Saturday, February 23, 2013

The Big Dogs On Wall Street Are Starting To Get Very Nervous

Why are some of the biggest names in the corporate world unloading stock like there is no tomorrow, and why are some of the most prominent investors on Wall Street loudly warning about the possibility of a market crash?  Should we be alarmed that the big dogs on Wall Street are starting to get very nervous?  In a previous article, I got very excited about a report that indicated that corporate insiders were selling nine times more of their own shares than they were buying.  Well, according to a brand new Bloomberg article, insider sales of stock have outnumbered insider purchases of stock by a ratio of twelve to one over the past three months.  That is highly unusual.  And right now some of the most respected investors in the financial world are ringing the alarm bells.  Dennis Gartman says that it is time to "rush to the sidelines", Seth Klarman is warning about "the un-abating risks of collapse", and Doug Kass is proclaiming that "we're headed for a sharp fall".  So does all of this mean that a market crash is definitely on the way?  No, but when you combine all of this with the weak economic data constantly coming out of the U.S. and Europe, it certainly does not paint a pretty picture. According to Bloomberg, it has been two years since we have seen insider sales of stock at this level.  And when insider sales of stock are this high, that usually means that the market is about to decline...

Corporate executives are taking advantage of near-record U.S. stock prices by selling shares in their companies at the fastest pace in two years.

There were about 12 stock-sale announcements over the past three months for every purchase by insiders at Standard & Poor’s 500 Index (SPX) companies, the highest ratio since January 2011, according to data compiled by Bloomberg and Pavilion Global Markets. Whenever the ratio exceeded 11 in the past, the benchmark index declined 5.9 percent on average in the next six months, according to Pavilion, a Montreal-based trading firm.
But it isn't just the number of stock sales that is alarming.  Some of these insider transactions are absolutely huge.  Just check out these numbers...

Among the biggest transactions last week were a $65.2 million sale by Google Inc.’s 39-year-old Chief Executive Officer Larry Page, a $40.1 million disposal by News Corp.’s 81- year-old Chairman and CEO Rupert Murdoch and a $34.2 million sale from American Express Co. chief Kenneth Chenault, who is 61. Nolan Archibald, the 69-year-old chairman of Stanley Black & Decker Inc. who plans to leave his post next month, unloaded $29.7 million in shares last week and Amphenol Corp. Chairman Martin Hans Loeffler, 68, sold $27.5 million, according to data compiled by Bloomberg.

Google Chairman Eric Schmidt, 57, announced plans to sell as many as 3.2 million shares in the operator of the world’s most-popular search engine. The planned share sales, worth about $2.5 billion, represent about 42 percent of Schmidt’s holdings.
So why are all of these very prominent executives cashing out all of a sudden?

That is a very good question.

Meanwhile, some of the most respected names on Wall Street are warning that it is time to get out of the market.

For example, investor Dennis Gartman recently wrote that the game is "changing" and that it is time to "rush to the sidelines"...

"When tectonic plates in the earth’s crust shift earthquakes happen and when the tectonic plants shift beneath our feet in the capital markets margin calls take place. The tectonic plates have shifted and attention... very careful and very substantive attention... must be paid.

"Simply put, the game has changed and where we were playing a 'game' fueled by the monetary authorities and fueled by the urge on the part of participants to see and believe in rising 'animal spirits' as Lord Keynes referred to them we played bullishly of equities and of the EUR and of 'risk assets'. Now, with the game changing, our tools have to change and so too our perspective.

"Where we were buyers of equities previously we must disdain them henceforth. Where we were sellers of Yen and US dollars we must buy them now. Where we had been long of gold in Yen terms, we must shift that and turn bullish of gold in EUR terms. Where we might have been 'technically' bullish of the EUR we must now be technically and fundamentally bearish of it. The game board has been flipped over; the game has changed... change with it or perish. We cannot be more blunt than that."
That is a very ominous warning, but he is far from alone.  Just the other day, I wrote about how legendary investor Seth Klarman is warning that the collapse of the financial markets could happen at literally any time...

"Investing today may well be harder than it has been at any time in our three decades of existence," writes Seth Klarman in his year-end letter. The Fed's "relentless interventions and manipulations" have left few purchase targets for Baupost, he laments. "(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors."
Other big hitters on Wall Street are ringing the alarm bells as well.  For example, Seabreeze Partners portfolio manager Doug Kass recently told CNBC that what he is seeing right now reminds him of the period just before the crash of 1987...

"I'm getting the 'summer of 1987 feeling' in the U.S. equity market," Kass told CNBC, "which means we're headed for a sharp fall."
And of course the "perma-bears" continue to warn that the months ahead are going to be very difficult.  For instance, "Dr. Doom" Marc Faber recently said that he "loves the high odds of a ‘big-time’ market crash".

Another "perma-bear", Nomura's Bob Janjuah, is convinced that the stock market will experience one more huge spike before collapsing by up to 50%...

I continue to believe that the S&P500 can trade up towards the 1575/1550 area, where we have, so far, a grand double top. I would not be surprised to see the S&P trade marginally through the 2007 all-time nominal high (the real high was of course seen over a decade ago – so much for equities as a long-term vehicle for wealth creation!). A weekly close at a new all-time high would I think lead to the final parabolic spike up which creates the kind of positioning extreme and leverage extreme needed to create the conditions for a 25% to 50% collapse in equities over the rest of 2013 and 2014, driven by real economy reality hitting home, and by policymaker failure/loss of faith in "their system".
So are they right?

We will see.

At the same time that many of the big dogs are pulling their money out of the market, many smaller investors are rushing to put their money back in to the market.  The mainstream media continues to assure them that everything is wonderful and that this rally can last forever.

But it is important to keep in mind that the last time that Wall Street was this "euphoric" was right before the market crash in 2008.

So what should we be watching for?

As I have mentioned before, it is very important to watch the financial markets in Europe right now.

If they crash, the financial markets in the U.S. will probably crash too.

And the financial markets in Europe definitely have had a rough week.  Just check out what happened on Thursday.  The following is from a report by CNBC's Bob Pisani...

Italy, Germany, France, Spain, U.K., Greece, and Portugal all on track to log worst day since Feb. 4. European PMI numbers were disappointing, with all major countries except Germany reporting numbers below 50, indicating contraction.

What does this mean? It means Europe remains mired in recession: "The euro zone is on course to contract for a fourth consecutive quarter," Markit, who provides the PMI data, said. A new insight is that France is now joining the weakness shown in periphery countries.

You're giving me agita: Italy was the worst market, down 2.5 percent. The CEO of banking company, Intesa Sanpaolo, said Italy's recession has been so bad it could cause a fifth of Italian companies to fail, noting that topline for those bottom fifth have been shrinking 35 to 45 percent. Italian elections are this weekend.

It wasn't any better in Asia. The Shanghai Index had its worst day in over a year, closing down nearly three percent.
And the economic numbers coming out of the U.S. also continue to be quite depressing.

On Thursday, the Department of Labor announced that there were 362,000 initial claims for unemployment benefits during the week ending February 16th.  That was a sharp rise from a week earlier.

But I am not really concerned about that number yet.

When it rises above 400,000 and it stays there, then it will be time to officially become alarmed.

So what is the bottom line?

There are trouble signs on the horizon for the financial markets.  Nobody should panic right now, but things certainly do not look very promising for the remainder of the year.

Zombie Foreclosures: Borrowers Hit With Debts That Won't Die

Borrowers are discovering that their foreclosed homes are coming back to haunt them -- long after they have moved out.

In these "zombie foreclosures," borrowers move out after their bank schedules a foreclosure auction only to learn months or years later that the auction never took place or the bank never transferred the deed. That means the borrower still technically owns the house and is on the hook for property taxes, fees and homeowners' association dues.

Since the housing bubble burst seven years ago, almost two million properties have started but never completed the foreclosure process, according to RealtyTrac. While no one knows the exact number, it's estimated that tens of thousands could be zombie foreclosures.

Many of these homes are in low-income communities where foreclosures are so difficult to sell that lenders sometimes delay taking possession to save on taxes and other costs that then stay under the borrower's name.

Those debts can then go unpaid for years because the borrower is unaware they owe them, further slamming their credit score and making life after foreclosure even harder.

"The most frustrating part is that I can't move on," said Rose Nathan, a 37-year-old office manager.

Nathan lost her South Bend, Ind., home in January 2009, after working out a deal with CitiMortgage to voluntarily walk away in a "deed in lieu of foreclosure."

"On Christmas Eve, the bank called and told me a sheriff's sale was coming and I had to move out right away," she said. "So that's what I did -- seven days after New Year's."

She sold her belongings and moved to Hawaii. Nearly two years later, she received a property tax bill from the City of South Bend for $5,000. The bank had never taken possession of the house.

Citi told her attorney, Judith Fox, that the holdup was due to a lien on the home that they were never told about. Nathan said she knew of no liens at the time of the transaction. Upon doing a title search, Fox found no evidence of a lien until well after the bank agreed to the deed-in-lieu deal.

Meanwhile, the unpaid debt has crushed Nathan's credit score. The deed-in-lieu alone lowered her score by 80 to 120 points, but the unpaid debt meant her credit kept taking a hit. Eventually her credit card companies cut her off, even though she said she was making her payments.

Her auto loan now carries a 25% rate. Her car insurance premiums have skyrocketed. She can only afford a one-bedroom apartment where she lives with her three kids. And forget about buying another home. "Nobody will give me a mortgage," she said.

Citi declined to comment on the case. Nathan said she has since paid off the lien with the hope that Citi will take the deed on the home.

Mustapha Sesay, a 45 year-old father of two, thought he had lost his Brandywine, Md., home in 2008. But two years later, a debt collector called telling him he owed $70,000.

The holder of his second mortgage had never forgiven his debt -- even though the lender holding his primary mortgage had foreclosed on the home.

Typically the second mortgage holder is out of luck if there isn't enough cash from the foreclosure sale to pay off both the first and second lien, said Cheryl Cassell, director of the housing counselor network for the National Community Reinvestment Coalition. But, depending on state law, second mortgage holders can sue homeowners to pay off the notes -- even after they lose the home in a foreclosure or the lender can sell the debt to a collection agencies.

In Sesay's case, the debt collector calls every week or two. He has had little luck stopping it. "I talk to credit counselors, lawyers," he said.

Sesay would have been well on the way to credit score recovery. But now, he said, "I could move to Alaska in winter and no one would lend me ice."

Bill Purdy, a real estate attorney in Soquel, Calif., said borrowers can't always trust lenders to file foreclosure paperwork properly. In November 2011, when his client Christopher Warner's Felton, Calif., home was auctioned off, his mortgage debt was fully extinguished -- standard practice based on California law.

Warner's lender, however, recorded $120,000 on its books as debt -- the difference between what he owed and what the house sold for -- and gave it to a collection agency. The debt has lowered Warner's credit score by an additional 100 points, he estimated.

"It nearly put me into bankruptcy," he said. He has hired Purdy to get the debt collectors off his back.

In a $25 billion settlement with the state attorneys general last spring, the nation's five largest mortgage lenders agreed to inform borrowers of any decision to forgo or delay a foreclosure. But victim's attorneys said the banks have not been careful about following that policy.

Borrowers can get credit counseling from community advocacy groups, like those affiliated with NeighborWorks America and NCRC. They can call the HopeNow Hotline to connect with a counselor near them. The organizations don't charge for their services and they are experienced in working with borrowers in trouble.

U.S. Air Force Developing Swarms Of Tiny Unmanned Drones That Can Hover, Crawl And Kill Targets

  • Air Vehicles Directorate at Wright-Patterson Air Force Base in Dayton, Ohio, is already developing prototypes of tiny drones that can hover
  • The Micro Air Vehicles will work in swarms to provide complex surveillance of a battlefield
  • They can also be armed with incapacitating chemicals, combustible payloads or even explosives 'for precision targeting capability'
The U.S. Air Force is developing tiny unmanned drones that will fly in swarms, hover like bees, crawl like spiders and even sneak up on unsuspecting targets and execute them with lethal precision.

The Air Vehicles Directorate, a research arm of the Air Force, has released a computer-animated video outlining the the future capabilities of Micro Air Vehicles (MAVs). The project promises to revolutionize war by down-sizing the combatants.

'MAVs will become a vital element in the ever-changing war-fighting environment and will help ensure success on the battlefield of the future,' the narrator intones.

'Unobtrusive, pervasive, lethal - Micro Air Vehicles, enhancing the capabilities of the future war fighter.'

Scroll down for video
Hovering: Micro Air Vehicles (MAVs) are the future of the unmanned drones program, according to a new video from the Air Force. The Air Force has already developed a drone capable of hovering like a moth

Hovering: Micro Air Vehicles (MAVs) are the future of the unmanned drones program, according to a new video from the Air Force. The Air Force has already developed a drone capable of hovering like a moth

Perching: The video, released by the Air Vehicle Directorate, shows a pigeon-like drone that can draw power from an electrical wire while its camera watches a target

Perching: The video, released by the Air Vehicle Directorate, shows a pigeon-like drone that can draw power from an electrical wire while its camera watches a target

Crawling: The drones will be equipped with legs so that they can crawl through tight spaces like an insect

Crawling: The drones will be equipped with legs so that they can crawl through tight spaces like an insect
The project, which is based at Wright-Patterson Air Force Base in Dayton, Ohio, was revealed in the March issue of the National Geographic magazine.

Air Force officials said they have already produced tiny remote-control prototypes - but they consume so much power that can only operate for a few minutes. Researchers estimate that it will take several years of advances in battery technology to make the designs feasible.

Still, the Air Force has a clear concept of what it hopes to accomplish with the program.

The promotional video begins with a swarm of tiny drones be dropped on a city from a passing plane. 

The drones will work in concert to patch together a wide, detailed view of the battlefield - singling out individual targets without losing sight of the broader scene. 

'Data will be communicated among the MAVs to enable real time, reliable decision-making and to provide an advanced overall picture for other platforms or operators,' the Air Force says.

Killing: The video demonstrates how MAVs could be used to sneak up behind unsuspecting targets and kill them with a single, lethal shot

Killing: The video demonstrates how MAVs could be used to sneak up behind unsuspecting targets and kill them with a single, lethal shot

Lethal: The drones could be equipped with incapacitating chemicals, combustable payloads or even explosives 'for precsion targeting capability'

Lethal: The drones could be equipped with incapacitating chemicals, combustible payloads or even explosives 'for precision targeting capability'
As the drones fall, they begin to fly - not like planes, but like insects. High frequency flapping wings allow the drones to hover and maneuver in tight spaces.

The military has already produced a drone patterned after a hawk moth that can flap its wings 30 times a second. However, the activity exhausts the drone's tiny battery in just a few minutes, according to National Geographic.

Another drone type soars like a pigeon and perches unobtrusively on a power line to observe a surveillance target with a camera.

The Air Force is working on technology that will allow the drones to steal electricity from power cables and other sources - so they can continue to operate for days or weeks on end.

Swarming: The drones couple be dropped en masse over a battlefield or a city and would work together to create a complex surveillance network

Swarming: The drones couple be dropped en masse over a battlefield or a city and would work together to create a complex surveillance network

Working together: The drones would use advanced software to navigate by 'sight,' rather than GPS - which can be blocked by buildings or by jamming from the enemy

Working together: The drones would use advanced software to navigate by 'sight,' rather than GPS - which can be blocked by buildings or by jamming from the enemy
The Air Force training video shows a winged MAV following a target as he drives through the streets of a dense city.

Advanced sensors will enable 'optic flow,' which will allow remote pilots to fly by 'sight' - rather than flying by GPS, which can be disrupted by buildings or deliberately jammed by enemy forces.

The video depicts three drones following the target into a house, where they maneuver hallways and rooms undetected.

'Small size and agile flight will allow MAVs to covertly enter locations inaccessible by traditional means of aerial surveillance,' the narrator says.

The video follows the drones as they fly through an open door and sneak up behind a man who is aiming a sniper rifle. 

'Individual MAVs may perform direct attack missions and can be equipped with incapacitating chemicals, combustible payloads or even explosives for precision targeting capability,' according to the video.

On screen, a small, hovering vehicle pauses before shooting the man directly in the back of the head.

20 Signs That The U.S. Economy Is Heading For Big Trouble In The Months Ahead

Is the U.S. economy about to experience a major downturn?  Unfortunately, there are a whole bunch of signs that economic activity in the United States is really slowing down right now.  Freight volumes and freight expenditures are way down, consumer confidence has declined sharply, major retail chains all over America are closing hundreds of stores, and the "sequester" threatens to give the American people their first significant opportunity to experience what "austerity" tastes like.  Gas prices are going up rapidly, corporate insiders are dumping massive amounts of stock and there are high profile corporate bankruptcies in the news almost every single day now.  In many ways, what we are going through right now feels very similar to 2008 before the crash happened.  Back then the warning signs of economic trouble were very obvious, but our politicians and the mainstream media insisted that everything was just fine, and the stock market was very much detached from reality.  When the stock market did finally catch up with reality, it happened very, very rapidly.  Sadly, most people do not appear to have learned any lessons from the crisis of 2008.  Americans continue to rack up staggering amounts of debt, and Wall Street is more reckless than ever.  As a society, we seem to have concluded that 2008 was just a temporary malfunction rather than an indication that our entire system was fundamentally flawed.  In the end, we will pay a great price for our overconfidence and our recklessness. So what will the rest of 2013 bring?

Hopefully the economy will remain stable for as long as possible, but right now things do not look particularly promising.

The following are 20 signs that the U.S. economy is heading for big trouble in the months ahead...

#1 Freight shipment volumes have hit their lowest level in two years, and freight expenditures have gone negative for the first time since the last recession.

#2 The average price of a gallon of gasoline has risen by more than 50 cents over the past two months.  This is making things tougher on our economy, because nearly every form of economic activity involves moving people or goods around.

#3 Reader's Digest, once one of the most popular magazines in the world, has filed for bankruptcy.

#4 Atlantic City's newest casino, Revel, has just filed for bankruptcy.  It had been hoped that Revel would help lead a turnaround for Atlantic City.

#5 A state-appointed review board has determined that there is "no satisfactory plan" to solve Detroit's financial emergency, and many believe that bankruptcy is imminent.  If Detroit does declare bankruptcy, it will be the largest municipal bankruptcy in U.S. history.

#6 David Gallagher, the CEO of Town Sports International, recently said that his company is struggling right now because consumers simply do not have as much disposable income anymore...

"As we moved into January membership trends were tracking to expectations in the first half of the month, but fell off track and did not meet our expectations in the second half of the month. We believe the driver of this was the rapid decline in consumer sentiment that has been reported and is connected to the reduction in net pay consumers earn given the changes in tax rates that went into effect in January."
#7 According to the Conference Board, consumer confidence in the U.S. has hit its lowest level in more than a year.

#8 Sales of the Apple iPhone have been slower than projected, and as a result Chinese manufacturing giant FoxConn has instituted a hiring freeze.  The following is from a CNET report that was posted on Wednesday...

The Financial Times noted that it was the first time since a 2009 downturn that the company opted to halt hiring in all of its facilities across the country. The publication talked to multiple recruiters.

The actions taken by Foxconn fuel the concern over the perceived weakened demand for the iPhone 5 and slumping sentiment around Apple in general, with production activity a leading indicator of interest in the product.
#9 In 2012, global cell phone sales posted their first decline since the end of the last recession.

#10 We appear to be in the midst of a "retail apocalypse".  It is being projected that Sears, J.C. Penney, Best Buy and RadioShack will also close hundreds of stores by the end of 2013.

#11 An internal memo authored by a Wal-Mart executive that was recently leaked to the press said that February sales were a "total disaster" and that the beginning of February was the "worst start to a month I have seen in my ~7 years with the company."

#12 If Congress does not do anything and "sequestration" goes into effect on March 1st, the Pentagon says that approximately 800,000 civilian employees will be facing mandatory furloughs.

#13 Barack Obama is admitting that the "sequester" could have a crippling impact on the U.S. economy.  The following is from a recent CNBC article...

Obama cautioned that if the $85 billion in immediate cuts -- known as the sequester -- occur, the full range of government would feel the effects. Among those he listed: furloughed FBI agents, reductions in spending for communities to pay police and fire personnel and teachers, and decreased ability to respond to threats around the world.

He said the consequences would be felt across the economy.

"People will lose their jobs," he said. "The unemployment rate might tick up again."
#14 If the "sequester" is allowed to go into effect, the CBO is projecting that it will cause U.S. GDP growth to go down by at least 0.6 percent and that it will "reduce job growth by 750,000 jobs".

#15 According to a recent Gallup survey, 65 percent of all Americans believe that 2013 will be a year of "economic difficulty", and 50 percent of all Americans believe that the "best days" of America are now in the past.

#16 U.S. GDP actually contracted at an annual rate of 0.1 percent during the fourth quarter of 2012.  This was the first GDP contraction that the official numbers have shown in more than three years.

#17 For the entire year of 2012, U.S. GDP growth was only about 1.5 percent.  According to Art Cashin, every time GDP growth has fallen this low for an entire year, the U.S. economy has always ended up going into a recession.

#18 The global economy overall is really starting to slow down...

The world's richest countries saw their economies contract for the first time in almost four years during the final three months of 2012, the Organisation for Economic Co-operation and Development said.

The Paris-based thinktank said gross domestic product across its 34 member states fell by 0.2% – breaking a period of rising activity stretching back to a 2.3% slump in output in the first quarter of 2009.

All the major economies of the OECD – the US, Japan, Germany, France, Italy and the UK – have already reported falls in output at the end of 2012, with the thinktank noting that the steepest declines had been seen in the European Union, where GDP fell by 0.5%. Canada is the only member of the G7 currently on course to register an increase in national output.
#19 Corporate insiders are dumping enormous amounts of stock right now.  Do they know something that we don't?

#20 Even some of the biggest names on Wall Street are warning that we are heading for an economic collapse.  For example, Seth Klarman, one of the most respected investors on Wall Street, said in his year-end letter that the collapse of the U.S. financial system could happen at any time...

"Investing today may well be harder than it has been at any time in our three decades of existence," writes Seth Klarman in his year-end letter. The Fed's "relentless interventions and manipulations" have left few purchase targets for Baupost, he laments. "(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors."

American Assassination History for Dummies

It’s hard to have a serious conversation about America’s drone assassination policy when no one seems to have a basic grasp of recent history. This cultural amnesia epidemic is starting to get me down— which is partly my fault for paying more than two minutes’ attention to Twitter at a single go.

The problem starts with Reagan, as problems so often do. Most people on the left take for granted that Reagan’s executive order 12333 "banned assassinations" — which is not just a false interpretation, but really awful mangling of one of the dark turning points in modern American history.

That same ignorance of the history of assassination policy runs right through today, with the repetition of another myth: That President Obama’s extrajudicial drone-assassinations of American citizens is "unprecedented" and "radical" and that "not even George Bush targeted American citizens."

The truth is a lot worse and a lot more depressing.

To understand the backstory to Reagan’s deceptive "assassination ban" in 1981, you have to know a bit about what was going on in the 70s, that brief period of American Glasnost, in the aftermath of Watergate and the military’s collapse after losing Vietnam.

All sorts of dirty Cold War secrets were pouring out in that brief period — in late 1974, Seymour Hersh broke the story that the CIA had been illegally spying on thousands of American antiwar dissidents inside of our borders, in violation of the law and the charter that brought the CIA into existence . Later, Vice President Rockefeller’s report said the CIA spied on 300,000 Americans.

Remember, the American public and most of the Establishment back then were very different from today’s. There’s some truth to the "Liberal Establishment" culture that ruled until Reagan took over — those people were serious about their do-gooder intentions and their civic duties and all that, whatever the results on the ground were — nothing at all like today’s armchair Machiavellis and backseat Nietzsches who dominate our political culture, a culture where everyone's jostling to scream "You can’t handle the truth!" at imaginary liberal do-gooders...

One of Hersh’s most incredible exposés focused on an undercover CIA spook who told of how they penetrated the Weather Underground from very early in the Columbia U protest days, right up through their nationwide bombing campaign. Which may finally answer how it was that a handful of upper class Ivy Leaguers managed to expertly set off bombs all across the country, spring Timothy Leary from Vacaville Prison, and "evade" law enforcement officials for so many years — only to get off with a slap on the wrist when they finally went up for air.

Ah well, but that’s another story. What started the assassination policy trend that frames today’s politics was a slip-up by President Ford. It’s a real-life Chevy Chase moment, only instead of stumbling over his podium and crashing to the floor for laughs, the real President Ford called a "meet ‘n’ greet" with theNew York Times’ top editors, wherein the President "slipped" and "blurted out" that he hoped they never found out about the CIA assassination program — an assassination program that none of them had ever seriously suspected until President Ford blurted it out over lunch. Whoa, Liberty! Down, boy!

Here’s how the scene is described in the book Challenging the Secret Government by UC Davis Prof. Kathryn Olmsted:

Toward the end of the luncheon, the subject of the Rockefeller Commission came up. The Times had criticized the dominance of conservatives on the commission. Ford explained that he needed men who could be trusted not to stray from their narrow mission of investigating the CIA’s domestic activities. Otherwise, he said, they might come up on matters that would "ruin the U.S. image around the world" and harm the reputation of every U.S. president since Truman.

"Like what?" asked [editor A.M.] Rosenthal, always the hard-nosed reporter.

"Like assassinations!" Ford blurted out, quickly adding, "That’s off the record."

By standard mainstream journalism rules, Ford’s "blurt" wasn’t off the record. But more importantly: fuck the rules, this was bombshell news, from the highest (and bumblingest) source in the land! Tom Wicker and Rosenthal both insisted on publishing the scoop — Wicker was convinced that Ford meant to blurt it out for reasons unknown, it was hard to imagine someone who spent decades close to J Edgar Hoover and other intelligence officials could be that unbelievably stupid.

But cowardice won the day — Wicker and Rosenthal were overruled by the rest of the Times execs and editors who were there, and they had to sit on their scoop and watch while a grandstanding jackass (in the good sense) named Daniel Schorr stole it from under their noses.

Yep, that crusty old voice on NPR was once one of the pushiest assholes in journalism. Schorr, who worked for CBS News during the post-Watergate era, had heard the rumors about Ford’s "assassination gaffe" at the New York Times. Schorr had assumed that Ford was talking about domestic assassinations of Americans, but he needed confirmation from someone high up. So he arranged an off-the-record interview with CIA chief William Colby, and got another "gaffe" scoop:

Finally, I said, as casually as I could, that I had heard President Ford had a problem about the CIA and assassinations. Colby fell silent.

"Has the CIA ever killed anybody in this country?" I asked directly.

His reply was quick and even: "Not in this country."

"Not in this country!" I stared at Colby as it sank in on me that I had been on the wrong track, but had now been put unintentionally on the right one.
Two gaffes, two Chevy Chase fall-on-their-faces screw-ups buy two of the highest and most experienced lawyer-intelligence officials in the land. What’re the odds!

Then again, there really was something of a whiff of failure in the air those years — Hell, even our assassins couldn’t hit the side of a barn if they stood right in front shooting, as Sara Jane Moore and Squeaky Fromme proved that year, the Lucille Balls of would-be presidential assassins...

This is where the slapstick ends, and things get deadly serious and depressing. Over the next several months, the Church Commission and Pike Commission exposed a number of CIA assassination plots — in the Congo, Haiti, Chile, Cuba, Indonesia, Dominican Republic, who knew where else — and the public reacted with genuine shock and horror. Not just the public, but most of the Liberal Establishment was shocked and horrified also — Democrats and Republicans, back when they had "moderate" and "liberal" Republicans in Congress. Hypocrites, sure, but after a couple of decades with the Col. Jessups who dominate our political discourse today, I’d take those old pre-Carter Cold War liberal hypocrites any day.

The CIA assassination program shocked the public more than any other revelation from that period. JFK and MLK conspiracy theories went mainstream. Robert Redford wouldn’t take a script if he wasn’t being chased by CIA villains. Everyone hated the CIA in America, and the fastest way to becoming a hero was being hated right back — like Daniel Schorr was.

In mid-1975, Schorr was anointed "CIA Enemy No 1" by none other than ex-CIA director and silver-spoon fascist Richard Helms himself — which Schorr proudly recounted in his memoir Clearing The Air:

Though, in a sense, my broadcast about assassination plots may have helped to spark the investigation that had brought Helms back [from Teheran, where Helms served as US ambassador], I was not thinking of it in personal terms as I waited in the corridor, with three or four other reporters, for him to emerge from the Vice President’s office and to invite him to be interviewed before camera staked out in the press room across the hall.

As I offered my hand in greeting, with a jocular, "Welcome back," Helms’ face, ashen from strain and fatigue, turned livid. "You son-o-f-a-bitch!" he raged. "you killer! You cocksucker! ‘Killer Schorr’ — that’s what they ought to call you!"
In that atmosphere, in early 1976, President Ford issued executive order 11905 — which has been wrongly described over the years as "banning assassinations," but at the time Ford signed it, 11905 was more properly understood as a window dressing largely designed to keep the liberal activist Democratic Party Congress from legislating changes to the CIA themselves. (Keep in mind, the Democratic Congress that swept into power after Watergate was, for a brief time, aggressively reformist and nothing like the Democratic Party of today.) Even Ford’s language banning assassinations or CIA domestic spying left a lot to be interpreted — a recurruing problem later on, with the exception of Carter.

Sen. Frank Church, who headed the Church Committee (sort of a "Truth Commission), dismissed Ford’s "reforms" when they were first announced in early March 1976, as Newsweek reported at the time:

"Over-all, the President’s proposal is clearly to give the CIA a bigger shield and a longer sword with which to stab about," argued Sen. Frank Church.

["Ford’s CIA Shake-Up", Newsweek, March 1, 1976]
Rather than creating conditions for greater accountability, Ford centralized power in the White House — and as Newsweek reported, the biggest beneficiary of Ford’s reforms (and likely its author) was none other than new CIA chief George H. W. Bush:

Ford's Executive order put its emphasis on a firmer chain of command - starting with the President - even though the investigations of most intelligence abuses have shown them to be the result of White House interference, not uncontrolled cloak-and-daggering. Might increased Presidential control lead to more abuses in the future?

"I would hope that the American people will elect a President who will not abuse that responsibility," Ford said. "I certainly don't intend to."

The biggest beneficiary of the new plan was CIA director Bush, who now will serve as chairman of the new Committee on Foreign Intelligence ... The committee will control the budgets for all the nation's foreign intelligence operations as well as the domestic counterintelligence activities of the FBI.
Finally, although Ford technically banned assassinations, his order left a giant loophole that could allow the CIA to spy on American dissidents all over again, as Newsweek reported:

Aside from the ban on assassinations, however, no new limits were set on covert operations overseas.

Ford did set some limits on surveillance, electronic eavesdropping and infiltration aimed at U.S citizens or groups. But [...] critics said his Executive order was ambiguous enough to open the way for domestic operations previously considered questionable or prohibited by law. The CIA, for example, illegally opened mail for twenty years; last week Ford proposed the agency be given authority to do so under appropriate court orders. Under Ford's proposal, a court order would also allow the FBI and NSA to bug U.S. citizens for intelligence purposes; at present, this can be done only in criminal cases.
But then something went wrong in Bush-Ford’s plans — the curse of the bumbling American fascist returned, in the form of Gerald Ford’s 1976 campaign chief, Dick Cheney, who flubbed Ford’s odds-on election victory simply by being there and putting in his two cents. That meant a do-gooder peanut farmer named Jimmy Carter was in control at the peak of the last gasp of Democratic Party liberal activism.

As everyone knows, Carter’s presidency was one long bummer. But what most people don’t know — or have forgotten — is that Carter did more than any president to bring the national security state under control. Especially the CIA, which Carter gutted, purged, and chained down with a whole set of policies and guidelines meant to protect American citizens’ civil liberties.

In his first year in office, Carter purged nearly 20% of the Agency’s 4500 employees, gutting the ranks of clandestine operatives, sending hundreds of dirty trickster vets into the private sector to seethe for the next few years. Carter signed an executive order worked out with Frank Church and the Senate committee on intelligence putting more serious limits on the CIA’s powers — unequivocally banning assassinations, restricting the CIA’s ability to spy domestically, and putting their covert operations under strict oversight under the president, Congressional committees and the attorney general. The CIA’s paramilitary was even disbanded, though not banned.

Carter’s people understood that real fundamental change in the CIA and national security state would only come through democratic politics — through passing laws. He and Sen. Church tried, but they were outmaneuvered and ground into mulch.

A Washington Post article from the summer of 1978 captured the changing mood, and the first early wave of gloom setting in with Democrat reformers that their days were over and their chance was missed:

Two years ago, when David Atlee Phillips and like-minded defenders of the Central Intelligence Agency set out on the college lecture circuit, they were routinely confronted by hecklers and protesters denouncing them as "assassins."

The climate has changed. The investigations are over. The recriminations have subsided. The apologists have turned into advocates, urging, even demanding a stronger hand for the CIA and the rest of the intelligence community despite the record of abuses.

A comprehensive piece of legislation, the National Intelligence Reorganization and Reform Act of 1978 (S.2525), has been drafted and debated at Senate hearings for months now, but all sides dismiss it as nothing more than a talking paper, a starting point.

Sen. Frank Church (D-Idaho), who served as the chairman of the original Senate Intelligence Committee and its unprecedented investigations, thinks it is already too late.

"Reforms have been delayed to death," he said in an interview. "This has been the defense mechanism of the agency and it could easily have been foreseen . . . Memories are very short. I think the shrewd operators, the friends of the CIA, recognized that time was on their side, that they could hold out against legislative action."
And yet even as comparatively progressive as Carter’s and Church’s proposed reforms were — this was the brief high point for civil liberties, it’s all downhill from here — nevertheless, pretty much everyone across the spectrum hated Carter’s and Church’s reforms for their own reasons, and Carter did little to inspire.

Carter’s gutting of the CIA and his new guidelines restricting domestic surveillance by the FBI and other agencies won him few friends among grandstanding professional liberals. If anything the country turned against Carter as the world went to shit around him — Iran, Afghanistan, Nicaragua, Jonestown — paving the way for Reagan to "restore" American power.

Which brings us to early 1981, and Reagan’s executive order 12333 which has been falsely described as "banning assassinations" by critics of Bush and now Obama.

Scott Horton, writing in Harpers [4] last year, has a good description:

But as with so much U.S. national-security legislation, this order turns out to be far less than meets the eye. Simplified, [Reagan’s EO] could be summarized this way: "No one shall be assassinated—unless the president authorizes it, in which case we will refrain from calling it an assassination."
But it’s much worse than that.

From the minute Reagan’s team took power, they went to work rewriting the rules to give themselves enormous unlimited power to re-animate the empire and the national-security state. In early 1981, it didn’t seem possible that the political culture could slide back so far after all those hard-won battles; by the end of the year, it was as if there’d never been a Church Committee or reforms of any kind.

To get a sense of how this developed, here’s a kind of timeline I put together:

March 10, 1981: "Reagan Administration Weighs Broader CIA Role in Domestic Spying"

The Reagan administration is considering a broad expansion of the CIA's authority to use break-ins, physical surveillance and covert infiltration of American groups and businesses, sources say. (AP)

June 15, 1981: "Recouping Under Reagan; CIA Is on the Rebound"

The Central Intelligence Agency, whose public image and private morale have been battered during much of the past decade, appears to be regaining some of its lost money, manpower and maneuvering room under the Reagan administration. (WaPo)

October 13, 1981: "Draft Order May Let CIA Resume Its Police Ties"

The Central Intelligence Agency, under a proposed administration order, apparently could resume many of its ties with local and state police agencies in addition to embarking on its own infiltrations of domestic organizations. (WaPo)

October 22, 1981: "Reagan Official Says Carter Overprotected Civil Liberties"

A Reagan administration official said Thursday a proposed order relaxing restrictions on CIA domestic activity is needed to strike a new balance between civil liberties and national security.

"President Carter went too far in protecting civil liberties. He erred in placing too many restrictions on the intelligence community," the official said at a briefing held on the condition that his name and position not be used. (AP)
In December 1981, Reagan signed the executive order 12333 undoing the previous decades’ reforms with the stroke of a pen. For cover, Reagan’s people planted fake scare stories through Jack Anderson about non-existent Libyan assassination squads [5] infiltrating U.S. borders, waterskiing their way across the Great Plains to spring John Hinckley and wreak havoc on the American Way of Life.

And that is the back story to Reagan’s executive order 12333, the one that allegedly banned assassinations and allegedly made him so much more progressive than Bush or Obama.

Reagan not only gave the CIA carte blanche in the US to spy, but he also massively expanded the powers of the FBI and law enforcement to spy on Americans domestically with another executive order in 1983, paving the way for a repeat of all the awful abuses uncovered by Sen. Church, which only started coming to light at the end of Reagan’s presidency.

As reported in the AP on March 7, 1983:

Rules Relaxed On FBI Surveillance

Attorney General William French Smith today relaxed the rules governing FBI surveillance of domestic groups that advocate social change through violence….

Specifically, the guidelines make these changes:

* Allow the FBI to use new informants and infiltrators during a preliminary inquiry, where there is not yet enough evidence to warrant a full investigation. Levi had restricted those techniques to full investigations.

* Specifically authorize the FBI to continue low-level monitoring through informants and other means of groups that have gone dormant and pose no "immediate threat of harm." The FBI had been closing such investigations when a group went one year without committing violence.

* Authorize, for the first time, full investigations based solely on public statements advocating crime or violence when there is an apparent intent to carry out the threat.

* Authorize the FBI to collect publicly available information that satisfies a law enforcement purpose but does not necessarily involve a group under investigation.
Cut to: 1988, and we’re on repeat from the 70s, like a bad sitcom, with scandals and exposes of police state overreach.

Here’s one example from the Chicago Tribune dated January 31, 1988:


Files of an FBI investigation of groups opposing President Reagan's policy in Central America show that secret guidelines for national security investigations gave the agents enormous latitude to delve into the lives of Americans who simply had criticized government actions.

The disclosures from FBI files have raised questions in the public and Congress about whether the relaxed guidelines, designed to make it easier for agents to examine groups suspected of trying to "achieve political or social change" through violence, are a sufficient protection for individual rights. President Reagan has ordered an internal review of the FBI surveillance, White House spokesman Marlin Fitzwater said Friday.
As you can probably guess, the Democrats made some noise, complained, opened hearings — but no one had the courage or stamina to go through all that again.

Meanwhile, on the assassination front, here’s a snapshot of what Reagan’s EO 12333 led to. This WaPo article, "Covert Hit Teams Might Evade Presidential Ban" dated February 12, 1984, needs to be unpacked to understand how little things have changed in the past three decades:

The Reagan administration has debated whether to authorize covert operations abroad that would allow military or CIA hit teams to secretly attack terrorist groups responsible for recent bombings of U.S. installations. By one account the debate is still going on and no decision has been made.

[S]ome CIA and military officials argue that the most effective way to retaliate--with the fewest mistakes and fewest innocent victims--is through a surgical strike by a hit team, run and organized by the United States but probably composed of U.S. military personnel or even foreign nationals.

Air strikes or bombardments with 16-inch, one-ton shells from the battleship New Jersey do not have the precision of a small hit team with a definite target, these officials have argued.

One senior intelligence official in Beirut recently said that air strikes, while in theory more "morally" acceptable and conventional, have killed many unintentionally.
This amazing passage gets right to one of the dark absurdities that informs our own debate today about how to fight terrorism — that it’s "legal" and considered essentially "normal" to shell with destroyers or bomb villages from the air if terrorists are suspected of being in those villages — but considered completely beyond the pale of civilized behavior to actually aim and target suspected terrorists.

It was a similar debate as this in the Bush years that led to increased use of drones and targeted assassinations — and now that we’re using drones, the sense is that the American imperial machine has crossed a Rubicon of death and evil unheard of. What Reagan’s war on terror reveals to our post-Reagan eyes is the absurdity of conducting imperial wars, period — whatever the choice of weapon is.

And then there’s this black comedy part of the story — putting the fate of the American imperial machine and justice in the hands of lawyers and "rule of law"-tards rather than in the public forum where it belongs:

Those officials opposed to using hit teams say it would be assassination. And, they noted, an executive order concerning the intelligence community, first signed by President Ford in February 1976 and later reaffirmed by Presidents Carter and Reagan, prohibits assassination. The order says: "No employee of the United States government shall engage in, or conspire to engage in, political assassination."

One official said the order could be revoked or simply ignored, arguing that covert action against terrorists could be defined as something other than "political assassination." This apparently could be done in secrecy. The law does not require the administration to give Congress prior notification of covert operations.

Both a White House and a State Department official confirmed last week that the use of a covert hit team was still being debated. They indicated that if any effort was made, the CIA would probably not be involved and the action would be called and considered "military activity" or even a "commando strike."
See what happens when you put assassination policy in the hands of lawyers? It’s not even assassination anymore — it’s "military activity"! And terrorists aren’t political targets! And you didn’t support Bush’s invasion of Iraq, you supported the institutions that supported the institution of the presidency which decided independently of the institutions you supported to invade Iraq. Duh!

* * * *

Around this time, another revelation about Reagan and assassinations was discovered by the great investigative reporter Robert Parry working at the AP: A new CIA training manual for Latin American death squads, published in 1983, included instructions on various methods of murdering and torturing. Hundreds of thousands in Central America were butchered, disappeared, raped and tortured during Reagan’s tenure, by death squads trained up by our forces. All carried out under Reagan’s alleged "ban" on assassinations:

The House Intelligence Committee chairman Wednesday night denounced a CIA psychological warfare manual produced for Nicaraguan rebels as "repugnant" and a "disaster for U.S. foreign policy."

The manual advises U.S.-backed Nicaraguan rebels that some officials of the nation's leftist government can be "neutralized" with the "selective use of violence" and recommends the hiring of professional criminals to carry out "selective jobs."

...The manual suggests arranging a violent demonstration that will lead to the death of one or more rebel supporters and the creation of a "martyr." It also instructs the rebels in how to coerce Nicaraguans into carrying out assignments against their will.
Reagan’s people claimed that the AP got ahold of one of a handful of defective copies of the CIA manual, swearing on their grandmothers’ graves that the real CIA manuals distributed around Latin America made no mention of assassination.

But as soon as George Bush Sr became president in 1989, he dispensed with whatever remained of the charade with an "aw, fuck it" attitude — and that was that:

Administration Redefines Ban on Foreign Assassinations

The Bush administration, without changing an executive order banning assassinations of foreign leaders, has chosen to legally interpret "assassination" as referring only to premeditated political murder, according to a published report.

Unidentified administration officials quoted by the Times said the ruling would significantly expand the scope of military operations the United States could legally launch against terrorists, drug lords or fugitives abroad, the newspaper reported.

"None of the executive orders defined the term assassination, which created a lot of confusion," a Pentagon official said. "This ruling takes away the excuse for indecision.".
Did you catch that? Does it even matter anymore? You can already see where the real problem lies here — the complete absence of any politics, leaving American democracy at the mercy of lawyers and their various interpretations of "rule of law."

The Clinton years don’t bring any improvements — the best you can say about Clinton is that he didn’t escalate the Reagan-Bush national security state evils to new insane levels. Instead, he played the liberal by squirting a few for the hundreds of thousands of Guatemalans massacred under US supervision — then got his little wars on in Kosovo and cruise-missile attacked Saddam Hussein.

Ironically, during one of Clinton’s Baghdad-bombings in 1998, Republicans backed by all the armchair Machiavelli pundit class started making a bunch of noise demanding Clinton stop pretending once and for all that we don’t assassinate foreigners, on the theory that being "hypocritical" about assassinating foreigners is somehow a lot worse than tearing off our shirts outside the proverbial bar, screaming, "Yeah, we assassinate! Whatcha gonna do about it, huh? We’re here, brah! Not fuckin’ afraid to admit it, we assassinate, cuz that’s how we roll, brah!"

Clinton, however, chose to stick with his liberal hypocrite strategy. Ultimately, it made no goddamn difference to his successor, George W. Bush, but in hindsight you really do have to wonder why our culture got so laughably sanctimonious about a "hypocritical" assassination policy versus what the other side demanded, "at least being open about it." No one ever explained how being "open" about assassinations made us more just.

* * * *

Which brings us to our time. May 4, 2001. George W. Bush just seated himself in the White House. That same month, who should be lobbying for a bill granting Dubya unfettered power to assassinate whomever he wants butlibertarian hero [6] Bob Barr, as reported in the Tulsa World:

Tough guys: Time to get back into the assassination business?

In case there was any doubt that the tough guys are back in charge in Washington, some of the new unilateralists making American policy these days seem to want to get us officially back into the assassination business.

[W]e search out individuals who might be inclined to harm one or more of us -- and we kill them. Rep. Bob Barr of Georgia is stepping up to that one, and he seems to be doing it on White House orders or suggestion.

Barr, who wanted to take out President Clinton last year, has other targets in his sights this time. On Jan. 3, he introduced HR 19, "The Terrorist Elimination Act of 2001." It is a bill, in its own words, "to nullify the effect of certain provisions of various Executive Orders."
A few months later, Bob Barr’s services were no longer needed by the Bush Administration.

Which brings me to the last part of this attempt at jolting your short-term memory. One of the other myths informing our feckless and half-baked debates is the meme going round claiming that President Obama, by approving extrajudicial assassinations of Americans suspected of being terrorists, crossed a line that supposedly "even Bush" never dared to cross.

For example, Wired [7] recently declared:

Like the Bush administration before it, the Obama administration white paper rejects any geographical restriction on where it can launch its drone strikes and commando raids. But the Bush administration actually stopped short of declaring that it had the authority to kill American citizens.
And Salon’s Joan Walsh expressed outrage [8] over the lack of liberal outrage at Obama’s "policies that Bush stopped short of, like targeted assassination of U.S. citizens loyal to al-Qaida."

(Walsh’s outrage is shared [9] by other outraged liberals [10].)

There are more examples of this, but you get the point.

For better or for worse — I say for worse — this story doesn’t have a neat made-for-TV narrative arc of evil. It’s pretty goddamn flat throughout, excepting the Carter years. And that non-dramatic flat evil holds true with Obama as well.

First, it’s not true that Americans were not assassinated by extrajudicial drone or missile attacks during the Bush years. There are two for sure that we know of: The first American-born citizen assassinated by a targeted drone attack was Kemal Derwish, blown up by a Predator in Yemen in 2002.

As Dana Priest wrote in the Washington Post [11]:

Word that the CIA had purposefully killed Derwish drew attention to the unconventional nature of the new conflict and to the secret legal deliberations over whether killing a U.S. citizen was legal and ethical.

After the Sept. 11 attacks, Bush gave the CIA, and later the military, authority to kill U.S. citizens abroad if strong evidence existed that an American was involved in organizing or carrying out terrorist actions against the United States or U.S. interests, military and intelligence officials said. The evidence has to meet a certain, defined threshold. The person, for instance, has to pose "a continuing and imminent threat to U.S. persons and interests," said one former intelligence official.
That piece was written in 2010, but early in Bush’s term, articles like this one from the New York Times [12] in 2003 made it clear that Bush approved of extrajudicial targeted assassinations of American suspected terrorists:

On Nov. 3, 2002, a missile fired from a C.I.A. Predator drone incinerated a car carrying six men through the Yemeni desert. The target, according to government sources, was Qaed Salim Sinan al Harethi, believed to be a key Qaeda operative in the Cole attack. But in a report issued Nov. 19 by the Yemen news agency, Saba, the country's interior minister, Maj. Gen. Rashad al-Alimi, confirmed that one of the passengers was Kamal Derwish.

Afterward, American officials said the president had the power to order a strike on Al Qaeda operatives overseas, including American citizens.

In a recent interview, Mr. Ridge said Mr. Derwish's death had been discussed within the administration. "If that's what you have to do under these circumstances of 9/11 to protect America," he said, "that's what we have to do."
Ridge’s interview confession to Lowell Bergman can be found at the PBS site [13].

The second American targeted for assassination that we know of was Ruben Shumpert [14] of Seattle, killed by a US missile strike in Somalia in 2008.

And now here we are today, with a "progressive" president who absorbed all the rancid policies of Ronald Reagan and George W Bush and adopted them as his own as titular head of the American Empire.

Now, if someone could just distill that down to 140 characters.



















US Uses Hacking Allegations To Escalate Threats Against China

The Obama administration is utilizing unsubstantiated charges of Chinese government cyber-attacks to escalate its threats against China. The past two days have seen allegations of hacking into US corporate and government web sites, hyped by the US media without any examination of their validity, employed to disorient the American public and justify an expansion of the Obama administration’s drive to isolate China and prepare for an eventual military attack.

The accusations of hacking against China will also be used to justify increased domestic surveillance of computer and Internet communications, as well as an expanded use of cyber warfare methods internationally.

The New York Times, functioning once again as a conduit for the Pentagon and the CIA, has taken the lead in the latest provocation against Beijing. On Tuesday it published a bellicose front-page article headlined “China’s Army Seen as Tied to Hacking Against US,” and carrying the ominous subhead “Power Grid is a Target.”

The article drips with cynicism and hypocrisy. It is well known that the United States is the world’s most ruthless practitioner of cyber warfare. The article itself acknowledged that the US worked with Israel to disrupt the Iranian nuclear program by introducing the Stuxnet virus into Iran’s computer systems. That bit of sabotage—itself an illegal act of aggression—was accompanied by a series of assassinations of Iranian scientists carried out by Israel with Washington’s support.

The sprawling front-page article, which continued on an entire inside page of the newspaper, was based on a 60-page report released that day by a private computer security firm with close ties to the Times, as well as to the US military and intelligence agencies. The report by Mandiant—founded by a retired Air Force officer and based in Alexandria, Virginia—provides no real evidence to substantiate its claim that a unit of China’s People’s Liberation Army based in Shanghai is directing hacking attacks on US corporations, organizations and government institutions.

In its report, Mandiant claims to have tracked 141 cyber attacks by the same Chinese hacker group since 2006, 115 of which targeted US corporations. On the basis of Internet footprints, including Internet provider addresses, Mandiant concludes that 90 percent of the hacking attacks come from the same neighborhood in Shanghai. It then notes that the headquarters of Unit 61398 of the People’s Liberation Army is located in that neighborhood. From this coincidence, Mandiant draws the entirely unwarranted inference that the cyber-attacks are coming from the PLA building.

As the Times admits in its article, “The firm was not able to place the hackers inside the 12-story [PLA Unit 61398 headquarters] building…” The newspaper goes on to report that “Mandiant also discovered an internal China Telecom memo discussing the state-owned telecom company’s decision to install high-speed fiber-optic lines for Unit 61398’s headquarters.” One can only assume that Mandiant “discovered” this memo by carrying out its own hacking of Chinese computers.

Chinese spokesmen have denied any involvement by the government or the military in hacking attacks and dismissed the Mandiant report as lacking any proof of its charges. The Chinese Ministry of Defense released a statement Wednesday pointing out that Internet provider addresses do not provide a reliable indication of the origin of hacking attacks, since hackers routinely usurp IP addresses. A Foreign Ministry spokesman pointed out that China is constantly being targeted by hackers, most of which originate in the US.

The Chinese position was echoed by Dell Secureworks cyber-security expert Joe Stewart, who told the Christian Science Monitor: “We still don’t have any hard proof that [the hacker group] is coming out of that [PLA Unit 61398’s] building, other than a lot of weird coincidence pointing in that direction. To me, it’s not hard evidence.”

The Obama administration followed up the Times article, which sparked a wave of frenzied media reports of Chinese cyber-attacks, by announcing on Wednesday that it would step up diplomatic pressure and consider more punitive laws to counter what it described as a wave of trade secret theft by China and other countries. The Associated Press reported that the administration was discussing “fines, penalties and tougher trade restrictions” directed against China.

The latest propaganda attack points to an escalation of the US offensive against China that went by the name “pivot to Asia” in Obama’s first term. That policy included whipping up territorial disputes in the East China and South China seas between China and a series of countries in East Asia, including Japan, Vietnam and the Philippines.

It has also included the establishment of closer military ties and new US installations in a number of countries, including India and Australia, to militarily encircle China.

The Times concluded its article by reporting that “The mounting evidence of state sponsorship… and the growing threat to American infrastructure are leading officials to conclude that a far stronger response is necessary.” It cited Rep. Mike Rogers, the Republican chairman of the House Intelligence Committee, as saying that Washington must “create a high price” to force the Chinese to back down.

In an editorial published Wednesday, the Times noted that the administration has decided to give US Internet providers and anti-virus vendors information on the signatures of Chinese hacker groups, leading to a denial of access to US networks for these groups. It also reported that President Obama last week signed an executive order authorizing increased sharing of information on cyber threats between the government and private companies that oversee critical infrastructure, such as the electrical grid.

The Wall Street Journal in its editorial called for “targeted sanctions” against Chinese individuals and institutions.

The background to this new salvo of anti-China propaganda underscores that it is part of an aggressive expansion of US military capabilities, both conventional and cyber-based. Obama raised the issue of cyber war in his February 12 State of the Union address, accusing US “enemies” of seeking to “sabotage our power grid, our financial institutions, our air traffic control systems,” and insisting that action be taken against such attacks.

In the same speech, he defended his drone assassination program, which is based on the claim that the president has the unlimited and unilateral power to order the murder of anyone anywhere in the world, including US citizens.

Last October, Obama signed an executive order expanding military authority to carry out cyber-attacks and redefine as “defensive” actions that would previously have been considered acts of aggression—such as the cutting off of computer networks. Around the same time, Defense Secretary Leon Panetta gave a bellicose speech in which he warned of a “cyber Pearl Harbor.” Panetta told Time magazine: “The three potential adversaries out there that are developing the greatest capabilities are Russia, China and Iran.”

At the end of January, the New York Times accused Chinese authorities of hacking into its news operations, a charge that was quickly seconded by the Washington Post and the Wall Street Journal. That same week, the Washington Post reported that the US military had approved a five-fold increase of personnel in its Cyber Command. Days later, the Times reported on its front page that the Obama administration had concluded that the president had the power to authorize pre-emptive cyber war attacks.

This bellicose posture toward China and expansion of cyber warfare methods goes hand in hand with growing threats to democratic rights at home. The cyber war plans include options for military action within the US. The Times reported earlier this month that the military “would become involved in cases of a major cyber-attack within the United States” under certain vaguely defined conditions.

Efforts to increase government control of the Internet and surveillance of Internet communications are being stepped up. Just last week, Rep. Rogers of Michigan and Democratic Congressman Dutch Ruppersberger of Maryland reintroduced the Cyber Intelligence Sharing and Protection Act (CISPA). The bill died in the Senate last year in the midst of protests over provisions allowing the government to spy on emails and other Internet-based communications.

The Return Of German Imperialism

Germany is making intensive preparations to conduct new wars to secure resources. This was the unmistakable message of a lead article in Germany's business newspaper Handelsblatt, “Expedition Resources: Germany's new course.”

The article shows the real face of the German bourgeoisie. As in the first half of the twentieth century, when it twice played a central role in plunging humanity into world war, it is again moving to enforce its imperialist interests through war. “The previous political measures to secure raw materials are reaching their limits,” the Handelsblatt states. Dependence on raw materials is the German economy’s Achilles heel, the paper writes: “Industry is plagued by the fear that the high-tech sector in Germany could be cut off from essential supplies.”

The very same business circles that financed Hitler are again banging the war drums. The article cites an interview with Dierk Paskert, the manager of the Resource Alliance founded in 2011. Members of the alliance include Volkswagen, ThyssenKrupp, Bayer and BASF—firms that either directly supported Nazi war plans, or whose predecessors did. Now they work closely with the German government to plan how Berlin will secure access to critical raw materials across the globe, by force if necessary.

The hunger of Germany’s export-dependent industry for materials and markets is huge. According to Handelsblatt German raw material imports over the last decade have nearly tripled. “The battle for resources is about oil and gas, but also minerals,” the newspaper writes. Handelsblatt gives a detailed overview of such highly prized resources as lithium, cobalt, chromium, indium and rare earth elements, and cites the growing conflict between the major powers over such resources.

Paskert makes clear that the German bourgeoisie is willing to use military force to secure such resources against its rivals. Asked by Handelsblatt whether there will once again be resource wars, he explains: “History shows that many conflicts are rooted in the fight for resources. Up to now it was mostly about oil or gas, but also increasingly minerals. The supply of raw materials is the basis for the value and wealth of a country and therefore has geopolitical significance. The presence of the US military in the Persian Gulf or the massive expansion of Chinese naval forces is also aimed at protecting such interests.” Handelsblatt assures its readers that this view finds support in political circles, and that for the federal government “the control of raw materials” is a “strategic issue for foreign policy”. It is preparing for a situation where “the existing resource partnerships” are insufficient and “additional security and military instruments are required.”

The return of aggressive German imperialism initiates a new stage of inter-imperialist conflict, raising the threat of a Third World War.

It is increasingly clear that the period after the Second World War—during which the German bourgeoisie adopted a pacifist stance and relied on Washington to carry out the wars and other military operations on which world imperialism relied—was merely a historical interlude.

The austerity policies pursued by the European Union after the outbreak of the world economic crisis have undermined the European market, which provided the basis for the expansion of German trade and production in recent decades. The result is the return of apparently long-buried specters of the past, as all the imperialist powers prepare for war.

In the 19th century Germany arrived late on the scene to take its place in the scramble for the division of the world. Then it acted all the more aggressively to enforce its interests against its rivals and twice plunged the world into war. With the intensification of the financial and economic crisis of world capitalism, German imperialism feels once again compelled to enter the arena.

After the collapse of the Soviet Union, the American ruling class saw an opportunity for unchallenged operations all over the world. For more than a decade, it has waged “preventive wars” throughout the Middle East. Now it is also turning increasingly toward Asia and has organized a global drone war in defense of its strategic and economic interests. US President Barack Obama claims the authority to assassinate even American citizens via drone attacks.

French imperialism is increasingly employing military means to defend its interests in Africa and the Middle East. After playing a key role in starting the war in Libya, as well as wars in two former French colonies, Ivory Coast and Syria, it is now invading a fourth country, Mali.

Like the German bourgeoisie, Japan, Germany’s strategic ally in World War II, is reacting to the crisis with attacks on the working class at home and growing militarism abroad. As in the 1930s, this militarism is particularly directed against China and is currently being inflamed in the conflict over the Senkaku/ Diaoyu Islands in the East China Sea.

Under these conditions the German bourgeoisie is re-arming. The Handelsblatt bluntly states that the German army will be rebuilt “in order to be used all over the world.”

The vast majority of the German population is vehemently opposed to militarism. The fact that the Handelsblatt can so publicly formulate the goals of the German bourgeoisie is above all a devastating indictment of the Green Party, the Social Democratic Party and the Left Party. They have repeatedly justified German foreign policy and military operations in Kosovo and Afghanistan, falsely claiming these wars were based on democratic and humanitarian considerations.

In the past 15 years, such forces have moved sharply to the right, aligning themselves increasingly openly with the interests of German big business and German militarism. Their silence on the Handelsblatt article speaks volumes. They agree with the war preparations.

Capitalism is once again dragging mankind toward catastrophe, under conditions where the destructive power of the ruling classes is vastly greater than during the two world wars of the last century. Though a new world war would place a question mark over the fate of the entire human race, it is precisely to this end that the ruling classes and their bankrupt social and economic system are leading mankind. To the policies of imperialist barbarism and national conflict, the working class—in Germany, Europe, and around the world—must advance the program of international solidarity.