by Stephan Foley / 18 November 2011

The ascension of Mario Monti to the Italian prime ministership is remarkable for more reasons than it is possible to count. By replacing the scandal-surfing Silvio Berlusconi, Italy has dislodged the undislodgeable. By imposing rule by unelected technocrats, it has suspended the normal rules of democracy, and maybe democracy itself. And by putting a senior adviser at Goldman Sachs in charge of a Western nation, it has taken to new heights the political power of an investment bank that you might have thought was prohibitively politically toxic. This is the most remarkable thing of all: a giant leap forward for, or perhaps even the successful culmination of, the Goldman Sachs Project.

It is not just Mr Monti. The European Central Bank, another crucial player in the sovereign debt drama, is under ex-Goldman management, and the investment bank’s alumni hold sway in the corridors of power in almost every European nation, as they have done in the US throughout the financial crisis. Until Wednesday, the International Monetary Fund’s European division was also run by a Goldman man, Antonio Borges, who just resigned for personal reasons. Even before the upheaval in Italy, there was no sign of Goldman Sachs living down its nickname as “the Vampire Squid”, and now that its tentacles reach to the top of the eurozone, sceptical voices are raising questions over its influence. The political decisions taken in the coming weeks will determine if the eurozone can and will pay its debts – and Goldman’s interests are intricately tied up with the answer to that question.

Simon Johnson, the former International Monetary Fund economist, in his book 13 Bankers, argued that Goldman Sachs and the other large banks had become so close to government in the run-up to the financial crisis that the US was effectively an oligarchy. At least European politicians aren’t “bought and paid for” by corporations, as in the US, he says. “Instead what you have in Europe is a shared world-view among the policy elite and the bankers, a shared set of goals and mutual reinforcement of illusions.”

This is The Goldman Sachs Project. Put simply, it is to hug governments close. Every business wants to advance its interests with the regulators that can stymie them and the politicians who can give them a tax break, but this is no mere lobbying effort. Goldman is there to provide advice for governments and to provide financing, to send its people into public service and to dangle lucrative jobs in front of people coming out of government. The Project is to create such a deep exchange of people and ideas and money that it is impossible to tell the difference between the public interest and the Goldman Sachs interest.

Mr Monti is one of Italy’s most eminent economists, and he spent most of his career in academia and thinktankery, but it was when Mr Berlusconi appointed him to the European Commission in 1995 that Goldman Sachs started to get interested in him. First as commissioner for the internal market, and then especially as commissioner for competition, he has made decisions that could make or break the takeover and merger deals that Goldman’s bankers were working on or providing the funding for. Mr Monti also later chaired the Italian Treasury’s committee on the banking and financial system, which set the country’s financial policies. With these connections, it was natural for Goldman to invite him to join its board of international advisers. The bank’s two dozen-strong international advisers act as informal lobbyists for its interests with the politicians that regulate its work. Other advisers include Otmar Issing who, as a board member of the German Bundesbank and then the European Central Bank, was one of the architects of the euro. Perhaps the most prominent ex-politician inside the bank is Peter Sutherland, Attorney General of Ireland in the 1980s and another former EU Competition Commissioner. He is now non-executive chairman of Goldman’s UK-based broker-dealer arm, Goldman Sachs International, and until its collapse and nationalisation he was also a non-executive director of Royal Bank of Scotland. He has been a prominent voice within Ireland on its bailout by the EU, arguing that the terms of emergency loans should be eased, so as not to exacerbate the country’s financial woes. The EU agreed to cut Ireland’s interest rate this summer.

Picking up well-connected policymakers on their way out of government is only one half of the Project, sending Goldman alumni into government is the other half. Like Mr Monti, Mario Draghi, who took over as President of the ECB on 1 November, has been in and out of government and in and out of Goldman. He was a member of the World Bank and managing director of the Italian Treasury before spending three years as managing director of Goldman Sachs International between 2002 and 2005 – only to return to government as president of the Italian central bank. Mr Draghi has been dogged by controversy over the accounting tricks conducted by Italy and other nations on the eurozone periphery as they tried to squeeze into the single currency a decade ago. By using complex derivatives, Italy and Greece were able to slim down the apparent size of their government debt, which euro rules mandated shouldn’t be above 60 per cent of the size of the economy. And the brains behind several of those derivatives were the men and women of Goldman Sachs.

The bank’s traders created a number of financial deals that allowed Greece to raise money to cut its budget deficit immediately, in return for repayments over time. In one deal, Goldman channelled $1bn of funding to the Greek government in 2002 in a transaction called a cross-currency swap. On the other side of the deal, working in the National Bank of Greece, was Petros Christodoulou, who had begun his career at Goldman, and who has been promoted now to head the office managing government Greek debt. Lucas Papademos, now installed as Prime Minister in Greece’s unity government, was a technocrat running the Central Bank of Greece at the time. Goldman says that the debt reduction achieved by the swaps was negligible in relation to euro rules, but it expressed some regrets over the deals. Gerald Corrigan, a Goldman partner who came to the bank after running the New York branch of the US Federal Reserve, told a UK parliamentary hearing last year: “It is clear with hindsight that the standards of transparency could have been and probably should have been higher.” When the issue was raised at confirmation hearings in the European Parliament for his job at the ECB, Mr Draghi says he wasn’t involved in the swaps deals either at the Treasury or at Goldman.

It has proved impossible to hold the line on Greece, which under the latest EU proposals is effectively going to default on its debt by asking creditors to take a “voluntary” haircut of 50 per cent on its bonds, but the current consensus in the eurozone is that the creditors of bigger nations like Italy and Spain must be paid in full. These creditors, of course, are the continent’s big banks, and it is their health that is the primary concern of policymakers. The combination of austerity measures imposed by the new technocratic governments in Athens and Rome and the leaders of other eurozone countries, such as Ireland, and rescue funds from the IMF and the largely German-backed European Financial Stability Facility, can all be traced to this consensus. “My former colleagues at the IMF are running around trying to justify bailouts of €1.5trn-€4trn, but what does that mean?” says Simon Johnson. “It means bailing out the creditors 100 per cent. It is another bank bailout, like in 2008: The mechanism is different, in that this is happening at the sovereign level not the bank level, but the rationale is the same.” So certain is the financial elite that the banks will be bailed out, that some are placing bet-the-company wagers on just such an outcome. Jon Corzine, a former chief executive of Goldman Sachs, returned to Wall Street last year after almost a decade in politics and took control of a historic firm called MF Global. He placed a $6bn bet with the firm’s money that Italian government bonds will not default. When the bet was revealed last month, clients and trading partners decided it was too risky to do business with MF Global and the firm collapsed within days. It was one of the ten biggest bankruptcies in US history.

The grave danger is that, if Italy stops paying its debts, creditor banks could be made insolvent. Goldman Sachs, which has written over $2trn of insurance, including an undisclosed amount on eurozone countries’ debt, would not escape unharmed, especially if some of the $2trn of insurance it has purchased on that insurance turns out to be with a bank that has gone under. No bank – and especially not the Vampire Squid – can easily untangle its tentacles from the tentacles of its peers. This is the rationale for the bailouts and the austerity, the reason we are getting more Goldman, not less. The alternative is a second financial crisis, a second economic collapse. Shared illusions, perhaps? Who would dare test it?

Mario Monti, Lucas Papademos and Mario Draghi have something in common: they have all worked for the American investment bank. This is not a coincidence, but evidence of a strategy to exert influence that has perhaps already reached its limits.

Our friends from Goldman Sachs…
by Marc Roche / 16 November 2011 / Le Monde

Serious and competent, they weigh up the pros and cons and study all of the documents before giving an opinion. They have a fondness for economics, but these luminaries who enter into the temple only after a long and meticulous recruitment process prefer to remain discreet. Collectively they form an entity that is part pressure group, part fraternal association for the collection of information, and part mutual aid network. They are the craftsmen, masters and grandmasters whose mission is “to spread the truth acquired in the lodge to the rest of the world.” According to its detractors, the European network of influence woven by American bank Goldman Sachs (GS) functions like a freemasonry. To diverse degrees, the new European Central Bank President, Mario Draghi, the newly designated Prime Minister of Italy, Mario Monti, and the freshly appointed Greek Prime Minister Lucas Papademos are totemic figures in this carefully constructed web.

Heavyweight members figure large in the euro crisis
Draghi was Goldman Sachs International’s vice-chairman for Europe between 2002 and 2005, a position that put him in charge of the the “companies and sovereign” department, which shortly before his arrival, helped Greece to disguise the real nature of its books with a swap on its sovereign debt. Monti was an international adviser to Goldman Sachs from 2005 until his nomination to lead the Italian government. According to the bank, his mission was to provide advice “on European business and major public policy initiatives worldwide”. As such, he was a “door opener” with a brief to defend Goldman’s interest in the corridors of power in Europe. The third man, Lucas Papademos, was the governor of the Greek central bank from 1994 to 2002. In this capacity, he played a role that has yet to be elucidated in the operation to mask debt on his country’s books, perpetrated with assistance from Goldman Sachs. And perhaps more importantly, the current chairman of Greece’s Public Debt Management Agency, Petros Christodoulos, also worked as a trader for the bank in London. Two other heavyweight members of Goldman’s European network have also figured large in the euro crisis: Otmar Issing, a former member of the Bundesbank board of directors and a one-time chief economist of the European Central Bank, and Ireland’s Peter Sutherland, an administrator for Goldman Sachs International, who played a behind the scenes role in the Irish bailout.

Relay exclusive information to the bank’s trading rooms
How was this loyal network of intermediaries created? The US version of this magic circle is composed of former highly placed executives of the bank who effortlessly enter the highest level of the civil service. In Europe, on the other hand, Goldman Sachs has worked to accumulate a capital of relationships. But unlike its competitors, the bank has no interest in retired diplomats, highly placed national and international civil servants, or even former prime ministers and ministers of finance. Goldman’s priority has been to target central bankers and former European commissioners. Its main goal is to legally collect information on initiatives in the near future and on the interest rates set by central banks. At the same time, Goldman likes its agents to remain discreet. That is why its loyal subjects prefer not to mention their filiation in interviews or in the course of official missions. These well-connected former employees simply have to talk about this and that secure in the knowledge that their prestige will inevitably be rewarded with outspoken frankness on the part of those in powerful positions. Put simply they are there to see “which way the wind is blowing,” and thereafter to relay exclusive information to the bank’s trading rooms.

Bid for global dominance
Now that it has a former director at the head of the ECB, a former intermediary leading the Italian government, and another in charge in Greece, the bank’s antagonists are eager to highlight the extraordinary power of its network in in Frankfurt, Rome and Athens, which could prove extremely useful in these turbulent times. But looking beyond these details, the power of Goldman’s European government before and during the financial ordeal of 2008 may well prove to be an obstacle. The relationships maintained by experienced former central bankers are less likely to be useful now that politicians are aware of the unpopularity of finance professionals who are seen to be responsible for the present crisis. Where Goldman Sachs used to be able to exercise its talents, it now has to contend with opposition from public authorities raising questions about a series of scandals. A well stocked address book is no longer sufficient in a complex and highly technical financial world, where a new generation of industry leaders are less likely to be imbued with an unquestioning respect for the establishment. In their bid for global dominance, they no longer need to rely on high finance crusaders in the Goldman mould, while the quest to protect shareholder’s rights, demands for more transparency and active opposition from the media, NGOs, and institutional investors continue to erode the potency of “the network effect.”

{Translated from the French by Mark McGovern}

The giant American investment bank which is accused of helping the Greek state to conceal the real nature of its financial situation while speculating on its debts can count on a remarkable network of advisers with very close links to European leaders, reports Le Monde.

Goldman Sachs, the international web
by Marc Roche / 3 March 2010 / Le Monde

Petros Christodoulou affects not to care about compliments or their source. Ever since he was a teenager, this top-of-the-class student has grown used to hearing his praises sung. Appointed on 19 February to the head of the organization for the management of Greek public debt, he has arrived at the top of the tree. However, the trouble is that the former manager of global markets at the National Bank of Greece (NBG) is at the centre of an inquiry, announced on 25 February by the United States Federal Reserve, on contracts relating to Greek national debt, which link Goldman Sachs and other companies to the government in Athens. The New York based investment bank was paid as a banking advisor to the Greek government while speculating on the Hellenic nation’s sovereign debt. In particular, the American regulator is interested in the role played by Petros Christodoulou, who, in collaboration with Goldman, supervised the creation of the London company Titlos to transfer debt from Greece’s national accounts to the NBG. Before joining the NBG in 1998, Mr Christodoulou had worked as a banker for – you guessed it – Goldman Sachs.

“Government Sachs”
The affair has highlighted the powerful network of influence that Goldman Sachs has maintained in Europe since 1985 – a tightly woven group of underground and high-profile go-betweens and loyal supporters, whose address books open the doors of ministries of finance. These carefully recruited and extraordinarily well-paid advisors understand all the subtleties of the corridors of power within the European Union, and have a direct line to decision makers that they can call during moments of crisis. But who are the members of the European arm of the institution which is so powerful in Washington that it is referred to as “government Sachs”? The key figure is Peter Sutherland, chairman of Goldman Sachs International, the bank’s London-based European subsidiary. The former European commissioner for competition and ex-chairman of BP, is an essential link between the investment bank and the 27 EU member states and Russia. In France, Goldman Sachs benefits from the support of Charles de Croisset, a former chairman of Crédit Commercial de France (CCF), who took over from Jacques Mayoux, a government inspector of finances and former chairman of Société Générale. In the United Kingdom, it can count on Lord Griffiths, who advised former prime minister Margaret Thatcher, and in Germany, on Otmar Issing, a one-time board member of the Bundesbank and ex-chief economist of the European Central Bank (ECB).

Discreetly advances its interests
And that is not to mention the many Goldman alumni who go onto hold positions of power, which the bank can count on to advance its position. The best known of these is Mario Draghi, Goldman’s vice-president for Europe between 2001 and 2006, who is the current governor of the Bank of Italy and Chairman of international regulator, the Financial Stability Board. But do not expect to come across former diplomats in the austere corridors of Goldman Sachs International. As an institution with real world interests, the bank prefers to recruit financiers, economists, central bankers, and former highly placed civil servants from international economic organizations, but considers retired ambassadors to be jovial status symbols without any real high-level contacts or business sense. For Goldman Sachs, this network has the advantage of enabling it to discreetly advance its interests. In the Financial Times of 15 February, Otmar Issing published an article voicing his hostility to any attempt by the European Union to rescue Greece. However, he omitted to mention the fact that he has been an international advisor to Goldman Sachs since 2006. Nor did he say that the bank’s traders, who have been speculating against the single European currency, might well lose their shirts if the EU does intervene.

Max Keiser & Catherine Austin Fitts on Goldman Sachs (2009)

The government and the big banks deceived the public about their $7 trillion secret loan program. They should be punished
by Eliot Spitzer  /   Nov. 30, 2011

Imagine you walked into a bank, applied for a personal line of credit, and filled out all the paperwork claiming to have no debts and an income of $200,000 per year. The bank, based on these representations, extended you the line of credit. Then, three years later, after fighting disclosure all the way, you were forced by a court to tell the truth: At the time you made the statements to the bank, you actually were unemployed, you had a $1 million mortgage on your house on which you had failed to make payments for six months, and you hadn’t paid even the minimum on your credit-card bills for three months. Do you think the bank would just say: Never mind, don’t worry about it? Of course not. Whether or not you had paid back the personal line of credit, three FBI agents would be at your door within hours. Yet this is exactly what the major American banks have done to the public. During the deepest, darkest period of the financial cataclysm, the CEOs of major banks maintained in statements to the public, to the market at large, and to their own shareholders that the banks were in good financial shape, didn’t want to take TARP funds, and that the regulatory framework governing our banking system should not be altered. Trust us, they said. Yet, unknown to the public and the Congress, these same banks had been borrowing massive amounts from the government to remain afloat. The total numbers are staggering: $7.7 trillion of credit—one-half of the GDP of the entire nation. $460 billion was lent to J.P. Morgan, Bank of America, Citibank, Wells Fargo, Goldman Sachs, and Morgan Stanley alone—without anybody other than a few select officials at the Fed and the Treasury knowing. This was perhaps the single most massive allocation of capital from public to private hands in our history, and nobody was told. This was not TARP: This was secret Fed lending. And although it has since been repaid, it is clear why the banks didn’t want us to know about it: They didn’t want to admit the magnitude of their financial distress.

The banks’ claims of financial stability and solvency appear at a minimum to have been misleading—and may have been worse. Misleading statements and deception of this sort would ordinarily put a small-market player or borrower on the wrong end of a criminal investigation. So where are the inquiries into the false statements made by the bank CEOs? And where are the inquiries about the Fed and Treasury officials who stood by silently as bank representatives made claims that were false, misleading, or worse? Only now, because of superb analysis done by Bloomberg reporters—who litigated against the Fed and the banks for years to get the information—are we getting a full picture of the Fed and Treasury lending. The reporters also calculated that recipient banks and other borrowers benefited by approximately $13 billion simply by taking advantage of the “spread” between their cost of capital in these almost interest-free loans and their ability to lend the capital.

In addition to the secrecy, what is appalling is that these loans were made with no strings attached, no conditions, and no negotiation to achieve any broader public purpose. Even if one accepts the notion that the stability of the financial system could not be sacrificed, those who dispensed trillions of dollars to private parties made no apparent effort to impose even minimal obligations to condition the loans on the structural reforms needed to prevent another crisis, made no effort to require that those responsible for creating the crisis be relieved of their jobs, took zero steps towards the genuine mortgage-reform that is so necessary to begin a process of economic renewal. The dollars lent were simply a free bridge loan so the banks could push onto others the responsibility for the banks’ own risk-taking. If ever there was an event to justify the darkest, most conspiratorial view held by many that the alliance of big money on Wall Street and big government produces nothing but secret deals that profit insiders—this is it.

So what to do? The revelations of the secret loan program may provide the opportunity for Occupy Wall Street to suggest a few concrete steps that would be difficult to oppose.

First: Demand a hearing where the bank executives have to answer questions—under oath—about the actual negotiations, or lack thereof, that led to these loans; about the actual condition of each of the borrowing banks and whether that condition differed from the public statements made by the banks at the time.

Second: Require the recipient banks to use this previously undisclosed gift—the profit they made by investing this almost interest-free money—to write down the value of mortgages of those who are underwater. The loans to the banks were meant to solve a short-term liquidity problem, not be a source of profits to fund bonuses. Take back the profits and put them to apublic use.

Third: Require the government officials responsible for authorizing these loans to explain why there was no effort made to condition these loans on changes in policy that would protect the public going forward.

Fourth: Ask congress to examine every filing and statement made to Congress by the banks about their financial condition and their indebtedness to see if any misrepresentations were made in an effort to hide these trillions of dollars of loans. Misleading Congress can be a felony, and willful deception of the Congress to hide the magnitude of the public bailouts should not go unprosecuted.

Finally: Demand that politicians return all contributions made by the institutions that got hidden loans. Pressure the politicians who continue to feed from the trough of Wall Street, even as they know all too well how the banks and others have gamed the system and the public.

The Fed’s European “Rescue”: Another back-door US Bank / Goldman bailout?
by Nomi Prins /  November 30, 2011

In the wake of chopping its Central Bank swap rates today, the Fed has been called a bunch of names: a hero for slugging the big bailout bat in the ninth inning, and a villain for printing money to help Europe at the expense of the US. Neither depiction is right. The Fed is merely continuing its unfettered brand of bailout-economics, promoted with heightened intensity recently by President Obama and Treasury Secretary, Tim Geithner in the wake of Germany not playing bailout-ball.  Recall, a couple years ago, it was a uniquely American brand of BIG bailouts that the Fed adopted in creating $7.7 trillion of bank subsidies that ran the gamut from back-door AIG bailouts (some of which went to US / some to European banks that deal with those same US banks), to the purchasing of mortgage-backed–securities, to near zero-rate loans (for banks). Similarly, today’s move was also about protecting US banks from losses – self inflicted by dangerous derivatives-chain trades, again with each other, and with European banks. Before getting into the timing of the Fed’s god-father actions, let’s discuss its two kinds of swaps (jargon alert – a swap is a trade between two parties for some time period – you swap me a sweater for a hat because I’m cold, when I’m warmer, we’ll swap back). The Fed had both of these kinds of swaps set up and ready-to-go in the form of : dollar liquidity swap lines and foreign currency liquidity swap lines. Both are administered through Wall Street’s staunchest ally, and Tim Geithner’s old stomping ground, the New York Fed.

The dollar swap lines give foreign central banks the ability to borrow dollars against their currency, use them for whatever they want – like to shore up bets made by European banks that went wrong, and at a later date, return them. A ‘temporary dollar liquidity swap arrangement” with 14 foreign central banks was available between December 12, 2007 (several months before Bear Stearn’s collapse and 9 months before the Lehman Brothers’ bankruptcy that scared Goldman Sachs and Morgan Stanley into getting the Fed’s instant permission to become bank holding companies, and thus gain access to any Feds subsidies.) Those dollar-swap lines ended on February 1, 2010. BUT – three months later, they were back on, but this time the FOMC re-authorized dollar liquidity swap lines with only 5 central banks through January 2011. BUT – on December 21, 2010 – the FOMC extended the lines through August 1, 2011. THEN– on June 29th, 2011, these lines were extended through August 1, 2012.  AND NOW – though already available, they were announced with save-the-day fanfare as if they were just considered.

Then, there are the sneakily-dubbed “foreign currency liquidity swap” lines, which, as per the Fed’s own words, provide “foreign currency-denominated liquidity to US banks.” (Italics mine.) In other words, let US banks play with foreign bonds. These were originally used with 4 foreign banks on April, 2009  and expired on February 1, 2010. Until they were resurrected today, November 30, 2011, with foreign currency swap arrangements between the Fed, Bank of Canada, Bank of England, Bank of Japan. Swiss National Bank and the European Central Bank. They are to remain in place until February 1, 2013, longer than the original time period for which they were available during phase one of the global bank-led meltdown, the US phase. (For those following my work, we are in phase two of four, the European phase.) That’s a lot  of jargon, but keep these two things in mind: 1) these lines, by the Fed’s own words, are to provide help to US banks. and 2) they are open ended.

There are other reasons that have been thrown up as to why the Fed acted now – like, a European bank was about to fail. But, that rumor was around in the summer and nothing happened. Also, dozens of European banks have been downgraded, and several failed stress tests. Nothing. The Fed didn’t step in when it was just Greece –or Ireland  – or when there were rampant ‘contagion’ fears, and Italian bonds started trading above 7%, rising unabated despite the trick of former Goldman Sachs International advisor Mario Monti replacing former Prime Minister, Silvio Berlusconi’s with his promises of fiscally conservative actions (read: austerity measures) to come. Perhaps at that point, Goldman thought they had it all under control, but Germany’s bailout-resistence was still a thorn, which is why its bonds got hammered in the last auction, proving that big Finance will get what it wants, no matter how dirty it needs to play.  Nothing from the Fed, except a small increase in funding to the IMF. Rating agency Moody’s  announced it was looking at possibly downgrading 87 European banks. Still the Fed waited with open lines. And then, S&P downgraded the US banks again, including Goldman ,making their own financing costs more expensive and the funding of their seismic derivatives positions more tenuous. The Fed found the right moment. Bingo.

Now, consider this: the top four US banks (JPM Chase, Citibank, Bank of America and Goldman Sachs) control nearly 95% of the US derivatives market, which has grown by 20% since last year to  $235 trillion. That figure is a third of all global derivatives of $707 trillion (up from $601 trillion in December, 2010 and $583 trillion mid-year 2010. )

Breaking that down:  JPM Chase holds 11% of the world’s derivative exposure, Citibank, Bank of America, and Goldman comprise about 7% each. But, Goldman has something the others don’t – a lot fewer assets beneath its derivatives stockpile. It has 537 times as many (from 440 times last year) derivatives as assets. Think of a 537 story skyscraper on a one story see-saw. Goldman has $88 billon in assets, and $48 trillion in notional derivatives exposure. This is by FAR the highest ratio of derivatives to assets of any so-called bank backed by a government. The next highest ratio belongs to Citibank with $1.2 trillion in assets and $56 trillion in derivative exposure, or 46 to 1. JPM Chase’s ratio is 44 to 1. Bank of America’s ratio is 36 to 1. Separately Goldman happened to have lost a lot of money in Foreign Exchange derivative positions last quarter. (See Table 7.) Goldman’s loss was about equal to the total gains of the other banks, indicative of some very contrarian trade going on. In addition, Goldman has the most credit risk with respect to the capital  it holds, by a factor of 3 or 4 to 1 relative to the other big banks. So did the Fed’s timing have something to do with its star bank? We don’t really know for sure.

Sadly, until there’s another FED audit, or FOIA request, we’re not going to know which banks are the beneficiaries of the Fed’s most recent international largesse either, nor will we know what their specific exposures are to each other, or to various European banks, or which trades are going super-badly. But we do know from the US bailouts in phase one of the global meltdown, that providing ‘liquidity’ or ‘greasing the wheels of ‘ banks in times of ‘emergency’ does absolute nothing for the Main Street Economy. Not in the US. And not in Europe. It also doesn’t fix anything, it just funds bad trades with impunity.

As the World Crumbles: the ECB spins, FED smirks, and US Banks Pillage
by Nomi Prins / November 21, 2011

Often, when I troll around websites of entities like the ECB and IMF, I uncover little of startling note. They design it that way. Plus, the pace at which the global financial system can leverage bets, eviscerate capital, and cry for bank bailouts financed through austerity measures far exceeds the reporting timeliness of these bodies. That’s why, on the center of the ECB’s homepage, there’s a series of last week’s rates – and this relic – an interactive Inflation Game (I kid you not)  where in 22 different languages you can play the game of what happens when inflation goes up and down. If you’re feeling more adventurous, there’s also a game called Economia, where you can make up unemployment rates, growth rates and interest rates and see what happens. What you can’t do is see what happens if you bet trillions of dollars against various countries to see how much you can break them, before the ECB, IMF, or Fed (yes, it’ll happen) swoops in to provide “emergency” loans in return for cuts to pension funds, social programs, and national ownership of public assets. You also can’t input real world scenarios, where monetary policy doesn’t mean a thing in the face of  tidal waves of derivatives’ flow. You can’t gauge say, what happens if Goldman Sachs bets $20 billion in leveraged credit default swaps against Greece, and offsets them (partially) with JPM Chase which bets $20 billion, and offsets that with Bank of America, and then MF Global (oops) and then… see where I’m going with this.

We’re doomed if even their board games don’t come close to mimicking the real situation in Europe, or in the US, yet they supply funds to banks torpedoing local populations with impunity. These central entities also don’t bother to examine (or notice) the intermingled effect of leveraged derivatives and debt transactions per country; which is why no amount of funding from the ECB, or any other body, will be able to stay ahead of the hot money racing in and out of various countries.  It’s not about inflation – it’s about the speed, leverage, and daring of capital flow, that has its own power to select winners and losers. It’s not the ‘inherent’ weakness of national economies that a few years ago were doing fine, that’s hurting the euro. It’s the external bets on their success, failure, or economic capitulation running the show. Similarly, the US economy was doing much better before banks starting leveraging the hell out of our subprime market through a series of toxic, fraudulent, assets.

Elsewhere in my trolling, I came across a gem of a working paper on the IMF website, written by Ashoka Mody and Damiano Sandri,  entitled ‘The Eurozone Crisis; How Banks and Sovereigns Came to be Joined at the Hip” (The paper does not ‘necessarily represent the views of the IMF or IMF policy’.) The paper is full of mathematical formulas and statistical jargon, which may be why the media didn’t pick up on it, but hey, I got a couple of degrees in Mathematics and Statistics, so I went all out.  And it’s fascinating stuff. Basically, it shows that between the advent of the euro in 1999, and 2007, spreads between the bonds of peripheral countries and core ones in Europe were pretty stable. In other words, the risk of any country defaulting on its debt was fairly equal, and small. But after the 2007 US subprime asset crisis, and more specifically, the advent of  Federal Reserve / Treasury Department construed bailout-economics, all hell broke loose – international capital went AWOL daring default scenarios, targeting them for future bailouts, and when money leaves a country faster than it entered, the country tends to falter economically. The cycle is set.

The US subprime crisis wasn’t so much about people defaulting on loans, but the mega-magnified effects of those defaults on a $14 trillion asset pyramid created by the banks. (Those assets were subsequently sold, and used as collateral for other borrowing and esoteric derivatives combinations, to create a global $140 trillion debt binge.) As I detail in It Takes Pillage, the biggest US banks manufactured more than 75% of those $14 trillion of assets. A significant portion was sold in Europe – to local banks, municipalities, and pension funds – as lovely AAA morsels against which more debt, or leverage, could be incurred. And even thought the assets died, the debts remained.

Greek banks bought US-minted AAA assets and leveraged them. Norway did too (through the course of working on a Norwegian documentary, I discovered that 8 tiny towns in Norway bought $200 million of junk assets from Citigroup, borrowed money from local banks to pay for them, and pledged 10 years of power receipts from hydroelectric plants in return. The AAA assets are now worth zero, the power has been curtailed for residents, and the Norwegian banks want their money back–blood from a stone.) The same kind of thing happend in Italy, Spain, Portugal, Ireland, Holland, France, and even Germany – in different degrees and with specific national issues mixed in.  Problem is – when you’ve already used worthless collateral to borrow tons of money you won’t ever be able to repay, and international capital slams you in other ways, and your funding costs rise, and your internal development and lending seize up, you’re screwed – or rather the people in your country are screwed.

In the IMF paper, the authors convincingly make the case that it wasn’t just the US subprime asset meltdown itself that initiated Europe’s implosion, but the fact that our Federal Reserve and Treasury Department adopted a reckless don’t-let-em-fail doctrine. Even though Bear Stearns and Lehman Brothers failed, their investors, the huge ones anyway, were protected. The Fed subsidized, and still subsidizes, $29 billion of risk for JPM Chase’s acquisition of Bear. The philosophy of saving banks and their practices poisoned Europe, as those same financial firms played euro-roulette in the global derivatives markets, once the subprime betting train slowed down.

The first fatal stop of the US bailout mentaility was the ECB’s 2010 bailout of Anglo Irish bank, which got the lion’s share of the ECB’s Irish-bailout: $51 billion euro of ELA (Emergency Loan Assistance) and $100 billion euro of regular lending at the time. After the international financial community saw the pace and volume of Irish bank bailouts, the game of euro-roulette went turbo, country by country.  More ‘fiscally conservative’ governments are replacing any semblance of population-supportive ones. The practice of  extracting ‘fiscal prudency’ from people and providing bank subsidies for bets gone wrong has infected all of Europe. It will continue to do so, because anything less will threathen the entire Euro experiement, plus otherwise, the US banks might be on the hook again for losses, and the Fed and Treasury won’t let that happen. They’ve already demonstrated that. It’d be just sooo catastrophic.

In the wings, the smugness of Treasury Secretary Tim Geithner and Fed Chairman, Ben Bernanke is palpable – ‘hey, we acted heroically and “decisively” to provide a multi-trillion dollar smorgasbord  of subsidies for our biggest banks and look how great we  (er, they) are doing now? Seriously, Europe – get your act together already, don’t do the trickle-bailout game – just dump a boatload of money into the same banks – and a few of your own before they go under  – do it for the sake of global economic stability. It’ll really work. Trust us.’ Most of the media goes along with the notion that US banks exposed to the ‘euro-contagion’ will hurt our (nonexistent) recovery. US Banks assure us, they don’t have much exposure – it’s all hedged. (Like it was all AAA.) The press doesn’t tend to question the global harm caused by never having smacked US banks into place, cutting off their money supply, splitting them into commercial and speculative parts ala Glass-Steagall and letting the speculative parts that should have died, die, rather than enjoy public subsidization and the ability to go globe-hopping for more destructive opportunity, alongside some of the mega-global bank partners.

Today, the stock prices of the largest US banks are about as low as they were in the early part of 2009, not because of euro-contagion or Super-committee super-incompetence (a useless distraction anyway) but because of the ongoing transparency void surrouding the biggest banks amidst their central-bank-covered risks, and the political hot potato of how many emergency loans are required to keep them afloat at any given moment.  Because investors don’t know their true exposures, any more than in early 2009. Because US banks catalyzed the global crisis that is currently manifesting itself in Europe. Because there never was a separate US housing crisis and European debt crisis. Instead, there is a worldwide, systemic, unregulated, uncontained,  rapacious need for the most powerful banks and financial institutions to leverage whatever could be leveraged in whatever forms it could be leveraged in. So, now we’re just barely in the second quarter of the game of thrones, where the big banks are the kings, the ECB, IMF and the Fed are the money supply, and the populations are the powerless serfs. Yeah, let’s play the ECB inflation game, while the world crumbles.

Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress
by Bob Ivry, Bradley Keoun and Phil Kuntz   /  Nov 27, 2011

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing. The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue. Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse. A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.

‘Change Their Votes’
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.” The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open. The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.

$7.77 Trillion
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year. “TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.” Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.

‘Motivate Others’
JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation. Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment. The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.

‘Core Function’
“Supporting financial-market stability in times of extreme market stress is a core function of central banks,” says William B. English, director of the Fed’s Division of Monetary Affairs. “Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.” The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland. The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view. The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.

Big Six
The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment. The six — JPMorgan, Bank of America, Citigroup Inc. (C)Wells Fargo & Co. (WFC)Goldman Sachs Group Inc. (GS) and Morgan Stanley — accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.

Bank Supervision
While the emergency response prevented financial collapse, the Fed shouldn’t have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the “supervision of the banks prior to the crisis was far worse than we had imagined,” Rosner says. Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.” On Jan. 14, 2009, six days before the company’s central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup’s financial strength to be “superficial,” bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis.

‘Need Transparency’
Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup. “I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,” says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee. Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark. “We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs. “We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”

Disclose Lending
Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial-industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival. It would have been “totally appropriate” to disclose the lending data by mid-2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank. “The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we’re dealing with a democracy,” Jones says. “Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.” The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag.

Protecting TARP
TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says. “Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says. Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.

No Clue
Lawmakers knew none of this. They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible. Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs. Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.

Moral Hazard
Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard — the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers. If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks. Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking. “Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.

Getting Bigger
Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble. Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data. For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.” Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.

‘Wanted to Pretend’
“The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out,” says Anil Kashyap, a former Fed economist who’s now a professor of economics at the University of Chicago Booth School of Business. “They shouldn’t be surprised that a lot of people find some of the stuff that happened totally outrageous.” Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America’s loans had reached $25 billion and Merrill Lynch’s had exceeded $60 billion, helping both firms keep the deal on track.

Prevent Collapse
Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase. “These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo. JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms.

‘Regulatory Discretion’
“Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,” says John Dearie, a former speechwriter at the New York Fed who’s now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world’s biggest financial firms. “The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.” The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms. “When a few banks have advantages, the little guys get squeezed,” Brown says. “That, to me, is not what capitalism should be.” Kaufman says he’s passionate about curbing too-big-to-fail banks because he fears another crisis.

‘Can We Survive?’
“The amount of pain that people, through no fault of their own, had to endure — and the prospect of putting them through it again — is appalling,” Kaufman says. “The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?” Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up — a gain of 33 percent, according to, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, reported. Lobbyists argued the virtues of bigger banks. They’re more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause “long-term damage to the U.S. economy,” according to a Nov. 13, 2009, letter to members of Congress from the FSF. The group’s website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies.

‘Serious Burden’
In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks.  “The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,” Williamson says. “The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.” Dearie says his group didn’t mean to imply that Williamson endorsed big banks. Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.

Geithner, Kaufman
On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission. At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman. Anthony Coley, a spokesman for Geithner, declined to comment.

‘Punishing Success’
Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says. The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn’t take a position on whether large banks should be dismantled before they get into trouble. Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner. “Dodd-Frank does not solve the problem of too big to fail,” says Shelby, the Alabama Republican. “Moral hazard and taxpayer exposure still very much exist.”

Below Market
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks “were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter — getting loans at below-market rates during a financial crisis — is quite a gift.” The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg. The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest. Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans.

Added Income
The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show. The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion. “The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” says Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia. While the method isn’t perfect, it’s impossible to state the banks’ exact profits or savings from their Fed loans because the numbers aren’t disclosed and there isn’t enough publicly available data to figure it out. Opinsky, the JPMorgan spokesman, says he doesn’t think the calculation is fair because “in all likelihood, such funds were likely invested in very short-term investments,” which typically bring lower returns.

Standing Access
Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank’s money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed. “Banks don’t give lines of credit to corporations for free,” he says. “Why should all these government guarantees and liquidity facilities be for free?” In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, “unemployment would rise — to 8 or 9 percent from the prevailing 6.1 percent,” Paulson wrote in “On the Brink” (Business Plus, 2010).

Occupy Wall Street
The U.S. jobless rate hasn’t dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California. The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor. “The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”

In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world’s largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries. They take full effect in 2019. Meanwhile, Kaufman says, “we’re absolutely, totally, 100 percent not prepared for another financial crisis.”


{Lehman still existed in 2007 dataset used}
The network of global corporate control
by Stefania Vitali, James B. Glattfelder & Stefano Battisto
28 Jul 2011 (v1), last revised 19 Sep 2011 (this version, v2)

“The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.”

The 1318 transnational corporations that form the core of the economy. Superconnected companies are red, very connected companies are yellow. The size of the dot represents revenue (Image: PLoS One)

a SUPER-ENTITY–the-capitalist-network-that-runs-the-world.html
Revealed – the capitalist network that runs the world
by Andy Coghlan and Debora MacKenzie / 19 October 2011

AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters’ worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy. The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.

The idea that a few bankers control a large chunk of the global economy might not seem like news to New York’s Occupy Wall Street movement and protesters elsewhere. But the study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world’s transnational corporations (TNCs). “Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder. “Our analysis is reality-based.” Previous studies have found that a few TNCs own large chunks of the world’s economy, but they included only a limited number of companies and omitted indirect ownerships, so could not say how this affected the global economy – whether it made it more or less stable, for instance.

The Zurich team can. From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs and the share ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company’s operating revenues, to map the structure of economic power. The work, to be published in PloS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues.

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

John Driffill of the University of London, a macroeconomics expert, says the value of the analysis is not just to see if a small number of people controls the global economy, but rather its insights into economic stability. Concentration of power is not good or bad in itself, says the Zurich team, but the core’s tight interconnections could be. As the world learned in 2008, such networks are unstable. “If one [company] suffers distress,” says Glattfelder, “this propagates.” “It’s disconcerting to see how connected things really are,” agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank.

Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system’s behaviour, he says, requires more analysis. Crucially, by identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Bar-Yam says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk. One thing won’t chime with some of the protesters’ claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. “Such structures are common in nature,” says Sugihara.

Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, “is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups”. Or as Braha puts it: “The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy.” So, the super-entity may not result from conspiracy. The real question, says the Zurich team, is whether it can exert concerted political power. Driffill feels 147 is too many to sustain collusion. Braha suspects they will compete in the market but act together on common interests. Resisting changes to the network structure may be one such common interest.

The top 50 of the 147 superconnected companies
1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
4. AXA
5. State Street Corporation
6. JP Morgan Chase & Co
7. Legal & General Group plc
8. Vanguard Group Inc
10. Merrill Lynch & Co Inc
11. Wellington Management Co LLP
12. Deutsche Bank AG
13. Franklin Resources Inc
14. Credit Suisse Group
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp
17. Natixis
18. Goldman Sachs Group Inc
19. T Rowe Price Group Inc
20. Legg Mason Inc
21. Morgan Stanley
22. Mitsubishi UFJ Financial Group Inc
23. Northern Trust Corporation
24. Société Générale
25. Bank of America Corporation
26. Lloyds TSB Group plc
27. Invesco plc
28. Allianz SE 29. TIAA
30. Old Mutual Public Limited Company
31. Aviva plc
32. Schroders plc
33. Dodge & Cox
34. Lehman Brothers Holdings Inc*
35. Sun Life Financial Inc
36. Standard Life plc
37. CNCE
38. Nomura Holdings Inc
39. The Depository Trust Company
40. Massachusetts Mutual Life Insurance
41. ING Groep NV
42. Brandes Investment Partners LP
43. Unicredito Italiano SPA
44. Deposit Insurance Corporation of Japan
45. Vereniging Aegon
46. BNP Paribas
47. Affiliated Managers Group Inc
48. Resona Holdings Inc
49. Capital Group International Inc
50. China Petrochemical Group Company

* Lehman still existed in the 2007 dataset used
Ownership Ties Among Global Corporations Strangely Resemble a Bow Tie
by Sophie Bushwick / August 8, 2011

Large international corporations can control a wide variety of smaller companies. For example, Scientific American is a publication of Nature Publishing Group, which is a subsidiary of the Georg Von Holtzbrinck Publishing Group in Germany. This group also owns a number of other publishers in the U.S., United Kingdom, and Germany, a pyramid that includes American suspense thrillers, British textbooks, a German weekly newspaper and more. But corporate pyramids like that of the Von Holtzbrinck Publishing Group do not stand alone: The web of relationships among companies is tangled and complex, as a July 28 paper published to pre-print reveals.

A team of ETH Zurich (Swiss Federal Institute of Technology Zurich) researchers used a network model to map the ownership relations among more than 43,000 transnational corporations, which do not identify themselves with one country but rather use a global perspective and employ an international roster of executives. Owning shares in a company grants the owner some direct control of that entity, and indirect control of any companies in the parent-company’s pyramid. By treating each major corporation as a node and drawing links between companies that owned shares of others, the researchers uncovered the tendrils of control that link one pyramid to another.

The links between nodes, shown above, represent influence that can flow two ways: any corporation could either influence or be influenced by any other corporation. Directly owning shares of a company gave a corporation more influence than indirect ownership, and the researchers assigned their links certain weights to reflect this difference. At first glance, the picture that emerged looks quite convoluted. However, the researchers discovered that the web of connections clustered into four different components that took the shape of a bow tie. In the illustration, red dots represent nodes, green arrows point from share-owner to the owned company, and the flow of control points in the direction of the most power.

The researchers observed a central cluster in which influence goes both ways between all the nodes, called the strongly connected component, or SCC, as shown above. Within the SCC, each member either directly or indirectly owns some of every other member’s shares. Second, there was the in group, companies that owned shares in various members of the SCC, but were not under the SCC’s influence: Influence “flowed” in but not out. Part three was the in-group’s opposite, the companies who were influenced by, but did not own shares in, the SCC companies—this became the out group. Finally, the fourth component of the network consists of the tubes and tendrils, or T&T, companies that remain separate from the SCC but may have ties to members of the in or out groups. The above illustration actually represents a generic version of a bow tie network, a category of network that can also be used to describe how Web pages are related. The researchers found that the corporate network looked more like the illustration below, which shows that the out group is much larger than the in group or even the SCC.

Only the tiny, elite in group gets to influence the SCC core without submitting to its influence at all. A significant amount of the corporations, however, still fall into the central strongly connected component, which indicates that many of the major market players have complex economic relationships with one another. “What are the implications for global financial stability?” said the researchers in their paper. “What are the implications for market competition?” The study may not have uncovered a corporate conspiracy, but it does show that corporations are not lone behemoths: They are inter-dependent and influence one another a great deal. Applying a scientific model to the market can help provide a clearer picture of how the world economy runs. And perhaps a hint at what our corporate overlords are wearing.

Image credit: Stefano Battiston et al., ETH Zurich (Swiss Federal Institute of Technology Zurich)

Who are the 1% and What Do They Do for a Living?
by Mike Konczal / 10/14/2011
There’s good reason to focus on the top 1%: they’re distorting our economy.

A lot of emphasis is on the “99%” versus the “1%” in these protests. But who are the 1% and what do they do for a living? Are they all Wilt Chamberlains and Oprahs and other people taking part in the dynamism of the new economy? Nope. It’s same as it ever was — high-level management and the financial sector. Suzy Khimm goes through the numbers here. I’m curious about occupations. I’ll hand the mic off to “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data“ by Bakija, Cole, and Heim. This is the latest and greatest report on occupations and inequality. Here’s a chart of the occupations of the top 1%:


Inequality has fractals. Let’s go into the top 0.1% — what do they look like?  Here’s the chart of the occupations of the top 0.1%, including capital gains:

It boils down to managers, executives, and people who work in finance. From the paper: “[o]ur findings suggest that the incomes of executives, managers, supervisors, and financial professionals can account for 60 percent of the increase in the share of national income going to the top percentile of the income distribution between 1979 and 2005.”

For fun, there are more than twice as many people listed as “Not working or deceased” than are in “arts, media, sports.” For every elite sports player who earned a place at the top of the income pyramid due to technology changes and superstar, tournament-style labor markets that broadcast him across the globe, there are two trust fund babies.

The top 1% of managers and executives often means C-level employees, especially CEOs. And their earnings versus the average worker have skyrocketed in the past 30 years, so this shouldn’t be surprising:



How has this evolved over time?  Can we get a cross-section of that protest sign above?

Same candidates. There’s a reason the protests ended up on Wall Street: The top 1% and top 0.1% comprises all the senior bosses and the financial sector. One of the best things about Occupy Wall Street is that there is no chatter about Obama or Perry or whatever is the electoral political issue of the day. There are a lot of people rethinking things, discussing, learning, and conceptualizing the kinds of world they want to create. Since so much about inequality is a function of the legal structure known as a “corporation,” I’d encourage you to check out Alex Gourevitch on how the corporate is structured in our laws.

The paper notes that stock market returns drive much of the manager’s income. This is related to a process of financialization, something JW Mason has done a fantastic job outlining here. The “dominant ethos among managers today is that a business exists only to enrich its shareholders, including, of course, senior managers themselves,” and this is done by paying out more in dividends that is earned in profits. Think of it as our-real-economy-as-ATM-machine, cashing out wealth during the good times and then leaving workers and the rest of the real economy to deal with the aftermath.

Both articles mention chapter 6 of Doug Henwood’s Wall Street; anyone interested in how things have changed and where they need to go would be wise to check it out. It’s even available for free pdf book download here.

There’s good reason to focus on the top 1% instead of the top 10 or 50%. There is evidence that financial pay at this elite level is correlated with deregulation and the other legal changes that brought on the crisis. High-ranking senior corporate executives’ pay has dwarfed workers’ salaries, but is only a reward for engaging in shady financial engineering practices. These problems require a legal solution and thus they require a democratic challenge and a rethinking of how we want to structure our economy. Here’s to the 99% and Occupy Wall Street helping get us there.

{Mike Konczal is a Fellow at the Roosevelt Institute.}


STATE STREET!ut/p/c4/04_SB8K8xLLM9MSSzPy8xBz9CP0os3i_0CADCydDRwP_IGdnA08Tc38fINvY3dFEPzg1Lz40WL8g21ERABezIio!/



The Large Families that rule the world / 18.10.2011

We are speaking of 6, 8 or maybe 12 families who truly dominate the world. Know that it is a mystery difficult to unravel. But what are the names of the families who run the world and have control of states and international organizations like the UN, NATO or the IMF?

To try to answer this question, we can start with the easiest: inventory, the world’s largest banks, and see who the shareholders are and who make the decisions. The world’s largest companies are now: Bank of America, JP Morgan, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley. Let us now review who their shareholders are.

Bank of America:
State Street Corporation, Vanguard Group, BlackRock, FMR (Fidelity), Paulson, JP Morgan, T. Rowe, Capital World Investors, AXA, Bank of NY, Mellon.

JP Morgan:
State Street Corp., Vanguard Group, FMR, BlackRock, T. Rowe, AXA, Capital World Investor, Capital Research Global Investor, Northern Trust Corp. and Bank of Mellon.

State Street Corporation, Vanguard Group, BlackRock, Paulson, FMR, Capital World Investor, JP Morgan, Northern Trust Corporation, Fairhome Capital Mgmt and Bank of NY Mellon.

Wells Fargo:
Berkshire Hathaway, FMR, State Street, Vanguard Group, Capital World Investors, BlackRock, Wellington Mgmt, AXA, T. Rowe and Davis Selected Advisers.

We can see that now there appears to be a nucleus present in all banks: State Street Corporation, Vanguard Group, BlackRock and FMR (Fidelity). To avoid repeating them, we will now call them the “big four”

Goldman Sachs:
“The big four,” Wellington, Capital World Investors, AXA, Massachusetts Financial Service and T. Rowe.

Morgan Stanley:
“The big four,” Mitsubishi UFJ, Franklin Resources, AXA, T. Rowe, Bank of NY Mellon e Jennison Associates. Rowe, Bank of NY Mellon and Jennison Associates.

We can just about always verify the names of major shareholders. To go further, we can now try to find out the shareholders of these companies and shareholders of major banks worldwide.

Bank of NY Mellon:
Davis Selected, Massachusetts Financial Services, Capital Research Global Investor, Dodge, Cox, Southeatern Asset Mgmt. and … “The big four.”

State Street Corporation (one of the “big four”):
Massachusetts Financial Services, Capital Research Global Investor, Barrow Hanley, GE, Putnam Investment and … The “big four” (shareholders themselves!).

BlackRock (another of the “big four”):
PNC, Barclays e CIC.

Who is behind the PNC? FMR (Fidelity), BlackRock, State Street, etc. And behind Barclays? BlackRock

And we could go on for hours, passing by tax havens in the Cayman Islands, Monaco or the legal domicile of Shell companies in Liechtenstein. A network where companies are always the same, but never a name of a family.

In short: the eight largest U.S. financial companies (JP Morgan, Wells Fargo, Bank of America, Citigroup, Goldman Sachs, U.S. Bancorp, Bank of New York Mellon and Morgan Stanley) are 100% controlled by ten shareholders and we have four companies always present in all decisions: BlackRock, State Street, Vanguard and Fidelity.

In addition, the Federal Reserve is comprised of 12 banks, represented by a board of seven people, which comprises representatives of the “big four,” which in turn are present in all other entities.

In short, the Federal Reserve is controlled by four large private companies: BlackRock, State Street, Vanguard and Fidelity. These companies control U.S. monetary policy (and world) without any control or “democratic” choice. These companies launched and participated in the current worldwide economic crisis and managed to become even more enriched.

To finish, a look at some of the companies controlled by this “big four” group:
Alcoa Inc.
Altria Group Inc.
American International Group Inc.
AT&T Inc.
Boeing Co.
Caterpillar Inc.
Coca-Cola Co.
DuPont & Co.
Exxon Mobil Corp.
General Electric Co.
General Motors Corporation
Hewlett-Packard Co.
Home Depot Inc.
Honeywell International Inc.
Intel Corp.
International Business Machines Corp
Johnson & Johnson
JP Morgan Chase & Co.
McDonald’s Corp.
Merck & Co. Inc.
Microsoft Corp.
3M Co.
Pfizer Inc.
Procter & Gamble Co.
United Technologies Corp.
Verizon Communications Inc.
Wal-Mart Stores Inc.
Time Warner
Walt Disney
Rupert Murdoch’s News Corporation.,
CBS Corporation
NBC Universal

The same “big four” control the vast majority of European companies counted on the stock exchange. In addition, all these people run the large financial institutions, such as the IMF, the European Central Bank or the World Bank, and were “trained” and remain “employees” of the “big four” that formed them. The names of the families that control the “big four”, never appear.

{Translated from the Portuguese version by Lisa Karpova / Pravda.Ru}

“A Libyan rebel fighter smokes a cigarette next to an improvised multiple rocket launcher in the back of a pickup truck, as the rebels prepare to make an advance, in the desert on the outskirts of Ajdabiya, on April 14.” (AP Photo/Ben Curtis)”

Libyan Rebel Council Forms Central Bank to Replace Qaddafi’s
by Bill Varner  /  Mar 22, 2011

Libyan rebels in Benghazi said they have created a new national oil company to replace the corporation controlled by leader Muammar Qaddafi whose assets were frozen by the United Nations Security Council. The Transitional National Council released a statement announcing the decision made at a March 19 meeting to establish the “Libyan Oil Company as supervisory authority on oil production and policies in the country, based temporarily in Benghazi, and the appointment of an interim director general” of the company.

The Council also said it “designated the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and the appointment of a governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.” The Security Council adopted a resolution on March 17 that froze the foreign assets of the Libyan National Oil Corp. and the Central Bank of Libya, both described in the text as “a potential source of funding” for Qaddafi’s regime.

Libya holds Africa’s largest oil reserve. Output has fallen to fewer than 400,000 barrels a day, Shokri Ghanem, chairman of the National Oil Corp., said on March 19. The country produced 1.59 million barrels a day in January, according to estimates compiled by Bloomberg. Exports may be halted for “many months” because of sanctions and unrest, the International Energy Agency said. Brent crude for May settlement on the London-based ICE Futures Europe exchange fell 0.3 percent to $114.62 as of 8:50 a.m. It surged to a 2 1/2-year high of $119.79 on Feb 24 as geopolitical tensions spread throughout the Middle East and North Africa. The European benchmark will average $109 a barrel this year, up from a previous forecast of $98, on expectations of an “extended shutdown” of Libyan oil supplies, Societe Generale SA said in a monthly review dated yesterday.

The statement by the Transitional National Council also said the rebels would “urgently prepare a file on the referral of Qaddafi and his gang and his associates involved in the killing of Libyans to the International Criminal Court.” The Security Council referred allegations of human rights violations by the Qaddafi regime to the court in a resolution adopted on Feb. 26. The statement said the council would begin choosing ambassadors to foreign countries. The UN said yesterday that Deputy Ambassador Ibrahim Dabbashi, who broke with the regime last month and said he was then representing the rebels, was no longer Libya’s accredited ambassador. Ambassador Mohammed Shalgham, who also broke with the regime, similarly lost his accreditation when Qaddafi appointed former UN General Assembly President Abdussalam Treki as envoy to the world body. Treki hasn’t presented his credentials yet to Secretary- General Ban Ki-moon, a prerequisite for officials taking the post.

“A convoy of Libyan rebels deploy around the western gate of Ajdabiya on April 19.” (AP Photo/Nasser Nasser)


the Interim Transitional National Council

“Meeting Outcomes of the Interim National Council held on 19 March 2011 BENGHAZI, LIBYA – The Interim National Council met on Saturday, 19 March 2011, and discussed a number of important national issues on the current circumstances of the country and the importance of taking necessary actions. The outcome of the meeting is summarized as follows:

First: The Council discussed all the developments on the ground, including the crimes committed by the Qadhafi regime against the Libyan people the Libyan people as well as the report submitted on the implementation of Security Council Resolutions 1970 and 1973 decided accordingly the following:

1-      To welcome the mentioned resolutions and urge the international community to expedite the initiative to implement the resolutions in order to protect the Libyan people and assist them in achieving the legitimate demand.

2-      To call upon the Libyans throughout the country to be cautions and to continue to demonstrate peacefully in order to achieve their legitimate demands by going out to the streets and peaceful sit-ins, particularly after the international community ensured the protection of Libyan civilians in accordance with Resolution 1973 and demanding the international community to ensure the safety of Libyan civilians.

3-      To urgently prepare a file on the referral of Qadhafi, his gang and his associates involved in killing of Libyans, to the international Criminal Court and entrusting a technical and legal team to complete the procedures.

4-      To intensify contacts with brotherly and friendly countries for the recognition of the Transitional National Council and welcome the positive response of many countries to deal with the Transitional National Council and urge other nations to an early recognition of the Council and urge other nations to an early recognition of the Council as the sole legitimate representative of Libyan People.

5-      To choose a number of ambassadors and representatives of Libya to foreign countries, according to proposal submitted by Foreign Affairs submitted for approval.

Second: The Designation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.

Third: The establishment of Libyan Oil Company as supervisory Authority on oil production and policies in the country, based temporarily in Benghazi and appointment of an interim Director-General for the Libyan Oil Company.”

“A rebel fighter rests on a weapon mounted on the back of a pickup truck on the front line between them and Muammar el-Qaddafi forces, 30 km south of Misurata, on May 27.” (AP Photo/Rodrigo Abd


As analysts debate possible motives behind President Obama’s United Nations-backed military intervention in Libya, one angle that has received attention in recent days is the rebels’ seemingly odd decision to establish a new central bank to replace dictator Muammar Gadhafi’s state-owned monetary authority — possibly the first time in history that revolutionaries have taken time out from an ongoing life-and-death battle to create such an institution, according to observers. In a statement released last week, the rebels reported on the results of a meeting held on March 19. Among other things, the supposed rag-tag revolutionaries announced the “[d]esignation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.”

The Gadhafi regime’s central bank — unlike the U.S. Federal Reserve, which is owned by private shareholders — was among the few central banks in the world that was entirely state-owned. At the moment, it is unclear exactly who owns the rebel’s central bank or how it will be governed. The so-called Interim Transitional National Council, the rebels’ self-appointed new government for Libya purporting to be the “sole legitimate representative of Libyan People,” also trumpeted the creation of a new “Libyan Oil Company” based in the rebel stronghold city of Benghazi. The North African nation, of course, has the continent’s largest proven oil reserves. The U.S. government and the U.N. have both recently announced that the rebels would be free to sell oil under their control — if they do it without Gaddafi’s National Oil Corporation. And the first shipments are set to start next week, according to news reports citing a spokesman for the rebels.

But the creation of a new central bank, even more so than the new national oil regime, left analysts scratching their heads. “I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising,” noted Robert Wenzel in an analysis for the Economic Policy Journal. “This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.” Wenzel also noted that the uprising looked like a “major oil and money play, with the true disaffected rebels being used as puppets and cover” while the transfer of control over money and oil supplies takes place. And other analysts agreed. A popular blog called The Economic Collapse used sarcasm to express suspicions about the strange rebel announcement. “Perhaps when this conflict is over those rebels can become time management consultants. They sure do get a lot done,” joked the piece, entitled “Wow That Was Fast! Libyan Rebels Have Already Established A New Central Bank Of Libya.” The blog also commented, sarcastically again, on the possibility of outside involvement. “What a skilled bunch of rebels — they can fight a war during the day and draw up a new central bank and a new national oil company at night without any outside help whatsoever. If only the rest of us were so versatile! … Apparently someone felt that it was very important to get pesky matters such as control of the banks and control of the money supply out of the way even before a new government is formed,” read the piece.

Even mainstream news outlets were puzzled. “Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power?” wondered CNBC senior editor John Carney. “It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.” But some observers are convinced that the central bank issue was actually the primary motivation for the international war against Libya‘s dictatorship. In an article that has spread far and wide across the web, entitled “Globalists Target 100% State Owned Central Bank of Libya,” author Eric Encina maintains that the world’s “globalist financiers and market manipulators” could not stand the Libyan monetary authority’s independence, explaining:

Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability. Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations. And when Gadhafi is gone and the dust has settled, according to Encina, “you will see the Allied reformers move in to reform Libya’s monetary system, pumping it full of worthless dollars, priming it for a series of chaotic inflationary cycles.” The future of Libya’s vast gold stockpiles could also be in jeopardy, he noted.

Numerous other analysts and experts have also pointed to the central banking issue as one of the top factors leading up to the Western backing of Libyan rebels. Monetary historian Andrew Gause, for example, recently shared his concerns about the matter publicly. Other points made in the rebels’ odd announcement last week included preparations to send Gadhafi to the U.N.’s International Criminal Court for trial, the selection of diplomats to send abroad, and the desire for other governments to recognize the Transitional National Council as the legitimate new rulers of Libya. France has already done so, and other governments may soon follow suit.

Of course, the U.S. government claims to have very little knowledge about who the rebels actually are. But the U.S. Commander of NATO forces recently admitted to the Senate that hints of al Qaeda involvement have been detected among the rebels. The terror group was created, armed, funded, and trained by the U.S. government decades ago, as Secretary of State Hillary Clinton admitted even recently. But since then, it has targeted American embassies and other U.S. targets. As The New American reported over the weekend, elements of al Qaeda and affiliated terror groups are indeed among the leadership of the revolution. But despite that fact, the U.S. government and the international coalition are providing air support and weapons for the new central-bank-creating rebels. Where the conflict goes from here is uncertain, but Western regimes have vowed not to let Gaddafi remain in power.

“A rebel poses with an armful of rocket-propelled grenades taken from an armored personnel carrier captured from forces loyal to Libyan leader Muammar el-Qaddafi on the outskirts of the town of Zliten, west of the rebel-held port city of Misurata, on June 10.” (Reuters/Abdelkader Belhessin)


July 16 (Bloomberg) — Muammer Qaddafi has at least $100 billion of assets abroad and Libya’s Transitional National Council expects a portion of the frozen funds to be released or to obtain borrowing against them. “To be safe we’re saying there’s over $100 billion,” spokesman Mahmoud Shammam said today by telephone from Istanbul, where the U.S. and its allies recognized the council as the sole legitimate governing authority in Libya at a meeting yesterday. “We need some necessity expenses and to get loans against a percentage.” The council requires $3 billion over six months to cover the budget and expects to get a $100 million loan from Turkey in the next three days, Shammam said. Kuwait has pledged $180 million, while Italy and other governments said yesterday that Libyan assets held by their countries “will be released or we’ll get loans against them,” he said. The TNC is saying the unfrozen funds won’t be spent, rather used as collateral to cover borrowing until an elected government is in place, Shammam said.

Seeking to free funds, U.S. recognizes Libya rebels
by Andrew Quinn / Jul 15, 2011

(Reuters) – The United States Friday recognized Libya’s rebel National Transitional Council (TNC) as a legitimate government, a diplomatic boost which could unlock billions of dollars in frozen assets. U.S. Secretary of State Hillary Clinton said Washington would extend formal recognition to the Benghazi-based TNC until a fully representational interim government can be established. “The TNC has offered important assurances today, including the promise to pursue a process of democratic reform that is inclusive both geographically and politically,” Clinton said in prepared remarks. “Until an interim authority is in place, the United States will recognize the TNC as the legitimate governing authority for Libya, and we will deal with it on that basis.”

Clinton’s announcement came as the Libya Contact Group, meeting in Istanbul, formally recognized the opposition as the representative of the Libyan people — sealing its diplomatic status as the successor government to embattled leader Muammar Gaddafi. The contact group, made up of more than 30 governments and international and regional organizations, also authorized U.N. special envoy Abdul Elah Al-Khatib to present terms for Gaddafi to leave power in a political package that will include a ceasefire to halt fighting in the civil war. Clinton said any deal “must involve Gaddafi’s departure” from power and a halt to violence. “Increasingly the people of Libya are looking past Gaddafi. They know, as we all know, that it is no longer a question of whether Gaddafi will leave power, but when,” she said. U.S. officials said the decision on formal diplomatic recognition marked an important step toward unblocking more than $34 billion in Libyan assets in the United States but cautioned it could still take time to get funds flowing to the cash-strapped Benghazi council. “We expect this step on recognition will enable the TNC to access additional sources of funding,” Clinton told reporters after the meeting, saying Washington would discuss with allies “the most effective and appropriate method” to do this. They also said no decisions had been made on upgrading U.S. representation in Benghazi — now a small office headed by special envoy Chris Stevens — or on bringing the TNC into the United Nations and other international organizations. Clinton acknowledged that the United States had “taken its time” in deciding on formal recognition of the TNC, but now firmly believed this was the way forward. “We think they are have made great strides and are on the right path,” she said.

U.S. President Barack Obama signed an executive order on February 25 freezing the assets of Gaddafi, his family and top officials, as well as the Libyan government, the country’s central bank and sovereign wealth funds. Most of the frozen assets are liquid in the form of cash and securities. U.S. officials have pledged to free up some of the money for the TNC, which has run dangerously short of cash to pay for salaries and basic services even as it takes on more of the responsibilities of government. But discussions with Congress on mechanisms to free up the money ran into legal complications — some of which could be swept away by U.S. recognition of the TNC as Libya’s legitimate government. “Our hope is that in a relatively short time frame we will be able to make progress (on funds) but there’s a lot of moving pieces here,” one senior State Department official said. The United States could direct banks to transfer frozen funds directly to the TNC, but this might still run foul of U.N. financial sanctions in place on Libya. A second option would be for the United States to establish a line of credit backed by the frozen assets as several other countries have done.

Clinton’s announcement formally recognizing the TNC marked the end of a process which began in February when Obama declared that Gaddafi had lost his legitimacy as Libya’s leader because of his brutal response to anti-government protesters. “We wanted to send a very clear signal to Gaddafi and the people around him that we are looking past Gaddafi to a future without him,” the senior U.S. official said. “We felt that taking this step today sends that message loud and clear.” The United States closed its embassy in Tripoli in February and withdrew its diplomatic staff, but maintains embassy staff working in Washington to develop ties with the TNC. The United States and Gaddafi’s government have been estranged for most of the past four decades, and only resumed contacts in 2003 when Tripoli gave up its pursuit of weapons of mass destruction and took responsibility for its role in the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland.

Central Bank of Libya offices in Tripoli

“The Central Bank of Libya (CBL) is 100% state ownership and represents the monetary authority in The Great Socialist People’s Libyan Arab Jamahiriya and enjoys the status of autonomous corporate body.”

May 17 2011 : “Farhat Bengdara was, until he defected, at the heart of the Libyan regime as central bank governor. As rebels began the uprising against Muammer Gaddafi, Bengdara flew to Turkey and began to help the other side. In this revealing interview with the FT’s Middle East editor Roula Khalaf, he describes where Libya’s gold is kept, how Gaddafi may have foreign reserve cash hidden in the desert and the powerful effect of western sanctions.” (video 8m 44sec)

Globalists Target 100% State Owned Central Bank of Libya
by Patrick_Henningsen / Mar 28, 2011

Eric V. Encina writes: One seldom mentioned fact by western politicians and media pundits: the Central Bank of Libya is 100% State Owned. The world’s globalist financiers and market manipulators do not like it and would continue to their on-going effort to dethrone Muammar Muhammad al-Gaddafi, bringing an end to Libya as independent nation. Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. Few can argue that Libya is a sovereign nation with its own great resources, able to sustain its own economic destiny. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability. Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations. When the smoke eventually clears from all the cruise missiles and cluster bombs, you will see the Allied reformers move in to reform Libya’s monetary system, pumping it full of worthless dollars, priming it for a series of chaotic inflationary cycles.

The CBL is currently a 100% state owned entity and represents the monetary authority in The Great Socialist People’s Libyan Arab Jamahiriya. The financial structure and general operation procedures of a state bank is of course much different than that of an American or European based central bank. Form starters it is not privately owned, for-profit bank with a undisclosed list of private shareholders like the US Federal Reserve and the Bank of England are. Libyan constitutional law establishing the CBL stipulates that its central bank maintains monetary stability in Libya and promotes sustained growth of its national economy. Libya also holds more bullion as a proportion of gross domestic product than any country except Lebanon, according to the London-based World Gold Council using January data from the International Monetary Fund. The value of gold is based on the March 25 close of $1,429.74 an ounce. Will this gold remain in Libya once Allied forces have taken control of Tripoli, or will it lost, or exchanged for pallets upon pallets of paper aka US dollars?


There is no denying at least one very popular achievement of the Libyan government: it brought water to the desert by building the largest and most expensive irrigation project in history, the US$33 billion GMMR (Great Man-Made River) project. Even more than oil, water is crucial to life in Libya.  The GMMR provides 70% of the population with water for drinking and irrigation, pumping it from Libya’s vast underground Nubian Sandstone Aquifer System in the south to populated coastal areas 4,000 kilometers to the north. The Libyan government has done at least some things right.

Another explanation for the assault on Libya is that it is “all about oil”, but that theory too is problematic. As noted in the National Journal, the country produces only about 2% of the world’s oil. Saudi Arabia alone has enough spare capacity to make up for any lost production if Libyan oil were to disappear from the market. And if it’s all about oil, why the rush to set up a new central bank?

Another provocative bit of data circulating on the Net is a 2007 “Democracy Now” interview of US General Wesley Clark (Ret). In it he says that about 10 days after September 11, 2001, he was told by a general that the decision had been made to go to war with Iraq. Clark was surprised and asked why. “I don’t know!” was the response. “I guess they don’t know what else to do!” Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. What do these seven countries have in common? In the context of banking, one that sticks out is that none of them is listed among the 56 member banks of the Bank for International Settlements (BIS). That evidently puts them outside the long regulatory arm of the central bankers’ central bank in Switzerland.

The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked. Kenneth Schortgen Jr, writing on, noted that “[s]ix months before the US moved into Iraq to take down Saddam Hussein, the oil nation had made the move to accept euros instead of dollars for oil, and this became a threat to the global dominance of the dollar as the reserve currency, and its dominion as the petrodollar.”  According to a Russian article titled “Bombing of Libya – Punishment for Ghaddafi for His Attempt to Refuse US Dollar”, Gaddafi made a similarly bold move: he initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Gaddafi suggested establishing a united African continent, with its 200 million people using this single currency.

During the past year, the idea was approved by many Arab countries and most African countries. The only opponents were the Republic of South Africa and the head of the League of Arab States. The initiative was viewed negatively by the USA and the European Union, with French President Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Gaddafi was not swayed and continued his push for the creation of a united Africa.  And that brings us back to the puzzle of the Libyan central bank. In an article posted on the Market Oracle, Eric Encina observed: “One seldom mentioned fact by western politicians and media pundits: the Central Bank of Libya is 100% State Owned … Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. Few can argue that Libya is a sovereign nation with its own great resources, able to sustain its own economic destiny. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability. Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations.”

Libya not only has oil. According to the International Monetary Fund (IMF), its central bank has nearly 144 tonnes of gold in its vaults. With that sort of asset base, who needs the BIS, the IMF and their rules? All of which prompts a closer look at the BIS rules and their effect on local economies. An article on the BIS website states that central banks in the Central Bank Governance Network are supposed to have as their single or primary objective “to preserve price stability”.

They are to be kept independent from government to make sure that political considerations don’t interfere with this mandate. “Price stability” means maintaining a stable money supply, even if that means burdening the people with heavy foreign debts. Central banks are discouraged from increasing the money supply by printing money and using it for the benefit of the state, either directly or as loans.

In a 2002 article in Asia Times Online titled “The BIS vs national banks” Henry Liu maintained: “BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies. The BIS does to national banking systems what the IMF has done to national monetary regimes. National economies under financial globalization no longer serve national interests. FDI [foreign direct investment] denominated in foreign currencies, mostly dollars, has condemned many national economies into unbalanced development toward export, merely to make dollar-denominated interest payments to FDI, with little net benefit to the domestic economies.” He added, “Applying the State Theory of Money, any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation.” The “state theory of money” refers to money created by governments rather than private banks.

The presumption of the rule against borrowing from the government’s own central bank is that this will be inflationary, while borrowing existing money from foreign banks or the IMF will not. But all banks actually create the money they lend on their books, whether publicly owned or privately owned. Most new money today comes from bank loans. Borrowing it from the government’s own central bank has the advantage that the loan is effectively interest-free. Eliminating interest has been shown to reduce the cost of public projects by an average of 50%.  And that appears to be how the Libyan system works. According to Wikipedia, the functions of the Central Bank of Libya include “issuing and regulating banknotes and coins in Libya” and “managing and issuing all state loans”. Libya’s wholly state-owned bank can and does issue the national currency and lend it for state purposes.  That would explain where Libya gets the money to provide free education and medical care, and to issue each young couple $50,000 in interest-free state loans. It would also explain where the country found the $33 billion to build the Great Man-Made River project. Libyans are worried that North Atlantic Treaty Organization-led air strikes are coming perilously close to this pipeline, threatening another humanitarian disaster.

So is this new war all about oil or all about banking? Maybe both – and water as well. With energy, water, and ample credit to develop the infrastructure to access them, a nation can be free of the grip of foreign creditors. And that may be the real threat of Libya: it could show the world what is possible.  Most countries don’t have oil, but new technologies are being developed that could make non-oil-producing nations energy-independent, particularly if infrastructure costs are halved by borrowing from the nation’s own publicly owned bank. Energy independence would free governments from the web of the international bankers, and of the need to shift production from domestic to foreign markets to service the loans.  If the Gaddafi government goes down, it will be interesting to watch whether the new central bank joins the BIS, whether the nationalized oil industry gets sold off to investors, and whether education and healthcare continue to be free.

{Ellen Brown is an attorney and president of the Public Banking Institute, In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are and}


The Magic of the Crystal Skulls – NYC 10:10:10

October 9th – 10th 10am-6pm New York, New York
Historic Event at FIT Conference Center, 28th street & 7th Ave. 

Planetary Transformation with Mayan Elder and ancient Crystal Skulls
Don Alejandro -Grand Elder of the Living Maya. Hunbatz Men -Mayan Solar Priest and Daykeeper. Don Pedro Pablo Chuc Pech, Mayan Historian Flordemayo –shaman, one of the 13 Grandmothers AND 13 Crystal Skulls and their guardians along with the Atlantean Orb. Alan Steinfeld & New Realities along with The Edgar Cayce Center of NYC and Oracle Stone Productions present this 2 day Crystal Skull Event devoted to planetary transformation and the modern messages of the ancient crystal skulls.

First time ever this many ancient artifacts are coming together with Mayan Priests to create a group activation of transformation. This is the planetary event we have been waiting for. These stone skulls found in the ruins of past civilizations have now surfaced and are coming together for the first time in history. These human shaped heads carved out of pure silicon oxide crystal show no modern day machine marking and some are believed to over 5,000 years old. The legend of the 13 is what Steven Spielberg hinted at in his movie Indiana Jones and the Kingdom of the Crystal Skull. It seems that certain energetic frequencies are formed when these skulls come together. Synergistically they create a vortex that activates human consciousness revealing greater perceptions of reality. Some people say they are alien to this world; others believe they contain hidden knowledge records device that need to be activated by the right individual! Many others believe these crystal skulls have miraculous healing properties.

Highlights: Mayan Elders prophesy on 2012, two newly revealed ancient skulls, Light and Sound Harmonics, group activation and energy healing.
Keynote speakers: Mayan Elders & shamans: Grandfather Cirilo, Hunbatz Men, Don Pedro Pablo Chuc Pech, Flordemayo
Crystal Skull experts: Stephen Mehler, DaEl Walker, Jaap van Etten, Kirby Seid. Musical genius: Steven Halpern, ceremonial drummer Imani. Shelley Yates on Fire The Grid of the Earth.
Skull Experts & Guardians: Stephen Mahler, Kirby Seid, Japp Van Eten, DaEl Walker, Jodi Serota.
For the public: $150 for this 2 -day event in New York City. 
Mayan elders, over 13 ancient crystal skulls with guardians and experts from around the world. Join us for this once in a lifetime event. Bring your crystals and your skulls for a two days of ceremonies, lectures, exhibits & energy healing. Participate by adding your frequency to one of the greatest shifts in human history.

COINCIDENTALLY, as PREDICTED | 10.13.2010 | UFOs over CHELSEA–Why-The-Sudden-Spurt-in-UFO-Sightings-1287095202/
UFO Over New York City: Why The Sudden Spurt in UFO Sightings? / 14 October, 2010

UFO New York City: Why The Sudden Spurt in UFO Sightings? Another unidentified flying object (UFO) has been sighted recently over Manhattan. The mysterious shining object appeared hovering over Manhattan’s West Side, leaving speculations for another UFO sighting over the city. But no one so far knows the truth behind the UFO over New York City. Reportedly, the silvery object was seen by the locals of Chelsea after which they contacted Police and the FAA at about 1.30 p.m. The sources from Law enforcement thought that the object was some sort of balloon. But it has been not yet confirmed what the object exactly was. A reporter sighted the tiny sliver dot hovering at approximately object 5,000 feet above 23rd St. and Eighth Ave. A dozen people gathered to catch its glimpse in the late afternoon. “It’s been hovering there for a while. I’m just kind of baffled,” told Joseph Torres of Dyker Heights, Brooklyn, who sighted the object after leaving a movie. “How can it be ordinary? There is something going on.” ”

You really have to look up to see it,” said another witness, Rico. “It’s a little crazy. I guess that’s why they call it an unidentified flying object because they don’t know what it is.” The social networking site, Twitter, was flooded with the messages that linked to a month-old press release of a book by a retired NORAD officer. It predicted that UFOs will be seen in earth’s major cities on 13th October this year. The Federal Aviation Administration also received calls from people at its operations center. But after reviewing radar data, the agency did not find anything out of the normal condition. “We re-ran radar to see if there was anything there that we can’t account for but there is nothing in the area,” stated Jim Peters, spokesman. “There was some helicopter traffic over the river at that time and we checked with LaGuardia Tower. And they said they had nothing going low at that time. Nothing that we can account for would prompt this kind of response,” he said. Peters told that if it were a weather balloon or any kind of organized balloon they would have got the prior notice for its release. But they did not get any notification. So the ‘UFO over NYC’ frenzy continues.

“SPANISH” BALLOONS,0,5816915.story

Several New Yorkers witnessed an unusual sight Wednesday afternoon when several shiny, circular objects were seen flying high above the streets of Manhattan. The NYPD and Federal Aviation Administration say around 1:30 p.m., they received calls from many people who saw the objects hovering over Chelsea. Many people took to Twitter to talk about the unidentified flying object sighting, and posted videos and photos of the bizarre event. Although officials could not confirm what the celestial objects were, skeptics believed the balloons were part of a tourism promotion event held on Broadway in Times Square for the centennial of the Madrid’s Gran Via on Wednesday, which included the release of several bunches of yellow balloons into the sky. Spanish newspaper El Mundo, explained, “Unfortunately for the advocates of ‘I want to believe’ what they saw on the 11.00 (New York time) were not UFOs, but dozens of yellow balloons that the City of Madrid had dropped in Times Square in a campaign to promote tourism on the Gran Via, which this year celebrates one hundred years.” A Westchester elementary school class also came forward Thursday claiming the balloons were from an engagement party the children held for their language arts teacher Andrea Craparo. A parent was walking to the Milestone School in Mount Vernon when the wind took away a bunch of white balloons intended for Craparo.

But believers cite a September 13 press release for the book Challenges of Change by retired NORAD officer Stanley A. Fulham, which predicted a fleet of UFOs would descend upon Earth’s major cities on Wednesday, October 13. Fulham stated the extraterrestrials would neither land nor make any communication with Earth on Wednesday. But their presence would be “the first in a series intended to avert a planetary catastrophe resulting from increasing levels of carbon-dioxide in the earth’s atmosphere dangerously approaching a ‘critical mass.’ […] They are aware from eons of experience with other planets in similar conditions their sudden intervention would cause fear and panic.” He asserts their contact with Earth is part of their process of leading mankind into accepting the “alien reality and technologies for the removal of poisonous gases from the earth’s atmosphere in 2015, if not sooner.” The book also states that with the help of a channeler, Fulham has been in contact with a group known as the Transcendors for more than a decade. He described them as a group of 43,000 eons-old souls, who use their experience and knowledge to provide information to “humans in search of basic realities of mankind’s existence.” The press release also stated: The Transcendors reveal through the author crucial information about urgent global challenges facing mankind such as earth changes, international terrorism, worldwide financial collapse and the environmental crisis. One revelation is al Qaeda has a dirty nuclear bomb and WMD, but faces a moral quandary over “containment of collateral damages.” Utilizing the theme of the Four Horsemen as symbolic metaphor, Fulham warns mankind will survive all of these future challenges, except the CO2 pollution of our atmosphere. According to information provided to the author by the Transcendors, the build-up of CO2 pollution is rising 1% annually to a “critical mass” of 22% in which mankind could not survive “without outside intervention.”

The FAA also stated Wednesday that after reviewing radar information, they only found typical helicopter traffic above the West Side but could not detect anything unusual that would prompt the avalanche of reports they received. “We re-ran radar to see if there was anything there that we can’t account for but there is nothing in the area,” said FAA spokesman Jim Peters. “There was some helicopter traffic over the river at that time and we checked with LaGuardia Tower. And they said they had nothing going low at that time.” NYPD and FAA officials say if the objects were part of an planned, organized weather balloon release, it is protocol that they are notified in advance. Neither agency received alerts. The National Weather Service also stated they were not missing any weather balloons Wednesday. On Thursday, the FAA stated the objects remained unidentified. “We’ll let people draw their own conclusions as to what they saw in the air over New York City,” said Peters.

Former NORAD officer reports alien disclosure date: October 13, 2010 / 10.9.2010

October 13, 2010, is the disclosure date where mankind will have no doubt that aliens are among us, according to a book by a former NORAD officer. Retired Air Force Officer Stanley A. Fulham released the third edition of his 352-page book, Challenges of Change, which suggests that on October 13 there will be “a massive UFO display over the world’s principal cities.” The author predicts that the “aliens will neither land nor communicate on that date; they are aware from eons of experience with other planets in similar conditions their sudden intervention would cause fear and panic.” The book “reports this event will be the initial interaction in a process leading to mankind’s acceptance of the alien reality and technologies for the removal of poisonous gases from the earth’s atmosphere in 2015, if not sooner.” From a press release on the book: “The author draws upon his military experience with the UFO phenomenon dating back to WW2, and later, with NORAD and his subsequent life-long association with a senior NORAD intelligence officer who provided him a wealth of historical data relating to NORAD’s experience with the UFO/alien reality which has never been revealed to the public. In the military’s view, as conveyed to and understood by Fulham, the public is not yet ready to accept an alien reality.”

Will our world be changed forever on October 13, 2010?

(New) Special Announcement: Since the event which took place the afternoon of Wednesday, October 13th, 2010, in the skies above Manhattan, of the sudden appearance of up to approximately 200 unknown aerial objects, some of which, according to eye-witness accounts in media reports, hovered stationary for up to 45-minutes or more, and some of which disappeared and reappeared as if quite literally going into and out of dimensions, we have been completely innundated/deluged with media requests for interviews; requests for more information; commentaries; book orders, etc. We will begin a thorough review of all phone and e-mail messages on the afternoon of Friday, October 15th, 2010, to categorize, and then prioritize, all messages, and will respond accordingly. Thank you for your patience. In the interim, if you would like to order the book, Challenges of Change, the quickest means possible is though our PayPal link.

Tungsten-Filled 1 Kilo Gold Bar Found In The UK
by Tyler Durden on 03/24/2012

The last time a story of Tungsten-filled gold appeared on the scene was just two years ago, and involved a 500  gram bar of gold full of tungsten, at the W.C. Heraeus foundry, the world’s largest metal refiner and fabricator. It also became known that said “gold” bar originated from an unnamed bank. It is now time to rekindle the Tungsten Spirits with a report from ABC Bullion of Australia, which provides photographic evidence of a new gold bar that has been drilled out and filled with tungsten rods, this time not in Germany but in an unnamed city in the UK, where it was intercepted by a scrap metals dealer, and was supplied with its original certificate. The reason the bar attracted attention is that it was 2 grams underweight. Upon cropping it was uncovered that about 30-40% of the bar weight was tungsten. So two documented incidents in two years: isolated? Or indication of the same phenomonenon of precious metal debasement that marked the declining phase of the Roman empire. Only then it was relatively public for anyone who cared to find out on their own. Now, with the bulk of popular physical gold held in top secret, private warehouses around the world, where it allegedly backs the balance sheets of the world’s central banks, yet nobody can confirm its existence, nor audit the actual gold content, it is understandable why increasingly more are wondering: just how much gold is there? And alongside that – while gold, (or is it GLD?), can be rehypothecated, can one do the same with tungsten?

From ABC Bullion:

ABC Bullion received the following email from one of our trusted suppliers this week.


  • It was not ABC Bullion that purchased this bar, the email and photos were sent to us as a general warning.
  • I xxxx’ed out the city’s name to avoid any second guessing as to the name of the dealer.


Attached are photographs of a legitimate Metalor 1000gm Au bar that has been drilled out and filled with Tungsten (W).

This bar was purchased by staff of a scrap dealer in xxxxx, UK yesterday. The bar appeared to be perfect other than the fact that it was 2gms underweight. It was checked by hand-held xrf and showed 99.98% Au. Being Tungsten, it would not be ferro-magnetic. The bar was supplied with the original certificate.

The owner of the business that purchased the bar only became suspicious when he realized the weight discrepancy and had the bar cropped. He estimates between 30-40% of the weight of the bar to be Tungsten.

This is very worrying and reinforces the lengths that people are willing to go to profit from the current high metal prices. Please be careful.

Photos of the cropped bars: 1000g Gold bar cut showing inserted tungsten rods

Two halves of the cropped bar:

by Theo Gray  /   03.14.2008

“On Wednesday, the BBC reported that millions of dollars in gold at the central bank of Ethiopia has turned out to be fake: What were supposed to be bars of solid gold turned out to be nothing more than gold-plated steel. They tried to sell the stuff to South Africa and it was sent back when the South Africans noticed this little problem. This is an amazing story for two reasons. First, that an institution like a central bank could get ripped off this way, and second that the people responsible used such a lousy excuse for fake gold. I consider myself something of an expert on fake gold (I’m not really, I just think I am) ever since I was asked to give advice on the subject to the author Damien Lewis for his recent thriller, Cobra Gold. I worked out in detail for him how you could make really convincing fake gold, and ended up as a minor character in the novel, where I am known as “Goldfinger Gus”.

The problem with making good-quality fake gold is that gold is remarkably dense. It’s almost twice the density of lead, and two-and-a-half times more dense than steel. You don’t usually notice this because small gold rings and the like don’t weigh enough to make it obvious, but if you’ve ever held a larger bar of gold, it’s absolutely unmistakable: The stuff is very, very heavy.

The standard gold bar for bank-to-bank trade, known as a “London good delivery bar” weighs 400 troy ounces (over thirty-three pounds), yet is no bigger than a paperback novel. A bar of steel the same size would weigh only thirteen and a half pounds. According to the news, the authorities have arrested pretty much everyone involved, from the people who sold the bank the gold, to bank officials, to the chemists responsible for testing and approving it on receipt.

The problem is, anyone who so much as picked up one of these bars should have known immediately that they were fake, no fancy test required. The weight alone is an instant dead giveaway. Even a forklift operator lifting a palette full of them should have noticed that his machine wasn’t working hard enough. I think they must have been swapped out while in storage: Someone walked in each day with a new fake gold bar and walked out with a real one. If they were fake on arrival then everyone who handled them in any way must have either had no experience with gold or been in on the scam.

Now, for me the more interesting question is, how do you make a fake gold bar that at least passes the pick-it-up test? The problem is that there are very few metals that are as dense as gold, and with only two exceptions they all cost as much or more than gold. The first exception is depleted uranium, which is cheap if you’re a government, but hard for individuals to get. It’s also radioactive, which could be a bit of an issue.

The second exception is a real winner: tungsten. Tungsten is vastly cheaper than gold (maybe $30 dollars a pound compared to $12,000 a pound for gold right now). And remarkably, it has exactly the same density as gold, to three decimal places. The main differences are that it’s the wrong color, and that it’s much, much harder than gold. (Very pure gold is quite soft, you can dent it with a fingernail.)

A top-of-the-line fake gold bar should match the color, surface hardness, density, chemical, and nuclear properties of gold perfectly. To do this, you could could start with a tungsten slug about 1/8-inch smaller in each dimension than the gold bar you want, then cast a 1/16-inch layer of real pure gold all around it. This bar would feel right in the hand, it would have a dead ring when knocked as gold should, it would test right chemically, it would weigh *exactly* the right amount, and though I don’t know this for sure, I think it would also pass an x-ray fluorescence scan, the 1/16″ layer of pure gold being enough to stop the x-rays from reaching any tungsten. You’d pretty much have to drill it to find out it’s fake. (Unless, of course, central bank gold inspectors are wise to this trick and have developed a test for it: Something involving speed of sound say, or more powerful x-rays, or perhaps neutron activation analysis. If bars like this are actually a common problem, you certainly could devise a quick, non-destructive test for them, and for all I know, they have. Except, apparently, in Ethiopia.)

Such a top-quality fake London good delivery bar would cost about $50,000 to produce because it’s got a lot of real gold in it, but you’d still make a nice profit considering that a real one is worth closer to $400,000. A lower budget version could be made by using the same under-sized tungsten slug but casting lead-antimony alloy around it (to match the hardness, sound, and feel of gold), then electroplating on a heavy coating of gold. Such a bar would still feel and sound right and be only very slightly underweight, while costing less than $500 to produce in quantity. It would not pass x-ray fluorescence, and whether it passes a chemical test would depend on how thick the electroplating is.

This is the solution I recommended for Cobra Gold, because they only needed their fake gold to pass a field inspection, which is to say, someone picking it up and knowing what gold should feel like when you lift it. You may quibble for other aspects of the plot if you like, but I think the fake gold would have worked. And let me tell you, it’s a sad day for criminal masterminds when my fictional fake gold, designed only to trick a terrorist cell, is so much better than the real fake gold used to rip off a real government bank for millions of real dollars.”

Make Everything Golden
Using sheets so thin they’re measured in atoms
by Theodore Gray  /  05.03.2005

Dept.: Gray Matter
Element: Gold
Project: Gilding
Cost: $60
Time: One hour

Malleable things can be hammered thinner without breaking; ductile things can be stretched thinner without snapping. Every material has its limit, but with gold, that limit is just a few hundred atoms thick. Gold is the most malleable and the most ductile of all metals. A cube of it about 21/2 inches on edge could be beaten out to cover an entire football field (at a cost of roughly $68,000, plus beating fees). Gold this thin is called gold leaf, and the ancient art of applying it for decoration is called gilding.

How thin is gold leaf? Using my steel rolling mill, I can make gold foil about one thousandth of an inch thick, similar to aluminum foil. Thin, sure, but gold leaf is nearly 500 times as thin as that. Only then does it become affordable enough and flexible enough to be used almost like paint to cover finely detailed carvings or anything else you want to be shiny for years to come. To make gold leaf, start with gold foil, interleave a few dozen squares of it with layers of special vellum (so the foil sheets don´t stick to one another), and beat the heck out of the stack with a 16-pound hammer for many hours, turning the squares into larger squares of thinner foil. Then cut the sheets in quarters, restack them, and pound them out again. The malleability of gold is what allows the sheets to just keep getting thinner and thinner without splitting. (OK, I admit, I tried and failed at this. Just haven´t got the arm for it. Or the proper vellum, or the family secrets handed down over generations. Making gold leaf is, like other ancient arts, not quite the garage project it might seem.)

Gilding, on the other hand, is not a particularly difficult skill. To gild a home-run baseball, I used commercially prepared gold leaf from an art-supply store. The process is simple: Paint the object with a sticky liquid called gold size, lay the sheets of gold leaf on, and rub them in. The catch is the part where you try to pick up the leaf. Don´t even think about using your fingers-this stuff is more like a soap bubble than a sheet of metal and will start wrapping around your fingers and then tear the instant you try to unwrap it. Brushes known as gilders´ tips, made of red-squirrel hair (none of that gray-squirrel crap, mind you) are used to pick up the sheets by static electricity. It takes a delicate touch, but at $2 per four-inch-by-four-inch sheet, you´re motivated to learn fast.

Gold leaf instantly welds to itself. Overlapping layers fuse together invisibly when rubbed in, so even if you´re sloppy, the end result will look smooth. It´s OK to touch it with your fingers at this point because the gold size will hold it in place. Gilded objects survive from 5,000 years ago (think King Tut´s mask), proving that gold is impervious to air, water, alkalis and most acids, no matter how thin it is.

1. Mini rolling mill squeezes one gram of gold into foil, which is still about 500 times as thick as gold leaf.
2. Gold leaf held to a squirrel-hair brush by static electricity, ready to be applied.

Fake fears over Ethiopia’s gold
by Elizabeth Blunt  /  13 March 2008
The price of real gold is currently soaring

Ethiopia’s national bank has been told to inspect all the gold in its vaults to determine its authenticity. It follows the discovery that some of the “gold” it had bought for millions of dollars was gold-plated steel. The first hint that something was wrong reportedly came when the Ethiopian central bank exported a consignment of gold bars to South Africa. The South Africans sent them back, complaining that they had been sold gilded steel. An investigation revealed that the bank had bought a consignment of fake gold from a supplier, who is now under

Other arrests followed, including business associates of the main accused; national bank officials; and chemists from the Geological Survey of Ethiopia, whose job it is to assay the bank’s purchases of gold and certify that they are real. But what has clearly now got the government even more worried is that another different batch of gold in the bank’s vaults has also been found to be fake, and this time it was gold which had been there for several years, after being seized from smugglers trying to take it to Djibouti.

The Ethiopian parliament’s budget and finance committee ordered the inspection of all gold in the national bank’s vaults. A report from the auditor-general on the affair is expected to be presented to parliament during its current session. Gold is mined in Ethiopia in considerable quantities, and a trader selling gold to the central bank has to have it tested and certified by the Geological Survey. Whether the bank bought fake gold in the first place, or whether real gold from the vaults has been swapped for gilded steel, the fraud has cost the bank many millions of dollars, and it must have involved collusion on a considerable scale.

Gold May Have Too Much Glow
by Joby Warrick  /  August 14, 1999

It was one of the most secretive missions at a factory that was all about secrecy: Nuclear warheads, retired from service and destined for the junkyard, were trucked at night to the Paducah Gaseous Diffusion Plant to be dismantled, hacked into unrecognizable pieces and buried. Workers used hammers and acetylene torches to strip away bits of gold and other metals from the warheads’ corrosion-proof plating and circuitry. Useless parts were dumped into trenches. But the gold – some of it still radioactive – was tossed into a smelter and molded into shiny ingots.

Exactly what happened next is one of the most intriguing questions to arise from a workers’ lawsuit against the former operators of the U.S.-owned uranium plant in western Kentucky. Three employees contend that the plant failed for years to properly screen gold and other metals for radioactivity. Some metals, they say, may have been highly radioactive when they left Paducah, bound perhaps for private markets.

The claim – based partly on circumstantial evidence – is now being investigated by Department of Energy officials who are also probing the workers’ accounts of plutonium contamination and alleged illegal dumping of radioactive waste at the uranium plant. “It is my belief that these recycled metals were injected into commerce in a contaminated form,” Ronald Fowler, a radiation safety technician at the plant, states in court documents that were unsealed this week by the Justice Department.

The investigation comes amid heightened scrutiny of government efforts to recycle valuable metals piling up at more than 16 factories that are part of the U.S. nuclear weapons complex. In the past week, congressional leaders, industry officials and scores of environmental groups have called on the Clinton administration to reconsider a controversial Department of Energy program to recycle scrap metal from nuclear weapons facilities into products that could end up in household goods or even children’s braces.

Opponents’ concerns soared this week with revelations, first reported in The Washington Post, that plutonium and other highly radioactive metals slipped into the Paducah plant over a 23-year period in shipments of contaminated uranium. The plutonium accumulated over decades in nickel-plated pipes where uranium was processed into fuel for bombs, government documents show. Smaller amounts of tainted uranium went to sister plants at Oak Ridge, Tenn., and Portsmouth, Ohio, the records show.

Scrap nickel from those plants is now the primary target of the Energy Department’s metal recycling program, which would be run jointly by the federal government, the state of Tennessee and a private contractor, British Nuclear Fuels Ltd. (BNFL). “If DOE denied or didn’t know plutonium was present at Paducah, why should we trust them to release waste from identical production plants into products ranging from intrauterine devices to hip replacements?” asked Wenonah Hauter of the watchdog group Public Citizen, one of 185 organizations to sign a letter to Vice President Gore Thursday demanding a halt to the program.

Recovering gold and other valuable metals from retired nuclear weapons had been a little-known mission of the government’s uranium enrichment plants over the past five decades. At Paducah, the process began in the 1950s and was conducted under extraordinary security, with heavily armed guards escorting warheads into the plant under cover of darkness. Garland “Bud” Jenkins, one of three Paducah workers involved in the lawsuit filed under seal in June, says he worked for several years in Paducah’s metals program recovering gold, lead, aluminum and nickel from nuclear weapons and production equipment. “We melted the gold flakes in a furnace to create gold bars,” Jenkins said in court documents. “The gold was never surveyed radiologically prior to its release, to my knowledge.”

Jenkins also says he never saw tests performed on nickel and aluminum ingots that were hauled out of the plant in trucks. In later years, when plant managers did begin screening the metals, many were found to be contaminated, he said. Hundreds of nickel ingots are still stored at the plant, too tainted to go anywhere, he said. A plant report included in the lawsuit filings may shed light on the degree of contamination in the gold. In a radiological survey of the plant last year, technicians discovered gold flakes inside an old ingot mold used for gold recovery. The fish scale-sized flakes were tested and found to emit radiation at a rate of 500 millirems an hour, the report said. By comparison, the average person receives between 200 and 300 millirems each year from all sources, including X-rays, radon gas and cosmic radiation from space. “If you had a wedding ring made out of those flakes you’d be getting twice as much radiation in an hour as most people get in a year,” said Joseph R. Egan, a lawyer representing the employees.

Fowler, the radiation safety technician, said he filed a report on the discovery of the radioactive gold in December but received no response from the plant’s management. Nothing further was done to investigate “the possibility that [the plant] may have contaminated the nation’s gold supply” at Fort Knox, he said. Plant officials shed little light on the process. U.S. Enrichment Corp., the plant’s current operator, says gold recovery at Paducah was the responsibility of the Energy Department. Department officials, in a response to written questions from The Post, acknowledged that gold was recovered from nuclear weapons at Paducah. But, “since these actions occurred many years ago, information regarding their past dispositions is not readily available,” the statement said.

In a letter to Rep. John D. Dingell (D-Mich.)., department officials strongly defended their efforts to salvage nickel and other valuable metals that have been piling up at nuclear complex sites for years. “Let me assure you that the safety of the public and workers and compliance with state and federal regulations are of paramount importance,” said Undersecretary of Energy T.J. Glauthier. Glauthier said BNFL’s license requires that “any metals released for unrestricted use will not pose a risk to human health or the environment.”

The recycling program, announced in 1996 by Gore as part of his “reinventing government” initiative, was touted at the time as a “win-win” deal for the environment, industry and taxpayers. BNFL, which was awarded the recycling contract in a noncompetitive bid, has already begun recycling some of the 100,000 tons of radioactively contaminated metal that were once part of the defunct K-25 complex at Oak Ridge, the world’s first full-scale uranium enrichment plant. Eventually the program expanded to Paducah and other facilities.

Purifying nickel is technically difficult because the radioactive contamination extends below the surface of the metal. According to department officials, BNFL was awarded the contract because it has developed a unique technology that can safely remove nearly all of the contaminants. But opponents say the technology has never been proven on such a large scale. Moreover, they note, there are no federal standards for releasing contaminated metal into the marketplace. Previous attempts to set such standards in the early 1990s were abandoned because of public opposition.

And, opponents add, the lack of restrictions on the recycled metal leaves the public in the dark about which products may have come from contaminated scrap. Even if radioactivity levels are low, consumers are entitled to an informed choice when buying materials that might be used by children, activists said. “The DOE has admitted they can’t protect the safety of their workers and misled them,” said Robert Wages, executive vice president of the Paper, Allied-Industrial, Chemical & Energy Workers International Union. “Now DOE wants to dump radioactive metals into everything from baby rattles to zippers . . . and tell us not to worry.”

Because there are no federal standards, the Energy Department’s recycling program relies on the state of Tennessee to set guidelines and regulate the process. In June, a federal judge sharply criticized the arrangement, saying the DOE had effectively thwarted public debate of an issue in which “the potential for environmental harm is great.” But U.S. District Judge Gladys Kessler rejected an attempt by labor and environmental groups to halt the recycling program, citing a law that prohibits courts from delaying federal cleanup of contaminated sites. Still, in unusually blunt language, the judge accused the Energy Department of “startling and worrisome” behavior in its alleged attempts to avoid federal oversight and public review. “There has been no opportunity at all for public scrutiny or input on such a matter of such grave importance,” Kessler wrote in her opinion. “The lack of public scrutiny is only compounded by the fact that the recycling process which BNFL intends to use is entirely experimental at this stage.”

from Paul Mylchreest

Let’s consider the run-up to Rome’s hyperinflation. I think this comment from “Good Money, Bad Money, and Runaway Inflation” resonates with what’s happening in the US today:

“Severus Alexander (AD 222-235) tried to reform by going back to the denarius but, once started, this path of runaway inflation and financial irresponsibility on the part of the imperial government proved impossible to control.”

It also seems that the hyperinflation was preceded by some kind of banking crisis, which is an interesting parallel. From “Demise and Fall of the Augustan Monetary System” by Koenraad Verboven:

“Papyri show it was common for private individuals to deposit money at a bank and to make and accept payments through bankers.Bankers in the west disappear from view around the middle of the 3rd c… A famous papyrus from Oxyrhynchus from 260 CE shows exchange bankers closing in order to avoid having to change the ‘imperial money’. The strategos ordered the exchange bankers to reopen and accept all genuine coins and warned businessmen to do the same. In 266 CE we find for the first time transactions being expressed in ‘ptolemaeic’ or ‘old silver’ as opposed to ‘new silver’.”

The chart shows how inflation remained relatively subdued until a tipping point was reached in the late- 260s A.D Monetary systems can absorb substantial abuse before there is a dramatic impact on the price level. For example, the debasement of the coinage was already accelerating in the early part of the third century A.D., before plunging in the latter part. Indeed, the chart below (apologies for the quality) only shows the trend up to 253 AD. By around 290 AD, the coins were only dipped in silver to give them a coating (<0.5%).



“A popular and recurring conspiracy theory, as alleged by Edward Durrell, Norman Dodd, Tom Valentine, Peter Beter and others, claims that the vault is mostly empty and that most of the gold in Fort Knox was removed to London in the late 1960s by President Lyndon Johnson. [3] In response, on September 23, 1974, Senator Walter Huddleston of Kentucky, twelve congressmen, and about 100 members of the news media toured the vault and opened various cells and doors, each filled with gold. Radio reporter Bill Evans, when asked if it seemed like the gold might have been moved in just for the visit, replied that “all I can say is that I saw gold there” and that it seemed like it was always there.[4] Additionally, audits of the gold by the General Accounting Office (in cooperation with the United States Mint and the United States Customs Service in 1974 and the Treasury Department) from 1975-1981 found no discrepancies between the reported and actual amounts of gold at the Depository.[5] However, the audit has been described as a peculiar process because it was only a partial audit done over an extended period of time.[6] The report states only 21 percent of the gold bars were audited as of 1981 (the audit report’s issue date) and that the audit has “covered more than 212.7 million fine troy ounces of gold” which “represents over 80 percent of the total amount of United States-owned gold of 264.1 million fine troy ounces.”[5] A small amount of gold is removed for regularly scheduled audits to ensure the purity matches official records.[1] The theory continues to persist, however. Of this alleged scandal, the ex-general counsel of the Export-Import Bank of the United States, Peter Beter, commented: “The Watergate scandal was child’s play compared with the covered-up Fort Knox Gold Scandal”.[7]”


“This is the Dr. Beter AUDIO LETTER, 1629 K St. NW, Washington, D.C. 20006 Hello, my friends, this is Dr. Beter. Today is July 30, 1980, and this is my AUDIO LETTER No. 56.

In writing his stories, Ian Fleming was drawing upon his own secret weapon. That weapon was knowledge. Fleming had been a high-ranking officer of Britain’s crack Intelligence agency called MI-5. It was the British who practically invented and perfected the modern concept of Intelligence, and to this day British Intelligence remains the equal of any in the world.

When Fleming left Her Majesty’s Secret Service to become a writer, he was severely limited in what he could publish. He was bound by the restrictions of the British “Official Secrets Act.” Under that Act, Fleming would have been liable for punishment for revealing any official secret without authorization. And so Ian Fleming, the former British Intelligence officer, became what is known as a “fictionalizer”–that is, he started with factual knowledge but rearranged and modified it in order to create startling stories of fiction. He was always extremely careful about how he did this. He always knew that he was skirting the fringes of the Official Secrets Act. He could not afford to make a mistake, because it would have meant prison for him and possible forfeiture of pension rights; and so he always altered every situation, every secret technology, and every personality enough to avoid revealing actual secrets. It was a long and meticulous process both to protect himself and to make each final story readable. For that reason Fleming completed a new James Bond novel only about once a year. If it had all been imagination, as many people believe, he would have been capable of producing a new book every few months, making himself far richer. But because his stories were all rooted in fact, secret fact, he did not dare speed up and run the risk of making a mistake.

Ian Fleming had two purposes in writing his famous series of spy novels. One purpose, of course, was to earn a very comfortable living; but beyond that he was also trying to subtly open the eyes of the reading public by the medium of fiction. Because of the Official Secrets Act he could not publish the facts that he knew as fact without modification, so he did what he felt was the next best thing, and that was to use his stories to open our minds to at least think in terms which were otherwise hidden from us. Fleming truly believed that this was something which somehow had to be done, because knowing what he knew he was not an optimistic man.

A perfect example of all of this took place with a book Fleming published 21 years ago in 1959. It was titled “GOLD FINGER.” The starting point for the book was knowledge about certain secrets. Fleming knew that there was a long-range plan to create monetary chaos for private gain and power. He also knew that a central feature of the plan was to be the secret disappearance of America’s monetary gold hoard at Fort Knox, and he knew that the kingpin of this international plot was a man with legendary greed for gold. His name: DAVID ROCKEFELLER. It was a plan that was totally unsuspected by the public. It was still the Eisenhower era, the heyday of the so-called “almighty dollar.” The dollar was good as gold, because it was backed by the world’s largest monetary gold hoard. Fort Knox was thought to be impregnable; and in those days, my friends, no one dared speak ill of the Four Rockefeller Brothers.

Ian Fleming decided to write a book that would begin to alert people to what was afoot. He could not tell the whole story, nor tell it as fact because of the Official Secrets Act; but by fictionalizing he was able to cause people to think of possibilities which would never have occurred to them otherwise. For example, in the 50’s it was a rare American who considered even the possibility of monetary turmoil. The dollar was good as gold, and that was that. Why even think about gold? Individual citizens could not own it except in jewelry. Wasn’t all the rest of it thought to be sealed up in Fort Knox? Everyone knew no one could get in there, and so we didn’t even think about it. But in his book GOLD FINGER, Fleming brought several key thoughts to our minds. He devised a fictional scheme to show that Fort Knox might not be impregnable after all. He raised the question: “What would happen to the dollar and other currencies if the Fort Knox gold were no longer available?” And he proposed the unthinkable thought that someone, if they were rich enough and greedy enough, might want to get their hands on America’s gold.

The actual GOLD FINGER story, of course, was fiction; but the basic points which I have just mentioned were fact. GOLD FINGER was published in 1959; and barely two years later in 1961, the hemorrhaging of America’s monetary gold supply began. Agents of David Rockefeller within the United States Government provided a cloak of authority called the “London Gold Pool Agreement”; and then for seven years until 1968, big Army trucks loaded with gold bullion rolled out of Fort Knox constantly–and all without a word to the public!

Some of the gold shipments during those seven years were recorded on a list kept by the United States Mint. Almost without exception the shipments listed went to the New York Assay Office, where they disappeared without any further accounting. As you may recall, the New York Assay Office was the focus of a scandal in December 1978 involving missing gold. Over 5,000 ounces had simply disappeared; but that, my friends, was a very small tip of a very large iceberg, and so the controversy over the missing millions in gold at the New York Assay Office was quickly smoothed over and covered up. They could not afford to allow any real investigation which might let the public know the truth. According to the official list of shipments I mentioned earlier, a large fraction of America’s monetary gold went to the New York Assay Office in the 60’s. There it disappeared, never to be seen again.

But, my friends, the real situation was even worse. Long ago my sources gave me hard evidence of many large gold shipments from Fort Knox which were not even listed. Five years ago this month in AUDIO LETTER No. 2 I revealed a specific example of this. It was a shipment on January 20, 1965, in which four (4) tractor-trailers loaded up at Fort Knox and then headed for railroad tracks across the river at Jeffersonville, Indiana. My sources provided me with details, including photographs, of the operation. But the shipment was one of many which did not show on any official Government list of shipments.

In June 1975, Mr. Edward Durell and my other associates were able to confront officials of the United States Mint with this example of missing shipments, and for once the confrontation took place under circumstances in which the Mint was under great pressure to respond. In the most specific terms the Bureau of the Mint was asked what was shipped out of Fort Knox in the four tractor-trailers on January 20, 1965. The written answer dated June 19, 1975 came from the then Director of the United States Mint, Mrs. Mary Brooks. She confirmed that this unlisted shipment amounted to more than one and three-quarter (1-3/4) million ounces of gold–and, my friends, it was not junk gold melted down from old coins which were confiscated from Americans in 1934. The shipment was part of America’s true monetary gold, good delivery gold which is .995 fine or better. After this admission in writing about an enormous secret shipment of gold out of Fort Knox, one would have thought that there would be fireworks, but not so!

My friend Mr. Durell showered the appropriate officials throughout the Government with this evidence of massive fraud at Fort Knox, and he notified the major media and all of the appropriate leaders in Congress about this evidence. For reasons which I will explain later in this message, I believe it’s time to call attention to one of these people. He is Senator William Proxmire of Wisconsin, Chairman of the Senate Banking Committee.

Proxmire loves to parade as a great defender of our financial interests in Washington. He’s famous for his so-called “Golden Fleece Award.” Proxmire searches through the Federal Budget with a fine-tooth comb, and he’s always able to find some project or contract which rightly or wrongly will look ridiculous to the public. He then trots it out, announces how much it costs, and with a great flourish gives it his Golden Fleece Award. By this and other means Proxmire is a master at maintaining his image as a protector of the American economy.

But if ever a situation deserved the Proxmire Golden Fleece Award, it is the FORT KNOX GOLD SCANDAL. The petty examples usually chosen by Proxmire fleece the American public out of perhaps hundreds of thousands or a few million dollars. It makes good publicity for Proxmire, but it’s insignificant. By contrast, the Fort Knox Gold Scandal is fleecing every one of us out of the shirt on our back. It has undermined the dollar itself, which is on its way to destruction. It has set off ever-worsening inflation even while our economy is stagnating. The Gold Scandal is fleecing us all, but what has Senator William Proxmire done about that??

Let me tell you what he has, and has not, done. For more than five years Proxmire has been among the top American leaders who have been kept informed about major developments and evidence in the Gold Scandal. He has been given the evidence I mentioned earlier about the missing shipment from Fort Knox, as well as other evidence of major discrepancies; but up to now, Proxmire has kept his lips sealed about discrepancies about America’s gold supply–with one exception. That exception took place in December 1978. Word had leaked out about the 5,000-or so missing ounces of gold at the New York Assay Office worth over $3,000,000 at today’s prices. As Chairman of the Senate Banking Committee, Proxmire immediately jumped on the story. Frowning in disapproval, he proclaimed that this would have to be looked into. Hearing those words from the champion of the Golden Fleece Award, the public relaxed and quickly forgot about it. And almost as quickly, Senator William Proxmire made sure he forgot about it too. To this day, no real investigation has ever taken place over the missing gold at the New York Assay Office.

Proxmire’s failure to follow up that $3,000,000 gold discrepancy was bad enough, but it’s nothing compared to his apparent disinterest in investigating the truth about the Fort Knox Gold Scandal. The case of the missing Fort Knox shipment is a case in point. At today’s prices, that one shipment alone was worth more than one billion dollars ($1,000,000,000)–not a mere million but 1000 times a million! And that, in truth, was only one example. There were many unreported shipments like that. That is why the Treasury figures, which show a huge remaining American gold hoard, are a fraud–a total fraud. And that’s why the United States could auction off only a small amount of junk gold over a period of time and then had to stop. And that’s why the United States dollar is no longer “as good as gold”; instead, it’s fast becoming worth less than the paper it’s printed on.

Senator William Proxmire, like many others trusted by the American public, has been given massive evidence about all of this; but his actions so far have helped only those who have taken our own gold in order to fleece us of everything we own. Later in this message I will have more to say about Senator William Proxmire and the Fort Knox Gold Scandal. But for now I want to finish the story of Ian Fleming’s aborted efforts to alert the public about things like these. As I already explained, his principle was “Fictionalize to open eyes”; but after his untimely death in 1964 his stories were seized upon and warped, especially in movies, for the opposite purpose. The new purpose became “Fictionalize to CLOSE eyes.” Nothing could be done to alter and neutralize Fleming’s books once they had been published, so instead attention was drawn away from the books to the James Bond movies; and as the movies were in preparation, disinformation agents were planted on the scene to guide the process. As a result, the James Bond who emerged on film was a very different character from the one in Fleming’s novels. The basic story lines remained the same, but in many subtle ways the psychology was radically changed. The movies retained the adventure, fast action, dazzling secret technologies, and bold plots which Fleming had pioneered; but by clever use of satirical humor, every James Bond movie ended up by laughing at itself. Secret weapons were exaggerated or twisted so as to make them entertaining but also ridiculous; and by filling the movies with strange characters and never-ending gimmicks, viewers were distracted from the underlying warnings of the basic plot.

The GOLD FINGER story was a perfect example of all this. Fleming’s original novel called attention to something which most readers would never have thought about otherwise. That was the potential relationship between Fort Knox gold and international monetary chaos, and through his fictional plot he also planted the idea that the legendary Fort Knox bullion depository might not be invulnerable after all. But these lessons were rarely, if ever, realized by those who saw only the movie; instead, the typical viewer walked out of the movie laughing. It was obviousthat what he had seen could happen only in fiction, and from that point onward he was programmed to react with disbelief if he should ever hear of tampering with Fort Knox gold. Such a thing could only be fiction–it was just too ridiculous ever to really happen.

This is the attitude I encountered more than seven years ago when I began giving public warnings about deliberate plans for economic chaos. I myself was first alerted to the Fort Knox Gold Scandal by none other than British Intelligence in London after completing a secret mission for Queen Elizabeth in Zaire; and in my book THE CONSPIRACY AGAINST THE DOLLAR, I outlined the overall plan, including the unseen role of America’s gold. I had one major advantage which Ian Fleming did not have. The United States does not yet have an Official Secrets Act like that of Britain, and so I was not forced to fictionalize. Instead I was able to give the real plans and real names of those responsible for things to come.

The prototype for Ian Fleming’s GOLD FINGER of two decades ago was none other than David Rockefeller, and in my book I showed in detail how he played his kingpin role in the plan to destroy our economy. I described how this was leading to a collapsing dollar, skyrocketing gold prices, a stagnating economy, spiraling financial problems for State and local governments, urban unrest, and eventually NUCLEAR WAR. But when David Rockefeller himself was interviewed about my book, even he resorted to the technique “Fictionalize to close eyes.” His comment about THE CONSPIRACY AGAINST THE DOLLAR was: “Interesting science fiction.”

From the archive, originally posted by: [ spectre ]


“to start sorry spelling sorry gramma.
ok its like this i recon… cut cable leading to information u want…
move away from severed point to another point on same cabel… sever
same cable again buy splice in your own info stealing apparatus…
wait for rich fat corps to fix there own cable again… nobody knows
your info is being intercepted and stolen… vwalla. thanks for
comming have a nice day.”
Posted by: annon | Feb 6, 2008 5:12:56 PM

“I got an anonymous IM from someone who works for Haliburton in the
mideast. He says there is 3 teams of techs that are installing taps on
the mideast internet backbones. They have to break the wire to install
the tap. Normally they synchronize their work so there’s no more than
one break every couple of days. What happened was they messed up the
dates. Someone wrote down the wrong dates, and they all broke cables
for taps right around the same time because they were rushing to get a
day off to watch the superbowl.”
Posted by: Johnny | Feb 6, 2008 6:10:52 PM

it’s been done before.
Look up “Operation Ivy Bells”.
Posted by: knowledgeable | Feb 7, 2008 2:25:02 PM

From Wired How-To Wiki

After two underwater cable cuts in the Middle East in early February
severely impacted countries from Dubai to India, alert netizens voiced
suspicions that someone — most likely Al Qaeda — intentionally
severed the cables for their own nefarious purposes, or that the U.S.
cut them as a lead-in to an attack on Iran.

Then two more cables failed in the same area, one in a segment
connecting Qatar to an island in the United Arab Emirates, and another
in a link between Oman and the UAE. The former wasn’t even a cut — it
was a power failure, but you can’t keep a good conspiracy theory down;
some news sites even began reporting incorrectly that Iran was cut off
from the internet.

So how to tell if your favorite Middle East country is still online?
Don’t believe the press — run a traceroute. This simple network
utility traces the hops internet packets take as they work their way
across the internet towards your destination. It also measures how
much time the journey from point A to point B takes, both in total and
for each hop between nodes. If your packets reach their intended
destination (which traceroute will tell you) then you’ll know if those
outage reports on Slashdot are legit or not.

What You’ll Need

* A live, unsevered internet connection
* Access to a command line tool on your computer (optional)
* A browser
* The address of a server somewhere in the destination country

Step 1: Find a Test Server

To do a proper traceroute, you’ll want to pick a server that’s
actually in the destination country. To check Iran, you could just use
a website with a .ir top level domain. Mahmoud Ahmadinejad’s blog, for
example. However, there’s no guarantee that any particular site is
hosted by a server in the country its domain name indicates.
Corporations especially tend to have servers spread out over several
countries. Official government sites are almost always a sure thing.

Step 2: Trace It!

On a Windows PC

1. Click on the Start button and choose Run.
2. In the text box, type cmd. This will bring up a command line
3. Type tracert hostname, where “hostname” is the web address of the
server you want to test.
You can also use an IP address by typing tracert x.x.x.x, where the
“x.x.x.x” is replaced by the IP address of the server.
4. Watch the packets fly across the tubes.

On Mac OS X

You can use the same steps listed in the Windows section by typing the
commands into Mac OS X’s Terminal application. Alternatively, you can
use the Network Utility that’s installed on every Mac.

1. Go to Applications > Utilities > Network Utility.
2. Click on the Traceroute tab.
3. Enter the domain name or IP address of the destination server and
click Trace.
4. Watch the packets fly across the tubes.

Step 3: Analyze the Result

As your packets travel from point A to point B, you’ll see each hop
appear on its own line. Traceroute should display the address and name
of each server or router along the way and the amount of time
(measured in milliseconds) the packets take to travel between your
desktop and that particular node. Eventually, you’ll see your packets
reach their destination. Here’s an example of some raw traceroute

5 (  9.153 ms
8.324 ms  9.992 ms
6 (  8.640 ms (  15.416 ms (  19.954 ms
7 (  207.604 ms (  17.331 ms (  9.409 ms
8 (
185.547 ms  196.288 ms
(  214.908 ms
9 (  300.511 ms  295.637 ms  310.359
ms 10 (  299.642 ms  289.998 ms
289.825 ms
11 (  297.686 ms
302.144 ms  290.565 ms
12 (  308.476 ms  298.427 ms  299.402
13 (  292.028 ms  292.011 ms  292.007 ms
14  * * *
15 (  307.571 ms  328.233 ms  327.580 ms

The times displayed are 3 pings from your desktop directly to that
node, not the time its taking between the previous node and the
current one.

Asterisks (* * *) indicate a timeout. If you see a line with just
asterisks on it, that means that the hop between nodes took longer
than 200ms. Several lines of timeouts mean the packets are being held
up, clogged or lost somewhere along the way. Blame the terrorist group
or national intelligence organization of your choice.

* Note some points on the traceroute will show a timeout because
administrators have restricted pings, and this may not necessarily
indicate a fail point. If the destination host is reachable at all,
then failures will typically be sporadic as in: * 200ms * (2 timeouts
and 1 successful). #14 above would indicate that the node is just
blocked for pings.


* To make sure your packets actually reached a server in the
intended country, you can look up the destination IP address to
determine its location. Consult the ARIN WHOIS database to dig up a
server’s location info.

* Uri Raz’s webpage has several useful tips for determining the
geographic location of servers on the internet.

* You can also use tools like IP2Location or GeoBytes’ IP Locator
to find out where a server is physically located.

* Instead of verifying the location server after the fact, you can
start out by using one of the destination country’s domain servers. To
find one, visit the listing of Root-Zone Whois information maintained
by the Internet Assigned Numbers Authority and click on the country
you want to reach. Under the list of Domain Servers, look for the
server with the same top-level domain as the destination country.

Portions of this how-to guide originally appeared in a post by Ryan
Singel on Wired’s Threat Level blog. Also, thanks to Kevin Poulsen for
the traceroute data and the inspiration.


Submarine Cables, Subsidiares and Subversion

[UPDATE – 02/12/08 – The Complete Guide to the 2008 Internet Outage
has been finished. It contains the most up to date information
including detailed images and explanations to help unravel this cable
mess. Please check it out here]

First off, I want to thank everyone for the positive feedback that I
have received for my last post, which illustrated the locations of the
5 submarine cables that have been damaged over the past couple of
weeks. I’m glad to see that some news sites such as Slashdot featured
my post and that people are starting to take a critical look at what
is happening.

[UPDATE: this post was recently featured in the most recent Epic-Fu
video episode. Check out the video here, and join the discussion

That being said, I’m sure that everyone is eager to read the results
of my findings on why these cables may have been damaged, who has to
gain from the damages, and where we, as concerned citizens, should
start to look for answers.

Before I begin, I would like to point out that these findings are from
my own research. I am not accusing anyone of anything here. I am
simply providing a resource for the rest of the internet so that
people can start to investigate what may really be happening over
there. There are some facts out there that are just too big to ignore.
While I may not be the person capable of asking the big questions to
the right people, I can still provide information for the people who

First of all, I want to revisit the map of the cable damages that have
occurred over the past few weeks:,52.734375&spn=99.660056,166.992188&z=2&source=embed

We have been told by various organizations that these damages are
attributed to power failures or by an anchor being accidentally
dragged along the ocean floor during a storm. However, it doesn’t take
more than a 5th grade education to start to recognize that there may,
in fact, be a pattern to what we are seeing here. When something like
this occurs, it starts the mind roaming around the possibilities as to
why this may have occurred.

Well, there are a few possibilities. Here are the top 4 possibilities/
connections that this author was able to find in his research:

#4 – Big Telecom Companies

In talking to a network operations manager about the damages that have
been done to the cables, the first companies that he suggested, which
stand to gain from this type of damage, are the larger
telecommunications companies. Especially the land-based ones. Here’s
why: when a huge pipeline providing tons of information to a
particular area is damaged, re-routing almost always occurs before
repair. This means, that the companies which surround the outage or
are within the outage area stand to benefit from the sudden jump in
needed bandwidth.,142068-page,1/article.html

So, which companies have some ties into this mess? Well, there are a
few companies that popped up while doing my research. However, for the
scope of this article, let’s look at Verizon Business. To start things
off, Verizon partially owns the SeaMeWe-4 (along with AT&T) cable that
was severed. According to them the repairs could take days but they
were going to offer an alternative network as quickly as possible.
Alternative meaning, routing through somewhere else. How else might
Verizon be involved with this deal? Verizon Business has ownership in
many of the submarine cables that have been in recent news. In
addition, they began work in 2007 on a new cable that will render
others obsolete. The construction for this is supposed to complete
this year. (source) By Verizon Business’ own admission, they’re all
about getting global:

“Global Strategic Services Still Driving Solid Verizon Business
Growth…Global sales of strategic services such as IP, Ethernet and
managed services continued to accelerate dramatically during the past
quarter, exceeding declines in revenue on a year-to-date basis from
traditional core voice and data services. In the fourth quarter 2007,
strategic services generated $1.4 billion in revenue, up 25.1 percent
from the fourth quarter 2006.”

With all that said, it seems very likely that Verizon would very much
want these cables to be damaged. Whether it be to leverage their land-
based networks or to further increase the popularity of their new
cable, it’s hard to ignore the connections.
#3 – December 2007

In December of 2007, there were a few events that occurred related
directly to the damages that we have recently seen. While these events
may be unrelated and/or random, the correlation is hard to ignore.

December 1, 2007: Alcatel finished its merger with large U.S. telecom
company Lucent. Why does this matter? Alcatel provides hardware and
service to large telecommunications companies. In fact, according to
their Wikipedia entry they are a “leading provider of optical
transmission equipment, especially for submarine communications

December 20, 2007: Reliance Communications (FLAG) finishes the multi-
million dollar acquisition of U.S. based company Yipes. (source) Why
is this weird? Well, Yipes provides solutions for data warehousing and
multimedia communications transfer. This acquisition would bring, yet
another U.S. based company, tons of pull in the global
telecommunications environment:

“The combination of Yipes’ enterprise Ethernet services; the
private undersea cable system of FLAG Telecom, a subsidiary of
Reliance Communications; and Reliance’s commitment to expansion and
growth will enable the creation of a global service-delivery platform
with unmatched coverage and capability.”

December, 2007: Iran announced that they were freely trading oil
without the use of the U.S. dollar. More details about this a bit
later in the post.

While there were other notable events in the global telecommunications
field in 2007, December seemed to be particularly full of events that
could possibly be related to the recent submarine cable damages.

#2 – Reliance Communications and FLAG

First of all, you need to understand that Reliance Communications is
part of a large huge massive company that, grouped with Reliance
Telecom and Flag Telecom, makes up Reliance Communications Ventures.
They provide solutions for all kinds of telecommunication services for
India as well as other countries. As an example (and to tie them even
closer to the Middle East), in June of 2006, Reliance Communications
along with Orbit Communications Company launched RiTV in the Middle
East. This is an interactive multimedia solution including on-demand
entertainment and internet access.

Reliance Communications is the leading broadband service provider in
India and part of another massive group of companies known as the Anil
Dhirubhai Ambani Group. Together, they are delivering service to over
19 million subscribers. One of the companies belonging to this group
is called Reliance Power Limited (RPL). Here again, we see a direct
tie into a large mostly-considered U.S. company. It’s a little company
called Chevron.

How big of a stake does Chevron have here? How about a 5% (that can
increase to 29%) stake in RPL? (source) Why would Chevron be
interested in an Indian energy company? Jamnagar. That link leads to
the Wikipedia entry for the Indian state. That link, however, does not
talk about how important a role RPL plays in that state — important
read as: 650,000 barrels per day. But that’s just the refinery that is
currently there. RPL is working on a new refinery that will have a
capacity of 580,000 barrels a day. That’s 1,230,000 barrels of oil
money that will be coming out of Jamnagar every day. It is expected
that this refinery will be completed this year.

The Anil Dhirubhai Ambani Group is far too large to try and track down
the various connections that they may have to the Middle East, but,
being that it is one of the companies most tightly knitted into this
knot of submarine cable woes, they deserve a mention.

This brings us to the number 1 reason that this author has found which
could explain the recent submarine cable damages.

#1 – The Iranian Oil Bourse

Through the research that I have exhaustingly done over the past few
days, this is the one that has struck me as the most likely reason for
the damages that have occurred to submarine internet cables.

First, a bit of background. A bourse is a, typically European, word
which refers to a stock exchange. Great, so Iran is going to have
their own “oil stock exchange,” but why does this matter? The Iranian
oil bourse was going to be a stock market for petroluem,
petrochemicals and gas. What’s the big catch here? The exchange
planned on being ran with currencies excluding the U.S. dollar. If you
remember from earlier in the post, Iran stopped allowing purchases of
their oil with the U.S. dollar in December of 2007. So, obviously, the
U.S. is not going to be happy about this. The biggest piece of
information linking this to the recent damages is the proposed
location of the bourse: the island of Kish. This is the island that is
RIGHT NEXT TO at least two of the cuts that have recently occurred:

And the locations of the cable damages once more:

To make matters even more interesting, the bourse was scheduled to
open this month.

Some of you may suddenly be thinking to yourselves that this sounds
familiar. That’s because the last person who decided to stop using the
U.S. dollar for trading oil was a man by the name of Saddam Hussein in
the fall of 2000.

[UPDATE: To further add to this argument, this would not be the first
time the U.S. would have disrupted submarine cables to further
themselves in times of war or conflict.]
(Operation Ivy Bells)
(Previous NSA Submarine Wiretaps)

As I said before, these are bits of information that hopefully others
can use as a resource to determine the true cause of these massive
internet outages that we have seen over the last couple weeks. I am
not blaming one source or the other. I am simply helping to increase
the awareness of what may really be happening right under our noses.

“Whoever undertakes to set himself up as a judge of Truth and
Knowledge is shipwrecked by the laughter of the gods.” – Albert

If you have additional information or updates to this, please drop me
a line. My email address is writer at


Cable Cut Fever Grips the Web
Are underseas telecom cable cuts the new IEDs?
BY Ryan Singel  /  February 06, 2008

Stephan Beckert of TeleGeography Research says it’s all a bit much:

“I’m much more worried about terrorists blowing up people than
cables,” Beckert said. “If you cut a cable, all you are doing is
inconveniencing a lot of people.”

Only the first two cuts had any serious impact on the internet, says
Beckert. Those cables near Alexandria, Egypt account for 76 percent of
the capacity through the Suez canal — connecting Europe with the
Middle East, North Africa and the India sub-continent.

Once those failures sensitized a conspiracy-happy net, it was natural
that other cable failures would be found to feed the frenzy, because
they occur all the time.

“Cable cuts happen on average once every three days,” Beckert said.
There are 25 large ships that do nothing but fix cable cuts and bends,
Beckert adds.

While any severed cable is a “cut” in the parlance of telecom, most
often they’re the result of cables rubbing against sea floor rocks,
eventually cutting through the copper shielding and exposing the thin
fiber optics inside.

Normally, netizens have no idea when there are cable cuts since large
providers instantly re-route communications through other cables.

“These outages don’t usually affect end users,” Beckert said. “For
example, Verizon doesn’t just have one link across the Atlantic, they
have seven, eight or nine they can route capacity on.”

Professional terrorist fear monger Annie Jacobsen says Middle Eastern
governments are lying about the real reason for the cuts. 9/11
truthers suggested the cuts came in preparation for a U.S. government-
faked terrorist attack on the Super Bowl. Bloggers have suggested that
the cuts are cover for the NSA installing taps on the lines using the
U.S.S. Jimmy Carter. The commander, though, seems to have an alibi.

That said, even some security experts who early on dismissed
suggestions of intentional sabotage are starting to get a little

Take Columbia University Professor Steven Bellovin, a computer
security and networking expert, for one:

As a security guy, I’m paranoid, but I don’t understand the threat
model here. On the other hand, four accidental failures in a week is a
bit hard to swallow, too. Let’s hope there will be close, open
examination of the failed parts of the cables.

Last week Todd Underwood, a vice president at internet analysis firm
Renesys, told THREAT LEVEL that outages are to be be expected. But on
Wednesday, he sounded a more cautious note.

“There’s a little cause to be suspicious but there is no smoking gun,”
Underwood said.

If the cuts were deliberate, one has to answer the question of means,
motive and opportunity. Since it’s not that hard to sever an
unprotected cable, the real question is motive, according to

“Its difficult to tell what the motive would be: is it just to annoy
people?” Underwood said. “If it were targeted, the targeting is bad.
The loonies on the American left say this was us targeting Iran. If
this is us targeting Iran, we are much worse than I thought we were.”

“Are we really targeting India or Pakistan?” Underwood asked

The real answer will likely come once the repair ships begin pulling
up the cable from the sea floor to repair it in the coming days and
weeks, according to Underwood.

“Then we will know quite a bit more,” Underwood said. “Does it look
like an anchor hit or did someone take an acetylene torch to it?”




Quoth the late, great Reverend Ivan Stang of the church of the
subgenius; Attributed and expanded…
“Of all conspiracy theories out there, there is one above them all.
All conspirators pay homage to it, be they the Yeti, the Men in Black,
the CIA, NSA, IRS, the Learned Elders of Zion and even the Reptillian
Overlords from Draco. This is known simply as “The Conspiracy”… What
is it? Simply put, the attack on Conspiracy theorists using the most
negative aspects of it. A person who compares the prices of three
‘competing’ phone companies and finds them similar becomes equated
with the person that calls the radio show and says that martians are
sending robots disquised as dogs but when you cut them open you see
blood and guts and stuff because of their ‘raydeo waves’…”
Posted by: Conspiracy! | Feb 6, 2008 2:45:52 PM

You wrote:
“There are not 8 confirmed cuts. Your type of “reporting” is exactly
why I had to write this post.”

There are ***EIGHT*** (or nine if you count the “unreported one from
Jan. 23).
Two off of Alexandria, Egypt
One in the Suez, Egypt
One off of Marseille, France
One off of Dubai, in the Persian Gulf
One off of Bandar Abbas, Iran in the Persian Gulf
One between Qatar and the UAE, in the Persian Gulf
One near Penang, Malaysia

Here they are:
THREE IN EGYPT – one running through the Suez to Sri Lanka; two near
“DUBAI (Zawya Dow Jones)–A third undersea fibre optic cable running
through the Suez to Sri Lanka was cut Friday, said a Flag official.
Two other fiber optic cables owned by Flag Telecom and consortium SEA-
ME-WE 4 located near Alexandria, Egypt, were damaged Wednesday leading
to a slowdown in Internet and telephone services in the Middle East
and South Asia.”
Here’s number FOUR: “the other in the waters off Marseille, France,
telecommunications operators said.”
Here’s FIVE: Between Dubai and Oman
“Internet provider in UAE confirms undersea cable cut between Dubai,
Oman, cause unknown”
Number SIX: near Bandar Abbas, Iran (being avoided by major media as
it’s in IRAN and will really stoke conspiracy “theories”???)
“FALCON near Bandar Abbas in Iran and SeaMeWe-4”
“FALCON Segment 7a – Fault 1st February between BND (Bandar Abbas,
Iran) and KWI (Kuwait), we are waiting for ship to go out and it maybe
fixed before going out the fault on 7b – to be confirmed.”
“FALCON Segment 7b (Bandra Abbas – Al Seeb) – E-Marine continues to
await the permit to enter the Iranian waters and current forecast for
the ship to start a work is around 19th February.”
Number SEVEN: Between Qatar and the UAE:
“An undersea telecom cable linking Qatar to the UAE was reported
damaged on Friday”
“This is the third incident of its kind in the area since January 30
since the cables were first damaged in the Mediterranean and then off
the coast of Dubai, causing widespread disruption to Internet and
international telephone services in Egypt, Gulf Arab states and south
And, number EIGHT: near Penang, Malaysia
“SeaMeWe-4 (South East Asia-Middle East-Western Europe-4) near Penang,
Number NINE: “unreported”
“The first cut in the undersea Internet cable occurred on January 23,
in the Flag Telcoms FALCON submarine cable which was not reported.
This has not been repaired yet and the cause remains unknown,
explained Jaishanker.”
So, there ya have it. At least EIGHT, if not NINE.
Posted by: EIGHT CUTS! – Search them! | Feb 6, 2008 3:23:24 PM

While we’re all throwing out wild causal speculations on events that
are themselves speculative in nature, mind if I put in my two cents?
Responding to Mr. Underwood’s (initial) skepticism, say its not a
prelude to a US attack. And in light of Sen. Rockefeller’s comments
today re: the NSA’s global operations, maybe the aim wasn’t to take
out certain cables. Just make sure that only the right ones are left
for traffic to be re-routed to.
Either that or, if not a Seawolf sub engaged in shenanigans on the
seabed (as laid out in “Blind Mans Bluff”) perhaps a less-capable,
less-skilled regional power might be attempting similar shenanigans
this time around. Its likely only their failed taps would be detected
as cable failure, and the successful taps would likely remain
undiscovered, no?
But it’s probably just a simple fact that the world is become more
wired and more unmanageable with each passing year, and accidents WILL
Posted by: SPD | Feb 6, 2008 3:34:46 PM

Easy to say that Iran has internets, but the facts beg to differ:
Let’s all just hope this is not in preparation for GWB’s last and
worst criminal offense- war with Iran.
Posted by: PluriMediaGroup | Feb 6, 2008 3:36:42 PM

Has anyone considered this as part of an elaborate man in the middle
known text cypher attack aimed at manipulating financial transactions
by altering timecode stamps? Cable splicing often involves the use of
buffers that store data and retransmit it time delayed. A tiny
fractional time variation in a financial transaction can translate
into huge amounts of money if applied many times.
Posted by: Bruce Surly, Counterpain | Feb 6, 2008 3:39:03 PM

This one has Bush bin Laden written all over it, six ways from Sunday.
Lori R. Price
Mgr., Citizens For Legitimate Government
“Hi, mom, this is Mark Bingham… you believe me, don’t you?” Mark
Bingham – Sept. 11, 2001
Posted by: Lori Price | Feb 6, 2008 4:38:26 PM

Telegeography, Inc.? A division of Primetrica? WTF? Go to their
websites: and . Read their literature and tell me
they don’t look exactly like CIA front corporations or some such
Strategic, Analytic, Intelligence (all terms from their website)
Mr. Beckert, I think you are lying.
Posted by: Free | Feb 6, 2008 4:47:10 PM

They [Iran] haven’t had internet according to that webpage for a week.
(I’ve been watching too)
Posted by: Randy | Feb 6, 2008 4:56:25 PM

@ There are 8 –
You are counting the same cuts over and over. The 3 in the market
watch include the two from the Times article. The Times report on the
Marseille cut is very likely inaccurate and was really in Egypt as
every one else reported.
That takes 3 away from your count. No one will know how or why until
the cables get pulled up.
Posted by: Ryan Singel | Feb 6, 2008 5:00:30 PM

An unknown number of cables cut AND the Maharishi died today. What it
means, I don’t know but don’t speak to me of coincidence!
Posted by: Caesar Tjalbo | Feb 6, 2008 5:05:06 PM

to start sorry spelling sorry gramma.
ok its like this i recon… cut cable leading to information u want…
move away from severed point to another point on same cabel… sever
same cable again buy splice in your own info stealing apparatus…
wait for rich fat corps to fix there own cable again… nobody knows
your info is being intercepted and stolen… vwalla. thanks for
comming have a nice day.
Posted by: annon | Feb 6, 2008 5:12:56 PM

Connecting The Many Undersea Cut Cable Dots
1) one off of Marseille, France
2) two off of Alexandria, Egypt
3) one off of Dubai, in the Persian Gulf
4) one off of Bandar Abbas, Iran in the Persian Gulf
5) one between Qatar and the UAE, in the Persian Gulf
6) one in the Suez, Egypt
7) one near Penang, Malaysia
8) initially unreported cable cut on 23 January 2008 ( Persian Gulf? )

Three things stand out about these incidents:
1) all of them, save one, have occurred in waters near predominantly
Muslim nations, causing disruption in those countries;
2) all but two of the cut/damaged cables are in Middle Eastern waters;
3) so many like incidents in such a short period of time suggests that
they are not accidents, but are in fact deliberate acts, i.e.,

The evidence therefore suggests that we are looking at a coordinated
program of undersea cable sabotage by an actor, or actors, on the
international stage with an anti-Muslim bias, as well as a proclivity
for destructive violence in the Middle Eastern region. The question
then becomes: are there any actors on the international stage who
exhibit a strong, anti-Muslim bias in their foreign relations, who
have the technical capability to carry out clandestine sabotage
operations on the sea floor, and who have exhibited a pattern of
violently destructive policies towards Muslim peoples and nations,
especially in the Middle East region? The answer is yes, there are
two: Israel and the United States of America.
Posted by: bernard shakey | Feb 6, 2008 5:17:02 PM

Ryan, I’m so glad to read an article that looks at both sides and
makes sense.
You’re correct; if it’s with motive, then the attackers’ are idiots.
Now, if I hear that an EMP goes off in Iran, then well…..well I’m
sure I’ll never hear the end of it.
Posted by: Flomaster ’95 | Feb 6, 2008 5:22:43 PM

I got an anonymous IM from someone who works for Haliburton in the
mideast. He says there is 3 teams of techs that are installing taps on
the mideast internet backbones. They have to break the wire to install
the tap. Normally they synchronize their work so there’s no more than
one break every couple of days. What happened was they messed up the
dates. Someone wrote down the wrong dates, and they all broke cables
for taps right around the same time because they were rushing to get a
day off to watch the superbowl.
Posted by: Johnny | Feb 6, 2008 6:10:52 PM

The cable cuts are designed to disrupt the Iranian Oil Bourse.
Posted by: Richard | Feb 6, 2008 6:14:23 PM

The tally is in. Johnny is our runner up for second funniest post with
“‘Anonymous Haliburton IM.” The funniest goes to ….
dorkhero for “bite marks”! Congratulations to our winners the rest of
you need to try harder next time.
Posted by: Simon | Feb 6, 2008 6:49:50 PM

The last time a mid-east country threatened to start selling oil in
Euros (Saddam 2002) we got shock and awe. This time (Iran Oil Bourse)
the response is a little more sophisticated and probably as effective.
Thou shalt not attempt to kill the flaky greenback.
Posted by: Pat | Feb 6, 2008 9:25:36 PM

wires work two ways though. maybe nobody wants anyone to see what’s
going on inside somewhere.
Posted by: ian | Feb 7, 2008 12:16:08 AM

before we go to monsters inc. what are the physics of u/w cables?
pretty heavy some whale species might be able to yank away but you’d
have to be pretty mad to be able to cut this seems beyond me – however
there was a programme on uk tv recently where it was found that
dolphins were being murdered by their own kind
Posted by: peter | Feb 7, 2008 1:18:40 AM

it was me. i cut the cable.
Posted by: jorge | Feb 7, 2008 1:48:36 AM

Ok – assuming it was the EVIL US/Israel. Why? To prevent Iran from
communicating with its vast empire? Radio still works, Sat phones/
links still work, intra-country lines still work – communications have
only been impacted and not prevented. Plus it’s a huge signal of
intent if you cut cables, then wait weeks before actually attacking.
Heck, if we’re playing conspiracy theory – I’d bet it was the Mid-East
despots themselves who cut the cables. Why let your citizens view
western values and send pictures of what is actually happening? Better
to control them by limiting their communication with the outside
Posted by: scott | Feb 7, 2008 5:28:57 AM

Here’s a variant on the conspiracy I really like! Assume the cuts were
deliberate and calculated. The effect of the cuts are to re-route
internet traffic between Northern Europe and Pakistan so
that it now traverses the USA. Who might want that?
Posted by: tinhat | Feb 7, 2008 5:34:08 AM

Israel is NOT cut off from the internet. Most people reading this
probably already know this, but I’ll explain it for the rest of you. makes it’s measurment by pinging ONE
specific address. For Iran, they use They haven’t
gotten a response from that ONE address for a few days, so they show
the ENTIRE country as offline, when really it’s just one router which
is offline or maybe just has a different address now. Check out
or, which have the same domain and are working fine.
Not only is Iran online, but the Iranian University with the bad
router address is also online.
Posted by: Stan | Feb 7, 2008 6:00:16 AM

You are all missing it! It is Diebold that is cutting the cables. That
way the Intraweb tubes won’t work and nobody will know about their
dastardly plan to re-elect ChimpyBusHitler by manipulating the votes
in Iran.
Posted by: Connect the dots! | Feb 7, 2008 6:04:23 AM

I like tinhat’s twist… Especially considering the CIA analyst’s
statement last month about cyber-hackers (OOOoooOOOOooohhhh…)
takingdown power grids in other countries.,141564-c,hackers/article.html
Which countries? He won’t say, but the CIA definitely needs to snoop
on all packets that enter and leave the US to protect us from…?
Posted by: manny | Feb 7, 2008 6:05:52 AM

I love how all these people insisting that the internet traffic report
site shows Iran really is completely offline and the people claiming
otherwise are liars have not taken the simple step of CHECKING AN
IRANIAN WEBSITE to see if it is reachable. Go on, give it a try. The
results may surprise you. Here are some links to get you started:
Posted by: Fearmonger | Feb 7, 2008 6:54:36 AM

I heard that they have found stingray barbs and saltwater crocodile
bites in the cables. Experts are theorizing that it could be a group
of rebel fish that have partnered up with a reptile militia.
Apparently, they have not liked the way they have been portrayed in
the world media over the past few years. They would have struck sooner
but travel time was longer than expected.
Posted by: getyourbone | Feb 7, 2008 7:01:02 AM

All the troother stuff aside, the USS Jimmy Carter is not the only
vessel capable of this sort of thing. and this is not the first time
this has been done. During the cold war, the US tapped a subsea cable
in the white sea that was used by the Soviets to communicate with
their missile sub bases. We tapped their communications for years
before they found the tap.
We have a number of Navy “oceanographic vessels” with ROV and
Saturation Diving capability all over the world. Any of them would be
capable of doing this as well.
Posted by: Rorschach | Feb 7, 2008 7:22:12 AM

I used to work at Bellcore (and tellabs and other places) in the field
of Optical Networks and Fiber media and components. I regard the
possibility of 4 fiber cuts (ok, three and one power outage) in such a
small area of the world remote at best.
An undersea cable is designed to withstand enormous pressures and
physical conditions, and that’s why, throughout the world, there are
only 11 cuts over the millions of deployed route-miles.
The idea of isolating Iran through this is not, I think, particularly
credible, particularly seeing that it would do far more damage to
western economies than to Iran.
The four cuts appear to my eyes to be an uninformed attempt to break
the working and protect sides of undersea BLSR (or their SDH
equivalent) fiber rings. Given their proximity to one another in both
time and space I can not ignore the possibility that this is not an
accident, and the author’s assumption that any belief on the contrary
is way below the normal standard for Wired.
Posted by: Em | Feb 7, 2008 8:04:01 AM

Iran’s global oil bourse was due to open this week – trading oil & gas
for euros and yen. Iran has no Internet access atm – witness
and, both down. It’s pretty obvious what is happening. The
oil bourse was due to start in March 2006 originally but had lots and
lots of difficulties. Hrm, I wonder who would shutdown Iran’s oil
bourse… it’s so hard to conceive…
Posted by: GreyGhost | Feb 7, 2008 8:50:27 AM

This is what is actually happening:
A rich communications tycoon was killed, and his daughter inherited
the business. She’s building an overland fibre optic link across the
Middle East, and wants to make sure it will be a success. She got a
guy that once kidnapped her to hijack a Russian submarine, and
secretly they are going around the seas of the Middle East sabotaging
cables. I’m trying to stop it all, but my BMW got cut in half by a
helicopter while I was driving along a pier.
For the daughter of the communications tycoon, The World Is Not
Posted by: JB | Feb 7, 2008 9:14:18 AM

I have never seen so many idiots posting in one spot. Iran has not
lost net connectivity. One router in Iran — the one that happens to
be used by Internet Traffic Report — is unreachable. As are dozens of
single points on the internet in many states in the region. By the
same metric, Columbia, Germany, and Florida are also now offline. A
quick perusal of, e.g., newspaper web sites in Iran finds every one I
have tried working fine, including all state-run media:
As is the web site of the Government of Iran:
…and numerous other government and press web sites physically
located in Iran. See for yourself:
(And yes, I am aware that simply ending in .ir does not mean the site
is necessarily physically in Iran, but you can easily verify via ARIN
that nearly all of them are.) So the premise that Iran is “offline”
and its implication are inaccurate.

Also, to the last poor fool who said “” and “” are
1. and are both up.
2. and are not even in Iran.
And, on the Oil Bourse: Iran can still conduct the bourse WITHOUT
undersea cable connectivity. They have missed their own deadlines
three times for opening the bourse, and just because it opens with all
the rhetoric of not using the dollar doesn’t mean it will be
successful. When all you can come up with is links from Iran’s state
run press and “Dissident Voice”, you’re really reaching. You people
are an embarrassment, literally, to the notion that humans are
intelligent. Get a life, or at least a grip on reality.

Dave Schroeder
das [at] doit [dot] wisc [dot] edu
Posted by: Dave Schroeder | Feb 7, 2008 9:18:09 AM

“If you cut a cable, all you are doing is inconveniencing a lot of
people.'” You need to understand Muslim radicals’ motives. They are
isolationists. Their main motive for blowing up people in Iraq and
Israel (what they call Palestine) is not only hate, they want us to
get out. At the same time, they don’t want Western cultural
influences. When you have iTunes, (and, and a ton
of other stuff that they view as filthy (ie’s upcoming swimsuit
issue) coming over these fiber-optic cables and a sea chart that says
“Don’t Drop Anchor Here! Fiber Optic Cable”, what do you expect?
(They’ll drop their anchor)
Posted by: Ed | Feb 7, 2008 9:20:34 AM

Well, if any ill-intending evil organizations (including, of course,
all of them everywhere) haven’t considered these ideas before, perhaps
they will now. Does speculating on cutting, tapping, fund rerouting,
etc…schemes that eventually leads to someone actually doing said
scheme result in treason or conspiracy? If terrorists read Wired, see
and use your idea, could you be held accountable? If the US is the one
to use it to great terrible deadly ends, do you get a medal?
While were at it, though, we could postulate a few more evil schemes.
Perhaps cutting the wires to convince the affected country that they
need a new infrastructure, resulting in billion dollar loans and
revenue to US/USbacked contracting organizations, who would then
rebuild the infrastructure, but leaving the country with
insurmountable debt. John Perkins type jackal and Economic HitMan
Posted by: iZealot | Feb 7, 2008 9:26:06 AM

I think its part of the marketing campaign for Cloverfield.
Posted by: marcusjones | Feb 7, 2008 10:18:20 AM

The MQ-1B Predator is controlled from Las Vegas via underground and
underwater fiber-optic cables linking the ground-control stations to
Europe, where a satellite dish makes the connection directly to every
Predator in the air.
Posted by: mdubbleyou | Feb 7, 2008 10:20:26 AM

It’s not a conspiracy. It’s Godzilla.
Posted by: Ray Eston Smith Jr | Feb 7, 2008 10:54:13 AM

Ray Eston Smith Jr, it’s not Godzilla. Godzilla would be cutting
cables near Japan, not Egypt. It’s the Goa’uld.
Posted by: Dalkorian | Feb 7, 2008 12:54:22 PM

Because of the internet being cut in half, my face has eaten a yard of
sweetened bread!
Who will this madness pie?? I have links to webpages, so that proves
Posted by: Sirch | Feb 7, 2008 1:22:26 PM

A frantic young female CIA agent is strangled in the style of a
jihaidist who has been dead for many years. An American journalist
unearths a clue to the the crime. She discovers that she herself is
actually responsible for the cut of the cables!
Posted by: The Do-It-Yourself Conspiracy Generator | Feb 7, 2008
1:36:28 PM

An American agent has her throat cut in a mosque. A TSA employee
overhears a conversation about the crime; and he unravels the
complicated plot and leads the FBI to the cable cutter. Unfortunately,
he is mistaken, and soon the real cable cutter is on his internet.
Posted by: he Do-It-Yourself Conspiracy Generator | Feb 7, 2008
1:39:08 PM

There is also a great deal of information available here:
Posted by: Taolf Sujat | Feb 7, 2008 1:56:10 PM












Posted by: Fronz | Feb 7, 2008 1:57:25 PM

I told my professor that I did not do my homework cause the cables had
been sabotaged. Even she didn’t believe me… :(
Posted by: aloowalah | Feb 7, 2008 2:12:52 PM

it’s been done before.
Look up “Operation Ivy Bells”.
Posted by: knowledgeable | Feb 7, 2008 2:25:02 PM

Are we sure its not just cooper thieves?
Posted by: | Feb 7, 2008 2:49:32 PM

They have the internet on computers now?
Posted by: U.Pseudonym | Feb 7, 2008 5:18:03 PM

ok here it is again: ok its like this i recon… cut cable leading to
information u want… move away from severed point to another point on
same cabel… sever same cable again buy splice in your own info
stealing apparatus… wait for rich fat corps to fix there own cable
again… nobody knows your info is being intercepted and stolen…
vwalla. thanks for comming have a nice day.
Posted by: annon | Feb 7, 2008 6:51:15 PM

These events(4 to 8 cables being cut) highlight the fact that their
may, or may not be, a vast or minute conspiracy to effect some thing,
some where in the world for some purpose. I think that solves it. If
not conspiracy, then it must be the same guy who stole the cables from
the train station here in Gloucester Mass. Maybe copper thieves are
forming an international conspiracy!
Posted by: captinseafood | Feb 7, 2008 6:58:30 PM

and again so u can get in ur heads. coz its realy this simple. ok here
it is again. ok its like this i recon… cut cable leading to
information u want… move away from severed point to another point on
same cabel… sever same cable again buy splice in your own info
stealing apparatus… wait for rich fat corps to fix there own cable
again… nobody knows your info is being intercepted and stolen…
vwalla. thanks for comming have a nice day.
Posted by: annon | Feb 7, 2008 6:59:15 PM

so iran has still internet and we all just nuts tinfoil hats? good so
explain this :
Posted by: trustno1 | Feb 8, 2008 5:28:51 AM

Interview with a senior telecommunications analyst with his thoughts
on whether the cuts were intentional and the impact on global
Posted by: | Feb 8, 2008 9:10:02 AM

I don’t know why other Americans are making snarky comments about this
issue, especially on the Wall Street Journal or Wired.
If the Iran oil bourse is successful, others will follow. Americans
will then use $100 dollar bills to heat their homes, because they will
be worthless.
Posted by: wake up Americans | Feb 9, 2008 8:41:40 AM

The Internet Traffic Report page monitors ONE ROUTER at an academic
institution in Iran. That router is currently unreachable. It is ONE
ROUTER. Please go back and read my previous post. Every single
newspaper and other web site in Iran, including state controlled
media, universities, official government web sites, and even
Ahmadenijad’s personal “blog” are all up. Did you read nothing I said?
Iran has NOT lost connectivity, and never did. Therefore, your
ridiculous assertions based on this provably false claim are all

Again, please read my Feb 7 post above, and see for yourself. Sorry to
burst your little conspiracy theory bubble. (I also can’t believe that
you’re using Internet Traffic Report as “proof” of anything when all
it does is use a SINGLE POINT in any nation as a point of reference
for whether the ENTIRE COUNTRY is up or down.

By Internet Traffic Report’s measures, here are some other things that
are down:

Oh well…at least reading comments from people like yourself provides
some good humor.

Dave Schroeder
das [at] doit [dot] wisc [dot] edu
Posted by: Dave Schroeder | Feb 9, 2008 9:07:18 AM

even if i was on pirpous ham radio would spred the word like we did
with cherinoble…hams will allwas tell the truth… no govermint can
stop us ..
Posted by: Peter | Feb 9, 2008 7:38:37 PM

It would be counterproductive for Al Qaeda, since they’re all about
the propaganda videos & they really do have their geeky side with
their websites etc, I would think these groups would be last to want
their propaganda pipelines cut. Wouldn’t you need a sub to do stuff
like this? That narrows it to a handful of countries – or former
countries with large, rich, erm… ‘business interests’ with access to
abandoned military gear. I’m still trying to grasp the ‘why’ of it
all. Extortion?
Posted by: punterjoe | Feb 10, 2008 5:36:23 AM

Consider the possibility that it is connected to Iran going off petro-
dollars to petro-euros. Consider the scheduled opening of the Iranian
oil bourse. Then ask yourself which government would most hate for
Iran to go off the dollar.
Posted by: Evelyn | Feb 11, 2008 11:35:44 AM

I found a really great guide with lots of detailed pictures and quotes
Posted by: Taolf Sujat | Feb 12, 2008 9:38:39 PM

Ever since those cables have been cut, the number of spam messages I
have received has dropped to a fraction of what they used to be. Maybe
the cables should be left.
Posted by: vonbulow | Feb 13, 2008 5:04:20 PM

From the archive, originally posted by: [ spectre ]


Are We Being Watched by Flying Robot Insects?
BY John Mahoney  /  10/2007

Now, this is pretty weird. Rumors have been floating around the Net
for a while now speculating on whether or not tiny, dragonfly-like
robots have been covertly monitoring recent political demonstrations
and protests around Washington, D.C., and New York. Numerous
protesters at multiple events have reported seeing the helicopter-like
insectoid entities, fueling suspicion that something sneaky was afoot.
Yesterday the Washington Post brought the story mainstream in the
interests of solving the case. What did they discover?

Basically, if the claims are true, someone has made great (and secret)
strides in the field of robots capable of mimicking insectoid flight-
something that’s currently incredibly difficult to do. Research teams
at universities across the country including Caltech, Vanderbilt and
Harvard, are all trying to reproduce insect-like flight in a man-made
robot-some of them even for the intended purpose of surveillance.
None, however, have gotten anywhere near the sophistication required
to engineer the minuscule, agile critters described by the protesters.

The Post also mentioned one of Darpa’s creepiest programs: the race to
embed microchips in the brains of moths and butterflies in the pupal
stage that will eventually fuse to the more developed adults’ brains,
enabling control over their actions. PopSci reported on this and other
ways that bugs are being enlisted for defense earlier this year.
Thankfully, said program is many, many years from realization.

As of now, no one has netted one of these mysterious creatures for
study. Here’s hoping a Homeland Security robo-bug pilot gets sleepy
sometime soon and allows one to be captured. Until then, protesters,
keep your eyes to the sky.



Bugging Out on Homeland Security

Wings, antennae and scales may be our best weapons yet against toxins
and explosives
By Abby Seiff  /  March 2007

Annoying as they are, you may want to think twice before you crush a
cockroach or swat a fly-you could be killing a future foot soldier in
the war on terror. Increasingly, scientists are turning to insects and
other creatures for better ways to identify biohazards.

“Cockroaches can detect all kinds of things, from anthrax spores to
DNA,” says Karen Kester, an entomologist at Virginia Commonwealth
University. With $1 million in funding from the Pentagon’s Defense
Advanced Research Projects Agency (Darpa), Kester is studying ways to
use roaches and houseflies as toxin sentinels inside contaminated
buildings or subways. This, of course, spares humans the job, and it
may prove more effective than mechanical sensors, which often lack the
range and sensitivity of their living counterparts.

Bees and fish are also in demand. A small British biotechnology firm
called Inscentinel is employing the finely tuned olfactory system of
bees to sniff for explosives. And New York, California and Maryland
are exploiting the highly sensitive nervous system of bluegill fish to
test for toxins in municipal water supplies. Bill Lawler, co-founder
of Intelligent Automation Corporation, the California company that
sells the bluegill-monitoring system, says living sensors are “the
wave of the future.” So go easy on the Raid.


Micro Inertial Navigation Technology (MINT)
Program Manager and PoC: Dr. Amit Lal
Document Type: Presolicitation Notice
Solicitation Number: BAA07-53
Posted Date: Jun 29, 2007
Original Response Date: Sep 18, 2007
Current Response Date: Sep 18, 2007
Original Archive Date: Jul 03, 2008
Current Archive Date: Jul 03, 2008
Classification Code: A — Research & Development
Naics Code: 541710 — Research and Development in the Physical,
Engineering, and Life Sciences


DARPA is soliciting innovative research and development (R&D)
proposals in the area of Micro Inertial Navigation Technology (MINT).
Proposed research should investigate innovative approaches that enable
revolutionary advances in science, devices, or systems. Specifically
excluded is research that primarily results in evolutionary
improvements to the existing state of practice.

The overall goal of this program is to create navigation sensors that
use secondary inertial variables, such as velocity, to enable long
term precise navigation that a traditional IMU equipped only with
accelerometers and gyros cannot accomplish. This program seeks the
creation of micro and nano scale low-power navigation sensors that
allow long term (hours to days) GPS denied precision navigation. The
sensors should be small enough to be placed in small compartments,
such as the shoe sole or small UAVs, where zero relative velocity
measurement may be accomplished with high accuracy. The power
consumption of the sensors should be small, ideally compatible with
energy harvested during locomotion, so that the weight load due to
batteries powering the sensors is minimized. The sensor technology
should work over wide temperature range and shock environment that is
typical in DOD applications

DARPA Broad Agency Announcement (BAA) No. 07-53, entitled “Micro
Inertial Navigation Technology (MINT),” is provided as an attachment
to this solicitation notice and includes information on the specific
areas of interest; the submission process; abstract and proposal
formats; evaluation and selection/funding processes; as well as all
other pertinent administrative and contractual information. The BAA
may be obtained from the FedBizOpps website:, website:, World Wide Web (WWW) at
URL (go to “solicitation” area) or by fax,
electronic mail, or mail request to the administrative contact address
given below. Proposals not meeting the format or following the
submission instructions described in the BAA may not be reviewed.


A “Proposer’s Questions,” website will be posted for BAA 07-53 on the
DARPA, Microsystems Technology Office solicitations page
( If you would like to have a question
answered and posted on this site, please send your question to the
following address: BAA07-53 [at] darpa [dot] mil [dot]

Amit Lal, DARPA Program Manager,
Phone 571-218-4682, Fax 703-248-1933,
Email amit [dot] lal [at] darpa [dot] mil

Microsystems Technology Office (MTO)
T: (571)218-4682 / F: (703)696-2206

Michael Blackstone, Contracting Officer,
Phone (571) 218-4804, Fax (703) 696-2208,
Email michael [dot] blackstone [at] darpa [dot] mil



Dragonfly or Insect Spy? Scientists at Work on Robobugs
By Rick Weiss  /  October 9, 2007

Vanessa Alarcon saw them while working at an antiwar rally in
Lafayette Square last month.

“I heard someone say, ‘Oh my god, look at those,’ ” the college senior
from New York recalled. “I look up and I’m like, ‘What the hell is
that?’ They looked kind of like dragonflies or little helicopters. But
I mean, those are not insects.”

Out in the crowd, Bernard Crane saw them, too.

“I’d never seen anything like it in my life,” the Washington lawyer
said. “They were large for dragonflies. I thought, ‘Is that
mechanical, or is that alive?’ ”

That is just one of the questions hovering over a handful of similar
sightings at political events in Washington and New York. Some suspect
the insectlike drones are high-tech surveillance tools, perhaps
deployed by the Department of Homeland Security.

Others think they are, well, dragonflies — an ancient order of
insects that even biologists concede look about as robotic as a living
creature can look.

No agency admits to having deployed insect-size spy drones. But a
number of U.S. government and private entities acknowledge they are
trying. Some federally funded teams are even growing live insects with
computer chips in them, with the goal of mounting spyware on their
bodies and controlling their flight muscles remotely.

The robobugs could follow suspects, guide missiles to targets or
navigate the crannies of collapsed buildings to find survivors.

The technical challenges of creating robotic insects are daunting, and
most experts doubt that fully working models exist yet.

“If you find something, let me know,” said Gary Anderson of the
Defense Department’s Rapid Reaction Technology Office.

But the CIA secretly developed a simple dragonfly snooper as long ago
as the 1970s. And given recent advances, even skeptics say there is
always a chance that some agency has quietly managed to make something

“America can be pretty sneaky,” said Tom Ehrhard, a retired Air Force
colonel and expert in unmanned aerial vehicles who is now at the
Center for Strategic and Budgetary Assessments, a nonprofit Washington-
based research institute.

Robotic fliers have been used by the military since World War II, but
in the past decade their numbers and level of sophistication have
increased enormously. Defense Department documents describe nearly 100
different models in use today, some as tiny as birds, and some the
size of small planes.

All told, the nation’s fleet of flying robots logged more than 160,000
flight hours last year — a more than fourfold increase since 2003. A
recent report by the U.S. Army Command and General Staff College
warned that if traffic rules are not clarified soon, the glut of
unmanned vehicles “could render military airspace chaotic and
potentially dangerous.”

But getting from bird size to bug size is not a simple matter of
making everything smaller.

“You can’t make a conventional robot of metal and ball bearings and
just shrink the design down,” said Ronald Fearing, a roboticist at the
University of California at Berkeley. For one thing, the rules of
aerodynamics change at very tiny scales and require wings that flap in
precise ways — a huge engineering challenge.

Only recently have scientists come to understand how insects fly — a
biomechanical feat that, despite the evidence before scientists’ eyes,
was for decades deemed “theoretically impossible.” Just last month,
researchers at Cornell University published a physics paper clarifying
how dragonflies adjust the relative motions of their front and rear
wings to save energy while hovering.

That kind of finding is important to roboticists because flapping
fliers tend to be energy hogs, and batteries are heavy.

The CIA was among the earliest to tackle the problem. The
“insectothopter,” developed by the agency’s Office of Research and
Development 30 years ago, looked just like a dragonfly and contained a
tiny gasoline engine to make the four wings flap. It flew but was
ultimately declared a failure because it could not handle crosswinds.

Agency spokesman George Little said he could not talk about what the
CIA may have done since then. The Office of the Director of National
Intelligence, the Department of Homeland Security and the Secret
Service also declined to discuss the topic.

Only the FBI offered a declarative denial. “We don’t have anything
like that,” a spokesman said.

The Defense Department is trying, though.

In one approach, researchers funded by the Defense Advanced Research
Projects Agency (DARPA) are inserting computer chips into moth pupae
— the intermediate stage between a caterpillar and a flying adult —
and hatching them into healthy “cyborg moths.”

The Hybrid Insect Micro-Electro-Mechanical Systems project aims to
create literal shutterbugs — camera-toting insects whose nerves have
grown into their internal silicon chip so that wranglers can control
their activities. DARPA researchers are also raising cyborg beetles
with power for various instruments to be generated by their muscles.

“You might recall that Gandalf the friendly wizard in the recent
classic ‘Lord of the Rings’ used a moth to call in air support,” DARPA
program manager Amit Lal said at a symposium in August. Today, he
said, “this science fiction vision is within the realm of reality.”

A DARPA spokeswoman denied a reporter’s request to interview Lal or
others on the project.

The cyborg insect project has its share of doubters.

“I’ll be seriously dead before that program deploys,” said vice
admiral Joe Dyer, former commander of the Naval Air Systems Command,
now at iRobot in Burlington, Mass., which makes household and military

By contrast, fully mechanical micro-fliers are advancing quickly.

Researchers at the California Institute of Technology have made a
“microbat ornithopter” that flies freely and fits in the palm of one’s
hand. A Vanderbilt University team has made a similar device.

With their sail-like wings, neither of those would be mistaken for
insects. In July, however, a Harvard University team got a truly fly-
like robot airborne, its synthetic wings buzzing at 120 beats per

“It showed that we can manufacture the articulated, high-speed
structures that you need to re-create the complex wing motions that
insects produce,” said team leader Robert Wood.

The fly’s vanishingly thin materials were machined with lasers, then
folded into three-dimensional form “like a micro-origami,” he said.
Alternating electric fields make the wings flap. The whole thing
weighs just 65 milligrams, or a little more than the plastic head of a
push pin.

Still, it can fly only while attached to a threadlike tether that
supplies power, evidence that significant hurdles remain.

In August, at the International Symposium on Flying Insects and
Robots, held in Switzerland, Japanese researchers introduced radio-
controlled fliers with four-inch wingspans that resemble hawk moths.
Those who watch them fly, its creator wrote in the program, “feel
something of ‘living souls.’ ”

Others, taking a tip from the CIA, are making fliers that run on
chemical fuels instead of batteries. The “entomopter,” in early stages
of development at the Georgia Institute of Technology and resembling a
toy plane more than a bug, converts liquid fuel into a hot gas, which
powers four flapping wings and ancillary equipment.

“You can get more energy out of a drop of gasoline than out of a
battery the size of a drop of gasoline,” said team leader Robert

Even if the technical hurdles are overcome, insect-size fliers will
always be risky investments.

“They can get eaten by a bird, they can get caught in a spider web,”
said Fearing of Berkeley. “No matter how smart you are — you can put
a Pentium in there — if a bird comes at you at 30 miles per hour
there’s nothing you can do about it.”

Protesters might even nab one with a net — one of many reasons why
Ehrhard, the former Air Force colonel, and other experts said they
doubted that the hovering bugs spotted in Washington were spies.

So what was seen by Crane, Alarcon and a handful of others at the D.C.
march — and as far back as 2004, during the Republican National
Convention in New York, when one observant but perhaps paranoid peace-
march participant described on the Web “a jet-black dragonfly hovering
about 10 feet off the ground, precisely in the middle of 7th
avenue . . . watching us”?

They probably saw dragonflies, said Jerry Louton, an entomologist at
the National Museum of Natural History. Washington is home to some
large, spectacularly adorned dragonflies that “can knock your socks
off,” he said.

At the same time, he added, some details do not make sense. Three
people at the D.C. event independently described a row of spheres, the
size of small berries, attached along the tails of the big dragonflies
— an accoutrement that Louton could not explain. And all reported
seeing at least three maneuvering in unison.

“Dragonflies never fly in a pack,” he said.

Mara Verheyden-Hilliard of the Partnership for Civil Justice said her
group is investigating witness reports and has filed Freedom of
Information Act requests with several federal agencies. If such
devices are being used to spy on political activists, she said, “it
would be a significant violation of people’s civil rights.”

For many roboticists still struggling to get off the ground, however,
that concern — and their technology’s potential role — seems

“I don’t want people to get paranoid, but what can I say?” Fearing
said. “Cellphone cameras are already everywhere. It’s not that much


e-mail : fir [at] epfl [dot] ch


Micromechanical Flying Insect (MFI) Project The goal of the
micromechanical flying insect (MFI) project is to develop a 25 mm
(wingtip-to-wingtip) device capable of sustained autonomous flight.
The MFI is designed based on biomimetic principles to capture some of
the exceptional flight performance achieved by true flies. The high
performance of true flies is based on large forces generated by non-
steady state aerodynamics, a high power-to-weight ratio motor system,
and a high-speed control system with tightly integrated visual and
inertial sensors. Our design analysis shows us that piezoelectric
actuators and flexible thorax structures can provide the needed power
density and wing stroke, and that adequate power can be supplied by
lithium batteries charged by solar cells.

The MFI project started in May 1998. In the first 3 years of this MURI
grant, research concentrated on understanding fly flight aerodynamics
and on analysis, design and fabrication of MFI actuators, thorax and
wings. In August 2001, our MFI prototype (with 1 wing) showed thrust
forces on a test stand. In September 2002, we switched our fabrication
from folded stainless steel to carbon fiber. In March 2003 we
demonstrated 500 microNewtons of lift from a single wing on a test
stand. Since March 2003, we have been working on reducing weight,
increasing actuator power density, increasing air frame strength, and
improving wing control.

Overview of MFI project from UCB Public Affairs office:

Currently work on MFI flight control and sensors is sponsored by NSF
“Robotic Insect Flight Stabilization Using Biomimetic Sensors”, Jan
2005-. NSF Disclaimer: “This material is based upon work supported by
the National Science Foundation under Grant No. IIS-IIS-0412541. Any
opinions, findings and conclusions or recommendations expressed in
this material are those of the author(s) and do not necessarily
reflect the views of the National Science Foundation (NSF).”

Formerly sponsored by ONR MURI Biomimetic Robotics and DARPA
Controlled Biological Systems Program 1998-2003.


Military Builds Robotic Insects
by David Hambling  /  January 24, 2007
Published by Wired

If you feel something crawling on your neck, it might be a wasp or a
bee. Or it might be something much more dangerous.

Israel is developing a robot the size of a hornet to attack
terrorists. And although the prototype will not fly for three years,
killer Micro Air Vehicles, or MAVs, are much closer than that.

British Special Forces already use 6-inch MAV aircraft called WASPs
for reconnaissance in Afghanistan. The $3,000 WASP is operated with a
Gameboy-style controller and is nearly silent, so it can get very
close without being detected. A new development will reportedly see
the WASP fitted with a C4 explosive warhead for kamikaze attacks on
snipers. One newspaper dubbed it “The Talibanator.”

Fred Davis, technical director of the Assessment and Demonstrations
Division of the Air Force Research Laboratory Munitions Directorate at
Eglin Air Force Base in Florida, confirmed that the United States has
ambitious plans for future micro-munitions, which he says will be
pocket-sized with mission-specific payloads.

“You’re not going to be knocking down walls,” says Davis. “What we’re
looking at is functional defeat.”

This means preventing the target from carrying out its mission, rather
than destroying it, Davis says. A truck, for example, can be put out
of action by destroying its tires; a MAV can do this by squirting them
with few milliliters of a catalytic de-polymerization agent, causing
them to disintegrate rapidly.

Davis sees future MAVs landing and hopping or crawling on the ground
like insects, enabling them to get inside buildings. Once inside, an
entire command center can be disabled by targeting the power supply.

“You could short out the circuit box,” says Davis.

The MAV could do this by physically crawling inside like a wayward
squirrel, or it might release a cloud of metal-coated fibers —
similar to the “soft bombs” the Air Force used to shut down power
stations in Kosovo with a cloud of conductive whiskers. Such fibers
could effectively destroy PCs and other electronic gear as well as
interrupting power to a building.

But what about attacking people? The smallest munitions ever used by
the Air Force were “gravel mines” or “button bombs” dropped by the
millions in the Vietnam war, some weighing just a quarter of an ounce.
A crawling MAV could deliver this type of bomb to the victim’s most
vulnerable spot.

Or, as Davis suggests, the tiny vehicle itself might be the warhead.

“You can make the structure of the craft out of reactive (explosive)
material,” he says. Any unused fuel can add to the blast, a technique
already used in some surface-to-air missiles, and the explosion would
convert the rest of the MAV into lethal shrapnel.

Others have suggested “fire-ant warfare” with tiny robots that can
only do limited damage individually, but have enough cumulative effect
to overwhelm an opponent.

Poison needles or stings have also been proposed. Treaty obligations
would prevent the military from using this approach, but the CIA
developed lethal needles using shellfish toxin in the 1950s, and the
technology is on the shelf.

Of course, the bad guys can use Micro Air Vehicles too.

“After some development time, many countries would produce them,”
warns Juergen Altmann, a physicist at Dortmund University, working in
assessment of new military technologies. Indiscriminate use would
cause many civilian casualties — and they could end up in the hands
of terrorists.

“Big dangers can ensue from terrorists,” Altmann says. “For instance,
using MAVs with small explosive charges to assassinate high-level
politicians or to transport biological/chemical agents into protected

To prevent this danger, Altmann advocates an international ban on
armed MAVs, similar to the ban on landmines. Until then, development
will proceed apace.