Obama’s Refinancing Swindle

This is the kind of thing I wish diehard Obama-maniacs would pay attention to when they start up on how great he is. The fact is he's just another politician catering to his financial supporters. Otherwise, anyone: feel free to explain why this ISN'T a horrible idea.--jef

The Banks Want to Dump Millions of Risky Mortgages Onto FHA
by MIKE WHITNEY

Barack Obama’s new housing refinance plan has nothing to do with “lowering monthly mortgage payments so responsible borrowers can stay in their homes”. That’s all public relations bunkum. The truth is the banks want to offload their garbage mortgages onto Uncle Sam to avoid hundreds of billions of dollars in losses. That’s what this refi-ruse is really all about.

The administration estimates that 3.5 million people with private label mortgages will be eligible to refinance into loans backed by the Federal Housing Administration (FHA) Many of these are high risk mortgages that will eventually go into foreclosure which is why the banks want to get them off their books. Regrettably, Obama is only too happy to help them achieve that goal. Here’s a little background from the Christian Science Monitor:

“The nation now has about 30 million mortgages backed by government-sponsored enterprises (GSEs), mainly Fannie or Freddie…. About 3 million of those are “under water,” meaning the loan is now bigger than home value. Another 20 million or more have been underwritten entirely by private lenders. Some 35 percent of those, 7 million or more, are under water.” (“Obama plan to lower mortgage payments could help, but how much?”, Christian Science Monitor)

Why are so many more “private label” mortgages underwater than loans that were issued by
Fannie or Freddie?

Because the banks were lending money to every Tom, Dick and Harry who could fog a mirror. It was all a big joke. The banks didn’t really give a hoot if the borrowers were creditworthy or not because they were bundling the mortgages together into mortgage backed securities (MBS) and selling them off to investors around the world, so documentation and loan standards didn’t really matter to them. They got their pound of flesh whether the loans blew up or not. Here’s a little refresher from the Washington Post on how we got to where we are today:

“The biggest culprits in the housing fiasco came from the private sector, and more specifically from a mortgage industry that was out of control. These included lenders who originated home
loans, investment bankers who packaged them into securities, rating agencies that misjudged these securities, and global investors who bought them without much, if any, study…. 

Between 2004 and 2007, private lenders originated three quarters of all subprime and alt-A mortgage loans. These were loans to financially fragile homeowners with credit scores under 660, well below the U.S. average, which is closer to 700. But only a fourth of such loans were originated by government agencies, including Fannie, Freddie and the Federal Housing Administration. 

The dollar amount of subprime and alt-A loans made during this period by the private sector was jaw-dropping, reaching nearly $600 billion at the height of the lending frenzy in 2006. …. By contrast, government lenders made just over $100 billion in subprime and alt-A loans in 2006. Even in 2007, when the housing market was beginning its free fall, private lenders still handed out more than $300 billion via these very shaky mortgage loans…(“Fannie and Freddie don’t deserve blame for bubble,” Mark Zandi, Washington Post)

The vast amount of bad mortgages were generated by privately-owned banks, not government-sponsored entities. Keep that in mind the next time your loudmouth brother-in-law starts spouting off about how the GSE’s or the Community Reinvestment Act (CRA) caused the financial meltdown. The banks were 100 percent responsible. And now they’re back for a double-dip because they still have tons of these wilting loans in their vaults and they need to get rid of them pronto. And that’s where Obama comes in. The banks are counting on the dissembler in chief to make it look like this refi-claptrap is really an effort to “provide a bit of relief for an ailing economy” or “to help working folks make their mortgage payment”. It’s all hogwash.

The reason the banks have waited this long (for another bailout) is because the 50-state robosigning case has dragged on longer than they’d anticipated. They figured the 50 state Attorneys General would roll over and play dead like the other politicians they deal with. But that hasn’t happened. The legal fight continues with no end in sight. What the banks are hoping for is a ruling “that prevents states from effectively challenging future foreclosure actions that are based on faulty prior assignments.” In other words, they want to be able to boot you out of your home whether they have proper documentation or not.

Meanwhile, the backlog of homes (that’s in some stage of foreclosure) continues to grow to record levels. When the sluice-gates finally open, an ocean of distressed homes will surge onto the market sending prices plunging and leaving bank balance sheets deep in the red. Here’s more from CNBC’s Diana Olick:

“To give you an idea of just how much the “robo” scandal is toying with the numbers, LPS compared states that require foreclosures to go through the courts versus states that don’t (judicial versus non-judicial) and found the following: 

- 50 percent of loans in foreclosure in judicial states have not made a payment in two years, as opposed to 28 percent in non-judicial states. 

Foreclosure sale rates in non-judicial states are about four times those in judicial states.” (“Robo-Reality: Final Foreclosures Fall as Pipeline Swells” Realty Check, CNBC)

The backlog of distressed homes is much greater than the data would indicate. Neither the official nor the shadow inventory accurately accounts for the bulging number of homes (10 million) currently in the pipeline.

That’s why the administration is looking for creative ways to whittle down the supply. One idea is to sell foreclosures in bulk to deep-pocket investors with the proviso that they convert them into rentals. But why give Wall Street fatcats the privilege of buying foreclosures at a discount when mom and pop investors are already scarfing them up like hotcakes? How fair is that?

The driving force behind the foreclosures-to-rental scam is that the banks want to remove the GSE’s stock of distressed homes from the competition so they can fetch a better price when their REO’s hit the market. Once again, the policy is being tailored to meet the needs of the banks not the people. Here’s more from Olick about the risks this poses to FHA:

“Critics will also argue that the FHA, which now has an inordinately, historically large share of the mortgage market, is in no position to take on any more risk. The FHA could be considered “underwater” itself, guaranteeing about $1 trillion in mortgages but sitting on just a $1.2 billion dollar cushion to cover losses. 

To that end, officials say they could create a separate fund for these loans, not the regular mutual mortgage insurance fund (MMI). This would be a special risk fund, designed to handle high losses.” (“Obama’s Mortgage Refi Plan to Go Through FHA”, CNBC)

How do you like that? The FHA is already leveraged at 100-to-1 and the banks want to add even more debt. And they want to do it in the most deceptive way possible, by creating an off-balance sheet investment vehicle where the red ink can be hidden from public view.

To be eligible for Obama’s refi-program, borrowers will need a credit score (FICO) above 580,(which is extremely low), they’ll have to be employed, and they’ll have to be current on their mortgage payments. (for the last 6 months) In other words, lending standards are being eased so the banks can dump as many high-risk mortgages on the FHA as possible. Obama breezily refers to these abysmal lending standards as “cutting through the red tape.”

Applicants will also be able to refinance under the Obama’s program with loan balances up to (get this) 140 percent of the value of their home. So, even if you owe $560,000 on a home that is currently worth $400,000–and you don’t have a dime’s worth of equity in the house–have no fear–you can still get money from Uncle Sugar. This isn’t a good way to keep people in their homes. It just turns them into debt slaves.

One last thing, all the talk about a “bank tax” is pure blather. The banks will be more than happy to cough-up $5 billion or so if it means they’ll be able to jettison the hundreds of billions in crappy loans on their books. As far as they’re concerned, that’s money “well spent”.

Koch Brothers Convene Super-Secret Billionaires' Meeting for 2012 Elections

Some of America's wealthiest Republicans flew into Palm Springs last weekend to update their stealthy political strategy for 2012.
By Lee Fang, Republic Report
Posted on February 4, 2012


At a retreat last weekend, dozens of wealthy donors convened in a large golf resort in Indian Wells, Calif. for a four day conference to raise money and plot out election year strategy, the Republic Report has confirmed. We traveled to the conference, and spoke to a few of the attendees.


The summit, organized by the billionaire brothers Charles and David Koch, was cloaked in secrecy. Helicopters, private security and police officers from neighboring cities patrolled the area constantly. In previous years, Supreme Court justices, some of the wealthiest businessmen in the country and Republican politicians like Congressman Paul Ryan have all gathered at these twice-annual events. The Esmerelda Renaissance, the conference venue this year, was guarded carefully with every entrance blocked and the entire 560-room resort rented out. I arrived at the hotel the night before the event, but was followed closely by security and asked to leave the next morning before the Koch meeting guests arrived.


Though the donors will funnel tens of millions of dollars into the election this year, they will not have to disclose a single cent. Using an elaborate array of foundations, nonprofits and other legal entities, the Koch network sponsored bus tours, attack ads, think tanks, and hired Tea Party organizers to shape the midterm elections two years ago. Now, they appear to be expanding their effort.


The most the public knows about these meetings has been culled from leaked audio tapes,reporting from journalists like Ken Vogel, and from an invitation I exclusively reported back in October 2010. The document I posted over a year ago explained that during the meetings, strategy is discussed, from legislative campaigns to judicial elections, and money is raised from an assortment of executives from the oil, banking, manufacturing, and real estate industries.


At the Palm Springs Airport last weekend, I ran into Phil Kerpen, the vice president of Americans for Prosperity, the Tea Party group founded by David Koch. Kerpen, who was in a rush to make it to the event, didn’t say much about the agenda. Kerpen’s group recently purchased $6 million in undisclosed attack ads against President Obama, the largest such buy of the entire campaign cycle so far.


Kerpen asked how I knew about the conference. “I thought they had stopped all leaks,” he muttered, as I walked with him through the baggage claim. Eventually he relented a bit and told me that he hopes to help achieve “aggressive cuts to government spending and to regulation to allow robust economic growth” in January 2013.


At the last Koch meeting, in Vail, Colo., Charles Koch raised several million dollars from his cohorts, while reffering to President Obama as “Saddam Hussein” and this year’s election as the “mother of all wars.” Kerpen disputed the reporting of Charles Koch’s comments, but did not elaborate on what the Koch Industries CEO really meant.


“Ask your leaker to post my speech, because it’s very good,” he added, before getting in a car with two associates.


The added secrecy was apparent even to local reporters, who were confused about why the multi-golf course Esmerelda Renaissance was locked down and why the hotel staff couldn’t talk to anyone about what was going on.


The jets provided many clues into who was attending the event. A private plane owned by wealthy mutual fund manager Foster Friess flew to the area the morning of the conference, and left the day it ended. Friess is a social conservative who has gained headlines recently for his massive backing of a super-PAC supporting Rick Santorum. He has also attended the Koch meeting in the past.


A plane belonging to billionaire investor Phil Anschutz, another regular Koch attendee and major conservative financier, arrived at a nearby airport during the event. We identified over half a dozen private planes owned by major Republican donors that also arrived in the Indian Wells area during the event, but none of their owners would respond to requests for comment. Some, like Kenny Troutt, a financier of a super-PAC that supported Rick Perry’s bid for the presidency, seem to suggest new participants to the Koch meetings.


A jet owned by Continental Resources, a large fracking company that dominates the Bakken shale formation in North Dakota, arrived at the event. The company, headed by Obama critic Harold Hamm, refused to answer any questions about the Koch meeting.


About a day after our call, a Web site that tracks private jet flights posted a note about Continental Resources: “This aircraft is not available for tracking per request from the owner/operator.”

The Democrats Who Unleashed Wall Street and Got Away With It

Thursday, February 2, 2012 by TruthDig.com
by Robert Scheer

That Lawrence Summers, a president emeritus of Harvard, is a consummate distorter of fact and logic is not a revelation. That he and Bill Clinton, the president he served as treasury secretary, can still get away with disclaiming responsibility for our financial meltdown is an insult to reason.

Yet, there they go again. Clinton is presented, in a fawning cover story in the current edition of Esquire magazine, as “Someone we can all agree on. ... Even his staunchest enemies now regard his presidency as the good old days.” In a softball interview, Clinton is once again allowed to pass himself off as a job creator without noting the subsequent loss of jobs resulting from the collapse of the housing derivatives bubble that his financial deregulatory policies promoted.

At least Summers, in a testier interview by British journalist Krishnan Guru-Murthy of Channel 4 News, was asked some tough questions about his responsibility as Clinton’s treasury secretary for the financial collapse that occurred some years later. He, like Clinton, still defends the reversal of the 1933 Glass-Steagall Act, a 1999 repeal that destroyed the wall between investment and commercial banking put into place by Franklin Roosevelt in response to the Great Depression.

“I think the evidence is that I am right about that. If you look at the big players, Lehman and Bear Stearns were both standalone investment banks,” Summers replied, referring to two investment banks allowed to fold. Summers is very good at obscuring the obvious truth—that the too-big-to-fail banks, made legal by Clinton-era deregulation, required taxpayer bailouts.

The point of Glass-Steagall was to prevent jeopardizing commercial banks holding the savings of average citizens. Summers knows full well that the passage of the repeal of Glass-Steagall was pushed initially by Citigroup, a mammoth merger of investment and commercial banking that create the largest financial institution in the world, an institution that eventually had to be bailed out with taxpayer funds to avoid economic disaster for millions of ordinary Americans. He also knows that Citigroup—where Robert Rubin, who preceded Summers as Clinton’s treasury secretary, played leading roles during a critical time—specialized in precisely the mortgage and other debt packages and insurance scams that were the source of America’s economic crisis.

Even Clinton, in a rare moment of honest appraisal of his record, conceded that his signing of the Commodity Futures Modernization Act (CFMA), legalizing those credit default swaps and collateralized debt obligations, was based on bad advice. That advice would have had to come from Summers, his point man pushing the CFMA legislation, which Clinton signed into law during his lame-duck days.

When the British interviewer reminded him of Clinton’s comment, Summers, as is his style, simply bristled: “Again, you make everything so simple, when in fact it’s complicated. Would it have been better if the whole financial reform legislation had passed in 1999, or 1998, or 1992? Yes, of course it would have been better. But … at the time Bill Clinton was president, there essentially were no credit default swaps. So the issue that became a serious problem really wasn’t an issue that was on the horizon.”

That is a lie. Credit default swaps had been sold at least since 1991, and collateralized debt obligations of all sorts quickly became the rage during the Clinton years. Summers surely remembers that Brooksley Born, the legal expert on such matters that Clinton appointed to head the Commodity Futures Trading Commission (CFTC), warned about the ballooning danger of those unregulated derivatives. Born, who served with Summers as one of four members of the President’s Working Group on Financial Markets, tried repeatedly and in vain to get her colleagues to act. When her pleas fell on deaf ears she issued a “concept release” calling attention to an unregulated derivatives market that was even then spiraling out of control.

The CFMA legislation that Summers pushed and Clinton signed was a specific rebuke to Born’s efforts. As Summers testified at the time before a Senate committee: “As you know, Mr. Chairman, the CFTC’s recent concept release has been a matter of great concern, not merely to Treasury, but to all those with an interest in the OTC [over-the-counter] derivatives market. In our view, the Release has cast the shadow of regulatory uncertainty over an otherwise thriving market—raising risks for stability and competitiveness of American derivative trading. We believe it quite important that the doubts be eliminated.”

Those doubts were eliminated by the new law exempting all of that troubling OTC derivatives trading from all existing regulations and regulatory agencies. Summers argued in his congressional testimony that there was no reason for any government regulation of what turned out to be tens of trillions of dollars in toxic assets:

“First, the parties to these kinds of contracts are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies and most of which are already subject to basic safety and soundness regulation under existing banking and securities law.

“Second, given the nature of the underlying assets involved—namely supplies of financial exchange and other financial instruments—there would seem to be little scope for market manipulation of the kind seen in traditional agricultural commodities, the supply of which is inherently limited and changeable.”

Has any economist ever gotten it so wrong?

Wall Street Journal Slammed for Giving Platform to Climate Change Deniers

Wednesday, February 1, 2012 by Common Dreams

In response to an op-ed printed late last week in the Wall Street Journal, signed by sixteen 'scientists' and entitled, 'No Need to Panic About Global Warming,' forty climate scientists have penned a letter, printed in today's WSJ, arguing that taking advice on climate change from scientists who have either "no expertise in climate science" or "extreme views that are out of step with nearly every other climate expert" is akin to allowing dentists perform heart surgery.

A letter from some 40 leading scientists, which the Wall Street Journal published, noted that 97% of researchers who publish on climate change agree the phenomenon is real and caused by humans.

Suzanne Goldenberg reports for The Guardian:

The Wall Street Journal  has received a dressing down from a large group of leading scientists for promoting retrograde and out-of-date views on climate change. 

In an opinion piece run by the Journal on Wednesday, nearly 40 scientists, including acknowledged climate change experts, take on the paper for publishing an article disputing the evidence on global warming. 

The offending article, No Need to Panic About Global Warming, which appeared last week, argued that climate change was a cunning ploy deployed by governments to raise taxes and by non-profit organisations to solicit donations to save the planet. 

It was signed by 16 scientists who don't subscribe to the conventional wisdom that climate change is happening and is largely man-made - but as Wednesday's letter points out, many of those who signed don't actually work on climate science.

Here's the full letter, along with the signatories:

Do you consult your dentist about your heart condition? In science, as in any area, reputations are based on knowledge and expertise in a field and on published, peer-reviewed work. If you need surgery, you want a highly experienced expert in the field who has done a large number of the proposed operations. 

You published "No Need to Panic About Global Warming" (op-ed, Jan. 27) on climate change by the climate-science equivalent of dentists practicing cardiology. While accomplished in their own fields, most of these authors have no expertise in climate science. The few authors who have such expertise are known to have extreme views that are out of step with nearly every other climate expert. This happens in nearly every field of science. For example, there is a retrovirus expert who does not accept that HIV causes AIDS. And it is instructive to recall that a few scientists continued to state that smoking did not cause cancer, long after that was settled science. 

Climate experts know that the long-term warming trend has not abated in the past decade. In fact, it was the warmest decade on record. Observations show unequivocally that our planet is getting hotter. And computer models have recently shown that during periods when there is a smaller increase of surface temperatures, warming is occurring elsewhere in the climate system, typically in the deep ocean. Such periods are a relatively common climate phenomenon, are consistent with our physical understanding of how the climate system works, and certainly do not invalidate our understanding of human-induced warming or the models used to simulate that warming. 

Thus, climate experts also know what one of us, Kevin Trenberth, actually meant by the out-of-context, misrepresented quote used in the op-ed. Mr. Trenberth was lamenting the inadequacy of observing systems to fully monitor warming trends in the deep ocean and other aspects of the short-term variations that always occur, together with the long-term human-induced warming trend. 

The National Academy of Sciences of the U.S. (set up by President Abraham Lincoln to advise on scientific issues), as well as major national academies of science around the world and every other authoritative body of scientists active in climate research have stated that the science is clear: The world is heating up and humans are primarily responsible. Impacts are already apparent and will increase. Reducing future impacts will require significant reductions in emissions of heat-trapping gases. 

Research shows that more than 97% of scientists actively publishing in the field agree that climate change is real and human caused. It would be an act of recklessness for any political leader to disregard the weight of evidence and ignore the enormous risks that climate change clearly poses. In addition, there is very clear evidence that investing in the transition to a low-carbon economy will not only allow the world to avoid the worst risks of climate change, but could also drive decades of economic growth. Just what the doctor ordered.

• Kevin Trenberth, Sc.D, Distinguished Senior Scientist, Climate Analysis Section, National Center for Atmospheric Research

• Richard Somerville, Ph.D., Distinguished Professor, Scripps Institution of Oceanography, University of California, San Diego

• Katharine Hayhoe, Ph.D., Director, Climate Science Center, Texas Tech University

• Rasmus Benestad, Ph.D., Senior Scientist, The Norwegian Meteorological Institute

• Gerald Meehl, Ph.D., Senior Scientist, Climate and Global Dynamics Division, National Center for Atmospheric Research

• Michael Oppenheimer, Ph.D., Professor of Geosciences; Director, Program in Science, Technology and Environmental Policy, Princeton University

• Peter Gleick, Ph.D., co-founder and president, Pacific Institute for Studies in Development, Environment, and Security

• Michael C. MacCracken, Ph.D., Chief Scientist, Climate Institute, Washington

• Michael Mann, Ph.D., Director, Earth System Science Center, Pennsylvania State University

• Steven Running, Ph.D., Professor, Director, Numerical Terradynamic Simulation Group, University of Montana

• Robert Corell, Ph.D., Chair, Arctic Climate Impact Assessment; Principal, Global Environment Technology Foundation

• Dennis Ojima, Ph.D., Professor, Senior Research Scientist, and Head of the Dept. of Interior's Climate Science Center at Colorado State University

• Josh Willis, Ph.D., Climate Scientist, NASA's Jet Propulsion Laboratory

• Matthew England, Ph.D., Professor, Joint Director of the Climate Change Research Centre, University of New South Wales, Australia

• Ken Caldeira, Ph.D., Atmospheric Scientist, Dept. of Global Ecology, Carnegie Institution

• Warren Washington, Ph.D., Senior Scientist, National Center for Atmospheric Research

• Terry L. Root, Ph.D., Senior Fellow, Woods Institute for the Environment, Stanford University

• David Karoly, Ph.D., ARC Federation Fellow and Professor, University of Melbourne, Australia

• Jeffrey Kiehl, Ph.D., Senior Scientist, Climate and Global Dynamics Division, National Center for Atmospheric Research

• Donald Wuebbles, Ph.D., Professor of Atmospheric Sciences, University of Illinois

• Camille Parmesan, Ph.D., Professor of Biology, University of Texas; Professor of Global Change Biology, Marine Institute, University of Plymouth, UK

• Simon Donner, Ph.D., Assistant Professor, Department of Geography, University of British Columbia, Canada

• Barrett N. Rock, Ph.D., Professor, Complex Systems Research Center and Department of Natural Resources, University of New Hampshire

• David Griggs, Ph.D., Professor and Director, Monash Sustainability Institute, Monash University, Australia

• Roger N. Jones, Ph.D., Professor, Professorial Research Fellow, Centre for Strategic Economic Studies, Victoria University, Australia

• William L. Chameides, Ph.D., Dean and Professor, School of the Environment, Duke University

• Gary Yohe, Ph.D., Professor, Economics and Environmental Studies, Wesleyan University, CT

• Robert Watson, Ph.D., Chief Scientific Advisor to the UK Department of Environment, Food and Rural Affairs; Chair of Environmental Sciences, University of East Anglia

• Steven Sherwood, Ph.D., Director, Climate Change Research Centre, University of New South Wales, Sydney, Australia

• Chris Rapley, Ph.D., Professor of Climate Science, University College London, UK

• Joan Kleypas, Ph.D., Scientist, Climate and Global Dynamics Division, National Center for Atmospheric Research

• James J. McCarthy, Ph.D., Professor of Biological Oceanography, Harvard University

• Stefan Rahmstorf, Ph.D., Professor of Physics of the Oceans, Potsdam University, Germany

• Julia Cole, Ph.D., Professor, Geosciences and Atmospheric Sciences, University of Arizona

• William H. Schlesinger, Ph.D., President, Cary Institute of Ecosystem Studies

• Jonathan Overpeck, Ph.D., Professor of Geosciences and Atmospheric Sciences, University of Arizona

• Eric Rignot, Ph.D., Senior Research Scientist, NASA's Jet Propulsion Laboratory; Professor of Earth System Science, University of California, Irvine

• Wolfgang Cramer, Professor of Global Ecology, Mediterranean Institute for Biodiversity and Ecology, CNRS, Aix-en-Provence, France

The Rapidly Expanding, Secret 'No-Fly List'

AP report shows number has doubled in past year to 21,000
Thursday, February 2, 2012 by Common Dreams

The classified list of individuals on the U.S. government's "no-fly list" has more than doubled in the last year.

According to the Associated Press, the list now has jumped from 10,000 a year ago to 21,000 now. 

They add:

The flood of new names began after the failed Christmas 2009 bombing of a Detroit-bound jetliner when the US government lowered the standard for putting people on the list and scoured its files for anyone who qualified. "We learned a lot about the watchlisting process and made strong improvements, which continue to this day," said Timothy Healy, director of the Terrorist Screening Center, which produces the no-fly list.Among the most significant new standard is that a person doesn't have to be considered only a threat to aviation to be placed on the list.People considered a broader threat to domestic or international security or who attended a terror training camp are also included, said a US counter-terrorism official who spoke on condition of anonymity. As agencies complete the reviews of their files, the pace of growth is expected to slow, the counter-terrorism official said.

On its website the Terrorist Screening Center writes this of its mission:

Consolidate the Government’s Watchlists into a Single Database 

Before the TSC was created, various government agencies maintained nearly a dozen separate watchlists designed to screen persons of interest to U.S. law enforcement and intelligence officials. While some lists were shared, there was little integration and cooperation, and there was no central clearinghouse where all law enforcement and government screeners could access the best information about a potential person of interest. That all changed when TSC consolidated the government’s approach to terrorism screening and today, the TSC is the global authority for watchlisting and identifying known and suspected terrorists.Maintain the Terrorist Watchlist, the No-Fly List, and the Selectee ListThe Terrorist Watchlist (a.k.a., the Terrorist Screening Database or TSDB), contains thousands of records that are updated daily and shared with federal, state, local, territorial, tribal law enforcement, and Intelligence Community members as well as international partners to ensure that individuals with links to terrorism are appropriately screened. The No-Fly and Selectee Lists are two much smaller subsets of the Terrorist Watchlist.

In June of 2010, the American Civil Liberties Union (ACLU) filed a lawsuit challenging the constitutionality of the no-fly list.

"More and more Americans who have done nothing wrong find themselves unable to fly, and in some cases unable to return to the U.S., without any explanation whatsoever from the government," said Ben Wizner, staff attorney with the ACLU National Security Project. "A secret list that deprives people of the right to fly and places them into effective exile without any opportunity to object is both un-American and unconstitutional." 

"Without a reasonable way for people to challenge their inclusion on the list, there's no way to keep innocent people off it," said Nusrat Choudhury, a staff attorney with the ACLU National Security Project. "The government's decision to prevent people from flying without giving them a chance to defend themselves has a huge impact on people's lives - including their ability to perform their jobs, see their families and, in the case of U.S. citizens, to return home to the United States from abroad."

The Health Care Racket

Follow the Bills
by RALPH NADER

Looking at millions of individual bills that makeup the 2.7 trillion dollars of annual health care costs opens a gigantic window on the massive waste, redundancy, profiteering, fraud and sometimes criminal over-billing.

Here is a partial example of what I mean, in the words of Philip M. Boffey, the estimable science writer for the New York Times:

“Why does an appendectomy in Germany cost roughly a quarter what it costs in the United States? ($3,285 compared to $13,123). Or an MRI scan cost less than a third as much, on average, in Canada? ($304 compared to $1,009).
“Americans continue to spend more on health care than patients anywhere else. In 2009, we spent $7,960 per person, twice as much as France, which is known for providing very good health services. And for all that spending, we get very mixed results—some superb, some average, some inferior—compared with other advanced nations.”

Moreover, France and Germany, Italy, England, Canada, Belgium, Sweden and all other western countries plus Japan and Taiwan cover almost all their citizens, unlike the U.S. where 50,000,000 people are uninsured.

Boffey, who wrote a book on the National Academy of Sciences, (The Brain Bank of America: An Inquiry into the Politics of Science), under our sponsorship in 1975 goes on to cite the comparative price report of the International Federation of Health Plans in 2010. They are stunning! For Britain, Canada, France, Germany and the U.S. respectively, the average cost in dollars for bypass surgery is $13,998, $22,212, $16,325, $27,237 and in the U.S. $59,770. For cataract surgery the bill is $1,299, $927, $3,352, N.A. and in the U.S. $14,764.

Boffey adds other explanatory factors. These include higher administrative costs to deal with insurance paperwork, higher insurance company profits and executive compensation and less developed electronic health records leading to costly errors.

Except for Germany there are somewhat longer waiting times for some patients to see a specialist in these countries. But in the U.S. seeing specialists is often prohibitively expensive, and if you cannot afford such services, that is the longest waiting time of all.

A recent commentary in the Mayo Clinic Proceedings last August by Charles. W. Slack and Warner V. Slack, MD suggests another compelling comparison—between outcomes in different states in the U.S. They ask “why, for example, do Mississippi, Louisiana, and Georgia have such a high rate of mortality amenable to health care when compared with Idaho, Oregon and Washington.” Wide differences between states and counties have been documented regarding the cost of identical operations, frequency of operations such as cesarean sections or hysterectomies and other surgical disparities studied under controlled variables.

Health care bills come with hefty levels of fraud. From the historic study twenty years ago by the then General Accounting Office of the Congress to the present estimates by the nation’s leading expert in this field, Professor Malcolm Sparrow at Harvard University, fully ten percent of all health care expenditures are the result of computerized billing fraud and abuse. That will be $270 billion this year.

Dr. Sparrow, an applied mathematician, says it could be higher if the federal government would simply do a more detailed study. He adds that the enforcement budget should be one percent of the estimable volume of fraud. In actual practice, the enforcement budget is less than one/tenth of one percent, even though every dollar of enforcement brings in at least seventeen dollars back. (See Dr. Sparrow’s website: http://www.hks.harvard.edu/fs/msparrow/ )

Obviously the corporate fraud lobby is stronger than the taxpayer/consumer lobby in Washington, D.C. But why the health insurance companies, a formidable force in their own right when it comes to protecting its turf against single payer or full Medicare insurance (see singlepayeraction.org) do not do more to stop fraudulent billing practices, is a puzzle.

All in all, the health care industry is replete with rackets that neither honest practitioners or regulators find worrisome enough to effectively challenge. The perverse economic incentives in this industry range from third party payments to third party procedures. Add paid-off members of Congress who starve enforcement budgets and the enormous profits that comes from that tired triad “waste, fraud and abuse” and you have a massive problem needing a massive solution.

So, voters, why not start challenging all candidates for elective office to make this vast daily heist a front burner campaign issue.

New Mexico House Passes Bill Calling On Congress To Reverse Citizens United

Citizens United is exactly as they wanted it, too. Money paid to get the candidate in office who will return favors big time.--jef




New Mexico House Passes Bill Calling On Congress To Reverse Citizens United
February 1, 2012
By Stephen D. Foster Jr.

Another blow has been struck against Citizens United, and this time it’s not by a city council. The New Mexico House of Representatives passed a bill on Tuesday, calling for Congress to overturn Citizens United via Constitutional Amendment. The final vote was 38-29 with one independent and one Republican joining Democrats to rebuke the controversial Supreme Court case that has allowed corporations and the super wealthy to donate unlimited amounts of money to candidates through the unfettered use of SuperPACS.

The New Mexico House joins the city councils of New York City, Albany, Missoula, Los Angeles, and several others across the country in calling for an end to Citizens United. The bill now heads for the New Mexico Senate.

The notion that corporations are people is very unpopular among the American people and the movement for a Constitutional Amendment is only growing, especially since Occupy Wall Street made the repeal of Citizens United one of their key demands. Republican Presidential candidate Mitt Romney has been vocal about his support of Citizens United, going so far as to declare that corporations are people in front of a crowd in Iowa. One thing is clear though. The American people do not like the idea of corporate personhood and are furious about corporations buying elections. And rightfully so. The American people want their democracy back.

Dempsey Told Israelis U.S. Won't Join Their War on Iran

Dempsey Told Israelis U.S. Won't Join Their War on Iran

By Gareth Porter

WASHINGTON, Feb 1, 2012 (IPS) - Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey told Israeli leaders Jan. 20 that the United States would not participate in a war against Iran begun by Israel without prior agreement from Washington, according to accounts from well-placed senior military officers.

Dempsey's warning, conveyed to both Prime Minister Benjamin Netanyahu and Israeli Defence Minister Ehud Barak, represents the strongest move yet by President Barack Obama to deter an Israeli attack and ensure that the United States is not caught up in a regional conflagration with Iran. 

But the Israeli government remains defiant about maintaining its freedom of action to make war on Iran, and it is counting on the influence of right-wing extremist views in U.S. politics to bring pressure to bear on Obama to fall into line with a possible Israeli attack during the election campaign this fall. 

Obama still appears reluctant to break publicly and explicitly with Israel over its threat of military aggression against Iran, even in the absence of evidence Iran has decided to build a nuclear weapon. 


Dempsey's trip was highly unusual, in that there was neither a press conference by the chairman nor any public statement by either side about the substance of his meetings with Israeli leaders. Even more remarkable, no leak about what he said to the Israelis has appeared in either U.S. or Israeli news media, indicating that both sides have regarded what Dempsey said as extremely sensitive. 


The substance of Dempsey's warning to the Israelis has become known, however, to active and retired senior flag officers with connections to the JCS, according to a military source who got it from those officers. 


A spokesman for the Joint Chiefs of Staff, Commander Patrick McNally, offered no comment Wednesday when IPS asked him about the above account of Dempsey's warning to the Israelis. 


The message carried by Dempsey was the first explicit statement to the Netanyahu government that the United States would not defend Israel if it attacked Iran unilaterally. But Defence Secretary Leon Panetta had given a clear hint in an interview on "Face the Nation" Jan. 8 that the Obama administration would not help defend Israel in a war against Iran that Israel had initiated. 


Asked how the United States would react if Israel were to launch a unilateral attack on Iran, Panetta first emphasised the need for a coordinated policy toward Iran with Israel. But when host Bob Schieffer repeated the question, Panetta said, "If the Israelis made that decision, we would have to be prepared to protect our forces in that situation. And that's what we'd be concerned about." 


Defence Minister Barak had sought to dampen media speculation before Dempsey's arrival that the chairman was coming to put pressure on Israel over its threat to attack Iran, but then proceeded to reiterate the Netanyahu-Barak position that they cannot give up their responsibility for the security of Israel "for anyone, including our American friends". 


There has been no evidence since the Dempsey visit of any change in the Netanyahu government's insistence on maintaining its freedom of action to attack Iran. 


Dempsey's meetings with Netanyahu and Barak also failed to resolve the issue of the joint U.S.-Israeli military exercise geared to a missile attack, "Austere Challenge '12", which had been scheduled for April 2012 but had been postponed abruptly a few days before his arrival in Israel. 


More than two weeks after Dempsey's meeting with Barak, the spokesman for the Pentagon, John Kirby, told IPS, "All I can say is that the exercise will be held later this year." That indicated that there has been no major change in the status of U.S.-Israeli discussions of the issue since the postponement of the exercise was leaked Jan. 15. 

The postponement has been the subject of conflicting and unconvincing explanations from the Israeli side, suggesting disarray in the Netanyahu government over how to handle the issue. 


To add to the confusion, Israeli and U.S. statements left it unclear whether the decision had been unilateral or joint as well as the reasons for the decision. 


Panetta asserted in a news conference Jan. 18 that Barak himself had asked him to postpone the exercise. 


It now clear that both sides had an interest in postponing the exercise and very possibly letting it expire by failing to reach a decision on it. 


The Israelis appear to have two distinct reasons for putting the exercise off, which reflect differences between the interests of Netanyahu and his defence minister. 


Netanyahu's primary interest in relation to the exercise was evidently to give the Republican candidate ammunition to fire at Obama during the fall campaign by insinuating that the postponement was decided at the behest of Obama to reduce tensions with Iran. 


Thus Mark Regev, Netanyahu's spokesman, explained it as a "joint" decision with the United States, adding, "The thinking was it was not the right timing now to conduct such an exercise." 


Barak, however, had an entirely different concern, which was related to the Israeli Defence Forces' readiness to carry out an operation that would involve both attacking Iran's nuclear facilities and minimising the Iranian retaliatory response. 


A former U.S. intelligence analyst who followed the Israeli military closely told IPS he strongly suspects that the IDF has pressed Barak to insist that the Israeli force be at the peak of readiness if and when they are asked to attack Iran. 


The analyst, who insisted on anonymity because of his continuing contacts with U.S. military and intelligence personnel, said the 2006 Lebanon War debacle continues to haunt the thinking of IDF leaders. In that war, it became clear that the IDF had not been ready to handle Hezbollah rocket attacks adequately, and the prestige of the Israeli military suffered a serious blow. 


The insistence of IDF leaders that they never go to war before being fully prepared is a primary consideration for Barak, according to the analyst. "Austere Challenge '12" would inevitably involve a major consumption of military resources, he observes, which would reduce Israeli readiness for war in the short run. 


The concern about a major military exercise actually reducing the IDF's readiness for war against Iran would explain why senior Israeli military officials were reported to have suggested that the reasons for the postponement were mostly "technical and logistical". 


The Israeli military concern about expending scarce resources on the exercise would apply, of course, regardless of whether the exercise was planned for April or late 2012. That fact would help explain why the exercise has not been rescheduled, despite statements from the U.S. side that it will be. 


The U.S. military, however, has its own reasons for being unenthusiastic about the exercise. IPS has learned from a knowledgeable source that, well before the Obama administration began distancing itself from Israel's Iran policy, U.S. Central Command chief James N. Mattis had expressed concern about the implications of an exercise so obviously based on a scenario involving Iranian retaliation for an Israeli attack. 


U.S. officials have been quoted as suspecting that the Israeli request for a postponement of the exercise indicated that Israel wanted to leave its options open for conducting a strike on Iran's nuclear facilities in the spring. But a postponement to the fall would not change that problem. 


For that reason, the former U.S. intelligence analyst told IPS he doubts that "Austere Challenge '12" will ever be carried out. 


But the White House has an obvious political interest in using the military exercise to demonstrate that the Obama administration has increased military cooperation with Israel to an unprecedented level. 

The Defence Department wants the exercise to be held in October, according to the military source in touch with senior flag officers connected to the Joint Chiefs. 

Super PAC Power: The 0.1% Buying Our Elections

Wednesday, February 1, 2012 by Common Dreams

FEC disclosures yesterday show wealthy donors, corporations behind Super PAC money


Super PACS--made possible following the outcomes of two court decisions in 2010: the Citizens United v. FEC decision and the SpeechNow.org v. FEC decision--can take unlimited donations from individuals, corporations, associations and unions.

As the disclosures to the Federal Election Commission (FEC) late last night show, not only have millions been flowing to these Super PACs, the disclosures show these are clearly donations from the "0.1%" -- corporations and individuals donating tens of thousands, one hundred thousand, even donations of millions of dollars.

Mitt Romney's Super PAC Restore Our Future shows around 60 donations of $100,000 or more, with a total of around $17.9 million for the last six months of 2011.

An NBC/MSNBC report adds:

The Romney Super PAC collected seven $1 million donations, including one from Paul Singer, the billionaire and secretive head of the Elliott Management hedge fund, and two others from hedge fund kingpins Julian Robertson of Tiger Management and Robert Mercer of Rennaissance Technologies. 

Others accounting for $1 million donations included Florida energy executive Bill Koch of Oxbow Carbon, who has also been a fundraiser for Romney's presidential campaign; Miguel Fernandez, who chairs a Miami private equity firm MBF Healthcare Partners; and Rooney Holdings of Tulsa Oklahoma. 

Also giving a total of $1 million were firms headed by Frank L. VanderSloot of Idaho. He is also the co-chair of Romney's Idaho finance operation. His firms, operating under the names Melaleuca Inc., Melaleuca of Asia Ltd. Co., Melaleuca of Japan Inc., Melaleuca of Southeast Asia Inc., gave a total of $250,000. The company sells Nicole Miller Timeless Age Defying Serum and other home "wellness" remedies. Forbes magazine has a profile of VanderSloot here. 

Three executives of Bain Capital, the private equity firm formerly headed by Romney, gave a total of $625,000. 

Romney has insisted he is not involved in the Super PAC and has no control over its ad buys or messages. But further evidence that the group is working closely with Romney's interests came Tuesday night when Restore Our Future held back its required filing with the Federal Election Commission until after Romney had given his victory speech in the Florida primary.

Speaking to Chris Matthews last night on Hardball, NBC investigative correspondent Michael Isikoff talked about the influence of big-money donors on Romney's Super PAC:

Reuters adds details on Newt Gingrich's Super PAC, Winning Our Future:

Total raised as of December 31: $2.1 million

• Sheldon Adelson - billionaire Las Vegas casino magnate who built the Venetian hotel and casino. Donation: $5 million (not reflected in the PAC's fundraising filing on Tuesday because the donation was made in January, after the December 31 cutoff for the FEC reporting period) 

• Miriam Adelson - doctor, wife of Sheldon Adelson. Donation: $5 million (also made in January ) 

• William Propst - real estate investor in Huntsville, Alabama. Donation: $500,000 

• Harold Simmons - billionaire Dallas banker and pioneer of leverage buyouts, chairman and CEO of Contran Corp. Initially supported Texas Governor Rick Perry. Donation: $500,000 

• Sivan Ochshorn - step-daughter of Sheldon Adelson. Donation: $500,000 

• Yasmin Lukatz - casino executive in Las Vegas and step-daughter of Sheldon Adelson. Donation: $250,000

Despite these disclosures to the FEC, there remains mystery behind the non-profit arms of those super PACS.

WBUR Boston reports:

But what’s behind the headlines is the money the non-profit arms of those super PACS are raking in, such as Crossroads GPS, part of Karl Rove’s super PAC “American Crossroads.”
It’s out with a new ad Wednesday, attacking the Obama administration’s financial backing of now-bankrupt solar panel maker Solyndra. 

American Crossroads and Crossroads GPS disclosed that they raised $51 million last year, but because it’s a tax-exempt 501(c)4 group, “Crossroads GPS” does not have to disclose its donors.

International agreement cements frequently-abused U.S. copyright law

By Stephen C. Webster - RAW Story

Wednesday, February 1, 2012

With the latest round of anti-piracy bills now soundly defeated, many activists and lawmakers have begun thinking about ways that the Digital Millennium Copyright Act (DMCA) may be changed to remediate portions that have been abused by copyright holders.

Only, they’ve discovered that it may be too late.

The Obama administration signed off on an international agreement late last year called the Anti-Counterfeiting Trade Act (ACTA) that effectively exports much of the DMCA to Europe, Japan, Australia and other developed nations, and most likely cements those laws in place as-is here at home. Though negotiated in out of public view, as all U.S. Trade Representative (USTR) agreements are, portions of ACTA’s early form became public after anti-secrecy website WikiLeaks released a trove of U.S. diplomatic cables referring to the talks.

Those cables showed a vastly different — and much more objectionable — agreement than what President Barack Obama eventually signed in 2011. Nonetheless, anti-ACTA activists have tried to generate mass opposition to the treaty by comparing it to the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA), in an apparent effort to energize the same Internet users that were so successful in defeating those bills last month. But their arguments, largely based on conjecture and hyperbole, may ultimately hurt opponents of ACTA more than they help, allowing the Obama administration to reject lawmakers who call for reforms, like Sen. Ron Wyden (D-OR) and Rep. Darrell Issa (R-CA).

As ACTA exists today, the administration insists that it does not make any alterations to U.S. law and does not introduce any new concepts for countries that have signed on, which is why the USTR and the Obama administration treated it as an “executive agreement” and did not send it to the U.S. Senate for ratification. Such executive agreements, though controversial, are not unheard of. The president does have the authority to enter into international agreements if it does not alter U.S. law, because such an agreement does not meet the technical definition of a treaty.

Instead of mirroring SOPA/PIPA, ACTA appears to primarilly formalize language from a number of existing bilateral free trade agreements, all of which have included intellectual property enforcement requirements.

The current copyright enforcement regime, codified under the DMCA, has been greatly abused in the U.S. because of the number of pitfalls that were not foreseen by lawmakers who crafted the legislation in the mid-90s. The Electronic Frontier Foundation (EFF), a technology policy group, has a list of DMCA abuses where copyright holders have been empowered by the law to prevent the publication of damaging information, bully competition out of the market, limit consumer choices, hinder scientific research, censor media outlets, modify or delete user-submitted multimedia on the Internet and discourage technological innovation.

“Years of experience with the ‘anti-circumvention’ provisions of the DMCA demonstrate that the statute reaches too far, chilling a wide variety of legitimate activities in ways Congress did not intend,” the EFF explained. “As an increasing number of copyright works are wrapped in technological protection measures, it is likely that the DMCA’s anti-circumvention provisions will be applied in further unforeseen contexts, hindering the legitimate activities of innovators, researchers, the press, and the public at large.”

Although it’s not technically a treaty in the strictest sense because it doesn’t require changes to current law, any future legislative changes to the DCMA that counter provisions in ACTA could run into roadblocks. Once ACTA enters into force, any changes to U.S. copyright enforcement law could well run afoul of ACTA, forcing a future Administration to either withdraw from ACTA, renegotiate parts of the treaty to remain in compliance or risk sanctions from the other parties to the agreement. For its part, the Obama administration has insisted that ACTA does not tie the hands of Congress, but a future administration may read the text differently.

“The theory is that ‘foreign affairs’ is, in Article II of the Constitution, a power specifically allocated to the President — and, therefore, since ACTA is an issue under ‘foreign affairs’ it should be viewed as a Sole Executive Agreement that does not need Congressional approval,” Michael Burke, a Washington, D.C. attorney who specializes in international law, explained to Raw Story. “Both the Constitution and relevant Supreme Court cases are clear that the President, sometimes, has ‘sole’ and ‘plenary’ authority on foreign relations/foreign affairs.”

“However,” Burke added, “others feel that Article I, Section 8 of the Constitution — that allocates to Congress the power to regulate trade among nations-means that ACTA should not be considered a Sole Executive Agreement but a treaty subject to review and vote by the Senate.” That’s led the president’s critics to latch on to claims that he’s superseded his constitutional authority.

In its earliest forms, anti-ACTA activists wouldn’t have been wrong in their assertions: ACTA previously contained SOPA-like provisions that would disconnect repeat copyright offenders from the Internet, DNS blockades for rogue websites and liability provisions that would make network administrators and website owners responsible for the actions of their users. Sources say, and cables show, those provisions were fought tooth-and-nail behind the scenes and ultimately dropped from the final version, though they’ve already reappeared in the Trans-Pacific Partnership, a potential treaty which enters its 11th round of negotiations in March.

While ACTA is not a backdoor to imposing SOPA/PIPA on an unwilling populace, as some have claimed, it is broadly representative of the American entertainment industry’s long-term investment in using the American government to help it impost new copyright regimes abroad. Further evidence of that long-term goal can be found in U.S. diplomatic cables leaked last year.

ACTA is not likely to have immediate effects in the States, as part of the U.S.’s overall international copyright enforcement strategy, but it does give the Administration yet another tool in its arsenal to pursue sanctions against nations it deems insufficiently committed to protecting the U.S. entertainment industry’s profits.

For example, the U.S. keeps a list of countries that skirt these requirements, targeting them with economic pressure to force compliance. Already, Spain was the most recent to face such pressure, which was revealed in December after a U.S. diplomat’s letter was leaked to the media. Because of U.S. pressure, Spain’s new administration adopted intellectual property laws similar to SOPA, even after the previous administration refused.

Under ACTA, U.S. power to force compliance onto countries with more liberal fair use and less onerous enforcement policies will simply grow.

ACTA--The Underlying Trap to Control the Web

Austerity Does Not Grow the Economy

The Results are in From Britain!
by DEAN BAKER

The Federal Reserve Board issued new projections for the economy last week, and they are not pretty. It projects the unemployment rate will still be 8.2 percent at the end of this year, 7.4 percent at the end of 2013, and 6.7 percent at the end of 2014. To put this in context, the unemployment rate peaked at 7.6 percent in the 1990-91 recession and never got above 6.3 percent in the 2001 recession. The Fed is projecting that seven years after the onset of the current recession, the unemployment rate will still be higher than at any point in the last recession.

This should have people alarmed and angry since it means that millions of lives will be ruined. Workers who are unable to find jobs will not be able to support families, contributing to stress and breakups.

The reason the economy is not creating jobs is simply that there is no source of demand to replace the demand created by the housing bubble. With nothing to replace this lost demand, companies see little reason to expand production and hiring.

Government spending is an obvious source of demand. However this spigot has been closed due to concerns over deficits. We have thousands of people in Washington who seem convinced that if the government would just stop spending money and lay off more employees then the private sector would respond with increased output and hiring.

While this might seem implausible on its face (what business hires people because the government has laid off school teachers or firefighters?), we no longer have to speculate about the impact of budget cuts and government layoffs, the United Kingdom is showing us.

The government elected last spring in the United Kingdom committed itself to rapidly reducing the size of its deficit. This government austerity was supposed to give a big boost to the private sector. It actually did the opposite. Growth has fallen to a near standstill. The IMF projects that the U.K. economy will grow by just 0.6 percent this year and an only slighter better 1.6 percent in 2013. This pace is not even fast enough to keep up with the growth of the U.K.’s labor market.

It would be good if the politicians in Washington could learn these basic facts about the British economy. They might then realize that deficit reduction destroys jobs, it doesn’t create them. There are times when we should be worried about the size of the deficit, but this is not one of them.

Economics 101

The Emperor Has No Clothes
by PAUL CRAIG ROBERTS

FEBRUARY 01, 2012




Last Friday (January 27) the US Bureau of Economic Analysis announced its advance estimate that in the last quarter of 2011 the economy grew at an annual rate of 2.8% in real inflation-adjusted terms, an increase from the annual rate of growth in the third quarter.


Good news, right?


Wrong. If you want to know what is really happening, you must turn to John Williams at shadowstats.com.


What the presstitute media did not tell us is that almost the entire gain In GDP growth was due to “involuntary inventory build-up,” that is, more goods were produced than were sold.


Net of the unsold goods, the annualized real growth rate was eight-tenths of one percent.


And even that tiny growth rate is an exaggeration, because it is deflated with a measure of inflation that understates inflation. The US government’s measure of inflation no longer measures a constant standard of living. Instead, the government’s inflation measure relies on substitution of cheaper goods for those that rise in price. In other words, the government holds the measure of inflation down by measuring a declining standard of living. This permits our rulers to divert cost-of-living-adjustments that should be paid to Social Security recipients to wars of aggression, police state, and banker bailouts.


When the methodology that measures a constant standard of living is used to deflate nominal GDP, the result is a shrinking US economy. It becomes clear that the US economy has had no recovery and has now been in deep recession for four years despite the proclamation by the National Bureau of Economic Research of a recovery based on the rigged official numbers.


A government can always produce the illusion of economic growth by underestimating the rate of inflation. There is no question that a substitution-based measure of inflation understates the inflation that people experience. More proof that there has been no economic recovery is available from those data series that are unaffected by inflation. If the economy were in fact recovering, these date series would be picking up. Instead, they are flat or declining, as John Williams demonstrates.


For example, according to the government’s own data, payroll employment in December 2011 is less than in 2001. Meanwhile, there has been a decade of population growth. The presstitute media calls the alleged economic recovery a “jobless recovery,” which is a contradiction in terms. There can be no recovery without a growth in employment and consumer income.


Real average weekly earnings (deflated by the government’s CPI-W) have never recovered their 1973 peak. Real median household income (deflated by the government’s CPI-U) has not recovered its 2001 peak and is below the 1969 level. If earnings were deflated by the original methodology instead of by the new substitution-based methodology, the picture would be bleaker.


Consumer confidence shows no recovery and is far below the level of a decade ago.


How does an economy recover without a recovery in consumer confidence?


Housing starts have remained flat since 2009 and are below their previous peak.


Retail sales are below the index level of January 2000.


Industrial production remains below the index level of January 2000.


To repeat, the only indicator of economic recovery is the GDP deflated with an understated measure of inflation.


The US economy cannot recover, because the US economy depends on consumer expenditures for more than 70% of its activity. The offshoring of middle class jobs has stopped the rise in middle class income and caused a drop in consumer spending power.


The Federal Reserve under Alan Greenspan compensated for the absence of US consumer income growth with a policy of easy credit and a policy of driving up home prices with low interest rates. This policy allowed people to refinance their homes and to spend the inflated equity in their homes that Greenspan’s policy created.


In other words, an increase in consumer indebtedness and dissavings drove the economy in the place of the missing growth in consumer incomes.


Today, consumers are too indebted to borrow, and banks are too insolvent to lend. Therefore, there is no possibility of further debt expansion as a substitute for real income growth. An offshored economy is a dead and exhausted economy.


The consequences of a dead economy when the government is wasting trillions of dollars in wars of naked aggression and in bailouts of fraudulent financial institutions is a government budget that can only be financed by printing money.


The consequence of printing money when jobs have been moved offshore is an inflationary depression. This catastrophe could begin to unfold this year or in 2013. If Europe’s problems worsen, flight into dollars could delay sharp rises in US inflation until 2014.


The emperor has no clothes, and sooner or later this will be recognized.