YORK (Reuters) - A big mystery seller of futures contracts during the market meltdown last week was not a hedge fund or a high-frequency trader as many have suspected, but money manager Waddell & Reed Financial Inc, according to a document obtained by Reuters.

Waddell on May 6 sold a large order of e-mini contracts during a 20-minute span in which U.S. equities markets plunged, briefly wiping out nearly $1 trillion in market capital, the internal document from Chicago Mercantile Exchange parent CME Group Inc said.

The e-minis are one of the most liquid futures contracts in the world, providing holders exposure to the benchmark Standard & Poor's 500 Index. The contracts can act as a directional indicator for the underlying stock index.

Regulators and exchange officials quickly focused on Waddell's sale of 75,000 e-mini contracts, which the document said "superficially appeared to be anomalous activity."

More than a week after the incident, it was still not clear what impact the unusual trading in the futures contracts had on the broader meltdown in the stock market.

Waddell manages the $22.1 billion Ivy Asset Strategy fund, which is well-known for hedging with equity index futures when manager Mike Avery, who is also chief investment officer at the company, feels uneasy about the market.

The Asset Strategy fund has dropped 2.76 percent this quarter, compared with a 0.80 percent decline in the S&P 500, data from Lipper Inc, a unit of Thomson Reuters Corp show.

Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, said in congressional testimony on Tuesday that it had found one sale that was responsible for about 9 percent of the volume in e-minis during the sell-off in the U.S. markets.

Gensler said there was no suggestion that the trader, whom he did not identify, did anything wrong in only entering orders to sell. Gensler said data showed that the trades appeared to be part of a bona fide hedging strategy.


It is unclear what impact the trading in the e-minis had on stock prices during the plunge, but regulators have scrutinized futures trading because the sharp decline in that market preceded the dive in the broader U.S. equities market.

The document said that during the sell-off and subsequent rally, other active traders in e-minis included Jump Trading, Goldman Sachs Group Inc, Interactive Brokers Group Inc, JPMorgan Chase & Co and Citadel Group.

During the 20-minute period, 842,514 contracts in e-minis were traded. The CME document did not provide a break-out of Waddell's trading during that crucial time, but said from 2 p.m. EDT (1800 GMT) to 3 p.m. it traded 75,000 contracts.

Overland Park, Kansas-based Waddell declined to return calls seeking comment. But in a statement, the company said: "Like many market participants, Waddell & Reed was affected negatively by the market activity of May 6."

Waddell said in its statement that it often uses futures trading to "protect fund investors from downside risk," and on May 6 it executed several trading strategies including the use of index futures contracts as part of normal operations.

The notional value of the contracts sold by Waddell was $4.2 billion, according to document. How much Waddell paid for the contracts was not stated, but typically the cost would be far less than their notional value.

The company, which advises and distributes the Ivy Funds, has made a name with good results from its family of mutual funds.

Waddell's shares fell after the Reuters report, and closed down 5.3 percent at $32.25. Volume was 1.28 million shares, more than triple the daily average this year.

Analyst Jason Weyeneth of New York brokerage Sterne Agee said he had not learned anything on Friday to lead him to change his "neutral" rating on Waddell stock.

The CFTC declined to comment.

A CME spokesman, who declined to comment on the document, said the Chicago-based futures exchange operator never discusses customer activity.

"We found no evidence of improper trading activity or erroneous trades by CME Globex customers," said CME spokesman Allan Schoenberg.

Trading in e-minis takes place entirely on the CME's Globex exchange. Hedge funds and high-speed trading firms often use the e-mini in an arbitrage strategy that seeks to capture the change in prices between the futures contract and the S&P 500.

Waddell's contracts were executed at Barclays Plc'sBarclays Capital and later given up to Morgan Stanley, according to the document.

CME said it spoke to representatives from both banks on May 6 and planned to speak to Waddell representatives the following day. The firm oversaw $74.2 billion in assets as of March 31.

Morgan Stanley told CME that it did not have concerns regarding Waddell's activity because it "would typically use equity index futures to hedge macro market risk associated with the substantial long exposure of its clients," the document said.


Gensler said the contracts were sold between 2:32 p.m. and 2:51 p.m., the height of the meltdown.

The market for e-minis on May 6 fell more than 5 percent in a little more than 5 minutes starting at 2:40 p.m. -- the height of the crash, the document said. The e-minis began to recover before stock prices turned higher.

An order the size of the Waddell contract would be a big trade to execute on a normal day, said a trader whose firm is active in the S&P 500 futures market. About 50,000 contracts are typically traded in an hour, the trader said.

"To get rid of 75,000 contracts, that's a lot of trading even if the market is healthy," the trader said. "But when suddenly the market changes and there's not as many bids there to trade with, 75,000 is going to cause quite a shock to the market.

"That's an enormous position for anybody, whether it's a hedge or whether it's a trade. It's a big position, no doubt about it," the trader said.

The Uptick Rule & Fat Finger Idiocy

There’s been no shortage of ridiculous explanations behind last Fridays stock market plunge which took the Dow Jones Industrial Average down 1,000 points. Perhaps the most preposterous of them all is the so called “Fat Finger” theory which suggests that some “lone trader” accidentally shorted S&P E-Mini futures contracts to the tune of $1 billion. This theory would be easily laughed away if it weren’t plastered all over our main stream media.

Both the CME and ICE trading systems, have multiple market protection mechanisms which would make this impossible. Both reject orders placed outside of a reasonable price range and limit the number of contracts one can trade per given transaction. CME also has a “Stop Spike Functionality” which prevents against a cascade of stop orders from triggering a precipitous collapse. Lastly, every time a trade is entered a “Review Order” screen pops up that repeats your desired trade and basically asks – are you sure you want to do this? The “Fat Finger” theory doesn’t hold water. What does hold water, however, is the removal of a long standing SEC rule designed to protect against short sellers driving a stock into the ground – The Uptick Rule.

The Uptick Rule (SEC Rule 10a-1) went into effect in 1938, following a crash in the previous year. The rule is quite simple – Short sellers can only short a stock after an “up tick” (increase) in price. This mechanism, which remained in effect until July 2007 , prevented free fall stock prices for nearly 70 years. Months after the removal of the uptick rule, stock prices plummeted in a manner which was reminiscent of crashes experienced 70 years earlier.

The history of the Uptick rule is interesting. It was created by a market manipulator who amassed a fortune by short selling stocks into the ground during the crash of 1929. As the country reeled through the depression, this investors net worth climbed from $4 million in 1929 to $180 million by 1935 and he would go on to become the 1st Chairman of the SEC, working to fill the very market vulnerability that made him reach years earlier. His name, of course, was Joseph P Kennedy (Father of John F Kennedy).

Kennedy was ‘uniquely qualified’ to expose the inefficiencies of the stock market. The zero uptick which was formed under his SEC prevented the 50% to 90% crashes that were common during his era. The SEC, in their infinite wisdom, decided to try things out for a while without the rule. Well, it didn’t work. The question is when will our politicians speak out and takes steps to protect investors rather than the powerful hedge fund interest who like the way thing are “Just fine.”

Gordon Duff: Times Square Bombing Part of CIA False Flag Against Pakistan



By Unattributed Intelligence Sources for Veterans Today

Foreword by Gordon Duff, Senior Editor

Veterans Today realized some time ago that Pakistan would be the key to US security. Toward that end, we formed a partnership with Opinion-Maker (, one of the most influential publications in that country and one that takes courageous stands in a country new to democracy. Jeff Gates and I traveled to Pakistan this spring at the initiation of VT co-editor Raja Mujtaba. While in Pakistan, we were briefed by the highest levels of the military and intelligence communities in what were frank and open exchanges. These exchanges were open to a degree where considerable trust was shared and much of the information given could never be released. Those agreements related to the lives and safety of American and Pakistani soldiers in the field and were based on relationships of honor and trust. Those promises will be kept.

I can still tell my grandchildren that I had dinner with former ISI Chief Hameed Gul and tea with Colonel Imam, the famed intermediary with the Mujahideen now missing and presumed held prisoner by the Taliban. In military circles, being able to claim former Chairman of Pakistan’s Joint Chiefs of Staff, Admiral Sirohey a friend or being consulted by former Head of the Army General Beg is well up the “name dropping” scale. It isn’t who you meet, it is what is done, what is contributed that counts. Toward that end, these individuals and those we can’t name, along with Raja Mujtaba’s associates led by military strategist and author BG Asif Haroon Raja, Jeff and I felt we had a rare privilege and a rare look into the inner workings of Pakistan’s intelligence community.

Our point was to make sure everyone could take the gloves off and let fly, say what they thought and not play journalist or whatever it is when America sends officials into Pakistan to be told what they want to hear. Lack of status has its rewards at times and this was one of those rare times when views and doubts could be expressed and shared. This leads us to the document below. What is it?

It comes from Pakistan and bears the seal of approval of, well, I know where it comes from. How it is taken and what is done is another story. I have been assured that witnesses, recordings and such exist. I recognize the methodologies used and attributed to American intelligence agencies. I also see the untold hand of India and Israel, names not included for reason of, frankly, survival.

The reader can see truth if it is there or, as so often is the case, see truth but feel overwhelmed and helpless, knowing that America can be duplicitous and that nothing is as it seems. You are going to be told that the CIA is responsible for the Time Square bombing, knows as the “Time Square Fizzler.” Many suspected it, the CIA or the CIA with their constant companions in idiocy, the Israeli Mossad, a name that no official in Pakistan will mention to their paymasters in Washington for fear of offense.

No mention of a 65 billion dollar per year drug trade is made either but I strongly suggest that, where appropriate, a texture, a backdrop be constructed that includes mercenary contractors, Mossad and RAW agents and a sea of drug cash. The story itself is simple, a tale of betrayal. Why would the US have an intelligence agency involved in such convoluted plots as seen below? What is the role of Israel or India? How much of what is going on is driven by so many other concerns, not just drugs but religion, jealousy and hate?

What is clear, or should be is that what is done, what has been done did not serve the security of the United States. Another agenda was there. Security services that Americans pay tens, even hundreds of billions of dollars per year to be protected by have, for decades, often answered to a different call, one related to power, criminalism and deceit. Our culture is filled with such stories, none will be unfamiliar.

We can pretend it is just movie. Keep telling yourself this.

And the story opens as follows:

BEEP: Bloody CIA agent Hamid Mir exposed (WITH TAPED AUDIO CALL)
Today at 7:51am
This looks like a tale of fiction and movies. But this is a real life drama unfolding in Pakistan around us.

The secret web of betrayal and treachery – The untold story of Khalid Khawaja, Hamid Mir, Mullah Barader and Faisal Shehzad

Any links between the three?? Seems impossible! But not in this high stakes State-sponsored dirty, sinister world of covert ops, double agents, sting operations and assassinations.

Lets start the story:

Americans have been trying to play a sinister game. They had penetrated into the ranks of Afghan Taliban especially into the Popalzai tribe and had cultivated a high level Afghan Taliban leader to be pitched against Mullah Umer. Basically, CIA was creating a “coup” within Taliban. Hold your breath, sit back and prepare yourself to know who this secret “CIA asset” within the Taliban was.. It was Mullah Barader! Yes, the same one captured in Karachi by ISI and US is desperate to have him.

The CIA plan was that Mullah Barader would be brought to Karachi and then ISI would be tipped to arrest him. Then US were to ask the custody of the Afghan leader and Pakistan government would hand over the Afghan Talib leader to US. The result would be catastrophic for Pakistan as all pro-Taliban elements would then condemn ISI and Pakistan as CIA puppets and a serious breach of trust and confidence would appear between Pakistani security establishment and Afghan Mujahideen. This would also humiliate army and ISI in front of the nation. CIA and US administration were extremely upset when ISI refused to hand over Mullah Barader to US, despite the pressure from Zardari mafia. ISI initially did not know the CIA game. They just refused to hand over Barader to US and insisted upon their own interrogation first. Unknowingly, ISI was seriously damaging the US game plan of staging a coup against Mullah Omar as well as against ISI. During the interrogation, the entire game became exposed to the ISI.

The Zardari clan was equally desperate to hand over Barader to US. Here, enters Khalid Khawaja!

Out of his love for Taliban, unknowingly that he is entering to a global game of espionage and betrayal, KK filed a petition into the SC taking a stay order against handing over of Mullah Barader to US. Now US were furious. KK had signed his death warrant and now was marked for death.

KK (Khalid Khawaja) had been going to North Waziristan and dealing with TTP, trying his best to start a reconciliation process between Pakistan and TTP. He was also aware of the fact that a “Lashkar Jhangvi” faction of TTP was opposed to these attempts at peace talks. These include Ilyas Kashmiri gang commonly called Punjabi Taliban. When KK was returning from talks with Hakim Ullah Mehsud, he was invited by Punjabi Taliban group and taken prisoner along with Col Imam and Asad Qureshi, the journalist.

Initially, TTP was unaware of KK and his party’s being taken prisoner by the Punjabi Taliban. Later, when Hakeem Ullah Mehsud came to know of the drama, he tried to secure the release of the men. But then, enters another treacherous character from Geo TV.

Hamid Mir, makes a call to the Punjabi Taliban and ask them not to release KK and instigates them to assassinate KK as a spy! Hamid Mir, talks to Punjabi Taliban (PT) in detail and this entire conversation is recored by the PT and the tape is taken to HakimUllah Mehsud. The allegations, charges and accusations against KK which were leveled by Hamid Mir were so severe that HakimUllah Mehsud also fell for the trap and allowed the execution of KK after making him read the confessional statement which was exactly what Hamid Mir had dictated to the PT. This tape is now available and is the most direct incriminating evidence against Hamid Mir. It is clear that Hamid Mir was launched by Americans to use his influence on the TTP and PT to get KK assassinated. It was done with precision, except for one blunder – the tape is now with Pakistani secret services.

The American desire is to wage a war in North Waziristan against Haqqani / Afghan Taliban networks. Pakistan army is not willing to do that. Americans tried to use Mullah Barader to create serious mistrust and hatred between Afghan Taliban and Pakistan army. That was failed when Barader was not handed over to US and Khalid Khawaja unknowingly became a major setback for the Americans when he took a court order against Barader’s extradition. Khalid was trapped and Hamid Mir was used to mislead TTP into assassinating KK. But in the end, the US plan of waging a war in North Waziristan fizzles out.

Now a backup plan was required to create reasons to initiate a war into North Waziristan. – Here enter Faisal Shehzad – a false flag operation to implicate Pakistani Taliban and then threaten and force Pakistan to “do more” in North Waziristan! Another Pakistani is arrested in Chile in the US embassy with traces of explosives on his luggage and clothes. More Pakistanis are being arrested and a massive media disinformation war is being launched that all global terrorism is emerging from Pakistani tribal pocket of North Waziristan and ISI/army is either hands and gloves with Taliban or nor willing to do more.

So now, you understand the tone, language and demeanor of Hillary and US media over Faisal Shehzad! Despite the fact that US army Generals have confirmed that Faisal had no links with anyone in FATA.

Pakistan was being setup for a possible geopolitical disaster. Allah protected Pakistan. US and Indians through their assets in Media and in terrorist groups continue to kick dust and deceive the world and Pakistani nation. But now, this time at least, their game is exposed.


Mervyn King: "World's Worst Financial Crisis Ever"

Bank of England Governor Mervyn King says:

We are still halfway through the world's worst financial crisis ever.

He is in good company.

The following experts have said that the economic crisis could be worse than the Great Depression:

Gold could touch $5,000 before this is all over…

Gold is once again above $1,200 and making new highs. And yet, Doug Casey thinks we’re just getting started, estimating gold could touch $5,000 before this is all over. A titillating thought, to be sure, but… how likely is that?

Gold’s latest rise stems from mounting fear that the Greek bailout will be followed by other euro-area countries queued for a me-too handout. In other words, gold is serving its historical role as a safe haven, a store of value, and an alternate form of money when governments recklessly plunge themselves heavily into debt and abuse their currency.

“But Jeff, $5,000 gold is a long way up,” the skeptics observe. “If you step back and look at the big picture, isn’t the gold price bubbly here?”

One way to test Doug’s thinking is to look at other simmering trouble spots that would similarly impact gold should they boil over. So, let us indeed review the big-screen events I believe could send gold a lot higher. See if you agree.

ONE: The PIIGS are not done squealing.

Greece’s Gordian Knot of public debt has not been solved. In fact, Moody’s is considering downgrading Greece’s debt to junk status, stating that the announced €750 billion aid package will be “inadequate to stabilize the problems in both Greece and Portugal.”

Ireland appears next likely to be downgraded. Spain and Italy are not far behind. And little reported is the European Central Bank (ECB) saying it will purchase billions of troubled assets from Europe’s largest banks as part of the rescue program. Where have we seen this before? And gee, it’s worked so well; 68 U.S. banks have failed so far in 2010, a full year after the government provided bailout money.

But it’s the long-term consequences of intended ECB actions that are most worrisome. “The ECB is going to crank up the printing presses,” says Anton Börner, head of Germany’s export federation. “In five to ten years we will have a weak currency, with rising inflation and higher rates of inflation that will act as a break on growth.”

Nouriel Roubini notes that “rising sovereign debt from the U.S. to Japan and Greece will ultimately lead to higher inflation or government defaults. While today markets are being worried about Greece, Greece is just the tip of the iceberg.”

So the obvious question is, what happens to the gold price as debt contagion spreads beyond Greece and the monetary effects of the bailout slam onto the shores of other European countries?

TWO: Knee-jerk confidence in the dollar keeps inflation at bay.

The U.S. debt-to-GDP ratio stands at 90.1%, and the projected 2011 budget deficit is $1.26 trillion or 7.1% of GDP. Total U.S. debt exceeds $55 trillion, over $180,000 per citizen, and the new healthcare legislation is expected to add another $1 trillion burden on the economy. These numbers put America in league with our squealing European friends mentioned above.

Plus, the U.S. monetary base was ballooned and remains over $2 trillion. Are we absolutely sure governments are done printing money? How will government leaders react if bank failures continue? Or commercial real estate crashes? Or state pensions begin to fail? Or unemployment remains in double digits?

It’s clear the U.S. dollar will suffer inflation due to high and growing debt-servicing costs, government payrolls, and unfunded entitlement promises. The U.S. can either default or inflate, and the former is unthinkable to a career politician. At some point – and we think it is fast approaching – global investors will see that U.S. indebtedness has reached unsustainable levels and exit the dollar, which today means selling bonds. Interest rates will be forced higher, and the U.S. will face its own Greek Moment.

So, what happens to the gold price when the dollar starts falling in earnest?

THREE: The public still doesn’t own much gold.

This may be the biggest one of all. To show just how small the investment in gold is on a worldwide scale, consider these facts:

* Jim Rogers reported that at a conference of 300 money managers last month, 76% admitted they still own no gold.
* Fund manager John Paulson is having difficulty raising money for his gold fund.
* Total investment in all forms of gold represents less than 1% of global financial assets. If investment demand merely doubles to 2% – something we see as easily attainable – it will have a powerful effect on the gold price.

What happens to the gold price when the public begins to clamor for it and a true gold rush gets underway?

FOUR: The Unknown Unknowns.

A boxing coach will tell you rule #1 is to not get fixated on the hand that’s punching you – because that’s when the other glove comes flying in and decks you, sending you down for the count.

It’s the unexpected event, the unforeseen catastrophe, the surprise punch that could catch us all off guard and send gold higher. And while we may like the green on our screen from a rising gold price, my fear is that an unexpected economic or monetary ambush could be serious enough that what the gold price is doing is a secondary affair.

Prepare for the unknown. And that, perhaps, is gold’s greatest strength – not that it can make you rich, but that it protects you and your family from unpredictable events that would otherwise be catastrophic.

Whether you agree or not that gold will reach $5,000 an ounce, don’t miss the point. Any number of events could send gold higher. And it is during calamitous times of crisis, devaluation, debasement, inflation, and the unknown that gold is needed most. Imagine the Greek worker who has one-third of his assets in gold right now; he may be smiling more than rioting.

I think the rise in price is sending us a message. And this is what I think gold is saying…

I won’t always be this cheap. If you don’t buy me soon, you may regret it. I may get less expensive in the short term, but don’t mistake that to mean I’m losing value or that everything is fine with your paper currencies or your economic future. What you’ve done to your fiat currencies will hurt you. What is coming to the price of things will overwhelm you. What the government has debased will haunt you. I’m here to protect your finances. I may be the only thing that can really do that.

You can be cautious about the price, but don’t be short-sighted about the purpose. Are you sure you own enough of me?

We review and recommend a new gold fund in the April issue of Casey’s Gold & Resource Report. And you can access all our back issues, including one that names the least expensive dealers for buying physical gold. Get a risk free trial here…

California: "Absolutely terrible" budget cuts to be announced at 4 PM ET

There will be a live webcast of Governor Schwarzenegger's comments here on the new budget that his office says includes "absolutely terrible cuts".

From the LA Times: Schwarzenegger's revised budget plan is expected to eliminate health programs

Administration officials declined to reveal which specific programs the governor would eliminate. But officials involved in the budget process, who spoke on condition of anonymity because they are not authorized to speak publicly, said they would probably include home healthcare for the elderly and disabled, a nearly $2-billion program that serves 440,000 Californians.
From the SacBee: Schwarzenegger's prison plan would move nonviolent felons to county jails
Gov. Arnold Schwarzenegger will revive a plan to house 15,000 nonviolent felons in county jails instead of state prisons, a cost-cutting move that likely would result in some inmates leaving jail early. ... His office warned earlier this week that the package will contain "absolutely terrible cuts" to shrink a nearly $20 billion deficit.
The cutbacks and layoffs continue for many state and local governments.

Lone money manager may have sparked (stock market) plunge

Reuters: Document shows money manager sold a large order of contracts

NEW YORK - A big mystery seller of futures contracts during the market meltdown last week was not a hedge fund or a high frequency trader as many have suspected, but money manger Waddell & Reed Financial Inc, according to a document obtained by Reuters.

Waddell sold on May 6 a large order of e-mini contracts during a 20-minute span in which U.S. equity markets plunged, briefly wiping out nearly $1 trillion in market capital, the internal document from CME Group Inc said.

Regulators and exchange officials quickly focused on Waddell's sale of 75,000 e-mini contracts, which the document said "superficially appeared to be anomalous activity."

Gary Gensler, chairman of the Commodity Futures Trading Commission, said in congressional testimony Tuesday that it had found one sale was responsible for about 9 percent of the volume in e-minis during the sell-off in the U.S. markets.


Turkey positions missiles to repulse Israeli aerial incursions

According to a leading Turkish newspaper, Turkey has set up anti-aircraft batteries against Hawk planes in a village near the Turkey-Syria border. The news item was reproduced by the Israeli daily 'Maariv' which refrained from mentioning its Turkish source.

The Turkish newspaper asserted that the purpose of deploying the missile batteries was to prevent Israeli aircraft from penetrating Turkish airspace on their way to launching attacks against the Syrian capital of Damascus or Iranian targets.

According to the newspaper, the missile batteries were set up in the village of Kiel, located in the province of Iskandaron near the Syrian border in southern Turkey.

The newspaper quoted a Turkish military source, who preferred to remain anonymous, as saying that the purpose of the missiles were to protect and defend Turkish airspace against all aerial incursions in addition to repulsing American and Israeli penetrations in the event that they should launch attacks against Syria or Iran.

Fighting For Our Freedom?

To even question the active wars in Iraq and Afghanistan or the now-institutionalized worldwide military empire being maintained by the U.S. government draws Tourette’s-like attacks from all who identify themselves as conservatives. Not only are critics of U.S. foreign policy accused of being unpatriotic or even traitorous, but conservatives routinely go so far as to label them ungrateful. The argument goes that critics of the empire enjoy the freedom of speech with which they criticize the government only because the military has fought to defend that freedom. Therefore, those who oppose the present wars or our military presence around the world should be ashamed of themselves for "biting the hand that feeds them."

Of course, this argument rests upon an assumption. The assumption is that if the U.S. had not fought any of its past or current wars or had not maintained its military presence around the world, that we would have lost some or all of our freedom. This fundamental assumption is never questioned (or I suspect even considered) by supporters of U.S. foreign policy, despite the fact that it completely disintegrates under even superficial examination.

Let’s give conservatives WWII for now, Pat Buchanan’s interesting arguments notwithstanding. Is there any credible argument to be made regarding any of the major wars that the United States has waged since 1945 wherein one could conclude that not fighting it would have resulted in a loss of freedom for Americans? What chain of events can any reasonable person construct whereby U.S. citizens would have lost their freedom if not for the invasions of Korea, Viet Nam, Afghanistan, or Iraq?

The first two post-WWII wars were justified for ostensibly the same reason. We supposedly had to prevent the communist governments of North Korea and North Viet Nam from taking over South Korea and South Viet Nam, respectively, because if we did not, communism would spread like a virus throughout all of Asia and eventually the world. This was the so-called "Domino Theory." While anyone with a globe that is more or less correctly scaled can see through the ridiculousness of the argument in terms of Korea, one need not even resort to conjecture to refute this argument regarding the Viet Nam war. History has shown in its case that the domino theory was completely untrue.

North Viet Nam did take over South Viet Nam. The U.S. pulled out of Viet Nam in defeat and the very outcome that the U.S. had spent 14 years, the lives of 50,000 U.S. soldiers, and hundreds of billions of dollars attempting to prevent came to pass. The communists took over all of Viet Nam.

Did American citizens lose any freedom as a result? No. In fact, as young men were no longer conscripted into the army to participate in this futile exercise, antiwar protestors were no longer being suppressed, and a huge chunk of government spending was eliminated (in theory, anyway), Americans were actually far freer once the war was lost than they were while it was being fought.

There is no argument to be made, no matter how far logic is stretched or how much disbelief is suspended, that Americans lost any freedom as a result of the loss of the Viet Nam war. Therefore, the assertion that the troops fighting it were "fighting for our freedom" must be false.

Moreover, communism didn’t spread like wildfire beyond Viet Nam. After approximately 12 years, it imploded there just as it did in China at about the same time. In the mid-1980’s, the Vietnamese began transitioning to a market economy, just as China did. Today, both countries are arguably as capitalist as the United States, which unfortunately isn’t saying much.

As for Korea, the most generous conclusion one could come to regarding the "fighting for our freedom" theory is that the jury is still out – sixty years later. U.S. troops are still stationed at the 38th parallel, supposedly keeping the communist barbarians from taking over South Korea as a stepping stone to the rest of the world. Here speculation is certainly necessary, but not random speculation. While it certainly would not be a positive outcome for South Koreans, can anyone seriously argue that if North Korea took over South Korea tomorrow that American freedom would be lost or even noticeably diminished? How?

Fast-forward 25 years and consider the present war in Iraq. That war was started based upon on the assertion that Iraq possessed weapons of mass destruction that it was preparing to use against its neighbors to destabilize the Middle East. Let’s pretend for a moment that this assertion was not proven completely false. Exactly how would another war in the Middle East, which would presumably resemble Iraq’s ten-year war with Iran, jeopardize the freedom of American citizens? What cause and effect relationship could possibly be established between Middle Eastern politics and American freedom? This question has to be answered before the "fighting for our freedom" assertion can be proven.

There is only one answer: none. The Middle East has been unstable for thousands of years, and freedom has come and gone for countless western nations regardless of political developments in the Middle East, with the exception of the actual invasions of Western Europe by Muslim nations in the Middle Ages. Those were ultimately defeated. Certainly today the Middle Eastern nations pose no military threat to Europe, much less the United States. To assert that Afghanistan could possibly threaten American freedom borders upon the absurd.

Putting the active wars aside for the moment, any objective observer would be even harder pressed to conclude that the U.S. military presence in the other 135 countries in which the U.S. maintains troops is contributing anything toward American freedom. Can anyone seriously argue that if the U.S. government were to remove the 56,000 troops presently stationed in Germany that American freedom would somehow be jeopardized? How? The same question applies to the 33,000 troops in Japan, the 10,000 in Italy, and so on. There is simply no reasonable argument to be made that Americans would be one iota less free if all of these troops were to come home.

Warfare conducted for any purpose other than defending the borders of the nation does not make Americans freer. On the contrary, it destroys freedom without exception. More of Americans’ property is confiscated in taxes to support warfare. Freedom of speech is curtailed. Opponents of the war are rounded up and imprisoned or exiled. Privacy is destroyed by the government in search of enemy spies or saboteurs. These destructions of freedom have occurred during every war that the United States has ever fought, including all of the wars of the past 60 years.

Furthermore, America’s vast military presence in countries where no active war is being fought also results in less freedom for Americans. Regardless of the public relations efforts of the U.S. military establishment, foreign troops are universally regarded the same way by the citizens of countries where they are stationed: they are resented. This resentment breeds terrorism in some countries and other forms of protest in others. Americans traveling abroad are much less free in what they can do, where they can safely go, and where they are welcome because of resentment born of U.S. troops’ stationing in foreign nations.

As Randolph Bourne famously observed, "war is the health of the state," and the state is the enemy of freedom. America was founded upon the idea that the state was "at best a necessary evil" and that there was an inverse relationship between war and liberty. James Madison wrote that if "tyranny and oppression come to this land, it will be in the guise of fighting a foreign enemy. No Nation could preserve its freedom in the midst of continual warfare." History has proven him correct. In the post-WWII era, the wars have become more numerous and longer and government has grown exponentially. With the expansion of war and the state, freedom has diminished.

This is not an argument for pacifism or against the actual soldiers. We live in a world with other nations that pose a threat to our lives and liberty and there must be some means to defend ourselves against an aggressor nation. Whatever their reasons for joining, the men and women who serve in our military do make a huge sacrifice. The overwhelming majority of them serve honorably both on the battlefield and off. They join believing that they are defending our nation and freedom and the blame for our foreign policy does not rest with them. A military force cannot function with each of its members questioning every order before carrying it out. They have an obligation to disobey an order which is obviously immoral, such as shooting a non-combatant or torturing a prisoner, but beyond situations like those they must carry out their orders without question. They place a sacred trust in their civilian leaders to deploy them only when it is absolutely necessary.

It is those civilian leaders who have violated that trust over and over again for the past sixty years. It is they who have not supported our troops, spending their lives like so much loose change in wars that have been fought for everything but freedom. They have sent them to countries that pose no military threat to the United States whatsoever and then tied their hands with rules of engagement that, whether intentionally or not, have prolonged those wars for years and even decades. There can be no greater insult to the honor of brave soldiers than to exhort them to give their lives defending freedom when in fact freedom is not at issue in the war.

The United States government is broke. It has accumulated a debt that can never legitimately be repaid. While entitlement programs are ultimately far more economically destructive, costing over twice as much as U.S. military adventures, the $700 billion annual military budget is the next largest contributor to the deficits. Of that $700 billion, less than $200 billion is spent fighting the two current active wars. An active war should represent the high water mark of government spending, yet most of our military expenditures go to support standing armies in places like Germany and Japan.

It is evident that the military could be downsized by orders of magnitude without jeopardizing U.S. security in the least. In fact, the U.S. would be far more secure without troops in 135 countries inspiring resentment against Americans and fighting wars against nations that could not launch a military attack against the United States in anyone’s wildest dreams. Most importantly, the lives of hundreds of thousands of our troops, their opponents, and the innocent civilians in the countries that they fight in would be spared.

The gargantuan U.S. military establishment survives because American soldiers and civilians continue to accept the assertion that it is necessary to preserve our freedom. This assertion is at best a destructive delusion and at worst an insidious lie, told by people who care nothing for our troops or the civilians they defend. It is time to stop believing the lie and to truly support our troops. Bring them home.

© Thomas Mullen 2010

Senate panel approves money for Afghan, Iraq wars

WASHINGTON (Reuters) – A Senate committee on Thursday approved another $33.5 billion for the wars in Afghanistan and Iraq this year, although some members said they did so reluctantly.

The action by the Senate Appropriations Committee is the first step toward congressional approval of the extra war spending that President Barack Obama requested in February to support his surge of 30,000 more U.S. troops into Afghanistan.

But the money still must be approved by the full Senate and also by the House of Representatives, where the majority Democrats are split over the wisdom of continuing the wars.

The Senate panel unanimously approved $33.5 billion for the Pentagon for the two wars and a little under $4 billion for the State Department to help fund a "civilian stabilization strategy" to deliver more economic aid to Afghanistan as well as neighboring Pakistan.

Chairman Daniel Inouye said he hoped the Senate would act on the legislation by the end of May. The money comes on top of about $130 billion that Congress already approved for the Afghanistan and Iraq wars through September 30 of this year.

Senator Barbara Mikulski said she had "grave questions" about spending so much in Afghanistan given that its president is "running the second-most corrupt country in the world."

While U.S. troops are fighting in Afghanistan, "the Chinese are building railroads and buying up mining interests" there, Mikulski added. But she voted for the bill.

Senator Patrick Leahy, another Democrat, echoed her concerns.

"Every cent we've been spending in Iraq and Afghanistan, we've been borrowing from others, particularly the Chinese," he said. "It's very, very hard to justify some of the spending for either place."

In addition to fully funding Obama's troop surge for Afghanistan, the Pentagon funds included money to help train and equip Afghan and Iraqi security forces -- $2.6 billion and $1 billion, respectively.

It also included $1.1 billion for mine-resistant vehicles known as MRAPs.

The appropriations committee added money for other projects to the bill, including:

-- $13 billion for benefits for Vietnam War veterans who were exposed to Agent Orange.

-- $2.8 billion requested by the Obama administration for relief and reconstruction for Haiti after its devastating earthquake on January 12.

-- $5.1 billion for the Federal Emergency Management Agency. "Everyone should be advised that the ... agency is out of funding for disaster relief," Inouye said.

-- $400 million for relief from recent floods from Tennessee to Rhode island.

-- $68 million to help address the impact of the massive oil spill in the Gulf of Mexico.

(Editing by John O'Callaghan)

92% of Conservatives Believe Obama is a Socialist or a Marxist: Invasion of the Pod People

According to veteran right wing Republican direct mail consultant, Richard Viguerie, a poll he commissioned indicates that 92% of conservatives believe President Obama is a Socialist or Marxist. Did they have lobotomies or is it the invasion of Roger Ailes?

In a news release, Viguerie included this bio: "Richard A. Viguerie pioneered political direct mail and has been called 'one of the creators of the modern conservative movement'(The Nation magazine) and one of the 'conservatives of the century"\' (Washington Times). He is author of 'Conservatives Betrayed: How George W. Bush and Other Big Government Republicans Hijacked the Conservative Cause.'"

It appears that the purpose of Viguerie's poll was to urge the Tea Party not to run third party candidates because it would dilute the Republican vote. Instead, he urges them to support "principled" conservatives , which is kind of like finding a virgin at a hookers' convention. Viguerie managed to get this drivel published by the right leaning opinion section of the Washington Post.

"Tea partiers must make ourselves a constant presence and conscience in the lives of those we elect," Viguerie urges in his op-ed. Lord have mecy on our souls.


Size of Oil Spill Underestimated, Scientists Say

Two weeks ago, the government put out a round estimate of the size of the oil leak in the Gulf of Mexico: 5,000 barrels a day. Repeated endlessly in news reports, it has become conventional wisdom.

But scientists and environmental groups are raising sharp questions about that estimate, declaring that the leak must be far larger. They also criticize BP for refusing to use well-known scientific techniques that would give a more precise figure.

The criticism escalated on Thursday, a day after the release of a video that showed a huge black plume of oil gushing from the broken well at a seemingly high rate. BP has repeatedly claimed that measuring the plume would be impossible.

The figure of 5,000 barrels a day was hastily produced by government scientists in Seattle. It appears to have been calculated using a method that is specifically not recommended for major oil spills.

Ian R. MacDonald, an oceanographer at Florida State University who is an expert in the analysis of oil slicks, said he had made his own rough calculations using satellite imagery. They suggested that the leak could “easily be four or five times” the government estimate, he said.

“The government has a responsibility to get good numbers,” Dr. MacDonald said. “If it’s beyond their technical capability, the whole world is ready to help them.”

Scientists said that the size of the spill was directly related to the amount of damage it would do in the ocean and onshore, and that calculating it accurately was important for that reason.

BP has repeatedly said that its highest priority is stopping the leak, not measuring it. “There’s just no way to measure it,” Kent Wells, a BP senior vice president, said in a recent briefing.

Yet for decades, specialists have used a technique that is almost tailor-made for the problem. With undersea gear that resembles the ultrasound machines in medical offices, they measure the flow rate from hot-water vents on the ocean floor. Scientists said that such equipment could be tuned to allow for accurate measurement of oil and gas flowing from the well.

Richard Camilli and Andy Bowen, of the Woods Hole Oceanographic Institution in Massachusetts, who have routinely made such measurements, spoke extensively to BP last week, Mr. Bowen said. They were poised to fly to the gulf to conduct volume measurements.

But they were contacted late in the week and told not to come, at around the time BP decided to lower a large metal container to try to capture the leak. That maneuver failed. They have not been invited again.

“The government and BP are calling the shots, so I will have to respect their judgment,” Dr. Camilli said.

BP did not respond Thursday to a question about why Dr. Camilli and Mr. Bowen were told to stand down. Speaking more broadly about the company’s policy on measuring the leak, a spokesman, David H. Nicholas, said in an e-mail message that “the estimated rate of flow would not affect either the direction or scale of our response, which is the largest in history.”

Dr. MacDonald and other scientists said the government agency that monitors the oceans, the National Oceanic and Atmospheric Administration, had been slow to mount the research effort needed to analyze the leak and assess its effects. Sylvia Earle, a former chief scientist at NOAA and perhaps the country’s best-known oceanographer, said that she, too, was concerned by the pace of the scientific response.

But Jane Lubchenco, the NOAA administrator, said in an interview on Thursday: “Our response has been instantaneous and sustained. We would like to have more assets. We would like to be doing more. We are throwing everything at it that we physically can.”

The issue of how fast the well is leaking has been murky from the beginning. For several days after the April 20 explosion of the Deepwater Horizon rig, the government and BP claimed that the well on the ocean floor was leaking about 1,000 barrels a day.

A small organization called SkyTruth, which uses satellite images to monitor environmental problems, published an estimate on April 27 suggesting that the flow rate had to be at least 5,000 barrels a day, and probably several times that.

The following day, the government — over public objections from BP — raised its estimate to 5,000 barrels a day. A barrel is 42 gallons, so the estimate works out to 210,000 gallons per day.

BP later acknowledged to Congress that the worst case, if the leak accelerated, would be 60,000 barrels a day, a flow rate that would dump a plume the size of the Exxon Valdez spill into the gulf every four days. BP’s chief executive, Tony Hayward, has estimated that the reservoir tapped by the out-of-control well holds at least 50 million barrels of oil.

The 5,000-barrel-a-day estimate was produced in Seattle by a NOAA unit that responds to oil spills. It was calculated with a protocol known as the Bonn convention that calls for measuring the extent of an oil spill, using its color to judge the thickness of oil atop the water, and then multiplying.

However, Alun Lewis, a British oil-spill consultant who is an authority on the Bonn convention, said the method was specifically not recommended for analyzing large spills like the one in the Gulf of Mexico, since the thickness was too difficult to judge in such a case.

Even when used for smaller spills, he said, correct application of the technique would never produce a single point estimate, like the government’s figure of 5,000 barrels a day, but rather a range that would likely be quite wide.

NOAA declined to supply detailed information on the mathematics behind the estimate, nor would it address the points raised by Mr. Lewis.

Mr. Lewis cited a video of the gushing oil pipe that was released on Wednesday. He noted that the government’s estimate would equate to a flow rate of about 146 gallons a minute. (A garden hose flows at about 10 gallons per minute.)

“Just anybody looking at that video would probably come to the conclusion that there’s more,” Mr. Lewis said.

The government has made no attempt to update its estimate since releasing it on April 28.

“I think the estimate at the time was, and remains, a reasonable estimate,” said Dr. Lubchenco, the NOAA administrator. “Having greater precision about the flow rate would not really help in any way. We would be doing the same things.”

Environmental groups contend, however, that the flow rate is a vital question. Since this accident has shattered the illusion that deep-sea oil drilling is immune to spills, they said, this one is likely to become the touchstone in planning a future response.

“If we are systematically underestimating the rate that’s being spilled, and we design a response capability based on that underestimate, then the next time we have an event of this magnitude, we are doomed to fail again,” said John Amos, the president of SkyTruth. “So it’s really important to get this number right.”

This article has been revised to reflect the following correction:

Correction: May 13, 2010

Millions of jobs lost, many may never return

In this photo taken Wednesday, May 5, 2010, Erik Proulx, a former advertising copywriter, is seen on the roof of an office building where he maintains an office in Boston. Proulx says he no longer wants to rejoin an industry he thinks will continue to struggle.

WASHINGTON - Fewer construction workers will be needed. Don't expect as many interior designers or advertising copywriters, either. Retailers will get by with leaner staffs.

The economy is strengthening. But millions of jobs lost in the recession could be gone for good.

And unlike in past recessions, jobs in the beleaguered manufacturing sector aren't the only ones likely lost forever. What sets the Great Recession apart is the variety of jobs that may not return.

Eight banks face US investigation

Eight banks are facing a US investigation into the rating of their mortgage products, the BBC understands.

New York Attorney General Andrew Cuomo is looking at whether the relationship between the banks and credit rating agencies was manipulated to gain a better ratings for risky securities.

The banks under investigation are believed to include Goldman Sachs and Morgan Stanley.

Bad US mortgage debt was one of the main causes of the financial crisis.

This is because much of the investments were repackaged into wider debt offerings and then resold around the world.

This spread the problem of bad debt to other banks when subprime US households - those on low earnings, or deemed a risky investment - began to default on their mortgage payments.

Rating agencies clamp-down

The attorney general has requested information from the eight banks, as well as the three major rating agencies - Standard and Poor's, Moody's and Fitch Ratings.

Last month, the Securities and Exchange Commission, which regulates US banking, charged Goldman Sachs with civil fraud over the way it marketed its subprime mortgage products prior to the crisis.

The other institutions being investigated by Mr Cuomo are UBS, Citigroup, Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch - now part of Bank of America.

Bank shares on Wall Street fell on Thursday amid the speculation.

The investigations came as the US senate voted in favour of tougher regulation of the credit rating agencies, which have been blamed for their part in the financial crisis.

Under the proposals, US regulators will be in charge of deciding which rating agencies should rate products from different banks.

Senators argued that the agencies had allowed banks to sell high-risk financial products with low-risk ratings.

Bankers jailed, sued as Iceland seeks culprits for crisis

More than a year and a half after Iceland's major banks failed, all but sinking the country's economy, police have begun rounding up a number of top bankers while other former executives and owners face a two-billion-dollar lawsuit.

Since Iceland's three largest banks -- Kaupthing, Landsbanki and Glitnir -- collapsed in late 2008, their former executives and owners have largely been living untroubled lives abroad.

But the publication last month of a parliamentary inquiry into the island nation's profound financial and economic crisis signaled a turning of the tide, laying much of the blame for the downfall on the former bank heads who had taken "inappropriate loans from the banks" they worked for.

On Wednesday, the administrators of Glitnir's liquidation announced they had filed a two-billion-dollar (1.6-billion-euro) lawsuit in a New York court against former large shareholders and executives for alleged fraud.

"I think this lawsuit is without precedence in Iceland," Steinunn Gudbjartsdottir, who chairs Glitnir's so-called winding-up board, told reporters in Reykjavik.

"It is about higher figures than we have ever seen," she said, adding that she expected Glitnir to file more lawsuits going forward, but that "it is unlikely any will be this big."

Glitnir said it was suing "Jon Asgeir Johannesson, formerly its principal shareholder, Larus Welding, previously Glitnir's chief executive, Thorstein Jonsson, its former chairman and other former directors, shareholders and third parties associates with Johannesson for fraudulently and unlawfully draining more than two billion dollars out of the bank."

The bank also said it was "taking action against its former auditors PricewaterhouseCoopers (PwC) for facilitating and helping to conceal the fraudulent transactions engineered by Johannesson and his associates, which ultimately led to the bank's collapse in October 2008."

Glitnir's suit, filed in the New York state Supreme Court on Tuesday, blamed most of the bank's woes on "Johannesson and his co-conspirators," who had "conspired to systematically loot Glitnir Bank in order to prop up their own failing companies."

Johannesson, the former owner of the now-defunct Baugur investment group with stakes in a number of British high street stores including Hamleys, Debenhams and House of Fraser, said he was shocked by the lawsuit.

"The distortions and the nonsense in the lawsuit are incredible," he told the Pressan news website.

Glitnir's administrators "can get a 10-year-prison sentence for misusing US courts in this manner," he insisted.

The bank's chief administrator Gudbjartsdottir took his comments in stride.

"I didn't expect him to be happy with the lawsuit," she said.

In addition to its New York suit, Glitnir said it had "secured a freezing order from the High Court in London against Jon Asgeir Johannesson's worldwide assets, including two apartments in Manhattan's exclusive Gramercy Park neighbourhood for which he paid approximately 25 million dollars."

Gudbjartsdottir said Johannesson had just 48 hours to come up with a satisfactory list of his assets.

"If he does not give the right information he faces a jail sentence," she said.

Four former Kaupthing executives, who all live in Luxembourg, have meanwhile been arrested in Iceland in the past week and Interpol has issued an international arrest warrant for that bank's ex-chairman, Sigurdur Einarsson.

Former head of the bank's domestic operations, Ingolfur Helgason, and former chief risk officer Steingrimur Karason were arrested late Monday on arrival from Luxembourg, just days after former Kaupthing boss Hreidar Mar Sigurdsson, along with Magnus Gudmunsson, who headed the bank's unit in Luxembourg, were taken into custody.

The 49-year-old Einarsson, who lives in London, said late Tuesday he had no plans to travel to Iceland to be arrested.

"I'm absolutely flabbergasted about the latest news," he told the Frettabladid daily.

"There is in my opinion no need for the arrests or custody rulings, and I will not of my own free will take part in the play that it appears is being staged to soothe the Icelandic people," he said.

"I'll put the human rights I enjoy here in Britain to the test and will not therefore come home (to Iceland) to these conditions without being forced," he added.

Copyright AFP 2008, AFP stories and photos shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium

US faces same problems as Greece, says Bank of England

Mervyn King, Governor of the Bank of England, fears that America shares many of the same fiscal problems currently haunting Europe. He also believes that European Union must become a federalised fiscal union (in other words with central power to tax and spend) if it is to survive. Just two of the nuggets from one of the most extraordinary press conferences I have been to at the Bank.

What with all the excitement yesterday over our new Government, I never had time to remark on the Inflation Report press conference. Most of our attention was on what King said about the Government’s fiscal plans (a ringing endorsement). But, as Jeremy Warner has written in today’s paper, it was as if King had suddenly been unleashed. Bear in mind King is usually one of the most guarded policymakers in both British and central banking circles. Not yesterday.

It isn’t often one has the opportunity to get such a blunt and straightforward insight into the thoughts of one of the world’s leading economic players. Most of this stuff usually stays behind closed doors, so it’s worth taking note of. And I suspect that while George Osborne will have been happy to hear his endorsement of the new Government’s policies, Barack Obama and the European leaders will have been far less pleased with his frank comments on their predicament.
The transcript and video are online at the Bank’s website, but below are the extended highlights, all emphasis mine. Well worth checking out.

America, and many other large economies including the UK, share some of the same problems as Greece with its public finances:

Every country around the world is in a similar position, even the United States; the world’s largest economy has a very large fiscal deficit. And one of the concerns in financial markets is clearly – how will this enormous stock of public debt be reduced over the next few years? And it’s very important that governments, both here and elsewhere, get to grips with this problem, have a clear approach and a very clear and credible approach to reducing the size of those deficits over, in our case, the lifetime of this parliament, in order to convince markets that they should be willing to continue to finance the very large sums of money that will be needed to be raised from financial markets over the next few years, at reasonable interest rates.

On why Europe will have to become a federalised fiscal union:

I do not want to comment on a particular measure by a particular country, but I do want to suggest that within the Euro Area it’s become very clear that there is a need for a fiscal union to make the Monetary Union work. But if that is to happen there needs to be also a mechanism to enable other countries that have lost competitiveness to regain competitiveness. That requires actions, probably structural reforms, changes in wages and prices, in the countries that need to regain competitiveness. But it also needs a solid and expansionary state of domestic demand in the stronger economies in Europe.

On the deficit:

The most important thing now is for the new government to deal with the challenge of the fiscal deficit. It is the single most pressing problem facing the United Kingdom; it will take a full parliament to deal with, and it is very important that measures are taken straight away to demonstrate the seriousness and the credibility of the commitment to dealing with that deficit.

Why it is right that the Government wants to cut spending as soon as this year:

We see the recovery beginning to take place, and we expect that the pace of that recovery will pick up. But we’ve also seen the market response in the past two weeks, where major investors around the world are asking themselves questions about the interest rate at which they are prepared to finance trillions of pounds of money that will need to be raised on financial markets in the next two to three years, to finance government requirements around the world. And that I think has been a sobering reflection of what can happen if you don’t make very clear at the outset – I think markets were not expecting any action before the election. After the election they need and they want a very clear, strong signal and evidence of the determination to make it work.

And I think that it’s quite difficult to make credible a commitment to fiscal consolidation if all the measures are somehow in the future. You need to start and get on with it….

I don’t believe that the scale of those measures, the £6bn cuts, is likely to be such as to dramatically change the outlook for growth this year. And as I said earlier in response to answers, I think it does reduce some of the downside risks by taking away some of the market risk that might have occurred if there’d been a sharp upward movement in yields.

On Greece:

I think the lesson from Greece is that, if the problem had been dealt with three months ago, it would not have become as serious as it subsequently became. And I think the important thing now is that Greece has been dealt with a major IMF and European Union package…

But those measures provide only a window of opportunity. They do not affect the total amount of debt, in themselves which countries around the world have to repay. The markets, which some of our European partners like to describe as speculators causing difficulty, are the very same markets where the public sector is looking to provide trillions of pounds of support to finance public debt around the major countries in the world over the next few years.

What matters is that those investors are prepared to buy government debt at interest rates which make it tolerable for the countries concerned. And that is why it is important for each and every country to demonstrate that they are on top of a programme for their country to reduce the fiscal deficit to a sustainable path.

That has been the big message, but within the international community I think there is a very clear understanding that the package of financial support which was made available at the weekend is not an underlying solution to the problem. It provides a window of opportunity which gives governments the chance to put their house in order; and it gives the international economic community a chance to talk about what I think – and have always said for some considerable time – to be one of the major issues facing us, which is the need to rebalance demand around the world economy.

On how worried international leaders are about the economy and Europe’s fiscal problems:

As you know international conversations proceed very slowly – too slowly usually. In 2008 there was an exception.
I think the mood and manner of the G7 meetings at the IMF in October 2008 was very different, and that people did come together and recognise that, unless they worked together, we would all be facing an extraordinarily serious position. That’s pretty well documented in Hank Paulson’s memoirs of the period.

But I think what I heard on the telephone conversations that I was part of at the weekend, it was slightly reminiscent of that: a recognition that the problems are far too serious for countries not to work together. After all, dealing with a banking crisis was difficult enough, but at least there were public sector balance sheets onto which the problems could be moved.

Once you move into the sphere of concerns about sovereign debt, there is no answer; there’s no backstop. And it is very important therefore that we hit these problems on the head now, put in place credible solutions to prevent the problems becoming worse.

And I detected at the weekend, in the conversations that I spent hours listening to on the telephone, that this sense of the need to work together was there again….

It is absolutely vital, absolutely vital, for governments to get on top of this problem. We cannot afford to allow concerns about sovereign debt to spread into a wider crisis dealing with sovereign debt. Dealing with a banking crisis was bad enough. This would be worse.

Why it’s too early to start raising UK interest rates, but not too early to be worried about inflation:

If you mean a tightening of monetary policy, then at some point it certainly will come. And when it comes it will be very welcome because it will be a sign of the strength of the UK economy, and the fact that we feel we will need to tighten monetary policy because we think the prospect for inflation is that it will not be to fall below the target as a result of so much spare capacity. So I think we would look forward to that time when it will come, because it will be a reflection of strength of the economy.

We’re not at that point now; I don’t know when it will come; that’s something we will judge month by month.
I can assure you the MPC is very concerned about what’s been happening to inflation. I do think that we have seen a sequence of shocks, price level shocks, which have inevitably raised inflation. We have also seen in the past three years two episodes now in which inflation did go up quite significantly and then came down quite sharply. And I think our judgement is that next year we will see a repeat of that. If these effects are not repeated, if we don’t see further increases in indirect taxes, or oil prices, then those shocks will not be there and inflation will start to come back and reflect the extent of spare capacity.

Fond words on former Chancellor Alistair Darling:

Perhaps I could take the opportunity of thanking Alistair Darling, and saying that I think that – for someone who became Chancellor and after only a few weeks the world’s greatest financial crisis took place – he has brought, not just domestically but internationally, a sense of calm and good humour which has made it much easier to deal with the problems that arose. And indeed, I think we had some rocky times, but we ended up with a very strong working relationship and in large part that’s because of the way he handled himself in the job.

Rather less fond words on former PM Gordon Brown:

I worked very closely with him late at night, weekends, to deal with the financial crisis. And I think when we both look back on our careers in many years to come, not now, many years to come, we will reflect that we probably had few opportunities to do something as important as the recapitalisation of the banking system in October 2008. It led, I think, the reaction of the rest of the world to that crisis. We worked incredibly closely on that. And I think that will seem a high point. And I very much valued the opportunity to work closely with Gordon Brown over many years as Chancellor and then Prime Minister. He had a remarkable period in office. And I wish him well in what I suspect is a career of which we may yet see more to come.

Gerald Celente: Banks Robbing the People

The turmoil that has stricken Greece has spread to Romania and Ireland. This crisis may be spreading worldwide as the debt crisis continues, there have been reports that it may spread to Japan, one of the biggest economies in the world. Gerald Celente says that this is the greatest bank robbery in history and it is the banks that are doing the stealing.

Reprinted from the Gerald Celente Channel.

Boycott the People Boycotting Arizona

On Friday April 23, Arizona did something federal politicians don't have the guts to do. Enforce the immigration laws.

Immigrants will have to prove they are in the country legally. What's wrong with that?

You can't have a country if you don't distinguish between citizens and non-citizens. You can't have a country if anyone can enter illegally and receive the benefits of citizenship.

That is why the Illuminati media is up in arms about this legislation. "You can't have a country" is the message the Illuminati has for the American people. The USA will be merged into a world government controlled by the central bankers.

The people opposing this legislation represent a fifth column in America. The leading opponent is the impostor-in-chief Barack Obama, who can't produce his own credentials. The others consist of certain Latino and Leftist groups who are using immigration to invade and take over America.

I am not opposed to immigration. I am married to a Mexican. She entered Canada legally and applied for and received Canadian citizenship. I am an immigrant myself. I was born in Switzerland and am a naturalized Canadian. I am grateful to be a Canadian citizen. I don't believe in abusing this privilege by forcing Canadians to accept more immigrants than they want or need. I came here to contribute to the common welfare, not to invade and take over.

We are talking about illegal immigration. The fact that this is even an issue shows how far gone we are. Opponents of the legislation complain that it will lead to racial profiling. What's wrong with asking someone who looks like they are an immigrant to prove their status? They don't have a problem with searching everyone who takes an airplane in case they are terrorists.

No country in the world allows illegal immigration. Why should America? Israel does not let non-Jews become citizens. You don't hear the New York Times complaining about that. But here is their biased article on Arizona.

24immig_CA0-popup.jpg(left, USA, all humans welcome)

Here is a list of the people boycotting Arizona. I urge you to notify them of your boycott. Urge your legislators to boycott them. They are mostly Union and Lefty groups. They are world banker dupes. Here are the cities you should boycott. Contact their tourism offices.

Los Angeles: On May 12, the L.A. City Council voted 13-1 to approve a boycott of Arizona. The city plans to cancel several contracts with Arizona. While the exact contracts are still under consideration, the result could amount in $8 million in business.

San Francisco: Supervisor David Campos and City Attorney Dennis Herrera are both calling for a boycott of Arizona. "We won't be sending any city employees to conferences in Arizona," said Campos. A resolution will be brought to the city council this week as well.

Boston: On May 5, the Boston City Council passed a resolution for city officials to identify city contracts and purchasing agreements with Arizona and Arizona-based companies, and end those agreements immediately. City Council President Michael Ross and fellow Councilor Felix G. Arroyo presented the resolution.

Similar proposals to the one in Boston are being presented in Springfield, MA; Worcester, MA, Washington D.C., Milwaukee, Chicago and New York. Let these cities know you will boycott them.

Boulder: City Manager Jane Brautigam announced on May 5 that employees of the City of Boulder will no longer be traveling to Arizona on business.

Oakland: Under the direction of City Council President Jane Brunner, the city of Oakland voted unanimously to boycott Arizona on May 4. The city is asking officials to "not to enter contracts with or purchase goods from companies with headquarters in Arizona, calls on city staffers to review existing contracts with Arizona companies, and aims to keep city employees from traveling to Arizona on official business," reported the San Jose Mercury News.

Other Updates on Boycotts & Movements
One blog, Alto Arizona, includes updates on boycotts and protests across the nation, as well as a Twitter feed where opponents of the new law express their opinions.

On the other hand, support Arizona. Change your holiday plans to include this state. Let them know!


We hear talk of "compassion." What about self-preservation? Many Americans have been trained to adopt behavior and policies that are simply self-destructive. Repeatedly, the Protocols of the Elders of Zion marvel that they (Illuminati Jews) have been able to teach the goyim self-destructive behavior.

Our countries are the basis of our freedom. Destroy nationhood and you destroy democracy That is the goal of the Illuminati.


The Bailout of Big American Banks Has Cost Trillions More Than We've Been Told

Granted, the $700 billion dollar TARP bailout was a massive bait-and-switch. The government said it was doing it to soak up toxic assets, and then switched to saying it was needed to free up lending. It didn't do that either. Indeed, the Fed doesn't want the banks to lend.

True, as I wrote in March 2009:

The bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts:

  • A lot of the bailout money is going to the failing companies' shareholders
  • Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is "a massive redistribution of wealth to the bank shareholders and their top executives"
  • The Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry (this has caused a lot of companies to bite off more than they can chew, destabilizing the acquiring companies)
And as the New York Times notes, "Tens of billions of [bailout] dollars have merely passed through A.I.G. to its derivatives trading partners".


In other words, through a little game-playing by the Fed, taxpayer money is going straight into the pockets of investors in AIG's credit default swaps and is not even really stabilizing AIG.

But the TARP bailout is peanuts compared to the numerous other bailouts the government has given to the giant banks.

And I'm not referring to the $23 trillion in bailouts, loans, guarantees and other known shenanigans that the special inspector general for the TARP program mentions. I'm talking about more covert types of bailouts.

Like what?

Guaranteeing a Fat Spread on Interest Rates

Well, as Bloomberg notes:

The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks, said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics. “It’s a transfer from savers to banks.”

The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter.

The gap between short-term interest rates, such as what banks may pay to borrow in interbank markets or on savings accounts, and longer-term rates, known as the yield curve, has been at record levels. The difference between yields on 2- and 10-year Treasuries yesterday touched 2.71 percentage points, near the all-time high of 2.94 percentage points set Feb. 18.

Harry Blodget explains:

The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.

For the 63 straight trading days in Q1, in other words, Goldman Sachs (GS), JP Morgan (JPM), Bank of America (BAC), and Citigroup (C) made money trading for their own accounts.

Trading, of course, is supposed to be a risky business: You win some, you lose some. That's how traders justify their gargantuan bonuses--their jobs are so risky that they deserve to be paid millions for protecting their firms' precious capital. (Of course, the only thing that happens if traders fail to protect that capital is that taxpayers bail out the bank and the traders are paid huge "retention" bonuses to prevent them from leaving to trade somewhere else, but that's a different story).

But these days, trading isn't risky at all. In fact, it's safer than walking down the street.


Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What's more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits--by borrowing from the taxpayer and then lending back to the taxpayer.

The government's zero-interest-rate policy, in other words, is the biggest Wall Street subsidy yet. So far, it has done little to increase the supply of credit in the real economy. But it has hosed responsible people who lived within their means and are now earning next-to-nothing on their savings. It has also allowed the big Wall Street banks to print money to offset all the dumb bets that brought the financial system to the brink of collapse two years ago. And it has fattened Wall Street bonus pools to record levels again.

Paul Abrams chimes in:

To get a clear picture of what is going on here, ignore the intermediate steps (borrowing money from the fed, investing in Treasuries), as they are riskless, and it immediately becomes clear that this is merely a direct payment from the Fed to the banking executives...for nothing. No nifty new tech product has been created. No illness has been treated. No teacher has figured out how to get a third-grader to understand fractions. No singer's voice has entertained a packed stadium. No batter has hit a walk-off double. No "risk"has even been "managed", the current mantra for what big banks do that is so goddamned important that it is doing "god's work".

Nor has any credit been extended to allow the real value-producers to meet payroll, to reserve a stadium, to purchase capital equipment, to hire employees. Nothing.

Congress should put an immediate halt to this practice. Banks should have to show that the money they are borrowing from the Fed is to provide credit to businesses, or consumers, or homeowners. Not a penny should be allowed to be used to purchase Treasuries. Otherwise, the Fed window should be slammed shut on their manicured fingers.

And, stiff criminal penalties should be enacted for those banks that mislead the Fed about the destination of the money they are borrowing. Bernie Madoff needs company.

There is another type of guaranteed spread that allows the giant banks to make money hand over fist. Specifically, the Fed pays the big banks interest to borrow money at no interest and then keep money parked at the Fed itself. (The Fed is intentionally doing this for the express purpose of preventing too much money from being lent out to Main Street. That's just dandy.)

The giant banks are receiving many other covert bailouts and subsidies as well.

Too Big As Subsidy

Initially, the fact that the giant banks are "too big to fail" encourages them to take huge, risky gambles that they would not otherwise take. If they win, they make big bucks. If they lose, they know the government will just bail them out. This is a gambling subsidy.

The very size of the too big to fails also decreases the ability of the smaller banks to compete. And - since the government itself helped make the giants even bigger - that is also a subsidy to the big boys (see this).

The monopoly power given to the big banks (technically an "oligopoly") is a subsidy in other ways as well. For example, Nobel prize winning economist Joseph Stiglitz said in September that giants like Goldman are using their size to manipulate the market:

"The main problem that Goldman raises is a question of size: 'too big to fail.' In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information."

Further, he says, "That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk. And that's why the Volcker report came out and said that we need to restrict the kinds of activity that these large institutions have. If you're going to trade on behalf of others, if you're going to be a commercial bank, you can't engage in certain kinds of risk-taking behavior."

The giants (especially Goldman Sachs) have also used high-frequency program trading which not only distorted the markets - making up more than 70% of stock trades - but which also let the program trading giants take a sneak peak at what the real (aka “human”) traders are buying and selling, and then trade on the insider information. See this, this, this, this and this. (This is frontrunning, which is illegal; but it is a lot bigger than garden variety frontrunning, because the program traders are not only trading based on inside knowledge of what their own clients are doing, they are also trading based on knowledge of what all other traders are doing).

Goldman also admitted that its proprietary trading program can "manipulate the markets in unfair ways". The giant banks have also allegedly used their Counterparty Risk Management Policy Group (CRMPG) to exchange secret information and formulate coordinated mutually beneficial actions, all with the government's blessings.

In addition, the giants receive many billions in subsidies by receiving government guarantees that they are "too big to fail", ensuring that they have to pay lower interest rates to attract depositors.


The government's failure to rein in derivatives or break up the giant banks also constitute enormous subsidies, as it allows the giants to make huge sums by keeping the true price points of their derivatives secret. See this and this.

Toxic Assets

The PPIP program - which was supposed to reduce the toxic assets held by banks - actually increased them, and just let the banks make a quick buck.

In addition, the government suspended mark-to-market valuation of the toxic assets held by the giant banks, and is allowing the banks to value the assets at whatever price they desire. This constitutes a huge giveaway to the big banks.

As one writer notes:

By allowing banks to legally disregard mark-to-market accounting rules, government allows banks to maintain investment grade ratings.

By maintaining investment grade ratings, banks attract institutional funds. That would be the insurance and pension funds money that is contributed by the citizen.

As institutional money pours in, the stock price is propped up ....

Mortgages and Housing

PhD economists John Hussman and Dean Baker (and fund manager and financial writer Barry Ritholtz) say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.

Many also accuse Obama's foreclosure relief programs as being backdoor bailouts for the banks. (See this, this and this).

Foreign Bailouts

The big banks - such as JP Morgan - also benefit from foreign bailouts, such as the European bailout, as they are some of the largest creditors of the bailed out countries, and the bailouts allow them to get paid in full, instead of having to write down their foreign losses.

These are just a few of the secret bailouts programs the government is giving to the giant banks. There are many other bailout programs as well. If these bailouts and subsidies are added up, they amount to many tens - or perhaps even hundreds - of trillions of dollars.

And then there is the cost of debasing the currency in order to print money to fund these bailouts. The cost to the American citizen in less valuable dollars will be truly staggering.