IS AN INTERNATIONAL FINANCIAL CONSPIRACY DRIVING WORLD EVENTS?

http://www.globalresearch.ca/index.php?context=va&aid=8450

“They make a desolation and call it peace.” -Tacitus

Was Alan Greenspan really as dumb as he looks in creating the late housing bubble that threatens to bring the entire Western debt-based economy crashing down?

Was something as easy to foresee as this really the trigger for a meltdown that could destroy the world’s financial system? Or was it done, perhaps, “accidentally on purpose”?

And if so, why?

Let’s turn to the U.S. personage that conspiracy theorists most often mention as being at the epicenter of whatever elite plan is reputed to exist. This would be David Rockefeller, the 92-year-old multibillionaire godfather of the world’s financial elite.

The lengthy Wikipedia article on Rockefeller provides the following version of a celebrated statement he allegedly made in an opening speech at the Bilderberg conference in Baden-Baden, Germany, in June 1991:

“We are grateful to the Washington Post, the New York Times, Time magazine, and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during these years. But the world is now more sophisticated and prepared to march towards a world government which will never again know war, but only peace and prosperity for the whole of humanity. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in the past centuries.”

This speech was made 17 years ago. It came at the beginning in the U.S. of the Bill Clinton administration. Rockefeller speaks of an “us.” This “us,” he says, has been having meetings for almost 40 years. If you add the 17 years since he gave the speech it was 57 years ago—two full generations.

Not only has “us” developed a “plan for the world,” but the attempt to “develop” the plan has evidently been successful, at least in Rockefeller’s mind. The ultimate goal of “us” is to create “the supranational sovereignty of an intellectual elite and world bankers.” This will lead, he says, toward a “world government which will never again know war.”

Just as an intellectual exercise, let’s assume that David Rockefeller is as important and powerful a person as he seems to think he is. Let’s give the man some credit and assume that he and “us” have in fact succeeded to a degree. This would mean that the major decisions and events since Rockefeller gave the speech in 1991 have probably also been part of the plan or that they have at least represented its features and intent.

Therefore by examining these decisions and events we can determine whether in fact Rockefeller is being truthful in his assessment that the Utopia he has in mind is on its way or has at least come closer to being realized. In no particular order, some of these decisions and events are as follows:

The implementation of the North American Free Trade Agreement by the Bill Clinton and George W. Bush administrations has led to the elimination of millions of U.S. manufacturing jobs as well as the destruction of U.S. family farming in favor of global agribusiness.

Similar free trade agreements, including those under the auspices of the World Trade Organization, have led to export of millions of additional manufacturing jobs to China and elsewhere.

Average family income in the U.S. has steadily eroded while the share of the nation’s wealth held by the richest income brackets has soared. Some Wall Street hedge fund managers are making $1 billion a year while the number of homeless, including war veterans, pushes a million.

The housing bubble has led to a huge inflation of real estate prices in the U.S. Millions of homes are falling into the hands of the bankers through foreclosure. The cost of land and rentals has further decimated family agriculture as well as small business. Rising property taxes based on inflated land assessments have forced millions of lower-and middle-income people and elderly out of their homes.

The fact that bankers now control national monetary systems in their entirety, under laws where money is introduced only through lending at interest, has resulted in a massive debt pyramid that is teetering on collapse. This “monetarist” system was pioneered by Rockefeller-family funded economists at the University of Chicago. The rub is that when the pyramid comes down and everyone goes bankrupt the banks which have been creating money “out of thin air” will then be able to seize valuable assets for pennies on the dollar, as J.P. Morgan Chase is preparing to do with the businesses owned by Carlyle Capital. Meaningful regulation of the financial industry has been abandoned by government, and any politician that stands in the way, such as Eliot Spitzer, is destroyed.

The total tax burden on Americans from federal, state, and local governments now exceeds forty percent of income and is rising. Today, with a recession starting, the Democratic-controlled Congress, while supporting the minuscule “stimulus” rebate, is hypocritically raising taxes further, even for middle-income earners. Back taxes, along with student loans, can no longer be eliminated by bankruptcy protection.

Gasoline prices are soaring even as companies like Exxon-Mobil are recording record profits. Other commodity prices are going up steadily, including food prices, with some countries starting to experience near-famine conditions. 40 million people in America are officially classified as “food insecure.”

Corporate control of water and mineral resources has removed much of what is available from the public commons, and the deregulation of energy production has led to huge increases in the costs of electricity in many areas.

The destruction of family farming in the U.S. by NAFTA (along with family farming in Mexico and Canada) has been mirrored by policies toward other nations on the part of the International Monetary Fund and World Bank. Around the world, due to pressure from the “Washington consensus,” local food self-sufficiency has been replaced by raising of crops primarily for export. Migration off the land has fed the population of huge slums around the cities of underdeveloped countries.

Since the 1980s the U.S. has been fighting wars throughout the world either directly or by proxy. The former Yugoslavia was dismembered by NATO. Under cover of 9/11 and by utilizing off-the-shelf plans, the U.S. is now engaged in the military conquest and permanent military occupation of the Middle East. A worldwide encirclement of Russia and China by U.S. and NATO forces is underway, and a new push to militarize space has begun. The Western powers are clearly preparing for at least the possibility of another world war.

The expansion of the U.S. military empire abroad is mirrored by the creation of a totalitarian system of surveillance at home, whereby the activities of private citizens are spied upon and tracked by technology and systems which have been put into place under the heading of the “War on Terror.” Human microchip implants for tracking purposes are starting to be used. The military-industrial complex has become the nation’s largest and most successful industry with tens of thousands of planners engaged in devising new and better ways, both overt and covert, to destroy both foreign and domestic “enemies.”

Meanwhile, the U.S. has the largest prison population of any country on earth. Plus everyday life for millions of people is a crushing burden of government, insurance, and financial fees, charges, and paperwork. And the simplest business transactions are burdened by rake-offs for legions of accountants, lawyers, bureaucrats, brokers, speculators, and middlemen.

Finally, the deteriorating conditions of everyday life have given rise to an extraordinary level of stress-related disease, as well as epidemic alcohol and drug addiction. Governments themselves around the world engage in drug trafficking. Instead of working to lower stress levels, public policy is skewed in favor of an enormous prescription drug industry that grows rich off the declining level of health through treatment of symptoms rather than causes. Many of these heavily-advertised medications themselves have devastating side-effects.

This list should at least give us enough to go on in order to ask a hard question. Assuming again that all these things are parts of the elitist plan which Mr. Rockefeller boasts to have been developing, isn’t it a little strange that the means which have been selected to achieve “peace and prosperity for the whole of humanity” involve so much violence, deception, oppression, exploitation, graft, and theft?

In fact it looks to me as though “our plan for the world” is one that is based on genocide, world war, police control of populations, and seizure of the world’s resources by the financial elite and their puppet politicians and military forces.

In particular, could there be a better way to accomplish all this than what appears to be a concentrated plan to remove from people everywhere in the world the ability to raise their own food? After all, genocide by starvation may be slow, but it is very effective. Especially when it can be blamed on “market forces.”

And can it be that the “us” which is doing all these things, including the great David Rockefeller himself, are just criminals who have somehow taken over the seats of power? If so, they are criminals who have done everything they can to watch their backs and cover their tracks, including a chokehold over the educational system and the monopolistic mainstream media.

One thing is certain: The voters of America have never knowingly agreed to any of this.

Richard C. Cook is a former U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites. His book on monetary reform entitled We Hold These Truths: The Promise of Monetary Reform is in preparation. He is also the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, called by one reviewer, “the most important spaceflight book of the last twenty years.” His website is at www.richardccook.com.

USDA PROTECTS RETAILERS OF TAINTED MEAT

http://www.chicagotribune.com/news/nationworld/chi-meat-tainted-agriculture-webmar27,1,6695394.story

U.S. may withhold names of retailers in certain meat recalls

By Erica Werner |  Associated Press
4:26 PM CDT, March 26, 2008

WASHINGTON (AP) — Under pressure from the food industry, the Agriculture Department is considering a proposal not to identify retailers where tainted meat went for sale except in cases of serious health risk, The Associated Press has learned.

Had that been the rule in place last month, consumers would not have been told if their supermarkets sold meat from a Southern California slaughterhouse that triggered the biggest beef recall in U.S. history.

The plan is being considered as the USDA puts the final touches on a proposed disclosure rule. It had lingered in draft form for two years until February, when 143 million pounds of beef were recalled by Westland/Hallmark Meat Co. in Chino, Calif., after undercover video by an animal-rights activist showed workers abusing crippled cows.

Agriculture Department spokesman Chris Connelly confirmed Wednesday that the agency is weighing whether to make naming the stores mandatory only for so-called “Class I” recalls, which pose the greatest health hazard. The Chino recall was categorized as “Class II” because authorities determined there was minimal risk to human health.

Currently, the government discloses only a recall itself. It does not list which retailers might have received recalled meat. The same holds true for recalled vegetables.

Consumer groups and Democratic lawmakers contended that the public should have access to the names of retailers in all recalls. As originally written, the rule would have applied to all recalls.

“It’s unacceptable to us because of the way the rule was originally fashioned, and we have an immediate example of the Hallmark case being exempted,” said Tony Corbo of Food & Water Watch, a Washington, D.C., advocacy group.

At an appearance in Sacramento, Calif., earlier this week, Agriculture Secretary Edward Schafer said there are “differences with the different classes of recalls.”

“But, you know, a Class I recall, to have a retailer notification, I think, is important,” Schafer said.

Partly for competitive reasons, industry groups support the way recalls are currently done, where a description of the recalled product is released by the Agriculture Department’s Food Safety and Inspection Service along with some other information including where it was produced.

Retailers must remove recalled meat from their shelves but there’s no requirement that they notify their customers about meat already sold, though some take voluntary steps to do so.

Consumers may be able to identify prepackaged foods like hot dogs that the Agriculture Department mentions by brand name, but with ground beef or other items that are repackaged at grocery stores, there’s usually no identifying information on the package to tell consumers it’s a recalled item.

That’s what has led consumer groups to argue that customers need more information, a position shared by Dr. Richard Raymond, who made publishing the retailer rule a top priority when he took over as the Agriculture Department’s undersecretary for food safety in 2005.

In an interview this week Raymond said that it was “common sense to assume” that some consumers may have fallen ill because they didn’t have access to names of retailers selling tainted meat. But he disputed the suggestion that industry opposition — expressed in written and public comments, meetings with the White House Office of Management and Budget, and other venues — has stalled the rule.

“It’s going through the normal process,” Raymond said. “It does unfortunately take a long time to go through the normal process.”

Industry groups argue that even if just Class I recalls are covered, the rule could create confusion for consumers since retailer lists could be incomplete or take days or weeks to compile. Customers could have a false sense of security if their grocery store doesn’t immediately show up on the list, the groups contend.

Some cite the example of California, which is unique among states in having a law requiring disclosure of retailers’ names in recalls. California’s list of retailers from the Westland/Hallmark recall is 147 pages long and has been continuously updated.

“We’ve met with USDA numerous times to be sure that they understand our goal, which is to be sure that if a consumer has bought a product that has been recalled we do not want them to eat that food,” said Jill Hollingsworth of the Food Marketing Institute in Arlington, Va.

But some industry officials also acknowledge competitive concerns, because if lists of retailers selling recalled meat become public, competitors would know who to approach to offer the product at a lower price. “That does cause some issues in the marketplace,” said Jeremy Russell, spokesman for the National Meat Association.

Food stamp use hits all-time high in Ohio

http://rawstory.com/news/2008/Food_stamp_use_hits_alltime_high_0324.html

Associated Press
Published: Monday March 24, 2008

COLUMBUS — Amid a sluggish economy, a record 1.1 million Ohioans are getting food stamps, the state’s welfare agency said. That’s about 10 percent of the state’s population.

Caseloads have almost doubled since 2001, when an estimated 628,000 people were in the program, according to the Ohio Department of Job and Family Services.

Low wages, unemployment and more expensive groceries, gasoline and other necessities have contributed to financial hardships facing many families. Ohio’s jobless rate is 5.3 percent, up from 4.4 percent in 2001.

Caseloads have been increasing for the past seven years, said Brian Harter, spokesman for the Job and Family Services Department, which oversees the food stamp program.

“The economy and loss of manufacturing jobs are at the root of what’s going on. But lately (it’s) the rising cost of transportation and food — people who were barely getting by, are not getting by,” said Jack Frech, director of the Athens County Department of Job and Family Services in southeast Ohio. “It has pressed folks to the edge to have to rely on food stamps.”

Another 500,000 Ohioans are eligible for the program but not enrolled, experts who study poverty say.

Those in households that make up to 130 percent of the federal poverty level — $22,880 for a family of three — and with assets no greater than $2,000, in most cases, are eligible for food stamps.

The federal government gives eligible families $100 a month in food stamps while the state covers administrative costs. Recipients, however, are buying less with the money, advocates say.

“Food stamps provide only about $1 per person, per meal. Who in the world is buying groceries with that?” asked Lisa Hamler-Fugitt, executive director of the Ohio Association of Second Harvest Food Bank in Columbus.

On average, food stamps are now providing less than two weeks of groceries.

“There’s the presumption that folks have the cash to make up the rest. Well, they don’t,” Frech said.

Food pantries and soup kitchens across the state have been facing record demands, but like families, are having trouble keeping up. In central Ohio, demand at the Mid-Ohio Food Bank in January was up 14 percent over the same period a year ago, with 120,000 requests for food. The increased demand coupled with rising food costs and fewer donations have forced the food bank to reduce the five-day supply of food it had been giving out to a three-day supply.

“Milk is up 25 percent,” said Mid-Ohio president Matt Habash. “Applesauce, a big staple at food banks, has gone from $9 to $15 a case.”

In other areas of the state, pantries with their supplies depleted have been forced to temporarily close.

“The shortages are a double whammy for people who have been relying on food stamps and pantries,” Hamler-Fugitt said.

A recipe for disaster

http://www.aspo-usa.com/index.php?option=com_content&task=view&id=343&Itemid=91

 Written by Dave Cohen   
 Wednesday, 26 March 2008

 Things fall apart; the centre cannot hold;
 Mere anarchy is loosed upon the world
      —from The Second Coming by William Butler Yeats

Signs of an economic meltdown are springing up all around us. The U.S. is almost certainly in a recession now, but the worst is yet to come. The full consumer price index has risen at a 6.8% annual rate in the last 3 months just as GDP growth has likely entered negative territory, raising the Specter of Stagflation. Americans have not faced such dire straits in 25 years.

When the New York Times feels compelled to reassure us that the chances of a full-blown 1930’s-style depression are low, you know something is up. See Depression You Say? Check Those Safety Nets, March 23, 2008. The Bear Stearns debacle, a classic run on the bank, took most observers by surprise. This point was brought home to me personally when Standard & Poors downgraded National City’s outlook from ’stable’ to ‘negative’ last week, “citing risk from the shaky housing and mortgage markets.” National City is my bank. Deposits are insured, of course, but that didn’t make me feel any better somehow.

Paul Krugman joined the chorus, warning that we’re Partying Like It’s 1929. Alan “Bubbles” Greenspan, who oversaw an economy that is now unraveling, writes that “the current economic turmoil is likely to become the ‘most wrenching’ since World War II.”  Even as the no-longer-infallible former Fed Chairman tries to squirm out of this one, Ben Bernanke is left to sort out the mess. Helicopter Ben is cutting interest rates and opening credit windows for banks to “replenish [their] depleted capital,” a strategy that is further driving down the dollar’s value and boosting pre-existing inflationary pressures deriving mainly from high oil prices and biofuels.

Over the next year we’re going to learn a lot about global oil demand and prices. We’re also going to learn whether American consumption is still the sine qua non of global economic health it once was. Regardless of the outcome, Americans are in for a tough time. Let’s go through some recession scenarios.

Oil Demand and Price in a Recession

In Another Wild Ride in 2008, we noted that American oil demand growth has been slow and steady since 1990, despite two mild, short recessions in 1990-1991 and 2001 (ASPO-USA, December 19, 2008). The American economy had its longest expansion in the 1990’s and continued to grow after the post-9/11 recession (graph left from the Times, cited above). This recession promises to be different.

According to the EIA’s data for oil products supplied, U.S. demand actually peaked in 2005 at 20,802 million barrels per day (b/d). The data set is incomplete, but demand fell 0.6% in 2006 and was flat at the 2006 level during the last 6 months of 2007 (≅ 20,685 million b/d). This is a modest decrease, considering that the oil price has doubled over the last year.

Last week, the EIA reported that demand for petroleum products fell a whopping 3.2% in the 4-week period ending March 14th, coming in at 20,259 million b/d. Much of the decrease was in distillate fuel oils (-5.4%), which is mostly diesel fuel. Diesel prices stood at an all-time record $4.037/gallon on March 22nd according to AAA’s Daily Fuel Gauge Report.

Diesel consumption fell in part because of the end of the winter heating season, in part because of the slowing economy—trucks moving fewer goods from place to place—and in part because of the price. By contrast, inelastic gasoline demand showed only an insignificant drop-off of 0.1%. Gasoline prices are also close their recent record-high.

The consumption signals are mixed. No recession U.S. oil demand trend is in place yet as we approach the “summer driving” season, which may be a bust this year as disposable income for travel becomes scarce.

The main effect of the shaky economy so far has been on the oil price, which has fluctuated wildly in the past few weeks. Traders moved their money into commodities—gold topped $1000/ounce—as a safe haven from an unregulated “shadow banking” system populated by a bestiary of exotic financial instruments in which no one knows the true value of the paper they’re holding. Oil prices surpassed $111/barrel but then tumbled to values closer to $100. These actions followed another interest rate cut by the Fed.

Paul Horsnell, a commodities analyst at Barclays in London, asked the pertinent rhetorical question about the “dramatic” fall of the oil price.

“We see headlines: ‘Oil collapses to $102.’ Is that really a collapse?”

If the U.S. economy tanks and oil demand does take a swan dive, what will happen to global oil demand and the price? The answer depends on whether the American consumption still drives the global economy and its thirst for oil.

The Dangers of Decoupling

The term “decoupling” refers to the degree of economic independence of the developing economies from the American market. In Prospects For China, it was argued that 1) Chinese GDP growth, and hence their import levels for oil and other commodities, must eventually slow down to prevent overheating and tame inflation; and 2) China must function within the globalized economy, which implies that they can not push commodity prices up to levels that cripple the economies of their export markets (ASPO-USA, January 16, 2008). China has effectively underwritten debt-financed American ventures like the occupation of Iraq with their massive $1 trillion treasury bond holdings. So it would appear that the U.S. and China are locked in a mutual dependency— if the U.S. economy falters, China’s will too.

This “coupling” of the two economies is rapidly losing steam. The decoupling debate, an analysis in the March 6th issue of The Economist, contains data to back up that assertion—

Sales to America will obviously weaken. The point is that [emerging economy] GDP-growth rates will slow by much less than in previous American downturns. Most enjoyed strong growth during the fourth quarter of last year, and some speeded up, even as America’s economy ground to a virtual halt [0.6% growth] and its non-oil imports fell…

 The four biggest emerging economies, which accounted for two-fifths of global GDP growth last year, are the least dependent on the United States: exports to America account for just 8% of China’s GDP, 4% of India’s, 3% of Brazil’s and 1% of Russia’s. Over 95% of China’s growth of 11.2% in the year to the fourth quarter came from domestic demand. China’s growth is widely expected to slow this year—it needs to, since even Wen Jiabao, the prime minister, warned this week of overheating—but to a still boisterous 9-10%.

Two possible outcomes follow from a substantial decoupling of the American and developing economies and neither is good news for American consumers. First, lower U.S. oil demand would have little effect on oil consumption in the emerging economies. China, Russia and others will likely gobble up the decrease, leaving global demand unchanged. The oil price would thus remain above $90-$100/barrel or continue to rise in a stagnant American economy, giving consumers little reprieve from higher fuel and food costs. See  Would a U.S. recession lower oil prices? Not necessarily by the unfailing Jad Mouawad (International Herald Tribune, January 23, 2008).

The second, more speculative, outcome is that the Chinese may lose interest in propping up American spending when they realize that their growth can be sustained without relying heavily on the U.S. export market. Here’s a quote from Prospects For China—

As [Atlantic Magazine's] James Fallows points out [in The 1.4 Trillion Dollar Question], whenever a Chinese official raises a trial balloon even hinting at the possibility that the Chinese might start unloading dollars and investing them to subsidize rapid growth in their own economy, “phrases like ‘run on the dollar’ and ‘collapse of confidence’ [show] up more and more frequently in financial newsletters.” China has deliberately chosen to inhibit their own growth to keep their export customers, especially the United States, happy.

Although the Chinese are heavily invested in the U.S, they may decide to cut their losses, especially if highly leveraged American consumers are no longer buying much of their stuff in a prolonged, deep recession. Imagine the consequences for the shaky American economy should China start unloading dollars. This would give new meaning to the phrase “Cut & Run.”

A Meltdown for American Consumers

 As if the possibility of China abandoning its investment in the United States weren’t bad enough, there is mounting evidence to suggest that American consumers are about to get seriously squeezed. It’s not just the investment banks that have a liquidity crisis.

In Not Fixing To Walk, we explored the standard view of economists that rising oil prices have not affected U.S. demand because energy spending is still fairly low as a percentage of all household expenditures, and discovered that this percentage started to rise toward levels last seen in the 1970’s and early 80’s in 2003 after a brief spike during the post-9/11 recession (ASPO-USA, November 14, 2008). This trend is poised to get worse.

Bear in mind that wages have not nearly kept up with GDP and productivity growth throughout the Bush years, while oil prices have tripled since the beginning of 2002 (graph above left, cited by Jerome á Paris at The Oil Drum:Europe). The media was looking at this topic back in 2006. The Wall Street Journal’s Wages Fail to Keep Pace With Productivity Increases, Aggravating Income Inequality was typical (March 27, 2006).

Since the end of 2000, gross domestic product per person in the U.S. has expanded 8.4%, adjusted for inflation, but the average weekly wage has edged down 0.3%…

Some factors aren’t in dispute. Since the end of the recession of 2001, a lot of the growth in GDP per person — that is, productivity — has gone to profits, not wages…  Since 2000, labor’s share of GDP, or the total value of goods and services produced in the nation, has fallen to 57% from 58% while profits’ share has risen to almost 9% from 6%. (The remainder goes to interest, rent and other items.)
It’s easy to overlook rising household expenditures for food or fuel when easy credit is available in the form of Visa cards or home equity loans. It was also possible to refinance and take money out of equity. Credit is now drying up for indebted consumers as housing prices plunge, which puts the bill paying burden on stagnant household income alone. Nine million households have negative equity, i.e. their mortgages exceed the market value of their homes. Mortgage defaults are way up. Here are three among the many recent examples indicating distress—
    1     By the end of 2007, 36 percent of consumers’ disposable income went to food, energy and medical care, a bigger chunk of income than at any time since records were first kept in 1960, according to Merrill Lynch. (Associated Press)
    2     Americans’ percentage of equity in their homes fell below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday… That marks the first time homeowners’ debt on their houses exceeds their equity since the Fed started tracking the data in 1945… Economists expect this figure to drop even further as declining home prices eat into the value of most Americans’ single largest asset. (Yahoo Finance)
    3     The Great Unwind has begun, Citigroup warns — Avoid leveraged companies, countries and consumers, bank’s strategists say… “Easy money encouraged many to buy a bigger house, a bigger car or a bigger speculative position… But now, any behavior that relied upon continued access to easy money is being dramatically reassessed,” [Citigroup] added. “Leveraged banks must lend less, leveraged consumers must consume less, leveraged companies must acquire or invest less, and leveraged speculators must speculate less.” (MarketWatch)

There you have it: continuing high energy and food costs, contracting credit, stagnant wages and increasing property debt. Highly leveraged or poor American consumers—this is just about everybody who isn’t among the richer rich—are about to get nailed. The day of debt reckoning has arrived as the U.S. receives a long overdue margin call (Wall Street Journal, March 15, 2008).

Consumer spending makes up about 70% of GDP. The money squeeze is a recipe for disaster. Household finance will be getting more unmanageable for Americans, who have been living the high life made possible by easy credit following from rising house prices. The only silver linings are that American exports are up and we’re getting more foreign tourists because of the shrinking value of the dollar.

On the oil front, it appears that reduced demand in a cash-strapped American economy is unlikely to lower oil prices much as the recession unfolds, but all bets are off—no one knows how much demand will be affected yet. If China and the other emerging economies truly are “decoupled’ from American consumption trends, it won’t matter much if U.S. demand falls off significantly in any case.

The Chinese will be partying at the Beijing Olympics while Americans be scrambling around trying pay their mortgages and make ends meet at the fuel pump. Kind of symbolic, don’t you think? Here’s an idea—why don’t we build some light rail systems?

Contact the author at  dave.aspo@gmail.com

Das Phony Kapital

http://www.dailyreckoning.com/

Today’s Daily Reckoning
Friday, March 28, 2008

“My bills are all due
And the kids all need shoes
And I’m busted

“Coffee is down
To a quarter a pound
And I’m busted.

“I went to my brother to ask for a loan
’Cause I was busted
I took the bait like a dog takes a bone
’Cause I was busted

“My brother said there ain’t a thing I can do
My wife and my kids are all down with the flu
And I was just thinkin’ ’bout callin’ on you
’Cause I’m busted…”

The old Ray Charles song might be coming back in style. During the boom years of the ’90s and the ’00s, it made no sense to people. ‘Why not just take out a credit card?’ they wondered. ‘Or, refinance the house?’

But now credit is becoming scarce and busted is becoming plentiful. At least, that is what we expect.

Yesterday brought mixed news. The Dow dropped 120 points. The dollar rose slightly, leaving the euro above $1.57. Gold remained a little below $950.

The Wall Street Journal calls the last ten years a “lost decade” for stockholders. The S&P is now about where it was in 1999. Stock market investors are ten years older and wiser; but not a penny richer.

And now they’re beginning to wonder about the whole scheme of things. The stock market was supposed to make them rich. “Stocks for the long run,” was the mantra of the late ’90s. Buy…hold…you can’t go wrong. But 10 years seems like a long time. If they don’t go up in a one decade, what makes buyers think they’ll go up in the next? Plus, even now, the S&P still trades at a P/E over 18 – which isn’t cheap. It seems as likely that stocks will go down in the next 10 years as up.

And, of course, there’s the housing market. Ten years ago few people doubted that if they just put money into property and left it there, they would make a good profit. For quite a while, it seemed to be true. But now, for the first time in U.S. history, housing prices are falling nationwide. They’re down about 11% from the peak…and leading economists think they have another 20% – 30% to go. What’s worse, Americans are realizing that it costs a lot of money to hold onto a position in property. There are bills to pay – taxes, utilities, maintenance…all of which seem to be going up.

You could add to those things the growing realization that wages in the United States are not going up. This inconvenient truth was masked – for more than 30 years – by rising household incomes and increasing debt. Real wages per hour didn’t go up, but more Americans worked and put in more hours. Then, they turned to credit cards and housing finance to increase their spending power. Both of those avenues have come to dead ends recently.

But here’s a little bright spot. According to a Bloomberg report, the Fed’s efforts to loosen credit really have done the job. Mortgage resets have been much less of a problem than anticipated – because the resets are linked to Libor, which has been pushed down by central bank action.

Of course, people are still losing their homes in record numbers – but it’s not necessarily because of the mortgage resets.

Also, the feds are looking at various plans to bail out homeowners in advance of the upcoming elections. Neither party wants long lines of angry, homeless voters lining up at the polls in November.

But the malaise that is spreading over America is more than just a matter of numbers. Ten years ago, America seemed invulnerable. Its money was on top of the world. Its military could take on the entire rest of the planet, if necessary. Its stocks were flying. Its houses were rising. Its financial institutions were the most dynamic, innovative and solid on earth. Nothing could stop it.

We argued then that when nothing can stop you, everything will. And, in the event, everything did. Ten years later, stocks have gone nowhere…housing is on its way down…the Pentagon is gummed up in a trillion-dollar war it can never win…and Wall Street has revealed itself not as cunningly cupid, but as blunderingly stupid.

More than that, the fantasy failed. Americans permitted themselves such an extravagant conceit that they practically begged the gods to punish them. “They sweat; we think,” was the gist of it. They allowed themselves the illusion that their new, post-Reagan, Internet-savvy capitalism would make them rich without saving money…and without actually producing anything. They thought the rest of the world would extend them boundless credit – forever. Now the scales are falling from their eyes…they’re beginning to see things more clearly. As a result, consumer confidence has dropped to the lowest level more than 30 years. Most people think things are bad…and few think they will get better. In the history of such surveys, never have so few people expected their incomes to increase over the next six months – less than 15% of those polled.

But here at The Daily Reckoning headquarters, we are always optimistic. Yes, Americans will be busted and broken by the realities of the real world in the 21st century. But they will eventually be bent into a better shape.

[...]

What is ahead now? We don’t know. But our view of things has not changed. Nor has it played it itself out.

In our view, markets make opinions, not the other way around. In other words, people come to think what they must think in order to play their roles in the great drama. America has become a huge empire. All empires are extraordinary things…fragile and doomed to failure. When the Soviet Union threw in the towel, America was left without any major competition. Since empires cannot last, and since she had no competitors worthy of the name, the Empire of Debt had to find a way to destroy herself.

In that sense, it was no accident that the financial industry invented subprime debt…and then put it in its own coffers. Nor was it any accident that households spent more than they could afford. Nor that Congress went on the biggest spending spree in history. Nor that George W. Bush took the nation into an unbelievably pointless and expensive war, effectively squandering not only the nation’s credit…but also its military advantage.

Meanwhile, Americans’ eagerness to spend money they didn’t have on things they didn’t need caused a huge boom in places they’d never been. Asians built factories, roads and entire cities with money gotten from selling gadgets to Americans. Arabs built ski-slopes in the desert…and constructed towns on manmade islands. And even their former enemies – the Russians – created one of the world’s largest piles of U.S. dollar reserves, and saw their own wages rise 6 times in the last eight years. These foreign competitors have been adding to their skills, their savings, and their capital bases – just while the United States has been running its own down.

This drama is far from over. We are only at the beginning of it. The next scenes should be even more interesting. The dollar will lose its status as the world’s reserve currency (possibly with episodes of hyper-inflation)…China and Russia will greatly increase military spending (with some dangerous moments, as the US still tries to throw its weight around)…U.S. stocks will work their way down to real values – with P/Es below 10…and the average American household will find itself no better off, financially, than the average family in, say, Latvia or Malaysia. Then, Asian manufacturers will outsource production to an area where wages are low and productivity is high – Arkansas, maybe.

So stay tuned!

[...]

DAS PHONY KAPITAL

by Bill Bonner

A good flim flam needs a good mountebank and a good mark. Two weeks ago, we pointed out that Wall Street was full of bright cads and dull sharks. Then, last week, we showed that conceited humbuggers run the central banks. Today, it is the politicians we come, not to bury, but to praise. They did their work well; they set up the marks.

The two great political figures of the last thirty years were Mrs. Thatcher and Mr. Reagan. These titans from the two sides of the Atlantic led the way to a new idea of how the world should work. Thenceforth, capitalism was king. But it was a new kind of capitalism they had crowned, one with a strange, unnatural face. It was not the old free enterprise, king of the jungle, red in tooth and claw. This new capitalism was more like the owner of a pet shop, where all the animals were cute and cuddly – and didn’t eat the customers.

Mrs. Thatcher and Mr. Reagan and their followers had seen how centrally planned economies worked; the Chinese and Russians showed what happened when bureaucrats ran an economy. The free market seemed like the best alternative. But the trouble was, these new ‘conservatives’ had no real respect for it. Instead of quaking before it in genuine fear and awe, like Moses before the burning bush, they began to believe that they could be its master. Then, they developed a whole host of fantasies about what this tamed beast could do for them.

Not only could the free market solve the problem of poverty, it could solve almost every other problem too. It was a social panacea. Just look at the wealthy countries, they said. Switzerland is clean and prosperous. By contrast, communist China is a dump. People are healthier and happier in capitalist countries, where they have better automobiles and lower birthrates. Science, supported by the free market, would find cures to diseases too…and even help people live longer. The logic was simple enough: free enterprise made people rich. And with their money, they could do wonders – cleaning up the factories, building hospitals and clinics, organizing public day care and Pilates classes…even getting rid of smoking!

Nothing was too absurd or contradictory for the True Believers. Gradually, they began to confuse the fruit with the tree…and then mistake the tree for a lamppost. Financial incentives were thought to be the key to everything. If an executive failed to maximize shareholder value, it was because his bonus was not large enough. If students showed poor test results, it was because teachers were paid by the job, not by the outcome. And if terrorists attacked a building in New York, it was because they lacked financial opportunities in Cairo. (Later, people were dumbfounded when doctors who had worked for the National Health Service tried to blow up cars in Glasgow and London.)

The ideas were slippery but they greased the skids. Soon, the marks were ready to go along with anything. Shareholders consented to hundreds of millions in bonuses and stock options for key executives. Investors signed up for hedge funds, willingly giving managers “2% and 20%” for putting quarters in the slot machine for them. Taxpayers allowed huge tax cuts – widely believed to be aiding the wealthy – because they looked forward to the day when they would be wealthy too. And almost everyone, everywhere eagerly went on a spending spree, in the belief that this new, kindler, gentler capitalism would add wealth faster than they could get rid of it. And if they overspent, hyper-capitalism would soon catch up.

In public finance, this delusion led to Dick Cheney’s famous quip: “Deficits don’t matter.” This, in turn, led to the greatest explosion of government red ink the planet had ever seen. During the first seven years of the George W. Bush administration, about $20 trillion was added to the U.S. ‘financing gap’ – more than under all America’s other presidents put together.

What was good for the top was good for the bottom. Private households, too, ran deficits of their own. Savings rates fell close to zero while U.S. household debt rose from less than $2 trillion in the first year of the Reagan administration to nearly $13 trillion in the 6th year of the present administration.

In Britain the story is about the same. Before the Thatcher revolution, household debt was about 65% of household income. By 1988, it had reached 100%. And by 2007, it was more than 150%.

When a consumer spends a dollar he earned, it is taken in as income to the businesses that receive it. But it offset by a cost too – a wage expense. But if the consumer spends a borrowed dollar, it comes to business like manna from heaven, with no balancing wage cost. Higher profits, greater leverage, more debt – it was all catnip to Wall Street. Financial assets were only 4.5 times GDP in 1980. Now they are 10 times as large. But that is nothing compared to the sugary confections of the credit industry. Credit default swaps, alone, are said to be worth $45 trillion.

The earnings of the financial sector equaled only 10% of total corporate earnings in 1980. By 2007, they made up 40% of the total, even though they still only employed 5% of the workforce.

But, “that game is now up,” says the Economist . The “new” capitalism was a fraud. It didn’t make people rich. It only allowed them to get rich – or poor – depending on what they did with it. Americans used their economic freedom to ruin themselves. But that’s just the way capitalism really works. You don’t get what you expect…or what you want; you get what you deserve.

Enjoy your weekend,

Bill Bonner
The Daily Reckoning

Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning . He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis .

Bill’s latest book, Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics , written with co-author Lila Rajiva, is available now by clicking here:

Mobs, Messiahs and Markets 

Ray Kurzweil Pulls Out All the Stops (and Pills) to Live to Witness the Singularity

Source: Wired

 

Ray Kurzweil, the famous inventor, is trim, balding, and not very tall. With his perfect posture and narrow black glasses, he would look at home in an old documentary about Cape Canaveral, but his mission is bolder than any mere voyage into space. He is attempting to travel across a frontier in time, to pass through the border between our era and a future so different as to be unrecognizable. He calls this border the singularity. Kurzweil is 60, but he intends to be no more than 40 when the singularity arrives.

Kurzweil’s notion of a singularity is taken from cosmology, in which it signifies a border in spacetime beyond which normal rules of measurement do not apply (the edge of a black hole, for example). The word was first used to describe a crucial moment in the evolution of humanity by the great mathematician John von Neumann. One day in the 1950s, while talking with his colleague Stanislaw Ulam, von Neumann began discussing the ever-accelerating pace of technological change, which, he said, “gives the appearance of approaching some essential singularity in the history of the race beyond which human affairs as we know them could not continue.”

Many years later, this idea was picked up by another mathematician, the professor and science fiction writer Vernor Vinge, who added an additional twist. Vinge linked the singularity directly with improvements in computer hardware. This put the future on a schedule. He could look at how quickly computers were improving and make an educated guess about when the singularity would arrive. “Within 30 years, we will have the technological means to create superhuman intelligence,” Vinge wrote at the beginning of his 1993 essay The Coming Technological Singularity: How to Survive in the Post-Human Era. “Shortly after, the human era will be ended.” According to Vinge, superintelligent machines will take charge of their own evolution, creating ever smarter successors. Humans will become bystanders in history, too dull in comparison with their devices to make any decisions that matter.

Kurzweil transformed the singularity from an interesting speculation into a social movement. His best-selling books The Age of Spiritual Machines and The Singularity Is Near cover everything from unsolved problems in neuroscience to the question of whether intelligent machines should have legal rights. But the crucial thing that Kurzweil did was to make the end of the human era seem actionable: He argues that while artificial intelligence will render biological humans obsolete, it will not make human consciousness irrelevant. The first AIs will be created, he says, as add-ons to human intelligence, modeled on our actual brains and used to extend our human reach. AIs will help us see and hear better. They will give us better memories and help us fight disease. Eventually, AIs will allow us to conquer death itself. The singularity won’t destroy us, Kurzweil says. Instead, it will immortalize us.

There are singularity conferences now, and singularity journals. There has been a congressional report about confronting the challenges of the singularity, and late last year there was a meeting at the NASA Ames Research Center to explore the establishment of a singularity university. The meeting was called by Peter Diamandis, who established the X Prize. Attendees included senior government researchers from NASA, a noted Silicon Valley venture capitalist, a pioneer of private space exploration, and two computer scientists from Google.

At this meeting, there was some discussion about whether this university should avoid the provocative term singularity, with its cosmic connotations, and use a more ordinary phrase, like accelerating change. Kurzweil argued strongly against backing off. He is confident that the word will take hold as more and more of his astounding predictions come true.

Kurzweil does not believe in half measures. He takes 180 to 210 vitamin and mineral supplements a day, so many that he doesn’t have time to organize them all himself. So he’s hired a pill wrangler, who takes them out of their bottles and sorts them into daily doses, which he carries everywhere in plastic bags. Kurzweil also spends one day a week at a medical clinic, receiving intravenous longevity treatments. The reason for his focus on optimal health should be obvious: If the singularity is going to render humans immortal by the middle of this century, it would be a shame to die in the interim. To perish of a heart attack just before the singularity occurred would not only be sad for all the ordinary reasons, it would also be tragically bad luck, like being the last soldier shot down on the Western Front moments before the armistice was proclaimed.

Photo: Garry McLeod

In his childhood, Kurzweil was a technical prodigy. Before he turned 13, he’d fashioned telephone relays into a calculating device that could find square roots. At 14, he wrote software that analyzed statistical deviance; the program was distributed as standard equipment with the new IBM 1620. As a teenager, he cofounded a business that matched high school students with colleges based on computer evaluation of a mail-in questionnaire. He sold the company to Harcourt, Brace & World in 1968 for $100,000 plus royalties and had his first small fortune while still an undergraduate at MIT.

Though Kurzweil was young, it would have been a poor bet to issue him life insurance using standard actuarial tables. He has unlucky genes: His father died of heart disease at 58, his grandfather in his early forties. He himself was diagnosed with high cholesterol and incipient type 2 diabetes — both considered to be significant risk factors for early death — when only 35. He felt his bad luck as a cloud hanging over his life.

Still, the inventor squeezed a lot of achievement out of these early years. In his twenties, he tackled a science fiction type of problem: teaching computers to decipher words on a page and then read them back aloud. At the time, common wisdom held that computers were too slow and too expensive to master printed text in all its forms, at least in a way that was commercially viable.

But Kurzweil had a special confidence that grew from a habit of mind he’d been cultivating for years: He thought exponentially. To illustrate what this means, consider the following quiz: 2, 4, ?, ?.

What are the missing numbers? Many people will say 6 and 8. This suggests a linear function. But some will say the missing numbers are 8 and 16. This suggests an exponential function. (Of course, both answers are correct. This is a test of thinking style, not math skills.)

Human minds have a lot of practice with linear patterns. If we set out on a walk, the time it takes will vary linearly with the distance we’re going. If we bill by the hour, our income increases linearly with the number of hours we work. Exponential change is also common, but it’s harder to see. Financial advisers like to tantalize us by explaining how a tiny investment can grow into a startling sum through the exponential magic of compound interest. But it’s psychologically difficult to heed their advice. For years, an interest-bearing account increases by depressingly tiny amounts. Then, in the last moment, it seems to jump. Exponential growth is unintuitive, because it can be imperceptible for a long time and then move shockingly fast. It takes training and experience, and perhaps a certain analytical coolness, to trust in exponential curves whose effects cannot be easily perceived.

Moore’s law — the observation by Intel cofounder Gordon Moore that the number of transistors on an integrated circuit doubles roughly every 18 months — is another example of exponential change. For people like Kurzweil, it is the key example, because Moore’s law and its many derivatives suggest that just about any limit on computing power today will be overcome in short order. While Kurzweil was working on his reading machine, computers were improving, and they were indeed improving exponentially. The payoff came on January 13, 1976, when Walter Cronkite’s famous sign-off — “and that’s the way it is” — was read not by the anchorman but by the synthetic voice of a Kurzweil Reading Machine. Stevie Wonder was the first customer.

The original reader was the size of a washing machine. It read slowly and cost $50,000. One day late last year, as a winter storm broke across New England, I stood in Kurzweil’s small office suite in suburban Boston, playing with the latest version. I hefted it in my hand, stuck it in my pocket, pulled it out again, then raised it above a book flopped open on the table. A bright light flashed, and a voice began reading aloud. The angle of the book, the curve of its pages, the uneven shadows — none of that was a problem. The mechanical voice picked up from the numerals on the upper left corner — … four hundred ten. The singularity is near. The continued opportunity to alleviate human distress is one key motivation for continuing technological advancement — and continued down the page in an artificial monotone. Even after three decades of improvement, Kurzweil’s reader is a dull companion. It expresses no emotion. However, it is functionally brilliant to the point of magic. It can handle hundreds of fonts and any size book. It doesn’t mind being held at an angle by an unsteady hand. Not only that, it also makes calls: Computers have become so fast and small they’ve nearly disappeared, and the Kurzweil reader is now just software running on a Nokia phone.

In the late ’70s, Kurzweil’s character-recognition algorithms were used to scan legal documents and articles from newspapers and magazines. The result was the Lexis and Nexis databases. And a few years later, Kurzweil released speech recognition software that is the direct ancestor of today’s robot customer service agents. Their irritating mistakes taking orders and answering questions would seem to offer convincing evidence that real AI is still many years away. But Kurzweil draws the opposite conclusion. He admits that not everything he has invented works exactly as we might wish. But if you will grant him exponential progress, the fact that we already have virtual robots standing in for retail clerks, and cell phones that read books out loud, is evidence that the world is about to change in even more fantastical ways.

Look at it this way: If the series of numbers in the quiz mentioned earlier is linear and progresses for 100 steps, the final entry is 200. But if progress is exponential, then the final entry is 1,267,650,600,228,229,400,000,000,000,000. Computers will soon be smarter than humans. Nobody has to die.

In a small medical office on the outskirts of Denver, with windows overlooking the dirty snow and the golden arches of a fast-food mini-mall, one of the world’s leading longevity physicians, Terry Grossman, works on keeping Ray Kurzweil alive. Kurzweil is not Grossman’s only client. The doctor charges $6,000 per appointment, and wealthy singularitarians from all over the world visit him to plan their leap into the future.

Grossman’s patient today is Matt Philips, 32, who became independently wealthy when Yahoo bought the Internet advertising company where he worked for four years. A young medical technician is snipping locks of his hair, and another is extracting small vials of blood. Philips is in good shape at the moment, but he is aware that time marches on. “I’m dying slowly. I can’t feel it, but I know its happening, little by little, cell by cell,” he wrote on his intake questionnaire. Philips has read Kurzweil’s books. He is a smart, skeptical person and accepts that the future is not entirely predictable, but he also knows the meaning of upside. At worst, his money buys him new information about his health. At best, it makes him immortal.

“The normal human lifespan is about 125 years,” Grossman tells him. But Philips wasn’t born until 1975, so he starts with an advantage. “I think somebody your age, and in your condition, has a reasonable chance of making it across the first bridge,” Grossman says.

According to Grossman and other singularitarians, immortality will arrive in stages. First, lifestyle and aggressive antiaging therapies will allow more people to approach the 125-year limit of the natural human lifespan. This is bridge one. Meanwhile, advanced medical technology will begin to fix some of the underlying biological causes of aging, allowing this natural limit to be surpassed. This is bridge two. Finally, computers become so powerful that they can model human consciousness. This will permit us to download our personalities into nonbiological substrates. When we cross this third bridge, we become information. And then, as long as we maintain multiple copies of ourselves to protect against a system crash, we won’t die.

Kurzweil himself started across the first bridge in 1988. That year, he confronted the risk that had been haunting him and began to treat his body as a machine. He read up on the latest nutritional research, adopted the Pritikin diet, cut his fat intake to 10 percent of his calories, lost 40 pounds, and cured both his high cholesterol and his incipient diabetes. Kurzweil wrote a book about his experience, The 10% Solution for a Healthy Life. But this was only the beginning.

Kurzweil met Grossman at a Foresight Nanotech Institute meeting in 1999, and they became research partners. Their object of investigation was Kurzweil’s body. Having cured himself of his most pressing health problems, Kurzweil was interested in adopting the most advanced medical and nutritional technologies, but it wasn’t easy to find a doctor willing to tolerate his persistent questions. Grossman was building a new type of practice, focused not on illness but on the pursuit of optimal health and extreme longevity. The two men exchanged thousands of emails, sharing speculations about which cutting-edge discoveries could be safely tried.

Though both Grossman and Kurzweil respect science, their approach is necessarily improvisational. If a therapy has some scientific promise and little risk, they’ll try it. Kurzweil gets phosphatidylcholine intravenously, on the theory that this will rejuvenate all his body’s tissues. He takes DHEA and testosterone. Both men use special filters to produce alkaline water, which they drink between meals in the hope that negatively charged ions in the water will scavenge free radicals and produce a variety of health benefits. This kind of thing may seem like quackery, especially when promoted by various New Age outfits touting the “pH miracle of living.” Kurzweil and Grossman justify it not so much with scientific citations — though they have a few — but with a tinkerer’s shrug. “Life is not a randomized, double-blind, placebo-controlled study,” Grossman explains. “We don’t have that luxury. We are operating with incomplete information. The best we can do is experiment with ourselves.”

Obviously, Kurzweil has no plan for retirement. He intends to sustain himself indefinitely through his intelligence, which he hopes will only grow. A few years ago he deployed an automated system for making money on the stock market, called FatKat, which he uses to direct his own hedge fund. He also earns about $1 million a year in speaking fees.

Meanwhile, he tries to safeguard his well-being. As a driver he is cautious. He frequently bicycles through the Boston suburbs, which is good for physical conditioning but also puts his immortality on the line. For most people, such risks blend into the background of life, concealed by a cheerful fatalism that under ordinary conditions we take as a sign of mental health. But of course Kurzweil objects to this fatalism. He wants us to try harder to survive.

His plea is often ignored. Kurzweil has written about the loneliness of being a singularitarian. This may seem an odd complaint, given his large following, but there is something to it. A dozen of his fans may show up in Denver every month to initiate longevity treatments, but many of them, like Matt Philips, are simply hedging their bets. Most health fanatics remain agnostic, at best, on the question of immortality.

Kurzweil predicts that by the early 2030s, most of our fallible internal organs will have been replaced by tiny robots. We’ll have “eliminated the heart, lungs, red and white blood cells, platelets, pancreas, thyroid and all the hormone-producing organs, kidneys, bladder, liver, lower esophagus, stomach, small intestines, large intestines, and bowel. What we have left at this point is the skeleton, skin, sex organs, sensory organs, mouth and upper esophagus, and brain.”

In outlining these developments, Kurzweil’s tone is so calm and confident that he seems to be describing the world as it is today, rather than some distant, barely imaginable future. This is because his prediction falls out cleanly from the equations he’s proposed. Knowledge doubles every year, Kurzweil says. He has estimated the number of computations necessary to simulate a human brain. The rest is simple math.

But wait. There may be something wrong. Kurzweil’s theory of accelerating change is meant to be a universal law, applicable wherever intelligence is found. It’s fine to say that knowledge doubles every year. But then again, what is a year? A year is an astronomical artifact. It is the length of time required by Earth to make one orbit around our unexceptional star. A year is important to our nature, to our biology, to our fantasies and dreams. But it is a strange unit to discover in a general law.

“Doubling every year,” I say to Kurzweil, “makes your theory sound like a wish.”

He’s not thrown off. A year, he replies, is just shorthand. The real equation for accelerating world knowledge is much more complicated than that. (In his book, he gives it as: .)

He has examined the evidence, and welcomes debate on the minor details. If you accept his basic premise of accelerating growth, he’ll yield a little on the date he predicts the singularity will occur. After all, concede accelerating growth and the exponential fuse is lit. At the end you get that big bang: an explosion in intelligence that yields immortal life.

Despite all this, people continue to disbelieve. There is a lively discussion among experts about the validity of Moore’s law. Kurzweil pushes Moore’s law back to the dawn of time, and forward to the end of the universe. But many computer scientists and historians of technology wonder if it will last another decade. Some suspect that the acceleration of computing power has already slowed.

There are also philosophical objections. Kurzweil’s theory is that super-intelligent computers will necessarily be human, because they will be modeled on the human brain. But there are other types of intelligence in the world — for instance, the intelligence of ant colonies — that are alien to humanity. Grant that a computer, or a network of computers, might awaken. The consciousness of the this fabulous AI might remain as incomprehensible to us as we are to the protozoa.

Other pessimists point out that the brain is more than raw processing power. It also has a certain architecture, a certain design. It is attached to specific type of nervous system, it accepts only particular kinds of inputs. Even with better computational speed driving our thoughts, we might still be stuck in a kind of evolutionary dead end, incapable of radical self-improvement.

And these are the merely intellectual protests Kurzweil receives. The fundamental cause for loneliness, if you are a prophet of the singularity, is probably more profound. It stems from the simple fact that the idea is so strange. “Death has been a ubiquitous, ever-present facet of human society,” says Kurzweil’s friend Martine Rothblatt, founder of Sirius radio and chair of United Therapeutics, a biotech firm on whose board Kurzweil sits. “To tell people you are going to defeat death is like telling people you are going to travel back in time. It has never been done. I would be surprised if people had a positive reaction.”

To press his case, Kurzweil is writing and producing an autobiographical movie, with walk-ons by Alan Dershowitz and Tony Robbins. Kurzweil appears in two guises, as himself and as an intelligent computer named Ramona, played by an actress. Ramona has long been the inventor’s virtual alter ego and the expression of his most personal goals. “Women are more interesting than men,” he says, “and if it’s more interesting to be with a woman, it is probably more interesting to be a woman.” He hopes one day to bring Ramona to life, and to have genuine human experiences, both with her and as her. Kurzweil has been married for 32 years to his wife, Sonya Kurzweil. They have two children — one at Stanford University, one at Harvard Business School. “I don’t necessarily only want to be Ramona,” he says. “It’s not necessarily about gender confusion, it’s just about freedom to express yourself.”

Kurzweil’s movie offers a taste of the drama such a future will bring. Ramona is on a quest to attain full legal rights as a person. She agrees to take a Turing test, the classic proof of artificial intelligence, but although Ramona does her best to masquerade as human, she falls victim to one of the test’s subtle flaws: Humans have limited intelligence. A computer that appears too smart will fail just as definitively as one that seems too dumb. “She loses because she is too clever!” Kurzweil says.

The inventor’s sympathy with his robot heroine is heartfelt. “If you’re just very good at doing mathematical theorems and making stock market investments, you’re not going to pass the Turing test,” Kurzweil acknowledged in 2006 during a public debate with noted computer scientist David Gelernter. Kurzweil himself is brilliant at math, and pretty good at stock market investments. The great benefits of the singularity, for him, do not lie here. “Human emotion is really the cutting edge of human intelligence,” he says. “Being funny, expressing a loving sentiment — these are very complex behaviors.”

One day, sitting in his office overlooking the suburban parking lot, I ask Kurzweil if being a singularitarian makes him happy. “If you took a poll of primitive man, happiness would be getting a fire to light more easily,” he says. “But we’ve expanded our horizon, and that kind of happiness is now the wrong thing to focus on. Extending our knowledge and casting a wider net of consciousness is the purpose of life.” Kurzweil expects that the world will soon be entirely saturated by thought. Even the stones may compute, he says, within 200 years.

Every day he stays alive brings him closer to this climax in intelligence, and to the time when Ramona will be real. Kurzweil is a technical person, but his goal is not technical in this respect. Yes, he wants to become a robot. But the robots of his dreams are complex, funny, loving machines. They are as human as he hopes to be.

New Papers Expose the Clinton Machine’s NAFTA Lie

http://action.credomobile.com/sirota/2008/03/clinton_nafta.html

David Sirota
SirotaBlog
Wed, 19 Mar 2008 16:21 EDT

Finally, the dishonesty is being unmasked. Finally, we see just how much we’re being lied to when it comes to economic policy. Finally, we see it hasn’t just been Hillary Clinton lying about her role in championing NAFTA, but we see it is the entire Clinton machine.

For the last few weeks, Hillary Clinton has been claiming that she never supported the North American Free Trade Agreement (NAFTA). She has explicitly claimed “I have been a critic of NAFTA from the very beginning.“

Clinton’s record of speeches over the last decade, of course, tells a much different story. In 1996, she toured Texas to promote NAFTA. In 1998, she visited Davos, Switzerland to thank corporations for mounting “a very effective business effort in the U.S. on behalf of NAFTA.” In her memoir a few years ago, she touted NAFTA as one of her husband’s big successes. In 2004, she told reporters that “NAFTA has been good for New York and America.”

And yet, despite all of this evidence, Clinton has worked to confuse voters by insisting that she has always been fighting against NAFTA. As I’ve written in another post, it is a tactic reminiscent of Joe Lieberman denying he supported the Iraq War in the lead up to his 2006 election contest with Ned Lamont. And it is a tactic that Establishment shills have tried to embolden. As just one example, the esteemed David Gergen has used his television platform to back up Clinton’s historical revisionism – and Gergen has been cited by others as “proof” Clinton’s claims are true – despite, of course, her very own words.

But now with the release of Clinton’s White House schedules, the veneer has been torn off, and the brazen dishonesty is finally on display for everyone to see. As Reuters reports:

“Democratic presidential candidate Hillary Clinton now argues that the North American Free Trade Agreement needs to be renegotiated, but newly released records showed on Wednesday she promoted its passage…Among the thousands of details of daily life for Clinton, there was a November 10, 1993, entry — a ‘NAFTA Briefing drop-by,’ in Room 450 of the executive office building next door to the White House, closed to the news media. Approximately 120 people were expected to attend the briefing, and Clinton was to be introduced by White House aide Alexis Herman for brief remarks concluding the program.”

ABC’s Jake Tapper digs even deeper, noting that at one of the meetings, Gergen “served as a sort of master of ceremonies as various women members of the Cabinet talked up NAFTA.” In other words, Gergen has been on television deliberately lying for the Clinton campaign, as he was actually running these NAFTA-promoting events with Clinton. Tapper goes on to interview people who were in the room.

This revelation comes just as the other appendages of the Clinton machine attempts to revise history even further. This week, Rahm Emanuel – the chief White House lobbyist who rammed NAFTA through Congress – authored a Wall Street Journal op-ed praising candidates for indicting NAFTA and claiming “I share their concern for Americans who have lost their jobs to global competition.” To quote my book Hostile Takeover, this is “the same Rahm Emanuel who penned an op-ed in the conservative Wall Street Journal pressuring Democrats to capitulate and pass the 2000 China trade deal – a move perfectly timed to help secure the critical votes that ultimately passed the deal.”

The facts are clear: The Clinton machine joined with K Street to manufacture the very international economic policies that are destroying the economy. And yet, this same machine now claims to have had nothing to do with those economic policies – at the very moment, the machine is pushing a NAFTA-style Colombia Free Trade Agreement in Congress. We are, in short, experiencing the renaissance of “Clintonism” – an ideology that treats Americans like we are stupid and treats basic undebatable facts as commodities to be manipulated and perverted for personal gain. And that renaissance should make everyone question all the recent promises by Clinton about changing NAFTA.

Had she simply acknowledged she was for NAFTA and that now she’s not for NAFTA, that might give her some credibility. But, then, this is a candidate who just a few months ago laughed at a serious question about NAFTA, claiming “all I can remember are a bunch of charts.” In other words, this is a candidate and a campaign machine that is absolutely uninterested in how these policies have devastated the middle class – and hostile to an honest discussion about those policies. So the question now is simple: Can a Wall-Street backed candidate who denies the undeniable past be trusted with the future?

UPDATE: Just to show you how complacent the media is in the face of lies, the New York Times’ headline about the papers is “The Early Word: Clinton Papers Reveal Little.” Yes – the fact that the papers directly refute the very claims about NAFTA she used to win Ohio is not news to the New York Times.

UPDATE II: Jake Tapper has more on how the “schedules show her holding at least five meetings in 1993 aimed at helping to win congressional approval of the deal.” Clinton’s official defense is now that “numerous contemporary accounts make clear that Hillary Clinton was personally opposed to NAFTA, and her position on NAFTA was and remains consistent.” That’s nice “contemporary accounts” as a euphemism for “historical revisionism” – and, of course, those accounts come from people like David Gergen, who we now know is lying.

Comedian Margaret Cho questions official 9/11 story

Top Comedian Believes In 9/11 Conspiracy Actress Cho says Americans will be angry when they realize true agenda behind attacks

Top comedian and actress Margaret Cho has joined Willie Nelson and Charlie Sheen in questioning the official 9/11 story, stating that the public were going to become very angry when they realized there was a conspiracy behind the terror attacks.

Appearing on the nationally syndicated Alex Jones Show, Cho said her doubts about 9/11 were sparked by President Bush’s non-reaction to the unfolding crisis.

“I got concerned right after 9/11 where the plane had hit the World Trade Center and he was in that classroom with all those children and they told him what was going on and he did nothing,” said Cho.

“We were attacked for the first time on American soil and he did nothing – that’s when I realized there was something very very wrong,” she added.

Cho questioned the official story of what happened at the Pentagon, asking why so much footage of the twin towers being attacked was available in comparison with not even a clear picture of what occurred at the Pentagon – a far more sensitive and symbolic target.

“Why are they not focusing on that? What are they hiding?” asked Cho, “Of course it’s going to be monitored from every angle at every second and yet we have no footage of it – it’s very mysterious.”

Cho said that there was usually a conspiracy behind every major event in American history and that when the conspiracy behind 9/11 was fully uncovered, people were going to be very angry.

The actress said that many of her Arab-American friends doubted the organizational skills of Al-Qaeda in being able to pull off the terror attacks and questioned the plausibility of the passengers on the plane not fighting back against the hijackers.

Incompetence Alert: Pentagon gives inexperienced 22 year-old $300 million contract

http://www.crooksandliars.com/2008/03/27/incompetence-alert-pentagon-gives-inexperienced-22-year-old-300-million-contract/

Add this to the pile of monumental screw-ups committed by the Bush administration.Raw Story:

A lengthy investigation published Thursday reveals that the Pentagon gave an inexperienced 22-year-old a $300 million contract to provide ammunition to Afghanistan. The shady deal resulted in decades old, substandard munitions being delivered to US and Afghan troops fighting on the front lines of the war on terror.

So to recap: During the free-cash-giveaway that is defense contracting, the Pentagon awards $300 million to the company of a clueless 22 year old, resulting in our soldiers having to use substandard weaponry.

The bright side? According to his MySpace page, he’s a “super nice guy.” That’s nice to know, at least.

Thank God Waxman is on the case. We’ll definitely be following this one.

The March 20, 2008 US Declaration of War on Iran

http://globalresearch.ca/index.php?context=va&aid=8429



John McGlynn
Centre for Research on Globalization
Mon, 24 Mar 2008 18:29 EDT

March 20, 2008, [was] destined to be another day of infamy. On this date the US officially declared war on Iran. But it’s not going to be the kind of war many have been expecting.

No, there was no dramatic televised announcement by President George W. Bush from the White House oval office. In fact on this day, reports the Washington Post, Bush spent some time communicating directly with Iranians, telling them via Radio Farda (the US-financed broadcaster that transmits to Iran in Farsi, Iran’s native language) that their government has “declared they want to have a nuclear weapon to destroy people.” But not to worry, he told his listeners in Farsi-translated Bushspeak: Tehran would not get the bomb because the US would be “firm.”

Over at the US Congress, no war resolution was passed, no debate transpired, no last-minute hearing on the Iran “threat” was held. The Pentagon did not put its forces on red alert and cancel all leave. The top story on the Pentagon’s website (on March 20) was: “Bush Lauds Military’s Performance in Terror War,” a feel-good piece about the president’s appearance on the US military’s TV channel to praise “the performance and courage of U.S. troops engaged in the global war on terrorism.” Bush discussed Iraq, Afghanistan and Africa but not Iran.

But make no mistake. As of Thursday, March 20 the US is at war with Iran.

So who made it official?

A unit within the US Treasury Department, the Financial Crimes Enforcement Network (FinCEN), which issued a March 20 advisory to the world’s financial institutions under the title: “Guidance to Financial Institutions on the Continuing Money Laundering Threat Involving Illicit Iranian Activity.”

FinCEN, though part of the chain of command, is better known to bankers and lawyers than to students of US foreign policy. Nevertheless, when the history of this newly declared war is someday written (assuming the war is allowed to proceed) FinCEN’s role will be as important as that played by US Central Command (Centcom) in directing the wars in Afghanistan and Iraq.

In its March 20 advisory FinCEN reminds the global banking community that United Nations Security Council Resolution (UNSC) 1803 (passed on March 3, 2008) “calls on member states to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran, and their branches and subsidiaries abroad.”

UNSC 1803 specifically mentions two Iranian state-owned banks: Bank Melli and Bank Saderat. These two banks (plus their overseas branches and certain subsidiaries), along with a third state-owned bank, Bank Sepah, were also unilaterally sanctioned by the US in 2007 under anti-proliferation and anti-terrorism presidential executive orders 13382 and 13224.

As of March 20, however, the US, speaking through FinCEN, is now telling all banks around the world “to take into account the risk arising from the deficiencies in Iran’s AML/CFT [anti-money laundering and combating the financing of terrorism] regime, as well as all applicable U.S. and international sanctions programs, with regard to any possible transactions” with – and this is important – not just the above three banks but every remaining state-owned, private and special government bank in Iran. In other words, FinCEN charges, all of Iran’s banks – including the central bank (also on FinCEN’s list) – represent a risk to the international financial system, no exceptions. Confirmation is possible by comparing FinCEN’s list of risky Iranian banks with the listing of Iranian banks provided by Iran’s central bank.

The “deficiencies in Iran’s AML/CFT” is important because it provides the rationale FinCEN will now use to deliver the ultimate death blow to Iran’s ability to participate in the international banking system. The language is borrowed from Paris-based Financial Action Task Force (FATF), a group of 32 countries and two territories set up by the G-7 in 1989 to fight money laundering and terrorist financing. As the FinCEN advisory describes, in October 2007 the FATF stated “that Iran’s lack of a comprehensive anti-money laundering and combating the financing of terrorism (AML/CFT) regime represents a significant vulnerability in the international financial system. In response to the FATF statement, Iran passed its first AML law in February 2008. The FATF, however, reiterated its concern about continuing deficiencies in Iran’s AML/CFT system in a statement on February 28, 2008.”

Actually, the February 28 FATF statement does not comment on Iran’s new anti-money laundering law. The statement does say, however, that the FATF has been working with Iran since the October 2007 FATF statement was issued and “welcomes the commitment made by Iran to improve its AML/CFT regime.” Moreover, the February 28 statement, for whatever reason, drops the “significant vulnerability” wording, opting instead to reaffirm that financial authorities around the world should “advise” their domestic banks to exercise “enhanced due diligence” concerning Iran’s AML/CFT “deficiencies.” In linking its March 20 advisory to the recent FATF statements, apparently FinCEN cannot wait for FATF or anyone else to evaluate the effectiveness of Iran’s brand new anti-financial crime laws.

Anyway, the “deficiencies in Iran’s AML/CFT” is probably the main wording FinCEN will use to justify application of one its most powerful sanctions tools, a USA Patriot Act Section 311 designation (see below).

Hammering away at Iran’s state-owned banks is central to US efforts to raise an international hue and cry. Through its state-owned banks, FinCEN states, “the Government of Iran disguises its involvement in proliferation and terrorism activities through an array of deceptive practices specifically designed to evade detection.” By managing to get inserted the names of two state-owned banks in the most recent UN Security Council resolution on Iran, the US can now portray the cream of Iran’s financial establishment (Bank Melli and Bank Saderat are Iran’s two largest banks) as directly integrated into alleged regime involvement in a secret nuclear weaponization program and acts of terrorism.

To inject further alarm, FinCEN accuses Iran’s central bank of “facilitating transactions for sanctioned Iranian banks” based on evidence (which for various reasons appears true) gathered by Treasury and other US agencies that the central bank has facilitated erasure of the names of Iranian banks “from global transactions in order to make it more difficult for intermediary financial institutions to determine the true parties in the transaction.” The central bank is also charged with continuing to “provide financial services to Iranian entities” (government agencies, business firms and individuals) named in two earlier UN Security Council resolutions, 1737 and 1747. In defense, Iran’s central bank governor recently said: “The central bank assists Iranian private and state-owned banks to do their commitments regardless of the pressure on them” and charged the US with “financial terrorism.”

So what does all this bureaucratic financial rigmarole mean?

What it really means is that the US, again through FinCEN, has declared two acts of war: one against Iran’s banks and one against any financial institution anywhere in the world that tries to do business with an Iranian bank.

To understand how this works requires understanding what FinCEN does. This means going back in history to September 2005, when the US Treasury Department, based on the investigatory work of FinCEN, sanctioned a small bank in Macau, which in turn got North Korea really upset.

FinCEN’s mission “is to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity” (FinCEN website).

Under Section 311 of the USA Patriot Act the US Treasury Department, acting through FinCEN, has been provided with “a range of options that can be adapted to target specific money laundering and terrorist financing concerns.” Specifically, Section 311 contains six “special measures” to significantly increase the powers of the Treasury (and other US government agencies) to block alleged terrorist financing activities. As explained by a Treasury official during April 2006 testimony before Congress, the most punitive measure requires:

“U.S. financial institutions to terminate correspondent relationships with the designated entity. Such a defensive measure effectively cuts that entity off from the U.S. financial system. It has a profound effect, not only in insulating the U.S. financial system from abuse, but also in notifying financial institutions and jurisdictions globally of an illicit finance risk.”

On September 20, 2005 FinCEN issued a finding under Section 311 that Banco Delta Asia (BDA), a small bank in the Chinese territory of Macau, was a “primary money laundering concern.” BDA was alleged to have knowingly allowed its North Korean clients to use the bank to engage in deceptive financial practices and a variety of financial crimes (such as money laundering of profits from drug trafficking and counterfeit US $100 “supernotes”).

By publicizing its allegations, FinCEN let the world know that BDA was now at risk of having all “correspondent relationships” with US banks severed, a disaster for any bank wanting to remain networked to the largest financial market in the world. Frightened BDA customers reacted by staging a run on the bank’s assets.

In the interest of self-preservation, BDA was forced to act. After a quick conference with Macau financial authorities the bank decided to freeze North Korean funds on deposit.

It just so happened that the day before the FinCEN finding was made public the US and North Korea, working through the Six-Party talks process (also involving host China, Russia, South Korea and Japan), had formally agreed on a new diplomatic roadmap that promised to lead to a denuclearized and permanently peaceful Northeast Asia. But because of Treasury’s BDA sanctions, North Korea was now labeled an international financial outlaw and the Six Party process stalled.

Other banks began severing their business ties with North Korea, leaving the country more isolated than ever from global commerce and finance. These other banks had no choice. Treasury repeatedly made clear that any bank that continued to do business with North Korea was another potential Patriot Act Section 311 target.

In anger, North Korea withdrew from the Six-Party process. It required 18 months of negotiations before a diplomatic and financial approach was devised that left BDA blacklisted but allowed North Korea to regain access to its frozen funds and rejoin Six Party negotiations.

Neither FinCEN nor anyone else at Treasury has ever publicly produced any evidence in support of the financial crime allegations against BDA and North Korea (articles by this author on BDA, North Korea and Treasury’s lack of proof can be found at the Japan Focus website).

If Treasury was eventually forced to back off in the BDA case (apparently because the Bush administration changed its policy priorities), it had discovered that Patriot Act Section 311 could really shake things up.

The “real impact” of the BDA-North Korea sanctions, as Treasury undersecretary Stuart Levey told members of the American Bar Association in early March 2008, was that “many private financial institutions worldwide responded by terminating their business relationships not only with [BDA], but with North Korean clients altogether.” Levey and his Treasury colleagues had come up with a way to go beyond governments to use the global banking sector to privatize banking sector sanctions against an entire country (this, by the way, is presidential candidate John McCain’s proposed strategy for dealing with Iran as described in the Nov/Dec 2007 issue of the journal Foreign Affairs). This “key difference” in the “reaction by the private sector” was an exciting revelation. Through a little extraterritorial legal arm-twisting of the international banking community the US was able to put “enormous pressure on the [North Korean] regime – even the most reclusive government depends on access to the international financial system,” said Levey. Washington now had “a great deal of leverage in its diplomacy over the nuclear issue with North Korea.” Turning to the present, Levey informed the gathering of US lawyers that “we are currently in the midst of an effort to apply these same lessons to the very real threat posed by Iran.” However, “Iran presents a more complex challenge than North Korea because of its greater integration into the international financial community.”

Stuart Levey

Over the past two years Levey and other Treasury officials have been crisscrossing the globe to make it abundantly clear in meetings (described by Treasury as opportunities to “share information”) with banking and government officials in the world’s key financial centers that dealing with Iran is risky business. Levey frequently claims that major European and Asian banks, once they hear the US pitch, freely decided to cooperate with anti-Iran banking sanctions for reasons of “good corporate citizenship” and a “desire to protect their institutions’ reputations.”

But these meetings include quite a bit of browbeating. This can be deduced from some of Levey’s public statements, such as his testimony to Congress. On March 21, 2007 Levey told the Senate Committee on Banking, Housing and Urban Affairs that unilateral US financial sanctions “warn people and businesses not to deal with the designated target. And those who might still be tempted to work with targeted high risk actors get the message loud and clear: if they do so, they may be next.” Also, the possibility of becoming a Patriot Act Section 311 sanctions victim (which means exclusion from the US market) probably comes up at the meetings, as this part of his testimony indirectly suggests: “Our list of targeted proliferators is incorporated into the compliance systems at major financial institutions worldwide, who have little appetite for the business of proliferation firms and who also need to be mindful of U.S. measures given their ties to the U.S. financial system.”

Reportedly, Treasury Secretary Henry Paulson has also been involved in high-level meetings around the world concerning Iran, which presumably includes presentations on the arsenal of US financial sanctions. The message he imparts is unknown, but hints of the likely content can be found in public statements. Among Treasury officials Paulson has used the most dramatic language by making the argument that not only is Iran a danger to the international community but that this danger permeates virtually all of Iranian society. In a June 14, 2007 speech to the Council on Foreign Relations he first makes the point that Iran’s Revolutionary Guard Corps (IRGC) is a “paramilitary” organization “directly involved in the planning and support of terrorist acts, as well as funding and training other terrorist groups.” Then he offers the alarming revelation that the IRGC “is so deeply entrenched in Iran’s economy and commercial enterprises, it is increasingly likely that if you are doing business with Iran, you are somehow doing business with the IRGC.” With such language, Treasury lays the groundwork for applying financial sanctions against the entirety of Iran. All this makes clear that the growing coalition of bankers against Iran the US likes to trumpet may not be such a willing group.

Some indication of how unwilling can be found in the pages of Der Spiegel (English edition). In July 2007 the German news magazine reported that “anyone wishing to do business in the United States or hoping to attract US investors had best tread softly when it comes to Iran. Germany’s Commerzbank stopped financing trade with Iran in US dollars in January, after the Americans piled on the pressure.” One German banker interviewed said: “German financial institutions feel the United States government has been engaging in ‘downright blackmail’.” The magazine goes on to report: “Anti-terror officials from the US Treasury are constantly showing up to demand they cut their traditionally good relations with Iran. The underlying threat from the men from Washington is that they wouldn’t want to support terrorism, would they?”

Also, an April 2007 report from the UK’s House of Lords Economic Affairs Committee states that the Confederation of British Industry indicated “strong concern” about Patriot Act provisions and other US extra-territorial sanctions. The Committee recognized the need for “vigorous action” in response to terrorist threats but also “endorse[d] the condemnation by the EU of the extra-territorial application of US sanctions legislation as a violation of international law.”

Thus the US will need help from European government leaders to overcome resistance among major European financial institutions to US-led financial sanctions. Such help has already come from German Chancellor Angela Merkel. During her recent state visit to Israel, Merkel told the Knesset that Iran was global enemy number one. “What do we do when a majority says the greatest threat to the world comes from Israel and not from Iran?” she asked. “Do we bow our heads? Do we give up our efforts to combat the Iranian threat? However inconvenient and uncomfortable the alternative is, we do not do that.” Iran is public enemy #1 in the world, and everyone – including the European banking establishment it would seem – has to accept that.

To summarize to this point: (1) the March 20 advisory represents a US declaration of war by sanctions on Iran and a sanctions threat to the international banking community, (2) the US has various unilateral financial sanctions measures at its command in the form of executive orders and Patriot Act Section 311 and (3) the BDA-North Korea sanctions were, at least in retrospect, a test run for Iran.

If the US succeeds, an international quarantine on Iran’s banks would disrupt Iran’s financial linkages with the world by blocking its ability to process cross-border payments for goods and services exported and imported. Without those linkages Iran is unlikely to be able to engage in global trade and commerce. As 30% of Iran’s GDP in 2005 was imports of goods and services and 20% was non-oil exports (World Bank and other data), a large chunk of Iran’s economy would shrivel up. The repercussions will be painful and extend well beyond lost business and profits. For example, treating curable illnesses will become difficult. According to an Iranian health ministry official, Iran produces 95% of its own medicines but most pharmaceutical-related raw materials are imported.

With a financial sanctions war declared, what happens next? There have been some hints.

On February 25 the Wall Street Journal reported that Treasury was considering sanctioning Iran’s central bank (known as Bank Markazi). “The central bank is the keystone of Iran’s financial system and its principal remaining lifeline to the international banking system,” explains the Journal. “U.S. sanctions against it could have a severe impact on Iranian trade if other nations in Europe and Asia choose to go along with them.” In anticipation of future events, the Journal notes: “U.S. officials have begun trying to lay the groundwork for a move against the central bank in public statements and meetings with key allies.”

So look for the following to happen in the coming weeks: FinCEN will probably issue a Patriot Act Section 311 finding that Iran’s central bank is a “primary laundering concern.” The “deficiencies in Iran’s AML/CFT” wording lifted from the FATF statement will be a key reason for that finding. The finding may be accompanied by a formal decision to cut off Iran’s central bank from the US financial market, or such a decision could come later. Of course, an actual or threatened cut-off has no immediate financial implications for Iran since no Iranian-flagged bank is doing business in the US, except possibly to allow shipments from the US of humanitarian provisions of food and medicine, which, if they exist, probably terminate with the March 20 FinCEN announcement.

But a Section 311 designation of Iran’s central bank would have a powerful coercive effect on the world’s banks. For any bank in Europe, Asia or anywhere else that goes near the central bank once the 311 blacklist is on, it would be the kiss of death for that bank’s participation in the international banking community, as it was (and remains today) for BDA. Not only would that bank be barred from the US financial market, it would also be shunned by European and Japanese financial markets, as government and private banking officials in those markets are likely to cooperate with Washington’s intensifying sanctions campaign.

What about China, now one of the world’s major financial centers (two Chinese banks ranked among the top 25 in The Banker’s 2007 survey of world banks) and a major trading partner for Iran?

China and Japan “were the top two recipients of exports from Iran, together accounting for more than one-quarter of Iran’s exports in 2006,” according to an analysis of International Monetary Fund (IMF) trading statistics contained in a December 2007 US Government Accountability Office (GAO) report on Washington’s anti-Iran sanctions regime. On the import side, the GAO found that in 2006 “Germany and China were Iran’s largest providers of imports, accounting for 23 percent of Iran’s imports.” Airtight global banking sanctions imposed on Iran would presumably make the financial administration of this trade next to impossible.

Will China bend to US sanctions wishes? Early signs suggest the answer is yes.

In December 2007 ArabianBusiness.com reported that Chinese banks were starting to decline to open letters of credit for Iranian traders. Asadollah Asgaroladi, head of the Iran-China chamber of commerce, was quoted as saying that China’s banks did not explain the refusal but “if this trend continues it will harm the two countries’ economic cooperation and trade exchange.” In February, ArabianBusiness.com found that China’s cutbacks in its banking business with Iran was affecting a joint automobile production arrangement.

Such disruptions in the Chinese-Iranian banking relationship are minor. Meanwhile, Beijing keeps insisting that peaceful diplomacy with Iran is the best policy and that the only sanctions needed are those mandated under the three UN Security Council resolutions already on the books. Thus, to make China cooperate with Washington’s unilateral banking sanctions, the US and the EU, reports the Financial Times, are apparently using a tag-team strategy.

On February 12 the FT told readers that “the US believes that tighter EU sanctions will put pressure on other nations that do more business with Iran – China for example – to curb their activities.” Therefore, explained an anonymous diplomat apparently from the US: “We will be pushing the EU to go further than the Security Council,” a move intended, the diplomat said, to “gold plate” Security Council requirements.

To explain this move the FT provided an example of “gold plating” from 2007, when the EU implemented UN Security Council resolutions 1737 and 1747 on Iran.

In similar language to the current text on Banks Saderat and Melli, the UN had called for “vigilance and restraint” concerning the movements of individuals linked to Iran’s nuclear and missile programmes and members of its Revolutionary Guard. But in implementing the resolutions, the EU subjected all the named individuals to a travel ban – a much tougher measure.

Reading between the lines, the intention behind “gold plating” Security Council resolutions is to put pressure on China to bow to a more aggressive US-EU sanctions program. In the case of the most recent Security Council resolution on Iran, 1803, which put sanctions on two Iranian banks, FinCEN rolled two “gold plating” actions into one. It combined the Security Council’s naming of the two banks with the October and February FATF statements to justify its March 20 warning to the world that Iran’s entire banking system is a danger. Whether the EU will follow FinCEN’s action, and how China will respond to any of this, remains to be seen.

In short, the US has in effect declared war on Iran. No bombs need fall as long as the US strategy relies solely on financial sanctions. But if the US Section 311 designates Iran’s central bank as a financial criminal, the impact will be the financial equivalent to the first bombs falling on Baghdad at the start of the US-UK invasion of Iraq in March 2003.

In a 1996 publication written for the National Defense University, Harlan Ullman and James Wade introduced a military doctrine for “affecting the adversary’s will to resist through imposing a regime of Shock and Awe to achieve strategic aims and military objectives.”

Former US defense secretary Donald Rumsfeld made Shock and Awe famous by invoking it as the US strategy in the attack on Iraq in March 2003 (though weeks later Ullman was claiming Rumsfeld was misapplying the doctrine).

But Shock and Awe’s authors (apparently with something like Vietnam or the 1993-1994 Somalia fiasco in mind) also envisioned that “[i]n certain circumstances, the costs of having to resort to lethal force may be too politically expensive in terms of local support as well as support in the U.S. and internationally.” Consequently, they wrote:

“Economic sanctions are likely to continue to be a preferable political alternative or a necessary political prelude to an offensive military step … In a world in which nonlethal sanctions are a political imperative, we will continue to need the ability to shut down all commerce into and out of any country from shipping, air, rail, and roads. We ought to be able to do this in a much more thorough, decisive, and shocking way than we have in the past … Weapons that shock and awe, stun and paralyze, but do not kill in significant numbers may be the only ones that are politically acceptable in the future.”

It was only a matter of finding a sanctions strategy systematic enough to make this more obscure portion of the Shock and Awe doctrine operational. What Ullman and Wade could not have imagined was that Washington’s global planners would use extraterritorial legal powers and its financial clout to coerce the global banking industry into accepting US foreign policy diktat. North Korea was a test-run for the new strategy of Shock and Awe financial sanctions. As Washington Post columnist David Ignatius put it in February 2007, “[t]he new sanctions are toxic because they effectively limit a country’s access to the global ATM. In that sense, they impose — at last — a real price on countries such as North Korea and Iran.”

What then will the impact be of this US-Iran banking standoff? For the US, almost no impact at all. Treasury bureaucrats will spend some time and a little taxpayer money making phone calls, checking computer screens and paper trails to monitor global banking compliance with sanctions. The cost of financially ostracizing Iran will be a bargain for US taxpayers compared with the eventual $3 trillion cost of the Iraq and Afghanistan wars estimated by Nobel prize-winning economist Joseph Stiglitz and Harvard financial expert Linda Bilmes.

Iran, however, will become another Gaza or Iraq under the economic sanctions of the 1990s, with devastating impact on economy and society. That Iran’s complete financial and economic destruction is the goal of US policy was spelled out by the State Department the day before the FinCEN announcement.

During a daily press meeting with reporters on March 19, the State Department’s spokesperson was asked about a deal recently signed between Switzerland and Iran to supply Iranian natural gas to Europe. After condemning the deal, the spokesperson explained that the US is opposed to any “investing in Iran, not only in its petroleum or natural gas area but in any sector of its economy” and questioned rhetorically the wisdom of doing business with Iranian “financial institutions that are under UN sanctions or could become under sanctions if it’s found that they are assisting or aiding or abetting Iran’s nuclear program in any way.” A clearer expression of US desires is hardly possible.

John McGlynn is an independent Tokyo-based economic and financial analyst. His three reports on the US use of financial sanctions against North Korea in the Banco Delta case are available at 1, 2, 3. Email: jmcgtokyo@yahoo.com