Archive for April, 2010

>The Trouble with Corporate Personhood

2010/04/26 1 comment

>Freedom of Speech for a Fiction

by Christopher Ketcham (February 03 2010)

I often correspond with a long-time Washington DC operator named Leigh Ratiner, who spent forty years in government, serving under Presidents Kennedy, Johnson, Nixon, Ford and Reagan, with cabinet-level posts in the Defense Department, under the Secretary of the Interior, in the Department of Energy, and in the State Department. Usually I’m prompted to contact him while investigating this or that instance of criminality or stupidity in the federal government. We’re in conversation a lot. “Chris, no disrespect intended”, Leigh once wrote, “but I’m not sure yet that you truly understand how profoundly corrupt the government really is. Lying, perjury, devious deception, law breaking have been a constant pattern in the American government for several decades and have driven us to the point where it has become impossible for an intelligent person to trust the government.” Leigh sometimes goes on for pages like this.

In the annals of lying and devious deception we can now add what will hopefully be remembered as one of the foulest decisions – but not a surprising one – by the Supreme Court to be imposed on the American public, namely the majority opinion in Citizens United vs the Federal Election Commission. I’ll let the New York Times summarize: “Corporations have been unleashed from the longstanding ban against their spending directly on political campaigns and will be free to spend as much money as they want to elect and defeat candidates. If a member of Congress tries to stand up to a wealthy special interest, its lobbyists can credibly threaten: We’ll spend whatever it takes to defeat you”.

Or, better yet, as Leigh Ratiner puts it: “Obama’s failures amount to a thimble of sugar compared to this decision, which is equivalent to a truckload of oil barrels filled with rat poison. The spending limits the court overturned were the unlimited sums of money that Lockheed, Boeing or Bank of America can take out of the corporate treasury and give to NBC in exchange for a two minute spot attacking a candidate without the stockholders’ permission. This is gigantic.”

Par for the course in the dying republic, where judges with the regularity of sun-up defend corporate interests against the public interest. But what’s compelling here is that the decision hinges on another longstanding idea, which is that corporations have the rights of living breathing people. The Supreme Court claims in this matter to be defending the corporate right of free speech. The laws of corporate personhood go back to the 1860s, in decisions offered by judges with close ties to the very corporations whose rights they were asked to judge. Corporate citizens, needless to say, have been a plague upon the land ever since. (Joel Bakan, the law professor, has correctly observed that corporate citizenship often accords with sociopathic behavior, the kind of behavior that as a society we do not tolerate from individuals.) In any case, corporate freedom is not a constitutional right, and corporations do not very much care about freedom of speech, press or assembly as it involves the individual. What a corporation cares about it is its collective endeavor. To provide a collectivist institution with the rights of the individual, to announce a corporation as a citizen, is one of those wonderful juridical inventions that could only be taken seriously in a system where law is exploited to veil reality and to render lies as truth. As Leigh Ratiner notes, no intelligent person can trust such a system. And as regards “corporate persons”, Ratiner asks the right question: “If they are natural citizens and commit crimes, why don’t we liquidate them as punishment (since they can’t be put in jail)? Of course, the answer is that if you liquidate them it will hurt the economy and the innocent shareholders. But doesn’t that make it very clear that a corporation is not a person who can be put in a cage or hung by the neck until dead? That’s the kind of person the Founders were trying to protect.”

Right … so, for example, I can’t take a corporation out in the backyard and bury it alive. I can’t smack a corporation flat across the face and break its nose. I can’t take a corporation’s head and split it with an axe, nor can I chop off all its fingers, nor stab out its eyes with a rusty screwdriver, nor burn off its flesh with a blowtorch, nor flay it with an electric sander, nor stomp its kneecaps with a sledgehammer, nor cut its head off and parade it around the room on a broomstick, nor use its entrails as a rappel rope, nor smash its testicles with a spiked bat, nor do any of the things that really should be done to corporations these days – if they were people – but which one would never do to a human being. If only corporate persons would finally show their fleshy faces.

[Originally published at]


Christopher Ketcham, a freelance writer in Brooklyn, New York, is working on a book about US secession movements. Find more of his work at or contact him at

Bill Totten

Categories: Uncategorized

>The Real Socialist Threat is the Military

>Watch Out for Those Pinko-Commies in Camouflage

by Christopher Ketcham (April 22 2010)

I got into an e-mail conversation recently with a former CIA officer and ex-Marine, who, in horror at the Obama administration, went into a Tea Partyist fit denouncing the “communists, socialists, wealth redistribution folks, Democrats in Congress”. This was not his usual lucid style (he has helped me as a source on several stories), and he seemed to have momentarily lost his mind in considering the matter, or, at least, that part of the mind wherein a cold assessment of facts might operate. I wrote him back: “Where are these communist/socialist/wealth-redistribution folks? I see none of their ilk anywhere in Congress.” He never replied.

Perhaps that’s because the “right-wing” types such as my good pal refuse to recognize – or perhaps recognize all too well, and therefore don’t want to talk about it – that whenever wealth needs to be redistributed for the benefit of corporate personhood, our Congress goose-steps to the line. It’s “socialism” for the rich, the powerful, the influential, those able to marshal cash incentives to get their cats’ paws to pass laws that favor their interests, for the doling out of public funds for private benefit. It’s socialism for banks and automakers and big pharma and big agribusiness and the behemoths in energy and defense, and on and on. So much for the glorious independence and striving of the perceived paragons of the free market. The derangement of so many rightists in this country – namely the dingbat Tea Partiers – is clear: They fail to understand that when large corporations hold sway over government there is no “capitalism” and no “free market”, certainly not as Adam Smith imagined it in The Wealth of Nations (1776). And as businesses grow bigger to capture government, so does government grow when captured – how else could it service big business?

Then again, my ex-CIA/ex-Marine source may be on to something about the socialist menace – as he would know all about it, having been trained, directed, housed and pensioned by a grossly expanding branch of government for most of his working life. Consider the path to happiness paved by the bomb-makers and the aircraft and tank and battleship manufacturers and the makers of grenades and rifles and teargas and bullets, and all the ancillaries of the military industrial complex, the “counterterror” thinktanks and mercenary contractors and intelligence-surveillance-security firms. These would not, could not, survive without government contracts, government intervention, government swaddling and succoring and snuggling, and, of course, the perpetual preparation for and making of government-run wars that feed their industries. The imperial war-machine is the great socialist enterprise of our time.

Indeed, if we want real socialism for actual persons, we should all join the US military: Everything is socialized in the military, the personnel getting socialized medicine and socialized housing and socialized transport and much else (socialized bullets and bombs), the ideal and modus operandi being one of purest collectivism, the training the kind that teaches recognition of hierarchies and obedience in that long chain of command – chain is the operative word – wherein you do what you’re told, you listen to the boss, you don’t question, you don’t fend for yourself, you don’t step out of line. How totally un-American. Thus does the military man, having given up the struggle for self-command and self-reliance, receive diapering and feeding and care, ideally from cradle to grave, never opting to grow up and survive in the rigors of the marketplace. Those filthy pinko-commies in the US Army! Who woulda thunk it!

It’s astonishing, though, that these same government-trained and -paid personnel so often are to be found griping about the shape and size of the tit that keeps them alive. I have a close relative, for example, who talks the hard-core right-winger line, complaining endlessly about big government and “socialism” – yet he works for the ever-metastasizing State Department. When he calls me a “leftist”, I like to tell him I have never worked for government, never gotten a government paycheck, nor any grant or subsidy from government, nor any loans, never profited from government personally (as opposed, say, to profiting from government roads), never gotten food stamps or welfare or Medicaid or workman’s compensation or unemployment insurance, nor cashed in my Social Security benefits (forced to pay for them in the first place), nor received any other scrap of so-called “wealth redistribution”. What a leftist I must be.


Christopher Ketcham, a freelance writer in Brooklyn, New York, is working on a book about US secession movements. Find more of his work at or contact him at

Bill Totten

Categories: Uncategorized

>Can US dollar remain world’s currency? Part Four

>The world wants a new reserve currency – would be good for Americans too

Jane D’Arista Interview (Part 4 of 4) (April 20 2010)

Jane D’Arista is a research associate with the Political Economy Research Institute (PERI), University of Massachusetts, Amherst where she also co-founded an Economists’ Committee for Financial Reform called SAFER, that is, stable, accountable, efficient & fair reform: She is also a research associate at the Economic Policy Institute. Jane served as a staff economist for the Banking and Commerce Committees of the US House of Representatives, as a principal analyst in the international division of the Congressional Budget Office. Representing Americans for Financial Reform, Jane has currently given Congressional testimony at financial services hearings. Jane has lectured at the Boston University School of Law, the University of Massachusetts at Amherst, the University of Utah and the New School University and writes and lectures internationally. Her publications include The Evolution of US Finance (1994) a two-volume history of US monetary policy and financial regulation.


PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I’m Paul Jay in Washington. And we’re joined again by Jane D’Arista. She’s an economist at the Political Economy Research Institute (PERI), in Amherst, Massachusetts. She also cofounded Committee of Economists for Financial Reform, Called SAFER. So thanks for joining us again.


JAY: So we’re talking about different possible solutions. So you’ve got another one. What is it?

D’ARISTA: Well, an investment fund, global investment fund that would take the balance of payments surpluses of countries and put them into – give them securities for them, sell them securities, and invest the money back into developing countries.

JAY: So if I’m China or India or somebody that’s got a lot of exports and I’m holding on to a lot of US dollars, as an alternative to just coming back and buying US Treasury bills, I would buy this security from some kind of international, World Bank, global kind of financial institution.

D’ARISTA: Right.

JAY: So why would I do that?

D’ARISTA: They’re getting very worried. The Chinese are not happy. And last year they said we want another system. We want the dollar out of the system. Big shock. And the BRICs joined in. That is Brazil, Russia, India, China. Very powerful emerging nations now have a real voice in the global economy. So the idea that an investment fund is one in which you can attract, also, not only the savings that end up in central banks and government treasuries around the world, but the private savings, the important private savings, which are pension funds, not only in the US and other developed countries, but also in emerging market countries where pension funds are growing like crazy and they have no place to put them. I mean, you can’t keep it all in Chile, as they found out. They have to diversify. So where do they go? What’s the safety for them? Does Brazil go to India? What kind of guarantees are there? So if you have a global fund that looks at this and is guaranteed by all the member countries, so that if it makes mistakes, you know, then everybody’s on the hook – you got to put in more money at the government level to make it work all right.

JAY: So to sum it all up – if I get your main points – number one: the current global system, where the US currency is the currency for all global trade – the reserve currency for the world – is not very good for most of the countries of the world and is not very good for the American people, but it’s pretty good if you’re in the American banking system and you own a bank. So the move towards some kind of reform is really being blocked at the level of finance. But as speculative and, as many people call it, parasitical, this financial sector is, we’re at a time when politicians in the US – but certainly not only the US, in much of the world – are so entwined with this finance sector, that the politics is pretty much as parasitical as the banks. Especially in US right now, you can’t get any kind of serious legislation through, that would just mildly reform the system that caused such crisis. Then the other thing we’ve been talking about, is on the other side, the fact that the wages have been static for so long is one of the fundamental roots of the problem. There is no real purchasing power. So sum it all up for us, where we’re at and where do you think ordinary people, what conclusions they should come to.

D’ARISTA: Well, I think, you know, the power in the US financial sector is, as you say, the roadblock, and its alliance with the political sector, yes.

JAY: Of both parties.

D’ARISTA: Yes, both parties, absolutely. But at the same time what we’re seeing is other countries, they may not be more democratic, they may not be more holier than thou than we are, they may have their crony capitalism, et cetera, but they also have their self interests, and they don’t necessarily see it as allied with ours. So they’re making waves, and in some sense they may force an issue here.

JAY: And your point is the American people should not consider this a threat, that to reform this global system the way some of the other countries want is actually good for Main Street.

D’ARISTA: It is, absolutely, because we’ve gotten the global system into – there’s no fear of inflation. Why? We have so much overcapacity in the world. And we have forgotten the sort of basic economic, practical position that Henry Ford offered us back in the 1920s when he said, pay my workers five dollars a day, because that way they can buy what they make. The world cannot buy – the workers of the world cannot buy what they make.

JAY: Well, even more specifically, the workers of Detroit that used to make $28 an hour are now making $14 an hour. So for the first time since Henry Ford, they can’t buy cars.

D’ARISTA: That’s right. What they haven’t focused on is, well, so why is the dollar so strong? So why can’t we make, and sell abroad and here in the United States, our own goods? It’s not only the cost of labor. It is the fact that the dollar is overpriced, and consistently so, because that is what the central bank does in order to keep Wall Street running at its fast pace. This is incredibly unknown, if you will, that the value of your currency can change your life. Most people do not understand this. They assume it’s wages or other things that are going on in the economies. But it is so important to look at this particular element in the global system and understand that what is happening now, as economies are under the gun and very vulnerable and exchange rates are moving around rather volatilely, that you have an exacerbation, if you will, of competitiveness, and we are repeating to some extent those things that happened in the 1930s.

JAY: Which wind up leading to world war.

D’ARISTA: Exactly.

JAY: Thank you. And thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.

Bill Totten

Categories: Uncategorized

>German Magazine Reveals Drug Companies’ Influence

>to Engineer Swine Flu Fake Pandemic

Posted by Dr Mercola (April 22 2010)

When the swine flu first emerged, World Health Organization officials estimated that between two and 7.4 million could die. The panic that ensued mounted worldwide vaccination programs while government agencies prepared for disaster.

But as the world now knows, swine flu was actually relatively harmless … and the deadly “pandemic” never emerged. As it turns out, those who suspected a greed- and money-driven conspiracy was at play may have been right all along.

As the German magazine Der Spiegel reports, the swine flu pandemic of 2009 may have been engineered by the drug companies:

In mid-May, about three weeks before the swine flu was declared a pandemic, thirty senior representatives of pharmaceutical companies met with WHO Director-General Chan and United Nations Secretary General Ban Ki Moon at WHO headquarters.

The vaccine industry was mainly interested in one question: the decision to declare phase six.

Phase six acted as a switch that would allow bells on the industry’s cash registers to ring, risk-free, because many pandemic vaccine contracts had already been signed. Germany, for example, signed an agreement with the British firm GlaxoSmithKline (GSK) in 2007 to buy its pandemic vaccine – as soon as phase six was declared.

Many jumped on the pandemic bandwagon, but not everyone was fooled. As Spiegel Online reported, Polish health minister, physician Ewa Kopacz, saw through the scam and declined to buy swine flu vaccines for the country. She asked:

Is it my duty to sign agreements that are in the interest of Poles, or in the interest of the pharmaceutical companies?


Digital Journal (March 14 2010)

Spiegel Online (March 12 2010),1518,682613,00.html

Dr Mercola’s Comments:

I remember very well when last year on June 11, the World Health Organization (WHO) raised its swine flu pandemic alert from a five to a six. Already by this time the swine flu virus was showing itself to have mild symptoms, quick recovery time, and low incidence of death among the vast majority of H1N1 patients throughout the world.

Yet all the drug companies needed to begin shipping out their profitable new H1N1 vaccine across the world was for the swine flu to be kicked up one notch, from a phase five to a phase six pandemic … and that is exactly what they got.

How Did a Mild Flu Virus Get the Highest Warning Level Available?

Phase six is the highest warning level that indicates a pandemic capable of widespread human infection.

However, in reality, the word ‘pandemic’ only means that a new virus is spreading across the world. It says nothing about its level of physical danger, but that was not always the case.

WHO actually changed their definition of a pandemic just one month before raising the swine flu alert level.

As Spiegel Online reported:

On the WHO Web site, the answer to the question “What is a pandemic?” included mention of “an enormous number of deaths and cases of the disease” – until May 4 2009. That was when a CNN reporter pointed out the discrepancy between this description and the generally mild course of the swine flu. The language was promptly removed.

So the swine flu only became a “pandemic” because the WHO decided to change the definition in May last year to make it no longer necessary for an enormous amount of people to have contracted an illness or died before a pandemic could be called.

Instead, under the new definition, it doesn’t matter how many, or how few, people are affected. All a disease has to do to be labeled a pandemic is move beyond a few countries’ borders.

So in mid-May 2009, just weeks before the swine flu was declared a pandemic, what do you think the thirty senior pharmaceutical company representatives wanted to discuss when they met with WHO Director-General Chan and United Nations Secretary General Ban Ki Moon at WHO headquarters?

By changing the definition, nations were compelled to implement pandemic plans and to purchase H1N1 flu vaccines – some already had existing contracts in place to do so! In the blink of an eye, this enabled drug companies to pocket billions of dollars on fast-tracked, untested vaccines.

Swine Flu Hysteria

In the beginning, even before it was declared a level six pandemic by WHO, a group of “scientists” were sounding the alarm that this might indeed be the terrifying, deadly pandemic they had been expecting for over half a century.

We were told that young, healthy people, pregnant women and small children were falling ill and quickly dying, and the virus was spreading rapidly. They even suggested it could mutate into an even more dangerous form that could kill countless numbers of people.

The drug companies, of course, also played a role in keeping up this mounting hysteria. According to Spiegel Online:

The pharmaceutical industry was particularly adept at keeping this vision alive. Manufacturers of flu remedies and vaccines even funded a group of scientists devoted solely to this issue: the European Scientific Working Group on Influenza, which regularly held conferences and meetings of experts.

The lobbying group was headed by Albert Osterhaus of the Erasmus Medical Center in Rotterdam, who also happened to be one of the WHO’s most influential advisors on influenza vaccines.

The Scam, Exposed

The scare phenomenon … the scare machine … the fear mongering that took hold of much of the world last year as government officials spread panic in the form of inaccurate swine flu statistics and worst-case scenarios turned out to be a major scam.

It started to come out in late 2009 when British and French media began saying the H1N1 pandemic had been “hyped” by medical researchers {1} to further their own cause, boost research grants and line the pockets of drug companies.

Ontario health officials also declared H1N1 a “dud” pandemic {2}, stating the huge government investment made so far may have been unjustified. And a study by researchers at Harvard University and the Medical Research Council Biostatistics Unit in the UK also found that the “pandemic” was never a cause for alarm {3}.

After analyzing H1N1 deaths in the United States in the spring, then projecting outcomes for this past fall, they found the flu season should have been no different than a typical flu season – and possibly even milder than average!

A Faked Pandemic!

On January 4, fourteen members from ten countries in the Council of Europe stunned the world by calling H1N1 a FAKED pandemic!

In a motion asking the council to investigate the declaration of H1N1 as a pandemic, these members accused pharmaceutical companies of faking the pandemic {4} and farming it out to the world, so they could fill their pockets with the proceeds:

In order to promote their patented drugs and vaccines against flu, pharmaceutical companies have influenced scientists and official agencies, responsible for public health standards, to alarm governments worldwide.

They have made them squander tight health care resources for inefficient vaccine strategies and needlessly exposed millions of healthy people to the risk of unknown side-effects of insufficiently tested vaccines.

The motion, spear-headed by Dr Wolfgang Wodarg, chairman of the Parliamentary Assembly of the Council of Europe (PACE), goes on to say:

The “bird-flu”-campaign (2005/2006) combined with the ‘swine-flu’ campaign seem to have caused a great deal of damage not only to some vaccinated patients and to public health budgets, but also to the credibility and accountability of important international health agencies. The definition of an alarming pandemic must not be under the influence of drug-sellers.

The member states of the Council of Europe should ask for immediate investigations on the consequences at national as well as European level.

In the United States, we should be doing the same thing, by demanding a call to action for complete, detailed accountings from the CDC, the FDA, the Advisory Committee on Immunization Practices (ACIP) and all health agencies and academic researchers and scientists who have stakes in any drug that is mass-marketed.

At the very least, this swine flu fiasco will likely make many Americans think twice before standing in line for an experimental vaccine against a very mild disease.

As for how it will impact the workings of the public health agencies … well, that remains to be seen. As it stands, as of April 9 2010 the US CDC is STILL recommending Americans get vaccinated for 2009 H1N1 {5}.

Outrageous, yes, but true nonetheless.







Related Links:

WHO and Big Pharma: Guilty of Blackmail and Extortion in Swine Flu Fiasco?

Harvard Takes it Back and Says Swine Flu was Oversold

What May Be the Single Biggest Threat to Your Health?

Bill Totten

Categories: Uncategorized

>The Compound Interest Paradox

>FSK’s Guide to Reality (June 02 2007)

I made an updated series of posts on the Compound Interest Paradox. Some people complained this post is too complicated, and I made a simpler version.

By a wide margin, this is my most popular post. It’s popular for a good reason. You don’t understand the corrupt nature of the economic system until you understand the Compound Interest Paradox.

I’ve seen the following argument mentioned on many “critics of the Federal Reserve” pages. It confused me immensely until I finally figured it out. The argument is that in a financial system like the one in the United States, where money is created via debt, the only outcome can be that the banks will eventually own everything. The problem is that, in the course of repaying a loan, the sum amount of payments always exceeds the amount of the loan. The net effect of a loan is to decrease the amount of money in circulation. Since money can only be put into circulation via a loan, the system guarantees that the banks will eventually own practically everything.

Suppose you buy a house for $350,000. You make a $50,000 downpayment and take out a loan for $300,000 at a fixed six percent interest rate payable over thirty years. Your total payments over the lifetime of the loan (assuming you don’t repay it early), will be $647,514.

What is the effect of this loan on the money supply? When you take out the loan, the money supply was increased by $300,000. Either the bank loaned you money that was already on deposit, or it borrowed the money from the Federal Reserve at the discount rate. As you pay off your loan, money is removed from circulation. In practice, as you pay off your loan, that money will be used to issue other loans, or be paid out as the bank’s expenses and profits. (Actually, the bank typically will sell your loan immediately so it isn’t exposed to the risk that the short-term interest rate will change. That was the cause of the Savings & Loan crisis; banks were borrowing short-term from depositors but lending long-term to mortgages. When short-term interest rates spiked up due to inflation and the abandonment of the gold standard, the banks were stuck.)

The net effect of your loan, viewed in isolation, is that the total money supply has DECREASED by $347,514. You collected $300,000 and repaid $647,514. Fortunately for you, between the time you received your loan and when you repaid it, the bank was also issuing other loans to other people. Enough extra money was printed so that you could repay your loan.

But where does that $347,514 go? It goes to the financial industry. They are receiving the money in the future, when it will be worth less than it is now. Some of that money is paid out as profits and salaries and expenses. But what effort did the bank spend to create the $300,000 it gave you? The answer is: no effort at all. It was just a bookkeeping entry. They may have borrowed the money from the Federal Reserve at the risk-free rate of 5.25%, so they could loan it to you at six percent, but the Federal Reserve ultimately just printed the money it lent to the bank. The bank had sufficient collateral, its assets and other deposits (and now your mortgage).

In such a system, the banks will eventually own everything. The only way for new money to be created is by a loan, and money lent out is always less than money repaid. Total debt can only increase exponentially over time.

That is why newspapers and television are never critical of the banking industry. You will never see a major newspaper or TV show criticize the fundamental structure of our financial system. That’s because the banks were careful to make sure they control all the major media. After all, with all the money, it’s very easy to buy up all the major media. Their control is hidden via trusts and preferred voting shares. Plus, any story critical of the banking industry really wouldn’t be entertaining. It would be too complicated for the average person to understand and wouldn’t attract advertisers. A TV station wouldn’t want to lose the ads placed by banks.

However, the banks don’t own absolutely everything. A careful person can minimize his use of debt, and eventually build up a reasonable amount of investments. Plus, debt at a rate of only six percent might be beneficial, if you can invest the proceeds at ten percent or more. It’s only possible to do this because other people are making loans as well. If you knew that the loan you took out would be the last one ever issued, you would never be able to repay it.

Each loan has the effect of decreasing the number of dollars in circulation, because the payments always are more than the principal. What would happen if all the banks got together and said “let’s collude and offer no more new loans”? As loans were repaid, there would be fewer and fewer dollars in circulation. Prices would drop. Some people would be unable to pay off their loans. The banks would foreclose, taking possession of real assets, even though the dollars they loaned out cost nothing to print. Provided the bank had managed its risk effectively, the value of the confiscated assets, plus the loan repayments received, would be enough to stay in business and still profit.

If all outstanding loans were called in, would there be enough dollars in circulation to pay them all back simultaneously? I suspect the answer is no, but I couldn’t find hard statistics. That’s why the Federal Reserve is able to lower the money supply by increasing interest rates. As interest rates are raised, fewer new loans are issued. The net effect is that loans are called back and the amount of money in circulation decreases.

The Federal Reserve is able to force banks to collude and offer fewer loans, because the Federal Reserve controls interest rates. If the interest rate was so high that no new loans were offered at all, then banks would just invest their assets with the Federal Reserve at that rate, instead of investing by issuing loans.

Economic cycles are inevitable in an economy where money is only created by debt. Artificially low interest rates encourage borrowing. At some point, those loans need to be repaid and there’s a temporary decrease in available money. During a recession or depression, loans are defaulted on and the banks take possession of real assets. That is the only time that total debt decreases, but even with these defaults, debt increases exponentially faster than the money supply.

In my “Discounted Cashflow Paradox” post, I made an argument that the value of a dollar is zero. If the supply of dollars in circulation is less than the sum of all outstanding loans, then the value of a dollar is not zero, it’s imaginary! I mean imaginary in the strict Mathematical sense. If there’s no way that all outstanding loans could be simultaneously repaid, then the supply of dollars will always be less than the total demand. If you solve the equations, you get (I suspect), an imaginary number. In practice, this does not occur, because new loans are always being issued.

I really need to look up this statistic – sum total of all outstanding loans and sum total of all dollars in circulation. I have no idea where to look, but I suspect that the sum of all dollars is far less than the sum of all loans. New loans need to keep being issued to prevent collapse.

For example, the accumulated federal deficit is larger than the current M2 money supply. How can the government be in debt by more money than actually is in circulation? That’s kind of silly.

Of course, if there was an absolute bar on issuing new loans, it would soon be obvious to everyone what is happening. Instead, what happens is that the price of a loan is increased slightly. This means that marginal loans are not issued. There are now slightly fewer dollars in circulation, but not so much fewer that the entire scam is exposed. Only the people with the worst credit rating are forced into bankruptcy. Does this sound familiar? It’s the current “sub-prime lending” problem.

The Federal Reserve doesn’t say “Let’s increase the wealth confiscation rate”. Instead, they say “We are concerned about inflation and decreasing unemployment and we are increasing the short-term interest rates”.

Why should the Federal Reserve be concerned about decreasing unemployment? Decreasing unemployment means that workers are starting to be able to demand higher salaries. Their standard of living is increasing. That means that there is more wealth available due to a more productive economy. That wealth needs to be confiscated. The easiest way to confiscate it is to take money out of circulation, forcing everyone who has a loan to have a harder time repaying it.

When the money supply starts getting too tight, the fed lowers interest rates. However, the average person does not get to borrow at the risk-free rate. The benefits of financial stimulation (lower rates) primarily go to financial industry insiders. The average person just sees inflation, especially if he has money in the bank instead of inflation-hedged investments.

Plus, the average person does not know in advance when interest rates are going to be raised or lowered. That makes it much riskier for the average person to take out a loan. An insider has the opportunity to profit immensely.

There needs to be continuous inflation or else the whole system will collapse. Inflation is needed to ensure there’s enough new money to pay back all the loans. If everybody simultaneously refused to borrow money, the financial system would collapse. If a substantial percentage of people simultaneously refused to borrow money, everyone else would be forced into bankruptcy.

Another benefit of inflation is that the average person keeps his money in the bank, or has benefits such as a pension or social security. These payments are not properly adjusted for inflation. Inflation allows the financial industry and government to slowly confiscate these assets. That’s why the government doesn’t want to ever contract the money supply too much. If the money supply contracted too much there would be deflation and the average person, who is holding mostly cash, would benefit.

As long as the Federal Reserve keeps a balance, the average person won’t get wise to the situation. As long as a certain number of new loans are made, the average person will have access to enough money to repay his debts. There will be some foreclosures and bankruptcies, but from the point of view of the average person, those people deserved it. They won’t say “The financial system was stacked against them – a certain number people had to go bankrupt because there wasn’t enough money in circulation”.

Most of the people who are aware of the details of this scam are themselves billionaires already. Knowing the defect in the financial system, they are able to profit from it immensely. Plus, they are insiders who know in advance which way interest rates are going to be moved. It’s easy to make money if you know that. They have no incentive to fix the current system, except for the possibility that it might completely collapse soon. Any billionaire who is aware of the system can profit immensely from it. Any billionaire who is not aware will soon lose his wealth. With an awareness of the manipulations of others, it is possible to structure your own investments to maximum advantage. The basic advice I would give the average person is to minimize debt and invest in concrete assets – stocks or real estate or your own business.

If the banks wound up obviously owning everything, the average person would revolt. Some of the assets are hidden in trusts, so the average person doesn’t know about it. Most media companies are incorporated in a way that insiders effectively control the company, even though they own a minority interest, through the issue of preferred voting shares. The money supply and tax rate are carefully managed so that the average person gets to own enough so that they don’t revolt.

The national debt is actually absolutely necessary under the current system. Money can only be created via debt, and debt increases exponentially faster than the supply of money. The only way that someone can have money is for someone else to be in debt by an even bigger amount. Since the government is the only entity that can have unlimited debt without being forced into bankruptcy, the government needs to have bigger and bigger debt just so that there would be a supply of money for other people to have.

Is there any escape from this system? I think there is, but it would take a massive coordinated effort. I’m worried that the government and media are too corrupt to be trusted to fix this problem. It’s tricky, because any solution would have to be implemented without breaking any existing laws, which are specifically designed to prevent anyone from ending this system of abuse.

I thought about advocating a return to a barter system. That wouldn’t work, because a person doing barter legally has to pay income taxes on the value of his transaction, and the only valid means for paying taxes is with dollars. Because the government demands that taxes be paid in dollars, that creates a certain demand for dollars. It’s impossible to live legally without dollars, because you have to pay your taxes. Maybe that’s why the income tax had to be implemented the same time as the Federal Reserve system was established. Without income taxes, a person could effectively boycott the Federal Reserve, only making enough transactions in dollars to pay their taxes and dealing in barter otherwise. Since barter transactions are taxed the same as dollar transactions, with taxes paid in dollars, there’s no way to boycott the Federal Reserve system by returning to a barter system.

The only way to fix the monetary system is by changing the laws. There’s no way for individuals to legally boycott the standard financial system, because they have to pay their taxes in dollars.

That’s one thing that annoys me about the other “critics of the Federal Reserve” websites. They explain the problem, but they don’t really propose a workable solution. I don’t think there is a solution possible without getting enough grassroots support to change the laws.

Bill Totten

Categories: Uncategorized

>Looting Main Street

>How the nation’s biggest banks are ripping off American cities with the same predatory deals that brought down Greece

by Matt Taibbi (Issue 1102, April 15 2010)

If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama. Pack got rudely introduced to life in post-crisis America last August, when word came down that she and 1,000 of her fellow public employees would have to take a little unpaid vacation for a while. The county, it turned out, was more than $5 billion in debt – meaning that courthouses, jails and sheriff’s precincts had to be closed so that Wall Street banks could be paid.

As public services in and around Birmingham were stripped to the bone, Pack struggled to support her family on a weekly unemployment check of $260. Nearly a fourth of that went to pay for her health insurance, which the county no longer covered. She also fielded calls from laid-off co-workers who had it even tougher. “I’d be on the phone sometimes until two in the morning”, she says. “I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard – foreclosure, bankruptcy. I’d go to bed at night, and I’d be in tears.”

Homes stood empty, businesses were boarded up, and parts of already-blighted Birmingham began to take on the feel of a ghost town. There were also a few bills that were unique to the area – like the $64 sewer bill that Pack and her family paid each month. “Yeah, it went up about 400 percent just over the past few years”, she says.

The sewer bill, in fact, is what cost Pack and her co-workers their jobs. In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 – but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world’s grandest toilet – “the Taj Mahal of sewer-treatment plants” is how one county worker put it. What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human shit into billions of dollars of profit for Wall Street – and misery for people like Lisa Pack.

And once the giant shit machine was built and the note on all that fancy construction started to come due, Wall Street came back to the local politicians and doubled down on the scam. They showed up in droves to help the poor, broke citizens of Jefferson County cut their toilet finance charges using a blizzard of incomprehensible swaps and refinance schemes – schemes that only served to postpone the repayment date a year or two while sinking the county deeper into debt. In the end, every time Jefferson County so much as breathed near one of the banks, it got charged millions in fees. There was so much money to be made bilking these dizzy Southerners that banks like JP Morgan spent millions paying middlemen who bribed – yes, that’s right, bribed, criminally bribed – the county commissioners and their buddies just to keep their business. Hell, the money was so good, JP Morgan at one point even paid Goldman Sachs $3 million just to back the fuck off, so they could have the rubes of Jefferson County to fleece all for themselves.

Birmingham became the poster child for a new kind of giant-scale financial fraud, one that would threaten the financial stability not only of cities and counties all across America, but even those of entire countries like Greece. While for many Americans the financial crisis remains an abstraction, a confusing mess of complex transactions that took place on a cloud high above Manhattan sometime in the mid-2000s, in Jefferson County you can actually see the rank criminality of the crisis economy with your own eyes; the monster sticks his head all the way out of the water. Here you can see a trail that leads directly from a billion-dollar predatory swap deal cooked up at the highest levels of America’s biggest banks, across a vast fruited plain of bribes and felonies – “the price of doing business”, as one JP Morgan banker says on tape – all the way down to Lisa Pack’s sewer bill and the mass layoffs in Birmingham.

Once you follow that trail and understand what took place in Jefferson County, there’s really no room left for illusions. We live in a gangster state, and our days of laughing at other countries are over. It’s our turn to get laughed at. In Birmingham, lots of people have gone to jail for the crime: More than twenty local officials and businessmen have been convicted of corruption in federal court. Last October, right around the time that Lisa Pack went back to work at reduced hours, Birmingham’s mayor was convicted of fraud and money-laundering for taking bribes funneled to him by Wall Street bankers – everything from Rolex watches to Ferragamo suits to cash. But those who greenlighted the bribes and profited most from the scam remain largely untouched. “It never gets back to JP Morgan”, says Pack.

If you want to get all Glenn Beck about it, you could lay the blame for this entire mess at the feet of weepy, tree-hugging environmentalists. It all started with the Cahaba River, the longest free-flowing river in the state of Alabama. The tributary, which winds its way through Birmingham before turning diagonally to empty out near Selma, is home to more types of fish per mile than any other river in America and shelters 64 rare and imperiled species of plants and animals. It’s also the source of one of the worst municipal financial disasters in American history.

Back in the early 1990s, the county’s sewer system was so antiquated that it was leaking raw sewage directly into the Cahaba, which also supplies the area with its drinking water. Joined by well – intentioned citizens from the Cahaba River Society, the EPA sued the county to force it to comply with the Clean Water Act. In 1996, county commissioners signed a now-infamous consent decree agreeing not just to fix the leaky pipes but to eliminate all sewer overflows – a near-impossible standard that required the county to build the most elaborate, ecofriendly, expensive sewer system in the history of the universe. It was like ordering a small town in Florida that gets a snowstorm once every five years to build a billion-dollar fleet of snowplows.

The original cost estimates for the new sewer system were as low as $250 million. But in a wondrous demonstration of the possibilities of small-town graft and contract-padding, the price tag quickly swelled to more than $3 billion. County commissioners were literally pocketing wads of cash from builders and engineers and other contractors eager to get in on the project, while the county was forced to borrow obscene sums to pay for the rapidly spiraling costs. Jefferson County, in effect, became one giant, TV-stealing, unemployed drug addict who borrowed a million dollars to buy the mother of all McMansions – and just as it did during the housing bubble, Wall Street made a business of keeping the crook in his house. As one county commissioner put it, “We’re like a guy making $50,000 a year with a million-dollar mortgage”.

To reassure lenders that the county would pay its mortgage, commissioners gave the finance director – an unelected official appointed by the president of the commission – the power to automatically raise sewer rates to meet payments on the debt. The move brought in billions in financing, but it also painted commissioners into a corner. If costs continued to rise – and with practically every contractor in Alabama sticking his fingers on the scale, they were rising fast – officials would be faced with automatic rate increases that would piss off their voters. (By 2003, annual interest on the sewer deal had reached $90 million.) So the commission reached out to Wall Street, looking for creative financing tools that would allow it to reduce the county’s staggering debt payments.

Wall Street was happy to help. First, it employed the same trick it used to fuel the housing crisis: It switched the county from a fixed rate on the bonds it had issued to finance the sewer deal to an adjustable rate. The refinancing meant lower interest payments for a couple of years – followed by the risk of even larger payments down the road. The move enabled county commissioners to postpone the problem for an election season or two, kicking it to a group of future commissioners who would inevitably have to pay the real freight.

But then Wall Street got really creative. Having switched the county to a variable interest rate, it offered commissioners a crazy deal: For an extra fee, the banks said, we’ll allow you to keep paying a fixed rate on your debt to us. In return, we’ll give you a variable amount each month that you can use to pay off all that variable-rate interest you owe to bondholders.

In financial terms, this is known as a synthetic rate swap – the spidery creature you might have read about playing a role in bringing down places like Greece and Milan. On paper, it made sense: The county got the stability of a fixed rate, while paying Wall Street to assume the risk of the variable rates on its bonds. That’s the synthetic part. The trouble lies in the rate swap. The deal only works if the two variable rates – the one you get from the bank, and the one you owe to bondholders – actually match. It’s like gambling on the weather. If your bondholders are expecting you to pay an interest rate based on the average temperature in Alabama, you don’t do a rate swap with a bank that gives you back a rate pegged to the temperature in Nome, Alaska.

Not unless you’re a fucking moron. Or your banker is JP Morgan.

In a small office in a federal building in downtown Birmingham, just blocks from where civil rights demonstrators shut down the city in 1963, Assistant US Attorney George Martin points out the window. He’s pointing in the direction of the Tutwiler Hotel, once home to one of the grandest ballrooms in the South but now part of the Hampton Inn chain.

“It was right around the corner here, at the hotel”, Martin says. “That’s where they met – that’s where this all started”.

They means Charles LeCroy and Bill Blount, the two principals in what would become the most important of all the corruption cases in Jefferson County. LeCroy was a banker for JP Morgan, serving as managing director of the bank’s southeast regional office. Blount was an Alabama wheeler-dealer with close friends on the county commission. For years, when Wall Street banks wanted to do business with municipalities, whether for bond issues or rate swaps, it was standard practice to reach out to a local sleazeball like Blount and pay him a shitload of money to help seal the deal. “Banks would pay some local consultant, and the consultant would then funnel money to the politician making the decision”, says Christopher Taylor, the former head of the board that regulates municipal borrowing. Back in the 1990s, Taylor pushed through a ban on such backdoor bribery. He also passed a ban on bankers contributing directly to politicians they do business with – a move that sparked a lawsuit by one aggrieved sleazeball, who argued that halting such legalized graft violated his First Amendment rights. The name of that pissed-off banker? “It was the one and only Bill Blount”, Taylor says with a laugh.

Blount is a stocky, stubby-fingered Southerner with glasses and a pale, pinched face – if Norman Rockwell had ever done a painting titled “Small-Town Accountant Taking Enormous Dump”, it would look just like Blount. LeCroy, his sugar daddy at JP Morgan, is a tall, bloodless, crisply dressed corporate operator with a shiny bald head and silver side patches – a cross between Skeletor and Michael Stipe.

The scheme they operated went something like this: LeCroy paid Blount millions of dollars, and Blount turned around and used the money to buy lavish gifts for his close friend Larry Langford, the now-convicted Birmingham mayor who at the time had just been elected president of the county commission. (At one point Blount took Langford on a shopping spree in New York, putting $3,290 worth of clothes from Zegna on his credit card.) Langford then signed off on one after another of the deadly swap deals being pushed by LeCroy. Every time the county refinanced its sewer debt, JP Morgan made millions of dollars in fees. Even more lucrative, each of the swap contracts contained clauses that mandated all sorts of penalties and payments in the event that something went wrong with the deal. In the mortgage business, this process is known as churning: You keep coming back over and over to refinance, and they keep “churning” you for more and more fees. “The transactions were complex, but the scheme was simple”, said Robert Khuzami, director of enforcement for the SEC. “Senior JP Morgan bankers made unlawful payments to win business and earn fees”.

Given the shitload of money to be made on the refinancing deals, JP Morgan was prepared to pay whatever it took to buy off officials in Jefferson County. In 2002, during a conversation recorded in Nixonian fashion by JP Morgan itself, LeCroy bragged that he had agreed to funnel payoff money to a pair of local companies to secure the votes of two county commissioners. “Look”, the commissioners told him, “if we support the synthetic refunding, you guys have to take care of our two firms”. LeCroy didn’t blink. “Whatever you want”, he told them. “If that’s what you need, that’s what you get. Just tell us how much.”

Just tell us how much. That sums up the approach that JP Morgan took a few months later, when Langford announced that his good buddy Bill Blount would henceforth be involved with every financing transaction for Jefferson County. From JP Morgan’s point of view, the decision to pay off Blount was a no-brainer. But the bank had one small problem: Goldman Sachs had already crawled up Blount’s trouser leg, and the broker was advising Langford to pick them as Jefferson County’s investment bank.

The solution they came up with was an extraordinary one: JP Morgan cut a separate deal with Goldman, paying the bank $3 million to fuck off, with Blount taking a $300,000 cut of the side deal. Suddenly Goldman was out and JP Morgan was sitting in Langford’s lap. In another conversation caught on tape, LeCroy joked that the deal was his “philanthropic work”, since the payoff amounted to a “charitable donation to Goldman Sachs” in return for “taking no risk”.

That such a blatant violation of anti-trust laws took place and neither JP Morgan nor Goldman have been prosecuted for it is yet another mystery of the current financial crisis. “This is an open-and-shut case of anti-competitive behavior”, says Taylor, the former regulator.

With Goldman out of the way, JP Morgan won the right to do a $1.1 billion bond offering – switching Jefferson County out of fixed-rate debt into variable-rate debt – and also did a corresponding $1.1 billion deal for a synthetic rate swap. The very same day the transaction was concluded, in May 2003, LeCroy had dinner with Langford and struck a deal to do yet another bond-and-swap transaction of roughly the same size. This time, the terms of the payoff were spelled out more explicitly. In a hilarious phone call between LeCroy and Douglas MacFaddin, another JP Morgan official, the two bankers groaned aloud about how much it was going to cost to satisfy Blount:

LeCroy: I said, “Commissioner Langford, I’ll do that because that’s your suggestion, but you gotta help us keep him under control. Because when you give that guy a hand, he takes your arm.” You know?

MacFaddin: [Laughing] Yeah, you end up in the wood-chipper.

All told, JP Morgan ended up paying Blount nearly $3 million for “performing no known services”, in the words of the SEC. In at least one of the deals, Blount made upward of fifteen percent of JP Morgan’s entire fee. When I ask Taylor what a legitimate consultant might earn in such a circumstance, he laughs. “What’s a ‘legitimate consultant’ in a case like this? He made this money for doing jack shit”.

As the tapes of LeCroy’s calls show, even officials at JP Morgan were incredulous at the money being funneled to Blount. “How does he get fifteen percent?” one associate at the bank asks LeCroy. “For doing what? For not messing with us?”

“Not messing with us”, LeCroy agrees. “It’s a lot of money, but in the end, it’s worth it on a billion-dollar deal”.

That’s putting it mildly: The deals wound up being the largest swap agreements in JP Morgan’s history. Making matters worse, the payoffs didn’t even wind up costing the bank a dime. As the SEC explained in a statement on the scam, JP Morgan “passed on the cost of the unlawful payments by charging the county higher interest rates on the swap transactions”. In other words, not only did the bank bribe local politicians to take the sucky deal, they got local taxpayers to pay for the bribes. And because Jefferson County had no idea what kind of deal it was getting on the swaps, JP Morgan could basically charge whatever it wanted. According to an analysis of the swap deals commissioned by the county in 2007, taxpayers had been overcharged at least $93 million on the transactions.

JP Morgan was far from alone in the scam: Virtually everyone doing business in Jefferson County was on the take. Four of the nation’s top investment banks, the very cream of American finance, were involved in one way or another with payoffs to Blount in their scramble to do business with the county. In addition to JP Morgan and Goldman Sachs, Bear Stearns paid Langford’s bagman $2.4 million, while Lehman Brothers got off cheap with a $35,000 “arranger’s fee”. At least a dozen of the county’s contractors were also cashing in, along with many of the county commissioners. “If you go into the county courthouse”, says Michael Morrison, a planner who works for the county, “there’s a gallery of past commissioners on the wall. On the top row, every single one of ’em but two has been investigated, indicted or convicted. It’s a joke.”

The crazy thing is that such arrangements – where some local scoundrel gets a massive fee for doing nothing but greasing the wheels with elected officials – have been taking place all over the country. In Illinois, during the Upper Volta-esque era of Rod Blagojevich, a Republican political consultant named Robert Kjellander got ten percent of the entire fee Bear Stearns earned doing a bond sale for the state pension fund. At the start of Obama’s term, Bill Richardson’s Cabinet appointment was derailed for a similar scheme when he was governor of New Mexico. Indeed, one reason that officials in Jefferson County didn’t know that the swaps they were signing off on were shitty was because their adviser on the deals was a firm called CDR Financial Products, which is now accused of conspiring to overcharge dozens of cities in swap transactions. According to a federal antitrust lawsuit, CDR is basically a big-league version of Bill Blount – banks tossed money at the firm, which in turn advised local politicians that they were getting a good deal. “It was basically, you pay CDR, and CDR helps push the deal through”, says Taylor.

In the end, though, all this bribery and graft was just the table-setter for the real disaster. In taking all those bribes and signing on to all those swaps, the commissioners in Jefferson County had ­basically started the clock on a financial time bomb that, sooner or later, had to explode. By continually refinancing to keep the county in its giant McMansion, the commission had managed to push into the future that inevitable day when the real bill would arrive in the mail. But that’s where the mortgage analogy ends – because in one key area, a swap deal differs from a home mortgage. Imagine a mortgage that you have to keep on paying even after you sell your house. That’s basically how a swap deal works. And Jefferson County had done 23 of them. At one point, they had more outstanding swaps than New York City.

Judgment Day was coming – just like it was for the Delaware River Port Authority, the Pennsylvania school system, the cities of Detroit, Chicago, Oakland and Los Angeles, the states of Connecticut and Mississippi, the city of Milan and nearly 500 other municipalities in Italy, the country of Greece, and God knows who else. All of these places are now reeling under the weight of similarly elaborate and ill-advised swaps – and if what happened in Jefferson County is any guide, hoo boy. Because when the shit hit the fan in Birmingham, it really hit the fan.

For Jefferson County, the deal blew up in early 2008, when a dizzying array of penalties and other fine-print poison worked into the swap contracts started to kick in. The trouble began with the housing crash, which took down the insurance companies that had underwritten the county’s bonds. That rendered the county’s insurance worthless, triggering clauses in its swap contracts that required it to pay off more than $800 million of its debt in only four years, rather than forty. That, in turn, scared off private lenders, who were no longer ­interested in bidding on the county’s bonds. The banks were forced to make up the difference – a service for which they charged enormous penalties. It was as if the county had missed a payment on its credit card and woke up the next morning to find its annual percentage rate jacked up to a million percent. Between 2008 and 2009, the annual payment on Jefferson County’s debt jumped from $53 million to a whopping $636 million.

It gets worse. Remember the swap deal that Jefferson County did with JP Morgan, how the variable rates it got from the bank were supposed to match those it owed its bondholders? Well, they didn’t. Most of the payments the county was receiving from JP Morgan were based on one set of interest rates (the London Interbank Exchange Rate), while the payments it owed to its bondholders followed a different set of rates (a municipal-bond index). Jefferson County was suddenly getting far less from JP Morgan, and owing tons more to bondholders. In other words, the bank and Bill Blount made tens of millions of dollars selling deals to local politicians that were not only completely defective, but blew the entire county to smithereens.

And here’s the kicker. Last year, when Jefferson County, staggered by the weight of its penalties, was unable to make its swap payments to JP Morgan, the bank canceled the deal. That triggered one-time “termination fees” of – yes, you read this right – $647 million. That was money the county would owe no matter what happened with the rest of its debt, even if bondholders decided to forgive and forget every dime the county had borrowed. It was like the herpes simplex of loans – debt that does not go away, ever, for as long as you live. On a sewer project that was originally supposed to cost $250 million, the county now owed a total of $1.28 billion just in interest and fees on the debt. Imagine paying $250,000 a year on a car you purchased for $50,000, and that’s roughly where Jefferson County stood at the end of last year.

Last November, the SEC charged JP Morgan with fraud and canceled the $647 million in termination fees. The bank agreed to pay a $25 million fine and fork over $50 million to assist displaced workers in Jefferson County. So far, the county has managed to avoid bankruptcy, but the sewer fiasco had downgraded its credit rating, triggering payments on other outstanding loans and pushing Birmingham toward the status of an African debtor state. For the next generation, the county will be in a constant fight to collect enough taxes just to pay off its debt, which now totals $4,800 per resident.

The city of Birmingham was founded in 1871, at the dawn of the Southern industrial boom, for the express purpose of attracting Northern capital – it was even named after a famous British steel town to burnish its entrepreneurial cred. There’s a gruesome irony in it now lying sacked and looted by financial vandals from the North. The destruction of Jefferson County reveals the basic battle plan of these modern barbarians, the way that banks like JP Morgan and Goldman Sachs have systematically set out to pillage towns and cities from Pittsburgh to Athens. These guys aren’t number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark – and walk away with big money. “It’s not high finance”, says Taylor, the former bond regulator. “It’s low finance”. And even if the regulators manage to catch up with them billions of dollars later, the banks just pay a small fine and move on to the next scam. This isn’t capitalism. It’s nomadic thievery.

More by Matt Taibbi:;kw=[blog,58584]

Bill Totten

Categories: Uncategorized

>Eyjafjallajokull: Impending Catastrophe?

>by Timothy Bancroft-Hinchey

Pravda.Ru (April 17 2010)

Eyjafjallajökull. While some say it is “unpronounceable”, it would be a good idea to get used to the name because for sure it is going to be around the international media for a long time to come. Eyjafjallajökull is threatening to become an ecological catastrophe. Eyjafjallajökull is dangerous, it is toxic, is poses a serious health threat and it has always been a precursor of worse disasters to come.

Let us call a spade a spade. And let us start to treat these issues with a frank, sincere openness and inform people of what is going on. Eyjafjallajökull (ei-zha-fiAla-jo-kUtl). Island-Mountains Glacier. It’s done it before and it wasn’t pretty. It erupted in 920, 1612, 1821 to 1823 and now in 2010. All of the previous eruptions were precursors to more massive activity from the neighbouring Katla volcano, which this time, according to geologists, could take one to two years to erupt. And Eyjafjallajökull is the dwarf, Katla the giant.

The last time Eyjafjallajökull erupted, the outpouring of toxic ash went on (intermittently) for around two years. If after three days European airspace is closed down (Austria, Belgium, Bosnia-Herzegovina, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Ireland, Latvia, Luxembourg, Netherlands, Poland, Slovakia, Slovenia, Sweden, Switzerland, Ukraine have closed their airspace totally; Belarus, Croatia, France, Italy, Lithuania, Norway, Serbia, Spain, Bulgaria, Greece and Turkey have severe restrictions, some almost total), let us imagine what can happen if this goes on for a couple of months. Or if the wind changes and blows it south-west across Canada and the USA.

Then what happens when Katla blows?

It is a question of going to bed on Wednesday night, waking up on Thursday morning and finding oneself in a different world.

Economic impact

In the first 24 hours after the eruptions on April 13 and 14 (when the crater blew through 200 metres of compacted ice), 29,000 flights from and to Europe were cancelled. Saturday added a further 16,000 (out of 22,000), as the plume rises eleven kilometres in height and contains particles of glass, sand and rock which would tear an aircraft’s engine to shreds. The impact on an industry already reeling from the collapse of the economic and banking system is some 200 million US Dollars per day. With the situation at Eyjafjallajökull worsening, the situation in the skies cannot be expected to improve.

Health hazard

Let us tell the truth. It is alarming.

Once again the World Health Organization has nothing to say (after all, what to expect from an organization which stood back and watched A H1N1 sweep the globe and limited itself to informing us how far it was spreading instead of doing something?), apart from the fact that “so long as ash remains in the upper atmosphere, there will not likely be an increased risk of health effects”.

Things fall, Newtonwise. Gravity and stuff.

According to research into the matter being belched out of Eyjafjallajökull, around 25% of the particles are less than ten microns in size. Here the WHO contradicts itself: “The small particulates less than ten microns in size are more dangerous because they can penetrate deeper into the lungs” (Dr Maria Neira, Director of Public Health and Environment, World Health Organization).

She adds “If people are outside and notice irritation in their throat and lungs, a runny nose or itchy eyes, they should return indoors and limit their outdoor activities”.

So then, there is a health risk. The last time Eyjafjallajökull had an episode was in 1821, pouring tonnes of ash containing toxic fluoride gas into the atmosphere. It lasted not 24 hours, but until 1823, causing the deaths of many cattle and sheep through fluor poisoning. The winds were more clement, dissipating the plume and blowing it in several directions. When another Icelandic volcano, Laki, blew in 1783 and 1784, 120 million tonnes of sulphur dioxide was released (three times the European industrial output in 2006), resulting in thousands of deaths across Europe.

While this article is presenting a worst-case scenario, and is not an attempt at scare-mongering, it is a valid point to entertain the notion that you can wake up one morning in a changed world. Eyjafjallajökull has reared its head. Let us hope that for the first time in the last thousand years, Katla decides not to follow suit.

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Bill Totten

Categories: Uncategorized