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Japan Wants to Power 300,000 Homes With Wireless Energy From Space

WarOnYou — Sat, 05 Sep 2009 10:10:15 +0000

Japan’s Wireless, Power-Generating, Solar Satellite Inhabitat

Japan has serious plans to send a solar-panel-equipped satellite into space that could wirelessly beam a gigawatt-strong stream of power down to earth and power nearly 300,000 homes.

The satellite will have a surface area of four square kilometers, and transmit power via microwave to a base station on Earth. Putting solar panels in space bypasses many of the difficulties of installing them on Earth: in orbit, there are no cloudy days, very few zoning laws, and the cold ambient temperature is ideal.

A small test model is scheduled for launch in 2015. To iron out all the kinks and get a fully functional system set up is estimated to take three decades. A major kink, presumably, is coping with the possible dangers when a 1-gigawatt microwave beam aimed at a small spot on Earth misses its target.

The $21 billion project just received major backing from Mitsubishi and designer IHI (in addition to research teams from 14 other countries).

[via Bloomberg via Inhabitat]

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Two Analysts Who Think We’ll Soon Be Hunting Squirrels And Eating Cat Food

WarOnYou — Fri, 14 Aug 2009 19:44:59 +0000

We clicked over to Zero Hedge last night for a brief check-in on the decline and fall of civilization. We found these two beauts.

As with many reports in this genre, the logic is weakened by the dismissiveness and arrogance of the rhetoric, but the reports make some excellent points. They’re also a fun contrast to endless celebrations of the v-shaped recovery crowd.

To briefly summarize:

Our collective debt is still vastly higher than it was in the early 1930s and in Japan in the 1990s.
Consumers account for 70% of economic growth, and they’re broke
The banks are still insolvent, but they’re now allowed to lie about it
Recovering from crises like this takes years

Collapse In The Wake of the Fed’s Wall Street Bubble?, by Bob Chapman

Collapse in the Wake of the Fed’s Wall Street Bubble

The New Bull Market Fallacy, by Naufal Sanaullah at Shadow Capitalism.

The New Bull Market Fal lacy

See Zero Hedge’s take on these here >

A Cure for an Ailing Economy: Taxing the Rich

shamuscook — Mon, 10 Aug 2009 07:16:35 +0000

A Cure for an Ailing Economy: Taxing the Rich

By Shamus Cooke

Healthcare isn’t the only social ill in the U.S. that needs a serious remedy. The list is long and growing: state budget crises, unemployment, infrastructure, education, housing, food assistance, etc. These are all things that must be paid for, but the money seems to be in short supply. When a country is in as much debt as the U.S., – $12 trillion and counting — the tasks at hand seem all but unachievable.

And this is exactly what many politicians would like you to believe.

Fortunately, the seriousness of the crisis is forcing a return to a forgotten, “radical” debate. For the first time in decades, some mainstream media and politicians are posing an extremely controversial question: should we increase taxes on the rich — and if so, how much?

The debate is being open to the public for lack of other options. The social inequality in the U.S. has been rising for decades, and has now reached the point where most of the population has zero disposable income; millions owe much more than they own. The only people who have money to spare are the wealthy. Another reason to tax the rich is that “…tax increases on high-income residents are less harmful than spending cuts; wealthier taxpayers tend to pay higher taxes from savings, not money they would otherwise spend.” (The New York Times, August 3, 2009).

Not pursuing higher taxes on the rich is resulting in social devastation. Look no farther than California, where Governor Schwarzenegger proudly declared that the state budget deficit was balanced “without raising taxes.” Instead, the budget was balanced at the expense of education, health care, welfare, etc. The working class and poor bore nearly the full extent of the burden. This dynamic is quickly turning the country backwards to a world that resembles the last depression.

Indeed, during the great depression tax rates for the wealthiest were raised significantly, from 24% in 1929, to 79% in 1936. Again, it was economic necessity — combined with a growing working class insurgency — that determined the tax increase.

Tax rates for the wealthy remained high for decades — 90% at times — until Regan “revolutionized” the system. The man Obama speaks so highly of lowered the national income dramatically: taxes for the wealthiest individuals fell from 70% to 33% with both Democrats and Republicans voting for the reduction.

In an attempt to partially fund some of his campaign promises, Obama plans to allow the Bush Jr. tax cuts for the rich to expire, which will raise taxes on the wealthiest a mere 3%. This insufficient amount has caused an uproar in some sections of the elite who use their control over media outlets to vent their frustration — branding Obama as a “socialist” (an insult to actual socialists). Their outrage is genuine, since they believe that giving up a little may cause people to then demand they give up much more.

This increasingly venomous rhetoric against taxing the wealthy often comes with implied threats, the most common being: if you tax the super-wealthy and corporations, they will move themselves and their money oversees. Jobs will thus be lost; the economy will be sabotaged.

It must first be noted that the rich are already professional tax evaders, while corporations are giant welfare recipients. Tax “exemptions,” off-shore tax havens, and the type of logic that allows mega-billionaire Rupert Murdoch to pay 17% in taxes from his stock market “earnings” are just a few of the problems in our tax system that need correcting.

Correcting these numerous, irrational loopholes, while greatly increasing taxes on the wealthy and corporations is likely to create the predicted exodus of rich, for the same reasons that the wealthy Venezuelans and Cubans crowd the shores of Miami Beach.

If this were to happen, we needn’t stand idly by as they further bankrupt the country. Such a purposely destabilizing act would require their bank accounts be frozen, and their excess property seized. Although harsh sounding, one must remember that this money isn’t legitimately theirs in the first place: they’ve acquired these billions by de-industrializing the country, driving down wages and slashing benefits, betting on housing bubbles and other financial schemes, bank bailouts, etc. In effect, they’ve bankrupted tens of millions of people and — if threatened by higher taxes — want to take their stolen money and run.

It should also be pointed out that the very question of the rich fleeing from higher taxes proves a higher economic law: our economic system is completely owned and manipulated by a tiny majority of ultra-rich individuals, who shield themselves behind omnipotent sounding corporate names: Goldman Sachs, Wells Fargo, Boeing, etc. This is not a topic of abstract philosophizing, but the cause of the country’s economic crisis.

For decades the whole economy has been run by and for the interests of the corporate elite, with the recent bank bailouts proving this beyond any question — the federal treasury has been opened up for the mega-banks to grab trillions of dollars, with no questions asked.

This bankrupting of the country by bank bailouts and foreign wars is being used by sections of the elite to demand the end of a program long-hated by them: Social Security. The bedrock social program that many have referred to as “untouchable” is in danger of being molested by Obama’s corporate-dominated administration. And although Obama has hinted at the coming attack by repeatedly stating that “entitlement programs need to be reformed,” he has yet to be as blunt as the many recent articles appearing in national magazines and newspapers, intended to soften public opinion. The enormous national debt will be used as the pretext for the attack.

This cannot be allowed to happen; working people and the poor have sacrificed enough. The giant shift of wealth that has occurred in the last 40 years towards the wealthy must cease and be drastically reversed. For society to regain any semblance of equilibrium, wealth must be re-distributed on a magnificent scale, since any society that intends to meet the basic needs of its citizens — food, housing, health care, education, etc. — is utterly incompatible with the current situation, where a small group of billionaires enrich themselves off bursting financial bubbles and war profiteering.

The White House and Congress will do anything to avoid the urgently needed tax increases on the wealthy that the economic situation demands. All kinds of complicated tax increases on the working and middle-classes are likely to be proposed, such as the European-style Value Added Tax, and other taxes on consumption.

Labor unions and community organizations must unite to demand that the very wealthy – the top 5 percent of the population — and corporations pay for the economic crisis that they’ve manufactured. The enormous national debt and the dire need to maintain and expand social services make this demand especially urgent. There’s no time to waste.

And while placing the major burden of taxation on the rich who can afford it is an obvious necessity, a redistribution of existing wealth would be only a temporary solution to the current economic crisis. A basic restructuring of our society— taking political, economic, and social control out of the hands of the tiny group who have wielded power since the founding of this country— is the only road to a prosperous and sustainable future.

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action (www.workerscompass.org). He can be reached at shamuscook@yahoo.com

The Re-Election Campaign of Ben Bernanke

WarOnYou — Fri, 31 Jul 2009 08:47:34 +0000

The Federal Reserve chief fights for his future. Why is he bothering?

Brian Doherty | July 30, 2009

In the past weeks, Federal Reserve chief Ben Bernanke has taken the prior reputation of the high priesthood of history’s mightiest central bank—august, oracular, mysterious—and devalued it as surely as his bank has devalued the dollar over the past century.

Bernanke is facing the possible loss of his job come January, when President Obama either reappoints him or chooses a successor (current Obama administration economics czar Larry Summers heads the rumor list). Bernanke, or whomever succeeds him, will enjoy the dubious pleasure of managing the Federal Reserve’s confrontation with the inflationary danger posed by a staggering increase in the monetary base (it has more than doubled) since the economic crisis began last year.

In the past couple of weeks, Bernanke has done a highly unusual song and dance defending his record, opining on The Wall Street Journal’s op-ed page and touring Congress like a singer desperate to increase his album sales without any record label support.

In the past few months, Bernanke made public appearances unprecedented for a Fed chair, such as yakking it up on 60 Minutes and holding a press conference at the National Press Club. The ultimate humanizing step for this formerly mandarin office came when Bernanke took questions from a squad of supposedly ordinary Midwesterners about their confusions, doubts, and fears at a public forum in Kansas City, as if he were a monetary policy Oprah.

Bernanke’s fighting not only for his own future, but for that of his institution. From angry right-populists in the street to standard Keynesians and monetarists in economic academia, from the House of Representatives to Obama’s own Treasury Secretary Timothy Geithner, the Fed’s probity and wisdom are being seriously questioned, and its responsibility for the current crisis taken almost for granted. In the quickest version of the story, the Fed laid the foundation for our current economic mess through its reckless suppression of interest rates in the early years of this decade, which it did to juice up the economy following the NASDAQ bust. This, the story goes, was a necessary condition of the housing boom and bust.

But of all the anti-Fed hostility, the element that seems to have Bernanke most worked up is H.R. 1207, a proposal by Rep Ron Paul (R-Texas) to “audit the Fed.” The bill would eliminate some long-standing restrictions on where the Government Accountability Office (GAO) can look when it examines the Fed. Bernanke said in a July 21 appearance before the House Committee on Financial Services:

Financial markets, in particular, likely would see a grant of review authority in these areas to the GAO as a serious weakening of monetary policy independence. Because GAO reviews may be initiated at the request of members of Congress, reviews or the threat of reviews in these areas could be seen as efforts to try to influence monetary policy decisions. A perceived loss of monetary policy independence could raise fears about future inflation, leading to higher long-term interest rates and reduced economic and financial stability.

Ah, independence—who doesn’t want plenty of it in monetary policy? Despite polls showing only 30 percent of Americans think the Fed is doing an excellent or good job—lower than both the CIA and the IRS—Bernanke blithely assured us that he doesn’t “think the American people want Congress running monetary policy, and I think that’s very, very critical for people to understand.”

Who knows what the American people want when it comes to monetary policy? The vast majority of people know nothing about the subject. Folks trying to save a little cash wind up as suckers, with 60 percent of the value of their savings disappearing over the past 30 years. If they understood the role of the Federal Reserve in this devaluation, perhaps they’d want the power to inflate the money supply taken out of hands of government and disciplined by some sort of commodity standard. But that sort of idea just isn’t on the agenda, and as long as the agenda is set by people like Bernanke, it won’t be.

Still, I don’t doubt for a second that having Congress in charge of a disciplineless paper money system would be a disaster. Given the political cover Congress gets out of the façade of Fed independence, I don’t think Congress wants to run monetary policy anyway. It’s to camouflage a lack of openness that Bernanke cries about theats to Fed independence.

Even only considering his behavior since the crisis began, and ignoring the Fed’s history of collaboration with the goals and desires of presidents and treasury secretaries, Bernanke can’t seriously expect Americans to believe that his institution is airily above politics, making decisions only based on advanced and disinterested economic wisdom.

The politics of his situation require him to do something, anything, even if the best thing to do might be to let the mistakes of the past decade—both the Fed’s in keeping interest rates too low too long, and those of the thousands of individuals and companies sucked into bad investments to a large degree by the Fed’s own policies—work themselves out. Even if that takes a little, or a lot, of temporary economic pain.

But allowing the economy to naturally experience pain—one of the supposed benefits of the independent Fed that Bernanke touts—is exactly what he’s been unwilling to do. He tries to scare Congress away from Ron Paul’s audit bill with fears of the dire economic effects of lost independence, even as he demonstrates over and over that he is clearly just one more member of the Obama economic team.

Bernanke has led the Fed in buying up mortgage securities and covering tens of thousands of auto loans and small business loans (both of which he crowed about in Kansas City) and giving direct cash infusions to selected companies. (Selected how? That’s why some people think we need to audit the Fed.) The Fed is on board to take an even larger role in regulating financial markets. Bernanke even took time during that Kansas City pow-wow to tout the importance of cost-cutting health care reform. Consider it a hat tip to the boss.

Bernanke isn’t blind to the tenuous and, in many ways, meaningless nature of his institution’s “independence.” As he told the crowd in Kansas City, “Our independence has to be won every day, if you will, in that we have to show that we are producing good results and doing so without intervention or interference from other political bodies.” And to whom do you have to “show that [you] are producing good results,” Mr. Chairman?

“Good results” are defined politically, not by the economic wisdom of Bernanke’s team of experts. He talks of the Fed’s readiness and willingness to rein in monetary growth exactly when it threatens to overheat the economy into inflation. But that will mean at least temporarily slowing down the stimulating effects of the rush of new dollars, which means risking a temporary economic downturn. He shows no signs that he is willing to make any decision that could pin bad economic news on the administration. If he does anything now other than exactly what the administration wants and needs him to do, he’d be out of a job early next year, and he knows it. And his current wave of self- and institution-justifying public appearances proves that keeping the job matters a great deal to him.

Bernanke may be losing Congress’s confidence, and he may be losing China’s confidence. He’s in a rough position, and it’s not all his fault. It isn’t his fault, for example, that the federal government is planning to nearly double the national debt over the next 10 years. His talk of how the Fed will not monetize the debt is brave, but barely believable. All that nonexistent money the government is now spending and borrowing is going to have to come from somewhere, and if Bernanke or his successor wants to keep their job, it’s going to come from them.

It’s possible Bernanke’s plan to somehow neutralize all the fresh money the Fed is creating will work. Perhaps he will actually remember this rhetoric about the importance of Fed independence and let momentary pain slam the economy, rather than priming the next boom and bust with eternally low interest rates. Perhaps productivity and employment will buoy up. Maybe, just maybe, Bernanke will earn accolades as the hero of the Great Depression that Wasn’t.

That is surely his highest hope. He declared at the Kansas City forum that “I was not going to be the Federal Reserve Chairman who presided over the second Great Depression.” Well, there’s only one way to make sure of that, Ben. Considering all the complications and hazards facing both him and the economy he sees as his fragile charge, the real question the citizens in Kansas City should have asked was: Chairman Bernanke, why don’t you just get out while the getting’s good?

Senior Editor Brian Doherty is author of This is Burning Man (BenBella), Radicals for Capitalism (PublicAffairs) and Gun Control on Trial (Cato Institute).

Ron Paul: The Fed Works In Collusion With Goldman Sachs

America’s energy problems are solved

WarOnYou — Thu, 28 May 2009 21:58:11 +0000

by Mark Yannone

Oops! This wasn’t supposed to happen. We were supposed to be slaves to petroleum and corn, but algae can yield at least 1000 times more oil than corn, and it can be customized. Investments in algae production could pay handsomely, leading to a reversal of the tide of campesinos moving across Mexico’s northern border. Those who migrated to the US because they couldn’t earn a living from their farms in Mexico may well be this continent’s new oil barons.

Vertical Algae Biofuel Production

Mylow’s lawyer brings MIB guy who takes his motor and papers

WarOnYou — Sun, 05 Apr 2009 07:25:07 +0000

Mylow’s lawyer brought an unidentified, intimidating man with him last night, taking his motor, all his papers, leaving him with a note of warning — only to return the items this morning. Mylow defiantly posts another video, calling it his last.

by Sterling D. Allan
Pure Energy Systems News

Mylow’s replication of Howard Johnson’s magnet motor. April 3, 2009.

YouTube user, MYLOW121363 (Mylow) has stirred up the free energy community in the past couple of weeks with his numerous videos of a rotating all-magnet motor based on Howard Johnson’s “Stonehenge” model. I’ve been in touch with him to help him in his desire to open source his set-up, which appears to be the first successful replication of Johnson’s technology in the three decades since Johnson first announced his device.

If you’re not up-to-date on the saga, feel free to see our replication project at http://MylowMagnetMotor.com

Before getting on a flight this morning to come home from a recent speaking tour, I sent out a flash message to my mailing lists that Mylow phoned me this morning, distraught and very scared.

He said that last night his lawyer, who he was expecting, unexpectedly brought with him a man in a dark suit and briefcase, who looked and acted very intimidating.

They ended up taking his motor, all his papers, and left him with a note warning him to not say anything about this or to tell anyone or to post any more videos but said that it was in his best interest to just leave it alone. Mylow said the paper they provided him with said something about the technology possibly disrupting society.

The suit never identified himself, but asked Mylow how he got this to work, to which Mylow defiantly replied that he would not tell him.

His attorney kept reassuring him that it had to be this way and urged him to not resist.

Mylow said they were taking all kinds of video and photographs of the motor and of his papers, including the drawings he made back when he was a high school student.

Then they picked everything up and took it with them, without an explanation.

He said he had called the police, but they took a long time to arrive, not getting there until some ten minutes after his lawyer and the suit left.

As he told me about some of this in his first call this morning, I advised him to not go into fear, but to send them love and to not let them scare him. Nevertheless, Mylow was extremely rattled and cut the call short.

I got on the phone to some of my associates and was recommended that Mylow press charges because a criminal act was carried out against him.

Mylow then phoned back and said that his wife just called him and said that the lawyer and the guy brought all the stuff back in a box. Mylow told me he was returning home.

As Mylow had instructed her, when they showed up, she called the police, who came right over, but the guy in the suit told the police something, and they then turned things around and said that Mylow could be the one in trouble if he didn’t comply.

The suit told Mylow, with the Attorney’s concurrence, something to the effect: “Don’t say anything about this. Just let it drop. It’s ‘just a toy’; keep it that way. Don’t post any more videos on YouTube.”

When I talked to Mylow again a little while later, before I had to get on my 7:35 am Pacific flight, he told me that he intends to keep the work going forward. “The spirit of Howard Johnson [inspires] me, and I’m going to bring this forward.”

When I phoned the Chicago Police Department, the guy I was talking to was very impatient with me as I had to pull over to get my computer out to look up Mylow’s address. He told me that they had not received any calls from that address since January. I presume that the suit was able to dust off the these tracks they would have otherwise left.

I’m not accusing these guys of tapping phones, but I find it curious that the lawyer and the suit returned the items quite shortly after Mylow phoned me this morning to tell me what had happened. I should also mention that in another phone call I had with Pmmtester who has been screening Mylow’s emails for him, that I was going to place a call to the Chicago Police department, but then had to postpone that as I was getting out to my car from the Salt Lake City International Airport. It was at least an hour before I tried again and talked to the above-mentioned agent.

I later saw the following email he had sent to me this morning at 7:53 am Central:

dear friend device moved to secured local i am been told that it would be in my best interest not to show this to the public. lawer came with some stranger i dont know. my house phone are tap! i will call you
this is to much for me to handle replicate as to the way i have describe look at the pictures in that mag the secrete is in the pictures.i never new that this would work they want me to stop!!!!!!!!!.they took pictures and films.they left and told me to stop.sorry ………but my life come first…………………………………………. they know.

When I talked to Mylow after his lunch hour, he was quite distraught over all this — very disheartened. Here he was, just trying to help, and they do this. He’s also expressed a number of times to me his disgust at the negativity that he finds by a few people (including Omnibus, Paul Lowrance) over on the Overunty.com forum, where he would have thought he would have gotten more support. His twin brother’s skepticism and lack of accepting this motor, even though he’s seen it in person, has also weighed heavily on him.

All in all, these things have apparently taken a heavy toll on Mylow.

Nevertheless, true to the spirit of his word, he posted a final video this evening at around 9:30 pm Mountain. I happened see it immediately after it was posted. I’d not checked all day, and I thought to go see if he might have something up. It showed “0″ views. Now, about 1.5 hours later, there are already 300 views.

(7:47 minutes)
howard johnson magnetic motor – new stator magnet set up LAST VIDEO I WILL POST. (YouTube; by MYLOW121363; April 03, 2009)

[Previous description is as follows (removed because of a glitch in the recording)]

howard johnson magnetic motor – NOT A SELF STARTER .new stator setup sorry no glass table will not continue this project i am not responsible what others do to make some thing like this i am not asking for any credet or any other thing.if you can make this work better then i i wish you luck this want easy for me and my wife to my brother you are they must sciptcal person in the world and i repsect your comments and advice if it wasnt for you i would of gave up.thank you everyone for opening up my eyes to the real world.have fun all and be responsible. (YouTube; by MYLOW121363; April 04, 2009)

There is no vocal commentary from him like there was in his previous videos, just the audio on, so you see and hear the motor running quietly, with the rotor turning. Though it runs slowly, it does actually speed up at the beginning, as he had apparently just started it before turning on the camera.

When I phoned him after seeing this new video, he said that when he tried to move the stator magnet closer it goes too fast and the rotor magnets begin to come unglued and are thrown off.

Note that the rotor magnet arrangement here is different than for the weaker iron magnet he was using before. As mentioned yesterday, with the new alnico magnet (HS811N) that he received from me on Wednesday, he’s had to rearrange the rotor magnets into seven sets of seven and one set of six, with a larger gap between the last set of six and the first set of seven.

He told me that previously he was playing with the larger stator magnet I sent him (HS90), that he had to do the rotor in sets of 5 and 2 and 3, with varying gaps between them to get it to work. He described it as “violently strong,” saying that it “flew apart.”

As he mused over the situation or predicament he’s gotten into, he wondered what Howard Johnson might be thinking, looking over this. He said he planned to make a trip to his graveside and pay him his respects. “I don’t want anything in return for this. I just want people to know what a genius Howard Johnson is.” But in the same breath, he remarked how “simple” the design is.

“Once you’ve made this, you can take it apart and put it back together again.” He compared it to coming up with a recipe for a good pie. “You won’t forget the ingredients.”

In all the reading he’s been doing on Howard Johnson’s work, he thinks there is “something going on at the atomic level”. Again he commented on how very cold the stator magnet was as the motor was spinning. He said the thermometer he had used yesterday showing a diminished temperature (13 degrees) of the stator magnet a couple minutes after he had stopped the motor, was one you put in your mouth. It has a digital readout, showing either F or C.

I encouraged to take a little breather, but to not give up on the project, as it is just beginning and will surely bring forth lots of fruit. Drawing from an analogy he brought up, I compared it to childbirth. Labor might not be fun, but once the baby is out, it will all be worth while.

I am actually surprised that others haven’t yet been able to replicate this. I guess the magnet sourcing issue has proven a fairly significant impediment.

I’m working on an instruction manual that I had hoped would be done today, but it may take yet another day or so. As I see it, this really is a very simple system — so easy a Junior High student could build it. Once we get some demand going, I’m guessing that the materials could be obtained for less than $100.

This is going to get real exciting as more people start reporting what combinations give the best results, how to get more torque, what materials are optimal, what materials don’t work. A brand new industry is about to be launched into the public’s awareness and participation. We don’t need the government or angel investors to bring this forward. This can be brought forth through a grassroots effort.

# # #

(From two weeks ago.)

Mylow’s replication of the Howard Johnson magnetic motor (YouTube originally posted by MYLOW12136; March 17, 2009)

A Banana Republic By 2012?

WarOnYou — Mon, 02 Mar 2009 23:59:29 +0000

Change for the Worse

By Paul Craig Roberts

March 02, 2009 “Information Clearing House” — -President Obama has presented the most irresponsible budget in US history. His fiscal year 2010 budget projects federal spending of $3.5 trillion and a federal deficit of $1.75 trillion. In other words, 50 percent of the government’s budget consists of red ink.

And Americans are angry that sub-prime borrowers took mortgages they couldn’t afford.

The bald fact is that the US government is going to have to borrow–or print–half of the money it intends to spend in Obama’s first budget. This fact has fallen through the cracks as New York Times headlines proclaim “A Bold Plan Sweeps Away Reagan Ideas.” It certainly does sweep away Reagan ideas. No Reagan budget ever presumed that the federal government could borrow half of its annual expenditures. Indeed, Obama’s budget deficit for 2010 alone exceeds the totality of “Reagan Deficits” for Reagan’s two terms of office.

As presidential budgets are marketing devices rather than financial statements, they are imbued with optimistic assumptions. Obama’s budget is based on optimistic assumptions about the extent of decline in GDP. A more realistic projection of GDP decline would reveal that Obama’s budget is the first since World War II in which more than half of the government’s expenditures must be financed by red ink. I suspect that the red ink component of the FY 2010 budget will surpass World War II budgets.

To whom can the US government turn for $1.75 trillion for FY 2010, on top of $1.2 trillion for FY 2009?

Not to taxpayers. Obama’s net tax increase comes to $170 billion over 10 years, or $17 billion a year, a drop in the bucket. A supply-side economist could have told him that not even these paltry revenues will be realized.

Not to private savers. Americans are over their heads in debts.

Not to foreigners. Thanks to Clinton/Bush financial deregulation and Wall Street and bankster greed, the rest of the world is in financial turmoil and hasn’t $1.75 trillion in savings to lend. Possibly, the stock market will collapse further, and whatever remaining wealth Americans have will flow into “safe” US Treasuries.

The only other alternative is the printing press. Printing press finance would destroy the dollar as reserve currency and ignite high inflation. The US would be unable to pay for its imports, and Americans whose incomes do not rise with the rate of inflation would be plowed under.

This prospect is not a “war on terror” scare tactic like “anthrax,” “weapons of mass destruction,” “al Qaeda connections,” and “Iranian nukes.”

The economic catastrophe that the US faces is very real. But there is no awareness of this reality in Obama’s budget. The crux of Obamanomics is the assumption that the economy can run forever on consumer loans, if we can just get the banks to lend, and the federal government can run forever on loans from China, Japan,and Saudi Arabia.

Obama is requesting $130 billion for wars in Iraq and Afghanistan during 2010 plus a $75 billion supplemental request for the wars during 2009. This $205 billion is on top of $534 billion for the Pentagon in 2010, for total military spending of $739 billion.

The Chinese government’s budget shows China’s military spending at $59 billion in 2008. (The Pentagon claims Chinese military spending is between $97 billion and $139 billion.) Russia’s military spending in 2009 is projected to be about $50 billion.

In the midst of the greatest economic crisis in US history when trillions of dollars are being added to US national debt, Obama’s budget spends more on two pointless wars than the total military spending of China and Russia combined. Obama’s wars serve only the profits of the military/security complex and the promotion rate of military officers. The longer the wars continue, the larger the number of officers who can retire at higher ranks, thus further swelling future annual deficits and the national debt.

Moreover, as is becoming apparent, the Bush/Obama war in Afghanistan cannot be fought without fighting a war in Pakistan.

As if this isn’t enough war, Obama parrots Dick Cheney’s charge, totally unsupported by any evidence, that Iran is making nuclear weapons. The chances are high that the new White House Moron will have us at war in Afghanistan, Pakistan, Iran, and Iraq. As Obama’s wars expand, the $205 billion for war in Iraq and Afghanistan will become $400 billion annually and then $600 billion annually.

Obama’s “troop withdrawal” from Iraq has proved to be just another con job. Obama has announced that the withdrawal doesn’t include the 50,000 US soldiers who will remain in Iraq indefinitely–like the US troops that have been kept in Japan and Germany for 64 years and in Korea since the early 1950s,

Meanwhile Medicare is on the ropes. The latest Medicare trustees report says that Medicare’s funds for hospital payments will be exhausted in 10 years. To make ends meet, Obama proposes cutting payments to Medicare providers.

Obama’s plan is to make doctors and patients pay for Medicare. One way to get National Health is to make it uneconomic for private health care to service Medicare patients. Already many doctors will not accept Medicare patients because of the low payments, endless paperwork, and risk of prosecution for “over-billing.” Looking at one recent Medicare patient medical bill, Medicare and supplemental insurance paid 29 percent of the billed amount, requiring the doctor to eat 58.5 percent of his charges and the patient to pay 12.5 percent. The doctor was paid $93.16 on a $320.89 bill. And Obama wants to reduce payments to providers?

What is Obama thinking? A country that can’t afford Medicare can’t afford National Health. Medicare provides only for the elderly, and it provides very little. A person pays the Medicare tax as long as he earns and on the totality of earnings. For the rich the Medicare tax can exceed the cost of a gold-plated private insurance policy.

Basic Medicare leaves a person unprotected. To provide better coverage, it is necessary to enroll in Medicare Part B for which the premium is $308.30 per month or $3,699.60 per year. On top of this, a person needs a privately supplied supplemental policy to complete Medicare coverage. AARP’s policy, which, after deductibles are met, covers half of drug costs, cost the “Medicare protected” elderly $ 273.50 per month or $3,282 per year. The drug prescription plan passed by Congress costs the individual yet more.

The two supplements to Medicare cost the Medicare patient $6,981.60 per year. In addition, if the Medicare patient has much retirement income besides Social Security, he pays income tax on 85% of the $3,699.60 Medicare Part B premium as it is part of taxable Social Security, which for someone in the 25% bracket is another $925 dollars.

In the late 1970s, Democratic Senator Russell Long, Chairman of the Senate Finance Committee, told me that as Social Security was collected as a tax on wages and salaries, the US government had promised never to tax the benefits. So much for any commitment that the US government makes to the American people.

A top Social Security income, net of Medicare Part B premium, is $23,220 per year. Deduct the AARP policy, and the elderly who have paid in maximum Social Security taxes, get $20,000 per year. Of course, few Social Security retirees receive the maximum payment. AARP’s Public Policy Institute reports that in 2006 the average annual Social Security benefit for a retired worker was $12,372. Such a worker would have little left after paying the Medicare Part B premium and an additional premium for a supplement.

Offshoring and “free trade” have destroyed employer-provided health coverage for millions of employees. Private health care coverage can cost as much as one-third and even one-half of a person’s earned income, and some people are not insurable. National Health seems to be in the cards–only there is no money for it. All the money is being spent in pointless wars and on bailouts of financial fraud. The Obama budget puts bankster bailouts and pointless wars ahead of the health of the American people.

National Health advocates emphasize that a single-payer system is less expensive because it eliminates layers of profits. It is also less expensive for a less promising reason. Unless there is a parallel private health care system, National Health systems limit health spending to what is provided in the government budget. Over time, health care has to compete with everything else in the budget. Every part of the budget has its partisans and special interests. It is fantasy to assume that National Health will always be well funded. Just look at the state of the National Health Service in the UK.

Obama’s plan to tax the rich is another con job. Obama’s budget defines the rich as a person with a $250,000 before tax income. This is a rotten joke. The rich are the banksters, such as Hank Paulson with his $160 million annual bonus, and heads of hedge funds with their $1,000 million annual incomes. To confuse the struggling middle class with the real rich is criminal. A person with a $250,000 income before tax does not come close to being rich. Obama’s “tax the rich” scheme will devastate the upper middle class and leave the super rich undamaged.

The only change we have from Obama and the Democrats is for the worse. Bush’s FY 2008 budget deficit was $450 billion. The FY 2009 deficit is projected at $1.2 trillion. The budget deficit in Obama’s first budget is $1.75 trillion, a fourfold increase in two years.

Obama’s projected budget deficits are an understatement. For example, Obama’s budget assumes a less steep economic decline than the economy is experiencing, and it projects that war costs will drop to $50 billion annually beginning in 2011–this despite Obama sending more troops to Afghanistan and recent congressional testimony of Lt. General David Barno, former head of US forces in Afghanistan, who said the war in Afghanistan could last until 2025.

The “war on terror” will never end, because the moronic US government has defined everyone who resists US hegemony as a “terrorist.” The great danger to American civil liberty is that the US government regards as terrorists American citizens who realize that the neoconservative dream of American hegemony is a fantasy. As the Obama regime has not repealed the Bush regime rule– “you are with us or against us”–Americans who oppose hegemonic war are lumped into the “against us” category.

There seems little chance that civil liberties will be restored. Obama and his “liberal” Justice (sic) Department have sided with Bush/Cheney on every important civil liberties issue. Yet, the ACLU sees “hope” in Obama’s rhetoric!

On February 21 Yahoo News reported: “President Barack Obama’s administration has sided with predecessor George W. Bush on the rights of detainees at Bagram air base in Afghanistan, saying they cannot challenge their detention in US courts. In a two-sentence court filing Friday, the US Justice Department said “the government adheres to its previously articulated position” of denying habeas corpus rights to Bagram detainees, backing a similar decision by the Bush administration.”

“Earlier this month,” Yahoo News reports, “the Obama administration backed another Bush anti-terror policy when it urged a federal court to dismiss a lawsuit accusing Boeing Company of helping fly suspects to secret CIA detention centers overseas. The Justice Department said the case should be thrown out to protect state secrets.”

Do you remember the illegal spying? The US telecom industry succumbed to Bush regime pressure and broke the law together with President Bush. The illegal act made the US telecom industry subject to lawsuits, but the Bush regime placed its co-conspirators above the law.

Now Obama has sided with the Bush regime. On February 26, therawstory.com reported: “The Obama Justice Department continues to stand behind a Bush era law meant to prevent lawsuits against telecommunications companies accused of illegally sharing private customer information with intelligence agencies. In a brief filed late Wednesday obtained by Raw Story, the Department of Justice provided its views to Chief U.S. District Judge Vaughn Walker, after the San Francisco federal judge questioned the constitutionality of the wide-sweeping law and whether it gives the U.S. Attorney General too much power in deciding whether a company is immune from lawsuits after it has shared information with federal agents.”

On February 26 antiwar.com reported that the “new CIA director (Leon Panetta) declares nothing has changed, nothing will change.” Panetta declared that the US policy of conducting war on Pakistan’s sovereign territory “would continue.” The attacks, Panetta claimed, “have been successful.” For the CIA, claims of success equal legality. Did the Bush regime ever express greater arrogance and hubris?

With Rahm Israel Emanuel, an Israeli dual citizen, in charge of the White House and Obama’s schedule, Obama will have an even less independent foreign policy in the Middle East than Bush. Somehow someone among the Obamacons managed to put forward an appointment that could challenge the Israel Lobby’s stranglehold. Charles Freeman, former US ambassador to Saudi Arabia, former top Pentagon official, and president of the Middle East Policy Council, was chosen by Admiral Denis Blair, Director of National Intelligence, to head the National Intelligence Council.

The neocons went berserk. Steve Rosen, formerly of AIPAC, currently indicted as an Israeli spy, Gabriel Schoenfeld, who wants the New York Times indicted for allegedly violating the Espionage Act for reporting the Bush regime’s illegal spying, Daniel Pipes, who sees Muslim terrorists under every bed, Michael Rubin of the warmonger American Enterprise Institute, and Frank Gaffney, possibly the goofiest person in America, damned Freeman’s appointment as “deeply troubling,” because Freeman has an open mind on the Middle East situation.

In other words, if you are not on Israel’s side, you are disqualified.

There is no more certain indication of continuing war in the Middle East on Israel’s behalf than for Freeman’s appointment to be blocked.

Pay close attention to this one. If Obama succumbs to the Israel Lobby and nixes Blair’s appointment of Freeman, the US will have to finance interminable wars on top of trillion dollar bailouts and massive unemployment.

The US might not even make it to 2012 before it is a banana republic.

Dr. Roberts was assistant secretary of the Treasury in the Reagan administration. He was associate editor of the Wall Street Journal, columnist for Business Week and the Scripps Howard News Service, Senior Research Fellow at the Hoover Institution, Stanford University, and William E, Simon Chair in Political Economy, Center for Strategic and International Studies, Georgetown University.

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Police bracing themselves for ’summer of rage’ against economic crisis

WarOnYou — Mon, 23 Feb 2009 21:27:21 +0000

Superintendent Hartshorn fears there could be ‘mass protest’ at rising unemployment Photo: GETTY

Supt Hartshorn, who heads the Metropolitan Police’s public order branch, said he feared there could be “mass protest” at rising unemployment, failing financial institutions and the downturn in the economy.

The officer that “known activists” were planning returns to the streets, and intelligence revealed that they may be able to call on more protesters than normal due to the unprecedented conditions.

He told The Guardian: “Those people would be good at motivating people, but they haven’t had the ‘foot soldiers’ to actually carry out (protests).

“Obviously the downturn in the economy, unemployment, repossessions, changes that. Suddenly there is the opportunity for people to mass protest.”

Mr Hartshorn, who is regularly briefed on potential causes of civil unrest, singled out April’s G20 summit of the leading developed nations in London as one of the events that could kick start a series of protests.

“We’ve got G20 coming and I think that is being advertised on some of the sites as the highlight of what they see as a ’summer of rage’,” he said.

The officer added that banks, particularly those that still pay large bonuses despite receiving billions of aid from the taxpayer, had also become “viable targets” for protesters.

Other parts of Europe have already seen large-scale protests against the handling of the economy.

Up to 120,000 people marched through Dublin on Saturday in an emotional and angry national demonstration over the Irish Government’s handling of the economic crisis.

In the UK earlier this month, hundreds of oil refinery and power station workers carried out a series of wildcat strikes over the use of foreign workers.

And across the Channel in France, a million people joined demonstrations to demand greater protection for jobs.

Brzezinski: ‘Hell, There Could Be Even Riots’

WarOnYou — Fri, 20 Feb 2009 21:32:37 +0000

Brzezinski fears class warfare. Not Mika. Zbigniew. And not Barney-Frank-on-Meet-the-Press class warfare. Real, blood-in-the-streets riots.

Jimmy Carter’s former National Security Adviser expressed his concern about the possibility of riots on Morning Joe today. To stave them off, he proposes the creation of a voluntary National Solidarity Fund, whose contributors would be those who made out very well in recent times.

JOE SCARBOROUGH: You also talked about the possibility of class conflict.

ZBIGNIEW BRZEZINSKI: I was worrying about it because we’re going to have millions and millions of unemployed, people really facing dire straits. And we’re going to be having that for some period of time before things hopefully improve. And at the same time there is public awareness of this extraordinary wealth that was transferred to a few individuals at levels without historical precedent in America . . . And you sort of say to yourself: what’s going to happen in this society when these people are without jobs, when their families hurt, when they lose their homes, and so forth?

We have the government trying to repair: repair the banking system, to bail the housing out. But what about the rich guys? Where is it? [What are they] doing?

It sort of struck me, that in 1907, when we had a massive banking crisis, when banks were beginning to collapse, there were going to be riots in the streets. Some financiers, led by J.P. Morgan, got together. He locked them in his library at one point. He wouldn’t let them out until 4:45 AM, until they all kicked in and gave some money to stabilize the banks: there was no Federal Reserve at the time.

Where is the monied class today? Why aren’t they doing something: the people who made billions, millions. I’m sort of thinking of Paulson, of Rubin. Why don’t they get together, and why don’t they organize a National Solidarity Fund in which they call on all of those who made these extraordinary amounts of money to kick some back in to [a] National Solidarity Fund?

A bit later, Zbig made his fears explicit.

BRZEZINSKI: And if we don’t get some sort of voluntary National Solidarity Fund, at some point there’ll be such political pressure that Congress will start getting in the act, there’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots!

Note: This might have been Zbig’s first Morning Joe appearance since he sneeringly dismissed Scarborough as “stunningly superficial.” Unfortunately, from a selfish entertainment-value perspective, there was no renewal of those fireworks, all parties being on their best behavior. Mika, apparently off on vacation, is certainly relieved.

WHAT’S THE RUSH?

WarOnYou — Mon, 16 Feb 2009 00:07:51 +0000

‘URGENT’ $TIMULUS ON HOLD FOR BAM’S WEEKEND OFF

After pushing Congress for weeks to hurry up and pass the massive $787 billion stimulus bill, President Obama promptly took off for a three-day holiday getaway.

Obama arrived at his home in Chicago on Friday, and treated wife Michelle to a Valentine’s Day dinner downtown last night. The couple was spotted leaving upscale Table Fifty-Two, which specializes in Southern cuisine, with the first lady toting what appeared to be a doggie bag.

The president plans to spend the Presidents’ Day weekend in the Windy City, and is not expected to sign the bill until Tuesday, when he travels to Denver to discuss his economic plan.

Both the House and Senate passed the bill Friday night.

The push to get the bill through before the holiday weekend was so frantic, members of Congress didn’t have a chance to read all 1,071 pages of the document before they could vote.

“In a perfect world it would have been nice to have had more time to process it,” said Ilan Kayatsky, a spokesman for Rep. Jerrold Nadler (D-NY).

Meanwhile, Gov. Paterson called yesterday for fiscal restraint with the massive influx of federal aid. His budget office estimated that New York will receive $24.6 billion over the next two years, $4 billion more than first believed. brendan.scott@nypost.com

Fuel addiction and the ethics of ethanol

WarOnYou — Mon, 09 Feb 2009 07:16:29 +0000

by Ciaran Walsh

The scarcity of fossil fuels and the threat to our climate from carbon emissions have focused attention on alternative energy sources. In recent years, biofuels have led the way. But in the rush to embrace this new solution, have we made a huge mistake?

It is already a huge business. The United States plans to provide 15 per cent of its fuel requirements with biofuel by 2012, while the European Union wants ethanol to make up 10 per cent of each litre of gasoline sold by 2020. The World Economic Forum in Davos has recommended that 515 billion dollars a year should be spent globally on clean energy development – like ethanol – between now and 2030.

However, some believe that the turn to biofuels will prove to be an unmitigated disaster. They claim it will result in the destruction of tropical rain forests, the proliferation of genetically modified monocultural crops across the planet, and therefore accelerate any impending ecological disaster rather than stopping it.

Supporters of biofuels accuse the naysayers of using old data and making unfair or outdated assumptions on what factors to include in their analysis.

So just how ethical is ethanol? And what are the boundaries or measurements we should use to decide whether the agrofuel route is indeed the greenest and cleanest? Peter Nuurbier is the Associate Professor of International Business Management at Holland’s Wageningen University; he also advises the Dutch government on their ethanol dealings with Brazil.

“There are three basic ethical dilemmas with ethanol. One, climate change – does it have a negative impact on global warming? Two, the food versus fuel debate, is it ethical to put arable land aside for fuel and in effect link the two markets together? And three, does it actually help re-distribute wealth?” Nuurbier asks.

Two men that think ethanol fails on all these fronts are David Pimental, professor of ecology and agriculture at Cornell University and Tad Patzek, formerly of Berkeley and now Chairman of the Department of Petroleum and Geosystems Engineering at University of Texas at Austin.

Fighting the corner for agrofuels is Bruce Dale, Distinguished University Professor at the Dept. of Chemical Engineering & Materials Science at Michigan State University.

Climate change

“Biofuels will never deliver enough to quench our thirst,” Professor Tad Patzek says from his office in Texas. “In addition, their mass production damages the soil and massive amounts of greenhouse gases are emitted through the various stages of the processing. The plantations will ruin our ecosystems. From any point of view, it’s a bad idea.”

Professor Dale disagrees: “One of the very few ways of naturally taking carbon out of the air and putting it in the ground is how plants naturally behave. They accumulate large amounts of carbon in the soil. The very presence of these fuel crops reduces carbon levels.“

Unfortunately this argument will continue to rage on until agreement is reached on how to measure the effect ethanol production has on climate change. The reason there are conflicting theories, as Peter Zuurbier explains, is due to the methodology involved: “There is no general world-wide methodology to measure the effect on atmosphere. We have to consider other factors. For example what was the land used for beforehand? Coffee, cotton? Once we agree on common a denominator to measure greenhouse gas emissions then we can tell for sure.”

Food v Fuel

Using food crops to produce ethanol also raises major nutritional and ethical concerns. With nearly half of the world classified as ‘malnourished’, how can growing crops for fuel be seen as a clean and green way for the future? Has our addiction to fuel finally consumed us to the point of taking priority over food?

It is something Cornell’s David Pimentel is passionate about: “Growing crops for fuel squanders land, water, and energy resources vital for the production of food for people. The President of the World Bank reported that biofuels have increased world food prices 75 per cent. Jacques Diouf, Director General of the U.N. Food & Agriculture Organization has said that biofuels are increasing world human starvation.”

Again however, Professor Dale does not buy the logic involved: “The idea that we don’t have enough land or are short on ability to produce food does not bear up to the facts. The number of obese people in the world is growing faster than the number of malnourished people in world. If people want to go on about the moral use of land for anything other than human food then we should just chop down all our tress plant food in their place too.”

The fear remains that the sheer profitability of biofuels – massive subsidies and tax breaks mean it is possible for a farmer to use more than a gallon of fuel to make a gallon of biofuel and still make a profit – will encourage poorer nations to grow these cash crops instead of crops for food. The image of fields of corn grown for biofuels in a country where the people are starving has a particular nightmarish quality to it.

Wealth distribution

Brazil hopes to be the world leader when it comes to the fuel of the future – cheap ethanol derived from sugarcane. Last year alone, Brazil produced 26 billion litres of ethanol. That figure is expected to double to 53 billion litres by 2017, with more than 30 countries worldwide using it as an additive to gasoline.

It is advertised as a renewable energy source that will both solve our dependence on petrol and help reverse climate change. It could even help address the unequal distribution of wealth in the world.

Professor Dale, who has been involved with ethanol studies for more than 30 years, thinks that it’s only fair that underdeveloped countries have their turn:

“One of reasons the West became so rich was we got to oil first. There is not much cheap oil left and we need to find a way where the rest of world can develop with cheap energy.”

The President of Brazil is convinced Dale is right. Luiz Inacio Lula Da Silva wants to create a green belt of sugarcane production along the equator. This would link large parts of the tropical Third World. These countries could then distil ethanol and their governments could join forces to form an organization along the same lines as OPEC.

Prof Patzek cannot fathom that logic: “The industrial production of sugar cane is so intensive that the current system can last for the next 30 years or so and then there will be a massive failure. When you are talking about chopping down the Amazon you are changing the climate for northern and Central America. You can cause massive drought in western US this way. We are blind fools for ignoring that the world is connected in this way and the President of Brazil is a double blind fool,” he says from his office in Texas.

Brazil – green belt built on slave labour?

The arguments above are grounded in theory. The reality is tens of thousands of people in Brazil are working the sugarcane plantations for wages akin to slave labour – all to quench our new thirst, not for oil but agrofuel.

In 2007/8 Emma Raynes was the Lewis Hine Documentary Fellow from the Center for Documentary Studies in North Carolina. As part of her work she visited the sugar cane plantations of Sao Paulo and witnessed firsthand the hardships of the migrant workers there.

”Families subsisted on money from the migrant workers on sugar cane plantations in Sao Paulo. The workers spend most of the year working away from their families. Their wives, left behind, are known as ‘viúvas de maridos vivovs’ – widows of living husbands. In Sao Paulo, a sugarcane cutter currently earns $8 for working a 10-12-hour day. Many workers suffer from spinal injuries, deep lacerations, and dehydration. Between 2004 and 2007, the Pastoral of Migrant Workers registered 17 deaths from excessive labor in Sao Paulo.”

Whatever the positive or negative eco effects biofuels may have on the world – it’s clear that there are more than earthly ethical issues to deal with. The success of clean and renewable energy should not be made off the sweat and blood of slave labourers. Ethanol is hardly providing a more equal distribution of wealth around the world when workers like these are living and dying on plantations in the name of ‘clean fuel’. Until that is corrected, ethanol, regardless of it benefits and drawbacks, is far from a green, clean and ethical solution to our insatiable thirst for fuel.

Perhaps it’s time to become more efficient as a species rather than trying to find new and efficient sources of power.

Global Energy War: Washington’s New Kissinger

WarOnYou — Wed, 04 Feb 2009 01:26:06 +0000

The appointment of US Marine General James Jones

Lost amid the national and international fanfare accompanying the inauguration of the 44th president of the United States is attention to the person who is slated to be the next major foreign policy architect and executor, retired US Marine General James Jones.

In nearly identical phraseology that cannot be construed as either fortuitous or without foundation, the Washington Post of November 22, 2008 referred to the then pending selection of Jones as US National Security Adviser in these terms:

“Sources familiar with the discussions said Obama is considering expanding the scope of the job to give the adviser the kind of authority once wielded by powerful figures such as Henry A. Kissinger.”

And the following day’s Israeli Ha’aretz wrote:

“Jones is expected to play a key role in the Obama administration. According to U.S. press reports, he will be as strong as Henry Kissinger, the all-powerful national security adviser to President Richard Nixon.”

The analogy is with the role of Henry Kissinger as National Security Adviser to the first and second Nixon administrations (1969-1977, continuing into the Ford White House) and as both National Security Adviser and Secretary of State during the second term; that is, as a then unprecedentedly influential player in determining US foreign policy.

A similar comparison can be made with the Carter administration’s National Security Adviser, Zbigniew Brzezinski, the true power behind the foreign policy throne from 1977-1981, with Secretaries of State Cyrus Vance and, briefly, Edmund Muskie, largely figureheads in relation to him.

James Jones is now the first career military officer to hold the post as head of the National Security Council since retired general Colin Powell did so in the second Reagan Administration and is the first former NATO Supreme Allied Commander to do so.

Jones was appointed to the NATO post of Supreme Allied Commander Europe (SACEUR) and the overlapping, essentially co-terminous one of Commander, United States European Command (COMUSEUCOM) in the first Bush term and is part of the two-thirds of the Obama administration’s foreign policy triumvirate – National Security Adviser, Secretary of State, Secretary of Defense – inherited from the preceding administration. The other is, of course, Defense Secretary Robert Gates, who like Jones is a graduate of Georgetown University, with a doctorate degree in Sovietology and Russian studies.

As commander of the Pentagon’s European Command (EUCOM) Jones was in charge of the largest area of military responsibility in world history, one that encompassed anywhere from 13-21 million square miles and included 92 of the world’s 192 nations. And as NATO’s Supreme Allied Commander he was the chief military commander of an expanding military bloc of twenty six full members, two new candidates and twenty three Partnership for Peace, six Mediterranean Dialogue, six Gulf Cooperation Council and assorted other military partners in South and Far East Asia and the South Pacific, altogether on five continents.

While wearing both the above braided hats, Jones was the major architect of what last October 1st was officially launched as the first new US military command in over half a century, Africa Command (AFRICOM), whose chartered area of operations includes fifty-three nations.

AFRICOM’s historical precedents were commented upon by a Ghanian news source almost three years ago:

“Marine General James L. Jones, Head of the US European Command…said the Pentagon was seeking to acquire access to two kinds of bases in Senegal, Ghana, Mali and Kenya and other African countries.

“The new US strategy based on the conclusions of May 2001 report of the President’s National Energy Policy Development group chaired by Vice President Richard Cheney and known as the Cheney report.” (Ghana Web, February 23, 2006)

And by a Nigerian commentator the following year:

“[In January of 2002 the African Oil Policy Initiative Group] recommended that African oil be treated as a priority for the national security of the US after 9/11, that the US government declares the Gulf of Guinea an “area of vital interest” and that it set up a sub-command structure for US forces in the region. In September 2002, the then US Defence Secretary, Donald Rumsfeld, put forward a proposal to establish a NATO Rapid Response Force (NRF) which was approved by the defence ministers of NATO in Brussels in June 2003 and was inaugurated in October 2003.” (Leadership, November 22, 2007)

In keeping with the above, after his formal selection as nominee for Nationl Security Adviser late last year, Jones revealed that “[A]s commander of NATO, I worried early in the mornings about how to protect energy facilities and supply chain routes as far away as Africa, the Persian Gulf and Caspian Sea.” (Agence France-Presse, November 30, 2008)

Or as a US daily newspaper put it later:

“During his 2003-2006 stint as NATO’s supreme commander, Jones stressed his view that energy policy was a top national security matter for the United States and a leading international security priority. For the past year, Jones has been president and CEO of the U.S. Chamber of Commerce’s Institute for 21st Century Energy. Until his Dec. 1 selection by Obama, he also served as a board member of the Chevron Corp.” (Houston Chronicle, December 25, 2008)

The above reflected designs voiced earlier, as evidenced by:

“NATO’s top commander of operations, U.S. General James Jones, has said he sees a potential role for the alliance in protecting key shipping lanes such as those around the Black Sea and oil supply routes from Africa to Europe.” (Reuters, November 27, 2006)

And shortly before stepping down as both European Command and NATO commander, Jones, addressing US business leaders, said:

“Officials at U.S. European Command spend between 65 to 70 percent of their time on African issues, Jones said….Establishing such a group [military task force in West Africa] could also send a message to U.S. companies ‘that investing in many parts of Africa is a good idea,’ the general said.” [U.S. Department of Defense, August 18, 2006)

And, just as candidly, he and his NATO civilian cohort declared:

"NATOs' executives are ready to use warships to ensure the security of offshore oil and gas transportation routes from Western Africa, reportedly said Jaap de Hoop Scheffer, NATO's Secretary General, speaking at the session of foreign committee of PACE [Parliamentary Assembly of the Council of Europe]. “On April 30 General James Jones, commander-in-chief of NATO in Europe, reportedly said NATO was going to draw up the plan for ensuring security of oil and gas industry facilities. “In this respect the block is willing to ensure security in unstable regions where oil and gas are produced and transported.” (Trend News Agency, May 3, 2006)

Note that while speaking to those he assumes to be interested and complicit parties, Jones is quite candid in moving his finger across the map of the world and indicating precisely where the Pentagon’s – not the State Department’s, say, or the US Department of Energy’s – priorities lie.

And they are, as mentioned above, immediately in three of the five areas of the world where hitherto unexploited or underexploited massive oil and natural gas deposits lie: Africa’s Gulf of Guinea, the Black and Caspian Seas and the Persian Gulf.

The other two contested zones and already current battlegrounds between the West and Russia and other emerging nations in this regard are the Arctic Circle and the northern part of South America and the Caribbean. Southeast Asia may be soon be another candidate for the role.

The drive into Africa, from the Mediterranean north to the South African way station to Antarctica and its offshore environs (the sixth key global energy chess piece) and from the war-torn northeast to the oil-rich Atlantic west, is thus integrally linked to the concomitant US and NATO military expansion into the Black and Caspian Seas and Persian Gulf regions.

Mind, this is not a direct, reductionist ‘war for oil’; it is rather an international strategic bid by a consortium of declining Western powers united under the NATO aegis to seize and dominate world energy resources and transportation lines to in turn maintain and expand global economic and political hegemony. (Indeed, the two nations most central to Western plans for trans-Eurasian oil transit plans, Azerbaijan and Georgia, have recorded the largest per capita and percentile increases in military spending in the world over the past five years – a case of oil for war rather than the reverse.)

Jones’ resume as top military commander of both US European Command and of NATO gave him, and still gives him, a pivotal role in what the State Department of Condoleezza Rice (herself with a doctorate degree in Sovietology and Russian studies) has referred to for years as the “push east and south.”

As the US armed forces newspaper Stars and Stripes reported a year and a half ago:

“Five years ago, then-Defense Secretary Donald Rumsfeld sent marching orders to Marine Gen. James L. Jones, telling him that the U.S. European Command needed an overhaul to meet the unique challenges of the 21st century. “Jones’ plan, started in 2002, called for the moving of thousands of troops from Europe back to the United States, moving troops into Eastern Europe and setting up forward operating sites in Africa.”

What has occurred in the interim regarding the first trajectory, the push to the east, is that the Pentagon and NATO have selected seven military bases in Bulgaria and Romania, after the latter two’s NATO accession in 2004, for land, naval and air ‘lily pads’ on the Black Sea for operations in the Caucasus, Ukraine, Central and South Asia, the Eastern Mediterranean and the Persian Gulf.

The US and its Alliance cohorts have similarly turned another Black Sea, and Caucasus, nation – Georgia – into a military and strategic energy corridor heading both east and south.

In fact Georgia is the central link in what Western officials for years have touted as the “project of the century”: The Baku-Tbilisi-Ceyhan (BTC) pipeline transporting oil from the Caspian to the Mediterranean Seas.

Along with its sister projects, the Baku-Tbilisi-Erzurum gas pipeline and the Kars-Tbilisi-Baku (”China to London”) railway, the West envisions plans to export oil and natural gas from as far east as Kazakhstan on the Chinese border over, around and under the Caspian Sea to the South Caucasus and from there north to Ukraine and Poland to the Baltic Sea and onto Western Europe, and south along the Mediterranean to Israel to be shipped on tankers through the Suez Canal and the Red Sea and across the Arabian Sea to countries like India and Japan. That is, back to East Asia where much of it originated.

If any more grand (or grandiose) and far-reaching geopolitical design has ever been contemplated, history fails to record it.

Chinese military analyst Lin Zhiyuan summed up the general stratgey over two years ago:

“[N]ew military bases, airports and training bases will be built in Hungary, Romania, Poland, Bulgaria and other nations to ensure “gangways” to some areas in the Middle East, African and Asia in possible military actions in the years ahead. “More important, the United States will successfully move eastward the gravity and frontline of its Europe defense, go on beefing up its military presence in the Baltic states and the central Asia region, and also raise its capability to contain Russia by stepping into the backyard of the former Soviet Union. “James L. Jones, commander of the European command of the US army [EUCOM, as well as NATO], acknowledged that EETAF [Eastern European Task Force] would “greatly upgrade” the capacity of coordinating the forces of the U.S. and its allies, and the capacity of training and operation in Eurasia and the Caucasian region, so that they are able to make faster responses in some conflict areas….” (People’s Daily, December 5, 2006)

The author was perhaps referring to an earlier statement by James Jones, one reported on the US State Department’s website on March 10, 2006:

“[Jones] discussed ongoing shifts in troop levels, the creation of rotational force hubs in Bulgaria and Romania, and initiatives in Africa….Those forces remaining in Europe will focus on being able swiftly to deploy to temporary locations in southeast Europe, Eurasia and Africa. Along the Black Sea, recent basing agreements will allow U.S. forces to start establishing an Eastern European Task Force [which will] “significantly increases” the ability of U.S. and partner forces to coordinate and conduct training and missions in Eurasia and the Caucasus…. Jones also described Caspian Guard, a program to improve the capabilities of Azerbaijan and Kazakhstan in a strategic region that borders northern Iran. “Africa’s vast potential makes African stability a near-term global strategic imperative.”

In the past week the Pentagon’s Central Command chief General David Petraeus visited Kazakhstan, Kyrgystan and Turkmenistan, the first and third on both ends of the Caspian Sea and the two largest producers of oil and natural gas in Central Asia.

This is the further implementation of Jones’ plan which he bluntly articulated well over three years ago:

“NATO’s top military commander is seeking an important new security role for private industry and business leaders as part of a new security strategy that will focus on the economic vulnerabilities of the 26-country alliance. “Two immediate and priority projects for NATO officials to develop with private industry are to secure the pipelines bringing Russian oil and gas to Europe…to secure ports and merchant shipping, the alliance Supreme Commander, Gen. James Jones of the U.S. Marine Corps said Wednesday. “A further area of NATO interest to secure energy supplies could be the Gulf of Guinea off the West African coast, Jones noted…’a serious security problem.’ Oil companies were already spending more than a billion dollars a year on security in the region, he noted, pointing to the need for NATO and business to confer on the common security concern.” (United Press International, October 13, 2005)

On the far western end of what British geographer and proto-geostrategist Halford Mackinder called the World Island (Africa, Asia, Europe, the Middle East) lies the Atlantic Coast of Africa and the Gulf of Guinea.

It is here that then EUCOM and NATO top military commander Jones arranged the foundation of the future AFRICOM.

Though not without attending to the rest of the continent as well during his dual tenure from 2003-2006.

In April of 2006 he already advocated the following:

“Jones…raised the prospect of NATO taking a role to counter piracy off the coast of the Horn of Africa and the Gulf of Guinea, especially when it threatens energy supply routes to Western nations.” (Associated Press, April 24, 2006)

Two and a half years before NATO initiated the Atalanta interdiction operation in the Horn of Africa and the Gulf of Aden last autumn (NATO warships even docked at the Kenyan port city of Mombasa), Jones was laying the groundwork for the NATO cum European Union mission of today.

As the Horn of Africa region was the only part of Africa not formerly in EUCOM’s area of responsibility (in was in Central Command’s), Jones was clearly speaking of an AFRICOM that wouldn’t appear for another 30 months.

Also, in addition to bilateral military agreements with Northern African states, Jones was NATO Supreme Commander in 2004 when at the Istanbul summit NATO upgraded the Alliance’s seven Mediterranean Dialogue members – the bulk of which are in North Africa (Algeria, Egypt, Mauritania, Morocco and Tunisia) – to an enhanced partnership status.

He also created the military wing of the US State Department’s Pan Sahel Initiative. The Pentagon’s website described it in early 2006 as follows:

“The 2002 Pan Sahel Initiative involved training and equipping a least one rapid-reaction company in each of the four Sahel states: Mali, Mauritania, Niger and Chad. The current initiative involves those four states and Algeria, Morocco, Senegal, Tunisia and Nigeria.

“‘U.S. Naval Forces Europe, (the command’s) lead component in this initiative, has developed a robust maritime security strategy and regional 10-year campaign plan for the Gulf of Guinea region.’ “‘Africa’s vast potential makes African stability a near-term global strategic imperative,’ Jones said.” (Defense Link, March 8, 2006}

In the following year an Algerian article called “U.S. embassies turned into command posts in North Africa” added this:

“[T]he countries involved in the U.S. embassies command posts are Algeria, Morocco, Tunisia, Mauritania, Niger, Mali, Chad and Senegal. A major focus of AFRICOM will be the Gulf of Guinea, with its enormous oil reserves in Nigeria, Equatorial Guinea, Gabon, Angola and the Congo Republic…. -The U.S. is already pouring $500 million into its Trans-Sahel Counterterrorism Initiative that embraces Morocco, Tunisia, and Algeria in North Africa, and nations boarding the Sahara including Mauritania, Niger, Mali, Mauritania, Chad and Senegal.” (Ech Chorouk, October 17, 2007}

And in May of 2005 NATO began its first official operation on the African continent, transporting troops to the Darfur region of Sudan, thereby beginning Western military intrusion into the Central African Republic-Chad-Sudan triangle.

Yet the Gulf of Guinea remained the main focus of attention.

No later than 2003 Western news sources reported on a suspected unprecedented oil bonanza in the former Portuguses possessions of Sao Tome and Principe in the Gulf.

Shortly afterward there was talk of the Pentagon establishing a naval base on Sao Tome.

The State Department estimated at the time that the US was then currently importing 15% of its oil from the Gulf of Guinea and that the figure would rise to 25% in a few years.

Western Africa oil offers two key advantages to the US. It’s comparatively high-grade crude and can be transported on tankers directly across the Atlantic Ocean, thereby circumventing straits, canals and other potential chokepoints and attendant customs duties and taxes by littoral nations.

Throughout his time as EUCOM and NATO top military commander Jones touted what he described as ongoing and permanent US and NATO naval presence in the Gulf.

In June of 2006 NATO helds its first large-scale military exercises in Africa, in fact initiating the NATO Rapid Response Force, north of the Gulf in Cape Verde.

Below are accounts of the drills:

“Hundreds of elite North Atlantic Treaty Organisation (Nato) troops backed by fighter planes and warships will storm a tiny volcanic island off Africa’s Atlantic coast this week in what the Western alliance hopes will prove a potent demonstration of its ability to project power around the world.” (Associated Press, June 21, 2006)

“Seven thousand NATO troops conducted war games on the Atlantic Ocean island of Cape Verde on Thursday in the latest sign of the alliance’s growing interest in playing a role in Africa. “The land, air and sea exercises were NATO’s first major deployment in Africa and designed to show the former Cold War giant can launch far-flung military operations at short notice. “‘You are seeing the new NATO, the one that has the ability to project stability,’ said NATO Secretary-General Jaap de Hoop Scheffer told a news conference after NATO troops stormed a beach on one of the islands on the archipelago in a mock assault on a fictitious terrorist camp. “NATO Supreme Allied Commander Europe James Jones, the alliance soldier in charge of NATO operations, said he hoped the two-week Cape Verde exercises would help break down negative images about NATO in Africa and elsewhere.” (Reuters, June 22, 2006)

Jones may have inveigled Reuters with concerns about NATO’s public image, but its rival agency was more forthcoming:

“NATO is developing a special plan to safeguard oil and gas fields in the region, says its Supreme Allied Commander on Europe, Gen. James Jones.

“He said a training session will be held in the Atlantic oceanic area and the Cabo Verde island in June to outline activities to protect the routes transporting oil to Western Europe….Jones said the alliance is ready to ensure the security of oil-producing and transporting regions.” (Associated Press, May 2, 2006)

That same month Jones was in the northern tip of the Gulf, in Monrovia, the capital of the one nation on the continent that seemed at first willing to host the future AFRICOM’s headquarters after Washington assisted in the toppling of the Charles Taylor government and the installation of former US-based Ellen Johnson Sirleaf to head its successor.

A local paper reported:

“A United States military delegation today met with President Ellen Johnson Sirleaf at her Executive Mansion office in Monrovia. The delegation was headed by General James Jones of the US Marine Corps who is also the head of the US government European Command. “Also with General Jones today were seven members of his delegation, who were in full US military uniform. General Jones reaffirmed his government’s support in assisting the Liberian government in the formation of the new Liberian army. He said some members of his command, were due in Liberia soon, to begin the training of the new Liberian army, which is expected to begin in July. (African News Dimension, June 2, 2006)

Two months before the US State Department reported on another of Jones’ African plans, the Gulf of Guinea Maritime Security Initiative, and thereby tied together a few threads in Washington’s African tapestry:

“‘Left unattended, political instability in Africa could require reactive and repeated interventions at enormous costs, as in the case of Liberia,’ Jones said.” (Washington File, April 7, 2006)

And in the intervening month Jones reminded readers that he still wore two commanders’ caps and that his energy and broader geopolitical strategy encompassed, still, both south and east:

“‘Our strategic goal is to expand…to Eastern Europe and Africa…. -”‘The United States is not unchallenged in its quest to gain influence in and access to Africa.’” (Stars And Stripes, March 9, 2006)

And so it remains.

The West, the US in the first instance, is waging an unparalleled drive to retain and expand what military, political and economic domination and monopolies it has wrested from the rest of the world over the past five centuries, and control of the globe’s energy resources and their transportation is a vital component of that reckless campaign.

Africa is rapidly shaping up to be a major battleground in that international struggle.

With James Jones as new US National Security chief, complemented by the ’soft power’ efforts of former State Department Africa hand Dr. Susan Rice as probable US ambassador to the United Nations, the continent’s and the world’s guard must not be relaxed.

Rick Rozoff has been involved in anti-war and anti-interventionist work in various capacities for forty years. He lives in Chicago, Illinois. Is the manager of the Stop NATO international email list at: http://groups.yahoo.com/group/stopnato/

Worse than the Great Depression.

WarOnYou — Mon, 02 Feb 2009 10:54:55 +0000

by Dr. Krassimir Petrov

The mainstream media and Wall Street have reached the consensus that the current credit crisis is the worst since the post-war period. George Soros’ statement that ”the world faces the worst finance crisis since WWII” epitomizes the collective wisdom. The crisis is currently the ultimate scapegoat for all the economic evils that currently plague the global financial system and the global economy – from collapsing stock markets of the world to food shortages in third world counties. We are repeatedly assured that the ultimate fault lies with the Credit Crisis itself; if there were no Credit Crisis, all of these terrible things would never have happened in the economy and the financial markets.

The most extraordinary thing is that the mainstream media has never attempted to compare the current economic environment to the one preceding the Great Depression. In essence, it is assumed outright that the Great Depression can never possibly happen again, ever, thus obviating the need for such a comparison. I actually believe that the macroeconomic fundamentals today are much worse, so that we are in for a protracted period of economic depression – a depression much worse than the Great Depression, a depression that would likely be remembered in history as “The Second Great Depression” or The Greater Depression, as Doug Casey has called it so aptly. Here is why I believe that this is the case.

Duplicating Mistakes from the Great Depression

At its core, the environment of the 1990s, and the response of the Fed to the tech-telecom bust has created an economic environment that has encouraged the repetition of the very same mistakes that led to the Great Depression. Here is a concise summary of widely recognized mistakes of the 1920s, without going into the details, with obvious parallels in the current environment:

Asset Bubbles – first in the stock market during the 1990s, then in real estate during the 2000s, pretty much mirroring the stock and real estate market bubbles of the 1920s.
Securitization – although not in the very “ultra-modernistic” form and shape of the 2000s, with slicing and dicing of pools and tranches of seniority, it was widely recognized in the 1930s that securitization during the 20s drove the domino effect in the U.S. financial system during the Great Depression.
Excessive Leverage – just like in 2008 the topic du jour is “deleveraging”, so the unwinding of leverage during the 1930s was the driver of forced liquidations and financial pain. Of course, it was very clear back then that the root of the problem was not deleveraging per se, but the excessive leverage that took place prior to the deleveraging process. “Investment Pools” were then instrumental in both the securitization and excessive leverage, just like the Hedge Funds of today.
Corrupt Gatekeepers – we know well that the Enrons and Worldcoms were aided and abetted by the accounting firms – those same firms that were supposedly the Gatekeepers of the financial community, yet handsomely profited from the boom while neglecting their watchdog functions. In the current financial crisis, we also know that the rating agencies were also making hay during the boom. Very similar were the issues during the 1920s that led to the establishment of the SEC and other regulatory bodies to replace the malfunctioning “gatekeepers” at the time.
Financial Engineering – we are led to believe that financial engineering is a rather recent phenomenon that flourished during the New Age Finance Era of the last 15 years, yet financial engineering was prevalent in the 1920s with very clear goals: (1) to evade restrictive regulations, (2) to increase leverage, and (3) to remove liabilities from the books, all too familiar to all of us today.
Lagging Regulations – just like the regulatory environment lagged the events of the 1920s and regulations were introduced only after the Great Depression had obliterated the U.S. financial system, so we are yet to see new regulations addressing the causes of the current crisis. Understandably, regulations should have foreseen today’s financial problems and should have been introduced before the crisis.
Market Ideology – back in the 1920s, just like in the last two decades, the market ideology of “laissez faire”, which Soros quite appropriately described as “Market Fundamentalism”, has swept the financial markets. Of course, the free market knows the best, but the reality is that the money market is not really free – when the Fed determines the cost of money (interest rates), and can fix this cost for as long as it wants, then all sorts of financial imbalances can be sustained without the discipline imposed by the market. This can lead to all sorts of problems that we actually have to face today.
Non-Transparency – back in the 1930s, it was widely recognized that businesses and especially financial institutions lacked transparency, which allowed for the accumulation of significant imbalances and abuses. Today, financial markets and institutions have intentionally compromised transparency in a number of ingenious, or better disingenuous, accounting trickeries and financial gimmicks, like off-balance-sheet entities (SIVs), hard-to-understand derivatives, and opaque instruments with mind-boggling complexity. Today CEOs and Chief Risk Officers of major financial institutions cannot figure out their own risk exposures. Originally, lack of transparency was designed to fool the markets; ironically, modern-day financial executives have gotten to the point of fooling themselves.

Worse than the Great Depression

So, why Worse Than The Great Depression? What makes me believe that the current depression will be worse than the Great Depression? I present six of the most important fundamentals that are “baked in the cake” and that suggest of a Greater Depression.

Overvalued Real Estate. The real estate market has been driven by a number of innovations in real estate finance. Overvaluation in real estate implies overvaluation in real estate financial instruments; an implosion of real estate prices implies an implosion in those instruments. It is widely recognized by economists that the Case-Shiller Index is a good proxy for the prices of real estate. A widely-recognized chart from 1890 to 2007 tells the story. The chart makes it crystal clear that the current overvaluation of real estate in real terms grossly exceeds the one during the 1920s. The coming correction in real estate will be protracted and gut-wrenching, with an expected cumulative effect that is much worse than the Great Depression.

.
Total U.S. Credit. Credit makes leverage: the more credit in the financial system, the more leveraged it is. Today’s total U.S. credit relative to GDP has surpassed significantly the levels preceding the Great Depression. Back then, the total amount of credit in the financial system almost reached an astonishing 250% of GDP. Using the same metric today, the debt level in the U.S. financial system surpassed 350% in 2008, while the level in 1982 was “only” 130%. As Charles Dumas from Lombard Street Research put it quite aptly, “we’ve had a 30-year leveraging up of America, ending in an unchecked orgy.”

The chart below shows a dramatic buildup of debt (leverage) in the 1920s and a deleveraging from 1930 to 1945 (or 1952). Then it shows a consistent buildup of debt afterwards, with a dramatic rise since the 1990s, and surpassing in 2000 the previous peak in 1929. The chart shows the level of 299% at the end of 2005, but the level has already reached 350% by 2008.

Of course, leveraging, as already indicated above, must necessarily be followed by deleveraging.

The best way to think about leverage is to compare it with using drugs, while deleveraging is like detox. The problem is not that the detox is killing the patient who has abused drugs for years; what is really killing the patient is the drug abuse itself. However, one thing is clear – the patient must either go through a painful detox or die; the same applies for the financial system – it must either deleverage or implode.
Explosion of Derivatives. Derivatives have been likened by Warren Buffet to “financial weapons of mass destruction”. The notional amount of total derivatives, as well as “Value at Risk” (VaR), has skyrocketed in recent years with the potential to destabilize the financial system for decades. To put it more allegorically, derivatives hang like a sword of Damocles over the financial system.

A comparison with the 1920s is difficult to make. mostly Derivatives back then were extensively used, although not widely understood. Given that I am not aware of any statistics of derivatives for the period of the 1920s, a meaningful comparison based on hard data is admittedly impossible. Nevertheless, I would venture to make an intelligent guess that the size of modern-day derivatives is hundreds or even thousands of times larger relative to the size of the economy in comparison to the 1920s. Some of the latest reports indicate that the total notional value of derivatives outstanding surpasses one quadrillion dollars. To put this into perspective, this amounts to almost 100 times the GDP of the U.S. economy.

The chart below shows the explosion of derivatives in the U.S. banking system. You can see that in 1991 the notional value of the derivatives was about the size of the U.S. GDP. By 2006 the size has grown to about 10 times the GDP, vastly outgrowing the real economy.

The chart below shows an even more telling picture. It shows world GDP and world’s notional value of derivatives. Again, while there is no direct comparison with the 1920s, it is clear that the overall level of derivatives has skyrocketed during the last two decades and presents risks that were simply not present at the onset of the Great Depression. The unwinding of these derivatives could only be compared with a nuclear explosion in the financial system.
Dow-Gold Ratio. The Dow-Gold ratio represents the most important ratio between the relative prices of financial assets and real assets. The Dow component represents the valuation of financial assets; the gold component – of real assets. When leverage in the financial system increases significantly, so does this ratio. A very high ratio is interpreted as an imbalance between financial and real assets – financial assets are grossly overvalued, while real assets are grossly undervalued. It also implies that a correction eventually will be necessary – either through deflation, which implies deleveraging and a collapsing stock market, or through inflation, which implies stagnant stock market for many years and steadily rising prices of real assets, commodities, and gold, usually associated with stagnant economy and typically resulting in stagflation. The first case—deflation—occurred during the 1930s, while the second case—stagflation—occurred during the 1970s.

The graph below illustrates the above concepts. The very high Dow-Gold Ratio in 1929 was followed by the Great Depression, while the higher level in 1966 was followed by the stagflationary 70s. It is evident from the chart the peak in 2000 surpassed the previous two peaks in 1929 and 1966, so this provides a reasonable expectation that the forthcoming return to “normalcy” will be more painful than the Great Depression, at least in terms of cumulative pain over the next 10-15 years.
Global Bubbles. It is impossible to make direct comparison with the 1920s, but today the global economy is rife with bubbles. Back then in the 1920s, the U.S. had its stock and real estate bubbles, while the European economies were struggling to rebuild from the devastations of WW1 that ended in 1919. I am personally not aware of any other bubbles during this period, although I welcome reader feedback on this topic.

Today the picture is very different. The U.S. economy had a stock market and real estate bubble that has surpassed its own during the 1920s. Colossal US current account deficits have fuelled extraordinary growth in global monetary reserves. As a result, Europe has real estate bubbles across the board, from the U.K. and Ireland, throughout the Mediterranean (Spain, France, Italy and Greece), to the entire Baltic region (Latvia, Lithuania, and Estonia) and the Balkans (Romaina and Bulgaria). Even worse, many Asian countries (China, Korea, etc.) also have their own stock and property bubbles, only with the exception of Japan, which is still in the process of recovering from its own during the 1980s. Thus, during the 1920s only the U.S. suffered from gross financial imbalances, while today the imbalances have engulfed the whole world – both developed and developing. It stands to reason that the unwinding of those global imbalances is likely to be more painful today than it was during the Great Depression due to both size and scope.
Collapsing Bretton Woods II. The global monetary system was on a quasi-gold standard during the 1920s. Back then dollars and pounds were convertible to gold, while all other currencies were convertible to dollars and pounds. An appropriate way to think about it is that of a precursor to the Bretton Woods from 1945-1971. What is important to understand is that while the system was fiat in nature, gold imposed significant limitations to credit expansion and leveraging.

Somewhat similar was the role of Bretton Woods that lasted from 1945 to 1971. The dollar was tied to gold, while all other fiat currencies were tied to the dollar. Just like the interwar period, gold imposed some limitations on credit and financial imbalances.

We now live in what has been termed Bretton Woods II. Essentially, this is a pure fiat dollar standard, where all currencies are convertible to dollars, either at fixed or floating exchange rates, while the dollar itself is convertible to “nothing”. Thus, the dollar has no limitations imposed to it by gold, so without the discipline of gold, the current global monetary system has accumulated significantly more imbalances than ever before in modern capitalism. These imbalances show up in the international monetary system as unsustainable trade deficits (and surpluses), skyrocketing official dollar reserves in some European and many Asian central banks, and the proliferation of Sovereign Wealth Funds; more generally, these imbalances result in a myriad of bubbles, overleveraging, and other maladjustments already discussed above.

Today Bretton Woods II is in the process of disintegration. The world is slowly but steadily losing its confidence in the dollar as the world reserve currency. A flight from the dollar is in progress and the collapse of the global monetary system is imminent. As Bretton Woods II disintegrates and a new system replaces it, the process of readjustment will be necessarily more painful than the respective process during the Great Depression.

A caution on terminology is necessary here. While the literature over the last 10-20 years has widely recognized the term “Bretton Woods II”, in September-October of 2008 the term was widely used by the media to describe a proposed international summit with the goal of reconstructing a new international monetary system designed from scratch, just like “Bretton Woods”. Instantly dubbed by the media “Bretton Woods II”, this term could be potentially very confusing as it could mean very different things to different people. The interested reader should consult Wikipedia’s

Bretton Woods II where both meanings are explained in detail.

Conclusion

Since August of 2007 we have witnessed the relentless escalation of the credit crisis: a steady constriction of credit markets, starting with subprime mortgage-backed securities, spreading to commercial paper, then to interbank credit, and then to CDOs, CLOs, jumbo mortgages, home equity lines of credit, LBOs and private equity markets, and then generally to the bond and securities markets.

While the media describes the problem as one of illiquidity and confidence, a more serious analysis indicates that boom-time credit has been employed unproductively and so losses must be incurred. In other words, scarce capital has been misallocated, poorly invested, and effectively wasted. No amount of monetary or fiscal policy can fix the errors of the past, just like no modern treatment can quickly restore to health a drug addict debilitated from a decade-long drug abuse.

Based on indicators like (1) global real estate overvaluation, (2) indebtedness, (3) leverage, (4) outstanding derivatives, (5) global bubbles, and (6) the precariousness of the global monetary system, I would argue that the accumulated imbalances in the current period surpass significantly those preceding the Great Depression. I therefore conclude that the coming U.S. (and possibly) global depression will be of greater magnitude than the Great Depression of the 1930s. It likely suggests that we are entering a historic period that will likely be known as The Greater Depression.

Investor beware! Only gold can protect you from the ravages of another Depression!

Massive Oil Deposit Could Increase US reserves by 10x

WarOnYou — Thu, 29 Jan 2009 02:58:26 +0000

America is sitting on top of a super massive 200 billion barrel Oil Field that could potentially make America Energy Independent and until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times, giving western economies the trump card against OPEC’s short squeeze on oil supply and making Iranian and Venezuelan threats of disrupted supply irrelevant.

In the next 30 days the USGS (U.S. Geological Survey) will release a new report giving an accurate resource assessment of the Bakken Oil Formation that covers North Dakota and portions of South Dakota and Montana. With new horizontal drilling technology it is believed that from 175 to 500 billion barrels of recoverable oil are held in this 200,000 square mile reserve that was initially discovered in 1951. The USGS did an initial study back in 1999 that estimated 400 billion recoverable barrels were present but with prices bottoming out at $10 a barrel back then the report was dismissed because of the higher cost of horizontal drilling techniques that would be needed, estimated at $20-$40 a barrel.

It was not until 2007, when EOG Resources of Texas started a frenzy when they drilled a single well in Parshal N.D. that is expected to yield 700,000 barrels of oil that real excitement and money started to flow in North Dakota. Marathon Oil is investing $1.5 billion and drilling 300 new wells in what is expected to be one of the greatest booms in Oil discovery since Oil was discovered in Saudi Arabia in 1938.

The US imported about 14 million barrels of Oil per day in 2007 , which means US consumers sent about $340 Billion Dollars over seas building palaces in Dubai and propping up unfriendly regimes around the World, if 200 billion barrels of oil at $90 a barrel are recovered in the high plains the added wealth to the US economy would be $18 Trillion Dollars which would go a long way in stabilizing the US trade deficit and could cut the cost of oil in half in the long run.

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Energy War: US starting strangulation tactics against Moscow

WarOnYou — Mon, 19 Jan 2009 19:56:07 +0000

In view of the recent Ukrainian ploy in joining the Americans to attempt at boycotting Russian gas transportation to Europe, Moscow could study and implement a new strategy and logistics for its gas sale to its European consumers, experts said to WorldFutures.info. The Ukrainian Foreign Ministry confirmed on Thursday Russian media reports that Kiev was planning to involve the United States in modernizing its Soviet-era gas pipeline network.

The Russian daily Izvestia reported Wednesday that under a strategic partnership charter signed between Ukraine and the United States, Washington would help the ex-Soviet republic modernize its worn-out gas pipelines

On January 15, Ukraine had again blocked Russian gas from flowing back into Europe, this after an agreement that was reached hours ago between the Russian government and the Ukrainian authorities. The attempt was seen by observers as a boycott of Russian gas for several reasons but mainly after the US meddling in the business.

Following this meddling, it was promptly announced that the US will be involved in the pipeline repairs and upgrading in Ukraine, thus putting Russian gas transportation to Europe in jeopardy. It will be under US control for as long as the repairs are not completed, said observers.

“This is meant at creating tension between Russia and Ukraine (Kiev has surely been guaranteed NATO help in this matter) and such tensions are to make it uneasy for Moscow and to attempt at disrupting the economic performance of Russia overall,” the observer said.

Russia exports more than 80 percent of its gas through Ukraine’s transportation system to Europe. “This means the Russians must find solutions, rapid and long term ones too, that would break the obvious ‘monopoly’ that Ukraine is now having over Russia’s gas exports,”

“If that is not done, Russia would be allowing the US to play a vital economic card against its own interest,” he added.

“Sea routes, other border nations and direct negotiations between Russia and EU member states could solve the problem. The issue is the Europeans are in great need of Russian gas for their energy consumption and they have no other options at the moment but to depend largely on Moscow,” he said.

He said the Americans were implementing what he called the ’strangulation’ strategy, which is a very long term one and is targeted at ’suffocating’ Russia’s economy out in order to cause a collapse of the great Russian nation. He told WorldFutures.info that the same ’strangulation’ tactics were being used by the US to attempt at countering the Taliban in Afghanistan and the Chinese regime altogether.

“America want to control all the exit and entry routes that leads to China, Russia and Afghanistan (which is a small part in their military game plan). Russia and China are the real aims in the American new century game plan,” he said.

He also said that Russia was surely aware of such a move since its Prime Minister Vladimir Putin was a superb strategist but swift action was needed in order ‘check mate’ Washington which is playing a very dangerous game at the foot of Russia itself.

“The Russian Bear should kick Washington hard and send it off the Ukrainian lands by cutting off the gas supply routes that leads to Ukraine,” he concluded.

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