Wednesday, June 8, 2011

Military Spending Linked to 18 Percent of Hawaii's Economy

Up to 18 percent of Hawaii's economy can be linked to spending by the U.S. Department of Defense, according to a new study from the RAND Corporation.

"It's common knowledge that defense activity in Hawaii plays a significant role in Hawaii's economy, but the size of that role has not been previously studied and quantified," said James Hosek, lead author of the study and a senior economist at RAND, a nonprofit research organization. "For example, 20 percent of defense procurement goes to the professional, scientific and technical services industry, and generates further economic activity."

Defense department spending in Hawaii averaged $6.5 billion per year during fiscal years 2007-2009. Of that, $4.1 billion was for personnel and $2.4 billion for the purchase of goods and services in Hawaii.

These expenditures were associated with 101,000 jobs and $12.2 billion worth of the total value of goods produced and services provided in Hawaii — or 18 percent of Hawaii's economic activity in 2009.

The study was done in cooperation with the Hawaii Institute of Public Affairs and the Military Affairs Council of the Chamber of Commerce of Hawaii. These two public interest groups asked RAND to make an assessment of the relationship between defense department spending and Hawaii's levels of output, employment and earnings.

The RAND study collected information about defense spending on personnel and procurement, and estimated the relationship between these expenditures and the levels of output, employment and earnings in Hawaii's economy.

The study also considered the sensitivity of the estimates to a number of factors such as undercounting or overcounting defense procurement and state paid by defense personnel. Most factors made little difference, but different estimates of the savings rate of personnel and where the earnings of afloat and deployed personnel are spent could decrease the estimated economic impact by approximately 10 percent.

Hosek cautioned that the study should not be used as a basis for estimating how much a given increase or decrease in defense spending would affect the Hawaii economy, because there are other variables that must be considered.

The study also notes that defense department spending in Hawaii has increased by $1 billion since the mid-1990s. Future studies may want to examine what effect this increase has had on the dynamics of Hawaii's economy, including whether it has led to investments in Hawaii's private sector, infrastructure and people.

The study, "How Much Does Military Spending Add to Hawaii's Economy?" can be found at Other authors include Aviva Litovitz and Adam Resnick, both of RAND.

Research for the study was sponsored by the Office of the Secretary of Defense and conducted within the Forces and Resources Policy Center of the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies and the defense Intelligence community.

As The Last Dying Embers Gutter Out In The Gloaming Darkness

This afternoon I scanned through the United Nations global economic report that came out last week.

World Economic Situation and Prospects 2011

It starts off with a healthy dose of sleep-inducing, bureaucratic mumbo-jumbo, but in just a few pages it suddenly gets right down to brass tacks and sums up the world's parlous economic condition in just two succinct sentences.

<< The baseline outlook for 2011 and 2012 is subject to a number of risks. These include problems regarding the sustainability of public finances in developed economies, the remaining vulnerability of the private financial sector, continued high and volatile commodity prices, and the still looming risk of a collapse of the United States dollar. >>

Simply put: we are skating on the razor edge of a financial abyss.

“...(L)ooming risk of a collapse of the United States dollar.” If that doesn't grab your attention I do not know what will.

It certainly has gotten my attention. Indeed, the evidence for the ongoing collapse of the dollar is ubiquitous. The collapse is already well underway. All that remains is the ultimate coup de grâce, which some people expect as early as this summer.

When the last props fall away and the whole façade of phony-baloney paper “wealth” denominated in ephemeral USA dollars comes fluttering down, like red-white-and-blue confetti raining from on high, the silence will be deafening.

At first.

The world will pause ever so briefly in a global moment of dumbstruck incredulity. And then the chaotic reshuffling of the planetary order for whatever comes next will commence. That process should prove to be – how to put this? – boisterous.

Oh, there's still hope for you, or at least some of you, and for me, and for some others here and there, but make no mistake about it, the America and the world that could have been, overflowing with the sweetest love and bounty that ever were, surpassing even flowing honey in its nectar good and pureness, are about to hit an exceptionally rough patch in the road.


I remember walking home from school on a splendid fall day in 1963 in the Virginia Tidewater, in a time and a place that no longer exist, down Lucas Creek Road past Sam Powell's dairy pasture where his Guernsey and Swiss Brown cows were grazing. I was just 8 years old. A car slowed and someone leaned out the window and shouted, “President Kennedy has been shot in Dallas!” and sped away down the road.

That day the course of the great evil that has brought us to this unfortunate fork in the road took a huge stride forward in its plan for subjugating this planet and the human race. That period was also characterized by assassinations of other important public and political figures: Dr. Martin Luther King, Malcolm “X”, Robert Kennedy, and by war in Indo-China and the omnipresent threat of nuclear war.

Right down to this very second the global system is afflicted with the pestilence of never ending war –Iraq, Afghanistan, attack against Libya, coups and invasions here, there and anywhere for the sake of bloody empire and corporate plunder. And it is all set against a back drop of past decades, centuries and millennia of never-ending warfare, slaughter, conquest, pillage, enslavement, rape and ruin. So much is made in American popular culture of The Good America, The Pure and Noble America of Centuries Past, but even that is a lie. That place never existed. The ugly reality of today is built on a historical foundation of horrific slaughter of Native Americans, theft of their territory and resources, and enslavement of unknown millions of Africans, forcibly brought to the British colonies and later the USA in chains. It was a a cruel and murderous business and that is how a large part of America was really built – on blood, guts, theft, genocide and slavery.

It always was an exploitive, hyper-violent, imperial project. It always was that way from the very beginning.

And now it is all impoding, as the dollar wheezes and coughs, as prologue to its approaching death rattle, perhaps as early as sometime later this summer. The dollar's death is unquestionably for the best, both for the people of what is still known (for at least a little while longer yet) as the USA and also for the rest of the planet's peoples. The central banking – debt based – warfare centric, economic model that the USA dollar props up is so murderously foul, exploitive and destructive that no sane person will long mourn its passing, if at all.

We don't know the half of the deep wickedness that has been done behind our backs by the shadow creatures furtively scuttling about in the dark of night, constructing their elaborately compartmentalized vampiric parallel realities that siphon off our life juice unawares. One of my readers has some knowledge of how numerous, secret underground facilities have been built all over the place, literally right under our feet, in front of our faces, with the vast majority of us being none the wiser, basically being positively clueless, dumb 'n dumberer, as it were. Here's one example of how it's done:

<< There was an old factory building that was being demolished, and they left the outside walls intact while in the center of the area they dug down to build the (underground) area so the public could not see what they were doing. (And) they usually build these next to a motel nearby, at which the people working in the (underground) location park their cars, and the (underground) install(ation) is usually accessed by a new building such as a 7-11 or other store where there is an entrance door with a key which leads to another door with an electronic lock which then leads to a stairwell or elevator down to the (underground) area. And the employees of the small store & maybe also the motel are gov(ernment) employees. >>

The Hopi people in Arizona warned us about all this. They warned us to mend our ways, to repent of all of this destruction, lying, exploitation, war and evil. They told us to turn aside and go down a more peaceful and constructive path.

We did not. And now we are where we are, as a people, as a species, as a global society.

We have called the tune, the centuries-long jig is up, and now the piper will certainly be paid, and paid in full.

Oh, the horror, soon-to-be-dead and dread!

There is a real analogy to the hubris that was associated with the sinking of the Titanic, a century ago. On that unfortunate occasion, the ship's orchestra serenaded the passengers as they slid down to their mortal end in the cold and unforgiving waters of the North Atlantic.

Today, the crisis is ever so much more severe than that. It's not just the fate of one large passenger liner at stake, but the life and times of a whole planetful of several billions of living, breathing souls. And so, as the nuclear radiation from the melted-down reactors at Fukushima, Japan wends its way across the northern hemisphere, as the petroleum and Corexit befouled waters of the Gulf of Mexico make their way to the open sea, as war rages in more and more places and the international, fiat-currency-based economy teeters on the brink of ruination, we ponder the fast approaching cataclysmic rupture of the socio-political-economic-military-industrial paradigm that has held sway on our home planet for a very long time.

I don't know about you, but I'm a little like the passengers on the foundering Titanic; I also find solace in music, and not the raucous, eardrum splitting noise that so much of contemporary popular culture regards as “music," either. No, I mean real music, with actual lyrics that speak to the full depth and breadth of the human condition, music performed by accomplished artists who have mastered their craft. I'm thinking of people like Johann Sebastian Bach and Samuel Barber.

J.S. Bach Air on the G String

Adagio for Strings (Samuel Barber)

And Tony Bennet and Janis Joplin.

When Joanna Loved Me

Little Girl Blue

And a great classic by Willie Nelson and Shania Twain.

Blue Eyes Crying In The Rain

Shania Twain with Willie Nelson, Blue eyes crying in the rain

Then there are George Dalaras and Glykeria at the Herodeion in Athens in 2006.
(I wish the volume were a bit louder on this clip.)


I am especially fond of this rendition of Amazing Grace, sung in Cherokee by Walela.

Amazing Grace

Of course, a new order will arise, Phoenix-like, from all the doom and gloom that will characterize so much of the coming months and years. Ultimately, a different sort of age will come into focus, characterized by a new Zeitgeist, by alternative ways of thinking, behaving and living that will be as different as day is from night, when compared to what has passed for "normal" for so long in this world.

I think Carl Calleman has tremendous insight into the overall process. There is a "World Oneness Revolution" aborning.

The Third day of the Ninth Wave (Universal Underworld) and the World Oneness Revolution

Something new and fresh is beginning on this world, right alongside the hyper-violent death rattle of the expiring world order. The two are taking place at the same time, in virtually the same space. All of us have the opportunity to choose which process to resonate with and cooperate with. Many will elect to pursue the path of death, destruction, exploitation and ruin. We wish them well, though in the same instant we recognize that such elections tend not to end pleasantly.

Others are choosing a path in an altogether different direction. They have decided to “Upwise.” They are taking part in a grand, global “Upwising,” characterized by withdrawing their support from the system of death, destruction, exploitation and ruination and spontaneously joining with others to sketch out alternative ways and means of acting and living in the present times.

A big key to the global “Upwising” is an actual change in the process of mentation. Naturally, new ways of thinking and acting reflect and require changed mental circuitry, new neural pathways that are adequate to channel novel visions and life modalities.

I suppose this falls into the “Music of the Hemispheres” category, but one of the best and most useful ways I have run across for “Upwising” the human brain and mind can be found at this website, and scores of others like it:

You can find many similar websites, offering a wealth of similar CDs and MP3 tracks for spiritual and mental “Upwising,” by doing keyword searches on terms such as << binaural, hemisync, brainsync, mindsync, holosync, brain entrainment, brainwave generator, etc. >>

Individual “Upwisings” happen one new neural connection at a time, one newly harmonious brainwave synchronized with another and another – until – whoa! – suddenly you sort of seamlessly slip into a new reality groove, exactly like a slick watermelon seed squirts through your fingers ~

It will be something like, well, like when I went into the Godforsaken, hole in the wall toilet at the Greyhound bus station in Amarillo, Texas in mid-October last year. I ensconced myself on the throne and there on the side of the stall I espied to my surprise, not the usual crude renderings of you-know-what and attendant crass odes thereto, but a genuinely inspired piece of poetry. It was the last thing you would expect in a third world bus station latrine, smack dab in the middle of the Texas Panhandle, and yet, there it was:

A new and glorious dawn awaits,
Not a sunrise, but a galaxy rise,
A morning filled with 400 billion suns,
The dawning of the Milky Way.
-- Carl Sagan


p.s. A final note: if you are financially able to purchase property and would like to transition out of wherever you may be and relocate to South America, please e-mail me at your very earliest convenience: dr_samizdat1618 at Heavy events are going to be coming down in the coming months and if you are able to, and desire to establish a life in South America, right now is the propitious time to act. Available properties range from a beautiful, 1000 hectare working estancia with year-round water in Uruguay for $4 million, to a productive 23 acre farm in central Chile with new house and appliances, garden, orchard, animals and farm equipment for less than $500K, to a wide variety of houses and lots in Ecuador from less than $100K and up. Serious inquiries only. Please don't waste my time and yours if you are not financially able to purchase property, and prepared to act now.

Homeless charity program about to be homeless itself

By Mike Anderson

WEST VALLEY CITY — A program designed to help the homeless may soon be homeless itself, after the building organizers were renting was foreclosed on.

The Salt Lake City Mission is now fighting to keep its Men's Recovery Home in West Valley City open.

"I've got my life back, my family back, everything. All the bridges I thought were burnt are back." -Shaun Fackrell, formerly homeless

Program participant Shaun Fackrell is what you might call a success story. He was homeless for two years; now he is a pastor at the Salt Lake City Mission.

"After a while, I had kinda lost hope," Fackrell said. "(I) just kind of did what I could to get by, just kind of settled myself to be on the streets.

He got off the streets with the help of the Men's Recovery Home.

"I have this perfect job where I'm happy to come to work every day," Fackrell said. "I've got my life back, my family back, everything. All the bridges I thought were burnt are back."

But now the four-plex that houses the recovery home has been foreclosed on, and pastors at the mission say their requests to either rent or buy the property from the bank are getting little response.

"It seems kind of down, right now, because the homeless mission's gonna be homeless and all that," Fackrell said. "But you now, He's gonna provide. I totally believe that."

"God says he doesn't give you more than you can handle. And we've got a really good crew of men, so it just seems to flowing really good." -Brad Jacques, Salt Lake City Mission spokesman.

To make matters worse, the Salt Lake City building where the mission used to house its was recently sold. The new owners asked them to leave.

Monday, the mission moved into a new space. Volunteers say they're grateful their offices have a home, even though their West Valley shelter may not.

"God says he doesn't give you more than you can handle. And we've got a really good crew of men, so it just seems to flowing really good," said Brad Jacques, spokesman for the Salt Lake City Mission.

But this group isn't losing hope. Fackrell says the mission has overcome other challenges, so why not this one?

"I'm choosing to see the positive, where it's not we're getting kicked out on the street, it's there's an opportunity for us here and God's gonna create that opportunity," he said.

Salt Lake City Mission officials were originally told to be out by June 1. They're still in the West Valley building, though, while they negotiate with the current owners: Bank of America.

A spokeswoman with Bank of America said the bank is looking into the situation, but she couldn't give a specific response in time this posting.


Chronic unemployment worse than Great Depression

The unemployed have, on average, remained unemployed longer than in the 1930s; Employers wary of job gaps in resumes

(CBS News)

There is an unfortunate adage for the unemployed: The longer folks are out of a job, the longer it takes them to find a new one.

CBS News correspondent Ben Tracy reports that the chronically unemployed face the hardest road back to recovery, and that while the jobs picture may be improving statistically on a national level, it is not for them.

Tinong Nwachan, for example, has far too much time on his hands. When CBS News met the former truck driver he had been out of work for two years.

"I don't really tell too many people this but I'm not ashamed or nothing, I'm homeless," Nwachan said.

Summer job bummer: Teen unemployment 24 percent
Nearly 14 million Americans are looking for work

His day job is looking for work at a jobs center in Hollywood. He has plenty of company, including Fabian Lambrecht, who wonders when the economy's improvement will affect them.

"They're saying there are more jobs. I'm just wondering where those jobs are," Lambrecht said.

About 6.2 million Americans, 45.1 percent of all unemployed workers in this country, have been jobless for more than six months - a higher percentage than during the Great Depression.

The bigger the gap on someone's resume, the more questions employers have.

"(Employers) think: 'Oh, well, there must be something really wrong with them because they haven't gotten a job in 6 months, a year, 2 years.' But that's not necessarily the case," said Marjorie Gardner-Cruse with the Hollywood Worksource Center.

The problem of course is the economy, but some industries, especially certain manufacturing jobs, are not ever expected to come back. Experts say unemployed workers need to be prepared to change careers.

"That person has to realize that, discover what field they want to work in, become trained and find a job in that field," said Jerry Nickelsburg, Sr., an economist at UCLA.

Here's another problem: more than 1 million of the long-term unemployed have run out of unemployment benefits, leaving them without the money to get new training, buy new clothes, or even get to job interviews.

"If you have been unemployed for 6 months or more, it takes a much deeper toll - not just on your personal finances and your career prospects - but on your emotional well-being," said Paul Taylor, an executive vice president with the Pew Research Center.

Tinong Nwachan said no matter how hard it's been, he isn't giving up on his search.

"I'm taking everything one day at a time. Eventually I know I'm gonna find something," Nwachan said.

All he says he's hoping for is a job that will take more of his time, and take him off the streets.

© 2011 CBS Interactive Inc.. All Rights Reserved.

10 Tipping Points Which Could Potentially Plunge The World Into A Horrific Economic Nightmare

Dees Illustration
The Economic Collapse

The global economy has become so incredibly unstable at this point that it is not going to take much to plunge the world into a horrific economic nightmare. The foundations of the world economic system are so decayed and so corrupted that even a stiff breeze could potentially topple the entire structure over. Over the past couple of months a constant parade of bad economic news has come streaming in from Europe, Asia and the United States. Signs of an impending economic slowdown are everywhere. So what "tipping point" will trigger the next global economic downturn? Nobody knows for sure, but potential tipping points are all around us.

Today, the global economic system is even more vulnerable than it was back in 2008. Virtually none of the systemic problems that contributed to the 2008 collapse have been fixed.

Mark Mobius, the head of the emerging markets desk at Templeton Asset Management, was recently was quoted in Forbes as saying the following....
There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis.
The "financial reform" law that Barack Obama and the Congress passed a while back was a complete and total joke. They might as well have written the law on toilet paper for all the good that it is doing.

We did not learn from our mistakes and our future economic lessons are going to be even more painful.

The world is drowning in a mountain of debt, the global financial system is packed to the gills with toxic derivatives, everyone is leveraged to the hilt and the dominoes could start falling at any time.

I am not the only one that is warning that another financial collapse is coming. In fact, a whole lot of people have been warning about the next financial collapse lately.

So what will the tipping point for the next collapse be?

The following are some potential nominees....

Tipping Point #1: Syria
Syria is a situation to watch very, very closely. The Syrian government is in a lot of trouble right now. Sadly, the instability inside Syria probably makes war with Israel even more likely.

Make no mistake - a war between Israel and Syria has been brewing for a long, long time and at some point it will happen. When it happens, the entire Middle East may erupt in warfare.

Just the other day, a very troubling incident happened in the area around the Golan Heights. The following is an excerpt from a report by The Daily Mail about the incident....
"About 20 pro-Palestinian demonstrators were killed and 325 injured yesterday when Israeli forces opened fire on them as they crossed the border from Syria into occupied territories, according to reports."
At this point, the Syrian government is probably glad that the attention has been taken off of them at least for a while. The Syrian government has been getting a lot of bad press lately. The following is an excerpt from a recent report by Human Rights Watch about the treatment of protesters inside Syria....
"The methods of torture included prolonged beatings with sticks, twisted wires, and other devices; electric shocks administered with Tasers and electric batons; use of improvised metal and wooden 'racks'; and, in at least one case documented by Human Rights Watch, the rape of a male detainee with a baton.
"Interrogators and guards also subjected detainees to various forms of humiliating treatment, such as urinating on the detainees, stepping on their faces, and making them kiss the officers' shoes. Several detainees said they were repeatedly threatened with imminent execution."

So in light of the "precedent" that we recently set in Libya, does this mean that we will be "forced" to conduct a "humanitarian mission" inside Syria as well?

Syria is one tipping point that we all need to keep a close eye on.

Tipping Point #2: Iran
The Iranian nuclear program is in the news again. A new report by RAND Corporation researcher Gregory S. Jones claims that Iran could have a nuclear weapon within 2 months. His report is based on recent findings by the International Atomic Energy Agency. According to Jones, airstrikes alone would be incapable of stopping Iran's nuclear weapons program at this point. Instead, Jones says that a "military occupation" would be required.

It is a minor miracle that a war with Iran has not erupted yet. It seems almost inevitable that at some point either the United States or Israel will use military force to try to stop Iran's nuclear program.
When that happens, it is going to cause a major shock to the global economy.

Tipping Point #3: Libya
NATO has made it abundantly clear that Moammar Gadhafi will no longer be tolerated. In fact, NATO apparently plans to reduce Tripoli to a heap of smoking ruins if that is what it takes to bring about the fall of Gadhafi.

What a "humanitarian mission" we have going in Libya, eh? It turns out that NATO believes that the United Nations gave it permission to bomb television stations and to make attack runs with helicopters.
Russian Deputy Prime Minister Sergei Ivanov recently said that by using attack helicopters, NATO has moved dangerously close to turning the Libya operation into a ground invasion....
Using attack helicopters, in my view, is the last but one step before the land operation.
So why is Libya a potential tipping point?

It isn't because Gadhafi is a threat. He is toast.

It is because the rest of the world is watching what is happening in Libya, and that is raising global tensions.

Even if Gadhafi falls, the Libyan operation will still be a failure because it has brought us all significantly closer to World War III.

Tipping Point #4: More Revolutions In The Middle East
The revolutions throughout the Middle East earlier this year sent oil prices absolutely skyrocketing and they have remained at elevated levels.

And in case you haven't noticed, revolutions continue to sweep the Middle East.

Have you seen what has been happening in Yemen lately?

Yemeni President Ali Abdullah Saleh has burns over 40% of his body and he has suffered a collapsed lung as a result of a recent attack.

If violence and protests throughout the Middle East become even more intense as the weather warms up this summer that could have a very significant impact on world financial markets.

Tipping Point #5: Fukushima
The mainstream news has gotten a bit tired of covering it, but the situation at Fukushima is still a complete and total disaster.

Japan's Nuclear Emergency Response Headquarters admitted on Monday that three reactors experienced "full meltdowns" in the aftermath of the earthquake and tsunami in March.

Did it really take them nearly three months to figure this out, or were they lying to the rest of the world all of this time?

The truth is that the nuclear disaster at Fukushima is far worse than the mainstream media has been telling us. If you doubt this, just check out this excellent article or this article by Natural News: "Land around Fukushima now radioactive dead zone; resembles target struck by atomic bomb".

The economic impact of the Fukushima disaster is going to continue to unfold over an extended period of time. It turns out that Japan is now officially in a recession. Their economy contracted at a 3.7 percent annualized rate during the first quarter.

Look for more bad economic numbers to come out of Japan for the rest of the year. Considering the fact that the Japanese economy is the third largest economy in the world, the fact that they are struggling so badly right now is not a good sign for the rest of us.

Read Full Article

State, local governments set to see record job cuts, layoffs

Wiki Image
Tami Luhby
Yahoo Finance

Don't look to state and local governments to prop up the job market.

To the contrary, this cash-strapped sector is set to go on a record-breaking layoff binge when the new fiscal year starts on July 1.

State and local governments are forecast to shed up to 110,000 jobs in the third quarter, the first time the blood-letting has risen into the triple digits, according to IHS Global Insight.

"We're on a downward path," said Greg Daco, principal U.S. economist at IHS. "It's not looking good."

State and local government employment has been a drag on the economy all year, averaging a loss of 23,000 jobs a month over the past three months. Meanwhile, the private sector has created an average of 180,000 a month during the same period.

Read Full Article

The Global Debt Crisis: How We Got in It and How to Get Out

Countries everywhere are facing debt crises today, precipitated by the credit collapse of 2008. Public services are being slashed and public assets are being sold off in a futile attempt to balance budgets that can't be balanced because the money supply itself has shrunk. Governments usually get the blame for excessive spending, but governments did not initiate the crisis. The collapse was in the banking system and in the credit that it is responsible for creating and sustaining.

Contrary to popular belief, most of our money today is not created by governments. It is created by private banks as loans. The private system of money creation has grown so powerful over the centuries that it has come to dominate governments globally. The system, however, contains the seeds of its own destruction. The source of its power is also a fatal design flaw.

The flaw is that banks advance "bank credit" that must be paid back with interest, continually requiring more money to be repaid than was created as loans; and the only way to get additional money from the private banking system is to take out yet more loans, at interest. The system is, in effect, a pyramid scheme. When the banks run out of borrowers to support the pyramid, it must collapse; and we are nearing that point today.

There are more sustainable ways to run a banking and credit system, as will be shown.

How Banks Create Money

The process by which banks create money was explained by the Chicago Federal Reserve in a booklet called "Modern Money Mechanics." It states:

"The actual process of money creation takes place primarily in banks." [p 3]

"[Banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise [by the same amount]." [p 6]

"With a uniform 10 percent reserve requirement, a $1 increase in reserves would support $10 of additional transaction accounts." [p 49]

A $100 deposit supports a $90 loan, which becomes a $90 deposit in another bank, which supports an $81 loan etc.

That's the conventional model, but banks actually create the loans FIRST. They find the deposits to meet the reserve requirement later. Banks create money as loans, which become checks, which go into other banks. Then, if needed to clear the checks, they borrow the money back from the other banks. In effect, they borrow back the money they just created, pocketing the spread between the interest rates as their profit. The rate at which banks can borrow from each other in the US today - the Fed funds rate - is an extremely low 0.2 percent.

How the System Evolved

The current system of privately issued money is traced in "Modern Money Mechanics" to the 17th century goldsmiths. People who left gold with the goldsmiths for safekeeping would be issued paper receipts for it called "banknotes." Other people who wanted to borrow money were also happy to accept paper banknotes in place of gold, since the notes were safer and more convenient to carry around. The sleight of hand came in when the goldsmiths discovered that people would come for their gold only about 10 percent of the time. That meant that up to ten times as many notes could be printed and lent as the goldsmiths had gold. Ninety percent of the notes were basically counterfeited.

This system is called "fractional reserve" banking and was institutionalized when the Bank of England was founded in 1694. The bank was allowed to lend its own banknotes to the government, forming the national money supply. Only the interest on the loans had to be paid. The debt was rolled over indefinitely.

That is still true today. The US federal debt is never paid off, but just continues to grow, forming the basis of the US money supply.

The Public Banking Alternative

There are other ways to create a banking system, ways that would eliminate its scheme-scheme elements and make the system sustainable. One solution is to make the loans interest free; but for Western economies today, that transition could be difficult.

Another alternative is for banks to be publicly owned. If the people collectively own the bank, the interest and profits go back to the government and the people, who benefit from decreased taxes, increased public services and cheaper public infrastructure. Cutting out interest has been shown to reduce the cost of public projects by 30-50 percent.

In the United States, this system of publicly owned banks goes back to the American colonists. The best of the colonial models was in Benjamin Franklin's colony of Pennsylvania, where the government operated a "land bank." Money was printed and lent into the community. It recycled back to the government and could be lent and relent. The system was mathematically sound because the interest and profits returned to the government, which then spent the money back into the economy in place of taxes. Private banks, by contrast, generally lend their profits back into the economy, or invest in private money-making ventures in which more is always expected back than was originally invested.

During the period that the Pennsylvania system was in place, the colonists paid no taxes except excise taxes, prices did not inflate and there was no government debt.

How Private Banknotes Became the National US Currency

The Pennsylvania credit system was sustainable, but some early American colonial governments just printed and spent, inflating the money supply and devaluing the currency. The British merchants complained, prompting King George II to forbid the colonists to issue their own money. Taxes had to be paid to England in gold. That meant going into debt to the English bankers. The result was a massive depression. The colonists finally rebelled and went back to issuing their own money, precipitating the American Revolution.

In an international first, the colonists funded a war against a major power with mere paper receipts and won. But the British counterattacked by waging a currency war. They massively counterfeited the colonists' paper money at a time when this was easy to do. By the end of the war, the paper scrip was virtually worthless. After it lost its value, the colonists were so disillusioned with paper money that they left the power to issue it out of the US Constitution.

Meanwhile, Alexander Hamilton, the first US Treasury secretary, was faced with huge war debts and he had no money to pay them. He, therefore, resorted to the ruse used in England known as fractional reserve banking. In 1791, Hamilton set up the First US Bank, a largely private bank that would print banknotes "backed" by gold and lend them to the government.

The ruse worked: the paper banknotes expanded the money supply, the debts were paid and the economy thrived. But it was the beginning of a system of government funded by debt to private bankers, who lent banknotes only nominally backed by gold.

During the American Civil War, President Lincoln avoided a crippling war debt by returning to the system of government-issued money of the American colonists. He issued US notes from the Treasury called "Greenbacks" rather than borrowing at usurious interest rates. But Lincoln was assassinated and Greenback issuance was halted.

In 1913, the privately owned Federal Reserve was authorized to issue its own Federal Reserve notes as the national currency. These notes were then lent to the government, eliminating the government's own power to issue money (except for coins). The Federal Reserve was set up to prevent bank runs, but 20 years later, we had the Great Depression, the greatest bank run in history. Robert H. Hemphill, credit manager of the Federal Reserve Bank of Atlanta, wrote in 1934:

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"We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve."

For the bankers, however, it was a good system. It put them in control.

Setting the Global Debt Trap

Prof. Carroll Quigley was an insider groomed by the international bankers. He wrote in "Tragedy and Hope" in 1966:

"The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.

"The apex of the system was to be the Bank for International Settlements [BIS] in Basle, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank ... sought to dominate its government by its ability to control Treasury loans...."

The debt trap was set in stages. In 1971, the dollar went off the gold standard internationally. Currencies were unpegged from gold and allowed to "float" in currency markets, competing with other currencies, making them vulnerable to speculation and manipulation.

In 1973, a secret agreement was entered into in which the OPEC countries would sell oil only in dollars and the price of oil would be dramatically increased. By 1974, oil prices had increased by 400 percent from 1971 levels. Countries lacking oil had to borrow dollars from US banks.

In 1981, the Fed funds rate was raised to 20 percent. At 20 percent compound interest, debt doubles in under four years. As a result, most of the world became crippled by debt. By 2001, developing nations had repaid the principal originally owed on their debts six times over; but their total debt had quadrupled because of interest payments.

When debtor nations could not pay the banks, the International Monetary Fund (IMF) stepped in with loans - with strings attached. The debtors had to agree to "austerity measures," including:

  • blockquote>cutting social services
  • privatizing banks and public utilities
  • opening markets to foreign investors
  • letting currencies "float"

Today, austerity measures are being imposed not just in developing countries, but in the European Union (EU) and on US States.

The BIS: Apex of the Private Central Banking Pyramid

What Professor Quigley foretold about the Bank for International Settlements (BIS) has also come to pass. The BIS now has 55 member nations and heads the global financial pyramid.

The power of the BIS was seen in 1988, when it raised the capital requirement of its member banks from 6 percent to 8 percent in an accord called Basel I. The result was to cripple the Japanese banks, which until then were the world's largest creditors. Japan entered a recession from which it has not yet recovered.

US banks managed to escape by dodging the capital requirement. They did this by moving loans off their books, bundling them up as "securities," and selling them to investors.

To persuade the investors to buy them, these mortgage-backed securities were protected against default with "derivatives," which were basically just bets. The "protection seller" collected a premium for agreeing to pay in the event of default. The "protection buyer" bought the premium. Owning the asset was not required. Like gamblers at a horse race, derivative players could bet without owning a horse.

Derivatives became a very popular form of gambling. The result was the mother of all bubbles, exceeding $500 trillion by the end of 2007.

Because of securitization and derivatives, credit mushroomed. Virtually anyone who walked in the door could get a loan.

The tipping point came in August 2007, with the collapse of two hedge funds. When the derivatives scheme was exposed, the market for derivative-protected securities suddenly dried up. But the US stock market did not collapse until November 2007, when new accounting rules were imposed. The rules grew out of the Basel II Accords initiated by the BIS in 2004. "Mark to market" accounting required banks to value their assets according to market demand that day. Many US banks, like those in Japan in the 1990s, suddenly had insufficient capital to make new loans. The result was a credit crisis from which the US has not yet recovered.

The BIS has now become a global regulator, just as Quigley foresaw. In April 2009, the G20 nations agreed to be regulated by a Financial Stability Board based in the BIS and to comply with "standards and codes" set by the board. The codes are only guidelines, but countries that fail to comply risk downgrades in their credit ratings, something so costly that the guidelines have effectively become laws.

An article on the BIS web site states that central banks in the Central Bank Governance Network should have as their single or primary objective "to preserve price stability." That means governments should not devalue the national currency by inflating the money supply; and that means not "printing money" or borrowing credit created by their own central banks. Like the American colonies after King George took away their power to issue their own money, governments must fund their deficits by borrowing from private banks. The bankers' global control over currency issuance has become virtually complete.

The effects of this policy are particularly evident in the EU, where EU rules allow deficits of only 3 percent of government budgets and prevent member countries from either issuing their own money or borrowing credit advanced by their own central banks. Member nations must borrow instead from the European Central Bank, private international banks, or the IMF. The result has been forced austerity measures, as seen in Greece and Ireland. The system is so unsustainable that commentators are predicting that the EU may break up.

The Way Out: Return the Money Power to Public Control

To escape the debt trap of the global bankers, the power to create the national money supply needs to be restored to national governments. Alternatives include:

Legal tender issued directly by national treasuries and spent on national budgets.

  • Publicly owned central banks empowered to advance the nation's credit and lend it to the government interest free.
  • Nationalization of bankrupt banks considered "too big to fail" (after expunging or writing down bad debts on inflated bubble assets). These banks could then issue credit to the public and serve the public's banking needs, with the profits recycling back to the government, defraying the tax burden on the people.
  • Publicly owned local banks (state, provincial or municipal).

Publicly owned banks have been successfully established and operated in many countries, including Australia, New Zealand, Canada, Germany, Switzerland, India, China, Japan, Korea and Malaysia.

In the United States there is currently only one state-owned bank, the Bank of North Dakota. The model, however, has proven to be highly successful. North Dakota is the only US state to have escaped the credit crisis unscathed. In 2009, while other states floundered, North Dakota had its largest budget surplus ever. In 2008, the Bank of North Dakota (BND) had a return on equity of 25 percent. North Dakota has the lowest unemployment rate in the country and the lowest default rate on loans. It also has the most local banks per capita.

North Dakota has had its own bank since 1919 when farmers were losing their farms to the Wall Street bankers. They organized, won an election and passed legislation. The state is required by law to deposit all its revenues in the BND. As with the sustainable model of the bank of colonial Pennsylvania, interest and profits are returned to the government and to the local economy.

A growing movement is afoot in the United States to copy this public banking model in other states. Fourteen US state legislatures have now initiated bills for state-owned banks.

The model could also be replicated in other countries. In Ireland, for example, where the major banks are insolvent and are already nationalized or soon will be, the government could deposit its revenues in its own publicly owned banks, add sufficient capital to meet capital requirements and leverage these funds to create interest-free credit for its own local needs. That is exactly what Hamilton did when faced with government debts that were impossible to repay: he put the government's existing funds in a bank, then borrowed the money back several times over, employing the accepted "fractional reserve" model.

Japan's solution is also a variant of what Hamilton proposed two centuries earlier. Japan retains its status as the third-largest economy in the world, although it has a debt to GDP ratio of 226 percent. Japan has "monetized" the national debt, turning it into the national money supply. The government-owned Bank of Japan holds Japanese government debt equal to 100 percent of the nation's GDP; and because the government owns the bank, this loan is interest free and can be rolled over indefinitely. An interest-free loan rolled over indefinitely is the equivalent of issuing money.

U.S. funding for future promises lags by trillions

The federal government's financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows.

  • The Capitol in Washington, D.C., is seen with a marble chimera rhyton that stands in front of the Rayburn House Office Building in the foreground.

    Alex Brandon, AP

    The Capitol in Washington, D.C., is seen with a marble chimera rhyton that stands in front of the Rayburn House Office Building in the foreground.

Alex Brandon, AP

The Capitol in Washington, D.C., is seen with a marble chimera rhyton that stands in front of the Rayburn House Office Building in the foreground.

The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for.

This gap between spending commitments and revenue last year equals more than one-third of the nation's gross domestic product.

Medicare alone took on $1.8 trillion in new liabilities, more than the record deficit prompting heated debate between Congress and the White House over lifting the debt ceiling.

Social Security added $1.4 trillion in obligations, partly reflecting longer life expectancies. Federal and military retirement programs added more to the financial hole, too.

Corporations would be required to count these new liabilities when they are taken on — and report a big loss to shareholders. Unlike businesses, however, Congress postpones recording spending commitments until it writes a check.

The $61.6 trillion in unfunded obligations amounts to $527,000 per household. That's more than five times what Americans have borrowed for everything else — mortgages, car loans and other debt. It reflects the challenge as the number of retirees soars over the next 20 years and seniors try to collect on those spending promises.

"The (federal) debt only tells us what the government owes to the public. It doesn't take into account what's owed to seniors, veterans and retired employees," says accountant Sheila Weinberg, founder of the Institute for Truth in Accounting, a Chicago-based group that advocates better financial reporting. "Without accurate accounting, we can't make good decisions."

Michael Lind, policy director at the liberal New America Foundation's economic growth program, says there is no near-term crisis for federal retirement programs and that economic growth will make these programs more affordable.

"The false claim that Social Security and Medicare are about to bankrupt the United States has been repeated for decades by conservatives and libertarians who pretend that their ideological opposition to these successful and cost-effective programs is based on worries about the deficit," he says.

USA TODAY has calculated federal finances based on standard accounting rules since 2004 using data from the Medicare and Social Security annual reports and the little-known audited financial report of the federal government.

The government has promised pension and health benefits worth more than $700,000 per retired civil servant. The pension fund's key asset: federal IOUs.

Inside Job part 1/8

Inside Job part 2/8

Inside Job part 3/8

Inside Job part 4/8

Inside Job part 5/8

Inside Job part 6/8

Inside Job part 7/8

Inside Job part 8/8

State, local layoffs to hit record levels

State and local government job losses are expected to soar this summer as teachers are laid off.

State and local government job losses are expected to soar this summer as teachers are laid off.

NEW YORK (CNNMoney) -- Don't look to state and local governments to prop up the job market.

To the contrary, this cash-strapped sector is set to go on a record-breaking layoff binge when the new fiscal year starts on July 1.

State and local governments are forecast to shed up to 110,000 jobs in the third quarter, the first time the blood-letting has risen into the triple digits, according to IHS Global Insight.

"We're on a downward path," said Greg Daco, principal U.S. economist at IHS. "It's not looking good."

State and local government employment has been a drag on the economy all year, averaging a loss of 23,000 jobs a month over the past three months. Meanwhile, the private sector has created an average of 180,000 a month during the same period.

In May, public employment shrunk by 29,000 jobs, mostly at the state and local level, while businesses created 83,000 jobs, the Labor Department reported Friday. All told, the sector has lost 510,000 positions since its peak in August 2008.

States still cutting

Though tax revenue is starting to rise, states are still wrestling with multi-billion-dollar budget gaps. Federal stimulus funds helped minimize job cuts until now, but that money essentially runs out on June 30.

So states are planning to slash funds for education, social services and local governments, as well as downsize their payrolls even more, in the coming fiscal year.

And that's the good news.

The bad news is that local governments are in even worse shape. Not only are they losing state aid, but they are finally feeling the fallout from the mortgage meltdown. Property tax assessments, a major funding source for municipalities, have only started to drop.

Hiring slows, unemployment rises

Caught in a fiscal bind, local governments will have to reduce personnel expenses since it is the costliest part of their budgets and they've already slashed their programs and services.

"We're at the tip of the iceberg," said Christiana McFarland, the National League of Cities' program director for finance and economic development. Cities "don't have many options at this point."

Teachers and school staff will bear the brunt of the layoffs this summer, as hundreds of thousands will likely be laid off around the nation. The national job numbers should reflect the hit in July and September.

It's not uncommon for state and local governments to take longer to emerge from a recession. But usually by then, businesses have ramped up their hiring. This time around, private sector hiring has remained soft, making government cutbacks that much more painful.

And it will likely take at least a year before the state and local government job market revives, economists said. Until then, they are waiting to see the extent of the downsizing.

"The only question is 'how much worse?," said Dean Baker, co-director of the Center for Economic and Policy Research. To top of page

Abercrombie: Stop feeding homeless

Governor Abercrombie unveiled a 90-day plan to tackle the homeless problem, and it includes discouraging feeding people in parks or other public places.

The governor's homeless coordinator says that kind of service doesn't get people out of homelessness. Some who feed people in parks, and those who get the food, question that part of the plan.

Bob Erb is getting supper ready, not for him, but for 150 homeless people in Kapiolani Park through his Waikiki Beach Outreach Ministry.

"He says feed me when I’m hungry, he says give me drink when I’m thirsty, he says when I need clothes give me clothing,” said Erb. "If you have a love for god you'll do what god tells you to do."

But the governor and the administration's homeless coordinator have a different suggestion.

“We think that feeding people in the parks for example is not always the best way of helping people out of their homelessness,” said Marc Alexander, state coordinator on homelessness.

He has met and has more meetings ahead with church groups and other providers that bring food to the people, suggesting they help a shelter or outreach agency instead.

"They know what they're doing isn't really working because they're getting more homeless, not less homeless,” said Alexander.

Homeless living in Kapiolani Park say the availability of a free meal is not what attracts them there or keeps them there.

"No, no. It's just that we've got no place to go. Where can we go?" said Steven who lives in Kapiolani Park. "Some people say they don't want to go to the shelter because there isn't enough room. Another thing is bed bugs."

"Come on, you don't want the people to go around unfed, go to sleep with their bellies empty,” said Hector who also lives in Kapiolani Park.

As for Bob Erb and his ministry?

"I'm going to keep doing it. They can arrest me,” he said. "Just like the visitors use it they have picnics out there every day, I’m going to have a picnic out there every day."

Where and how to feed people is among many other aspects of the governor's nine-point plan, that centers around better coordination and delivery of existing services for homeless people statewide and cleaning up public spaces.

"We're going to be relentless. When we clean up an area it's going to stay that way and people who may have seen an opportunity to simply wait for an area to get cleaned up and then move back in are going to find that is not going to be possible,” said Governor Neil Abercrombie.

The plan seeks to leverage more private and federal money with about $23 million in existing state, city and federal funds to help homelessness.

E.coli: Russia is right. Stick it, Brussels!

The World Health Organization has confirmed that the strain of E.coli which has infected over 2,200 people and killed 22 is extremely rare and has never before been seen in an outbreak of this kind. The finger was wrongly pointed at Spain, an act of irresponsibility which cost hundreds of millions of Euros in lost revenue and thousands of jobs and now the first tests on German bean sprouts are negative.

Of the 40 samples taken from a farm growing bean sprouts in Uelzen, south of Hamburg, the first 23 samples have tested negative. The restaurant supplied the bean sprouts to restaurants and markets in the Hamburg area, which is also the centre of the outbreak.

The World Health Organization has issued a statement claiming that "The strain of enterohaemorrhagic Escherichia coli (EHEC) isolated from cases in the EHEC infection outbreak in Germany is a rare one, seen in humans before but never in an EHEC outbreak." Some patients with EHEC develop haemolytic uraemic syndrome, or HUS.

"EHEC is a severe strain of E. coli bacterium that is commonly found in the gut of animals, mainly ruminants. It produces toxins, known as Shigatoxins or verotoxins, which damage blood cells and the kidneys," according to WHO. HUS can develop as a complication of EHEC, leading to life-threatening situations such as renal failure, a collapse of the Central Nervous System or a low platelet count as red blood cells are affected.

Typical symptoms include general malaise, abdominal cramps and diarrhoea, which may be bloody, fever and vomiting. Most patients make a full recovery within ten days.E.coli: Russia is right. Stick it, Brussels!. 44550.jpeg

Putting things into perspective, since the case broke out on May 2, there have been 22 deaths among over 2,200 people, all of these cases being linked to people who had travelled to Germany except two unlinked cases in Denmark. In Germany itself there have been 520 reported cases of HUS and 1,213 of EHEC. Globally there have been a further 32 cases of HUS and 58 cases of EHEC, in the UK, Netherlands, Poland, Sweden, Denmark, Norway, Spain, Austria, Switzerland, the Czech republic, France and the USA. 21 deaths have occurred in Germany and one in Spain.

Russia is right. Stick it, Brussels!

The first thing the Russian authorities did was to ban the import of all vegetables from the European Union until the source of the infection is identified, a measure criticised by Brussels as being contrary to the World Trade Organization rules. Well, here is a message for Brussels: stick it!

Firstly, Russia is not in the WTO and secondly, who wants to buy dangerous products infected with substances which provoke extremely serious illness or even death? As Vladimir Putin said "We do not want our citizens poisoned".

So, if it isn't Spanish cucumbers, then who is going to compensate Spain for the 200 million Euro a week they lost and for the thousands of jobs destroyed? And if it isn't German bean sprouts, then is it from some other product that Germany imported or from something grown in Germany itself?

Germany? Israel? Does it matter?

Andreas Hensel, Director of the Federal Institute for Risk Assessment, quoted in TheLocal site, stated that "It doesn't matter where the products are from. They could be from Germany, Israel or wherever. At the moment we cannot narrow down the search".

One thing is obvious: the country which is found to be the culprit in this can say goodbye to its agricultural exports in the near future. Yes, it does matter. That much is certain. One hopes that this will not spark a cover-up attempt. If it is not cucumbers or bean sprouts, then what is it?

If it is affecting many more women than men, then vegetables and/or fruit would seem to be the logical answer. However, the bacterial infection might have been contained only in a batch consumed some two weeks ago when the outbreak started, furthermore it might have nothing to do with the production, but rather, became infected in transit. This would complicate matters because even if it is proved that the products came, for example, from country X, it does not mean that that country was responsible.

Was it a terrorist attack, as we have stated previously in this column? Or is the E.coli contained in some other substance such as bottled water?

Another point to be included in this debate is precisely what farming methods are being used in the production of meat and in the use of fertilisers in the production of vegetables. What antibiotics or growth hormones are being fed to animals? What is the effect of these antibiotics on bacteria? Are we creating superbugs and passing these onto the food we eat?

And isn't this, then, the epitome of a globalised food market such as the EU, where chickens which in their natural state take three months to rear need only a few weeks in battery farms, where the need to produce for a market of 500 million people means God alone knows what methods are employed.

Is this what the people of Europe wanted? Or did they only ever want the trade barriers for their national products to be broken down to allow for the free movement of goods... and full stop?

Photo credits: AP

Timothy Bancroft-Hinchey