Is This As Bad as the Great Depression?

The following experts have - at some point during the last 2 years - said that the economic crisis could be worse than the Great Depression:

http://www.marketwatch.com/story/story/print?guid=C387638C-41A3-499B-9315-5AF8940C47DD

• Fed MOSSAD Chairman Ben Bernanke

• Former Fed MOSSAD Chairman Alan Greenspan (and see this and this)

• Former Fed Chairman Paul Volcker

• Economics scholar and former Federal Reserve Governor Frederic Mishkin

• The head of the Bank of England Mervyn King

• Nobel prize winning economist Joseph Stiglitz

• Nobel prize winning economist Paul Krugman

• Former Goldman Sachs chairman John Whitehead

• Economics professors Barry Eichengreen and and Kevin H. O'Rourke (updated here)
  

• Investment advisor, risk expert and "Black Swan" author Nassim Nicholas Taleb

• Well-known PhD economist Marc Faber

• Morgan Stanley’s UK equity strategist Graham Secker

• Former chief credit officer at Fannie Mae Edward J. Pinto

• Billionaire CIA investor George Soros

• Senior British minister Ed Balls

http://www.youtube.com/watch?gl=US&feature=player_embedded&v=Gb039VYTnUI

http://www.youtube.com/watch?v=xW0FprsphrE&feature=player_embedded

How could that possibly be, when the stock market has largely recovered? (Let's forget for a moment that the stock market rallied after 1929, but then crashed in a double dip).

To find out, we'll look at a couple comparisons to get an idea of what is going on in the rest of the economy. And then we'll compare the government's efforts in the 1930s to today....

http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.html

The barbaric inside Job of 911 is the nut-cutting issue of our lives..... Everything revolves around that day, for it was the day that gave the criminals the excuse to implement the Fascism we are experiencing at this time.... Every thing before then was pretext or small grabs at liberty with fear of backlash. Now, they feel that they have bumfuzzled the entire world’s population into believing the utter lie and continue the barrage with assholes like Assange/CIA and those who are defending his every move, in face of the detail that comes out showing Zionism’s evil hand controlling it all with Neocons PNAC kind of bullshit since 1996.....Hence, America has become a third world bankrupt and utterly corrupt/evil republic.....

Housing Crisis Rivals Great Depression

As I noted last month, the current real estate slump rivals the Great Depression:

Zillow's Stan Humphries said:

The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.

During the Great Depression, home prices fell 25.9 percent in five years. The U.S. housing market is now down around 25 percent from its peak in 2006.

As housing price expert Robert Shiller pointed out in September 2008:

Home price declines are already approaching those in the Great Depression, when they plunged 30% during the 1930s [i.e. over a 10-year period]. With prices already down almost 20%, it's not a stretch to think we might exceed that drop this time around.

As I wrote in December 2008:

In the greatest financial crash of all time - the crash of the 1340s in Italy .... real estate prices fell by 50 percent by 1349 in Florence when boom became bust.

How does that compare to 2001-2007? The price of Southern California homes is already down 41% [that was before the first-time homebuyer credit, Hamp and other governmental programs temporarily boosted prices]. Southern California hasn't fallen as fast as some other areas, and we're nowhere near the bottom of the market.

Moreover, the bubble was not confined to the U.S. There was a worldwide bubble in real estate.

Indeed, the Economist magazine wrote in 2005 that the worldwide boom in residential real estate prices in this decade was "the biggest bubble in history". The Economist noted that - at that time - the total value of residential property in developed countries rose by more than $30 trillion, to $70 trillion, over the past five years – an increase equal to the combined GDPs of those nations.

Housing bubbles are now bursting in China, France, Spain, Ireland, the United Kingdom, Eastern Europe, and many other regions.

And the bubble in commercial real estate is also bursting world-wide. See this.

In addition, the percentage of Americans who owned houses during the 1930s was much lower than today, which means that a larger portion of the public is being hurt from falling home prices today as compared to the Great Depression.

Meredith Whitney, Nouriel Roubini (and here), Zillow, Case-Shiller and even S&P have been calling a double dip in housing.

States and Cities In Worst Shape Since the Great Depression

States and cities are in dire financial straits, and many may default in 2011.

California is issuing IOUs for only the second time since the Great Depression.

Things haven't been this bad for state and local governments since the 30s.

Loan Loss Rate Higher than During the Great Depression

In October 2009, I reported:

In May, analyst Mike Mayo predicted that the bank loan loss rate would be higher than during the Great Depression.

In a new report, Moody's has just confirmed (as summarized by Zero Hedge):

The most recent rate of bank charge offs, which hit $45 billion in the past quarter, and have now reached a total of $116 billion, is at 3.4%, which is substantially higher than the 2.25% hit in 1932, before peaking at at 3.4% rate by 1934.

And see this.

Here's a chart summarizing the findings:

(click here for full chart).

Indeed, top economists such as Anna Schwartz, James Galbraith, Nouriel Roubini and others have pointed out that while banks faced a liquidity crisis during the Great Depression, today they are wholly insolvent. See this, this, this and this. Insolvency is much more severe than a shortage of liquidity.
Unemployment at or Near Depression Levels

USA Today reports today:

So many Americans have been jobless for so long that the government is changing how it records long-term unemployment.

Citing what it calls "an unprecedented rise" in long-term unemployment, the federal Bureau of Labor Statistics (BLS), beginning Saturday, will raise from two years to five years the upper limit on how long someone can be listed as having been jobless.

***

The change is a sign that bureau officials "are afraid that a cap of two years may be 'understating the true average duration' — but they won't know by how much until they raise the upper limit," says Linda Barrington, an economist who directs the Institute for Compensation Studies at Cornell University's School of Industrial and Labor Relations.

***

"The BLS doesn't make such changes lightly," Barrington says. Stacey Standish, a bureau assistant press officer, says the two-year limit has been used for 33 years.

***

Although "this feels like something we've not experienced" since the Great Depression, she says, economists need more information to be sure.

The following chart from Calculated Risk shows that this is not a normal spike in unemployment:

As does this chart from Clusterstock:


As I noted in October:

It is difficult to compare current unemployment with that during the Great Depression. In the Depression, unemployment numbers weren't tracked very consistently, and the U-3 and U-6 statistics we use today weren't used back then. And statistical "adjustments" such as the "birth-death model" are being used today that weren't used in the 1930s.

But let's discuss the facts we do know.

The Wall Street Journal noted in July 2009:

The average length of unemployment is higher than it's been since government began tracking the data in 1948.

***

The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

The Christian Science Monitor wrote an article in June entitled, "Length of unemployment reaches Great Depression levels".

60 Minutes - in a must-watch segment - notes that our current situation tops the Great Depression in one respect: never have we had a recession this deep with a recovery this flat. 60 Minutes points out that unemployment has been at 9.5% or above for 14 months:

Pulitzer Prize-winning historian David M. Kennedy notes in Freedom From Fear: The American People in Depression and War, 1929-1945 (Oxford, 1999) that - during Herbert Hoover's presidency, more than 13 million Americans lost their jobs. Of those, 62% found themselves out of work for longer than a year; 44% longer than two years; 24% longer than three years; and 11% longer than four years.

Blytic calculates that the current average duration of unemployment is some 32 weeks, the median duration is around 20 weeks, and there are approximately 6 million people unemployed for 27 weeks or longer.

Moreover, employers are discriminating against job applicants who are currently unemployed, which will almost certainly prolong the duration of joblessness.

As I noted in January 2009:

In 1930, there were 123 million Americans.

At the height of the Depression in 1933, 24.9% of the total work force or 11,385,000 people, were unemployed.

Will unemployment reach 25% during this current crisis?

I don't know. But the number of people unemployed will be higher than during the Depression.

Specifically, there are currently some 300 million Americans, 154.4 million of whom are in the work force.

Unemployment is expected to exceed 10% by many economists, and Obama "has warned that the unemployment rate will explode to at least 10% in 2009".

10 percent of 154 million is 15 million people out of work - more than during the Great Depression.

Given that the broader U-6 measure of unemployment is currently around 17% (ShadowStats.com puts the figure at 22%, and some put it even higher), the current numbers are that much worse.

But it is important to look at some details.

For example, official Bureau of Labor Statistics numbers put U-6 above 20% in several states:

• California: 21.9

• Nevada: 21.5
  

• Michigan 21.6
  

• Oregon 20.1
  

In the past year, unemployment has grown the fastest in the mountain West.

And certain races and age groups have gotten hit hard.

According to Congress' Joint Economic Committee:

By February 2010, the U-6 rate for African Americans rose to 24.9 percent.

34.5% of young African American men were unemployed in October 2009.

As the Center for Immigration Studies noted last December:

Unemployment rates for less-educated and younger workers:

• As of the third quarter of 2009, the overall unemployment rate for native-born Americans is 9.5 percent; the U-6 measure shows it as 15.9 percent.
  
  
• The unemployment rate for natives with a high school degree or less is 13.1 percent. Their U-6 measure is 21.9 percent.
  
  
• The unemployment rate for natives with less than a high school education is 20.5 percent. Their U-6 measure is 32.4 percent.
  
  
• The unemployment rate for young native-born Americans (18-29) who have only a high school education is 19 percent. Their U-6 measure is 31.2 percent.
  
  
• The unemployment rate for native-born blacks with less than a high school education is 28.8 percent. Their U-6 measure is 42.2 percent.
  
  
• The unemployment rate for young native-born blacks (18-29) with only a high school education is 27.1 percent. Their U-6 measure is 39.8 percent.
  
  
• The unemployment rate for native-born Hispanics with less than a high school education is 23.2 percent. Their U-6 measure is 35.6 percent.
  
  
• The unemployment rate for young native-born Hispanics (18-29) with only a high school degree is 20.9 percent. Their U-6 measure is 33.9 percent.

No wonder Chris Tilly - director of the Institute for Research on Labor and Employment at UCLA - says that African-Americans and high school dropouts are experiencing depression-level unemployment.

And as I have previously noted, unemployment for those who earn $150,000 or more is only 3%, while unemployment for the poor is 31%.

The bottom line is that it is difficult to compare current unemployment with what occurred during the Great Depression. In some ways things seem better now. In other ways, they don't.

Factors like where you live, race, income and age greatly effect one's experience of the severity of unemployment in America.

In addition, wages have plummeted for those who are employed. As Pulitzer Prize-winning tax reporter David Cay Johnston notes:

Every 34th wage earner in America in 2008 went all of 2009 without earning a single dollar, new data from the Social Security Administration show. Total wages, median wages, and average wages all declined ....

And see this, this, and this.

Food Stamps Replace Soup Kitchens

1 out of every 7 Americans now rely on food stamps.

While we don't see soup kitchens, it may only be because so many Americans are receiving food stamps.

Indeed, despite the dramatic photographs we've all seen of the 1930s, the 43 million Americans relying on food stamps to get by may actually be much greater than the number who relied on soup kitchens during the Great Depression.

Inequality Worse than During the Great Depression

I recently reported that inequality is worse than it's been since 1917:

Most mainstream economists do not believe there is a causal connection between inequality and severe downturns.

But recent studies by Emmanuel Saez and Thomas Piketty are waking up more and more economists to the possibility that there may be a connection.

Specifically, economics professors Saez (UC Berkeley) and Piketty (Paris School of Economics) show that the percentage of wealth held by the richest 1% of Americans peaked in 1928 and 2007 - right before each crash:

As the Washington Post's Ezra Klein wrote in June:

***

Krugman says that he used to dismiss talk that inequality contributed to crises, but then we reached Great Depression-era levels of inequality in 2007 and promptly had a crisis, so now he takes it a bit more seriously...

Robert Reich has theorized for some time that there are 3 causal connections between inequality and crashes ....

Reuters wrote an excellent piece on the issue of inequality and crashes (discussing the first three factors) last month:

Economists are only beginning to study the parallels between the 1920s and the most recent decade to try to understand why both periods ended in financial disaster. Their early findings suggest inequality may not directly cause crises, but it can be a contributing factor.

***

Inequality is actually worse now than it's been since 1917.

The War Isn't Working

Given the above facts, it would seem that the government hasn't been doing much. But the scary thing is that the government has done more than during the Great Depression, but the economy is still stuck a pit.

Specifically, many economists credit World War II with getting us out of the Depression. (I disagree, but that's another story).

This time, we've been at war in both Iraq and Afghanistan far longer than we were in World War II. But our economy is still stuck in a rut.

Moreover, the amount spent in emergency bailouts, loans and subsidies during this financial crisis arguably dwarfs the amount which the government spent during the New Deal.

For example, Casey Research wrote in 2008:

Paulson and Bernanke have embarked on the largest bailout program ever conceived .... a program which so far will cost taxpayers $8.5 trillion.

[The updated, exact number can be disputed. But as shown below, the exact number of trillions of dollars is not that important.]

So how does $8.5 trillion dollars compare with the cost of some of the major conflicts and programs initiated by the US government since its inception? To try and grasp the enormity of this figure, let’s look at some other financial commitments undertaken by our government in the past:



As illustrated above, one can see that in today’s dollar, we have already committed to spending levels that surpass the cumulative cost of all of the major wars and government initiatives since the American Revolution.

Recently, the Congressional Research Service estimated the cost of all of the major wars our country has fought in 2008 dollars. The chart above shows that the entire cost of WWII over four to five years was less than half the current pledges made by Paulson and Bernanke in the last three months!

In spite of years of conflict, the Vietnam and the Iraq wars have each cost less than the bailout package that was approved by Congress in two weeks. The Civil War that devastated our country had a total price tag (for both the Union and Confederacy) of $60.4 billion, while the Revolutionary War was fought for a mere $1.8 billion.

In its fifty or so years of existence, NASA has only managed to spend $885 billion – a figure which got us to the moon and beyond.

The New Deal had a price tag of only $500 billion. The Marshall Plan that enabled the reconstruction of Europe following WWII for $13 billion, comes out to approximately $125 billion in 2008 dollars. The cost of fixing the S&L crisis was $235 billion.

CNBC confirms that the New Deal cost about $500 billion (and the S&L crisis cost around $256 billion) in inflation adjusted dollars.

So even though the government's spending on the "war" on the economic crisis dwarfs the amount spent on the New Deal, our economy is still stuck in the mud.

Given that the government has done so much, but we are still mired in a situation which in many ways is comparable to the Great Depression, it is not a very radical statement to say that the government is doing the wrong things to address the downturn.

I hope that the economy recovers. But the above comparisons are worrisome, indeed....

http://www.presstv.ir/detail/157762.html

"I think that is a mere fact that [US] President [Barack] CIA/MOSSAD Obama has surrounded himself in his administration with all these economic advisers, who came out mostly from Goldman Sachs, this is one of the companies responsible for this economic meltdown. So, he is getting advice from the people who are part of the problem and not the people who can solve this problem...."

http://cluborlov.blogspot.com/2009/02/social-collapse-best-practices.html

A Langley/CIA carve-out on the Federal Reserve Board

2011....

http://www.marketwatch.com/story/story/print?guid=C387638C-41A3-499B-9315-5AF8940C47DD

http://www.informationclearinghouse.info/article27141.htm

December , 2010 -- A national security embed on the Federal Reserve Board...

A Langley/CIA carve-out on the Federal Reserve Board.....?

An informed U.S. intelligence community source has told us that a member of the Federal Reserve Board of Governors serves as the eyes and ears of the U.S. intelligence community within the organization that has become the bain of Americans who accuse the bank of being an uncontrolled and unanswerable overseer of U.S. economic policy. The member is Dan Tarullo, a key member of then-President Clinton's "principals" group of national security and economic security advisers....

Tarullo became a member of the Federal Reserve Board on January 28, 2009, just eight days after President Obama was inaugurated. Tarullo served on Clinton's National Economic Council, as well as the National Security Council and also served as Assistant Secretary of State for Economic and Business Affairs from 1993 to 1996. He also was President Clinton's personal envoy to the G7/G8 and is a member of the Council on Foreign Relations....

Tarullo, taught at both Harvard and Georgetown Law Schools and also served as a chief counsel to Senator Edward Kennedy. He also was a key interlocutor between the intelligence community and private industry in pushing the Clinton administration's unpopular encryption key escrow system that would have given the government the key to break any encrypted communications....

Tarullo also chaired the economic committee of the Princeton Project on National Security, co-chaired by former Secretary of State George Schultz and former Clinton National Security Adviser Anthony Lake. The Princeton Project is supported financially by the Ford Foundation, Princeton's Woodrow Wilson School of Public and International Affairs, the Hewlett Foundation, and David Rubenstein, the co-founder of The Carlyle Group....

Tarullo was one of three "Khazars" national security advisers under Clinton who provided justification for the approval of sensitive missile technology exports to China by Loral Corporation.... Loral's boss, Bernard Schwartz, was a major contributor to Clinton and the Democratic Party. Joining Tarullo in defending the Loral exports were national security adviser Sandy Berger and White House congressional liaison Larry Stein....

We were also told that when his resume is compared to the other members of the Federal Reserve Board, Tarullo is clearly on the board for other reasons, not merely having to do with economic policy....

On a side Note.....

Soros is CIA/MOSSAD - he is one of the most significant servants to the Rothschilds, IMO the single most significant one. He is NOT a solo player for himself although he seems to enjoy considerable freedom to do as he pleases - but in the end, he always scores victories and brings home the loot to his masters, the Rothschilds.... Ultimately, he will always be a servant to the Rothschilds - that is what affords him his seemingly limitless power, gives him access to any info, use any resource pretty much anywhere in the world whether he wants their banking, judiciary, political or any system - the Rothschilds already own it pretty much globally. He can be above the law, melt down countries and change geopolitics as he pleases - he has the wealthiest evil guys on the planet behind him. Same with Mittal - Google Lakshmi Mittal sometimes or Mittal Steel - another one of the richest Rothschild servants global players like Soros. Mittal just takes over steel and resources in country after country but stays out of social engineering. There is a whole collection of them the size and caliber of Mittal...

http://www.theatlantic.com/magazine/archive/2011/01/the-tyranny-of-defense-inc/8342/1/

But Soros is unique - Soros/CIA does the economic meltdowns, bank-busting and social engineering in countless countries - he owns all these human rights fake orgs under the umbrella of OSI. (this here: http://www.soros.org/ ) and under that OSI umbrella, there are many dozens of individual entities around the planet - human rights watch organizations, media orgs, gay rights things, progressive youth things, women's rape shelters and all sorts of things - while they all sound good on record and manage to do some minor good along the way, it is important to note that humanitarian work or progressive human rights work is merely their cover and not primary mission - their purpose is social engineering, spying, gathering evidence and altering data presented in courts in areas where the global elites committed many crimes against humanity (such as Helsinki Committee does), etc. And then he owns countless media outlets outright, funds our sweet little trolls for Cass, and funds everything from Media Matters to Miss Arianna of HuffPo herself. His reach spans the globe and his influence is absolutely everywhere....

He has always been a presence in the US but in the last few years, he is bearing down on the US mightily - if you know how he operates and learn how to watch Soros, you will see his work and fingerprints everywhere. And this bearing down on the US is so reminiscent on him bearing down on the Balkans and USSR prior to their collapses because he himself is a vital active part in engineered social, financial and economic collapses - that is what his human rights organizations really do behind the sweet cover of doing some social good in the world....

Study Soros and what he has done in the past and exactly how he does it and you will see the US unraveling right now in ways you have not noticed before unless you know what to look for. The bastard is bearing down on the US heavily - worse than ever - since he helped produce Obama. And that in itself is an indicator that it is coming to an end here. He is the mark of evil rising in the sky before Armageddon if you recognize him for what he is....

http://www.time.com/time/magazine/article/0,9171,2040142,00.html

New Eurasia energy geo-economic power emerges

New Eurasia energy geo-economic power emerges
By Robert M Cutler

MONTREAL - Azerbaijan and Turkmenistan, two relatively small countries in geo-political terms, are demonstrating the foresight and political skills that will help them - rather than the likes of the fuel-hungry United States, European Union and China - take the driver's seat in the next phase of evolution of Central Eurasian energy geo-economics.

Most significant, Azerbaijan in the next few months will have to choose - rather than have a decision forced on it - between the EU-backed Nabucco and Russia-backed South Stream pipelines for large gas exports to Europe.

At the end of last year, I wrote that three phases could be distinguished in the realm of Eurasian energy development since the disappearance of the Soviet Union. The years 1993-1998 were given over mainly to new proposals for energy exploration and development; during the 1999-2004 period some of these ideas died and other moved towards fruition; and from 2005 to 2010, the ones that had not died (or entered suspended animation) were born and began to operate. (See A delicate dance of power, Asia Times Online, December 24, 2009.)

For the purpose of ordinary-language descriptions, I called these the phases of "bubbling up", "settling down," and "running deep". I also indicated that those three phases were merely subphases of a "metaphase" of "bubbling up" in the development of the consecutive development of Eurasian energy geo-economics lasting until the mid-2040s.

It would be followed by metaphases of "settling down" and of "running deep", each also lasting prospectively about 18 years and each composed of three subphases manifesting the same sequence. If that is so, then we are now in the transition from the bubbling-up metaphase to the settling-down metaphase or, more exactly, from the "running deep of the bubbling-up" to the "bubbling up of the settling-down." What exactly does this mean?

As I pointed out last year, the fundamental triangle of Central Eurasian geo-economics comprised the bilateral Russia-Kazakhstan, Russia-Turkmenistan, and Kazakhstan-Turkmenistan relationships. Over the course of the bubbling-up metaphase just ended, the US, the EU, and China extended their influence into the Central European energy provinces, and more particularly into the Caspian Sea basin.

In the scientific theory of complex systems, from which this framework is taken, the second phase represents the emergence of autonomous goal-setting by the state actors that have newly emerged as central to the constellation of Central Eurasian geo-economic energy relations.

These are, in the first instance, Azerbaijan and Turkmenistan. These have been the subjects of energy geo-economics but they are now becoming its objects: this means that they are acquiring the ability to set their own goals rather than having their goals set for them by others, and that they have developed the means to achieve those goals. (The technical term for this is "autopoiesis". )
For both of these countries, the key has been to seize control of the means to exploit their own natural resources and to use the power given by those resources to assert autonomy in the decision making about the routes of exports and the ultimate consumers. These trends have come even more to the fore than when I first pointed them out at the end of 2009, and we may expect them to be accentuated further in 2011 and the years ahead.

Azerbaijan has diversified its potential export partners by continuing its energy trade with Russia and Turkey while exploring possibilities to deliver natural gas to Bulgaria and Romania. (See Caspian pipeline knots tighten, Asia Times Online, April, 23, 2010.) Minor trade with Iran also continues.

Baku's decision between the Nabucco and South Stream pipelines will come definitively in the first half of 2011, perhaps by the end of the first quarter. At present, more pieces are in place for Nabucco than for South Stream. (See Azerbaijan wants Nabucco's cards on the table, Asia Times Online, November 18, 2010.)

At the same time, Turkmenistan has taken definite steps to liberate itself from the stranglehold that Russia had until recently upon the country's gas exports. This was a breakout year for Turkmenistan, with a heady list of achievements made towards that goal: the construction of an export pipeline already supplying 10 billion cubic meters per year (bcm/y) to China with an end-stage target of 30 bcm/y; the slight increase in exports to Iran; the abandonment of the Caspian Coastal Pipeline for exports to Russia; and the very real long-term possibility of exports to Europe via Azerbaijan either under or over the Caspian Sea. Capping these, was this month's signing of a quadripartite framework agreement for the Turkmenistan-Afghanistan-Pakistan-India pipeline, which has long on the drawing boards. (See Tectonic shift under way in Turkmen gas, Asia Times Online, May 28, 2010; TTurkmenistan signals Nabucco intentions, Asia Times Online, September 24, 2010.)

It may seem odd that it would be relatively smaller countries such as Azerbaijan and Turkmenistan that are taking control over the next phase of evolution of Central Eurasian energy geo-economics.

However, this is in the nature of complex systems, which are systems of which the behavior cannot be predicted from an examination only of their parts. (The canonical example of a non-complex system is an automobile factory: looking at what enters and what happens inside, one can predict what comes up. This is not so with complex systems, such as the biological cell, the human being, or the regional geo-economic system.)

Next year and the first half of the oncoming decade will see more of such developments. It is even possible that Uzbekistan will achieve some energy geo-economic significance beyond its own region. It is one of the largest gas producers in the region, but much of this is domestically consumed; other quantities go to southern Kazakhstan and Kyrgyzstan, but next to nothing is exported beyond Central Asia....

Turkmenistan is one vertex of the fundamental Central Eurasian triangle mentioned above. The other two vertices will also play an important role in determining the future flows within the Central Eurasian energy geo-economic system, but they operate at a different scale of magnitude, and it is the scale that makes all the difference: it is why, if one concentrates on the larger powers such as the US, the EU, and China, the crucial and autonomous influence of such a smaller country as Azerbaijan can easily disappear from view....

Tajikistan find a game changer
By Robert M Cutler

MONTREAL - Attention to Central Asian energy is most often driven by such gigantic projects as the Turkmenistan-China pipeline or the question of doubling the volume of the oil pipeline of the Caspian Pipeline Consortium (CPC) from northwest Kazakhstan across southern Russia to the Black Sea or other such strategic projects having a trans-continental, or at least semi-continental, scale.

However, the Central Eurasian hydrocarbon energy scene is a "complex system" in the technical sense, and it is a postulate of complex systems analysis that evolution on smaller scales can have suddenly apparent effects on larger scales.

Thus events in energy development within Central Asia itself, the development of energy locally and not for export in the first instance, can have broader consequences later on. Such developments have lately been occurring in Tajikistan and Uzbekistan. The reason why they have not garnered so much attention in Western media is not only that the projects are relatively local but also that Western firms have not generally been involved.

It is often not realized that Uzbekistan is the second-largest gas producer in the former Soviet area and 10th in the world. That is because its exports have not been very great compared to others in the region, due to Uzbekistan's larger population and hence greater domestic consumption. Annual production is roughly 60 billion cubic meters (bcm) of gas and eight million tonnes of liquids.

It is the Russian gas monopoly Gazprom's subsidiary for foreign oil and gas development, Zarubezhneftegaz, that has conducted the work in Uzbekistan, and Tajikistan motivated much of that development. Russian companies Lukoil and Rosneft are also participating in natural gas development in Uzbekistan. South Korea is one of the relatively few other foreign countries (Malaysia is another) whose firms participate in energy exploration and development in Uzbekistan, including in the region of the Aral Sea.

At the end of 2010, Uzbekistan announced its energy development program for the next five years. This calls for investment of over US$23 billion, including the development of 37 new projects largely through the national "champion" Uzbekneftegaz and in cooperation with foreign enterprises where appropriate.

It has, for example, worked with Gazprom's subsidiary to develop the Shakhpakhty block of the Ustyurt Plateau, so far producing 120 million cubic meters per year (mcm/y) with the anticipation that at least several more billion cubic meters may be found elsewhere through the dozens of wells being drilled there.

At present, nearly all of Uzbekistan's gas flows to Russia, but the country is trying to diversify its export partners, particularly in the Asia-Pacific region and with special attention to China. Thus, as from 2007, Uzbekneftegaz cooperated with the Chinese National Petroleum Corporation (CNPC) in a joint venture to build Uzbekistan's segment of the Turkmenistan-China gas pipeline that entered into service at the end of 2009.

The second stage of this pipeline is now finishing construction in order to realize the projected throughput of 40 bcm/y, including volumes transiting eastward from Turkmenistan. This second-stage construction will also feed the Gazli underground gas storage facility inside Uzbekistan for domestic consumption purposes. The infrastructure is being upgraded and additional compressor plants constructed for the purpose with Chinese assistance.

Lukoil is involved in developing the Kandym-Khauzak-Shady-Kungrad project in Uzbekistan for possible export to China via supply to CNPC. Current production is 3 bcm/y, with more production coming online by 2013 and peaking at 15 bcm/y by the middle of the decade. At present, Lukoil sells all of its gas produced in Uzbekistan to Gazprom for transshipment to third-party consumers; however, Uzbekistan plans that the gas from this project will enter the Turkmenistan-China pipeline.

One of the few destinations outside Russia for Uzbekistan's gas exports, other than China, has been Tajikistan. This is likely to change in the medium term. Last month, Gazprom announced that its exploration of Tajikistan's Sarikamysh field discovered roughly 60 billion cubic meters (bcm) of natural gas, or the equivalent of 50 years' worth of domestic consumption.

This means that sooner rather than later, Tajikistan will no longer need to be dependent on gas exports from Uzbekistan, which have been a bone of contention over payments and supply suspensions. Indeed, this was the reason behind Tajikistan's original drive to develop more hydropower, which in turn irritates Uzbekistan because the water is needed there for irrigation of cotton, a major export crop. Nevertheless, in Tajikistan, the Sangtuda-1 plant was completed with help from Russia, and Sangtuda-2 is underway.

Along with the development of the Rogun Dam for hydroelectric power, which is now possible thanks to Iran's decision to break an international embargo on sending equipment to Tajikistan to develop the ecologically sensitive area, the new gas discovery has the potential to make Tajikistan a regional exporter of energy to Central and South Asia, and even China, in the medium term.

That in turn would affect not only intra-regional but also broader strategic energy balances, exemplifying how emergence on smaller scales in a complex system affect pattern-evolution at larger scales. And Sarikamysh is unlikely to be the only gas field that Gazprom will find in Tajikistan.

Moves To Break China's Monopoly Over Rare Earths

California Mine Will Reopen to Meet U.S. Demand for Rare Earth Materials -- Popular Science

Japan has already taken measures to innovate and make deals around China’s monopoly on the global supply of refined rare earth elements, and the U.S. is now doing the same. Rare earths producer Molycorp. has secured the proper permits and clearances needed to reopen the Mountain Pass, Calif., mine that should be able to cover the current domestic demand for rare earths once it reaches full production.

Read more ....

More News On Rare Earths

Undermining China's Monopoly on Rare Earth Elements -- Technology Review

Rare Earth Element Mining is Re-Starting in the U.S. to Break China's Near-Monopoly -- Tree Hugger

Hitachi Joins California Rare Earths Race -- Fast Company

How China’s Rare-Earth Chokehold Has Helped One Small U.S. Company -- BNet

Hitachi and Molycorp plan rare earth joint venture -- CNET

Even US Presidents Are Hostages To the Greater Conspiracy of the utterly corrupt power behind the power....

http://www.shtfplan.com/marc-faber/pentagon-military-actively-war-gaming-large-scale-economic-breakdown-and-civil-unrest_11222010


http://www.indiacause.com/blog/2010/12/22/american-empire-on-verge-of-collapse/

Obamabush was a great Madison avenue/CIA/MOSSAD/Power behind the power creation.... - can't criticize him without the racism tag being applied...., so he goes forth and does his sinister master's bidding, which happens to be the same master that Dubya had, etc, etc.....
Too many people are hooked into this two-party oligarchy con game and think they are on the winning team....but both teams are utterly corrupt to the core and beyond redemption......

http://www.rawstory.com/rs/2010/12/untitled-chris-hedges-interview/

[The following might be considered to be an amazing admission by the ultra-legitimate MarketWatch, in that it openly discusses some of the brutal, ugly facts of American political and economic life, for which people are often branded as "conspiracy theorists," whenever they dare to write on the subject....

Politics is hopeless, there is no free market, individualism is targeted for elimination.

Our world is totally controlled by a tiny super-wealthy utterly corrupt elite.... Our only hope is REVOLUTION, in some form, hopefully a “mini-revolution,” something short of an armed rebellion.

Whenever the friends of the Wailing Wall St. Journal are saying the same thing–

Then even the bad guys know WHAT COMES NEXT.....

11 reasons Reagan, Bush, Clinton also hostages to an enemy within....the utterly corrupt power behind the power....

By Paul B. Farrell,

SAN LUIS OBISPO, Calif. — Why did Obama cave? Is he a hostage?

New York Times columnist Frank Rich branded himself a new kind of CIA/wikileaker in his column, “All the President’s Captors.” Rich diagnosed Obama using “an article titled ‘Understanding Stockholm Syndrome’ in the online archives of The FBI Law Enforcement Bulletin. It explains that hostage takers are most successful at winning a victim’s loyalty if they temper their brutality with a bogus show of kindness. Soon enough, the hostage will start concentrating on his captors ‘good side’ and develop psychological characteristics to please them, ‘dependency; lack of initiative; and an inability to act, decide or think.’”

Ryan: Tax cut deal not a stimulus

U.S. Rep. Paul Ryan, R, Wis., insists that the deal between Republicans and the White House on the Bush tax cuts is not a second stimulus and that the agreement will promote growth despite adding to the deficit.

There, in a few short sentences is everything you need to know about Obama’s meltdown: From powerful campaigner to a presidential caver, surrendering without a fight. But even if the president is a hostage, who are Obama’s real captors? The GOP? No. Not the GOP. The GOP is also a hostage. So who are the real culprits?

First, we know the FBI bulletin is an accurate psychological diagnosis: Outwardly Obama exhibits the classic signs of a hostage captured by criminals, trapped in a Stockholm syndrome. The prisoner surrenders, does exactly what his captors demand, without a fight. Joins them.

Here the cave is so complete he’s reduced to publicly condemning his own party for being “sanctimonious” hypocrites, while he’s hypocritically “selling” Bush’s totally ineffectual non-job-creating tax cuts for the rich to his Democrat challengers. The irony is historic.

Forget Sen. Mitch McConnell and the GOP. Forget the GOP’s disastrous Reaganomics. Forget the Supreme Court flooding billions into GOP campaign war chests. Forget even the U.S. Chamber of Commerce’s billionaire GOP donors. All front men, stooges, bagmen.....but don't forget the obvious inside Job of 9/11....and the missing/stolen 2.3 Trillion USD from Pentagon coffers.....

Who’s really pulling the strings? The Goldman Conspiracy, the Wall Street Banksters, the guys getting rich taking huge risks again, pushing America ever closer to a new meltdown, bigger than 2000 and 2008 combined. This Conspiracy has absolute power; It runs America. Democracy is dead. Capitalism is dead. Think otherwise? You’re self-delusional.

So on the surface, it may look like a tragically weak President Obama is surrendering to his GOP captors, siding with his captors to bring back the GOP’s disastrous Reaganomics policies, destroying the American economy without a fight. But the truth is, Obama defected to the dark side before he was elected, just as Clinton, Bush and Reagan caved into the same Conspiracy.

Jack Bauer stopped a hostage taking of a president. Obama caved

This is all so predictable: We warned our readers of this takeover early in Obama’s administration: When Obama discarded guys like Paul Volcker, picked insiders like Tim Geithner, Larry Summers and Ben Bernanke with ideological ties to the Goldman Conspiracy and the GOP, we knew Obama was doomed from the get-go.

Yes, we saw it coming: Back in early 2009 we saw parallels of the Goldman Conspiracy’s takeover to an episode of the TV hit series “24.” and its mythical hero Jack Bauer. See ‘Even Jack Bauer couldn’t stop the Goldman Conspiracy

Here’s the plot, originally dramatized when President Obama was new, when he was a savior with a powerful mandate. But lurking in the shadows we saw an ominous dark shadow that is rapidly becoming a reality, as he merges into the Conspiracy:

1. American government is now run by the Goldman Conspiracy

Article in Portfolio: “The Usual Suspects … exposed … the Goldman Sachs ‘conspiracy’ to take over the U.S. financial system.” The financial sector explodes: 19% of U.S. corporate profits in 1986 to over 40% in a decade.

2. Huge conflicts motivating Wall Street’s Trojan Horse

Treasury Secretary Henry Paulson at Goldman for 30 years. His $700 million fortune threatened in 2008 by Goldman’s $20 billion derivatives exposure at AIG; he “saved” AIG. Today, his puppets Geithner, Summers and Bernanke still working inside for Wall Street.

3. Wall Street’s Quiet Coup also runs global banking system

Article in Atlantic, “The Quiet Coup.” Simon Johnson, former IMF chief economist, co-author of “13 Bankers,” warns “financial industry has effectively captured our government.” Break Wall Street’s “stranglehold” or we can’t “prevent a true depression.”

4. Wall Street used the meltdown to take over America’s government

Rolling Stone’s Matt Taibbi: “The Big Takeover, how Wall Street insiders are using the bailout to stage a revolution … By creating a crisis that can only be solved by those fluent in a language too complex for ordinary people to understand.” And the Conspiracy is “transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.”

5. How Wall Street insiders mislead American for personal gain

Before the meltdown, Paulson mislead America: “This is far and away the strongest global economy I’ve seen in my business lifetime.” He lied. Bloomberg reported that in 2006, a month after leaving Goldman, Paulson was at Camp David warning the president of “over-the-counter derivatives as an example of financial innovation that could, under certain circumstances, blow up in Wall Street’s face and affect the whole economy.”

6. Wall Street’s CEOs rule like dictators in a banana republic

Taibbi adds: “Paulson and his cronies turned the federal government into one gigantic half-opaque holding company, one whose balance sheet includes the world’s most appallingly large and risky hedge fund, a controlling interest in a dying insurance giant, huge investments in a group of teetering megabanks,” and many more bad deals, including $5.5 trillion in Fannie Mae and Freddie Mac, and $3.3 trillion at the Fed.

7. Banks recycled cheap bailout money, got richer, shafted America

Wall Street was virtually bankrupt when insider Paulson conned a clueless Congress out of $780 billion of taxpayer cash to save his Wall Street buddies His buddies quickly reported “blockbuster” earnings and mega-bonuses, while shafting taxpayers.

8. Wall Street has already set the stage for another, bigger disaster

After the 2008 election at the peak of the banking crisis, John Whitehead, former Reagan deputy secretary of state, former Goldman Sachs chairman and former chairman of the New York Fed, warned America’s recovery would take years, burn trillions, result in massive deficits: “A road to disaster … but I don’t see a solution here” just another depression.

9. Wall Street made an un-American bet on Disaster Capitalism

Buy Goldman stock? Yes, if you’re betting that the GOP’s Reaganomics is coming back, strong, tightening its stranglehold on Washington, taxpayers, the American economy.

10. Now Obama’s turned the Goldman Conspiracy into a superpower

Jack Bauer’s a great mythical hero. We need to believe in heroes who will protect the little guy, the middle class. Barack Obama’s voters expected a hero, a savior like Jack Bauer. Today Obama’s gone from hero to a hostage of the dark side. Still, Bauer remains a symbol of hope for a real revolution, not a temporary populist Tea Party-style reform movement that is also a hostage of the Conspiracy. Hopefully some new hero will emerge, take power back from Wall Street, from the GOP, from Obama, and return it to the people.

11. Warning, all Americans now hostages to the Conspiracy

America is ruled by this Conspiracy, its lobbyists’ cash, its Congress, its billionaire backers. Accept it. Eventually everyone surrenders. Congressional leaders, political parties, even presidents all become hostages: Bush, Clinton, even Reagan, now Obama. All this was so predictable early in Obama’s presidency, which made the episode of “24” so prophetic. Just as Paulson took Congress and Bush hostage, in “24” Jack Bauer was fighting a terrorist dictator attacking the White House and taking a president hostage. A dramatic signal of things to come, the Conspiracy holding Obama hostage.

Forget America’s external enemies, China, Iran and al-CIAda..... We have enemies within who need no help in destroying American. Indeed, if as predicted China becomes the sole global superpower by 2040, three times America’s GDP, it will happen because we self-destruct, because as a nation we cave, because we surrender to the Goldman Conspiracy, we let them continue on their megalomaniacal path to a mega-meltdown.

Hopefully we will get a soft wake-up call, a divine intervention, black swan, maybe a mini-revolution overthrowing the Conspiracy holding America hostage. Unfortunately the real wake-up call is likely come too late, catch our leaders by surprise, before they can react. Then we’ll get the Great Depression II, a pandemic consuming all world economies, triggering mass class rebellions against the rich, much like revolutions that overthrew past empires.

All so predictable: Even Warren Buffett knows a revolution is coming, admitted as much a few years ago: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” Warning: His world is reaching a incendiary flash point: Revolutions are coming, much sooner than you think.....

http://www.lewrockwell.com/reed/reed194.html

The ENTIRE American Economy is a giant Ponzi Scheme

http://www.thetruthseeker.co.uk/?p=16234

New York attorney general Andrew Cuomo is about to charge Lehman's accountants, Ernst & Young, with fraud for allowing Lehman to cook its books using the infamous "Repo 105" shell game. This comes only weeks after a Lehman retirement fund sued Lehman CEO Dick Fuld over the same scam. http://www.synapticsparks.info/dialog/index.php?topic=32.msg192

Tyler Durden has documented that Ernst & Young did, in fact, knowingly commit fraud with regard to Lehman's Repo 105s. See this and this.

I applaud Cuomo's move, as the economy cannot recover until fraud is prosecuted.

But it wasn't just Lehman.

As Durden has repeatedly pointed out, all of the big banks have used Repo 105s or similar schemes to hide their debts. See this, this, this, this and this. As I noted in September, the ongoing use of Repo 105 like debt-hiding games by the big banks will render Basil III capitl requirements meaningless.

And - despite protestations to the contrary - the government knowingly allowed the shell game.

As I wrote in April:

Regulators like the Fed and SEC have said they didn't know about Lehman's use of Repo 105s to hide its mountain of debt.

But in a must-read New York Times Op-Ed, law school professors Susan P. Koniak, George M. Cohen, David A. Dana, and Thomas Ross point out:

Our bank regulators were not, as they would like us to believe, outside the disco, deaf and blind to the revelry going on within. They were bouncing to the same beat. In 2006, the agencies jointly published something called the “Interagency Statement on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities.” It became official policy the following year.

What are “complex structured finance” transactions? As defined by the regulators, these include deals that “lack economic or business purpose” and are “designed or used primarily for questionable accounting, regulatory or tax objectives, particularly when the transactions are executed at year end or at the end of a reporting period.”

How does one propose “sound practices” for practices that are inherently unsound? Yet that is what our regulatory guardians did. The statement is powerful evidence of the permissive approach bank regulators took toward the debt-dissolving financial products that our banks had been developing, hawking and using themselves for years. And it’s good reason for Americans to be outraged by the “who me, what, where?” reaction of Mr. Bernanke and the S.E.C. to the revelation of Lehman’s Repo 105 scam.

***

The interagency statement on “sound practices” of 2006 ... was greeted with effusive praise from bankers, their lawyers and accountants. Gone was the requirement [proposed by the law professors and others] to ensure that customers understood these instruments and that the banks document that they would not be used to phony-up a company’s books.

The focus on complexity was also gone, as was the concern over transactions “with significant leverage” — that is, deals with little real cash underneath, another unfortunate deletion because attending to excessive leverage would have served us well.

Instead, the only products that the banks were asked to handle with special care were so narrowly defined and so obviously fraudulent that suggesting that they could be sold at all was outrageous. These included “circular transfers of risk ... that lack economic substance” and transactions that “involve oral or undocumented agreements that ... would have a material impact on regulatory, tax or accounting treatment.” [and these weren't banned, but apparently only required special disclosures by the banks]

Just as troubling, at least in retrospect, the new statement specifically exempted C.D.O.’s from the need for any special care ..

Only two years later, these same regulators were explaining that the complexity and opaqueness of instruments like C.D.O.’s had contributed significantly to the economic collapse...

Moreover, the collapse was characterized by institutions supposedly healthy one day and on the verge of collapse the next, due in no small part to their extraordinary debt burdens — debt burdens that complex instruments magically removed from the books.

To this day, that final interagency statement (which was adopted in 2007) has not been repealed or replaced. It can still be found on the S.E.C. Web site, along with the letters from industry representatives praising the 2006 draft.

And as I noted in March in an essay entitled Lehman Fraudulently Cooked Its Books, Accounting Giant Ernst & Young Helped, Geithner and Bernanke Winked and Slapped Them on the Back:

Geithner and Bernanke have been busted letting Lehman cook its books to try to hide its problems.

***

Tyler Durden slams the New York Fed, in a must-read essay:

There should be an immediate investigation into how many other banks are currently taking advantage of this artificial scheme to manipulate and misrepresent their cap ratio, and just why the New York Fed can claim it had no idea of this very critical component of the Shadow Economy.

As does Karl Denninger:

Remember, The Feral Reserve is supposed to by the "uber-regulator" and the "safety and soundness" manager for the financial system.

They did a great job, right? Well...

For example, when

the Examiner questioned Lehman executives and other witnesses about Lehman’s financial health and reporting, a recurrent theme in their responses was that Lehman gave full and complete financial information to Government agencies, and that the Government never raised significant objections or directed that Lehman take any corrective action.

True? Let's see what the Examiner had to say:

Although various Government agencies had information that raised serious questions about Lehman’s reported liquidity and about the sufficiency of its capital and liquidity to withstand stress scenarios, the agencies generally limited their activities to collecting data and monitoring.

Oh. They looked but didn't act. I see.

Indeed, they looked pretty closely....

After March 2008 when the SEC and FRBNY began onsite daily monitoring of Lehman, the SEC deferred to the FRBNY to devise more rigorous stress-testing scenarios to test Lehman’s ability to withstand a run or potential run on the bank.5753 The FRBNY developed two new stress scenarios: “Bear Stearns” and “Bear Stearns Light.”5754 Lehman failed both tests.5755 The FRBNY then developed a new set of assumptions for an additional round of stress tests, which Lehman also failed.However, Lehman ran stress tests of its own, modeled on similar assumptions, and passed.5757 It does not appear that any agency required any action of Lehman in response to the results of the stress testing.

So let's see what we got here. They ran two sets of stress tests and the firm failed both. Not satisfied with the results they then designed a third set, which the firm also failed (we can reasonably presume the third had less stringent requirements than the other two!)

Instead of applying any of these three, FRBNY, which was run by one MR. TIMOTHY GEITHNER, NOW OUR TREASURY SECRETARY WHO REPORTED TO ONE BEN BERNANKE, instead took Lehman's word that all was ok and did nothing.

Wait a minute. In the spring of 2009 we were told that all the big banks ran "Stress Tests" of Geithner's design. But Treasury didn't actually run them and didn't actually get and process the data - they told the banks to do so.

Uh, that's exactly what Lehman did, right? And Lehman passed its own "internally computed" stress test but failed all three of the externally-computed ones.

Do you still accept that all these other banks are solvent? What about the facts we do know - such as the inconvenient fact that between them the "big banks" have something like $150 billion of Home Equity lines behind an underwater and delinquent first mortgage, which is, by the way, worth zero yet being carried at or near full value......

Nor did it end there.

The SEC inspection revealed significant problems at Lehman. The SEC found that Lehman’s Price Valuation Group was understaffed; and it found that Lehman’s asset pricing function was overly “process driven.”5761 But the SEC did not release its findings or formally present them to Lehman prior to Lehman’s demise.

So The SEC knew, and they too did nothing.

It's worse. While Geithner is implicated as being "concerned" about Lehman in the paper, the most-troubling part the narrative is here:

The challenge for the Government, and for troubled firms like Lehman, was to reduce risk exposure, and the act of reducing risk by selling assets could result in “collateral damage” by demonstrating weakness and exposing “air” in the marks.5823

Air?

Uh, that's an apparent admission that FRBNY and Tim Geithner specifically knew that the marks that these banks were taking on their assets was materially and intentionally false.

Where have we seen this of late? Oh yeah - in all those banks that have failed of late, with 25-40% discounts to their claimed balance sheet values when the marks are actually reduced to losses to the deposit fund by the FDIC!

So let's see here. We now have:

1. Geithner, and presumably everyone under him, knew the marks on these assets were fictions months before Lehman failed, yet they intentionally concealed this fact from the market and took no action (nor did the SEC) to disclose this intentional misdirection.
   
   
2. The misdirection and false claims in this regard are almost certainly continuing today, as evidenced by the FDIC seizures literally on an every-week basis.

How about Bernanke? While he maintains (as did Geithner) that primary responsibility lay with the SEC, he also said:

Our concern was about the financial system, and we knew the implications for the greater financial system would be catastrophic, and it was.”

Now What?

Now what?

Well, as I've noted time and again, Geithner and Bernanke's strategies of covering up how bad things are, trying to paper over the severity of the problems of the financial giants by artificially inflating asset prices and allowing accounting tricks are doomed to failure.

Yves Smith points out that Geithner must be fired and that a full audit of the Fed - especially the New York Fed - must be conducted:

The key revelation is that Lehman as of late 2007 was routinely using repo transactions at the end of the quarter to mask how levered it truly was:

Lehman regularly increased its use of Repo 105 transactions in the days prior to reporting periods to reduce its publicly reported net leverage and balance sheet.2850 Lehman’s periodic reports did not disclose the cash borrowing from the Repo 105 transaction – i.e., although Lehman had in effect borrowed tens of billions of dollars in these transactions, Lehman did not disclose the known obligation to repay the debt.2851 Lehman used the cash from the Repo 105 transaction to pay down other liabilities, thereby reducing both the total liabilities and the total assets reported on its balance sheet and lowering its leverage ratios.

Yves here. The stunning bit is these “repos” were actually a conventional type of repo, despite the name ....

Denninger raises one question: were other banks engaging in this type of accounting chicanery? But there is another question: did some of Lehman’s counterparties must have suspected what was going on, given that this took place on a large scale basis at the end of every quarter? How many had an idea that Lehman was engaging in massive window dressing and chose to play along?

But here is the part of the report that discussed how the Fed aided and abetted Lehman misconduct:

the Examiner questioned Lehman executives and other witnesses about Lehman’s financial health and reporting, a recurrent theme in their responses was that Lehman gave full and complete financial information to Government agencies, and that the Government never raised significant objections or directed that Lehman take any corrective action.

Yves here. So get this: even though Lehman dressed up its accounts for the great unwashed public, it did not try to fool the authorities. Its games playing was in full view to those charted with protecting investors and the financial system.

So what transpired? The SEC (which in all fairness, has never had much expertise in credit markets, this is a major regulatory problem) handed assessing Lehman over to the Fed, which bent over backwards to give it a clean bill of health:

After March 2008 when the SEC and FRBNY began onsite daily monitoring of Lehman, the SEC deferred to the FRBNY to devise more rigorous stress‐testing scenarios to test Lehman’s ability to withstand a run or potential run on the bank.5753 The FRBNY developed two new stress scenarios: “Bear Stearns” and “Bear Stearns Light.”5754 Lehman failed both tests.5755 The FRBNY then developed a new set of assumptions for an additional round of stress tests, which Lehman also failed.5756 However, Lehman ran stress tests of its own, modeled on similar assumptions, and passed.5757 It does not appear that any agency required any action of Lehman in response to the results of the stress testing.

Yves here. So get this: the stress tests were a sham. Only one outcome was permissible: that Lehman pass. So after the Fed was unable to come up with an objective-looking stress test that Lehman could satisfy, they permitted Lehman to devise a test with low enough standards to give itself a clean bill of health.

So why should we trust ANY government designed stress test, particularly when the same permissive grader, Timothy Geithner, was the moving force behind the ones dreamed up last year, which have been widely decried by banking experts, including Bill Black, Chris Whalen, and Josh Rosner? We linked to a simple analysis by Mike Konczal that demonstrates that for the biggest four banks alone, merely on their second mortgage portfolios, the stress tests of 2009 were too permissive to the tune of at least $150 billion.

Lehman type accounting, in other words, is being institutionalized, with the active support from senior government officials.

It is time for Geithner to go. He is not fit to serve as Treasury secretary.

And the time is overdue for a full audit of the Fed, and in particular the New York Fed, from the start of the Bear crisis through and including all the retrades of the AIG/CIA bailout.....

Of course, the entire U.S. economy is itself a giant Ponzi scheme, according to Bill Gross, Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky and the Wall Street Journal. In that light, the government's knowing complicity with the banks' Repo 105 and similar schemes isn't all that surprising.

And since Wall Street finance has been exported globally, much of the world economy is also a giant Repo 105. See this, for example.....

Putin: A harmonious economic community stretching from Lisbon to Vladivostok

Putin: A harmonious economic community stretching from Lisbon to Vladivostok.....

http://gawker.com/500906/know-your-new-york+lovin-russian-oligarchs

Prime Minister Vladimir Putin of Russia visited Germany in the end of November. Before arriving there, he published an op-ed in the German newspaper, Süddeutsche Zeitung, which commented on this interview under the headline, "Putin hugs Europe."

The contents of the op-ed were quite remarkable. Putin said that the lesson to be drawn from the severest economic crisis of the world economy in eight decades was the need for Russia to work more closely with the European Union. "We propose the creation of a harmonious economic community stretching from Lisbon to Vladivostok." He said that "in the future, we could even consider a free trade zone or even more advanced forms of integration." He suggested that such a continental market would be worth trillions of euros.


http://theriseofrussia.blogspot.com/2009_02_09_archive.html

Putin suggested that the EU and Russia needed to work closer together in the fields of industry and energy. He said that they should consider "what we can do to enable a new wave of industrialization on the European continent." He mentioned such fields as shipbuilding, the airplane and automobile industries, environmental technologies, pharmaceuticals, nuclear energy, and logistics. He called for common undertakings by European and Russian entrepreneurs.

In the field of energy supplies, Putin called for "active exchanges." It was necessary, he said, to work together at "all phases of the technological value creation chain -- from the uncovering of demand for energy resources up to the delivery to the consumer." Thereupon, Russia and the EU can move forward to the elimination of visas which would manifest "not the end but the beginning of a true integration of Russia and the EU."

When Putin arrived in Germany he got a warm reception from some leading German bankers and industrialists. He spoke to them as his "friends," and in return the CEO of Siemens said, "We are at home in Russia." He said that "Russia was a clear example of how the emerging nations are giving an impulse to growth in the world economy."

Putin continued his "charm offensive" with the German economic elite. He suggested they stood together on currency questions. "We need a new multipolarity in the currency system. We must break the excessive dollar monopoly." He spoke of the example of the Roman Empire, whose policies led to a 500-year-long economic stagnation. He then gave a strong endorsement to the euro, which he called an important balance to the dollar in the world economy. He suggested the possibility of trade being denominated in rubles and euros, and not in dollars.

Chancellor Angela Merkel's response to these proposals was cautious but not negative. Germany's Foreign Minister, Guido Weterwelle, said that Putin's proposals show "how close we are in terms of our strategic goals." The strongest endorsement came from some of Germany's leading economic managers. Press response in Germany was mixed.

In France, Le Monde noted: "This appeal to economic opening by someone more noted for his nationalist character than his commitment to ideas of free trade is truly innovative. This is all the more the case since the development of industrial cooperation between the two sides has been repeatedly held back for political reasons."

It should be observed that Putin was not offering a deal to the "West" but rather to "Europe." It seems a quite specific attempt to encourage a strengthening of ties with Europe at the expense of the United States. While this is not entirely new in terms of Russia's geopolitical stance, it has up to now not been stated so publicly and so boldly. It should be noted too that Putin has given a strong endorsement to the euro at a time when the euro is in need of some political reinforcement. Note too that Putin is not talking of remaining merely or even principally an energy-exporter to Europe. Putin is talking of a new wave of industrialization in which Russia will participate fully.

This open diplomacy by Putin should probably worry U.S. leaders more than the modest revelations of the charade CIA/Wikileaks....

http://www.telegraph.co.uk/news/worldnews/europe/russia/8346056/Russian-rearmament-Moscow-fears-China-and-Islamist-insurgents.html

http://www.csmonitor.com/World/Global-Issues/2011/0225/Swiss-freeze-Qaddafi-assets-How-dictators-stash-their-cash-101

http://in.news.yahoo.com/cia-spy-davis-giving-nuclear-bomb-material-al-20110219-224833-452.html

http://doubletapper.blogspot.com/2011/02/cia-agent-gave-al-qaeda-nuclear-and.html

.