Thursday, January 14, 2010

Europe in Crisis

At the start of the last decade, in March 2000, the European Union heads of state announced the Lisbon Strategy. Its aim, by 2010, was to make Europe “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.” This would create “the conditions for full employment and the strengthening of regional cohesion in the European Union.”

As the second decade of the 21st century begins, the aspirations set forth in the Portuguese capital have evaporated. Instead of full employment, Europe is gripped by mass unemployment; instead of economic growth, there is stagnation; in place of cohesion, there is discord. Even the common currency, the foundation of the lofty plans of Lisbon, is in acute danger.

The Lisbon Strategy was the expression of widespread illusions that Europe, by means of EU enlargement and deeper integration, could catch up with or even overtake the US as a major power. This would happen entirely as a result of a united Europe’s economic power, without the social tensions and political and military conflicts of an earlier period.

These illusions found their clearest expression in a speech by then-German Foreign Minister Joschka Fischer (Green Party) in May 2000 at Berlin’s Humboldt University. Fischer called for the transformation of the European Union from a loose alliance of states into a federation.

Through the “close integration of their vital interests and the transfer of national sovereignty rights to supranational European institutions,” said Fischer, the European states would signal their rejection of the national conflicts that had torn apart the continent prior to 1945. Only in this way would Europe be able to “play its due role in the global economic and political competition.”

Since then, Fischer’s idea that Europe could be harmoniously organized on a capitalist basis has proven to be a pipe dream. In Paris, and especially in London, his proposal was interpreted as an attempt to subjugate Europe to the dictates of Berlin. The EU’s enlargement into Eastern Europe has turned out to be a double-edged sword. It has brought not only the expansion of the internal market, but also political strife and instability.

In 2003, the US attacked Iraq, dividing Europe. While the British and Polish governments fully supported the war, the German and French were opposed. The American administration used the conflict to drive a wedge between “old” and “new” Europe.

The European Constitution, what remained of Fischer’s concept, failed in 2005 at the hands of French and Dutch voters, who interpreted it correctly as an attempt to subordinate the people of Europe to the dictates of the most powerful financial and economic interests. After a diplomatic and political tug of war that lasted several years, the basic framework of the European Constitution came into being in the form of the Lisbon Treaty. But by then, Berlin and Paris had largely lost interest. This was demonstrated in the appointment to the two new key positions—the council president and the European foreign minister—of secondary figures without any authority.

With the coming to power of Nicolas Sarkozy and Angela Merkel, France and Germany had turned again to a more independent foreign policy, with a stronger focus towards the US. In 2005, German Chancellor Gerhard Schröder (Social Democratic Party) had left office prematurely, amongst other things because his foreign policy orientation towards Russia had led to his increasing isolation. But the hope that Washington would respond with increasing concern for European interests has remained unfulfilled, even after the change from President George W. Bush to Barack Obama.

The international financial and economic crisis has now brought all the unresolved contradictions of European domestic and foreign policy to the surface. In the conflict between the US and China, which increasingly dominates the world stage, Europe is being pushed to the edge and torn apart.

The German and French governments are bitter that Washington decided on a massive expansion of the Afghan war without prior consultation with its NATO allies. On the one hand, they do not want to leave the strategically important region to the sole influence of the United States; on the other, they fear that in an ever escalating war they could become mere agents of the USA. The failure of the Copenhagen climate change summit, which Europe lays at the door of the American and Chinese governments, has caused further anger.

The economic crisis has laid bare the inherent weakness of the European economy. The huge budget deficits in Greece, Ireland, Italy, Portugal and Spain threaten to break the euro’s back. So far, the common currency has prevented a massive devaluation and accompanying surge in inflation, but the high value of the euro, coupled with rising interest rates, makes it impossible for the Eurozone countries to overcome the crisis on the basis of the free market. Brussels has responded by calling for draconian cuts in government spending, particularly in the social sector.

Britain, which is not a member of the Eurozone, is becoming the sick man of Europe. Its economy is heavily dependent on the financial sector. In the last ten years, the number of manufacturing jobs in the UK has declined by 30 percent. Over the same period in Germany and France, the decline was far less, 5 and 10 percent respectively. To rescue the financial sector from collapse, the British government has taken on debt on a vast scale. The value of the pound has fallen correspondingly. Another banking crisis would quickly raise the specter of a British default on its sovereign debt.

For Germany, and, to a lesser extent, France, their relative economic strength has proven to be their Achilles’ heel. Industrial production in Germany, as a percentage of gross domestic product, is more than twice the figure for the US. The relative strength of German industrial production is bound up with a massive increase in German exports. Over the past 20 years, Germany’s production for export has risen from about 20 percent to 47 percent of GDP. Even China’s exports account for only 36 percent of its GDP.

This large dependence on industrial exports has made Germany especially vulnerable to the impact of the international economic crisis. Last year, economic output declined by 5.3 percent. Engineering production is currently running at only 70 percent of capacity, and according to experts, the prospects for improvement are slim.

The German export industry is under massive pressure from both the US and China. The United States has exploited the low dollar and its low wage levels, established with brute force as part of the reorganization of the US auto industry, to gain a competitive advantage against its European competitors. Symbolic in this respect was the partial shift of production of the Mercedes S-Class from Germany to the United States. For its part, China is now pushing into market segments that were once the preserve of the Germans, due to their high quality standards.

The European and German elite are reacting to the growing problems and contradictions as they did at the start of the last century: with social and political attacks on the working class and with increasing militarism.

Many governments seem paralysed, given the growing foreign policy problems and internal conflicts. The Christian Democratic-Free Democratic government in Berlin has succumbed to internal squabbles since taking office in November. Chancellor Merkel has been accused on all sides of a lack of determination and weak leadership. But behind the scenes, there is an intensive search for new mechanisms of rule to facilitate the shifting of the consequences of the economic crisis onto the working class, the methods of social compromise having been largely exhausted.

It is in this context that the ongoing assault on democratic rights is being intensified, in part through the fomenting of terrorist scares and the stoking up of resentment against Muslims. Among those at the forefront of these reactionary efforts are the German Social Democrat Thilo Sarrazin and the former Socialist Party politician and current French Immigration Minister Eric Besson. The Swiss referendum against the construction of minarets has been followed attentively and sympathetically by these circles. Such measures represent an attempt to divert attention from class issues and mobilize right-wing layers of the middle class to be thrown at some point against the working class.

Working people must draw their own conclusions from the failure of the bourgeoisie’s European plans. European workers must unite in order to defend their own social and political interests. They must fight for a socialist Europe, under the banner of the United Socialist States of Europe.

Judaized Christianity: Front for New World Order -- Sen. McCarthy

"Your Churches Will Teach the Jew's Religion"


Excerpt from a 1956 speech, "GEORGE WASHINGTON'S SURRENDER" by Senator Joseph McCarthy (1908-1957.)

And many of the people of the land became Jews." Esther 9:17.

"The confession of General Cornwallis (left) to General Washington at Yorktown (Oct. 17, 1781) has been well hidden by historians. History books and text books have taught for years that when Cornwallis surrendered his army to General Washington that American independence came, and we lived happily ever after until the tribulations of the twentieth century."

"Jonathan Williams recorded in his "LEGIONS OF SATAN," 1781, that Cornwallis revealed to Washington that "a holy war will now begin on America, and when it is ended America will be supposedly the citadel of freedom, but her millions will unknowingly be loyal subjects to the Crown."

Cornwallis went on to explain what would seem a contradiction:

"Your churches will be used to teach the Jew's religion and in less than two hundred years the whole nation will be working for divine world government. That government that they believe to be divine will be the British Empire. All religions will be permeated with Judaism without even being noticed by the masses, and they will all be under the invisible all-seeing eye of the Grand Architect of Freemasonry."

And indeed George Washington himself was a Mason, and he gave back through a false religion what he had won with his army.

"Cornwallis well knew that his military defeat was only the beginning of world catastrophe that would be universal and that unrest would continue until mind control could be accomplished through a false religion. What he predicted has come to pass. A brief sketch of American religious history and we have seen Masonry infused into every church in America with their veiled Phallic religion.

"Darby and the Plymouth Brethren brought a Jewish Christianity to America. Masons Rutherford and Russell started Jehovah Witnesses' Judaism which is now worldwide with their message of the divine kingdom. Mason Joseph Smith started Mormon Judaism with its Jewish teaching of millennialism.

[ Millennialism is the belief that there will be a Golden Age or Paradise on Earth in which "Christ will reign" prior to the final judgment and future eternal state (the New Heavens and New Earth). In fact, this will be the rule of the Masonic Jewish (Illuminati) bankers fronted by the Luciferian Anti-Christ. ed.]

"At the turn of the twentieth century there appeared the Scofield Bible with a Jewish interpretation of the prophecies. With wide use of this "helpful" aid, all the American churches have silently become synagogues. We now have Baptist Jews, Methodist Jews, Church of God Jews, apostate Catholic Jews, and many Protestant Jews throughout America. We are aliens in our own country because of false religion. All are praying for divine deliverance into that "Divine Government" which Cornwallis knew to be the British Empire.

"A false religion has been used to deceive us into allegiance to our enemies of Yorktown and Bunker Hill. No! Not a gun has been fired but the invisible and malignant process of conquering America with the Jew's religion has gone on unabated.

"The Union Jack has been planted in our hearts with religious deception. All has happened "legally," "constitutionally," "freely" and completely within our most sacred trust -- our churches. Religious deception is painless inoculation against truth. It cannot be removed from the conscience with surgery, yet it is the motivator of our actions and directly controls our lives.

"Once man gives over to false religion, he is no longer rational because he originates no thought. His life is controlled by whomever controls his religion.

"The veil of false religion is the sword of Damocles and its power to control humanity defies even the imagination of tyrants who use it."

"This is not to say that George Washington was a traitor willingly, or knowingly. He was beguiled into a Satanic religious order that insidiously controls men's minds. So have American statesmen and military leaders down through the years given aid and allegiance to the enemies of the United States because they did not have knowledge of the invisible subterfuge that stalks this land. My eyes were opened the day my colleague from Ohio handed me Wagner's "FREEMASONRY AN INTERPRETATION." If every American would read it, they would no longer ask why and how it has happened.
"

REPOSSESSION FIGURE 'IS BOGUS'

TWICE as many families have lost their home in the recession than official figures suggest, the Tories claim.

Yesterday they challenged Labour assertions that repossessions are falling. The total is being deliberately underestimated, they said, by excluding “sale and rentbacks”.

This is when owners with mortgage arrears are forced to sell their home to a firm which then allows them to continue living in the house as tenants.

Tory housing spokesman Grant Shapps believes that if these forced sales were included then the number of people made homeless would be almost double. He said the official figures “fail to reflect their misery”.

Officially there were 48,000 repossessions in 2009, according to the Council of Mortgage Lenders.

But Mr Shapps said: “Taking sale and rentback properties into account, it is likely that nearer 85,000 families have been compelled to hand their keys back.”

The Office for Fair Trading suggested 50,000 “sale and rentback” schemes took place up to October 2008, with many more last year.

Cartoon

A Foreclosure Process Lasting over Two Years in Pasadena. What is the Estimated Value of Shadow Inventory in Pasadena?

The deterioration of the housing market in California is stunning. If we look at the amount of distress in the state it would be hard to believe that the market is doing well yet some think the next boom is just around the next subdivided lot. Loans that were made at the peak of the bubble are now coming back to haunt the state in 2010. People forget that the bulk of the option ARM loans were made from 2004 to 2007. The problem goes beyond option ARMs, Alt-A, and even subprime loans. Many prime loans are now defaulting because homeowners are dealing with a weak economy. Today we are going to look at a vintage WaMu loan that is now finally heading back to the bank after two years of distress in Pasadena.

Before we examine today’s Real Home of Genius, let us take the market pulse of Pasadena California:

Every zip code in Pasadena has a significant amount of shadow inventory. For example, a zip code like 91103 supposedly only has 2.2 months of inventory if we only look at the MLS but add in the shadow data and that number balloons to over 19 months. That is the difference between a hot market and a market in major distress. Today’s home is in the 91103 zip code.

Today we salute you Pasadena with our Real Home of Genius Award.

This above home is one example of thousands of why the housing down turn will be prolonged. The above home has an interesting history to it. This home is a 4 bedrooms and 2 baths home listed at over 1,500 square feet. The first sign of distress occurred back in March of 2008 when the notice of default was first filed. So what this means, is the first missed payment must have occurred sometime in December of 2007 or January of 2008. In other words, this home has been struggling for 24 to 25 months and who really knows how many payments were coming in (this home has essentially tracked the recession). The mortgage note history shows us a disturbing trend:

US Will Hit 94% Debt to GDP Ratio Next Year, Surpassing the Level Where Debt Starts Reducing Economic Growth

Ambrose-Evans Pritchard notes:

Fitch expects the combined state and federal debt to reach 94pc of GDP next year, up from 57pc at the end of 2007. Federal interest costs will reach 13pc of revenues, meaning that an eighth of all taxes will go to service debt.

The figure of 94% is dramatic given that two top American economists – Carmen Reinhart and Kenneth Rogoff – wrote last month :

The relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies…

Deficits do matter.

Note 1: Reinhart and Rogoff also make it clear that the larger the ratio of external to internal debt, the greater the drag on economic growth. The U.S. had a high level of external debt, although the Fed is now covertly monetizing much of the U.S. debt. So I’m not sure what the ratio of external versus internal debt really is at the moment.

Note 2: Fitch’s 94% figure includes state as well as Federal debt. I am not sure if this changes the above analysis.


If Government Won't Break Up the Giant Banks, Let's Do It Ourselves

As everyone knows, the economy cannot permanently recover and truly stabilize until the giant banks are broken up. The top independent experts agree that the "too big to fails" are a drain on the economy and put the entire system at risk.

The giant banks aren't lending much to the people who need it. Fortune pointed out in February that smaller banks are stepping in to fill the lending void left by the giant banks' current hesitancy to make loans. Indeed, the article points out that the only reason that smaller banks haven't been able to expand and thrive is that the too-big-to-fails have decreased competition.

Federal Reserve Governor Daniel K. Tarullo said in June:

The importance of traditional financial intermediation services, and hence of the smaller banks that typically specialize in providing those services, tends to increase during times of financial stress. Indeed, the crisis has highlighted the important continuing role of community banks...

For example, while the number of credit unions has declined by 42 percent since 1989, credit union deposits have more than quadrupled, and credit unions have increased their share of national deposits from 4.7 percent to 8.5 percent. In addition, some credit unions have shifted from the traditional membership based on a common interest to membership that encompasses anyone who lives or works within one or more local banking markets. In the last few years, some credit unions have also moved beyond their traditional focus on consumer services to provide services to small businesses, increasing the extent to which they compete with community banks.
But the government - instead of breaking up the giant banks who aren't lending to the people who need loans - is trying to prop them up using permanent bailouts. See this, this, this and this.

And - instead of separating different business activities (such as depository banking functions and speculative investments) - the government is actually allowing companies to get involved in a wider variety of business activities.

For example, economist Simon Johnson points out that Goldman Sachs recently converted to a "financial holding company", allowing Goldman to borrow money from the Fed at essentially no cost, and then invest it in any thing it wants. Johnson gives an example: Goldman bought a large share of the stock of a Chinese automaker. If the investment succeeds, Goldman will reap the profits. If it fails, the American taxpayers are on the hook.

And Goldman is apparently profiting from its combination of roles as both an investment brokerage house for other investors and as a large speculative investor itself. Specifically, Goldman apparently delays trades it makes for its clients long enough to use that inside knowledge of who is buying or selling what to make speculative investments for itself, oftentimes taking the exact opposite position for itself and its largest clients as the position it is recommending to its Mom and Pop investor clients.

Why are politicians letting this happen?

Could it be because the giant banks have bought and paid for Congress and the White House? See this, this and this.

We'll Have to Do It Ourselves

If the government isn't doing anything to fix this dangerous situation, we'll have to do it ourselves.

As a start, if Congress won't reimplement the Glass-Steagall Act (the Depression-era law which previously separated depository functions from speculative investing), let's manually separate these two types of businesses.

How?

Simple: let's pull our money out of the too big to fails and put it into small community banks and credit unions.

The giant banks may still make bucketloads of cash on their casino style speculative gambling (for now, at least), but after we've moved our deposits to more responsible, smaller banks which don't gamble as much, then we will have manually separated depository banking functions from the giant banks' speculative investing.

Get it?

The government isn't doing the job and fixing the problems which have led to the economic crisis ... so we'll have to do it ourselves.

Note: Some people say that moving our money out of the too big to fails will just mean that the government will give them more bailouts. But this misses 3 points:

  1. If the deposits are withdrawn, the giant banks will only be speculative gamblers, and at least our deposits will be safe and won't be mixed with their toxic assets

  2. The giant banks and their enablers in Washington will look even worse if they are bailing out companies that are solely and obviously gambling casinos

  3. The head of the International Monetary Fund, Dominique Strauss-Kahn, has warned:
    The public will not bail out the financial services sector for a second time if another global crisis blows up in four or five years time, the managing-director of the International Monetary Fund warned this morning.

    Dominique Strauss-Kahn told the CBI annual conference of business leaders that another huge call on public finances by the financial services sector would not be tolerated by the “man in the street” and could even threaten democracy.

    "Most advanced economies will not accept any more [bailouts]...The political reaction will be very strong, putting some democracies at risk," he told delegates.

In other words, the government - fearing revolt - might be more hesitant to give another round of bailouts than people assume.
I'm not looking at this with rose-colored glasses, and I realize that the TBTFs will act like the kid who killed his parents and then cries for pity since he's an orphan.

But I think that if the government is not doing its job, we should do it ourselves, and that a focused gesture of taking things into our own hands can only help.

December deficit nearly doubles

NEW YORK (CNNMoney.com) -- The U.S. government posted a deficit of $91.9 billion in December, nearly double the shortfall of a year earlier and marking the government's 15th straight month in the red, the Treasury Department reported Wednesday.

The shortfall brings the total deficit for the first quarter of fiscal year 2010 to $388.5 billion, up from $332 billion during the same period last year.

It was the second consecutive December the government spent more than it took in. In December 2008, the deficit was $51.8 billion.

While December's deficit was less than the $120.3 billion in November, that's no reason to celebrate. The government typically rings up a surplus in December as year-end bonuses boost high individual withholding and as companies make quarterly income tax payments.

The deficit remained high in the first three months of the fiscal year because while spending was down by $3.6 billion from the same period last year, tax revenue fell even more, dropping by $59.7 billion as individual income and payroll taxes declined.

Interest paid on the debt in December was $104.6 billion -- 34% of federal outlays for the month.

"No surprises, the government obviously continues to run a very large deficit," said Gus Faucher, director of macro economics at Moody's Economy.com. "But that's necessary as a response to the recession and the financial crisis."

The Treasury estimates the annual deficit will climb to $1.502 trillion for the full fiscal year 2010, up from $1.42 trillion in 2009.

Debt ceiling: For the long term, many economists are less concerned about monthly and annual deficits, focusing instead on the enormous accumulation of national debt and its rapid upward trend.

"We want to have a big deficit now because that's helping to stimulate the economy, said Faucher. "The concern is about the longer run."

That's especially true after Congress raised the debt ceiling again. The new limit for the amount of debt the Treasury is allowed to have, passed in the last days of 2009, was set at $12.394 trillion, up $290 billion from the previous level of $12.104 trillion. Depending on the state of the economy, this should provide the government relief until mid-February.

As of Monday, the country's total public debt was $12.285 trillion, $109 billion below the debt limit. To top of page

S & P Downgrades California

S&P has downgraded State of California debt to A- from A.

This will make raising money for the state significantly more expensive, and is likely to force some funds that can only hold A paper or better to sell California debt.

Here's All the Help You Need to Oversee the State Board of Administration

MIAMI, Jan. 11 /PRNewswire/ -- Noted economist Farid Khavari, a Democratic
candidate for Florida governor, has gained national attention for his plan to
create a state-owned bank in Florida. Today he responded to Chief Financial
Officer Alex Sink's recent call for additional oversight of the State Board of
Administration (SBA). Sink is also a Democratic candidate for governor.

"The simplest way to eliminate dubious investing by the State Board of
Administration is to shine light on every deal. Simply post all documents
relating to every transaction on a website. For each deal, show who is selling
it, how many other deals they have sold the SBA, what fees the seller is
earning, who is buying, who approves it, how many other deals they have done
with this seller, and so on, together with a summary of the amount invested
and the terms.

"Now who would buy a bunch of derivatives from a company in the Cayman Islands
for $650 million, where over half of the money was lost? Who would ignore
pages and pages of warnings and buy junk ever again, when people could see
what is going on? Thousands of ordinary people with common sense would keep an
eye on the SBA for you, all for free," Khavari said.

"I agree that Alex Sink, Bill McCollum and Charlie Crist, as the three
trustees of the SBA, do need plenty of help. On their watch tens of billions
of dollars were lost. The people of Florida will have to pay thousands of
dollars per person in higher taxes if we can't get the SBA back on track."
McCollum is Attorney General and a Republican candidate for governor. Crist is
governor and a Republican candidate for the U.S. Senate.

"In a good year, the SBA's goal was to earn about 7.5%. Last year their goal
was to lose less than 50%. Creating the Bank of the State of Florida could
provide the SBA with a guaranteed 10% per year yield," Khavari said. "This
would save hundreds of millions in investment bankers' fees alone."

Khavari's campaign is based on his economic plan involving the creation of one
million new private sector jobs in Florida - without subsidies, reducing
insurance costs by 30%, and the creation of the Bank of the State of Florida.
Using ordinary fractional reserve rules, the bank would pay 6% for savings and
provide 2% mortgages as well as low-cost financing for state and local
governments and Florida businesses, while earning billions per year for the
state treasury.

Farid A. Khavari, Ph.D. is an economist and author of nine books, including
Environomics. His latest book, Toward a Zero-Cost Economy, is available in
stores or for free download at his website, http://www.khavariforgovernor.com.

Photo of Farid A. Khavari: http://www.ereleases.com/pr/Farid-Khavari.jpg

Contact:

Bob Waterstripe, Spokesman
Khavari for Governor Campaign
P.O. Box 570502, Miami, FL 33257
bob@khavariforgovernor.com
305-318-4984



This release was issued through eReleases(TM). For more information, visit
http://www.ereleases.com.

SOURCE Khavari for Governor Campaign


Bob Waterstripe, Spokesman, Khavari for Governor Campaign, +1-305-318-4984,
bob@khavariforgovernor.com

Obama wants record $708 billion for wars next year

WASHINGTON (AP) - President Barack Obama will ask Congress for an additional $33 billion to fight unpopular wars in Afghanistan and Iraq on top of a record $708 billion for the Defense Department next year, The Associated Press has learned - a request that could be an especially hard sell to some of the administration's Democratic allies.

The extra $33 billion in 2010 would mostly go toward the expansion of the war in Afghanistan. Obama ordered an extra 30,000 troops for that war as part of an overhaul of the war strategy late last year.

Military officials have suggested that the 2011 request would top $700 billion for the first time, but the precise figure has not been made public.

The administration also plans to tell Congress next month that its central military objectives for the next four years will include winning the current wars while preventing new ones and that its core missions will include both counterinsurgency and counterterrorism operations.

The administration's Quadrennial Defense Review, the main articulation of U.S. military doctrine, is due to Congress on Feb. 1. Top military commanders were briefed on the document at the Pentagon on Monday and Tuesday. They also received a preview of the administration's budget plans through 2015.

The four-year review outlines six key mission areas and spells out capabilities and goals the Pentagon wants to develop. The pilotless drones used for surveillance and attack missions in Afghanistan and Pakistan are a priority, with the goals of speeding up the purchase of new Reaper drones and expanding Predator and Reaper drone flights through 2013.

U.S. officials outlined the coming requests on condition of anonymity because the budget request will not be sent to Congress until later this month.

Obama's request for more war spending is likely to receive support on Capitol Hill, where Republicans will join moderate Democrats to pass the bill.

But the budget debate is also likely to expose a widening rift between Obama's administration and Democratic leaders, who have watched public opinion turn against the military campaign.

"The president's going to have to make his case," House Speaker Nancy Pelosi, D-Calif., told reporters last month at her year-end briefing.

The 2010 budget contains about $128 billion for military operations in Iraq and Afghanistan.

That figure would rise to $159 billion next year under the proposals prepared for Congress.

The Pentagon projects that war funding would drop sharply in 2012, to $50 billion, and remain there through 2015. That is a calculation that the United States will save money from the withdrawal of forces in Iraq, as well as a prediction that the Afghanistan war will begin to wind down in the middle of 2011.

Obama has promised that U.S. forces will begin to withdraw from Afghanistan in July 2011, but his defense advisers have set no time limit for the war.

The Pentagon projects that overall defense spending would be $616 billion in 2012; $632 billion in 2013; $648 billion in 2014; and $666 billion in 2015. Congress sets little store by such predictions, which typically have fallen short of actual requests and spending.

Defense Secretary Robert Gates and Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, are expected to testify to Congress about the budget and the policy review in February.

The four-year policy statement is a more important statement of administration goals. For the current wars, the policy statement focuses on efforts to refocus money and talent on beefing up special operations forces, countering weapons of mass destruction and terrorism threats, and maintaining cyber security.

For example, the Pentagon would like to expand special operations aviation by expanding the gunship fleet from 25 to 33.


Global Warming Causes More Energetic Earthquakes?

At first, when I got an email message pointing out this topic of global warming driving more earthquake energy, I thought it was satire. Then I saw it was on CBS News, so I knew it couldn’t be satire, but something else altogether. I’ll leave deciding what that is up to you the reader.

Study: Seismic Activity 5 Times More Energetic Than 20 Years Ago Because Of Global Warming

June 18th full story is here

New research compiled by Australian scientist Dr. Tom Chalko shows that global seismic activity on Earth is now five times more energetic than it was just 20 years ago.

Excerpt:

“The most serious environmental danger we face on Earth may not be climate change, but rapidly and systematically increasing seismic, tectonic and volcanic activity,” said Dr. Chalko.

“Increase in the annual energy of earthquakes is the strongest symptom yet of planetary overheating. “

In related news:

Energy release from earthquakes may be up since 1990, but it is still below levels early in the 1900s; see the graph from this page:

http://www.johnstonsarchive.net/other/quake1.html

Source data: USGS


Click for a larger image

Estimated total annual earthquake energy release (magnitude 8 earthquake = 1 = 1,000 magnitude 6 earthquakes) in red; 7-year average in grey.


Click for a larger image

Annual earthquake death rate per million population in red; smoothed rates in grey (specifically, linear smoothing with 7-year Hann window). Note logarithmic scale.

UPDATE: I resisted my primal urges of expression on this subject, figuring others with such skills would take care of that for me. Strangely, I now find myself in my first ever agreement with BigCityLib, on this issue.

UPDATE2: Junkscience.com reports that Hansen’s modeling may be the impetus for this idea:

We’ve probably had enough fun at Chalko’s expense but should point out his ‘research’ is based on totally flawed model output from none other than Hansen himself. Remember the infamous “smoking gun” release? In Earth’s Energy Imbalance: Confirmation and Implications Hansen, et al, state: “Our climate model, driven mainly by increasing human-made greenhouse gases and aerosols, among other forcings, calculates that Earth is now absorbing 0.85 ± 0.15 watts per square meter more energy from the Sun than it is emitting to space. This imbalance is confirmed by precise measurements of increasing ocean heat content over the past 10 years.” This is the source of Chalko’s “NASA measurements from space confirm that Earth as a whole absorbs at least 0.85 Megawatt per square kilometer more energy from the Sun than it is able to radiate back to space. This ‘thermal imbalance’ means that heat generated in the planetary interior cannot escape and that the planetary interior must overheat. Increase in seismic, tectonic and volcanic activities is an unavoidable consequence of the observed thermal imbalance of the planet” Unfortunately for Tom, they aren’t “NASA measurements from space” but Hansen’s crappy model output and it’s quite wrong.

When the “Energy Imbalance” paper was written the model output was a fair wiggle-fit with Willis (2004) and Levitus (2004). Like all happy accidents, however, this good thing came to an end, too. We’ll let Professor Roger Pielke, Sr., do the honors:

The Correction To The Lyman Et Al 2006 Paper Is Available – The correction to the Lyman et al paper “Recent cooling of the upper ocean” is available. It is “Correction to ‘Recent Cooling of the Upper Ocean’” by Josh K. Willis, John M. Lyman, Gregory C. Johnson and John Gilson. While this correction eliminates the cooling that they reported in the 2006 paper, the warming of the 1990s and very early 2000s has not continued. This absence of global ocean warming (which is consistent with the absence of a significant global average sea surface temperature anomaly trend for the last few years) is a challenge to the modelers and to the conclusions of the IPCC with respect to the ability to skillfully predict global warming. Indeed, it appears that with respect to the challenge on Climate Science of A Litmus Test For Global Warming – A Much Overdue Requirement, the models have failed so far. (Climate Science)

UPDATE UPDATE!

Ron Paul - Discussing Austrian vs. Keynesian Economics

Click this link ...... http://eclipptv.com/viewVideo.php?video_id=9447

The cover-ups continue

Obama's pick to investigate Northwest bomb attempt assures failure won't be punished

The Obama administration announced Friday the appointment of John E. McLaughlin, former deputy CIA director, to head the internal investigation of the intelligence failures that led to the Christmas Day attempted bombing of a Northwest Airlines flight headed for Detroit. With this appointment, President Obama has assured that the culture of intelligence cover-up will continue. Mr. McLaughlin has participated in the cover-up of many of the CIA's most egregious failures and misdeeds during the last decade. When he left the CIA, he served as the agency's chief apologist.

Most of official Washington views Mr. McLaughlin as the mild-mannered, professorial CIA bureaucrat whom former CIA director George Tenet called the "smartest man he had ever met." Few people understand, however, that Mr. McLaughlin played the central role in providing the Bush administration with false intelligence to justify the use of force against Iraq in 2003. Washington insiders remember that it was CIA director Tenet who told President George W. Bush, "Don't worry, it's a slam dunk," in response to the demand for stronger intelligence on Iraq's weapons of mass destruction. Few people remember that it was Mr. McLaughlin who actually delivered the "slam-dunk" briefing to the president in January 2003.

Mr. McLaughlin was behind much of the politicized intelligence before the war. He perverted the intelligence process, ignored high-level briefings on the weakness of the WMD evidence and tried to silence David Kay, the chief of the Iraq Survey Group, when the weapons inspectors found no sign of WMD in Iraq.

Mr. McLaughlin was also behind the CIA's preparation of Secretary of State Colin Powell's speech to the U.N. in February 2003 that used phony intelligence to convince an international audience of the need for war. According to Larry Wilkerson, Mr. Powell's chief of staff, Mr. Tenet and Mr. McLaughlin lied to the secretary of state about the sourcing of serious allegations dealing with Saddam Hussein and WMD. The most serious allegation came from an Iraqi con man known as "Curveball," who maintained that Iraq had mobile biological laboratories, a key charge in the justification for war. German intelligence officials who debriefed Curveball warned the CIA that he was unstable and there was no validation for his claims. Tyler Drumheller, the chief of the CIA's European Division, knew that Curveball was a liar, and he urged Mr. McLaughlin to drop all references to the mobile labs from Mr. Powell's speech. Mr. McLaughlin ignored him too.

Five weeks after the invasion of Iraq, Mr. Powell and Mr. McLaughlin shared a table at the White House Correspondents' Dinner, where Mr. McLaughlin, an amateur magician, performed a few magic tricks with coins and bills. Everyone at the table laughed except for Mr. Powell. According to Bob Drogin of the Los Angeles Times, who wrote an authoritative book on Curveball, Mr. Powell requested another trick: "Let's see you find the WMD in Iraq." Mr. McLaughlin looked surprised, and his broad grin faded. "We will," he replied. "They're there, and we'll find them."

In addition to being one of the ideological drivers for the CIA's policies of torture and abuse, secret prisons and extraordinary renditions, Mr. McLaughlin demonstrated early in his career that he was willing to do what was necessary to advance his career. In the 1980s, when CIA director William Casey and his deputy Robert Gates were "cooking the books" on intelligence dealing with the Soviet Union, Mr. McLaughlin offered no dissent. When the CIA did an internal investigation of one of the worst examples of politicization of intelligence, the case for Soviet complicity in the attempt on the life of Pope John Paul II in 1981, Mr. McLaughlin made sure there were no references to politicization in the final report and made every effort to hide Mr. Gates' role in preparing the intelligence assessment. (When Mr. Gates' nomination as CIA director was in trouble during the confirmation process in 1991, it was Mr. McLaughlin who stepped forward to defend his former boss from charges of politicization.)

President Obama has made many mistakes in his handling of the CIA that could be attributed to his inexperience and his reliance on intelligence officials who are themselves part of the culture of cover-up. He has named weak figures to be director of national intelligence and CIA director and has named no one to replace the CIA's inspector general, who announced his retirement nearly 11 months ago. His administration has threatened the British government with the cut-off of sensitive intelligence if a British court revealed details of CIA renditions in Europe and has resorted to a state security defense to prevent revelations of renditions policies in U.S. courts as well.

Mr. Obama has also been unwilling to release photographs that document torture and abuse by intelligence officers, and he has permitted the day-to-day operations of the CIA to remain in the hands of those operational officers, Steve Kappes and Mike Sulick, responsible for the program of renditions, detentions and interrogations.

The president's early mistakes demonstrated that he simply didn't get it; the appointment of Mr. McLaughlin indicates that the president doesn't want to get it.

Melvin A. Goodman of Bethesda was a CIA analyst from 1966-1990. His e-mail is goody789@comcast.net.

How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps

Goldman SachsInvestment banking giant Goldman Sachs has become perhaps the most prominent symbol for everything that is wrong with the U.S. financial system, but most Americans cannot even begin to explain what they do or how they have made tens of billions of dollars from the economic collapse of America. The truth is that what Goldman Sachs did was fairly simple, and there may not have even been anything "illegal" about it (although they are now being investigated by the SEC among others).

The following is how Goldman Sachs made tens of billions of dollars from the economic collapse of America in four easy steps....

Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.

Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses.

Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they can get paid after they win their bets.

Step 4: Collect the profits - Goldman Sachs is having their "most successful year" and will end up reporting approximately $50 billion in revenue for 2009.

So is it right for the biggest fish on Wall Street to make tens of billions of dollars by betting that the U.S. housing market will collapse?

You see, when you are talking about a financial giant the size of Goldman Sachs, the line between "betting that something will happen" and "making something happen" gets blurred very quickly.

Not that Goldman Sachs was the only one betting against the housing market.

According to the New York Times, firms like Deutsche Bank and Morgan Stanley also created mortgage-related securities and then bet that they would fail.....

Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc.

But certainly Goldman Sachs was the most prominent financial player involved in this type of activity.

In fact, without mentioning specifics, Goldman has even admitted publicly to wrongdoing. On November 17th, 2008 Goldman Sachs CEO Lloyd Blankfein even issued a public apology....

"We participated in things that were clearly wrong and have reason to regret."

But complicated financial transactions are something that most Americans simply do not understand, so the public outrage towards Goldman Sachs and others has been somewhat limited. But that does not change the very serious nature of the activities that Goldman was involved in....

"The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen," Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, recently told The New York Times. "When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson."

But the sad thing is that many Americans do not even understand what Goldman Sachs is. Goldman Sachs was founded in 1869 and has forged a reputation as one of the elite financial institutions in the entire world. They only hire "the best and the brightest" and Ivy League graduates flock to the firm. Of the five major investment banks that dominated Wall Street before the crash, only Goldman Sachs and Morgan Stanley have survived. Merrill Lynch and Bear Stearns were severely damaged by the crash and ended up being purchased by retail banks and Lehman Brothers ended up folding.

There are persistent rumors that Goldman played a major role in the collapse of Bear Stearns and that ex-Goldman CEO Hank Paulson could have done much more to bail out Lehman Brothers, but perhaps nobody will ever know the full truth. All we do know is that at the end of the crash several of Goldman's competitors were destroyed and Goldman found itself in a more dominant position than ever.

The truth is that Goldman is a financial shark and they do not apologize for it.

An article in Rolling Stone recently put it this way....

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

So how did Goldman Sachs prosper so greatly in an environment that destroyed their competitors?

The following is an extended breakdown of just how Goldman Sachs was able to reap tens of billions of dollars in profits from the collapse of the U.S. housing market....

Step 1: Sell mortgage-related securities that are absolute junk to trusting clients at vastly overinflated prices.

In late 2006, Goldman Sachs made some fundamental changes in the way that they were approaching the U.S. housing market. According to a McClatchy report, Goldman spokesman Michael DuVally said that the firm decided at that time to reduce its mortgage risks by selling off subprime mortgage-related securities and by purchasing credit-default swaps to hedge against a serious downturn in the U.S. housing market.

The key moment came in December 2006. After "10 straight days of losses" in Goldman's mortgage business, Chief Financial Officer David Viniar called a meeting of key Goldman personnel.

Vanity Fair described the results of that meeting this way....

After a now famous meeting in David Viniar’s office on December 14, 2006, Goldman’s traders began to protect the firm against further declines in the market. Just as you can short the S&P 500, the traders took short positions in an index that tracked the price of mortgage-backed securities. They also either sold assets they owned to others at losses or dramatically marked down the price on their own books. In the aftermath of the crisis, criticism erupted that Goldman had continued to sell mortgage-backed securities to its clients while betting against those very securities for its own account. Clearly, in the simplest terms possible, this is true: while Goldman was never the biggest underwriter of C.D.O.’s (collateralized debt obligations—Wall Street’s vehicle of choice for mortgage-backed securities), the firm did remain in the top five until the summer of 2007, when the market crashed to a halt.

So Goldman Sachs proceeded to sell approxmiately $39 billion of its own mortgage securities in 2006 and 2007 and they sold at least $17 billion more mortgage securities for others, but they never told the buyers of those securities that Goldman was secretly betting that a significant drop in U.S. housing prices would send the value of those mortgage securities plummeting.

These sales and the massive clandestine wagers placed by Goldman enabled the firm to pass most of its potential losses on to others prior to the collapse of the U.S. housing market.

But many of the investors who got the short end of the stick were not pleased. When they discovered that what Goldman had promoted as triple-A rated investments were actually a bunch of garbage, many of them were absolutely furious.

"The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Boston University economics professor Laurence Kotlikoff. "This is fraud and should be prosecuted."

One of the victims of this fraud was the state of Mississippi....

Mississippi Attorney General Jim Hood, whose state has lost $5 million of the $6 million it invested in Goldman's subprime mortgage-backed bonds in 2006, said the state's funds are likely to lose "hundreds of millions of dollars" on those and similar bonds.

Another one of the victims of this fraud was California's retirement system for public employees....

California's huge public employees' retirement system, known as CALPERS, purchased $64.4 million in subprime mortgage-backed bonds from Goldman on March 1, 2007. While that represented a tiny percentage of the fund's holdings, in July CALPERS listed the bonds' value at $16.6 million, a drop of nearly 75 percent, according to documents obtained through a state public records request.

So who is left holding the bag in cases such as these?

The taxpayers.

And that is just fine with Goldman Sachs. Just as long as they keep raking in huge profits.

Vanity Fair was even more blunt regarding this injustice....

"Goldman’s management team was almost flawless in its execution. But how many people needed government help because of the things Goldman sold them?"

The truth is that a lot of people needed help because of the things Goldman sold them, but up until now Goldman has completely gotten away with it.

Step 2: Bet against those same mortgage-related securities and make massive bets against the U.S. housing market so that your firm will make massive profits when the U.S. economy collapses.

Not only did Goldman sell mortgage-related securities that were absolute junk to investors at vastly overinflated prices, they also placed massive bets that the U.S. housing market would absolutely collapse.

The New York Times recently described how Goldman used a new index known as the ABX to make many of these bets....

A handful of investors and Wall Street traders, however, anticipated the crisis. In 2006, Wall Street had introduced a new index, called the ABX, that became a way to invest in the direction of mortgage securities. The index allowed traders to bet on or against pools of mortgages with different risk characteristics, just as stock indexes enable traders to bet on whether the overall stock market, or technology stocks or bank stocks, will go up or down.

Goldman, among others on Wall Street, has said since the collapse that it made big money by using the ABX to bet against the housing market. Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.

These bets would only make money for Goldman Sachs if the U.S. housing market declined.

So if the biggest giant on Wall Street has a huge financial incentive to see the U.S. housing market fail, what do you think the odds are that they are going to do anything to support it?

Step 3: Have ex-Goldman executives in key positions of power in the U.S. government so that bailout money can be funneled to entities such as AIG that Goldman has made these bets with so that they could get paid.

For years, Goldman Sachs has encouraged executives to serve in U.S. government positions. Now they are world famous for the amount of influence their former employees have over government policy.

For example, according to the New York Times, Treasury Secretary Hank Paulson (also a former Goldman CEO) spoke with the current CEO of Goldman Sachs about two dozen times during the week of the bailout, although Paulson says that he obtained an "ethics waiver" before doing so.

So does an "ethics waiver" make everything okay?

But the sad thing is that is not an isolated example.

It turns out that Goldman benefited greatly from a number of decisions made by their former CEO while he was Treasury Secretary....

*Goldman greatly benefited when Paulson elected not to save rival Lehman Brothers from collapse. Paulson certainly stepped in to help Fannie Mae, Freddie Mac and AIG, but apparently had no problem with letting Lehman Brothers fall apart.

*Under Paulson's direction, Goldman ended up receiving bailout money (which they may or may not have needed) from the U.S. government and has since paid back much of that money with interest. So why didn't Bear Stearns or Lehman Brothers get the bailout funds that they needed?

*Goldman greatly benefitted when Paulson organized a massive rescue of American International Group while in constant telephone contact with Goldman CEO Blankfein. AIG ultimately ended up using $12.9 billion taxpayer dollars to pay off every single penny that it owed to Goldman.

But it is not just Paulson who has had significant influence in Washington.

On October 16th, Adam Storch, a Goldman Sachs vice president, was named managing executive of the SEC's enforcement division. What do you think the odds are that he will crack down hard on Goldman?

In addition, former Goldman Sachs lobbyist Mark Patterson is the chief of staff for current Treasury Secretary Timothy Geithner.

In fact, ex-Goldman employees are seemingly everywhere. According to Vanity Fair, at one G-7 meeting an anonymous source identified at least 24 out of 32 finance officials in attendance as ex-Goldman employees.

The influence of Goldman Sachs even reaches to the White House. Goldman was Barack Obama's number one campaign donor, and its employees gave $981,000 to his campaign.

If you don't think that kind of money does not buy influence then you are delusional.

Goldman used some of that powerful influence to get the U.S. government to bail out AIG so that AIG could pay off the bets that Goldman had made with them. In a recent article, Vanity Fair described part of what went down....

After the government bailout of A.I.G., in order to end the collateral calls on the insurance giant, the New York Federal Reserve—whose chairman at the time was former Goldman chairman Steve Friedman—decided to purchase a slew of the securities that A.I.G. had insured, including $14 billion of those on which Goldman had purchased insurance. The government—meaning taxpayers—did so at full price, although according to a recent Bloomberg story, there had been negotiations with A.I.G. to do so at a 40 percent discount. Goldman says that the New York Fed broached the topic of a discount only once. The firm’s response: a flat no. While no one will ever know what would have happened had A.I.G. gone under, the essence of what did happen is perfectly clear. As a recent report by the Office of the Special Inspector General for tarpput it, the decision to pay full price “effectively transferred tens of billions of dollars of cash from the Government to A.I.G.’s counterparties.” Or to put it another way: because Goldman felt it was owed its billions by A.I.G., the firm took it from taxpayers instead.

So what about all of the thousands of small businesses that are failing and what about the millions of Americans that are losing their jobs and homes?

Do they get bailouts?

Of course not.

But the U.S. government definitely made sure that AIG and Goldman were taken care of.

Step 4: Collect the profits - Goldman Sachs is having their "most successful year" and will end up reporting approximately $50 billion in revenue for 2009.

Goldman Sachs ranks #1 in annual net income when compared with 86 peers in the investment services sector. They are on course for their best year ever.

Yes, they are having a really good "crisis".

Goldman Sachs is on course to surpass $50 billion in revenue in 2009 and to pay its employees more than $20 billion in year-end bonuses.

20 billion just in bonuses?

That would mean that the average bonus for all Goldman employees would be over $700,000.

No wonder everyone wants to work for them.

It's good to be on the winning side.

So just how are they making so much money?

In their recent article, Vanity Fair described it this way....

But because so many of Goldman’s competitors were gone or disabled, spreads—the difference between the price at which you sell and buy a variety of securities—were wider than they had been in years, meaning that Goldman could practically mint money. By acting at the moment it did, with Lehman out and Merrill Lynch down for the count, the government enabled this situation.

The other reason for Goldman’s profits is that the government has flooded the system with money, not just the money it used to rescue the financial system but hundreds of billions more in stimulus, in support of the housing market, and in the Federal Reserve’s purchases of securities.

But all of this success has not come without controversy. In fact, Goldman executives are very much aware of the growing backlash against the firm.

Senior officials at Goldman Sachs have reportedly loaded up on firearms and are now equipped to defend themselves if there is a "populist uprising" against the bank.

In addition, Goldman Sachs employees are now not allowed to gather in groups of 12 or more outside the office. The firm very much discouraged "holiday parties" as they most definitely did not want to be seen as celebrating the downfall of the U.S. economy.

But the truth is that Goldman Sachs won because so many others lost.

In his very revealing article on Goldman Sachs in Rolling Stone, Matt Taibbi described how Goldman keeps making money from the bursting of these economic bubbles....

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.

The truth is that in this latest economic collapse there were millions of losers and just a few winners.

Goldman Sachs was one of those winners.

So will they lose next time?

Not likely.

In their recent article, Vanity Fair quoted an anonymous source in the financial industry as saying the following....

"Are they the Yankees? No, the Yankees actually lose! Goldman never loses."

How Average Americans don’t Partake in the Current Casino Stock Market Rally. Most of Net Worth is Stored in Housing but not for the top 10 Percent.

For the most recent job opening data, according to the JOLT survey by the BLS, there were 2.4 million job openings in November of 2009. Now this might seem like a large number but it is not. Consider the fact that we have 15.3 million Americans that are still officially labeled as unemployed. And this is probably one of the main issues in this recession now. Even though massive layoffs have seemed to stop, it would appear that even less people are hiring today than back in March when the economy was falling into the economic abyss. What we can garner right now is the banking sector with record profits is now able to milk American workers even more since one of the biggest line items is labor and many companies are chopping this high cost item down.

This is rather obvious when we look at the actual job opening rate from the start of the recession:

job openings

The pattern is unmistakable. Fewer and fewer jobs are to be had while more and more Americans are looking for work. This is happening right in line with the bursting housing bubble where many Americans stored the bulk of their wealth. Yet Wall Street somehow thinks that a rising stock market is enough to resolve the issues on Main Street. Of course Americans are seeing a very different economy than say the investment banks residing on Wall Street. Even if we chart the incredible S&P 500 rally since March with monthly job cuts, the data is stunning:

job cuts and snp500

While the stock market is now up close to 70 percent we have seen an additional 2.7 million job cuts since that time (or basically the entire pool of job openings). Is it any wonder why so many Americans are completely outraged at Wall Street and the banking system that is largely responsible for this current mess? Even during this bubble decade where stock markets peaked the typical American household saw less of their net worth aggregated in stocks:

net worth

At the same time, more and more Americans started relying on the housing bubble and counting home equity as the largest portion of their net worth. But with the housing market imploding, the largest line item of wealth has taken a major hit for most Americans. And just do the math, a 70 percent increase on a home valued at $200,000 is much bigger than say a 70 percent increase in a stock portfolio of $20,000. And that is the crux of the problem. The housing market has completely collapsed shattering the number one asset of Americans while banks continue to increase their stock wealth at the expense of typical Americans. Take a look at where Americans hold their wealth:

non-financial asset value

Non-financial assets makeup 66 percent of the asset column of American families (with real estate making up nearly 60 percent of this amount). The banking syndicate is satisfied right now because they are back to gambling in the stock market while the real economy continues to fall deeper into disrepair. And this makes absolute sense. Investment banks only exists to garner profits even if it hurts the economy. There is nothing wrong with earning a profit on your dime but right now, the American public is subsidizing billions in bonuses for what? Because employment is still imploding? What has the too big to fail banking system done for the average American? And here’s the big kicker, lower to middle income people, the vast majority of the population have the significant portion of their wealth in real estate (no 70 percent rally there). In fact, the percentile numbers are startling:

home as percent of asset group

“For over 90 percent of the population home value makes up over 40 percent of all total asset worth.”

Yet once you reach the higher chamber of the economy, stocks suddenly become the vehicle of choice. So you can see why Americans aren’t buying this “stock market” recovery because many aren’t even participating in it. Actually they are through bailouts but they are getting nothing in return. The system is inherently flawed and more and more people are waking up to this reality.

If you really parse the data, sure it was a lost decade for over 80 percent of the population but someone made out this decade:

decade of wealth

People don’t like bringing up class in the U.S. because they believe in this pull yourself up from your bootstraps myth. But banks don’t need to pull themselves up because they have the American taxpayer to yank them out of any bad bet and recover them fully. Their shoelaces are tied like an albatross around the middle class American. Those that work and earn money from an actual paycheck saw little gain this decade. There is a class system in this country and it boils down to the banks and the rest of the public. Time to change the system. Break these banks up and reform Wall Street. You would think the biggest economic crisis since the Great Depression would light a fire under our politicians but instead they are rewarding the culprits with a larger casino to play in.

Goldman admits 'improper' actions in sales of securities


Goldman Sachs' secret bets.

WASHINGTON — Goldman Sachs' chief acknowledged Wednesday that the investment bank engaged in "improper" behavior in 2006 and 2007 when it made huge bets on a housing downturn while peddling as safe more than $40 billion in securities backed by risky U.S. home loans.

Lloyd Blankfein, Goldman's chairman and chief executive, made the surprising concession at the opening hearing of the Financial Crisis Inquiry Commission, a 10-member panel that Congress created to investigate and lay out for the public the causes of the worst financial crisis since the Great Depression.

Blankfein and senior officers of three other of the nation's most prominent banks told the panel that serious flaws in their risk models and business practices contributed to Wall Street's meltdown and the massive taxpayer bailouts that followed. The commission also heard testimony that the banks and quasi-government mortgage giant Fannie Mae recklessly took on as much as 95 times more risk than they could cover, and that Wall Street excels "at pulling the wool over the eyes of the American people."

Blankfein faced the toughest questioning.

Commission Chairman Phil Angelides, a former California state treasurer, warned Blankfein that he'd be "brutally honest" in his questioning. He asked why Goldman thought it was necessary to take out protection against investment-grade mortgage securities it was selling by purchasing insurance-like contracts known as credit-default swaps. Angelides likened it to selling a car with knowledge it had faulty brakes and then taking out an insurance policy on the buyer.

"I do think the behavior is improper, and we regret . . . the consequence that people have lost money in it," Blankfein told Angelides.

Until Wednesday, Goldman had insisted that it was merely managing its risks when it placed "hedges," in the form of wagers against the housing market, various venues including in secret offshore deals, with insurance giant American International Group and on a private London exchange.

In November, McClatchy reported exclusively that Goldman failed to tell investors about its contrary bets while selling $39 billion in risky mortgage securities it had issued, and another $18 billion in similar bonds issued by other firms. The Securities and Exchange Commission and Congress are investigating Goldman's swap dealings, said knowledgeable people who asked not to be identified because of the sensitivity of the issue.

While conceding that its contrary bets were improper, Blankfein said that in most cases Goldman took those positions to offset bets it had underwritten for clients seeking to wager on a housing downturn.

Similarly, he said that the firm got into the business of securitizing subprime loans to marginally qualified buyers on behalf of "sophisticated investors who sought that exposure."

Angelides, who crusaded for corporate accountability as California treasurer from 1999-2007, pressed Blankfein to explain why Goldman plunged deeper into subprime mortgages despite an FBI warning to Congress in 2004 that the lax lending standards could lead to a crisis. He also needled Blankfein for seeming to resist taking responsibility.

Goldman's purchase of the dicey loans, Blankfein admitted, allowed subprime mortgage lenders "to go out and originate more loans. So to that extent, we . . . played a part in making that market."

After the hearing, Angelides told McClatchy that he was "troubled" that Blankfein "never admitted that there was any responsibility of Goldman Sachs to make sure the products themselves were good products."

All the executives, including J.P. Morgan Chase Chief Executive Jamie Dimon, Morgan Stanley Chairman John Mack and Bank of America President and Chief Executive Brian Moynihan, acknowledged that they'd paid a huge price for failing to build the possibility of declines in home prices into their risk-management models.

That failure had disastrous consequences, since the banks packaged mortgages into investments that were sold worldwide as securities, often with top ratings from credit-rating agencies such as Moody's Investors Service. When home prices fell, these securities plummeted in value, the credit agencies' credibility plunged and distrust over banks' ability to cover tens of billions of dollars in swap bets created waves of panic that froze financial markets.

The lesson learned is that "given enough time, everything will happen, not can happen," Blankfein said. He noted that in the aftermath of the housing meltdown his firm models for even the most improbable scenarios in all its lines of business.

Dimon, whose company has been the least tarnished by the crisis, said that in retrospect it should have been obvious that mortgages given to people with little or no proof of income was a terrible idea.

However, he cautioned, until the market meltdown "you never saw losses in these products, because home prices were going up."

The sector's failure, he added, was the assumption that prices can only go up.

"I would say that was one of the big misses," Dimon said. "That is now part of the stress test" that J.P. Morgan conducts.

Moynihan, who's new in his job, said that post-crisis, his company tests for a range of improbable but possible scenarios in all areas where it extends credit.

Another criticism of the big banks that packaged mortgages into securities is that they didn't retain portions of what they were selling. They weren't exposed themselves to the risk that they were exposing others to. In plain speaking, they weren't eating their own cooking.

"We did eat our own cooking, and we choked on it," Mack said, referring to his firm's mistake in hanging on to too many of the securities.

Michael Mayo, a managing director and financial services analyst for the U.S. branch of French bank Calyon Securities, rattled off 10 causes of the financial crisis, including excessive investment in real estate, the surge in exotic bets such as credit-default swaps, and the fact that U.S. investment banks allowed leverage — the ratio to which their risks outstripped capital — to approach 40-to-1.

"I'm shocked and amazed more changes have not taken place," Mayo said. "There seems an unwritten premise that Wall Street, exactly how it exists today, is necessary for the economy to work. That's not true. ... Wall Street has done an incredible job at pulling the wool over the eyes of the American people."

Kyle Bass, whose Dallas-based hedge fund cashed in by betting on a housing downturn beginning in 2006, told the panel that AIG and other insurers could never have taken on such risk if they had been required to put up initial cash, or collateral, whenever they wrote protection via a swap contract.

He said that at one point in 2007, Fannie Mae had taken on risk exceeding 95 times the minimum capital it was required to hold, meaning its had set aside less than two tenths of a percent of its potential losses before it was placed in conservatorship in September 2008.

One commission member, Brooksley Born, enjoyed an element of sweet revenge Wednesday.

As the chair of the Commodity Futures Trading Commission in the Clinton administration, Born tried to persuade Congress to let her agency regulate exotic financial instruments such as swaps, but her views were overridden then Federal Reserve Chairman Alan Greenspan and then-Treasury Secretary Lawrence Summers, now a top Obama adviser.

On Wednesday, Born got a former executive of now-defunct investment bank Lehman Brothers to acknowledge that the "excessive" political lobbying power of large financial firms resulted in legislative changes that contributed to the crisis.

Surrounded by reporters during a recess, J.P. Morgan's Dimon maintained that "the people who should be blamed are the people in the management of the companies that failed."

Reacting to that assertion, Angelides told McClatchy that "there are some companies that survived because they got massive federal assistance," including Goldman and other banks whose officers testified Wednesday.

Google to end censorship in China over cyber attacks

Decision from world's leading search engine comes amid a clampdown on the internet in China over the last year

China - Internet - Google
A Chinese Internet user browses for information on the popular search engine Google. Photograph: Reuters/Corbis


Google, the world's leading search engine, has thrown down the gauntlet to China by saying it is no longer willing to censor search results on its Chinese service.

The internet giant said the decision followed a cyber attack it believes was aimed at gathering information on Chinese human rights activists.

The move follows a clampdown on the internet in China over the last year, which has seen sites and social networking services hosted overseas blocked – including Twitter, Facebook and YouTube – and the closure of many sites at home. Chinese authorities ­criticised Google for supplying "vulgar" content in results.

Google acknowledged that the decision "may well mean" the closure of Google.cn and its offices in China.

That is an understatement, given that it had to agree to censor sensitive material – such as details of human rights groups and references to the pro-democracy protests in Tiananmen Square in 1989 – to launch Google.cn.

Google was in contact with the US state department before its announcement. Spokesman PJ Crowley said: "Every nation has an obligation, regardless of the origin of malicious cyber activities, to keep its part of the network secure.

"That includes China. Every nation should criminalise malicious activities on computer networks."

In a post on the official Google Blog, the company outlined a "highly sophisticated and targeted" attack in December which it believes affected at least 20 other firms: "These attacks and the surveillance they have uncovered, combined with the attempts over the past year to further limit free speech on the web, have led us to conclude that we should review the feasibility of our business operations in China.

"We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all."

Hillary Clinton stepped into the debate, urging Beijing to respond to Google's announcement.

The US secretary of state said in a statement: "We have been briefed by Google on these allegations, which raise very serious concerns and questions. We look to the Chinese government for an explanation."

She added: "The ability to operate with confidence in cyberspace is critical in a modern society and economy."

Human Rights Watch praised the decision and urged other firms to follow suit in challenging censorship. "A transnational attack on privacy is chilling, and Google's response sets a great example," said Arvind Ganesan, director of the group's corporations and human rights programme.

Google said the cyber attack originated from China and that its intellectual property was stolen, but that evidence suggested a primary goal was accessing the Gmail accounts of Chinese human rights activists.

Two accounts were accessed but Google believed only account information and subject lines were obtained. It is notifying the other targeted companies and working with US authorities.

Its investigation had shown that, separately, the accounts of dozens of US-, China- and Europe-based Gmail users who are advocates of human rights in China appeared to have been routinely accessed by third parties.

The company added that it was sharing the information not just because of the security and human rights implications "but because this information goes to the heart of a much bigger global debate about freedom of speech".

Acknowledging the potential consequences, it stressed: "This move was driven by our executives in the United States, without the knowledge or involvement of our employees in China."

The message, headlined "A New Approach to China" and signed by David Drummond, senior vice-president of corporate development and chief legal officer, said the company launched Google.cn in 2006 in the belief that the benefits of increased access to information for people in China "outweighed our discomfort in agreeing to censor some results".

At the time Google promised to monitor conditions in China and reconsider its approach if necessary.

But Evgeny Morozov, an expert on the political effects of the internet and a Yahoo fellow at Georgetown University, questioned why Google had made the decision after four years.

"They knew pretty well what they were getting into. Now it seems they are playing the innocence card ... It's like they thought they were dealing with the government of Switzerland and suddenly realised it was China," he said.

Morozov said it was hard to see the logical connection between the security of human rights activists and Google's self-censorship, particularly given that the firm had chosen not to comment on whom it believed responsible for the hacking. It had become easier for "pretty much anyone" to launch cyber attacks in the last few years, he added.

He added that it could have been damaging for Google if news of the breach had emerged later and it appeared the company had done nothing.

Google has only a third of the search-engine market in China, which is dominated by the Chinese giant Baidu. Although its revenues have continued to rise, many analysts believed it was finding business hard going. In June Google suffered intensive disruption to search functions and Gmail for over an hour, after authorities told it to scale back search functions.

China has the world's largest internet population.

Rebecca MacKinnon, an assistant professor at the University of Hong Kong's Journalism and Media Studies Centre, said her research showed Google had censored less than Baidu. Google's decision "certainly sets an example in terms of a company trying to do what's best for the user and not just whatever increases the profit margins", she added.

Nart Villeneuve, research fellow at the University of Toronto's Citizen Lab – which examines the exercise of political power in cyberspace – said the decision to give such a full account of the attacks and link it to human rights issues was unprecedented.

Google's decision to launch the censored service was highly controversial at the time. It was attacked by campaigners and accused of "sickening collaboration" in a Congressional hearing.

The Chinese Foreign Ministry referred the Guardian to the Ministry of Industry and Information Technology. But an employee at MIIT said it was not responsible for handling the query, because it dealt with only the technical side of internet issues. He added that many other departments dealt with other aspects of internet management, but added that he did not know who the Guardian should contact in this instance.