Posts Tagged ‘Wall Street’

Homeland Security will tell you how to run your network

November 25, 2010 Leave a comment

Seal of the United States Department of Homela...

Seal of the United States Department of Homeland Security.

Policing standards

The Land of the Free, which revolted against a penny a year tax which was designed to pay for its defence, is ordering companies to turn over control of their networks to a government department.

New laws are being drafted up which will give the Department of Homeland Security some amount of regulatory control over private networks

“The Homeland Security Cyber and Physical Infrastructure Protection Act of 2010,” will empower DHS to set cybersecurity standards for some private networks that are considered critical infrastructure.

It will create a Cybersecurity Compliance Division which will pop around and see if network managers are doing what the spooks say they should.

The DHS will have to work with network operators, to develop tailored security plans that meet risk-based, performance-based standards.

However the DHS will have to share threat intelligence and protect proprietary information.

Part of the problem in the US has been that the local utility companies have monopolies and  thought that they could afford to skimp on security.

But the law could also apply to whichever company’s security is considered important to the defence of the US.

For example banks, Wall Street and Walt-Disney might come under Homeland Security’s powers.

The belief that a government department could tell Wall Street about security is a bit of a joke, but too much law based on terror fears often bring out dafter ideas.

Read more: article



Bankers and Traders in Vast Insider Trading Probe

November 25, 2010 Leave a comment


Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.




The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.

One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide “expert network” services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.

Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries.

“I have no comment on that,” said Phani Kumar Saripella, Primary Global’s chief operating officer.

Primary’s chief executive and chief operating officers previously worked at Intel Corp., according to its website.

In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.

“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” the email said. “(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.”

The email, which Mr. Kinnucan confirms writing, was addressed to traders at, among others: hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management.

SAC, Wellington and MFS declined to comment; Janus and Citadel didn’t immediately comment. It isn’t known whether clients are under investigation for their business with Mr. Kinnucan.

The investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney’s office, the FBI and the SEC declined to comment.

Another aspect of the probe is an examination of whether traders at a number of hedge funds and trading firms, including First New York Securities LLC, improperly gained nonpublic information about pending health-care, technology and other merger deals, according to the people familiar with the matter.

Some traders at First New York, a 250-person trading firm, profited by anticipating health-care and other mergers unveiled in 2009, people familiar with the firm say.

A First New York spokesman said: “We are one of more than three dozen firms that have been asked by regulators to provide general information in a widespread inquiry; we have cooperated fully.” He added: “We stand behind our traders and our systems and policies in place that ensure full regulatory compliance.”

Key parts of the probes are at a late stage. A federal grand jury in New York has heard evidence, say people familiar with the matter. But as with all investigations that aren’t completed, it is unclear what specific charges, if any, might be brought.


The action is an outgrowth of a focus on insider trading by Preet Bharara, the Manhattan U.S. Attorney. In an October speech, Mr. Bharara said the area is a “top criminal priority” for his office, adding: “Illegal insider trading is rampant and may even be on the rise.” Mr. Bharara declined to comment.

Expert-network firms hire current or former company employees, as well as doctors and other specialists, to be consultants to funds making investment decisions. More than a third of institutional investment-management firms use expert networks, according to a late 2009 survey by Integrity Research Associates in New York.

The consultants typically earn several hundred dollars an hour for their services, which can include meetings or phone calls with traders to discuss developments in their company or industry. The expert-network companies say internal policies bar their consultants from disclosing confidential information.

Generally, inside traders profit by buying stocks of acquisition targets before deals are announced and selling after the targets’ shares rise in value.

The SEC has been investigating potential leaks on takeover deals going back to at least 2007 amid an explosion of deals leading up to the financial crisis. The SEC sent subpoenas last autumn to more than 30 hedge funds and other investors.

“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information…. We obviously beg to differ, so have therefore declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.” John Kinnucan, of Broadband Research, in an Oct. 26 email to clients

Some subpoenas were related to trading in Schering-Plough Corp. stock before its takeover by Merck & Co. in 2009, say people familiar with the matter. Schering-Plough stock rose 8% the trading day before the deal plan was announced and 14% the day of the announcement.

Merck said it “has a long-standing practice of fully cooperating with any regulatory inquiries and has explicit policies prohibiting the sharing of confidential information about the company and its potential partners.”

Transactions being focused on include MedImmune Inc.’s takeover by AstraZeneca PLC in 2007, the people say. MedImmune shares jumped 18% on April 23, 2007, the day the deal was announced. A spokesman for AstraZeneca and its MedImmune unit declined to comment.

Investigators are also examining the role of Goldman bankers in trading in shares of Advanced Medical Optics Inc., which was taken over by Abbott Laboratories in 2009, according to the people familiar with the matter. Advanced Medical Optics’s shares jumped 143% on Jan. 12, 2009, the day the deal was announced. Goldman advised MedImmune and Advanced Medical Optics on the deals.

A spokesman for AstraZeneca and its MedImmune unit declined to comment.

In subpoenas, the SEC has sought information about communications—related to Schering-Plough and other deals—with Ziff Brothers, Jana Partners LLC, TPG-Axon Capital Management, Prudential Financial Inc.’s Jennison Associates asset-management unit, UBS AG’s UBS Financial Services Inc. unit, and Deutsche Bank AG, according to subpoenas and the people familiar with the matter.

Representatives of Ziff Brothers, Jana, TPG-Axon, Jennison, UBS and Deutsche Bank declined to comment.

Among hedge-fund managers whose trading in takeovers is a focus of the criminal probe is Todd Deutsch, a top Wall Street trader who left Galleon Group in 2008 to go out on his own, the people close to the situation say. A spokesman for Mr. Deutsch, who has specialized in health-care and technology stocks, declined to comment.

Prosecutors also are investigating whether some hedge-fund traders received inside information about Advanced Micro Devices Inc., which figured prominently in the government’s insider-trading case last year against Galleon Group hedge fund founder Raj Rajaratnam and 22 other defendants.

Fourteen defendants have pleaded guilty in the Galleon case; Mr. Rajaratnam has pleaded not guilty and is expected to go to trial in early 2011.

Among those whose AMD transactions have been scrutinized is hedge-fund manager Richard Grodin. Mr. Grodin, who received a subpoena last autumn, didn’t return calls. An AMD spokesman declined to comment.

Write to Susan Pulliam at, Michael Rothfeld at, Jenny Strasburg at and Gregory Zuckerman at


How Corporate America Is Pushing Us All Off a Cliff …a letter from Michael Moore

November 19, 2010 Leave a comment

The corner of Wall Street and Broadway, showin...

The corner of Wall Street and Broadway, showing the limestone facade of One Wall Street in the backg...

Friday, November 19th, 2010


When someone talks about pushing you off a cliff, it’s just human nature to be curious about them. Who are these people, you wonder, and why would they want to do such a thing?

That’s what I was thinking when corporate whistleblower Wendell Potter revealed that, when “Sicko” was being released in 2007, the health insurance industry’s PR firm, APCO Worldwide, discussed their Plan B: “Pushing Michael Moore off a cliff.”

But after looking into it, it turns out, it’s nothing personal! APCO wants to push everyone off a cliff.

APCO was hatched in 1984 as a subsidiary of the Washington, D.C. law firm Arnold & Porter — best known for its years of representing the giant tobacco conglomerate Philip Morris. APCO set up fake “grassroots” organizations around the country to do the bidding of Big Tobacco. All of a sudden, “normal, everyday, in-no-way-employed-by-Philip Morris Americans” were popping up everywhere. And it turned out they were outraged — outraged! — by exactly the things APCO’s clients hated (such as, the government telling tobacco companies what to do). In particular, they were “furious” that regular people had the right to sue big corporations…you know, like Philip Morris. (For details, see the 2000 report “The CALA Files” (PDF) by my friends and colleagues Carl Deal and Joanne Doroshow.)

Right about now you may be wondering: how many Americans get pushed off a cliff by Big Tobacco every year? The answer is 443,000 Americans die every year due to smoking. That’s a big cliff.

With this success under their belts, APCO created “The Advancement of Sound Science Coalition.” TASSC, funded partly by Exxon, had a leading role in a planned campaign by the fossil fuel industry to create doubt about global warming. The problem for Big Oil speaking out against global warming, according to the campaign’s own leaked documents, was that the public could see the “vested interest” that oil companies had in opposing environmental laws. APCO’s job was to help conceal those oil company interests.

And boy, have they ever succeeded. Polls now show that, as the world gets hotter, Americans are getting less and less worried about it.

How big is this particular cliff? According to the World Health Organization, climate change contributes — right now — to the deaths of 150,000 people every year. By 2030 it may be double that. And after that…well, the sky is literally the limit! I don’t think it’s crazy to say APCO may rack up even bigger numbers here than they have with tobacco.

With this track record, you can see why, when the health insurance industry wanted to come after “Sicko,” they went straight to APCO. The “worst case,” as their leaked documents say, was that “Sicko evolves into a sustained populist movement.” That simply could not be allowed to happen. Something obviously had to be done.

As Wendell Potter explains, APCO ran their standard playbook, setting up something called “Health Care America.” Health Care America, according to Potter, “was received by mainstream reporters, including the New York Times, as a legitimate organization when it was nothing but a front group set up by APCO Worldwide. It was not anything approaching what it was reporting to be: a ‘grassroots organization.’ It was a sham group.”

Health Care America showed up online in 2007 (the year “Sicko” was released) and disappeared quickly by early 2008. You can still find their website archived here. As you’ll see, their “moderated forum” allowed normal, everyday, in-no-way-employed-by-the-insurance-industry Americans to speak out. For instance, here’s something Nicole felt very strongly about:

“Moore shouldn’t be allowed to call his film a ‘documentary.’ It should be called a political commercial. We need to fix our health care system, but we shouldn’t accept a Hollywood moviemaker’s political views as the starting point.”

Here’s what Wendell Potter revealed about the insurance industry’s media strategy:

“As we would do the media training, we would always have someone refer to him as ‘Hollywood entertainer’ or ‘Hollywood moviemaker Michael Moore.’ They don’t want you to think that it was a documentary that had some truth.”

Thanks for your perspective, “Nicole”!

Now, how big was THAT cliff? A pretty good size — according to a recent study, 45,000 Americans die every year because they don’t have health insurance.

And here we are in 2010. A lesser PR firm might be resting on its laurels at this point, content to sit back and watch hundreds of thousands of people continue to be pushed off the various cliffs they’ve built. But not APCO! Right now they’ve taken on their biggest challenge yet: leading a giant, multi-million dollar effort to help Wall Street “earn back the trust of the American people.”

We may never know the size of this particular cliff. But we can be sure it’s gigantic. According to the New York Times, one of the things Wall Street’s recession gave us is “the crippling of the government program that provides life-sustaining antiretroviral drugs to Americans with H.I.V. or AIDS who cannot afford them.” Internationally, organizations fighting AIDS and other diseases are “hugely afraid” of cutbacks in funding.

Of course, there are the 101 ways recessions kill quietly. For instance, children’s hospitals are seeing a sharp 55% rise in the abuse of babies by parents.

And that’s just the previous cliff. If APCO and its Wall Street co-conspirators lull us into turning our backs on them again, we can be sure the next cliff — the next crash — will be much bigger.

Anyway, this is all just a way for me to say to APCO: No hard feelings! My getting mad at you would be like a chicken who’s still happily pecking away getting mad at McDonald’s. Compared to the millions you’ve already turned into McNuggets, you’ve actually treated me much, much BETTER! Spying on my family, planting smears and lies about me, privately badgering movie critics to give the film a poor review, scaring Americans into believing they’d be committing a near-act of treason were they to go to the theater and see my movie — hey, ya done good, health insurance companies of America. And, most important, you stopped the nation from getting true universal health care. Good job!

There’s only one problem — I’m not one of those “liberals” you fund in Congress, the ones who fear your power.

I’m me. And that, sadly, is not good for you.

Yours in good health,
Michael Moore

P.S. It seems to me that APCO’s discussion of pushing me off a cliff should legitimately be part of their Wikipedia page. And why not something about their role in Wall Street’s new PR offensive? So I’m asking everyone interested to write something up that meets Wikipedia’s guidelines and help bring the APCO Worldwide entry up to date. Post it somewhere online and send a tweet about it to @mmflint. I’ll award a signed copy of “Sicko” by noon Sunday to the best entry…and then deputize you to post it on Wikipedia for real and make sure APCO’s minions don’t take it down. Just be sure afterward not to walk near any cliffs!

P.P.S. The late, great comedian Bill Hicks had some thoughts about marketing and the people who do it.

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Bank of America Is in Deep Trouble, and There May Be Financial Disaster on the Horizon

November 12, 2010 Leave a comment

Its stock value has dropped 40 percent since April, and the bank is mum on what losses it’s hiding on its $2.3 trillion balance sheet.
November 11, 2010 |

Will Bank of America be the first Wall Street giant to once again point a gun to its own head, telling us it’ll crash and burn and take down the financial system if we don’t pony up for another massive bailout?

When former Treasury Secretary Hank Paulson was handing out trillions to Wall Street, BofA collected $45 billion from the Troubled Asset Relief Program (TARP) to stabilize its balance sheet. It was spun as a success story — a rebuke of those who urged the banks be put into receivership — when the behemoth “paid back” the cash last December. But the bank’s stock price has fallen by more than 40 percent since mid-April, and the value of its outstanding stock is currently at around half of what it should be based on its “book value” — what the company says its holdings are worth.

“The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet,” wrote Bloomberg columnist Jonathan Weil, “is that it’s largely impenetrable.” Nobody really knows the true values of the assets these companies are holding, which has been the case ever since the collapse. But according to Weil, some of BofA’s financial statements “are so delusional that they invite laughter.”

Weil points to the firm’s accounting of its purchase of Countrywide Financial — the criminal enterprise at the center of the sub-prime securitization market. Bank of America, Weil notes, hasn’t written off Countrywide’s entire value. “In its latest quarterly report with the SEC,” he wrote, “Bank of America said it had determined the asset wasn’t impaired. It might as well be telling the public not to believe any of the numbers on its financial statements.”

With investors valuing BofA at half the worth that the bank claims, it’s one titan of Wall Street that may be on the brink of collapse. But it’s not alone. “Everybody was doing this, this is not just something that Countrywide and Bank of America were doing,” legendary investor Jim Rogers told CNBC. As a result, the banks’ balance sheets are “full of rotten stuff” that “is going to be a huge mess for a long time to come.”

And that “rotten stuff” will continue to be a drag on the brick-and-mortar economy until the mess gets cleaned up. Which, in turn, is a powerful argument for a second dip into the public trough.

When the financial crisis hit, those of us who view the free market as more than a hollow slogan urged the government to take over the ailing giants of Wall Street, wipe out their investors, send their parasitic management teams to the unemployment line and gradually unwind the huge pile of “toxic” assets that they’d amassed before selling them back, leaner and meaner, to the private sector.

It worked in the past — it was Ronald Reagan’s response to the Savings and Loan crisis of the 1980s. But that was then, and today Reaganite policies are deemed to be “creeping socialism” — thoroughly unacceptable. We were told the banks were too big to fail, and Bush saw eye-to-eye with Republicans and Blue Dogs in Congress and bailed the banks out without exacting a penalty in exchange for the taxpayers’ largesse. They socialized the risk, but the financial industry went right back to its old tricks, paying its execs fat bonuses and playing fast and loose with its accounting.

Much of that toxic paper remains on their books — somewhere. The assets are still impossible to price and now several Wall Street titans appear to be approaching a tipping point, poised to once again to extort a mountain of cash from our Treasury by claiming to be too big — and interconnected — to crash and burn as the principles of the free market would otherwise dictate.

But there’s a difference between then and now.  At the time, most of us saw the crash as a result of hubris and greed run amok in an under-regulated financial sector. Now, we know the financial crisis was the result of unchecked criminality — that fraud was perpetrated, in the words of University of Missouri scholar (and veteran regulator) William Black, “at every step in the home finance food chain.” As Black and economist L. Randall Wray wrote recently:

The appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers’ incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false [representations] and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct.That homeowners would default on the nonprime mortgages was a foregone conclusion throughout the industry — indeed, it was the desired outcome. This was something the lending side knew, but which few on the borrowing side could have realized.

And since the crash, they’ve committed widespread foreclosure fraud, dutifully whitewashed by the corporate media as nothing more than some “paperwork” problems resulting from a handful of “errors.”

It is anything but. As Yves Smith, author of Econned: How Unenlightened Self-Interest Undermined Democracy and Corrupted Capitalism, wrote in the New York Times, “The major banks and their agents have for years taken shortcuts with their mortgage securitization documents — and not due to a momentary lack of attention, but as part of a systematic approach to save money and increase profits.”

Increasingly, homeowners being foreclosed on are correctly demanding that servicers prove that the trust that is trying to foreclose actually has the right to do so. Problems with the mishandling of the loans have been compounded by the Mortgage Electronic Registration System, an electronic lien-registry service that was set up by the banks. While a standardized, centralized database was a good idea in theory, MERS has been widely accused of sloppy practices and is increasingly facing legal challenges.

Judges are beginning to demand that the banks show their work — prove they have the right to foreclose — and in many instances they can’t, having sliced and diced those mortgages up into a thousand securities without bothering to verify the paperwork as most states require by law. This leaves what Smith calls a “cloud of uncertainty” hanging over trillions in mortgage-backed securities — the largest class of assets in the world — and preventing a real recovery of the housing market. In turn, that is holding back the economy at large; according to the International Monetary Fund, it’s the drag of the housing mess that’s causing the high and sustained levels of unemployment we see today.

Big financial firms have also been cooking their books in order to obscure how shaky their balance sheets really are because honest accounting would likely bring an end to those big bonuses that drive “the Street.” Yet a day of reckoning may be fast approaching.

If the worst-case scenario should come to pass, with the banks hit by thousands of lawsuits, unable to foreclose on properties in default and with investors running for the hills, expect to hear calls for TARP II. It’d be a very heavy political lift, but given Congress’s fealty to Wall Street it could plausibly be passed.

There are alternatives. As in 2008, the federal government could put failing financial institutions into receivership. But some experts are saying that if we want to get off the roller coaster of an economy moving from one financial bubble to the next, a bolder approach is necessary: permanent nationalization of banks that can’t survive without public dollars.

“Inevitably, American taxpayers are going to pick up much of the tab for the banks’ failures,” wrote Nobel prize-winning economist Joseph Stiglitz last year.  “The question facing us is, to what extent do we participate in the upside return?” Stiglitz argued that the government should take “over those banks that cannot assemble enough capital through private sources to survive without government assistance.”

To be sure, shareholders and bondholders will lose out, but their gains under the current regime come at the expense of taxpayers. In the good years, they were rewarded for their risk-taking. Ownership cannot be a one-sided bet.Of course, most of the employees will remain, and even much of the management. What then is the difference? The difference is that now, the incentives of the banks can be aligned better with those of the country. And it is in the national interest that prudent lending be restarted.

Leo Panitch, a professor of comparative political economy at Canada’s York University, wrote that “the prospect of turning banking into a public utility might be seen as laying the groundwork for the democratization of the economy.”

Ellen Brown, author of Web of Debt, points to the success of the nation’s only government-owned bank, the Bank of North Dakota. “Last year,” she wrote, “North Dakota had the largest budget surplus it had ever had…and it was the only state that was actually adding jobs when others were losing them.”

North Dakota has an abundance of natural resources, including oil, but as Brown notes, other states that enjoy similar riches were deep in the red. “The sole truly distinguishing feature of North Dakota seems to be that it has managed to avoid the Wall Street credit freeze by owning and operating its own bank.” She adds that the bank serves the community, making “low-interest loans to students, farmers and businesses; underwrit[ing] municipal bonds; and serv[ing] as the state’s ‘Mini Fed,’ providing liquidity and clearing checks for more than 100 banks around the state.”

Several states have considered proposals to emulate North Dakota, but such a bold move would obviously be all but impossible in Washington. But it shouldn’t be off the table. Banks provide an “intermediary good” to the economy, creating no real value. But Big Finance’s speculation economy has caused great and real pain for the rest of us. As Joe Stiglitz put it, there’s no reason in the world the incentives of the banks shouldn’t be better aligned with the interests of the country and its citizens.


The Wall Street TARP Gang Wants to Take Away Your Social Security

November 10, 2010 Leave a comment

By Dean Baker – November 9, 2010, 8:01AM

Just over two years ago, the Wall Streeters were running around Congress and the media saying that if they don’t immediately get $700 billion the world will end. Since they own large chunks of both, they quickly got their money.

Even more important than the hundreds of billions of loans issued through the TARP was the trillions of dollars of loans and guarantees from the Fed and the FDIC. This money came with virtually no strings attached. It kept Goldman Sachs, Citigroup, Morgan Stanley, and Bank of America and many others from collapsing. As a result, folks like Goldman CEO Lloyd Blankfein are again pocketing tens of millions a year in wages and bonuses, instead of walking the unemployment lines. Instead, 15 million ordinary workers are being told to just get used to being unemployed; it’s the “new normal.”

But wait, it gets worse. The thing about Wall Streeters is that no matter how much money you give them, they always want more. Now they are using their political power and control over the media to attack Social Security.

This effort is being led by billionaire investment banker Peter Peterson. Mr. Peterson has personally profited to the tune of tens of millions of dollars from the “fund managers’ tax subsidy,” an obscure provision of the tax code that allows billionaires to pay a lower tax rate than schoolteachers and firefighters. However, Peterson believes in giving back. He has committed $1 billion to an effort that is intended to take away the Social Security benefits that people have worked and paid for.

As part of this effort, Peterson set up a whole new foundation, the Peter G. Peterson Foundation. He and/or his foundation created a “news service,” the Fiscal Times, which is intended to promote the view that we have no choice but to cut Social Security. The Fiscal Times has entered into agreements with the Washington Post and other credible newspapers to provide material.

Peterson is also funding the creation of a high school curriculum which is intended to tell our children that the in the future the country will be too poor to finance Social Security. He funded a silly exercise called “America Speaks,” which was supposed to convince an assembly of selected participants that we must cut Social Security after a daylong immersion in Peterson-style propaganda. (The people didn’t buy it.) And now his crew is spending $20 million on an ad campaign to convince people the world will end if we don’t cut Social Security.

Attacks on Social Security have been fended off in the past and it is possible that this one will be too. It is an incredibly popular and successful program. It does exactly what it was supposed to do. It provides a modest income to the retired and disabled, and their families, to ensure that people who have spent their lives working will not fall into poverty. It is also extremely efficient, with administrative costs that are less than 1/20th as large as the costs of private insurers.

It also has very little fraud. We know this because earlier this year the Washington Post made a big point of hyping mistaken payments to federal employees than involved less than 0.01 percent of Social Security spending. If substantial fraud did exist, the Washington Post wouldn’t have to hype small change to try to discredit the program.

The really incredible part of this story is that we should be talking about increasing Social Security benefits. Benefits are quite low by international standards. The portion of wage income replaced by Social Security is considerably lower than the retirement benefit provided by the systems in Australia, Canada, Germany and most other wealthy countries.

As a result, many of the retirees who are dependent almost entirely on Social Security have incomes that are only slightly above the poverty line. A modest increase in benefits could make a big difference in these people’s standard of living.

In addition, the near retirees, the people directly in the gun sights of the Wall Street TARPers, have just seen most of their wealth destroyed by the collapse of the housing bubble. The Wall Streeters now want to kick them yet again, by taking away Social Security benefits that they have already paid for.

If Congress and the media worked for the public, we would be debating Wall Street speculation taxes right now. Insofar as we need to do something about the deficit in the longer term, taxing Wall Street speculation is a far more economic desirable route than taking away the Social Security benefits that ordinary workers have already paid for. We could easily raise more than $1.5 trillion over the next decade with a broadly based speculation tax than would have almost no impact on anyone except the Wall Street crew.

Even the IMF is now pushing higher taxes on the Wall Street types, recognizing the enormous waste and rents in the financial sector. But the media and Congress do not respond to economic reality, they respond to money. And Peter Peterson and the Wall Street crew are not paying for an honest discussion of the country’s fiscal and economic problems. They are financing a rigged debate that is intended to result to even more money flowing to Wall Street and less to those who work for a living.



NIA Projects Future U.S. Food Prices

November 5, 2010 2 comments


The National Inflation Association today announced projections for future U.S. food prices based after this week’s announced $600 billion in quantitative easing by the Federal Reserve. The Federal Reserve announced this week that it will be expanding its balance sheet by $75 billion per month until the end of June 2011, for total quantitative easing of $600 billion. Quantitative easing is nothing more than inflation and when the Federal Reserve creates inflation, it steals from the purchasing power of the incomes and savings of all Americans.

Inflation does not create jobs. Inflation merely causes prices of goods and services to rise and makes it more expensive for American families to support themselves. While years ago it was possible for a father to support an entire family of four or five on one income; today, both parents need to work and they also need to get deeply into debt just to make ends meet.

With all of our society’s technological advances of recent years, Americans’ cost of living should be declining, but it has instead been spiraling out of control due to the Federal Reserve’s destructive monetary policies.

Politicians love inflation because it allows them to monetize their deficit spending. Politicians can also take credit for an “economic recovery” when stock prices rise. However, nominal stock market gains mean nothing to middle class Americans if prices of food and other agricultural products are rising at a much faster rate.

Inflation does not cause the prices of all assets, goods, and services to rise equally. Real Estate, for example, will likely rise the least this decade, because the U.S. government never allowed the Real Estate bubble to fully deflate and there is still an excess glut of vacant homes on the market. NIA expects both Real Estate and stock market prices to decline in terms of real money, gold and silver.

The best way to value stocks and Real Estate is not in fiat U.S. dollars, but in terms of real money, gold and silver. The Dow Jones is currently worth 8.2 ounces of gold. After the NIA Projects Future U.S. Food Prices inflationary crisis of the 1970s, the Dow Jones declined to just 1 ounce of gold. We believe the Dow Jones (currently 11,434) is guaranteed to meet in price with gold (currently $1,390) at some point this decade.

The median U.S. home is currently worth $171,700 or 6,550 ounces of silver. After the inflationary crisis of the 1970s, the median U.S. home declined to below 1,000 ounces of silver. NIA believes that because this decade’s Real Estate bubble was so large, Real Estate prices will likely overcorrect to the downside and the median U.S. home will be worth only 500 ounces of silver at some point this decade. Therefore, if you buy just $13,000 worth of physical silver today, NIA believes you will be able to pay cash (without any mortgage) for an average American home within the next 5 to 10 years.

NIA believes the only asset class that has the potential to rise in value by more than gold and silver this decade is agricultural commodities. Inflation gravitates most towards goods that Americans need to live and survive. There is nothing that Americans need more to live and survive than food.

Americans can cut back on entertainment (the New York Mets just announced a 14% decrease in ticket prices for next season). They can cut back on college education (NIA considers college to be a scam). Americans can sell their McMansion that they thought was an investment and can no longer afford and move in with family members or friends. They can sell their car, use mass transportation, and consume less fuel. However, Americans can never stop spending money on food.

For many decades, most American students went to college to get a job on Wall Street. (When the financial system collapses due to hyperinflation, most of these Wall Street jobs will be gone forever.) With all the fantasy wealth being created on Wall Street, no Americans had any desire to become a farmer.

Large portions of the country that were once farmland, have now been turned into housing develop2 National Inflation Association – ments. There is a lack of young farmers in America and this will soon lead to major food shortages. The fundamentals are there for agricultural commodity prices to go through the roof like nothing any American has ever experienced before.

During the months of September and October alone, just in anticipation of the Federal Reserve’s quantitative easing announcement, cotton prices rose by 54%, corn prices rose by 29%, soybean prices rose by 22%, orange juice prices rose by 17%, and sugar prices rose by 51%. Wheat prices are also up 36% since the beginning of July.

Despite these huge increases in commodity prices, according to the U.S. Bureau of Labor and Statistics (BLS)’s consumer price index (CPI), food prices only rose 0.3% in September. (The BLS’s October CPI report will be released on November 17th.)

The BLS today calculates the CPI differently than they did decades ago. Being that retired Americans are supposed to receive social security payment increases when the CPI rises, the BLS purposely manipulates the CPI as low as possible using geometric weighting and hedonics. Geometric weighting gives a lower weighting to goods that are rising in price and a higher weighting to goods that are dropping in price.

The BLS justifies this by saying that if the price of steak is rising but hamburgers are falling, Americans will switch to eating hamburgers. Hedonics accounts for the increased pleasure that a product provides. Meaning, if the price of a computer goes up 10% but it is now twice as fast, the BLS can say the price declined 45%.

NIA believes real price inflation in the U.S. is already 5% and the recent spike in agricultural commodity prices along with Bernanke’s just announced $600 billion in quantitative easing will send the real inflation rate back up to above 10% in early 2011. Once Americans wake up and realize just how rapidly the U.S. dollar is being debased, NIA believes we will see a rush out of the U.S. dollar that could eventually trigger an outburst of hyperinflation.

Despite the recent rise in agricultural commodities, food manufacturers, wholesalers, and retailers have been reluctant to pass commodity price increases along to the consumer because they know that Americans have been struggling to make their mortgage payments. However, agricultural commodity price increases have gotten so far out of control that if corporations don’t start passing them along to consumers immediately, they will simply go out of business.

Almost all agricultural commodites are down substantially from their all time inflation adjusted highs from the 1970s. This shouldn’t be, because our national debt is now 15 times larger than it was in 1980 and our GDP has only grown by 1 and 1/2 times since then. The only way our nation can pay back its national debt is by the Federal Reserve monetizing it. NIA is confident that the upcoming monetization of our debt will send nearly all agricultural commodities soaring to new all time inflation adjusted highs.

Corn futures are currently trading for $5.90 per bushel and the average grocery store sells corn for $1.25 per ear. In September of 1974, corn reached a high of $3.83 per bushel, which based on the CPI is $16.55 per bushel in today’s dollars. Based on the way NIA calculates real price inflation, by eliminating geometric weighting and hedonics, corn’s real inflation adjusted high in September of 1974 was $53.97 per bushel.

NIA expects corn to reach new inflation adjusted highs this decade and if so, the average price of a ear of corn in your grocery store will likely rise to around $11.43.

Wheat futures are currently trading for $7.14 per bushel and the average grocery store sells a 24 oz loaf of the cheapest store brand of wheat bread for $1.69.

In February of 1974, wheat reached a high of $6.45 per bushel, which based on the CPI is $29.85 per bushel in today’s dollars. Based on the way NIA calculates real price inflation, by eliminating geometric weighting and hedonics, wheat’s real inflation adjusted high in February of 1974 was $97.37 per bushel.

NIA expects wheat to reach new inflation adjusted highs this decade and if so, the average price for a 24 oz loaf of the cheapest store brand of wheat bread in your grocery store will likely rise to around $23.05. 3 National Inflation Association – Sugar futures are currently trading for $0.3166 per pound and the average grocery store sells a 32 oz package of Domino Granulated Sugar for $2.19.

In November of 1974, sugar reached a high of $0.65 per pound, which based on the CPI is $2.757 per pound in today’s dollars. Based on the way NIA calculates real price inflation, by eliminating geometric weighting and hedonics, sugar’s real inflation adjusted high in November of 1974 was $8.99 per pound. NIA expects sugar to reach new inflation adjusted highs this decade and if so, the average price for a 32 oz package of Domino Granulated Sugar in your grocery store will likely rise to around $62.21. Soybeans futures are currently trading for $12.75 per bushel and the average grocery store sells their cheapest store brand 32 fl oz container of soy milk for $1.49.

In June of 1973, soybeans reached a high of $12.90 per bushel, which based on the CPI is $63.75 per bushel in today’s dollars. Based on the way NIA calculates real price inflation, by eliminating geometric weighting and hedonics, soybean’s real inflation adjusted high in June of 1973 was $207.97 per bushel. NIA expects soybeans to reach new inflation adjusted highs this decade and if so, the average price for the cheapest store brand 32 fl oz container of soy milk in your grocery store will likely rise to around $24.31.

Coffee futures are currently trading for $2.06 per pound and the average grocery store sells a 11.30 oz container of Folgers Ground Classic Roast Coffee for $3.99.

In April of 1977, coffee reached a high of $3.38 per pound, which based on the CPI is $12.29 per pound in today’s dollars. Based on the way NIA calculates real price inflation, by eliminating geometric weighting and hedonics, coffee’s real inflation adjusted high in April of 1977 was $40.08 per pound. NIA expects coffee to reach new inflation adjusted highs this decade and if so, the average price for a 11.30 oz container of Folgers Ground Classic Roast Coffee in your grocery store will likely rise to around $77.71. Orange juice futures are currently trading for $1.66 per pound and the average grocery store sells a 64 fl oz container of Minute Maid 100% Pure Squeezed Orange Juice for $2.99.

In November of 1977, orange juice reached a high of $2.20 per pound, which based on the CPI is $7.76 per pound in today’s dollars. Based on the way NIA calculates real price inflation, by eliminating geometric weighting and hedonics, orange juice’s real inflation adjusted high in November of 1977 was $25.33 per pound. NIA expects orange juice to reach new inflation adjusted highs this decade and if so, the average price for a 64 fl oz container of Minute Maid 100% Pure Squeezed Orange Juice in your grocery store will likely rise to around $45.71.

Cocoa futures are currently trading for $2,798 per metric ton and the average grocery store sells a Hershey’s Milk Chocolate 1.55 oz candy bar for $0.69. In July of 1977, cocoa reached a high of $5,379.20 per metric ton, which based on the CPI is $19,262.74 per metric ton in today’s dollars. Based on the way NIA calculates real price inflation, by eliminating geometric weighting and hedonics, cocoa’s real inflation adjusted high in July of 1977 was $62,837.17 per metric ton. NIA expects cocoa to reach new inflation adjusted highs this decade and if so, the average price for a Hershey’s Milk Chocolate 1.55 oz candy bar in your grocery store will likely rise to around $15.50.

Cotton futures are currently trading for $1.40 per pound 4 National Inflation Association – and Wal-Mart currently sells a plain white men’s cotton t-shirt for $5.

The average American family currently spends only 13% of their total annual expenditures on food and they spend 34% of their total annual expenditures on housing. NIA projects that by the year 2015, Americans will be spending as much as 40% of their annual expenditures on food, and as little as 10% of their annual expenditures on housing.

NIA expects the government to implement legislation that will prevent landlords from increasing rents in a way that even remotely keeps up with price inflation. We pray that the U.S. government doesn’t implement similar price controls in the food sector, as it will only lead to empty store shelves like what was seen during recent years in Zimbabwe.

In September of 1973, cotton reached a high of $0.99 per pound, which based on the CPI is $4.78 per pound in today’s dollars. Based on the way NIA calculates real price inflation, by eliminating geometric weighting and hedonics, cotton’s real inflation adjusted high in September of 1973 was $15.61 per pound. NIA expects cotton to reach new inflation adjusted highs this decade and if so, the average price for a plain white men’s cotton t-shirt at Wal-Mart will likely rise to around $55.57.


My Comment:


Please note that these astronomical prices are for the end of the decade.

NIA also recommends that Americans raise rabbits as a food source just like they did in the Great Depression.

As a vegetarian I am morally opposed to eating rabbits.


“Where’s The Note” Update

November 5, 2010 Leave a comment

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SEIU or not, here is a status update from Where’s The Note, as the recently launched campaign to request proof of mortgage note existence approaches the 20 day limit by law within which banks have to respond to all properly-submitted verification claims.

Heard Anything?

When news broke that Wall Street had made a total mess of our mortgages, we launched a website that let homeowners ask their bank a simple question: where’s my mortgage note?

By law, banks had 20 days to respond to your request. We’re coming up on 20 days – can you give us a few minutes to tell us what you’ve heard? Click the appropriate link:

* My bank sent me what they claim to be the original note.

* My bank responded, but did not send me my original note.

* I haven’t heard back from my bank.

We’ve already started to hear back from some of the 200,000 homeowners that have gone to our site. So far, the responses are troubling.

Some banks claim they have no idea where the note is. Others have sent what they claim is the note, but closer inspection shows that it’s a completely different document.

But, the most troubling of all is the response that many homeowners have gotten from Bank of America. They’re telling customers they have no legal right to see their own note. Think about how absurd that is; your mortgage note is a contract you signed with your bank – and they’re telling you that you can’t see it?

Did your bank give you a similar response? Click here to alert your state attorney general:

We aren’t going to get to the bottom of Wall Street’s mess overnight. But step one is alerting the authorities if your bank fails to honor your request in a way that you think is acceptable. And if there’s any hint of possible fraud, it needs to be investigated immediately.

I’ll send you another update once we hear back from other homeowners in the same boat as you. If we’re going to keep paying thousands of dollars to these banks, we have every right to demand some shred of accountability from them.