The Debt Story

The debt story of America is going to serve as a wonderful tale to tell my grandchildren many years from now (considering I don’t even have children, this requires some assuming). The greatest thing about our current debt story is that its genre is so wonderfully flexible. Certainly the drama is there for anyone to see, and I don’t need to tell you about the scary part of the whole thing; it can certainly fill the ranks of a horror story. And what about the action category? You better believe that this debt story is action packed, with everything from market crashes to fire arm displays taking center stage. You could even weave this narrative into a musical if you liked, borrowing sounds from CNBC, Bloomberg and the like to fill your orchestra pit with. But perhaps the most overlooked though no less glaring theme to this debt story is the comical aspect. Yes, the comedy of it all! The comedic aspect of this debt story is not one to be over looked, and I promise you, just as Tacitus so playfully exposed the absurd musings and missteps of all those Caesars past, so too will future authors recall with absolute hilarity the absurdity of this period in human history. I stress human here, because although this is mostly an American story from a contemporary perspective, future historians will find it relevant no matter what tribe they hail from.

If you want one tiny example of what will perhaps be a footnote in a long list of examples that historians will salivate over decades, if not centuries from now, please digest for a moment the recent request by the Obama Whitehouse that the Senate raise the national debt limit beyond $12.1 trillion by mid-October. If you didn’t know that we even had a legislative limit on the national debt in place, don’t feel bad, because I didn’t either! Not only does congress actually place limits on the debt ceiling, but also it apparently has had to adjust these ceilings three times in the past two years!! The federal government is like an out of control teenager asking for cab money after just crashing the corvette through the garage door, which in turn smashed the commuter car right into the master bedroom. What else does this freak want from us? That’s a rhetorical question. It’s clear that he doesn’t know what he wants anymore, and is just going to keep smashing shit until there is nothing left to ask for.

Of course, this is not the funniest thing that has happened as a result of our fiscal “situation.” Remember when they had to eliminate the spot on the national debt clock that was originally used as a dollar sign placeholder in order to make room for another digit? I do, especially because I used to work in Time Square and my office had a direct view of that nasty little green, satanic clock-like thing. And what about the “wealth creation” skit by Greenspan? Remember, it’s the one where after he lowered the price of money and basically eliminated the need for bank reserves, he would get in front of a microphone every now and again and say that the ongoing rise in home prices was an indication of “wealth creation.” That was really funny, except it also wasn’t, which is why it was super extra funny at the end of the day. After all, only a completely retarded audience strung out on debt could have taken that man seriously, and yet, as we know today, the vast majority of the audience was so inebriated from credit that it was willing to believe just about anything.

So, I guess my point is that people should look on the bright side of things, and recognize the comedy in this whole thing. I really don’t think people are going to get all furry-browed when they discuss this period as they do now with “The Great Depression” of the 1930’s. Anyway, that’s just my take-away.

Greenspan: U.S. Banks Need Higher Reserve Requirements

I love how Alan Greenspan comes out of his little post-chairmanship wood shop with his worn out little fiddle and drops these big advisory statements on us that the mainstream press picks up on every few months. According to Reuters, the Oracle, while speaking to an audience in Mumbai, India (via satellite and probably getting a few hundred thousand bucks for the mumble) said that U.S. banks should hold higher amounts of capital than is currently the case, and that “even in non-euphoria, non-crisis times, we need to have a larger buffer than we currently have.” Thanks Al. All these years that you were cutting reserve requirements out at the knees and looking the other way while your broker dealer buddies were using all sorts of accounting magic to inflate what little capital they had in the first place you didn’t seem to mind that the banking system was completely bankrupt. Now, all of a sudden, you think we need to tighten up on reserve requirements? Give me a break.

2 Japanese Men Detained by Italian Police with $134.5 Billion in US Bonds – hugh??

According to an article by “Il Giornale,” two Japanese nationals were detained by Italian financial police almost two weeks ago after trying to enter Switzerland with $134.5 billion worth of undeclared U.S. bearer bonds, most of them treasury bills. According to the article, two unidentified Japanese men in their 50s concealed the bonds, including 249 U.S. Treasury bills each worth $500 million, in a suitcase with a false bottom that was searched by the Italian authorities in Chiasso, at the border with Switzerland – 50 kilometers north of Milan. The Japanese consulate general in Milan confirmed that the detention had taken place and said it was trying to confirm with Italian authorities whether the two were indeed Japanese nationals.

This is quite a shocking bit of news. First of all, I do not understand how 249 $500 million T-bills could possibly be counterfeit, since such large denominations don’t exactly constitute your run-of-the-mill deposit. If these bonds are not counterfeit, however, then this begs the question: whose money is this and where was it going?

Before we even try to answer this question, let us first just try, as best we can, to put this amount of money into perspective. In so doing, we feel that it is important for our readers to understand that if these two Japanese men, with their $134.5 billion dollars were an entire nation, then they would be the 6th largest holder of US Treasury debt on the planet, just shy of Russia and her $138 billion (March 2009 figures). If these individuals were able to successfully sell these treasuries on the open market, they could single-handedly raise the interest payments on our government’s own credit line, to say nothing about the potential profits for the sellers who could easily take out short positions on the very bond’s that they would be selling.

Now, to add an extra twist to this story, I was made aware this evening of an article published by the WSJ Online about two months ago. The article’s title, “Treasury Has $134.5 Billion Left in TARP,” I believe, speaks for itself. Is it just a coincidence that these two, very large numbers are identical? Certainly it’s possible, but given the penchant by firms like Goldman Sachs, JP Morgan, and the rest of the major broker dealers for regular fraud and accounting shenanigans, I would not eliminate the possibility that these firms, working in collusion with the Federal Reserve and possibly the BIS, are using such bearer bonds (which, I thought, were no longer being issued anyway – topic for another time) to secretly transfer funds from one account to another, as part of an effort to defraud not only taxpayers, but more importantly, to cover their own tracks as they manipulate the Treasury market using off-shore vehicles posing as private investors. Remember, we know that during the autumn of 2008, massive funds were being transferred from anonymous accounts in the Cayman Islands into the US Treasury Bond market. Could these transfers have been by private investors looking to safeguard their wealth by buying US Treasuries? Perhaps, but another possibility is that the Federal Reserve was just using these accounts as front companies while it laundered the money needed by its member banks in order to meet their daily margin requirements – so that banks like Citigroup and Goldman Sachs would not go belly-up. Lastly, it is important to note that the Chair of the TARP oversight committee, a seemingly nice, dare I say innocent, Harvard economics professor, has admitted that, out of the first $350 billion, $78 billion was stolen outright by the banks (see interview here)

I don’t know if we are going to get more information on this case. It would be a real treat if the Italian authorities and the state played hardball. After all, by Italian law, the government is privy to 40% of any undeclared sum of money passing through its boarders that exceeds $10,000. Since the sum that we are speaking about clearly exceeds 10k, the Italian government would potentially be giving up $54 billion. I’m sure even Silvio wouldn’t mind slapping some of that money on his own asset ledger…

We will have to wait and see, but the simple fact that this amount of money can be transferred from bank account to bank account, anonymously, should frighten the daylights out of anyone at this point. If HR 1207 (bill to audit the Federal Reserve) and its sister bill in the Senate do manage to pass, the Fed will do everything in its power to come out of that audit “squeaky clean.” If all they have to do is transfer a few trillion dollars in Treasury bills from one bank to another, and finally into their coffers at 20th Street and Constitution Avenue, then this audit is going to be a complete waste of time. In fact, it may undermine the entire effort, as Bernanke will come back and say, “see, I told you we were solvent.”

Threat Level Privacy, Crime and Security Online Bullion and Bandits: The Improbable Rise and Fall of E-Gold by Kim Zetter

MELBOURNE, Florida — In a sparsely decorated office suite two floors above a neighborhood of strip malls and car dealerships, former oncologist Douglas Jackson is struggling to resuscitate a dying dream.

Jackson, 51, is the maverick founder of E-Gold, the first-of-its-kind digital currency that was once used by millions of people in more than a hundred countries. Today the currency is barely alive.

Stacks of cardboard evidence boxes in the office, marked “U.S. Secret Service,” help explain why, as does the pager-sized black box strapped to Jackson’s ankle: a tracking device that tells his probation officer whenever he leaves or enters his home.

“It’s supposed to be jail,” he says. “Only it’s self-administered.”

Jackson, whose six-month house arrest ends this month, recently met with Wired.com for his first in-depth interview since pleading guilty last year to money laundering-related crimes, and to operating an unlicensed money transmitting service. His tale is one of countless upstarts and entrepreneurs who approached the internet with big dreams, only to be chastened by sobering realities. But his rise and fall also offers a unique glimpse at the web’s frontier halcyon days, and the wilderness landscape that still covers much of the unregulated and un-policed web, where fraud artists prospect for riches alongside pioneers, and sometimes stake, and win, a claim on their territory.

Despite the shackle, Jackson’s conviction isn’t black and white. In a twist still unacknowledged by prosecutors, Jackson turned E-Gold for a time into one of law enforcement’s most productive honey pots, providing information that helped lead to the arrest and conviction of some of the web’s most wanted credit card thieves and hackers. He’s now working with regulatory agencies to try to bring back E-Gold, steps he says he would have taken voluntarily years ago if authorities had given him a chance.

(click here to read more)

Asheville man charged in alleged Liberty Dollar fraud scheme by Clarke Morrison

ASHEVILLE — Federal authorities arrested an Asheville man in what they said was a scheme to undermine the U.S. currency system and defraud consumers with so-called Liberty Dollars.

William Kevin Innes marketed the “barter” currency in Western North Carolina and recruited merchants willing to accept it and give it as change for products bought with real money, according to an indictment unsealed this week.

Innes, 53, faces up to 45 years in prison if convicted. He was indicted along with Bernard von NotHaus, president of the National Organization for the Repeal of the Federal Reserve and Internal Revenue Codes, and two other defendants from Indiana associated with the corporation.

Innes made an initial appearance before a federal magistrate judge in Asheville Wednesday and was ordered detained pending a detention hearing set for Monday before a judge in Charlotte, according to the U.S. Department of Justice.

Liberty Dollars are coins made of silver or gold and are touted as inflation-proof and a way to encourage buying local goods.

“When groups seek to undermine the U.S. currency system, the government is compelled to act,” said acting U.S. Attorney Edward Ryan of the Western District of North Carolina.

“These coins are not government-produced coinage, yet purchasers were led to believe by those who made and sold them that they should be spent like U.S. Federal Reserve Notes,” Ryan said. “Such claims are in violation of federal law.”

Innes and von NotHaus are charged with uttering and passing coins resembling genuine U.S. coins and intended for use as money, mail fraud and selling and possessing Liberty Dollar coins with intent to defraud.

Past statements

Despite warnings from the federal government to the contrary, Innes told the Citizen-Times in 2006 that Liberty Dollars were legal.

“One of the first things I did when I started this in Asheville was go to the police and tell them what I was doing,” he said then.

Von NotHaus created his organization in Evansville, Ind., in 1998, and developed the Liberty Dollar. He touted the silver medallions as an inflation-proof alternative to official currency.

The indictment alleges the corporation’s purpose was to limit reliance on and compete with U.S. currency.

Innes held the title of North Carolina regional currency officer and was one of three members of the group’s executive committee, the indictment states.

A 2007 affidavit said more than 70 businesses in the Asheville area agreed to accept the Liberty Dollar.

“People understand that there is only one legal currency in the United States,” said Owen Harris, special agent in charge of the Charlotte office of the FBI. “When groups try to replace the U.S. dollar with coins and bills that don’t hold the same value, it affects the economy.

“Consumers were using their hard-earned money to buy goods and services, then getting fake change in return.”

The arrests are the latest development in an investigation under way since at least 2004. Federal agents raided the company’s headquarters in 2007 and seized documents and precious metals. A private mint in Coeur d’Alene, Idaho, that produced the coins was raided the same day.

Von NotHaus’ organization said in 2006 that more than $20 million worth of Liberty Dollar coins and notes were in circulation. Congress has exclusive power to coin money in the U.S. and to regulate its value, according to the Treasury Department.

Long-Term Yields are not Looking Back

I came across an interesting chart yesterday from Elliott Wave International that I thought I would share with you. On December 12th, 2008, we published an article titled “The American Bond Bubble and the Future of Gold,” advising our readers that the American Treasury market had reached a point of “incremental euphoria” and that a collapse in prices was eminent. Likewise, we declared that the future of gold was as bright as ever, and that investors should up their purchases of the precious metal, and maintain as small a position in dollar denominated debt as possible, including cash reserves.

Although one can seldom time major market peaks/bottoms, in retrospect, it appears that we may have really nailed this one. As you can see in this chart plotting 30-year US Treasuries, yields have been steadily increasing since mid-December of 2008, now surpassing pre-crisis levels. We do not believe that this is a temporary trend, and cannot conceive of a scenario under which long-term yields would return to or break their December lows for decades to come. In fact, given the massive debt issuance by the Treasury, along with the simultaneous monetization of debt by the Federal Reserve, it is far more likely that the dollar will be replaced before Americans ever see long-term interest rates like these again.

The New Atlantis

As far as I know, it was Sir Francis Bacon who first coined the phrase “The New Atlantis,” in his novel of the same name. I have not read the book, so in speaking briefly about it I am depending on the accuracy of second hand accounts. Nonetheless, it appears that Bacon’s novel was actually reciting his visions for a new age of social and political enlightenment for mankind; perhaps even a new global society, much like the mythical Atlantis of Plato’s Timaeus and Critias.

In theory, there is nothing wrong with such a vision. The more we all communicate and interact with each other, the more the artificial barriers of nationality, religion and other such institutional constructs will erode, leading to a slow but eventual gravitation towards an international sociopolitical identity for all mankind. The danger, as has always been the case with our species, is found not in the size or the sense of the society, but in the mode with which it is organized. If individual liberty is preserved, it matters not what form the society takes. If, however, international governance comes at the expense of personal liberty then global governance becomes a tyrannical tool for the megalomaniacal visions of those atop the political pyramid.

Unfortunately, it is the later of these two organizational paradigms that we have been moving towards, in particular since the 1930’s. Most Americans do not even realize how radical our modern political and institutional order is in relation to what had existed before this tremendous period of transformation. The Department of Defense (symbolized by the almighty pentagon building), the Federal Communications Committee, the Central Intelligence Agency, and the National Security Council and Agency all came out of the 1930’s and WWII, with much of the groundwork having been laid within intellectual circles dating back to the early 1900’s. (For a list of all government agencies click here). And although the period of post-WWII reconstruction proved the most creative and expansive time for government restructuring, it would not be the last. Many Americans would likewise be surprised to learn that it was during the long-forgotten Carter administration that the Department of Education, the Department of Health and Human Services, and the Department of Energy were all created.

At first mention, one does not see anything particularly wrong with having departments dedicated to such noble endeavors as “education,” “health,” and “defense.” Indeed, I have no doubt that there were and still are people working for these agencies that believe their work is positively contributing to the lives of ordinary people. The reality, however, is that these agencies and departments, whatever their original purpose (though there is plenty of reason to believe that their purpose was never one of benevolence) have become hazards to liberty and roadblocks to innovation and progress in our society. People wonder why Americans are so ignorant of history and so easily manipulated, like a heard of sheep, by the day-to-day rhythms of the news cycle and government propaganda. One needs look no further than the educational system, which teaches children from an early age, not only what to think but more importantly how to think. Americans are taught to take certain things as unquestionable truths, and are never taught to examine the veracity of official dogma. It is truly remarkable how large swaths of history’s most critical periods are glanced over by textbooks, or even worse, cluttered with references to largely irrelevant events and circumstances so as to “make sense out of nonsense.” What about the Department of Health and Human Services? Well, did you know that just in 2005, this supposedly benevolent organization spearheaded a program mandating that homeless people in participating cities across the US be implanted with a Radio Frequency Identification Chip (RFID) as part of a pilot study meant to prepare the department and participating corporations and institutions for the eventual deployment of this technology across the entire population of the United States? Of course, because most Americans have been raised to believe that their government is benevolent, the clearly Orwellian implication of such programs does not strike them as even remotely possible.

Despite this remarkable push towards centralization of power and control over these many decades, I believe there are many reasons to feel optimistic about the prospects for liberty in the decades to come. Primarily, one must understand that the institutional hierarchy of control that has been painstakingly built and remastered over the course of many decades, no longer offers any significant value to the society it attempts to regulate and direct. Due almost entirely to innovations in information technologies, including massive investments in broadband infrastructure, nanotechnology (which has made possible the introduction of ultra-cheap netbooks for the average citizen) and social-network applications, the implicit operating procedures within our society are rapidly transforming. We no longer need to organize ourselves in a hierarchical structure. In this new world, all one needs is proper access to the World Wide Web of networked computers in order to complete any intellectual task imaginable. Sure, it takes a lot more than a broadband connection to build a car, but even in the space of manufacturing we are seeing this paradigm shift take place. Dell Computers’ entire business model is based on horizontal integration. The same is true of Amazon, where individuals can actually publish, print and distribute their own books at a fraction of what it would have cost them only 10 years ago! Indeed, modern technology has transformed every single aspect of our lives except one: Government.

Ultimately, it is the federal government’s monopoly on the use of force that has enabled it to evade the rules by which the rest of society’s institutions must abide. After all, the government controls thousands of nuclear warheads, has ongoing biological and chemical weapons research projects and controls the largest and most destructive military force in history. In such a hyper-threat environment, one is compelled to ask the question, “who is this government arming itself against?” The answer: “you.” The government knows that it is no longer relevant to the lives of ordinary people, and that newer, better and more just ways of political organization exist for society. It knows that the only way to maintain its authority is through the ever-increasing threat of force. It demonstrates this force in localized conflicts, like the wars in Iraq, the bombing of Yugoslavia and the quarantine and continual terrorization of Palestinians in Gaza (though in this last case the commands are executed by the heavily subsidized and well-armed Israeli Defense Forces).

The recent “financial crisis” may be just the catalyst our society needs to make its first great push against this decades long consolidation of power and control by the centrifuge of a fascist government, using the technology at our fingertips to finally tip the scale in the direction of individual liberty. People across the spectrum of society are waking up. More and more people are looking outside traditional channels for information that can help them make sense of all the madness they see around them. The lies needed to sustain public faith in this anachronistic system have grown by such a multiple as to have become unsustainable. Blatant contradictions are now the norm when it comes to mainstream political dialogue. The lie has grown too big to maintain, and people are beginning to come face to face with the truth: the giant elephant sitting in the middle of their living room.

It is from the well of truth that all great systems are devised. It is only when a society is true to itself that it can flourish unimpeded, fulfilling its natural potential. Though I have been saddened by so much of what happens in this world, I also maintain a powerful sense of promise for the future of our society if we can just manage to confront the truth about ourselves, no matter how hard it may initially be. Technology gives us that opportunity, and the hardships that are coming our way give us the rational; all we need now is the will. If we can just find that will, then maybe, just maybe, we will finally have our new Atlantis.

Obama Strengthens the Orwellian Police State

Today I had the opportunity to review the Obama administration’s movement to dismiss the “Jewel et al. v. National Security Agency et al.” case, filed before this president took office. The case was brought by a number of plaintiffs who were suing the government for having been unlawfully spied upon through warrantless wiretaps (click here for information on the special AT&T NSA room).

What I have discovered does not shock me. Rather it confirms my fears that Barack Obama, his administration and this entire government not only do not wish to roll back the incursion upon our civil liberties that were accelerated since 9-11, but actually are looking to EXPAND UPON THEM.

In their defense strategy, the Obama administration is not only arguing the standard “state’s secrete” privilege, but has actually gone a step further, stating that unless the government “willfully” discloses information about who it has been spying on or what the surveillance has been about, that it and its partners (the telecoms, cable providers, etc.) are completely immune from prosecution. What this means in laymen’s terms is that the Government is claiming full immunity from any american citizen wishing to sue it for redress of grievances as a result of UNLAWFUL spying. The Obama administration is not debating the legality of their actions but rather claiming that in order for evidence of spying to be used in court that it must be willfully provided by the government itself!! This is a breach of the 1st Amendment of the American Constitution: “Congress shall make no law prohibiting the people to petition the government for a redress of grievances.” Excerpts from the Obama defense team’s argument are found below:

Accordingly, Section 223(a)(3) amended the Wiretap Act to state that “[a]ny willful disclosure or use by an investigative or law enforcement officer or governmental entity of information beyond the extent permitted by [the Wiretap Act] is a violation . . . of [the Act].” See 18 U.S.C. § 2520(g). Similarly, Section 223(b)(3) amended ECPA to state that “[a]ny willful disclosure of a ‘record’. . . obtained by an investigative or law enforcement officer, or a governmental entity, pursuant to 2703 of this title . . . that is not a disclosure made in proper performance of the official functions of the officer or governmental entity making the disclosure, is a violation of [ECPA].” See 18 U.S.C. § 2707(g).

As a threshold matter, the Court should dismiss plaintiffs’ statutory claims against the Government Defendants in their official capacity for lack of subject matter jurisdiction because Congress has not waived sovereign immunity. This leaves plaintiffs with, at most, constitutional claims for declaratory and injunctive relief against the United States. These claims cannot proceed as well—indeed, none of plaintiffs’ claims could proceed against any defendant—because, at every stage, litigation plaintiffs’ claims would require or risk the disclosure of information that is properly subject to the state secrets privilege and related statutory privileges.

Accordingly, Section 223(a)(3) amended the Wiretap Act to state that “[a]ny willful disclosure or use by an investigative or law enforcement officer or governmental entity of information beyond the extent permitted by [the Wiretap Act] is a violation . . . of [the Act].” See 18 U.S.C. § 2520(g). Similarly, Section 223(b)(3) amended ECPA to state that “[a]ny willful disclosure of a ‘record’. . . obtained by an investigative or law enforcement officer, or a governmental entity, pursuant to 2703 of this title . . . that is not a disclosure made in proper performance of the official functions of the officer or governmental entity making the disclosure, is a violation of [ECPA].”

Thus, both the text and legislative history of Section 223 of the Patriot Act make clear that a “willful violation” in 18 U.S.C. § 2712 means a willful, unauthorized disclosure of information by a Government agent. Plaintiffs do not allege any such disclosures, and thus the general reservations of sovereign immunity in 18 U.S.C. §§ 2520(a) and 2707(a) control plaintiffs’ statutory claims for damages against the Government under Counts IX, XII, and XV.5…Sovereign immunity cannot be waived implicitly; waivers of sovereign immunity must instead be explicit and unequivocal.

Finally, all of plaintiffs’ claims require the disclosure of whether or not AT&T assisted the Government in alleged intelligence activities, and the DNI again has demonstrated that disclosure of whether the NSA has an intelligence relationship with a particular private company would also cause exceptional harm to national security—among other reasons by revealing to foreign adversaries which channels of communication may or may not be secure.

Notice that in the second paragraph of the five-paragraph excerpt, Obama’s lawyers acknowledge that plaintiffs have “only a constitutional claim” but that the plaintiffs are legally unable to exercise their constitutional right “because, at every stage, litigation plaintiffs’ claims would require or risk the disclosure of information that is properly subject to the state secrets privilege and related statutory privileges.” What Obama’s lawyers are actually saying is that laws passed by the congress automatically supersede the first amendment of the Constitution of the United States! This sort of disrespect for the constitution of our country by a guy who supposedly taught constitutional law at Chicago University is an insult of the highest order.

I hope you are all as outraged as I am that this is going on. Those of us who elected this government did so because we were promised that the unlawful stripping away of our civil liberties would not only be stopped, but rolled back. Barack Obama ran on a platform of openness, and instead, he is implementing laws and following policies that show a desire to advance the dictatorial, police state at the expense of liberty.

If this administration thinks that it can continue a policy of constitutional rape that was made such common practice by its predecessor, it is dead wrong. The American people are waking up to what is going on, and they have had enough. We will not sit by quietly as you loot trillions of dollars out of our bank accounts, strip away our freedoms and demean the very essence of our constitutional republic.

London G20 Summit Communiqué

I don’t want to spend too much time going over this document, so I will just make a few quick points.

First, let me point out that the most overlooked aspect of this communique is the repeated emphasis on promoting a “green economy.” Hey, don’t get me wrong, I’m as green as next guy (by the way, “green” is the new “change” for those who didn’t get the memo), but doesn’t anyone find it strange that there is so much emphasis being placed on the “global warming” agenda at a G20 meeting meant to deal with the financial crisis? And by the way, it isn’t just at the G20 that international cooperation on climate change and financial regulation seem to cross paths. When Treasury Secretary Tim Geithner spoke recently at the Council on Foreign Relations he went out of his way to emphasize the importance of the climate talks coming up in Copenhagen on the last month of the year. Indeed, these two processees, though seemingly separate, are in fact two sides of the same coin. Whatever the real threat of climate change is, it has been exploited in order to build the international framework for additional financial regulation and, most importantly, to aid in the creation of an international revenue service (a global IRS). Don’t take my word for it, just look at the language that has come out of these summits and connect the dots for yourselves.

Second, this document talks about a new international financial institution called the Financial Stability Board (FSB), whose job will be to “collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed in order to address them; to reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks.” When deputy managing director to the IMF, John P. Lipsky (former economist for the Chase Manhattan Bank) spoke before the Council on Foreign Relations in mid-December, he used similar language while portending the formation of a new executive body that would handle “day-to-day” operations for the IMF (you can see more of the speech here):

“One of the proposals under consideration is to convert the IMFC from its current advisory form into an executive body or council. Creating such a council — a ministerial-level group whose creation is authorized in the Fund’s articles — would increase the direct connection between ministerial authority and the Fund’s day-to-day activities. Like the Fund’s board of governors and the executive board, the council would represent the entire Fund membership, and therefore would also have a decision rule via voting shares.”

Could this new Financial Stability Board be the executive body that Lipsky was talking about? If so, it sounds like this body is going to be the equivalent of the Federal Open Market Committee that currently regulates the price of credit in the US economy. If so, this means that the G20 leaders are trying to perpetuate our current central banking model by simply internationalizing it. What’s worse is that we have heard no mention of ensuring for commodity backed reserves, which would put some restraint on the growth of money. Of course, this is no surprise as this is a meeting of bankers, for bankers, so of course they are going to try and get away with as much as they can. If they can institute another fiat monetary system, but this time on a global scale, why wouldn’t they do it? I mean, if you gave me the sole legal authority to create money out of thin air, which I could then use to buy up real assets wouldn’t I do it? Ummmm yea, I would.

Well, those were my two quick points. Perhaps a third, even quicker one, would be that we still have a long way to go before we really see whether these pranksters can pull this thing off. The deleveraging is still going on in full force. Gold has reversed the upwards momentum it gained after Bernanke’s pledge to monetize another trillion in treasury debt, which means that more and more investors, banks and financial institutions are liquidating their best performing assets in order to raise cash for margin calls. Expect this to continue, and as I say over and over again, if you are a dollar earner you should take every opportunity to buy gold and other commodities on the dips. Once gold breaks below $850 you should be getting right back to buying, bit by bit.

Now I will leave you to the communique – enjoy!

1. We, the Leaders of the Group of Twenty, met in London on 2 April 2009.

2. We face the greatest challenge to the world economy in modern times; a crisis which has deepened since we last met, which affects the lives of women, men, and children in every country, and which all countries must join together to resolve. A global crisis requires a global solution.

3. We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared; and that our global plan for recovery must have at its heart the needs and jobs of hard-working families, not just in developed countries but in emerging markets and the poorest countries of the world too; and must reflect the interests, not just of today’s population, but of future generations too. We believe that the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles, effective regulation, and strong global institutions.

4. We have today therefore pledged to do whatever is necessary to:

• restore confidence, growth, and jobs;
• repair the financial system to restore lending;
• strengthen financial regulation to rebuild trust;
• fund and reform our international financial institutions to overcome this crisis and prevent future ones;
• promote global trade and investment and reject protectionism, to underpin prosperity; and
• build an inclusive, green, and sustainable recovery.
• By acting together to fulfil these pledges we will bring the world economy out of recession and prevent a crisis like this from recurring in the future.

5. The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs, to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy. Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale.

Restoring growth and jobs

6. We are undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs which would otherwise have been destroyed, and that will, by the end of next year, amount to $5 trillion, raise output by 4 per cent, and accelerate the transition to a green economy. We are committed to deliver the scale of sustained fiscal effort necessary to restore growth.

7. Our central banks have also taken exceptional action. Interest rates have been cut aggressively in most countries, and our central banks have pledged to maintain expansionary policies for as long as needed and to use the full range of monetary policy instruments, including unconventional instruments, consistent with price stability.

8. Our actions to restore growth cannot be effective until we restore domestic lending and international capital flows. We have provided significant and comprehensive support to our banking systems to provide liquidity, recapitalise financial institutions, and address decisively the problem of impaired assets. We are committed to take all necessary actions to restore the normal flow of credit through the financial system and ensure the soundness of systemically important institutions, implementing our policies in line with the agreed G20 framework for restoring lending and repairing the financial sector.

9. Taken together, these actions will constitute the largest fiscal and monetary stimulus and the most comprehensive support programme for the financial sector in modern times. Acting together strengthens the impact and the exceptional policy actions announced so far must be implemented without delay. Today, we have further agreed over $1 trillion of additional resources for the world economy through our international financial institutions and trade finance.

10. Last month the IMF estimated that world growth in real terms would resume and rise to over 2 percent by the end of 2010. We are confident that the actions we have agreed today, and our unshakeable commitment to work together to restore growth and jobs, while preserving long-term fiscal sustainability, will accelerate the return to trend growth. We commit today to taking whatever action is necessary to secure that outcome, and we call on the IMF to assess regularly the actions taken and the global actions required.

11. We are resolved to ensure long-term fiscal sustainability and price stability and will put in place credible exit strategies from the measures that need to be taken now to support the financial sector and restore global demand. We are convinced that by implementing our agreed policies we will limit the longer-term costs to our economies, thereby reducing the scale of the fiscal consolidation necessary over the longer term.

12. We will conduct all our economic policies cooperatively and responsibly with regard to the impact on other countries and will refrain from competitive devaluation of our currencies and promote a stable and well-functioning international monetary system. We will support, now and in the future, to candid, even-handed, and independent IMF surveillance of our economies and financial sectors, of the impact of our policies on others, and of risks facing the global economy.

Strengthening financial supervision and regulation

13. Major failures in the financial sector and in financial regulation and supervision were fundamental causes of the crisis. Confidence will not be restored until we rebuild trust in our financial system. We will take action to build a stronger, more globally consistent, supervisory and regulatory framework for the future financial sector, which will support sustainable global growth and serve the needs of business and citizens.

14. We each agree to ensure our domestic regulatory systems are strong. But we also agree to establish the much greater consistency and systematic cooperation between countries, and the framework of internationally agreed high standards, that a global financial system requires. Strengthened regulation and supervision must promote propriety, integrity and transparency; guard against risk across the financial system; dampen rather than amplify the financial and economic cycle; reduce reliance on inappropriately risky sources of financing; and discourage excessive risk-taking. Regulators and supervisors must protect consumers and investors, support market discipline, avoid adverse impacts on other countries, reduce the scope for regulatory arbitrage, support competition and dynamism, and keep pace with innovation in the marketplace.

15. To this end we are implementing the Action Plan agreed at our last meeting, as set out in the attached progress report. We have today also issued a Declaration, Strengthening the Financial System. In particular we agree:

• to establish a new Financial Stability Board (FSB) with a strengthened mandate, as a successor to the Financial Stability Forum (FSF), including all G20 countries, FSF members, Spain, and the European Commission;
• that the FSB should collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed to address them;
• to reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks;
• to extend regulation and oversight to all systemically important financial institutions, instruments and markets. This will include, for the first time, systemically important hedge funds;
• to endorse and implement the FSF’s tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms;
• to take action, once recovery is assured, to improve the quality, quantity, and international consistency of capital in the banking system. In future, regulation must prevent excessive leverage and require buffers of resources to be built up in good times;
• to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information;
• to call on the accounting standard setters to work urgently with supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high-quality global accounting standards; and
• to extend regulatory oversight and registration to Credit Rating Agencies to ensure they meet the international code of good practice, particularly to prevent unacceptable conflicts of interest.

16. We instruct our Finance Ministers to complete the implementation of these decisions in line with the timetable set out in the Action Plan. We have asked the FSB and the IMF to monitor progress, working with the Financial Action Taskforce and other relevant bodies, and to provide a report to the next meeting of our Finance Ministers in Scotland in November.

Strengthening our global financial institutions

17. Emerging markets and developing countries, which have been the engine of recent world growth, are also now facing challenges which are adding to the current downturn in the global economy. It is imperative for global confidence and economic recovery that capital continues to flow to them. This will require a substantial strengthening of the international financial institutions, particularly the IMF. We have therefore agreed today to make available an additional $850 billion of resources through the global financial institutions to support growth in emerging market and developing countries by helping to finance counter-cyclical spending, bank recapitalisation, infrastructure, trade finance, balance of payments support, debt rollover, and social support. To this end:

we have agreed to increase the resources available to the IMF through immediate financing from members of $250 billion, subsequently incorporated into an expanded and more flexible New Arrangements to Borrow, increased by up to $500 billion, and to consider market borrowing if necessary; and
we support a substantial increase in lending of at least $100 billion by the Multilateral Development Banks (MDBs), including to low income countries, and ensure that all MDBs have the appropriate capital.
18. It is essential that these resources can be used effectively and flexibly to support growth. We welcome in this respect the progress made by the IMF with its new Flexible Credit Line (FCL) and its reformed lending and conditionality framework which will enable the IMF to ensure that its facilities address effectively the underlying causes of countries’ balance of payments financing needs, particularly the withdrawal of external capital flows to the banking and corporate sectors. We support Mexico’s decision to seek an FCL arrangement.

19. We have agreed to support a general SDR allocation which will inject $250 billion into the world economy and increase global liquidity, and urgent ratification of the Fourth Amendment.

20. In order for our financial institutions to help manage the crisis and prevent future crises we must strengthen their longer term relevance, effectiveness and legitimacy. So alongside the significant increase in resources agreed today we are determined to reform and modernise the international financial institutions to ensure they can assist members and shareholders effectively in the new challenges they face. We will reform their mandates, scope and governance to reflect changes in the world economy and the new challenges of globalisation, and that emerging and developing economies, including the poorest, must have greater voice and representation. This must be accompanied by action to increase the credibility and accountability of the institutions through better strategic oversight and decision making. To this end:

we commit to implementing the package of IMF quota and voice reforms agreed in April 2008 and call on the IMF to complete the next review of quotas by January 2011;
we agree that, alongside this, consideration should be given to greater involvement of the Fund’s Governors in providing strategic direction to the IMF and increasing its accountability;
we commit to implementing the World Bank reforms agreed in October 2008. We look forward to further recommendations, at the next meetings, on voice and representation reforms on an accelerated timescale, to be agreed by the 2010 Spring Meetings;
we agree that the heads and senior leadership of the international financial institutions should be appointed through an open, transparent, and merit-based selection process; and
building on the current reviews of the IMF and World Bank we asked the Chairman, working with the G20 Finance Ministers, to consult widely in an inclusive process and report back to the next meeting with proposals for further reforms to improve the responsiveness and adaptability of the IFIs.

21. In addition to reforming our international financial institutions for the new challenges of globalisation we agreed on the desirability of a new global consensus on the key values and principles that will promote sustainable economic activity. We support discussion on such a charter for sustainable economic activity with a view to further discussion at our next meeting. We take note of the work started in other fora in this regard and look forward to further discussion of this charter for sustainable economic activity.

Resisting protectionism and promoting global trade and investment

22. World trade growth has underpinned rising prosperity for half a century. But it is now falling for the first time in 25 years. Falling demand is exacerbated by growing protectionist pressures and a withdrawal of trade credit. Reinvigorating world trade and investment is essential for restoring global growth. We will not repeat the historic mistakes of protectionism of previous eras. To this end:

• we reaffirm the commitment made in Washington: to refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organisation (WTO) inconsistent measures to stimulate exports. In addition we will rectify promptly any such measures. We extend this pledge to the end of 2010;
• we will minimise any negative impact on trade and investment of our domestic policy actions including fiscal policy and action in support of the financial sector. We will not retreat into financial protectionism, particularly measures that constrain worldwide capital flows, especially to developing countries;
• we will notify promptly the WTO of any such measures and we call on the WTO, together with other international bodies, within their respective mandates, to monitor and report publicly on our adherence to these undertakings on a quarterly basis;
• we will take, at the same time, whatever steps we can to promote and facilitate trade and investment; and
• we will ensure availability of at least $250 billion over the next two years to support trade finance through our export credit and investment agencies and through the MDBs. We also ask our regulators to make use of available flexibility in capital requirements for trade finance.

23. We remain committed to reaching an ambitious and balanced conclusion to the Doha Development Round, which is urgently needed. This could boost the global economy by at least $150 billion per annum. To achieve this we are committed to building on the progress already made, including with regard to modalities.

24. We will give renewed focus and political attention to this critical issue in the coming period and will use our continuing work and all international meetings that are relevant to drive progress.

Ensuring a fair and sustainable recovery for all

25. We are determined not only to restore growth but to lay the foundation for a fair and sustainable world economy. We recognise that the current crisis has a disproportionate impact on the vulnerable in the poorest countries and recognise our collective responsibility to mitigate the social impact of the crisis to minimise long-lasting damage to global potential. To this end:

• we reaffirm our historic commitment to meeting the Millennium Development Goals and to achieving our respective ODA pledges, including commitments on Aid for Trade, debt relief, and the Gleneagles commitments, especially to sub-Saharan Africa;
• the actions and decisions we have taken today will provide $50 billion to support social protection, boost trade and safeguard development in low income countries, as part of the significant increase in crisis support for these and other developing countries and emerging markets;
• we are making available resources for social protection for the poorest countries, including through investing in long-term food security and through voluntary bilateral contributions to the World Bank’s Vulnerability Framework, including the Infrastructure Crisis Facility, and the Rapid Social Response Fund;
• we have committed, consistent with the new income model, that additional resources from agreed sales of IMF gold will be used, together with surplus income, to provide $6 billion additional concessional and flexible finance for the poorest countries over the next 2 to 3 years. We call on the IMF to come forward with concrete proposals at the Spring Meetings;
• we have agreed to review the flexibility of the Debt Sustainability Framework and call on the IMF and World Bank to report to the IMFC and Development Committee at the Annual Meetings; and
• we call on the UN, working with other global institutions, to establish an effective mechanism to monitor the impact of the crisis on the poorest and most vulnerable.

26. We recognise the human dimension to the crisis. We commit to support those affected by the crisis by creating employment opportunities and through income support measures. We will build a fair and family-friendly labour market for both women and men. We therefore welcome the reports of the London Jobs Conference and the Rome Social Summit and the key principles they proposed. We will support employment by stimulating growth, investing in education and training, and through active labour market policies, focusing on the most vulnerable. We call upon the ILO, working with other relevant organisations, to assess the actions taken and those required for the future.

27. We agreed to make the best possible use of investment funded by fiscal stimulus programmes towards the goal of building a resilient, sustainable, and green recovery. We will make the transition towards clean, innovative, resource efficient, low carbon technologies and infrastructure. We encourage the MDBs to contribute fully to the achievement of this objective. We will identify and work together on further measures to build sustainable economies.

28. We reaffirm our commitment to address the threat of irreversible climate change, based on the principle of common but differentiated responsibilities, and to reach agreement at the UN Climate Change conference in Copenhagen in December 2009.

Delivering our commitments

29. We have committed ourselves to work together with urgency and determination to translate these words into action. We agreed to meet again before the end of this year to review progress on our commitments.

Luke Rudkowski Released just hours ago by NYPD

Luke Rudkowski, founder of the We Are Change movement, was arrested by the NYPD at the Hilton Hotel this Saturday and charged with trespassing. I spoke with an officer from the NYPD’s Central Booking office today and was informed that Luke had been released at 6:00PM this evening (Sunday, March 29th). I’m surprised that this information has not been put out on the Internet yet, so I am posting this short blog in order to get the word out to those who are eager to know.

I should also mention that the officer I spoke with was exceedingly respectful. He was also astounded by the number of people who called in on Luke’s behalf. Thanks to everyone who took action to denounce this wrongful arrest and unconstitutional charging of Mr. Rudkowski, including all those who flooded the call centers at the 18th precinct and then at central booking and the manhattan criminal court.