CRISIS COVERAGE REPORT
BAILOUTS, MERGERS, CORRUPTION
EXTENDED BREAKDOWN ANALYSIS

* Violence Begins in Earnest
* The Seamy Side of Corruption
* Military Hegemony & Martial Law Plans
* On Verge of US Systemic Failure
* Recognition of Financial Syndicates


HAT TRICK LETTER
Issue #61
Jim Willie CB, 
“the Golden Jackass”
15 April 2009

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VIOLENCE BEGINS IN EARNEST

Sometime this summer, the United States is very likely to suffer a shock of food price or limited food supply, maybe both. Multiple sources report stories about distress to farmers of all kinds, crops and dairy and livestock. There are widespread fertilizer shortages, water shortages, inadequate bank loans from a shortage of borrowed funds, inability to purchase adequate crop seeds, and more. The result is likely to be huge food shortages to major supermarkets this summer, with accompanying high prices. The latest specific story pertains to milk producers. The National Milk Producers Federation has warned that US dairy farms are at serious risk due to plummeting milk prices producers receive. The price of milk has dropped 50% from a year ago, reports USA Today. The Pennsylvania Center for Dairy Excellence said the state's producers received $11.50 per hundred pounds of milk in February against production costs of $15.50 to $18.50 per hundred pounds. Many milk producers will soon go out of business. Surprisingly, the demand for milk had dropped off the cliff in the last few months, perhaps offset by a rise in wine & whisky demand. Many major revolutions in modern history extended from food riots and food shortages. A hungry man resorts to violence!

The much more concentrated crisis looms in California. A water drought threatens the important agricultural state, which provides 80% of US food supplies, and almost 50% of global food supplies. To exacerbate the water shortage, some degree of water supply diversion accommodates environment concerns, with certain rare fish species favored. Banks recognize the problem and have denied credit to many farmers who cannot be assured of water supply, from a strict business risk. The problem is escalating in severity. The outcome of the damage to food output should be felt by summer. The shortages and higher prices for a slew of food items, far beyond milk, are extremely likely.

In the extraordinary September Hat Trick Letter reports, a forecast was made that riots would be a leading cause of death within the next year or two. Mine should have included murder/suicides from the distraught, despaired, and disenfranchised. Conditions have grown much worse in the last several weeks, clearly due to the economic problems, unemployment, lost savings, and broken families. A rash of killings with suicides has hit the news networks in numerous US cities. They have occurred in offices where people have been laid off, centers for immigration, even at retirement homes. A few at homes have taken victim whole families, wife, kids and all. It seems the chaos on the social side has begun in earnest. Contrast what we know to the stock market rally, completely disconnected from the reality of households and families.

Here are some rough beliefs of mine, purely from the gut, an amalgam from many beliefs, together with conversations and exchanges with very informed friends and associates. We discuss awareness of the US public on a host of issues. My belief is that a sizeable 90% of Americans sense something is really gone wrong at a national level, 50% think the USEconomy will become much worse, only 10% understand that insolvent banks do not return to life, a growing 40% are very angry at the bankers but in a vague unclear manner, no more than 30% understand that the Afghan War is about heroin (but only 5% understand the USMilitary has captured it for full exploit), less than 5% comprehend that gigantic crime syndicates are in operational control and have killed the financial sector. Also, over 70% will be shocked by autumn when things actually grow worse all around, the President Obama approval rating will plummet toward 30% by Labor Day, and 90% of Europe believes 911 was a CIA inside job (far higher than the US figure of 50%).

 

Trinity Church in Manhattan has experienced a big jump in its noontime service attendance. It is finally dawning on the sheeple that this is not going to be your run-of-the-mill recession, and a that a galloping depression has taken root. Across the Atlantic Ocean, St Andrew Church in Dublin city center has seen its weekly visitors rise by over 30%. The number of people booking appointments with priests for advice on how to handle the recession has seen a dramatic jump. Father John Gilligan said, “Our Sunday mass collections are down, but during the week, a lot more young adults are coming in to light candles and say a quick prayer. Our candle money has gone up from about €800 to €1100 a week. Eighteen months ago, the only appointments made were for baptisms and weddings. Now, we have about 20 people a week booking appointments where they are specifically looking for advice.” Recall that US Homeland Security has publicized its intention to use priests and ministers to help contain the social chaos and to report key information to the USGovt.

◄ Richard Maybury of the Early Warning Report has turned explicit in his warning of social stress and growing chaos. In detail, he urges the public to make preparations. This glimmer of hope heard by politicians and media anchors is but a ruse. Maybury wrote of malinvestment, dislocation, corporations either turned upside down or heavily disrupted, even as pricing systems and wage structures are badly askew. He plainly expects riots, violent crime, widespread robberies, and sharp rise in murders. He omitted kidnappings for ransom. He refers directly to political policy errors, where the middle class and under-class are subsidizing the wealthy, with certain deep resentment. He cites actual casualties from important US-based riots. The Watts Riot within Los Angeles in 1965 resulted in 34 deaths and over 1000 wounded. In the broader Los Angeles Riot in 1992, a total of 53 were killed and almost 2000 were wounded. He warns that the Oakland California riot that occurred in January 2009 was the first of many to come. He warns about the contagious unstable violent situation spreading from Mexico. He provides shocking details of the battle for control of Mexico. The US Defense Dept estimates that just two of the several drug cartels together have about 100k troops, of similar magnitude to the Mexican Govt army of 130k troops. The violence has hit US towns along the Mexican border. Both the Oakland incident and Mexican degradation have been covered in the Hat Trick Letter, with full warning about Mexico. He expects hordes of refugees coming from South of the Border, among whom cartel vermin will infiltrate to cause further violence inside the United States. Maybury wrote the following.

“Scores of times throughout history, we have seen today’s type of economic calamity repeated on a national level, but never before has it happened globally. This is the first time the world reserve currency has been fiat paper that can be created infinitely, producing unlimited amounts of malinvestment… We do not know what will happen, but the many national examples of fiat caused malinvestment give us some clues. Looking at 2500 years of economic history, I cannot see how this calamity will not lead to riots… Judging by what I overhear in grocery store lines and other public places, hatred of the rich is growing fast… Raising taxes, taking more money from the people who create jobs will only produce more unemployment and anguish, and desperate people do desperate things… I counted the riots in the US during the 20th century. There were at least 54 large ones. The January riot in Oakland was, I'm afraid, only the beginning of what's coming… The US State Dept issued a travel alert for Americans going to Mexico. Drug cartels have, in effect, seceded from the union and large firefights have taken place in many towns and cities across Mexico… In fact, in recent months, the number of Mexicans killed in the violence has been running much higher than the number of Americans killed in Iraq, Afghanistan, and Pakistan together. Add the economic crisis, and Mexico (Mexistan) could be on the brink of chaos…  We cannot have an honest financial system and stable economy when the currency they depend on is corrupt… The fiat paper money house of cards is finally collapsing… Again, this economic crisis is shaping up to be the biggest ever, and 2500 years of economic history tell us what to expect. By thinking things through ahead of time, and being prepared, you increase your chances to be just a spectator in this crisis, and hopefully a wealthier one, instead of a victim.” Wow!

In summer 2007, the Hat Trick Letter forecasted a failed Mexican state, as crude oil revenues would dry up, strain their federal finances into a critical condition, and drug lords gradually take control. THE BREAKDOWN, IF NOT FAILURE, OF MEXICO, HAS OCCURRED. Lately, Mexico has grabbed headlines. In late March, during her first trip there as Secy State, Hillary Clinton was asked about narcotics related violence, the thousands of its related deaths, the inability of the Mexican military to halt the drug trade, and the possibility that the country might be at risk of becoming a failed state (in so many words explicitly). Hillary denied that Mexico was on the verge of collapse, but she did acknowledge a rise in violent crime along the US-Mexican border and the associated threat. She officially promised a military response that includes a significant increase in US anti-narcotics assistance, with delivery of BlackHawk helicopters.

The Mexican drug cartels are in competition among themselves, and in conflict with their government, both federal and provincial. In the last two years, clearly in parallel with economic decline, the violence has reached critical levels among the leading crime syndicates, the Juárez Cartel, the Sinaloa Cartel, the Gulf Cartel, and Los Zetas. They have prevailed against the Mexican Govt crackdowns. According to the Mexican Attorney General Eduardo Medina-Mora, 5376 Mexicans were killed in drug related violence in the first 11 months of 2008, compared to 2477 during the same period in 2007, an increase of 117%. US police officials report inter-gang warfare is spilling into the United States in a serious way, producing rising murder rates in border states like Arizona, California, and Texas. This was cited in HTLetter reports months ago.

Impoverished parts of Africa, Asia, and Latin America are witnessing a downward spiral that features fringe and black market jobs. Other parts of the world have seen sharp rises in criminal violence since last year as the global economic crisis has worsened. With legitimate jobs vanishing, growing numbers of unemployed youth are drawn to illicit posts in the military and police that, in such countries, are low paid but allow access to bribes. See the story (CLICK HERE).

THE SEAMY SIDE OF CORRUPTION

◄ The White House Chief of Staff in the Obama Admin, Rahm Emanuel is a both a Clinton Gang henchman embroiled in bank fraud (and probably far worse) and a likely double agent working for the Israeli security agencies (many years of association). On US soil, he has been involved in some corruption that nobody seems to pursue. Mortgage giant Freddie Mac has been the focus of a major accounting scandal that led to a management shake-up, huge fines, and scathing condemnation of passive directors by a top federal regulator, but no prosecutions. One of its players was Rahm Emanuel, who gathered $22k in monthly fees for a 14-month ride at Freddie Mac. It is unclear that any work was involved. He directs White House traffic for financial solutions, which surely must include both Fannie Mae & Freddie Mac. Although his Freddie Mac job has been a prominent point on his political resume, his actual role and duties at the hallowed den of fraud remain a mystery. It is my firm belief that his responsibility was to steal money from both Fannie & Freddie for the benefit of the Clinton criminal organization. He lists investment banker as one professional attribute after all. Chicago-based investigative journalists accuse Rahm of directing stolen funds to cover up much of the Arkansas banks looted by the Clintons and their friends. Other Chicago-based reports indicate that funds were stolen, laden with Rahm fingerprints, from bank accounts containing massive $billion awards from asbestos cases, and funneled into Arkansas banks. Such is his valuable past work, leading to his greater role in the USGovt. See the Chicago Tribune article (CLICK HERE).

Emanuel has a minor blemish worthy of mention. According to the Cook County Assessor office, the Chicago home of Rahm Emanuel does not exist. While the address of 4228 North Hermitage is listed as his residence for the Illinois State Board of Elections, no public record exists for Emanuel ever paying property taxes on this home. The Cook County Assessor and Cook County Treasurer online records indicate Rahm’s Chicago neighbors pay between $3500 and $7000 annually in property tax. The Illinois Review has been unable to locate any evidence Emanuel has paid his fair share of the Cook County tax burden. Emanuel and Rule declared their North Hermitage home as the office location for the Rahm Emanuel & Amy Rule Charitable Foundation, their personal non-profit foundation. In January 2007, USA Today reported on the foundation has only Emanuel and Rule as donors, has donated to the private school where the Rahm/Rule children attend, and to a charity that provides art and other educational services for low income children. Yes, Emanuel is a prince.

The new Attorney General in the Obama Admin, Eric Holder has pledged great caution and snail’s pace speed in prosecuting public corruption cases. They call it carefulness and respect for reputations, but one should regard it as inaction and malignant neglect. The color of Republican and Democrat should never be considered when syndicates are at work, since they are but two chambers of the same corrupt edifice. Holder decided last week to abandon the case against ex-Senator Ted Stevens from Alaska, due to prosecutorial missteps. That means fumbles. Thus the Obama Admin wins some Republican favors. The new attorney general has also promised to restore morale at the Justice Department, which has been tarnished by charges of politically motivated interference. In my view, the Attorney General wants no progress on prosecution of syndicate corruption or any other corruption for that matter. Obama wears a blue coat from the Clinton Crime Family, which has taken a smooth handoff from red coats of the Bush Crime Family. They worked together to kill the nation after gutting it since 1988, probably earlier.

◄ Steve Bierfeldt is the head of the Campaign for Liberty. He was recently detained and questioned by St. Louis officials from the Transportation Security Admin. He was traveling from a regional meeting of a conservative political organization known to advocate sound money, small government, civil liberties, and belief in the United States Constitution. He was detained and interrogated by officials for apparently having a large hoard of cash in his possession. TSA agents claim having a large sum of money in his possession over $50 (yes, fifty dollars) is cause to being held and interrogated. When he questioned the lawfulness of his detainment, he was threatened with further investigation by the Drug Enforcement Agency and the FBI. TSA held him even after discovering the cash in question belonged to Ron Paul’s Campaign for Liberty. The FBI acknowledged the funds to be political contributions, and ordered the TSA to free Bierfeldt from custody. However, the top TSA official dragged his feet, insisting that he must contact his supervisor first because Bierfeldt is a ‘suspicious person’ in his opinion. This incident with USGovt official agencies is unnerving, if not chilling, in the shadow of the politically motivated Missouri Fusion Center MIAC Report recently released. In it, the institute labeled Congressman Ron Paul, his supporters, Campaign for Liberty, and anyone one who believes in conservative issues as a threat to national security. Listen to the audio account (CLICK HERE).

A politically savvy colleague responded to me on the incident, saying “This is really deep insight into what the United States has become. I have seen this in many other Third World countries where equally brain dead government goons are harnessing people for no other reason then their own stupidity and incompetence. Just wait and see what is going to happen once the shxx hits the fan and these people have to act under stress in emergency situations.”

Without question, the syndicates are abusing their power, protecting their fortress. In 2005, a middle level Homeland Security officer attempted to come forward to supply the USCongress with damaging information concerning 911 and the insider complicity. He was smeared with child pornography on his office computer, with both the news networks and public accepting the story. Also in 2005, a shootout between Bush security agents and British agents took place in the Congressional parking garage in WashingtonDC. The British were attempting to provide a CD loaded with damaging evidence about 911 and insider complicity, which was intercepted. The garage was closed for 48 hours, and over a dozen cars were repaired from bullet fire rapidly and secretly. One must wonder where the whistle blowers are on Wall Street bond fraud. The answer there is simpler. Those from Bear Stearns and Lehman Brothers were all rehired by Wall Street firms, since they knew too much. AIG key officers are given giant bonuses, not for retention, but for silence. The last thing the USDept of Treasury and Wall Street want is a bunch of guys involved at the center of the bond fraud, complete with mortgage bonds not linked to any property or its revenue, complete with counterfeit bonds issued at Fannie & Freddie, to write books, to write journal articles, to set up websites with You-tube videos, or to appear on talk shows.

MILITARY HEGEMONY & MARTIAL LAW PLANS

◄ Michael Hudson equates USTreasury Bond support with USMiltary outreach and coerced military subsidies. He makes a profound, erudite, and excellent argument on how the global USDollar glut actually enables foreign creditors to unwillingly and begrudgingly finance the USMilitary enterprise, and indirectly support an empire hardly benevolent. At the same time, the military overhead forces an enormous staggering burden on the USEconomy itself, leading to higher debt burden, redirecting capital toward destructive production, and attracting key professional talent. That includes its aggression abroad, instigation of borderline revolutions, even intimidation of the creditors themselves to continue the system. The United States Military has gone from global protector, in my opinion, to global intimidator and narcotics syndicate support team. It is difficult to find a key role performed by the USMilitary in the last 20 years in the pursuit of freedom and ensured security for Western Europe and the Pacific Rim. In fact, the USGovt has dictated terms of the creditor extravaganza, by ordering that the primary investment by USTreasury Bonds and USAgency Mortgage Bonds, precisely the fraud-ridden securities. Foreigners purchase such high order bonds, which the USGovt and its operating syndicate counterfeit for sale. High tech computer and telecommunications products are forbidden. Large strategic corporations like Unocal or Dubai Port facilities are verboten also for acquisition. Deep investments in stock for Citigroup or other Western big banks are copasetic, aok, approved. Hudson makes superb points. Here is an excerpt. See the Global Research article (CLICK HERE).

“CNOOK GO HOME is the motto when it comes to serious attempts by foreign governments and their sovereign wealth funds (central bank departments trying to figure out what to do with their dollar glut) to make direct investments in American industry. So we are left with the extent to which the US payments deficit stems from military spending. The problem is not only the war in Iraq, now being extended to Afghanistan and Pakistan. It is the expensive build-up of US military bases in Asian, European, post-Soviet, and Third World countries… The military overhead is much like a debt overhead, extracting revenue from the economy. In this case it is to pay the military industrial complex, not merely Wall Street banks and other financial institutions. The domestic federal budget deficit does not stem only from ‘priming the pump’ to give away enormous sums to create a new financial oligarchy. It contains an enormous and rapidly growing military component. So Europeans and Asians see US companies pumping more and more dollars into their economies, not only to buy their exports in excess of providing them with goods and services in return, and not only to buy their companies and ‘commanding heights’ of privatized public enterprises, without giving them reciprocal rights to buy important US companies, and not only to buy foreign stocks, bonds, and real estate.

The US media somehow neglect to mention that the U.S. Government is spending hundreds of billions of dollars abroad not only in the Near East for direct combat, but to build enormous military bases to encircle the rest of the world, to install radar systems, guided missile systems, and other forms of military coercion, including the ‘Color Revolutions’ that have been funded and are still being funded all around the former Soviet Union. Pallets of shrink wrapped $100 bills adding up to tens of millions of the dollars at a time have become familiar ‘visuals’ on some TV broadcasts, but the link is not made with US military and diplomatic spending and foreign central bank dollar holdings, which are reported simply as ‘wonderful faith in the US economic recovery’ and presumably the ‘monetary magic’ being worked by Wall Street’s Tim Geithner at Treasury and Helicopter Ben Bernanke at the Federal Reserve.

So we are confronted with the fact that the USTreasury prefers foreign central banks to keep on funding its domestic budget deficit, which means financing the cost of America's war in the Near East and encirclement of foreign countries with rings of military bases. The more ‘capital outflows US investors spend to buy up foreign economies, … the more funds end up in foreign central banks to support America’s global military build-up. No textbook on political theory or international relations has suggested axioms to explain how nations act in a way so adverse to their own political, military, and economic interests. Yet this is just what has been happening for the past generation... It is not simply a problem of ‘regulation’ or ‘control of speculative capital movements.’ The question is how nations can act as real nations, in their own interest, rather than being roped into serving whatever US diplomats decide is in America's interest…

The implication today is that the only way a nation can block capital movements is to withdraw from the IMF, the World Bank, and the World Trade Organization. For the first time since the 1950s this looks like a real possibility, thanks to worldwide awareness of how the US economy is glutting the global economy with surplus ‘paper’ dollars and US intransigence at stopping its free ride. From the United States vantage point, this is nothing less than an attempt to curtail its international military program. What concerns me next is retaliation.

 

While the Obama Admin ran a campaign on reduced military activity, its actions are exactly the opposite. The Military Industrial Complex will enjoy increased funding, evidence being the Obama Admin 2010 budget just put forth. The latest budget hatched by Obama calls for 26% increase in spending on Defense versus what President Bush budgeted in 2006. Even after the Soviet Union collapsed in 1989, the USGovt has spent $7 trillion from the USTreasury on Defense spending since 1990, over half the total USGovt federal deficit itself. My view is that investment in energy systems, a natural (wind, solar, wave) grid of electric generation, alongside a new generation of electric cars, in addition to diverse infrastructure upgrades, would have resulted in a significant reduction of foreign dependence. But the nation accepted the War on Terrorism, complete with colossal defense fraud, military contractor fraud, and Iraq Reconstruction fraud, with yet half the US nation still accepting the phony war. This is primary example of syndicates depleting the host nation. The hundreds of thousands employed by the military defense complex, in my opinion, work toward detrimental ends, not in greater systemic efficiency throughout the USEconomy, but in the destruction of buildings, homes, networks, and individual lives, without the benefit of any trickle down whatsoever economically. The economic benefits are heretically offered. The only true benefit from war spending in modern history has been victory that produces entirely new continental trade routes and physical channels, like after World War II. One is hard pressed to identify any such thing, except for guaranteed Iraqi oil supply and improved narcotics trafficking channels with clearing house banks (see the Bank of Baghdad, managed by JPMorgan).

The USGovt federal debt in 1990 was $3.2 trillion. Today it has ballooned to over $11 trillion. This is a 343% increase in nineteen years. One must ask the benefit from $7 trillion of spending on Defense produced. It has helped to sack the United States, and to weaken the world. In 2001, spending on Defense was 17% of total USGovt spending. In 2008, the Defense, Homeland Security, and war spending combined accounted for 26% of USGovt spending. Back on the home front stateside, the infrastructure is clearly in dire need, but funds go to war efforts while the news networks sound increasingly like out of the 1984 novel or the Brave New World novel. Most major cities operate with very old electric grids. Of the collection of bridges, up to 156 thousand are structurally deficient. Most older cities contain water distribution systems with pipes over a century old. The US writes checks to spend $500 billion per year to foreign countries for oil. Few analysts and a tiny minority of citizens seem to realize that the cost of the war economy at work in the United States has been and continues to be huge and crippling. Economists ignore the entire detrimental effect. It has been a principal pillar behind the economic and financial failure staring at the United States.

The USGovt is preparing a military response to the coming social chaos. The threat of social meltdown and chaos is so great that a domestic law enforcement arm of the USMilitary has been created to deal with unprecedented wave of violence and disorder. The Army Times call it the Consequence Management Response Force. A new report by the Army War College Strategic Studies Institute states flatly the USMilitary must prepare for ‘a violent, strategic dislocation inside the United States’ that could be provoked by ‘unforeseen economic collapse’ or ‘loss of functioning political and legal order.’ Already, in December 2008 over 20 thousand Army Brigade troops from Iraq were returning stateside to deal with domestic emergencies. Since then, the Army Times has broken the story that the domestic emergency army unit has been increased to 80 thousand, now trained and stationed in Georgia (capital Atlanta, not confused with nation in West Asia). In December, the managing director Dominique Strauss-Kahn of the Intl Monetary Fund warned of riots and turbulence sweeping through Western countries as households become frustrated with credit constraints and rampant unemployment. Such riots have already caused the government of Iceland to fall and triggered riots in Greece. Last week, the US Homeland Security has warned that returning troops from the Iraq War might run the risk of reverting to extremists. Many might become distraught and frustrated by loss of home, loss of job, loss of wife, loss of family, and degradation of their neighborhoods, with little hope of securing gainful employment or winning approval of either a car loan or home loan. See the disturbing article entitled “Economic Collapse to Trigger Social Pandemonium” that leaked its way onto public websites (CLICK HERE).

USGovt and USMilitary officials expect big trouble, but they are not warning the general public about the danger. A rare critic of the policy to keep the public in the dark is Stephen Flynn, former head of the US Commission on National Security.  He wrote in a recent Wall Street Journal editorial, “Too many officials believe telling the truth to Americans about the risk would set off a nationwide panic. Thus, they keep us sheep in the dark for our own good.” Make preparations personally, since no help will come from leaders. Millions of unsuspecting Americans will be caught flat-footed. Even mainstream financial analysts are finally awakening to the reality of the nation mired in something deeper than an ordinary recession. My analysis has documented many shocking developments, with job loss, store shutdowns, home foreclosures, all creating a powerful dynamic of negative feedback loops. John Williams of the Shadow Govt Statistics notes that clean statistics free from manipulation suggest a civilian unemployment rate of 17%, with a projected total to exceed 30%. That would top the 25% rate seen during the Great Depression. Many responsible journals have noted certain conditions actually growing worse, with job loss broadening from the original sources over a year in the past.

A remarkably clever and effective new campaign is underway to limit the usage of guns by Americans. A squeeze of ammunition this way comes, while at the same time technology is near to actually place ID codes on bullets. The anti-gun forces are coming to ban the ammo this time, not the guns. The Dept of Defense has ordered all brass from once fired bullets must be destroyed and no longer sold to commercial re-loading companies, in what appears to be a very devious policy. The DOD claims it will lose significant income in selling surplus brass, unless it secretly retrieves all such spent bullet casings to their own recycle centers. My expectation is that they will redirect used brass to defense contractors, to resupply the military, and to deny the public supply chain. The civilian ammo supply will lose significant supply in an already very tight market for ammunition. Protests have been filed to the USCongress to challenge and reverse the policy. The threat to training and recreational shooting is very real also. Watch for a black market to spring up.

New stories have emerged that cyberspies have penetrated the US electrical grid. The mysterious hackers have carefully placed software programs within the software system that could be used at a later time to disrupt the system. The official story indicates that current and former national security officials have offered accounts on the national threat from past events, which implies the story has been selected to be revealed now. So why sit on the story until now? Unless perhaps greater control is desired on internet traffic. The Obama Admin has submitted legislation for full internet control during a national emergency. The spies for these electrical grid intrusions allegedly came from China, Russia, and other countries, and were believed to be on a mission to navigate the US electrical grid and its control system, along with water, sewage and other infrastructure systems. It is nearly impossible to know whether or not an attack is sponsored by any government because of the difficulty in tracking true identities in cyberspace. US officials said investigators have followed electronic trails of stolen data to China and Russia. The reported incidents seem to be scouting missions, much like with field exercises, to test the perimeter and to check recognition monitors once inside. No attempt to damage the power grid or other key infrastructure was detected.

A senior intelligence official said, “The Chinese have attempted to map our infrastructure, such as the electrical grid. So have the Russians. If we go to war with them, they will try to turn them on.” A former Department of Homeland Security official claims the espionage was pervasive across the US and has no target in particular, whether company or region. He said, “There are intrusions, and they are growing. There were a lot last year.” Many intrusions were detected not by the companies in charge of the infrastructure but by US intelligence agencies, officials said. Intelligence officials worry about cyber attackers taking control of electrical facilities, a nuclear power plant, or financial networks via the Internet. The fact that the electrical utilities did not detect anything lays even more suspicion on the story. So the CIA detects a break-in to company loaded with failsafe systems that they did not notice when operating the companies? Very fishy indeed!

Protecting the electrical grid and other infrastructure is a critical part of the Obama Admin cyber security review. Under the Bush Admin, the USCongress approved $17 billion in secret funds to protect government networks. The Obama Admin is evaluating whether to expand the program to deal with vulnerabilities in private computer networks. A senior USMilitary official said the Pentagon has spent $100 million in the past six months repairing cyber damage. China is indeed notorious in downloading weapon systems, detailed schematics, and related documents from Sandia Labs during the Clinton Admin. The USMilitary and research lab facilities are like a sieve with thousands of holes, when compared to electrical grids. The military runs a game without accountability, when utility firms run a company with profit & loss responsibility.

The flow of power is controlled by local utilities and regional transmission organizations. The growing reliance of utilities on Internet-based communication has increased the vulnerability of control systems to spies and hackers, according to USGovt reports. The sophistication of the US intrusions, which extend beyond electric to other key infrastructure systems, suggests that China and Russia are mainly responsible, according to intelligence officials and cybersecurity specialists. One would expect uneducated Islamic fanatics, complete with lack of education, holding Korans instead of manuals, would have motive to hack into electrical grids in a glorious follow-up for their supposed 911 incredible feats!!! The US security agencies admit that no terrorist groups have yet penetrated the US-based systems, although they have the developed ability they do not appear to have yet mounted attacks, these officials say. See the Wall Street Journal article (CLICK HERE). Take the entire story with at most a dozen grains of salt, as the USGovt is probably conditioning the public in a deceit manner for another diabolic event, which results in USGovt control of the internet. The internet, by the way, has become the singlemost critic of the USGovt and Wall Street.

Contrast the cyber attacks with actual open sea ship hijack attacks, primarily off the Somali coast. In 2008, the number of global shipping attacks was 80, with 19 involving actual boarding of the vessel by the pirates. In 2009 so far, the numbers are shocking, having risen to 114 attacks with 92 boarding incidents in little more than one quarter of a year. Attacks have reached critical levels on the oceans of the world. The 1500-mile (2400-km) coastline off Somalia is strategically located near the Persian Gulf entrance at the Straits of Hormuz and farther south of passageways leading up to the Suez Canal. Perhaps the terrorists are not so much located in Iraq, but rather in Somalia, where no government exists, only warlords. Check also Wall Street for white-collar terrorists and their numerous weapons of mass destruction. Germany has responded effectively to menacing pirates on the high seas, blowing them out of the water without mercy. Americans have only begun to take action, like this past week.

ON VERGE OF US SYSTEMIC FAILURE

◄ James Galbraith is the son of the famous economist John Kenneth Galbraith, whose fame came from his classic “Affluent Society” in 1969. It urged greater social responsibility to expand the middle class and more equitably distribute wealth along with its potential after the United States became a wealthy powerful nation. James has contributed to the body economic recently. Younger Galbraith makes some excellent arguments in a recently article entitled “This Crisis is Way Bigger Than Dead Banks and Wall Street Bailouts” worth coverage (CLICK HERE). The new Galbraith has his own book Predatory State that has been a smash hit.

In short, Galbraith believes the entire recovery initiative led by USFed Chairman and Treasury Secy Geithner has failed because the attempted solution was imposed from the top down, beginning with banker redemption, largely ignoring the people, if not the USEconomy itself. He offers numerous specifics. Here his major points will be cited only. Galbraith criticizes a common notion by economists, including USFed Chairman Bernanke, that the USEconomy is a self-sustaining system that will return to stability and even a natural 4.8% jobless rate. It contains no genes within the system! The multiplier effect from re-spending in the Trickle Down is fallacious when people will save stimulus benefits, and pay off debt. No sequential trickle is evident. Their computer models have failed them, and have warned of nothing in the recent crisis, since they do not anticipate anything, only forecast in straight lines toward natural states. “The normal mechanics of a credit cycle do not involve interludes when asset values crash and credit relations collapse… For the first time since the 1930s, millions of American households are financially ruined. Families that two years ago enjoyed wealth in stocks and in their homes now have neither.”

The USGovt Stimulus programs were exercises in expedience in drafted legislation. He called it “a triumph of fast drafting, practical politics, and progressive principle” where attention was directed away from any project with long construction lead times or planning. Galbraith called it ‘dogged political refusal’ for the FDIC to take control of numerous large banks. He believes the banking reform rescue plan would prolong the state of denial. He calls the Public Private Partnership (PPPIP) for handling the toxic bank assets a redux of the original Paulson TARP Plan that Paulson himself rejected as unworkable. The new PPIP project has two insurmountable obstacles in quantity of toxic assets and lack of proper price discovery. He pointed out that Fitch Ratings examined a sample of more than 100 loan files and discovered fraud in almost every single one. Delay in treating bank insolvency kills prudent banking, leaving a bank vulnerable to become frozen in inaction, looted of their own assets, and engaged in speculation desperately. He stresses the bank insolvency that cannot be solved by taking a liquidity plunger to its toxic assets. (Like an enema to fix a poison incident victim, useless.)

Galbraith calls credit not a flow but a CONTRACT. The plumbing metaphor is entirely fallacious since liquidity is not the problem. The ‘Credit Contract’ requires a solvent lender, a worthy borrower, and adequate collateral. The current system lacks all three, but it does have unbridled looting and fraud. The Stimulus package pales by comparison to the breadth and depth of the FDR Programs, when in the Great Depression the USGovt hired 60% of the unemployed. Back then, banks did not recover until after the gold confiscation. He calls the current plan of bank recovery by stuffing them with cash a failure. He offers direct suggestions: 1) Make a bigger recovery USGovt Bill that includes state and local govts and addresses transportation, hospitals, and colleges & universities. 2) Help the elderly who have suffered losses from stocks & pensions, home values, and low interest rates (from savings), by first increasing Social Security benefits instead of cutting them. 3) Embark on a rich mix of programs for the arts, scientific research, teaching, conservation, and non-profit groups. 4) Institute a payroll tax holiday to restore purchase power directly to households. 4) Take control of insolvent banks, however large and “get on with the business of reorganizing, re-regulating, decapitating, and recapitalizing them.” Protect depositors, but total losses to stock & bond holders should be ordered.

Independent prestigious analyst Greg Weldon offers deep criticism for USFed Chairman Bernanke. He offers a warning that the USFed cannot stop its lending process without dire consequences, almost immediately felt. Weldon wrote, “This suggests that the credit crunch is only just now beginning to impact bank lending, which has, surprisingly, continued to expand throughout most of the credit crisis, largely due to the Fed’s overtly easy monetary policy. This is MOST disturbing, and implies that the Fed is on the verge of having FAILED to avert a full-blown debt deflation. Indeed, it is truly frightening to realize that the ‘minute’ officialdom stopped printing more money, bank lending is threatening to break down and violate the reflation trend ‘engineered’ during the 2000-01 episode. This, in conjunction with the Balance Sheet contraction, suggests that the Fed could FAIL to avert a full-blown debt deflation, if they do not keep pumping the printing press at a rate rapid enough to generate year/year growth of three quarters of a TRILLION dollars (or more, as total money supply expands, nominally)” One can properly say that Bernanke was forced to open Pandora’s Box as a result of the delayed failure handed him by Greenspan and his delayed reaction, but now cannot stop the churn from under Pandora’s eyes.

Michael Shedlock delivers a shattering report card to the failed central bankers who have inflicted themselves and their wretched heretic policies upon the US banks and USEconomy. He claims that Bernanke has failed. The dreaded debt deflation has begun to take root, under the watchful stewardship of Chairman Bernanke. It has happened, and might yet turn severe. Here is Bernanke’s list of policy measures, point by point, from a recent speech given the chairman himself. Shedlock does not treat the chairman harshly enough. Almost every one of Bernanke’s economic assessments and forecasts of future impact has been ridiculously wrong, enough to warrant being fired from his post for gross incompetence.

1. Reduce nominal interest rate to zero. Check. That didn’t work...

2. Increase the number of dollars in circulation. Check. That didn’t work...

3. Expand the scale of asset purchases and the menu of assets. Check. That didn’t work...

4. Make low interest rate loans to banks. Check. That didn’t work...

5. Cooperate with fiscal authorities to inject more money. Check. That didn’t work...

6. Lower rates further out along the USTreasury term structure. Check. That didn’t work...

7. Commit to holding the overnight rate at zero for a specified period. Check. That didn’t work...

8. Announce ceilings for yields on longer maturity Treasury debt. Check. That didn’t work...

9. Enforce targeted interest rate ceilings via interventions. Check. That didn’t work...

9. If needed, cap yields of other USTreasury securities. Check. That didn’t work...

10. Operate in the markets for mortgage agency debt. Check. That didn’t work...

11. Influence yields on privately issued securities. Check. That didn’t work...

12. Offer low rate collateralized fixed-term loans to banks. Check. That didn’t work...

13. Buy foreign government debt securities. Check. That didn’t work...

◄ The United States could learn something from the Argentine crisis under Peron. Toward this chapter, the US madmen do not bother to rewrite that history. Instead, they ignore it as irrelevant since they do not acknowledge the shameful parallel. The disastrous path on which America is currently embarked is similar to another country in the American Hemisphere. Its story is parallel but surely much smaller a scale. Before World War II, the nation of Argentina was an economic powerhouse. From the 1880s leading up to war, it was one of the most prosperous and sophisticated nations in the world. At that time, Juan Peron and his wife Eva took control in the 1940s. They wrecked the nation in just one decade. Argentina had a strong industrial base, burgeoning agricultural exports, sprawling cattle ranches, and a thriving middle class. It grew its population in part from immigration, as people throughout Europe (mainly Italy but also Eastern Europe). Within 15 years under the socialist Peron rule, Argentina declined badly into one of the poorest countries in the Americas, and has never fully recovered. Its misfortunate in the last two decades has been compounded by US banker exploitation. But Peronist policy was disastrous.

 

Upon coming to office, Peron instituted policies of profligate social spending, detailed welfare programs, protectionism, prohibitive taxation, and exploding deficits. Juan Peron often used speeches about class warfare. He opposed big business, and the excesses of the banks, private corporations, and lords of property. He empowered the labor unions power as key allies. Finally Peron permitted the government bureaucracy to grossly expand, and to impose itself in many corners of business and society. Corruption grew internally to extreme levels. Consequently, the Peronist economic foundation destroyed industrial productivity and growth through centralized rule with socialist direction. The investment capital from many channels fled. As taxes, inflation, unemployment, and interest rates grew out of control, the middle class was virtually destroyed. Lastly, the judicial system and press media networks fell victim, having lost its independence. Colossal losses were suffered by the entire nation. The nation of Argentina slid into a dark place, marred by profound violence, shamed by thousands murdered and disappeared (Los Desaparecidos), as poverty and fear gripped the nation. Argentina ended up a typical debt-ridden Latin American country that it remains today.

The example of the Argentina failure under Peron is an ignored warning. Socialism and a sky-rocketing debt can permanently impoverish a wealthy nation. It can deliver a death blow to nation such as the United States, which now suffers from a broken banking system and an economy in a downward spiral. Capitalism breeds uneven gains, but socialism assures evenly distributed misery. Corruption has undermined capitalism. The same corruption will result in accelerated decline for the entire system. Obama has already taken the first few dangerous strides toward an US adaptation of Peronism. He is seen as a political messiah and a significant change agent. He must be watched for wealth destruction from systemic measures of supposed reform, even as he continues to trust the same Wall Street high priests who are responsible for trillion$ in bond fraud. His wife Michelle could become a new Eva Peron. See the Washington Times article (CLICK HERE).

◄ Investigate parallels between the current situation inside the United States and the rise of dictators and fascism in once free societies. Political analysts uncover a number of deeply unsettling similarities to what has occurred during the last decade. Widespread usage of paramilitary groups and secret prisons in foreign lands is but one parallel. The arbitrary and targeted suspension of the rule of law is another parallel. Total impunity for high level fraud among those associated with government functions is another parallel. Deep corruption and horrendous pilferage is another parallel. Controlled media networks and spouted propaganda is another parallel. One could fill a page, but let it stop there.

The majority of US citizens are unaware of the dimensions of the financial sector criminality and collusion, let alone its control tentacles to the USGovt. The nation lacks proper information in order to form motive toward required reform on any grassroots level that would put the nation on sound legitimate footing. The teeth of financial sector influence cannot be adequately extracted without public awareness and institutional participation. Evasive half truths will triumph. Empty slogans will foster the hope. The shreds of freedom will gradually be removed, thread by thread. The disaster that besets the nation is a massive cyclone of high pressure from monetary inflation pitted against low pressure from debt destruction. It was the wish of Bernanke to oversee such a flood of inflation, curiously. We are witnessing the bursting of the massive 25-year debt bubble that enabled USEconomy to be captured and raped by a cancerous financial sector, which will result in financial loss and depleted liberties. The magnitude of debt bubble is in the tens of trillion$, difficult to calculate, given the hidden vaults of credit derivatives that strangle the nation in basement vaults. The deep shame earned by Wall Street after the 1930 Depression is miniscule. It is grossly overshadowed compared with the crimes, theft, and treason perpetrated by the US financial sector and its political and regulatory allies in the recent chapter of US history. The pinnacle of high crimes is the narcotics business run by the US security agencies, several of them with key roles. As the United States cedes its global economic leadership won in World War II, a reverse gear has demanded a global realignment in which the United States has lost the mantle and stage of power.

 

Sean Olender of SFGate, an independent San Francisco journal, makes some outstanding points regarding the air pockets of bailout psychology, which can potentially destroy the USEconomy. My analysis has pointed out that bailouts of fraud, corruption, and acid pits will bring with it a powerful brand of economic cost from the sheer outcomes extended from failure. Olender has a main theme that bailouts cause broad behavior responses among the population and economy itself, in the form of harmful changes. Banks delay home foreclosures in the hope of USGovt sponsored refinanced loans. More than half such loans have defaulted and will continue to default, at eventual public expense. Many who are delinquent on credit card accounts delay their painful bankruptcy because of hope of deliverance from predatory bankers. Millions of homeowners desperate to sell delay in selling their empty shell of homes, as they hope for a price rebound, essentially flushing new income down the toilet. Perversely, worsening economic data confirms more hope of ever-greater federal bailouts, rescues, and stimulus. They overlook how previous USGovt programs have almost all fallen flat in apparent failure.

Olender said, “The logic is much like medieval blood letting: The patient died because we did not drain enough of his blood. The promise of more bailouts also keeps everyone from doing what is necessary… Our tax money is given to banks and speculators to hold houses empty. On 20 March 2007, I wrote here that a mortgage bailout was coming and would cost at least $1 trillion, yet not bail out homeowners. As it turned out, the bailout did nothing to stop foreclosures from going through the roof. On 8 February 2008, I wrote here that Fannie and Freddie would be taken into receivership within a year, an event that occurred September 7. I argued there on Sept. 18 that most loan modifications were a fraud… To ‘fix’ all these problems, the George W Bush Admin, and now the Obama Admin, have chosen people (or their accomplices) who stole from the public. That is why no one has been prosecuted… We have a crisis of confidence, because fraud permeates most of our banks and financial institutions. The solution is law enforcement, not handouts.”

Olender points out that those who would indeed instill sweeping reform would require technical competence and possess deep integrity for their posts. Bankers would tolerate neither trait in an administration official. Obama chooses not to be motivated by revenge as he refuses to investigate the crimes of investment bankers and to prosecute them. He regards doing so to render irreversible harm to the very financial foundation he deems urgently necessary to serve in a recovery. Instead, the law enforcement will prosecute those who wish food and shelter, but not the Ruling Elite for their national plunder, if not treason. See the unique SFGate article (CLICK HERE).

A great deception has been told regarding the financial viability of the Social Security Admin funding model. Opponents of Social Security reform have managed successfully for years to underplay the problem of gross under-funding. They made absurd claims that the SS Fund would run surpluses all the way to 2017. Political pressure is fierce not to reduce benefits. The false forecasts motivated lack of reform, and stemmed any effort at changes. Social Security has for years been the bizarre bright spot in the federal budget, since it raised $50 billion to $100 billion more each year in payroll taxes than it paid out in benefits. NOW THE TIDE HAS TURNED TOWARD DEFICITS. According to the latest Congressional Budget Office estimate, the Social Security surplus will be only $3 billion in 2010. That number itself almost assuredly is far too optimistic, as even their grand step toward reality falls short. The actual realization in year 2010 will be a hefty deficit. In just this latest month of February, according to data from the Social Security Office of the Actuary, the program was in deficit! The USEconomic recession underway has reduced employment, and thus payroll tax revenue. Worse, some workers opt for early retirement and also choose the smaller but earlier SS option for benefit initiation. Another force is at play. In the past few years, the CBO twisted its own model assumptions with pure distortions to make Social Security’s financial future look sounder. Great damage has been wrought by the systematic chronic effort to downplay the crisis. See the Bloomberg article (CLICK HERE).

Staggering losses to pension funds generally have occurred, whether managed by corporations or sitting in private 401k accounts. Benefit retirement plans at large US corporations fell a record $300 billion in value in 2008, according to the 9th Annual Milliman Pension Funding Study. John Ehrhardt from the study claims losses last year reduced the value of the 100 largest corporate pension plans to under 80% of their payment obligations, in a very sudden reversal of fortune. At the end of 2007, the plans were over-funded, holding 106% of their obligations. Investment losses were linked to every conceivable type, whether stocks, bonds, or managed property. Additional declines in value and new requirements in the Pension Protection Act are expected lead to an added $50 billion in expenses to their programs in 2009, the report said.

The collapse in value of US state and local government pension plans has resulted in a disastrous double blow. Their collective $2000 billion in assets make them major investors in every asset class. The 2600 pension plans across the nation provide retirement savings for 22 million public employees. They range in size from the giant CALPERS, with $120 billion in assets, to tiny small town funds for their workers on town payrolls. They are compelled to sell off assets at low valuations in order to satisfy pension payouts, while their funding levels fall sharply to dangerous new lows. In the past year these government pension funds have lost about 40% of their value through investment losses. Phillip Silitschanu is a senior analyst at consultant group Aite Group. He said, “[The pensions] could face a cash flow collapse. They are liquidating assets to meet their monthly cash flow needs… Instead of selling positions that are down 10%, they are being forced to liquidate positions down 40%. It is a fire sale liquidation of assets to have the cash on hand to meet obligations.” Pension funds are like a storm drain.

 

Bill Atwood is the executive director of the Illinois State Board of Investments. He sheds light on the pension fund pressures faced by their many managers. He said, “Right now it is very bad. For the full year 2009 (ending in June) we will have $270 million negative cash flow on $8.5 billion in assets.” State pension benefits are required by law to be paid even if the fund suffers loss. For instance, the nation’s largest government pension fund is CALPERS, the California pension fund. It has lost $70 billion over the past eight months for California public workers, but still must pay $11 billion in benefits this year. The prospect of recouping its losses seems a heavy uphill struggle. Therefore, the California state government will be compelled to increase its contributions to the fund next year, despite being burdened by a huge deficit. The collapse in funding levels is considered by most in the industry to be of much greater significance.

Analyst Rick Ackerman brings some horrible data to the table regarding the mutual fund ledgers. In January 2008, early in the stock market collapse phase, domestic equity mutual funds were worth about $6.5 trillion. By February 2009, these mutual funds had fallen by half to $3.4 trillion. During that time, net redemptions totaled only 2%, or about $100 billion. The public held on during the decline, as mutual fund investors largely held pat. Ackerman believes “The fatal problem for that kind of optimism, he says, is, in a word, capitulation, or rather, the absence of capitulation in a bear market that so far has been marked by more or less orderly declines the whole way down... So, do we infer that guys like Kudlow, Suze Orman, and CNBC’s talking heads actually believe this bear market will somehow be different from all others before it, with no exhaustion selling to carve out a durable low? We do not merely doubt this. We view such an outcome as very nearly impossible. This bear market will end, like every other bear market in history, with a wholesale dumping of stocks at prices that will make current values seem exorbitant in comparison.” He thus expects mutual funds to take more devastating hits. The recent 20% stock rally will lead the public to again hold on with hope, and not sell.

◄ Federal pension rules have actually pressured small businesses to fork over huge sums of money or shut down private pension programs, with no middle ground legally. We have yet more federal stupidity. In many cases, the matching contribution offered by small companies can make or break the firm. David Wray is president of the Profit-Sharing/401k Council of America in Chicago. He commented on the polarized policy at work. He said, “As long as we make small companies contribute in the worst of times, a lot will not have [retirement savings plans.] They are so close to the margin that a 3% contribution can make or break these guys. They cannot put their company at risk just because they want this benefit.” An endless raft of companies with fewer than 250 employees is considering liquidation of their safe harbor 401k plans as earnings decline badly in the worst US recession likely to be seen in 70 years. The USEconomic recession that has brought 6.3% decline in 4Q2008 has also eliminated 2.6 million jobs in the last four months. With that downdraft has come evaporation of small company profits. Most small firms use the kind of safe harbor 401k plan that requires employers to make payments equal to 3% of eligible employee compensation, regardless of whether employees add their own money to the plan. Liken it to profit sharing, so as to bypass rules to demonstrate that small business owners are not usurping profits for pension purposes. This is unintended harm forced on small businesses.

By contrast, large companies abide by different rules. More than 50 of the largest US firms have ratcheted back their pension contributions during the current recession. Greater flexibility is needed, since terminations have a more harmful for employees than missing the payment. The USDept Treasury is strongly considering changes that will allow companies to retain their plans without the 3% contributions. See the Bloomberg article (CLICK HERE).

RECOGNITION OF FINANCIAL SYNDICATES

Simon Johnson delivers a very deep warning that any recovery for the USEconomy has an urgent pre-requisite, to break the financial oligarchy that inhibits critical imperative reform. To avert a depression, time is urgent to remove the banksters from their seats of power. Johnson writes an extraordinary article entitled “The Quiet Coup” (CLICK HERE) that describes an economic and financial crisis is disturbingly similar to those recently seen in emerging markets, and only in emerging markets. His work reinforces my notion that the US is sliding into a Third World corner. The common theme is that creditors exit and flee. They see an ever-growing mountain of debt and suddenly stop lending. Banks next could not overcome the halt in credit, unable to roll over debt, unable at times to service their debt burden. The United States thus risks becoming yet another Banana Republic.

The financial industry boomed in the past 25 years, and grew in power, not coincidentally as Goldman Sachs was invited to run the USDept Treasury. This in my view constitutes the singlemost crucial step in the destruction of the US banking system and decline in the USEconomy. Wall Street became a parasite, then a cancer. The momentum in power grab and profitability stems in part from deregulatory policies of the Clinton and Bush II Admins. Ironically, Volcker’s monetary policy in the 1980s resulted in a long lasting bond bull market that propelled the finance sector into prominence. Success from Volcker policies bred the cancer from a bond bull market. Both bond securitization and credit derivative trading enabled a skyrocketing rise in transaction fees and generally profit opportunities in financial services. The fast rise in private 401k pension funds and mutual funds surely reinforced the trend. Some figures highlight the rise of the financial sector turned cancerous. From 1973 to 1985, the financial sector earned up to 16% of total domestic corporate profits. In 1986, that figure rose to 19%. In the 1990 decade, its profit share fluctuated between 21% and 30%, a warning signal not heeded but rather boasted from. In the current decade, it rose further to 41%. Pay scales rose just as dramatically. The financial chieftains simultaneously enjoyed a doubled compensation from the early 1980s through 2007. The removal of the Glass Steagall Act and its restrictions actually open the gates for the bankers to wrest control, to flood the system with their bond fraud, and to cripple the foundation with credit derivatives. They remain in control of the USGovt finance ministry at the Dept Treasury still. The cancer remains, complete with deep criminal activity, clear blatant cover-ups, and utter domination of the flow of federal rescue funds. Johnson followed up.

“The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government, a state of affairs that more typically describes emerging markets, and is at the center of many emerging market crises. If the IMF’s staff could speak freely about the United States, it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform… Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people. But there is a deeper and more disturbing similarity: elite business interests, financiers, in the case of the US, played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of US interest rates after the dotcom bust or, even better… on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits, such as Brooksley Born’s now famous attempts to regulate Credit Default Swaps at the Commodity Futures Trading Commission in 1998, were ignored or swept aside… The great wealth that the financial sector created and concentrated gave bankers enormous political weight, a weight not seen in the United States since the era of JP Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.

One must be careful in personally assigning blame and pointing out systemic faults. Simon Johnson comes from the bank centers himself, having plied his trade from the Intl Monetary Fund. In effect, he implicitly defends central banking and shifts the blame for the current crisis onto Wall Streets titans, the infamous ‘oligarchs’ who must be cast out. To point out bank errors, bank fraud, and bank control without mentioning the central banks and their destructive policies from their modern day Politburos is a grotesque omission. Some call it muckracking. He implies that the system needs a change in the guard, a transition of Elites. The US Federal Reserve has worked more closely with greater cooperative efforts with Wall Street firms than ever before. The USFed closed its eyes during bond securitization, with credit derivatives, even with funneled narco funds from Afghan sources. Johnson is shouting down the wrong hall at the right building. The central bankers must be driven from the financial temple.

◄ James Howard Kunstler is a controversial straight shooting financial writer, with an odd background that includes the Rolling Stone magazine. That explains his cheeky style and irreverent style. He has delivered a stern warning about the American standard of living, to be marred by bankruptcies on a gross scale, great economic disorder. It will sweep away the sense of luxury, leisure, and entitlement, in his words. He wrote, What is going on now is nature’s way of telling you that America’s standard of living has to be reduced by something between 20 and 50%. You can have it in the form of a compressive deflationary depression, including widespread bankruptcies,… or you can have by way of inflation, in which money loses its value. But there’s one basic qualification to this: the way down is not symmetrical with the way up. This is where we are headed. It could easily be worse than the 1930s, when we still had plenty of family farms, plenty of oil, plenty of factories in good running order, and a highly regimented population of workers unaccustomed to luxury, leisure, and entitlement. We have hardly begun to see the potential political repercussions of economic disorder now underway. I think it will start to show in a big way not long after Memorial Day, when the current false euphoric Wall Street rally ends in yet another pool of tears, and the despair trickles downward. But that would be too sensible for a nation determined to become the Bulgaria of the western hemisphere.” See the article (CLICK HERE).

Kunstler delivered another warning at the Aspen Environment Forum, pulling the green chairs out from under the audience. He warned how the economic pains the United States has experienced in the last 18 months will be easily eclipsed by what is coming next. He expects severe hard times to begin in about four months. People are delusional in embracing the notion that the USEconomy shows signs of recovery, glimmers of hope, or green shoots, he explains. Since the populace is so ill-trained in matters of finance and economics, the public is unaware of what lies over the horizon. He paints a picture with specifics. a) A multitude of companies that are fighting to sustain themselves will roll over and die. b) The stock market’s final sucker rally will fail and send it tumbling to the 4000 Dow level by the end of the year. c) Creditor nations will choose to stop investing in USTreasury Bonds, stripping the stimulus effort of fuel. d) The capital for investment in giant solar and wind farms will not materialize. He concluded that the depression (not a recession) has destroyed so much capital, “that no amount of phony baloney capital that the federal reserve creates can overcome the amount that has disappeared. We literally cannot restart the growth thing. We really cannot restart the consumer credit thing. Even if the bank wanted to lend, we are not going to lend more people money to buy more flat-screen TVs. It’s basically over.” He accused President Obama of not realizing the severity of the economic upheaval or refusing to acknowledge it. My comment is that foreign creditor halt to purchase USTBonds will result in isolation financially, thus putting the risk on the USDollar, but not at all stripping stimulus fuel. That fuel will in my view continue to be mis-spent. My view is that Obama was selected to preside over the economic disintegration, the transition to martial law, and the demise of the USDollar. See the Aspen Times article (CLICK HERE).

Economist author James Galbraith warns of a breakdown in financial order. He warns about the bank rescue plan, the faulty conception of the problem as one of liquidity, and of faulty economic models. He expects that the newest Geithner baby, the Public Private Partnership Investment Program, will most likely result in “a combination of looting, fraud, and a renewed speculation in volatile commodity markets such as oil. Ultimately the losses fall on the public anyway, since deposits are largely insured. There is no chance that the banks will simply resume normal long-term lending. And if banks are recapitalized without changing their management, why should we expect them to change the behavior that caused the insolvency in the first place?” Banks lack qualified borrowers. Banks lack sufficient capital. Borrowers lack adequate collateral. And the same guys are running the same big banks. Galbraith accuses Geithner of limited vision, as he surely cannot perceive the current crisis as a credible threat to the entire failed system. My analysis has repeatedly pointed out that the crisis is one of insolvency, whereas bank officials and the USFed continue to describe it as a liquidity issue. A bankrupt entity will not make usage of funds offered, plain and simple, well, except to steal for the benefit of its executives perhaps. Galbraith went further.

“In banking, the dominant metaphor is of plumbing: there is a blockage to be cleared. Take a plunger to the toxic assets, it is said, and credit conditions will return to normal. This, then, will make the recession essentially normal, validating the stimulus package. Solve these two problems, and the crisis will end. That is the thinking. But the plumbing metaphor is misleading. Credit is not a flow. It is not something that can be forced downstream by clearing a pipe. Credit is a contract. It requires a borrower as well as a lender, a customer as well as a bank. And the borrower must meet two conditions. One is creditworthiness, meaning a secure income and, usually, a house with equity in it. Asset prices therefore matter. With a chronic oversupply of houses, prices fall, collateral disappears, and even if borrowers are willing they cannot qualify for loans. The other requirement is a willingness to borrow, motivated by what Keynes called the ‘animal spirits’ of entrepreneurial enthusiasm. In a slump, such optimism is scarce… Our modern numerical models just do not capture the key feature of that crisis, which is, precisely, the collapse of the financial system. If the banking system is crippled, then to be effective the public sector must do much, much more… Recent months have seen much debate over the economic effects of the New Deal, and much repetition of the commonplace that the effort was too small to end the Great Depression, something achieved, it is said, only by World War II.”

Galbraith describes more symptoms of the economic and financial crisis. People are spending less, saving more, thus creating a liquidity trap without a debt dominated system. People are feeling poor suddenly, which explains car sale showrooms do not see the flock of traffic anymore. The slower money velocity in flows of funds throughout the system results in reduced multiplier effects from the so-called trickle down. Money is being re-spent, re-used, and re-circulated less by participants to commerce. Workers simply save their extra income or USGovt handouts and tax cuts with a newfound sense of insecurity, or use the money to pay debt. With smaller multipliers at work, the USGovt stimulus packages must be designed even larger, in order to fill in all the holes in total demand. So the next USGovt Stimulus bill will be much bigger.

Many have asked of my future perspective for the nation and the syndicates often described. That requires a full book. Briefly instead, start with the most dangerous of the syndicates. The

Pentagon, the US-based defense contractors, and the CIA are highly likely to morph into a private cartel. They are close to that now. They might even seek out a new client and become a future supplier to the Chinese Military and Russian Military. The USMilitary fighting force is highly likely to become a mercenary army in future years, provided it can maintain a supply of soldiers. Profound economic decline will provide a steady supply of soldiers, who enlist with hope for a future, even education. Wall Street will fade away, having completed its mission of looting the nation, diverting funds from the recovery, and transferring ill-gotten funds to a foreign location. Caribbean banks and Israeli banks are the only locations that are mentioned by informed associates in contact with me. A skeletal crew will be required to manage the tremendous flow of narco funds. The Fannie Mae organization will suffer the fate of a Black Hole under the USGovt roof, with a twin Black Hole in the American Intl Group. They were dispatched to USGovt ownership since the gutting process was complete, and the inevitable implosion was ordered to occur with all tentacles tied to the federal purse strings. This is not a pretty picture. Bear in mind that most syndicates murder their host after finishing their work, in order to wipe out all evidence. Thus, beware of attacks of all kinds.