Friday, February 27, 2009

Those Banks..........

Proof that Central Bankers Don't Know Their History...
By Jack Crooks
Though it is in fashion to blame the U.S. for all the ills now flowing into the global economy, I don't think it's quite that simple.
Remember the "global savings glut." In short, it was the massive current account surplus accumulation of the East thanks to the massive consumption of the West. This was buoyed by the massive "global savings glut" allowing for the creation of rocket science products called derivatives.
And yes, we've seen it all before. In fact, only the names at the top of the central banks have changed.
It's All Been Done Before...
Let's set the stage and go back a few decades. Those of you, like me, with grey hair now unfortunately growing on your face (guess it beats the alternative) may remember that back in the mid-70s our major international banks were recycling petrodollars (OPEC stash). This led to the international lending/debt boom that eventually caused the crisis of 1982.
This time not only did we have OPEC recycling its stash through the major financial systems, we added the "global savings glut" to the party. This time around Asia had to recycle its massive current account surpluses generated by the usual way they do — suppress their currencies, and put up barriers for Western goods to flow in freely.
"Of course, if Mr. Westerner wants to build a plant and transfer hundreds of millions of technology for us to take at will — well then, come on in. We will continue to enjoy almost 100% free access to your markets while your own policymakers help us by spouting the mantra of ‘free trade.' It's a beautiful thing," says the proud Easterner as he criticizes the extravagance of the West.
(Guess what Mr. Know-it-all Easterner, that double-digit fall in your exports shows that Mr. Westerner is finally getting some religion and starting to consume less and save more; so lighten up — relax.)
But I digress.
Sounds Familiar Doesn't It? Just Replace "Eurodollar Market" with "Derivatives Market"
Now, let's take a look at Mr. George Soros' (Soros the brilliant global macro trader; not the political Soros' who seems such a huge disappointment) excellent summary/analysis of the situation back in the mid-70's that preceded the crisis of 1982 back in 1986, in his book Alchemy of Finance. Please replace the following:
Eurodollar market = OTC derivative market
"The history of central banking is a history of crises followed by institutional reform. It is truly surprising that the lessons of the international debt crisis have still not been learned. The champions of unregulated competition are more vocal, and more influential, than ever. They base their case on the inefficiency of regulators and it must be admitted that they have a point. The participants could not have prevented the international lending boom from getting out of hand, but the monetary authorities could have. Why did they fail to do so?
"There is no clear answer to this question. Central banks were aware of the explosive growth of the Eurodollar market, although they lacked reliable statistics. They recognized their responsibilities as lenders of last resort and mapped out their respective spheres of responsibility as early as 1975, but they did not deem it necessary to regulate the growth of Eurodollar lending. Why? The question requires more thorough historical research than it has received so far. I shall hazard two tentative hypotheses.
"One is that the central banks themselves were influenced by the competitive pressures that affected the commercial banks under their aegis. Had they imposed regulatory restrictions, the banks under their supervision would have lost business to others. Only concerted action by all the central banks could have brought the burgeoning Eurodollar market under control. That would have required institutional reform, and the monetary authorities did not recognize the need for reform. Reform usually occurs after a crisis, not before.
"That is where the second hypothesis comes into play. I contend that the central banks were acting under the influence of a false ideology. It was a time when monetarism was gaining ground among central bankers. Monetarism holds that inflation is a function of money and not credit. If monetarism is valid, the growth of money supply needs to be regulated, not the growth of credit. Accordingly, there was no need to interfere with the Eurodollar market: as long as the central banks regulate their own money supply, the market will regulate itself."
And now, the idea that demand can be stimulated by pumping up money supply in order to force banks to grant more credit as a way of solving a massive credit induced problem seems nonsensical.
But, I digress.

Stock Play From Schiff

The Price of Popularity

Peter Schiff, President and Chief Global Strategist

For much of the last decade, most investment professionals chortled and laughed as I advocated exposure to foreign stocks, natural resources and precious metals. Derision aside, it appears that by 2007 many of my erstwhile critics ultimately adopted the strategy themselves.
The change became clear during a May 2007 Bull-Bear Debate in which I participated, at the Las Vegas Money Show. (Click here to watch it on YouTube) My two usually bullish opponents, Louie Navalier and Joe Battapaglia, though still bullish on the U.S economy, actually made investment recommendations very similar to my own. Though they certainly had different reasons for their recommendations, they had concluded that my investment recipe was ripe for success.
As a contrarian, I had some initial concerns regarding the apparent conversion of my critics. In hindsight their about-face amounted to a form a capitulation, where investors jumped on bandwagons that they did not understand. Years of foreign stock outperformance and surging commodity prices had lured many skeptics into the market right near what turned out to be a significant short-term market top.
As the wave crested in mid-2008, these newly arrived investors jumped off as quickly as they had jumped on. After the ensuing carnage in commodities and foreign stocks, it is likely that most of the money that entered the market in 2007 and 2008 has been flushed out. Since many of these investors did not understand the true reasons behind the momentum, they lacked the conviction to hold through the sell-off. The fact that many were also leveraged to the hilt also contributed to their being forced out of the market.
Those that came relatively late to the party (which is really just beginning) did so based on their feelings that continued health in the U.S. would pull along the global economic train. But once the global financial crisis developed, this thesis quickly fell apart, as did any investment strategy based on it. However, my reason for investing abroad and in commodities was based on a collapsing U.S. economy and the inflationary policies that would likely follow in an effort to prop it back up. Since that is exactly what has happened, my thesis remains unchanged.
The synchronized decline in stock markets and global economic growth that began after the U.S. economy rode off the rails is not that surprising. The short-term dollar rally continues to be a conundrum; however, recent dollar strength in no way alters how I expect this entire crisis to ultimately play out.
Most financial professionals have strongly concluded that recent market action has completely disproved the decoupling theory that I have espoused. This is premature. It will take some time for the rest of the world to realize that what has been decoupled from the economic train is the caboose, not the engine. In the meantime, I am heartened by my return to pariah status. With criticism of my investment strategy once again flowing with the same vigor it did earlier in the decade, I think the coast is clear for the long-term trends I have been following for years to resume in earnest. The good news (unless you're selling, of course) is that being out of favor means that the assets I am recommending are still cheap.
Now that the weak hands have been completely shaken out of the market, I think the stage is set for a major rally. How long it will take foreign stocks or commodities to make new highs, or the dollar to make a new low is anyone's guess, but I'm sure when they do, those who recently cashed out will be looking to get back in.

Nicely Said.................

The money power preys on the nation in times of peace, and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. It denounces, as public enemies, all who question its methods or throws light upon its crimes. - Abraham Lincoln

Geithner The Tax Cheat

Friday, February 20, 2009

A Letter To SOC

“Dear Sirs or Madams,
“May God damn your stinking capitalistic, avaristic [sic] souls to hell. Unfortunately I do not believe in God’s judgment, for if I did I would be sure that you would roast in hell forevermore. But it is nice, at least, to know that your rotten lives are limited, and despite all the evil you do, you will die like everyone else. Too bad your deaths will not be any worse than that of the nice people!”
“A flaming Liberal”

A flaming liberal indeed…
I suspect that the lake of fire will be filled to the brim with liberals, all of whom will certainly be flaming at the time. After all, what is more deserving of hell than pride? Last I checked slavery and murder were both good reasons for a few eons in the oven, too.
And what’s more liberal than telling people what to do with themselves and their labor and its fruits while holding the government’s gun to their heads?

RON PAUL: WHAT IF... The American People Learn Truth!

Ron Paul says it all! What a great American and what a leader! It's America's loss that he's not President right now!!!!!!

What A Great Idea..................

A backhanded congratulations to the White House. Today they are crafting the final details of what they call a “fiscal responsibility summit.” It’ll be quite a meeting of the minds, with the Obama Administration, 30 House members, 30 senators and 30 scholars and industry reps invited to attend. The “summit” will last three hours, just enough time to figure this whole mess out.
Would have been nice to chat about this sort of thing before passing a $787 billion stimulus plan, no? Or maybe back in 2001, before GW got his chance to slap nearly $5 trillion on to the public tab. Ugh… at least they’re pretending to care about it.

Y'think The Liberals Even Know This???!!!

Suzanna Gratia-Hupp Explains the Real Purpose of the Second

It's not about duck hunting you idiots! It's abouting protecting the citizenry from an overbearing government!!!!!

R.I.P. Kelly Groucutt From ELO

ELO's Kelly Groucutt dies
ELO Bassist has passed away aged 62
ELO bassist Kelly Groucutt has passed away aged 62.Stafford-born Groucutt died of a heart attack yesterday afternoon (February 19).After he left ELO in 1983, Groucutt he played with spin-off bands The Orchestra, Orkestra and ELO Part 2.In a statement Groucutt's management said: "Our hearts and thoughts go out to [wife] Anna and Kelly's family. He touched all of our lives with his love, kindness and generosity as well as his talent for music and song. "He was a true and wonderful friend who loved every second of life, and he will be greatly missed by us all."
We here at Sound Of Cannons are ardent ELO fans. We saw Kelly perform many times and spoke with him after a gig outside of Carnegie Hall. Gracious and vibrant fall utterly short of descriptions of the legendary bassist. Many people get old and miserable as they wither into their later years; yet Kelly was still performing with vim and vigor and bringing joy to so many people. Too often, life is unfair to the truly good people here on earth. The good pass too quickly and the rat-fuck-basterds stay too long. Kelly was definitely one of the good ones. The man, his music and his joy will be sorely missed. Rest In Peace great musician, your works will echo through eternity.

Thursday, February 12, 2009

wtc 7 beijing fire

Please. please leave a comment about what you think of these videos. I'd love to hear some ideas.

Beijing Hotel fires VS WTC7 FIRES

If an SOC Reader has an explanation about why this hotel didn't collapse, I'd love to hear it.

PROOF That wtc7 Was Imploded!

Sorry folks, it bears repeating because this was the start of it all. The beginning of our planned end.

Wednesday, February 11, 2009

Geithner: 'Try things we've never tried before' Meaning: "We Don't Know What The Hell Will Work!"

Excerpts from Geithner's speech on bank plan
Tue Feb 10, 2009 10:25am EST
WASHINGTON (Reuters) - The following are excerpts from a speech U.S. Treasury Secretary Timothy Geithner will deliver on financial stability at 11 a.m. EST.
"As President Obama said in his inaugural address, our economic strength is derived from 'the doers, the makers of things.'
"The innovators who create and expand enterprises.
"The workers who provide life to companies and, with their earnings, support families and invest in their future... This is what drives economic growth.
"The financial system is central to this process, transforming the earnings and savings of American workers into the loans that finance a first home, a new car or a college education, the credit necessary to build a company around a new idea.
"Without credit, economies cannot grow, and right now, critical parts of our financial system are damaged.
"Instead of catalyzing recovery, the financial system is working against recovery, and that's the dangerous dynamic we need to change.
"It is essential for every American to understand that the battle for economic recovery must be fought on two fronts. We have to both jump-start job creation and private investment, and we must get credit flowing again to businesses and families.
"Last fall, as the global crisis intensified, Congress acted quickly and courageously to provide emergency authority to help contain the damage.
"That vote gave the Administration the authority to act to pull the financial system back from the edge of catastrophic failure.
"The actions we took were absolutely essential, but they were inadequate.
"The force of government support was not comprehensive or quick enough to withstand the deepening pressure brought on by the financial crisis.
"The spectacle of huge amounts of taxpayer money being provided to the same institutions that help caused the crisis, with limited transparency and oversight, added to public distrust.
"Our challenge is much greater today because the American people have lost faith in the leaders of our financial institutions, and are skeptical that their government has -- to this point -- used taxpayers' money in ways that will benefit them.
"Making Banks Strong and Healthy:
"Second, we're going to require banking institutions to go through a carefully designed comprehensive stress test, to use the medical term.
"We want their balance sheets cleaner, and stronger. And we are going to help this process by providing a new program of capital support for those institutions which need it.
"The capital will come with conditions to help ensure that every dollar of assistance preserves or generates lending capital above the level that would have been possible in the absence of government support.
"Public-Private Investment Fund:
"Third ... together with the Fed, FDIC and private sector, we will establish a Public Private Investment Fund. This program will provide government capital and government financing to help leverage private capital to help get private markets working again for the legacy loans and assets that are now burdening the entire financial system.
"By providing the financing the private markets cannot now provide, this will help start a process of providing a market for the real estate-related assets that are at the center of this crisis. Our objective is to use private capital and private asset managers to help provide a market mechanism for valuing the assets.
"Opening up new lending:
"In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them. Because this vital source of lending has frozen up, no plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses -- large and small.
"Look ahead:
"... I want to be candid: this comprehensive strategy will cost money, involve risk, and take time.
"We will have to adapt it as conditions change. We will have to try things we've never tried before. We will make mistakes. We will go through periods in which things get worse and progress is uneven or interrupted.
"But we will be guided by the principles of transparency and accountability...
"... Dedicated to the goals of restoring credit to families and businesses...
"... and committed to moving our nation toward an economic recovery that is as swift and widespread as humanly possible.
"This is a challenge more complex than any our financial system has ever faced, requiring new systems and persistent attention to solve. But the President, the Treasury and the entire Administration are committed to see it through because we know how directly the future of our economy depends on it."

No Offshore Drilling........Obama Recommends Buying A Magic Carpet

Obama Blocks Offshore Drilling, Barrie Doesn't Understand

Economics...............At All

Facing gas prices near $4 a gallon and a pivotal national election, congressional Democrats allowed a ban on offshore drilling to lapse in September
But times change, and on Tuesday, the Obama administration - with gas prices roughly half what they were and many Democrats' having been swept into office - blocked offshore drilling plans put in place at the last minute by the Bush administration, including plans to open the national outer continental shelf for drilling.
Interior Department Secretary Ken Salazar also announced last week that his agency would block drilling on public lands in Utah, criticizing the Bush administration for releasing its offshore drilling plan just days before leaving office.
"It was a headlong rush of the worst kind," he said. "It was a process rigged to force hurried decisions based on bad information. It was a process tilted toward the usual energy players while renewable energy companies and the interests of American consumers and taxpayers were overlooked."
Mr. Salazar said he plans to hold four meetings nationwide as he considers how to rewrite the nation's five-year offshore drilling plan and has extended the public-comment period six months, pushing any action well into the fall.
A former Bush administration staffer said the extended review process needlessly drags out an already thorough process.
"Given the domestic-supply challenges we face, it's hard to imagine what more can be accomplished by extending the comment period," said Michael D. Olsen, a former Interior Department staffer now working with the Bracewell & Giuliani law firm.
Offshore oil exploration and drilling became a tough topic for Democrats during the 2008 elections, as gas prices topped $4 a gallon and public opinion polls showed broad support for expanded domestic oil production - a prospect opposed by many environmental groups at the core of their base.

Agence France-Presse/Getty Images Interior Secretary Ken Salazar will delay a plan made in the waning days of the Bush administration to allow offshore oil drilling. He has extended a public-comment period, a tactic critics say is only dragging his feet.
The congressional moratorium, which had been in place since 1982, lapsed just months after President Bush lifted an executive order banning offshore drilling.
Mr. Salazar also chastised the Bush administration's snubbing of offshore wind farms, saying that offshore renewable energy sources would be included in the Obama administration's new energy plans.
"For them, it was oil and gas or nothing," he said of the Bush administration.
President Obama has said that he supports domestic oil exploration and production as part of a larger plan to break the nation's dependence on foreign oil, but oil companies and Republican leaders have been skittish since he took office.
Environmental groups said that they were encouraged by Mr. Salazar's announcement but that offshore drilling should be banned outright.
"Without a new moratorium, our coasts and oceans will be more vulnerable to oil damage than they have been since the Exxon Valdez spill," said Jacqueline Savitz, senior campaign director for Oceana, a nonprofit that tracks the health of the oceans. "Saying 'no' to offshore drilling is the only way to keep sensitive ocean and coastal areas from becoming oiled industrial zones, and to put a lid on climate change by reducing our use of fossil fuels."

Has Obama presidency already failed?

Why Obama’s new Tarp will fail to rescue the banks
By Martin Wolf

Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. The costs to the US and the world of another failed presidency do not bear contemplating.
What is needed? The answer is: focus and ferocity. If Mr Obama does not fix this crisis, all he hopes from his presidency will be lost. If he does, he can reshape the agenda. Hoping for the best is foolish. He should expect the worst and act accordingly.
Yet hoping for the best is what one sees in the stimulus programme and – so far as I can judge from Tuesday’s sketchy announcement by Tim Geithner, Treasury secretary – also in the new plans for fixing the banking system. I commented on the former last week. I would merely add that it is extraordinary that a popular new president, confronting a once-in-80-years’ economic crisis, has let Congress shape the outcome.
The banking programme seems to be yet another child of the failed interventions of the past one and a half years: optimistic and indecisive. If this “progeny of the troubled asset relief programme” fails, Mr Obama’s credibility will be ruined. Now is the time for action that seems close to certain to resolve the problem; this, however, does not seem to be it.
All along two contrasting views have been held on what ails the financial system. The first is that this is essentially a panic. The second is that this is a problem of insolvency.
Under the first view, the prices of a defined set of “toxic assets” have been driven below their long-run value and in some cases have become impossible to sell. The solution, many suggest, is for governments to make a market, buy assets or insure banks against losses. This was the rationale for the original Tarp and the “super-SIV (special investment vehicle)” proposed by Henry (Hank) Paulson, the previous Treasury secretary, in 2007.
Under the second view, a sizeable proportion of financial institutions are insolvent: their assets are, under plausible assumptions, worth less than their liabilities. The International Monetary Fund argues that potential losses on US-originated credit assets alone are now $2,200bn (€1,700bn, £1,500bn), up from $1,400bn just last October. This is almost identical to the latest estimates from Goldman Sachs. In recent comments to the Financial Times, Nouriel Roubini of RGE Monitor and the Stern School of New York University estimates peak losses on US-generated assets at $3,600bn. Fortunately for the US, half of these losses will fall abroad. But, the rest of the world will strike back: as the world economy implodes, huge losses abroad – on sovereign, housing and corporate debt – will surely fall on US institutions, with dire effects.
Personally, I have little doubt that the second view is correct and, as the world economy deteriorates, will become ever more so. But this is not the heart of the matter. That is whether, in the presence of such uncertainty, it can be right to base policy on hoping for the best. The answer is clear: rational policymakers must assume the worst. If this proved pessimistic, they would end up with an over-capitalised financial system. If the optimistic choice turned out to be wrong, they would have zombie banks and a discredited government. This choice is surely a “no brainer”.
The new plan seems to make sense if and only if the principal problem is illiquidity. Offering guarantees and buying some portion of the toxic assets, while limiting new capital injections to less than the $350bn left in the Tarp, cannot deal with the insolvency problem identified by informed observers. Indeed, any toxic asset purchase or guarantee programme must be an ineffective, inefficient and inequitable way to rescue inadequately capitalised financial institutions: ineffective, because the government must buy vast amounts of doubtful assets at excessive prices or provide over-generous guarantees, to render insolvent banks solvent; inefficient, because big capital injections or conversion of debt into equity are better ways to recapitalise banks; and inequitable, because big subsidies would go to failed institutions and private buyers of bad assets.
Why then is the administration making what appears to be a blunder? It may be that it is hoping for the best. But it also seems it has set itself the wrong question. It has not asked what needs to be done to be sure of a solution. It has asked itself, instead, what is the best it can do given three arbitrary, self-imposed constraints: no nationalisation; no losses for bondholders; and no more money from Congress. Yet why does a new administration, confronting a huge crisis, not try to change the terms of debate? This timidity is depressing. Trying to make up for this mistake by imposing pettifogging conditions on assisted institutions is more likely to compound the error than to reduce it.
Assume that the problem is insolvency and the modest market value of US commercial banks (about $400bn) derives from government support (see charts). Assume, too, that it is impossible to raise large amounts of private capital today. Then there has to be recapitalisation in one of the two ways indicated above. Both have disadvantages: government recapitalisation is a bail-out of creditors and involves temporary state administration; debt-for-equity swaps would damage bond markets, insurance companies and pension funds. But the choice is inescapable.
If Mr Geithner or Lawrence Summers, head of the national economic council, were advising the US as a foreign country, they would point this out, brutally. Dominique Strauss-Kahn, IMF managing director, said the same thing, very gently, in Malaysia last Saturday.
The correct advice remains the one the US gave the Japanese and others during the 1990s: admit reality, restructure banks and, above all, slay zombie institutions at once. It is an important, but secondary, question whether the right answer is to create new “good banks”, leaving old bad banks to perish, as my colleague, Willem Buiter, recommends, or new “bad banks”, leaving cleansed old banks to survive. I also am inclined to the former, because the culture of the old banks seems so toxic.
By asking the wrong question, Mr Obama is taking a huge gamble. He should have resolved to cleanse these Augean banking stables. He needs to rethink, if it is not already too late.

Tuesday, February 10, 2009

The Greater Depression (originally termed by Doug Casey)

We've explained that the probability of an imminent great depression was uncomfortably high. Our reasoning, in a nutshell, was that the recent credit bubble was much bigger than any previous credit bubble of the past century and that the policymakers of today were blundering much more rapidly and on a much grander scale than their counterparts of the 1930s.
We can't over-emphasise that the Great Depression did not become "great" due to the economic problems signaled by the 1929 stock market crash, but, instead, due to government policies undertaken to counteract the economic problems. The policy errors we are referring to do NOT include the Fed's so-called failure to prevent the money supply from shrinking, but do include government actions designed to boost prices, expand credit, create employment, and re-distribute wealth. These actions delayed necessary adjustments, and as a result it took more than 15 years for the economy to do what it should have done in 2-3 years. As Franklin Roosevelt's own Treasury secretary, Henry Morgenthau, lamented in an address to Congressional Democrats in May of 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong ... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises ... I say after eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"*
It is commonly believed that the Second World War finally ended the Great Depression, but this is not true -- the Depression didn't finally end until government controls were eventually relaxed after the War. Preparing for and fighting WWII made sure that everyone had a job, but minimal unemployment does not necessarily go hand-in-hand with economic strength. In the former Soviet Union there was very little unemployment, but living standards were "third world". Herein lies the problem with treating job creation as a primary goal of economic policy.
As noted above and in our earlier commentary on this topic, government today is unfortunately enacting the same policies that made the Great Depression "great". Additionally, policymakers have stepped-up their efforts and appear to be more committed than ever to the path of increased spending, monetary pump-priming and economic intervention. As a result, we think the probability of a great depression has risen to the point where such an outcome is almost inevitable.
At this point it is appropriate for us to address a couple of related issues. The first is the perceived problem of falling confidence.
The famous economist J. M. Keynes didn't understand the link between the boom/bust cycle, fractional reserve banking and the central bank's manipulation of interest rates. He therefore relied on mysterious changes in something he called "animal spirits" to explain how booms would evolve into busts. Many of today's economists operate from within a similar faulty framework, and thus believe a key to turning the economy around is boosting the confidence of consumers and businesses. They don't seem to appreciate that the problems are REAL, as opposed to figments of our collective imagination. A loss of confidence, leading to less spending on current consumption and a consequential increase in saving, is a RATIONAL response to the current economic REALITY. By putting a hallucinogen in the water supply you could probably make people feel more confident and thus cause them to go out and spend freely for a while, but how could this possibly help given that the current predicament involves too much debt, too little savings, and a mismatch between production and consumption? Obviously it wouldn't help; it would just make a bad situation even worse.
Policies that encourage people to increase their borrowing and spending are, in effect, encouraging people to dig themselves into deeper financial holes, but such policies are now 'all the rage' in the world of economic policymaking. For example, one of this week's US Government schemes puts in place a financial incentive for people to borrow money to buy new cars. This scheme will cause damage to the extent that it actually does what it is supposed to do, but fortunately for the US economy it probably won't work (it probably won't lead to many additional car loans).
In sum, the problems are real. Confidence will naturally return after savings and production have adjusted to the new reality, while policies that convince people to ignore reality and behave less prudently in the short-term will only exacerbate the problems.
The next issue we'll cover is the implication of increasing the money supply. Many people, including the Fed Chairman, believe that the economy can be helped through its 'rough patch' via monetary inflation.
Those who share the Fed Chairman's belief should explain in detail, using good economic theory as opposed to Keynesian "animal spirits", how counterfeiting money can possibly strengthen the economy. One of the main considerations is that years of monetary inflation prompted massive investment in projects that should never have seen the light of day, leading to the situation where the economy's capital structure doesn't mesh with the needs of consumers. As far as we can tell, creating more money out of nothing couldn't possibly alleviate this problem.
Some will argue that monetary inflation 'works' (does good) by pushing up asset prices and thus reducing the debt burden, but let's think this through. If there's enough monetary inflation to push up asset prices then lenders will start demanding higher interest rates due to anticipated currency depreciation. Also, the cost of living will rise. At the same time, the aforementioned mismatch between production and consumption -- the root of the high and climbing unemployment rate -- will remain in place and probably become even more pronounced due to additional mal-investment. So, rather than having their financial burdens lessened by falling prices and low interest rates, those without jobs and those with excessive debt loads will have to deal with higher living and debt-servicing costs.
The bottom line is that the government can't improve the situation by creating money out of nothing, but it can CHANGE the situation. Specifically, it can make sure that the depression will be the inflationary kind rather than the deflationary kind. The inflationary kind is potentially worse because under this scenario the economy is less able to repair itself and you don't get the benefits that would otherwise be conferred by a falling cost of living. Unfortunately, the actions being taken by today's policymakers skew the odds in favour of an inflationary depression.
Finally, forewarned is forearmed. Our economic outlook could prove to be too pessimistic, but if you prepare for a depression -- by, for example, getting out of debt and building up substantial reserves of cash and gold -- and things turn out better than expected, you won't lose much. On the other hand, you will probably lose a lot if you prepare for a rosy scenario and a depression actually occurs.

Column on "Whose Wealth is It?"

Tibor R. Machan

There is an application of the tragedy of the commons little discussed butworth knowing about. Public wealth, actual or borrowed, is subject tobeing raided by everyone who can manage to do so since nearly everyonebelieves the public weal is available to any member of the public who canget his or her hands on it. That's what explains the proliferation oflobbyist through the political landscape. Send in the experts who canbring home the bacon to you and yours! As one sensible commentator put iton a recent The News Hour with Jim Lehrer, the demonization of lobbyistsis wrongheaded. And he was a supporter of Barack Obama!When I was smuggled out of Hungary back in October of 1953, four adultswere part of the group making its way out of the country to Austria (andthen who knows were in the West). I came penniless but the four adults hadthousands of Hungarian forints with them, having raided the Hungariannational motion picture assocation's treasury for which they were working.Of course, they thought they were doing nothing at all wrong--the moneybelonged to all the people of Hungary and they were some of those people,so what could be wrong with taking a goodly portion of it? The tragedy of the commons is clearly evident here--people think that whatis commonly owned is theirs as much as anyone else's and by now very fewpeople believe that governments have any moral authority to decided whogets what. After all, why should those people, perfectly like us (unlikethey were thought to be in feudal days), be the ones to make suchimportant decisions?The more American society becomes a collective community, the more thepeople will start thinking of the funds in the public treasury asbelonging to whoever can get it dip into first. Why not? The people aresaid to own all the wealth, no? That is what famous political theoristsare telling us now, namely that private ownership is a myth! So publicownership is the alternative and being a member of the public entitleseveryone to grab some of the booty. The point many thinkers, starting with Aristotle, saw in a system ofprivate property rights was exactly to ration wealth according to areasonable, ethical first come, first serve basis. Find it or make it orget it as a gift from willing others, then go ahead and keep it, use it,sell it, bequeath it, whatever. It's yours. And this applies to everyoneand the government is supposed to secure your right to your property andall your other rights. But no, dreamers of a collective utopia want to destroy this system, laidout originally by John Locke and later by jurists and political economistwho refined it, and regiment us all as some kind of army of servants tothe whole, to "the people." That means, of course, that some of us willhave to rule the process of using the common weal and here is where allthe trouble starts--who will be the rulers and why they, not you or I? Whowill redistribute the wealth for various valuable purposes and who willestablish what is valuable?With the private property system, with its often chided but actually quiteharmless inequality of riches, there is a simple answer: you own it andyou decide what is going to be done with it. Others do not get to steal,rob, burglarize, trespass, intrude or otherwise violate your privateproperty and other rights, and you don't get to violate theirs. Andgovernment is simply there to make sure anyone who breaches this ruledoesn't get away with it.It is this system, which is of course quite complex and nuanced but can besimply stated as above, is a moral and practical invention and now a greatmany utopians want to ruin it. I hope they do not get away with that plan!

Nicely Said.................

"It is not possible to increase the nation's wealth without somebody becoming more wealthy." -Alan Reynolds

Only The Government Can Enslave You

Obama: 'Only government can break the vicious cycle'

Remember the old joke? A guy walks up to you and says, "Hello, I'm from the government, and I'm here to help." People would chuckle because we all know what happens when government tries to "fix" things. Well, it looks like the joke's on us... except no one is laughing.
On Monday night, President Obama held his first prime time press conference. As usual, when not in a majestic setting and delivering a grand speech, he stumbled with "ums" and "ers", but was able to get out one sentence in particular that should open the eyes of all Americans. When talking about our current economic situation, Obama said, "It is only government that can break the vicious cycle."
That's right... even though the government got us into this mess with the sub-prime lending fiasco (to name only one), Obama tells us that it is time to throw capitalism and the business cycle out the window. Only government can solve the problem. Doesn't that statement send shivers down your spine? It does for me!
The campaign of "hope and change" has been replaced by the rhetoric of gloom and doom. Obama basically used Monday night's press conference to scare the American people into embracing an unprecedented infusion of government control and social engineering. As I wrote yesterday, Obama and those on the left don't believe we are smart enough to make our own choices on how to stimulate the economy. The government will do it for us.
In his opening remarks, Obama laments that he inherited "the most profound economic emergency since the Great Depression." Hello! Did everyone simply forget the Jimmy Carter years? Gas lines, double-digit inflation, massive unemployment, and sky-high taxes? Oh, that's right, comparing to the Great Depression sounds scarier. That's why Obama added, "doing little or nothing at all will result in even greater deficits, even greater job loss, even greater loss of income, and even greater loss of confidence."
Hmmmmm.... doing nothing will create a bigger deficit than the nearly $1 trillion they are about to spend? I've pretty much had every math class that exists, and I simply don't understand that one.
Obama continued... "Those are deficits that could turn a crisis into a catastrophe, and I refuse to let that happen. As long as I hold this office, I will do whatever it takes to put this economy back on track and put this country back to work."
Whatever it takes? Meaning... "I will infuse more government into your lives as long as you will let me." Message to former President Clinton... remember that era of big government you talked about? It's here with a vengence.
Obama went on with a comment that should reveal to the American public that his rhetoric of "hope and change" and "working together" is simply that... rhetoric. Obama said, "The strongest democracies flourish from frequent and lively debate, but they endure when people of every background and belief find a way to set aside smaller differences in service of a greater purpose."
Greater purpose? You mean embracing bigger government? This bill is not "bipartisan." No Republicans except Specter, Snowe, and Collins supported this measure so far. And I hope the new RNC Chairman and other leaders will take them to task. This is not some fringe issue where Republicans from all ends of the spectrum can disagree. This bill goes to the core of our beliefs in smaller government, less spending, and more freedom. Those are BASIC Republican beliefs. If they don't believe in those simple principles, then they are simply not Republicans.
Obama is about to impose the biggest intervention of government upon us, ever. We don't need massive government to turn this country around. We need less money in Washington and more in our own pockets so that we can make our own decisions. America is great because of the strength and spirit of the American people. Obama shows no faith in them, but only faith in a massive government. The politics of gloom and doom certainly do work... I'm scared for this country.


Congress considering opening scores of concentration camps disguised as FEMA emergency centers. States also considering laws to destroy all personal ammunition unless registered with government. You fill in the dots.

Ayn Rand Gets Some Pub

Ayn Rand the Prophet?
Our attention is brought to a curious article in The Wall Street Journal from Stephen Moore, formerly of the Cato Institute…
“Having read Rand's book (long ago),” Bob told us, “I agree that the United States government and its self-styled political saviors in Washington have by now surpassed the worst case scenario Rand spelled out in her best-selling book. The similarities of the plot to the present are uncanny – and disturbing.”
“As Stephen Moore notes, Obama's “...current economic strategy is right out of Atlas Shrugged: The more incompetent you are in business, the more handouts the politicians will bestow on you... With each successive bailout to 'calm the markets,' another trillion of national wealth is subsequently lost. Yet, as Atlas grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate 'windfalls.'”
“Ultimately, Atlas Shrugged is a celebration of the entrepreneur, the risk taker and the cultivator of wealth through human intellect. Critics dismissed the novel as simple-minded, and even some of Rand's political admirers complained that she lacked compassion. Yet one pertinent warning resounds throughout the book: When profits and wealth and creativity are denigrated in society, they start to disappear -- leaving everyone the poorer.”
“Based on current events, one might venture the opinion that an even greater threat to personal and collective liberty results from a deadly combination of the stupidity and greed of entrepreneurs with the incompetence and idiocy of Big Brother government and its slavish advocates.”

Not All Is Well Within China

Violent unrest rocks China as crisis hits
The collapse of the export trade has left millions without work and set off a wave of social instability

Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.
The research was conducted for The Sunday Times over the last two months in three provinces vital to Chinese trade – Guangdong, Zhejiang and Jiangsu. It found that the global economic crisis has scythed through exports and set off dozens of protests that are never mentioned by the state media.
While troubling for the Chinese government, this should strengthen the argument of Premier Wen Jiabao, who will say on a visit to London this week that his country faces enormous problems and cannot let its currency rise in response to American demands.
The new US Treasury secretary, Timothy Geithner, has alarmed Beijing and raised fears of a trade war by stating that China manipulates the yuan to promote exports.
However, a growing number of economists say the unrest proves that it is not the exchange rate but years of sweatshop wages and income inequality in China that have distorted global competition and stifled domestic demand. The influential Far Eastern Economic Review headlined its latest issue “The coming crack-up of the China Model”.
Yasheng Huang, a professor at the Massachusetts Institute of Technology, said corruption and a deeply flawed model of economic reform had led to a collapse in personal income growth and a wealth gap that could leave China looking like a Latin American economy.
Richard Duncan, a partner at Blackhorse Asset Management in Singapore, has argued that the only way to create consumers is to raise wages to a legal minimum of $5 (£3.50) a day across Asia – a “trickle up” theory.
The instability may peak when millions of migrant workers flood back from celebrating the Chinese new year to find they no longer have jobs. That spells political trouble and there are already signs that the government’s $585 billion stimulus package will not be enough to achieve its goal of 8% growth this year.
The American economist Nouriel Roubini said growth figures of 6.8% in the fourth quarter of 2008 masked the reality that China was already in recession – a view privately shared by many Chinese financial analysts who dare not say so in public.
Even security guards and teachers have staged protests as disorder sweeps through the industrial zones that were built on cheap manufacturing for multinational companies. Worker dormitory suburbs already resemble ghost towns.
In the southern province of Guangdong, three jobless men detonated a bomb in a business travellers’ hotel in the commercial city of Foshan to extort money from the management.
The Communist party is so concerned to buy off trouble that in one case, confirmed by a local government official in Foshan, armed police forced a factory owner to withdraw cash from the bank to pay his workers.
“Hundreds of workers protested outside the city government so we ordered the boss to settle the back pay and sent police armed with machine-guns to take him to the bank and deliver the money to his workforce that very night,” the official said.
On January 15 there were pitched battles at a textile factory in the nearby city of Dongguan between striking workers and security guards.
On January 16, about 100 auxiliary security officers, known in Chinese as Bao An, staged a street protest after they were sacked by a state-owned firm in Shenzhen, a boom town adjoining Hong Kong.
About 1,000 teachers confronted police on the streets of Yangjiang on January 5, demanding their wages from the local authorities.
In one sample week in late December, 2,000 workers at a Singapore-owned firm in Shanghai held a wage protest and thousands of farmers staged 12 days of mass demonstrations over economic problems outside the city.
All along the coast, angry workers besieged labour offices and government buildings after dozens of factories closed their doors without paying wages and their owners went back to Hong Kong, Taiwan or South Korea.
In southern China, hundreds of workers blocked a highway to protest against pay cuts imposed by managers. At several factories, there were scenes of chaos as police were called to stop creditors breaking in to seize equipment in lieu of debts.
In northern China, television journalists were punished after they prepared a story on the occupation of a textile mill by 6,000 workers. Furious local leaders in the city of Linfen said the news item would “destroy social stability” and banned it.
At textile companies in Suzhou, historic centre of the silk trade, sales managers told of a collapse in export orders. “This time last year our monthly output to Britain and other markets was 60,000 metres of cloth. This month it’s 3,000 metres,” said one.
She said companies dared not accept orders in pounds or euros for fear of wild currency fluctuations. Trade finance has all but ceased. Some 40% of the workforce had been laid off, she added.
Nearby, in the industrial hub of Changshu, all the talk was of Singapore-listed Ferro China, which exported steel products to customers in Britain, Germany, Korea and Japan. Last October its shares were suspended.
The company is reported to have been weighed down by $800m in debts and, according to the specialist business magazine Caijing, has started a court-or-dered restructuring.
A researcher found the gates closed and under tight guard, 2,000 employees out of work and witnesses who told of company vehicles being seized by impatient creditors. Holders of Ferro China debt include Credit Suisse and Citi-group.
Even in the city regarded as the most entrepreneurial in China, Wenzhou, the business community is reeling. “We estimate that foreign companies have defaulted on payments for 20 billion yuan (£20 billion) owed to Wenzhou firms,” said Zhou Dewen, chairman of the city’s association for small and medium-sized businesses.
“British businessmen are better than other customers because even if they owe money they can be contacted and promise to pay their bills if they can raise the cash but many other foreigners just disappear,” he said.
Slumping demand for consumer electronics in Britain has been blamed for the crisis engulfing the southern city of Shunde, in Guangdong, where a cluster of 3,000 electrical firms has grown up around big exporters like Kelon, a white-goods manufacturer.
“The impact on us from the slowdown in the British market will be huge,” said a manager at Kelon, who asked not to be named.
Shunde is one of the amazing one-industry Chinese towns that has come from nothing to generate 20% of China’s export production of domestic electrical appliances, making 60% of its sales to Europe.
Now the whole province is wrestling with sudden, sharp decline. A researcher who watched officials handling complaints at a local labour bureau reported “class hatred” among workers.
“Why did the boss cut your salary? You must be lazy or absent from work,” an official told one group of petitioners.
“What do you mean? Are you an official of the people’s government or a slave of the bosses?” demanded an irate worker.
Their claim dismissed, the group warned onlookers: “We are thinking of taking extreme action.”
A legal advocate for migrant workers, Xiao Qingshan, told a tale of violent intimidation by the state in collusion with unscrupulous businessmen.
On January 9, Xiao said, 14 security officers from the local labour bureau broke into his office, confiscated 600 legal case files, 160 law books, his computer, his photocopier, his television set and 100,000 yuan in cash.
“That evening I was ambushed near the office by five strangers who forced a black bag over my head and then threw me into a shallow polluted canal,” he said. His landlord has since given him notice to quit his rented home.
Xiao said he was defying bribery and threats to speak to the foreign media because he wants international businesses to know what is really happening in “the workshop of the world”.

New Orleans residents startled by helicopters in military training for crowd control and martial law.

Bombs, choppers during military exercises startle residents
12:42 PM CST on Thursday, February 5, 2009
Katie Moore / Eyewitness News
NEW ORLEANS – Residents in and around New Orleans have been hearing the sounds of low-flying helicopters and what sounds like bomb blasts over the past few nights, but the sounds are part of a training exercise for some of America's elite military troops.

At one Lakefront home, Gigi Burk normally hears her son, 6-year-old Beau, practicing the piano, but last night she heard something much different at around 10 p.m.
“I said, oh my God! They're bombs. That's what I thought it was, somebody dropping bombs,” Burk said.
Burk said she panicked, not knowing why she was hearing what sounded like explosions and low-flying helicopters.
“We're a little skittish around here with things that have happened,” Burk said.
But according to military officials, it’s a training exercise that brought about 150 U.S. troops from the U.S. Special Operations Command to train in New Orleans for urban warfare.
“They are regularly engaged in combat operations,” said U.S. Special Operations Command staffer Kimberly Tiscione. “They are the best of the best we have to offer across all the branches of the military.”
Black Hawk and "Little Bird" helicopters are transporting troops to several locations around New Orleans, according to Tiscione.
“They're going to be flying near buildings, doing approaches on them,” Tiscione said. “You might see them landing on the roof tops or landing on the ground near them as well.”
“I heard a bunch of explosions starting at about 10 p.m. They were about ten seconds apart, and then they'd stop, and we thought it was over, but then they started again,” said Burk.
Tiscione said that the ground troops were performing “breeches at several different locations.
“So, they're moving through doorways or walls or that sort of thing. They're also doing weapons proficiency,” Tiscione said.
The forces are using simulated ammunitions, almost like paintball pellets, to conduct the training. And even though the noise may affect your neighborhood, the night-time training is only supposed to last from sundown to 11 p.m., according to Tiscione.
“They are the best of the best because they get these kind of training events,” she said.
Burk said she wishes the training had been better publicized before-hand to avoid a scare Tuesday night.
"People were talking about it everywhere today," Burk said.
The NOPD did put a press release out about the training, and WWL-TV aired a story about it; however, that was a week ago.
Since U.S. Special Operations Command hasn't done a similar training here since 2000, it has caught many people by surprise.
The training will go on every night through the end of this week.

Psychos Amongst Us!

For the last several months, the sordid tales of Wall Street's greed and deception have read like the story line from a riveting suspense thriller. But the most recent tales are so unbelievably gruesome that they resemble something more macabre, like the story line from a documentary about Jeffrey Dahmer or John Wayne Gacy.
Each subsequent act is more grisly and disturbing than the one before. So as the body count rises, and Lower Manhattan becomes a vast crime scene, your editors become increasingly fearful of leaving through their Wall Street Journals at night, even with the doors locked and all the lights on. The news is simply too terrifying. Even more terrifying is the fact that financial predators continue to roam freely among us and continue to occupy positions of power.
Late last week, for example, we learned that AIG, Citigroup and several other struggling financial institutions duped the U.S. government out of billions of dollars, even as the government was trying to rescue them.
According to a report from the Congressional Oversight Panel, the U.S. Treasury overpaid by about $78 billion for toxic assets from American banks. "The report showed," a Reuters news story relates, "that the Treasury got the worst [of its many bad deals] on second-round investments in American International Group for $40 billion and Citigroup for $20 billion under special aid programs tailored for the two institutions. For each $100 spent on these two companies, the Treasury received securities worth $41."
In other words, for those readers who do not have an abacus handy, taxpayers lost $35.4 billion dollars the second they drove their toxic securities off the lot at AIG and Citigroup.
Who do you suppose would have had the best idea about the true value of the securities the government purchased from AIG? The government employees who purchased them or the sellers at AIG? We'll go out on a limb here and guess that the folks at AIG knew better.
So if the sellers had an inkling that the assets were worth far less than the government was paying, didn't the sellers also have an obligation to divulge that information to the government?
And since the sellers at AIG did not divulge accurate values to the government, didn't the sellers commit a kind of fraud? And if they did commit a kind of fraud, don't they also deserve a kind of prison sentence?
But let's not rush to judgment. If AIG executives legitimately had no idea that the prices the government was paying for AIG's securities were light-years away from real-world prices, they would not have been guilty of fraud. Instead, the executives would have been guilty of extreme incompetence…again.
Criminal or moronic. It's one or the other. Either way, they deserve dismissal.
The chilling storyline that is unfolding from Wall Street's corner offices prompts an obvious question that never seems to produce the obvious answer. Why does the government conduct bailouts at the top of America's socio-economic pyramid, where the perpetrators of the crisis reside, rather then at the bottom of the pyramid, where the victims reside? Why, in other words, do we taxpayers continue to throw good money after bad?
An alarming report by Mark Pittman and Bob Ivry of Bloomberg News emphasizes the point.
"The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged to provide up to $5.7 trillion more if needed," the Bloomberg duo reveal… These enormous pledges, Pittman and Ivry point out, would almost be enough to "pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve."
Despite this deluge of bailouts and guarantees that has rained down upon American financial institutions, the economy continues to atrophy and the finance sector remains comatose. So why continue the ruse? Why not squander taxpayer money to help families stay in their homes, rather than to help psychopaths stay in their Armani suits?
Maybe its time to try something different, like revising the most popular destinations for corporate retreats from Aspen and St. Barts to Sing Sing and San Quentin. But lest you think we are kicking America's corporate chieftains while they are down – or as close to down as we have seen them in a long time, which is actually not very down at all – we would remind you that your editors also kicked the corporate chieftains (often) while they were riding high.
Nearly four years ago, we remarked:
"A corporate culture of well-mannered avarice restrains the mighty American economy. Many public companies labor under a Soviet-style central planning - the sort of planning that arranges things very nicely for the planners themselves, but much less well for the proletariat…
"'In 2003, the ratio between CEO Pay and worker pay reached 301 to 1, up from 282 to 1 in 2002' according to a report from United for a Fair Economy. 'If the minimum wage had increased as quickly as CEO pay has since 1990, it would today be $15.76 per hour, rather than the current $5.15 per hour.' [Editor's note: United for a Fair Economy now reports that CEO pay has soared to 344 times that of hourly workers.]
"'By any standard, many of today's executive compensation packages are excessive,' BusinessWeek asserts. 'Too often, directors have awarded compensation packages that go well beyond what is required to attract and retain executives and have rewarded even poorly performing CEOs...Moreover, a poorly designed executive compensation package can reward decisions that are not in the long-term interests of a company, its shareholders and employees.'"
Shortly after airing these remarks, we followed up with a column entitled "Pinstriped Psychopaths." Regrettably, the observations within that column proved to be much more prescient and relevant than we could have ever imagined

Pinstriped Psychopaths, Revisited

By Eric J. Fry
Some psychopaths occupy a prison cell. Others occupy a corner office. Both are dangerous.
Psychopaths possess a profound lack of empathy. They use other people callously and remorselessly for their own ends. Psychopathic CEOs are no different. By advancing their own interests, with little regard for the agony they might inflict on others, they jeopardize the welfare of employees and investors alike.
In short, psychopathy is bad business.
It's true that heartless managers can achieve statistically heroic corporate triumphs. But it is also true that the garlands of such victories often contain the pink slips (and sufferings) of thousands of employees.
But before we proceed to condemn America's self-serving CEOs, allow us to give credit where credit is due, both to Prof. Robert Hare for linking psychopathy to corporate behavior and to Alan Deutscheman for explaining the topic in a fascinating essay.
"One day in 2002," Mr. Deutscheman begins, "a 71-year-old professor emeritus from the University of British Columbia, Robert Hare, gave a talk on psychopathy to about 150 police and law-enforcement officials. He was a legendary figure to that crowd. The FBI and the British justice system had long relied on his advice.
"According to the Canadian Press and Toronto Sun reporters who rescued the moment from obscurity, Hare began by talking about Mafia hit men and sex offenders, whose photos were projected on a large screen behind him. But then those images were replaced by pictures of top executives from WorldCom, which had just declared bankruptcy, and Enron, which imploded only months earlier."
"These are callous, cold-blooded individuals," Hare scowled. "They don't care that you have thoughts and feelings. They have no sense of guilt or remorse...I always said that if I wasn't studying psychopaths in prison, I'd do it at the stock exchange."
Collectively, corporate psychopaths inflict pain on hundreds of thousands – if not millions – of employees and shareholders. The senseless sufferings include lost livelihoods, lost life savings and sometimes even broken families or suicides.
And all the while that these CEOs sow agony, they reap riches for themselves.
In 2004 the CEOs of 179 major companies were paid an average of $9.84 million, up 12 percent from 2003, according to a survey by Pearl Meyer & Partners. By contrast, average labor compensation rose only 4.5 percent. (Unless a guy can hit a baseball 400 feet, or create misogynistic rap lyrics, he doesn't deserve that kind of money!)
But these highly compensated – and sometimes brutal – corporate executives, as implements of financial Darwinism, can produce a greater good, according to Robert J. Samuelson in a recent article for the Washington Post. "The obsessive drive to improve profits, though cold-blooded, also creates often-overlooked social benefits," he asserts. "It's not simply that growing profits bolster the stock market or finance new investment. The broader point is that advancing productivity - a fancy term for efficiency and a byproduct of the quest for profits - is the wellspring of higher living standards."
Maybe so. Or maybe we have simply baptized a social evil, in the process canonizing villains. There is a very fine line between "creative destruction" and creative annihilation. But morality is not our beat here at the Rude Awakening. We, too, pursue a profit motive that is morally ambiguous.
But even from a rabidly capitalistic perspective, investing in psychopathic management can be very bad business. Folks like Enron's Andrew Fastow, Sunbeam's "Chainsaw" Al Dunlap and Worldcom's Bernie Ebbers have demonstrated the destructive capacity of corporate psychopathy.
When in doubt, therefore, the prudent investor might opt to invest in companies that do NOT promote psychopaths to positions of influence.
Given the power that CEOs wield, Prof. Hare suggests that we screen them for psychopathic behavior. "Why wouldn't we want to screen them?" he asks. "We screen police officers, teachers. Why not people who are going to handle billions of dollars?"
The professor may have a point. Several big-name CEOs would score "mildly psychopathic" on Hare's corporate Psychopathy Checklist, according to Deutschman.
"'Chainsaw' Al Dunlap [would] score impressively," Deutschman relates. "What do you say about a guy who didn't attend his own parents' funerals? He allegedly threatened his first wife with guns and knives. She charged that he left her with no food and no access to their money while he was away for days. His divorce was granted on grounds of 'extreme cruelty.' That's the characteristic that endeared him to Wall Street, which applauded when he fired 11,000 workers at Scott Paper, then another 6,000 (half the labor force) at Sunbeam...His plant closings kept up his reputation for ruthlessness but made no sense economically, and Sunbeam's financial gains were really the result of Dunlap's alleged book cooking."
We would not be opposed to "CEO screening," but we'd prefer to allow market forces to eradicate the scoundrels. Specifically, we'd prefer that the lessons of the past govern the investor behavior of the future. Now that we have observed the downside of corporate psychopathy, we individual investors should have learned to avoid buying into companies run by self-serving lunatics.
We cannot always know, of course, who is psychopathic and who is merely "tough." But perhaps the time has come to attempt to discern the difference. For too long, we have revered executives who seemed charismatic, visionary, and long as they were lifting profits and share prices. We did not care about mass job layoffs, provider that they occurred as remotely and silently as a lethal injection
"We were willing to overlook the fact that CEOs could also be callous, conning, manipulative, deceitful, verbally and psychologically abusive, remorseless, exploitative, self-delusional, irresponsible, and megalomaniacal," Deutschman sums up.
"So we colluded in the elevation of leaders who were sadly insensitive to hurting others and society at large."
But we individual investors seem to be repenting of our complicity. In general, we no longer revere "tough CEOs," and we no longer look the other way while psychopathic corporate managers abuse the companies they purport to lead. Morgan Stanley's Philip Purcell was recently "shown the door," mostly because he excelled at producing vitriol, rather then profitability. We will not miss Philip J. Purcell, and neither will Morgan Stanley Deane Whitter's shareholders.
Psychopathy is destructive, no matter whether it roams the back streets or roams on Wall Street.

A Taxing Situation

It seems taxes have always been a sexy issue, at least for the last millennium since Lady Godiva, that notoriously anti-tax Anglo-Saxon noblewoman who - according to legend - rode naked through the streets of Coventry in England in order to gain a remission of the oppressive taxation imposed by her husband on his tenants.
Naked Demagoguery
From all historic accounts, at least Lady Godiva was sincere about her tax protest.
On February 17, 2007 when the junior senator from Illinois introduced his bill, the Stop Tax Haven Abuse Act, he issued a ringing statement in which he decried what he claimed was an annual loss of $100 billion due to alleged offshore tax evasion by Americans.
"This is a basic issue of fairness and integrity," intoned then Senator Barack Obama. "We need to crack down on individuals and businesses that abuse our tax laws so that those who work hard and play by the rules aren't disadvantaged." In his 2008 Presidential campaign, candidate Obama often repeated this theme to applause, promising to crack down on tax cheats.
Do As I say, Not As I Do
Fast forward to 2009. President Obama's choice to be Secretary of the Treasury is the supposedly indispensable Tim Geithner (who?) - thus making a tax cheat/incompetent who owed about $120,000 in back taxes head of the Internal Revenue Service.
Asked about the propriety of nominating a Treasury secretary who was a major tax scofflaw, Obama characterized the eight-year tax evasion as "an innocent mistake."
Than came ex-Health and Human Services nominee, ex-Senator Tom Daschle, who was forced to pay back almost $200,000 in taxes with interest (but no penalties) on the free car and driver he had been receiving from a Wall Street friend for the past three years. And there was Nancy Killefer, who withdrew her nomination for Obama's chief performance officer, because she too owed back taxes.
Not to mention my former House colleague, Rep. Charlie Rangel (D-NY), who is embroiled in a controversy over non-payment of years of back taxes on unreported income from a beach front villa in the Dominican Republic. Don't worry folks, Charlie only heads the House Ways and Means Committee that writes all the tax laws.
Dutch Treat
But this tax hypocrisy by politicians is not confined to this side of the Atlantic Ocean.
Leftist members of the Dutch Parliament are in full cry against Princess Maria Christina of the Netherlands, the youngest of four daughters of the late Queen Juliana of the Netherlands and her Prince consort Bernhard.
It seems that Princess Christina, who lives in London and also holds British citizenship, has been exposed as being the beneficiary of private foundations that act on behalf of members of the Dutch royal family, both registered in the Channel Island's tax haven of Guernsey, where they enjoy legal tax exemption!
"Eh gad," say the Dutch parliamentarians, "this must be investigated!" (Forget the fact that the Netherlands is possibly the world's leading tax haven for offshore registration of corporations that bring in millions of tax dollars).
It is not enough that the Princess was forced by Dutch law to renounce her and her children's rights to the throne before converting to Catholicism when she married a Catholic in 1975 without the permission of Parliament.
Although the Guernsey trusts are fully legal, MPs say Christina should act as a role model. "She should not be looking for financial loopholes to avoid paying the full amount of tax,' Labour MP Diederik Samsom said. (Someone should investigate him!)
British Blather
And not be outdone in hypocrisy, in London the British Left is demanding the political scalp of one Glen Moreno, the chairman of the Pearson corporation, which owns the Financial Times, who was appointed as acting chairman of the government's UK Financial Investments (UKFI) company last month. UKFI was set up to manage the billions of pounds of public money that is helping to keep troubled British banks afloat.
Moreno's sin? Until last April he was a trustee of Liechtenstein Global Trust, where allegedly some British citizens had accounts that may have been used for tax evasion.
Give ‘Em a Hand
So I will again quote the late, distinguished Judge Learned Hand of the U.S. Court of Appeals in New York, who in a memorable tax case dissent, offered these timeless remarks, "There is nothing sinister in arranging one's affairs so as to keep taxes as low as possible...nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions." [IRS Com. v. Newman, 159 F2d 848, 851 (2nd Cir 1947)]
I don't know which is worse - the taxes or the politicians' demagoguery about taxes. Take your pick.

Funny, We've Been Advising This For Several Years Now............

A Few Great Reasons to Expatriate Today...
We've got a few reasons why now might be the best time to expatriate, if you're interested,
"For Americans, "expatriation" means giving up U.S. residence, citizenship and passport," we're told.
"Why would anyone take such a radical step?"
"First, expatriation is the only way a U.S. citizen or long-term resident can permanently sever the obligation to pay tax on worldwide income. That makes investing and doing business offshore far easier than if you remain a U.S. taxpayer."
Second, once you've expatriated, you're no longer subject to the dictates of U.S. government should it declare an "economic emergency" to deal with the worst economic crisis in 80 years. That means you'll avoid possible foreign exchange controls, forced repatriation of offshore assets, etc."
"And, speaking of the global collapse in commodities and stocks, the timing has never been more favorable for any U.S. person considering expatriation. That's because the 2008 law that imposes an "exit tax" on former U.S. citizens (or long-term U.S. residents) affects only unrealized gains that exceed US$600,000. And, a lot more prospective expatriates have unrealized gains under that amount than, say, one year ago."
"In addition, the long-term capital gains rate—15%—is the lowest it's been in decades. Combined with today's depressed asset values, the tax cost of liquidating assets to get below the US$600,000 threshold may never be lower. That's particularly true if the Obama "bailout" results not only in a recovery in asset values, but also in a tax hike for high-net-worth Americans to pay for the plan."
"Before you expatriate, you also must acquire a passport from another country. You also need to decide where you want to live outside the United States and make preparations to relocate there. Finally, you must plan to minimize the tax consequences of expatriation."

Gee, You Don't See This On The Evening News......

Obama’s Trilateral Commission Connections, Council on Foreign Relations Sellouts and Wartime Military/National Guard Draft Re-Instatement Issues that the Republicans Don’t Even Talk About
By Patrick Wood, EditorThe August Review, Global elite research center
January 30, 2009[Ed. note: For clarity, members of the Trilateral Commission appear in bold type.]As previously noted in Pawns of the Global Elite, Barack Obama was groomed for the presidency by key members of the Trilateral Commission. Most notably, it was Zbigniew Brzezinski, co-founder of the Trilateral Commission with David Rockefeller in 1973, who was Obama’s principal foreign policy adviser.
The pre-election attention is reminiscent of Brzezinski’s tutoring of Jimmy Carter prior to Carter’s landslide election in 1976.
For anyone who doubts the Commission’s continuing influence on Obama, consider that he has already appointed no less than eleven members of the Commission to top-level and key positions in his Administration.
According to official Trilateral Commission membership lists, there are only 87 members from the United States (the other 337 members are from other regions). Thus, in less than two weeks since his inauguration, Obama’s appointments encompass more than 12% of Commission’s entire U.S. membership.
Is this a mere coincidence or is it a continuation of dominance over the Executive Branch since 1976? (For important background, read The Trilateral Commission: Usurping Sovereignty.)
Secretary of Treasury, Tim Geithner
Ambassador to the United Nations, Susan Rice
National Security Advisor, Gen. James L. Jones
Deputy National Security Advisor, Thomas Donilon
Chairman, Economic Recovery Committee, Paul Volker
Director of National Intelligence, Admiral Dennis C. Blair
Assistant Secretary of State, Asia & Pacific, Kurt M. Campbell
Deputy Secretary of State, James Steinberg
State Department, Special Envoy, Richard Haass
State Department, Special Envoy, Dennis Ross
State Department, Special Envoy, Richard Holbrooke
There are many other incidental links to the Trilateral Commission, for instance,
Secretary of State Hillary Clinton is married to Commission member William Jefferson Clinton.
Geithner’s informal group of advisors include E. Gerald Corrigan, Paul Volker, Alan Greenspan and Peter G. Peterson, among others. His first job after college was with Henry Kissinger at Kissinger Associates.
Brent Scowcroft has been an unofficial advisor to Obama and was mentor to Defense Secretary Robert Gates.
Robert Zoelick is currently president of the World Bank. The World Bank Group is comprised of five agencies that make loans or guarantee credit to 177 member countries. Its stated aim is to help countries reduce poverty by making long-term loans to governments for large-scale projects such as dams or pipelines, or to back economic reform programs. However, World Bank loans have often had very negative effects on countries putting them in situations of precarious debt and setting conditions on which countries can receive loans, conditions which often have a devastating impact on the lives of citizensLaurence Summers, White House Economic Advisor, was mentored by former Treasury Secretary Robert Rubin during the Clinton administration.
There are many other such links, but these are enough for you to get the idea of what’s going on here.
Analyze the positions
Notice that five of the Trilateral appointees involve the State Department, where foreign policy is created and implemented. Hillary Clinton is certainly in line with these policies because her husband, Bill Clinton, is also a member.What is more important than economic recovery? Paul Volker is the answer.What is more important than national intelligence? Gen. James Jones, Thomas Donilon and Adm. Dennis Blair hold the top three positions.
What is more important than the Treasury and the saving of our financial system? Timothy Geithner says he has the answers.
The State Department is virtually dominated by Trilaterals: Kurt Campbell, James Steinberg, Richard Haass, Dennis Ross and Richard Holbrooke.
This leaves Susan Rice, Ambassador to the United Nations. The U.N. is the chosen instrument for ultimate global governance. Rice will help to subvert the U.S. into the U.N. umbrella of vassal states.
Conflict of interest
Since 1973, the Commission has met regularly in plenary sessions to discuss policy position papers developed by its members. Policies are debated in order to achieve consensuses. Respective members return to their own countries to implement policies consistent with those consensuses.
The original stated purpose of the Trilateral Commission was to create a “New International Economic Order.” Its current statement has morphed into fostering a “closer cooperation among these core democratic industrialized areas of the world with shared leadership responsibilities in the wider international system.” (See The Trilateral Commission web site)
U.S. Trilateral members implement policies determined by a majority of non-Americans that most often work against the best interests of the country.
“How,” you say?
Since the administration of Jimmy Carter, Trilaterals held these massively influential positions:
Six out of eight World Bank presidents, including the current appointee, Robert Zoelick
Eight out of ten U.S. Trade Representatives
President and/or Vice-President of every elected administration (except for Obama/Biden)
Seven out of twelve Secretaries of State
Nine out of twelve Secretaries of Defense
Is this sinking in? Are you grasping the enormity of it?
Endgame is at hand
For the Trilateral crowd, the game is about over. The recent reemergence of original members Henry Kissinger, Zbigniew Brzezinski, Brent Scowcroft and Paul Volker serves to reinforce the conclusion that the New International Economic Order is near.
The Trilateral Commission and its members have engineered the global economic, trade and financial system that is currently in a state of total chaos.
Does that mean that they have lost? Hardly.
In the article Chorus call for New World Order, they are using the crisis to destroy what remains of national Sovereignty, so that a New World Order can finally and permanently be put into place. Sovereignty is the principle that the state exercises absolute power over its territory, system of government, and population. Accordingly, the internal authority of the state supersedes that of all other bodies.
Conclusion on Obama’s Trilateral Commission Connections
The Obama presidency is a disingenuous fraud. He was elected by promising to bring change, yet from the start change was never envisioned. He was carefully groomed and financed by the Trilateral Commission and their friends.In short, Obama is merely the continuation of disastrous, non-American policies that have brought economic ruin upon us and the rest of the world. The Obama experience rivals that of Jimmy Carter, whose campaign slogan was “I will never lie to you.”
When the Democrat base finally realizes that it has been conned again (Bill Clinton and Al Gore were members), perhaps it will unleash a real political revolution that will oust Trilateral politicians, operatives and policies from the shores of our country.
If the reader is a Democrat, be aware that many Republicans and conservatives are still licking their wounds after finally realizing that George Bush and Dick Cheney worked the same con on them for a disastrous eight years of the same policies!
A who’s who guide to the people poised to shape Obama’s foreign policy.
U.S. policy is not about one individual, and no matter how much faith people place in President-elect Barack Obama, the policies he enacts will be fruit of a tree with many roots. Among them: his personal politics and views, the disastrous realities his administration will inherit, and, of course, unpredictable future crises. But the best immediate indicator of what an Obama administration might look like can be found in the people he surrounds himself with and who he appoints to his Cabinet. And, frankly, when it comes to foreign policy, it is not looking good.
Obama has a momentous opportunity to do what he repeatedly promised over the course of his campaign: bring actual change. But the more we learn about who Obama is considering for top positions in his administration, the more his inner circle resembles a staff reunion of President Bill Clinton’s White House. Although Obama brought some progressives on board early in his campaign, his foreign policy team is now dominated by the hawkish, old-guard Democrats of the 1990s. This has been particularly true since Hillary Clinton conceded defeat in the Democratic primary, freeing many of her top advisers to join Obama’s team.
“What happened to all this talk about change?” a member of the Clinton foreign policy team recently asked the Washington Post. “This isn’t lightly flavored with Clintons. This is all Clintons, all the time.”
Amid the euphoria over Obama’s election and the end of the Bush era, it is critical to recall what 1990s U.S. foreign policy actually looked like. Bill Clinton’s boiled down to a one-two punch from the hidden hand of the free market, backed up by the iron fist of U.S. militarism. Clinton took office and almost immediately bombed Iraq (ostensibly in retaliation for an alleged plot by Saddam Hussein to assassinate former President George H.W. Bush). He presided over a ruthless regime of economic sanctions that killed hundreds of thousands of Iraqis, and under the guise of the so-called No-Fly Zones in northern and southern Iraq, authorized the longest sustained U.S. bombing campaign since Vietnam.
Under Clinton, Yugoslavia was bombed and dismantled as part of what Noam Chomsky described as the “New Military Humanism.” Sudan and Afghanistan were attacked, Haiti was destabilized and “free trade” deals like the North America Free Trade Agreement and the General Agreement on Tariffs and Trade radically escalated the spread of corporate-dominated globalization that hurt U.S. workers and devastated developing countries. Clinton accelerated the militarization of the so-called War on Drugs in Central and Latin America and supported privatization of U.S. military operations, giving lucrative contracts to Halliburton and other war contractors. Meanwhile, U.S. weapons sales to countries like Turkey and Indonesia aided genocidal campaigns against the Kurds and the East Timorese.
The prospect of Obama’s foreign policy being, at least in part, an extension of the Clinton Doctrine is real. Even more disturbing, several of the individuals at the center of Obama’s transition and emerging foreign policy teams were top players in creating and implementing foreign policies that would pave the way for projects eventually carried out under the Bush/Cheney administration. With their assistance, Obama has already charted out several hawkish stances. Among them:
– His plan to escalate the war in Afghanistan;
– An Iraq plan that could turn into a downsized and rebranded occupation that keeps U.S. forces in Iraq for the foreseeable future;
– His labeling of Iran’s Revolutionary Guard as a “terrorist organization;”
– His pledge to use unilateral force inside of Pakistan to defend U.S. interests;
– His position, presented before the American Israel Public Affairs Committee (AIPAC), that Jerusalem “must remain undivided” — a remark that infuriated Palestinian officials and which he later attempted to reframe;
– His plan to continue the War on Drugs, a backdoor U.S. counterinsurgency campaign in Central and Latin America;
– His refusal to “rule out” using Blackwater and other armed private forces in U.S. war zones, despite previously introducing legislation to regulate these companies and bring them under U.S. law.
Obama did not arrive at these positions in a vacuum. They were carefully crafted in consultation with his foreign policy team. While the verdict is still out on a few people, many members of his inner foreign policy circle — including some who have received or are bound to receive Cabinet posts — supported the invasion and occupation of Iraq. Some promoted the myth that Saddam had weapons of mass destruction. A few have worked with the neoconservative Project for the New American Century, whose radical agenda was adopted by the Bush/Cheney administration. And most have proven track records of supporting or implementing militaristic, offensive U.S. foreign policy. “After a masterful campaign, Barack Obama seems headed toward some fateful mistakes as he assembles his administration by heeding the advice of Washington’s Democratic insider community, a collective group that represents little ‘change you can believe in,’” notes veteran journalist Robert Parry, the former Associated Press and Newsweek reporter who broke many of the stories in the Iran-Contra scandal in the 1980s.
As news breaks and speculation abounds about cabinet appointments, here are 20 people to watch as Obama builds the team who will shape U.S. foreign policy for at least four years:
Joe Biden
There was no stronger sign that Obama’s foreign policy would follow the hawkish tradition of the Democratic foreign policy establishment than his selection of Sen. Joe Biden as his running mate. Much has been written on Biden’s tenure as head of the Senate Foreign Relations Committee, but his role in the invasion and occupation of Iraq stands out. Biden is not just one more Democratic lawmaker who now calls his vote to authorize the use of force in Iraq “mistaken;” Biden was actually an important facilitator of the war.
In the summer of 2002, when the United States was “debating” a potential attack on Iraq, Biden presided over hearings whose ostensible purpose was to weigh all existing options. But instead of calling on experts whose testimony could challenge the case for war — Iraq’s alleged WMD possession and its supposed ties to al-Qaida — Biden’s hearings treated the invasion as a foregone conclusion. His refusal to call on two individuals in particular ensured that testimony that could have proven invaluable to an actual debate was never heard: Former Chief United Nations Weapons Inspector Scott Ritter and Hans von Sponeck, a 32-year veteran diplomat and the former head of the U.N.’s Iraq program.
Both men say they made it clear to Biden’s office that they were ready and willing to testify; Ritter knew more about the dismantling of Iraq’s WMD program than perhaps any other U.S. citizen and would have been in prime position to debunk the misinformation and outright lies being peddled by the White House. Meanwhile, von Sponeck had just returned from Iraq, where he had observed Ansar al Islam rebels in the north of Iraq — the so-called al-Qaida connection — and could have testified that, rather than colluding with Saddam’s regime, they were in a battle against it. Moreover, he would have pointed out that they were operating in the U.S.-enforced safe haven of Iraqi Kurdistan. “Evidence of al-Qaida/lraq collaboration does not exist, neither in the training of operatives nor in support to Ansar-al-Islam,” von Sponeck wrote in an Op-Ed published shortly before the July 2002 hearings. “The U.S. Department of Defense and the CIA know perfectly well that today’s Iraq poses no threat to anyone in the region, let alone in the United States. To argue otherwise is dishonest.”
With both men barred from testifying, rather than eliciting an array of informed opinions, Biden’s committee whitewashed Bush’s lies and helped lead the country to war. Biden himself promoted the administration’s false claims that were used to justify the invasion of Iraq, declaring on the Senate floor, “[Saddam Hussein] possesses chemical and biological weapons and is seeking nuclear weapons.”
With the war underway, Biden was then the genius who passionately promoted the ridiculous plan to partition Iraq into three areas based on religion and ethnicity, attempting to Balkanize one of the strongest Arab states in the world.
“He’s a part of the old Democratic establishment,” says retired Army Col. Ann Wright, the State Department diplomat who reopened the U.S. embassy in Kabul in 2002. Biden, she says, has “had a long history with foreign affairs, [but] it’s not the type of foreign affairs that I want.”
Rahm Emanuel
Obama’s appointment of Illinois Congressman Rahm Emanuel as Chief of Staff is a clear sign that Clinton-era neoliberal hawks will be well-represented at 1600 Pennsylvania Ave. A former senior Clinton advisor, Emanuel is a hard-line supporter of Israel’s “targeted assassination” policy and actually volunteered to work with the Israeli Army during the 1991 Gulf War. He is close to the right-wing Democratic Leadership Council and was the only member of the Illinois Democratic delegation in the Congress to vote for the invasion of Iraq. Unlike many of his colleagues, Emanuel still defends his vote. As chair of the Democratic Congressional Campaign Committee in 2006, Emanuel promoted the campaigns of 22 candidates, only one of who supported a swift withdrawal from Iraq, and denied crucial Party funding to anti-war candidates. “As for Iraq policy, at the right time, we will have a position,” he said in December 2005. As Philip Giraldi recently pointed out on, Emanuel “advocates increasing the size of the U.S. Army by 100,000 soldiers and creating a domestic spying organization like Britain’s MI5. More recently, he has supported mandatory paramilitary national service for all Americans between the ages of 18 and 25.”
While Obama has at times been critical of Clinton-era free trade agreements, Emanuel was one of the key people in the Clinton White House who brokered the successful passage of NAFTA.
Hillary Rodham Clinton
For all the buzz and speculation about the possibility that Sen. Clinton may be named Secretary of State, most media coverage has focused on her rivalry with Obama during the primary, along with the prospect of her husband having to face the intense personal, financial and political vetting process required to secure a job in the new administration. But the question of how Clinton would lead the operations at Foggy Bottom calls for scrutiny of her positions vis-a-vis Obama’s stated foreign-policy goals.
Clinton was an ardent defender of her husband’s economic and military war against Iraq throughout the 1990s, including the Iraq Liberation Act of 1998, which ultimately laid the path for President George W. Bush’s invasion. Later, as a U.S. senator, she not only voted to authorize the war, but aided the Bush administration’s propaganda campaign in the lead-up to the invasion. “Saddam Hussein has worked to rebuild his chemical and biological weapons stock, his missile-delivery capability and his nuclear program,” Clinton said when rising to support the measure in October 2002. “He has also given aid, comfort and sanctuary to terrorists, including al-Qaida members … I want to insure that Saddam Hussein makes no mistake about our national unity and for our support for the president’s efforts to wage America’s war against terrorists and weapons of mass destruction.”
“The man who vowed to deliver us from 28 years of Bushes and Clintons has been stocking up on Clintonites,” New York Times columnist Maureen Dowd recently wrote. “How, one may ask, can he put Hillary — who voted to authorize the Iraq war without even reading the intelligence assessment — in charge of patching up a foreign policy and a world riven by that war?”
Beyond Iraq, Clinton shocked many and sparked official protests by Tehran at the United Nations when asked during the presidential campaign what she would do as president if Iran attacked Israel with nuclear weapons. “I want the Iranians to know that if I’m the president, we will attack Iran,” she declared. “In the next 10 years, during which they might foolishly consider launching an attack on Israel, we would be able to totally obliterate them.”
Clinton has not shied away from supporting offensive foreign policy tactics in the past. Recalling her husband’s weighing the decision of whether to attack Yugoslavia, she said in 1999, “I urged him to bomb. … You cannot let this go on at the end of a century that has seen the major holocaust of our time. What do we have NATO for if not to defend our way of life?”
Madeleine Albright
While Obama’s house is flush with Clintonian officials like former Secretary of State Warren Christopher, Defense Secretary William Perry, Director of the State Department Office of Policy Planning Greg Craig (who was officially named Obama’s White House Counsel) and Navy Secretary Richard Danzig, perhaps most influential is Madeleine Albright, Bill Clinton’s former Secretary of State and U.N. ambassador. Albright recently served as a proxy for Obama, representing him at the G-20 summit earlier this month. Whether or not she is awarded an official role in the administration, Albright will be a major force in shaping Obama’s foreign policy.
“It will take time to convince skeptics that the promotion of democracy is not a mask for imperialism or a recipe for the kind of chaos we have seen in the Persian Gulf,” Albright recently wrote. “And it will take time to establish the right identity for America in a world that has grown suspicious of all who claim a monopoly on virtue and that has become reluctant to follow the lead of any one country.”
Albright should know. She was one of the key architects in the dismantling of Yugoslavia during the 1990s. In the lead-up to the 1999 “Kosovo war,” she oversaw the U.S. attempt to coerce the Yugoslav government to deny its own sovereignty in return for not being bombed. Albright demanded that the Yugoslav government sign a document that would have been unacceptable to any sovereign nation. Known as the Rambouillet Accord, it included a provision that would have guaranteed U.S. and NATO forces “free and unrestricted passage and unimpeded access throughout” all of Yugoslavia — not just Kosovo — while also seeking to immunize those occupation forces “from any form of arrest, investigation or detention by the authorities in [Yugoslavia].” Moreover, it would have granted the occupiers “the use of airports, roads, rails and ports without payment.” Similar to Bush’s Iraq plan years later, the Rambouillet Accord mandated that the economy of Kosovo “shall function in accordance with free-market principles.”
When Yugoslavia refused to sign the document, Albright and others in the Clinton administration unleashed the 78-day NATO bombing of Serbia, which targeted civilian infrastructure. (Prior to the attack, Albright said the U.S. government felt “the Serbs need a little bombing.”) She and the Clinton administration also supported the rise to power in Kosovo of a terrorist mafia that carried out its own ethnic-cleansing campaign against the province’s minorities.
Perhaps Albright’s most notorious moment came with her enthusiastic support of the economic war against the civilian population of Iraq. When confronted by Lesley Stahl of “60 Minutes” that the sanctions were responsible for the deaths of “a half-million children … more children than died in Hiroshima,” Albright responded, “I think this is a very hard choice, but the price — we think the price is worth it.” (While defending the policy, Albright later called her choice of words “a terrible mistake, hasty, clumsy, and wrong.”)
Richard Holbrooke
Like Albright, Holbrooke will have major sway over U.S. policy, whether or not he gets an official job. A career diplomat since the Vietnam War, Holbrooke’s most recent government post was as President Clinton’s ambassador to the U.N. Among the many violent policies he helped implement and enforce was the U.S.-backed Indonesian genocide in East Timor. Holbrooke was an Assistant Secretary of State in the late 1970s at the height of the slaughter and was the point man on East Timor for the Carter Administration.
According to Brad Simpson, director of the Indonesia and East Timor Documentation Project at the National Security Archive at George Washington University, “It was Holbrooke and Zbigniew Brzezinski [another top Obama advisor], both now leading lights in the Democratic Party, who played point in trying to frustrate the efforts of congressional human-rights activists to try and condition or stop U.S. military assistance to Indonesia, and in fact accelerated the flow of weapons to Indonesia at the height of the genocide.”
Holbrooke, too, was a major player in the dismantling of Yugoslavia and praised the bombing of Serb Television, which killed 16 media workers, as a significant victory. (The man who ordered that bombing, now-retired Army Gen. Wesley Clark, is another Obama foreign policy insider who could end up in his cabinet. While Clark is known for being relatively progressive on social issues, as Supreme Allied Commander of NATO, he ordered bombings and attacks that Amnesty International labeled war crimes.)
Like many in Obama’s foreign policy circle, Holbrooke also supported the Iraq war. In early 2003, shortly after then-Secretary of State Colin Powell’s speech to the UN, where he presented the administration’s fraud-laden case for war to the UN (a speech Powell has since called a “blot” on his reputation), Holbrooke said: “It was a masterful job of diplomacy by Colin Powell and his colleagues, and it does not require a second vote to go to war. … Saddam is the most dangerous government leader in the world today, he poses a threat to the region, he could pose a larger threat if he got weapons of mass destruction deployed, and we have a legitimate right to take action.”
Dennis Ross
Middle East envoy for both George H.W. Bush and Bill Clinton, Ross was one of the primary authors of Obama’s aforementioned speech before AIPAC this summer. He cut his teeth working under famed neoconservative Paul Wolfowitz at the Pentagon in the 1970s and worked closely with the Project for the New American Century. Ross has been a staunch supporter of Israel and has fanned the flames for a more hostile stance toward Iran. As the lead U.S. negotiator between Israel and numerous Arab nations under Clinton, Ross’ team acted, in the words of one U.S. official who worked under him, as “Israel’s lawyer.”
“The ‘no surprises’ policy, under which we had to run everything by Israel first, stripped our policy of the independence and flexibility required for serious peacemaking,” wrote U.S. diplomat Aaron David Miller in 2005. “If we couldn’t put proposals on the table without checking with the Israelis first, and refused to push back when they said no, how effective could our mediation be? Far too often, particularly when it came to Israeli-Palestinian diplomacy, our departure point was not what was needed to reach an agreement acceptable to both sides but what would pass with only one — Israel.” After the Clinton White House, Ross worked for the Washington Institute for Near East Policy, a hawkish pro-Israel think tank, and for FOX News, where he repeatedly pressed for war against Iraq.
Martin Indyk
Founder of the Washington Institute for Near East Policy, Indyk spent years working for AIPAC and served as Clinton’s ambassador to Israel and Assistant Secretary of State for Near East Affairs, while also playing a major role in developing U.S. policy toward Iraq and Iran. In addition to his work for the U.S. government, he has worked for the Israeli government and with PNAC.
“Barack Obama has painted himself into a corner by appealing to the most hard-line, pro-Israel elements in this country,” Ali Abunimah, founder of, recently told Amy Goodman of Democracy Now!, describing Indyk and Dennis Ross as “two of the most pro-Israel officials from the Clinton era, who are totally distrusted by Palestinians and others across the Middle East, because they’re seen as lifelong advocates for Israeli positions.”
Anthony Lake
Clinton’s former National Security Advisor was an early supporter of Obama and one of the few top Clintonites to initially back the president-elect. Lake began his foreign policy work in the U.S. Foreign Service during Vietnam, working with Henry Kissinger on the “September Group,” a secret team tasked with developing a military strategy to deliver a “savage, decisive blow against North Vietnam.”
Decades later, after working for various administrations, Lake “was the main force behind the U.S. invasion of Haiti in the mid-Clinton years,” according to veteran journalist Allan Nairn, whose groundbreaking reporting revealed U.S. support for Haitian death squads in the 1990s. “They brought back Aristide essentially in political chains, pledged to support a World Bank/IMF overhaul of the economy, which resulted in an increase in malnutrition deaths among Haitians, and set the stage for the current ongoing political disaster in Haiti.” Clinton nominated Lake as CIA Director, but he failed to win Senate confirmation.
Lee Hamilton
Hamilton is a former chairman of the House Foreign Affairs Committee and was co-chairman of both the Iraq Study Group and 9/11 Commission. Robert Parry, who has covered Hamilton’s career extensively, recently ran a piece on Consortium News that characterized him this way: “Whenever the Republicans have a touchy national-security scandal to put to rest, their favorite Democratic investigator is Lee Hamilton. … Hamilton’s carefully honed skill for balancing truth against political comity has elevated him to the status of a Washington Wise Man.”
Susan Rice
Former Assistant Secretary of Sate Susan Rice, who served on Bill Clinton’s National Security Council, is a potential candidate for the post of ambassador to the U.N. or as a deputy national security advisor. She, too, promoted the myth that Saddam had WMDs. “It’s clear that Iraq poses a major threat,” she said in 2002. “It’s clear that its weapons of mass destruction need to be dealt with forcefully, and that’s the path we’re on.” (After the invasion, discussing Saddam’s alleged possession of WMDs, she said, “I don’t think many informed people doubted that.”)
Rice has also been a passionate advocate for a U.S. military attack against Sudan over the Darfur crisis. In an op-ed co-authored with Anthony Lake, she wrote, “The United States, preferably with NATO involvement and African political support, would strike Sudanese airfields, aircraft and other military assets. It could blockade Port Sudan, through which Sudan’s oil exports flow. Then U.N. troops would deploy — by force, if necessary, with U.S. and NATO backing.”
John Brennan
A longtime CIA official and former head of the National Counterterrorism Center, Brennan is one of the coordinators of Obama’s intelligence transition team and a top contender for either CIA Director or Director of National Intelligence. He was also recently described by Glenn Greenwald as “an ardent supporter of torture and one of the most emphatic advocates of FISA expansions and telecom immunity.” While claiming to oppose waterboarding, labeling it “inconsistent with American values” and “something that should be prohibited,” Brennan has simultaneously praised the results achieved by “enhanced interrogation” techniques. “There has been a lot of information that has come out from these interrogation procedures that the agency has, in fact, used against the real hard-core terrorists,” Brennan said in a 2007 interview. “It has saved lives. And let’s not forget, these are hardened terrorists who have been responsible for 9/11, who have shown no remorse at all for the death of 3,000 innocents.”
Brennan has described the CIA’s extraordinary rendition program — the government-run kidnap-and-torture program enacted under Clinton — as an absolutely vital tool. “I have been intimately familiar now over the past decade with the cases of rendition that the U.S. Government has been involved in,” he said in a December 2005 interview. “And I can say without a doubt that it has been very successful as far as producing intelligence that has saved lives.”
Brennan is currently the head of Analysis Corporation, a private intelligence company that was recently implicated in the breach of Obama and Sen. John McCain’s passport records. He is also the current chairman of the Intelligence and National Security Alliance (INSA), a trade association of private intelligence contractors who have dramatically increased their role in sensitive U.S. national security operations. (Current Director of National Intelligence Mike McConnell is former chairman of the INSA.)
Jami Miscik
Miscik, who works alongside Brennan on Obama’s transitional team, was the CIA’s Deputy Director for Intelligence in the run-up to the Iraq war. She was one of the key officials responsible for sidelining intel that contradicted the official line on WMD, while promoting intel that backed it up.
“When the administration insisted on an intelligence assessment of Saddam Hussein’s relationship to al-Qaida, Miscik blocked the skeptics (who were later vindicated) within the CIA’s Mideast analytical directorate and instructed the less-skeptical counterterrorism analysts to ’stretch to the maximum the evidence you had,’ ” journalist Spencer Ackerman recently wrote in the Washington Independent. “It’s hard to think of a more egregious case of sacrificing sound intelligence analysis in order to accommodate the strategic fantasies of an administration. … The idea that Miscik is helping staff Obama’s top intelligence picks is most certainly not change we can believe in.” What’s more, she went on to a lucrative post as the Global Head of Sovereign Risk for the now-bankrupt Lehman Brothers.
John Kerry and Bill Richardson
Both Sen. Kerry and Gov. Richardson have been identified as possible contenders for Secretary of State. While neither is likely to be as hawkish as Hillary Clinton, both have taken pro-war positions. Kerry promoted the WMD lie and voted to invade Iraq. “Why is Saddam Hussein attempting to develop nuclear weapons when most nations don’t even try?” Kerry asked on the Senate floor in October 2002. “According to intelligence, Iraq has chemical and biological weapons … Iraq is developing unmanned aerial vehicles capable of delivering chemical and biological warfare agents.”
Richardson, whose Iraq plan during his 2008 presidential campaign was more progressive and far-reaching than Obama’s, served as Bill Clinton’s ambassador to the UN. In this capacity, he supported Clinton’s December 1998 bombing of Baghdad and the U.S.-led sanctions against Iraq. “We think this man is a threat to the international community, and he threatens a lot of the neighbors in his region and future generations there with anthrax and VX,” Richardson told an interviewer in February 1998.
While Clinton’s Secretary of Energy, Richardson publicly named Wen Ho Lee, a scientist at the Los Alamos National Laboratory, as a target in an espionage investigation. Lee was accused of passing nuclear secrets to the Chinese government. Lee was later cleared of those charges and won a settlement against the U.S. government.
Robert Gates
Washington consensus is that Obama will likely keep Robert Gates, George W. Bush’s Defense Secretary, as his own Secretary of Defense. While Gates has occasionally proved to be a stark contrast to former Secretary of Defense Donald Rumsfeld, he would hardly represent a break from the policies of the Bush administration. Quite the opposite; according to the Washington Post, in the interest of a “smooth transition,” Gates “has ordered hundreds of political appointees at the Pentagon canvassed to see whether they wish to stay on in the new administration, has streamlined policy briefings and has set up suites for President-elect Barack Obama’s transition team just down the hall from his own E-ring office.” The Post reports that Gates could stay on for a brief period and then be replaced by Richard Danzig, who was Clinton’s Secretary of the Navy. Other names currently being tossed around are Democratic Sen. Jack Reed, Republican Sen. Chuck Hagel (a critic of the Iraq occupation) and Republican Sen. Richard Lugar, who served alongside Biden on the Senate Foreign Relations Committee.
Ivo H. Daalder
Daalder was National Security Council Director for European Affairs under President Clinton. Like other Obama advisors, he has worked with the Project for the New American Century and signed a 2005 letter from PNAC to Congressional leaders, calling for an increase in U.S. ground troops in Iraq and beyond.
Sarah Sewall
Former Deputy Assistant Secretary of Defense for Peacekeeping and Humanitarian Assistance during the Clinton administration, Sewall served as a top advisor to Obama during the campaign and is almost certain to be selected for a post in his administration. In 2007, Sewall worked with the U.S. military and Army Gen. David Petraeus, writing the introduction to the University of Chicago edition of the Army/Marine Corps Counterinsurgency Field Manual. She was criticized for this collaboration by Tom Hayden, who wrote, “the Petraeus plan draws intellectual legitimacy from Harvard’s Carr Center for Human Rights Policy, whose director, Sarah Sewall, proudly embraces an ‘unprecedented collaboration [as] a human rights center partnered with the armed forces.’”
“Humanitarians often avoid wading into the conduct of war for fear of becoming complicit in its purpose,” she wrote in the introduction. “‘The field manual requires engagement precisely from those who fear that its words lack meaning.”
Michele Flournoy
Flournoy and former Clinton Deputy Defense Secretary John White are co-heading Obama’s defense transition team. Flournoy was a senior Clinton appointee at the Pentagon. She currently runs the Center for a New American Security, a center-right think-tank. There is speculation that Obama could eventually name her as the first woman to serve as defense secretary. As the Wall Street Journal recently reported: “While at CNAS, Flournoy helped to write a report that called for reducing the open-ended American military commitment in Iraq and replacing it with a policy of ‘conditional engagement’ there. Significantly, the paper rejected the idea of withdrawing troops according to the sort of a fixed timeline that Obama espoused during the presidential campaign. Obama has in recent weeks signaled that he was willing to shelve the idea, bringing him more in line with Flournoy’s thinking.” Flournoy has also worked with the neoconservative Project for the New American Century.
Wendy Sherman and Tom Donilon
Currently employed at Madeline Albright’s consulting firm, the Albright Group, Sherman worked under Albright at the State Department, coordinating U.S. policy on North Korea. She is now coordinating the State Department transition team for Obama. Tom Donilon, her co-coordinator, was Assistant Secretary of State for Public Affairs and Chief of Staff at the State Department under Clinton. Interestingly, Sherman and Donilon both have ties to Fannie Mae that didn’t make it onto their official bios on Obama’s website. “Donilon was Fannie’s general counsel and executive vice president for law and policy from 1999 until the spring of 2005, a period during which the company was rocked by accounting problems,” reports the Wall Street Journal.
While many of the figures at the center of Obama’s foreign policy team are well-known, two of its most important members have never held national elected office or a high-profile government position. While they cannot be characterized as Clinton-era hawks, it will be important to watch Denis McDonough and Mark Lippert, co-coordinators of the Obama foreign policy team. From 2000 to 2005, McDonough served as foreign policy advisor to Senate Democratic Leader Tom Daschle and worked extensively on the use-of-force authorizations for the attacks on Afghanistan and Iraq, both of which Daschle supported. From 1996 to 1999, McDonough was a professional staff member of the House International Relations Committee during the debate over the bombing of Yugoslavia. More recently, he was at the Center for American Progress working under John Podesta, Clinton’s former chief of staff and the current head of the Obama transition.
Mark Lippert is a close personal friend of Obama’s. He has worked for Vermont Sen. Patrick Leahy, as well as the Senate Appropriations Committee and the Democratic Policy Committee. He is a lieutenant in the Navy Reserve and spent a year in Iraq working intelligence for the Navy SEALs. “According to those who’ve worked closely with Lippert,” Robert Dreyfuss recently wrote in The Nation, “he is a conservative, cautious centrist who often pulled Obama to the right on Iraq, Iran and the Middle East and who has been a consistent advocate for increased military spending. ‘Even before Obama announced for the presidency, Lippert wanted Obama to be seen as tough on Iran,’ says a lobbyist who’s worked the Iran issue on Capitol Hill, ‘He’s clearly more hawkish than the senator.’ ”
Barack Obama campaigned on a pledge to bring change to Washington. “I don’t want to just end the war,” he said early this year. “I want to end the mindset that got us into war.” That is going to be very difficult if Obama employs a foreign policy team that was central to creating that mindset, before and during the presidency of George W. Bush.
“Twenty-three senators and 133 House members who voted against the war — and countless other notable individuals who spoke out against it and the dubious claims leading to war — are apparently not even being considered for these crucial positions,” observes Sam Husseini of the Institute for Public Accuracy. This includes dozens of former military and intelligence officials who spoke out forcefully against the war and continue to oppose militaristic policy, as well as credible national security experts who have articulated their visions for a foreign policy based on justice.
Obama does have a chance to change the mindset that got us into war. More significantly, he has a popular mandate to forcefully challenge the militaristic, hawkish tradition of modern U.S. foreign policy. But that work would begin by bringing on board people who would challenge this tradition, not those who have been complicit in creating it and are bound to continue advancing it.
Re-Instating the Draft
“Obama will call on citizens of all ages to serve America, by developing a plan to require 50 hours of community service in middle school and high school and 100 hours of community service in college every year,” says Rahm.
In the interview, Emanuel was questioned whether participants in the proposed force would live in barracks.
“Somewhere between the age of 18 to 25 you will do three months of training. You can do it at some point in your college time,” he said. “There can be nothing wrong with all Americans having a joint, similar experience of what we call civil defense training or civil service.”
Emanuel said the planned requiring service “will give people a sense of what it means to be an American.”
He said, of course, the plan at that point was flexible.
“We propose three months [but] at the end of the day [if] someone says it should be four … I’m not going sit here and hold up [plans],” Emanuel said.
When the reporter questioned the commitment, Emanuel responded, “Guess what. We have a lot more challenges. We are going to need a lot to do it. If you’re worried about are you going to have to do 50 jumping jacks the answer is yes.”
He chuckled at the reporters concerns.
“Rather than figure out if whether you take a train ride or a barrack. … Think of it this way, it will be a common experience.
“There will be a body of citizens who are ready, capable and trained,” he said.
But the plan, especially its demand that Americans participate in a domestic “force,” has been raising questions.
The blogger Gateway Pundit called Obama’s plan the “creation of his Marxist youth corps,” and DBKP commented, “‘Choosing’ to serve should be approved by parents – not required by the government. No amount of good intentions can sugar-coat words like ‘mandatory,’ ‘compulsory’ or ‘required.’”
Emanuel uses his book, “The Plan: Big Ideas for America,” to specify that he would propose, for all Americans ages 18 to 25, that they “serve their country by going through three months of basic training, civil defense preparation and community service.”
Obama, meanwhile, also has yet to clarify what he meant during his July “Call to Service” speech in Colorado Springs in which he insisted the U.S. “cannot continue to rely only on our military
in order to achieve the national security objectives we’ve set” and needs a “civilian national security force.”