Get Ready For The Next Great Stock Market Exodus et al. Get Ready For The Next Great Stock Market Exodus 2013-07-12 Brandon Smith In the years 2006 and 2007, the underlying stability of the global economy and the U.S. credit base in particular was experiencing intense scrutiny by alternative economic analysts. The mortgage-driven Xanadu that was the late 1990s and early 2000s seemed just too good to be true. Many of us pointed out that such a system, based on dubious debt instruments animated by the central banking voodoo of arbitrary fractional reserve lending and fiat cash creation, could not possibly survive for very long. A crash was coming, it was coming soon, and most of our society was either too stupid to recognize the problem or too frightened to accept the reality they knew was just over the horizon. The Federal Reserve had cheated America out of an economic reset that was desperately needed. The 1980s had brought us utter destruction disguised as “globalization.” Our industrial center, the very heart of the American middle class that generated enormous wealth and decades of opportunity, had been dismantled and shipped overseas to the lowest bidder. It was then that the U.S. economy actually died; we just couldn’t see it. From that point forward, Americans were fully dependent on the charity of central bank money creation and international bank lending standards. The collapse that should have occurred in the 80s was delayed and thus made more volatile as the Fed artificially lowered interest rates and allowed trillions upon trillions of dollars in dubious loans to be generated. Free money abounded, and average citizens were suckered royally. Their greed was used against them, as they collateralized homes they could not afford to buy more crap they didn’t need. Of course, you know the rest of the story... Today, credit markets remain frozen. Lending is nowhere near the levels reached in 2006. The housing market is showing signs of life; but that’s only because most home purchases are being made by banks, not regular people, for pennies on the dollar, as bankrupt properties are then reissued on the market for rent rather than for sale. If you are lucky, maybe one day you’ll get to borrow the keys to the house you used to own. And, millions of higher-paying full-time jobs have been lost and then replaced with lower-paying part-time-wage slavery positions. The image of American prosperity carries on, but it is nothing but a cruel farce; and anyone with any sense should question how long this false image can be given life before the truth dawns. The novice will question why it is necessary to re-examine all of this information. Is it not widely known? Am I not simply preaching to the choir a message heard over and over again since the crash of 2008? Maybe - or maybe it is time for us to finally apply some foresight given our knowledge of the recent past. Why did 2008 creep up on so many people? Weren’t there plenty of economists out there “preaching to the choir” at that time? Weren’t there plenty of signals? Weren’t there plenty of practical conclusions being made about the future? And yet, the world was left stunned. The truth is, human beings have a nasty habit of ignoring the cold hard facts of the present in the hopes of using apathy as a magical elixir for future prosperity. They want to believe that disaster is a mindset, that it is a boogeyman under their bed that can be defeated through blind optimism. They refuse to accept that disaster is a tangible inevitability of life that pays no heed to our naïve, happy-go-lucky attitudes. The American people allowed themselves to be caught off guard in 2008, just as they are setting themselves up to be caught off guard again today. Again, the reality is clear; the Federal Reserve has propped up equities and bonds using money created out of thin air — so much so that both markets have become totally reliant and disturbingly addicted to fiat injections. The distribution of this fiat threatens the continued dominance of the dollar as the world reserve currency and will invariably lead to currency collapse and hyperstagflation. This process is much more likely to climax in the near term given the accelerated rate of quantitiative easing within our system to date and the accelerated rate at which our primary lenders (namely China) are dumping the dollar in bilateral trade with each other. The endgame is obvious, but I still fear millions of people within this country and around the world will be shell-shocked once again by a renewed crash. The argument is always the same: “Yeah, things might get dicey, but it won’t be as bad as all the doom-mongers claim, and probably not for many years.” Similar statements were made by naysayers before the Great Depression and before the 2008 crash. So why are the skeptics wrong again this time around? The Stimulus Fantasy Let’s put this in the simplest terms possible: Stimulus is now the lifeblood of our economy. There is nothing else sustaining our nation. Period. Stimulus in the form of bailouts and QE are keeping the stock market and bonds afloat. This means that the continued existence of equities, and the continued existence of healthy treasuries, and thus the foundation of our currency, our general economy, and a functioning (or barely functioning) government, is completely dependent on the Fed continuing to print. In recent weeks, the Fed hinted at possible intentions reduce or remove stimulus measures, which would effectively shut down the life-support machine and let the patient drown in his own fluids. http://money.cnn.com/2013/06/19/news/economy/federal-reserve-stimulus/index.html http://www.reuters.com/article/2013/06/14/usa-imf-lagarde-idUSL2N0EQ0QI20130614 Day traders and common investors are not very bright, but they do understand well that no stimulus means no stock market and no bond market. In response, indexes have become erratic, shifting on the slightest rumor that the central bank might continue QE for a little longer. Pathetically, the Dow Jones now rallies upward whenever bad financial news hits the wire, as insane investment groups pour in money in the hopes that dismal economic developments might cause the Fed to extend the bailout bonanza. In our modern nightmare era of hyper-centralized economy, one word or rumor from Ben Bernanke now determines whether stocks dramatically rise or fall. This is NOT the behavior of a healthy and vibrant fiscal system. The anatomy of American finance and trade has been horribly mutilated; and clearly, such a monstrous creation cannot last. Stocks are supposed to perform based on the true profitability of individual businesses as well as the political and social health of the overall culture. The wild printing of paper money by private banking magnates is not a catalyst for a successful economy. Whether the Fed actually ends QE is ultimately irrelevant. No fiscal structure can survive when it abandons fundamentals for fantasy. Either QE continues, becoming less and less effective in staving off negative results in equities, inspiring a flight from the dollar leading to a crash, or QE ends, exposing the inevitability of negative results in equities, leading to a crash. If the Fed ends stimulus, the process of collapse will merely take place slightly faster than if stimulus remains. But every historic economic crisis has a defining moment, a moment in which the tide turned overwhelmingly sour for a majority of the public. The question now becomes what, exactly, will trigger the avalanche? Precious Metals Signal Secret Shift To Asia As I have discussed in numerous articles over the years, China's shift away from the U.S. consumer and the U.S. dollar is well under way. Over half of the world's major economies now have bilateral trade agreements in place which remove the dollar as the world reserve currency in trade with China and the ASEAN economic bloc. China is issuing trillions in Yuan and Yuan denominated bonds around the globe, setting the stage for a higher Yuan valuation and allowing Chinese consumer markets to replace American consumer markets as the number one driver of manufacturing in export countries. At the same time, China has increased its purchases of precious metals exponentially to the point that the nation is now set to become the largest holder of gold and silver in the world in the next two years. This is clearly in preparation for a currency crisis event... The buying spree in Asia seems to directly contradict the "paper market" value of metals in recent weeks. Demand for gold and silver has only increased throughout most of the world, even in light of Federal Reserve suggestions that QE might end. Manipulations within metals markets by the CME and JP Morgan explain half the story, but there may be another issue at work. It is very possible that the COMEX is now essentially broken, and that gold and silver ETF's (paper gold and silver) are decoupling from the street value of physical metals during the last gasp of a failing system. In the near term, I believe that premiums on physical coins and bars will skyrocket, even as the official market prices of those metals is held down. At the same time, China, Russia, and other countries heavily invested in gold may break from Western COMEX valuations completely using their own metals markets to establish their own prices. As the dollar loses its world reserve status, the countries holding the most physical gold in their coffers stand to weather the storm most effectively, and because U.S. gold stores have never been officially audited, we have no idea if America has any reserve whatsoever. Crushing Energy Prices Coming Soon? While China continues a careful strategy of decoupling from the dollar and the U.S. consumer through bilateral agreements and trading blocks, another issue is arising: the issue of energy. I would like to note that despite globally diminishing oil demand caused by the 2008 credit collapse, gas prices have experienced little to no deflation. I would also like to note that after the Federal Reserve hinted at shutting down QE, oil was one of the few commodities that continued to rise. http://www.bloomberg.com/news/2013-01-18/u-s-oil-demand-falls-to-16-year-low-api-reports.html This has not been caused by a lack of supply, as many American-based companies ramp up production. (I am aware of all the arguments behind peak oil. As soon as a peak oil proponent can show me an example of oil demand not being met because of a legitimate lack of supply, then I’ll be happy to consider that peak oil is the main cause of price increases.) http://www.bizjournals.com/sananton...n/2013/06/us-oil-production-up-as-global.html The fact is current regressive global demand and ample supply should have led to lower gas prices, not higher. If speculation was the cause, then price shifts within the oil market should have been far more volatile, with increases lasting weeks or perhaps months, but certainly not years. The only plausible explanation for this kind of commodity activity is a weakening of the currency it is directly tied to. The petrodollar is slowly but surely coming to an end. I believe the next market exodus may be triggered by the weakening effects of stimulus (or the removal of stimulus altogether) along with extreme energy prices cause by steady inflation and a global political crisis in the near future. China, being strangely and consistently prophetic when it comes to economic calamity, has recently established an astonishing oil trade deal with Russia, which plans to supply China with an alternative petroleum source for the next 25 years. (This news went almost completely unnoticed by the mainstream media.) http://www.forbes.com/sites/kenrapoza/2013/06/22/russia-inks-big-china-oil-deal/?partner=yahootix Now, keep in mind that in 2010, China and Russia signed an agreement completely removing the U.S. dollar in bilateral trade. The dollar has been the world reserve and the only currency used to purchase petroleum for decades. The Russia/China oil deal changes everything. It sets a trend toward the removal of the petrodollar function of the Greenback which ultimately destroys any credibility the currency has left. This news flies in the face of dollar proponents who consistently claim that the dollar's ties to oil make it invincible. Apparently, there are some weaknesses in the armor. Ongoing social unrest in Egypt has also made oil markets jumpy, being that the Suez Canal oversees the transfer of a significant portion of the world’s oil shipping. Clearly, there are two opposing factions within the country vying for power, and regardless of who is best suited to U.S. interests, the Egyptian people overall have no love for the West. There is a distinct chance of a shooting war, similar to Syria, in the coming months in Egypt. Meanwhile, the engineered conflict in Syria continues to go exactly as I predicted in my article'The Terrible Future Of The Syrian War'. http://www.alt-market.com/articles/1535-the-terrible-future-of-the-syrian-war Syria remains an explosive trigger point for regional war which will, in the end, draw in Iran and result in the closure of the Strait of Hormuz, which annually handles the shipping of about 20 percent of the world’s oil. All trends point toward higher gas prices over the horizon, and the U.S. economy is barely able to survive on the cost of energy we have today. So Close They Can’t See It Reduced stimulus combined with adversely high oils prices may very well be the tumbling boulders that bring down the mountain. We are close now. Beyond the undeniable economic factors, the very fabric of American government is crumbling. Corruption is openly rampant. Scandals are exposed daily. The establishment leadership is unapologetic and grows even more despotic with each truth that escapes into the open air. They are becoming MORE bold, not less bold, and those of us who seek transparency in all things, from politics, to economics, to surveillance, are being attacked as the source of the problem rather than the solution. Collapse, from a historical perspective, seems to occur when the searchlights of the individual mind are dimmest, when the threat is the greatest, and when we are most comfortable in our ignorance. In 2008, the U.S. public was mostly oblivious to the danger, and they were painfully stung. Today, I hope that the liberty movement, the alternative media, and alternative economic analysts have created a window of opportunity by which millions of people can this time see the writing on the wall and prepare accordingly. At this point, there is no question that Americans have been warned. Whether or not they pay heed, is out of our hands. http://www.alt-market.com/articles/1587-get-ready-for-the-next-great-stock-market-exodus * * * * * * * * * * * * * * * # New Zealand's economy is rapidly disintegrating, as part and parcel of the "Chinese Flu" (as China's tightening its credit and restructuring its economy under the new leadership amidst the slowdowns in global demand for manufactured goods thus its export, in turn causing much slowdowns in global commodity demand), just as Australia has. Australia's economy is going down rapidly. We may have a positive GDP, but most major sectors are already in recession/contraction (call it what you want) and have been for many months. Now the mining and energy sector is chucking a spaz too, the whole top-end is stagnant or recessing. And so much for the insane blurb at the beginning of 2013 that real estate was going to approximate the idiotic surge in prices in 2009. However the media keeps pumping the story that demand and price is higher, because RBA rates are currently low, and structural RE shortages etc. So how screwed in the head can one get? ... to buy an overpriced house, at top of the market, on a 30 year mortgage, just before a wave of global sovereign defaulting, trade war and currency collapses... because a transient RBA rate is currently low. Just last week numerous commentators saying Australia never had it so good, problem is, it's only good for a tiny fraction, the rest are all screwed. Just read the newspaper there. FortescueMetalGroup's (FMG) Andrew Forrester said everything is okay. That's why, after nearly going belly up with iron ore at ~$90 a few months ago, he has slashed a couple of thousand jobs and halted expansion of Berth 5 even though it's now +$130/ton. It's reckoned that the earnings this Christmas will be weak with lower AUD strength limiting battler's ability to make various non-essential purchases. Demand was even struggling with high AUD, but now the imports are going to be ~10% higher, as inventories are replenished at weaker AUD. Who's going to be paying up to 10% more retail for those non-essentials? And that does not even factor in the major gasoline price increase we're now seeing. That has to flow through too. A falling AUD is a good thing, yes, but only if it really plunges, and takes oil down with it. But what we have now is not only higher prices (i.e. new records coming very soon), but a comparative REAL price that's well above what we effectively experienced in June-July-Aug 2008. Retailers are going to get smashed, and before Christmas I suspect. Just today unemployment rose above the level we experienced in first half of 2009, and it's very likely to rise from here. RBA, meet the beast of ZIRP. Australian Unemployment Unexpectedly Climbs to 5.7% in June | Bloomberg There's not going to be soft landings all around. As far as currencies go, the last thing the EU nor Japan can tolerate at this point in the game of high stakes poker, are reflating currencies. Ask Korea how that's working out for them. The last 4+ years have been an absolute debt-fueled reflationary boom (inevitably destined to bust as they do), just verify this juicy morsel of prima facie evidence as to how a debt/deficit dependent economy (i.e. a negative real growth one) needs more debtors in order to merely tread water: White House pushes for home loans to people with weaker credit | Business News (2013-07-13) http://business-news.thestreet.com/...se-pushes-home-loans-people-weaker-credit-3/1 # If one looks around or listens with decent filters to the ads all around it's fairly obvious to anyone with rational thought that the only thing that matters is DEBT. Just notice on how aggressive the banking sector and credit card companies are in offering all kinds of consumer's credits (even sweetening their offers with 'guaranteed' approval crap). In short: MORE DEBT!! # Ben Bernanke now can see both the rock and the hard place simultaneously. He can't threaten to shut off the QE (Quantitative Easing). He can't threaten to keep it either. He realizes that he cannot stop QE to Infinity for it'll bust the stock market (just note the sacrosanct Dow Jones index). On the other hand it's hard for him to print money if oil continues to ramp. Imagine a world of September with WTI at $130. Then Fed will have to print money in order to lend it to end users. They are monetizing the debt (and will continue to do so). They are devaluing the currency. That in essence means decreasing one's standard of living (raises equal or greater than inflation mean you are treading water). Worse, it would prompt more long holders of bonds outside the US to dump them adding a bit more fiat on the pile floating around out there. Energy prices always effect the economy in the immediate term. Food, getting to work, shopping, public transportation, etc. Energy is simply the core ingredient. Who could have imagined that jamming trillions into the monetary system could lead to a conundrum. Bernanke can't even open his toxic mouth anymore without wrecking at least one market. Btw, WTI (West Texas Intermediate) is light, "sweet" crude oil commonly referred to as "oil" in the Western world, considered a "sweet" crude because it is about 0.24% sulfur, a lower concentration than North Sea Brent crude. WTI is high quality oil that is easily refined. Read on "The Bernanke Conundrum" "Ben Bernanke gave a press conference after the last Fed decision where he laid out the Fed`s plans for exiting their stimulus program and the market to put it bluntly freaked out with Bonds yields soaring, and all other asset classes selling off sharply. The Fed didn`t like the reaction, especially with bond yields jumping much higher than they ever anticipated, and immediately sent numerous Fed governors to the media trying to talk back the market, again especially bond yields. The catch 22 is that they cannot exit now without markets and asset classes freefalling back to natural sustainable levels, yet markets are at hundred year highs! The real problem is that if they cannot exit now, then they push markets and asset classes even higher artificially to even more unsustainable levels! The drop becomes even more pronounced a la the Tech bubble where stocks trading in the 100`s dropped to zero, silicon valley had their fire sale for property as all the business built up around unsustainable market valuations came crashing back to reality..." ~ EconMatters # Theoretically this is about trying to "pay down" partially the sovereign debt with cheaper debased currencies with each world currency taking their turn and of course all orchestrated so that no one currency falls completely out of favor. If done correctly years over years, the debt can be paid off (diluted) partially with a cheaper debased currency in each country and no one knows the difference at the end. Repeat, no one knows the difference EXCEPT the price of commodities and precious metals will be up sharply in all currencies, at one point of time! INFLATED currencies allow the DEBT systems to continue issuing more DEBT. Then the Central Planner Overlords will tell us it's a growing economy when in reality we know it's an INFLATION masquerading as growth. Yet in reality none of the Keynes Overlords have ever planned on paying down anything... because they KNOW in the long run, they're dead! Just shift the burden to the future generations!! In the meantime, the Central Planner may sing the same tunes over and over again: rinse, clean, repeat "TAPER, MORE PRINTING, economy is strong, economy isn't strong, the sky is blue, the sky isn't blue." Maybe that's the strategy. Just change their minds so often every short period and keep people perplexing However, things may be starting to unravel... going rampage beyond their controls. There are massive bubbles all over the places, it is scary. * * * * * Leaked IMF Report Shows Dangers for US Economy | Daniel Amerman CFA | FINANCIAL SENSE "A confidential internal International Monetary Fund report was recently leaked to the Wall Street Journal, with the contents later being made public by the IMF. The contents of this report have major implications for Europe, but even greater implications for the United States. Greece is not the only nation that has what could be called an "artificial" economy, if we define an artificial economy as being one where both economic output and employment levels are each materially dependent on the government borrowing money that it can't possibly pay back under normal circumstances. And arguably the globe's largest "artificial" economy is also the globe's largest economy – which is that of the United States of America. As I have previously covered in detail in a series of articles which includes, "The Economic Deception At The Heart Of The Fiscal Cliff", the economic situation in the United States is in fact much worse than what can be seen at the surface level of government statistics and the financial media's reporting thereof." * * * * * 9 Plagues That Are Collapsing Capitalism « The Burning Platform By Paul Rosenberg, FreemansPerspective.com Let me be blunt: Our capitalist system is approaching failure. Or, perhaps better said: Our marginally capitalist, partly-free market systems are approaching a massive collapse. Not because of what capitalism is, mind you, but because the powers that be have bastardized it. Capitalism can bear many distortions and abuses, but it is not indestructible. And, make no mistake, the ‘capitalist’ system we have today has been massively corrupted, so much so that it’s sagging under the load… and will continue to do so until the proverbial straw breaks its back. The 9 Plagues The average producer is being stripped bare. In the US, for example, the total take of taxes has not risen dramatically, but fewer and fewer people actually pay them. There was a big uproar during the last election cycle over the fact that 47% of working-aged Americans paid no income tax. That means that the half who do work (read suckers) are paying the whole. And more than that, they are also paying for the many millions who are on food stamps and disability. Producers are being punished and abused, made into chumps. Thrift is essentially impossible. I’ve explained this in detail previously, but a hundred years ago, it was possible for an average person to accumulate money. Mechanics, carpenters, and shop owners slowly filled their bank accounts with gold and silver. It was common for them to make business loans and to retire comfortably. But now, all of our surplus is drained away to capital cities, where it is poured down the drains of welfare, warfare, and political lunacy. Money has been removed from the hands that made it, and moved into the hands of non-producers, liars, and destroyers. In 2008, US federal government regulations cost an estimated $1.75 trillion, an amount equal to 14 percent of US national income. Let me restate: Simply complying with regulations costs American businesses more than $1,750,000,000,000 (that’s $1.75 Trillion) every year. This, again, is money taken out of production and wasted on political lunacy. Small businesses are being squeezed out. Take a look at the two graphs below, and understand that as small businesses are squeezed out, only the large corporations remain. These days, only the largest and best-connected entities are able to get their concerns dealt with (by the politicians they fund). Small operations are cut off from the redress of their grievances and are crushed by taxes and regulation. And don’t forget the comments of Mussolini: Fascism should more properly be called corporatism, since it is the merger of state and corporate power. While there may be no dictator, state/corporate partnerships are taking over commerce in the West. The military industrial complex is out of control. Their lobbying, fear-mongering, and spending can only be characterized as obscene. Dwight Eisenhower was right when he warned us about this in 1960. It is sad beyond measure that so few Americans took him seriously. Trillions of dollars and millions of productive lives are being spent on the war machines of the West. Never forget that wars destroy massively and produce nothing. All the Western nations now feature large enforcer classes, composed of bureaucrats, law enforcement units, inspectors, and so on. In the US alone this amounts to several million people – none of whom produce anything, and all of whom restrain producers from producing. Millions of people are paid to restrain commerce. We now have a very large financial class in which blindly aggressive people make millions of dollars. The problem is that finance is not productive. It may allocate money in beneficial ways (though it often allocates mainly to itself), but it doesn’t actually produce anything. At present, the allocators get the big bucks, and the producers get scraps. The modern business ethic has become about acquisition only. In more enlightened times, it was also about creating benefit in the world, or at least creating newer and better things. Mere grasping is an insufficient philosophy for capitalism; it leads to dark places. Every nation on the planet is using play money and forcing their inhabitants to use their play money. Moreover, they have super-empowered a small class of Central Banking Elites, who make fortunes on their currency monopolies, and who are entirely unknown to the producers who unwillingly (and unknowingly) purchase jets and yachts for them. Our money systems have brought back aristocracies; a class that is both hidden and immensely powerful.. . . . * * * * * The economy isn’t coming back Posted on July 10, 2013 by mrchumpy Presently Americans wait with bated breath, watching sales numbers and unemployment statistics, grasping for signs that an economic recovery is underway. We search for signals that indicate we’re growing, that there will be a job for everyone who wants one, and that the United States will resume the prosperity and standing in the world it once had. We wait in vain. Sometimes it takes a cartoon character to show the absurdity of our global economic system (click to play video) The economy isn’t coming back. On the contrary, it’s a patched-together mess on its way to the crapper. Though the Obama administration might crow about a tepid recovery, even today’s insufficient economy is itself a lie, propped up by governments printing money to buy their own bonds and simulate growth. The Dow ascends to ever more lofty heights, and yet few believe it’s tied to improving conditions for regular people. China, the economic engine of the world, is now slowing precipitously, and experiencing serious market declines and confidence problems. Europe is an economic mess, and when the EU eventually implodes (it really is a when and not an if), it will send shocks through the rest of our globalized world. . . . * * * * * David Stockman's Non-Recovery Part 5: Peak Debt And The Wages Of Keynesian Sin 06/23/2013 In the final section of this five-part series (Part 1, Part 2, Part 3, and Part 4) on the dismal reality behind the non-recovery, David Stockman explains what lies ahead. He details in his new book 'The Great Deformation', that the mainstream notion that there is a choice between fiscal austerity and fiscal stimulus is wishful thinking. It does not recognize that owing to the triumph of crony capitalism and printing-press money America has become a failed state fiscally. What lies ahead is a continuous, mad-cap cycling back and forth - virtually on an odd-even day basis - between deficit cutting and fiscal stimulus to the GDP. As Stockman notes, the proximate cause of this recession waiting to happen is the federal government’s unfolding encounter with Peak Debt. The latter is not a magical statistical point such as a federal debt ratio of 100 percent of GDP, but a condition of permanent crisis - "no viable economy can survive on chronic fiscal deficits nor can it fail to save at a sufficient rate to fund a healthy level of investment in productive capital assets. The blithe assumption to the contrary which animates current policy rests on self-serving clichés such as “deficits don’t matter” and the Chinese savings glut." So the American economy faces a long twilight of no growth, rising taxes, and brutally intensifying fiscal conflict. These are the wages of five decades of Keynesian sin - the price of abandoning financial discipline. . . . More about Stockman's latest book: The Great Deformation: The Corruption of Capitalism in America by David A. Stockman LewRockwell.com “In The Great Deformation, David Stockman – former US congressman and budget director under Ronald Reagan – tells the story of the recent crisis, and takes direct aim at the conventional wisdom that credits government policy and Ben Bernanke with rescuing Americans from another Great Depression. In this he has made a seminal contribution. But he does much more than this. He offers a sweeping, revisionist account of US economic history from the New Deal to the present. He refutes widely held myths about the Reagan years and the demise of the Soviet Union. He covers the growth and expansion of the warfare state. He shows precisely how the Fed enriches the powerful and shelters them from free markets. He demonstrates the flimsiness of the present so-called recovery. Above all, he shows that attempts to blame our economic problems on "capitalism" are preposterous, and reveal a complete lack of understanding of how the economy has been deformed over the past several decades…Thanks to The Great Deformation, not a shred of the regime’s propaganda is left standing. This is truly the book we have been waiting for, and we owe David Stockman a great debt.” Who's David A. Stockman? David Alan Stockman (born November 10, 1946) is a former U.S. politician and businessman, serving as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985), under Ronald Reagan administration. Stockman was born in Fort Hood, Texas, of German descent, and was raised in a conservative family. He graduated from Lakeshore High School in 1964 and received a B.A. in history from Michigan State University, East Lansing, during 1968. He performed graduate studies at Harvard University, 1968–1970 and 1974–1975. He attended Harvard Divinity School. He was elected to the US House of Representatives for the 95th Congress and was reelected by two subsequent elections, serving from January 3, 1977, until his resignation January 21, 1981, to accept appointment as Director of the Office of Management and Budget for U.S. President Ronald Reagan, in his 30s. ANOTHER book worth to mention here: The Final Crash: Addictive Debt and the Deformation of the World Economy by Hugo Bouleau "It's a wonderful book and gives a world view of the global debt crisis." "Hugo Bouleau’s (pseudonym of the author) book was for me, perhaps the most riveting reading of 2008. Bouleau writes the book not only from his practitioner experience as an asset manager for a large private bank in the Channel Islands (he is also a fellow of the Securities & Investment Institute), not only from his educational background from City University in London, but from that of a concerned citizen of the world who realises the core issue of the financial crisis, the one that remains largely uncovered in the day to day reporting, that of debt and leverage, in particular, that of irresponsible debt, and excessive leverage. Some of the things mentioned in the ‘Final Crash’ (written in 2006, published in 2007) have already come to pass, but it is the breadth of knowledge and tying together discordant worldwide occurrences as well as policy changes then putting them into a meaningful and understandable story that mere mortals can comprehend which is the true genius his work." ~ Karl Deeter ------------------ "The consequences of printing press money are horrendous. If you could make the world rich by having all the central banks print unlimited money, then we have been making a mistake for the last several thousand years of human history." - David A. Stockman, 2012
China and Russia sign US$270 billion energy deal over the next 25 years _ Here are some more elaboration into the significances and size of the long term energy cooperation between Russia and China. Russia and China oil cooperation estimated at the unprecedented $270bn – Putin Published time: June 20, 2013 16:40 Edited time: June 21, 2013 13:13 Russia's President Vladimir Putin (R) welcomes Chinese Vice Premier Zhang Gaoli during their me The value of 25 years of cooperation between Russia’s state oil major Rosneft and China National Petroleum Corporation (CNPC) will be $270 billion, said President Putin at the economic forum in St. Petersburg. Under the contract Rosneft will export 360.3 million tonnes of crude to China.Boosting economic ties with the Asian Pacific region, especially in energy issues, is now the focus for Russian authorities, Putin said at the St. Petersburg International Economic Forum (SPIEF). On Thursday the heads of Russia and China announced drafting a major oil contract, where“prospective crude deliveries to China will top hundreds of millions of tonnes and exceed $60 billion,"Putin said. However, later on Friday the President clarified that the $60 billion figure classified then as ‘unprecedented’ was just a part of the prepayment, with the total cost of the energy deal between the countries being many times bigger – at $270 billion over 25 years.The issue of increasing exports of Russian oil to China has been repeatedly raised this year.Rosneft’s intention to boost oil supplies to China has been underpinned by opening the second line of Russia’s East Siberia-Pacific Ocean (ESPO) pipeline in December 2012. Vladimir Putin (R) examining stands with updates on the construction of the East Siberia-Pacific Ocean (ESPO) oil pipeline and the export route from Russia to China (RIA “Expansion of cooperation between Rosneft and China is utterly positive for the company, as it creates additional market outlet, which is important given the aggressive growth of its resource base,”according to Ivan Anoshkin, an analyst at Invetscafe. New export markets for energy resources seems to be the thing that Russia really needs, as “there are many saying two thirds of yet to find resources on the planet would be in the arctic,” according to Tim Dodson, executive vice president at Statoil, talking at the SPIEF.Rosneft is the only Russian company producing oil for exports to China. Tatneft, Russia’s oil transportation company, also has contracts with China, with its oil exports estimated at 6 million tonnes a year. However, the oil transporter buys the commodity from Rosneft. Rosneft oil supplies to China stand at 15 million tonnes a year, which is planned to be boosted 250% - to 37.8 million tonnes.Given that the projected capacity of the ESPO stands at 31 million tonnes a year, Rosneft needs to use alternative export routes. These might include via the pipeline network through Kazakhstanor via the Kozmino oil port.“However, as a vector to the tightening energy relations between the two countries, the optimal variant looks to be to construct additional pipeline capacity,” the Investcafe analyst concluded. http://rt.com/business/russia-china-oil-spief-009/ ~~~~~~~~~~~~~~~~~~~~~~ China and Russia sign US$270 billion energy deal | Asian Power (2013-06-24) http://asian-power.com/environment/more-news/china-and-russia-sign-us270-billion-energy-deal Pact will deepen their existing energy industry cooperation. The deal will see Russia supply oil to China worth US$270 billion over the next 25 years. Russia will pump 365 million metric tons of oil to China starting next month. The deal was signed June 21 between Rosneft, Russia’s oil and gas monopoly, and China National Petroleum Corporation, China’s largest state-owned oil and gas producer. The oil is likely to be delivered to China via the existing Eastern Siberia-Pacific Ocean oil pipeline that will pump direct into the Chinese region of Mohe in Heilongjiang. Russia has been looking for new markets for its energy exports because of shrinking demand in Europe, its traditional market. Rosneft is to open a refinery in Tianjin in cooperation with a Chinese company in the second half of the year. In 2009, the two countries reached a framework agreement in which Russia would deliver about 70 billion cubic meters of natural gas to China annually for 30 years starting from 2014. China, the world's largest energy consumer, used 145 billion cubic meters of natural gas last year and will import 78.5 billion cubic meters of natural gas in 2014. ~~~~~~~~~~~~~~~~~~~~~~ China, Russia sign US$270b oil deal Xinhua, June 22, 2013 China National Petroleum Corporation (CNPC) and the Russian oil giant Rosneft on Friday signed a long-term agreement for oil deliveries with an estimated value of 270 billion U.S. dollars, a good progress made in energy cooperation between the two neighboring countries. The deal was inked during Chinese Vice Premier Zhang Gaoli's visit to Saint Petersburg, Russia, for an international economic forum. [TABLE="width: 80, align: center"] [TR] [TD="bgcolor: #FFFFFF, align: left"][/TD] [/TR] [TR] [TD="bgcolor: #FFFFFF, align: left"]Chinese Vice Premier Zhang Gaoli delivers a speech at the St. Petersburg International Economic Forum in St. Petersburg, Russia, June 21, 2013. [Xinhua][/TD] [/TR] [/TABLE] Energy cooperation between China and Russia holds great potential and has gained steam in recent years as the overall ties between the two nations are in their best status than ever. "Russia and China are strategic partners, and the cooperation in energy has been positive," Rosneft CEO Igor Sechin told Xinhua on the sidelines of the Saint Petersburg International Economic Forum, saying his company would cooperate further with Chinese partners. It is believed that the CNPC-Rosneft deal would reshape the geographic feature of Russia's oil exports, which currently are mostly Europe-oriented. For China, the world's second largest economy and a major energy consumer, Russia could offer it with oil and gas to power growth, while for Russia, China would become an ideal export destination for its energy as demand in its main market -- Europe -- wobbles amid economic woes. Also on Friday, Russian President Vladimir Putin said at a plenary session of the forum that Russian energy company Gazprom is readying contracts for the gas deliveries to Japan and China. The Chinese vice premier, who began his visit in Saint Petersburg Wednesday, is due to leave Russia Saturday. His visit came in the wake of the successful summit held in Moscow between Chinese President Xi Jinping and his Russian counterpart Putin in March, which is intended to translate the latest highest-level consensus into concrete results, with energy cooperation coming high up on the agenda. The Chinese vice premier's schedule was packed with bilateral meetings with Russian political leaders, including Russian President Putin, as well as business leaders in the country's energy sector. "China would like to work together with Russia to maximize the potential for bilateral economic cooperation and translate the best ever political relationship into results of practical cooperation," Zhang said at a meeting with Putin Thursday. Analysts said the frequent high-level contacts between China and Russia play an important role in boosting bilateral cooperation. "Frequent contact between the two countries' leaders has created a political foundation for further economic cooperation," noted Wu Hongwei, a researcher with the Institute of Russian, Eastern European and Central Asian Studies under the Chinese Academy of Social Sciences (CASS). The two countries are also exploring new areas to deepen relations. When meeting with Putin, Zhang proposed that the two countries should carry out the projects already agreed upon in such areas as energy, infrastructure and investment, while expanding two-way cooperation in high-tech industry, launching new forms of cooperation such as joint research and production, and introducing new projects in new energy, environmental protection and manufacturing. Putin said the two countries have designated energy and high- tech technology as the two areas of priority for further development, and cooperation in the long-term, large projects are showing strong momentum. "Both governments have strong will to strengthen cooperation, and I believe the practical cooperation between Russia and China has a bright future," he added. http://www.china.org.cn/world/2013-06/22/content_29196568.htm ~~~~~~~~~~~~~~~~~~~~~~ Russia Hastens China Energy Pivot With Oil, LNG Supply Deals - Bloomberg (2013-06-21) http://www.bloomberg.com/news/2013-...energy-pivot-with-crude-lng-supply-deals.html Russia signed deals to supply China with crude oil and liquefied natural gas, deepening the embrace between the world’s largest energy producer and the fastest-growing major economy. OAO Rosneft (ROSN) agreed on long-term contracts to supply more than 2.6 billion barrels of crude oil to China National Petroleum Corp. over the next 25 years. The Beijing-based company also agreed to buy a 20 percent stake in OAO Novatek (NVTK)’s Yamal liquefied natural gas project, the first time a Chinese company will participate in a Russian gas-export project. President Vladimir Putin is encouraging energy producers to make deals with China, responsible for 77 percent of the growth in global energy demand last year, as consumption of oil and gas falls in traditional European markets. The development of fields in Russia’s Far East (3360) that are nearer to Asia than Europe is hastening the shift. The deal between Novatek, Russia’s second-largest gas producer, and CNPC shows Russia’s willingness to end OAO Gazprom (GAZP)’s monopoly on gas exports in a quest to open markets in Asia. Gazprom has been negotiating to export gas to China for more than a decade without reaching an agreement. Yamal Project The $20 billion Yamal LNG project, where France’s Total SA (FP) is also a partner, will liquefy gas from fields above the Arctic circle for shipment around the world. Novatek, controlled by billionaire’s Leonid Mikhelson and Gennady Timchenko, expects the first cargoes in 2016. CNPC will buy 3 million tons of LNG a year under today’s agreement. China’s rising energy needs are driving world demand growth. It shares a border with Russia, which holds the world’s second-largest gas reserves after Iran, according to BP Plc (BP/)’s statistical review published June 12. Demand in China will grow by 12 percent a year over the next five years as it absorbs one-third of new LNG supplies worldwide over that period, the International Energy Agency said yesterday in its Medium-Term Market Report. TNK = BP Acquisition The deal includes a $70 billion prepayment, according to Putin. That is more than Rosneft’s net debt, which surged to 1.78 trillion rubles ($54 billion) at the end of March, following the $55 billion acquisition of Russia’s third-largest crude producer TNK-BP. “It secures a good market for Rosneft and helps the balance sheet,” said Bob Dudley, chief executive officer of BP, which became a 18.5 percent shareholder in Rosneft this year after the sale of TNK-BP. “It also secures a long-term crude supply to a country where energy demand is growing very rapidly.” China’s demand for crude oil to more than 10 million barrels a day in 2012, or 12 percent of global consumption, according to statistics compiled by BP. Europe’s demand dropped 2.5 percent last year. Likewise, gas demand jumped 9.9 percent in China and dropped 2.3 percent in Europe. ~~~~~~~~~~~~~~~~~~~~~~ China in $270b oil deal with Russia | People's Daily Online (2013-06-22) http://english.peopledaily.com.cn/90778/8294885.html China and Russia are to deepen their existing energy industry cooperation after signing a deal to supply oil to China worth $270 billion over the next 25 years. The deal will see the supply of 365 million metric tons of oil to China starting from next month, according to media reports. Igor Sechin, the chief executive of Russian state-controlled oil giant Rosneft, was widely quoted after being interviewed during Russia's annual economic forum in Saint Petersburg, who said deliveries could start as early as this year. The oil is likely to be delivered to China via the existing Eastern Siberia-Pacific Ocean oil pipeline that will pump direct into the Chinese region of Mohe in Heilongjiang province. The deal was signed on Friday between Rosneft and China National Petroleum Corporation, the country's largest State-owned oil and gas producer. Asked to comment on the report, a source from CNPC told China Daily that the deal had been in discussion for months, since Chinese President Xi Jinping visited Moscow and an agreement was signed in March. The source said the price of the deal had been a major sticking point between the nations. During his visit to Russia on Thursday, Vice-Premier Zhang Gaoli said that China was keen to work together with Russia to maximize the potential for bilateral economic cooperation. Russia has been looking for new markets for its energy exports because of shrinking demand in Europe, its traditional market, said Liao Na, the vice-president of energy consultancy ICIS C1 Energy. "The seller and the buyer both have strong willingness to reach the deal provided the price was comfortable for each of them. "It is a good timing, considering current international oil prices," she said, adding that most institutions and commodity consultancies do not expect any dramatic oil price fluctuations. She said after the deal was finalized, Rosneft is scheduled to open a refinery in Tianjin in cooperation with a Chinese company, in the second half of the year. In 2009, the two countries reached a framework agreement in which Russia would deliver about 70 billion cubic meters of natural gas to China annually for 30 years starting from 2014. China, the world's largest energy consumer, used 145 billion cu m of natural gas last year and will import 78.5 billion cu m of natural gas in 2014, according to data from ICIS C1 Energy. Liao said the two countries also have huge potential for cooperation in non-traditional energy sectors, and Russia may become the next major supplier of coal to China. ~~~~~~~~~~~~~~~~~~~~~~ How China and Russia Came Together on Natural Gas Deal | Caixin Online (2013-05-07) http://english.caixin.com/2013-05-07/100524719.html "(Beijing) – President Xi Jinping's state visit to Russia in late March brought advances that could end nine years of tough talks between China and its northern neighbor over natural gas transmission. China National Petroleum Corp. (CNPC), the country's largest producer of gas, signed a memorandum of understanding with Russian energy giant Gazprom in late March. The two agreed that from 2018 to 2048 Gazprom would send 38 billion cubic meters of natural gas annually through a pipeline into China." ~~~~~~~ Xi Jinping visits Moscow to raise the prospects of between China and Russia’s energy deals [2013-3-1] http://energychinaforum.com/news/70562.shtml "Xi Jinping has picked Moscow as the first foreign capital he will visit as Chinese president, raising hopes that Russia and China will finally agree the terms of a gas supply deal that has been in the works for more than six years. Gazprom sees the fast-growing Chinese market as critical to its plan to globalise Russian gas trade, but has so far been unwilling to reduce gas prices enough get China to sign up for supplies. But with rival Russian gas producers suddenly courting China, Gazprom may have to cave in. A string of Russian officials have been in Beijing this month in a flurry of energy diplomacy ahead of Xi Jinping’s Moscow visit. Among them was Alexander Medvedev, deputy head of Gazprom, who met the Chinese National Petroleum Corporation on Wednesday to try to break a deadlock in negotiations of a deal that would see Russia supply up to 68bn cubic meters a year of gas to China through new pipelines across Siberia." ~~~~~~~ OF COURSE, NOT all parties share the positive outlook for the close energy cooperation between Russia and China, the two giant countries that share a land border as long as 3,645 km. One of the them, The Diplomat, lamented its adverse views in below article just recently: Russia’s Energy Deals with East Asia: Who Wins? | The Diplomat (2013-07-03) http://thediplomat.com/2013/07/03/russias-energy-deals-with-east-asia-who-wins/ ". . . Indeed, these recent agreements, coming on top of earlier ones signed in March, now ensure China access to the Arctic fields of both Novatek and Rosneft, enhancing China’s economic and political position in this crucial sector. Novatek is unlikely to be able to enforce a price on China; quite the contrary given the abundance of Chinese sources from other producers. In fact, the Yamal project may come to depend on Chinese financing, not necessarily an optimal outcome. Chinese sources now report that growing political contact will encourage more large deals with Russia. Already the recent contracts give China another leg up on its rivalry with South Korea and Japan in the Russian Far East. China also stands to profit handsomely in financial terms given the loans it has already made to Rosneft and the terms under which Rosneft must now operate. And those benefits for Rosneft, and indeed Russia? A closer look raises some serious questions. As The Moscow Times reported recently, Rosneft will need to find a way to increase the carrying capacity of the pipeline to China, and find the oil to fill it. Ultimately the funds and supply to meet these demands are likely to be at the expense of the Russian consumer. As the paper reports, Rosneft has already stopped fulfilling its obligation to supply a refinery that produces gas for the domestic market. Meanwhile, as we have noted, the balance of need between China and Rusisa heavily tilts in China’s favor, because Russia and Rosneft need its purchases much more than China needs them. While this deal undoubtedly boosts China’s oil and LNG supplies as well as its ties to the Arctic and leverage over Russia, can Rosneft meet its new responsibilities? And even if it does, does Russia really gain in Asia beyond what it already had? The conventional refrain is that time will tell, but this seems to be another case where Rosneft has been able to persuade Beijing and Moscow that what’s good for Rosneft is good for Russia. That’s a contention that remains decidedly unproven." Stephen Blank is Research Professor of National Security Affairs at the Strategic Studies Institute.
Detroit Files Largest Municipal Bankruptcy In History (2013-07-18) THURSDAY, JULY 18, 2013 BREAKING: City of Detroit Files for Chapter 9 Bankruptcy Developing... UPDATE 1 If the Chapter 9 filing is approved, Detroit’s case would be the largest municipal bankruptcy in the history of the United States. UPDATE 2 The tax base has been destroyed. From CNBC: Detroit lost a quarter-million residents between 2000 and 2010. A population that in the 1950s reached 1.8 million is struggling to stay above 700,000. Much of the middle-class and scores of businesses also have fled Detroit, taking their tax dollars with them. UPDATE 3 Kevin Orr, a bankruptcy expert, that was hired by the state in March, has said that long-term debt was more than $14 billion and could be between $17 billion and $20 billion. UPDATE 4 Likely those holding any of the $11 billion in unsecured debt will get next to nothing. UPDATE 5 Justin Amash ✔ @justinamash Per person, the debt of the U.S. government ($54K/person) is about twice as large as the debt of the City of Detroit ($26K/person). 3:52 AM - 19 Jul 2013 74 RETWEETS14 FAVORITES ------------------------- Detroit Files Largest Municipal Bankruptcy In History ROB WILE JUL. 18, 2013, 4:15 PM Business Insider Detroit has filed for bankruptcy, the AP's Ken Thomas reports. The full filing can be found below. "Right now, the City cannot meet its basic obligations to its citizens," Gov. Rick Snyder, who signed off on the filing, said in the petition. He added, "Right now, the City cannot meet its obligations to creditors." This means a judge will now have to sort out which entities Detroit owes money to will get their money back. The move proved inevitable after two municipal pension funds sued city emergency manager Kevyn Orr. It's the largest municipal bankruptcy in U.S. history, dwarfing Jefferson County, Ala.'s $3.1 billion sewage district restructuring. In June 2012, the City of Stockton became the largest-ever city to file for bankruptcy, at the time. The Motor City faces $20 billion of long-term liabilities. The Wall Street Journal's Matt Dillon says those holding onto $11 billion in unsecured debt are basically staring into the abyss, facing the prospect of getting next to nothing from the city's obligations. The pension funds want to block Orr's attempt to drastically reduce the amount of benefits owed to current and former city workers. The funds are fully aware that they could still face such cuts even if the city is forced to go to court, but say they'd prefer to fight the cuts there. Here's the Freep's cut from their suit: It appears imminent the governor will grant the emergency manager the unconditional power to proceed under Chapter 9 (bankruptcy) and the emergency manager will seek to have the city’s pension debts impaired pursuant to Chapter 9 unless the retirement systems and their participants accept the emergency manager’s unilateral imposition of significant impairments to their accrued financial benefits. Detroit News' Robert Snell Tweets the city has listed more than 100,000 creditors. Detroit Chapter 9 Bankruptcy Filing - WXYZ by webteam2410 . . . http://www.businessinsider.com/detroit-likely-to-file-for-bankruptcy-2013-7 ------------------------- Detroit has officially filed for Chapter 9 bankruptcy It's the largest municipal bankruptcy case in U.S. history on top of it. Detroit—The city of Detroit filed the largest municipal bankruptcy case in U.S. history Thursday afternoon, culminating a decades-long slide that transformed the nation’s iconic industrial town into a model of urban decline crippled by population loss, a dwindling tax base and financial problems. The 16-page petition was filed in U.S. Bankruptcy Court in Detroit. Gov. Rick Snyder’s office was making plans this afternoon to hold a Friday morning news conference at the Maccabees Building, 5057 Woodward in Midtown, according to a source. It’s the same location where the governor declared a financial emergency for Detroit on March 1. - Now let's see who got all the money - Who gets the NEW money - And who gets screwed the worst !! And just to show you how absurd these rating bureau's are "Detroit Files Chapter 9 Bankruptcy As Moody's Raises US Outlook". And in an example of absolutely sublime timing, Uncle Warren Buffet's Moody's just hiked its outlook on the US from negative to stable. MOODY'S: U.S. Aaa SUPPORTED BY SECURE STATUS OF U.S. DOLLARS Detroit files for record bankruptcy - The Hill's On The Money Detroit's emergency manager, Kevyn Orr, filed the request to begin what will be the biggest municipal bankruptcy in United States history. Chapter 9 status would shield the municipality from some $18.5 billion in debt and other liabilities. "Michigan Gov. Rick Snyder (R) added that the situation had been forming for 60 years. "From a financial point of view, let me be blunt: Detroit's broke. It's been spending 38 cents on the dollar towards legacy costs. That number was projected to grow to 65 cents on the dollar. That's not a sustainable situation." "Filing for Chapter 9 bankruptcy leaves restructuring Detroit's finances to a federal bankruptcy judge and Orr. The process could take years, and is likely to be contentious." . . . http://thehill.com/blogs/on-the-mon...titutions/312113-detroit-files-for-bankruptcy ------------------------- The City of Detroit has long been bankrupt -- but now it's official. On Thursday, the City of Detroit petitioned the U.S. Bankruptcy Court for the Eastern District of Michigan, Southern Division, seeking Chapter 9 bankruptcy protection. The petition has been assigned case number 13-53846. No judge has yet been assigned to hear the case. Detroit files for bankruptcy, setting off battles with creditors, pensions, unions | Detroit Free Press | freep.com Detroit on Thursday became the largest American city to file for bankruptcy, a historic move sure to ignite complex battles in coming months with creditors, pensioners and unions who stand to lose significantly as the state tries to rescue a city whose failure Gov. Rick Snyder said was 60 years in the making. Bankruptcy and restructuring experts said the filing will initiate a new round of battles in federal court, potentially setting national precedents on matters ranging from whether bondholders get repaid when cities run out of money to whether public pensions, previously thought to be sacrosanct under the Michigan Constitution, are protected in municipal bankruptcies. PDF: Read the bankruptcy filing Lawsuit over pensions This week, the city’s two pension funds, which have claims to $9.2 billion in unfunded pension and retiree health care liabilities, filed suit in state court to prevent Orr from slashing retiree benefits as part of a bankruptcy restructuring. Ambac Assurance Guaranty, which insures some of the city’s general obligation bonds, has also objected to Orr’s plan to treat those bonds as unsecured, meaning they’re not tied directly to a revenue stream and would receive pennies on the dollar of their value. Ambac and other creditors have threatened to file suit. One of Orr’s deal with creditors, widely reported to be Bank of America Merrill Lynch and UBS AG, to pay a $344-million swap with a $255-million debtor-in-possession loan, appeared to be instrumental in the timing of the bankruptcy filing. The deal gives the city access to $11 million a month in casino tax revenues that Orr has said is key to maintaining city services while negotiations, in or out of bankruptcy court, take their course with other creditors and unions. Strategy of filing Plunkett Cooney bankruptcy lawyer Doug Bernstein, who is not involved in the bankruptcy and is not representing any parties related to it, said Thursday that the timing of the filing likely was driven by a growing number of legal challenges. The eligibility fight could be prolonged if creditors mount a significant challenges. In other communities that have filed for Chapter 9 protection, such fights have extended the process a year or more, including Jefferson County, Alabama, and Stockton, California, two of the largest municipal bankruptcy filings so far in the U.S. Detroit’s debts and liabilities dwarf both of those communities, making it by far the largest of its kind in U.S. history. The stakes involved are enormous. Analysts warn a bankruptcy could drive up bond costs for cities statewide, and the losses that could be forced on the city’s 30,000 current and retired city workers remain unknown. The city has lost more than half of its population over the past 60 years. In 1950, the city was the fifth-largest city in the country with a population of about 1.8 million. http://www.freep.com/article/201307...bankruptcy-filing-Kevyn-Orr-emergency-manager ------------------------- Meredith Whitney on Muni Bonds and Red State-Blue State Migration By: Money_Morning, 2013.07.09 Frank Marchant writes: In 2010 Meredith Whitney made an earth shattering statement during a CBS's "60 Minutes" interview that rocked the municipal bond investment world. "There is not a doubt in my mind that you will see a spate of municipal-bond defaults,"said Meredith Whitney on Dec 19, 2010. She continued, "You could see 50 sizable defaults, and 50 to 100 sizeable defaults, more. This will amount to hundreds of billions of dollars' worth of defaults." The muni bond market fell far short of Whitney's prediction. But many today feel she was merely ahead of her time. Recently Detroit has defaulted on its muni bonds leaving investors hoping to get 10% return on their original investment, but there are no guarantees. As Detroit moves closer to bankruptcy California has 10 cities facing the same fate. The cities of Atwater, Azusa, Compton, Fresno, Hercules, Mammoth Lakes, Monrovia, Oakland, San Jose and Vernon are ready to file for bankruptcy following the now bankrupt Stockton's lead. Money Morning's Shah Gilani recently talked to Whitney in an exclusive interview about her new book, The Fate Of The States: The new Geography of American Prosperity She believes that wealth and opportunity are moving away from the coasts and toward the central corridor. The states of California, Florida and Nevada benefited from the housing boom. However instead of budgeting wisely, local governments spent their windfall profits as fast as they came in on pay increases for public employees, pension increases and pay hikes. When the housing boom ended, the money stream became just a trickle of new capital. The states were left with pensions they couldn't pay and employees they couldn't afford. They were forced to raise taxes for schools and essential public services. In contrast a much different scenario was developing in the interior states: N. Dakota, Texas, Indiana. These states avoided the housing crisis. Because foreclosure was not a serious problem they found themselves rich in capital with money to offer tax incentives to companies to relocate and retrain new employees. These central states are also positioned to reap the massive benefits of from the oil and natural gas boom. Whether or not this trend is irreversible is anybody's guess but Whitney's track record at predicting trends is pretty impressive. This is why Money Morning wanted to get her opinion: On the much talked about the Red state-Blue state migration Whitney has definite ideas on the, "How's and Whys'" of the migration. The Red State-Blue State Migration . . . http://www.marketoracle.co.uk/Article41319.html ------------------ "At some point the entire scheme crashes, probably when enough people recognize that the greater fool theory is in danger of exhausting the quantity of fools."
Panopticon PANOPTICON Here is an idea that seems to fit, a Panopticon is being laid down. Read up on the Panopticon if you don't know what it is here. In essence, the Panopticon is a theoretical prison where the inmates are kept in line because they know their every move is being watched. Inmates are much less likely to behave badly because they know they will be caught every time. The interesting thing about the Panopticon is that the inmates do not actually need to be watched all the time. They just need to THINK they are being watched all the time, and the controllers of the Panopticon will get the same behavior they desire without the expenditure (or in the case of the entire country or planet, the impossibility) of watching everything. More of this thought at VT. * * * 2013.07.18 From Michael Krieger: Congressman: Did You Think This Program Could be Indefinitely Kept Secret from the American People? Government Attorney: “Well we Tried” Rep. Bob Goodlatte (R-Va.), the chairman of the committee, said he was surprised that the programs had been kept secret for so long. “Do you think a program of this magnitude gathering information involving a large number of people involved with telephone companies could be indefinitely kept secret from the American people?” Goodlatte asked. “Well,” ODNI general counsel Robert S. Litt said with a slight smile, “we tried.” - From a Washington Post article yesterday
Asians, Africans to pay £3000 cash bond deposit for UK visa Asians, Africans to pay £3,000 cash bond deposit for UK visa (2013.06.23) Visitors from Asian and African nations will have to pay £3,000 cash bond deposit to enter Britain. The Sunday Times newspaper said the pilot scheme, according to which visitors aged 18 and over would be forced to pay £3,000 for a six-month visit visa, will target visitors from November this year. Moreover, the money would be forfeited in case of overstay. According to reports, the plans which aimed at preventing abuse of immigration rules in the country, will initially cover India, Pakistan, Bangladesh, Sri Lanka, Nigeria and Ghana. “This is the next step in making sure our immigration system is more selective, bringing down net migration from the hundreds of thousands to the tens of thousands while still welcoming the brightest and the best to Britain," Home Secretary Theresa May was quoted as saying. http://presstv.com/detail/2013/06/23/310481/uk-plans-visa-bonds-for-asians-africans/ ~~~~~~~~~~~~~~~~~ Published: June 23, 2013 19:11 IST | Updated: June 23, 2013 22:53 IST Indians to pay £3,000 cash bond deposit for U.K. visa Hasan Suroor Move targeted at non-white Commonwealth countries for reducing immigration levels India has been put on a list of “high-risk” Asian and African countries whose citizens would be required to deposit £3,000 cash bond when they apply for a British visa. The money would be forfeited if they overstay. Controversially, the move is targeted only at people from non-white Commonwealth countries as part of the Tory-led government’s resolve to drastically cut down on immigration levels. A similar attempt by Canada had to be abandoned amid protests that it was discriminatory. According to The Sunday Times, the scheme — aimed at preventing abuse of immigration rules — will initially cover India, Pakistan, Bangladesh, Sri Lanka, Nigeria and Ghana. “They have been designated ‘high-risk’ countries, from which visitors aged over 18 on six-month visit visas will be forced to pay the £3,000 from November. The countries are being targeted by the Home Office because of the high volume of visitor visa applications and relatively high levels of fraud and abuse,” it said. The Home Office said these countries posed “the most significant risk of abuse” by their citizens. Home Secretary Theresa May said the move was part of the government’s policy to make the immigration system “more selective.” “This is the next step in making sure our immigration system is more selective, bringing down net migration from the hundreds of thousands to the tens of thousands while still welcoming the brightest and the best to Britain … In the long run, we are interested in a system of bonds that deters overstaying and recovers costs if a foreign national has used our public services,” she said. http://www.thehindu.com/news/intern...h-bond-deposit-for-uk-visa/article4843455.ece ~~~~~~~~~~~~~~~~~ OPINION - allAfrica.com Nigeria: £3,000 UK Visa Bond - Is Government Huffing and Puffing? BY LES LEBA, 1 JULY 2013 Nigerians were recently agitated by the British government's proposed demand for a £3000 bond as prerequisite for the issuance of a six-month visa for visitors from Nigeria, and five other Commonwealth countries to the United Kingdom. The British High Commissioner, on his side, noted that the financial bond was a way of tackling abuse of the UK immigration system. In an attempt to assuage the concerns expressed, the UK mission advised that, the bond would only affect a small number of the highest risk Nigerian visa applicants, and those who do not violate the original terms of entry would receive a refund on return to Nigeria. However, critics observe that the conservative party in the UK hopes to reap political, security and financial benefits from the 'visa bond' policy, when effected. In recent years, the results of elections in several European countries have been critically influenced by a swelling demand by electorates for tougher immigration policies, as indigenous European populations become seriously concerned about what they consider as the threat of liberal immigration policies to their culture and social welfare. It is also expected that the requirement for a visa bond would enhance security by selectively reducing entry to potential fundamentalists and terrorist materials. Thirdly, critics also, see a 'parasitic' financial benefit in the proposed policy. For example, the British High Commission confirmed that over 180,000 Nigerians apply to visit the UK annually; in reality, with current visa fees of about N20,000, this would translate to over N3.6bn annually; i.e. a sizeable revenue source that may, in fact, be adequate to run the UK mission in Nigeria. Indeed, if each visa applicant pays the new bond price of £3000, the British treasury will forcibly collect over £540m from Nigerians. Furthermore, if only 10 per cent of applicants pay the £3000 bond, this would still mean an interest-free loan of about £54m from economically beleaguered Nigerians, just for the joy of visiting a Commonwealth nation, which arguably became sumptuously endowed from the sweat of the people and wealth of its former colonies. Curiously, francophone countries, from whom the British derived minimal capital, and indeed, other politically more volatile Arab states have been exempted from the visa levy. Incidentally, there is no indication that the bond refunds would earn any interest for the six months 'loan' to the UK government by Visa applicants. ... http://allafrica.com/stories/201307011313.html?viewall=1 ~~~~~~~~~~~~~~~~~ Visitors from India and other 'high risk' countries in Asia and Africa will be forced to pay £3,000 cash bond before they enter UK | Mail Online Visitors from India and other 'high risk' countries in Asia and Africa will be forced to pay £3,000 cash bond before they enter UK Plans by Home Secretary mean visitors lose their cash if they overstay visa India, Pakistan, Nigeria, Ghana, Sri Lanka and Bangladesh to be targeted Pilot scheme will later be extended to cover work permits and student visas http://www.dailymail.co.uk/news/art...rica-forced-pay-3-000-cash-bond-enter-UK.html ~~~~~~~~~~~~~~~~~ UK £3,000 visa bond: Finally, London ‘Bridge is falling down’ Rated the 6th largest oil producing nation in the world, Nigeria is also termed the “Giant of Africa” and its dense population makes it the most populous black nation in the world. http://www.vanguardngr.com/2013/06/uk-3000-visa-bond-finally-london-bridge-is-falling-down/
SPIEGEL's Coverage on NSA Spying Scandal NSA Spying Scandal - SPIEGEL ONLINE http://www.spiegel.de/international/topic/nsa_spying_scandal/ Related articles, background features and opinions about this topic. * * * * * Snooping Fears: German Firms Race to Shield Secrets By Claus Hecking 2013.07.23 DPAThe ruins of a former Cold War NSA listening post on the outskirts of Berlin. Edward Snowden's revelations about data surveillance have left German firms feeling acutely vulnerable to industrial espionage. In the medium-sized business sector, which contains a host of world leaders in high-tech fields, the race is on to shield vital know-how. . . . Other companies were taken by surprise, though. Be it Prism, Tempora or XKeyscore, reports about mass electronic surveillance and tapped Internet hubs and trans-Atlantic data lines have alarmed German companies. Many firms are now worried that the intelligence services aren't just trying to pinpoint terrorists but to get at German industrial secrets as well. They fear that their lead over US, British and French competitors could be at risk. And they've suddenly realized that they've got to do something to protect themselves against the organized theft of data. "The reports of the activities of intelligence services are a wake-up call for many companies. It sent alarm bells ringing," said Rainer Glatz, director of product and know-how protection at the VDMA German engineering association. In the past, warnings of hacker attacks and IT espionage often fell on deaf ears. But now Germany's small and medium-sized business sector, or Mittelstand, often described as the backbone of the German economy, has woken up to the risk. "There is growing sensitivity," said Glatz. "In many firms, the management boards are now thinking about how they can shield themselves better." http://www.spiegel.de/international...l-espionage-after-snowden-leaks-a-912624.html ~~~~~~~~~ Berlin and the NSA: Questions Mount for Merkel's Chief of Staff By Veit Medick 2013.07.22 Getty ImagesThe Federal Chancellery in Berlin has become the new focus in the NSA snooping scandal. Revelations that German intelligence services have been using US spying software could create problems for Angela Merkel and her chief of staff, who is responsible for coordinating the agencies. Opposition politicians are demanding answers. German Chancellor Angela Merkel had hoped to tune out of politics this week during her annual hiking holiday in northern Italy But that may prove difficult following the latest revelations in the spying scandal involving America's National Security Agency (NSA) and its mass surveillance of German communications. Over the weekend, SPIEGEL reported on NSA documents seen by the magazine's journalists from the trove of data provided by whistleblower Edward Snowden, indicating not only that German intelligence agencies worked together with the NSA, but also that they deployed some of its tools -- even after Merkel became chancellor. That, combined with indications that German intelligence agencies may have been playing fast and loose with data privacy laws in Germany, has the opposition foaming. "The latest media reports about the close relationship between German and American intelligence services confirm the impression that the German government either feigned ignorance, kept quiet about its complicity or that the intelligence agencies have gotten out of control," Peer Steinbrück, the Social Democratic challenger for the Chancellery, said in a Monday statement. "The most alarming news is that the government of Ms. Merkel appears to have made the interpretation of the G-10 law (which establishes the conditions under which surveillance of German citizens is permissible) more flexible in order to make it easer to provide protected data to foreign services," he added. "Now it has to be clear that the time of playing this issue down has passed." "The issue here goes to the core of our democracy and constitutional state," Steinbrück said. "That's why it is to be expected the chancellor herself demand a binding pledge from the US government to immediately cease the spying on citizens, companies and possibly official locations in millions of instances." . . . http://www.spiegel.de/international...s-spy-programs-rock-chancellery-a-912401.html ~~~~~~~~~ 'Key Partners': Secret Links Between Germany and the NSA AF Chancellor Angela Merkel has repeatedly said she knew nothing about American surveillance activities in Germany. But documents seen by SPIEGEL show that German intelligence cooperates closely with the NSA and even uses spy software provided by the US. By SPIEGEL It was a busy two days for the surveillance specialists of the Bundesnachrichtendienst (BND), Germany's foreign intelligence agency. At the end of April, a team of 12 senior BND officials flew to the United States, where they visited the heart of the global American surveillance empire: the National Security Agency (NSA). The purpose of their mission can be read in a "top secret" NSA document which SPIEGEL has seen -- one of the trove of files in the possession of whistleblower Edward Snowden. According to the document, BND President Gerhard Schindler repeatedly expressed an "eagerness" to cooperate more closely with the NSA. The Germans, the document reads, were looking for "guidance and advice." Their wish was fulfilled. Senior employees with the NSA's Foreign Affairs Directorate were assigned to look after the German delegation. The Americans organized a "strategic planning conference" to bring their German partners up to speed. In the afternoon, following several presentations on current methods of data acquisition, senior members of a division known as Special Source Operations, or SSO, spoke to their German guests. The SSO, one of the most secretive groups within the intelligence community, is the division that forms alliances with US companies, especially in the IT sector, for data mining purposes. Snowden describes this elite unit as the NSA's "crown jewels". The journey to Washington wasn't the first educational trip by German intelligence officials across the Atlantic this spring -- nor was it the last. Documents from Snowden that SPIEGEL has seen show that cooperation between Berlin and Washington in the area of digital surveillance and defense has intensified considerably during the tenure of Chancellor Angela Merkel. According to one document, the Germans are determined to "strengthen and expand bilateral cooperation." http://www.spiegel.de/international...y-with-nsa-on-data-surveillance-a-912355.html
How CNN uses disaster to propagandize against a government | Hidden Harmonies How CNN uses disaster to propagandize against a government 2013-07-24 Western propaganda has become an art-form, and for the unsuspecting audience, it is invisible. If you decide to be critical though, you will immediately see how thinly-veiled the propaganda is. Some of you might have heard about the recent high-speed rail crash in Spain, killing 69 people according to the latest count [correction: the death toll is 80 /ed.]. The weird coincidence is that China’s Wenzhou crash was exactly 2 years ago. Below are two articles from CNN reporting on the crashes. On the right column is of China’s crash two years ago and on the left column is a recent coverage for Spain’s. Notice how the Spain article is about the accident while the article on China is a condemnation of China’s HRS and governance. CNN can find tons of criticism and dissatisfaction on Spain’s Internet too if it wants. Yes, right now. CNN can find critical things to write about the Spanish government: for example, Spain woefully under-funds its infrastructure. These are CNN’s explicit choices to make. See the glaring difference in the articles as a result of the choices CNN made. Welcome to “free” press. ......................................................................................................................................... [TABLE="width: 0"] [TR] [TD="align: left"]Report: Train derails in Spain, killing 69By Al Goodman. Elwyn Lopez and Catherine E. Shoichet, CNN updated 1:12 AM EDT, Thu July 25, 2013[/TD] [TD="width: 399, align: left"]Chinese netizens outraged over response to fatal bullet train crashBy Steven Jiang, CNN July 26, 2011 5:16 a.m. EDT[/TD] [/TR] [TR] [TD="width: 399, align: left"]Madrid (CNN) – A high-speed passenger train derailed as it hurtled around a curve in northwestern Spain on Wednesday, killing dozensand injuring more than 100, a regional official said.By Thursday morning, the death toll had reached 69, Galicia regional government official Samuel Juarez told the Spanish newspaper El Pais. Pictures of the scene showed a train car snapped in two and another car on fire.Rescue crews and fellow passengers pulled out bodies through broken windows and pried open doorsas stunned survivors looked on. Police escorted bloodied passengers from the wreckage. More than 20 injured victims remained in critical condition early Thursday, said Agustin Hernandez Fernandez of the Galicia infrastructure ministry. State railway Renfe said the train crashed on a curve several kilometers from the train station in the city of Santiago de Compostela. The train had 218 passengers aboard and was nearing the end of a six-hour tripfrom Madrid to the town of Ferrol in northwest Spain when it derailed at 8:41 p.m., the railway said. It was unclear how fast the train was traveling when it crashed. The train was capable of going up to 250 kilometers per hour (155 mph), the chief spokesman for Renfe said. Residents who lived near the tracks told the Voz de Galicia newspaper that they heard a thunderous bang when the train crashed. Many of them rushed to the area with blankets and bottled water for the injured, the newspaper reported. “The train had broken in half. Some pieces were on top, some pieces were on the bottom,” said Ivette Rubiera Cabrera of Florida, who caught a glimpse of the wreckage while on a family vacation in Spain and sent photos to CNN’s iReport. “It was quite shocking,” she said. “We had never seen anything like that. We had just been on the train last week.” Oscar Mateos told Spain’s El Pais newspaper that he saw fellow passengers thrown to the ground, then tossed from one side of the train to the other. “Help came in five minutes, but that time became an eternity,” he said. “I helped people get out with broken legs and many bruises.” Alen Perez, 16, said he had been walking nearby and saw passengers helping each other out of the train. Emergency vehicles swarmed the scene. There were several bodies on the ground, he said. Photos he took of the crash site showed mangled pieces of a train car and black smoke billowing out of the wreckage. Investigators are looking at all possible causes of the crash, a senior aide to Spain’s prime minister said Wednesday; their initial assessment is that it likely wasn’t the result of terrorism. Are you there and safe? Tell us what’s happening Renfe’s spokesman said he did not know how many crew members were aboard the train when it crashed. Normally there would be at least five crew members on a train like that, he said. Firefighters, police and psychologists were at the scene, the Galicia government said in a statement. In Twitter posts, officials said blood donations were needed as a result of the crash. Spain’s train infrastructure authority said it was investigating. The crash occurred shortly before a large annual celebration was set to start in Santiago de Compostela, a popular tourist destination. Local officials canceled festivities planned for Wednesday night and Thursday.[/TD] [TD="width: 399, align: left"]Beijing (CNN) – Nationwide outrage continued Monday in China over the government’s response to a deadly bullet train collision last weekend, even as operations resumed on the affected high-speed rail lines.A bullet train was struck from behind Saturday night by another train near Wenzhou in eastern Zhejiang province, killing at least 38 people — including two American citizens — and injuring almost 200. The first train was forced to stop on the tracks due to a power outage and the impact caused six cars to derail, including four that fell from an elevated bridge. Although Chinese reporters raced to the scene, none of the major state-run newspapers even mentioned the story on their Sunday front pages. A user of Sina Weibo, China’s equivalent of Twitter, first broke the story and increasingly popular social media outlets then provided millions of Chinese with the fastest information and pictures as well as the most poignant and scathing commentaries. By the time the railway ministry held its first press conference more than 24 hours after the collision, the public had seen not just reports of passengers trapped inside dark trains or images of a mangled car dangling off the bridge — but also bulldozers crushing mangled cars that had fallen to the ground and burying the wreckage on site. “How can we cover up an accident that the whole world already knew about?” said a defiant railway ministry spokesman Wang Yongping. “They told me they buried the car to facilitate the rescue effort — and I believe this explanation.” Wang was terse when reporters asked him to explain the fact that a toddler girl was being pulled out of the wreckage alive 20 hours after the accident — and long after authorities declared no more signs of life in the trains. “That was a miracle,” he said. Blaming lightning strike-triggered equipment failure as the cause of the accident based on preliminary investigation, Wang put on a brave face on the safety of China’s controversial high-speed rail. “Chinese technologies are advanced and we are still confident about that,” he said. While some state media echoed Wang’s sentiment, many netizens questioned his every statement from the death toll to the cause and called him the face of a ministry mired in allegations of corruption and ineptitude. “This land is a hotbed for the world’s most sprawling bureaucracy and most cold-blooded officials,” user “chenjie” wrote on Sina Weibo. Netizens also dug up an old video clip showing the railway ministry’s chief engineer proudly telling state television in 2007 that China had developed modern technologies to ensure bullet trains never rear-end each other. The quick sacking of three top local railway officials in Shanghai — who were in charge of the affected rail lines — failed to placate the public, either. The announced new Shanghai railway chief prompted more scorn than applause, as the replacement — the railway ministry’s chief dispatcher — was once demoted for his role in another fatal train accident in 2008 that killed 72 people. In a user-generated opinion poll on Sina Weibo on the government’s handling of the accident, more than 90 percent of the 30,000 respondents chose the option “terrible — it doesn’t treat us as humans.” Now the world’s second-largest economy, and flush with cash, China has built the world’s longest high-speed rail network — boasting more than 8,300 kilometers (5,100 miles) of routes — in a few short years. The government plans to pour over $400 billion into rail projects in the next five years. The massive investment and rapid construction have long raised public doubts on the new lines’ safety and commercial viability. The skeptics’ voices became louder after the former railway minister — a champion of high-speed rail — was sacked for corruption early this year. Even the Beijing-Shanghai high-speed rail — the ministry’s newest and proudest project — has broken down several times since its much-touted launch less than a month ago. “It’s not the faster, the better,” Sun Zhang, a railway professor at Tongji University in Shanghai and a long-time railway ministry consultant, told CNN last month. “We have to take safety, economics and environmental impact into consideration.” “Strategically we can talk about a great leap forward in the industry, but tactically we have to do things step by step,” he added. Back online, many users — already jittery about safety in their daily life — now view China’s high-speed rail, long considered a symbol of the country’s fast rise, as a metaphor of its troublesome approach to development. “This is a country where a thunderstorm can cause a train to crash, a car can make a bridge collapse and drinking milk can lead to kidney stones,” user “xiaoyaoyouliu” posted on Sina Weibo. “Today’s China is a bullet train racing through a thunderstorm — and we are all passengers onboard.” [/TD] [/TR] [/TABLE] More info: http://bit.ly/1cn9NGB
Battles between the Realists vs. Pollyannas: Achuthan vs. Bloomberg & Schiff vs. CNBC Lakshman Achuthan: The US Entered Recession Last Year And "Is Worse Than Japan In the 90s" 07/30/2013 Despite Tom Keene's best efforts to appear fair-and-balanced, this brief interview on Bloomberg TV places ECRI's Lakshman Achuthan in the uncomfortable position of destroying every propagandized 'fact' that the mainstream media is entrusted with disseminating to the Pavlovian investing community. From recessions with job growth ("we believe a US recession began in 2012") to the wealth divide and from GDP revisions to job quality differentials, Achuthan warns the US is becoming Japan, "U.S. growth over the last five years is weaker than Japan during the Lost Decades." Keene's insistence that things are on-the-up (though admitting that Achuthan's call on the decline in growth was correct) is met with the rhetorical question, "you wouldn't have four years of zero-interest rate policy and quantitative easing if everything was okay." Watch the corresponding Bloomberg TV video 'Achuthan vs. Bloomberg' here. At 1:05, Achuthan stuns the Bloomberg anchors - "We believe that a recession began last year. Time will tell if that call is correct." [below is the script] To which they retort... "The jobs situation is great" [LA] ...the job market is not doing well, all headlines aside. When you – I think the core thing here, and something that concerns us quite a bit, is the types of jobs that make money. So if you happen to be between the age of 35 and 54, since this so-called jobs recovery began three-and-a-half years ago, you’ve actually seen job losses, not gains, okay? Job losses for 35 to 54 year-olds approaching a million jobs lost. Now that happens to be, that 20-year span of your life, happens to be where you make the most money, and where you spend the most money. And so I think that is at the core of why, when you say, “Hey, jobs are great,” people say, “Eh, you know, it doesn't feel that way.” And they're right. "Who is doing well?" [LA] Madison Avenue is not the country. It's not the world we live in, actually. It's kind of a little bit of a bubble, and as is some of the luxury items, to tell you the truth, right? If you are doing well, financially generally, then in the recent economy, you’ve been doing very well because you’ve seen real estate prices recover sharply, and you’ve seen the stock market recover sharply. To switch gears here, it's good – If you're around Wall Street, you're probably close to the helicopters which are spewing out cash. And that's a pretty good thing. "But most people are not near Wall Street" [LA] Most people are near Main Street. And that is why there is all this kind of disconnect. The President is doing what he’s doing. The policymakers are saying – The conservatives are saying, “Hey, there’s too much regulation and too much taxing.” The liberals are saying, “Let’s do some more Keynesian stimulus and other things.” And I think everybody’s missing what’s going on, which is that growth is not there. Growth has been downshifting since before the Great Recession. And it's not only happening in the U.S. And that's ailing the aggregate economy. "but again, jobs are improving?" [LA] First off, all you have now are preliminary numbers... All that gets revised massively, that defines where the economy is. And secondarily, you cannot get away from the fact that 35 to 54 year olds have lost almost a million jobs since this jobs recovery began. That's where you make your money. You don’t make your money as a kid. And you don’t make your money when you're about to retire. "but The Fed sees growth..." [LA] Of course. They would like you to believe that everything’s okay, and things are relatively under control, except their actions suggest otherwise, right? I’ve never heard a Fed Chairman call a recession. They’ve always said there isn’t one. And then they’ve said, “if you don’t do” – or, “If I didn't do what I was doing, there would be one,” when there is, in fact, one going on, if you look at the history. But I just want to say plainly that you wouldn't have four years of zero-interest rate policy and quantitative easing and Q-ternity if everything was okay. "Short-term GDP growth might be weak but growth is around the corner" [LA] ...tomorrow, you're going to get a revision, and a preliminary number for the latest quarter and then a revision to the history. And when you do that, and when you see that, I want you to understand that GDP, following recessions, gets revised. It gets revised much more than you think... It gets revised – On the last few recessions - Two to four percentage point revision, almost always downward, following the last few recessions. And you're sitting here applauding about a 1% growth In the first six months you get about 10% of the revision. There are subsequent revisions to come. So tomorrow is not [the end] "but how can we be in recession if we are creating jobs?" [LA] ...you have had recessions where you’ve had positive job growth for eight or so months... In the ’73 – ’75 recession, which was a severe global recession, you had positive jobs growth. Now, to your point, there are also revisions to the jobs data. Geoffrey Moore was Commissioner of BLS at one time, and knows that the information that is used to define recession: output, employment, income and sales – Those things all get revised massively. Before Lehman, if you look back, those jobs data, on average, are revised down 140,000 per month. And you're sitting here, rightly reporting that we’re hoping for 150,000 to 180,000. I'm suggesting that that is well within the range of the revisions that you need to go negative. And on top of that, now, anyone who’s in the moment of their life when they're supposed to make money, is not making money. They’ve lost almost a million jobs, 35 to 54. I think Main Street agrees with us. [LA] ...This is an inconvenient thing I'm saying here, that there is no growth, and it's going the other way. Now if you're the Fed, and you're the only game in town, you're at zero interest rates, and you're trying the wealth effect, you have to say it's working, and you have to say, “Now I can taper.” If you're a politician maker, you say, “You should use my policy.” But what’s happening is growth has been declining since before the last recession. And it's not only happening here. On The US Becoming Japan, Five years ago, the summer before the Lehman collapse, ECRI’s research found that U.S. economic growth had been stair-stepping down in successive economic expansions, going back to the 1970s. So, even before the Global Financial Crisis (GFC) and deleveraging concerns came to the fore, we predicted a feeble economic expansion to follow the then-ongoing recession. We extended our research to other major developed economies, most of which exhibited similar patterns of slowing trend growth. Driven by deep structural changes, these patterns were likely to result in low trend growth for many years to come – with or without the deleveraging that followed the GFC. In the chart, the rear row of green bars depicts average GDP growth in each economy from 1980 to the beginning of the 21st century (for Japan the green bar shows average GDP growth from 1980 to 1992, which saw the first recession of its “lost decades”). Japan’s entry into its lost decades (1992 to present, red bar), and the other developed economies’ entry into the 21st century (yellow bars), saw major downshifts in growth. Notably, the U.S. and other major developed economies have experience slower growth in the last five years (blue bars, front row) than Japan experienced in its lost decades (red bar). Chinese GDP growth has also declined. The bottom line: around the world, long-term trends in growth have downshifted, already resulting in weaker recoveries and more frequent recessions than most had expected when the 21st century began. The response, following Japan’s example, has been more and more quantitative easing, which has been unable to break this pattern of long-term declines in trend growth. But to those betting on a return to much stronger trend growth, either after the end of deleveraging or after policy changes, it is simply not convenient to recognize that the downshifts in growth are global in nature, and predated both the GFC and supposed policy mistakes. Source: ECRI and Bloomberg TV # ECRI co-founder and COO: Lakshman Achuthan is sharp and frank but he should keep in mind about the Michael Hasting's fate. # It's the battle of the Realists vs. Pollyannas Tom Keene did not know what to do with Achuthan... PRICELESS! WATCH the videos at below links: Lakshman Achuthan vs. Bloomberg Peter Schiff vs. CNBC From Merriam-Webster, definition of POLLYANNA: a person characterized by irrepressible optimism and a tendency to find good in everything — Pollyanna adjective — Pol·ly·an·na·ish also Pol·ly·an·nish adjective # JAPAN had an equity blow off top in 1989 that took the Nikkei from high of 40,000 to as low as 7000, over 24 years uninterruptedly, and the ill-fated Japanese people have just voted for confidence in the ultimate Keynesian failure policy represented by Abenomics as effectuated by the current BoJ governor, Kuroda, because they've pushed the Nikkei up a few thousand points in NOMINAL terms through currency debasement, even though it's lost 95%+ of its value, and is the ultimate widow maker - and it's going to play out in similar manner in the U.S. as a matter of mathematical certainty, and yet, you have the ultimate propagandist tools like Tom Keene spewing horseshit on behalf of the statist financial press organs such as Bloomberg L.P. It's one thing to have a lost decade or two when your population is homogeneous and very well behaved. Also the Japanese don't ask for much: a small car, a tiny house, a little fuel and food. Things can go on pretty smoothly. But when your population wants swimming pools, 24/7 central air and heat (yes, that is a luxury, gasp) monstrous automobiles and appetites, well, then that's a different story. When the heavily armed crying babies start whining about their freedom, I mean their luxuries, being lost, it gets silly, then it gets ugly. # Deeds matter, not words! Like Achuthan implied, watch what the Fed is doing, NOT what they are saying! What really matters is that the ruling class has been getting richer and richer for the past five years. # The true extent of slowdown in the world economy can be judged by the data points which are NOT subjected to adjustments by the government such as Change in Electricity and Fuel consumption, Ratio of working population to the total population of a country, Miles driven, Baltic Dry Index, Change in commercial Rental Rates etc. Countries around the world are taking on more debt without any fruitful attempts to curb their expenditures. This has resulted in a much more fragile and artificially held up financial system which is on a much shaky ground than it was in 2008. In 2008 companies failed due to excessive leverage and debt and now countries are likely to default because they took on the same bad debt on themselves. There is no economic recovery because all the efforts of politicians, government, central banks etc are focused on saving banks instead of targeting job creation which is the only way economy can recover. The weakness in the democratic process ensures the victory of the Wall Street over the Real Economy for the foreseeable future. Things are definitely going to get much much worse before they get better for the real economy i.e. for more than 90% of the population. A Lost Battle : Wall Street Vs. The Real Economy | The Market Oracle http://www.marketoracle.co.uk/Article40231.html The following activities of the worldwide financial institutions, motivated by the sole motive of maximizing profits, created the biggest financial bubble in the history of the world : Lending money to borrowers (individuals, corporates and governments) who had insufficient income or assets to pay off the loans undertaken. Engaged in and encouraged massive speculation in the currencies, bonds, equity and commodities exchanges. Use of leverage in the form of Derivatives and High Frequency Trading to game the process of price fixing on electronic exchanges. # The United Kingdom has been in a depression since 2008. The government is fudging the figures to pretend it isn't. See it here. "I can help with what has been happening with the GDP implied deflator as I covered some changes made to it back in October of last year on my Notayesmanseconomics blog. If you read the explanation linked to below it will become clear why the implied deflator now longer follows RPI and in fact that the consumer section (where RPI is most relevant) no longer does either. For the same reality economic growth in the UK will be recorded as higher than before…" * RPI = Retail Prices Index; CPI = Consumer Prices Index. # SEE ALSO "Japan; from quagmire to Abenomics to collapse! Part III" This is the last article of the three-part series. Japan has been in a stable, but unsustainable, equilibrium for years. Its leaders know it is unsustainable and in their immense wisdom, decided to manage the whole system in order to achieve a sustainable development. However, this will prove fraught with danger since moving an unsustainable system away from its steady-state runs the risk of unleashing a gale wave of unintended consequences. The problem of course is that the people now in charge of moving the Japanese system from its current constellation have absolutely no idea on how to get it from where it is back on sound footing. The reason is simple, as with most policy quacks they are taught by other quacks. Some of the teachers even have Ph.D.’s. in quackery to prove to lesser quacks who truly master the art of quacking; we call them economists. ------------------ "You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes." "Madoff taught us that you can make promises in the future ad infinitum as long as you have more dummies entering than exiting the scheme." - Kyle Bass “Lots of people are betting on the greater fool..."
It's important to know 'who owns what' but sometimes even though one finds out the name of the owner or the controlling party, it may not mean anything unless one's digging seriously, which is a tedious task. Perception management is the name of the games they're throwing out daily. The short answer: NO! (One can't just say that BBC is more credible than CNN) The UK has The City of London, a financial enclave as the counterpart of the Wall St. Hint: there are some good reading under the entries of "Who Owns The Media? The 6 Corporations"
Six Media Companies Control 90% Of What We Read, Watch, and Listen to The Real Reason They Still Play 'Mrs. Robinson' On The Radio By Sara Critchfield Stations haven't been playing "Mrs. Robinson" for years just because everyone likes Simon & Garfunkel (although I really do love them!). It's because a huge percentage of stations' playlists match all across the country. So much for thinking that media exposes us to new and different ideas, eh? An Upworthy original graphic. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ These 6 Corporations Control 90% Of The Media In America ASHLEY LUTZ JUN. 14, 2012 This infographic created by Jason at Frugal Dad shows that almost all media comes from the same six sources. That's consolidated from 50 companies back in 1983. NOTE: This infographic is from last year and is missing some key transactions. GE does not own NBC (or Comcast or any media) anymore. So that 6th company is now Comcast. And Time Warner doesn't own AOL, so Huffington Post isn't affiliated with them. But the fact that a few companies own everything demonstrates "the illusion of choice," Frugal Dad says. While some big sites, like Digg and Reddit aren't owned by any of the corporations, Time Warner owns news sites read by millions of Americans every year. Here's the graphic: Frugal Dad Source: “Media Consolidation: The Illusion of Choice (Infographic)”, November 22, 2011 by Jason (Frugal Dad) Few related links: - Who Owns The Media? The 6 Monolithic Corporations That Control Almost Everything We Watch, Hear And Read By Michael Snyder, 2010.10.04 - 6 Media Giants Control 90% of What We Read, Watch, or Listen to - Who Owns the Media? | Free Press Note that the late Eustace Mullins did elaborate and warn about this TV network and media consolidation and domination many decades ago! And if you pay attention to your local printed newspaper's international section, you may notice that an overwhelming portion of the international news are actually fed by the few aggregated news agencies only: -Thomson Reuters (or simply Reuters); -the Associated Press (AP), which is a subsidiary company of Thomson Reuters; and -the Agence France-Presse (AFP)
What Google Knows About You What Google Knows About You 08/01/2013 Earlier, we reported the personal narrative of Michele Catalano who recounted how one day she found herself face to face with six agents from the joint terrorism task force. The reason? "Our seemingly innocent, if curious to a fault, Googling of certain things was creating a perfect storm of terrorism profiling. Because somewhere out there, someone was watching. Someone whose job it is to piece together the things people do on the internet raised the red flag when they saw our search history." The answer of "who" was watching should be far clearer in the aftermath of the Snowden revelations from the past two months. But instead of rehashing the old story of the NSA intercepting and recording virtually every form of electronic communication that exists, or ruminating on what filters Ms. Catalano triggered to lead to this truly disturbing outcome, perhaps a better question is just what is it that Google knows about each and everyone who uses its interface daily, which in this day and age means everyone with a computer. As it turns out, pretty much everything. Here is the thought, and not so "thought" experiment that the WSJ's Tom Gara ran yesterday, before Ms. Catalano's story had hit, to uncover just how rich his informational tapestry is in the repositories of the firm that once upon a time urged itself, rhetorically, to "not be evil." Let’s run through a little thought experiment. Imagine there’s a list somewhere that contains every single webpage you have visited in the last five years. It also has everything you have ever searched for, every address you looked up on Google GOOG +1.86% Maps, every email you sent, every chat message, every YouTube video you watched. Each entry is time-stamped, so it’s clear exactly, down to the minute, when all of this was done. Now imagine that list is all searchable. And imagine it’s on a clean, easy-to-use website. With all that imagined, can you think of a way a hacker, with access to this, could use it against you? And once you’ve imagined all that, go over to google.com/dashboard, and see it all become reality. For a piece complementing today’s story on Google and privacy by the WSJ’s Amir Efrati, I took a deep dive into Google Dashboard, a kind of Grand Central Terminus for all the information the company has stored on you. It’s a truly amazing amount, especially if, like me, you have been a heavy Gmail user since its launch in 2004. As long as you are logged into Gmail, or any other Google account, the company isn’t just keeping track of how you use its own service — it’s noting every site you visit on the web. Here’s a snapshot of the kind of data we found on my Google Dashboard, put together as a graphic for today’s newspaper. It includes my 64,019 Google searches, and 134,966 Gmail conversations: The snapshot in question: Gara's purely theoretical ruminations continue: The idea that all of this data exists as a mass of ones and zeros deep in a server farm in California, being studied by disinterested robots to serve up better search results and more relevant ads, is something most of us can process in the abstract. But the fact that it is all viewable right now, on a user-friendly Web page complete with its own search service (yes, you can run Google searches on your own web history), is something else entirely. For example, I searched for every website I’ve ever visited containing the word “octopus.” And yes, the results were wonderful. Of course, if somebody else managed to access my Google Dashboard — and the chances of this happening are well above zero — they could search for things far less innocent than an eight-tentacled sea creature. The bad possibilities seem endless, from digital blackmail to much deeper forms of identity theft. Or six joint terrorism task force agents showing up on your front step just because you googled "pressure cookers." But wait, there's more. Because it is not just the NSA, and its downstream enforcement tentacles, that has open access to the informational nexus that is Google and its "Don't be evil" creed.So does the FBI. The WSJ is again on the trail. Law-enforcement officials in the U.S. are expanding the use of tools routinely used by computer hackers to gather information on suspects, bringing the criminal wiretap into the cyber age. Federal agencies have largely kept quiet about these capabilities, but court documents and interviews with people involved in the programs provide new details about the hacking tools, including spyware delivered to computers and phones through email or Web links—techniques more commonly associated with attacks by criminals. People familiar with the Federal Bureau of Investigation's programs say that the use of hacking tools under court orders has grown as agents seek to keep up with suspects who use new communications technology, including some types of online chat and encryption tools. The use of such communications, which can't be wiretapped like a phone, is called "going dark" among law enforcement. A spokeswoman for the FBI declined to comment. The FBI develops some hacking tools internally and purchases others from the private sector. With such technology, the bureau can remotely activate the microphones in phones running Google Inc.'s Android software to record conversations, one former U.S. official said. It can do the same to microphones in laptops without the user knowing, the person said. Google declined to comment. There is more but the gist is clear: all those seemingly ridiculous surveillance methods used by Jack Bauer and countless other fictional characters... they were all too real. Just as real, in fact, as the Big Brother predicted by George Orwell so many years ago. And just as real, although we will need another Edward Snowden to reveal it, as the modern-day equivalent of Room 101. ~~~~~~~~~ Digital Privacy Black Paper | Sovereign Man (pdf)
NSA Can Spy on Smart Phone Data - SPIEGEL :: iPhone, Android Smartphones, BlackBerry Privacy Scandal NSA Can Spy on Smart Phone Data September 07, 2013 – 06:00 PM SPIEGEL has learned from internal NSA documents that the US intelligence agency has the capability of tapping user data from the iPhone, devices using Android as well as BlackBerry, a system previously believed to be highly secure. German Chancellor Angela Merkel holds a BlackBerry Z10 smart phone: Will the company face a setback following claims the NSA can spy on its phones? The United States' National Security Agency intelligence-gathering operation is capable of accessing user data from smart phones from all leading manufacturers. Top secret NSA documents that SPIEGEL has seen explicitly note that the NSA can tap into such information on Apple iPhones, BlackBerry devices and Google's Android mobile operating system. The documents state that it is possible for the NSA to tap most sensitive data held on these smart phones, including contact lists, SMS traffic, notes and location information about where a user has been. The documents also indicate that the NSA has set up specific working groups to deal with each operating system, with the goal of gaining secret access to the data held on the phones. In the internal documents, experts boast about successful access to iPhone data in instances where the NSA is able to infiltrate the computer a person uses to sync their iPhone. Mini-programs, so-called "scripts," then enable additional access to at least 38 iPhone features. The documents suggest the intelligence specialists have also had similar success in hacking into BlackBerrys. A 2009 NSA document states that it can "see and read SMS traffic." It also notes there was a period in 2009 when the NSA was temporarily unable to access BlackBerry devices. After the Canadian company acquired another firm the same year, it changed the way in compresses its data. But in March 2010, the department responsible at Britain's GCHQ intelligence agency declared in a top secret document it had regained access to BlackBerry data and celebrated with the word, "champagne!" The documents also state that the NSA has succeeded in accessing the BlackBerry mail system, which is known to be very secure. This could mark a huge setback for the company, which has always claimed that its mail system is uncrackable. In response to questions from SPIEGEL, BlackBerry officials stated, "It is not for us to comment on media reports regarding alleged government surveillance of telecommunications traffic." The company said it had not programmed a "'back door' pipeline to our platform." The material viewed by SPIEGEL suggests that the spying on smart phones has not been a mass phenomenon. It has been targeted, in some cases in an individually tailored manner and without the knowledge of the smart phone companies. Correction: The original version of this news story was adapted from a SPIEGEL press release on Saturday that did not include information attributing the March 2010 document cited in the original to Britain's GCHQ intelligence agency. This important information has been added, and the full English version of the article has since been posted online. http://www.spiegel.de/international...nsa-can-spy-on-smart-phone-data-a-920971.html ---------------------------------------------------------------------------------------- UK, US able to crack most encryption used online Summary: By weakening encryption standards, inserting vulnerabilities into vendors' technology, and using supercomputer-backed password crackers, the US and the UK are able to break encryption used to back technologies like SSH, HTTPS, and VPNs. By Michael Lee | September 6, 2013 -- 00:11 GMT (08:11 SGT) | ZDNet Spy agencies in the UK and the US are reportedly able to crack the same encryption used online to routinely secure information. The reveal is the latest part of the cache of documents leaked by former US Defence contractor Edward Snowden. According to The Guardian andThe New York Times, the US National Security Agency and the UK counterpart, the Government Communications Headquarters (GCHQ), have been working to ensure that encryption has been undermined in three broad ways. The methods used by the spy agencies are controlling international encryption standards; working with technology companies and online service providers to insert weaknesses in technology and software; and the use of supercomputer brute force encryption keys. The US program around vulnerability insertion targets "commercial encryption systems, IT systems, networks, and endpoint communications devices". It has been called the SIGINT (Signals Intelligence) Enabling Project, and is reported to be a US$250 million a year initiative. The US documents also outline where the NSA expects its capabilities to be for the 2013 financial year. These include achieving full SIGINT access to an unnamed, but "major communications provider", as well as a "major peer-to-peer voice and text communications system". The UK documents around its "BULLRUN" system are more general, and note that its US ally has been leading the charge against "defeating network security and privacy". Its decryption efforts appear to focus mostly around network communications, and the program is run from its Penetration Target Defences (PTD) division. "The various types of security covered by BULLRUN include, but are not limited to, TLS/SSL, https (eg, webmail), SSH, encrypted chat, VPNs, and encrypted VoIP." Analysts using the BULLRUN system are required by GCHQ to be kept in the dark, noting that they should not necessarily be told how the data they are working on was acquired. "Access to BULLRUN does not imply any 'need-to-know' the details of sources and methods used to achieve exploitation, and, in general, there will beno 'need-to-know'," the UK document says. Ironically, the UK document emphasises that the existence of BULLRUN must never be known. "Any admission of 'fact of' a capability to defeat encryption used in specific network communication technologies or disclosure of details relating to that capability must be protected by the BULLRUN [community of intelligence] and restricted to those specifically indoctrinated for BULLRUN." France, Australia, and New Zealand appear to be lagging behind the UK's efforts, as the UK document indicates that they are only expected to introduce BULLRUN at a later date. More here. ---------------------------------------------------------------------------------------- NSA Has Full "Back Door" Access To iPhone, BlackBerry And Android Smartphones, Documents Reveal 09/08/2013 Two months ago, when we reported that the NSA has successfully inserted illegal access protocols into the Android OS, thus granting it back door access into nearly three quarters of all cell phones, the news was met with skepticism and resistance: how could an open-sourced architecture be so frail and open to penetration was the most common complaint. We wonder if today's news, broken by Germany's Spiegel, according to which the NSA can spy not only on Android smartphones but tap user data on all iPhone and BlackBerry devices "including contact lists, SMS traffic, notes and location information about where a user has been", will be met with the same skepticism or if the realization that every form of privacy is now gone, has finally dawned on the population. Spiegel reports, citing"internal NSA documents that the NSA has the capability of tapping user data from the iPhone, devices using Android as well as BlackBerry, a system previously believed to be highly secure. The documents also indicate that the NSA has set up specific working groups to deal with each operating system, with the goal of gaining secret access to the data held on the phones." While at this point it should come as no surprise that the NSA pervasively spies on Americans without a warrant or clearance, and has access to every device permitting electronic communication, the bigger question is: if everything is being spied on, what is left? Is carrierpigeons.com about to IPO? From Spiegel: The United States' National Security Agency intelligence-gathering operation is capable of accessing user data from smart phones from all leading manufacturers. Top secret NSA documents that SPIEGEL has seen explicitly note that the NSA can tap into such information on Apple iPhones, BlackBerry devices and Google's Android mobile operating system. The documents state that it is possible for the NSA to tap most sensitive data held on these smart phones, including contact lists, SMS traffic, notes and location information about where a user has been. In the internal documents, experts boast about successful access to iPhone data in instances where the NSA is able to infiltrate the computer a person uses to sync their iPhone. Mini-programs, so-called "scripts," then enable additional access to at least 38 iPhone features. The documents suggest the intelligence specialists have also had similar success in hacking into BlackBerrys. A 2009 NSA document states that it can "see and read SMS traffic." It also notes there was a period in 2009 when the NSA was temporarily unable to access BlackBerry devices. After the Canadian company acquired another firm the same year, it changed the way in compresses its data. But in March 2010, the department responsible at Britain's GCHQ intelligence agency declared in a top secret document it had regained access to BlackBerry data and celebrated with the word, "champagne!" The documents also state that the NSA has succeeded in accessing the BlackBerry mail system, which is known to be very secure. This could mark a huge setback for the company, which has always claimed that its mail system is uncrackable. In response to questions from SPIEGEL, BlackBerry officials stated, "It is not for us to comment on media reports regarding alleged government surveillance of telecommunications traffic." The company said it had not programmed a "'back door' pipeline to our platform." Of course not, it just allowed the NSA to program one. And while the biggest scandal of the Obama administration continues to get ever bigger, and makes Nixon look like an amateur, what is the response? Why a media that aside for a few outlets remains mute... and diversion from the administration of course, in the form of war and hundreds of thousands about to die just to keep the president in his seat. --------------------------------------------------------- NSA, no way! Anti-spying sentiments on the rise amid steady stream of disclosures — RT USA (2013-09-11) http://rt.com/usa/nsa-poll-surveillance-issa-722/ The National Security Agency isn’t making many friends, apparently: a new poll published this week suggests that a majority of Americans continue to have complaints with the NSA’s surveillance practices amid a myriad of recent disclosures. [...] ------------------ "These wars are a function of the current Imperium." "A lie told often enough becomes truth" - Vladimir Lenin "An unexciting truth may be eclipsed by a thrilling lie." - Aldous Huxley, author of among others, 'Brave New World', 'Brave New World Revisited', 'The Doors of Perception', 'Island' (his last book) "For the great majority of mankind are satisfied with appearances, as though they were realities, and are often more influenced by the things that seem than by those that are." - Niccolo Machiavelli
The Newest iPhone 5S featuring 'Touch ID' Fingerprint-Sensor Technology Apple To Announce Cheaper, Golder, Bigger, Faster iPhone 5S 09/10/2013 We just can't wait to hear about the different colors, the camera, the screen size, the cheapness, and everything else that has been rumored to make this Apple announcement as un-evolutionary as many of the previous ones. Of course, there could be 'just one more thing', but we suspect not... The highlights: APPLE INTRODUCES IPHONE 5S IPHONE 5S Includes 'Touch Id' Fingerprint-Sensor Technology IPHONE 5S Includes Slow-Motion Video-Recording Feature IPHONE 5S Adds Burst Mode To Take 10 Pictures Per Second IPHONE 5S Adds Improved Camera Lens IPHONE 5S Includes A7 64-Bit Chip IPHONE 5S CPU Performance Is 40X From Original iPhone In 2007 IPHONE 5S Includes White, Black, Gold Colors IPHONE 5S Is Twice As Fast As iPhone 5 Finger-Touch Sensor Is Located On iPhone 5S Home Button IPHONE 5S To Cost $199 To $399 With Two-Year Contract and don't forget... the NSA still mocks the iPhone users... But the kicker is when, in another secret presentation, the NSA itself mocks Orwell, using a reference from the iconic Apple "1984" advertisement... ... As it says the man who has become "Big Brother" is none other than AAPL's deceased visionary leader Steve Jobs... ... And is so very grateful for Apple's paying clients who make its job so much easier ... And the punchline: IPHONE 5S INCLUDES 'TOUCH ID' FINGERPRINT-SENSOR TECHNOLOGY Now the fingerprint database creation will be made much easier... In the meantime, here's the pricing info in the USA: Apple’s new lower-end iPhone 5c will run US$549 for a 16GB and US$649 for a 32GB model off contract, according to Apple’s store site. While the higher-end model iPhone 5s will continue to run US$649 (16GB), US$749 (32GB) and US$849 (64GB) off-contract.
Matthew Green Speculates on How the NSA Defeats Encryption Bruce Schneier Schneier on Security A blog covering security and security technology. September 11, 2013 Matthew Green Speculates on How the NSA Defeats Encryption This blog post is well worth reading, and not just because Johns Hopkins University asked him to remove it, and then backed down a few hours later. https://www.schneier.com/blog/archives/2013/09/matthew_green_s.html About Bruce Schneier Bruce Schneier is an internationally renowned security technologist, called a "security guru" by The Economist. He is the author of 12 books -- including Liars and Outliers: Enabling the Trust Society Needs to Survive -- as well as hundreds of articles, essays, and academic papers. His influential newsletter "Crypto-Gram" and his blog "Schneier on Security" are read by over 250,000 people. He has testified before Congress, is a frequent guest on television and radio, has served on several government committees, and is regularly quoted in the press. Schneier is a fellow at the Berkman Center for Internet and Society at Harvard Law School, a program fellow at the New America Foundation's Open Technology Institute, a board member of the Electronic Frontier Foundation, an Advisory Board Member of the Electronic Privacy Information Center, and the Security Futurologist for BT -- formerly British Telecom. ~~~~~~~~~~~~~~~~~~~~~~~~~ Read also "The NSA's next move: silencing university professors?" On 9 September, Johns Hopkins University asked one of its professors to take down a blog post on the NSA. This actually happened yesterday (9/9/2013): A professor in the computer science department at Johns Hopkins, a leading American university, had written a post on his blog, hosted on the university's servers, focused on his area of expertise, which is cryptography. The post was highly critical of the government, specifically the National Security Agency, whose reckless behavior in attacking online security astonished him. Professor Matthew Green wrote on 5 September: I was totally unprepared for today's bombshell revelations describing the NSA's efforts to defeat encryption. Not only does the worst possible hypothetical I discussed appear to be true, but it's true on a scale I couldn't even imagine. The post was widely circulated online because it is about the sense of betrayal within a community of technical people who had often collaborated with the government. [...] http://www.theguardian.com/commenti...atthew-green-takedown-blog-post-johns-hopkins ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ A Few Thoughts on Cryptographic Engineering Some random thoughts about crypto. Notes from a course I teach. Pictures of my dachshunds. Thursday, September 5, 2013 On the NSA Let me tell you the story of my tiny brush with the biggest crypto story of the year. A few weeks ago I received a call from a reporter at ProPublica, asking me background questions about encryption. Right off the bat I knew this was going to be an odd conversation, since this gentleman seemed convinced that the NSA had vast capabilities to defeat encryption. And not in a 'hey, d'ya think the NSA has vast capabilities to defeat encryption?' kind of way.No, he'd already established the defeating. We were just haggling over the details. Oddness aside it was a fun (if brief) set of conversations, mostly involving hypotheticals. If the NSA could do this, how might they do it? What would the impact be? I admit that at this point one of my biggest concerns was to avoid coming off like a crank. After all, if I got quoted sounding too much like an NSA conspiracy nut, my colleagues would laugh at me. Then I might not get invited to the cool security parties. All of this is a long way of saying that I was totally unprepared for today's bombshell revelations describing the NSA's efforts to defeat encryption. Not only does the worst possible hypothetical I discussed appear to be true, but it's true on a scale I couldn't even imagine. I'm no longer the crank. I wasn't even close to cranky enough. And since I never got a chance to see the documents that sourced the NYT/ProPublica story -- and I would give my right arm to see them -- I'm determined to make up for this deficit with sheer speculation. Which is exactly what this blog post will be. 'Bullrun' and 'Cheesy Name' If you haven't read the ProPublica/NYT or Guardian stories, you probably should. The TL;DR is that the NSA has been doing some very bad things. At a combined cost of $250 million per year, they include: Tampering with national standards (NIST is specifically mentioned) to promote weak, or otherwise vulnerable cryptography. Influencing standards committees to weaken protocols. Working with hardware and software vendors to weaken encryption and random number generators. Attacking the encryption used by 'the next generation of 4G phones'. Obtaining cleartext access to 'a major internet peer-to-peer voice and text communications system' (Skype?) Identifying and cracking vulnerable keys. Establishing a Human Intelligence division to infiltrate the global telecommunications industry. And worst of all (to me): somehow decrypting SSL connections. All of these programs go by different code names, but the NSA's decryption program goes by the name 'Bullrun' so that's what I'll use here. How to break a cryptographic system There's almost too much here for a short blog post, so I'm going to start with a few general thoughts. Readers of this blog should know that there are basically three ways to break a cryptographic system. In no particular order, they are: Attack the cryptography. This is difficult and unlikely to work against the standard algorithms we use (though there are exceptions like RC4.) However there are many complex protocols in cryptography, and sometimes they are vulnerable. Go after the implementation. Cryptography is almost always implemented in software -- and software is a disaster. Hardware isn't that much better. Unfortunately active software exploits only work if you have a target in mind. If your goal is mass surveillance, you need to build insecurity in from the start. That means working with vendors to add backdoors. Access the human side. Why hack someone's computer if you can get them to give you the key? Bruce Schneier, who has seen the documents, says that 'math is good', but that 'code has been subverted'. He also says that the NSA is 'cheating'. Which, assuming we can trust these documents, is a huge sigh of relief. But it also means we're seeing a lot of (2) and (3) here. So which code should we be concerned about? Which hardware? [TABLE="class: tr-caption-container"] [TR] [TD="align: center"][/TD] [/TR] [TR] [TD="class: tr-caption, align: center"]SSL Servers by OS type. Source: Netcraft.[/TD] [/TR] [/TABLE] This is probably the most relevant question. If we're talking about commercial encryption code, the lion's share of it uses one of a small number of libraries. The most common of these are probably the Microsoft CryptoAPI (and Microsoft SChannel) along with the OpenSSL library. Of the libraries above, Microsoft is probably due for the most scrutiny. While Microsoft employs good (and paranoid!) people to vet their algorithms, their ecosystem is obviously deeply closed-source. You can view Microsoft's code (if you sign enough licensing agreements) but you'll never build it yourself. Moreover they have the market share. If any commercial vendor is weakening encryption systems, Microsoft is probably the most likely suspect. And this is a problem because Microsoft IIS powers around 20% of the web servers on the Internet -- and nearly forty percent of the SSL servers! Moreover, even third-party encryption programs running on Windows often depend on CAPI components, including the random number generator. That makes these programs somewhat dependent on Microsoft's honesty. Probably the second most likely candidate is OpenSSL. I know it seems like heresy to imply that OpenSSL -- an open source and widely-developed library -- might be vulnerable. But at the same time it powers an enormous amount of secure traffic on the Internet, thanks not only to the dominance of Apache SSL, but also due to the fact that OpenSSL is used everywhere. You only have to glance at the FIPS CMVP validation lists to realize that many 'commercial' encryption products are just thin wrappers around OpenSSL. Unfortunately while OpenSSL is open source, it periodically coughs up vulnerabilities. Part of this is due to the fact that it's a patchwork nightmare originally developed by a programmer who thought it would be a fun way to learn Bignum division.* Part of it is because crypto is unbelievably complicated. Either way, there are very few people who really understand the whole codebase. On the hardware side (and while we're throwing out baseless accusations) it would be awfully nice to take another look at the Intel Secure Key integrated random number generators that most Intel processors will be getting shortly. Even if there's no problem, it's going to be an awfully hard job selling these internationally after today's news. Which standards? From my point of view this is probably the most interesting and worrying part of today's leak. Software is almost always broken, but standards -- in theory -- get read by everyone. It should be extremely difficult to weaken a standard without someone noticing. And yet the Guardian and NYT stories are extremely specific in their allegations about the NSA weakening standards. The Guardian specifically calls out the National Institute of Standards and Technology (NIST) for a standard they published in 2006. Cryptographers have always had complicated feelings about NIST, and that's mostly because NIST has a complicated relationship with the NSA. Here's the problem: the NSA ostensibly has both a defensive and an offensive mission. The defensive mission is pretty simple: it's to make sure US information systems don't get pwned. A substantial portion of that mission is accomplished through fruitful collaboration with NIST, which helps to promote data security standards such as the Federal Information Processing Standards (FIPS) and NIST Special Publications. I said cryptographers have complicated feelings about NIST, and that's because we all know that the NSA has the power to use NIST for good as well as evil. Up until today there's been no real evidence of malice, despite some occasional glitches -- and compelling evidence that at least one NIST cryptographic standard could have contained a backdoor. But now maybe we'll have to re-evaluate that relationship. As utterly crazy as it may seem. Unfortunately, we're highly dependent on NIST standards, ranging from pseudo-random number generators to hash functions and ciphers, all the way to the specific elliptic curves we use in SSL/TLS. While the possibility of a backdoor in any of these components does seem remote, trust has been violated. It's going to be an absolute nightmare ruling it out. Which people? Probably the biggest concern in all this is the evidence of collaboration between the NSA and unspecified 'telecom providers'. We already know that the major US (and international) telecom carriers routinely assist the NSA in collecting data from fiber-optic cables. But all this data is no good if it's encrypted. While software compromises and weak standards can help the NSA deal with some of this, by far the easiest way to access encrypted data is to simply ask for -- or steal -- the keys. This goes for something as simple as cellular encryption (protected by a single key database at each carrier) all the way to SSL/TLS which is (most commonly) protected with a few relatively short RSA keys. The good and bad thing is that as the nation hosting the largest number of popular digital online services (like Google, Facebook and Yahoo) many of those critical keys are located right here on US soil. Simultaneously, the people communicating with those services -- i.e., the 'targets' -- may be foreigners. Or they may be US citizens. Or you may not know who they are until you scoop up and decrypt all of their traffic and run it for keywords. Which means there's a circumstantial case that the NSA and GCHQ are either directly accessing Certificate Authority keys** or else actively stealing keys from US providers, possibly (or probably) without executives' knowledge. This only requires a small number of people with physical or electronic access to servers, so it's quite feasible.*** The one reason I would have ruled it out a few days ago is because it seems so obviously immoral if not illegal, and moreover a huge threat to the checks and balances that the NSA allegedly has to satisfy in order to access specific users' data via programs such as PRISM. To me, the existence of this program is probably the least unexpected piece of all the news today. Somehow it's also the most upsetting. So what does it all mean? I honestly wish I knew. Part of me worries that the whole security industry will talk about this for a few days, then we'll all go back to our normal lives without giving it a second thought. I hope we don't, though. Right now there are too many unanswered questions to just let things lie. The most likely short-term effect is that there's going to be a lot less trust in the security industry. And a whole lot less trust for the US and its software exports. Maybe this is a good thing. We've been saying for years that you can't trust closed code and unsupported standards: now people will have to verify. Even better, these revelations may also help to spur a whole burst of new research and re-designs of cryptographic software. We've also been saying that even open code like OpenSSL needs more expert eyes. Unfortunately there's been little interest in this, since the clever researchers in our field view these problems as 'solved' and thus somewhat uninteresting. What we learned today is that they're solved all right. Just not the way we thought. Notes: * The original version of this post repeated a story I heard recently (from a credible source!) about Eric Young writing OpenSSL as a way to learn C. In fact he wrote it as a way to learn Bignum division, which is way cooler. Apologies Eric! ** I had omitted the Certificate Authority route from the original post due to an oversight -- thanks to Kenny Patterson for pointing this out -- but I still think this is a less viable attack for passive eavesdropping (that does not involve actively running a man in the middle attack). And it seems that much of the interesting eavesdropping here is passive. *** The major exception here is Google, which deploys Perfect Forward Secrecy for many of its connections, so key theft would not work here. To deal with this the NSA would have to subvert the software or break the encryption in some other way. Posted by Matthew Green at 11:27 PM About Matthew Green I'm a cryptographer and research professor at Johns Hopkins University. I've designed and analyzed cryptographic systems used in wireless networks, payment systems and digital content protection platforms. In my research I look at the various ways cryptography can be used to promote user privacy. http://blog.cryptographyengineering.com/2013/09/on-nsa.html
Vladimir Putin Addresses American People Through The New York Times (2013-09-11) Vladimir Putin Addresses America In NYT Op-Ed; Calls For Caution In Syria, Denounces "American Exceptionalism" 09/11/2013 Authored by Vladimir Putin, originally posted at The New York Times, highlights ours (ZH) A Plea For Caution From Russia Recent events surrounding Syria have prompted me to speak directly to the American people and their political leaders. It is important to do so at a time of insufficient communication between our societies. Relations between us have passed through different stages. We stood against each other during the cold war. But we were also allies once, and defeated the Nazis together. The universal international organization — the United Nations — was then established to prevent such devastation from ever happening again. The United Nations’ founders understood that decisions affecting war and peace should happen only by consensus, and with America’s consent the veto by Security Council permanent members was enshrined in the United Nations Charter. The profound wisdom of this has underpinned the stability of international relations for decades. No one wants the United Nations to suffer the fate of the League of Nations, which collapsed because it lacked real leverage. This is possible if influential countries bypass the United Nations and take military action without Security Council authorization. The potential strike by the United States against Syria, despite strong opposition from many countries and major political and religious leaders, including the pope, will result in more innocent victims and escalation, potentially spreading the conflict far beyond Syria’s borders. A strike would increase violence and unleash a new wave of terrorism. It could undermine multilateral efforts to resolve the Iranian nuclear problem and the Israeli-Palestinian conflict and further destabilize the Middle East and North Africa. It could throw the entire system of international law and order out of balance. Syria is not witnessing a battle for democracy, but an armed conflict between government and opposition in a multireligious country. There are few champions of democracy in Syria. But there are more than enough Qaeda fighters and extremists of all stripes battling the government. The United States State Department has designated Al Nusra Front and the Islamic State of Iraq and the Levant, fighting with the opposition, as terrorist organizations. This internal conflict, fueled by foreign weapons supplied to the opposition, is one of the bloodiest in the world. Mercenaries from Arab countries fighting there, and hundreds of militants from Western countries and even Russia, are an issue of our deep concern. Might they not return to our countries with experience acquired in Syria? After all, after fighting in Libya, extremists moved on to Mali. This threatens us all. From the outset, Russia has advocated peaceful dialogue enabling Syrians to develop a compromise plan for their own future. We are not protecting the Syrian government, but international law. We need to use the United Nations Security Council and believe that preserving law and order in today’s complex and turbulent world is one of the few ways to keep international relations from sliding into chaos. The law is still the law, and we must follow it whether we like it or not. Under current international law, force is permitted only in self-defense or by the decision of the Security Council. Anything else is unacceptable under the United Nations Charter and would constitute an act of aggression. No one doubts that poison gas was used in Syria. But there is every reason to believe it was used not by the Syrian Army, but by opposition forces, to provoke intervention by their powerful foreign patrons, who would be siding with the fundamentalists. Reports that militants are preparing another attack — this time against Israel — cannot be ignored. It is alarming that military intervention in internal conflicts in foreign countries has become commonplace for the United States. Is it in America’s long-term interest? I doubt it. Millions around the world increasingly see America not as a model of democracy but as relying solely on brute force, cobbling coalitions together under the slogan “you’re either with us or against us.” But force has proved ineffective and pointless. Afghanistan is reeling, and no one can say what will happen after international forces withdraw. Libya is divided into tribes and clans. In Iraq the civil war continues, with dozens killed each day. In the United States, many draw an analogy between Iraq and Syria, and ask why their government would want to repeat recent mistakes. No matter how targeted the strikes or how sophisticated the weapons, civilian casualties are inevitable, including the elderly and children, whom the strikes are meant to protect. The world reacts by asking: if you cannot count on international law, then you must find other ways to ensure your security. Thus a growing number of countries seek to acquire weapons of mass destruction. This is logical: if you have the bomb, no one will touch you. We are left with talk of the need to strengthen nonproliferation, when in reality this is being eroded. We must stop using the language of force and return to the path of civilized diplomatic and political settlement. A new opportunity to avoid military action has emerged in the past few days. The United States, Russia and all members of the international community must take advantage of the Syrian government’s willingness to place its chemical arsenal under international control for subsequent destruction. Judging by the statements of President Obama, the United States sees this as an alternative to military action. I welcome the president’s interest in continuing the dialogue with Russia on Syria. We must work together to keep this hope alive, as we agreed to at the Group of 8 meeting in Lough Erne in Northern Ireland in June, and steer the discussion back toward negotiations. If we can avoid force against Syria, this will improve the atmosphere in international affairs and strengthen mutual trust. It will be our shared success and open the door to cooperation on other critical issues. My working and personal relationship with President Obama is marked by growing trust. I appreciate this. I carefully studied his address to the nation on Tuesday. And I would rather disagree with a case he made on American exceptionalism, stating that the United States’ policy is “what makes America different. It’s what makes us exceptional.” It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation. There are big countries and small countries, rich and poor, those with long democratic traditions and those still finding their way to democracy. Their policies differ, too. We are all different, but when we ask for the Lord’s blessings, we must not forget that God created us equal. ------------------ "These wars are a function of the current Imperium." Currency Wars, Trade Wars then World Wars. "When all else fails, they take you to War." - Gerald Celente "I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones." - Albert Einstein
Laurence Kotlikoff: "The US Fiscal Gap Is $200 Trillion..." Laurence Kotlikoff: "The US Fiscal Gap Is $200 Trillion..." 2013-09-11 While it is easy and often enjoyable to distract oneself with daily drudgery such as who will bomb whom (if not so enjoyable for those on the receiving end of said bombs), the key word in the sentence is just one: "distract" and as Kyle Bass pointed out correctly, the best, and most "economy-boosting" of all distractions ends up with the proverbial red button being pushed. Sadly, with an economy which Boston University's Larry Kotlikoff defines as "arguably in worst fiscal shape than any other developed country", there is much to be distracted by such as wars here and there. So for those who have no desire to prove the axiom that ignorance is bliss, or to have their heads stuck in the sand, here is a must read interview between Goldman Sachs' Hugo Scott-Gall and the iconoclast economist who, in a vast minority, calls it like it is. Here is the full interview: Hugo Scott-Gall: You argue that the official debts that countries report are economically meaningless numbers. Please explain this? Larry Kotlikoff: Every dollar the government takes in or pays out can be labelled in economically arbitrary ways. For example, the government can call our social security contributions “taxes” or “official borrowing.” And it can call our social security benefits “transfer payments” or “return of principal or principal plus interest.” There is nothing in the math of economic theory that pins down the government’s word choice and each labelling convention will produce a different reported time path of debt, deficits, taxes, and spending. At their heart, these measures are linguistic and convey nothing about a country’s underlying fiscal policy – only about what the government decides to put on and keep off the books. Uncle Sam is very powerful, but he has only one set of vocal cords. We are all free to label past, present, and projected future government receipts and outlays any way we want, as long as our labelling convention is internally consistent (e.g., if we label government receipts as borrowing, we need to label other outlays as debt service). Consequently, we can produce any past, current, and projected future measure of the government’s debt and other fiscal quantities. With the right past labelling, we can say the current debt to GDP ratio is miles higher than Rogoff-Reinhart’s critical 90 percent. Or, we can argue that the debt to GDP ratio is hugely negative. The Economics labelling problem tells us that what we measure as the size of standard fiscal variables is language- or frame of reference-dependent. This is fundamentally no different from physics. The measurement of time and distance is not uniquely pinned down by the math. What time you report and how you measure the size of physical objects depends on one’s frame of reference (direction and rate of speed through space) or language, if you will. Here’s another way to see my point. My mother gets checks from the US Treasury all the time. They all look the same except for their amounts. Some are for social security and some are for holding Treasury bonds. But Uncle Sam is discounting the amounts coming on the Treasuries and including that in his official debt measure, while ignoring the amounts coming for social security benefits. Using economically meaningless fiscal indicators to guide fiscal policy is like driving in NY with a map of LA. If you aren’t careful, you’ll drive into the East River. Hugo Scott-Gall: If conventional fiscal measures are, as you say, content free, what should we measure? Larry Kotlikoff: Every dynamic mathematical model of the economy that economists write down (and thousands are being constructed each year) includes what’s called the government’s intertemporal budget constraint. This constraint simply requires that the present value of government outlays, no matter how labelled, equals the present value of government receipts, no matter how labelled. In this over-time government balance sheet, the outlays represent the liabilities and the receipts represent the assets. If the value in the present of the liabilities exceeds the value in the present of the receipts, the government’s balance sheet isn’t balanced, with the difference between the liabilities and assets call the fiscal gap. The fiscal gap doesn’t suffer from an economics labelling problem for a simple reason - it puts everything on the books. The fiscal gap is the true measure of a government’s debt. And once one determines its size, one can assess the impact on our children of paying it off if it’s all dumped into their laps. This is part of a companion analysis, called Generational Accounting, which I initiated in the late 80s together with my co-author, UC Berkeley economist Alan Auerbach and my then student, Jagaadesh Gokhale (now at the Cato Institute). Hugo Scott-Gall: How big is the US fiscal gap and what does US generational accounting show? Larry Kotlikoff: The CBO will release its 2013 long-term fiscal projection, called the Alternative Fiscal Forecast (an alternative to the Extended Budget Forecast produced for Congress) this Fall. But I estimate the US fiscal gap at US$200 tn, 17 times the reported US$12 tn in official debt in the hands of the public. And this incorporates this year’s tax increases and spending sequestration. What would it take to come up with US$200 tn in present value? The answer is tax hikes or spending cuts, or a combination of the two, amounting to 10 percent of GDP, starting immediately and continuing indefinitely. To do so via spending cuts, alone, would require an immediate and permanent 36% cut in all non-interest spending. To do so via tax hikes, alone, would need an immediate and permanent 55% increase in all federal taxes. Hence, a description of the fiscal adjustments made over the last year could be “too little too late.” In terms of generational accounting, were we to leave our kids and future descendants to cover the entire fiscal gap, they’d face tax rates over their lifetimes around twice as high as those we face. Hugo Scott-Gall: How do we get better fiscal book keeping? Larry Kotlikoff: At my encouragement and that of The Can Kicks Back – a non-profit in DC run by twenty-somethings fighting for generational equity, Senators Kaine and Coons – two Democrats – and Senators Thune and Portman – two Republicans – have just co-introduced THE INFORM ACT. The Bill, which I largely drafted in consultation with Alan Auerbach, will require three agencies in the US government (the CBO, the OMB and the GAO) to do fiscal gap analysis as well as generational accounting on an ongoing basis. To date, 12 Nobel Laureates in economics, over 500 of the nation’s other leading economists, George Shultz, the Former Secretary of the Treasury, State and Labor and the OMB Director, and other prominent government officials, and thousands of non-economists have endorsed the bill at www.theinformact.org. I’m hoping everyone in the country will go to the site, endorse the bill, and spread the word. Hugo Scott-Gall: How do you recommend solving this issue? Larry Kotlikoff: Measuring our fiscal gap and disclosing its implications for ourselves and our children is just step one in addressing our fiscal issues. What’s really needed is the adoption of radical, but generationally fair reforms to our tax, social security, and healthcare system. Maintaining the status quo is not an option. When a patient needs heart surgery, radical surgery is often the safe option. America needs radical policy surgery. I lay out postcard length reforms of out tax, social security, healthcare, and banking systems at www.thepurpleplans.org. Many of these plans have been endorsed by the economics’ profession’s top economists. Let me lay out just one of these plans - the Purple Health Plan. The costs of Medicare, Medicaid, the new health exchanges, and employer-paid healthcare (here the costs entail loss of revenue because premiums are exempt from taxes) constitute 60% of the fiscal gap. The Purple Health Plan would eliminate these four systems and start with a clean slate. Under the plan, each US citizen gets a voucher each year, the size of which is determined by his pre-existing medical condition. The voucher is used to purchase, in full, the Basic Health Plan from an insurance provider. The Basic Health Plan’s coverages are established by a panel of doctors subject to the constraint that the costs of all the vouchers never exceeds 10% of GDP. Those who could afford it would be free to buy supplemental policies. No insurer could turn anyone away, but since each voucher is individually rated, insurers would have no incentive to cheery pick. This simple reform, in essence, the healthcare system of Germany, Israel, Holland, Switzerland, and Japan, retains private provision, turns the Basic Health Plan into a commodity with insurance providers competing to attract and retain participants. A very large share – roughly 60% – of America’s fiscal gap can be eliminated via this reform alone. Adopting the other purple plans would eliminate the rest of the fiscal gap without visiting untoward hardship on anyone. Hugo Scott-Gall: Will society be able to hold current demographic fiscal systems together where young people are heavily taxed... Larry Kotlikoff: Our country is broke. It’s not broke in 50 years or 30 years or 10 years. It’s broke today. Six decades of take as you go has led us to a precipice. That’s why almost the entire economics profession is talking as one at www.theinformact.org. Economists from all political persuasions are collectively sending our government a warning about what is, effectively, a nuclear economic bomb. I’ve been around economics for a long time. I’ve never seen such a strong response to a proposed Congressional bill. This is the profession sending a statement to the President and Congress that’s not unlike the warning physicists sent via Einstein to Roosevelt about the bomb. Hugo Scott-Gall: What does all of this mean for overall consumption and savings in the US? Larry Kotlikoff: Our huge off-the-books fiscal problems were created as a result of the take-as-you-go policies of the post war periods that passed on benefits to older people at the expense of younger people. This systematic intergenerational redistribution produced a massive increase in the absolute and relative consumption of the elderly and a massive decline in our net national saving rate, from 15% in 1950 to 1% now. The ratio of the consumption of a 70-year-old compared to a 35-year-old is about 2.5 times larger today than it was back in 1950. And the reason they’re consuming so much more is that they get the entire set of benefits, from healthcare and social security to tax cuts. National saving finances most domestic investment, so as we’re saving next to nothing means we’re also investing next to nothing. Last year’s net domestic investment rate was 5%, only a third of the 1950 level. And less domestic investment means slower real wage growth, as workers have less capital with which to operate. Finally, since we Americans aren’t saving, we can’t invest in our country. So $4 out of every $5 of investment in the US is now by foreigners. In the late 1970s, Alan Auerbach and I pioneered the development of large-scale computable general equilibrium life-cycle models that we could simulate on a computer. In this and subsequent research, we were able to simulate the impact of take-as-you-go fiscal policy. What we see from these increasingly sophisticated computer models matches exactly what you see in the country, less saving, less investment, less growth, and stagnant wages. While generational policy is not the sole driver of post-war secular economic trends, it’s likely the biggest. Hugo Scott-Gall: How do other countries compare to the US when you look at their fiscal gaps? Larry Kotlikoff: The US is arguably in worst fiscal shape than any other developed country. But Greece, the UK, and Japan are close runner ups. As mentioned, our fiscal gap is 10% of the present value of our future GDP. In Germany it’s around 5%, while Canada, Australia and New Zealand are close to zero. Even Italy's long-term fiscal gap is just half of the US’s, yet Italian government bonds sell at a much lower price than US government bonds simply because people don't understand the pension reforms that Italy has rolled out or that Italy has much better control of its healthcare spending. The case of Norway is also very interesting. I conducted generational accounting with a Norwegian economist named Erling Steigum back in the mid-90s, which proved that while Norway was reporting a huge surplus because of how it was labelling its transactions, in reality the country was spending at far too high a rate. To its credit, the government went ahead and continued carrying out this analysis on a regular basis, and as a result, created a generational trust fund, where some of the North Sea oil revenue is set aside for future generations. This has left them in a much better position today. Chile, another resource-dominated economy, has also got a similar trust fund in effect. The Canadians have also been very careful about their long-term liabilities. So, some countries are acting more responsibly. Hugo Scott-Gall: Have you considered the impact of fewer jobs, driven by rising automation, in your analysis? Larry Kotlikoff: Automation and the structural loss of jobs is a very important issue. In fact, Jeff Sachsand I have together written about the implications of smart machines, machines that today can substitute almost perfectly, if not more than perfectly for people, and constitute, effectively, competing robots. We’re not far from the day when machines will drive cars too. While that sounds great, the other side of the coin is that younger people are earning less and saving less, and so, they bring much less wealth into old age than previous generations did. Owing to this vicious cycle, these youngsters, who as a group are not the prime owners of capital, aren't going to reap the benefits from this new technology. The beneficiaries are instead going to be a small number of people who are either the inventors, or older people who have the capital to help get the invented technology in place. So, we’re going to see wealth redistributed further, from young workers to older people, with yet direr implications for national saving, domestic investment and growth. Indeed, technological change can, through these general equilibrium feedback effects, end up making all of society worse off in the long run, unless one is careful to redistribute to the young losers from the old winners. About Laurence Kotlikoff Laurence Jacob Kotlikoff (born January 30, 1951) is a William Warren FairField Professor at Boston University, a Professor of Economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Research Associate of the National Bureau of Economic Research, a Fellow of the Econometric Society, a former Senior Economist, and President Reagan's Council of Economic Advisers. Kotlikoff, on his own and with co-authors, has made major contributions in the fields and subfields of generational economics, fiscal policy, computational economics, economic growth, national saving, intra- and intergenerational inequality, sources of wealth accumulation, intergenerational altruism and intrafamily risk sharing, banking, and personal finance. He has also done important work on Social Security, healthcare, tax, and banking reform. ---------------- # And please note that this mind-boggling amount "owed" to the society and others, the said US$200,000,000,000,000, just belongs to the Federal government. It does not include the debt and promises of the entire 57 states. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ And here's an article from one year ago: Blink! U.S. Debt Just Grew by $11 Trillion - Bloomberg By Laurence Kotlikoff & Scott Burns, Aug 9, 2012 Republicans and Democrats spent last summer battling how best to save $2.1 trillion over the next decade. They are spending this summer battling how best to not save $2.1 trillion over the next decade. In the course of that year, the U.S. government’s fiscal gap -- the true measure of the nation’s indebtedness -- rose by $11 trillion. The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones. Some question whether “official” and “unofficial” spending commitments can be added together. But calling particular obligations “official” doesn’t make them economically more important. Indeed, the government would sooner renege on Chinese holding U.S. Treasuries than on Americans collecting Social Security, especially because the U.S. can print money and service its bonds with watered-down dollars. For its part, economic theory sees through labels and views a country’s official debt for what it is -- a linguistic construct devoid of real economic content. In contrast, the fiscal gap is theoretically well-defined and invariant to the choice of labels. Each labeling choice changes the mix of obligations between official and unofficial, but leaves the total unchanged. Read further here.
Larry Summers: The Sudden Departure as the Top Horse for the Fed #1 Larry Summers: The Sudden Departure as the Top Horse for the Fed #1 Monday, September 16, 2013 By Greg Palast for Vice Magazine On Sunday afternoon (Sep. 15), facing a revolt by his own party's senators, Obama dumped Larry as likely replacement for Ben Bernanke as Chairman of the Federal Reserve Board. Read here the fascinating story behind the scene. Miss not the Secret "End-Game" Memo about the derivative deregulation vis-à-vis WTO negotiation. Cover for TIME Magazine U.S. edition of February 15, 1999 | Vol. 153 No. 6 L-R: Robert Rubin, Alan Greenspan, and Lawrence Summers
