IRA Confiscation: It's Happening

Submitted by Simon Black via Sovereign Man blog,

I have an old acquaintance named Sam who has a hell of a deal for you.

Sam is actually a pretty famous guy with a big reputation. Unfortunately he has been a bit down and out on his luck lately… but he’s trying to make a comeback. And Sam is prepared to float you a really great investment opportunity.

Here’s the deal he’s offering: you give Sam your hard-earned retirement savings. Sam will invest your funds, and pay you a rate of return.

Granted, the rate of return he’s promising doesn’t quite keep up with inflation. So you will be losing some money. But don’t dwell on that too much.

And, rather than invest your funds in productive assets, Sam is going to blow it all on new cars and flat screen TVs. So when it comes time to make interest payments, Sam won’t have any money left.

But don’t worry, he still has that good ole’ credibility. So even though his financial situation gets worse by the year, Sam will just go back out there and borrow more money from other people to pay you back.

Of course, he will be able to keep doing this forever without any consequences whatsoever.

I know what you’re thinking– “where do I sign??” I know, right? It’s the deal of the lifetime.

This is basically the offer that the President of the United States floated last night.

And like an unctuously overgeled used car salesman, he actually pitched Americans on loaning their retirement savings to the US government with a straight face, guaranteeing “a decent return with no risk of losing what you put in. . .”

This is his new “MyRA” program. And the aim is simple– dupe unwitting Americans to plow their retirement savings into the US government’s shrinking coffers.

We’ve been talking about this for years. I have personally written since 2009 that the US government would one day push US citizens into the ‘safety and security’ of US Treasuries.

Back in 2009, almost everyone else thought I was nuts for even suggesting something so sacrilegious about the US government and financial system.

But the day has arrived. And POTUS stated almost VERBATIM what I have been writing for years.

The government is flat broke. Even by their own assessment, the US government’s “net worth” is NEGATIVE 16 trillion. That’s as of the end of 2012 (the 2013 numbers aren’t out yet). But the trend is actually worsening.

In 2009, the government’s net worth was negative $11.45 trillion. By 2010, it had dropped to minus $13.47 trillion. By 2011, minus $14.78 trillion. And by 2012, minus $16.1 trillion.

Here’s the thing: according to the IRS, there is well over $5 trillion in US individual retirement accounts. For a government as bankrupt as Uncle Sam is, $5 trillion is irresistible.

They need that money. They need YOUR money. And this MyRA program is the critical first step to corralling your hard earned retirement funds.

At our event here in Chile last year, Jim Rogers nailed this right on the head when he and Ron Paul told our audience that the government would try to take your retirement funds:





I don’t know how much more clear I can be: this is happening. This is exactly what bankrupt governments do. And it’s time to give serious, serious consideration to shipping your retirement funds overseas before they take yours.

 

OBAMA’S NSA WATCHDOG: ‘REASONABLE’ TO TRACK CARS. Shock views on monitoring devices, Fourth Amendment

Posted on January 3, 2014 at 1:03 AM EST

By Aaron Klein
It is “reasonable” for law enforcement officials to decide whether to place a tracking device on the car of a private citizen, one of the five members of President Obama’s NSA review group charged with recommending surveillance policy has argued.
University of Chicago law professor Geoffrey Stone addressed the tracking issue in a February 12, 2012, Stanford Law Review article entitled, “A Reasonableness Approach to Searches After the Jones GPS Tracking Case.”
The Jones case centered on a private citizen, Antoine Jones, who was suspected of drug trafficking. Police had received a warrant to attach a GPS device to Jones’ car for a limited period of time, but then exceeded the warrant by tracking him for a month and beyond the geography limited in the warrant.
The case went to the Supreme Court, which sided with Jones’ attorneys, who had argued the police trespassed on private property – Jones’ car – and had conducted an unreasonable search against the constraints of the Fourth Amendment.
In his brief, Justice Stephen Breyer wrote to the police: “[I]f you win this case, then there is nothing to prevent the police or the government from monitoring 24 hours a day the public movement of every citizen of the United States.”
“[I]f you win, you suddenly produce what sounds like 1984…”
Justice Sonia Sotomayor warned about “the government’s unrestrained power to assemble data” and its “unfettered discretion” to track citizens, which “may ‘alter the relationship between citizen and government in a way that is inimical to democratic society.’”
However, Stone took issue with the Supreme Court ruling.
He looked to other case law to define reasonable “search or seizure” as that which is determined by law enforcement, pending judicial review after the fact.
Wrote Stone: “Some ‘searches,’ however, do not require warrants under existing case law. For instance, the mechanism of court review of new technologies could be similar to that for a Terry stop, the brief detention of a person by police based on reasonable suspicion.
“For Terry stops, the initial decision about reasonableness is made by law enforcement officials. The role of the courts is to review the reasonableness of the police behavior after the fact.”
He recommended “courts review the reasonableness of the police behavior after the fact.”
According to Stone’s plan for tracking, “The reasonableness of procedures for GPS tracking or other searches would be assessed by law enforcement initially. Courts would test that reasonableness only in a concrete case, after surveillance was conducted pursuant to the procedures.”
He continued: “Effective procedures for a type of surveillance can and should be crafted in advance. Where a prior judicial warrant is not required, ‘reasonableness’ should still be required of police officers at the time of the action, and then tested after the fact by judicial scrutiny. Failure to craft procedures will often not be reasonable, nor will failure to comply with established procedures.”
These shady foxes guarding NSA hen house
Stone is just one of several controversial figures on Obama’s NSA review panel.
The panel includes a controversial former administration official who once advocated government agents infiltrate chat rooms and online social networks.
Also on the panel is a resigning CIA official fingered in the scandal surrounding the White House’s edited Benghazi talking points.
Cass Sunstein, Obama’s former regulatory czar, is among the “high-level group of outside experts” probing government surveillance programs.

Cass Sunstein

Also on the panel is recent acting head of the CIA, Michael Morell, who announced his resignation in June, the news network reported.
Obama announced the panel’s formation in August, stating at the time the group will “consider how we can maintain the trust of the people [and] how we can make sure that there absolutely is no abuse.”
Sunstein’s role in the panel may not go a long way toward inspiring confidence in the group.
As KleinOnline previously reported, Sunstein advocated infiltrating the chat rooms and social network sites of private citizens, actions similar to what the National Security Agency is now accused of doing.
In a 2008 Harvard law paper, “Conspiracy Theories,” Sunstein and co-author Adrian Vermeule, a Harvard law professor, ask, “What can government do about conspiracy theories?”
“We can readily imagine a series of possible responses. (1) Government might ban conspiracy theorizing. (2) Government might impose some kind of tax, financial or otherwise, on those who disseminate such theories,” the paper answers.
In the 30-page paper – obtained and reviewed by KleinOnline – Sunstein argues the best government response to “conspiracy theories” is “cognitive infiltration of extremist groups.”
Continued Sunstein: “We suggest a distinctive tactic for breaking up the hard core of extremists who supply conspiracy theories: cognitive infiltration of extremist groups, whereby government agents or their allies (acting either virtually or in real space, and either openly or anonymously) will undermine the crippled epistemology of believers by planting doubts about the theories and stylized facts that circulate within such groups, thereby introducing beneficial cognitive diversity.”
Sunstein said government agents “might enter chat rooms, online social networks, or even real-space groups and attempt to undermine percolating conspiracy theories by raising doubts about their factual premises, causal logic or implications for political action.”
Sunstein defined a conspiracy theory as “an effort to explain some event or practice by reference to the machinations of powerful people, who have also managed to conceal their role.”
Some “conspiracy theories” recommended for covert action by Sunstein include:

• “The theory of global warming is a deliberate fraud.”
• “The view that the Central Intelligence Agency was responsible for the assassination of President John F. Kennedy.”
• “The 1996 crash of TWA flight 800 was caused by a U.S. military missile.”
• “The Trilateral Commission is responsible for important movements of the international economy.”
• “That Martin Luther King Jr. was killed by federal agents.”
• “The moon landing was staged and never actually occurred.”

Sunstein allowed that “some conspiracy theories, under our definition, have turned out to be true.”
He continued: “The Watergate hotel room used by Democratic National Committee was, in fact, bugged by Republican officials, operating at the behest of the White House. In the 1950s,
the CIA did, in fact, administer LSD and related drugs under Project MKULTRA, in an effort to investigate the possibility of ‘mind control.’”
White House talking points
Morell, meanwhile, is also on the panel probing government surveillance.
Morell, who announced his resignation in June, may have misled lawmakers when he told senators in a briefing that references to terrorism and al-Qaida were removed from the White House’s Benghazi talking points to “prevent compromising an ongoing criminal investigation.”
A 46-page House Republican report from April probing the Benghazi attacks detailed how lawmakers who led the investigation were given access to classified emails and other communications that prove the talking points were not edited to protect classified information – as Morell had originally claimed – but instead to protect the State Department’s reputation.
“Contrary to administration rhetoric, the talking points were not edited to protect classified information,” states the “Interim Progress Report for the Members of the House Republican Conference on the Events Surrounding the Sept. 11, 2012, Terrorist Attacks in Benghazi.”
“Evidence rebuts administration claims that the talking points were modified to protect classified information or to protect an investigation by the Federal Bureau of Investigation (FBI),” the report continues.
The report charges that the talking points were “deliberately” edited to “protect the State Department.”
States the report: “To protect the State Department, the administration deliberately removed references to al-Qaida-linked groups and previous attacks in Benghazi in the talking points used by [United Nations] Ambassador [Susan] Rice, thereby perpetuating the deliberately misleading and incomplete narrative that the attacks evolved from a demonstration caused by a YouTube video.”
Morell’s claims
The tale of the talking points began when U.S. intelligence officials testified behind closed doors in early November 2012 and were reportedly asked point blank whether they had altered the talking points on which Rice based her comments about the Benghazi attacks.
On Sunday, Sept. 16, 2012, Rice appeared on five morning television programs to discuss the White House response to the Benghazi attacks. In nearly identical statements, she asserted that the attacks were a spontaneous protest in response to a “hateful video.”
Other Obama administration officials made similar claims.
Two congressional sources who spoke to Reuters on condition of anonymity said Morell, then acting CIA director, along with Director of National Intelligence James Clapper and National Counterterrorism Center Director Matthew Olsen, each testified behind closed doors that they did not alter the talking points.
On Nov. 16, 2012, former CIA director David Petraeus testified before the same congressional intelligence committees and also replied no to the question of whether he had changed the talking points, three congressional sources told Reuters.
Then, on Nov. 27, the CIA reportedly told lawmakers that it had in fact changed the wording of the unclassified talking points to delete a reference to al-Qaida, according to senators who met with Morell that day.
The Nov. 27 meeting was between Morell, Rice and Republican Sens. John McCain, Lindsey Graham and Kelly Ayotte.

Sen. McCain

The three senators said in a statement that Morell told them during the meeting that the FBI had removed references to al-Qaida from the talking points “and did so to prevent compromising ‘an ongoing criminal investigation’” of the attack on the U.S. mission.
The senators’ joint statement reads: “Around 10:00 this morning in a meeting requested by Ambassador Rice, accompanied by acting CIA Director Mike Morell, we asked Mr. Morell who changed the unclassified talking points to remove references to al-Qaida.
“In response, Mr. Morell said the FBI removed the references and did so to prevent compromising an ongoing criminal investigation. We were surprised by this revelation and the reasoning behind it,” the senators wrote.
Morell’s claim of changing the talking points for security reasons is now contradicted by the new Republican probe.
Further, on Nov. 28, 2012, CBS News reported the CIA then told the news agency that the edits to the talking points were made “so as not to tip off al-Qaida as to what the U.S. knew, and to protect sources and methods.”
That same report quoted a source from the Office of the Director for National Intelligence who told Margaret Brennan of CBS News that the source’s office made the edits as part of the interagency process because the links to al-Qaida were deemed too “tenuous” to make public.
Meanwhile, a few hours after his meeting with the senators, Morell’s office reportedly contacted Graham and stated that Morell “misspoke” in the earlier meeting and that it was, in fact, the CIA, not the FBI, that deleted the al-Qaida references.
“CIA officials contacted us and indicated that Acting Director Morell misspoke in our earlier meeting. The CIA now says that it deleted the al-Qaida references, not the FBI. They were unable to give a reason as to why,” said the senators’ statement.
“This was an honest mistake and it was corrected as soon as it was realized. There is nothing more to this,” an intelligence official said about Morell’s briefing to the senators.
The official said the talking points “were never meant to be definitive and, in fact, noted that the assessment may change. The points clearly reflect the early indications of extremist involvement in a direct result. It wasn’t until after they were used in public that analysts reconciled contradictory information about how the assault began.”
However, the intelligence community clearly at first portrayed the edited White House talking points as a bid to protect classified information.
White House fingers Morell
Morell’s involvement in the talking points was further called into question in a New York Times article quoted administration officials who said Morell deleted a reference in the draft version of the talking points to CIA warnings of extremist threats in Libya, which State Department officials objected to because they feared it would reflect badly on them.
The officials said Morell acted on his own and not in response to pressure from the State Department.
According to the interim House report on Benghazi, after a White House deputies meeting on Saturday, Sept. 15, 2012, the administration altered the talking points to remove references to the likely participation of Islamic extremists in the attacks.
The administration also removed references to the threat of extremists linked to al-Qaida in Benghazi and eastern Libya, including information about at least five other attacks against foreign interests in Benghazi.
Charged the report: “Senior State Department officials requested – and the White House approved – that the details of the threats, specifics of the previous attacks, and previous warnings be removed to insulate the department from criticism that it ignored the threat environment in Benghazi.”
The report authors said that they went through email exchanges of the inter-agency process to scrub the talking points. They wrote the emails do not reveal any concern with protecting classified information.
“Additionally, the bureau itself approved a version of the talking points with significantly more information about the attacks and previous threats than the version that the State Department requested,” the report concluded. “Thus, the claim that the State Department’s edits were made solely to protect that investigation is not credible.”
In a particularly stinging accusation, the report states that when draft talking points were sent to officials throughout the executive branch, senior State Department officials requested the talking points be changed “to avoid criticism for ignoring the threat environment in Benghazi.”
“Specifically, State Department emails reveal senior officials had ‘serious concerns’ about the talking points, because members of Congress might attack the State Department for ‘not paying attention to agency warnings’ about the growing threat in Benghazi,” the report claimed.
With research by Brenda J. Elliott.

Who Has the Time and Motivation to Comprehend the Mess We're In? Almost Nobody

by charles hugh smith

If we don't understand the problem or the dynamics that are generating the problem, it is impossible to reach a solution or practical plan of action.

When it comes time to assess our grasp of the dynamics of this unprecedented era, how do you reckon historians will grade our collective political "leadership," intelligentsia, central state, corporate leadership and the "common man/woman" citizen? Did we rise to the occasion or did we falter, not in acting to counter the dissolution of the Status Quo, but in simply making a concerted effort to understand the tangled web of lies, corruption, perverse incentives, unintended consequences, simplistic (and utterly misguided) ideologies, not to mention the real-world limits of a supposedly limitless world, that have become the key dynamics of this era?

I suspect future historians (presuming the funding of such scholarly assessments survives) will grade all categories either F or D-. The reasons are not difficult to discern, and it behooves us to understand why we are collectively so ill-prepared to understand our era, much less fix what's broken before the whole over-ripe mess collapses in a heap.

1. Intellectual laziness. Very few people are willing to work hard enough to figure things out on their own. It's so much easier to join Paul Krugman dancing around the fire of the Keynesian Cargo Cult, chanting "aggregate demand! Humba-Humba!" while waving dead chickens than ditch reductionist, naive ideologies and actually work through an independent analysis.

2. Independent thinking is an excellent way to get fired, demoted or sent to Siberia. Though America claims to value independent thinking, this is just another pernicious lie: what America values is the ability to mask failing conventional ideas and systems with a thin gloss of "fresh thinking."
In other words, what the American state and corporatocracy value is the appearance of independent thinking, not the real thing. Since the real thing will get you fired, everyone who works for government or Corporate America masters the fine arts of producing simulacra, legerdemain and illusion. This only further obscures the real dynamics, making legitimate analysis that much more difficult.

3. Relatively few have any incentive to question authority, the state or the corporatocracy. Humans excel at figuring out which side of the bread is buttered, and who's lathering on the butter: self-interest is the ultimate human survival trait (we cooperate because it serves our self-interest to do so).

While we cannot hold the pursuit of self-interest against any individual--after all, who among us truly acts selflessly when push comes to shove?--we can monitor the monumentally negative consequences of self-interest and complicity on the systems and Commons we share.

When roughly half of all households are drawing direct cash/benefits from the central state, how many of those people are interested in doing anything that might put their place at the feeding trough at risk? Sure, people will grouse about this or that (usually related to the conviction that they deserve more or have been cheated out of "their fair share"), but as long as the government payments, direct deposits and benefits keep coming, what possible motivation is there for the recipients to devote energy to investigating the potential collapse of the gravy train?

Corporate America is no different. The store may be devoid of customers, but the employees will strive to look busy to keep the paychecks coming until the inevitable lay-off/implosion occurs. How many Corporate America employees will critique their way out of a paycheck? In an environment this difficult for job-seekers, you'd be nuts to bother figuring out why your division is failing, knowing as you do that the truth will result in the "termination with extreme prejudice" of the naive fools who presented the truth as if it would be welcome
.
Does anyone seriously imagine that any employee of a bloated bureaucracy will ever voluntarily challenge the squandering of revenues when that might cost them their own paycheck, bonus, contract for their brother-in-law, etc.? A few protected people (professors with tenure, for example) can be "brave," but their "bravery" is cheap: their protestations cannot trigger termination with extreme prejudice, so the gesture of resistance is just that, a gesture.

4. Those relative few who might have a real motivation to undertake independent analysis have little time to pursue this noble project. They are working absurd hours and enduring absurd commutes. Between getting the bundles of diapers into the elevator and planning what to cook for dinner, there is precious little time or energy left for figuring out the mess we're in. Just getting to a second or third job can suck up a significant amount of time, money amd energy.

And so the busy employee/sole-proprietor/contract worker listens to NPR or some talk radio program for a few minutes, reinforcing their ideology of choice, and turns on the "news" (laughably bad propaganda churned up with "if it bleeds, it leads") as background noise and spends whatever personal time they have on Roku, Netflix, Facebook, Twitter, email, etc. seeking distraction or solace from the daily workload.

In a strange irony, there are plenty of citizens who have plenty of time (recall that Americans manage to watch 6-8 hours of TV a day), but their marginalized status and dependence on the state drains them of motivation to do anything but seek amusement and distraction.

If we don't understand the problem or the dynamics that are generating the problem, it is impossible to reach a solution or practical plan of action. In other words, the four points above doom us just as surely as the dynamics of insolvency, corruption, debt servitude, Tyranny of the Majority, etc. etc. etc.

Choose your metaphor of choice, but rearranging the deck chairs on the Titanic has a nice ironic texture in an election year, when the "news" will be focusing on rearranging the political deck chairs on the first class deck--at least when there's no celebrity ruckus or "if it bleeds, it leads" to crowd out what passes for "hard news" in a regime dedicated to the distractions of bread and circuses.

Guest Post: America Is Plunging Into Kafka's Nightmare

Submitted by Brandon Smith of Alt-Market blog,

There is a certain level of dishonesty in the common study of history. We look back at the tyrannies of the past, the monstrous governments, the devastating wars and the unimaginable crimes, and we wonder how it could have been possible. How could the people of that particular generation let such atrocities come to pass? Why didn’t they do something? Why didn’t they protest? Why didn’t they fight back?

We wonder all of this as we absorb the lists of dates, names and actions in books written by other men who memorized other lists of dates, names and actions. We are taught to study and wonder without ever actually applying the lessons of the past to the developments of today. We are conditioned to assert our own narrow spin on yesterday, instead of placing ourselves in the shoes of our ancestors or recognizing that their struggles remain our struggles. The modern method of viewing history detaches us from it, making it seem distant, alien or surreal.

Perhaps many societies fail to prepare or act in the face of tyranny because they had forgotten their own histories, making the demise of their culture appear so schizophrenic they would not believe what their eyes were telling them.

Often, the only way to grasp the more complete truth of the present is to examine it through the lens of the absurd. Sadly, our Nation, our culture and most of the world around us have become so backward, ugly, feeble and twisted that the only adequate comparison is to the nightmares of surrealists.

When I examine recent U.S. legislation, the exposure of classified documents, and the openly admitted criminality of political leadership, I am consistently reminded of Franz Kafka’s The Trial.

Kafka was a self-styled socialist back in the days when socialism was thought to be the next revolutionary movement for the downtrodden masses. It was, of course, controlled opposition created by global elitists attempting to exploit the natural rebellious tendencies of the general public within a false paradigm — using the masses to achieve greater power for a select few, while making the people think that they had won. It is ironic that Kafka would write The Trial, one of the greatest condemnations of totalitarian surveillance society, while at the same time supporting the socialist political vehicle that would eventually be used to implement unrelenting bureaucratic despotism.

The Trial is commonly labeled a “surrealist” piece of fiction, but I wonder now if it was actually far more literal than the academics of the past actually gave it credit for. The problem is that most of America, and much of the Western world, has forgotten what it is like to experience true danger and true suffering. We read about it now and watch movies about it like it’s entertainment, but few people have the slightest inkling how to deal with the real thing. We don’t even know how to recognize it. Because of this, Americans tend to pay more attention to fictional representations of tyranny rather than legitimate tyranny taking place right under their noses.

With that sad fact in mind, watch this clip from Orson Welles’ cinematic version of The Trial. See if you recognize your own world in this work of "fantasy":



The main character of The Trial, Josef K., finds his apartment invaded by police in the early hours of the morning. Josef responds with anger but also fear, attempting to defend his character without actually understanding the nature of the police visit. The police answer his questions with more accusatory questions, only later warning him that he is being watched and that he is under arrest. The police do not, however, take him immediately into custody; nor do they ever tell him what his crime was. It is implied, in fact, that Josef is not allowed to know what he is being charged with.

This episode in The Trial has been played out in the real world over and over again, from the Soviet Cheka, to Adolf Hitler’s SS and Brownshirts, to Benito Mussolini’s Organization for Vigilance and Repression of Anti-Fascism (OVRA), to the German Stasi, to Mao Zedong’s Central Security Bureau, etc. In the United States, the culture of surveillance and intrusion has (for now) taken a more subtle approach through the use of technology. We do not yet have agents physically rummaging through all our homes and asking for our papers (though we are not far away from this). Rather, we have the National Security Agency, which rummages through our electronic communications while using our own computer cameras and cellphones to watch us, listen to us and track us. All of this, mind you, is done on a massive scale without warrant.

We have the Authorization for Use of Military Force and the National Defense Authorization Act, which give the President the centralized authority to detain and even kill those Americans designated as “enemy combatants” without trial, without due process and without public oversight.

Our government now uses secret evidence to charge citizens with crimes they are not allowed to discuss with the public on the argument that to do so would “threaten national security.” That’s right; the government can arrest you or assassinate you based on evidence they never have to disclose to you, your family, your lawyer or the citizenry.

In the U.S. today, the kind of establishment terror Kafka imagined is indeed a reality. We are not on the verge of a total surveillance state, we are there. It exists. And if we do not accept that this is our social condition, there may be no historians tomorrow to look back on our era and wonder: “Why didn’t they do something? Why didn’t they fight back?”

The revelations brought by Edward Snowden on the NSA and its PRISM mass surveillance program are still only partially understood by the public. Even many self-proclaimed “cypherpunks” and “techno-warriors” don’t really grasp the pervasiveness of the all-seeing NSA eye. Recent documents leaked to German news source Der Spiegel by Snowden reveal an Internet almost completely dominated by the NSA, where even total encryption would be a mere temporary stopgap, according to tech researcher and journalist Jacob Appelbaum. The TAO group, sanctioned by the NSA, has been using technologies for years that startle even the most avid tech experts. To make matters worse, many of the intrusive mechanisms have been implemented — likely with the direct aid of American software and computer companies.

With NSA access to the backbone or core of the Internet, there is no digital privacy anywhere. The cypherpunks lost the war for the Web a long time ago, and they don’t seem to know it yet.

Beyond the undeniable prevalence of government surveillance, what would our American Kafkaesque experience be like without kangaroo courts designed to defend the criminal establishment instead of the victimized population? The latest Federal court decision on the NSA’s methods is that they are perfectly legal and “necessary” to protect Americans from national security threats. If you are a student of Constitutional law, this decision truly boggles the mind.

One of the most powerful incidents in The Trial is Josef’s speech to his court of accusers. In this moment, Josef argues with concrete logic and impassioned reason. His position is supported with beautifully crafted merit and truth. But what he does not realize is that the court he is trying to convince does not exist to discover the truth. The court is a sideshow, a piece of elaborate theater. The participants are there to make Josef, and the society at large, feel as though justice has been given a fair chance. Josef’s pleas are met with fake cheers, scripted jeers and even engineered distractions. Finally, he comes to understand that the system’s purpose is to destroy him. Everything else is an illusion.



The Web cannot be made free or private from within; our courts cannot be made fair and just from within; neither political party can be forced to represent the common man from within; and our government cannot be made honest or transparent from within. To play games of activism within establishment dominated systems is to play make-believe within a surrealist nightmare; a piece of “Alice in Wonderland” political quackery. Like the audience at Josef’s trial, the elites simply laugh at such activists, or feign applause, while continuing forever with the same corruption and the criminal status quo.

America has long presented itself as the ultimate alternative to the torturous mechanisms of oligarchs; and a long time ago, it was certainly a noble effort. However, our heritage of liberty — the faint memory of it — is all that’s left today. There is a contingent of men and women in our country, millions of us, that steward over this memory and seek to make whole once again, but the road ahead is long, with struggles beyond all reckoning.

Some people may ask how this could have occurred. How did we become the monster we were supposed to fight against? What happened to the good side and the bad side? Have they become exactly the same?

Those of us who have looked beyond the standardized veil of history know that this is not by accident. Those of us who decipher the surreal know that there is a method to the madness and an ultimate goal. To explain further, I leave you with another piece of fiction, a clip from the British TV series “The Prisoner.” While not written by Kafka, it was definitely inspired by him. It carries a message I would have liked to have warned him about concerning the disturbing path of duality, the mask with multiple faces that tyranny uses to subvert and enslave...

 

How Twitter Algos Determine Who Is Market-Moving And Who Isn't

Submitted by Tyler Durden

Now that even Bridgewater has joined the Twitter craze and is using user-generated content for real-time economic modelling, and who knows what else, the scramble to determine who has the most market-moving, and actionable, Twitter stream is on. Because with HFT algos having camped out at all the usual newswire sources: Bloomberg, Reuters, Dow Jones, etc. the scramble to find a "content edge" for market moving information has never been higher. However, that opens up a far trickier question: whose information on the fastest growing social network, one which many say may surpass Bloomberg in terms of news propagation and functionality, is credible and by implication: whose is not? Indeed, that is the $64K question. Luckily, there is an algo for that.

In a note by Castillo et al from Yahoo Research in Spain and Chile, the authors focus on automatic methods for assessing the credibility of a given set of tweets. Specifically, they analyze microblog postings related to “trending” topics, and classify them as credible or not credible, based on features extracted from them. Our results shows that there are measurable differences in the way messages propagate, that can be used to classify them automatically as credible or not credible, with precision and recall in the range of 70% to 80%.

Needless to say, the topic of social media credibility is a critical one, in part due to the voluntary anonymity of the majority of sources , the frequent error rate of named sources, the painfully subjective attributes involved in determining good and bad information, and one where discerning the credible sources has become a very lucrative business. Further from the authors:

In a recent user study, it was found that providing information to users about the estimated credibility of online content was very useful and valuable to them. In absence of this external information, perceptions of credibility online are strongly influenced by style-related attributes, including visual design, which are not directly related to the content itself. Users also may change their perception of credibility of a blog posting depending on the (supposed) gender of the author. In this light the results of the experiment described are not surprising. In the experiment, the headline of a news item was presented to users in different ways, i.e. as posted in a traditional media website, as a blog, and as a post on Twitter. Users found the same news headline significantly less credible when presented on Twitter.

This distrust may not be completely ungrounded. Major search engines are starting to prominently display search results from the “real-time web” (blog and microblog postings), particularly for trending topics. This has attracted spammers that use Twitter to attract visitors to (typically) web pages offering products or services. It has also increased the potential impact of orchestrated attacks that spread lies and misinformation. Twitter is currently being used as a tool for political propaganda. Misinformation can also be spread unwillingly. For instance, on November 2010 the Twitter account of the presidential adviser for disaster management of Indonesia was hacked. The hacker then used the account to post a false tsunami warning. On January 2011 rumors of a shooting in the Oxford Circus in London, spread rapidly through Twitter. A large collection of screenshots of those tweets can be found online.

Recently, the Truthy service from researchers at Indiana University, has started to collect, analyze and visualize the spread of tweets belonging to “trending topics”. Features collected from the tweets are used to compute a truthiness score for a set of tweets. Those sets with low truthiness score are more likely to be part of a campaign to deceive users. Instead, in our work we do not focus specifically on detecting willful deception, but look for factors that can be used to automatically approximate users’ perceptions of credibility.

The study's conclusion: "we have shown that for messages about time-sensitive topics, we can separate automatically newsworthy topics from other types of conversations. Among several other features, newsworthy topics tend to include URLs and to have deep propagation trees. We also show that we can assess automatically the level of social media credibility of newsworthy topics. Among several other features, credible news are propagated through authors that have previously written a large number of messages, originate at a single or a few users in the network, and have many re-posts."

All of the above is largely known. What isn't, however, is the mostly generic matrix used by various electronic and algorithmic sources to determine who is real and who isn't, and thus who is market moving and who, well, ins't. Once again, courtesy of Castillo, one can determine how the filtering algo operates, (and thus reverse engineer it). So without further ado, here is the set of features used by Twitter truth-seekers everywhere.



Those are the variables. And as for the decision tree that leads an algo to conclude if a source's data can be trusted and thus acted upon, here it is in its entirety. First, verbally:

As the decision tree shows, the top features for this task were the following:

• Topic-based features: the fraction of tweets having an URL is the root of the tree. Sentiment-based features like fraction of negative sentiment or fraction of tweets with an exclamation mark correspond to the following relevant features, very close to the root. In particular we can observe two very simple classification rules, tweets which do not include URLs tend to be related to non-credible news. On the other hand, tweets which include negative sentiment terms are related to credible news. Something similar occurs when people use positive sentiment terms: a low fraction of tweets with positive sentiment terms tend to be related to noncredible news.
• User-based features: these collection of features is very relevant for this task. Notice that low credible news are mostly propagated by users who have not written many messages in the past. The number of friends is also a feature that is very close to the root.
• Propagation-based features: the maximum level size of the RT tree is also a relevant feature for this task. Tweets with many re-tweets are related to credible news.

These results show that textual information is very relevant for this task. Opinions or subjective expressions describe people’s sentiments or perceptions about a given topic or event. Opinions are also important for this task that allow to detect the community perception about the credibility of an event. On the other hand, user-based features are indicators of the reputation of the users. Messages propagated trough credible users (active users with a significant number of connections) are seen as highly credible. Thus, those users tend to propagate credible news suggesting that the Twitter community works like a social filter.

And visually:



Get to the very bottom of the tree without spooking too many algos, and you too can have a Carl Icahn-like impact on the stock of your choosing.

Source: "Information Credibility on Twitter"

Bridging the Obamacare, IRS, and Benghazi Scandal Gap

By Clarice Feldman

My neighbor Professor Zigmund Bensky, stopped in to thaw out. It seems that with all the stuff occupying his big brain -- like "why is 'settled science' like 'established law'?" he'd forgotten to pay his gas bill. While he was waiting for the gas company to turn his heat back on, I offered him a spot near the fireplace and some libations to warm him up.
He's a professor of journalism at Whackadoodle School here in the District of Columbia, a place that attracts ambitious, earnest young people who "want to make a difference" without working too hard at it. He's a nice enough fellow and a decent neighbor but we rarely see eye to eye. I generally try to stick to nonpolitical things with him, but he was not to be muzzled this day, brimming as he was with outrage at reports that Chris Christie's aides manipulated bridge traffic to punish the governor's political opponent.
"Terrible stuff," he humphed, downing a huge gulp of my best scotch. "How can he claim he didn't know?"
"My own view is that most politicians pose as know-everythings when they run for office and know-nothings after they are elected," I replied, hoping that such a general observation would end this discussion before we started tossing things at one another.
"What do you mean?" he asked looking genuinely surprised.
"Well, Obama claims not to have known about almost anything his administration has done until he's read it in the newspaper. And once he does know, no one seems to get punished for his or her misdeeds. He lied repeatedly about ObamaCare and Benghazi which affects many more people more substantially than a traffic jam -- and yet, no one has been fired and the press has not spent a lot of time covering the bad deeds or the lies about them."
After reaching for the cheese and gobbling some on a cracker, Professor Bensky took a crumpled copy of the NYT out of his pocket and started reading aloud the reporters' accounts of the emails of the NJ incident that so incensed him.
"Isn't that the article where the fact checkers misstated the name of the reporter and misidentified the governor of New York (the state where the paper is headquartered), Andrew Cuomo, as the governor of New Jersey?" I asked. He reluctantly admitted that was the case.
"And didn't that paper just this week print a map of the U.S. in which unbelievably they reversed North and South Dakota?" I continued. "These might seem like small potatoes to you, Zigmund, but to me they bespeak an unbelievable degree of carelessness which casts doubt on everything they publish. It's not as if they were self-publishing online on a shoestring budget. This is a large, well-funded operation. This is the paper people like you think of as 'the newspaper of record', but its record is not great in my eyes. And the rest of the mainstream media is usually worse."
I know Professor Bensky's disdain for bloggers, but as he accidentally knocked over the ice bucket, I pointed out some contrasting material from online sources. It seems to me using the IRS to squelch your political opposition while helping your allies is a bigger offense than that which Christie is being charged with, an incident creating hardly more inconvenience to travelers than Obama's many rush-hour convoys in New York, Los Angeles, and San Francisco -- and yet it doesn't appear that IRS has made any changes or that the officials who carried out this clearly illegal conduct were punished. I showed him the Tax Pro site's coverage of this scandal. "You don't see much coverage from what one would call the mainstream media, do you?"
"No," he conceded, "but surely the media provided more coverage of the IRS meddling than they did of this bridge congestion story."
"Not so, " I countered, showing him Newsbusters count.

In less than 24 hours, the big three networks have devoted 17 times more coverage to a traffic scandal involving Chris Christie than they've allowed in the last six months to Barack Obama's Internal Revenue Service controversy. Since the story broke on Wednesday that aides to the New Jersey governor punished a local mayor's lack of endorsement with a massive traffic jam, ABC, CBS and NBC have responded with 34 minutes and 28 seconds of coverage. Since July 1, these same networks managed a scant two minutes and eight seconds for the IRS targeting of Tea Party groups.

You'd have to read the Washington Times to learn that the Department of Justice lawyer heading the investigation in the lawless behavior of IRS officials to aid Obama was herself a big contributor to Obama and that now, seven months after the conduct was made public, the FBI is just starting to question some of the affected tea party members.

"After seven months of no contact from federal investigators, a small number of our clients recently received a request for an interview from the FBI," said Jay Sekulow, chief counsel for the American Center for Law & Justice, which represents more than three dozen groups.
He said the clients were evaluating FBI's request but were troubled by the revelation of Ms. Bosserman's political leanings.
"This development creates a serious conflict of interest and raises more questions and doubts about the Obama administration's promise to get to the bottom of what happened," he said.
The IRS internal auditor found that the agency singled out tea party groups for intrusive scrutiny, with agency investigators asking questions about groups' reading lists, members' political affiliations and volunteer histories, and work with other tea party groups.

"They did better on international stuff, though, didn't they? Large staff -- lots of my students work there." the professor responded with apparent pride, as he poured himself another stiff drink. If he was hoping to best me on that, I think he failed.
Slightly less than two weeks after an incredible NYT whitewash of Hillary Clinton's role in the Benghazi tragedy, the Department of State undercut that fantastical version of events.

In an 8,000-word article billed as the result of a lengthy New York Times investigation, Kirkpatrick claims the Times could find "no evidence that Al Qaeda or other international terrorist groups had any role in the assault" on the Benghazi consulate and that the attack "was fueled in large part by anger at an American-made video denigrating Islam."
These claims are astonishing since the Obama administration long ago backed away from its insistence that the attack on the consulate was not a terrorist attack but a spontaneous demonstration in response to an anti-Muslim video that spun out of control. (In fairness, I must note that Kirkpatrick admits the attack was not spontaneous although he says it was not "meticulously planned.")

And furthermore:

"The State Department on Friday for the first time blamed specific groups and militants for the 2012 Benghazi attack, designating them as terrorists -- a move that further undermines initial claims the attack was spontaneous."

Hillary's assertion, '"With all due respect, the fact is we had four dead Americans. Was it because of a protest or was it because of guys out for a walk one night decided to go kill some Americans? What difference at this point does it make?'" simply can't be sufficiently whitewashed by the Times to make it go away. This attempt to distort facts to smooth Hillary's path to the White House should further undermine the paper's already rapidly diminished standing and reputation among those who read for meaning rather than in support of their biases.
I realized by this time that my neighbor had pretty much drained the bottle and his eyes had closed. Further conversation was kind of pointless. So I removed the serving tray, turned out the lights and determined to let him sleep it off. On the way to the kitchen I almost tripped on a slip of paper he'd dropped. It was a letter from the Dean of Whackadoodle warning that the inability of the journalism school's grads to find jobs was well known and enrollment was down so considerably that layoffs of staff were inevitable.

Education Establishment: Giving Their All for Gold, Glory, and Gospel of Progressivism

By Bruce Deitrick Price

During the 1500s, the Spanish came to America (we were told in history classes) for "gold, glory, and gospel." Merchants made money; soldiers distinguished themselves in war; Catholic priests spread religion. The three Gs were a handy way to understand why people ventured across 3,000 miles of dangerous ocean in little boats.

Surprisingly enough, when we jump forward four centuries, we find that we can use this mnemonic to understand our Education Establishment, one of this country's more peculiar and inscrutable subcultures.

GOLD: Professors of education make excellent salaries without having special abilities or skills, other than being enthusiastic enforcers of the party line. H.L. Mencken sized up the big picture all the way back in 1928 (from "The War On Intelligence"):

To take a Ph.D. in education in most American seminaries, is an enterprise that requires no more real acumen or information than taking a degree in window dressing. ... Most pedagogues ... are simply dull persons who have found it easy to get along by dancing to whatever tune happens to be lined out. At this dancing they have trained themselves to swallow any imaginable fad or folly, and always with enthusiasm. The schools reek with this puerile nonsense. Their programs of study sound like the fantastic inventions of comedians gone insane. The teaching of the elements is abandoned for a dreadful mass of useless fol-de-rols[.] ... Or examine a dozen or so of the dissertations ... turned out by candidates for the doctorate at any eminent penitentiary for pedagogues, say Teachers College, Columbia. What you will find is a state of mind that will shock you. It is so feeble that it is scarcely a state of mind at all.

GLORY: Education, in its progressive forms, attracts people who think that making a Brave New World is an accomplishment -- never mind how much you have to hurt people when forcing them into their new roles.

Brave New Worlders want to tear down the old world and build a new one according to their specifications. They become the bosses of the new society. Wouldn't you want to join a new ruling elite?

Top educators gain glory by concocting new methods for the public schools. There is great honor in being first with some twist of jargon or a fresh spin on a failed method. The praise for Look-Say, New Math, Constructivism, Common Core, and all the other gimmicks can be compared to nuns singing about religious events. (For one example: "Constructivism is a scientific theory that explains the nature of human knowledge. It is also the only known theory that explains children's construction of knowledge from birth to adolescence.")

Glory (that is, ego, self-esteem, prestige, pride) is quite a motivator. Ordinary people, covered in glory, can more easily believe they are geniuses. A hunger for glory explains a lot.

GOSPEL: That's the progressive doctrine according to John Dewey. He provided the tools for a Marxist transformation of society. His central teaching was that schools of education should be used to indoctrinate teachers, who in turn would indoctrinate their students and thus society.

"[T]his view of Dewey as the creator of an implementation strategy for a Marxian society is confirmed by what Lenin did in 1918 when he and the Bolsheviks were broke and the Russian Civil War was still raging. They started translating and publishing Dewey's books on education into Russian. ... Clearly the Kremlin considered Dewey's recommended educational practices to be an essential weapon to gain control over the Russian people." That story has continued in America as well until the present day. ("Credentialed to Destroy," page 49.)

The Gospel according to John Dewey can be summarized this way: we need to control the public schools so we can level the children -- that's the foundation for a better society. Thus spake John Dewey.

This school-reconstruction saga started almost 100 years ago. Gold, glory, and gospel persuaded many a professor to join the Socialist crusade.

These self-appointed experts told parents they were trying to educate children, when they were actually trying to destroy the society created by the parents and grandparents.

Here's where we ended up: "For well over a decade, college instructors have been complaining about students who are not only apathetic and unmotivated but who belittle and resist efforts to educate them[.] ... Without sugar coating it, Paul M. Levitt flatly declares, 'many college kids are a sorry lot. Preoccupied with their hair, their clothes, their cars, they have never developed a critical turn of mind and have no interest in doing so.' It does not bode well for higher education that many students entering college do not have--in the words of Peter Sacks -- 'anything resembling an intellectual life.'"

These kids, please note, are the ones going on to college. You can imagine the devastation among the kids who drop out or quit after high school. It seems that our students, at all levels, have little education and little interest in being educated. That's what our Education Establishment has engineered in return for gold, glory, and gospel.

Inflation Vs Deflation – The Ultimate Chartbook Of 'Monetary Tectonics'

by Tyler Durden on 01/09/2014

Financial markets have become increasingly obviously highly dependent on central bank policies. In a follow-up to Incrementum's previous chartbook, Stoerferle and Valek unveil the following 50 slide pack of 25 incredible charts to crucially enable prudent investors to grasp the consequences of the interplay between monetary inflation and deflation. They introduce the term "monetary tectonics' to describe the 'tug of war' raging between parabolically rising monetary base M0 driven by extreme easy monetary policy and shrinking monetary aggregate M2 and M3 due to credit deleveraging. Critically, Incrementum explains how this applies to gold buying decisions as they introduce their "inflation signal" indicator.



GoldSilverWorlds.com has done a great job of summarizing the key aspects (and the full chartbook is below)...

The authors introduce the term “monetary tectonics” as a metaphor for this war. Similar to tectonic plates under a volcano, monetary inflation and deflation is currently working against each other:

• Monetary inflation is the result of a parabolically rising monetary base M0 driven by the central bank monetary easing policy.
• Monetary deflation is the result of shrinking monetary aggregates M2 and M3 because of credit deleveraging.

The following chart clearly shows that 2013 was a pivot year in which the monetary base M0 grew exponentially while net M2 (expressed on the chart line as M2 minus M0) declined significantly.

The chartbook shows several trend which confirm the deflationary monetary pressure:

• Total credit market debt as a % of US GDP has been shrinking since 2007 (“debt deleveraging”).
• US bank credit of all commercial banks is stagnating (close to negative growth), similar to the period 2007/2008. See first chart below.
• Money supply growth in the US and the Eurozone is trending lower. See second chart below.
• Personal consumption expenditures are exhibiting disinflation .
• The gold/silver-Ratio is declining. Gold tends to outperform silver during disinflationary and/or deflationary periods.
• The gold to Treasury ratio is declining. See third chart below.
• The Continuous Commodity Index (CCI) has been in a steep decline since the fall of 2011.

On the other hand, inflationary pressure is present through the following trends:

• An explosion of the monetary base M0. See first chart below.
• US households show signs of stopped deleveraging. See second chart below.
• The currency in circulation keeps on expanding.
• Commercial banks have piled up an enormous amount of excess reserves which, in case of a rate hike by central planners, could flood the market through lending in the fractional banking system. See thrid chart below.

How is gold impacted in this inflation vs deflation war? The key conclusion of the research is that, due to the fractional reserve banking system and the dynamics of the ‘monetary tectonics’, inflationary and deflationary phases will alternate in the foreseeable future. Gold, being a monetary asset in the view of Austrian economics, tends to rise in inflationary periods and decline during times of disinflation.

The key take-away for investors is to position themselves accordingly and consider price declines as buying opportunities for the coming inflationary period. How comes one can be so sure that inflation is coming? Consider that the government must avoid deflation; it is a horror scenario for the following reasons:

• Price deflation results in a real increase in the value of debt and a nominal decline in asset values. Debt can no longer be serviced.
• Price deflation would lead to massive tax revenue declines for the government due to a declining taxable base.
• Deflation would have fatal consequences for large parts of the banking system.
• Central banks also have the mandate to ensure ‘financial market stability‘

Interesting to know, Stoeferle and Valk developed the “Incrementum Inflation Signal,” an indicator of how much monetary inflation reaches the real economy based on market and monetary indicators. According to the signal, investors should take positions according to the the rising, neutral or falling inflation trends.

Monetary Tectonics Inflation vs Deflation Chartbook by Incrementum

 

Jim Kunstler's 2014 Forecast - Burning Down The House

Submitted by James H. Kunstler of Kunstler.com [43],

Many of us in the Long Emergency crowd and like-minded brother-and-sisterhoods remain perplexed by the amazing stasis in our national life, despite the gathering tsunami of forces arrayed to rock our economy, our culture, and our politics. Nothing has yielded to these forces already in motion, so far. Nothing changes, nothing gives, yet. It’s like being buried alive in Jell-O. It’s embarrassing to appear so out-of-tune with the consensus, but we persevere like good soldiers in a just war.

Paper and digital markets levitate, central banks pull out all the stops of their magical reality-tweaking machine to manipulate everything, accounting fraud pervades public and private enterprise, everything is mis-priced, all official statistics are lies of one kind or another, the regulating authorities sit on their hands, lost in raptures of online pornography (or dreams of future employment at Goldman Sachs), the news media sprinkles wishful-thinking propaganda about a mythical “recovery” and the “shale gas miracle” on a credulous public desperate to believe, the routine swindles of medicine get more cruel and blatant each month, a tiny cohort of financial vampire squids suck in all the nominal wealth of society, and everybody else is left whirling down the drain of posterity in a vortex of diminishing returns and scuttled expectations.

Life in the USA is like living in a broken-down, cob-jobbed, vermin-infested house that needs to be gutted, disinfected, and rebuilt — with the hope that it might come out of the restoration process retaining the better qualities of our heritage. Some of us are anxious to get on with the job, to expel all the rats, bats, bedbugs, roaches, and lice, tear out the stinking shag carpet and the moldy sheet-rock, rip off the crappy plastic siding, and start rebuilding along lines that are consistent with the demands of the future — namely, the reality of capital and material resource scarcity. But it has been apparent for a while that the current owners of the house would prefer to let it fall down, or burn down rather than renovate.

Some of us now take that outcome for granted and are left to speculate on how it will play out. These issues were the subjects of my recent non-fiction books, The Long Emergency [44] and Too Much Magic [45] (as well as excellent similar books by Richard Heinberg, John Michael Greer, Dmitry Orlov, and others). They describe the conditions at the end of the cheap energy techno-industrial phase of history and they laid out a conjectural sequence of outcomes that might be stated in shorthand as collapse and re-set. I think the delay in the onset of epochal change can be explained pretty simply. As the peak oil story gained traction around 2005, and was followed (as predicted) by a financial crisis, the established order fought back for its survival, utilizing its remaining dwindling capital and the tremendous inertia of its own gigantic scale, to give the appearance of vitality at all costs.

At the heart of the matter was (and continues to be) the relationship between energy and economic growth. Without increasing supplies of cheap energy, economic growth — as we have known it for a couple of centuries — does not happen anymore. At the center of the economic growth question is credit. Without continued growth, credit can’t be repaid, and new credit cannot be issued honestly — that is, with reasonable assurance of repayment — making it worthless. So, old debt goes bad and the new debt is generated knowing that it is worthless. To complicate matters, the new worthless debt is issued to pay the interest on the old debt, to maintain the pretense that it is not going bad. And then all kinds of dishonest side rackets are run around this central credit racket — shadow banking, “innovative” securities (i.e. new kinds of frauds and swindles, CDOs CDSs, etc.), flash trading, insider flimflams, pump-and-dumps, naked shorts, etc. These games give the impression of an economy that seems to work. But the reported “growth” is phony, a concoction of overcooked statistics and wishful thinking. And the net effect moves the society as a whole in the direction of more destructive ultimate failure.

Now, a number of stories have been employed lately to keep all these rackets going — or, at least, keep up the morale of the swindled masses. They issue from the corporations, government agencies, and a lazy, wishful media. Their purpose is to prop up the lie that the dying economy of yesteryear is alive and well, and can continue “normal” operation indefinitely. Here are the favorites of the past year:

• Shale oil and gas amount to an “energy renaissance” that will keep supplies of affordable fossil fuels flowing indefinitely, will make us “energy independent,” and will make us “a bigger producer than Saudi Arabia.” This is all mendacious bullshit with a wishful thinking cherry on top. Here’s how shale oil is different from conventional oil:

[46]

• A “manufacturing renaissance” is underway in the US, especially in the “central corridor” running from Texas north to Minnesota. That hoopla is all about a few chemical plants and fertilizer factories that have reopened to take advantage of cheaper natural gas. Note, the shale gas story is much like the shale oil story in terms of drilling and production. The depletion rates are quick and epic. In a very few years, shale gas won’t be cheap anymore. Otherwise, current talk of new manufacturing for hard goods is all about robots. How many Americans will be employed in these factories? And what about the existing manufacturing over-capacity everywhere else in the world? Are we making enough sneakers and Justin Beiber dolls? File under complete fucking nonsense.

• The USA is “the cleanest shirt in the laundry basket,” “the best house in a bad neighborhood,” the safest harbor for international “liquidity,” making it a sure bet that both the equity and bond markets will continue to ratchet up as money seeking lower risk floods in to the Dow and S & P from other countries with dodgier economies and sicker banks. In a currency war, with all nations competitively depreciating their currencies, gaming interest rates, manipulating markets, falsely reporting numbers, hiding liabilities, backstopping bad banks, and failing to regulate banking crime, there are no safe harbors. The USA can pretend to be for a while and then that illusion will pop, along with the “asset” bubbles that inspire it.

• The USA is enjoying huge gains from fantastic new “efficiencies of technological innovation.” The truth is not so dazzling. Computer technology, produces diminishing returns and unanticipated consequences. The server farms are huge energy sinks. Online shopping corrodes the resilience of commercial networks when only a few giant companies remain standing; and so on. Problems like these recall the central collapse theory of Joseph Tainter [47] which states that heaping additional complexity on dysfunctional hyper-complex societies tends to induce their collapse. Hence, my insistence that downscaling, simplifying, re-localizing and re-setting the systems we depend on are imperative to keep the project of civilization going. That is, if you prefer civilization to its known alternatives.

Notice that all of these stories want to put over the general impression that the status quo is alive and well. They’re based on the dumb idea that the stock markets are a proxy for the economy, so if the Standard & Poor’s 500 keeps on going up, it’s all good. The master wish running through the American zeitgeist these days is that we might be able to keep driving to Wal-Mart forever.
The truth is that we still have a huge, deadly energy problem. Shale oil is not cheap oil, and it will stop seeming abundant soon. If the price of oil goes much above $100 a barrel, which you’d think would be great for the oil companies, it will crash demand for oil. If it crashes demand, the price will go down, hurting the profitability of the shale oil companies. It’s quite a predicament. Right now, in the $90-100-a-barrel range, it’s just slowly bleeding the economy while barely allowing the shale oil producers to keep up all the drilling. Two-thirds of all the dollars invested (more than $120 billion a year) goes just to keep production levels flat. Blogger Mark Anthony [48] summarized it nicely:

…the shale oil and gas developers tend to use unreliable production models to project unrealistically high EURs (Estimated Ultimate Recovery) of their shale wells. They then use the over-estimated EURs to under-calculate the amortization costs of the capital spending, in order to report “profits”, despite of the fact that they have to keep borrowing more money to keep drilling new wells, and that capital spending routinely out paces revenue stream by several times… shale oil and gas producers tend to over-exaggerate productivity of their wells, under-estimate the well declines…in order to pitch their investment case to banks and investors, so they can keep borrowing more money to keep drilling shale wells.

As stated in the intro, these perversities reverberate in the investment sector. Non-cheap oil upsets the mechanisms of capital formation — financial growth is stymied — in a way that ultimately affects the financing of oil production itself. Old credit cannot be repaid, scaring off new credit (because it is even more unlikely to be repaid). At ZIRP interest, nobody saves. The capital pools dry up. So the Federal Reserve has to issue ersatz credit dollars on its computers. That credit will remain stillborn and mummified in depository institutions afraid of lending it to the likes of sharpies and hypesters in the shale gas industry.
But real, functioning capital (credit that can be paid back) is vanishing, and the coming scarcity of real capital makes it much more difficult to keep the stupendous number of rigs busy drilling and fracking new shale oil wells, which you have to do incessantly to keep production up, and as the investment in new drilling declines, and the “sweet spots” yield to the less-sweet spots or the not-sweet-at-all spots… then the Ponzis of shale oil and shale gas, too will be unmasked as the jive endeavors they are. And when people stop believing these cockamamie stories, the truth will dawn on them that we are in a predicament where further growth and wealth cannot be generated and the economy is actually in the early stages of a permanent contraction, and that will trigger an unholy host of nasty consequences proceeding from the loss of faith in these fairy tales, going so far as the meltdown of the banking system, social turmoil, and political upheaval.
The bottom line is that the “shale revolution” will be short-lived. 2014 may be the peak production year in the Bakken play of North Dakota. Eagle Ford in Texas is a little younger and may lag Bakken by a couple of years. If Federal Reserve policies create more disorder in the banking system this year, investment for shale will dry up, new drilling will nosedive, and shale oil production will go down substantially. Meanwhile. conventional oil production in the USA continues to decline remorselessly.
The End of Fed Cred
It must be scary to be a Federal Reserve governor. You have to pretend that you know what you’re doing when, in fact, Fed policy appears completely divorced from any sense of consequence, or cause-and-effect, or reality — and if it turns out you’re not so smart, and your policies and interventions undermine true economic resilience, then the scuttling of the most powerful civilization in the history of the world might be your fault — even if you went to Andover and wear tortoise-shell glasses that make you appear to be smart.
The Fed painted itself into a corner the last few years by making Quantitative Easing a permanent feature of the financial landscape. QE backstops everything now. Tragically, additional backdoor backstopping extends beyond the QE official figures (as of December 2013) of $85 billion a month. American money (or credit) is being shoveled into anything and everything, including foreign banks and probably foreign treasuries. It’s just another facet of the prevailing pervasive dishonesty infecting the system that we have no idea, really, how much money is being shoveled and sprinkled around. Anything goes and nothing matters. However, since there is an official consensus that you can’t keep QE money-pumping up forever, the Fed officially made a big show of seeking to begin ending it. So in the Spring of 2013 they announced their intention to “taper” their purchases of US Treasury paper and mortgage paper, possibly in the fall.
Well, it turned out they didn’t or couldn’t taper. As the fall equinox approached, with everyone keenly anticipating the first dose of taper, the equity markets wobbled and the interest rate on the 10-year treasury — the index for mortgage loans and car loans — climbed to 3.00 percent from its May low of 1.63 — well over 100 basis points — and the Fed chickened out. No September taper. Fake out. So, the markets relaxed, the interest rate on the 10-year went back down, and the equity markets resumed their grand ramp into the Christmas climax. However, the Fed’s credibility took a hit, especially after all their confabulating bullshit “forward guidance” in the spring and summer when they couldn’t get their taper story straight. And in the meantime, the Larry-Summers-for-Fed-Chair float unfloated, and Janet Yellen was officially picked to succeed Ben Bernanke, with her reputation as an extreme easy money softie (more QE, more ZIRP), and a bunch of hearings were staged to make the Bernanke-Yellen transition look more reassuring.
And then on December 18, outgoing chair Bernanke announced, with much fanfare, that the taper would happen after all, early in the first quarter of 2014 ­— after he is safely out of his office in the Eccles building and back in his bomb shelter on the Princeton campus. The Fed meant it this time, the public was given to understand.
The only catch here, as I write, after the latest taper announcement, is that interest on the 10-year treasury note has crept stealthily back up over 3 percent. Wuh-oh. Not a good sign, since it means more expensive mortgages and car loans, which happen to represent the two things that the current economy relies on to appear “normal.” (House sales and car sales = normal in a suburban sprawl economy.)
I think the truth is the Fed just did too darn much QE and ZIRP and they waited way too long to cut it out, and now they can’t end it without scuttling both the stock and bond markets. But they can’t really go forward with the taper, either. A rock and a hard place. So, my guess is that they’ll pretend to taper in March, and then they’ll just as quickly un-taper. Note the curious report [49] out of the American Enterprise Institute ten days ago by John H. Makin saying that the Fed’s actual purchase of debt paper amounted to an average $94 billion a month through the year 2013, not $85 billion. Which would pretty much negate the proposed taper of $5 billion + $5 billion (Treasury paper + Mortgage paper).
And in so faking and so doing they may succeed in completely destroying the credibility of the Federal Reserve. When that happens, capital will be disappearing so efficiently that the USA will find itself in a compressive deflationary spiral — because that’s what happens when faith in the authority behind credit is destroyed, and new loans to cover the interest on old loans are no longer offered in the non-government banking system, and old loans can’t be serviced. At which point the Federal Reserve freaks out and announces new extra-special QE way above the former 2013 level of $85 billion a month, and the government chips in with currency controls. And that sets in motion the awful prospect of the dreaded “crack-up boom” into extraordinary inflation, when dollars turn into hot potatoes and people can’t get rid of them fast enough. Well, is that going to happen this year? It depends on how spooked the Fed gets. In any case, there is a difference between high inflation and hyper-inflation. High inflation is bad enough to provoke socio-political convulsion. I don’t really see how the Fed gets around this March taper bid without falling into the trap I’ve just outlined. It wouldn’t be a pretty situation for poor Ms. Janet Yellen, but nobody forced her to take the job, and she’s had the look all along of a chump, the perfect sucker to be left holding a big honking bag of flop.
We’re long overdue for a return to realistic pricing in all markets. The Government and its handmaiden, the Fed, have tweaked the machinery so strenuously for so long that these efforts have entered the wilderness of diminishing returns. Instead of propping up the markets, all they can accomplish now is further erosion of the credibility of the equity markets and the Fed itself — and that bodes darkly for a money system that is essentially run on faith. I think the indexes have topped. The “margin” (money borrowed to buy stock) in the system is at dangerous, historically unprecedented highs. There may be one final reach upward in the first quarter. Then the equities crater, if not sooner. I still think the Dow and S &P could oversell by 90 percent of their value if the falsehoods of the post-2008 interventions stopped working their hoodoo on the collective wishful consciousness.
The worldwide rise in interest rates holds every possibility for igniting a shitstorm in interest rate swaps and upsetting the whole apple-cart of shadow banking and derivatives. That would be a bullet in the head to the TBTF banks, and would therefore lead to a worldwide crisis. In that event, the eventual winners would be the largest holders of gold, who could claim to offer the world a trustworthy gold-backed currency, especially for transactions in vital resources like oil. That would, of course, be China. The process would be awfully disorderly and fraught with political animus. Given the fact that China’s own balance sheet is hopelessly non-transparent and part-and-parcel of a dishonest crony banking system, China would have to use some powerful smoke-and-mirrors to assume that kind of dominant authority. But in the end, it comes down to who has the real goods, and who screwed up (the USA, Europe, Japan) and China, for all its faults and perversities, has the gold.
The wholesale transfer of gold tonnage from the West to the East was one of the salient events of 2013. There were lots of conspiracy theories as to what drove the price of gold down by 28 percent. I do think the painful move was partly a cyclical correction following the decade-long run up to $1900 an ounce. Within that cyclical correction, there was a lot of room for the so-called “bullion banks” to pound the gold and silver prices down with their shorting orgy. Numerous times the past year, somebody had laid a fat finger on the “sell” key, like, at four o’clock in the morning New York time when no traders were in their offices, and the record of those weird transactions is plain to see in the daily charts. My own theory is that an effort was made — in effect, a policy — to suppress the gold price via collusion between the Fed, the US Treasury, the bullion banks, and China, as a way to allow China to accumulate gold to offset the anticipated loss of value in the US Treasury paper held by them, throwing China a big golden bone, so to speak — in other words, to keep China from getting hugely pissed off. The gold crash had the happy effect for the US Treasury of making the dollar appear strong at a time when many other nations were getting sick of US dollar domination, especially in the oil markets, and were threatening to instigate a new currency regime by hook or by crook. Throwing China the golden bone is also consistent with the USA’s official position that gold is a meaningless barbaric relic where national currencies are concerned, and therefore nobody but the barbaric yellow hordes of Asia would care about it.
Other nations don’t feel that way. Russia and Switzerland have been accumulating gold like crazy at bargain prices this year. Last year, Germany requested its sovereign gold cache (300 tons) to be returned from the vaults in America, where it was stored through all the decades of the cold war, safe from the reach of the Soviets. But American officials told the Germans it would take seven years to accomplish the return. Seven years ! ! ! WTF? Is there a shortage of banana boats? The sentiment in goldville is that the USA long ago “leased” or sold off or rehypothecated or lost that gold. Anyway, Germany’s 300 tons was a small fraction of the 6,700 tons supposedly held in the Fed’s vaults. Who knows? No auditors have been allowed into the Fed vaults to actually see what’s up with the collateral. This in and of itself ought to make the prudent nervous.
I think we’re near the end of these reindeer games with gold, largely because so many vaults in the West have been emptied. That places constraints on further shenanigans in the paper gold (and silver) markets. In an environment where both the destructive forces of deflation and inflation can be unleashed in sequence, uncertainty is the greatest motivator, trumping the usual greed and fear seen in markets that can be fairly measured against stable currencies. In 2014, the public has become aware of the bank “bail-in” phenomenon which, along with rehypothication schemes, just amounts to the seizure of customer and client accounts — a really new wrinkle in contemporary banking relations. Nobody knows if it’s safe to park cash money anywhere except inside the mattress. The precedent set in Cyprus, and the MF Global affair, and other confiscation events, would tend to support an interest in precious metals held outside the institutional framework. Uncertainty rules.
Miscellany
I get a lot of email on the subject of Bitcoin. Here’s how I feel about it.
It’s an even more abstract form of “money” than fiat currencies or securities based on fiat currencies. Do we need more abstraction in our economic lives? I don’t think so. I believe the trend will be toward what is real. For the moment, Bitcoin seems to be enjoying some success as it beats back successive crashes. I’m not very comfortable with the idea of investing in an algorithm. I don’t see how it is impervious to government hacking. In fact, I’d bet that somewhere in the DOD or the NSA or the CIA right now some nerd is working on that. Bitcoin is provoking imitators, other new computer “currencies.” Why would Bitcoin necessarily enjoy dominance? And how many competing algorithmic currencies can the world stand? Wouldn’t that defeat the whole purpose of an alternative “go to” currency? All I can say is that I’m not buying Bitcoins.
Will ObamaCare crash and burn. It’s not doing very well so far. In fact, it’s a poster-child for Murphy’s Law (Anything that can go wrong, will go wrong). I suppose the primary question is whether they can enroll enough healthy young people to correct the actuarial nightmare that health insurance has become. That’s not looking so good either now. But really, how can anyone trust a law that was written by the insurance companies and the pharmaceutical industry? And how can it be repealed when so many individuals, groups, companies, have already lost their pre-ObamaCare policies? What is there to go back to? Therefore, I’d have to predict turmoil in the health care system for 2014. The failure to resolve the inadequacies of ObamaCare also may be a prime symptom of the increasing impotence of the federal government to accomplish anything. That failure would prompt an even faster downscaling of governance as states, counties, communities, and individuals realize that they are on their own.
Sorry to skip around, but a few stray words about the state of American culture. Outside the capitals of the “one percent” — Manhattan, San Francisco, Boston, Washington, etc. — American material culture is in spectacular disrepair. Car culture and chain store tyranny have destroyed the physical fabric of our communities and wrecked social relations. These days, a successful Main Street is one that has a wig shop and a check-cashing office. It is sickening to see what we have become. Our popular entertainments are just what you would design to produce a programmed population of criminals and sex offenders. The spectacle of the way our people look —overfed, tattooed, pierced, clothed in the raiment of clowns — suggests an end-of-empire zeitgeist more disturbing than a Fellini movie. The fact is, it simply mirrors the way we act, our gross, barbaric collective demeanor. A walk down any airport concourse makes the Barnum & Bailey freak shows of yore look quaint. In short, the rot throughout our national life is so conspicuous that a fair assessment would be that we are a wicked people who deserve to be punished.
Elsewhere in the World
Globalism, in the Tom Friedman euphoric sense, is unwinding. Currency wars are wearing down the players, conflicts and tensions are breaking out where before there were only Wal-Mart share price triumphs and Foxconn profits. Both American and European middle-classes are too exhausted financially to continue the consumer orgy of the early millennium. The trade imbalances are horrific. Unpayable debt saturates everything. Sick economies will weigh down commodity prices except for food-related things. The planet Earth has probably reached peak food production, including peak fertilizer. Supplies of grain will be inadequate in 2014 to feed the still-expanding masses of the poor places in the world.
The nervous calm in finance and economies since 2008 has its mirror in the relative calm of the political scene. Uprisings and skirmishes have broken out, but nothing that so far threatens the peace between great powers. There have been the now-historic revolts in Egypt, Libya, Syria, and other Middle East and North African (MENA) states. Iraq is once again disintegrating after a decade of American “nation-building.” Greece is falling apart. Spain and Italy should be falling apart but haven’t yet. France is sinking into bankruptcy. The UK is in on the grift with the USA and insulated from the Euro, but the British Isles are way over-populated with a volatile multi-ethnic mix and not much of an economy outside the financial district of London. There were riots in — of all places — Sweden this year. Turkey entered crisis just a few weeks ago along with Ukraine.
I predict more colorful political strife in Europe this year, boots in the street, barricades, gunfire, and bombs. The populations of these countries will want relief measures from their national governments, but the sad news is that these governments are broke, so austerity seems to be the order of the day no matter what. I think this will prod incipient revolts in a rightward nationalist direction. If it was up to Marine LePen’s rising National Front party, they would solve the employment problem by expelling all the recent immigrants — though the mere attempt would probably provoke widespread race war in France.
The quarrel between China and Japan over the Senkaku Islands is a diversion from the real action in the South China Sea, said to hold large underwater petroleum reserves. China is the world’s second greatest oil importer. Their economy and the credibility of its non-elected government depends on keeping the oil supply up. They are a long way from other places in the world where oil comes from, hence their eagerness to secure and dominate the South China Sea. The idea is that China would make a fuss over the Senkaku group, get Japan and the US to the negotiating table, and cede the dispute over them to Japan in exchange for Japan and the US supporting China’s claims in the South China Sea against the other neighbors there: Vietnam, Indonesia, Malaysia, and the Philippines.
The catch is that Japan may be going politically insane just now between the rigors of (Shinzo) Abenomics and the mystical horrors of Fukushima. Japan’s distress appears to be provoking a new mood of nationalist militarism of a kind not seen there since the 1940s. They’re talking about arming up, rewriting the pacifist articles in their constitution. Scary, if you have a memory of the mid-20^th century. China should know something about national psychotic breaks, having not so long ago endured the insanity of Mao Zedong’s Cultural Revolution (1966-71). So they might want to handle Japan with care. On the other hand, China surely nurtures a deep, deadly grudge over the crimes perpetrated by Japan in the Second World War, and now has a disciplined, world-class military, and so maybe they would like to kick Japan’s ass. It’s a hard one to call. I suspect that in 2014, the ball is in Japan’s court. What will they do? If the US doesn’t stay out of the way of that action, then we are insane, too.
That said, I stick by my story from last year’s forecast: Japan’s ultimate destination is to “go medieval.” They’re never going to recover from Fukushima, their economy is unraveling, they have no fossil fuels of their own and have to import everything, and their balance of payments is completely out of whack. The best course for them will be to just throw in the towel on modernity. Everybody else is headed that way, too, eventually, so Japan might as well get there first and set a good example.
By “go medieval” I mean re-set to a pre-industrial World Made By Hand level of operation. I’m sure that outcome seems laughably implausible to most readers, but I maintain that both the human race and the planet Earth need a “time out” from the ravages of “progress,” and circumstances are going to force the issue anyway, so we might as well kick back and get with the program: go local, downscale, learn useful skills, cultivate our gardens, get to know our neighbors, learn how to play a musical instrument, work, dine, and dance with our friends.


Links:[1] http://www.zerohedge.com/users/tyler-durden
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