Hank Paulson Burned As Another Electric Car Maker Goes Up In Flames

It would appear that (apart from Tesla, for now) that any thing related to electric cars is going up in flames. From Fisker's fubar (and blowing all that hard-earned government funding) and Chevy's Volt dysphoria to A-123 Systems (the Lithium-Ion battery-maker) and now Coda - which Yahoo Finance notes was among an emerging crop of California startups seeking to build emission-free electric cars three years ago.

After selling just 100 of its $37,250 five-passenger vehicles, Coda filed Chapter 11 today taking a few well-known investors with it. On the bright side, the government was not involved (from what we can tell), but on the even brighter side, none other than former US Treasury Secretary Hank Paulson was among those burned by the company going up in flames (as was Harbinger's Phil Falcone).

Despite the $300 million the company managed to raise, that quickly went and unable to raise an additional $150 million in new funding (we suspect blaming 'market conditions' for its mere $22million raise), Coda had no choice (and Fortress was more than happy to scoop it up and provide the DIP - the cars will make for fancy paperweights in a collateral liquidation). 'Green' is the new 'red' as it seems when it comes to electric cars, regardless of funding source - private or public - it goes up in flames. Read more >>

Secret and Lies of the Bailout

The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come

Matt Taibbi


It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you'd think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we've been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?

Wrong.

It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.

But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn't the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. "It is," says former bailout Inspector General Neil Barofsky, "the ultimate bait-and-switch."

The bailout deceptions came early, late and in between. There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout. The only reason investors haven't run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed. Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it. Read more >>

Warren Buffett is one of America’s biggest bailout beneficiaries

Warren Buffett is one of America’s biggest bailout beneficiaries, having profited hugely from buying into firms whose assets were subsequently bailed out. Shortly after the crisis began in 2008, Warren Buffett loaned money to, and bought options from, Goldman Sachs, seemingly with the knowledge the bailout of AIG — a counterparty to which Goldman had massive, massive exposure — would take place.

Dimon as Treasury Secretary would intend more of the same. Dimon and Buffett and others like them believe in having their cake and eating it. They seem to believe that the U.S. taxpayer should provide a liquidity lifeline to their fragile and risky too-big-to-fail businesses, but without at the same time demanding any regulatory oversight to prevent too-big-to-fail banks from acting irresponsibly. Read more >>

Collapse of the U.S. Dollar Could Happen Any Moment

Greg Hunter’s USAWatchdog.com

There has been plenty of calamitous news surrounding the European debt crisis.  Greece is insolvent.  Spain just got a big bank bailout, and Ireland wants a new bailout deal.  No matter how bad it looks in the EU, Paul Craig Roberts says the problems in Europe are “nowhere near as big as the ones here.” 

The U.S. is printing massive amounts of money to paper over the mess, but it won’t work.  Roberts says a collapse of the U.S. dollar could happen at any moment.   It could be triggered by any number of things such as war or a derivatives meltdown.  When a former Assistant Treasury Secretary (under the Reagan Administration) and a PhD in economics sounds the alarm bell, people should take cover. 

Dr. Roberts says, “The cliff dive we are experiencing in housing isn’t over,” and precious metals prices are “being suppressed.”  Roberts says, “Gold prices should be rising.  Why? Because the debt is rising.”   What is the reason why Dr. Roberts thinks the suppression game has gotten so intense?  Dr.  Roberts says, “The fact that they are driving the price down suggests to me the situation is getting more desperate.”  Greg Hunter interviews Paul Craig Roberts one on one about these subjects and more.

Truth Has Fallen and Taken Liberty With It

PAUL CRAIG ROBERTS
There was a time when the pen was mightier than the sword. That was a time when people believed in truth and regarded truth as an independent power and not as an auxiliary for government, class, race, ideological, personal, or financial interest.

Today Americans are ruled by propaganda. Americans have little regard for truth, little access to it, and little ability to recognize it.

Truth is an unwelcome entity. It is disturbing. It is off limits. Those who speak it run the risk of being branded “anti-American,” “anti-semite” or “conspiracy theorist.”

Truth is an inconvenience for government and for the interest groups whose campaign contributions control government.

Truth is an inconvenience for prosecutors who want convictions, not the discovery of innocence or guilt.

Truth is inconvenient for ideologues.

Today many whose goal once was the discovery of truth are now paid handsomely to hide it. “Free market economists” are paid to sell offshoring to the American people. High-productivity, high value-added American jobs are denigrated as dirty, old industrial jobs. Relicts from long ago, we are best shed of them. Their place has been taken by “the New Economy,” a mythical economy that allegedly consists of high-tech white collar jobs in which Americans innovate and finance activities that occur offshore. All Americans need in order to participate in this “new economy” are finance degrees from Ivy League universities, and then they will work on Wall Street at million dollar jobs.

Economists who were once respectable took money to contribute to this myth of “the New Economy.”

And not only economists sell their souls for filthy lucre. Recently we have had reports of medical doctors who, for money, have published in peer-reviewed journals concocted “studies” that hype this or that new medicine produced by pharmaceutical companies that paid for the “studies.”

The Council of Europe is investigating the drug companies’ role in hyping a false swine flu pandemic in order to gain billions of dollars in sales of the vaccine.

The media helped the US military hype its recent Marja offensive in Afghanistan, describing Marja as a city of 80,000 under Taliban control. It turns out that Marja is not urban but a collection of village farms.

And there is the global warming scandal, in which NGOs. the UN, and the nuclear industry colluded in concocting a doomsday scenario in order to create profit in pollution.

Wherever one looks, truth has fallen to money.

Wherever money is insufficient to bury the truth, ignorance, propaganda, and short memories finish the job.

I remember when, following CIA director William Colby’s testimony before the Church Committee in the mid-1970s, presidents Gerald Ford and Ronald Reagan issued executive orders preventing the CIA and U.S. black-op groups from assassinating foreign leaders. In 2010 the US Congress was told by Dennis Blair, head of national intelligence, that the US now assassinates its own citizens in addition to foreign leaders.

When Blair told the House Intelligence Committee that US citizens no longer needed to be arrested, charged, tried, and convicted of a capital crime, just murdered on suspicion alone of being a “threat,” he wasn’t impeached. No investigation pursued. Nothing happened. There was no Church Committee. In the mid-1970s the CIA got into trouble for plots to kill Castro. Today it is American citizens who are on the hit list. Whatever objections there might be don’t carry any weight. No one in government is in any trouble over the assassination of U.S. citizens by the U.S. government.

As an economist, I am astonished that the American economics profession has no awareness whatsoever that the U.S. economy has been destroyed by the offshoring of U.S. GDP to overseas countries. U.S. corporations, in pursuit of absolute advantage or lowest labor costs and maximum CEO “performance bonuses,” have moved the production of goods and services marketed to Americans to China, India, and elsewhere abroad. When I read economists describe offshoring as free trade based on comparative advantage, I realize that there is no intelligence or integrity in the American economics profession.

Intelligence and integrity have been purchased by money. The transnational or global U.S. corporations pay multi-million dollar compensation packages to top managers, who achieve these “performance awards” by replacing U.S. labor with foreign labor. While Washington worries about “the Muslim threat,” Wall Street, U.S. corporations and “free market” shills destroy the U.S. economy and the prospects of tens of millions of Americans.

Americans, or most of them, have proved to be putty in the hands of the police state.

Americans have bought into the government’s claim that security requires the suspension of civil liberties and accountable government. Astonishingly, Americans, or most of them, believe that civil liberties, such as habeas corpus and due process, protect “terrorists,” and not themselves. Many also believe that the Constitution is a tired old document that prevents government from exercising the kind of police state powers necessary to keep Americans safe and free.

Most Americans are unlikely to hear from anyone who would tell them any different.

I was associate editor and columnist for the Wall Street Journal. I was Business Week’s first outside columnist, a position I held for 15 years. I was columnist for a decade for Scripps Howard News Service, carried in 300 newspapers. I was a columnist for the Washington Times and for newspapers in France and Italy and for a magazine in Germany. I was a contributor to the New York Times and a regular feature in the Los Angeles Times. Today I cannot publish in, or appear on, the American “mainstream media.”

For the last six years I have been banned from the “mainstream media.” My last column in the New York Times appeared in January, 2004, coauthored with Democratic U.S. Senator Charles Schumer representing New York. We addressed the offshoring of U.S. jobs. Our op-ed article produced a conference at the Brookings Institution in Washington, D.C. and live coverage by C-Span. A debate was launched. No such thing could happen today.

For years I was a mainstay at the Washington Times, producing credibility for the Moony newspaper as a Business Week columnist, former Wall Street Journal editor, and former Assistant Secretary of the U.S. Treasury. But when I began criticizing Bush’s wars of aggression, the order came down to Mary Lou Forbes to cancel my column.

The American corporate media does not serve the truth. It serves the government and the interest groups that empower the government.

America’s fate was sealed when the public and the anti-war movement bought the government’s 9/11 conspiracy theory. The government’s account of 9/11 is contradicted by much evidence. Nevertheless, this defining event of our time, which has launched the US on interminable wars of aggression and a domestic police state, is a taboo topic for investigation in the media. It is pointless to complain of war and a police state when one accepts the premise upon which they are based.

These trillion dollar wars have created financing problems for Washington’s deficits and threaten the U.S. dollar’s role as world reserve currency. The wars and the pressure that the budget deficits put on the dollar’s value have put Social Security and Medicare on the chopping block. Former Goldman Sachs chairman and U.S. Treasury Secretary Hank Paulson is after these protections for the elderly. Fed chairman Bernanke is also after them. The Republicans are after them as well. These protections are called “entitlements” as if they are some sort of welfare that people have not paid for in payroll taxes all their working lives.

With over 21 per cent unemployment as measured by the methodology of 1980, with American jobs, GDP, and technology having been given to China and India, with war being Washington’s greatest commitment, with the dollar over-burdened with debt, with civil liberty sacrificed to the “war on terror,” the liberty and prosperity of the American people have been thrown into the trash bin of history.

The militarism of the U.S. and Israeli states, and Wall Street and corporate greed, will now run their course. As the pen is censored and its might extinguished, I am signing off.

Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury. His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com

Dick Fuld made almost half a billion dollars from fraud

Image via Wikipedia

The Automatic Earth
Lehman's CEO Dick Fuld made almost half a billion dollars off the fraud he oversaw, states Dylan Ratigan. Fuld has been walking around free, enjoying his loot, for 18 months, since Lehman collapsed. And that's not because nobody among the US market regulators knew. You know why it is? It's because they DID know. It’s because the SEC and the NY Fed under Geithner and the Treasury under Paulson and the Fed under Greenspan and Bernanke DID know, that Dick Fuld gets to spend his part of the loot. It’s because part of the loot went to all of the above, because they’re all guilty as sin. Oh wait, what does that say about Obama? That he's guilty too, or only that he's not all that savvy? And look in the mirror, what does it say about you?

Yves Smith says Tim Geithner needs to be fired for his involvement in the insane saga of the Lehman demise. Well, that's a nice first reaction, but when you dig a bit, he should maybe also have been fired for his part in the AIG scam. Or Bear Stearns for that matter, which he had the duty to oversee as head of the New York Fed. Tim Geithner will never be brought to justice precisely because Tim Geithner himself should be brought before a jury of his peers, and his peers are as guilty as he is.

Firing Geithner would be letting him off easy. He should be put on temporary leave pending an independent investigation. That's how politics works in other countries, so why not in the US? The investigation should be rapid and thorough, and led by someone who can prove they’re not associated with Wall Street in any given way. Say, Elizabeth Warren or Bill Black. And then there should be a temp replacement as Treasury Secretary, say, let's see, Elizabeth Warren or Bill Black. Or you could give either post to Harry Markopolos. Am I leaving out anyone? There's really only a few good "men", ain't there? It’s much easier to come up with a lost of names of people who should never ever be appointed to these posts than it is to name those who might.

But yeah, I know, I'm only dreaming. This present bag of Al Capones, except for a few carefully selected scapegoats (Dick Fuld: Tar and Feathers!), will never be brought to justice, because Eliott Ness wouldn't stand a chance in today's America, or London, Paris, or Tokyo. We just would like to believe he would, so much so that that very belief is actually aiding and abetting both the crimes and perpetrators. We don’t want real life, we want the hologram. We tell ourselves: "but there's nothing I can do about it", and we use that statement as an excuse to let people like Dick Fuld and Tim Geithner walk all over our children's graves.

There's times when I think that perhaps the best thing that could happen to us is for our lives and dreams to be thrown off a cliff and see what survives the landing, we can't seem to wake up in any other way. You know, the sort of thing that sounds good in theory. But I can clearly see the suffering that would come with it, and I don’t like it. Not one bit. Whatever we do, though, we must make sure of one thing. That we find back our moral fiber, and act on it. More...

Another toothless bank “reform” from Obama

Tom Eley and Barry Grey
Flanked by former Federal Reserve Chairman Paul Volcker, President Obama on Thursday announced new proposals that he claimed would limit the ability of the major banks to profit from risky speculative investments.

The brief appearance before the press corps, replete with bank-bashing demagogy, was a transparent effort to give his persona a populist gloss, two days after the Democrats suffered a humiliating defeat in the Massachusetts Senate election to fill the vacancy left by the death of Edward Kennedy.

Obama was vague on the precise content of the regulations he was proposing, which he said would complement the bank regulatory overhaul passed last December by the House of Representatives. That bill, drafted in close consultation between the White House, Congressional Democrats and Wall Street CEOs and further diluted after heavy lobbying by the banks, does nothing to limit, let alone end, the unregulated “shadow” banking system that played a major role in bringing the US and global financial system to the brink of collapse.

Obama specifically denounced commercial banks making use of government support to engage in speculative trading on their own behalf—a practice known as proprietary trading.

He suggested that he wanted to revive some aspects of the separation between commercial and investment banking that was a cornerstone of the bank reform laid down by the 1933 Glass-Steagall Act. The law was repealed in 1999 during the Clinton administration. Clinton’s treasury secretary at the time, Lawrence Summers, is now Obama’s chief economic adviser.

The announcement, hastily organized, was little more than a public relations stunt, designed to placate mounting popular anger over the administration’s subservience to Wall Street and its refusal to take any measures to address the jobs crisis and growing social distress. Obama is well aware that any measures that might seriously rein in the banks will be blocked in Congress or watered down to the point of irrelevance. He and his political advisers calculated that a populist gesture would, in practice, commit his administration to nothing.

He demonstratively did not call for breaking up the banking giants--such as JPMorgan and Goldman Sachs--which have grown bigger and more powerful as a result of the administration’s policies.

The presence of Volcker underscored the cynicism of the announcement. In recent months Volcker, the chairman of Obama’s Economic Recovery Advisory Board, has been publicly calling for measures to limit proprietary trading and other speculative practices by commercial banks, i.e., institutions that hold the deposits of ordinary people and are therefore afforded special protections by the Federal Reserve Board and the Federal Deposit Insurance Corporation. Of the major banks, these include JPMorgan Chase, Citigroup, Bank of America and Wells Fargo.

For months, Volcker has been ignored or ridiculed by Obama administration officials for suggesting even a partial return to the limits on bank speculation imposed under Glass-Steagall. Now, in the wake of the political disaster suffered by the Democrats in Massachusetts, he has been brought forward to demonstrate the supposed “toughness” of Obama toward Wall Street.

Volcker, however, is hardly a fortuitous choice to symbolize the administration’s newfound determination to defend the public against the bankers. As Fed chairman from 1979, under Jimmy Carter, to 1987, under Ronald Reagan, he engineered a deep recession by raising interest rates as high as 20 percent. This was the centerpiece of an offensive against the working class that employed mass unemployment to beat back its militant opposition and impose wage cuts, attacks on benefits and speedup across the economy.

Volcker publicly supported the unionbusting and strikebreaking that characterized the 1980s, carried out with the collusion of the AFL-CIO. He famously declared that Reagan’s busting of the 1981 PATCO air traffic controllers’ strike and outlawing of the union was his greatest contribution to reining in inflation.

Acknowledging that the financial system is “still operating under the same rules that led to its near-collapse,” Obama declared that “never again will the American taxpayer be held hostage by a bank that is too big to fail.”

He continued: “We simply cannot accept a system in which hedge funds or private equity firms inside banks can place huge, risky bets that are subsidized by taxpayers and that could pose a conflict of interest. And we cannot accept a system in which shareholders make money on these operations if the bank wins, but taxpayers foot the bill if the bank loses.”

Such statements have no credibility coming from a president who has presided over a vast expansion of the multi-trillion-dollar bailout of the banks and has opposed any restraints on bankers’ pay. If the banks are “still operating under the same rules” as before the crash of 2008, that is because his administration has refused to change the rules.

Obama’s phony bank-bashing was for public consumption. Next Tuesday, Treasury Secretary Timothy Geithner, who as president of the Federal Reserve Bank of New York played a key role in the bank bailout, will meet behind closed doors with more than 40 chief executives of financial institutions to reassure them and give them the real dope on Obama’s proposals.

Wall Street struck back at the mere suggestion of new regulations, driving down bank stocks and ending the trading day with the Dow down 213 points.

Goldman Sachs and Others Investigated for Betting Against Securities They Created

Image via CrunchBase

Noel Brinkerhoff
Betting against their own securities has prompted numerous investigations of Goldman Sachs and other Wall Street institutions. Prior to the financial collapse, Goldman and others figured out a way to package risky securities, such as subprime mortgages, and sell them to investors who were told they were buying sound investments. Little did the investors know that the firms selling the synthetic collateralized debt obligations (or CDOs) turned around and bet that the CDOs would fail—costing pension funds and insurance companies billions of dollars.

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, told The New York Times. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

In addition to Goldman, CDOs were sold and bet against by Deutsche Bank, Morgan Stanley and Tricadia Inc.—an investment company whose parent firm’s CDO management committee was overseen by Lee Sachs. Sachs is now a special counselor to Treasury Secretary Timothy Geithner. The schemes are now being investigated by Congress, the Securities and Exchange Commission and Wall Street’s Financial Industry Regulatory Authority.

Understanding The FED for Dummies 101

Interview with J.S. Kim

Introduction

J.S. Kim is the founder of SmartKnowledgeU™, an independent investment research and wealth consulting firm. J.S. accurately called the recent global financial crisis, sharing his thoughts on his investment blog, to his subscribers, and in a series of YouTube videos. His articles have been reprinted online by Reuters, the New York Times, USA Today, the Wall Street Journal, the Financial Times and the International Business Times. He recently authored the timely book, “Confessions of a Wall Street Insider, a Zen approach to making a fortune from the coming global economic crisis.”

Recently, J.S. Kim and I have been speaking via Skype and email about the banking industry, the Federal Reserve, fixes for the economy, and current investment trends.

Interview

Ilene: Hi J.S., thanks for speaking with me and showing me how to use Skype; this is pretty easy. Can you tell me a little about your background and what led you into the financial field?

J.S.: I studied neurobiology at University of Pennsylvania and then earned two masters at the University of Texas, in Public Policy and Business Administration. After graduating, I began working in the Private Wealth Management division of Wells Fargo. Subsequently, I worked for several years at Smith Barney. In 2005, I launched my company, SmartKnowledgeU™.

Ilene: What did you learn while working in the banking industry?

J.S.: I was seeing an unsettling picture of industry excesses. I saw problems developing, for example, with mortgages – no document loans or liar loans. If the loan application didn’t support a mortgage, the loan might be denied at first, but then it was sent through a special process to convert it to a no document loan. Every bank did it. This was not specific to Wells Fargo. All the major U.S. banks had this “don’t ask, don’t tell” policy, so they could say they didn’t know. They either should have known from the start that the mortgages couldn’t be paid back, or they didn’t care because they were making huge commissions up front. So they would make the loans and then slice and dice them up and quickly sell them off.

Ilene: The banks knew what they were doing and knew they’d be bailed out as well?

J.S.: Yes, this happened before in the 1920s and I believe they knew it would happen again. The process of taking the clients’ money and making loans that are gambles (heads I win, tails the taxpayer pays) has a history that goes back to the Great Depression. They have the best of both worlds. The reward for risks stays with the banks top executives, but losses are shifted to the taxpayers.

This is a pattern that happens over and over again – the robbing of a nation’s wealth for the benefit of the elite banking oligarchs. This is nothing new, and nobody should have been surprised by ex-Goldman Sachs CEO and then US Treasury Secretary’s bait and switch with the $700+ billion bailout plan in which he promised to use the money to help American homeowners stay in their homes. Paulson promptly reneged on the deal as soon as Congress passed the bill and gave the money to his banking buddies.

Ilene: So do you believe it was a conspiracy to rid the population of wealth and transfer it to the bankers?

J.S.: I really don’t subscribe to conspiracy theories. Rather the system enables the bankers to do what they do. The banking industry and the media take the tactic of calling people who believe that cycles of boom and bust are intentional, “conspiracy theorists.” It’s the simplest way for the bankers to keep their power by calling everyone that exposes their immorality and greed as crazy conspiracy loonies. As Simon Johnson said in his article, “The Quiet Coup” (The Atlantic, May 2009), the bankers have taken over all major world governments so the public never receives the truth. Instead, we have to look for it.

Education has been taken over by the moneyed elites as well. Keynesian economics, not the Austrian theory, is the predominantly accepted theory and the one taught in every major economics school today. I graduated from the University of Texas at Austin with my MBA, but in that time, I hadn’t learned anything truthful about economics. What I learned since is in almost direct opposition to what my school taught.

The central bankers’ reach extends to academia and permeates the field. There was a good article on this recently in Huffington Post. This is not conspiracy. This is stifling of an opposing viewpoint, the one that would enlighten the world to the fraud of our global monetary system and our global banking system.

Ilene: Was the article by Ryan Grim, “How the Federal Reserve bought the economics profession?”

J.S.: Yes, that’s the one. A journalism professor of mine, Professor Mercedes Lynn de Uriarte from the University of Texas, once told me that if I only read the mainstream newspapers or watched the mainstream TV news channels, I would never understand the truth about any major political event. When I asked her what she meant by this, she told me that all major media outlets frame stories by excluding relevant facts. Therefore, one must dig for these relevant facts that would be reported through independent media channels.

Our education about the economy, the monetary system and the banking system is the same. Government and academic officials continually exclude and withhold relevant facts from us. If one truly wants to consider oneself “educated” in matters of our monetary system, one must dig for the truth. I guarantee what one discovers would be shocking to most people.

Ilene: When you say “they,” who do you mean?

J.S.: The government officials that have allegiances to bankers and the private individuals that control the world’s most important central banks.

Ilene: What do you see as the source of the problems caused by the banking system?

J.S.: Central banks are the original creators of the collapse. For instance, the bankers have caused problems inherent in a fractional reserve lending system by allowing much less than 10% to be kept in reserve. A ten percent reserve was way too much for the bankers, and over time, the member banks of the Federal Reserve system lobbied the U.S. Federal Reserve (through Chairman Alan Greenspan back then) to ensure that today, the real requirement is less than 2%, and in many cases, incredibly, zero percent. The central bankers run the economy, not the government.

Ilene: They lobby the Federal Reserve?

J.S.: Yes, that’s correct, Ilene. The banks lobbied the Fed chairman directly.

Ilene: So you’re saying that those who control the banks have enormous political power, due to controlling so much of the world’s wealth?

J.S.: Yes, look at how U.S. Congressmen Mel Watt (NC-Dem) has recently tried to gut Ron Paul’s bill to audit the Fed and its monetary policy. The bankers have people in their back pocket throughout government that work for their own interests and against the rights of the people.

The owners of the central banks direct policy decisions. Men like Ben Bernanke and Alan Greenspan are just the face of the U.S. Fed but ultimately not the real decision makers. The owners of the central banks influence global economic policy at meetings such as the G-8, G-20 and Bilderberg group meetings. They get together and make decisions that affect the entire global monetary system. Collectively, the original founders of the U.S. Federal Reserve held 20% to 25% of the world’s wealth in the early 1900’s. I believe their wealth is greater now.

In fact, I loathe using the term the U.S. Federal Reserve, because the founders of the US Federal Reserve purposefully placed the word “Federal” in the name of the U.S. Central Bank to fool the people into believing that the U.S. government is running this institution. It’s actually a public-private hybrid. They felt that the people would trust a government monetary institution but not a privately held one. And they were right. So they misrepresented themselves in the assignment of this name. A more accurate name for the U.S. Federal Reserve would be something like “The Most Powerful Private Bank in the World.”

Ilene: I’ve read that no one owns the Fed, on its website, but entities have stock in the Fed and get 6% in dividends. So what does “ownership” mean? It’s not clear. It would be interesting to have an audit of the Fed to get a better idea of what it is doing and why. It also says on the website that the Fed is regularly audited. If this were true, why do we need Ron Paul’s audit the Fed bill?

J.S.: It’s audited, but not by an outside independent auditor. Not worth much in my opinion. It hasn’t been audited by an outside independent auditor since it was founded in 1913.

They say the twelve regional Federal Reserve Banks control the Fed because they issue stock to member banks, but the stock is stock in word only because it carries no weight normally assigned to stock – no voting rights, no ownership rights. The only regional bank with true power is the NY reserve bank.

Ilene: Do you believe these bankers, or groups, control the elections and ultimately the politicians?

J.S.: Yes. President Obama owes the central bankers because they contributed to his campaign and they were responsible for his present position. Obama pulled his cabinet members from Wall Street. His cabinet consists of more power players from Wall Street than any administration in the past several decades. That’s how the political system is built. If you’re backed by a certain element, you have to do favors for them. It’s also hard to get factual information out because the moneyed elites also control the media.

Ilene: Why do you believe there’s no free market?

J.S. It’s impossible to have free markets and central banks at the same time. The free market will dictate what the interest rate should be, but central banks keep altering it and causing boom bust cycles. They created the housing bubble because interest rates were so low for too long. Whenever central banks artificially suppress interest rates to serve their purposes, a real estate or stock market bubble is inevitable. And a bubble always bursts. Without a central bank, the fed-induced cycles would be very much muted. Artificially set interest rates cause bubbles and are clearly not consistent with a free market. When we put an end to the central banks, people will have a chance to have free markets. In my mind, the greatest gift in the world would be to have a free market and to shut down all of the world’s central banks.

Ilene: How can some of the problems with our economy get fixed?

J.S.: Implement sound money again. All people, no matter where in the world we live, are debt slaves to the central banks. If you have strong moral opposition to the concept of slavery, then you should be strongly opposed to the very idea of central banks. We have little power in retaining our wealth, since the banks devalue our wealth at will. Alan Greenspan himself stated in 1967 that “gold and economic freedom are inseparable,” and that “under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade.” Of course today, a dual bi-metal gold/silver standard is probably more realistic to implement as a sustainable solution than a gold standard. But Alan Greenspan’s former comments grant a narrow window into the mentality of central banker’s today. This is why the U.S. and the U.K. are always denigrating gold. Gold is the anti-US dollar, the kryptonite to central bankers per se. In order to keep people slaves to a fraudulent monetary system, people must not own gold or silver, for it is the only means people have to protect themselves against the theft of their wealth by central banks through inflation and devaluation of paper currencies.

Ilene: Can you tell me about the Worldwide Initiative to Prevent Financial Fraud?

J.S.: This is a collective project run by various people of different ages and professions, running the gamut of students to professional career men and women. I’ve agreed to participate in it and contribute articles but those that run the project wish to remain anonymous and I respect their wish.

Often the greatest most truthful dissent in history has originated under conditions of anonymity. For example, the Federalist papers, a series of 85 articles advocating the ratification of the US Constitution were written under anonymity by Alexander Hamilton, James Madison and John Jay. Writing under conditions of anonymity spared Hamilton, Madison and Jay from acts of retaliation from the intolerant elites currently in power at the time. The same can be said of Subcomandante Marcos, or Zero Delegado, in his struggle to reinstate the property rights of the poor in Mexico, of his decision to never show his face in public.

Thus, I have no problem with the fact that the Worldwide Initiative to Prevent Financial Fraud is run by people wishing to remain anonymous. Some of history’s most important changes critical to freedom were only possible due to the cloak of security and assurances against retribution by those in power that can only be afforded through anonymous dissent.

Ilene: From the site:

As truth is always censored from the top down, this unique initiative to educate the world’s population about the true roots of this global financial crisis must originate momentum from the bottom up in an organic fashion. The inspiration for this project is the deafening silence that exists in the mainstream media regarding the true originators and the real story behind this global economic crisis. The fact that global stock markets can rise at the same time when the world’s leading economies are deathly ill is a symptom of this fraud, and this situation will not end well for the world’s citizens unless we take action now…

In our estimation, less than 1% of the world understands the central role central bankers have played in our current global economic crisis.

In your estimation, less than 1% of the population understands the role the central bankers have played. Can you tell me what you wish people understood about the central bankers that they don’t understand? What do we need to understand?

J.S. Sure. But I want to be clear that I am answering this question not on behalf of the Worldwide Initiative to Permanently End Financial Fraud but as JS Kim, Chief Investment Strategist for SmartKnowledgeU, LLC.

In a free market, market forces would dictate interest rates, as the forces of supply and demand would dictate the flow of money into various investment opportunities. When a central bank continuously interferes in this process by artificially cutting or increasing interest rates, it disrupts free market forces and creates artificial bubbles and collapses.

In a sound money system (i.e. money backed by silver or gold, or best yet, one backed by a dual gold and silver standard) there would be no need for central banks. Though this is a complex process that could take 10 pages to explain, I’ll try to explain it in as simple terms as possible. If money supply becomes too great, the people turn in their paper money for gold and silver, and interest rates naturally increase as bankers do not wish to give up commodities of value (silver and gold) for commodities with zero intrinsic value (paper). If money supply is too small and is stifling economic growth, interest rates would naturally fall to stimulate growth. Thus gold (or gold and silver) naturally regulates the monetary supply to provide sustainable economic growth and to regulate interest rates. In the absence of central banks, there would also be an absence of capital bubbles and bursting bubbles. However, the purpose of a central bank is to allow its owners to manipulate currency supplies, valuations, and to control the wealth of a nation at the worst possible outcome to its citizens.

The U.S. Central Bank, the U.S. Federal Reserve, states on its website that one of its primary missions is price stability. Since the U.S. Federal Reserve was formed in 1913, the US dollar has lost 98% if its value. Price stability would mean that the U.S. dollar would have lost 5% or less of its value since 1913. People do not understand that central banks are formed solely to enrich its owners and that they cause great harm to all citizens of the nations in which they operate. Central banks are a scam a million times greater than Bernard Madoff’s ponzi scheme.

Goldman Sachs bankers stockpiling weapons in case people revolt

Image via CrunchBase

Alice Schroeder
Bloomberg
“I just wrote my first reference for a gun permit,” said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank.

I called Goldman Sachs spokesman Lucas van Praag to ask whether it’s true that Goldman partners feel they need handguns to protect themselves from the angry proletariat. He didn’t call me back. The New York Police Department has told me that “as a preliminary matter” it believes some of the bankers I inquired about do have pistol permits. The NYPD also said it will be a while before it can name names.

While we wait, Goldman has wrapped itself in the flag of Warren Buffett, with whom it will jointly donate $500 million, part of an effort to burnish its image -- and gain new Goldman clients. Goldman Sachs Chief Executive Officer Lloyd Blankfein also reversed himself after having previously called Goldman’s greed “God’s work” and apologized earlier this month for having participated in things that were “clearly wrong.”

Has it really come to this? Imagine what emotions must be billowing through the halls of Goldman Sachs to provoke the firm into an apology. Talk that Goldman bankers might have armed themselves in self-defense would sound ludicrous, were it not so apt a metaphor for the way that the most successful people on Wall Street have become a target for public rage.

Pistol Ready

Common sense tells you a handgun is probably not even all that useful. Suppose an intruder sneaks past the doorman or jumps the security fence at night. By the time you pull the pistol out of your wife’s jewelry safe, find the ammunition, and load your weapon, Fifi the Pomeranian has already been taken hostage and the gun won’t do you any good. As for carrying a loaded pistol when you venture outside, dream on. Concealed gun permits are almost impossible for ordinary citizens to obtain in New York or nearby states.

In other words, a little humility and contrition are probably the better route.

Until a couple of weeks ago, that was obvious to everyone but Goldman, a firm famous for both prescience and arrogance. In a display of both, Blankfein began to raise his personal- security threat level early in the financial crisis. He keeps a summer home near the Hamptons, where unrestricted public access would put him at risk if the angry mobs rose up and marched to the East End of Long Island.

To the Barricades

He tried to buy a house elsewhere without attracting attention as the financial crisis unfolded in 2007, a move that was foiled by the New York Post. Then, Blankfein got permission from the local authorities to install a security gate at his house two months before Bear Stearns Cos. collapsed.

This is the kind of foresight that Goldman Sachs is justly famous for. Blankfein somehow anticipated the persecution complex his fellow bankers would soon suffer. Surely, though, this man who can afford to surround himself with a private army of security guards isn’t sleeping with the key to a gun safe under his pillow. The thought is just too bizarre to be true.

So maybe other senior people at Goldman Sachs have gone out and bought guns, and they know something. But what?

Henry Paulson, U.S. Treasury secretary during the bailout and a former Goldman Sachs CEO, let it slip during testimony to Congress last summer when he explained why it was so critical to bail out Goldman Sachs, and -- oh yes -- the other banks. People “were unhappy with the big discrepancies in wealth, but they at least believed in the system and in some form of market-driven capitalism. But if we had a complete meltdown, it could lead to people questioning the basis of the system.”

Torn Curtain

There you have it. The bailout was meant to keep the curtain drawn on the way the rich make money, not from the free market, but from the lack of one. Goldman Sachs blew its cover when the firm’s revenue from trading reached a record $27 billion in the first nine months of this year, and a public that was writhing in financial agony caught on that the profits earned on taxpayer capital were going to pay employee bonuses.

This slip-up let the other bailed-out banks happily hand off public blame to Goldman, which is unpopular among its peers because it always seems to win at everyone’s expense.

Plenty of Wall Streeters worry about the big discrepancies in wealth, and think the rise of a financial industry-led plutocracy is unjust. That doesn’t mean any of them plan to move into a double-wide mobile home as a show of solidarity with the little people, though.

Cool Hand Lloyd

No, talk of Goldman and guns plays right into the way Wall- Streeters like to think of themselves. Even those who were bailed out believe they are tough, macho Clint Eastwoods of the financial frontier, protecting the fistful of dollars in one hand with the Glock in the other. The last thing they want is to be so reasonably paid that the peasants have no interest in lynching them.

And if the proles really do appear brandishing pitchforks at the doors of Park Avenue and the gates of Round Hill Road, you can be sure that the Goldman guys and their families will be holed up in their safe rooms with their firearms. If nothing else, that pistol permit might go part way toward explaining why they won’t be standing outside with the rest of the crowd, broke and humiliated, saying, “Damn, I was on the wrong side of a trade with Goldman again.”

FED Chairman Threatens Crash if Audited

Carl Herman with the Examiner says the following 7-minute video is one of the best he's ever seen in economics. It begins with Federal Reserve Chair Ben Bernanke threatening an economic crash if Congress audits the Fed, moves to revealing headlines of financial corporate profits being socialized from gambling losses, then closes with Secretary of the Treasury Tim Geithner telling Congress that TARP is really a perpetual line of $700 billion credit for him to do with as he pleases as long as Bernanke agrees. That means, if Treasury can sell the troubled assets, that money returns to Geithner's private reserve to buy more assets. As you may know, Harvard's Elizabeth Warren, the chair for the Oversight Panel, reported to the Senate that Treasury is over-paying corporations by about 50%. That's a gift from us, the taxpayers, to the gambling-addicted plutocrats of $82 BILLION.