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Everything Is Rigged…

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Everything Is Rigged: The Biggest Price-Fixing Scandal Ever
The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There’s no price the big banks can’t fix
by Matt Taibbi
APRIL 25, 2013

From Rolling Stone here

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world’s largest banks may be fixing the prices of, well, just about everything.

You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that’s trillion, with a “t”) worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it “dwarfs by orders of magnitude any financial scam in the history of markets.”

That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world’s largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world’s largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It’s about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.

It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.

The Scam Wall Street Learned From the Mafia

Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-on-manipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption. If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.

“It’s a double conspiracy,” says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. “It’s the height of criminality.”

The bad news didn’t stop with swaps and interest rates. In March, it also came out that two regulators – the CFTC here in the U.S. and the Madrid-based International Organization of Securities Commissions – were spurred by the Libor revelations to investigate the possibility of collusive manipulation of gold and silver prices. “Given the clubby manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry,” CFTC Commissioner Bart Chilton said.

But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants’ incredible argument: If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.

“A farce,” was one antitrust lawyer’s response to the eyebrow-raising dismissal.

“Incredible,” says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.

All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation’s GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing. Moreover, it’s increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.

If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it’s no secret. You can stare right at it, anytime you want.

The banks found a loophole, a basic flaw in the machine. Across the financial system, there are places where prices or official indices are set based upon unverified data sent in by private banks and financial companies. In other words, we gave the players with incentives to game the system institutional roles in the economic infrastructure.

Libor, which measures the prices banks charge one another to borrow money, is a perfect example, not only of this basic flaw in the price-setting system but of the weakness in the regulatory framework supposedly policing it. Couple a voluntary reporting scheme with too-big-to-fail status and a revolving-door legal system, and what you get is unstoppable corruption.

Every morning, 18 of the world’s biggest banks submit data to an office in London about how much they believe they would have to pay to borrow from other banks. The 18 banks together are called the “Libor panel,” and when all of these data from all 18 panelist banks are collected, the numbers are averaged out. What emerges, every morning at 11:30 London time, are the daily Libor figures.

Banks submit numbers about borrowing in 10 different currencies across 15 different time periods, e.g., loans as short as one day and as long as one year. This mountain of bank-submitted data is used every day to create benchmark rates that affect the prices of everything from credit cards to mortgages to currencies to commercial loans (both short- and long-term) to swaps.

Gangster Bankers Broke Every Law in the Book

Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the “Libor submitters”) and asking them to fudge the numbers. Usually, the gimmick was the trader had made a bet on something – a swap, currencies, something – and he wanted the Libor submitter to make the numbers look lower (or, occasionally, higher) to help his bet pay off.

Famously, one Barclays trader monkeyed with Libor submissions in exchange for a bottle of Bollinger champagne, but in some cases, it was even lamer than that. This is from an exchange between a trader and a Libor submitter at the Royal Bank of Scotland:

SWISS FRANC TRADER: can u put 6m swiss libor in low pls?…
SWSISS FRANC TRADER: ive got some sushi rolls from yesterday?…
PRIMARY SUBMITTER: ok low 6m, just for u
SWISS FRANC TRADER: wooooooohooooooo. . . thatd be awesome

Screwing around with world interest rates that affect billions of people in exchange for day-old sushi – it’s hard to imagine an image that better captures the moral insanity of the modern financial-services sector.

Hundreds of similar exchanges were uncovered when regulators like Britain’s Financial Services Authority and the U.S. Justice Department started burrowing into the befouled entrails of Libor. The documentary evidence of anti-competitive manipulation they found was so overwhelming that, to read it, one almost becomes embarrassed for the banks. “It’s just amazing how Libor fixing can make you that much money,” chirped one yen trader. “Pure manipulation going on,” wrote another.

Yet despite so many instances of at least attempted manipulation, the banks mostly skated. Barclays got off with a relatively minor fine in the $450 million range, UBS was stuck with $1.5 billion in penalties, and RBS was forced to give up $615 million. Apart from a few low-level flunkies overseas, no individual involved in this scam that impacted nearly everyone in the industrialized world was even threatened with criminal prosecution.

Two of America’s top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it’s dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to “collateral consequences” in the economy.

The relatively small sums of money extracted in these settlements did not go toward reparations for the cities, towns and other victims who lost money due to Libor manipulation. Instead, it flowed mindlessly into government coffers. So it was left to towns and cities like Baltimore (which lost money due to fluctuations in their municipal investments caused by Libor movements), pensions like the New Britain, Connecticut, Firefighters’ and Police Benefit Fund, and other foundations – and even individuals (billionaire real-estate developer Sheldon Solow, who filed his own suit in February, claims that his company lost $450 million because of Libor manipulation) – to sue the banks for damages.

One of the biggest Libor suits was proceeding on schedule when, early in March, an army of superstar lawyers working on behalf of the banks descended upon federal judge Naomi Buchwald in the Southern District of New York to argue an extraordinary motion to dismiss. The banks’ legal dream team drew from heavyweight Beltway-connected firms like Boies Schiller (you remember David Boies represented Al Gore), Davis Polk (home of top ex-regulators like former SEC enforcement chief Linda Thomsen) and Covington & Burling, the onetime private-practice home of both Holder and Breuer.

The presence of Covington & Burling in the suit – representing, of all companies, Citigroup, the former employer of current Treasury Secretary Jack Lew – was particularly galling. Right as the Libor case was being dismissed, the firm had hired none other than Lanny Breuer, the same Lanny Breuer who, just a few months before, was the assistant attorney general who had balked at criminally prosecuting UBS over Libor because, he said, “Our goal here is not to destroy a major financial institution.”

In any case, this all-star squad of white-shoe lawyers came before Buchwald and made the mother of all audacious arguments. Robert Wise of Davis Polk, representing Bank of America, told Buchwald that the banks could not possibly be guilty of anti- competitive collusion because nobody ever said that the creation of Libor was competitive. “It is essential to our argument that this is not a competitive process,” he said. “The banks do not compete with one another in the submission of Libor.”

If you squint incredibly hard and look at the issue through a mirror, maybe while standing on your head, you can sort of see what Wise is saying. In a very theoretical, technical sense, the actual process by which banks submit Libor data – 18 geeks sending numbers to the British Bankers’ Association offices in London once every morning – is not competitive per se.

But these numbers are supposed to reflect interbank-loan prices derived in a real, competitive market. Saying the Libor submission process is not competitive is sort of like pointing out that bank robbers obeyed the speed limit on the way to the heist. It’s the silliest kind of legal sophistry.

But Wise eventually outdid even that argument, essentially saying that while the banks may have lied to or cheated their customers, they weren’t guilty of the particular crime of antitrust collusion. This is like the old joke about the lawyer who gets up in court and claims his client had to be innocent, because his client was committing a crime in a different state at the time of the offense.

“The plaintiffs, I believe, are confusing a claim of being perhaps deceived,” he said, “with a claim for harm to competition.”

Judge Buchwald swallowed this lunatic argument whole and dismissed most of the case. Libor, she said, was a “cooperative endeavor” that was “never intended to be competitive.” Her decision “does not reflect the reality of this business, where all of these banks were acting as competitors throughout the process,” said the antitrust lawyer Sokol. Buchwald made this ruling despite the fact that both the U.S. and British governments had already settled with three banks for billions of dollars for improper manipulation, manipulation that these companies admitted to in their settlements.

Michael Hausfeld of Hausfeld LLP, one of the lead lawyers for the plaintiffs in this Libor suit, declined to comment specifically on the dismissal. But he did talk about the significance of the Libor case and other manipulation cases now in the pipeline.

“It’s now evident that there is a ubiquitous culture among the banks to collude and cheat their customers as many times as they can in as many forms as they can conceive,” he said. “And that’s not just surmising. This is just based upon what they’ve been caught at.”

Greenberger says the lack of serious consequences for the Libor scandal has only made other kinds of manipulation more inevitable. “There’s no therapy like sending those who are used to wearing Gucci shoes to jail,” he says. “But when the attorney general says, ‘I don’t want to indict people,’ it’s the Wild West. There’s no law.”

The problem is, a number of markets feature the same infrastructural weakness that failed in the Libor mess. In the case of interest-rate swaps and the ISDAfix benchmark, the system is very similar to Libor, although the investigation into these markets reportedly focuses on some different types of improprieties.

Though interest-rate swaps are not widely understood outside the finance world, the root concept actually isn’t that hard. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you’ve got the basic idea of an interest-rate swap.

In practice, it might be a country like Greece or a regional government like Jefferson County, Alabama, that borrows money at a variable rate of interest, then later goes to a bank to “swap” that loan to a more predictable fixed rate. In its simplest form, the customer in a swap deal is usually paying a premium for the safety and security of fixed interest rates, while the firm selling the swap is usually betting that it knows more about future movements in interest rates than its customers.

Prices for interest-rate swaps are often based on ISDAfix, which, like Libor, is yet another of these privately calculated benchmarks. ISDAfix’s U.S. dollar rates are published every day, at 11:30 a.m. and 3:30 p.m., after a gang of the same usual-suspect megabanks (Bank of America, RBS, Deutsche, JPMorgan Chase, Barclays, etc.) submits information about bids and offers for swaps.

And here’s what we know so far: The CFTC has sent subpoenas to ICAP and to as many as 15 of those member banks, and plans to interview about a dozen ICAP employees from the company’s office in Jersey City, New Jersey. Moreover, the International Swaps and Derivatives Association, or ISDA, which works together with ICAP (for U.S. dollar transactions) and Thomson Reuters to compute the ISDAfix benchmark, has hired the consulting firm Oliver Wyman to review the process by which ISDAfix is calculated. Oliver Wyman is the same company that the British Bankers’ Association hired to review the Libor submission process after that scandal broke last year. The upshot of all of this is that it looks very much like ISDAfix could be Libor all over again.

“It’s obviously reminiscent of the Libor manipulation issue,” Darrell Duffie, a finance professor at Stanford University, told reporters. “People may have been naive that simply reporting these rates was enough to avoid manipulation.”

And just like in Libor, the potential losers in an interest-rate-swap manipulation scandal would be the same sad-sack collection of cities, towns, companies and other nonbank entities that have no way of knowing if they’re paying the real price for swaps or a price being manipulated by bank insiders for profit. Moreover, ISDAfix is not only used to calculate prices for interest-rate swaps, it’s also used to set values for about $550 billion worth of bonds tied to commercial real estate, and also affects the payouts on some state-pension annuities.

So although it’s not quite as widespread as Libor, ISDAfix is sufficiently power-jammed into the world financial infrastructure that any manipulation of the rate would be catastrophic – and a huge class of victims that could include everyone from state pensioners to big cities to wealthy investors in structured notes would have no idea they were being robbed.

“How is some municipality in Cleveland or wherever going to know if it’s getting ripped off?” asks Michael Masters of Masters Capital Management, a fund manager who has long been an advocate of greater transparency in the derivatives world. “The answer is, they won’t know.”

Worse still, the CFTC investigation apparently isn’t limited to possible manipulation of swap prices by monkeying around with ISDAfix. According to reports, the commission is also looking at whether or not employees at ICAP may have intentionally delayed publication of swap prices, which in theory could give someone (bankers, cough, cough) a chance to trade ahead of the information.

Swap prices are published when ICAP employees manually enter the data on a computer screen called “19901.” Some 6,000 customers subscribe to a service that allows them to access the data appearing on the 19901 screen.

The key here is that unlike a more transparent, regulated market like the New York Stock Exchange, where the results of stock trades are computed more or less instantly and everyone in theory can immediately see the impact of trading on the prices of stocks, in the swap market the whole world is dependent upon a handful of brokers quickly and honestly entering data about trades by hand into a computer terminal.

Any delay in entering price data would provide the banks involved in the transactions with a rare opportunity to trade ahead of the information. One way to imagine it would be to picture a racetrack where a giant curtain is pulled over the track as the horses come down the stretch – and the gallery is only told two minutes later which horse actually won. Anyone on the right side of the curtain could make a lot of smart bets before the audience saw the results of the race.

At ICAP, the interest-rate swap desk, and the 19901 screen, were reportedly controlled by a small group of 20 or so brokers, some of whom were making millions of dollars. These brokers made so much money for themselves the unit was nicknamed “Treasure Island.”

Already, there are some reports that brokers of Treasure Island did create such intentional delays. Bloomberg interviewed a former broker who claims that he watched ICAP brokers delay the reporting of swap prices. “That allows dealers to tell the brokers to delay putting trades into the system instead of in real time,” Bloomberg wrote, noting the former broker had “witnessed such activity firsthand.” An ICAP spokesman has no comment on the story, though the company has released a statement saying that it is “cooperating” with the CFTC’s inquiry and that it “maintains policies that prohibit” the improper behavior alleged in news reports.

The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. “It’s almost hilarious in the irony,” says David Frenk, director of research for Better Markets, a financial-reform advocacy group, “that they called it ISDAfix.”

After scandals involving libor and, perhaps, ISDAfix, the question that should have everyone freaked out is this: What other markets out there carry the same potential for manipulation? The answer to that question is far from reassuring, because the potential is almost everywhere. From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we’re forced to trust.

“In all the over-the-counter markets, you don’t really have pricing except by a bunch of guys getting together,” Masters notes glumly.

That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it. The problem in each of these markets is the same: We all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of things like interest rates, swaps, currencies and commodities.

All of these benchmarks based on voluntary reporting are now being looked at by regulators around the world, and God knows what they’ll find. The European Federation of Financial Services Users wrote in an official EU survey last summer that all of these systems are ripe targets for manipulation. “In general,” it wrote, “those markets which are based on non-attested, voluntary submission of data from agents whose benefits depend on such benchmarks are especially vulnerable of market abuse and distortion.”

Translation: When prices are set by companies that can profit by manipulating them, we’re fucked.

“You name it,” says Frenk. “Any of these benchmarks is a possibility for corruption.”

The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it. It’s not just stealing by reaching a hand into your pocket and taking out money, but stealing in which banks can hit a few keystrokes and magically make whatever’s in your pocket worth less. This is corruption at the molecular level of the economy, Space Age stealing – and it’s only just coming into view.

This story is from the May 9th, 2013 issue of Rolling Stone.

This is quite funny. It’s not a conspiracy. It’s emergence. A bunch of people who think the same way, all doing the same thing and providing an environment where there is no censure of this behaviour.

It’s trivial I know, but he misses the point about the trader’s comment about day old sushi rolls…it was a joke…. and then goes on to take everything else as evidence of a conspiracy.

What’s going on is a natural progression. Collapse of a civilisation as it starts devouring itself. The reason things were done in the first place is long forgotten and the system is gamed by the players, serving nothing but themselves to the detriment of all. Governments believe themselves responsible for everything but do not have the capability of managing everything. By taking away responsibility from the individual, they weaken society. For it to work, society requires some investment of themselves by the individuals who comprise it, and therefore there must be a good reason for individuals to invest something of themselves.

With the government disempowering and trampling on individual liberties, those reasons evaporate.

The result is what we see.

Written by anubis

May 1st, 2013 at 5:44 pm

Economic slow down

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Written by anubis

April 13th, 2013 at 11:05 am

Posted in Epochal Collapse

George Carlin on You Tube

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A depressing post…

George Carlin on You Tube

Written by anubis

September 21st, 2011 at 9:00 am

On the brink

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Via Gerald Celente’s June 13, 2011 Trend Alert

Everything is not all right. And things are going to get worse … much worse. The economy is on the threshold of calamity. Wars are spreading like wildfires. The world is on a razor’s edge.
Not so, say world leaders and mainstream media experts. Yes, there are problems, but the financiers and politicians are aware of them. Policies are already in place and measures are being taken to correct them.

Whether it’s failing economies, intractable old wars or raging new wars, the word from the top always maintains that steady progress is being made and comforts the populace with assurances that the brightest minds and the sharpest generals are in charge and on the case. On all fronts, success is certain and victory is at hand. Only “patience” is required … along with more men, more time and more money.

As far as these “leaders” and their media are concerned, the only opinions that count come from a stable of thoroughbred experts, official sources and political favorites. Only they have the credentials to speak with authority and provide trustworthy forecasts. That they are consistently, if not invariably, wrong apparently does nothing to diminish their credibility.

How can any thinking adult possibly imagine that the same central bankers, financiers and politicians responsible for creating the economic crisis are capable of resolving it?

Yet even in the face of their proven failures and gross incompetence, anyone daring to challenge the party line or the conventional wisdom is dismissed as an “alarmist,” “fear monger,” or “gloom-and-doomer.”

…with the Dow on a down trend and the economic data increasingly pointing in the direction of Depression, Washington and Wall Street remain in denial. The only debate among the “experts” is whether or not a “double dip” recession is likely.

However, for the man on the street – pummeled by falling wages, higher prices, intractable unemployment, rising taxes and punitive “austerity measures” – “Depression,” not “recession,” and certainly not “prosperity,” is just around the corner.

Trend Forecast: The wars will proliferate and civil unrest will intensify. As we forecast, the youth-inspired revolts that first erupted in North Africa and the Middle East are now breaking out in Europe (See “Off With Their Heads,” Trends Journal, Autumn 2010)

Given the trends in play and the people in power, economic collapse at some level is inevitable. Governments and central banks will be unrelenting in their determination to wring every last dollar, pound or euro from the people through taxes while confiscating public assets (a.k.a. privatization) in order to cover bad bets made by banks and financiers.

When the people have been bled dry financially and have nothing left to give, blood will flow on the streets.

We’ve been saying it for over two years, and we maintain our position today – this is a depression. No amount of government machination is going to fix the fundamental problems within the financial, economic, monetary and political systems of our country. Nature will force balance one way or the other. And nature, as we have come to learn in recent months, can be very brutal.

Make no mistake. We are in as serious a time today as any in the last century. While we may not be directly engaged in a World War, it is not that far off. Analysts often speak of the engagements in the middle east as four separate wars (Iraq, Afghanistan, Libya, and now Yemen). We may be engaged in conflict across four different borders, but there is only one war – and it will soon expand. It’s only a matter of time before China and Russia get involved. Look at the middle east and you’ll clearly see this is a battle for resources and regional dominance. Chinese state owned companies have had to withdraw 30,000 employees from the Libyan oil fields. Ownership, it seems, has now been granted to the “rebels.” Similar activities, though hidden from the view of the masses, are occuring all over the world. How long before the Chinese, the Russians and others take a real stand – a military stand?

Even if we were to avoid global war, which is doubtful in the long-term, the fact that the super majority of the world’s population is broke and going hungry means that rioting, revolution and bloody civil wars cannot be avoided. If you still believe that the powers that be, those politicians who are in bed with the very financiers and military industrial complex that is robbing us blind and pushing us towards war, have your interests at heart, then you need to have your head examined. It’s time to be blunt. You either get it, or you don’t.

The United States of America, as well as the world, will be unrecognizable as it exists today within the next decade.

We offer the same advice that Mr. Celente has offered:

…it has to be treated as if you are preparing for battle; expect the unexpected and prepare for the worst, which in these perilous times could be a declaration of economic martial law. Banks may close, currencies may be devalued and deposit withdrawals may be imposed. Remember Gerald Celente’s basic survival strategy, “GC’s Three G’s: Guns, Gold and a Getaway plan.”

We’re in the middle of an unprecedented global crisis. Make preparations or suffer the consequences.

Written by anubis

June 17th, 2011 at 5:47 am

Posted in Epochal Collapse

Things are spinning out of control

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from zerohedge…

Things Are Spinning Out of Control

The pretense of centralized control of history is wearing thin.

The single greatest conceit of the Status Quo in the U.S., China and Euroland is that systems and trends can be tightly controlled. That conceit is slowly being revealed as hubris, as all sorts of things are spinning out of the control of the centralized authorities and financial elites in each geopolitical power center.

Does anyone really think the people of Greece will stand idly by while the state treasures of their nation are transferred to the banks which foolishly lent billions to a visibly risky enterprise? The banks, of course, lent freely to insolvent governments throughout the European Union, confident in the backstop of the E.U. itself.

The analogy to subprime mortgages in the U.S. is near-perfect: banks lent freely to extremely risky borrowers, breezily confident that their worker-bees in the Federal Reserve, Fannie Mae and Freddie Mac, the Treasury and Congress would all toil feverishly to transfer the risk to the U.S. taxpayers, by whatever means were necessary.

Does anyone really think the uprisings against this transfer of national wealth to the “too big to fail” banks in Europe will fade as unemployment rises and the true costs of the transfer become apparent to all?

Does anyone really think there is no chance that the citizens of one of the nations lined up to be stripmined by the E.U. will openly rebel against the stripmining, throwing out their government until they find some politicians who are not spineless lackeys and factotums of the financial Status Quo?

Does anyone really think the banks are really that precious to the people they are stripmining? Just how awful would it be if all the big banks with exposure to sovereign debt in the E.U. went belly up and were declared insolvent? A handful of very wealthy managers would lose their jobs, a handful of very wealthy owners would lose their stake, and all the pension funds and mutual funds which bet on the infinite passivity of the citizenry and the infinite checkbook of the E.U. would lose, too.

It’s called Capitalistic risk and return, baby, and return can be negative. All the big players assumed the citizenry would quietly line up to have the clothing ripped from their backs and their flesh flayed to extract the pound of flesh “owed” the banks. But as the citizenry of Europe wake up to costs of the stripmining, which extends now to the taxpayers of Germany, Finland and beyond, they are withdrawing their support of the financial Status Quo.

Here is my plea: Ireland, Please Do the World a Favor and Default (November 29, 2010).

Things are spinning out of the control of the centralized mandarins in the E.U. They seem to have borrowed the Federal Reserve’s playbook to keep the stripmining proceeding as planned: lie, frequently (practice helps); obscure systemic risks by printing money; and issue a foul sewage of propaganda about how nicely the economy is “recovering” to mask the real game, which is diverting the national income stream to the banking cartel.

The levers of interest rates, credit and money supply do not control larger trends; the appearance of control is illusory. The E.U. and the Fed are both busily applying the duct tape of various monetary machinations to the overheating boilers of the global economy, and presenting their frantic improvisations as “finely tuned, guaranteed to work” policies. As things spin out of their control, reality is poking through their rice-paper facade of “normalcy” and control.

Here in the U.S., the Fed’s game plan of stripmining the nation to “save” the banking cartel is based on a cruel deceit I explained yesterday in The ‘Baseball’ Economy: The Fed Strikes Out (May 24, 2011): while the Fed maintains incentives for financial speculation and backstops any cartel losses in those speculations, it claims its policies are designed to “boost employment” in the real economy.

That is the world’s most dangerous joke: if you believe it, you die from extreme irony. What the Fed is actually doing is starving the real economy and thus precluding any gains in employment as it diverts the national income to fatten the insolvent banking cartel.

Does anyone seriously believe their scam can endure? As I described in Your Pick, Ben, But One Goes Off the Cliff (April 22, 2011), the Fed’s policies are setting up multiple double-binds. The Fed cannot finesse the unraveling of the entire financialization project.

There is currently a “great debate” over QE3, the next round of Fed “stimulus” (read stripmining). As things spin out of control, it no longer matters what the Fed does. That is, after all, their central conceit and the basis of their power: that the Fed actually controls anything. This quote, attributed to Napoleon Bonaparte, is increasingly relevant: “Do you know what amazes me more than anything else? The impotence of force to organize anything.”

The Fed claims it can force the real economy to “grow” by forcefeeding it credit. But all the Fed is really doing is fattening the banking cartel with guaranteed profits (borrow from the Fed for free and then deposit the funds at the Fed for interest) and enabling another speculative frenzy which generates fees and profits for the banking cartel while the U.S. taxpayers play bagholder.

The Fed has lost control of the reaction to QE3. There is no “surprise” in QE3, so the potential positive is lost. Whatever the limitations the Fed imposes on QE3, they will be recognized as limiting the “high” of the credit-cocaine injected by the Fed.

If the Fed chooses an open-ended, essentially infinite QE3, then it will be recognized by the market that the Fed has lost all control and the pretense of “growth” is truly threadbare. No matter what the Fed does with QE3, the results will be negative. If they try to finesse a limited QE3, the markets will recognize the policy is unable to force-feed more speculative bubbles. If the Fed unleashes the printing press, then inflation will wrench free of the last rotten ropes restraining it, and the market will recognize that the current stock and bond bubbles are so tenuous that only unlimited money printing can keep them inflated.

Simply put, things are spinning out of the Fed’s control. The Fed has been transferring the wealth of the nation to the banking cartel and the financial Power Elite for three long years, and the fraud at the heart of their claim to be “stimulating” the real economy is now in plain view.

Does anyone really believe Japan’s economy is under control? The tragedy at the out-of-control Daiichi Fukushima reactors might well be an analogy for the entire Japanese economy. Does anyone seriously believe Japan’s over-indebted experiment in endless quantitative easing will sustain a demographic sea change and yet another explosion of debt to support rebuilding and more “stimulus,” i.e. bailing out Japan’s insolvent banking cartel, which has been insolvent for 20 years?

As for China: inflation is now out of control. Party authorities are frantically pulling the same levers of monetary policy, but the wires connecting the levers to the real economy have snapped. All their efforts to “cool” rampant speculative bubble-blowing and rampant inflation are failing. Taking their cue from the U.S., they are desperately trying to mask their loss of control with doctored statistics, but the conceit cannot endure for much longer: rents are rising even as housing sales decline. Local governments are still borrowing and speculating wildly, in a last-ditch effort to prop up their own income streams, which are dependent on real estate speculation and land grabs from peasants.

Things are spinning out of control. Trends are beyond the feeble grasp of central financial authorities. Power is based not just on controlling events in the real world but on the perception of having some control over the real world. Once the central banks’ control over large-scale trends and systems is revealed as illusory, then the unraveling of the Status Quo’s powers will gain momentum.

Written by anubis

May 31st, 2011 at 1:04 am

Why I Won’t Support More Bailouts – Timo Soini

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Insolvency must be purged from Europe’s system and it must be done openly and honestly.

When I had the honor of leading the True Finn Party to electoral victory in April, we made a solemn promise to oppose the so-called bailouts of euro-zone member states. These bailouts are patently bad for Europe, bad for Finland and bad for the countries that have been forced to accept them. Europe is suffering from the economic gangrene of insolvency—both public and private. And unless we amputate that which cannot be saved, we risk poisoning the whole body.

The official wisdom is that Greece, Ireland and Portugal have been hit by a liquidity crisis, so they needed a momentary infusion of capital, after which everything would return to normal. But this official version is a lie, one that takes the ordinary people of Europe for idiots. They deserve better from politics and their leaders.

To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them. Let’s follow the money.

At the risk of being accused of populism, we’ll begin with the obvious: It is not the little guy that benefits. He is being milked and lied to in order to keep the insolvent system running. He is paid less and taxed more to provide the money needed to keep this Ponzi scheme going. Meanwhile, a kind of deadly symbiosis has developed between politicians and banks: Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever-more money back to our governments, keeping the scheme afloat.

In a true market economy, bad choices get penalized. Not here. When the inevitable failure of overindebted euro-zone countries came to light, a secret pact was made.

Instead of accepting losses on unsound investments—which would have led to the probable collapse and national bailout of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund, Ireland’s NAMA and a lineup of special-purpose vehicles that make Enron look simple. Some politicians understood this; others just panicked and did as they were told.

The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds.

Further contrary to the official wisdom, the recipient states did not want such “help,” not this way. The natural option for them was to admit insolvency and let failed private lenders, wherever they were based, eat their losses.

That was not to be. As former Finance Minister Brian Lenihan recently revealed, Ireland was forced to take the money. The same happened to Portuguese Prime Minister José Sócrates, although he may be less forthcoming than Mr. Lenihan about admitting it.

Why did the Brussels-Frankfurt extortion racket force these countries to accept the money along with “recovery” plans that would inevitably fail? Because they needed to please the tax-guzzling banks, which might otherwise refuse to turn up at the next Spanish, Belgian, Italian, or even French bond-auction.

Unfortunately for this financial and political cartel, their plan isn’t working. Already under this scheme, Greece, Ireland and Portugal are ruined. They will never be able to save and grow fast enough to pay back the debts with which Brussels has saddled them in the name of saving them.

And so, unpurged, the gangrene spreads. The Spanish property sector is much bigger and more uncharted than that of Ireland. It is not just the cajas that are in trouble. There are major Spanish banks where what lies beneath the surface of the balance sheet may be a zombie, just as happened in Ireland for a while. The clock is ticking, and the problem is not going away.

Setting up the European Stability Mechanism is no solution. It would institutionalize the system of wealth transfers from private citizens to compromised politicians and otherwise failed bankers, creating a huge moral hazard and destroying what remains of Europe’s competitive banking landscape.

Some defend the ESM, saying its use would always require unanimity. But the current mess with Portugal shows that the elite in Brussels will seek to enforce unanimity through pressure when it cannot be obtained by persuasion. Abolishing unanimity is only a matter of time. After that we have a full-fledged fiscal transfer union that is obviously in hock to Brussels’ anti-growth corporatism.

Fortunately, it is not too late to stop the rot. For the banks, we need honest, serious stress tests. Stop the current politically inspired farce. Instead, have parallel assessments done by regulators and independent groups including stakeholders and academics. Trust, but verify.

Insolvent banks and financial institutions must be shut down, purging insolvency from the system. We must restore the market principle of freedom to fail.

If some banks are recapitalized with taxpayer money, taxpayers should get ownership stakes in return, and the entire board should be kicked out. But before any such taxpayer participation can be contemplated, it is essential to first apply big haircuts to bondholders.

For sovereign debt, the freedom to fail is again key. Significant restructuring is needed for genuine recovery. Yes, markets will punish defaulting states, but they are also quick to forgive. Current plans are destroying the real economies of Europe through elevated taxes and transfers of wealth from ordinary families to the coffers of insolvent states and banks. A restructuring that left a country’s debt burden at a manageable level and encouraged a return to growth-oriented policies could lead to a swift return to international debt markets.

This is not just about economics. People feel betrayed. In Ireland, the incoming parties to the new government promised to hold senior bondholders responsible, but under pressure, they succumbed, leaving their voters with a sense of democratic disenfranchisement. The elites in Brussels have said that Finland must honor its commitments to its European partners, but Brussels is silent on whether national politicians should honor their commitments to their own voters. In a democracy, where we govern under the consent of the people, power is on loan. We do what we promise, even if it costs a dinner in Brussels, a “negative” media profile, or a seat in the cabinet.

When in Europe’s long night of 1939-45, war came to Finland with the winter blizzards, my mother was one of eight siblings being raised on a small farm in central Finland where my grandparents eked out a frugal living. My two young uncles rushed to the front and were both wounded in action during Finland’s chapter of Europe’s most terrible bloodshed. I was raised to know that genocidal war must never again be visited on our continent and I came to understand the values and principles that originally motivated the establishment of what became the European Union.

This Europe, this vision, was one that offered the people of Finland and all of Europe the gift of peace founded on democracy, freedom, justice and subsidiarity. This is a Europe worth having, so it is with great distress that I see this project being put in jeopardy by a political elite who would sacrifice the interests of Europe’s ordinary people in order to protect certain corporate interests.

Europe may still recover from this potentially terminal disease and decline. Insolvency must be purged from the system and it must be done openly and honestly. That path is not easy, but it is always the right path—for Finland, and for Europe.

Mr. Soini is the chairman of the True Finns Party in Finland.

Written by anubis

May 12th, 2011 at 7:19 am

Posted in Epochal Collapse

Circus Clowns And Sideshow Freaks

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from zerohedge

Submitted by Brandon Smith from Alt Market

Circus Clowns And Sideshow Freaks

In my worst nightmares, when the lights are swallowed by the smog of some nefarious gloom and the air itself becomes a stale sarcophagus into which I am entombed, and the grim hands of putrefied fate sink their wretched grip into the thick of my neck and all seems irrevocably lost, I merely recall that soon I will awaken to the horror of a terminal America infested by career criminals and certifiable morons, and suddenly, my off color dreams don’t seem so bad. Ultimately, there is nothing worse to me than a public majority that takes everything they hear from the mouths of political warlocks at face value. Even the fear of death is truly a pittance compared to the threat of being enveloped by a stampeding herd of frightened, stupid, human cattle.

Is this melodramatic? Not at all. When a man is aware, and by aware I mean honest with himself, he inevitably suffers the pain of being certain while the rest of the world enjoys the bliss of false assumptions. We live in a culture that inflicts great punishment on those who know, and lavishes enticing but short lived rewards on those who ignore. In such a place as this, meaning disappears, and countries die.

The first century satirist, Decimus Juvenalis, grief-stricken by the destruction of the Roman Republic at the hands of a succession of emperors and tyrants, wrote: “The people that once bestowed commands, consulships, legions, and all else, now meddle no more and long eagerly for just two things — bread and circuses.” At that time, the autocratic rulers of the empire were highly visible. Even celebrities. They played the hollow Roman Senate like a pipe organ and created elaborate events, moments of pageantry in the otherwise terrifyingly bleak lives of the citizenry, and of course, the people were thoroughly distracted while their economy, their government, and their land crumbled around them.

Today, our autocratic rulers in the form of a corporate oligarchy keep rather hidden from the prying eyes of the commoners, but they wield the same power as the emperors of old, with the same obvious results. America is ripping apart at the seams. Our currency has been destroyed. Our treasury is indebted beyond the point of any return. The cost of our daily survival is quickly rising beyond any average person’s means to pay. And, our political system is a never ending parade of googly-eyed muppets singing and dancing to the tune of the false left/right paradigm. Yet, where has our attention been lately…?

Apparently our impending doom is not as entertaining as the Osama Bin Laden Show, which has been written and choreographed like a bad Tom Clancy novel, or a contrived episode of ‘24’ (Jack Bauer finally shoots Bin Laden square in the head with his hawk-like vision and badass marksmanship while Osama in typical TV land fashion uses a woman as a human shield. Sorry to spoil the ending for you if you haven’t seen the final episode yet). Or how about the battle of “wits” (I say this knowing full well the irony) between Barack Obama and Donald Trump, two soulless rock-em’ sock-em’ robots in a fake duel for fake polls, fake votes, and a fake presidency. Let’s not forget about the “Royal Wedding”, the eagerly awaited international event that featured a throng of throwbacks from the Dark Ages prancing around in Nutcracker outfits and partying to the tune of millions in British taxpayer dollars.

Do any of these things really matter? Not in the slightest. How long must we endure this hokey carnival ride before we finally start focusing on legitimately important issues? That’s really up to us…

Day after day, we allow ourselves to be conned, befuddled, and frightened by a cast of clowns and freaks. Why do we do this? How can we stop the madness? First, we have to understand how the propaganda works, before we can diffuse it. Let’s examine some of the tactics of disinformation being used today, as well as the purpose behind some of America’s most prominent distractions.

“The Boogeyman Is Under Your Bed…”

A collapsing dollar, state funding on the brink, a still irradiated Japan, gasoline price spikes, and, the only thing that has lately been able draw people outside of their television and microwave fajita saturated cocoons is the orchestrated hoax of Osama Bin Laden’s death. No independently corroborated physical evidence? No independently corroborated video? Body dumped at sea in less than a day without independent verification of the identity (apparently to avoid his rising from the grave as the invincible Zombie Bin Laden)? No problem! We fully believe every word the Obama Administration says without question! Lets go do keg stands on the White House lawn, yeehaw!

A boogeyman is a very powerful tool for corrupt governments. In fact, every despotic regime in history has concocted one fantasy villain after another in order to maintain their psychological stranglehold on the populace. Killing one only means a replacement is soon to be introduced. While many Americans are intelligent enough to at least express some concerns about the obviously deceitful manner in which the Bin Laden death has been handled and promoted, there is still a significant swath of the population that has invested themselves so completely in the Bin Laden myth that they will support the official story without question.

Sadly, villains often become the drivers of history. Most events on the human timeline are merely reactionary movements of states and peoples to counter a dangerous antagonist, whether actual or fabricated. Very rarely do people act in concert to change the shape of their society or their surroundings without a symbolic devil to spur them on. This is not to say that there are not real ghouls to be dealt with in every generation, but problems surface when we become ADDICTED to the idea of villains. We become so lethargic when it comes to putting in the effort of determining our own destinies that soon we start to need monsters to inspire us to take action in life. We welcome governments to conjure enemies for us because it makes us feel as though we have purpose again. As though we are a “team”. Just look at the deluded lemmings that roamed D.C. enthralled at the unconfirmed and unsupported claim of Bin Laden’s death. A civilization caught in this circle of pure reaction usually devolves into something utterly pathetic; a people without principles feeding on each other for comfort.

Interestingly, the fermentation of amoral or destructive behavior is found most often in power structures, like governments and corporate institutions, where the desire for overt control can be satisfied. It is at the top of the pyramid that we find the bottom of the barrel in terms of humanity. So, it is not strange at all to consider the fact that elitists seek to create monsters out of thin air, like the “axis of evil”, terrorists, lone gunman, homegrown extremists, barter networkers, or Amish dairy farmers. They know that people seek out dragons to slay and so provide proxies and facsimiles. If they didn’t, the masses may turn their attentions towards a real threat, like the elites themselves.

Again, this is common sense and a consistent tactic, one which has been admitted to openly by establishment authorities for decades. The true boogeymen are not under your bed, they are not your next door neighbors who participate in activist groups, they are not right wing extremists, they are not even men in caves in Afghanistan or Pakistan. The only monsters worth so much attention and dedication are those that are closest to us. To find them, we have only to follow where all our money goes, where all our votes are misspent, and where all our decisions are made without our consent.

“If You Didn’t Vote, You Have No Right To Complain…”

Perhaps the most effective scam of all time is the construction of the false left/right paradigm. Anyone who does not understand this fundamental fallacy of our political system will never be able to understand the bigger picture of how our government works or why or “elected” officials do the things they do. If you cannot accept the fact that both major parties are essentially the same, supporting the same primary legislation and differing only in rhetoric, then you will probably attribute the constant failings of our leadership to “greed” or “stupidity”. This is simply not the case.

When Obama went back on his election year promises to end the wars in Iraq and Afghanistan and pull troops out (there are still thousands of troops and private contractors in Iraq too, for those that bought the second pullout lie), for instance, or when he decided to support the Patriot Acts after criticizing them, this was not because he has a bad memory, or even because he wanted to win your vote. He made promises and then nixed them because that’s HIS JOB; to perpetuate the false idea that the Democratic Party is anti-war, and different from the Republican Party.

When Bush Jr. ran on a platform of limited government and conservatism, then tripled the size of the Federal Government, it was not because he is an idiot man-child. It is because it was his job to pretend as if he cared about traditional conservative values, while instituting socialist globalist programs under our noses.

When a hypocrite and a bottom feeder like Donald Trump, a confessed liberal on taxes, health care, and trade, a man who stooped to using eminent domain in an effort to steal an elderly woman’s home so he could pour a limousine parking lot on top of it, is suddenly presented as the new hope of the Republican Party and limited government, I think its time to pack up our preconceptions about there being any such thing as a two party system.

In the end, most political leaders are more like circus clowns, meant to amuse us. They bumble about the center ring spraying seltzer water at each other and cracking each other’s skulls with rubber mallets, but who really cares which clown wins this slapstick contest? They may make us feel as though we have a choice, and thus a voice, in our government, but at bottom, it is the ringmaster that decides the course of the show. The clowns are a sidenote. Not voting for either of them seems to be only the option left, or, voting with one’s conscience for a candidate that’s not an establishment favorite (aka Ron Paul).

“War Is Necessary To Perpetuate Freedom…”

War leads to many things, but rarely does it ever lead to people being more readily free. WWI (a fabricated war) led to the implosion of Germany and the subsequent rise of National Socialism (a banker fabricated political movement) which led to WWII, which then destroyed most of Europe making way for the construction of the EU (a banker fabricated supranational union), basically a more subversive and insidious form of socialism with even greater control and unaccountability. Most wars are planned like cross country vacations; you may deviate here and there, but eventually you’ll find yourself at the destination mapped out for you before hand. The vitriol brewing in the Middle East today is no exception.

Wars not only break down and then centralize sovereign systems, they also rally the masses to support governments they otherwise might oppose. Wars create fear, not to mention the thrill of tribal victory. Wars collectivize societies, dissuade and shame individualism, and bring everyone under a single banner and a single philosophy. Where I might be applauded today as a writer for speaking out against the nonsensical involvement of the U.S. and the EU in an internal civil war in Libya, I may be attacked tomorrow if a terrorist bombing occurs in Libya’s name. Where I might point out that only a year ago and despite his disturbingly violent nature Gaddafi was the globalist go-to man for the African Union, and supported widely by the UN for purchasing African Union memberships for poorer nations with Libyan oil money, others might say that I am undermining U.S. solidarity in the “war on terror” by being factual. Wars have the ability to turn the common man into a mini-tyrant, not to mention a censor for the establishment.

In the end, if you want to distract the public away from the horrifying strife of economic collapse or even hyperinflation, the only conceivable avenue is war. Nearly every engineered financial disaster in modern history has been followed by an engineered conflict to muffle the cries for new management. In America’s case, these wars are always preempted with calls for the “spread of democracy”, making the target country more than a target, but a monster (as discussed earlier) and making us the knight in shining armor off to rescue the poor helpless villagers of the planet. We play out the myth then find that we have again only furthered the aims of globalists, and weakened ourselves in the process.

The Show Must Go On

The world that we experience through what is often termed the “mainstream” is, quite simply, an illusion. The life many live is not real, but an elaborate production. A rented life. A life they do not own.

Is this not the stuff of “conspiracy”…? That is the wrong question. Is this the stuff of fact? THAT is what we should be asking ourselves.

It is time for the American people to stop fooling around with what is “probable”, or “more likely”. Occum’s Razor (the misinterpreted version of the principle) has never been applicable in terms of human systems, and especially not those dominated by a handful of men, as most usually are. The “simplest explanation” for a social situation is rarely the correct one, and is completely up for interpretation. I would replace the word “simplest” with the word “practical”. What I deem as practical (the influence of elite minorities over the flow of historical events) may be considered outlandish by others because their perception is skewed by their lack of knowledge. Perception changes with knowledge. Practical explanation changes with awareness. The underlying truth, after all is said and done, is constant. The truth does not change, we change.

Propagandists have always understood this condition, and the science of manipulating perception with diversion, bias, and fear, is ever present today. Whether it’s a faux attack on an Al-Qaeda compound containing a Bin Laden body we’ll never see first hand, a sham of an election with marionette candidates, or a war in Libya that is never officially categorized as a war, you will be lied to by government, and these lies, whether you accept it or not, will eventually hurt you, or someone you care about. Recognizing the distraction is the first step in dismantling disinformation. Knowing what we are facing is the key to undoing the damage done.

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.”

From ‘Propaganda’ by Edward Bernays (named one of Life Magazine’s 100 most influential people of the 20th Century).


Written by anubis

May 4th, 2011 at 4:47 pm

Posted in Epochal Collapse

End of the US Empire

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The fall of the American Empire has begun:

An interview with Richard Maybury conducted by The Daily Crux


The Daily Crux: Richard, you’ve long said the collapse of the American Empire would be the central issue for Americans, with regard to money, investing, and life in general.

In your recent issue of Early Warning Report, you said there’s now a very high probability this collapse has already started. Can you talk about why you think that is?

Richard Maybury: Let’s start with a little history: All empires eventually fall. No one in Washington will admit it, but the U.S. has been an empire for decades now, and there has never been any reason to believe our empire would be immortal.

People who are power-seekers want more power, and they’ll sacrifice other things in order to get that power. One of the things power-seekers in a large government almost always sacrifice is the financial integrity of the country. They will simply bleed the whole economy dry in order to increase their power. That’s a main reason empires fall.

We see it all through history. You can look back to any of the ancient empires. They’re forever wrecking their economies in order to increase their political power. So it’s no brilliant prediction to say the U.S. Empire is going to fall. Anyone who has studied much history should have been able to predict this mess was going to arise… and here it is.

It’s fascinating to me. I talk to all sorts of so-called ordinary people, such as dentists, barbers, and taxi drivers. Most have no understanding of what’s actually happening to America, but they all know deep in their hearts something has gone terribly wrong… and it’s not going to end anytime soon. This is an interesting condition that has arisen recently.

Americans, up until the last year or two, have always been optimistic. They would say things like, “Yes, hard times come along, but this, too, shall pass.” But they aren’t saying this anymore. They’re beginning to figure out that America’s troubles aren’t going away this time.

You can see these problems in the financial markets and elsewhere… unemployment, bankruptcies, mortgage defaults, poverty… these are all just symptoms of the fall of the Empire. Let me quickly point out, however, that the fall of the Empire is actually a wonderful thing. Empires are cancers and it’s a good thing to excise them as fast as possible. But the surgery necessary to do it is awfully painful.

If you look at any previous empires I write about all time – the French Empire, the British Empire, the Russian Empire – these countries are all much better places today than they were when they had empires. America will be too. But we’ve got to get from here to there, and the process is very, very painful. We’re going to experience an awful lot of trouble because of it.

Crux: For many years, you’ve also been writing about the problems in the Middle East. In the past few months, it seems many of those problems are coming to a head. Can you explain how the troubles there – part of the area you refer to as “Chaostan” – are related to the troubles we’re facing here at home?

Maybury: Sure. For those who aren’t familiar, “Chaostan” is a term I coined for the area from the Arctic Ocean to the Indian Ocean, and Poland to the Pacific, along with North Africa. This area includes the Middle East.

In Central Asia, the suffix “stan” means “the land of.” For example, Afghanistan is the land of the Afghans. So in 1992 I coined the term Chaostan to mean “the land of great chaos.”

The reason this area is so often in chaos is a conversation of it’s own, but here’s a quick summary.

All religions teach that there is a higher law than any government’s law, and they all teach two fundamental laws:  do all you have agreed to do, which is the basis of contract law, and do not encroach on other persons or their property, which is the basis of tort law and some criminal law.  Each religion expresses these laws in different ways, but they all teach them.

These principles are the basis of the old British common law.  It was called common law because it grew out of principles common to all.

In a book called The Ideological Origins of the American Revolution, historian Bernard Bailyn pointed out that the American Revolution, the Constitution, Bill of Rights and Declaration of Independence all sprang from the common law.

In the decades following the revolution, other people saw America’s new liberty and prosperity.  They wanted the same thing, and the American philosophy began to spread around the world.  The areas where it took root became known as the free world.

Then in the mid-1800s, socialism began to spread, and it nearly killed off the American philosophy — the philosophy that, I believe, incidentally, is now being rediscovered.

Chaostan is the most important area where the principles of liberty never got a chance to take root.  From the beginning of history, most parts of Chaostan have been a sea of blood and destruction, because they never had rational legal systems, and still don’t.

The turmoil is greatly aggravated by the interference of European regimes during past centuries.

When you look at this area on a map of the world, you see all these countries are delineated by borders drawn by Europeans. Very few Americans understand this. Practically every border in the world was drawn by the European governments as they swept over the globe conquering one country after another.

European rulers would draw the borders in locations that were convenient to them. And so there are very few borders in the world that were drawn by the people who are native to those areas.

This means what we regard as a country when we look at a map usually isn’t really a country at all. It’s a collection of tribes cobbled together by the Europeans for the convenience of the Europeans.

In each of these so-called “countries” there are some tribes that are either dominant or want to be dominant, and the way they achieve dominance is by acquiring money, weapons, and other resources from outside powers, which were originally the Europeans.

A good example is Saudi Arabia. The Saudi tribe was one of many that lived on the Arabian Peninsula. The British government essentially created Saudi Arabia by giving money and weapons to the Saudi tribe and helping them take control of the other tribes.

This would be akin to China or some other foreign country coming to the United States and choosing single families or neighborhoods to rule over entire states. These families would have all the wealth, all the power, and would make all the rules. And just in case anyone got any ideas, the Chinese government would keep a few battleships and aircraft carriers parked near our shores.

Crux: We’re huge fans of your Uncle Eric books here at The Crux, and I remember being blown away the first time I read that example. We’re not taught these things in our schools… But when you look at it from that perspective, it’s not surprising there’s so much anger toward Western governments.

Maybury: Exactly… and this is the case all over Chaostan. None of those nations are what you and I would regard as natural countries. They were artificially created, and the rulers of those countries were propped up, in nearly every case, by the Europeans.

Keep in mind that except for five countries — Iran, Thailand, Afghanistan, most of China, and Japan — every country in the world at one time or another was conquered by the Europeans. So the political structures we see in these countries — nearly all countries — are either creations of the Europeans or outgrowths of those creations.

During and after World War II, some of these tribal leaders wanted help maintaining their power after the Europeans departed. The U.S. was the top dog at that time, so they said to Washington, “We will do your bidding – we will be your surrogate here – if you do what’s necessary to keep us in power.”

That’s the deal that was made with dozens of regimes around the world. That’s the U.S. Empire, and that’s what is falling apart now. The people who have been dominated by tribes backed by Washington are sick of it, and they’re starting to over-turn the existing political matrix.

So the troubles in the Middle East are to a large extent part of the collapse of the empire. For instance, Hosni Mubarak in Egypt was one of Washington’s closest surrogates… and he was a nasty guy. He’s out of power now and Egypt is in great turmoil. Nobody knows who’s going to take over the place.

That’s just one example out of many. The whole thing is beginning to crumble. Egypt was one of the early cases, and I think there are going to be a lot more.

Even nations that were not part of the U.S. Empire are being thrown into chaos, as the spirit of rebellion spreads.

As of yesterday, I think there are now 11 countries over there experiencing uprisings of one kind or another. I expect this is going to continue to spread.

It’s very possible Egypt will wind up being the model for what happens in many of those countries… where you have a U.S.-backed dictator who is overthrown and then so-called Islamic fundamentalists come in and take over. That’s very likely what’s going to happen in Egypt.

Obviously, I don’t know for sure… no one should be certain about these things. But I’m inclined to believe the Egyptian government is going to be replaced by something that will not be friendly to Washington.

Again, however, we’re really on thin ice when it comes to making predictions about these sorts of things. Egypt contains many millions of people, each with his own agenda. Predicting how all that’s going to go is very, very problematic.

What I can say with confidence is the political matrix Washington put in place during and after World War II is now crumbling. I think that’s pretty clear. And again, I return to the point: This is ultimately a good thing. The U.S. Empire should never have existed in the first place.

Crux: Why did the U.S. get involved in Chaostan to begin with?

Maybury: I believe it really just goes back to the lust for power. That’s one thing the mainstream news media is absolutely derelict about… they say practically nothing about political power.

Crux: Could you define political power for us?

Maybury: Perhaps the simplest definition is “the legalized privilege of using brute force on persons who have not harmed anyone.” This privilege is what sets governments apart from all other institutions. No church, charity, fraternal organization, or any other institution can legally send people with guns to your home to force you to buy their services or obey their rules. Only the government can do that. And whether they realize it or not, it’s this privilege – of using force on persons who don’t deserve it – that a power seeker wants.

Crux: Is that related to the old saying that power corrupts?

Maybury: Very astute of you to make that connection. If the American founders were here today, they’d tell us political power is poison… Stay as far from it as you can… It’s evil stuff.

But the media have bought into this assumption that political power is good, it’s the solution to our problems, and a world full of political power is a good place. They almost never look into the psychology of it… What causes a human being to want to force his will on other people? Because that’s what political power essentially is – the ability to bend other people to your will. And the media just don’t look at that at all.

There’s this assumption that the people in the federal government are a whole lot of nice individuals who have good intentions, and it would never occur to any of them to get a thrill out of forcing their plans onto somebody else.

But that’s what it’s all about, and that’s what it’s been about for thousands of years. Government is brute force. Coercion. Chains. Prisons. Follow our plans or else. The political mind is the mind of a bully.

Crux: We often hear the U.S. is involved in the Middle East because of oil… How big a role does oil actually play?

Maybury: I think oil is an excuse. I don’t think it’s a reason for the Empire. Whoever owns the oil has to sell it, or it’s worthless.

They may not want to sell it directly to us, but they’re going to sell it to somebody. This will increase the total world supply of oil, and the price of oil from other suppliers will go down.

So the idea that this is all about oil… that’s just a smokescreen. It’s about power. It’s about the thrill that these people in Washington get out of meddling in other countries.

Crux: You mentioned before that it’s very difficult to make predictions. But what do you see happening next in the region?

Maybury: As far as that’s concerned, I refer back to Egypt again. The friends of Washington are widely hated by their own people, and they will be coming under pressure to hit the road.

Look what happened to the Shah of Iran back in the late ’70s. I think it’s going to happen to pretty much all of Washington’s surrogates. Like I said, it’s a fool’s game to try to predict these things, but that’s the direction events are going now, and that’s the direction I’ve been predicting since the early 1990s.

Before the Soviet Empire fell apart, the Soviet Union sat on Chaostan like a lid on a pressure cooker. One of the forces at work there was the individual tribes that ruled these countries did not want to be conquered by the Soviets, so they formed alliances with Washington as a protection against the Soviets. When the Soviet Union fell in the early ’90s, this essentially removed the lid on the pressure cooker. The explosion began, and now it’s escalating.

In the 1990s, the rest of the world was cheering a new era of peace and brotherly love… and I was saying, “That’s ridiculous. The whole place is going to blow up.” Everybody said I was crazy, and I kind of wondered if maybe I was.

But it turned out that by the year 2000 – a mere 10-year stretch of the new era of peace and brotherly love – more than 100 wars broke out and more than 5 million people were killed.

I think what’s happening today is just the beginning of what will turn out to be even more violent than the ’90s. There are literally hundreds of millions of really angry people over there, and a rebellious momentum is growing.

Again, I’m really reluctant to make specific forecasts on this kind of thing. All you can say is governments have been creating empires since the beginning of history, and empires have been falling apart since the beginning of history… We’re in one of those “falling apart” periods now.

Crux: Do you think the individuals in power in Washington realize the Empire is crumbling? Do they even realize it’s an empire?

Maybury: Well, it’s official U.S. policy that Washington does not have an empire. Everybody is taught that.

But just a couple months ago, President Obama phoned up Mubarak in Egypt and fired him. If that’s not an empire, what is it?

Now, Obama has decided the Libyan government should change too. These people in Washington seem to think they’re ordained by God to somehow make the world better.

I think it’s amazing they believe they’re intelligent enough to be able to do that. It’s actually pretty hilarious.

Crux: So as the empire begins to crumble, how do you think Washington will respond?

Maybury: I think we’ll see more examples of Washington trying to steer events in directions favorable to Washington. Notice I’m not saying favorable to America. I’m saying favorable to the U.S. government. They are two entirely different things.

Of course, the people in Washington are all individuals. They all have their own agendas. They can’t even agree on what’s favorable to the government.

So they’re all grasping at straws. They have no idea what they should really do in a situation like this. There are no guidelines. And since they don’t even want to acknowledge they have an empire, they don’t understand what it is they’re trying to save.

I mean, talk about a bunch of lost souls. They seem to think being elected means they have some sort of special ethical position in the world. They have no idea what it is they’re trying to defend. All they know is they’re trying to defend it.

Typically, in every empire, it all continues until one day somebody looks at the books and says, “Gee, we’re broke. We can’t do this anymore.” That’s when it all starts to come apart.

One of my favorite stories is about William Gladstone – the Prime Minister of England in the mid-1800s – and that’s essentially what he did. He just said, “Look, we’re going broke trying to prop up this empire. This is ridiculous.”

He started dismantling the British government’s power. He probably made more progress in abolishing political power than any other lone individual in history. It’s an amazing story.

Gladstone is one of the few peaceful examples of how all empires go down. They eventually realize they can’t play the game anymore. They realize they’ve exhausted their resources… They’ve bled the population dry.

Humans can only produce so much wealth, and the government is consuming this wealth in order to prop up the empire. Eventually, it all just goes under.

Incidentally, we’re talking here today about the federal government’s empire abroad, but America itself, internally, is part of the federal empire, too. There are no less than a quarter-million federal bureaucrats making and enforcing regulations on us, and each of these regulations is backed by guns, chains, and prisons. It’s not much of an exaggeration to say the whole world – including America itself – has been conquered by the federal government.

Crux: How close do you think we are to the point where the Empire collapses the economy?

Maybury: My best guess is we’re in the process of going under now. That’s the economic trouble the average American is noticing… the unemployment, the business failures, the financial crash, the real estate collapse… plus the mental and emotional strain – the psychological depression, marital problems, divorces. It’s the process of the empire going under. The economic problems are symptoms of the manipulation of the currency, and all sorts of other economic tomfoolery, to try to keep the federal bureaucracy well fed at the expense of the rest of us.

The absolute best thing Washington could do for the American people – if the folks in Washington were honest – is just announce that the Empire is over. It’s finished, we quit. We’re going to withdraw our troops from all those countries around the world. We’re going to bring them home to defend America. We’re not going to meddle in other countries anymore.

After all, this attempt to keep the Empire alive is just squandering blood and treasure for nothing. We’re bankrupt. We can’t do this anymore. The attempt to preserve the empire – which means, largely, the attempt to keep Washington’s surrogates in power – is just dragging out the whole painful process and making it all the more expensive and hopeless.

If they’d just give it up, that would be the first big step in triggering the economic recovery. But they’re not going to do it. They’re power junkies. They’ll drag this thing out until – in the words of political philosopher Howard Kershner – the last bone of the last taxpayer has been picked bare.

Crux: So what are the personal and investment implications of the fall of the American Empire? How do you recommend people prepare for what you see coming?

Maybury: First and foremost, you should have a good stash of emergency equipment and supplies. Everybody should have these things anyway, because you never know what’s going to happen, be it earthquakes, riots, hurricanes, riots, epidemics, riots, blizzards – did I mention riots?

Life is full of really nasty surprises. Everyone should have the ability to be completely self-sustaining for at least a month. Three months would be better. You want food, water, all the necessities of life, plus the ability to defend yourself and your loved ones.

As far as investing, my approach in Early Warning Report is to try to identify long-term trends that are very solid, and invest in things that will benefit from these long-term trends.

If you look at history, you’ll find there are two carved-in-granite long-term trends that never seem to change. The first is war. The second is currency debasement. So what I do is suggest investments that will benefit from these two major trends.

The obvious winners from war are the defense giants: Northrop Grumman, Lockheed, General Dynamics, and Raytheon. If you want to just buy a collection of defense stocks, the Fidelity Select Defense & Aerospace Fund contains those four and a lot more. Its symbol is FSDAX.

The major beneficiaries from currency debasement are raw materials, because they cannot be created in unlimited quantities on a printing press…. especially precious metals. So I recommend everyone own some gold, silver, and platinum bullion coins. These have been doing wonderfully, and I think they’ll continue to do so because the fiat paper currencies are dying. Beyond those, you can also consider some of the top commodity and energy producer stocks. To find a list, just look at “Track Record” on the home page of our website.

For an investor who’s just starting out in this area, FSDAX and the coins are good ways to go. Get into those first, and as you learn more, you’ll find other ideas you’ll want to follow. You can find many more in my letter as well.

Crux: You mentioned earlier that the fall of the empire – while painful – will ultimately be a great thing for our country. Can you talk about what you see for the future of America?

Maybury: Many people misinterpret me as a “doom-and-gloomer.” But let me tell you, for the long term, I’m unimaginably optimistic. I am more optimistic now than I have ever been in my entire life, and I’m 64 years old.

I fully expect to live a healthy life until at least 140 because I believe technological breakthroughs are coming so fast now that Ray Kurzweil is right – a healthy 140-year lifespan is plausible. And before I die I expect to see the beginning of the civilization that is depicted in the Star Trek stories. Not the whole Star Trek civilization, but the beginning.

I believe the next great civilization will begin almost instantly, as soon as we get the present statist nightmare out of the way. But getting from here to there is going to be really hard. For the short term and medium term, it’s going to be really awful, I’m afraid for quite a few years.

I hope things in America and Western Europe don’t get as bad as Russia was in the 1990s – when the Soviet empire was falling – but it’s definitely a possibility in some places, especially the major cities. I encourage everybody to be ready to ride through some very hard times, because empires almost never fall quietly.

Once the U.S. Empire does go down, though, I expect we’ll see a new prosperity. I’m very optimistic about this, because the world is now learning what statism is really all about… what political power really does. It’s not theory anymore… We’re experiencing it every day.

The true nature of statism is an extremely painful lesson to learn, but once it’s learned, the decks will be clear to produce a truly healthy, advanced civilization. When that happens, hold on to your hat… Things are going to be wonderful, and it will happen fast.

Crux: Could you define statism for us?

Maybury: Statism is the belief that political power does not corrupt, and government is a good thing, the solution to all our problems. This is what is taught in the government-controlled schools. If Jefferson and the other American founders were here, they’d fall down laughing at such a notion. But what else would a government-controlled school teach?

Crux: Why wasn’t that lesson learned after the fall of the Soviet Union?

Maybury: Well, the economic side of it was learned to a large extent. The world saw what central planning did to the Soviet economy… So even communist China has embraced free-market economic principles to some extent.

But you still have seen practically no focus on the dangers of political power itself… on the fact that political power is evil and treacherous – it corrupts.

That lesson has yet to be learned… or re-learned. The early Americans understood it well. But most people today have this attitude that the reason things are bad is the wrong people are in power, and if we somehow put the right people in power, everything would be okay.

There’s little appreciation for the fact that political power itself is the problem. It corrupts morals and the judgment. And no matter who you put in there, he or she will likely end up making a mess.

So that lesson has yet to be learned. Once you see discussions about political power itself – about what it is and what it does to a person’s mind – appearing in the news media, we’re going to be well on our way to where we want to be: a new world of liberty, peace, and abundance.

Crux: That sounds great. Thanks so much for talking with us, Richard.

Maybury: It was great speaking with you. Thanks for having me. Take care.

Editor’s Note: We agree with Richard that the sooner Americans learn about the dangers of statism… and return to the founding fathers’ ideas on liberty, freedom, and personal responsibility… the sooner we’ll be on our way to a real recovery. As we mentioned earlier, his Uncle Eric books present these ideas in a way that’s accessible to adults and children alike. We urge all readers to take a look, and pass them on to friends and family. You can learn more here. You can also learn more about Early Warning Report by clicking here.


Written by anubis

April 10th, 2011 at 5:09 pm