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Global Backlash After Leaks Reveal Hypocrisy of US Spying

Three weeks since news broke that the National Security Administration is conducting a massive international surveillance operation, the US corporate media is still largely...

Eavesdropping on the Planet

The above is the title of an essay that I wrote in 2000 that appeared as a chapter in my book Rogue State: A Guide...

Eavesdropping on the Planet, Whistleblowers and Edward Snowden

In the course of his professional life in the world of national security Edward Snowden must have gone through numerous probing interviews, lie detector...

Is the Government Spying On You Through Your Own Computer’s Webcam Or Microphone?

Washington’s BlogJune 25, 2013 We documented earlier today that - if you are near your smart...

Is the Government Spying On You Through Your Own Computer’s Webcam Or Microphone?

Government — Or Private Individuals — May Be Watching and Listening We documented earlier today that - if you are near your smart phone —...

Trafficking in Lies about Syria

Trafficking in Lies about Syria by Stephen Lendman Media scoundrels substitute lies for truth and full disclosure. They violate core journalistic ethics doing so. They threaten...

Cell Phone Users Beware: How to Protect Yourself from Government Spying

Unless You Know About This Spying Method, You Might Say Something Which Could Get You In Hot Water Given that the NSA is tapping into...

Cell Phone Users Beware: How to Protect Yourself from Government Spying

Unless You Know About This Spying Method, You Might Say Something Which Could Get You In Hot Water Given that the NSA is tapping into...

NSA Spying and Intelligence Collection: A Giant Blackmail Machine and “Warrantless Wiretapping” Program

Despite a stream of mendacious twaddle from President Obama, congressional grifters and spook agency mouthpieces like Office of the Director of National Intelligence head...

The SINGLE Most Important Step to Protect Yourself from Government Spying

Washington’s BlogJune 24, 2013 Given that the NSA is tapping into your phone calls and spying...

UK tells Google to remove private data

Britain's data regulator says Google must delete all personal data it has gathered using its Street View project or face court action by the...

Snoop Valley: Facebook ex-officer ‘signs up’ with NSA

Published time: June 22, 2013 12:10 A former security officer at Facebook was hired by the National Security Agency (NSA) in 2010, US...

“Conspiracy of Secrecy”: System Failure, Cyber Threats and Corporate Denial

“Computer commands can derail a train or cause a gas pipeline to burst,” warned former Bush administration counter-terrorism chief Richard Clarke in Cyber War,...

New Quantum Computer System to Improve “Machine Learning”

Two announcements in May about the collaboration of the National Aeronautics and Space Administration (NASA), Google, and a private, non-profit group, the Universities Space...

New Quantum Computer System to Improve “Machine Learning”

Two announcements in May about the collaboration of the National Aeronautics and Space Administration (NASA), Google, and a private, non-profit group, the Universities Space...

Michael Hastings Assassinated for Work Uncovering Surveillance State

Kurt NimmoInfowars.comJune 20, 2013 The journalist Michael Hastings, who died in what authorities have...

NSA Capable of False Flag Attacks

Surveillance agency could expand to fueling mass hysteria. Kit DanielsInfowars.comJune 20, 2013 Inside a grocery...

Google’s chief engineer: People will soon upload their entire brains to computers

Published time: June 20, 2013 16:02 There are around 377 million results on Google.com for the query “Can I live forever?” Ask that...

Do You Have ANY IDEA How Widespread the Spying Really Is?

Washington’s Blog June 20, 2013 Preface: Americans now know that the government is spying. But they still have no idea how many of...

Skynet rising: Google acquires 512-qubit quantum computer; NSA surveillance to be turned over to...

Mike Adams Natural News June 20, 2013 Most people don’t know about the existence of quantum computers. Almost no one understands how they...

Your TV is Killing the Planet

Note to TV-loving couch potatoes: That little box sitting atop your television set that transforms a signal into your favorite show is likely the largest single source of electrical waste in your entire household.

Terms & Conditions

Introduction These terms and conditions govern your use of this website; by using this website, you accept these terms and conditions in full.  If you...

Guardian Posts Live Chat with Edward Snowden

On Sunday, June 16, national newspaper, USA Today published an interview with three former National Security Agency (NSA) whistleblowers: Thomas Drake, William Binney, and...

Guardian Posts Live Chat with Edward Snowden

On Sunday, June 16, national newspaper, USA Today published an interview with three former National Security Agency (NSA) whistleblowers: Thomas Drake, William Binney, and...

The National Security Industrial Complex and NSA Spying: The Revolving Doors Between State Agencies...

When Edward Snowden, an employee of Booz Allen Hamilton — a military contractor based in McLean, Virginia - blew the whistle on the extent of U.S. global electronic...

AT&T iPhones to Receive Obama Alerts

Joe SchoffstallCNS NewsJune 18, 2013 Are you a customer of AT&T who owns an iPhone 4S...

9/11 and the Military-Intelligence-Security Machine: Towards a Permanent State of Emergency in America

The US government is a criminal syndicate, openly committing atrocities on a global scale. The rule of law is a memory, buried in the...

NSA Scandal Goes Global: British Government Spied on G20 Delegates

New revelations exposed Sunday show that British government hosts of the 2009 G20 summit spied on the internet and phone communications of foreign delegates...

Google’s deep CIA and NSA connections

Eric SommerPravda.ruJune 17, 2013 The Western media is currently full of articles reporting Google’s denial that...

Keiser: The Collapse of the Current Bankster Regime is Upon Us

Max KeiserInfowars.comJune 17, 2013 We’re in a post-capitalist, post-socialism world. I have just come back from...

Media, Government Denounce Snowden as “Traitor” and “Chinese Spy”

Representatives of the national security apparatus, including former Vice President Dick Cheney, appeared on the Sunday morning news programs to denounce Edward Snowden as...

Apple received 5,000 data requests from US govt in 6 months

Apple received thousands of requests from US authorities for user info, but was unaware of Washington’s PRISM program, the company said. It joins internet...

The Next NSA Spying Shoe to Drop: “Pre-Crime” Artificial Intelligence

Washington’s BlogJune 17, 2013 NSA spying whistleblower Edward Snowden’s statements have been verified.   Reporter Glenn Greenwald has...

Secret Service Invades Home Of Obama Critic Over Twitter Followers

Tara DodrillOff The Grid NewsJune 17, 2013 I am sick and tired of looking out the...

The Next NSA Spying Shoe to Drop: “Pre-Crime” Artificial Intelligence

NSA Building Big Brother “Pre-Crime” Artificial Intelligence Program NSA spying whistleblower Edward Snowden’s statements have been verified.   Reporter Glenn Greenwald has promised numerous additional disclosures...

The Deeper Meaning of Mass Spying in America: Political and Economic Consequences of ...

Introduction            The exposure of the Obama regime’s use of the National Security Agency to secretly spy on the communications of hundreds of millions of...

The Government’s Spying Is Not As Bad As The Whistleblower Said … It’s WORSE

Whistleblower Claims Validated … and Then Some The government is attacking whistleblower Edward Snowden by claiming that he was lying about the scope of the...

How Predatory Reformers Are Destroying Education and Profiting at Our Children’s Expense

Several months ago, on a damp gray afternoon, I found myself sitting in a coffee shop in downtown Racine, Wisconsin, just a few blocks from the Lake Michigan shoreline.

Facebook Gives Gov't Access to Nearly 20,000 User Accounts

Have you updated your Facebook account lately? If so, the government may know all about it. According to a statement posted on the company’s website...

Facebook Gives Gov't Access to Nearly 20,000 User Accounts

Have you updated your Facebook account lately? If so, the government may know all about it. According to a statement posted on the company’s website...

The Obama Regime: What the NSA Revelations Tell Us about America’s Police State

Ongoing revelations by The Guardian and The Washington Post of massive, illegal secret state surveillance of the American people along with advanced plans for...

Thousands Of Companies Have Been Handing Over Your Personal Data To The NSA

Michael SnyderEconomic CollapseJune 15, 2013 It isn’t just Internet and phone companies that are giving your...

Is the Snowden Case Headed for a Plea Deal?

I’m guessing that there is more to Edward Snowden’s choice of Hong Kong instead of Iceland as an intial refuge than a matter of...

The History of America’s Secret Wars: Corporate Espionage and the Outsourcing of National Security

This text is excerpted from Big Lies: How Our Corporate Overlords, Politicians and Media Establishment Warp Reality and Undermine Democracy Pre-9/11 Flashback When NATO’s US and...

The Secret War: Infiltration, Sabotage, Devastating Cyber Attacks

He may be a four-star Army general, but Alexander more closely resembles a head librarian than George Patton. His face is anemic, his lips...

Spies Without Borders: Using Domestic Networks to Spy on the World

Much of the U.S. media coverage of last week’s NSA revelations has concentrated on its impact on the constitutional rights of U.S.-based Internet users....

Spies Without Borders: Using Domestic Networks to Spy on the World

Much of the U.S. media coverage of last week’s NSA revelations has concentrated on its impact on the constitutional rights of U.S.-based Internet users....

Google Hiding Behind Smoke Screen Of NSA’s Internet Spying Scheme

In an exclusive interview with Fox News, Google feigned shock and dismay at revelations that the NSA (National Security Agency) had been using the network to spy on millions of American citizens.

Government Spying on Americans … and then Giving Info to Giant Corporations

You’ve heard that the government spies on all Americans. But you might not know that the government shares some of that information with big corporations. In...

Greenwald Botches NSA Leak

Edward Snowden’s leak of NSA material was not well executed. One of several mistakes was that he sought refuge in Hong Kong, which, as...

“Digital Blackwater” Rules: The NSA Black Box in a Black Hole

The judgment of Daniel “Pentagon Papers” Ellsberg is definitive; “There has not been in American history a more important leak than Edward Snowden’s release...

Assange on RT to NSA whistleblower Snowden: ‘We are winning, but I hope you...

WikiLeaks founder Julian Assange has voiced strong support for fellow whistleblower Edward Snowden, but urged him to escape Hong Kong immediately to avoid being...

Black Woman Gets 20 Years for Firing Shot at Wall; White Man Gets 0...

A man in Florida shoots a man he finds having sex with his wife, killing him.  A woman in Florida shoots the wall to...

IRS Buying Spying Equipment: Covert Cameras in Coffee Trays, Plants

Elizabeth Harrington CNS News June 11, 2013 The IRS, currently in the midst of scandals involving the targeting of conservative groups and lavish taxpayer-funded...

86 Civil Liberties Groups and Internet Companies Demand an End to NSA Spying

Rainey Reitmaneff.orgJune 10, 2013 Today, a bipartisan coalition of 86 civil liberties organizations and Internet companies...

Tax tracks: IRS buys spy equipment amid spending scandal

The Internal Revenue Service (IRS), already embroiled in a high-profile scandal over its operations, is looking to acquire surveillance equipment that includes cameras concealed...

Government Spying on Americans … and then Giving Info to Giant Corporations

You’ve heard that the government spies on all Americans. But you might not know that the government shares some of that information with big corporations.

Main Core: A List Of Millions Of Americans That Will Be Subject To Detention...

Michael SnyderAmerican DreamJune 11, 2013 Are you on the list? Are you one of the...

Main Core: A List Of Millions Of Americans That Will Be Subject To Detention...

This article has been generously contributed by Michael Snyder. You can follow his regular writings, research and analysis at The Economic Collapse Blog and...

State of Emergency and “Continuity of Government”: What is the Real Reason the Government...

Are Emergency Plans Meant Only for Nuclear War the Real Justification for Spying? To understand the scope, extent and reason that the government spies on...

“Digital Blackwater”: Meet the Contractors Who Analyze Your Personal Data

Private companies are getting rich examining...

Soldier Reprimanded Over Promotion Party Featuring Chick-fil-A Sandwiches

A U.S. Army soldier was disciplined after he hosted a party for his promotion to the rank of master sergeant and served Chick-fil-A sandwiches...

Revealed: Secret Government Map Catalogues Spy Reports by Country

A screenshot of Boundless Informant: The color scheme ranges from green (least subjected to surveillance) through yellow and orange to red (most surveillance). (Image...

The NSA Is Building the Country’s Biggest Spy Center, “Watch What You Say”

The spring air in the small, sand-dusted town has a soft haze to it, and clumps of green-gray sagebrush rustle in the breeze. Bluffdale...

Boundless Informant: NSA’s complex tool for classifying global intelligence

A new batch of classified NSA docs leaked to the media reveals the details of a comprehensive piece of software used by NSA to...

Revealed: Secret Government Map Catalogues Spy Reports by Country

A screenshot of Boundless Informant: The color scheme ranges from green (least subjected to surveillance) through yellow and orange to red (most surveillance). (Image...

Telecom Insider Reveals Everyone Is Wiretapped!

Infowars.comJune 7, 2013 Rob Dew speaks with telecom insider James Knox (pseudonym) who has...

Soldier Reprimanded Over Promotion Party Featuring Chick-fil-A Sandwiches

A U.S. Army soldier was disciplined after he hosted a party for his promotion to the rank of master sergeant and served Chick-fil-A sandwiches...

The Monitoring of Our Phone Calls? Government Spooks May Be Listening

The Obama administration has been caught spying on the Verizon phone calls of tens of millions of Americans. The spying effort specifically targeted Americans...

Ore. Senate passes bill to regulate tracking devices for kids

Infowars.comJune 6, 2013 Oregon senators took a major step in affirming school students’ rights to privacy...

Alleged Anonymous hacker raided by FBI after exposing Ohio rape scandal

A 26-year-old Kentucky man says the FBI raided his home earlier this year in an attempt to investigate two hacker groups and the role...

Unprecedented Wealth, Debt Slavery and Conditioned Consciousness

Introduction Seventeen years ago, I read a book called The Evolving Self. Though I didn’t realize it at the time, it profoundly affected the direction...

Second day of Manning trial focuses on hacker who turned him in

The Colombian-American computer hacker who turned Army Private Bradley Manning in to authorities surprised courtroom spectators Tuesday when he took the stand during day...

‘NetTraveler’ cyber-spy network compromised over 350 high-profile victims — Kaspersky report

Kaspersky Lab has discovered a years-long cyber-espionage operation that victimized hundreds of high-profile targets in 40 countries. The malware, known as NetTraveler, was used...

China hacking Vs. Pentagon whacking: An arms race in cyber-space?

<!--Nile Bowie-->Nile Bowie is a political analyst and photographer currently residing in Kuala Lumpur, Malaysia. ...

The “Cloudy” Skies Corporations Want to Sell You

It’s the nature of the shallow, consumer-driven, dream-drunken culture our society tries to impose on us that we popularly adopt terms without knowing what...

‘Iran ready to counter US cyber threats’

Iran has been the target of several cyberattacks over the past few years. (File photo)An Iranian lawmaker says the country has what it takes...

Deflation Smackdown: Bernanke’s Madcap Money Printing Fails to Boost Inflation

“Under a fiat money system, a government… should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest...

US lifts ban on gadget exports to Iran ahead of elections

The US has announced it is easing sanctions on Iran, allowing exports of computers, cellphones and software to individuals. The move comes ahead of...

Deflation Smackdown

“Under a fiat money system, a government… should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest...

L’Italia nel business di guerra dell’F-35

Undici anni fa, il 30 maggio 2002, documentavamo sul manifesto in quale situazione veniva portata l’Italia aderendo al programma del Joint Strike Fighter, il...

US lifts ban on gadget exports to Iran ahead of elections

The US has announced it is easing sanctions on Iran, allowing exports of computers, cellphones and software to individuals. The move comes ahead of...

US lifts ban on gadget exports to Iran ahead of elections

The US has announced it is easing sanctions on Iran, allowing exports of computers, cellphones and software to individuals. The move comes ahead of...

National Taxpayers Union Finds Major Spending Shift in 112th Congress

A report from the National Taxpayers Union’s foundation, published on Tuesday, illustrates a massive shift in spending versus cutting that occurred during the 112th...

National Taxpayers Union Finds Major Spending Shift in 112th Congress

A report from the National Taxpayers Union’s foundation, published on Tuesday, illustrates a massive shift in spending versus cutting that occurred during the 112th...

We’re Being Watched: How Corporations and Law Enforcement Are Spying on Environmentalists

(Photo illustrations Nadia Khastagir / Design Action)In February 2010 Tom Jiunta and a small group of residents in northeastern Pennsylvania formed the Gas Drilling...

Corporate Spying on Environmental Groups

In February 2010 Tom Jiunta and a small group of residents in northeastern Pennsylvania formed the Gas Drilling Awareness Coalition (GDAC), an environmental organization...

Why The Next War With China Could Go Very Badly For The United States

Michael SnyderAmerican DreamMay 29, 2013 Most Americans assume that the U.S. military is so vastly superior...

The Bilderberg, Google and the G8: New Global Tax Regime Already in the Works

This year’s annual Bilderberg conference is rapidly approaching — where the world’s political and business elite meet in private to discuss their agenda which...

Jalili vows devotion to Revolution ideals

Iranian presidential candidate Saeed Jalili says he will stick to the ideals of the 1979 Islamic Revolution in his foreign policy should he win...

Baa, baa robot! Drone controlled by computer will be able to track and round...

UK Daily MailMay 27, 2013 The bond between shepherds and their loyal sheepdogs is a rural...

Israel’s Hand in Guatemala’s Genocide

Image: Former Israeli Prime Minister Ariel Sharon. (Photo credit: Jim Wallace of the Smithsonian Institution) The Guatemalan genocide of the 1980s does not just implicate...

Google attempts to trump Facebook $1bn bid for Waze

Google are among a number of companies circling Israeli mapping software company Waze after Facebook put in a $1bln takeover bid. ...

Why the Senate’s “Border Security Triggers” May Leave Millions in Limbo

On May 21st the Senate Judiciary Committee concluded debate on the “Gang of 8” immigration reform proposal, passing the amended proposal onto the full...

Why the Senate’s “Border Security Triggers” May Leave Millions in Limbo

On May 21st the Senate Judiciary Committee concluded debate on the “Gang of 8” immigration reform proposal, passing the amended proposal onto the full...

Xbox One: Constantly Listening To Conversations

With the announcement of Microsoft's next generation gaming console, the Xbox One, it has emerged that the new system carries a device that will be 'constantly listening' to gamer's conversations.

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...

Real American Boy: How Our Byzantine Immigration System and Failed Economy May Have Made...

http://www.truthdig.com/report/item/real_american_boy_how_our_byzantine_immigration_system_and_failed_economy_m/ Posted on May 20, 2013 ...

Why Is Tumblr Worth $1.1 Billion to Yahoo? You

http://www.truthdig.com/report/item/why_is_tumblr_worth_11_billion_to_yahoo_you_20130521/ Posted on May 20, 2013 ...

US claims Chinese military is on new cyber offensive against America

Officials within the United States government say hackers from China have renewed their assault on US targets only three months after a highly-touted investigation...

US claims Chinese military is on new cyber offensive against America

Officials within the United States government say hackers from China have renewed their assault on US targets only three months after a highly-touted investigation...

Is EVERY Market Rigged?

European Union Launches Investigation Into Manipulation of Oil Prices Since 2002 CNN reports: The European Commission raided the offices of Shell, BP and Norway’s Statoil this...

No swarms in space: DARPA axes $200mn ‘fractionated sat’ project

After spending more than $200 million, the Pentagon’s advanced research branch has decided to scrap one of its key space projects, System F6, which...

The US Government Might Be the Biggest Hacker in the World

Cyber crime is big business in the US. It’s used to spy, steal, harass competition, political opponents, or to stage an attack and blamed...

Italian ‘Tango Down’ operation arrests 4 Anonymous hackers

A crackdown on hacker group Anonymous has seen the arrests of four suspected hacktivists in Italy, report local police. The four are thought to...

June 6-9: Bilderberg Meeting behind Closed Doors. On the Agenda: Domestic Spying, Diffusing Social...

Its four-day meeting occurs annually. It’s a rite of spring. British political economist Will Hutton calls the group the “high priests of globalization.” Powerful...

Bahraini activist granted asylum in Britain

A Bahraini blogger and human rights activist, Ali Abduleman, says he has been granted political asylum in the UK after emerging from hiding after...

Nuclear Terror in the Middle East

http://www.truthdig.com/report/item/nuclear_terror_in_the_middle_east_20130514/ Posted on May 14, 2013 By...

UK spyware used against Bahraini activists — court witness

UK spy technology was used against British citizen in Bahrain, new evidence filed in a UK high court has claimed. Activists are calling for...

‘UK spy tech used against Bahrainis’

A witness statement says UK spy technology has been used against Bahraini activists.A UK-based companyâ„¢s surveillance software has been used by the Al Khalifa...

‘US conducts numberless cyber raids yearly’

Cyber security experts say the US government has some of the most malicious cyber warfare resources in the world. (File photo)A new report has...

'Iran N-sites immune to quake, cyber raid'

Iranâ„¢s nuclear facilities are fully safeguarded against the most powerful earthquakes and any potential cyber attacks, head of Iran's Environment Protection Organization (IEPO) says. Å“The...

Washington State court system hacked

The Washington state Administrative Office of the Courts has been hacked. Hackers have infiltrated the website of Washington state Administrative Office of the Courts, and...

Daily Rituals

Daily Rituals Email   Print   Share Posted on May 9, 2013 By Gabriel Thompson “Daily Rituals: How Artists Work”A book edited by Mason Currey Precisely one day...

Fred Reed Ditched His PC for a Mac

by Fred Reed Recently by Fred Reed: Terrorism in Boston Every farm boy and columnist learns early on what not to step in. Some...

Fred Reed Ditched His PC for a Mac

by Fred Reed Recently by Fred Reed: Terrorism in Boston Every farm boy and columnist learns early on what not to step in. Some...

Stunning Astronomical Alignment Found at Peru Pyramid

Stunning Astronomical Alignment Found at Peru Pyramid 2013 05 07 By Owen Jarus | LiveScience An ancient astronomical alignment in southern Peru has been discovered by...

Google Glasses Hack Reveals Disturbing Level Of Privacy Intrusions

A software developer has reportedly hacked Google Glasses, revealing a number of disturbing security flaws. Through a simple modification to the Google Glasses software, practically anyone can secretly record video and audio from the wearable device.

Google Fined (Again) Over Privacy

Google has been fined by German authorities over claims it illegally collected personal data during its Street View project.

The Deplorable Treatment of Wounded Troops

For a country always at war, the United States is remarkably not interested in taking care of soldiers it has broken in its wars. Having bankrupted the country, Washington sinks every available penny into the two purposes of the military.

The Failure of Laissez Faire Capitalism and Economic Dissolution of the West

paulcroberts

Author’s  Note

I receive numerous questions from readers about our economic situation and the condition of civil liberty.

There is no way I can answer so many inquiries, and no need. I have written two books that provide the answers, and they are inexpensive. I have done my job. It is up to you to inform yourself. Kindle Reader software is available as a free online download that permits you to read ebooks in your own web browser.

My latest, The Failure Of Laissez Faire Capitalism And Economic Dissolution of the West , is available as an ebook in English as of March 2013 from Amazon.com and from Barnes&Noble.

My book is endorsed by Michael Hudson and Nomi Prims and has a 5 star rating from Amazon reviewers (as of March 23, 2013). Pam Martens’ review at Wall Street On Parade is available here

Libertarians who have not read the book have had an ideological knee-jerk reaction to the title. They demand to know how can I call the present system of crony capitalism laissez faire. I don’t. The current system of government supported crony capitalism is the end result of a 25-year process of deregulation.

Deregulation did not produce libertarian nirvana. It produced economic concentration and crony capitalism.

Amazon provides as a free read the introduction by Johannes Maruschzik to the German edition. Below is my Introduction to my book.

Paul Craig Roberts, March 27, 2012

Not only has your economy been stolen from you but also your civil liberties. My coauthor Lawrence Stratton and I provide the scary details of the entire story in The Tyranny of Good Intentions [5]. In the US law is no longer a shield of the people against arbitrary government. Instead, law has been transformed into a weapon in the hands of the government.

Josie Appleton documents that in England also law has been turned into a weapon against the people. http://www.spiked-online.com/site/printable/13420/ [6] Anglo-American law, the foundation of liberty and one of the greatest human achievements, lies in ruins.

Libertarians think that liberty is a natural right, and some Christians think that it is a God-given right. In fact, liberty is a human achievement, fought for by Englishmen over the centuries. In the late 17th century, the achievement of the Glorious Revolution was to hold the British government accountable to law. William Blackstone heralded the achievement in his famous Commentaries On The Laws Of England, a bestseller in pre-revolutionary America and the foundation of the US Constitution.

In the late 20th century and early 21st century, governments in the US and Great Britain chafed under the requirement that government, like the people, is ruled by law and took steps to free government from accountability to law.

Appleton says that the result is a “tectonic shift in the relationship between the state and the citizen.” Citizens of the US and UK are once again without the protection of law and subject to arbitrary arrests and indictments or to indefinite detention in the absence of indictments.

In the US, citizens can be detained indefinitely and even executed without due process of law. There is no basis in the US Constitution for these asserted powers. The unconstitutional powers exist only because Congress, the judiciary and the American people have accepted the lie that the loss of civil liberty is the price paid for protection against terrorists.

In a very short time the raw power of the state has been resurrected. Most Americans are oblivious to this outcome. As long as government is imprisoning and killing without trials demonized individuals whom Americans have been propagandized to fear, Americans approve. Americans do not understand that a point is reached when demonization becomes unnecessary and that precedents have been established that revoke the Bill of Rights.

If you are educated by these two books, you will be better able to understand what is happening and, thus, you will be in a better position to survive what is coming.

Introduction to The Failure of Laissez Faire Capitalism and Economic
Dissolution of the West: Towards a New Economics for a Full World

The collapse of the Soviet Union in 1991 and the rise of the high speed Internet have proved to be the economic and political undoing of the West. “The End Of History” caused socialist India and communist China to join the winning side and to open their economies and underutilized labor forces to Western capital and technology. Pushed by Wall Street and large retailers, such as Wal-Mart, American corporations began offshoring the production of goods and services for their domestic markets. Americans ceased to be employed in the manufacture of goods that they consume as corporate executives maximized shareholder earnings and their performance bonuses by substituting cheaper foreign labor for American labor. Many American professional occupations, such as software engineering and Information Technology, also declined as corporations moved this work abroad and brought in foreigners at lower renumeration for many of the jobs that remained domestically. Design and research jobs followed manufacturing abroad, and employment in middle class professional occupations ceased to grow. By taking the lead in offshoring production for domestic markets, US corporations force the same practice on Europe. The demise of First World employment and of Third World agricultural communities, which are supplanted by large scale monoculture, is known as Globalism.

For most Americans income has stagnated and declined for the past two decades. Much of what Americans lost in wages and salaries as their jobs were moved offshore came back to shareholders and executives in the form of capital gains and performance bonuses from the higher profits that flowed from lower foreign labor costs. The distribution of income worsened dramatically with the mega-rich capturing the gains, while the middle class ladders of upward mobility were dismantled. University graduates unable to find employment returned to live with their parents.

The absence of growth in real consumer incomes resulted in the Federal Reserve expanding credit in order to keep consumer demand growing. The growth of consumer debt was substituted for the missing growth in consumer income. The Federal Reserve’s policy of extremely low interest rates fueled a real estate boom. Housing prices rose dramatically, permitting homeowners to monetize the rising equity in their homes by refinancing their mortgages.

Consumers kept the economy alive by assuming larger mortgages and spending the equity in their homes and by accumulating large credit card balances. The explosion of debt was securitized, given fraudulent investment grade ratings, and sold to unsuspecting investors at home and abroad.

Financial deregulation, which began in the Clinton years and leaped forward in the George W. Bush regime, unleashed greed and debt leverage. Brooksley Born, head of the federal Commodity Futures Trading Commission, was prevented from regulating over-the-counter derivatives by the chairman of the Federal Reserve, the Secretary of the Treasury, and the chairman of the Securities and Exchange Commission. The financial stability of the world was sacrificed to the ideology of these three stooges that “markets are self-regulating.” Insurance companies sold credit default swaps against junk financial instruments without establishing reserves, and financial institutions leveraged every dollar of equity with $30 dollars of debt.

When the bubble burst, the former bankers running the US Treasury provided massive bailouts at taxpayer expense for the irresponsible gambles made by banks that they formerly headed. The Federal Reserve joined the rescue operation. An audit of the Federal Reserve released in July, 2011, revealed that the Federal Reserve had provided $16 trillion–a sum larger than US GDP or the US public debt–in secret loans to bail out American and foreign banks, while doing nothing to aid the millions of American families being foreclosed out of their homes. Political accountability disappeared as all public assistance was directed to the mega-rich, whose greed had produced the financial crisis.

The financial crisis and plight of the banksters took center stage and prevented recognition that the crisis sprang not only from the financial deregulation but also from the expansion of debt that was used to substitute for the lack of growth in consumer income. As more and more jobs were offshored, Americans were deprived of incomes from employment. To maintain their consumption, Americans went deeper into debt.

The fact that millions of jobs have been moved offshore is the reason why the most expansionary monetary and fiscal policies in US history have had no success in reducing the unemployment rate. In post-World War II 20th century recessions, laid-off workers were called back to work as expansionary monetary and fiscal policies stimulated consumer demand. However, 21st century unemployment is different. The jobs have been moved abroad and no longer exist. Therefore, workers cannot be called back to factories and to professional service jobs that have been moved abroad.

Economists have failed to recognize the threat that jobs offshoring poses to economies and to economic theory itself, because economists confuse offshoring with free trade, which they believe is mutually beneficial. I will show that offshoring is the antithesis of free trade and that the doctrine of free trade itself is found to be incorrect by the latest work in trade theory. Indeed, as we reach toward a new economics, cherished assumptions and comforting theoretical conclusions will be shown to be erroneous.

This book is organized into three sections. The first section explains successes and failures of economic theory and the erosion of the efficacy of economic policy by globalism. Globalism and financial concentration have destroyed the justifications of market capitalism. Corporations that have become “too big to fail” are sustained by public subsidies, thus destroying capitalism’s claim to be an efficient allocator of resources. Profits no longer are a measure of social welfare when they are obtained by creating unemployment and declining living standards in the home country.

The second section documents how jobs offshoring or globalism and financial deregulation wrecked the US economy, producing high rates of unemployment, poverty and a distribution of income and wealth extremely skewed toward a tiny minority at the top. These severe problems cannot be corrected within a system of globalism.

The third section addresses the European debt crisis and how it is being used both to subvert national sovereignty and to protect bankers from losses by imposing austerity and bailout costs on citizens of the member countries of the European Union.

I will suggest that it is in Germany’s interest to leave the EU, revive the mark, and enter into an economic partnership with Russia. German industry, technology, and economic and financial rectitude, combined with Russian energy and raw materials, would pull all of Eastern Europe into a new economic union, with each country retaining its own currency and budgetary and tax authority. This would break up NATO, which has become an instrument for world oppression and is forcing Europeans to assume burdens of the American Empire.

Sixty-seven years after the end of World War II, twenty-two years after the reunification of Germany, and twenty-one years after the collapse of the Soviet Union, Germany is still occupied by US troops. Do Europeans desire a future as puppet states of a collapsing empire, or do they desire a more promising future of their own?

Americans’ Economic Prospects And Civil Liberties Have Been Stolen

Not only has your economy been stolen from you but also your civil liberties. My coauthor Lawrence Stratton and I provide the scary details of the entire story in The Tyranny of Good Intentions.

Windows open: Microsoft reveals tens of thousands of users data disclosed

Published time: March 22, 2013 14:01
AFP Photo / Robyn Beck

Microsoft received 75,378 government requests in 2012 to disclose user information, a report reveals. The company joins the likes of Google, which handed over troves of user data to governments last year, raising concerns over privacy violations.

The software giant claims the requests come from the FBI and as such the disclosure of the information can be justified.

Microsoft revealed in its transparency report it had disclosed data pertaining to 137,424 user accounts at the behest of world governments. Microsoft maintains that actual “customer content” was released in only 2.1 per cent of cases.

However, names, email addresses, user names and locations, which the company classifies as ‘non-content’, were released in 79.8 per cent of cases.

Most of the requests to reveal user information over the past year originated in the US, UK, Turkey, Germany and France.

“However, we only disclose data in 46 countries where we have the ability to validate the lawfulness of the request,” said a company spokesperson.

"In recent months, there has been broadening public interest in how often law enforcement agencies request customer data from technology companies and how our industry responds to these requests," Microsoft general counsel Brad Smith said.

Stressing the company’s commitment to transparency, he added that Microsoft was following suit with companies like Google and Twitter, which had “made important and helpful contributions to this discussion by publishing some of their data.”

Google was first off the mark and has published a transparency report three years running, detailing the quantity of information handed over to government agencies. It also claimed to have received request letters from the FBI as part of terrorism investigations.

Last week a judge in the US ruled that the use of such letters went against the American constitution because it bypasses the rights of the individual involved. However, the judge allowed the measures to remain in place pending appeal.

Microsoft has come in the firing line before for its surveillance practices regarding popular telephony tool Skype, which the company acquired in 2011. Earlier this year a group of 44 privacy and free expression groups wrote an open letter to Microsoft, urging them to publish a transparency report on how exactly the company uses private information in government surveillance.

“We believe that this data is vital to help us help Skype’s most vulnerable users, who rely on your software for the privacy of their communications and, in some cases, their lives,” read the letter.

Eva Galperin from the Electronic Frontier Foundation told Forbes she was “a little suspicious of the language” used in the transparency report regarding Skype and is concerned that Skype may have provided the government with a backdoor to eavesdrop on conversations without consulting Microsoft.

“This doesn’t exclude the possibility that Microsoft used cryptographic means to undermine a users’ security and allow law enforcement to perform their own wiretap,” Galperin told Forbes magazine.

Big Brother Knows How You’re Feeling

A company that develops crowd control weapons for the military and law enforcement personnel have now created an advanced 'Minority Report' style facial - and emotion - recognition system.

Samsung Galaxy S4 Launched In New York

Technology giant Samsung has unveiled its new Galaxy S4 smartphone, a handset which allows users to control the screen using their eyes.

The range of new features were revealed at the global launch in New York, including a dual camera function that can take two pictures at once and "smart pause", which lets users pause a video by looking away from the screen.

"We have taken technology and innovation forward to help us get closer to what matters in life, to help us live a richer, simpler and more full life," said JK Shin, president and head of IT and mobile communications at Samsung.

The highly-anticipated smartphone is predicted to pose a major threat to Apple and its dominance of the US market.

But investors have largely shrugged off the launch. Shares in Samsung were 2.3% lower in Seoul on Friday.

The device will be on sale in the UK from April 26, and will be available through 327 mobile operators in 155 countries, including Orange, EE and Vodafone.

Samsung is said to be expecting sales of its new handsets to be as high as 10 million per month, largely driven by its new features, which were demonstrated in a theatrical launch event at the Radio City music hall and Times Square.

A heavily emphasised feature was the Galaxy S4's remote technology which allows users to control functions without touching the 5in (12.7cm) screen.

As well as "smart pause", "smart scroll" lets users browse through emails without touching the screen, the S4 detecting the movements of the eyes and wrist.

Users can also change music tracks or accept a call with a wave of a hand.

Performers on the Radio City stage acted out role-plays to demonstrate other features.

A 'doting father' took photos of his tap-dancing son to show off the dual camera function, which means you can take photos or video using a 13 megapixel rear camera and a two megapixel front camera at the same time and blend the images together, even recording voice tags with them

The phone also has an in-built translator, which can translate voice or text, can measure temperature and humidity, allows users to activate commands via voice control when driving and even monitors your health.

The S4 also automatically creates "story albums" of photos and videos, which can be synchronised with devices at home, while a "group play" function lets people enjoy music, photos and games with people around them.

Marketed as "slimmer and stronger", the S4 weighs 130g and is 7.9mm thick, while its AMOLED technology means the screen has a resolution of 441 pixels per inch.

But technology critics have been divided in their opinions, with some saying the phone was just an update that did not feel "revolutionary".

Web magazine Engadget said it felt the new product "fell flat next to the competition" and that it had an "unabashed focus on features over designs".

But Ernest Doku, telecoms expert at uSwitch, said the handset "more than" lived up to its hype.

"With brains as well as beauty, Samsung's latest effort looks set to be the biggest handset of the year - and that's in spite of an inevitable iPhone sequel.

"However, several manufacturers are trying to fan the flames of a revival, and a string of strong recent launches from BlackBerry, Sony, and HTC will give Samsung some stiff competition."

Technology website The Verge said: "There's a baffling collection of new software here."

Paul Thompson, managing director of mobile advertising company BlisMedia, said the S4 "set" the benchmark on how a mobile device can be integrated into daily life.

He praised the eye-controlled features as "ground-breaking innovation that could change the face of how we use technology", saying "there is certainly enough to set the Galaxy S4 apart from the iPhone 5 by some distance".

 

It believes in the importance of an effortless user experience, making your life easy and hassle-free; and, it empowers your life, helping take care of your well-being.

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Internal intelligence agencies hungry for deeper cooperation from Skype

Published time: March 14, 2013 04:15

AFP Photo / Mario Tama

While already giving intelligence services access to private data without a court order, some Russian experts say, Skype is still being pressured into registering as a telecom agency, allowing intelligence to operate around a series of legal loopholes.

Intelligence services have for years have been monitoring Skype communications, several participants in the Russian information security industry have told Russian newspaper Vedomosti. According to security experts, access to correspondence and Skype conversations within the Russian intelligence community does not always go through the court system – it is often obtained on a “simple request.”

After Microsoft acquired Skype in May 2011, it updated its software with a technology allowing “legitimate wiretapping,” Maksim Emm, CEO of Peak Systems, told the publication. Since then, any user account can be switched to a special mode in which the encryption keys that were previously generated on a user’s mobile device or computer would be generated on Skype’s server.

With access to the server, anyone can listen to the conversation or read the correspondence, including short messages sent to mobile phones. Microsoft provides the opportunity to use this technology to security services all around the world, including Russia, the expert explained.

Another expert elaborated that “for a couple of years” the intelligence agencies can not only listen, but also determine a user's location. “That is why our employees, for example, are forbidden to talk on work-related manners on Skype,” Ilya Sachkov, CEO of Group-IB, told Vedomosti.

The Federal Security Service (FSB) asked Microsoft back in 2011 to provide Skype's source code, claiming it was required to reduce the threat to Russia's national security. Although the code would not allow authorities to obtain direct and easy access to private data, it could help to crack the encryption system.

The request was apparently turned down, leaving security services with the only fully legal ways of obtaining private information – through a direct court request to Microsoft.

RIA Novosti / Iliya Pitalev

Microsoft’s somewhat cooperative attitude towards releasing private data did not stop the FSB from filing numerous complaints to the company, pushing it to register under a different designation – as a telecommunications operator.

While Skype provides VoIP (Voice over IP) services, the company is not registered as an operator. Such a move would make accessing and collecting private data even easier for the authorities, because in accordance with Russian legislation, mobile operators and Internet service providers are required to collect personal data and store it for at least three years.

Meanwhile, the French telecom regulator ARCEP is also pushing Skype towards further collaboration with the special security services.

The body posted a notice on Tuesday saying that prosecutors had been notified that Skype should register with the authorities as telecom firm as it provides its users with the ability to make phone calls, and therefore is required to meet regulations including “implementing the means required to perform legally ordered interceptions.”

ARCEP added further that Skype's failure to register as an “electronic communications operator,” after several requests by ARCEP, could be viewed as a criminal offense.

Skype's position on the matter was outlined in a statement sent to Ars Technica, which said:

Frontrunning: March 12

  • Cardinals head to conclave to elect pope for troubled Church (Reuters)
  • Hyperinflation 'Unthinkable' Even With Bold Easing: Abe (Nikkei)
  • Ryan Plan Revives '12 Election Issues (WSJ)
  • Republicans to unveil $4.6tn of cuts (FT) - Obama set to dismiss Ryan plan to balance budget within decade
  • Italy 1-yr debt costs highest since Dec after downgrade (Reuters)
  • CIA Ramps Up Role in Iraq (WSJ)
  • Hollande Hostility Fuels Charm Offensive to Show He’s No Sarkozy (BBG)
  • SEC testing customized punishments (Reuters)
  • Judge Cans Soda Ban  (WSJ)
  • Hungary Lawmakers Rebuff EU, U.S. (WSJ)
  • Even Berlusconi Can’t Slow Bulls Boosting Euro View (BBG) - luckily the consensus is never wrong
  • Funding for Lending ‘put on steroids’ (FT)
  • Investigators Narrow Focus in Dreamliner Probe (WSJ)
  • With new group, Obama team seeks answer to Karl Rove (Reuters)
  • Boston Booms as Workers Say No to Suburbs (BBG)

Overnight Media Digest

WSJ

* Illinois settled Securities and Exchange Commission civil-fraud charges that the state misled municipal-bond investors by failing to adequately disclose the risks of its underfunded pension system.

* Lawmakers grilling Mary Jo White, President Barack Obama's nominee for chairman of the Securities and Exchange Commission, on Tuesday will have to weigh two seemingly contradictory versions of the attorney.

* U.S. aviation safety investigators examining Boeing Co's 787 Dreamliner increasingly are focusing on manufacturing or design problems with the batteries as possible causes of overheating rather than on other parts of the jet's electrical system, the head of the National Transportation Safety Board said on Monday.

* Starr International Co, run by the former chief executive of American International Group Inc, won the right to pursue as a class action its case against the U.S. government, alleging that elements of AIG's financial-crisis bailout package were unconstitutional.

* A crisis of confidence in the nuclear-power industry has trickled down to Namibia, where uranium accounts for 12 percent of exports. But uranium prices are down 70 percent over the past six years.

* General Motors Co is in the process of changing advertising agencies of its Cadillac brand. Advertising and marketing work to support Cadillac, valued at about $250 million, will be moved to longtime Michigan advertising agency Campbell Ewald, according to three people briefed on the matter.

* The monopoly powers of Mexico's telephone giant, América Móvil SAB de CV and leading broadcaster Grupo Televisa SAB, are coming under fire with a broad set of new laws that aim to open up the telecommunications and television businesses to competition.

* Many small U.S. banks are feeling a financial pinch from the government's efforts to punish executives and directors of banks that collapsed during the height of the financial crisis.

* KKR & Co LP is considering teaming with other private equity firms to pursue biotech firm Life Technologies Corp, according to people familiar with the matter, in the latest sign that buyout shops are still willing to form "clubs" if they covet a large target.

* VeriFone Systems Inc Chief Executive Douglas Bergeron is stepping down after a dozen years at the helm of the card-payment systems maker. The company said it will hire an executive-search firm to find a successor, with Chairman Richard McGinn serving as CEO on an interim basis.

FT

Dell Inc has agreed to give Carl Icahn a closer look at its books less than a week after the activist investor joined a growing chorus of opposition to founder Michael Dell's plan to take the world's No. 3 personal computer maker private.

Private equity firms are looking to buy the UK property business of Germany's second-biggest lender, Commerzbank AG, in a potential 5 billion pound ($7.45 billion) deal.

UK lender LLoyds Banking Group plans to sell 20 percent of its stake in wealth manager St James's Place

Alibaba Group has chosen Jonathan Lu, its Chief Data Officer who has more than a decade of experience in executive roles, to lead China's largest e-commerce company as it prepares to launch an initial public offering.

Italy's central bank has told some of the country's biggest banks to increase their bad loan provisions by an estimated 21 billion euros ($27.33 billion) amid deepening of a nearly two-year old recession.

Billionaire hedge fund manager John Paulson is exploring moving to Puerto Rico from New York to lower his tax bill.

Richard Joseph, a former futures trader, was convicted of six counts of insider trading, leaking information from the print room at JPMorgan Cazenove. Joseph placed spread bets with CMC Markets ahead of a series of deals in 2007 and 2008.

Mexico is looking to overhaul its telecom industry by introducing sweeping proposals that will increase competition and limit the control of telecoms tycoon Carlos Slim and broadcasting giant Televisa.

NYT

* For the second time in history, federal regulators have accused an American state of securities fraud, finding that Illinois misled investors about the condition of its public pension system from 2005 to 2009.

* A state court judge invalidated New York City's new restrictions on sweetened beverages on Monday, a day before they were set to take effect, saying the rules were "arbitrary and capricious."

* Britain, unlike other economic powers, is responding to the financial crisis by creating two new agencies, one to oversee institutions and another to watch for market abuses.

* In advance of a summit meeting of European Union leaders on Thursday in Brussels, the president of the European Commission, José Manuel Barroso, called on the bloc's 17 members to stay the course on austerity.

* Intrade, the online betting site, announced late on Sunday that it had halted trading and frozen customer accounts after the discovery of potential financial irregularities.

* Oppenheimer & Co will pay nearly $3 million to settle accusations by federal and state regulators that it misled investors about the performance of one of its private equity funds, in a case that signals stepped-up scrutiny of the buyout industry and how it values its holdings.

* Dell Inc has agreed to open its books to the activist investor Carl Icahn, signaling a possible truce on one front in the battle over the computer maker's proposed $24.4 billion buyout.

* In prepared testimony for her nomination hearing, Mary Jo White placed a premium on unearthing financial fraud, as she works to deflect concerns from lawmakers who question her ability to regulate banks she recently defended.

* British authorities have opened an investigation into Hewlett-Packard Co's claims that it was duped when it bought the business software maker Autonomy, according to regulatory documents filed on Monday.

Canada

THE GLOBE AND MAIL

* Ottawa and the Northwest Territories have reached a deal to hand the territory province-like power over its land, a move aimed at empowering local leaders to unlock more of their resource riches.

* Less than a third of the almost 300,000 members and supporters who signed up to choose the Liberal party's next leader have so far registered to vote, prompting front-runner Justin Trudeau's camp to complain about a host of technical glitches and request a one-week extension on registration.

* The federal government is facing questions over the legitimacy of its centerpiece for aboriginal education reform. Manitoba chiefs rejected the Harper government's vision for aboriginal education on Monday, claiming Ottawa is trying to "bypass" first nations chiefs and shirk its treaty responsibilities.

Reports in the business section:

* Chrysler Canada is jumping back into leasing for the first time since 2008, raising the competitive stakes another notch in an auto market already awash with financing and leasing incentives.

* AT&T Inc will begin selling BlackBerry's new BlackBerry Z10 smartphone next week, marking the smartphone's debut in a crucial U.S. market that has largely shunned the company's devices in recent years.

* Molson Coors Brewing Co's Canadian arm sold far less Miller Genuine Draft beer in the country over the past three years than the targets called for under its agreement with Miller Brewing Co. That under-performance - spelled out in court filings - is at the crux of a dispute that has erupted between the two companies, as Miller tries to cancel its Canadian licensing agreement with Molson.

NATIONAL POST

* The federal government, which has come under fire over tougher employment insurance (EI) rules, is sweetening benefits for parents. It says it will allow individuals receiving parental benefits through EI to qualify for sickness benefits as well, starting March 24.

* The latest annual report on federal ad spending shows Ottawa shelled out C$78.5 million ($76.5 million) in 2011-12 telling Canadians about everything from the switch to digital TV and the War of 1812, to elder abuse and anti-drug messaging. The Harper government spent C$21 million on major advertising campaigns under its Economic Action Plan brand.

* Despite activist claims that the city's homeless are dying due to a lack of shelter space, there is no shelter bed shortage in Toronto, according to an internal report prepared for city council.

FINANCIAL POST

* After years of growth, economists say the real estate boom is over and predict Canadian housing prices to flatline over the next decade. A TD Economics study, Long-Run Rate of Return for Canadian Home Prices, predicts a "string of lackluster performances" over the next few years.

* Alamos Gold Inc is going on the offensive in the takeover battle for Aurizon Mines Ltd, asking a securities regulator to reject both a break fee and poison pill that it believes are highly irregular.

* Travel tour operator Transat AT Inc said it has managed to wrest concessions from its flight attendants as the company continues its campaign to be more cost competitive. The bulk of the expected C$9 million in annual savings will come from Transat lowering the amount of flight attendants on its Airbus A330s to 10 from 11, and the move will also support a potential shift to a fleet of Boeing Co's 737s.

China

SECURITIES TIMES

-- Huatai Securities said on Tuesday its board of directors had sanctioned the issuance of no more than 10 billion yuan of corporate bonds on the Shanghai Stock Exchange to supplement operating funds.

-- The Shanghai securities regulator said five foreign banks, including Standard Chartered, have applied for licences to distribute mutual fund products in China.

CHINA SECURITIES JOURNAL

-- The Shanghai stock exchange is looking to invest more in regional stock exchanges to support smaller firms in China, its director general said on Monday.

CHINA DAILY

-- China's first special envoy for Asian affairs will have a focus on Myanmar, the Foreign Ministry said on Monday. There has been tension between China and its southern neighbour over conflict in Myanmar, close to the Chinese border.

-- Roughly one in ten of the 5,000 proposals submitted to China's top political advisory body since March 3 are related to environmental issues, said Lu Fuhe, a top national political advisor.

SHANGHAI DAILY

-- French firm Carrefour, the world's number two retailer, has implemented a system to allow shoppers to trace the origin of fruit and vegetables in their Chinese stores in Shanghai, a reflection of the recent pressure in China over food safety.

CHINA BUSINESS NEWS

-- The number of dead pigs found in the Huangpu River, one of Shanghai's key water sources, is now estimated to have increased to 2,800.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Axiall (AXLL) upgraded to Buy from Neutral at Citigroup
Dick's Sporting (DKS) upgraded to Outperform from Market Perform at BMO Capital
Dick's Sporting (DKS) upgraded to Conviction Buy from Buy at Goldman
Intercontinental Hotels (IHG) upgraded to Neutral from Sell at UBS
Mosaic (MOS) upgraded to Outperform from Market Perform at BMO Capital
Sherwin-Williams (SHW) upgraded to Neutral from Underperform at Credit Suisse
Vantiv (VNTV) upgraded to Outperform from Market Perform at Raymond James
Vitamin Shoppe (VSI) upgraded to Buy from Neutral at Goldman

Downgrades

CVS Caremark (CVS) downgraded to Neutral from Buy at Goldman
EverBank Financial (EVER) downgraded to Neutral from Buy at Sterne Agee
RadioShack (RSH) downgraded to Sell from Neutral at Goldman
Red Hat (RHT) downgraded to Neutral from Buy at Citigroup

Initiations

Fifth & Pacific (FNP) initiated with a Buy at Brean Capital
Rush Enterprises (RUSHA) initiated with a Market Perform at BMO Capital
TJX (TJX) initiated with an Overweight at Barclays
Wabash (WNC) initiated with an Outperform at BMO Capital
WABCO (WBC) initiated with an Outperform at BMO Capital
Xoom (XOOM) initiated with an Outperform at RW Baird
Xoom (XOOM) initiated with an Overweight at Barclays

HOT STOCKS

SEC charged Illinois for misleading pension disclosures
Treasury Department sold $489.9M of GM (GM) common stock in February
HP (HPQ) disclosed U.K Serious Fraud Office opened investigation related to Autonomy
KKR (KKR) has considered teaming to bid for Life Technologies (LIFE), and Thermo Fisher (TMO) and Danaher (DHR) also weigh bids for Life, valued at $12.5B with debt, DJ reports
Diamond Foods (DMND) sees second half sales down more than first half
Rio Tinto (RIO) slowed Guinea iron ore investment, to cut staff, Reuters reports
Said Guinea iron ore project not frozen, to work with government on funding, Bloomberg reports
Hill International (HIL) sees FY13 consulting fee revenue $500M-$520M
Cadence Design (CDNS) acquired Tensilica for $380M in cash
Pall Corp (PLL) signed 30 year agreement to supply Embraer (ERJ) with KC-390 manifolds
MRC Global (MRC), NAWAH entered into alliance to open distribution facility in Iraq
Lakeland Industries (LAKE) reported $11.5M goodwill impairment charge in Brazil

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Costco (COST), BioScrip (BIOS), Stewart Enterprises (STEI), XenoPort (XNPT), Heckmann (HEK)

Companies that missed consensus earnings expectations include:
Stage Stores (SSI), FuelCell (FCEL), Chiquita Brands (CQB), Hill International (HIL), Casey's General Stores (CASY), Urban Outfitters (URBN)

Companies that matched consensus earnings expectations include:
Douglas Dynamics (PLOW), Flow International (FLOW), Manitex (MNTX)

NEWSPAPERS/WEBSITES

  • Multinationals (GE, HPQ, CAT, HON) have been increasing their footprint in Asia for years as they have moved from selling into the region to also investing here. But the transformation is gaining critical mass as Western companies' market-share leads in Asia over cash-flush local competitors narrow, forcing Western firms to invest more, tailor their products and transfer top executives to Asia, the Wall Street Journal reports
  • Rising fuel prices have GM (GM) and Chrysler Group (FIATY) taking another look at selling smaller pickup trucks—vehicles that the Detroit Three automakers (F) abandoned in the U.S. amid weak demand. Both see the vehicles helping them to hit higher fuel-economy targets and to regain market share from Toyota (TM), the current top-selling small hauler., the Wall Street Journal reports
  • Two groups of AIG (AIG) shareholders won class-action status from a federal judge on in a $25B lawsuit by former CEO Maurice "Hank" Greenberg over alleged losses caused by the U.S. government's bailout of the insurer, Reuters reports
  • As the jobs market showing signs of healing, economists think they know what's next for monetary policy: the Fed will at some point reduce its monthly bond purchases, and soon after, end them altogether. But perhaps they shouldn't be so sure, Reuters reports
  • Shares of companies that own and operate their truck fleets (WERN, KNX, SWFT, HTLD) are outperforming those that act as brokers for trucking services, driven by stronger U.S. freight activity, Bloomberg reports
  • The Treasury Department, exiting its ownership stake in GM (GM), accelerated its sell- down of the automaker in February, saying it received $489.9M in proceeds from the sale of common shares, Bloomberg reports

SYNDICATE

Emeritus (ESC) announces 7.97M share secondary offering by holders
Government Properties (GOV) 9.95M share Spot Secondary priced at $25.20
HeartWare (HTWR) announces public offering of 1.5M shares of common stock
Lexington Realty (LXP) files to sell 15M shares of common stock
Salesforce.com (CRM) announces proposed $1B offering of convertible senior notes
Sapiens (SPNS) files to sell $40M of common stock, 6M shares for holders
Sun Communities (SUI) announces 4.5M share common stock offering
U.S. Silica (SLCA) announces 8.5M share secondary offering by stockholder
Yandex (YNDX) announces 24.25M Class A ordinary shares offering by holders

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Spotting ‘fashion fingerprints’: Google Glass app helps locate friends

Published time: March 08, 2013 12:47

A Google employee wears Glass at Google's Developers Conference. (AFP Photo / Mathew Sumner)

New Google Glass app InSight takes the experience of spotting your friends to the next level, as it recognizes your peers by their clothes and accessories – matching specific color patterns and textures to the user.

This new human recognition software makes it impossible to lose your friends in a packed place, such as an airport, concert hall or shopping center.

The app creates a ‘fashion fingerprint’ for every friend based on the outfit they are wearing including clothes, jewelry, glasses, etc.

‘Fashion fingerprint’ is generated by snapping pictures of the user and creating a file of that image called a ‘spatiogram’, which calculates patterns and spatial distribution of colors on the user and analyzes the information to identify that particular person later on in the distance or from a different angle. 

The new system is being partly funded by Google and was presented at the HotMobile technology conference last week, while currently still being developed by the Duke University in North Carolina.

So far the app has been tested by 15 volunteers and managed to identify people correctly 93 per cent of the time.

The software does not use facial recognition systems to locate individuals since it is unlikely that the users will be looking straight into the Google Glass’ camera, InSight developer Srihari Nelakuditi told New Scientist.

He also noted that the ‘fashion fingerprint’ lasts only as long as the user does not change clothes. Afterwards, a new snapshot must be made and a new ‘fingerprint’ created. Thus, for privacy protection, all the user has to do is change outfits, argues Nelakuditi.

Google Glass is a new wearable computer with a head-mounted display. It displays information in a smartphone-like format hands-free and can interact with the internet via natural language voice commands.

The new product does raise new privacy issues, especially considering that users will be able to video record everything through Google Glass without being noticed by others.

Australian Senator Cory Bernardi believes that Google Glass will be “the end of privacy as we know it” because the device can be used for massive surveillance, The Register quoted him as saying.

“A single Google Glass wearer in your favorite restaurant could capture your image and your conversation without you ever knowing,” argues Bernardi. “The footage would be stored on the Google servers, your voice could be translated into text and with the use of facial recognition, could be actually matched to your Google profile.”

Google also has been facing a row of privacy battles in EU and US for its current products.

Just last month European data protection agencies said they intend to crack down on the US internet giant Google before summer after it allegedly failed to follow their orders to comply with EU privacy laws.

Previously, the data protection agencies warned Google that its new confidentiality policy was not in line with EU laws. The regulators included a list of 12 "practical recommendations" which would bring Google’s privacy policy and data collection up to standard. The advisory centers on the firm’s automatic collection of personal data, ranging from browsing histories, to real-time location, to credit card details.

Since January, Google has also been embroiled in its biggest privacy battle yet in the UK over reportedly tracking users’ online habits. At least 10 UK citizens began legal action with dozens more lining up. According to media estimates up to 10 million Britons could join in.

Google is accused of evading security settings on Apple’s devices and Safari’s web browser in order to keep tabs on people’s online preferences.

Flying high: Next ISS crew set to reach station in record time

Published time: March 07, 2013 19:27

Download video (143.16 MB)

The next crew to set off for the International Space Station may reach it in a record six hours, far outstripping the current time of two days. The quicker trip is now possible thanks to a launch trajectory, which is currently undergoing tests.

The 35th space mission to the ISS consists of a Russian-US crew and includes cosmonauts Pavel Vinogradov and Alexander Misurkin together with NASA astronaut Chris Cassidy. The launch is scheduled on March 28 at 2043 GMT from the Baikonur Cosmodrome in Kazakhstan aboard a Russian Soyuz spacecraft.

The new fast-track trajectory has the rocket launching shortly after the ISS passes overhead.

Normally it takes Soyuz capsules two days to reach the orbiting laboratory after launch. Vinogradov, Misurkin and Chris Cassidy are set to make the trip faster than any other astronauts before them - in just six hours. Docking is set for 0231 GMT on March 29. The planned duration of the expedition is 168 days. The crew will undertake a scientific program involving dozens of experiments, unload four Russian “Progress" cargo spaceships and also conduct a series of spacewalks.

One of the reasons given in the past for having the two-day or even three-day flight in the Soyuz was to allow the crew members time to acclimatize to being in zero-gravity.

L-R: cosmonauts Alexander Misurkin, Pavel Vinogradov and Chris Cassidy at a training session of the ISS 35/35 prime crew in a Soyuz TMA_M simulator at the Gagarin Cosmonaut Training Center (RIA Novosti / Grigory Syisoev)

The actions of the cosmonauts will be the same as what they do on a two-day profile, according to the participant of 35th space expedition to ISS, Chris Cassidy. Normally they go to bed and have a period of time on the next day when cosmonauts just monitor the vehicle.

“On our mission it all will happen in a tight sequence of six hours. We have periods of about 45 minutes or so in between these maneuvers – it’s a bit of downtime, but technically that’s how it’s possible. There’s tighter constraints on where the space station can be on launch time than on a typical profile the space station has a little more leeway on where can it be at the time of launch,” added Cassidy.

The fast-track trajectory is not a completely new practice, with the method already being tested on cargo vehicles. But now they will ‘try to do it on the manned vehicles,’ head of the Gagarin Cosmonaut Training Center, Sergey Krikalev told NASA TV.

“Now we have onboard new machinery and new software, so the vehicle is more autonomous, so it’s possible to do a lot onboard the vehicle and to calculate the burns so they don’t consume a lot of fuel,” added the former cosmonaut.

Additional firings of the vehicle’s thrusters early after launch are said to help shorten the time it takes to reach the station.

The new fast-track trajectory could become a permanent feature of ISS missions, either by the end of this year or starting from 2014.


How Deregulation Resurrected American Economic Insecurity

John N. Gray, a distinguished intellect and retired professor of intellectual history at the London School of Economics, disagrees with the view that “the end of history” has placed humanity on a course of ethical and economic progress.

Dotcom can sue NZ’s intelligence agency, court rules

Published time: March 07, 2013 13:52

Megaupload founder Kim Dotcom (AFP Photo / Michael Bradley)

A New Zealand court has sided with IT tycoon Kim Dotcom, confirming his right to sue the national spy agency for damages over illegally gathering intelligence on him.

The Court of Appeal upheld last year’s ruling of the High Court, which the country’s attorney general was seeking to overturn.

The Government Communications Security Bureau (GCSB) was spying on Dotcom prior to the police raid on his home in 2012. The agency did so illegally, believing that the German national had no residency in New Zealand.

The blunder led to Prime Minister John Key apologizing to Dotcom, saying New Zealand “failed to provide that appropriate protection for him.” Dotcom wants to include GCSB in a suit he plans against the police alleging wrongful arrest.

The ruling also means GCSB will have to disclose to Dotcom’s attorneys detail of information sharing arrangements it had with foreign agencies, particularly US authorities. American law enforcers seek extradition of Dotcom to the US for trial over alleged internet piracy and wire fraud. The charges carry a maximum sentence of 20 years, if proven. Extradition hearings are scheduled to begin later in March.

A view at the "Dotcom Mansion" (AFP Photo / Michael Bradley)

Dotcom’s defense team questions the legality of evidence seized in the raid after the warrants for it were declared invalid.

Earlier the Appeals Court ruled that the US authorities are not obliged to present their entire corps of evidence against Dotcom to his attorneys. A summary of the case is sufficient, the judges decided.

Dotcom’s file storage service Megaupload was taken down in January 2012 by authorities over its use to store pirated movies, music, software and other content. US officials say he and six associates caused damages amounting $500 million to copyright holders and encouraged users to engage in piracy, allegations Dotcom denies.


What it Means that Monsanto Holds the Patents on Life

How long are we going to let Monsanto bully farmers and politicians into controlling the very source of life on earth?

Photo Credit: © igor.stevanovic/ Shutterstock.com

March 1, 2013  |  

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Last week, the U.S. Supreme Court began hearing arguments in a seed patent infringement case that pits a small farmer from Indiana, 75-year old Vernon Hugh Bowman, against biotech goliath Monsanto. Reporters from the New York Times to the Sacramento Bee dissected the legal arguments. They speculated on the odds. They opined on the impact a Monsanto loss might have, not only on genetically modified crops, but on medical research and software.

What most of them didn’t report on is the absurdity – and the danger – of allowing companies to patent living organisms in the first place, and then use those patents to attempt to monopolize world seed and food production.

The case boils down to this. Monsanto sells its patented genetically engineered (GE) “Roundup Ready” soybean seeds to farmers under a contract that prohibits the farmers from saving the next-generation seeds and replanting them. Farmers like Mr. Bowman who buy Monsanto’s GE seeds are required to buy new seeds every year. For years, Mr. Bowman played by Monsanto’s rules. Then in 2007, he bought an unmarked mix of soybeans from a grain elevator and planted them. Some of the soybeans turned out to have been grown from Monsanto’s patented Roundup Ready soybean seeds. Monsanto sued Mr. Bowman, won, and the court ordered the farmer to pay the company $84,000. Mr. Bowman appealed, arguing that he unknowingly bought soybeans grown from Monsanto’s seeds, not the seeds themselves, and that therefore the law of “patent exhaustion” applies.

The press and public have fixated on the sticky legal details of the case, and the classic David vs. Goliath nature of the fight. But win or lose, Mr. Bowman’s predicament is part of a much bigger problem.

The real issue is this: Why have we surrendered control over something so basic to human survival as seeds? Why have we bought into the biotech industry’s program, which pushes a few monoculture commodity crops, when history and science have proven that seed biodiversity is essential for growing crops capable of surviving severe climate conditions, such as drought and floods?

As physicist and environmentalist Vandana Shiva explains, we have turned seed, which is the heart of a traditional diversity-rich farming system across the world, into a powerful commodity, used to monopolize the food system. According to a recent report by the Center for Food Safety and Save our Seeds, three companies – Monsanto, DuPont and Syngenta – control 53 percent of the global commercial seed market. They have pressured farmers to replace diverse, nutritional seeds, seeds that are resilient because they’ve been bred by small-scale farmers to adapt to local climates and soil conditions, with monocultures of genetically engineered seeds. In the U.S. these crops are predominately corn and soybeans. According to the report, entitled “Seed Giants vs. U.S. Farmers,” 93 percent of soybeans and 86 percent of corn crops in the U.S. come from patented, genetically engineered seeds.

Monsanto profits handsomely from selling its patented seeds. But the real profits are in selling farmers its proprietary pesticides, like Roundup. Farmers can spray huge amounts of Roundup on Monsanto’s Roundup Ready soybeans, killing everything except the soybean plants. It’s a win-win for Monsanto. And it’s sold as a win to farmers, who have been told that by following the Monsanto method, they’ll increase their yields and make more money. Monsanto even claims that its GE crops are the answer to world hunger.

But little of what Monsanto has promised, to farmers and the world, has proven true.

Since farmers first began buying into Monsanto’s scheme in 1995, the average cost to plant one acre of soybeans has risen 325 percent, according to the Center for Food Safety’s report. Corn seed prices are up by 259 percent. Those increases don’t include the cost of the lawsuits Monsanto has aggressively filed against farmers the company claims have violated patent agreements. By the end of 2012, Center for Food Safety calculates that Monsanto had received over $23.5 million from patent infringement lawsuits against farmers and farm businesses.

MiniDuke: New cyber-attack ‘hacks governments’ for political secrets

Published time: February 27, 2013 21:35

Image from flickr.com user@dustball

The governments of at least 20 countries may have fallen victim to a sophisticated new cyber-attack. Security experts believe the hackers are attempting to steal political intelligence.

The governments of at least 20 countries may have fallen victim to a sophisticated new cyber-attack. Security experts believe the hackers are attempting to steal political intelligence.

Computer security firms Kaspersky Lab and CrySyS Lab discovered that the malware, dubbed "MiniDuke," targeted government computers in the Czech Republic, Ireland, Portugal and Romania along with think tanks, research institutes and healthcare providers in the United States.

“The technical indicators from our analysis show this is a new type of threat actor that hasn't been seen before,” Kurt Baumgartner, a senior security researcher with Kaspersky Lab, told RT.

Although experts avoid speculating on who the attackers may be, Baumgartner clarified that “based on the target victims and the functionality of the malware” the objective of MiniDuke’s authors is “to collect geopolitical intelligence.”

The threat operates on low-level code to stay hidden, and uses Twitter and Google to get instructions and updates. It allegedly infected PCs when ‘victims’ opened a cleverly disguised Adobe PDF attachment to an email.

“The high level of encryption in the malware and the flexible system it used to communicate with the C2 via Twitter and Google indicates this was a strategically planned operation,” Baumgartner said.

The PDF documents were specifically tailored to their targets, according to the researchers. The attachments referred to highly relevant topics subjects like “foreign policy,” a “human rights seminar,” or “NATO membership plans."

When the files were opened, MiniDuke would install itself on the user's computer.

So far it is only known that the malware then connects to two servers, one in Panama and one in Turkey, but security researchers say there are no clear indications of who was behind the online attacks.

According to Karpersky Lab the spyware was written in “assembler language,” a low-level code where each statement corresponds to a specific command, and is very small in size, only 20 kilobytes. Assembler language codes are written specifically for each system they are meant to attack, as opposed to higher-level codes, which can infect multiple types of technologies.

The way the malware was created and used indicates that the attackers “have knowledge from the elite, ‘old school’  type of malicious programmers who were extremely effective at creating highly complex viruses in the past,” Baumgartner says. “MiniDuke’s attackers have combined these skills with the newly advanced sandbox-evading exploits to target high-profile victims, which is unique and something we haven’t seen before.”

MiniDuke is a three-stage attack, technology news and information website, Arstechnica, explains. First it tricks a victim into opening an authentic-looking PDF document, and then infected machines start using Twitter or Google “to retrieve encrypted instructions showing them where to report for additional backdoors.”

"These accounts were created by MiniDuke’s Command and Control (C2) operators and the tweets maintain specific tags labeling encrypted URLs for the backdoors,” Kaspersky Lab said in a statement. “Based on the analysis, it appears that the MiniDuke’s creators provide a dynamic backup system that also can fly under the radar - if Twitter isn’t working or the accounts are down, the malware can use Google Search to find the encrypted strings to the next C2.

Stages two and three are hidden inside a GIF image file which is downloaded from the command server and “disguised as pictures that appear on a victim’s machine.”

Image from securelist.com

Eugene Kaspersky, founder and chief executive of Kaspersky Lab, compared the highly-advanced MiniDuke to “malicious programming from the end of the 1990s and the beginning of the 2000s”, saying it has the potential to be "extremely dangerous" because it was an "elite, old-school" attack.

"This is a very unusual cyber-attack," the statement emailed to RT read.

"I remember this style of malicious programming from the end of the 1990s and the beginning of the 2000s. I wonder if these types of malware writers, who have been in hibernation for more than a decade, have suddenly awoken and joined the sophisticated group of threat actors active in the cyber world. These elite, “old school” malware writers were extremely effective in the past at creating highly complex viruses," Kaspersky's CEO added.

Neither Kaspersky nor CrySyS is disclosing what the malware does once it takes hold of a victim until they have had a chance to privately warn infected organizations, Arstechnica reported.

According to the technology news and information website, at least 60 victims have been affected. Kaspersky has identified at least 23 affected countries, including the US, Hungary, Ukraine, Belgium, Portugal, Romania, the Czech Republic, Brazil, Germany, Israel, Japan, Russia, Spain, the UK, and Ireland.

Revelations about the new malware come two weeks after Silicon Valley security firm FireEye discovered security flaws in Reader and Acrobat software.

Leaked document sample. Image from securelist.com


The Perils of Hoarding Cash

Tim Cook, the head of Apple, visiting the iPhone production line at the Foxconn factory in China. (Photo: Apple)Tim Cook, the head of Apple, visiting the iPhone production line at the Foxconn factory in China. (Photo: Apple)There is lots of talk now about Apple's cash hoard, which is actually kind of amazing: this is supposedly our cutting-edge technology company, and apparently it can't find things it wants to invest in. Or more accurately, given its incredible profits, it can't find enough things to do with all the money it makes.

So, I've had a mild-mannered dispute with the economist Joe Stiglitz over whether individual income inequality is retarding recovery right now; let me say, however, that I think there's a very good case that the redistribution of income away from labor to corporate profits is very likely a big factor.

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Take a look at the chart on corporate profits as a share of gross domestic product. Corporations are taking a much bigger slice of total income — and are showing little inclination either to redistribute that slice back to investors or to invest it in new equipment, software, etc. Instead, they're accumulating piles of cash.

2013 0227kr chStill Say's Law After All These Years When the economist John Maynard Keynes wrote "The General Theory of Employment, Interest and Money" three generations ago, he structured his argument as a refutation of what he called "classical economics," and in particular of Say's Law, the proposition that income must be spent at some point and hence that there can never be an overall deficiency of demand. Ever since, historians of thought have argued about whether this was a fair characterization of what the classical economists, or at any rate Keynes' own intellectual opponents, really believed.

Not being a historian myself, I won't venture an opinion on that subject. What I will say, however, is that Say's Law (Say's False Law? Say's Fallacy?) is something that opponents of Keynesian economics consistently invoke to this day, falling into exactly the same fallacies that Keynes identified back in 1936.

In the past I've caught economists like Brian Riedl and John Cochrane doing this; Peter Dorman, writing in a recent blog post, found Tyler Cowen in their company. Mr. Cowen can't see why corporate hoarding is a problem. Like Mr. Riedl and Mr. Cochrane, he concedes that there might be some problem if corporations literally piled up stacks of green paper, but he argues that it's completely different if they put the money in a bank, which will lend it out, or use it to buy securities, which can be used to finance someone else's spending.

But of course there isn't any difference. If you put money in a bank, the bank might just accumulate excess reserves. If you buy securities from someone else, the seller might put the cash under his mattress, or put it in a bank that just adds it to its reserves, etc. The point is that buying goods and services is one thing, adding directly to aggregate demand; buying assets isn't at all the same thing, especially when we're at the zero lower bound.

What's depressing about all this is that Say's Law is a primitive fallacy — so primitive that Keynes has been accused of attacking a straw man. Yet this primitive fallacy, decisively refuted three-quarters of a century ago, continues to play a central role in distorting economic discussion and crippling our policy response to depression.

The Moral Decoding of 9-11: Beyond the U.S. Criminal State, The Grand Plan for...

911

We are bring to the consideration of our readers this incisive and carefully formulated analysis by Canada’s renowned philosopher Professor John McMurtry. 

The complete text published by the Journal of 9/11 Studies can be downloaded in pdf

*          *          *

I was sceptical of the 9-11 event from the first time I saw it on television. It was on every major network within minutes. All the guilty partieswere declared before any evidencewas shown.The first questions of any criminal investigation were erased.  Who had the most compelling motives for the event? Who had the means to turn two central iconic buildings in New York into a pile of steel and a cloud of dust in seconds?[i]

Other questions soon arose in the aftermath. Why was all the evidence at the crime scenes removed or confiscated?

Who was behind the continuous false information and non-stop repetition of “foreign/Arab terrorists”when no proof of guilt existed? Who was blocking all independent inquiry?

Even 11 years on these questions are still not answered.

But those immediately named guilty without any forensic proof certainly fitted the need for a plausible Enemy now that the “threat of the Soviet Union” and “communist world rule” were dead.  How else could the billion-dollar-a-day military be justified with no peace dividend amidst a corporately hollowed-out U.S. economy entering its long-term slide?While all the media and most of the people asserted the official 9-11 conspiracy theory as given fact, not all did.

A Bay Street broker with whom I was improbably discussing the event in Cuba had no problem recognising the value meaning. When I asked what he thought about the official conspiracy theory, he was frank:

“You can call it what you want, but America needs a war to pull the people together and expand into new resource rich areas. That what it has always done from Mexico on. And that is what it needs now”.  When I wondered why none in the know said so, he smirked: “It would be impolite”, adding, “It affects the entire future prosperity of America and the West”. And all the deaths? “It had to be done –far less than it could have been”. The 19 Arabs with box-cutters reducing the World Trade Center buildings to powder in a few seconds?He shrugged.

Thus everyone since 9-11 is prohibited nail-clippers on planes to confirm the absurd – including 15 of the 19alleged hijackers being from Saudi Arabia and several apparently still alive after crashing the planes into the buildings.[ii]As for the diabolical mastermind Osama bin Laden, he is never linked by credible evidence to the crime and never claims responsibility for the strike since the videos of him are fakes. “Ground Zero” is a double entendre. All doubts are erased apriori.

Decoding the U.S. Theater of Wars and the Moral Driver Behind

One already knew that suspension of belief is the first act of fiction, and that instant culture rules the U.S. One already knew that monster technical events are America’s stock in trade. And one already knew the long history of false U.S. pretexts for war – so well established that a young strategic thinker a decade after 9-11 advises the right-wing Washington Policy Institute on how to create a crisis by deadly planned incident to make war on Iran – “it is the traditional way of getting into war for what is best in America’s interests”.[iii]

One further knew from past research that the U.S.’s strategic leadership since 1945 had been Nazi-based in information and connections and the dominant Central-European figures articulating it ever after across Democrat and Republican lineshave a common cause. For over 40 years, Henry Kissinger as Republican and Zbigniew Brzezinski as Democrat have been protégés of David Rockefeller, selected as Trilateral Commission and Bilderberg Group leaders, and capable of any mass-homicidal plan to advance “U.S. interests”. The banker-and-oil imperial line through David Rockefeller as paradigm case goes back to the Nazi period to John Foster Dulles (an in-law) and his brother Allen Dulles (OSS and then CIA Director), who Supreme Court Justice Arthur Goldberg called “traitors” for their support of the Nazi regime.  The Rockefeller Foundation funded and developed German eugenics programs in the pre-war years, Standard Oil supplied oil in collaboration with I.G. Farben, and so on.[iv]

The supreme moral goal and strategic methods governing U.S. covert-state performance have not only have been very similar in moral principle, but have deeply connected Rockefeller protégés Kissinger and Brzezinski, and more deeply still the theoretical godfather of U.S. covert state policy, Leo Strauss, who was funded out of Germany by David Rockefeller from the start.

The inner logic of covert and not-so-covert U.S. corporate world rule since 1945unified under Wall Street financial management and transnational corporate treaties for unhindered control of commodities and money capital flows across all borders is undeniable if seldom tracked. This architecture of the grand plan for a New World Order is evident in both strategic policy and global political and armed action over decades that have seen the objectives increasingly fulfilled with constructed deadly crises as pretexts for war the standard technique.[v]Behind them as first post-Nazi historical turn lies the 1947 National Security Act (NSA) which created the Central Intelligence Agency (CIA)and explicitly licensesdestruction of life, truth and other societies as institutional methods.

The CIA is charged with designing, planning and executing “propaganda, economic war, direct preventive action, sabotage, anti-sabotage, destruction, subversion against hostile States, assistance to clandestine liberation movements, guerrilla murders, assistance to indigenous groups opposed to the enemy countries of the free world”. The linkage back to Nazi methods and world-rule goal as the highest moral objective is not just one of corresponding ultimate principles and strategic policy formation. It relied on Nazi SS intelligence sources and means from the beginning of the covert terror state.[vi]

There is no heinous means that is not assumed as the highest morality by this long-standing covert institutional formation linking to the presidential office.It is an explicitly secret system involving at least the Defense Department and the CIA, the former with many more operatives and offices.

The Special Activities Division (SAD) to carry out NSA criminal operations, for example, also confers the highest honors awarded in recognition of distinguished valor and excellence – as did the earlier SS prototype in Germany. What people find difficult to recognise is that these actions, whether by the SAD or other system operations,are conceived as the highest duty, however life-system destructive and mass murderous they are. All participants are super patriots in their own view, as were the Nazis. Contradiction between declared and actual values, however, is a central mode of the covert system. For example, what can be considered a high duty in the perpetual U.S.“war on drugs”, the most morally obligatory commitment of the U.S. state,is at the same time a war against and with other drug operations to transport illegal hard drugs into the U.S. itself.[vii]

We might see here a parallel between foreign mass murder and domestic mass murder in 9-11, with both regarded as high patriotism in this supreme morality. In the background of America’s Reichstag Fire and likewise disclosing the unlimited geo-strategic action that can be operationalized as necessary and good, the post-1945 U.S. control of international sea-lanes made the covert U.S. state the world’s dominant narcotics controller so as to fund secret criminal war actions from South-East Asia to Latin America, entailing the addiction of its own peoples.[viii]This woeful method has been long known by experts, but came to be public knowledge in the Reagan-state funding of the death-squad Contras of Nicaragua as “the moral equal of our Founding Fathers” (a tribute he is said to have given later to the drug-running warlords and jihadists of Afghanistan).

These moral contradictions seem insane, but this is so only if one does not comprehend the underlying supreme morality of which they are all expressions.

Even U.S.-sponsored death squads torturing and killing tens of thousands of poor people across Latin America before 2000 and their return as direct covert U.S.-state method from Iraq to Syria after 9-11 – called “the Salvador option”[ix] – is regarded as necessary and obligatory to “defend the Free World and our way of life”. They entail ever more total U.S. world rule and self-maximizing position by strategic deduction from the supreme morality’s first premises.

The covert nature of the mass-murderous operationalization is never from moral embarrassment. It is solely to ensure effectiveness of execution against “soft” and “uninformed” public opinion, to terrorize people in situ from continued resistance, and to annihilate its leadership and community agency all the way down. Throughout the deciding moments of execution of the underlying supreme value program, global corporate money demand multiplication is always the ultimate value driver -as may be tested by seeking any covert U.S. action or overt war which is not so regulated beneath saturating propaganda of lawful intentions of peace and freedom.

These lines of underlying moral institution, policy, strategic plan, and massive life destruction at every level are indisputable facts of the covert and official faces of the U.S. state, but are typically not connected to the September 11, 2001 attack. Since most people cannot believe their own government or the “leader of the free world” could execute such a sabotage action as “9-11” in which thousands of American themselves died, these behavioral reminders forge the unifying meaning.

Worse still occurred in the last “war”before 9-11. In the background providing graphic example of how the covert U.S. state apparatus is structured to attack and murder U.S. citizens themselves to strategically maximize implementation of its supreme value program of transnational corporate money sequences over all barriers, there is the now known Operation Northwoods. Very familiar to the 9-11 truth movement, but unpublicized since its release under freedom of information laws, this Department of Defense and Joint Chiefs of Staff plan proposed that the CIA and other operatives covert operatives “undertake a range of atrocities” to be blamed on Cuba to provide pretext for invasion.

“Innocent civilians were to be shot on American streets; boats carrying refugees fleeing Cuba were to be sunk on the high seas; a wave of violent terrorism was to be launched in Washington DC, Miami and elsewhere. People would be framed for bombings they did commit; planes would be hijacked”.[x]

All would be blamed on Castro the Communist in place of bin Laden the Islamicist, and invasion of desired resistant territory would be achieved as a triumph of American freedom and interests over its enemies.

 Operation Northwoods was not, however, okayed by President Kennedy – perhaps another reason for his assassination and replacement by more pliant presidents to represent “America’s interests” in accord with the supreme morality. Underneath the stolen election of George Bush Jr.in contrast – whose family made its money, in part, by serving the covert financial requirements of the Nazi regime before and during the 1939-45 War – was a domestic and foreign administration which would push further than any in the past to advance “U.S. interests”to full-spectrum world rule. Its project included reversing the Roosevelt New Deal and the social state within the U.S. itself – “an anomaly” as Bush Jr. expressed the historical perspective and ethic at work.

This plan was more explicit in the published Project for the New American Century formed from 1997 on. It even supplied the need for a 9-11 event in its 2000 version, the year that Bush Jr. was elected and the year before 9-11. To indicate the “non-partisan” nature of the planning, Democrat National security Adviser Zbigniew Brzezinski had already hinted at the usefulness of a 9-11-style domestic attack to move policy forward in his 1998 book, The Grand Chessboard: American Primacy and Its Geostrategic Imperatives.[xi]

The Moral Compass of 9-11

As a moral philosopher with social value systems as my primary object of analysis, my first thoughts in understanding “9-11” were of the system motives,known methods, and objective interests driving the event which could coherently explain it.Whatever the immediate hold of the official conspiracy theory on the public mind,a rational explanation is required which is consistent with the suppressed facts and the organising geo-strategic plan on both sides of the event.

For over a decade before 9-11, there were three U.S.-propelled global trends that almost never come into the understanding of 9-11 itself. 9-11 truth seekers themselves have focused on the foreground technics and the transparent motive for oil. But these are undergirded by deeper sea-shifts of geopolitical and economic wars of seizure and destruction by other name against which the world’s people were rising. To compel books of analysis into one unifying frame, transnational corporate-rights treaties from NAFTA to the Maastracht Treaty to the WTO overrode all other rights across borders;the private “financialization”stripping of social sectors and welfare states had advanced across the world; and the totalizing movement of the system across all former “cold war” and cultural borders was “the new world order” in formation. Together these vast shifts towards transnational money-sequence rule of all reversed centuries of democratic evolution. And every step of the supreme value program was life blind at every step of its global operationalization.[xii]

Yet states and cultures were so sweepingly re-set into unaccountable transnational corporate and bank rule that few recognised the absolutist value program being imposed on the world.  Fewer still recognised all was unfolding according to plan.

What has been least appreciated about the long-term strategic plan unfolding on both sides of what was immediately called “9-11” – CallEmergency!–is that supreme banker and global money director David Rockefeller had summarized “the plan” to fellow money-party elites across borders at the Bildersberg meeting in Baden Baden Germany in June 1991 -exactly at the same time that the Soviet Union and its resistant barriers fell.[xiii] Bear in mind that Rockefeller among other initiatives appointed both Kissinger and Brzezinski for the lead in both the supranational Bilderberg and Trilateral strategic bodies of which he was the lead patron, not to mention financed the unemployed academic Leo Strauss out of Germany to be the godfather  “philosopher” of the “new world order”. Rockefeller speaks very precisely to his fellow “elite of the elite” of the Western world where only Americans and Europe are invited and reportage excluded:

“A supranational sovereignty of an intellectual elite and bankers is surely preferable to the national auto-determination practiced in past centuries”, Rockefeller said.[xiv]

Observe the foundational new concepts in place of responsible government and democratic accountability. They are now consigned to “past centuries”. A “supranational sovereignty”has replaced them and is morally“preferable”. Rockefeller is not exaggerating. By 1991 a “supranational sovereignty” had already developed in the form of transnational treaties conferring override rights of “profit opportunity” on transnational corporations and private bank rule of government finances across borders – procedurally trumping any elected legislatures and their laws which are inconsistent with their thousands of treaty articles, even when the system eventually leads to world depression as now.[xv] The source of the legitimacy of governments, ultimate sovereignty, has now passed as preferable to “an intellectual elite and bankers”: more exactly, academic strategy servants and transnational money sequences overriding all human and planetary life requirements a-priori by the supreme moral goal.

Ask which function of the world’s people and means of life is not now in debt to Wall Street and the private global banking system it leads. Ask which means of life from food and water to autos and pension cheques is not thus ultimately controlled, or which commodity is not under oligopolist corporate sway. The “surely preferable” objective was already achieved by 1991 or in advanced global institutional motion. Now supreme over all else so that all else is now accountable to it, and it is not accountable to anything above it, “the plan”seemed all but accomplished by Rockefeller’s own considered words.

But what if people resist the new world rule with no life coordinate or constraint at any level of its execution? We may recall that during the death-squad rule of the Argentina generals at this time in which civilians were murdered and tortured in the thousands, National Security Adviser Kissinger congratulated the junta on their “very good results – - The quicker you succeed the better.”Kissinger also heartily approved of the earlier massacres and torture in Chile.

The resistance was in this way pre-empted long before the Soviet Union fell, and after 1990 had no block in the Middle East and Central Asia either. “The plan” has been very long term. Kissinger the geo-executer was originally appointed to high office by Rockefeller (to lead the Council on Foreign Relations back in 1954), and – to give a sense of the long-range trajectory of the plan design –was,incredibly,the U.S. administration’s first choice for an “independent 9-11 Commission”. The obviously not-independent Kissinger was still not a problem for “the free press” and official discourse. But when he was required to disclose his business connections, he withdrew to stay covert in his ongoing backroom capacities and enrichment.

The 9-11 sacrifice is better understood within the deep-structural context of the unfolding plan. Thus David Rockefeller gave special thanks to media like “the New York Times, Washington Post, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion” in co-operating with the plan. Rockefeller was again precise:

This plan for the world would have been impossible for us to develop if we had been subjected to the light of publicity during those years. [xvi]

The plan’s next decisive steps were in fact already in motion as Rockefeller expressed gratitude for the media black-out. A new strategic manifesto from the Pentagon was in preparation entitled “Defense Planning Guidance on Post-Cold- War Strategy,” completed on February 18, 1992.[xvii]Prepared under the supervision of Paul Wolfowitz, then the Pentagon’s Undersecretary for Policy, it was disclosed in March of 1992 by the New York Times.After the first invasion of Iraq, it became known as the Project for the New American Century, publicly released from 1997 to 2000 prior to 9-11.

Again we may note the long arc of planning control, crisis and war as required. Item 6 of the strategic plan defined the agenda in general terms: “In the Middle East and Southwest Asia, our overall objective is to remain the predominant power in the region and preserve U.S. and western access to the region’s oil.”

Oil-rich Iraq had in fact been invaded – not only to privatize its peerlessly high-quality surface oilfields but to destroy its region-leading socialist infrastructure.Iraq became accessible for invasion as the arms-bankrupted Soviet Union was in collapse. We may observe that the covertly genocidal destruction of Iraq bridged Republican and Democrat administrations over three changes of government – disclosing how the covert state operates as a moral constant across party fronts.

The actions confirm and express the one supreme moral goal identified above. They bridge from Saddam himself as CIA-payroll killer and war proxy against Iran to recapture lost Iran oilfields dating from 1980 to 1988 to the fall of the USSR in 1991 as the axis of the long-term strategic plan of global turnaround to “America’s century” still to come before and after 9-11.But between 1990 and 2003 Saddam was transmuted from former ally to aggressor against Kuwait in an invasion given an official green light from the U.S. government, to “mushroom cloud”threat with invented “weapons of mass destruction”.

In fact, National Security Adviser Wolfowitz explained after the invasion found nothing of the kind: “[We had] virtually no economic options with Iraq because the country floats on a sea of oil.”

Observe how the invasion is conceived as obligatory for a reason that expresses the supreme value goal. Observe that it occurs less than two years after 9-11, which gave the open-cheque justification for the bombing and occupation which allowed the expropriation of Iraq’s society’s oil resources.

The problem was not the evil Saddam or the “weapons of mass destruction”, the standard reverse projection.[xviii]The problem was the Iraqi people themselves and their developed oil-funded social life infrastructure between the supreme oil-fields and their U.S. corporate control and privatization. 9-11 was,thus, first the justification for invading Afghanistan – to clear the way for pipelines into the former Soviet republics from the Caspian Sea region– pipelines that prompted the U.S. representative to predictively warn the Taliban:“Either you accept our offer of a carpet of gold, or we bury you under a carpet of bombs.”[xix]9-11 was then the necessary basis of justification for the bombing of Baghdad for the unifying supreme objective.

In fact,seldom published in the corporate media keeping the glare of publicity away from the supreme moral objective, the publicly owned and managed oil revenues of Iraq had been invested since the 1950’s in Iraq’s advanced social infrastructure, leading the Middle East with free higher education, high health standards, and near universal livelihood security. The world’s oldest civilisation was robust in organisational capacities long before the CIA-asset Saddam was installed.

Despite his murdering his way to the top in this function, even Saddam could not destroy the system because socialist government had been achieved decades earlier by a powerful oil-workers’ union base and a population glad to have all education free, an efficient low-cost foods delivery system, and the most advanced public healthcare system in the Middle East. So there was not only the “sea of oil” as a motive to assert U.S. control in the new “supranational sovereignty” of the world. Just as important in this ultimate moral cause, what the U.S. covert state always seeks to destroy by any means, isa successful social infrastructure without private big oil, bankers and transnational corporations free to control it towards higher profit opportunities.

Unravelling the Supreme Moral Doctrine behind the U.S. Covert State

The genocide of Iraq, as the long-opposing “evil empire” was in free-fall, is the most important strategic anchoring prior to “9-11”. Covert strategic policy to forward the supreme goal is by now self-evident, but the inner moral logic is assumed not penetrated.  The most influential of Rockefeller’s protégés in this regard is the “philosopher king” of the U.S. covert state, Leo Strauss. While he never worked in a philosophy department or has any training in logic, his concept of “natural right” fits exactly to the “supranational sovereignty” of private money-sequence rule of the world – what “the intellectual elite” Rockefeller refers to invoke as “moral anchor”, “right” and “justice”.

The moral thought system is not unlike that of Mein Kampf without the racist rant, camouflaged everywhere in practice by the method of big lies – “noble lies” as Strauss exalts them.[xx] The innermost value driver is a perpetual war of dispossession of the weaker for the private transnational money-capital multiplication of the rich.

Nothing in this doctrine is too mendacious, greed-crazed and murderous if it fulfills the plan of this limitless private-capital rule as ultimate moral ground and compass. In Strauss’s canonical teaching of U.S. national security advisers and intellectual following, the ruling moral absolute is expressed by the core master idea behind the “supranational sovereignty” of an “intellectual elite and bankers”:

“limitless capital accumulation – — the highest right and moral duty”.[xxi]

This is the ethical absolute of the covert U.S. state and its strategic decision structure. And there is no internal limit within this moral universe to life means seizure from poorer societies and resource looting for the supreme goal.  It is the natural and absolute Good.

To justify its meaning, the Straussian canon adopts a potted reading of Western moral and political philosophy from Plato through Hobbes, Hegel, Nietzsche, Marx and Weber. This impresses American political operatives of the faith, but Strauss is a failed philosopher turned down by Paul Tillich for his post-doctoral Habilitation and only saved from academic ruin in Germany by Rockefeller grant money. While not taken seriously as philosophy anywhere else, it is worth decoding its talmudic involution for the borrowed ideas that drive its covert state disciples and neo-fascist public “intellectuals” in America.

The ultimately organising idea is to commend all forms of conquering and limitlessly expanding private capital as “natural right and law” with genocidal subjugations justified in glowing moral terms. For example, “noble lies” is the moral category for limitless mendacity. One may wonder how educated people can be so bent out of moral shape. So I now concisely provide what cannot be found elsewhere: the inner logic of the supreme doctrine as perversions of great thinkers.

Its framework of meaning and value helps us to understand why the 9-11 event could easily follow for the managers of the covert U.S. state and its Straussian planners as not at all anomalous or evil within their moral logic. 9-11 follows as a maximally rational and unique tool to achieve the objectives in fact achieved by 9-11, and the geo-strategic cabal behind it is servilely linked from the beginning to the dominant private transnational corporate and banking interests exemplified by David Rockefeller.

To understand this brutal moral universe and its connection to 9-11, the 9-11 wars and a globalizing police state, we need to understand the deformations of its basic organising ideas. Plato’s idea of “the noble lie” means, in fact, a myth or parable to communicate an underlying truth about the triadic human soul of reason, spirit and appetite which, Plato argues, should be reflected in the construction of the ideal state (in which the rulers are communist in their common property to keep them uncorrupted and true).

But through the prism of U.S. global money-party rule a la Strauss this idea becomes the principle of lying to the public to keep the vulgar herd – the people themselves – ignorant and obedient. The philosophies of Hobbes and Hegel are also grist for this mill. Hobbes argues that “man is moved by a restless desire for power after power that ceaseth only in death”, but this brute desire in the “State of Nature” is tamed by “the covenant of peace” ordered by the internal sovereign as absolute.

Via Strauss and the U.S. covert state this becomes right is might and the ultimate “natural right” is limitless private capital power and empire with no end of totalization across the peoples and lands of the world. Hegel too suits a fascist-capitalist reading since he argues “the State is the march of God  through the world”, and war itself is history’s test of which State is a higher realisation of “the absolute Idea”. But Hegel still envisaged a “universal state”to supersede the competitive private-property division of capitalism in the “universalization of right and law on earth”.

Once again U.S. private money-capital power with no bound, the supreme moral goal in the Rockefeller-Strauss doctrine, is opposite to the classical philosophy it invokes. Once more dialectical development of reason to more coherently inclusive conception and life is reversed into one-way private money capital sequences maximized to rule the world with the U.S. military as its instrument of force and terror.

However it conceals its meaning, all positions come down to this underlying value code – as may be tested on whatever transnational money-sequence demand, right or war is launched next. 9-11 construction in such a moral world does not violate this value code. It expresses it in self-maximizing strategic turn to achieve the ultimate goal.

Friedrich Nietzsche may provide the best fodder for the doctrine when he advises that “life is essentially appropriation, injury, overpowering of what is alien and weaker, imposing of one’s own forms, and at its mildest exploitation” in his superman vision of “beyond good and evil”. For philosophical Nietzscheans, this is code for the inner meaning of the angst of artistic creation. But this meaning is predictably lost on the U.S. covert-state school seeking the “supranational sovereignty” of “limitless capital accumulation” as the supreme good with the “intellectual elite” as servants to it. Karl Marx’s link of capitalism’s success to productive force development is the ultimate equivocation upon which this ruling doctrine depends – making no distinction between productive capital providing life goods and unproductive money sequencing hollowing out the world by money-capital multiplication. Marx, it must be acknowledged, did not made the distinction himself since this mutation of capital came a century after his death.[xxii]

Finally Max Weber’s Protestant Ethic and the Spirit of Capitalism does not ground this doctrine of “limitless capital accumulation as the highest right and duty” with the state to serve it, as Strauss again torturously suggests. In fact, Weber deplores any such perversion of public authority. His capitalist model is a young Benjamin Franklin speaking of money saved and invested as like having “a breeding sow”, not a transnational money-sequence juggernaut of eco-genocidal expansion.  Revealingly, Benjamin Franklin and “the protestant ethic” in general were most concerned about non-waste, which Strauss explicitly excludes from the meaning of “limitless capital accumulation”. For Leo Strauss and his U.S. “national security” disciples, the capitalist may waste as much as he wants by “natural right”.

Further, in complete inversion of source, the greed worship of the U.S. state, its patrons and its academy disciples reverses the model of the “spirit of capitalism” exemplified by Benjamin Franklin in proprietary claim on knowledge and inventions. He,in fact,refused to patent his famous Franklin Stove because he believed that no innovation or new knowledge from which other people could benefit should be denied them – just as he himself had benefitted from the community of knowledge and science as the distinguishing feature of being a civilised human being.

In short, it is important to recognise how twisted the covertly ruling doctrine is. No element of it is life coherent or true to the classical thinkers in which it costumes itself. In the end, only the transnational U.S. money party has any place in its rights and obligations, and any sacrifice of other life to its supreme goal is legitimate – linking back to the Nazi-U.S. corporate axis that nearly destroyed the civilised world once before.[xxiii]

Money-Capital Power UeberAlles: How Economic Rationality Leads the Plan

The U.S. culture of money-sequence “rationality” is the underlying intellectual and moral disorder which leads to “limitless money capital accumulation” as the supreme moral goal. In formal terms, the equation of rationality to atomic self-maximization is assumed a-prioriacross domains. With globalizing Wall-Street-led “financialization”, this “rationality” becomes equated to private money-sequence multiplication across all borders as theultimate Good. This is the innermost mutation of value logic and goal, the moral DNA, from which the cancerous world system develops on both sides of 9-11.[xxiv]

This first principle itself is,in fact,built into formal economics, decision and game theory, and strategic science, as I explain step by step in “Behind Global System Collapse: The Life-Blind Structure of Economic Rationality.”[xxv] It is axiomatic but unexamined, life-blindly absolutist but not recognised as morally problematic. To make a long story short, competitive self-maximization in the market is assumed to produce “the best of possible worlds” by mathematical proof. “Pareto efficiency” is believed to demonstrate this by private money exchanges between self-maximizing atoms apriori stripped of all life properties, relations, society, conditions of choice, and all natural and civil life support systems. Pareto himself recognised outside this formula what has since been covered up.

Not only is the formula consistent with most having remaining impoverished by the “optimum” of “no-one worse off”, what none who cite “Pareto efficiency” as a standard academic mantra ever acknowledge or even recognise. Pareto himself is in no doubt of the implication. As the fascist party he belongs to rules Italy and Rockefeller creates the Council of Foreign Relations, he asserts with approval: “Very moral civilized peoplehave destroyed and continue to destroy, without the least scruple, savage or barbarian peoples”.[xxvi]We glimpse here at the roots the supreme morality built into “economic science” itself.

Yet, as demonstrated in “Behind Global System Collapse”, even the most liberal canons of America, including John Rawls’ classic A Theory of Justice, are grounded in the same meta principle.[xxvii] Rationality and value are equated to self-maximizing gain with no limit within game-theoretic interactions as the sole limiting framework of “limitless money capital acquisition”. The generic equation defines, indeed, the dominant intellectual and economic mind-set of America and the global system in action since 1980. The cabal internal to U.S. national security strategic planning follows the moral logic to its most radical conclusions with no constraints by life or law.

The one absolute moral meaning is the spread of U.S. economic, military and political power as good for all, or, more exactly in Straussian language, limitless private transnational money-capital expansion as the highest right and moral duty. Only what is consistent with or serves this supreme morality, it follows, deserves to exist. This is the alpha and omega of the covert doctrine and state, and careful reading can find no disconfirmation beneath the rhetoric of “noble lies”.

The Iraq Paradigm:  Genocide Strategy From 1990 On

The Iraq line of the geostrategic plan from 1990 to 2001 and after is a paradigmatic articulation of the covertly ruling moral logic. It launches into the theatre of war as direct war attack when U.S. Ambassador to Iraq, April Glaspie, is instructed to green-light Saddam’s already known plan to invade Kuwait in 1990: “The US. has no opinion on your Arab-Arab conflicts, such as your dispute with Kuwait”, she advises. To formalize the lie as official and traditional, she reports: “Secretary Baker has directed me to emphasize the instruction, first given to Iraq in the 1960s, that the Kuwait issue is not associated with America”.[xxviii]

The dispute was, in fact, over Kuwait’s drawing out oil from reserves underlying Iraq as enabled by the colonial split of the oil-rich Kuwait province from Iraq – the classic divide-and-rule policy holding also in the division of oil-rich Kurdistan among four manufactured states. Saddam had good reason to trust the U.S., not only by the long-term official promise of neutrality but as blood-mix ally when he waged a U.S.-supported war of aggression against Iran – which still remains the target. Note the big lie to provoke the supreme crime of war has remained without any glare of publicity that might derail the plan.

When Saddam did exactly as planned by invading Kuwait, Bush Sr. raved about the Nazi-like aggression against a weaker country in the reverse projection that always defines the covert U.S. state before, through and after 9-11. So in the same name of “preventing aggression” U.S. “defense” forces invaded Iraq to destroy any life capacity it had to defend itself – always the strategy since the defeat in Vietnam. The genocide began by the massacre of many tens of thousands of fleeing soldiers. Recall the weeping young woman, the Kuwait ambassador’s daughter, planted next to baby incubators falsely claiming the monster Saddam had murdered the babies. This reverse projection was soon to be made real thousands of times over inside the victim society of Iraq.

Reverse projection of evil is the meta law of U.S. psy-ops propaganda in the deadly conflicts and wars it covertly starts. This is the supreme moral program in action as “noble lies”. In this case, the air-bombing after surrender continued from U.S. and “special ally” Britain as “sanctions of Iraq” to “prevent aggression” – again the reverse projection. In fact the bombs continually fell on the water and electricity infrastructures of the defenceless people and against all lines of repair to restore either – “the line in the sand against Iraq aggression”. We might bear in mind that Wolfowitz was Undersecretary of Defense under Secretary Cheney at this time, their positions not unlike those at the time of 9-11.

Air-bombing, as Bertrand Russell long ago pointed out, is inherently fascist in erasing the killed and maimed from sight while ensuring impunity for the bombers of defenceless people.  But all such mass murder is only collateral damage to the supreme moral goal as “natural right and law”.  The air bombing of Iraq’s water and electricity supplies dressed in one big lie after another continued in slow mass-murderous destruction of the people and their social life infrastructures years on end.

Denis Halliday, United Nations Humanitarian Co-ordinator for the mission finally called it “genocide” (Wikipedia calls it “the Persian Gulf War”) when he resigned in 1998 to protest against “the crimes against humanity”. But no-one knew until the U.S. Department of Defense Intelligence got out that the first sweep of Iraq was planned down to the mass killing of the infants and children. September 11 in 2001 is better understood in this wider context of strategic planning by the covert U.S. terror state. For years the non-stop bombing of the people’s central life-water support system deliberately engineered mass dying from diseases of children in the hundreds of thousands.

What was predicted by Harvard Medical School researchers from the continuous civilian infrastructure bombing by the U.S. military – the deaths of over 500,000 children- was verified by the counts scientifically taken at the risk of researchers as the bombing continued month after month with NATO support.[xxix]

Full-spectrum corporate money-sequencing through Iraq under the Comprehensive Privatization Program would only be enabled by “9-11”down the road. But first the bases of advanced social life organization needed to be destroyed. The later-leaked U.S. Defense Intelligence document entitled “Iraq Water Treatment Vulnerabilities” expresses the moral DNA at work. I cite the key lines of U.S. Defense Intelligence Agency reports because they reveal the character of the supreme moral goal and its strategic planning.“With no domestic sources of water treatment replacement or chemicals like chlorine”and “laden with biological pollutants and bacteria”, the leaked Defense Intelligence Agency report says (italics added), “epidemics of such diseases as cholera, hepatitis, and typhoid” will “probably take six months before the [drinking and sewage water] system is fully degraded”.

The document continues, Conditions are favorable for communicable disease outbreaks [by the one-way air bombing] with the “most likely diseases during next sixty-ninety days of diarrheal diseases (particularly children) acute respiratory diseases (colds and influenza); typhoid; hepatitis (particularly children); measles, diphtheria, and pertussis (particularly children); meningitis including meningococcal (particularly children), cholera”. “Medical Problems in Iraq”, dated March 15, 1991, reports that the “water is less than 5 percent of the original supply – - diarrhea is four times above normal levels – - Conditions in Baghdad remain favorable for disease outbreaks”. The fifth document in June reports “almost all medicines in critically short supply” and “Gastroenteritis killing children – - in the south, 80 percent of the deaths are children”.[xxx]

In short, no limit to covert U.S. planning of indiscriminate mass murder for the supreme goal exists. The number who died in 9-11 suddenly pales in comparison. In all cases, it lets “those inimical to U.S. interests” know that there is no limit to how far the covert terror state will go for the supreme moral code not yet decoded. Combined with wars of aggression before and after 9-11, raining fire and explosions on civilians from the air so that no defense or escape can be made, saturating the fields of public meaning with big lies civilly dangerous to unmask, and bringing vast enrichment and new powers to transnational corporate conglomerates and their past and present CEO’s of the acting U.S. state – all become clear in their ultimate meaning once decoded. As the Democrat U.S. Secretary of State responded to the question of the 500,000 killed children, “we think the price was worth it”. No price is too much to pay for fulfilment of the transcendent project of the global U.S. state and its private capital rule as “the Free World”. “Those inimical to our interests” are those who oppose or are in the way of it, and thus “hate our freedom”.

The  Strategic Logic of Value through 9-11

By 2000 it was very clear to the U.S. strategic planners that the opening up of the Middle East and Central Asia after the fall of the Soviet Union had to be further pursued before it was too late.The great regret for the planning personnel of the coming Bush Jr. administration such as Paul Wolfowitz was that Iraq had not been taken over on the first invasion. The need for “full spectrum dominance” across the Middle East and Central Asia was thus the essential argument of the Project for the New American Century (PNAC), with the prescription that no other “regional power”was able to contest this dominance.

The PNAC more explicitly recognised the strategic necessity for what Zbigniew Brzezinski had already called for in 1998 in The Grand Chessboard: American Primacy and Its Geostrategic Imperatives – namely,“the circumstance of a truly massive and widely perceived direct external threat” to ensure public support for “the United States, as the sole and, indeed, the first truly global power”. The now once untouchable Central Asia, formerly of the USSR, was thus targeted as essential not only for its vast oil reserves, but to complete rule of the “first truly global power”.

The Project for the New American Century was more explicit than Brzezinski in 2000, the year before 9-11. As former Defence Minister of Canada, Paul Hellyer, lucidly puts it in a recent address (italics added): “The authors of this American ‘Mein Kampf’ [the PNAC] for conquest recognized the difficulty of persuading sophisticated Americans to accept such a gigantic change in policy. So they wrote the following (subsequently removed from the record):  ‘Further, the process of transformation, even if it brings revolutionary changes, is likely to be a long one, absent some catastrophic and catalyzing event – like a new Pearl Harbor.’”[xxxi]

Excepting the Vietnam War ending in military defeat – but vastly enriched armaments and connected private bank and corporate interests – the hitherto favoured strategic-plan mode had been local death squads along with pervasive American media propaganda against the victims as “communists” and “sponsored by the USSR”. But once there was no remotely equal opponent in mass-kill capacities and transnational trade treaties now bound governments within corporate-rights law as overriding domestic laws and policies, anything became permissible. The plan for the “supranational sovereignty” of “limitless capital accumulation” in “full-spectrum power”required only 9-11 to derail world-wide peace, environmental and anti-corporate globalization movements growing into uncontrollable civilian capacity across borders and continents.

People were waking up to the one-way destruction of life systems at all levels. Iraq was not alone in the genocidal clearance of formersocialist infrastructures uniting peoples across ethnic lines. A far more democratic Yugoslavia was set up and destroyed by financial means in the same year by the 1991 U.S. Foreign Operations Appropriations Law after the 1980’s multiplication of public interest rates to over 20percent primedevoured social life support structures across the world.

This was the unseen financialization base of a global war against public and worker economic and political powers that was reaping a cumulative global civilian reaction of opposition to “the plan”. 9-11 ensured against the fightback of financially dispossessed peoples with the signature reverse operation – diversion to an external “terrorist threat” that stood in the way of more sweeping transnational corporate wars on more peoples being dispossessed. Civil war in Yugoslavia long targeted by Reagan’s secret National Security Directive 133 as early as 1984 was predicted and occurred after the underlying employment and welfare structure of multi-ethnic Yugoslavia collapsed under deliberate financial destabilization. (The villain of the piece, Slobodan Milosevic, was himself a major banker).

In oil-rich Somalia, two-thirds of its territory had been leased out to four transnational oil companies by 1993 – a condition of lost grounds of life for Somalians behind the primeval civil war ever since. These are merely expressions of the underlying logic of value and the plan for its supranational rule beneath the lights of publicity as “discretion”. The examples are myriad from Latin America to South-East Asia to sub-Sahara Africa and the Middle East to Israel and Canada today. But a descriptive law of the supreme moral goal holds across all diverse instances of its expression.

Strategic planning for the destruction of social life infrastructures of peoples for private money capital gain without limit is the ultimate value program throughout from the U.S. to China.

The people of the U.S. are not exempt from their own system of covert state rule, although democratic heroism here joins with the larger world against it. This is the ultimate moral struggle on earth today. The moral politics of the disorder are the enforcement of the descriptive law.  This is the ruling meta program, and it is carcinogenic by its nature. The supreme motive force it multiplies by is privately self-maximizing money possession (individual and corporate)seeking to be limitlessly more.More = Better. Less = Militant Demand for More.

The “9-11” event is the epicentre of the supreme moral objective seated in Wall Street. Itis best understood as an ultimate strategic maximizer of theitalicizedformula. Exactly expressed, its ultimatelyregulating axiology is private money inputs through all life to maximally more private money outputs in ad infinitum progression: Money àLife as Meansà More Money or, formally, $àLasMà$1,2,3,4— N.

At the highest level of anchoring moral meaning, this private money-demand rule seeks to beabsolute and total across borders with no quarter. “Full spectrum dominance” is its military method. Yet what distinguishes it from theNazirule it connects with as prior transnational corporate partner in war making is that in the U.S. private money demand multiplication at the top is the only organising value meaning. 97% of its money command is produced by private bank notes of others’ debt to the private bank system centred in Wall Street. Yet despite this very narrow centre of control,almost no global territory or field of life is outside its rule and strategic plan.

The “Trans-Pacific Partnership” is but its latest expression – focusing on private knowledge-patent money sequencing to rule out generic pharmaceuticals and other life-and-death knowledge commons from which higher profits cannot be made. The one underlying common principle throughout all phases is transnational corporate and bank money sequencing to more. Its converse is to overrideall life requirements at all levels, and strategically planned crises and wars are the advancing lines of control and enforcement.

What is not recognized through all the genocidal wars,ecocidal results, collapsing social life support systems and falling wages, however,is that this ruling value sequence rationally leads to9-11” as maximal strategic payoff progression.“Absent some catastrophic and catalyzing event”, the Project for the New American Century declared before 9-11,

“ – - the U.S risks the loss of a global security order that is uniquely friendly to American principles and prosperity”.

Decoded, this meant in theory and practice more transnational private money sequence progression to ever more control over all still-uncontrolled assets for more and richer returns without limit of take or life destruction. But these are unspeakable lines of value meaning, and that is likely why, for example, Wikipedia keeps altering the entry of my name with conspiracy theory attributions and smears to ensure that such deep-structural diagnosis does not gain currency. That is how this system works, and analysis will provide more variations of this gagging method on 9-11 ahead.

The strategic necessity of the 9-11 event for “global security order”can even be asserted by the principal architects of the administration under which it happened, and those who observe this can be dismissed as “conspiracy theorists”. Reverse projection is, as always, the essential psychological operation. The documented but shouted-down logistics included V-P Cheney having control of the air-de

The Last Picture Show

The Last Picture Show

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Posted on Feb 15, 2013
Kenneth Lu (CC-BY)

By Thomas Hedges, Center for Study of Responsive Law

In 1975, Universal Pictures launched the first nationwide ad campaign for its new film, “Jaws.” Universal avoided marketing its film regionally, as other major studios had been doing. Instead, it organized one major ad campaign, released the film nationally on a single date and raked in most of its profits that weekend, before anyone could say whether the film was worth the money.

Today, all major studios do nationwide releases. After “Jaws,” studios got rid of their regional marketing offices and consolidated them into national headquarters, where films would be distributed to thousands of theaters across the country.

Theaters, in turn, consolidated their spaces. Independent theaters were swallowed up by regional chains, which were then swallowed up by national chains, which were then swallowed up by multinational chains. It became more profitable to have one 20-screen complex rather than 10 two-screen theaters, especially because most people went to see the same few films.

During merger mania, small, independent theaters have struggled to survive as movie studios and multiplex chains spend more and more money promoting conventional cinema.

But now, independent theaters are facing a new threat: the shift from 35mm film to digital projection equipment, which reduces the fees of printing and shipping 40-pound film reels for studios but costs exhibitors from $60,000 to $80,000 to install. The price tag is one that many small-theater owners cannot afford.

To redistribute some of the savings, studios have created a Virtual Print Fee (VPF) agreement that ensures exhibitors a cut of the studio’s savings.

Say a studio saves $3,000 on a film print by shipping a digital copy that is some 40 pounds lighter than the 35mm reel. The studio will give $800 to the exhibitor to show the film. In most cases, the exhibitor has leased the equipment for digital projection. That $800 then goes to pay for converting from 35mm film to the Digital Cinema Package (DCP).

The package is a set of high-definition video files delivered on a hard drive encrypted with copyright protection that plugs into a system of proprietary servers, software and projectors. “Avatar,” released in 2009, was the movie that spurred industry adoption.

The lower distribution costs, the studios say, allows theaters and filmmakers more freedom in producing film. 

Instead, small exhibitors have found that signing a VPF agreement limits the movies that they can show. Smaller studios and independent filmmakers do not have the money to offer VPFs to exhibitors and that shuts many of them out.

It is, in many ways, the next step in the consolidation of the film industry, intentional or not.

It’s “really a creepy system,” says Karen Cooper, director of Film Forum in downtown Manhattan, “and I’m very fortunate in that I didn’t have to deal with that.”

Film Forum is one of the roughly 3,500 exhibitors that have converted to digital out of 5,700 independent theaters in the United States, and was able to pay for the conversion itself.

In the end, Cooper says, “either you own the DCP,” as Film Forum does, “or you owe a bunch of money ... and that’s a rotten deal.”

Cooper is frustrated with a government that has not empowered its arts agencies to act on the issue.

“The U.S. has an extremely bad track record,” she says. The National Education Association and Department of Cultural Affairs, she says, have annual budgets of about $150 million. “That’s a laughable amount of money. The cities of Berlin and Vienna have larger arts budgets.”

“In a city that used to have 30 theaters when I was a kid, we now have … five,” says Josh Levin, co-owner and manager of West End Cinema in Washington, D.C.

Levin says that, despite the trajectory of neighborhood cinemas, he is not angry at the developments that contribute to the dearth of independent theatergoers.

The required conversion to digital projection, the creation of the VPF agreement, the popularity of new competitors such as Netflix—none of these changes, he says, are malicious.

“The idea of studios taking a chance on a low-budget drama, a serious drama or a comedy that is not of the lowest common denominator doesn’t make any economic sense,” he says. “At the same time that technology is democratizing filmmaking, the business model is crushing that democracy.

“It’s not sinister,” he says. “It’s just business.”

The responsibility to save neighborhood cinemas has apparently fallen into the laps of communities and charity groups.

When the Loews theater in Friendship Heights, D.C. went bankrupt in 2001, for example, Bob Zich, a retired Library of Congress librarian, and his wife, Joanne, stood out on the street collecting donations as small as 25 cents to reopen the theater.

“There was a sense of outrage when the theater closed down,” Joanne said over the phone, her husband also on the line. “There was a great sense of loss ... and [we saw our efforts] as a quixotic enterprise.” 

Bob and Joanne, who did not have backgrounds in film or in community organizing, managed to save the theater. The Avalon Theater, which has replaced the old Loews cinema, is now a not-for-profit art house.

The space, Bob and Joanne say, reflects something that is lost in America beyond film. Bob grew up in Nebraska and remembers the intimacy of four small theaters in his town. It was a different social atmosphere, he says, one where instead of having organized soccer games and music lessons, kids had “one place to play and that was outside.”

He remembers that when he and his wife moved to Washington, D.C., neighbors stopped by his apartment to welcome them. “They might bake a cake and stop to chat,” he says. “These were the people you would be living with.”

Now, Bob and Joanne feel estranged from their neighbors. People, they say, prefer prescribed events. There is no more faith in random interaction, which sits at the center of community life. “They have their own way of entertaining people now,” Bob says.

Every seat in the Avalon Theater has the name of a donor on the back, a reminder that the cinema was not an impersonal, private undertaking. For Bob, the theater is a glitch in an alienating culture.

“It was the perfect storm in reverse,” he says.

This article was made possible by the Center for Study of Responsive Law.

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An Australian software developer has raised concerns over Google's app store, after being sent the full names, email and some postal code information of everyone who bought his mobile app.

CISPA, the Privacy-Invading Cybersecurity Spying Bill, is Back in Congress

It's official: The Cyber Intelligence Sharing and Protection Act was reintroduced in the House of Representatives yesterday. CISPA is the contentious bill civil liberties advocates fought last year, which would provide a poorly-defined "cybersecurity" exception to existing privacy law. CISPA offers broad immunities to companies who choose to share data with government agencies (including the private communications of users) in the name of cybersecurity. It also creates avenues for companies to share data with any (Photo: Kai-Huei Yau/ Tri-City Herald)federal agencies, including military intelligence agencies like the National Security Agency (NSA).

EFF is adamantly opposed to CISPA. Will you join us in calling on Congress to stop this and any other privacy-invasive cybersecurity legislation?

As others have noted, “CISPA is deeply flawed. Under a broad cybersecurity umbrella, it permits companies to share user communications directly with the super secret NSA and permits the NSA to use that information for non-cybersecurity reasons. This risks turning the cybersecurity program into a back door intelligence surveillance program run by a military entity with little transparency or public accountability.”  

Last year, CISPA passed the House with a few handful of amendments that tried to fix some of its vague language. But the amendments didn't address many of the significant civil liberties concerns. Those remaining problems were reintroduced in today's version of CISPA. Here's a brief overview of the issues:

Companies have new rights to monitor user actions and share data—including potentially sensitive user data—with the government without a warrant.

First, CISPA would still give businesses the power to use "cybersecurity systems" to obtain any "cybersecurity threat information" (CTI)—which could include personal communications—about a perceived threat to their networks or systems.  The only limitation is that the company must act for a "cybersecurity purpose," which is vaguely defined to include such things as "safeguarding" networks.

CISPA overrides existing privacy law, and grants broad immunities to participating companies.

At the same time, CISPA would also create a broad immunity from legal liability for monitoring, acquiring, or sharing CTI, so long as the entity acted “in good faith.”  Our concern from day one has been that these combined power and immunity provisions would override existing privacy laws like the Wiretap Act and the Stored Communications Act. 

Worse, the law provides immunity “for decisions made based on” CTI. A rogue or misguided company could easily make bad "decisions" that would do a lot more harm than good, and should not be immunized.  

CISPA also raises major transparency and accountability issues.

Information provided to the federal government under CISPA would be exempt from the Freedom of Information Act (FOIA) and other state laws that could otherwise require disclosure (unless some law other than CISPA already requires its provision to the government).  

Users probably won't know if their private data is compromised under CISPA, and will have little recourse. 

CISPA's authors argue that the bill contains limitations on how the federal government can use and disclose information by permitting lawsuits against the government. But if a company sends information about a user that is not cyberthreat information, the government agency does not notify the user, only the company. 

CISPA is a dangerous bill

These are just a couple of reasons of why CISPA is a dangerous bill and why President Obama threatened to veto the bill last year. CISPA essentially equates greater cybersecurity with greater surveillance and  information sharing. But many of our cybersecurity problems arise from software vulnerabilities and human failings, issues CISPA fails to address. For instance, the recent series of hackssuffered by New York Timeswere suspected to be from spearphishing and victims downloading malicious software masked as email attachments—the types of issues that CISPA doesn't deal with.

We were heartened to hear that President Obama's new Executive Order on cybersecurity will encourage government agencies to more readily share cybersecurity information with companies, and may even reduce unnecessary secrecy around cybersecurity information. Let's use the momentum from the Executive Order to turn a new leaf in the cybersecurity debate, beginning a broader public dialogue about cybersecurity that doesn’t assume that surveillance is the right solution.

Please join EFF in opposing CISPA by contacting Congress today.

This work is licensed under a Creative Commons License

Mark M. Jaycox

Mark M. Jaycox is a Policy Analyst and Legislative Assistant for EFF.

NHS Guidelines Breached 500 Times in Three Years

security
New statistics released today reveal that NHS staff have breached IT guidelines almost 500 times in the past three years, although the true numbers are expected to be much higher.

Smartphones To Collect Biometric Data

The U.S. Department of Defense has awarded a $3 million research contract to technology firm AOptix to turn smartphones into devices that collect biometric data.

North Korea Nuclear Test Sends Message to Washington One Week After US-South Korean War...

The United Nations Security Council is holding an emergency meeting after North Korea conducted its third-ever nuclear test in defiance of U.N. orders. According to international monitors, the underground explosion was roughly twice as large as North Korea’s last nuclear test in 2009. North Korea had vowed to conduct rocket launches and a U.S.-aimed nuclear test after the U.N. Security Council resolution tightened sanctions in response to a rocket launch two months ago. "North Korea has been saying for years they would like to have a peace agreement to formally end the [Korean] war, and they would like to have negotiations directly with the United States," says Tim Shorrock, an independent journalist who has covered Korea for more than 30 years. "The only way out of this for the United States is to hold direct negotiations and talks with North Korea on stopping its nuclear program and stopping its missile program."

AMY GOODMAN: We begin today’s show looking at North Korea. The United Nations Security Council is holding an emergency meeting today after North Korea conducted its third-ever nuclear test in defiance of U.N. orders. According to international monitors, the underground explosion was roughly twice as large as North Korea’s last nuclear test in 2009.

The state-run Korean Central News Agency said, quote, "The nuclear test was conducted as part of measures to protect our national security and sovereignty against the reckless hostility of the United States that violated our republic’s right for a peaceful satellite launch," unquote.

President Obama condemned North Korea’s actions and urged, quote, "swift and credible action by the international community." Sung Kim, the U.S. ambassador to South Korea, also condemned the nuclear test.

AMBASSADOR SUNG KIM: This is a very provocative act that undermines regional peace and stability. And I think it will be critical for us to coordinate very closely with you and our colleagues in South Korea, going forward.

AMY GOODMAN: Today’s nuclear test is North Korea’s first since leader Kim Jong-un took power in December 2011 following the death of his father, Kim Jong-il.

For more, we’re joined by Tim Shorrock, an independent journalist who has covered Korea for more than 30 years, grew up partly in South Korea. His most recent book is Spies for Hire: The Secret World of Intelligence Outsourcing.

The significance of this nuclear test, Tim?

TIM SHORROCK: I think the significance is in that statement you read from the North Korean official agency there, which is that this test is aimed at stemming the hostility of the United States. And I think for the last couple months, and actually couple of weeks, they’ve increasingly been focused on the role of the United States, the role of the United States military in South Korea and the whole Asian region. And they’ve been talking a lot about these massive war games that the United States and South Korea take that take place almost every year, and which one took place last week. And they see the United States and these war games as very hostile and as a threat to their sovereignty, as they put it.

AMY GOODMAN: Explain what the U.S. and South Korea are doing. What are these exercises that they’re involved in?

TIM SHORROCK: Well, every year the United States and South Korea hold very large military exercises. There’s different ones. There’s one called "OPLAN 5098" that they—North Koreans take particular umbrage at, which is basically a practice run of regime change in North Korea. It’s ostensibly to prepare for a collapse of the regime. But what they do is they practice first-strike nuclear capability. They practice invading North Korea. They practice taking over the territory of North Korea and having South Korea-U.S. forces, you know, take over it while there’s a crisis there. And there’s other war games, you know, basically aimed at testing all the weaponry the United States and South Korea have, and these are seen as very dangerous.

On the other hand, exploding nuclear weapons and testing nuclear weapons is itself dangerous and a provocation, as a lot of countries have stated this morning.

AMY GOODMAN: Well, I mean, this is the largest nuclear—ever—test, the largest test that has been done to date by North Korea. So, talk about how significant this is, how this fits into politics there and the relationship between North Korea, China, and what this means for the United States on this—it happened, you know, on the eve of the State of the Union address. Do you think the North Korean leader is aware of that?

TIM SHORROCK: Well, first of all, I don’t think it’s the largest test they’ve done, although the reports this morning are contradictory and fragmentary, as they would be only 12 hours after the event took place. But it’s not clear yet whether it was a uranium or plutonium explosion, how large the bomb was exactly. What I read in the South Korean press is that it was actually a smaller kind of test designed, as they’ve been trying to do, to put some kind of weapon on a missile. As you know, they’ve been testing missiles, and they tested one another—they launched one a few weeks ago. So, you know, that’s—that’s unclear exactly how large it is, and we’ll know that in a few days, because there’s massive U.S. intelligence around there that can sniff the air and figure out exactly what kind of explosion it was.

As for the Chinese and the North Koreans, they remain very close, but I think in China there’s—patience is running out. I think they feel that North Korea is being provocative, is upsetting the strategic situation there. China has close economic ties with South Korea, Japan, the entire region. And the Chinese government has said—said a few—made a few statements in recent days that are saying that, you know, this would be a very dangerous step for them to take to test another nuclear weapon. So I think there’s a lot of—there’s a lot of concern in China itself.

I think that for the purposes of this particular test, it’s important for us, as Americans, to keep focused on the role of the United States there, which is massive. And a lot of journalists in America write about it as if the United States is just some kind of neutral observer that happens to be the brunt of North Korean criticism. In fact, there was a Korean War, as we all know, that ended 60 years ago this July. It ended with an armistice; it did not end with a peace agreement. The two combatants that signed the agreement were the United States and North Korea. North Korea has been saying for years they would like to have a peace agreement to formally end the war, and they would like to have negotiations directly with the United States. And I’ve been saying this for years. I think the only way out of this for the United States is to hold direct negotiations and talks with North Korea on stopping its nuclear program and stopping its missile program.

AMY GOODMAN: What would economic integration look like, and how much does North Korea need that support, Tim?

TIM SHORROCK: North Korea needs economic support and economic stability desperately. Its economy is in very bad shape. There are pockets of, you know, healthy economic technological development, such as in software, computer software. A couple weeks ago, you know, a high-ranking executive from Google was there visiting with Governor Richardson of New Mexico. And they actually do export certain kinds of software and certain kinds of computer games. They have the basis for many different kinds of industries—you know, steel and transportation—but over the last 25, 30 years, since really the collapse of the Soviet Union, it’s been downhill.

And they have, you know, some economic ties with South Korea. There’s one remaining large project between this—between North Korea and South Korea, which is called the Kaesong Industrial Zone, where Korean companies have set up and North Korean workers produce goods for South Korean companies for export. But they desperately need, you know, integration with both China. Russia is talking about building oil pipelines through the Korean Peninsula that would go through North and South Korea and send oil from—send energy from the southern ports of Korea. There’s a lot of talk about it, but I think that before anything can happen there’s got to be some kind of peace and stability on the peninsula.

AMY GOODMAN: Tim Shorrock, I want to thank you for being with us, independent journalist who has covered Korea for more than 30 years, grew up partly in South Korea. His most recent book, Spies for Hire: The Secret World of Intelligence Outsourcing.

TSA nude scanners might be coming to federal buildings

A traveler undergoes a full body scan performed by Transportation Security Administration agents as she and others pass through the security checkpoint at the Denver International Airport on November 22, 2010 in Denver, Colorado.(AFP Photo / John Moore)

A traveler undergoes a full body scan performed by Transportation Security Administration agents as she and others pass through the security checkpoint at the Denver International Airport on November 22, 2010 in Denver, Colorado.(AFP Photo / John Moore)

The TSA is retiring 250 of their high-tech “backscatter” screening machines in the coming weeks, easing both healthcare and privacy woes from frequent travelers that don’t trust the devices. Are they really going away for good though?

Backscatter makers Rapiscan and the Transportation Security Administration announced the ending of a partnership just last month, and by June 1 the TSA will have removed the space-age body screeners from around 200 airports across the country. In a recent interview with Federal Times, though, TSA spokesperson David Castelveter says that the roughly $40 million worth of machinery could be moved elsewhere to provide airport-style security outside of departure terminals.

“We are working with other government agencies to find homes for them,” Castelveter tells reporter Andy Medici. “There is an interest clearly by DoD and the State Department to use them — and other agencies as well.”

According to Medici, those machines may soon be coming to federal buildings to be used in routine, day-to-day security screenings for both visitors and employees.

Last February, lawmakers in Washington responded to opponents of the machines by demanding that the TSA only implement devices that produce "generic passenger images,” a maneuver they hoped would bring change substantial enough to alleviate the privacy concerns from travelers made uncomfortable by the X-ray-like machines that have earned them the moniker “pornoscanners.” With a deadline looming and Congress’ challenge left unanswered, though, the TSA confirmed last month that their $5 million contract with Rapiscan would be coming to a close and the company’s Secure 1000SP Advanced Imaging Technology (AIT) systems and Automated Target Recognition (ATR) software would be shelved.

“It became clear to TSA they would be unable to meet our timeline,” Karen Shelton Waters, an assistant administer for acquisitions at the agency, told Bloomberg at the time. “As a result of that, we terminated the contract for the convenience of the government.”

Now just weeks after that announcement, Medici’s report suggests that Americans won’t be saying goodbye to the backscatters anytime soon. Although the TSA has removed at least 76 of the machines from airports already and intends on having the other 174 gone by the June 1 deadline, Castelveter wants them elsewhere.

“Hopefully we will be able to deploy them within other government agencies,” he says.

In the January 17 press release from Rapiscan that announces the end of their backscatter deal with the TSA, the company hints at what could be to come regarding other deals.

“As the Secure 1000SP has been operated by TSA as an effective imaging system, TSA plans to deploy these systems, with Rapiscan’s assistance, to U.S. government agencies that already rely on the Secure 1000 product line or can enhance their security programs with the Secure 1000SP,” the presser reads.

Late last year in November, Rapiscan announced on its website that it had been awarded a $15 million contract from an unnamed, “critical US government agency” in order to provide people and baggage scanning technology. Although that write-up declined to name the entity that will work with Rapiscan or what kind of technology will be implemented, it does little to calm the fears of those who worried that invasive airport pat-downs were just the beginning of a bigger trend — a problematic one where Americans are forced to sacrifice privacy for protection.

Rep. Bennie Thompson (D-Mississippi) made a statement last month condemning the use of the devices and insisted “The American public must be assured that these machines will not be used in any other public federal facility.” Bob Burns of the TSA Blog says the units will be “stored until they can be redeployed to other mission priorities within the government.”

Pentagon ‘dumbs down’ aviation tests for underperforming F-35

F-35 JSF fighter jet (AFP Photo/JSF)

F-35 JSF fighter jet (AFP Photo/JSF)

America’s latest stealth fighter jet is too heavy and slow to pass performance tests. Instead of improving the aircraft, the Pentagon has decided to lower its expectations. Experts say the F-35 is more vulnerable than the jet it’s replacing.

Simply put, the F-35 Joint Strike Fighter (JSF) doesn’t go as fast, turn as sharply or handle as gracefully as it should. But instead of bringing in a team of aviation experts to fix the problem, the Pentagon has chosen to accept that the jet underperforms.

In an 18-page annual weapons testing report, the Pentagon outlined changes to its rulebook, which include amending performance specifications and increasing time for acceleration for the JSF. “These changes were due to the results of air vehicle performance and flying qualities evaluations,” the report read.

The JSF’s reduced performance means the aircraft might not be able to compete with the latest Russian and Chinese-made fighters. Even before the downgrades, some analysts questioned the F-35′s ability to defeat newer Sukhoi and Shenyang jets, Wired reported.

The news comes after US taxpayers worked to pay for the stealth fighter program’s $1-trillion price tag – the most expensive in US history. It’s the second time in a year that the US government has eased the performance requirements of the aircraft.

In January, the military granted the F-35 a longer takeoff run than originally required and adjusted the plane’s standard flight profile in order to compensate for some of the flying range lost to increasing weight and drag.

It’s not the first time the F-35 series has faced setbacks. Last month, the F-35B was banned from traveling within 25 miles of a thunderstorm amid fears that lighting could cause its fuel tank to explode.

And last year, the Air Force suspended operation of its fleet of 20 Joint Strike Fighters after they experienced malfunctions – the third time the program was put on hold.

Previous tests revealed a number of problems, including excessive vibration, a malfunctioning high tech helmet display and a flawed tail hook that failed to catch arresting gear wires on aircraft carriers.

As the US government continues to stress its need for a strong military, the F-35 appears to be anything but intimidating, and is believed to be vulnerable than the jet it is replacing.

But the continuous problems faced by the aircraft haven’t stopped the plane’s maker, Lockheed Martin, from praising the fighter jet. The company said the plane is still the second-most maneuverable warplane in existence.

Company test pilot Billy Flynn told Flight Global that the JSF accelerates better and flies at higher angles than every other fighter jet, except Lockheed’s F-22. “The F-35 is comparable or better in every one of those metrics, sometimes by a significant margin,” Flynn said.

But others in the aviation business were quick to challenge Flynn’s comments. A Navy aviator told Wired that Lockheed’s boasts were “fantastical.”

There’s even more bad news for the program: A series of problems with the plane’s software and safety measures indicate that future downgrades to the jet may be on the horizon. The safety problems could force Lockheed Martin to add fire-suppression gear that will only further increase the plane’s weight and decrease its maneuverability, Wired reported.

Several years ago, to save around 50 pounds of weight, aircraft designers removed some fuel safety valves. As a result, the JSF is now 25 per cent more likely to burn if hit in combat, making it “overall more vulnerable [to fire] than most” older warplanes, Director, Operational Test, and Evaluation (DOT&E) spokesperson Jennifer Elzea told Bloomberg.

The Pentagon should tell Lockheed to “immediately reinstall” the valves, Rep. James Moran, a Democrat on the House Defense Appropriations subcommittee, wrote in a letter to the Defense Department earlier this month.

If that happens, more weight will subsequently be added to the fighter jet, likely prompting another revision of the F-35’s performance specs.

The JSF program was launched in 2001, and was designed to be a “one-size-fits-all” approach, with plans to deliver 2,443 planes in different versions for the US Air Force, Navy and Marines.

The program called for launching construction at an early stage, at the same time the aircraft was being put through flight tests. The Pentagon assumed at that time that technical hurdles had been worked out in computer modeling. Instead, technical glitches forced delays in production schedules, resulting in redesigns and cost overruns.

The Pentagon said the JSF will be combat-ready in 2018.

Frontrunning: February 12

  • The Man Who Killed Osama bin Laden... Is Screwed (Esquire)
  • G7 fires currency warning shot, Japan sanguine (Reuters)
  • North Korea Confirms It Conducted 3rd Nuclear Test (NYT)
  • Italian Police Arrest Finmeccanica CEO (WSJ)
  • Legacy, political calendar frame Obama's State of the Union address (Reuters)
  • China joins U.S., Japan, EU in condemning North Korea nuclear test (Reuters)
  • Wall Street Fading as Emerging-Market Banks Gain Share (BBG)
  • Berlin Conference 2.0: Drugmakers eye Africa's middle classes as next growth market (Reuters)
  • Barclays to Cut 3,700 Jobs After Full-Year Loss (BBG)
  • US Treasury comment triggers fall in yen (FT)
  • ECB Ready to Offset Banks’ Accelerated LTRO Payback (BBG)
  • Fed's Yellen Supports Stimulus to Spur Jobs (WSJ)
  • Libor Scrutiny Turns to Middlemen (WSJ)
  • Samsung Girds for Life After Apple in Disruption Devotion (BBG)

Overnight Media Digest

WSJ

* North Korea appeared to have exploded a nuclear device Tuesday, its third experimental detonation in a long effort to build weapons of mass destruction that the U.S. and other countries consider a serious threat.

* Pope Benedict XVI will become the first pontiff in six centuries to resign, marking the end of a transitional papacy that focused more on theological and internal renewal and less on the broader challenges that face the Roman Catholic church at the start of its 21st century of existence.

* U.S. regulators are widening their probe of global interest-rate-rigging by scrutinizing what they claim is a pivotal role of two U.K. brokerage firms in the scandal, people close to the investigation say.

* The regulator that oversees the professional conduct of Britain's accountants has launched a probe into the past financial reports of Autonomy Corp, the U.K. software company that Hewlett-Packard Co purchased for $11 billion in 2011 and later accused of having made outright financial misrepresentations ahead of the deal.

* Hedge-fund manager David Einhorn has proposed that Apple Inc issue a special class of stock that would carry a high dividend yield.

* Nasdaq OMX Group Inc, long on the hunt for a partner, has ramped up its conversations about strategic options ranging from joint ventures to a sale, according to people familiar with the talks, as rival NYSE Euronext moves ahead with a merger that will form an even-bigger competitor.

* U.S. regulators told the world's biggest maker of insulin, Denmark's Novo Nordisk, that they couldn't approve a potential blockbuster diabetes drug, delaying its U.S. introduction and sending the company's shares tumbling.

* Hostess Brands Inc won permission to place a selection of its cake and bread assets, including the Twinkie brand, on the auction block as the baking company continues to sell off its business piece by piece.

FT

EDF Energy is seeking state support to guarantee the new nuclear reactors it plans to build in the UK. EDF is asking the government to underwrite some of the project's financing. Nasdaq OMX Group was in talks with private equity firm Carlyle Group about taking the trans-Atlantic exchange operator private, but the talks broke down because of disagreements over valuation.

Britain's accountancy regulator said it was investigating the financial reports of British software firm Autonomy before it was bought by Hewlett-Packard, a deal that was later subject to accusations of fraud. Goldman Sachs has promoted Gregg Lemkau to jointly head its global mergers and acquisitions (M&A) team.

Telefonica has put off plans to list its Latin American business.

BlackRock sold a large stake in oil services group Saipem - a unit of Italy's Eni, in deal that is under the scrutiny of Italian and British regulators.

Lion Capital, a big investor in Findus - the UK-based frozen food company engulfed in the horse meat scandal, has called on management to explain how the adulteration took place.

Dutch retailer Ahold sold its 60 percent stake in its Nordic joint venture - ICA - to co-owner Hakon Invest for 2.5 billion euros ($3.34 billion) in cash.

NYT

* British accounting regulators said on Monday that they would investigate the financial reporting at the British software maker Autonomy before its $11.1 billion acquisition by Hewlett-Packard Co in 2011.

* Concern over the euro moved to the forefront Monday as finance ministers of the countries using the currency held their monthly meeting. But this time, with the European Union's recession continuing, the topic was the strength of the euro rather than its many weaknesses.

* The Swedish investment company Hakon Invest agreed on Monday to buy the remaining stake in the Nordic retailer ICA it did not already own for $3.1 billion.

* A new 24-hour news and entertainment channel, Fusion, has powerful backers in Univision and ABC News, a unit of the Walt Disney Co, and underscores the growing influence of the burgeoning Hispanic audience.

* Mary Jo White, who has been nominated to run the U.S. Securities and Exchange Commission, has also disclosed that her husband would relinquish his partnership at Cravath, Swaine & Moore, converting his interest in the firm from an equity to non-equity status.

* Pope Benedict XVI's surprise announcement on Monday that he will resign on Feb. 28 sets the stage for a succession battle that is likely to determine the future course of a church troubled by scandal and declining faith in its traditional strongholds around the world.

* It will be four years on Tuesday since the last fatal crash in the United States, a record unmatched since propeller planes gave way to the jet age more than half a century ago. Globally, last year was the safest since 1945, with 23 deadly accidents and 475 fatalities, according to the Aviation Safety Network, an accident researcher.

Canada

THE GLOBE AND MAIL

* The Harper government will not resurrect its controversial Internet surveillance bill, and will not introduce new legislation to monitor the activities of people on the web.

* Former school trustee Liz Sandals inherited one of Ontario's most difficult files Monday, taking on the post of Education Minister and the ambitious task of resolving a dispute with Ontario's teachers and restoring sports teams, clubs and other after-school activities.

Reports in the business section:

* Genivar Inc, one of Quebec's biggest engineering firms, uncovered "inappropriate conduct" after investigating the company's role in financing political parties and bidding on municipal contracts, another sign of corruption in the province's engineering and construction industry.

NATIONAL POST

* A federal report on military procurement to be released Tuesday will recommend bidders be required to explicitly outline how they will spur innovation and long-term economic growth in Canada, a source familiar with the file told the National Post.

FINANCIAL POST

* WestJet Airlines Ltd will launch its new regional carrier Encore in Western Canada this summer starting on June 24, the company said Monday.

* Following the grilling in London last week, outgoing Bank of Canada governor Mark Carney may be in for a second round of tough questioning Tuesday, this time from Canadian Ministers of Parliament.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Alexandria Real Estate (ARE) upgraded to Overweight from Equal Weight at Evercore
Boston Properties (BXP) upgraded to Outperform from Sector Perform at RBC Capital
DCT Industrial (DCT) upgraded to Market Perform from Underperform at Wells Fargo
Digital Realty (DLR) upgraded to Overweight from Equal Weight at Evercore
Gold Fields (GFI) upgraded to Neutral from Sell at Citigroup
J.M. Smucker (SJM) upgraded to Outperform from Market Perform at Bernstein
Nortel NetApp (NTAP) upgraded to Buy from Hold at Brean Capital
Novo Nordisk (NVO) upgraded to Buy from Neutral at Nomura
Royal Gold (RGLD) upgraded to Buy from Neutral at UBS
Suburban Propane (SPH) upgraded to Buy from Neutral at BofA/Merrill
Walgreen (WAG) upgraded to Buy from Neutral at Mizuho

Downgrades

Boyd Gaming (BYD) downgraded to Sell from Neutral at Goldman
Capstead Mortgage (CMO) downgraded to Market Perform from Outperform at JMP Securities
Corporate Office (OFC) downgraded to Equal Weight from Overweight at Evercore
Cubic (CUB) downgraded to Hold from Buy at Benchmark Co.
Facebook (FB) downgraded to Market Perform from Outperform at Bernstein
General Growth (GGP) downgraded to Underperform from Sector Perform at RBC Capital
Macerich (MAC) downgraded to Sector Perform from Outperform at RBC Capital
Piedmont Office (PDM) downgraded to Underperform from Outperform at RBC Capital
Qualcomm (QCOM) downgraded to Neutral from Overweight at JPMorgan
Questar (STR) downgraded to Neutral from Buy at UBS

Initiations

Cincinnati Bell (CBB) initiated with a Hold at Deutsche Bank
CyrusOne (CONE) initiated with a Buy at Deutsche Bank
CyrusOne (CONE) initiated with a Neutral at BofA/Merrill
Idenix (IDIX) initiated with a Neutral at RW Baird
Legacy Reserves (LGCY) initiated with an Overweight at Barclays
Manchester United (MANU) initiated with an Outperform at Raymond James
Navios Maritime Partners (NMM) initiated with a Buy at Citigroup
Theravance (THRX) initiated with an Outperform at RW Baird

HOT STOCKS

Barclays (BCS) to reduce headcount by at least 3,700 this year
Rexnord (RXN) hired Goldman Sachs (GS) to explore possible sale
JANA Partners rejected Agrium's (AGU) settlement offer, director appointments
Arris (ARRS), Google (GOOG) received second DOJ request for more information about Arris' proposed acquisition of Motorola Home business from Google
American Express (AXP), Twitter signed online purchasing agreement
Procter & Gamble (PG), Verix Business initiated strategic partnership
VMware (VMW) acquired Virsto, terms not disclosed
Groupon (GRPN) acquired MashLogic, terms not disclosed
Laclede Group (LG) announced sale of New England Gas Co. (SUG) to Algonquin Power
Masco (MAS) sees “repair and remodel” to grow modestly in FY13
Titan International (TWI) announced offer for Wheels of India
Nielsen (NLSN) initiated dividend policy, declared 16c per share dividend

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Otter Tail (OTTR), American Financial Group (AFG), Masco (MAS), Nielsen (NLSN), Tesoro Logistics (TLLP), Lionsgate (LGF)

Companies that missed consensus earnings expectations include:
Owens & Minor (OMI), Dun & Bradstreet (DNB), Rexnord (RXN), Danaos (DAC), tw telecom (TWTC), Cubic (CUB)

Companies that matched consensus earnings expectations include:
DynaVox (DVOX)

NEWSPAPERS/WEBSITES

  • Fed Vice-Chairwoman Janet Yellen offered a vigorous defense of the central bank's easy-money policies, suggesting she favors continuing them amid a slow economic recovery and disappointing job market, the Wall Street Journal reports
  • Behind David Einhorn's protestations on Apple (AAPL) is a novel way to return cash to shareholders. Einhorn, of hedge fund Greenlight Capital, proposed that Apple issue a special class of stock, which he called "perpetual preferred," that would carry a high dividend yield. But with some investors feeling more confident about the future, shareholder pressure is growing to put that cash to work, the Wall Street Journal reports
  • The NTSB is investigating whether tiny fiber-like formations, known as dendrites, inside lithium-ion batteries could have played a role in battery failures on two Boeing (BA) 787 Dreamliners last month, Reuters reports
  • The shifting nature of Africa’s disease burden is luring Big Pharma (SNY, GSK) as new opportunities open up for treating chronic diseases afflicting the middle classes, rather than just fire-fighting infection.European companies, in particular, hope to reap rewards by investing early in a region where many of them already have historic commercial ties, Reuters reports
  • Global investment banks based in Europe and the U.S., facing regulatory and cost-cutting pressures at home, are losing market share (CS, MS, C) in emerging economies to smaller domestic competitors, Bloomberg reports
  • In 2007, Wal-Mart Stores (WMT) planned to open as many as 2,000 in-house medical clinics by mid-2012. Today, they have fewer than 130 clinics and is closing locations faster than it’s opening them. CVS Caremark (CVS) has about 630 MinuteClinics and aims to have 1,500 within four years, Bloomberg reports

SYNDICATE

ARCA Biopharma (ABIO) files to sell 3.48M shares of common stock for holders
American Capital Mortgage (MTGE) to offer 18M shares of common stock
ConnectOne Bancorp (CNOB) 1.6M share IPO priced at $28.00
DryShips (DRYS) announces offering of 5M common shares of Ocean Rig UDW
Gulfport Energy (GPOR) 7.75M share Secondary priced at $38.00
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Iran, India to collaborate on book fairs

Iran’s Cultural Fairs Institute and India’s National Book Trust (NBT) have signed an agreement to expand their cooperation on international book fairs and marketing.

The agreement was inked during the New Delhi World Book Fair, which was mounted from February 4 to 10.

A number of Iranian publishers participated in the fair and introduced different books in various genres.

Iran’s Cultural Fairs Institute offered over 600 books and software in the field of Iranology, children and young adults, and religion during the fair.

The 2013 New Delhi World Book Fair dedicated its Particular Mention to
Iran’s Cultural Fairs Institute during a meeting held on the sidelines of the event.

India, as the world’s third largest producer of books in English language, is planning to bring book export into its international trade priorities.

FGP/FGP

Iran, India to collaborate on book fairs

Iran’s Cultural Fairs Institute and India’s National Book Trust (NBT) have signed an agreement to expand their cooperation on international book fairs and marketing.

The agreement was inked during the New Delhi World Book Fair, which was mounted from February 4 to 10.

A number of Iranian publishers participated in the fair and introduced different books in various genres.

Iran’s Cultural Fairs Institute offered over 600 books and software in the field of Iranology, children and young adults, and religion during the fair.

The 2013 New Delhi World Book Fair dedicated its Particular Mention to
Iran’s Cultural Fairs Institute during a meeting held on the sidelines of the event.

India, as the world’s third largest producer of books in English language, is planning to bring book export into its international trade priorities.

FGP/FGP

Apple, Microsoft and Adobe face Australian parliamentary probe

Customers check the latest technology in an Apple retail store in central Sydney. (AFP Photo / Greg Wood)

Customers check the latest technology in an Apple retail store in central Sydney. (AFP Photo / Greg Wood)

Apple, Microsoft and Adobe have been summonsed to appear before the Australian parliament at a hearing into why the tech firms sell their goods to local consumers at higher prices than in the US.

­The parliamentary committee for infrastructure and communications announced that a public hearing will be held on March 22nd in Canberra.

"The Committee is looking at the impacts of prices charged to Australian consumers for IT products – Australian consumers often pay much higher prices for hardware and software than people in other countries," the committee said. "The Committee has been examining claims made by organizations such as CHOICE, and the Australian Communications Consumer Action Network."

"In what's probably the first time anywhere in the world, these IT firms are now being summoned by the Australian parliament to explain why they price their products so much higher in Australia compared to the United States," said ruling Labor government MP Ed Husic, who helped set up the committee.

Australian “people’s watchdog”, CHOICE found that Australians pay on average 34% more for software, 52% more for iTunes music, 88% more for Wii games and 41% for computer hardware than US consumers, their official website states. The research indicated that the majority of these price discrepancies were likely due to price discrimination from large international firms.

Mehdi’s Morning Memo: ‘International Criminal Conspiracy’

The ten things you need to know on Monday 11 February 2013...

1) 'INTERNATIONAL CRIMINAL CONSPIRACY'

Could the scandal over horsemeat in our food end up being as big as the BSE controversy? From the Sun:

"Environment Secretary Owen Paterson said intensive tests are urgently being carried out on horsemeat found in supermarket ready meals.

"He warned: 'We may find out as the week progresses, and the tests begin to come in, there is a substance which is injurious to human health.'

"But Mr Paterson, who will make a Commons statement today, admitted EU rules mean Britain CANNOT ban meat from other European countries — unless there is clear proof of a health risk.

"Mr Paterson said the scandal was the result of 'an international criminal conspiracy'."

2) SOCIAL CARE

The social care funding story is the splash in the Times ("Families to 'foot bill for cost of care for elderly'") and the Telegraph ("Cameron abandons inheritance tax pledge").

The Telegraph reports:

"George Osborne, the Chancellor, will announce that the level at which inheritance tax becomes payable will be frozen at £325,000 until at least 2019 to fund reform of the social care system.

"The decision will mean that the owners of an average home across much of southern Britain and large areas elsewhere will be liable for inheritance tax. Critics said it was effectively a 'double tax' as it was a levy on assets already raided by the taxman and accused the Treasury of 'picking people’s pockets'."

Meanwhile, the Guardian reports on a warning from the opposition:

"The average person in social care will not benefit from raising the cap on care home costs to £75,000, Labour has warned.

"As the government pledged to end the 'scandal', in which people have to sell their home to pay for social care, the shadow social care minister, Liz Kendall, said most people would die before they could benefit from the new cap.

"Jeremy Hunt will announce on Monday that the government will introduce a £75,000 cap on the costs of social care – excluding the costs of accommodation and food – in April 2017. The health secretary will also raise the threshold on assets below which patients are eligible for state help, from £23,000 to £123,000. The cap is to be funded by freezing the threshold for inheritance tax."

3) VOTE YES, SIGN 14,000 TREATIES

Some bad news for Alex Salmond and co - from the Independent:

"A breakaway Scotland would be a 'new state' under international law and have to renegotiate membership of the European Union and the United Nations, according to legal advice obtained by the Government.

"The monumental challenges facing a newly independent Scotland are disclosed in a 57-page dossier published today that represents London's opening shot against separation.

"The paper claims that Scottish ministers would need to wade through 14,000 separate treaties that have been signed by the United Kingdom, and apply afresh to join international bodies.

"... The new legal advice was drawn up by Professor James Crawford, of Cambridge University, and Professor Alan Boyle, of Edinburgh University, who are experts on international law.

"'If Scotland became independent, only the remainder of the UK would automatically continue to exercise the same rights, obligations and powers under international law as the UK currently does,' they say."

The SNP's response? "This is an act of breath-taking arrogance by this Tory-led UK Government, which completely shatters their claim that Scotland is an equal partner within the existing UK – it will only serve to boost support for an independent Scotland," said Scotland's Deputy First Minister, Nicola Sturgeon.

Bring on the referendum campaign, eh?

4) SLEEPY MIKE VS TORIES' SARAH PALIN

The Eastleigh by-election campaign is heating up - from the Daily Mail:

"Within hours of Liberal Democrat Mike Thornton being chosen to fight disgraced ex-Cabinet minister Chris Huhne's Eastleigh constituency, a photograph emerged of him apparently asleep on the job.

"The picture which seems to show Mr Thornton nodding off, was taken at a council meeting in 2011. As that photograph was gleefully circulated by opponents, the local Lib Dems moved quickly to delete from their website pictures they deemed far more damaging - showing the councillor with Mr Huhne, who quit Parliament after admitting he lied to police to escape a driving ban."

The paper adds:

"Mr Thornton, married with a 19-year-old daughter, faces a challenge from a Tory described as her party's 'answer to Sarah Palin'.

"Maria Hutchings has been likened to the controversial US Republican politician because of her robust views on issues such as gay marriage and immigration, which potentially put her at odds with Conservative leadership."

Deputy prime minister and Lib Dem leader Nick Clegg will be visiting Eastleigh today and has conceded that, due to a diary clash, he could, at some stage soon, end up campaigning in the constituency on the same day as the prime minister.

5) 'APPALLING WASTE OF PRECIOUS MONEY'

Yet another report from the Public Accounts Committee - where do its members find the time? From the Sun:

"Millions of pounds in foreign aid is being squandered on fat cat consultants and wasteful bodies, a report by MPs warns.

The Department for International Development is blasted for shelling out £37million to advisory firm Adam Smith International.

"The company paid a £1MILLION dividend to managing director William Morrison — along with pay and perks of more than £250,000.

"Commons Public Accounts Committee chairman Margaret Hodge said: 'That feels like an absolutely outrageous and appalling waste of this very precious money.'"

BECAUSE YOU'VE READ THIS FAR...

Watch this video of a disabled 4lb piglet who, because he has no use of his back legs, now gets around on a dog style wheelchair. Bizarre.

6) MIGRANT WARS

The Times (under the headline: "Influx of Romanian migrants 'threatens to cause social unrest'") says:

"As Britain prepares for an influx of Romanians and Bulgarians next year, schools in poorer parts of Germany are already struggling to cope with arrivals from the two states.

"Germans warn that 'social peace' is being endangered and British ministers are looking at ways to deter migrants heading to the UK."

Meanwhile, the Independent (under the headline: "Not coming here. Not stealing our jobs") reports:

"Right-wing politicians and media are stoking fears that Romanian Gypsies plan to flock to Britain. But the reality is very different..."

7) GIVE ME YOUR RICH, YOUR WEALTHY, YOUR CHINESE MASSES...

Forget Romanians and Bulgarians. It's the Chinese that we really want to come over here. Why do you think that is?

From the Telegraph front page:

"Britain can and must do more to attract educated and wealthy immigrants, and 'inflexible' visa rules are threatening to undermine the economy, the Business Secretary warned today.

"In an article for The Daily Telegraph, Vince Cable said 'Britain simply can’t afford to miss out' on wealthy Chinese immigrants and tourists deterred by red tape.

"His intervention makes public an increasingly acrimonious Cabinet row over the immigration system – particularly as it is applied to Chinese applicants."

8) LIB-LAB FOOTSIE UNDER THE TABLE

Cable is going all out to impress his Tory colleagues, it seems. From the Sun:

"Nick Clegg and Vince Cable have admitted they have a 'sensible businesslike relationship' with Ed Miliband and his Shadow Cabinet.

"In a move that will anger Tory MPs, Mr Cable said senior Lib Dems had discussed long-term policies, including pensions and industrial strategy, with their Labour counterparts. Asked if Mr Clegg and he spoke to Labour's hierarchy, Mr Cable said: 'Well, I think both of us do. I think the public would find this very narrow, tribal way of looking at politics very unhelpful — of course you've got to talk to opposition people.'"

9) 'GOOGLE FOR SPIES'

That's the headline to a rather disturbing story on the Guardian front page:

"A multinational security firm has secretly developed software capable of tracking people's movements and predicting future behaviour by mining data from social networking websites.

"A video obtained by the Guardian reveals how an "extreme-scale analytics" system created by Raytheon, the world's fifth largest defence contractor, can gather vast amounts of information about people from websites including Facebook, Twitter and Foursquare.

"Raytheon says it has not sold the software - named Riot, or Rapid Information Overlay Technology - to any clients. But the Massachusetts-based company has acknowledged the technology was shared with US government and industry as part of a joint research and development effort, in 2010, to help build a national security system capable of analysing "trillions of entities" from cyberspace."

10) DAVE'S INSPIRATION?

Remember when David Cameron announced, at the October 2011 Conservative Party conference: "I don't support gay marriage despite being a Conservative. I support gay marriage because I'm a Conservative"?

Writing in the Daily Mail, Andrew Pierce says:

"The words bear an uncanny resemblance to the writings of Peter Tatchell... In his blog at the beginning of October 2011, Tatchell wrote: 'If marriage is a Conservative value, then same-sex marriage is consistent with this value. Far from undermining marriage, gay marriage strengthens it. Conservatives believe in marriage. They should therefore support same-sex marriage precisely because they are Conservatives.' The Prime Minister spoke only days later. Tatchell is convinced he is the source. 'That line about "I believe in gay marriage because I'm a Conservative" came directly from what I wrote,' he says.

"Downing Street will deny it, of course. But who would have thought that Peter Tatchell, who left the Labour Party because it was not Left-wing enough, and is now a member of the Greens, could be the muse for a Conservative Prime Minister?"

PUBLIC OPINION WATCH

From yesterday's Sunday Times/YouGov poll:

Labour 41
Conservatives 32
Lib Dems 11
Ukip 9

That would give Labour a majority of 96.

140 CHARACTERS OR LESS

@oflynnexpress Today prog should arrange radio debate between London mayor who wants a fox cull and Telegraph columnist who says don't blame foxes...

@NicolaSturgeon UK gov legal expert says on Radio 4 that Scot Gov's timescale for independence is realistic and that treaty accession wouldn't be problem.

@iankatz1000 Former food boss Lord Haskins says on @BBCr4today Findus was under pressure to cut costs because of private equity ownership

900 WORDS OR MORE

Tim Montgomerie, writing in the Times, says: "Tories must keep talking about family values."

Gary Younge, writing in the Guardian, says: "Barack Obama is pushing gun control at home, but he's a killer abroad."

Daniel Trilling, writing in the Mirror, says: "The rebranding of fascism: We need to be vigilant against the far right racists."


Got something you want to share? Please send any stories/tips/quotes/pix/plugs/gossip to Mehdi Hasan (mehdi.hasan@huffingtonpost.com) or Ned Simons (ned.simons@huffingtonpost.com). You can also follow us on Twitter: @mehdirhasan, @nedsimons and @huffpostukpol

Guest Post: Note To Fed: Giving The Banks Free Money Won’t Make Us Hire...

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Lowering interest rate and making credit abundant doesn't make employers hire more workers.

The Federal Reserve's policy of targeting unemployment is based on a curious faith that low interest rates and lots of liquidity sloshing around the bank system with magically lead employers to hire more workers. I say this is a curious faith because it makes no sense. In effect, the Fed policy is based on the implicit assumption that the only thing holding entrepreneurs and employers back from hiring is the cost and availability of credit.

But as anyone in the actual position of hiring more staff knows, it is not a lack of cheap credit that makes adding workers unattractive, it is the lack of opportunities to increase profit margins by adding more workers.

If the economic boom of the mid-1980s proves anything, it is that the cost of credit can be very high but that in itself does not restrain real growth. What restrains growth is not interest rates, it is opportunities to profitably expand operations.

What the Fed cannot dare admit is that in a crony-capitalist, globalized, State/cartel-dominated economy, there are few profitable opportunities, regardless of the cost of credit. Yes, there is a natural-gas boom in the Dakotas, but outside of energy plays the harsh reality is that the only way for most businesses to increase profits is reduce labor, not hire more workers.

The second survival tactic is to lower labor costs by recycling full-time, full benefits jobs into part-time or lower-paid jobs. Rather than pay insanely high healthcare premiums on full-time jobs, businesses lay off full-benefit workers and replace them with a mix of part-time workers who receive no benefits or contract workers who handle their own healthcare costs.

There is another way to recycle jobs to reduce costs: fire a $90,000/year employee and hire someone for $60,000 to do the same job. Mish has shown that virtually all the gain in employment since the start of the "recovery" is in the 55+ age group: Startling Look at Job Demographics by Age (Mish)

Older workers often complain that they have been replaced with "cheaper" younger workers who will work for less, but the real trend to is to hire higher-productivity workers for less pay. In most cases, as revealed by the above chart, the older workers are higher productivity for a number of self-evident reasons: they won't take maternity leave, they know their work well and have proven a work ethic that younger workers may not have had the opportunity to prove.

It is difficult to transition to a new career or get a job as an inexperienced worker for the reason that employers want someone who can be productive on Day One. Sadly, it is too costly and risky to take chances with on-the-job training or mentoring; it is lower-risk to find someone who can do the work immediately.

Older workers' healthcare insurance costs are skyhigh, but the solution is to hire older workers as consultants and push the costs of healthcare onto them. In many cases, older workers are covered by a spouse's insurance, so they can afford to take a job that offers no benefits.

The other trend the Fed cannot dare recognize is that cheap credit enables employers to reduce labor by investing in automation and software. If opportunities are scarce (and they are), or if the business is hanging on by a thread, then hiring more employees is the last thing an employer would do to boost productivity: the solution is reduce headcount and invest in tools that make the remaining employees more productive.

We can see this reality in the following charts: full-time employment has returned to levels reached 13 years ago, but median wages are lower, reflecting the "recycling" described above.

Meanwhile, labor's share of the non-farm private economy has fallen off a cliff, along with money velocity, which measures the relative activity of cash and credit:

So exactly what mechanism is the Fed trying to boost with super-low interest rates and massive liquidity (free money) in the banking sector? Answer: push businesses into high-risk ventures.

Federal Reserve Bank of Chicago President Charles Evans: “The investment climate seems to be one where people are increasingly understanding that very low interest rates on super safe assets are going to be around for a while. And if they’re worried by that they need to take on more risk - and taking on that more risk will help get the economy growing.”

In other words, the Fed's policy is to push for more mal-investment. There is no other way to describe the flow of money into risky, marginal ventures.

Note to Fed: there is too much of everything. Too many restaurants, too many apps, too many empty dwellings (19 million at last count), too many malls, too many nail salons. There is too much junk for sale everywhere, from retail outlets to online to jumble/garage sales. The developed world is awash in overcapacity in every sector other than a relative handful of special equipment/services (deep-ocean drilling rigs, etc.)

Pushing businesses to borrow money to gamble in risky ventures is precisely what happened in Japan in the late 1980s. With interest rates low and credit in abundance, bank reps went around to enterprises small and large begging them to borrow money for essentially any reason.

The net result: massive bubbles across asset classes and an overhang of debt that remains 20+ years later, as unpayable now as it was in 1992. That is the result of pushing enterprises into risk-on bets: bubbles and collapses.

What those with access to the Fed's free money--big banks and hedge funds--are doing with the zero-cost credit is invest in rentier skimming operations: buying 5,000 single family homes, buying $1 billion in apartments and homes to rent out, etc.

“It’s hard to find a private-equity firm on the planet that doesn’t have a strategy in this space,” Gary Beasley, chief executive officer at Waypoint Homes, said last week at the American Securitization Forum’s annual conference in Las Vegas. The Oakland, California-based company has bought homes in California, Arizona, Illinois and Georgia.

How many jobs are created by rentier skimming? Very few. Get the houses painted, hire a few handypeople to take care of maintenance and a few people to handle the property management.

The other way to make money with nearly-free credit is to chase risk-on assets, for example stocks. Why would any hedge fund or bank trading desk with easy access to the Fed's free money bother taking risks in the real economy which is burdened with massive over-capacity and sclerotic State-mandated cartels (healthcare, defense, etc.) when the easy money is in chasing assets higher?

How many jobs are created by chasing assets higher? Maybe the Fed thinks that high-end Manhattan restaurants will add staff to handle the influx of new money skimmed from the stock and bond markets, but if they think rentier/speculative skimming is going to add millions of jobs to the economy, they are delusional.

Perhaps if any of the Fed governors had ever operated a real business in the real economy, the board might have a somewhat better grasp on reality.

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On the News With Thom Hartmann: The Fight for Election Reform Got Some Huge...

In today's On the News segment: The fight for election reform got some huge support; Ohio Gov. John Kasich has joined the growing list of Republican governors trying to screw poor people in their states; Sen. Bernie Sanders took a stand against corporate greed by introducing his newest piece of legislation, the Corporate Tax Fairness Act; and more.


TRANSCRIPT:

Thom Hartmann here – on the news...

You need to know this. Yesterday, Senator Bernie Sanders took a stand against corporate greed, by introducing his newest piece of legislation, the Corporate Tax Fairness Act. And now, Rep. Jan Schakowsky has announced that she too, is fighting in the House to make corporations pay their fair share. The Corporate Tax Fairness Act will stop corporations from sheltering income in the Caymen Islands, and ends tax breaks for companies that ship our jobs overseas. Richard Trumpka, president of AFL-CIO said this legislation "would increase investment, employment, and wages in the United States." According to the Joint Committee on Taxation, this bill would raise more than $590 billion in revenue over the next decade – eliminating the need for nearly half the proposed austerity looming in the sequester. And it's the best way to keep – and create – American jobs. It's time to make corporations pay their fair share for the benefits of using our commons, and for making huge profits off hard-working Americans. Call your senators, and your representative, and tell them to support the Sanders-Schakowsky Corporate Tax Fairness Act.

In screwed news...Ohio Governor John Kasich has joined the growing list of Republican governors trying to screw poor people in their states. Kasich is pushing a plan to reduce income taxes for rich people in his state, and cut the business tax rate in half, while replacing the revenue by raising the state sales tax. This seems to be the newest Republican "screw-the-poor" fad, as Governors in Red States all over our country, like Bobby Jindal of Louisiana, Dave Heineman of Nebraska, and Sam Brownback of Kansas, are all pushing this regressive tax scheme. As poor and working people typically spend 100% of their disposable income, an increase in sales tax hurts those who can least afford it. As the Think Progress Blog points out, Kasich's plan would raise taxes on the poorest 60% of the states residents, while giving the wealthiest 1% in the state an average tax cut of over $10,000. As state budget cuts are already devastating many of the social programs that poor people in these states rely on, an additional tax increase will only make it more difficult for them to survive. The wealthy don't need more tax breaks. It's time for Republican governors like John Kasich to start working for all of the people in their states - not just their largest campaign donors.

In the best of the rest of the news...

Today, the fight for election reform got some huge support. One of the nation's largest teachers unions, the National Education Association, is pushing President Obama to prioritize protecting our democratic process. In a letter to Obama, NEA president, Van Roekel said, "We must correct this threat to our democracy by ensuring: 1) universal voter registration; 2) equitable administration by state of voting procedures and access to the polls; and 3) that we curb the influence of money in politics that has resulted from the infamous Citizens United decision." That pretty much says it all. Republicans around our nation gave voter-suppression their all in 2012, and already in 2013, we've seen scheme after scheme to rig the next election. It isn't surprising that those responsible for crafting the leaders of our future, recognize the importance of protecting our nation's historic democratic principles. Mr. Roekel's ideas are a great starting point in the fight to protect our democracy... but let's go even further. Take the election-rigging ability away from Republican governors and legislators by moving to a national popular vote. Go toNationalPopularVote.com.

In Australia – unsubsidized renewable energy is now cheaper than fossil fuels. A new study by Bloomberg New Energy Finance found that wind farms in Australia are supplying energy at $80/MWh, while coal plants are more costly, at $143/MWh. As the chief executive at Bloomberg New Energy Finance said, "The perception that fossil fuels are cheap, and renewables are expensive, is now out of date." It's actually been out of date for a while if you account for all the externalities of fossil fuels – from diseases to war – that are being paid for by taxpayers instead of by oil companies. It's time for a Manhattan Project for renewable energy right here in America.

Seattle residents won't be stalked from the sky. In an announcement today, Mayor Mike McGinn said the Seattle police department will not use two small surveillance drones it obtained through a federal grant. In a brief statement, Mayor McGinn said "I spoke with Seattle Police Chief John Diaz, and we agreed that it was time to end the unmanned aerial vehicle program, so that SPD can focus its resources on public safety and the community building work." This is a huge victory for privacy advocates, who've been protesting the proposed use of drones, as the program would have allowed police to use facial recognition software during surveillance. Seattle is the second city to announce this week that drones won't be spying on residents. On Monday, Charlottesville, Virginia passed a resolution imposing a two-year moratorium on drone use. Our Constitution guarantees the right of privacy, and it's nice to know that some of our leaders still understand that.

And finally...who knew that former President George W. Bush enjoyed painting himself in the nude? The Smoking Gun is in possession of several images it claims were hacked from personal emails belonging to people close with the Bush family. And those emails contain a number of paintings that were allegedly done by the former President himself. Two of the paintings depict Bush bathing – one in the shower and one in the bathtub. A third picture shows Bush hard at work over a canvas painting a church. A hacker names "Guccifer" is claiming responsibility for the stolen emails – and he says there's more to come. It's rumored that Bush plans to sell his painting – and any proceeds will go to his war crimes legal defense fund.

And that's the way it is today – Friday, February 8th, 2013. I'm Thom Hartmann – on the news.

Frontrunning: February 6

  • Tunisian opposition politician shot dead, protests erupt (Reuters)
  • China says extremely concerned after latest North Korea threats (Reuters)
  • Postal Service to cut Saturday mail to trim costs (AP)
  • Debt Rise Colors Budget Talks (WSJ)
  • Obama proposes short-term budget fix, Republicans swiftly object (Reuters)
  • S&P Analyst Joked of Bringing Down the House Before Crash (BBG)
  • Dell’s Bigger Challenge Ahead in Turnaround After Buyout (BBG)
  • Some of the Mark Carney Gloss Is Coming Off (WSJ)
  • Japan Official Says BOJ Tools Sufficient as Shake-Up Looms (BBG)
  • S&P Lawsuit Undermined by SEC Rules That Impede Competition (BBG)
  • Heavy Clashes Erupt in Syrian Capital (WSJ)
  • Carmakers Use Aluminum Over Steel in Boost for Rio (BBG)
  • Beijing vows to raise minimum wages (FT)
  • China Port Operators Step Up Overseas Investment (WSJ)

Overnight Media Digest

WSJ

* A slowly improving U.S. economy and recently enacted tax increases will help bring down the federal deficit for the next few years, the Congressional Budget Office said Tuesday, but it will take another $2 trillion in belt-tightening over the next decade to begin to move the federal debt closer to historic levels.

* The U.S. government wants Standard & Poor's Ratings Services to pay more than $5 billion - roughly what its parent company has earned in the past seven years - for giving its seal of approval to bundles of subprime mortgages that eventually crumbled, costing investors billions and helping sink the economy.

* Nasdaq OMX Group's missteps during last year's debut of Facebook Inc shares cost Wall Street an estimated $500 million. In the end, U.S. securities regulators may end up fining the exchange group 1 percent of that.

* Pinterest is in talks to raise a new round of financing that would value the online scrapbooking site at $2 billion to $2.5 billion.

* Regulators leading the world-wide probe into rate-rigging allegations are expected to announce Wednesday a settlement of around 400 million pounds ($626.72 million) with Royal Bank of Scotland, according to people close to the investigation.

* John Malone's international cable business Liberty Global Inc has agreed to acquire U.K. cable-television and Internet provider Virgin Media Inc for $16 billion, in a deal that may create a stronger rival to market leader British Sky Broadcasting Group Plc.

* Walt Disney Co's net income weakened in the latest quarter, even as revenue grew, reflecting slimmer profits at the movie studio, where home-video titles were less lucrative than those released in the final months of 2011.

* Chipotle Mexican Grill Inc and Panera Bread Co have posted solid results even as traditional fast-food chains like McDonald's Corp and Yum Brands Inc are struggling with waning consumer confidence.

FT

John Malone's Liberty Global Inc struck a deal to buy British cable group Virgin Media for $23.3 billion in a cash and stock deal, a move that would put the U.S. billionaire up against old rival Rupert Murdoch.

Michael Dell struck a deal to take Dell Inc private for $24.4 billion in the biggest leveraged buyout since the financial crisis, partnering with the Silver Lake private equity firm and Microsoft Corp to try to turn around the struggling computer company without Wall Street scrutiny.

Business secretary Vince Cable is expected to revive a radical plan to return state-owned Royal Bank of Scotland to private sector hands by distributing free shares to the public.

BP Plc is facing demands of more than $34 billion in damages from states and local government in the United States over its 2010 Deepwater Horizon disaster. The claims could significantly increase its potential bill for the Gulf of Mexico spill.

Swiss bank UBS said it was cutting bonus payments to its staff in a move to appease regulators and investors and recoup a large part of its $1.5 billion Libor fine.

Boeing said it sought permission from U.S. aviation authorities to start test flights of its 787 Dreamliner jet as part of its effort to identify the cause of battery failures that forced the plane to be grounded.

European aerospace and defence company EADS plans to bring an American on its board for the first time as the company plans to boost its credentials in the lucrative US market. The Airbus parent has nominated Ralph Crosby, a former executive at Northrop Grumman, to join its board.

Jim O'Neill, chairman of Goldman Sachs' asset-management division and the man who coined the acronym 'BRIC', will retire from the bank later this year.

NYT

* Court documents offer a look at the inner workings of Standard and Poor's, which the U.S. government says inflated credit ratings with dire consequences for the entire economy.

* Dell Inc, seeking to revive itself after years of decline, said on Tuesday it had agreed to go private in a deal led by its founder and the investment firm Silver Lake.

* U.S. President Barack Obama on Tuesday called on Congress to quickly pass a new package of limited spending cuts and tax increases to head off substantial across-the-board reductions to domestic and military spending set to begin on March 1, but his appeal for more revenue was dismissed by Republicans.

* Liberty Global Inc, the international cable company owned by American billionaire John Malone, agreed on Tuesday to buy the British cable company Virgin Media Inc for about $16 billion.

* Law firm Debevoise & Plimpton's move to get out of the estate-planning business comes as the legal industry continues to emphasize more profitable practices.

* Twitter confirmed on Tuesday that it was acquiring Bluefin Labs, a company that analyzes online chatter about TV shows and companies and sells its findings.

* Jim O'Neill, the economist who a decade ago coined the term "BRICs" - the acronym for the emerging growth economies in Brazil, Russia, India and China - plans to retire from Goldman Sachs Group Inc later this year, the firm announced on Tuesday.

Canada

THE GLOBE AND MAIL

* The Canadian government is prepared to knock holes in the hefty tariff walls shielding dairy producers from foreign competition and admit more European cheese into the country in return for greater access to EU markets for Canada's beef and pork.

* The Conservative government is preparing to commit long-term cash for infrastructure in its 2013 budget in an effort to squeeze more projects - including partnerships with the private sector - out of limited public funds.

Reports in the business section:

* Suncor Energy Inc has taken a writedown of nearly C$1.5 billion on its Voyageur project, a massive oil sands plant that is now at serious risk of cancellation.

* Kathleen Taylor spent years preparing for the top job at Four Seasons Hotels Ltd, but the company said on Tuesday that she will be replaced only three years after she finally sat down in the corner office.

NATIONAL POST

* Prime Minister Stephen Harper would seek a constitutional amendment to give the House of Commons primacy over any future elected Senate, said Harper's point-person on reform in the Senate.

FINANCIAL POST

* Car loans drove Canadians to record debt in the fourth quarter of 2012 as the pace of consumer borrowing began to pick up after a brief lull, according to a survey released on Tuesday.

China

CHINA SECURITIES JOURNAL

-- Top Chinese steel maker Baoshan Iron & Steel Co said it had so far bought back 424 million shares in response to a regulatory call last year for listed companies to buy back their own shares to support the stock market.

CHINA DAILY (www.chinadaily.com.cn)

-- Chinese health authorities have launched a campaign to address abusive practices in the country's growing assisted reproductive technology industry.

-- Beijing weather authorities have launched a "fireworks index" to inform residents celebrating the upcoming Spring Festival holiday whether conditions are appropriate for setting off fireworks.

SHANGHAI DAILY

-- Ten people who illegally detained citizens trying to take complaints to the central government have been jailed. The defendants allegedly intercepted people coming to Beijing to complain about land seizures. The practice is believed to be common in China, the report said.

-- Clothing retailer H&M has been fined by the Shanghai city market watchdog for selling substandard shoes.

PEOPLE'S DAILY

-- China will announce the names of the 10 most polluted cities in the country every month, said Wu Xiaoqing, vice minister of environmental protection.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Allergan (AGN) upgraded to Outperform from Market Perform at JMP Securities
Carlyle Group (CG) upgraded to Buy from Neutral at Citigroup
Dell (DELL) upgraded to Neutral from Sell at Citigroup
Express (EXPR) upgraded to Overweight from Neutral at JPMorgan
Gannett (GCI) upgraded to Buy from Neutral at Citigroup
Marsh & McLennan (MMC) upgraded to Buy from Neutral at Goldman

Downgrades

Arch Coal (ACI) downgraded to Neutral from Overweight at JPMorgan
Ashford Hospitality (AHT) downgraded to Neutral from Outperform at RW Baird
C.H. Robinson (CHRW) downgraded to Underperform from Buy at BofA/Merrill
Centene (CNC) downgraded to Neutral from Buy at Citigroup
Charter (CHTR) downgraded to Market Perform from Outperform at Raymond James
Expedia (EXPE) downgraded to Sector Perform from Outperform at RBC Capital
Hologic (HOLX) downgraded to Neutral from Buy at BofA/Merrill
Intercontinental Hotels (IHG) downgraded to Neutral from Outperform at RW Baird
Marcus (MCS) downgraded to Neutral from Outperform at RW Baird
McClatchy (MNI) downgraded to Neutral from Buy at Citigroup
Minerals Technologies (MTX) downgraded to Neutral from Overweight at JPMorgan
Pebblebrook Hotel (PEB) downgraded to Neutral from Outperform at RW Baird
SandRidge Permian Trust (PER) downgraded to Sector Perform at RBC Capital
Silgan Holdings (SLGN) downgraded to Neutral from Buy at Citigroup
Sirius XM (SIRI) downgraded to Neutral from Outperform at Macquarie
Sohu.com (SOHU) downgraded to Neutral from Outperform at Macquarie
Trimble Navigation (TRMB) downgraded to Neutral from Overweight at JPMorgan
Validus (VR) downgraded to Neutral from Conviction Buy at Goldman
Vascular Solutions (VASC) downgraded to Hold from Buy at Benchmark Co.

Initiations

Advanced Energy (AEIS) initiated with a Buy at Citigroup
Finish Line (FINL) initiated with a Neutral at RW Baird
First Solar (FSLR) initiated with a Buy at Citigroup
Foot Locker (FL) initiated with an Outperform at RW Baird
Global Eagle (ENT) initiated with an Overweight at Piper Jaffray
MEMC Electronic (WFR) initiated with a Buy at Citigroup
SunPower (SPWR) initiated with a Buy, added to Top Picks Live at Citigroup
Suntech (STP) initiated with a Sell at Citigroup
Tesaro (TSRO) initiated with a Buy at Deutsche Bank
Thor Industries (THO) initiated with an Outperform at BMO Capital
Trina Solar (TSL) initiated with a Neutral at Citigroup
Yingli Green (YGE) initiated with a Neutral at Citigroup

HOT STOCKS

Liberty Global (LBTYA) to acquire Virgin Media (VMED) for $23.3B
Silver Wheaton (SLW) acquired some gold production from two Vale (VALE) mines for $1.9B
Biogen (BIIB) to acquire full rights and control of Tysabri from Elan (ELN)
Disney (DIS) said confident about FY13, ability to create long-term growth
Ford (F) announced 900 dealers to be certified to sell plug-in EVs by spring
Home Depot (HD) to hire 80,000 associates for spring season
Chipotle (CMG): Confident in continued ability to drive sales growth in 2013
Sees 2013 comparable restaurant sales flat to low single digits
3M Company (MMM) authorized $7.5B share repurchase program
Moody's affirmed MetLife's (MET) ratings, long-term ratings' outlook to negative
Fitch: Yum! Brands (YUM) ratings not immediately impacted by China weakness
Equity Residential (EQR) sees Q1 FFO 62c-66c, consensus 66c
Zynga (ZNGA) sees FY13 EBITDA margin 0%-10%
Said no full year 2013 year guidance, cites platform transition
Netflix (NFLX), Queen Latifah's Flavor Unit Entertainment announced multi-year deal

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Elan (ELN), W.R. Grace (GRA), KKR Financial (KFN), Horace Mann (HMN), Genworth (GNW), Jive Software (JIVE), Take-Two (TTWO), Hanesbrands (HBI), Panera Bread (PNRA), Hain Celestial (HAIN), Zynga (ZNGA)

Companies that missed consensus earnings expectations include:
AU Optronics (AUO), C.H. Robinson (CHRW), Stanley Furniture (STLY), Chipotle (CMG), Expedia (EXPE)

Companies that matched consensus earnings expectations include:
Myriad Genetics (MYGN), Aflac (AFL), Fiserv (FISV), CME Group (CME), Thoratec (THOR)

NEWSPAPERS/WEBSITES

U.S. stock exchanges, banks, trading firms and mutual funds want the SEC to study the effect of pricing some small stocks in nickels and dimes, rather than in pennies, the Wall Street Journal reports
Microsoft’s (MSFT) contribution to the Dell (DELL) buyout is a $2B gamble that the software firm can boost up one of its major customers without upsetting all the others, the Wall Street Journal reports
The Federal Reserve said that one of its internal websites had been briefly breached by hackers, though no critical functions of the U.S. central bank were affected by the intrusion, Reuters reports
Softbank (SFTBF) will issue $3.2B in corporate bonds, the biggest ever by a non-financial Japanese firm to retail investors, to convert part of the $17.7B in short-term loans used to purchase Sprint Nextel (S) to longer term debt, sources say, Reuters reports
With Michael Dell’s (DELL) deal to take his company private, he now faces the larger challenge of turning a business falling behind in personal computers into a provider of high-margin cloud-computing tools and services, Bloomberg reports
Automakers from Ford (F) to Audi (VLKAY) and Jaguar Land Rover (TTM) are using record amounts of aluminum to replace heavier steel, providing relief to producers of the metal facing excess supplies and depressed prices, Bloomberg reports

SYNDICATE

Boise Cascade (BCC) 11.765M share IPO priced at $21.00
Celldex (CLDX) 12M share Secondary priced at $7.50
MagnaChip (MX) 5M share Secondary priced at $14.50
NCI Building Systems (NCS) files to sell 54.14M shares of common stock for holders
Rose Rock Midstream (RRMS) files to sell 2M common units for holders
Silver Bull (SVBL) proposes public offering of units
TICC Capital (TICC) files to sell 3M shares of common stock
WNS Holdings (WNS) files to sell 12.6M ADSs for Warburg Pincus

Your rating: None

Google exposes racial discrimination in online ads delivery — study

(AFP Photo / Eva Hambach)

(AFP Photo / Eva Hambach)

Google’s search algorithms expose racial discrimination, a new study by Harvard professor purports. It claims ads related to criminal records are more likely to pop up when "black-sounding names" are ‘googled’.

­Latanya Sweeney, Professor of Government and Technology in Residence at Harvard, had found out that Google searches involving "black-sounding names" are more than 25 percent likely to produce ads that imply that person has been arrested than “white-sounding names”.

What are “black- and white-sounding names”?

In her paper “Discrimination in Online Ad Delivery” (published January 28) Sweeney refers to the a Job Discrimination study that “used a correlation of names given to black and white babies in Massachusetts between 1974 and 1979.”

First, using those findings, she collected a list of more than 2,000 names that were suggestive of race.

Names such as Lakisha, DeAndre, Jermaine, Leroy and Darnell more often tend to suggest that the person was black, while names like Allison, Kristen, Greg or Jack were considered to be white-identifying names.

Sample face images on google.com retrieved for searches “latisha”. (Image from arxiv.org)
Sample face images on google.com retrieved for searches “latisha”. (Image from arxiv.org)

Sweeney has taken a look at the so-called public record ads like InstantCheckMate or PeopleSmart and some others. She compared search results on Google.com and Reuters.com.

It turned out that “black-sounding names” are more likely than “white-sounding” to trigger ads including the word "arrest".

Searching for names like Leroy, Jamal or Kenya yielded a greater percentage of ads with the word “arrested” in the ad’s text, while for Jack or Greg, for instance, neutral ads, with no criminal related text, popped up.

In Google search InstantCheckMate ads contained the word “arrested” in 92 per cent of returns (in 332 cases out of 366) when “black-sounding” names were looked for, 8 per cent of neutral ads popped up.

For comparison, on Reuters search InstantCheckMate ads suggested checking criminal records in 60 per cent of all black identifying names.

Sweeney  tried her own name. A computer scientist with no criminal past, she discovered that prior to presenting her academic merits, she first of all was greeted by an ad that suggested checking if “Latanya Sweeney, arrested?”

Sweeney followed the link and paid a fee to discover there was no criminal record associated with that name.

"Perhaps you are in competition for an award, an appointment, a promotion, or a new job…” the scientist writes in her paper, giving a bunch of circumstances for which an online researcher seeks to learn more about a person.

“Appearing alongside your list of accomplishments is an advertisement implying you may have a criminal record whether you actually have one or not,” Sweeney concluded.

However, she hesitated to give a cause for the differences in ads, saying more information “about the inner workings of Google AdSense [Google's online ad tool]” is required. 

Sweeney suggested that the search engines might be just a reflection of society’s prejudices and delivered ads are simply based on the most popular links previous users have clicked on.

"So the ad text getting the most clicks eventually displays more frequently,"
she explained.

Google AdSense has responded Sweeney’s findings saying that it does not conduct any racial profiling in its search software.

Sample ads and criminal reports for “latanya farrell” (a,b), “latanya sweeney” (c,d). (Image from arxiv.org)
Sample ads and criminal reports for “latanya farrell” (a,b), “latanya sweeney” (c,d). (Image from arxiv.org)

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 Winners Of The New World”, Circa February 2000

Because humor is always the best and only cure to pervasive central planning that has made a mockery of traditional investing and capital allocation, and because nobody delivers unlimited sheer, unadulterated humor quite as well as one James J. Cramer when he is "recommending" stocks, here is the full text of Jim Cramer's "The Winners of the New World" speech delivered in February 2000. Because it really never is different this time.

James J. Cramer is the keynote speaker at the 6th Annual Internet and Electronic Commerce Conference and Exposition, held at the Jacob Javits Center in New York City. From TheStreet.com

February 29, 2000

The Winners of the New World

You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now.

OK. Here goes. Write them down -- no handouts here!: 724 Solutions, Ariba, Digital Island, Exodus, InfoSpace.com, Inktomi, Mercury Interactive, Sonera, VeriSign and Veritas Software.

 We are buying some of every one of these this morning as I give this speech. We buy them every day, particularly if they are down, which, no surprise given what they do, is very rare. And we will keep doing so until this period is over -- and it is very far from ending. Heck, people are just learning these stories on Wall Street, and the more they come to learn, the more they love and own! Most of these companies don't even have earnings per share, so we won't have to be constrained by that methodology for quarters to come.

There, now that that's done with, can we talk about the methodology that produced those top 10 so that you can understand how, in a universe of a gazillion stocks, we arrived at those, so you too can figure it out? I hope we can because I have another 10 and still another 10 and another. They all do the same thing: They make the Web faster, cheaper, better and easier to access anywhere, anytime. They allow you to get on the Web securely anywhere in the world. They make the Web economy the only economy that matters. That's all they do.

We try to own every one of them. Every single one. And if I had my druthers, I wouldn't own any other stocks in the year 2000. Because these are the only ones worth owning right now in this extremely difficult, extremely narrow stock market. They are the only ones that are going higher consistently in good days and bad. I love every one of them, just as I loathe the rest of the stock universe.

How did this stock market get like this, to where the only people who can make a dime in it are the people who are interested in the most arcane subject, the moving of data from one space to another, via strange new machines and software? How did it get to the point where nothing else matters, most particularly the 90% of the stock market I have studied for the last 20 years? How did all of that knowledge become totally irrelevant and the only stocks that work are the stocks of companies that didn't exist five years ago and came public in the last two or three years?

Let's start with the world in the early 21st century, a world where capital is abundant for a chosen few and nonexistent for just about everybody else. It is a world where the whole of Wall Street and Silicon Valley is at your fingertips if you are creating the infrastructure for the New Economy, and a world where neither Wall Street nor Silicon Valley could give a darn about you if you are using that infrastructure.

Or in other words, we don't care if General Motors (GM_) and Ford (F_) are going with Oracle (ORCL_) or with i2 (ITWO_) for their new parts procurement process. We don't want to own GM or Ford on any occasion. In fact, we would rather own the loser in that tech bake-off than the winner in nontech, because in this new world, there is so much business to be done for the i2s and the Oracles that the capital will remain plentiful for them, win or lose a particular piece of business.

Just yesterday I found myself wishing I had bought i2 when it lost out to Oracle for the giant business-to-business contract for the Big Three automakers. Others had the same idea because i2, the loser Friday, was up much more Monday than GM and Ford could be this year. i2 can own the world because the company with the access to cheap capital always wins. And the companies with no access have to lose.

Or, closer to home. We in the stock market don't care that The Street.com Inc., a company I helped create, has built a compelling new brand, has more than 100,000 paid subscribers and has $100 million in the bank. We just want to know which companies TheStreet.com employs to publish each day. We want to know who the host is, which publishing tool works best, which wireless strategy TheStreet.com is adopting and how does it automate its email? (By the way, the answers are Exodus, Vignette, Motorola and Kana  -- all at or near their 52-week highs as TheStreet.com languishes at its 52-week low, a triumph of the arms merchants over the combatants if there ever were one.)

How did this bizarro world where nine-tenths of the companies I have followed as a stock picker for the last 20 years are losers and one-tenth are winners? To answer that question, you have to throw out all of the matrices and formulas and texts that existed before the Web. You have to throw them away because they can't make money for you anymore, and that is all that matters. We don't use price-to-earnings multiples anymore at Cramer Berkowitz. If we talk about price-to-book, we have already gone astray. If we use any of what Graham and Dodd teach us, we wouldn't have a dime under management.

So how do we sort through which stocks get bought and which stocks get assigned to the waste bin?

We have a phrase on Wall Street. It's called raising the bar. If you can raise the bar, or brighten the outlook for your company, if you can see your growth accelerating, your stock will go higher and you will be given the currency to expand, acquire and do whatever you want. That's the secret of the quintessential New Economy stock: Cisco (CSCO_). This giant networker has the ability to control its own destiny. It can, as my colleague Adam Lashinsky says at TSC, buy any company it wants to. It can pay any price. Because it has a currency that it better than U.S. dollars: It has Cisco stock. It can do that because it raises the bar every quarter!

But what about the Old Economy stocks? Can Merck raise the bar? Can Pfizer? Can U.S. Steel? Or Phelps Dodge? Union Pacific? No, no, no, no, no and no. So what happens to them? Despite the billions in buybacks and the plethora of strong buys that the Street has put out about these companies, their stocks have no traction. They just stumble along, rising and falling haphazardly with every whim and quizzical speech of the Federal Reserve chairman that still controls their destiny. If Greenspan indicates that there is more tightening ahead, these traditional companies, the ones that you measure with traditional matrices, get pole-axed as we worry about where the capital will ultimately come from if credit gets choked off, while the arms merchants in the Web war, with capital to burn, just go higher.

It is no secret that the Dow, made up principally of companies that can't raise the bar, is down 12% while the Nasdaq, which is made up of companies that can raise the bar, is up 12%. And in the self-fulfilling jungle that is Wall Street, only growth can maintain growth!

So how do we find what are the great growth companies, knowing that growth and not cheapness of stock to company is what matters? We have to look for the fastest-growing industries and then select the companies that can make the infrastructure happen the fastest and the cheapest in those industries. The growth must be positively organic, if not viral. There must be heavy technological barriers to entry. And there must be an ability to scale without any thought to human cost. These companies must be able to dominate their businesses or be willing to become part of a larger institution that dominates.

So, whom does that eliminate? First, any company that is a commodity producer simply can't be owned, no matter what. The New Economy makes those be simply a function of low-cost producer with no ability ever to raise price. This, of course, is the crying shame of the way the Fed is trying to break the economy because the only place that could stand for a little inflation is in the deflationary commodity industries. But their inflation revolves around the ability to build inventory to anticipate future price hikes and the Fed is taking short rates to a height that makes it uneconomic to stockpile.

Second, it eliminates any bricks-and-mortar company that doesn't embrace the Net. To not embrace the Net is to give a cost edge to a competitor who does. It does so because the Net removes the middleman that was a product of the regional economy. There is $4 trillion worth of wholesaling that gets instantly eliminated by the Net. Before only the largest orders could be processed by the biggest companies because it was too expensive otherwise. Now all orders can be processed by the biggest companies through the Web. There is no need for the jobber or the wholesaler. Obviously, if you are still using that old distribution network, you can't compete against those who do.

Third, it eliminates any industry that does not have a proprietary brand. This is one of those weird features of the Web that people haven't woken up to yet, but it will seem obvious a few months from now. In the New World's economy, the desire to "name your own price" is too great to squelch. An outfit like priceline will change the very nature of brands in this country. It won't destroy the premium brand, but it will force everyone else out of the market. Why? Because the way priceline works is that we are trying to buy the premium brand for the price of the off-price brand. That means the off-price brands, whether they be Colgate or Dial or Hunt's or Ralston, are simply doomed by the Web. Why would you ever buy the second- or third-best when you can get the best via priceline for the same price as the lower tier? Ahh, that's a real killer. It leaves only the top brands to vie for supermarket space. The others won't be worth carrying. They won't move! Oh yeah, same goes for the airlines and the hotels and just about everybody else.

Fourth, it just destroys retail as we know it. Why? Because the companies that embrace the Web more vigorously will eventually be pitted against other companies that embrace the Web more vigorously, creating a virtual constant price war, the kind of war that Marx, of all, actually predicted would happen to capitalism. It will happen to retail once everyone realizes that Amazon recreated Wal-Mart online because it will forever have access to cheap capital. Why do I say forever? Because at a certain point, it will be done with its buildout and will effectively be able to cherry-pick whomever it wants to destroy while having it be subsidized by other areas. It will be Home Depot vs. Wal-Mart vs. Amazon in the end. Nobody else. And that's only if Home Depot figures out it better get on the Web and fast.

Fifth, it wipes out everybody who straddles the Old and New Worlds. Let's take the brokerage industry. If you are trying to preserve a price point, because you need those margins, you can't and you become roadkill. Same with journalism. If you are free online and cost offline, you will eventually not be able to charge offline. Why not? Because the Hewlett-Packards and Intels and Ciscos are bent on making the online version far superior to the offline version. And they will do it. They, too, have the access to capital to make it happen.

I can tell you from TheStreet.com that we have substantial cost advantages over our printed cousins. We can come out around the clock. We don't require paper, ink, delivery people or trucks. In that sense, we are much more like television, personal television, which is why we were wrong initially to think we could charge for basic news, and right to think we can charge a huge amount for proprietary analysis that can make you money.

The struggle between the offliners and the onliners in banking will also pan out just like these other industries, with huge wins for those with a fresh online culture and hideous losses for those who don't see it coming or are slow to adjust. If you have to preserve your giant branch network and the costs that come with it while someone else perfects secure wireless Internet transactions, you can forget about it. You can't afford to compete. How can Bank of America compete with Nokia as a way to bank? How can Goldman Sachs compete with Yahoo! as a way to invest? Isn't Nokia, with its wireless machine that goes everywhere a better bank than one that needs branches? Isn't Yahoo!, with its access to all of the information and quotes in the financial world a better place to buy stocks than Goldman?

Of course they are.

So, if you can't own the retailers, and you can't own transports, and you can't own banks and brokers and financials and you can't own commodity makers and you can't own the newspapers, and you can't own the machinery stocks, what can you own?

A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now. It is by that process of elimination that I have picked my top 10. And my next 10 and my next 10 after. Only those companies are worth owning. The rest?

You can have them.

Thank you.

Your rating: None

“The Winners Of The New World”, Circa February 2000

Because humor is always the best and only cure to pervasive central planning that has made a mockery of traditional investing and capital allocation, and because nobody delivers unlimited sheer, unadulterated humor quite as well as one James J. Cramer when he is "recommending" stocks, here is the full text of Jim Cramer's "The Winners of the New World" speech delivered in February 2000. Because it really never is different this time.

James J. Cramer is the keynote speaker at the 6th Annual Internet and Electronic Commerce Conference and Exposition, held at the Jacob Javits Center in New York City. From TheStreet.com

February 29, 2000

The Winners of the New World

You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now.

OK. Here goes. Write them down -- no handouts here!: 724 Solutions, Ariba, Digital Island, Exodus, InfoSpace.com, Inktomi, Mercury Interactive, Sonera, VeriSign and Veritas Software.

 We are buying some of every one of these this morning as I give this speech. We buy them every day, particularly if they are down, which, no surprise given what they do, is very rare. And we will keep doing so until this period is over -- and it is very far from ending. Heck, people are just learning these stories on Wall Street, and the more they come to learn, the more they love and own! Most of these companies don't even have earnings per share, so we won't have to be constrained by that methodology for quarters to come.

There, now that that's done with, can we talk about the methodology that produced those top 10 so that you can understand how, in a universe of a gazillion stocks, we arrived at those, so you too can figure it out? I hope we can because I have another 10 and still another 10 and another. They all do the same thing: They make the Web faster, cheaper, better and easier to access anywhere, anytime. They allow you to get on the Web securely anywhere in the world. They make the Web economy the only economy that matters. That's all they do.

We try to own every one of them. Every single one. And if I had my druthers, I wouldn't own any other stocks in the year 2000. Because these are the only ones worth owning right now in this extremely difficult, extremely narrow stock market. They are the only ones that are going higher consistently in good days and bad. I love every one of them, just as I loathe the rest of the stock universe.

How did this stock market get like this, to where the only people who can make a dime in it are the people who are interested in the most arcane subject, the moving of data from one space to another, via strange new machines and software? How did it get to the point where nothing else matters, most particularly the 90% of the stock market I have studied for the last 20 years? How did all of that knowledge become totally irrelevant and the only stocks that work are the stocks of companies that didn't exist five years ago and came public in the last two or three years?

Let's start with the world in the early 21st century, a world where capital is abundant for a chosen few and nonexistent for just about everybody else. It is a world where the whole of Wall Street and Silicon Valley is at your fingertips if you are creating the infrastructure for the New Economy, and a world where neither Wall Street nor Silicon Valley could give a darn about you if you are using that infrastructure.

Or in other words, we don't care if General Motors (GM_) and Ford (F_) are going with Oracle (ORCL_) or with i2 (ITWO_) for their new parts procurement process. We don't want to own GM or Ford on any occasion. In fact, we would rather own the loser in that tech bake-off than the winner in nontech, because in this new world, there is so much business to be done for the i2s and the Oracles that the capital will remain plentiful for them, win or lose a particular piece of business.

Just yesterday I found myself wishing I had bought i2 when it lost out to Oracle for the giant business-to-business contract for the Big Three automakers. Others had the same idea because i2, the loser Friday, was up much more Monday than GM and Ford could be this year. i2 can own the world because the company with the access to cheap capital always wins. And the companies with no access have to lose.

Or, closer to home. We in the stock market don't care that The Street.com Inc., a company I helped create, has built a compelling new brand, has more than 100,000 paid subscribers and has $100 million in the bank. We just want to know which companies TheStreet.com employs to publish each day. We want to know who the host is, which publishing tool works best, which wireless strategy TheStreet.com is adopting and how does it automate its email? (By the way, the answers are Exodus, Vignette, Motorola and Kana  -- all at or near their 52-week highs as TheStreet.com languishes at its 52-week low, a triumph of the arms merchants over the combatants if there ever were one.)

How did this bizarro world where nine-tenths of the companies I have followed as a stock picker for the last 20 years are losers and one-tenth are winners? To answer that question, you have to throw out all of the matrices and formulas and texts that existed before the Web. You have to throw them away because they can't make money for you anymore, and that is all that matters. We don't use price-to-earnings multiples anymore at Cramer Berkowitz. If we talk about price-to-book, we have already gone astray. If we use any of what Graham and Dodd teach us, we wouldn't have a dime under management.

So how do we sort through which stocks get bought and which stocks get assigned to the waste bin?

We have a phrase on Wall Street. It's called raising the bar. If you can raise the bar, or brighten the outlook for your company, if you can see your growth accelerating, your stock will go higher and you will be given the currency to expand, acquire and do whatever you want. That's the secret of the quintessential New Economy stock: Cisco (CSCO_). This giant networker has the ability to control its own destiny. It can, as my colleague Adam Lashinsky says at TSC, buy any company it wants to. It can pay any price. Because it has a currency that it better than U.S. dollars: It has Cisco stock. It can do that because it raises the bar every quarter!

But what about the Old Economy stocks? Can Merck raise the bar? Can Pfizer? Can U.S. Steel? Or Phelps Dodge? Union Pacific? No, no, no, no, no and no. So what happens to them? Despite the billions in buybacks and the plethora of strong buys that the Street has put out about these companies, their stocks have no traction. They just stumble along, rising and falling haphazardly with every whim and quizzical speech of the Federal Reserve chairman that still controls their destiny. If Greenspan indicates that there is more tightening ahead, these traditional companies, the ones that you measure with traditional matrices, get pole-axed as we worry about where the capital will ultimately come from if credit gets choked off, while the arms merchants in the Web war, with capital to burn, just go higher.

It is no secret that the Dow, made up principally of companies that can't raise the bar, is down 12% while the Nasdaq, which is made up of companies that can raise the bar, is up 12%. And in the self-fulfilling jungle that is Wall Street, only growth can maintain growth!

So how do we find what are the great growth companies, knowing that growth and not cheapness of stock to company is what matters? We have to look for the fastest-growing industries and then select the companies that can make the infrastructure happen the fastest and the cheapest in those industries. The growth must be positively organic, if not viral. There must be heavy technological barriers to entry. And there must be an ability to scale without any thought to human cost. These companies must be able to dominate their businesses or be willing to become part of a larger institution that dominates.

So, whom does that eliminate? First, any company that is a commodity producer simply can't be owned, no matter what. The New Economy makes those be simply a function of low-cost producer with no ability ever to raise price. This, of course, is the crying shame of the way the Fed is trying to break the economy because the only place that could stand for a little inflation is in the deflationary commodity industries. But their inflation revolves around the ability to build inventory to anticipate future price hikes and the Fed is taking short rates to a height that makes it uneconomic to stockpile.

Second, it eliminates any bricks-and-mortar company that doesn't embrace the Net. To not embrace the Net is to give a cost edge to a competitor who does. It does so because the Net removes the middleman that was a product of the regional economy. There is $4 trillion worth of wholesaling that gets instantly eliminated by the Net. Before only the largest orders could be processed by the biggest companies because it was too expensive otherwise. Now all orders can be processed by the biggest companies through the Web. There is no need for the jobber or the wholesaler. Obviously, if you are still using that old distribution network, you can't compete against those who do.

Third, it eliminates any industry that does not have a proprietary brand. This is one of those weird features of the Web that people haven't woken up to yet, but it will seem obvious a few months from now. In the New World's economy, the desire to "name your own price" is too great to squelch. An outfit like priceline will change the very nature of brands in this country. It won't destroy the premium brand, but it will force everyone else out of the market. Why? Because the way priceline works is that we are trying to buy the premium brand for the price of the off-price brand. That means the off-price brands, whether they be Colgate or Dial or Hunt's or Ralston, are simply doomed by the Web. Why would you ever buy the second- or third-best when you can get the best via priceline for the same price as the lower tier? Ahh, that's a real killer. It leaves only the top brands to vie for supermarket space. The others won't be worth carrying. They won't move! Oh yeah, same goes for the airlines and the hotels and just about everybody else.

Fourth, it just destroys retail as we know it. Why? Because the companies that embrace the Web more vigorously will eventually be pitted against other companies that embrace the Web more vigorously, creating a virtual constant price war, the kind of war that Marx, of all, actually predicted would happen to capitalism. It will happen to retail once everyone realizes that Amazon recreated Wal-Mart online because it will forever have access to cheap capital. Why do I say forever? Because at a certain point, it will be done with its buildout and will effectively be able to cherry-pick whomever it wants to destroy while having it be subsidized by other areas. It will be Home Depot vs. Wal-Mart vs. Amazon in the end. Nobody else. And that's only if Home Depot figures out it better get on the Web and fast.

Fifth, it wipes out everybody who straddles the Old and New Worlds. Let's take the brokerage industry. If you are trying to preserve a price point, because you need those margins, you can't and you become roadkill. Same with journalism. If you are free online and cost offline, you will eventually not be able to charge offline. Why not? Because the Hewlett-Packards and Intels and Ciscos are bent on making the online version far superior to the offline version. And they will do it. They, too, have the access to capital to make it happen.

I can tell you from TheStreet.com that we have substantial cost advantages over our printed cousins. We can come out around the clock. We don't require paper, ink, delivery people or trucks. In that sense, we are much more like television, personal television, which is why we were wrong initially to think we could charge for basic news, and right to think we can charge a huge amount for proprietary analysis that can make you money.

The struggle between the offliners and the onliners in banking will also pan out just like these other industries, with huge wins for those with a fresh online culture and hideous losses for those who don't see it coming or are slow to adjust. If you have to preserve your giant branch network and the costs that come with it while someone else perfects secure wireless Internet transactions, you can forget about it. You can't afford to compete. How can Bank of America compete with Nokia as a way to bank? How can Goldman Sachs compete with Yahoo! as a way to invest? Isn't Nokia, with its wireless machine that goes everywhere a better bank than one that needs branches? Isn't Yahoo!, with its access to all of the information and quotes in the financial world a better place to buy stocks than Goldman?

Of course they are.

So, if you can't own the retailers, and you can't own transports, and you can't own banks and brokers and financials and you can't own commodity makers and you can't own the newspapers, and you can't own the machinery stocks, what can you own?

A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now. It is by that process of elimination that I have picked my top 10. And my next 10 and my next 10 after. Only those companies are worth owning. The rest?

You can have them.

Thank you.

Your rating: None

“Smart Cards” in a Surveillance Society: The Implanted Radio-Frequency Identification Chip

The Implanted Radio-Frequency Identification Chip: "Smart Cards" in a Surveillance Society

If incorporating personal details into an RFID (radio-frequency identification) chip implanted into a passport or driver’s license may sound like a “smart” alternative to endless lines at the airport and intrusive questioning by securocrats, think again.

Since the late 1990s, corporate grifters have touted the “benefits” of the devilish transmitters as a “convenient” and “cheap” way to tag individual commodities, one that would “revolutionize” inventory management and theft prevention. Indeed, everything from paper towels to shoes, pets to underwear have been “tagged” with the chips. “Savings” would be “passed on” to the consumer. Call it the Wal-Martization of everyday life.

RFID tags are small computer chips connected to miniature antennae that can be fixed to or implanted within physical objects, including human beings. The RFID chip itself contains an Electronic Product Code that can be “read” when a RFID reader emits a radio signal. The chips are divided into two categories, passive or active. A “passive” tag doesn’t contain a battery and its “read” range is variable, from less than an inch to twenty or thirty feet. An “active” tag on the other hand, is self-powered and has a much longer range. The data from an “active” tag can be sent directly to a computer system involved in inventory control–or surveillance.

But as Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), the American Civil Liberties Union (ACLU), the Electronic Frontier Foundation (EFF) and the Electronic Privacy Information Center (EPIC) state in a joint position paper, “RFID has the potential to jeopardize consumer privacy, reduce or eliminate purchasing anonymity, and threaten civil liberties.” As these organizations noted:

While there are beneficial uses of RFID, some attributes of the technology could be deployed in ways that threaten privacy and civil liberties:

* Hidden placement of tags. RFID tags can be embedded into/onto objects and documents without the knowledge of the individual who obtains those items. As radio waves travel easily and silently through fabric, plastic, and other materials, it is possible to read RFID tags sewn into clothing or affixed to objects contained in purses, shopping bags, suitcases, and more.

* Unique identifiers for all objects worldwide. The Electronic Product Code potentially enables every object on earth to have its own unique ID. The use of unique ID numbers could lead to the creation of a global item registration system in which every physical object is identified and linked to its purchaser or owner at the point of sale or transfer.

* Massive data aggregation. RFID deployment requires the creation of massive databases containing unique tag data. These records could be linked with personal identifying data, especially as computer memory and processing capacities expand.

* Hidden readers. Tags can be read from a distance, not restricted to line of sight, by readers that can be incorporated invisibly into nearly any environment where human beings or items congregate. RFID readers have already been experimentally embedded into floor tiles, woven into carpeting and floor mats, hidden in doorways, and seamlessly incorporated into retail shelving and counters, making it virtually impossible for a consumer to know when or if he or she was being “scanned.”

* Individual tracking and profiling. If personal identity were linked with unique RFID tag numbers, individuals could be profiled and tracked without their knowledge or consent. For example, a tag embedded in a shoe could serve as a de facto identifier for the person wearing it. Even if item-level information remains generic, identifying items people wear or carry could associate them with, for example, particular events like political rallies. (“Position Statement on the Use of RFID on Consumer Products,” Privacy Rights Clearinghouse, November 14, 2003)

RFID under the skin

As the corporatist police state unfurls its murderous tentacles here in the United States, it should come as no surprise that securocrats breathlessly tout the “benefits” of RFID in the area of “homeland security.” When linked to massive commercial databases as well as those compiled by the 16 separate agencies of the “intelligence community,” such as the Terrorist Identities Datamart Environment (TIDE) that feeds the federal government’s surveillance Leviathan with the names of suspected “terrorists,” it doesn’t take a genius to conclude that the architecture for a vast totalitarian enterprise is off the drawing board and onto the streets.

As last week’s mass repression of peaceful protest at the Republican National Convention in St. Paul amply demonstrated, the Bush regime’s “preemptive war” strategy has been rolled out in the heimat. As the World Socialist Web Site reports,

On Wednesday eight members of the anarchist protest group the Republican National Convention Welcoming Committee (RNCWC) were charged under provisions of the Minnesota state version of the Patriot Act with “Conspiracy to Riot in Furtherance of Terrorism.”

The eight charged are all young, and could face up to seven-and-a-half years in prison under a provision that allows the enhancement of charges related to terrorism by 50 percent. …

Among other things, the youth, who were arrested last weekend even prior to the start of the convention, are charged with plotting to kidnap delegates to the RNC, assault police officers and attack airports. Almost all of the charges listed are based upon the testimony of police infiltrators, one an officer, the other a paid informant. (Tom Eley, “RNC in Twin Cities: Eight protesters charged with terrorism under Patriot Act,” World Socialist Web Site, 6 September 2008)

As the ACLU pointed out, “These charges are an effort to equate publicly stated plans to blockade traffic and disrupt the RNC as being the same as acts of terrorism. This both trivializes real violence and attempts to place the stated political views of the defendants on trial,” said Bruce Nestor, president of the Minnesota Chapter of the National Lawyers Guild. “The charges represent an abuse of the criminal justice system and seek to intimidate any person organizing large scale public demonstrations potentially involving civil disobedience,” he said.

An affidavit filed by the cops in order to allow the preemptive police raid and subsequent arrests declared that the RNCWC is a “criminal enterprise” strongly implying that the group of anarchist youth were members of a “terrorist organization.”

Which, as we have learned over these last seven and a half years of darkness, is precisely the point: keep ‘em scared and passive. And when they’re neither scared nor passive, resort to police state tactics of mass repression. While the cops beat and arrested demonstrators and journalists outside the Xcel Energy Center, neanderthal-like Republican mobs chanted “USA! USA!” while the execrable theocratic fascist, Sarah Palin, basked in the limelight. But I digress…

Likened to barcodes that scan items at the grocery store check-out line, what industry flacks such as the Association for Automatic Identification and Mobility (AIM) fail to mention in their propaganda about RFID is that the information stored on a passport or driver’s license is readily stolen by anyone with a reader device–marketers, security agents, criminals or stalkers–without the card holder even being remotely aware that they are being tracked and their allegedly “secure” information plundered. According to a blurb on the AIM website,

Automatic Identification and Mobility (AIM) technologies are a diverse family of technologies that share the common purpose of identifying, tracking, recording, storing and communicating essential business, personal, or product data. In most cases, AIM technologies serve as the front end of enterprise software systems, providing fast and accurate collection and entry of data. (“Technologies,” Association for Automatic Identification and Mobility, no date)

Among the “diverse family of technologies” touted by AIM, many are rife with “dual-use” potential, that is, the same technology that can keep track of a pallet of soft drinks can also keep track of human beings.

Indeed, the Association touts biometric identification as “an automated method of recognizing a person based on a physiological or behavioral characteristic.” This is especially important since “the need” for biometrics “can be found in federal, state and local governments, in the military, and in commercial applications.” When used as a stand-alone or in conjunction with RFID-chipped “smart cards” biometrics, according to the industry “are set to pervade nearly all aspects of the economy and our daily lives.”

Some “revolution.”

The industry received a powerful incentive from the state when the Government Services Administration (GSA), a Bushist satrapy, issued a 2004 memo that urged the heads of all federal agencies “to consider action that can be taken to advance the [RFID] industry.”

An example of capitalist “ingenuity” or another insidious invasion of our right to privacy? In 2006, IBM obtained a patent that will be used for tracking and profiling consumers as they move around a store, even if access to commercial databases are strictly limited.

And when it comes tracking and profiling human beings, say for mass extermination at the behest of crazed Nazi ideologues, IBM stands alone. In his groundbreaking 2001 exploration of the enabling technologies for the mass murder of Jews, communists, Roma and gays and lesbians, investigative journalist Edwin Black described in IBM and the Holocaust how, beginning in 1933, IBM and their subsidiaries created technological “solutions” that streamlined the identification of “undesirables” for quick and efficient asset confiscation, deportation, slave labor and eventual annihilation.

In an eerie echo of polices being enacted today against Muslims and left-wing “extremists” by the corrupt Bush regime in their quixotic quest to “keep America safe” in furtherance of capitalist and imperialist goals of global domination, Black writes:

In the upside-down world of the Holocaust, dignified professionals were Hitler’s advance troops. Police officials disregarded their duty in favor of protecting villains and persecuting victims. Lawyers perverted concepts of justice to create anti-Jewish laws. Doctors defiled the art of medicine to perpetrate ghastly experiments and even choose who was healthy enough to be worked to death–and who could be cost-effectively sent to the gas chamber. Scientists and engineers debased their higher calling to devise the instruments and rationales of destruction. And statisticians used their little known but powerful discipline to identify the victims, project and rationalize the benefits of their destruction, organize their persecution, and even audit the efficiency of genocide. Enter IBM and its overseas subsidiaries. (IBM and the Holocaust: The Strategic Alliance Between Nazi Germany and America’s Most Powerful Corporation, New York: Crown Publishers, 2001, pp. 7-8)

As security and privacy analyst Katherine Albrecht writes describing IBM’s patented “Identification and Tracking of Persons Using RFID-Tagged Items in Store Environments,”

…chillingly details RFID’s potential for surveillance in a world where networked RFID readers called “person tracking units” would be incorporated virtually everywhere people go–in “shopping malls, airports, train stations, bus stations, elevators, trains, airplanes, restrooms, sports arenas, libraries, theaters, [and] museums”–to closely monitor people’s movements. (“How RFID Tags Could Be Used to Track Unsuspecting People,” Scientific American, August 21, 2008)

According to the patent cited by Albrecht, as an individual moves around a store, or a city center, an “RFID tag scanner located [in the desired tracking location]… scans the RFID tags on [a] person…. As that person moves around the store, different RFID tag scanners located throughout the store can pick up radio signals from the RFID tags carried on that person and the movement of that person is tracked based on these detections…. The person tracking unit may keep records of different locations where the person has visited, as well as the visitation times.”

Even if no personal data are stored in the RFID tag, this doesn’t present a problem IBM explains, because “the personal information will be obtained when the person uses his or her credit card, bank card, shopper card or the like.” As Albrecht avers, the link between the unique RFID number and a person’s identity “needs to be made only once for the card to serve as a proxy for the person thereafter.” With the wholesale introduction of RFID chipped passports and driver’s licenses, the capitalist panoptic state is quickly–and quietly–falling into place.

If America’s main trading partner and sometime geopolitical rival in the looting of world resources, China, is any indication of the direction near future surveillance technologies are being driven by the “miracle of the market,” the curtain on privacy and individual rights is rapidly drawing to a close. Albrecht writes,

China’s national ID cards, for instance, are encoded with what most people would consider a shocking amount of personal information, including health and reproductive history, employment status, religion, ethnicity and even the name and phone number of each cardholder’s landlord. More ominous still, the cards are part of a larger project to blanket Chinese cities with state-of-the-art surveillance technologies. Michael Lin, a vice president for China Public Security Technology, a private company providing the RFID cards for the program, unflinchingly described them to the New York Times as “a way for the government to control the population in the future.” And even if other governments do not take advantage of the surveillance potential inherent in the new ID cards, ample evidence suggests that data-hungry corporations will.

I would disagree with Albrecht on one salient point: governments, particularly the crazed, corporate-controlled grifters holding down the fort in Washington, most certainly will take advantage of RFID’s surveillance potential.

In 2005 for example, the Senate Republican High Tech Task force praised RFID applications as “exciting new technologies” with “tremendous promise for our economy.” In this spirit, they vowed to “protect” RFID from regulation and legislation. Needless to say, the track record of timid Democrats is hardly any better when it comes to defending privacy rights or something as “quaint” as the Constitution.

Under conditions of a looming economic meltdown, rising unemployment, staggering debt, the collapse of financial markets and continuing wars and occupations in Iraq and Afghanistan, U.S. imperialism, in order to shore up its crumbling empire, will continue to import totalitarian methods of rule employed in its “global war on terror” onto the home front.

The introduction of RFID-chipped passports and driver’s licenses for the mass surveillance and political repression of the American people arises within this context.

Tom Burghardt is a researcher and activist based in the San Francisco Bay Area. In addition to publishing in Covert Action Quarterly, Love & Rage and Antifa Forum, he is the editor of Police State America: U.S. Military “Civil Disturbance” Planning, distributed by AK Press.

An Economic Alternative to Exploitative Free Market Capitalism

In 1649, a group of English communists started fighting the notion of private property in what became known as the commons movement. They were using the unstable period in England’s history to introduce a new economy, one that would see land, wells and other means of wealth as shared resources. This group would prevent a small class of people from collecting and consolidating the rights to basic human life, such as water and food. In an annual celebration that doubled as a protest, they would circle the village commons and level or dig up any hedges and fences that designated spots of private ownership. They became known as the “levelers” or “diggers.”(Illustration by Jac Depczyk)

The movement, which was subsequently quelled in 1651 by landowners and the Council of State, has seen a revival in the past decade. It remained dormant for so many years because of its fundamental threat to modern economics, putting community needs at the center of society rather than those of the individual. 

The commons protects large resources from privatization, such as the lobster fisheries in Maine or grassland management in Mongolia, and allows collectives to regulate extraction. Exploitation is avoided because no one individual has more of a right to the source than any other.

“[The commons]” is “an intellectually coherent way of talking about inalienable value, which we don’t have a vocabulary for,” David Bollier, author of “The Wealth of the Commons” said in a conference Tuesday at the Heinrich Böll Foundation in Washington, D.C.

It is a way, Bollier says, of formally introducing the “political, public policy, cultural, social, personal, even spiritual” aspects of life into our economic system, which now, he says, can deal only with monetary value.

"You could say that it’s a different metaphysics than that of the modern liberal state,” he says, “which looks at the individual as the sole agent.”

The commons movement is a reaction to exploitative free market capitalism. It rejects the notion that resources, spaces and other assets are purely a means to wealth. It condemns the privatization of public works, such as the parking meters in Chicago, which allows the sovereign wealth fund that controls it to increase the rates.

When an economy allocates wealth to private entities, Bollier says, those property rights inevitably get consolidated until a few large institutions control its means.

The commons movement is a reaction to exploitative free market capitalism. It rejects the notion that resources, spaces and other assets are purely a means to wealth.

Instead, he says, we need to protect the commons with rules that bar individual ownership of that property. It is not, however, a space that is left as a free-for-all; it still has regulations and state recognition that prevent private groups from exploiting it.

The commons introduces a “role for organized self-governance as opposed to government,” Bollier says, “although they can be made complimentary.” The community manages the resource and has an involved interest in keeping others from decreasing its supply, he says, because the license belongs to the public.

But the commons is not restricted to natural resources—it extends to the Web, science and other technologies.

The Internet has become the setting for a fierce battle between public advocates that would like to designate forums as open and free, and companies that seek to control more of its content through bills like the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA). Many programmers have handed over their copyright ownership to the public in the form of General Public Licenses and Creative Commons licenses, which allow the public to use and contribute to forums without having to pay for usage. It also keeps companies from using personal information, as with Facebook, to target potential consumers.

Additionally, one-fifth of the human genome is privately owned through patents. Salt Lake City-based Myriad Genetics, for example, owns the breast cancer susceptibility gene, which guarantees monopoly control over research into cancer. It discourages many other researchers from exploring treatment, something that could ultimately stunt our capacity for medical advances.

The issue extends further: Monsanto uses Genetically Modified Organisms to displace natural seeds, multinational water bottle companies are privatizing groundwater, and software companies retain copyrights on mathematical algorithms that others then cannot use.

“Enclosure,” Bollier says about patents and private ownership, “is about dispossession. It’s a process by which the powerful convert a shared community resource into a market commodity … This is known as development.

“The strange thing about the commons is that it’s invisible because it’s outside of the market and the state,” Bollier says. “It’s not seen as valuable and isn’t recognized because it has little to do with property rights for markets or geopolitical power … but there’s an estimated 2 billion people around the world whose lives depend upon commons like fisheries, forests, irrigation water and so forth.”

The neoliberal market does not, paradoxically, grasp the purpose behind the commons. Our current system is one-dimensional, Bollier says, and is designed to attach a price to everything.

For years, sustainability experts have sought ways to incorporate moderation and conservation into the neoliberal model through such incentives as cap and trade. But companies, Bollier says, will pay the extra fees until it is no longer economically viable, proving that in a system of privatization, people are willing to shell out penalty payments as long as they do not disrupt their profits.

“There’s an allure in trying to meet microeconomics and neoliberal economics on its own ground,” says Carroll Muffett, moderator of the discussion and president of the Center for International Environmental Law, “to say ‘if you want to put a price on everything, here’s the price for this and look how massive the price is,’ whether it’s access to water or it’s pollination … but for me the danger is: Is meeting them on their own ground what we should be doing? Is there an inherent compromise in there that risks giving up something that ultimately cannot have a value put on it?”

Until recently, Bollier and Muffett say, there has been much wiggle room for the free market to expand. But as the basic needs of fresh water, energy and food are being overproduced or vanishing because of climate change, companies are finding that their only options are to draw from the scant resources of Third World communities to meet their profit margins. It is a test to see what, in the end, neoliberalism holds higher in value: money or life.

Muffett says that question has already been answered in the building of the coal-fired Medupi Power Station in South Africa. An assessment of the power station projected that there wouldn’t be enough water to keep the plant operating and meet the needs of the local community. The watershed adjacent to the plant is already so overtaxed that it doesn’t reach the sea. The company, Eskom, proposed to reroute water from another watershed for its main operation and use the local supply for its filtration system. It would raise the price of water for the community to keep “poachers” from draining the source.

“The water that’s being poached,” Muffett says, “is to give people access to fresh water and to water their crops for subsistence living.

"Putting a price on that for a community is ultimately missing the point. The water isn’t fungible. If I give you my gallon of water and you give me $1,000, I can’t drink the thousand dollars.”

Both Bollier and Muffett say this is the result of an economy based on the philosophies of Thomas Malthus and John Locke, whose models do not guarantee the right of existence. To exist, one must have money. It becomes the defining characteristic of life.

“That’s the risk in the natural capital approach,” Muffett says. “It’s saying ‘if you give me a thousand dollars, that’s a substitute for my bees, my pollinators, for the land where my ancestors are buried.’ And there is no substitute for that.”

This article was made possible by the Center for Study of Responsive Law.

© 2012 TruthDig.com

Thomas Hedges works for the Center for Responsive Law in Washington, DC

An Economic Alternative to Exploitative Free Market Capitalism

In 1649, a group of English communists started fighting the notion of private property in what became known as the commons movement. They were using the unstable period in England’s history to introduce a new economy, one that would see land, wells and other means of wealth as shared resources. This group would prevent a small class of people from collecting and consolidating the rights to basic human life, such as water and food. In an annual celebration that doubled as a protest, they would circle the village commons and level or dig up any hedges and fences that designated spots of private ownership. They became known as the “levelers” or “diggers.”(Illustration by Jac Depczyk)

The movement, which was subsequently quelled in 1651 by landowners and the Council of State, has seen a revival in the past decade. It remained dormant for so many years because of its fundamental threat to modern economics, putting community needs at the center of society rather than those of the individual. 

The commons protects large resources from privatization, such as the lobster fisheries in Maine or grassland management in Mongolia, and allows collectives to regulate extraction. Exploitation is avoided because no one individual has more of a right to the source than any other.

“[The commons]” is “an intellectually coherent way of talking about inalienable value, which we don’t have a vocabulary for,” David Bollier, author of “The Wealth of the Commons” said in a conference Tuesday at the Heinrich Böll Foundation in Washington, D.C.

It is a way, Bollier says, of formally introducing the “political, public policy, cultural, social, personal, even spiritual” aspects of life into our economic system, which now, he says, can deal only with monetary value.

"You could say that it’s a different metaphysics than that of the modern liberal state,” he says, “which looks at the individual as the sole agent.”

The commons movement is a reaction to exploitative free market capitalism. It rejects the notion that resources, spaces and other assets are purely a means to wealth. It condemns the privatization of public works, such as the parking meters in Chicago, which allows the sovereign wealth fund that controls it to increase the rates.

When an economy allocates wealth to private entities, Bollier says, those property rights inevitably get consolidated until a few large institutions control its means.

The commons movement is a reaction to exploitative free market capitalism. It rejects the notion that resources, spaces and other assets are purely a means to wealth.

Instead, he says, we need to protect the commons with rules that bar individual ownership of that property. It is not, however, a space that is left as a free-for-all; it still has regulations and state recognition that prevent private groups from exploiting it.

The commons introduces a “role for organized self-governance as opposed to government,” Bollier says, “although they can be made complimentary.” The community manages the resource and has an involved interest in keeping others from decreasing its supply, he says, because the license belongs to the public.

But the commons is not restricted to natural resources—it extends to the Web, science and other technologies.

The Internet has become the setting for a fierce battle between public advocates that would like to designate forums as open and free, and companies that seek to control more of its content through bills like the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA). Many programmers have handed over their copyright ownership to the public in the form of General Public Licenses and Creative Commons licenses, which allow the public to use and contribute to forums without having to pay for usage. It also keeps companies from using personal information, as with Facebook, to target potential consumers.

Additionally, one-fifth of the human genome is privately owned through patents. Salt Lake City-based Myriad Genetics, for example, owns the breast cancer susceptibility gene, which guarantees monopoly control over research into cancer. It discourages many other researchers from exploring treatment, something that could ultimately stunt our capacity for medical advances.

The issue extends further: Monsanto uses Genetically Modified Organisms to displace natural seeds, multinational water bottle companies are privatizing groundwater, and software companies retain copyrights on mathematical algorithms that others then cannot use.

“Enclosure,” Bollier says about patents and private ownership, “is about dispossession. It’s a process by which the powerful convert a shared community resource into a market commodity … This is known as development.

“The strange thing about the commons is that it’s invisible because it’s outside of the market and the state,” Bollier says. “It’s not seen as valuable and isn’t recognized because it has little to do with property rights for markets or geopolitical power … but there’s an estimated 2 billion people around the world whose lives depend upon commons like fisheries, forests, irrigation water and so forth.”

The neoliberal market does not, paradoxically, grasp the purpose behind the commons. Our current system is one-dimensional, Bollier says, and is designed to attach a price to everything.

For years, sustainability experts have sought ways to incorporate moderation and conservation into the neoliberal model through such incentives as cap and trade. But companies, Bollier says, will pay the extra fees until it is no longer economically viable, proving that in a system of privatization, people are willing to shell out penalty payments as long as they do not disrupt their profits.

“There’s an allure in trying to meet microeconomics and neoliberal economics on its own ground,” says Carroll Muffett, moderator of the discussion and president of the Center for International Environmental Law, “to say ‘if you want to put a price on everything, here’s the price for this and look how massive the price is,’ whether it’s access to water or it’s pollination … but for me the danger is: Is meeting them on their own ground what we should be doing? Is there an inherent compromise in there that risks giving up something that ultimately cannot have a value put on it?”

Until recently, Bollier and Muffett say, there has been much wiggle room for the free market to expand. But as the basic needs of fresh water, energy and food are being overproduced or vanishing because of climate change, companies are finding that their only options are to draw from the scant resources of Third World communities to meet their profit margins. It is a test to see what, in the end, neoliberalism holds higher in value: money or life.

Muffett says that question has already been answered in the building of the coal-fired Medupi Power Station in South Africa. An assessment of the power station projected that there wouldn’t be enough water to keep the plant operating and meet the needs of the local community. The watershed adjacent to the plant is already so overtaxed that it doesn’t reach the sea. The company, Eskom, proposed to reroute water from another watershed for its main operation and use the local supply for its filtration system. It would raise the price of water for the community to keep “poachers” from draining the source.

“The water that’s being poached,” Muffett says, “is to give people access to fresh water and to water their crops for subsistence living.

"Putting a price on that for a community is ultimately missing the point. The water isn’t fungible. If I give you my gallon of water and you give me $1,000, I can’t drink the thousand dollars.”

Both Bollier and Muffett say this is the result of an economy based on the philosophies of Thomas Malthus and John Locke, whose models do not guarantee the right of existence. To exist, one must have money. It becomes the defining characteristic of life.

“That’s the risk in the natural capital approach,” Muffett says. “It’s saying ‘if you give me a thousand dollars, that’s a substitute for my bees, my pollinators, for the land where my ancestors are buried.’ And there is no substitute for that.”

This article was made possible by the Center for Study of Responsive Law.

© 2012 TruthDig.com

Thomas Hedges works for the Center for Responsive Law in Washington, DC

It’s Good to Be a Goldman

Here’s a get-out-of-jail-free card, and while we’re at it, take this obscenely huge bonus for having wrecked the economy. As the inspector general for the Troubled Asset Relief Program pointed out in a devastating report this week, “excessive” compensation was approved by the Treasury Department for the executives of the three companies that required the largest taxpayer bailouts to survive. Goldman Sachs chairman and chief executive officer Lloyd Blankfein testifies before the Senate Subcommittee on Investigations hearing on Wall Street investment banks and the financial crisis. (Photo: AP/Charles Dharapak)

In a stinging rebuke of Timothy Geithner’s Treasury Department, the report “found that once again, in 2012, Treasury failed to rein in excessive pay.” Whopping pay packages of $5 million or more were allowed by the Treasury Department for a quarter of the top executives at AIG, General Motors and Ally Financial, the former financial arm of GM.

But that’s nothing compared with the $21 million for last year’s work garnered by Lloyd Blankfein, CEO of Goldman Sachs, which is now free of TARP supervision. In addition to his paltry $2 million in salary, Blankfein received a $19 million bonus for his efforts. Not quite the $67.9 million bonus he got in 2007 before the market crash that his firm did so much to engineer, but times are still hard.

Goldman was the training ground for Robert Rubin and Henry Paulson, the two Treasury secretaries who did their best to grease the skids for Wall Street hustlers. It was Rubin under President Bill Clinton who pushed to get the law changed to allow investment banks like Goldman to become commercial banks, and it was Paulson under President George W. Bush who permitted Goldman to take advantage of that loophole and partake in the low interest Fed money available to the commercial banks. Throw in the AIG bailout that allowed the passage of billions of dollars to Goldman, and you get the picture.

What you may not know, and file this in the gallery of the terminally shameless, is the role of James A. Johnson, the longest serving director of Goldman Sachs and chairman of its compensation committee that awarded Blankfein his outrageous bonuses. Before being named a director at Goldman, Johnson served as the CEO of Fannie Mae when the once public-spirited federal housing agency joined forces with Countrywide CEO Angelo Mozilo and other mortgage scam artists in initiating the great housing bubble.

Back in 1996, Johnson had named Mozilo to be chair of Fannie Mae’s National Advisory Council, and together they cooked up a deal in which Fannie Mae came to rely on Countrywide’s proprietary CLUES software for short-circuiting the mortgage qualification process. Thus was born the housing mortgage debacle that to this day has haunted the economy. 

Countrywide announced its “Strategic Agreement with Fannie Mae” in a press release that all but predicted the subsequent housing crisis: “The objective is to expand markets to accommodate more customers and streamline loan processing in order to reduce the upfront cost of homeownership. This entails increased acceptance of Countrywide’s proprietary CLUES underwriting technology, greater usage of short form appraisals, expansion of streamlined loan products, flow sales for expanded criteria loans, and guideline waivers.”

That history became inconvenient back in 2008, when Democratic candidate Barack Obama picked Johnson, a lifelong Democrat, to head the search for a vice presidential candidate. Turns out Johnson was one of the beneficiaries of the new streamlined loan processing system, being what was known inside Countrywide as a “friend of Angelo,” entitled to fast-track approval on loans. As a result, Obama had to drop him, but not so Goldman Sachs, where Johnson had landed as a director and remains today as the chairman of the firm’s compensation committee.

They do flock together, and so it makes perfect sense that Johnson would approve the enormous bonus for Blankfein. In the end, it doesn’t matter whether these folks are Democrats or Republicans, nor whether they are operating at the highest levels of government or banking—they take care of their own. It is the new model of crony capitalism that must have Adam Smith turning in his grave, for it has nothing to do with free-market performance.

The invisible hand of that primitive and pure free market so celebrated in the folklore of capitalism as the essence of efficiency and productivity has been replaced by the all too visible hand of the fixer, who can combine government power and corporate profits to game the system. Yes, visible. Just observe how easily folks such as Rubin, Paulson and Johnson move through the revolving door between corporate and government power undeterred by critical media notice. And now it is Geithner’s turn.

© 2012 TruthDig.com

Robert Scheer

Robert Scheer is editor of Truthdig.com and a regular columnist for The San Francisco Chronicle.

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 Market: What determines the Price of Gold

gold

In this interview for Matterhorn Asset Management, Robert Blumen discusses some important but widely misunderstood elements acting on the gold price. He explains that frequently cited gold demand statistics have no relationship to the gold price. In addition, he explains that the annual gold mine production is of very little influence, as gold is hoarded, not consumed like other commodities.

Robert_Blumen

Lars Schall: Mr. Blumen, how did you become interested in the subject of gold in general?

Robert Blumen: There were two main influences when I was growing up in the 1970s and 80s. We went through a period of very high inflation in the United States. President Nixon imposed wage and price controls in a misguided, or perhaps very cynical, attempt to fight inflation. And Nixon’s successor, President Ford, handed out these silly little lapel buttons that said “Whip Inflation Now”. I remember seeing a young man on the TV news who had reported a chain store for the economic crime of raising the price of one of their products. He was being given some kind of award for this.

The second historical event was the gold bull market of the late 70s. Then Reagan came in along with Paul Volker who he inherited from the former president, Carter. I wasn’t paying much attention at the time but it stuck with me that gold had made this huge move.

Those two things came together and had a life-long influence on me. From that time I took away a curiosity about inflation. And that led me eventually to be curious about the whole field of economics. I was lucky that I came upon the Austrian School of Economics. I started reading Austrian economics in high school. The Austrian School emphasized gold as the basis of the monetary system and how well that has worked out over the course of human history.

L.S.: The growing interest in gold was underlined recently in a report that was published by the Official Monetary and Financial Institutions Forum (OMFIF), which has the title “Gold, the renminbi and the multi-currency reserve system“. (1) I think that this report is quite remarkable for various reasons. Do you agree?

R.B.: The report suggests that the international monetary system will accept gold in a more recognized way as a reserve asset. I think that this is already true, informally. There are many signs of this. Central banks have gone from selling to buying in recent years.

On the intellectual plane, I think there the consensus of many decades, namely that gold had been permanently removed from its monetary role, is changing. There is increasing discussion gold as a monetary metal among the elites. Several years ago, Benn Steil, a CFR economist wrote an opinion piece for the Financial Times (excerpted here) suggesting that the global gold standard worked better than the current system of floating rates. Robert Zoellick, who was president of the World Bank at the time, wrote a gold-friendly op-ed also in the FT a couple of years ago.

L.S.: What is your overall view on China?

R.B.: The popular perception of China an economic juggernaut on a path to eclipse the economies of the developed world. And how did that happen? Because their wise central planners chose an export-driven growth strategy. Many people now think that this strategy has gotten them to a point where they are deficient in domestic consumption, so they need to switch to a consumption-driven mode of economic growth; and that this also will be accomplished by the same wise central planners through a series of carefully designed five-year plans.

I think almost everything about this view is wrong; it is still largely a centrally planned economy and we know from the economics of the Austrian economist Ludwig von Mises, central planners cannot allocate resources.

L.S.: Why not?

R.B.: Mises wrote a paper in 1920, which became quite a famous and very controversial thesis in economics that was debated for decades. His paper was called Economic Calculation in the Socialist Commonwealth and you can find it for free at the Mises site.
economicCalculation

If you have a very simple economy where people make consumption goods with their bare hands, this can be done with central planning. But Mises was trying to explain the economic growth that has occurred in the world from small villages to vast modern economies with millions of goods and a complex division of labor. How could this type of growth occur? The process requires the development of a complex inter-relationship of capital goods, natural resources, and division of labor.

In a modern economy, the number of things that could be produced is nearly unimaginably large. And the number of different production methods for even a single good is incalculable. Take gold for example – finding a deposit is quite complex. There are many ways to look for it. Magnetic fields, chemistry, electrical, drilling. How much drilling and where? And then, when you have the deposit, should it be open pit or underground? Should a resource estimate be established first or start mining and follow the vein? And what about the metallurgy, the chemistry? What type of electrical power? What types of labor? Refine the ore on site, or partially refine? Build roads, rail, or ship the ore? There are millions of decisions and each one needs to be fully answered down to the hire or purchase of specific pieces of capital and individual workers.

Mises’ point was that all of these production decisions, not only what gets produced and what does not, but how it’s done, can only be decided on the basis of prices. In particular Mises noted that the prices of capital goods are crucial to production decisions. Contrary to what you read endlessly in the financial news about consumption driving the economy, spending on capital goods is the major part of total spending.

Only with prices can you have accounting, which is the ability to calculate profit and loss. In a market economic system, the important decisions are made on the basis of an anticipated profit and loss, which is the difference between the expected prices received on sales and the costs.

Mises had the insight that prices of capital goods are only a meaningful tool for resource allocation if they are established by a competitive bidding process among entrepreneurs. Entrepreneurs must choose how much they are willing to pay to acquire a specific capital asset and hire the skilled workers they need. Entrepreneurs are people who put at risk their own capital, and will either earn a profit or suffer a loss.

The diversity of entrepreneurs is a key part of this. Each business firm or company founder has a unique view of their own market, which may be highly detailed and based on years of experience. Mises also noted that each entrepreneur has his idea about what the customer will want. The market is a decentralized process in which the entrepreneur who has the best plan for each particular asset, along with some cash, will end up in a position to choose how that asset gets used.

In my own former job, I worked for a company that was in a small sub-sector of a sub-sector. There are perhaps half a dozen people in the world who truly understood our industry, maybe fewer. The entire world is full of experts like this, people who understand a particular industry or product really well.

Can you imagine, for example, that we would have iPhones or Kindles if the technology industry was planned by a central committee? Before the iPhone, competition in the mobile industry was primarily over how many minutes per month you got on weekdays or weekends. When Steve Jobs decided to develop the iPhone, he risked $150 million of his shareholder’s money and took on the US mobile industry, who did not want a disruptive phone taking away the spotlight from their monthly plans.

Central planning means the abolition of this type of competition. And that is the problem that Mises identified. There is no way to replace this competitive bidding process with a single planner or a planning committee. The central committee cannot bid against itself for the opportunity to acquire specific capital goods and labor. That would be nothing more than the left hand bidding against the right hand. They could assign fake prices to resources and pretend to calculate the best projects, but the numbers that would come out of this process would not be prices, they would be arbitrary numbers that did not reflect the best possible use of scarce productive resources. Mises showed that a central planner has no basis for making economic decisions, even if the process did not become entirely politicized, as it always does.

L.S.: So how does that apply to China’s growth prospects?

R.B: The China bull story as far as I can tell is based on the growth rate of GDP. Their economy is allegedly growing at 9%, if you believe the number. But the GDP number is more of a measure of spending. You can go along spending money for quite a while, but that doesn’t mean that it’s a useful allocation of resources in the face of scarcity. In the end if you have nothing that people want to show for it, it was wasted. And GDP does not capture that distinction.

chinagdpgrowth

The idea of export driven growth, it’s a contradictory concept. Economic growth means the ability of an economic system to produce more goods and services that people want and are willing to pay for, at a higher price than it cost to produce them. What they call export-driven growth is really a policy of holding their own currency exchange rate below the market rate in order to reduce the domestic monetary costs of their export industries. This creates a misallocation of labor and capital and a relative over-productive of export goods at the cost of fewer imports and fewer goods for domestic consumption.

If the cost of China’s policy were properly accounted for, it would be evident that the marginal export goods that is apparently produced at a profit (under the phony accounting of depreciating money) is in reality produced at a loss. But this loss is hidden because it is distributed over the entire population by reducing the purchasing power of their currency. And that impacts their ability to buy imported goods, or, as many domestically produced goods that have an import component.

They have a huge infrastructure bubble. They are building far more roads, bridges, power plants in relation to the rest of their capital structure. Bridges and roads to nowhere show up as GDP because spending is required to create them. But not all spending is created equal. Spending on thinks you don’t need or things that cost too much to produce is waste and it moves resources away from where they are needed to create real growth.

A lot of the writers in the West are in awe of China’s centrally planned economic system. A friend of mine, the American investment writer Chris Meyer, sent me news story a few years about the highly reputed UK fund manager Antony Bolton who had come out of retirement to manage a new China fund. Bolton cited the advantages of central planning compared to a market economy as one of his reasons for his enthusiasm. Things didn’t work out so well for Bolton. The fund has under-performed, which can happen for a lot of reasons besides believing in an incorrect political-economic theory. But I think that he came in right near the top of China’s planning bubble.

Economist Brad Setser wrote a paper around 2006 about the Chinese banking system. In his paper, he went back a number of years into the history of their banking system. Setser found that during this time, interest rates had been set at below-market levels by the central planners. This of course meant more demand for loans than banks could supply. Rather than rationing by price, resource allocation had been largely driven by political favoritism. Not surprisingly, most of the loans from this period went bad. The entire banking system eventually became nothing but a sea of bad loans. Then there was a bail-out, putting all of the bad loans in a bad bank. And then, they started over from zero and rebooted the whole system. But by the end of the time that Setser covered in his research, they had gotten right back where they started, full of bad loans again. More recently Edward Chancellor and Mike Monelly of the respected value investing firm GMO have produced a research piece saying more or less the same thing.

Overall they have a completely dysfunctional capital allocation process. That’s why I’m a bit of a skeptic on China.

L.S.: Last year the Austrian gold analyst Ronald Stöferle mentioned you in an interview with me for GoldSwitzerland. (2) Mr. Stöferle, in my opinion one of Europe’s best men in this field, said that you belong to the crème de la crème when it comes to the issue of price formation, and that you have something original and unique to say in your writings. So I am curious about this. But let’s begin the discussion with a more general question: In your opinion, where do you think that many analysts go wrong in their understanding of the gold market?

R.B.: I see four problems but in a way they are all different versions of one problem.

The first is a focus on the annual statistics. Whatever happened in the last year is not that significant because most of the gold that exists at the end of one year was there at the beginning of that year.

The second problem, which you could argue is a subset of the first one, is the emphasis mine supply. While a lot of ink or electrons are spilt on mine production, it has very little impact on the gold price.

The third is the vast amount of brainpower that goes into quantifying gold flows into market segments, such as industry, jewelry, coins, and funds. These quantities may be interesting for some purposes, but they’re not really that relevant if what you’re trying to do is understand the gold price, because there is not a connection between quantities and price in the way that most people think there is.

The last problem is the idea in some circles that there is a gold supply deficit. If you really look at the market, the concept doesn’t make sense. It’s based on a strange way of lining up the numbers to produce something like an optical illusion. The gold market, structurally, cannot be in a deficit in the way that any other commodity market could be in a deficit.

L.S.: We will discuss the last point in detail later. — As already mentioned, in the past you have written several pieces about the price formation mechanism in the gold market. Why have you chosen to focus on this area?

R.B.: I think the reason I have chosen to focus on this is that I see a lot of misunderstanding about this topic, and since very few people are active in this area, I have decided to take it on. I am hoping that through my writing and through interviews such as this one, I can play some part in shifting the thinking of the gold community.

There are a few others who get it. Stöferle who you mentioned has covered this in his gold report. Paul Mylchreest wrote about this exact issue when he was at Chevreux/Credit Agricole. Acting-man, a site that covers the Euro market, has some excellent content looking at gold and the price system from the correct perspective. James Turk and the people at GoldMoney are quite friendly to this concept. And I recall reading something by the fund manager John Hathaway in which he seemed to be saying approximately the same thing. I hope that I haven’t left anyone out.

I believe that the tide is slowly turning on this issue. While the incorrect view still predominates, increasingly the correct understanding is beginning to be expressed more frequently. A report such as Stöferle’s from a prominent research firm is a good sign.

L.S.: How does your view of gold price formation differ from the views of most analysts of the gold sector?

R.B.: I think I need to start out by giving a little background, and then proceed to directly answer your question. I am going to start by talking about where the wrong thinking comes from so you can see that it might make sense to someone to think that way. Then I will show where they go wrong and then, the correct way to think about it.

There are two different kinds of commodities and we need to understand the price formation process differently for each one. The first one I’m going to call, a consumption commodity and the other type I’m going to call an asset.

A consumption commodity is something that in order to derive the economic value from it, it must be destroyed. This is a case not only for industrial commodities, but also for consumer products. Wheat and cattle, you eat; coal, you burn; and so on. Metals are not destroyed but they’re buried or chemically bonded with other elements making it more difficult to bring them back to the market. Once you turn copper into a pipe and you incorporate it hull of a ship, it’s very costly to bring it back to the market.

People produce these things in order to consume them. For consumption goods, stockpiles are not large. There are, I know, some stockpiles copper and oil, but measured in terms of consumption rates, they consist of days, weeks or a few months.

Now for one moment I ask you to forget about the stockpiles. Then, the only supply that could come to the market would be recent production. And that would be sold to buyers who want to destroy it. Without stockpiles, supply is exactly production and demand is exactly consumption. Under those conditions, the market price regulates the flow of production into consumption.

Now, let’s add the stockpiles back to the picture. With stockpiles, it is possible for consumption to exceed production, for a short time, by drawing down stock piles. Due to the small size of the stocks, this situation is necessarily temporary because stocks will be depleted, or, before that happens, people will see that the stocks are being drawn down and would start to bid the price back up to bring consumption back in line with production.

Now let’s look at assets. An asset is a good that people buy it in order to hold on to it. The value from an asset comes from holding it, not from destroying it. The simplest asset market is one in which there is a fixed quantity that never changes. But it can still be an asset even when there is some production and some consumption. They key to differentiating between consumption and asset is to look at the stock to production ratio. If stocks are quite large in relation to production, then that shows that most of the supply is held. If stocks are small, then supply is consumed.

Let me give you some examples: corporate shares, land, real property. Gold is primarily an asset. It is true that a small amount of gold is produced and a very small amount of gold is destroyed in industrial uses. But the stock to annual production ratio is in the 50 to 100:1 range. Nearly all the gold in the world that has ever been produced since the beginning of time is held in some form.

indiagoldjewelry

Even in the case of jewelry, which people purchase for ornamental reasons, gold is still held. It could come back to the market. Every year people sell jewelry off and it gets melted and turned into a different piece of jewelry or coins or bars, depending on where the demand is. James Turk has also pointed out that a lot of what is called jewelry is an investment because in some parts of the world there’s a cultural preference for people to hold savings in coins or bars but in other areas by custom people prefer to hold their portable wealth as bracelets or necklaces. Investment grade jewelry differs from ornamental jewelry in that it has a very small artistic value-added on top of the bullion value of the item.

So, now that I’ve laid out this background, the price of a good in a consumption market goes where it needs to go in order to bring consumption in line with production. In an asset market, consumption and production do not constrain the price. The bidding process is about who has the greatest economic motivation to hold each unit of the good. The pricing process is primarily an auction over the existing stocks of the asset. Whoever values the asset the most will end up owning it, and those who value it less will own something else instead. And that, in in my view, is the way to understand gold price formation.

Many of the people who follow and write about this market look at it as if it were a consumption market and they look at mine supply and industrial fabrication as the drivers of the price as if it were tin, or coal, or wheat. People who look at gold as if it were a consumption market are looking at it the wrong way. But now you can see where the error comes from. In many financial firms gold is in the commodities department, so a commodities analyst gets assigned to write the gold report. If the same guy wrote the report about tin and copper, he might think that gold is just the same as tin and copper. And he starts by looking at mine supply and industrial off-take.

I wonder if more equity analysts or bond analysts were active in the gold area, if they would be more likely to look at it the same way they look at those assets.

L.S.: In your writings, you mention quite often the marginal price theory. Where does this theory originate and what is it all about?

R.B.: Marginal price theory has been part of economic theory for well over a hundred years. Most historians of the field of economics itself see the so-called marginal revolution as the boundary between the classical school of economics and modern economics. I learnt marginal price theory from Murray Rothbard‘s book, Man, Economy and State, but it’s something you could learn in any course on economics.

Marginal price theory was developed to answer a question a lot like what we are discussing today. It was known as the diamond-water paradox. The question that classically economists could not answer is, “Why do diamonds cost so much more than bread when bread is necessary for human life and diamonds are a luxury?” The problem was that classical economists did not think in terms of individual units. The breakthrough was the realization that we need to think about economic action in terms of individual units. A marginal theory says that human action acts on individual units of a good. The last unit that you buy or sell is always the marginal unit. As an economic actor you’re thinking, “What do I want to do with this next dollar? Do I want one more unit, one more dollars’ worth of diamonds or one more dollars’ worth of bread?

L.S.: How does that apply to the gold market?

R.B.: Gold is an asset. People buy it in order to hold it. The price of gold is set as people balance, at the margin, the amount of additional units of gold they want to hold against additional units of other assets or cash they want to hold, or consumption.

If you think of the possible gold buyer as the guy who is saying, “Do I want to hold one more ounce of gold or this $1,800 that I have?” The answer to his question is going to be different for each person and for each additional ounce. You might say “yes, I want one more ounce of gold instead of $1,800”. Now, you have an ounce of gold and if I ask you the question again you might say, “No, now that I have bought that additional ounce, I’ve got enough gold”.

On the supply side, are the people who own gold. From their point of view they have to answer the question, “Do I want to keep holding this ounce of gold or do I want to sell it on the market and have $1,800?” That $1,800 might stay in cash or maybe they have another use in mind for it. The supply side is everyone who has any gold and the buy-side of the market is anyone who has any money that they might want to put into gold.

Now, we can eliminate people who don’t know what gold is, the ones don’t know where to buy it or how to buy it, and those don’t want any because they don’t understand it, or maybe they do understand it but they don’t like it. But that still leaves a large number of people who might add to their position some quantity of gold at the right price. The people who already own gold, they could be active on either side of the market as a buyer or a seller. I want to emphasize that everyone who owns any gold at all is part of the supply-side of the market, not all at the current price, but at some price.

In micro-economics there’s a nice formalism where they use supply and demand curves. If you took a micro course you would have seen those. Many people might feel more familiar with these concepts if they can see the curves. You can do a lot with these curves but you can’t forget that they supply and demand curves are a way of aggregating of the preferences of all the individuals in the market. Murray Rothbard does a great job of explaining this.

In the market, people rebalance between gold and dollars until they’re happy with what they own. At that point there will be no more trading if no one ever changed their mind. But now and again people do change their mind; they realize they want more of one thing and less of another thing. Then you have more trading to bring the market back into balance.

In finance there is a similar concept called, optimal portfolio theory in which they see portfolio management in terms where people are trying to hold the ideal amount of each different form of savings. The portfolio manager rebalances based on the expected properties of each asset until they have the right mix.

L.S: Is it realistic to assume that everyone is willing to sell their gold? The gold buyers are perceived as very strong hands with long time horizon, people who hoard for a crisis.

R.B.: Many of the people who have bought gold in the last few years are not remotely interested in selling at the current price or even double the current price, but there is always a price or some combination of price and circumstances where somebody would put some of their gold on sale — maybe not all of it but some of it. And people on the money side of the market are asking the same question in relation to gold. The market balances all of those choices out and you have a price that brings out the quantities on both sides of the market into balance.

Maybe that’s not totally true, maybe some gold is held by people who wouldn’t sell it for any reason. But I think that the concept of the gold bug who plans to take it all to the grave is over-stated. I asked a person the gold business whether gold retail trade is all selling and no buying. He told me, “No of course not, there are always buyers and sellers”. After all, what is the point of having a store of value if you never use the value? That is John Maynard Keynes and his parable of the cake that is never eaten. But Keynes was really painting a caricature of the capitalist system which encourages saving for the future. The future does arrives at some point, whether it is old age or emergency, and at that time, the value of additional saving is diminished relative to spending.

And it is important to understand the cost of owning gold is not necessarily the amount of money you could get by selling it. Prices are only a way of quantifying true costs. The cost of owning an ounce of gold is whatever other sort of economic opportunity that you are sacrificing by owning the gold instead. People who own gold are every day looking at “what other economic opportunities am I giving up by holding this ounce of gold?” and then “Do I want to shift the next ounce of gold somewhere else that will give me a better return or a better consumption experience?”. If you could swap an ounce of gold for one unit of the American Dow Stock Average that was at the time yielding 12% then the cost of owning an ounce of gold is not owning a unit of the DJIA. The cost of owning gold is the opportunity cost, of which holding cash instead is only one possible choice.

Let me give you another example; if the price of a new car that you like is twenty ounces of gold, you might prefer the gold. The cost of owning the gold is 1/20th of a car. But if the price of that car in gold ounces dropped to one ounce, you might say, “Nineteen ounces of gold is enough and I’d like to have that new car”. And at that point it makes sense to swap a single ounce of gold for a car. You still have nineteen ounces of gold, so you haven’t sold all of your gold, but at the margin, you have sold the least valued ounce for something that became more attractive.

L.S.: So your view is basically that of portfolio balancing. Do you see the price mechanism in the gold market as similar to the share market?

R.B.: Yes, in terms of the formal model of how pricing works it is similar. You see you have a relatively fixed quantity of a good and people are bidding the price up or down, based on who is the most motivated to hold that good, who is most willing to sacrifice the opportunity to hold a different asset or to increase their consumption.

Now, gold is different than shares in that gold is more of a cash-like asset whereas with shares you are buying an actual business that has a management team, products, and a financial statement. So, in that way it’s different. But in terms of the pricing process it’s quite similar.

L.S.: You use in your writings also the concept of “reservation demand”. Can you explain this further, please?

R.B.: There are two different expressions of demand for a good. If I trade with you, I supply one apple and I demand one banana and you do the opposite. We each demand something by offering something in supply. When there’s a buyer and a seller, the buyer demands and the seller supplies. That is exchange demand.

The concept of reservation demand is where you demand something by holding onto it rather than selling it. This concept might sound unfamiliar but it is very relevant to everyone’s life. We all have reservation demand for many goods. I have reservation demand at the moment for an auto, a dining room table, a couch, a mobile phone, and so forth. My reservation demand for cash in my pocket is $20. Any good that you’re any holding onto rather than selling, you are exercising reservation demand.

Most of the market research about gold deals with exchange demand, which has the advantage that you can measure it. But reservation demand is far more relevant to the price. The profile of reservation demand among people who own gold is the main determinant of the gold price from the supply side.

A very closely-related concept is reservation price. This is the price where you would be willing to sell a good that you currently hold. In the gold market, you can think of every ounce with a price tag on it. Or maybe today, it would be a QR code instead of a tag. That price depends on who owns that ounce of gold and their reason for holding it. Short-term traders might take a position for five minutes looking for a small move. If they got their $10 move they would sell and lock in a profit. You have other people who have a much longer time horizon, years or even decades, and a much higher expectation of where they’re going to sell. And even the same person will have a different price tag on each ounce. The first ounce you might be more willing to sell than your last ounce. It is important to understand that reservation prices are not necessarily money prices; they may be construed more broadly in terms of economic opportunities as I described just a moment ago.

You also might object that a lot of people may not know exactly what their reservation price is in money terms because it is impossible to know accurately what the purchasing price of money will be at a time when you might want to sell. And this is true. Many gold buyers are envisioning that we are going to experience hyper-inflation in some countries and their plan might be to look for distressed assets that go on sale during a hyperinflation. That would be the time to sell their gold, or more accurately, to swap their gold for assets. This type of person may conceive of the reservation price as, “When I can buy a small business, like a cleaners, for five ounces of gold” or “when I can buy a rental apartment for 10 ounces of gold”. People conceive of the reservation price more broadly in terms of what is going on in the world around them.

There is reservation demand on the money side of the market as well. Why does everyone not spend all of their money? Because we have reservation demand for money. The reason that you have any money at all and you haven’t spent it is you see some potential use for that money, possibly when you see something you need or want at a low enough price, that the good comes in ahead of your reservation price in so you buy the good.

The bid and ask that you see in the gold market at any point in time is the price offered by the marginal non-buyer and the price asked by the marginal non-seller. The marginal non-buyer is the person whose reservation price for their money is just below the ask and the marginal non-seller is the person whose reservation price for that ounce of gold is just above the bid. The equilibrium of the market is that you have the bid and the ask which are the best reservation prices are on each side.

L.S. Why do you object to the emphasis on annual statistics in looking at this market?

R.B: What I want people to take away from this interview is that the gold price is not primarily a way of rationing gold that was mined during the last year, it’s a way of rationing all of the gold in the world because all of the gold is held and everyone who holds it cares about the price one way or the other.

The gold market is not segregated into one market for the gold that was mined this year and another market for gold that was mined in past years. The buyer doesn’t care whether he’s buying a newly mined ounce of gold or buying from somebody who had purchased gold that was mined 100 years ago. All of the buyers are competing to buy and all of the sellers are competing to sell.

I think that the focus on annual numbers is another residual of the domination of this space by commodities-type thinking.

L.S. You have stated that mine supply is not a key factor driving the gold price. Most gold analysts would not agree with you. Please explain your view on this.

If you pick up a typical research report on a gold market from a research firm or a bank, you will find that the main portion of the report is about annual quantities. Annual mine production is the most important followed by the jewelry melted, jewelry bought, coin and bar sales, dental, industrial, and central bank. And these quantities are thought by most analysts to be critically important in determining the gold price but that is just not the case.

Gold is always owned by whoever has puts greatest value on it. The ask price is the value placed on gold by the individual who values their last ounce the least of anyone who owns gold, compared to the last buyer who got rationed out of the market, the guy who values gold the most of anyone who does not own that last ounce.

Mining add about 1% to the total supply each year. If the total amount of gold is 5.05 billion ounces rather than 5.0 billion, that allows a few more of what were the marginal non-buyers to become buyers.

I think of the miners and the gold destroyers – such as dentists and the electronics industry, as a small delta on top of the price formation process that is mainly about who is willing to bid the most to hold all of the gold. Mine supply is only a small share of all gold.

The only difference between a miner and someone else who owns the same amount of gold is that the miners pretty much have to sell because they are businesses and they have to cover costs. The investor who owns some gold doesn’t necessarily have to sell, they can hold as long as they want to or until they have a better place for their savings than gold. You can say that they are price takers.

You can think of the miner as coming in to that market and selling down into the bid side of the market a little bit. Of course the miner is going to enable some people to get into the market at a lower price than without the miner because those buyers are not forced to go up higher into the ask side of the market in order to buy their gold.

A lot of analysts go even further down the road to absurdity by looking at the growth rate of gold mining. If you start out from year 1 where mine supply is, let’s say 2000 tonnes, and in year 2 mine supply is 2,500 tonnes, that is an increase of 20%. So the thinking goes, if supply is up by 20%, then demand also has to go up by 20% and that looks like a lot. If buyers bought 2000 tons last year and this year you are asking them to buy the same and then 20% more, how is that going to happen? It’s really not a big influence. In math terms, mine supply is the first derivative and now we are talking about second derivatives.

L.S.: You have given your reasons for thinking that the impact of mining on the gold price is small. Do you have any way of quantifying that?

R.B.: I can’t say for sure but there are some ways to make an educated guess.

One is that mine supply only adds around 1% or 2% to the total stockpile of gold. You can think of mining as a form of gold inflation with a rate of around 1-2%. If we were looking at the supply of money in a country or shares of a stock we would expect the value to be diluted by something close to the growth rate. Miners are diluting the value of the existing gold stock by 1%. If this is correct, and if everyone who owned gold was trying to maintain a constant amount of gold in purchasing power terms, then all other things being equal, a 1% dilution would have a 1% impact on price.

Another way of looking at it is when the supply of gold is 5 billion ounces there is a price quotation, which is the best ask. Now one year later mining has brought us up to 5.05 billion ounces. A group of buyers was able to come in and buy the additional 50 million ounces. Where do those new buyers value gold? If we assume static preferences, maybe slightly above their buy price. Not a lot above their buy price or they would have become buyers the year before. So that would suggest a slightly lower price, depending on how deep you have to go down into the bids to fill the additional ounces.

I looked at some figures from geologist Brent Cook showing that all of the gold mined in any one year is about equal to a few days volume on the LBMA. And the LBMA is not the only market where gold is traded in the world. I’m not saying that the difference due to mining is equal to the ratio of trading days to volume. But the point is, selling the mined gold onto the market is a very small part of the market activity. It’s easily absorbed into a liquid market.

L.S.: In your most recent article you argue that many analysts are incorrectly bullish or bearish, because their data does not support their price outlook. Is that so?

R.B.: You see every day in the media statements like “Gold investment demand is up by 20 percent this year” and that’s supposed to be very bullish. Or “investment demand was down by 15 percent” and that is supposed to be bearish.

There is also I remember a wave of stories in the early 90s as the gold industry was increasing up exploration and bringing new properties on line, where it was popular to say, “Gold mine supply was 2000 tons this year and it’s going to be 2500 tons next year”. That is an increase of 25 percent in supply, and wow, that sounds like a big, big increase in supply. To keep up, the demand side of the market has to step up by 500 tons this year otherwise the price is going to be much-much lower. That would be a huge increase in demand. Where is all that demand going to come from to keep up with supply?

When you see statement like that, what does that mean, exactly? It means something like this. If investors as a sector had a net addition to their portfolio of 50 million ounces one year and the next year they added 60 million ounces they’re calling that a 20 percent increase in demand. And that’s supposed to be very bullish.

This way of thinking about the market is not logical. What they call “supply” and “demand” is the amount of gold that got moved around the market. And that is fine as far as it goes. The problem is when they go from the number to the price. Those numbers do not characterize the forces of supply and demand that do set the price.

L.S.: Then what do they mean by supply and demand? And why do you dislike their definitions?

R.B.: Let me explain how they come up with these numbers and what they’re supposed to mean and then, where they go wrong.

What analysts typically do is divide the market up into sectors such as mines, investment, jewelry, industrial and central banks and maybe funds or ETFs get their own sector. Often a country like China is considered a sector. They want to measure the amount of gold that was bought and sold that year by individuals or actors within each sector. Those are gross amounts. From grosses you can compute net amounts. The net is the difference between the gross bought and sold quantity for that sector. There’s always a net outflow from the mine sector because they’re in business to sell. For any other sector, the net might be a positive or a negative number during a year because people may have bought more jewelry than they sold, or the opposite. During any given year investors might on net have added to their positions or diminished their holdings.

When you read “supply” or “demand” in the financial media, the definition is not consistent from one place to the next. There are a lot of ways people slice and dice all of the numbers. Everyone does not do it the say way. However you do it, you have a number made by adding up some gross and net quantities. For example, one report might say that supply is mine supply plus gross jewelry scrap. Someone else might include gross investment purchases, and someone else might count only net investment as part of the demand number. When you read that demand is up, what they mean is that one of these contrived Rube Goldberg definitions that has the misleading name “demand” has changed from one year to the next.

Let me give you one example. The CPM Group (a research consultancy that produces in-depth reports on the gold and silver markets) does it like this: they define supply as the all of following: mine supply, the gross industrial sales, and gross jewelry sold. CPM defines demand as the sum of all of these: gross industrial purchases, gross jewelry purchases, net central bank activity and net investor activity.

CPM uses a mix of gross quantities and net quantities. This definition by itself strikes me as quite eccentric because of the mixture grosses and nets into the same aggregate. Gross quantities measure a flow, while nets are the change in magnitude of a stock. What happens when you add grosses and nets together? I have no idea. This reminds me of breaking the rules of dimensional consistency, something that the physics faculty at my university prohibited.

Now let’s delve into these net quantities a bit more. To simplify the situation, suppose there are only two sectors in the market. Let’s call those two sectors “mines” and “everyone else”. Then the relationship between the quantities is very simple. Whatever the miner sold somebody bought. There’s always a market for gold at some price. An ounce of gold is worth more than zero. Any quantity of gold that someone offers on the market will find a buyer at some price and that gold will end up in someone’s portfolio or maybe consumed. Mine supply gross (or net) sold is equal to everyone else net purchased. That is a simplified understanding of a two-sector market.

Now let’s complicate the model a bit more to get it closer to reality. If you have three sectors, mines, jewelry and investment, then you can have a net outflow from jewelry one year and that would have to show up as a net inflow into investment because all the quantities have to balance out. Everything still has to net out to zero across all sectors. The gold miners are always sellers but any other sector could be a net buyer or a net seller in any one year period.

You can keep making the model more complex by adding more and more sectors. Each time you add another sector to your model, that sector has inflows and outflows. But this doesn’t change the fundamental logic which is that every ounce that is sold in one place is purchased in another place. All of the flows have to balance out to the net change in the world’s total position, which is mine supply less destruction. And that is always a positive number as long as anyone has been counting.

Now, I’ve been saying that this is at best, not very useful, and at worst, misleading. By now you probably want to know, “what is the problem?” The problem is that these quantities and these flows have no causal relationship with the gold price. All we have done is to add up some of the volume in the market and shifts in aggregate holdings. But we are still no closer to the price because neither the volume of trading, nor position changes as are causes of the price. Quantities are not the cause of the gold price. Gross quantities are not the cause of the gold price. Net quantities are not the cause of the gold price. And so it must also be true that any Frankenstein monster number you invent, even if you give it a familiar name, like “supply” and “demand” also does not cause the gold price.

Suppose I tell you that there was a net flow of gold from sector A to sector B last year, then what is the impact on the gold price? There is no way to say. The gold price could be higher, lower or unchanged when gold moved from A to B. If the gold moved from A to B because the buyers on the A side were more aggressive and raised their bid prices, then you would see a higher price. If gold flowed because the people in B valued it less, so they were willing to let it go for less in return, then you would see a lower price. If both of those things happened, there would be a lot of trading but the price might end up about the same.

A price is a quantity of money that is exchanged for a quantity of gold. In these voluminous reports about mine supply and jewelry and everything, they’re only looking at quantities of gold. There is no way that looking at quantities alone can tell you anything about price because there is no money involved. It’s sort of like the is-ought problem in philosophy, which says that you cannot derive a sentence containing “ought” from any number of propositions that contain only “is”. You cannot make any conclusions about money if you do not have money in your premises. No matter how hard you study these quantities it won’t tell you anything about the price. Whatever the driver is of the price, it has to involve both gold and money.

L.S.: If not cause and effect, is there any relationship between these quantities and the gold price?

R.B. : Yes, it’s almost the opposite of what most people think. The gold price is formed by a balancing process, as investors shift different assets in order to hold the amount of gold, cash, and other assets they want. These quantities come about because of discrepancies between what people own, what they want, and the collective preferences of the rest of the market. These discrepancies are resolved by exchanging and that gets counted as a quantity. But these quantities do not drive the price. The more preference changes among the buyers and sellers, the greater the volume of trading required to get back to an equilibrium.

I recall Warren Buffet describing a cartoon of a financial news anchor with the caption, “There was no volume on the market today because everyone was happy with what they own”. This is quite funny but the serious point is that buying and selling comes about because there are people who wish to change their position in a way that is complementary to what someone else wants, so they are both able to change their positions to something that they like better. The one side wants more cash, less god; the other wants the opposite.

The volume of buying and selling shows how far out of adjustment people are between their own positions and the preferences of other people in the market which is what creates the opportunity to trade. Buying and selling as such do not cause the price, buying and selling come about because of a preference disequilibrium. That disequilibrium requires trading to equilibrate but it does not tell us at what price the trading occurs.

There might be a statistical correlation between, for example, a net inflow into one sector and higher (or lower) prices. If someone has a statistical model that works, that is great. But it’s not causal.

But it seems to me that even if someone has discovered correlations like that, they will be coincident with the price, rather than predictive. In order to forecast the price, you need an indicator that moves in advance of the price. You read all the time how bullish it is that people bought so many coins, or bars or whatever, but buying that was the cause of the price going up, then it would have already gone up due to the buying. That would not help you forecast at all.

L.S.: You say that the way supply and demand are reported in the financial media is confusing. Please explain to our readers your thought process in more detail.

demandsupplycurve

R.B.: When the average reader, or even the quite sophisticated reader sees the word “supply” and “demand” they don’t think to ask, “what is definition of that word” because we already have a good intuitive feeling about what those words mean. And we all know that an increase in demand drives the price higher, while an increase in supply sets us up for a lower price. And that is true if you use the terms “supply” and “demand” correctly to mean as the intensity of investor preferences on each side of the market.

If the author got all their numbers right – and some of these firms go to a lot of trouble to count up every microgram of gold dust in the entire world – then these statements are accurate in a very limited sense. But it is not true that a quantity made out of the sum of various flows and position shifts has any relationship to the forces that set the market price.

Everyone will agree: “The price of gold is set by supply and demand”. But what does did we all just agree on? Correctly understood, this statement means that the price balances out the overall the set of choices people make to offer on their desired terms from each side of the market. The price results from balancing those two sides.

Suppose that instead of “supply” and “demand” these aggregates were called X and Y, if you like algebra. Now if I change my statement to say “The price of gold is set by X and Y” you are immediately going to ask “what do you mean by X and Y?” And when you find that X = A + B + (C – D) + (E – F), etc. and Y is something similar it starts to make a lot less sense. At that point your head will probably start exploding. When you use X and Y in place of “supply” and “demand”, you no longer have a true statement.

The problem happens by starting out from truth and then changing the definitions of terms so the statement looks the same but it is no longer means the same thing and the thing that it now means is not true. By using words that have a clear meaning in our minds, but using them to mean something else this creates immense confusion. And hardly anyone realizes this when they are reading an innocent-looking statement.

L.S.: If not by quantities, then can the gold price otherwise be analyzed quantitatively?

R.B.: The gold price is set by investor preferences, which cannot be measured directly. But I think that we understand the main factors in the world that influence investor preferences in relation to gold. These factors are the growth rate of money supply, the volume and quality of debt, political uncertainty, confiscation risk, and the attractiveness (or lack thereof) of other possible assets. As individuals filter these events through their own thoughts they form their preferences. But that’s not something that’s measurable.

I suspect that the reason for the emphasis on quantities is that they that can be measured. Measurement is the basis of all science. And if we want our analysis to be rigorous and objective, so the thinking goes, we had better start with numbers and do a very fine job at measuring those numbers accurately. If you are an analyst you have to write a report for your clients, after all they have paid for it, so they have to come up with things that can be measured and the quantity is the only thing that can be measured so they write about quantities.

And in the end this is the problem for gold price analysts, you’re talking about a market in which it’s difficult to really quantify what’s going on. I think that looking at some broad statistical relationships over a period of history, like gold price to money supply, to debt, things like that, might give some idea about where the price is going. Or maybe not, maybe you run into the problem I mentioned about synchronous correlations that are not predictive.

Part of the problem is that statistics work better the more data you have. But we really don’t have a lot of data about how the gold price behaves in relation to other things.

Anecdotal Quips Regarding The Inevitable Failure Of Blackberry (ex-Research In Motion)

Research in Motion, now known as Blackberry, has had a tripling of price over the six months or so. For those that don't follow me, I warned when Blackberry was in the $60's that it was just about a goner (reference Hindsight Is 20/20, And As Luck Has It Our Foresight On Research in Motion Was Right On The Money Two Years Ago). Like Apple, it had a lot of followers who spent more time looking backward than forwards, hence were literally and figuratively blind to the upcoming crash.

image008image008

Well, after tripling in an overdose of hopium, here we go again. Those who rode the fantasy narcotic-induced ride up obviously didn't read my post "Smartphone Hardware Manufacturers Are Dead, Long Live The Google-like Solution Providers".

You see, the problem is that Google's new age "less than free" business model has sparked a hardware war that no company that does not manufacturer its own parts can hope to win, or even flourish in - that is unless it is an expert in low margin sales. That... Blackberry is not! The Andriod tech, functionality, and mindhsar on both the hardware and software side is leapfrogging the competition (primarily Windows, Blackberry, iOS devices) almost QUARTERLY! With new handsets launching every six months boasting new functionality, and new OS versions launching every six months (alternating, thus creating an effective 3 month cycle) at the same many (or most) companies are slashing prices... How is a company like Blackberry which took two years to launch the revamped, yet barely competitive Blackberry OS10 to compete while maintaing a semblance of healthy margins or material market share? Quick answer, it can't! It's as simple as that.

All of the margin warnings that I gave throughout 2010 and 2011 still hold true today. Google's Android business model was designed to gut companies such as Nokia, Blackberry and Apple - all three of which need wide margins in order for thier business models to thrive. Two years ago, I warned that Android would compress the margins of all three of these companies - to Google's benefit and to their detriment. Let's see if I was correct...

 thumb image004 copythumb image004 copy

So, do Blackberry investors really think this time is different??? I answered this question many months ago...

Relevant research...

  1. The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download
  2. The Complete, 63 pg Google Forensic Valuation is Available for Download
  3. Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All
  4. Subscribers see Apple 4Q2012 update professional & institutional and Apple 4Q2012 update - retail

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Women: What The Hell’s Wrong With Us Now?

New York Times columnist Nicholas Kristof, a real credit to his gender, has come through for the ladies again, writing this past Sunday on why she's (rarely) the boss. And his answer? Why, sadly, it's that we lack ambition. This conclusion is total...

Defiance: “This Is A Standing Invitation To My Fellow Americans…”

Editor’s Note: James Wesley Rawles is a  former U.S. Army Intelligence officer, owner of the wildly popular Survival Blog web site, and author of numerous books including Patriots: A Novel of Survival in the Coming Collapse.

In the following open letter, James Rawles addresses the one question that’s on the minds of millions of Americans who see their country being systematically stripped of their fundamental laws and protections. 

What can we do?

We will resist. We will defy. We will unite.

Not One More Inch. 


Nunc Pro Tunc: The Coming Day of Burn Barrels and Blessings

This is a standing invitation to my fellow Americans: If congress ever enacts a law mandating the registration and/or a production ban of detachable magazine semiautomatic rifles then you are hereby invited to the town square of your local community. There, burn barrels will be set up and we will publicly burn Form 4473s, FFL Bound Books, state and local registration records, and the sales receipts for every firearm in the United States. On that same day, FFL holders and public officials holding electronic firearms records will simultaneously erase those records, permanently and irretrievably. (Using special file erasure software such as BlanccoX-Ways, and Stellar Wipe, or though the physical destruction of disk drives.)

Spontaneous Gatherings, Spontaneous Combustion

This burn barrel day–likely to be held the day after the President signs any new draconian legislation–will include speeches, public prayers, and the blessing of those who have gathered by ministers, rabbis, and priests.

The core of the activities on that day will be stalwart public defiance of any new unconstitutional law(s), the open and notorious destruction of records that might be used to enslave us, and vocal public affirmations of solidarity of free men and women, in the face of tyranny. This will be a defining moment for America–a line drawn in the sand. We will forthrightly declare that we will not obey any unconstitutional law and that we will treat it dismissively, as if it had never been enacted – nunc pro tunc. We will pledge ourselves to the defense of liberty, both individually and collectively. We will vow that if ever called to jury duty, we will nullify any unconstitutional laws, vacating the charges against the accused, in accordance with our long-standing right as jurors. (See: www.FIJA.org.)

The Law is On Our Side

We will publicly re-affirm some long standing precepts of American jurisprudence, to wit:

“The General rule is that an unconstitutional statute, though having the form and name of law is in reality no law, but is wholly void, and ineffective for any purpose; since unconstitutionality dates from the time of it’s enactment and not merely from the date of the decision so branding it. An unconstitutional law, in legal contemplation, is as inoperative as if it had never been passed. Such a statute leaves the question that it purports to settle just as it would be had the statute not been enacted.

Since an unconstitutional law is void, the general principles follow that it imposes no duties, confers no rights, creates no office, bestows no power or authority on anyone, affords no protection, and justifies no acts performed under it…

A void act cannot be legally consistent with a valid one. An unconstitutional law cannot operate to supersede any existing valid law. Indeed, insofar as a statute runs counter to the fundamental law of the lend, it is superseded thereby.

No one is bound to obey an unconstitutional law and no courts are bound to enforce it.” – 16 Am Jur 2d, Sec 177 late 2d, Sec 256

Never Again!

Recognizing the many sad lessons of civilian disarmament and subsequent genocides in the 20th Century, we will make bold and forthright statement: Never Again! Wewill not submit to the unlawful decrees of tyrants. We will not meekly go their jails and internment camps. We will fight for our liberty, to our dying breath.

Come Armed, Come Masked

I recommend that all adults who publicly assemble at these burn barrel events do so armed, as is our right. And those who come armed should also wear masks, to protect themselves from malicious prosecution. I plan to wear a Guy Fawkes mask, but you can wear a bandana, face muffler, or the face mask of your choice. Joining you, also wearing masks, will be many mayors, sheriffs and their deputies, chiefs of police and their officers, town council members, clergy, and people of all walks of life. We vastly outnumber the tyrants. The tyrants deserve nothing but our scorn and derision. Their fate is already sealed.

Plausible Denial

After this fateful day has come and gone, FFL holders and public officials will be able to recount: “I had no choice. My records were taken by men with guns who were wearing masks!” (So they’ll have no excuse if they don’t cooperate with this nationwide display of civil disobedience.)

God Bless The Republic. Down with Tyrants. We Will Prevail!

- James Wesley, Rawles – January 28, 2013

Payday Loan Sites’ Dirty Tricks To Boost Traffic

A Sky News investigation has found that some payday loan brokers have benefitted from hacking into websites to divert the history and status of a legitimate business to their domain. This increases their ranking on Google, and the tactic has given unr...

Frontrunning: January 25

  • Fed Pushes Into ‘Uncharted Territory’ With Record Assets (BBG)
  • Next up in the currency wars: Korea - Samsung Drops on $2.8 Billion Won Profit-Cut Prediction (BBG)
  • China Warns ‘Hot Money’ Inflows Possible on Easing From Abroad (Bloomberg)
  • BOJ Shirakawa affirms easy policy pledge but warns of costs (Reuters)
  • Merkel Takes a Swipe at Japan Over Yen (WSJ)
  • Wages in way of Abe’s war on deflation (FT)
  • Italian PM under fire over bank crisis (FT)
  • Senior officials urge calm over islands dispute (China Daily)
  • Spain tries to peel back business rules (FT)
  • Rifts Over Cyprus Bailout Feed Broader Fears (WSJ)
  • Soros Says the Euro Is Here to Stay as Currency War Looms (BBG)
  • Deutsche Bank Debt Salesmen Said to Go Amid Pay Overhaul (BBG)
  • Cameron pitches new deal as good for EU (FT)

Overnight Media Digest

WSJ

* U.S. President Barack Obama nominated a former prosecutor turned white-collar criminal defender, Mary Jo White, as his choice for top U.S. securities regulator.

* Microsoft's quarterly earnings slipped 3.7 percent as the software giant reported weaker sales in its business and entertainment divisions, though revenue in its core Windows business strengthened.

* Citigroup Inc's private bank has decided to pull its $187 million investment from SAC Capital Advisors LP, the latest in a string of client defections that have occurred amid scrutiny of the hedge-fund firm.

* JP Morgan will not be trying 'staple financing' in the potential Dell deal, a possible ramification of a court decision criticizing what was once a common practice on Wall Street.

* Samsung Electronics Co on Friday said its fourth-quarter profit rose 76 percent to a record high on strong smartphone sales and higher margins in its chip business.

* Morgan Stanley Chairman and Chief Executive James Gorman is expected to take a second straight annual pay cut for 2012, as the securities firm continues to struggle to get back on track.

* Casino operator Las Vegas Sands Corp has stopped executing international money transfers for its high-rolling customers and is overhauling its compliance procedures as it faces scrutiny from U.S. and international regulators, people familiar with the matter said.

* Bristol-Myers Squibb Co agreed to pay $80 million to settle cases involving 15 patients killed or hurt during company-sponsored testing of an experimental drug for hepatitis C.

FT

BARCLAYS EXECUTIVES FACE MOUNTING LIBOR PRESSURE Top executives at Barclays were aware the bank was manipulating its submissions to Libor rate-setting panel in November 2011, almost a year earlier than previously disclosed, emails suggested. (link.reuters.com/tud55t)

OSBORNE STICKS TO AUSTERITY PLAN Finance minister George Osborne will not be diverted from his austerity plan even if data on the strength of British economy disappoints. (link.reuters.com/xud55t)

GOVERNMENT TO DELIVER CHILDCARE BOOST Britain's coalition government is planning to spend 1.5 billion pounds on a package of measures to help families cope with nursery fees. (link.reuters.com/vud55t)

FEARS RAISED OVER ECB FUNDING SCHEME Senior bankers are becoming increasingly concerned about the European Central Bank's special longer-term funding scheme, saying that it could encourage the creation of a two-tier banking market. (link.reuters.com/dyd55t)

RETAILERS MAKE APPEAL ON TAX AVOIDANCE High street retailers said the government needed to take action to stop tax avoidance by multinational companies. (link.reuters.com/bed55t)

RIM BOOSTED BY LENOVO INTEREST Lenovo has signalled it could be interested in buying Research In Motion, lifting the shares in the troubled Canadian maker of BlackBerry smartphones

NYT

* U.S. President Barack Obama tapped Mary Jo White, a former United States attorney turned white-collar defense lawyer, to lead the Securities and Exchange Commission. He also renominated Richard Cordray as director of the Consumer Financial Protection Bureau.

* Jill Sommers, a Republican regulator overseeing the investigation into MF Global's collapse, has abruptly decided to depart the Commodity Futures Trading Commission, the agency said.

* After a year of mixed financial performance at Morgan Stanley, the firm's chief executive, James Gorman, is expected to take a second annual pay cut.

* AT&T sold a record number of smartphones over the holiday season, but its quarterly earnings took a hit from pension costs and Hurricane Sandy.

* Microsoft's biggest product in decades, Windows 8, helped lift sales of the company's flagship operating system business, but not enough to rejuvenate overall growth.

* Greenhill reported a 4 percent drop in advisory revenue last year, a week after larger rivals JPMorgan Chase & Co and Morgan Stanley posted much larger declines.

* HCA Holdings, the largest profit-making hospital chain in the United States, was ordered to pay $162 million after a judge ruled that it had failed to abide by an agreement to make improvements to dilapidated hospitals that it bought in the Kansas City area several years ago.

* A federal appeals court in the United States tossed out $172 million in damages that Mattel had been ordered to pay MGA Entertainment, the maker of Bratz dolls. It was the latest move in a bitter nine-year legal dis

Canada

THE GLOBE AND MAIL

* An executive from a Quebec engineering firm has testified that many of the province's top engineering companies, including the troubled giant SNC Lavalin Group Inc, colluded to pay political kickbacks and to win fixed construction contracts.

Michel Lalonde, the president of Genius Conseil, told Quebec's construction inquiry on Thursday that a list of top companies were complicit in the scheme to secure road and sewer design and construction surveillance contracts by sending bribes and kickbacks to the political party headed by the city's mayor.

* Shawn Atleo, national chief of Assembly of First Nations, said any divisions in the aboriginal community are trumped by shared objectives, including ending "the status quo", and that many of the community's goals are similar to those of the rest of Canadians.

Reports in the business section:

* Talisman Energy Inc plans to slash its general and administrative (G&A) costs by "at least 20 per cent over all", Helen Wesley, the company's executive vice president of corporate services, told the CIBC Whistler Institutional Investor Conference on Thursday.

* Agrium Inc raised its fourth-quarter earnings estimate based on robust grain and oilseed prices that are helping boost demand for its fertilizers and other products. The Calgary-based company said it expects fourth-quarter earnings to be slightly above C$2 per share, compared with its previous guidance of C$1.50 to C$1.90.

NATIONAL POST

* Facing drastically falling oil revenue, Alberta Premier Alison Redford set the stage for serious spending cuts and possible tax hikes during a televised fireside chat on Thursday.

Redford blamed a "bitumen bubble" and warned Albertans about austere times to come. The government has forecast a deficit in the current fiscal year of C$3 billion.

FINANCIAL POST

* At least one Calgary oil executive is appealing to Canadian pocket books as the U.S. state department decides the fate of TransCanada Corp's Alberta-to-Texas Keystone XL pipeline. Export constraints on Alberta heavy oil production are costing each Canadian C$1,200 per year, Cenovus Energy Inc CEO Brian Ferguson said on Thursday.

* Canadian wireless carriers must make changes to their networks and systems to support 911 emergency text messages from hearing and speech impaired persons, the federal telecom regulator said on Thursday. The service would only be provided to the hearing and speech impaired who have pre-registered for it with their wireless carrier, the Canadian Radio-television and Telecommunications Commission (CRTC) said.

China

CHINA SECURITIES JOURNAL

-- China will build six control standards, including PM2.5, in 113 cities and will release the monitoring data before the end of December this year, Environment Minister Zhou Shengxian said.

-- The number of Chinese mobile phone users reached 1.11 billion as of the end of 2012, according to Ministry of Industry and Information Technology data released on Thursday.

-- China Financial Futures Exchanges has approved the application of account opening from several QFII institutions.

CHINA DAILY (www.chinadaily.com.cn)

-- Alibaba Group Holdings, China's largest e-commerce company, plans to join hands with partners to build a logistics network across China that can support 100 billion yuan worth of transactions a year within the next decade.

-- China is expected to lead emerging economies in spending on consumable products, with an estimated average annual increase in total consumer spending of 15 percent every year to 2016, according to a report released by the Economist Intelligence Unit and U.K. research firm Mintel.

SHANGHAI DAILY

-- Shanghai expects to set up China's first free trade zone in Waigaoqiao in Pudong New Area as the city bids to become a global trade hub by 2020, a senior official said. Unlike a bonded area, a free trade zone offers businesses lower taxes, a more liberal currency exchange and better efficiency due to less supervision.

CHINA BUSINESS NEWS

-- New bank loans in January are expected to reach between 1 trillion yuan and 1.2 trillion yuan as the economy rebounds, according to market participants. Total new loans for 2013 are expected to reach 8.5 trillion yuan to 9 trillion yuan.

Fly On The Wall 7:00 Market Snapshot

ANALYST RESEARCH

Upgrades

AMC Networks (AMCX) upgraded to Equal Weight from Underweight at Morgan Stanley
Autodesk (ADSK) upgraded to Conviction Buy from Sell at Goldman
eBay (EBAY) upgraded to Outperform from Market Perform at Bernstein
EQT Midstream Partners (EQM) upgraded to Outperform from Neutral at Credit Suisse
Horizon Bancorp (HBNC) upgraded to Outperform from Market Perform at Raymond James
JPMorgan (JPM) upgraded to Buy from Hold at Deutsche Bank
KLA-Tencor (KLAC) upgraded to Hold from Sell at Deutsche Bank
NetEase.com (NTES) upgraded to Buy from Neutral at UBS
QLogic (QLGC) upgraded to Equal Weight from Underweight at Morgan Stanley
STMicroelectronics (STM) upgraded to Outperform from Neutral at Exane BNP Paribas
Sony (SNE) upgraded to Buy from Neutral at BofA/Merrill
Tiffany (TIF) upgraded to Overweight from Neutral at HSBC
Union First Market (UBSH) upgraded to Outperform from Neutral at RW Baird

Downgrades

Canadian Pacific (CP) downgraded to Sell from Hold at Canaccord
City National (CYN) downgraded to Neutral from Buy at SunTrust
Dime Community (DCOM) downgraded to Equal Weight from Overweight at Barclays
Flextronics (FLEX) downgraded to Neutral from Buy at UBS
Flowserve (FLS) downgraded to Buy from Strong Buy at CL King
Ford (F) downgraded to Equal Weight from Overweight at Barclays
Goldman Sachs (GS) downgraded to Hold from Buy at Deutsche Bank
Goldman Sachs (GS) downgraded to Neutral from Buy at Citigroup
Hanmi Financial (HAFC) downgraded to Market Perform from Outperform at FBR Capital
IAMGOLD (IAG) downgraded to Neutral from Buy at BofA/Merrill
Janus Capital (JNS) downgraded to Sell from Neutral at Citigroup
Janus Capital (JNS) downgraded to Underperform from Neutral at Credit Suisse
Medtronic (MDT) downgraded to Hold from Buy at Wunderlich
Noble Corp. (NE) downgraded to Hold from Buy at Jefferies
Scripps Networks (SNI) downgraded to Underweight from Equal Weight at Morgan Stanley
Select Comfort (SCSS) downgraded to Equal Weight from Overweight at Barclays
Skullcandy (SKUL) downgraded to Neutral from Overweight at Piper Jaffray
United Continental (UAL) downgraded to Underperform from Neutral at BofA/Merrill
Virginia Commerce (VCBI) downgraded to Market Perform from Outperform at FBR Capital

Initiations

Accenture (ACN) initiated with an Overweight at Evercore
Actavis (ACT) initiated with an Overweight at Morgan Stanley
Amazon.com (AMZN) initiated with a Buy at ISI Group
Aon Corp. (AON) initiated with a Market Perform at Wells Fargo
BioMed Realty (BMR) initiated with a Neutral at Goldman
BioScrip (BIOS) initiated with a Buy at SunTrust
Boston Properties (BXP) initiated with an Overweight at Evercore
Brown & Brown (BRO) initiated with a Market Perform at Wells Fargo
Forestar Group (FOR) initiated with a Buy at DA Davidson
Marsh & McLennan (MMC) initiated with an Outperform at Wells Fargo
Park-Ohio (PKOH) initiated with an Outperform at Imperial Capital
Red Hat (RHT) initiated with an Outperform at Northland Securities
Starz (STRZA) initiated with a Sell at Stifel Nicolaus
Starz (STRZA) initiated with an Underweight at Evercore

HOT STOCKS

AT&T (T) sees FY13 EPS growth to be upper-single digits or higher
Consensus for FY13 revenue is $128.3B
Sees FY13 consolidated margins to be stable
Starbucks (SBUX) targets opening of about 1,300 net new stores globally in FY13
Expects to open 1,500 new stores in U.S. over next five years
Said China a ”significant market opportunity,” expects to have 1,500 stores there by 2015
Court of Appeals agreed with Mattel (MAT), verdict, damages on MGA's claims reversed
Belkin to buy Cisco's (CSCO) home networking unit
Juniper (JNPR): Trends driving network investment in cloud/mobility intact
Sees improved momentum in routing in 2013 in Europe and U.S.
Expects to expand FY13 operating margins
City National (CYN) expects net income to grow 'very modestly' in 2013
US Airways (LCC) reached tentative agreement with flight attendants

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
KLA-Tencor (KLAC), Synaptics (SYNA), QLogic (QLGC), ResMed (RMD), Rambus (RMBS), Tempur-Pedic (TPX), Juniper (JNPR), Microsoft (MSFT), Cirrus Logic (CRUS)

Companies that missed consensus earnings expectations include:
Key Technology (KTEC), E-Trade (ETFC), Sterling Financial (STSA), AT&T (T)

Companies that matched consensus earnings expectations include:
Western Alliance (WAL), IBERIABANK (IBKC), Starbucks (SBUX)

NEWSPAPERS/WEBSITES

U.S. electricity producers have increased their use of natural gas now that technological advances have unlocked vast amounts of the fuel in shale rock formations. But executives at some top utilities are wary of relying too heavily on natural gas to make electricity, concerned that its current low price may not last, the Wall Street Journal reports
As Samsung Electronics (SSNLF) and Apple (AAPL) attempt to defend their dominance in the smartphone market, the latest data show China’s Huawei Technologies Co. ranked third in terms of market share for the first time, an indication that a rapid increase of smartphone users in China and other emerging markets may be starting to alter the global landscape, the Wall Street Journal reports
Innovation Network Corp. of Japan, a Japanese state-backed fund, wants a Nissan Motor Co. (NSANY) and NEC Corp. JV to buy Sony’s (SNE) lithium-ion battery unit to prevent rivals in China and Taiwan from getting its technology as the TV maker looks to offload non-core businesses, the Daily Yomiuri said, Reuters reports
Lockheed Martin (LMT) is challenging the U.S. government in court over $13.6M in research tax credits in a case that tests the often unclear line between research and production, with future R&D claims by other companies possibly at stake, Reuters reports
Fed Chairman Bernanke’s unprecedented bond buying pushed the Fed’s balance sheet to a record $3T as he shows no sign of softening his effort to bring down 7.8% unemployment, Bloomberg reports
Over half of the $18T in national daily trading of energy swaps has moved to futures exchanges from the over-the-counter market in response to the U.S. regulatory overhaul aimed at increasing transparency--Dodd-Frank--following the 2008 financial crisis, Bloomberg reports

SYNDICATE

Adecogro (AGRO) files to sell 8.7M shares of common stock for holders
Anthera Pharmaceuticals (ANTH) files to sell common stock
ArrowHead Research (ARWR) files to sell common stock and warrants
BG Medicine (BGMD) enters $12M common stock purchase agreement with Aspire Capital
Bright Horizons (BFAM) 10.1M share IPO priced at $22.00
Chuy's (CHUY) 4.5M share Secondary priced at $25.00

Your rating: None

Kim Dotcom wants to encrypt half of the Internet to end government surveillance (FULL...

In an in-depth interview, Megaupload founder Kim Dotcom discusses the investigation against his now-defunct file-storage site, his possible extradition to the US, the future of Internet freedoms and his latest project Mega with RT’s Andrew Blake.

Megaupload founder Kim Dotcom (C) launches his new file sharing site "Mega", surrounded by dancers, in Auckland January 20, 2013. (Reuters/Nigel Marple)
Megaupload founder Kim Dotcom (C) launches his new file sharing site "Mega", surrounded by dancers, in Auckland January 20, 2013. (Reuters/Nigel Marple)

The United States government says that Dotcom, a German millionaire formerly known as Kim Schmitz, masterminded a vast criminal conspiracy by operating the file-storage site Megaupload. Dotcom, on the other hand, begs to differ. One year after the high-profile raid of his home and the shut-down and seizure of one of the most popular sites on the Web, Dotcom hosted a launch party for his latest endeavor, simply called Mega. On the anniversary of the end of Megaupload, Dotcom discusses the year since his arrest and what the future holds in regards to both his court case and the Internet alike. Speaking with RT’s Andrew Blake from his Coatesville, New Zealand mansion, Dotcom weighs in on the US justice system, the death of Aaron Swartz, the growing surveillance state, his own cooperation with the feds and much more.

Megaupload founder Kim Dotcom (2nd R) poseswith actors dessed as police after the launch of his new website at a press conference held inside his home in Auckland on January 20, 2013. (AFP Photo/Michael Bradley)
Megaupload founder Kim Dotcom (2nd R) poseswith actors dessed as police after the launch of his new website at a press conference held inside his home in Auckland on January 20, 2013. (AFP Photo/Michael Bradley)

'­Hollywood is a very important contributor to Obama'

RT: You’ve blamed President Obama and the Obama administration for colluding with movie companies in order to orchestrate this giant arrest here in New Zealand. Is this kind of give-and-take relationship between Washington and Hollywood all that you say it is? Or are you just the exception? Does this really exist?

Kim Dotcom: You have to look at the players behind this case, okay? The driving force, of course, is Chris Dodd, the chairman of the MPAA [Motion Picture Association of America]. And he was senator for a long time and he is — according to [US Vice President] Joe Biden — Joe Biden’s best friend. And the state attorney that is in charge of this case has been Joe Biden’s personal counsel, Neil MacBride, and [he] also worked as an anti-piracy manager for the BSA, the Business Software Association, which is basically like the MPAA but for software companies.

And also, the timing is very interesting, you know? Election time. The fundraisers in Hollywood set for February, March [and] April. There had to have some sort of Plan B, an alternative for SOPA [the Stop Online Piracy Act], because the president certainly was aware — and his team at the White House was aware — that if they don’t have anything to give at those fundraisers, to those guys in Hollywood who are eager to have more control over the Internet, they wouldn’t have probably raised too much. And Hollywood is a very important contributor to Obama’s campaign. Not just with money, but also with media support. They control a lot of media: celebrity endorsements and all that.

So I’m sure the election plays an important role. The relationships of the people that are in charge of this case play an important role and, of course, we have facts that we want to present at our extradition hearing that will show some more detail about this and that this is not just some conspiracy theory but that this actually happened.

Local Maori arrive as Megaupload founder Kim Dotcom (unseen) launches his new file sharing site "Mega" in Auckland January 20, 2013. (Reuters/Nigel Marple)
Local Maori arrive as Megaupload founder Kim Dotcom (unseen) launches his new file sharing site "Mega" in Auckland January 20, 2013. (Reuters/Nigel Marple)

'Operation Takedown'

RT: The US Justice Department wants to extradite you, a German citizen living in New Zealand operating a business in Hong Kong. They want to extradite you to the US. Is that even possible?

KD: That is a very interesting question because the extradition law, the extradition treaty in New Zealand, doesn’t really allow extradition for copyright. So what they did, they threw some extra charges on top and one of them is racketeering, where they basically say we are a mafia organization and we set up our Internet business to basically be an organized crime network that was set up and structured the way it was just to do criminal copyright infringement. And anyone who has every used Megaupload and has any idea about how that website worked knows immediately that it was total nonsense. But they needed to chop that on in order to have even a chance for extradition. But in our opinion, you see, all of that was secondary. The primary goal was to take down Megaupload and destroy it completely. That was their mission and that’s why the whole thing in Hong Kong, for example, they called it Operation Takedown. And I think everything that’s happening now, they are trying on the fly to doctor it around, and found a way to find a case. They probably came here and thought, “We will find something; that these guys have done something wrong.” In the indictment, if you actually read that, it’s more like a press release. There’s nothing in there that has any merits.

Megaupload founder Kim Dotcom speaks during the launch of his new website at a press conference at his mansion in Auckland on January 20, 2013. (AFP Photo/Michael Bradley)
Megaupload founder Kim Dotcom speaks during the launch of his new website at a press conference at his mansion in Auckland on January 20, 2013. (AFP Photo/Michael Bradley)

RT: When the raid happened one year ago today, it got a lot of people talking both about the Internet and about this character, Kim Dotcom. But it was a lot of talking and not so much action, because here it is one year later and this case is still happening. Back up earlier this month, and we saw Aaron Swartz — an online information activist — pass away, and only in his mid-20s. And it got a lot of people talking, so much so that members of Congress have actually asked for changes to federal computer laws so that this doesn’t happen again. What is it actually going to take to get people to stop just talking and to actually start acting?

KD: Our case is going to be the one that will have much more attention down the road because it is a crucial case for Internet freedom. And I think more and more people realize that and the government is quite exposed here because they really went in with completely prosecutorial abuse and overreach and ignoring due process, ignoring our rights, spying on us, illegal search warrants, illegal restraining orders, illegal spying. The whole picture, when you look at it, shows that this was an urgent mission, done on a rush. “Take them down, I want them to go.” And it was a political decision to do that. And the execution was extremely poor, and the case is extremely poor, because that is something they thought that they could worry about later. It was all about the takedown. “Let’s send a strong message to Hollywood that we are on their side.”

RT:And now it’s been a year and nothing has progressed. At least for them. It seems like the case is falling apart day by day.

KD: Let me give you one example of how crazy this is. We have a judge here who said, “Please show us your evidence about your racketeering allegations. Show us that these guys were setting up some sort of organized crime network,” because that’s what the extradition will focus on primarily. They are using the organized crime treaty to get us extradited. So the US appealed that and said, “We don’t want to show you what we have.” And then they appealed to the high court and the high court then said, “We want to see it.” And they just keep appealing it, all the way to the court of appeals and to the Supreme Court. And what does that tell you? If you don’t even want to show us your cards — show us what you have! If you have such a strong case and are seriously interested about getting someone extradited, why waste all this time? Just show your hand. And they don’t have anything because we haven’t done anything wrong. We were law abiding. We were a good corporate citizen. And they knew that the time they came here to do this. They just wanted to take us down.

Megaupload founder Kim Dotcom (C) launches his new file sharing site "Mega", with dancers, in Auckland January 20, 2013. (Reuters/Nigel Marple)
Megaupload founder Kim Dotcom (C) launches his new file sharing site "Mega", with dancers, in Auckland January 20, 2013. (Reuters/Nigel Marple)

'I want to reestablish a balance between a person and the state'

RT :The new program, Mega, is fully encrypted, and you’re touting it as an encrypted program so that people will want to use it. Do you think this is even necessary, right now, that people need encryption on the Internet?

KD: I think it’s important for the Internet that there is more encryption. Because what I have learned since I got dragged into this case is a lot about privacy abuses, about the government spying on people. You know, the US government invests a lot of money in spy clouds: massive data centers with hundreds of thousands of hard drives storing data. And what they are storing is basically any communication that traverses through US networks. And what that means they are not spying on individuals based on a warrant anymore. They just spy on everybody, permanently, all the time. And what that means for you and for anybody is that if you are ever a target of any kind of investigation, or someone has a political agenda against you, or a prosecutor doesn’t like you, or the police wants to interpret something in a way to get you in trouble — they can use all that data, go through it with a comb and find things even though we think we have nothing to hide and have done nothing wrong. They will find something that they can nail you with and that’s why it’s wrong to have these kinds of privacy abuses, and I decided to create a solution that overtime will encrypt more and more of the internet. So we start with files, we will then move to emails, and then move to Voice-Over-IP communication. And our API [Application Programming Interface] is available to any third-party developer to also create their own tools. And my goal is, within the next five years, I want to encrypt half of the Internet. Just reestablish a balance between a person — an individual — and the state. Because right now, we are living very close to this vision of George Orwell and I think it’s not the right way. It’s the wrong path that the government is on, thinking that they can spy on everybody.

Actors in police costume mock-arrest Megaupload founder Kim Dotcom (C), as he launches his new file sharing site "Mega" in Auckland January 20, 2013. (Reuters/Nigel Marple)
Actors in police costume mock-arrest Megaupload founder Kim Dotcom (C), as he launches his new file sharing site "Mega" in Auckland January 20, 2013. (Reuters/Nigel Marple)

RT: Long before Megaupload was ever taken down, the Justice Department was looking into Ninja Video and you actually cooperated with them. People want to know: how is Kim Dotcom, this guy who is incredibly against Washington and hates everything that they’ve done to him, how is this same guy also helping out the Justice Department?

KD: Let me explain to you how this worked, okay? I was a good corporate citizen. My company was abiding to the laws. If we get a search warrant or we get a request by the government to assist in an investigation, we will comply and we have always complied. And that is the right thing to do, because if someone uploads child pornography or someone uploads terrorist stuff or anything that is a serious crime, of course we are there to help. This is our obligation. And I am not for copyright infringement. People need to understand that. I’m against copyright infringement. But I’m also against copyright extremism. And I’m against a business model: the one from Hollywood that encourages piracy. Megaupload is not responsible for the piracy problem, you see? It’s the Hollywood studios that release a movie in the US, and then six months later in other parts of the world. And everyone knows that the movie is out there and fans of a particular actress want to have it right now, but they are not giving them any opportunity to get access to that content even though they are willing to pay. And they are looking for alternatives on the Internet, and then they find them. They are trying to make me responsible for their lack of ability to adapt to a new reality, which is the Internet, where everything happens now. It doesn’t happen three months later. Imagine you go to Wikipedia. You want to find something, research an article, and they tell you to come back in three months, ‘We’ll give it to you then.’ If you find another site where you can get it right now, that’s where you go, right? So it’s really their business model that is responsible for this issue. And if they don’t adopt, they will be left behind on this side of the road of history like many others who haven’t adopted in the past.

Photo by Andrew Blake
Photo by Andrew Blake

'I’m not Aaron Swartz. Aaron Swartz is my hero. He was selfless'

RT: What about your skeptics who point out this big playboy lifestyle and this giant, elaborate house and say ‘He’s not worried about Internet freedoms, he’s just worried about protecting his profits’?

KD: Let me be clear: I am a businessman, okay? I started Megaupload as a business to make money. I wanted to list the company. I am an entrepreneur, alright? I’m not Aaron Swartz. Aaron Swartz is my hero. He was selfless. He is completely the opposite of me, but I’m a businessman. I’m driven by the success of achieving something in the business world. That’s not a crime. There is nothing wrong with that. And if you create something that is popular and that people want to use, you automatically make money. And I’ve always been an innovator. I’ve always created products that people like. And that’s why I’m successful. I’m not successful because people have used Megaupload for copyright infringement. And what everyone needs to understand [is] there have been massive amounts of legitimate users on Megaupload. We don’t believe that 50 million users a day are all just transferring piracy. That’s wrong. A lot of people have used it to back up their data, to send a file quickly to a friend. Young artists have used it to get traction, to get downloads, to get known. There was a lot of legitimate use on Megaupload. It’s a dual-use technology, just like the Internet. You can go to any ISP right now, anyone who connects customers to the Internet. And if they are honest to you and you ask them the question ‘How much of your traffic is peer-to-peer piracy?’ anyone who will tell you less than 50 percent is lying to your face. This is a problem of the Internet and not Megaupload.

RT: If you weren’t doing Mega, or Megaupload, what would you be doing? Here’s this businessman who strives to accomplish success. What would you be doing?

KD: I would probably build spaceships and we would probably already be on Mars.

Photo by Andrew Blake
Photo by Andrew Blake

RT: What happens next, though? What are the chances of Mega being shut down. We already saw that radio stations were pulling ads.

KD: The content industry is still very emotional about us.We bought radio ads with one of the major networks here for eight radio stations. Very funny, very cool ads, promoting our service as a privacy service. And the labels called up the radio station, and one advertiser who is in the movie business called up the radio station, and demanded those adds to be taken down or else they will not buy ads from them anymore. And they were forced because they rely, of course, on that advertisement. My campaign was comparably small to the amount that they are sending. So they used their power to interfere in our right to have a media campaign, an ad campaign. And that just shows you that attitude. It’s against the law. They can’t do that. That’s interfering in our business and they have done that many times in the past. Calling payment processors, calling advertisers, telling them, ‘I don’t want you to work with these guys.’ That’s just wrong. If you have an issue with us, go hire a lawyer, sue us, take us to court and then see if you have anything that will give you a judgment against us. But instead, they use that power and their money to get new laws made for them, to lobby politicians, to get the White House to come here and destroy our lives. Destroy 220 jobs. Hardworking innocent people and they don’t give a damn about that. They had an agenda that is about more control over the Internet. And they made a strategic decision to say ‘Who are we going to take out to send a strong message?’ And I was the one.

Photo by Andrew Blake
Photo by Andrew Blake

"If they come to attack us, it’s just going to backfire"

RT: But what happens if Mega is shut down? You are only on day one right now. How long is it going to take before the government steps up again and what are you going to do if that happens? Are you prepared to just start all over again? It’s been one year and here you are, doing this over again, what happens when Uncle Sam puts his foot down and grinds you into the dirt again? Do you get back up?

KD: Here is the thing. This startup is probably the most scrutinized when it comes to legal advice. Every single aspect of it has been under the looking glass by our legal team. So we are confident that it’s fully compliant with the law, and if they come to attack us it’s just going to backfire. Exactly like the Megaupload case did. The shutdown of our site backfired already, massively. And it’s just going to get worse for them. If they think they can pursue this and get away with this, they are dead wrong. Because the society is not on their side. Everyone who uses the Internet knows what’s going on here. They don’t like what’s going on here. They saw it with SOPA and you will see it with our case. People will come together and fight this kind of aggression against innovation and Internet freedom.

Photo by Andrew Blake
Photo by Andrew Blake

"We are all the little puppets that they think they can kick around"

RT: After Megaupload was shut down by the FBI last year, hacktivist with the movement Anonymous retaliated, so to speak. In response, they went and took down the websites for the FBI, the Motion Picture Association of America, the Department of Justice, the Recording Industry Association of America. All of these organizations were shut down by Anonymous in response to what they did to you. These were people who you never met but were so moved by what happened that they had to stand up and do something. Did you ever thank them, and how did you take it? How did you respond to their reaction?

KD: It’s a kind of virtual protest, you know? I think it’s not a good idea to shut down websites. I’ve been a hacker myself. I understand why they are doing it and how they are doing it, but I think there are better ways to protest. Where you organize yourself in a group and do petitions and actually email congressmen, email your local politicians, let them know about what you don’t like. Organize your movement rather than attacking. I had a sense of understanding for them because everyone had stored so much data on Megaupload, and then all of a sudden a site like that disappears and billions of files are taken offline, the majority of them perfectly legitimate. You need to understand one thing: 50 percent of all files that were ever uploaded to Megaupload have not even been downloaded once. That clearly shows the non-infringing use. People just wanted to store their stuff on our site. And of course they were outraged when that disappeared and the government said, ‘We don’t give a care and we don’t give a damn about you people. We don’t care that you have your personal documents there because we have our agenda and we are going to take over the Internet.’ And you know the White House was supporting SOPA, and only when the masses came together — and Aaron Swartz: he stopped SOPA. With his efforts, he stopped SOPA. And he became a target. A political target, okay? And that’s why all these things happened to him. There is no reasonable cause behind going after a young genius like that in the fashion they did. It’s political. Because the White House wanted SOPA. They promised it to Hollywood and they failed and they couldn’t go ahead because the White House was afraid if they keep pushing hard and they keep pushing it forward, that the people who oppose it are not going to vote for Obama in the reelection campaign. So it’s all a game to them really and we are all the little puppets that they think they can kick around. So we need to organize. There needs to be a movement that identifies these things and fights that. Not with shutting down websites but with real protests. Going out on the streets, writing to politicians and especially, most importantly, don’t vote for the guys that are against Internet freedom. Anyone who voted for SOPA, you should have a close look at that guy. Do I want to give him my vote next time around? Because that’s the only language politicians understand is your vote. And if you can bring all these votes together, somehow pooled for Internet freedom, you will see all these efforts disappear. Because at the end of the day, they represent the public. Politicians represent the public. And when they have enough pressure they can’t move forward. And SOPA was the best example for that.

Graphic ‘Graph Search’: New Facebook system reveals too much

Introducing its new search engine, Facebook assured users that the system is strongly privacy aware. However, prank searches made by one of the beta testers have revealed that the system may expose just a bit more people would want.

­The new ‘Graph Search’ system was presented by Facebook founder Mark Zuckerberg and his team last week. The engine was designed to search Facebook for specific information, be it a Mexican restaurant your Facebook friends like the most or single people from India in your neighborhood.

The current Graph Search is a beta version still to be tested; it is limited to searches of people, their likes, places, interests and photos. Posts and status messages so far are out of reach, but soon may become searchable as well, Forbes reported.

During the presentation Zuckerberg and his crew devoted a special part to the issue of Facebook privacy. They assured the audience that the engine is only going to process data that has been allowed to be processed by the users themselves.

To demonstrate the system at work the team conducted a number of sample searches including ‘Friends who like Star Wars and Harry Potter’, ‘Languages my friends speak’, ‘Music liked by people who like Mitt Romney’ and ‘Music liked by people who like Obama’.

However, one of the people invited to test the beta version of the engine soon found out that Graph Search can find way more than Star Wars fans and music preferences of Obama supporters.

In his blogpost published on Wednesday, computer programmer and ‘Gadget Geek’ Tom Scott revealed some peculiar searches he conducted using Graph Search. The results turned out to be quite controversial, if not scandalous.

Scott found out that the new search engine will readily find ‘Married people, who like prostitutes’ and ‘Spouses of married people who like Ashley Madison’, a dating website for people who are already in a relationship.

Furthermore, he was able to find ‘Islamic men interested in men who live in Tehran, Iran’, where homosexual relations are prohibited by law and ‘Places where they’ve worked’.

Something corporate America would not like – a search exposing ‘Current employers of people who like Racism’.

These are just some of the searches Scott was able to do using the new Graph Search. When posting the results, he blurred the names and the pictures of those he found.

Commenting on his research, Scott said that although the search does not directly violate Facebook privacy settings, users just need to be aware of the new search engine capabilities and might want to reconsider the information they put on the web.

“If it’d be awkward if it was put on a screen in Times Square, don’t put it on Facebook. Oh, and check your privacy settings again,” he said.

Facebook has repeatedly been accused of violating the privacy of its users. In early January, the EU pressured the world`s most popular social network to provide more data protection. In September, Facebook was forced to stop using its facial recognition software in Europe following an investigation by the Office of the Data Protection Commissioner in Ireland.

Envy and dissatisfaction on Facebook

A recent study conducted by German scientists revealed that envy and dissatisfaction are among most popular feelings Facebook users experience while browsing through their friends’ ‘timelines’.

The survey of some 600 Facebook users showed that one third of them have negative feelings as using the social network mostly because they are envying their ‘Facebook friends’, whose life seems more interesting and wholesome than their own.

“Although respondents were reluctant to admit feeling envious while on Facebook, they often presumed that envy can be the cause behind the frustration of ‘others’ on this platform – a clear indication that envy is a salient phenomenon in the Facebook context,” said project manager Dr. Hanna Krasnova from Humboldt-Universität.

She explained that access to positive news and the profiles of seemingly successful friends bolsters social comparison, which can easily provoke envy.

The survey found that about one-fifth of all recent online and offline events provoking envy among respondents were posted on Facebook. According to the researchers, respondents’ envy often led to “embellishing their Facebook profiles” creating what they called “envy spiral.”

It was also established that the envy provoked by looking through Facebook lead many to “greater life dissatisfaction”.

“Considering the fact that Facebook use is a worldwide phenomenon and envy is a universal feeling, a lot of people are subject to these painful consequences,” Co-author Helena Wenninger of TU-Darmstadt University said.

Guest Post: The Hipster Techie Mental Map

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Washington D.C. is not even on the Hipster Techie mental map.

We all have inner maps that assign awareness, priority and importance to geographic features. For those who work inside the Beltway, Washington D.C. dominates their mental map of the world. Residents of Manhattan famously regard it as the center of the financial, art, fashion, etc. world.
 

In the hipster techie mental map, Washington D.C. doesn't exist, and New York has a small tech innovation footprint. In this world view, politics, finance and fashion are not what changes the world for the better; only tech does that.
 

Everyone wants to defend their city as important, if not the center of the universe, but the reality is that people who want to "make it" gravitate to the capital of their interest, be it Nashville, New York City, Hollywood, San Francisco or a regional magnet-city.
 

The typical hipster techie works for a start-up or fast-growing company in the social media / e-commerce / marketing mobile/web apps/software space. While these firms can be found in many cities, a great many are located in San Francisco and the S.F. Bay Area (Silicon Valley, etc.) for a variety of reasons, including a culture that celebrates innovation and understands that failure and success are two aspects of the same dynamic.
 

Having a start-up crash and burn is a disaster in most places; in the Bay Area, it is generally regarded as "getting your sea legs."
 

Three large research universities--two of the premiere public universities, University of California, Berkeley ("Cal") and University of California, San Francisco (UCSF) and one of the premiere private universities, Stanford-- act as incubators of start-ups which have access to seed money from a high concentration of venture capital. Two national labs provide government support of research: Lawrence Berkeley National Laboratory and Lawrence Livermore National Laboratory.
 

These elements spawn waves of newcomers and start-ups, most of which eventually fail or are bought up by established tech firms.
 

Many locales around the world have attempted to recreate the "magic" of Silicon Valley; the recipe is not that easy to duplicate. Many feel the Valley has lost its edge; as global competition increases, perhaps that can be said of every established innovation center.
 

If you've been offered a job in S.F. with a mobile apps start-up, here are 25 Things I wish I knew before moving to San Francisco by Jason Evanish (via Maoxian).
 

Here is one approximation of the hipster techie mental map:
 

Notes:

SFO: San Francisco International Airport

JFK: John F. Kennedy International Airport

Page Mill Road: home to many start-ups and Stanford Research Park
Not to be confused with Sand Hill Road, the concentration of venture capital (VC) firms (a.k.a. vulture capital)

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Aaron Swartz stopped SOPA, his persecution political – Kim Dotcom to RT

Aaron Swartz became a political target, and that is what led to his tragic death, believes Kim Dotcom, the founder of the now-defunct file-storage site Megaupload, in a feature interview with RT.

Frontrunning: January 23

  • Doubt Greets Bank of Japan's Easing Shift (WSJ)
  • Japan hits back at currency critics (FT)
  • Japan upgrades economic view for first time in eight months (Australian) - only to lower them in a few months again
  • GOP critics get opportunity to grill Secretary Clinton on Benghazi (Hill)
  • Global economy set for ‘slow recovery’ (FT)
  • Obama to back short debt limit extension (FT)
  • Spain economy contracted 1.3% in 2012: Bank of Spain (Presstv)
  • Unfinished Luxury Tower Is Stark Reminder of Las Vegas’s Economic Reversal (NYT)
  • Draghi Says ‘Darkest Clouds’ Over Europe Have Subsided (BBG)
  • High-Speed Dustup Hits a Clubby Corner (WSJ)
  • U.S. Budget Discord Is Top Threat to Global Economy in Poll (BBG)
  • Sir Mervyn King says abandoning inflation target would be 'irresponsible' (Telegraph)
  • Spain Says It May Cover 13% of 2013 Funding in January (BBG)
  • BOE Cites Pound as Rebalancing Obstacle in 8-1 Stimulus Vote (BBG)
  • Riksbank Has Room for More Cuts as Krona Gains, Ekholm Says (BBG)

Overnight Media Digest

WSJ

* Microsoft Corp entered discussions in recent days with private equity firm Silver Lake Partners and Dell Inc founder Michael Dell to help finance a leveraged buyout of the computer maker, according to people familiar with the deliberations. (http://link.reuters.com/vuq45t)

* Google Inc reversed the trend of slowing revenue growth in its core online advertising business, signaling that the internet giant is beginning to get a handle on how the consumer shift toward mobile devices is affecting the online ad industry. (http://link.reuters.com/xuq45t)

* Johnson & Johnson officials learned of problems with a metal hip-replacement implant in 2008, a year before the company stopped making the joints and two years before recalling them, according to documents unsealed in a California state court. (http://link.reuters.com/gyq45t)

* Allergan Inc said it will buy MAP Pharmaceuticals Inc in a $958 million deal that would help the Botox maker expand sales of medical treatments. (http://link.reuters.com/jyq45t)

* IBM Corp got back on track in the fourth quarter after disappointing investors the previous quarter as its software business and sales in emerging markets returned to growth. (http://link.reuters.com/byq45t)

* The White House offered a tacit endorsement of a House Republican plan to defer a fight over the U.S.'s borrowing limit, likely clearing the way for a deal that would forestall a showdown over the country's borrowing limit until late spring. (http://link.reuters.com/tuq45t)

* Prime Minister David Cameron plans to let the British people vote in about five years on whether or not to stay in the European Union, a surprise move critics say will hurt both economies and cast a new shadow over the troubled bloc. (http://link.reuters.com/suq45t)

* Two prominent names in semiconductors, Advanced Micro Devices Inc and Texas Instruments Inc, provided more evidence of soft demand for personal computers and other products. (http://link.reuters.com/myq45t)

* Dish Network Corp plans to close a further 300 Blockbuster stores in the U.S. in the coming weeks, leaving the video chain with less than one-third of the stores acquired by the satellite-television company in 2011. (http://link.reuters.com/nyq45t)

* Banks are fighting an effort by Fannie Mae to cut costs on backup insurance policies often imposed on cash-strapped homeowners, a step that would crimp the lucrative fees the lenders collect on the coverage. (http://link.reuters.com/hyq45t)

* The U.S. Securities and Exchange Commission barred Egan-Jones Ratings Co from issuing ratings on certain bonds, an unprecedented step by the regulator and a setback for a small credit-rating firm. (http://link.reuters.com/zuq45t)

* IKEA is poised to embark on a global spending spree, but its departing chief executive says red tape is slowing how fast the home-furnishings retailer can open its pocket book. (http://link.reuters.com/dyq45t)

FT

 CAMERON TO PROMISE IN-OUT EU BALLOT David Cameron will on Wednesday vow to settle Britain's future in the European Union with a straight in-out referendum by 2017, in a high-risk strategy which will test the willingness of Paris and Berlin to cut the UK a better membership deal.

KING STANDS BY INFLATION TARGETING The governor of the Bank of England has called for it to shed some of the burden of reviving Britain's economy, suggesting the UK government should do more to support the "disappointingly slow" recovery.

POSEN ATTACKS BANK OF ENGLAND'S CULTURE A former policy maker at the Bank of England has attacked the management and culture of the bank, saying its directors abdicated responsibility for reining in a governor who had become far too powerful.

BoJ ACTION TRIGGERS CURRENCY WAR FEARS The Bank of Japan bowed to domestic political pressure and pledged to buy government bonds in potentially unlimited quantities as international policy makers aired fresh concern about the possibility of a global currency war.

BARCLAYS REVAMP TO COST UP TO 2,000 JOBS Barclays is cutting up to 2,000 jobs in its investment bank as part of a strategic overhaul by the bank's chief executive Antony Jenkins. BUMI MOVES CLOSER TO TAKING LEGAL ACTION Bumi intends to take legal action to recover lost funds at its Indonesian subsidiary, Berau Coal, as well as considering other claims resulting from a four-month long investigation into "financial irregularities" at its mining businesses.

NYT

* Microsoft Corp is in talks to help finance a takeover bid for Dell Inc that would exceed $20 billion, a person briefed on the matter said. Microsoft is expected to contribute up to several billion dollars. (http://link.reuters.com/gar45t)

* A closer look at Google Inc's results shows that while the company continues to be a moneymaking machine, its most lucrative business, search on desktop computers, is slowing, while it has not yet figured out how to make equivalent profits on mobile devices. (http://link.reuters.com/har45t)

* Allergan Inc has agreed to pay nearly $1 billion to acquire MAP Pharmaceuticals and gain full control of its experimental treatment for migraine headaches, the two companies announced Tuesday night. (http://link.reuters.com/par45t)

* Investigators in the United States and Japan indicated on Tuesday that many questions remained unanswered in their search for the cause of two incidents in which lithium-ion batteries burned on Boeing Co's 787 aircraft. (http://link.reuters.com/var45t)

* An internal analysis conducted by Johnson & Johnson in 2011 not long after it recalled a troubled hip implant estimated that the all-metal device would fail within five years in nearly 40 percent of patients who received it, newly disclosed court records show. (http://link.reuters.com/kar45t)

* Celgene Corp's drug Abraxane prolonged the lives of patients with advanced pancreatic cancer by almost two months in a clinical trial, researchers reported Tuesday, signifying an advance in treating a notoriously difficult disease but not as big a leap as some doctors and investors had hoped. (http://link.reuters.com/nar45t)

* A hotly contested tax on financial trades took a big step forward on Tuesday when European Union finance ministers allowed a vanguard of member states to proceed with the plan. (http://link.reuters.com/qar45t)

* The governor of Nebraska on Tuesday approved a revised route through the state for the Keystone XL pipeline, setting up a decision for President Obama that pipeline opponents say will be a crucial test of his intentions on climate change. (http://link.reuters.com/rar45t)

* Facing criticism for selling garments made at a Bangladesh factory where 112 workers died in a fire last November, Wal-Mart Stores Inc told its worldwide suppliers that it was adopting tougher rules on fire safety at its contractors and would have "zero tolerance" for suppliers that used unauthorized subcontractors.

Canada

THE GLOBE AND MAIL

* British Columbia community minister Bill Bennett said on Tuesday that the final regulatory pieces have fallen in place for a new liquefied natural gas plant to be built on a native reserve near Kitimat.

The massive LNG plant, a joint venture by Apache Canada Ltd and Chevron Canada Ltd, in cooperation with the Haisla First Nation, will process about 700 million cubic feet of gas per day, becoming a key link in the transportation chain between the province's northeast gas fields and off-shore markets.

* Cash-strapped Parks Canada is consulting the public on a long list of proposed fee hikes for the country's national parks and historic sites, pointing out that the rates have been frozen since 2008 and costs are on the rise.

But at the same time as fees are going up, many services are in decline following C$55 million in announced budget cuts and the resultant 600 jobs lost across the system.

Reports in the business section:

* Quebecor Inc may be the next Canadian regional cable company that will strike a deal to eventually sell some of its unused wireless spectrum, predicts a new analyst report.

* The Canadian federal government is ready to offer financial incentives as part of a pitch to get Volkswagen AG to locate some manufacturing facilities in the country.

Industry minister Christian Paradis said he urged senior Volkswagen executives to "look north" during meetings in Berlin this week, offering the prospect of tapping into Ottawa's newly-replenished C$250 million ($252 million) auto innovation fund.

NATIONAL POST

* Calgary energy firm Griffiths Energy International Inc (GEI) pleaded guilty to a bribery charge under the Corruption of Foreign Public Officials Act and faces fines in excess of C$10.3 million. The company admitted that it paid C$2 million to officials in Chad to get an advantage in two exploration blocks in the oil-rich African country.

* Manitoba chiefs meeting in Winnipeg this week are reportedly slated to consider pulling out of the Assembly of First Nations, highlighting the fragility of a national body that some say needs a reset of its own.

FINANCIAL POST

* Inmet Mining Corp made its long-awaited rejection of First Quantum Minerals Ltd's C$5.1 billion hostile bid on Tuesday.

The Toronto-based miner disputed First Quantum's assertion that it could realize enormous cost savings at Cobre Panama project by using its internal project team and hiring far fewer contractors.

* Supermarket chain Metro Inc will sell about half of its 25-year investment in convenience store operator Alimentation Couche-Tard to three Canadian banks for C$479 million.

The Montreal-based company said on Tuesday that it has agreed to sell 10 million Class B subordinate voting shares to BMO Nesbitt Burns, National Bank Financial and TD Securities for C$47.90 per share.

* Air Canada's Chief Executive Calin Rovinescu said he had faith that Boeing Co will be able to resolve the issues plaguing its 787 Dreamliner and believed in the benefits the plane will bring the country's largest carrier.

China

CHINA SECURITIES JOURNAL

--Analysts expect China's inflation to fall below 2 percent in January due to a high base from last year and as food prices have remained stable.

--China could cut its reserve requirement ratio twice at the beginning of this year with a reduction of 0.5 percent each time, the Bank of Communications said in its outlook report.

SHANGHAI SECURITIES NEWS

--Party Chief Xi Jinping took his campaign against corruption to the petty bureaucracy and minor infractions of low-level officials. Xi said it was just as important to go after junior officials as it was to tackle the seniors in the battle against graft. He called for a "disciplinary prevention and guarantee mechanism" to be set up to prevent corruption.

SHANGHAI DAILY

--Investors who lost money in a wealth management product sold in Hua Xia Bank have recouped their principal amount from the credit guarantee firm, a local TV station reported. Investors recently recovered their principal after Zhongfa Investment Guarantee Co stepped in to acquire the whole investment plan, Shanghai TV station said.

--The national security fund and foreign investors were the two biggest net buyers of Chinese mainland shares last year, the top securities regulator said.

CHINA DAILY (www.chinadaily.com.cn)

--China's State Development and Investment Corp (SDIC), the country's major investment holding company, saw profit grow 16 percent in the first eleven months of 2012 and plans to expand its overseas businesses, its chairman said. SDIC plans to raise the share of its overseas investment business, currently focused on fuel tank manufacturing, to 10 percent in the near future.

PEOPLE'S DAILY

--Turnover in China's land market fell 14 percent in 2012, the finance ministry said.

Fly On The Wall 7:00 am Market Snapshot

ANALYST RESEARCH

Upgrades

Alcatel-Lucent (ALU) upgraded to Neutral from Sell at Citigroup
Costco (COST) upgraded to Market Perform from Underperform at Bernstein
D.R. Horton (DHI) upgraded to Market Perform from Underperform at Raymond James
Honda (HMC) upgraded to Outperform from Neutral at Macquarie
IBM (IBM) upgraded to Hold from Sell at Societe Generale
KB Home (KBH) upgraded to Market Perform from Underperform at Raymond James
Middleby (MIDD) upgraded to Outperform from Neutral at RW Baird
Novartis (NVS) upgraded to Buy from Neutral at Citigroup
Platinum Group (PLG) upgraded to Outperform from Sector Perform at RBC Capital
Questar (STR) upgraded to Buy from Neutral at Citigroup
Spirit Realty (SRC) upgraded to Outperform from Market Perform at Raymond James
Unum Group (UNM) upgraded to Overweight from Equal Weight at Barclays
Verizon (VZ) upgraded to Buy from Hold at Canaccord

Downgrades

Ellie Mae (ELLI) downgraded to Market Perform from Outperform at William Blair
Ford (F) downgraded to Hold from Buy at Deutsche Bank
France Telecom (FTE) downgraded to Underperform from Market Perform at Bernstein
GrafTech (GTI) downgraded to Neutral from Buy at Davenport
Grupo Aeroportuario (ASR) downgraded to Equal Weight at Morgan Stanley
Hartford Financial (HIG) downgraded to Market Perform from Outperform at FBR Capital
Incyte (INCY) downgraded to Underweight from Equal Weight at Morgan Stanley
NewBridge (NBBC) downgraded to Market Perform from Outperform at Keefe Bruyette
Synovus (SNV) downgraded to Market Perform from Outperform at Bernstein

Initiations

Allot Communications (ALLT) initiated with an Overweight at Barclays
Avago (AVGO) initiated with an Outperform at RBC Capital
Emulex (ELX) initiated with a Neutral at Piper Jaffray
FIS (FIS) initiated with a Buy at UBS
Fiserv (FISV) initiated with a Neutral at UBS
Global Eagle Acquisition (EAGL) initiated with an Outperform at Imperial Capital
Harbinger Group (HRG) initiated with a Buy at Jefferies
Mellanox (MLNX) initiated with an Overweight at Piper Jaffray
QLogic (QLGC) initiated with a Neutral at Piper Jaffray
Starz (STRZA) initiated with a Neutral at ISI Group
Workday (WDAY) initiated with a Neutral at RW Baird

HOT STOCKS

Allergan (AGN) to acquire MAP Pharmaceuticals (MAPP) for $25 per share
IBM (IBM) said good opportunities to drive profit growth, margin expansion in FY13
Said 1H13 growth rate will be “slightly higher” than 2H13
Texas Instruments (TXN) CEO Templeton said demand environment still weak
Praxair (PX) said backlog will contribute 4%-6% growth in 2013
Reported $2.6B project backlog at FY12-end
Heinz (HNZ) made $60M earn-out payment to China business
First Cash Financial (FCFS) to open 75-85 new stores in 2013, majority in Mexico
Gannett's (GCI) USA TODAY, American Media announced partnership
Choice Hotels (CHH) and Bluegreen (BXG) announced strategic alliance

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Air Products (APD), Wellpoint (WLP), Novartis (NVS), Texas Instruments (TXN), International Game (IGT), AMD (AMD), IBM (IBM), Celestica (CLS), Norfolk Southern (NSC), CA Technologies (CA), Google (GOOG), Cree (CREE)

Companies that missed consensus earnings expectations include:
Textron (TXT), Southwest Bancorp (OKSB), Praxair (PX), Baker Hughes (BHI), Woodward (WWD), Total System (TSS)

NEWSPAPERS/WEBSITES

The estimated $1.7T that American companies say they have indefinitely invested overseas is actually sitting right here at home. Some companies, including Google (GOOG), Microsoft (MSFT) and EMC Corp. (EMC), keep over three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, sources say, the Wall Street Journal reports
U.K. Prime Minister Cameron today pledged to hold a referendum on whether the country should remain a member of the EU within two and a half years of the next general election, due in 2015, the Wall Street Journal reports
Fewer investors are taking corporate America to court for fraud as the number of new federal securities fraud lawsuits seeking class-action status fell to a seven year low in 2012, according to a study by Stanford Law School and Cornerstone Research, Reuters reports
In 2007, the FAA cleared Boeing's (BA) use of a highly flammable battery in the 787 Dreamliner, deciding it was safe to let the lithium-ion battery burn out if it caught fire mid-air as long as the flames were contained, and smoke and fumes vented properly, according to documents reviewed by Reuters.That decision is now coming under scrutiny, Reuters reports
Clients of the largest U.S. banks withdrew funds this month at the fastest weekly pace since the September 11 attacks as a deposit-insurance program ended and customers tapped into a year-end cash hoard. Net withdrawals at the 25 largest U.S. banks totaled $114.1B in the week ended January 9, pushing deposits down to $5.37T, according to Federal Reserve data, Bloomberg reports
Global investors say the state of the U.S. government’s finances is the greatest risk to the world economy and nearly 50% are curbing their investments in response to continuing budget battles, according to a Bloomberg poll

SYNDICATE

Invesco Mortgage (IVR) files to sell 15M shares of common stock
KB Home (KBH) files to sell $100M in common stock; $150M in convertible senior notes
Numerex (NMRX) files to sell common stock
Senior Housing (SNH) files to sell 8M shares of common stock

Your rating: None

­Guess who? Japanese scientists launch face recognition-blocking glasses

The glasses stymie facial recognition software with infrared LED light. (Image from press release of The National Institute of Informatics, Japan)

The glasses stymie facial recognition software with infrared LED light. (Image from press release of The National Institute of Informatics, Japan)

Those concerned with online privacy may soon get another weapon to defend it. Two Japanese scientists have designed glasses that confuse face recognition technology without affecting one`s vision.

An associate professor at Tokyo's national Institute of Informatics, Isao Echizen, together with Professor Seiichi Gohshi from Kogakuin University, have created a pair of glasses preventing internet search engines, social networks and other services using face recognition technology from identifying photos of a wearer.

The device is equipped with near-infrared light sources which distort the features of one who wears the glasses for cameras and at the same time do not affect his or her vision.

The glasses are powered by a battery placed in the wearer’s pocket. But the researchers say they are working on an improved version of their ‘privacy visor’ which would not need a separate battery.

Some companies have already demonstrated interest in the device, the inventors said. When mass-produced the glasses are expected to be priced very reasonably, at about $1 a pair.

According to Professor Echizen, the essential goal of the technology is to protect “photographed subjects from the invasion of privacy caused by photographs taken in secret and unintentional capture in camera images."

The idea of the device came about as  Echizen discovered that Google face recognition technology was able to recognize individuals wearing five different types of sunglasses from various angles.

Face recognition technology is extensively used by law enforcement services, internet search engines and social networks. The technology also has been adopted by shops to collect statistical data about their customers for better marketing.

Execution of facial detection (examples). Area in green frame indicates successful detection. (Image from press release of The National Institute of Informatics, Japan)
Execution of facial detection (examples). Area in green frame indicates successful detection. (Image from press release of The National Institute of Informatics, Japan)

New Glasses Prevent Facial Recognition

In an unexpected twist against the rising tide of image-capturing technologies, an engineer has created glasses that thwart facial recognition scanners.

TSA Removes X-Ray Body Scanners from Airports

The Transportation Security Administration will remove all X-ray body scanners from airports, Bloomberg News reports. The reason: Software couldn't be developed by a congressionally mandated deadline to automatically detect suspicious items on the body. Instead, TSA officers viewed images of passengers' naked bodies to see if they were carrying weapons or other contraband, a process that privacy advocates have dubbed a "virtual strip search."

Privacy had not been the only concern dogging the scanners. A ProPublica investigation found that the TSA had glossed over the small cancer risk posed by even the low doses of radiation emitted by X-ray scanners. The stories also showed that the United States was almost alone in the world in X-raying passengers and that the Food and Drug Administration had gone against its own advisory panel, which recommended the agency set a federal safety standard for security X-rays. In addition, ProPublica reported that, outside airports, other security agencies are exposing people to radiation in more settings and in increasing doses.

The TSA also uses another, safer kind of scanner that doesn't emit X-rays. Instead, it sends out millimeter waves like those used in cell phones. Although there has been some doubt about the long-term safety of millimeter waves, scientists have not found a mechanism for such waves to mutate genes and cause cancer.

In October, the TSA parked many of its 250 X-ray scanners in a Texas warehouse after it removed them from most of the biggest U.S. airports, including Los Angeles, Chicago O'Hare, New York's John F. Kennedy, Boston Logan, Charlotte Douglas and Orlando. Back then, the TSA said it made the change to speed up checkpoints at busier airports. Because human officers have to view images, the X-ray scanners are slower than the automated millimeter wave machines.

In November, the TSA sent the maker of the scanners, Rapiscan Systems, a "show cause letter," which is typically issued when the government is considering terminating a contract. Rep. Mike Rogers, the Republican head of the House transportation security subcommittee, cited an allegation that Rapiscan had falsified a software test, which the company denies.

X-ray scanners could still come back. The TSA is considering an X-ray machine made by another company under a contract for the next generation of body scanners.

The last X-ray scanners in use in Europe were removed from Manchester Airport in the United Kingdom in September. Israel, which is influential in the security world, has installed an X-ray body scanner for testing at Ben Gurion Airport in Tel Aviv.

Frontrunning: January 22

  • Geithner allegations beg Fed reform (Reuters)
  • BOJ Adopts Abe’s 2% Target in Commitment to End Deflation (BBG)
  • Bundesbank Head Cautions Japan (WSJ)
  • In speech, Obama pushes activist government and takes on far right (Reuters)
  • Atari’s U.S. Operations File for Chapter 11 Bankruptcy (BBG)
  • Israel goes to polls, set to re-elect Netanyahu (Reuters)
  • Apple May Face First Profit Drop in Decade as IPhone Slows (BBG)
  • EU states get blessing for financial trading tax (Reuters)
  • Indian Jeweler Becomes Billionaire as Gold Price Surges (BBG)
  • Europe Stocks Fall; Deutsche Bank Drops on Bafin Request (BBG)
  • Algeria vows to fight Qaeda after 38 workers killed (Reuters)
  • GS Yuasa Searched After Boeing 787s Are Grounded (BBG)
  • Slumping pigment demand eats into DuPont's profit (Reuters)

Overnight Media Digest

WSJ

* U.S. President Barack Obama began his second term on Monday by setting an agenda for the next four years built on bedrock Democratic social policies, in a provocative speech coming at a time of deep partisanship in the capital and lingering economic uncertainty across the country.

* Jonathan Baum, chairman and chief executive of Bank of New York Mellon Corp's mutual-fund unit, has left the firm, the company said Monday.

* International investigations into the battery malfunctions that grounded Boeing Co's 787 jet are accelerating, with U.S. and Japanese experts pursuing some new and possibly differing leads.

* Wal-Mart Stores Inc is warning suppliers that it is adopting a "zero tolerance policy" for violations of its global sourcing standards, and soon plans to immediately sever ties with anyone who subcontracts work to factories without the retailer's knowledge.

* Japan's central bank agreed to adopt a 2 percent inflation target and strengthened its monetary-easing program in a bid to rid the economy of long-running deflationary pressures.

* Bundesbank President Jens Weidmann warned Japan not to "politicize" its exchange rate by pursuing an overly aggressive monetary policy, reflecting mounting concern in Europe that other central banks may cheapen their currencies as a means of stimulating economic growth.

* Federal officials are expected to slap a Deutsche Bank AG unit with a $1.5 million penalty in coming days after concluding that its energy-trading arm extracted illicit profits from the California electricity marketplace in 2010.

* Mary Jo White, who made her name pursuing terrorists, mobsters and white-collar criminals as a federal prosecutor in New York, is the Obama administration's likely pick to lead the Securities and Exchange Commission, according to people familiar with the administration's search.

* House Republicans on Monday moved to extend U.S. borrowing authority until May 19, setting a timeline for the next phase of budget wrangling between the White House and Congress.

FT

RULES ON OFFICE-FLAT CONVERSION TO EASE Developers will be able to convert office buildings into blocks of flats without asking councils for permission under radical changes to the English planning system. (link.reuters.com/keh45t) WEIDMANN WARNS OF CURRENCY WAR RISK The erosion of central bank independence around the world threatens to unleash a round of competitive exchange rate devaluations, which leading economies have so far avoided during the financial crisis, the president of Germany's Bundesbank warned. (link.reuters.com/qeh45t)

OBAMA DEFENDS ROLE OF STRONG GOVERNMENT Barack Obama mounted a vigorous defence of interventionist government and the role of a social safety net in an uplifting and uncompromising speech that marked the formal opening of his second term as president. (link.reuters.com/seh45t) HEATHROW AND BA DID NOT ACT ON SNOW ALERT The operator of Heathrow and airlines led by British Airways decided against taking pre-emptive measures to deal with snow that could have prevented the airport's descent into chaos on Friday, the Financial Times has learnt. (link.reuters.com/heh45t)

GRADE TO STEP DOWN AS OCADO CHAIRMAN Online grocer Ocado will reveal on Tuesday that Michael Grade will step down as chairman later this year. Grade has been chairman of Ocado for seven years and brought the lossmaking company to market in an 800 million pound float three years ago. (link.reuters.com/geh45t)

HUAWEI IN PLEDGE TO DISCLOSE MORE INFORMATION Huawei has pledged to start disclosing more detailed financial and shareholding information as the Chinese telecoms equipment maker tries to dispel fears over suspected ties to the Chinese military, which are hampering its global expansion. (link.reuters.com/veh45t)

FRUIT FARMERS LOOK TO FOREIGN LABOUR INFLUX British ministers are under pressure to allow migrant workers from Russia, Ukraine and Turkey into the UK to mitigate a predicted shortage of fruit pickers which is threatening the 3 billion pounds a year horticulture industry. (link.reuters.com/duh45t)

NYT

* U.S. President Barack Obama ceremonially opened his second term on
Monday with an assertive Inaugural Address, arguing that "preserving our
individual freedoms ultimately requires collective action."

*
The Bank of Japan set an ambitious 2 percent inflation target and
pledged to ease monetary policy "decisively" by introducing open-ended
asset purchases, following intense pressure from the country's audacious
new prime minister, Shinzo Abe.

* As Facebook and Twitter
become as central to workplace conversation as the company cafeteria,
federal regulators are ordering employers to scale back policies that
limit what workers can say online. The agency has pushed companies
nationwide, including giants like General Motors, Target Corp and
Costco, to rewrite their social media rules.

* Aerospace
represents the latest frontier for China, which is eyeing parts
manufacturers, materials producers, leasing businesses, cargo airlines
and airport operators. The country now rivals the United States as a
market for civilian airliners. And the new leadership named has publicly
emphasized long-range missiles and other aerospace programs in its push
for military modernization.

* Atari's U.S. unit, Atari
Interactive, filed for Chapter 11 protection on Monday as part of an
effort to cleave itself from its French parent.

* After four
months of fierce bidding between two Asian tycoons, a
multibillion-dollar battle for control of Fraser & Neave appears to
have reached its end. A bidding deadline on Monday evening came and
went, meaning the victor will probably be TCC Assets, which is
controlled by Charoen Sirivadhanabhakdi of Thailand.

* The
Maloof family has agreed to sell a controlling stake in the Sacramento
Kings, one of the NBA's most troubled and well-traveled franchises, to
an investment group led by Christopher Hansen, a hedge fund manager who
intends to move the team to Seattle by next season and rename them the
SuperSonics.

* A report from the International Labor
Organization predicted jobless levels to rise to 202 million worldwide
this year, and said government budget-balancing was hurting employment.

*
Jeroen Dijsselbloem, the new president of the group of ministers
overseeing the euro, said on Monday he wanted to heal the rift over
austerity policies that had bred mistrust between southern and northern
nations using the currency

Canada

THE GLOBE AND MAIL

* The demand for university education is not slowing down, as high school students continue to apply to Ontario institutions in record numbers. Preliminary figures released by the Ontario Universities' Application Centre showed that the number of high school students applying to first-year programs in the fall climbed by 2.4 per cent over the previous year.

* Cable sweepers and "hydrophobic" coatings are part of the British Columbia government's new plan to winterize the Port Mann Bridge, where last month vehicles and motorists were pummelled with ice falling from overhead cables. More than 340 insurance claims have been filed since the Dec. 19 snowstorm, according to ICBC spokesman Adam Grossman.

Reports in the business section:

* Rona Inc's two largest shareholders are taking matters into their own hands, installing a turnaround expert who is familiar with reducing costs to lead the board of directors.

The hardware retailer named Robert Chevrier as executive chairman, replacing Robert Paré, a Montreal lawyer who took the chairman's role in May, but who had little retail or operational experience.

* Sun News Network is pinning its hopes for survival on a ruling by Canada's broadcast regulator. Canada's newest and most controversial news channel has argued its signal must be broadcast into every Canadian home if it is ever going to recover from losses that have already reached C$17 million a year.

NATIONAL POST

* Canadian Prime Minister Stephen Harper's government said on Monday it will not include Governor General David Johnston in any future policy discussions with First Nations, further clouding its battle of wills with aboriginal leaders.

* Dan Ross, the former assistant deputy minister of defence materiel, has blamed the Stephen Harper government's culture of secrecy and a lack of accountability at all levels for the failure of the F-35 stealth fighter program.

FINANCIAL POST

* Bank of Canada will deliver a one-two punch on Wednesday, combining its latest interest rate decision with the central bank's latest quarterly outlook for the domestic and global economies.

* The Alberta provincial government said on Monday that its March 7 budget for 2013-14 will make a course correction from big spending to big belt tightening as a shortage of pipeline space and competition in oil production in the United States have tempered the surge in global oil prices.

China

CHINA SECURITIES JOURNAL

--A total of 1,271 funds in 70 fund companies made profits of 104.6 billion yuan ($16.81 billion) in the fourth quarter of last year, from a loss of 179.6 billion yuan in the third quarter, data showed.

--China's National Development and Reform Commission said it will reduce credit card comissions next month, with analysts expecting it could help merchants save 4 billion yuan a year.

SHANGHAI SECURITIES NEWS

--A netizen has demanded U.S. fruit distributor Chiquita explain why slices of apples sold in FamilyMart stores in Shanghai fail to turn brown after 80 hours, sparking a debate online whether the steps Chiquita is taking to protect apple slices from oxidizing are unhealthy.

SHANGHAI DAILY (www.chinadaily.com.cn)

--Subsidised license plates for new energy vehicles in Shanghai received a lukewarm welcome, with only one customer applying for the plates on the first day they were made available.

CHINA DAILY (www.chinadaily.com.cn)

--Chinese vehicle exports topped 1 million units for the first time in 2012, up 29.7 percent.

--Shanghai saw a contraction in total trade in 2012, the first time in three years.

PEOPLE'S DAILY

--China's central government will invest 122.2 billion yuan to support the domestic spring ploughing industry, the finance ministry said.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

ASML (ASML) upgraded to Buy from Hold at ABN Amro
ASML (ASML) upgraded to Hold from Sell at Deutsche Bank
Bank of Kentucky (BKYF) upgraded to Outperform from Neutral at RW Baird
Goodrich Petroleum (GDP) upgraded to Outperform from Market Perform at BMO Capital
Precision Castparts (PCP) upgraded to Buy from Neutral at UBS
Research in Motion (RIMM) upgraded to Outperform from Sector Perform at Scotia Capital
Viacom (VIAB) upgraded to Buy from Neutral at Goldman
VimpelCom (VIP) upgraded to Overweight from Neutral at HSBC
WESCO (WCC) upgraded to Outperform from Neutral at Credit Suisse

Downgrades

ARM Holdings (ARMH) downgraded to Hold from Buy at Benchmark Co.
Amgen (AMGN) downgraded to Neutral from Outperform at Credit Suisse
Becton Dickinson (BDX) downgraded to Neutral from Buy at Mizuho
Diamond Offshore (DO) downgraded to Neutral from Outperform at Credit Suisse
F5 Networks (FFIV) downgraded to Hold from Buy at Needham
FirstEnergy (FE) downgraded to Underperform from Hold at Jefferies
Fortinet (FTNT) downgraded to Market Perform from Outperform at JMP Securities
LRR Energy (LRE) downgraded to Neutral from Outperform at RW Baird
Och-Ziff Capital (OZM) downgraded to Market Perform from Outperform at Keefe Bruyette
Open Text (OTEX) downgraded to Hold from Buy at Stifel Nicolaus
Roche (RHHBY) downgraded to Neutral from Outperform at Exane BNP Paribas
Trinity Biotech (TRIB) downgraded to Neutral from Buy at Roth Capital
Urban Outfitters (URBN) downgraded to Neutral from Overweight at Atlantic Equities
Uroplasty (UPI) downgraded to Market Perform from Outperform at JMP Securities

Initiations

ExactTarget (ET) initiated with an Outperform at Credit Suisse
LivePerson (LPSN) initiated with a Neutral at Credit Suisse
PBF Energy (PBF) initiated with a Hold at Deutsche Bank
PBF Energy (PBF) initiated with an Outperform at Credit Suisse
S&W Seed (SANW) initiated with an Overweight at Piper Jaffray
Verint Systems (VRNT) initiated with a Neutral at Credit Suisse

HOT STOCKS

Ericsson (ERIC) to acquire IT services capabilities from Devoteam in France
KKR (KKR), Blackstone (BX) said to be among those in talks for Life Technologies (LIFE), Bloomberg reports
Caterpillar (CAT) to record $580M goodwill impairment charge in Q4
Shaw Communications (SJR) reported Shaw family acquired 750,000 class B shares
SeaCube (BOX) to be acquired by Ontario Teachers' Pension for $23 per share
NeoPhotonics (NPTN) subsidiary to acquire OCU unit from LAPIS Seminconductor for $36.8M
BGI-Shenzhen extended tender offer for Complete Genomics (GNOM)
FDA approved Botox (AGN) to treat overactive bladder
FDA approved Mallinckrodt's (COV) Gablofen prefilled syringe
OM Group (OMG) divested Advanced Materials business for up to $435M (FCX)
DaVita (DVA) formed JV with RHC in Taiwan
Daimler AG (DDAIF) created subsidiary for innovative mobility services
Pearson (PSO) sees tough market conditions continuing into 2013

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
DuPont (DD), Signature Bank (SBNY), TAL Education (XRS)

Companies that missed consensus earnings expectations include:
Verizon (VZ), Sierra Bancorp (BSRR)

NEWSPAPERS/WEBSITES

International investigations into the battery troubles that grounded Boeing’s (BA) Dreamliner 787, are growing, with U.S. and Japanese experts pursuing some new and possibly differing leads, the Wall Street Journal reports
Apple’s (AAPL) future is getting harder to read. Their move into new markets and its more complex supply chain are making its growth prospects more difficult to understand and predict, say longtime investors and analysts, the Wall Street Journal reports
Microsoft (MSFT) CEO Steve Ballmer is not the right leader for the software company but holds his grip on it by systematically forcing out any rising manager who challenges his authority, claims former senior executive Joachim Kempin, who has written a book about his time at the company, Reuters reports
South Africa's Competition Tribunal today gave the green light to the proposed takeover of global miner Xstrata (XSRAY) by Glencore (GLNCY). But the tribunal attached some conditions to the $33B deal to limit the merger's impact on job losses in the mining sector, Reuters reports
Consumption of high fructose corn syrup, used to sweeten products from Coca-Cola (KO) to H.J. Heinz (HNZ) ketchup and linked to obesity, is falling in the U.S. as health-conscious consumers drink less soda, Bloomberg reports
The world’s biggest investors are moving away from allocating money to government bond markets based on their amount of debt, a strategy that has favored the largest borrowers for three decades, Bloomberg reports

BARRON’S

A $14 per share LBO undervalues Dell (DELL)
Rockwell Automation, ABB provide good opportunities for robotics (ROK, ABB, ADEP, CGNX)
Crocs' (CROX) operational shifts could raise 2013 EPS by 11% to $1.55
Fossil (FOSL) could reach over $120 per share as earnings are reported
Data usage providing return on LTE investment for Verizon (VZ), AT&T (T)
Intel's (INTC) “branch prediction” on hybrid PCs a risky move

SYNDICATE

Performant Financial (PFMT) files to sell 7M shares of common stock

Your rating: None

President Putin orders FSB to protect media sites from cyber attack

RIA Novosti / Andrey Stenin

RIA Novosti / Andrey Stenin

The Russian President has told the country’s federal security service to set up a system that would detect, counter and prevent computer attacks on state information resources.

The order defines official resources as information systems and networks that are located in the territory of the Russian Federation and in its diplomatic and consular offices.

The work and control over the system will be run by the FSB. The state security department will also cooperate with other state ministries and agencies to ensure anti-terrorist cyber systems work properly. Putin’s order published on an official web site on Monday states that law enforcers should establish how several recent cyber attacks against government agencies have been allowed to happen.

In recent years there have been a number of attacks but only a few claimed to be successful.The attacks are mostly launched through networks of infected computers belonging to unsuspecting users, which makes the work of FSB specialists difficult.

It has been established that in early May 2012 some internet activists who claimed to belong to the Anonymous hackers’ group promised to launch an attack on Russian government web-sites to support the rally against alleged election violations that took place in early May.

The attacks by Anonymous yielded at least one result – on May 9 the hackers managed to block access to the Russian President’s official web-site kremlin.ru for about four hours.

Before that, hackers who claimed to belong to the Anonymous group, managed to deface the web-sites of some regional offices of Russian parliamentary majority United Russia, posting texts that accused top officials of corruption.

Due to the Anonymous group being very loose and evasive such cases are rarely investigated with success.

However, in mid-January this year, the FSB directorate for the Krasnoyarsk Region in Siberia filed a case in court against a local hacker who is suspected of attacks on the Russian President’s web-site in May. The activist has been charged with spreading malicious software, which is a criminal offence punishable with up to four years in prison.

“The PirateBox”: WiFi + USB Drive = Your Own Mini-Internet (Freedom)

internet1

Worried about draconian Internet laws? Creeping surveillance? The inability to share with others without being criminalized? The Internet is still a tool of tremendous power, but a deep rot has set in. We have caught it early and we are fighting to stop this rot, but there are other options we can begin exploring to hedge our bets, enhance our current efforts of fighting against corporate monopolies, and eventually, build an Internet of the people, by the people, for the people – big-telecom monopolies not welcomed.

Image: The PirateBox in use on a handheld device. Once the PirateBox is up and running, either on a standalone device like the one pictured to the right (background), or on your laptop as described here, it will appear as another WiFi network for people in range to connect to. Once connected files can be freely shared, and there is even a chat client users can communicate with. It is just as useful as a file server for a small business, as it is for circumventing the draconian criminalization of Internet file sharing. 

….


In last week’s “Fighting Back Against the “Intellectual Property” Racket,” the “PirateBox” was introduced. The PirateBox transforms a laptop, router, or single board computer into a mini-Internet hub where files can be freely shared, and even features a chat program so users can communicate. It is a lite version of the mesh networks described in December 2012′s “Decentralizing Telecom” where independent mesh networks featured many software alternatives to emulate popular online programs such as Facebook, Twitter, Blogger, and others. The PirateBox is an introductory project anyone with a WiFi adapter and a USB thumbdrive can do on their own with a little motivation and an hour to experiment.

In a busy office, a PirateBox can serve as a simple local wireless file server and chat client. In an apartment complex, it can become the center of a social experiment, an opportunity to reach out to neighbors and organize constructively, or just for fun – building badly needed local communities back up.

Instructions for perhaps the easiest of PirateBox’s implementations can be found on blogger, designer, and activist David Darts’ website here. The instructions are nearly fool proof, and a lot of the common problems ran into are described and their solutions linked to throughout the explanation.

The PirateBox does not connect to the Internet, nor does it operate from your hard drive. It works entirely on the USB thumbdrive you install it on, simply using your computer’s WiFi to network all who are in range.

Ideally you’d want to make a dedicated, standalone PirateBox to serve your space, office, and neighbors. A great place for beginners to embark on this is at your local hackerspace. If you don’t have a local hackerspace, look into starting one up.

Protesting is important, but protesting alone will not stem the problem at its source. The rot will continue to spread unless we develop tangible tools to pragmatically excise it and repair the damage it has already done. The problem of corporate monopolies ensnaring and subjugating us through their telecom monopolies can and is being solved by solutions like mesh networks, the PirateBox, and the onward march of open source software and hardware, simply displacing proprietary products and services. The best way to ensure success is to have as many informed and constructive people as possible join in the problem-solving process.

….

Since posting about the PirateBox, LocalOrg has received several success stories of people who have either already been using it, or have looked into it, prompting this follow up. Continue sharing your success, and if you would like, contact us and have them covered here on LocalOrg.

TSA ends naked airport scanners contract after years of controversy

A TSA agent waits for passengers to use the TSA PreCheck lane being implemented by the Transportation Security Administration at Miami International Airport.(AFP Photo / Joe Raedle)

A TSA agent waits for passengers to use the TSA PreCheck lane being implemented by the Transportation Security Administration at Miami International Airport.(AFP Photo / Joe Raedle)

The US Transport and Security Administration (TSA) will remove all 174 of OSI Systems Inc. (OSIS)’s Rapiscan body scanners from airports, following serious concerns over their inability to protect the privacy of passengers.

­The $5 million contract Rapiscan had with the TSA will come to an end, leading to the removal of the invasive machines from all US airports. The contract has been terminated as a result of the company’s inability to meet TSA requirements that their machines develop software to produce less invasive images of passengers.

The need for a speedy adjustment intensified in November 2012, when Wired reported that Rapiscan may have been manipulating the results of tests on integrated privacy software that they were supposed to have been implementing. In a letter quoted by Bloomberg, Rep Mike Rogers (R-AL) claimed that Rapiscan “may have attempted to defraud the government by knowingly manipulating an operational test.”

As a result of the outcry that followed these accusations about the then-current software, the TSA ordered the manufacturer to adjust the machines so that an avatar of a miscellaneous body was displayed in place of the individual being searched.

Rapiscan indicated that they would not be able to meet the TSA’s demands until 2014. TSA Assistant Administrator Karen Shelton Waters said that it “became clear to TSA they would be unable to meet our timeline.”

As early as August 2010, the TSA had required that software be developed to make body scans of airline passengers less revealing, after the administration was criticized for essentially stripping their travellers naked. However, their airport scanners have continued to be a source of controversy – in 2012, a Texas woman was sent through a scanner three times, and told she was ‘cute,’

The TSA has been using two companies to conduct the searches, outsourcing to both Rapiscan and L-3 Communications Holdings to produce the machines. While the Rapiscan machines have been utilizing weak X-rays to create what appears to be a naked image of the subject, the machines of L-3 Communications Holdings use radio waves to depict concealed objects on an avatar image on a screen, and will continue to be used by the TSA.  

The Rapiscan machines will be replaced by 60 units supplied by L-3.

Frontrunning: January 18

  • Foreign Hostages Die in Algeria’s Battle With Terrorists (Bloomberg)
  • The latest bank to soon join the currency wars: McCafferty Says BOE Must Keep Open Mind on New Policy Tools (Bloomberg)
  • US debt talks complicated by timing (FT)
  • BOJ eyes open-ended asset buying, agrees new inflation goal (Reuters)
  • AmEx Says U.S. Card Income Fell 42% as Loss Provisions Increased (BBG)
  • Call to raise age for US’s Medicare (FT)
  • Obama Promise to Raise Middle Class Living Already Seen in Peril (BBG)
  • China Exits Slowdown as Quarterly Growth Tops Forecasts (BBG) - actually, as new Politburo says to make it appear that way
  • Britain to drift out of European Union without reforms (Reuters)
  • Republicans weigh interim debt-limit hike (FT)
  • Abe's aide says Japan shouldn't fret if yen falls to 100 vs dlr (Reuters) ... and it was 90 just a few days ago
  • PBOC May Seek More Liquidity Operations (Dow Jones)

Overnight Media Digest

WSJ

* Former professional cyclist Lance Armstrong told the world Thursday
evening that he used performance-enhancing drugs to win seven Tour de
France titles.

* Algeria's military launched a raid on Thursday
to free about 40 foreigners held by militants at a remote natural-gas
complex, leaving some hostages dead, surprising and angering several
governments and putting leaders across the world at a loss to determine
the fate of their citizens.

* In his final days as U.S. Treasury
secretary, Timothy Geithner reflected on the financial crisis and the
response he helped craft, in an interview with The Wall Street Journal.
Among other things, he said the government's rescue of the financial
system was doomed to be unpopular.

* In approving Boeing Co's
787 Deamliner to start carrying passengers in 2011, the Federal Aviation
Administration relied extensively on data generated by Boeing that
indicated the plane's advanced lithium-ion battery systems -- never used
before on a big jetliner -- featured redundant safeguards that were
essentially foolproof.

* Rio Tinto Chief Executive Tom Albanese
agreed to step down on Thursday, the latest in a string of leaders
toppled by shifting fortunes at the world's biggest mining companies.

*
Quarterly earnings reports released on Thursday underscore the
lingering illnesses afflicting some of the largest, best-known U.S.
banks and the comparatively ruddy health of some smaller regional
lenders.

* Sony Corp has reached a deal to sell its U.S.
headquarters at 550 Madison Avenue for $1.1 billion, the company said on
Thursday, a strong price that shows how investors are bidding
aggressively for top Manhattan properties.

* Toyota Motor Corp
has settled what was to be the first in a group of hundreds of pending
wrongful death and injury lawsuits involving sudden, unintended
acceleration by Toyota vehicles.

FT

In a drive for transparency, authorities in the Cayman Islands are planning on creating a public database of funds domiciled in the British territory for the first time.

Videogames seller Game Group is interested in acquiring stores from collapsed music retailer HMV, the CEO said.
 
As their mega-merger continues to go through regulatory clearance, Glencore and Xstrata are set to extend the deadline for the deal for a third time.

The British banking industry wants a deadline of May 2014 to be imposed for claims from customers who say they were mis-sold payment protection insurance, says one senior executive.

Barclays is considering whether it should recoup some or all of the 290 million pounds it was fined for Libor-rate rigging from the bonuses it is due to pay investment bankers in 2012.

NYT

* Hours after Algerian forces raided a gas facility, there was still no official word on the number of hostages freed, killed or still held by their Islamist kidnappers.

* In a televised interview with Oprah Winfrey, Lance Armstrong admitted to using banned substances but did not say how he did it or who helped him.

Thomas Weisel, who bankrolled Lance Armstrong through seven Tour de France wins, said in his first public comment on the matter that he never personally saw an instance of doping on the team.

* Most banks have recovered from the recent financial collapse, but two companies, Bank of America and Citigroup have reported continuing effects on earnings.

* AT&T warned that it would take a fourth-quarter charge of about $10 billion because of bigger-than-expected pension obligations.

* The Chinese economy picked up steam during the last few months of 2012, closely watched data from Beijing on Friday confirmed. But at the same time the figures underlined the view that the pace of future growth is likely to remain well below that seen in recent years.

* E*Trade Financial named Paul Idzik, a former executive at Barclays, as its new chief, ending a five-month search for a new leader.

* Norwegian Cruise Line Holdings has sold shares in itself at $19 apiece, a person briefed on the matter said, reaping about $446.5 million in proceeds.

Canada

CHINA SECURITIES JOURNAL

--The State Electricity Regulatory Commission of China (SERC) said China's power consumption could reach above 9 percent in 2013 from 5.5 percent in 2012.

CHINA DAILY (www.chinadaily.com.cn)

--Fears over intellectual property lawsuits by foreign train technology companies will not derail exports of Chinese bullet trains, Vice Minister of Science and Technology Cao Jianlin said in an interview, dismissing copycat claims by Japan's Kawasaki as "nonsense."

--A former Japanese leader visited a memorial site to victims of Japanese wartime aggression, but analysts were quick to reject ay suggestion that Tokyo will change its policies toward China.

PEOPLE'S DAILY

--China's Railway Ministry said investment in railway could hit 650 billion yuan and that it will set a National Railway Development Fund as soon as possible.

China

THE GLOBE AND MAIL

* Two class action lawsuits were filed against the federal government in Canada after the human resources and skills development department lost a portable hard drive containing personal information about more than half a million people who took out student loans.

The department said last week the device contained data on 583,000 Canada Student Loans Program borrowers from 2000 to 2006.

* The federal ethics commissioner wants to talk to Finance Minister Jim Flaherty about his letter to the Canadian Radio-television and Telecommunications Commission (CRTC) after it was revealed that he wrote to the arm's-length broadcast regulator in support of a constituent's bid for a radio licence.

Reports in the business section:

* More Canadians went online to do their Christmas shopping this year, according to a new report by MasterCard Advisors.

Canadian consumers spent C$2.8 billion ($2.84 billion) shopping online in December, up 26 percent over the previous year and representing about 6.6 per cent of the month's total retail sales.

NATIONAL POST

* Three Quebec City teens have been arrested over charges of planning a shootout at their high school.

The three teens, two boys aged 14 and 15 and a 16 year old girl, who have pleaded not guilty, face charges of conspiracy to commit murder and will remain detained until a bail hearing on Monday.

FINANCIAL POST

* The blowout in price between Alberta's heavy oil and the North American benchmark price is a "longer term issue" with no quick fix, Alberta Investment Management Corp (AIMCo) CEO Leo de Bever said.

Fly On The Wall 7:00 Market Snapshot

ANALYST RESEARCH

Upgrades

Amazon.com (AMZN) upgraded to Outperform from Sector Perform at Pacific Crest
Cornerstone OnDemand (CSOD) upgraded to Buy from Neutral at Goldman
Credit Suisse (CS) upgraded to Overweight from Equal Weight at Morgan Stanley
Expeditors (EXPD) upgraded to Outperform from Neutral at Credit Suisse
Fabrinet (FN) upgraded to Overweight from Neutral at JPMorgan
Las Vegas Sands (LVS) upgraded to Outperform from Market Perform at Wells Fargo
Movado (MOV) upgraded to Buy from Neutral at Citigroup
Netflix (NFLX) upgraded to Buy from Neutral at Janney Capital
Qlik Technologies (QLIK) upgraded to Buy from Neutral at Goldman
Research in Motion (RIMM) upgraded to Buy from Hold at Jefferies
Tyson Foods (TSN) upgraded to Outperform from Market Perform at BMO Capital
Wynn Resorts (WYNN) upgraded to Outperform from Market Perform at Wells Fargo

Downgrades

Alterra Capital (ALTE) downgraded to Neutral from Buy at Sterne Agee
Ball Corp. (BLL) downgraded to Hold from Buy at Jefferies
CSX (CSX) downgraded to Neutral from Outperform at Credit Suisse
Capital One (COF) downgraded to Neutral from Buy at Janney Capital
Carrizo Oil & Gas (CRZO) downgraded to Underperform from Neutral at Credit Suisse
Clarcor (CLC) downgraded to Market Perform from Outperform at William Blair
Finisar (FNSR) downgraded to Underperform from Hold at Jefferies
MGM Resorts (MGM) downgraded to Market Perform from Outperform at Wells Fargo
NetSuite (N) downgraded to Neutral from Conviction Buy at Goldman
Ultimate Software (ULTI) downgraded to Neutral from Buy at Goldman
Visa (V) downgraded to Neutral from Outperform at RW Baird
Westamerica (WABC) downgraded to Underperform from Market Perform at BMO Capital

Initiations

Geron (GERN) initiated with an Overweight at Piper Jaffray
Halcon Resources (HK) initiated with a Hold at Stifel Nicolaus
Harry Winston (HWD) initiated with a Buy at Nomura
Inovio Pharma (INO) initiated with an Overweight at Piper Jaffray
Intuitive Surgical (ISRG) initiated with a Buy at Janney Capital
Marathon Oil (MRO) initiated with a Buy at Stifel Nicolaus
Oncothyreon (ONTY) initiated with an Underweight at Piper Jaffray
Threshold Pharmaceuticals (THLD) initiated with a Neutral at Piper Jaffray
Tronox (TROX) initiated with a Buy at B. Riley Caris
Ziopharm (ZIOP) initiated with a Neutral at Piper Jaffray

HOT STOCKS

GE (GE) on target to achieve dougle-digit earnings growth in 2013
Said outlook for developed markets remain uncertain
Sees growth in China, resource rich countries
Weiss family raised American Greetings (AM) offer to $17.50 from $17.18 per share
Moody's changed Rite Aid (RAD) outlook to positive from stable
Schlumberger (SLB) said global macroeconomic environment remains uncertain
Sees 2013 global oil demand similar to 2012
Liberty Media (LMCA) bought 50M shares of Sirius XM (SIRI), control above 50%
Intel (INTC) ”excited about strong pipeline of products coming to market”
Sees little growth in wireless in 2013
Capital One (COF) sees average quarterly revenue levels in 2013 like Q412
Sees reduction in loan balances in 2013
Sony Corporation of America (SNE) sold 550 Madison Avenue building for $1.1B
AZZ Inc. (AZZ) sees FY14 margins remaining strong
ONEOK Partners (OKS) announced $465M-$500M project investments through 2015
NuPathe's (PATH) Zecuity approved by FDA

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
General Electric (GE), Schlumberger (SLB), Xilinx (XLNX), Bank Mutual (BKMU), Intel (INTC), Wintrust Financial (WTFC)

Companies that missed consensus earnings expectations include:
Matthews (MATW), People's United (PBCT), Capital One (COF)

Companies that matched consensus earnings expectations include:
Wipro (WIT), Associated Banc-Corp (ASBC), American Express (AXP)

NEWSPAPERS/WEBSITES

GE (GE) is the world's top producer of aircraft engines and medical-imaging equipment, but as far as its profits are concerned, it’s very much a bank. GE Capital is expected to account for nearly half the company's 2012 profit, the Wall Street Journal reports
Dell’s (DELL) potential $23B leveraged buyout could also be the deal that finally gets the leveraged-buyout machine going again, showering financiers in fees and potentially yielding big returns for investors, the Wall Street Journal reports
Americans are more confident in the future and are increasingly striking out to set up their own homes, a move that is helping propel the housing recovery, Reuters reports
When U.S. natural gas producers release their 2012 annual reports, many companies may have to significantly reduce a key indicator of their financial health: reserves. The SEC
requires companies to calculate and report year-end oil and gas reserves using 12-month average prices, Reuters reports
With the worst flu outbreak since 2009 gripping the U.S., vaccine makers (GSK, AZN) are determined to do better next season. They’re developing powerful vaccines that hold the promise of cutting incidences of flu by the thousands, Bloomberg reports
Franklin Templeton Investments (BEN) reduced its holdings of Apple (AAPL) last year to 4.2% from 7% in 2011 on concern the maker of the iPhone lacks a strategy to sell cheaper smartphones in emerging markets such as China and India, Bloomberg reports

SYNDICATE

CyrusOne (CONE) 16.5M share IPO priced at $19.00
Northern Tier (NTI) Energy 10.7M share Secondary priced at $24.46
Norwegian Cruise Line (NCLH) 23.529M share IPO priced at $19.00
SunCoke Energy (SXCP) 13.5M share IPO priced at $19.00
Trius Therapeutics (TSRX) files to sell common stock

Your rating: None

DNA Anonymity Under Threat

A person donating their DNA sequence anonymously for research purposes may in fact be identified by a few simple web searches, according to a paper published today (January 17) in Science.

Mediaworks pulls plug on Kim Dotcom’s Mega ad campaign

Megaupload boss Kim Dotcom (AFP Photo/Michael Bradley)

Megaupload boss Kim Dotcom (AFP Photo/Michael Bradley)

Mediaworks, a New Zealand media company, has cancelled an ad campaign for Kim Dotcom’s new business Mega, a file-locker service. The enfant terrible of web media still faces extradition to the US for breaking copyright laws.

Mediaworks, a New Zealand based television, radio and interactive media company has said that it has cancelled an advertising campaign for Kim Dotcom’s new business, Mega.

Mega says it will be capable of transferring confidential information securely, which previously has required the installation of dedicated software. .

Mega launches on Sunday January 20th at Kim Dotcom’s Coatesville mansion in New Zealand.

The advertisements were expected to run on Mediaworks’ the Edge radio and other stations from Wednesday.

Dotcom tweeted Wednesday that Mediaworks had pulled the plug on the radio ad campaign, which had been booked prior to Mega’s launch:

Dotcom added that he was “Not blaming Mediaworks. They are a great company with great people. It’s the music labels that are abusing their power, again.”

Dotcom has appealed to other radio stations to play the ad campaign instead.

Media works confirmed they had canceled the ad but didn’t say why.

“When it comes to details of relationships with all our clients, including Mr. Dotcom, we keep those arrangements pretty confidential”, said a Mediaworks spokeswoman. Although she did say that cancelling an ad campaign was a “unique situation” for Mediaworks.

Despite a series of legal victories against prosecutors, Dotcom still faces an extradition hearing next year amid allegations that he should be made to face trial in the US over charges his wealth has been obtained by widespread copyright infringement.

Dotcom and his co-accused, Finn Batata, Mathias Ortman and Bram Van der Kolk, deny the charges.

“If I win my case and Mega becomes a powerful business that creates thousands of jobs, I get involved in startups and contribute to the economy – then I want to be New Zealander of the year,” The German National previously told the Weekend Herald, with regards to his new business Mega.

Aaron Swartz’s FOIA Requests Shed Light on His Struggle

Aaron Swartz at a 2008 Creative Commons panel.Aaron Swartz at a 2008 Creative Commons panel. (Photo: dsearls)It looked like Aaron Swartz was up to something.

Two months before his death, the high-profile Internet activist filed a Freedom of Information Act request with the US Mint and asked for copies of its 2005 survey results which claimed, "147 million adults continued to collect the 50 State Quarters ... the most successful coin program in the nation's history."

The 50 State Quarters Program report Swartz cited in his November 24 FOIA request said the US Mint "shipped 34.3 billion quarter-dollar coins to the Federal Reserve Banks (FRB), generating $8.6 billion in revenue and nearly $6.3 billion in seigniorage, which helps finance the national debt."

"The United States Mint estimated it shipped 16.3 billion more coins to the FRB than it would have in the absence of the Program. Consequently, the Agency attributes $4.1 billion in revenue and $3.0 billion in seigniorage solely to the 50 State Quarters Program," according to the report. "The sale of 50 State Quarters numismatic products generated another $470.1 million in revenue and $136.2 million in earnings and seigniorage."

It's unknown what Swartz had hoped to do with the information if and when he received the types of records he was requesting. Swartz's request remains open, according to Muckrock, a transparency web site that streamlines the FOIA request process for journalists and the public and which Swartz used to request records.

Michael Morisy, the founder of Muckrock, who met Swartz in 2010 after Morisy launched the site, told Truthout they spoke regularly about a number of Swartz's FOIA requests "but not that one in particular."

Perhaps the boy genius who founded a software company that merged with the popular social networking web site Reddit was hoping to come up with a solution to the country's financial woes and use the statistics in the government report to show why an idea to mint a platinum trillion-dollar coin as a means of dealing with the federal debt ceiling could be even bigger than the 50 State Quarters Program. In one of his last tweets before he took his own life Friday, he urged his followers to "save the country" and "sign the platinum coin petition."

The idea was ultimately shot down on Saturday.

A day earlier, Swartz hanged himself with his belt in his Brooklyn, New York home. He was 26. He had battled depression and in years past had publicly written about thoughts of suicide. He did not leave a suicide note, according to police.

While his supporters, family and friends continue attempt to come to grips with the tragic loss of such a gifted computer programmer, who at 14, developed an early version of Really Simple Syndication, or RSS, which allowed blogs and news web sites to easily share their content, a peek at the FOIA requests Swartz filed over the past two years sheds a little light on what he had been grappling with personally and professionally.

Although a majority of his FOIA requests were self-serving it is also clear that the information he sought, particularly in areas pertaining to government surveillance, would have greatly benefited the public. However, his efforts to pry loose materials from a highly secretive administration were mostly unsuccessful.

On the Government's Radar

Swartz filed his first FOIA request using Muckrock's service in December 2010, more than two years after he landed on the government's radar. He was seeking information about himself. 

In 2008, Swartz's friend and fellow open government activist Carl Malamud, the founder of the nonprofit public.resource.org, wanted to make federal court documents housed on the Public Access to Court Electronic Records system (PACER) available to the public for free. Using $600,000 he raised from supporters, Malamud purchased 50 years worth of appellate court documents and posted them on his website.

Then, the government started a pilot program in which access to federal court documents on PACER would be made available to users at no cost at 17 libraries around the country. Malamud urged activists like Swartz to visit the libraries, download the documents and send it over to him so he could make it availble to the public via his website. 

"So Aaron went to one of them and installed a small PERL script he had written that cycled sequentially through case numbers, requesting a new document from Pacer every three seconds, and uploading it to" Amazon's Elastic Compute (EC2) Cloud server, Wired reported. "Aaron pulled nearly 20 million pages of public court documents, which are now available for free on the Internet Archive." 

The court documents Swartz legally accessed were worth $1.5 million. The government shut down the PACER pilot program and the FBI launched an investigtation

On December 10, 2010, Swartz filed a FOIA request with the Justice Department's Criminal Division seeking "documents related to me, Aaron Swartz, as well as any documents related to any associated PACER investigation." The government responded by stating it could not locate any responsive records.

The same day he filed a FOIA request with the Justice Department he also filed one with the Food and Drug Administration (FDA) seeking "All clinical trial information, including the medical and statistical reviews of New Drug Applications." The FDA said his request was too broad. Swartz narrowed it and asked for "the list or log that includes all names of drugs which the FDA has already processed and prepared for public release all the submitted medical and statistical new drug reviews. [sic]" The FDA told Swartz he could find that information on the agency's website. It's unknown why Swartz was so interested in the data.

Two years ago, Swartz was indicted on federal wire and computer fraud charges for allegedly downloading illegally more than 4 million journal articles and documents from JSTOR, an electronic database of journal articles, by entering a wiring closet in the basement of a research building at the Massachusetts Institute of Technology (MIT), connecting a laptop to the university's network and uploading the articles to Amazon's cloud server. Swartz later returned to retrieve the computer, according to federal court documents.

This time the government aggressively pursued Swartz, even after he turned over hard drives containing the articles and JSTOR said it was not interested in pursuing the matter further. His trial was due to start in April. He faced $1 million in fines and decades in prison if convicted.

In March 2011, about two months after he was arrested by MIT and Cambridge, Massachusetts, police and a Secret Service agent and four months prior to his indictment, Swartz filed a FOIA request with the Justice Department, which appeared to be related to his PACER case, seeking:

Any records requests made to Amazon and any responses from Amazon in connection with any such requests. This includes subpoenas, warrants, 2703 orders, National Security Letters, etc.

In addition, I request any guidelines, policies, advice, or procedures related to using data stored by Amazon for investigations, data-collection, and surveillance. For example, any guides or advice to law enforcement akin to the "AOL Inc. Law Enforcement Manual" or "Facebook Law Enforcement Guidelines" would be included by this request.

In particular, I request the response from Amazon to a Grand Jury subpoena as included in an email from Eric Wenger dated Nov 4, 2008 and labeled "Amazon_GJS_Response.pdf". Since it pertains to me, I request this information under the Privacy Act as well as the Freedom of Information Act.

A week before he filed his FOIA, Swartz exchanged emails with Christopher Soghoian, a security and privacy researcher at the American Civil Liberties Union, asking him to provide feedback about a blog post he was considering publishing: "Is the Government Snooping On Your EC2 Instance?" While Swartz's post raised a number of important privacy and security questions, he was clearly concerned about how the government was obtaining information about him without his knowledge.

When I heard that the government had [ordered Twitter to turn over data about its users], I got real interested in the legal techniques for getting people's private data," Swartz wrote. "I've spent the past few months talking to lawyers, policy experts, and executives at online service providers about how the rules work and what protections they afford. What I've found is that ­­- incredibly -­­ anyone who's filed a lawsuit can order online service providers to turn over just about anything." In a message on the same email string, Soghoian questioned the accuracy of Swartz's finding that "anyone" could obtain such information, citing a provision in the Electronic Communications Privacy Act that prohibits disclosure of content to anyone but the government. (And the government doesn't even need to file a lawsuit.) But most major online service providers warn you before they hand over your data and give you a chance to challenge the order in court. Google, Yahoo, and Twitter all send their users emails with a copy of the request and instructions on how to challenge it.

What are Amazon's policies? I've had several conversations with them about this, but they refuse to comment on the record. Still, I'm in the rare position of getting to experience them first­hand. A couple years ago the government sent Amazon a subpoena for information about an EC2 instance I'd purchased. Amazon handed it over without stopping to warn me. When I asked them about it specifically, they refused to comment. When I asked them about their general policy, they refused to comment. The only reason I found out about it was because I filed a FOIA request with the Department of Justice. The DOJ was more transparent about this than Amazon.

As best as I can tell, this is Amazon's policy: When the government asks, turn stuff over. Never tell the people affected. Don't give them a chance to object.

In his email to Soghoian, Swartz said he could not publish the article under his name "for personal reasons." He did not elaborate. Swartz's attorney did not return calls from Truthout seeking comment. Soghoian also did not respond to email requests for comment.

A week after his email exchange with Soghoian, Swartz filed a FOIA request with the FBI and Justice Department seeking records from the FBI and records related to a "raid" of Soghoian's Indiana home in 2006.

According to Muckrock, Swartz did not receive any documents pertaining to Soghoian at the time of his death.

Why the government was so determined to punish Swartz is a mystery. The Huffington Post reported that Swartz's attorney, Elliot Peters, said that the assistant US attorney in Massachusetts prosecuting the case, Stephen Heymann, was looking for "some juicy computer crime cases and Aaron's case, sadly for Aaron, fit the bill." Peters believes Heymann thought he "was going to receive press and he was going to be a tough guy and read his name in the newspaper."

Over the weekend, Swartz's family issued a statement and said Swartz's death "is the product of a criminal justice system rife with intimidation and prosecutorial overreach. Decisions made by officials in the Massachusetts U.S. Attorney's office and at MIT contributed to his death."

Rankled By ICE Domain Name Seizures

Morisy, the Muckrock founder, said Swartz was particularly disturbed by actions on the part of Immigrations and Customs Enforcement (ICE) that led to the seizure of dozens of Internet domain names. He filed a FOIA in December 2010 with the agency in hopes of prying loose documents about its actions.

"That really bothered him," Morisy said about the domain name seizures. "He felt it was politicized. He was just really upset that the government could come in and do this."

ICE turned over to Swartz last October about 100 pages of heavily redacted documents. But the materials do not help explain the government's actions.

Morisy said he was working on an appeal for Swartz to send to ICE, a draft of which was ready at the time of his death last week. He added that Swartz expressed some interest in working with advocacy organizations, such as the Electronic Frontier Foundation (EFF), to "raise awareness about these issues and effect change."

"It wasn't just a curiosity for him," Morisy said about Swartz's FOIA requests. "He wanted to see something done differently."

Free Speech Advocate

Swartz also sought government records related to Pfc. Bradley Manning, the intelligence analyst accused of leaking hundreds of thousands of State Department cables and other documents to WikiLeaks. Specifically, Swartz's December 27, 2010 FOIA request asked the Marine Corps to "please process as quickly as possible a request for the government-curated audio tapes created in Quantico brig visitation room #2 on December 18 and December 19 2010 from 1:00pm – 3:00pm.

"These tapes may also contain a recording of David M. House; I have permission from David House under the Privacy Act to request these records," Swartz wrote. He filed the same request with the Army Criminal Investigative Service on February 9, 2011.

House is a founding member of the Bradley Manning Support Network who helped raise awareness about the conditions of Manning's detention, which a military judge recently ruled was illegal. In June 2011, House was subpoeaned to appear before a federal grand jury in Alexandria, Virginia, which is reportedly investigating Wikileaks and associations a group of Boston-area hackers may have had with Wikileaks founder Julian Assange and/or Manning. 

House declined to comment on the record about Swartz's FOIA. 

Morisy said Swartz "was very interested in due process and the freedom of speech issues." That certainly appeared to be  the common thread in all of his FOIA requests. 

But it was also deeply personal for Swartz.

Indeed, one of his FOIA requests sought from the United States Secret Service, "Any records on the procedures the Secret Service uses for reading encrypted hard disks." Swartz, who filed the records request on February 28, 2011, was still waiting for the Secret Service to produce responsive records at the time of his death. 

In a blog post published Monday, investigative blogger Marcy Wheeler reported that two days before Swartz was arrested in January 2011, the Secret Service took over the investigation.

On Monday, in what is considered standard procedure when the defendant in a case has died, the Justice Department announced that it had dropped its criminal case against Swartz.

Electronic Sanctions: Targeting Iran’s Media, Preventing Iranians from Using the Internet

internet

The inhumane sanctions of the United States and its European allies against Iran know no boundaries. At the cost of the lives of thousands of Iranian patients suffering from different types of cancer, thalassemia, hemophilia, HIV/Aids, psychiatric disorders and other diseases, the West has banned the export of life-saving medicines and medical equipments to Iran and this is deteriorating the lives of those patients who cannot find medicines needed for their survival. The companies that do business with Iran will be immediately penalized by the U.S. government and so far no exemptions have been made to ensure that ordinary Iranian citizens will at least get access to foodstuff, medicines and other humanitarian goods.

The recent wave of sanctions have also targeted Iranian media as several satellite providers across Asia, Europe, Latin America and North America have taken Iranian television channels off air, denying millions of viewers around the world the chance to find an alternative, Iranian perspective on the world affairs.

However, the sanctions have been so extensive and widespread that they even deprive the Iranian citizens from enjoying the latest productions of technology.

The internet explorer “Google Chrome” is unavailable for downloading to the Iranian users, and so are the instant messaging software “Google Chrome”, picture sharing platform “Picasa” and the geographical surveying application “Google Earth.” Although the Iranian computer geeks know tricks to circumvent these limitations, for the majority of Iranian computer users these services are not easy-to-access.

Ironically, Google lifted the limitations in early 2011 when the opponents of President Ahmadinejad had taken to the streets and staged demonstrations. Google announced that it will ease the restrictions to allow the protesters communicate more smoothly and organize rallies and mass demonstrations. “There are many activist layers on Google Earth. Anyone can create a layer to show exactly what is going on in Iran,” said Google’s head of public policy Scott Rubin.

Rubin also said that having access to Google Chrome will be also useful for the protesters: “in a country with a history of government surveillance it is useful having a browser that can’t easily be hacked.”

So it’s clear that even when the American internet giant made some concessions, it did not intend to serve the interests of the Iranian people in general, but only meant to contribute to the weakening of the government and empowerment of the opposition.

But the limitations imposed on Iranian internet users by the United States are not new or unprecedented. On August 19, 1997, President Clinton signed the 13059 executive order which stipulated harsh restrictions on Iranian internet users and computer companies in terms of using the U.S.-produced software, hardware and other technology products.

According to this order, “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, technology, or services to Iran or the Government of Iran, including the exportation, reexportation, sale, or supply of any goods, technology, or services to a person in a third country” will be prohibited.

According to the U.S. Department of Treasury, only a handful of commonplace computer applications including document readers such as Acrobat Reader, plug-ins such as Flashplayer and Shockwave and “free mobile apps related to personal communications” are legally downloadable in Iran.

In April 2003, it was reported that in a racially discriminatory and politically motivated decision, the popular career and job-finding website Monster.com removed the profiles and résumés of users from a number of countries on the U.S. Department of State’s blacklist including Iran, Syria, Sudan, Myanmar, Cuba, Libya and North Korea.

In a March 21, 2012 report, the CNet’s political correspondent Declan McCullagh wrote that Google has also restricted Iranian users’ access to Android Market, known as Google Play.

Collin Anderson, an independent researcher in North Dakota has listed a number of U.S.-based technology products that are unavailable to Iranian users. These products include, but are not limited to, Apple’s iOS app store, McAfee’s antivirus software, Oracle’s Java and MySQL, Adobe Acrobat Reader, DropBox, Real Player, Google AdWords, and Google Android Market.

But the unfair measures taken by the U.S. government as dictated to the American internet, IT and other technology-related service providers have gone beyond the pale and are now taking the form of racial discrimination. It was reported in June 2012 that an Apple Store in Alpharetta, Georgia refused to sell an iPhone and iPad to the Persian-speaking customers, resorting to the excuse that they may send at least one of these devices to their friends in Iran!

When Sara Sabet, a 19-year-old student of the Georgia University went to an Apple Store in a local mall with her friend to buy a couple of iDevices, the salesperson found her speaking in a foreign language. The employee asked her what language she spoke, where she was from and where the iPad and iPhone she were heading to. She responded by saying that she is from Iran and wants to send the devices to her friend in Iran. It was then that the Apple employee responded by saying, “I just can’t sell this to you. Our countries have bad relations.” Sabet said that the left the store and shed tears all the way back to home.

The Council on American-Islamic Relations called the Apple Store’s treatment of the Iranian student discriminatory in a statement issued in condemnation: “Apple must revise its policies to ensure that customers do not face discriminatory treatment based on their religion, ethnicity or national origin,” said CAIR National Executive Director Nihad Awad. “If the actions of these Apple employees reflected company policy, that policy must be changed and all employees retrained.”

Overall, this is how the Iranians are being treated by a government which has always been busy trumpeting its anxiety and nervousness for the protection of human rights around the world. Perhaps Iranians are paying the price for the independence of their nation and their refusal to be brought under the hegemonic domination of the United States. These sanctions which directly affect the daily lives of ordinary citizens show the extent to which the U.S. government can be brutal and ruthless to deprive a nation of its most rudimentary and basic rights. Can anyone really understand what Uncle Sam is doing?

‘Aaron was killed by the government’ – Robert Swartz on his son’s death

The father of information activist Aaron Swartz blames US prosecutors for his son’s death, RT’s Andrew Blake reports from an emotional Tuesday morning funeral outside of Chicago.

Aaron Swartz, 26, was found dead on Friday of a reported suicide. Swartz had been instrumental in designing software that aimed to make the Internet easy and open for everyone, and also co-founded both Reddit.com and Demand Progress — one of the most visited sites on the Web and an highly touted activism organization, respectively.

But while friends, family and loved ones recalled Swartz’ compassion for technology and his utter selflessness during Tuesday’s service, those in attendance did not shy away from acknowledging the tremendous legal trouble that plagued the activist in recent years.

In 2011, federal prosecutors charged Swartz with a series of counts under the Computer Fraud and Abuse Act, crimes that could have sent him away to prison for upwards of 35 years if convicted. Swartz, said the government, entered a building at the Massachusetts Institute of Technology and downloaded millions of academic and scholarly papers from the service JSTOR with presumably the intent of distributing them for free.

“Aaron did not commit suicide but was killed by the government,” Robert Swartz said during Tuesday’s service at the Central Avenue Synagogue in Highland Park, Illinois. “Someone who made the world a better place was pushed to his death by the government.”

During the funeral, which lasted little less than 90 minutes, phrases such as “Googled,” “Anonymous,” “hackers” and “the Computer Fraud and Abuse Act” were spoken so nonchalantly it was as if including them in the service was simply to be expected. Taren Stinebrickner-Kauffman, Swartz’s partner, said amidst laughter and tears that one of her fondest memories of Aaron as of late was an early-morning moment from only weeks earlier when he insisted she help him spend hours analyzing an advanced algebraic math equation he was determined to solve.

In her eulogy as well as those offered by others, the take-away by and large was that Swartz, to the ones closest to the computer genius, was adamant on social change.

“Aaron meant more to our people than I think anyone else we know,” said Stinebrickner-Kauffman, who met Swartz through a tight-knit circle of activists from New England.

“Aaron wanted so badly to change the world,” she said, more so than acquiring wealth or fame.

Despite those intentions though, loved ones said the looming possibility of a felony conviction complicated matters for Swartz since his indictment in 2011.

“He was so tired” in recent weeks, Stinebrickner-Kauffman recalled. “He said to me, ‘Am I always going to feel that way?’”

With Swartz’ passing, though, his partner said it was now up to his colleagues and peers to push forward with the advocacy that Aaron was so incredibly passionate about.

“There’s nothing Aaron would want more than for us to take this moment and change the world,” she said, calling for the community Swartz was a part of to continue rallying for justice without him. If the community can combine forces and further his advocacy, she said, “prosecutors can stop going after innocent young people” like Aaron.

Elsewhere during her eulogy, Stinebrickner-Kauffman spoke harshly of the Massachusetts attorney general that filed charges against Swartz, as well as the institution that some say could have stopped the federal government from following up with the hacking case but did not.

That “false characterization” spearheaded by the Massachusetts Attorney General’s office, said Swartz’ dad, was likely the cause of his son’s death. Whereas the public applauds computer icons like Bill Gates and Steve Jobs as visionaries, Robert Swartz said his son was much more innocent in the eyes of the world at large, just not the federal government.

Before his days with Apple, recalled Mr. Swartz, Jobs and his business partner Steve Wozniak “used to criminally defraud the phone company” by selling small “blue box” devices that allowed anyone in the country to conduct long-distance calls for free. Gates’ development of Microsoft’s BASIC, Swartz said, was “sketchy” at best.

“These are people who are lionized,” he said, and “treated like idols in our culture.”

“How is that Aaron did something that legally wasn’t illegal — and he was destroyed by it,” he asked.

Mr. Swartz also had harsh words for MIT, who, unlike JSTOR, was relentless in their pursuit of the alleged criminal hacker.

“We tried and tried to get MIT to help and show compassion,” he said, but “their institutional concerns were more important than compassion.”

Following Swartz’ passing, members of the hacktivist group Anonymous gained unauthorized access to MIT’s servers and posted a tribute that was cited during Tuesday’s service, which also included eulogies from some of the most respected figures of Internet culture.

Tim Berners-Lee, a British scientist responsible for developing the World Wide Web, called Aaron Swartz “an elder” of the computer and information community during the funeral. When Berners-Lee first met Swartz, the young prodigy was all of 14 years old.

“I have no met anyone else so ethical,” Berners-Lee said. “He knew by writing code . . . he could change the world.”

“Up until the end, he was fighting for right,” he said.

Lawrence Lessig, an academic and political activist who knew Aaron Swartz for over a decade, called the government’s attempt to prosecute his friend pointless and an example of “idiocy” during the service. Elliot Peters, Swartz’ attorney in the JSTOR case, said his client’s peers are now without someone whose “passion for freedom and fairness” and a “mistrust for power” was unmatched. Peters echoed that same mistrust in his eulogy, which condemned the federal prosecutors that he suggested were at least partially responsible in his client’s death.

“Aaron, sadly, provided them the opportunity to make a case,” he said. “Something they could brag about.”

“They didn’t care who Aaron really was, or what he was doing,” Peters said. Meanwhile, he considered Swartz a “young, diminutive and oh so brilliant client” and compared his advocacy against the government to that of the American patriots during the US revolution.

“Aaron still lives as a voice for good,” his father said as the ceremony neared ending. “He spent his short life selflessly trying to make the world a better place for everyone.”

“Selfless” was an adjective used countless time during the funeral by several persons who cited Swartz’ insistence on putting himself first perhaps his most powerful trait.

“Your grief should not be equal to his work, because then your sorrow will never end,” Peters said at one point to quote Shakespeare’s Macbeth.

“As much as we despair, and we all do, we must know that we do all change the world. And we must never stop,” Mr. Swartz said before the ceremony concluded.

Memorial services for Swartz across the country are currently being planned. Hundreds are expected to gather in New York City later this week for a tribute planned in Times Square.

Guest Post: Why Expansionist Central States Inevitably Implode

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The Expansionist State is on the path to insolvency and systemic political crisis.

The S-Curve usefully charts the gradual development, explosive rise and eventual stagnation and collapse of complex systems. Remarkably, natural phenomena such as the spread of bacteriological diseases and financial dynamics both follow S-Curves as they mature, stagnate and collapse. I have described the dominant dynamic of our era (1981-present), financialization, with the S-Curve: Financialization's Self-Destruct Sequence (August 16, 2012)

The S-Curve also helps us understand why the Expansionist Central State is doomed to inevitable implosion/collapse. This chart displays the key dynamics:

In its initial "boost phase," State investment in the low-hanging fruit of public infrastructure offers a high yield. Examples include rural electrification, the rapid expansion of the railroad system, the construction of the Interstate Highway system, and the publicly funded research and development of science and technology that enabled the basic protocols and software infrastructure of the world wide web.
 

These investments of public tax revenues acted as multipliers of private investment and leaps in productivity.
 

We can see in the chart that modest fiscal deficits when public monies are leveraging fast growth in the overall economy have little consequence, for tax revenues are climbing more or less alongside State expenditures as the economy rapidly expands.
 

The key dynamic in State spending is this: the allocation of public capital is intrinsically a political process, not a market or communal process. Thus politically powerful cartels and guilds will secure State funding for their vested interests, and potentially higher-value investments will go begging.
 

This is the opportunity cost of any financial decision: the opportunities left behind in the decision-making must be weighed along with the purported benefits of the chosen avenue of spending.
 

As the State expands its share and control of the economy, this political allocation of capital and national income also expands. As the State grabs an ever-larger share of the economy and extends its Central Planning to every layer of the economy, the "best game in town" inevitably becomes lobbying the State for funds and perquisites.
 

Private investment decisions start being made on the basis of State subsidies and tax loopholes rather than market-based metrics. This dynamic is especially pernicious: not only does the State increasing choose to fund projects with diminishing returns as a result of political allocation, the State's expansion of command and control distorts private investment as well.
 

The Expansionist State thus distorts the investment decisions of the entire economy, public and private. Households don't buy a home because it is a fruitful investment, they buy it to obtain the mortgage interest deduction. Corporations buy medical-supply companies because they see Medicare as low-risk cash-cow, and so on.
 

State expenditures cease to yield productive returns as spending increasingly goes to politically favored cartels. Did the billions of dollars spent on the B-1 Bomber in the 1980s yield a weapons system that provided leverage amd dominance? No, it was a horrendously costly and inefficient jobs project, with the defense cartel skimming millions of dollars off a program that had been terminated by those who realized the money would be better spent on other defense needs.

Has higher education improved dramatically as a result of the vast increase in spending on higher education? Has the health of American improved dramatically as a result of the vast increase in spending on healthcare? The answer in both cases is obviously no. Increasing spending simply increases systemic friction and unproductive skimming.
 

Central State spending has reached the point of negative returns: money is dumped into cartels but the yield on the investment is near-zero. This is the point of stagnation, where spending keeps rising but tax revenues are no longer keeping pace because the State has become an enormous drag on the economy.
 

Political allocation of the national income knows no bounds. Politically, there are never any limits. If tax revenues aren't keeping pace, then the State must borrow increasing sums of money to fund its spending. Politicians and their State fiefdoms/private-sector masters, the cartels of finance, defense, healthcare, education, construction, etc. are screaming for more funding; where it comes from is secondary to easing the political pain.
 

So the political class raises taxes on all but the parasitic class (finance) and wealthy cartels and corporations buy loopholes and exclusions to the new taxes. The burden falls on higher income households, who then have less to invest in the private sector.
 

We are at the inflection point indicated on the chart where the lines cross, just before the crisis: tax revenues are lagging spending in an enormous structural deficit; the State dominates the economy and its spending cannot possibly be contained, due to the political promises made to entitlement constituencies, fiefdoms and cartels, and the drag of unproductive State spending has sent the economy into systemic decline.
 

Each constituency, cartel and fiefdom is convinced that they are acting in their own best interests in demanding more State funding and subsidies. As a result, they are blind to the consequence of everyone becoming dependent on the Expansionist State: the collapse of a system that is now yielding a highly negative return on State spending.
 

When State spending is expanding faster than tax revenues (which are a function not just of tax rates but of economic expansion) and the underlying productive (non-State, non-finance) economy, then the gap can only be filled by borrowing money. This works until the interest on the fast-rising debt begins to crowd out spending on entitlements and other politically protected programs.
 

Progressives assume all State spending is productive; this is clearly a false assumption. Some State spending may be productive, but when it is allocated by a corrupting political process, the inevitable outcome is most State spending devolves to unproductive transfers from the politically weak to the politically powerful.
 

Tweaking tax policy or raising the debt ceiling will not change any of these dynamics.The Expansionist State is on the path to implosion (insolvency) and collapse, i.e. a political crisis. If we understand the core dynamics of the Expansionist Central State--the political allocation of scarce national income to favored constituencies and cartels--we understand why this process is inevitable.

France offers an illuminating example of this path to implosion and collapse, but every Expansionist Central State from China to the U.S. is also on the same path. France, the Hidden Zombie in Europe (Mish).
I describe these dynamics in more detail in my book Resistance Revolution Liberation: A Model for Positive Change.


New video with CHS and Gordon Long (25 min.): 2013 Themes:

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Aaron Swartz – a Fighter Against the Privatization of Knowledge

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Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

Aaron Swartz was a brilliant 26-year-old software developer who most recently worked at a company called Thoughtworks, a global software developer, but before that, was well known as a developer of Reddit, the inventor of RSS, and one of the designers of Creative Commons. Well, Aaron committed suicide on Friday, January 11. At the time of his death, Aaron Swartz was under indictment for using MIT access to log into JSTOR, a database of scholarly articles, and downloading those articles with the intent to make them public. If Swartz had been convicted of these charges, he faced more than 30 years in prison.Now joining us to talk about Aaron the man and the significance of this case: first of all, Roy Singham. He's the founder and chairman of Thoughtworks Inc., the company that Aaron most recently worked for. And Brian Guthrie. Brian was a coworker with Aaron, and he's also a software developer and internet activist. Thank you both for joining us. BRIAN GUTHRIE, SOFTWARE DEVELOPER AND INTERNET ACTIVIST: Thank you.JAY: So, Roy, first of all, talk quickly about the basic case, but really what was at stake. I mean, the question I suppose everybody's asking is: why was the prosecutor going after Aaron with such fervor? Nothing actually was ever released. He took these documents perhaps with the intention of making them public, but he never did. But yet they were making a major case out of this.ROY SINGHAM, FOUNDER AND CHAIRMAN, THOUGHTWORKS: Yeah, no, no. The family issued a very, I think, poignant statement about this when they were defining this as prosecutorial overreach, and, unfortunately, in this case, also the complicity of MIT in letting this happen. I mean, understanding that these documents were downloaded, he had the right to access them, they were sitting on a server, nobody else received them, there was no victim in this alleged crime, none, why would you take—because you would have to allege intent to distribute.By the way, these documents are academic documents. These are not, you know, corporate secrets, they're not state secrets. These are often—most of these documents were created over, you know, centuries of human knowledge. And so the idea that there was an economic benefit to be gained is not true. So there was no economic motivation. There was no damage done to any of the institutions. JSTOR, which was the actual company from—organization from which the documents were downloaded, was quite frankly aghast at the end that this would—'cause they would have said, we'd settle, we don't believe in any charges.So here you have a government going after somebody where there are no damages and no victim, and at the same time the people who might have been the victim have said, please stop. Very unusual.JAY: So, clearly the objective has to be to send a message that anyone that has the kind of specialized know-how or talent that Aaron had, you stay away from privately owned or state-owned documents, period. This has to be about, you know, making—sending the message to this community.SINGHAM: Yeah. I mean, again, you know, different people have different views on this. Glen Greenwald, in his, I think, brilliant piece in The Guardian, looks at all the potential theories of why would this overreach have occurred. You know, was it because, you know, they wanted to make him a sample case? Was it because he had made some powerful enemies in the United States?As you probably know, he was the guy who led or certainly that he helped the movement against the defeat of the piracy act. You know, so he led that. He had already entangled with the government in showing then that the things [incompr.] that they had already produced for the courts ought to be free. He downloaded them. He had embarrassed them in this way. So he clearly had already reached the attention point of the FBI and the government. So we know that he was a target.What this individual prosecutor did, however, in Boston, in addition to whatever political issues are undoubtedly underlying his case—this was a vindictive, mean office of—and remember, this is the federal prosecutor's office. It is the—you know, this was not a state issue. The state prosecutors in Massachusetts was not going after him. This was a federal prosecutor, you know, of Massachusetts, Carmin Ortiz. And the particular prosecutor, they were vicious over a two-year period in attempting to drive this young, beautiful boy, man, into jail. So, now, what is the political case versus what were the individual motives of these two prosecutors at a minimum? And we called for this in our press statement today [incompr.] Today I'm speaking as an individual to you. But in our press statement, this idea that, you know, you can have prosecutors who use the plea bargaining system to drive people into admission of guilt [incompr.] defend this stuff is millions of dollars, bankruptcy, 35 years in prison. This is terrifying to any person. And so a number of issues have to be called into play, in our opinion, and certainly in my opinion and Brian's opinion, who also worked closely, you know, with Aaron. If this is allowed unchallenged, we will lose the next generation of Aarons, the next generation of the most important intellectual leaders of the planet. That's what's at stake. I have some personal views, which I would agree, you know, in terms of what was the underlying political motive. But I think first that the family really, you know, would want us to say this. You know, why was nobody in the federal government blocking the federal prosecution from taking on this [incompr.]JAY: Brian, you worked alongside Aaron. Tell us a little bit about the man. What motivated him, first of all, do you think, to take these documents in the first place? I don't think he ever denied doing it. But it was part of a broader vision he had about the world. What was that?GUTHRIE: Aaron is most often known for his technical contributions, but he really had the soul of a philosopher and activist. He was extremely widely read. He reached out early and often in his life to his heroes and people he admired, asking how he could get involved and how he could help out. And he used those technical skills to improve things all over the internet. I mean, one thing that you see people talking about everywhere is how often Aaron would reach out, out of the blue, with offers to help, to get involved, to support their website in some way. He really had a prodigious intellect and genuinely wanted to use that intellect and his skills and energy to do good in the world.He was also a tremendous writer, very, very thoughtful. And his personality really comes out, I think, in his online writings. When you met Aaron in person, face to face, he was a little quiet, he was very humble. He didn't come across as being this incredible activist. But really, when you follow what he had to say online and read the online archive of his thoughts and his opinions, you see this unbelievably thoughtful individual with a wealth of knowledge who really had done the research and worked his way through the issues.JAY: You must have discussed this specific case with him. How did he explain to you why he had done it and what his expectations were?SINGHAM: Aaron had a pretty disciplined approach to the way he worked and how he wanted to do good in the world in the issue of copyright specifically. He was targeting databases of documents that really had a public-good aspect and should have been opened by virtue of either government funding or content that was otherwise public domain as the property of the United States people. For example, the PACER database is a database of court documents that he helped to bring out into the open internet that PACER was charging money for. Those documents are public domain. They are funded and produced by the United States people. There's no reason why they should be behind a paywall. And that was the sort of thing that Aaron did. He was looking for the disconnect between the laws that we have about our information and the way in which regular people have access to that information. And that's what he was doing here. He was trying to bring an important database of documents that should have been opened out into the world.SINGHAM: And there's all kinds of even [incompr.] nuances. For example, most academics who write these journals, they're not getting paid for these materials. They're often funded by state institutions. And so—and/or the copyright has expired and these kind of things. In fact, JSTOR just last week released millions of documents, because—.GUTHRIE: Twenty percent of their archive.SINGHAM: Twenty percent. One of the things that he said in his speech, I think, in 2011 was, you know, here we have the last hundreds of years of human knowledge. I as a student in a wealthy country, in a wealthy institution, I have access to this, but, you know, a young girl in India, she has no access to the world's scientific and literary culture. I mean, this is a really dramatic change in how we think of knowledge. I mean, there was a library, and you can go read this. Now we're saying that a poor, you know, child in some country, in Brazil, has no access to the world's intellectual legacy. This really morally offended him. And he also understood, you know, the damage that it was going to do to society. GUTHRIE: [incompr.] JSTOR has a mission to do public good, and they were certainly founded with good intentions. And I think that we've been a lot happier with the way they've comported themselves here than with some of the other institutions that were involved. But Aaron's point was that academics share access to that knowledge already. JSTOR started to charge a prescription fee to institutions to gain access to their databases. And academics already share access to that. They invite people into their networks. They'll share passwords in order to give other people access. Academics form a community around sharing with the intent to bring that knowledge out into the world. They're not, most of them, reflexively protective people of their research. They want more people to go out and read their research.But people growing up and living in places without access to those expensive subscriptions don't have the same wherewithal to gain access to that knowledge. And he wanted to change that in a really big way.JAY: So, Roy, why does this prosecutor—and as you said, it's not likely just one prosecutor here. There's got to be other people in the justice department that are aware of all this. Why do they go after him (same question again) so strongly? Why do they consider this so threatening?SINGHAM: So, I mean, you know, obviously we don't have the chance—I mean, Heymann, who is the particularly egregious prosecutor, he worked for Ortiz. He was the head of the office. The two of them have, in my opinion, a 100 percent culpability for the overreach and for what happened here. Whether or not, you know, Holder or other people discussed this case, it's highly implausible to me that they didn't. And if you look at the timing of when these charges were filed against Aaron, it was exactly at the time of, you know, Assange and Manning, and there was just this paranoia, you know, in the Justice Department, in Homeland Security, that [incompr.] There's a generation of hackers out there that if we do not suppress and grab these people, our national security is in threat. And so the mood at the time was really, let us go out and guarantee [incompr.] even says this, not only Aaron, I mean, Jeremy Hammond, the Anonymous, a lot of these guys who—and [incompr.] who have been very active in internet freedom, they are being hunted down globally. I mean, this is—so if you ask me as a social—an historic thing, I had an internal debate with some of our colleagues last night about the press statement that we issued, because, you know, there is this question of why would Thoughtworks care as the company, 'cause we are very much calling for an investigation of prosecutorial overreach, and we're calling also for an apology by MIT to the family and for changes in policy. Why is that important? Isn't internet access important? Yes. If we allow the 12-year-old—and if you look at Aaron's site, for example, there's a 14-year-old who posted about how Aaron is their hero. Imagine if that 14-year-old who could be the next Aaron reads this thing about, you know, his—you know, the threats of imprisonment and what happened to Aaron. That young, you know, future humanist internet, you know, revolutionary is crushed.We have been forced into a defensive position to fight the suppression of civil resistance and disobedience. And unfortunately we, some of us—that's why it was just amazing, the last two days, some of the most creative and intelligent responses of the community towards these egregious acts.JAY: Is part of this that, you know, the United States has military superiority over just about everybody, they have financial superiority over just about everybody? But is it—and when it comes to computer technology—and they are so vulnerable on that front—that maybe they don't have intellectual superiority, and that leaves them feeling open?GUTHRIE: We have a narrative that we've constructed because technology is new and because it seems scary of the rogue hacker who can gain access to any system and do what they want with it at will, which simply isn't true. I mean, our understanding of technology is certainly still evolving. But I think Aaron got sucked into that narrative that prosecutors can use to their advantage if they're trying to bring home a prosecution, if they can paint Aaron in a particular way that makes him part of this unnoble, vast conspiracy of hackers. And Aaron—.JAY: Yeah. You explained something to me off-camera which is important, which is that Aaron actually didn't hack anything. I mean, he had a password. What Aaron did is akin to somebody going into a library with their library card and photocopying books and then, you know, planning to hand out the copies, isn't it?SINGHAM: But remember, he didn't even make the copies. In that case, he didn't even make the copies.GUTHRIE: Right. It's equivalent to checking out a lot of books very quickly, right? Unfortunately, it impacted the system for other people because he was downloading the papers very quickly. But he didn't do anything that any reasonable person would characterize as hacking. He didn't break into any systems. He didn't change any passwords. He didn't do anything that the website he was accessing didn't already allow people to access. He didn't so much as change the URL, which is an extremely—SINGHAM: Obvious.GUTHRIE: —an extremely obvious—it's something that increasingly has come to be used as a tool to accuse people of hacking. If you ever changed the URL of a YouTube video, there are people who would claim that under the wrong circumstances that's hacking. And Aaron didn't even go that far. He simply wasn't that person.JAY: So doesn't this mean—I mean, if an ordinary student that had no history of internet activism, of having had such high-level skills, if an ordinary student had done the same thing, it seems like it's not likely to have had the same kind of prosecutorial effort here. Were they not going after him because he's Aaron Swartz and because they're afraid of what people like Aaron are capable of?SINGHAM: I mean, that's my opinion, that this is a calculated move be the authorities to suppress the next generation. And, by the way, these civil disobedience are the same as Dr. King, the same as Gandhi, right? The argument that, you know, Gandhi broke the law because he called for the salt tax or, you know, Dr. King violated the law by, you know, breaking segregation, if a small transgression of an unjust law—. I mean, Aaron, you know, was a risk-taker. He believed—you know, and whether or not he could have possibly foreseen this [incompr.] absurd response is probably unlikely. But he understood that the laws that were no longer keeping up with the changes of technology, that laws that had passed 30 or 40 years ago had no relevance in this new area, were being used by a small group of very large corporations to privatize and monetize what was the human legacy of intellectual capital. That's why even The Economist, not known for its progressive views, called him the "commons man" and not [incompr.] in the sense of the defender or one of the great defenders of the concept of the commons [incompr.] and, as we know, that complete erosion. So Aaron in that sense was taking on directly the economic interests of the people who are trying to privatize human knowledge.But he also knew that there was a relationship between that and the state, which was actually why most of what you worked with him on was activism around legislation for this, because he then began to realize that the broader context was a political context. Even as passionate as he was about the Creative Commons, he was also passionate about the next generation of fighters.JAY: Yeah. Brian, talk a little bit about the other areas that Aaron worked in, 'cause you told me off-camera this actually was really a very small piece of Aaron's activism.GUTHRIE: Yeah. I mean, Aaron—again, we know him as a technologist, but technology to him was a tool. It's something that he wanted to leverage to really make change in the world. The work we were doing with him at Thoughtworks involved building a piece of software using the same tools and techniques that your startups in Silicon Valley are using to get people to post more on Facebook, applying that same level of analytical detail to encourage people to do good in the world and bring their voice out into the collective of people who are trying to change things.And so to that end, they're working on a piece of software that he intended to bring out and make—it's available for free now. You can download it yourself. It's released under an open-source license. He wanted to use that to bring the most advanced tools for social activism on the internet in the world to people who might not otherwise have access to them without a subscription fee.SINGHAM: Yeah. I mean, [incompr.] people think of him in some ways as a global Western hero. He was deeply an internationalist. I mean, in this particular [incompr.] he realized that the knowledge about campaigning and structuring right now is a wealthy-country phenomenon, and that even the progressives, there's a risk that the agendas are set not by the people themselves, but by an elite, even an elite that's pretending to speaking on behalf of the people. And so he was fiercely a democrat in the small-D sense of saying, what happens if I'm a villager in Burundi and I want to have my campaign around whatever my issues are, and I don't want that agenda to be [incompr.] by somebody in Washington, or even [incompr.] person in New York, how do they use that [incompr.] cell phones and all these things. He was an incredibly advanced thinker about the nature of political power, how to democratize access, how the internet ought to have been used to disempower wealth accumulation and power accumulation. He was really one of the last standing, you know, in that sense, humanists who fought aggregated power and totalitarian states.JAY: Brian, people like Aaron usually are able to make a lot of money, and that's what they focus on. But he never seemed all that interested in it, if that's what—if I understand correctly. GUTHRIE: Yeah. It—to his enormous credit, you know, I think he could have gone almost anywhere and done almost anything. I think he fell into money rather than seeking it. And, you know, it's to his enormous credit that he continued to pursue opportunities, wherever he could find them, to do good rather than make money. And he actively pursued that, rather than staying with the company helped found, Reddit.com, after it sailed to Condé Nast, he parted ways with them and used that money the same way we'd use oxygen, not to help propel him into the ranks of the wealthy, but to keep him going and give him the freedom to do what he needed to do to improve the world.SINGHAM: Yeah, I mean, just—you know, I mean, I think people—I mean, Larry said it in his pieces. It wasn't a lot of money. It wasn't as much money as people think. GUTHRIE: Yeah.SINGHAM: And he was only one of the owners. And he pretty much decimated that in the cause of all these things, PACER, living—you know, he wasn't a man of means.GUTHRIE: Yeah.SINGHAM: Right? And so there's a little bit of a misleading thing that—to believe that he sat there. So, therefore, here is this guy. And I—as a technologist, I'm very worried that young technical people are given the beautiful pictures of Steve Jobs as an icon. The human race needs Aaron Swartz as an icon, not Steve Jobs, because we are lucky, I mean, in our industry, because we get to do things we like for a living [inaud.] What do you use that for? And Aaron, in that sense, [incompr.] in my mind, the most important role model of your generation, certainly in the United States, and, I would argue, for somebody of privilege in the world, that there cannot be—.And, you know, it's hard for me. And I think Aaron—and, I mean, you know, you and I are in this incredibly fortunate thing, 'cause we spent a lot of time with Aaron in the last, you know, six or eight months. And I have cried for two days straight, as you have. And it's only today, in day three, that we can sort of begin to rebuild Aaron's legacy in the way that we know he would want us to. The thing that really disturbs me in all this kind of stuff is that they want to pigeonhole Aaron into too many narrow sets, right? It's the hacker or the internet guy. I have met—you and I have met lots of people. Can you imagine a deeper-caring person? I mean, it's just incredible. I mean, I still cry. I mean, he would touch anybody and do anything. I—we had a meeting, you know, recently about how could we change American views towards Muslims. Here's this young, beautiful Jewish kid. He walks into a room with a bunch of, you know, Muslim activists saying, we have to do something to change American opinion. He gets up on a white board and he says, listen, what we need to do is have a war against the merchants of hate. [incompr.] He walked in there for—what, you guys were in there for an hour or two.GUTHRIE: Right.SINGHAM: He would do those kind of things. His breadth of the issues that he would concern with were truly astounding. And a lot of the people, because he was in that sense quite a radical—I mean, he read Chomsky when he was 15. And those kind of things, again, people don't want to talk about. He was deeply unsatisfied. In fact, one of his speeches on SOPA, you know, when he first called about it, he says, listen, I'm not interested in copyright law; I want to deal with health care access, you know, I want to deal with this financial crisis, I want to understand how we don't have the Congress in the pay of these military contractors. I mean, he was thinking about every issue.JAY: Roy, a lot of people watching are going to ask—you know, are going to be asking the question, you know, why didn't he want to fight this case. Now, we know that Aaron suffered from depression. And so—I mean, it's not one and one equals two that he was facing a jail sentence and this was his choice; he wasn't—you know, I mean, the depression obviously played a major role here.GUTHRIE: One of the things that's come out into the internet after his passing is that—one of the things I've learned—I had no the problem was this big—is that the minimum amount of money to fight a federal grand jury case, even if you're completely innocent, even if you do, I guess, one day of trial and then walk away, you're looking at $1.5 million. I can't imagine the kind of [crosstalk]SINGHAM: Money he didn't have.GUTHRIE: Yeah. Yeah. And in order to do that, he would have had to go out and, I think, ask for that money, right? And that—.SINGHAM: And we were trying to help raise that money for him. I kept on personally saying, Aaron, the community will come to your defense. But he was such a polite, private person, that was just inconceivable to him. Yeah. And I think, you know, one never knows what happened to somebody's—in their brain. And, you know, I've had to deal with it in my personal life, people who I know are depressed. And I've thought a lot about this question of depression. So I'm aware that depression is a complex thing. And he was very open about it. I mean, very few people of his stature would have been as open and honest as he was about this thing. You know.And I feel that, you know, I can say safely that he was loved. I mean, you know, his partner and his parents are just amazing people. You know, he knew that he was loved. But it is difficult, no matter what anybody says, to have somebody who's thinking about the most deepest future of the human race to have this distraction, to be embarrassed about himself, to know there's a possibility of going to jail. I have—none of us in the family or in the company allege a direct correlation. But, you know, we did care for him. [incompr.] loved him.And, of course, any time you have a tragic thing, we all had to go through a self-realization—did we do enough, could we have done more. I mean, there's no way around that as a grieving process. But that misses the point. What if he hadn't? Would that change the outcome of going after prosecutorial reach? Would that excuse what MIT did? Would not the same terror to a young person fearing a jail sentence have occurred? It doesn't in the end matter, really, about the thing. It's personally a tragedy for Aaron and personally a tragedy for all of us who loved him. And that's a horrible thing, and we want accountability for that. But the broader is much deeper: intimidate the next generation of intellectual fighters, and we have created the world's greatest totalitarian state that dwarfs 1984.JAY: Alright. Thank you both for joining us.GUTHRIE: Thank you.JAY: And thank you for joining us on The Real News Network.~~~ADAM SWARTZ: The internet really is out of control. But if we forget that, if we let Hollywood rewrite the story so it was just big company Google who stopped the bill, if we let them persuade us we didn't actually make a difference, if we start seeing it as someone else's responsibility to do this work and it's our job just to go home and pop some popcorn and curl up on the couch to watch Transformers, well, then next time they might just win. Let's not let that happen.TEXT ON SCREEN: Aaron Swartz 1986-2013.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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Why Was the Secret Service Involved in Aaron Swartz Case?

aaron

Over on TechDirt, they're asking this question: Why, two days before Aaron Swartz' arrest, did the Secret Service take over handling of the case? Their question comes from Marcy Wheeler's excellent reporting on new documents disclosed in his case:

According to a suppression motion in his case, however, two days before Aaron was arrested, the Secret Service took over the investigation.

On the morning of January 4, 2011, at approximately 8:00 am, MIT personnel located the netbook being used for the downloads and decided to leave it in place and institute a packet capture of the network traffic to and from the netbook.This was accomplished using the laptop of Dave Newman, MIT Senior Network Engineer, which was connected to the netbook and intercepted the communications coming to and from it.Later that day, beginning at 11:00 am, the Secret Service assumed control of the investigation. [my emphasis]

In fact, in one of the most recent developments in discovery in Aaron’s case, the government belatedly turned over an email showing Secret Service agent Michael Pickett offering to take possession of the hardware seized from Aaron “anytime after it has been processed for prints or whenever you [Assistant US Attorney Stephen Heymann] feel it is appropriate.” Another newly disclosed document shows the Pickett accompanied the local cops as they moved the hardware they had seized from Aaron around.

Her point is well-taken: According to the Secret Service website, they get involved in computer crime investigations in limited situations, and downloading academic papers from JSTOR fits none of the criteria.

But if you go and look at the testimony of the Secret Service before Congress, you might find the answer there. In April 2011, Special Agent Pablo Martinez testified before the Senate Judiciary Subcommittee on Crime and Terrorism. The purpose of his testimony was to inform the subcommittee about measures to coordinate and investigate computer crimes which could result in economic loss. Buried in that testimony, there is this:

The Secret Service developed a multifaceted approach to combating cyber crime by: expanding our Electronic Crimes Special Agent Program; expanding our network of Electronic Crimes Task Forces; creating a Cyber Intelligence Section; expanding our presence overseas; forming partnerships with academic institutions focusing on cybersecurity; and working with DHS to establish the National Computer Forensic Institute to train our state and local law enforcement partners in the area of cyber crime. These initiatives led to the opening of 957 criminal cases and the arrest of 1,217 suspects in fiscal year 2010 for cyber crime related violations with a fraud loss of $507.7 million. The arrest of these individuals prevented an additional loss estimated at $7 billion dollars and involved the examination of 867 terabytes of data, which is roughly the equivalent of 867,000 copies of the Encyclopedia Britannica. As a result of these efforts, the Secret Service is recognized worldwide for our investigative and innovative approaches to detecting, investigating and preventing cyber crimes.

Could one of those partners have been MIT? Did the Secret Service and FBI fear that their partnership work in the area of combating computer crime and online fraud would be revealed?

On the question of partnerships, let's have a look at Janet Napolitano's speech at MIT and what she had to say about the government relationship with the university:

MIT, of course, is the source of one of the great national-security collaborations, in the form of the Lincoln Laboratory, which currently works with DHS on several projects. I have seen a good example of an impressive DHS-MIT project, which is called the Imaging System for Immersive Surveillance – or "ISIS." The prototype camera, which is at Boston's Logan Airport, greatly expands our ability to spot suspicious objects and quickly analyze any breaches in security.

Marcy asks whether MIT asked the Secret Service to get involved*. From these two pieces of information, it's unclear whether or not they actually asked, or it was simply routine in cases where there was not just one (perceived) breach on the network, but a persistent effort to breach and download information. Accept for the moment that federal law enforcement agencies make wingnuts' paranoia look mild. In my limited experience, they're paranoid and make presumptions of major guilt over minor things, leaving the accused with the unpleasant task of proving their innocence.

Since MIT is a collaborator on national security via their Lincoln laboratory, I think it's entirely possible that at the point where the feds were brought into the case, they were fearful that JSTOR was simply a dry run for their national security scholarship; hence, the Secret Service involvement.

There are other explanations as well, but they all seem to lead back to some kind of belief that Aaron Swartz was doing more than simply downloading journal articles from JSTOR. In short, I believe they feared he was going to steal and publish "national security secrets." Take this little piece Special Agent Martinez' subcommittee testimony with regard to the Secret Service CERT liason program:

The primary goals of the program are: to broaden the Secret Service's knowledge of software engineering and networked systems security; to expand and strengthen partnerships and relationships with the technical and academic communities; to provide an opportunity to work closely with CERT-SEI and Carnegie Mellon University; and to present the results of this partnership at the quarterly meetings of our ECTFs.

In August 2004, the Secret Service partnered with CERT-SEI to publish the first ever "Insider Threat Study" examining the illicit cyber activity in the banking and finance sector. Due to the overwhelming response to this initial study, the Secret Service and CERT-SEI, in partnership with DHS S&T, are working to update the study. An updated study, expected to be released in late 2011, will analyze actual incidents of insider crimes from inception to prosecution. The research team will share its findings with federal, state, and local law enforcement, private industry, academia and other government agencies.

It's always the damned banks, isn't it? But the point here is that there's clearly academic-government research partnerships, forensic partnerships, and policy partnerships. They want to guard those, and with some good reason.

The problem I see is that Aaron Swartz didn't touch any data from those partnerships, yet from investigator to prosecutor, they treated him as though he were the modern-day Rosenberg spy team rolled up in one really, really smart young guy. Instead of reading what he wrote in the Guerrilla Open Access Manifesto, where he clearly said that he believed information should be free, and he intended to free it, they leapt to a conclusion and then reached for every fragment they could find to support it. As Marcy points out, the government invoked that manifesto for the very first time in their response to Swartz' Motion to Suppress:

In other words, precisely at the moment the government defended all the searches it did of Swartz, it (for the first time, I believe) introduced a new descriptor (in addition to the adjectives “writer, hacker, and activist”): Swartz wrote the Guerilla Open Access Manifesto.

The reference is particularly odd, being introduced (though not elaborated on) in this brief defending the investigative approach used by MIT and then the government. It effectively invokes First Amendment protected speech to justify investigative tactics.

Of course, in the end, no Monday-morning quarterbacking will restore Aaron Swartz. But if it leads us to a place where we might have a real conversation about prosecutorial and investigatory overreach, perhaps it will at least begin to facilitate a long-overdue conversation about why people mistrust government with reason, what safeguards government should implement to protect the rights of citizens, and why we must reject celebrating prosecutors who want to "make examples" of others.

Now that the government has dropped the charges against him posthumously, I am hoping his attorneys will release all of the pleadings and documents related to his case. It's time to have an honest conversation about this notion of "homeland security", who exactly is being protected (besides banks, of course), and how it can come to pass that the full force of the FBI and Secret Service came down on the head of a smart, passionate person who simply wanted to publish academic papers for everyone to access.

*Update: As I was going through the new documents released in the case more carefully, I came across a report of new discovery released by Deputy US Attorney Heymann. It indicates that MIT police were involved in the investigation from day one and remained involved. That tracks with reports that MIT, unlike JSTOR, was not willing to drop the charges against Swartz and actually assisted in the investigation.

What is most heartbreaking, however, is that the US Attorney's office, even after they had all of the facts and knew there had been no breach of national security, would not agree to any sentence that did not include prison time. They had also been warned that Swartz was a suicide risk, and showed no heart at all.

Andy Good, Swartz’s initial lawyer, is ­alternately sad and furious.

“The thing that galls me is that I told Heymann the kid was a suicide risk,” Good told me. “His reaction was a standard reaction in that office, not unique to Steve. He said, ‘Fine, we’ll lock him up.’ I’m not saying they made Aaron kill himself. Aaron might have done this anyway. I’m saying they were aware of the risk, and they were heedless.”

Good says the hard-line attitude was not unique to his case, but the facts were. People who steal things usually benefit financially from it. Swartz downloaded the material because he believed that such information — in this case, much of it research underwritten by taxpayers — should be free to the public. He did it not to make a buck, but to make a point.

Swartz and his lawyers were not looking for a free pass. They had offered to accept a deferred prosecution or probation, so that if Swartz pulled a stunt like that again, he would end up in prison.

Marty Weinberg, who took the case over from Good, said he nearly negotiated a plea bargain in which Swartz would not serve any time. He said JSTOR signed off on it, but MIT would not.

“There were subsets of the MIT community who were profoundly in support of Aaron,” Weinberg said. That support did not override institutional interests.

There it is, in black and white. An "almost done deal", except it was MIT who walked away from it. They should be ashamed.

‘Red October’: Global cyber-spy network uncovered by Russian experts

Picture by Kaspersky Lab’s Global Research & Analysis Team

Picture by Kaspersky Lab’s Global Research & Analysis Team

A sophisticated cyber-espionage network targeting the world's diplomatic, government and research agencies has been uncovered by the Kaspersky Lab, whose experts say the malware's complexity could rival that of the notorious Flame virus.

­The system's targets include a wide range of countries, with the primary focus on Eastern Europe, former Soviet republics and Central Asia – although many in Western Europe and North America are also on the list.

In addition to attacking traditional computer workstations, Rocra – a shortened name for Red October, the name given the network by the Kaspersky team – can steal data from smartphones, dump network equipment configurations, snatch files from removable disk drives, including those that had been erased, and scan through email databases and local network FTP servers.  

Unlike other well-known highly automated cyber-espionage campaigns like Flame and Gauss, the Rorca's attacks all appear to be carefully chosen. Each operation is apparently driven by the configuration of the victim’s hardware and software, native language and even habit of document usage.

The information extracted from infected networks is often used to gain entry into additional systems. For example, stolen credentials were shown to be compiled in a list for use when attackers needed to guess passwords or phrases.

The hackers behind the network have created more than 60 domain names and several server hosting locations in different countries – the majority of those known being in Germany and Russia – which worked as proxies in order to hide the location of the “mothership” control server.

That server's location remains unknown.

Experts have uncovered over 1,000 modules belonging to 30 different module categories. While Rocra seems to have been designed to execute one-time tasks sent by the hackers’ servers, a number of modules were constantly present in the system executing persistent tasks. For example, retrieving information about a phone, its contact list, call history, calendar, SMS messages and even browsing history as soon as an iPhone or a Nokia phone is connected to the system.

The hackers' primary objective is to gather information and documents that compromised governments, corporations or other organizations and agencies. In addition to focusing on diplomatic and governmental agencies around the world, the hackers also attacked energy and nuclear groups and trade and aerospace targets.

No details have been given so far as to who the attackers could be. However, there is strong technical evidence to indicate that the attackers have Russophone origins, as Russian words including slang have been used in the source code commentaries. Many of the known attacks have taken place in Russian-speaking countries.

Click to enlarge
Click to enlarge

The hackers designed their own authentic and complicated piece of software, which has its own unique modular architecture of malicious extensions, info-stealing modules and backdoor Trojans. The malware includes several extensions and malicious files designed to quickly adjust to different system configurations while remaining able to grab information from infected machines.

These included a ‘resurrection’ module, which allowed hackers to gain access to infected machines using alternative communications channels and an encoded spy module, stealing information from different cryptographic systems such as Acid Cryptofiler, which is known to be used by organizations such as NATO, the European Parliament and the European Commission since 2011.

The first instances of Red October malware were discovered in October 2012, but it has been infecting computers since at least 2007, according to Kaspersky. The Kaspersky Lab worked with a number of international organizations while conducting the investigation including the US, Romanian and Belorusian Computer Emergency Readiness Teams. 

The EU has attempted to counter the huge rise in cyber-espionage by launching the European Cybercrime Center, which opened on Friday.

Picture by Kaspersky Lab’s Global Research & Analysis Team
Picture by Kaspersky Lab’s Global Research & Analysis Team

We Are All Aaron Swartz! Fighting Back Against the “Intellectual Property” Racket

Aaron Swartz’ passing becomes even more tragic if we do not recognize what he spent his life fighting for, and realize that no matter where we think we stand on the issue of Internet freedom, the interests driving the debate from Wall Street and Washington, do not have any of our best interests in mind.

In your standard dictatorship, activists are brought out back and shot.

In the United States’ crypto-dictatorship, activists are bullied by the state until they go bankrupt, are buried under a mountain of legal woes, are publicly discredited or humiliated, or as in the case of activist and Reddit co-founder Aaron Swartz, made to crack under the constant pressure, and commit suicide.

While superficially the United States