How Bad is the Current Crisis

[Rajiv]

Two related items from Catherine Austin Fitts

How Bad is the Current Crisis

In 2003, Catherine published an article, Solari & the Rise of the Rule of Law. In response to requests from readers regarding what has caused and how bad is the current crisis, we are re-publishing Part IX. - Macroeconomic & Risk Issues on the blog.

Several themes emerge from a review of unsustainable economics in the developed world:

• Debt: A robust economy has been bought at the price of astonishing increases in government, corporate, mortgage and consumer debt. When this is compounded by the growth in financial institution and system risks from derivatives and contingent liabilities, an actuarially honest picture is not pretty. We have dug a much deeper hole thanks to the ability of the central banks to manipulate the gold, stock and other markets to keep the bubble growing. There is an intimate and painful relationship between the financial incentives of global theft and depopulation — whether through economic warfare, biological warfare, terrorism or more traditional warfare — and the magic of compound interest.
• Oil Production Peak: A future of plenty of low cost fossil fuel is no longer with us. The financial incentives for military, covert and corporate conquest of oil reserves in Russia, the Middle East, Eurasia and South America say a lot more about US policy than is to be found in the corporately controlled news. Our failure to institute a system for changing institutional and individual energy consumption patterns in order to achieve energy self-sufficiency, or even sustainable economics in energy, is mirrored in frightening extraction economics and environmental damage throughout the world.

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(contd)

Second related item
An Unanswered Question

An unanswered question proposed for our discussion: Is M3 rising at 15-25% rate really a combination of a much higher M3 printing loans and money (including in the form of fictitious marking up above market of worthless collateral) to insiders within the Tapeworm offset by the deflation of all monetary aggregates accessible to outsiders as the insiders stop making loans and hoard liquidity to de-leverage and wind down their own positions.


In short, is part of the Solari’s slow burn scenario to send the blood to the insiders and shut off circulation to the outsiders? I believe that this is, in fact, what is happening and it is a urgent matter that outsiders take all steps possible to find ways of withdrawing resources and circulating them to trusted and responsible networks.


Derivative Trades Fell Most in 14 Years in Money Market Freeze
By Hamish Risk - Bloomberg.com (3 Mar 2008)

[GRG55]

Re: How Bad is the Current Crisis

OK Rajiv, you got my attention. I cannot keep up with your prodigious posting pace (say that three times quickly). I have periodically picked up bits and pieces of Catherine Austin Fitts on the Solari site, but can you point me to anything where I can understand her terms "Tapeworm" and the "slow burn" she references?

Many thanks. Good food for thought!!
GRG55

[metalman]

Re: How Bad is the Current Crisis

OK Rajiv, you got my attention. I cannot keep up with your prodigious posting pace (say that three times quickly). I have periodically picked up bits and pieces of Catherine Austin Fitts on the Solari site, but can you point me to anything where I can understand her terms "Tapeworm" and the "slow burn" she references?

Many thanks. Good food for thought!!
GRG55

she's a complicated case. she's posted here before...

http://www.itulip.com/forums/showthread.php?t=365

itulip keeps a distance. maybe her ideas are not consistent with the itulip "pragmatic libertarian" philosophy?

ej's response, i think (though not directly... my interpretation) to her ideas re "tapeworm" etc...

http://www.itulip.com/forums/showthr...=4142#poststop

[jk]

Re: How Bad is the Current Crisis

reading fitts scares me. if you take her seriously, there really is an elite conspiracy, a conscious conspiracy and not just a concurrence of interests, running the world. anyway, when i read her i start to feel paranoid, and i hate feeling that way, and so stop reading. this doesn't speak to the truth or falsity of her assertions, just to my willingness to entertain them.

[metalman]

Re: How Bad is the Current Crisis

reading fitts scares me. if you take her seriously, there really is an elite conspiracy, a conscious conspiracy and not just a concurrence of interests, running the world. anyway, when i read her i start to feel paranoid, and i hate feeling that way, and so stop reading. this doesn't speak to the truth or falsity of her assertions, just to my willingness to entertain them.

that's right. we all decided she's too conspiracy theorist to fit in here. somewhere ej posted along those lines... more politely than i did elsewhere ;)

[GRG55]

Re: How Bad is the Current Crisis

reading fitts scares me. if you take her seriously, there really is an elite conspiracy, a conscious conspiracy and not just a concurrence of interests, running the world. anyway, when i read her i start to feel paranoid, and i hate feeling that way, and so stop reading. this doesn't speak to the truth or falsity of her assertions, just to my willingness to entertain them.

metalman, jk: Understood. I have the same reactions. In fact I first came across her through iTulip. I am never pursuaded by conspiracy theories, but in a complex situation it can force some new ways to think about things, without adopting the party line. That's why
I wanted to understand more about tapeworm and slow burn.

[Rajiv]

Re: How Bad is the Current Crisis

GRG - The last post by CA-F really caught my attention and hence the post

I don't have to go to a conspiracy theory mode to see how a "you scratch my back, I scratch your back" society would work in a time of debt deflation - when money supply is shrinking -- and I have been around the block more than a few times to see that we live in a "YSMB-ISYB" society, no matter how much we try to pretend that it isn't so.

As regards the tapeworm economics, you can get at her articles below (click on the images below)








Another good article by her Economics 101 - A Curriculum - by Catherine Austin Fitts

The above article shows up as white type on white background for me - however turning off the styles in the view menu of my browser allows me to see the article

I hope that this helps

[Slimprofits]

Re: How Bad is the Current Crisis

that's right. we all decided she's too conspiracy theorist to fit in here. somewhere ej posted along those lines... more politely than i did elsewhere ;)

This is a question for anyone that falls into the you all camp mentioned above in metalman's post.

Where is the line drawn that seperates Dr. Hudson from Austin-Fitts?

Specifically, I'm thinking of this quote:

Acres Magazine Interview with Dr. Michael Hudson

During the Vietnam War, Robert McNamara at the Defense Department went to Chase Manhattan and other banks and said that he wanted to attract more foreign funds to the dollar so as to stabilize the war-induced balance-of-payments deficit. He and the banks calculated that the most liquid industry in the world was the drug and crime industry — the Mafia, the Colombian drug cartel, etc. — and of course the dictators that America was keeping in power to fight the class war throughout Latin America, Africa and the rest of the Third World. At that time, however, their money was going largely into numbered Swiss bank accounts, pushing up that country’s currency.

So Chase and other banks set up branches throughout the Caribbean and other island quasi-nations to attract this money. The Cayman Islands, for instance, had declared independence from Britain, but then renounced it and joined the empire once again so that it could act as a money laundering center. The U.S. banks that established branches in these countries found an inexpensive source of deposits, and also a way of helping their customers avoid taxation by arranging dummy companies locally — “a veil of tiers,” it was called at the time. But the big picture was clear every three months from the U.S. Treasury Bulletin and the Federal Reserve Bulletin, which reported the deposits recycled from these tax-avoidance branches to the head offices in New York and other money-center cities. Criminal money thus became a mainstay of the U.S. balance of payments, along with the grain exports that in turn required foreign food dependency on the United States.

[GRG55]

Re: How Bad is the Current Crisis

This is a question for anyone that falls into the you all camp mentioned above in metalman's post.

Where is the line drawn that seperates Dr. Hudson from Austin-Fitts?

Specifically, I'm thinking of this quote:

Acres Magazine Interview with Dr. Michael Hudson

Something similar is driving Dubai's frenetic pace today. Except they made it simpler than the US model. Why bother setting up branches in the Caribbean. Make the home jurisdiction a tax haven, and the money will just flow in. Started as an ooze years ago, now a torrent.

[GRG55]

Re: How Bad is the Current Crisis

GRG - The last post by CA-F really caught my attention and hence the post

I don't have to go to a conspiracy theory mode to see how a "you scratch my back, I scratch your back" society would work in a time of debt deflation - when money supply is shrinking -- and I have been around the block more than a few times to see that we live in a "YSMB-ISYB" society, no matter how much we try to pretend that it isn't so.

As regards the tapeworm economics, you can get at her articles below (click on the images below)








Another good article by her Economics 101 - A Curriculum - by Catherine Austin Fitts

The above article shows up as white type on white background for me - however turning off the styles in the view menu of my browser allows me to see the article

I hope that this helps

Thanks for the links Rajiv. Although Catherine Austin Fitts may not be exactly my cuppa tea, one is hard pressed to completely dismiss her sentiments and observations.

BMO Financial Group's Donald Coxe, a grizzled veteran who knows what a real bear market looks like, recently wrote: "The US recession has been caused by a handful of wealthy men. They authorized and financed a large-scale debauchery of the US home mortgage market...No one knows how deep and how long this totally unnecessary financial crisis will last, or the extent of the damage it will inflict on the global economy"

He goes on to reference the FT's Gillian Tett, writing about Wall Street's "begging bowl" campaign seeking equity infusions from Asia, and the backlash created by the banker's open glee at getting help from Ben Bernanke..."The dramatic scale of Fed cuts has prompted concern that Wall Street is still sitting on a putrid mess - contrary to what the US banks told the sovereign wealth funds late last year"
(C1ue: contrary to my inclinations, the consensus is converging on your position at that time - SWFs may be cash rich but they aren't necessarily smart investors)

I almost never read anything by this author (Jim Jubak), but someone sent this article to me...

What's the scariest investing story of 2008 so far?

...Here's my nominee:

The Pension Benefit Guaranty Corp., the government agency that protects the pensions of 44 million workers in case their employers can't (or won't) pay promised benefits, has announced that to avoid going bust it will double the percentage of its portfolio -- to 45% -- that it puts into stocks. An additional 10% will go into alternative investments, including hedge funds.

In other words, facing a $14 billion deficit and even larger projected shortfalls, the Pension Benefit Guaranty Corp., or PBGC, decided not to save (by raising premiums) or to live within its means (by cutting benefits) but to gamble in the financial markets by taking on more risk...

...I've increasingly come to believe that those of us who play by the rules (work hard, live within our paychecks, save) are chumps. The way to get ahead is to gamble big and then, if you lose, find someone to cover your losses.

I've been hearing the same thing in e-mails from some of you. There's sympathy for families that were defrauded in the housing boom and now face foreclosure. There's a willingness to fix the system so that buyers with a mortgage they can't afford don't lose everything. But there's also a deep anger from those of you who played by the rules and didn't buy more house than your paychecks would cover and are now paying the price in falling home values, a slowing economy, jobs lost and a sinking stock market.


Some of you are afraid -- for good reason -- that you'll be picking up the tab not just for honest mistakes but for greed and fraud as well.

Some of you have written to me saying that playing by the rules only makes you a loser. I've tried to argue you out of that conclusion despite my own doubts...
http://articles.moneycentral.msn.com....aspx?page=all

Sentiments like this appear to still be building. The authorities don't seem to have any motivation to stop the shenanigans (witness Fannie Mae doling out unsecured loans to delinquent mortgage holders to avoid writing down the losses). It seems difficult to imagine a scenario other than one where, over time, more people become more aware what the financial and political elite have perpetrated, and what price will be paid for that.

No wonder Barak Obama is receiving so much support.

[tree]

Re: How Bad is the Current Crisis

This business about the PBGC is interesting to me. When I was laid off after becoming ill, I made a decision to cash in my small pension and put the money in my IRA. (It's in short term treasuries at Vanguard.) I was concerned that if my former employer couldn't meet its obligations and the pension went to the PBGC, that I wouldn't be able to get my money until I was 65 and, being sick, I might need it before then. The thought that the PBGC is out there gambling with its funds is nauseating. This is a big story, to my mind.

[Rajiv]

Re: How Bad is the Current Crisis

He and the banks calculated that the most liquid industry in the world was the drug and crime industry — the Mafia, the Colombian drug cartel,

Just for the sake of clarity, it was not just during the Vietnam war that this happened. Gary Webb's excellent reporting in the San Jose Mercury News in the 1996 article series "The Dark Alliance"

For the better part of a decade, a San Francisco Bay Area drug ring sold tons of cocaine to the Crips and Bloods street gangs of Los Angeles and funneled millions in drug profits to a Latin American guerrilla army run by the U.S. Central Intelligence Agency, a Mercury News investigation has found.

This drug network opened the first pipeline between Colombia’s cocaine cartels and the black neighborhoods of Los Angeles, a city now known as the crack capital of the world.

In August 1996, Gary Webb began publishing the results of a yearlong investigation that traced the money fueling the horrific U.S.-backed “contra” war against Nicaragua to the profits from Los Angeles’ 1980s crack epidemic. The CIA led its contra army to spend the entire decade terrorizing the Nicaraguan people and their Sandinista government, happily allowing the contras to flood Los Angeles and other North American cities with cocaine to fund their efforts. Gary provided extensively documented evidence that while poor communities in L.A. paid the price of the crack explosion – from rampant addiction in their neighborhoods to oppressive law enforcement and jailing with Reagan’s stepped-up “war on drugs” – the United States government protected the men moving a great deal of the drugs coming into the city. Local dealers faced life sentences while the bigtime narcos from Washington to Managua went free.

What came next is well known. Gary’s story, and the website he and the San Jose Mercury News created to showcase and expand upon it, were initially the talk of the global village. Politicians cited the article in both Sacramento and Washington. The CIA launched an internal investigation. Millions of people were visiting the website.

But then the backlash came. The L.A. Times, embarrassed at having missed a major story on its own turf, and the New York Times, happy to follow its colleagues’ lead in squashing a story that didn’t fit with its own narrative, wielded their mercenary pens against him. Rather than follow up on his exhaustive research, the attack dogs on both coasts pulled his work apart and attacked him for things he hadn’t even said. Although the CIA’s internal investigation would later confirm many of Gary’s own claims, the paper retracted the story and marginalized Gary to the point where he was forced to quit.

San Jose Mercury News executive editor Jerry Ceppos’ cowardly retreat from Dark Alliance included deleting the website, and destroying thousands of undistributed CDROM versions of the site. It was the Internet’s first book burning. Among Ceppos’ lame excuses for the latter was that the now-famous Dark Alliance logo (above; how much more straightforward could a logo for a story about the CIA and crack be?) was “too suggestive.” (Inherent in that statement is that Ceppos’ could not find sufficient fault with Webb’s story itself to censor the website.) And so, for a long time, the most talked-about investigative news story of the 1990s was largely inaccessible to world beyond the small daily’s reach.

Even when copies of the text from the published stories were posted on websites and sent out to mailing lists, it was not the same. The Dark Alliance website was truly groundbreaking, one of the first innovations in using the Internet to not just replicate but expand what journalism could be. Rather than remaining static, the articles lived on the website, surrounded by images, sound files, reader discussion forums that Gary participated in, and an entire library of background information supporting Webb’s powerful case against the C.I.A. Millions of readers flocked to these pages, a nearly unheard-of response in those early days of the World Wide Web.


Until the end of his life, Gary was immensely proud of this website and its role in expanding the idea of what Internet journalism could be. In 2002, having gotten his hands on one of the few remaining copies of the CD, he triumphantly resurrected it. At that time, Gary wrote:

“This site, which won a CNET “Best of the Web” award in 1996, was constructed from a CDROM made by the San Jose Mercury News to promote its Internet presence. Thousands of CDs were made, then quietly incinerated. The reason: the website’s logo—a crack smoker superimposed over the CIA seal—had been criticized as “too suggestive.” Fortunately a few CDs were saved from the flames. Despite the passage of time, this webpage remains a brilliant testament to the power of Internet journalism.”

Gary Webb, a hero of authentic journalism, an inspiration to truth-seekers around the world, a friend to all of us at Narco News, but now an unemployable outcast in the world of commercial newspapers, took his own life on December 10, 2004. His resurrected website died with him: the company hosting it was bought out and the files lost.

That web site has now been resurrected.

Also Michael Ruppert's work on CIA drug involvement in the late 70's (Carter Administration) is known

From the wiki entry on Ruppert

After graduation from UCLA in June 1973 as the valedictorian for the last three classes of 1973, he was assigned to Wilshire Division patrol, and excelled at patrol work and was subsequently sent on detective assignments, including burglary and homicide. He was later recommended by the narcotics officer-in-charge to attend a two-week DEA training school held in Las Vegas, Nevada. Narcotics was Ruppert's chosen specialty, and has given expert court testimony on the subject 27 times.

In 1977, Ruppert discovered an extensive drug trafficking operation run by the Central Intelligence Agency and went on record about this on-going criminal activity. He resigned from the LAPD in 1978 despite earning the highest rating reports possible, over the tolerance of continued CIA drug dealing activities. Ruppert's personal experience with death threats, 3 shooting attempts on him, aggressive intimidation over his attempted exposure of these illegal drug activities within Los Angeles, and his ethical conflict with tolerance of these activities, was the catalyst for the resignation.

Ruppert filed an official complaint with FBI Special Agent Stan Curry of the L.A. Field Office on December 4, 1978. This was after Ruppert was forced out of LAPD on November 30, 1978.

In 1996 Ruppert achieved some justice through his comments at a televised visit of then Director of Central Intelligence John Deutch to South Central Los Angeles. Deutch had made the trip to Los Angeles to dispel rumors in the black community that followed the publication of Gary Webb's series in the San Jose Mercury News revealing evidence of CIA connections to cocaine dealers in the city, and evidence of CIA and Contra's cocaine trafficking in the US. Webb was a Pulitzer Prize-winning American investigative journalist, best known for his 1996 Dark Alliance investigative report. In Webb's three-part series (later published as a book titled Dark Alliance: The CIA, the Contras, and the Crack Cocaine Explosion), Webb investigated Nicaraguans linked to the CIA-backed Contras who had allegedly distributed crack cocaine into Los Angeles and funneled profits to the Contras. Webb also proved that this influx of Nicaraguan supplied cocaine sparked and significantly fueled the widespread crack epidemic that swept through urban areas.

On November 15, 1996, Ruppert stood at the town hall meeting at Locke High School in Los Angeles and said to Director of Central Intelligence John Deutch, "I am a former Los Angeles Police narcotics detective. I worked South Central Los Angeles and I can tell you, Director Deutch, emphatically and without equivocation, that the Agency has dealt drugs in this country for a long time." He then referred Deutch to three specific CIA agency operations known as Amadeus, Pegasus and Watchtower. At the meeting, Ruppert publicly confronted Deutch, saying that in his experience as an LAPD narcotics officer he has seen evidence of CIA complicity in drug dealing for a long time.

Michael Rupert quoted one entry from Oliver North's diary dated July 5, 1985, which said that $14 million to buy weapons for the Contras, "came from drugs." and he wouldn't need to mention the two hundred and fifty other such entries in his diary, which refer to narcotics.

On October 1, 1997, Ruppert submitted documents to the Select Intelligence Committees of both Houses. To date, it remains only a document submitted in advance of testimony and has not been placed in the Congressional Record.

[Rajiv]

Re: How Bad is the Current Crisis

I've been hearing the same thing in e-mails from some of you. There's sympathy for families that were defrauded in the housing boom and now face foreclosure. There's a willingness to fix the system so that buyers with a mortgage they can't afford don't lose everything. But there's also a deep anger from those of you who played by the rules and didn't buy more house than your paychecks would cover and are now paying the price in falling home values, a slowing economy, jobs lost and a sinking stock market.

Couple that with Bernanke's call for Banks to Forgive Portion of Mortgages.

Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting.

``Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,'' Bernanke said in a speech to bankers in Orlando, Florida, today. ``Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.''

Bernanke's call goes beyond the stance of the Bush administration and previous Fed comments. By comparison, the central bank's Feb. 27 report to Congress called for lenders to ``pursue prudent loan workouts'' through means such as modifying mortgage terms and deferring payments.

The Fed chief highlighted the threat posed by home values falling below mortgage balances, something Treasury Secretary Henry Paulson played down yesterday. Bernanke said the ``recent surge'' in delinquencies has been ``closely linked'' to the slide of home equity.

[c1ue]

Re: How Bad is the Current Crisis

(C1ue: contrary to my inclinations, the consensus is converging on your position at that time - SWFs may be cash rich but they aren't necessarily smart investors)

GRG,

Jury's still out, but the reason for my view on this is simply that the recipients on said investments have completely different aims than those investing - very similar to brokers/hedge funds/mutual fund managers vs. their customers:

The recipient of OPM (other people's money) has only 1 goal: to get more OPM. Anything and everything else is secondary to this ultimate aim.

Certainly some sop must be thrown - i.e. performance, but as the holder of OPM the 'manager' has a nearly infinite range of plays to siphon off, ranging from outright embezzlement, through to manipulation of accounting, onwards to taking too much risk, and down to paying too much fees (to self).

In a very real sense, these 'managers' have the exact same characteristics of the professional grifter: to capitalize on other people's greed via adroit manipulation of human nature.

Having a valuable resource like the 1996 Russian default and subsequent bank machinations is also helpful :rolleyes:

I especially like the one where one bank went bankrupt, but the next day another bank rose under the same owner, with the exact same locations and buildings.

The same thing will happen to the SWFs.

[dbarberic]

Re: How Bad is the Current Crisis

Catherine Austin Fitts is in GATA and appears in the WSJ one page advertisement they did a month or so ago. I guess GATA doesn't think that she is such a hot potato that they won't assocate with her.

...I've increasingly come to believe that those of us who play by the rules (work hard, live within our paychecks, save) are chumps. The way to get ahead is to gamble big and then, if you lose, find someone to cover your losses.

I highly recommend the book The Creature from Jekyll Island by G. Edward Griffin.
http://www.amazon.com/Creature-Jekyl.../dp/0912986212

You can also get a transcription of an interview that Jim Puplava did with him regarding the book:
http://www.financialsense.com/transc...18griffin.html

A key tenet of the book is that the name of the game with central banking is bail out. The Fed is not a representative of the people or there to maintain purchasing power of the currency. The Fed's primary stakeholder is the money center banks and bailing them out when they have gone to far off the deep end. The Fed only cares about the goverment and the public only to the extent that they need to keep both happy enough to prevent the Fed from being closed down.

JIM: With the passage of the Federal Reserve Act creating the Fed, it was no longer necessary for banks to practice caution; and what we have now, or seen created since the Fed, they’ve gotten more reckless. I mean what do you have to worry about if you’re guaranteed a bailout.

EDWARD: Exactly, and that’s one of the reasons that these people said that they were meeting on Jekyll Island – in secret. One of the objectives they had for the creation of the Federal Reserve System was to create a structure which would have a hand in the public purse, so that when the banks got into trouble they would be able to draw upon tax payers’ support to bail them out, and they would do so under the banner of protecting the public. It’s a very clever ploy.
But you know, whenever let’s say some of these banks make outrageous loans to Third World countries that they know that those countries are not going to repay, they know that there’s no capacity in that little country to repay these gigantic loans, but they loan it anyway. Why do they do that? They do it because they know when the time finally comes to fish or cut bait, Congress will vote to pay the loans for those countries. They’ll come to the taxpayer and say, “you know, if Mexico can’t pay its loans to the banks, why there could be a great economic collapse there. In fact, that country may even turn communist, or something like that. And we don’t want a hostile country on our borders. So it’s in the best interests of the United States, it’s in the best interests of you folks, the American taxpayers, to dig in a little deeper and cover the debts for the banks so we can keep these loans going.” They have done this so many times that it’s amazing.
But even when the loans are not to Third World countries, but to large corporations inside the United States like Chrysler or Penn Central, or some huge corporation or even New York City, and these enterprises can no longer keep paying their interest to the banks, then the banks go to their partners in Congress and say, you know: “We’ve got to have taxpayers cover this debt to keep those payments coming because, you know, we don’t want Chrysler to go out of business. Look at all the people that would be put out of work, and no income coming for those families, babies wouldn’t have milk, it would be terrible.” The story goes on and on. “So we’ve got to have the taxpayer put up the money, guarantee the loan, make sure the banks don’t suffer for making the bad loan in the first place, and we’ll do it all in the name of protecting you folks.”