Landmark Financial Sector Overhaul Clears Final Hurdle in U.S.

Excellent interview with John Williams about the economy:

John Williams interview with Miningstocktalk.com 29 July 2010

That's what happens when you create a society where elites can engage in the most wretched and destructive acts with total impunity: it engenders a blinding, empathy-free, effete sense of entitlement whereby they see themselves as the only ones who matter and their own plight as the only one worthy of consideration. If you build a political system grounded in the premise that there's an elite caste so special and elevated that they are entitled even to hover above the laws and rules to which everyone else is subjected, the beneficiaries of that caste system are always the first to believe in its virtue....

16 Jul 2010

With three Republicans joining the Democrats, the Senate finally passed bold financial regulation reforms yesterday that promise to reshape the sector and hopefully prevent a re-run of the 2008/09 crisis.

IHS Global Insight Perspective
Significance	The Senate vote was the last hurdle before President Barack Obama signs the reforms into law, and came only after agonising brinkmanship.
Implications	The reforms give the government considerable new powers over the sector and will adjust the business models of many players. Consumers are also afforded greater protection against unscrupulous players with the establishment of a new agency.
Outlook	In general, the design of the reforms appears sensible, but their full impact will not be known until the detailed rules are written and the new system is tested in practice.

Congress Gives Green Light

After months of bargaining and brinkmanship, Democrats have managed to squeeze a major overhaul of financial-sector regulation through Congress. The final hurdle was Senate assent, with the House of Representatives already having given its approval. The final Senate vote carried 60-39 yesterday, Democrats requiring three Republican votes to get to the 60-seat super-majority required to overcome blocking tactics. The three broke ranks with their party despite the intensely partisan atmosphere in the build-up to the November mid-term elections. The bill now goes to President Barack Obama for his signature. As with healthcare reform—which successfully passed earlier this year—the financial overhaul came perilously close to unravelling on numerous occasions. It is a testament to the political skills of the Democratic leaders in Congress and of Obama himself that the legislation somehow survived to see the light of day. What is more, in both cases the reforms were not watered-down significantly in the process.

The regulations are very wide-ranging and will have profound structural implications for the sector, but at the same time there are concerns that they will still leave the door open to the kind of excessive risk-taking that contributed to the financial crisis of 2008/09. Banks have campaigned vociferously against elements of the overhaul, but broadly they seem confident that they can survive and prosper in the new environment. The full impact and shape of the reforms will not be known until detailed rules have been written by the various regulatory agencies. There is much to play for during this process, so there will be another huge onslaught of lobbying. Republicans opposed the reforms on the basis that they could choke the banking industry and reduce credit, and for expanding government dangerously.

A Closer Look at Reforms

The bill addresses key issues such as revamping and streamlining the structure of the financial and regulatory system, the role of the Federal Reserve, systemic risk mitigation, the "too big to fail" principle, and stabilising the massive financial derivatives market. The final version of the bill stripped out many of the more controversial proposals—including regular audits of the Federal Reserve, restricting the Fed's supervisory ambit, carving all proprietary and derivatives trading from the banking systems, and overly punitive fees. The "Volcker rule" was substantially watered down, with banks retaining the ability to conduct proprietary trading up to 3% of Tier 1 capital, and banks are still permitted to engage in a wide range of core derivatives trading, including interest rate, foreign exchange, and gold/silver. Only the most risky commodity derivatives would have to be spun off into affiliates. The bank fee to cover future large bank failures to be collected by the Federal Deposit Insurance Corporation (FDIC) was scaled back from US$50 billion to only US$19 billion.

The ten major elements can be summarised as follows:

• A modified "Volcker rule", whereby banks can engage in propriety trading through investments in hedge and private equity funds up to 3% of Tier 1 capital.
• "Standardised" derivatives transactions to take place on registered exchanges under Commodity Futures Trading Commission (CFTC) supervision with enhanced reporting requirements. Customised derivatives still need to be reported to regulators. Overall derivative prudential standards would be tightened up.
• Banks still allowed to conduct derivatives and swaps for interest rates, foreign exchange, and gold and silver, but trading in other commodities would be pushed out to affiliates.
• Revamped bank capital standards, including the removal of trust-preferred securities as Tier 1 capital with a five-year phase-in period.
• Treasury to form a "Financial Stability Oversight Council" to oversee the broader financial markets and monitor systemic risks to the financial system and the economy.
• An "Orderly Liquidation Authority" established that creates mechanisms for liquidating systemically important firms under the FDIC. Banks with assets over US$50 billion would have to pay fees to create a fund of US$19 billion over 10 years.
• The role of the Securities and Exchange Commission (SEC) will be substantially expanded, with additional registration and systemic risk-reporting requirements for derivatives traders and large hedge funds. The SEC is also mandated to oversee credit rating agencies, and study conflicts of interest with a view to potentially greater supervision.
• Originators of mortgage-backed securities and other collateralised debt obligations (CDOs) to hold at least 5% of the credit risk.
• Establish an "Office of National Insurance" under the Treasury to monitor industry, identify national insurance issues, and establish standards and report on insurance industry systemic risk issues. A "Bureau of Consumer Financial Protection" would be created under the Federal Reserve.
• Federal Reserve supervisory authority over banks remains intact, including thousands of community banks. Congress requires only a one-time audit of all of the Fed's emergency programmes from the financial crisis. Details of loans through the discount window and open-market operations to be released after two years, while bankers would not be allowed to select the presidents of the regional banks.

Outlook and Implications

The financial reform bill addresses a number of key weaknesses in the U.S. financial regulatory structure that led to the financial meltdown in 2008 and early 2009. The most important of these elements is to streamline the existing regulatory structure, expand regulated frameworks for standardised derivatives, subject the credit rating agencies to greater accountability, and create a mechanism for liquidating systemically important firms. In addition, the bill attempts to accomplish all of this without severely handcuffing the major banks or seriously undermining the pre-eminent competitive position of the U.S. money centre banks in global financial markets. Thus, there is at least a thread of common sense in this bill—a thread which was difficult to detect in the early stages of negotiation. The financial sector overhaul does not stop here; as mentioned above, the detailed rule writing will determine the reach of the reforms, and the administration has also indicated that it will move on to consider the future of the government-run mortgage finance giants Fannie Mae and Freddie Mac. They emerged as key weak links in the system during the crisis. This may be an easier legislative task as there are many Republicans who have called for change in this area.

Politically, the breakthrough is another important success for Obama's administration in the face of ferocious opposition. Recent months have also seen health-care reform proceed and several important foreign policy achievements. The domestic victories have come at a price, however, and Obama's popularity has been weakening in recent polls. His opponents' charge that he is expanding government dangerously has struck a chord with many voters. The weakening economic recovery is adding to the sense of gloom and doubt over Obama's strategy. The Democrats are braced for heavy losses in the November mid-term elections, which would make legislative progress on bold initiatives much harder over the following two years. One key outstanding priority for Obama is comprehensive energy and environment legislation. The administration remains committed to bold changes in this area, but for now is proceeding with a scaled-back bill given the political realities. In future, Obama will have to pick out priorities that he knows will find some support among the Republicans. He is also likely to focus more on foreign affairs if he finds himself frustrated domestically.....

EU Commissioner: Russia tries to call Nabucco into question to be gas monopolist in Europe

17.07.2010

Azerbaijan, Baku, July 17 / Trend A. Badalova /

Russia is trying to put “Nabucco” gas pipeline project under question to be the only producer and seller of gas in Europe having no competitors, EU Commissioner for Energy said.

Russia is trying to call Nabucco into question to become the sole producer and wholesaler of gas, with no competition.

“I can understand their view, it’s fair enough. Russian interests are the same as ours in several areas, in others they differ, in the case of Nabucco our interests differ,” EU Energy Commissioner Gunther Oettinger said in an interview with Deutschlandradio.

A text of the interview was received by Trend from RWE company by e-mail. RWE is a shareholder in the Nabucco project with 16.67 percent stake.
Oettinger said that Russia is a key partner for the EU in the energy field.

About a quarter of the gas we consume in Europe comes from Russia.

The Russians also have an interest in making sure that gas is flowing because the pipelines they own – and Gazprom owns over 50 percent of the North Stream pipeline – are financed by them and the financing system will only function if gas is flowing.

“And the Russians need foreign currency to buy German and European machinery to drive forward their industrial development. We have a good business relationship,” Oettinger said.

That’s why we want to have a strong partnership with mutual commitment with the Russians, but also to have other partnerships to ensure our independence, he said.

In the gas crisis with Ukraine over a year ago and now again with the Belarus/Russia conflict, we have seen that there are political differences of opinion in Eastern Europe and gas is being used as an instrument of pressure. We cannot allow this to happen in Europe, Oettinger said.

“The general rule is – and this goes for food, oil and any other product – never to be 100 percent dependant on one supplier, but rather to have several suppliers. In the case of gas this is in our fundamental interest,” Oettinger said.

Europe needs another direct partner. Nabucco project in this plan corresponds more with its interests, he said.

According to the German energy group RWE, which is one of the shareholders of Nabucco gas pipeline, Europe’s dependence on gas import is 57 percent. The share of Russian import is 24 percent. The rest part of gas supplies falls to countries such as Algeria, Egypt, Libya, Qatar.
According to the International Energy Agency (IEA), demand for gas in Europe will increase from 526 billion cubic meters in 2010 to 622 billion cubic meters in 2030. Europe’s dependence on gas import is expected to increase from current 232 billion cubic meters to 476 billion cubic meters in 2030.

The European market requires large gas supplies as demand increases but own reserves run out. A need for more gas can be met by a large number of gas pipelines, he said.

The EU implements the concept “Southern Corridor” to diversify routes and sources of supply by increasing European countries’ energy security.
A project of Nabucco gas pipeline is a priority project within “South Corridor”. It aims to transport gas from the Caspian region and the Middle East to the EU countries.

The Nabucco gas pipeline project is worth 7.9 billion euro.

Construction is planned to launch in 2011, with first supplies being commissioned in 2014.

Azerbaijan, Baku, July 17 / TrendA.Badalova /

EU commissioner for Energy Gunther Oettinger named as “maneuver” the Russian Gazprom‘s proposal to the German RWE to take part in the Southern Stream project with design capacity of 63 billion cubic meters of gas per year.

“The offer is therefore a maneuver we should see as being part of the game, we should not see it as a possible change to the Nabucco fundamentals,” Oettinger said in an interview to Deutschlandradio radio station. Trend received the text of the interview by e-mail from the company RWE.

Earlier, it was reported that Gazprom discussed South Stream with RWE top management last week and RWE has shown an interest in joining the Russian project. Later RWE reported that it remains committed to the Nabucco pipeline project despite its intention to review Gazprom’s proposal to participate in the Russian South Stream project.

Regarding the potential withdrawal of RWE from the Nabucco project, Oettinger said “the separation is impossible”.

Investment decision on Nabucco designed to deliver gas from the Caspian region and the Middle East to EU is expected to be taken in late 2010. This decision will allow to begin the construction of the pipeline in 2011, so that the first gas on it went in 2014.

Oettinger assured that the European Commission will do its utmost to remove obstacles in the implementation of the project. Oettinger expects the investment decision on the project to be taken by late 2010.

“I expect that all involved companies will make a decision about whether and to what extent will invest in the pipeline during the year,” he said.

In April, the Nabucco consortium announced a pre-qualification tender for supply of durable goods (pipes, valves) for the construction of gas pipeline. Companies that will be responsible for the development of the national sections of the pipe have been established in transition countries, Turkey, Bulgaria, Romania, Hungary and Austria.

Oettinger said the European Commission as a matter of procedure discusses the details of future work with the entire transit countries of the Nabucco gas pipeline, whose maximal capacity will hit 31 billion cubic meters per year.

“I think that we will be able to reach a good decision by late 2010,” he added.

Nabucco gas pipeline project is worth €7.9 billion. Participants of the project are Austrian OMV, Hungarian MOL, Bulgarian Bulgargaz, Romanian Transgaz, Turkish Botas and German RWE companies. Each of participants has equal share to the amount of 16.67 percent. Nabucco Gas Pipeline International shareholders will invest 30 percent of total cost of the project, the rest 70 percent will be paid owing to loans.

The scandal over possible sale of Georgia’s gas-main pipeline to Russia is still on. Parliamentarians are disputing, banging parliament doors and fail to come to a unique position. The decision is almost here. The draft law on the pipeline withdrawal from the list of strategic facilities will be adopted in third reading in two days. What is in store for the longsuffering pipeline and how will major players act? This is what GeorgiaTimes correspondent discussed with Alexander Rusetsky, head of South Caucasus institute for regional security and Soso Tsintsadze, president of Georgian Diplomatic Academy, a politologist.

It’s been a long time since Georgia attracted so much attention. These 10-15 % of main-gas pipeline shares make different countries dance to the tambourine to pacify Georgia’s parliamentary minority. Even the government offers a friendly hand to the opposition assuring that the control stake won’t be sold away. As discussed behind the scenes it was Saakashvili himself who started this project to iron out difficulties in dialogue with Russia with the help of Gazprom’s intermediary. It seems selling these shares to the Russian group is everyone’s concern. According to our experts the pipeline was taken out of the list of non-privatizable facilities on purpose – since it is not operated at full capacity. Now the boom is guaranteed and a once ordinary facility will be made a hit.

Here is an incredible fact: it turns out that Russia and the USA have a common interest in the pipeline deal. Russia wants to accede into WTO. But until the embargo on imports of Georgian wines and mineral water is lifted and normal economic cooperation begins – things are in a bad way. The States, of course, are also interested in Russia’s accession into WTO but what Washington wants the least is Georgia’s closer ties with Turkey and Iran. Thus, Georgian authorities and US government, both having no warm feelings for the Russian Federation, choose the better of two evils. Georgians are afraid of money-offering Russians, but they are more afraid of being abandoned right at the door of Euro-Atlantic integration project.

Despite the crisis in Georgian-Russian relations, can the Georgian government or the opposition prefer Azerbaijan for the pipeline deal. It also, as we know, takes interest in the gas-main pipeline. May it be that selling a package to Azerbaijan, Georgia will strengthen its relations with Iran and Turkey and consequently stops being politically attractive to Europe and the States?

Alexander Rusetsky:

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Fresh Armenian-Iranian Energy Projects Set For Launch

Armenia — Energy and Natural Resources Minister Armen Movsisian at a news conference

14.07.2010

Tatevik Lazarian

Armenia announced on Wednesday the impending launch of three more joint energy projects with neighboring Iran that are estimated to cost more than $700 million.

Energy Minister Armen Movsisian said the two nations will start building this year a third high-voltage transmission line connecting their power grids, a hydro-electric station on the Arax river marking their border, and a pipeline that will pump Iranian oil products to Armenia.

The Armenian and Iranian governments have spent years negotiating on these projects and preparing for their implementation, which would give a massive boost to their economic ties.

With a projected capacity of 140 megawatts and an estimated cost of $350 million, the hydro-electric station is to be constructed by Iranian firms. According to Movsisian, the Armenian side will pay half of the bill with supplies of electricity to the Islamic Republic.

Movsisian told journalists that the two governments will also equally co-finance the $180 million construction of the pipeline which he said will get underway this fall. It will enable Armenian fuel companies to import petrol and diesel fuel at prices well below the international level, he said.

Movsisian added that the two sides will also start “within approximately one month” work on the third power transmission line. He said earlier that it will take 18 months.

The facility will allow for large-scale exports of Armenian electricity to Iran to be mainly generated by Iranian natural gas. Armenia began importing it, in modest amounts, through a newly constructed gas pipeline in May last year. The volume of these deliveries is due to increase drastically to at least 2 billion cubic meters per annum in the next few years.

Armenia is pressing ahead with these projects despite tougher sanctions which the U.N. Security Council imposed on the Islamic regime in Tehran last month over its controversial nuclear program. The sanctions do not directly target the energy sector, the main area of Armenian-Iranian economic cooperation.

Official Yerevan said on June 10 that it is closely monitoring the intensifying standoff between Iran and the West and hopes for its “peaceful” resolution. Visiting Germany two weeks later, President Serzh Sarkisian urged Western powers to address Tehran’s “sense of being in danger” and reckon with its geopolitical interests in the region. He also held up these and other Armenian-Iranian economic projects as a model for regional cooperation....

Economics in freefall

Economics in freefall By Paul Craig Roberts Jul 16, 2010,

I admire Joselph E. Stiglitz, because he has a social conscience and a sense of justice, the absence of which turns economists into monsters. Despite his virtues and Nobel Prize, Stiglitz sometimes falls down as an economist. Readers of my new book, How The Economy Was Lost, will be aware that I take him to task for the Solow-Stiglitz production function, which seriously misleads economics about the scarcity of nature’s capital.

Another of Stiglitz’s shortcomings, one that he shares with most economists, is his habit of reifying the market economy. The market is a social organization. The results of market activity reflect the behavior of the human participants in the market. When economists reify the market, they attribute the behavior, ethics, and morality--or lack thereof--of humans to the market itself. Thus, Stiglitz describes human failures as “market failures,” and he asks in his new book, Freefall, “why didn’t the market exercise discipline on bad corporate governance and bad incentive structures?”

Social institutions are inanimate. They do not possess life and cannot impose good outcomes on human action.

Libertarians also reify markets, but instead of blaming markets for human failures, they imbue the market with human virtues and even with the super-human virtue of producing results that human intelligence cannot improve upon. Economists’ “risk models” for which Nobel Prizes have been awarded and Federal Reserve chairman Alan Greenspan attributed the social institution with economic wisdom beyond man’s.

It is likely that the practice of reifying the market economy developed as a form of shorthand. It was convenient to say that the market did this and that rather than to have to describe the human interactions that produced the results. The market was transformed from an abstraction into a life form and became the actor instead of the humans operating within the institution.

If the outcomes are good, libertarians attribute the good results to the market’s virtues; if bad, libertarians blame human interference -- government regulation. Economists of Stiglitz’s persuasion see it in the opposite way. Good results are produced by regulation; bad results are the result of allowing the market to make decisions on its own.

This way of thinking, which reifies a social institution, is ingrained in economics. It is the source of enormous confusion and has resulted in a pointless long-running ideological battle that Stiglitz calls “a battle of ideas.”

It is possible to clear away the confusion. First, understand that a free market is one in which prices are free to respond to supply and demand. Economists of all persuasions understand that to fix a price below the price at which supply and demand equate results in shortages. Economists have learned this from rent control. Fixing a price above the price at which supply and demand equate results in surpluses. Economists have learned this from agricultural subsidies. A free market does not mean a market in which human behavior is not regulated. A free market is one in which supply and demand are permitted to equate.

Second, understand that regulation regulates human behavior, not the market. It is the actors in the market who are charged with regulatory infractions, not the institution itself. Regulation is necessary because of human faults, such as greed, fraud, carelessness, not because of market faults. Regulation is necessary because of human failure, not because of market failure.

Third, understand that the problem of regulation is that it is done by flawed humans. Human flaws do not disappear by moving human action from the economy to government. Most likely the flaws worsen as government decisions are often unaccountable. Many economists assume that regulators act in the public interest. However, as George Stigler, another Nobel Prizewinner, pointed out several decades ago, regulators are invariably captured by the industries that they regulate.

There are endless examples of regulators--indeed, entire governments--captured by the private interests that they are supposed to regulate. For example, in a recent subscriber’s only edition of CounterPunch (June 16-30), Jeffrey St. Clair describes in detail the incestuous relationship between the government’s Minerals Management Service and the oil industry. An agency charged with regulating the impact of oil drilling on the environment became “a bureaucratic facilitator of big oil.” Thus, the environmental catastrophe in the Gulf of Mexico and looming catastrophes along Alaska’s fragile coastline.

Indeed, economists themselves and academics are often captured by private interest groups and turned into shills. In How The Economy Was Lost, I accuse economists of shilling for transnational corporations when they falsely describe jobs offshoring as the beneficial workings of free trade. Like the Israel Lobby, corporations have found that money will purchase professors, academic departments and think tanks, as well as journalists.

Offshoring transforms American workers’ wages into performance bonuses for executives, capital gains for shareholders, and honoraria and research grants for economists who shill for the practice.

The problem that the US economy faces is far more serious than the financial crisis resulting from financial deregulation. The reason that traditional monetary and fiscal policies cannot produce an economic recovery is that so much of the US economy has been moved offshore. As the jobs have departed, there is no work to which low interest rates and massive government spending can recall workers. This is the real freefall....
The debt overhang as we previously mentioned is staggering. In order to give you prospective, in 1998 debt to GDP was 257%. Today it is at 357%, which means the private sector is still overleveraged in a big way. This means inventories will be slow to liquidate, manufacturing will slow and unused space will expand in factories, retail and offices. Foreclosures continue a pace. No one really knows what the total of residential vacancies are, but the figure has to be near 1-1/2 years supply, whereas four months is normal. By the end of the year, that figure could be more than two years. The tax credits are over and now comes the avalanche. In addition, builders will build 535,000 homes this year. Next year should be a big year for builder bankruptcies. That is unless there is another tax credit or the Fed literally floods the economy with money and credit. After four years we just may start to cover our housing shorts. As we mentioned some time ago government intends to consolidate the housing industry into three companies, which will then be nationalized.
All of the above means higher unemployment. Building and manufacturing should reflect higher unemployment for years to come. America needs a net monthly gain of 150,000 jobs just to keep up with the birthrate. In the last 11 years eight million jobs were lost to free trade, globalization, offshoring and outsourcing, plus another 5.3 million jobs have been lost in our three year depression and some ten million are forced to work part-time or 34.1 hours per week. Unemployment is 22-3/8% and will hit 25%, the same as it was during the “Great Depression,” by the end of the year.
As America waits to see if the Fed is going to inject $5 trillion into the US economy, Spanish banks stumbled and borrowed $161 billion from the ECB in June, an 18% increase from May. Spain is in deep trouble as European bankers and politicians continue to lie concerning Europe’s financial problems. There is no liquidity. Germany realizes this and wants to write off 2/3’s of the PIIGS debt, and finally exit the euro. It is also significant that no one has lent funds to any Spanish financial entity for more than two months, except the ECB. We should also mention that $560 billion has already been written off since the beginning of the global credit crisis in 2007, now almost three years old.
Spain has the 3rd largest deficit among countries in the euro zone. One third of the euro zone members are insolvent and that is why stress tests have not been released and probably won’t be. Even the solvent nations and their banks are in serious trouble. Sovereign bonds and CDOs are not worth the paper they are written on. Worse yet, they, like US banks and other corporations, are carrying two sets of books. If one set of books were kept all the toxic waste would have to be written off and that would deplete their capital and most likely put them out of business. Is it no wonder banks do not want to lend to each other? Banks and nations are lying, the ECB and its president Jean-Claude Trichet are lying about it. European banks were almost all involved in the same speculative activities that the US banks were involved in. The ECB is doing the same thing in Europe that the Fed has done in the US, and both are equally insolvent. It is incredible that the public doesn’t understand that the system is broken. The bankers still control the system from behind the scenes and still are making billions. European lenders have $3.3 trillion at risk in PIIGS loans. German banks alone are preparing to write off some $325 billion this year – a bill to be paid by German taxpayers. It is now only a matter of time until the PIIGS leave the euro zone and the euro is no more. The write offs could last 30 to 50 years, and that as well could be how long the depression will last. Ninety-five percent (95%) of the bad debt on average in Europe and the US has yet to be written off. Worse yet, nothing has been done to solve these problems, which has resulted in record unemployment in Europe and the US. The ECB has lent out $1.3 trillion it created out of thin air. This means the world will experience the Japanese experience of the past 18 years for another 30 to 50 years. In addition, most of this is done in secret, so the citizens won’t know what is going on. Banks are doing their own stress tests and lying about the results. Even at that the results are dreadful. Derivatives now reflect 60% losses on Greek bonds. By the time this is over all the bad paper will be 62.5% written off, not just in Europe but in the US and UK as well, as we predicted months ago. This is where we are headed and it is not good. Your only protection is gold and silver assets.
Thank heavens, Barry's in command or we would really be in a serious situation... The Soetero-Pelosi-Reid-Dodd "financial reform" package should do wonders to get us back on track. After all, TPTB promise to "fix" the derivatives problem starting in 2052....!

Paul Craig Roberts was Assistant Secretary U.S. Treasury, Associate Editor Wall Street Journal, Columnist for Business Week, Senior Research Fellow Hoover Institution Stanford University, and William E. Simon Chair of Political Economy in the Center for Strategic and International Studies, Washington, D.C.

Fear takes over Russia's businesses

http://www.popularmechanics.com/technology/military/weapons/modern-russian-military-vehicles-we-respect

Fear takes over Russia's businesses
By Claire Bigg and Kevin O'Flynn

How Wall Street took down the Russian Empire:

http://www.youtube.com/watch?v=ynJIK3SeX-s&NR=1


http://en.rian.ru/mlitary_news/20100722/159902971.html

MOSCOW - Vladimir Romanov looks forward to celebrating his company's birthday this month. The small family start-up he created a decade ago has since grown into a sprawling business with more than 300 employees. Today, the firm provides mobile-phone services and leases payment terminals from a dozen offices across Russia.

http://www.popularmechanics.com/technology/military/news/russian-tank-ballet-video

Proud of his success, the 34-year-old Moscow entrepreneur never misses his company's anniversary. This year, the festivities have taken on special significance.

"Thankfully, I can celebrate this 11th anniversary," he says. "I spent my own birthday, on March 5, in the town of Mozhaisk - not in a restaurant, but in pre-trial jail."

Romanov is one of hundreds of Russian business owners who face prison each year for alleged financial misconduct. And like him, most accuse corrupt police and investigators of trumping up charges to extort money from them or to take over their businesses.

Not all are innocent. But the number of criminal cases against businesspeople has grown so sharply in recent years that entrepreneurs are now taking action to combat what they say is a vast campaign of racketeering by law-enforcement officials.

Fighting 'repression'
Business-Solidarity, a non-governmental organization that defends the rights of entrepreneurs, has organized a dozen street rallies in Moscow since the beginning of the year. The group's chairwoman, Yana Yakovleva, says not a week goes by in Russia without entrepreneurs getting arrested. Official graft, she says, has spun out of control.

"It has become so severe in Russia that entrepreneurs live with the fear of being arrested," she tells RFE/RL. "It has become a way of making money [for law-enforcement officials], a kind of conveyor belt."

Yakovleva, who spent eight months in prison on what she claims were false fraud charges, says the unrelenting legal assaults on the country's business community can safely be described as repression.

Many in Russia share her view. "That's the way our law-enforcement system functions, with the protection of the FSB [Federal Security Service] security services," says Yelena Lukyanova, a law professor at the Moscow State University.

"A trend has swept the country, and it already has a name: criminal-legal repression," she continues. "It is a state within the state. This system has long cut loose and turned against the population, but now it has cut loose even from the federal authorities."

The recent deaths of businesswoman Vera Trifonova and Sergei Magnitsky, a lawyer who had accused Interior Ministry officials of corruption, further incensed business circles. Both died in pre-trial detention after being denied medical care.

Afraid to meet the same fate in Russia's notoriously brutal prisons, some entrepreneurs are resorting to desperate measures.

Yury Fink, a businessman charged with fraud, posted two online appeals to President Dmitry Medvedev in April and May.

Fink accuses officials in the Investigative Committee of the Prosecutor-General's Office of trying to take control of his company, which develops and sells transportation safety systems. He faces up to 10 years in prison.

In the clips, he says he fears for his life if convicted. "I know that I can end the same way as murdered Sergei Magnitsky and Vera Trifonova," he says. "I don't wish to repeat their silent participation in this process. I want to name my future killers, I want to make their names public so there won't be any need for an investigation after my death."

Too little, too late?
The Kremlin is well aware of the problems faced by small- and medium-sized business, despite having done little to solve them. Medvedev has pledged to fight police corruption, support entrepreneurs and improve Russia's investment climate. In April, he signed new legislation prohibiting the detention of suspects accused of economic crimes pending trial - a move welcomed by entrepreneurs as a step in the right direction.

For entrepreneur Romanov, the decision came too late; he had just won a release on bail in court. After seven months spent in detention, he is nonetheless grateful for the knowledge that he can now stay home with his family right until his trial.

He could spend as much as 32 years in jail if found guilty of all the charges against him, which include illegal banking activities and money laundering. The arrest of an investigator caught red-handed extorting money from Romanov's wife has not led to a revision of the charges. Lawyer Sergei Magnitsky died after implicating senior officials in a fraud case.

Seated behind his desk in his office, based in a somewhat rundown two-story building on the northern edge of Moscow, Romanov relentlessly maintains his innocence. The raid on his office last autumn, he recalls, came as a complete shock.

"A man entered my office and identified himself as a police officer. He told me to place my hands on the table and shut down my computer," he recalls. "At first I thought it was a joke, but then several people entered the room armed with machine guns. More than 50 people were involved in the operation. That's when I realized I was in trouble, in big trouble."

Large-scale bribery
Romanov claims more than US$300,000 in cash was stolen during the raid on his office and accuses police of placing wash towels on his surveillance cameras to cover up the theft.

He says investigators offered to free him in return for a large sum of money just a few weeks following his arrest. After refusing to pay the bribe, he says, investigators turned against his wife Margarita, threatening to throw her in jail and to place the couple's child in an orphanage. It wasn't long before she caved in to the pressure.

"I had no connection whatsoever with the business activities that were causing Vladimir problems. It all sounded crazy to me," she says. "But when I started receiving threats on my home and mobile phones, it became very real. And by the time these people started calling one of my friends, I was ready to give anything to make them back off, to make all of this end."

Margarita Romanova ended up paying $400,000 in return for her husband's release on bail, but investigators failed to honor the deal. When they asked for another $500,000 to prevent additional charges from being brought against him, she reported the case to the Interior Ministry's internal crimes unit. One of the corrupt investigators was soon detained after a sting operation.

But things only got worse for Romanov. He was transferred to another prison outside Moscow and placed in a tiny cell with hardened criminals in what he believes was retaliation from investigators. Today, he considers himself lucky to be alive and out of jail, at least until his trial begins, for which no date has been announced.

Romanov, who now spends much of his time preparing his defense, says he remains upbeat about his chances in court. But for all his optimism, the young entrepreneur is planning to change careers if he walks free.

"You run your company for 10 years thinking that you are acting lawfully, that everything is fine, that you are being useful to society," Romanov says. "And then you find out you could go to prison for a long, long time and all your relatives will suffer. It doesn't really make you want to continue in that profession."

The runaway inflation train...

The runaway inflation train... Inflationary risks have seemingly fallen out of the mindset of many investors recently, with the European debt crisis causing many to re-evaluate their outlook for global economic growth in concert with record low headline consumer price index numbers being released. Despite this, gold, traditionally a hedge against inflation, continues to move up in price. Is this dynamic inconsistent? We don't think so. Of course, some of gold's price movement may reflect its safety aspect, given renewed concerns over the long-term health of the economy, but in our opinion, inflationary concerns are very much valid and should be front and center of any investment strategy going forward. We believe there may be considerable inflationary pressures built into the system, which may become apparent over the coming years. Importantly, we believe structural changes to the global economic landscape have raised the risk of inflation in the United States substantially, regardless of whether the US economy experiences strong or weak economic growth through the medium term. We have never been in the "V" shaped recovery camp, and maintain this position. Having said that, many market participants contend that the US will experience substantial above-trend economic expansion over the coming years. Curiously, many of these same people also believe that deflation, not inflation, is the major risk facing the US economy, pointing to factors such as resource slack, high unemployment, and the substantial price decline in commodities and natural resources as reasons why inflation is unlikely to be an issue. Many of these same factors underpin the Federal Reserve's benign inflationary outlook. Many also hold the view that the Fed should continue to print money to ensure the recovery becomes self-sustaining, downplaying the risks to inflation, seemingly having trust that the Fed will be able to rein in any inflation if it does raise its ugly head. We find this stance counterintuitive for a number of reasons. Over the very near term, we agree that if one looks at the most commonly followed measure of inflation - the CPI - we appear to be experiencing the mildest inflationary period in the past 40 years. After all, we have seen commodity prices across the board come back substantially from their peaks (albeit substantially off lows) and a slowdown in end-user demand, which has had a marked effect on the overall price of goods. Having said that, if we were to more adequately incorporate the average costs incurred by households, such as healthcare cost increases, one may come to a slightly different conclusion. In our opinion, there are significant inflationary risks on the horizon that may play out, regardless of whether the US economy rebounds strongly or experiences slow economic growth. Let's assume you are in the camp that believes the US economy will experience strong economic growth as consumer confidence comes back, businesses begin redeploying all the cash that is sitting on their balance sheets, hiring employees and further reinforcing a recovery. It appears that both the government and Fed want the US economy to grow at any cost (we are particularly concerned about the "at any cost" part of this equation - see below). Given this outlook, it is hard to fathom how we wouldn't experience inflation. After all, a natural prerequisite for this outcome to transpire would be a reversal of risk-aversion at both the business and personal level. Overlay this with the fact that there are at present US$1.1 trillion of bank reserves just sitting on the sidelines waiting to be deployed. This has never happened before. The reason? Banks are unwilling to lend for fear those loans will go bad. Said another way, banks continue to be extremely risk averse. If we have even a marginal thawing in risk aversion, the likelihood that much of this money flows back into the system is high. After all, the banking industry is a highly competitive one; if Citi sees JPMorgan beginning to lend once more, they won't want to miss out on a piece of the action, nor would any other industry player. It is quite likely that all these excess reserves may flow back into the economy rather quickly, flooding the economy with liquidity and creating massive inflationary pressures. Additionally, consider the huge amount of cash businesses are sitting on: according to the Federal Reserve, cash and liquid assets of non-financial firms presently stands at $1.84 trillion; cash represents 7% of all company assets, the highest level since the 1960s. Reduced risk aversion throughout the economy would likely speed up the velocity of money (banks lend more; businesses spend more; consumers spend more), which slowed down considerably throughout the crisis - a key reason why all the additional money printing has not yet been inflationary. As money velocity accelerates, this will likely only feed the inflationary fire, and the Fed may find itself incapable of curtailing it. To use an analogy, it might be like asking a freighter ship to act like a jet boat, and turn on a dime. Given the competitive nature of the banking industry, the excess reserves may be drained rather quickly; can the Fed suck that money back out of the system so easily and so fast, with little inflationary impact? We doubt it. Regardless of one's US economic outlook, we believe inflationary risks are heavily skewed to the upside. In our assessment, the US economy is unlikely to experience substantial above-trend growth over the coming years, for a multitude of reasons. Yet we still believe there are significant inflationary threats. Our logic has nothing to do with the "resource slack" explanation Fed chairman Ben Bernanke and many others at the Fed have been constantly touting as the core reason why inflation will not be an issue for the foreseeable future. Our reason? China. Consider China for a moment. We know two things about China: 1) the government is incentivized to have a strong, stable economy, and 2) China has moved up the value chain in terms of goods produced. To stay in power, China's Communist Party must maintain social stability. History has shown that a strong, stable economy fosters social and political stability, whereas high inflationary environments tend to lead to social unrest, uprising and political disaster. It logically follows that the Chinese government is incentivized to foster a strong economy and mitigate inflationary pressures. We believe China's recent approach to curtailing inflation is rather ineffective and inefficient. Instead of imposing rather draconian measures on the banking sector, we have long argued that allowing the currency (the yuan) to appreciate would be a more effective way to manage inflationary pressures. Indeed, the Chinese have recently signaled their intention to allow the yuan to trade more freely. That said, we don't believe this will happen overnight; it's likely to be a gradual, drawn-out process over multiple years. The Japanese yen may provide some insight as to the extent of currency appreciation likely to be exhibited by the yuan. When the Japanese allowed the yen to float freely, it appreciated quite substantially on the back of relatively lousy economic growth; in contrast, the Chinese economy is likely to experience much higher levels of economic growth over the coming years. We therefore believe there is significant upside potential for the yuan. China has allowed many of the lower-value industries to fail and migrate to other Asian nations, such as the Philippines and Vietnam (the toy industry is a prime example). As a result, we consider that the Chinese have greater pricing power and a greater ability to pass on any increases in production costs. Labor costs have gained headline attention lately - both Honda and Toyota recently agreed to substantial wage increases to end strikes at their Chinese plants, while iPhone maker Foxconn increased wages after hitting headlines for its high employee suicide rate. These examples are not isolated incidents - minimum wages have been raised throughout China. As an example, in Shenzhen, minimum wages were recently raised by an average of 15.8%. Combine this with increases in the cost of commodities and natural resources and China may be facing significant upward increases in the cost of doing business for the foreseeable future. The ability to pass on cost increases, in combination with an appreciation of the Chinese yuan, leads us to believe that it is highly likely that the Chinese may simply export inflation to the West, and the US. Importantly, this dynamic would have nothing to do with whether there is resource slack in the US economy or whether the US economy bounces back strongly. We have already seen this dynamic play out. In the spring of 2008, before the global market meltdown, we saw reports of triple-digit increases in prices for goods such as coat hangers. The reason? Chinese manufacturers could no longer absorb the increased costs of raw materials brought about by the massive run-up in the price of oil and other commodities. In our opinion, we are likely to see this phenomenon happen again, but this time on a larger scale. Consequently, we believe there are significant inflationary risks evident for the US economy. Moreover, we do not think the Fed will be capable of reining in inflation should it become apparent. The Fed has widely discussed its anticipated liquidity-draining program, namely the use of reverse repurchase agreements (reverse repos). The Fed has stated they are unlikely to sell any of the $1.25 trillion in mortgage-backed securities (MBS) held on its balance sheet. After all, you would be hard-pressed to find a willing buyer over the near term, not to mention the significant upward pressure this would likely have on interest rates (which may cause the economy to crash right back down given the continued high levels of consumer debt). What scares us is that the Fed's anticipated use of reverse repos may work in theory but has never been proven in practice; these fears are compounded given the especially large scale that may be required. The total size of demand for such repos may fall substantially short of the total amount required. We estimate that the indicative size of demand is unlikely to be much more than half the $1.1 trillion represented by excess reserves, which leads to our next point. Any central bank policy is only as good as the trust in that central bank to follow through with that policy. As outlined above, it may only be time before it becomes abundantly clear that the Fed's liquidation policies, at best, are questionable; at worst may fail. If this happens, market confidence in the Fed will erode; the Fed's credibility with regards to its ability to counteract any inflationary pressures will be put under severe pressure. In our opinion, the biggest factor impacting inflation are inflationary expectations - when credibility in the Fed erodes, this is likely to place significant upside pressure on inflation expectations and therefore inflation itself. To us, there appears little the Fed could do in such a situation. Inflation may be a runaway train, derailing the Fed's integrity. Either way we look at it, there seems to be significant inflationary risks baked into the system. It is within this context that investors may want to consider adding a currency component to their portfolios in an attempt to protect against the purchasing power of their savings.

Georgia on borrowed time...

Georgia on borrowed time...
By Lela Iremashvili

Economists say Georgia is increasingly at risk from its mounting foreign debt, which could reach critical levels if the government does not curb its appetite for borrowing.

The latest Finance Ministry figures indicate that the government's external debt stood at US$3.4 billion at the end of May. That is nearly 19% more than it was at the same point last year, and 28% higher than at the start of 2009.

As of the end of 2009, the ratio of foreign public debt to gross domestic product (GDP), an important measure of a country's economic health, had surpassed 31% at the end of 2009, compared with 21% the previous year.

While the government continues to accrue loans to pay for a host of projects nationwide, analysts say the economy is growing too slowly to bring in the kind of tax revenues that would allow the state to meet its repayment obligations comfortably.

"In the last three years, foreign debt has grown noticeably, and the trend continues," said David Narmania, head of the Economic Issues Research Center in Tbilisi. "By European standards, a critical debt-to-GDP ratio for a country with an economy like Georgia's would be 50% to 60%. Georgia has not yet reached that point, but it is steadily heading towards it."

Repayments weigh heavily on the national budget, and are projected to increase exponentially from $95 million this year to $275 million in 2012. According to Narmania, repayments will be especially burdensome in 2013 when $772 million will be due.

"The state will probably be unable to make such a payment out of its own resources alone, and it will therefore have to borrow more," Narmania said.

Government officials play down concerns about the state's creditworthiness.

Deputy finance minister Dmitri Gvindadze said that while the ratio of external public debt to GDP is predicted to grow to 37% this year, "it will start to fall in 2011 and will be just 28% or 29% in 2013 and 2014. That's not a bad indicator if you consider that the figure is higher than 100% in many other countries, including European Union members."

Gvindadze said the reason the government was going further into debt was the 2008 war with Russia, after which international lenders made funds available to help rebuild the country.

However, Georgian economist Demur Giorkhelidze said that as it understated the scale of the problem, the government was omitting to mention the underlying weakness of the economy.

"If the country's foreign debt is growing, then its economic potential needs to be growing too, but that isn't happening," Giorkhelidze said. "Yes, there are countries where the debt-to-GDP ratio is over 100% yet they still remain creditworthy. But it all depends on how strong a country's economy is. Georgia's economy isn't up to it."

Giorkhelidze said current growth projections of 5% or 6% for this year were over-optimistic, and at best, GDP would probably rise by no more than 2% or 3% year on year.

"With a background of negative external factors - above all I mean the global economic crisis and its consequences - Georgia's government needs to act very carefully because it is a country that is dependant on support from allies, which have been hard hit by the crisis," he said.

Giorgi Khukhashvili, chairman of the Center for Public Projects, said the government needed to change its economic policies if it wanted to stay afloat in the longer term.

He called for wide-ranging reforms to create a more liberal business climate, free from political interference, so as to ensure continued growth. At the moment, he said, "the authorities act as managers rather than partners for businesses. The problem stems from bad legislation and poor administration."

Khukhashvili said: "The country is not yet on the brink of default; external debt isn't critical, but that isn't the only issue here. It's also about the capacity of the economy to service the debt, and it isn't fit enough. At the moment we are in a stable phase of development because of donor aid. But the aid will dry up, and what will we fill the gap with then?"

Lela Iremashvili is a freelance journalist in Tbilisi.

When will the SEC prosecute for market rigging?

When will the SEC prosecute for market rigging? By Michael Schmidt Jul 12, 2010,

After recent testimony from a JPMorgan precious metals trader, investing in gold could be a dangerous investment or reap you huge awards assuming it’s done properly. The problem is figuring out what is a good investment and what is just another scam.

For thousands of years, gold has been a central monetary component of most civilizations. It is durable and has been able to retain its value even to this day. That, in and of itself, is extremely remarkable considering how many paper currencies that have gone the way of the dodo. That is why the when Bill Murphy of GATA (Gold Anti-Trust Association) gave his testimony on April 9 before the CFTC (Commodity Futures Trading Commission), it may have been one of the most important testimonies in history for uncovering the massive fraud in today’s gold market. There are two central issues in today’s gold market: the massive short selling that artificially pushes the price down during certain option expiration periods and the paper ETFs that are running a virtual Ponzi scheme in the gold market.

Bill Murphy has been screaming out in the wilderness for years about the gold market suppression scheme that goes on with the large bullion banks in the US and Europe. In April of this year, Bill Murphy was contacted by Andrew Maguire, a trader working for JPMorgan’s London gold office. Andrew Maguire did confirm many people’s suspicions that there has been a massive amount of naked short selling, and mainly by the large, oversized investment banks such as JPMorgan, Deutche Bank, etc. He even contacted the SEC two days before the takedown, and literally minutes prior on the day of. This sort of accuracy and precision can only be the result of a massive coordinated effort, something the SEC and CFTC know full well. But this may not even be the most egregious offense taking place in the gold market.

Gold ETFs seem to be a great way to make an investment play on the price of gold. However, because of the recent testimony by Andrew Maguire, it appears that this may be another cruel trick on the American people, as well. It is quite simple and really no different than any other sophisticated Ponzi scheme. The idea is to get retail investors and everyday folks to by a paper promise of gold (gold ETF) rather than taking physical delivery of that gold. The scheme can continue until enough people demand their gold in physical form. That is the moment when every gold ETF investor realizes that there may be 100 other people demanding the same gold bars. During the CFTC hearing in April, Adrian Douglass of GATA summed it up best when he testified,

“I would just like to make a comment. We are talking about the futures market hedging the physical market. But if we look at the physical market, the LBMA, it trades 20 million ounces of gold per day on a net basis which is 22 billion dollars. That’s 5.4 Trillion dollars per year. That is half the size of the US economy. If you take the gross amount, it is about one and a half times the US economy; that is not trading 100% backed metal; it’s trading on a fractional reserve basis. And you can tell that from the LBMA’s website because they trade in ‘unallocated’ accounts. And if you look at their definition of an ‘unallocated account,’ they say that you are an ‘unsecured creditor.’ Well, if it’s ‘unallocated’ and you buy one hundred tonnes of gold even if you don’t have the serial numbers, you should still have one hundred tonnes of gold, so how can you be an unsecured creditor? Well, that’s because its fractional reserve accounting, and you can’t trade that much gold, it doesn’t exist in the world. So the people who are hedging these positions on the LBMA, it’s essentially paper hedging paper.”

The main question we have to ask is why the SEC or CFTC hasn’t stepped in to stop this egregious farce and protect the average investor. Are the large gold bullion banks working in collusion with the US Federal Reserve to artificially torpedo the key rival to US dollar hegemony? Considering the extreme sovereign debt problems throughout the developed world, including the US, at what point will the Ponzi scheme collapse as they all eventually do? At that point, it certainly would be prudent to have a few gold coins or physical gold to make sure you don’t miss out on the inevitable rise in prices.

Azerbaijan deals blow against Nabucco

No gas from Azerbaijan?

By Adam Newman

It has not been a good week for the Nabucco pipeline; first the AGRI project – a planned Azerbaijan-Georgia-Romania-Interconnection (AGRI) project to transport LNG from Azerbaijan to the EU through Georgia and Romania – was said to be moving rapidly to being finalised ahead of Nabucco and today, the development of Azerbaijan’s Shah-Deniz gas field, one of the main sources of gas for the European pipeline, was pushed back.

Azerbaijan report stated that the delaying of the development of the second stage of its large Shah-Deniz gas field was due to the lack of a way to export the gas to Europe. As such, gas is not expected to be yielded from the site until 2016 which means the Nabucco Pipeline is officially in trouble.

Without a source of gas, there is a good chance the project could be scrapped. While Azerbaijan and Turkey are in active talks on gas supplies during which they are discussing gas prices, transport tariffs and volumes to be supplied to Turkey and Europe, the lack of an official agreement could halt construction of the pipeline designed to relieve Russian energy dependency.

It is however not the only blow dealt to Nabucco this week

South Stream support grows

Meanwhile, one of Nabucco’s main rivals - the South Stream project – has been finding support in Europe with Italy’s ENI and France’s EDF officially joining the plan to transport Russian gas past the Ukraine and under the Black Sea to Bulgaria and inwards to Serbia and Europe.

However, news that Austria has also come on board the project could put the final nail in the Nabucco coffin. Prime Minister Putin is planning to visit both Austria and Italy at the end of the week, and Russian Energy Minister Sergey Shmatko has hinted that agreements could be signed during the trip.

“Inter-governmental agreements on building South Stream are issues that are determined by those who are authorized,” Shmatko said.

If Austria is on board, that would mean that it joins a host of other European countries supporting South Stream: Turkey, Bulgaria, Serbia, Hungary, Greece and Italy.

By Adam Gibson

The EU-backed Nabucco Pipeline has arguably been on its last legs for months now, with European firms jumping ship to the Russian alternative South Stream one after the other. However, it appears Russia has finished torturing the European pipeline with news that it has discussed its alternative pipeline with German utility RWE, another clear attempt to undermine the Nabucco project.

RWE is one of the last remaining participants to the Nabucco Pipeline, which has long been planned to end continental dependency on Russian supplies, but has faced frequent obstacles.

Reuters has sources that both state that Gazprom and RWE met to discuss the South Stream project that aims to deliver gas to Europe under the Black Sea, however both companies are playing their cards close to their chest.

“It was just a preliminary discussion, nothing concrete. They are interested in entering the project,” a Gazprom source said. An RWE source said the project had been discussed but declined further comment, saying it remained committed to Nabucco as “the best project for RWE at the moment”.

Nabucco’s nemesis

Nabucco’s plan was to see gas delivered from Azerbaijan, central Asia and Iraq to southern Europe, but delays have seen the Russian South Stream project gain momentum. On top of that, Russia has often described Nabucco as “politically-motivated” and “not economically viable project” saying it lacked firm gas contracts. With the recent Azerbaijan delay, it is fair to say this is an accurate assessment.

Russia’s dominance of the situation has also continued with Gazprom winning a gas imports deal with Azerbaijan and signing another key Nabucco member, Austria’s OMV, for South Stream.

Other European suppliers that have switched to South Stream include Italy’s Eni and France’s EDF, while the Nabucco consortium also includes Hungary’s MOL, Turkish Botas, Bulgaria’s Bulgargaz and Romania’s Transgaz, although there are rumours that Transgaz may also be close to switching.

According to Upstreamonline.com, RWE would not be the first Nabucco shareholder to have a hand in both projects. Austrian energy group OMV, which has close business ties with Gazprom, signed up to build part of South Stream in May but maintains that Nabucco is its priority.

To take back control of our destiny...

"To take back control of their destiny..."

I do not expect this in what remains of my lifetime....

Prof. Hobson long ago described the condition of Imperial Britain in which a cosmopolitan elite gained state power and used the machinery of the state for its own interests. This was/is an arrangement into which certain of the older families were drawn by marriage, financial inducements, and other methods.

As one analytic approach, we might also consider Pareto's classic "circulation of elites" concept and modify it to reflect present circumstances. Thus, we might observe the movement of a "predatory elite" into positions of power in the US over the past century and, in so doing, displacing and co-opting a faction of the remaining "traditional elite."

War is a profitable business for those commercial and financial interests servicing the war as predatory elites know well. Some elements of the remaining traditional elite can be co-opted into a pro-war stance out of pecuniary interest. There are always the Alcibiades type of military "leaders" to be found, particularly in a corrupted society where virtue is not a "social value." Loyalty to the state does not exist in rootless and predatory elements in their fully realized cosmopolitan perspective, does it?

Profit is the thing, avarice is the driver, corruption and divide to conquer....is the method....

Certain elites know quite well the British imperial and colonial experience. But the empire was profitable indeed to some, was it not? Thus others bleed not those insiders profiting handsomely from the hubris and naiveté of those doing their bidding.

As I have remarked before, Osama CIA Bin Laden, etal.... can really start their retirement planning as it appears the US has been lured into their trap for some years to come and is bleeding at quite a good clip these days....

"War without end, Amen" [irony, no disrespect to the Liturgy intended]