The Tapernanke has spoken

by Dmitry Orlov

Club Orlov (June 26 2013)

If you’ve noticed, the financial markets have been in a bit of a state lately. The latest crisis has been triggered by the Federal Reserve Chairman Bernanke publicly mouthing the opinion that there shall be a “tapering off” of the frenzied free money printing and US government debt-buying scheme that he has been running for quite some time now.

Before proposing the alcoholic “tapering off” metaphor as a viable therapy for what ails the financial realm, Bernanke should have consulted some medical web sites around the internet, to see if it even works. If you are a serious drunk and suddenly go “cold turkey”, then you run the risk of developing Delirium Tremens. Same thing happens if you attempt to “taper off”: withdrawal symptoms are withdrawal symptoms, no matter whether the withdrawal is fast or slow. They include nervousness, depression, not being able to think clearly, fatigue, irritability, jumpiness, nightmares, clammy skin, dilated pupils, insomnia, loss of appetite, sweating, rapid heart rate, pallor, tremors, agitation, severe confusion, hallucinations, fever, seizures and death. Successful detox therapies substitute some other, less addictive drug for alcohol, and then taper the patient off that drug. Unfortunately, Dr Bernanke has just one drug in his bag – free money – leaving just two equally non-therapeutic options: “cold turkey” or “tapering off”. And the latter only sounds better if you don’t happen to know much.

And now that he has said it, there is nothing he can do to un-say it. The denizens of Last Chance Saloon now know that their friendly proprietor will no longer let them continuously run up a tab to keep their habits going, and, once they get miserable enough, they are going to completely lose it and smash the place up. And once that happens there will be no more drinks for anyone, free or otherwise.

Looking at the first three stages of collapse – financial, commercial, political – it is clear why financial collapse should, and to some extent already has, come first. Commercial collapse results from the disruption of the physical flows of products and services; political collapse occurs when governments are no longer able to fulfill their obligations to their citizens in the wake of commercial collapse; but all that is required for financial collapse is for certain assumptions about the future to be invalidated, for finance is not a physical system but a mental construct, one resembling a house of cards that, to stretch this metaphor just a little, can remain stable only while continuously adding more cards, in the sense of continuous credit expansion supported by economic growth. But we are entering a time when a wide variety of physical constraints are making themselves felt around the world, from the depletion of fossil fuel resources, metal ores, phosphate, fresh water and arable land, to massive disruptions because of droughts, floods and heat waves brought by accelerating climate change, to the political instability and upheaval which sweep the world in the wake of each food price spike. All of these elements combine to make a rosy projection for global economic growth untenable. In turn, an extended period of economic stagnation followed by a sustained, perhaps terminal contraction is fatal to a financial system that constantly requires more debt, and more growth.

The system is no longer self-stabilizing. Its sustained existence requires a continuous, concerted intervention: bailouts, “quantitative easing”, “liquidity injections” and so on – all euphemisms for printing money and handing it out to insolvent financial institutions to allow them to continue functioning. Left to its own devices, the financial system would collapse instantly. Nor are these interventions sustainable: the position of the governments that are continually backstopping and papering over the losses in the financial system becomes more and more untenable every time they step in. Although at present the United States is still able to borrow at record low rates, this is not because its debt is any more repayable than Greek or Spanish debt; it is because the markets think that it will be last to default; the United States has been described as “the best-looking horse at the glue factory”. It is the place where big money goes to die. With the US Federal Reserve now committed to endless money-printing and financial asset-buying, the prospects for the US dollar grow dim, and since it is still the reserve currency throughout much of the world, with it grow dim the prospects of other paper currencies around the world. A case in point: Bank of Russia has more than enough foreign currency reserves to buy up every single ruble in circulation, but such a defense in depth against a run on the ruble becomes ineffective if the foreign currency reserves themselves plummet in value, causing the ruble and the dollar to plummet together, like star-crossed lovers jumping off a cliff, embracing each other all the way down. This is why Russia (along with other countries) is now busy accumulating gold.

These quotes are from my Five Stages of Collapse (2013), which is available from all the usual places, pulled from the beginning of the long chapter on Financial Collapse, which goes on to describe ways of cashing out of the system before cash (along with all other financial contrivances) becomes worthless, how to trade in absence of banks or other financial institutions (you can trust) and what life without (access to) money tends to look like.

The Naked Empire

by Robert C Koehler (June 28 2013)

America, America …

Certainly Edward Snowden’s crime is one of public relations. In this day and age, power ain’t just jackboots, tanks and missiles. What he did by outing the NSA and its gargantuan surveillance operation was mess hugely with the American image – the American brand – with its irresistible combination of might and right.

That’s the nature of his “treason”. The secret he gave away was pretty much the same one the little boy blurted out in Hans Christian Andersen’s tale: “The emperor has no clothes!” That is, the government’s security industry isn’t devoted, with benevolent righteousness, to protecting the American public. Instead, it’s obsessively irrational, bent on accumulating data on every phone call we make. It’s a berserk spy machine, seemingly to no sane end. How awkward.

For instance, the government of Hong Kong, in refusing to extradite Snowden as per the Obama administration’s request, explained in its refusal letter that it has “formally written to the US Government requesting clarification on reports about the hacking of computer systems in Hong Kong by US government agencies. It will follow up on the matter, to protect the legal rights of people of Hong Kong.”

In other words, sorry, Naked Empire. We’re not going to do what you ask, and by the way, we have some issues with your behavior we’d like to discuss.

This is not the sort of insolence the world’s only superpower wants to hear, and it’s Snowden’s fault, along with other whistleblowers who preceded him, some of whom, such as Bradley Manning, are enduring harsh consequences for their truth-telling. Traitors, all of them – at least as far as the government is concerned, because, when you strip away the public relations mask, the primary interest of government is the perpetuation of power. And anyone who interferes with that perpetuation, even, or especially, in the name of principle, is a “security risk”.

Incredibly, so much of the Fourth Estate goes along with this, aligning itself with the raw, unarticulated interests of power – with the idea that security equals the status quo. Mainstream coverage of the Snowden affair assumes that a crime has been committed and has no further interest in that aspect of the story: a crime is a crime. The unspoken assumption is that the government protects us by doing whatever it does, and we don’t really need to know the details. We just need to round up the transgressors and bring them to justice, because this, rather than the upholding of some sort of principle independent of raw power, is what constitutes the “national interest”.

The privileged social position of the media is based on the idea that it’s beholden first and foremost to principle and speaks truth to power, not that it’s a glib collaborator with power, but that old saw has been on the wane for decades. It’s just one of many principles that consumer culture seems to have given up on. (Nobody, for instance, seems to worry that “Christmas has gotten too commercial” anymore, either.)

Outside the mainstream, there has, of course, been excellent critical analysis both of Snowden’s revelations and the mainstream media’s snarky dismissal of same, but one assumption strikes me as largely unexamined: that the US government essentially has the power to do whatever it wants, independent of the citizenry living under its auspices, and that our choices are either to go along with it or rail angrily against it. But maybe we have other options as well.

Gene Sharp, the extraordinary historian and theorist of nonviolent power, writes in Power and Struggle: The Nature and Control of Political Power (

Basically, there appear to be two views of the nature of power. One can see people as dependent upon the good will, the decisions and the support of their government or any other hierarchical system to which they belong. Or, conversely, one can see that government or system dependent on the people’s good will, decisions and support.

One can see the power of a government as emitted from the few who stand at the pinnacle of command. Or one can see that power, in all governments, as continually rising from many parts of the society. One can also see power as self-perpetuating, durable, not easily or quickly controlled or destroyed. Or political power can be viewed as fragile, always dependent for its strength and existence upon replenishment of its sources, by the cooperation of a multitude of institutions and people – cooperation which may or may not continue. (Emphasis added.)

Indeed, Snowden, Manning and other whistleblowers have demonstrated the fragility of governmental power with their very actions. Hence the government’s kneejerk response: They’re traitors! They disobeyed and must be punished, because any unofficial leakage of government policy is, by definition, bad for security. Of course the security in question is the security of those in power. The belief that their security is our security is the link that must be broken. As Sharp points out, we don’t automatically owe those in power our good will.

Tim Wise, in an excellent essay putting the NSA revelations into context, writes:




Maybe it is time to remind ourselves that the only things worse than what this government and its various law enforcement agencies do in secret, are the things they’ve been doing blatantly, openly, but only to some, for a long time now.




From a genocidal war against the continent’s original inhabitants to the institution of slavery to Jim Crow … to Vietnam, Agent Orange, the invasion of Iraq and Afghanistan, shock and awe bombing, torture, ecocide, drone warfare … to the millions of people trapped in our prison gulag … the agenda of empire has been going on, with unquestioning public support, for far too long. What the empire fears most is the day that it can no longer take this support for granted. That day is coming.

(c) 2013 Tribune Media Services

Robert Koehler is an award-winning, Chicago-based journalist and nationally syndicated writer. His new book, Courage Grows Strong at the Wound (2010) is now available. Contact him at or visit his website at

The Criminal NSA

by Jennifer Stisa Granick and Christopher Jon Sprigman

The New York Times (June 27 2013)

The twin revelations that telecom carriers have been secretly giving the National Security Agency information about Americans’ phone calls, and that the NSA has been capturing e-mail and other private communications from Internet companies as part of a secret program called Prism, have not enraged most Americans. Lulled, perhaps, by the Obama administration’s claims that these “modest encroachments on privacy” were approved by Congress and by federal judges, public opinion quickly migrated from shock to “meh”.

It didn’t help that Congressional watchdogs – with a few exceptions, like Senator Rand Paul, Republican of Kentucky – have accepted the White House’s claims of legality. The leaders of the Senate Intelligence Committee, Dianne Feinstein, Democrat of California, and Saxby Chambliss, Republican of Georgia, have called the surveillance legal. So have liberal-leaning commentators like Hendrik Hertzberg and David Ignatius.

This view is wrong – and not only, or even mainly, because of the privacy issues raised by the American Civil Liberties Union and other critics. The two programs violate both the letter and the spirit of federal law. No statute explicitly authorizes mass surveillance. Through a series of legal contortions, the Obama administration has argued that Congress, since 9/11, intended to implicitly authorize mass surveillance. But this strategy mostly consists of wordplay, fear-mongering and a highly selective reading of the law. Americans deserve better from the White House – and from President Obama, who has seemingly forgotten the constitutional law he once taught.

The administration has defended each of the two secret programs. Let’s examine them in turn.

Edward J Snowden, the former NSA contract employee and whistle-blower, has provided evidence that the government has phone record metadata on all Verizon customers, and probably on every American, going back seven years. This metadata is extremely revealing; investigators mining it might be able to infer whether we have an illness or an addiction, what our religious affiliations and political activities are, and so on.

The law under which the government collected this data, Section 215 of the Patriot Act, allows the FBI to obtain court orders demanding that a person or company produce “tangible things”, upon showing reasonable grounds that the things sought are “relevant” to an authorized foreign intelligence investigation. The FBI does not need to demonstrate probable cause that a crime has been committed, or any connection to terrorism.

Even in the fearful time when the Patriot Act was enacted, in October 2001, lawmakers never contemplated that Section 215 would be used for phone metadata, or for mass surveillance of any sort. Representative F James Sensenbrenner Junior, a Wisconsin Republican and one of the architects of the Patriot Act, and a man not known as a civil libertarian, has said that “Congress intended to allow the intelligence communities to access targeted information for specific investigations”. The NSA’s demand for information about every American’s phone calls isn’t “targeted” at all – it’s a dragnet. “How can every call that every American makes or receives be relevant to a specific investigation?” Mr Sensenbrenner has asked. The answer is simple: It’s not.

The government claims that under Section 215 it may seize all of our phone call information now because it might conceivably be relevant to an investigation at some later date, even if there is no particular reason to believe that any but a tiny fraction of the data collected might possibly be suspicious. That is a shockingly flimsy argument – any data might be “relevant” to an investigation eventually, if by “eventually” you mean “sometime before the end of time”. If all data is “relevant”, it makes a mockery of the already shaky concept of relevance.

Let’s turn to Prism: the streamlined, electronic seizure of communications from Internet companies. In combination with what we have already learned about the NSA’s access to telecommunications and Internet infrastructure, Prism is further proof that the agency is collecting vast amounts of e-mails and other messages – including communications to, from and between Americans.

The government justifies Prism under the FISA Amendments Act of 2008. Section 1881a of the act gave the president broad authority to conduct warrantless electronic surveillance. If the attorney general and the director of national intelligence certify that the purpose of the monitoring is to collect foreign intelligence information about any non­American individual or entity not known to be in the United States, the Foreign Intelligence Surveillance Court can require companies to provide access to Americans’ international communications. The court does not approve the target or the facilities to be monitored, nor does it assess whether the government is doing enough to minimize the intrusion, correct for collection mistakes and protect privacy. Once the court issues a surveillance order, the government can issue top-secret directives to Internet companies like Google and Facebook to turn over calls, e-mails, video and voice chats, photos, voice­over IP calls (like Skype) and social networking information.

Like the Patriot Act, the FISA Amendments Act gives the government very broad surveillance authority. And yet the Prism program appears to outstrip that authority. In particular, the government “may not intentionally acquire any communication as to which the sender and all intended recipients are known at the time of the acquisition to be located in the United States”.

The government knows that it regularly obtains Americans’ protected communications. The Washington Post reported that Prism is designed to produce at least 51 percent confidence in a target’s “foreignness” – as John Oliver of “The Daily Show” put it, “a coin flip plus one percent”. By turning a blind eye to the fact that 49-plus percent of the communications might be purely among Americans, the NSA has intentionally acquired information it is not allowed to have, even under the terrifyingly broad auspices of the FISA Amendments Act.

How could vacuuming up Americans’ communications conform with this legal limitation? Well, as James R Clapper Junior, the director of national intelligence, told Andrea Mitchell of NBC, the NSA uses the word “acquire” only when it pulls information out of its gigantic database of communications and not when it first intercepts and stores the information.

If there’s a law against torturing the English language, James Clapper is in real trouble.

The administration hides the extent of its “incidental” surveillance of Americans behind fuzzy language. When Congress reauthorized the law at the end of 2012, legislators said Americans had nothing to worry about because the surveillance could not “target” American citizens or permanent residents. Mr Clapper offered the same assurances. Based on these statements, an ordinary citizen might think the NSA cannot read Americans’ e-mails or online chats under the FISA Amendments Act. But that is a government ­fed misunderstanding.

A “target” under the act is a person or entity the government wants information on – not the people the government is trying to listen to. It’s actually okay under the act to grab Americans’ messages so long as they are communicating with the target, or anyone who is not in the United States.

Leave aside the Patriot Act and FISA Amendments Act for a moment, and turn to the Constitution.

The Fourth Amendment obliges the government to demonstrate probable cause before conducting invasive surveillance. There is simply no precedent under the Constitution for the government’s seizing such vast amounts of revealing data on innocent Americans’ communications.

The government has made a mockery of that protection by relying on select Supreme Court cases, decided before the era of the public Internet and cellphones, to argue that citizens have no expectation of privacy in either phone metadata or in e-mails or other private electronic messages that it stores with third parties.

This hairsplitting is inimical to privacy and contrary to what at least five justices ruled just last year in a case called United States versus Jones. One of the most conservative justices on the Court, Samuel A Alito Junior, wrote that where even public information about individuals is monitored over the long term, at some point, government crosses a line and must comply with the protections of the Fourth Amendment. That principle is, if anything, even more true for Americans’ sensitive nonpublic information like phone metadata and social networking activity.

We may never know all the details of the mass surveillance programs, but we know this: The administration has justified them through abuse of language, intentional evasion of statutory protections, secret, unreviewable investigative procedures and constitutional arguments that make a mockery of the government’s professed concern with protecting Americans’ privacy. It’s time to call the NSA’s mass surveillance programs what they are: criminal.


Jennifer Stisa Granick is the director of civil liberties at the Stanford Center for Internet and Society. Christopher Jon Sprigman is a professor at the University of Virginia School of Law.

Why the Ruling Class is So Upset About Edward Snowden

“The Damage to Our Intelligence is Gut-Wrenching to See”

by Gary Leupp

CounterPunch (June 26 2013)

I don’t have a weak stomach, but I confess that watching TV news does get me nauseated. So I do so sparingly. I have of course been following the coverage of the Edward Snowden story, just to see how opinion is being shaped.

In the days immediately after June 5, when Snowden revealed that the US government daily collects meta-data of all phone call records in the US and beyond, the cable news networks seemed puzzled about how to deal with the story.

They couldn’t very well denounce Snowden out of hand, lest they be accused of being shameless lackeys of the state (even though that’s in fact what they are). They all like to posture as “fair and balanced”, so they did initially pose the question: is Snowden a hero, or a villain?

Early opinion polls showed considerable support for Snowden’s action; a Time poll released June 13 showed 54% of those surveyed in the US thought he’d done the right thing. Some unlikely people (Bill O’Reilly, Glenn Beck) called Snowden a “hero”. But that may be changing, as the networks now compete with one another to generate outrage – not at the spying, mind you, but at Snowden for violating the law. O’Reilly’s current position is that while a hero, Snowden should be placed on trial and judged by a jury. Which is to say, he should be apprehended abroad, brought back in handcuffs and treated to the same benefits of the US judicial system enjoyed by a Bradley Manning or a Guantanamo detainee.

He broke the law! He told us: “Any analyst at any time can target anyone”.

“He took an oath”, thunders Dianne Feinstein, chair of the Senate Intelligence Committee (and thus someone complicit in the spying programs). What she means by this is that he broke his pledge, made when he became an employee of the CIA contractor Booz Allen Hamilton – which helps handle the massive effort to monitor all of us daily – to conceal any secrets he obtained as an employee. She is of course not referring to the oath he made at the same time, to uphold the Constitution of the United States, which says very clearly that “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated …”

Snowden has not merely revealed that the US government has forced service providers Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube and Apple to share all their records with itself, in the form of meta-data that can only be accessed for content following the issuance of warrants from (secret) courts, in order to thwart real or imagined terrorist plots.

He hasn’t merely shown that the NSA intercepts 1.7 billion electronic records every day (in order, of course, to thwart the terrorists). He has charged the following:


Any analyst at any time can target anyone. Any selector, anywhere … I, sitting at my desk, certainly had the authorities to wiretap anyone, from you or your accountant, to a federal judge, to even the President …”


He is referring to tens, maybe hundreds of thousands of employees of the state security apparatus. (The numbers are of course secret.)

That was and is the main story. Obama may say, “No one is listening to your phone calls”, and acknowledge, now that Snowden has come forward, that the government “merely” has available for perusal (following clandestine court procedures that secretly authorize such inspection) all of your telecommunications addresses and locations, all of your email and online contacts, lists of all the sites you visit online such that an analyst may sit at his desk with this comprehensive picture of your life but no access to the content of your communications. That’s bad enough.

But Snowden indicates that those with that power can indeed gain access to what Bill Clinton recently called the “meat” of your communications. That is, every word you’ve spoken on the phone recently, or maybe for several years; or test-messaged or instant-messaged online; can be accessed by government “analysts” at their whim.

Now why should this bother anybody? A virtual industry of bloggers has mushroomed overnight, people boasting, in the wake of Snowden’s revelations, that they have nothing to hide. Why should anybody not doing wrong be concerned?

Well, recall how, in 2008, ABC News revealed that National Security Agency staffers enjoyed monitoring satellite phone sex involving US officers in Iraq. It’s worth quoting at length.


‘These were just really everyday, average, ordinary Americans who happened to be in the Middle East, in our area of intercept and happened to be making these phone calls on satellite phones’, said Adrienne Kinne, a 31-year old US Army Reserves Arab linguist assigned to a special military program at the NSA’s Back Hall at Fort Gordon from November 2001 to 2003.

Kinne described the contents of the calls as ‘personal, private things with Americans who are not in any way, shape or form associated with anything to do with terrorism’ […]

Another intercept operator, former Navy Arab linguist, David Murfee Faulk, 39, said he and his fellow intercept operators listened into hundreds of Americans picked up using phones in Baghdad’s Green Zone from late 2003 to November 2007.

‘Calling home to the United States, talking to their spouses, sometimes their girlfriends, sometimes one phone call following another’, said Faulk […]

‘Hey, check this out’, Faulk says he would be told, ‘there’s good phone sex or there’s some pillow talk, pull up this call, it’s really funny, go check it out. It would be some colonel making pillow talk and we would say, ‘Wow, this was crazy’, Faulk told ABC News.


If that’s the way NSA analysts could deal with US military officers in Iraq – fellow cogs in the system, fighting on behalf of US imperialism – how much respect do you suppose they have for you and your privacy? For your security from their searches, their violations?

But the main issue is not your protection from phone-sex interlopers, but protection from those who want to do you harm. The FBI’s “Counterintelligence Program” (COINTELPRO), active from 1956 to 1971, collected information through wiretaps and other means with the specific objective of destroying civil rights and left-wing organizations. One of its stated missions was to use surveillance on activists to release negative personal information to the public to discredit them. In many instances the agents succeeded, and they ruined lives. And their abilities to do so pale in comparison with the abilities of Obama’s NSA.

Tens of Thousands of Spooks, with Access to Your Data

Snowden says that his personal history should not be the issue in the media, but rather his revelations. Certainly this is true. But his history is a part of this story. It shows that the monitoring of personal communications is so vast, requiring so much labor power, that those overseeing it enlist even high school dropouts without formal academic credentials to do what they do.

(I do not mention this out of any disrespect for Snowden. On the contrary, I think he’s obviously highly intelligent and plainly very competent at his former job. One can question the wisdom, judgment and political consciousness of Snowden at  age 21, when he joined the Army as a Special Forces recruit thinking he’d fight in Iraq, as he put it,  “to help free people from oppression”, or his subsequent involvement with the CIA. But I think he’s extremely bright, and more than that, at this point in his life, a real moral exemplar.)

What I mean is that the demand for “analysts” in this data-collecting apparatus is so vast that those running it are surely signing on some people who have excellent computer skills but little understanding of anything else, are control-freaks, bigots, voyeurs (like those referenced above) … And they have ready access to your information.

Just as one example of ignorance within this stratum: after 9/11 a friend of mine was visited by FBI agents inquiring about a recent computer game purchase. She and her husband answered all the questions posed, but she was astounded by the agents’ lack of sophistication.  They asked where the couple was from; India, they replied. “Is that a Muslim country?” they were asked. My friend was both intimidated and amused by the visit. She’d assumed US intelligence personnel would have some basic grasp of geography and history.

Imagine such people accessing your personal information with impunity, thinking, well, here’s a reason to investigate – and doing it even if only just to pass (well-paid) time at their desks?

Remember the “Information Awareness Office” under Admiral John Poindexter, set up by a mysterious agency in the Defense Department in January 2002, and its creepy “Total Information Awareness” program?  The one with the weird icon of an eye atop a pyramid, staring down at the planet, illuminating the Greater Middle East? That was specifically advertised as a body to gather personal information on everybody in the country – phone records, emails, medical records, credit card records, et cetera – so that all this could be made immediately available to law officials when required and without warrants. It generated unease, even during that period in which the Bush-Cheney administration was systematically using fear to justify all kinds of repressive measures. It was defunded by Congress the following year. But the mentality remained, and Congress notwithstanding, the machinery of “total” surveillance obviously grew, along with the culture of secrecy.

In 2004 there were reports, citing Russian intelligence, that the former East German spy chief Markus Wolf had been hired as a consultant by US Homeland Security. I have not found confirmation of them (and Wolf is now dead.) But I thought at the time it was entirely plausible that the Bush administration would be willing to learn a thing or two about domestic spying from the experts of the former Stasi. What ruling elite has ever gained more total information awareness about its citizens than the old German Democratic Republic?  And done it with such elegant legal scaffolding?

Legal, Like East Germany

As historians such as Katherine Pence and Paul Betts have shown, the GDR authorities operated within scrupulously observed legal constraints. One sees this in the film Das Leben der Anderen (The Lives of Others) produced in the reunited Germany in 2006. It depicts the surveillance culture of the former East Germany, leaving the viewer nauseated. As it happens, the protagonist, a popular writer and regime loyalist named Georg Dreyman, is subjected to meticulous surveillance. His home is thoroughly bugged; an agent reports on his conversations, visitors, love-making, et cetera. He is never charged with anything nor punished. At one point his apartment is raided on a suspicion that he’s authored an article critical of the GDR published in the west. He cooperates politely; nothing is found; the authorities leave money for the repair of furniture they’d torn up. Everything according to law.

I thought of that film while reading the lead Boston Globe editorial on June 13. It concludes that the “policies that [Snowden revealed], however objectionable, are properly authorized” while Snowden himself “broke the law”. Thus, you see, he’s not a whistle-blower but a criminal. The editors call for him to be placed on trial, as do virtually all mainstream journalists. I should not be shocked, but it is quite amazing to see Keith Olbermann’s successor, MSNBC’s “progressive” Ed Schultz join the crowd, labeling Snowden a “punk” and lawbreaker. (Chris Hayes however remains, somewhat timidly, pro-Snowden.)

The message to the masses is: How dare Mr Snowden tell the people that they are virtually naked in the eyes of the state, that the United States of America has become one huge airport body-scanner! Because in so doing he betrays state secrets, and helps the terrorists who will now take more precautions to escape surveillance.

And how dare he tell the Chinese that Tsinghua University and the Hong Kong headquarters of Pacnet have been hacked by the NSA, even as the US has accused the Chinese of hacking (in all likelihood, in response to US actions, and less effective, and on a smaller scale)!  How dare he consort with the “enemy”!

US to World: “You Must View Snowden as a Criminal, and Give Him Back”

Suddenly, the Cold War has reappeared. Snowden is charged with espionage, some of his critics alleging that he’s in the service of the PRC and/or Russia or other “enemies”. It in fact appears that Beijing and Moscow both were taken by surprise by this episode, and that both have attempted to handle Snowden’s unexpected presence carefully to avoid annoying the US.

But how should they respond to Washington’s logic, thoroughly embraced by the TV talking heads? “Look”, says the US State Department, expecting the world to cower and obey. “This man has been charged with felonies. We’ve gone through the legal process, through treaties we have with other countries, to have him appropriately returned to face justice. We’ve revoked his passport, so he can’t legally travel, except to be returned to the US. So damn it, do the right thing. Turn him over!”

That’s supposed to be convincing? The media’s complaining of Russian “defiance”. Senator Chuck Schumer appeared on some show suggesting that Putin never misses an opportunity to “poke America in the eye” (referring no doubt to Russian refusal to cooperate in “regime change” in Syria, and refusal to toe the US-Israeli line on Iran). But imagine if a Russian in the US revealed to a US paper that Putin had a massive surveillance program, and Putin demanded his immediate extradition for breaking Russian law? How would the US public react?

Kerry’s talking tough. He’s demanding that Putin not allow Snowden to fly out the country (presumably to Ecuador via Cuba). His tough talk might explain the reported fact that Snowden missed his planned Monday flight out of Moscow. (Might he have threatened to force the Aeroflot plane to land in the US?)

It all, in my humble opinion, boils down to this. The entirety of the ruling elite and the journalistic establishment are keen on defending the programs Snowden has exposed; keen on punishing him for his whistle-blowing; determined to vilify him as a punk, narcissist, egoist, attention-hungry ne’er-do-well (anything but a thoughtful man who made a moral choice that has enlightened people about the character of the US government); feverishly working on damage control while anticipating more damning revelations; and determined to get those four laptops with their incriminating content back into the bosom of the national security state.

What sort of state is it, that says to its own people, we can invade a country based on lies, kill a million people, hold nobody accountable but hey, when one of us does something so abominable as to reveal that the state spies constantly on the people of the world, we have to have a “manhunt” for him and punish him for treason?

The Director of National Intelligence, James Clapper, has the audacity to tell NBC News, “It is literally gut-wrenching to see” Snowden’s revelations … because of the “damage” they do to “our intelligence capabilities”! As though there were really an “our” or “us” at this point. As though we were a nation united, including the mindful watchers and the grateful watched.

No, there are us, and there are them. The tiny power elite that controls the mainstream press and cable channels, the corporations that dutifully hand over meta-data to the state (and then deny doing so to allay consumer outrage), the twin political parties, are sick to their stomachs that they’ve been so exposed.

We in our turn should feel, if not terrorized, nauseated.


Gary Leupp is Professor of History at Tufts University, and holds a secondary appointment in the Department of Religion. He is the author of Servants, Shophands and Laborers in in the Cities of Tokugawa Japan (1994); Male Colors: The Construction of Homosexuality in Tokugawa Japan (1997); and Interracial Intimacy in Japan: Western Men and Japanese Women, 1543-1900 (2003). He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press, 2012). He can be reached at:

Life Outside the Mental Comfort Zone

by Dmitry Orlov

Club Orlov (June 25 2013)

While procrastinating on the topic of Communities that Abide (will it be a series of blog posts, a book, or both?) I’d like to take a step back. I’ve been running this blog for over five years now, and it’s time to take stock.

The subjects I like to explore on this blog lie far outside the mental comfort zone for most people, making it a sort of proving ground of mental fortitude – mine and the readers’. Some topics have become safe for discussion since I started this blog some years ago, others are yet to do so.

Financial collapse is now a perfectly acceptable topic: the financial collapse of 2008 has been postponed by money-printing, runaway sovereign debt and various other kick-the-can-down-the-road schemes, which will all stop working today or tomorrow or the day after. Peak Oil (the fact that conventional oil production peaked in 2005 and that unconventional oil is too expensive to produce to keep industrial economies from collapsing) emerged into the mainstream and then went for a sort of continuous mental loop-the-loop of centrally choreographed delusion. I expect the loop-the-loop to turn into a tailspin once the reality of rapid depletion rates and high costs of the unconventional resources catches up with the delusional script. The end of the American Empire is also quite acceptable as a topic of conversation now, and university faculty can now expound on it without facing any negative repercussions. But that’s a boring topic; as I witnessed in Russia, there is nothing quite as boring as an empire right before its collapse.

But there are some other topics that are still considered beyond the pale. One of these is the idea that the industrial nation-state is a doomed institution throughout much of the world, and that we are headed toward a world of slums run by criminal warlords. Another is that agriculture is a method of growing food that dates to the now bygone period of Earth’s history – the ten thousand-or-so-year period of unusually stable climate during which all of human civilizations will have emerged, risen and fallen.

To comply with the Principle of Least Astonishment (a very useful principle if you want to keep people listening), let us explore in some detail the mental discomfort these topics tend to cause. This will allow you, as you read along, to classify your own reactions, and if you find that you fall into one of the nonproductive categories I will provide, then you can either work at developing a different, more productive reaction, or you can go play fetch with the dog instead, because your participation in this project is entirely optional.

There are various lines in the sand which most people are loathe to cross. To help you gauge your own level of mental discomfort, let us try grouping the expected reactions in accordance with common (though meaningless) political labels. I expect the first two categories to balk at what follows to be the so-called “conservatives” (what it is they are conserving is anyone’s guess – certainly not their land’s once-abundant natural resources) and the so called “liberals” or “progressives” (what it is they are progressing toward is anyone’s guess too – I think they are progressing toward collapse).

The conservatives tend to be more tolerant of separatist and isolationist groups found within their midst, generally disliking government meddling in people’s lives, but on the other hand they are also more likely to eagerly swallow the propaganda spewed forth by their corporate government media, and any criticism “their country right or wrong” is likely to produce an angry reaction, especially if such criticism is coming from a “foreigner”. They also tend to take a dim view of those who do not resemble them ethnically, attempting to preserve Anglo cultural dominance the fiction of the US as an ethnically Anglo country even though the Anglos have already lost their majority status. Some of them even go as far as advocating the use of subjective (person on person) violence to remedy what they perceive as the source of the country’s problems – “immigrants” and such – with the assistance of lightly armed militias and vigilante groups. No self-respecting American-equipped cannibalistic Syrian “freedom fighter” would ever sally forth with such a puny armory, and yet some Americans feel that they can use their pea-shooters to face down the US military. That is pathetic.

The liberals/progressives tend to be more tolerant of criticism (producing some of their own – up to a point) and, being constrained by the requirements of political correctness, they would never (in public) disqualify a criticism simply because it is coming from a “foreigner” or attack groups simply because they are “immigrants” but on the other hand they tend to be all too eager to condemn separatist and isolationist groups on the grounds that they do not share their set of social values, which they deem to be the only right ones. Separatist and isolationist groups tend to come in for harsh treatment for their supposed ill treatment of women, or children, or animals, for their “substandard” educations, for their “substandard” living arrangements and so forth. They tend to couch their rhetoric in the language of universalism: universal human rights, universal rights of women and so forth; the educationalists among them strive for universal literacy (and fall ridiculously far short). They often advocate the use of objective (system on person) violence to remedy what they perceive as the source of the country’s problems – substandard practices of this or that group – by the imposition of government mandates, the dismantlement of the communities in question through regulation, law enforcement, imprisonment and the imposition of large government programs.

Having listened to the rhetoric and the propaganda from both sides, I have found them to be equally obnoxious. I have come to see them as part of a sickness: the brain of the body politic seems to have had its corpus callosum severed (that’s the crossbar switch between the two hemispheres of the brain that allows them to act as a unit). Each side thinks that it represents the whole even as the two sides have all but lost the ability to communicate with each other. This arrangement has evolved as a convenience for the corporate government media whose job is to manipulate them into submission: it is classic “divide and conquer”. But the rhetoric of both groups serves the same purpose: to gain their consent for suppressing, dismantling and destroying all that which does not serve the system. Both groups embrace the use of violence: subjective, “shoot ’em up” sort of person-on-person violence in the case of conservative groups and objective, system-on-person violence in the case of liberals/progressives. Of these, it is the objective violence – which works its destruction through the use of regulations and mandates, educational standards, paperwork requirements, ever-present law enforcement and a hypertrophied surveillance system that is supposed to provide “security” – that produces the wide assortment of bad personal outcomes we see all around us.

What’s worse, both hemispheres of this particular split-brain patient’s brain also suffer from bipolar affective disorder. During the manic phase each hemisphere believes in infinite technological progress toward some sort of space-based, highly automated nirvana; during the depressive phase it believes in some version of the apocalypse, which presupposes more or less instantaneous destruction by forces beyond anyone’s control, which, obviously, it is useless to try to resist. Neither side wants to believe in its steady degeneration into irrelevance and extinction. But perhaps this is not an illness at all, but simply the way we tend to remember things: we remember pleasure and forget pain, and thus we remember being in the state of nirvana as a process, but we remember being in a persistent state of pain as the event that signaled its onset.

John Michael Greer has done a wonderfully thorough job of explaining the tendency to jump to extremes (endless progress or instant destruction) when facing the future, along with the true shape of things, which is that cultures and civilizations germinate, grow, ripen, mellow and rot according to a timeless pattern, and the fact that this particular global technological civilization is following the same script to perfection in spite of it being global and technological. He even trotted out well-forgotten intellectual mighties such as Oswald Spengler to show that there is a science behind his claims. As with all methods, this method has its limits, however: characterize the growth and decay of cultures all you like, but it all becomes moot if a large rock comes around and smashes your Petri dish. And there are two such rocks flying for it right now: one is rapid nonlinear climate change; the other is natural resource depletion. A new narrative is emerging, called NTE, which stands for “near-term (human) extinction” – the idea that we humans won’t be around for more than a couple more generations. I am an optimist, and so I believe that some of us will persist as small bands and tribes of semi-aquatic, nomadic humanoids. What’s more, I find this perspective quite inspiring – far more so than the perspective of breeding many more generations of office plankton whose job is to convert natural resources into smoke and garbage while popping pills to try to stay sane.

Here’s where I was with these ideas five years ago, and that is where I am with them today. The only difference is that now a few more people might pay attention to them, not as a work of whimsy but as something that will affect them and their children. What follows is an excerpt from The New Age of Sail, which I published in August of 2006.

A few decades from now, just off the coast …

It is nearing sunset when the vegan ship sights land. There are two vegans on deck; two more are roused from their hammocks below the deck to help with the landing. They lower and furl the sails, take down and secure the masts, then row and scull the boat through the surf. When she finally noses up onto the beach, they jump down into the water and wade ashore hauling lines, then labor mightily to get her up onto level ground, panting in the stuffy air. They thrust pieces of driftwood under the bow, tie lines around trees and rocks, and roll the boat out of the water and well away from it. To lighten the load, they drain the ballast tanks that kept the boat upright and stable while it was underway. Once the boat is high and dry, and sitting upright on level ground like a giant piece of furniture, they unload their cargo of dried sea squirrel. Finally, they post a watch, and the other three retreat below, stretch out in their hammocks, and rock themselves to sleep, for once without any assistance from the sea.

Sea squirrels are pale, sickly-looking, and, above all, sad. Dried ones doubly so. They are endowed with flabby bags for a body, some ineffectual spiny tendrils, and dangling dark bits of uncertain purpose. One might conjecture that they are mutant shellfish that survived having their shells dissolved by the carbonic acid in the seawater. Being vegans, the vegans would never think of eating one; nor anything else that washes up on the shores of that brownish, carbonated ocean, almost lifeless after that final, desperate binge of coal-burning that occurred just as oil and gas were running out. Picking dead sea squirrels off the beach with a pointed stick is an unpleasant chore, making it useful for teaching children the subtle difference between work and play. Sea squirrels have but two charms: they are at times plentiful, and, dried into flat chips, they burn with a clean, yellow flame – not bad for illumination, and convenient for cooking the food which the vegans both plant and harvest all along the shore.

The Vegans’ passion is for spreading seeds and gathering and consuming the proceeds. They are on an indefinite mission to boldly grow food where no one grew it before. They are carried forth by their ship, which looks like a long box sharpened into a wedge on one end, but is capable of a full warp four knots to windward, and double that in anything more favorable. Their mission is of an indefinite duration because their home port is under several feet of water, and although that water came from pristine, ancient glaciers and icecaps, it is now briny and laced with toxins. And although their grandparents never tire of telling them how at one time their home port had not one, but several excellent vegan restaurants, now there is hardly anything there that a vegan would want to eat, and hardly anyone to eat it with.

The vegans abstain from eating animal flesh not because of their tastes or their sense of ethics, but because most animal flesh has become toxic. The increased mining and burning of coal, tar sands, shale, and other dirty fuels, dust storms blowing in from desertified continental interiors, and the burning and degradation of plastic trash, have released into the biosphere so much arsenic, cadmium, lead, mercury, dioxins, and numerous other toxins, that the vast majority of predatory species, non-vegan humans among them, have become extinct. Since toxin concentrations increase as they travel up the food chain, certain top predators, such as belugas and orcas, went first, followed by most non-vegetarian animals. Along with chemical toxins, the biosphere became inundated with long-lived radionucleotides from derelict nuclear installations left over from the hasty attempts to ramp up nuclear power generation. Those built near the coasts are still bubbling away underwater due to rising ocean levels. And so the only surviving humans are those clever enough to realize that only the plants remain edible.

Although the vegans rarely want for food, this is only because of their Permaculture skills, because growing food has become an uncertain proposition. Droughts and wildfires alternate with torrential rains that wash away the topsoil, the ocean keeps spreading further and further inland, and in better years insects sometimes stage a revival and devastate much of what the vegans have planted. Were they to settle in any one place, they would certainly starve before too long. But because they have boats, and because climate upheaval is constant but uneven, they can be sure that something of what they have planted is growing and bearing fruit somewhere. It is solely by virtue of being migratory, and, over the years, nomadic, that they are able to persist from one generation to the next. They carry what they gather with them, and, carefully conserving the seed stock and constantly experimenting with it, manage to renew it. When a period of devastation runs its course, they step in and plant a new forest garden ecosystem. When they revisit it, after a few weeks or a few years, it may be dead, or overgrown with weeds, or it may be thriving, and yield a harvest of wood, nuts, berries, fruits, tubers, and herbs. And, of course, seeds.

The shore is for gathering food, for hauling out, making repairs, and for congregating. For everything else, there are the boats. They provide shelter, transportation, and a place to store food and other supplies. They carry all the tools needed to repair them, and even to reproduce them. They provide fresh water for drinking and washing, by capturing the rainwater that falls on their decks: one good torrential downpour is enough to fill their freshwater tanks, which hold several months’ supply. They provide escape from wild weather, being sturdy enough to ride it out safely. In open ocean, away from flying and floating debris, they dutifully pound their way up and down towering waves, rattling the bones of the crew hiding in the enclosed cockpit and below the deck, but remaining impervious to either wind or water. It is little wonder, then, that boatbuilding and seafaring skills are at the top of the vegan home schooling curriculum: they are what keeps them afloat.

Extreme Energy, Extreme Implications

Interview with Michael Klare

by James Stafford (June 18 2013)

If oil and gas is a profoundly dynamic phenomenon, then so too must be environmental risk and conflicts over natural resources – and we are not getting the full picture from the mainstream media, according to Michael T Klare, professor of peace and world security studies at Hampshire College, TomDispatch blogger, and author of Rising Powers, Shrinking Planet: The New Geopolitics of Energy (Metropolitan Books, 2008). As risks multiply, conventional sources evaporate and we are left with “extreme” energy, renewables may be the only way to avoid war and disaster.

In this Tom Dispatch exclusive interview with, Klare discusses:

* Why we are talking about a “resurgence” of American power

* Why the issue of US natural gas exports is a geopolitical dilemma

* Why Myanmar is important but not critical to the US Asia-Pacific “pivot”

* Why Myanmar IS critical to China

* Why India and Japan are key to the US’ evolving Asia policy

* Why the shale revolution is the number topic around the world

* Why unconventional oil and gas has the unfair advantage

* Why WE don’t need Keystone XL, but the tar sands industry is desperate

* Why the renewables are the only way forward


Interview by James Stafford of  In a recent article, you opined that “Militarily, culturally, and even to some extent economically, the US remains surprisingly alone on planet Earth in imperial terms, even if little has worked out as planned in Washington”. Can you add to this from the perspective of the unconventional oil and gas boom in the US?

Michael Klare: The United States emerged from the end of the Cold War with the most powerful military force on Earth and, because of the decline of the USSR and its other rivals, was seen as the world’s dominant power.  In recent years, however, the rise of China has led some analysts to question America’s overwhelming superiority, saying that China’s accumulation of economic and technological power will allow it to compete on equal terms with the US in the not-too-distant future.

This, combined with the economic toll generated by the economic crisis of 2008 – largely attributed to lax economic oversight in the US –  has led some to speak of the eventual “decline” of American power.  But now, with the rise in domestic oil and gas production, that talk is disappearing; instead, analysts are speaking of a “resurgence” of American power based on strong oil and gas output.  In terms of the pending decision on whether to expand US natural gas exports, the geopolitical argument for this appears to be trumping the economic arguments. Will the geopolitical argument – natural gas exports to challenge Russia and Iran – win out in Washington?

Michael Klare: This is hard to predict, as the geopolitical argument cuts both ways:
while increased exports bolster American power vis-a-vis Russia and Iran, a revival of domestic manufacturing based on cheap energy also bolsters American power in the global economic equation. I would predict some exports, but not so much as they endanger the expected surge in domestic manufacturing. How important is Myanmar to Washington’s Asia “pivot”, and how should we interpret the sudden blossoming of relations here despite the systematic ethnic cleansing that is taking place? China has the foothold here, but can it maintain it?

Michael Klare: Myanmar is important to the Asia-Pacific pivot, especially in symbolic terms (as it was long in the Chinese orbit), but not especially critical. Far more important are US ties with Japan, the Philippines and, above all, India. You can expect a major US drive to bolster military ties with New Delhi – this will really capture the attention of the Chinese! How important will Myanmar’s potential hydrocarbon reserves be against its position as a strategic gateway?

Michael Klare: Myanmar’s hydrocarbon reserves are not that important to either China or the US.  But it is becoming very important as an alternative delivery route from the Indian Ocean to southwest China, diminishing their reliance on the vulnerable Strait of Malacca, which is largely dominated by the US Navy.  China is keenly determined to reduce its reliance on sea lanes controlled by the US Navy.  Iraqi Kurdistan is shaping up to be one of the hottest exploration venues in the Middle East, and while it comes with a lot of political baggage, oil companies show no concern. What do you think the political risk potential is once the Kurds get a new pipeline up and running directly to Turkey by the end of this year or early next year, courtesy of Anglo-Turkish Genel Energy?

Michael Klare: I think it would be very dangerous to make predictions about this, given all the instability in the region. The Iraqis in Baghdad are obviously very unhappy about this, and have various means to make it difficult for companies that invest there.  But these companies may feel that the risks can be overcome, or minimized.  Given the unrest in Syria and Turkey, I just don’t know how all this will play out.  We’ve written a lot about the petro-politics surrounding the conflict in Syria, both in terms of the Iranian-Qatari race for good pipeline acreage as well as the recent discoveries in the Levant Basin. What role do you think hydrocarbons and hydrocarbon infrastructure are really playing in the end game for this conflict?

Michael Klare: Well, I always tend to look for the role of oil and gas in conflicts like this, and I’m sure that they’re present.  But I suspect that this is less about oil and gas per se than about the ultimate division of power in the Middle East between long-contending actors – the Iranians, Kuwaitis, Turks, Iraqis, Russians, Americans, and so on. Of course, this has a lot to do with oil and gas in the long run, as the victor in this power struggle will be able to dominate the production and sale of hydrocarbons. But for now I see it as a power game first and foremost. What is the number one energy topic that grabs your readers, and how does your coverage of it go beyond the depths (or shallows) of the mainstream media?

Michael Klare: Right now the number one topic is how the “Shale gas (and oil) revolution” will alter the power balance between the United States and its major rivals, especially Russia and China. I heard this in Russia, China, and Mexico during visits to universities and think-tanks to these countries last year – it was always the Number One question. They want to know if other countries can replicate the US success in this field, or will be forever dependent on American fracking technology. People also want to know how this “revolution” will affect the future of renewables. Will more gas production prove a “bridge” to renewables, or a “bridge to nowhere”? In your view, how is the mainstream media being manipulated in the climate change debate? How is the public being cheated out of a rational, smart debate?

Michael Klare: I am concerned that the media is not adequately explaining the difference between conventional and unconventional oil and gas. Proponents of fracking, the Keystone XL pipeline, deep-offshore production, and so on all say that these are just other forms of “oil” and “clean-burning natural gas”, without explaining that vastly different production techniques are involved and that these techniques have significantly worse impacts on the environment. Will we ever get to the real debate, or will interest groups continue to maintain control?

Michael Klare: We can have a fair debate in universities and think-tanks, but the American media are saturated with advertising paid for by the oil and gas industry that distorts the environmental consequences of relying on these fuels – and it’s very hard for ordinary people to challenge these accounts. Recently you have expressed your disappointment over the climate change rallies, focusing on the Keystone XL pipeline. What’s gone wrong? Has the movement lost its momentum?

Michael Klare: Perhaps I’ve expressed some disappointment from time to time but I’ve been very impressed by the emergence of a new movement on college campuses – including my own – to get colleges and universities to eliminate their investments in big carbon corporations, as a way of persuading them to keep unproduced carbon in the ground. Do we need the Keystone XL pipeline?

Michael Klare: We Americans do not need Keystone XL – there are plenty of other available sources of energy, and we can reduce our demand through conservation efforts.  But the tar sands industry desperately needs KXL, as all other practical conduits for exporting increased tar sands production seem to be closed off (like the Northern Gateway pipeline through British Columbia) – meaning they’ll have lots of resources, but no export options.  No wonder they’re desperate to get Obama to approve the pipeline!  What should we know about Keystone XL that the mainstream media doesn’t tell us, or doesn’t understand?

Michael Klare: The fact that KXL will not carry “oil” at all – despite their claims – but a heavily polluting mixture of bitumen, diluents, and toxic chemicals that must be processed through extraordinary means before it can be refined into anything resembling a usable fuel.  How do you address the renewable energy-vs-fossil fuels race?

Michael Klare: My argument is that the production of oil and gas is not a static phenomenon but is undergoing profound changes, involving greater risk to the environment and greater risk of conflict over disputed sources of supply (such as offshore and Arctic reserves).  These risks are bound to multiply as all sources of “easy” oil disappear and we become increasingly reliant on hard-to-reach, hard-to-process “extreme” energy. Only through the accelerated development of renewables can we avoid an inevitable spiral of war and disaster. Is there a point at which we will be able to say that the two can help each other?

Michael Klare: Some investments in biofuels may have this capacity, but otherwise I do not see how. There has been a lot of transparency activity in the US and Europe this year aimed at punishing big oil and its bankers for manipulating energy prices, for which the end consumer eventually foots the bill. Energy price manipulation is a time-honored tradition and usually the giants get a slap on the wrist and a fine that wouldn’t even make them blink. Are times changing, though? Will things be different now?

Michael Klare: Well, we can always hope so.  But with Chinese, Indian, and Russian state-owned companies playing an ever-increasing role in the extraction of fossil fuels, I’m not optimistic about this! Thanks for taking the time to speak with us Michael.


Related articles:

Energy and Geopolitics – New Realities Take Shape: Interview with David Shorr

Will Saudi Arabia Allow the US Oil Boom? Interview with Chris Faulkner


Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Energy Intelligence Report gives you this and much more. Click here to find out more:

For those of you interested in seeing more of Michael’s work please visit his authors page over at TomDispatch:

Bank on Being Bilked

by Leo Gerard (March 25 2013)

It’s hard to believe considering what happened in 2008 on Wall Street and in Washington, but banking is built on trust.

A worker hands his hard-earned dollars to a teller and trusts the money will be deposited and available for withdrawal when needed. Despite the crash on Wall Street, workers still trust bankers to safeguard deposits from robbers and reckless investments.

Granting banks a little less credulity might be wise. Just consider what happened in the past two weeks. A US Senate investigation revealed that the 2010 Dodd-Frank banking reforms utterly failed in the case of the $6.2 billion “London Whale” gambling loss at JPMorgan Chase. Then a US House committee passed seven measures to weaken Dodd-Frank. And there was the European Union’s demand that Cyprus expropriate money from depositors to prevent that nation’s big banks from failing. That means no depositor can trust that a government won’t dip its hands into savers’ accounts to bail too-big-to-fail banks. The trust is gone, baby.

Last week’s bad banking news began in Cyprus. It’s a cautionary tale about trust in both politicians and bankers. Cyprus is a tax haven for wealthy Russians the way the Caymans are for wealthy Americans. The Cypriot financial institutions, which made bad bets on Greek debt, are teetering on the edge of bankruptcy and were closed last week to stave off bank runs.

The European Union, which includes Cyprus but not Russia, was not eager to provide loans to secure moneyed Russians. Eurozone finance ministers and representatives of the International Monetary Fund (IMF) and European Central Bank worked out a deal under which Europe and the IMF would provide $13 billion to bail out the banks if the country took $7.5 billion from depositors’ accounts.

Cypriot and European officials betrayed depositors, particularly small ones whose savings of less than $130,000 supposedly are insured. The newly elected president of Cyprus, Nicos Anastasiades, turned on his own people. He rejected a proposed deal under which Cyprus would take 12.5 percent from depositors with more than $130,000 euros and about half of that from smaller account holders. Anastasiades demanded the rich, often Russian oligarchs, pay less, which meant, of course, the smaller depositors, everyday Cypriot workers, would have to pay more.

As a result, a deal was struck under which 9.9 percent would be taken from the wealthy and 6.75 percent from those with less than $130,000, effectively nullifying their insurance.

Naturally, the working people of Cyprus went crazy. Their president had focused on protecting rich foreigners. And he decided it was fine for the government to reach into workers’ savings accounts and grab money to rescue big banks.

Cypriots asked how a depositor could trust any bank in the Euro Zone now that finance ministers had determined that countries could confiscate money from insured accounts. A 26-year-old Cypriot, Andreas Andreou, told the New York Times he’d withdraw all of his money as soon as the banks re-opened, adding:

I’d rather put the money in my mattress.

Trust is seriously breached when a mattress seems safer than a bank vault. Cypriots pointed out that no one should feel immune. If Cyprus can pinch depositors, any government can.

In 2008, the US Congress did not take bailout money from depositors, but instead from every taxpayer. And it wasn’t a mere $700 billion in Toxic Asset Relief Program (TARP) money. Including loans and other help offered by the Treasury Department, Federal Reserve and FDIC, it’s more like $4.76 trillion, with $1.54 trillion not paid back.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was supposed to give taxpayers some trust that the banks would be sufficiently regulated, that too-big-to-fail wouldn’t happen again. But the London Whale drowned that fantasy.

JPMorgan Chase, long considered the safest Wall Street bank, an institution whose managers lobbied hard for a lily-livered Dodd-Frank, has paid more than $8.5 billion since the crash in fines, settlements and other litigation expenses.

Joshua Rosner, co-author of the New York Times bestseller Reckless Endangerment (2011), analyzed JPMorgan for consulting firm Graham Fisher & Company and wrote in a report titled “JPMorgan: Out of Control”:

JPM has a reputation of being the best managed of the biggest banks. This has enabled the company to employ its muscle with elected officials and thwart regulatory efforts.

Regulators saw no evil as a JPMorgan trader in London lost $6.2 billion last year. A scathing Senate investigative report released March 14 says the nation’s largest bank fought with and dodged federal regulators, misinformed investors and the public and circumvented internal and federal rules.

Less than a week after the Senate released the report, a House committee passed seven bills that would gut Dodd-Frank’s already weak-kneed regulations governing the very derivatives that the London Whale traded.

This action is an example of right-wing Cypriot President Anastasiades’ view of government: protect the wealthy and influential and compel the workers to pay.

It didn’t go over well in Cyprus. After massive street demonstrations, the Cyprus Parliament unanimously rejected the initial plan to seize money from small depositors’ insured accounts to rescue the banks.

But unless Americans step up the way Cypriots did and demand real regulation, as well as send the message that they don’t trust Wall Street by moving their money to community banks and credit unions, they can bank on being bilked. Again.


(c) 2013 Leo Gerard

Leo Gerard, is the International President of the United Steelworkers (USW) union. He also is a member of the AFL-CIO Executive Committee and chairs the labor federation’s Public Policy Committee.

Gerard is co-chairman of the BlueGreen Alliance and on the boards of Campaign for America’s Future and the Economic Policy Institute.


The original version of this article, at the URL below, contains links to further information not included here.