Saturday, February 27, 2010

Wall street GREED cannot and should not lead

Many parts of the economy of the USA are falling apart, or getting retarded. It is as if the economy was not an activity worth having anymore...

Even Lawrence Summers, President Obama’s chief economic adviser, an admirer and perpetuator of plutocracy, recognized that 75 percent of the public schools have structural deficiencies and 25 percent have problems with their ventilation systems. Dozens of thousands of bridges are falling apart, and the number of those decaying is growing faster than the number of those getting repaired. Even Russia is building high speed electric rail, and China claims to build 47 such lines, but the USA is not working on a single one. What is going on?

Video (11 min): Goldman Sucks

A small power elite has grabbed the debate, and imposed its conceptology, and its axis is maximizing financial profit, independently of any other considerations. Unfortunately for humankind, that financial world is derivative, not primary. It is a convention, not a realization. Thus make belief has replaced what really is. The real infrastructure is disintegrating, precisely because the derivative rules, and, as all mathematicians know, integration is the inverse operation from differentiation.

This is not a silly play on words and concepts: the mathematical analogy here goes all the way; letting financial derivatives rule is basically a gigantic mathematical mistake civilization has been making, in great part because those who decided, or let decide in their name, a bunch of lawyers without calculus background, such as Bill Clinton, were cognitively incapable of understanding the most basic mathematics in play.

To have made financial profit the guiding principle of civilization is, of course, deeply absurd: the fox was made guardian of the hens.

Finance was given extravagant powers in the last two centuries, powers that it did not have in the 4,000 years of civilization before that, and for very good reasons.

This abdication of power made finance the real power behind the throne, worldwide.

As Baron Nathan Rothschild (yes, from the Rothschild family) put it: "I care not what puppet is placed on the throne of England to rule the Empire, …The man that controls Britain’s money supply controls the British Empire. And I control the money supply."

Puppet. That is Rothschild’s word, not mine. It is also reality. A reality that explains the main diversion of most available capital towards the system set-up by Goldman Sachs and the like in the last 90 years, and, in particular, reinforced in the last 13 months.

Indeed, unbelievably for those not in the know, this is the exact same system that brought fascism to Italy, Germany, Spain after World War One, and made Britain, France, and the USA into close calls themselves.

The same system of thought, and actually some of the other same institutions were tender nannies for nascent Nazism (Nazism being just the most outrageous example, outrageous not just because it happened that way, and the horrendous toll, but because the instigating institutional system was capable to successfully cover its tracks. Of the people behind the Nazi scene, only Hjalmar Schacht, a "Lord Of Finance" was put on trial, and promptly acquitted in 1946. But Schacht, directly, and his ilk, more generally, made it so that Hitler got his job).

There are extremely extensive regulations in most economic domains, worldwide, but not so much in finance, although finance is the overall money creating and money allocating system.

Finance created Hitler, even the Soviets. Lenin used to joke that the "capitalists would even sell him the rope to hang them with"; at least one American plutocrat, Averell Harriman, was bestowed with the honor of being made a "Hero of the Soviet Union". Harriman got the top medal both from the Soviets, and the Nazis!

The bank Brown Brothers Harriman was a massive money laundering operation for the Nazis. JP Morgan organized and financed German cartels that propelled Hitler, etc. Unsurprisingly the same lords of finance are back to variations of their old tricks, as they allowed, if not incited, some governments to turn around all sorts of laws. Then, having violated the law, they trade on this, as the ultimate insiders! [Some of this occurred even in the last few weeks, so sure of impunity Goldman Sachs is. I say: write international warrants of arrest!]

So what is happening now, with the invention of financial derivatives, is that most of the world’s disposable capital is manipulated by financial sharks, so as to create fake revenues, to justify their bonuses and overall power wielding. There is therefore no more capital for the real economy (or, more exactly, increasingly insufficiently little).

Hence all financial products ought to be declared unlawful, until proven safe and effective. Financiers already are endowed with the regalian power of creating money (which government bestowed on them in the last 2 centuries, but which they did not have prior).

However, financiers know not enough to create a sustainable economy. Financiers are not engineers, just profiteers. And their search for profits has blinded them to their extravagant privilege, and even to how the universe works. Civilization is an exquisite mechanism, and so is an increasingly stressed biosphere. [This is not to be taken lightly: violating ecology and civilization simultaneously is how the immensely old Maya civilization self destructed, without any exterior input aside from a drought.]

None of this is new in principle. As James Madison, fourth president of the USA put it: "History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance."

This is not new, but we have just reached the breaking point, the point at which civilization and the biosphere are not sustainable anymore, from the activities of that obsolete particular financial system. It brought us Auschwitz, among other disasters. Left in power, it will bring up worse, soon.

There are other emotions than greed. Love, altruism, the passion for understanding, or for a job well done, can guide reason better than the obsession with having what one stole from others as they were looking somewhere else. It is time for reason to guide, and greed to be crushed. Otherwise there will be no world to call home, for anybody, whatsoever.


Annex and background: 1) FINANCIERS HAVE BEEN TELLING US WHAT MAN IS, AND THEY ARE WRONG. They have just been telling us about who they truly are. It’s all about them, not us.

Subjacent to economic theory is neuroeconomics. The hypothesis that the financiers and their political servants made, that profits ought to dominate social organization, was, fundamentally, a neurological hypothesis.

But greed belongs to the basic instinct of the Will To Power, whereas studying neurology belongs to the specifically human endeavor of establishing systems of thought. In other words, the neurologist is a new species, with a new kind of motivation, whereas the financier is an all together different species, animated by the sort of motivation we have seen in the last half a billion years, since there are social animals, and they crowd together, and need a unique leader, to have the single mind that allows them to stick together. This need, E Pluribus Unum, is the fundamental reason for the Will To Power, Nietzsche talked so much about. Will To Power is also the mechanism behind tyranny, oligarchy, and the domination of the Lords Of Finance.

Man is the species that went beyond Will To Power as the fundamental organizational principle of society. Being overlorded by finance is subhuman.


2) The "Nobel" Prize in Economics was given for some equation helping to price some financial call options. It surely will not be given for the simple mathematics alluded to above, which are much more drastic, but much more deserving, as they throw the entire existing financial system out of the window, as deserved for flaming material threatening to burn down the house of civilization.


3) Shacht (economics PhD, 1899) met with the American JP Morgan as early as 1905. Yes, JP Morgan, founder of the eponymous bank, whose present leader is much admired and befriended by Barack Obama (so he says).

Shacht, in charge of finances in imperial Germany occupied Belgium, was summarily dismissed, when his superior, general von Lumm, discovered that Schacht had diverted funds through his present and future employer, the bank (Dresdner), the sort of incest that passes for routine in present Washington.

After WWI Schacht came to lead the Reichsbank, the German central bank, and got to campaign against Germany paying war reparations, and helped set-up the Young and Dawes plans with Wall Street (which made Germany into Wall Street toy and profit generating center).

By 1926, besides supporting Wall Street, JP Morgan and various American banks’ operations, Shacht, the most important Lord of Finance in Germany, entangled with American financiers, through and through, was supporting the Nazis. Soon Schacht organized petitions by top personalities and plutocrats to persuade president Hindenburg to nominate Hitler Chancellor. Schacht’s financial career blossomed further under Hitler, as he headed the Reichsbank and the economy ministry (busy stealing Jews and other victims). He was to rise again after he got cleared of any wrongdoing in 1946.

Not to say that Shacht was thoroughly evil in appearance. He was not. Like Eichmann, his evil was rather “banal” (to use the concept from Hannah Arendt). Like Eichmann, Schacht pretended to keep on befriending Jews under the Nazis, and have empathy for them.

For a plutocratic servant, Schacht was rather personally pristine. But he efficiently pushed many extremely criminal ideas in his lifetime, and thus he was an ideal instrument for the plutocrats. Such people are legions. Instead of attacking them one by one, day by day, emotion by emotion, and anti-idea by anti-idea, it is more productive to attack the system of thought that gave rise to them.

And, as it is, the criminal system of thought is the regalian fractional reserve banking system, which allows private, unrepresentative, unelected, unsupervised money men, the bankers, to create most of the money, and distribute it to whoever they want, to do whatever they please.

Indeed, contrarily to what most people believe, although the state makes physical bank notes and coins, it’s the big private bankers who create most of the money, and, aggravating factor, do it through debt. That system was created, because it is very profitable to those, the plutocrats, who selected the politician-servants who defend and further their interests. That it went on for about two centuries in some parts (Britain) does not mean it is sustainable. Rome switched to a system biased towards plutocracy in 300 BCE, but lost its republic about 255 years later.


The question of how to have a currency, and how to make money to use in the USA, was a central question from 1791 (when up to an amazing 50 currencies were used inside the USA) until the “greenbacks” of the Secession War. Two attempts were made at making a “Bank of the USA”. The second such bank helped create a huge bubble in land and agriculture, to feed Europe, and displace its agriculture, after the old continent had been devastated by the Napoleonic wars (this to say that speculative bubbles can serve imperialism well). Because the “Bank of the USA” got accused of corruption and undue influence of European financiers, it was allowed to expire under president Jackson....


Greed is called the "profit motive", in the present USA, and now, undeterred by the weak and scared Obama, the private health, military and banking industries of the USA are running away with greed, pushing around the naïve and overwhelmed young president.

Some health insurance jumped by 39% (now delayed by weeks, to Obama’s naïve satisfaction), and the number of American soldiers killed in Afghanistan tripled in the first year of Obama’s naivety, now having passed 1,000. The military budget of the USA, also augmented enormously, bigger than the rest of the world combined, has jumped up, in a country with 10% deficit. And bankers own the place, now that all taxpayer money, and more (borrowed from China), was sent to them to lose again.

Greed is another bad emotional ultrafilter, and it is related to nationalism and superstition. Greed basically asserts that having power on others is the emotion that matters most. In a sense greed stands above nationalism and superstition, because it is conducive to them both....

Capitalism has to grow up and become less greedy, relying less on a blind faith in "the invisible hand" and more on an understanding of human nature, including insights from the field of behavioral economics.

It must include sophisticated checks and balances to make sure that thesystem is not gamed, instead of childish ideas about the "inherent stability" of the market.

And it must make sure that the poker game doesn't suddenly end when one of the players gets all of the chips.

Of course, with high-frequency trading dominating the market (and see this), frontrunning, permanent bailouts (and see this), government-sponsored credit rating scams and enterprises, the creation and maintenance by the government of banks so big that their very size warps the entire system, socialism for the big boys, and all of the other shenanigans going on, we don't currently have free market capitalism.

Thursday, February 25, 2010

NSA threatened Qwest CEO with repercussions if he didn't cut a surveillance deal

NSA threatened Qwest CEO with repercussions if he didn't cut a surveillance deal

WMR has learned from sources who worked in senior positions for the telecommunications company Qwest that its former Chairman and CEO Joseph Nacchio was threatened with retaliation after he refused to participate in an unconstitutional and illegal National Security Agency (NSA) wiretapping program after he met with NSA officials on February 27, 2001, some six months before the 9/11 attacks. Nacchio refused to turn over customer records without a court order -- something NSA did not possess at the time it made its request.

After Nacchio refused NSA's request on the grounds that it was illegal, sources close to Nacchio reported his legal problems with the Department of Justice and the Securities and Exchange Commission began in earnest. First, Qwest lost out on several lucrative federal government contracts and second, Nacchio was indicted and convicted in 2007 of 19 counts of insider stock trading. Nacchio was sentenced to six years the Schuykill federal prison camp in Minersville, Pennsylvania where he is now assigned prison number 33973-013.

In January, US District Judge Marcia Krieger of the 10th Circuit Court in Denver denied Nacchio's motion for a new trial. Krieger was nominated for the federal bench by President George W. Bush on September 10, 2001. The September 10 date is significant -- it was then clear that Nacchio was not going to be a player in the NSA and FBI illegal surveillance programs and it was the day before the Bush administration would sweep aside the First and Fourth Amendments to the Constitution in the wake of the 9/11 attacks. Qwest is headquartered in Denver.

The illegal NSA surveillance program, once known by its highly-classified code-name STELLAR WIND, was also revealed by AT&T employee Mark Klein, who divulged NSA's wiretaps on AT&T 4ESS switches at its Folsom Street office in San Francisco. AT&T and Verizon agreed to participate in the STELLAR WIND program.

Even though there is ample evidence that the federal government engaged in massive prosecutorial misconduct in retaliation for Nacchio's refusal to participate in STELLAR WIND and associated FBI surveillance programs, the Supreme Court refused to review the case against the former Qwest chief. The Supreme Court also denied Nacchio bail pending his appeal, a clear attempt by the most corrupt Supreme Court in American history to prevent Nacchio from airing the NSA's dirty laundry about domestic wiretapping and pressure on telecommunication firms' senior corporate officials.

Qwest shareholders and retirees blamed Nacchio for their financial losses, however, it is now clear that the NSA and the Bush administration targeted Qwest for retribution after its top boss refused to cooperate in the illegal domestic wiretap programs of the NSA and FBI.

Qwest founder, railroad and oil magnate Philip Anschutz, a conservative Christian who owns The Examiner chain of metro region newspapers and several entertainment firms and professional sports teams, testified on Nacchio's behalf.

The news of NSA's threats of retaliation against Nacchio will come as little comfort to those NSA employees, including the jailed ex-NSA analyst Ken Ford, Jr. on similar trumped up charges. If someone as wealthy and powerful as Nacchio could be brought down by the illegal domestic joint targeting operations carried out by the NSA, FBI, and corrupt Justice Department prosecutors, those rank-and-file NSA employees who have blown the whistle on NSA's illegal operations stand little chance of having their "day in court."

WMR has been told by NSA insiders that if the full extent of NSA's illegal operations became public, the American people would go into a "state of shock...."

Fixing Washington .... in Afghanistan, courtesy of USAID... i.e. the CIA

Fixing Washington .... in Afghanistan, courtesy of USAID... i.e. the CIA

Explain something to me....

In recent months, unless you were insensate, you couldn't help running across someone talking, writing, speaking or pontificating about how busted government is in the United States. State governments are increasingly broke and getting broker. The federal government, while running up the red ink, is, as just about everyone declares, "paralyzed" and so incapable of acting intelligently on just about anything.

Only the other day, no less a personage than Vice President Joseph Biden assured the co-anchor of the CBS Early Show, "Washington, right now, is broken." Indiana Senator Evan Bayh used the very same word, "broken", when he announced recently that he would not run for re-election and, in response to his
decision, Washington Post media critic Howard Kurtz typically commented, "The system has been largely dysfunctional for nearly two decades, and everybody knows it."

Voters seem to agree. Two words, "polarization" and "gridlock" - or hyperbolic cousins like "paralyzing hyperpartisanship" - dominate the news when the media describes that dysfunctionalism. Foreign observers have been similarly struck, hence a spate of pieces like the one in the British magazine the Economist headlined, "America's Democracy, A Study in Paralysis."

Washington's incapacity to govern now evidently seems to ever more Americans at the root of many looming problems. As the New York Times summed up one of them in a recent headline: "Party Gridlock in Washington Feeds Fear of a Debt Crisis." When President Barack Obama leaves the confines of Washington for the campaign trail, he promptly attacks congressional "gridlock" and the "slash and burn politics" that have left the nation's capital tied in knots.

And he has an obvious point since, when he had a 60-vote supermajority in the senate, congressional Democrats and the White House still couldn't get their act together and pass health-care reform, not even after a year of discussion, debate, and favors trading, not even as the train wreck of the Massachusetts election barreled toward them. These days the Democrats may not even be a party, which means their staggering Senate majority has really been a majority of next to nothing.

The Republicans, who ran us into this ditch in the George W Bush years, are now perfectly happy to be the party of "no" - and the polls seem to show that it's a fruitful strategy for the 2010 election. Meanwhile, special interests rule Washington and lobbying is king. As if to catch the spirit of this new reality, the president recently offered his vote of support to the sort of Wall Street chief executive officers who took Americans to the cleaners in the great economic meltdown of 2008 and are once again raking in the millions, while few have faith that change or improvement of any kind is in our future. Good governance, in other words, no longer seems part of the American tool kit and way of life.

Meanwhile, on the other side of the planet, to the tune of billions of taxpayer dollars, the US military is promoting "good governance" with all its might. In a major campaign in the modest-sized city of Marjah (a place next to no one had heard of two weeks ago) in Taliban-controlled Helmand province, Afghanistan, it's placing a bet on its ability to "restore the credibility" of President Hamid Karzai's government.

In the process, it plans to unfurl a functioning city administration where none existed. According to its commanding general, Stanley McChrystal, as soon as the US Army and the US Marines, along with British troops and Afghan forces, have driven the Taliban out of town, he's prepared to roll out an Afghan "government in a box", including police, courts, and local services.

The US military is intent, according to the Wall Street Journal, on "delivering a new administration and millions of dollars in aid to a place where government employees didn't dare set foot a week ago". Slated to be the future "mayor" of Marjah, Haji Zahir, a businessman who spent 15 years in Germany, is, according to press reports, living on a US Marine base in the province until, one day soon, the American military can install him in an "abandoned government building" or simple "a clump of ruins" in that city.

He is, we're told, to arrive with four US civilian advisors, two from the State Department and two from the US Agency for International Development....i.e, CIA , described (in the typically patronizing language of American press reports) as his CIA "mentors". They are to help him govern, and especially dole out the millions of dollars that the US military has available to "reconstruct" Marjah. Road-building projects are to be launched, schools refurbished and a new clinic built, all to win Pashtun "hearts and minds". As soon as the fighting abates, White House press secretary Robert Gibbs has suggested, the post-military emphasis will be on "economic development", with an influx of "military and civilian workers" who will "show a better way of life" to the town's inhabitants.

So explain something to me: Why does the military of a country convinced it's becoming ungovernable think itself so capable of making another ungovernable country governable? What's the military's skill set here? What lore, what body of political knowledge, are they drawing on? Who do they think they represent, the Philadelphia of 1776 or the Washington of 2010, and if the latter, why should Americans be considered the globe's leading experts in good government anymore? And while we're at it, fill me in on one other thing: Just what has convinced American officials in Afghanistan and the nation's capital that they have the special ability to teach, prod, wheedle, bribe or force Afghans to embark on good governance in their country if we can't do it in Washington or Sacramento?

Explain something else to me: Why are our military and civilian leaders so confident that, after nine years of occupying the world's leading narco-state, nine years of reconstruction boondoggles and military failure, they suddenly have the key, the formula, to solve the Afghan mess?

Why do leading officials suddenly believe they can make Karzai into "a Winston Churchill who can rally his people", as one unnamed official told Matthew Rosenberg and Peter Spiegel of the Wall Street Journal - and all of this only months after Karzai, returned to office in a wildly fraudulent presidential election, overseeing a government riddled with corruption and drug money, and honeycombed with warlords sporting derelict reputations, was considered a discredited figure in Washington? And why do they think they can turn a man known mockingly as the "mayor" or "president" of Kabul (because his government has so little influence outside the capital) into a political force in southern Afghanistan?

And someone tell me: Just who picked the name "Operation Moshtarak" for the campaign in Marjah? Why am I not convinced that it was an Afghan? Though news accounts say that the word means "togetherness" in Dari, why do I think that a better translation might be "crushing embrace"? What could "togetherness" really mean when, according to the Wall Street Journal, to make the final decision to launch the operation, already long announced, McChrystal "stepped into his armored car for the short drive ... to the presidential palace," and reportedly roused Karzai from a nap for "a novel moment". Karzai agreed, of course, supposedly adding, "No one has ever asked me to decide before."

This is a black comedy of "governance". So is the fact that, from the highest administration officials and military men to those in the field, everyone speaks, evidently without the slightest self-consciousness, about putting an "Afghan face" on the Marjah campaign. The phrase is revelatory and oddly blunt. As an image, there's really only one way to understand it (not that the Americans involved would ever stop to do so). After all, what does it mean to "put a face" on something that assumedly already has a face? In this case, it has to mean putting an Afghan mask over what we know to be the actual "face" of the Afghan War, which is American.

National Security Adviser James Jones, for instance, spoke of the Marjah campaign having "'a much bigger Afghan face,' with two Afghans for every one US soldier involved." And this way of thinking is so common that news reports regularly use the phrase, as in a recent Associated Press story: "Military officials say they are learning from past mistakes. The offensive is designed with an 'Afghan face'."

And here's something else I'd like explained to me: Why does the US press, at present so fierce about the lack of both "togetherness" and decent governance in Washington, report this sort of thing without comment, even though it reflects the deepest American contempt for putative "allies"? Why, for instance, can those same Wall Street Journal reporters write without blinking: "Western officials also are bringing Afghan cabinet members into strategy discussions, allowing them to select the officials who will run Marjah once it is cleared of Taliban, and pushing them before the cameras to emphasize the participation of Afghan troops in the offensive"? Allow? Push? Is this what we mean by "togetherness"?

Try to imagine all this in reverse - an Afghan general motoring over to the White House to wake up the president and ask whether an operation, already announced and ready to roll, can leave the starting gate? But why go on?

Just explain this to me: Why are the representatives of Washington, civilian and military, always so tone deaf when it comes to other peoples and other cultures? Why is it so hard for them to imagine what it might be like to be in someone else's shoes (or boots or sandals)? Why do they always arrive not just convinced that they have identified the right problems and are asking the right questions, but that they, and only they, have the right answers, when at home they seem to have none at all?

Thinking about this, I wonder what kind of "face" should be put on global governance in Washington?

Thursday, February 18, 2010

Offshore Havens for the Defense Industry

A pile of dollar bills, courtesy of Tracy O/flickr

A recent US government report criticizing large American defense contractors of avoiding taxes by moving operations offshore could have interesting implications for the relationship between the industry and the state, Jody Ray Bennett writes for ISN Security Watch.

Unplug the Signal: The Truth Will Not Be Televised....

By Jody Ray Bennett

Nearly one year after the G20 announced a commitment to crackdown on the use of international tax havens, giant US defense contractors continue to enjoy lightly regulated offshore financial centers to avoid taxation and escape paying millions in employee benefits.

In a report released in late January by the Government Accountability Office (GAO), the independent watchdog organization that investigates how the federal government spends taxpayer dollars, research found several large defense contractors with registered offshore subsidiaries and other holdings.

The findings of the report are rather interesting: “Many of the top 29 U.S. publicly traded defense contractors - those with $1 billion or more in DOD contracts in fiscal year 2008 - have created offshore subsidiaries to facilitate global operations,” and since 2003, have “increased their use of these subsidiaries by 26 percent, maintaining at least 1,194 in 2008.”

The report analyzed the following 13 companies: Lockheed Martin Corporation, The Boeing Company, General Dynamics Corporation, L-3 Communications, KBR Inc, ITT Corporation, General Electric, Computer Sciences Corporation, Health Net Inc, Harris Corporation, Honeywell International Inc, DynCorp International Inc, Rockwell Collins Inc, Fluor Corporation, Combat Support Associates and AECOM Technology Corporation.

Offshore incentives

Industry analysts, however, are distinguishing these large defense contractors from many of the companies that characterize the private military and security industry such as Blackwater (Xe) and Triple Canopy.

“For the moment [the GAO report] will not have great impact on the private military and security industry, as distinct from the more traditional defense industry sector [because] the GAO Report focused on publicly traded companies, while many of the companies in the PMSC sector are not publicly traded,” David Isenberg, independent analyst of private military and security contracting and author of the book Shadow Force: Private Security Contractors in Iraq, told ISN Security Watch.

“Most of the companies listed in the GAO report range from fairly to very large firms. These firms generate lots of revenue and thus have a greater incentive to go offshore to try and shelter their money from US taxes. But many firms in the sector are of much smaller size and have less reason to go offshore,” Isenberg said.

Nevertheless, the GAO explained that while offshore subsidiaries comprise only 3 percent of those who do business with the Department of Defense, “about one-third [of the companies] decreas[ed] their effective U.S. corporate tax rates in 2008 in part through the use of foreign affiliates, lower foreign tax rates, and indefinite reinvestment of foreign income outside of the United States.”

Three percent of the defense industry is significant, especially since government contracts have, in large part, enabled companies that sell defense, security, intelligence and logistics services to grow to a multi-billion dollar industry.

The regulation game

Companies continue to use subsidiaries in places such as Barbados, the Cayman Islands, Lichtenstein and the United Arab Emirates. As a result, the report found several companies were able to use subsidiaries in these countries to “hire US workers providing services overseas on US government contracts in order to avoid Social Security, Medicare - known as Federal Insurance Contributions Act (FICA) - and other payroll taxes.”

Subsidiaries also “allowed contractors to offer lower bids when competing for certain services and thereby reduce costs for DOD.”

Industry proponents cite these DOD savings as an advantage of the business practice. Indeed, the report found that after analyzing just two contracts, companies that avoided paying payroll taxes through the use of offshore subsidiaries “saved DOD at least $110 million.”

In 2008, the US Congress passed the Heroes Earnings Assistance and Relief Tax (HEART) Act, effectively forcing these companies that use offshore subsidiaries to pay FICA taxes. However, the law failed to make rules regarding state and federal payroll taxes while companies later “requested reimbursement from DOD of at least $140 million for [the] new FICA payments.”

“I doubt the GAO report will have much impact on the reputation of the industry, given all the other issues it has to contend with. However, there are a couple of issues it does raise, [such as] avoiding payroll taxes like FICA and thus screwing the contractors in the field who are worthy of note,” Isenberg told ISN Security Watch.

Indeed, the report mentioned its review of documentation “for about 140 former employees of several contractors” who were later “denied unemployment benefits in 2009” because “the employees worked for a foreign subsidiary and not an American employer.”

“It also has other interesting implications for the perennial cost-effectiveness argument that industry likes to make,” Isenberg said.

More interestingly, however, were the words that came from the defense industry business elites, some of whom contended that there was a growing competitive trend between the industry and government that would place both at a disadvantage.

Just weeks before the GAO report was released, Norm Augustine, former CEO of Lockheed Martin, released his own prediction:

“The issues facing the nation and the world increasingly transcend the ability of either government or industry to solve alone. For example, the government clearly has overall responsibility for homeland security, yet 90 percent of the assets to be protected currently reside in the private sector. At the same time, as the federal debt grows along with the non-discretionary part of the federal budget, heightening fiscal pressures will be placed on the procurement process. As a consequence, [the] industry is unfortunately likely to find itself more and more a competitor with government than a partner [and the] problem will be exacerbated by the inability or unwillingness of qualified individuals with industry experience to serve terms in government.”

Clearly, the former executive of the top defense contractor in the US realizes the business advantage of industry executives who seek positions in government. Although unknown is the direction in which industry and government travel, Augustine concludes, “As one who has spent a significant part of his professional life in each government and industry, I truly hope the above is wrong but that would not be how I would bet.”

Tuesday, February 16, 2010

As Defense Budget Soars, Security Firms Reap Huge Profits, Go Offshore to Avoid Taxes

The Obama administration is seeking to increase the obscenely bloated U.S. Defense Department budget to a whopping $708 billion for fiscal year 2011, 3.4% above 2010's record level, The Wall Street Journal reported.

While the overall budget deficit will balloon to a staggering $1.6 trillion in 2011, the result of massive tax cuts for the rich, declining revenues, a by-product of capitalism's economic meltdown, imperial adventures abroad and general corporate malfeasance (the old tax-dodge grift), the administration plans to cut $250 billion over three years from non-military "discretionary spending" on domestic social programs.

However, as the World Socialist Web Site points out: "President Barack Obama has done nothing to reverse decades of wage stagnation, mounting poverty, and attacks on the social welfare system. On the contrary, following George W. Bush, he has seized on the crisis to redistribute wealth to a tiny financial elite through the ongoing bailout of the finance industry."

It is no small irony that despite stark budget figures and an even bleaker future for the American working class, Washington Technology reported January 28 that the "29 largest publicly traded defense contractors increased their use of offshore subsidiaries by 26 percent from 2003 to 2008."

Citing reports by the Government Accountability Office (GAO), journalist Alice Lipowicz disclosed that the "subsidiaries helped the contractors reduce taxes, in part by avoiding Social Security and Medicare payroll taxes for U.S. workers hired at the foreign subsidiaries."

Considering that the Pentagon hands out some $396 billion annually to contractors, outsourcing everything from "in theatre" construction in places like Afghanistan and Iraq to pricey "intelligence analysts" at secret state agencies, cash not spent on payroll taxes by dodgy firms slices another hole into the already-shredded social safety net.

Amongst the largest firms cited in GAO's 2008 report, updated in January 2010, Oracle Corp., operates in 77 tax havens; Boeing Co., 38; Dell Inc., 29; BearingPoint Inc., 28; Computer Sciences Corp., 21; Fluor Corp., 34; General Dynamics, 5; Harris Corp., 13; Hewlett-Packard, 14; Honeywell International, 7; ITT Corp., 18; L-3 Communications, 15; Sprint Nextel, 7.

Many of the firms are heavily-leveraged in the lucrative "homeland security" market and provide technology and "cleared" intelligence analysts, many of whom jumped ship from government service for richer, if more dubious employment, to a host of secret state agencies including the CIA, DIA, NSA as well as ultra-secretive outfits engaged in global satellite surveillance such as the National Reconnaissance Office (NRO) and the National Geospatial-Intelligence Agency (NGA).

You would think these firms, flush with record profits since the U.S. embarked on its "War on Terror" in 2001, would do something as pedestrian as paying their fair share of taxes or providing benefits to workers, given severe budgetary pressures on domestic programs, dizzying housing foreclosure rates and skyrocketing unemployment.

You'd be wrong, however; dead wrong.

An "Island Paradise" Where Profits Go to Hide

Despite fabulous riches showered on shareholders by taxpayers, the Military-Industrial-Security-Complex will not rest until every dime has been squeezed from the American people, swelling corporate abdomens well-past the bursting point.

In cinematic terms, think of America's ruling elite as a horde of sociopathic zombies gobbling everything in sight. Instead of screaming "Brains!" as in Sam Raimi's cult classic, The Evil Dead, corporate zombies cry "Cash! I Need Cash!" as they take down entire nations in one rapacious bite!

A new report published by the Government Accountability Office (GAO) in January found, "Many of the top 29 U.S. publicly traded defense contractors--those with $1 billion or more in DOD contracts in fiscal year 2008--have created offshore subsidiaries to facilitate global operations. Between fiscal years 2003 and 2008, they increased their use of these subsidiaries by 26 percent, maintaining at least 1,194 in 2008."

GAO auditors revealed that corporate subsidiaries in tax havens such as the Bahamas, Switzerland, the Cayman Islands, Bahrain, Netherlands Antilles, Jersey, Bermuda, the Channel Islands, Luxembourg, Macao, Lebanon, Liechtenstein and Cyprus "helped the 29 contractors reduce taxes, with about one-third decreasing their effective U.S. corporate tax rates in 2008 in part through the use of foreign affiliates, lower foreign tax rates, and indefinite reinvestment of foreign income outside of the United States."

A convenient shell game since the "indefinite reinvestment of foreign income" isn't taxable until its been repatriated to the United States. What do you think the chances are of that happening any time soon?

As an added incentive that helped firms hit the old corporate "sweet spot," the congressional watchdogs found that "companies principally used offshore subsidiaries to hire U.S. workers providing services overseas on U.S. government contracts in order to avoid Social Security, Medicare--known as Federal Insurance Contributions Act (FICA)--and other payroll taxes. This practice allowed contractors to offer lower bids when competing for certain services and thereby reduce costs for DOD."

Not that workers derived any benefit from this "special" arrangement; in fact, the use of off-shore tax havens by defense grifters had dire consequences when workers lost their jobs.

"In one state," GAO auditors revealed, "we reviewed documentation for about 140 former employees of several contractors who were denied unemployment benefits in 2009. State workforce officials indicated these benefits were denied because the employees worked for a foreign subsidiary and not an American employer."

Interestingly enough, many of the global hidey-holes used to shield corporate wealth from the IRS have long been identified by law enforcement investigators and political researchers as prime money-laundering venues for the international drugs trade.

This is hardly surprising. Considering the close proximity of U.S. covert operations, illicit arms- and drug trafficking, and general subversive activities carried out by the CIA and other members of the "Intelligence Community," what better way for defense firms to keep it "all in the family" so to speak, then to stash war-derived loot in discrete locations.

As researcher Alan Block described the metastatic growth of the tax-haven phenomenon in his groundbreaking work, Masters of Paradise: Organized Crime and the Internal Revenue Service in the Bahamas, "professional criminals were those who took it upon themselves to organize crime. Their true work was the process of organizing crime itself."

Block's description is all the more appropriate considering that it is the American militarist state that "took it upon themselves" to organize corporate looting on a planetary scale. After all, resource wars, military interventions or the standing-up of death squad states through CIA fomented coups, directly benefit imperialism's real, indeed only, constituents: U.S. multinational corporations.

Out of Sight, Out of Mind

A futile exercise perhaps, given that our corrupt representatives in Congress, "change" Democrats and troglodytic Republicans alike, will do nothing to close tax loop-holes big enough to sail an aircraft carrier through.

And why would they, since the largest contributors flooding congressional campaign coffers with cold, hard cash are the same firms that reap the benefits of corporate-friendly tax codes, as the Center for Responsive Politics points out.

Just for kicks, let's take a look at some of the worst malefactors, firms whose stated mission is to "protect" heimat citizens while inflating the bottom line through the creative use of foreign subsidiaries.

Aside from "taking advantage of foreign government markets for commercial work," the GAO reports, "a key benefit of using offshore subsidiaries cited by contractors and other experts we spoke with was the ability to reduce overall taxes."

Indeed, "one defense contractor's offshore subsidiary structure decreased its effective U.S. tax rate by approximately 1 percent equaling millions of dollars in tax savings," which of course did nothing to reduce America's swelling deficit or ameliorate crashing social services for millions of workers.

GAO "identified some defense contractors that used subsidiaries registered outside the place of contract performance to support DOD service contracts abroad. These offshore subsidiaries had no staff or business activity where registered."

I don't know about you, but I don't think Netherlands Antilles or the Cayman Islands have ever been major manufacturing hubs producing ballistic missiles, spy satellites, supercomputers or other assorted goodies for the National Security State!

Typically however, GAO discovered that for "one contract task order we reviewed, more than 80 percent of the contractor's staff were employed by its offshore subsidiary."

Tellingly, "while five of the six contractors in our case studies said that reducing FICA tax payments was the primary reason for using offshore subsidiaries," the auditors concluded that "this practice also allowed the contractors to reduce costs by avoiding state and federal unemployment insurance taxes for U.S. personnel working overseas."

"For U.S. citizens performing certain work outside the United States," we're informed that "federal law requires only American employers to pay unemployment taxes; foreign subsidiaries are not defined as American employers under the law."

Therefore if a worker is "let go," the enterprising grifter is off the hook for unemployment payments. Pretty neat trick, eh!

Flying the Friendly Skies ... With the CIA!

What do these studies tell us? It pays to have friends in high places! Let's take a peek at just two of the 29 firms profiled in GAO's 2010 report as well as their earlier 2008 investigation.

The Boeing Company (Boeing): Washington Technology lists Boeing as No. 2 on their Top 100 list of federal contractors with $10,838,231,984 in overall revenue.

Primary government contracts include projects for NASA, the Navy, Air Force, Army, Marine Corps, the Department of Homeland Security and the State Department. One subsidiary, and contract, which the giant firm isn't too keen on publicizing is Jeppesen International Trip Planning, the booking agent for CIA torture flights.

As Antifascist Calling previously reported, the firm is being sued by victims of the Bush administration's illegal practice of "rendering" (kidnapping) so-called "terrorists" into the hands of torture-friendly regimes or to CIA "black sites" in Europe and the Middle East.

The ACLU's landmark litigation on behalf of the victims, Mohamed et al. v. Jeppesen Dataplan, Inc. seeks to hold the Boeing subsidiary accountable for planning and providing logistical support for CIA "ghost flights." The Obama administration, like their Bushist predecessors oppose the suit on grounds that "vital state secrets" will be disclosed.

On February 10, the British High Court ordered Britain's secret state to release documents disclosing MI5's collaboration in Binyam Mohamed's torture. Mohamed is a litigant in the ACLU's suit against Jeppesen.

The Guardian reported that "MI5 faced an unprecedented and damaging crisis tonight after one of the country's most senior judges found that the Security Service had failed to respect human rights, deliberately misled parliament, and had a 'culture of suppression' that undermined government assurances about its conduct."

In response to the release of previously classified documents by the British government, as promised, the U.S. Government has threatened that the disclosure "would cloud future intelligence relations with Britain," The Wall Street Journal reported.

Meanwhile back in the heimat, Boeing and Jeppesen's corporate officers continue to hold get-out-of-jail-free cards from the Obama administration.

As investigative journalist Jane Mayer revealed in The New Yorker back in 2006, Bob Overby, the managing director of Jeppesen International Trip Planning, said during a breakfast for new hires in San Jose, Calif., "We do all of the extraordinary rendition flights--you know, the torture flights. Let's face it, some of these flights end up that way."

Technical writer Sean Belcher blew the whistle on the firm and told Mayer that Overby, extemporaneously extolling the virtues for the corporatist bottom line, said: "It certainly pays well. They"--the CIA--"spare no expense. They have absolutely no worry about cost. What they have to get done, they get done."

But facilitating CIA torture flights wasn't the only, or even the most lucrative, enterprise driving Boeing's close collaboration with the National Security State.

Little known outside the security industry, Boeing's Defense, Space and Security division (DSS, formerly Integrated Defense Systems or IDS) is the firm's intelligence unit.

With some 71,000 employees, most holding top secret clearances, DSS is probably the most profitable of the firm's divisions with some $32 billion in revenues, about half of Boeing's annual earnings.

According to investigative journalist and security analyst Tim Shorrock, writing on CorpWatch's Spies for Hire collaborative research web site, DSS "has close ties with the NSA and the intelligence community's signals intelligence units. It has an important office about a mile from the agency’s headquarters in Fort Meade, Maryland, in an industrial park filled with NSA contractors."

And within DSS, its most important intelligence unit is the Advanced Global Services & Support division.

According to Boeing, Advanced Global Services & Support "is the advanced arm of the Global Services & Support business unit ... responsible for driving the development, growth and transition of innovative, knowledge-based logistics capabilities for Global Services & Support. With a central focus on the emerging network-centric logistics marketplace, Advanced Global Services & Support is working on deploying integrated solutions for end-to-end (factory-to-foxhole) logistics. Its focus--'readiness transformation'."

The unit provides "horizontal integration" for "Intelligence Community customers" such as the National Geospatial-Intelligence Agency (NGA), the Central Intelligence Agency (CIA), the Defense Intelligence Agency (DIA) and the National Security Agency (NSA).

"In December 2007" Shorrock writes, "Boeing formed a new Intelligence and Security Systems (I&SS) division that appears to combine many of the company's services for foreign and domestic intelligence. Based in Washington, D.C., I&SS has a workforce of about 2,000 people at nine locations nationwide, and includes four program areas: Advanced Information Systems; Mission Systems; Security Solutions, which includes SBInet (the electronic wall being built on the US-Mexico border); and Advanced I&SS. According to a company press release, the new division 'enables increased focus on the complex challenges faced by our homeland security and intelligence community customers. ...I&SS will improve our ability to bring comprehensive, net-enabled capabilities to meet our customers' dynamic requirements'."

Much the same can be said of Boeing's imaginative use of tax-havens. According to GAO's 2008 study, Boeing maintained 38 foreign subsidiaries in major airline manufacturing hubs such as Bermuda (6); Cayman Islands (1); Gibraltar (2); Hong Kong (4); Ireland (4) Netherlands Antilles (2); Singapore (3); and U.S. Virgin Islands (16).

Spying for Dollars

Computer Sciences Corporation (CSC): One of the largest defense contractors operating under the radar, CSC is No. 9 on Washington Technology's Top 100 list of prime federal contractors with some $3,435,767,906 in revenue.

The Falls Church, Virginia-based outfit's business includes consulting, systems integration and outsourcing, and their major customers include the Defense Department, NASA, Navy, Army, Air Force, Treasury Department, Health and Human Services, the Environmental Protection Agency, Transportation Department and Department of State.

In his essential book Spies for Hire, Shorrock has described CSC as "one of the NSA's most important contractors," managing "global information networks and produces and disseminates intelligence products, including specialized expertise in the area of imagery processing and archiving."

"After 9/11" Shorrock writes, "CSC formed a new business unit to go after homeland security and intelligence work," including contracts with the Defense Intelligence Agency.

Shorrock reveals that one of the "mission critical" consortiums that run DIA global operations "is managed by Computer Sciences Corporation (CSC). ... The CSC team includes CACI International and L-3 MPRI. This last company is one of the largest private armies in the world, and would have at its disposal hundreds of paramilitary officers who would fit in exceedingly well with the DIA's secret intelligence teams in the Middle East and North Africa."

According to the firm's web site, CSC's Intelligence Analysis and Operational Support division "applies advanced information technology, expert knowledge, best practices, and business process improvement in all phases of the intelligence cycle (planning and direction, collection, processing, analysis and production, and dissemination)."

"At the enterprise level," CSC informs us, "our prowess in systems integration, engineering, and consulting help create IT infrastructures and ways of doing business that put the right tools in the right hands at the right time, so that intelligence staffs and decision makers can get on with the business of protecting the country."

With no end in sight, the data-mining growth curve continues along its merry way, integrating and analyzing the electronic communications of Americans "captured" by CIA, DIA, FBI, NCTC and NSA data miners and their partners in the telecommunications industry.

Accordingly, CSC "develops and integrates automated tools for unique requirements of specialized intelligence analysts." Tools that enable secret state agencies to "Capture and mine information from multiple sources in multiple languages; Collaborate in real time with fellow analysts; Create models in which to store working data and test hypotheses; Discover insider threats by tracking network behavior; Automatically analyze and visualize complex data using intelligent software agents."

As with hundreds of other firms who trade top secret security clearances as if they were trading cards, CSC provides "experienced, cleared intelligence professionals who perform intelligence analysis, database construction and population, editorial support and quality assurance, production and collection management, analytic tradecraft training, on-the-ground acquisition of unique data sets, and foreign language support."

Conveniently, CSC has some 1,200 employees who they rent to the secret state at a premium price "who meet DCID 6/4 eligibility requirements and have access to Sensitive Compartmented Information (SCI) or Special Access Programs (SAPs)," i.e., Pentagon, CIA and NSA "black programs" only known by code words that escape congressional scrutiny, or indeed any democratic oversight.

The firm's "Information Refinery" is touted as an "innovative approach to open source intelligence that captures multilingual information from the Internet and other publicly available sources, then mines, refines and translates it for use by government intelligence analysts and decision makers."

Translation: CSC, on behalf of secret state "stakeholders" surveil web pages, blog posts and other electronic communications and "assist" spooks in transforming data, including First Amendment-protected free speech into grist for the "actionable intelligence" mill.

One would think a red-blooded, patriotic American firm like CSC would do their all for "God and Country," and pay their fair share of taxes, considering the billions of dollars in contracts the firm has speared from the government. Think again, chumps!

GAO reports that CSC has 21 subsidiaries "in jurisdictions listed as tax havens" by the federal government. Some of the firm's global operations are located in tech manufacturing powerhouses such as Bermuda (1); British Virgin Islands (4); Costa Rica (1); Hong Kong (5); Ireland (2); Luxembourg (2); Macao (1); Singapore (4); Switzerland (1).

Despite the fact that "DOD officials were aware of the roles offshore subsidiaries played in the DOD contracts we reviewed," GAO investigators found that "contracting officials stated that the use of offshore subsidiaries did not negatively impact contract schedule or performance."

After all, $708 billion does a lot of talking!

Thursday, February 11, 2010

Obama waging economic warfare on several fronts, including Japan

Obama waging economic warfare on several fronts, including Japan

The Obama administration has expanded its economic warfare against other countries, first reported on January 18 by WMR in the case of an authorized financial campaign against Venezuela. The Obama administration, according to WMR's Asian sources, is waging an economic warfare campaign, coupled with industrial sabotage, against Japan through a pre-planned operation directed against the Japanese automobile manufacturer, Toyota.

WMR has learned that the Obama administration authorized the anti-Toyota campaign as a warning shot to Japan over its reformist government's insistence that the U.S. pull its military troops out of Okinawa. WMR has learned that Obama and his chief of staff, Rahm Emanuel, have decided to turn the screws on Japan, not only for auto market leverage, but also to punish Japan over the insistence by Prime Minister Yukio Hatoyama and the newly-elected anti-U.S. military mayor of Nago on Okinawa to move the U.S. military off of Okinawa.

Transportation Secretary Ray LaHood, a former congressman from Peoria, Illinois and who is owned and operated by Peoria-based Caterpillar, whose major competitor is Japan's Kubota Tractor Corporation, kicked off the anti-Toyota campaign when he stated that all Toyota owners should stop driving their vehicles and return them to the dealership for a fix. LaHood was referring to a problem with some uncontrolled acceleration problems with some Toyota vehicles. However, LaHood painted a wide brush in his comments about Toyotas when the problem, which resulted in a voluntary recall of millions of Toyota vehicles, including the popular Camry and Corolla, by the Japanese auto giant, affected only a small fraction of Toyota vehicles. LaHood has also threatened Toyota with unspecified civil penalties.

Asian intelligence agencies have discovered that LaHood was implementing a White House operation to grab a major portion of Toyota's market share and hand it over the General Motors and Ford. The Obama administration, through its bailout of GM, has become a virtual auto company and, therefore, is playing economic hard-ball with Japan. Ford also benefited from the Obama administration's stimulus package. The chief architects of the anti-Toyota campaign, according to our sources, are Treasury Secretary Tim Geithner and White House chief of staff Emanuel.

By increasing GM's viability at the expense of Toyota, Geithner sees a potential windfall when the federal government sells its share of GM stock to the public. The corporate media has played along with the Obama administration's anti-Toyota and anti-Japan operation by hyping the safety issues with Toyota's vehicles, especially the once-popular Prius hybrid vehicle. The Obama administration has decided on economic warfare against Toyota to restore GM as the world's number one auto manufacturer, a position enjoyed by GM until 2007 when Toyota overtook it in sales.

The Japanese government is aware of the machinations of the Obama administration in creating the controversy about Toyota. Tokyo is also acutely aware of the ill-effects the Toyota recall is having on the value of the yen vis a vis the dollar.

Informed sources point out to WMR that some 37,000 Americans died last year in road accidents. The issue of sticky accelerator pedals arose last year after a California Highway Patrolman and three of his family members were killed when their Lexus ES350 attained speeds in excess of 120 mph and struck another vehicle and was propelled off an embankment bursting into flames. One of the passengers in the Lexus reported in a 911 call that the accelerator was stuck. There is a controversy over whether the crash was caused by electronics or the floor mat. Toyota recalled millions of vehicles last October over concerns that gas pedals were catching on floor mats.

Ironically, Toyota does not make the sensor-equipped accelerator pedal for its recalled vehicles. Elkhart, Indiana-based CTS (formerly known as Chicago Telephone Supply) manufactures the pedals for Toyota, as well as for Ford. China's Jiangling Motors has complained about sticking gas pedals from CTS and the firm has developed a reputation for faulty accelerator pedals and their associated sensors. CTS's President and CEO is India-born Vinod Khilnani. Curiously, the Obama administration, which is flush with Indian-Americans at high levels, has not criticized CTS, especially since it supplied the very same accelerator pedals it manufactures for Toyota and GM to the U.S. military.

WMR has learned additional details about the hype by the Obama administration over Toyota's accelerator pedals. We are informed by a knowledgeable source that the earlier problem with 2002-2004 Toyota models regarding the so-called sticking floor mat has nothing to do with Toyota Corporation, since the mats are fastened to the floorboard with clips and there's a space around each pedal. The problem occurs when a cheap substitute carpet is installed by a garage or a cheating dealer. Toyota always prefers to see its own products used inside their vehicles. WMR has also learned that the Prius brake problem is not serious and that it is caused by a difference in torque when the car switches from engine to electric motors.

Some may question why the Obama administration chose to target Toyota in its economic warfare campaign and not other Japanese auto manufacturers. The major shareholder in Isuzu is GM, which the Obama administration effectively owns. In addition, Ford owns Mazda.

The CTS-manufactured accelerator pedal used in Toyotas relies on an electronic pressure sensor. WMR has been informed by knowledgeable sources that the sensors are vulnerable to non-civilian frequencies. The Obama administration, fearful that military transmissions may be responsible for accelerator accidents, may have sought to jump the gun by blaming Toyota for the accelerator problems.

The last time an American president authorized a major economic intelligence operation against Japan was during the administration of Bill Clinton. In 1995, Clinton authorized NSA to spy on companies like Toyota and Nissan during U.S. trade negotiations with Japan over Japanese luxury car imports to the United States. George H W Bush also used NSA to eavesdrop on Indonesia during negotiations between that government and Japan's NEC on a major multi-million dollar telecommunications contract. Bush shared the intelligence with AT&T, a competitor of NEC on the Indonesian contract. On January 30, Obama met with former President George H. W. Bush at the White House in what was described as a "courtesy call."

In addition to Japan, the Obama administration is also waging war on the "soft underbelly" of the European Union. The Treasury and the Federal Reserve Bank have decided that if the national economies of the "PIGS" -- Portugal, Italy, Greece, and Spain -- are attacked, the euro will fall against the dollar, since the European Central Bank will be forced to bail out the most vulnerable large economies in the European Union. Spanish Prime Minister Jose Luis Rodriguez Zapatero, a Socialist, recently attended the National Prayer Breakfast meeting in Washington, also attended by Obama, in order to plead Spain's case. Apparently, Zapatero came away empty-handed and he was roundly criticized for attending an event sponsored by an ultra-right wing group, The Fellowship, which had tied with the Spanish fascist government of Francisco Franco. Obama also snubbed Zapatero, the current president of the rotating EU presidency, by saying he would not attend an EU-US summit scheduled for Madrid in May.

Obama's worsening relations with China, developing from the U.S. administration's agreement to sell advanced weaponry to Taiwan, and the tweaking of the nose of the Russian bear by placing missile systems in Poland and Romania, have a number of worldwide intelligence agencies wondering whether Obama is trying to outdo George W. Bush in obstinacy and diplomatic bluster.

Wednesday, February 10, 2010

Unprecedented Challenges In Financial History

I doubt there has ever been a time in financial history when there has been challenges of this magnitude....

This is not business as usual in any form....

When have financial meetings been so top secret?

When has the military cordoned off financial meetings?

When have F-18s, F-22s and French Rafales provided air support (as the Swiss did for the Davos seminar) for two central bank meetings in the last few weeks as the USA and Australia did?

Don't accept terrorism as an excuse for everything that remains unexplained. There are so many lies and so much misinformation out there that the task of figuring out what is real is a daunting task.

I implore you to go for safety in everything you do. How can you go wrong hunkering down?

Do not speculate....

You cannot out trade these people nor can you read their intentions by charts. Both are impossibilities.

Do not deal on borrowed money. Secure you and yours. Take delivery of your precious metals and share certificates.

We are in uncharted seas of international financial turmoil. The mega rich have no loyalty to anyone or anything.

I know some of them, made one of them from scratch, and I assure you, they would put their mothers in a microwave for the right price. This is a financial world war taking place behind top secret meetings that are deciding our fate while not even knowing they are out of control....

I can't change this but I can do my best to protect you.


Jim Sinclair

BIS tried to warn us.

Rosenberg gave us a head's up.

Ferguson and Faber sounded the alarm.

Now SocGen's Edwards and Grice are ringing the bell.

A lot of heavy-hitters are saying that this is not just a problem in Iceland, Dubai or Greece, but the start of sovereign defaults in fiat economies world-wide.....

Excerpt from must-read Zero Hedge exclusive:

An article written by University of Tennessee professor John R Garrett, "Monetary Policy and Expectations: Market-Control Techniques and the Bank of England, 1925-1931", describes in exquisite detail the gold falsification measures undertaken by the Bank of England in the interwar period in order to impact interest rates in a favorable direction, performed with the full criminal complicity of the Federal Reserve Bank of New York....

Jim Sinclair is the Chairman and CEO of Tanzanian Royalty Exploration Corporation (TRE: Altanext NYSE platform, TNX: Senior Toronto Stock Exchange). He is a precious metals and commodities specialist. Some of the highlights of his nearly 50 year career include the founding of Sinclair Group of Companies (1977), which offered full brokerage services. Mr. Sinclair served as a Precious Metals Advisor to Hunt Oil and the Hunt family for the liquidation of their silver position as a prerequisite for the $1 billion loan arranged by the Chairman of the Federal Reserve, Paul Volcker. He was also a General Partner and Member of the Executive Committee of two New York Stock Exchange firms and President of Sinclair Global Clearing Corporation and Global Arbitrage.

He has authored numerous magazine articles and three books dealing with a variety of investment subjects. He is a regular speaker at various commodities related events.

In January 2003, Mr. Sinclair launched, "Jim Sinclairs MineSet," which now hosts his gold commentary and is intended as a free service to the gold community.

Tuesday, February 9, 2010

‘multi-vector diplomacy’, pipelines and cash

‘multi-vector diplomacy’, pipelines and cash

After taking a backseat to the United States and Russia in Central Asia since the collapse of the Soviet Union, China is finally making its mark in the region, says Joshua Kucera. But while the three powers vie for influence, it could be the ‘stans’ that are playing the wiliest game of all.

When the leaders of Kazakhstan, Uzbekistan, Turkmenistan and China gathered in the desert of eastern Turkmenistan in December to inaugurate a new 1,800-kilometre natural gas pipeline running from Central Asia to China, it marked China's dramatic entrance into a battle previously dominated by Russia and the West over access to the region's natural resources. It also was a measure of Beijing's increasingly confident foreign policy, and its growing ties to--and interest in--its neighbours of the former Soviet Union.

‘This project has not only commercial or economic value. It is also political,’ Turkmenistan's president, Kurbanguly Berdymukhamedov, said at the time. ‘China, through its wise and farsighted policy, has become one of the key guarantors of global security.’

Since the collapse of the Soviet Union, when the five ‘stans’ of Central Asia became independent countries, China has for the most part taken a back seat to the United States and Russia in this strategic region. In the 1990s, the United States began trying to gain influence largely to secure access for US companies to the oil and gas reserves that were just starting to be discovered, while also, through various democratization and human rights efforts, trying to get the authoritarian governments to liberalize their political systems. After the attacks of September 11, 2001, the US focus turned to military cooperation as it set up air bases in Uzbekistan and Kyrgyzstan. The region was a useful gateway into Afghanistan (which borders Turkmenistan, Uzbekistan and Tajikistan) and was also thought to be susceptible to the same sort of radical Islamism that vexed Afghanistan.

Russia has viewed all of this as an unwelcome intrusion into its backyard, and a threat to its own interests. The Soviet-era oil and gas infrastructure oriented all the export routes for Central Asia's petroleum resources through Russia, from which Russian state-owned companies profit handsomely. US democracy promotion campaigns look, from Moscow's vantage point, to be stalking horses for the sort of anti-Russian ‘colour revolutions’ that took place in Georgia and Ukraine. And US military bases in Central Asia compromise Russia's strategic depth in the region--Russia has its own large military base in Tajikistan and smaller facilities in Kyrgyzstan.

China, meanwhile, has carried out relatively quiet diplomacy in Central Asia, focused on narrow issues like delineating borders between it and the newly independent states, and in gaining cooperation on shutting down networks of dissident Uyghurs, a Turkic people closely related to Central Asians who were using the ‘stans’ as rear bases for anti-Beijing activities.

For most of the past 20 years, China's presence in Central Asia was innocuous enough to allow both the United States and Russia to believe that it benefited them. In US eyes, the primary goal was to loosen the grip that Russia had on these territories for centuries, and China would help in this. In addition, especially after September 11, the US welcomed China's cooperation in fighting terrorism in Central Asia.

Russia, too, cooperated with China in Central Asia, especially in trying to thwart a US military presence there, in both of their backyards. They formed the Shanghai Cooperation Organization, a regional security group originally billed as a ‘NATO of the East’ and including all of the ‘stans’ except Turkmenistan, which in 2005 called for the United States to leave its military bases in Central Asia.

And it worked: Shortly afterwards, the government of Uzbekistan forced the US to leave its base there; now it only has a base in Kyrgyzstan. (However, differences eventually emerged between Russia and China as to how the SCO should be oriented: while Russia wanted a more military-oriented alliance--the group still holds regular joint military exercises, though they've grown smaller in recent years--China was more interested in making it a tool for economic integration.)

But the opening of the Turkmenistan-China pipeline has changed the game, and has established China as a true player in the region, to the likely detriment of both Russian and US energy interests.

The focus of US energy policy in the region is getting natural gas to Europe from the Caspian Sea region without going through Russia. While the United States wouldn't get any of the Caspian gas itself, its aim is to break the monopoly that Russia has over the natural gas market in many European countries, especially former Warsaw Pact countries like Bulgaria and Romania that are most vulnerable to Russian pressure and also some of the most loyal US allies in Europe. The danger of that monopoly has been illustrated over several recent winters when Russia cut off gas supplies to Europe--ostensibly over pricing disputes, but targeting political nemeses like Ukraine.

To that end, a US-backed pipeline transporting gas from Baku, on the Caspian Sea coast, to eastern Turkey, went online in 2006. And the United States is now attempting to put its weight behind another pipeline project, either the Nabucco pipeline (which would take gas from Turkey to Austria) or the so-called Interconnector Turkey-Greece-Italy.

But no one will build such a pipeline, no matter how strong the political support from Washington, if it won't make money. And the question about these pipelines is, where would the gas come from? Azerbaijan has pledged some gas from the Caspian Sea, but the amount it could provide would not be enough to make the pipeline worth building. Iran--which has the second-largest gas reserves on Earth--has offered to take part. Turkey supports that, but it is of course not palatable to the Americans. Iraq is a possibility, but by far the most tempting options are from Central Asia: Kazakhstan and, especially, Turkmenistan.

Turkmenistan's known gas reserves are in the top five in the world, with the possibility of even greater discoveries to come. But no one is sure if it has enough gas to supply both China and the West, not to mention Russia (where Turkmenistan exported 70 percent of its gas until the Chinese pipeline started up) and Iran (with whom it also inaugurated a pipeline in December).

The Chinese pipeline could hurt Russia's monopoly position in Europe if it siphons off so much gas that Russia doesn't have enough to supply its European customers. But it could also thwart US plans. Turkmenistan's government says that it will have enough gas to ship some across the Caspian to Europe, in addition to supplying Russia, China and Iran, with whom it also inaugurated a new pipeline project in December. But it’s not yet clear if that’s true. And US officials have publicly acknowledged that China has made their bargaining position weaker: ‘It’s hard for us to compete with China in some of these countries, particularly countries that are a little more insular,’ said Richard Morningstar, the Obama administration's Eurasian energy envoy, at a congressional hearing last year. ‘It’s easy for Turkmenistan to make a deal with China, when China can come in and say, “Hey, we’re going to write a check for X amount of money, and we’re going to build a pipeline, and furthermore we’re going to lend you money so that you can explore, and we will be paid back in gas that you, ultimately, deliver to us.” You know, that's not a hard deal to accept. And we can’t compete in that way.’

Meanwhile, the US is correspondingly scaling back its energy ambitions in Central Asia, perhaps a tacit admission that they’re not likely to be achieved. In a January speech, Morningstar showcased a new Caspian energy strategy that was remarkable for its modesty. Morningstar said the United States would not necessarily object if Europeans chose not to build Nabucco and instead built one of the alternative pipelines that Russia backs. And he said Russia would even be welcome to participate in Nabucco if it wanted.

Thus far, China's economic gains in the region have not been matched by political influence. And Central Asian publics are much warier of China than they are of the United States or Russia: When Kazakhstan in December mooted the idea of leasing some of its farmland to China, rare public protests erupted.

So, in all this geopolitical back-and-forth, who is ‘winning’ in Central Asia? It's a common trope among armchair geopoliticians that the competition between the United States and Russia in Central Asia is a new ‘Great Game,’ referring to the spy-vs-spy intrigue between Britain and Russia in the 19th century, when each country manipulated the weak kingdoms and city-states of Central Asia as pawns against their rivals.

But these days, the Central Asian states are as likely to be using the big powers as pawns. For example, in 2008, while the Turkmenistan-China pipeline was under construction, Kazakhstan, Uzbekistan and Turkmenistan announced that they would dramatically raise the prices they charged to Russia for their natural gas. Says Central Asia analyst Martha Brill Olcott: ‘The increased bargaining power of the Central Asian states owes more to the entry of China into the market than to the opening of [the U.S.-backed pipelines going west].’

Kazakhstan's government even has a name for this tactic: ‘multi-vector diplomacy.’ Its government has dealt skilfully with oil companies, governments and militaries from Russia, China and the West to maximize its leverage and build the country into the success story of Central Asia. And its resource-rich neighbours, particularly Turkmenistan, are learning that lesson.

‘With an increasingly sophisticated understanding of the “game,” Central Asian governments have been able to bid up the price they are paid for their resources by playing one superpower off another,’ says Scott Radnitz, a Central Asia scholar at the University of Washington. ‘As Central Asian energy exporters increasingly diversify their export markets, the leverage anyone has over them will decrease.’

In the end, the ‘winner’ of all this 21st century intrigue might not be Russia or the US or even China, but the Central Asian countries themselves.

Sunday, February 7, 2010

Triple Curve graph

Federal Reserve - The London Connection

Triple Curve graphic, shown above, to demonstrate how he was able to forecast the present collapse of the globalized monetarist system, which is now reaching a critical point of instability.
LaRouche is proposing a non-monetarist credit system as the basis for a new economic system to replace the bankrupt IMF. This is the only way to avoid a world-wide economic collapse.

I see the biggest and most fundamental problem is that the "elites" in the USA (and by extension the West in general) who are supposed to "lead" have failed to exercise any responsibility at all. Except with their most important business, lining their own pockets at taxpayer expense.

I would argue that America is no longer a "free" nation, but just an advanced crony oligarchy married to corporate fascism. With a thin layer of "democracy" on top for appearance sake. It was a bloodless coup that few noticed over the last 15 years or so, and was so complete that opposing forces are all but rendered irrelevant. The public face is the Wall St mafia known as The Squidmen, you know the names.

For those who doubt this, consider Washington, who rushed to bail out their financial paymasters despite the fact the vast majority of the populace were opposed to bailing out Wall St. Voters are just sheeple, to be shorn of their money but otherwise ignored. The US requires A sound banking system to prosper, not the one you have which is only focused on looting.

The leadership class has failed as a whole, and so the nation has failed. Some might argue this is by design, but I put it down to simply greed and narrow focus on "getting mine" without regard to outcomes and history. They "won" individually, and the country lost collectively. It requires a special kind of power hunger to enrich yourself at the expense of your nations future. Maybe they envision being in charge of a nation that resembles downtown Detroit is still a win in their eyes.

With "leadership" like that it seems clear to me that the collapse has already happened. It only remains for the Potemkin village facade to fall away under the weight of history.

The point of financial 'no-return' may have already been passed - the amount of debt amassed could be insurmountable. Budgets could be cut to 0 and there still would not be enough revenue to balance the Budget and pay down the deficits.

Irresponsibility has squandered the wealth of the nation, as the future was mortgaged to support extremely bad decisions made in the past. An "empire" that requires loans from foreigners to survive is not worthy of the name.

Recognition of the true state of affairs and final collapse are the only stages left. Denial can't overcome reality forever, whatever lies the captured media class may utter.

I recall I said much the same a few years back, and nothing has changed, the cancer has spread....