Saturday, December 31, 2011

Democracy expropriated and crushed, There are no markets anymore, only interventions....

Republic, Lost - The Quiet Coup D'etat, "Money, and ZOG Dollars Buys Results In Congress, the White House, Pentagon, and ALL the Dark Alleys on the Potomac..."

The NATIONAL DEFENSE AUTHORIZATION ACT passed by the traitors in congress is 662 billion ,,the total fiscal budget is for 1 trillion , this means that the war dept . is taking 66.2 % of the total u.s. budget, the elites have turned America into a nation of wars and cowardly assassinations of innocent people....

The international and domestic banking cabal that owns the fed enables the wars to be fought by creating trillions and trillions out of thin air to supposedly cover the cost of the wars, how ever every penny of the trillions created out of thin air for the wars is laid on the American taxpayer as debt as the elite cabal owned fed off loads the trillions and trillions onto the off record accounting of the treasury dept . and so onto us taxpayers.

To end the wars abolish the elite privately owned counterfeiting machine ponzi scheme aka the fed and the wars will be forced to end.

Under the provisions of THE NATIONAL DEFENSE AUTHORIZATION act which gives the government the power to arrest American citizens without warrant and to imprison and murder without trial, the day will come when these drones will be used against anyone who opposes the fourth Reich dictatorship that America is quickly becoming.

Also FEMA is letting contracts to KELLOGG BROWN and ROOT a subsidiary of HALLIBURTON to build even more CONCENTRATION CAMPS, ask yourself who do they intend to put in these camps,,, the people of Germany did not believe Hitler was building these camps until some of them ended up in them, it can happen here and it appears it will happen here under NDAA and FEMA AKA THE Waffen US/SS....

"Crooked Zioconned Money Buys Results In Congress"....

Summary: The reason for the failure of the American economy and the inability of the government to address it is because of the corruption and distortions inherent in a system where campaign contributions control the politicians and the policy, and less than one percent of the people control the vast majority of those campaign contributions and therefore the distribution of power.

Video presentation

Lawrence Lessig:
Republic, Lost

"The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than the democratic state itself. That in its essence is fascism: ownership of government by an individual, by a group, or any controlling private power.”

Franklin D. Roosevelt

This is the critical issue that will be addressed, one way or the other, across the developed world. The timing is difficult to judge because of the many exogenous factors. It could come quickly, or be over a longer period of time of many years. But in any case the result will be a mixed revival of democracy and the rapidly increasing repression of totalitarianism, in various countries at various times, similar to what the world had seen in the 1930's.
"If there must be trouble, let it be in my day, that my child may have peace.”

Thomas Paine
The roles that the various countries and their alliances will play are not yet clear. But what seems likely is that the next great leader or antichrist will once again appear draped in a flag, but this time will be wearing business attire instead of jackboots....
Financial and political repression Galore....
Referring to Financial Times editor Gillian Tett's December 22 column, "Ties Between Sovereigns and Banks Set to Deepen," to which the GATA Dispatch called your attention the other night with the headline "Citing 'Financial Repression,' FT's Gillian Tett Sounds Like Jim Rickards and Rob Kirby", a friend asks:

"Is the message here that governments have determined that the only way to stay in power is:
"To fund their excess through the banking system, at the expense of the private sector;

"And to go along with the gold price suppression scheme so that the only alternative to that system is not attractive either?

"If the Chinese, Indians, Japanese, and others buy into this power-preservation scheme, then it appears -- as you have long said -- there really is no true market left, and we're all screwed, no? This is not particularly what I want to believe, but if that's where we are, then I guess I need to deal with it."
Your secretary/treasurer replied: "Yes, that's how I construe the comments about 'financial repression' made by Rickards, Kirby, Tett, and others. It's a matter of government's making it impossible for investors to make money except in undertakings specifically approved and designed by the government itself, undertakings that get narrower and narrower as government intervention in markets grows more pervasive.

"Economic circumstances and markets will keep trying to find ways to assert themselves, and the different interests of some countries may cause them to act against the 'financial repression' other countries try to impose, what Rickards describes in his new book, Currency Wars so there's no assurance about how things will end up, just assurance of less democracy and more totalitarianism. That's what GATA has been fighting all along."

"Financial repression" was perhaps first foreseen by the British economist Peter Warburton in his 2001 essay "The Debasement of World Currency: It Is Inflation, But Not as We Know It"

Warburton wrote: "What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities, or anything else that might be deemed an indicator of inherent value.
Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets." [Emphasis added.]

That is, "financial repression."

As the idea reached her this month, Tett wrote incisively: "To understand this, it is worth taking a look at a fascinating recent working paper by Carmen Reinhart and M. Belen Sbrancia, published by the Bank for International Settlements but drawing on earlier work for the International Monetary Fund. ...

"... What Reinhart and Sbrancia argue is that if you want to understand how the West cut its debts during the last great bout of deleveraging -- namely, after the Second World War -- then do not just focus on austerity or growth. Instead, the crucial issue is that during that period, the state engineered a situation where the yields on government bonds were kept slightly below the prevailing rate of inflation for many years. This gap was not vast. But since asset managers and banks continued to buy those bonds at unfavorable prices, this implicit, subtle subsidy from investors helped the government to cut its debt pile over several years. Indeed, Reinhart and Sbrancia calculate that such 'repression' accounted for half of the post-Second World War fiscal adjustment in the U.S. and U.K., due to the magic of compounding.

"Now these days it is hard to imagine any Western government overtly calling for a second wave of such 'repression.' After all, as Kevin Warsh, a former Fed governor, recently pointed out, the drawback of financial repression is that it curbs private-sector investment and credit growth. And in any case it is a moot point whether such repression could even be implemented today, given the globalized nature of markets.

"Nevertheless, the political incentives to flirt with this concept are clear. After all, the beauty of a stealth subsidy is precisely that: It is too subtle for most voters to understand. It is also arguably a more equitable form of burden sharing, and thus less politically divisive, than, say, state spending cuts.

"Moreover, governments do not necessarily need to be 'repressive' to achieve the 'repression' trick. As the economist Alan Taylor observes, if investors are so terrified that they cannot see alternative investment choices, they may end up buying government bonds by default -- even at unattractive prices. [Emphasis added.]
Indeed, that is arguably what is already occurring today in the Treasuries market or the world of Japanese government bonds. And, perhaps, in the eurozone too. After all, when eurozone banks were given E442 billion of European Central Bank money two years ago, they used half of this to buy government bonds -- without compulsion at all.

"Whatever you want to call it, then, the state and private-sector finance are becoming more entwined by the day. It is a profound irony of 21st-century 'market' capitalism. And in 2012 it will only deepen."

Thus Tett, like Warburton long before her, expressed perfectly the rationale for the gold price suppression scheme even as she explained why there would be little point in questioning central bankers about their implementation of "public" policy. ("Now these days it is hard to imagine any Western government overtly calling for a second wave of such 'repression.'") In mainstream financial journalism it is simply taken for granted that the purposes and objectives of central banking are not to be learned from central banks themselves but rather from academics, market analysts, soothsayers, or whoever else might answer the telephone when a central banker won't.

As a practical matter, this assumption of mainstream financial journalism is probably correct. But the world might begin to change, however slowly, if journalists tried putting the questions to central bankers in public settings anyway and reported their evasions or refusals to answer. Eventually investors and even the public might come to understand that great power, the power to control the prices of all capital, labor, goods, and services in the world -- that is, the power to control the price of everything, absolute power -- was being exercised in secret so that the world more easily might be expropriated, that democracy had been crushed, and that, as a mere high school graduate remarked a few years ago, "There are no markets anymore, only interventions."

Secretary/Treasurer, GATA

I always considered his 'Austrian' and 'Laisser Faire' economics as utter nonsense at best, or absolute lunacy at worst. But now they are gaining more and more traction with the US public and I think that it is therefore time to honestly discuss these ideas here.

As a theory, 'Austrian' economics are fantastic. But so are Marxism and Anarchism. These theories all suffer from the same problem: highly loaded assumptions. In the case of 'Austrian economics', the flaw is basic, but huge: the concept of a free market. The fact is, of course, that there never was such a thing and that it will never exist. Markets are always, by definition, regulated by somebody. In the words of the brilliant economist Michael Hudson:
Every economy is planned. This traditionally has been the function of government. Relinquishing this role under the slogan of “free markets” leaves it in the hands of banks.
One might wonder why a political and economic theory based on a so self-evidently flawed idea has so many followers. The fact is, of course, that this theory has followers in significant numbers only in the USA. Why? Because of three uniquely American circumstances:

The evil nature of the state in US history:

It is a fact that throughout the history of the USA the state as always been on the side of the rich and powerful and not of the masses. Not only that, but the US state has spent trillions of dollars in waste, mismanagement and fraud. So it is no wonder that most Americans instinctively dislike a state which has almost never done anything useful for them. Why would Americans care for a state when they never lived in a society in which the state did care for the common folks? From its very inception the US state was both multi-genocidal (extermination of numerous Indian nations), slave-owning (Black slavery), plutocratic (Robber Barons) and oligarchic (Masonic). There is a good case to be made that the US state has been one of the worst ones in mankind's history, so its no wonder that it is also distrusted and hated by so many Americans.

The insular nature of the US society:

The vast majority Americans are hopelessly insular. Not to offend anybody here, but this is an undeniable fact. Not all Americans, of course, but the vast majority. The know only one language, they have rarely, if ever, been abroad. When they are abroad they don't really interact with the locals and, last but not least, they are largely ignorant of world history. I have yet to meet a US libertarian who could even pronounce "laisser faire" correctly, nevermind understand why this idea has been universally rejected by the rest of mankind. This is why Americans have these bizarre views about Obama being a 'socialist' or why they don't realize that civilized mankind has, for example, rejected the death penalty and adopted universal health care as a right for all. No, Americans will still passionately argue about issues which have already been settled pretty much everywhere else on this planet.

Then there are those Americans who are aware of the bigger planet out there, but still fall back on some form or another of 'American exceptionalism" (let them Euroliberals have their health care, this is not the American way!). The fact that what US libertarians call "statism" has been accepted and adopted by the rest of mankind therefore has no influence inside the USA at all. As the lyrics of a song which was popular in the late eighties say: "if it's good enough for Texas it's good enough for me"...

The unbridled power of US corporation:

It is well established that the "Tea Party" has been largely financed by the Koch brothers. But this is just the tip of the iceberg. The roots of this corporate libertarianism go back much further, to Ronald Reagan and his famous words in his first inaugural address:
Government is not the solution to our problem; government is the problem
That statement was the slogan under which US corporations marched into a real crusade against any form of control over them. We all know what happened after that: massive deregulations crippled entire sectors of the economy and nation, worker's rights collapsed, social safeguards were wiped-off, unions all but died, and every bit of the power vacuum left by a retreating state was immediately filled by US corporations. The difference being that while the US people had at least a modicum of control over their government, they had none over the corporations. Corporate America recognized that, and ever since it has backed anything on the spectrum going from Reaganomics to Austrian libertarian theories.

Compare these factors with the situation in Europe where most Europeans did, at one time or another of their lives, get real, valuable services from their government, where corporations are carefully controlled and regulated and the consumer thereby protected, where civil and worker's rights are considered "social achievements" (acquis sociaux in French) never to be rescinded (although under US pressure politicians like Merkel, Papandreou/CIA, Sarkozy/MOSSAD, Blair/CIA and Co. are now trying hard to dismantle them). Sure, there were plenty of incompetent, corrupt and outright evil governments in Europe, but there were always enough counter-examples sufficiently nearby (geographically or historically) to always remind Europeans that the solution to bad government is good government, not no government.

So we are really dealing with a misnomer here. Austrian Laisser Faire economics should really be called "US Turbocapitalsm" (term concocted by Ed Luttwak), or "US hypercapitalism" or even simply plutocracy.

Coming back to Ron Paul, I invite you all to listen to the interview of Webster Tarpley recorded by Bonnie Faulkner for her show Guns and Butter. Tarpley and Faulkner take a close look at Ron Paul's economic program and what it would mean if implemented.

For the direct link to the audio click here.
For the web page with the interview, click here.

The real danger:

Having said all these highly critical things about Ron Paul and his delusional and outright dangerous economic views, let me say that I understand that it is a fact that a US President has far more influence on foreign policy than in internal politics where he must contend with a Congress which can block the implementation of his economic policies and a Federal Reserve which will fight with everything it has to prevent Ron Paul from abolishing it (let me add here that this idea, to abolish the Fed, is an excellent and fundamentally sound economic idea of Ron Paul!). Finally, there is no doubt in my mind that if Ron Paul was elected President we would be simply murdered by the US "deep state".

So my concern is not that Ron Paul would instantly create millions of starving Americans by giving them a maximum of 15 dollars per week in food stamps or that he would wreck WIC, but that his ideology can be used by Corporate America to further weaken the state and strengthening the power of Wall Street. All this libertarian nonsense really serves only one practical purpose: to turn citizens of a state into corporate subjects/slaves.

Michael Hudson is quite correct. What we are witnessing in the USA (and, to a lesser degree, in Europe) is a return to feudalism, where the 99% serve the 1%, a society in which the people become simply a means of production for their corporate overlords. Laisser Faire indeed...

So ask yourself this question: do Ron Paul's economic ideas strengthen or weaken the power of Corporate America over the US people?

The answer is, I think, sadly obvious.....

The following “artistic liberty” is from Patrick Henry’s 1775 speech after ten years of his government’s violations of constitutional rights. The speech followed the first government attempts to use a standing army to disarm Americans. A standing army was in explicit violation of the English Bill of Rights.

NDAA 2012 (National Defense Authorization Act for fiscal year 2012) explicitly states dictatorial authority of the US executive branch to order US military to seize any person, including US citizens, for unlimited detention and without rights. This repeats explicit language in the 2006 Military Commissions Act. The previous two links document the specific and explicit Constitutional violations.

Because US government’s 1% “leadership” has tortured, refused to stop or prosecute torture under “new” “leadership” of Obama, now assassinates American citizens upon the dictation of the president, and now legislatives in NDAA 2012 to “disappear” Americans, our choice in 2012 seems clear: either arrest the criminal 1% “leadership” for obvious crimes, or suffer the seizure, disappearance, and torture of your neighbors, friends, family, and yourself in 2012.

The 30-second video shows what NDAA 2012 authorizes. You all learned in high school history that educated Germans allowed the same fascist devolution of their government.

Open proposal for US Revolution: end unlawful wars, parasitic economics is my strongest work to explain and document the 1%’s CRIMES centering in war and money.

Occupy This: US History exposes the 1%’s crimes then and now is my strongest work to explain and document that criminal Wars of Aggression and looting have been central in US policies for over 150 years.

History’s purpose is to recognize and act upon patterns of behavior in the present. Patrick Henry strongly agrees:

This is no time for ceremony.

The question before Americans is one of awful moment to this country. For my own part, I consider it as nothing less than a question of freedom or slavery. Should I keep back my opinions at such a time, through fear of giving offense, I should consider myself as guilty of treason towards my country, and of an act of disloyalty toward the Majesty of Heaven, which I revere above all earthly presidents and would-be kings.

It is natural to man to indulge in the illusions of hope.

We are apt to shut our eyes against a painful truth, and listen to the song of that siren while it transforms us into animals. Is this the part of wise men and women, engaged in a struggle for liberty? Are we to be of those who, having eyes, see not, and, having ears, hear not? For my part, whatever it may cost, I am willing to know the whole truth; to know the worst, and to provide for it.

I have but one lamp by which my feet are guided, and that is the lamp of experience.

I know of no way of judging of the future but by the past. And judging by the past, I wish to know what there has been in the conduct of Presidents and Congress for the last ten years to justify those hopes with which Americans have been pleased to solace themselves.

Is it that insidious smile with which Obama states “reservations” while signing NDAA into law? Trust it not; it will prove a snare to your feet! Do be betrayed with a kiss. Ask yourselves how a signing statement compares with those warlike preparations that darken our land.

Are armies necessary to a work of love?

Have we shown ourselves so unwilling to be reconciled with our own Constitution that force must be called in to win back our love? Let us not deceive ourselves! These are the implements of war and subjugation; the last arguments to which a tyrants resort!

And what have we to oppose them? Shall we try argument? We have been trying that for the last ten years!

Have we anything new to offer upon the subject? Nothing! We have held the subject up in every possible light; but it has been all in vain.

What arguments shall we find which have not been already exhausted when we “hoped” for “change”?

Let us not, I beseech you, deceive ourselves. We have done everything that could be done! We have petitioned; we have begged; we have prostrated ourselves before President Obama and Congress to arrest the tyrannical hands of President Bush, his War Criminals, and his Wall Street looting “1%.”

Our petitions to uphold the rule of law have been rejected while the petitioners have been arrested.

Our requests for justice have only produced additional violence and insult with expanded wars, more lies for war on Iran, torture, and continued bankster looting. We have been spurned, with contempt, from the foot of the 1%!

In vain we indulged the hope of peace and reconciliation with the 1% to uphold justice and our own Constitution. There is no longer any room for hope! If we wish to be free– if we mean to preserve our Constitutional rights for which we have been so long contending –we must Occupy!

I repeat it: we must Occupy!

Civil resistance, appeal to law enforcement to arrest the criminal 1% and not those who protest against the crimes, and appeal to the God of 100% is all that is left us!

They tell us that we are weak; unable to cope with so formidable an adversary. But when shall we be stronger? Will it be when we are totally disarmed, and when our military shall be stationed in every house? Shall we acquire the means of effectual resistance by lying on our backs and hugging the delusive phantom of hope, until the criminal 1% have bound us hand and foot and placed us in FEMA camps?

We are not weak if we make a proper use of those means which the God of nature has placed in our power!

The hundreds of millions of people, armed in the holy cause of liberty, and in such a country as that which we possess, are invincible by any force which the 1% can send against us.

Besides, we shall not fight our battles alone. There is a just God who presides over the destinies of nations, and who will raise up friends to fight with us. The battle is not to the strong alone; it is to the vigilant, the active, the brave.

Besides, Americans, we have no election with corporate media propaganda and unaccountable electronic voting machines. Even if we were weak enough to desire it, it is now too late to quit from the contest. There is no retreat but in submission and slavery! Our chains are forged! Their clanking may be heard at Occupy camps across the country!

Occupy is inevitable–and let it come! I repeat it: let Occupy come!

It is impossible to overstate the matter.

Americans may cry, “Hope, Change,” but there is no peace from unlawful wars! There is no Constitutional law! The next act of tyranny that sweeps from the 1% with NDAA will bring the clash of resounding arms! Occupy brethren and sisters are already in the fields and parks!

Why stand we here idle? What is it that Americans wish? What would they have? Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death!

Perhaps more accurately: either We the People demand and defend our liberty, or NDAA will give us death. That is, if US military chooses to reject the Constitution, love, and justice to disappear Americans rather than arrest obvious War Criminals and looters of trillions of Americans’ dollars every year.

Btw: my personal observation and recommendation for Occupy groups is to develop strategies that avoid arrests. Gandhi and Dr. King strategically targeted specific laws to break that made visible their government’s hypocrisy. When creative and lawful means of 1st Amendment rights are available, perhaps creative thinking can create expressions within the law that are more effective public communications than having to confront legal arguments regarding “Time, Place, and Manner.” If there are unconstitutional/unlawful violations by the 1% that Occupy groups choose to make visible and challenge, then polarizing that specific violation by refusing unjust laws might be effective.

With strategy, we can place the 1% on our own horns of a dilemma whereby their crimes are more effectively exposed to the 99%....

Saudi F-15s tip of $123 Billion gulf arms plan....

Saudi F-15s tip of $123 Billion gulf arms plan....

U.S. touts Saudi Arabia jet deal as a security, economic boon Thank Allah the Iranians-at least-can provide Zioconned USA jobs....

The worst part is that ALL these countries don't even know that these arms are electronically "Locked" into a certain pattern of use...and that most of them don't even know how to use them in any effective way.....

The $30 billion sale of 84 advanced Boeing F-15SA fighters and upgrades for 70 older models is a major component of a far wider U.S. arms deal with Saudi Arabia that's worth $63 billion and aimed at countering Iran.

But even that mega-deal is dwarfed by what the Financial Times calls "one of the largest re-armament exercises in peacetime history" -- the sale of advanced weapons worth $122.88 billion to the Arab monarchies of the Persian Gulf, all to smother Iran's expansionist aims.

Washington's announcement of the F-15 deal Thursday was apparently timed to coincide with major Iranian naval maneuvers in the Persian Gulf.

These are widely seen as a warning by Tehran it will seek to close the strategic Strait of Hormuz, the only way in and out of the gulf and a key oil artery, if the West imposes new sanctions to throttle Iraq's oil exports.

The $63 billion, 10-year U.S. arms package for Saudi Arabia, which includes helicopters, missiles, precision-guided munitions and tanks, was unveiled in 2007 and is now kicking in.

The sales to the gulf monarchies, along with a projected arms deal with Iraq worth $11 billion, are intended to underline the Americans' commitment to protect the region's Arab oil states from Iran as it allegedly strives to develop nuclear weapons.

The U.S. withdrawal from Iraq, which was completed a couple of weeks ago, has alarmed the Saudis and their partners in the Gulf Cooperation Council.

The gulf monarchies' concern was heightened by the way the administration of U.S. President Barack Obama abandoned one of the Americans' staunchest Arab allies, President Hosni Mubarak of Egypt.

Mubarak was driven from office by unprecedented street protests in February in the early phase of the political upheavals that have convulsed the Arab world since January 2011.

Saudi Arabia is Iran's archrival in the gulf region. The kingdom, like the other GCC states, is dominated by Sunni Muslims, the main Muslim sect. Iran is controlled by the breakaway Shiite sect. The two have been locked in a religious feud since the seventh century.

Tensions between the two camps in the gulf have been rising steadily in recent years.

The Obama administration recently accused Iran's Revolutionary Guards of involvement in a plot to assassinate the Saudi ambassador in Washington, a charge Tehran denies.

Saudi Arabia has the largest military forces in the region. But like its GCC partners, has little or no combat experience.

These states, particularly the United Arab Emirates, are heavily reliant on foreign technicians to keep their complex weapons systems functioning -- and have even had to depend on Pakistani pilots to man their frontline squadrons in the past because of manpower problems.

The United Arab Emirates has in recent years built up a formidable air force with considerable striking power.

Military analysts in the gulf say the emirates, dominated by economic powerhouse Abu Dhabi, has signed contracts for military hardware totaling $35 billion-$40 billion, mostly with the United States and France.

U.S. officials reported Thursday Abu Dhabi has signed a $3.59 billion deal with the Lockheed Martin Corp. to buy Terminal High Altitude Area Defense missile interceptors capable of shooting down, short-, medium- and long-range ballistic weapons, such as Iran's Shehab-3b and Sejjil-2 systems.

The officials said the contract, involving 96 interceptors rather than the 144 originally envisioned when the project was first mooted in 2008, is likely to be formally announced next week.

THAAD will form the core of a regional missile defense shield the Obama administration plans to deploy across the region.

The GCC's defense chiefs agreed years ago to develop an integrated early warning system but dynastic rivalries have prevented progress.

The emirates is the first foreign buyer of THAAD. Saudi Arabia is reported to be interested in the system as well.

Kuwait has signed a contract for upgrading its Raytheon Patriot missile defense systems, which are designed to counter low-level threats, to PAC-3 standard.

All told, tiny Kuwait is expected to spend $7 billion on U.S. weapons systems over the next few years.

The sultanate of Oman, which shares control of the Strait of Hormuz with Iran, is slated to spend $12 billion on 18 Lockheed Martin F-16C/D jets and installing new command-and-control centers....

Boeing's big win to supply Saudi Arabia with F-15 fighters could set up a larger, more lucrative deal to revamp the country's naval forces, according to company officials.

Washington and Riyadh inked a $29.4 billion deal to provide 84 new Boeing-built F-15E fighters for the Royal Saudi Air Force. Boeing and the Air Force will also modernize 70 of the fighters already in the fleet, according to the deal signed this week. The first batch of new Saudi Strike Eagles will be delivered by 2014. The remodeled jets will hit the Saudi fleet later that year, according to a Pentagon fact sheet. The new and refurbished F-15 jets will be outfitted with a number of capabilities requested specifically by the Saudi military, Dennis Muilenburg, president and CEO of Boeing's defense, space and security division, told AOL Defense yesterday. Those Saudi-specific amenities include a new digital electronic warfare package, a "fly-by-wire' capability and the next-generation Active Electronically Scanned Array radar, he said. That is the same radar on board the F-35 Joint Strike Fighter.

The Saudi sale is the first of many Boeing hopes to lock in over the next few years, Muilenburg said. Company officials are looking to
increase foreign sales of their military aircraft by 25 to 30 percent this fiscal year, he said. The F-15E deal could also bring the company a step closer to securing part of what could be one of the most lucrative foreign military deals of the decade.
Yesterday's deal with Riyadh gave Boeing "a boost in our momentum" towards participating in the Saudi Naval Expansion Plan II, Muilenburg said. The SNEP II program -- worth an estimated $10 to $20 billion over the next decade -- is focused on reconstituting the eastern fleet of the Royal Saudi Navy. American defense firms have been clamoring for a chance to sell the latest and greatest naval hardware to Riyadh. For their part Boeing is looking to supply the Saudis with next-generation fighters, helicopters and intelligence, surveillance and reconnaissance aircraft for SNEP II. This week's Strike Eagle sale to the Saudi air force is certainly a positive step in that direction, according to Muilenburg. Aside from its implications for a potential SNEP II deal, the F-15E sale also helped Boeing rebound from its loss in Japan's recent fighter competition.

Boeing's F-18 E/F was beat out by the Lockheed Martin-built F-35 to be Japan's next fighter aircraft.
Tokyo inked the deal for 40 to 50 JSFs earlier this month. Boeing's win this week proves the company "still has a robust pipeline" into international markets, despite the loss to the F-35, Muilenburg said. "Anytime we win business. . . it benefits [all fighter programs]," he added.

The recent influx of U.S. military hardware into the Saudi Arabia comes as simmering tensions in the region threatened to bubble over this week. The situation began when Tehran announced plans to shut down the Straits of Hormuz. The key waterway bordering Iranian coastline is a vital transit point for commercial and military vessels looking to enter the Persian Gulf. The threat comes as
Iran is in the midst of their own massive buildup of their naval forces. The announcement drew a sharp rebuke from commanders of the Navy's Fifth Fleet, the headquarters of Naval Forces Central Command. "Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations. Any disruption will not be tolerated," according to a NAVCENT statement. Iranian navy eventually backed off their threat but continues to conduct wargames in the area.

That new crop of foreign stealth fighters that’s emerging; don’t worry, the F/A-18E/F Super Hornet can handle ‘em. That’s the interesting pitch that Boeing’s man in Tokyo for fighters gave me earlier this month while discussing Japan’s F-X fighter contest. I suspect that’s Boeing’s main pitch for many of it’s potential fighter customers

Basically, the Super Hornet’s active electronically scanned array (AESA) radar — and it’s ability to jam enemy radars and electronic countermeasures — combined with the jet’s infrared search and track (IRST) system will allow it to compete with low-observable jets, said Phil Mills, director of Boeing’s F-X program in an interview just days before Boeing lost that contest to Lockheed Martin’s stealthy F-35 Joint Strike Fighter.

(IRST systems have been around for decades, they use an infrared sensor to allow a pilot to ID and lock onto a target’s heat signature rather than radar signature.)

Here’s his pitch as to why the newest versions of the Super Hornet will be a viable competitor to the latest stealth jets:

IRST expands our frequency spectrum of sensor coverage so that it gives us much better counter-stealth capability than we had with just AESA.

AESA’s much better [than older radars] as far as detecting small targets. But, AESA plus IRST gives you the capability of not worrying about targets with low radar cross sections, so you can see those targets and actually establish a weapons-quality track without the radar. You can also cue that AESA, that has two and-a-half to three-times the detection range of the old radar anyway, and it can see further than that if you cue it to look at a very small piece of the sky.

The Super Hornet is a proven design, with some stealthiness built in, that can be continuously upgraded to survive in 21st Century aerial combat, added Mills.

The F/A-18E/F is an example of “where Boeing has been really successful, not doing clean-sheet developments so much, but evolving proven designs and integrating new technology and putting in new capabilities on more an evolutionary basis as opposed to a revolutionary, let’s do a clean sheet, like F-35, and go through all the development pains of a new start,” said Mills.

Now, the IRST as a stealth killer could have been Mills’ be a last ditch argument to sell the Super Hornet to Japan. Modern stealth jets are designed to mask their heat signatures. After all, 21st Century stealth isn’t just about being invisible to radar. Truly stealthy designs limit the amount of heat, electronic signals and even noise emitted by the aircraft in an attempt to make them undetectable.

I’d like to see what happens when one of the new IRST-equipped Block II Super Hornets goes up against an F-22 Raptor or F-35. Remember, a Navy EA-18G Growler electronic attack jet did score a fake kill against a Raptor a couple of years ago..... lol

America's gift to the world in 2011: Destabilization....

America's gift to the world in 2011: Destabilization....

We should ALL stop promoting this fantasy of having a global economy.... we don't have a global society and an economy is but one element of a society.... So, it's not possible. the focus needs to come off money related issues and move on to ironing out ideological differences - which are the entire source of all the global unrest as we move into 2012...., the problem is that there is a complete lack of Leadership WORLDWIDE...

Extremists on Both the Right and the Left Like Tyranny...

Lou Rockwell notes:

The most definitive study on fascism written in [the first half of the 20th century] was As We Go Marching by John T. Flynn. Flynn was a journalist and scholar of a liberal spirit who had written a number of best-selling books in the 1920s. He could probably be put in the progressive camp in the 1920s.


In reviewing the history of the rise of fascism, Flynn wrote:

One of the most baffling phenomena of fascism is the almost incredible collaboration between men of the extreme Right and the extreme Left in its creation.


If you think about it, right-wing statism is of a different color, cast, and tone from left-wing statism. Each is designed to appeal to a different set of voters with different interests and values.

These divisions, however, are not strict, and we’ve already seen how a left-wing socialist program can adapt itself and become a right-wing fascist program with very little substantive change other than its marketing program [or vice versa].

How Can Supposed “Right” and “Left” Wing People Both Be for Tyranny?

The short answer, of course, is that tyrannical interests may wear different masks, but it is just a dog-and-pony show meant to distract us into artificial “teams”.

George W. Bush cracked down on constitutional liberties such as freedom of speech, freedom of assembly and due process.

Obama has done the same … and has cracked down even harder.

Both Bush and Obama are waging brutal, unnecessary and insanely expensive wars throughout the Middle East and North Africa.

Indeed, these wars were planned before either Bush or Obama. Both Democratic and Republican leaders are servants to the military-industrial complex and the most infamous White House Murder INC, in the Levant since January 24th 2002, and Worldwide, and they both accept the wholly-debunked myth that war is good for the economy....

Both Bush and Obama have both allowed crony capitalism to flourish. How can this be, when they are from such different sides of the aisle?

Because “fascism” (on the right), Soviet style “socialism” (on the left) and crony capitalism (a more modern, Western term) are all the exact same thing economically. They are all about an unholy alliance between a handful of corrupt, banana republic style government leaders and giant companies run amok.

Tyranny is a bipartisan disease.....

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” - Mark Twain

The Cause of the Financial Crisis: Greed and utter corruption; Fraudulent Creation of 3,000 Times Leverage On House Prices by the Big Banks....

We’ve repeatedly noted that fraud by the big banks – more than anything done by the little guy – caused the financial crisis.

And we’ve repeatedly noted that excessive leverage helped cause the Great Depression and the current crisis.

Reader McFid – who has been a breach of fiduciary duty expert since 2003 – sent me the following article (edited slightly) which provides a new angle on both themes.

This article disabuses the notion that “deadbeat borrowers” caused the financial crisis. And offers an answer to the question that still lurks in the mind of every American; whether black, white, native American, asian or Hispanic; whether educated or not; whether English, Spanish, or Mandarin speaking.

Taking a big step back, and looking at it like a business process: “How could so many Americans ALL have made the same ill-advised mortgage borrowing decisions?” The answer lies in what did they ALL have in common…

It was all about leverage
What is leverage?

Leverage is a way to control more of something when you can’t pay for it in full. We do it all the time; when we buy a car — except few of us actually buy the car, we finance it or lease it. We also do it when we buy a house — except almost no one pays cash for a house, we finance the purchase with a loan; it’s secured by a mortgage on the property.

Example of 5 times leverage:

When we buy a house and put 20% down, we buy a house worth 5 times as much as the down payment. If we put $100 thousand down we can buy a house worth $500 thousand. $500 thousand divided by the $100 thousand we put down equals 5 times leverage.

100 times leverage:

By the same calculation ZERO down mortgages were suffice it to say, 100 times leverage, it’s actually more but that’s a discussion for later. Repeat after me, no money down mortgages equal 100 times leverage.


Who controlled and approved EVERY leverage decision?

Leverage Approval #1 by:

TBTF Banks (ultimately) approved every one of these loans and bundled thousands of others like them initially into mortgage backed securities (MBS).

Leverage Approval #2 by: [the key, little known fact]

In the past, TBTF Banks used to sell them off (remember that word) to investors like mutual funds, insurance companies and pension plans. In the 2000′s TBTF banks issued almost $17 Trillion of MBS, but did not sell all of them OFF to 3rd parties. They held massive amounts of them to turbo-juice their bonus checks in a 2nd set of books (legally) in OFF balance sheet, special purpose entities. As a refresher Enron did the same type of thing. In the decades, make that for over 60 years before the 2000′s TBTF banks’ leverage was around 12 times; however when they concealed trillions worth of MBS — their leverage increased to over 30 times. Remember 5 times leverage? It was based on how much the house was worth right? And when TBTF banks add more leverage on top of the borrower’s leverage we don’t just add it — we ______? You guessed it — we multiply it.

3,000 times leverage on house prices:

100 times leverage on the borrowers side times 30 times leverage on the TBTF banks’ side is 3,000 times leverage ON house prices.

Lather, rinse and repeat — 100 times 30 equals 3,000 times leverage. Lather, rinse and repeat.

100 times 30 equals 3,000 times leverage.

Remember what I first told you about leverage?

Leverage lets you (or TBTF bank) control something that you can’t fully pay for. Well the TBTF banks’ way of financing them in the Asset Backed Commercial Paper market began to dry up in August 2008, so they couldn’t pay for these assets. This is the direct cause (but not the root) for the Fed and US Treasury to (have to) step in and pay CASH for them in the bailouts of 2008, and again in 2009, and again in 2010 and yet again 2011 via the Fed’s QE trifecta to the tune of over $20 Trillion dollars.

The interactive portion is about to begin:

Is it any surprise that the assets backing the commercial paper were ________? You may have guessed it — MBS.

Is it any surprise that the Fed created a new category to track ABCP in_______? You would be correct if you guessed 2006; just two swift months after Ben Bernanke was appointed chairman of the Federal Reserve by President Bush.

Is it just a random coincidence that almost $17 Trillion of Mortgage Securitieswere created by TBTF banks from 2001 to 2008?

What was that word I asked you to remember?

Oh, right it was OFF.

When TBTF banks’ CEOs, executives or prop traders got their year end bonus check did we hear reports that anyone said it was OFF (or that it was too much)? Nope.


The top 12 reasons + one
TBTF banks, before 2008 created a hidden, secret “market” for MBS:
  1. As stated above TBTF banks changed from financial intermediaries into speculators via their proprietary (for the house only) trading desks;
  2. Hiding (the FDIC used the word “concealed”) trillions of MBS off balance sheet;
  3. Allowing their own internal prop traders to value #2 (legal under the SEC’s 2004 Consolidated Supervised Entity (CSE) program) despite the fact few if any, of #2 had EVER seen the light of any “market” trade as one between arms-length parties;
  4. Why? To maximize same prop traders’, managers’ and CEOs’ cash bonus checks;
  5. All based on the assumption (almost a religious belief) that national median home prices had NEVER gone down — true, as you may recall;
  6. BUT the past was under a 60 times house finance, prudently underwritten leverage regime (20% down payments, verified job, income, assets and 12 times bank balance sheet leverage);
  7. TBTF Banks’ single handedly created 3,000 times leverage on house prices, the underlying collateral of any MBS, CDO, etc.;
  8. 3,000 times leverage is the product of Zero down loans; 100 times leverage for the borrower and 30 or more times TBTF bank on and off balance sheet leverage;
  9. Mr Bass testified to the FCIC in January 2010 that TBTF banks’ leverage at the end of 2007 — yes end of 2007 (see page 13) shows almost all TBTF Banks were over 30 times, Citigroup at 68 times leverage; meant an adverse swing (in the value of the underlying collateral or obligations) of as little as 1.5% wiped them out completely — insolvent;
  10. And we know that leverage worsened in 2008…and we know from Goldman Sach’s 2007 to 2008 collateral call dispute with AIG that MBS valuation marks (not even CDO’s) were south of 90;
  11. It’s not about Fannie or Freddie either; they were downstream of information from the TBTF banks — again TBTF banks held trillions of MBS, in secret OFF balance sheet; I’m not saying it was necessarily illegal but it was fraudulent; as it was knowing, willful and intentional fraud upon the other side to the mortgage — the borrowers. And it only went on as long as it did — BECAUSE they were hidden;
  12. And we know it’s not about CRA as home ownership peaked in 2004 nor can we blame it on the variant of “homeownership for all” as just a few too many houses were not primary residences but 2nd, 3rd, 4th and 5th homes and condos — each time the loan was approved (ultimately) by TBTF banks;
  13. Last, 3,000 times leverage on home prices represents a 50 fold increase over the 60 times historical norm; more importantly shows that TBTF Banks’ violated requirements of their banking charters; i.e. to operate according to “safety and soundness”.

[TBTF Banks on LSD indeed; massive amounts of Leverage, Swaps and Derivatives.].....

Friday, December 30, 2011

The overwhelming direction for the US dollar for the last 220 years has been down....

The overwhelming direction for the US dollar for the last 220 years has been down....

The first US Treasury Secretary, Alexander Hamilton, found himself constantly embroiled in sex scandals. Take a ten dollar bill out of your wallet and you’re looking at a world class horndog, a swordsman of the first order. When he wasn’t fighting scandalous accusations in the press and the courts, he spent much of his six years in office orchestrating a rescue of our new currency, the US dollar.

Winning the Revolutionary War bankrupted the young United States, draining it of resources and leaving it with huge debts. Hamilton settled many of these by giving creditors notes exchangeable for then worthless Indian land west of the Appalachians. As soon as the ink was dry on these promissory notes, they traded in the secondary market for as low as 25% of face value, beginning a centuries long government tradition of stiffing its lenders, a practice that continues to this day. My unfortunate ancestors took him up on his offer, the end result being that I am now writing this letter to you from California—and am part Indian.

It all ended in tears for Hamilton, who, misjudging former Vice President Aaron Burr’s intentions in a New Jersey duel, ended up with a bullet in his back that severed his spinal cord. Cheney the assassin in Chief, eat your heart out.

Since Bloomberg machines weren’t around in 1790, we have to rely on alternative valuation measures for the dollar then, like purchasing power parity, and the value of goods priced in gold. A chart of this data shows an undeniable permanent downtrend, which greatly accelerates after 1933 when FDR banned private ownership of gold and devalued the dollar.

Today, going short the currency of the world’s largest borrower, running the greatest trade and current account deficits in history, with a diminishing long term growth rate is a no brainer. But once it became every hedge fund trader’s free lunch, and positions became so lopsided against the buck, a reversal was inevitable. We seem to be solidly in one of those periodic corrections, which began six month ago, and could continue for months or years.

The euro has its own particular problems, with the cost of a generous social safety net sending EC budget deficits careening. Use this strength in the greenback to scale into core long positions in the currencies of countries that are major commodity exporters, boast rising trade and current account surpluses, and possess small consuming populations. I’m talking about the Canadian dollar (FXC), the Australian dollar (FXA), and the New Zealand dollar (BNZ), all of which will eventually hit parity with the greenback. Think of these as emerging markets where they speak English, best played through the local currencies.

For a sleeper, buy the Chinese Yuan ETF (CYB) for your back book. A major revaluation by the Middle Kingdom is just a matter of time.

I’m sure that if Alexander Hamilton were alive today, he would counsel our modern Treasury Secretary, Tim Geithner, to talk the dollar up, but to do everything he could to undermine the buck behind the scenes, thus over time depreciating our national debt down to nothing through a stealth devaluation. Given Geithner’s performance so far, I’d say he studied this history of utter corruption at the ZOG very well indeed.... Hamilton must be smiling from the grave....

Thanks to Turkey, threat very real to Ukraine, who fears new Russian gas route....

Thanks to Turkey, threat very real to Ukraine, who fears new Russian gas route....

[This is Putin's ultimatum--Sell us your pipelines, or South Stream will cut you out of the equation. Now, thanks to Turkey, the threat seems very real....]

Turkey’s decision to allow Russia permission to build the South Stream gas pipeline seems to have cause a degree of panic in Ukraine. The agreement, reached on Wednesday, could have significant implications on long-running gas negotiations between the two countries and reduce Ukraine’s bargaining power in extracting much needed price concessions from Moscow.

The South Stream pipeline would see Russian gas exported across the Black Sea to Europe, bypassing Ukraine, whose gas transit network is currently responsible for carrying 80 per cent of Russian energy exports to the EU.

In a display of understandable nervousness, Ukraine’s Prime Minister Mykola Azarov, took to Facebook on Thursday to threaten Russia with legal action should no deal be done.

“Ukraine is ready to take this dispute to international arbitration. But we would like to try settling it first,” wrote Azarov on his Facebook page, according to Reuters.

Ukraine’s reliance on Russian gas has placed its finances in a perilous position.

Energy imports account for over a third of Ukraine’s import costs. The government, which currently pays around $416 per 1000 cubic metres of gas, has been trying to get Russia to give it a discount of around 40 per cent, so that it would in effect pay only $250 per 1000 cubic metres.

Talks over a new deal have been on-going for over a year and will begin again in January, according to Ukraine’s Minister for Energy. In return for a cut-price arrangement, Gazprom, Russia’s state-owned gas company, is demanding a share in Ukraine’s pipelines. But selling stakes in the country’s vital rent-generating assets would be politically unpopular for pro-Russian president Viktor Yanukovich before parliamentary elections in October next year.

For all Azarov’s threats, the omens don’t bode well for Ukraine. The South Stream deal indicates Russia’s desire to diversify away from its dependence on export routes through Ukraine. This has been made all the more urgent following Wednesday’s signing of a memorandum of understanding between Azerbaijan and Turkey to build a new pipeline to carry Azeri gas to Europe.

Elsewhere, in a worrying precedent for Kiev, neighbours Belarus – who faced a similar predicament earlier this year – caved in to Russian pressure by selling their remaining stake in Beltransgaz to Gazprom last month.

But as reported by the FT, Gazprom may yet abandon the South Stream project if it succeeds in gaining greater control of Ukraine’s transit network.

Even so, Ukraine’s deteriorating fiscal position means it can’t afford to engage in a game of ‘chicken’ with Moscow. The bloated energy bill – exacerbated by the fact that Ukraine sells the gas onto its citizens at heavily subsidised prices – has contributed to a current account deficit of 5.4 per cent of GDP or $8.6 bn, even as its currency – the hryvnia – is under sustained pressure. Central bank intervention has kept the exchange rate at 8 hryvnia to the US dollar at the cost of $1.5bn every month. With effective gross reserves at only $17bn, intervention can only continue for another 12 months if no new deal is reached. Either way, a devaluation looms.

“The longer it takes Janukovich to make a decision [over gas prices], the wider the deficit will become and the larger the currency shock when it comes” Dmytro Boyarchuk, an adviser with Global Source partners told beyondbrics.

Boyarchuk does not believe the situation has yet reached a critical point, but estimates that if the current gas contract remains, Ukraine will suffer a sharp currency shock in the autumn, with the currency falling to 11 hryvnia per dollar.

This could have fatal consequences for investment.

“If investors see the potential currency risk, the government will not be able to raise financing from the markets for its current liabilities. In this situation and dependent on the depreciation risks, there is a possibility of technical default.”

Alexey Miller, Chairman of the Gazprom Management Committee reported today to Vladimir Putin, Prime Minister of the Russian Federation on the negotiations with Ukraine in the gas sector and, in this regard, on the South Stream project implementation.

According to Alexey Miller, Ukrainian partners estimate that the Ukrainian gas transmission system will cost USD 20 billion. In addition, the GTS upgrade, according to various estimates, will require another EUR 2–3 to 7–8 billion. Moreover, the Ukrainian party insists on the Russian gas price discount, which will cost Gazprom some USD 9 billion a year.

While the South Stream project is estimated to cost EUR 16.5 billion, EUR 10 billion out of this amount will be spent on the offshore section and EUR 6.5 billion – the onshore section.

Vladimir Putin ordered to continue negotiations with Ukrainian partners, “on the assumption that Ukraine has always been, it is and, I hope, will remain a strategic partner of ours”, yet to speed up the South Stream project execution. And to start constructing it as early as in 2012, instead of 2013.

Thursday, December 29, 2011

IRAN, a natural gas giant...

In recent days and weeks, Iran has found itself in the news on a fairly regular basis, particularly now that it appears that they are ramping up their nuclear program and messing with the British Embassy. Iran is often overlooked as an energy producing nation, while most people are aware that Iran is a member of OPEC, they are not aware of the significance of Iran's oil and natural gas reserves. Hopefully this posting will put Iran's place in the energy world into context.

Let's open with some background information on the country. Iran is located along the north shore of the Persian Gulf, a very strategically important geographic location since the country is in partial control of the entry to the Gulf of Oman, the narrowest part of the access and egress from the Persian Gulf. Iran is not an Arab county, the majority of Iran's population of 77,891,000 people are Persian. Iran has a very young population; the median age of both males and females is only 26.8 years compared to 36.9 years in the United States. Iran's economy relies heavily on the oil and natural sector which provides the majority of government revenues. Iran suffers from one of the world's highest unemployment rates (139th out of 199 countries) with 13.2 percent unemployment in 2010. Surprisingly, Iran's government is one of the most fiscally responsible in the world, in 2010, Iran's government ran a budget surplus that reached 6 percent of GDP (11th place in the world) and public debt is only 16.3 percent of GDP, enviable by any standard.

Now let's look at Iran's main industry, oil and gas. Iran is one of the world's leading producers of both natural gas and oil; it is OPEC's second largest oil producer and exporter after Saudi Arabia and, in 2010, was the world's third largest exporter of oil after Saudi Arabia and Russia. Here is a map showing Iran's main oil and gas fields and pipeline infrastructure. Note that the vast majority of the country’s producing oil and gas fields are located along the Persian Gulf. Note the huge South Pars/North Dome gas field (in red); this is the world's largest natural gas field shared by Iran and Qatar:

In this posting, I’m going to focus on Iran’s natural gas reserves. Let’s start out by taking a look at the world's top natural gas reserve holders:

As I mentioned earlier, Iran and Qatar jointly own the North Dome Field and South Pars Field, a wonder of the natural gas world. Here's a more detailed map of the fields:

The combined field was discovered in 1990 by the National Iranian Oil Company (NIOC), the second largest oil company in the world after Saudi Aramco. It covers an area of 9700 square kilometres of which 3700 kilometres are situated in Iranian territory. The field is part of the north-trending Qatar Arch with most of the gas trapped in Permian-Triassic formations. The total reserves for the field are estimated to be around 2000 trillion cubic feet (TCF) and it contains an additional 50 billion barrels of condensate. With in-place reserves of 360 billion barrels of oil equivalent, the field is larger than the world's largest oil field, Ghawar (170 billion barrels of oil-in-place) located in Saudi Arabia. It is anticipated that the gas recovery factor is about 70 percent resulting in total recoverable gas reserves of 1260 TCF. Using a 70 percent recovery factor results in the combined field containing 19 percent of the world's total gas reserves. Interestingly enough, the fields also contain the world's largest reserves of helium totalling 10 billion cubic metres or about 25 percent of the world's total helium reserves.

Let's look at Iran's share of this elephant. Iran owns 500 TCF of gas-in-place and approximately 360 TCF of recoverable gas. This is 36 percent of Iran's total gas reserves and 5.6 percent of the world's entire proven gas reserves. Let's step away from Iran for a moment to put these massive reserves into perspective. Here is the data showing the changes in proved natural gas reserves since the 1920's for the United States from the U.S. Energy Information Administration:

Iran's proven natural gas reserves in this one field alone are nearly twice that of the entire United States.

Iran's South Pars field also contains about 18 billion barrels of condensate-in-place with an estimated recovery factor of 50 percent. The gas produced is quite rich in liquids, yielding approximately 40 barrels of condensate per million cubic feet of gas. Wells are extremely productive with an average well producing 100 MMcf/day. Production began in July 2003 at a total rate of 1 BCF per day plus 40,000 barrels of gas condensates. Development of the field is taking place in 29 phases; Iran has signed development agreements with TotalFinaElf, Gazprom, Petronas, Agip, Statoil, Shell, Spain's Repsol, India Oil Corporation and China's Sinopec and CNPC among others. As I will detail below, sanctions by foreign governments have caused many of the aforementioned companies to abandon their development agreements with Iran. Here is a chart showing the phases, partnerships and current production levels along with Iran’s future plans for development:

The current political issues in Iran have impacted development of the South Pars field. Here is the latest press release from NIOC outlining their plans for future development, noting the use of Iranian contractors and the end of control over projects by foreign contractors:

"Iran plans to reach the maximum level of gas production from the South Pars Oil Field, a year before the end of Fifth development plan, he added. “All eight remaining phases of South Pars were entrusted to Iranian contractors and the foreign contractors have no longer any control over South Pars projects, the official stated. 
Although Tehran is trying to rely on Iranian contractors but it has no plan to discharge foreign companies because they can strengthen Iran’s national development plan, Suri expressed. Tehran plans to be self-sufficient in the oil industry, furthermore, Iran has a program to export technical services, he added. “The today mission of Pars Oil and Gas Company is to maintain the current 250- million cubic meter production. It plans to develop the North Pars, Golshan and Ferdowsi oil fields as a second priority. 
The Fifth Development Plan sets guidelines for the socio-economic development of Iran. The plan is part of 'Vision 2025', a strategy for long-term sustainable growth. Under the plan, following annual approval of the government’s budget, the Central Bank of Iran will forward a detailed monetary and credit policy to the Money and Credit Council (MCC) for approval. Thereafter, major elements of these policies will be incorporated into the five-year economic development plan. South Pars is the biggest gas field in the world, shared by Iran and Qatar. The South Pars field is the name of northern part of the joint located in Iranian waters and the North Dome is the name of southern part, located in Qatari waters. South Pars field was discovered in 1990.” (my bold)

In 2009, the National Iranian Oil Company announced that China National Petroleum Company signed a $4.7 billion contract to develop Phase 11 (out of 29 total phases) of development of the South Pars field. CNPC replaced Total as a partner; Total had signed a memorandum of agreement to develop the field in 2004, however, those nasty international sanctions interfered with Total's ability to develop the field. Iran had become increasingly concerned that a portion of their natural gas reserves were being competitively drained by Qatar.

China is also active in two exploration projects with NIOC as shown on these charts:

It's interesting to see that NIOC also partnered with Russian, Brazilian, Vietnamese, Italian and Spanish oil companies for various exploration projects throughout Iran.

Where is all of this natural gas going? Iran’s domestic demand for natural gas has risen by 550 percent over the past two decades with consumption keeping pace with production increases. Here is a graph showing the growth in both natural gas consumption and production:

In 2010, Iran produced roughly 6 TCF of marketed natural gas and consumed an estimated 5.1 TCF. Of the 7.7 TCF of gross natural gas produced, 1.2 TCF was reinjected into oil reservoirs as part of Iran’s plan to increase crude oil production through the use of enhanced oil recovery (EOR) techniques. Even with the massive and growing output from South Pars, it is unlikely that Iran will increase its exports of natural gas. In fact, despite having the world’s second largest natural gas reserves, Iran imported about 0.7 BCF/day of natural gas from Turkmenistan to satisfy demand in the northern part of the country.

As an aside, in January 2011, Iran's Petroleum Minister announced the discovery of a new onshore natural gas field located in southeastern Iran near Assaluyeh in Bushehr province. The field contains recoverable gas reserves of 7.4 TCF and an additional 7.7 million barrels of condensate in place.

One can readily see from this posting that Iran is sitting on a very strategic resource. The combination of huge reserves of both oil and natural gas may well make Iran a very, very tempting target for military intervention in the future. In this case, however, the issue is complicated by the presence of both Chinese and Russian economic interests in Iran’s natural resource base....

First casualty of another war in the Middle East will be economic recovery in U.S. and Europe.

Iran has threatened that it will retaliate against the Obama administration's proposed new economic sanctions on Iran's oil exports by blocking the flow of oil from the Persian Gulf. "If sanctions are adopted against Iranian oil," said Iran's Vice President Mohammad Reza Rahimi, "not a drop of oil will pass through the Strait of Hormuz," the narrow waterway at the mouth of the Persian Gulf, which one-fifth of the world's oil supply passes through daily.

To drive the point home, Iran has started a 10-day naval exercise in the Persian Gulf to show off how it could use small speedboats and a barrage of missiles to combat America's naval armada. And the U.S. Navy has responded, in the words of a spokeswoman: "Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated."

This is a significant escalation of tension between the United States and Iran, and the start of a more dangerous phase in the West's attempt to curtail Iran's nuclear program.

The new sanctions are a response to last month's alarming report on Iran's nuclear intentions by the United Nations nuclear watchdog agency, the International Atomic Energy Association. The Obama administration has ruled out military strikes to stop Iran's nuclear program in favor of tougher sanctions, which, once signed by the president, and if fully implemented, would sharply reduce Iran's oil revenue. The administration sees this added pressure on Iran's fragile economy as an effective alternative to military strikes.

If Iran's reaction is any indication, the administration is correct in its estimation. Sanctioning Iran's oil industry will cripple Iran's economy, and that in turn will threaten the stability of the clerical regime. It is for this reason that Iran is treating the proposed new sanctions as an act of war, and is issuing threats of its own to dissuade the United States from going through with the new sanctions.

The administration's strategy is based on the assumption that cutting Iran out of the oil market will not substantially impact world oil supply and prices. Saudi Arabia can step up production to cover the loss of Iran's export of 2 million barrels a day.

But it is not clear whether Saudi Arabia actually would increase production to compensate for the loss of Iranian oil. Iran has clearly started a charm offensive with Riyadh to influence the Saudi decision. Iran's intelligence minister recently visited Riyadh to reduce tensions between the two countries in the wake of the alleged Iranian plot to assassinate the Saudi ambassador to Washington, and the Iranian Navy has claimed that it rescued a Saudi ship from pirates.

In facing off against the U.S. and its European allies, Iran thinks it holds economic cards of its own and is announcing loud and clear that if push comes to shove, it intends to use them.

Iran notes that Western economies are under stress and predicts they could not afford higher oil prices. Even the threat of disruption in oil supply would send energy prices spiraling sky high, and that would plunge the already struggling economies of the United States and Europe into deeper recession. Iran is hoping to change the conversation in Western capitals from how tightly to squeeze Iran to what could be the cost of doing so.

Nor would economic woes caused by conflict in the Persian Gulf remain limited to the West. Persian Gulf exports already account for 60% of Asia's energy consumption. Economies from India to China would be impacted by a Persian Gulf oil cutoff and higher energy prices. Iran is in effect threatening global economic crisis.

Those advocating new sanctions on Iran's oil industry have said little about the potential cost to the global economy. The cutoff would also hurt Gulf Cooperation Council countries and could drag them into a conflict with Iran they have thus far avoided. Iran hopes its saber-rattling will persuade Asia's economic powerhouses and Persian Gulf emirates to pressure Washington to back away from the new sanctions.

War between the U.S. and Iran may very well start, not if and when Washington decides to strike against Iran's nuclear facilities, but because sanctions designed as the alternative to military action end up hastening its advent. That might prove to be the least desired outcome, for no better reason than the possibility that the first casualty of another war in the Middle East might very well be economic recovery in U.S. and Europe....