Prospects for Democratic Redistribution of Wealth

August 27th, 2014

Capital in the Twenty-First Century, Thomas Piketty, 2014

An important new work based on many years of meticulous research and made possible by improvements in research materials and methods. French economist Piketty decries economic thought in the past from Malthus to Marx to Kuznets (and this reader adds Milton Friedman of the Chicago School) who first arrived at their theories and conclusions and then sought evidence to support their pre-conceived conclusions. He equally decries modern mathematical economics for trying to reduce a complex and human subject to a few sterile and usually unhelpful formulas.

Honore’ de Balzac Balzac Jane Austen jane austen

Piketty was able to collect considerable data for the entire period from 1700 to the present. The most complete data are available for England and France for the entire period. The period from 1700-1914 was characterized by relative stability of the economies with national incomes growing at 0 to 1½% and with populations and inflation growing at about the same rate. Piketty’s primary focus in this work is the inequalities in individual incomes and wealth. He uses the novels of Jane Austen in England and Honore’ de Balzac in France to give a very specific sense of what it meant to be wealthy and how much income was necessary to live well. The novels are very specific giving numbers in Pounds and Francs so it was possible for readers up to 1914 to get an exact sense of the meaning of the character’s income and wealth and their consequent place in society.
Piketty’s first conclusion is that the relative stability of the period 1700-1914 is the typical state of the world’s economy barring major upsets such as occurred in the period form 1914-1945 and that we are heading into another period of similar stability in the twenty-first century, barring new major catastrophes. The reason that those living today who grew up after WWII and therefore lived through an unusual period of higher growth as the world economies recovered from the catastrophes of 1914-1945 have an expectation of growth that it has been their personal lifetime experience. The data indicates that long term the outlook is for low income growth, low population growth, and low inflation.

piketty capital vs growth

Piketty’s second conclusion is that individual wealth (capital) and its concentration grows over time because the return on capital exceeds the growth in output except in times of extreme catastrophes such as the period 1914-1945. Furthermore, wealthier individual’s or institution’s (like the Harvard $30+ billion endowment) return is higher than less wealthy individual’s or institution’s returns. This gives a long term trend toward an extreme concentration of wealth.
Piketty believes that messy and human democratic processes are the only viable means for societies to determine the proper role of government in society. For Piketty, public education, public health care, and aging security are minimum required functions of government. Public transportation and other infrastructure are also essential. These minimum public requirements cannot be privatized. Piketty specifically does not mention military defense security. To pay for these public functions, the government must raise money and they have a choice of taxation or debt to do so. Government debt requires repayment and so ultimately taxes must be raised to pay for government functions. Debt increases the cost of government, transfers the cost to a later time, and further enriches those wealthy enough to loan to the government. For all these reasons, Piketty believes that government debt must be limited. Big economies are very wealthy and Piketty finds no reason to worry that excessive government debt will transfer ownership to foreign sovereign funds or to any small number of wealthy individuals but excessive government debt is still undesirable and should be avoided. Talking about the recent Greek experiences with the large scale sale of public assets to private owners to reduce government debt levels, Piketty says that wealthy Greeks simply preferred this solution to paying more taxes which they could easily have done with little long term impact on their personal fortunes.


Even before 1914 the Europeans were experimenting with progressive taxes on individual incomes and with estate taxes on the inheritance of wealth. In the ensuing period 1914-1945 extreme tax rates up to 90 percent were levied on incomes and estates. These taxes along with extreme inflation (1913-1950 France averaged 13% and Germany averaged 17%) along with direct confiscation of assets caused a great decrease in wealth and income and a great decrease in income and wealth inequality. Piketty says that the French Revolution did not decrease income and wealth inequality in France as much as is commonly believed and wealth quickly consolidated again immediately following the first violence of the revolution. While revolutions, wars, and economic depression all reduce income and wealth inequality optimistic Piketty believes these goals should be achievable by less catastrophic means. The solution to reduced inequality is progressive income and inheritance wealth taxation and Piketty argues that far less extreme rates of progressive taxation can achieve the desired end of reducing inequality if moderate progressive taxation is maintained consistently over the long term. In 2010 taxes as a percentage of national income were 55% in Sweden, 50% in France, 40% in Britain, and 30% in the US. Up til 1910 wealthy countries taxes seldom exceeded 10%.
In comparing Europe and the US today, Piketty finds the US by far the least economically (and socially) mobile society. Most great US Universities are private and their students almost all have wealthy parents. Education in the US is no longer a path to upward mobility. Even the public Universities in the US have skyrocketing costs putting them out of reach of all but the wealthiest families. Oddly, Piketty does not discuss students accumulating massive er-reputable debt to finance their own educations going into indentured servitude to banks or the US government. Most of the top jobs and highest incomes are then given to graduates of the elite universities. He talks about the philanthropic uses of great wealth such as that of the Gates Foundation, but he clearly would prefer the society as a whole make these philanthropic decisions rather than a single wealthy individual. These decisions are the proper role of democratic decision making.


In 2010 the top 10% of the US working population got 58% of total income while in Europe the top 10% got 30%. In 2010 total wealth for the US top 10% was about 70% and for the top 1% was 35%. The top 10% of Europeans owned 90% of wealth in 1900 and that level dropped by 2010 to 60%. Piketty suspects that wealthy individuals and institutions hide one third or more of their actual income and capital. Judging by US Presidential candidate Romney, Piketty is probably underestimating the problem of hiding wealth from taxation.
Historically, Piketty notes that foreign ownership of capital was highest in France and Britain during the colonial period and dropped to negligible levels after WWII. He also notes that the capitalization of labor in the US slave south was a significant feature in US wealth up to the civil war. Capitalizing 40% of the total population of the US south meant that US slave owners were far wealthier than their European counterparts of the period. He notes, wryly, that Thomas Jefferson owned 600 slaves about which he held conflicting emotions.
Piketty is particularly sensitive to the lack of adequate data and record keeping which is essential to a fair and equitable tax system. Information on income and capital holdings must be made available automatically to the governments by banks and institutions and governments must freely share this information among themselves. Today there is a race to the bottom as countries compete with one another to offer lower tax rates on income and inheritance and some aggressively hide wealth held in their territories. Without a court order with proof of fraud or other illegality, Swiss banks will not release information on individual accounts held in Switzerland. Without the account information governments are hard pressed to bring evidence of illegality. There are many such places in the world. Too much of the world’s individual and institutional wealth is hidden in secret shelters which creates problems for researchers and governments alike. Piketty thinks it makes more sense to base taxes on the location of the wealth and income rather than the residence of the individual. Piketty notes with envy that larger economies like the US and China have an easier time setting and enforcing tax policy than the smaller European countries. He talks at some length about the Euro-zone. A central bank for the Euro was created but with little thought to its actual role and function. Piketty holds little hope for the Euro-zone unless a corresponding legislative body with real authority can be established.

wealth inequality

Piketty finishes with a discussion of economists’ treatment of the climate change crisis which is widely viewed as the next huge and looming economic catastrophe. Economists are arguing about the proper discount rate to apply to this catastrophe while the world’s governments seem unable to come up with any meaningful plans of action.
One of Piketty’s big contributions to the discussion of wealth and income inequality is his insistence that you cannot just look at the top 10% or even the top 1% but you must continue down to the .1% the .01% etc because of the extreme concentrations of wealth. He notes that inherited wealth is still dominant but that with the recent extreme inequalities in income and high savings rates of top earners it is now possible to build sizable fortunes within one’s lifetime. Piketty can find no rational economic justification for the extreme new top salaries but governments, unlike the war years when there were salary boards, does nothing to control runaway salary levels.
Despite all the evidence to the contrary, Piketty is optimistic that an international democratic consensus can be achieved with increased wealth and income transparency and reporting and with sensible tax policies that can slowly control and correct for income and wealth inequality.

Eric Holder: Too Big to Jail

June 20th, 2014

The Divide; American Injustice in the Age of the Wealth Gap, Matt Taibbi, 2014

A painful book full of well researched stories from both ends of the injustice spectrum; from wall street to welfare to stop and frisk to immigrant extortion and deportations.

justice equality blind_justice justice money

At the center of the failure to try or jail a single financial bankster is Attorney General Eric Holder, author during the Clinton administration of the infamous Collateral Consequences doctrine at the heart of the current “too big to jail” policy. This then is the bookend to the story of Timothy Geithner’s refusal to break up Citibank or any other too big to fail institution. See She Bear at the FDIC. As with Geithner, Taibbi makes a strong case for cowardliness at the heart of each failure. This is in sharp contrast to the effective government action to deal with the savings and loan crisis of the 1980s where many executives were sent to jail and were banned for life from banking. See William Black’s account.

holder jail

Collateral Consequences doctrine dictates that no prosecution should be undertaken where innocent bystanders like stockholders and corporate employees or global financial stability may be adversely effected. In effect, this vague, undefinable “doctrine” has prevented any and all government prosecutions from proceeding. Instead, the government has negotiated an endless stream of financial “settlements” where the corporations agreeing to the settlement admit to no wrong doing, no one gets fired, and no one has to face future litigation. At its highest in the case of JP Morgan the total settlements amounted to 12% of one year’s profits. The target institutions have come to look at these “settlements” as a normal cost of doing business as usual. The underlying criminal behavior continues.

The most notorious and disgusting cases were the The HongKong and Shanghai Bank HSBC settlement for mafia and drug cartel money laundering and the LIBOR interest fixing settlement involving many banks. If these cases do not involve criminal activity then what does. Oh, I see, it is criminal to stand on the sidewalk outside your own apartment. This is the type of contrast Taibbi is exposing.

Less emphasized in this book but equally true, most of these bankster “settlements” have gone directly into government coffers. Those victimized by the fraud receive nothing or laughable amounts. The bank illegally repossessed and sold your house? Here’s $200, now go away.

How about the whistle blowers like the woman at JP Morgan Chase fired because she blew the whistle on robo-signing for credit card collections. All the government can seem to do after several years is to continue to “lose” her whistle blower’s case file. She doesn’t even know if she is on file.

For lighter entertainment, Taibbi includes the case of several big time short sellers (see also the Big Short) who wrongly guess that a well run Canadian insurance company is about to go out of business and then hire some clowns to try to force them out of business with dirty tricks. When this fails, the insurance company sues the short sellers for damages but of course the Canadians lose the case.

Then there is the interesting case of the Barclay Bank buying the husk of Lehman Brothers after the government (read Hank Paulson) refuse to bail them out forcing Lehmans into bankruptcy. Barclay masterminds a clever scheme to secretly reduce the $50 Billion asset purchase by $5 billion by tricking the judge with an amendment. When the Lehmans creditors discover the scheme and sue, the same judge that was fooled during bankruptcy hearings buys a weird McNamara like “Fog of War” defense, this time called the “Fog of Bankruptcy” that during hurried bankruptcy filings “shit happens”. Too bad, no relief for the creditors.

Want to invest in a growth industry? Try private jailers. Note that the sharp increased slope starts with Reagan but does not slow for Clinton.

jailed chart

High Frequency Extortion

June 11th, 2014

Flash Boys, A Wall Street Revolt, Michael Lewis, 2014

This book is about the fast changing character of market exchanges, the big banks, and their collusion with high frequency traders that have made trading into a totally opaque dive into the shark tank. The book was rushed to market with incorrect words, syntax, and spelling problems, but it is still worth reading.

Wall street has undergone a technological revolution into electronic trading led first by NASDAQ . A few years ago there were three stock exchanges plus the Chicago futures market where an individual stock could be listed on only one exchange. Now there are countless exchanges and stocks can be traded on any of them. After September 11, 2001 there was an exodus of the markets from Manhattan to the suburbs of New Jersey. In 2007 the SEC implemented Reg NMS which required brokers to find the best market price for investors. This new regulation was in response to a growing epidemic of front running in the markets, but its implementation actually increased the opportunity for front running because brokers were required to pass their orders to more exchanges leading to more opportunities to front run. Wikipedia defines and explains front running as follows:

Front running is the illegal practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers. When orders previously submitted by its customers will predictably affect the price of the security, purchasing first for its own account gives the broker an unfair advantage, since it can expect to close out its position at a profit based on the new price level. The front running broker either buys for his own account (before filling customer buy orders that drive up the price), or sells (where the broker sells for its own account, before filling customer sell orders that drive down the price).

As if things were not complicated enough many financial institutions have created something called dark (or black) pool as a total alternative to the mess with the public exchanges. Again Wikipedia defines a dark pool as:

dark poolA great white shark … look out for one near Britain soon.

In finance, a dark pool (also black pool) is a private forum for trading securities that is not openly available to the public. Liquidity on these markets is called dark pool liquidity.The bulk of dark pool trades represent large trades by financial institutions that are offered away from public exchanges like the New York Stock Exchange and the NASDAQ, so that such trades remain confidential and outside the purview of the general investing public. The fragmentation of financial trading venues and electronic trading has allowed dark pools to be created, and they are normally accessed through crossing networks or directly among market participants via private contractual arrangements.

One of the main advantages for institutional investors in using dark pools is for buying or selling large blocks of securities without showing their hand to others and thus avoiding market impact as neither the size of the trade nor the identity are revealed until the trade is filled. However, it also means that some market participants are disadvantaged as they cannot see the trades before they are executed; prices are agreed upon by participants in the dark pools, so the market becomes no longer transparent.

The main focus of this book is high frequency trading defined again in Wikipedia:

hft chart

High-frequency trading (HFT) is a type of algorithmic trading, specifically the use of sophisticated technological tools and computer algorithms to rapidly trade securities. HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.

As of 2009, studies suggested HFT firms accounted for 60-73% of all US equity trading volume, with that number falling to approximately 50% in 2012.

High-frequency traders move in and out of short-term positions aiming to capture sometimes just a fraction of a cent in profit on every trade. HFT firms do not employ significant leverage, accumulate positions or hold their portfolios overnight. HFT firms make up the low margins with incredible high volumes of tradings, frequently numbering in the millions.

HFT may cause new types of serious risks and dangers to the financial system. Algorithmic and HFT were both found to have contributed to volatility in the May 6, 2010 Flash Crash, when high-frequency liquidity providers rapidly withdrew from the market.

High Frequency traders trade with perfect information and their speed advantage assures that their trades incur no risk of loss. HDTs never lose money unless their algorithms or machines blow up.

Katsayama with Lewis katsayama lewis

Personalizing this mess, Lewis focuses on Brad Katsuyama a young trader at the Royal Bank of Canada who, in 2006 noticed that whenever he placed an order, the price instantly changed. Welcome to the brave new world of trading. What Brad discovers is that HFT and other financial institutions act on his orders before the actual traders can do so. These leaches co locate their equipment with the exchanges and pay fortunes for fast communications links. To gather information they troll tiny orders for a wide variety of stocks and when these tiny orders get a nibble they determine by the stock involved and the trader that this may be a part of a large trade and they rush throughout the exchanges to beat the traders to the stocks being offered. Once owned the front runners can change the price and sell them back.

Katsuyama eventually leaves RBC to start his own “honest” exchange, IEX. The trick is to ensure that his exchange IEX support only the few most common trading types and to guarantee that all connections to IEX are slow enough to prevent front running. If you trade exclusively on IEX, HFT and other financial institutions cannot front run your orders. IEX is new and its survival and success were unknown at publication time. Goldman Sachs placed its first large order on IEX on Dec 19, 2013 which IEX took as a very hopeful sign. Because stocks seldom trade exclusively on IEX, HFT and other financial institutions systematically troll IEX for information that they can exploit on other exchanges. Life goes on as usual.

Sergey Aleynikov and his attorney Kevin Marino serge and kevin marino

Lewis includes the side story of Sergey Aleynikov charged by Goldman Sachs with stealing proprietary software when he left the company. Sergey was acquitted on appeal but, for this reader, the interesting details concerned the use of open source software defined again by Wikipedia:

Open-source software (OSS) is computer software with its source code made available and licensed with a license in which the copyright holder provides the rights to study, change and distribute the software to anyone and for any purpose. Open-source software is very often developed in a public, collaborative manner. Open-source software is the most prominent example of open-source development and often compared to (technically defined) user-generated content or (legally defined) open-content movements.

Open source software is often used by developers to shorten their development time and to produce better software. The trick is to find the right software on the internet that can be modified for the user’s purposes. Sergey’s stolen software was modified open source software that, according to the license of its use must remain open and the modifications made available to the public open source community. Goldman Sachs removed the license notice from the software so it was actually Goldman Sachs, not Sergey who illegally stole the software.

Cuba and the end of Apartheid

June 7th, 2014

Visions of Freedom, Havana, Washington, Pretoria and the struggle for Southern Africa, 1976-1991, Piero Gleijeses, 2013

This is a well researched history of Cuba’s involvement in Angola and the role of Cuba in the ending of South Africa’a apartheid rule. There has been so much distorted and wrong history of these events that Gleijeses felt compelled to spend years amassing documents and interviewing principals to tell the real story as best he can determine it.

Angola Founding Father Sam Nujoma Sam Nujoma

It begins with South Africa’s invasion of communist Angola in 1975 which led Cuba to send troops to Angola where they successfully drove the South Africans out of the country. The Cuban military was to remain in Angola until 1988 when they left as part of a four party settlement agreement between Cuba, Angola, South Africa, and the United States.

Namibian SWAPO slogans swapo

South Africa again attacked and destroyed a Namibian refugee camp at Cassinga in Angola. International outrage led ultimately to UN Resolution 435 which called for free elections in Namibia which South Africa occupied militarily and ruled through a puppet government. South Africa signed the resolution but knew it would lose a free election to SWAPO so refused to implement 435 til forced to do so in 1988.

Angola had its own civil war with the communist MPLA government fighting insurgent Jonas Savimbi’s UNITA. South Africa supported anti communist Savimbi militarily and economically. When Reagan became president, the US also began support of Savimbi. Savimbi spoke good English, was charismatic, and knew how to exploit anti communist sentiment. He had collaborated with Portugal in the colonial struggles and was a brutal and cruel terrorist. The Cubans made clear throughout their stay in Angola that they were there to stop South African incursions, not to help the government in its civil war.

UNITA Jonas Savimbi Jonas_Savimbi

The Soviets took a different view and helped plan and arm major MPLA offensives to destroy UNITA. The Soviets had no understanding of guerrilla warfare and wrongly believed that South Africa would stay out of their offensives. The first offensive was in 1985 and the MPLA lost about half its forces to South African artillery and air strikes. South Africa allowed the MPLA to retreat. The second disastrous attack was in 1987 and again MPLA lost many soldiers. This time South Africa pursued the MPLA with the intention of eliminating them altogether.

Cuba opposed both Soviet planned attacks but felt obligated to save the MPLA from South Africa. The counter offensive was planned by Fidel Castro himself in close consultation with his generals. Castro sent his best troops, MIG fighters, artillery and tanks and the latest Soviet anti aircraft weapons to Angola. This left him exposed at home but Gorbachev promised to send more weapons to Cuba.

Military Strategist Fidel in Angola castro angola

South Africa attempted to capture Cuito Cuanavale and the Cubans engaged them there. For the first time Cuba had air superiority and they prevailed. This time, Castro was determined to drive the South Africans out of Angola and developed a slow, careful, methodical campaign to achieve this objective. Reagan had set as his top priority in Africa to get the Cuban troops out of Angola. His diplomats, led by Chester Crocker, worked tirelessly trying to get the MPLA government to negotiate an agreement that would remove the Cubans but the Cubans were always excluded from these talks.

Reagan Crocker Discuss Angola crocker reagan

Once it was clear the Cubans were prevailing against the South Africans, American diplomats agreed to add Cuba to the negotiations. Cuba insisted that South Africa be added to the negotiations as well. Cuba had two non negotiable requirements; South Africa must implement UN Resolution 435 allowing free elections in Namibia; and South Africa must stop supporting Savimbi. After much posturing and bumbling, South Africa had to agree to the two conditions and to leave Angola. Cuba was in a position, not only to force South Africa out of Angola, but to attack South African bases in Namibia. Cuba agreed to leave Angola as part of the settlement in 1988. Free elections were held in Namibia and were won by SWAPO as expected. Free elections were also held in Angola and were won by MPLA. Savimbi refused to accept the results and US assistance was finally cut off for UNITA.

Fidel and Nelson castro mandela

Pretoria Freedom Park Monument freedom-park

Had these events happened only a year later when the Soviet system collapsed, Cuba would have been unable to force the removal of South Africa from Angola and force free elections in Angola and Namibia. Apartheid might still have ended under the pressure of an international boycott and sanctions but who knows if and when this would have happened. When Nelson Mandela visited Fidel Castro in 1991 he acknowledged that Cuba was centrally responsible for the fall of Apartheid in South Africa. The names of the 2000 Cubans who died in Angola are enshrined alongside those of the ANC on a monument in Pretoria’s Freedom Park South Africa today.

Nuclear Roulette

February 5th, 2014

Command and Control, Nuclear Weapons, the Damascus Accident, and the Illusion of Safety, Eric Schlosser, 2013

A history of the era of Nuclear Weapons and the miracle that there have been no accidental Nuclear blasts and no Nuclear wars were started. Many believe this has been either dumb luck or divine intervention.

Trinity Test

The book features the Damascus (Arkansas) accident in 1980 (Carter is President and Clinton is Governor of Arkansas) when a Titan II (the type used for the Astronaut’s Gemini flights) carrying a Mark W-53 nuclear warhead exploded in its silo. The bomb proof 700 ton silo door was blown off and the 4 ton warhead was thrown a thousand feet into the air and landed in a nearby ditch without a Nuclear detonation. The 9 megaton bomb was the largest in the US arsenal and would have destroyed most of Arkansas. The incident started when a maintenance crewman dropped a socket which punctured the main booster rocket and started a fuel leak. All gauges and controls for the site are located in the bomb proof control room but the crew were ordered to evacuate the room once the leak started. This greatly narrowed the options available to deal with the crisis. The Air Force insisted that decisions on dealing with the crisis be made in Omaha rather than locally and the people in Omaha were not expert on the Titan II and its silo. After a delay of eight hours, two highly trained maintenance crew members were ordered to return to control room to get readings but they were ordered to enter the hard way rather than use the emergency access route. They got the readings and were leaving when they were ordered to return and activate an exhaust fan. One of them volunteered to return alone and when he turned the fan on a spark from the motor triggered the explosion. Miraculously both men managed separately to get away from the site where they waited for hours for evacuation and medical help. Everyone at the site had panicked and left the site and only later did a few return to look for survivors. Both men suffered from inhaling rocket fuel and the man who turned the fan on died several days later. The Air Force and the officer who gave the order to turn on the fan denied having given the order and the dead mechanic was blamed for the explosion. The surviving mechanic was reprimanded to failing to follow procedures and he asked to be discharged from the Air Force. Eventually he was placed on reserve with the understanding he would never be recalled. The evacuated control room survived the explosion with no damage whatever.

The book is a long chronicle of accidents involving Nuclear weapons and an equally long list of near Nuclear war incidents, mostly of false alarm origin but featuring the near miss Cuban missile crisis with Kennedy and Khrushchev.

Curtis LeMay

Also featured was General Curtis LeMay, the creator of the Air Force SAC. Even after the introduction of ICBMs and submarine Nuclear missiles, LeMay and SAC insisted on keeping a number of B52 Nuclear armed bombers in the air perpetually. A B52 would need many hours to reach any target while a submarine missile may take 5 minutes and an ICBM only 15 minutes. B52s are still used today for Nuclear weapons even though the last B52 was built when Kennedy was President. The B52 features prominently in the very long list of Nuclear accidents.

George C Scott as Gen. Buck Turgidson Dr. Strangelove

LeMay was caricatured by George C Scott as an insane general trying to start a Nuclear holocaust in Stanley Kubrick’s 1964 Dr. Strangelove. The movie was based on the 1958 book Red Alert by Peter George who co wrote the script for the movie. Schlosser says this black comedy remains one the best and accurate depictions of command and control in the Nuclear era. The movie ends with the Russians disclosing that the detonation of the rogue pilot’s lone Nuclear bomb has automatically triggered the secret Russian Doomsday Machine which will totally destroy life on earth. Dr. Stranglove, the Nazi German scientist played by Peter Sellers, has to explain to the Soviet ambassador that keeping the Doomsday Machine a secret defeats the whole purpose of the weapon as a deterrent to war. In 1974 it was learned that the Soviets had in fact created a secret doomsday machine that would automatically launch their entire Nuclear arsenal including many bombs buried in Russia in the event a Nuclear explosion was detected by their monitors.

Schlosser notes that the very Existence of Nuclear weapons requires centralized control. The US first put the control of Nuclear weapons into the hands of a Civilian group, the Atomic Energy Agency Commission. The introduction of missiles made required reaction times far shorter and control was passed directly to the President and his ever present “football”, the case containing the necessary codes to authorize a Nuclear attack. The problem then became, how to assure the President survives the first wave, a problem that was never solved. Schlosser believes that the decision to launch an attack in real conditions of a Nuclear attack would be made by lower level military officers unable to communicate with superior officers or civilian officials.

Throughout the Nuclear era, communications technology has been abysmal with incompatible systems and single points of failure that would certainly eliminate all communications at the start of any attack. Equally deplorable has been the military and defense departments opposition to the introduction of any safety devices that would reduce the risk of accidental detonation. After the end of the cold war in 1991, both safety and communications have improved. More than 70,000 Nuclear weapons were built in the US. Today there are approximately 1500 active Nuclear weapons among NATO and US forces with another 2500 in reserve (in a single location near Albuquerque). Leading experts say 300 Nuclear weapons would be enough to assure a worldwide holocaust.

After WWII the US disarmed so quickly there was absolutely no radar available to detect Soviet bombers. It was assumed they would fly a polar route and thousands of little huts were built in small towns across the northern US complete with binoculars, plastic pictures of different planes to help identify a Soviet bomber, and a telephone. These huts were manned by civilians (including yours truly) during daylight hours and we were instructed to call the local air force base if we saw a suspicious plane flying overhead. This reader assumed that the huts were akin to asking students to get under their desks during a Nuclear attack, a ploy to reassure citizens that everything was OK and under control. In fact the little huts were the only detection system in existence at the time.

The US built 3 Nuclear bombs initially, one was used in the Trinity test, one destroyed Hiroshima, and the last destroyed Nagasaki. At the end of the war, the US had no Nuclear weapons and most of the scientists of the Manhattan project returned to civilian life. This absence of Nuclear weapons was a closely held secret for years. Even the DEW line radar system was useless once ICBMs came into existence and for years the primary policy of war was called Mutual Assured Destruction (appropriately MAD. If you start anything, we all die.) Until recently, our defense plans were centered around a top secret plan the SIOP. Those who have been allowed to see to SIOP agree that the plan is ill conceived, arbitrary, massively overkill, and truly mad. Had the order ever been given the military would have dutifully executed the SIOP rendering the earth uninhabitable. Carl Sagan pointed out many years ago that the dust alone raised by these massive explosions would have blocked the sun and driven the earth into an uninhabitable ice age making all life on earth impossible. Forget nuclear contamination and sickness. We would all die anyway.


June 20th, 2013

Earthmasters, The Dawn of the Age of Climate Engineering, Clive Hamilton, 2013

The title of this book is intended ironically. We are masters of the Earth only in the sense that we have the power to destroy all life forms on Earth but lack the will or the knowledge to prevent that destruction. was named for the number of parts per million of carbon dioxide in the atmosphere that scientists believe to be the tipping point beyond which catastrophic climate changes are inevitable. We are currently at 395 parts per million and climbing with predictions of 700 or even 1100 by the end of this century. In other words, carbon dioxide in the atmosphere must be reduced, not merely stabilized to avoid the inevitable catastrophe. Hamilton summarizes:

It took the Earth millions of years to immobilize a large portion of the planet’s carbon in fossilized form deep underground. When we extract and burn it we mobilize the carbon and there is no place on Earth where, over human timescales, we can safely sequester it again. We know we cannot leave it in the atmosphere, Carbon stored in vegetation and soils is always on the brink of release through fire or human disturbance. The oceans are in constant flux, with even the deepest layers naturally coming to the surface sooner or later. Heavily promoted plans for carbon capture and storage, in which carbon dioxide extracted from the smoke-stacks of coal fired power plants is pumped in geological repositories underground, looks increasingly risky and expensive. I hope we have learned enough by now to be wary of any technology that claims to have found a way to immobilize for centuries huge quantities of carbon somewhere in the Earth system where it does not belong. Even if such a place could be found there is something deeply perverse in the demand that we construct an immense industrial infrastructure in order to deal with the carbon emissions from another immense infrastructure, when we could stop burning fossil fuels.

When you are already in a hole, stop digging. That would be too sensible.

Pinatubo The Scream

Hamilton discusses a group of climate engineering suggestions intended to regulate sunlight including making clouds whiter or generating more or fewer clouds in various parts of the world. The main focus of research, however, seems to have been on studying the effects of the historic volcanic eruptions of Laki in 1783 (effects studied by Ben Franklin), 1816 (the largest in recent history and resulting in famines), Krakatoa in 1883 and Pinatubo in 1991. All resulted in significant cooling of the global climate. Hamilton, tongue in cheek, notes that Krakatoa inspired “Frankenstein“, Lord Bryon’s poem Darkness, and Edward Munch’s painting “The Scream“.

The climate engineering idea is to somehow put sulphate aerosol particles into the stratosphere which is between 10 and 50 kilometers in altitiude. The engineering problem is getting the quantity of particulars required up there. One estimate has thousands of special planes making a million flights per year to produce the equivalent effect of the 1991 Pinatubo eruption. The big problem for researchers is that it is difficult to learn much from small scale experimentation and full scale deployment will undoubtedly have unforeseen consequences. Scientists agree that it would cool the Earth. Some believe more limited deployment over the arctic could reverse the melting of the ice and cool the Earth sufficiently. There is major concern that the sulphates would further damage the ozone layer, delaying its recovery for decades and increasing the ozone holes. The effects on patterns of rainfall and monsoons is unknown but likely large.

Then there is the problem that once started it would be impossible to stop the program regardless of the political or economic climate. Stopping it in the future would lead to instant warming without giving life on Earth any time at all to adapt. The catastrophe would be immediate and worse than if the program had not been started in the first place. This plan would affect everyone on Earth but the decision to go ahead could be made by a single nation or even a single very wealthy individual. Billions of people would be put at risk without having any say in the program.

China and India live within a constant brown haze from industrial emissions pollution that cause more than a million deaths a year. The US and Europe have put emissions controls in place to greatly reduce the pollution and China and India want to do the same. The problem is that reducing the haze results in increased warming so you trade improved health for accelerated climate change. There is little doubt that both countries will implement their emissions controls programs.

Caldeira liming the oceans
Keith let’s buy an ice age

Research in geoengineering is controlled by a small, incestuous group where two scientists, Ken Caldeira and David Keith, are so dominant they have been labeled the “geoclique“. Bill Gates is the biggest backer, but funds are also provided by N Murray Edwards, a Canadian oil billionaire with an enormous stake in the oil sands. Hamilton likens this to cancer research being funded by big tobacco. Keith plans to “test” sulphate aerosol spraying in New Mexico. Caldeira is conducting small scale tests of liming the oceans. Hamilton is worried that the backers, which include Richard Branson, are engaged in magical thinking, looking for the sexy “killer application“. They view existing technologies for wind and solar energy, insulation, and other energy reduction methods as boring and old fashioned, definitely not sexy.

Gates Branson Magical Thinkers

The geoclique has its origins, not surprisingly, at Lawrence Livermore Labs, home of nuclear Armageddon. The Dr. Strangeloves of geoengineering suggest we simply move the Earth a little further from the Sun perhaps by detonating a huge nuclear blast to steer a large asteroid close to the Earth. Hope they don’t miscalculate!

Arctic Oil

BP, Shell, and Exxon are all investing in geoengineering. Hamilton notes that the melting of arctic ice has made previously protected reserves of oil that were under the ice now accessible. The arctic oil gold rush is on so don’t expect an arctic sulphate aerosol shield anytime soon.

Big oil seem to favor experiments to get the ocean to absorb more carbon dioxide from the atmosphere by stimulating the growth of carbon eating lifeforms by fertilizing the oceans with iron or liming. The oceans are very complicated and the effects of major deployment are unknown. Major deployment would require massive industrial infrastructures and would divert chemicals needed to grow food. Phosphorous, in particular, is a scarce resource that should be preserved for food growing. Simply outlawing the killing of whales could have a big effect on the ability of the oceans to absorb carbon but the chances of passing such laws are negligible. Big oil is also supporting very small scale experiments in algae and other plants as “carbon neutral” sources of energy. This is safe for big oil since land, fertilizer, and water are not available for growing the plants on a meaningful large scale.

Hamilton notes the bizarre and illogical willingness of climate change deniers to embrace geoengineering technofixes to a problem they deny even exits:

..if planning to take control of the Earth’s climate system forever – using highly speculative technologies and risks – is needed to appease those whose prejudices prevent them from accepting scientific fact, then that is what we must do…We know we are in trouble when liberals who say they accept the science begin advocating geoengineering as a means of appeasing conservatives who reject the science.

This new coalition, in the name of doing something politically, is likely to embrace grand system changing interventions like stratospheric sulphate aerosols rather than more modest efforts like reforestation, biochar, or painting roofs white, and to favor US unilateral implementation of those grand schemes.

More humble scientist Ron Prinn asks: “How can you engineer a system you don’t understand?” Overconfident geoengineers say we just need to decide where to set the thermostat.

The Earth’s decision makers lost an entire decade waiting for the miracle of Carbon Capture and Sequestration (CCS) in which carbon was to be extracted from the smoke chimneys of coal fired plants and permanently stored somewhere. The oxymoron “clean coal” CCS was never technically or economically feasible. We are now well into the second decade of waiting for the magic solution that won’t require changes to the existing social and political power structures or our life styles.

Paul Crutzen

This time, the magic solution seems to be stratospheric sulfate aerosols made public for the first time in a 2006 “intervention” by Dutch scientist Paul Crutzen with his essay “Albedo (Reflection) enhancement by stratospheric sulfur injections: A contribution to resolve a policy dilemma?” Crutzen strongly believes that we must also find ways to reduce carbon emissions as well as ways to remove carbon from the atmosphere, but not all sulfate aerosol advocates share this conviction. Many seriously believe we can carry on as usual to burn fossil fuels, compensating for the resulting climate changes with sulfate aerosols or ocean cloud whitening. This is just what those that control big oil and coal want to hear. Little attention is given to “side effects” like damage to the ozone layer and changes to weather patterns affecting monsoons and inducing droughts.

Lonnie Thompson stores a million year history of Earth’s Climate gathered from the highest places on the planet

A previous post Thin Ice discusses the three cycles of Earth orbit and wobble which, in the past, have determined patterns of Earth temperatures with long ice ages followed by short warm ages. The last 10,000 years, during which time agriculture and human civilizations have risen, has been named the “Holocene”. In 2000, Crutzen and another scientist declared a new age, the “Anthropocene”, the age induced by human activity.

With the Anhropocene, humans have become a geological force, so that the two kinds of history have merged…Our future has become entangled with that of the Earth’s geological evolution. Anthropogenic climate change affects not just the atmosphere but the chemical composition of the oceans (acidification), the biosphere (species extinctions and shifting habitats), the cryosphere (melting ice masses), and the lithosphere itself.

Yet how can we think our way out of the problem when the problem is the way we think? There is something increasingly desperate about placing more faith in technological cleverness when it is the unrelenting desire to command the natural world that has brought us to this point.

The magnitude of this climate change is emphasized when we realize the already released carbon dioxide from burning fossil fuels will suppress the entire next ice age. Brace yourselves for the geoengineering era. Geoengineers are “Earthmasters” like Wall Street denizens are “Masters of the Universe“. Maybe they can hold a competition to see who can do the most damage.

Edward Snowden, Targeted Assassinations, and cell phone privacy

June 14th, 2013

How private is your cellphone? How anyone can trace your location from your cellphone

Edward Snowden in the Guardian

This post is a reaction to the recent proof that Verizon (and presumably all other cellular operators) are providing the US government (NSA and private contractors like Booz Allen) with all your phone call metadata which, in the case of cell phones which almost everyone uses, include location information.

Osama bin Laden Courier Abu Ahmed al Kuwaiti found after cell phone call.

The targeted killing program has located and killed many of its targets because they made or received calls on their cell phones, including Osama bin Laden whose courier’s vehicle was identified and followed to the Abbottabad compound because of a cell phone call made by Kuwaiti as shown in a scene from the movie Zero Dark Thirty.

The book Digital Disconnect pointed out that smartphones should be called trackers because they allow the government and private corporations to track your movements.

Searches on the internet make it abundantly clear that the tracking capabilities of cell phones and the ability of governments and private companies to access this information is broadly misunderstood.

The author of this post is a retired engineer with more than ten years working with digital cellular networks and the technology that is now known as WIFI. Any errors in this information is his own.

All cell phone operators are able to trace the approximate location of the cell phone based on the cell that is currently being used during the call. Individual cell phones can be “heard” by more than one cell during use allowing cell phone operators to use the relative signal strengths (the number of bars on your phone) at each cell to calculate your actual real time location using triangulation. Because radio signals are affected by terrain, buildings, and other obstructions, using the cell phone signal strength to determine location is only an approximation. This approximation is usually good enough when the cell phone user is looking for a gas station or a restaurant or a landmark near his location. Smartphones target their searches based on location information.


Smartphones usually include GPS satellite receivers in their devices to enable the cell phone operator to know your exact location. The GPS is so accurate it can determine your location to within a few feet and if you are moving can determine your direction and speed with enough precision that the information could be used to accurately target a missile. The first basis of misunderstanding of the technology is that GPS signals are receive only. The location information from the GPS satellite must still be transmitted to a third party via ground wireless transmission and this requires a smartphone transmission to a central information collector using cellular frequencies or WIFI.

Smartphones have introduced a second independent communication technology, WIFI capability. Now your phone can be transmitting your location via the cell phone network or via WIFI. Since the range for WIFI transmissions is very limited, your WIFI location is within a few hundred yards of the WIFI node. So if your location is determined by the cell phone network, you can be located within a mile or so, if your location is determined by the WIFI node, your location can be known to within a few hundred yards, if your location is determined by GPS, you can be targeted to within a few feet.

If you don’t want your location monitored by third parties what can you do? If you want to use your phone to receive or send phone calls or use WIFI there is nothing you can do short of changing the law and enforcing that law. Sorry.

Can you “turn your phone off” as many web sites suggest? Short of removing the battery, no you can’t. When your screen goes dark, the phone has entered a battery saving standby mode where an incoming call can instantly wake the phone up. Is your phone transmitting location information while it “sleeps”? We don’t know but probably not as this would drain your battery, but the cell phone operator still retains the technical ability to get your location from a sleeping phone without alerting you should they wish to do so.

If you are also connected to a WIFI node things become even more complicated and a definitive answer probably depends on the phone provider software and on the applications that the provider or you have loaded into your phone. Generally, when the phone goes to sleep, WIFI is inoperable, but it is technically possible for a WIFI transmission to wake a sleeping phone without alerting the user. The technical problem is that a sleeping phone can be woken remotely. It depends on secret technical information unavailable to the user. As to downloaded applications anything goes. The Way of the Knife includes a story about Michael Furlong an overweight long time government and military contractor. He ran an operation where spyware was hidden in a cell phone game with information gathered and stored in an illegal database in the Czech Republic. You have no way to know what is hidden secretly inside the software the cell phone provider or you load to your cell phones.

Removing the SIM card may not prevent location transmission because of the emergency call requirements of cell phones in some countries including the US. Wikipedia reports that some US smartphones can make 911 calls without a SIM card. An inactive SIM card will not prevent you from making a 911 call on any cell phone but removing the card may or may not disable transmission. It depends on the phone model.

The assassination books noted that targeted terrorists routinely remove the SIM cards from their phones and use multiple SIM cards and multiple cell phones to avoid tracking, but the manufacturers and operators know this and could easily create phones that transmit location information without SIM cards if they wanted to. One would guess the US government is pressuring manufacturers to include this capability in all new cell phones. If a SIM card has been removed, the transmitted metadata would still include the unique identifier of the cell phone. Cell phones known to have been used by people on the US government’s targeted kill list have not only the phone numbers (associated with the SIM card) but the unique identifying numbers of the physical phones themselves. When one of the targeted cell phones is used, the information, including the location of the phone, is instantly available to the government assassination teams. Many assassinations have resulted from a phone call.

So the best bet at the moment to avoid transmission of tracking information in the US is to do two things:

1) Current Airline FAA regulations absolutely prohibit passengers from transmitting radio signals, specifically cell phone transmissions while flying. Consequently, most cell phones, including smart phones have an “airplane mode” which disables your cell phone transmission. Your cell phone will still allow the camera, music player, GPS and other features to function. So if you want to disappear from tracking monitors, just turn on your phone’s airplane mode.

2) If your phone has built in WIFI, you will need to turn it off to avoid location tracking. Strangely, the airlines are pressuring the FAA to allow the use of WIFI aboard their flights and this seems to be the new trend so turning on airplane mode still leaves WIFI functioning. How the FAA justifies allowing you to use WIFI but not cell phone transmission is one of those mysteries that have almost nothing to do with technology and may be carryovers from the distant past where old cell phone frequencies might interfere with aircraft communications. I doubt interference is possible today if it ever was a problem. Still airplane mode is one of the few remaining options if you want to use your cell phones for some functions while blocking cell phone transmission.

For a general discussion of metadata, the Guardian, which broke the Edward Snowden FISA authorization story posted this What is metadata guide. A recent blog post lists the information currently available and probably collected by the government and its contractors as NSA metadata.

Moyers and Lessig

For a great discussion of Snowden, Privacy, and Congressional corruption which prevents fixing our problems see Bill Moyers’ Big Brother’s Prying Eyes which aired on June 14, 2013.

Lawrence Lessig and Bill explore how we can protect our privacy when Big Government and Big Business morph into Big Brother.

Rise of the President as Assassin

June 14th, 2013

The Way of the Knife, The CIA, A Secret Army, and a War at the ends of the Earth, Mark Mazzeti, 2013

Dirty Wars, the World is a Battlefield, Jeremy Scahill, 2013

Or How the ChickenHawks Dick Cheney and Donald Rumsfeld institutionalized Presidential Assassinations

The political term Chickenhawk is defined in Wikipedia as:

Chickenhawk (also chicken hawk and chicken-hawk) is a political term used in the United States to describe a person who strongly supports war or other military action (i.e., a War Hawk), yet who actively avoided military service when of age.

The term indicates that the person in question is hypocritical for personally dodging a draft or otherwise shirking their duty to their country during a time of armed conflict while advocating that others do so. Generally, the implication is that chickenhawks lack the moral character to ask others to support, fight and perhaps die in an armed conflict. Those who avoid military service and continue to oppose armed aggression are not chickenhawks.

Chickenhawks 1980 and 2000

These two books explore how Dick Cheney and Donald Rumsfeld , hereinafter referred to as CR, transformed the elite special forces (Navy Seals, Delta Forces, and Army Rangers) into the ultra secretive JSOC command, reporting directly to the President with a worldwide license to kill. CR largely insulated W from their decisions under the guise of denyability.

Prior to CR under W, these special forces were primarily famous for two disastrous actions, the aborted 1980 attempt to rescue the Iran hostages under Carter and the even more disastrous 1993 Black Hawk Down incident in Mogadishu Somalia under Clinton. The only group with a more disastrous history than the special forces was the CIA who Congress outlawed from initiating assassinations after the revelations of the Frank Church hearings in 1975. For more on CIA incompetence see Secrets in an Open Society.

A more minor enabling player in these books is the FBI with their proclivities to entrap innocent victims in their notorious sting operations. Two US citizen victims of drone assassinations were driven by previous FBI sting operations, Imam Anwar Awlaki was killed in September 2011 and Buffalo citizen Ahmed Hijazi (Kamal Derwish) was killed in November 2002 along with the alleged mastermind of the USS Cole attack, Abu Ali al Harithi. Awlaki was arrested twice in San Diego when FBI prostitute undercover agents approached him unsolicited. Hijazi was accused of being one of the Buffalo NY “Lackawanna Six” after his assassination. The FBI stings were instrumental in encouraging both men to leave their US homes for Yemen where they were assassinated. For more on FBI methods see Paranoid Ideologues.

The central theme of both books is how American policy in Afghanistan, Iraq, Yemen, Somalia, Pakistan, and elsewhere has actually led to an increase in American insecurity and how policy makers refused to see how their policies were counterproductive. In each case, America either invaded directly to destroy an existing regime, or had proxies (Christian Ethiopians invading Islamic Somalia) destroy the existing regime or undermined the regimes by totally disregarding the country’s sovereignty (Yemen and Pakistan). America always chose the wrong people to form new regimes and these US backed regimes always led to an increased presence of enemies of the US in the countries. For example, al Shabab, a Taliban like group in Somalia, has gone from a nonentity to a major force controlling more and more of Somalia. Unless American soldiers stay in Afghanistan, the Taliban will likely retake control of the country. Our good ally Pakistan likely welcomes this outcome. This universally disastrous foreign policy has cost hundreds of thousands of innocent lives and trillions of US taxpayer dollars. Enemies of the US have multiplied many fold. Yet none of these enemies pose an existential threat to the US, unlike the Soviet Union during the cold war. The disastrous policy of “war on terror” and “the world is a battlefield” is designed to continue forever.

Stanley McChrystal with Obama

CR authorized a secret JSOC facility camp in Iraq, NAMA under McChrystal, where JSOC personnel both captured and “interrogated” prisoners. NAMA was far worse than Abu Ghraib yet Americans were never told about it and its abuses. Tortured prisoners will say whatever the torturers want to hear, in this case WMD and al Queda. That the confessions were untrue didn’t matter to true ideologues CR. When a major insurgency erupted, CR kept insisting it was just a few “dead enders” from the Hussein Baathist era. De-Baathification had created hundreds of thousands of unemployed, trained soldiers, with unlimited weapons. There were plenty of groups willing to exploit these soldiers for their own purposes. A Jordanian terrorist claiming to be associated with al Queda, and working in Iraq, Zarqawi, started chopping off heads, giving CR “evidence” that Hussein had harbored terrorists. The evidence was that Zarqawi had traveled to Iraq for medical treatment once prior to the American invasion. Hussein probably never heard of Zarqawi.

Obama and Brennen Terror Tuesdays

Obama, upon taking office and to everyone’s surprise, kept W’s security team of Petraeus, McChrystal, McRaven, Gates, and Brennen. Early in Obama’s administration, Somali pirates mistakenly boarded an American flagship. They quickly realized their mistake and attempted to escape, taking the captain hostage. A battleship was ordered to the scene. Obama was informed that the planet’s best snipers (the JSOC ninjas) were only 45 minutes away from the battleship. Obama ordered them to the scene and when they reported they had clear shots at the pirates, Obama gave the order to kill. Three shots, three dead Somali pirates. Obama loved it and invited the ninjas involved (members of Navy Seal Team 6) to the White House. Thus was born the era of Obama as assassin in Chief.

Who snatched Leon Panetta’s Body?

Obama had appointed trusted ally Leon Panetta to head the CIA and under Obama the JSOC and CIA were to form a closer working relationship in their “targeted killing” program. This program has been expanded from the W era and has been largely successful in assassinating people on the kill lists although with countless innocent victims. Obama and Panetta announced the closing of the black sites (secret prisons), the end of torture interrogations, and the end of renditions, and then secretly continued all three.

The books recount discussions about the best way to kill a target, with an M16 or a drone strike. The drone strike is seen as more antiseptic but more difficult to confirm the kill. Occasionally, CIA operatives have been sent to strike sites to collect DNA samples and other evidence, but the strikes make such a mess that identification is difficult. Maybe the Ninjas should bring back the head after a kill. The reader is reminded of scenes from the movie “GoodFellas” and discussions among its psychotic characters. Kill or capture? If you capture you need a prison and you are expected to interrogate. Do you hold indefinitely or are you forced to try the “detainee“? Better to just kill the target and be done with it.

Obama condemns US citizen to death without due process >
Anwar’s 16 year old son Abdulrahman also killed by US drone

In the case of Anwar Awlaki, the intelligence community seems to have concluded that his speeches and blogs were protected free speech and they never got evidence, despite Obama’s false statements, that Awlaki was associated with al Queda or ever assisted any terrorist. This conclusion also included analysis of emails between Awlaki and Nidal Hasan the American soldier that killed 13 at Fort Hood Texas. Awlaki posted a blog after the killings supporting Hasan’s actions which may have been the breaking point for Obama. Awlaki was killed simply to silence him. Nothing more. two weeks later a US drone strike “accidentally” killed Awlaki’s son Abdulrahman. Obama press secretary Robert Gibbs comment: “Well I would suggest that he should have a more responsible father.” Unbelievable.

Petraeus sells Obama on Afghan “surge”

When McChrystal was put in charge of the Afghanistan “surge” other military commanders expected the worst and got it. McChrystal reproduced his Iraq operation on steroids. JSOC operators multiplied, black ops prisons like NAMA were created, and targeted killings skyrocketed. Like Iraq, there were virtually no al Queda operating inside Afghanistan. The targets this time were mid level Taliban but the ninjas couldn’t even tell the tribes apart, so the killing of innocents and allies multiplied. Hatred of Americans and sympathy if not support for the Taliban increased. One mistaken raid killed Daoud, an American trained regional head of intelligence, and members of his family. Realizing their mistake, the JSOC team refused to call medical assistance and starting digging their bullets out of the victims body while some were still alive. They died. The team was only able to recover only 17 of the 21 rounds fired in the raid. A dogged British journalist, Jerome Starkey, exposed the coverup and witnessed a scene where a fatigue wearing soldier with the name tag McRaven enacts a ritualistic sheep sacrifice in front of the family by way of apology. Starkey didn’t even know who McRaven was at the time. Another example of foreign policy gone terribly wrong.

Raymond Davis contractor with license to kill

Secret Wars is organized chronologically, jumping from Iraq to Afghanistan to Yemen to Somalia with Awlaki’s story threaded throughout. Toward the end, we finally get to Pakistan where things get really strange. Remember that the CIA and Pakistan’s ISI worked closely through the 1980′s to support the Afghan Mujahedin (see Ghost Wars) in their fight against the Soviet occupation and that Pakistan is a nuclear power. In January 2011 American Raymond Davis killed two Pakistanis at a busy intersection in Lahore. Davis’ rented Honda Civic was carrying enough arsenal to hold off a small army in addition to GPS, satellite communications, night vision equipment, multiple ids and cell phones, ATM cards, makeup and disguises and other trade craft. He would have made James Bond envious. The killed Pakistanis were ISI operatives who were following Davis and he shot them both through the windshield as only a trained assassin would have been able to do. He was in possession of sensitive photos of secret Pakistani military facilities including nuclear storage facilities. His cell phones showed he had made calls to both Tehrik-e-Taliban and Lahkar-e-Jhangvi Pakistani terror groups. Who was Davis working for? Was it the CIA, JSOC or someone we haven’t heard of? People at his obvious level of experience have level after level of cover stor. He was released after admission that he worked for the CIA but the reality is probably deeper. What was he doing at the secret military sites? It seems that the US government has secret plans to secure (i.e. steal) Pakistan’s nuclear arsenal in the event of a coup or other instability inside Pakistan. How wild is that? Why was he calling Pakistani terror groups?

Davis called for backup, calmly photographed the two Pakistani’s he killed, and fled the scene in his Honda. A backup Land Cruiser with false license plates rushed to assist Davis but ran over a motorcycle killing its driver. The Land Cruiser fled but Davis’ Honda was stopped by police two miles from the murders. ISI sent special forces to guard his prison cell and prevent a JSOC style rescue. Had Davis been put with the general prison population he would probably have had his throat slit. The backup team returned to the CIA-JSOC safe house, destroyed all their documents and equipment, and fled to the US Consulate where they were evacuated from the country before Pakistani officials could question them. They have not been identified.

The CIA had followed a courier to Osama bin Laden’s safe house five months prior to the Davis incident and were awaiting confirmation that Osama was there and assassination plans were readied when the Davis incident happened. The US needed to get Davis out of Pakistan before they could initiate the assassination of bin Laden. Thus the negotiations with Pakistan and the ISI took on an urgency it would not have otherwise had. Then the wife of one of the ISI murder victims committed suicide leaving a video statement blaming the US. Davis’s handlers apparently hid his true job from the white house and state department leading both to make embarrassing and false claims about Davis’s job. Afraid that Davis might start talking and needing to proceed with bin Laden’s assassination, top US military officials including Admiral Mullen and Petraeus met in Oman with their Pakistani counterparts in the military and ISI to hash out a solution. A very unusual Sharia court proceeding presented the families of the victims with $2.3 million and Davis was whisked out of the country on a CIA rendition plane.

William McRaven Mr. Cool

Six weeks later Osama bin Laden was assassinated in Abbottabad Pakistan. For bin Laden’s murder, the JSOC ninjas under CIA direction shot and killed bin Laden, brought the entire body to a ship, and buried it at sea. It was not deemed necessary to share confirmation with the American people. Before the mission the team discussed not shooting bin Laden in the head since the reason for sending a team on a dangerous mission 150 miles inside sovereign Pakistan to a house a mile away from a military academy was to confirm the kill.

Matt Bissonnette Seal Team 6 Member

The first team member to encounter a tall man in the house shot him three times in the head. The next team member shot the body multiple times in the chest. Matt Bissonnette’s job was to collect DNA samples (they had DNA from bin Laden’s sister) and when he cleaned off the face he was surprised how young the man was and that his beard was completely black. Bissonnette had surely seen every photo and video of bin Laden in existence yet he didn’t recognize the man in person. Bissonnette remembers thinking at the time that the American people don’t need to see this (the messed up face and head). Even if this is the reason photos were not released there is no security reason why the DNA test results should not have released to the public. Guns were found in the house but none were loaded. Anyone there could have been captured without a fight but the mission was assassination. Four men and one woman were killed in the raid. Others, including children, were injured. Immediately after the raid Brennan said that the team had been in a firefight (false) and that bin Laden had used women as a shield (false). The Obama administration said just trust us then lied about so many aspects of the mission that Bissonnette felt compelled to write his own account No Easy Day. He would not have been privy to the DNA test results. We should trust them that the DNA test results were a match?

Michael Furlong Michele Ballarin

The Way of the Knife includes a couple of characters (for comic relief?). Michael Furlong was an overweight long time government and military person who spoke in fast government-military speak that seemed to bedazzle whoever he met. He ran an operation where spyware was hidden in a cell phone game with information gathered and stored in an illegal database in the Czech Republic. Furlong showed up in Prague during sensitive negotiations over deploying a US missile defense system in the Czech Republic and US government officials had him thrown out the the country.
Michele Ballarin was a wealthy West Virginia Republican socialite who raised Lippizaner horses. She somehow inserted herself into Somali pirate ransom negotiations and pirates on one seized ship raised a sign asking specifically for her. She proposed setting up a food program for refugees in Somalia where she would collect intelligence about everyone who came to get aid that she could feed to US intelligence. The program was not approved.

Blackwater’s Eric Prince appears in both books with activities no less bizarre but certainly not comic. Prince is drawn to unsavory characters around the world like a magnet. He outfitted his own small ship with an incredible arsenal, helicopter, and small speed boats, and offered to escort ships through the Somali pirate area of operations for $200,000 a trip. This was his sanest venture. He lives in Abu Dhabi to be close to the action and avoid taxes.

Internet as Monopolistic Paradise

May 20th, 2013

Digital Disconnect; How capitalism is turning the internet against democracy, Robert W. McChesney, 2013

This book is really depressing. If you are at all suicidal you may want to pass this one up. Mercifully, the book is relatively short. About half the book is given to the death of the forth estate, journalism. McChesney attributes this death, not to the internet, but to the media “consolidation” that preceded the public introduction of the internet. Once a handful of huge corporations got control of newspapers, television stations, and cable operators, they slashed costs, fired the journalists and killed journalism. He estimates that 85% of what passes for news on television and in newspapers and magazines are unattributed press releases from corporations and the government. No one has the staff to fact check or even edit these pieces, rendering the “news” organizations pure distribution channels for the corporation and government, i.e. propaganda arms. The absence of journalism allows unparalleled levels of corruption and scandal to go unreported and unknown by the public. The corporations and government both enjoy operating with complete impunity and secrecy. Add to this Obama’s acceleration of classification of documents and his war on whistle blowers and you have a prescription for producing one of the most ignorant publics in the world.

Wasn’t the internet supposed to give us better journalism by making production and distribution of news free? For 150 years journalism has been supported by an advertising model where sponsors were willing to pay to have their ads appear in targeted magazines, newspapers, and news broadcasts. A funny thing happened with the introduction of the internet. As late as 2000 Google had no idea how it was going to monetize its search service and make Google profitable. For Facebook the date of this discussion was much later. The answer for both was to collect personal information from their customers, give that information to corporate (and government) touts who would pay to have their ads or infomercials delivered to a targeted audience of one. The touts proved to be total agnostics about where their increasingly intrusive information appeared (porn sites or news sites) so long as the target met the appropriate (secret) criteria. Advertisers or propagandists no longer needed to subsidize journalism and journalists today have no viable means to support themselves.

McChesney documents that European countries use public subsidies to support journalism with no apparent cost to democratic government. Germany, followed by Scandinavia have the highest levels of subsidy and are among the most economically egalitarian in the world. With corporate control of government, public subsidy of journalism has no chance in this country. The US used to subsidize news distribution via low postal rates for delivery of newspapers and magazines. McChesney estimates that the equivalent government subsidy in today’s dollars would amount to $35 billion annually, enough to support considerable internet journalism. Instead the government today spends $5 billion a year on defense public relations.

McChesney spends some time documenting the unprecedented concentration of wealth in this country. He concludes that the secret to accumulating wealth is monopoly, the elimination of all competition. 40% of Americans have only one choice for broadband internet access. A sizable percentage of Americans have no broadband access at all available because the controlling companies have deemed them insufficiently profitable to serve (too poor or too remote). In the early days of electricity and telephones, the government, through subsidies and regulation, made sure almost everyone who wanted it had access to affordable power and phones regardless of where they lived. Today, a few enlightened small municipalities unserviced by the giants have built their own broadband networks. In reaction, ALEC inspired legislation has been passed in 19 states to make community broadband illegal. What a country. The giants have also been allowed to monopolize the public airwaves often warehousing the spectrum with no use. Television broadcasters increasingly move popular broadcasts (sports and entertainment) to their cable subsidiaries or to satellite providers. A large portion of public airways broadcasting today are paid advertisements with no content whatever. And those are the public’s airwaves.

Far from promoting innovation, the monopoly giant corporation is best at suppressing innovation. Television was delayed at least 20 years by American corporations (RCA). Likewise DSL was invented by BellCore in 1988 but it was 20 years before DSL found its way to our house via baby bell Qwest. So much for innovation. Our cell networks are at least a generation behind the rest of the world and provide lousy service at astronomical public cost. We live in the heart of Phoenix and get no usable cellular signal from any carrier at our house so we use IP voice communication over DSL broadband. You don’t even own the right to use the cell phone you paid for on any other service. This restriction on your own property’s use might be challenged in court but don’t hold your breath. If you unlock your own cell phone today you may be breaking the law.

McChesney also spends time on copyrights that never expire and patents that seem endlessly extendable. In addition to corporate consolidation and bigness, copyrights and patents have the become the tool of choice for corporations to preserve their monopoly. Originally intended to protect individual creators, patents and copyrights have now become the exclusive property of the big corporation. Coogle recently acquired Motorola’s moribund cell phone division for 12.5 billion dollars, not because Google wanted to build cell phones (although they may) but for Motorola Mobility’s 17,000 cell phone related patents. Now Google can hold its own in the cutthroat legal patent battles for the mobile phone market.

Speaking of cell phones, one wag has suggested that “smart” phones should be relabeled trackers because with their built in GPS and massive information collection, that’s primarily what they are good for. Cell phone service is among the most unreliable, antiquated, and expensive anywhere in the world, and almost certainly the most intrusive. Did you know that the government actually pays the corporations when they request phone records and other private usage information? And the government retroactively immunized the companies from privacy invasion lawsuits. Opt out of information disclosure? That’s as useless as adding yourself to the government’s “do not call” list. The public can’t read, much less understand the privacy policies of companies like Google and Facebook. The policies along with the information shared are secret. A few executives at these companies have called the sharing process “icky”. If you knew what was going on, it would make you sick. This from the executives themselves who have no intention to stop doing it.

Icons of the New Gilded Age

The internet has reshaped the corporate landscape. Apple, Google, Amazon, Microsoft, and Cisco are now among the richest and most powerful corporations in America. Facebook will soon join them. Google (70% of US market 85% in Europe), Amazon, and Facebook all share a tendency toward monopoly. All hide billions in profits offshore to avoid taxes. Periodically, (last under W) a tax repatriation holiday is declared to allow the corporations to bring their stashed hordes home without paying taxes.

McChesney extensively quotes economists Joseph Stiglitz and Paul Krugman (characterized as apoplectic) and reformed neocon Jeffrey Sachs. His best quote is from former Clinton Treasury Secretary Robert Rubin:

Don’t you see. Too big to fail isn’t a problem with the system. It is the system.

Rubin’s Citibank would have tanked were it not for the government’s bailout. The banks today are bigger than ever. Is there hope? Probably not until the whole country crumbles. The revolution will not be televised (or streamed).

She Bear at the FDIC

December 24th, 2012

Bull By the Horns: Fighting to save main street from Wall Street and Wall Street from Itself, Sheila Bair, 2012

Hank Ben Sheila Tim Sheila Ben

There were four central regulatory players in the great financial crisis of 2008; Ben Bernanke of the Fed, Hank Paulson of Treasury, Tim Geithner of the New York Fed and Obama’s Treasury secretary, and Sheila Bair of the FDIC. Paulson left Treasury at the end of W’s term and wrote his account of the crisis which this reader has not read. Bair left the FDIC in 2011 and this is her account. Geithner is leaving the Obama administration and will no doubt give us his account. We will have to wait for Bernanke to leave the Fed for his account.

We previously reviewed the Suskind book which featured Geithner ignoring an order from Obama to come up with a plan to break up Citigroup ( Scamming the President ). Bair recalls the meeting in question where the breakup of Citibank is discussed with the President: “Tim seemed to view his job as protecting Citigroup from me, when he should have been worried about protecting the taxpayers from Citi.” Bair says she only learned that Summers was in favor of breaking up Citigroup after reading Suskind’s book. Had she known at the time, she could have insisted that Summers arrange another meeting with the President where she could discuss and advocate using FDIC to resolve Citigroup. She never doubted this breakup could have been done.

This is the first time we learn about the “systemic risk exception” where super majorities of the Fed and FDIC boards declare that putting an institution into an FDIC type resolution would cause “systemic ramifications”. This effectively means that Treasury and the President himself must approve the resolution. Bair says of the NY Fed invoking the exception for Bear Stearns:

In fact, prior to the 2008 financial crisis, the FDIC had never invoked the systemic risk exception. But here we had the NY Fed (Geithner) going out on its own and deciding to bail out a relatively small investment bank, a perimeter player at best…I was concerned about the precedent the NY Fed was setting.

Senator Elect Elizabeth Warren

As Suskind relates, both Geithner and Summers went to great lengths to control access to Obama and the administration had an all boys club atmosphere. Christina Romer, nominal head of the Counsel of Economic Advisers, left the administration early and gets one brief mention in Bair’s account. Bair did have a close working relationship with Elizabeth Warren, newly elected Senator from Massachusetts in Ted Kennedy’s old seat, and Bair still has high hopes for the Consumer Financial Protection Bureau.

She Bear

Bair is a tough, no nonsense, plain speaking advocate of the public interest. Her fierce and protective support of the FDIC against all critics led her staff to call her “She Bear”. When she arrived at the FDIC in 2006, moral was low and the agency hadn’t closed a bank in three years. The black clouds were on the horizon and the FDIC through its own and other regulators examinations had probably the clearest picture of the looming catastrophe. She launched a major offensive to educate the public and woo the media to the role of the FDIC, the mechanisms of the bank resolution process, and reassure the public that insured bank accounts were perfectly safe.

Tim and Sheila Adversaries

Almost immediately the FDIC was overrun with bank failures; Wachovia, Countrywide, Indymac, Washington Mutual and others. She ran into her first major conflict with Geithner who wanted his client Citigroup, despite their dismal financial condition to acquire Wachovia to add their FDIC insured deposits to Citigroups small deposits. Geithner was furious when Bair continued to press Wells Fargo to purchase Wachovia, which they did without any government assistance or guarantees. Geithner doesn’t fare well in Bair’s account in this book.

Rubin’s Acolytes

Bair does a good job explaining the complex structure of financial regulation in this country. The Fed has certain regulatory functions; the FDIC domain covers any institution with insured deposits; Treasury houses two regulatory agencies, the OCC for mega banks; and the OTS for the thrifts including WAMU, Countrywide, and Golden West. While the Fed and FDIC are more independent, the Treasury is highly politicized and has been under the sway of the financial industry for some time. Citigroup’s Bob Rubin (Clinton’s first Treasury Secretary) mentored both Larry Summers and Tim Geithner and it was under Clinton that Glass-Steagall was repealed and Derivatives declared free from all regulation. And Hank Paulson was former CEO at Goldman-Sachs. The SEC and CFTC are separate and are dependent on annual budget allocations.

When Senator Dodge advocated creating a single unified regulatory agency, Bair talked him out of it because she feared a single agency would more easily fall under the control of the financial industry and become a super OCC. Besides her wars with the Citigroup dominated Geithner, Bair had continuing problems with the OCC, with John Dugan and John Walsh, comptrollers of the currency, and OTS’s John Reich, who opposed Chase’s purchase of WAMU, Reich’s last bank. The OTS is now abolished. None of these were advocating for main street and the public interest.

Reich opposed Wamu sale

Bair strongly advocated using the government through the resolution process to clean up the toxic mortgage backed securities. The FDIC successfully demonstrated simplified methods to modify mortgages en-mass during the cleanup of the thrifts. Bair was a consistent advocate for loan modification as a way to keep people in their homes and minimize the overall losses to the industry and government. She called TARP, which Paulson sold as a fund to buy toxic assets, then used it to bail out the banks and wall street with capital infusions, a case of bait and switch. She explained some of the reasons for the failure of loan modification programs. Mortgages were lumped into securities which were sold with banks providing loan servicing for low flat fees. This meant the banks were understaffed, under trained, and unsupervised. Breaking the securities into tranches meant that holders of the “safest” tranches would not be hurt financially until perhaps 20% of the mortgages defaulted so were incentivized to prefer foreclosure to restructuring loans. When robo signing was uncovered where single bank workers were fraudulently claiming to have examined the loans being foreclosed the issue moved to the front burner but no effective action resulted. Banks still had separate groups working simultaneously on foreclosure and modification of the same mortgage with customers being approved for modification at the same time they are being evicted. To this date, loan modifications are woefully inadequate and the bulk of toxic assets are still looming.

During the debate on Dodge-Frank, there was considerable discussion of FDIC style regulatory resolution verses bankruptcy. Bair uses the infamous case of the Lehman Brothers bankruptcy to prove her case that regulatory resolution is far better. Legal and other fees topped $1.5 billion and to date, creditors have recovered 21 cents on the dollar. The Lehman brand is dead and all employees lost their jobs. An FDIC style resolution results in an instant solution, preserving the brand and jobs. Her staff estimated that an FDIC resolution would have recovered 97 cents on the dollar at Lehman.

Bair is generally positive on Dodge-Frank but worries that the industry will continue to attack and modify the measures. Much of the effectiveness of Dodge-Frank will depend on the regulatory implementation and the jury is still out on much of the new complex legislation.

Bair complains that Sorkin in his book Too Big To Fail and in his columns failed to contact the FDIC to get their perspective and thus misrepresented FDIC positions and actions.

Bair spends considerable time on the Basel II accords which greatly reduced capital requirements for banks allowing the European banks to load up on sovereign debt from Greece, Italy, Spain, and Portugal. Much of the current European financial crisis is attributable directly to Basel II. Bair with a little help from the Fed was able to prevent the US from adopting Basel II. Bair then pushed Basel III to greatly increase capital requirements and to require mega banks to have even higher (9.5%) capital reserves.

Geithner Grilled after Libor Scandal Breaks

Bair notes that the Barclay misconduct in the Libor interest rate fixing scandal from mid 2005 to early 2009 took place at Barclay’s NY trading desk which was subject to Geithner’s NY Fed. The investigation was conducted jointly by the CFTC, UK authorities and the Justice Department. The investigation did not involve the NY Fed. During his appointment hearings for Treasury, Geithner proudly stated “I have never been a regulator, for better or worse.” For once he seems to have been telling the truth. Unfortunately for us, regulating was his Fed job.

Bair is very disappointed in Obama and hopes he will appoint better people in his next administration. The FDIC currently has no head. Would it be too much to hope that Obama might appoint audacious Bair to Treasury?