Breaking Bad (Debt) - Episode Three

By: The Burning Platform

Monday, March 2, 2015


In Part One of this three part article I laid out the groundwork of how the Federal Reserve is responsible for the excessive level of debt in our society and how it has warped the thinking of the American people, while creating a tremendous level of mal-investment.

In Part Two I focused on the Federal Reserve/Federal Government scheme to artificially boost the economy through the issuance of subprime debt to create a false auto boom.

In this final episode, I´ll address the disastrous student loan debacle and the dreadful global implications of $200 trillion of debt destroying the lives of citizens around the world.


  Getting a PhD in Subprime Debt
"When easy money stopped, buyers couldn´t sell. They couldn´t refinance. First sales slowed, then prices started falling and then the housing bubble burst. Housing prices crashed. We know the rest of the story. We are still mired in the consequences. Can someone please explain to me how what is happening in higher education is any different?This bubble is going to burst."  Mark Cuban

Subprime Nation 


Now we get to the subprimiest of subprime debt - student loans. Student loans are not officially classified as subprime debt, but let´s compare borrowers. A subprime borrower has a FICO score of 660 or below, has defaulted on previous obligations, and has limited ability to meet monthly living expenses. A student loan borrower doesn´t have a credit score because they have no credit, have no job with which to pay back the loan, and have no ability other than the loan proceeds to meet their monthly living expenses. And in today´s job environment, they are more likely to land a waiter job at TGI Fridays than a job in their major. These loans are nothing more than deep subprime loans made to young people who have little chance of every paying them off, with hundreds of billions in losses being borne by the ever shrinking number of working taxpaying Americans.

Student loan debt stood at $660 billion when Obama was sworn into office in 2009. The official reported default rate was 7.9%. Obama and his administration took complete control of the student loan market shortly after his inauguration. They have since handed out a staggering $500 billion of new loans (a 76% increase), and the official reported default rate has soared by 43% to 11.3%. Of course, the true default rate is much higher. The level of mal-investment and utter stupidity is astounding, even for the Federal government. Just some basic unequivocal facts can prove my case.

There were 1.67 million Class of 2014 students who took the SAT. Only 42.6% of those students met the minimum threshold of predicted success in college (a B minus average). That amounts to 711,000 high school seniors intellectually capable of succeeding in college. This level has been consistent for years. So over the last five years only 3.5 million high school seniors should have entered college based on their intellectual ability to succeed. Instead, undergraduate college enrollment stands at 19.5 million. Colleges in the U.S. are admitting approximately 4.5 million more students per year than are capable of earning a degree. This waste of time and money can be laid at the feet of the Federal government. Obama and his minions believe everyone deserves a college degree, even if they aren´t intellectually capable of earning it, because it´s only fair. No teenager left behind, without un-payable debt.


Fewer Students

According to National Center for Educational Statistics, colleges and universities will award 1 million associate´s degrees and 1.8 million bachelor´s degrees in 2014-2015. So they are admitting more than 5 million in the front end, with only 2.8 million ever earning a degree.

That means almost 50% never graduate, confirming the SAT predictive results. Then there is the fact an associate´s degree and most of the liberal arts degrees awarded qualify the graduate for a fry cook job at Burger King. What is even more fascinating in this episode of absurdity is the fact undergraduate enrollment has fallen by 930,000 in the last two years and stands only 700,000 higher than when Obama took office. A critical thinking person might ask how student loan debt could grow by $500 billion when college enrollment only grew by 700,000. That is $711,000 per additional student in college. Something doesn´t add up.

The Federal government couldn´t possibly have doled out $500 billion to anyone with a pulse as a way to manipulate the national unemployment rate lower, because anyone in school is not considered unemployed. Do you think the $500 billion was spent on tuition and books?

Or do you think those "students" used it to for hookers, blow, booze, iGadgets, HDTVs, online poker, weed, fantasy football entry fees, and Linkedin stock? “ Whatever it takes to boost GDP.

With default rates already at all-time highs and accelerating skyward, with $131 billion of loans already in serious delinquency, you don´t need a PhD from the University of Phoenix (where default rates exceed 30%) like Shaq to realize the American taxpayer is going to get it good and hard once again.

For profit and Non-Profit

It seems the for-profit diploma mills and community colleges account for a huge percentage of loan defaults. They are nothing but bottom feeders in a feeding frenzy of Federal loans. The five schools in the country with the highest level of defaulters from 2011 through 2014 are as follows:

  1. University of Phoenix  45,123
  2. ITT Technical Institute  11,260
  3. Kaplan University  10,684
  4. DeVry University  9,081
  5. Ivy Tech Community College  7,237
These institutions of lower learning spend more annually on marketing than Ivy League business schools generate in total revenue. They are nothing more than swindlers, gaming the Federal loan system, and dispensing virtually worthless diplomas, and leaving its students deep in debt. The true consequence of providing easy money to people who shouldn´t be in college has been to drive up tuition rates at all colleges and universities. Without this $500 billion infusion of illusion, demand would drop, the diploma mills would go out of business, and legitimate institutions would have to lower tuition rates to attract students. But that´s not how Obama and his administration roll.

The biggest scam is the reported default rate disseminated by the Fed and regurgitated by the mainstream media. There are over 7 million borrowers in default on a federal or private student loan. Roughly a third of Federal Direct Loan Program borrowers have been forced into choosing alternative repayment plans to lower their payments. The reported 11.3% delinquency rate is based on total student loans outstanding. In reality 50% of the loan balances are held by students still in school, in their grace period, in deference, or in forbearance. They haven´t been required to make a payment yet. Of course the loans in deference or forbearance due to unemployment or economic hardship are essentially an allowable delinquency. The true delinquency rate on loans in the repayment cycle is 23%. This strongly implies that taxpayers will be on the hook for at least $250 billion of losses.

The long term impact on borrowers is also dire. Student loan debt cannot be extinguished in bankruptcy. It will follow them throughout their lives. Defaulting on a federal student loan has serious consequences. Unlike other consumer credit, borrowers in default on a federal student loan might see their tax refund taken and their wages garnished without a court order. The impact on their credit rating will keep them from buying a home. The pure volume of student loan debt is currently restricting household formation, first time home buyers, marriages, and consumer spending. The unintended negative consequences of issuing hundreds of billions in bad debt have far outweighed the ephemeral short term fake benefits. But short-term appearances are all that matter to the ruling class.

Default rate by Student Loan Cohert


As of the fourth quarter of 2014, 11.3% of all borrowers were in default, with an additional 7% of borrowers having defaulted in the past. Another 6% of borrowers were in earlier stages of delinquency, but not yet defaulted; fully 37% of borrowers had at least one missed payment on their credit report. The chart below shows the cohort of student loans since 2005. Each cohort has progressively worse default experience. Roughly one quarter of each of the cohorts has defaulted as of the fourth quarter of 2014. The default rate of the 2009 cohort has surpassed that of the earlier cohorts much more quickly. Based on historical trends, the 2009 cohort will experience close to a 40% default rate. And this is before Obama unleashed the torrent of subprime student loan debt.

Only an Ivy League educated Princeton economist could examine the facts presented and conclude these were brilliant fiscal policy decisions which have boosted economic activity and fended off another Depression. A rational thinking person would conclude these desperate reckless measures will result in far worse outcomes when the debt dominoes begin to fall.


Falling Dominos

  

WE ARE IN A WORLD OF DEBT

"After the 2008 financial crisis and the longest and deepest global recession since World War II, it was widely expected that the world´s economies would deleverage. It has not happened. Debt continues to grow. Since 2007, global debt has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points." McKinsey

Debt Crisis was never resolved

It seems McKinsey is making the mistake of thinking like a logical sentient human being, rather than intellectually dishonest central bankers, criminally psychotic Wall Street CEOs, greedy myopic mega-corporation CEOs, or captured cowardly politicians. In a world run by honest, intelligent, rational people who cared about the long-term sustainability of our economic system, the actions taken after the 2008 debt fueled implosion would have been far different than the actions taken by the psychopathic, greedy, ego maniacal, hubristic moneyed interests over the last six years.

The 2008 worldwide financial crisis was produced due to excessively easy monetary policy, which caused the largest debt driven mal-investment in housing, automobiles, and Chinese produced crap in world history. It was done purposely by a uber-wealthy ruling class who call the shots, rig the game, reap the benefits, and deny responsibility when their machinations create havoc and suffering across the globe for the masses.

The consequences of this debt bacchanalia should have been the orderly liquidation of the Wall Street entities that created the crisis, the writing off of trillions in bad debt, corporate and personal bankruptcies of businesses and people who borrowed recklessly, a sharp steep economic decline to cleanse the excesses, and politicians who immediately began the process of reducing budgets and addressing long term unfunded unpayable liability promises. Instead, the psychotic oligarchs did not want to lose any of their power, wealth or control over the proletariat. They have done the exact opposite of what needed to be done. You must deleverage to solve a crisis caused by excessive debt.

The oligarchs have succeeded in further raping and pillaging the working class, but have only delayed the final reckoning and guaranteed a debt apocalypse when their futile schemes fail again. And fail they will.

Arrogant condescending central bankers, narcissistic Wall Street psychopaths, crooked bought off politicians, and narrow-minded government apparatchiks across the developed world have colluded to add $57 trillion of additional debt to the existing Himalayan Mountain of unpayable debt we started with in 2008. We´ve entered the NIRP phase of the currency debasement race for the bottom.

Households throughout the developed world have acted in a relatively rational manner by paying down credit card debt and attempting to live within their means, because their real wages continue to decline and they are receiving no return on their savings. The moneyed interests continue to prey on the desperate and financially ignorant in their last ditch desperate attempt to loot the remaining treasure from the U.S.S. Titanic, hijack the remaining lifeboats, and leave the American people to sink into the frigid murky depths.

Corporate titans have added $18 trillion of debt as they take on debt to buy back their overpriced stock, artificially enhancing earnings per share and boosting their own compensation packages. Investing in their business is passé. We´ve entered a new paradigm where driving your stock price higher is all that matters to the Ivy League MBA executives.

The Financial sector has shifted most of their toxic debt onto the Federal Reserve balance sheet and the backs of the American taxpayer.

The governing bodies of Japan, the EU, and the US have accounted for the vast majority of the $25 trillion increase in debt by the government sector. Total world debt as a percentage of World GDP is now approaching 300%. In 2000, the percentage was 185%. This level of debt can´t be sustained at zero interest rates, let alone normalized rates of 5%. Something that can´t be sustained won´t be. It is mathematically impossible for $200 trillion of debt to ever be repaid. It´s just a question of who gets screwed. And if the moneyed interests have their way, it´ll be you.

Global Outstanding Debt


Everyone loves a boom. The party from 1996 to 2000 was a blast. Remember your moronic brother-in-law boasting about getting rich day trading. The bust was a bummer and your brother-in-law had to get a job at Wendy´s. The highly educated academics at the Fed couldn´t allow the pain or consequences to last. They made it their sole responsibility to create another boom from 2003 to 2008. It was a real doozy. The hangover afterwards was going to be epic.

The party should have been over, but Ben and Janet know better than the rest of us. Ben is a self-proclaimed expert on the Great Depression. Pain isn´t fun. Corrections and adversity must be banned. They have now created the most all-encompassing debt fueled contrived boom in history, with debt, stocks, and real estate all outrageously overvalued. The party has been going on for over five years. The inevitable collapse will be earth shatteringly horrendous. The public will be shocked once again. The anger, disillusionment, and shattering of confidence in the powers that be will be monstrous. This time there will be blood.

"The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application, and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse. In the opinion of the public, more inflation and more credit expansion are the only remedy against the evils which inflation and credit expansion have brought about."  Ludwig von Mises

Despite the non-stop propaganda campaign waged by the ruling class through their media mouthpieces about a non-existent economic recovery, the papering over of the gaping funding holes through the issuance of $57 trillion more debt, the waging of wars against terrorists we created to distract the masses, conducting coups against our latest perceived enemies, and the blatant rigging of financial markets to extract the remaining wealth of the nation from the people, the crack-up boom is nearing its endgame. The system is exceptionally fragile.

Confidence in leaders is waning. The people are growing weary of the lies and their restlessness will morph into anger when the economic collapse resumes. You can sense things are not right.

Trust in the system has turned to suspicion and cynicism. The growing anger in the nation and the world is palpable. Violent protests are a daily event, even if the mainstream media doesn´t report them.


Davos cartoon

Yellen, Draghi, and Kuroda speak as if they know what they are doing, perform confidently when on stage, but continue to act in desperate manner five years into a supposed economic recovery.

The emergency measures they continue to employ and expand upon reveal their angst and inability to implement a monetary solution. Their only tool is the printing press and when confidence in their infallibility dissipates, the system will fail. The stench of fraud, cronyism, corruption, and hypocrisy of the moneyed interests permeates our degraded culture of materialism, greed and criminality.

The party was fun while it lasted, but it is reaching its sordid drunken climax in the near future.

There is no means of avoiding the final collapse of this Federal Reserve created boom.

Collapse
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."  
Ludwig von Mises


The Herd Can Be Blind

by: Peter Schiff             
             

Summary
  • Wall Street has a herd mentality.
  • They are blind to the warning signs.
  • Don't run off the cliff with the rest.
The below is an abridged version of a longer article that appears in the Winter 2015 Euro Pacific Global Investor Newsletter


Going into 2015 the economic outlook held by the U.S. investment establishment could not have been much more positive, and more unified. Pundits saw all the variables aligning to create the best of all investment worlds, a virtual "no-brainer" of optimism. Many believed that the 5.0% annualized growth in 3rd quarter would stay strong in the 4th Quarter and then usher in a strong 2015, which many believed would be the best economic year since the crash of 2008. The only question that divided most forecasters was how good the year would be.

High degrees of certainty can be dangerous. Herd mentality can cause investors to chase returns en masse and pile into positions that may already be overvalued. But herds can be spooked, most often by unexpected developments which can catch the herd wrong-footed and spark major movements when the masses scatter at the same time. When that occurs, those who resisted the herd may find themselves rewarded. We believe that we are approaching such a point.

Although the employment reports continue to bathe the economy in the diffuse light of recovery, many of the less followed economic indicators have further diverged from expectations in the opening months of 2015. Many economists initially believed that GDP in the 4th quarter 2014 would come in at an annualized pace north of 3.0%. But, in January the actual number came in at 2.6% (which was revised down to 2.2%). Recent data in such categories as consumer spending (which after falling in December, declined again in January - the first consecutive monthly declines since 2009), factory orders, trade, manufacturing, and business investment have missed on the downside. But these lesser reports are often explained away and have not made much of a dent on overall optimism.

In the six years since the Great Recession began in 2008, the economy has been boosted by both monetary and fiscal stimuli. The Federal Reserve has held its overnight rate at 0% while expanding its balance sheet by almost $4 trillion, and the Federal government had run four consecutive $1 trillion plus budget deficits (before pulling back to less than half a trillion annually more recently). But despite these unprecedented levels of stimulus, real GDP growth in the U.S. averaged just 2.2% from 2010 through 2014, which compares with an average of almost 3.5% in the post-WWII period. If this substandard growth is all we could achieve with the floodgates wide open, why should we expect that the economy will improve in 2015 if the stimulus doesn't return, as few expect it will?

Despite the records being set almost daily on Wall Street, (today the NASDAQ eclipsed 5,000 for the first time in almost 15 years), optimists claim that the market is not overvalued because the current S&P 500 price-to-earnings ratio, of about 19 times trailing 12 months earnings, is not too far above the historical norm of about 14. But most investors have not considered the extraordinary factors that helped push up earnings, artificially we believe, in 2014.

According to Bloomberg, in 2014 S&P 500 companies spent an estimated $565 billion (or 58% of corporate earnings) on share buybacks, a figure that is extremely high by historical standards. Money spent on buybacks is not available to purchase new plant and equipment, to fund research and development, or to spend on marketing and logistics. In that sense, buyback spending generates current earnings at the expense of future earnings. Corporate results have also been boosted by zero percent interest rates, which have allowed businesses to borrow cheaply.

To factor out these short-term earnings distortions, we suggest that investors should look past current P/E ratios and instead look at Cyclically-Adjusted-Price-to-Earnings (CAPE), which is also known as the Shiller Ratio, a metric that looks at earnings over a 10-year period thereby smoothing out cyclical and economic anomalies. Looked through a lens of CAPE ratios, the U.S. markets begin to look very expensive in comparison to other global markets. The graph below tells the tale:


(click to enlarge)

In addition, U.S. stocks currently offer some of the lowest dividend yields to compensate investors for the higher valuations (see chart above). The current estimated 1.87% annual dividend yield for the S&P 500 puts it far below the annual dividend yields of Australia, New Zealand, Finland and Norway.

In 2014 the S&P 500 outperformed stocks in the rest of the world (as represented by the MSCI Index of non-U.S. global markets) by an astounding 20%. This was by far the largest gap in the past 13 years. But on Wall Street, investors generally chase returns. After six consecutive years of positive gains in the S&P 500 (and more than 200% return since March of 2009), few forecasters see any reason to suspect that the upward run of U.S. stocks will end anytime soon.

But should we really expect another year of such results? Would it not be more logical to suggest that the slowing economy will crimp potential over-performance of U.S. markets in 2014? Given that the S&P 500 has not been among the top performers over a 10-year timeframe [see 2015 Global Investor Newsletter] news, would we not at least expect the index to begin moving back to trend, and perhaps underperform world markets in coming years?

Don't be fooled by the madness of the crowd. The U.S. is not the sole remaining engine of world growth as the talking heads would seem to have you believe.

The good news is that unloved assets may be attractively priced. At a time when energy and labor costs are at multi-year lows, and gold priced in some non-dollar currencies is approaching all-time highs, there are overseas gold mining stocks trading at levels consistent with lower gold prices. The fall in oil has pushed many energy stocks down by 50% or more. In addition, currencies issued by fiscally solvent nations are at fresh multi-year lows.

At Euro Pacific Capital we rely on a variety of strategies to help find real value in overlooked places around the world. In our latest newsletter, we examine this theme in greater detail and describe four stocks that we believe exemplify these ideals. We also take some time in the newsletter to highlight some of the more egregious examples of irrational exuberance on Wall Street. We also dissect the later indecipherable statements coming out of the Federal Reserve and we explain how deflation helped fuel one of the most successful periods of long-term economic growth in U.S. history.

Receiving the report is free and will set you up to receive more research and analysis on an ongoing basis.

Thomas Piketty’s Japanese Tour.
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Yuriko Koike.
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MAR 1, 2015 .
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Newsart for Thomas Piketty’s Japanese Tour


TOKYO – Six months after Thomas Piketty's book Capital in the Twenty-First Century generated so much buzz in the United States and Europe, it has become a bestseller in Japan.

But vast differences between Japan and its developed counterparts in the West, mean that, like so many other Western exports, Piketty's argument has taken on unique characteristics.
 
Piketty's main assertion is that the leading driver of increased inequality in the developed world is the accumulation of wealth by those who are already wealthy, driven by a rate of return on capital that consistently exceeds the rate of GDP growth. Japan, however, has lower levels of inequality than almost every other developed country. Indeed, though it has long been an industrial powerhouse, Japan is frequently called the world's most successful communist country.
 
Japan has a high income-tax rate for the rich (45%), and the inheritance tax rate recently was raised to 55%. This makes it difficult to accumulate capital over generations – a trend that Piketty cites as a significant driver of inequality.
 
As a result, Japan's richest families typically lose their wealth within three generations. This is driving a growing number of wealthy Japanese to move to Singapore or Australia, where inheritance taxes are lower. The familiarity of Japan, it seems, is no longer sufficient to compel the wealthy to endure the high taxes imposed upon them.
 
In this context, it is not surprising that Japan's “super-rich" remain a lot less wealthy than their counterparts in other countries. In the US, for example, the average income of the top one percent of households was $1,264,065 in 2012, according to the investment firm Sadoff Investment Research. In Japan, the top 1% of households earned about $240,000, on average (at 2012 exchange rates).
 
Yet Japanese remain sensitive to inequality, driving even the richest to avoid ostentatious displays of wealth. One simply does not see the profusion of mansions, yachts, and private jets typical of, say, Beverly Hills and Palm Beach.
 
For example, Haruka Nishimatsu, former President and CEO of Japan Airlines, attracted international attention a few years ago for his modest lifestyle. He relied on public transportation and ate lunch with employees in the company's cafeteria. By contrast, in China, the heads of national companies are well known for maintaining grandiose lifestyles.
 
We Japanese have a deeply ingrained stoicism, reflecting the Confucian notion that people do not lament poverty when others lament it equally. This willingness to accept a situation, however bad, as long as it affects everyone equally is what enabled Japan to endure two decades of deflation, without a public outcry over the authorities' repeated failure to redress it.
 
This national characteristic is not limited to individuals. The government, the central bank, the media, and companies wasted far too much time simply enduring deflation – time that they should have spent working actively to address it.
 
Japan finally has a government, led by Prime Minister Shinzo Abe, that is committed to ending deflation and reinvigorating economic growth, using a combination of expansionary monetary policy, active fiscal policy, and deregulation. Now in its third year, so-called “Abenomics" is showing some positive results. Share prices have risen by 220% since Abe came to power in December 2012. And corporate performance has improved – primarily in the export industries, which have benefited from a depreciated yen – with many companies posting their highest profits on record.
 
But Abenomics has yet to benefit everyone. In fact, there is a sense that Abe's policies are contributing to rising inequality. That is why Piketty's book appeals to so many Japanese.
 
For example, though the recent reduction in the corporate-tax rate was necessary to encourage economic growth and attract investment, it seems to many Japanese to be a questionable move at a time when the consumption-tax rate has been increased and measures to address deflation are pushing up prices. To address this problem, the companies that enjoy tax cuts should increase their employees' wages to keep pace with rising prices, instead of waiting for market forces to drive them up.
 
Herein lies the unique twist that Piketty's theory takes on in Japan: the disparity is not so much between the super-rich and everyone else, but between large corporations, which can retain earnings and accumulate capital, and the individuals who are being squeezed in the process.
 
 

Economy

Washington Strips New York Fed’s Power

Secret ‘Triangle Document’ gives control of big-bank regulation to committee

By Jon Hilsenrath

March 4, 2015 10:30 p.m. ET

Fed governor Daniel Tarullo, above, runs a panel called the LISCC that has assumed much of the regulatory authority over Wall Street banks once held by the New York Fed Photo: Getty Images


WASHINGTON—The Federal Reserve Bank of New York, once the most feared banking regulator on Wall Street, has lost power in a behind-the-scenes reorganization at the nation’s central bank.

The Fed’s center of regulatory authority is now a little-known committee run by Fed governor Daniel Tarullo , which is calling the shots in oversight of banking titans such as Goldman Sachs Group Inc. and Citigroup Inc .
     
The new structure was enshrined in a previously undisclosed paper written in 2010 known as the Triangle Document. Under the new system, Washington is at the center of bank supervision, exercising control over the Fed’s 12 reserve banks, much as the State Department exerts control over embassies.

The power shift, initiated after the financial crisis and slowly put in place over the past five years, is more than a bureaucratic change. It influences how the biggest banks on Wall Street are overseen and has begun to affect regulation in unanticipated ways across the Fed system.

During internal debates on a range of issues—including a Citigroup bid to raise its dividend a year ago and J.P. Morgan’s 2012 “London Whale” trading losses—New York Fed examiners have been challenged by Washington. At times they have been shut out of policy meetings and even openly disparaged by Mr. Tarullo for failing to stem problems at banks, according to current and former Fed officials involved the discussions.

“It was obvious that a lot in the U.S. regulatory system had not worked particularly well before the crisis,” Mr. Tarullo said in an interview. “It was equally obvious that there was going to need to be a rethink and reorganization.”

The new structure will be on display Thursday, when the Fed releases results of annual stress tests of big banks, a program run out of Washington by Mr. Tarullo’s group.

The Fed undertook the reorganization with little disclosure about what was taking place, but officials are now drawing attention to it. “The Federal Reserve is requiring more of large institutions,” Fed Chairwoman Janet Yellen said in a speech Tuesday that addressed the reorganization. “We are also requiring more of ourselves.”

The New York Fed, as it loses power, is adjusting its approach in some ways. It is pulling examiners out of offices at the banks they review and relocating them to a building near New York Fed headquarters.
              
             
           
At the center of the organizational shift are broad regulatory questions that have continued since the financial crisis: How to avoid getting too close to the banks, and whether hard data should trump human judgment in overseeing financial firms. This account of the changes is based on interviews with current and former Fed officials, bankers, board directors and lawyers, in addition to the Triangle Document.

Many of the firms that faced the gravest trouble in 2008—Bear Stearns, Fannie Mae, Freddie Mac, American International Group and Lehman Brothers—weren’t the responsibility of the New York Fed. But it has borne the brunt of the blame, as the central bank’s eyes and ears on Wall Street. And certain postcrisis incidents, such as the 2012 losses at J.P. Morgan Chase & Co., gave ammunition for those seeking to rein in the New York branch and its examiners.

It also came under scrutiny when a former employee, Carmen Segarra, told news organization ProPublica the New York Fed had gone easy on Goldman—and made tapes of internal discussions.
The New York Fed said the facts didn’t support her assertions. Her wrongful-dismissal suit was dismissed, a ruling she is appealing. Even so, the case has led central-bank officials to explore whether they get adequate information from district banks on financial firms.

Officials in Washington say centralizing regulatory authority in D.C. gives the Fed a broader view of risks across the whole system and a more evenhanded oversight approach. As evidence of benefits from the stress tests Washington introduced, officials say the 50 largest U.S. banks increased their capital to $1.2 trillion by the end of the 2014 third quarter from $506 billion in early 2009.
Added strains
There also have been strains. Some regulated banks say they are uncertain whether they can depend on feedback from front-line examiners. Others complain of an increase in paperwork and complexity that they doubt makes the system safer.

The organizational shakeout and criticism of the New York Fed have placed its president, William Dudley , in a vise: holding less authority to regulate banks even as he faces a bigger burden to prove the New York branch is up to such work.

Under the new structure, the New York Fed president isn’t directly involved in many of the central bank’s most important supervision decisions, including stress tests. Supervisors of bank examiners often report directly to Mr. Tarullo’s group.

Still, Mr. Dudley is taking heat. At a Senate hearing in November, Sen. Elizabeth Warren (D., Mass.) suggested there was a cultural problem at the New York Fed and told Mr. Dudley he needed to fix it “or we need to get someone who will.” Sen. Jack Reed (D., R.I.) has introduced a bill to subject New York Fed presidents to Senate confirmation. Dallas Fed President Richard Fisher recently said the New York Fed should have less sway in monetary-policy decisions.

Ms. Yellen is standing behind Mr. Dudley, who won respect inside the Fed for spotting emerging problems in markets during the financial crisis and is part of Ms. Yellen’s inner circle on monetary policy. “He’s done a fine job,” Ms. Yellen said in December. In an interview, Mr. Tarullo said he had a good working relationship with Mr. Dudley.

      William Dudley, president of the New York Fed, testifying at a Senate hearing in November. Photo: Bloomberg News 
 
              
Mr. Dudley, in a prepared statement, endorsed the new structure. “I believe in a more integrated Federal Reserve System approach,” he said. “This has been an important part of our effort to ensure effective supervision of the nation’s largest financial institutions.”

Behind the scenes, Mr. Dudley, a former senior economist at Goldman, has been trying to restore the New York Fed’s dinged reputation.

In 2011, he began a “Listening to Our Critics” series that brought in detractors for daylong discussions. The bank screened for its staff the documentary “Inside Job,” which finds the Fed, along with others from government and Wall Street, culpable for the financial crisis. A discussion with the film’s director followed. Mr. Dudley sat in the front row.

The criticism has baffled some New York Fed examiners and left them feeling under assault. “Why do we get blamed for everything?” one New York Fed employee asked Sheila Bair , the former head of the Federal Deposit Insurance Corp., at one of Mr. Dudley’s events, according to her.

“I do think they are trying to effectuate culture change,” said Ms. Bair, who often sparred with Mr. Dudley’s predecessor, Timothy Geithner .
      
The New York Fed’s move to base bank examiners in New York instead of at banks helps them compare notes, officials of the regional bank said. Other Fed officials said it lowers the risk of examiners becoming loyal to banks they review.

The regulatory changes mark a sharp turn in the central bank’s 100-year history. The New York Fed once towered over the system, with New York Fed President Benjamin Strong the dominant figure.

The Fed board had regulatory power but delegated many decisions to the 12 reserve banks.

After the Depression, the New York Fed lost power to dictate short-term interest rates but retained great sway as the regulator of Wall Street banks. “Heads of the New York Fed really were dominant figures,” said Liaquat Ahamed, author of the book “Lords of Finance” about central banking in the 1930s. “Their closeness to Wall Street was viewed as an asset and not as a liability.”

The Dodd-Frank law in 2010 instructed the White House to name a Fed vice chairman for bank supervision, a step it has never taken. It declined to comment on why. In the absence of a nomination, Mr. Tarullo filled the void.

He hatched the regulatory shift with the approval of former Fed Chairman Ben Bernanke, who put Mr. Tarullo in charge of a post-financial-crisis overhaul.

“The precrisis situation was one that relied too much on the on-site people and did not provide enough perspective on correlated risks and how things could be problematic at multiple institutions,” Mr. Tarullo said.
Chewed out supervisors
He was hard on New York’s team of examiners from the start. He chewed out their supervisors during discussions in late 2009 of a plan by Citigroup to repay its $45 billion federal bailout, said people involved in the discussions.

New York Fed supervisors doubted Citigroup could raise as much money as Washington wanted it to raise before starting repayment. Mr. Tarullo said New York wasn’t pushing Citigroup hard enough. One person involved in the talks said Mr. Tarullo’s message to New York officials was that he was tired of cleaning up their messes.


During discussions the same year over what became the Triangle Document, New York Fed bank examiners, led by supervisor William Rutledge, fought for more representation on committees but lost, according to people who took part. Mr. Rutledge, now at Promontory Financial Group, which advises firms on dealing with regulators, said he supported the reorganization.

The six-page document placed a new panel called the Large Institution Supervision Coordinating Committee, overseen by Mr. Tarullo, at the center of Fed supervision of banks. Supervisors at the 12 reserve banks operate under the “guidance and supervision” of the LISCC (pronounced “lissick”).

Nine of the Federal Reserve Board’s members are on the 16-person committee; the New York Fed has three representatives, and they answer to Washington. Mr. Dudley isn’t on it.

“This reserve bank doesn’t breathe any more without asking Washington if it can inhale or exhale,” said one person prominent in the banking community.

Mr. Tarullo has empowered economists in both New York and Washington, while weakening examination teams. His top lieutenant, economist Michael Gibson, and Mr. Gibson’s deputy, Timothy Clark, have central roles at the LISCC and in running the Fed’s current stress tests of the largest 31 U.S. banks.

The LISCC also oversees the 16 financial firms the Fed believes would pose the biggest risks to financial stability if they failed. It includes a “vetting committee” to oversee the Fed’s internal bank ratings and a Risk Secretariat that runs specialized “risk teams” watching for problems across a broad swath of banking.

Before the financial crisis, New York Fed officials regularly took part in Washington-run meetings on regulatory policy, such as rules for derivatives oversight or capital. Mr. Tarullo ended the practice of including New York officials in these high-level meetings—a source of frustration for New York officials, they said privately.

Eugene Ludwig, the CEO of Promontory Financial Group, said banks now must navigate three layers of Fed supervision: examiners from the regional Fed banks, the committee Mr. Tarullo heads plus the risk teams. “It makes getting an approval or an issue rectified a more complex undertaking,” he said.

Tensions accompanying the reorganization became apparent in 2012 when J.P. Morgan’s London large trading losses came to light. In a conference call, Mr. Tarullo pressed New York Fed supervisors to explain how the matter slipped through regulatory cracks and asked whether it was their responsibility, according to people on the call.

New York had its own frustrations. Employees there complained that the emphasis on stress tests of banks drained resources and was at odds with the New York Fed’s ability to attend to individual institutions, said a report by the Fed inspector general. Mr. Gibson told the IG the tests shouldn’t strain New York examiners because they didn’t have to do much work on them.

Stress tests became a source of friction again in March 2014, when the Fed rejected a Citigroup plan for its capital that included a dividend increase. Citi had been assured by New York Fed examiners that it had until 2015 to correct shortcomings found in an earlier stress test, according to people familiar with the matter. The LISCC committee believed Citi hadn’t made enough progress and rejected its capital plan, a decision ratified by the Fed board.

Several New York Fed supervisors have left—stung, some said, by lost power, low morale and pay freezes imposed after the financial crisis.

At times, New York has recommended tougher treatment of banks—but still lost out to Washington.
In one round of stress tests, Michael Silva, the New York Fed’s former point person on Goldman Sachs, recommended penalizing the bank for not adequately calculating potential losses in a downturn. (Goldman declined to comment.)

But, said a person familiar with the tests, Mr. Tarullo’s committee judged that all of the big banks needed more time to address the same problem, and rejected the New York Fed’s recommendation.

Gold and Silver Trading Alert: Gold and Miners Decline Together Too

By: Przemyslaw Radomski

Tue, Mar 3, 2015




Briefly: In our opinion speculative short positions (full) in gold, silver and mining stocks are justified from the risk/reward perspective. We are keeping the stop-loss levels at their current levels, which means that we are effectively keeping some gains locked and at the same time we're allowing the profits to increase.

Gold stocks erased the gains of the previous days during yesterday's session alone and gold declined visibly as well. Is their and gold's rally over?

It's quite likely, but the more important thing is that even if they rally some more here, they are not likely to rally much more and lower prices are likely to be seen in the coming weeks anyway.

Let's start today's analysis with the gold market (chart courtesy of http://stockcharts.com).

$GOLD Gold - Spot Price (EOD) CME

Our previous comments on gold from the long-term perspective remain up-to-date:
Gold ended the week below the declining red dashed resistance line and the trend remains down - there were no changes based on Thursday's and Friday's small moves higher.
Keeping this in mind, let's take a look at the short-term gold chart.

$GOLD Gold - Spot Price (EOD) CME
Larger Image


In yesterday's alert we commented on the above chart in the following way:
Please note that we are not ruling out a more visible corrective upswing at this point. The retracement levels based on this month's decline are marked in green. The first retracement is at about $1,235, so even if gold moves to this level, it will not change anything. In fact, even gold moving to $1,262 would still be viewed as an upward correction at this time (we don't think that it will move as high, though). 
Regardless of the possible upward correction (based on today's pre-market action, it's already taking place), it seems that keeping the short position intact is still justified from the risk/reward perspective. The reason is that we are after major sell signals and breakdowns and a possible move back above the previously broken levels would need to be confirmed before having bullish implications. The correction could end quickly and be followed by a big slide (say $1+ decline in silver) that one would not be able to take advantage of by being out of the market. The breakdowns and medium-term sell signals justify preparing for the above while enduring small upswings.
The above remains up-to-date. Please note that gold indeed moved higher, but didn't invalidate anything - it remains below both resistance lines and the outlook remains bearish. 
We saw a repeat of Thursday's action on Friday as gold once again moved higher, didn't rise above the upper of the rising resistance lines, and closed very close to the lower one.  
The volume was also similar - and rather low - on both days. The implications are also similar - and bearish. The current small move higher seems to be nothing more than a correction after a quite visible decline that we saw in February.
Gold declined once again after reaching the upper of the resistance lines. The volume was higher than during the previous days' upswings, so the price-volume implications are bearish.

If we consider the gold to USD Index ratio, we have just seen a breakdown below the 2014 lows and the ratio seems to be on its way to its target level. The implications are bearish.

$GOLD:$USD Chart


Meanwhile, all that we wrote regarding the above silver chart previously remains up-to-date:
Meanwhile, the situation in the silver market didn't change at all yesterday. Silver is after an important breakdown and it's likely to decline in the following days or weeks. Please note that the fact that silver didn't decline yet is not a sign of strength. It's the natural way of silver to react - it very often either moves very sharply or stays in the same place for an extended time. Based on the recent breakdown, it seems that the next move will be to the downside.

$SILVER Silver - Spot Price (EOD) CME
Larger Image


Silver remains below the rising short-term resistance line and the declining long-term resistance line. Consequently, the outlook remains bearish.

$HUI Gold bugs Index - NYSE Arca INDX
Larger Image



Meanwhile, we wrote the following about the HUI Index:
(...) it seems that this decline is not over and that miners have further to fall. Gold is moving higher in today's pre-market trading, so the odds are that HUI will move back above its 2013 low. This will not have profoundly bullish implications, though. The key declining resistance line is currently at about 200, so the odds are that even if gold stocks move higher, they will not move above this level. 
The above remains up-to-date. We saw some strength and we could even see some more, but it would not invalidate the bearish outlook unless we see a confirmed breakout above the declining resistance line (which seems unlikely).
There's one more chart that we would like to share with you today. It features the gold stocks' performance relative to other stocks.

$HUI:$SPX Chart

The above little-followed ratio has bearish implications for the precious metals market. As long as gold stocks are likely to underperform other stocks, gold will be likely to decline. The former is the case right now as the gold stocks to the general stock market ratio remains in a major downtrend.

Overall, we can summarize the situation in the precious metals market in the same way as we did previously:
Summing up, while we are already seeing some kind of corrective upswing, it doesn't seem to be justified from the risk/reward perspective to adjust the current profitable positions. The profits may get smaller temporarily, but the odds are that they will become even greater as the medium-term trends remain down and the medium-term sell signals remain in place.
To summarize:

Trading capital (our opinion): Short positions (full) in gold, silver and mining stocks with the following stop-loss orders and initial (!) target prices:

Gold: initial target level: $1,180; stop-loss: $1,254, initial target level for the DGLD ETN: $75.23; stop loss for the DGLD ETN $63.16

Silver: initial target level: $15.70; stop-loss: $17.63, initial target level for the DSLV ETN: $66.25; stop loss for DSLV ETN $45.40

Mining stocks (price levels for the GDX ETN): initial target level: $18.40; stop-loss: $22.17, initial target level for the DUST ETN: $18.99; stop loss for the DUST ETN $11.32

In case one wants to bet on lower junior mining stocks' prices, here are the stop-loss details and initial target prices:

GDXJ: initial target level: $23.37; stop-loss: $28.37

  JDST: initial target level: $12.30; stop-loss: $7.00

Long-term capital (our opinion): No positions

Insurance capital (our opinion): Full position

You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

Thank you.

What the BRICS plus Germany are really up to?

Pepe Escobar

Published time: February 27, 2015 15:52         

Reuters / Ueslei Marcelino             

Winston Churchill once said, “I feel lonely without a war.” He also badly missed the loss of empire.

Churchill’s successor – the ‘Empire of Chaos’ – now faces the same quandary. Some wars – as in Ukraine, by proxy – are not going so well.

And the loss of empire increasingly manifests itself in myriad moves by selected players aiming towards a multipolar world.

So no wonder US ‘Think Tankland’ is going bonkers, releasing wacky CIA-tinted “forecasts” where Russia is bound to disintegrate, and China is turning into a communist dictatorship. So much (imperial) wishful thinking, so little time to prolong hegemony.

The acronym that all these “forecasts” dare not reveal is BRICS (Brazil, Russia, India, China, and South Africa). BRICS is worse than the plague as far as the ‘Masters of the Universe’ that really control the current - rigged - world system are concerned. True, the BRICS are facing multiple problems. Brazil at the moment is totally paralyzed; a long, complex, self-defeating process, now coupled with intimations of regime change by local ‘Empire of Chaos’ minions. It will take time, but Brazil will rebound.

That leaves the “RIC” – Russia, India and China - in BRICS as the key drivers of change. For all their interlocking discrepancies, they all agree they don’t need to challenge the hegemon directly while aiming for a new multipolar order.

The BRICS New Development Bank (NDB) – a key alternative to the IMF enabling developing nations to get rid of the US dollar as a reserve currency – will be operative by the end of this year.

The NDB will finance infrastructure and sustainable development projects not only in the BRICS nations but other developing nations. Forget about the Western-controlled World Bank, whose capital and lending capacity are never increased by the so-called Western “powers.” The NDB will be an open institution. BRICS nations will keep 55 percent of the voting power, and outside their domain no country will be allowed more than 7 percent of votes. But crucially, developing nations may also become partners and receive loans.

Russia's President Vladimir Putin delivers a speech as he attends the VI BRICS Summit in Fortaleza July 15, 2014.(Reuters / Paulo Whitaker )
Russia's President Vladimir Putin delivers a speech as he attends the VI BRICS Summit in Fortaleza July 15, 2014.(Reuters / Paulo Whitaker )

Damn those communists

A tripartite entente cordiale is also in the making. Indian Prime Minister Narendra Modi will be in China next May – and ‘Chindia’ will certainly engage in a breakthrough concerning their bitter territorial disputes. As much as Delhi has a lot to benefit from China’s massive capital investment and exports, Beijing wants to profit from India’s vast market and technology savvy.

In parallel, Beijing has already volunteered economic help to Russia – if Moscow asks for it – on top of their evolving strategic partnership.

The US “pivoting to Asia” – launched at the Pentagon – is all dressed up with no place to go.

Bullying Southeast Asia, South Asia and, for that matter, East Asia as a whole into becoming mere ‘Empire of Chaos’ vassals – and on top of it confronting China - was always a non-starter.

Not to mention believing in the fairy tale of a remilitarized Japan able to “contain” China.

Isolating the “communist dictatorship” won’t fly. Just watch, for instance, the imminent high-speed rail link between Kunming, in Yunnan province, and Singapore, traversing a key chunk of a Southeast Asia which for Washington would never qualify to be more than a bunch of client states.

The emerging 21st century Asia is all about interconnection; and the inexorable sun in this galaxy is China.

As China has embarked in an extremely complex tweaking of its economic development model, as I outlined here, China’s monopoly of low-end manufacturing – its previous industrial base – is migrating across the developing world, especially around the Indian Ocean basin. Good news for the Global South – and that includes everyone from African nations such as Kenya and Tanzania to parts of Southeast Asia and Latin America.

Of course the ‘Empire of Chaos’, business-wise, won’t be thrown out of Asia. But its days as an Asian hegemon, or a geopolitical Mob offering “protection”, are over.

The Chinese remix of Go West, Young Man – in fact go everywhere – started as early as 1999. Of the top 10 biggest container ports in the world, no less than 7 are in China (the others are Singapore, Rotterdam, and Pusan in South Korea). As far as the 12th Chinese 5-year plan – whose last year is 2015 – is concerned, most of the goals of the seven technology areas China wanted to be in the leading positions have been achieved, and in some cases even superseded.

The Bank of China will increasingly let the yuan move more freely against the US dollar. It will be dumping a lot of US dollars every once in a while. The 20-year old US dollar peg will gradually fade.

The biggest trading nation on the planet, and the second largest economy simply cannot be anchored to a single currency. And Beijing knows very well how a dollar peg magnifies any external shocks to the Chinese economy.

Sykes-Picot is us

A parallel process in Southwest Asia will also be developing; the dismantling of the nation-state in the Middle East – as in remixing the Sykes-Picot agreement of a hundred years ago. What a stark contrast to the return of the nation-state in Europe.

There have been rumblings that the remixed Sykes is Obama and the remixed Picot is Putin.

Not really. It’s the ‘Empire of Chaos’ that is actually acting as the new Sykes-Picot, directly and indirectly reconfiguring the “Greater Middle East.” Former NATO capo Gen. Wesley Clark has recently “revealed” what everyone already knew; the ISIS/ISIL/Daesh fake Caliphate is financed by “close allies of the United States,” as in Saudi Arabia, Qatar, Turkey and Israel. Compare that with Israeli Defense Minister Moshe Yaalon admitting that ISIS “does not represent a threat to Israeli interests.” Daesh does the unraveling of Sykes-Picot for the US.

The ‘Empire of Chaos’ actively sought the disintegration of Iraq, Syria and especially Libya.

And now, leading the House of Saud, “our” bastard in charge King Salman is none other than the former, choice jihad recruiter for Abdul Rasul Sayyaf, the Afghan Salafist who was the brains behind both Osama bin Laden and alleged 9/11 mastermind Khalid Sheikh Mohammad.

This is classic ‘Empire of Chaos’ in motion (exceptionalists don’t do nation building, just nation splintering). And there will be plenty of nasty, nation-shattering sequels, from the Central Asian stans to Xinjiang in China, not to mention festering, Ukraine, a.k.a Nulandistan.

Parts of Af-Pak could well turn into a branch of ISIS/ISIL/Daesh right on the borders of Russia, India, China, and Iran. From an ‘Empire of Chaos’ perspective, this potential bloodbath in the “Eurasian Balkans” – to quote eminent Russophobe Dr. Zbig “Grand Chessboard” Brzezinski – is the famous “offer you can’t refuse.”

Russia and China, meanwhile, will keep betting on Eurasian integration; strengthening the Shanghai Cooperation Organization (SCO) and their own internal coordination inside the BRICS; and using plenty of intel resources to go after The Caliph’s goons.

And as much as the Obama administration may be desperate for a final nuclear deal with Iran, Russia and China got to Tehran first. China’s Foreign Minister Wang Yi was in Tehran two weeks ago; stressing Iran is one of China’s “foreign policy priorities” and of great “strategic importance.” Sooner rather than later Iran will be a member of the SCO. China already does plenty of roaring trade with Iran, and so does Russia, selling weapons and building nuclear plants.
Germany's Chancellor Angela Merkel.(Reuters / Eric Vidal)
Germany's Chancellor Angela Merkel.(Reuters / Eric Vidal)
 
 
Berlin-Moscow-Beijing?

And then there’s the German question.

Germany now exports 50 percent of its GDP. It used to be only 24 percent in 1990. For the past 10 years, half of German growth depended on exports. Translation: this is a giant economy that badly needs global markets to keep expanding. An ailing EU, by definition, does not fit the bill.

German exports are changing their recipient address. Only 40 percent - and going down – now goes to the EU; the real growth is in Asia. So Germany, in practice, is moving away from the eurozone.

That does not entail Germany breaking up the euro; that would be interpreted as a nasty betrayal of the much-lauded “European project.”

What the trade picture unveils is the reason for Germany’s hardball with Greece: either you surrender, completely, or you leave the euro. What Germany wants is to keep a partnership with France and dominate Eastern Europe as an economic satellite, relying on Poland. So expect Greece, Spain, Portugal and Italy to face a German wall of intransigence. So much for European “integration,” it works as long as Germany dictates all the rules.

The spanner in the works is that the double fiasco Greece + Ukraine has been exposing. Berlin as an extremely flawed European hegemon – and that’s quite an understatement. Berlin suddenly woke up to the real, nightmarish possibility of a full blown, American-instigated war in Europe’s eastern borderlands against Russia. No wonder Angela Merkel had to fly to Moscow in a hurry.

Moscow – diplomatically – was the winner. And Russia won again when Turkey – fed up with trying to join the EU and being constantly blocked by, who else, Germany and France – decided to pivot to Eurasia for good, ignoring NATO and amplifying relations with both Russia and China.

That happened in the framework of a major ‘Pipelineistan’ game-changer. After Moscow cleverly negotiated the realignment of South Stream towards Turk Stream, right up to the Greek border, Putin and Greek Prime Minister Tsipras also agreed to a pipeline extension from the Turkish border across Greece to southern Europe. So Gazprom will be firmly implanted not only in Turkey but also Greece, which in itself will become mightily strategic in European ‘Pipelineistan’.

So Germany, sooner or later, must answer a categorical imperative - how to keep running massive trade surpluses while dumping their euro trade partners. The only possible answer is more trade with Russia, China and East Asia. It will take quite a while, and there will be many bumps on the road, but a Berlin-Moscow-Beijing trade/commercial axis – or the “RC” in BRICS meet Germany - is all but inevitable.

And no, you won’t read that in any wacky US ‘Think Tankland’ “forecast.”

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

Markets

Fed Finds 31 Banks Put Through Dodd Frank Stress Tests Adequately Capitalized

Second round of stress tests next week determines banks’ ability to return capital

By Ryan Tracy And Victoria McGrane

March 5, 2015 4:30 p.m. ET

Thursday’s stress-test results from the Federal Reserve give a peek into which banks may be on the cusp in terms of having their capital plans approved. Photo: Associated Press


WASHINGTON—The largest U.S. banks are strong enough to keep lending during a severe recession, the Federal Reserve said Thursday, a sign that many banks will soon get permission to return profits to investors by raising dividends or buying back shares.

The Fed’s annual “stress test” of banks’ financial health found all 31 of the biggest U.S. banks had enough capital to continue lending during a hypothetical economic shock where corporate debt markets deteriorate, unemployment hits 10% and housing and stock prices plunge. The exams are designed to ensure large banks can withstand severe losses during times of market turmoil without a taxpayer bailout.

It was the first time since the tests began in 2009 that all banks maintained capital levels above what the Fed views as a minimum allowance. The banks will need to maintain those minimum capital levels to pass the second round of stress tests on Wednesday, which will determine whether a firm can return money to shareholders. Two banks, Goldman Sachs Group Inc. and Zions Bancorp, had certain capital ratios that came close to the Fed’s minimum, which could limit shareholder payouts.

The overall results buttress regulators’ view that the financial system is safer than before the Great Recession, in large part because of loss-absorbing capital built up for the annual stress test exercise.

The Fed said the 31 banks’ aggregate Tier 1 common capital ratio, which shows high-quality capital as a percentage of risk-weighted assets, dropped as low as 8.2% under the stressful scenario, well above the 5.5% level measured in early 2009 and the 5% level the Fed considers a minimum allowance.

“Higher capital levels at large banks increase the resiliency of our financial system,” Federal Reserve Governor Daniel Tarullo said in a statement.

The results could bolster big banks’ push to return more of their income to restless shareholders after years of conservative payouts. The Fed will announce on Wednesday whether banks “pass” or “fail” the second round of stress tests and can return their requested amounts of capital to shareholders.

The Fed has loosened its hold on capital payouts somewhat but they are still below precrisis levels.

The payments of common-share dividends at U.S.-owned banks in the stress test process rose to $25 billion last year, according to data from Thomson Reuters, from a low of $6.6 billion in 2010, when the banks were most severely constrained. In 2007, those payouts totaled $44 billion. Citigroup, Inc., which failed the tests last year and in 2012, hasn’t been permitted to boost its dividend since being bailed out during the financial crisis.

Strong capital levels don’t guarantee banks will get a green-light to make payouts. As banks have boosted their ability to absorb severe losses, the Fed has increasingly shifted its focus toward banks’ culture, governance, and ability to assess internal and external risks. Those “qualitative” factors are now playing a leading role in the Fed’s decision about whether to approve or reject banks’ requests to pay out billions of dollars in dividends and share buybacks.

Last year the Fed rejected Citigroup, and the U.S. units of HSBC Holdings PLC, Banco Santander SA and Royal Bank of Scotland Group PLC for problems related to their ability to measure and predict risks. The U.S. units of Deutsche Bank AG, which is taking the test for the first time this year, and Santander are expected to fail next week due to “qualitative” factors, according to people familiar with the matter.

Thursday’s test results don’t take into account banks’ requests to return more capital to shareholders in 2015 and beyond, instead assuming that the banks maintain existing payout levels. Next week’s results will incorporate banks’ plans to pay dividends or purchase shares, moves that will likely lower their capital ratios below Thursday’s results. That could prove problematic for banks whose capital ratios came close to the Fed’s minimum allowance on Thursday, since a payout could further deplete that capital buffer. Goldman Sachs and Zions both had certain capital ratios close to the Fed’s minimum. The Fed looks at different measurements of capital at each bank, including comparing capital levels against a bank’s total assets and against assets weighted by risk.

Banks will be told privately by the Fed on Thursday whether their capital plans would put them below the Fed’s minimum threshold in next week’s tests, kicking off a week of jockeying among some banks. Any firm in that situation will have a one-time shot at changing their request for dividends or buybacks. Last year, Bank of America Corp. and Goldman told the Fed they wanted to scale back their payout plans after seeing that their leverage ratio, a measure of equity as a percentage of total assets, had fallen below the Fed’s minimum allowance. Both firms would have failed the test without making an adjustment.

                  

viernes, marzo 06, 2015

THE RISE OF FASCISM IS AGAIN THE ISSUE / ASIA TIMES

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The rise of fascism is again the issue

By John Pilger

Feb 26, '15


The recent 70th anniversary of the liberation of Auschwitz was a reminder of the great crime of fascism, whose Nazi iconography is embedded in our consciousness.

Fascism is preserved as history, as flickering footage of goose-stepping blackshirts, their criminality terrible and clear. Yet in the same liberal societies whose war-making elites urge us never to forget, the accelerating danger of a modern kind of fascism is suppressed; for it is their fascism.

"To initiate a war of aggression…," said the Nuremberg Tribunal judges in 1946, "is not only an international crime, it is the supreme international crime, differing only from other war crimes in that it contains within itself the accumulated evil of the whole." Had the Nazis not invaded Europe, Auschwitz and the Holocaust

would not have happened. Had the United States and its satellites not initiated their war of aggression in Iraq in 2003, almost a million people would be alive today; and Islamic State, or ISIS, would not have us in thrall to its savagery. They are the progeny of modern fascism, weaned by the bombs, bloodbaths and lies that are the surreal theatre known as news. 


Like the fascism of the 1930s and 1940s, big lies are delivered with the precision of a metronome: thanks to an omnipresent, repetitive media and its virulent censorship by omission.


Take the catastrophe in Libya. In 2011, Nato launched 9,700 "strike sorties" against Libya, of which more than a third were aimed at civilian targets. Uranium warheads were used; the cities of Misurata and Sirte were carpet-bombed. The Red Cross identified mass graves, and Unicef reported that "most [of the children killed] were under the age of ten".


The public sodomising of the Libyan president Muammar Gaddafi with a "rebel" bayonet was greeted by the then US secretary of state, Hillary Clinton, with the words: "We came, we saw, he died." His murder, like the destruction of his country, was justified with a familiar big lie; he was planning "genocide" against his own people. "We knew ... that if we waited one more day," said President Barack Obama, "Benghazi, a city the size of Charlotte, could suffer a massacre that would have reverberated across the region and stained the conscience of the world."


This was the fabrication of Islamist militias facing defeat by Libyan government forces. They told Reuters there would be "a real bloodbath, a massacre like we saw in Rwanda". Reported on March 14, 2011, the lie provided the first spark for Nato's inferno, described by David Cameron as a "humanitarian intervention".


Secretly supplied and trained by Britain's SAS, many of the "rebels" would become ISIS, whose latest video offering shows the beheading of 21 Coptic Christian workers seized in Sirte, the city destroyed on their behalf by Nato bombers.


For Obama, British Prime Minister David Cameron and French President Francois Hollande, Gaddafi's true crime was Libya's economic independence and his declared intention to stop selling Africa's greatest oil reserves in US dollars.


The petrodollar is a pillar of American imperial power. Gaddafi audaciously planned to underwrite a common African currency backed by gold, establish an all-Africa bank and promote economic union among poor countries with prized resources. Whether or not this would happen, the very notion was intolerable to the US as it prepared to "enter" Africa and bribe African governments with military "partnerships".


Following Nato's attack under cover of a Security Council resolution, Obama, wrote Garikai Chengu, "confiscated $30 billion from Libya's Central Bank, which Gaddafi had earmarked for the establishment of an African Central Bank and the African gold backed dinar currency".


The "humanitarian war" against Libya drew on a model close to Western liberal hearts, especially in the media. In 1999, Bill Clinton and Tony Blair sent Nato to bomb Serbia, because, they lied, the Serbs were committing "genocide" against ethnic Albanians in the secessionist province of Kosovo. David Scheffer, US ambassador-at-large for war crimes [sic], claimed that as many as "225,000 ethnic Albanian men aged between 14 and 59" might have been murdered.


Both Clinton and Blair evoked the Holocaust and "the spirit of the Second World War". The West's heroic allies were the Kosovo Liberation Army (KLA), whose criminal record was set aside. The British foreign secretary, Robin Cook, told them to call him any time on his mobile phone.


With the Nato bombing over, and much of Serbia's infrastructure in ruins, along with schools, hospitals, monasteries and the national TV station, international forensic teams descended upon Kosovo to exhume evidence of the "holocaust". The FBI failed to find a single mass grave and went home. The Spanish forensic team did the same, its leader angrily denouncing "a semantic pirouette by the war propaganda machines".


A year later, a United Nations tribunal on Yugoslavia announced the final count of the dead in Kosovo: 2,788. This included combatants on both sides and Serbs and Roma murdered by the KLA. There was no genocide. The "holocaust" was a lie. The Nato attack had been fraudulent.


Behind the lie, there was serious purpose. Yugoslavia was a uniquely independent, multi-ethnic federation that had stood as a political and economic bridge in the Cold War. Most of its utilities and major manufacturing was publicly owned. This was not acceptable to the expanding European Community, especially newly united Germany, which had begun a drive east to capture its "natural market" in the Yugoslav provinces of Croatia and Slovenia. By the time the Europeans met at Maastricht in 1991 to lay their plans for the disastrous eurozone, a secret deal had been struck; Germany would recognise Croatia. Yugoslavia was doomed.


In Washington, the US saw that the struggling Yugoslav economy was denied World Bank loans. Nato, then an almost defunct Cold War relic, was reinvented as imperial enforcer. At a 1999 Kosovo "peace" conference in Rambouillet, in France, the Serbs were subjected to the enforcer's duplicitous tactics.


The Rambouillet accord included a secret Annex B, which the US delegation inserted on the last day. This demanded the military occupation of the whole of Yugoslavia - a country with bitter memories of the Nazi occupation - and the implementation of a "free-market economy" and the privatisation of all government assets. No sovereign state could sign this. Punishment followed swiftly; Nato bombs fell on a defenceless country.


It was the precursor to the catastrophes in Afghanistan and Iraq, Syria and Libya, and Ukraine.


Since 1945, more than a third of the membership of the United Nations - 69 countries - have suffered some or all of the following at the hands of America's modern fascism. They have been invaded, their governments overthrown, their popular movements suppressed, their elections subverted, their people bombed and their economies stripped of all protection, their societies subjected to a crippling siege known as "sanctions". The British historian Mark Curtis estimates the death toll in the millions. In every case, a big lie was deployed.


"Tonight, for the first time since 9/11, our combat mission in Afghanistan is over." These were opening words of Obama's 2015 State of the Union address. In fact, some 10,000 troops and 20,000 military contractors (mercenaries) remain in Afghanistan on indefinite assignment.


"The longest war in American history is coming to a responsible conclusion," said Obama. In fact, more civilians were killed in Afghanistan in 2014 than in any year since the UN took records. The majority have been killed - civilians and soldiers - during Obama's time as president.


The tragedy of Afghanistan rivals the epic crime in Indochina. In his lauded and much quoted book, The Grand Chessboard: American Primacy and Its Geostrategic Imperatives, Zbigniew Brzezinski, the godfather of US policies from Afghanistan to the present day, writes that if America is to control Eurasia and dominate the world, it cannot sustain a popular democracy, because "the pursuit of power is not a goal that commands popular passion … Democracy is inimical to imperial mobilisation."


He is right. As WikiLeaks and Edward Snowden have revealed, a surveillance and police state is usurping democracy. In 1976, Brzezinski, then president Jimmy Carter's National Security Advisor, demonstrated his point by dealing a death blow to Afghanistan's first and only democracy. Who knows this vital history?


In the 1960s, a popular revolution swept Afghanistan, the poorest country on earth, eventually overthrowing the vestiges of the aristocratic regime in 1978. The People's Democratic Party of Afghanistan (PDPA) formed a government and declared a reform programme that included the abolition of feudalism, freedom for all religions, equal rights for women and social justice for the ethnic minorities. More than 13,000 political prisoners were freed and police files publicly burned.


The new government introduced free medical care for the poorest; peonage was abolished, a mass literacy programme was launched. For women, the gains were unheard of. By the late 1980s, half the university students were women, and women made up almost half of Afghanistan's doctors, a third of civil servants and the majority of teachers.


"Every girl," recalled Saira Noorani, a female surgeon, "could go to high school and university. We could go where we wanted and wear what we liked. We used to go to cafes and the cinema to see the latest Indian film on a Friday and listen to the latest music. It all started to go wrong when the mujaheddin started winning. They used to kill teachers and burn schools. We were terrified. It was funny and sad to think these were the people the West supported."


The PDPA government was backed by the Soviet Union, even though, as former secretary of state Cyrus Vance later admitted, "there was no evidence of any Soviet complicity [in the revolution]". Alarmed by the growing confidence of liberation movements throughout the world, Brzezinski decided that if Afghanistan was to succeed under the PDPA, its independence and progress would offer the "threat of a promising example".


On July 3, 1979, the White House secretly authorized support for tribal "fundamentalist" groups known as the mujaheddin, a program that grew to over $500 million a year in U.S. arms and other assistance. The aim was the overthrow of Afghanistan's first secular, reformist government. In August 1979, the US embassy in Kabul reported that "the United States' larger interests ... would be served by the demise of [the PDPA government], despite whatever setbacks this might mean for future social and economic reforms in Afghanistan." The italics are mine.


The mujaheddin were the forebears of al-Qaeda and Islamic State. They included Gulbuddin Hekmatyar, who received tens of millions of dollars in cash from the CIA. Hekmatyar's specialty was trafficking in opium and throwing acid in the faces of women who refused to wear the veil. Invited to London, he was lauded by prime minister Margaret Thatcher as a "freedom fighter".


Such fanatics might have remained in their tribal world had Brzezinski not launched an international movement to promote Islamic fundamentalism in Central Asia and so undermine secular political liberation and "destabilise" the Soviet Union, creating, as he wrote in his autobiography, "a few stirred up Muslims".


His grand plan coincided with the ambitions of the Pakistani dictator, General Zia ul-Haq, to dominate the region. In 1986, the CIA and Pakistan's intelligence agency, the ISI, began to recruit people from around the world to join the Afghan jihad. The Saudi multi-millionaire Osama bin Laden was one of them.


Operatives who would eventually join the Taliban and al-Qaeda were recruited at an Islamic college in Brooklyn, New York, and given paramilitary training at a CIA camp in Virginia. This was called "Operation Cyclone". Its success was celebrated in 1996 when the last PDPA president of Afghanistan, Mohammed Najibullah - who had gone before the UN General Assembly to plead for help - was hanged from a streetlight by the Taliban.


The "blowback" of Operation Cyclone and its "few stirred up Muslims" was September 11, 2001. Operation Cyclone became the "war on terror", in which countless men, women and children would lose their lives across the Muslim world, from Afghanistan to Iraq, Yemen, Somalia and Syria. The enforcer's message was and remains: "You are with us or against us."


The common thread in fascism, past and present, is mass murder. The American invasion of Vietnam had its "free fire zones", "body counts" and "collatoral damage". In the province of Quang Ngai, where I reported from, many thousands of civilians ("gooks") were murdered by the US; yet only one massacre, at My Lai, is remembered.


In Laos and Cambodia, the greatest aerial bombardment in history produced an epoch of terror marked today by the spectacle of joined-up bomb craters which, from the air, resemble monstrous necklaces. The bombing gave Cambodia its own ISIS, led by Pol Pot.


Today, the world's greatest single campaign of terror entails the execution of entire families, guests at weddings, mourners at funerals. These are Obama's victims. According to the New York Times, Obama makes his selection from a CIA "kill list" presented to him every Tuesday in the White House Situation Room.


He then decides, without a shred of legal justification, who will live and who will die. His execution weapon is the Hellfire missile carried by a pilotless aircraft known as a drone; these roast their victims and festoon the area with their remains. Each "hit" is registered on a faraway console screen as a "bugsplat".


"For goose-steppers," wrote the historian Norman Pollock, "substitute the seemingly more innocuous militarisation of the total culture. And for the bombastic leader, we have the reformer manque, blithely at work, planning and executing assassination, smiling all the while."


Uniting fascism old and new is the cult of superiority. "I believe in American exceptionalism with every fibre of my being," said Obama, evoking declarations of national fetishism from the 1930s. As the historian Alfred W McCoy has pointed out, it was the Hitler devotee, Carl Schmitt, who said, "The sovereign is he who decides the exception."


This sums up Americanism, the world's dominant ideology. That it remains unrecognised as a predatory ideology is the achievement of an equally unrecognised brainwashing. Insidious, undeclared, presented wittily as enlightenment on the march, its conceit insinuates Western culture.


I grew up on a cinematic diet of American glory, almost all of it a distortion. I had no idea that it was the Red Army that had destroyed most of the Nazi war machine, at a cost of as many as 13 million soldiers. By contrast, US losses, including in the Pacific, were 400,000. Hollywood reversed this.


The difference now is that cinema audiences are invited to wring their hands at the "tragedy" of American psychopaths having to kill people in distant places - just as the President himself kills them. The embodiment of Hollywood's violence, the actor and director Clint Eastwood, was nominated for an Oscar this year for his movie American Sniper, which is about a licensed murderer and nutcase. The New York Times described it as a "patriotic, pro-family picture which broke all attendance records in its opening days".


There are no heroic movies about America's embrace of fascism. During the Second World War, America (and Britain) went to war against Greeks who had fought heroically against Nazism and were resisting the rise of Greek fascism. In 1967, the CIA helped bring to power a fascist military junta in Athens - as it did in Brazil and most of Latin America. Germans and east Europeans who had colluded with Nazi aggression and crimes against humanity were given safe haven in the US; many were pampered and their talents rewarded. Wernher von Braun was the "father" of both the Nazi V-2 terror bomb and the US space programme.


In the 1990s, as former Soviet republics, eastern Europe and the Balkans became military outposts of Nato, the heirs to a Nazi movement in Ukraine were given their opportunity. Responsible for the deaths of thousands of Jews, Poles and Russians during the Nazi invasion of the Soviet Union, Ukrainian fascism was rehabilitated and its "new wave" hailed by the enforcer as "nationalists".


This reached its apogee in 2014 when the Obama administration splashed out $5 billion on a coup against the elected government. The shock troops were neo-Nazis known as the Right Sector and Svoboda. Their leaders include Oleh Tyahnybok, who has called for a purge of the "Moscow-Jewish mafia" and "other scum", including gays, feminists and those on the political left.


These fascists are now integrated into the Kiev coup government. The first deputy speaker of the Ukrainian parliament, Andriy Parubiy, a leader of the governing party, is co-founder of Svoboda. On February 14, Parubiy announced he was flying to Washington get "the USA to give us highly precise modern weaponry". If he succeeds, it will be seen as an act of war by Russia.


No Western leader has spoken up about the revival of fascism in the heart of Europe - with the exception of Vladimir Putin, whose people lost 22 million to a Nazi invasion that came through the borderland of Ukraine.


At the recent Munich Security Conference, Obama's Assistant Secretary of State for European and Eurasian Affairs, Victoria Nuland, ranted abuse about European leaders for opposing the US arming of the Kiev regime. She referred to the German Defence Minister as "the minister for defeatism". It was Nuland who masterminded the coup in Kiev. The wife of Robert D. Kagan, a leading "neo-con" luminary and co-founder of the extreme right wing Project for a New American Century, she was foreign policy advisor to Dick Cheney.


Nuland's coup did not go to plan. Nato was prevented from seizing Russia's historic, legitimate, warm-water naval base in Crimea. The mostly Russian population of Crimea - illegally annexed to Ukraine by Nikita Krushchev in 1954 - voted overwhelmingly to return to Russia, as they had done in the 1990s. The referendum was voluntary, popular and internationally observed. There was no invasion.


At the same time, the Kiev regime turned on the ethnic Russian population in the east with the ferocity of ethnic cleaning. Deploying neo-Nazi militias in the manner of the Waffen-SS, they bombed and laid to siege cities and towns. They used mass starvation as a weapon, cutting off electricity, freezing bank accounts, stopping social security and pensions. More than a million refugees fled across the border into Russia. In the Western media, they became unpeople escaping "the violence" caused by the "Russian invasion".


The Nato commander, General Breedlove - whose name and actions might have been inspired by Stanley Kubrick's Dr Strangelove - announced that 40,000 Russian troops were "massing". In the age of forensic satellite evidence, he offered none.


These Russian-speaking and bilingual people of Ukraine - a third of the population - have long sought a federation that reflects the country's ethnic diversity and is both autonomous and independent of Moscow. Most are not "separatists" but citizens who want to live securely in their homeland and oppose the power grab in Kiev. Their revolt and establishment of autonomous "states" are a reaction to Kiev's attacks on them. Little of this has been explained to western audiences.


On May 2, 2014, in Odessa, 41 ethnic Russians were burned alive in the trade union headquarters with police standing by. The Right Sector leader Dmytro Yarosh hailed the massacre as "another bright day in our national history". In the American and British media, this was reported as a "murky tragedy" resulting from "clashes" between "nationalists" (neo-Nazis) and "separatists" (people collecting signatures for a referendum on a federal Ukraine).


The New York Times buried the story, having dismissed as Russian propaganda warnings about the fascist and anti-Semitic policies of Washington's new clients. The Wall Street Journal damned the victims - "Deadly Ukraine Fire Likely Sparked by Rebels, Government Says". Obama congratulated the junta for its "restraint".


If Putin can be provoked into coming to their aid, his pre-ordained "pariah" role in the West will justify the lie that Russia is invading Ukraine. On January 29, Ukraine's top military commander, General Viktor Muzhemko, almost inadvertently dismissed the very basis for US and EU sanctions on Russia when he told a news conference emphatically: "The Ukrainian army is not fighting with the regular units of the Russian Army".


There were "individual citizens" who were members of "illegal armed groups", but there was no Russian invasion. This was not news. Vadym Prystaiko, Kiev's Deputy Foreign Minister, has called for "full scale war" with nuclear-armed Russia.


On February 21, US Senator James Inhofe, a Republican from Oklahoma, introduced a bill that would authorise American arms for the Kiev regime. In his Senate presentation, Inhofe used photographs he claimed were of Russian troops crossing into Ukraine, which have long been exposed as fakes. It was reminiscent of Ronald Reagan's fake pictures of a Soviet installation in Nicaragua, and Colin Powell's fake evidence to the UN of weapons of mass destruction in Iraq.


The intensity of the smear campaign against Russia and the portrayal of its president as a pantomime villain is unlike anything I have known as a reporter. Robert Parry, one of America's most distinguished investigative journalists, who revealed the Iran-Contra scandal, wrote recently, "No European government, since Adolf Hitler's Germany, has seen fit to dispatch Nazi storm troopers to wage war on a domestic population, but the Kiev regime has and has done so knowingly.


"Yet across the West's media/political spectrum, there has been a studious effort to cover up this reality even to the point of ignoring facts that have been well established ... If you wonder how the world could stumble into world war three - much as it did into world war one a century ago - all you need to do is look at the madness over Ukraine that has proved impervious to facts or reason."


In 1946, the Nuremberg Tribunal prosecutor said of the German media: "The use made by Nazi conspirators of psychological warfare is well known. Before each major aggression, with some few exceptions based on expediency, they initiated a press campaign calculated to weaken their victims and to prepare the German people psychologically for the attack .... In the propaganda system of the Hitler State it was the daily press and the radio that were the most important weapons."


In the Guardian on February 2, Timothy Garton-Ash called, in effect, for a world war. "Putin must be stopped," said the headline. "And sometimes only guns can stop guns." He conceded that the threat of war might "nourish a Russian paranoia of encirclement"; but that was fine. He name-checked the military equipment needed for the job and advised his readers that "America has the best kit".


In 2003, Garton-Ash, an Oxford professor, repeated the propaganda that led to the slaughter in Iraq. Saddam Hussein, he wrote, "has, as [Colin] Powell documented, stockpiled large quantities of horrifying chemical and biological weapons, and is hiding what remains of them. He is still trying to get nuclear ones." He lauded Blair as a "Gladstonian, Christian liberal interventionist". In 2006, he wrote, "Now we face the next big test of the West after Iraq: Iran."


The outbursts - or as Garton-Ash prefers, his "tortured liberal ambivalence" - are not untypical of those in the transatlantic liberal elite who have struck a Faustian deal. The war criminal Blair is their lost leader. The Guardian, in which Garton-Ash's piece appeared, published a full-page advertisement for an American Stealth bomber.


On a menacing image of the Lockheed Martin monster were the words: "The F-35. GREAT For Britain". This American "kit" will cost British taxpayers 1.3 billion pounds (US$2 billion), its F-model predecessors having slaughtered across the world. In tune with its advertiser, a Guardian editorial has demanded an increase in military spending.


Once again, there is serious purpose. The rulers of the world want Ukraine not only as a missile base; they want its economy. Kiev's new Finance Minister, Nataliwe Jaresko, is a former senior US State Department official in charge of US overseas "investment". She was hurriedly given Ukrainian citizenship.


They want Ukraine for its abundant gas; Vice President Joe Biden's son is on the board of Ukraine's biggest oil, gas and fracking company. The manufacturers of GM seeds, companies such as the infamous Monsanto, want Ukraine's rich farming soil.


Above all, they want Ukraine's mighty neighbour, Russia. They want to Balkanise or dismember Russia and exploit the greatest source of natural gas on earth. As the Arctic ice melts, they want control of the Arctic Ocean and its energy riches, and Russia's long Arctic land border. Their man in Moscow used to be Boris Yeltsin, a drunk, who handed his country's economy to the West. His successor, Putin, has re-established Russia as a sovereign nation; that is his crime.


The responsibility of the rest of us is clear. It is to identify and expose the reckless lies of warmongers and never to collude with them. It is to re-awaken the great popular movements that brought a fragile civilisation to modern imperial states.


Most important, it is to prevent the conquest of ourselves: our minds, our humanity, our self respect. If we remain silent, victory over us is assured, and a holocaust beckons.


Posted with permission www.johnpilger.com.


(Copyright 2015 John Pilger)