Hedge Hogs; Gold Man’s Sacks; “financial terrorist attacks;” and the Obama sellout:

In the Name of Allah, Most Beneficent and Most Merciful | May the peace and blessing of Allah be upon His Messenger Muhammad, and his family and followers | Peace for those that follow the guidance.

Hedge Hogs; Gold Man’s Sacks;

“financial terrorist attacks;” and the Obama sellout:

 Status Quo “change” we do not believe in.

Blockbuster coming to local theaters soon: You may not be interested in “Financial Terrorist Attacks,” “Structural Adjustments Programs,” and “WWIII,” but the Banksters (& their contractors) are making them interested in you.

 

 September 7, 2011

Arrangement Abu Salman Deya ud Deen Eberle

www.tauheed.com | www.abusalman.com | Other Blogospheres

Contents: -(A)- Highlights | -(B)- Partial Timeline  

[Full article/book coming soon, by the will of God Almighty] 

|-A: Some Highlights:

Highlight: Many texts of scripture warn against the evil of usury / interest, which are well known, and can be read for their wisdom.

Islam Declares War on those that demand and pay usury / interest, and the greatest trial of the Muslim Nation/Community will be … money.  [Details TBA]

Highlight:

Some well known facts below, but maybe we will benefit to remember them in these times of global “debt” crisis [i.e. interest / usury and “leverage” and “equity” paid to the private banks for the use of their “banknotes” in boom, bust, war and peace].

Napoleon said in a telling quote: “Terrorism, war and bankruptcy are caused by the privatization of money, issued as a debt and compounded by interest …”

He might be one to know, for as Richard Lewinsohn explained in “The Profits of War,” the famous financier Rothschild’s war profits from the Napoleonic Wars financed the family’s later stock speculations.  The Rothschild’s were to monopolize the “national” banks of European nations, and gain unprecedented power and wealth.

The New York Times, April 1, 1915 reported that in 1914 Baron Nathan Mayer de Rothschild went to court to suppress Ignatius Balla’s book [The Romance of the Rothschilds] on the grounds that the Waterloo story about his grandfather was untrue and libelous [i.e. how he made vast fortune crashing the London Stock Exchange by cunning deception and manipulation]. The court ruled that the story was true, dismissed Rothschild’s suit, and ordered him to pay all costs.

See New York Times:

http://query.nytimes.com/mem/archive-free/pdf?res=F50C1EFE385F13738DDDAF0A94D9405B838DF1D3

E.C. Knuth said in “The Empire of the City” [p.71]: “The fact that the House of Rothschild made its money in the great crashes of history and the great wars of history, the very periods when others lost their money, is beyond question.”

Note that all nations of the world, now in 2011, have some strategically Rothschild controlled banks (except a few ‘rogue’ nations). Do you wonder who will be positioned to profit handsomely in the coming global financial crash and manipulated war?

Lothrop Stoddard, states in [“The New World of Islam”, New York Charles Scribner’s and Sons 1921 p. 34]: that the “…  prohibition on the lending of money at interest … is the example oftenest cited to prove Islam’s innate incompatibility with modern civilization. But the Christian canon law equally forbade interest, and enforced that prohibition so strictly, that for centuries the Jews had a monopoly of business in Europe, while the first Christians who dared to lend money (the Lombards) were regarded almost as heretics, were universally hated, and were frequently persecuted.” End Quote:

Ira M. Lapidus says [in A History of the Islamic Societies; Cambridge, 1988 pp. 606-607]:      “…. the first Ottoman loans were contracted in 1854, and henceforth, Ottoman economic development depended on European loans for railroads, mining, and public utilities. Foreign capital also financed military expenditures and the formation of Ottoman banks. By 1882 the Ottoman state could no longer pay the interest on its debts and was forced to accept a foreign debt administration.  Henceforth the foreign bankers controlled the Ottoman economy.  … This foreign-stimulated and foreign-regulated economy had important consequences for the social structure of Ottoman society. It favored the prosperity of Greek, Armenian, Jewish, and other minority groups involved in international trade….” End Quote:

Moral: “Bank” usury had specific historical beginning and progression, and has a cycle of Boom and Bust Crashes, and War, which march hand in hand, and woudnt ya know it, the banksters profit, over and over again, at the expense of those paying what is called – as a sly euphemism – interest.

Highlight: Goldman Sachs (Gold Man’s Sacks of gold and Sacks the others) concentrates wealth for clients and completely dominates “High Frequency Trading” business (HFT is the usage of supercomputers to automatically electronically buy-sell- manipulate the markets), and is fully implicated in manufacturing US and European economic ‘debt’ crisis, with collusion of Washington, the London “City,” the Federal Reserve (Ponzi Scheme “Fed”) and other Wall Street insiders, vs. the real interests of the Main Street of the world population, (honest businessmen and working classes and poor of the world).

Highlight: Former Goldman Sachs CEO Henry Paulson (a conspicuously large “hedge” hog) is positioned by Bush to “fix” the 2008 financial crisis of bankruptcies by Lehman Brothers, AIG etc, but really to protect Wall Street and hide the true extent of their crimes (subprime mortgages, derivatives, swaps, “toxic” debt, inside trading, etc) with Washington collusion, from Main Street, and to save privileges of super rich [top tenth of 0.01% of population] with their servants/ clients/ vassals and their tax cuts, privileges and ‘insider’ elitist corporate friendly laws.

Highlight: “High Frequency Trading” creates “flash clashes” in Stock Market on September 29, 2008, and on  May 6, 2010, (etc), are called “financial terrorist attacks” obviously to warn Main Street (if they are awake) who really is in control, and the Beltway (Washington) since they are impeccably timed to frighten Washington (unless they get frisky) from any real prosecution and “regulation” of the loaded corporate financial system, and from any audacious crazy idea of ‘Audit the Fed’ which would expose multitude trillions given to the ‘too big to fail” banks at taxpayers’ expense, above and beyond TARP, the Big Bailouts, “quantative easing,” the extension of  Bush’s super rich tax cuts, and corporate CEO super salaries and benefits, etc etc.

Highlight: Just like there will never be an independent investigation about the Sept 11, 2001 terrorist attacks (to expose the New Pearl Harbor event that propelled the perpetual war agenda of the Neo Con military-industrial-corporate-financial Empire i.e. by collusion and controlled demolition) there also will be never be an independent investigation into the more devastating HFT “financial terrorist attacks”  (to expose that they are inside jobs to further the agenda of super rich (0.01% of population) for continued massive wealth and power concentration).

Highlight: President Obama has shown to be the lackey of War (Noble “Peace” prize a cruel joke) and of Wall Street (despite the rhetoric) and not of Main Street (as some had hoped). For Wall Street see below.  For the WOT (War on Terrorism), with CIA black ops, drone warfare, national security secrecy laws, preemptive prosecution, protection of criminal “high treason” Bush administration, etc, Obama is proving to be more Bush than two Bushes (Papa and Baby, and with Jeb possibly coming, maybe three Bushes).

Hightlight: Warren Buffett, Chairman and CEO of Berkshire Hathaway and one of the richest men in the globe (said to be one of the ‘good’ guys because at least he admits that he pays less tax than his secretary, and admits that derivative are financial weapons of mass destruction): “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

 

This is confirmed by many reports: for instance, “The Center on Budget and Policy Priorities” report proves without doubt that the system is skewered to benefit the Corporate Oligarchy, just read the file: “Income Gaps Between Very Rich and Everyone Else More Than Tripled In Last Three Decades, New Data Show.”

|-B: Background: Some parts of the timeline and a few choice pieces of the puzzle

 

Napoleon Wars onwards, help reformulate “national banks” (in Europe and America) (see above)

1913: Federal Reserve Act enacted as law of the land. After three years President Woodrow Wilson later considers it to be the biggest mistake of his presidency, and says: “I am a most unhappy man. I have unwittingly ruined my country. A great industrial Nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the Nation, therefore, and all our activities are in the hands of a few men….”

Who are these “few men” but the Big Private Bankers [Bankers + Gangsters = Banksters] i.e. the top tenth of the 0.01% of super rich powerful “Financial Market” elite class, who receive the profits of the “interest” (usury) that must be paid for the Federal Reserve “notes” and “legal tender” [awfully harsh in reality] which is not “Federal” except in name, rather highly private, secret and profitable for the elite class of insiders, and is a “Reserve” not for the public but, the likes of GMS [Gold Man’s Sacks].

 

1930’s: Great Depression, precipitated by hubris, greed and historical concentration of wealth by super rich top tenth of the 0.01% (and their clients and servants) vs. 99.0 % of common folks.   Eventually “New Deal” economy, and increasing Capitalist, Communists and Fascist (all corporate entities in final analysis) tensions lead to WWII and massive debt and financial “change.”

1944 onwards: “Bretton Woods” financial system, with IMF & WB and the some winners of WWII in control of global money supply system, financing the “recovery” of Germany Inc and Japan Inc if they play the game, (which they do very well in the beginning), and the rehabilitation of periphery “third world” countries newly independent [from European and Japanese colonization (nominally at least)] as raw material suppliers, surplus markets.

1944 onwards: the façade of “Cold War” of Capitalism and Communism [both fascist by definition with collusion of National + Corporate makers and shakers, ‘the power that be’] which is very ‘Hot’ for third world proxy periphery battlegrounds, and facilitates the rape of their assets and resources, and “reopens” their markets in post (neo) colonial era .

 

1944 onwards: Institutionalized national growth of massive multinational international corporations (President Ike Eisenhower’s “military industrial complex” warning) in all major players, [i.e. see fascist note in proceeding].

 

1967: G. William Domhoff, publishes “Who Rules America” and proves (with data culled from many official sources) that the top tenth of the 0.01 % are political elite and they control wealth and the political and legislative process to their advantage and for proportionally increased wealth. Follow up books and studies and later editions substantiate these claims and add multitudes of dimensions of the class war of the elite upon the poor and working classes.

1971: US President Richard Nixon ends the Bretton Woods monetary “national bank” system (winners take all but players get some) taking US Dollar off gold standard (to help finance Vietnam War), and the resultant currency speculation and “financialization” of economy begins on grand scale, increasingly devastating the real economy of product creation, work and beneficial services.   Without gold backup the dollar is backed by sheer military superiority (might is right) and the forthcoming Kissinger petrodollar cycle scheme (oil is black gold) to benefit the Wall Street and City Banksters since entire world must buy oil with US Federal (private) Reserve dollars play (monopoly) money and pay the interest back the banksters.

May 1971: ‘petrodollar recycling” scheme agreed upon in the Bilderberger meeting in Saltsjoebaden, Sweden.

1972:  foreign currency “futures” were established on the Chicago Board Options Exchange. Thus for the first time the banksters can legally “hedge” against the risks associated with reckless foreign currency transactions, i.e. massive speculation, hedging, short selling (bet to lose), etc.  Now the insiders “hedge” their bets and make money both ways, with “long” sell and “short” sell.  Big game players make BIG MONEY no matter what: winning (with their money plus some) and losing (other people’s money never theirs).

Bankruptcy of entire nations, of entire essential commodity markets becomes part of wealth accumulation game, but that is nothing new, and actually IS the game.

 

1973:  Henry Kissinger appointed Secretary of State by Nixon, and in 1974 instituted the Petrodollar Recycling scheme whereby OPEC dollars are deposited in the BIG BANKS of the London ‘City’ and Wall Street, and then re-lent (with very good interest we might add) as Eurodollar bonds or loans to countries of the Third World desperate to borrow dollars to finance oil imports (which can only be bought in, that’s right, “hard currency” US dollars). Hundreds of billions of dollars are recycled between OPEC and the London and New York banks and back to distressed Third World borrowing countries, but eventually the petrodollar debts explode into the Third World debt crisis of the 1980’s causing widespread misery.

 

70’s onwards: IMF and WB and “Washington Consensus” force ‘structural adjustment programs’ on “3rd” world nations to enforce debt repayment plans, steal wealth, assets and resources of populations, and control of the “free” markets with “neo-liberal” agenda, orientate for exports (to provide luxurious life to elites), and local downgrade health, education and sustainable agriculture and industry.  Debt is cleverly structured to gain control of assets and markets and enrich “donor” nations of “First World.” Read for “free” and “liberal” the bitter reality of “slavery” and “constriction” by debt induced “structural adjustment programs.”

[See “petro dollars,” and also, below, how this will be replayed upon working classes in the “West” (2011 onwards crisis in Amerozone and Eurozone) since it worked so well on the “Rest”]

 

 

1973: “Trilateral Commission” created by David Rockefeller and other big banksters.

 

1980’s onward: Reagan-Thatcher era of “neoliberal” “trickledown” economics wherein economic programs are enacted to enrich the very wealthy.  It is claimed that this massive wealth concentration will “trickle down” to the rest.  Amazingly the public laps up this fantasy and even applauds corporate greed to run amok and the total “freedom” and “deregulation” of financial transactions and “services,” and we begin 30+ years of largest transfer and concentration of wealth in history to minuscule elite class at expense of all others in the world. GOP (Republican Party) increasingly favors rich corporate interests, and Democrats tag along to corporate interests for their survival despite rhetoric.

 

1990’s: Hedge funders like George Soros, one of the founders of the “hedge” (hog) fund industry, made $1 billion (€700 million) betting against British Pound and winning. He famously said: “Financial markets have a very safe way of predicting the future. They cause it.”  Later he is called to be “plotting against the euro.”

1995:  David C Korten  publishes “When Corporations Rule the World” and proves destructive monopolies and domination of BIG corporation, who have rights as “people” without their accountability, and who by their colossal greed and the collusion of BIG government, are destroying the world’s limited resources, all for the unprecedented ‘profits’ of financial elite class.  The reason why money is tighter for middle and lower income Americans is that they’re losing out to the tremendous concentration of wealth and power by giant multinational corporations, a fact confirmed by thousands of other researchers and reports. It’s the elites and manipulations of the political economy for wealth concentration, stupid! (as Clinton’s PR men would say).

See the article “20 Statistics That Prove That Global Wealth Is Being Funneled Into The Hands Of The Elite – Leaving Most Of The Rest Of The World Wretchedly Poor,” which is interesting but falls very short except #20: The most famous banking family in the world, the Rothschilds, has accumulated mountains of wealth while much of the rest of the world has been trapped in poverty. 

 

1999:  Glass-Steagall Act was repealed (under President Bill Clinton); thus creation of “too big to fail and jail but not to bail” banks, and banksters.  Coming era with unprecedented explosion of open ended hedge fund markets, complex “derivatives” and “swaps” and increased “financialization” of everything, even basis food commodities, etc, with disastrous price manipulation consequences etc (except for the game players, shakers and makers, like Gold Man’s Sacks, etc)

 

2000: the “dot-com” bubble bursts.

2000: The former chief economist of the World Bank, Joe Stiglitz, was fired, who had pointed out to top executives (as if they didn’t know) that every country the IMF/World Bank forced their way into ended up with a crashed economy, a destroyed government (and some even broke out in riots). Former President of the World Bank/IMF Sir James Wolfensohn, refuses to comment on his dismissal.

Joe Stiglitz took a large stack of secret documents out of the World Bank (about WB and IMF) which reveal that the IMF required nations to sign secret agreements containing destructive items, to sell off their key assets (water, electric, gas, etc) and to agree to take economic steps for “structural adjustments” that profit foreign financial market interests.

Sept 10, 2001: Rumsfeld announced that DoD and the Pentagon (previously called “War” Department) misplaces $2.3 trillion. No one has asked about this money ever since – not a word, ever – and it just so happened that the plane that hit the Pentagon, oh so conveniently and coincidently, hit that very spot of the huge Pentagon complex where those accounting records and accountants had their offices in “safe” hands.  Actually the amount is much larger, as the Pentagon Comptroller Dov Zakheim, indicted before he resigned on March 2005 (to go to Booz Allen Hamilton, a major DoD “contactor” like Halliburton and others), that additional trillion (s) [who knows how much] went unaccounted for. An interesting coincidence is that Zakheim (an ordained Jewish Rabbi) was the coauthor, with other prominent 1990’s neocon’s like Cheney and crew, of the infamous document REBUILDING AMERICA’S DEFENSES, by the PNAC [Project for a New American Century], and that for years he had been the ultimate inside deal maker for US military “aid” to Israel and various Israeli defense projects.

Sept 1, 2001: Terrorists attacks in World Trade Towers and Pentagon.  The collapse of “Building No 7” (when not struck by any airplane) and many other anomalies exposes wider conspiracy of collusion and falsehoods, stirring up the 9/11 truth and justice movement, who call for more investigation into the “Pearl Harbor like” event that the neo-cons PNAC [Project for a New American Century] had dreamed for and mentioned in their infamous document REBUILDING AMERICA’S DEFENSES.  All evidence of the crime scene is quickly trashed or sold to China and India, which is an unprecedented violation of criminal investigation procedures, 100% illegal, but never investigated in its own right (wrong). The Official 9/11 Report is total whitewash, brainwash, and hogwash, but the American public swallows it hook, line and sinker.

 

2004: European Union (Old Europe plus stragglers) threatens to limit the foreign transactions of major US investment banks, yet in the USA the SEC continues total capitulation and abandonment to “deregulation” and “tax breaks for the rich and incorporated” and “free” neoliberal market policies on Wall Street, and the CEO and insider trading profits of complex securities swaps and derivatives rise, soar and take off to unprecedented levels of greed.

 

2006: Goldman Sachs chief Lloyd Blankfein rewards himself with the highest payouts in Wall Street history [$53 million in 2006, and $68 million in 2007] in the years of the food derivative glut years (GS is the major player) which caused major food commodity crisis, starving many poor people the world over. As one commentator said: “Shockingly, people were starving not because there was not enough food but because the banks’ profiteering had made food unaffordable.”

Read more: http://www.dailymail.co.uk/news/article-1296068/Trading-death-Rapacious-bankers-making-fortunes-forcing-price-food-leaving-millions-starve.html#ixzz1VzdD0yoJ

 

2006: Former Goldman Sachs CEO Henry Paulson, (Biggest Hedge Hog) becomes treasury secretary under then President George W. Bush, and will play a crucial role in following series of financial crises and Wall Street bailouts.

Remember that John Paulson, the world’s most successful speculator, and hedge (hog) fund manager (who had over $30 billion in assets) and other insiders, had bet on the collapse of the American mortgage market (i.e. they created subprime and toxic products in market knowing that they must ultimately fail).   Various “Investment Banks” like Gold Man’s Sacks, create customized securities specially for Paulson and his likes based on subprime mortgages, i.e. re-packaged, sliced and diced, bundled, and sold off to various fools as “toxic” “securities” (oxymoron name if there ever was one for their innate ‘insecurity’ but they got the toxic right). In 2008, John Paulson is the very man chosen to manage the financial crisis in which he had played a VISIBLE hand in triggering it in the first place  (not Adam Smith’s invisible hand).  As the Arabs say: “Haamiha Haraamiha,” (the one guarding is actually the crook), or as the English say, putting the fox to guard the chicken.

2007: Wikileaks cables of US embassy reveal that the US and French government were fully aware of a coming crash precipitated by massive fraud and deceit by Wall Street banks and financial institutions. Translate: We, the Banksters and otherworld financial experts, win because we knew what was coming, and we bet the right way “short selling and hedging (hogging)” to make a quick buck (trillions), and then position ourselves for the coming bailouts (more trillions), and you (taxpaying) suckers lose big time both times.   

 

2008, 09-15 – :  Lehman Brothers files for bankruptcy protection, and US government does not bail it out. The next day, it does bail out AIG, etc.  Soon we will have the “Troubled Assets Relief Program’ [TARP], and gov’t takeovers, and stimulus packages (see next item).

September 29, 2008: prices plunge on Wall Street with High Frequency Trading (HFT) with a “financial terrorist attack” to show Congress (Main Street sheeple are asleep) who is the real boss of the economy ($1.2 trillion value lost in market downgrade) and terrorize them into political submission, and throw a TARP to cover their crimes.

Scenario: Immediately after the U.S. House of Representatives voted against the Troubled Asset Relief Program, the BIG banks manipulate a market plunge to a record 778 points, sparking widespread fear and panic – terror.

The insider comical scenes before the “Bailout” was “secured” to benefit the ‘too big to fail’ banks are revealing.  Baby Bush is reported to have said,  “If money isn’t loosened up, this sucker could go down,” on that eventful Thursday as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room. And in the Roosevelt Room after the session, Treasury secretary Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal. “I didn’t know you were Catholic,” Ms. Pelosi said, a wry reference to Mr. Paulson’s kneeling, according to someone who observed the exchange. She went on: “It’s not me blowing this up, it’s the Republicans.” Mr. Paulson sighed. “I know. I know.”

This unprecedented market plunge helps persuade Congress to eventually pass the “bailout” of the “too big to fail” Banks.   The stunning success of this “financial terrorist attack” will convince the ‘powers that be’ to repeat this tactic in the May 6, 2010 “Flash Crash” and, heh, who knows when it will be handy next.

Note that the TARP and “Stimulus Package” and subsequent “quantative easing” [Q1 and Q2] for printing and pumping trillions of (ultimately taxpayers) dollars in the system towards the “too big to fail and jail but not to bail” banksters, to “grease the system” and “get them to loan again,” has failed miserably to sufficiently “stimulate” the global economy, but has – what else – enriched the banksters who may have been collaterally damaged some aspects by the market debacle.

April 2008: Carmen M. Reinhart (University of Maryland) and Kenneth S. Rogoff, Harvard University, publish “This Time is Different: A Panoramic View of Eight Centuries of Financial Crises” and prove that illusionary expansions thru external debt (usury) inevitably lead to crashes, currency debasement (inflation), bankruptcy. Translate: Big Bankers always win the interest paid on their loans, make money on the “boom” times, make sovereign nations go stark bankrupt, make money on the “bust,” and then another cycle begins because the fools think ‘this time is different’ and the “boom” wealth creation with continue.   

Dec 2009: CNNMoney.com [Jeanne Sahadi, December 20, 2009] reports: “More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest…. in fact $4.8 trillion.”

Guess who pays, and guess who it is paid to?  Need a nudge: yep, proportionally you suckers and not the super (“tax cut”) rich, and yep, the banksters.

2009:  Top corporate CEO bonuses are projected to be 30 to 40 percent higher in 2009 than in 2008’s. Heh, that’s the “bailout” taxpayer money given to you guys just a while ago! Note that once a glutton is addicted he must eat ever increasing portions and cannot miss an easy and free feeding opportunity of delicious fare. Like the gluttonous Romans, even if he has to peuwck it out to start another feasting frenzy.

May 6 2010 “Flash Crash”: Wall Street plunges by almost 10 percent within 10 minutes, (700 points) in the so called “Flash Crash.”  Another High Frequency Trading (HFT) “financial terrorist attack” to show Congress who is real boss and to call off any meaningful regulation of “markets.” Max Keiser, who has written and authored about “Program Trading” and “HFT” computer algorithms, says: “May 6th was an unequivocal act of domestic financial terrorism in America. A day that will live in infamy. To scare the lawmakers, themselves large owners of the very banks and stocks that they are supposed to be regulating, a financial Weapon of Mass Destruction was put to their head and they acquiesced.”

Remember that Warren Buffet has called derivatives, “Weapon of Mass Destruction” and the derivative market is tens of trillions bigger that global GNP.

On this day the Dow Jones Industrial Average plummeted 700 points in about 10 minutes. A few hours later, top Democratic negotiators reached a compromise with Sen. Bernie Sanders, I-Vermont, over a plan to audit the Federal Reserve’s secret bailout operations. The Fed had pumped nearly $4.3 trillion (actually more) in bailout funds into the banking system since the onset of the crisis.  We (the 99%) know almost nothing about that money (and never will).  The “Audit the Fed” amendment would have maybe finally exposed to the public the full extent of Wall Street’s bailout operations (crimes).  BUT, later Thursday night, Congress voted on—and rejected—an amendment that would have forced the break-up of the six largest U.S. financial behemoths into banks that can fail without wrecking the economy. Goldman Sachs would have been one of those six banks. Meanwhile, riots in Greece and inaction from the European Central Bank raised the possibility of major trouble for USA financial titans.

August 8, 2011: The stock market, reeling from a downgrade of American debt and crisis in Europe, the Dow Jones industrials plunged 634 points.  It was the worst day for the market since the financial crisis in the fall of 2008 and extended Wall Street’s sudden, sharp decline. Stocks lost 15 percent of their value in just two and a half weeks. Monday was the first trading day since Standard and Poor’s downgraded the United States’ risk-free credit rating, and the Dow dropped 250 points in minutes of the opening bell, finished the day down 5.5 percent. The point decline was the worst since Dec. 1, 2008, and the sixth-steepest ever.

After months of partisan bickering, and Tea Party antics described as ‘suicide terrorist” tactics (threats) to blackmail Congress, with “financial suicide vests”  (blow up the system) in the  Credit “Ceiling” Crisis, the USA is nevertheless Downgraded anyways to AAa (ouch) status by SP (Standard and Poor’s). GOP and TP activists call to “get our expenses in order” and “balance the budget” etc, which translates: pay back the interest (at least) on the outrageous loans to the banksters and remain in debt bondage so we can suck more out of you… suckers… (their call to ‘Audit the Fed’ is mere smoke screen).

Remember that the criminals who caused the debt crisis in the first place, by the greed of Wall Street and The City Banksters and self servers for the interests and benefits for the super rich elites, [just like what occurred in the corrupt 3rd world elites], manipulate TP and other “Astro Turf” groups (controlled by the likes of the Koch brothers billionaires and other elite) to bring ‘structural adjustment programs’ to the poor and working classes of the USA, England, and other countries like the PIIGS of the Euro Zone “West” (as opposed to the Rest), because, heh, we have to: adjust the system to pay our debts, control our working class entitlements; raise taxes on poor and lower incomes so everyone can share the new realities; deregulate more to help the corporation make us more jobs; make our economy more “free,”  and “secure;” invest more in security which brings more jobs; blah blah and other farcical claims.

It would be funny if it didn’t mean so much pain and destruction for real honest middle class poor people, stupefied by propaganda, for the sake of saving the privilege of the gilded ‘let them eat cake” super rich elite warmongering banksters.  “Fed” keeps “interest rates” (call it usury) at near zero trickery in order to feed the banksters without declaring it (taxpayers to pay later in inflation-deflation-conflation), and because if it is raised it will expose their immediate bankruptcy with increased interest payment levels, and as Bush said in his last days “bring this sucker down.”

Late Aug 2011:  David J. Rothkopf publishes “The Black Hole of 911” and says: “In fact, the success of Osama bin Laden was in masterminding … one of the most profound overreactions in military history. Trillions of dollars were expended and hundreds of thousands of lives lost in the emotion-fueled maelstrom unleashed by a shaken and clearly disoriented America. …We spoke of 9/11 as though it were somehow equivalent to Pearl Harbor …. We reorganized our entire security establishment to go after a few thousand bad guys. We went mad.”

2011 ongoing: Mismanagement and misappropriation (euphemism for theft) of DoD funds and “creative” financing and billings of “contractors” like Xe (formally Blackwater), Halliburton etc continually becoming exposed by intrepid investigative journalism, (just search it for yourselves guys, you get the idea by now). 

2011 September onwards:

Here we are folks, in September 2011: Stay tuned for more “financial terrorist attacks” and ‘structural adjustment programs,’ and related deceits, manipulations, and cover ups.

Stay tuned for, not a new Pearl Harbor, but a new and better 9/11 like event.

Some informed people are calling, after the Arab Spring and UK summer, for an Israeli and American FALL of the elite banksters and their servant thugs. Search out their protest “Tahir Square” dates. [Actually I suspect the majority of the American people are too preoccupied in intoxicants, sports, movies, and their weekend escapades and reveilles, to know and care.]

 

END RESULT SO FAR:

 

Score card summery: they win, you lose [for now but Allah is eventually victorious] 

No change, no prosecution of too big to fail bankers, of truly criminal ‘warmonger for profit’ financial terrorists.

Calls for sending “too big to fail and jail but not to bail” banksters, to prosecution, or at least a report or audit to stave off a repeat of economic crisis precipitated by their  greed and feed, will not happen until there is mass protest revolution, since they “own” Washington and London, and all the laws, lawmakers, lawyers, lawbreakers, outlaws, and in-laws.

Sort of a financial version of Obama Care (Health Bill) sellout, wherein the big insurance companies and health providers cut sweet deals before the apparent bitter deals: a pure whitewash.

No ‘reform’ laws from President Obama or any others to ‘regulate’ the “free” financial markets, and the winners are –  you get it –  the “tax cuts for rich” banksters, the ‘too big to fail’ Big Banks, the “short selling” Hedge Hogs, the “corporations are people” Republicans, the Blue Dog and Hot Dog Democrats, all of whom are continuing to win increasingly larger proportions of wealth, privileges, control, manipulation, “tax cuts,” bailouts, qauntative easings, subsidies, stimulates, etc, ad-nausea.

If there is any change, it is the Big Game Change tilting even more and more for the interests of the Super Rich .01%.  We now have the continuing gluttonous feeding frenzy of Hedge Hog funders and private “equity” firms, “short” sellers [i.e. bet on the fall and failure of prices to make billions and trillions on the loss of others] and “shadow” banks, to manipulate markets and currencies at expense of all others, 99% of people, and real economy of the world.

Propaganda Note: financial terms are Orwellian double speak: “equity,” describes their inequalities and injustice) “short sale” aptly describes fraudulent selling which short people’s rights (all legal of course), and “shadow,” bank indicates their secrecies.  Remember that the astute PR man figured out to rename the “Department of War” to the “Department of Defense” to suck more taxpayer’s money, sweat, tears and blood to “Defense” and not to “War.”

Who will be the scapegoats this time around? Any guess?

As Allah said: “They make strategy, and Allah makes strategy, and Allah is the best of those that make strategy.” 

These Contents (Highlights & Partial Timeline) are hopefully a precursor to the full article/book, coming soon, by the will of God Almighty.

>

Also see  here

which begins

American Debt Crisis: Charts, real causes, etc (is it really 202 trillion?)

Charting the American Debt Crisis

Economic, Financial and Budget Crisis – what goes around comes around

 Economic Collapse, debt bondage, etc

 Economic Collapse, debt bondage,

deficient spending against future taxes, job loss, inflation/deflation, audit threats, etc

Super Rich Bankers and Corporate Elites, with Government Collusion, leading us into Massive Global economic and Financial Crisis, to further their super elite class agenda for their wealth creation& preservation

In my doctorate thesis in the 1990′s I had researched and wrote about how usury-interest based debt, the major aspect of the modern economic system with its fraudulent “National Bank” fractional banking system of “creating” and printing so called “money” and perpetuating the system by mortgages and personal and commercial  lending, etc,  essentially by debt bondage, and those usury-interest based “financial instruments” like bonds, junk bonds, etc,  [latter adding along the way the role of  Brent Woods institutions IMF WB etc], was leading the global economic system into massive financial collapse, all for the benefit of a super rich elite class  of bankers and government collaborators  (read fascism by definition), at the expense of the poor, working poor, and the middle class. Indeed it was a monumental claim, but backed by solid research and numerous economic and financial indicators. I clearly predicted (by many of these indicators) that the massive deception and fraud built into the interest-usury based debt system, the backbone of this global economic and financial system, is all a HUGE Anglo-USA financial asset bubble of debt instruments, and that, by all definitions, mathematics, logic and historical reality, the system will eventually collapse since it was not sustainable, like house  of cards, and line of dominoes, and a huge ponzi scheme.   The boom-bust debt and commercial cycle had to end in huge collapse when the inherent contradictions and inevitable unsustainable reaches the tipping point. This has been prophetically foretold by the Prophet Muhammad, peace and blessings be upon him and his family and followers, in many texts of scriptures of Islam, but we will here indicate one like when he said:

مَا أَحَدٌ أَكْثَرَ مِنْ الرِّبَا إِلَّا كَانَ عَاقِبَةُ أَمْرِهِ إِلَى قِلَّةٍ

There is no one that does a lot of “Riba” (usury and interest transactions, fraudulent borrowing and debt schemes etc) except that their final affair will be ruin and utter loss (i.e. including total collapse. bankruptcy, insolvency, etc). Reported by Ibn Majah (6/53) and authenticated by the scholars of Hadeeth sciences scholars (Historical Prophetic Narrations) like Sheikh al-Albani. This Muslim Ummah’s has a special trial, and one of the many forms of the trial of these times is in wealth, and following  behind this fraudulent globalinterest based debt structures, and in this also the Prophet Muhammad prophesized  in a specific warning, may the peace and blessing of Allah be upon him:

إِنَّ لِكُلِّ أُمَّةٍ فِتْنَةً وَفِتْنَةُ أُمَّتِي الْمَالُ

“For every Ummah (nation and community) there is a trial, and the trial of my Ummah is wealth.” [Reported by Tirmidhi, and authenticated by Sheikh al-Albani] Now it is really happening, with all the ugly global consequences.See some interesting news items below, for further investigation, reflection and repentance: a return to truth and justice. In the book This Time Is Different Eight Centuries of Financial Folly authors Carmen M. Reinhart and Kenneth Rogoff, meticulously looked at Eight Centuries of Financial Data, and proved conclusively that debt fueled expansions, based on usury (interest based) loans almost always end in financial ruin. As one review astutely observed: “… The common theme is that excessive debt accumulation by government, banks, corporations, or consumers often brings great risk. It makes government look like it is providing greater growth than it is, inflates housing and stock prices beyond sustainable levels, and makes banks seem more stable and profitable than they really are. Large-scale debt buildups make an economy vulnerable to crises of confidence … What did the authors learn from their data digging? Severe financial crises share three characteristics: 1) Declines in real housing prices … 2) The unemployment rate rises … 3) Government debt tends to explode … the biggest driver of this debt explosion is the collapse in tax revenues…” Sounds familiar? It should, because that’s the exact description of today’s debt crisis. Of course we know that it has its roots in the greed of the elite Bankers and Corporate leaders in collusion with the government, and that they have engineered the economy since WWII as a Brentwood’s (IMF –WB) Anglo-American petro-dollar driven economy, sustained by the great Ponzi scheme called the Federal Reserve System, and other factors. Now the roosters are coming home to roost.  As they say what goes around comes around. Just as the racism of imperial Europe came back to haunt Europe with the racism of “Aryanism” and the Nazis which imploded upon Europe with devastating results, the “Washington Consensus” and “Bilderberg ” and  “Davos” elites have set debt traps all over the third world for decades, which the elites of those counties have happily gotten themselves entrapped into by their own greed at the treacherous expense of their counties’ sovereignty and real local development for the working masses of citizens.  But now this debt trap is returning upon these elites of WC and B and D with the Greek Debt fiasco of the European Union, and with the Debt Crisis of the USA, all with devastating results upon the working masses and poor, so much devastation of the middle and working classes that the whole system is unsustainable. Is there a reason that this 30 year periods is the largest historical transfer of wealth from the middle classes and workers to the super rich, as documents and proven by many studies, starting roughly with Reagan and Thatcher trickle down thesis’s (help to make richer richer and it will trickle down to the others) and culminating in Bush tax breaks for the rich, and so many other aspects of this systemic fraud and theft made legal by the plutocracy (rule of rich) some people call democracy.         Sort of like the environment disaster: eventually there is a tipping point of pollution, over which, when tipped, the self cleaning mechanisms of the natural system begin to fail, and massive chemical changes begin to take place, and the system is eventually devastated from within. Who are the massive polluters in the system?  Sort of like the massive fish decline and who to blame: the fisherman on subsistence levels, or the corporate fishing fleets with gigantic fleets of ships and huge nets and tracking systems overfishing some species, for simple greed and disregard for the consequences on us all.     

See also > HERE 

>

Also see


SUPER COMMITTEE BIG BANK ROBBERY and “this sucker” going down > HERE

Terrorism by Economic Collapse, debt bondage, money as debt on interest, etc > HERE

Derivatives ‘Mother of All Bubbles’ exploding > HERE

Super rich 1% vs 99 %; Terrorism Cycle: Guillotines: Occupy “ALL” streets  > HERE

and so many more on those websites (under development with limited resources)

>

And HERE  which starts

8,000 ounce Gold? – (and where did the Fort Knox gold go?)

by the will of God Almighty.

>

Also see  here

<><><><><><><><><><><><><><>

NOW SOME NEWS,

>

by the will of God Almighty.

>

Also see  here

>

FYI a very relevant news item Nov 2012 exposing Paulson and Hedge funders

The secret meeting between Henry Paulson and hedgefund chiefs

November 29, 2011 |  9:10 am

http://latimesblogs.latimes.com/money_co/2011/11/the-secret-meeting-between-henry-paulson-and-the-hedge-funds.html

In case there wasn’t enough anger about the cozy ties between Wall Street and Washington, new revelations this morning suggest that former Treasury Secretary Henry Paulson gave hedge funds an inside scoop about the government’s plans for Freddie and Fannie Mac in the heart of the financial crisis.

The revelations come from the new Bloomberg Markets magazine, which describes the exclusive meeting at the Manhattan headquarters of a hedge fund on July 21, 2008.

Around the conference room table were a dozen or so hedge-fund managers and other Wall Street executives — at least five of them alumni of Goldman Sachs Group Inc., of which Paulson was chief executive officer and chairman from 1999 to 2006.

This was after the investment bank Bear Stearns had gone under — thanks to its bets on subprime mortgages — but before Lehman Brothers declared bankruptcy, and everyone was wondering what would happen to the government-sponsored mortgage giants Fannie Mae and Freddie Mac.

That morning, before the meeting with the hedge-fund magnates, Paulson held meetings with reporters in which he said that government examinations of Fannie and Freddie were likely to prove their health.

At the hedge-fund meeting, though, Paulson sang a very different tune, according to an attendee who spoke with Bloomberg Markets reporter Richard Teitelbaum. The magazine says that Paulson told the gathered magnates that the government could, in fact seize Fannie and Freddie and wipe out their stock.

Such information would be very valuable to investors because it would allow them to sell the stock short — or bet against it. Indeed, just a few months after the meeting, the government did what Paulson had sketched out and stock in both companies lost almost all their value.

Teitelbaum writes that he did not turn up evidence that any of the meeting participants placed such a bet, but he also notes that investors do not have to provide public notice when they make short sales.

Former banker and current writer William Cohan said that such meetings between top government officials and powerful investors are actually quite commonplace. Cohan said he was particularly surprised by the inability of the meeting’s participants to remember what happened or what they did with the information.

The blowback against the story has been swift. A well-read economics bloggers, Mike Shedlock, had some of the most scathing commentary:

Anyone who says they do not remember a meeting like that is a liar. Anyone who says “no comment” is indeed commenting and the possible interpretation is not pretty. So what else did Paulson say?

I would like to know who Paulson talked to outside the meeting.

Paulson did not respond to the article, other than to point the magazine to a book he wrote that makes no mention of the meeting.

RELATED:

Treasury’s changed man

U.S. seizes mortgage titans in multibillion-dollar rescue

The Paulson Effect: A rush into Fannie and Freddie bonds

— Nathaniel Popper

twitter.com/nathanielpopper

Photo: FormerTreasury Secretary Henry M. Paulson. Credit: Shawn Thew / EPA

Twitter: @latimesbiz

Facebook: L.A. Times Business

More in: Hedge funds, Insider trading

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Comments  (0)

Abu Salman Deya Eberle

Did you see:

The secret meeting between Henry Paulson and hedgefund chiefs

November 29, 2011 |  9:10 am

http://latimesblogs.latimes.com/money_co/2011/11/the-secret-meeting-between-henry-paulson-and-the-hedge-funds.html

hmmm….

Banksters again…. seeking …smelling ,,,, killer profits in coming chaos.

Search and see.

Knowledge sets you free.

Hedge Hogs; Gold Man’s Sacks; “financial terrorist attacks;” and the Obama sellout:
https://abusalmandeyauddeeneberle.wordpress.com/hedge-hogs-gold-mans-sacks-financial-terrorist-attacks-and-the-obama-sellout/

SUPER COMMITTEE BIG BANK ROBBERY and “this sucker” going down.
https://abusalmandeyauddeeneberle.wordpress.com/super-committee-big-bank-robbery-and-this-sucker-going-down/
Terrorism by Economic Collapse, debt bondage, money as debt on interest, etc.
http://terrorismbreedsterrorism.wordpress.com/terrorism-topics/terrorism-by-economic-collapse/
Derivatives ‘Mother of All Bubbles’ exploding.
http://inlightofrecentevents.wordpress.com/derivatives-%E2%80%98mother-of-all-bubbles%E2%80%99-exploding/

Super rich 1% vs 99 %; Terrorism Cycle: Guillotines: Occupy “ALL” streets.

http://terrorismbreedsterrorism.wordpress.com/super-rich-1-vs-99-terrorism-cycle-guillotines-occupy-all-streets/

<><>

How Paulson Gave Hedge Funds Advance Word

Q

By Richard Teitelbaum – Nov 29, 2011 12:46 PM ET

Bloomberg Markets Magazine

  • inShare233

Enlarge image

Former Treasury Secretary Henry M. Paulson testifies before the Financial Crisis Inquiry Commission on Capitol Hill in Washington on May 6, 2010. Photographer: Luke Sharrett/The New York Times

Play Video

Nov. 29 (Bloomberg) — William Cohan, author of “Money and Power: How Goldman Sachs Came to Rule the World” and a Bloomberg View Columnist, talks about a meeting former U.S. Treasury Secretary Henry Paulson held in July 2008 with hedge fund managers and Wall Street executives. According to a fund manager who attended, Paulson hinted of a Fannie Mae and Freddie Mac rescue, Bloomberg Markets magazine reports in its January issue. Cohan speaks with Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Cohan is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

Play Video

Nov. 29 (Bloomberg) — Joshua Rosner, an analyst at Graham Fisher & Co., talks about a meeting former U.S. Treasury Secretary Henry Paulson held in July 2008 with hedge fund managers and Wall Street executives. According to a fund manager who attended, Paulson hinted of a Fannie Mae and Freddie Mac rescue, Bloomberg Markets magazine reports in its January issue. Rosner speaks on Bloomberg Television’s “InBusiness With Margaret Brennan.” (Source: Bloomberg)

Play Video

Aug. 12 (Bloomberg) — Former U.S. Treasury Secretary Henry Paulson speaks about the actions taken to address the financial crisis in 2008 and the Standard & Poor’s downgrade of the U.S. credit rating. Paulson participated in a discussion at Dartmouth College on Aug. 11 with former Republican U.S. Senator Judd Gregg of New Hampshire. (This report is an excerpt from Bloomberg Television’s “Street Smart.” Source: Bloomberg)

Attachment: TIMELINE OF FANNIE, FREDDIE TAKEOVER

Enlarge image

Former U.S. treasury secretary Henry Paulson. Photographer: Jerome Favre/Bloomberg

Treasury Secretary Henry Paulson stepped off the elevator into the Third Avenue offices of hedge fund Eton Park Capital Management LP in Manhattan. It was July 21, 2008, and market fears were mounting. Four months earlier, Bear Stearns Cos. had sold itself for just $10 a share to JPMorgan Chase & Co. (JPM)

Now, amid tumbling home prices and near-record foreclosures, attention was focused on a new source of contagion: Fannie Mae (FNMA) and Freddie Mac, which together had more than $5 trillion in mortgage-backed securities and other debt outstanding, Bloomberg Markets reports in its January issue.

Paulson had been pushing a plan in Congress to open lines of credit to the two struggling firms and to grant authority for the Treasury Department to buy equity in them. Yet he had told reporters on July 13 that the firms must remain shareholder owned and had testified at a Senate hearing two days later that giving the government new power to intervene made actual intervention improbable.

“If you have a bazooka, and people know you have it, you’re not likely to take it out,” he said.

On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.

A Different Message

At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives — at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.

After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.

Stock Wipeout

Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.

The fund manager says he was shocked that Paulson would furnish such specific information — to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

There’s no evidence that they did so after the meeting; tracking firm-specific short stock sales isn’t possible using public documents.

And law professors say that Paulson himself broke no law by disclosing what amounted to inside information.

Rampant Rumors

At the time, rumors about Fannie and Freddie were tearing through the markets. The government-chartered firms’ mandate, which continues today, is to buy mortgages from banks and repackage them into securities either for their own portfolios or to sell to others. The banks can then use the proceeds from those transactions to write new mortgages.

By mid-2008, delinquencies and foreclosures were soaring, and the GSEs set aside billions of dollars against future losses. In the first six months of 2008, they racked up net losses of $5.46 billion as they slashed dividends and marked down the values of their huge inventories of mortgage-backed securities.

On Wall Street, confusion reigned. UBS AG analyst Eric Wasserstrom on July 10 cut his share price target on Freddie to $10 from $28. The next day, Citigroup Inc. (C) analyst Bradley Ball reiterated a “buy” recommendation on the two GSEs. On July 12, the Times of London, without citing a source, reported that Paulson was contemplating a $15 billion capital injection into the firms.

Shares Rally

At the time Paulson privately addressed the fund managers at Eton Park, he had given the market some positive signals — and the GSEs’ shares were rallying, with Fannie Mae’s nearly doubling in four days.

William Black, associate professor of economics and law at the University of Missouri-Kansas City, can’t understand why Paulson felt impelled to share the Treasury Department’s plan with the fund managers.

“You just never ever do that as a government regulator — transmit nonpublic market information to market participants,” says Black, who’s a former general counsel at the Federal Home Loan Bank of San Francisco. “There were no legitimate reasons for those disclosures.”

Janet Tavakoli, founder of Chicago-based financial consulting firm Tavakoli Structured Finance Inc., says the meeting fits a pattern.

“What is this but crony capitalism?” she asks. “Most people have had their fill of it.”

A Lawyer’s Advice

The fund manager who described the meeting left after coffee and called his lawyer. The attorney’s quick conclusion: Paulson’s talk was material nonpublic information, and his client should immediately stop trading the shares of Washington- based Fannie and McLean, Virginia-based Freddie.

Seven weeks later, the boards of the two firms voted to go into conservatorship under the newly created Federal Housing Finance Agency. The takeover was effective Sept. 6, a Saturday, and the companies’ stock prices dropped below $1 the following Monday, from $14.13 for Fannie Mae and $8.75 for Freddie Mac (FMCC) on the day of the meeting. Various classes of preferred shares lost upwards of 85 percent of their value.

A complete list of those at the Eton Park meeting isn’t publicly available. A Treasury Department roster of those expected to attend, obtained by Bloomberg News under the Freedom of Information Act, includes Ripplewood Holdings LLC CEO Timothy Collins, who says, through a spokesman, that he didn’t participate.

Storied Investors

At least one fund manager who wasn’t listed in the FOIA document, Daniel Stern of Reservoir Capital Group, did attend, says the manager who described the meeting.

The gathering comprised some of Wall Street’s most storied investors. Mindich, a former chief strategy officer of New York- based Goldman Sachs, started Eton Park in 2004 with $3.5 billion, at the time one of the biggest hedge-fund launches ever. Singh, a former head of Goldman’s proprietary-trading desk, also began his fund in 2004, in partnership with private- equity firm Texas Pacific Group Ltd.

Lone Pine’s Mandel worked as a retail analyst at Goldman before joining Julian Robertson’s Tiger Management LLC, one of the most successful hedge funds of the 1980s and 1990s. He started his own firm in 1997. Och was co-head of U.S. equity trading at Goldman before founding Och-Ziff in 1994. The publicly listed firm managed $28.9 billion in November.

Goldman Alums

One other Goldman Sachs alumnus was at the meeting: Frank Brosens, founder and principal of Taconic Capital Advisors LP, who worked at Goldman as an arbitrageur and who was a protege of Robert Rubin, who went on to become Treasury secretary.

Non-Goldman Sachs alumni who attended included short seller James Chanos of Kynikos Associates Ltd., who helped uncover the Enron Corp. accounting fraud; GSO Capital Partners LP co-founder Bennett Goodman, who sold his firm to Blackstone Group LP (BX) in early 2008; Roger Altman, chairman and founder of New York investment bank Evercore Partners Inc. (EVR); and Steven Rattner, a co-founder of private-equity firm Quadrangle Group LLC, who went on to serve as head of the U.S. government’s Automotive Task Force.

Another person in attendance: Michele Davis, then-assistant secretary for public affairs at the Treasury Department, who now represents Paulson as a managing partner at public relations firm Brunswick Group Inc. In an e-mail response to Bloomberg Markets, she referred all questions to Paulson’s book on the financial crisis, “On the Brink” (Business Plus, 2010), which makes no mention of the Eton Park meeting.

Paulson Thinktank

Paulson is now a distinguished senior fellow at the University of Chicago, where he’s starting the Paulson Institute, a think tank focused on U.S.-Chinese relations.

Eton Park’s Mindich, Lone Pine’s Mandel, TPG-Axon’s Singh and Och-Ziff (OZM)’s Och all declined to comment through spokesmen. Reservoir’s Stern didn’t return phone calls. Altman, through a spokesman, confirmed his attendance and declined to comment further.

Brosens confirmed in an e-mail that he had attended and said he couldn’t recall details. A spokesman for Rattner acknowledged he attended and said he didn’t trade in Fannie Mae- or Freddie Mac-related instruments after the meeting. Chanos declined to comment.

A Blackstone spokesman confirmed in an e-mail that GSO’s Goodman attended the meeting. Blackstone doesn’t believe market- sensitive information was discussed, and in any event Blackstone didn’t take any positions in Fannie or Freddie between the luncheon and Sept. 6, he wrote.

Strong Short Interest

Records show that many investors were betting against Fannie Mae and Freddie Mac at the time. According to Data Explorers Ltd., a London-based research firm, short interest in Fannie Mae shares rose sharply in July, to 163 million shares on July 14 from 86.3 million shares on July 9.

Short Interest continued to rise, to 240 million shares, on the day of the Eton Park meeting; it hit 262 million on July 24, its high for the year. Freddie Mac’s short interest showed a similar trajectory.

Revelations about the meeting come at a sensitive time.

“The optics are awful; there’s no doubt about it,” says professor Larry Ribstein of the University of Illinois College of Law in Champaign. “Everyone knows that insider trading is a huge issue.”

Rajat Gupta, the former head of McKinsey & Co. who was a member of Goldman’s board, was indicted by a federal grand jury on Oct. 26 for disclosing nonpublic information on Goldman and other companies to Raj Rajaratnam, a hedge-fund manager who earlier in October was sentenced to 11 years in prison for profiting from inside information provided by a web of industry insiders, including Gupta.

Gupta has pleaded not guilty.

LightSquared Probe

Several U.S. agencies face increased scrutiny in Congress for possible improper disclosures or ties to hedge funds. Senators are looking into whether the U.S. Department of Education divulged nonpublic details about new rules being considered to regulate for-profit educational institutions to outsiders, including Steven Eisman, former managing director of FrontPoint Partners LLC, who held short positions in the sector.

Education Department spokesman Justin Hamilton denies any impropriety. Eisman hasn’t been accused of any wrongdoing.

In October, Republican Senator Charles Grassley of Iowa asked hedge-fund manager Philip Falcone for copies of all communications between his Harbinger Capital Partners and the Department of Commerce, the Federal Communications Commission and the White House. Grassley is looking into whether Falcone improperly sought to influence regulators and the White House while seeking approvals for LightSquared Inc., the company constructing a broadband wireless network his fund is bankrolling.

‘Government Information’

Robin Roger, general counsel for the fund’s management firm, says any assertion that the fund or LightSquared tried to improperly influence regulators is unfounded.

For government officials, the leaking of market-sensitive information, even if inadvertent, represents an ethical minefield.

“There’s a lot of government information out there, and the hedge funds are trying to get it,” says Richard Painter, a law professor at the University of Minnesota who advised the Bush administration on Paulson’s sale of his Goldman stock when he became Treasury secretary. “It’s a huge problem that has to be addressed.”

The rules for what can or cannot be disclosed by government officials are often either unclear or nonexistent.

Tipping Hands

“The bottom line is that senior-level people in Washington, in the name of keeping in touch with their stakeholders, are tipping their hands,” says Adam Zagorin, a senior fellow at the Project on Government Oversight, a Washington watchdog group. “You can’t prosecute them for insider trading if they didn’t trade the shares. You may not be able to even reprimand them. What the hell are the rules?”

An official such as Paulson has no legal obligation to keep material nonpublic information to himself, says Phillip Kaplan, partner for litigation at Manatt Phelps & Phillips LLP, where he specializes in securities and class-action cases.

“I don’t think a government person is liable,” he says. “He didn’t profit from the information or trade on it.”

In the rapidly evolving world of insider-trading prosecutions, that could change, says the University of Illinois’s Ribstein, adding that the U.S. Securities and Exchange Commission is taking a broader view of what constitutes insider trading. SEC Enforcement Director Robert Khuzami, who can bring only civil cases, and the Justice Department, which can mount criminal prosecutions, have cast their net wide, Ribstein says.

Small Players Sued

In addition to going after big names like Rajaratnam and Gupta, the authorities are suing and indicting smaller players who might not have been prosecuted in the past, like accountants and analysts at so-called expert networks, who sell their expertise to hedge funds.

The University of Missouri’s Black says there’s no question that the plan to take over Fannie and Freddie — however uncertain — was material nonpublic information that could not be lawfully traded on. “What Paulson said put those managers in an untenable position,” he says. “They were exposed to all kinds of liabilities.”

The situation also generates some sympathy for Paulson.

“It seems to me, you’ve got to cut the guy some slack, even if he tipped his hand,” says William Poole, a former president of the Federal Reserve Bank of St. Louis. “How do you prepare the market for the fact that policy has changed without triggering the very crisis that you’re trying to avoid? What is he supposed to say without misleading these people?”

Market Insights

Poole says government officials need to communicate with industry participants in order to gain insights into market conditions and gauge likely reaction to interventions.

Black says the Eton Park meeting was the wrong way to communicate to the markets.

“Wink, wink, nod, nod is no way to approach sensitive information,” he says.

Paulson often contacted Wall Street participants throughout his tenure, according to his calendar. On that July trip to New York alone, he talked to Lehman Brothers Holdings Inc. CEO Richard Fuld, Washington Mutual Inc. CEO Kerry Killinger and Citigroup senior adviser Rubin.

Morgan Stanley and BlackRock Inc. both helped the Federal Reserve and OCC prepare the reports on Fannie Mae and Freddie Mac that Paulson told the New York Times would instill confidence the morning of the Eton Park meeting.

‘Unsafe and Unsound’

Paulson learned by mid-August that the Federal Reserve had found the GSEs “unsafe and unsound,” he told the Financial Crisis Inquiry Commission, which was appointed by President Barack Obama and Congress to probe the causes of the financial collapse.

“We’d been prepared for bad news, but the extent of the problems was startling,” he wrote in “On the Brink.”

On Sept. 6, when the GSEs’ boards agreed to have their companies placed in conservatorship, full-year 2008 losses were projected to reach as much as $50 billion for Fannie Mae and $32 billion for Freddie Mac. In October 2011, the FHFA estimated the cost to taxpayers of rescuing the firms at $124 billion through 2014.

The manager who described the Eton Park meeting says he also discussed it with an investigator from the FCIC. The discussion was confirmed by a former FCIC employee.

That manager says he ended up profiting from his Fannie Mae and Freddie Mac positions because he was already short the stocks. On his lawyer’s advice, he stopped covering his short positions and rode Fannie and Freddie shares all the way to the bottom.

To contact the reporter on this story: Richard Teitelbaum in New York at rteitelbaum1@bloomberg.net.

To contact the editor responsible for this story: Michael Serrill at mserrill@bloomberg.net.

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Showing 1-40 of 706 comments on How Paulson Gave Hedge Funds Advance Word

To those who say “You can’t eat Gold’. Brilliant. I never thought of that – in fact I’ve been buying Gold all along to eat it. <roll ceiling=”” eyes=”” to=””>
Obviously the only braintrust saying this are people who don’t have the forsight to either own Gold or stock up on food stuffs – preferably freeze-dried food that lasts 25 years.
Once you ride through this coming storm, if you’ve been able to preserve your wealth and assets in terms of their purchasing power and to maintain liquidity–which the physical gold will give you–you’ll be in a position to take care of yourself and take advantage of some extraordinary investment opportunities that likely would flow out of the turmoil ahead.</roll>

I lost more than money, I lost a son when bush told that fairy tail about “weapons of mass destruction”. Paulson and anybody who was involved with this financial fiasco is a criminal and financial terrorist and should be tried and put in jail if guilty. My son gave his life so these animals can keep on stealing from all of us! I am too disgusted to even think.

IF BLOOMBERG WOULD LET ME AUDIT HIM AND FIND OUT WHERE HIS MONEY CAME FROM, ALL I COULD GET FROM HIS REPS WERE, DROP SHIPPING FREIGHT, OR SOMETHING LIKE THAT.   GOOD GRIEF.  MAYBE IF IT’S GOVERNMENT DROP SHIPS WHERE HE CHARGES LIKE 2.5 MILLION FOR SHIPPING A FILING CABINET.   I KNOW HOW THE GAME IS PLAYED.  SOCIETY IS WASTING SO MUCH ENERGY, TO SAY IT EASILY, LYING PLOTTING BOMBING WASTE WASTE WASTE OF NON RENEWABLES.  IT’S ONE BIG THIEVES BANQUET AND FOR BLOOMBERG TO PRINT THIS YOU CAN BET YOUR BOTTOM DOLLAR NOTHING WILL COME OF IT, OR THERE TONS MORE TO THE STORY SO THEY’RE GETTING OUT FRONT TO MAKE YOU THINK. BUT BLOOMBERG SAID. HAHAHHAHA.  THIS IS STALE.  THESE GUYS ARE ROBBING THE TAX PAYERS BLIND.  BUT THERE ARE STRINGS ATTACHED TO THEM LETTING YOU IN ON THE REAL WHITE SHOE BOYS WEALTH……ALA’ WALLSTREET BACKERS WHO BACK THE GUYS WHO’LL LET THEM CONTINUE TO RAPE THIS GREAT WORLD.  BLOOMBER? OBAMA? MORE AT 11.

UNTIL BLOOMBERG PROSECUTES THE REAL PERPS OF 911 HE CAN KEEP HIS PROPAGANDA CON JOBS,     KOSHER APPROVED CON JOBS.

Paulson should be charged and prosecuted for insider trading.  Treasonous betrayal of the taxpaying public.

Thank you to the reporters and editors of Bloomberg News for being so determined to (un)cover this story – and an even bigger thank you of course to Mike Bloomberg.

How much worse can this apocalyptic level of power abuse and corruption
go on.

As said elsewhere, the OWS movement ideally has it right: dump the banks
and medieval corporate capitalistic economics. Convert them to credit unions,
labor-sponsored ventures and cooperative trusts. This would also
finally end the comfy feather-bedding relationship between the
banking/financial tyrannies and government bureaucrats and bought-off
politicians.

So the state run fiancial system in China is better than any western democratic banking system?  Why would a “credit union” be able to compete in international banking systems, at present they don’t have export or even interest in international banking.  Why don’t we just go back to Glass-Stegall where the investment bankers were totally separate from the domestic banking.  Why do we throw out the old tried and true banking standards that have worked for 50years?  Why does the government allow “side bets” in the form of derivatives on our real property without our permission?  Why don’t they allow derivatives on the life spans of our politicians?

The problem isn’t the overall system, it’s that it’s been overrun by crooks and they have put their toadies into power so the system is slanted violently towards them. TARP (The Astonishing Rip Off) was the biggest theft in the history of the world.

If Paulson’s leak to the hedge funds wasn’t a crime then it should be a crime now.

Breathtaking criminality masquerading as public service… it doesn’t matter if law professors agree that he committed no crime. A high school graduate can see that this behavior is analogous to stealing from the taxpayers. The same kind that the US has accused all sorts of banana republics of.

> “It seems to me, you’ve got to cut the guy some slack, even if he tipped his hand,”
> says William Poole, a former president of the Federal Reserve Bank of St. Louis.
> “How do you prepare the market for the fact that policy has changed without
> triggering the very crisis that you’re trying to avoid? What is he supposed to say
> without misleading these people?”

DUH… heard of newspapers and television?
By the way, funny Poole would say that. Sounds like he may have been dipping into the cookie jar too.

Slimeball is the word that comes to mind when I think of Paulson

Ok, so when is he going to be arrested?  Isn’t what he did illegal?

Oh that’s right, the rules don’t apply to some people…

I just think that Paulson and people who have worked for these financial firms feel more alliance with these firms than they do with the American people.  I think maybe they should never be hired to work for us Americans.

The reporting in this article seems to bolster the reporting in Matt Taibbi’s excellent book, “Griftophia” and cast Bush’s Treasury Secretary as a Wall Street Insider from Goldman Sachs. It makes the reporting in “Too Big to Fail” by Andrew Ross Sorkin suspect and too influenced by his collaboration in interviews with Paulsen. Unlike the Saving and Loan scandal of the 1980s, hardly anyone has gone to jail for this much bigger failure and graft by Wall Street.

And for this he will get a slap on the wrist.  I am glad I never invested in the Wall Street fraud.  Anything promoted by the federal media is a lie and a scam.  The sheeple who are victimized by these scams are too beaten down to do a damn thing about it.  Sad.

Sounds like insider trading any peons like me would be sent to jail for.

Wait…So the article concludes by telling us that the rat, in this instance, maintained his position all the way to the bottom?  If I am reading this right, then this person (the “rat”) seems to be indicting others here to assuage his own guilt!

A bunch of cronies.  They are all the same…

I doubt they will jail him as so many allowances to “save the system” came from above. He was quite likely a willing participant in, “Only following orders”. The job was delegated and Bush didn’t care how it was done.

After a trial, if found guilty, this should be, IMO, considered financial treason to the nation and in a more civilized day he would hang by the neck until dead for what he did. It’s a mere game to these people. It needs to no longer be a game. But with the FBI and the SEC (who pray to get “set for life with a job offer) in a “hands off those we bail-out position, we openly duplicate the days of Rome when they clearly saw its demise so theft was done in the open. And for that, our present Caesar has been a poster child for the theft of both public and private funds.

We ourselves have accomplished everything Al Queda had hoped for.

Line him and a few dozen other politicians line up against the wall and let us citizens fire bazookas at them for practice while the list grows.

I lost $25,000 preferred stock in Freedie Mac thanks to this obvious fraud.
I will be made whole when OWS extracts their due.Expect nothing from Ivy
Leaguer Obama,prosecutors,courts,ect.
Always suspected financial system is rigged.Very sad to see confirmation.

Jail this guy – or at least take him to UC Davis so Lt Pike can Pepper Spray him

People were not forced to buy homes or invest in the stock
market.

Yes, Wall Street, the US Gov and K Street (big oil, big pharma, big food, overseas influence) are all crooks!
However, the US public is complicit as well.

Living beyond our means, buying homes we could not afford,
getting the latest and greatest accessories, all on credit. We allowed
ourselves to be deceived by talking heads, endless wars, graft, cronyism and
lack of will.

The sad thing is, the system was unregulated and took advantage
of people who were not taught to save money or live responsible lives. Making
it all the worse.

The Easy Credit-Cheap Gas era is over. Something will
replace it but who knows what that will be.

You are blaming me for the biggest rip off in the history of the world. Sorry, but 99.99% of us are victims of the fraud, not perpetrators. I don’t live beyond my means, spend wildly or lack savings. The value of my savings (40 years worth) has diminished sharply because of the crooks at the top.

Pauly, is that you?  You over at Frankie Wankie’s reading freaky fannie/freddie blogs again?

i hope the next terrorist attack is all of washington

Why isnt he in jail this is why a revolution and more is coming

traitor

Group theory in maths is the study of symmetry. Objects in nature (math, physics, chemistry, etc.) have beautiful symmetries.

In sociology, a group is usually defined as a collection consisting of a
number of humans or animals, who share certain aspects, interact with
one another, accept rights and obligations as members of the group and
share a common identity.

A group in sociology exhibits cohesiveness to a larger degree. Aspects
that members in the group may share include interests, values,
ethnic/linguistic background and kinship.

The dictionary quotation by the famous British editor and author Walter
Bagehot (1826-1877) probably sums it up : Man can only make progress in
cooperative groups.

This is an example of a cooperative group letting its members progress.

Voting is the opiate that clouds the vision of the masses. It is an endorsement of the corrupt corporate fascist system. Taxation and inflation is the loot that greases the wheels. Legal tender laws and the Federal reserve the con game. Democracy is a slogan which prevents system change by offering the continual hope for change. The end result is always bigger government and greater corruption. Only inevitable financial collapse will bring about the will for real change and the correct justice for the Paulsons out there. Already financial hardship is proving to be the mirror that reveals the vampires. Off with their heads, Crucify them.

In a July 10, 2008 interview with Bloomberg News discussing two Government Sponsored Enterprises (GSEs)—Fannie Mae and Freddie Mac—Poole
said, “Congress ought to recognize that these firms are insolvent, that
it is allowing these firms to continue to exist as bastions of
privilege, financed by the taxpayer.”[2]
The common and preferred equity shares of both GSEs declined sharply
following Poole’s comments, which prompted several Congressmembers, the
OFHEO regulator, the Treasury Secretary, and President George W. Bush
to make comments that were seen as supportive to the GSEs in order to
stem fears that Fannie Mae and Freddie Mac would require a government
bailout.

Nothing surprises me… finally someone heard our voices!
SEC, please do the job… 99% are behind you for taking the right actions to those torn middle class, financial meltdown and much more…

With this revelation we are one day closer to total revolt.  Everyone is sick of this tyranny.  The man should be hung for treason -I can think of no higher crime or misdemeanor than to undermine the faith and credit of the United States for personal gain, which is what these fraudsters did.

SuperPatriot, it shouldn’t only be Paulson. It should be all the Bush/Cheney cronies. My lord, they started a war for profit and revenge (mainly profit) and brought down the world economy on purpose for their own obscene profits. And we know that’s just the surface. Hang all of them.

Treason, thy name is Paulson.

Treason on Wall Street, unfortunately has many many names!

I don’t understand the lawyers’ argument. I was trained on several occasions on government ethics laws. You are to avoid conflict of interest or the appearance of conflict of interest. This implies, certainly we are warned when processing contract bids, that you keep your mouth shut on financial decisions you are involved in.

IMO, Paulson should face legal action and possible jail time. My understanding of the law. Even if not, this is outrageous.

BTW, Goldman Sachs  called Paulson and told him the roof would fall in if he didn’t secure the bonds AIG had promised to back. GS was a “co-party” who bought pseudo-insurance — AIG didn’t have the required capital for backing the bond required by law to be real insurance but its “credit default swaps” were cheaper than regulated insurance — to back GS’s bad bonds. When housing prices collapse, Paulson used federal money to back the co-parties 100% of value. To justify this, the news media reported people wouldn’t get fire insurance contracted for on their burnt houses (not true).

I can’t fathom why all those Occupy Wall Street people are mad. Really.

AntClast: But you hit on the head: All government officials are “trained on … government ethics laws.”

It boggles the mind to even suggest that Secretary Paulson, a former CEO of Goldman Sachs, did not know that what he was telling a room filed with some the nation’s most powerful and richest hedge fund managers, all of whom he knew personally, could not be considered inside information upon which these hedge fund managers could act and make millions. From the Bloomberg article, it appears that these smart men had more regard for Wall Street ethics and laws than did Paulson himself, because, as of this writing, there is absolutely no evidence of any wrongdoing by any of them.

I am a lawyer. If we violate our ethical code, we are disbarred. Doctors have their licensed revoked, or, in the case of Michael Jackson’s physician, they go to jail.Thanks for your between the lines comment.Carl Kirsch, Atlanta, GA
Atlanta, GA
It boggles the mind to even suggest that Secretary Paulson, a former CEO of Goldman Sachs, did not know that what he was telling a room filed with some the nation’s most powerful and richest hedge fund managers, all of whom he knew personally, could not be considered inside information upon which these hedge fund managers could act and make millions. From the Bloomberg article, it appears that these smart men had more regard for Wall Street ethics and laws than did Paulson himself, because, as of this writing, there is absolutely no evidence of any wrongdoing by any of them.

I am a lawyer. If we violate our ethical code, we are disbarred. Doctors have their licensed revoked, or, in the case of Michael Jackson’s physician, they go to jail.

Thanks for your between the lines comment.

Carl Kirsch, Atlanta, GA

Atlanta, GA

Henry Paulson, Tim Geitner, Barney Frank, and Chris Dodd should all be wearing striped suits by now!  There’s enough evidence to put them away for decades!

>

Here is a whopper also ,

from Porter Stansberry

[As one commentator said “…. yeah, I don’t like the end … with the scammy sounding free reports, but the research he presents and ties together is solid. Nearly everything he mentions I’ve read from another source also. We ARE headed for a currency crisis, but now I’m even more convinced that it’s going to happen sooner than anyone imagines…]

All our researcher points to it also and as mentioned in other articles of mine elsewhere

(and Yeh… don’t listen to scam part and hype for his products [out to make lots of money for himself and buddies with 50$ free reports] but listen closey about some of the facts he presents about the USA decline and the reserve status of the Dollar collapsing by massive inflation by the Fed, other sovereign countries switching to other financial and other resources, etc, etc)

with and article called

The Corruption of America

(i.e. Paulson and the hedgehogs, just as I had said above, and I found this confirmation after I wrote the piece above) [of course I only agree with parts of the followings]

on Daily Reckoning

KEY QUOTE

To quote

Henry Paulson, the former CEO of Goldman Sachs and the Republican U.S. Treasury secretary during the financial crisis…..

Here you had a high-government official, explicitly lying to Congress (and by extension, the general public), while giving the real facts to a group of people who represented the financial interests of the world’s wealthiest folks. The story didn’t come to the public’s attention for two years.

This was the most outrageous example of graft and corruption I have ever seen. Certainly it involves more billions of dollars in misappropriated value than any other similar story I can recall. These managers had the risk-free ability to make tens of billions of dollars, if not hundreds of billions, by using derivatives to capitalize on what they knew was the imminent collapse of the world’s largest mortgage bank. Who picked up the tab? You know perfectly well. It was you and me, the taxpayers.

End quote
The Daily Reckoning Presents
The Corruption of America
Guest Editor
Porter Stansberry

The numbers tell us America is in decline… if not outright collapse.

I say “the numbers tell us” because I’ve become very sensitive to the impact this kind of statement has on people. When I warned about the impending bankruptcy of General Motors in 2006 and 2007, readers actually blamed me for the company’s problems — as if my warnings to the public were the real problem, rather than GM’s $400 billion in debt.

The claim was absurd. But the resentment my work engendered was real.

So please… before you read this column, which makes several arresting claims about the future of our country… understand I am only writing about the facts as I find them today. I am only drawing conclusions based on the situation as it stands. I am not saying that these conditions can’t improve. Or that they won’t improve.

The truth is; I am optimistic. I believe our country is heading into a crisis. But I also believe that… sooner or later… Americans will make the right choices and put our country back on sound footing.

Please pay careful attention to the data I cite. And please send me corrections to the facts. I will happily publish any correction that can be substantiated. But please don’t send me threats, accusations against my character, or baseless claims about my lack of patriotism. If I didn’t love our country, none of these facts would bother me. I wouldn’t have bothered writing this column.

I know this is a politically charged and emotional issue. My conclusions will not be easy for most readers to accept. Likewise, many of the things I am about to say will challenge folks to re- examine what they believe about their country. The facts about America today tell a painful story about a country in a steep decline, beset by problems of its own making.

I am speaking out now because I believe someone must. And I have the resources to do it. I am sharing these ideas because I know we have arrived at the moment of a long-brewing crisis.

Our political leaders, our business leaders, and our cultural leaders have made a series of catastrophic choices. The result has been a long decline in America’s standard of living.

For decades, we have papered over these problems with massive amounts of borrowing. But now, our debts total close to 400% of GDP, and America is the world’s largest borrower (after being the world’s largest creditor only 40 years ago)… And the holes in our society can no longer be hidden…

We’ve reached the point where we will have to fix what lies at the heart of America’s decline… or be satisfied with a vastly lower standard of living in the future.

How do I know? How do I statistically define the decline of America?

The broadest measure of national wealth is per-capita gross domestic product (GDP). Economists use this figure to judge standards of living around the world. It shows the value of the country’s annual production divided by the number of its citizens. No, the production isn’t actually divided among all the citizens, but this measure provides us with a fair benchmark to compare different economies around the world. Likewise, this measure shows the growth (or the decline) in wealth in societies across time.

So… is America growing richer or poorer based on per-capita GDP? Seems like a simple enough question, doesn’t it? Is our economy growing faster than our population? Are we, as individuals, becoming more affluent? Or is the pie, measured on a per-person basis, growing smaller?

This is the most fundamental measure of the success or the failure of any political system or culture. Are the legal and social rules we live under aiding our economic development or holding us back? What do the numbers say?

Unfortunately, it’s a harder question to answer than it should be. The problem is; we don’t have a sound currency with which to measure GDP through time. Until 1971, the U.S. dollar was defined as a certain amount of gold. And the price of gold was fixed by international agreement. It didn’t actually begin to trade freely until 1975. Therefore, the value of the U.S. dollar (and thus the value of U.S. production, which is measured in dollars) was manipulated higher for many years.

Even today, our government’s nominal GDP figures are greatly influenced by inflation. The influence of inflation is particularly pernicious in GDP studies. You see, inflation, which actually reduces our standard of living, drives up the amount of nominal GDP. So it creates the appearance of a wealthier country… while the nation is actually getting poorer.

The only real way to accurately measure per-capita GDP is to build our own model. The need to build our own tools tells you something important — the government doesn’t want anyone to know the answer to this question. It could easily publish data far more accurate than the indexes it puts out. But government doesn’t want anyone to know. And it wants to be able to say “those aren’t the real data” when studies like ours produce bad news.

So pay attention to how we built our charts. You can see for yourself that our data are far more accurate than the government’s figures. Our data are based on the real purchasing power of the currency, not the nominal numbers, which are completely meaningless in the real world.

The question we are trying to answer is: What would per-capita GDP numbers look like, if we used a real-world currency, like gold, or a basket of commodity prices, instead of the paper-based U.S. dollar? What would the figures be if we measured GDP in sound money instead of the government’s funny money?

Here’s how we figured it out. We took the government numbers for nominal GDP and measured them first against commodity prices, and later (after it began to trade freely) gold. We used a standard commodity index (the CRB) up to 1975 and gold post-1975. The result of this analysis shows you the real trend in U.S. per-capita GDP, as measured on a real-world purchasing power basis.

Our analysis shows you what’s actually happened to our real standard of living. The results, we suspect, will surprise even the most bearish among you.

America is in a steep decline.

Per Capita GDP in the US In Constant, Sound Money
Americans Are Getting Poorer — Fast

Let me anticipate the “official” criticism of our study. Many people will claim that our numbers aren’t “real.” They will say that we “mined” the data to produce a chart that showed a steep decline.

That’s simply not so. All we’ve done is convert the government’s nominal GDP stats into a fixed currency value that’s based on real- world purchasing power. The fact is, our data are far more accurate than the government’s because they represent the real-world experience. That’s why our data are far more closely correlated to other real-world studies of wealth in America.

Consider, for example, annual sales of automobiles. Auto sales peaked in 1985 (11 million) and have been declining at a fairly steady rate since 1999. In 2009, Americans bought just 5.4 million passenger cars. As a result, the median age of a registered vehicle in the U.S. is almost 10 years.

Our data shows that real per-capita wealth peaked in the late 1960s. Guess when we find the absolutely lowest median age of the U.S. fleet? In 1969. At the end of the 1960s, the median age of all the cars on the road in the U.S. was only 5.1 years. Even as recently as 1990, the median age was only 6.5 years.

Rich people buy new cars. Poor people do not.

Most important, our data “proves” something I know many of you have felt or perceived for many years. You’ve seen the decline of your neighborhoods. You’ve gone years without being able to earn more money in your job. Or you’ve seen your purchasing power decrease to the point where you’re now substituting lower-quality products on your grocery list for the brand-name products you used to buy.

You can see how much harder it is on your children to find good jobs, to buy good housing or a new car. As a result, few people under the age of 40 have the same kind of “life story” as their parents.

And because they can’t “make it,” many have decided to “fake it.” The average college student now graduates with $24,000 in debt… and by his late 20s has racked up more than $6,000 in credit card debt. Meanwhile, median earnings for Americans aged 25-34 equals $34,000-$38,000. (Source: Demos.org, “The Economic State of Young America,” November 2011.)

Can you imagine starting your life out as an adult with a personal debt-to-income level at close to 100%? What does this say about the state of our economy? What does this say about the state of our culture?

Who Suffers Most

It’s not only the young that are having trouble in America. It is also the old.

Debt levels among households headed by people older than 62 have been rising for two decades. The average mortgage size for this population is now $71,000 — five times larger than it was in 1987 (adjusted for inflation), according to William Apgar of Harvard’s Joint Center for Housing Studies.

Older Americans are also more reliant on credit card debt than ever before… credit card debt. From 1992 through 2007 (which is the latest data available) older Americans took on credit card debt at a faster pace than the population as a whole. According to USA Today, lower- and middle-income Americans aged 65 and older now carry an average of more than $10,000 in credit card debt, up 26% since only 2005.

Given average interest rates of 20% for these debts, it’s a fair bet that these obligations will never be repaid. But they will have a terrible impact on the standard of living of these older Americans.

What in the heck is going on? Don’t Americans pay off their mortgages before they retire? Don’t they work hard during their careers, save, and invest, so they can move to Florida and spend their retirement in comfort?

Older Americans living with credit card debt! This doesn’t sound like America, does it? Or maybe it does.

My bet is that most folks know that something has gone terribly wrong with America. It’s not easy to figure out how all of this happened… but you know from your own experiences that these numbers aren’t wrong. It might not be pleasant to think about… but these figures paint a sad but accurate picture: America is not the country it was 40 years ago. These changes are warping our economy, politics, and culture.

I can’t possibly analyze all the factors that have led to this decline. But I want to document the growth of graft in politics. I want to demonstrate — with real facts and examples — how public company leadership has deteriorated. And I want to document some of the things that are occurring in the broader society, all of which I believe are linked to this fundamental decline in our standard of living.

You see, I believe the decline of our country is primarily a decline of our culture.

We have lost our sense of honor, humility, and the dedication to personal responsibility that, for more than 200 years, made our country the greatest hope for mankind. I want to detail some of the factors that gave rise to the current entitlement society. We have become a country of people who believe their well-being is someone else’s responsibility.

I’ve labeled these problems: The Corruption of America.

These problems manifest themselves in different ways across institutions in all parts of our society. But at their root, they are simply facets of the same stone. They are all part of the same essential problem.

The corruption of America isn’t happening in one part of our country… or in one type of institution. It is happening across the landscape of our society, in almost every institution. It’s a kind of moral decay… a kind of greed… a kind of desperate grasp for power… And it’s destroying our nation.

The Ethos of ‘Getting Yours’

Americans know, in their bones, that something terrible is happening. Maybe you can’t articulate it. Maybe you don’t have the statistics to understand exactly what’s going on. But my bet is, you think about it a lot.

For me, a poignant moment of recognition came this month.

Bloomberg news published an article based on confidential sources about how Henry Paulson, the former CEO of Goldman Sachs and the Republican U.S. Treasury secretary during the financial crisis, held a secret meeting with the top 20 hedge-fund managers in New York City in late July 2008. This was about two weeks after he testified to Congress that Fannie Mae and Freddie Mac were “well-capitalized.”

I knew for a fact that what Paulson told Congress wasn’t true. I wrote my entire June 2008 newsletter detailing exactly why Fannie and Freddie certainly had billions in losses that they had not yet revealed to investors — $500 billion in losses, at least. There was no question in my mind, both companies were insolvent — “zeros,” as I explained.

And yet, in front of Congress, the U.S. Treasury secretary was saying exactly the opposite. Either I was a liar… or he was.

Then… only a few days later… what did Paulson tell those hedge- fund managers?

He told them the same thing I had written in my newsletter. He told them the opposite of what he’d said publicly to Congress. He told these billionaire investors that Fannie and Freddie were a disaster… They would require an enormous, multibillion-dollar bailout… The U.S. government would have to take them over… And their shareholders would be completely wiped out.

Here you had a high-government official, explicitly lying to Congress (and by extension, the general public), while giving the real facts to a group of people who represented the financial interests of the world’s wealthiest folks. The story didn’t come to the public’s attention for two years.

This was the most outrageous example of graft and corruption I have ever seen. Certainly it involves more billions of dollars in misappropriated value than any other similar story I can recall. These managers had the risk-free ability to make tens of billions of dollars, if not hundreds of billions, by using derivatives to capitalize on what they knew was the imminent collapse of the world’s largest mortgage bank. Who picked up the tab? You know perfectly well. It was you and me, the taxpayers.

(One of the investment managers present at this meeting was Steve Rattner, who by that point was already deeply involved in another bit of graft, his efforts to bribe New York state pension-fund managers for large investments into his hedge fund, from which he earned perhaps as much as $100 million. He later settled the charges for a mere $10 million shortly after Andrew Cuomo was elected governor of New York.)

The Bloomberg story… about a crooked Treasury secretary handing a room full of crooked billionaires inside information worth billions of dollars… hardly caused a ripple. As far as I know, no actions are being planned against Henry Paulson or any of the hedge-fund managers involved. No other major media outlet picked up the story. I saw nothing about it from the Department of Justice or the Securities and Exchange Commission.

What does that say about our country when even the most egregious kind of corruption — involving hundreds of billions of dollars — is simply ignored?

It seems like everyone in our country has lost his moral bearing, from the highest government officials and senior corporate leaders all the way down to schoolteachers and local community leaders. The ethos of my fellow Americans seems to have changed from one of personal integrity and responsibility to “getting yours” — the all- out attempt, by any means possible, to get the most amount of benefits with the least amount of work.

You can see this in everything from the lowering of school standards (revising the SAT) to the widespread use of performance-enhancing drugs in professional, college, and high school sports. Cheating has become a way of life in America.

I have an idea about how this happened… about the root cause of this kind of corruption and why it was inevitable, given some of the basic facts regarding how we’ve organized our government and our corporations.

Let me show you the numbers — the hard facts — behind what’s happened to our country…

Regards,

Porter Stansberry
for The Daily Reckoning

Editor’s note: This essay is excerpted from one of the most controversial documents in America right now…the December 2011 issue of Stansberry’s Investment Advisory. To access the full issue — where Porter walks readers through the facts behind the rampant and blatant corruption that has us on the brink of an economic crisis — click here. It’s the most important document you’ll read in the next year…and it’s completely, 100% free. Warning: Do not read this if you are easily offended.

To read the rest of this article, click here.

> HERE > the original article

The Corruption of America

Inside This Month’s Issue
Where the criminals live… and why
Detroit’s gone, its politicians remain
Newt’s $1.6 million shakedown of Fannie Mae
Why I’m still bullish on America
By: Porter Stansberry

The numbers tell us America is in decline… if not outright collapse.

I say “the numbers tell us” because I’ve become very sensitive to the impact this kind of statement has on people. When I warned about the impending bankruptcy of General Motors in 2006 and 2007, readers actually blamed me for the company’s problems – as if my warnings to the public were the real problem, rather than GM’s $400 billion in debt.

The claim was absurd. But the resentment my work engendered was real.

So please… before you read this issue, which makes several arresting claims about the future of our country… understand I am only writing about the facts as I find them today. I am only drawing conclusions based on the situation as it stands. I am not saying that these conditions can’t improve. Or that they won’t improve.

The truth is, I am optimistic. I believe our country is heading into a crisis. But I also believe that… sooner or later… Americans will make the right choices and put our country back on sound footing.

Please pay careful attention to the data I cite. And please send me corrections to the facts. I will happily publish any correction that can be substantiated. But please don’t send me threats, accusations against my character, or baseless claims about my lack of patriotism. If I didn’t love our country, none of these facts would bother me. I wouldn’t have bothered writing this letter.

I know this is a politically charged and emotional issue. My conclusions will not be easy for most readers to accept. Likewise, many of the things I am writing about this month will challenge my subscribers to re-examine what they believe about their country. The facts about America today tell a painful story about a country in a steep decline, beset by problems of its own making.

One last point, before we begin… I realize that this kind of macro-economic/political analysis is not, primarily, what you pay me for. You rightly expect me to provide you with investment opportunities – whether bull market, bear market, or total societal collapse. And that’s what I’ve done every month for more than 15 years.

But that’s not what I’ve done this month. You won’t find any investment ideas at all in these pages. This issue is unlike any other I have ever written.

I’m sure it will spark a wave of cancellations – costing me hundreds of thousands of dollars. I fear it will spark a tremendous amount of controversy. Many people will surely accuse me of deliberately writing inflammatory things in order to stir the pot and gain attention. That’s not my intention. The truth is, I’ve gone to great lengths throughout my career to protect my privacy.

I am speaking out now because I believe someone must. And I have the resources to do it. I am sharing these ideas with my subscribers because I know we have arrived at the moment of a long-brewing crisis.

Our political leaders, our business leaders, and our cultural leaders have made a series of catastrophic choices. The result has been a long decline in America’s standard of living.

For decades, we have papered over these problems with massive amounts of borrowing. But now, our debts total close to 400% of GDP, and America is the world’s largest borrower (after being the world’s largest creditor only 40 years ago)… And the holes in our society can no longer be hidden…

We’ve reached the point where we will have to fix what lies at the heart of America’s decline… or be satisfied with a vastly lower standard of living in the future.

How do I know? How do I statistically define the decline of America?

The broadest measure of national wealth is per-capita gross domestic product (GDP). Economists use this figure to judge standards of living around the world. It shows the value of the country’s annual production divided by the number of its citizens. No, the production isn’t actually divided among all the citizens, but this measure provides us with a fair benchmark to compare different economies around the world. Likewise, this measure shows the growth (or the decline) in wealth in societies across time.

So… is America growing richer or poorer based on per-capita GDP? Seems like a simple enough question, doesn’t it? Is our economy growing faster than our population? Are we, as individuals, becoming more affluent? Or is the pie, measured on a per-person basis, growing smaller?

This is the most fundamental measure of the success or the failure of any political system or culture. Are the legal and social rules we live under aiding our economic development or holding us back? What do the numbers say?

Unfortunately, it’s a harder question to answer than it should be. The problem is, we don’t have a sound currency with which to measure GDP through time. Until 1971, the U.S. dollar was defined as a certain amount of gold. And the price of gold was fixed by international agreement. It didn’t actually begin to trade freely until 1975. Therefore, the value of the U.S. dollar (and thus the value of U.S. production, which is measured in dollars) was manipulated higher for many years.

Even today, our government’s nominal GDP figures are greatly influenced by inflation. The influence of inflation is particularly pernicious in GDP studies. You see, inflation, which actually reduces our standard of living, drives up the amount of nominal GDP. So it creates the appearance of a wealthier country… while the nation is actually getting poorer.

The only real way to accurately measure per-capita GDP is to build our own model. The need to build our own tools tells you something important – the government doesn’t want anyone to know the answer to this question. It could easily publish data far more accurate than the indexes it puts out. But government doesn’t want anyone to know. And it wants to be able to say “those aren’t the real data” when studies like ours produce bad news.

So pay attention to how we built our charts. You can see for yourself that our data are far more accurate than the government’s figures. Our data are based on the real purchasing power of the currency, not the nominal numbers, which are completely meaningless in the real world.

The question we are trying to answer is: What would per-capita GDP numbers look like, if we used a real-world currency, like gold, or a basket of commodity prices, instead of the paper-based U.S. dollar? What would the figures be if we measured GDP in sound money instead of the government’s funny money?

Here’s how we figured it out. We took the government numbers for nominal GDP and measured them first against commodity prices, and later (after it began to trade freely) gold. We used a standard commodity index (the CRB) up to 1975 and gold post-1975. The result of this analysis shows you the real trend in U.S. per-capita GDP, as measured on a real-world purchasing power basis.

Our analysis shows you what’s actually happened to our real standard of living. The results, we suspect, will surprise even the most bearish among you.

America is in a steep decline.

Americans Are Getting Poorer – Fast

Let me anticipate the “official” criticism of our study. Many people will claim that our numbers aren’t “real.” They will say that we “mined” the data to produce a chart that showed a steep decline.

That’s simply not so. All we’ve done is convert the government’s nominal GDP stats into a fixed currency value that’s based on real-world purchasing power. The fact is, our data are far more accurate than the government’s because they represent the real-world experience. That’s why our data are far more closely correlated to other real-world studies of wealth in America.

Consider, for example, annual sales of automobiles. Auto sales peaked in 1985 (11 million) and have been declining at a fairly steady rate since 1999. In 2009, Americans bought just 5.4 million passenger cars. As a result, the median age of a registered vehicle in the U.S. is almost 10 years.

Our data shows that real per-capita wealth peaked in the late 1960s. Guess when we find the absolutely lowest median age of the U.S. fleet? In 1969. At the end of the 1960s, the median age of all the cars on the road in the U.S. was only 5.1 years. Even as recently as 1990, the median age was only 6.5 years.

Rich people buy new cars. Poor people do not.

Most important, our data “proves” something I know many of you have felt or perceived for many years. You’ve seen the decline of your neighborhoods. You’ve gone years without being able to earn more money in your job. Or you’ve seen your purchasing power decrease to the point where you’re now substituting lower-quality products on your grocery list for the brand-name products you used to buy.

You can see how much harder it is on your children to find good jobs, to buy good housing or a new car. As a result, few people under the age of 40 have the same kind of “life story” as their parents.

And because they can’t “make it,” many have decided to “fake it.” The average college student now graduates with $24,000 in debt… and by his late 20s has racked up more than $6,000 in credit card debt. Meanwhile, median earnings for Americans aged 25-34 equals $34,000-$38,000. (Source: Demos.org, “The Economic State of Young America,” November 2011.)

Can you imagine starting your life out as an adult with a personal debt-to-income level at close to 100%? What does this say about the state of our economy? What does this say about the state of our culture?

Who Suffers Most

It’s not only the young that are having trouble in America. It is also the old.

Debt levels among households headed by people older than 62 have been rising for two decades. The average mortgage size for this population is now $71,000 – five times larger than it was in 1987 (adjusted for inflation), according to William Apgar of Harvard’s Joint Center for Housing Studies.

Older Americans are also more reliant on credit card debt than ever before… credit card debt. From 1992 through 2007 (which is the latest data available) older Americans took on credit card debt at a faster pace than the population as a whole. According to USA Today, lower- and middle-income Americans aged 65 and older now carry an average of more than $10,000 in credit card debt, up 26% since only 2005.

Given average interest rates of 20% for these debts, it’s a fair bet that these obligations will never be repaid. But they will have a terrible impact on the standard of living of these older Americans.

What in the heck is going on? Don’t Americans pay off their mortgages before they retire? Don’t they work hard during their careers, save, and invest, so they can move to Florida and spend their retirement in comfort?

Older Americans living with credit card debt! This doesn’t sound like America, does it? Or maybe it does.

My bet is that most of my subscribers know that something has gone terribly wrong with America. It’s not easy to figure out how all of this happened… but you know from your own experiences that these numbers aren’t wrong. It might not be pleasant to think about… but these figures paint a sad but accurate picture: America is not the country it was 40 years ago. These changes are warping our economy, politics, and culture.

In this month’s issue, I’d like to try to define a few of the core reasons we’re in this situation. I can’t possibly analyze all the factors that have led to this decline. But I want to document the growth of graft in politics. I want to demonstrate – with real facts and examples – how public company leadership has deteriorated. And I want to document some of the things that are occurring in the broader society, all of which I believe are linked to this fundamental decline in our standard of living.

You see, I believe the decline of our country is primarily a decline of our culture.

We have lost our sense of honor, humility, and the dedication to personal responsibility that, for more than 200 years, made our country the greatest hope for mankind. I want to detail some of the factors that gave rise to the current entitlement society. We have become a country of people who believe their well-being is someone else’s responsibility.

I’ve labeled these problems: The Corruption of America.

These problems manifest themselves in different ways across institutions in all parts of our society. But at their root, they are simply facets of the same stone. They are all part of the same essential problem.

The corruption of America isn’t happening in one part of our country… or in one type of institution. It is happening across the landscape of our society, in almost every institution. It’s a kind of moral decay… a kind of greed… a kind of desperate grasp for power… And it’s destroying our nation.

The Ethos of ‘Getting Yours’

Americans know, in their bones, that something terrible is happening. Maybe you can’t articulate it. Maybe you don’t have the statistics to understand exactly what’s going on. But my bet is, you think about it a lot.

For me, a poignant moment of recognition came this month.

Bloomberg news published an article based on confidential sources about how Henry Paulson, the former CEO of Goldman Sachs and the Republican U.S. Treasury secretary during the financial crisis, held a secret meeting with the top 20 hedge-fund managers in New York City in late July 2008. This was about two weeks after he testified to Congress that Fannie Mae and Freddie Mac were “well-capitalized.”

I knew for a fact that what Paulson told Congress wasn’t true. I wrote my entire June 2008 newsletter detailing exactly why Fannie and Freddie certainly had billions in losses that they had not yet revealed to investors – $500 billion in losses, at least. There was no question in my mind, both companies were insolvent – “zeros,” as I explained.

And yet, in front of Congress, the U.S. Treasury secretary was saying exactly the opposite. Either I was a liar… or he was.

Then… only a few days later… what did Paulson tell those hedge-fund managers?

He told them the same thing I had written in my newsletter. He told them the opposite of what he’d said publicly to Congress. He told these billionaire investors that Fannie and Freddie were a disaster… They would require an enormous, multibillion-dollar bailout… The U.S. government would have to take them over… And their shareholders would be completely wiped out.

Here you had a high-government official, explicitly lying to Congress (and by extension, the general public), while giving the real facts to a group of people who represented the financial interests of the world’s wealthiest folks. The story didn’t come to the public’s attention for two years.

This was the most outrageous example of graft and corruption I have ever seen. Certainly it involves more billions of dollars in misappropriated value than any other similar story I can recall. These managers had the risk-free ability to make tens of billions of dollars, if not hundreds of billions, by using derivatives to capitalize on what they knew was the imminent collapse of the world’s largest mortgage bank. Who picked up the tab? You know perfectly well. It was you and me, the taxpayers.

(One of the investment managers present at this meeting was Steve Rattner, who by that point was already deeply involved in another bit of graft, his efforts to bribe New York state pension-fund managers for large investments into his hedge fund, from which he earned perhaps as much as $100 million. He later settled the charges for a mere $10 million shortly after Andrew Cuomo was elected governor of New York.)

The Bloomberg story… about a crooked Treasury secretary handing a room full of crooked billionaires inside information worth billions of dollars… hardly caused a ripple. As far as I know, no actions are being planned against Henry Paulson or any of the hedge-fund managers involved. No other major media outlet picked up the story. I saw nothing about it from the Department of Justice or the Securities and Exchange Commission.

What does that say about our country when even the most egregious kind of corruption – involving hundreds of billions of dollars – is simply ignored?

It seems like everyone in our country has lost his moral bearing, from the highest government officials and senior corporate leaders all the way down to schoolteachers and local community leaders. The ethos of my fellow Americans seems to have changed from one of personal integrity and responsibility to “getting yours” – the all-out attempt, by any means possible, to get the most amount of benefits with the least amount of work.

You can see this in everything from the lowering of school standards (revising the SAT) to the widespread use of performance-enhancing drugs in professional, college, and high school sports. Cheating has become a way of life in America.

I have an idea about how this happened… about the root cause of this kind of corruption and why it was inevitable, given some of the basic facts regarding how we’ve organized our government and our corporations.

Let me show you the numbers – the hard facts – behind what’s happened to our country…

The Corruption of Politics

I’ll start with one of the biggest factors in the decline of our civilization – the link between welfare, education, crime, and politics.

It is routinely alleged in national political debates that something is fundamentally unfair and un-American about the huge “wealth gap” between the poorest Americans and the wealthiest. Some politicians like to argue that the poor never have a real shot at the American dream, and as a nation, we owe them more and more of our resources to correct this injustice. Most important, it is alleged that only the government has the resources to correct this inequality.

This is a dangerous notion…

First, it promotes the idea of entitlement. Entitlement is a fairly new idea in the American political lexicon – perhaps because most of our nation’s wealth is still fairly new. The American idea of entitlement argues that because you were born into a rich society, other people owe you something. The idea has become pervasive in our culture. It underlies the basic assumptions behind the idea of a “wealth gap.” Implicit is the assumption that successful Americans haven’t rightfully earned their wealth… that in one way or another, they’ve taken advantage of the society and have an obligation to give back most of what they’ve “taken.”

As you’ll see, I believe the idea of entitlement lies at the root of many of our most serious cultural problems.

The more obvious problem is the idea that the government is responsible for fixing the “wealth gap.” But the government has proved wholly ineffective at dealing with poverty in America. The data is nearly conclusive that government efforts are far more likely to be the cause of the wealth gap than the solution.

The simple fact is, the government has to take resources from someone before it can dole them out to others. And this act of taking turns out to be economically destructive. It reduces the market’s incentives for entrepreneurs. The more you take from the productive members of society, the less productive they become. That’s the primary lesson of the history of socialism. Yet… many of our political leaders seem oblivious to this iron law of human nature.

Consider a simple analysis that compares the unemployment rate with the size of the federal government’s spending, as measured against GDP. (We created this chart after reading a similar analysis at Mark Perry’s excellent financial blog, Carpe Diem.)

As you can see in this chart, the larger the government grows as a percentage of our economy, the higher unemployment rises. The more government, the less opportunity. These figures are similar when studied comparatively across many different countries.

We also know from decades of experience that little of the government’s funding for the poor will ever reach those who are actually in need. Instead, these kinds of socialist policies end up sending billions of dollars into the hands of unions, “community organizers,” and other sponsors of the Democratic Party. This tightens their political control of America’s inner cities, which have become the source of our country’s most intractable social problems.

Believe me, I have reams of data and decades of case studies for these conclusions. But before we get to my proof, I want you to simply assume that what I’m saying is 100% correct. Assume most of the government’s social spending ends up corrupting the politics of the inner city. Assume these efforts actually make the “wealth gap” larger. Assume these policies and the politicians who sponsor them are actually creating a society of complete dependence, where the spread of ignorance has created entire generations of people who aren’t educated enough to know they’ve been enslaved by their own leaders.

If these things are true, if my conclusions are exactly right, what would America’s poorest communities look like today?

It has now been almost 50 years since the start of the War on Poverty, President Lyndon Johnson’s program to radically increase domestic welfare spending. These programs and their various spinoffs have been at the center of Democratic politics ever since. In fact, if you compare speeches about these programs from the mid-1960s until today, you will find the verbiage never changes. Obama is merely echoing the same calls for “social justice” that Robert Kennedy used in his ill-fated 1968 campaign for president.

But besides the soaring rhetoric, besides the promise of a “chicken in every pot,” what have these programs actually achieved? The wholesale destruction of urban communities across America, communities that are overwhelmingly African American. If the intention of these programs had been to destroy black communities, you could have hardly done more damage than the last 50 years of Democratic policy.

I don’t think most Americans realize how dangerous these communities have become or the toll they take on our country as a whole. That’s primarily because talking about this problem is seen as racist. That’s complete nonsense. The victims of these policies are primarily black people. Trying to help them restore dignity and independence to their communities isn’t a racist goal. It’s humanitarian.

And let me offer a prediction… Sooner or later, the people in these communities are going to finally point their finger at the politicians who’ve lied and pandered to them for decades, all while stealing from them at every turn. When that moment comes, having a track record of correctly speaking out about the real nature of these problems will be a valuable political asset.

No, I’m not running for office… I’m just trying to buck-up the politicians who I know read this letter. They need to get out in front of this issue.

Let me give you some of the numbers that define the enormous scope of these problems.

According to the NAACP, Texas taxpayers spent $175 million in 2009 to imprison residents from a small part of Houston – only 10 zip codes out of 75. Thus, people from neighborhoods that are home to only about 10% of the city’s population account for more than 33% of the state’s entire $500 million annual prison spending. These neighborhoods are overwhelmingly poor and African American.

In Pennsylvania, taxpayers will spend $290 million in 2009 to imprison residents from just 11 of Philadelphia’s neighborhoods, representing about 25% of the city population. On this relatively small urban area, the state will spend roughly half its $500 million prison budget. These neighborhoods are overwhelmingly poor and African American.

In New York, taxpayers will spend $539 million to imprison residents from only 24 of New York City’s 200 different neighborhoods. Only 16% of the city’s population lives in these areas, but they will account for nearly half of the state’s $1.1 billion prison budget. These neighborhoods are overwhelmingly poor and African American.

America has many problems… but these neighborhoods represent more than a society in decline. Life in these places reflects a complete collapse of Western civilization. What’s happening in these communities? A breakdown of the family and the resulting collapse of the school system. What you have left is crime – violent and political.

In Detroit, only 27% of the black male students in the school system graduate from high school. This is not a racial problem: Only 19% of the white male students graduate from those same schools. What’s causing this problem? A complete breakdown of society. When communities can no longer teach their children the most basic academic skills, such as reading, math, history, literature, and economics… what future can we expect? And what kind of society do you expect after several generations of total ignorance?

These problems are still found primarily in urban areas, but they are spreading across the country. In Pinellas County, Florida, only 21% of black male students graduate from high school. In Palm Beach County, Florida, you find a similar number. Likewise Duval County, Florida… and Jefferson Parish, Louisiana… and Charleston County, South Carolina. In Nebraska, only 40% of black male students graduate from high school. In Nevada, only 45%. In New York state, only 25%.

What opportunities are available in America to people without even a basic education? The New York Times reports almost 70% of black males without a high school diploma are unemployed in the United States.

In many predominantly black, urban communities, the actual unemployment rate is close to 100% for young dropouts. Given these figures, it isn’t surprising that many of these people end up in jail.

According to various studies, black males who dropped out of school by age 16 are four times more likely to end up in jail than those who remained in school. Crime is literally all they know. Likewise, a black youth whose mother was a high school dropout is 88% more likely to end up in jail. These are the two primary reasons nearly one in 11 adult black men are either in jail or on parole.

How did this all happen? How did we end up with expensive schools that can’t teach? How did we end up with young mothers who aren’t married? How did we end up with entire generations of people who won’t – and probably can’t – work in the labor force? How did we end up with a skyrocketing prison population? The prison population in America has soared from less than half a million people in 1980 to more than 2.5 million people today. More than 7 million adults are in prison or on parole in the United States. We have an incarceration rate that’s seven times higher than any other industrialized nation.

The land of the free?

Let’s ask the most basic question: What has the gigantic increase in welfare spending and education spending done for the underclass of America? It seems apparent that growth in federal spending has caused far more harm than good. When you study these neighborhoods, what you find is a horrifying story that’s been repeated, generation after generation since the early 1960s. It’s a story of families who have been destroyed by their dependency on the state.

The truly extraordinary part is that all these things happened after these neighborhoods began voting and electing their own (typically black and Democratic) leadership. The socialism they voted for themselves led most directly to the destruction of their communities. It was their own mayors, ward leaders, and congressmen who chose this path for these communities.

Let me show you one case study – Detroit.

How Socialism Came to America…
and Destroyed Detroit

In 1961, the last Republican mayor of Detroit, Louis C. Miriani, lost his re-election bid. He probably would have lost to anyone who ran against him because he was known to be a crook. He later served 10 years in prison for tax evasion.

The man who defeated him, Jerome Cavanagh, was a Democrat. He ushered in a new kind of politics in Detroit. Cavanagh, who was white, got elected by promising to give Detroit’s African American population the civil rights they deserved. But he didn’t stop there. Seeing the political advantage to serving this community’s interests, he did all he could to bring government benefits and government spending to Detroit’s black community.

Cavanagh brought socialism to Detroit.

Mayor Cavanagh was the only elected official to serve on President Johnson’s Model Cities task force. The program was modeled after Soviet efforts to rebuild whole urban areas in Eastern Europe. At the time, this centralized approach to urban development was proclaimed as an advantage to the Soviet system, something that could give them an edge in the Cold War.

Detroit received widespread acclaim for its leadership in the program, which attempted to turn a nine-square-mile section of the city (with 134,000 inhabitants) into a “Model City.” To help finance the effort, Cavanagh pushed a new income tax through the state legislature and a “commuter tax” on city workers. He promised the mostly poor and black residents of the Model City area that the rich would pay for all of these benefits. He bought their votes with taxes they didn’t have to pay.

It was classic American socialism.

More than $400 million was spent on the program – and that was back when quarters still had actual silver in them. The feds and Democratic city mayors were soon telling people where to live, what to build, and what businesses to open or close. In return, the people received cash, training, education, and health care.

But they didn’t like being told what to do… or how to live. Not surprisingly, the Model Cities program was a disaster for Detroit. Within five years, it had helped trigger a complete breakdown of civil order and the city’s population began to rapidly decline.

On July 23, 1967, police attempted to break up a notorious “blind pig” in the heart of the new Model City. Blind pigs were after-hours clubs that featured gambling and prostitution. They were part of the black culture of Detroit, with many having been in operation since the Prohibition period. The community tolerated these establishments – but the political leadership didn’t want any blind pigs in the new Model City area.

On this particular night, at this particular club, the community was celebrating the return of two Vietnam War veterans. More than 80 people had packed into the club. The police decided to arrest everyone present, including the two war vets. This outraged the entire neighborhood, which began to riot. The scene turned into the worst race riot of the 1960s.

As my friend Doug Casey likes to say about the War on Poverty, “The poor lost.” The violence killed more than 40 people and left more than 5,000 people homeless. One of the first stores to be looted was a black-owned pharmacy. The largest black-owned clothing store in the city was also burned to the ground. Cavanagh did nothing to stop the riots. (He claimed a large police presence would make matters worse.) Five days later, President Johnson sent in two divisions of paratroopers to put down the insurrection.

The situation destabilized the entire city. Most of the people who could afford to leave did. Over the next 18 months, 140,000 upper- and middle-class residents – almost all of them white – left the city.

And so, you might ask… after five years of centralized planning, higher taxes, and a fleeing population, what did the government decide to do with its grand experiment? You’ll never guess…

Seeing it had accomplished nothing but failure… The government expanded the Model City program with 1974’s Community Development Block Grant Program. Here again, politicians would decide which groups (and even individuals) would receive state funds for various “renewal” schemes. Later, big business was brought into the fold. In exchange for various concessions, the Big Three automakers “gave” $488 million to the city for use in still more redevelopment schemes in the mid-1990s.

What happened? Even with all of their power and all of the money, centralized planners couldn’t succeed with any of their plans. Nearly all of the upper- and middle-class citizens left Detroit. The poor fled, too. The Model City area lost 63% of its population and 45% of its housing units from the inception of the program through 1990.

Even today, the crisis continues. At a recent auction of nearly 9,000 seized homes and lots, less than one-fifth of the available properties sold, even with bidding starting at $500. You literally can’t give away most of the property in Model City areas today. The properties put up for sale represented an area the size of New York’s Central Park. Total vacant land in Detroit now occupies an area the size of Boston. Detroit properties in foreclosure have more than tripled since 2007.

None of this is surprising. It’s exactly what you’d expect to see given the implementation of a socialist scheme like a Model Cities’ program. Quite simply, coercion doesn’t work for economic development. You cannot tax yourself into prosperity.

It might buy votes… but sooner or later the voters will realize all that’s been promised was a lie. Won’t they?… Maybe not.

You see, the failure of the Model Cities program and of the War on Poverty wasn’t surprising. What is surprising is that every single mayor of Detroit since 1961 has been a Democrat. And extremely liberal, black politicians have filled almost every major political office in the city since the mid-1960s.

For example, John Conyers, Jr. has represented most of Detroit’s worst neighborhoods since 1965. Today, Conyers is the second-longest serving congressman in the House. And his election track record could be described as “Putin-esque.” Conyers doesn’t merely win all of his election campaigns… He wins by margins that aren’t explainable in a normal, two-party system.

He defeated Republican Robert Blackwell in 1964, getting 84% of the vote. He was re-elected 13 times in a row from that district, all with a greater margin of victory than 85%. Ironically, the district was so ill-served by his socialistic policies that about half of the people moved away. The population losses led to redistricting. From then on, his margin of victory has fallen… to “only” around 80%.

These election results don’t seem reasonable, do they? They aren’t. By controlling the state legislature in Michigan, the Democrats are able to draw the congressional districts in a way that guarantees them almost permanent control. It’s no different than what despots do all over the world. They hold an “election.” But it’s only for show.

And what do the Democrats do with this power? They push a form of American socialism. This political system features transfer payments, government jobs, and lucrative government contracts to voters in exchange for political support – and in many cases, outright bribes. They do all of these things under the cover of “progressive” politics and “social justice.”

But if you brush away the veneer, what you find is a history of abuse of power, corruption, and outright bribery. Conyers himself was found guilty of several minor ethical violations in 2006 – mainly of using his staff as personal servants, forcing them to babysit and chauffer his children. In 1992, he was one of the most egregious abusers of the House Banking scandal. He wrote 273 bad checks and left his account overdrawn for nine months. But that’s all small-time graft compared to how things really work in his office and in his district.

How do I know? Well… just ask yourself where Conyers’ wife sleeps today.

Monica Conyers, the wife of the second-longest tenured congressman in the United States, sleeps in a federal prison in West Virginia. She pled guilty to bribery in June 2009. She is serving a 37-month sentence for accepting $60,000 in bribes as the president pro tempore of the Detroit City Council. And yet… and yet… Conyers won re-election handily in 2010.

How is that possible?

These kinds of people and their political philosophy have destroyed what was once America’s fourth-largest city. There is almost nothing left of what was the capital of America’s industrial heartland. It’s not hard to understand what has happened. When you start taxing people at extremely progressive rates to pay for socialist “benefits”… when you start telling them which schools their children must attend… when you start giving jobs away to people based on political patronage, race, or anything other than ability… you quash human freedom, you create dependency. And you deter capital and investment… which bogs down productivity and economic growth. If continued for long enough, it leads to social collapse.

And Conyers is hardly an anomaly. Just look at those same blighted districts in Houston and Philadelphia…

In Houston, most of the city’s worst neighborhoods in terms of high-school graduation rates and crime are found in Texas Congressional District 18, where Democrats have won every election since the district was created through re-zoning in 1972. In 1994, Sheila Jackson Lee won the seat by promising to deliver more federal benefits to her constituents…

To appreciate the sterling representation the Honorable Ms. Jackson Lee provides, consider this… In 2010 in bizarre remarks before Congress, she demanded the government recognize victory in Vietnam. You can try to figure out what she’s talking about here. She also alleged racism on the part of her fellow members of Congress who were voting against raising the debt ceiling. Don’t believe it? View for yourself.

In Philadelphia, Chaka Fattah represents the worst parts of the city, Pennsylvania’s 2nd Congressional District. The 2nd District is the fifth-most Democratic Congressional District out of the 435 in Congress (and the most Democratic outside of New York) based on the consistency and margin of Democratic victories. A black Democrat has held the seat since 1963.

Among Chaka Fattah’s political highlights is his economically illiterate plan to implement a 1% surcharge on all financial transactions and transfers in lieu of all other forms of tax. This ill-fated plan, which hasn’t gotten a single co-sponsor, ignores everything we know about actual human behavior. (If you implemented such a cost to financial transactions, the viability of those transactions would be destroyed and they wouldn’t occur.)

Fattah’s other notable political position is his support for convicted cop killer Mumia Abu-Jamal. Mumia’s case has been a cause célèbre for years. The details of his endless appeals are tedious… just know the evidence presented against him is overwhelming. And the Fraternal Order of Police has consistently campaigned against Fattah’s re-election over his support of Mumia.

The larger point is… These districts are among the most blighted in our nation. Society has broken down there to a horrible degree. Opportunity has vanished… Crime is rampant… Dependency on the state is the norm. The leadership in these communities should be the most scrutinized, their elected positions among the most contested. And yet, they are the safest seats in Congress. The officials dominance goes unchallenged.

Why haven’t these policies and these leaders been dropped – even after they’ve pled guilty to outright bribery? You would think having experienced enough failure, having lived through horrible riots, terrible crime, total economic collapse, brazen corruption… that sooner or later, the voters in Detroit (and many other cities in America) would come to their senses. But that’s not what happened. Instead, these systems have continued to fail up to the point of total collapse. It is as if one part of our society decided to run off the cliff… and then continued to do so for decades.

Why? Why did this happen? Why does it continue to happen?

Government Employee Unions:
Organized Corruption

A big part of the answer lies in understanding the key mechanism in the Democratic Party’s funding system. (Don’t worry… so far, we’ve been talking about Democratic Party failures, but I’ll get to the Republicans next. The corruption of America is a bipartisan problem.)

We can trace the origins of these ultraliberal politicians and the beginnings of America’s severe urban decline to the early 1960s. Yes, that was when the civil rights movement inspired the black community to take political power. But that wouldn’t have necessarily led them to embrace socialism. Americans of all races largely rejected socialism for decades.

That all changed in the mid-1960s. Facing tough mid-term elections, the Democratic Party convinced President John F. Kennedy to allow the federal workforce to unionize. Executive order 10988 – signed on January 17, 1962 – permitted federal employees to organize unions and bargain collectively for higher wages and benefits. This set the stage for similar measures in cities and states across the country and led to a transformation of the union workforce. (Technically, Wisconsin became the first state to allow collective bargaining from state employees in 1959. But that’s an outlier. Most states followed the federal lead.)

This represented a major change in both Democratic Party strategy and a major revolution in American politics. Even Franklin Delano Roosevelt, who was the most liberal president in history prior to Barack Obama, recognized that allowing collective bargaining on behalf of government workers was incompatible with a free democratic system of government…

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. – President Franklin Roosevelt in a letter to Luther Steward, president of the National Federation of Federal Employees, August 16, 1937.

A government union turns the public servant into the public’s master. It is a means of using the government’s own spending to organize control of that government. And that is exactly what’s happened. The government, unlike private companies, isn’t limited by normal economics because the government controls the monopoly on force and has the power to levy taxes.

The power of unions had long been held in check by market forces. Companies that gave too much to the unions in terms of pay or benefits soon found themselves driven out of the market because of high costs or poor products. Except in cases of government bailouts (like GM), these companies soon went out of work and their union members were left unemployed.

Nobody could reliably adopt truly socialistic policies because eventually, the costs of those bad ideas limited the power of the people promoting them. The growth of unions stalled in the 1950s, and they began to shrink in the 1960s. This caused a crisis in the Democratic Party (among the principal beneficiaries of union dues). Something had to be done.

Organizing unions made up of state employees completely eliminated the ability of market forces to temper their power. After all, taxes aren’t subject to the demands of consumers. Following Kennedy’s executive order, membership in public employee unions – The American Federal of State, County and Municipal Employees (AFSCME), the Service Employees International Union (SEIU), and the Teachers’ National Education Association (NEA) – boomed. So did their contributions to liberal, Democratic politicians.

These socialist organizations now had access to funding that wasn’t limited by market forces. They could control entire generations of politicians. And they did. From 1989 to 2004, AFSCME was the largest single donor to federal political campaigns in the country. More than 98% of its donations went to Democratic candidates.

To see the damage the heavy involvement of these unions has on the community, consider one government service – education.

The Democrats largely control all the areas plagued by the worst schools in the United States – the inner city schools of America’s big cities. A voucher system that would empower parents to send their children to better schools and introduce competition for government funding is a simple and proven way to improve both the results and cost-effectiveness.

If the Democratic Party were truly interested in the actual well-being of the communities it serves, supporting voucher plans and charter schools is among the first things you’d expect them to pass. But in fact, it is the last thing they would ever voluntarily do. It is the Democratic Party that stands firmly against any significant changes to the public school system – despite its obvious failure – because of lobbying by the NEA.

This is so clearly an example of graft and corruption that you must doubt the ability of the system to function.

Besides this obvious problem, there is a tremendous amount of corruption in the various direct transfer payment programs that have been organized and supported by the Democrats and their union backers, which have created an entire subculture of people who live and trade in various forms of welfare. If you don’t believe me, spend a few days shopping in your nearest ghetto. Look for the “Use EBT Here” and “We Accept WIC” signs… They’re essentially gift tags… demonstrating your compulsory largesse to the good folks of that neighborhood.

And people addicted to transfer payments will never see how their dependency is destroying their community. That’s exactly what happened in Detroit.

Today, we have a black, Democratic president, who came to power in the most corrupt state in the union – Illinois. Right now, two former Illinois governors have been convicted for corruption. One for blatantly trying to sell the Senate seat Obama vacated when he became president.

And realize… not a single member of Obama’s cabinet has any kind of private-sector experience.

On the other hand, he has extremely close ties to the unions. He had the most liberal voting record of any senator during his tenure in Congress. His agenda is explicitly socialist: “I think we should spread the wealth around a little bit.”

The likelihood America will become more and more like Detroit is growing – rapidly. Politicians now control the banking sector, most of the manufacturing sector (including autos), and a large amount of media. They are threatening to take over health care and the production of electricity via cap-and-trade rules and subsidies promoting solar power. These are major threats to the wealth and well-being of America. America is under siege by corrupt socialists.

And the big problem is… these kinds of political systems can’t be reformed because their power base is the government itself, thanks to the creation of government employee unions. That sets the stage for a collapse…

Look around… Taxes can no longer be raised without people actively fleeing states. This has happened in several places – New York, New Jersey, and California, to name a few.

In Maryland – where my company is headquartered – the Democratic state government couldn’t balance the budget in 2009, so it decided to double the income tax rate on citizens with more than $1 million in annual income. That left the rich facing a 9.45% marginal state and local income tax. Put that on top of a 36% federal rate, throw in another 6% for Social Security and Medicare, and you’re looking at a top marginal rate in excess of 50%. What kind of smart, hard-working citizen is going to give the government more than half his income if he can move somewhere else and pay substantially less?

The liberal editorial board at the Baltimore Sun happily praised the measure and predicted Maryland’s top earners would “grin and bear it.”

What a bunch of fools.

Instead, the rich left town. The number of million-dollar incomes in the state of Maryland declined by more than 30%, from 3,000 filers to only 2,000. Rather than gaining the predicted $106 million in income from these filers, Maryland collected $100 million less than it did the year before.

Do you think Maryland will rescind such stupidly progressive taxes? No way. It’s good politics to promise the voters that only the rich will pay. No, it doesn’t work. But that doesn’t matter – not until the entire system collapses. And that’s why such a collapse is inevitable. It happens all the time. The political promises expand and expand. The rate of marginal tax goes higher and higher. The tax base narrows and tax collection declines. Government debts soar, until… sooner or later… the interest rate soars because lenders realize there is no way they will ever get their money back.

That’s what’s happening now all over Europe.

And it will happen here next.

The states and their union employees have reached the inevitable endgame. The numbers in many states are mind-numbing. Illinois’ pension liability now exceeds $100 billion. Roughly half is unfunded. In California, the pension liability is $50 billion. Another 10 states have unfunded pension liabilities in excess of $10 billion.

The Pew Foundation estimates when retiree health care benefits are included, the total unfunded liabilities of the state governments currently exceed $1 trillion.

These debts are not currently on the books of any institution in America. They’re merely promises made by our state and local governments. But these promises add up to a bill we cannot possibly pay – not if we plan to honor the $20 trillion the federal government currently owes (which includes all of the debts of Fannie Mae and Freddie Mac).

What does this mean for the future of America? I’m sorry… But it’s not good.

Everyone knows what happens to socialist countries. They eventually collapse for the simple reason that everyone cannot live at the expensive of his neighbor – not for long.

And if you want to see what socialism will do to our country, don’t go to the Eastern-bloc countries of the former Soviet Union. They got rid of that kind of government 20 years ago. Now they’ve got low, flat taxes and booming economies. You might visit Cuba or spend time in Venezuela. You’ll find socialism there, certainly. But you don’t have to go that far…

All you really have to do is visit Detroit.

You can drop Congressman Conyers a Thank You note after your visit.

Welfare for the Rich, Too

Our country’s core problems are not found in only one political party.

There is just as much corruption, if not more, on the Republican side of the aisle. It was, for example, as I pointed out earlier, a white, Republican-appointed Treasury secretary (Henry Paulson) who tipped off 20 top hedge-fund managers about Fannie Mae and Freddie Mac’s imminent collapse after assuring the public that it wouldn’t happen.

For big business, the powerful role of government in our society is simply too valuable to ignore. And the amount of corruption it inspires is stunning. Few politicians even bother trying to hide the fact that they’re bought and sold like furniture.

Take Newt Gingrich. The white, Republican former House speaker was paid $1.6 million for “consulting” by Fannie Mae and Freddie Mac during a period of time the two firms were under constant attack by Newt’s fellow Republicans. Were the attacks efforts to truly reform a major threat to our financial system… or were they merely shakedowns? All we know for certain is Fannie and Freddie collapsed, just as many Republicans warned they would. The Republican effort to reform the firms failed. Newt collected $1.6 million.

Fannie and Freddie could end up costing taxpayers as much as $500 billion. No, I’m not ignoring the colossal role the Democrats played in staffing Fannie and Freddie, lobbying Congress for the companies, etc. I’m simply pointing out that, in Washington, everything and everyone seems to be for sale, on both sides of the aisle.

I realize that’s nothing new. What is new is the scope of the corruption and how brazenly our leaders have embraced it.

Think about the new prescription drug benefit – 2003’s Medicare Modernization Act. The law provided public funding for both public and private prescription drug benefits. (IBM, for example, estimated it would save $400 million over 10 years on retiree benefits thanks to the law.) At the same time, the law banned the federal government from negotiating with pharmaceutical companies. In summary, the law basically requires the federal government to pay for the prescription drugs of just about anyone over the age of 65 and requires the government to pay full retail prices.

There are now around 25 million beneficiaries of this law (not including the pharmaceutical companies). The average annual benefit is currently about $1,500. The total cost of the legislation over the next decade is expected to be around $1 trillion. This represents the largest expansion of Medicare in the history of the U.S.

The benefit was approved by a Republican-dominated Congress, in a midnight vote. Louisiana Republican Billy Tauzin, then chairman of the Committee on Energy and Commerce, which oversees the pharmaceutical industry, organized the vote. Two months later, Tauzin resigned his seat and took a job paying $2.5 million per year as a lobbyist for the Pharmaceutical Research and Manufacturers of America. The pharmaceutical industry continues to spend $100 million per year on campaign contributions and lobbying.

Americans are left paying the world’s highest prices for drugs. Worse, we have extended the entitlement sentiment into the one area of the economy where personal responsibility is crucial. For most people, good health can be achieved by maintaining a disciplined diet and simple exercise. Offering free pills in lieu of such steps will only further the serious problem of diabetes and obesity we face.

And remember… this law was passed by Republicans and signed into law by a Republican president.

I could go on and on here…

There is a tremendous amount of corruption between the federal government and big business. There’s even more corruption at the state and local level. Here’s one simple expression of what’s happening…

As late as 1969, the U.S. tax code required “only” 16,500 pages. By 2007, the code grew to 67,506 pages. The current form 1040 instruction booklet is 155 pages long. Obviously none of this is necessary for the collection of taxes. The code has been shaped by the corruption of our government, which in turn was shaped by the corruption of our society.

Here’s another simple measure. Look at how much of federal spending goes directly to millionaires and big business.

Republican Sen. Tom Coburn, of Oklahoma, recently published a report on the subject entitled “Subsidies of the Rich and Famous.” According to the study, the feds are now spending around $200 billion annually on direct transfer payments to the very rich.

Given the state of our national finances, this is patently absurd. Merely getting rid of these payments would result in a substantial reduction (almost 15%) of our annual federal deficit. And yet… despite the collapsing dollar, our soaring debt loads, and the lowest civilian employment levels since the Great Depression… everything seems to be business as usual in Washington D.C.

Doesn’t that make you sick? There’s simply no excuse for this kind of governance. None. Americans deserve a vastly better and more ethical federal government. But we will never get it unless we can find a way to hold our leaders personally accountable for what’s happening.

Here’s a simple solution. Hold the senators and congressmen personally liable for any deficit, each year. We elected these people to be our leaders. We did not elect them to spend us into bankruptcy. We did not elect them to feather their own nests with unlimited public spending. We did not elect them to buy votes. The only way to stop what’s happening is to make them personally responsible for their actions. Either they will balance the budget or face personal financial ruin.

Demanding personal accountability for fiduciary responsibilities would have an immediate and profound impact on our society. It would wipe out the entitlement mentality that’s destroying our society – almost overnight.

Restoring personal accountability is also crucial if we hope to restore confidence in our public corporations and capital markets, which were once the broadest, most efficient, and most trusted in the world.

The Corruption of the Corporation

If you think I’m exaggerating the problems we face or the far-reaching impact of the entitlement culture we’ve allowed to develop in America… then explain the following fact…

The 10 largest American bankruptcies in history have all occurred in the last decade: Lehman Brothers ($691 billion), Washington Mutual ($327 billion), WorldCom ($103 billion), General Motors ($91 billion), CIT ($80.4 billion), Enron ($65 billion), Conseco ($61.4 billion), MF Global ($41 billion), Chrysler ($39.3 billion), and Thornburg Mortgage ($36.5 billion).

All of these failures have a few things in common: extremely well-compensated CEOs with long tenures (which suggests the board of directors was asleep at the wheel), vast amounts of debt that would seem completely unsafe by any reasonable standard, and accounting policies that deliberately misled investors. Most tellingly, in the majority of these cases, board members and the executive management have no material investment in the company.

In every single case, the financial jeopardy was apparent – for years. In fact, at Stansberry & Associates, we accurately predicted several of these bankruptcies and warned about nearly all of them. (Several others we accurately forecast were narrowly avoided thanks to the TARP program and other federal bailouts.) We are far from the best-connected or the smartest financial analysts in the world. Yet… almost every single Wall Street firm remained silent… and so did the ratings agencies.

You never saw most of these problems revealed to the public, either in the Wall Street Journal or other mainstream news sources. What was almost common knowledge in financial circles was never shared with the public, which continued to buy these stocks (and many others in a similar situation) all the way down. Most Americans’ 401(k)s were eviscerated. But the bonuses on Wall Street never fell.

I can’t name a single major Wall Street firm that hasn’t engaged in massive fraud over the last decade. Not one. They have all paid massive fines to the SEC. But in only one of these cases was any firm held criminally responsible. And that firm was Arthur Anderson – Enron’s accountant! What about the bankers who actually lent the firm money against collateral they knew was bogus? What about the investment bankers who sold Enron’s stock to the public, even though it knew the earnings were fraudulent? And what happened to the huge corporations whose depositors, executives, and lawyers were full, active partners in the fraud that bankrupted Enron – namely Citigroup and JPMorgan, the two largest banks on Wall Street?

The Senate subcommittee investigating Enron’s collapse had this to say about Citigroup and JPMorgan: “The evidence… demonstrates that Citigroup and JPMorgan actively aided Enron in executing transactions, despite knowing the transactions utilized deceptive accounting or tax strategies, in return for substantial fees or favorable consideration in other business dealings.”

So what happened? Almost nothing. In August 2003, the banks settled with the SEC for a combined $255 million. They did not admit guilt. Nor did they stop committing fraud.

The very next year, in 2004, Citigroup settled for $2.65 billion (yes, billion) to get out of charges it had defrauded lenders and investors in the collapse of WorldCom.

(Ironically, the plaintiff who brought this case was New York State Comptroller Alan Hevesi. Hevesi, like Monica Conyers, is currently in jail, for corruption charges. Yes, really. In April, he was sentenced to up to four years in prison in the Steve Rattner-related bribery case I also mentioned earlier. In America today, even the people who are going after the banks for fraud are themselves corrupt.)

AIG paid $800 million in a settlement in 2006 – just two years before its collapse nearly triggered a global financial catastrophe, requiring a $125 billion federal bailout. Fannie Mae paid $400 million to settle accounting charges in 2006, just two years before its collapse cost taxpayers more than $100 billion. Its CEO, Franklin Raines, walked away with close to $100 million in compensation and was never criminally charged.

Goldman Sachs paid $550 million in 2010 related to fraudulent mortgage securities. Citigroup paid $400 million in 2003 for bogus equity research. Invesco paid $325 million in 2004, after it admitting to ripping off its own mutual-fund investors via a late-trading scheme. Prudential was also “dinged” $270 million in the same scandal.

I could go on… but you surely get the point. Nearly every major financial fiduciary in the United States has been involved in serious malfeasance in the last decade. The sums of these settlements indicate transgressions that should rise to the level of criminal indictments…

The Rigas family, for example, was thrown into prison after defrauding investors in Adelphia Communications. Their settlement with the government was “only” $715 million. Citigroup, on the other hand, has paid settlements close to five times that amount over the last decade… but not a single criminal charge has been filed. Adelphia Cable didn’t owe their subscribers a fiduciary duty. All of the Wall Street firms I mentioned did.

If that’s not corruption, what is? And if all of this doesn’t make you sick, what will?

We’ve written volumes about the other major corporate scandals over the past decade. We broke the executive options abuse story, for example, in 2002, showing how companies like Broadcom, Juniper Networks, and Apple Computer were ripping off shareholders by printing massive amounts of employee stock options (most of which went to executives) and then re-pricing them when their stock prices fell.

Under the system, all of the company’s cash flows (and more) would have to go to share buybacks in order to prevent massive dilution. Thus, the employees were actually stealing the company’s earnings. Most people on Wall Street knew this and were shorting the companies whose abuses were the most egregious. But the scheme wasn’t revealed to the public (outside of our newsletter) until 2006 when the Wall Street Journal finally wrote about the issue.

Steve Jobs, who was one of the most flagrant options abusers at both Apple and Pixar, got off the hook by naming Al Gore to the board of directors… and giving him millions in options grants. To this date, Apple Computer has not paid out a single penny in dividends to its rightful owners (its shareholders). Yet over the last decade, it has increased its outstanding share count via options issuance by 47%.

What can you do about the corruption of America’s public companies? Here’s a very simple solution: Make the board of directors personally liable for fraud, negligence, and depositor losses. If you’re on the board of MF Global, for example, and your firm fails because your CEO bet $6.3 billion in Italian bonds… your depositors – who are still missing more than $1 billion – ought to be allowed to sue you personally. Currently, a combination of legal liability limits and insurance (so-called D&O policies), paid for by the corporation, prevent any real personal liability – even in clear cases of fraud.

Franklin Raines, for example, who had Fannie Mae’s accounting set up to maximize his annual bonuses in violation of accounting standards was fined $2 million in a settlement with regulators. An insurance company paid the fine. The company paid the premiums on that policy.

The concept of the corporate shield for legal liability was created so that limited partners (like common-stock holders) couldn’t be held liable for the damages caused by the general partner’s actions or misdeeds. Over time, that shield has been extended to the general partners of public companies – the board of directors and the executive management team. But these people are paid to run the company. If they engage in fraud or are negligent in their duties, they ought to be held liable.

If you were to simply make that one legal change, the conduct of America’s corporations – especially those with fiduciary responsibilities to depositors – would change overnight. Confidence in America’s public companies and capital markets would soar. But… as long as the idea of entitlement remains ascendant, dictating that executives keep most of the profit but none of the risk… our capital markets will continue to suffer and the management of our public companies will be rife with negligence and fraud.

Is This Fascism?

Earlier this year, in my June issue, I tried to define the unique blend of socialism for the poor, corporate welfare for the rich, paper money for the government, and credit excess for the middle class that has shaped America for most of the last 40 years. I wrote…

You can’t just call our economic system “socialism.” It’s not. There’s a profit motive and private ownership of nearly all assets. Socialism has neither of these. Besides, far too many people have become far too rich in our system to simply label it “socialism”…

Our system isn’t truly capitalism either, though. The State intervenes in almost every industry, often in a big and expensive way. With government at all levels making up more than 40% of GDP, it’s fair to say we live in a State-dominated society…

A certain class of people has the power to not only protect itself from these policies but to profit as well. These people have used the last 40 years to produce massive amounts of paper wealth. And they are now desperately trying to convert those paper accounts into real wealth, which explains the exploding price of farmland and precious metals.

This explosion of wealth at the top of the “food chain” is the main feature of what I call New American Socialism. It’s a system fueled by paper money, the constant expansion of debt, and a kind of corruption that’s hard to police because it occurs within the boundaries of the law…

In the New American Socialism, the power of the system produces private profits. In this way, it provides a huge incentive to entrepreneurs and politicians to work together on behalf of the system. This is what keeps the system going. This is what keeps it from collapsing upon itself. And this, unfortunately, is why the imbalances in the world economy will continue to grow until the entire global monetary system itself implodes.

I continue to believe that’s a very accurate description of what’s happening to our country. But… many subscribers wrote in and complained that what I was calling “New American Socialism” was nothing new at all – it was actually fascism.

Webster’s defines fascism as…

a political philosophy, movement, or regime that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition.

That’s not what’s happening in America – at least, not yet. To this point, there’s little direct forcible suppression of opposition and little exultation of the federal government. And while certain congressional districts have become socially regimented and politically repressive, that’s not a widespread phenomenon.

Many people fear this is where we’re heading… that as conditions deteriorate and the currency collapses, the government will move to take still more power. I don’t think that’s likely – at least, not for long…

I do agree that the nation will soon face a choice between heading down the path towards fascism… or turning back the power of government and restoring the limited Republic that was our birthright. I continue to believe Americans will choose personal liberty.

I believe they will choose more freedom rather than more totalitarian rule. I don’t believe Americans will tolerate martial law for long – even in the advent of a real emergency, which I do believe will occur.

What gives me confidence for the future? Gun sales, for one thing. U.S. citizens legally own around 270 million firearms – about 88 guns per 100 citizens (including children) today.

That’s a hard population to police without its consent. America is the No. 1 country in the world as ranked by the number of guns per-capita. That plays a major factor in the kind of government you will see take root in America. Things might go too far in this country for a while… And I’d argue they’ve been going the wrong way for too long. But the government can only take things so far before they’ll be faced with a very angry, well-armed opposition.

If the government attempts to take our guns… my opinion would change immediately. But that’s one right the Supreme Court has been strengthening recently. It gives me hope that most people in America still understand that the right to bear arms has little to do with protecting ourselves from crime and everything to do with protecting ourselves from government…

Thanks for a Great Year

I hope you’ve enjoyed – or at least been challenged to think in new ways – by this issue of my newsletter. I’ve been thinking about the issues for a long time and believe they are important. Whether you agree with my analysis or not, I hope you’ll share these ideas with people in your circle of influence. Together, we can certainly draw far more attention to the moral failings of our leaders and the risk we face by the growth of the entitlement culture.

Once again… please realize, I’m not taking a political side here. I’m not saying the Democrats are singularly responsible for the state of our country. I’m not saying the Republicans are all to blame. And I’m not saying this is a black problem or a white problem. The problem is rooted in the corrupt belief that you can live at the expense of your neighbor… that we have become a nation where the vast majority of people believe their well-being is primarily, someone else’s responsibility.

This bankrupt belief has taken complete control of our government, educational system, medical industry, and our corporations. And unless we demand better from each other and our political leaders, our society is doomed to collapse under the crushing weight of the Corruption of America.

It’s time we got back to our traditions as Americans and started doing more to take care of our families, communities, and ourselves.

I feel so strongly about these ideas, I’d like you to forward this issue to everyone you know. We almost never allow this copyright violation… But in this case, feel free to forward as many times as you want. Print it up and pass copies around your hometown.

We are wrapping up the best year ever for this advisory in terms of readership. I hope you’ll agree that many of the key themes we’ve been working on have turned out an awful lot like we predicted. The global sovereign debt crisis continues. The stock market has not been a great place for your savings. Many of our short sell recommendations – particularly First Solar (Nasdaq: FSLR) – have led to big profits. For those of you unwilling or unable to speculate and hedge, my advice to hold gold and Treasury bills has produced double-digit gains, with almost no volatility.

For subscribers who are new to this publication, I don’t often focus on this kind of political analysis. I know our main job is to find ways to help you make more money with your investments. But the fact is… right now, politics drives the markets. And that may be true for some time…

Regardless… I pledge to get back to my knitting in the next issue.

Thank you very much for your support. You’ve given me the best job in the world. I take it – and the trust you show in me – seriously.

Warm regards,

Porter Stansberry
Baltimore, Maryland
December 15, 2011

P.S. If you are interested in learning more about these ideas—what has gone wrong in America in recent years, and what I believe will happen next—you might enjoy watching a free video I recently produced. In this video, I explain what is probably the biggest corruption in America today, and how it will likely lead to yet another U.S. crisis, affecting everything about your everyday life. I also explain some simple steps you can take today, to protect yourself and your family. You can watch this free video on the Internet, here.

See article HERE

and transcript HERE

and video  HERE

(but remember my disclaimer above about his company hype pitch, and pay attention to his facts presented)

and search more on debt slavery, federal reserve Ponzi scam, fraud on Wall Street, world reserve dollar currency collapsing, Islamic prohibition of usury and all interest on debt since sustainable development must be based on real assets and services, etc, etc and here below is an  anti PS article for comparison

Catching SEC-Busted Stansberry Research In 4 Blatant Lies & Why Porter Stansberry Is The Real Life Hyman Roth

Posted by Timothy Sykes on Mon 4th of Oct, 2010 08:20:04 AM

Holiday Sale of 60-70% Off, Learn More Here

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UPDATE: Because we get a ton of emails from Stansberry victims, we’re offering everyone special pricing to show you not everyone in the stock picking business is evil. If you’ve been abused emotionally and financially, please contact me and we’ll tell you all about how we can help!

I’ve previously written about Stansberry Research by exposing their $1.5 million SEC fine and how they use certainly unethical, but-not-always-illegal manipulative language to market their “picks” using sucker-inducing marketing messages like ““This is the kind of situation that can change your life… where a 
$10,000 stake can allow you to literally quit work, forever.”

(The stock Porter was referring to there was Arena Pharmaceuticals, Inc. (ARNA) and he claimed their fat pill would be a huge hit…it wasn’t that the $10,000 stake which was supposed to allow his subscribers to quit work forever would now be worth $4,000 or so.

As for Stansberry’s claims of superior returns, the unflappable CXO advisory unapologetically wrote:

“Stansberry & Associates Investment Research also offers Steve Sjuggerud’s True Wealth, “a monthly investment advisory that boasts one of the largest followings in the world,” claiming that: Since 2001, Steve has consistently booked double- and triple-digit returns for his subscribers.” There is no trade data to justify this claim.

(On the other hand CXO Advisory did a massively detailed study on my trades and track record, concluding in an article entitled “Timothy Sykes: Penny Stock Pump-and-Dump Detective?”: evidence from simple tests on available data supports a belief that Timothy Sykes can identify pump-and-dump patterns in real time with economically maningful consistency)

So when Texas Pacific Land Trust (TPL) surged from $27 to $30 solely due to one of Stansberry’s typically manipulative marketing newsletters claiming “A million acres for 250 bucks an acre…That includes a tax-free way to grow $10,000 into over $600 million”

(That turn $10k into blah blah blah million is what gets me every time as unlike Porter Stansberry and Steve Steve Sjuggerud, I have turned $12,415 into $1.65 million so I know EXACTLY how difficult it is….and there is no way that TPL is a stock that will EVER do that.)

So following ACTUAL research, I shorted around $30/share, explained here. But unlike ARNA and most of Stansberry’s other picks, TPL hasn’t collapsed (yet) and I lost a few thousand dollars, covering for a roughly 50 cent/shre loss just above $30 as detailed in my surprisingly popular blog post “5 Lessons From My Worst Trade Of 2010

But aside from another short in the high 33s (covered again for a small loss just over 34), I have told my subscribers repeatedly that I was flat out wrong and that as long as TPL continued to uptrend, I would not be shorting it.

So now here a few weeks later at 44, Stansberry emails their sucker subscribers—yes, yes, they got this one right, but even a broken clock is right twice/day—claiming “The more this guy attacked Steve and shorted the stock, the higher it went – time and time again. Apparently, people trust Steve a lot more than some crazy message-board short seller.”

Now I might’ve been wrong this time, which I fully admit—after all my FULLY TRANSPARENT & VERIFIED TRACK RECORD shows I’m only right 75% of the time—but in no way did I EVER attack Steve…after all, the guy doesn’t have a public track record to attack! Nor did I stay short and watch my losses grow as Stansberry suggests.

That’s lie #1

Lie #2: “It was a “plain vanilla” recommendation, as the trust does one thing: collect royalties on its oil and gas properties. That’s all.”

When you headline a “pick” with the title “The Greatest Unknown Investment Story On Wall Street” and claim it can turn $10,000 into $600 million, this is not just some pick—it’s blatantly manipulative marketing and the SEC should be more on point.

Lie #3: Referring to their TPL “plain vanilla” pick on TPL…the one they call the greatest unknown investment story on Wall Street, Stansberry goes on to say it’s “Nothing fancy… nothing risky… and nothing that should have upset anyone in the slightest. But boy, did it…”

The Stansberry pick, and their amateur research is irrelevant, what upsets me is the way that Stansberry continually claims to find hidden gems, making them out to be bigger and better than anything before, not because they actually believe it, but because they can craft good stories and because this kind of marketing sells subscriptions. Remember, they made $1.2 million by selling 1,200 subscribers a $1,000 report claiming to have inside information aka their blatant disregard for logic, ethics and sometimes even the law SHOULD UPSET EVERYONE…and it’s your duty reading this to spread the truth.

Lie #4: Stansberry refers to me as “Some rabid, half-crazed short seller”. He’s right about rabid, but there is no way anyone can say I am only half mad…that’s BS. I am 100% mad as hell and I’m not gonna take these scumbags lying anymore!

Taking into consideration the unethical and sometimes-in-the-past-fraudulent marketing campaigns, Porter Stansberry’s SEC checkered past and these blatant lies, I can’t help but be reminded of Hyman Roth who humbly stated “I’m a retired investor, living on a pension”.

hyman roth

After all, while I have easily exposed third rate thugs like BestDamnPennyStocks and penny stock promoters like Ian Cassel as the liars that they are, Porter Stansberry ain’t no buffer—he’s a kingpin.

This is why Porter Stansberry is so rich and his organization so powerful that he truly is a real-life Hyman Roth. While the SEC tagged him for a few million (a couple of days work for this kingpin), I promise you all that in the next few years, thanks to transparent financial websites like Investimonials and Profitly, this kingpin will be exposed and his power, and the power of other similarly unethical schemers, will be lessened.

PS Can you guess why Stansberry never refers to me by name? Think about it: the guy is petrified of allowing his paying subscribers to see his SEC fine and blog posts like this…as he should be.

AND HERE ANOTHER Rant against PS

“End Of America 2011”, Porter Stansberry’s Newest Scam

by: Bill Egnor AKA Something The Dog Said

Thu Feb 24, 2011 at 08:09:15 AM MST

con manOh, gods! My brain feels like it is burning. Is the quart of Mia-Tia’s from last night? Is it the allergens blowing in the wind this morning? It is that new position that they wife wanted to try with the trapeze and the mayonnaise? I could only wish it were these things! No it is from giving up 77 minutes of my life watching Porter Stansberry’s on line fear mongering investment services pitch!First off a word on format; it is set up so it has to run continuously. You have no opportunity to jump ahead. The whole thing is Stansberry droning on in a voice that could put a meth addict who just snorted a whole gram of meth to sleep inside ten minutes! The only video part of this on line Sominex is text of what Stansberry is saying, with scary red lettered words here and there for emphasis.He starts by tooting his own horn on how he predicted the collapse of GM and the Wall St. reaction to the housing bubble. He conveniently forgets to mention his 1.5 million dollar fraud fine from the SEC over investment “advice” he sold through a news letter. The SEC claimed and the judge agreed that the report was “replete with lies“.You may have seen the commercial on TV recently (I spotted it on the prime time MSNBC line up) touting an online video about a prescient investor who is predicting the collapse of the Untied States government this year (italic and bold). You got to the website http://www.Endofamerica2011.com to see this hour long turd. For the love of all that is good and pure don’t waste your fracking time! I did it for you and I’ll give you a good summary of this piece of ca-ca.
Bill Egnor AKA Something The Dog Said :: “End Of America 2011”, Porter Stansberry’s Newest Scam
So you can see why old Porter might feel the need to burnish his image a little. Then he goes on to lay out scary facts in the manner that is most common to the Republicans and Conservatives. He gives you actual facts but fails to give you the context that would allow you to understand them.For example he claims, accurately, that if all personal income were taxed at 100% it would not be enough to fund the spending of the United States government. The thing that he fails to point out is the amount of taxes on business is more than 50% of the total revenue collected. This is even though we have the pernicious pass thorough check box that allows businesses to skip paying taxes on revenue if they pass the money through to shareholders.He then starts to scare people by talking about the “when not if” the U.S. dollar stops being the worlds reserve currency. Again, it is true that there has been some talk about this, but the reality is no one talking about it has been able to put forward a way to do it that would not in and of itself perpetrate a massive world wide financial collapse. Sure other nations would like a piece of the pie that the US has in this regard, but getting them means killing their economies first so no one is seriously trying to do it, they just want to do it.From this premise of economic collapse Stanberry goes on and on and on about how things will get incredibly bad. He takes a long time talking about a European nation that had hyper inflation, that “stole” the assets of the people by keeping them form withdrawing the money from banks. How gas was unavailable at stations except ones that catered to foreign nationals. How the people all wanted Marks or Dollars and how their inflation rate hit 100% per day.What was this nation? Yugoslavia, in 1993-1995! You know after the collapse of the Soviet Union and the Soviet Block communist economies. This is the example he gives of “it can happen here!” the troubles of an Eastern Block nation as it struggled to form a market economy.He then asserts that it will happen here! He tries to defuse any skepticism the view might have (assuming they are still awake) with a droning explanation of the normalcy bias, which says that people can’t recognize paradigm change until it has happened and even then they will resist because they are more comfortable with the old norm. It is a real thing, but he is not using it to talk about sociology, he is trying to sell you something.Since he is not a fan of the Government (who is when they get their hand slapped for over a million dollar?) he gives the conservative trope about how regulation is killing business in the United States. As if the lack of regulation is not what got us in this mess in the first place.Then he gives a bunch of other dire examples like Britain in the 1960’s and how it devalued its currency 14% overnight. He talks about all the bad things that happened then and asserts they “will” happen here.Then he tells you that he is sure the government here is going to have such sever problems that there will be food and water shorteges and that there are likely to be riots in the street. He predicts that you must have a 6 month supply of food and water and that you should be ready to flee to the countryside if you live in an urban area.Now that he has done scaring the shit out of the view (not me I just got pissed off) he goes into his pitch, 59 minutes into this piece of shit!.He starts by saying you can not only protect your assets, you will be able to profit over the economic and social collapse of the United States! Do it now!

He has five ways that you’ll be able to make a fortune off of this disaster. Frist get as much of your money out of the U.S. as you can before that evil ol’ gub’ment seizes it to pay for its programs. He has a booklet for the 4 off shore investments you don’t have to report. After all if the gub’ment man don’t know where you money is they can’t take it! He is careful (after all he doesn’t want to pay another big ass fine) to say you’d have to report the money if you sell these investments and pay the taxes but only when you get out of them.

Then there is the pitch for gold. You knew there’d be a pitch for gold didn’t you? The Gold Investors Bible is just the thing for you! Then Stansberry predicts that gold will hit 5K an ounce sometime in the near future. Invest now! How can you lose?

He goes on to hype silver and his report “The Secrets of Silver Investing” including such tidbits as where to hide your silver (no joke) and an assetion that silver will once again be a hard currency, in the United States. Get yours while it is cheap!

Then he talks vaguely about something called the 100% Strategy. Without going into details he claims you can make tons of money and never have to own a stock. Then he makes the disclaimer that you might be forced to buy a stock at less than its current value if something goes wrong. By this point I assuming that Stansberry thinks viewers will be so afraid and nearly asleep that they won’t notice the cognitive dissonance between those two positions.

He bolsters his claim with the names of some folks who made a lot of money with this “strategy”. The thing here is there are always atypical results in everything from weight loss to test scores. Picking out a few at the far right of a standard distribution says nothing about the over all effectiveness of a product or a strategy.

So far all this is free, but wait there is more! Number four is the “One asset that will protect your family”. He never tells you what that asset is, just points out that it has done better than gold in the past 30 years and a bunch of really rich people own it. My guess is this is property but who knows? You have to get his report to find out.

Then the final bit:

The worlds most valuable asset in times of crisis” Again he won’t tell you what it is, but this bit of unobtainium is going to make you a butt load when the U.S. goes up in flames!

So how do you get all these wonderful and important documents? You pay $50 bucks (half the usual cost, don’t cha’ know?) for his news letter. You even get to ask for a refund in four months if you don’t like it and you get to keep these “reports” for free!

There is an hour and 17 minutes of my life I will never get back. You know I don’t mind people making a buck on investment advice, investments are tricky and if you know what is going on you should be able to sell that knowledge. What I do object to is fear mongering to pump up your subscription services.

This asshole Stansberry runs a commercial with a scary website name that says “Warning This Video is Controversial and May Offend Some Viewers”, and that is about the only honest thing he says about it. I was offended. I was offended that someone would play on the fears of the Fox News crowd and older folks about the future of our nation just to sell his crappy advice.

All the government bashing and no context warnings only serve to make people afraid and when people are afraid they are going to make bad choices. Which is what Stansberry wants, he wants them to make the bad choice of being propagandized by him on a regular basis while his pals in the gold and silver business suck up lots of profit by selling to scared people.

Porter Stansberry is a con man. He is so full of shit that no real investor would let him within 1000 yards of their portfolio. How can we be sure? Because if he really was that good, if he had the real deal, he would never be spamming his products around like this and never ever selling them for only $100 bucks a year.

Sadly there is one born every minute. There are people as we speak signing up to have this shit mailed to them and e-mailed to them. Do yourself a favor, if you hear any of your relatives talking about this con-man’s ideas, make them stop investing right away!

Ugh, I think I need another quart of Mia-Tia’s

The floor is yours

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> FYI also see

Must See: Porter Stansberry – ‘End of America’ is Coming. Are You Ready??

Submitted by BleuCream013on Wed, 12/22/2010 – 19:33

in

0 votes

‘The Crash’ IS coming. Are you ready??

“Porter Stansberry Research – The End of America”
http://www.youtube.com/watch?v=nI-BIVWlc7A

or watch it directly at his site:
http://www.stansberryresearch.com/pro/1011PSIENDVD/EPSILC94/PR

** There will be a sales promo in the above link. But, you can easily ignore and bypass it.

Here’s Porter on the Alex Jones Show, Dec. 14, 2010. Gerald Celente is also interviewed:

The Complete 2hr22min show, commercial free:
http://www.youtube.com/watch?v=-iuSNwu4scc

Or, watch Porter Stansberry’s segment separately:

“The Economic Implosion of America is Here”
1. http://www.youtube.com/watch?v=BTF5_TRn78c
2. http://www.youtube.com/watch?v=xq7nRqYAOqc
3. http://www.youtube.com/watch?v=3BioK9LDppg
4. http://www.youtube.com/watch?v=XZxmxpQdJ5Y
5. http://www.youtube.com/watch?v=2TbJWBOvGt8

Please visit his site to learn more:
http://www.stansberryresearch.com/pub/psi/index.asp

<><><>



> and here he is Porter  Stansberry replied to why he was sued for fraud; keep your eyes and hears open.

Why The SEC Sued Me – And Why You Should Care

By Porter Stansberry

leadimage

03/08/10 Baltimore, Maryland – The reason you might have heard about my Securities and Exchange Commission (SEC) lawsuit is because I didn’t settle the case.

When most people are sued by the SEC, they do their best to put the matter behind them – as quickly and quietly as possible.

This normally involves paying a large fine and essentially promising “not to do it again.” If you pay the fine, the chances are good most people will ignore the matter. You’re not required to admit any guilt. Thus, the damage to your reputation is largely mitigated and you can go on with your life. That’s why most people settle with the SEC when it comes to civil (noncriminal) lawsuits.

But I didn’t settle when they sued me.

Even when a settlement was offered to me for as little as $1 million, I refused it. Instead, I’ve faced a lengthy court battle that’s brought with it tremendous risks to my reputation and legal bills amounting to almost $3 million.

Why on Earth would I try to fight the “city hall” of the securities industry?

Because I’m eager for the facts of my case to come to the public’s attention. I know when the facts of my case are accurately known by the public, my subscribers will support my decision to fight the SEC. That’s why I’ve never tried to hide this matter from anyone.

Unfortunately, so far, almost none of the critical issues at stake in my fight have been accurately reported. Worse, people who have no idea what they’re talking about continue to assume my case is another example of a financial publisher acting scurrilously – front-running his subscribers or ripping people off by promoting penny stocks that he’s been paid to endorse.

And so… at the risk of upsetting the judges who have to date refused to believe a word I’ve said about the matter… I would like the opportunity to tell you, my subscribers, exactly why I’ve refused to settle my case. And why the matter is now pending before the U.S. Supreme Court.

I’d also like the opportunity to direct you to several reliable sources of information about the matter, such as The New York Times and The Wall Street Journal. Most of the things written about the case elsewhere are patently false and misleading.

For example, most people don’t know my battle with the SEC actually has nothing to do with stock trading or actual securities fraud.

The truth is, there isn’t any allegation that I ever owned the stock in question – and there never has been.

Nor is there any allegation I’ve done anything at all that’s directly related to the purchase or the sale of any security. I didn’t “front run” my recommendation. I wasn’t being paid by promoters to recommend a stock. These things have all been said about the case – even by a few fellow journalists. But in fact, I wasn’t even accused of doing them by the SEC.

So what is this case about, if it’s not about trading in securities?

My lawsuit with the SEC started as a fight over the First Amendment rights of a publisher – me. It has continued because I refused to settle or buckle under to the government. I maintain my writing was honest, materially correct, and is certainly protected by the First Amendment of the U.S. Constitution.

I claim a former unit of the Department of Energy – a unit that was sold to investors in 1996 and is now known as USEC – was withholding material information from the public. I believe it did so in order to reward certain investors, including its bankers, its corporate insiders, and members of the Department of Energy.

By revealing information about a major and long-pending agreement with USEC’s Russian supplier of uranium, I disrupted the opportunity insiders had to accumulate shares at lower prices. In short, I ruined the party by telling investors the agreement had been reached and would be announced in a few days.

Because USEC was trading at a very distressed price (half of book value) and was paying such a high dividend (yielding more than 8%), I believed the stock would soar once this long-pending agreement was made public. In my report, I explained why the agreement would turn USEC into a profitable company by lowering the company’s raw material costs dramatically. I predicted the stock would double on the news.

And that’s almost exactly what happened.

Based on what I’d learned from a company insider (the director of investor relations), I wrote the agreement would be announced at a major nuclear summit featuring presidents Bush and Putin on May 22, 2002. The insider explained the details of the summit to me in advance, long before they appeared in the newspaper and told me to “watch the stock on May 22.” And in fact, the long-awaited announcement came about a month later, on June 19, 2002. Keep in mind, this agreement had been pending for more than two years. And yet, somehow, I was able to pinpoint almost to the day when it would be announced to the public.

Did the stock soar? No, not exactly. It moved from around $8 to around $11. That’s roughly a 40% move in a few days. That’s not bad. More importantly though, following the new agreement with the Russian uranium supplier, the stock traded all the way up to nearly $20 over the following three years. In fact, by the time my case reached its first federal judge, investors who followed my advice would have made more than 150% on the investment, thanks to capital gains and big dividends. (The stock eventually went to $25 during the uranium bubble of 2007.)

Yes… that’s right. The SEC is suing me for a matter that involves a stock that went from under $8 to nearly $25. That’s more than a 200% gain. You’ve got to be kidding, right? Nope.

But why?

Here’s the heart of the matter.

I believe the company knew for certain its deal for cheap Russian uranium would receive the required final approval of both the U.S. and Russian governments at the summit. This approval was the only thing holding up the deal. With this knowledge in hand, it would have been easy for the company’s insiders and other senior officials in the Department of Energy to load up on the stock and profit once the news was announced to the public.

And I wasn’t the only analyst who was told when to expect the deal.

In the discovery process of our lawsuit, we found a notebook from USEC’s investment bank – Bank of America – where its analysts clearly indicated May 22 was the expected announcement date.

But instead of pursuing the possibility USEC’s managers and bankers were withholding this material information, the SEC decided to attack me. Keep this in mind: I didn’t use this information for my own personal gain. I didn’t buy the stock. Or even just tell my friends to buy the stock. No, instead I did my job. I published a report about what I’d learned and offered to sell my report to any (and all) interested investors.

I also sent a copy of my report (and the accompanying sales letter) to my source at USEC. He never asked me to change a single word of my report. He had my cell phone number. He had my office number. He had my e-mail address. If there was any legitimate problem with my report, all he had to do was ask for a correction. He never did. Not even to this day.

I did all of the things any reputable journalist would do. I checked my source’s facts. Sure enough, a presidential summit was approaching. Sure enough, there was a large pending contract. Sure enough, the new deal would change the economics of the company in a dramatically positive way. I sent a copy of my report to my source. And I offered it for sale to the public. If anyone wasn’t satisfied with the report, for any reason, I gave him his money back.

Even today, looking back at the matter through the lens of time and experience, I still think my USEC report was one of the great stories of my career and I’m proud of the report I wrote. Are there things I would have done differently? Yes. I would have made sure to have a recording of my interview.

You see, even though I never owned a share of the company, even though I had no incentive whatsoever to lie about the company, and even though third parties who have looked at the facts of the case (like The New York Times) agree my report on the matter was overwhelmingly correct… the SEC decided to come after me and not the people who were really defrauding the public.

Incredibly, the SEC sued me for securities fraud, saying I had lied about what my source told me and that selling my report about USEC was tantamount to brokering the stock. Specifically, the SEC claimed my source didn’t tell me to “watch the stock on May 22,” which was the only part of our conversation that I quoted.

Since I can’t prove what my source said, you might assume I must be lying. But if he didn’t explain the timing of the deal to me, how could I have known – within a month – exactly when the deal would close? The fact is, until our discussion, I didn’t know anything about the upcoming presidential summit. It wasn’t reported in The Wall Street Journal until about a week after our discussion.

But… just for the sake of the argument… what if you assume I knew about the summit from another source and I merely attributed it to the company in order to claim I really had “inside” information? Why then, even after I wrote the report and sent my source a copy, did he not demand a retraction?

And if the company knew my report was false, why didn’t it put out a press release denying it? The NYSE rules require companies to put out press releases anytime there’s a material misstatement in the press.

The fact of the matter is, my report was overwhelmingly correct. And my source couldn’t deny my report because he didn’t know whether or not I had a recording of our conversation (which took place over the phone).

When the SEC came calling later in 2002, I expected it would be going after the company for selective disclosure – a violation of SEC regulation FD. And sure enough, it wanted all of my personal records to make sure I wasn’t front-running the stock, etc. But then, instead of shifting its investigation to the company, it demanded to have the entire subscription list of not just my publishing company, but also of our parent company, Agora Inc.

It wasn’t going after USEC for withholding material information; it was going after us by intimidating our clients. And it didn’t ask for just the USEC report subscribers – it demanded every single name and address on our entire database, including my parent company’s database.

Rather than give in to this subpoena, we sued the SEC in federal court to protect our subscribers’ privacy. A well-established legal precedent protects a publisher’s subscriber lists. (What you decide to read is none of the government’s business.)

That’s part of the story I’m sure you’ve never heard before: We sued the SEC first. And we did so to protect our subscribers, the overwhelming majority of whom never bought the USEC report in the first place.

I understand that you might reasonably wonder… How could any of this be true? I mean, wouldn’t you expect that as soon as the SEC knew I’d sent my source a copy of the report, the matter would be closed? Or don’t you think as soon as it knew I wasn’t trading the stock or front-running it, the SEC would have simply left me alone?

Even after reading all of this, undoubtedly, a lot of people must think I’m merely trying to muddy the waters because I’m guilty of front-running the stock… or lying to investors. Why else would the government waste its time on a newsletter writer?

I understand my story might be hard to believe – at first. The public generally has confidence in our government. It will be hard for some people to imagine the SEC would actually go after a journalist with the intent of putting him out of business simply because it didn’t like what he was writing about.

But my story isn’t unique.

At the same time the SEC was abusing its power by subjecting me to interrogations, subpoenas, and crushing legal bills – all in violation of the First Amendment – it was also going after many other legitimate market participants – including David Einhorn, the well-regarded hedge-fund manager (Greenlight Capital) for merely speaking about securities.

As with my case, the SEC came after Einhorn for speaking openly about abuses taking place at a Washington-based business (Allied Capital), a company that – like USEC – was heavily staffed with former government officials, including Joan Sweeney, the company’s chief operating officer, who was a former senior member of the SEC’s Division of Enforcement. Our stories are eerily similar…

Allied Capital CP

THIS IS WHAT EINHORN WAS WARNING INVESTORS ABOUT, AS EARLY AS 2002. THE SEC RESPONDED BY INVESTINGATING EINHORN.

Rather than investigating Einhorn’s claim that Allied Capital was cooking its books by using fraudulent accounting, the SEC instead began investigating him, alleging securities fraud because of what he’d said about Allied Capital during a presentation at an investment conference that’s held to benefit charities.

After several years of threats and abuses (like having his phone records stolen), Einhorn was vindicated. The shares of Allied Capital collapsed as the company was revealed as fraudulent. But even today, Joan Sweeney is still with Allied Capital. The SEC has never been forced to fire any of the agents who abused their power during the investigation of David Einhorn.

To draw attention to the abuse he’d suffered, Einhorn decided to donate all of the money he made from shorting Allied Capital to charity, and he wrote an entire book about the situation called, Fooling Some of the People All of the Time.

Says Einhorm about his experience:

Allied isn’t the biggest, most egregious, or most audacious fraud I have seen. In a sense it is a garden-variety fraud – dishonest business dealings by dishonest management. So why all the fuss? The story I am telling is one that has been surprising and unexpected – even to me. I think it is important and needs to be told. This book reveals some serious problems in the regulatory landscape that I am in a unique place to discuss.

I care that the SEC and other regulators seem to have stopped enforcing laws against corporate malfeasance. I care that company officials can lie with impunity on public conference calls. And I have been appalled that the government officials overseeing the lending programs that Allied has defrauded are so indifferent and unwilling to act even when presented with clear evidence of abuse. The overall lack of law enforcement is startling…

If we are going to permit the retribution against the whistleblowers shown in this story – defamation, investigation, invasion of privacy and so forth – then we surrender public free speech. If we allow the people in this story to operate outside the law, then we nourish a corrupt business culture. Rather than turn a blind eye to the fraud I witnessed, I made a decision to stand up and speak out despite the consequences. I hope my story inspires regulators and government agencies to do the right thing.

I hope you’ll remember most people don’t do what I’ve done and what Einhorn did.

Most people don’t fight the SEC because they don’t want their names in the paper, they don’t want the stigma of being investigated by the government, etc.

Believe me, I can understand why. When the news of the SEC’s investigation of me leaked out, publishers around the world refused to do business with me. Potential employees refused to come to work with me. Companies refused to be interviewed by me. The lawsuit has made it vastly more difficult for me to simply stay in business. Even today, every time a potential subscriber stumbles across information about the lawsuit on the Internet (and much of it is completely untrue) he’s likely to cancel his subscription or simply decide not to renew.

And think about this… the more people who simply refuse to write about securities because of the threat of an SEC action or because they fear retaliation from the businesses they write about, the less high-quality information will be available to investors. The less information is available, the more bad actors will take advantage of investors.

Whether you realize it or not, the SEC isn’t trying to protect investors. If it were, Bernie Madoff would have never happened. The SEC knew all about Bernie Madoff – the SEC audited him regularly. Many people – including Barron’s – pointed their finger right at Madoff and revealed his fraud. Still, the SEC did nothing.

The SEC knew all about Enron and WorldCom and the conflicts at the investment banks during the Internet boom. The SEC knew all about GM’s debt load. It knew all about the problems with Fannie and Freddie. In fact, it was the SEC that approved the huge increase to investment banks’ leverage in 2004 – a move that directly led to the financial crisis of 2008.

But… maybe you still trust the SEC. And if you do and you want to believe Porter Stansberry is out to harm investors by publishing independent reports on public companies – that come with a money-back guarantee – there’s probably very little I can do to change your mind.

On the other hand, if you ask any securities industry professional who reads our newsletters, I have no doubt he will tell you our work is among the best you can buy anywhere and is far superior to nearly all of the research put out by the brokerage firms. I know this is true because thousands of professionals are our clients and I have hundreds, if not thousands, of testimonials from these readers.

The truth of this case is so simple to see. Just ask yourself two questions:

1. How can the SEC accuse Porter of intentionally lying when Porter sent his source his full report and the source never requested a retraction or a correction to any of Porter’s reporting?

2. Why would the SEC risk a constitutional battle with a bona fide journalist over a report even The New York Times says was basically correct? Why would the SEC want to shut down a business like Stansberry & Associates Investment Research – which offers refunds to any unsatisfied customers and whose analysts never trade in the securities they recommend?

Don’t you wonder why the SEC would target my business – which doesn’t manage money or broker stocks – while ignoring enormous ponzi schemes going on in the businesses it supposedly regulates?

I can’t prove it… but I don’t think the government likes it very much when I tell investors the truth about things like Fannie, Freddie, and General Motors. I don’t think the SEC wants the American people to know the truth about our financial markets – or the state of our government’s finances. And I think the government is afraid of what will happen when you find out the truth.

Whatever happens with my court case, I hope you’ll know I did, and have always done, my best to tell you the truth.

After all, unlike the government, the truth is my only weapon.

Regards,

Porter Stansberry
for The Daily Reckoning

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Porter Stansberry

Porter Stansberry founded Stansberry & Associates Investment Research LLC, a private publishing company based in Baltimore, Maryland, in 1999. His monthly newsletter, Porter Stansberry’s Investment Advisory, deals with safe value investments poised to give subscribers years of exceptional returns. And his weekly trading service, Porter Stansberry’s Put Strategy Report, shows readers the smartest way to book big gains during the ongoing financial crisis.

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Read more: Why The SEC Sued Me – And Why You Should Care http://dailyreckoning.com/why-the-sec-sued-me-and-why-you-should-care/#ixzz1hIupp3Xm

The SEC litigation against him is seen HERE

By the way there are so many scam artists out there

The really important thing is to save your and your families souls, everlasting salvation, for everybody knows that physical security needs water and farmland and food storage and local community protection, which all is a must at all times.

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Katrina vanden Heuvel
Opinion Writer

It’s accountability time for banks and Wall Street

By , Published: December 6

There’s a scene in the HBO adaptation of Andrew Ross Sorkin’s book “Too Big to Fail” where Treasury Secretary Henry Paulson’s adviser suggests he call Warren Buffett to ask for help with Lehman Brothers. “As what?” responds Paulson. “Warren’s friend? His former banker? The treasury secretary? No!” In the movie, Paulson understands the difference, that there are bright lines that he should not cross. In real life, it turns out, these were not the kind of distinctions Paulson was particularly concerned about making.

Missing from that movie — and other first drafts of recent financial history — was a bombshell recently uncovered by Bloomberg’s Richard Teitelbaum: Paulson gave his hedge fund friends inside information about government plans to seize Fannie Mae and Freddie Mac, seven weeks before it happened. Common stock and some preferred stock would be wiped out in the process, he told them, meaning a bet against the giants was a bet that could make them millions. Those without connections to Paulson didn’t get a tip-off; worse, they got the opposite. On the same day that Paulson met with the hedge funds, he told the New York Times that markets would soon have reason for renewed confidence in both enterprises.

Such shameful conduct, which law professors told Bloomberg is not illegal, is becoming increasingly typical. We know, for example, that Paulson held a secret meeting with the Goldman Sachs board in a Moscow hotel in June 2008 that, again, didn’t match his public statements. These are just the meetings we know about.

“You just never ever do that as a government regulator — transmit nonpublic market information to market participants,” William Black, a former general counsel at the Federal Home Loan Bank of San Francisco, told Bloomberg Markets Magazine. But Americans have learned by now: Never say “never ever.”

We also recently learned the details of the Federal Reserve’s $7.77 trillion bank bailout, which the banks that benefited and the Fed have spent years trying to keep secret. It turns out that trillions of dollars were lent to faltering banks at rates far below market value, allowing those institutions to turn a combined $13 billion profit on the deal. “This was perhaps the single most massive allocation of capital from public to private hands in our history,” wrote former New York governor and attorney general Eliot Spitzer, “and nobody was told.”

The problem isn’t just that this was done in secret; it was that those rates were only available to banks, not average Americans, millions of whom were desperate for a chance to reduce the interest on their own debt. The message — that nearly unlimited sums were available to financial institutions, but not the American people — is not lost on many, as support for Occupy Wall Street and the 99 percent movement so clearly reveals.

In all of this, there is no sense of accountability or responsibility. We don’t just see a pattern of duplicity; we see a pattern of banks and bank officials systematically shielded from negative consequences of any kind. And often, it’s the government itself doing the shielding. The Securities and Exchange Commission and Citigroup, for example, have been negotiating a settlement over allegations that Citigroup defrauded investors through the sale of toxic securities. The SEC proposed the bank pay just $285 million in settlement (by comparison, Citigroup had about $21 billion in revenue in the last quarter alone). In exchange, the bank wouldn’t have to admit fault and would be protected from investors lawsuits. That’s an awfully cheap price for flagrantly conducting business outside of the law.

Thankfully, the federal judge overseeing the case rejected the settlement outright, saying the price tag didn’t come close to matching the alleged wrongdoing and that the public deserved to know what happened. “In much of the world,” wrote Judge Jed Rakoff, “propaganda reigns, and truth is confined to secretive, fearful whispers. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges.”

The SEC, for its part, didn’t like Rakoff’s ruling, complaining that the steps he called for would “divert resources away from the investigation of other frauds.”What, one wonders, is the point of investigating other frauds, if each is met with a cheap fine and a get-out-of-jail free card?

This is as clear a picture of 2011 America as it is an ugly one — a system that works for the wealthy, the powerful and the connected but no one else. And while some of these events took place several years ago, not nearly enough has changed since.

And so we need a serious effort. We need not just to set tougher rules for Wall Street (something the Dodd-Frank bill only went part way in doing) but to make sure those who patrol that particular street take their jobs seriously. Those responsible for the economic mess will never be held accountable if we continue to define accountability as agreeing to pathetically small fines or paying back low-interest loans on time. Accountability should mean harsher penalties, including jail time, and a greater obligation to make the injured whole again.

Occupy Wall Street and the 99 percent movement erupted because Americans had the gut sense that financial institutions got off easy; now we know that gut sense was right. Justice has not been done, but it must be, before the next crisis — not just to prevent more turmoil but to prove to ordinary people that the government still works for them.

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