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3D Printing Company Aims to Block Printing of Guns

Danish company cites public safety and company liability as their chief concerns Adan SalazarInfowars.comJuly...

Fabrication power to the People! Why no government can stop the 3D printing revolution

Mike Adamsnaturalnews.comMay 11, 2013 The 3D printing revolution has arrived, and it’s freaking out...

The War on 3D Printing Begins

Tony CartalucciInfowars.comMay 11, 2013 May 11, 2013 (LocalOrg) — It was inevitable. A technology like 3D printing...

Navy considers 3D-printing future fleets of drones

Three-dimensional (3D) printers are quickly proving to be capable of creating just about anything out of little more than thin air, and that could...

Navy considers 3D-printing future fleets of drones

Three-dimensional (3D) printers are quickly proving to be capable of creating just about anything out of little more than thin air, and that could...

Scientists 3D-print ‘high-resolution’ living tissue

Published time: 18 Aug, 2017 16:05 Oxford University scientists have found a ground-breaking way of...

3D metal printer that works in zero gravity developed by British scientists

British scientist have designed a 3D metal printer that can function in zero gravity, allowing...

Paris attacks: Counter-terrorism chief wants fingerprinting & iris scans for all at UK borders

Every person entering the United Kingdom should be forced to undergo “fool-proof” fingerprinting and iris...

Bone in the USA: Researchers 3D print potential replacement skeleton parts

Bones made out calcium could be going the way of the flip phone! Not really, but...

3D Printers vs. Patents

By Gary North GaryNorth.com September 12, 2016 We know about 3D printing. It is in its primitive phase. Think about this technology 30 years from now. Of...
video

Video: First Russian 3D metal printer uses hardcore Titanium, Tungsten & Vanadium to create...

Hardcore printing: First Russian 3D metal printer showcased at Innoprom exhibition is able to cope with extraordinarily resistant metals like Titanium, Tungsten ... Via Youtube

3D bioprinter creates made-to-order body parts with living cells

Scientists have used 3D-printing technology to create first-of-their-kind structures made of living tissue. The bioprinter breakthrough has shown promise with cartilage, bone and muscle,...

3D Printers Could Be Used To Print Medicine

RINF Alternative News Scientists at the Louisiana Tech University claim they have developed a way to print medicines and other biodegradable material using consumer grade 3D printers. Jeffery Weisman,...

Thai Hunger Games, 3D Ear, DIY Broadband — New World Next Week

var l_height = 3*43+46; jQuery(document).ready(function(){ie7_css_correct();});CLICK HERE for the mp3 audio of this video. Welcome to http://NewWorldNextWeek.com — the video series from Corbett Report and Media Monarchy that covers some of the m...

3D plastic guns: US lawmakers seek ban on national security grounds

RT As America's undetectable firearms ban is expiring within less than a month, the country's law enforcement united with lawmakers to label 3D-printed arms a...

3-D Plastic Printing Technology May Make Gun Detection “Impossible”

With the imminent expiration of the Undetectable Firearms Act on December 9, the media and federal agencies are ramping up concerns about public safety...

World’s First 3D Printed Metal Gun

Introducing metal 3D printing to the world as a viable solution for fully functional firearm prototypes. http://www.youtube.com/watch?v=u7ZYKMBDm4M Source: Infowars

Cut-price space? NASA successfully tests 3D-printed rocket engine injector

NASA has published a video of a rocket engine partly manufactured using 3D printing technology. The US space agency looks forward to bringing the...

3D Printed Rifle 2.0 Successfully Fires 14 Shots

Maker vows to share blueprints while authorities continue with crackdown Steve WatsonInfowars.comAug 8, 2013 A...

Meet “The Grizzly”: Shot Fired From First Ever 3D Printed Rifle

Canadian gunsmith bats away accusations of illegality Steve WatsonInfowars.comJuly 26, 2013 The 3D printing revolution continues apace...

NYC Introduces Bill To Outlaw 3D Printed Guns

Licensed gun makers would be forced to register plastic firearms Steve Watson Infowars.com June 15, 2013 The New York City council introduced a...

DHS Memo Warns 3D Printed Guns May Be ‘Impossible’ to Stop

“Is America ready for pat-downs at every event?” Adan SalazarInfowars.comMay 24, 2013 A new Department...

$25 Gun Created With Cheap 3D Printer Fires Nine Shots (Video)

Andy GreenbergForbesMay 21, 2013 When high tech gunsmith group Defense Distributed test-fired the world’s first fully...

Pizza from a printer: NASA to spend $125,000 funding 3D food production project

NASA is funding research into 3D printed food which would provide astronauts with meals during long space flights. The futuristic food printers would use...

Defiant Pirate Bay to continue hosting banned 3D printer gun designs

File-sharing site The Pirate Bay says it has no plans to remove the blueprints for the ‘Liberator’ gun — which can be used to...

3D Printed Guns Render Gun Control Moot

guncontrol

Forbes has recently published an article about New York Congressman Steve Israel’s promise to ban 3D printed high capacity ammunition magazines. The congressman’s comments come after Defense Distributed, an open source DIY gunsmith group working to manufacture both guns and their accessories using 3D printing technology, successfully printed and tested a 30-round AR-15 magazine.

Congressman Israel stated:

“Background checks and gun regulations will do little good if criminals can print high-capacity magazines at home. 3-D printing is a new technology that shows great promise, but also requires new guidelines. Law enforcement officials should have the power to stop high-capacity magazines from proliferating with a Google search.”

It seems that Congressman Israel doesn’t realize that background checks and gun regulations both in the United States and just over America’s border with Mexico, already don’t work – without advanced manufacturing and open source paradigms even playing a role. Criminals intent on breaking laws have existed since laws themselves. Additionally, technology like 3D printing, as Forbes correctly points out, will pose a serious challenge to gun control advocates in terms of enforcement. Forbes stated specifically:

“But for either [Congresswoman Diane] Feinstein or Israel’s bill, the same problem arises: How to enforce that prohibition in every garage and workshop in America that houses a 3D printer?”

Of course, without becoming Nazi Germany or Stalin’s Soviet Union, or something far worse, there is no way to enforce these gun regulations. Criminals in particular will continue trumping the law, and because of the government’s refusal to actually tackle the socioeconomic factors driving violence and its insistence on instead punishing law abiding citizens, their authority, legitimacy, and ability to enforce even sensible legislation will be compromised.

And 3D manufacturing isn’t the only way to build your own gun. As a matter of fact, around the world where criminals are unable to buy guns, they do indeed already make their own – and then, as criminals are wanton to do, commit crimes with them, including, murder.

In Thailand, vocational schools are plagued by fierce gang-style rivalries. With standard tools, these students construct homemade guns which they frequently murder each other with. And just this New Year’s Eve, a British tourist was killed when a fight broke out at a party, and a homemade gun was fired. The difference between a Thai vocational education, and say a German or Japanese vocational education is one of culture and socioeconomics – not access to tools.

Image: This homemade handgun was made by an unruly Thai party-goer who claimed the life of a British tourist this New Year’s Eve. Despite the ubiquitous nature of guns, both homemade and manufactured in Thailand, and nearly no means of enforcing whatever legislation may or may not be on the books, gun violence (and violence overall) is still less than in the United States.

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Preventing people from manufacturing guns, or worse yet, from possessing or using tools that can be used to create guns, is both ludicrous and impossible. Like with cars or anything else, laws are there to ensure we don’t harm others by abusing any given right or implement – not preventing us from having those rights or implements responsibly in the first place. In the end, one must address the factors in any given society that drive large numbers of people to commit violent crimes in the first place – regardless of their chosen means or method.

In reality, an honest public representative would already be far too busy improving education, infrastructure, and the economic prospects of their people to waste time on banning every conceivable implement that could be used in a crime, directly or indirectly. The goal of Congress members like Feinstein or Israel, is not to prevent violence – but to simply disarm the population as the corporate-financier interests they represent seek to be further unhindered as they loot people and nations both abroad and at home.

The fact that the White House is taking such bold actions against “guns,” citing “mass shootings” which account for a fraction of 1% of all homicides, indicates a far more insidious agenda – and one based not on real priorities, but built upon a carefully exploited, emotional campaign to exact an obvious but not forthcoming final goal.

Get Involved.

Defense Distributed has a website – DefCAD.org – and the files for building their various designs available for downloading and use – for free. The files are in .IGS format and require a computer aided design program (CAD) to view them. FreeCAD is an open source, free to download program that works well. This is where, again, a local hackerspace pooling people’s resources together would help infinitely, especially when most hackerspaces come equipped with 3D printers and people capable of operating them and more importantly, capable of teaching you how to use them.

Image: Distributed Defense’s 30 round magazine opened in FreeCAD.

….

Right now, there seems to be only Distributed Defense pursuing this project in any meaningful manner – which should be a cause of concern for anyone who thinks this is a good idea. One group of people working on this alone is a giant, slow-moving target prone to failure from both within and beyond. Many people working on this in parallel, however, presents the same problem the movie and music industry face with file sharing – impossible victory/inevitable defeat.

Starting your own open source “distributed defense” group would be a good way to hedge the risk of having just one group coordinating efforts toward developing open source firearms accessible to all. DefCAD could be infiltrated, co-opted, or derailed in so many conceivable ways considering the implications the work it is doing have, it would be foolish not to hedge such risk.

The lack of direct participation in preserving our rights, and instead depending on lobbyists and protesters alone to to do it for us is one problem. Another problem is the purposeful polarization of the “gun debate” – of gun advocates and their critics along predictable political lines. The Washington Post, which is ironically run by a right-wing Neo-Con editorial board, recently celebrated President Obama’s “clever” use of the Constitution to turn the gun debate on its head. It also noted gleefully that part of the plan was getting the “people” themselves to demand stricter gun control. This will be done by getting half of America (the left) to take the guns away from the other half (the right).

Faux right-wing leaders take particular care in ensuring that to be a “gun rights activist,” you must also be a xenophobic crypto-racist, Islamophobic, and a conservative who believes the problem facing the world are closet-Communist liberals. Likewise, the faux left’s leadership ensures that their followers believe conservatives, their religion, and their guns are the root of all problems. In reality, the corporate-financiers run both sides of the debate and direct the talking points of prominent personalities on both the faux-left and faux-right.

Obviously, instead of digging in and playing along, our goal should be to reach across the aisle and close this artificial divide – by abandoning the leaders claiming to represent our particular political proclivities and working together to address the true causes of violence – social injustice, socioeconomic decay, and inadequate, impractical education.

Getting involved includes creating local institutions that find common ground and reject this artificial polarization – common ground that includes improving education, health care, and local economic prospects, which in turn reduces violence and leaves only responsible people with firearms (and the means to make them). Local efforts must be apolitical and all-inclusive – because if we are reduced to talking politics, it is because we don’t have a pragmatic solution to solve our problems.

DefCAD has a pragmatic solution – leveraging tangible, modern technology to ensure our rights are not trampled upon by insidious politicians. Taking away guns is not an option politically, and soon, not an option practically. All sides who truly seek to reduce the violence in society will be forced to look elsewhere for the solution. Since guns were never the problem to begin with, the advent of 3D printed guns and the insurmountable deterrence they present to “gun control,” may be a blessing in disguise for all who seek a more peaceful and just world.

BREAKING: 3D printable gun ordered to shut down by government

Defense Distributed is complying, DefCad.org has gone dark Adan SalazarInfowars.comMay 9, 2013 On the Thusday, May 9 edition of the Alex Jones Show, 3D printing guru...

There’s Potentially 100,000 People Now Printing Out Their Own Handguns

Geoffrey IngersollBusiness InsiderMay 9, 2013 Downloaders have successfully acquired at least 100,000 schematics for Defense Distributed’s printable 3D handgun over the course of two days. By...

Infowars Exclusive Interview with 3D Gunsmith: ‘Information Will Be Free, and It Wants To...

“I think information will be free, and it wants to be.” Adan SalazarInfowars.comMay 10,...

Interview 814 — New World Next Week with James Evan Pilato

This week on the New World Next Week: the POTUS delivers his SOTU propaganda; a key 3d printing patent is set to expire; and the first American arrested via drone is sentenced.

The Climate Change Corporate Lobby Threatens the Environment

At a recent Washington climate change rally, who is demanding action? Demanding action from whom? What action?

In reality, the diminutive, corporate-media inflated rally in DC was organized by the very corporate-financier special interests that have been wreaking terrible havoc on both the human population and the environment of this planet for decades. They are demanding action from a government that already represents their interests. Their demands are policies, particularly financial tax schemes that they themselves created and are are best positioned to benefit from while making no discernible impact on the very real environmental threats we collectively face.

Image: Rampant CO2, high global temperatures, rising sea levels. A look into the future? No, this is Mesozoic North America 250-65 million years ago. Climate change has happened long before humanity’s emergence, it will happen again, with or without us. The key to preserving what we as humans value, including not only our cities, towns, and countrysides, but also ecosystems and species – is to devise technical, pragmatic solutions to ensure no matter what the climate does, we can not only survive, but thrive.

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It was an exercise in manufacturing consent for policies already long-ago devised and simply waiting for piecemeal implementation.

Yahoo! News’ report, “40,000 People Reported at Climate Change Rally,” mentions 350.org as one of the rally’s organizers and key representatives. Upon 350.org‘s “Friends & Allies” page, an extensive list of human rights and environmental racketeers can be found, all either linked, or directly connected to big-oil, big-finance, big-agri, and big-defense.

The World Wildlife Fund (WWF) and its “Earth Hour” for instance, includes Fortune 500 corporations (page 24, .pdf) (and here) Walmart, Unilever, Coca-Cola, draconian intellectual property racketeer Christopher Dodd representing the Motion Picture Association of America (MPAA) as a director, Bank of America, Google, and others.

While the WWF claims having big corporations as partners is “good news” for the environment, implying that they are shifting toward environmental responsibility – in reality it is exactly the other way around. Corporations are co-opting genuine concern for the environment to further enrich themselves and to create global frameworks that eliminate indigenous competition over resources they themselves are already exploiting and plan to continue exploiting.

The lack of real, pragmatic solutions, or even an honest scientific discussion on issues like climate change are particularly telling. This collection of organizations falling under the 350.org website have also been key in pushing other establishment agendas, most notably regime change and political subversion worldwide, couching a corporate-fascist warmongering agenda behind liberal concerns for “freedom,” “democracy,” and “human rights.”

Real Environmental Threats

The climate of Earth has always changed throughout its natural history, and many times before the existence of man, has changed so dramatically that it has caused mass extinction events. 65 million years ago, for example, Antarctica was a thriving ecosystem covered in temperate forests inhabited by dinosaurs. The global temperatures were higher, sea levels were higher, and carbon dioxide (CO2) levels were many times higher than they are today. Higher temperatures, sea levels, and CO2 levels made the planet more habitable, not less. This changed however, and to the detriment of many species that are now extinct.

Before the Cretaceous period, there have been many points throughout Earth’s natural history, that were we as humans to travel back, would find uninhabitable. The atmosphere has been in a state of perpetual change, the biology driven by this change has likewise continuously evolved. There is no “norm” in terms of geology, biology, or climate. The only constant is the inevitability of its constant change.

The climate will change with or without us. To ensure the survival of what we value in terms of human society, history, and infrastructure, as well as ecosystems and individual species we desire to preserve, we must come up with something better than “carbon neutrality” implemented by giving bankers yet another derivative to trade, and energy companies a legal framework to maintain monopolies over powering human civilization.

Part of the solution is not only leveraging technology to protect our towns, cities, and countrysides from adverse weather, flooding, and changes in temperature through innovative infrastructure projects, but undermining, decentralizing, and eventually eliminating permanently these corporate monopolies that are demonstrably destroying the environment.

Strange that 350.org wasn’t marching against genetically modified organisms (GMO) and Monsanto’s pursuit of overwriting the planet genetically. Could a planet face a more dire threat than being overwritten genetically, its very essence mutilated by profiteering corporations? Strange that 350.org‘s “Friends & Allies” don’t demand an end to profiteering wars around the planet that see tons of depleted uranium, with a half-life of billions of years, being dumped in both human and natural habitats the world over. Strange that 350.org, and “Friends & Allies” like WWF have in fact partnered with Fortune 500 corporations that perpetuate global monopolies, centralized manufacturing and distribution (and profits) that encourage wasteful supply chains, unhealthy socioeconomic trends, incur large amounts of garbage, and require the very petroleum and CO2 producing processes they allegedly were in Washington to oppose.

Indeed, 350.org and partners like the WWF do not represent corporations joining environmentalists, but rather represent environmentalists being co-opted and manipulated by the very special interests committing real harm to this planet.

Don’t Demand Action – Be the Action 

Waving around placards as part of a big-business rally couched behind environmentalism, demanding action from a government big-business already fully owns, simply legitimizes and manufacturers public consent for more of the same. More schemes, more waste, more fraud, more abuse, while the environment continues to unravel and a host of problems both directly and indirectly related continue to grow.

Real solutions generally don’t involve corporations or governments, in fact, as a necessity must exclude them. The marriage between corporate interests and government regulations should be something all of us can agree on, regardless of where we sit on the political or environmental spectrum.

Real solutions involve a real education in science, technology, design, and manufacturing. This empowers people in all levels of society to accurately assess problems and apply local solutions. This, coupled with modern manufacturing technology enables more to be done on a local level, short-circuiting the petroleum intensive logistical chains WWF sponsors like Walmart couldn’t live without.

Organic farming on a local level coupled with local farmers’ markets eliminates entirely the need for Monsanto poison, fertilizers, and genetically modified franken-crops, along with the replacement of the petroleum intensive logistical networks that distribute big-agri’s products. 3D printing, computer-controlled manufacturing, and local hackerspaces that encourage local entrepreneurship accelerate technological development and solutions that allow us to live the lives we wish to lead while doing so more efficiently in terms of energy, waste, and environmental impact.

In fact, when you think about it, almost all of these real solutions involve real community and local action, not placard-waving trips to Washington. These are not solutions that involve policies, taxes, and regulations, but rather technology, education, constructive, pragmatic, technical solutions that not only would make our environment more livable, but make our local economies and communities more viable and self-sufficient. The catch is, and the reason why this isn’t being done, you will notice that none of these activities require WWF sponsors like Walmart, Nike, IBM, Toyota, Bank of America, Coca-Cola, HSBC, Citi, IKEA, Nokia, etc.

We all desire cleaner air, healthier food, safer water, and greener parks. Waiting for a corporate-financier establishment to give it to us, when they themselves are the ones that have denied us of these essentials is the height of both naivety and futility.

Does it make sense then, to see why real problems and their solutions have become the target of hijackers like the corporate conglomeration that is 350.org and the WWF? Does it make sense to see them offering “alternative” centralized, corporate dependent solutions that replace local activism and tangible, technological solutions?

Why travel to Washington D.C. and demand non-solutions to real problems when you can organize locally and begin making this planet livable in very real, tangible, pragmatic, and measurable ways?

#SOTU – The Summary: Minimum Wage, Maximum Genomes, Macs, And Moar Cyber-Security

5% fewer words, slightly shorter than last year but just as hope-full. From a hike (and inflation-indexed) in the minimum wage to a 140x multiplier of genome sciences investment (now that is Keynesian awesomeness); from extending homeownership (and refinancing plans) even more to energy independence; from Apple, Ford, and CAT's US Manufacturing to Bridge-Building and infrastructure spending; and from Trans-Pacific and -Atlantic Trade to cyber-security; it's all gonna be great - because as President Obama reminded us at the start... "Our housing market is healing, our stock market is rebounding," and this won't add a dime to the deficit... oh and that Student loan bubble - no worries, there's a college scorecard so now you know where you can get the biggest bang for your credit-based buck. Summing it all up:

  • Guns 9 : 3 Freedom
  • Jobs 31 : 17 Tax
  • Congress 17 : 40 Work
  • Recovery 2 : 0 Unicorns
  • Spending 3 : 2 Cutting

Fed heads chimed in early:

  • *PLOSSER: `BRIGHTER LINE' NEEDED BETWEEN FISCAL, MONETARY POLICY
  • *PLOSSER EXPECTS FED TO REDUCE BOND BUYING BY END OF THIS YEAR

That won't help fund all of this wonderfulness...

But we started on an awkward note with Reince Priebus:

and David Axelrod...

Oh well...

The word cloud: Jobs - Years - America (and... people education like)

Full Speech:

Mr. Speaker, Mr. Vice President, Members of Congress, fellow citizens:

     Fifty-one years ago, John F. Kennedy declared to this Chamber that “the Constitution makes us not rivals for power but partners for progress…It is my task,” he said, “to report the State of the Union – to improve it is the task of us all.”

     Tonight, thanks to the grit and determination of the American people, there is much progress to report. After a decade of grinding war, our brave men and women in uniform are coming home. After years of grueling recession, our businesses have created over six million new jobs. We buy more American cars than we have in five years, and less foreign oil than we have in twenty. Our housing market is healing, our stock market is rebounding, and consumers, patients, and homeowners enjoy stronger protections than ever before.

     Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger.

     But we gather here knowing that there are millions of Americans whose hard work and dedication have not yet been rewarded. Our economy is adding jobs – but too many people still can’t find full-time employment. Corporate profits have rocketed to all-time highs – but for more than a decade, wages and incomes have barely budged.

     It is our generation’s task, then, to reignite the true engine of America’s economic growth – a rising, thriving middle class.

     It is our unfinished task to restore the basic bargain that built this country – the idea that if you work hard and meet your responsibilities, you can get ahead, no matter where you come from, what you look like, or who you love.

     It is our unfinished task to make sure that this government works on behalf of the many, and not just the few; that it encourages free enterprise, rewards individual initiative, and opens the doors of opportunity to every child across this great nation.

     The American people don’t expect government to solve every problem. They don’t expect those of us in this chamber to agree on every issue. But they do expect us to put the nation’s interests before party. They do expect us to forge reasonable compromise where we can. For they know that America moves forward only when we do so together; and that the responsibility of improving this union remains the task of us all.

     Our work must begin by making some basic decisions about our budget – decisions that will have a huge impact on the strength of our recovery.

     Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion – mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances.

     Now we need to finish the job. And the question is, how?

     In 2011, Congress passed a law saying that if both parties couldn’t agree on a plan to reach our deficit goal, about a trillion dollars’ worth of budget cuts would automatically go into effect this year. These sudden, harsh, arbitrary cuts would jeopardize our military readiness. They’d devastate priorities like education, energy, and medical research. They would certainly slow our recovery, and cost us hundreds of thousands of jobs. That’s why Democrats, Republicans, business leaders, and economists have already said that these cuts, known here in Washington as “the sequester,” are a really bad idea.

     Now, some in this Congress have proposed preventing only the defense cuts by making even bigger cuts to things like education and job training; Medicare and Social Security benefits.

     That idea is even worse. Yes, the biggest driver of our long-term debt is the rising cost of health care for an aging population. And those of us who care deeply about programs like Medicare must embrace the need for modest reforms – otherwise, our retirement programs will crowd out the investments we need for our children, and jeopardize the promise of a secure retirement for future generations.

     But we can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and most powerful. We won’t grow the middle class simply by shifting the cost of health care or college onto families that are already struggling, or by forcing communities to lay off more teachers, cops, and firefighters. Most Americans – Democrats, Republicans, and Independents – understand that we can’t just cut our way to prosperity. They know that broad-based economic growth requires a balanced approach to deficit reduction, with spending cuts and revenue, and with everybody doing their fair share. And that’s the approach I offer tonight.

     On Medicare, I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission. Already, the Affordable Care Act is helping to slow the growth of health care costs. The reforms I’m proposing go even further. We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors. We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our seniors receive. And I am open to additional reforms from both parties, so long as they don’t violate the guarantee of a secure retirement. Our government shouldn’t make promises we cannot keep – but we must keep the promises we’ve already made.

     To hit the rest of our deficit reduction target, we should do what leaders in both parties have already suggested, and save hundreds of billions of dollars by getting rid of tax loopholes and deductions for the well-off and well-connected. After all, why would we choose to make deeper cuts to education and Medicare just to protect special interest tax breaks? How is that fair? How does that promote growth?

     Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit. The American people deserve a tax code that helps small businesses spend less time filling out complicated forms, and more time expanding and hiring; a tax code that ensures billionaires with high-powered accountants can’t pay a lower rate than their hard-working secretaries; a tax code that lowers incentives to move jobs overseas, and lowers tax rates for businesses and manufacturers that create jobs right here in America. That’s what tax reform can deliver. That’s what we can do together.

     I realize that tax reform and entitlement reform won’t be easy. The politics will be hard for both sides. None of us will get 100 percent of what we want. But the alternative will cost us jobs, hurt our economy, and visit hardship on millions of hardworking Americans. So let’s set party interests aside, and work to pass a budget that replaces reckless cuts with smart savings and wise investments in our future. And let’s do it without the brinksmanship that stresses consumers and scares off investors. The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next. Let’s agree, right here, right now, to keep the people’s government open, pay our bills on time, and always uphold the full faith and credit of the United States of America. The American people have worked too hard, for too long, rebuilding from one crisis to see their elected officials cause another.

     Now, most of us agree that a plan to reduce the deficit must be part of our agenda. But let’s be clear: deficit reduction alone is not an economic plan. A growing economy that creates good, middle-class jobs – that must be the North Star that guides our efforts. Every day, we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills needed to do those jobs? And how do we make sure that hard work leads to a decent living?

     A year and a half ago, I put forward an American Jobs Act that independent economists said would create more than one million new jobs. I thank the last Congress for passing some of that agenda, and I urge this Congress to pass the rest. Tonight, I’ll lay out additional proposals that are fully paid for and fully consistent with the budget framework both parties agreed to just 18 months ago. Let me repeat – nothing I’m proposing tonight should increase our deficit by a single dime. It’s not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth.

     Our first priority is making America a magnet for new jobs and manufacturing.

     After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three. Caterpillar is bringing jobs back from Japan. Ford is bringing jobs back from Mexico. After locating plants in other countries like China, Intel is opening its most advanced plant right here at home. And this year, Apple will start making Macs in America again.

     There are things we can do, right now, to accelerate this trend. Last year, we created our first manufacturing innovation institute in Youngstown, Ohio. A once-shuttered warehouse is now a state-of-the art lab where new workers are mastering the 3D printing that has the potential to revolutionize the way we make almost everything. There’s no reason this can’t happen in other towns. So tonight, I’m announcing the launch of three more of these manufacturing hubs, where businesses will partner with the Departments of Defense and Energy to turn regions left behind by globalization into global centers of high-tech jobs. And I ask this Congress to help create a network of fifteen of these hubs and guarantee that the next revolution in manufacturing is Made in America.

     If we want to make the best products, we also have to invest in the best ideas. Every dollar we invested to map the human genome returned $140 to our economy. Today, our scientists are mapping the human brain to unlock the answers to Alzheimer’s; developing drugs to regenerate damaged organs; devising new material to make batteries ten times more powerful. Now is not the time to gut these job-creating investments in science and innovation. Now is the time to reach a level of research and development not seen since the height of the Space Race. And today, no area holds more promise than our investments in American energy.

     After years of talking about it, we are finally poised to control our own energy future. We produce more oil at home than we have in 15 years. We have doubled the distance our cars will go on a gallon of gas, and the amount of renewable energy we generate from sources like wind and solar – with tens of thousands of good, American jobs to show for it. We produce more natural gas than ever before – and nearly everyone’s energy bill is lower because of it. And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen.

     But for the sake of our children and our future, we must do more to combat climate change. Yes, it’s true that no single event makes a trend. But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, and floods – all are now more frequent and intense. We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science – and act before it’s too late.

     The good news is, we can make meaningful progress on this issue while driving strong economic growth. I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago. But if Congress won’t act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.

     Four years ago, other countries dominated the clean energy market and the jobs that came with it. We’ve begun to change that. Last year, wind energy added nearly half of all new power capacity in America. So let’s generate even more. Solar energy gets cheaper by the year – so let’s drive costs down even further. As long as countries like China keep going all-in on clean energy, so must we.

     In the meantime, the natural gas boom has led to cleaner power and greater energy independence. That’s why my Administration will keep cutting red tape and speeding up new oil and gas permits. But I also want to work with this Congress to encourage the research and technology that helps natural gas burn even cleaner and protects our air and water.

     Indeed, much of our new-found energy is drawn from lands and waters that we, the public, own together. So tonight, I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good. If a non-partisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we. Let’s take their advice and free our families and businesses from the painful spikes in gas prices we’ve put up with for far too long. I’m also issuing a new goal for America: let’s cut in half the energy wasted by our homes and businesses over the next twenty years. The states with the best ideas to create jobs and lower energy bills by constructing more efficient buildings will receive federal support to help make it happen.

     America’s energy sector is just one part of an aging infrastructure badly in need of repair. Ask any CEO where they’d rather locate and hire: a country with deteriorating roads and bridges, or one with high-speed rail and internet; high-tech schools and self-healing power grids. The CEO of Siemens America – a company that brought hundreds of new jobs to North Carolina – has said that if we upgrade our infrastructure, they’ll bring even more jobs. And I know that you want these job-creating projects in your districts. I’ve seen you all at the ribbon-cuttings.

     Tonight, I propose a “Fix-It-First” program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country. And to make sure taxpayers don’t shoulder the whole burden, I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children. Let’s prove that there is no better place to do business than the United States of America. And let’s start right away.

     Part of our rebuilding effort must also involve our housing sector. Today, our housing market is finally healing from the collapse of 2007. Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent, and construction is expanding again.

     But even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected. Too many families who have never missed a payment and want to refinance are being told no. That’s holding our entire economy back, and we need to fix it. Right now, there’s a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today’s rates. Democrats and Republicans have supported it before. What are we waiting for? Take a vote, and send me that bill. Right now, overlapping regulations keep responsible young families from buying their first home. What’s holding us back? Let’s streamline the process, and help our economy grow.

     These initiatives in manufacturing, energy, infrastructure, and housing will help entrepreneurs and small business owners expand and create new jobs. But none of it will matter unless we also equip our citizens with the skills and training to fill those jobs. And that has to start at the earliest possible age.

     Study after study shows that the sooner a child begins learning, the better he or she does down the road. But today, fewer than 3 in 10 four year-olds are enrolled in a high-quality preschool program. Most middle-class parents can’t afford a few hundred bucks a week for private preschool. And for poor kids who need help the most, this lack of access to preschool education can shadow them for the rest of their lives.

     Tonight, I propose working with states to make high-quality preschool available to every child in America. Every dollar we invest in high-quality early education can save more than seven dollars later on – by boosting graduation rates, reducing teen pregnancy, even reducing violent crime. In states that make it a priority to educate our youngest children, like Georgia or Oklahoma, studies show students grow up more likely to read and do math at grade level, graduate high school, hold a job, and form more stable families of their own. So let’s do what works, and make sure none of our children start the race of life already behind. Let’s give our kids that chance.

     Let’s also make sure that a high school diploma puts our kids on a path to a good job. Right now, countries like Germany focus on graduating their high school students with the equivalent of a technical degree from one of our community colleges, so that they’re ready for a job. At schools like P-Tech in Brooklyn, a collaboration between New York Public Schools, the City University of New York, and IBM, students will graduate with a high school diploma and an associate degree in computers or engineering.

     We need to give every American student opportunities like this. Four years ago, we started Race to the Top – a competition that convinced almost every state to develop smarter curricula and higher standards, for about 1 percent of what we spend on education each year. Tonight, I’m announcing a new challenge to redesign America’s high schools so they better equip graduates for the demands of a high-tech economy. We’ll reward schools that develop new partnerships with colleges and employers, and create classes that focus on science, technology, engineering, and math – the skills today’s employers are looking for to fill jobs right now and in the future.

     Now, even with better high schools, most young people will need some higher education. It’s a simple fact: the more education you have, the more likely you are to have a job and work your way into the middle class. But today, skyrocketing costs price way too many young people out of a higher education, or saddle them with unsustainable debt.

     Through tax credits, grants, and better loans, we have made college more affordable for millions of students and families over the last few years. But taxpayers cannot continue to subsidize the soaring cost of higher education. Colleges must do their part to keep costs down, and it’s our job to make sure they do. Tonight, I ask Congress to change the Higher Education Act, so that affordability and value are included in determining which colleges receive certain types of federal aid. And tomorrow, my Administration will release a new “College Scorecard” that parents and students can use to compare schools based on a simple criteria: where you can get the most bang for your educational buck.

     To grow our middle class, our citizens must have access to the education and training that today’s jobs require. But we also have to make sure that America remains a place where everyone who’s willing to work hard has the chance to get ahead.

     Our economy is stronger when we harness the talents and ingenuity of striving, hopeful immigrants. And right now, leaders from the business, labor, law enforcement, and faith communities all agree that the time has come to pass comprehensive immigration reform.

     Real reform means strong border security, and we can build on the progress my Administration has already made – putting more boots on the southern border than at any time in our history, and reducing illegal crossings to their lowest levels in 40 years.

     Real reform means establishing a responsible pathway to earned citizenship – a path that includes passing a background check, paying taxes and a meaningful penalty, learning English, and going to the back of the line behind the folks trying to come here legally.

     And real reform means fixing the legal immigration system to cut waiting periods, reduce bureaucracy, and attract the highly-skilled entrepreneurs and engineers that will help create jobs and grow our economy.

     In other words, we know what needs to be done. As we speak, bipartisan groups in both chambers are working diligently to draft a bill, and I applaud their efforts. Now let’s get this done. Send me a comprehensive immigration reform bill in the next few months, and I will sign it right away.

     But we can’t stop there. We know our economy is stronger when our wives, mothers, and daughters can live their lives free from discrimination in the workplace, and free from the fear of domestic violence. Today, the Senate passed the Violence Against Women Act that Joe Biden originally wrote almost 20 years ago. I urge the House to do the same. And I ask this Congress to declare that women should earn a living equal to their efforts, and finally pass the Paycheck Fairness Act this year.

     We know our economy is stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong. That’s why, since the last time this Congress raised the minimum wage, nineteen states have chosen to bump theirs even higher.

      Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets. In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher. So here’s an idea that Governor Romney and I actually agreed on last year: let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.

     Tonight, let’s also recognize that there are communities in this country where no matter how hard you work, it’s virtually impossible to get ahead. Factory towns decimated from years of plants packing up. Inescapable pockets of poverty, urban and rural, where young adults are still fighting for their first job. America is not a place where chance of birth or circumstance should decide our destiny. And that is why we need to build new ladders of opportunity into the middle class for all who are willing to climb them.

     Let’s offer incentives to companies that hire Americans who’ve got what it takes to fill that job opening, but have been out of work so long that no one will give them a chance. Let’s put people back to work rebuilding vacant homes in run-down neighborhoods. And this year, my Administration will begin to partner with 20 of the hardest-hit towns in America to get these communities back on their feet. We’ll work with local leaders to target resources at public safety, education, and housing. We’ll give new tax credits to businesses that hire and invest. And we’ll work to strengthen families by removing the financial deterrents to marriage for low-income couples, and doing more to encourage fatherhood – because what makes you a man isn’t the ability to conceive a child; it’s having the courage to raise one.

     Stronger families. Stronger communities. A stronger America. It is this kind of prosperity – broad, shared, and built on a thriving middle class – that has always been the source of our progress at home. It is also the foundation of our power and influence throughout the world.

     Tonight, we stand united in saluting the troops and civilians who sacrifice every day to protect us. Because of them, we can say with confidence that America will complete its mission in Afghanistan, and achieve our objective of defeating the core of al Qaeda. Already, we have brought home 33,000 of our brave servicemen and women. This spring, our forces will move into a support role, while Afghan security forces take the lead. Tonight, I can announce that over the next year, another 34,000 American troops will come home from Afghanistan. This drawdown will continue. And by the end of next year, our war in Afghanistan will be over.

     Beyond 2014, America’s commitment to a unified and sovereign Afghanistan will endure, but the nature of our commitment will change. We are negotiating an agreement with the Afghan government that focuses on two missions: training and equipping Afghan forces so that the country does not again slip into chaos, and counter-terrorism efforts that allow us to pursue the remnants of al Qaeda and their affiliates.

     Today, the organization that attacked us on 9/11 is a shadow of its former self. Different al Qaeda affiliates and extremist groups have emerged – from the Arabian Peninsula to Africa. The threat these groups pose is evolving. But to meet this threat, we don’t need to send tens of thousands of our sons and daughters abroad, or occupy other nations. Instead, we will need to help countries like Yemen, Libya, and Somalia provide for their own security, and help allies who take the fight to terrorists, as we have in Mali. And, where necessary, through a range of capabilities, we will continue to take direct action against those terrorists who pose the gravest threat to Americans.

     As we do, we must enlist our values in the fight. That is why my Administration has worked tirelessly to forge a durable legal and policy framework to guide our counterterrorism operations. Throughout, we have kept Congress fully informed of our efforts. I recognize that in our democracy, no one should just take my word that we’re doing things the right way. So, in the months ahead, I will continue to engage with Congress to ensure not only that our targeting, detention, and prosecution of terrorists remains consistent with our laws and system of checks and balances, but that our efforts are even more transparent to the American people and to the world.

     Of course, our challenges don’t end with al Qaeda. America will continue to lead the effort to prevent the spread of the world’s most dangerous weapons. The regime in North Korea must know that they will only achieve security and prosperity by meeting their international obligations. Provocations of the sort we saw last night will only isolate them further, as we stand by our allies, strengthen our own missile defense, and lead the world in taking firm action in response to these threats.

     Likewise, the leaders of Iran must recognize that now is the time for a diplomatic solution, because a coalition stands united in demanding that they meet their obligations, and we will do what is necessary to prevent them from getting a nuclear weapon. At the same time, we will engage Russia to seek further reductions in our nuclear arsenals, and continue leading the global effort to secure nuclear materials that could fall into the wrong hands – because our ability to influence others depends on our willingness to lead.

     America must also face the rapidly growing threat from cyber-attacks. We know hackers steal people’s identities and infiltrate private e-mail. We know foreign countries and companies swipe our corporate secrets. Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, and our air traffic control systems. We cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy.

     That’s why, earlier today, I signed a new executive order that will strengthen our cyber defenses by increasing information sharing, and developing standards to protect our national security, our jobs, and our privacy. Now, Congress must act as well, by passing legislation to give our government a greater capacity to secure our networks and deter attacks.

     Even as we protect our people, we should remember that today’s world presents not only dangers, but opportunities. To boost American exports, support American jobs, and level the playing field in the growing markets of Asia, we intend to complete negotiations on a Trans-Pacific Partnership. And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs.

     We also know that progress in the most impoverished parts of our world enriches us all. In many places, people live on little more than a dollar a day. So the United States will join with our allies to eradicate such extreme poverty in the next two decades: by connecting more people to the global economy and empowering women; by giving our young and brightest minds new opportunities to serve and helping communities to feed, power, and educate themselves; by saving the world’s children from preventable deaths; and by realizing the promise of an AIDS-free generation.

     Above all, America must remain a beacon to all who seek freedom during this period of historic change. I saw the power of hope last year in Rangoon – when Aung San Suu Kyi welcomed an American President into the home where she had been imprisoned for years; when thousands of Burmese lined the streets, waving American flags, including a man who said, “There is justice and law in the United States. I want our country to be like that.”

     In defense of freedom, we will remain the anchor of strong alliances from the Americas to Africa; from Europe to Asia. In the Middle East, we will stand with citizens as they demand their universal rights, and support stable transitions to democracy. The process will be messy, and we cannot presume to dictate the course of change in countries like Egypt; but we can – and will – insist on respect for the fundamental rights of all people. We will keep the pressure on a Syrian regime that has murdered its own people, and support opposition leaders that respect the rights of every Syrian. And we will stand steadfast with Israel in pursuit of security and a lasting peace. These are the messages I will deliver when I travel to the Middle East next month.

     All this work depends on the courage and sacrifice of those who serve in dangerous places at great personal risk – our diplomats, our intelligence officers, and the men and women of the United States Armed Forces. As long as I’m Commander-in-Chief, we will do whatever we must to protect those who serve their country abroad, and we will maintain the best military in the world. We will invest in new capabilities, even as we reduce waste and wartime spending. We will ensure equal treatment for all service members, and equal benefits for their families – gay and straight. We will draw upon the courage and skills of our sisters and daughters, because women have proven under fire that they are ready for combat. We will keep faith with our veterans – investing in world-class care, including mental health care, for our wounded warriors; supporting our military families; and giving our veterans the benefits, education, and job opportunities they have earned. And I want to thank my wife Michelle and Dr. Jill Biden for their continued dedication to serving our military families as well as they serve us.

     But defending our freedom is not the job of our military alone. We must all do our part to make sure our God-given rights are protected here at home. That includes our most fundamental right as citizens: the right to vote. When any Americans – no matter where they live or what their party – are denied that right simply because they can’t wait for five, six, seven hours just to cast their ballot, we are betraying our ideals. That’s why, tonight, I’m announcing a non-partisan commission to improve the voting experience in America. And I’m asking two long-time experts in the field, who’ve recently served as the top attorneys for my campaign and for Governor Romney’s campaign, to lead it. We can fix this, and we will. The American people demand it. And so does our democracy.

     Of course, what I’ve said tonight matters little if we don’t come together to protect our most precious resource – our children.

     It has been two months since Newtown. I know this is not the first time this country has debated how to reduce gun violence. But this time is different. Overwhelming majorities of Americans – Americans who believe in the 2nd Amendment – have come together around commonsense reform – like background checks that will make it harder for criminals to get their hands on a gun. Senators of both parties are working together on tough new laws to prevent anyone from buying guns for resale to criminals. Police chiefs are asking our help to get weapons of war and massive ammunition magazines off our streets, because they are tired of being outgunned.

     Each of these proposals deserves a vote in Congress. If you want to vote no, that’s your choice. But these proposals deserve a vote. Because in the two months since Newtown, more than a thousand birthdays, graduations, and anniversaries have been stolen from our lives by a bullet from a gun.

     One of those we lost was a young girl named Hadiya Pendleton. She was 15 years old. She loved Fig Newtons and lip gloss. She was a majorette. She was so good to her friends, they all thought they were her best friend. Just three weeks ago, she was here, in Washington, with her classmates, performing for her country at my inauguration. And a week later, she was shot and killed in a Chicago park after school, just a mile away from my house.

     Hadiya’s parents, Nate and Cleo, are in this chamber tonight, along with more than two dozen Americans whose lives have been torn apart by gun violence. They deserve a vote.

     Gabby Giffords deserves a vote.

     The families of Newtown deserve a vote.

     The families of Aurora deserve a vote.

     The families of Oak Creek, and Tucson, and Blacksburg, and the countless other communities ripped open by gun violence – they deserve a simple vote.

     Our actions will not prevent every senseless act of violence in this country. Indeed, no laws, no initiatives, no administrative acts will perfectly solve all the challenges I’ve outlined tonight. But we were never sent here to be perfect. We were sent here to make what difference we can, to secure this nation, expand opportunity, and uphold our ideals through the hard, often frustrating, but absolutely necessary work of self-government.      We were sent here to look out for our fellow Americans the same way they look out for one another, every single day, usually without fanfare, all across this country. We should follow their example.

     We should follow the example of a New York City nurse named Menchu Sanchez. When Hurricane Sandy plunged her hospital into darkness, her thoughts were not with how her own home was faring – they were with the twenty precious newborns in her care and the rescue plan she devised that kept them all safe.

     We should follow the example of a North Miami woman named Desiline Victor. When she arrived at her polling place, she was told the wait to vote might be six hours. And as time ticked by, her concern was not with her tired body or aching feet, but whether folks like her would get to have their say. Hour after hour, a throng of people stayed in line in support of her. Because Desiline is 102 years old. And they erupted in cheers when she finally put on a sticker that read “I Voted.”

     We should follow the example of a police officer named Brian Murphy. When a gunman opened fire on a Sikh temple in Wisconsin, and Brian was the first to arrive, he did not consider his own safety. He fought back until help arrived, and ordered his fellow officers to protect the safety of the Americans worshiping inside – even as he lay bleeding from twelve bullet wounds.

     When asked how he did that, Brian said, “That’s just the way we’re made.”

     That’s just the way we’re made.

      We may do different jobs, and wear different uniforms, and hold different views than the person beside us. But as Americans, we all share the same proud title:

     We are citizens. It’s a word that doesn’t just describe our nationality or legal status. It describes the way we’re made. It describes what we believe. It captures the enduring idea that this country only works when we accept certain obligations to one another and to future generations; that our rights are wrapped up in the rights of others; and that well into our third century as a nation, it remains the task of us all, as citizens of these United States, to be the authors of the next great chapter in our American story.

     Thank you, God bless you, and God bless the United States of America.

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#SOTU – The Summary: Minimum Wage, Maximum Genomes, Macs, And Moar Cyber-Security

5% fewer words, slightly shorter than last year but just as hope-full. From a hike (and inflation-indexed) in the minimum wage to a 140x multiplier of genome sciences investment (now that is Keynesian awesomeness); from extending homeownership (and refinancing plans) even more to energy independence; from Apple, Ford, and CAT's US Manufacturing to Bridge-Building and infrastructure spending; and from Trans-Pacific and -Atlantic Trade to cyber-security; it's all gonna be great - because as President Obama reminded us at the start... "Our housing market is healing, our stock market is rebounding," and this won't add a dime to the deficit... oh and that Student loan bubble - no worries, there's a college scorecard so now you know where you can get the biggest bang for your credit-based buck. Summing it all up:

  • Guns 9 : 3 Freedom
  • Jobs 31 : 17 Tax
  • Congress 17 : 40 Work
  • Recovery 2 : 0 Unicorns
  • Spending 3 : 2 Cutting

Fed heads chimed in early:

  • *PLOSSER: `BRIGHTER LINE' NEEDED BETWEEN FISCAL, MONETARY POLICY
  • *PLOSSER EXPECTS FED TO REDUCE BOND BUYING BY END OF THIS YEAR

That won't help fund all of this wonderfulness...

But we started on an awkward note with Reince Priebus:

and David Axelrod...

Oh well...

The word cloud: Jobs - Years - America (and... people education like)

Full Speech:

Mr. Speaker, Mr. Vice President, Members of Congress, fellow citizens:

     Fifty-one years ago, John F. Kennedy declared to this Chamber that “the Constitution makes us not rivals for power but partners for progress…It is my task,” he said, “to report the State of the Union – to improve it is the task of us all.”

     Tonight, thanks to the grit and determination of the American people, there is much progress to report. After a decade of grinding war, our brave men and women in uniform are coming home. After years of grueling recession, our businesses have created over six million new jobs. We buy more American cars than we have in five years, and less foreign oil than we have in twenty. Our housing market is healing, our stock market is rebounding, and consumers, patients, and homeowners enjoy stronger protections than ever before.

     Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger.

     But we gather here knowing that there are millions of Americans whose hard work and dedication have not yet been rewarded. Our economy is adding jobs – but too many people still can’t find full-time employment. Corporate profits have rocketed to all-time highs – but for more than a decade, wages and incomes have barely budged.

     It is our generation’s task, then, to reignite the true engine of America’s economic growth – a rising, thriving middle class.

     It is our unfinished task to restore the basic bargain that built this country – the idea that if you work hard and meet your responsibilities, you can get ahead, no matter where you come from, what you look like, or who you love.

     It is our unfinished task to make sure that this government works on behalf of the many, and not just the few; that it encourages free enterprise, rewards individual initiative, and opens the doors of opportunity to every child across this great nation.

     The American people don’t expect government to solve every problem. They don’t expect those of us in this chamber to agree on every issue. But they do expect us to put the nation’s interests before party. They do expect us to forge reasonable compromise where we can. For they know that America moves forward only when we do so together; and that the responsibility of improving this union remains the task of us all.

     Our work must begin by making some basic decisions about our budget – decisions that will have a huge impact on the strength of our recovery.

     Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion – mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances.

     Now we need to finish the job. And the question is, how?

     In 2011, Congress passed a law saying that if both parties couldn’t agree on a plan to reach our deficit goal, about a trillion dollars’ worth of budget cuts would automatically go into effect this year. These sudden, harsh, arbitrary cuts would jeopardize our military readiness. They’d devastate priorities like education, energy, and medical research. They would certainly slow our recovery, and cost us hundreds of thousands of jobs. That’s why Democrats, Republicans, business leaders, and economists have already said that these cuts, known here in Washington as “the sequester,” are a really bad idea.

     Now, some in this Congress have proposed preventing only the defense cuts by making even bigger cuts to things like education and job training; Medicare and Social Security benefits.

     That idea is even worse. Yes, the biggest driver of our long-term debt is the rising cost of health care for an aging population. And those of us who care deeply about programs like Medicare must embrace the need for modest reforms – otherwise, our retirement programs will crowd out the investments we need for our children, and jeopardize the promise of a secure retirement for future generations.

     But we can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and most powerful. We won’t grow the middle class simply by shifting the cost of health care or college onto families that are already struggling, or by forcing communities to lay off more teachers, cops, and firefighters. Most Americans – Democrats, Republicans, and Independents – understand that we can’t just cut our way to prosperity. They know that broad-based economic growth requires a balanced approach to deficit reduction, with spending cuts and revenue, and with everybody doing their fair share. And that’s the approach I offer tonight.

     On Medicare, I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission. Already, the Affordable Care Act is helping to slow the growth of health care costs. The reforms I’m proposing go even further. We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors. We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our seniors receive. And I am open to additional reforms from both parties, so long as they don’t violate the guarantee of a secure retirement. Our government shouldn’t make promises we cannot keep – but we must keep the promises we’ve already made.

     To hit the rest of our deficit reduction target, we should do what leaders in both parties have already suggested, and save hundreds of billions of dollars by getting rid of tax loopholes and deductions for the well-off and well-connected. After all, why would we choose to make deeper cuts to education and Medicare just to protect special interest tax breaks? How is that fair? How does that promote growth?

     Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit. The American people deserve a tax code that helps small businesses spend less time filling out complicated forms, and more time expanding and hiring; a tax code that ensures billionaires with high-powered accountants can’t pay a lower rate than their hard-working secretaries; a tax code that lowers incentives to move jobs overseas, and lowers tax rates for businesses and manufacturers that create jobs right here in America. That’s what tax reform can deliver. That’s what we can do together.

     I realize that tax reform and entitlement reform won’t be easy. The politics will be hard for both sides. None of us will get 100 percent of what we want. But the alternative will cost us jobs, hurt our economy, and visit hardship on millions of hardworking Americans. So let’s set party interests aside, and work to pass a budget that replaces reckless cuts with smart savings and wise investments in our future. And let’s do it without the brinksmanship that stresses consumers and scares off investors. The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next. Let’s agree, right here, right now, to keep the people’s government open, pay our bills on time, and always uphold the full faith and credit of the United States of America. The American people have worked too hard, for too long, rebuilding from one crisis to see their elected officials cause another.

     Now, most of us agree that a plan to reduce the deficit must be part of our agenda. But let’s be clear: deficit reduction alone is not an economic plan. A growing economy that creates good, middle-class jobs – that must be the North Star that guides our efforts. Every day, we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills needed to do those jobs? And how do we make sure that hard work leads to a decent living?

     A year and a half ago, I put forward an American Jobs Act that independent economists said would create more than one million new jobs. I thank the last Congress for passing some of that agenda, and I urge this Congress to pass the rest. Tonight, I’ll lay out additional proposals that are fully paid for and fully consistent with the budget framework both parties agreed to just 18 months ago. Let me repeat – nothing I’m proposing tonight should increase our deficit by a single dime. It’s not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth.

     Our first priority is making America a magnet for new jobs and manufacturing.

     After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three. Caterpillar is bringing jobs back from Japan. Ford is bringing jobs back from Mexico. After locating plants in other countries like China, Intel is opening its most advanced plant right here at home. And this year, Apple will start making Macs in America again.

     There are things we can do, right now, to accelerate this trend. Last year, we created our first manufacturing innovation institute in Youngstown, Ohio. A once-shuttered warehouse is now a state-of-the art lab where new workers are mastering the 3D printing that has the potential to revolutionize the way we make almost everything. There’s no reason this can’t happen in other towns. So tonight, I’m announcing the launch of three more of these manufacturing hubs, where businesses will partner with the Departments of Defense and Energy to turn regions left behind by globalization into global centers of high-tech jobs. And I ask this Congress to help create a network of fifteen of these hubs and guarantee that the next revolution in manufacturing is Made in America.

     If we want to make the best products, we also have to invest in the best ideas. Every dollar we invested to map the human genome returned $140 to our economy. Today, our scientists are mapping the human brain to unlock the answers to Alzheimer’s; developing drugs to regenerate damaged organs; devising new material to make batteries ten times more powerful. Now is not the time to gut these job-creating investments in science and innovation. Now is the time to reach a level of research and development not seen since the height of the Space Race. And today, no area holds more promise than our investments in American energy.

     After years of talking about it, we are finally poised to control our own energy future. We produce more oil at home than we have in 15 years. We have doubled the distance our cars will go on a gallon of gas, and the amount of renewable energy we generate from sources like wind and solar – with tens of thousands of good, American jobs to show for it. We produce more natural gas than ever before – and nearly everyone’s energy bill is lower because of it. And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen.

     But for the sake of our children and our future, we must do more to combat climate change. Yes, it’s true that no single event makes a trend. But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, and floods – all are now more frequent and intense. We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science – and act before it’s too late.

     The good news is, we can make meaningful progress on this issue while driving strong economic growth. I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago. But if Congress won’t act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.

     Four years ago, other countries dominated the clean energy market and the jobs that came with it. We’ve begun to change that. Last year, wind energy added nearly half of all new power capacity in America. So let’s generate even more. Solar energy gets cheaper by the year – so let’s drive costs down even further. As long as countries like China keep going all-in on clean energy, so must we.

     In the meantime, the natural gas boom has led to cleaner power and greater energy independence. That’s why my Administration will keep cutting red tape and speeding up new oil and gas permits. But I also want to work with this Congress to encourage the research and technology that helps natural gas burn even cleaner and protects our air and water.

     Indeed, much of our new-found energy is drawn from lands and waters that we, the public, own together. So tonight, I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good. If a non-partisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we. Let’s take their advice and free our families and businesses from the painful spikes in gas prices we’ve put up with for far too long. I’m also issuing a new goal for America: let’s cut in half the energy wasted by our homes and businesses over the next twenty years. The states with the best ideas to create jobs and lower energy bills by constructing more efficient buildings will receive federal support to help make it happen.

     America’s energy sector is just one part of an aging infrastructure badly in need of repair. Ask any CEO where they’d rather locate and hire: a country with deteriorating roads and bridges, or one with high-speed rail and internet; high-tech schools and self-healing power grids. The CEO of Siemens America – a company that brought hundreds of new jobs to North Carolina – has said that if we upgrade our infrastructure, they’ll bring even more jobs. And I know that you want these job-creating projects in your districts. I’ve seen you all at the ribbon-cuttings.

     Tonight, I propose a “Fix-It-First” program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country. And to make sure taxpayers don’t shoulder the whole burden, I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children. Let’s prove that there is no better place to do business than the United States of America. And let’s start right away.

     Part of our rebuilding effort must also involve our housing sector. Today, our housing market is finally healing from the collapse of 2007. Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent, and construction is expanding again.

     But even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected. Too many families who have never missed a payment and want to refinance are being told no. That’s holding our entire economy back, and we need to fix it. Right now, there’s a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today’s rates. Democrats and Republicans have supported it before. What are we waiting for? Take a vote, and send me that bill. Right now, overlapping regulations keep responsible young families from buying their first home. What’s holding us back? Let’s streamline the process, and help our economy grow.

     These initiatives in manufacturing, energy, infrastructure, and housing will help entrepreneurs and small business owners expand and create new jobs. But none of it will matter unless we also equip our citizens with the skills and training to fill those jobs. And that has to start at the earliest possible age.

     Study after study shows that the sooner a child begins learning, the better he or she does down the road. But today, fewer than 3 in 10 four year-olds are enrolled in a high-quality preschool program. Most middle-class parents can’t afford a few hundred bucks a week for private preschool. And for poor kids who need help the most, this lack of access to preschool education can shadow them for the rest of their lives.

     Tonight, I propose working with states to make high-quality preschool available to every child in America. Every dollar we invest in high-quality early education can save more than seven dollars later on – by boosting graduation rates, reducing teen pregnancy, even reducing violent crime. In states that make it a priority to educate our youngest children, like Georgia or Oklahoma, studies show students grow up more likely to read and do math at grade level, graduate high school, hold a job, and form more stable families of their own. So let’s do what works, and make sure none of our children start the race of life already behind. Let’s give our kids that chance.

     Let’s also make sure that a high school diploma puts our kids on a path to a good job. Right now, countries like Germany focus on graduating their high school students with the equivalent of a technical degree from one of our community colleges, so that they’re ready for a job. At schools like P-Tech in Brooklyn, a collaboration between New York Public Schools, the City University of New York, and IBM, students will graduate with a high school diploma and an associate degree in computers or engineering.

     We need to give every American student opportunities like this. Four years ago, we started Race to the Top – a competition that convinced almost every state to develop smarter curricula and higher standards, for about 1 percent of what we spend on education each year. Tonight, I’m announcing a new challenge to redesign America’s high schools so they better equip graduates for the demands of a high-tech economy. We’ll reward schools that develop new partnerships with colleges and employers, and create classes that focus on science, technology, engineering, and math – the skills today’s employers are looking for to fill jobs right now and in the future.

     Now, even with better high schools, most young people will need some higher education. It’s a simple fact: the more education you have, the more likely you are to have a job and work your way into the middle class. But today, skyrocketing costs price way too many young people out of a higher education, or saddle them with unsustainable debt.

     Through tax credits, grants, and better loans, we have made college more affordable for millions of students and families over the last few years. But taxpayers cannot continue to subsidize the soaring cost of higher education. Colleges must do their part to keep costs down, and it’s our job to make sure they do. Tonight, I ask Congress to change the Higher Education Act, so that affordability and value are included in determining which colleges receive certain types of federal aid. And tomorrow, my Administration will release a new “College Scorecard” that parents and students can use to compare schools based on a simple criteria: where you can get the most bang for your educational buck.

     To grow our middle class, our citizens must have access to the education and training that today’s jobs require. But we also have to make sure that America remains a place where everyone who’s willing to work hard has the chance to get ahead.

     Our economy is stronger when we harness the talents and ingenuity of striving, hopeful immigrants. And right now, leaders from the business, labor, law enforcement, and faith communities all agree that the time has come to pass comprehensive immigration reform.

     Real reform means strong border security, and we can build on the progress my Administration has already made – putting more boots on the southern border than at any time in our history, and reducing illegal crossings to their lowest levels in 40 years.

     Real reform means establishing a responsible pathway to earned citizenship – a path that includes passing a background check, paying taxes and a meaningful penalty, learning English, and going to the back of the line behind the folks trying to come here legally.

     And real reform means fixing the legal immigration system to cut waiting periods, reduce bureaucracy, and attract the highly-skilled entrepreneurs and engineers that will help create jobs and grow our economy.

     In other words, we know what needs to be done. As we speak, bipartisan groups in both chambers are working diligently to draft a bill, and I applaud their efforts. Now let’s get this done. Send me a comprehensive immigration reform bill in the next few months, and I will sign it right away.

     But we can’t stop there. We know our economy is stronger when our wives, mothers, and daughters can live their lives free from discrimination in the workplace, and free from the fear of domestic violence. Today, the Senate passed the Violence Against Women Act that Joe Biden originally wrote almost 20 years ago. I urge the House to do the same. And I ask this Congress to declare that women should earn a living equal to their efforts, and finally pass the Paycheck Fairness Act this year.

     We know our economy is stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong. That’s why, since the last time this Congress raised the minimum wage, nineteen states have chosen to bump theirs even higher.

      Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets. In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher. So here’s an idea that Governor Romney and I actually agreed on last year: let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.

     Tonight, let’s also recognize that there are communities in this country where no matter how hard you work, it’s virtually impossible to get ahead. Factory towns decimated from years of plants packing up. Inescapable pockets of poverty, urban and rural, where young adults are still fighting for their first job. America is not a place where chance of birth or circumstance should decide our destiny. And that is why we need to build new ladders of opportunity into the middle class for all who are willing to climb them.

     Let’s offer incentives to companies that hire Americans who’ve got what it takes to fill that job opening, but have been out of work so long that no one will give them a chance. Let’s put people back to work rebuilding vacant homes in run-down neighborhoods. And this year, my Administration will begin to partner with 20 of the hardest-hit towns in America to get these communities back on their feet. We’ll work with local leaders to target resources at public safety, education, and housing. We’ll give new tax credits to businesses that hire and invest. And we’ll work to strengthen families by removing the financial deterrents to marriage for low-income couples, and doing more to encourage fatherhood – because what makes you a man isn’t the ability to conceive a child; it’s having the courage to raise one.

     Stronger families. Stronger communities. A stronger America. It is this kind of prosperity – broad, shared, and built on a thriving middle class – that has always been the source of our progress at home. It is also the foundation of our power and influence throughout the world.

     Tonight, we stand united in saluting the troops and civilians who sacrifice every day to protect us. Because of them, we can say with confidence that America will complete its mission in Afghanistan, and achieve our objective of defeating the core of al Qaeda. Already, we have brought home 33,000 of our brave servicemen and women. This spring, our forces will move into a support role, while Afghan security forces take the lead. Tonight, I can announce that over the next year, another 34,000 American troops will come home from Afghanistan. This drawdown will continue. And by the end of next year, our war in Afghanistan will be over.

     Beyond 2014, America’s commitment to a unified and sovereign Afghanistan will endure, but the nature of our commitment will change. We are negotiating an agreement with the Afghan government that focuses on two missions: training and equipping Afghan forces so that the country does not again slip into chaos, and counter-terrorism efforts that allow us to pursue the remnants of al Qaeda and their affiliates.

     Today, the organization that attacked us on 9/11 is a shadow of its former self. Different al Qaeda affiliates and extremist groups have emerged – from the Arabian Peninsula to Africa. The threat these groups pose is evolving. But to meet this threat, we don’t need to send tens of thousands of our sons and daughters abroad, or occupy other nations. Instead, we will need to help countries like Yemen, Libya, and Somalia provide for their own security, and help allies who take the fight to terrorists, as we have in Mali. And, where necessary, through a range of capabilities, we will continue to take direct action against those terrorists who pose the gravest threat to Americans.

     As we do, we must enlist our values in the fight. That is why my Administration has worked tirelessly to forge a durable legal and policy framework to guide our counterterrorism operations. Throughout, we have kept Congress fully informed of our efforts. I recognize that in our democracy, no one should just take my word that we’re doing things the right way. So, in the months ahead, I will continue to engage with Congress to ensure not only that our targeting, detention, and prosecution of terrorists remains consistent with our laws and system of checks and balances, but that our efforts are even more transparent to the American people and to the world.

     Of course, our challenges don’t end with al Qaeda. America will continue to lead the effort to prevent the spread of the world’s most dangerous weapons. The regime in North Korea must know that they will only achieve security and prosperity by meeting their international obligations. Provocations of the sort we saw last night will only isolate them further, as we stand by our allies, strengthen our own missile defense, and lead the world in taking firm action in response to these threats.

     Likewise, the leaders of Iran must recognize that now is the time for a diplomatic solution, because a coalition stands united in demanding that they meet their obligations, and we will do what is necessary to prevent them from getting a nuclear weapon. At the same time, we will engage Russia to seek further reductions in our nuclear arsenals, and continue leading the global effort to secure nuclear materials that could fall into the wrong hands – because our ability to influence others depends on our willingness to lead.

     America must also face the rapidly growing threat from cyber-attacks. We know hackers steal people’s identities and infiltrate private e-mail. We know foreign countries and companies swipe our corporate secrets. Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, and our air traffic control systems. We cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy.

     That’s why, earlier today, I signed a new executive order that will strengthen our cyber defenses by increasing information sharing, and developing standards to protect our national security, our jobs, and our privacy. Now, Congress must act as well, by passing legislation to give our government a greater capacity to secure our networks and deter attacks.

     Even as we protect our people, we should remember that today’s world presents not only dangers, but opportunities. To boost American exports, support American jobs, and level the playing field in the growing markets of Asia, we intend to complete negotiations on a Trans-Pacific Partnership. And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs.

     We also know that progress in the most impoverished parts of our world enriches us all. In many places, people live on little more than a dollar a day. So the United States will join with our allies to eradicate such extreme poverty in the next two decades: by connecting more people to the global economy and empowering women; by giving our young and brightest minds new opportunities to serve and helping communities to feed, power, and educate themselves; by saving the world’s children from preventable deaths; and by realizing the promise of an AIDS-free generation.

     Above all, America must remain a beacon to all who seek freedom during this period of historic change. I saw the power of hope last year in Rangoon – when Aung San Suu Kyi welcomed an American President into the home where she had been imprisoned for years; when thousands of Burmese lined the streets, waving American flags, including a man who said, “There is justice and law in the United States. I want our country to be like that.”

     In defense of freedom, we will remain the anchor of strong alliances from the Americas to Africa; from Europe to Asia. In the Middle East, we will stand with citizens as they demand their universal rights, and support stable transitions to democracy. The process will be messy, and we cannot presume to dictate the course of change in countries like Egypt; but we can – and will – insist on respect for the fundamental rights of all people. We will keep the pressure on a Syrian regime that has murdered its own people, and support opposition leaders that respect the rights of every Syrian. And we will stand steadfast with Israel in pursuit of security and a lasting peace. These are the messages I will deliver when I travel to the Middle East next month.

     All this work depends on the courage and sacrifice of those who serve in dangerous places at great personal risk – our diplomats, our intelligence officers, and the men and women of the United States Armed Forces. As long as I’m Commander-in-Chief, we will do whatever we must to protect those who serve their country abroad, and we will maintain the best military in the world. We will invest in new capabilities, even as we reduce waste and wartime spending. We will ensure equal treatment for all service members, and equal benefits for their families – gay and straight. We will draw upon the courage and skills of our sisters and daughters, because women have proven under fire that they are ready for combat. We will keep faith with our veterans – investing in world-class care, including mental health care, for our wounded warriors; supporting our military families; and giving our veterans the benefits, education, and job opportunities they have earned. And I want to thank my wife Michelle and Dr. Jill Biden for their continued dedication to serving our military families as well as they serve us.

     But defending our freedom is not the job of our military alone. We must all do our part to make sure our God-given rights are protected here at home. That includes our most fundamental right as citizens: the right to vote. When any Americans – no matter where they live or what their party – are denied that right simply because they can’t wait for five, six, seven hours just to cast their ballot, we are betraying our ideals. That’s why, tonight, I’m announcing a non-partisan commission to improve the voting experience in America. And I’m asking two long-time experts in the field, who’ve recently served as the top attorneys for my campaign and for Governor Romney’s campaign, to lead it. We can fix this, and we will. The American people demand it. And so does our democracy.

     Of course, what I’ve said tonight matters little if we don’t come together to protect our most precious resource – our children.

     It has been two months since Newtown. I know this is not the first time this country has debated how to reduce gun violence. But this time is different. Overwhelming majorities of Americans – Americans who believe in the 2nd Amendment – have come together around commonsense reform – like background checks that will make it harder for criminals to get their hands on a gun. Senators of both parties are working together on tough new laws to prevent anyone from buying guns for resale to criminals. Police chiefs are asking our help to get weapons of war and massive ammunition magazines off our streets, because they are tired of being outgunned.

     Each of these proposals deserves a vote in Congress. If you want to vote no, that’s your choice. But these proposals deserve a vote. Because in the two months since Newtown, more than a thousand birthdays, graduations, and anniversaries have been stolen from our lives by a bullet from a gun.

     One of those we lost was a young girl named Hadiya Pendleton. She was 15 years old. She loved Fig Newtons and lip gloss. She was a majorette. She was so good to her friends, they all thought they were her best friend. Just three weeks ago, she was here, in Washington, with her classmates, performing for her country at my inauguration. And a week later, she was shot and killed in a Chicago park after school, just a mile away from my house.

     Hadiya’s parents, Nate and Cleo, are in this chamber tonight, along with more than two dozen Americans whose lives have been torn apart by gun violence. They deserve a vote.

     Gabby Giffords deserves a vote.

     The families of Newtown deserve a vote.

     The families of Aurora deserve a vote.

     The families of Oak Creek, and Tucson, and Blacksburg, and the countless other communities ripped open by gun violence – they deserve a simple vote.

     Our actions will not prevent every senseless act of violence in this country. Indeed, no laws, no initiatives, no administrative acts will perfectly solve all the challenges I’ve outlined tonight. But we were never sent here to be perfect. We were sent here to make what difference we can, to secure this nation, expand opportunity, and uphold our ideals through the hard, often frustrating, but absolutely necessary work of self-government.      We were sent here to look out for our fellow Americans the same way they look out for one another, every single day, usually without fanfare, all across this country. We should follow their example.

     We should follow the example of a New York City nurse named Menchu Sanchez. When Hurricane Sandy plunged her hospital into darkness, her thoughts were not with how her own home was faring – they were with the twenty precious newborns in her care and the rescue plan she devised that kept them all safe.

     We should follow the example of a North Miami woman named Desiline Victor. When she arrived at her polling place, she was told the wait to vote might be six hours. And as time ticked by, her concern was not with her tired body or aching feet, but whether folks like her would get to have their say. Hour after hour, a throng of people stayed in line in support of her. Because Desiline is 102 years old. And they erupted in cheers when she finally put on a sticker that read “I Voted.”

     We should follow the example of a police officer named Brian Murphy. When a gunman opened fire on a Sikh temple in Wisconsin, and Brian was the first to arrive, he did not consider his own safety. He fought back until help arrived, and ordered his fellow officers to protect the safety of the Americans worshiping inside – even as he lay bleeding from twelve bullet wounds.

     When asked how he did that, Brian said, “That’s just the way we’re made.”

     That’s just the way we’re made.

      We may do different jobs, and wear different uniforms, and hold different views than the person beside us. But as Americans, we all share the same proud title:

     We are citizens. It’s a word that doesn’t just describe our nationality or legal status. It describes the way we’re made. It describes what we believe. It captures the enduring idea that this country only works when we accept certain obligations to one another and to future generations; that our rights are wrapped up in the rights of others; and that well into our third century as a nation, it remains the task of us all, as citizens of these United States, to be the authors of the next great chapter in our American story.

     Thank you, God bless you, and God bless the United States of America.

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Live streaming The State of the Union: Full Transcript Open Thread

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It is our generation’s task, then, to reignite the true engine of America’s economic growth – a rising, thriving middle class.

It is our unfinished task to restore the basic bargain that built this country – the idea that if you work hard and meet your responsibilities, you can get ahead, no matter where you come from, what you look like, or who you love.

It is our unfinished task to make sure that this government works on behalf of the many, and not just the few; that it encourages free enterprise, rewards individual initiative, and opens the doors of opportunity to every child across this great nation.

The American people don’t expect government to solve every problem. They don’t expect those of us in this chamber to agree on every issue. But they do expect us to put the nation’s interests before party. They do expect us to forge reasonable compromise where we can. For they know that America moves forward only when we do so together; and that the responsibility of improving this union remains the task of us all.

Our work must begin by making some basic decisions about our budget – decisions that will have a huge impact on the strength of our recovery.

Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion – mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances. Now we need to finish the job. And the question is, how?

In 2011, Congress passed a law saying that if both parties couldn’t agree on a plan to reach our deficit goal, about a trillion dollars’ worth of budget cuts would automatically go into effect this year. These sudden, harsh, arbitrary cuts would jeopardize our military readiness. They’d devastate priorities like education, energy, and medical research. They would certainly slow our recovery, and cost us hundreds of thousands of jobs. That’s why Democrats, Republicans, business leaders, and economists have already said that these cuts, known here in Washington as “the sequester,” are a really bad idea.

Now, some in this Congress have proposed preventing only the defense cuts by making even bigger cuts to things like education and job training; Medicare and Social Security benefits.

That idea is even worse. Yes, the biggest driver of our long-term debt is the rising cost of health care for an aging population. And those of us who care deeply about programs like Medicare must embrace the need for modest reforms – otherwise, our retirement programs will crowd out the investments we need for our children, and jeopardize the promise of a secure retirement for future generations.

But we can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and most powerful. We won’t grow the middle class simply by shifting the cost of health care or college onto families that are already struggling, or by forcing communities to lay off more teachers, cops, and firefighters. Most Americans – Democrats, Republicans, and Independents – understand that we can’t just cut our way to prosperity. They know that broad-based economic growth requires a balanced approach to deficit reduction, with spending cuts and revenue, and with everybody doing their fair share. And that’s the approach I offer tonight.

On Medicare, I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission. Already, the Affordable Care Act is helping to slow the growth of health care costs. The reforms I’m proposing go even further. We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors. We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our seniors receive. And I am open to additional reforms from both parties, so long as they don’t violate the guarantee of a secure retirement. Our government shouldn’t make promises we cannot keep – but we must keep the promises we’ve already made.

To hit the rest of our deficit reduction target, we should do what leaders in both parties have already suggested, and save hundreds of billions of dollars by getting rid of tax loopholes and deductions for the well-off and well-connected. After all, why would we choose to make deeper cuts to education and Medicare just to protect special interest tax breaks? How is that fair? How does that promote growth?

Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit. The American people deserve a tax code that helps small businesses spend less time filling out complicated forms, and more time expanding and hiring; a tax code that ensures billionaires with high-powered accountants can’t pay a lower rate than their hard-working secretaries; a tax code that lowers incentives to move jobs overseas, and lowers tax rates for businesses and manufacturers that create jobs right here in America. That’s what tax reform can deliver. That’s what we can do together.

I realize that tax reform and entitlement reform won’t be easy. The politics will be hard for both sides. None of us will get 100 percent of what we want. But the alternative will cost us jobs, hurt our economy, and visit hardship on millions of hardworking Americans. So let’s set party interests aside, and work to pass a budget that replaces reckless cuts with smart savings and wise investments in our future. And let’s do it without the brinksmanship that stresses consumers and scares off investors. The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next. Let’s agree, right here, right now, to keep the people’s government open, pay our bills on time, and always uphold the full faith and credit of the United States of America. The American people have worked too hard, for too long, rebuilding from one crisis to see their elected officials cause another.

Now, most of us agree that a plan to reduce the deficit must be part of our agenda. But let’s be clear: deficit reduction alone is not an economic plan. A growing economy that creates good, middle-class jobs – that must be the North Star that guides our efforts. Every day, we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills needed to do those jobs? And how do we make sure that hard work leads to a decent living?

A year and a half ago, I put forward an American Jobs Act that independent economists said would create more than one million new jobs. I thank the last Congress for passing some of that agenda, and I urge this Congress to pass the rest. Tonight, I’ll lay out additional proposals that are fully paid for and fully consistent with the budget framework both parties agreed to just 18 months ago. Let me repeat – nothing I’m proposing tonight should increase our deficit by a single dime. It’s not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth.
Our first priority is making America a magnet for new jobs and manufacturing.
After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three. Caterpillar is bringing jobs back from Japan. Ford is bringing jobs back from Mexico. After locating plants in other countries like China, Intel is opening its most advanced plant right here at home. And this year, Apple will start making Macs in America again.

There are things we can do, right now, to accelerate this trend. Last year, we created our first manufacturing innovation institute in Youngstown, Ohio. A once-shuttered warehouse is now a state-of-the art lab where new workers are mastering the 3D printing that has the potential to revolutionize the way we make almost everything. There’s no reason this can’t happen in other towns. So tonight, I’m announcing the launch of three more of these manufacturing hubs, where businesses will partner with the Departments of Defense and Energy to turn regions left behind by globalization into global centers of high-tech jobs. And I ask this Congress to help create a network of fifteen of these hubs and guarantee that the next revolution in manufacturing is Made in America.

If we want to make the best products, we also have to invest in the best ideas. Every dollar we invested to map the human genome returned $140 to our economy. Today, our scientists are mapping the human brain to unlock the answers to Alzheimer’s; developing drugs to regenerate damaged organs; devising new material to make batteries ten times more powerful. Now is not the time to gut these job-creating investments in science and innovation. Now is the time to reach a level of research and development not seen since the height of the Space Race. And today, no area holds more promise than our investments in American energy.

After years of talking about it, we are finally poised to control our own energy future. We produce more oil at home than we have in 15 years. We have doubled the distance our cars will go on a gallon of gas, and the amount of renewable energy we generate from sources like wind and solar – with tens of thousands of good, American jobs to show for it. We produce more natural gas than ever before – and nearly everyone’s energy bill is lower because of it. And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen.

But for the sake of our children and our future, we must do more to combat climate change. Yes, it’s true that no single event makes a trend. But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, and floods – all are now more frequent and intense. We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science – and act before it’s too late.

The good news is, we can make meaningful progress on this issue while driving strong economic growth. I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago. But if Congress won’t act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.

Four years ago, other countries dominated the clean energy market and the jobs that came with it. We’ve begun to change that. Last year, wind energy added nearly half of all new power capacity in America. So let’s generate even more. Solar energy gets cheaper by the year – so let’s drive costs down even further. As long as countries like China keep going all-in on clean energy, so must we.

In the meantime, the natural gas boom has led to cleaner power and greater energy independence. That’s why my Administration will keep cutting red tape and speeding up new oil and gas permits. But I also want to work with this Congress to encourage the research and technology that helps natural gas burn even cleaner and protects our air and water.

Indeed, much of our new-found energy is drawn from lands and waters that we, the public, own together. So tonight, I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good. If a non-partisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we. Let’s take their advice and free our families and businesses from the painful spikes in gas prices we’ve put up with for far too long. I’m also issuing a new goal for America: let’s cut in half the energy wasted by our homes and businesses over the next twenty years. The states with the best ideas to create jobs and lower energy bills by constructing more efficient buildings will receive federal support to help make it happen.

America’s energy sector is just one part of an aging infrastructure badly in need of repair. Ask any CEO where they’d rather locate and hire: a country with deteriorating roads and bridges, or one with high-speed rail and internet; high-tech schools and self-healing power grids. The CEO of Siemens America – a company that brought hundreds of new jobs to North Carolina – has said that if we upgrade our infrastructure, they’ll bring even more jobs. And I know that you want these job-creating projects in your districts. I’ve seen you all at the ribbon-cuttings.

Tonight, I propose a “Fix-It-First” program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country. And to make sure taxpayers don’t shoulder the whole burden, I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children. Let’s prove that there is no better place to do business than the United States of America. And let’s start right away.

Part of our rebuilding effort must also involve our housing sector. Today, our housing market is finally healing from the collapse of 2007. Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent, and construction is expanding again.

But even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected. Too many families who have never missed a payment and want to refinance are being told no. That’s holding our entire economy back, and we need to fix it. Right now, there’s a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today’s rates. Democrats and Republicans have supported it before. What are we waiting for? Take a vote, and send me that bill. Right now, overlapping regulations keep responsible young families from buying their first home. What’s holding us back? Let’s streamline the process, and help our economy grow.

These initiatives in manufacturing, energy, infrastructure, and housing will help entrepreneurs and small business owners expand and create new jobs. But none of it will matter unless we also equip our citizens with the skills and training to fill those jobs. And that has to start at the earliest possible age.

Study after study shows that the sooner a child begins learning, the better he or she does down the road. But today, fewer than 3 in 10 four year-olds are enrolled in a high-quality preschool program. Most middle-class parents can’t afford a few hundred bucks a week for private preschool. And for poor kids who need help the most, this lack of access to preschool education can shadow them for the rest of their lives.

Tonight, I propose working with states to make high-quality preschool available to every child in America. Every dollar we invest in high-quality early education can save more than seven dollars later on – by boosting graduation rates, reducing teen pregnancy, even reducing violent crime. In states that make it a priority to educate our youngest children, like Georgia or Oklahoma, studies show students grow up more likely to read and do math at grade level, graduate high school, hold a job, and form more stable families of their own. So let’s do what works, and make sure none of our children start the race of life already behind. Let’s give our kids that chance.

Let’s also make sure that a high school diploma puts our kids on a path to a good job. Right now, countries like Germany focus on graduating their high school students with the equivalent of a technical degree from one of our community colleges, so that they’re ready for a job. At schools like P-Tech in Brooklyn, a collaboration between New York Public Schools, the City University of New York, and IBM, students will graduate with a high school diploma and an associate degree in computers or engineering.

We need to give every American student opportunities like this. Four years ago, we started Race to the Top – a competition that convinced almost every state to develop smarter curricula and higher standards, for about 1 percent of what we spend on education each year. Tonight, I’m announcing a new challenge to redesign America’s high schools so they better equip graduates for the demands of a high-tech economy. We’ll reward schools that develop new partnerships with colleges and employers, and create classes that focus on science, technology, engineering, and math – the skills today’s employers are looking for to fill jobs right now and in the future. Now, even with better high schools, most young people will need some higher education. It’s a simple fact: the more education you have, the more likely you are to have a job and work your way into the middle class. But today, skyrocketing costs price way too many young people out of a higher education, or saddle them with unsustainable debt.

Through tax credits, grants, and better loans, we have made college more affordable for millions of students and families over the last few years. But taxpayers cannot continue to subsidize the soaring cost of higher education. Colleges must do their part to keep costs down, and it’s our job to make sure they do. Tonight, I ask Congress to change the Higher Education Act, so that affordability and value are included in determining which colleges receive certain types of federal aid. And tomorrow, my Administration will release a new “College Scorecard” that parents and students can use to compare schools based on a simple criteria: where you can get the most bang for your educational buck. To grow our middle class, our citizens must have access to the education and training that today’s jobs require. But we also have to make sure that America remains a place where everyone who’s willing to work hard has the chance to get ahead.

Our economy is stronger when we harness the talents and ingenuity of striving, hopeful immigrants. And right now, leaders from the business, labor, law enforcement, and faith communities all agree that the time has come to pass comprehensive immigration reform.

Real reform means strong border security, and we can build on the progress my Administration has already made – putting more boots on the southern border than at any time in our history, and reducing illegal crossings to their lowest levels in 40 years.

Real reform means establishing a responsible pathway to earned citizenship – a path that includes passing a background check, paying taxes and a meaningful penalty, learning English, and going to the back of the line behind the folks trying to come here legally. And real reform means fixing the legal immigration system to cut waiting periods, reduce bureaucracy, and attract the highly-skilled entrepreneurs and engineers that will help create jobs and grow our economy.

In other words, we know what needs to be done. As we speak, bipartisan groups in both chambers are working diligently to draft a bill, and I applaud their efforts. Now let’s get this done. Send me a comprehensive immigration reform bill in the next few months, and I will sign it right away.

But we can’t stop there. We know our economy is stronger when our wives, mothers, and daughters can live their lives free from discrimination in the workplace, and free from the fear of domestic violence. Today, the Senate passed the Violence Against Women Act that Joe Biden originally wrote almost 20 years ago. I urge the House to do the same. And I ask this Congress to declare that women should earn a living equal to their efforts, and finally pass the Paycheck Fairness Act this year.

We know our economy is stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong. That’s why, since the last time this Congress raised the minimum wage, nineteen states have chosen to bump theirs even higher.

Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets. In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher. So here’s an idea that Governor Romney and I actually agreed on last year: let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.

Tonight, let’s also recognize that there are communities in this country where no matter how hard you work, it’s virtually impossible to get ahead. Factory towns decimated from years of plants packing up. Inescapable pockets of poverty, urban and rural, where young adults are still fighting for their first job. America is not a place where chance of birth or circumstance should decide our destiny. And that is why we need to build new ladders of opportunity into the middle class for all who are willing to climb them.

Let’s offer incentives to companies that hire Americans who’ve got what it takes to fill that job opening, but have been out of work so long that no one will give them a chance. Let’s put people back to work rebuilding vacant homes in run-down neighborhoods. And this year, my Administration will begin to partner with 20 of the hardest-hit towns in America to get these communities back on their feet. We’ll work with local leaders to target resources at public safety, education, and housing. We’ll give new tax credits to businesses that hire and invest. And we’ll work to strengthen families by removing the financial deterrents to marriage for low-income couples, and doing more to encourage fatherhood – because what makes you a man isn’t the ability to conceive a child; it’s having the courage to raise one. Stronger families. Stronger communities. A stronger America. It is this kind of prosperity – broad, shared, and built on a thriving middle class – that has always been the source of our progress at home. It is also the foundation of our power and influence throughout the world.

Tonight, we stand united in saluting the troops and civilians who sacrifice every day to protect us. Because of them, we can say with confidence that America will complete its mission in Afghanistan, and achieve our objective of defeating the core of al Qaeda. Already, we have brought home 33,000 of our brave servicemen and women. This spring, our forces will move into a support role, while Afghan security forces take the lead. Tonight, I can announce that over the next year, another 34,000 American troops will come home from Afghanistan. This drawdown will continue. And by the end of next year, our war in Afghanistan will be over.

Beyond 2014, America’s commitment to a unified and sovereign Afghanistan will endure, but the nature of our commitment will change. We are negotiating an agreement with the Afghan government that focuses on two missions: training and equipping Afghan forces so that the country does not again slip into chaos, and counter-terrorism efforts that allow us to pursue the remnants of al Qaeda and their affiliates.

Today, the organization that attacked us on 9/11 is a shadow of its former self. Different al Qaeda affiliates and extremist groups have emerged – from the Arabian Peninsula to Africa. The threat these groups pose is evolving. But to meet this threat, we don’t need to send tens of thousands of our sons and daughters abroad, or occupy other nations. Instead, we will need to help countries like Yemen, Libya, and Somalia provide for their own security, and help allies who take the fight to terrorists, as we have in Mali. And, where necessary, through a range of capabilities, we will continue to take direct action against those terrorists who pose the gravest threat to Americans.

As we do, we must enlist our values in the fight. That is why my Administration has worked tirelessly to forge a durable legal and policy framework to guide our counterterrorism operations. Throughout, we have kept Congress fully informed of our efforts. I recognize that in our democracy, no one should just take my word that we’re doing things the right way. So, in the months ahead, I will continue to engage with Congress to ensure not only that our targeting, detention, and prosecution of terrorists remains consistent with our laws and system of checks and balances, but that our efforts are even more transparent to the American people and to the world.

Of course, our challenges don’t end with al Qaeda. America will continue to lead the effort to prevent the spread of the world’s most dangerous weapons. The regime in North Korea must know that they will only achieve security and prosperity by meeting their international obligations. Provocations of the sort we saw last night will only isolate them further, as we stand by our allies, strengthen our own missile defense, and lead the world in taking firm action in response to these threats.

Likewise, the leaders of Iran must recognize that now is the time for a diplomatic solution, because a coalition stands united in demanding that they meet their obligations, and we will do what is necessary to prevent them from getting a nuclear weapon. At the same time, we will engage Russia to seek further reductions in our nuclear arsenals, and continue leading the global effort to secure nuclear materials that could fall into the wrong hands – because our ability to influence others depends on our willingness to lead.

America must also face the rapidly growing threat from cyber-attacks. We know hackers steal people’s identities and infiltrate private e-mail. We know foreign countries and companies swipe our corporate secrets. Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, and our air traffic control systems. We cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy.

That’s why, earlier today, I signed a new executive order that will strengthen our cyber defenses by increasing information sharing, and developing standards to protect our national security, our jobs, and our privacy. Now, Congress must act as well, by passing legislation to give our government a greater capacity to secure our networks and deter attacks.

Even as we protect our people, we should remember that today’s world presents not only dangers, but opportunities. To boost American exports, support American jobs, and level the playing field in the growing markets of Asia, we intend to complete negotiations on a Trans-Pacific Partnership. And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs.

We also know that progress in the most impoverished parts of our world enriches us all. In many places, people live on little more than a dollar a day. So the United States will join with our allies to eradicate such extreme poverty in the next two decades: by connecting more people to the global economy and empowering women; by giving our young and brightest minds new opportunities to serve and helping communities to feed, power, and educate themselves; by saving the world’s children from preventable deaths; and by realizing the promise of an AIDS-free generation.
Above all, America must remain a beacon to all who seek freedom during this period of historic change. I saw the power of hope last year in Rangoon – when Aung San Suu Kyi welcomed an American President into the home where she had been imprisoned for years; when thousands of Burmese lined the streets, waving American flags, including a man who said, “There is justice and law in the United States. I want our country to be like that.”

In defense of freedom, we will remain the anchor of strong alliances from the Americas to Africa; from Europe to Asia. In the Middle East, we will stand with citizens as they demand their universal rights, and support stable transitions to democracy. The process will be messy, and we cannot presume to dictate the course of change in countries like Egypt; but we can – and will – insist on respect for the fundamental rights of all people. We will keep the pressure on a Syrian regime that has murdered its own people, and support opposition leaders that respect the rights of every Syrian. And we will stand steadfast with Israel in pursuit of security and a lasting peace. These are the messages I will deliver when I travel to the Middle East next month.

All this work depends on the courage and sacrifice of those who serve in dangerous places at great personal risk – our diplomats, our intelligence officers, and the men and women of the United States Armed Forces. As long as I’m Commander-in-Chief, we will do whatever we must to protect those who serve their country abroad, and we will maintain the best military in the world. We will invest in new capabilities, even as we reduce waste and wartime spending. We will ensure equal treatment for all service members, and equal benefits for their families – gay and straight. We will draw upon the courage and skills of our sisters and daughters, because women have proven under fire that they are ready for combat. We will keep faith with our veterans – investing in world-class care, including mental health care, for our wounded warriors; supporting our military families; and giving our veterans the benefits, education, and job opportunities they have earned. And I want to thank my wife Michelle and Dr. Jill Biden for their continued dedication to serving our military families as well as they serve us.

But defending our freedom is not the job of our military alone. We must all do our part to make sure our God-given rights are protected here at home. That includes our most fundamental right as citizens: the right to vote. When any Americans – no matter where they live or what their party – are denied that right simply because they can’t wait for five, six, seven hours just to cast their ballot, we are betraying our ideals. That’s why, tonight, I’m announcing a non-partisan commission to improve the voting experience in America. And I’m asking two long-time experts in the field, who’ve recently served as the top attorneys for my campaign and for Governor Romney’s campaign, to lead it. We can fix this, and we will. The American people demand it. And so does our democracy. Of course, what I’ve said tonight matters little if we don’t come together to protect our most precious resource – our children.

It has been two months since Newtown. I know this is not the first time this country has debated how to reduce gun violence. But this time is different. Overwhelming majorities of Americans – Americans who believe in the 2nd Amendment – have come together around commonsense reform – like background checks that will make it harder for criminals to get their hands on a gun. Senators of both parties are working together on tough new laws to prevent anyone from buying guns for resale to criminals. Police chiefs are asking our help to get weapons of war and massive ammunition magazines off our streets, because they are tired of being outgunned.
Each of these proposals deserves a vote in Congress. If you want to vote no, that’s your choice. But these proposals deserve a vote. Because in the two months since Newtown, more than a thousand birthdays, graduations, and anniversaries have been stolen from our lives by a bullet from a gun.

One of those we lost was a young girl named Hadiya Pendleton. She was 15 years old. She loved Fig Newtons and lip gloss. She was a majorette. She was so good to her friends, they all thought they were her best friend. Just three weeks ago, she was here, in Washington, with her classmates, performing for her country at my inauguration. And a week later, she was shot and killed in a Chicago park after school, just a mile away from my house.

Hadiya’s parents, Nate and Cleo, are in this chamber tonight, along with more than two dozen Americans whose lives have been torn apart by gun violence. They deserve a vote. Gabby Giffords deserves a vote. The families of Newtown deserve a vote. The families of Aurora deserve a vote. The families of Oak Creek, and Tucson, and Blacksburg, and the countless other communities ripped open by gun violence – they deserve a simple vote.

Our actions will not prevent every senseless act of violence in this country. Indeed, no laws, no initiatives, no administrative acts will perfectly solve all the challenges I’ve outlined tonight. But we were never sent here to be perfect. We were sent here to make what difference we can, to secure this nation, expand opportunity, and uphold our ideals through the hard, often frustrating, but absolutely necessary work of self-government.

We were sent here to look out for our fellow Americans the same way they look out for one another, every single day, usually without fanfare, all across this country. We should follow their example.

We should follow the example of a New York City nurse named Menchu Sanchez. When Hurricane Sandy plunged her hospital into darkness, her thoughts were not with how her own home was faring – they were with the twenty precious newborns in her care and the rescue plan she devised that kept them all safe.

We should follow the example of a North Miami woman named Desiline Victor. When she arrived at her polling place, she was told the wait to vote might be six hours. And as time ticked by, her concern was not with her tired body or aching feet, but whether folks like her would get to have their say. Hour after hour, a throng of people stayed in line in support of her. Because Desiline is 102 years old. And they erupted in cheers when she finally put on a sticker that read “I Voted.”

We should follow the example of a police officer named Brian Murphy. When a gunman opened fire on a Sikh temple in Wisconsin, and Brian was the first to arrive, he did not consider his own safety. He fought back until help arrived, and ordered his fellow officers to protect the safety of the Americans worshiping inside – even as he lay bleeding from twelve bullet wounds.

When asked how he did that, Brian said, “That’s just the way we’re made.”
That’s just the way we’re made.

We may do different jobs, and wear different uniforms, and hold different views than the person beside us. But as Americans, we all share the same proud title:

We are citizens. It’s a word that doesn’t just describe our nationality or legal status. It describes the way we’re made. It describes what we believe. It captures the enduring idea that this country only works when we accept certain obligations to one another and to future generations; that our rights are wrapped up in the rights of others; and that well into our third century as a nation, it remains the task of us all, as citizens of these United States, to be the authors of the next great chapter in our American story.
Thank you, God bless you, and God bless the United States of America.

Guest Post: Insights Into Cultural Shifts From A Visit To A Hardware Store

Submitted by Pete Kofod of Casey Research

Insights Into Cultural Shifts From A Visit To A Hardware Store

"So this is what it looks like when a society is starting to collapse," the man standing behind the counter at the hardware store said matter-of-factly. The remark had been directed at no one in particular, but generally at anyone standing nearby. As I was among that audience, I looked at him inquisitively, eliciting in return a look indicating that his observation should be intuitively obvious to even the casual observer.

"We should not be this busy," he continued. "People are normally out Christmas shopping for the latest tech gadgets for their kids, but instead they are spending their hard-earned money here." I had to agree with his observation, because the place was packed, and it was obvious that his inventory was disappearing from the glass showcases and from the wall behind the counter quicker than the store could replenish it.

"We have manufacturers that aren't taking any more orders. We even have a manufacturer that has shut down production and furloughed the entire workforce. I guess when we run out, we run out." He excused himself and joined his staff to help restock the shelves as well as operate the register.

As I surveyed the store, I noticed no discernible demographic pattern among the customers. They included elderly ladies, young couples, construction workers, police officers and hipster techies as well as people from virtually every ethnic and socio-economic background. They would have made the perfect tapestry for a politician's campaign stop.

"So this is what it looks like when a society starts to collapse," I reflected on what the man behind the counter had said. As melodramatic as his words were, they would be understood by any student of human history.

But it raised questions in my mind: "Does social decline precede economic decline? Does the decay of social graces, the protocols that define civilized interaction, the written and unwritten laws of the land, precipitate the ruin of a nation, or is it the other way around? Is it a vicious cycle where one feeds the other, and if so, can the destructive feedback loop be reversed?"

Based on what I observed in the store, I'm inclined to believe that people are concerned about social collapse, in whatever form that may take. Publications such as The Casey Report implore its readership to hedge against inflation (as well as deflation) by dividing their portfolio into balanced thirds spread across asset classes and political jurisdictions, but what does the erosion of a fiat currency really mean?

I would suggest that very much depends on where you live. In more resilient communities, in which economic actors all create value, the impact may in fact be little more than a moderate nuisance. Various South American countries have shown that, despite their governments' penchant for destroying the nation's currency at predictable intervals, life can go on. As a result, while people in those countries know that things can periodically get tougher, they also have become resolved to soldiering through the hardships, knowing that the latest challenging period will pass.

By contrast, with their advanced – and leveraged – economies and large urban centers that are highly dependent on government subsidies as well as consumer supply chains that are extended, the social impact of a fiat currency collapse in the US and Europe could be far more profound.

Such an event would likely be even further exacerbated, and significantly so, by the absence of such experiences to most Western nations in recent memory. In the United States, a small but emerging subculture known as "preppers" focus their resources and attention on developing personal resiliency in response to the perceived deterioration of both financial and social infrastructure. While the theories and actions of "preppers" range from the sublime to the ridiculous, it is undeniable that the financial, social and logistical fabric of the United States has been stretched very thin.

This tenuous position in turn manifests itself as a palpable level of stress readily observed in many people. There is no longer a sense that "everything will be OK." In conversations with people, I get the sense that people feel very uncertain about the future, and not in a hopeful way. They see their prospects as having limited upside with virtually unlimited downward risk. There is a prevailing belief that this is as good as it is going to be for a long time. It is this subsurface tension that was palpable among shoppers in the hardware store.

You see, the hardware store I was in was a gun store. What on earth would compel me to visit a gun store so close to the horrible tragedy in Connecticut? As some readers know, firearms played a significant role in my former professional life in the military. The truth is I wanted to get a sense for what's actually going on in the gun industry, as opposed to the manufactured "reality" presented by the mainstream media.

Having returned from serving a customer, the owner of the gun store continued his observations.

"It's different this time. The last time, with the Clinton gun ban, people knew that it would be temporary. The economy was good and people didn't really care. This time… well, it's different." He then elaborated on the reason that one manufacturer had shut down its fabrication facility: Apparently it was unwilling to be stuck with inventory that at a stroke of a pen will become contraband.

In reply to my follow-on question as to what he meant when he said society was starting to collapse, he answered, "People talk about debt, a recession that won't go away and how we are on track to bankrupting the country. This is all true. But they are all part of a bigger problem."

"What problem is that?" I asked.

"Respect," he said, with just a hint of bitterness. "Treating people with disrespect has become a way of doing business, a way of life. When a culture ceases to demand respect for life or livelihood, anything and everything is fair game."

At this point another gentleman joined the conversation, adding, "You know, these tragedies are a politician's best friend. It allows them to take the public's eye off issues like financial woes and cutbacks in benefits."

In my view, the spectacle in the gun store, which apparently has played out nationwide, is a clear indication that people are doing the equivalent of "shorting" social stability. This is clearly concerning, because the extent to which we can plan our future is directly related to the faith we can reasonably place in social stability.

It may be presumptive, but in my view, people who rush out to purchase firearms in anticipation of gun-control measures are not part of the "gun culture." The "gun culture" already has its arsenal stocked up. The "last-minute shoppers" are people who believe that one day they may need a gun and may not be able to buy one. These are the same people who clean out the grocery store before the first big winter storm hits.

As for the logistics of controlling access to firearms, I suspect that in short order, it will prove to be an academic point anyway, perhaps even more futile than the War on Drugs.

The relevant agents include: crypto currency, open-source hardware, 3D printing, and Dark Net exchanges like The Silk Road.

On the topic of technical limitations to keeping guns out of the hands of the citizenry, let me direct your attention to the following article on a gunsmith who "printed" a gun. Is it a good thing or a bad thing? I don't know, but I do know that it is inevitable. The first group that will make a go at it will likely be people who are legally prohibited from owning firearms, yet their livelihood depends on access to weapons; in other words, members of criminal organizations. Shortly behind them will be technically gifted people who, one can only hope, are imbued with decency and respect for human life.

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Market Euphoria During Troubled Times

Market Euphoria During Troubled Times

by Stephen Lendman

Major equity markets approach nosebleed levels. Experts disagree on whether bubble extremes approach. They're not unusual. They happen often.

The myth about markets reflecting reality is hokum. Keynes once warned about "enterprise becom(ing) the bubble on a whirlpool of (destructive) speculation." Hard times usually follows.

Easy credit fuels speculation. Euphoria follows. Greed trumps good sense. Folly pays a big price. This time is different talk proliferates. Momentum drives prices higher.

Stories of easy riches abound. Why miss out. Overvaluation leads to more of it. Fraudsters sell at the top. Greater fools buy at the wrong time. Hindsight is the best insight. Excess ends badly every time.

Downward momentum happens faster than market upswings. Years of gains are wiped out in months. Valuations evaporate rapidly.

Goldilocks economies turn rancid without warnings. Lenders remember how to say no. Reality arrives with a bang. Animal spirits disappear. Angst becomes pervasive.

This time IS different. Market appreciation is supposed to reflect good times. They go hand in hand. Ordinary people are fighting for the soul of the American dream. 

It's fast disappearing. It's dying. Main Street Depression conditions are killing it. They're at levels last seen in the 1930s.

Spin hides them. Fed governors say QE and low interest rates stimulate economic growth. It's cover for what's been ongoing since late 2008.

It artificially inflates markets. It keeps too-big-to fail banks from collapsing. It's failed to stimulate economic growth. It weakened the dollar. It created bond and equity market bubbles.

Offshoring manufacturing and professional high-pay/good benefit jobs to low wage countries prevents growth. Replacing them with low pay/poor or no benefits ones doesn't compensate.

Money printing madness isn't forever. Reality has final say. The greater the excess, the bigger the bang when it arrives. America is in decline. It's on a collision course with trouble.

Weakness defines current conditions. Markets astonishingly defy gravity. They're rising during economic decline. 

It's practically unheard of during hard times. Market declines nearly always accompany them. Not this time. Fed/Wall Street manipulation elevates them higher.

Imagine doing so during protracted economic weakness. Short-term recoveries punctuate it. Fundamental problems are unresolved.

Real investment is weak. Western unemployment and poverty remain disturbingly high. Banks aren't lending. Major ones are insolvent. Consumers are spending less. Government debt levels are rising. They're dangerously high.

In the past two decades, Japan experienced multiple recessions. Doing so reflects classic stagnation. It reflects longterm decline.

Money printing madness hasn't stimulated sustained economic growth. Since 2008, Japan experienced a triple-dip recession. Expect a fourth to follow.

Eurozone economies and Britain remain extremely troubled. Greece, Spain, Portugal, Ireland and Italy are basket cases. 

Austerity is force fed when stimulus is needed. Hard times for ordinary people go from bad to worse. Troubled banks assure continued economic weakness.

Markets are addicted to free money. Providing it comes at the expense of Main Street. Communities are wrecked. Economic growth is sacrificed. Offshoring jobs America most needs exacerbates things.

Fragility, weakness and instability characterizes economic conditions. Hard times keep getting harder. 

Markets are oblivious to what's happening. Free money keeps party time going. Perhaps another banking crash will change things. Maybe it'll be worse than before. Cassandras predict it. Maybe they're right. Hindsight explains best.

Ben Inker co-heads GMO investments Asset Allocation team. He's a GMO Board of Directors member. He believes US equity markets are about 40% overvalued.

He calls fair S&P fair value 1,100. It currently exceeds 1,800. It's in nosebleed territory. It could go much higher before topping out. Markets work that way. 

Irrational exuberance characterizes them in times like these. There's never been anything like them before in memory. Coinciding with hard times is unheard of. For how long remains to be seen.

Small cap overvaluation is even more extreme than large cap S&P equities.

"The US stock market is trading at levels that do not seem capable of supporting the type of returns that investors have gotten used to receiving from equities," said Inker. 

"Our additional work does nothing but confirm our prior beliefs about the current attractiveness - or rather lack of attractiveness - of the US stock market."

Legendary investor Jeremy Grantham co-founded GMO. Admirers call him the philosopher king of Wall Street. He operates north in Boston.

What's ongoing reflects another bubble/bust scenario. According to Grantham:

"One of the more painful lessons in investing is that the prudent investor almost invariably must forego plenty of fun at the top end of markets." 

"This market is already no exception, but speculation can hurt prudence much more and probably will." 

"Ah, that’s life. Be prudent and you'll probably forego gains. Be risky and you'll probably make some more money, but you may be bushwhacked and, if you are, your excuses will look thin."

Robert Shiller popularized the Shiller P/E ratio. It's 50% above its longterm average. The US equity market is way overvalued.

Shiller's S&P ratio uses a 10-year inflation-adjusted earnings average to calculate valuation. Historically, it averaged 16.5 longterm.

Shiller's current ratio slightly exceeds 25. It's worrisome. At 28.8, it's bubble territory," he says.

Warren Buffett has his own favorite metric. He calculates market value of all publicly traded securities based on a percentage of Gross National Product (GNP). He calls it the best single valuations measure.

GNP values goods and services produced at home and abroad. According to Buffett:

"If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you." 

"If the ratio approaches 200% - as it did in 1999 and (early) 2000 - you are playing with fire."

In late November, it was 134%. It's in the 94th percentile of results over the past six decades. It's well above the 60-year average. 

It's way overvalued. It perhaps heading for 1999 levels. The fullness of time will tell.

Economic conditions then were strong. Weakness followed. Protracted hard times reflects what's ongoing now.

Markets may go higher before peaking. Or maybe not. Betting on continued advances is a fool's game. 

Winning makes investors look smart. Losing extracts pain when bubbles pop. Is this time different? We heard it lots of times before. 

It bears repeating. Hindsight is the best insight. Forewarned is forearmed.

A Final Comment

On November 25, the Washington Post headlined "Among American workers, poll finds unprecedented anxiety about jobs, economy."

John Stewart is typical of others. He's middle-aged. His job pays too little to live on. "I can't save any money," he said. He can't "buy the things (he) need(s) to live as a human being."

Over four years into so-called recovery, "American workers are living with unprecedented economic anxiety," said WaPo. Low income workers feel it most.

A recent WaPo-Miller Center poll showed over six in 10 workers fear losing their jobs. Concerns are greater than found in previous surveys dating from the 1970s.

Low income workers worry most. At the same time, angst today affects "all levels of the income ladder.

"Once you control for economic and demographic factors, there is no partisan divide," said WaPo. 

"There's no racial divide, either, and no gender gap. It also doesn't matter where you live."

At issue is protracted Main Street Depression level economic conditions. Millions of Americans are unemployed. Millions more are underemployed.

Incomes don't keep up with inflation. Job insecurity is unprecedented in modern times.

Conditions go from bad to worse. Every day reflects a struggle to survive. It's the new normal. It shows no signs of ending.

Stephen Lendman lives in Chicago. He can be reached at [email protected] 

His new book is titled "Banker Occupation: Waging Financial War on Humanity."

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com. 

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.

It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour

http://www.dailycensored.com/iran-nuclear-deal-bashing/


http://www.dailycensored.com/market-euphoria-troubled-times/

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Thom Hartmann’s War on Your Mind

By James F. Tracy

In October a debate ensued on Memory Hole and at Project Censored regarding Alex Jones and Infowars’ legitimacy and trustworthiness as news sources. The exchange began when Nolan Higdon presented various predictions made by Jones that were not borne out by subsequent events.

Yet it looks as if the gloom and doom-style Jones has been taken to task for is being appropriated and given a “liberal” spin by Thom Hartmann–also a longtime proponent anthropogenic global warming theory. The progressive-left author and talk show host has begun touting his new conspiracy-flavored book, The Great Crash of 2016: The Plot to Destroy America–and What We Can Do to Stop It.

Hartmann and Jones are well-acquainted, having on occasion simulcast their weekday radio programs where they once expressed mutual appreciation of each others’ views and work. For example, on April 15, 2009 the two personalities co-hosted a remarkable hour-length segment in which they generally found common ground on numerous issues–civil liberties, the financial industry’s gigantic influence over federal governance, the growing militarized police state, and even local militias.

Indeed, at one point during the above referenced broadcast Hartmann remarked, “I think that actually as Americans, Alex, who believe in the Constitution and the Bill of Rights, there’s more that unites [libertarians and progressives] than divides us” (Alex Jones and Thom Hartmann 3/4 at 8:55).

Yet in subsequent years, the two personalities drifted apart. As the reality of Obama’s presidency and shifting political winds set in Hartmann went on to host a program at RT where he increasingly disparaged Jones and the Truth movement, and from this perch even seemed to vie for a post at MSNBC.

Unlike Jones’ hillbilly-meets-DARPA-whistleblower rants, Hartmann consciously plays the bespectacled scholarly-type, appealing to his self-styled dispassionate and rational progressive audience. Appearing on Democracy Now! this week, the liberal talker’s sturm und drang economic forecast at first glance resembles not only Jones, but also Texas Congressman Ron Paul, libertarian talk show host Peter Schiff and “Father of Reaganomics” Paul Craig Roberts. Among others, these economic analysts argue that the private Federal Reserve bank’s incessant and fervent money printing will inevitably lead to and intensify the coming economic cataclysm.

Hartmann appears to “borrow” from these observers by arguing that such a crash is indeed unavoidable. Yet in a clear sleight of hand the pedantic doomsayer completely evades the problem of monetary profligacy by suggesting how the Obama administration and Fed are earnestly staving off the final reckoning. Is this White House-inspired (or perhaps sponsored) propaganda? Here are some outtakes and reinterpretations from the recent interview below (beginning at about 2:05).

“Obama was successful in the first few months of his administration by putting enough of a band aid on it that they’re holding this back with bailing wire and bubble gum.”

[Translation: The Federal Reserve (US Taxpayer) shoveled untold trillions to the bankers and corporatists to temporarily prop up the economy with another gigantic stock market bubble, yet the Fed can't print forever.]

Hartmann: “But, Bush had hoped—he saw this coming, the Bush administration—had hoped [sic] that he could wait until November 2008 so that it would be after the election so that it wouldn’t hurt the Republican candidate. He was unsuccessful.”

[Translation: The two party system is continuously at odds and competing to represent the popular will. There’s absolutely no chance that such a crash was engineered by Wall Street financiers to ensure an Obama-Biden victory. Or, “free markets capitalism” inevitably leads to dire crises.]

Hartmann: “The Obama administration is now—because they’re not doing the real structural changes necessary—they’re hoping they can push it off until 2016 and that’s why we chose that date [in the book’s title]. Now there’s an enormous amount of effort in our government and in the Fed to try to hold this off ‘til after the election of 2016. Whether they’re successful or not I don’t know [sic]. This literally could happen overnight.”

[Translation: We are doomed! Again, any conflict worthy of public attention takes place directly on the political stage. The good guys—you know, the Democratic Party, the Federal Reserve, and the prevailing economic scheme controlled by central banking--aren't fleecing taxpayers and the economic system but rather saving them.]

Some representatives of the “fanatical right wing” that progressives so readily point to in arguments about the deficit and economy argue that such a crash is in fact being intensified by the careless monetary policies of the Fed, which continue and intensify with the tacit approval of the US Congress and Obama administration. In fact, the federal debt has grown seventy percent under Obama–from $10 to $17 trillion. Such a reckless monetary policy is tailor-made for politicians who cannot resist a money-printing press that allows them to “kick the can down the road,” while leaving Americans with the ever-expanding tab.

Hartmann attempts to commandeer the economic thesis long-articulated by libertarians and their advocacy for “sound money,” while tempering it for those who hang on every word uttered by Paul Krugman. The upshot of Hartmann’s (and the overall Keynesian) version, however, is that profligate monetary policy is not the cause of the present problem, but remains to a large degree its solution. Nevermind the fact that America’s industrial base has been thoroughly gutted.

For example, Hartmann argues how the buildup to the next disaster is a replay of the prelude to the 1929 crash and, moreover, how both are rooted in “conspiracies” and “plots” developed by “economic royalists,” “banksters,” and “globalism,” against which the federal bureaucracy (FDR and his postwar successors) wages a valiant struggle.

Yet Hartmann’s sensationalism doesn’t end there. He goes on to reference his previous anthropogenic  climate change propaganda, describing the deathly carbon-based greenhouse gases destined to do us all in should they be allowed to increase even minutely over the next several decades. But wait! The scenario is even more dire. According to Hartmann (at around 12:35 in the DN! interview video above), such apocalyptic climate change could take place almost overnight, and is something the (some would argue fraudulant) United Nations Intergovernmental Panel on Climate Change “is not talking about.”

“It’s a very significant stressor,” Hartmann somberly informs Goodman in the November 12 interview. “Scientists [and] people are hysterical or very concerned” about the imminent release of

trillions of tons of methane hydrate–methane frozen up in ice, in the arctic and around continental shelves. If that melts, then there will be a sudden global warming. And when you look at the five past extinctions on planet earth every single one was triggered by one of these methane releases.

This will come to pass unless, of course, we can drastically reform our behavior and energy consumption … and assuming the forthcoming economic crash doesn’t get us first, or both don’t hit simultaneously.

But, hey, whoever said that a talk show host should be held accountable for making extravagant claims and suggesting that the modern situation is almost completely hopeless? Further, is the promotion of unfounded conspiracy theories and historical revisionism really all that bad? If you’re championing the “correct” political stances then negativity appears to become prophetic, shadowy plots constitute accurate economic and historical analysis and projections, and UN-distilled interpretations of climate science and “green” advocacy literature are embraced as genuine climatological research. Taken as a whole, Thom Hartmann delivers the entire package in an absolute war on your mind that is without parallel.

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DEA: Law and Science Unto Itself

In an empty, muted family court, with armed guards at its doors, D.C. Superior Court Judge J. William Ryan released a discovery order revealing that the DEA’s analysts are producing false marijuana test reports resulting in wrongful convictions[1].  By critiquing DEA chemist Heather Hartshorn’s reports and testimony through the prism of the 2009 National Academy of Sciences (NAS) report on forensic tests,[2] Ryan showed that her marijuana report mirrored the NAS’s example of a totally deficient  report. Their example read: “Results: The green-brown plant material in item 1 was identified as marijuana.”[3] Hartshorn’s report read: “Exhibit 1 contains a measurable amount of marijuana.”[4]

A number of state courts have “held that the [prosecution] should provide more than the bare test results and reports to the defendant in discovery under similar [expert notice] rules.”[5]  For instance, the Court of Appeals of North Carolina has ruled that a defendant charged with selling heroin was entitled to the state laboratory analyst’s “laboratory protocols, incidences of false positive test results, quality control and quality assurance, and proficiency tests.” [6]

The Supreme Court in Jackson v. Virginia has ruled that reports such as Hartshorn’s, based on non-specific, screening tests are not worth the paper they’re printed on because they do not provide proof beyond a reasonable doubt of the presence of marijuana in a seized substance.[7]  Hartshorn herself admitted she used non-specific, screening tests yet testified erroneously that they positively confirmed the presence of marijuana.[8]

Ryan also disclosed that Hartshorn’s report lacked adequate details and data to allow a review of her work by an independent defense analyst to see whether she used valid, reliable tests and applied them correctly.[9] This was a significant failing as the NAS report concluded that many forensic tests “are not based on a body of knowledge that recognizes the underlying limitations of the scientific principles and methodologies for problem solving and discovery (Hartshorn claimed there were no limitations) [and] are not informed by scientific knowledge, or are not developed within the culture of science.”

According to Dr. Vedoster Ingram, a 29-year-veteran of the DEA, this was typical of the DEA. “As reports are normally presented, an official report of analysis is introduced into the court records for litigation without significant explanation.”[10] Reviewable data for Hartshorn’s tests should have included microphotographs of the suspected marijuana sample, highlighting the relevant morphological characteristics; photographs of the Duquenois-Levine (D-L) color chemical test results, including side-by-side contemporaneous images of the suspected marijuana and actual marijuana standard for proper comparison; and photographs or photocopies of the Thin Layered Chromatography (TLC) plate with the measured values and observed colors recorded contemporaneously with the testing.

The NAS report said that such reports were unacceptable and should lead to dismissals of charges.[11] In fact, much of Hartshorn’s report was indecipherable with abbreviations known only to herself. She dismissed this concern by stating that: “It’s not our policy to keep [reviewable data]; it’s not needed.” [12]

Reviewability and reproducibility are at the heart of verification and the scientific method. Regarding the Supreme Court’s ruling in Daubert v. Merrell Dow Pharmaceuticals, Inc., the Ninth Circuit Court declared that: “Something doesn’t become ‘scientific knowledge’ just because it’s uttered by a scientist nor can an expert’s self-serving assertions that his conclusions were ‘derived by the scientific method’ be deemed conclusive, else the Supreme Court’s opinion could have ended with footnote 2. As we read the Supreme Court’s teaching in Daubert, therefore, though we are largely untrained in science and certainly no match for any of the witnesses whose testimony we are reviewing, it is our responsibility to determine whether those experts’ proposed testimony amounts to ‘scientific knowledge,’ constitutes ‘good science,’ and was ‘derived by the scientific method.’[13]

Judge Kozinski’s Ninth Circuit opinion noted further that a gate keeping court must decide in part whether “ ‘… scientists have derived their findings through the scientific method or whether their testimony is based on scientifically valid principles….’ (Daubert, 43F. 3d at 1316). In its gate keeping role, the court should view reliability as follows: ‘this means that the expert’s bald assurance of validity is not enough. Rather, the party presenting the expert must show that the expert’s findings are based on sound science, and this will require some objective, independent validation of the expert’s methodology.’”[14] – i.e., review and reproduction of test findings.

The Court of Appeals of Maryland has ruled that: “Access to laboratory information generally is significant for another reason. The validity of testing procedures and principles is assessed in the scientific community by publishing the data in peer review journals …. [P]ublication of a laboratory’s work product and data used in [scientific] analysis, as well as independent replication and validation studies, are essential prerequisites to reliability.”[15] Replication and validation of Hartshorn’s findings were impossible since she presented no supporting data.

For independent reviewability, replication, and validation, lab reports should contain sufficient information to evaluate case notes and interpret the data as well as procedures, standards, blanks, observations, and  test results. Supporting documentation should include charts, graphs, and spectra generated during an analysis. [16]  Since Hartshorn provided none of these details, her reports could not be checked out and proved nothing, least of all that the suspected sample was marijuana.

The DEA founded and presently chairs Scientific Working Group on the Analysis of Seized Drugs (SWGDRUG) which provides minimum standards for  scientifically sound  lab and testing procedures. According to SWGDRUG:

Laboratories shall have documented policies establishing protocols for technical and administrative review.

Laboratories shall have and follow documented analytical procedures.

Laboratories shall have in place protocols for the sampling of evidence.

Laboratories shall monitor the analytical processes using appropriate controls and traceable standards.

Laboratories shall have and follow documented guidelines for the acceptance and interpretation of data.

Analytical procedures shall be validated in compliance with Section 11.

When analysts determine the identity of a drug in a sample, they shall ensure that the result relates to the right submission. This is best established by the use of at least two appropriate techniques based on different principles and two independent samplings.

Method validation is required to demonstrate that methods are suitable for their intended purpose. For qualitative analysis (identifying drugs), the parameters that need to be checked are selectivity, limit or detection and reproducibility.

Minimum acceptability criteria should be described along with the means for demonstrating compliance.

Validation documentation is required. Laboratories adopting methods validated elsewhere should verify their methods and establish their own limits of detection and reproducibility.

Documentation shall contain sufficient information to allow a peer to evaluate case notes and interpret the data.

Analytical documentation should include documentation including charts, graphs, and spectra generated during analysis.

Laboratories shall perform proficiency testing in order to verify the laboratory’s performance. [17]

Hartshorn was asked whether she followed DEA protocols or at least the guidelines of SWGDRUG.  “[T]hey aren’t laws, and so, as of right now, that is not our policy,”[18] she casually responded. In other words, the DEA does not follow its own regulatory body. Even worse, the “DEA does not have such guidance set forth in one particular document type or ‘protocol’ that would provide instruction on how one is to test cocaine or marijuana. . . There are no mandatory methods, and the forensic chemists are afforded considerable discretion in determining which testing methods and instruments to use.”[19] This according to Harshorn’s lab director, James Malone, who testified that the DEA has no protocol or standard methodology and does not validate its drug tests; calibrate its testing instrumentation right before testing; or run contemporaneous scientific controls to prevent and detect contamination.[20]

Judge: For marijuana in this case, for example, there is no calibration? 

James Malone: There is not. . .  So we’re not running a positive control on the Duquenois-Levine (marijuana test) on a daily basis.

Prosecutor: Now with regard to standard methodologies, DEA has a standard methodology on how to do examinations?

JM: No, we don’t.

P: So for qualitative analysis, the actual identification of a drug, you don’t have such (validation) studies, as you understood her (defense expert) to mean, correct?

JM: Correct. . . Identification – (validation) studies related to identification are not generally – there are no requirements for that. (SWGDRUG: “Method validation is required to demonstrate that methods are suitable for their intended purpose.”[21])

According to SWGDRUG Recommendations at Part IV.A.6.1.1 (“Laboratories shall have and follow documented analytical procedures”); id at Part IV.A.6.1.6 (“Analytical procedures shall be validated in compliance with Part IV B Validation”); id, at Part IV.B.IA (“All methods shall be validated or verified to demonstrate that they will perform in the normal operational environment when used by individuals expected to utilize the methods on casework”); id at Part IV.B.1.5 (“The entire validation/verification process shall be documented and the documentation shall be retained. Documentation shall include … personnel involved, dates, observations from the process, analytical data, a statement of conclusions and/or recommendations, authorization approval signature”).”

In short, the DEA is not engaged in scientific testing; a conviction machine. Voodoo science as someone commented. It also means that the DEA labs are, in fact, unaccredited because they received their accreditation on the basis that they follow strict protocols and SOPs, determine error rates and test limitations, validate its tests, and run positive and negative controls.

What really set off Ryan, however, was Hartshorn’s testimony that the DEA’s marijuana tests as well as her testing are infallible.  She claimed a zero percent (0%) error rate with the tests and her testing.[22] “Ridiculous on its face,”[23] said Ryan.  “Ms. Hartshorn makes a bold statement in her testimony in which she asserted that the three tests performed in these cases are infallible in their combined ability to conclusively identify marijuana,” wrote defense expert Heather Harris. “She was unable to offer any scientific studies to confirm this assertion, which is a scientific impossibility.”[24]  The NAS report concluded that “no forensic method has been rigorously shown to have the capacity to consistently, and with a high degree of certainty, demonstrate a connection between evidence and a specific individual or source.”[25]

Infallibility claims fly in the face of the fact that uncertainty enters testing in many ways, and each life stage of the evidence is susceptible to error. Contamination or misidentification can occur during the collection of the evidence. Analytical methods have practical and technical limitations. Reference standards and controls may fail quality control checks. Laboratory analysts who oversee the entire analytical process may make mistakes. Transcription errors can occur. In short, contrary to Hartshorn’s testimony, there is a panoply of errors that can occur. The three tests she used were: a microscopic examination, a presumptive color test named Duquenois-Levine (D-L), and Thin Layer Chromatography (TLC). None of these tests provide a specific identification to the exclusion of all other possible substances, and each of these tests has an associated degree of uncertainty or error rate.

With the microscopic exam, DEA analysts look for so-called cystolith hairs which occur on marijuana plants. But many other plant species unrelated to marijuana have cystolith hairs. Thus, a false positive (error) is possible with this examination.  Also according to the NAS report, the microscopic exam can only be done properly by a qualified botanist.[26] The DEA does not employ botanists.

George Nakamura, who is not a botanist, established use of the microscopic exam as a marijuana test. He examined 600 plants and found 80 with cystolith hairs. He then subjected the 80 “similar” plants to the D-L test, and only marijuana passed the entire test.[27]  However there was an elementary scientific flaw in Nakamura’s procedure for which reason his report should not have been published, let alone adopted as a protocol. His plant population sample was woefully inadequate since there are 200 –500, 000 plants he did not examine, and there are at least 24 species of plants with cystolith hairs. Nakamura himself admitted that there were some 30,000 plants which he did not examine.

Nakamura also claimed that the D-L was confirmatory of, and, specific to, marijuana, i. e. identified it to the exclusion of all other substances and did not render false positives. In fact, with the D-L test, false positives are expected based on the analytical mechanism of color tests. Color tests are screening tests that look at molecular groups rather than the specific molecule as a whole. Many unrelated molecules share common molecular groups, so any substance containing the target molecular group would give a positive response. In other words, the D-L test solely identifies the group of chemicals to which marijuana belongs. And there are other chemicals in that group which could give a positive D-L response, i.e., a false positive. Moreover, Nakamura himself reported that there were 25 substances that had been shown to cause false positives with the D-L test. So his claim was contrary to chemical facts and scientific demonstrations, and, again, should not have been published.

The D-L test is actually a combination of two individual tests. With the Duquenois test, a petroleum ether or chloroform extract of the plant extract is added to an ethanolic solution of vanillin and acetaldehyde, followed by addition of concentrated hydrochloric acid. Marijuana gives a deep blue-violet color. With the Levine modification, the blue-violet test mixture obtained in the Duquenois test is shaken with chloroform. With marijuana, the blue-violet color is transferred into the chloroform layer. However, at least 50 legal substances have been shown to give the same color reactions.

As early as 1938, the French pharmacist Pierre Duquenois, who developed the Duquenois test, found that it was not specific and gave false positives.[28] Yet, he reported that the test was specific.[29]  Although he claimed it was specific, he worked to modify the original test into the D-L test to eliminate false positives –  which as noted above was impossible given the nature of the D-L test. As he should have known in advance, the D-L test was no better and rendered false positives. Still, he reported that the D-L test was specific. Duquenois’s lie was repeated in 1972 by John Thornton and George Nakamura who falsely claimed that the D-L test was specific and in conjunction with a microscopic exam was a confirmatory, identification test.[30] Their study is still the protocol for marijuana identification in crime labs throughout the country even though it was false and rebutted by Fullerton and Kurzman and Whitehurst.

With regard to TLC, its ability to identify a substance, which in this case is not marijuana but rather its active ingredient THC, is limited by the number of distinguishable responses possible. TLC is a method of separation, not of identification. “It is prone to confusion because of the appearance of unrecognized peaks or spots on a chromatograph, particularly when an analyst is dealing with a wide variety of biological samples from a number of sources.”[31] The TLC test as generally performed for marijuana evidence has 100 distinct measurable values and 2 to 3 distinguishable colors. This allows for the distinct identification of at most 300 compounds without taking into account the possibility of compounds that will behave the same as the target molecule, THC.  In other words, a positive TLC test could indicate any one of some 300 compounds in addition to THC.

When these three tests are performed in sequence, the uncertainty of the final result is the sum of the uncertainties attributable to each test. In this case, where each of the tests can produce errors, the uncertainty can be great.  Moreover, a main concern with this sequence of testing is that the D-L and TLC tests produce results that are heavily dependent on the analyst’s subjective interpretation of the colors produced. What’s dark blue to one analyst, is purple to another. At a minimum, a standard reference material (a sample of known marijuana) should be tested along with the evidence sample as a comparison sample. The DEA does not do this. In addition, without the proper determination of the variability of positive results, the final identification is still simply the analyst’s subjective opinion.

Confirmation bias is also a concern with this sequence of testing. This is the tendency of an analyst to interpret analytical information in a way that confirms his/her preconceptions about an item of evidence as well as the results of the previous test. In a sequence of testing that relies entirely upon an analyst’s interpretation of test results, this is a likely source of error.

Hartshorn admitted that separately each of the tests is a screening test that renders false positives, i.e. errors. But miraculously when they are conducted in concert, they are error-free as is the analyst. In direct contradiction of Hartshorn’s claims of infallibility was a study done at her own lab which found false positives and a very high 20% error rate.[32] And every independent scientific study has found an error rate and false positives with these tests. For instance, a comprehensive series of studies in 1974 involving no fewer than 14 scientists and two attorneys concluded, in part, as follows.[33]

The probability of error in using screening tests for forensic identification is particularly great with marijuana because:

1. Screening tests are not specific;

2. Many common plants are confused with marijuana by “users” and law officers alike;

3. Inexpertly collected plant samples are not necessarily homogenous, i. e., only a single plant; and

4. The flowering plants include some 200,000 – 500,000 species besides marijuana.

As many as 20% (An Army study found 30%.) of the samples presumed to be marijuana and submitted to forensic laboratories have been found in recent years not to be Cannabis. “If BNDD (Bureau of Narcotics and Dangerous Drugs, predecessor to DEA) files are any indication, many. . . marijuana users are getting ‘high’ on parsely, alfalfa, or some other weed.” Common plants which have been confused with marijuana include tobacco, catnip, parsley, oregano, tea and other substances – sometimes laced with various chemicals.

Inexpertly collected plant samples commonly contain some extraneous plant materials – a weed grabbed by mistake, a plant which looked like the others, etc. The forensic analyst then needs to be concerned with one plant passing one screening test, and a contaminant passing another. (Furthermore, it’s not possible to determine if ground-up plant samples are from the same species. To avoid a misidentification, the analyst should assume the sample is adulterated or contaminated.) Because of this factor, and the common presence of added chemicals, the specificity of marijuana screening tests, even when used in combination, is no greater than the specificity of the most specific single test.

Because Hartshorne’s testimony raised serious concerns about her qualifications and “integrity” as well as a “flaw” in her testing, Ryan ordered that the prosecution produce all information verifying that the three tests in combination were infallible.[34] What Ryan apparently did not realize was that Hartshorn was repeating unsupported infallibility claims made by DEA lab directors since at least 1999. For instance, on April 9, 1999, Joseph P. Bono, director of the DEA’s Mid-Atlantic Laboratory submitted a sworn affidavit to the courts that all DEA analyses and tests are “incapable of producing a false positive. . . In other words, even if the test results are inaccurate, the results will not indicate the presence of a controlled substance when none is present in the unknown sample. Even if the instruments used in the testing are not properly calibrated, if no controlled substance is present in the exhibit, then no controlled substance will be identified . . . even when an instrument is not functioning properly, it will not identify cocaine, or any other controlled substance, as being present in a sample, unless that controlled substance is actually present.”[35]

Bono’s successor at this lab, Richard Fox, was more specific in his sworn affidavit which stated, in part, that:

“There is no other plant material that will give a positive result for all three tests. . . Neither the analyst in this case, nor any other DEA analyst, has ever misidentified marijuana. . . As such, the uncertainty measurement associated with the conclusions reached by the analyst resulting in the identification of marijuana is zero.[36]

Fox’s successor, James Malone, who is also Hartshorn’s supervisor who has signed off on her reports, has testified, in part, as follows in another marijuana case in D.C.

Prosecutor: To your knowledge, while you’ve been at the lab, has the laboratory ever misidentified a controlled substance?

James Malone: No.

P: And when you say – what are you basing that on?

JM: On my knowledge of the operations of the laboratory. We have not misidentified anything.

P: Are you aware of anything which shows that a mis-calibrated system or chromatographer in this case, but any system that was not calibrated correctly would create a false positive for cocaine or a controlled substance?

JM: No

P: Have you ever seen it in the lab? 

JM: Have I ever seen what?

P: A false positive from a mis-calibrated system.

JM: No.

Judge: But Mr. Chawla’s position was, can it ever – can a mis-calibrated machine ever give a false positive?

JM:  No. A mis-calibrated machine isn’t going to give you a positive cocaine if there’s not cocaine.

Judge: Why not?

JM: It just wouldn’t. . .

P: More specifically, if the reagent isn’t working, is it going to show that the substance isn’t marijuana? In other words, if the reagent isn’t working, what’s the result of the Duquenois-Levine going to be?

JM: It’s going to be negative.

P: Would I get a positive out of a Duquenois-Levine test? If I used a reagent that wasn’t working anymore and tried to run a Duquenois-Levine with that reagent, what would happen?

JM: You wouldn’t get a false positive, no.

P: With regard to identification techniques, is there any – do you have any reason to believe that a mis-calibrated or non-calibrated device would result in a false positive?

JM: No, I don’t.[37]

Malone’s testimony makes clear that he is basing his infallibility claim on ipse dixit evidence as were Bono and Fox who have never presented data to support their unheard of assertions.

Decades before their infallibility claims, several high courts including the U.S. Supreme Court found that the tests did not prove the presence of marijuana beyond a reasonable doubt. The Supreme Court of Wisconsin ruled in 1973 that: “An expert opinion that the substance is probably marijuana (based on a microscopic examination, D-L test and TLC) is not sufficient to meet the burden of proving the identity of the substance beyond a reasonable doubt. . . If this were a possession case, the tests would be insufficient. . . It is quite true that the tests used by Mr. Michael Rehburg, a chemist and witness for the prosecution, were not specific for marijuana. . . . He admitted, . . .  these tests were not specific for marijuana.”[38]

In 1979, a trial judge in North Carolina found that the D-L test was “not specific for marijuana” and had “no scientific acceptance as a reliable and accurate means of identifying the controlled substance marijuana.”[39] This finding was upheld by the North Carolina Court of Appeals as well as the North Carolina Supreme Court which found that: “The determination that the test used was not scientifically acceptable because it was not specific for marijuana was amply supported by the facts. . . The trial court’s ruling that the results of the tests conducted on green vegetable matter by using the Duquenois-Levine color test in the Sirchie drug kit were inadmissible in evidence was supported by the court’s findings that the test is not scientifically accepted, reliable or accurate and that the test is not specific for marijuana because it reportedly also gives a positive reaction for some brands of coffee and aspirin. . . . The conclusion to exclude the test results is amply supported by these findings of fact . . . and the test results were properly suppressed . . .”[40]

Also in 1979, the U.S. Supreme Court in Jackson v Virginia ruled that nonspecific tests could not be the basis for advancing a prosecution or a conviction because they do not provide proof beyond a reasonable doubt.[41]

Ultimately, Judge Ryan concluded that “such claims of infallibility belie one of the most basic tenets of science: that some degree of error is inherent in every scientific test, process, or analysis. . .While explaining that each of these tests used alone is presumptive, as distinct from confirmatory, Ms. Hartshorn nonetheless maintained their infallibility when used in concert. With the designation that these tests are merely presumptive, the DEA chemist acknowledged that there is some degree of inherent error calculable with respect to each of these tests when they are performed in isolation. That there is some distinct and additional degree of error calculable with respect to this analyst’s performance of each test is also without question.”[42]

It is clear from Judge Ryan’s remarks that he would have denied admission of the test results as evidence as well as Hartshorn’s testimony at trial, and this would have resulted in a withdrawal of the charges. He did not do so because defense counsel did not request it. Since Kurzman’s study and others occurred before this case as well as applicable court decisions such as Jackson, Daubert and Kumho Tire, defense counsel should have requested an evidentiary hearing for challenging the tests and sufficiency of evidence. Their failure to do so amounted to ineffective counsel.

This is exactly what U.S. District Court Judge Nancy Gertner concluded in a similar case wherein the defense counsel did not request an evidentiary hearing to challenge the forensic evidence. This is seen if one simply substitutes “marijuana” in her following remarks. “Under the ‘prevailing professional norms,’ reasonably competent counsel should have moved for a Daubert/Kumho Tire hearing before trial on all the expert testimony — a) on the [marijuana] laboratory analysis based on the investigator’s failure to use a comparison or control sample and not test beyond the generic finding of [“Exhibit 1 contains a measurable amount of marijuana”]; b) on the [marijuana] evidence, highlighting problems with proficiency testing and emphasizing the limited scope of the testimony; and, c) on the expert cause-and-origin testimony, when the expert’s proposed testimony was scientifically flawed. If counsel had requested such a hearing, there is more than a ‘reasonable probability’ that it would have been granted, that the laboratory analysis and the [marijuana] evidence would have been excluded, or severely limited, at the very least. . . .  As the Court held in Daubert, some testimony may be so problematic that the usual trial techniques are just not enough to prevent a jury from giving it far more credence than it deserves. See Daubert, 509 U.S. at 596-97. The testimony should not reach the jury at all. (This was absolutely true with Judge Ryan’s case.) Here, the scientific literature cast doubt on the significance of the [marijuana tests] and even raised concerns about . . . “proficiency” testing, concerns counsel never raised. . . just what the law and literature caution against”[43]

It is instructive to compare the two cases in detail because like Judge Ryan, Judge Gertner also critiqued the government’s evidence and experts through the prism of the NAS report. Gertner pointed out that it was significant that by 2006, a number of articles in legal journals and cases had cast a critical eye on the scientific reliability of arson evidence, methodologies, and techniques. Because of this, competent counsel should have been aware that defendants had been convicted and sentenced on the basis of flawed arson evidence and taken appropriate steps to litigate the issues using all the tools available including challenging the tests and requesting an evidentiary hearing.

The same was even more true of marijuana evidence by the time of Judge Ryan’s case.  The marijuana tests had been scientifically established as unreliable and inaccurate, and previous court decisions had excluded admission of the marijuana test results as evidence.

Gertner found that there was ineffective counsel because the defense attorneys did not move for a Daubert hearing prior to trial on any expert issue. They did not seek exclusion of any of the proposed expert testimony or move for its limitation. They did not argue that the expert testimony failed to meet the minimal threshold for reliability of scientific evidence and should not have been admitted at all. They did not alert the Court to the ways in which the government’s investigation undermined their very ability to present a defense.

The same was true with the case of Judge Ryan who called Hartshorn’s testimony “[R]idiculous on its face” and lacking in “integrity.”

In addition, Gertner argued that it was crucial to try to exclude expert testimony before trial because “a certain patina attaches to an expert’s testimony unlike any other witness; this is ‘science,’ a professional’s judgment, the jury may think, and give more credence to the testimony than it may deserve. United States v. Hines, 55 F. Supp. 2d 62, 64 (D. Mass. 1999); see also Michigan Millers Mut. Ins. Corp. v. Benfield, 140 F.3d 915, 920 (11th Cir. 1998) (‘The use of ‘science’ to explain how something occurred has the potential to carry great weight with a jury, explaining both why counsel might seek to couch an expert witness’s testimony in terms of science, as well as why the trial judge plays an important role as the gate-keeper in monitoring the evidentiary reliability of such testimony.’).”[44]

This again was even more true with Judge Ryan’s case because DEA chemists were poised to testify that the marijuana tests as well as their testing were infallible, and that no DEA analyst had ever misidentified marijuana. In fact, defense counsel in Judge Ryan’s case had been involved in previous marijuana case wherein DEA analysts had claimed infallibility under oath. All the more reason why they should have sought to exclude the evidence.

For its part, the DEA was ethically and scientifically bound to suspend Hartshorn and Malone and investigate all their previous marijuana cases. In fact, Hartshorn and Malone were subsequently both witnesses in another discovery hearing in the same court room opposed by the same defense counsel who again had not requested an evidentiary hearing to challenge the same marijuana tests. This hearing was presided over by Judge Florence Y. Pan who had read Judge Ryan’s order.[45] Heather Harris, who was highly praised by Judge Ryan, was the defense expert in this hearing as well. With no justification, Pan found Hartshorn and Malone to be credible as opposed to Harris even though Malone claimed infallibility without any proof. “On my knowledge of the operations of the laboratory,” he said, “We have not misidentified anything.” He also said that “a mis-calibrated instrument would never cause a false positive result.” Asked why by Pan, he replied:  “It just wouldn’t.”[46]

As we saw, Malone further testified that the DEA has no protocols or standard operating procedures and does not validate its tests or run sufficient numbers of controls.[47]  He threw in that the Analysis of Drugs Manual and the Analytical Sufficiency Document  are “the closest thing the DEA has to standard operating procedures for the chemists.”[48] Again, no problem for Pan even though Malone said these documents were “DEA proprietary,”[49] and SWGDRUG and scientific practice require protocols, test validations, and controls. Malone claimed there were published studies validating the tests, but this is not true.

Harris disagreed with Malone on all accounts.  No problem for Pan who decreed that: “To the extent the testimony of the witnesses conflicts, however, the Court credits the testimony of Mr. Malone. . . the Court found the testimony of Mr. Malone to be extremely credible and persuasive [and was] impressed by Mr. Malone’s candor, expertise, and professional demeanor. . . His testimony was very clear and logical, and the Court found him to be forthright.”[50] Pan did not mention the lack of scientific data or explanations for Malone’s testimony or that it showed the DEA was at odds with SWGDRUG requirements and scientific practice.

In short, there were more than enough scientific studies and favorable case law before Judge Pan’s case, not to mention Judge Ryan’s order, to justify requesting an evidentiary hearing in an attempt to deny admission of the test results as evidence. Defense counsel also had a highly qualified expert to confirm that the tests results did not provide proof beyond a reasonable doubt, and that the DEA’s proffered evidence and testimony were false.

As Judge Gertner observed: “If the lawyers do not tee up the issue, the evidence will be introduced without objection.”[51] This is exactly what happens in nearly all marijuana cases. Defense attorneys do not challenge the tests or the sufficiency of the evidence. In 2010, 853, 839 people were arrested on marijuana charges, and you can count on one hand the number of defense attorneys who challenged the tests or even the subjective opinions of arresting police officers.

This failure on the part of defense attorneys is particularly irresponsible because claims of infallibility can be to the advantage of a defendant as they undermine the admissibility of marijuana test results and the credibility of a prosecutor’s expert witnesses. Before a trial, a defense attorney can request an evidentiary hearing wherein he or she can examine the qualifications of the prosecution’s forensic analysts, the laboratory, and the nature and manner of the testing procedures used in identifying the drug the defendant was charged with possessing or selling. If this examination reveals deficiencies or inadequacies, the attorney can challenge the sufficiency of the prosecution’s evidence and seek a dismissal.  Dr. Bruce Stein et al have reported that: “Based on our survey, such a challenge would be warranted in many cases.”[52]

The possibilities of these challenges was seen in a recent case in Michigan in 2010.   Defense attorney Michael Nichols obtained a pre-trial evidentiary hearing and cross examined Michigan State Police lab analyst Jerome Waldron who testified that in more than 6,000 cases, he had never encountered a false positive, and that the marijuana tests had an error rate of zero. Nichols then entered a motion to exclude Waldron’s testimony from trial as well as use of the test results as evidence, citing scientific articles, prior court decisions, and Waldron’s lack of credibility. Even before the judge rendered his decision, the prosecutor withdrew the charges.[53]

If lab conditions or procedures do not conform to scientific guidelines and principles or court rulings such as Daubert, the defense attorney can motion to exclude the test results as well as testimony from the analyst at trial. Below is a list of such requests which have led to pre-trial dismissals of marijuana charges because they revealed deficiencies in the lab.

1. Evidence collection forms or logs (description of evidence, packaging, identification of specimens, identification of individuals collecting samples, sample collection procedures.

2. Chain-of-custody records (field-to-lab transfers, and all transfers of evidence and associated analytical samples within the laboratory).

3. Laboratory receiving records (records documenting the date, time and condition of receipt of the evidence in question; laboratory-assigned identifiers; storage location).

4. Laboratory procedures for subsampling (collection of analytical aliquots) and contamination control.

5. Copies of technical procedures in effect at the time the subject testing was performed (often termed Standard Operating Procedures, or SOP’s) for each procedure used during sample screening and confirmation, including; sample preparation, sample analysis, data reporting, and instrument operation.

6. Copies of the two bracketing controlled substance proficiency results for each analyst and technician responsible for preparation or analysis of subject specimens, including raw data and reported results, target values and acceptance ranges, performance scores, and all related correspondence.

7. Copies of traceability documentation for standards and reference materials used during analysis, including unique identifications, origins, dates of preparation and use, composition and concentration of prepared materials, certifications or traceability records from suppliers, assigned shelf lives and storage conditions.

8. Sample preparation records, including dates and conditions of preparation, responsible analyst, procedural reference, purity, concentration and origins of solvents, reagents, and control materials prepared and used, samples processed concurrently, extract volume.

9. Copies of bench notes, log books, and any other records pertaining to case samples or instruments; records documenting observations, notations, or measurements regarding case testing.

10. Instrument run log with identification of all standards, reference materials, sample blanks, rinses, and controls analyzed during the day/shift with subject samples (as appropriate: run sequence, origins, times of analysis and aborted run sequences).

11. Record of instrument operating conditions and criteria for variables, including as appropriate: Gas chromatograph column, instrument file identification, tuning criteria, instrument performance check (e.g., ion abundance criteria), initial calibration, continuing calibration checks, calibration verification.

12. Record of instrument maintenance status and activities for instruments used in subject testing, documenting routine and as-needed maintenance activities in the weeks surrounding subject testing.

13. Raw data for the complete measurement sequence (opening and closing quality control included) that includes the subject samples.  For GC-MS analysis, this would include: areas and retention times, injection volumes, dilution factors, chromatograms and mass spectra.  As prepared and as determined values for all quality control samples.

14. A description of the library used for spectral matches for the purpose of qualitative identification of controlled substances, including source(s) and number of reference spectra.

15. Copy of records documenting computation of illicit drug laboratory’s theoretical production yield, including the basis for the computation, and the algorithm used, as appropriate.

16. Procedure(s) for operation and calibration checks of analytical balances used to weigh controlled substances

17. Results of calibration checks and documentation of mass traceability for gravimetric determinations.

18. Results of contamination control surveys for trace level analytes relevant to test methods at the time of analysis, including sampling design and analytical procedures.

19. Records and results of internal reviews of subject data.

20.  Method validation records documenting the laboratory’s performance characteristics for qualitative identification and quantitative determinations of the controlled substance, to include data documenting specificity, accuracy, precision, linearity, and method detection limits.

21. Copy of the laboratory’s Quality Manual in effect at the time the subject samples were tested as well as the laboratory’s most recent Quality Manual (however named; the document that describes the laboratory’s quality objects and policies).

22. Copy of the laboratory’s ASCLD-LAB application for accreditation, and most recent Annual Accreditation Review Report, as appropriate.

23. Statement of qualifications of each analyst and/or technician responsible for processing case samples to include all names, locations and jurisdictions of cases in which these personnel testified concerning the same substances found in the present case.

24. Copy of the laboratory’s ASCLD-LAB on-site inspection report, as appropriate, as well as any reports of on-site inspections by any other testing laboratory audit organization.

25.  Copy of internal audit reports generated during the period subject samples were tested..

26.  List of capital instrumentation in the laboratory at the time subject testing was performed, including manufacturer, model number, and major accessories.

27. Production throughput data for the drug testing section: numbers of tests performed per month or per year, and the number of Full Time Equivalent personnel in the drug testing section of the laboratory.[54]

Marijuana field tests also have specific requirements that are seldom observed by the police. For instance, the field tests used by police officers have expiration dates because the chemicals and reagents in the tubes deteriorate over time and as a result of heat or cold. Before going to a hearing or trial, a defense attorney can find out exactly what brand of field test kit was used with his/her client. This can be done through a public records request and sometimes by simply asking the prosecutor. The defense attorney can then purchase the exact same kit online. In court, the defense attorney can show the judge that the test has an expiration date after which the test would be inaccurate. If the police officer did not check the expiration date before using the test, then the test results should be assumed to be invalid. Under the law, any tests or equipment that are not in good working order produce results that are inadmissible as evidence. If the police officer cannot attest to the expiration date or whether the test was used after its expiration date, the drug charges should be dismissed. Some search warrants are based on positive kit results and may be ruled invalid if the police officer did not know the expiration date of the kit. This should also result in a dismissal of charges.

Even if the field test has not expired, the test does not prove the presence of marijuana in a seized substance because it is a presumptive or screening test only. Information accompanying the kits indicate this fact. For instance, the carton containing one commonly used NIK field test states that it is: “A specially formulated reagent system for the presumptive identification of Marijuana.”  In other words, the company itself is saying that the test does not prove the presence of marijuana. It is further stated that: “The results of a single test may or may not yield a valid result. . . There is no existing chemical reagent test, adaptable to field use that will continually eliminate the occurrence of an occasional invalid test results [sic]. A complete forensic laboratory would be required to qualitatively identify an unknown suspect substance.”[55]  A defense attorney can show this to a judge or jury and explain what it means. Therefore, if the only evidence is positive results from a field test, the charges should be dismissed or the defendant acquitted.

Recently, defense attorneys in Colorado did challenge the DEA’s test results and blocked their admission as evidence including results from Gas Chromatography/Mass Spectrometry (GC/MS) analysis, the gold standard of drug testing. U.S. District Court Judge Marcia S. Krieger of Colorado ruled on April 21, 2011 that based on DEA information and the testimony of DEA chemist Anthea Chan, the prosecution failed to show the existence of reliable, accurate testing being reliably applied that proved the presence of amphetamines. She therefore denied admission of the test results as evidence at trial.[56]

The hearing, known as a Rule 702 (of the Federal Rules of Evidence) Hearing, provided a rare glimpse into the inner workings of a DEA lab. It was meant to determine whether their testing conformed to Rule 702 requirements for scientifically sound testing. Rule 702 requirements are all but identical to Daubert requirements. Krieger’s first task was to determine whether Chan had correctly tested according to DEA protocols and SOPs. Chan testified that she followed no protocols or SOPs and, in fact, was not aware of any protocols or SOPs.[57] These facts alone, said Krieger, were enough to deny admission of the test results as evidence because it was impossible to determine whether Chan reliably applied reliable tests.

Krieger did, not, however, rule at this point because she wanted her ruling to encompass  defense expert Janine Arvizu’s findings. Arvizu attempted to reconstruct the practices, protocols, and results relevant to Chan’s qualitative and quantitative test conclusions and whether they adhered to quality requirements and universally accepted standards designed to ensure the quality and reliability of tests, specifically, what’s known as ISO 17025 standards. However, as was the case in Washington, only a very limited amount of laboratory discoverable material was made available making it impossible to determine or evaluate the laboratory’s technical requirements or quality controls during the subject testing.

“That’s exactly the position the Court finds itself in,” noted Judge Krieger, “because it does not have evidence as to the protocol that was used, the reliability of the protocol compared to other labs, or whether Ms. Chan complied with the protocol in a reliable fashion.”[58]

Arvizu was, however, able to determine that Chan’s testing in particular was unreliable and inaccurate. Chan first used the Marquis chemical color test as a screening test, and the suspected substance turned orange/brown suggesting it was amphetamines.  But the test was unreliable and meaningless because she did not use a color chart with which to compare her results. As she herself testified: “I believe it’s the same as you saying something is blue and me saying it’s light blue. It’s subjective.”[59] Subjective tests are unreliable by definition.

Her next test was a GC/MS analysis.  Chan first ran a “blank” or negative control to check for contamination. The test consisted of putting the suspected amphetamines into a solution and then placing this solution onto the machine. But she first put the solution alone onto the machine, to see whether it would register positive. It did, meaning the machine was contaminated.[60] As Arvizu testified: “When quality control samples fail, the run should be terminated and the failure should be investigated and corrective action taken before unknown sample are tested.”[61] Inexplicably, Chan continued the testing with the contaminated machine.

Actually, even before beginning her test, Chan should have also run a positive control by placing a known quantity of amphetamines, known as a standard, on the machine to calibrate it and see whether it was working properly. DEA analysts are required under ASCLD/LAB and ISO 17025 guidelines to run standards immediately before testing. Chan said she was not familiar with these guidelines and was not required to do so. Chan’s superior Shana Irby, who approved her testing, also testified that it is not required to run contemporaneous standards, and that it suffices if the machine has been checked ten months prior.[62] She claimed to have never seen any protocol requiring the running of contemporaneous standards, and that “as soon as I walk up to an instrument, I know – I generally know if it’s working or not.”[63] She also claimed it was not necessary to check beforehand whether the standard had disintegrated because “[M]ethamphetamine to my knowledge does not degrade.”[64] This is false, and these standards come with an expiration date beyond which they are not useable.

DEA labs are accredited by the American Society of Crime Laboratory Directors/ Laboratory Accreditation Board ((ASCLD/LAB) under the international criteria detailed in ISO/IEC 17025:2005 and the 2006 ASCLD/LAB International Supplemental Requirements. Accreditation certifies that the management and technical operations of the laboratory comply with the program requirements, including any corrective action that was required during any of audits. (Details regarding the accreditation program may be obtained from www.ascld-lab.org.) In other words, DEA labs are accredited on the basis that they ascribe to ISO/IEC 17025 and ASCLD/LAB International Supplemental Requirements. Arvizu said the DEA adheres to neither, and is, therefore, de facto, unaccredited.

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Another Nail in the Neocon Coffin

The recent opening of the Ron Paul Institute for Peace and Prosperity was a watershed moment in American history. There has never been anything quite like it. Ideologically diverse, the Ron Paul Institute reaches out to all Americans, and indeed to people all over the world, who find the spectrum of foreign-policy opinion in the United States to be unreasonably narrow. Until Ron Paul and his new institute, there was no resolutely anti-interventionist foreign-policy organization to be found. Neoconservatives have not responded warmly to the announcement of Ron’s new institute. Whatever their particular gripes, we can be absolutely certain of the real … Continue reading

The Iraq War Wouldn’t Have Happened Under President Al Gore, That’s for Sure

Former Vice President and Nobel laureate Al Gore during his speech on energy at Constitution Hall in Washington, Thursday, July 17, 2008. (Photo: Brendan Smialowski / The New York Times) Former Vice President and Nobel laureate Al Gore during his speech on energy at Constitution Hall in Washington, Thursday, July 17, 2008. (Photo: Brendan Smialowski / The New York Times) Denied the presidency by the United States Supreme Court (in a 5-4) vote, Al Gore became a Jeremiah for awhile during the worst of the Bush years. Generally, the mainstream media ignored him or derided him, even as he spoke truth to power about the War in Iraq and the threats to democracy.

Since then he's become an apostle about the crisis of climate change, an entrepreneur, and a visionary.

In his latest book, "The Future: Six Drivers of Global Change," Gore offers a futurist manifesto. As with most chroniclers of the human condition and the debate over the challenges ahead for our species, Gore has his advocates and detractors.

Gore considers himself an optimist, as he notes at the end of his introduction:

"Indeed, I am an optimist—-though my optimism is predicated on the hope that we will find ways to see and think clearly about the obvious trends that are even now gaining momentum, that we will reason together and attend to the dangerous distortions in our present ways of describing and measuring the powerful changes that are now under way, that we will actively choose to preserve human values and protect them, not least against the mechanistic and destructive consequences of our baser instincts that are now magnified by technologies more powerful than any that those in previous generations, even Jules Verne, could have imagined."

When you read that Gore hopes that "we will reason together," you can tell that he has been away from Washington DC for a long, long time.

But his book is not about the circus of politics; it is about the survival of the planet and the co-existence of people that transcends national boundaries.

Support Truthout's mission. "The Future: Six Drivers of Global Change" is yours with a minimum donation to Truthout of $40 (which includes shipping and handling) or a monthly donation of $15. Click here.

The following excerpt is the introduction to "The Future: Six Drivers of Global Change":

Like many fulfilling journeys, this book began not with answers but with a question. Eight years ago, when I was on the road, someone asked me: “What are the drivers of global change?” I listed several of the usual suspects and left it at that. Yet the next morning, on the long plane flight home, the question kept pulling me back, demanding that I answer it more precisely and accurately—-not by relying on preconceived dogma but by letting the emerging evidence about an emerging world take me where it would. The question, it turned out, had a future of its own. I started an outline on my computer and spent several hours listing headings and subheadings, then changing their rank order and relative magnitude, moving them from one category to another and filling in more and more details after each rereading.

As I spent the ensuing years raising awareness about climate change and pursuing a business career, I continued to revisit, revise, and sharpen the outline until finally, two years ago, I concluded that it would not leave me alone until I dug in and tried to thoroughly answer the question that had turned into something of an obsession.

What emerged was this book, a book about the six most important drivers of global change, how they are converging and interacting with one another, where they are taking us, and how we as human beings—-and as a global civilization—-can best affect the way these changes unfold. In order to reclaim control of our destiny and shape the future, we must think freshly and clearly about the crucial choices that confront us as a result of:

• The emergence of a deeply interconnected global economy that increasingly operates as a fully integrated holistic entity with a completely new and different relationship to capital flows, labor, consumer markets, and national governments than in the past;

• The emergence of a planet--wide electronic communications grid connecting the thoughts and feelings of billions of people and linking them to rapidly expanding volumes of data, to a fast growing web of sensors being embedded ubiquitously throughout the world, and to increasingly intelligent devices, robots, and thinking machines, the smartest of which already exceed the capabilities of humans in performing a growing list of discrete mental tasks and may soon surpass us in manifestations of intelligence we have always assumed would remain the unique province of our species; 

• The emergence of a completely new balance of political, economic, and military power in the world that is radically different from the equilibrium that characterized the second half of the twentieth century, during which the United States of America provided global leadership and stability—-shifting influence and initiative from West to East, from wealthy countries to rapidly emerging centers of power throughout the world, from nation--states to private actors, and from political systems to markets;

• The emergence of rapid unsustainable growth—-in population; cities; resource consumption; depletion of topsoil, freshwater supplies, and living species; pollution flows; and economic output that is measured and guided by an absurd and distorted set of universally accepted metrics that blinds us to the destructive consequences of the self--deceiving choices we are routinely making;

• The emergence of a revolutionary new set of powerful biological, biochemical, genetic, and materials science technologies that are enabling us to reconstitute the molecular design of all solid matter, reweave the fabric of life itself, alter the physical form, traits, characteristics, and properties of plants, animals, and people, seize active control over evolution, cross the ancient lines dividing species, and invent entirely new ones never imagined in nature; and 

• The emergence of a radically new relationship between the aggregate power of human civilization and the Earth’s ecological systems, including especially the most vulnerable—-the atmosphere and climate balance upon which the continued flourishing of humankind depends—-and the beginning of a massive global transformation of our energy, industrial, agricultural, and construction technologies in order to reestablish a healthy and balanced relationship between human civilization and the future.

This book is data--driven and is based on deep research and reporting—-not speculation, alarmism, naïve optimism, or blue--sky conjecture. It represents the culmination of a multiyear effort to investigate, decipher, and present the best available evidence and what the world’s leading experts tell us about the future we are now in the process of creating.

There is a clear consensus that the future now emerging will be extremely different from anything we have ever known in the past. It is a difference not of degree but of kind. There is no prior period of change that remotely resembles what humanity is about to experience. We have gone through revolutionary periods of change before, but none as powerful or as pregnant with the fraternal twins—-peril and opportunity—-as the ones that are beginning to unfold. Nor have we ever experienced so many revolutionary changes unfolding simultaneously and converging with one another.

This is not a book primarily about the climate crisis, though the climate crisis is one of the six emergent changes that are quickly reshaping our world, and its interaction with the other five drivers of change has revealed to me new ways to understand it. Nor is it primarily about the degradation of democracy in the United States and the dysfunctionality of governance in the world community—-though I continue to believe that these leadership crises must be resolved in order for humankind to reclaim control of our destiny. Indeed all six of these emergent revolutionary changes are threatening to overtake us at a moment in history when there is a dangerous vacuum of global leadership.

Neither is this a manifesto intended to lay the groundwork for some future political campaign. I have run for political office often enough in the past. The joke I often use to deflect questions about whether I have finally surrendered any intention to do so again is actually as close to the truth as any words I can summon in describing my attitude toward politics: I am a recovering politician and the chances of a relapse have been diminishing for long enough to increase my confidence that I will not succumb to that temptation again. In the Conclusion, however, you will find a recommended agenda for action that is based on the analysis in this book.

A New Law of Nature

As a young freshman member of the U.S. House of Representatives elected in 1976, I joined a new bipartisan group of congressmen and senators known as the Congressional Clearinghouse on the Future, founded by the late Charlie Rose of North Carolina. In my second term, Rose asked me to succeed him as chair of the group. We organized workshops on the implications of new technologies and scientific discoveries and met with leaders in business and science. Among our other initiatives, we persuaded all 200 subcommittees in the Congress to publish a list of the most important issues they expected to emerge over the following twenty years and published it as “The Future Agenda.” Most of all, we studied emerging trends and met regularly with the leading thinkers about the future: Daniel Bell, Margaret Mead, Buckminster Fuller, Carl Sagan, Alvin Toffler, John Naisbitt, Arno Penzias, and hundreds of others.

The visiting scholar who made perhaps the biggest impression on me was a short and balding scientist born in Russia a few months before the 1917 Revolution but educated in Belgium: Ilya Prigogine, who had just won the Nobel Prize in Chemistry for his discovery of a major corollary to the Second Law of Thermodynamics.

Entropy, according to the Second Law, causes all isolated physical systems to break down over time and is responsible for irreversibility in nature. For a simple example of entropy, consider a smoke ring: it begins as a coherent donut with clearly defined boundaries. But as the molecules separate from one another and dissipate energy into the air, the ring falls apart and disappears. All so--called closed systems are subject to the same basic process of dissolution; in some, entropy operates quickly, while in others the process takes more time.

Prigogine’s discovery was that an open system—-that is, a system that imports flows of energy from outside the system into it, through it, and out again—-not only breaks down, but as the flow of energy continues, the system then reorganizes itself at a higher level of complexity. In a sense, the phenomenon described by Prigogine is the opposite of entropy. Self--organization, as a law of nature and as a process of change, is truly astonishing. What it means is that complex new forms can emerge spontaneously through self--organization.

Consider the increased flows of information throughout the world following the introduction of the Internet and the World Wide Web. Elements of the old information pattern began to break down. Many newspapers went bankrupt, readership sharply declined in most others, bookstores consolidated and closed. Many business models became obsolete. But the new emergent pattern led to the self--organization of thousands of new business models, and volumes of online communication dwarfing those that characterized the world of the printing press.

The Earth itself, when viewed as a whole, is also an open system. It imports energy from the sun that flows into and through the elaborate patterns of energy transfer that make up the Earth system, including the oceans, the atmosphere, the various geochemical processes—-and life itself. The energy then flows from the Earth back into the universe surrounding it as heat energy in the form of infrared radiation.

The essence of the emergent crisis of global warming is that we are importing enormous amounts of energy from the crust of the Earth and exporting entropy (that is, progressive disorder) into the previously stable, though dynamic, ecological systems upon which the continued flourishing of civilization depends. These new flows of energy, originally imported to the Earth from the sun ages ago, have been stabilized underground for millions of years as inert deposits of carbon.

By mobilizing them and injecting the waste products from their combustion into the atmosphere, we are breaking down the stable climate pattern that has persisted since not long after the end of the last Ice Age ten millennia ago. This was not long before the first cities and the beginning of the Agricultural Revolution, which began to spread in the valleys of the Nile, Tigris, Euphrates, Indus, and Yellow rivers 8,000 years ago after Stone Age women and men patiently picked and selectively bred the plant varieties on which our modern diet still depends. In the process, we are forcing the emergence of a new climate pattern very different from the one to which our entire civilization is tightly configured and within which we have thrived.

While Prigogine’s discovery of this new law of nature may seem arcane, its implications for the way we should think about the future are profound. The modern meaning of the word “emergence,” and the entire field of knowledge known as complexity theory, are both derived from Prigogine’s work. The motivation for his exploration of emergence was his passion for understanding how the future becomes irreversibly different from the past. He wrote that, “given my interest in the concept of time, it was only natural that my attention was focused on . . . the study of irreversible phenomena, which made so manifest the ‘arrow of time.’ ”

The History of the Future

The way we think about the future has a past. Throughout the history of human civilization, every culture has had its own idea of the future. In the words of an Australian futurist, Ivana Milojevi´c, “Although the conception of time and the future exist universally, they are understood in different ways in different societies.” Some have assumed that time is circular and that past, present, and future are all part of the same recurring cycle. Others have believed that the only future that matters is in the afterlife. 

The crushing disappointments that are so often part of the human condition have sometimes led to crises of confidence in the future, replacing hope with despair. But most have learned from their life experiences and the stories told by their elders that what we do in the present, when informed by knowledge of the past, can shape the future in objectively better ways. 

Anthropologists tell us of evidence dating back almost 50,000 years of humans trying to divine the future with the help of oracles or mediums. Some attempted to see into the future by reading clues to the unfolding patterns of life in the entrails of animals sacrificed to the gods, by studying the movements of fish, by interpreting marks on the Earth, or in any of a hundred other ways. Some still read the patterns of palms or Tarot cards for the same purpose. The implicit assumption in such searches is that all reality is of one fabric encompassing past, present, and future, according to a design whose meaning can be divined from particular portions of the whole and applied to other parts of the fabric in order to interpret the unfolding future. 

Doctors and scientists now divine clues about the future of individuals from the pattern of DNA that is found in every cell. Mathematicians discern the nature of fractal equations—-and the geometric forms derived from them—-by observing the “self--sameness” of the patterns they manifest at every level of resolution. Holographic images are contained in their entirety in each molecule of the gaseous cylinders onto which the emergent larger image is projected.

According to historians, astrologers of ancient Babylon used a double clock—-one for measuring the timescale of human affairs, and another for tracking the celestial movements they believed had an influence on earthly events. In divining our own future, we too must now pay due attention to a double clock. There is the one that measures our hours and days, and the other that measures the centuries and millennia over which our disruptions of the Earth’s natural systems will continue to occur. 

Even as teams of scientists race against the clock to compete with other teams in making new genetic discoveries that may cure diseases and lay the foundation for multibillion--dollar products, we must consult another clock that measures the timescales over which evolution operates—-because the emergent capabilities bursting forth from the revolutionary advances in the life sciences are about to make us the principal agent of evolution.

Because of the new power that seven billion of us collectively wield with our new technologies, voracious consumption, and outsized economic dynamism, some of the ecological changes that we are setting in motion are going to unfold, the scientists tell us, in geologic time, measured by a planetary clock that tracks timespans that strain the limits of human imagination. Roughly a quarter of the 90 million tons of global warming pollution we put into the atmosphere each day will still linger there—-still trapping heat—-more than 10,000 years from now.

Consequently, in reconciling the difference between what “is” and what “ought to be,” we are faced with an existential conundrum. Though we have great difficulty conceiving of geologic time, we have nevertheless become a geologic force; though we cannot imagine evolutionary timescales, we are nevertheless becoming the chief force behind evolution.

The idea that human history is characterized by progress from one era to the next is not, as some have long thought, an invention of the Enlightenment. The explosion of philosophy in ancient Greece marked the beginning of recorded contemplations about the future of humankind. In the fourth century bce, Plato wrote about progress as “a continuous process, which improves the human condition from its original state of nature to higher and higher levels of culture, economic organization and political structure towards an ideal state. Progress flows from the growing complexity of society and the need to enlarge knowledge, through the development of sciences and arts.”

In the fourth century ce, St. Augustine, who frequently quoted Plato, wrote, “The education of the human race, represented by the people of God, has advanced, like that of an individual, through certain epochs, or, as it were, ages, so that it might gradually rise from earthly to heavenly things, and from the visible to the invisible.”

Nor is progress exclusively a Western invention. Many interpret the Tao of ancient China as a guide for those who wish to progress as they make their way forward in the world—-though its conception of progress is very different from what emerged in the West. The eleventh--century Islamic philosopher Muhammad al--Ghazali wrote that Islam teaches that “Sincere accomplished work towards progress and development is, therefore, an act of religious worship and is rewarded as such. The end result will be a serious, scrupulous and perfect work, true scientific progress and hence actual achievement of balanced and comprehensive development.” 

At the beginning of the Renaissance, the rediscovery of the Aristotelian branch of ancient Greek philosophy—-which had been preserved in Alexandria in Arabic and reintroduced to Europe in Al--Andalus—-contributed to a fascination with the physical as well as the philosophical legacies of both Athens and Rome. The legacies of that recovered past nourished dreams that would find fruition in the Enlightenment, when a strong consensus emerged that secular progress is the dominant pattern in human history.

The discoveries of Copernicus, Galileo, Descartes, Newton, and the others who launched the Scientific Revolution helped to ignite a belief that, whatever God’s role or plan, the growth of knowledge made progress in human societies inevitable. Francis Bacon, who more than any other emphasized the word “progress” in describing humanity’s journey into the future, was also among the first to write about human progress with a special emphasis on subduing, dominating, and controlling nature—as if we were as separate from nature as Descartes believed the mind was separate from the body.

Centuries later, this philosophical mistake is still in need of correction. By tacitly assuming our own separateness from the ecological system of the planet, we are frequently surprised by phenomena that emerge from our inextricable connections to it. And as the power of our civilization grows exponentially, these surprises are becoming increasingly unpleasant.

The cultural legacy that still influences the scientific method is reductionist - that is, by dividing and endlessly subdividing the objects of our research and analysis, we separate interconnected phenomena and processes to develop specialized expertise. But the focusing of attention on ever narrower slices of the whole often comes at the expense of attention to the whole, which can cause us to miss the significance of emergent phenomena that spring unpredictably from the interconnections and interactions among multiple processes and networks. That is one reason why linear projections of the future are so often wrong.

A New Vision of the Past and the Future

The invention of powerful new tools and the development of potent new insights - and the discovery of rich new continents - led to exciting new ways of seeing the world and expansive optimism about the future. In the seventeenth century, the father of microbiology, Antonie van Leeuwenhoek, fashioned new lenses for the microscope (which itself had been invented in Holland less than a century earlier), and by looking through them discovered cells and bacteria. Simultaneously, his close friend in Delft, Johannes Vermeer, revolutionized portraiture with the use (most art historians agree) of the camera obscura, made possible by the new understanding of optics.

As the Scientific Revolution accelerated and the Industrial Revolution began, the idea of progress shaped prevailing conceptions of the future. In the years before his death, Thomas Jefferson wrote about the progress he had witnessed in his life and noted, “And where this progress will stop no one can say. Barbarism has, in the meantime, been receding before the steady step of amelioration, and will in time, I trust, disappear from the earth.”

Four years after Jefferson’s death, the publication by Charles Lyell of his masterwork, Principles of Geology, in 1830, profoundly disrupted the long prevailing view of humanity’s relationship to time. In the Judeo--Christian world especially, most had assumed that the Earth was only a few thousand years old, and that humans were created not long after the planet itself, but Lyell amply proved that the Earth was not thousands, but at the very least millions of years old (4.5 billion, we now know). In reshaping the past, he also reshaped the idea of the future. And he provided the temporal context for the discovery by Charles Darwin of the principles of evolution. Indeed, as a young man Darwin took Lyell’s books with him during his voyage on the Beagle. 

The previously unimaginable longevity of the past revealed by Lyell inspired symmetrical dreams of distant futures in which the progress of man might reach limitless heights. In the generation that followed Lyell, Jules Verne conjured a future with rockets landing on the moon, a submarine traversing the oceans’ depths, and men traveling to the center of the Earth.

The exuberant optimism of the nineteenth century was dampened for many by the excesses of the Second Industrial Revolution, but was revivified during the first decade of the twentieth century with the birth of a political movement based on the belief that progress required governmental policy interventions and social changes in order to ameliorate the problems accompanying industrialization and consolidate its obvious benefits. As the scientific and technological revolution brought some of the visions conjured by Verne and his successors into reality, optimism about the future gained further momentum.

But the balance of the twentieth century brought two world wars and the murder of millions by totalitarian dictators of the left and right to serve their own twisted conceptions of progress—-and our view of the future began to change. The malignant nightmare of the Thousand Year Reich, the Holocaust, and the cruelties of Stalin and Mao came to be emblematic of the potential for emergent evil emanating from the use of any means, however horrific, in an effort to impose grand designs for the future of humanity that conformed to the visions of twisted men with too much power.

In the aftermath of World War II, the lingering dismay at the way totalitarian governments had used the wondrous new communications technologies of radio and film to persuade millions to suppress their better instincts and conform their lives to an evil design—-coupled with the deep emotional and spiritual impact of the atomic sword of Damocles that the emergence of the nuclear arms race left hanging over civilization—-reawakened concerns that new inventions might be double--edged. The uneasiness in the popular mind that powerful technologies—-whatever their benefits—-might also magnify the innate human vulnerability to hubris deepened for many the loss of their confidence that progress was a reliable guiding star.

The prophecies of Jules Verne were replaced by those of Aldous Huxley, George Orwell, and H. G. Wells, and popular movies about destructive monsters from the ancient past—awakened by nuclear testing or dangerous creatures modified by genetic engineering gone awry—and malevolent robots from the distant future or distant planets, all seemingly bent on ravaging humanity’s future.

And now many wonder: who are we? Aristotle wrote that the end of a thing defines its essential nature. If we are forced to contemplate the possibility that we might become the architects of our own demise as a civilization, then there are necessarily implications for how we answer the question: what is our essential nature as a species? As a scientist once reframed the question: is the combination of an opposable thumb and a neocortex viable as a sustainable form of life on Earth?

Our natural and healthy preference for optimism about the future is difficult to reconcile with the gnawing concerns expressed by many that all is not well, and that left to its own devices the future may be unfolding in ways that threaten some of the human values we most cherish. The future, in other words, now casts a shadow upon the present. It may be comforting, but of little practical use, to say, “I am an optimist!” Optimism is a form of prayer. Prayer does, in my personal view, have genuine spiritual power. But I also believe, in the words of the old African saying, “When you pray, move your feet.” Prayer without action, like optimism without engagement, is passive aggression toward the future.

Even those who understand the different dangers we are facing and are committed to taking action often feel stymied by a sense of powerlessness. On the issue of climate, for example, they change their own behaviors and habits, reduce their impact on the environment, speak out and vote, but still feel they are having precious little impact, because the powerful momentum of the global machine we have built to give us progress seems almost independent of human control. Where are the levers to pull, the buttons to push? Is there a steering mechanism? Do our hands have enough strength to operate the controls?

More than a decade before writing Faust, Goethe wrote his well--known poem “The Sorcerer’s Apprentice” about a young trainee who, left to his own devices, dared to use one of his master’s magic spells in order to bring to life the broom he was supposed to be using to clean the workshop. But once animated, the broom could not be stopped. Growing desperate to halt the broom’s increasing frenzy of activity, the apprentice split the broom with an axe—-which caused it to self--replicate, with each half growing into another new animated broom. Only when the master returned was the process brought back under control. 

Democratic Capitalism and Its Discontents  

The idea of making truly meaningful collective decisions in democracy that are aimed at steering the global machinery we have set in motion is naïve, even silly, according to those who have long since placed their faith in the future not in human hands, but in the invisible hand of the marketplace. As more of the power to make decisions about the future flows from political systems to markets, and as ever more powerful technologies magnify the strength of the invisible hand, the muscles of self-governance have atrophied.

That is actually a welcome outcome for some who have found ways to accumulate great fortunes from the unrestrained operations of this global machinery. Indeed, many of them have used their wealth to reinforce the idea that self-governance is futile at best and, when it works at all, leads to dangerous meddling that interferes with both markets and technological determinism. The ideological condominium formed in the alliance between capitalism and representative democracy that has been so fruitful in expanding the potential for freedom, peace, and prosperity has been split asunder by the encroachment of concentrated wealth from the market sphere into the democracy sphere.

Though markets have no peer in collecting, processing, and utilizing massive flows of information to allocate resources and balance supply with demand, the information in markets is of a particularly granular variety. It is devoid of opinion, character, personality, feeling, love, or faith. It’s just numbers. Democracy, on the other hand, when it operates in a healthy pattern, produces from the interactions of people with different perspectives, predispositions, and life experiences emergent wisdom and creativity that is on a completely different plane. It carries dreams and hopes for the future. By tolerating the routine use of wealth to distort, degrade, and corrupt the process of democracy, we are depriving ourselves of the opportunity to use the “last best hope” to find a sustainable path for humanity through the most disruptive and chaotic changes civilization has ever confronted.

In the United States, many have cheered the withering of self-governance and have celebrated the notion that we should no longer even try to control our own destiny through democratic decision making. Some have recommended, only half in jest, that government should be diminished to the point where it can be “drowned in the bathtub.” They have enlisted politicians in the effort to paralyze the ability of government to serve any interests other than those of the global machine, recruited a fifth column in the Fourth Estate, and hired legions of lobbyists to block any collective decisions about the future that serve the public interest. They even seem to sincerely believe, as many have often written, that there is no such thing as “the public interest.” 

The new self-organized pattern of the Congress serves the special interests that are providing most of the campaign money with which candidates - incumbents and challengers alike - purchase television commercials. It no longer responds to any but the most emotional concerns of the American people. Its members are still “representatives,” but the vast majority of them now represent the people and corporations who donate money, not the people who actually vote in their congressional districts. 

The world’s need for intelligent, clear, values-based leadership from the United States is greater now than ever before - and the absence of any suitable alternative is clearer now than ever before. Unfortunately, the decline of U.S. democracy has degraded its capacity for clear collective thinking, led to a series of remarkably poor policy decisions on crucially significant issues, and left the global community rudderless as it faces the necessity of responding intelligently and quickly to the implications of the six emergent changes described in this book. The restoration of U.S. democracy, or the emergence of leadership elsewhere in the world, is essential to understanding and responding to these changes in order to shape the future. 

One of the six drivers of change described in this book - the emergence of a digital network connecting the thoughts and feelings of most people in every country of the world - offers the greatest source of hope that the healthy functioning of democratic deliberation and collective decision making can be restored in time to reclaim humanity’s capacity to reason together and chart a safe course into the future.

Capitalism - if reformed and made sustainable - can serve the world better than any other economic system in making the difficult but necessary changes to the relationship between the human enterprise and the ecological and biological systems of the Earth. Together, sustainable capitalism and healthy democratic decision making can empower us to save the future. So we have to think clearly about how both of these essential tools can be repaired and reformed.

The structure of these decision-making systems and the ways in which we measure progress - or the lack thereof - toward the goals we decide are important have a profound influence on the future we actually create. By making economic choices in favor of “growth,” it matters a lot which definition of growth we use. If the impact of pollution is systematically removed from the measurement of what we call “progress,” then we start to ignore it and should not be surprised when much of our progress is accompanied by lots of pollution. 

If the systems we use for recognizing and measuring profit are based on a narrow definition - for example, quarterly projections of earnings per share, or quarterly unemployment statistics that don’t include people who have given up looking for work, those who have been forced to take large pay cuts in order to continue working, or those who are flipping hamburgers instead of using higher--value skills hard won with education or prior experience - then what we are seeing is an imperfect and partial representation of a much larger reality. When we become accustomed to making important choices about the future on the basis of distorted and misleading information, the results of those decisions are more likely to fall short of our expectations.

Psychologists and neuroscientists have studied a phenomenon called selective attention—-a tendency on the part of people who are so determined to focus intensely on particular images that they become oblivious to other images that are present in the field of vision.

We select the things to which we pay attention not only by curiosity, preference, and habit, but also through our selection of the observational tools, technologies, and systems we rely on in making choices. And these tools implicitly mark some things as significant and obscure others to the point that we completely ignore them. In other words, the tools we use can have their own selective attention distortions.

For example, the system of economic value measurement known as gross domestic product, or GDP, includes some values and arbitrarily excludes others. So when we use GDP as a lens through which to observe economic activity, we pay attention to that which is measured and tend to become oblivious to those things that are not measured at all. British mathematician and philosopher Alfred North Whitehead called the obsession with measurements “the fallacy of misplaced concreteness.”

Here is a metaphor to illustrate the point: the electromagnetic spectrum is often portrayed as a long thin horizontal rectangle divided into differently colored segments that represent the different wavelengths of electromagnetic energy - usually ranging from very low frequency wavelengths like those used for radio on the left, extending through microwaves, infrared, ultraviolet, X-rays, and the like, to extreme high frequency gamma radiation at the right end of the rectangle.

Somewhere near the middle of this rectangle is a very thin section representing visible light - which is, of course, the only part of the entire spectrum that can be seen with the human eye. But since the human eye is normally the only “instrument” with which most of us attempt to “see” the world around us, we are naturally oblivious to all of the information contained in the 99.9 percent of the spectrum that is invisible to us.

By supplementing our natural vision with instruments capable of “seeing” the rest of the spectrum, however, we are able to enhance our understanding of the world around us by collecting and interpreting much more information. During the eight years I worked in the White House, I started every day, six days a week, with a lengthy briefing from the intelligence community on all the issues affecting national security and vital U.S. interests, and it routinely contained information collected from almost all parts of the electromagnetic spectrum. It was, as a result, a much more complete and accurate picture of a very complex reality.

One of the current realities in the business world that has been most surprising to me is the near consensus that markets are “short on long and long on short” - that is, there is an unhealthy focus on very short--term goals, to the exclusion of long-term goals. If the incentives routinely provided for business leaders - and political leaders - are focused on extremely short-term horizons, then no one should be surprised if the decisions they make in pursuit of the rewards to be gained are also focused on the short term - at the expense of any consideration of the future. Compensation and incentive structures reinforce these biases and penalize most CEOs and businesses that dare to focus on more sustainable longer-term strategies. “Short-termism” has long since become a frequently used buzzword in business circles. In both business and politics, short-term decision making is dominant.

“Quarterly capitalism” is a phrase some use to describe the prevailing practice of managing businesses from one three-month period to the next, and focusing budgets and strategies on the constant effort to ensure that each quarter’s earnings per share report never fails to meet projections or the market’s expectations. When investors and CEOs focus on a definition of “growth” that excludes the health and well--being of the communities where businesses are located, the health of the employees who do most of the work, and the impact of the businesses’ operations on the environment, they are tacitly choosing to ignore material facts with the potential to make real growth unsustainable.

Similarly, the dominance of money in modern politics - particularly in the United States - has now led to what might be described as “quarterly democracy.” Every ninety days, incumbent officeholders running for reelection and challengers in political contests are required to publicly report their fundraising totals for the previous ninety days. At the end of each of these quarters, there is a flurry of fundraising events, email solicitations, and fundraising telephone calls to maximize the amount that can be reported - much as a puffer fish increases its perceived size in the presence of another puffer fish encroaching on its territory.

Our evolutionary heritage has made us vulnerable to numerous stimuli that trigger short-term thinking. Though we also have the capacity for long-term thinking, of course, it requires effort, and neuroscientists tell us that distractions, stress, and fear easily disrupt the processes by which we focus on the longer term. When elected officials are under constant systemic stress to focus intently on short-term horizons, the future gets short shrift.

This is particularly dangerous during a period of rapid change. Some of the trends now under way are so well documented by observations in the past that projections of those same trends into the future can be made with a very high degree of confidence. The rate of advancement in computer chips, to pick a well-known example, is understood more than well enough to justify predictions that computer chips will continue to advance rapidly in the future.

The speedy drop in the cost of sequencing DNA has occurred for reasons that are understood more than well enough to justify predictions that this trend too will continue to shape our future. The accumulation of greenhouse gases in the past and the rise in global temperatures they have caused is also understood more than well enough to justify predictions of what will happen to global temperatures if we continue to increase emissions at the same rate in the future - and what the consequences of much higher global temperatures would be.

Other changes, however, burst upon the world seemingly fully formed: a brand-new pattern that represents a sudden shift from an older pattern that persisted for as far back in the past as humans can recall. In our own lives, we are accustomed to gradual, linear change. But sometimes the potential for change builds up without being visibly manifested until the inchoate pressure for change reaches a critical mass powerful enough to break through whatever systemic barriers have held the change back. Then suddenly one pattern gives way to another that is entirely new. This “emergence” of systemic change is often difficult to predict, but does occur frequently both in nature and in complex systems designed by human beings.

Many who were once fascinated and excited about the possibilities of the future are now focused solely on the implications of the future’s potential for the business, political, and security strategies of the present. As the Scientific Revolution accelerated in the last decades of the twentieth century, corporate planners and military strategists began to devote considerably more attention to the study of alternative futures, motivated by a concern that the potency of new scientific and technological discoveries could threaten the strategic interests - or even survival - of business models and the balance of power among nations.

What is our present conception of the future? How does our image of the future affect the choices we are making in the present? Do we still believe that we have the power to shape our collective future on Earth and choose from among the alternative futures one that preserves our deepest values and makes life better than it is in the present? Or do we have our own crisis of confidence in humanity’s future?

If the spectrum of past, present, and future were displayed as a long thin rectangle similar to that used to portray the electromagnetic spectrum, the birth of Planet Earth 4.5 billion years ago would be at the far left end. Moving to the right, we would see the emergence of life 3.8 billion years ago, the appearance of multicellular life 2.8 billion years ago, the appearance of the first plant life on land 475 million years ago, the first vertebrates more than 400 million years ago, and the first primates 65 million years ago. Then, moving all the way to the right end of the rectangle, the death of the sun would appear 7.5 billion years from now.

The narrow slice of time to the left of the midpoint in this spectrum - the one that represents the history of the human species - is an even narrower slice of the spectrum of time than is visible light of the electromagnetic spectrum. The thoughts we devote to these vast stretches of time in the past and future are often fleeting at best.

There are ample reasons for optimism about the future. For the present, war seems to be declining. Global poverty is declining.

Some fearsome diseases have been conquered and others are being held at bay. Lifespans are lengthening. Standards of living and average incomes - at least on a global basis - are improving. Knowledge and literacy are spreading. The tools and technologies we are developing - including Internet-based communication - are growing in power and efficacy. Our general understanding of our world, indeed, our universe (or multiverse!) has been growing exponentially. There have been periods in the past when limits to our growth and success as a species appeared to threaten our future, only to be transcended by new advances - the Green Revolution of the second half of the twentieth century, for example. 

So the positive and negative sets of trends are occurring simultaneously. The fact that some are welcome and others are not has an effect on our perception of them. The unwelcome trends are sometimes ignored, at least in part because they are unpleasant to think about. Any uncertainty about them that can be conjured to justify inaction is often seized upon with enthusiasm, while new hard evidence establishing their reality is often resisted with even stronger denial of the reality the evidence supports.

Just as naïve optimism can amount to self-deception, so too can a predisposition to pessimism blind us to bases for legitimate hope that we can find a path that leads around and through the dangers that lie ahead. Indeed, I am an optimist - though my optimism is predicated on the hope that we will find ways to see and think clearly about the obvious trends that are even now gaining momentum, that we will reason together and attend to the dangerous distortions in our present ways of describing and measuring the powerful changes that are now under way, that we will actively choose to preserve human values and protect them, not least against the mechanistic and destructive consequences of our baser instincts that are now magnified by technologies more powerful than any that those in previous generations, even Jules Verne, could have imagined. I have tried my best to describe what I believe the evidence shows is more likely than not to present us with important choices that we must consciously make together. I do so not out of fear, but because I believe in the future.

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Excerpted from The Future by Al Gore. Copyright © 2013 by Al Gore. Excerpted by permission of Random House, a division of Random House, Inc. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

“Like All Sleight-of-Hand Games It Cannot Continue Forever”

Mac Slavo
March 11th, 2013
SHTFplan.com

Read by 1,388 people

Spring is in the air, stock markets are driving higher than ever before, and happy days are here again.

Or are they?

The facts are that last night Japanese machinery orders fell 13% in January, despite the Japanese government pledging to “beat deflation” with new monetary operations (read: printing money) that has driven the Yen weaker by some 20% in the last couple of months.  That move started in December and as such should have been reflected in January’s order figures – if anyone believed it in Japanese business.

They clearly don’t.

Then there’s China.  They have a major property bubble problem, which is what always comes when you start printing cheap “money” (really credit) and allowing it to go into the real estate market.  In China’s case it’s built to the point of literal cities with nobody living in them.  That will eventually burst, and when it does you’ve got trouble.  China has the “luxury” of having an effective command economy since they’re a communist nation, but even that won’t change the laws of mathematics.

Finally we have Europe.  It’s a basket case.  Europe has failed to deal with its banks, it has failed to deal with its budget deficits and it is still trying to find a way to “pull forward demand” to fill fiscal holes.  It’s not working because it can’t — the leverage was never taken out.  Not there and not here.

We’re “printing” $85 billion a month and yet can only muster a 0.1% GDP print?  Let’s assume we manage to “rebound” and get a 2% GDP number.  We’re diluting purchasing power by ~8% annually!  Where is that going?  Right into the middle class and below’s pocketbook; like a thief in the night it comes and steals their buying power and that ultimately has to reflect in what they purchase — and thus what people sell.

There are those who argue that the housing market has “turned.”  Really?  Look at Las Vegas, where there are tens of thousands of homes sitting with people in them who haven’t made a mortgage payment in three years!

… The key question: Is this a stable environment or is it another bubble that will bust when cap rates fall?  And if the latter, and you erroneously bet on a “housing recovery”, are you going to get reamed twice in a decade?

In short what we have here is a market that is levitating upward not due to an improving macro environment but rather due to Fed monetary games.  This can and has worked for a while, but like all sleight-of-hand games it cannot continue forever, and won’t.  The structural imbalances that have been built over the last four years set the table for a snapback move worse than 2008.

This morning CNBS is playing a card that we “should” put forward fiscal policy mirroring The Fed’s views.  These clowns actually believe that the laws of mathematics have been repealed?

Give me a break.  The guy who decides he doesn’t need more than 2 hours of sleep a night and starts shoving coke up his nose to achieve that outcome may indeed produce more work with less sleep and appear to be more productive.

For a while.

But eventually he has a heart attack, and the question becomes this: What are you going to do when you collapse due to the abuse you have heaped on your body and now are able to produce nothing?

Our economy is experiencing chest pains and rapidly-escalating amounts of coke are going up the nose on a daily basis.

Source: Karl Denninger’s Market Ticker

Fundamentally, nothing has changed since 2007. The only thing keeping the stock market rising and the economy seemingly stable is the literal Trillions of dollars of funny-money being slammed into the system on a regular basis. They did it in the U.S., in Europe and in China.

As Karl Denninger points out, this is akin to a cocaine addict continuously snorting to maintain their high. It always ends badly for the addict, as it will for us.

There is a strong chance that we see a stock market crash, or at the very least a massive correction, in coming weeks or months.

But, there is also the possibility that it keeps going higher, an effect of the Fed’s monetary easing and cheap money being given to banks who then leverage that money in stocks and other financial instruments. In this scenario, as we’ve seen since 2008, prices for essential goods continue to rise. What won’t rise is wages commensurate with the price inflation, which means that things like food, gas, and electricity become so expensive that disposable income shrinks to near zero (or goes negative) for the majority of Americans.

There is no way out.

All roads lead to a detonation of the financial, monetary and economic systems as we have come to know them.


(Watch at Youtube)

When the economies of the world’s ‘super regions’ finally collapse, and hundreds of millions of people are left destitute and with no hope of recovery, the end result may very well be nuclear engagements across the globe.

Author: Mac Slavo
Views: Read by 1,388 people
Date: March 11th, 2013
Website: www.SHTFplan.com

Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats.

A Failure Analysis of the US Economy

Introduction

As failure analysis engineers for companies, our job is to find the root cause of failure and recommend changes in design, process, tests, etc. to fix the problem. This type of analysis has become an important part of semiconductor mass production, which makes electronics cheaper and affordable for consumers. At the same time, mass production helps the manufacturer / producer of parts by increasing their profits.

“Workers should be able to work for fewer hours to achieve their production target. They could use their spare time to pursue higher education, leisure, hobbies, vocational training, etc.”

What we need to recognize is that both producers and consumers are vital for the semiconductor industry. Without a healthy demand for the latest electronic gadgets such as smartphones, tablet PCs, hybrid cars, etc. there would be no incentive for global semiconductor firms to keep investing in the research and development of new technologies that improve the quality of life. While we make a living through the failure analysis of modern-day electronics and keep our jobs, pay for mortgages, groceries, utilities, cars, etc., we also contribute to the demand for other goods by spending our wages. We are workers on one side and consumers on the other. Consumer spending helps create jobs for other services and 70% of the US economy depends on consumer spending [1]. It is the consumer’s purchasing capacity that is the best metric of economic performance.

Common Sense Macroeconomics

Producers and Consumers are like two wings of a bird. If either of the wings gets hurt, the bird will no longer be able to fly. If that bird is not nursed quickly and properly, it would be disabled and either die from hunger or fall prey to a predator. With the same analogy, both producers and consumers have to prosper for a robust economy.

Before we get into more details of macro-economics, let us see where the economic profession stands at this juncture. In a recent article in The New York Times, Professor Robert J. Shiller of Yale University and a best-selling author argues that even now we don’t understand what really causes a recession and layoffs [2]. But another best-selling economist, Professor Ravi Batra, seems to have solved the puzzle of recessions by offering a new theory of unemployment. His theory relies on common sense as he argues that recessions and depressions occur when worker productivity keeps rising faster than the economy’s average real wage. He demonstrates that this happened in the 1920s, which were followed by a depression. The same thing also occurred during the 2000s and the world has been in The Great Recession since 2007.

Batra argues that worker productivity is the main source of supply while wages are the main source of demand. If productivity rises faster than wages, then supply rises faster than demand. This results in overproduction and forces the manufacturer to fire workers. Producers are the suppliers of goods, and consumers generate the demand for these goods. Consumer demand, being dependent on wages, is sustainable only if the consumers as workers earn higher salaries. If the wages of consumers do not catch up with increased supply of goods, the supplier of goods is unable to sell all that he/she has manufactured.

Let us take an example of the semiconductor industry where the semiconductor wafer foundries manufacture tens of thousands of wafers per month. These facilities supply silicon for the semiconductor industry. For a wafer fabrication facility to be profitable, it has to be able to produce as many wafers as possible that meet the Statistical Process Control (SPC) stability metrics and customers’ quality requirements when it comes to DPPM (Defective Parts per Million). This ability to mass produce is measured by the productivity of the work force. A wafer foundry, like every other company, wants its employees to be highly productive to maintain a high supply of wafers for its customers. The wafer fab management pays incentives based on productivity.

Now, where does the need come for wafer fab to hire more workers? This occurs only if wafer fab customers demand more goods. Where does the customer demand come from? It comes from the wages of the people. When we have an economy where employed people have high wages or high purchasing capacity, they are able to generate a high demand for goods. Hence, the wages of the workers have to catch up with their productivity. If employees are very productive, that is they work hard and efficiently, they are able to increase the supply of goods into economy with their productivity. Now, what happens if the wages of the productive workers fail to catch up with their productivity? As a result of the growing gap between wages and productivity, eventually the purchasing capacity of the workers is not able to catch up with the amount of goods that are being manufactured by them. Hence this correlates to a gap between the supply of goods and the sustainable demand for them. In other words, the wage-productivity gap causes a supply-demand gap.

In my previous analogy, this hurts one of the two wings of a bird. In other words, the imbalance between oversupply of goods and weak demand for them leads to layoffs at the wafer fabrication facility. This is how an economy is so closely connected to maintaining a sustainable supply and demand of goods. Thus layoffs occur when people’s purchasing capacity falls short of the goods that workers produce due to their high productivity.

Consumer and National Debt

Some brilliant minds have devised a way to keep the wages of workers to remain the same or even fall, i.e. not letting wages catch up with their high productivity, but still maintain a high consumer demand. They do this by creating ‘consumer debt’. When a consumer is unable to buy much out of their real salary or wage, he/she can buy it using a credit card or by going into debt with a loan from financial institutions. While relatively stable consumer debt is good for the economy as long as the borrower is able to repay his/her debt within the allotted time frame with interest, what can consumers do when they lose their jobs in a recession, and are not able to find other employment soon? If the consumer is not able to repay his/her debt in time, the increase in interest on the credit card loan wipes out his/her savings, thereby resulting in bankruptcy.

It should be clear that when wages trail productivity, the overall economy suffers because of the reduced purchasing capacity of unemployed workers. If you follow this logic, then it is evident that consumer’s purchasing capacity is critical for sustainable demand. Hence, I consider a strong consumer purchasing capacity to be the chief source of high consumer demand, which acts as an engine for economic growth. Thus, the real job creators in a free market economy are not only the producers of goods but also the consumers of goods. Every company estimates its consumer base prior to manufacturing in order to avoid the over-production of goods. Hence, if consumer demand keeps on weakening, then the economy goes into a recession. In that case to avoid a depression, the government has to step in and increase its own spending that makes up for the loss in demand due to lost wages of the laid off workers. The government may also cut tax rates to boost consumer demand. In either case, the budget deficit rises, and may rise very sharply if the wage-productivity gap and hence the supply-demand gap are very high. This is the main reason why the budget deficit rocketed after 2007, so much so that it almost tripled from about $500 billion in 2007 to $1.3 trillion in 2011.

Now, if government spending creates jobs, then these workers can jump start the engine of economic growth by paying off their debts and boosting consumer demand through their real wages. The higher the wages of these workers, the higher will be their purchasing capacity and the higher the consumer demand. This would act as an incentive to the producers/manufacturers to make further investments.

However, if increased government spending does not boost consumer demand and instead goes into the pockets of manufacturers, the manufacturing sector may hire a few more workers because of the extra money it receives from the government stimulus, but that growth will not be sustainable. In fact, a case can be made that the high budget deficit of recent years has mainly helped the manufacturer. For instance, in 2011 the economy generated 1 million new jobs with the help of a budget deficit of $1.3 trillion. If you divide 1.3 trillion with 1 million, you get 1.3 million. In other words, the government spent an extra $1.3 million to create one job in the economy. Is this not absurd, given the fact that the average wage is only $50,000 per year? Thus, the government deficit is now mainly helping the manufacturers, who must be getting the difference between $1.3 million and $50,000 for each person they hire.

As Batra shows, this is what the continued rise in the wage-productivity gap does to an economy. Just 15 years ago, in 1999, we had a budget surplus along with an unemployment rate of less than 5 percent. Today, we have a trillion dollar deficit along with an unemployment rate close to 8 percent.

Free Trade vs Fair Trade

An economy is sustainable when it is able to balance its trade and budget. If any country has a trade deficit (where imports are larger than exports), it leads to a fall in the country’s FOREX (FOREign eXchange) reserves (which eventually depreciates its currency). The value of a country’s currency is a deciding factor in the standard of living. Hence, a country cannot run year-over-year trade deficits if it wishes to maintain the standard of living of its citizens. Also, high trade deficits result in loss of FOREX reserves, which are important as they determine the buying power of the country’s currency.

Let us take an example of a country ‘A’ where its population has sufficient purchasing power and can buy everything produced in the nation. But there are some products that are not produced at home and have to be imported from another country ‘B’. Hence country ‘A’ has to pay money [its currency] to buy country B’s goods. Either country ‘A’ has to balance its trade by getting country ‘B’ currency from a third country ‘C’, or go on printing its own currency. But there is a limit that country ‘B’ will accept country ‘A”s money. After that country ‘A’ will have to produce the items within the country, causing huge inflation due to depreciated value of its currency resulting from excess money printing. It is possible to avoid trade deficits through balanced trade policies. Fair trade is more important than Free trade. Free trade implies no import duties imposed by a country on its imported goods. While Free trade works great when trading with countries having nearly similar value of their monetary currencies, it results in high trade deficits when multinational corporations (MNCs) from a rich country make goods for cheap in another country with a significantly lower value of its currency. The MNCs in the United States prefer to manufacture things in low wage countries with cheap currencies, as it is highly profitable. However, in addition to increasing trade deficits, this practice also leads to massive job losses in the home country, especially when jobs are also outsourced.

As a result of this free trade policy, the U.S. economy has been running over half a trillion dollar trade deficit for the past four years [3].While such a deficit results in higher corporate profits for MNCs in the United States, it results in depreciating FOREX reserves. This threatens the economic independence of the U.S. as a country.

Figure 1 below shows the FOREX reserves of BRIC (Brazil, Russia, India and China) in USD over ten years. According to Dr. Richard Haas, Chairman of the Council of Foreign Relations, China’s ownership of trillions in FOREX is a great threat to the United States, as China, with vast FOREX reserves, is in a position to influence US foreign policies through its control over the value of US currency [4].This is similar to the way the United States was able to dominate the foreign policies of Britain and France after World War II and forced their troop withdrawal during the Suez crisis purely because of its ownership of British and French debt [5].

030213-6aFigure 1: World Forex reserves in billions of USD as per International Monetary Fund (IMF), April 2009 [6]

During the Reagan years, the trade deficit started to increase at a rate not seen in the last 60-70 years [7]. The Reagan administration then had to pressure Japan to sign the 1985 Plaza Accord to devalue the U.S. dollar at the expense of the Japanese yen in order to increase U.S. exports [8]. As a result of yen’s appreciation, Japan experienced an economic crash and lost a decade of growth. The Nikkei average went up to about 39,000 in December 1989, but after the crash it hovered around 15,000 during the lost decade of the 1990s. In the last several years it has dropped even more, hovering around 10,000 [9].

Looking at the fate of what happened to Japan as a result of the yen appreciation; China has refused to appreciate its currency significantly in spite of the pressure by the Obama administration, which hopes to boost U.S. exports to China [10]. This should be a great concern for the United States because it would not be able to export significant amount of goods to China to balance its trade.

Counterfeit Electronics as a Threat to US National Security

In addition to nearly 600 billion dollars in trade deficit due to free trade policies, the counterfeit electronics from China entering into the U.S. supply chain have become a national security threat [11]. Initially, the United States manufactured all defense-related products at home. However, consumer electronics were being built in China due to its low cost of labor. As technology progressed to advanced transistor technology, it required a large investment from defense contractors, who work for profit, to manufacture semiconductor wafers in the United States. Hence, several defense contractors started to use Chinese built ICs for military weapons like missiles and machine guns. Along with the state-of-the-art infrastructure, the technical know-how to make advanced technology products has also been transferred to China.

So now China is flooding the U.S. defense supply chain with counterfeit ICs [12]. It has become very costly to prevent this, which is also eating away profits of U.S. defense contractors. The free trade policies of the United States are creating a perfect storm for its semiconductor industry. According to Professor Ravi Batra, “Free trade has done to the United States what Hitler and Imperial Japan could not do during the war.” He characterizes free trade as the ‘Agrification syndrome’ by which Americans continue to lose manufacturing jobs, and continue to work harder at the jobs they do have, but suffer declining wages, despite increases to their productivity [13].

If the United States had adopted fair trade instead of free trade, it would have imposed tariffs on the cheap goods that are dumped in this country by China. As people prefer to get the best value for their money, U.S. consumers would have preferred to buy U.S. made goods as tariffs would make them competitive with Chinese goods. This way manufacturing jobs would have been preserved. Simple math shows that by just eliminating the 600 billion dollar annual trade deficit would create 6 million jobs paying a $100,000 salary every year. This is a simple job creation strategy, as the country faces the highest unemployment rate since the Great Depression.

030213-6bFigure 2: BLS, BEA Census- Productivity and real income index from 1964-2008 relative to 1970 (Source: David Ruccio: Graph of the week: USA productivity and real hourly wages 1964-2008 [14])

Economic Reforms

If you observe Fig. 2 above, real wages have failed to keep up with productivity since the 1970s. The productivity of American workers has been consistently increasing. However, the average household median income has not increased at the rate at which productivity has increased. The real hourly wages have remained fairly constant. The United States needs to reform its current economic model so that wages keep track with the productivity of workers [15]. Professor Batra argues that this can happen only in a free market system, where companies are small and unable to control prices. In such a system, there would be no need for the government budget deficit, and it would raise the living standard for every individual in society.

Under this system, the majority of shares of corporations would be owned by its employees rather than by a few investors on Wall Street. When workers become majority shareholders, they know that they are part owners of the company and will be fairly rewarded for hard work. By being highly productive, these workers would receive a fair share of corporate profits.

The system would still preserve the incentive for growth because hard work would bring higher incomes. At the same time, it would avoid severe recessions and depressions caused by poor consumer demand (due to a huge gap between wages and productivity resulting in poor purchasing capacity of the majority of consumers). Also, in economic downturns, it will be possible to cut back the working hours of the workers and reduce their wages across the board rather than lay off some workers. This would minimize, if not eliminate, the problem of high unemployment [16].

Modern economic thinkers blame automation as a major cause of job losses. Technology could be productively utilized in such a way that the manufacturing sector could cut back on work hours while paying workers a high wage due to their high productivity. This is because automation enables a worker to be very productive through use of machines to manufacture products. High worker productivity significantly increases the supply of goods in an economy. As a result workers would be able to work for fewer hours to achieve their production target. They could use their spare time to pursue higher education, leisure, hobbies, vocational training, etc. This way it is also possible to minimize, if not eliminate, the problem of high unemployment resulting from automation while still keeping the supply of goods proportionate to consumer demand.

Employee guided firms will also be able provide health insurance and pension benefits to workers and the government would not need to spend money for this purpose. This way the budget deficit would fall to zero and the national debt could be retired over time.
Additionally, it would also avoid undue pressure from Wall Street to ship jobs overseas under pressure of delivering maximum profits to Wall Street investors. This would minimize speculation, malpractices and economic bubbles through economic self-regulation with minimal government interference.

References:

1. http://en.wikipedia.org/wiki/Consumer_spending

2. Robert J. Shiller: “The Mystery of Economic Recessions”, New York Times, 4 February 2001. p. 17 http://cowles.econ.yale.edu/news/shiller/rjs_01-02-01_nyt_mystery.htm

3. Martin Crutsinger: “US deficit tops $1 trillion for fourth year,” Associated Press, 12 October 2012. http://finance.yahoo.com/news/us-deficit-tops-1-trillion-fourth-011445884–finance.html

4. Justin Webb, “Don’t be distracted by Greece : Americans must also face financial facts, ” Telegraph (UK), 25 June 2011. http://www.telegraph.co.uk/news/worldnews/us-politics/8598451/Dont-be-distracted-by-Greece-Americans-must-also-face-financial-facts.html

5. Laurie Milner, The Suez Crisis, 03 March 2011. http://www.bbc.co.uk/history/british/modern/suez_01.shtml

6. http://en.wikipedia.org/wiki/Foreign-exchange_reserves

7. Alex Seitz-Wald: 10 Things Conservatives Don’t Want You To Know About Ronald Reagan, 5 February 2011. http://thinkprogress.org/politics/2011/02/05/142288/reagan-centennial/?mobile=nc

8. http://en.wikipedia.org/wiki/Plaza_Accord

9. http://en.wikipedia.org/wiki/Lost_Decade_(Japan)

10. China seeks to learn from mistakes of 1985 Plaza Accord, The Japan Times, 9 September 2006. http://www.japantimes.co.jp/text/nb20060909a3.html

11. Richard Dudley: Counterfeit Electronics in DoD are Widespread and Threaten National Security, 3 June 2012. http://defense-update.com/20120603_counterfeit-electronics-in-dod-are-widespread-and-threaten-national-security.html

12. Joseph Farah: Fake Chinese electronics threaten U.S. Defense. 29 May 2012. http://www.wnd.com/2012/05/fake-electronics-feared-undermining-u-s-defense/

13. Sean Fenley: Barack Obama, What’s Wrong with Protectionism?, 21 September 2008. http://www.opednews.com/articles/Barack-Obama-What-s-Wrong-by-Sean-Fenley-080918-200.html

14. David Ruccio: Graph of the week: USA productivity and real hourly wages 1964-2008. http://rwer.wordpress.com/2010/11/20/graph-of-the-week-usa-productivity-and-real-hourly-wages-1964-2008/

15. Ravi Batra: The New Golden Age : The Coming Revolution against Political Corruption and Economic Chaos, New York, Palgrave Macmillan, 2007. Also see ravibatra.com for Batra’s other writings.

16. P.R.Sarkar : PROUT in a Nutshell, AMPS.

US Sponsored Coup d’Etat: The Destabilization of Haiti

aristide

Author’s Note

This article was written nine years ago, in the last days of February 2004 in response to the barrage of disinformation in the mainstream media. It was completed on February 29th, the day of President Jean Bertrand Aristide’s kidnapping and deportation by US Forces.

The armed insurrection which contributed to unseating President Aristide on February 29th 2004 was the result of a carefully staged military-intelligence operation, involving the US, France and Canada. The 2004 coup had set the stage for the installation of US puppet government in Port au Prince, which takes orders directly from Washington.

Michel Chossudovsky, Global Research, February 26, 2013


(Minor editorial corrections were made to the original draft since its publication on February 29th 2004, the title of article predates the actual Coup D’Etat which was in the making at the time of writing)

original article published at http://globalresearch.ca/articles/CHO402D.html

by Michel Chossudovsky

The Rebel paramilitary army crossed the border from the Dominican Republic in early February. It constitutes a well armed, trained and equipped paramilitary unit integrated by former members of Le Front pour l’avancement et le progrès d’Haiti (FRAPH), the  “plain clothes” death squadrons, involved in mass killings of civilians and political assassinations during the CIA sponsored 1991 military coup, which led to the overthrow of the democratically elected government of President Jean Bertrand Aristide

The self-proclaimed Front pour la Libération et la reconstruction nationale (FLRN) (National Liberation and Reconstruction Front) is led by Guy Philippe, a former member of the Haitian Armed Forces and Police Chief. Philippe had been trained during the 1991 coup years by US Special Forces in Ecuador, together with a dozen other Haitian Army officers. (See Juan Gonzalez, New York Daily News, 24 February 2004).

The two other rebel commanders and associates of Guy Philippe, who led the attacks on Gonaives and Cap Haitien are Emmanuel Constant, nicknamed “Toto” and Jodel Chamblain, both of whom are former Tonton Macoute and leaders of FRAPH.

In 1994, Emmanuel Constant led the FRAPH assassination squadron into the village of Raboteau, in what was later identified as “The Raboteau massacre”:

“One of the last of the infamous massacres happened in April 1994 in Raboteau, a seaside slum about 100 miles north of the capital. Raboteau has about 6,000 residents, most fishermen and salt rakers, but it has a reputation as an opposition stronghold where political dissidents often went to hide… On April 18 [1994], 100 soldiers and about 30 paramilitaries arrived in Raboteau for what investigators would later call a “dress rehearsal.” They rousted people from their homes, demanding to know where Amiot “Cubain” Metayer, a well-known Aristide supporter, was hiding. They beat people, inducing a pregnant woman to miscarry, and forced others to drink from open sewers. Soldiers tortured a 65-year-old blind man until he vomited blood. He died the next day.

The soldiers returned before dawn on April 22. They ransacked homes and shot people in the streets, and when the residents fled for the water, other soldiers fired at them from boats they had commandeered. Bodies washed ashore for days; some were never found. The number of victims ranges from two dozen to 30. Hundreds more fled the town, fearing further reprisals.” (St Petersburg Times, Florida, 1 September 2002)

During the military government (1991-1994), FRAPH was (unofficially) under the jurisdiction of the Armed Forces, taking orders from Commander in Chief General Raoul Cedras. According to a 1996 UN Human Rights Commission report, FRAPH had been supported by the CIA.

Under the military dictatorship, the narcotics trade, was protected by the military Junta, which in turn was supported by the CIA. The 1991 coup leaders including the FRAPH paramilitary commanders were on the CIA payroll. (See Paul DeRienzo,   http://globalresearch.ca/articles/RIE402A.html , See also see Jim Lobe, IPS, 11 Oct 1996). Emmanuel Constant alias “Toto” confirmed, in this regard, in a CBS “60 Minutes” in 1995, that the CIA paid him about $700 a month and that he created FRAPH, while on the CIA payroll. (See Miami Herald, 1 August 2001). According to Constant, the FRAPH had been formed “with encouragement and financial backing from the U.S. Defense Intelligence Agency and the CIA.” (Miami New Times, 26 February 2004)

The Civilian “Opposition” 

The so-called “Democratic Convergence” (DC) is a group of some 200 political organizations, led by former Port-au-Prince mayor Evans Paul.  The “Democratic Convergence” (DC) together with “The Group of 184 Civil Society Organizations” (G-184) has formed a so-called “Democratic Platform of Civil Society Organizations and Opposition Political Parties”.

The Group of 184 (G-184), is headed by Andre (Andy) Apaid, a US citizen of Haitian parents, born in the US. (Haiti Progres, http://www.haiti-progres.com/eng11-12.html ) Andy Apaid owns Alpha Industries, one of Haiti’s largest cheap labor export assembly lines established during the Duvalier era. His sweatshop factories produce textile products and assemble electronic products for a number of US firms including Sperry/Unisys, IBM, Remington and Honeywell. Apaid is the largest industrial employer in Haiti with a workforce of some 4000 workers. Wages paid in Andy Apaid’s factories are as low as 68 cents a day. (Miami Times, 26 Feb 2004). The current minimum wage is of the order of $1.50 a day:

“The U.S.-based National Labor Committee, which first revealed the Kathie Lee Gifford sweat shop scandal, reported several years ago that Apaid’s factories in Haiti’s free trade zone often pay below the minimum wage and that his employees are forced to work 78-hour weeks.” (Daily News, New York, 24 Feb 2004)

Apaid was a firm supporter of the 1991 military coup. Both the Convergence démocratique and the G-184 have links to the FLRN (former  FRAPH death squadrons) headed by Guy Philippe. The FLRN is also known to receive funding from the Haitian business community.

In other words, there is no watertight division between the civilian opposition, which claims to be non-violent and the FLRN paramilitary. The FLRN is collaborating with the so-called “Democratic Platform.”

The Role of the National Endowment for Democracy (NED)

In Haiti, this “civil society opposition” is bankrolled by the National Endowment for Democracy which works hand in glove with the CIA. The Democratic Platform is supported by the International Republican Institute (IRI) , which is an arm of the National Endowment for Democracy (NED). Senator John McCain is Chairman of IRI’s Board of Directors. (See Laura Flynn, Pierre Labossière and Robert Roth, Hidden from the Headlines: The U.S. War Against Haiti, California-based Haiti Action Committee (HAC), http://www.haitiprogres.com/eng11-12.html ).

G-184 leader Andy Apaid was in liaison with Secretary of State Colin Powell in the days prior to the kidnapping and deportation of President Aristide by US forces on February 29. His umbrella organization of elite business organizations and religious NGOs, which is also supported by the International Republican Institute (IRI), receives sizeable amounts of money from the European Union.(http://haitisupport.gn.apc.org/184%20EC.htm ).

It is worth recalling that the NED, (which overseas the IRI) although not formally part of the CIA, performs an important intelligence function within the arena of civilian political parties and NGOs. It was created in 1983, when the CIA was being accused of covertly bribing politicians and setting up phony civil society front organizations. According to Allen Weinstein, who was responsible for setting up the NED during the Reagan Administration: “A lot of what we do today was done covertly 25 years ago by the CIA.” (‘Washington Post’, Sept. 21, 1991). 

The NED channels congressional funds to the four institutes: The International Republican Institute (IRI), the National Democratic Institute for International Affairs (NDI), the Center for International Private Enterprise (CIPE), and the American Center for International Labor Solidarity (ACILS). These organizations are said to be “uniquely qualified to provide technical assistance to aspiring democrats worldwide.” See IRI, http://www.iri.org/history.asp )

In other words, there is a division of tasks between the CIA and the NED. While the CIA provides covert support to armed paramilitary rebel groups and death squadrons, the NED and its four constituent organizations finance “civilian”  political parties and non governmental organizations with a view to instating American “democracy” around the World.

The NED constitutes, so to speak, the CIA’s “civilian arm”. CIA-NED interventions in different part of the World are characterized by a consistent pattern, which is applied in numerous countries.

The NED provided funds to  the “civil society” organizations in Venezuela, which initiated an attempted coup against President Hugo Chavez. In Venezuela it was the “Democratic Coordination”, which was the recipient of NED support; in Haiti it is the “Democratic Convergence” and G-184.

Similarly, in former Yugoslavia, the CIA channeled support to the Kosovo Liberation Army (KLA) (since 1995), a paramilitary group involved in terrorist attacks on the Yugoslav police and military. Meanwhile, the NED through the  “Center for International Private Enterprise” (CIPE) was backing the DOS opposition coalition in Serbia and Montenegro. More specifically, NED was financing the G-17, an opposition group of  economists responsible for formulating (in liaison with the IMF) the DOS coalition’s  “free market” reform platform in the 2000 presidential election, which led to the downfall of Slobodan Milosevic.  

The IMF’s Bitter “Economic Medicine”

The IMF and the World Bank are key players in the process of economic and political destabilization. While carried out under the auspices of an intergovernmental body, the IMF reforms tend to support US strategic and foreign policy objectives.

Based on the so-called “Washington consensus”, IMF austerity and restructuring measures through their devastating impacts, often contribute to triggering social and ethnic strife. IMF reforms have often precipitated the downfall of elected governments. In extreme cases of economic and social dislocation, the IMF’s bitter economic medicine has contributed to the destabilization of entire countries, as occurred in Somalia, Rwanda and Yugoslavia. (See Michel Chossudovsky, The globalization of Poverty and the New World Order, Second Edition, 2003, http://globalresearch.ca/globaloutlook/GofP.html )

The IMF program is a consistent instrument of economic dislocation. The IMF’s reforms contribute to reshaping and downsizing State institutions through drastic austerity measures. The latter are implemented alongside other forms of intervention and political interference, including CIA covert activities in support of rebel paramilitary groups and opposition political parties.

Moreover, so-called “Emergency Recovery” and “Post-conflict” reforms are often introduced under IMF guidance, in the wake of a civil war, a regime change or “a national emergency”.

In Haiti, the IMF sponsored  “free market” reforms have been carried out consistently since the Duvalier era. They have been applied in several stages since the first election of president Aristide in 1990. 

The 1991 military coup, which took place 8 months following Jean Bertrand Aristide’s accession to the presidency, was in part intended to reverse the Aristide government’s progressive reforms and reinstate the neoliberal policy agenda of the Duvalier era.

A former World Bank official Mr. Marc Bazin was appointed Prime minister by the Military Junta in June 1992. In fact, it was the US State Department which sought his appointment.

Bazin had a track record of working for the “Washington consensus.”  In 1983, he had been appointed Finance Minister under the Duvalier regime, In fact he had been recommended to the Finance portfolio by the IMF: “President-for-Life Jean-Claude Duvalier had agreed to the appointment of an IMF nominee, former World Bank official Marc Bazin, as Minister of Finance”. (Mining Annual Review, June, 1983). Bazin, who was considered Washington’s “favorite”, later ran against Aristide in the 1990 presidential elections.

Bazin, was called in by the Military Junta in 1992 to form a so-called  “consensus government”. It is worth noting that it was precisely during Bazin’s term in office as Prime Minister that the political massacres and extra judicial killings by the CIA supported FRAPH death squadrons were unleashed, leading to the killing of more than 4000 civilians. Some 300,000 people became internal refugees,  “thousands more fled across the border to the Dominican Republic, and more than 60,000 took to the high seas” (Statement of Dina Paul Parks, Executive Director, National Coalition for Haitian Rights, Committee on Senate Judiciary, US Senate, Washington DC, 1 October 2002). Meanwhile, the CIA had launched a smear campaign representing Aristide as “mentally unstable” (Boston Globe, 21 Sept 1994).

The 1994 US Military Intervention

Following three years of military rule, the US intervened in 1994, sending in 20,000 occupation troops and “peace-keepers” to Haiti. The US military intervention was not intended to restore democracy. Quite the contrary: it was carried out to prevent a popular insurrection against the military Junta and its neoliberal cohorts.

In other words, the US military occupation was implemented to ensure political continuity.

While the members of the military Junta were sent into exile, the return to constitutional government required compliance to IMF diktats, thereby foreclosing the possibility of a progressive “alternative” to the neoliberal agenda. Moreover, US troops remained in the country until 1999. The Haitian armed forces were disbanded and the US State Department hired a mercenary company DynCorp to provide “technical advice” in restructuring the Haitian National Police (HNP).

“DynCorp has always functioned as a cut-out for Pentagon and CIA covert operations.” (See Jeffrey St. Clair and Alexander Cockburn,  Counterpunch, February 27, 2002, http://www.corpwatch.org/issues/PID.jsp?articleid=1988 ) Under DynCorp advice in Haiti, former Tonton Macoute and Haitian military officers involved in the 1991 Coup d’Etat were brought into the HNP. (See Ken Silverstein, Privatizing War, The Nation, July 28, 1997, http://www.mtholyoke.edu/acad/intrel/silver.htm )

In October 1994, Aristide returned from exile and reintegrated the presidency until the end of his mandate in 1996. “Free market” reformers  were brought into his Cabinet. A new wave of deadly macro-economic policies was adopted under a so-called Emergency Economic Recovery Plan (EERP) “that sought to achieve rapid macroeconomic stabilization, restore public administration, and attend to the most pressing needs.” (See IMF Approves Three-Year ESAF Loan for Haiti, Washington, 1996, http://www.imf.org/external/np/sec/pr/1996/pr9653.htm ).

The restoration of Constitutional government had been negotiated behind closed doors with Haiti’s external creditors. Prior to Aristide’s reinstatement as the country’s president, the new government was obliged to clear the country’s debt arrears with its external creditors. In fact the new loans provided by the  World Bank, the  Inter-American Development Bank (IDB), and the IMF were used to meet Haiti’s obligations with international creditors. Fresh money was used to pay back old debt leading to a spiraling external debt.

Broadly coinciding with the military government, Gross Domestic Product (GDP) declined by 30 percent (1992-1994). With a per capita income of $250 per annum, Haiti is the poorest country in the Western hemisphere and among the poorest in the world. (see World Bank, Haiti: The Challenges of Poverty Reduction, Washington, August 1998, http://lnweb18.worldbank.org/External/lac/lac.nsf/0/8479e9126e3537f0852567ea000fa239/$FILE/Haiti1.doc ).

The World Bank estimates unemployment to be of the order of 60 percent. (A 2000 US Congressional Report estimates it to be as high as 80 percent. See US House of Representatives, Criminal Justice, Drug Policy and Human Resources Subcommittee, FDHC Transcripts, 12 April 2000).

In the wake of three years of military rule and economic decline, there was no “Economic Emergency Recovery” as envisaged under the IMF loan agreement. In fact quite the opposite: The IMF imposed  “stabilization” under the “Recovery” program required further budget cuts in  almost non-existent social sector programs.  A civil service reform program was launched, which consisted in reducing the size of the civil service and the firing of “surplus” State employees. The IMF-World Bank package was in part instrumental in the paralysis of public services, leading to the eventual demise of the entire State system. In a country where health and educational services were virtually nonexistent, the IMF had demanded the lay off of “surplus” teachers and health workers with a view to meeting its target for the budget deficit.   

Washington’s foreign policy initiatives were coordinated with the application of the IMF’s deadly economic medicine. The country had been literally pushed to the brink of economic and social disaster.

The Fate of Haitian Agriculture

More than 75 percent of the Haitian population is engaged in agriculture, producing both food crops for the domestic market as well a number of cash crops for export. Already during the Duvalier era, the peasant economy had been undermined. With the adoption of the IMF-World Bank sponsored trade reforms, the agricultural system, which previously produced food for the local market, had been destabilized. With the lifting of trade barriers, the local market was opened up to the dumping of US agricultural surpluses including rice, sugar and corn, leading to the destruction of the entire peasant economy. Gonaives, which used to be Haiti’s rice basket region, with extensive paddy fields had been precipitated into bankruptcy:

. “By the end of the 1990s Haiti’s local rice production had been reduced by half and rice imports from the US accounted for over half of local rice sales. The local farming population was devastated, and the price of rice rose drastically “ ( See Rob Lyon, Haiti-There is no solution under Capitalism! Socialist Appeal, 24 Feb. 2004, http://cleveland.indymedia.org/news/2004/02/9095.php ).

In matter of a few years, Haiti, a small impoverished country in the Caribbean, had become the World’s fourth largest importer of American rice after Japan, Mexico and Canada.

The Second Wave of IMF Reforms

The presidential elections were scheduled for November 23, 2000. The Clinton Administration had put an embargo on development aid to Haiti in 2000. Barely two weeks prior to the elections, the outgoing administration signed a Letter of Intent with the IMF. Perfect timing: the agreement with the IMF virtually foreclosed from the outset any departure from the neoliberal agenda.

The Minister of Finance had sent the amended budget to the Parliament on December 14th. Donor support was conditional upon its rubber stamp approval by the Legislature. While Aristide had promised to increase the minimum wage, embark on school construction and  literacy programs, the hands of the new government were tied. All major decisions regarding the State budget, the management of the public sector, public investment, privatization, trade and monetary policy had already been taken. They were part of the agreement reached with the IMF on November 6, 2000.

In 2003, the IMF imposed the application of a so-called “flexible price system in fuel”, which immediately triggered an inflationary spiral. The currency was devalued. Petroleum prices increased by about 130 percent in January-February 2003, which served to increase popular resentment against the Aristide government, which had supported the implementation of the IMF economic reforms.

The hike in fuel prices contributed to a 40 percent increase in consumer prices (CPI) in 2002-2003 (See Haiti—Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding, Port-au-Prince, Haiti June 10, 2003, http://www.imf.org/external/np/loi/2003/hti/01/index.htm ). In turn, the IMF had demanded, despite the dramatic increase in the cost of living, a freeze on wages as a means to “controlling inflationary pressures.” The IMF had in fact pressured the government to lower public sector salaries (including those paid to teachers and health workers).  The IMF had also demanded the phasing out of the statutory minimum wage of approximately 25 cents an hour. “Labour market flexibility”, meaning wages paid below the statutory minimum wage would, according to the IMF, contribute to attracting foreign investors. The daily minimum wage was $3.00 in 1994, declining to about $1.50- 1.75 (depending on the gourde-dollar exchange rate) in 2004. 

In an utterly twisted logic, Haiti’s abysmally low wages, which have been part of the IMF-World Bank “cheap labor” policy framework since the 1980s, are viewed as a means to improving the standard of living. In other words, sweatshop conditions in the assembly industries (in a totally unregulated labor market) and forced labor conditions in Haiti’s agricultural plantations are considered by the IMF as a key to achieving economic prosperity, because they “attract foreign investment.” 

The country was in the straightjacket of a spiraling external debt. In a bitter irony, the IMF-World Bank sponsored austerity measures in the social sectors were imposed in a country which has 1,2 medical doctors for 10,000 inhabitants and where the large majority of the population is illiterate. State social services, which were virtually nonexistent during the Duvalier period, have collapsed.

The result of IMF ministrations was a further collapse in purchasing power, which had also affected middle income groups. Meanwhile, interest rates had skyrocketed. In the Northern and Eastern parts of the country, the hikes in fuel prices had led to a virtual paralysis of transportation and public services including water and electricity.

While a humanitarian catastrophe is looming, the collapse of the economy spearheaded by the IMF, had served to boost the popularity of the Democratic Platform, which had accused  Aristide of “economic mismanagement.” Needless to say, the leaders of the Democratic Platform including Andy Apaid –who actually owns the sweatshops– are the main protagonists of the low wage economy.

Applying the Kosovo Model

In February 2003, Washington announced the appointment of James Foley as Ambassador to Haiti . Foley had been a State Department spokesman under the Clinton administration during the war on Kosovo. He previously held a position at NATO headquarters in Brussels. Foley had been sent to Port au Prince in advance of the CIA sponsored operation. He was transferred to Port au Prince in September 2003, from a prestige diplomatic position in Geneva, where he was Deputy Head of Mission to the UN European office.

It is worth recalling Ambassador Foley’s involvement in support of the Kosovo Liberation Army (KLA) in 1999.

Amply documented, the Kosovo Liberation Army (KLA) was financed by drug money and supported by the CIA. ( See Michel Chossudovsky, Kosovo Freedom Fighters Financed by Organized Crime, Covert Action Quarterly, 1999, http://www.heise.de/tp/english/inhalt/co/2743/1.html )  

The KLA had been involved in similar targeted political assassinations and killings of civilians, in the months leading up to the 1999 NATO invasion as well as in its aftermath.  Following the NATO led invasion and occupation of Kosovo, the KLA was transformed into the Kosovo Protection Force (KPF) under UN auspices. Rather than being disarmed to prevent the massacres of civilians, a terrorist organization with links to organized crime and the Balkans drug trade, was granted a legitimate political status.

At the time of the Kosovo war, the current ambassador to Haiti James Foley was in charge of State Department briefings, working closely with his NATO counterpart in Brussels, Jamie Shea. Barely two months before the onslaught of the NATO led war on 24 March 1999, James Foley had called for the “transformation” of the KLA into a respectable political organization:

We want to develop a good relationship with them [the KLA] as they transform themselves into a politically-oriented organization,’ ..`[W]e believe that we have a lot of advice and a lot of help that we can provide to them if they become precisely the kind of political actor we would like to see them become… “If we can help them and they want us to help them in that effort of transformation, I think it’s nothing that anybody can argue with..’ (quoted in the New York Times, 2 February 1999)

In the wake of the invasion “a self-proclaimed Kosovar administration was set up composed of the KLA and the Democratic Union Movement (LBD), a coalition of five opposition parties opposed to Rugova’s Democratic League (LDK). In addition to the position of prime minister, the KLA controlled the ministries of finance, public order and defense.” (Michel Chossudovsky, NATO’s War of Aggression against Yugoslavia, 1999, http://www.globalresearch.ca/articles/CHO309C.html )

The US State Department’s position as conveyed in Foley’s statement was that the KLA would “not be allowed to continue as a military force but would have the chance to move forward in their quest for self government under a ‘different context’” meaning the inauguration of a de facto “narco-democracy” under NATO protection. (Ibid).

With regard to the drug trade, Kosovo and Albania occupy a similar position to that of Haiti: they constitute “a hub” in the transit (transshipment) of narcotics from the Golden Crescent, through Iran and Turkey into Western Europe. While supported by the CIA, Germany’s Bundes Nachrichten Dienst (BND) and NATO, the KLA has links to the Albanian Mafia and criminal syndicates involved in the narcotics trade.( See Michel Chossudovsky, Kosovo Freedom Fighters Financed by Organized Crime, Covert Action Quarterly, 1999, http://www.heise.de/tp/english/inhalt/co/2743/1.html )  

Is this the model for Haiti, as formulated in 1999 by the current US Ambassador to Haiti James Foley?

For the CIA and the State Department the FLRN and Guy Philippe are to Haiti what the KLA and Hashim Thaci are to Kosovo.

In other words, Washington’s design is “regime change”: topple the Lavalas administration and install a compliant US puppet regime, integrated by the Democratic Platform and the self-proclaimed Front pour la libération et la reconstruction nationale (FLRN), whose leaders are former FRAPH and Tonton Macoute terrorists. The latter are slated to integrate a “national unity government” alongside the leaders of the Democratic Convergence and The Group of 184 Civil Society Organizations led by Andy Apaid. More specifically, the FLRN led by Guy Philippe is slated to rebuild the Haitian Armed forces, which were disbanded in 1995.

What is at stake is an eventual power sharing arrangement between the various Opposition groups and the CIA supported Rebels, which have links to the cocaine transit trade from Colombia via Haiti to Florida. The protection of this trade has a bearing on the formation of a new “narco-government”, which will serve US interests.

A bogus (symbolic) disarmament of the Rebels may be contemplated under international supervision, as occurred with the KLA in Kosovo in 2000. The “former terrorists” could then be integrated into the civilian police as well as into the task of “rebuilding” the Haitian Armed forces under US supervision.

What this scenario suggests, is that the Duvalier-era terrorist structures have been restored. A program of civilian killings and political assassinations directed against Lavalas supporter is in fact already underway.

In other words, if Washington were really motivated by humanitarian considerations, why then is it supporting and financing the FRAPH death squadrons? Its objective is not to prevent the massacre of civilians. Modeled on previous CIA led operations (e.g. Guatemala, Indonesia, El Salvador), the FLRN death squadrons have been set loose and are involved in targeted political assassinations of Aristide supporters.

The Narcotics Transshipment Trade

While the real economy had been driven into bankruptcy under the brunt of the IMF reforms, the narcotics transshipment trade continues to flourish.  According to the US Drug Enforcement Administration (DEA), Haiti remains “the major drug trans-shipment country for the entire Caribbean region, funneling huge shipments of cocaine from Colombia to the United States.” (See US House of Representatives, Criminal Justice, Drug Policy and Human Resources Subcommittee, FDHC Transcripts, 12 April 2000). 

It is estimated that  Haiti is now responsible for 14 percent of all the cocaine entering the United States, representing billions of dollars of revenue for organized crime and US financial institutions, which launder vast amounts of dirty money. The global trade in narcotics is estimated to be of the order of 500 billion dollars.

Much of this transshipment trade goes directly to Miami, which also constitutes a haven for the recycling of dirty money into bona fide investments, e.g. in real estate and other related activities.

The evidence confirms that the CIA was protecting this trade during the Duvalier era as well as during the military dictatorship (1991-1994). In 1987, Senator John Kerry as Chairman of the Subcommittee on Narcotics, Terrorism and International Operations of the Senate Foreign Affairs Committee was entrusted with a major investigation, which  focused  on the links between the CIA and the drug trade, including the laundering of drug money to finance armed insurgencies. “The  Kerry Report” published in 1989, while centering its attention on the financing of the Nicaraguan Contra, also included a section on Haiti: 

“Kerry had developed detailed information on drug trafficking by Haiti’s military rulers that led to the indictment in Miami in 1988, of Lt. Col. Jean Paul. The indictment was a major embarrassment to the Haitian military, especially since Paul defiantly refused to surrender to U.S. authorities.. In November 1989, Col. Paul was found dead after he consumed a traditional Haitian good will gift—a bowel of pumpkin soup…

The U.S. senate also heard testimony in 1988 that then interior minister, Gen. Williams Regala, and his DEA liaison officer, protected and supervised cocaine shipments. The testimony also charged the then Haitian military commander Gen. Henry Namphy with accepting bribes from Colombian traffickers in return for landing rights in the mid 1980’s.

It was in 1989 that yet another military coup brought Lt. Gen. Prosper Avril to power… According to a witness before Senator John Kerry’s subcommittee, Avril is in fact a major player in Haiti’s role as a transit point in the cocaine trade.” ( Paul DeRienzo, Haiti’s Nightmare: The Cocaine Coup & The CIA Connection, Spring 1994, http://globalresearch.ca/articles/RIE402A.html )

Jack Blum, who was Kerry’s Special Counsel, points to the complicity of US officials in a 1996 statement to the US Senate Select Committee on Intelligence on Drug Trafficking and the Contra War:

“...In Haiti …  intelligence “sources” of ours in the Haitian military had turned their facilities over to the drug cartels. Instead of putting pressure on the rotten leadership of the military, we defended them. We held our noses and looked the other way as they and their criminal friends in the United States distributed cocaine in Miami, Philadelphia and New, York. (http://www.totse.com/en/politics/central_intelligence_agency/ciacont2.html )

Haiti not only remains at the hub of the transshipment cocaine trade, the latter has grown markedly since the 1980s. The current crisis bears a relationship to Haiti’s role in the drug trade. Washington wants a compliant Haitian government which will protect the drug transshipment routes, out of Colombia through Haiti and into Florida.

The inflow of narco-dollars –which remains the major source of the country’s foreign exchange earnings– are used to service Haiti’s spiraling external debt, thereby also serving the interests of the external creditors.

In this regard, the liberalization of the foreign-exchange market imposed by the IMF has provided (despite the authorities pro forma commitment to combating the drug trade) a convenient avenue for the laundering of narco-dollars in the domestic banking system. The inflow of narco-dollars alongside bona fide “remittances” from Haitians living abroad, are deposited in the commercial banking system and exchanged into local currency. The foreign exchange proceeds of these inflows can then be recycled towards the Treasury where they are used to meet debt servicing obligations.

Haiti, however, reaps a very small percentage of the total foreign exchange proceeds of this lucrative contraband. Most of the revenue resulting from the cocaine transshipment trade accrues to criminal intermediaries in the wholesale and retail narcotics trade, to the intelligence agencies which protect the drug trade as well as to the financial and banking institutions where the proceeds of this criminal activity are laundered. 

The narco-dollars are also channeled into “private banking” accounts in numerous offshore banking havens. (These havens are controlled by the large Western banks and financial institutions). Drug money is also invested in a number of financial instruments including hedge funds and stock market transactions. The major Wall Street and European banks and stock brokerage firms launder billions of dollars resulting from the trade in narcotics.

Moreover, the expansion of the dollar denominated money supply by the Federal Reserve System , including the printing of billions of dollars of US dollar notes for the purposes of narco-transactions constitutes profit for the Federal Reserve and its constituent private banking institutions of which the most important is the New York Federal Reserve Bank. See (Jeffrey Steinberg, Dope, Inc. Is $600 Billion and Growing, Executive Intelligence Review, 14 Dec 2001, http://www.larouchepub.com/other/2001/2848dope_money.html

In other words, the Wall Street financial establishment, which plays a behind the scenes role in the formulation of US foreign policy, has a vested interest in retaining the Haiti transshipment trade, while installing a reliable “narco-democracy” in Port-au-Prince, which will effectively protect the transshipment routes.

It should be noted that since the advent of the Euro as a global currency, a significant share of the narcotics trade is now conducted in Euro rather than US dollars. In other words, the Euro and the dollar are competing narco-currencies.

The Latin American cocaine trade –including the transshipment trade through Haiti– is largely conducted in US dollars.  This shift out of dollar denominated narco-transactions, which undermines the hegemony of the US dollar as a global currency, largely pertains to the Middle East, Central Asian and the Southern European drug routes.

Media Manipulation

In the weeks leading up to the Coup d’Etat, the media has largely focused its attention on the pro-Aristide “armed gangs” and “thugs”,  without providing an understanding of the role of the FLRN Rebels.

Deafening silence: not a word was mentioned in official statements and UN resolutions regarding the nature of the FLRN.  This should come as no surprise: the US Ambassador to the UN  (the man who sits on the UN Security Council) John Negroponte.  played a key role in the CIA supported Honduran death squadrons in the 1980s when he was US ambassador to Honduras. (See San Francisco Examiner, 20 Oct 2001  http://www.flora.org/mai/forum/31397 )

The FLRN rebels are extremely well equipped and trained forces. The Haitian people know who they are. They are Tonton Macoute of the Duvalier era and former FRAPH assassins.

The Western media is mute on the issue, blaming the violence on President Aristide. When it acknowledges that the Liberation Army is composed of death squadrons, it fails to examine the broader implications of its statements and that these death squadrons are a creation of the CIA and the Defense Intelligence Agency.

The New York Times has acknowledged that the “non violent” civil society opposition is in fact collaborating with the death squadrons, “accused of killing thousands”, but all this is described as “accidental”. No historical understanding is provided. Who are these death squadron leaders?  All we are told is that they have established an “alliance” with the “non-violent” good guys who belong to the “political opposition”. And it is all for a good and worthy cause, which is to remove the elected president and “restore democracy”: 

“As Haiti’s crisis lurches toward civil war, a tangled web of alliances, some of them accidental, has emerged. It has linked the interests of a political opposition movement that has embraced nonviolence to a group of insurgents that includes a former leader of death squads accused of killing thousands, a former police chief accused of plotting a coup and a ruthless gang once aligned with Mr. Aristide that has now turned against him. Given their varied origins, those arrayed against Mr. Aristide are hardly unified, though they all share an ardent wish to see him removed from power.” (New York Times,  26 Feb 2004)

There is nothing spontaneous or “accidental” in the rebel attacks or in the “alliance” between the leader of the death squadrons Guy Philippe and Andy Apaid, owner of the largest industrial sweatshop in Haiti and leader of the G-184. 

The armed rebellion was part of a carefully planned military-intelligence operation. The Armed Forces of the Dominican Republic had detected guerilla training camps inside the Dominican Republic on the Northeast Haitian-Dominican border. ( El ejército dominicano informó a Aristide sobre los entrenamientos rebeldes en la frontera, El Caribe, 27 Feb. 2004, http://www.elcaribe.com.do/articulo_multimedios.aspx?id=2645&guid=AB38144D39B24C6FBA4213AC40DD3A01&Seccion=64 )

Both the armed rebels and their civilian “non-violent” counterparts were involved in the plot to unseat the president. G-184 leader Andre Apaid was in touch with Colin Powell in the weeks leading up to the overthrow of Aristide;  Guy Philippe and “Toto” Emmanuel Constant have links to the CIA; there are indications that Rebel Commander Guy Philippe and the political leader of the Revolutionary Artibonite Resistance Front Winter Etienne were in liaison with US officials. (See BBC, 27 Feb 2004, http://news.bbc.co.uk/2/hi/americas/3496690.stm ).

While the US had repeatedly stated that it will uphold Constitutional government, the replacement of Aristide by a more compliant individual had always been part of the Bush Administration’s agenda.

On Feb 20, US Ambassador James Foley called in a team of four military experts from the U.S. Southern Command, based in Miami. Officially their mandate was “to assess threats to the embassy and its personnel.” (Seattle Times, 20 Feb 2004). US Special Forces are already in the country. Washington had announced that three US naval vessels “have been put on standby to go to Haiti as a precautionary measure”. The Saipan is equipped with Vertical takeoff Harrier fighters and attack helicopters. The other two vessels are the Oak Hill and Trenton.  Some 2,200 U.S. Marines from the 24th Marine Expeditionary Unit, at Camp Lejeune, N.C. could be deployed to Haiti at short notice, according to Washington.

With the departure of President Aristide, Washington, however, has no intention of disarming its proxy rebel paramilitary army, which is now slated to play a role in the “transition”. In other words, the Bush administration will not act to prevent the occurrence of killings and political assassinations of Lavalas and Aristide supporters in the wake of the president’s kidnapping and deportation.

Needless to say, the Western media has not in the least analyzed the historical background of the Haitian crisis. The role played by the CIA has not been mentioned. The so-called “international community”, which claims to be committed to governance and democracy, has turned a blind eye to the killings of civilians by a US sponsored paramilitary army. The “rebel leaders”, who were commanders in the FRAPH death squadrons in the 1990s, are now being upheld by the US media as bona fide opposition spokesmen. Meanwhile, the legitimacy of the former elected president is questioned because he is said to be responsible for “a worsening economic and social situation.” 

The worsening economic and social situation is largely attributable to the devastating economic reforms imposed by the IMF since the  1980s. The restoration of Constitutional government in 1994 was conditional upon the acceptance of the IMF’s deadly economic therapy, which in turn foreclosed the possibility of a meaningful democracy. High ranking government officials respectively within the Andre Preval and Jean Bertrand Aristide governments were indeed compliant with IMF diktats. Despite this compliance, Aristide had been “blacklisted” and demonized by Washington.  

The Militarization of the Caribbean Basin

Washington seeks to reinstate Haiti as a full-fledged US colony, with all the appearances of a functioning democracy. The objective is to impose a puppet regime in Port-au-Prince and establish a permanent US military presence in Haiti. 

The US Administration ultimately seeks to militarize the Caribbean basin.

The island of Hispaniola is a gateway to the Caribbean basin, strategically located between Cuba to the North West and Venezuela to the South.  The militarization of the island, with the establishment of US military bases, is not only intended to put political pressure on Cuba and Venezuela, it is also geared towards the protection of the multibillion dollar narcotics transshipment trade through Haiti, from production sites in Colombia, Peru and Bolivia.

The militarisation of the Caribbean basin is, in some regards, similar to that imposed by Washington on the Andean Region of South America under “Plan Colombia’, renamed “The Andean Initiative”. The latter constitutes the basis for the militarisation of oil and gas wells, as well as pipeline routes and transportation corridors. It also protects the narcotics trade.

How the Fed Could Fix the Economy–and Why It Hasn’t

fedreserve

Quantitative easing (QE) is supposed to stimulate the economy by adding money to the money supply, increasing demand. But so far, it hasn’t been working. Why not? Because as practiced for the last two decades, QE does not actually increase the circulating money supply. It merely cleans up the toxic balance sheets of banks. A real “helicopter drop” that puts money into the pockets of consumers and businesses has not yet been tried. Why not?  Another good question . . . .

When Ben Bernanke gave his famous helicopter money speech to the Japanese in 2002, he was not yet chairman of the Federal Reserve.  He said then that the government could easily reverse a deflation, just by printing money and dropping it from helicopters. “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent),” he said, “that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Deflation could be cured, said Professor Friedman, simply by dropping money from helicopters.

It seemed logical enough. If the money supply were insufficient for the needs of trade, the solution was to add money to it. Most of the circulating money supply consists of “bank credit” created by banks when they make loans. When old loans are paid off faster than new loans are taken out (as is happening today), the money supply shrinks. The purpose of QE is to reverse this contraction.

But if debt deflation is so easy to fix, then why have the Fed’s massive attempts to pull this maneuver off failed to revive the economy? And why is Japan still suffering from deflation after 20 years of quantitative easing?

On a technical level, the answer has to do with where the money goes. The widespread belief that QE is flooding the economy with money is a myth. Virtually all of the money it creates simply sits in the reserve accounts of banks.

That is the technical answer, but the motive behind it may be something deeper . . . .

An Asset Swap Is Not a Helicopter Drop

As QE is practiced today, the money created on a computer screen never makes it into the real, producing economy. It goes directly into bank reserve accounts, and it stays there.  Except for the small amount of “vault cash” available for withdrawal from commercial banks, bank reserves do not leave the doors of the central bank.

According to Peter Stella, former head of the Central Banking and Monetary and Foreign Exchange Operations Divisions at the International Monetary Fund:

[B]anks do not lend “reserves”. . . . Whether commercial banks let the reserves they have acquired through QE sit “idle” or lend them out in the internet bank market 10,000 times in one day among themselves, the aggregate reserves at the central bank at the end of that day will be the same.

This point is also stressed in Modern Monetary Theory.  As explained by Prof. Scott Fullwiler:

Banks can’t “do” anything with all the extra reserve balances. Loans create deposits—reserve balances don’t finance lending or add any “fuel” to the economy. Banks don’t lend reserve balances except in the federal funds market, and in that case the Fed always provides sufficient quantities to keep the federal funds rate at its . . . interest rate target.

Reserves are used simply to clear checks between banks. They move from one reserve account to another, but the total money in bank reserve accounts remains unchanged.  Banks can lend their reserves to each other, but they cannot lend them to us.

QE as currently practiced is simply an asset swap. The central bank swaps newly-created dollars for toxic assets clogging the balance sheets of commercial banks. This ploy keeps the banks from going bankrupt, but it does nothing for the balance sheets of federal or local governments, consumers, or businesses.

Central Bank Ignorance or Intentional Sabotage?

Another Look at the Japanese Experience

That brings us to the motive.  Twenty years is a long time to repeat a policy that isn’t working.

UK Professor Richard Werner invented the term quantitative easing when he was advising the Japanese in the 1990s.  He says he had something quite different in mind from the current practice.  He intended for QE to increase the credit available to the real economy.  Today, he says:

[A]ll QE is doing is to help banks increase the liquidity of their portfolios by getting rid of longer-dated slightly less liquid assets and raising cash. . . . Reserve expansion is a standard monetarist policy and required no new label.

Werner contends that the Bank of Japan (BOJ) intentionally sabotaged his proposal, adopting his language but not his policy; and other central banks have taken the same approach since.

In his book Princes of the Yen (2003), Werner maintains that in the 1990s, the BOJ consistently foiled government attempts at creating a recovery. As summarized in a review of the book:

The post-war disappearance of the military triggered a power struggle between the Ministry of Finance and the Bank of Japan for control over the economy.  While the Ministry strove to maintain the controlled economic system that created Japan’s post-war economic miracle, the central bank plotted to break free from the Ministry by reverting to the free markets of the 1920s.

. . . They reckoned that the wartime economic system and the vast legal powers of the Ministry of Finance could only be overthrown if there was a large crisis – one that would be blamed on the ministry.  While observers assumed that all policy-makers have been trying their best to kick-start Japan’s economy over the past decade, the surprising truth is that one key institution did not try hard at all.

Werner contends that the Bank of Japan not only blocked the recovery but actually created the bubble that precipitated the downturn:

[T]hose central bankers who were in charge of the policies that prolonged the recession were the very same people who were responsible for the creation of the bubble. . . . [They] ordered the banks to expand their lending aggressively during the 1980s.  In 1989, [they] suddenly tightened their credit controls, thus bringing down the house of cards that they had built up before. . . .

With banks paralysed by bad debts, the central bank held the key to a recovery: only it could step in and create more credit.  It failed to do so, and hence the recession continued for years.  Thanks to the long recession, the Ministry of Finance was broken up and lost its powers. The Bank of Japan became independent and its power has now become legal.

In the US, too, the central bank holds the key to recovery. Only it can create more credit for the broad economy. But reversing recession has taken a backseat to resuscitating zombie banks, maintaining the feudal dominion of a private financial oligarchy.

In Japan, interestingly, all that may be changing with the election of a new administration. As reported in a January 2013 article in Business Week:

Shinzo Abe and the Liberal Democratic Party swept back into power in mid-December by promising a high-octane mix of monetary and fiscal policies to pull Japan out of its two-decade run of economic misery. To get there, Prime Minister Abe is threatening a hostile takeover of the Bank of Japan, the nation’s central bank. The terms of surrender may go something like this: Unless the BOJ agrees to a 2 percent inflation target and expands its current government bond-buying operation, the ruling LDP might push a new central bank charter through the Japanese Diet. That charter would greatly diminish the BOJ’s independence to set monetary policy and allow the prime minister to sack its governor.

From Bankers’ Bank to Government Bank

Making the central bank serve the interests of the government and the people is not a new idea. Prof. Tim Canova points out that central banks have only recently been declared independent of government:

[I]ndependence has really come to mean a central bank that has been captured by Wall Street interests, very large banking interests.  It might be independent of the politicians, but it doesn’t mean it is a neutral arbiter.  During the Great Depression and coming out of it, the Fed took its cues from Congress.  Throughout the entire 1940s, the Federal Reserve as a practical matter was not independent. It took its marching orders from the White House and the Treasury—and it was the most successful decade in American economic history.

To free the central bank from Wall Street capture, Congress or the president could follow the lead of Shinzo Abe and threaten a hostile takeover of the Fed unless it directs its credit firehose into the real economy. The unlimited, near-zero-interest credit line made available to banks needs to be made available to federal and local governments.

When a similar suggestion was made to Ben Bernanke in January 2011, however, he said he lacked the authority to comply. If that was what Congress wanted, he said, it would have to change the Federal Reserve Act.

And that is what may need to be done—rewrite the Federal Reserve Act to serve the interests of the economy and the people.

Webster Tarpley observes that the Fed advanced $27 trillion to financial institutions through the TAF (Term Asset Facility), the TALF (Term Asset-backed Securities Loan Facility), and similar facilities. He proposes an Infrastructure Facility extending credit on the same terms to state and local governments. It might offer to buy $3 trillion in 100-year, zero-coupon bonds, the minimum currently needed to rebuild the nation’s infrastructure. The collateral backing these bonds would be sounder than the commercial paper of zombie banks, since it would consist of the roads, bridges, and other tangible infrastructure built with the loans. If the bond issuers defaulted, the Fed would get the infrastructure.

Quantitative easing as practiced today is not designed to serve the real economy. It is designed to serve bankers who create money as debt and rent it out for a fee. The money power needs to be restored to the people and the government, but we need an executive and legislature willing to stand up to the banks. A popular movement could give them the backbone.  In the meantime, states could set up their own banks, which could leverage the state’s massive capital and revenue base into credit for the local economy.

Ellen Brown is an attorney and president of the Public Banking Institute.  In Web of Debt, her latest of eleven books, she shows how a private, privileged banking oligarchy has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com, http://EllenBrown.com, and http://PublicBankingInstitute.org.  The Public Banking Institute is hosting a conference June 2-4, 2013, in San Rafael, CA; details here.

Norway Enters The Currency Wars

While the G-20 and the G-7 haggle among each other, all (with perhaps the exception of France) desperate to make it seem that Japan's recent currency manipulation is not really manipulation, and that the plunge in the Yen was an indirect, "unexpected" consequence of BOJ monetary policy (when in reality as Richard Koo explained it is merely a ploy to avoid the spotlight falling on each and every other G-7/20 member, all of which are engaged in the same type of currency wars which eventually will all morph into trade wars), Europe's energy powerhouse Norway quietly entered into the war. From Bloomberg: "Norges Bank is ready to cut interest rates further to counter krone gains that interfere with the inflation target, Governor Oeystein Olsen said. “If it gets too strong over time, leading to inflation that’s too low, we will act,” Olsen said yesterday in an interview at his office in Oslo.

The problem for Norway is that on one hand it, too, seeks to boost its export-business in an imitation of the beggar-thy-neighbor policies adopted by every other government, or artificial monetary union, with a printing press, while on the other, its property market which is overheating due to Norway's perceived status as one of Europe's safest money parking locations (alongside Switzerland) will merely heat up even more should the Norges Bank cut rates as it appears set to do, in order to preserve its front in the global currency war.

Olsen and his colleagues are torn between protecting exporters through lower rates that stem krone gains, and a policy that addresses an overheated property market. Western Europe’s largest oil exporter, which boasts the biggest budget surplus of any AAA rated nation, has emerged as a haven from the euro area’s debt crisis.

The krone sank as much as 0.6 percent against the euro following Olsen’s comments. Versus the dollar, it dropped as much as 1.4 percent. The krone was little changed at 7.3939 per euro as 11:57 a.m. today.

“A pronounced weakening of growth prospects, or a krone that is too strong, may over time lead to inflation that’s too low,” Olsen also said in the text of his annual speech held yesterday in Oslo. “Such development would be counteracted by monetary policy measures.”

Some will see in Norway's actions the germ of the same ruinous policies enacted by Ben Bernanke:

Low interest rates and falling unemployment have boosted private borrowing, with household debt estimated to swell to more than 200 percent of disposable incomes this year, according to the central bank. House prices, which rose an annual 8.5 percent last month, have surged almost 30 percent since 2008, almost doubling in the past decade. “Household debt and house prices are still moving up,” Olsen said. “These are the key reasons why the key policy rate hasn’t been lowered further.”

The dilemma has spurred debate on the extent to which monetary policy should target asset bubbles, or whether rates are too blunt a tool. The central bank will start advising the Finance Ministry on how much extra capital banks need to hold in their counter-cyclical buffers next month. That follows a proposal to triple minimum risk weights on banks’ mortgage assets to 35 percent and a separate recommendation to limit the use of covered bonds to finance mortgages.

Although growth in our part of the world is weak and real interest rates are low, many banks are still operating with high return targets, which could lead to excessive short-term risk taking,” Olsen said. “Banks and their owners should accept that return on equity will be lower, but also safer in the years ahead.”

Yet while hurting domestic home buyers, a weak FX policy will certainly help home sellers and everyone else looking to flip assets for a quick gain - a process that has taken the entire developed world by storm once more - and will most certainly aid exporting mega corps such as Norsk Hydro.

Companies such as Norsk Hydro ASA, Europe’s third-largest aluminum maker, have struggled to adjust to a stronger krone, which is pushing up export prices even as demand from Europe declines. The krone reached a record on a trade-weighted basis yesterday. Demand has left the currency 41 percent overvalued versus the dollar this year, topping 12 major currencies, according to calculations from the Organization for Economic Cooperation and Development.

Olsen also said yesterday the bank has no plans to talk the currency “up or down” and no “specific” level for what too strong means.

We may have heard that one before.

“It’s appropriate to use a few years to bring up inflation,” Olsen said. “Prices for Norwegian goods have increased considerably more than consumer prices, reflecting the improvement in Norway’s terms of trade. Incomes, output and employment are rising at a solid pace.”

Few years? Hasn't Mr Olsen heard that in Japan Abe plans on talking up the USDJPY by some 20% in a matter of months, and at last check economy minister Amari had a 13,000 Nikkei target by the end of March. Surely if a central bank does not stick to such a ridiculous hourly schedule it will lose all credibility. Or something.

As for Norway, its formal entry into the global FX war will likely take place next month:

The bank left its benchmark interest rate at 1.5 percent for a fifth meeting in December and signaled it may raise rates as early as next month to cool record debt growth.

The conclusion:

Norway’s politicians, central bankers and business leaders have joined forces in a push to weaken the currency. Kristin Skogen Lund, chief executive officer of the Confederation of Norwegian Enterprise, said krone gains were the “main” reason Norway’s exporters have a cost disadvantage.

And with that we return to the regularly scheduled C-grade gameshow infomercial straight from the G-20, titled: "The FX price is wrong; or let's lie to everyone just a little more."

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Guest Post: Currency Wars Are Trade Wars

Submitted by John Aziz of Azizonomics blog,

Paul Krugman is all for currency wars, but not trade wars:

First of all, what people think they know about past currency wars isn’t actually true. Everyone uses some combination phrase like “protectionism and competitive devaluation” to describe the supposed vicious circle of the 1930s, but as Barry Eichengreen has pointed out many times, these really don’t go together. If country A and country B engage in a tit-for-tat of tariffs, the end result is restricted trade; if they each try to push their currency down, the end result is at worst to leave everyone back where they started.

And in reality the stuff that’s now being called “currency wars” is almost surely a net plus for the world economy. In the 1930s this was because countries threw off their golden fetters — they left the gold standard and this freed them to pursue expansionary monetary policies. Today that’s not the issue; but what Japan, the US, and the UK are doing is in fact trying to pursue expansionary monetary policy, with currency depreciation as a byproduct.

There is a serious intellectual error here, typical of much of the recent discussion of this issue. A currency war is by definition a low-level form of a trade war because currencies are internationally traded commodities. The intent (and there is much circumstantial evidence to suggest that Japan at least is acting with mercantilist intent, but that is another story for another day) is not relevant — currency depreciation is currency depreciation and still has the same effects on creditors and trade partners, whatever the claimed intent.

Krugman cites Barry Eichengreen as evidence that competitive devaluation does not necessarily mean a trade war, but Eichengreen does not address the issue of a trade war directly, much less denying the possibility of one.  Indeed, while broadly supportive of competitive devaluation Eichengreen notes that the process was “disorderly and disruptive”.

And the risks of disorder and disruption are still very real today.

As Mark Thoma noted in 2010:

While the positive effects a currency war produced in the 1930s are unlikely to reappear, there is a chance of large negative effects such as a simultaneous trade war or the breakdown of the international monetary system, so let’s hope a currency war can be avoided.

The mechanism here is very simple. Some countries — those with a lower domestic rate of inflation, like Japan — have a natural advantage in a currency war against countries with a higher domestic rate of inflation like Brazil and China. If one side runs out of leverage to debase their currency because of heightened domestic inflation, their next recourse is to resort to direction trade measures like quotas and tariffs.

And actually, the United States and China in particular have been engaging in a low-level trade and currency war for a long time.

As I noted last year:

China and Russia and Brazil have all recently expressed deep unease at America’s can-kicking and money-printing mentality. This is partly because American money printing has exported inflation to the world, as a result of the dollar’s role as the global reserve currency, and partly because these states already own a lot of American debt, and do not want to be paid off in hugely-debased money.

Since I made that statement, there has been a great lot of debasement without any great spiral of damaging trade measures. But with the world locked into ever greater monetary and trade interdependency, and with fiery trade rhetoric continuing to spew forth from the BRIC nations, who by-and-large seem to continue to believe that American money-printing is damaging their interests   — who in the past two years have put together a new global reserve currency framework — it would be deeply complacent to believe that the risks of a severe trade war have gone away.

(Unfortunately, Krugman and Eichengreen both seem to discount the reality that Okun’s law has broken down, and that monetary expansion today is supporting crony industries, and exacerbating income inequality, but those are another story for another day)

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James Howard Kunstler: The Dangers Of The Age Of Delusion

It’s characteristic of the time that we’re living in that there simply is no sense of consequence. And that’s exactly what you get when you have a Federal Reserve that’s out of control and a public that is filled with technological narcissistic visions of Santa Claus delivering rescue remedies on demand. And so there’s no general sense that when you do things, bad things can happen

James Howard Kunstler is concerned. Sure, he still has the same issues with the West's highly energy-consuming suburban lifestyle that he famously brought to light in his books, The Long Emergency, the World Made by Hand series, and Too Much Magic. But beyond our decaying fundamentals, he's distressed by society's unwillingness to be honest with itself about the issue's it's facing.

Instead, we are embracing a narrative based in "magical thinking" (e.g., prosperity through the printing press, energy independence through domestic shale) that assures us everything is fine. That we'll be able to enter the future without having to make any changes to our manner or standards of living, despite our massive debts and depleting resources:

History is very peculiar in the sense that sometimes cultures and societies go through very strange periods of their history, and we’re in one of those now. And I characterize this as the “great period of America lying to itself.” And the way that it’s really carried out as a practical matter is that accounting fraud is now the basic mechanism for running most of the important things in American life. Accounting fraud is now the basis for banking and finance, and it’s certainly the basis for government, and certainly for its fiscal role.

So I think what you’re seeing is a kind of deformity of the consensus. And of course, the most striking feature of our current times is this inability of the country to construct a coherent story about what’s happening to us, and therefore the inability to construct a story about what we might do about it.

And the sad thing is there is much we can get busy on to address our situation. But to get started, we need to engage in an eyes-wide open assessment of our true state:

What's really happening in reality, in this moment in history, is a comprehensive contraction in economic activity, because there’s a connection between the energy inputs into an economy and a culture and your ability to accumulate wealth of the kind that we’re used to, produced by industrial activity. And that’s coming to an end, and there’s no way around it.

Now, there are plenty of things we can do. And the terminology that we use, I think, the way we deal with this – for example, using the word “growth” incessantly is, I think, very counterproductive rather than using the term “activity”. Because you can have a lot of activity of the kind that we need without necessarily having the kind of industrial growth that we’ve experienced in the past. For example, we have a tremendous amount of work to do in this country to reform and downscale and re-localize and reorganize the major activities of American life, whether it’s agriculture – which is going to have to get smaller and more local and finer and be done by more human beings than machines, and be done by more human beings than energy slaves – or commerce – which has got to be reorganized from the Wal-Mart level of twelve-thousand-mile supply lines and warehouses on wheels, depending on all of the tractor-trailer trucks running incessantly around the interstate highway system.

So that’s a huge test that faces us. We basically have to rebuild the Main Street economies – and not just in an intellectual or conceptual way, but actually in the bricks and mortar. We’ve got to go in there and refurbish our downtowns. We’ve got to change the transportation system, because the airline industry is failing and the happy motoring industry or way of life will be coming to an end, probably sooner rather than later.

Yet if we continue to cling to our magical, no-consequences narrative, Kunstler fears we will likely burrow deeper into our delusion:

It comes back to the unfortunate condition of a nation that is so frightened of the consequences of what it has been doing that it cannot really face reality, and so it just spins one story after another.

I think Jim Rickards put it pretty well the other day when he said that this kind of monetary policy exists in what he referred to as a critical state dynamic. In other words, you can’t just dial up free money and then dial down free money when you seem to be getting into an inflationary problem. The control, the toggle, just doesn’t work that way. And what happens, in fact, is that things go critical because it is a critical state dynamic.

And what’s been going on is that we’ve been trying to compensate for the lack of capital formation with this imaginary money. And by capital formation, I mean the ability to accumulate real wealth from real wealth-producing activities. And creating credit card money on a national level is not real wealth-producing activity.

I think the closer we get to this point of criticality, the more delusional we’re liable to become about it. So this is just a subset of that larger dynamic of, the more distressed the society gets, the more delusional it gets.

Click the play button below to listen to Chris' interview with James Howard Kunstler (46m:59s):

Ron Paul On State of the Union: “It Was Rather Depressing” ; Serious Problems...

Mac Slavo
February 13th, 2013
SHTFplan.com

Read by 12,524 people

Dr. Ron Paul may no longer be a congressman, but he still understands the core problems facing the United States of America.

Despite President Obama’s promises for a better, more prosperous future for our country, as with his previous State of the Union addresses, it was light on substance and heavy on the rhetoric.

If you’re one of those who feel that hope and change has turned to despair and more of the same, you’re not alone.

Ron Paul is right there with you.

I didn’t come out of that very optimistic. It was rather depressing.

It was terrible. It’s like a circus…

The jumping up and down and the ritual they go through… it sounds like the world’s been saved. If you had walked in, just being on that floor, it would be so distorted. But that’s about the way Washington is. It’s so distorted. They live in their own little bubble and they don’t know that there’s anybody like you who might have questions about what’s going on in this country.

And, certainly, we didn’t get any answers tonight.

The truth is, after listening to a speech like that, we should be convinced that this spending isn’t going to quit before we have a calamity.

That’s what I think is going to happen.

But that doesn’t mean we should stop trying to change people’s minds.

But, to think that next year or two years from now we’re going to have more members of Congress and we’re finally going to come to our senses and we’re going to vote against some of this largess for all the special interests, and that we’re going to bring our troops home, and they’re going to repeal and restrain the President from assassinating American citizens – his so called right to do that – that’s not going to happen.

There’s going to be a serious problem – economic and a crisis here…

I think it’s inevitable…

Video Interview With John Stossel (Via: SGT ReportADG UK News:

After 35 years in Congress, Ron Paul says that it all got worse – spending always went up, government got bigger, more wars, more printing of money, more power the to The Fed, and more central economic planning.

Now, after decades of government interference, we will, as a nation, experience the blow back.

A three year old with a pocket calculator can figure out we’ve got a one way ticket to collapse.

At this point, there is no fixing it.

Nature will take its course and the economic, financial, and political free markets will soon correct the imbalance.

As Dr. Paul warns, it’s inevitable.

Author: Mac Slavo
Views: Read by 12,524 people
Date: February 13th, 2013
Website: www.SHTFplan.com

Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats.

Guest Post: Cheap, Abundant Credit Creates A Low-Return, Bubble-Prone World

Via Charles Hugh-Smith of OfTwoMinds blog,

By bailing out banks and targeting equity prices, the central banks are exacerbating the misallocation of savings/financial capital to historically overvalued corporate equity.

What happens when central banks make credit cheap and abundant? All that cheap money chases scarce productive assets. The yields on assets drop, and speculative "risk-on" assets are boosted into bubbles.

Even as corporate profits have skyrocketed, equity valuations have risen apace, keeping yields at historically low levels.

Just to state the obvious: does that trajectory strike you as sustainable? Up almost 300% in less than four years? In a debt-burdened global economy, where are the next $1.75 trillion in corporate profits going to come from?

Anyone who claims "stocks are cheap" would do well to study these charts, which are courtesy of longtime correspondent B.C.:

Another measure of the S&P 500 yield using corporate bond yields (Baa):

In response to my observation that this looked like too much cheap credit chasing too few productive assets, B.C. added these explanatory comments:

This is characteristic of the liquidation/hoarding of a debt-deflationary Long-Wave Trough depression. The financial media and economists want us to believe that the Fed printing is "stimulus" when in fact it is part of the "liquidation" of Fed member banks' balance sheets of bad assets. 

With the 10-yr. avg. P/E of 22-23, a 10-yr. earnings yield of 4.5%, a dividend of 2% (0% in real terms before fees and taxes), average reported earnings growth since '00 of 3-4%, the real yield on 10- and 30-year Treasuries of slightly negative to 1%, and real wage/salary growth of 0%, the imputed discount rate implies inferior returns to capital vs. continuing decline in returns to labor; these conditions are not conducive to private sector investment growth and employment. 

Historically, the only "solution" was debt deflation and consumption of financial capital to the point that debt and asset prices fell to a level at which the imputed discount rate rose to encourage investment at rising returns to labor's share of GDP, i.e., inflationary Long-Wave Upwave. 

By bailing out banks and targeting equity prices, the central banks are exacerbating the misallocation of savings/financial capital to historically overvalued corporate equity of the Fortune 25-300 firms, resulting in low-velocity hoarding and worsening wealth and income concentration, unproductive rentier speculation, further declines in labor's share of GDP, and contracting trend real GDP and gov't receipts per capita. 

Along with these conditions are the once-in-history effects of Peak Cheap Oil, falling oil exports per capita, deteriorating EROEI, population overshoot, and accelerating automation of labor and loss of income and purchasing power. 

Consider that market cap-to-GDP today is 110%, ~100% above the historical average and 230% above the average of secular bear market lows. The differential $8-$12 trillion in market cap, primarily held by the top 0.1-1% to 10% of households in form of the equity of the Fortune 25-300 firms, is effectively captive current and future savings/investment/business, household, and gov't consumption that otherwise would occur at the given ratio to wages, profits, and GDP. 

George Brockway made the case in his book, The End of Economic Man: Principles of Any Future Economics (1995), that a stock bull market is a disaster, because bull markets coincide historically with growing wealth and income concentration and gross misallocation of savings/financial capital that encourages unproductive gambling and speculating, bank leverage, and bubbles that burst and cause mayhem. 

However, we are conditioned by the dominant rentier zeitgeist that rising asset prices (debt-money proxy claims on wages, profits, and gov't receipts in perpetuity by the top 0.1-1%) are an unambiguous sign of widespread prosperity.

Thank you, B.C. for placing the charts in context. B.C. also passed along this investment-bank report on the same topic, The Low-Return World (Credit Suisse).

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Guest Post: Show This To Anyone That Believes That “Things Are Getting Better” In...

Submitted by Michael of The Economic Collapse blog,

How can anyone not see that the U.S. economy is collapsing all around us?  It just astounds me when people try to tell me that "everything is just fine" and that "things are getting better" in America.  Are there people out there that are really that blind?  If you want to see the economic collapse, just open up your eyes and look around you.  By almost every economic and financial measure, the U.S. economy has been steadily declining for many years.  But most Americans are so tied into "the matrix" that they can only understand the cheerful propaganda that is endlessly being spoon-fed to them by the mainstream media.

As I have said so many times, the economic collapse is not a single event.  The economic collapse has been happening, it is is happening right now, and it will continue to happen.  Yes, there will be times when our decline will be punctuated by moments of great crisis, but that will be the exception rather than the rule.  A lot of people that write about "the economic collapse" hype it up as if it will be some huge "event" that will happen very rapidly and then once it is all over we will rebuild.  Unfortunately, that is not how the real world works.

We are living in the greatest debt bubble in the history of the world, and once it completely bursts there will be no going back to how things were before.  Right now, we are living in a "credit card economy".  As long as we can keep borrowing more money, most people think that things are just fine.  But anyone that has lived on credit cards knows that eventually there comes a point when the game is over, and we are rapidly approaching that point as a nation.

Have you ever been there?  Have you ever desperately hoped that you could just get one more credit card or one more loan so that you could keep things going?

At first, living on credit can be a lot of fun.  You can live a much higher standard of living than you otherwise would be able to.

But inevitably a day of reckoning comes.

If the federal government and the American people were forced at this moment to live within their means, the U.S. economy would immediately plunge into a depression.

That is a 100% rock solid guarantee.

But our politicians and the mainstream media continue to perpetuate the fiction that we can live in this credit card economic fantasy land indefinitely.

And most Americans could not care less about the future.  As long as "things are good" today, they don't really think much about what the future will hold.

As a result of our very foolish short-term thinking, we have now run up a national debt of 16.4 trillion dollars.  It is the largest debt in the history of the world, and it has gotten more than 23 times larger since Jimmy Carter first entered the White House.

The chart that you see below is a recipe for national financial suicide...

U.S. National Debt

Of course things have accelerated over the past four years.  Since Barack Obama entered the White House, the U.S. government has run a budget deficit of well over a trillion dollars every single year, and we have stolen more than 100 million dollars from our children and our grandchildren every single hour of every single day.

It is the biggest theft of all time.  What we are doing to our children and our grandchildren is beyond criminal.

And now our debt is at a level that most economists would consider terminal.  When Barack Obama first entered the White House, the U.S. debt to GDP ratio was under 70 percent.  Today, it is up to 103 percent.

We are officially in "the danger zone".

If things really were "getting better" in America, we would not need to borrow so much money.

Our politicians are stealing from the future in order to make the present look better.  During Obama's first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.

That is utter insanity!

If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.

So what is the solution?

Get ready to laugh.

The most prominent economic journalist in the entire country, Paul Krugman of the New York Times, recently suggested the following in an article that he wrote entitled "Kick That Can"...

Realistically, we’re not going to resolve our long-run fiscal issues any time soon, which is O.K. — not ideal, but nothing terrible will happen if we don’t fix everything this year. Meanwhile, we face the imminent threat of severe economic damage from short-term spending cuts.

So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do.

You mean that we might actually do damage to the debt-fueled economic fantasy world that we are living in if we stopped stealing so much money from future generations?

Oh the humanity!

It is horrifying to think that all that one of the "top economic minds" in America can come up with is to "kick the can" down the road some more.

Unfortunately, neither Paul Krugman nor most of the American people understand that our financial system is actually designed to create government debt.

The bankers that helped create the Federal Reserve intended to permanently enslave the U.S. government to a perpetually expanding spiral of debt, and their plans worked.

At this point, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was first created.

So why don't the American people understand what the Federal Reserve system is doing to us?

It is because most of them are still plugged into the matrix.  A Zero Hedge article that I came across today put it beautifully...

US society in a nutshell: Chris Dorner has been around for a week and has 222 million results on Google; the Federal Reserve has been around for one hundred years and has 187 million results.

If nothing is done about our exploding debt, it is only a matter of time before we reach financial oblivion.

According to Boston University economist Laurence Kotlikoff, the U.S. government is facing a "present value difference between projected future spending and revenue" of 222 trillion dollars in the years ahead.

So how in the world are we going to come up with an extra 222 trillion dollars?

But it is not just the U.S. government that is drowning in debt.

Just check out this chart which shows the astounding growth of state and local government debt in recent years...

State And Local Government Debt

All over the United States there are state and local governments that are on the verge of bankruptcy.  Just check out what is going on in Detroit.  The only way that most of our state and local governments can keep going at this point is to also "kick the can" down the road some more.

And of course most of the rest of us are drowning in debt as well.

40 years ago, the total amount of debt in the U.S. economic system (government + business + consumer) was less than 2 trillion dollars.

Today, the total amount of debt in the U.S. economic system has grown to more than 55 trillion dollars.

Can anyone say bubble?

The good news is that U.S. GDP is now more than 12 times larger than it was 40 years ago.

The bad news is that the total amount of debt in our financial system is now more than 30 times larger than it was 40 years ago...

Total Credit Market Debt Owed

At the same time that we are going into so much debt, our ability to produce wealth continues to decline.

According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001.  That number dropped to 21.6 percent in 2011.  That is not just a decline - that is a nightmarish freefall.  Just check out the chart in this article.

We are becoming less competitive as a nation with each passing year.  In fact, the U.S. has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.

Most Americans don't understand this, but the United States buys far more from the rest of the world than they buy from us each year.  In 2012, we had a trade deficit of more than 500 billion dollars with the rest of the world.

That means that more than 500 billion dollars that could have gone to U.S. workers and U.S. businesses went out of the country instead.

So how does our country survive if hundreds of billions of dollars more is flowing out of the country than is flowing into it?

Well, to make up the shortfall we go to the countries that we sent our money to and we beg them to lend it back to us.  If that doesn't work, we just print and borrow even more money.

Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.

That is 8 trillion dollars that could have saved U.S. businesses, paid the salaries of U.S. workers and that would have helped fund government.

But instead, our foolish policies have greatly enriched China and the oil barons of the Middle East.

Sadly, politicians from both political parties continue to boldly support the one world economic agenda of the global elite.

Just consider how destructive many of these "free trade" deals have been to our economy...

When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars.

By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.

Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little "m") for the entire year.

In 2012, our trade deficit with China was 315 billion dollars.  That was the largest trade deficit that one nation has had with another nation in the history of the world.

In particular, our trade with China is extremely unbalanced.  Today, U.S. consumers spend approximately 4 dollars on goods and services from China for every one dollar that Chinese consumers spend on goods and services from the United States.

But isn't getting cheap stuff from China good?

No, because it costs us good paying jobs.

According to the Economic Policy Institute, the United States is losing half a million jobs to China every single year.

Overall, more than 56,000 manufacturing facilities in the United States have been shut down since 2001.  During 2010, manufacturing facilities in the United States were shutting down at a rate of 23 per day.  How can anyone say that "things are getting better" when our economic infrastructure is being absolutely gutted?

The truth is that there are never going to be enough jobs in America ever again, because millions of our jobs are being sent overseas and millions of our jobs are being lost to technology.

You won't hear this on the news, but the percentage of the civilian labor force in the United States that is employed has been steadily declining every single year since 2006.

Younger workers have been hit particularly hard.  In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent.  Today, the unemployment rate for that same age group is about 13 percent.

If you are under the age of 30 and you aren't living with your parents, there is a really good chance that you are living in poverty.  If you can believe it, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

Our economy has been steadily bleeding huge numbers of middle class jobs, and many of those jobs have been replaced by low paying jobs in recent years.

According to one study, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.

And at this point, an astounding 53 percent of all American workers make less than $30,000 a year.

Oh, but "things are getting better", right?

Maybe if you live on Wall Street or if you are an employee of the federal government.

But for most families this economic decline has been a total nightmare.  Median household income in America has fallen for four consecutive years.  Overall, it has declined by over $4000 during that time span.

Sometimes people forget how good things were about a decade ago.  About three times as many new homes were sold in the United States in 2005 as were sold in 2012.

But we like to live in denial.

In fact, a lot of families are trying to keep up their standards of living by going into tremendous amounts of debt.

Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned.  By 2007, that figure had soared to $1.48.

Fake it until you make it, right?

But how much debt can our system possibly handle?

Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.

Total credit card debt in the United States is now more than 8 times larger than it was just 30 years ago.

We are a nation that is completely addicted to debt, but as the financial crisis of 2008 demonstrated, all of that debt can have horrific consequences.

As the economy has slowed in recent years, the Federal Reserve has decided that "the solution" is to recklessly print money in an attempt to get the debt spiral cranked up again.

Have they gone overboard?  You be the judge...

Monetary Base 2013

And of course this won't have any affect on the value of the money that you have been saving up all these years right?

Wrong.

Every single dollar that you own is continually losing value...

Purchasing Power Of The Dollar

Overall, the value of the U.S. dollar has declined by more than 96 percent since the Federal Reserve was first created.

As the cost of living continues to go up and wages continue to go down, millions of American families have fallen out of the middle class and into poverty.

If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.

But "things are getting better", right?

Incredibly, more than a million public school students in the United States are homeless.  This is the first time that has ever happened in our history.

But "things are getting better", right?

There are now 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.

But "things are getting better", right?

In 1999, 64.1 percent of all Americans were covered by employment-based health insurance.  Today, only 55.1 percent are covered by employment-based health insurance.

But "things are getting better", right?

Today, more Americans than ever have found themselves forced to turn to the federal government for help.

Overall, the federal government runs nearly 80 different "means-tested welfare programs", and at this point more than 100 million Americans are enrolled in at least one of them.

According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government.  Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.

So is it a good sign or a bad sign that the percentage of Americans that are financially dependent on the federal government is at an all-time high?

And in future years the number of Americans that are receiving benefits from the federal government is projected to absolutely skyrocket.

Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse.  It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

If you take a look at Medicare, things are very more sobering.

As I wrote recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.

At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for every single household in the United States.

Are you ready to contribute your share?

Social Security is a complete and total nightmare as well.

Right now, there are approximately 56 million Americans collecting Social Security benefits.

By 2035, that number is projected to soar to an astounding 91 million.

Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.

Oh, but don't worry because "things are getting better", right?

I honestly do not know how anyone can look at the numbers above and come to the conclusion that the economy is in good shape.

We have accumulated the largest mountain of debt in the history of the world, our economic infrastructure is being gutted, we are bleeding good jobs, government dependence is at an all-time high and we are getting poorer as a nation with each passing day.

But other than that, everything is rainbows and lollipops, right?

If you want to see the economic collapse, just open up your eyes.

And if dramatic changes are not made quickly, things are going to get much, much worse from here.

Please share this article with as many people as possible.  Time is quickly running out and there are a whole lot of people out there that we need to wake up while we still can.

The Economic Collapse Is Happening

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Guest Post: China Surpasses U.S. As Number One Global Trading Power

Submitted by Brandon Smith from Alt-Market


China Surpasses U.S. As Number One Global Trading Power

Back in 2008, at the onset of the derivatives and credit collapse, I wrote several economic editorials discussing what I saw as the single most vital trend in the global fiscal system, and how it would cause a disastrous upheaval that would leave the U.S. and the dollar financially sunk.  This trend, which seemed to take serious root in 2005, was the massive shift by China from an export dependent source of cheap manufacturing and labor, into a moderate exporter, and consumer hub, and currency powerhouse.  In my view at the time, the evidence suggested that China was positioning itself to decouple from its dependence on U.S. markets and the dollar.  I was, of course, attacked as a “doom monger” and “conspiracy theorist”.  Five years later, the critics have changed their tune…

For the past decade, China has been slowly but surely issuing Yuan denominated bonds and securities around the globe, while simultaneously forming bilateral trade agreements with multiple nations and cutting out the U.S. dollar as the world reserve currency.  This process has gone mostly ignored by the mainstream financial media.  However, I and many other independent analysts could not overlook the red flags.  I tried to summarize as much of the situation and facts as I could in my article ‘How The U.S. Dollar Will Be Replaced’, which was published in May of last year:

http://www.alt-market.com/articles/784-how-the-us-dollar-will-be-replaced

The biggest question for me was, if China is one of the largest holders of Forex reserves on the planet, and had the largest savings of any nation, WHY did they feel the need or desire in 2005 to begin issuing Yuan denominated debt?  Why begin borrowing capital from foreign creditors?  They certainly didn’t need the money.  Why were they moving away from export dependency and building a consumer base?  And why attempt to proliferate their currency?  Wouldn’t the pursuit of global Yuan circulation lead to an eventual increase in valuation?  Didn’t the Chinese want their currency cheap so that they could maintain export superiority?  What did the Chinese know in 2005 that we didn’t?

Well, apparently they were either psychic, or SOMEONE gave them advanced warning.  They knew that there would be a crisis in American consumption and that this would lead to severe reduction in imports, which is why they began building trade deals within the ASEAN trading bloc to insulate themselves.  They knew that there would be considerable devaluation in the dollar, which is why they converted much of their long term treasury holdings to short term treasury bonds that they could dump with far more ease, and they knew that the IMF would be promoting Special Drawing Rights as a new reserve replacing the dollar, which is why they have been spreading the Yuan everywhere, earning them favor with the global banksters and inclusion in the basket currency.  In fact, China has been pumping Yuan into global markets even faster than the Federal Reserve has been printing the dollar:

http://www.zerohedge.com/news/2013-02-08/china-accounts-nearly-half-worlds-new-money-supply

China is flooding the system with Yuan!  This means only one thing; China is no longer seeking to maintain the traditional trade relationship it has had with the U.S.

To make my case even more clear, I would point out that China has not only become the world’s largest gold producer, but also its largest BUYER, recently surpassing India.  Official estimates place Chinese gold purchases in 2012 at around 800 tons; an astonishing increase in their stockpile. 

The U.S. and the Federal Reserve can’t even deliver gold it is supposed to be holding for others, including Germany.

China has also recently quadrupled imports of rice and tripled wheat and corn imports in only one year.  Why?  Again, I ask, what do they know that we are not being told?

http://ajw.asahi.com/article/economy/business/AJ201302020056

As I have stated for many years, China is being groomed as an alternative economic engine in opposition to the U.S., and that this will lead to an eventual dump by them of the Greenback.  This scenario is not only based on my opinion, it has also been spoken of openly by elitist financiers, including George Soros:

This past month, the same plan has been reiterated by Zhu Min, the deputy managing director of the IMF.  In his statement, he proclaimed that the shift by China into a more consumer based system had been successful, and that the Yuan or RMB, was on the way to becoming a world reserve currency:

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20130118000075&cid=1102

I believe that the moment for the epic changeover, and all the political and financial conflict that comes with it, has begun…

It has been announced this week that China surpassed the U.S. for the first time ever as the number one trading power in the world:

http://www.bloomberg.com/news/2013-02-09/china-passes-u-s-to-become-the-world-s-biggest-trading-nation.html

U.S. exports and imports last year totaled $3.82 trillion, the U.S. Commerce Department said last week. China’s customs administration reported last month that the country’s total trade in 2012 amounted to $3.87 trillion. China had a $231.1 billion annual trade surplus while the U.S. had a trade deficit of $727.9 billion:

“It is remarkable that an economy that is only a fraction of the size of the U.S. economy has a larger trading volume,” Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington, said in an e-mail. “The surpassing of the U.S. is not because of a substantially undervalued currency that has led to an export boom,” said Lardy, noting that Chinese imports have grown more rapidly than exports since 2007.”

“According to O’Neill (Goldman Sachs Jim O’Neill), the trade figures underscore the need to draw China further into the global financial and trading architecture that the U.S. helped create.

“One way or another we have to get China more involved in the global organizations of today and the future despite some of their own reluctance,” O’Neill said, mentioning China’s inclusion in the International Monetary Fund’s Special Drawing Rights currency basket. “To not have China more symbolically and more importantly actually central to all these things is just increasingly silly.”

For those who are still not aware of why this is such a big deal, it is essentially a turning point moment in global trade.  There is no doubt that China will now be inducted into the SDR, and that their importance as a trade and consumption center will quickly lead to a move away from the dollar.  To put it simply, the dollar is going to lose its world reserve status VERY soon.  Many will cheer this change as necessary progress towards a more “globally conscious” economic system.  However, it’s not that simple.  Total centralization is first and foremost the dream of idiots, and in any mutation (or amputation) there is always considerable pain involved.  The proponents of this “New World Order” (their words, not mine) seem to have placed the U.S. squarely in their crosshairs as the primary recipient of this fiscal pain.

In my early analysis, I felt it possible that Japan would be inducted willingly into the new ASEAN trading bloc and that they would swiftly fall in line with a dump of the dollar, mainly because their export markets were suffering greatly due to the decline in American purchases.  Now it appears that Japan has not been as pliable as the globalists wanted, and so, a war may be on the table in the Pacific.

Rhetoric in Chinese newspapers has been very heated and provocative, and the tensions surrounding the Senkaku/Diaoyu Islands is reaching a boiling point.  The two countries have done everything so far EXCEPT shoot at each other, and that will be happening in due course now that China is allegedly locking offensive radar onto Japanese ships.  Even Chinese films released in the past two years have been soaked with anti-Japan propaganda, most of them usually set during WWII around the brutal invasion and subjugation by the Japanese in Chinese provinces.

The recipe is one of inevitable disaster, with the U.S. at the center of a boiling pot.  As I pointed in my last economic piece, we must now look to events rather than numbers to gain insight into where we are headed.  The time has come.  China is nearly ready for IMF inclusion.  Volatility around the world is high.  Our government has a final decision to make on the Fiscal Cliff in March, not to mention the sudden push for possible gun registration and confiscation.  My instincts tell me that so many explosive aspects coalescing together at the same tenuous moment is not a coincidence.  The next few months call for hyper-vigilance and every ounce of energy we can muster to educate as many people as possible in as short a time as possible.

I say again, China has surpassed the U.S. in global trade.  A drop of the dollar is the obvious next step…

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Guest Post: It’s Failing All Over the Show – So Let’s Do More of...

Via Pater Tenebrarum of Acting-Man blog,

The insanity that has gripped policymakers all over the world really is a sight to see. There was a time when central bankers were extremely careful not to do anything that might endanger the currency's value too much – in other words, they were intent on boiling the frog slowly. And why wouldn't they? After all, the amount by which the citizenry is plucked via depreciation of the currency every year is compounding, so that the men behind the curtain extract more than enough over time. That they thereby retard economic progress by decades over time as well is not something anyone would notice after all, since we cannot engage in a controlled experiment that proves it to all and sundry beyond doubt. We only know that it is so if we employ sound economic theory. Since sound economic theory is by its nature not statist, it is not employed by the mainstream, and so most citizens are successfully shielded from the truth.

 The latest example for the growing chutzpa of these snake-oil sellers is provided by Lord Adair Turner in the UK. To give you a little bit of background: the UK is about to fall into its third recession in a row (a 'triple dip', something that has never before happened) not in spite, but because the Bank of England has monetized a cool quarter of all outstanding gilts, which has allowed the zombie TBTF banks to remain on artificial life support.

However, that is not Turner's conclusion. The policy is evidently failing, so he naturally concludes that there should not only be more of it, but it should become more brazen by veering off into the 'Weimaresque'. After all, we will be able to stop in time, right? We just need a 'little bit of it'. Although Turner for some reason also thinks it is 'not appropriate for the UK' (why not? The UK for some reason 'does not respond to demand and price signals', which would really be a first in economic history…where do they find these people?), he thinks everybody else should do it. According to the FT, under the heading “Print Money to Fund Spending”:

“Lord Turner, the departing chairman of the Financial Services Authority has defended financing government spending by printing money arguing that, within limits, it “absolutely, definitively [does] not” lead to inflation.

Speaking before a farewell speech in London on Wednesday, Lord Turner, who applied unsuccessfully to be the next Bank of England governor, called for “intellectual clarity” in economic policy, including breaking a taboo that permanently printing money to pay for government services is always bad.

“I accept entirely that this is a very dangerous thing to let out of the bag, that this is a medicine in small quantities but a poison in large quantities but that there exist some circumstances, in which it is appropriate to take that risk,” he told the Financial Times.

The tool should have been used in 1930s Germany and 1990s Japan, he said. It should be considered across the world, he added, at a time when banks, companies and households are trying to pay down debts and seeking to return to growth by borrowing more is seen as perverse.

In a direct challenge to the German authorities who shudder at the memory of the hyperinflation of the Weimar Republic, Lord Turner suggested that the absence of monetary financing in the early 1930s, which led to depression, falling prices and the rise of the Third Reich, had been a greater disaster.

“Is [monetary financing] desperately dangerous because every pound of money financed turns into inflation? Absolutely definitively not. There is no coherent rigorous bit of economics that takes you in that direction,” he said.

He did add, however, that the country where monetary financing was least likely to be needed was the UK. There he accepts that more stimulus might lead to higher inflation as the underlying health of the economy is weak and could not “respond to demand and price signals”.

(emphasis added)

Let's count the ways in which this is misguided nonsense. It begins with the title already. 'Money' cannot 'fund' anything. What is required for funding economic activities are real savings and real capital. You could drop $10 trillion in the middle of the Sahel zone and still wouldn't be able to 'fund' anything. Money is merely a medium of exchange and as such indispensable to economic calculation, but it is not a means of 'funding'.

Now to the assertion that “printing money does not lead to inflation”, which is at the heart of Turner's argument. First of all, it may take many years, even decades, before a broad-based inflationary effect becomes noticeable. For example, the US and others 'printed money' and engaged in deficit spending throughout the 1950s and 1960s.  There also seemed to be no problem, until the problem suddenly became noticeable in the 1970s.

Moreover, 'inflation' in the sense of an increase in CPI is in any case a problem of secondary importance. Money printing most definitely distorts prices all across the economy – it is relative prices that change, as money is not neutral. This hampers rational economic calculation and therefore leads to capital malinvestment. Scarce capital is therefore wasted, and although there may be a 'feel good phase' (the boom), all the accounting profits generated in the boom will eventually disappear again in a bust. They are an inflationary illusion.

The appeal to the 1930s and Hitler is quite amusing in a way, as Hitler himself was a major inflationist. We already mentioned it:  A war on the scale of WW2 would not have been possible without massive inflation and employment of precisely the methods his Lordship recommends. Moreover, the reason for Hitler's rise is ultimately to be sought in the successive abandonment of the gold standard in order to finance WW1. This made it impossible to return to sound money without upheaval, and the 1920's boom ensued when the US attempted to help the misguided policymakers of the UK by leaving interest rates too low, so they could to push through their return to gold at par. This brought on the credit and asset boom of the 1920s, which ultimately led to the Great Depression.

To blame the rise of Hitler on the “refusal to inflate” is especially piquant if one considers that Germany was in the throes of a hyperinflationary conflagration in the year when Hitler was first heard about (he attempted a coup in 1923). Lastly, the 'argument from history', a specialty of Marxists and German historicists, is inappropriate when discussing points of economic theory.

Finally Turner asserts that “we should take the risk” because allegedly, “Is [monetary financing] desperately dangerous because every pound of money financed turns into inflation? Absolutely definitively not. There is no coherent rigorous bit of economics that takes you in that direction,”

This is at best a half-truth. Since money is not neutral, an outbreak of consumer price inflation may or may not happen, that depends largely on many other factors influencing peoples' inflation expectations. However, as noted above, there is no way a sound economic theory can regard inflation of the money supply as 'harmless' or even 'necessary'. Turner is just another snake oil seller.

As an aside, the Knappists, i.e., the  'Modern Monetary Theory' Church, think highly of Turner since he came out with this crazy argument. Enough said.

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Gold Sentiment Poor Due To Range-Bound Trade and Banks’ Bearish Predictions

Gold is little changed today in pound, euro and dollar terms after the Bank of England and the ECB kept interest rates at record low levels. Ultra loose monetary policies continue.


Gold in Japanese Yen, 4 Day – (Bloomberg)

The ECB kept interest rates at 0.75% and the BOE kept interest rates at 0.5% the lowest level since 1694. The BOE pledged to maintain their ‘stimulus’ or money printing or debt monetisation programmes.

This morning the Japanese yen fell to new record lows against gold on the TOCOM at over 157 million yen per ounce.

Ultra loose monetary policies are set to continue which is bullish for the precious metals.

Mario Draghi’s news conference begins at 1330 GMT and the ECB President could set the course for the single currency. If Draghi’s speech warns about the recent rise in the euro then the euro may fall against the dollar and gold.

Gold's range bound trading between $1,650/oz and $1,700/oz since December continues.


Gold in USD, 2 Year – (Bloomberg)

Physical gold volumes have been quite low in recent days with very few new buyers coming into the market. More clients have been selling than buying in recent days. But the more aware and risk averse money continues to add to their allocations. 

The mix is quite unusual as normally there is a clear bias towards clients selling or buying. On recent years, during gold’s bull market the bias has been towards buying.

Recent technical action has been poor and the short term trend is down and this allied to perceptions that the global economic situation has improved slightly is leading to the preponderance of sellers.

Sellers have also be emboldened by recent bold pronouncements of the end of gold’s bull market – by many of the same banks who never predicted the bull market or advised their clients to own gold in the first place.

Many of the banks, now predicting gold’s bull market will end in 2013, never predicted gold’s bull market in the first place. Most were bearish on gold in the early to mid years of the bull market and most only became bullish quite recently.

Very few have been consistent and very few have been bullish on gold in the long term.

It is also worth noting that most of them do not understand gold and continue to see it as a trade. 

Many of these banks' primary focus is short term profit, often trading profits, and therefore they do not understand the long term, passive diversification benefits of gold in a portfolio or as financial insurance. 

It is also not profitable for them to advise a buy and hold diversification strategy as more prudent advisers have been advising in recent years.  

While sentiment towards gold remains poor after recent weakness, the smart money is focused on the fundamentals and is positioning itself for higher gold prices in the medium term. Soros, Gross, Faber, Rogers, Paulson and other respected investors who predicted the crisis have large allocations which they continue to hold.


Silver in USD, 3 Year – (Bloomberg)

Investors need to be patient, fade out the day to day noise from banks and hedge funds and focus on gold’s value rather than its price movements – particularly in the short term. 

It remains important to focus on the long term diversification benefits of having an allocation to gold, silver, platinum and palladium.

NEWS   
Gold edges up before ECB meets, PGMs near 17-mth highs - Reuters

Gold Rises in Asia, Near-Term Outlook Weak; Precious Metals Lower – The Wall Street Journal

China's 2012 gold output up 12% - Paper - Reuters

Gold vending machine in Florida may be first of many – The Palm Beach Post

COMMENTARY
'Europe's A Fragile Bubble', Citi's Buiter Warns Of Unrealistic Complacency – Zero Hedge

Does China Still Love Gold? – Market Oracle

Video: Horror Bankers Attack – Max Keiser

Video: Goldsmiths put the nation's coins through their paces – The Telegraph

For breaking news and commentary on financial markets and gold, follow us on Twitter.

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Conservatives Upset Over Jim Carrey’s ‘Assault Rifle’ Tweet

Conservatives Upset Over Jim Carrey’s ‘Assault Rifle’ Tweet

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Posted on Feb 6, 2013
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Add Jim Carrey to the list of celebrities who have earned the ire of the right for publicly expressing an anti-gun sentiment. The actor, who is mostly known for comedic roles, took on a serious tone when he used Twitter to focus on the gun debate that has emerged in the wake of the Newtown, Conn., school shootings.

The backlash began after Carrey tweeted the following over the weekend:

Predictably, the actor’s statement did not go over well with those on the right with pro-gun views.

The Huffington Post:

This, of course, did not go over well with those who fear Obama himself will at any minute walk through their front door and take away their guns (except the ones they use for skeet shooting).

Fox Nation referred to the comment as “nasty”, while conservative blog WND noted, “‘Dumb and Dumber’ doesn’t begin to cover this one.”

Red Alert Politics writer Erin Brown wrote about it at length, decrying the tweet as a “careless remark ... rooted in the shallow, parroted talking points so commonly espoused by liberal elites.” She went on to lament the popularity of Carrey’s statement: “Sadly, his divisive comment has received more than 3,400 retweets and more than 1,600 ‘favorites’ as of this printing, proving once again that the power wielded by Hollywood celebrities carries a very real influence.”

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Carrey didn’t seem to be too fazed by the criticism, however, tweeting about the topic again Tuesday:

—Posted by Tracy Bloom.

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The U.S. Congress: From One Crisis to Another, The Politics of Debt Default

washington

“The full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate… Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets.”

-Ronald Reagan (1911-2004), 40th President of the United States (1981–89), (1983)

“Decisions about the debt level [should] occur in conjunction with spending and revenue decisions as opposed to the after-the-fact approach now used… [doing so] would help avoid the uncertainty and disruptions that occur during debates on the debt limit today.”

-U.S. Government Accountability Office (G.A.O.)

“I will not have another debate with this Congress over whether they should pay the bills for what they’ve racked up… We can’t not pay bills that we’ve already incurred.”

-President Barack Obama, Tuesday January 1, 2013

That’s why the American people hate Congress.”

-Chris Christie, New Jersey Republican Governor, (January 2, 2013, after the Republican House majority refused to vote on a $60 billion aid package for victims of Superstorm Sandy)

One crisis averted, three to come! Indeed, that’s what can be said after the U.S. House of Representatives passed legislation on January 23, 2013, to suspend the government’s statutory borrowing limit for three months.

In fact, the cycle of artificially created crises will go on and on in Washington D.C. Now, the next crises are scheduled for March 1s, for March 27th and for May 19th. Stay tuned. On March 1st, automatic sequester cuts agreed by Congress in 2012 will take effect, causing an immediate cut of $69 billion in public discretionary spending. Then, on March 27, the U.S. government’s ability to fund itself (the “continuing resolution”) will run out. And, of course, come May 19, the melodrama of raising the debt ceiling will be back again in force.

Ever since Republicans took control of the 435-member U.S. House of Representatives in 2010, a fiscal drama with the White House and the U.S. Senate has been replayed time and again. One of the political gimmick is called the “raising of the country’s debt limit.

Why so many artificial crises in the current American political system? Extreme political polarization seems to be the answer.

Indeed, since the 2010 mid-term election, when the Republican Party took control of the House of Representatives with some 242 seats, this party has behaved as if it were in fact two parties in one. There is the traditional conservative Republican Party on one side, and the radical Republican Tea Party on the other side. With some 67 anarchist anti-tax and anti-establishment Tea Party House members voting as a block, the latter has been in a position to hold the balance of power in the House and to prevent compromised solutions to the country’s fiscal problems.

A good example was the 2011 showdown between the Democratic Obama administration and the Republican-controlled House of Representatives regarding raising the U.S. government’s debt ceiling.

In the spring of 2011, House Republicans, spurred by Tea Party members who practice no party discipline toward the Republican Party except to themselves, and reneging on a decades-long bipartisan tradition, refused to raise the nation’s debt ceiling, thus threatening to push the U.S. government toward debt default. They demanded that the Obama administration concede to freezing tax revenues and to enacting massive spending cuts. In the midst of a financial crisis and an economic slowdown, such huge public spending cuts could have pushed the U.S. economy toward an economic depression similar to the 1930’s Great Depression.

For the first time, therefore, House Tea Party members decided to use the perfunctory requirement to raise the debt limit to gain partisan political advantage. That move has introduced into the functioning of the U.S. Congress an element of radicalism and brinkmanship that could prevent the U.S. government from operating properly for years to come.

Mind you, the obligation for Congress to vote on raising the U.S. government’s debt ceiling has existed since a 1917 law to that effect was enacted. It allows the U.S. Treasury to proceed with borrowing to finance government operations as outlined in an already approved budget for a given fiscal year.

Economically speaking, indeed, there are three main ways to finance public expenditures: -through tax revenues; -through borrowing; -or, through the printing press, when a government borrows from its own central bank. The latter is in fact an inflation tax imposed on every user of the national currency.

Therefore, if the U.S. Congress has already approved a public budget of operations that does not raise taxes in a sufficient amount to cover outlays, and if an inflation tax is out of question, the only other avenue left is to borrow the required funds.

For years, the 1917 requirement to raise the debt limit was considered redundant since the budget had already been approved and it was seen as a simple bipartisan formality. Since 1940, for example, the U.S. debt ceiling has been raised 94 times, 54 times by a Republican administration and 40 times by a Democratic administration. Altogether the debt ceiling has been raised 102 times since 1917. It has been raised every year that the U.S. government has run a deficit.

If the Tea Party members of the House keep on routinely using the 1917 law to formally raise the debt limit as an obstructionist tool, Congress may be constantly gridlocked and the U.S. government will continue going from crisis to crisis. A small minority of House members could then hold the U.S. government hostage. As a consequence, it could become increasingly difficult for the U.S. Administration to implement sensible economic and fiscal policies along the principle of majority rule. The U.S. economy is bound to suffer severely from such a political paralysis.

In 2011, former president Bill Clinton expressed the view that the 1917 law is unconstitutional since it goes against Article I, sec. 8 of the U.S. Constitution that requires that Congress pay “the Debts and provide for the … general Welfare of the United States.” Besides, the Fourteenth Amendment (section 4) of the U.S. Constitution states that: “the validity of the public debt of the United States… shall not be questioned.

Therefore, if Congress does not fulfill its duties for one reason or another, the President in whom executive power is vested may have the right to act for the “general Welfare of the United States”.

In the coming weeks, if the House of Representatives refuses bipartisan cooperation and keeps stonewalling the Administration, President Obama may have no other choice but to call the Tea Party members’ bluff by unilaterally declaring the 1917 law unconstitutional and letting the courts sort it out later.

A constitutional crisis may seem to many to be a better alternative than a repetitive and protracted economic and financial crisis and an economy constantly teetering on the brink of a permanent fiscal cliff.

Dr. Rodrigue Tremblay, a Canadian-born economist, is the author of the book “The Code for Global Ethics, Ten Humanist Principles”, and of “The New American Empire”)

Guest Post: Stocks, Money Flows, And Inflation

Via Pater Tenebrarum of Acting-Man blog,

Sentiment Goes Nuts

Mish reports that this week's Barron's cover looks like a pretty strong warning sign for stocks (but not only the cover as he points out, but also what's inside). However, there may be an even more stunning capitulation datum out there, in this case a survey that we have frequently mentioned in the past, the NAAIM survey of fund managers. This survey has reached an all time high in net bullishness last week, with managers on average 104% long (this is to say, including the bears, the average response results in a leveraged net long position, a first).


NAAIM

A new record high in the net bullish percentage of the NAAIM survey of fund managers – click for better resolution.

However, that is not all. NAIIM asks fund managers to relate their positioning as a range bounded by “200% net short” to “200% net long”, in other words, even fully leveraged net long and net short positions are considered.

The survey keepers also relate where the most extreme replies are situated within this range. Naturally, the most bullish manager(s) have been between 180% and 200% long for some time. So that number is actually only of concern if it shrinks, which has  in fact done (slightly) last week.

However, here is the stunner: the most “bearish” fund manager is now 60% net long! That has also never happened before – in effect, there not only are no bears left, there is also no-one left who's merely “neutral” on the market – the bullish consensus is now effectively 100% in the sense that not a single manager among those surveyed is left with an open net short position, not even a tiny one. Two weeks earlier, the most bearish respondent was still 200% short, and one week earlier 125%.

NAAIM response range

The NAAIM response range. The red ellipses show the new all time high in net bullish positioning, as well as the stance taken by the most “bearish” manager in the survey, who's now 60% net long.

That should be good for at least a two to three percent correction one would think, probably intraday (i.e., to be fully recovered by the close).

“Money Flows”

The nonsense people will talk – people who really should know better -  is sometimes truly breathtaking. Recently a number of strategists from large institutions, i.e., people who get paid big bucks for coming up with this stuff, have assured us that “equities are underowned”, that “money will flow from bonds to equities”, and that “money sitting on the sidelines” will be drawn into the market.

What are “underowned” equities, precisely? Are there any stocks that are not yet owned by someone, so to speak orphans, that are flying around in the Wall Street aether unsupervised? If so, give them to us please. Since apparently no-one owns them, they should presumably come for free.

And how exactly does money “flow from bonds to stocks”, pray tell? There may well be bondholders crazy enough to sell their bonds so they can buy into a stock market that's already 130% off the lows, but then someone else will have to buy their bonds, and someone will have to sell them his stocks. If that happens, someone will end up the patsy, but no money has “flowed” from one market to another. All that has happened is that the ownership of bonds, stocks and cash has changed. The same holds of course for so-called “money on the sidelines”.

Admittedly, the stock of money is indeed growing, courtesy of the Federal Reserve's virtual printing press. At the moment it increases at an 11.2% annual pace (broad money TMS-2) respectively a 9.3% annual pace (narrow money TMS-1), which is admittedly none too shabby and undoubtedly a major reason why stock prices have held firm. However, what that mainly  tells us is that money is now worth less, because there is more of it. Which prices in the economy will rise when the money supply is increased is never certain, but it is certain that some prices will rise.

Other than that, all stocks, all bonds and all cash are always held by someone. The only orphaned cash that is truly “on the sidelines” are banknotes people have lost on the street. Probably not enough to push equities even higher, but you never know.

John Hussman has also written about this very topic again last week (Hussman is  among the handful of people actually getting this right) and has raised a further interesting and logical point in this context. He explains why the weighting of bonds versus equities at pension funds and other institutional investors has been altered toward a larger percentage of bonds:

“Quite simply, the reason that pension funds and other investors hold more bonds relative to stocks than they have historically is that there are more bonds outstanding, relative to stocks, than there have been historically. What is viewed as “underinvestment” in stocks is actually a symptom of a rise in the gross indebtedness of the global economy, enabled and encouraged by quantitative easing of central banks, which have been successful in suppressing all apparent costs of that releveraging.”

(emphasis added)

There you have it – all it means at this juncture is that there is more debt extant than before. In fact, a lot more – as Hussman also remarks:

“[...] the volume of U.S. government debt foisted upon the public (even excluding what has been purchased by the Fed) has doubled since 2007, not to mention other sources of global debt issuance, while the market capitalization of stocks has merely recovered to its previously overvalued highs.”

(emphasis in the original)

The above facts have been pointed out over and over again, by Hussman and a few others (to our knowledge, Mish, Steven Saville and yours truly. If we forgot to mention anyone, then only because we haven't come across their writings yet). And yet, the fallacy keeps being repeated by people all over Wall Street.

Stocks  and “Inflation”

As noted above, there is currently (and has been for the past 4 ½ years), plenty of inflation. The money supply is inflated at breakneck speed, after all, the 10% and higher annualized growth rates we have experienced are compounding. We keep hearing from various sources that stocks are expected to be acting as a “hedge” when the time comes when a decline in money's purchasing power becomes evident by dint of rising indexes of the “general price level”, such as CPI. For instance, Kyle Bass last week reminded us of the excellent performance of Zimbabwe's stock market during the hyperinflation period by noting:

Zimbabwe's stock market was the best performer this decade – but your entire portfolio now buys you 3 eggs"

He's quite right, but it would actually be a mistake to compare the current market situation and the situation we will likely have the opportunity to observe should CPI actually ever rise again, with the Zimbabwe situation (at least initially).

Let us explain: right now, the “inflation” backdrop is a kind of sweet spot for stocks. There is plenty of monetary inflation, but the officially reported decline in money's purchasing power is very small, which helps to keep bond yields at a low level. “Inflation expectations”, i.e., expectations regarding future CPI, have risen, but not by enough to disturb this happy state of affairs.

It should be clear that the chance to go from “almost no inflation” (let's call that state “A”) directly to “hyperinflation” (which we will call state “C”)  is non-existent. Again, this is in the sense of rising consumer prices and disregarding the fact that the officially reported data are somewhat suspect. We are also disregarding the fact that the decline in money's purchasing power cannot be “measured” anyway.

So even to those who insist that stocks will protect one against the ravages of sharply rising prices of goods and services, it should be clear that things won't simply go from “A” to “C” in one go, but will first proceed to “B” (note, we are also leaving a deflationary contraction of the money supply aside here, which everyone agrees will result in falling stock prices. As long as there are Bernanke & co. at the helm, it isn't going to happen anyway).

“B” is the state of affairs that pertained in the 1970s: high levels of CPI, close to and intermittently even exceeding double digits, but not hyperinflation. What would stocks likely do if we were visited by such a state “B” in spite of the valiant efforts to keep CPI as low as possible by means of an ever changing calculation method?

Both logic and experience tell us that their valuations will be compressed, this is to say, p/e ratios will decline, very likely into single digits. This is because high levels of CPI will raise bond yields considerably, and the future stream of earnings will have to be discounted by higher interest rates.  Stock prices will also reflect the then presumably much higher inflation expectations. If nominal economic growth does not exceed the increase in CPI, then neither will earnings. The 1970s have in fact already shown what happens in such an environment: the stock market tends to decline.

So what if hyperinflation were to break out one day? In Zimbabwe even the nominal prices of stocks of companies that were effectively put out of business because they could no longer pay for inputs (due to a lack of foreign exchange) soared.

However, Kyle Bass is correct: the devaluation of money in the wider sense was even more pronounced than the increase in stock prices. Stocks did not protect anyone in the sense of fully preserving one's purchasing power. It was clearly better to hold stocks than cash or bonds in the hyperinflation period, but still your portfolio would 'only buy you three eggs' when all was said and done (while cash holdings bought absolutely nothing anymore in the end). 

The only things that actually preserved purchasing power were gold, foreign exchange and assorted hard assets for which a liquid market exists. We have put gold in first place because it not only preserved purchasing power during the hyperinflation in Zimbabwe, it actually increased it.  Stocks did no such thing.


zimbabwe stock market

The ZSE Industrial Index – impressive, right? Not so fast…..(via Random Thoughts) – click for better resolution.

709px-ZWDvUSDchart

The Zim$-USD exchange rate, official, parallel market, and the 'OMIR' rate (which is probably the most exact one: “…the Old Mutual Implied Rate (OMIR) was calculated by dividing the Zimbabwe Stock Exchange price of shares of the insurance company named "Old Mutual" by the London Stock Exchange Price for the same share.” – click for better resolution.

Zimbabwe's estimated inflation rate (from a report by the CATO institute, pdf):

Zim-inflation-1

Zimbabwe's hyperinflation progression

Hyperinflation episodes compared:

Zim-inflation-2

The time it took for prices to double, several hyperinflation episodes compared.  As can be seen, the rise in Zimbabwe's stock market was no match for the decline in money's purchasing power.

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Food Manufacturers are Fraudulently Diluting High-Quality Food with Inferior – Sometimes DANGEROUS – Quality...

 

Some of the Fake Ingredients Added to Food May be DANGEROUS

In a predictable trend, food manufacturers are fraudulently diluting high-quality food with inferior quality items.

As ABC News reports:

A new scientific examination by the non-profit food fraud detectives the U.S. Pharmacopeial Convention (USP), discovered rising numbers of fake ingredients in products from olive oil to spices to fruit juice.

"Food products are not always what they purport to be," Markus Lipp, senior director for Food Standards for the independent lab in Maryland, told ABC News.

In a new database to be released Wednesday, and obtained exclusively by ABC News today, USP warns consumers, the FDA and manufacturers that the amount of food fraud they found is up by 60 percent this year.

In addition, 70% of all ground beef  was found to contain "pink slime".

Butchers use "meat glue" to create "bigger" cuts of beef, chicken, lamb and fish, even though it leads to much higher levels of food poisoning:

British hamburgers were found to contain horse meat and pork ... and it could happen in the U.S. as well.

Indeed, modern red meat is arguably not really meat at all.

And selling genetically modified food without labeling them as such is arguably food fraud as well, since a large majority of Americans  want genetically modified foods to be labeled, genetically engineered foods have been linked to obesity, cancer, liver failure, infertility and all sorts of other diseases (brief videos here and here), and the Food and Drug Administration doesn't even test the safety of such foods.

Bad Policy Made Food Fraud Predictable

This trend was predictable because food manufacturers have been trying to hide food inflation in various ways.

The inflation in food prices, in turn, has been caused by quantitative easing - printed in an attempt to hide bank fraud - and the use of the printed money for wild speculation by the big banks has driven up food and related commodity prices.

And - instead of fighting for safer food - the Department of Justice and FDA often target whistleblowers and do everything they can to cover up wrongdoing. The Department of Agriculture is no better.  And the Feds are treating people who expose abuse in factory farms as potential errorists ... and the states want the same power.

Widespread food fraud is the predictable result.

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Breaking the Chains of Debt Peonage

Paying bills(Image: Paying Bills via Shutterstock)Chris Hedges gave this talk Saturday night in Brooklyn at the People’s Recovery Summit.

The corporate state has made it clear there will be no more Occupy encampments. The corporate state is seeking through the persistent harassment of activists and the passage of draconian laws such as Section 1021(b)(2) of the National Defense Authorization Act—and we will be in court next Wednesday to fight the Obama administration’s appeal of the Southern District Court of New York’s ruling declaring Section 1021 unconstitutional—to shut down all legitimate dissent. The corporate state is counting, most importantly, on its system of debt peonage to keep citizens—especially the 30 million people who make up the working poor—from joining our revolt.

Workers who are unable to meet their debts, who are victimized by constantly rising interest rates that can climb to as high as 30 percent on credit cards, are far more likely to remain submissive and compliant. Debt peonage is and always has been a form of political control. Native Americans, forced by the U.S. government onto tribal agencies, were required to buy their goods, usually on credit, at agency stores. Coal miners in southern West Virginia and Kentucky were paid in scrip by the coal companies and kept in perpetual debt servitude by the company store. African-Americans in the cotton fields in the South were forced to borrow during the agricultural season from their white landlords for their seed and farm equipment, creating a life of perpetual debt. It soon becomes impossible to escape the mounting interest rates that necessitate new borrowing.

Debt peonage is a familiar form of political control. And today it is used by banks and corporate financiers to enslave not only individuals but also cities, municipalities, states and the federal government. As the economist Michael Hudson points out, the steady rise in interest rates, coupled with declining public revenues, has become a way to extract the last bits of capital from citizens as well as government. Once individuals, or states or federal agencies, cannot pay their bills—and for many Americans this often means medical bills—assets are sold to corporations or seized. Public land, property and infrastructure, along with pension plans, are privatized. Individuals are pushed out of their homes and into financial and personal distress.

Debt peonage is a fundamental tool for control. This debt peonage must be broken if we are going to build a mass movement to paralyze systems of corporate power. And the most effective weapon we have to liberate ourselves as well as the 30 million Americans who make up the working poor is a sustained movement to raise the minimum wage nationally to at least $11 an hour. Most of these 30 million low-wage workers are women and people of color. They and their families struggle at a subsistence level and play one lender off another to survive. By raising their wages we raise not only the quality of their lives but we increase their capacity for personal and political power. We break one of the most important shackles used by the corporate state to prevent organized resistance.

Ralph Nader, whom I spoke with on Thursday, has been pushing activists to mobilize around raising the minimum wage. Nader, who knows more about corporate power and has been fighting it longer than any other American, has singled out, I believe, the key to building a broad-based national movement. There is among these underpaid 30 million workers—and some of them are with us tonight—a mounting despair at being unable to meet even the basic requirements to maintain a family. Nader points out that Walmart’s 1 million workers, like most of the 30 million low-wage workers, are making less per hour, adjusted for inflation, than workers made in 1968, although these Walmart workers do the work required of two Walmart workers 40 years ago.

If the federal minimum wage from 1968 were adjusted for inflation it would be $10.50. Instead, although costs and prices have risen sharply, the federal minimum wage remains stuck at $7.25 an hour. It is the lowest of the major industrial countries. Meanwhile, Mike Duke, the CEO of Walmart, makes $11,000 an hour. And he is not alone. These corporate chiefs make this much money because they have been able to keep in place a system by which workers are effectively disempowered, forced to work for substandard wages and denied the possibility through unions or the formal electoral systems of power to defend workers’ rights. This is why corporations lavish these CEOs with obscene salaries. These CEOs are the masters of plantations. And the moment workers rise up and demand justice is the moment the staggering inequality of wealth begins to be reversed.

Being a member of the working poor, as Barbara Ehrenreich chronicles in her important book “Nickel and Dimed,” is “a state of emergency.” It is “acute distress.” It is a daily and weekly lurching from crisis to crisis. The stress, the suffering, the humiliation and the job insecurity means that workers are reduced to doing little more than eating, sleeping—never enough—and working. And, most importantly, they are kept in a constant state of fear. Ehrenreich writes:

When someone works for less pay than she can live on—when, for example, she goes hungry so that you can eat more cheaply and conveniently—then she has made a great sacrifice for you, she has made you a gift of some part of her abilities, her health, and her life. The “working poor,” as they are approvingly termed, are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect; they endure privation so that inflation will be low and stock prices high. To be a member of the working poor is to be an anonymous donor, a nameless benefactor, to everyone else.

It is time to halt the sacrifice of the working poor. It is time to empower the 30 million low-wage workers—two-thirds of which are employed by large corporations such as Walmart and McDonald’s—to fight back.

Joe Sacco and I spent the last two years in the poorest pockets of the United States, our nation’s sacrifice zones, for our book “Days of Destruction, Days of Revolt.” We saw in Pine Ridge, S.D., Camden, N.J.—the poorest and the most dangerous city in the nation—the coalfields of southern West Virginia and the produce fields of Immokalee, Fla., how this brutal system of corporate exploitation works. In these sacrifice zones no one has legal protection. All institutions, from the press to the political class to the judiciary, are wholly owned subsidiaries of the corporate state. And what has been done to those in these sacrifice zones, those places corporations devastated first, is now being done to all of us.

There are no impediments within the electoral process or the formal structures of power to prevent predatory capitalism. We are all being forced to kneel before the dictates of the marketplace. The human cost, the attendant problems of drug and alcohol abuse, the neglect of children, the early deaths—in Pine Ridge the average life expectancy of a male is 48, the lowest in the Western Hemisphere outside of Haiti—is justified by the need to make greater and greater profit. And these costs are now being felt across the nation. The phrase “the consent of the governed” has become a cruel joke. We use a language to describe our systems of governance that no longer correspond to reality. The disconnect between illusion and reality makes us one of the most self-deluded populations on the planet.

The Weimarization of the American working class, and increasingly the middle class, is by design. It is part of a corporate reconfiguration of the national and global economy into a form of neofeudalism. It is about creating a world of masters and serfs, of empowered oligarchic elites and broken disempowered masses. And it is not only our wealth that is taken from us. It is our liberty. The so-called self-regulating market, as the economist Karl Polanyi wrote in “The Great Transformation,” always ends with mafia capitalism and a mafia political system. This system of self-regulation, Polanyi wrote, always leads to “the demolition of society.”

And this is what is happening—the demolition of our society and the demolition of the ecosystem that sustains the human species. In theological terms these corporate forces, driven by the lust for ceaseless expansion and exploitation, are systems of death. They know no limits. They will not stop on their own. And unless we stop them we are as a nation and finally as a species doomed. Polanyi understood the destructive power of unregulated corporate capitalism unleashed upon human society and the ecosystem. He wrote: “In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological, and moral entity ‘man’ attached to the tag.”

Polanyi wrote of a society that surrendered to the dictates of the market. “Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society. Undoubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human and natural substance as well as its business organizations was protected against the ravages of this satanic mill.

The global and national economy because of this “satanic mill” continues to deteriorate, and yet, curiously, stock market levels are close to their highs in 2007 before the global financial meltdown. This is because these corporations have been able to suppress wages, slash social programs and bilk the government for staggering sums of money. The Federal Reserve purchases about $85 billion worth of mortgage-backed securities and Treasury bills every month. This means that the Fed is printing endless streams of money to buy up government debt and toxic assets from the banks.  The Federal Reserve now owns assets, much of them worthless, of $3.01 trillion. This is triple what it was in 2008.

And while corporations such as Citibank and General Electric loot the Treasury they exact more pounds of flesh in the name of austerity. General Electric, as Nader points out, is a net job exporter. Over the past decade, as Citizens for Tax Justice has documented, GE’s effective federal income tax rate on its $81.2 billion in pretax U.S. profits has been at most 1.8 percent. Because of the way General Electric’s accountants play with tax liabilities the company actually receives money from the Treasury. They have several billion dollars paid to them from the federal government into company bank accounts—and these are not tax refunds. The company, as Nader argues, is a net drain on the Treasury and a net drain on jobs. It violates a host of environmental and criminal laws. And yet Jeffery Immelt, the CEO of General Electric, was appointed to be the chairman of Obama’s Jobs Council. Immelt’s only major contribution to the jobs initiative was to get rid of 37,000 of his employees since 2001. Jim McNerney, president and CEO of Boeing, who also sat on the Jobs Council, has cut over 14,000 jobs since 2008, according to Public Campaign. The only jobs the CEOs on the Jobs Council were concerned with were the ones these CEOs eradicated. The Jobs Council, which Obama disbanded this week, is a microcosm of what is happening within the corridors of power. Corporations increasingly terminate jobs here to hire grossly underpaid workers in India or China while at the same time stealing as much as fast as they can on the way out the door.

As Michael Hudson has pointed out, financialization has created a new kind of class war. The old class warfare took place between workers and bosses. Workers organized to fight for fair wages, better work hours and safety conditions in the workplace as well as adequate pensions and medical benefits. But with a country of debtors and a government that must also borrow to continue operating, Hudson says, we have changed the way class warfare works. Finance, he points out, controls state and federal policy as well as the lives of ordinary workers. It is able to dictate working conditions. The financiers, who insist that cuts be made so governments can repay loans, impose draconian austerity and long-term unemployment to, as Hudson told a Greek newspaper, “drive down wages to a degree that could not occur in the company-by-company clash between industrial employers and their workers.”

The former Federal Reserve Chairman Alan Greenspan, testifying before Congress, was quite open about the role of debt peonage in keeping workers passive. Greenspan pointed out that since 1980 labor productivity has increased by about 83 percent. Yet real wages have stagnated. Greenspan said this was because workers were too burdened with mortgage debts, college loans, auto payments and credit-card debt to risk losing a job. Household debt in the United States is around $13 trillion. This is only $2 trillion less than the country’s total yearly economic output. Greenspan was right. Miss a payment on your credit card and your interest rates jumps to 30 percent. Fail to pay your mortgage and you lose your home. Miss your health insurance payments, which have been spiraling upwards, and if you are seriously ill you go into bankruptcy, as 1 million Americans who get sick do every year. Trash your credit rating and your fragile financial edifice, built on managing debt, collapses. Since most Americans feel, on some level, as Hudson points out, that they are a step or two away from being homeless, they are deeply averse to challenging corporate power. It is not worth the risk. And the corporate state knows it. Absolute power, the philosopher Thomas Hobbes wrote, depends on fear and passivity.

The only way to break this fear and passivity is to organize workers to break the cycle of mounting debt. And the first step to achieving independence from debt—the primary form of political control by the corporate state—is to raise the minimum wage. There are other solutions—forgiving mortgage and student debt, instituting universal health care, establishing a nationwide jobs program to rebuild the country’s Third World infrastructure, and green energy—but none of this will happen until we are able to mount a sustained mass movement that discredits the corporate state. This mass movement will arise, as Nader says, when we mobilize around the minimum wage.

The lowest-grade worker at the General Electric plant that makes high-tech health care devices outside Paterson in Totowa [New Jersey]—a pay grade known as the D 04—was just raised to $14,555 a year. That is under $8 an hour. The plant’s highest-paid hourly employee, known as D 16, earns $22,000. Immelt makes over $11 million a year. This vast disparity in income, and this wage abuse, is played out in every corporation in the country. No one in Washington intends to challenge it.

Only 11.3 percent of workers in this country belong to unions. This is the lowest percentage in 80 years. And nearly all these unions, and especially the AFL-CIO, have been emasculated by corporate power.

Nader is right when he warns that we are not going to be assisted in this effort by established unions. Union leaders are bought off. They are comfortable. They are pulling down at least five times what rank-and-file workers make. Nader says we have to mount protests not only outside the doors of Walmarts and General Electric plants, not only outside congressional offices, but outside the doors of the AFL-CIO. There is no established institution inside or outside government that will help us. They are all broken or complicit. But there are the 30 million working poor who, if we organize to break the system of debt peonage that holds them hostage, may be willing to rise up. We are bound with many chains and shackles. We will have to break them one at a time. But once we rise up, once we are able to threaten the corporate systems that keep us supine through fear, we will unleash a torrent of energy and passion that will confirm the worst nightmares of our corporate overlords.

Breaking the Chains of Debt Peonage

Chris Hedges gave this talk Saturday night in Brooklyn at the People’s Recovery Summit.

(Photo: watchingfrogsboil via flickr)The corporate state has made it clear there will be no more Occupy encampments. The corporate state is seeking through the persistent harassment of activists and the passage of draconian laws such as Section 1021(b)(2) of the National Defense Authorization Act—and we will be in court next Wednesday to fight the Obama administration’s appeal of the Southern District Court of New York’s ruling declaring Section 1021 unconstitutional—to shut down all legitimate dissent. The corporate state is counting, most importantly, on its system of debt peonage to keep citizens—especially the 30 million people who make up the working poor—from joining our revolt.

Workers who are unable to meet their debts, who are victimized by constantly rising interest rates that can climb to as high as 30 percent on credit cards, are far more likely to remain submissive and compliant. Debt peonage is and always has been a form of political control. Native Americans, forced by the U.S. government onto tribal agencies, were required to buy their goods, usually on credit, at agency stores. Coal miners in southern West Virginia and Kentucky were paid in scrip by the coal companies and kept in perpetual debt servitude by the company store. African-Americans in the cotton fields in the South were forced to borrow during the agricultural season from their white landlords for their seed and farm equipment, creating a life of perpetual debt. It soon becomes impossible to escape the mounting interest rates that necessitate new borrowing.

Debt peonage is a familiar form of political control. And today it is used by banks and corporate financiers to enslave not only individuals but also cities, municipalities, states and the federal government. As the economist Michael Hudson points out, the steady rise in interest rates, coupled with declining public revenues, has become a way to extract the last bits of capital from citizens as well as government. Once individuals, or states or federal agencies, cannot pay their bills—and for many Americans this often means medical bills—assets are sold to corporations or seized. Public land, property and infrastructure, along with pension plans, are privatized. Individuals are pushed out of their homes and into financial and personal distress.

Debt peonage is a fundamental tool for control. This debt peonage must be broken if we are going to build a mass movement to paralyze systems of corporate power. And the most effective weapon we have to liberate ourselves as well as the 30 million Americans who make up the working poor is a sustained movement to raise the minimum wage nationally to at least $11 an hour. Most of these 30 million low-wage workers are women and people of color. They and their families struggle at a subsistence level and play one lender off another to survive. By raising their wages we raise not only the quality of their lives but we increase their capacity for personal and political power. We break one of the most important shackles used by the corporate state to prevent organized resistance.Ralph Nader, whom I spoke with on Thursday, has been pushing activists to mobilize around raising the minimum wage. Nader, who knows more about corporate power and has been fighting it longer than any other American, has singled out, I believe, the key to building a broad-based national movement. There is among these underpaid 30 million workers—and some of them are with us tonight—a mounting despair at being unable to meet even the basic requirements to maintain a family. Nader points out that Walmart’s 1 million workers, like most of the 30 million low-wage workers, are making less per hour, adjusted for inflation, than workers made in 1968, although these Walmart workers do the work required of two Walmart workers 40 years ago.

If the federal minimum wage from 1968 were adjusted for inflation it would be $10.50. Instead, although costs and prices have risen sharply, the federal minimum wage remains stuck at $7.25 an hour. It is the lowest of the major industrial countries. Meanwhile, Mike Duke, the CEO of Walmart, makes $11,000 an hour. And he is not alone. These corporate chiefs make this much money because they have been able to keep in place a system by which workers are effectively disempowered, forced to work for substandard wages and denied the possibility through unions or the formal electoral systems of power to defend workers’ rights. This is why corporations lavish these CEOs with obscene salaries. These CEOs are the masters of plantations. And the moment workers rise up and demand justice is the moment the staggering inequality of wealth begins to be reversed.

Being a member of the working poor, as Barbara Ehrenreich chronicles in her important book “Nickel and Dimed,” is “a state of emergency.” It is “acute distress.” It is a daily and weekly lurching from crisis to crisis. The stress, the suffering, the humiliation and the job insecurity means that workers are reduced to doing little more than eating, sleeping—never enough—and working. And, most importantly, they are kept in a constant state of fear. Ehrenreich writes:

When someone works for less pay than she can live on—when, for example, she goes hungry so that you can eat more cheaply and conveniently—then she has made a great sacrifice for you, she has made you a gift of some part of her abilities, her health, and her life. The “working poor,” as they are approvingly termed, are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect; they endure privation so that inflation will be low and stock prices high. To be a member of the working poor is to be an anonymous donor, a nameless benefactor, to everyone else.

It is time to halt the sacrifice of the working poor. It is time to empower the 30 million low-wage workers—two-thirds of which are employed by large corporations such as Walmart and McDonald’s—to fight back.

Joe Sacco and I spent the last two years in the poorest pockets of the United States, our nation’s sacrifice zones, for our book “Days of Destruction, Days of Revolt.” We saw in Pine Ridge, S.D., Camden, N.J.—the poorest and the most dangerous city in the nation—the coalfields of southern West Virginia and the produce fields of Immokalee, Fla., how this brutal system of corporate exploitation works. In these sacrifice zones no one has legal protection. All institutions, from the press to the political class to the judiciary, are wholly owned subsidiaries of the corporate state. And what has been done to those in these sacrifice zones, those places corporations devastated first, is now being done to all of us.

There are no impediments within the electoral process or the formal structures of power to prevent predatory capitalism. We are all being forced to kneel before the dictates of the marketplace. The human cost, the attendant problems of drug and alcohol abuse, the neglect of children, the early deaths—in Pine Ridge the average life expectancy of a male is 48, the lowest in the Western Hemisphere outside of Haiti—is justified by the need to make greater and greater profit. And these costs are now being felt across the nation. The phrase “the consent of the governed” has become a cruel joke. We use a language to describe our systems of governance that no longer correspond to reality. The disconnect between illusion and reality makes us one of the most self-deluded populations on the planet.

The Weimarization of the American working class, and increasingly the middle class, is by design. It is part of a corporate reconfiguration of the national and global economy into a form of neofeudalism. It is about creating a world of masters and serfs, of empowered oligarchic elites and broken disempowered masses. And it is not only our wealth that is taken from us. It is our liberty. The so-called self-regulating market, as the economist Karl Polanyi wrote in “The Great Transformation,” always ends with mafia capitalism and a mafia political system. This system of self-regulation, Polanyi wrote, always leads to “the demolition of society.”

And this is what is happening—the demolition of our society and the demolition of the ecosystem that sustains the human species. In theological terms these corporate forces, driven by the lust for ceaseless expansion and exploitation, are systems of death. They know no limits. They will not stop on their own. And unless we stop them we are as a nation and finally as a species doomed. Polanyi understood the destructive power of unregulated corporate capitalism unleashed upon human society and the ecosystem. He wrote: “In disposing of a man’s labor power the system would, incidentally, dispose of the physical, psychological, and moral entity ‘man’ attached to the tag.”

Polanyi wrote of a society that surrendered to the dictates of the market. “Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as victims of acute social dislocation through vice, perversion, crime, and starvation. Nature would be reduced to its elements, neighborhoods and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. Finally, the market administration of purchasing power would periodically liquidate business enterprise, for shortages and surfeits of money would prove as disastrous to business as floods and droughts in primitive society. Undoubtedly, labor, land, and money markets are essential to a market economy. But no society could stand the effects of such a system of crude fictions even for the shortest stretch of time unless its human and natural substance as well as its business organizations was protected against the ravages of this satanic mill.

The global and national economy because of this “satanic mill” continues to deteriorate, and yet, curiously, stock market levels are close to their highs in 2007 before the global financial meltdown. This is because these corporations have been able to suppress wages, slash social programs and bilk the government for staggering sums of money. The Federal Reserve purchases about $85 billion worth of mortgage-backed securities and Treasury bills every month. This means that the Fed is printing endless streams of money to buy up government debt and toxic assets from the banks.  The Federal Reserve now owns assets, much of them worthless, of $3.01 trillion. This is triple what it was in 2008.

And while corporations such as Citibank and General Electric loot the Treasury they exact more pounds of flesh in the name of austerity. General Electric, as Nader points out, is a net job exporter. Over the past decade, as Citizens for Tax Justice has documented, GE’s effective federal income tax rate on its $81.2 billion in pretax U.S. profits has been at most 1.8 percent. Because of the way General Electric’s accountants play with tax liabilities the company actually receives money from the Treasury. They have several billion dollars paid to them from the federal government into company bank accounts—and these are not tax refunds. The company, as Nader argues, is a net drain on the Treasury and a net drain on jobs. It violates a host of environmental and criminal laws. And yet Jeffery Immelt, the CEO of General Electric, was appointed to be the chairman of Obama’s Jobs Council. Immelt’s only major contribution to the jobs initiative was to get rid of 37,000 of his employees since 2001. Jim McNerney, president and CEO of Boeing, who also sat on the Jobs Council, has cut over 14,000 jobs since 2008, according to Public Campaign. The only jobs the CEOs on the Jobs Council were concerned with were the ones these CEOs eradicated. The Jobs Council, which Obama disbanded this week, is a microcosm of what is happening within the corridors of power. Corporations increasingly terminate jobs here to hire grossly underpaid workers in India or China while at the same time stealing as much as fast as they can on the way out the door.

As Michael Hudson has pointed out, financialization has created a new kind of class war. The old class warfare took place between workers and bosses. Workers organized to fight for fair wages, better work hours and safety conditions in the workplace as well as adequate pensions and medical benefits. But with a country of debtors and a government that must also borrow to continue operating, Hudson says, we have changed the way class warfare works. Finance, he points out, controls state and federal policy as well as the lives of ordinary workers. It is able to dictate working conditions. The financiers, who insist that cuts be made so governments can repay loans, impose draconian austerity and long-term unemployment to, as Hudson told a Greek newspaper, “drive down wages to a degree that could not occur in the company-by-company clash between industrial employers and their workers.”

The former Federal Reserve Chairman Alan Greenspan, testifying before Congress, was quite open about the role of debt peonage in keeping workers passive. Greenspan pointed out that since 1980 labor productivity has increased by about 83 percent. Yet real wages have stagnated. Greenspan said this was because workers were too burdened with mortgage debts, college loans, auto payments and credit-card debt to risk losing a job. Household debt in the United States is around $13 trillion. This is only $2 trillion less than the country’s total yearly economic output. Greenspan was right. Miss a payment on your credit card and your interest rates jumps to 30 percent. Fail to pay your mortgage and you lose your home. Miss your health insurance payments, which have been spiraling upwards, and if you are seriously ill you go into bankruptcy, as 1 million Americans who get sick do every year. Trash your credit rating and your fragile financial edifice, built on managing debt, collapses. Since most Americans feel, on some level, as Hudson points out, that they are a step or two away from being homeless, they are deeply averse to challenging corporate power. It is not worth the risk. And the corporate state knows it. Absolute power, the philosopher Thomas Hobbes wrote, depends on fear and passivity.

The only way to break this fear and passivity is to organize workers to break the cycle of mounting debt. And the first step to achieving independence from debt—the primary form of political control by the corporate state—is to raise the minimum wage. There are other solutions—forgiving mortgage and student debt, instituting universal health care, establishing a nationwide jobs program to rebuild the country’s Third World infrastructure, and green energy—but none of this will happen until we are able to mount a sustained mass movement that discredits the corporate state. This mass movement will arise, as Nader says, when we mobilize around the minimum wage.

The lowest-grade worker at the General Electric plant that makes high-tech health care devices outside Paterson in Totowa [New Jersey]—a pay grade known as the D 04—was just raised to $14,555 a year. That is under $8 an hour. The plant’s highest-paid hourly employee, known as D 16, earns $22,000. Immelt makes over $11 million a year. This vast disparity in income, and this wage abuse, is played out in every corporation in the country. No one in Washington intends to challenge it.

Only 11.3 percent of workers in this country belong to unions. This is the lowest percentage in 80 years. And nearly all these unions, and especially the AFL-CIO, have been emasculated by corporate power.

Nader is right when he warns that we are not going to be assisted in this effort by established unions. Union leaders are bought off. They are comfortable. They are pulling down at least five times what rank-and-file workers make. Nader says we have to mount protests not only outside the doors of Walmarts and General Electric plants, not only outside congressional offices, but outside the doors of the AFL-CIO. There is no established institution inside or outside government that will help us. They are all broken or complicit. But there are the 30 million working poor who, if we organize to break the system of debt peonage that holds them hostage, may be willing to rise up. We are bound with many chains and shackles. We will have to break them one at a time. But once we rise up, once we are able to threaten the corporate systems that keep us supine through fear, we will unleash a torrent of energy and passion that will confirm the worst nightmares of our corporate overlords.

© 2013 TruthDig

Chris Hedges

Chris Hedges writes a regular column for Truthdig.com. Hedges graduated from Harvard Divinity School and was for nearly two decades a foreign correspondent for The New York Times. He is the author of many books, including: War Is A Force That Gives Us Meaning, What Every Person Should Know About War, and American Fascists: The Christian Right and the War on America.  His most recent book is Empire of Illusion: The End of Literacy and the Triumph of Spectacle.

Obsolete Humans? Why Elites Want You to Fear the Robot

Dystopian technology fantasies are flooding the media, to the delight of the 1 percent.

Photo Credit: Shutterstock.com

February 4, 2013  |  

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Editor's note: This is the third part in an ongoing series on job insecurity.

Machines have been relieving humans from drudgery and delighting us with their marvelous feats for thousands of years. Consider the Antikythera mechanism, a Hellenistic wonder of wood and bronze gears that charted the movements of the heavens, thought to be the first analog computer. The island of Rhodes was so famous for its automata, as ancient robots were known, that Pindar wrote an ode in their honor:

The animated figures stand
Adorning every public street
And seem to breathe in stone, or
Move their marble feet.
—(trans. Rev. C. A. Wheelwright, 1830), Seventh Olympic Ode (95)

Do we still hold robots in such high esteem? It depends on how the economy is doing.

Robot Revolution?

When economic times are good, machines are celebrated as wonders of progress and prosperity that will improve our lives. But when times are tough, they become objects of fear. The unemployment crisis of the past four years was triggered by a Wall Street-driven financial crash, exacerbated by policy makers who failed to do enough to stimulate the economy and to ensure that there’s enough demand for goods and services. But lately, a new argument for job insecurity has made a splash in the media: It’s the machines! Pundits predict the “end of labor,” and talk about armies of sleek robots taking over the workplace as a foregone conclusion. Dystopian fantasies worthy of a late-night sci-fi flick flood the airwaves.

The 2011 book Race Against The Machine, by MIT researchers Erik Brynjolfsson and Adam McAfee, fueled the idea that machines are finally getting so smart that they’re displacing human jobs at an alarming rate and leaving stunned workers helpless in the unemployment line. This time, they warn, it’s not just factory workers or agricultural hands who will find their job snatched by a robot. White-collar workers like accountants and lawyers are losing out to machines.

Scary articles in the business section warn that any rise in wages will drive companies to save money by shedding workers and buying robots. Visions of increased efficiency and machines that can run 24/7 with no need for bathroom breaks have workers frantically trying to prove their value. Bosses warn that worker protests will only speed up automation. Don’t like the harsh conditions at Foxconn? Fine, a robot will do your job. The message: Keeping wages down and workers toiling until they drop is the only way to stave off a robot revolution.

People are naturally terrified when the economy is not growing. Technical change becomes the great evil, and gives people something concrete to blame for their economic woes. It also provides a handy scare tactic for those want to squeeze wages and workers, and a cover for politicians who push austerity policies and object to government intervention in the economy. During his first term, President Obama sometimes echoed this line of thought in remarks about the rise of things like ATMs, suggesting that because automation causes unemployment, there’s not a lot the government can do. (Never mind the incredible proliferation of banks on every corner staffed with what appear to be humans.)
 
The notion that technology is driving current unemployment doesn’t make much sense when you look at it closely. In 2007, there were reasonable, if not great, labor markets in the U.S. The giant leap in unemployment numbers dates from a very specific event, not from a long-run process that has been displacing workers over time. In 2007, the unemployment rate was 4.6. By 2009, it was 9.6, and remains very high. What happened wasn’t a sudden rush of robots onto the scene, but a financial catastrophe that nearly tanked the global economy.

Back in the 1990s, all kinds of technological changes were happening, as new users of the Internet will recall. Manufacturing productivity and some parts of service productivity went way up. People weren’t paranoid about machines because the economy was humming along. Technology was making humans more productive, the pundits said.

But now those same people who cheered technology are warning that this time, it’s different. Now robots have higher cognitive functions, and can do more things that used to be the sole province of humans. Noah Smith, a finance professor at Stony Brook University, sounded the alarm in a piece in The Atlantic:

“Once human cognition is replaced, what else have we got? For the ultimate extreme example, imagine a robot that costs $5 to manufacture and can do everything you do, only better. You would be as obsolete as a horse.”

You Are Not a Horse, Of Course

Is that really true? Are you about to become as redundant as a Victorian buggy horse?

Economist William Lazonick, director of the University of Massachusetts Center for Industrial Competitiveness, thinks that economists have gotten a lot of the labor-technology issue wrong. He reminds us that it was 19th-century economist David Ricardo, author of the theory of comparative advantage, who is largely responsible for the modern notion that technology depresses wages and displaces workers. He wrote a famous book in 1817, during the world’s first very first industrial revolution, in which he argued that machinery would not hurt workers. Then, in a third edition, Ricardo famously changed his mind. That recantation had enormous impact.

Nineteenth-century thinkers were influenced by Ricardo, and also by Friedrich Engels, whose dad owned a textile factory in Germany which had some outlets in England. Engels was deeply disturbed by what he saw in these factories, and at the age of 24 he wrote a treatise called “ Condition of the Working Class in 1844.”

Engels saw textile workers treated badly and being replaced by machines as weaving was moving into factories. He was right about what he saw.  A machine known as the “self-acting mule” which spun cotton was indeed taking over work done by humans. But Engels was also basing his theories on a moment in time that happened to be the worst economic downturn of the century. That would be like judging 20th-century factory conditions in the U.S. by visiting Chicago meat-packing plants in 1933. The problems faced by the workers Engels saw were not a permanent set of conditions, but partly the result of a cyclical downturn. Technology wasn’t really the issue. Many weavers were forced to move from their homes, where they had traditionally labored, into factories, where conditions were difficult and where women, who had traditionally worked as weavers, were excluded. In the long run, factory owners saw that they needed the skills of workers to run the new machines. Britain became the workshop of the world, workers did pretty well, and the country enjoyed a long economic boom.

But Karl Marx looked at Engels’ work and concluded that automation was decreasing the power of workers. Marx got many things right, but he may have gotten it very wrong on technology and labor.

It’s undeniable that mechanization can sometimes leave workers behind, like makers of Swiss watches, or, to use a more recent example, compositors who have been replaced by digital printing. But displacement doesn’t have to be inevitable or permanent. Countries can respond with national policies that help those valuable, highly trained workers acquire new training. They can use local, state, and federal taxes to help foot the bill. The kinds of policies used by companies makes a huge difference in how workers experience automation. Japan is the world leader in robots, but it’s also a place where permanent employment is much more common than in the U.S. In 1990, Japan had many times more robots than factories. But it turns out that in order to make those robots work, companies needed people for programming, maintenance and repair. Because they didn’t lay off employees, firms simply retrained them. Workers observed the robots and learned how to do new things to work alongside them.

In Lazonick’s view, economists have not thought enough about how workers can gain from technological change. When companies automate, he argues, you can expect more jobs, not fewer. Just look at a company like Apple, which automates rigorously and yet provides new possibilities for jobs. It produces software that does things humans used to do, for example, but it employs engineers, designers, and people who package, market, and sell new products.

Automation increases profits for companies, but for Lazonick the real question is, how are those profits distributed? Are they being distributed to shareholders for short-term profits? Or are they being invested back into the company to do vital things like retraining workers, which helps the long-term economic outlook? The problem is not automation, but greedy CEOs who pay themselves gigantic, disproportionate sums and follow the dangerous and misguided principle of “ maximizing shareholder value” to distribute profits to themselves, often caring little whether the company even survives 10 years down the road. What’s it to them? They’ll have their pay packages and can move on. The perverse misuse corporate profits is the real culprit, not Rosie the Robot.

Why should we expect companies to spend their money retraining workers? Aren’t they around to make a buck? Certainly many of them are doing quite well in that department, making record-breaking profits. The truth is that companies are also supposed to have a social purpose. That’s why we, as taxpayers, invest in all kinds of things that allow them to do business, from constructing roads and airports to basic research. (And why we confer on them the extraordinary privilege of limited liability and other legal advantages.) Apple would not be able to make its wondrous gadgets if the government had not invested heavily in the development of the Internet and things like touchscreen technology. So Apple owes something back to those who have footed the bill for its success. That includes not only sharing profits with workers, but investing in retraining them when new advances in technology change the workplace. It's not just altruism, it's about fairness. And smart economics.

Workers aren’t vulnerable because of robots. Investment in automation is a good thing that can produce more, and better jobs. People are vulnerable because of misguided policies that depress economic growth, reward short-term profit-making, and leave workers with nothing left in their pockets to buy goods and services – not even robot vacuum cleaners, now endowed with human-like emotive responses so we won’t be mad when they break down -- which they very frequently do. And guess what? They need a human to fix them.

The US Economy in Crisis: Recovery is an Illusion

economy

Headlines flashed warning signs. Commentaries downplayed them. A Wall Street Journal editorial headlined “As Contractions Go….”

US Q IV GDP shrank, “but not to worry. The report is better than it sounds, the stock market is rocking, and (the Fed will) keep both feet pressed firmly on the monetary accelerator.”

The Financial Times headlined “US outlook still clear despite shower,” saying:

Predicting recession “based on (-0.1% GDP decline) “is a bit like expecting rain because somebody threw a bucket of water out the window.”

The wildcard is “if Congress decides to dump water out the window every month, via across-the-board ‘sequester’ cuts” expected soon.

According to Bloomberg, “R-Word For US Economy in 2013 is Rebound Not Recession.”

According to JP Morgan Chase, Bank of America, and Morgan Stanley economists, America’s economy “will bounce back in (Q I) after plunging defense spending and dwindling inventory growth” hurt Q IV.

Not according to economist John Williams. Recovery is illusory, he says. It’s fake. Phony government numbers conceal weakness. Growth hasn’t occurred since 2006/2007.

Earlier Williams said:

“Indeed, the ‘recovery’ is an illusion that has been created as a direct result of methodological changes in government inflation reporting of recent decades.”

They “resulted in an artificial lowering of official rates of inflation.  The faux growth problem is in the use of understated inflation estimates in deflating a number of economic series.”

“Major economic series that have no underlying pricing base – such as housing starts, payroll employment and consumer confidence – correspondingly do not require inflation adjustment to put them on a consistent theoretical basis with the concept of real (inflation-adjusted) GDP.”

“Those series confirm a history of business activity in recent years that shows a plunge in the economy from 2006/2007 into late-2008/mid-2009, followed by a period of protracted, low-level stagnation, or bottom-bouncing, instead of ‘recovery.’ ”

Williams expects double-dip recession in 2013. It likely began in 2012 Q II or III, he believes.

Last August, market analyst Marc Faber rated odds for global recession at 100%. Little or nothing ahead looks promising. Corporate profits will disappoint.

The Fed can do so much and no more. Money printing has limits. It’s not magic. On January 31, Faber repeated earlier warnings.

“When you print money,” he said, it “doesn’t flow evenly into an economy. It flows to some people or to sectors first, and in this case, it flowed into equities, and until about five months ago into bonds.”

“I believe that markets will punish central banks at some state through an accident.”

Stocks could hit bubble levels and pop. Rising interest rates could collapse bonds.

“For the first time in four years, since the lows in March 2009, I love this market because the higher it goes, the more likely we will have a nice crash, a big time crash.”

He thinks weak global growth and disappointing corporate profits will trigger trouble.

Fed governors are cautious. On January 3, FOMC minutes said:

“With regard to the possible costs and risks of purchases, a number of participants expressed the concern that additional purchases could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation, for example, by potentially causing inflation expectations to rise or by impairing the future implementation of monetary policy.”

“Participants also discussed the implications of continued asset purchases for the size of the Federal Reserve’s balance sheet. Depending on the path for the balance sheet and interest rates, the Federal Reserve’s net income and its remittances to the Treasury could be significantly affected during the period of policy normalization.”

“Participants noted that the Committee would need to continue to assess whether large purchases were having adverse effects on market functioning and financial stability.” ”

“They expressed a range of views on the appropriate pace of purchases, both now and as the outlook evolved. It was agreed that both the efficacy and the costs would need to be carefully monitored and taken into account in determining the size, pace, and composition of asset purchases.”

Governors are conflicted. They have reason to worry. They’re questioning excessive longterm money printing benefits. Artificial schemes don’t work. They cause more harm than good.

Eventually they end. What can’t go on forever won’t. They’ll have to decide when. Economic and market consequences will follow.

Newly released Q IV GDP data showed growth contracted 0.1%. Sequestered deficit cutting suggests further declines. Consumer confidence is low for good reason. Europe, China, Japan, and other major world economies show weakness.

Is America on track for double dip trouble? In Q IV, government and business inventory spending declined. Auto sales alone drove consumer spending gains. Deep discounts, near zero interest rates, and Hurricane Sandy affected purchases stimulated sales.

Exports were down. Weak global manufacturing and trade affected them. Healthcare spending slowed noticeably. US economic growth ground to a halt. Doing so suggests weakness going forward.

Artificial stimulus works only so long. Q III included record defense spending. It accounted for over a third of GDP growth. It followed two years of reduced government spending.

Q III data were released days before November elections. Good news benefited Obama.

True Q III GDP growth was misreported. It wasn’t 3%. When accurately adjusted, it was 1 – 1.5%. It’s been that way for two years. Day of reckoning signs appeared in Q IV.

Multiple quantitative easing rounds barely held economic growth above water. Money printing madness substituted for stimulative growth. Central bank intervention repeated what hasn’t before worked.

European economies are troubled. America shows weakness. Force-fed austerity doesn’t work. Decline replaces prosperity. Living standards deteriorate. Households have less to spend.

Production and consumption suffer. So does the real economy. Financial war helps speculators alone benefit. Eventually expect systemic crisis. It could take months or years to arrive.

Market manipulation delays day of reckoning time. It can’t prevent it. Q IV GDP suggests 2013 weakness. Headwinds may be stiffer than expected.

Payroll tax increases cuts $100 billion from GDP. It does so when stimulus is needed. Consumer sentiment and spending are weak.

Expect sequestered/largely discretionary $1.2 trillion cuts by end of March. Stiff 10 – 20% health insurance premium hikes impact healthcare spending.

Business spending spiked in Q IV. It did so ahead of expected tax law changes. Expect it to slow in Q I. Manufacturing is weak. Housing remains troubled. So is America’s economy. Odds favor double-dip trouble.

Five years after economic collapse, virtually zero growth was achieved. Wall Street was bailed out. Main Street was sold out. Ellen Brown does some of the best financial writing.

Last September, she said America’s economy needs “a good dose of ‘aggregate demand.’ ” It needs money put in people’s pockets.

QE for Wall Street won’t jumpstart the economy. It won’t “reduce unemployment.” It’s stuck at 23%. It’s the highest since Great Depression levels.

QE puts no “money in the pockets of consumers.” It doesn’t “reflate the money supply.”

“(S)ignificantly lower interest rates for homeowners” aren’t achieved. Other consumer purchases don’t benefit.

QE helps bankers, other speculators and investors. Ordinary people are harmed. Economic growth is taxed. It’s monetary poison. It’s harming the dollar.

Finance is a new form of warfare. Money printing madness is based on the wrong-headed notion that Fed-supplied liquidity encourages bank lending to stimulate growth.

Despite multi-trillions of dollars in free zero interest rate money, bank lending to small/medium sized businesses and households is too little to help.

No loans mean no investment, no hiring, and no money in people’s pockets. At the same time, US corporate giants hoard enormous amounts of cash. Estimates range up to $5 trillion.

Fed reports downplay what’s held. Their data include only domestic cash reserves, Treasuries, other bonds, and bank accounts.

Foreign holdings aren’t included. Global trillions aren’t invested. They’re used for salaries, huge bonuses, dividends, stock buybacks, and speculation.

At the same time, inflation-adjusted consumer disposable income declined for decades. Post-9/11, it’s been especially hard hit.

Spending growth is largely credit driven. Insufficient income retards it. Households are debt-entrapped. Eventually they’ll be unable to assume more.

Progressive Radio News Hour regular Jack Rasmus discusses America’s “epic recession.” For five years, its economy “bumped along the bottom.” Conditions ahead look worse, not better.

Fed gamesmanship puts international finance at risk. Economies haven’t been healed. They’ve been wrecked. QE is a zero sum game. It’s financial terrorism.

It sacrifices growth for Wall Street. It hangs ordinary people out to dry. It promises protracted hard times. It leaves growing millions on their own sink or swim.

Let-eat-cake economics doesn’t work. It never did. It doesn’t now. It sparks decline and revolutions, not growth and prosperity.

Stephen Lendman lives in Chicago and can be reached at [email protected] 

His new book is titled “Banker Occupation: Waging Financial War on Humanity.”

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour

http://www.dailycensored.com/us-economy-troubled-or-alls-well/

Meet the Contractors Turning America’s Police Into a Paramilitary Force

The national security state has an annual budget of around $1 trillion. Of that huge pile of money, large amounts go to private companies the federal government awards contracts to. Some, like Lockheed Martin or Boeing, are household names, but many of the contractors fly just under the public's radar. What follows are three companies you should know about (because some of them can learn a lot about you with their spy technologies).

L3 Communications

L3 is everywhere. Those night-vision goggles the JSOC team in Zero Dark Thirty uses? That's L3. The new machines that are replacing the naked scanners at the airport? That's L3. Torture at Abu Ghraib? A former subsidiary of L3 was recently ordered to pay $5.28 million to 71 Iraqis who had been held in the awful prison.

Oh, and drones? L3 is on it. Reprieve, a UK-based human rights organization, earlier this month wrote on its Web site:

“L-3 Communications is one of the main subcontractors involved with production of the US’s lethal Predator since the inception of the programme. Predators are used by the CIA to kill ‘suspected militants’ and terrorise entire populations in Pakistan and Yemen. Drone strikes have escalated under the Obama administration and 2013 has already seen six strikes in the two countries.”

Unsurprisingly, L3 Communications is well connected beyond the national security community. Its chief financial officer recently spoke at Goldman Sachs, at what the financial titan hilariously refers to as a “fireside chat.”

L3 also supplies local law enforcement with its night-vision products and makes a license-plate recognition (LPR) device, a machine with disturbing implications. LPR can be mounted on cop cruisers or statically positioned at busy intersections and can run potentially thousands of license plates through law enforcement databases in a matter of hours. In some parts of the country LPR readers can track your location for miles. As the Wall Street Journal noted, surveillance of even “mundane” activities of people not accused of any crime is now “the default rather than the exception.”

L3 Communications embodies the totality of the national security and surveillance state. There is only minimal distinction between its military products and police products. Its night-vision line is sold to both military and law enforcement. Its participation in the drone program is now, as far as we know, limited to countries in the Middle East and North Africa. But in the words of the New York Times editorial board, “[i]t is not a question of whether drones will appear in the skies above the United States but how soon.” The NYT estimates the domestic drone market at $5 billion, likely a conservative estimate, and contractors will vie for that money in the public and private sphere. L3's venture into airports, the border of where domestic policy meets foreign policy in the name of national security, is therefore significant both symbolically and materially.

In many ways, that is the most important story of the post-9/11 United States: the complete evaporation of the separation of foreign and domestic polices. Whether we're talking about paramilitarized police, warrantless wiretapping, inhumane prison conditions, or drone surveillance, there exist few differences between a United States perpetually at war and a United States determined to police and imprison its people in unacceptable ways and at unacceptable rates.

Harris Corporation: Stingray “IMSI catcher”

Harris Corp. is a huge provider of national security and communications technology to federal and local law enforcement agencies. Though many people have never heard of it, Harris is a major player in the beltway National Security community. President and CEO William M. Brown was recently appointed to the National Security Telecommunications Advisory Committee, and in 2009 the Secret Service offered Harris a contract to train its agents in the use of Harris' Stingray line. The Secret Service awarded the company additional contracts in 2012.

If you've heard of Harris at all, it's likely been because its controversial Stingray product has been getting attention as an information-gathering tool with major privacy implications. The Stingray allows law enforcement to cast a kilometers' wide digital net over an area to determine the location of a single cell phone signal – and in the process collect cell data on potentially hundreds of people who aren't suspected of any crimes. EFF claims the device is a modern version of British soldiers canvassing the pre-Revolutionary colonies, searching people's homes without probable cause – exactly what the Fourth Amendment was created to prevent. EFF describes the process this way:

“A Stingray works by masquerading as a cell phone tower—to which your mobile phone sends signals to every 7 to 15 seconds whether you are on a call or not— and tricks your phone into connecting to it. As a result, the government can figure out who, when and to where you are calling, the precise location of every device within the range, and with some devices, even capture the content of your conversations.”

According to the Electronic Privacy Information Center (EPIC),the FBI has been using similar technology since 1995. But a recent federal case, United States v. Rigmaiden, has raised Fourth Amendment questions regarding whether law enforcement officials need to obtain a warrant before employing a Stingray. The judge in that case determined that the government hadn't provided enough information about how the devices work, and ordered that the information collected in Rigmaiden couldn't be used in court.

What's especially troubling about Stingrays is that the government either won't say, or doesn't understand, how the technology works. The WSJ reported that the US Attorney making the requests “seemed to have trouble explaining the technology.”

And it's not just the federal government that uses Stingrays. As Slate notes,referencing FOIA documents recently obtained by EPIC, “the feds have procedures in place for loaning electronic surveillance devices (like the Stingray) to state police. This suggests the technology may have been used in cases across the United States, in line with a stellar investigation by LA Weekly last year, which reported that state cops in California, Florida, Texas, and Arizona had obtained Stingrays.”

Harris has been tightlipped about the Rigmaiden case, but expect to be hearing a lot about Stingrays in the future.

BI2 Technologies

BI2 makes a fine pitch. Its iris-scanning technology can be made to sound very appealing. Iris scans are relatively non-invasive, there's no touching involved so the likelihood of spreading disease is reduced, and as B12 states on its Web site, "there are no lasers, strong lights or any kind of harmful beams.” It also claims that iris scanning is "strictly opt-in," and that a “user" (who in most cases would be better described as an “arrestee”) “must consciously elect to participate” in the scanning. (When I was arrested by the NYPD while covering a protest, the scan was voluntary -- though the NYPD didn't tell me that, a protester did. But if I refused to submit to it I could have been punished with an extra night in jail.)

Reuters reported that BI2's iPhone-based iris scanner -- called MORIS -- is capable of taking an accurate scan from four feet away, “potentially without the person being aware of it.” MORIS has drawn harsh condemnation from the ACLU. The primary concern from privacy advocates is that law enforcement will deploy this technology in an overly broad way. ACLU senior policy analyst Jay Stanley told Reuters that he didn't want the police “using them routinely on the general public, collecting biometric information on innocent people.”

MORIS isn't just for irises; it also scans faces. In 2011, the Wall Street Journal reported that the sheriff's office in Pinellas County, Florida, “uses digital cameras to take pictures of people, download the pictures to laptops, then use facial-recognition technologies to search for matching faces.” New database technology like Trapwire, a data mining system that analyzes “suspicious behavior” in purported attempts to predict terrorist behavior, makes face scanning potentially more worrisome. Trapwire uses at least “CCTV, license-plate readers, and open-source databases” as input sources, and although it doesn't employ facial-recognition software, the incentives to combine these types of technology is clear.

Beginning in 2014, BI2 will manage a national iris-scan database for the FBI, called Next-Generation Identification (NGI).Lockheed Martin is also involved in building the database.Much of BI2's iris data comes from inmates in 47 states, and despite BI2's claims that iris scanning can't be gamed, that is not the case. Experts showed last summer that the iris can be “reverse-engineered” to fool the scanners, which are generally thought to be more accurate than fingerprinting.

The usual suspects lamented in 2011 that iris scanning isn't used at airports or borders, but security creep is difficult to combat, especially once “national security” is invoked. Just days ago it was reported that the FBI is teaming with the Department of Homeland Security to ramp up iris scanning at US borders. AlterNet has previously reported that the Department of Defense scans the irises of people arriving at and departing from Afghanistan.

The story of BI2 is important because the initial technology is superficially appealing. The company's first projects were called the Child Project, designed to help locate missing children; and Senior Safety Net, developed to identify missing seniors suffering from Alzheimer's. According to B12's Web site, sheriffs' departments in 47 states use the BI2 iris-scanning device and database, which makes it easy to mobilize support to facilitate the safe return of children and seniors.

While the desire to find missing children and seniors is perfectly legitimate, the collection of biometric data is a pandora's box. Once it's opened, it's proven difficult if not impossible to limit.

Gold Backed Bonds – An Alternative To European Austerity?

From GoldCore

Gold Backed Bonds - An Alternative To European Austerity?

Today’s AM fix was USD 1,670.25, EUR 1,243.39, and GBP 1,058.93 per ounce.
Yesterday’s AM fix was USD 1,677.00, EUR 1,258.06, and GBP 1,059.18 per ounce.

Silver is trading at $31.55/oz, €23.54/oz and £20.04/oz. Platinum is trading at $1,689.00/oz, palladium at $723.00/oz and rhodium at $1,200/oz.


Cross Currency Table – Bloomberg

Gold dropped $17.90 or 1% in New York yesterday and closed at $1,667.70/oz. Silver slipped to a low of $31.60 and finished with a loss of 1.8%. Most traders were at a loss to explain the counter intuitive losses given the bullish backdrop.

Gold in Euros – 5 Years (Daily) - Bloomberg

Overnight gold bounced back from an almost 2 week low and was again especially strong in yen terms - strengthened by the Bank of Japan’s stance on aggressive monetary easing.

Russia’s Central Bank said it will continue to buy gold bullion as it seeks to diversify its foreign reserves away from paper assets, such as the euro, it views as more risky.

At Davos, George Soros, one of the largest buyers of gold in the world today, warned of currency wars and that “interest rates are going to take a big leap” - probably this year.

Bank of America warned of a “bond crash” comparable to 1994 that would trigger a string of upsets across the world. In 1994, the bond crash bankrupted Orange Country, California, and set off the Tequila Crisis in Mexico. 

Today, the world is much more fragile and the increasingly likely bond crash could lead to a Lehman style systemic crisis – but on an even greater scale.

These risks and the recent price drop has fuelled buying interest in physical metal and a minority of smart money gold buyers continue to diversify into allocated gold on the dip .

At 1500 GMT new U.S. new home sales data is released.

Across Europe, economic growth is faltering and in many Eurozone countries, sovereign debt yields are dangerously high and austerity measures are creating much hardship.

The World Gold Council has been exploring ways that Eurozone member states could use their gold reserves to help bring down the cost of borrowing.

The Eurozone is the largest sovereign holder of gold in the world and has over 10,000 tonnes of gold reserves. The Eurozone, including the ECB, has 10,787.4 tonnes of gold worth over a significant €450 billion.  Some of the countries worst affected by the crisis, including Portugal and Italy, own a significant proportion of these assets. Italy alone holds nearly 2,000 tonnes of gold. 

The Eurozone as a whole has 32.6% more gold reserves than the U.S. which has 8,133.5 tonnes of gold.

Due to the ongoing global debt crisis and significant systemic and monetary risk, it would be financial and monetary folly of the highest order to sell gold. Indeed, prudent creditor nation central banks are continuing to add to their gold reserves.

Most agree that outright sales of gold are not the answer. Aside from the obvious problem that the outstanding debt level of the struggling European countries far surpasses the value of their gold reserves, existing EU laws prohibit such a move to finance governments, as do the provisions of the Central Bank Gold Agreement, which limits gold sales.

To illustrate this point, the gold holdings of the crisis hit Eurozone countries (Portugal, Spain, Greece, Ireland and Italy) represent only 3.3% of the combined outstanding debt of their central governments.

A one-time sale of all of their gold reserves would probably not cover even one year’s worth of their debt service costs. This would be akin to an individual selling everything they owned in order to make one month’s mortgage payment.

However, there may be an alternative to selling gold for desperate cash strapped nations facing vicious austerity. The alternative is to use European gold reserves in a way that will buy time for growth to take hold. 

The World Gold Council and leading academics and international think tanks believe that using a portion of a nation's gold reserves to back sovereign debt would lower sovereign debt yields and give some of the Eurozone's most distressed countries time to work on economic reform and recovery.

According to research done by the World Gold Council using the European gold reserves as collateral for new sovereign debt issues would mean that without selling an ounce of gold, Eurozone countries could raise €413 billion. This is over 20% of Italy's and Portugal's two year borrowing requirements. 

The move to back sovereign bonds with gold would lower sovereign debt yields, without increasing inflation, which would help to calm markets. This should give European countries some vital breathing space to work on economic reform and recovery.

Some citizens would be concerned that there may be a risk that the sovereign nations who pledge their gold as collateral could ultimately end up losing their gold reserves to the ECB, or whoever the collateral of the gold reserves are pledged to, in the event of a default.

Unlike currency debasement and the printing and electronic creation of money to buy sovereign debt, under schemes such as Draghi's “outright monetary transactions” (OMT), the use of gold as collateral would not create fiscal transfers between Eurozone members, long term inflation or currency devaluation risk.

The proposal shows how gold is being increasingly seen as a safe haven asset and currency.

Indeed, it suggests that those who have suggested returning to some form of gold standard are not as deluded as they have often been portrayed.

Mobilising Europe's gold is a temporary move which the World Gold Council and leading academics believe will help to create a more permanent solution which in time would help the Eurozone extract itself from its debt crisis.

Europe and the world faces an exceptionally challenging period and unconventional policy responses are called for. 

A gold-backed bond may offer at least a partial solution to Europe’s woes. 

The video 'Leveraging Gold Reserves To Help Lower Eurozone Sovereign Debt Yields' explores why such a measure could offer an alternative to austerity for the Eurozone: 'Leveraging Gold Reserves To Help Lower Eurozone Sovereign Debt Yields' 

NEWS

Gold Seen by Morgan Stanley Extending Rally as QE3 Runs to 2014 - Bloomberg

Gold bounces from near 2-week low on euro, Japan policy - Bloomberg

Interest Rates Will Spike This Year: Soros - CNBC

Petrol Price Rise On Way As 'Floodgates Open' – Sky News

Russia central bank to keep buying gold: Ulyukayev - Brecorder

Ghana may repatriate Gold reserves from US, Europe – Bullion Street

COMMENTARY

Video: Gold Price To Rise In 2013 – The Telegraph

Bank of America issues `bond crash' alert on Fed tightening fears – The Telegraph

Video: Dalio's Perspective on Gold's Importance As Diversification - CNBC

Who Are the Whales Buying Gold? – Economic Policy Journal

For breaking news and commentary on financial markets and gold, follow us on Twitter.

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Guest Post: The Tangled Relationship Between Wealth & Money

Submitted by John Michael Greer of Peak Prosperity,

One of the most dangerous mistakes possible to make in trying to understand the shape of the economic future is to think of the fundamental concepts of economics as simple and uncontroversial.  They aren’t. 

In economics, as in all other fields, the fundamentals are where disguised ideologies and unexamined presuppositions are most likely to hide out, precisely because nobody questions them.

In this and future essays here at Peak Prosperity, I will explore a number of things that seem, at first glance, very obvious and basic.  I hope you’ll bear with me, as there are lessons of crucial and deeply practical importance to anyone facing the challenging years ahead.

This is, above all, true of the first thing I want to talk about: the tangled relationship between wealth and money.

Our co-host here, Chris Martenson, likes to remind us all that money is not wealth, but a claim on wealth.  He’s quite right, and it’s important to understand why.

Money is a system of abstract tokens that complex societies use to manage the distribution of goods and services, and that’s all it is.  Money can consist of lumps of precious metal, pieces of paper decorated with the faces of dead politicians, digits in computer memory, or any number of other things, up to and including the sheer make-believe that underlies derivatives and the like. Important differences separate these various forms of money, depending on the ease or lack of same with which they can be manufactured, but everything that counts as money has one thing in common – it has only one of the two kinds of economic value.

The Two Kinds of Value

Economists call those use value and exchange value.

You already know about them, even if you don’t know the names.  Odds are, in fact, that you learned about them back in elementary school the first time that one of your classmates offered to trade you something for the cookies in your lunchbox.  You then had to choose between trading the cookies for whatever your classmate offered and eating them yourself.  The first of those choices treated the cookies primarily as a bearer of exchange value; the second treated them primarily as a bearer of use value.

All forms of real wealth – that is, all nonfinancial goods and services – have use value as well as exchange value.  They can be exchanged for other goods and services, financial or otherwise, but they also provide some direct benefit to the person who is able to obtain them.  All forms of money, by contrast, have exchange value but no use value. You can’t do a thing with them except trade them for something that has use value (or for some other kind of money that can be traded for things with use value).

Most people realize this.  Or, more precisely, most people think that they realize this.

It’s still embarrassingly common for people to forget that money isn’t true wealth, and to assume that as long as they have some sufficiently large quantity of some kind of money that’s likely to hold its exchange value over time, they’ll never want for wealth.  This assumption is understandably made, because in the relatively recent past, this has been true a good deal more often than not, which feeds the belief that it will always be true in the future. 

But that assumption is lethally flawed, and it’s important to understand why.

The Economic Relationship between Money and Wealth

For the last three hundred years, as industrial society emerged from older socioeconomic forms and became adept at finding ways to use the immense economic windfall provided by fossil fuel energy, there have been two principal brakes on economic growth.

The first has been the rate at which new technologies have been developed to produce goods and services using energy derived from fossil fuels. The Industrial Revolution didn’t get started in the first place until inventors and entrepreneurs found ways to put the first generation of steam engines to work making goods and providing services.  At every step along the road from that tentative beginning to today’s extravagantly fueled high-tech societies, the rate of economic growth has been largely a function of the rate at which new inventions have appeared and linked up with the business models that were needed to integrate them into the productive economy.  That’s the source of the innovation-centered strategy that leads most industrial societies to fund basic and applied research as lavishly as they can afford.

The second major brake on economic growth is the relationship between the economy of goods and services, on the one hand, and the economy of money on the other.  Just as wealth and money are not the same, as we’ve seen, the economic processes that center on them are not the same.  The printing and circulation of money is not the same thing as the production and distribution of nonfinancial goods and services, and ignoring the difference between them confuses much more than it reveals.  In my book The Wealth of Nature, I called the economy of goods and services the 'secondary economy,' and the economy of money the 'tertiary economy,' with nature itself – the ultimate source of all wealth – as the 'primary economy.'  For the purposes of this essay and those to come, though, we’ll use simpler labels and call them the 'wealth economy' and the 'money economy'.

During this three-hundred-year timespan, when the money economy stayed in sync with the wealth economy, economic growth normally followed.  When the two economies got out of sync, on the other hand, growth normally faltered or went into reverse. There were (and are) two ways that the money supply can slip out of its proper relationship with the wealth economy. 

The first occurs when growth in the money supply outstrips growth in the production of real wealth, so that the more money is available to compete for any given good or service, and prices normally go up.  That’s inflation.

The second occurs when growth in the money supply fails to keep up with growth in the production of real wealth, so that less money is available to purchase any given good or service, and prices normally go down.  That’s deflation. 

Fighting to Keep the Economies in Sync

In either case, the imbalance hinders the ability of the wealth economy to keep producing goods and services, mostly by throwing a monkey wrench into the machinery of investment — the process by which the money economy allots extra wealth to the producers of wealth to assist them in expanding their ability to create real, nonfinancial goods and services. Whether it’s inflation or deflation that chucks the wrench into the gears, the result is flagging or negative growth.

It’s the hope of keeping inflation and deflation in check that motivates the obsessive tinkering with economics on the part of so many of the world’s governments these days. However poorly that tinkering works out in practice (and it usually works out very poorly, indeed) the politicians can at least claim to citizens that they’re doing something to get economic growth back on track.

Most economists, and for that matter most people who consider economic issues, think and act as though these two factors — the rate of innovation and the money economy’s habit of getting out of sync with the underlying economy of real wealth — are still the only factors that can get in the way of growth. That’s why proposals for putting an end to the current economic mess focus so narrowly on more innovation, on the one hand, and finding some way to gimmick the money economy so that it no longer drags on the wealth economy, on the other. 

Now, of course, scarcely any two people agree on what measures will get the two economies in sync again. Similarly there’s no general agreement over where government support for innovation ought to go. But there’s near-universal agreement that getting these two factors to work right is the way out of the ongoing global economic crisis.

The Tangled Web We've Woven

The disagreements between partisans of various economic schemes, and between proponents of various new technologies, make it easy to miss the fact that something is happening that’s clean outside the box of contemporary economic thought.

The wealth economy and the money economy are certainly out of sync just now, but the problem isn’t in the money economy; it’s in the wealth economy.

The production of real goods and services has run up against limits that are not financial in nature, and today’s economic orthodoxies can’t even imagine that possibility, much less respond to it in any useful fashion.

In Part II: Slamming Face-First into the Limits to Growth we explain why, given our misguided efforts to solve the wrong problems, you can no longer assume that having enough money – of any kind – will guarantee that you will have enough wealth.  Distortions in the money supply driven by the shenanigans of central bankers are not the only force twisting the relationship between money and growth.  The key factor now is a contraction in the wealth economy driven by the economic effects of the exhaustion of easily accessible resources. 

There simply is too much money chasing a limited (and, in some cases, shrinking) supply of real wealth. 

Click here to read Part II of this report (free executive summary; enrollment required for full access).

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Faber To Shiller: “You Keep Your U.S. Dollars And I’ll Keep My Gold”

From GoldCore

Faber To Shiller: “You Keep Your U.S. Dollars And I’ll Keep My Gold”

Today’s AM fix was USD 1,677.00, EUR 1,258.06, and GBP 1,059.18 per ounce.
Yesterday’s AM fix was USD 1,692.25, EUR 1,268.84, and GBP 1,066.19 per ounce.

Silver is trading at $31.92/oz, €24.05/oz and £20.26/oz. Platinum is trading at $1,692.75/oz, palladium at $718.00/oz and rhodium at $1,200/oz.


Cross Currency Table – (Bloomberg)

Gold fell $4.90 or 0.29% in New York yesterday and closed at $1,685.60/oz. Silver fell to $32.08 in Asia then rallied to a high of $32.47 in the afternoon in NY trade, but then it dropped off in the last few hours and finished with a gain of just 0.25%.

Gold edged down in most currencies on Thursday, easing off the one month high hit earlier in the week. More speculative players may be taking profits after the recent run from $1,625/oz to over $1,695/oz or 4.3%.

It is noteworthy that while gold is weaker in most currencies today it is again higher in Japanese yen as the yen has fallen sharply on the international markets due to concerns that the yen will be devalued in the coming months.

Gold in yen terms remains near record multiyear highs above 0.150 million yen per ounce. New nominal highs in yen terms above 0.2 million yen per ounce are only a matter of time (see charts). 

Bloomberg reported that Credit Suisse says gold holders may have withdrawn gold from the euro zone due to the region’s debt crisis. They noted the Bundesbank comment about capacity becoming available in its own vaults in Germany.

The World Economic Forum is into its second day in Davos, Switzerland, and with the theme of ‘Resilient Dynamism’ it appears a good time to announce or spin positive news in Europe such as a slight growth in consumer morale and confidence.  

I’m not sure what Europe the Davos attendees are living on but Ireland, Spain, Portugal and Greece’s ‘recoveries’ are bleak at best.

Spanish youth unemployment has risen again and is now nearly at 60%.

The U.S. House of Representatives passed a Republican led plan to allow the federal government to keep borrowing money through mid-May.

The borrowing and money printing party can continue a little while longer but it would be prudent to prepare for the hangover. 

Owning physical gold today is akin to drinking plenty of water and having a few pain killers to hand. When this party ends, those not owning gold are going to suffer one hell of a financial hangover.


XAU/JPY Daily, 2 Years – (Bloomberg)

“Everyone should keep gold in their portfolios” as the precious metal will be able to offer value to investors even in a worst-case scenario, said Marc Faber, the publisher of the Gloom, Boom & Doom report.

“In the worst case scenario, in the systemic failure that I expect, it would still have some value,” Faber, who is also the founder and managing director of Marc Faber Ltd., said today at an event hosted by Evli Bank Oyj in Helsinki.

Faber said his outlook was so bleak that he is “hyper bearish”. He joked that “sometimes I’m so concerned about the world I want to jump out of the window.”

He wisely said that `I advise everyone to have some gold.'

Faber said that he thought there could be a flight out of cash and overvalued bonds and into equities and gold. 

In response to a question from Yale University’s Robert Shiller querying the recommendation to hold gold, Faber said: “I’m prepared to make a bet, you keep your U.S. dollars and I’ll keep my gold, we’ll see which one goes to zero first.”


XAU/JPY Quarterly, 1971-2013 – (Bloomberg)

Shiller, who is the co-creator of the S&P/Case-Shiller index of property values, responded "I'm inclined to think gold prices after this crisis might return to a lower level. Given the low yields of the alternatives [ie, bonds], the valuation of the stock market doesn't look so bad."

Faber, whose advice has protected millions of investors in recent years, warned of a global systemic crisis possibly due to massive size of the global derivatives market which is now worth over an incredible $700 trillion.

He warned “when the system goes down,” and only plastic credit cards are left, “maybe then people will realize and go back to some gold-based system.”


What's Going To Happen To The Price Of Gold And Silver In 2013?

Join us for a webinar on Jan 30, 2013 at 1300 GMT.

?  Register now!

Join two experts - Money Week columnist, Dominc Frisby and GoldCore's Head of Research, Mark O'Byrne for a one hour webinar as they discuss the outlook for gold and silver in 2013. 

 
NEWS

Gold Seen Extending Rally as Fed Sticks With QE3 for Years - Bloomberg

Strong Silver Jewelry Sales Reported During 2012 Holiday Season – The Silver Institute

Gold drifts from 1-mth high, 'recovery' hopes dull appetite - Reuters

Currency war talk not appropriate – IMF chief economist - Reuters

COMMENTARY

The One Chart That Explains the Massive Risk of Investing in Gold & Gold Stocks – Zero Hedge

How Far Up Could Silver Go? - Minyanville

Video: undesbank's Thiele on Gold Relocation - Bloomberg

Central bankers should be brought to heel by elected parliaments – The Telegraph

For breaking news and commentary on financial markets and gold, follow us on Twitter.

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The Trillion Dollar Coin: A Debt Solution for the People

Coin standing on edge(Photo: Klaus M)Far from being a gimmick, having the US Treasury mint high-denomination coins is a solution that cuts to the root of America’s financial problems. And Benjamin Franklin would have liked it, too.

On Friday, January 11, economist and New York Times columnist Paul Krugman urged the White House to mint a platinum coin worth $1 trillion, as a counter to what was then a threat to block federal spending that Congress had already approved. (Republicans made good on that threat yesterday, putting the United States in danger of default.)

The White House responded by saying the trillion dollar coin is off the table, because the Federal Reserve declared that it “wouldn’t view the coin as viable.”

Even Krugman called the coin idea “silly.” He just thought it was less silly—and less dangerous—than playing with the debt ceiling.

But it is not silly. We have forgotten the role that money issued directly by the government has played in our history. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

Many people believe that the U.S. government creates its own money. This is not true. Today, the Federal Reserve creates trillions of dollars on its books and lends them at near-zero interest to private banks, which then lend them back to the government and the people at market rates. We have been brainwashed into thinking that it makes more sense to do this than for the government to simply create the money itself, debt- and interest-free.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: nations should be free to create their own money without incurring debt. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted this essential strategy. They realized that the freedom to print money offers a way to break the shackles of debt and free the nation to realize its full potential.

Money creation is an all-important power that has been fought over for centuries, in a largely secret battle between governments and private banks. For the last two and a half centuries, the banks have had the upper hand, making us forget that any other option exists. But we are learning the great secret of money: that how it gets created determines who has the power in society—we the people, or they the bankers.

It is no secret who has that power today. Witness the great bailout of 2008 that rewarded banks for making irresponsible and fraudulent gambles in the subprime mortgage scandal. None of the bankers responsible served time in jail. Then there was the robosigning scandal, in which banks skipped important steps in the process of foreclosing on the homes of ordinary Americans, and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold, in which traders at the Swiss financial services company UBS were convicted of colluding with other banks to tweak interest rates for their own financial benefit. We can make an educated guess as to how this too will turn out for them (hint: well). While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but change will not come until we grasp the fundamental secrets that are the foundation of their power: those who create the nation’s money control the nation, and nearly the entire money supply today is created by banks in concert with the Federal Reserve.

Remembering our roots

Everyone knows that Benjamin Franklin played an important role in the founding of the United States. Fewer know his views on the printing of money. “Experience, more prevalent than all the logic in the World,” he wrote, “has fully convinced us all, that [paper money] has been, and is now of the greatest advantages to the country.”

When the British forbade new issues of paper scrip by the colonial governments, Franklin went to London and argued that issuing their own money was responsible for the colonies’ prosperity.

The response of the king, leaned on by the Bank of England, was to ban all issues of paper scrip. Without their paper money, the money supply collapsed, and the economy sank into a deep recession. The colonists then rebelled. They won the revolution, but the bankers retained the power to create money by setting up a banking system like that dominated by the Bank of England.

Fourscore and six years later, in 1862, President Abraham Lincoln boldly took back the power to create money during the Civil War. To avoid exorbitant interest rates of 24 to 36 percent, he decided to print money directly from the U.S. Treasury as U.S. Notes or “greenbacks.” The issuance of $450 million in greenbacks was the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

After Lincoln was assassinated, however, the greenback program was quickly discontinued. Repeated popular attempts by farmers and laborers to revive it failed. They were opposed by a wave of banker activism to maintain the banks’ control over the printing of money, which had been established by the National Bank Act of 1863.

In 1872, New York bankers sent a letter to every bank in the United States. The letter, as quoted by Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers…as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders .

Bank-created money, including paper bills and now electronic money, could be rented to the people at a profit. The people’s debt-free money was limited to coins, which today compose less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks marked the exchange of physical slavery for what has been called “debt peonage” or “wage slavery.” Today, as a result, the American government and American people are so heavily mired in debt that only a radical overhaul of the monetary system can free us.

Gimmick or game-changer?

This is the real context and backstory of the trillion dollar coin. The stakes are much higher than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and we can’t do it with nickels and dimes. We’re going to need coins bearing some very large numbers.

The idea of minting large-denomination coins to solve economic problems seems to have first been suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and sets no limit on the value of the coins it creates.

That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, who at the time was blogging under the pseudonym “ Beowulf ,” proposed issuing a platinum trillion dollar coin to capitalize on this loophole, after he heard me mention the trillion dollar coin in a Thom Hartmann interview. At first, he said, it was just an amusing exercise. But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory (MMT), reviewed the idea of the trillion dollar coin and concluded it would work operationally. And Joe Firestone pointed out that the trillion dollar coin has far greater game-changing potential than mere political maneuvering. The coin could put within the government’s grasp the power to solve its debt problems once and for all, replacing austerity with the abundance enjoyed by our forefathers.

The invariable objection to government-issued money is that it will lead to hyperinflation. The trillion dollar coin can evoke images of million-Deutschemark notes filling wheelbarrows. But as economist Michael Hudson points out:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

And as professor Randall Wray observes, the coin would not circulate in the general economy. Instead, it would be deposited in the government’s account and held at the Fed, so it could not inflate the circulating money supply.

As far as spending goes, the fact that the Treasury has money in its account doesn’t mean Congress could or would go wild spending the funds. The budget would still need congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full productive capacity without creating price inflation (since supply and demand would rise together). After that, it would need to tax—not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to take back the money power

The current political stalemate cannot be solved with the thinking that created it. There is simply not enough money in the system to fund the services that Americans desperately need, create full employment, pay down the debt, and keep taxes affordable. The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.

The only real solution to the unemployment created by this shrinkage is to add more money to the economy, and that means that someone needs to create it. Either the Fed does this in the way that it is currently done, by adding the money nearly interest-free to the balance sheets of banks to be lent to the government and the people at interest; or the Treasury does it and adds the money to the government’s account debt- and interest-free.

After a century of domination by the Federal Reserve, it is time we tried something new. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself to be more powerful than the elected representatives of the people. If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. But the current government is so thoroughly captured by the bank-created money of our time that it is unlikely to take action without pressure from the people. Our ignorance on these issues has played into the hands of the 1 percent, who are dependent on the current system for their wealth and power. However, the massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

The Currency Wars: Now US Automakers Are Squealing

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

Japan’s Liberal Democratic Party went all out late last year to re-grab the power it had held for 50 years before getting booted out in 2009. Its platform: print and borrow with utter abandon to create asset bubbles and inflation, and to weaken the yen. It even threatened to wrest control over the printing press away from the Bank of Japan. That verbiage has been phenomenally successful: the stock market is surging, and the yen is crashing from historic—under normal circumstances, inexplicable—highs.

But now, US automakers are squealing. They want the government to fight back in the currency war. The American Automotive Policy Council (AAPC), a lobbying organization that represents only Ford, GM, and Chrysler, sent President Obama a letter, demanding retaliation against Japan’s NO EXIT strategy. Then it went public with it grievances.

“Here we go again,” said Matt Blunt, AAPC president and former Republican governor of Missouri. “Japan’s Liberal Democratic party is back in power and determined to repeat the ‘beggar thy neighbor’ policies that distort trade by cheapening the value of the yen to promote economic growth in Japan at the expense of its trading partners.”

He claimed that “these types of policies” had “inflicted tremendous harm” on manufacturing in the US. “We urge the Obama Administration to make it clear to Japan that such policies are unacceptable and will be met by reciprocal measures.”

The AAPC has been lambasting Japan, and rightfully so, for having “the most closed auto market in the developed world,” protected by “non-tariff barriers” that keep US automotive products out. But now it accused Japan of manipulating its currency “to boost its own exports at the expense of other nations, especially the United States.”

Alas, the biggest currency manipulator in the world is the Fed, not only with its verbiage but also with its endless and escalating waves of quantitative easing, to the point where it currently prints $85 billion a month to debase and demolish the dollar, or what is left of it, which isn’t much. It makes US wages more competitive with those in Mexico and China. It also makes imports more expensive for American consumers and exports cheaper for consumers elsewhere. Meanwhile, Japan’s infamous trade surplus has given way to a ballooning trade deficit (graph).

The automakers were whining to President Obama, ironically, as another announcement was made and received with hoopla: GM would invest $1.5 billion in plants in North America in 2013. While no further details emerged, hopes were swirling that this manna would rain down on Michigan.

Yet North America, in addition to Michigan, also includes among other places Canada and Mexico, and how much of this money will land in the US is uncertain. Embarrassingly, the $1.5 billion was just a fraction of GM’s planned investments of $8 billion for 2013, of which $6.5 billion will be sent to countries outside North America—not Europe where GM is bleeding to death, but Asia.

That has been the paradigm in manufacturing for decades. US corporations have invested prodigiously in China and other countries where labor is cheap and have thus contributed to their enormous economic growth, while only crumbs have fallen on US soil. In this manner, much of the US auto component industry has moved offshore.

Exhibit A: Delphi, formerly GM’s component division. GM spun it off in 1999. Two years later, Delphi axed 11,500 workers. In 2004, it got into hot water over its accounting practices. In 2005, it went bankrupt and closed 45 plants in the US, with much of the production moving to China. In 2009, it sold its chassis division to state-owned BeijingWest Industries, which now develops and manufactures brake and chassis components for US and European automakers.

Exhibit B: Visteon, formerly Ford’s component division. Always the laggard, Ford spun it off in 2000. In 2009, it went bankrupt, shuttered all but one of its 33 plants in the US, let go 25,000 workers, and shifted its center of gravity to Shanghai. It now has 171 plants and facilities in other countries. Its headquarters building in Van Buren Township, Michigan, was sold last year, though its headquarters is still officially located there.

Visteon is still “a US company at this point,” CEO Tim Leuliette said at the Automotive News World Congress on Wednesday. Yet globally, he added, only “about 4%, 5% of our employees are in the United States,” most of them supporting customers in North America. So, if the headquarters shifted to Asia, he said, it wouldn’t change much, jobs-wise.

Bitter irony: American automakers, after having sent their investments and manufacturing overseas, are using a Republican ex-governor to pressure the Obama administration to stop the Japanese from defending themselves in the currency war that the Fed has been waging relentlessly for years.

Meanwhile, Dallas Fed President Richard Fisher is waging his own war—against TBTF banks. “Repression” is what he calls “the injustice of being held hostage to large financial institutions,” whose investors, executives, counterparties, and customers “believe themselves to be exempt from the processes of bankruptcy and creative destruction.” These banks “capture the financial upside” of their bets but are bailed out when things go wrong, he says, “in violation of one of the basic tenets of market capitalism.” Read.... How Big Is ”BIG”?

And for an easy, fun guy read, if you like cars and the rambunctious process of selling them, check out TESTOSTERONE PIT, the novel.

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The Trillion Dollar Coin: A Debt Solution for the People

On Friday, January 11, economist and New York Times columnist Paul Krugman urged the White House to mint a platinum coin worth $1 trillion, as a counter to what was then a threat to block federal spending that Congress had already approved. (Republicans made good on that threat yesterday, putting the United States in danger of default.)

We have forgotten the role that money issued directly by the government has played in our history.

The White House responded by saying the trillion dollar coin is off the table, because the Federal Reserve declared that it “wouldn’t view the coin as viable.”

Even Krugman called the coin idea “silly.” He just thought it was less silly—and less dangerous—than playing with the debt ceiling.

But it is not silly. We have forgotten the role that money issued directly by the government has played in our history. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

Many people believe that the U.S. government creates its own money. This is not true. Today, the Federal Reserve creates trillions of dollars on its books and lends them at near-zero interest to private banks, which then lend them back to the government and the people at market rates. We have been brainwashed into thinking that it makes more sense to do this than for the government to simply create the money itself, debt- and interest-free.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: nations should be free to create their own money without incurring debt. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted this essential strategy. They realized that the freedom to print money offers a way to break the shackles of debt and free the nation to realize its full potential.

While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

Money creation is an all-important power that has been fought over for centuries, in a largely secret battle between governments and private banks. For the last two and a half centuries, the banks have had the upper hand, making us forget that any other option exists. But we are learning the great secret of money: that how it gets created determines who has the power in society—we the people, or they the bankers.

It is no secret who has that power today. Witness the great bailout of 2008 that rewarded banks for making irresponsible and fraudulent gambles in the subprime mortgage scandal. None of the bankers responsible served time in jail. Then there was the robosigning scandal, in which banks skipped important steps in the process of foreclosing on the homes of ordinary Americans, and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold, in which traders at the Swiss financial services company UBS were convicted of colluding with other banks to tweak interest rates for their own financial benefit. We can make an educated guess as to how this too will turn out for them (hint: well). While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but change will not come until we grasp the fundamental secrets that are the foundation of their power: those who create the nation’s money control the nation, and nearly the entire money supply today is created by banks in concert with the Federal Reserve.

Remembering our roots

Everyone knows that Benjamin Franklin played an important role in the founding of the United States. Fewer know his views on the printing of money. “Experience, more prevalent than all the logic in the World,” he wrote, “has fully convinced us all, that [paper money] has been, and is now of the greatest advantages to the country.”

When the British forbade new issues of paper scrip by the colonial governments, Franklin went to London and argued that issuing their own money was responsible for the colonies’ prosperity.

The response of the king, leaned on by the Bank of England, was to ban all issues of paper scrip. Without their paper money, the money supply collapsed, and the economy sank into a deep recession. The colonists then rebelled. They won the revolution, but the bankers retained the power to create money by setting up a banking system like that dominated by the Bank of England.

Fourscore and six years later, in 1862, President Abraham Lincoln boldly took back the power to create money during the Civil War. To avoid exorbitant interest rates of 24 to 36 percent, he decided to print money directly from the U.S. Treasury as U.S. Notes or “greenbacks.” The issuance of $450 million in greenbacks was the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

After Lincoln was assassinated, however, the greenback program was quickly discontinued. Repeated popular attempts by farmers and laborers to revive it failed. They were opposed by a wave of banker activism to maintain the banks’ control over the printing of money, which had been established by the National Bank Act of 1863.

In 1872, New York bankers sent a letter to every bank in the United States. The letter, as quoted by Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers…as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders .

Bank-created money, including paper bills and now electronic money, could be rented to the people at a profit. The people’s debt-free money was limited to coins, which today compose less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks marked the exchange of physical slavery for what has been called “debt peonage” or “wage slavery.” Today, as a result, the American government and American people are so heavily mired in debt that only a radical overhaul of the monetary system can free us.

Gimmick or game-changer?

This is the real context and backstory of the trillion dollar coin. The stakes are much higher than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and we can’t do it with nickels and dimes. We’re going to need coins bearing some very large numbers.

The coin could put within the government’s grasp the power to solve its debt problems once and for all.

The idea of minting large-denomination coins to solve economic problems seems to have first been suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and sets no limit on the value of the coins it creates.

That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, who at the time was blogging under the pseudonym “ Beowulf ,” proposed issuing a platinum trillion dollar coin to capitalize on this loophole, after he heard me mention the trillion dollar coin in a Thom Hartmann interview. At first, he said, it was just an amusing exercise. But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory (MMT), reviewed the idea of the trillion dollar coin and concluded it would work operationally. And Joe Firestone pointed out that the trillion dollar coin has far greater game-changing potential than mere political maneuvering. The coin could put within the government’s grasp the power to solve its debt problems once and for all, replacing austerity with the abundance enjoyed by our forefathers.

The invariable objection to government-issued money is that it will lead to hyperinflation. The trillion dollar coin can evoke images of million-Deutschemark notes filling wheelbarrows. But as economist Michael Hudson points out:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

And as professor Randall Wray observes, the coin would not circulate in the general economy. Instead, it would be deposited in the government’s account and held at the Fed, so it could not inflate the circulating money supply.

As far as spending goes, the fact that the Treasury has money in its account doesn’t mean Congress could or would go wild spending the funds. The budget would still need congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full productive capacity without creating price inflation (since supply and demand would rise together). After that, it would need to tax—not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to take back the money power

The current political stalemate cannot be solved with the thinking that created it. There is simply not enough money in the system to fund the services that Americans desperately need, create full employment, pay down the debt, and keep taxes affordable. The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.

The massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

The only real solution to the unemployment created by this shrinkage is to add more money to the economy, and that means that someone needs to create it. Either the Fed does this in the way that it is currently done, by adding the money nearly interest-free to the balance sheets of banks to be lent to the government and the people at interest; or the Treasury does it and adds the money to the government’s account debt- and interest-free.

After a century of domination by the Federal Reserve, it is time we tried something new. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself to be more powerful than the elected representatives of the people. If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. But the current government is so thoroughly captured by the bank-created money of our time that it is unlikely to take action without pressure from the people. Our ignorance on these issues has played into the hands of the 1 percent, who are dependent on the current system for their wealth and power. However, the massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

This work is licensed under a Creative Commons License

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

The Trillion Dollar Coin: A Debt Solution for the People

On Friday, January 11, economist and New York Times columnist Paul Krugman urged the White House to mint a platinum coin worth $1 trillion, as a counter to what was then a threat to block federal spending that Congress had already approved. (Republicans made good on that threat yesterday, putting the United States in danger of default.)

We have forgotten the role that money issued directly by the government has played in our history.

The White House responded by saying the trillion dollar coin is off the table, because the Federal Reserve declared that it “wouldn’t view the coin as viable.”

Even Krugman called the coin idea “silly.” He just thought it was less silly—and less dangerous—than playing with the debt ceiling.

But it is not silly. We have forgotten the role that money issued directly by the government has played in our history. The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

Many people believe that the U.S. government creates its own money. This is not true. Today, the Federal Reserve creates trillions of dollars on its books and lends them at near-zero interest to private banks, which then lend them back to the government and the people at market rates. We have been brainwashed into thinking that it makes more sense to do this than for the government to simply create the money itself, debt- and interest-free.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: nations should be free to create their own money without incurring debt. Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted this essential strategy. They realized that the freedom to print money offers a way to break the shackles of debt and free the nation to realize its full potential.

While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

Money creation is an all-important power that has been fought over for centuries, in a largely secret battle between governments and private banks. For the last two and a half centuries, the banks have had the upper hand, making us forget that any other option exists. But we are learning the great secret of money: that how it gets created determines who has the power in society—we the people, or they the bankers.

It is no secret who has that power today. Witness the great bailout of 2008 that rewarded banks for making irresponsible and fraudulent gambles in the subprime mortgage scandal. None of the bankers responsible served time in jail. Then there was the robosigning scandal, in which banks skipped important steps in the process of foreclosing on the homes of ordinary Americans, and came away with a slap on the wrist. Now we are seeing the LIBOR scandal unfold, in which traders at the Swiss financial services company UBS were convicted of colluding with other banks to tweak interest rates for their own financial benefit. We can make an educated guess as to how this too will turn out for them (hint: well). While a commoner might get 10 to 20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but change will not come until we grasp the fundamental secrets that are the foundation of their power: those who create the nation’s money control the nation, and nearly the entire money supply today is created by banks in concert with the Federal Reserve.

Remembering our roots

Everyone knows that Benjamin Franklin played an important role in the founding of the United States. Fewer know his views on the printing of money. “Experience, more prevalent than all the logic in the World,” he wrote, “has fully convinced us all, that [paper money] has been, and is now of the greatest advantages to the country.”

When the British forbade new issues of paper scrip by the colonial governments, Franklin went to London and argued that issuing their own money was responsible for the colonies’ prosperity.

The response of the king, leaned on by the Bank of England, was to ban all issues of paper scrip. Without their paper money, the money supply collapsed, and the economy sank into a deep recession. The colonists then rebelled. They won the revolution, but the bankers retained the power to create money by setting up a banking system like that dominated by the Bank of England.

Fourscore and six years later, in 1862, President Abraham Lincoln boldly took back the power to create money during the Civil War. To avoid exorbitant interest rates of 24 to 36 percent, he decided to print money directly from the U.S. Treasury as U.S. Notes or “greenbacks.” The issuance of $450 million in greenbacks was the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

After Lincoln was assassinated, however, the greenback program was quickly discontinued. Repeated popular attempts by farmers and laborers to revive it failed. They were opposed by a wave of banker activism to maintain the banks’ control over the printing of money, which had been established by the National Bank Act of 1863.

In 1872, New York bankers sent a letter to every bank in the United States. The letter, as quoted by Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers…as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders .

Bank-created money, including paper bills and now electronic money, could be rented to the people at a profit. The people’s debt-free money was limited to coins, which today compose less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks marked the exchange of physical slavery for what has been called “debt peonage” or “wage slavery.” Today, as a result, the American government and American people are so heavily mired in debt that only a radical overhaul of the monetary system can free us.

Gimmick or game-changer?

This is the real context and backstory of the trillion dollar coin. The stakes are much higher than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and we can’t do it with nickels and dimes. We’re going to need coins bearing some very large numbers.

The coin could put within the government’s grasp the power to solve its debt problems once and for all.

The idea of minting large-denomination coins to solve economic problems seems to have first been suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins. The Constitution gives Congress the power to coin money and regulate its value, and sets no limit on the value of the coins it creates.

That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, who at the time was blogging under the pseudonym “ Beowulf ,” proposed issuing a platinum trillion dollar coin to capitalize on this loophole, after he heard me mention the trillion dollar coin in a Thom Hartmann interview. At first, he said, it was just an amusing exercise. But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory (MMT), reviewed the idea of the trillion dollar coin and concluded it would work operationally. And Joe Firestone pointed out that the trillion dollar coin has far greater game-changing potential than mere political maneuvering. The coin could put within the government’s grasp the power to solve its debt problems once and for all, replacing austerity with the abundance enjoyed by our forefathers.

The invariable objection to government-issued money is that it will lead to hyperinflation. The trillion dollar coin can evoke images of million-Deutschemark notes filling wheelbarrows. But as economist Michael Hudson points out:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

And as professor Randall Wray observes, the coin would not circulate in the general economy. Instead, it would be deposited in the government’s account and held at the Fed, so it could not inflate the circulating money supply.

As far as spending goes, the fact that the Treasury has money in its account doesn’t mean Congress could or would go wild spending the funds. The budget would still need congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full productive capacity without creating price inflation (since supply and demand would rise together). After that, it would need to tax—not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to take back the money power

The current political stalemate cannot be solved with the thinking that created it. There is simply not enough money in the system to fund the services that Americans desperately need, create full employment, pay down the debt, and keep taxes affordable. The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.

The massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

The only real solution to the unemployment created by this shrinkage is to add more money to the economy, and that means that someone needs to create it. Either the Fed does this in the way that it is currently done, by adding the money nearly interest-free to the balance sheets of banks to be lent to the government and the people at interest; or the Treasury does it and adds the money to the government’s account debt- and interest-free.

After a century of domination by the Federal Reserve, it is time we tried something new. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself to be more powerful than the elected representatives of the people. If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. But the current government is so thoroughly captured by the bank-created money of our time that it is unlikely to take action without pressure from the people. Our ignorance on these issues has played into the hands of the 1 percent, who are dependent on the current system for their wealth and power. However, the massive push from educational campaigns such as those organized by Occupy Wall Street, Strike Debt, and the Free University is starting to lift the veil from our eyes.

We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

This work is licensed under a Creative Commons License

Ellen Brown

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. She is president of the Public Banking Institute, http://PublicBankingInstitute. org , and has websites at http://WebofDebt.com and http://EllenBrown.com

Does Bank Of England Hold €235 Million Of Irish Gold Reserves?

Ireland's finance minister, Michael Noonan, has been asked about the country's gold vaulted at the Bank of England, such as whether the gold is held in allocated form with a bar list available and whether the gold is leased out into international markets. Answers are as of yet not forthcoming.

Between a Rock and a Hard Place, or Up Against the Wall?

A friend who teaches in the social sciences–but not economics–wrote:

“Did you read this Marty Feldstein piece in the WSJ yesterday?  I know bupkes about Fed policy, but it seems to me the Fed is between a rock and a hard place.  It continues to buy U.S. securities (in part, by printing money) to keep the economy afloat.  But Feldstein suggests this is all going to come crashing down.  Do you agree? Who should I turn to for an alternative perspective?”

Feldstein warns that both quantitative easing and a softer line on inflation by the Fed are likely to “confuse the general public and undermine confidence in the bank’s commitment to price stability.”  In particular — and I think this what alarmed my friend — was Feldstein’s concern that:

“Because of the Fed’s purchases of bonds and mortgage-backed securities, commercial banks have $1.4 trillion more in reserves than is legally required by the size of their balance sheets. The banks can use these excess reserves to create loans and deposits, which will increase the money supply and fuel inflation…[T]he day will come when aggregate demand is increasing, companies want to borrow, and the banks are willing to lend aggressively….The final problem with the Fed’s unconventional policy is perhaps the most obvious. By keeping long-term interest rates low, it removes pressure on Congress and the Obama administration to deal with budget deficits…The Fed, in short, has killed the bond vigilantes before they could have forced Congress to act.” 

So from Feldstein’s perspective the Fed is interfering with healthy price signals from the bond market to both private agents and the Federal government.  The “bond market vigilantes” schtick is a retort to Paul Krugman and Brad DeLong.

Official U.S. unemployment is 7.8 percent and the employment-to-population ratio is around 6 percentage points below its 2000 peak — lower than it’s been anytime since 1984.  I just went to a session at the American Economics Association meetings in San Diego where Jesse Rothstein argued persuasively that the issue is strictly aggregate demand (not a growing taste for vacations). There is a lot of slack in this economy.

The Federal Reserve isn’t between a rock and a hard place: it’s up against a wall because it can’t lower interest rates below zero.  (In principle, the Fed could tax reserves which would effectively offer banks a negative interest rate for leaving money at the Fed rather than lending it out.)

Feldstein’s worry that the banks are poised for a wild lending binge seems far-fetched in the current climate. And if the banks were headed out for a binge, it’s clear from the last two major  bubbles that regulation, not interest rates, can stop the party.  (Who cares if you are paying 5.5 percent or 6.6 percent if you “know” that your house will appreciate between 25 and 30 percent per year?)

As for creative uses for 1.4 trillion in reserves, blog contrtibutors Heidi Garrett-Peltier, James Heintz, Robert Pollin, and Jeannette Wicks-Lim have a great take on what could be possible if some of the funds that banks are hoarding got pushed out into loans for infrastructure and green investment.

Bankers, Bradburys, Carnage And Slaughter On The Western Front

As I start to write this article, today is Remembrance Sunday and I’m listening live to the sombre but magnificent strains of Elgar’s Nimrod as the parade at The Cenotaph assembles for the nation’s annual act of remembrance to the fallen. Like almost everyone else, I’m always humbled and moved by the veterans’ march-pass to pay their respects to fallen friends and comrades – but this year I will find it particularly poignant in the light of my recent research concerning a little known fact about the outbreak of the First World War. Let me explain.

Yesterday, I watched by sheer chance the spectacle of the Lord Mayor’s Show on television. This year’s parade for the inauguration of the 685th Lord Mayor of London, Alderman Roger Gifford, was no different from any other. As ever it was a combination of centuries old, corporate traditions, with floats and vintage vehicles representing the various Worshipful Companies, combined with local units from the armed forces along with enthusiastic and diverse community groups of children and young people. It was pageantry and modern day life parading together side by side to show off all that is best about our capital city.

Alderman Roger Gifford, the new Lord Mayor of London, enjoying his big day.

All very innocent and benign you would think. There was Roger Gifford, a banker by trade, smiling and clearly enjoying himself hugely as he doffed his large black tricorne hat to the passing parade. All around him on the VIP stand were his family, friends, business acquaintances and representatives from the City of London - people who just seemed relaxed, normal and happy.

Looking at this joyous and colourful scene on the streets of London, I was reminded of the fictional character Richard Hannay in John Buchan’s pre-First World War famous spy novel The Thirty-nine Steps. The final scene sees the hero Hannay confronting The Black Stone, the network of ingenious German spies who had morphed into the higher echelons of British society and had discovered, by the use of magnificent disguise and deception, the war-time dispositions of the Royal Navy. Having tracked them down to their secret lair on the Kentish coastline, Hannay is confronted by a scene of complete domestic normality. There is nothing about the Germans or the villa that could suggest anything other than a typical British upper middle class household at ease with itself enjoying a seaside holiday. But just one sudden flicker of recognition restored Hannay’s confidence that he had discovered The Black Stone.

Well, such a flicker of recognition also restored my confidence. As soon as I saw the giant wicker effigies of Gog and Magog on the parade, the mythical ‘protectors’ of the City of London, my confusion disappeared. The façade of decency and respectability was gone in an instant - the truth of what we were really looking at had once again been restored.

Gog and Magog

For those of us who, after many years of careful and detailed research, now understand the hidden machinations of global finance and who are aware of the secretive network of criminals and traitors who seek world government on their terms, this annual spectacle of corporate celebration and respectability by people who are not household names clearly masks an evil that must now be exposed quickly and effectively.

With the exception of a few thousand very powerful people, the entire world’s population, all seven billion of us, are trapped ... trapped into a criminal debt creating banking ‘system’ that has taken hundreds of years to perfect and to come to fruition. This ‘system’ results in enslavement and servitude. It creates dreadful unhappiness amongst ordinary decent people and causes wars, debt, starvation, pollution and environmental destruction. It feeds on greed, fear and division. It forces people onto the corporate treadmills of mass mindless production and mass mindless consumption. It uses lies, deception, intimidation and entrapment at all times. It is a system that is so clever and so cunning that most of the world is completely oblivious to its existence. It is a system that allows a few winners at the expense of a huge number of losers. It is a system that considers itself to be unbeatable and indestructible and is now so arrogant that it believes it can control everything and everyone on its terms. It is a system where psychopaths and sociopaths can flourish. And without question the centre of this system, the heart of this global corporate beast is the innocent sounding Square Mile known as the City of London.

Put very simply, the banking dynasties, such as the House of Rothschild, control the political processes around the world to such an extent that their network of private central banks have the right to create money completely out of thin air and then charge interest on that ‘nothingness’. The polite term is ‘Fractional Reserve Lending’ but in reality it is just simple fraud. The result is that the whole world is currently drowning in a sea of fraudulent debt.

The USA now has a National Debt of over 16 trillion dollars, whilst the UK owes its creditors over one trillion pounds. The planned contagion of spiralling and unlawful debt is now sweeping over Europe with a renewed vigour. Greece and Spain are being torn apart by appalling austerity measures to the point that civil war or military intervention are now being openly talked about on the streets. Italy is giving all the signs that its economy is now entering into very stormy waters indeed. Ireland, Portugal, France and Belgium are already in a mess and are unlikely to see their debts become more manageable. Tens of millions of people have experienced a major downturn in their quality of life, along with their prospects for a more secure and better future, as unlawful austerity measures brought in by corrupt politicians begin to bite. Even the stronger economies of Germany, The Netherlands and Luxembourg have now been downgraded by Moody’s, the Rothschild controlled credit rating agency.

A Simple Solution To End This Madness – The Greenback:

What is happening to all of us is criminal. However, there is a very simple solution that the banking dynasties do not want you to know about.

At the height of the American Civil War, the US Treasury warned President Lincoln that further funding would be needed if the Federal North was to have the resources needed to defeat the Confederate South. The President initially went to the Rothschilds and the private banks who wanted between 24 and 36 per cent interest. Lincoln knew that if he agreed to take loans from the bankers that he would be putting his country into a debt noose that would strangle the economic prosperity out of his country and which would be almost impossible to pay off.

On the advice of a businessman with proven integrity, Colonel Dick Taylor from Illinois, Abraham Lincoln made the decision to print debt-free and interest-free paper money based on nothing more than the honour of the American Government. Called ‘Greenbacks’ because they were coloured green on one side only, the US Treasury issued 450 million dollars worth of these notes and they were immediately accepted as legal tender by a willing and grateful nation. The war was eventually won and this very popular new paper currency seemed set to continue. In the words of Lincoln himself:

The government should create issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power.

Senate document 23, Page 91. 1865

$5 Greenback

However, the response by the private bankers to this sudden threat to their banking empire was swift and brutal as this extract from The Times of London in 1865 shows:  

If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedence in the history of the civilised governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed, or it will destroy every monarchy on the globe.

On Good Friday, April 14th 1865, a lone gunman ended the presidency of Abraham Lincoln. Sadly, his Greenback legacy died with him as the private bankers managed to ‘persuade’ Congress to revoke this successful initiative in favour of the debt creating National Banking Act which eventually led to the formation of the privately run Federal Reserve in 1913. Since then, America’s unlawful debt has risen to over 16 trillion dollars.

"I have two enemies; the Southern army in front of me and the financial institutions in the rear. Of the two, the one in the rear is my greatest foe."  Abraham Lincoln

The solution for dealing with private debt-creating bankers is simple. There is nothing, absolutely nothing, to stop any sovereign government from issuing through its treasury its own interest-free money based on nothing more than the wealth and integrity of the nation. This is the big secret that the City of London would rather keep to itself. If this simple fact were to become mainstream then people everywhere would simply walk away and the entire banking system would completely collapse.

And now we come to a very little known historical episode that I alluded to at the beginning that takes this concept of the debt-free ‘Greenback’ from America to Britain ... and in so doing exposes the truly appalling values that are prevalent even today within the City of London.

The Great War And The Debt-free Bradbury Treasury Note:

Three weeks ago, as part of my ongoing research into the banking elite, I came across a fascinating book entitled The Financiers and the Nation by the Rt. Hon. Thomas Johnston, P.C., ex-Lord Privy Seal. It was written in 1934 and republished in 1994 by Ossian Publishers Ltd.

The text of this quite remarkable and rare book is available here.

In Chapter 6, entitled ‘Usury on the Great War’, I’ve selected the following paragraphs which I believe are both shocking and self-explanatory:

WHEN the whistle blew for the start of the Great War in August 1914 the Bank of England possessed only nine millions sterling of a gold reserve, and, as the Bank of England was the Bankers' Bank, this sum constituted the effective reserve of all the other Banking Institutions in Great Britain.

The bank managers at the outbreak of War were seriously afraid that the depositing public, in a panic, would demand the return of their money. And, inasmuch as the deposits and savings left in the hands of the bankers by the depositing public had very largely been sunk by the bankers in enterprises which, at the best, could not repay the borrowed capital quickly, and which in several and large-scale instances were likely to be submerged altogether in the stress of war and in the collapse of great areas of international trade, it followed that if there were a widespread panicky run upon the banks, the banks would be unable to pay and the whole credit system would collapse, to the ruin of millions of people.

Private enterprise banking thus being on the verge of collapse, the Government (Mr. Lloyd George at the time was Chancellor of the Exchequer) hurriedly declared a moratorium, i.e. it authorized the banks not to pay out (which in any event the banks could not do), and it extended the August Bank Holiday for another three days. During these three or four days when the banks and stock exchanges were closed, the bankers held anxious negotiation with the Chancellor of the Exchequer. And one of them has placed upon record the fact that 'he (Mr. George) did everything that we asked him to do.' When the banks reopened, the public discovered that, instead of getting their money back in gold, they were paid in a new legal tender of Treasury notes (the £1 notes in black and the 10s. notes in red colours). This new currency had been issued by the State, was backed by the credit of the State, and was issued to the banks to prevent the banks from utter collapse. The public cheerfully accepted the new notes; and nobody talked about inflation.

To return, however, to the early war period, no sooner had Mr. Lloyd George got the bankers out of their difficulties in the autumn of 1914 by the issue of the Treasury money, than they were round again at the Treasury door explaining forcibly that the State must, upon no account, issue any more money on this interest free basis; if the war was to be run, it must be run with borrowed money, money upon which interest must be paid, and they were the gentlemen who would see to the proper financing of a good, juicy War Loan at 31/2 per cent, interest, and to that last proposition the Treasury yielded. The War was not to be fought with interest-free money, and/or/with conscription of wealth; though it was to be fought with conscription of life. Many small businesses were to be closed and their proprietors sent overseas as redundant, and without any compensation for their losses, while Finance, as we shall see, was to be heavily and progressively remunerated.

Emergency Bradbury Treasury Notes (printed only on one side)

The real values of the private bankers and the City of London have been exposed for all to see. Whilst hundreds of thousands of British soldiers were dying on the killing fields of Flanders and elsewhere doing what they saw as their patriotic duty, British bankers, safely out of danger and not sharing the appalling conditions on the Western Front, were only interested in one thing – how to make obscene profits from Britain’s desperate efforts to win the war. To say that the private bankers and the City of London have the morals of sewer rats is to be extremely unkind to our little rodent friends. But this is the clincher. As a direct result of the greed and treason of the British private bankers in preventing the continuance of the Bradbury Treasury Notes, Britain’s National Debt went up from £650 million in 1914 to a staggering £7,500 million in 1919.

And this is where it all gets particularly interesting. The following is an extract from the official and current HM Treasury’s Debt Management Office website ... and it appears to be completely at odds with the account given by the Rt. Hon. Thomas Johnston.

The threat of World War One pushed British banks into crisis; exacerbated further as half the world's trade was financed by British banks and as a consequence international payments dried up. In response to this crisis, John Maynard Keynes (the renowned economist), persuaded the Chancellor Lloyd George to use the Bank of England's gold reserves to support the banks, which ended the immediate crisis. Keynes stayed with the Treasury until 1919. The war years of 1914-18 had seen an increase in the National Debt from £650 million at the start of the war to £7,500 million by 1919. This ensured that the Treasury developed new expertise in foreign exchange, currency, credit and price control skills and were put to use in the management of the post-war economy. The slump of the 1930s necessitated the restructuring of the economy following World War II (the national debt stood at £21 billion by its end) and the emphasis was placed on economic planning and financial relations.

Why is there is no mention whatsoever of the £300 million of Bradbury debt-free paper Treasury Notes issued in 1914? Instead, it says Lloyd George, on the advice of John Maynard Keynes, used the Bank of England’s gold reserves which, according to Johnston, only amounted to £9 million. What is going on here? Who is telling the truth? Could it be that HM Government, the puppets of the City of London, don’t want you to know about the simple but effective concept of debt-free and interest-free Treasury Notes?

What Do The System-serving Politicians And "Economists" Say About The issuance Of Treasury Notes?

As soon as the concept of the debt-free and interest-free Greenback Dollar (and now the Bradbury Pound) is raised in polite conversation with either a politician or an economist, two immediate knee jerk verbal reactions occur from these system-servers.

The first is to say that if a government suddenly starts printing its own money through its treasury based on the credit and wealth of the country, instead of going through its central bank, we would be heading towards what happened in the Weimar Republic in Germany in the early 1920s where hyperinflation spiralled out of control and a loaf of bread was bought with a barrow load of almost worthless paper money.

To this I just say look again at what actually happened in Germany at that time. It was not the Weimar’s treasury but it was the privately controlled central bank, the Reichsbank, who was printing the money, coupled with the extreme actions of currency speculators and foreign investors that caused all of the problems.

Hyperinflation could not happen as a result of the Bradbury Pound, because the democratically elected government would actually ‘govern’ ... now that is novel! Speculation would be prevented, and most importantly, the newly created money would be spent on a productive economy, rather than bankers bonuses.

The second reaction from system-servers is that the country is already printing its own money – it is called Quantative Easing, that mysterious cash injection into the economy which only seems to get as far as the banks and not to where it is actually needed. Only trouble is, it is the Bank of England doing the printing and not HM Treasury. Based around government issued Bonds (promissory notes based on the wealth of the nation), this complex process only increases the National Debt and it certainly doesn’t solve anything.

The simple truth is that people who serve the system and who have been ‘educated’ by such organisations as the Fabian inspired London School of Economics (LSE), are not suddenly going to bite the hand that gives them a very good living.

So what does all of this mean for us, the people?

Before looking at this, let’s just consider for a moment what ‘money’ actually is. It is simply a convenient unit of exchange for goods and services that people have COMPLETE CONFIDENCE in. Now if HM Government were to issue debt-free and interest-free treasury notes through HM Treasury rather than the Bank of England in order to meet the needs and happiness of all the people whilst getting them out of unlawful debt, my guess is that people might have a lot of confidence in such a benign and benevolent financial system.

There is absolutely no defence for the present system whereby private bankers create money completely out of thin air for themselves to lend and then charge interest on that ‘nothingness’. The Bank of England, with its hidden controller the Bank for International Settlements based in Basel, Switzerland (often described as the Central Bank of Central Banks), dictate behind the scenes the fiscal policies and direction that our supposed sovereign and independent government must take. We are all prisoners of this utterly corrupt system and it’s time to confront it head on to collapse it.

If our government were to go down the path of a new Bradbury Treasury Note (as well as pursuing the banksters with Common Law for their crimes against humanity) then our debt burden would be removed overnight – there would be no deficit and no national debt. Under Common Law, all debts involving the use of fractional reserve lending by the central and private banks will be written off as they were arrived at by the use of fraud. Money would be immediately made available by HM Treasury to meet the essential needs of the country. The nation’s happiness, well-being and security would be taken care of without the need for an invasive and complex tax system. We would have Gross Domestic Happiness instead of Gross Domestic Product dictating humanity’s future.

None of this is rocket science – if the Spanish and Greek governments genuinely wanted to put right overnight the economic woes of their countries, they would immediately start printing and supplying interest-free and debt-free treasury notes based on the wealth and integrity of their respective countries. They would also tell the IMF, the EU and the Bank for International Settlements to go and whistle for their ‘money’! Why? Because it was created out of thin air, it didn’t exist in the first place, and the whole banking system is fraudulent ... in other words, see you in a common law court in front of a jury!!!!

Banks, money and finance must exist to serve humanity, not the other way round. Our enslavement by unlawful debt can be ended overnight with one signature by the Chancellor of the Exchequer. It really is that simple!

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