Sunday, December 29, 2013

The Stock Market Has Officially Entered Crazytown Territory

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It is time to crank up the Looney Tunes theme song because Wall Street has officially entered crazytown territory.  Stocks just keep going higher and higher, and at this point what is happening in the stock market does not bear any resemblance to what is going on in the overall economy whatsoever.  So how long can this irrational state of affairs possibly continue?  Stocks seem to go up no matter what happens.  If there is good news, stocks go up.  If there is bad news, stocks go up.  If there is no news, stocks go up.  On Thursday, the day after Christmas, the Dow was up another 122 points to another new all-time record high.  In fact, the Dow has had an astonishing 50 record high closes this year.  This reminds me of the kind of euphoria that we witnessed during the peak of the housing bubble.  At the time, housing prices just kept going higher and higher and everyone rushed to buy before they were "priced out of the market".  But we all know how that ended, and this stock market bubble is headed for a similar ending.
It is almost as if Wall Street has not learned any lessons from the last two major stock market crashes at all.  Just look at Twitter.  At the current price, Twitter is supposedly worth 40.7 BILLION dollars.  But Twitter is not profitable.  It is a seven-year-old company that has never made a single dollar of profit.
Not one single dollar.
In fact, Twitter actually lost 64.6 million dollars last quarter alone.  And Twitter is expected to continue losing money for all of 2015 as well.
But Twitter stock is up 82 percent over the last 30 days, and nobody can really give a rational reason for why this is happening.
Overall, the Dow is up more than 25 percent so far this year.  Unless something really weird happens over the next few days, it will be the best year for the Dow since 1996.
It has been a wonderful run for Wall Street.  Unfortunately, there are a whole host of signs that we have entered very dangerous territory.
The median price-to-earnings ratio on the S&P 500 has reached an all-time record high, and margin debt at the New York Stock Exchange has reached a level that we have never seen before.  In other words, stocks are massively overpriced and people have been borrowing huge amounts of money to buy stocks.  These are behaviors that we also saw just before the last two stock market bubbles burst.
And of course the most troubling sign is that even as the stock market soars to unprecedented heights, the state of the overall U.S. economy is actually getting worse...
-During the last full week before Christmas, U.S. store visits were 21 percent lower than a year earlier and retail sales were 3.1 percentlower than a year earlier.
-The number of mortgage applications just hit a new 13 year low.
-The yield on 10 year U.S. Treasuries just hit 3 percent.
For many more signs like this, please see my previous article entitled "37 Reasons Why 'The Economic Recovery Of 2013' Is A Giant Lie".
And most Americans don't realize this, but the U.S. financial system and the overall U.S. economy are now in much weaker condition than they were the last time we had a major financial crash back in 2008.  Employment is at a much lower level than it was back then and our banking system is much more vulnerable than it was back then.  Just before the last financial crash, the U.S. national debt was sitting atabout 10 trillion dollars, but today it has risen to more than 17.2 trillion dollars.  The following excerpt from a recent article posted on thedailycrux.com contains even more facts and figures which show how our "balance sheet numbers" continue to get even worse...
Since the fourth quarter of 2009, the U.S. current account deficit has been more than $100 billion per quarter. As a result, foreigners now own $4.2 trillion more U.S. investment assets than we own abroad. That's $1.7 trillion more than when Buffett first warned about this huge problem in 2003. Said another way, the problem is 68% bigger now.
And here's a number no one else will tell you – not even Buffett. Foreigners now own $25 trillion in U.S. assets. And yet… we continue to consume far more than we produce, and we borrow massively to finance our deficits.
Since 2007, the total government debt in the U.S. (federal, state, and local) has doubled from around $10 trillion to $20 trillion.
Meanwhile, the size of Fannie and Freddie's mortgage book declined slightly since 2007, falling from $4.9 trillion to $4.6 trillion. That's some good news, right?
Nope. The excesses just moved to a new agency. The "other" federal mortgage bank, the Federal Housing Administration, now is originating 20% of all mortgages in the U.S., up from less than 5% in 2007.
Student debt, also spurred on by government guarantees, has also boomed, doubling since 2007 to more than $1 trillion. Altogether, total debt in our economy has grown from around $50 trillion to more than $60 trillion since 2007.
So don't be fooled by this irrational stock market bubble.
Just because a bunch of half-crazed investors are going into massive amounts of debt in a desperate attempt to make a quick buck does not mean that the overall economy is in good shape.
In fact, much of the country is in such rough shape that "reverse shopping" has become a huge trend.  Even big corporations such as McDonald's are urging their employees to return their Christmas gifts in order to bring in some much needed money...
In a stark reminder of how tough things still are for low-income families in America, McDonalds has advised workers to dig themselves "out of holiday debt" by cashing in their Christmas haul.
"You may want to consider returning some of your unopened purchases that may not seem as appealing as they did," said a website set up for employees.
"Selling some of your unwanted possessions on eBay or Craigslist could bring in some quick cash."
This irrational stock market bubble is not going to last for too much longer.  And a lot of top financial experts are now warning their clients to prepare for the worst.  For example, David John Marotta of Marotta Wealth Management recently told his clients that they should all have a"bug-out bag" that contains food, a gun and some ammunition...
A top financial advisor, worried that Obamacare, theNSA spying scandal and spiraling national debt is increasing the chances for a fiscal and social disaster, is recommending that Americans prepare a “bug-out bag” that includes food, a gun and ammo to help them stay alive.
David John Marotta, a Wall Street expert and financial advisor and Forbes contributor, said in a note to investors, “Firearms are the last item on the list, but they are on the list. There are some terrible people in this world. And you are safer when your trusted neighbors have firearms.”
His memo is part of a series addressing the potential for a “financial apocalypse.” His view, however, is that the problems plaguing the country won't result in armageddon. “There is the possibility of a precipitous decline, although a long and drawn out malaise is much more likely,” said the Charlottesville, Va.-based president of Marotta Wealth Management.

New Revelation that AG Eric Holder Is Protecting JPMorgan Chase NYC From Criminal Investigation

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Providing additional evidence that the Obama Administration's Department of Justice (DOJ) is protecting "banks too big to fail," Pulitzer Prize winning financial reporter David Cay Johnston has revealed that the DOJ has refused to force JPMorgan Chase to comply with an ongoing investigation into the bank's possible knowledge of Bernard Madoff's fraud scheme of a few years ago.
The information obtained might reveal that the bank chose to financially benefit from criminal activity:
Bernard Madoff’s principal bank, JPMorgan Chase, has for years obstructed federal bank examiners trying to ascertain what it knew about his gigantic Ponzi scheme, an official document obtained by Newsweek shows.
The Justice Department refused in September to back up Treasury inspector general staff who wanted a  court order to enforce a subpoena, in effect shielding JPMorgan from law enforcement, the October 8 document shows.
The Justice Department told the Treasury Inspector General “that they were denying the request for enforcement of the subpoena,” which means officials “could not undertake further actions regarding this matter,” wrote Jason J. Metrick, the inspector general special-agent-in-charge.
Johnston disclosed the latest damning indication of the DOJ shielding Wall Street banks that dominate US finanes in aNewsweek article. The DOJ pattern of not exploring potential big bank criminal activity was admitted to by Attorney General Eric Holder -- as BuzzFlash at Truthout reported at the time -- as recalled by Johnston:
Last March Attorney General Eric Holder told a Senate hearing he was afraid to prosecute the Too Big to Fail Banks, as it could do even more economic damage, in effect declaring them Too Big to Prosecute.
“The size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy -- perhaps even the world economy," Holder testified.
Although Madoff has been serving an effective life sentence in prison since 2009, a special Treasury Department inspector general with independent powers is still trying to ascertain if JPMorgan Chase turned a blind eye to Madoff's mega-ponzi scheme that left many individuals and organizations (including charities) with enormous losses.
The bottom line of the Obama DOJ's position is that Americans are left vulnerable to criminal bank activity on a massive scale because if they were held accountable, Holder believes, the US economic system would be hurt.
But the 2007-2008 crash showed what such uninvestigated and unprosecuted behavior leads to.
In short, the chief law enforcement officer of the United States is authorizing our largest banks to engage in criminal behavior because, he claims, preventing them from doing so might negatively impact our economy? But hasn't it prima facie been proven again and again that the likely criminal bank activity undermines our financial system?
This is so nonsensical, such a defilement of justice and economic integrity that there must be another answer to Holder's protection of suspected (and as indicated in civil and other suits) criminal actions on Wall Street.
The financial masters of the universe call the shots in DC.  Holder and his law firm base, Covington and Burling, represent many of them -- and Congress and the White House are beholden to them for campaign cash and revolving door jobs.

Fed decision fuels global financial parasitism

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The decision by the US Federal Reserve Board to begin to “taper” its program of “quantitative easing” (QE)—the pumping of $1 trillion a year into the financial markets—was supposed to signal a return to more normal monetary policy.
It turned out to be a commitment to continue the provision of ultra-cheap money to fuel the financial parasitism that has brought untold wealth to the corporate and financial elites, while creating ever-worsening social conditions for billions of people the world over.
The key decision was not the reduction in the asset-purchasing program by $10 billion a month—a move that will have little or no effect—but the Fed’s commitment to maintain the federal funds rate in the range of zero to 0.25 percent.
Previously, the US central bank had indicated it would consider lifting the rate—the interest it charges on loans to major banks—when the US unemployment rate went below 6.5 percent. But in its statement last Wednesday, the Fed made clear that money would continue to be provided to the banks at virtually no cost “well past the time” the official unemployment rate went below that level—in other words, at least until 2015, and probably beyond.
Financial markets duly celebrated the decision, with Wall Street’s S&P 500 index reaching a record high at the end of the week, having risen by 27 percent so far this year.
The announcement made clear that the Fed policy has never been about boosting growth in the real economy and creating more jobs—its official justification—but is instead directed to funding the financial parasitism that has become such a central feature of the global capitalist economy. As outgoing Fed Chairman Ben Bernanke repeated on numerous occasions during his hour-long press conference, the Fed remained “highly accommodative.” That is, it is there to do the bidding of the banks and the major finance houses.
The extent of that accommodation can be seen in the expansion of the Fed’s asset holdings. Last week alone they increased by $14.1 billion, taking the total to $4 trillion—up from $870 billion in 2008. The Fed’s holdings of financial assets are now greater in size than the entire US budget and larger than the gross domestic product (GDP) of Germany, the world’s third largest economy.
The rapid expansion of the Fed’s balance sheet, together with the increased holdings of the Bank of Japan and the Bank of England, both of which have been engaged in their own versions of QE, is creating the conditions for a new financial crisis. Bernanke suggested as much during his press conference.
“As the balance sheet of the Federal Reserve gets large, managing that balance sheet, exiting from that balance sheet, becomes more difficult,” he said.
This is because any significant diminution of monetary stimulus, and consequent return to higher interest rates, means a fall in the value of the financial assets held by central banks, since interest rates and bond prices move in opposite directions. This poses the danger of significant losses.
Earlier this year, research by the International Monetary Fund put those potential losses at 4 percent of GDP for the US Fed, 7.5 percent for the Bank of Japan, and almost 6 percent for the Bank of England. In other words, a new financial crisis, the conditions for which are being created by the QE program itself, would have even more serious consequences than the meltdown of 2008. Unlike the situation five years ago, this time the world’s major central banks would be directly impacted.
The Fed’s latest decision makes clear that far from having been resolved, the breakdown of global capitalism, which began in 2008, is deepening and assuming potentially more explosive forms.
All financial assets are, in the final analysis, claims on the underlying wealth of the global economy. For a time, the real situation can be masked by the continuous injection of money into the financial markets, which makes it possible to create wealth through speculation on rising asset values. But eventually the laws of the capitalist economy assert themselves, as Karl Marx put it, just as the law of gravity asserts itself when a house falls about our ears.
While financial assets have been growing to an enormous size, the real economy is barely expanding. Such expansion is driven by investment—capital expenditure that leads to a growth in markets and increased production. But as financial wealth rises in leaps and bounds, investment is falling.
Last July, the Financial Times Lex column pointed to what it called “the depressed state of global corporate capital expenditure.” Even though companies were sitting on cash holdings estimated to be around $4 trillion, capital expenditure was expected to fall in real terms this year, and could even drop by 5 per cent in 2014.
This signifies that rather than creating the conditions for future economic expansion, capital spending is not even covering depreciation on existing capital stocks.
The banks, hedge funds and investment houses, which are the majority and decisive shareholders in the world’s major corporations, are hostile to such spending, regarding it as a deduction from the profits they can make through financial manipulation.
Consequently, corporations are using their cash holdings not for investment, but to finance share buybacks, thereby boosting share prices and creating the conditions for reaping increased profits through stock market trading. According to data released last week, US companies are spending more on buying back their own shares than at any time since 2008.
Far from providing a cure for the crisis of the global capitalist system, the Fed’s policies are boosting the growth of a giant economic cancer, which threatens the lives and future of the world’s people. It must be surgically removed through the intervention of the international working class and the taking of political power to reconstruct the world economy. This starts with the expropriation of the major banks, finance houses and corporations so as to establish an economic system based on meeting human needs, rather than the rapacious demands of a financial oligarchy.

Inequality: Government Is a Perp, Not a Bystander

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In his speech on inequality earlier this month President Obama proclaimed that the government could not be a bystander in the effort to reduce inequality, which he described as the defining moral issue of our time. This left millions convinced that Obama would do nothing to lessen inequality.

The problem is that President Obama wants the public to believe that inequality is something that just happened. It turns out that the forces of technology, globalization, and whatever else simply made some people very rich and left others working for low wages or out of work altogether. The president and other like-minded people feel a moral compulsion to reverse the resulting inequality. This story is 180 degrees at odds with the reality. Inequality did not just happen, it was deliberately engineered through a whole range of policies intended to redistribute income upward.

Trade is probably the best place to start just because it is so obvious. Trade deals like NAFTA were quite explicitly designed to place our manufacturing workers in direct competition with the lowest paid workers in the world. The text was written after consulting with top executives at major companies like General Electric. Our negotiators asked these executives what changes in Mexico's law would make it easier for them to set up factories in Mexico. The text was written accordingly.

When we saw factory workers losing their jobs to imports from Mexico and other developing countries, this was not an accident. In economic theory, the gains from these trade deals are the result of getting lower priced products due to lower cost labor. The loss of jobs in the United States and the downward pressure on the jobs that remain is a predicted outcome of the deal.

There is nothing about the globalization process that necessitated this result. Doctors work for much less money in Mexico and elsewhere in the developing world than in the United States. In fact, they work for much less money in Europe and Canada than in the United States. If we had structured the trade deals to facilitate the entry of qualified foreign doctors into the country it would have placed downward pressure on the wages of doctors (many of whom are in the top one percent of the income distribution), while saving consumers tens of billions a year in health care costs.

In other words, the government quite deliberately structured our trade to put downward pressure on the wages of much of the labor force, while protecting doctors and other highly paid professionals from similar competition. Trade is just one of the many ways in which the government has redistributed income upward over the last three decades.

The subsidy for too big to fail banks, which makes the Wall Street crew incredibly rich, is another way that the government redistributes money to the top. Bloomberg estimated the size of this annual subsidy for the Wall Street gang at $80 billion a year, more than the government spends on food stamps.

The longer and stronger patent protection the government has given pharmaceutical companies is another way that money goes from the rest of us to the rich. The annual size of patent rents in the drug industry is currently in the neighborhood of $270 billion, more than three times as much as the government spends on food stamps.

And the macroeconomic policy run by the government has also worsened inequality. Budgets are crafted by politicians, not the gods or nature. The decision not to run a more stimulatory policy to reduce unemployment is every bit as much a conscious act as would be the decision to try to bring the economy to full employment with further stimulus.

In other words, Congress and the president have decided to craft budgets that lead to tens of millions of people being unemployed or underemployed. As Jared Bernstein and I point out in our new book, high levels of unemployment put downward pressure on workers' wages, especially those in the bottom third of the labor force. This means we have a federal budget that limits growth and employment in a way that redistributes income upwards.

There is a much longer list of ways in which the government has acted to redistribute income upwards over the last three decades. I have a fuller discussion in my book, The End of Loser Liberalism: Making Markets Progressive.

But the key point is that inequality didn't just happen, it was the result of government policy. That is why people who actually want to see inequality reduced, and for poor and middle class to share in the benefits from growth, are not likely to be very happy about President Obama's speech on the topic. His comment about the government being a bystander ignores the real source of the problem. Therefore it is not likely that he will come up with much by way of real solutions.

Tuesday, December 24, 2013

Washington Drives the World Toward War

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Washington has had the US at war for 12 years: Afghanistan, Iraq, Somalia, Libya, Pakistan, Yemen, and almost Syria, which could still happen, with Iran waiting in the wings. These wars have been expensive in terms of money, prestige, and deaths and injuries of both US soldiers and the attacked civilian populations. None of these wars appears to have any compelling reason or justifiable explanation. The wars have been important to the profits of the military/security complex. The wars have provided cover for the construction of a Stasi police state in America, and the wars have served Israel’s interest by removing obstacles to Israel’s annexation of the entire West Bank and southern Lebanon.
As costly and destructive as these wars have been, they are far below the level of a world war, much less a world war against nuclear armed opponents.
The fatal war for humanity is the war with Russia and China toward which Washington is driving the US and Washington’s NATO and Asian puppet states. There are a number of factors contributing to Washington’s drive toward the final war, but the overarching one is the doctrine of American exceptionalism.
According to this self-righteous doctrine, America is the indispensable country. What this means is that the US has been chosen by history to establish the hegemony of secular “democratic capitalism” over the world. The primacy of this goal places the US government above traditional morality and above all law, both its own and international.
Thus, no one in the US government has been held accountable for unprovoked aggression against other countries and for attacking civilian populations, unambiguous war crimes under international law and the Nuremberg standard. Neither has anyone in the US government been held accountable for torture, a prohibited crime under US law and the Geneva Conventions. Neither has anyone been held accountable for numerous violations of constitutional rights–spying without warrants, warrantless searches, violations of habeas corpus, murder of citizens without due process, denial of legal representation, conviction on secret evidence. The list is long.
A person might wonder what is exceptional and indispensable about a government that is a reincarnation of Nazi Germany in every respect. People propagandized into the belief that they are the world’s special people inevitably lose their humanity. Thus, as the US military video released by Bradley Manning reveals, US troops get their jollies by mowing down innocent people as they walk along a city street.
With the exception of the ACLU, constitutional rights groups and independent Internet voices, the American people including the Christian churches have accepted their government’s criminality and immorality with scant protest.
The absence of moral denunciation emboldens Washington which is now pushing hard against Russia and China, the current governments of which stand in the way of Washington’s world hegemony.
Washington has been working against Russia for 22 years ever since the collapse of the Soviet Union in 1991. In violation of the Reagan-Gorbachev agreement, Washington expanded NATO into Eastern Europe and the Baltic states and established military bases on Russia’s borders. Washington is also seeking to extend NATO into former constituent parts of Russia itself such as Georgia and Ukraine.
The only reason for Washington to establish military and missile bases on Russia’s frontiers is to negate Russia’s ability to resist Washington’s hegemony. Russia has made no threatening gestures toward its neighbors, and with the sole exception of Russia’s response to Georgia’s invasion of South Ossetia, has been extremely passive in the face of US provocations.
This is now changing. Faced with the George W. Bush regime’s alteration of US war doctrine, which elevated nuclear weapons from a defensive, retaliatory use to pre-emptive first strike, together with the construction on Russia’s borders of US anti-ballistic missile bases and Washington’s weaponization of new technologies, has made it clear to the Russian government that Washington is setting up Russia for a decapitating first strike.
In his presidential address to the Russian National Assembly (both chambers of parliament) on December 12, Vladimir Putin addressed the offensive military threat that Washington poses to Russia. Putin said that Washington calls its anti-ballistic missile system defensive, but “in fact it is a signifiant part of the strategic offensive potential” and designed to tip the balance of power in Washington’s favor. Having acknowledged the threat, Putin replied to the threat: “Let no one have illusions that he can achieve military superiority over Russia. We will never allow it.”
Faced with the Obama regime’s murder of the nuclear weapons reduction treaty, Putin said: “We realize all this and know what we need to do.”
If anyone remains to write a history, the Obama regime will be known as the regime that resurrected the cold war, which President Reagan worked so hard to end, and drove it into a hot war.
Not content to make Russia an enemy, the Obama regime has also made an enemy of China. The Obama regime declared the South China Sea to be an area of “US national security interest.” This is akin to China declaring the Gulf of Mexico to be an area of Chinese national security interest.
To make clear that the claim to the South China Sea was not rhetorical, the Obama regime announced its “Pivot to Asia,” which calls for the redeployment of 60% of the US fleet to China’s zone of influence. Washington is busy at work securing naval and air bases from the Philippines, South Korea, Vietnam, Australia, and Thailand. Washington has increased the provocation by aligning itself with China’s neighbors who are disputing China’s claims to various islands and an expanded air space.
China has not been intimidated. China has called for “de-americanizing the world.” Last month the Chinese government announced that it now possesses sufficient nuclear weapons and delivery systems to wipe the US off of the face of the earth. A couple of days ago, China aggressively harassed a US missile cruiser in the South China Sea.
The militarily aggressive stance that Washington has taken toward Russia and China is indicative of the extreme self-assuredness that usually ends in war. Washington is told that US technological prowess can prevent or intercept the launch of Russian and Chinese missiles, thus elevating a US pre-emptive attack to slam-dunk status. Yet the potential danger from Iran acquiring nuclear weapons is said to be so great that a pre-emptive war is necessary right now, and a massive Department of Homeland Security is justified on the grounds that the US remains vulnerable to a few stateless Muslims who might acquire a nuclear weapon. It is an anomalous situation that the Russian and Chinese retaliatory response to US attack is considered to be inconsequential, but not nuclear threats from Iran and stateless Muslims.
Not content with sending war signals to Russia and China, Washington has apparently also decided to torpedo the Iranian settlement by announcing new sanctions against companies doing business with Iran. The Iranians understood Washington’s monkey wrench as Washington probably intended, as a lack of Washington’s commitment to the agreement, left Geneva and returned to Iran. It remains to be seen whether the agreement can be resurrected or whether the Israel Lobby has succeeded in derailing the agreement that promised to end the threat of war with Iran.
American citizens seem to have little, if any, influence on their government or even awareness of its intentions. Moreover, there is no organized opposition behind which Americans could rally to stop Washington’s drive toward world war. Hope, if there is any, would seem to lie with Washington’s European and Asian puppets. What interests do these governments have in putting the existence of their countries at risk for no other purpose than to help Washington acquire hegemony over the world? Cannot they realize that Washington’s game is a death-dealing one for them?
Germany alone could save the world from war while simultaneously serving its own interests. All Germany has to do is to exit the EU and NATO. The alliance would collapse, and its fall would terminate Washington’s hegemonic ambition.

Washington Has Discredited America

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Years ago when I described the George W. Bush regime as a police state, right-wing eyebrows were raised. When I described the Obama regime as an even worse police state, liberals rolled their eyes. Alas! Now I am no longer controversial. Everybody says it.
According to the UK newspaper, The Guardian, the Chancellor of Germany, Angela Merkel, had an angry exchange with Obama in which Merkel compared Obama’s National Security Agency (NSA) with the East German Communist Stasi, which spied on everyone through networks of informers.http://www.theguardian.com/world/2013/dec/17/merkel-compares-nsa-stasi-obama
Merkel grew up in Communist East Germany where she was spied upon by the Stasi, and now that she has risen to the highest political office in Europe’s most powerful state, she is spied upon by “freedom and democracy” America.
A former top NSA official, William Binney, declared that “We (the US) are now in a police state.” The mass spying conducted by the Obama regime, Binney says “is a totalitarian process.”http://www.washingtonsblog.com/2013/12/former-top-nsa-official-now-police-state.html
Perhaps my best vindication, after all the hate mail from “super patriots,” who wear their ignorance on their sleeves, and Obama-worshipping liberals, whose gullibility is sickening, came from federal judge Richard Leon, who declared the Obama-sanctioned NSA spying to be “almost Orwellian.” As the American Civil Liberties Union realized, federal judge Leon’s decision vindicated Edward Snowden by ruling that the NSA spying is likely outside what the Constitution permits, “labeling it ‘Orwellian’–adding that James Madison would be ‘aghast.’”
If only more Americans were aghast. I sometimes wonder whether Americans like being spied upon, because it makes them feel important. “Look at me! I’m so important that the government spends enough money to wipe out US poverty spying on me and my Facebook, et. al., friends. I bet they are spending one billion dollars just to know who I connected with today. I hope it didn’t get lost in all the spam.”
Being spied upon is the latest craze of people devoid of any future but desperate for attention.
Jason Ditz at the FBI spied-upon Antiwar.com says that Judge Leon’s ruling is a setback for Obama, who was going to restore justice and liberty but instead created the American Stasi Spy State. Congress, of course, loves the spy state, because all the capitalist firms that make mega-millions or mega-billions from it generously finance congressional and senatorial campaigns for those who support the Stasi state.
The romance that libertarians and “free market economists” have with capitalism, which buys compliance with its greed and cooperates with the Stasi state, is foolish.
Let’s move on. It was only a few weeks ago that Obama and his Secretary of State John Kerry were on the verge of attacking Syria on the basis of faked evidence that Syria had crossed the “red line” and used weapons of mass destruction against the American organized, armed, and financed “rebels,” almost all of whom come from outside Syria.
Only the bought-and-paid-for-by-Washington French president made a show of believing a word or Washington’s lies against the Assad government in Syria. The British Parliament, long a puppet of Washington, gave Obama the bird and voted down participating in another American war crime. That left UK prime minister, David Cameron, hanging. Where do the British get prime ministers like Cameron and Blair?
Washington’s plan for Syria, having lost the cover of its British puppet, received a fatal blow from Russian President Putin, who arranged for Syria’s chemical weapons to be delivered to foreign hands for destruction, thus putting an end to the controversy.
In the meantime it became apparent that the “Syrian rebellion” organized by Washington has been taken over by al-Qaeda, an organization allegedly responsible for 9/11. Even Washington was able to figure out that it didn’t make sense to put al-Qaeda in charge of Syria. Now the headlines are: “West tells Syria rebels: Assad must stay.”
Meanwhile, Washington’s arrogance has managed to make an enemy of India. The TSA, a component of Homeland Security, subjected a female diplomat from India to multiple strip searches, cavity searches and ignored her protestations of consular immunity. http://news.nationalpost.com/2013/12/18/devyani-khobragade-reveals-how-she-broke-down-after-stripping-and-cavity-searches-as-row-between-u-s-and-india-deepens/
There was no justification whatever for this abuse of an Indian diplomat. To indicate its displeasure, the Indian government has removed barriers that prevent truck bombs from being driven into the US embassy.
Washington has managed to recreate the arms race. More profits for the military/security complex, and less security for the world. Provoked by Washington’s military aggressiveness, Russia has announces a $700 billion upgrade of its nuclear ballistic missiles. China’s leaders have also made it clear that China is not intimidated by Washington’s intrusion into China’s sphere of influence. China is developing weapon systems that make obsolete Washington’s large investment in surface fleets.
Recently, Pat Buchanan, Mr. Conservative himself, made a case that Russia’s Putin better represents traditional American values than does the President of the United States.http://www.unz.com/pbuchanan/is-putin-one-of-us/
Buchanan has a point. It is Washington, not Moscow or Beijing, that threatens to bomb countries into the stone age, that forces down airplanes of heads of state and subjects them to searches, and that refuses to honor grants of political asylum.
Certainly, Washington’s claim to be “exceptional” and “indispensable” and, therefore, above law and morality contrasts unfavorably with Putin’s statement that “we do not infringe on anyone’s interests or try to teach anyone how to live.”
Washington’s arrogance has brought America disrepute. What damage will Washington next inflict on us?

Manipulations Rule The Markets

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The Federal Reserve’s announcement on December 18 that beginning in January its monthly purchases of mortgage-backed financial instruments and US Treasury bonds would each be cut by $5 billion is puzzling, as is the financial press’s account of the market’s response.
The Federal Reserve conveys a contradictory message. The Fed says that improvements in employment and the economy justify cutting back on bond purchases. Yet the Fed emphasizes that it is maintaining its commitment to record low interest rates “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below the [Open Market] Committee’s 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.”
The last sentence in the quote states that the Fed does not regard its announced reduction in bond purchases as less accommodation or as a move toward tightening. In other words, the Fed is saying that tapering does not mean less accommodation.
To put it another way, the Fed is saying that the economy is doing well enough not to require the same amount of monthly bond purchases, but is not doing well enough to stand any change in the near zero nominal federal funds rate. The implication is that the Fed either does not think that a reduction in purchases will result in a rise in long-term interest rates or that such a rise will not derail the economy as long as the Fed keeps short-term rates at or near zero. If the $10 billion decrease in monthly bond demand results in higher long-term interest rates, what good does it do to keep the federal funds rate at zero? If the $10 billion monthly bond purchases were not needed as part of the accommodation policy, why was the Fed purchasing them?
Possibly the Fed thinks that Congress has taken steps to reduce the federal deficit, which would result in a reduced supply of bonds to match the Fed’s reduced demand for bonds, but the Fed’s statement makes no reference to federal deficit reduction, which is probably a smoke and mirrors change instead of a real one.
Moreover, the Fed’s outlook for the economy is mixed. The Fed says that “recovery in the housing sector slowed somewhat in recent months,” so why reduce purchases of mortgage-backed financial instruments? And surely the Fed is aware that the U3 unemployment rate has declined because discouraged workers who cannot find a job are not counted among the unemployed. As all measures show, real median family income and real per capita income are lower today than in 2007, and real consumer credit is not growing except for student loans. Without rising aggregate demand to drive the economy, why does the Fed see a recovery instead of faulty statistical measures that do not accurately portray economic reality?
The financial media’s reporting on the stock market’s response to the Fed’s announcement has its own puzzles. I have not seen the entirety of the news reports, but what I have seen says that the equity market rose because investors interpreted the reduction in bond purchases as signaling the Fed’s vote of confidence in the economy.
Previously when the Fed announced that it might cut back its bond purchases, the markets dropped sharply, and the Fed quickly back-tracked. Everyone knows that the high prices in the bond and equity markets are the result of the liquidity pouring out of the Fed and that a curtailment of this liquidity will adversely affect prices. So why this time did prices go up instead of down?
Pam Martens points out that there is evidence of manipulation. http://wallstreetonparade.com
As market data indicates, the initial response to the Fed’s announcement was a sharp move down as market participants sold stocks on the Fed’s announcement (see the chart of the Dow Jones Industrial Average in Pam Martens’ article). But within a few minutes the market changed course and rose on panic short-covering just as sharply as it had fallen.
The question is: who provided the upward push that panicked the shorts and sent the market up 292 points? Was it the plunge protection team and the NY Fed’s trading floor? Was it the large banks acting in concert with the Fed? It is hard to avoid the conclusion that this was an orchestrated event that forestalled a market decline.
Short selling in the paper gold futures market has been used to protect the US dollar’s value from being knocked down by the Fed’s Quantitative Easing. Following the Fed’s December 18 announcement, another big takedown of gold was launched.
William Kaye had predicted the takedown in advance. He noticed that the ETF gold trust GLD experienced a sudden loss in gold holdings as shares were redeemed for gold. Only the large Fed-dependent bullion banks can redeem shares for gold. Possession of physical gold allows the short-selling that drives down the gold price to be covered.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/17_Absolutely_Shocking_Developments_In_The_War_On_Gold.html
Bloomberg reports that gold is exiting the West. It has been shipped out to Asia. You explain, dear reader, how the price of gold can fall so much in the West while the supply of gold dries up.http://www.bloomberg.com/video/what-s-happening-to-all-the-gold-d33u1c23SDqA0p0e~9_INw.html
In a few days prior to the Fed’s tapering announcement, GLD was drained of 25 tonnes of gold by primary bullion banks, JP MorganChase, HSBC, Deutsche Bank, Goldman Sachs, and Citicorp. As Dave Kranzler pointed out to me, these banks happen to be the biggest players in the OTC derivatives market for precious metals. HSBC is the custodian of the GLD gold and JPM is the custodian of SLV silver. HSBC and JPM are two of the three primary custodial and market-making banks for Comex gold and silver.
The conclusion is obvious. QE helps the big banks, and manipulation of the gold price downward protects the US dollar from its dilution by QE.
The Fed’s reduced bond purchasing announced for the New Year still leaves the Fed purchasing $900 billion worth of bonds annually, so obviously the Fed does not think that everything is OK. Moreover, the Fed has other ways to make up for the $120 billion annual reduction, assuming the reduction actually occurs. The prospect for tapering is dependent on the US economy not sinking deeper into depression. Massaged “success indicators” such as the unemployment rate, which is understated by not counting discouraged workers, and the GDP growth rate, which is overstated with an understated measure of inflation, do not a recovery make. No other economic indicator shows recovery.
Until a whistleblower speaks, we cannot know for certain, but my conclusion is that the Fed understands that it must protect the dollar from being driven down by QE and that the orchestrated takedowns of gold are part of protecting the dollar’s value, and perhaps also the cutback in QE is a part of the protection by signaling an end of money creation. The Fed also understands that it cannot forever drive down the gold price and that it cannot forever pour liquidity into stock and bond markets. To retreat from this policy without crashing the edifice requires successful orchestrations. Therefore, we are likely to experience more of them in the days to come.
Allegedly, the US has free capital markets, and globalism is bringing free capital markets to the world. In actual fact, US capital markets are so manipulated–and now by the authorities themselves–that manipulation cannot stop without a crash.
What American “democratic capitalism” has brought to the world is manipulated financial markets and the absence of democracy. How long this game can play depends on the outside world.