Monday, December 6, 2010

Mounting Debts by States Stoke Fears of Crisis

Michael Cooper and Mary Williams Walsh
NY Times

The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week.

While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.

“It seems to me that crying wolf is probably a good thing to do at this point,” said Felix Rohatyn, the financier who helped save New York City from bankruptcy in the 1970s.

Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk.

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France awaits Eric Cantona's cashpoint bank revolution

The government has criticised the ex-footballer's call for the public to stage a mass cash-withdrawal protest

Eric Cantona calls for mass bank withdrawals to protest
Angelique Chrisafis

France is bracing for Eric Cantona's bank-run revolution Tuesday, with the government criticising his call for the public to stage a mass cash-withdrawal and the left questioning whether it would have much effect.

When the former Manchester United footballer gave a video interview in October calling on citizens to stage a cash-point revolution, protest groups against the financial system decided to coordinate a world-wide withdrawal on December 7, the number of Cantona's lucky shirt.

Asked about street demonstrations to protest against government austerity measures, Cantona said: "We have to change the way we do things nowadays. Talking of revolution, I don't mean we are going to pick up guns and go out to kill people. Revolution is very simple to do nowadays," he told the French paper Presse Ocean.

"What's the system? The system revolves around banks. The system is built on the banks' power. So it can be destroyed by the banks. Instead of having three million people going out to demonstrate with a placard, those three million people go to their bank branch, they withdraw their money and the banks crumble." He directed people: "You go to your bank in your village and you withdraw your money." But as tens of thousands of people signed up to the online campaigns led by a Franco-Belgian anti-bank protest group, the French government warned against "Eric Le Rouge" sticking his nose into economics.

Francois Baroin, the budget minister, said: "It would be funny if it wasn't so tragic." FCantona's call to arms was "grotesque" and "not serious". inance minister Christine Lagarde said witheringly: "There are those who play football magnificently, I wouldn't dare to try. I think it's best for everyone to stick to their own speciality." The director general of BNP Paribas deemed Cantona's appeal "ill-founded".

Cantona told the daily Liberation that he would heed his own call to withdraw money. "Given the strange solidarity that has sprung up, yes. On December 7, I'll be at the bank." Online supporters have pledged that they will either definitely or probably withdraw cash. They are aiming for a bank-run like that which hit the UK's Northern Rock in 2008.

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Stress & Worry: American Dream is 'to pay my rent'

No, The Big Banks Have Not "Paid Back" Government Bailouts and Subsidies

The big banks claim that they have paid back all of the bailout money they received, and that the taxpayers have actually made money on the bailouts.

However, as Barry Ritholtz notes:

Pro Publica has been maintaining a list of bailout recipients, updating the amount lent versus what was repaid.

So far, 938 Recipients have had $607,822,512,238 dollars committed to them, with $553,918,968,267 disbursed. Of that $554b disbursed, less than half — $220,782,546,084 — has been returned.

Whenever you hear pronunciations of how much money the TARP is making, check back and look at this list. It shows the TARP is deeply underwater.

Moreover, as I pointed out in May, the big banks have received enormous windfall profits from guaranteed spreads on interest rates:

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.)

The newly-released Fed data shows that the Fed also threw money at many of the big banks at ridiculously low interest rates.

And as I also pointed out, the government gave tax subsidies to the too big to fails:
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).
Indeed, the Wall Street Journal noted this week:

A series of tax relief measures is saving companies bailed out by the government billions of dollars at a time when concern over tax revenues has risen.

Although the Treasury Department first provided the tax guidance in the fall of 2008, the magnitude of the tax savings has become clearer in the past year ....

"The agencies are literally throwing gratuities at banks and other companies," said Christopher Whalen, a bank stock analyst at Institutional Risk Analytics.
And as I've previously reported:

Too Big As Subsidy

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)


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.

When all of the different bailouts and subsidies given to the big banks are added up, it is obvious that they have not come anywhere close to "paying back" what we gave to them.

Bernanke On 60 Minutes: "We're NOT Printing Money" »

Video - Federal Reserve Chairman Ben Bernanke - 60 Minutes - Aired Tonight

Below you will find web-only content from tonight's broadcast - 10 minutes not shown on CBS - plus a link to Bernanke's 2009 60 Minutes interview.

This is a must see - Bernanke is so nervous his lip quivers from beginning to end.

"Well, this fear of inflation, I think is way overstated. We've looked at it very, very carefully. We've analyzed it every which way. One myth that's out there is that what we're doing is printing money. We're not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way. What we're doing is lowing interest rates by buying Treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster. So, the trick is to find the appropriate moment when to begin to unwind this policy. And that's what we're gonna do."


Bonus clip...

60 Minutes Overtime - Exclusive web-only footage from tonight's broadcast


Has anything changed since 2009...


National Debt. To whom do we owe it

Click this link .....

The scramble for physical metal intensifies

December 4, 2010 – The scramble for physical gold and silver is intensifying. People increasingly want to own the real thing, and not some paper substitute, all of which come with counterparty risk. This conclusion is apparent from the following two charts of gold and silver forwards, which are based on data made available by the London Bullion Market Association through November 24th (the most recent data available).

Because gold is money, gold almost always trades in contango, meaning the future price is higher than the spot price. The percentage difference between gold’s spot and future price is gold’s interest rate, so in this regard, gold is not different from other moneys, except gold’s interest rate is lower than those of national currencies. Interest rates are a reflection of risk, and because gold’s purchasing power cannot be debased by central bank or government actions, the risk of losing purchasing power when holding gold is low. So gold is rewarded by the market with a low interest rate.

If the future price is lower than spot, which is called backwardation, you can sell your metal in the spot market, invest the dollars you receive to earn interest, and then buy your metal back in the future at a lower price and profit the difference. But there is another important factor to consider outside the math of this formula.

If you sell your physical metal in the spot market and at the same time agree with someone to buy it back at a future date, you are now holding someone’s paper promise instead of physical metal. In other words, you have counterparty risk, which of course is avoided when you own a tangible asset like physical gold or physical silver.

Normally, few people worry about counterparty risk. So bullion dealers and other institutions dealing in the precious metals watch for opportunities to profit from backwardation, with the result that gold rarely, if ever, trades in backwardation, which explains why the above chart is so extraordinary.

Gold for 1-month and 3-months forward has been mainly in backwardation for more than one year. Even more exceptional is that gold 6-months forward has been in backwardation since November 5th. To show how rare this event is, I checked the LBMA database, which goes back to 1989. There is not one instance of 6-month forward gold being in backwardation, which nearly confirms my own experience. I’ve been trading the precious metals since the 1970s, and I can’t recall any time before this year when 6-months forward gold was in backwardation. The current and continuing backwardation is truly incredible.

Note too the clear downtrend in 12-month forward gold which is approaching backwardation, which is similar to the downtrends for other forward periods. These downtrends make clear that the demand for physical gold is intensifying.

The picture is even starker in silver. Not only are its forwards also in clear downtrends, silver 6-months forward has been continuously in backwardation since June 2nd and mainly in backwardation for more than one year. What does it all mean?

In a word, it is bullish. The only way the increasing demand for physical metal can be met is with higher prices. The higher price will at some level entice people to sell their metal and hold a national currency instead, as I explained in my previous article, The Precious Metals Power Higher.

Some skeptics may argue that gold is in backwardation because dollar interest rates are so low, which does have an element of truth to it. This argument though ignores that dollar rates have been low since shortly after the Lehman collapse, which is months before the backwardation began to appear. Also when the Greenspan-led Fed lowered dollar interest rates after 9-11 to near-zero levels, no backwardation appeared.

Skeptics might also argue that there is no backwardation apparent from Comex settlement prices. Aside from the fact that Comex recently changed the method to determine settlement prices from a market-driven basis to instead allow a manual override, which now makes backwardation on the posted Comex settlement prices virtually impossible, one has to first recognize that Comex is first and foremost a market for paper-gold and paper-silver. Therefore, a piece of paper can promise virtually anything, without regard to the underlying reality of how physical metal is actually trading. In other words, Comex shows March futures in contango, when they should in reality be in backwardation. Thus, if you are buying March silver or April gold futures, you are overpaying. This overpayment is no doubt going into the pockets of those banks that are perennially short and use their size to control the paper market. They can, after all, always conjure up whatever paper they want out of thin air, which of course they cannot do with physical metal.

Any way you look at it, the backwardation in gold and silver is a truly rare event and an exceptionally bullish one too. So be prepared for an upside explosion in the price of both precious metals as the scramble for physical metal intensifies even further as a result of people increasingly choosing to hold a safe-haven tangible asset instead of paper.


GoldMoney Free Signup - The best way to buy gold & silver

A List of Related Articles Follow ...

Another Short Squeeze in the Precious Metals

The precious metals power higher

Playing With Fire

The Outlook for 2010

The Two Sides of the Gold Market

« Funny Money, Fraudclosure And The Fed »

The Queen's official QE2 cash...


Scroll down for VIDEO...


How Banks And The Federal Reserve Are Destroying The Planet

By Ellen Brown - Author - Web of Debt - Corruption and the Federal Reserve

Time for a new theory of money...

The reason our financial system has routinely gotten into trouble, with periodic waves of depression like the one we’re battling now, may be due to a flawed perception not just of the roles of banking and credit but of the nature of money itself. In our economic adolescence, we have regarded money as a “thing”—something independent of the relationship it facilitates. But today there is no gold or silver backing our money. Instead, it’s created by banks when they make loans (that includes Federal Reserve Notes or dollar bills, which are created by the Federal Reserve, a privately-owned banking corporation, and lent into the economy). Virtually all money today originates as credit, or debt, which is simply a legal agreement to pay in the future.

In an illuminating dissertation called “Toward a General Theory of Credit and Money” in The Review of Austrian Economics, Mostafa Moini, Professor of Economics at Oklahoma City University, argues that money has never actually been a “commodity” or “thing.” It has always been merely a “relation,” a legal agreement, a credit/debit arrangement, an acknowledgment of a debt owed and a promise to repay.

DB here. Another paragraph that caught my attention...

The bankers have engaged in what amounts to a massive fraud, not necessarily because they started out with criminal intent (although that cannot be ruled out), but because they have been required to in order to come up with the commodities (in this case real estate) to back their loans. It is the way our system is set up: The banks are not really creating credit and advancing it to us, counting on our future productivity to pay it off, the way they once did under the deceptive but functional facade of fractional reserve lending. Instead, they are vacuuming up our money and lending it back to us at higher rates. In the shadow banking system, they are sucking up our real estate and lending it back to our pension funds and mutual funds at compound interest. The result is a mathematically impossible pyramid scheme, which is inherently prone to systemic failure.

And this one. Read the 'Bank of North Dakota' link below...

For capital, a state bank could use some of the money stashed in a variety of public funds. This money need not be spent. It can just be shifted from the Wall Street investments where it is parked now into the state’s own bank. There is precedent establishing that a state-owned bank can be both a very sound and a very lucrative investment. The Bank of North Dakota, currently the nation’s only state-owned bank, is rated AA and recently returned a 26 percent profit to the state. A decentralized movement has been growing in the United States to explore and implement this option. [For more information, see]


Bonus clips...

Video: Ellen Brown with Alex Jones

Parts 2 and 3 on youtube...


Video: Ellen Brown with Max Keiser on fraudclosure


Stupid People are what's killing America

Click this link .....

Cheerleader for bankster economics

My email to Gary North on his October 8, 2010 hit piece on Ellen Brown, the author of Web of Debt:

Dr. North,

You’re getting real desperate with today’s hit piece on Ellen Brown, “Cheerleader for Hitler’s Economics,” as you scramble to defend what more and more people are realizing to be the gold standard bankster scam to confiscate people’s wealth in the inevitable terminal phase of their latest debt with interest money scheme, all in the name of a return to “sound money.” It happened in 1933, it will happen again, and you know it.

This year alone, despite being a self-professed “gold bug,” he admitted gold was a bad investment from 1980-2001, he made the outlandish claim that 21 years is a medium-term investment to justify gold’s embarrassing performance during that time, and claimed that gold coins produced by the U.S. and Canada aren’t money, despite being legal tender.

Gary North: Spokesman for a major Federal Reserve bankster smokescreen

In the latest example of Gary North’s growing list of outlandish claims for this year alone, on November 26, he took exception with Ellen Brown saying that the Federal Reserve is private.

From the cartoon video he produced of a “fantasy interview with her over QE2″:

North: But in your book, you wrote that the Federal Reserve System is a private agency.
Brown: That is correct, it is a private agency.
North: But the Board of Governors of the Federal Reserve is an agency of the federal government. Only the regional banks are private. That is what the law says.

Indeed, the Board of Governors isn’t private, but the ownership of the system is, as can be seen from the Act that created it as shown on their own site, and to insist the system isn’t private is to feed right into the hands of the banksters who instigated its creation and structure to confuse and fool the average American.

For an excellent explanation of how the Federal Reserve was deliberately structured to deceive the American people, watch this series of videos with G. Edward Griffin discussing his book, The Creature from Jekyll Island.

A summary is that they called it federal to give the false impression it was a government institution and not privately owned and operated primarily for private interests. They added the word reserve to fool the people into thinking their money was backed by reserves, and they called it a system instead of a central bank because the people were rightfully wary of a yet another failed private central bank after the first two had their charters terminated.

For North’s other outlandish claims this year, read my October 9, 2010 article, Cheerleader for Bankster Economics.

« Guest Post: A History Of Stimulus, Funny Money & Central Banking »

Guest post submitted by S. Gompers


World history is filled with examples of 'funny money policy,' starting with the Romans. Rome conquered, grew, and with each conquest returned with more stimulus in the form of gold, silver, land, and slaves. But the stimulus injected into the economy after each conquest only stimulated the need for more stimulus. It did not stimulate real prosperity. It undermined it.

First the ensuing slave markets destroyed the labor markets as rich landowners used the slave labor to ruin small farmers. Then as wheat began to be imported from the conquered provinces, as tribute (tax), this had a crippling effect on the large landowners as well. And Rome was now completely dependant on foreigners for their food.

In the first century Roman expansion reached the point of diminishing returns; the stimulus generated by conquest came to an end. But the borders still had to be protected. And Roman mobs of displaced workers and small landowners needed fed and distracted, which drained the treasury.

Caesar Augustus tried to solve the problem with more stimulus by increasing the money supply the only was he could. He ordered the slaves in the mines to work around the clock. But this did not bring prosperity, it brought inflation. Then when output from the mines could no longer be increased, Nero found a new source of stimulus; he reduced the silver content in the coins. By the time Rome fell there was almost no silver in their currency.

Another example is Spain in the 16th century. The conquistadors increased Spain’s money supply the old fashioned way, by stealing it. As galleons began arriving in Spain with their plunder from the America’s, increasing the money supply substantially, they had so much stimulus that they laid down their tools. After all, why should they work, when they could buy things. Spain, like Rome, welcomed stimulus and never recovered from it.

Spain’s bounty affected all of Europe as well, and between 1540 and 1640 the cost of living increased dramatically throughout Europe. But Spain still defaulted on their debts every 15 to 20 years, as they spent the loot faster than it could be dug out of the ground.

The revolution was powered by two very different engines: one driven by 18th-century Enlightenment values, the other guided by Christian imperatives that grew out of the Great Awakening. The former movement, emphasizing freedom of conscience, stressed freedom from the dictates of organized religion. The latter, stemming from a devout reading of the Gospels, demanded freedom for religion. Together, these seemingly opposite world-views collaborated brilliantly and effectively to establish the separation of church and state in America. Yet both groups, with seemingly opposing views, managed to agree on the fact that a central bank was not only dangerous, but created ALL oppression where they had come from.

As President John Adams said,

  • "All the perplexities, confusion and distress (crime, poverty, substance abuse, family disintegration, government immorality and dishonesty, etc.) in America arise, not from defects in the Constitution or confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation." This is because nearly every part of our lives revolves around money in some way. If we clear up the money problem, all sorts of seemingly unrelated problems will simply vanish!”

Thomas Jefferson said,

  • “I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.”

And the list goes on and on…

There have been several attempts at central banking in our nation's history. Those who failed before, while deceptive and fraudulent, pale in comparison to the scope and size of the fraud being perpetrated by our current FED. What they all have in common is the practice of "fractional banking."

Fractional banking or fractional lending is the ability to create money from nothing, lend it to the government or someone else and charge interest to boot. The practice evolved before banks existed. Goldsmiths rented out space in their vaults to individuals and merchants for storage of their gold or silver. The goldsmiths gave these "depositors" certificates that showed the amount of gold stored. These certificates were then used to conduct business.

In time the goldsmiths noticed that the gold in their vaults was rarely withdrawn. Small amounts would move in and out but the large majority never moved. Sensing a profit opportunity, the goldsmiths issued double receipts for the gold, in effect creating money (certificates) from nothing and then lending those certificates (creating debt) to depositors and charging them interest as well.

Since the certificates represented more gold than actually existed, the certificates were "fractionally" backed by gold. Eventually some of these vault operations were transformed into banks and the practice of fractional banking began.

Lincoln recognized the threat of banking cartels when he wrote:

  • “The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power." Abraham Lincoln Senate document 23, Page 91. 1865

The Europeans recognized the danger to their financial cartels when the London times published in 1865 this piece regarding our government printing its own currency as Lincoln wished to do:

  • "If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe." - Hazard Circular - London Times 1865.

Mary Todd Lincoln, upon hearing of her husband's death, began screaming, "Oh, that dreadful house!" Earlier historians felt that this spontaneous utterance referred to the White House. Some now believe it may have been directed to Thomas W. House, a gun runner, financier, and agent of the Rothschild's during the Civil War, who was linked to the anti-Lincoln, pro-banker interests.

What a shame we did not go through with it, for that plan died with Lincoln. By now we would be a truly prosperous nation, free of debt to foreigners.

Even after the Civil War, banking cartels continued to vie for control of our nation. Congressman Charles A. Lindbergh revealed to Congress the bankers Manifesto of 1892 which stated:

  • “When through the process of law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of the government applied to a central power of imperial wealth under the control of leading financiers. People without homes will not quarrel with their leaders. History repeats itself in regular cycles. This truth is well known among our principal men who are engaged in forming an imperialism of the world. While they are doing this, the people must be kept in a state of political antagonism.”

Let’s see, I believe this means the banking cartels intended the government to be their tool, not the other way around. And the people must remain distracted.

  • "From now on, depressions will be scientifically created." —Congressman Charles A. Lindbergh Sr. 1913

The Federal Reserve Bank was created in 1913 and the more money it was able to print, the more “income” it was able to generate for itself. The FED is able to print money at will, and regulate value. By its very nature, it must forever keep producing debt to stay alive.

In 1920 the Fed called in a mass percentage of loans and overnight, over 5,000 banks collapsed. In 1929 the FED again called in loans en masse. This time, the crash caused 16,000 banks to fail and the stock market to fall through the basement floor. And the international banks and private and well protected banks within the FED system were able to snap up the failed banks and corporations for pennies on the dollar. It was the greatest robbery in history.

Outraged, congressman Louis McFadden began bringing impeachment hearings against the Federal Reserve Board. He wrote:

  • “It was a carefully contrived occurrence. International bankers sought to bring about a condition of despair. So that they might emerge the rulers of us all”.

After two assassination attempts McFadden died of an “intestinal flu”, before he could push for the impeachment.

October 4, 1936

Attacks on Congressman McFadden's Life Reported

Commenting on Former Congressman Louis T. McFaddens's "heart-failure sudden-death" on Oct. 3, 1936, after a "dose" of "intestinal flu," "Pelley's Weekly" of Oct. 14 said:

  • ....."Now that this sterling American patriot has made the Passing, it can be revealed that not long after his public utterance against the encroaching powers of Judah, it became known among his intimates that he had suffered two attacks against his life. The first attack came in the form of two revolver shots fired at him from ambush as he was alighting from a cab in front of one of the Capital hotels. Fortunately both shots missed him, the bullets burying themselves in the structure of the cab."
  • "He became violently ill after partaking of food at a political banquet at Washington. His life was only saved from what was subsequently announced as a poisoning by the presence of a physician friend at the banquet, who at once procured a stomach pump and subjected the Congressman to emergency treatment." /s/ Robert Edward Edmondson (Publicist-Economist)

In 1933 the FED decided the gold standard needed to be abolished. Under the pretense of “helping to end the depression” you know, the one they started, everyone in America was required to turn in all bullion to the treasury. Under penalty of 10 years imprisonment, of course. This robbed the public of what little wealth they had left.

On June 4, 1963, a virtually unknown Presidential decree, Executive Order 11110, was signed. U.S. Treasury Notes began being printed, and entered into circulation. Our “moneyed priests” have a different take on this order, unfortunately, we will never know the truth. Within months JFK was killed, Treasury notes were recalled, and the Federal Reserve Note ruled again.

In the 150 years prior to 1971 nations could stimulate their economies with cash or credit to a point. They could overspend, but had to settle up in gold. After the gold window closed in 1971, the U.S. could square their debts with paper, and U.S. debt has been rising ever since. A debt that the money has never been created to repay, thanks to the Federal Reserve Act of 1913.

In the 1980’s we suffered the second most serious banking crisis in our 200 years. Some 1,500 commercial and savings banks, and 1,200 savings and loans failed. U.S. taxpayers were forced to make good on the losses after the S&L Insurance fund was exhausted. To the tune of 150 billion due to regulators denying the magnitude of the problem, and allowing it to worsen. One of the “Keating 5” just ran for President.

Challenged as being illegal in the 1990’s, Greenspan legalized the derivatives practice, which was really risky “gambling wagers”. And soon hedge funds became an entire industry, gambling as much as they wanted.

After 9/11 The President told the nation to spend, and during a war, that’s what our nation did. It borrowed at unprecedented levels (trillions) to finance not only the war on terror but also to pay for tax cuts. The reserve requirements were reduced from 10% to 2.5% on Fannie Mae and Freddie Mac. And they were now free to lend even more at bargain basement interest rates, and only a fraction of the required reserves.

The market had become the largest in the world, but Americans, long maxed out on credit were beginning to feel the pinch. They had borrowed to pay for houses, cars, student loans, credit cards, groceries, etc... They refinanced their debt for lower rates and then the housing bubble popped leaving many owing more than their homes were worth.

This is all a very condensed version of our history of the “moneyed priests” activities, and with each “failure” on their behalf, they have prospered in blood or money. All at our expense. And yet once again we now face the abyss of their failed arrogance and greed.

America is self destructing and bringing the world down with it, due to the excessive greed and arrogance of our “moneyed priests”. Who will merely move on to another “playpen” after exhausting every resource here. Many point to the sub prime mortgage collapse as the culprit; this only clouds the real issue. Because the whole system is based on hot air, that’s right, it’s a house of cards. The world’s economy is no longer Americas to control and the U.S. is now solidly indebted to the rest of the world. The largest act of criminal corruption has been perpetrated by our government and the FED for which it stands. It was the best game in town, get paid to sell vast amounts of risk, fail, and then receive bailouts from the taxpayers who never saw a penny of shared wealth to begin with.

The rich have always loved recession as things always become cheaper for them. And if you have money there are many opportunities in the markets and real estate today. The catch is you have to be able to afford to wait out the mess that has been created for them to make money.

The only thing that gives our money value is how much of it is in circulation, and if others recognize it. One only has to look to the South after the Civil War to see what happens to fiat currency when it is no longer recognized as having value, people wiped their butts, or used it as fire starters. The power to regulate the money supply is also the power to regulate its value. This is also the power to bring entire economies and societies to their knees. Many nations are talking about switching from the dollar on the oil markets to the euro and much of the Middle East is talking of doing the same. And China is clearly worried about the value of the dollar as well as our debt to them. This will be very detrimental to our economy.

So many Americans may be thinking that our foreign policy has nothing to do with them at home. However, world pressures are mounting against "us" in the U.S. and while foreign governments may not have issues with individual Americans they are taking increasing issue with American policy. One economic way they can "fight back" is to change how our basic world commodities are priced so that there is no longer a U.S. advantage built in. One small change to how oil is priced around the world may have a huge avalanche affect on how we prosper here at home.

The bailouts were meant to be stimulus, to get the banks lending again, thus freeing up credit markets. But instead were used as stimulus to redistribute the wealth upward to those who truly “deserve it”, themselves. History proves that stimulus only creates the need for more stimulus, it does not create wealth, only production/ creation can do that. Yet our “moneyed priests” seek to destroy that mechanism for wealth creation in America by their lust for sending our jobs to other nations for even greater profits.

The U.S. economy is now based on money as the major product instead of actual products made or farmed in the USA. Many of these money products can only survive on debts. Today this funny money market is collapsing with many losing their homes. And instead of doing what they were supposed to do with the money, our “moneyed priests” partied like rock stars and bought up stocks in companies for pennies on the dollar, and rewarded themselves for their good “work”. Just as they did in 1929, now all they have to do is wait out the slump, and divvy up the reward for creating the problem to begin with. And yet again accolades, promotions, and bonuses will abound. At the expense of the taxpayer, of course.

Aristotle called the birth of money from money " unnatural". Yet today it is glorified.

The game existed since before Christ, it has one goal. That goal is domination, and the tool to that end has been class warfare to destroy the middle class. Our forefathers warned us of this and created this nation as a haven to protect us from this plague of Europe. The system could be changed if the “sheeple” would awake, for our forefathers designed us a beautiful republic which has been defiled and turned into a “heroin addicted prostitute”. The majority could rule, but in a land where everyone says, “my vote does not matter”, the majority does not vote. But systemic change is required, or all you are doing is changing the name on the check for the bribe, I mean campaign contribution. I wonder where America would be right now in the recovery if S.2280 could have taken root in 2006.

For a novel twist, we should strive to create a political climate where wall street can not turn our politicians into their personal whores and get legislation passed or repealed to suit their greed.

Two final quotes...

  • “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes... Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." -- Napoleon Bonaparte, 1815
  • "If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way. It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people. " - Thomas Edison, The New York Times


Mounting State Debts Stoke Fears of Looming Crisis

The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week.

While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.

Super-sized pensions, and a doomsday scenario

“It seems to me that crying wolf is probably a good thing to do at this point,” said Felix Rohatyn, the financier who helped save New York City from bankruptcy in the 1970s.

Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk.

Municipal bankruptcies or defaults have been extremely rare — no state has defaulted since the Great Depression, and only a handful of cities have declared bankruptcy or are considering doing so.

But the finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.

Analysts fear that at some point — no one knows when — investors could balk at lending to the weakest states, setting off a crisis that could spread to the stronger ones, much as the turmoil in Europe has spread from country to country.

Mr. Rohatyn warned that while municipal bankruptcies were rare, they appeared increasingly possible. And the imbalances are so large in some places that the federal government will probably have to step in at some point, he said, even if that seems unlikely in the current political climate.

“I don’t like to play the scared rabbit, but I just don’t see where the end of this is,” he added.

Resorting to Fiscal Tricks
As the downturn has ground on, some of the worst-hit cities and states have resorted to fiscal sleight of hand to stay afloat, helping them close yawning budget gaps each year, but often at great future cost.

Few workers with neglected 401(k) retirement accounts would risk taking out second mortgages to invest in stocks, gambling that the investment gains would be enough to build bigger nest eggs and repay the loans.

But that is just what Illinois, which has been failing to make the required annual payments to its pension funds for years, is doing. It borrowed $10 billion in 2003 and used the money to invest in its pension funds. The recession sent their investment returns below their target, but the state must repay the bonds, with interest. The solution? Illinois sold an additional $3.5 billion worth of pension bonds this year and is planning to borrow $3.7 billion more for its pension funds.

The secret sauce behind bloated state pensions

It is the long-term problems of a handful of states, including California, Illinois, New Jersey and New York, that financial analysts worry about most, fearing that their problems might precipitate a crisis that could hurt other states by driving up their borrowing costs.

But it is the short-term budget woes that nearly all states are facing that are preoccupying elected officials.

Illinois is not the only state behind on its bills. Many states, including New York, have delayed payments to vendors and local governments because they had too little cash on hand to make them. California paid vendors with i.o.u.’s last year. A handful of other states, worried about their cash flow, delayed paying tax refunds last spring.

Now, just as the downturn has driven up demand for state assistance, many states are cutting back.

'The worst year'
The demand for food stamps has been rising significantly in Idaho, but tight budgets led the state to close nearly a third of the field offices of the state’s Department of Health and Welfare, which take applications for them. As states have cut aid to cities, many have resorted to previously unthinkable cuts, laying off police officers and closing firehouses.

Those cuts in aid to cities and counties, which are expected to continue, are one reason some analysts say cities are at greater risk of bankruptcy or are being placed under outside oversight.

Next year is unlikely to bring better news. States and cities typically face their biggest deficits after recessions officially end, as rainy-day funds are depleted and easy measures are exhausted.

This time is expected to be no different. The federal stimulus money increased the federal share of state budgets to over a third last year, from just over a quarter in 2008, according to a report issued last week by the National Governors Association and the National Association of State Budget Officers. That money is set to run out next summer. Tax collections, meanwhile, are not expected to return to their pre-recession levels for another year or two, given that the housing market and broader economy remain weak and that unemployment remains high.

Scott D. Pattison, the budget association’s director, said that for states, next year could be “the worst year of this four- or five-year downturn period.”

And few expect the federal government to offer more direct aid to states, at least in the short term. Many members of the new Republican majority in the House campaigned against the stimulus, and Washington is debating the recommendations of a debt-reduction commission.

So some states are essentially borrowing to pay their operating costs, adding new debts that are not always clearly disclosed.

Growing hidden debts
Arizona, hobbled by the bursting housing bubble, turned to a real estate deal for relief, essentially selling off several state buildings — including the tower where the governor has her office — for a $735 million upfront payment. But leasing back the buildings over the next 20 years will ultimately cost taxpayers an extra $400 million in interest.

Many governments are delaying payments to their pension funds, which will eventually need to be made, along with the high interest — usually around 8 percent — that the funds are expected to earn each year.

New York balanced its budget this year by shortchanging its pension fund. And in New Jersey, Gov. Chris Christie deferred paying the $3.1 billion that was due to the pension funds this year.

It is these growing hidden debts that make many analysts nervous. States and municipalities currently have around $2.8 trillion worth of outstanding bonds, but that number is dwarfed by the debts that many are carrying off their books.

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State and local pensions — another form of promised debt, guaranteed in some states by their constitutions — face hidden shortfalls of as much as $3.5 trillion by some calculations. And the health benefits that state and large local governments have promised their retirees going forward could cost more than $530 billion, according to the Government Accountability Office.

“Most financial crises happen in unpredictable ways, and they hit you when you’re not looking,” said Jerome H. Powell, a visiting scholar at the Bipartisan Policy Center who was an under secretary of the Treasury for finance during the bailout of the savings and loan industry in the early 1990s. “This one isn’t like that. You can see it coming. It would be sinful not to do something about this while there’s a chance.”

So far, investors have bought states’ bonds eagerly, on the widespread understanding that states and cities almost never default. But in recent weeks the demand has diminished sharply. Last month, mutual funds that invest in municipal bonds reported a big sell-off — a bigger one-week sell-off, in fact, than they had when the financial markets melted down in 2008. And hedge funds are already seeking out ways to place bets against the debts of some states, with the help of their investment banks.

Of course, not all states are in as dire straits as Illinois or California. And the credit-rating agencies say that the risk of default is small. States and cities typically make a priority of repaying their bond holders, even before paying for essential services. Standard & Poor’s issued a report this month saying that the crises that states and municipalities were facing were “more about tough decisions than potential defaults.”

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Change in Ratings
The credit ratings of a number of local governments have improved this year, not because their finances have strengthened somewhat, but because the ratings agencies have changed the way they analyze governments.

The new higher ratings, which lower the cost of borrowing, emphasize the fact that municipal defaults have been much rarer than corporate defaults.

This October, Moody’s issued a report explaining why it now rates all 50 states, even Illinois, as better credit risks than a vast majority of American non-financial companies.

One reason: the belief that the federal government is more likely to bail out a teetering state than a bankrupt company.

“The federal government has broadly channeled cash to all state governments during recent recessions and provided support to individual states following natural disasters,” Moody’s explained, adding that there was no way of being sure how Washington would respond to a bond default by a state, since it had not happened since the 1930s.

But some analysts fear the ratings are too sanguine, recalling that the ratings agencies also dismissed the possibility that a subprime crisis was brewing. While most agree that defaults are unlikely, they fear that as states struggle with their growing debts, investors could decide not to buy the debt of the weakest state or local governments.

That would force a crisis, since states cannot operate if they cannot borrow. Such a crisis could then spread to healthier states, making it more expensive for them to borrow, if Europe is an example.

Meredith Whitney, a bank analyst who was among the first to warn of the impact the subprime mortgage meltdown would have on banks, is warning that she sees similar problems with state and local government finances.

“The state situation reminded me so much of the banks, pre-crisis,” she said this fall on CNBC.

There are eerie similarities between the subprime debt crisis and the looming municipal debt woes. Among them:

  • Just as housing was once considered a sure bet — prices would never fall all across the country at the same time, conventional wisdom suggested — municipal bonds have long been considered an investment safe enough for grandmothers, because states could always raise taxes to pay their bondholders. Now that proposition is being tested. Harrisburg, the capital of Pennsylvania, considered bankruptcy this year because it faced $68 million in debt payments related to a failed incinerator, which is more than the city’s entire annual budget. But officials there have resisted raising taxes.
  • Much of the debt of states and cities is hidden, since it is off the books, just as the amount of mortgage-related debt turned out to be underestimated. States and municipalities often understate their pension liabilities, in part by using accounting methods that would not be allowed in the private sector. Joshua D. Rauh, an associate professor of finance at Northwestern University, and Robert Novy-Marx, an assistant professor of finance at the University of Rochester, calculated that the true unfunded liability for state and local pension plans is roughly $3.5 trillion.
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  • The states and many cities still carry good ratings, and those issuing warnings are dismissed as alarmists, reminding some analysts of the lead up to the subprime crisis.

Now states are bracing for more painful cuts, more layoffs, more tax increases, more battles with public employee unions, more requests to bail out cities. And in the long term, as cities and states try to keep up on their debts, the very nature of government could change as they have less money left over to pay for the services they have long provided.

Richard Ravitch, the lieutenant governor of New York, is among those warning that states are on an unsustainable path, and that their disclosures of pension and health care obligations are often misleading. And he worries how long it can last.

“They didn’t do it with bad motives,” he said. “Ninety-five percent of them didn’t understand what they were doing. They did it because it was easier than taxing people or cutting benefits. We’re getting closer and closer to the point where we can’t do that anymore. I don’t know where that is, but I know we’re close.”

This article, " Mounting State Debts Stoke Fears of a Looming Crisis," first appeared in The New York Times.

Copyright © 2010 The New York Times

Thousands Protest Irish Nightmare Economy

Last weekend in Ireland, thousands of people demonstrated against austerity measures and against bearing the burden of the Irish crisis. Just how did the Irish miracle turn into the Irish nightmare? Paul Jay of The Real News Network recently interviewed Leo Panitch. Panitch is a distinguished research professor at York University, teaches political science there, and he's the author (with Greg Albo and Sam Gindin) of the book In and Out of Crisis: The Global Financial Meltdown and Left Alternatives.

Paul Jay: So, in your view, how do we get from this miracle economy of Ireland with so low unemployment, and apparently a booming middle class, to bust?

Leo Panitch: Well, we got to it via the bust of the financial sector that Ireland certainly didn't cause. It was very much a American-made crisis. But insofar as a good part of the Irish boom involved Irish Banks borrowing short in order to lend long to their property boom, and to some extent to lend to foreign investors who were creating jobs, a lot of them American companies but borrowing from Irish Banks, the result of that when the financial boom ended in the United States was that the knock-on effect meant that Irish banks were virtually bankrupt. And one of the first places on the face of the earth that that was felt apart from Iceland was Ireland, and the Irish government immediately guaranteed all bank deposits. And insofar as they did so, they socialized, took onto the public shoulders the private debt of the banks. And you see the consequences.

JAY: So people are saying what happened is the banks bet, helped create a real estate bubble in Ireland. They bet on it, they lost the bets, and now the Irish people are being asked to bail them out. Is that a fair characterization?

PANITCH: Yeah. And, you know, Ireland didn't have a large public sector deficit, but it now does by virtue of having taken on the burden of the private sector banking deficit. And the result of that is what you see with the Irish debt, the Irish fiscal debt, not being willing – the banking sectors, especially in Europe, who provided most of this lending, not being willing to, as I said before, roll over that debt, not being willing to, in other words, lend any more when Irish bonds come due.

View video with scrolling text.

JAY: Paul Krugman wrote a piece recently where he compares what happened in Ireland to Iceland, where he said Iceland took a different approach toward a somewhat similar situation. What do you make of that?

PANITCH: Yeah. They tried to make the Dutch and the British bear some of the burden and came under a lot of pressure from the Dutch and the British for this and had to compromise somewhat, but they did spread it around a little. But you shouldn't think that the Icelandic people haven't had to carry most of that burden they have. Now, I must say, this is now a larger situation. And when the Germans, who always do this, since they never want to take responsibility for this themselves, it always falls more on the American state to organize the bailout. The Germans said that in the future, beginning in 2013, the banks ought to be taking some of the haircut themselves, rather than have the EU states lend – or the IMF or the Americans – lend the Irish state the money, provided they engage in this terrible austerity program. And as soon as the German banks heard that, and not only the German banks, they all the more wouldn't lend money to Ireland, because they didn't want to be caught holding Irish debt if they were going to be the ones who would have to take any of the haircut for this.

JAY: So first the banks get saved by the Irish state, and then they beat the hell out of the Irish state 'cause they may not be able to pay off the debt the Irish state took on to save them.

PANITCH: That's the situation, and there's nothing new about this.

JAY: Brilliant system. So what are Irish people demanding? What do you think they should be? What's the alternative for Ireland?

PANITCH: You know, the austerity program involves raising the sales tax – the value added tax, as it's called there – to 23 per cent (look at the hysteria here in Canada when we have a combined sales tax of 15 per cent), that at a time when corporate taxes in Ireland are famously at 12 per cent and it is being pledged that they will not be raised. And I might point out that the American corporations that have been the largest investors in Ireland in terms of manufacturing investment and exports from Ireland are threatening they'll pull out unless this 12 per cent corporate tax is maintained. So you see the enormous class inequity that's built into this, the enormous demonstrations that have taken place in Ireland. And they're not new. They occurred last year when austerity measures were introduced as well, and being led by a very, very moderate corporatist trade union leadership, which doesn't want to engage in any class mobilization – less radical than the AFL-CIO, but they're being forced into undertaking these demonstrations by virtue of the anger of the people. They're not demanding nearly enough. It's a very, very defensive set of demands they're engaged in. As I've argued before, the only real solution here is for Ireland to lead the way by defaulting on the debt, to do what Argentina did at the beginning of this century. But that will mean, and I hope it will mean, a much more radical set of responses in Europe, not only in Spain and Portugal and Greece, but much more broadly, whereby people are given a lead in terms of not just socializing the private banks' bad debts but actually nationalizing the banking system and turning it into a public utility. It'll mean breaking up the European Union, but reconstructing it on a basis of democratic and cooperative economic planning, where the money, our money that passes through the banking system, the people's money, is actually allocated in a democratic way. That – we have had a banker's Europe, a Europe based on free capital flows. It is inevitably one that was highly volatile, inevitably producing one crisis after another. And Ireland is facing the brunt of it at the moment. Greece faced it a few months ago. Portugal's about to face it at all.

JAY: But what do you make of the argument that the reason these countries are in difficulty is 'cause there's too much entitlement programs, the pension age is too low, unemployment insurance is too high, and so on?

PANITCH: I think it's ludicrous. This isn't the problem. The problem is not that Irish workers are too well off. The problem is the enormous wealth inequality, and above all inequality in power, and irrational investment that has gone on in these countries. And it will mean, if people are going to try to maintain something like the civilization that we've known, it'll mean redefining what our standard of living is. It will mean that we will not be able to engage in the kind of individual consumption, and have to turn to the kind of collective services that would be so rational and so needed – much more, much more extensive public transit and freer public transit, rather than private transit through automobiles that reproduces the ecological crisis and worsens it. But the answer is not that, you know, the Irish working class (give me a break) is so well off and wealthy, much less the Greek one. Now, it's true that many of these states are corrupt and are indeed the kinds of states that are built on clientalism. The type of democracies we've had there, the types of capitalist democracies we've had there, have involved bribing people, bribing people to – through agreeing to let them not pay as much taxes or any taxes, through giving them kickbacks, etc.

JAY: And you're using the public sector to make politicians rich.

PANITCH: Yes, and engaging in the type of relationships between politicians and capitalists that are indeed very, very unsavory, which involve, if not corruption, certainly scratching your back if you scratch mine. So there's no sense pretending that these have been, you know, wonderful democratic societies. And when one's calling for a different kind of economy, one needs to call for a different kind of state. •

Copper: Part I The new currency.

By Jack Barnes at

I don’t know if you have noticed what I have, but lately it appears that people are using Copper as a poor mans currency. I started to notice during the crash of 2008, that copper was being sold in a .999 pure bullion. The photo attached is for a single troy oz of “Fine Copper”. The list price for this copper, as is, was 12 dollars. Think about that for a moment.

Copper sells for about $4 per pound in the futures market. The contract size is for 25,000 pounds, and it costs $250 dollars per penny when quoting copper, the December forward month is currently quoted at 400.60 pennies, for a total cash cost of $100,150 per contract.

I dont know about you, but I would love to have a business where my future cost of inventory was 27 cents per oz, and after some remarketing costs, I am able to charge $10 to $12 per oz.

Check out this google link to Copper Bullion for sale. It’s not just the 1 oz bars, people are now selling copper bullion in kilo bars, coins, rounds and pretty much anything else they can make it look like a legitimate currency.

The ironic aspect to this, is that if the rumored one world currency is deployed, and it has in it, physical commodities like copper, you can expect an increase in crime to break out. If people started to look up at power-lines and instead of seeing a few pennies per pound in realized value at a junk shop, instead becomes thousands of future World Dollars, we will have problems.

Utilities, which are already heading underground will have to be moved there even quicker, and the deployment of new communications like WiMax will be necessary. The era of cell phones, and 4G internet, will end the need for copper to be installed in homes going forward. The Net will always be there, and why leave your phone at home wired to the desk?

In simple terms, we are close to turning a point in the technology curve, where the value of the copper in the old POTS (plain old telephone system) is more valuable torn out of the walls, than left in them. Consider that for a moment. Now, think about how easily accessible to anyone this stuff is. Savaging will greatly outweight the cost of trying to find job’s for our chronically unemployed.

The streets are currently lined with money hanging from wood poles. When you think about buried fiber optics, WiMax and Cell phones, the question becomes why do we have all of this copper in the walls, buried under the yard, etc.

Ironically, copper is already one of the most owned metals, due to its usage in home building. It could be argued that it is already distributed to the masses, and as such could be considered a currency already.

A buyer of an abandoned house in today’s economy *already* has to make sure that it still has its copper in the walls. It takes very little effort in the big picture, to strip out hundreds or thousands of pounds of copper from an abandoned home or factory.

If Copper becomes part of the next global currency, the world will have a new crime wave. The only difference, is that it will be based on a physical commodity changing hands, or at least represented in the exchange. While there is not enough Gold in the world, or Silver in the world to act as the physical basis of a currency, there is enough Copper.

Is that enough of a reason to develop it into an international currency? What say you?

Disclosure: Jack Barnes has no exposure to Copper, or any companies listed in this article. This disclosure and others are available at

What's behind the 2010 gold rush?

Investors and central banks are buying up the yellow metal at unprecedented levels, but will its allure last as fears over the global economy ease?

Richard Blackden

In the 19th century, San Francisco's citizens couldn't read about the gold rush happening little more than 200 miles from their city.

Most who worked for the local newspaper had dashed to the fields in the foothills of the Sierra Nevada mountains, where James W Marshall had unearthed a nugget in a riverbed in January 1848.

Rapid waves of immigration followed by ship and across the Midwest, with about 80,000 people braving the threat of cholera to make the journey in wagons.

Less than a month after Marshall's find and a few hundred miles further south, a defeated Mexican government signed the Treaty of Guadalupe Hidalgo, ending a two-year war with its northern neighbour and ceding swathes of territory to the US.

"The discovery of gold was little short of a revolution and came as California became American," explains Malcolm Rohrbough, author of Days of Gold: The Californian Gold Rush and the American Nation. "People were celebrating."

The yellow metal had of course dazzled many civilizations before, and from the middle of the 19th century added America to that list.

It has bewitched the country ever since and never more so than in the three years since the financial crisis erupted.

And as gold closes in on a 10th straight year of gains, a debate is raging across the country on whether the longest rally since at least 1920 can last.

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New, Unknown Strain of Flu Detected in Mongolia


A new, still unknown to the medical fraternity flu virus has been found in Mongolia. The symptoms of this influenza are similar to the so-called ‘bird’ and ‘swine’ flu viruses.

The virus is classified as H3N2 strain. In Ulan Bator, already 17 cases of this influenza have been registered. Young children are considered to be at greatest risk. Chief Public Relations Officer at National Research Center for Infectious Diseases in Mongolia Chuluunbat Urtnasan explained that doctors currently do not know how to protect themselves from the virus H3N2.

According to him, the main attention should be paid to protecting the body from cold. Body weakened by cold body can be prone to be infected by this new type of virus, report agencies.

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Report: Homeland Security Compiling TSA Enemies List

The Department of Homeland Security is gathering names and information about anti-Transportation Security Administration activists, members of the media, and other supposed troublemakers for investigation and possible tracking, according to an internal DHS memo cited by security expert and Northeast Intelligence Network Director Douglas Hagmann. Hagmann’s report, first published last week on the NIN website and in Canada Free Press, is causing widespread condemnation and ridicule of the U.S. regime across the internet. According to the article, Hagmann was contacted by a source within the DHS following publication of a previous article on TSA abuses entitled “Gate Rape of America.”

The secret memo was written “in response to the growing public backlash against enhanced TSA security screening procedures and the agents conducting the screening process,” explained the DHS document’s introductory paragraph. It was issued in the form of an “administrative directive” after high-level meetings between American “security” bosses like Janet Napolitano and TSA overlord John Pistole. And Obama apparently approved.

The memo reportedly labels opponents of the TSA’s heavy-handed groping, naked-body scanners, and other procedures as “domestic extremists.” Federal bureaucrats are actually instructed to identify and electronically report individuals falling under the “extremist” classification — including “any person, group or alternative media source” opposed to the TSA’s Fourth Amendment violations — to the Homeland Environment Threat Analysis Division, the “Extremism and Radicalization” branch of the Office of Intelligence & Analysis section of the DHS. The dragnet also includes anyone who “supports and/or elicits support” for people causing “disruptions.”

“It would appear that the Department of Homeland Security is not only prepared to enforce the enhanced security procedures at airports, but is involved in gathering intelligence about those who don’t. They’re making a list and most certainly will be checking it twice,” wrote Hagmann in the article, entitled “DHS & TSA: Making a list, checking it twice.”

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Stress & Worry: American Dream is 'to pay my rent'

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