Patent Office Back To Approving Pretty Much Anything

from the you-get-a-patent!-you-get-a-patent!-you-get-a-patent! dept

In the late '90s and early '00s, the US Patent Office saw a massive jump in patent grants -- including tons of really, really bad patents, that have been tied up in huge, expensive lawsuits for years, wasting tons of judicial time and (more importantly) wasting a ridiculous amount of resources that could have (and should have) been going to actual innovation. Some of the research into what was going on showed that the incentive structure at the patent office was totally screwed up. Basically, the incentive was "when in doubt, approve." Why? Because patent examiners were judged on how efficient they were -- meaning how many patents they were able to complete their analysis of in the short amount of time they had. So here's the problem: if you approve a patent, you're done. If you reject a patent, the inventor (well, the lawyers) get an unlimited number of times to change the examiners mind, resubmitting modified applications. In other words, they can bury patent examiners in paperwork, dragging down their efficiency numbers. This isn't to imply that any patent examiner purposely decides to approve junk patents, but that it's impossible to ignore the incentive problem here.

Combine that with some ridiculously bad court rulings, that made things (software, business methods) that people previously considered unpatentable "fair game," along with some insanely large rewards in patent infringement lawsuits, and you had a recipe for disaster. Multiple studies showed that the cost of legal fights over patents greatly outweighed the actual value of those patents. And it was becoming a dangerous snowball: the more bad patents approved, the more bad patent lawsuits, the more bad patents filed, etc. What was interesting was that around 2004, as the debate on this started getting so much attention, the USPTO realized it had a problem and started adjusting things so that incentives were a bit more aligned. And, lo and behold, a lot more patents started getting rejected, and the approval rate went down. Many patent system supporters chided those of us who complained about the incentive structure by saying "see? everything's fine now, since the patent office knows to reject bad patents."

Not so fast.

Last year, the new bosses at the patent office decided that the number one problem was "backlog." No doubt about it, there is a huge backlog and the time it takes to get a patent is very, very long. But rather than realize that the way to decrease the backlog is to reject all bad patents (thus making it less lucrative to file bad patent applications), it appears to have gone back to the old system: implicitly setting up the system so that "when in doubt, approve," is the norm -- just to get through the backlog.

The numbers don't lie, and the always excellent PatentlyO blog has the numbers and the graphs to show that we haven't just increased the rate of patent approvals, we've shot way up, beyond anything seen previously -- making it look like the "correction" from the past few years was just an anomaly. Not only that, but the rate of patent approvals on a monthly basis seems to be increasing, which doesn't bode well for the future either:

Of course, the unfortunate reality is that this won't actually solve the backlog problem at all. You would think, with all the engineering/operations brains at the Patent Office, that they would understand that this will only make the backlog worse. Approving junk patents only makes it more lucrative to file ever more ridiculous patent applications, which only increases the backlog. In rushing through more patents, it only encourages a bigger and bigger backlog. In treating the symptoms, rather than the actual disease, we're making the disease much, much worse.

Spill payouts likely to prohibit lawsuits against BP and all implicated firms

By Agence France-Presse
Friday, August 20th, 2010

Recipients of money from BP's 20-billion-dollar oil spill compensation fund will likely be required to waive their right to sue any firm involved in the disaster along the US Gulf Coast, The New York Times reported Friday (link).

Citing internal documents from lawyers handling the fund, the daily said businesses and individuals who accepted compensation from the fund would waive their rights to sue not only the British energy giant, but any company implicated in the largest accidental spill in history.

The waiver would come into effect only if a final settlement is accepted.

The fund, set up by BP at the White House's urging, is being administered by Kenneth Feinberg, who oversaw a similar fund to compensate victims of the September 11, 2001 attacks.

Recipients of money from that fund faced a similar choice: sue, risking a lengthy battle and uncertain outcomes, or waive their right to litigation and accept settlements before the full impact of the disaster is known.

In the case of the spill fund, even though BP is the only firm paying into the compensation account, it is expected to seek a litigation exemption for at least three other firms linked to the disaster, the Times said.

They include Transocean, which leased its Deepwater Horizon rig above the ruptured well to BP; Halliburton, which cemented the well; and Cameron International, which supplied the blowout preventer, the device atop the wellhead that failed to shut the well down after the April 20 explosion that ripped through the rig, sparking the spill.

The Times also reported that compensation eligibility is expected to be based partly on geographic proximity to the spill, potentially cutting out individuals and businesses who suffered serious knock-on financial hardships.

Other potentially controversial provisions prohibit payments based exclusively on declining home values linked to the spill, and compensation based on mental health claims.

Feinberg is expected to release regulations for emergency payments Friday and the final settlement protocols in the fall, with the two terms expected to be similar except for a higher burden of proof in the case of final payments, the newspaper said.

NOAA Claims Scientists Reviewed Controversial Report; Scientists Say Otherwise

Dan Froomkin | 08-20-10

In responding to the growing furor over the public release of a scientifically dubious and overly rosy federal report about the fate of the oil that BP spilled in the Gulf of Mexico, NOAA director Jane Lubchenco has repeatedly fallen back on one particular line of defense -- that independent scientists had given it their stamp of approval.

Back at the report's unveiling on August 4, Lubchenco spoke of a "peer review of the calculations that went into this by both other federal and non-federal scientists." On Thursday afternoon, she told reporters on a conference call: "The report and the calculations that went into it were reviewed by independent scientists." The scientists, she said, were listed at the end of the report.

But all the scientists on that list contacted by the Huffington Post for comment this week said the exact same thing: That although they provided some input to NOAA (the National Oceanic and Atmospheric Administration), they in no way reviewed the report, and could not vouch for it.

The skimpy, four-page report dominated an entire news cycle earlier this month, with contented administration officials claiming it meant that three fourths of the oil released from BP's well was essentially gone -- evaporated, dispersed, burned, etc. But independent scientists are increasingly challenging the report's findings and its interpretation -- and they are expressing outrage that the administration released no actual data or algorithms to support its claims.

HuffPost reached seven of the 11 scientists listed on the report. One declined to comment at all, six others had things to say.

In addition to disputing Lubchenco's characterization of their role, several of them actually took issue with the report itself.

In particular, they refuted the notion, as put forth by Lubchenco and other Obama administration officials, that the report was either scientifically precise or an authoritative account of where the oil went.

"What we were trying to do was give the Incident Command something that they could at least start with," said Ed Overton, an emeritus professor of environmental science at Louisiana State University. "But these are estimates. There's a difference between data and estimates."

Overton said NOAA asked him: "How much did I think would evaporate?" He responded with some ideas, but noted: "There's a jillion parameters which are not very amenable to modeling."

He said he didn't know what NOAA did with his input. "I pretty much did my estimates and let that go," he said.

And Overton bridled at the way the report was presented -- with very precise percentages attributed to different categories. For instance, the report declared that 24 percent of the oil had been dispersed.

"I didn't like the way they say 24 percent. We don't know that," Overton said. "They could have said a little bit more than a quarter, a little bit less than a quarter. But not 24 percent; that's impossible."

Michel Boufadel is on the list, but told HuffPost he did not review the report or its calculations. And the Temple University environmental engineer also said its specificity was inappropriate.

"When you look at that dispersed amount, and it says 8 percent chemically dispersed and 16 percent naturally dispersed, there's a high degree of uncertainty here," he said. "Naturally dispersed could be 6 or it could be 26."

Ron Goodman, a 30-year veteran of Exxon's Canadian affiliate who now runs his own consulting company, was incorrectly listed on the report with an academic affiliation: "U. of Calgary." He is only an adjunct there. He said he responded to a series of questions from NOAA -- "and that was it."

And once the report came out, he said, "I was concerned that the amount dispersed was very low. I think it was higher by maybe a factor of two or three."

In another example of how people are reading too much into the report, there has been some discussion suggesting that its estimate that 8 percent of the oil was chemically dispersed provides a new data point regarding how well those controversial chemicals worked. Goodman, however, said he believes the government scientists didn't base their conclusion on evidence, but on faith.

"They took the amount of dispersant that was applied, and multiplied it by 20 which is the manufacturer's suggested amount," he said.

Merv Fingas, a former chief researcher for Canada's environmental protection agency, said he thought the report was purely operational in nature. "The purpose of this was for the responders, and to tell them what to do -- as opposed to saying 'golly, the oil's all gone.' That was never the impression. That was very badly misinterpreted."

Fingas said the scientists stressed how broad the ranges should be for the estimates. "On the pie chart, if you say 15 percent, it could maybe be 30, it could maybe be 5."

Told how much certainty administration officials expressed in the estimates -- "we have high degree of confidence in them," is how Lubchenco put it -- Fingas was blunt.

"That's what happens when stuff goes from scientists to politicians," he said. "It was exactly the opposite with the scientists. We had a lot of uncertainty."

Juan Lasheras, an engineering professor at University of California, San Diego, on the list explained: "My involvement with the estimation of the oil spill budget has been minimal. I simply assisted Bill Lehr (NOAA) in a minor way with the estimation of the size of the oil droplets generated by the rising plume. I have not been involved in any of the other calculations or in the discussion and the writing of the report."

Jim Payne, a private environmental consultant on the list, declined to comment beyond saying: "I really don't know that much about how that was calculated."

Also worth noting: Four of the "independent scientists" listed on the report work for the oil industry, have until recently, and/or work for consulting companies that do business with the oil industry.

What happened here? Why did ballpark estimates clearly created to guide emergency responders suddenly get cast as a conclusive scientific facts? (See my story from a few hours ago, Questions Mount About White House's Overly Rosy Report On Oil Spill.)

Why did administration officials mislead the public about those findings -- and then claim that independent scientists had reviewed them, when the evidence suggests that they did not?

NOAA public affairs officials did not respond to requests for comment before my deadline.

Ian R. MacDonald, an oceanographer at Florida State University who was not one of the scientists on NOAA's list, sees this latest incident as part of an ongoing problem.

Lubchenco had previously been a key figure in the patently low-ball estimates for the oil flow, and fervently resisted acknowledging the existence of underwater oil plumes, he said.

"I've worked with NOAA essentially all my career and I have many good friends there, and people I respect in the agency, scientists who are really solid," MacDonald said.

"Throughout this process, it's been troubling to me to see the efforts of people like that passed through a filter where the objective seems to be much more political and public relations than making comments to inform the public.

"The consistent theme," MacDonald said, "seems to be to minimize the impact of the oil -- and to act as a bottleneck for information."

Allen: 'Impossible to lead cleanup efforts' without BP

By Vivian Kuo, CNN, August 20, 2010

(CNN) -- The government's point man in charge of the response to the Gulf of Mexico oil spill said it is "impossible" to lead cleanup efforts without cooperation from BP.

Speaking from Washington's National Press Club Friday, retired U.S. Coast Guard Admiral Thad Allen said, "You can call it trust, you can call it cooperation, you can call it collaboration."

He referred to the Oil Pollution Act of 1990, a law that established the burden of payment on the "responsible party" -- in this case, BP.

"It is very hard for the public to understand that a responsible party that is clearly responsible for the event itself could somehow be cooperative in the response to the spill. But as a matter of fact, since 1990, that's exactly the way we've conducted oil spill response in this country."

"The very notion of cooperating with BP in this response has met with universal disapproval," he said, adding that he and others in the Coast Guard who have worked on previous oil spills have had to manage that "paradox" of the law's requirements.

"The current response model assumes the responsible party will work with the federal on-scene coordinator and local state entities to achieve unity of effort and effective spill response. It's been challenging at times to create that unity of effort given sometimes what appears to be the rejection of the notion [by] the general public," Allen said.

The admiral delivered the remarks after providing an update on the status of BP's ruptured well. If all goes as planned, the "bottom kill" operation to permanently plug the ruptured underwater well in the Gulf of Mexico could be completed by the week after Labor Day, he said.

Thursday, Allen authorized BP to replace the existing blowout preventer on the well with a new one. That removal will require close supervision by government scientists, BP engineers and joint investigation teams -- all of whom will want to examine the device closely to gain insight into what happened during the explosion on April 20 when the oil rig exploded, killing 11 workers, and later sank. The government estimates some 4.9 million barrels of oil subsequently gushed into the Gulf, 800,000 of which was captured by surface ships.

The well was capped July 15, stopping the flow of oil, and a "static kill" operation two weeks ago further plugged it with cement and mud from above. The "bottom kill" operation is believed to be a permanent fix, in which the well will be intercepted by a relief well and the ruptured well will be plugged from below.

Allen told reporters Friday that officials are in the midst of conducting an ambient pressure test to determine whether the pressure in the top of the well matches the pressure outside the well. That test is expected to be complete Saturday morning. If no anomalies are detected, BP will conduct a "fishing experiment" to try to pull out the drill pipe through the top of the well, Allen said. If both steps are successful, he will then have to issue another go-ahead to remove the existing blowout preventer and replace it with a new one.

When asked about studies issued earlier this week that appear to be at odds with conclusions the government arrived at two weeks ago stating that 74 percent of the oil released from BP's leaking well has been captured, removed or broken down, Allen said the results were "based on a set of assumptions." He said after accounting for the amount of oil burned, skimmed, dispersed and evaporated, the remaining number is what scientists believe remains in the Gulf.

The University of Georgia said in a release earlier in the week it estimates 70 to 79 percent of the oil that gushed from the well "has not been recovered and remains a threat to the ecosystem." But Allen and National Oceanic and Atmospheric Administration Administrator Jane Lubchenco have said the UGA study was based on a different set of parameters.

"As a simple sailor, I'd say let's calm down and look at the data," Allen said Friday.
Additionally, the Woods Hole Oceanographic Institution issued a study Thursday that detailed finding an oil plume from the Deepwater Horizon spill that was at least 22 miles long and more than 3,000 feet below the Gulf surface back in June. Allen said he discussed the study results with Lubchenco and that they had known about the plume.

"We knew at the time they had located it. We actually dispatched NOAA boats and have had NOAA boats out there looking for hydrocarbons in the water column in and around the well head" but that "locating these things in perpetuity and tracking them is an ephemeral task." It's extremely "difficult" to track hydrocarbons as they travel and break down, Allen said.

While 22 percent of the Gulf of Mexico's federal waters remain closed to fishing, the Louisiana Wildlife and Fisheries Commission opened all state inshore and offshore territorial waters to recreational angling, including charter boat angling Friday.

The LWFC also voted to submit a letter urging the FDA and NOAA to expedite the required testing to re-open commercial fishing areas previously closed due to confirmed reports of oil. Previous to the opening, approximately 862 square miles, or 11 percent of saltwater areas of the state, remained closed to all recreational fishing due to the impacts from the Deepwater Horizon oil spill.

Kucinich compares Iraq 'exit' to Bush's 'Mission Accomplished'

By Ron Brynaert | Friday, August 20th, 2010

"Congressman Dennis Kucinich (D-OH) today challenged the notion that removing ‘combat brigades’ but leaving 50,000 U.S. troops in Iraq constitutes an end to combat operations, let alone an end to the war," a press release sent to RAW STORY on Thursday stated.

The press release continues:

“Who is in charge of our operations in Iraq , now? George Orwell? A war based on lies continues to be a war based on lies. Today, we have a war that is not a war, with combat troops who are not combat troops. In 2003, President Bush said ' Mission Accomplished ' . In 2010, the White House says combat operations are over in Iraq , but will leave 50,000 troops, many of whom will inevitably be involved in combat-related activities.

“Just seven days ago, General Babaker Shawkat Zebari, the commander of Iraq ’s military, said that Iraq ’s security forces will not be trained and ready to take over security for another 10 years. One story is being told to the military on the ground in Iraq and another story is being told to their families back home.

“You can’t be in and out at the same time. 

“This is not the end of the war; this is simply a new stage in the campaign to lull the American people into accepting an open-ended presence in Iraq . This is not an honest accounting to the American people and it diminishes the role of the troops who will put their lives on the line. This is not fair to the troops, their families or the American people.

“The Administration and the Pentagon would be wise to level with the American people about our long-term commitment to Iraq .

“The cost of the wars has been estimated to be around $1 million per soldier per year. Each year the troop levels stay at 50,000 means another $50 billion is wasted. I object to spending billions of dollars to maintain a charade in Iraq while our own economy is failing and over 15 million Americans are out of work. I object to keeping any level troops in Iraq to maintain a war based on lies. It is time that Congress sees through the manipulation and finally acts to truly end the war by stopping its funding,” said Kucinich.

Kucinich's statement doesn't mention President Obama's name once, but the president also didn't don a military jumpsuit and fly a plane onto a carrier with a gigantic "Mission Accomplished" banner.

Many of the top liberal blogs who have criticized Obama the past year went silent on the Iraq "exit" coverage (perhaps some are on August vacation).

Aside from Kucinich, RAW STORY was only able to find a scathing editorial on the World Socialist Web Site.

The White House and the Pentagon, assisted by a servile media, have hyped Thursday’s exit of a single Stryker brigade from Iraq as the end of the “combat mission” in that country, echoing the ill-fated claim made by George W. Bush seven years ago.

Obama is more skillful in packaging false propaganda than Bush, and no doubt has learned something from the glaring mistakes of his predecessor. Bush landed on the deck of the US aircraft carrier Abraham Lincoln on May 1, 2003 to proclaim—under a banner reading “Mission Accomplished”—that “major combat operations” in Iraq were over. A captive audience of naval enlisted personnel was assembled on deck as cheering extras.

Obama wisely did not fly to Kuwait to deliver a similar address from atop an armored vehicle. He merely issued a statement from the White House, while leaving the heavy lifting to the television networks and their “embedded” reporters, who accompanied the brigade across the border into Kuwait and repeated the propaganda line fashioned by the administration and the military brass.

Three years after former President George W. Bush declared "Mission Accomplished" on an aircraft carrier, MSNBC anchor Keith Olbermann proceeded to mock the early propagandistic call by announcing each successive night on his Countdown show that it has been "one thousand and blank" days since "Mission Accomplished was declared," RAW STORY noted yesterday.

Chances are, three years from now, even if US troops are still caught up in a quagmire in Iraq, Olbermann won't be doing a similar signoff schtick to mock the coverage that ran on NBC and MSNBC Wednesday evening.

At The New York Times Media Decoder blog, Brian Stelter reported, "The combat mission in Iraq doesn’t officially end until Aug. 31 but viewers and readers could be forgiven for thinking it ended tonight."

In a broadcast that Brian Williams said constituted an “official Pentagon announcement,” NBC showed live pictures Wednesday night as members of the last combat brigade in Iraq drove toward the Kuwait border, symbolizing an end to fighting in the country.

“We are with the last combat troops” in Iraq, the NBC correspondent Richard Engel said at 6:30 p.m. Eastern, the same time that the military lifted an embargo that had been placed on the reporters traveling with the 440 troops, a part of the 4/2 Stryker Brigade.

The Associated Press, Fox News, The Los Angeles Times, The Washington Post, Al Jazeera and other news media outlets also reported Wednesday evening that the last combat troops were crossing into Kuwait. Only NBC broadcast it live, in asymmetrical image to the invasion that captured the nation’s attention on television seven years ago.

Coverage by most media outlets on the "last combat brigade" leaving Iraq paint an almost rosy picture with their headlines, which suggest that not only will the close to 60,000 troops left behind not be fighting anyone, but that there is no chance of any future surge.

"As the United States military prepares to leave Iraq by the end of 2011, the Obama administration is planning a remarkable civilian effort, buttressed by a small army of contractors, to fill the void," the New York Times reports.

However, the Associated Press and many liberal blogs instead chose to criticize Fox News for not covering the "exit" with the same gusto.

Perhaps another network could have covered the extensive coverage MSNBC was provided by the Pentagon instead.

Pentagon: No one has declared the end of the Iraq war

US stresses military role in Iraq
By Agence France-Presse
Friday, August 20th, 2010

US troops will still be in combat and taking on Islamist militants in Iraq even as the American military moves to an "advise and assist" role with a smaller force, officials said.

The withdrawal of the last US combat brigade at dawn on Thursday was hailed as a symbolic moment for the controversial American presence in Iraq, more than seven years since the invasion that toppled Saddam Hussein.

Under cover of darkness, the 4th Stryker Brigade, 2nd Infantry Division, crossed into neighbouring Kuwait ahead of the planned declaration of an end to US combat operations in Iraq by an August 31 deadline.

The pullout came two days after a suicide bomber killed 59 people at a Baghdad army recruiting centre in Iraq's deadliest attack this year, sparking concern the country's forces are incapable of handling security on their own.

Story continues below...
But while the remaining 50,000 troops will no longer have a formal combat mission after September 1, they will be well-armed and possibly coming under fire as they join in manhunts for Al-Qaeda figures or other extremists.

"I don't think anybody has declared the end of the war as far as I know," Pentagon press secretary Geoff Morrell told MSNBC.

"Counter-terrorism will still be part of their mission," said Morrell, referring to the fight against militant networks.

From next month the US mission in Iraq will be called "Operation New Dawn" instead of "Operation Iraqi Freedom" -- the name given to American operations since the invasion.

The remaining force will operate in six "advise and assist brigades," taking part in operations at the request of Baghdad authorities and playing a supporting role to Iraqi units.

The US troops "will continue to conduct partnered counter-terrorism operations" in an effort "to help Iraqi security forces maintain pressure on the extremist networks and protect the citizens of Iraq," Major Christopher Perrine told AFP.

The brigades are equipped with robots, unmanned aircraft and dog teams to help track militants and roadside bombs, along with experts in intelligence and logistics, he said.

Recent bombings have underscored the threat still posed by Al-Qaeda and other militants in Iraq, even though the Qaeda network has suffered severe setbacks with the deaths of senior leaders and a shortage of cash.

Even as the Pentagon draws down the force in Iraq, US special operations command -- which focuses on counter-terrorist operations -- will stay at the same level of 4,500 troops.

The shift in the US military role has been underway for months, with June 2009 serving as a turning point when Iraqi security forces took the lead in the country's major cities and towns.

"At that point, we were not unilaterally conducting any combat operations anymore," Morrell said.

"So when they have a bad guy they need to go after and they want our assistance doing it, there's a warrant, they ask for our assistance and we go after them together."

He added that US forces will have the right to defend themselves in any situation "should that become necessary."

The US military presence, while dramatically altered, may continue long after the end of 2011, when all American forces are supposed to depart under a security agreement.

Top military leaders in both countries acknowledge Iraq still may need help from the US armed forces after 2011.

"We're obviously open to that discussion," US Defense Secretary Robert Gates said last week. "But that initiative will have to come from the Iraqis."

Iraq's top military officer told AFP last week that American forces may be needed for another decade.

A future accord with Iraq might include continued air patrols with US F-16s, as officials admit Baghdad's air force is a long way from being able to fend off attacks from fighter jets.

To make up for a scaled back US military force, Washington meanwhile plans to rely on large numbers of private security contractors, US officials said Thursday.

The State Department said it will double the number of contractors it employs in Iraq to about 7,000.

The pullout coincided with Wednesday's arrival of new US ambassador James Jeffrey, who takes up his post amid political deadlock, with no new government yet formed since elections in March.

"The readiness of the Iraqi security troops is quite enough to combat the threat," Iraqi government spokesman Ali al-Dabbagh said. "The plan is going on, irrespective of the political situation."

But there was fierce criticism in Iraq about the pullout, which also came during the holy Muslim fasting month of Ramadan, when insurgent attacks typically peak.

"This is an irresponsible withdrawal," said Hamid Fadhel, political science professor at Baghdad University.

"There are dangers to do with security of the country, concerns and fears for Iraq's external security, because of the lack of a military that is able to protect the country."

Many Iraqis agreed, voicing doubts about their own security forces.

"It would have been better for the Americans to wait until the Iraqi army and police complete their training and become a truly loyal force," engineer Ali Khalaf, 30, told AFP.

Economic forecaster: "Greatest Depression" coming

(Some people criticize Celente for being so doom and gloom, but he was one of those who predicted our current financial predicament 6 or more years ago. So, I take what he says seriously.--jef)

***

Collapse of middle class means there's no fuel for recovery, Gerald Celente argues

By Daniel Tencer | Friday, August 20th, 2010

The US economic recovery in recent quarters is little more than a "cover-up" and the world is headed for a "Greatest Depression," complete with social unrest and class warfare, says a renowned economic forecaster.

Gerald Celente, head of the Trends Research Institute, told Yahoo!News' Tech Ticker that there's no risk of a "double-dip recession" because the first "dip" never ended.

"We're saying there's no double dip, it never ended," Celente said. "We're looking at the Greatest Depression. There's no way out of this without [rebuilding] productive capacity. You can't print [money to get] out of it."

Celente, who has been credited with predicting the 1987 stock market crash, the collapse of the Soviet Union and the subprime mortgage crisis of recent years, said the US and other developed countries can expect to see the sort of social unrest the world witnessed in Greece this year once government attempts to shore up the economy fail and lawmakers turn to "austerity measures" to plug gaping budget holes.

"You're going to see it all over the world," Celente said. "What they call austerity programs ... What are they doing? They're bailing out the banks and they're making the people pay for it. And the people don't like that."

Celente pointed to a near-riot that took place last week in Atlanta when 30,000 people showed up to be put on a housing waiting list, saying that the event is a harbinger of what's to come.

He also argued that the way unemployment is measured today masks a much larger joblessness crisis because "once you're off the unemployment rolls, you're no longer unemployed."

Celente said the current unemployment rate, if it were measured as it was measured during the Great Depression, would be around 17.5 percent. And he expects that number to rise to around 22 percent in the coming years.

"One of the good businesses to get in to may be guillotines," Celente quipped. "Because there's a real off-with-their-heads fever going on. People are really fed up."

Celente argued that the conditions needed for an economic recovery simply don't exist. "Let's go back to the 1990s. We're in a recession. What got us out of it? The Internet. It wasn't a government policy, and Al Gore didn't invent it."

But today, Celente argued, there are no new booming industries pushing towards economic expansion. And the US middle class may not have the right skills to take up the challenge.

"We went from a country that used to be merchants, craftspeople, manufacturers, to clerks and cashiers," Celente said. "We have to bring manufacturing back to America."

Celente agreed with his Tech Ticker interviewers that the green economy, which seeks to replace fossil fuels with alternative and renewable energy sources, is a good place to start on an economic recovery, but he said the Obama administration's handling of the issue was misguided.

Celente pointed out the US has committed $54 billion for nuclear power expansion, and has also committed to "clean coal" -- neither of which he sees as being large drivers of the green economy.

The government is "not putting money where it should go," he said.

Our Promiscuous Prehistory

Sex at Dawn
By Dr. SUSAN BLOCK

What is it about the nature of human sexuality that virtually all civilizations throughout history have tried like the dickens to suppress? Why is sex so often such a problem when it really *should* be a pleasure? Why might your otherwise devoted husband rather masturbate to porn than have sex with you? Why might your normally modest wife fantasize about being consensually gangbanged by the Brazilian soccer team? Why do so many happily married people risk everything they love and cherish to go off and have an affair?

These are some of the big questions that Drs. Christopher Ryan, Ph.D. and Cacilda Jethá, M.D. address in their hot new book, Sex at Dawn: The Prehistoric Origins of Modern Sexuality. With provocative wit, yet intense seriousness of purpose, they gather together up-to-date research from various scientific disciplines to reveal a side of ourselves that is wild, scary, exhilarating, egalitarian and, without a doubt, non-monogamous.

Sex at Dawn also addresses some of the little questions like: Why does a man tend to thrust during intercourse (to displace a rival’s sperm through active suction)? Why does a woman tend to moan (to let other possible partners know she’s hot)? Is there a way to understand our non-monogamous sexual urges and fantasies as natural and useful instead of perverse, immoral or dysfunctional? Ryan and Jethá say yes.

The evidence is voluminous, but the repression of it is tremendous. So…are we ready to confront such scandalous biological truths about our hunter/gather sexual nature? Since Sex at Dawn recently hit the the New York Times Best-Seller List, it seems that yes, by golly, we are. At least, some of us are, from Newsweek’s Kate Dailey, who calls the book “a scandal in the best sense,” to Seattle-based sex guru Dan Savage, who has dubbed Sex at Dawn “the single most important book about human sexuality since the Kinsey Report.” Then again, Australia’s Sunrise on 7 tried to paint the book as a threat to marriage, morality and all that society holds dear, which, considering the source, only proves the irrefutable power of its message.

A Promiscuous Dawn

I discovered Sex at Dawn on Twitter—where the cyber-hunter/gatherers meet and feast on each other’s tweets—thanks to Bonobo Handshake author Vanessa Woods (a previous guest on The Dr. Susan Block Show). It’s appropriate that our kissin’ cousins the bonobos led me, swinging from Twitter tree to tree, to Sex at Dawn. In fact, the bonobos themselves, as well as the Bonobo Way of peace through pleasure, all but embody Ryan and Jethá’s concept of a prehistoric human forager community where “fierce egalitarianism” once ruled, war was virtually unknown, paternity was not an issue and possessiveness was not a problem—after all, what is there to possess when you’re always on the move and U-hauls haven’t been invented?

Most otherwise topnotch evolutionary psychologists, primatologists and anthropologists—like Drs. Helen Fisher, David Buss, Frans de Waal, Owen Lovejoy, Matt Ridley, Steven Pinker, Robert Wright and such notables—come up with flip, vague or convoluted ways to explain away unpopular evidence. They seem to be trying to squeeze the square peg of monogamy into the round hole of humanity. Ryan and Jethá have chosen a more well-rounded term to characterize the essence of human sexuality as practiced by our prehistoric progenitors: promiscuity.

That’s a loaded word in common parlance, but when Ryan and Jethá say “promiscuous,” they don’t mean reckless, uncaring, libertine screwing around. Rather they impart the sense of its Latin root, “miscere,” which means “to mix,” implying that our ancestors enjoyed what biologist Alan F. Dickson called “multi-male/multi-female mating systems,” involving ongoing erotic, caring relationships with a mix of selected members of their close-knit tribe. I imagine this promiscuity could take many different forms; perhaps one approach might involve serial romances with three or four partners at any given time, erotic skin-to-skin encounters with several others and an orgy around the fire every Saturday night. Sound like fun to you?

It did to me, so I asked Ryan to send me a review copy in preparation for our radioSUZY1 interview which would take place, appropriately enough, at dawn in Barcelona where he and wife/co-author Jethá reside. As soon as the 400-page tome arrived at the Institute, I devoured it like a hungry forager who had just stumbled upon the Tree of Knowledge, laden with luscious fruit. Then I read it again, slowly, savoring the pages like an after-dinner liqueur. Sex at Dawn is a sheer pleasure to peruse, and not only because it eloquently backs up theories I’ve been espousing for years with mountains of carefully compiled evidence (which I can now use to thwart enemies of pleasure). This is a book whose time has come…and with all the reverberating tweets, excited postings and passionate reactions (I’m not the only one who’s reading it twice), it seems to be coming again and again…

Farmers and Golddiggers

But back to Ryan and Jethá’s thesis: homo sapiens (that’s us) did not evolve in monogamous, Flintstonesque, nuclear families, with or without the white picket fences, as so many people, corporations and institutions in the “Marital Industrial Complex”—from couples counselors to congressmen, religious preachers to science teachers—preach and teach. Rather, we evolved in 20-150 person hunter-gatherer groups in which nobody owned property (nor much of anything at all), and normal adults would have been engaged in multiple ongoing sexual relationships with different group members at any given time, quite like our closest living relatives: common chimps and bonobos.

Why is the sexuality of our ancestors some 100,000-200,000 years ago such a huge deal to us now—even to those of us who don’t care about history, let alone prehistory? Because the human body (featuring, of course, the human brain inside that body) evolved under these prehistoric conditions to be, essentially, what it is today: a highly social, communicative and very sexy beast.

So how in civilized tarnation did we come up with monogamy? With blood, sweat and a lot of tears. After hundreds of thousands of years of nomadic, promiscuous foraging, some 10,000-12,000 years ago, a human revolution took place that spread throughout the planet. This was a revolution like no other before or since; though it didn’t alter human anatomy, it fostered a monumental change in the human way of life. This revolution was the advent of agriculture.

With agriculture came a relatively reliable source of food for which you didn’t have to hunt or search. You simply had to cultivate it. Sounds awesome, huh? Seems like it would make life a lot easier now that you didn’t have to chase down your lunch through the bushes every day. That’s a fine theory. The reality is that farming didn’t make life easier at all, say Ryan and Jethá. On the contrary, the Great Agricultural Revolution spawned a much more demanding, oppressive, property-oriented, greed-driven, envy-stricken, brutal, stressful lifestyle.

Of course, it also meant that a lot more babies would survive than did in hunter-gatherer days. Farming increased fertility and lowered the rate of infant mortality, generating population explosions that led to the creation of great cities and elaborate cultures. Yet, the host of new diseases farming unleashed, coupled with the less varied nutritional diet, actually worsened adult human health.

Farming also generated a need for a military, to protect “your” property and/or make war on your neighbors if you felt like taking their property. It spawned governing bureaucracies to make property-conscious laws against stealing and adultery. And it favored certain aggressive individuals (almost always men) who took “possession” of land, resources and animals, including their fellow homo sapiens. Yes indeed, the agricultural revolution involved the domestication of human beings—a farmer’s slaves and hired workers, as well as his “own” children and his “own” wife or wives—right along with his other domesticated animals.

I’ve said it before and I’ll say it again, this time while standing up on Ryan and Jethá’s mammoth mountain of evidence: Farming is the root of all evil.

Or as Sex at Dawn so eloquently explains: The Bible got it backwards. Adam and Eve weren’t kicked out of a Garden into the wilderness as punishment for their sins. They were kicked into one. Upon eating from the Tree of Knowledge and learning the mysteries of agriculture, humanity was swept out of the wilderness, the wild jungles, forests, savannas and untamed coastlines and plopped down behind a Neolithic lawn mower in a garden, aka: The Family Farm.

With farming, the “family” was born, complete with Father knowing best and Mother being barefoot and preggers, presumably with only Father’s offspring. Before the agricultural revolution, paternity was not an issue. Since prehistoric human females, like bonobos, hid their estrus, the mechanics of conception were a mystery. Nobody could be sure whose father was whose, just as no chimpanzee male knows whose baby his current favorite female is carrying (this, by the way, is how chimp kids escape infanticide).

Ryan and Jethá theorize that our prehistoric ancestors may have believed that it took several men’s sperm to make one baby (studies show that some forager tribes still believe this). Thus, all the men in any given tribe felt more or less the same level of responsibility for and kinship with all the children (also like bonobos and common chimps).

As soon as farmers started breeding plants and domesticated animals, learning exactly how “sex makes babies,” they applied this knowledge to their own sexual relationships. Paternity went from being a great unknown to being a great big deal. One of Ryan and Jethá’s main points here is that the male obsession with paternity and the female obsession with finding a breadwinner are not innate human sexual nature. They are not as old as humanity. They are a reaction to the modern, post-Neolithic world.

Choosy or Floozy?

With this newfound knowledge of paternity, men cultivated ownership of “their” women and children. The elite practiced polygamy while the majority developed monogamy, in order to “guarantee” paternity. This way, you knew your kids were “yours” and you could force them to work on your farm and then pass that farm down to them—the lucky little bastards—so that you might feel some sense of immortality, as you died prematurely, victim of diseases from which your forager ancestors never suffered.

With the Agricultural Revolution, the natural promiscuity of “mixing” lovers was turned into the grave sin of “cheating” or “infidelity,” for which the punishment—especially for women—ranged from ostracism to torture to public execution.

Thus chastened, ladies learned to hide their desire, along with their lovers. And civilization developed the notion that human females are naturally “choosy” and reserved about sex. Ryan and Jethá reference Advice Goddess Amy Alcon’s over-confident statement that “ancestral women who successfully passed their genes onto us...[were] choosy [about] weeding the dads from the cads” as a prime example of an ill-informed “sexpert” writing about sex; they then proceed to utterly demolish it with illustrations and recent studies from 12 different branches of science.

Though you’d think it would have been dashed by common sense. If females are indeed the “choosier,” more sexually reserved gender by nature, why would men throughout history have gone to such great lengths to control the female libido?

And isn’t it funny how we generally don’t assume that motherly love should be confined to one child. So why do we believe that sexual love must be confined to one lover?

Pleasure, Violence & The New Promiscuity (Much Like the Old Promiscuity)

Sex at Dawn doesn’t present any brand new findings or even any particularly new ideas. It’s the way in which Ryan and Jethá bring together old and recent findings and ideas to support their thesis that is so valuable and extraordinary.

I was particularly delighted to read their reference to my favorite developmental neuropsychologist and mentor, Dr. James Prescott, whose landmark 1975 paper, “Body Pleasure and the Origins of Violence,” demonstrated that the deprivation of pleasurable physical touch, especially during the infant and adolescent years, leads people to violence and war in 49 cultures.

Ryan and Jethá also quote The Lifestyle: Erotic Rites of Swingers, by my old friend Terry Gould, with regard to the WWII Air Force officers and wives who started the modern swinging couples “lifestyle” in 1940s suburban America with their secret “key clubs.” (Gould devotes another chapter in The Lifestyle to following me and my Bonobo Gang of friends and lovers around a 1996 Lifestyles Convention as we party and discuss Ethical Hedonism and the Bonobo Way.)

That same year, Gould introduced me to the concept of the “sperm wars” that go on inside a woman’s vagina (explained more thoroughly in “Sperm Wars: Cuckolds, Hot Wives and Evolutionary Biology”). So even if women aren’t so “choosy” about with whom we have sex, at least our reproductive tract is somewhat selective. That is, through a series of biological hurdles and the phenomenon of sperm wars, the female genital system only allows the strongest—or best positioned—sperm to win the prize of fertilizing the egg. Of course, this assumes that a woman has sperm from more than one man inside her—or, at least, that she is anatomically built for that purpose—which flows right into Ryan and Jethá’s thesis that the human body has evolved to practice promiscuity.

And they weave it all together—stats and studies on everything from porn to prairie voles, balls to bukkake, vibrators to vampire bats, cuckolds to cougars, Melanesian Wedding Orgies to Victorian morality, instant lust to lasting love—to support their idea (which holds very close to my idea) that the human body and the human mind and that general all-around crazy thing that we call human behavior all reflect both our true highly sexual nature and our very promiscuous prehistoric past—one which seems to have also been a relatively peaceful past, much like the Bonobo Way of peace through pleasure suggests that it would have been…

This is not to suggest that we should all live in polyamorous households. Personally, I love being married—to just one husband. And the Sex at Dawn authors, themselves married for over 10 years, aren’t overtly advocating anything except opening our minds to the evidence of our innate promiscuity and the way in which it influences our lives.

But that doesn’t mean that others won’t use Sex at Dawn to validate their open marriages and polyamorous adventures.

More power to them.

Israel, Big Money and Obama

Mr. Crown and the President
By MARGARET KIMBERLEY

“Barack Obama has established a strong record as a true friend of Israel, a stalwart defender of Israel’s security, and an effective advocate of strengthening the steadfast U.S.-Israel relationship, publicly stating that Israel’s right to exist as a Jewish state should never be challenged.”

– Lester Crown

Lester Crown is a Chicagoan with a net worth of four billion dollars. He owns a large stake in and is a former president and board chairman of defense contractor General Dynamics. He also has held large holdings in Hilton Hotels, Maytag (now Whirlpool), and the Chicago Bulls and New York Yankees.

Crown was an early supporter of Barack Obama’s candidacy first for the U.S. Senate, and then for president. He is one of the first and one of his most prodigious fundraisers. As the Obama presidential campaign website says, the candidate “… systematically built a sophisticated, and in many ways quite conventional, money machine.” The Crowns were an integral part of that machinery. One of Lester Crown’s children, James Crown, personally bundled $500,000 in campaign contributions for Obama and served as chairman of the Illinois fund raising effort. Lester Crown and his wife Renee hosted a fundraiser for Obama in 2007 at their home. The event invitation made it clear; their support for Obama was due to his support of Israel, its “right to exist“ and his willingness to strike militarily against Iran.

Every American president has wealthy individuals and families dedicated to getting them elected. The reliance of candidates for public office on the largesse of the rich may be common and expected, but it is nonetheless extremely dangerous. This corruption insures access for the rich, which guarantees that their interests are at the top of any president’s agenda, usually at the expense of what is good for everyone else.

For Lester Crown the top issue on his agenda is Israel. As he has said himself, "While my involvement in politics is motivated by a variety of issues, there is one issue that is fundamental: My deep commitment to Israel and to a strong U.S.-Israel relationship that strengthens both Israel's security and its efforts to seek peace."

According to a recently published article in The Atlantic, Israeli general Amos Yadlin traveled to Chicago in an effort to enlist Crown’s help in convincing the administration to attack Iran. White House visitor logs show that Crown did in fact visit the White House in April of this year to meet with Obama adviser Valerie Jarrett. The Israeli newspaper Haaretz reported that Prime Minister Benjamin Netanyahu applied “hidden pressure” on Obama which came “from Chicago.”

When asked about this report, Crown denied only that Yadlin traveled to Chicago. He confirmed that the two spoke and were in agreement about wanting the United States to attack Iran. “ ‘I support the president,” Crown said. ‘But I wish [administration officials] were a little more outgoing in the way they have talked. I would feel more comfortable if I knew that they had the will to use military force, as a last resort. You cannot threaten someone as a bluff. There has to be a will to do it.’ ”

Lester Crown’s opinions are not like anyone else’s two cents. He is a defense contractor, meaning he has a personal interest in maintaining the state of permanent war for the United States. He is also a very wealthy man who worked hard to get Barack Obama elected. Crown’s October 1, 2007 fundraiser was directed primarily at Jewish contributors who may have been insufficiently convinced of Obama‘s support for maintaining the status quo in America‘s relations with Israel. The event invitation read in part, “The purpose of the evening is to show Barack how appreciative we are of his steadfast, honest and proud support of Israel.”

Those are the words out of Crown’s own mouth. No one should be squeamish about questioning his actions and his motives and the very fact that a private citizen conducts foreign policy in secret. Lester Crown was not elected to any office, he was not appointed to pursue foreign policy on behalf of the government, he hasn‘t been confirmed by the United States Senate. If congress had even a small amount of courage, Crown would be subpoenaed to testify about his communications with Yadlin and with the president and his advisors.

The story of a presidential campaign contributor’s contacts with a general of a foreign nation’s military ought to be front page news. Sadly, that lack of coverage is not surprising. The corporate controlled media would reveal too much about themselves if they told us the truth about the little bit of democracy we have left. No one becomes a serious presidential contender without first passing muster with the Lester Crowns of the world. All of which means that American style democracy is little more than a sham. Iowans and New Hampshirites don’t determine who will be president. The Crowns and their ilk are the ones who get to choose before anyone pulls a lever in a voting booth.

The story of Lester Crown’s foray into foreign policy will not make headlines as it should. Congress will not question him under oath. Only individuals who are interested enough and savvy enough will know a little of the tale of how a nation’s people gave up their rights so the rich might have their way. The issue at hand for Lester Crown is Israel, but the CEOs and board chairmen of other industries hold sway in their spheres as much as Lester Crown does in his.

There will always be people of great wealth who influence what happens to people in the rest of world. Today Israel, tomorrow big pharma, and big oil the day after that. BP poisons the Gulf of Mexico with impunity and Lester Crown wants to commit a crime of his own. The only crime worse than an attack on Iran is acquiescence in the face of corporate control of our lives.

The Myth of "Credibility Markets"

The Obama Team's Perverse Economics
By MARSHALL AUERBACK

It is time to distinguish between the truths and the myths propagated by Wall Street, among them the hoary old stand-by, that “if you don’t do anything with spending cuts, it doesn’t get you credibility.”

This, in a word, encapsulates the Administration’s perverse Wall Street-centric thinking. Credibility with the American people takes a back seat to this amorphous concept called “the markets”, and the corresponding need to maintain “credibility”.

But how are we to divine the true aspirations of the markets? Is this really a legitimate basis for government policy? Private portfolio preference shifts (which are manifested daily in the capital markets) are probably the area least amenable to economic analysis. There are no cookie cutter models here (and economists LOVE models).

Consider the case of a currency: How does one respond to a weaker currency? The conventional response seems to be, “Raise interest rates and eventually you’ll re-attract the capital because you will re-establish ‘credibility’ with the markets”. That was essentially the IMF advice to East Asia in 1997. But, as that experience demonstrated, sometimes raising rates can actually trigger additional capital flight if it is perceived to be a panicked reaction to something. And Japan today clearly demonstrates that low rates per se do not necessarily prefigure a weaker currency. What does a 10 year Japanese government bond yielding less than 1% tell us about “the markets”? Does it reflect approval with a country that has a public debt to GDP ratio about 2.5 times higher than the US?

To paraphrase Milton (the poet, not Friedman), sometimes they also serve who only stand and wait!

Markets are an amorphous concept, which reflect heterogeneity of viewpoints. Some people today are buying gold because they foresee a Weimar style hyperinflation emerging in the face of all of this government spending. Some buy it because they envisage the death of fiat currencies and view the yellow metal as the ultimate insurance policy. Some invest because they consider gold the only real form of money. Some people view it as a barbarous relic and ignore it altogether. How does a government respond to these varying points of view? What’s the right policy response?

The myth that markets, not governments, ultimately determine rates has, of course, been legitimized to some degree by virtue of the fact that our institutional monetary arrangements still reflect archaic gold standard type thinking (whereby a certain amount of gold on hand was required to fund government operations). But we went off the gold standard decades ago. Still we have laws which mandate that all net government spending is matched $-for-$ by borrowing from the private market. So net spending appears to be “fully funded” (in the erroneous neo-liberal terminology) by the market. But in fact, all that is actually happening is that the Government is coincidentally draining the same amount from reserves as it adds to the banks each day and swapping cash in reserves for government paper.

The resultant bond market drain is there to ensure that the central bank maintains control of its reserve rate. It has nothing to do with “funding” government operations itself.

If you think that sounds radical then consider the following question posed by Professor Bill Mitchell: If a government bond auction “fails” (i.e. the government doesn’t find enough buyers for the paper it issues during that particular sale), does this mean that your Social Security cheque is going to bounce? Will national infrastructure projects be suddenly halted because the net spending is not “funded”? Do we have to stop fighting a war in Afghanistan? The answer to all of these questions is the same: Of course not! The net spending will go wherever the Government intends it to go - after all the Government needs no funds to spend because it first creates the currency which is ultimately required to be spent in the real economy. The private sector does not produce dollars (if it did, it would represent a jailable offence called counterfeiting).

More fundamentally, how does one presume that the private sector can net save (in this case, dollars) something it cannot net produce?

Isn’t it true that the government is in a unique position because only it has the capacity to create new net financial assets? Now, granted, this simple observation does not readily apply to the euro zone because the individual countries concerned have effectively ceded that authority, thereby circumscribing an adequate fiscal response to their crisis . But when the operations of government are examined in this light, it establishes that the Obama Administration’s ongoing fixation with “long term deficit reduction” and “establishing credibility with the markets” is as foolhardy as conducting human sacrifices to placate a deity.

Yet government policy responses today on issues like Social Security or Medicare reflect a misguided belief system and a genuine failure to understand the basis of modern money. Scaling back Social Security will certainly drive unemployment up higher than it is already going becomes it robs people of the very income required to sustain growth. Not a very sensible strategy if you truly care about implementing “change that people can believe in”.

Unfortunately, until these Wall Street-centric beliefs are fully exposed for the myths that they are, we can expect to see more dispiriting headlines of the sort reflected in Mike Allen’s latest politico playbook.

Whacking the Middle Class

When Wall Street Rules, We Get Wall Street Rules
By DEAN BAKER

The middle class is getting whacked by the Great Recession. Fifteen million people are out of work, another 9 million workers can only find part-time jobs, and millions more have given up looking for work altogether. Those lucky enough to be employed are unlikely to see any substantial wage gains for years to come.

Millions of homeowners are facing the loss of their home and more than 10 million are underwater in their mortgage. Most of the huge baby boom cohort is approaching retirement with little other than Social Security to support them, now that the collapse of the housing bubble has destroyed their home equity and much of the rest of their savings.

This pain is infuriating for two reasons. First, this was an entirely preventable disaster. The housing bubble was easy to see. Competent economists had long warned of its dangers.

The second reason why the current situation is infuriating is that we know how to get the economy out of this mess. We just need to boost demand. This can be done either with much more government stimulus, more aggressive monetary policy from the Fed, or pushing the dollar down to boost exports.

If this disaster were preventable and we knew how to get out of it, why didn't our leaders try to stop it before it happened? Why don't they take the steps necessary now to get the economy moving again?

The answer to both these questions is simple: The politicians work for someone else. On Election Day, the politicians might need our votes, but they won't get to be serious contenders unless they've gotten the campaign contributions of the big money crew. And the moneyed elite has been using its control of the political process to ensure that an ever larger share of the economy's output is redistributed upward in their direction.

The reason that there was little interest in cracking down on the housing bubble is that Goldman Sachs, Citigroup and the rest were making a fortune from the financial shenanigans that fueled the bubble. Former Treasury Secretary Robert Rubin personally pocketed over $100 million from this fun. Why would they want the government to rein it in?

Of course, when the bubble did finally blow and threaten their banks with bankruptcy, the Wall Street crew just ran to the government for help. And they got trillions of dollars in loans and loan guarantees to ensure that they would not be victims of the crisis they had created. Now that they are back on their feet, with Wall Street profits and bonuses both again at near record levels, they see little reason to concern themselves with the measures that might set the economy right for the rest of us.

After all, the steps necessary to revitalize the economy could mean some inflation. This would reduce the value of the debt owned by the wealthy. And the wealthy don't see any reason that they should risk any of their wealth just for the good of the economy.

We have enormous ground to cover to restore an economy that works for the vast majority, but the first step is to know where we are. The upward redistribution of the last three decades has nothing to do with the market and a belief in "market fundamentalism." This is about a process where the rich and powerful have rewritten the rules to make themselves richer and more powerful.

For example, they wrote trade rules that were designed to put downward pressure on the wages of the bulk of the U.S. workforce by placing manufacturing workers in direct competition with low-paid workers in China and other developing countries. This had nothing to do with a belief in "free trade." They did not try to subject lawyers, doctors or other highly paid workers to the same sort of international competition. They only wanted international competition to put downward pressure on the wages of workers in the middle and bottom, not those at the top.

This elite has instituted a system of corporate governance that allows top executives to pilfer companies at the expense of their shareholders and its workers. Top executives are overseen only by a board of directors who owe their hugely overpaid sinecures to the executives they supervise. And of course the Wall Street barons themselves are given a license to gamble with the implicit promise that government picks up their tab when they lose.

No progressive movement will make any progress until we understand the battle we are fighting. Our income is a cost to the rich. They will look to cut it wherever they can, whether this is wages for private sector workers, pensions for public employees, or Social Security for retirees. That is their target.

We have to fight back using the same logic. Their income is our cost -- the multimillion dollar bonuses for the Wall Street wizards is a direct drain on the economy. So are the bloated paychecks of top executives and their lackey boards. Progressives must be prepared to use all the same tactics to bring down the income of the rich and powerful that they have used to reduce the income of everyone else.

This means restructuring the rules of corporate governance to put serious downward pressure on the pay of top executives. The highest paid workers (doctors, lawyers, and economists) must be subjected to international competition in the same way as manufacturing workers have been subjected to international competition. And, we should sharply limit the extent of the patent or copyright protections that are exploited by the drug industry and the entertainment and software industries.

We have to put the focus on the ways the rich have rigged the rules and place this at the center of political debate. The three decade-long battle over tax cuts for the rich is important, but at the end of the day it is a side show. If we let them steal all the money at the onset, it really doesn't make much difference if they end up letting us tax a little of it back.

The Economy is in Big Trouble

Down the Drain
By MIKE WHITNEY

Imagine the reaction at the White House when the Department of Labor released its weekly unemployment figures on Thursday. Jobless claims rose by 12,000 to 500,000 in the second week of August. There's been no improvement in the jobs market in 9 months and now unemployment is edging upwards again. This wasn't supposed to happen. The Obama administration had bet everything that the economy had turned the corner and would gradually get better. Many economists saw less than a 10 per cent chance that the economy would tip back into recession. After all, double dip recessions are "extremely rare". Now more people are losing their jobs and Team Obama is caught in the headlights. There is no back-up plan, no Plan B. The Democrats will face the midterms with no stimulus to create new jobs and with an economy that is steadily deteriorating. It's going to be a massacre and they know it.

Obama and his lieutenants have stopped talking about austerity measures. The plan to dismantle Social Security has been put on hold,( though the Commission headed by the appalling former Senator Alan Simpson grinds on with its mission of destruction.) No one wants to hear about belt tightening when the future is uncertain and they're worried about losing their jobs. Obama will have to shift-gears again; switch from promoting the elitist "privatize everything" agenda to his "I feel your pain" routine. He might want to dig up some archived video of B. Clinton chewing his lip and blinking back the tears.

All of the economic data is being revised downwards. The economy is in big trouble and the politicians are just starting to catch on. Stocks fell sharply on Thursday (Dow down 144 points) on news that manufacturing (Philly Fed Index) shrank in August beyond analysts expectations. Nearly every category fell including shipments and new orders. The Dow Jones is off 10 per cent since April 23, more than a 1,000 point loss in the last 4 months. Also, Moody's reported that commercial real estate prices slipped another 4 per cent in June. According to Calculated risk website, "Commercial real estate values are now down 41.3 per cent from the peak in late 2007." It's a bloodbath.

Bond yields on US Treasuries continue to tumble as investor pessimism grows and increasingly bleak news feeds the fears of another slump. The two-year note has been setting records nearly every day. The benchmark 10-year which peaked at 3.99 per cent in April has since descended into Bernanke's inferno. It was last seen parachuting to terra firma at 2.61 per cent. If it continues to plunge at this rate, it will be below 2 per cent by year-end. Welcome to Japan.

Try to grasp the significance of bond yields. The business media spins the news and tries to dress up the data with all kinds of happy talk. Bond yields reflect cold hard reality. Investors only plunk their money into low-yielding liquid assets when they're sure things are going to get worse. Much worse. The rumors of a "bond bubble" is all nonsense. These aren't leveraged assets; there's no risk. People accept modest returns because they're afraid to put their money anywhere else. It's a referendum on failed monetary policy.

30-year mortgage rates are pinned to the 10-year which is why rates are lower now than any time in history. Still, housing inventory continues to build. Realtors are finding that they can't giveaway homes at any price. So much for the American dream.

Policymakers at the Fed, the Treasury, the White House and the Congress now look on as the foundations of the so-called recovery crack before their very eyes. Many of their careers will undoubtedly follow the economy down the drain. As the stimulus runs out, unemployment will rise, deleveraging and debt liquidation will gain momentum, and the economy will succumb to a second vicious contraction. Digging out will not be easy.

A Homeowners' Rebellion

Could 62 Million Homes be Foreclosure-Proof 

By ELLEN BROWN

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court). The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee’s Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled “Fannie and Freddie’s Foreclosure Barons” exposes a widespread practice of “foreclosure mills” in backdating assignments after foreclosures have been filed. Not only is thisperjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders’ case in 2004. Five years later, she says, some of the homeowners she’s helped are still in their homes. According to a Huffington Post article titled “‘Produce the Note’ Movement Helps Stall Foreclosures”:

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets’ all other claims). Charney says she’s helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?

Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used “the artifice of MERS to sabotage the judicial process to the detriment of borrowers;” that “to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;” that the scheme depended on “the MERS artifice and the ability to generate any necessary ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,’ the Defendants . . . participated in a criminal enterprise affecting interstate commerce.”

Local governments deprived of filing fees may also be getting into the act, at least through representatives suing on their behalf. Qui tam actions allow for a private party or “whistle blower” to bring suit on behalf of the government for a past or present fraud on it. In State of California ex rel. Barrett R. Bates, filed May 10, 2010, the plaintiff qui tam sued on behalf of a long list of local governments in California against MERS and a number of lenders, including Bank of America, JPMorgan Chase and Wells Fargo, for “wrongfully bypass[ing] the counties’ recording requirements; divest[ing] the borrowers of the right to know who owned the promissory note . . .; and record[ing] false documents to initiate and pursue non-judicial foreclosures, and to otherwise decrease or avoid payment of fees to the Counties and the Cities where the real estate is located.” The complaint notes that “MERS claims to have ‘saved’ at least $2.4 billion dollars in recording costs,” meaning it has helped avoid billions of dollars in fees otherwise accruing to local governments. The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum. Similar suits have been filed by the same plaintiff qui tam in Nevada and Tennessee.

By Their Own Sword: MERS’ Role in the Financial Crisis

MERS is, according to its website, “an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.” Or as Karl Denninger puts it, “MERS’ own website claims that it exists for the purpose of circumventing assignments and documenting ownership!”

MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:

Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder’s office where documents reflecting any ownership interest in real property are kept.... 

After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible .... The servicer was interested in only one thing – making a profit from the foreclosure of the borrower’s residence – so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the ‘beneficiary’ under millions of deeds of trust in Nevada and other states.

Axing the Bankers’ Money Tree

If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy. As was pointed out in a San Francisco Chronicle article by attorney Sean Olender following the October 2007 Boyko decision:

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process. 

. . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .

Nationalization of these giant banks might be the next logical step—a step that some commentators said should have been taken in the first place. When the banking system of Sweden collapsed following a housing bubble in the 1990s, nationalization of the banks worked out very well for that country.

The Swedish banks were largely privatized again when they got back on their feet, but it might be a good idea to keep some banks as publicly-owned entities, on the model of the Commonwealth Bank of Australia. For most of the 20th century it served as a “people’s bank,” making low interest loans to consumers and businesses through branches all over the country.

With the strengthened position of Wall Street following the 2008 bailout and the tepid 2010 banking reform bill, the U.S. is far from nationalizing its mega-banks now. But a committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide. While courts are not likely to let 62 million homeowners off scot free, the defect in title created by MERS could give them significant new leverage at the bargaining table.