Archive for the 'Books' Category

Democracy Under Seige

Saturday, February 28th, 2015

Lords of Secrecy; The National Security Elite and America’s Stealth Warfare, Scott Horton, 2015

Horton opens with a brief description of the bizarre events surrounding the Feinstein Senate Intelligence Committee’s attempt to launch an in-depth study of the CIA role in interrogation and imprisonment. The CIA, under Leon Panetta reacted with a series of delaying and evasive maneuvers starting with insisting that the committee staffers travel to Langley and do their research on specially prepared by CIA stand alone computers. The CIA then accused the staffers of “stealing” classified material by removing them from the premises. The CIA and Panetta chose to treat their regulators as adversaries to be fought and opposed.

Horton then proceeds with a short selected history of democracy. He says that too often Greek scholars have focused on Aristotle and Plato instead of looking at the remarkable effort of the Athenians to form a democratic government with public debate and consensus decision making. He says that it is precisely in the area of decisions regarding war and peace that debate and consensus building is most crucial. He credits Athens with effective governance using principles of public debate and consensus decision making. He moves on to Max Weber and Georg Simmel who focus on the role of secrecy in creating the conditions for authoritarian governance. He also spends time praising Danial Patrick Moynihan, a trained sociologist and politician who chaired the Commission on Protecting and Reducing Government Secrecy who produced a study in 1997 that concluded:

    Secrecy is a form of Government Regulation
    Secrecy Keeps Information Away from Decision Makers
    Secrecy Thwarts Accountability
    Secrecy Undermines Democracy

Hayden’s Swollen Head hayden Alexander Recruits Hackers alexander
Body Snatched Leon Panetta panetta Lying John Brennan brennan

Horton laments Congress’s abrogation of the sole authority to declare war since WWII, the inability of Congress to regulate the CIA and NSA security arms, and the tendency of the courts to accept national security and secrecy deference to deny due process of law to citizens.
He notes the record number of whistle blower prosecutions under Obama but largely blames a reorganization of the justice department under W which created a special division to deal with national security cases. In effect this division has become the client of the Lords of Secrecy that run the CIA and NSA.
Who are the Lords of Secrecy? Michael Hayden and Keith Alexander of the NSA and Leon Panetta and John Brennan of the CIA.
Trying to be objective, Horton finds three areas where secrecy is warranted and consistent with democratic governance.

    First, he says secrecy is needed to keep weapons research and medical research that could be weaponized secret.
    Second, he says that signals intelligence such as breaking the German and Japanese codes in WWII must be kept secret so our enemies don’t learn that their communications are being decoded and monitored.
    Third, the identity of covert operatives and foreign informants must be kept secret.

Horten next gives a list of things that should never be secret or classified.

    First, Opinions of the Justice Departments Office of Legal Counsel, which are being used as “get out of jail” cards for administrative officials who can claim to be relying of the opinions as to the legality of their actions and decisions. The public and other branches of government must have full access to these opinions. Most will not stand up to public scrutiny.
    Second, Material already in the public domain should never be classified. This includes material that entered the public domain via whistle blowers or other leakers. Attempts to put the genie back into the bottle cannot have standing in courts.
    Third, secrets should all have a known “shelf life” and it should not be possible for later administrations to change the time limits for disclosure.
    Forth, basic scientific research should never be classified. This is a fundamental principal of science and assures maximum progress and disciple in the scientific process.
    Fifth, classification should never be used to cover mistakes or incompetence or lying to Congress or the public.
    Sixth, classification should never be used to cover illegal actions and their perpetrators. Like NSA mass surveillance of American citizens communications.

Citizenfour Fighting the Lords of Secrecy snowden citizenfour

Horton concludes with lavish praise for the whistleblowers, particularly Edward Snowden, without which the public would remain in the dark about the actions of their government. America’s experience shows Weber’s faith in parliamentary inquiries ability to hold down the forces of secrecy too optimistic.

The cache of secrets, and particularly the vast and unwieldy store of intercepted communications, is growing into a modern Tower of Babel, already essentially unmanageable and overshadowing all the institutions of American democracy. Like the Tower of Babel or yore, it is a monument to the unseemly thirst for power of those who built it and to their indifference to the core values of their own society.

Strange Bedfellows

Thursday, February 12th, 2015

Unstoppable; The Emerging Left-Right Alliance to Dismantle the Corporate State, Ralph Nader, 2014
nader nader safe

This book advocates an idea that single purpose coalitions of leaders from the left and from the right can attack the major problems facing the nation including actions to:
1. Require that the Department of Defense budget be audited annually, and disclose all government budgets. Security destroys accountability.
2. Establish rigorous procedures to evaluate the claims of businesses looking for a government handout, which would end most corporate welfare and bailouts.
3. Promote efficiency in government contracting and government spending.
4. Adjust the minimum wage to inflation.
5. Introduce specific forms of taxation reform as well and push to regain uncollected taxes.
6. Break up “Too Big to Fail” banks.
7. Expand contributions to charity, using them to increase jobs and drawing on available “dead money”.
8. Allow taxpayers the standing to sue, especially immunized governments and corporations.
9. Further direct democracy – initiative, referendum, and recall, for starters.
10. Push community self reliance.
11. Clear away the obstacles to a competitive electoral process.
12. Defend and extend civil liberties.
13. Enhance civil skills and experience for students.
14. End unconstitutional wars and enforce Article 1, section 8, of the Constitution, which includes the exclusive congressional authority to declare war.
15. Revise trade agreements to protect US sovereignty, and resume full congressional deliberations, ending fast track.
16. Protect children from commercialism and its physical and mental exploitation and harm.
17. End corporate personhood.
18. Control more of the commons that we already own.
19. Get tough on corporate crime, providing penalties and enforcement budgets.
20. Ramp up investor power by strengthening investor-protection laws and by creating a penny brigade to pay an investor watchdog agency.
21. Oppose the patenting of life forms, including human genes.
22. End the ineffective war on drugs.
23. Push for environmentalism.
24. Reform health care.
25. Create convergent institutions.

Nader’s first example that change is possible is the coalition of conservatives and environmentalist that joined together in 1982 to defeat the Clinch River Breeder Reactor in Tennessee. Nader’s other examples to demonstrate that such coalitions are possible and work mostly come from the 70′s (Richard Nixon) EPA and OSHA. Nader also studied the 19th century populist movement of agrarians who opposed sharecropping and created cooperative to get leverage over agricultural suppliers and the railroads.
smith mises hayek

He talks briefly about the trust busting efforts of Teddy Roosevelt and highlights conservatives who were instrumental in getting New Deal legislation during the great depression. Nader believes that modern conservatism has been highjacked by the neoconservatives and the corporatists. He shows that original conservative philosophy from Adam Smith, through von Mises, through Hayek, have been misunderstood and/or misinterpreted by modern conservatives.

Nader’s central argument is that the 25 issues all have wide popular support as well as support of powerful individuals from the liberal and conservative political leadership who could form single issue coalitions to attack an individual problem.

He believes before this can start with the attention and organization required to overcome corporate and entrenched governmental interests, specially funded convergence organizations must be created. With this in mind, Nader has written an open letter to the 114 billionaires who signed the Gates-Buffet pledge to give away half their wealth to “good causes” during their lifetime. Nader thinks modest funding in the tens of millions could bootstrap this effort.

High Price of Investigative Journalism

Saturday, December 13th, 2014

Pay Any Price; Greed, Power, and Endless War, James Risen, 2014
Risen gives an eloquent rational for writing this book:

In 2009, when the new Obama administration continued the government’s legal campaign against me, I realized, in a very personal way, that the war on terror had become a bipartisan enterprise. America was now locked into an endless war and unintended consequences were spreading. And so my answer — both to the government’s long campaign against me and to this endless war — is this new book, Pay Any Price. Pay Any Price is my answer to how best to challenge the government’s draconian efforts to crack down on aggressive investigative reporting and suppress the truth in the name of endless war. My answer is to keep writing, because I believe that if journalists ever stop uncovering abuses of power, and ever stop publishing stories about those abuses, we will lose our democracy.

Paul Bremer, Mastermind of Chaos bremer

The book itself seems to have been written or at least published backward with the vaguest and weirdest stuff put first. In 2003 and 2004 $20 Billion in $100 bills was air lifted by military transport to Iraq. Serial numbers were not recorded and there was virtually no supervision or safeguards. Most of the money simply disappeared. Risen reports of one shipment of $1.6 Billion sent to a branch of the Iraq Central Bank in northern Iraq and stacked on the floor of the bank – not in a vault. The money vanished. When $1.6 Billion was reported found in a bunker in Lebanon, the US government couldn’t even be bothered to investigate under either W or Obama. Overall the US spent $63 Billion on the reconstruction of Iraq, most of it going to US contractors. Many is not most of the contracts were never completed and some were never even started.

Risen then turns to fraudsters of the war on terror, featuring Dennis Montgomery who used phantom-ware to decode secret Al Quaeda messages hidden in Al Jazerra broadcasts. His reports caused the grounding of international flights and a serious discussion of shooting down commercial airliners. When he approached the French government, their experts quickly exposed the hoax. The US government, having been duped, buried the incident under a mountain of top secret documents.

Flying Blues Brothers blues brothers

He features the Blue’s brothers who bought an unmanned aircraft subsidiary, General Atomics, for $50 million and now have a privately held near monopoly on US war drones.

warlung electrocution

He turns to to KBR the former subsidiary of Halliburton (Dick Cheney CEO), the military’s largest contractor. KBR built substandard housing for US troops using indentured third world untrained labor and with poor or nonexistent supervision and inspections. The result were showers that electrocuted soldiers. One mother persisted in finding out how her son died and then sued KBR. She won on appeal and the case has been appealed by KBR to the supreme court. Risen calls this section Too Big to Fail but it is really Too Big to Jail as with the banks who can’t even get prosecuted for massive drug money laundering activity. The shower electrocutions pail in comparison to the damage caused by KBR’s practice of burning trash (several hundreds of tons per day) in open pits using jet fuel. KBR burned anything including computers, batteries, and other electronics. This has led to the discovery of “war lung injury” this war’s equivalent of Agent Orange in Vietnam and Gulf War syndrome from exposure to uranium shells in the first Gulf war. Returning soldiers were found with titanium and unusual bio masses in their lungs as a result of exposure to the burning pits. The VA and DOD have gone to great lengths to cover up the problem and have failed to survey returning soldiers, provide diagnosis and care, or even to acknowledge a problem. One VA researcher Stephen Coughlin uncovered some suppressed studies and went to Congress with his findings. He was forced to resign under enormous pressure. One DOD official, Charles Smith, stood up to KBR when auditors pointed out a $1 Billion overcharge. He proposed opening bidding to other contractors. Smith was sidelined and soon retired.

taxi mitchell

Risen talks about the prison torture and abuse scandals and the “few bad apples” campaign by the government to scapegoat low level guards. When one prosecution failed, the government abandoned its efforts at scapegoating but the whole prison guard experience ruined many lives. Risen focuses on the the role of psychologists and the APA who gave cover to the torture program. The APA used the old NAZI argument that if the activity was legal (according to W administration legal justifications) it must be ethical. The DOD and VA are the largest employers of psychologists and their careers and livelihoods depend on giving the government what it wants. The legal rational is based on the military use of the techniques in training, particularly the SERE navy training. Risen shows what nonsense the use of torture is by presenting the navy SERE’s own PowerPoint presentation:

Why is torture the worst interrogation method?
Produces unreliable information
Negative world opinion
Subject to war crimes trials
Used as a tool for compliance

Brennan Defends Torture Dec 12, 2014 brennan

Yesterday, CIA director Brennan once again asserted that actionable intelligence was gained from the use of torture and it shouldn’t be banned outright. Utter nonsense as Diane Feinstein rebutted him point by point. Obama refuses to pursue war crimes prosecutions.

Haskell Free Library and Opera House Canadian Border Line haskell library

Risen turns to the cost of the endless war on ordinary American citizens. Most obvious are airports that today resemble high security prisons that visitors must transit if they want to fly. He features two small towns on the border, one in Vermont and one in Quebec that built an opera house spanning the border. The house, with its painted black line is the main tourist attraction of the towns. For generations residents have freely traveled back and forth across the border to shop and visit. Most residents didn’t even own passports since few travel abroad. All this changed after 9/11 when abusive homeland security outsiders started arriving in town. They build a fence and closed off all roads but one which is heavily guarded. Residents now require expensive passports and must endure abusive officials as they cross. When the local pharmacist was arrested for walking two blocks to pick up a pizza in Canada public outrage forced the reassignment of the homeland security official in charge. The draconian treatment eased but the fence and closed streets remain and passports are now required.

Diane Roark dianeroark.widea

Risen turns to the story closest to him, NSA warrant less surveillance and gives the best account yet of all the insiders who attempted to blow the whistle on the illegal activity. The efforts cost each of them their jobs and the government has ruined many lives. Featured here is the little known story of Diane Roark, a staffer for the House Permanent Select Committee on Intelligence. Her personal battle with NSA Director Michael Hayden dates from 2000 prior to 9/11 and the war on terror. It starts when NSA’s Bill Binney discovers that a part of the program he had worked on was being misused with the built in protections against spying on Americans removed. When his internal efforts to stop the activity failed, Binney reached out the Roark who immediately recognized the illegality of the collections. Roark quickly discovered her contacts inside the NSA and the house had been secretly informed of the program and none were objecting. When Roark contacted the Chief Judge of the FISA court Coleen Kollar Kotelly, Kotelly not only did not respond but she notified the Justice Department to inform them Roark was asking questions. Roark was forced to resign but this was not enough for Hayden who insisted on meeting Roark in person. Roark took notes and these are a summary:

General Michael Hayden Repeatedly Lies to Congress michaelhayden

I (Roark) pushed hard and repeatedly about why he had dropped the protections (for American Citizens). He avoided answering until finally he said again that they didn’t need them because they had the power.

Wyden Silenced by Classified Disclosures wyden

Roark was stunned by this answer. The rest of the conversation was equally shocking. Hayden believed that seeking authorization would shed unwanted light on the program. That “It is now among us.” I.E. the program is permanent and expanding. He told her he believed he would prevail if the program came before the supreme court and that he was considering leaking it to select Congress members to assure their silence. Among those silenced appears to be Oregon Senator Ron Wyden. Hayden was telling Roark all this to warn her to drop her efforts to oppose the program. Still, Roark took a chance and wrote a letter to Supreme Court Chief Justice William Rehnquist via hand delivery from Rehnquist’s daughter. Rehnquist never responded. The FBI sent a phalanx of officers to Roark’s Oregon home to seize all her files, computers, etc. Her lawyer advised her to ask for the affidavit in support of the search warrant and the FBI responded it was under seal and she couldn’t see it. That same day the FBI raided the homes of three other NSA whistle blowers. A few months later they raided the home of NSA whistle blower Thomas Drake. This time the supporting affidavit was later discovered to indicate the FBI was looking for evidence that Drake was the source of the leaks to reporters James Risen and Eric Lichtblau. The NYT repeatedly killed the NSA story for two years from 2004 til 2006 when they published it just weeks before the release of Risen’s book State of War. So much for the newspaper of record.

Risen comments that he fully understands why Edward Snowden felt compelled to leave the country before blowing the whistle on the NSA given the devastating personal experience of all previous NSA whistle blowers. In 2005 Risen reported on a botched harebrained CIA plan to give nuclear weapons blueprints to Iran. The government is still after Risen to reveal his source for this story and Risen faces jail time if he refuses to cooperate. The only way to go to jail in this country today is to be poor or to be an investigative reporter. Pretty sad.

Greenwald almost blows the biggest story of his life

Sunday, November 9th, 2014

No Place to Hide; Edward Snowden, the NSA, and the U.S. Surveillance State, Glenn Greenwald, 2014
This book seems to be a collection of five articles. For this reader, Part One, Ten Days in Hong Kong, is the most interesting.
On Dec 1 2012 (The first published article, featuring the FISA Verizon order appeared in the Guardian on June 5,2013, more than five months later.) Glenn Greenwald (GG) receives an email from “Cincinnatus” saying he has important documents to share but GG must first install PGP (Pretty Good Privacy) encryption on his computer. GG ignores the email. Three days later he receives another email from C asking him to confirm he received the first email. GG immediately says he got it and later that day he receives an email with detailed instructions for installing the encryption program. GG does nothing for seven weeks. He thinks encryption would be useful for his work so he emails C on Jan 28, 2013 saying he will get someone to help him install the encryption. GG still does nothing and C steps up his efforts, producing a ten minute video “PGP for Journalists” on how to install the program. GG does nothing.
PGP Public Key Encryption public-key-encryption-example

On April 18, GG flew to New York to give some talks. On landing GG receives an email from Laura Poitras (LP) the documentary filmmaker saying she needs to meet him in person the next time he is in New York. GG had written an article detailing all the times Poitras was detained at US airports and her equipment seized. After the article the harassment at the airports stopped. GG arranged to meet LP at a restaurant in Yonkers. She changed tables several times at the restaurant and told GG to remove the batteries from his cellphone. She then showed GG a couple of emails she received asking LP to work with GG. GG thinks the sender is real but they do nothing and GG returns to Brazil.

On May 11 GG receives an email from a technical expert he and LP had worked with in the past asking GG if he is ready to install the PGP encryption. He responded yes and was told to expect a Fedex package in Rio de Janeiro. The package was held in customs for a week enhancing the paranoia. The day after the package finally arrives, GG receives an email from LP saying they need urgently to talk but only via OTR chat. GG figures the source must have sent LP some documents. LP is far less a technophobe than GG so must have installed PGP. GG had used OTR in the past and now managed to install it and sign up for an account. LP tells GG they need to go to Hong Kong immediately to meet the source. GG thinks the source has to be guy in his late fifties with a thirty year career with the NSA living somewhere along the Washington beltway. Hong Kong makes no sense.

The source was getting upset with LP and GG delays and was discussing involving the Washington Post. That finally got GG into gear. The source agreed to chat over OTR and GG assured him he was committed to the story but he still can’t make sense of Hong Kong. LP had shared some PRISM material with the Washington Post and they responded with an army of lawyers and foot dragging, greatly worrying the source. GG asked to see some documents before he came to Hong Kong and the source patiently walked him keystroke at a time through the PGP installation process. GG was embarrassed by his lack of proficiency but the source assured him he had lots of free time then. Once installed, the source sent GG about 25 documents, the tip of the iceberg.

The documents convinced GG that he needed to go to Hong Kong immediately and that He would need major institutional support to get this material out. GG had been working at the Guardian for only nine months but had little contact with their editorial staff. GG immediately Skyped Janine Gibson British editor in chief of the US edition in New York gushing about the material. Gibson told GG to get off Skype immediately. GG flew to New York and agreed to meet LP in New York. GG arrived in NY May 31. GG and LP book a non stop flight from New York to Hong Kong but then Gibson drops that the Guardian insists on involving long time Guardian journalist Ewen MacAskill who will fly with them to Hong Kong. LP is furious and GG doesn’t know their minder MacAskill. LP was afraid a third person might freak the source but GG understood that the Guardian wanted a long time company man on the scene. LP relents but only if MacAskill stays away from the source until she and GG are ready to introduce him.

Snowden Journalists MacAskill, Greenwald, and Poitras MacAskill Greenwald and Poitras

LP insists that GG buy a new air gapped (never connected to the Internet) laptop before they leave. As they drive to the airport LP gives GG a tutorial on secure computer systems and hands him a thumb drive (with the full collection of documents). For the 16 hours of the flight GG can’t stop reading. He is amazed by the level of organization and pre thought put into the document archive. He immediately locates the FISA Verizon order that all domestic phone metadata records must be handed to the NSA.

We now enter the realm so well captured in the 1997 Norwegian movie Insomnia where the crime detective sent north of the Arctic Circle to the land of midnight sun finds he can’t sleep. GG doesn’t sleep for the next 10 days. When he is about to collapse, he pops a pill and drops off for a couple hours and is then back at work. Part of this is because constant communication with New York Guardian staff is necessary but mostly that he is too excited after chasing the NSA story for years, proof of the whole horrible reality and scope of their surveillance activities has fallen in his lap.
Snowden’s Hideaway MIRA mira room

GG wants to meet the source immediately but LP thinks that would look suspicious so they wait til tomorrow. The source gives LP elaborate spy trade-craft instructions of how and where to meet. GG is expecting a hideaway but instead they go to a Kowloon five star hotel. They are instructed to find a meeting room with an alligator (not real) on the floor where at a precise time they are to wait for exactly 2 minutes. If the source doesn’t appear they are to leave making sure they are not being tailed. Twenty minutes later they are to return to the alligator for exactly 2 more minutes. If the source does arrive they will recognize him carrying a Rubiks cube (GG laughs). GG is expecting an older very senior Washington bureaucrat and is shocked when a young kid (Snowden was 29 but looks younger in a tee shirt jeans and nerd glasses) shows up carrying a Rubiks cube. GG thinks this kid can’t possibly have had access to all those top secret documents. But they are now committed so follow Snowden to his room.

GG was once a practicing lawyer and treats the first meeting with Snowden as a legal deposition where the lawyer tries to trip up a witness forced to answer all questions. Snowden is calm, articulate, very organized and thoughtful and GG can’t find any holes in his amazing story. GG can’t contain his excitement. LP films the deposition. They plan the first release of articles and the time when Snowden wants to reveal himself as the whistle-blower.

The first article will be the FISA Verizon order and the Guardian plans to tell the government ahead of publication as has become standard practice. Gibson calls the government the morning of planned publication and then total silence. At 3PM an army of White House, NSA and other officials call Gibson back. They want to meet in about a week to explain why the Guardian shouldn’t run the story, Gibson says they have until she hangs up to convince the Guardian. The government tries bullying and threats. They don’t work. Their reasons are totally lame and Gibson decides to publish. London and the lawyers agree. At 5:40 May 5, 2013 the story goes live. GG spends the rest of the day and night on the phone with interviews, then starts the next cycle for the PRISM story where nine internet providers are giving the NSA all their data.

The same cycle between the Guardian and government repeats but this time someone in government give lap dog Washington Post a heads up and they rush to post the story they have been holding without publication. GG reads the Post story and realizes they haven’t even asked the internet services for comment. The Guardian story which goes live 10 minutes after the Post’s includes denials from all nine providers that they were cooperating with the government. GG figures the providers and NSA can fight out their denials in public. GG suddenly remembers Cincinnatus and sends an email to thank him for suggesting the PGP program. Snowden immediately emails back you are welcome. GG has never connected Cincinnatus to Snowden. Several more articles follow.

Finally the time arrives to announce the identity of the leaker who the NSA has been unable to identify. LP wants to include a video of Snowden but can’t use the disjointed GG deposition. LP writes down a list of 20 questions and asks MacAskil, who everyone has come to trust, to read the questions while she films. The result is the 12 minute video we have all seen introducing us to Edward Snowden for the first time.

About the time of this release a Guardian lawyer is sent to Hong Kong who asks what is being done to protect Snowden once his identity is released. GG and LP and even Snowden seem to have given this little thought. As the last story began breaking an acquaintance of GG’s, who lives in Hong Kong, called GG pointing out that everyone would now be looking for Snowden in Hong Kong and asking if they didn’t need some qualified Hong Kong lawyers. He suggested two human rights specialists with good contacts in the Hong Kong government. The Guardian lawyer quickly vetted them via the Internet and decided they were good choices. GG agrees to meet and the friend tells him they are already in the Hotel lobby. When GG opens his door a swarm of reporters are waiting. They follow him into the elevator and GG finds still more reporters waiting in the lobby. He decides to give a short impromptu interview and within 15 minutes most reporter have left to file their stories.

GG was finally able to locate his friend and the lawyers. They suggested the lawyers accompany Snowden to a UN mission and from there to a safe house. But how to get Snowden out of his five star Hotel? Snowden is now ahead of them with a prepared disguise and he makes his way safely to an exit where the lawyers are waiting. So that is how the biggest story of GG’s life got told.

Also featuring is GGs Brazilian partner David Miranda who comes across as a wise, intuitive advisor without whom GG would be even more indecisive. It is Miranda that first concludes the source is for real. He advises GG to pressure the Guardian so the story gets out there. Later, he becomes a story himself when LP and GG decide to use him to courier Snowden material from Berlin, where LP lives to Rio de Janiero where GG lives. It never occurs to either that Miranda is in danger as he transits the London airport. Miranda is stopped, his possessions seized and he is threatened and bullied for nine full hours under a British terror provision. Under pressure from the Guardian and Brazilian diplomats, Miranda was released to continue his journey after the full nine hours allowed under this dangerous law. Miranda arrived in Brazil a returning hero, but very frightened. Presumably the British government (or the US) has the thumb drive he was carrying but GG doesn’t say.

Snowden prepared thumb drives for both LP and GG with all documents. He also prepared a separate thumb drive for the Guardian containing the documents pertaining to the British GCHQ activities. British authorities later descended on Guardian London offices demanding all Snowden documents. The Guardian refused but agreed to let the GCHQ supervise and observe the destruction of all computers at the Guardian. Before this happened, the GCHQ materials were forwarded to the New York Times where they must be sitting in limbo.

Snowden encrypted the documents and assured GG and LP that neither China nor Russia would have the capability to break the encryption. This reader assumes the US could break the encryption but only if they dedicated some super computers for several years to the effort. Even if the Miranda carried thumb drive is in either British or US hands, it is unlikely any attempt will be made to decrypt the material. It is likely that the NSA is still unaware of the full extent of the documents in the archive unless all are now located in the new Intercept archive.

One of the big lessons learned by GG in this adventure is the absolute necessity for investigative journalists to use encrypted communications. Their work will be impossible in the future without these tools. GG further advises all activists and any lawyer engaged with litigation against the government to encrypt all their communications. He uses the example of David Petraeus to illustrate how easy it is to destroy a career if unencrypted emails fall into the wrong hands.
nsa-yes-we-scan nsa cartoon

Part twoCollect it All” highlights documents emphasizing the worldwide and universal scope of NSA ambitions.

Part three makes a strong case for the harm that Surveillance causes in a democracy. His strongest point comes in his conclusion. The public sector operates in total darkness and secrecy and privacy while the private sector is subjected to total surveillance of their activities with no place to hide. Somehow our system has become completely inverted. Snowden had expected Obama to reign in the illegal abuses and held off his release until it was clear things were worse than before.
obama whistleblowers

Part Four is a discussion of the forth estate much of which (the corporate media) have become mere tools of the corporate state. GG was shocked that media personalities were at the forefront of attacks suggesting GG be prosecuted for his reporting. This is new. News organizations used to come immediately and strongly to the defense of journalists under Government attack. They no longer do this. The Obama administration has felt free to conduct open warfare against whistle blowers and their reporters who are trying to do investigative reporting as guaranteed in the Constitution. The Guardian’s own lawyers suggested GG should avoid returning to the US and repeatedly failed to get assurances from the US government that GG would not be arrested and prosecuted should he return.
David Gregory shocks Glenn Greenwald gregory arrest greenwald
David Gregory Calls for Greenwald to be Arrested for Snowden Reporting Live on Meet the Press.
Seymour Hersh (who broke the My Lai massacre and Abu Ghraib prison abuses stories) suggests that journalism would be greatly improved if about 900 corporate media types were to lose their jobs.

LP has now released her new documentary Citizenfour in a theatrical release. It will doubtless receive Academy Award nominations.

Climate Change and the Death of Capitalism

Thursday, November 6th, 2014

This Changes Everything; Capitalism vs the Climate, Naomi Klein, 2014
Naomi Klein in Vancouver BC. Photo taken by Jeff Chant Naomi Klein

This was supposed to be a book to give hope to those that want to transition from greenhouse emitting fossil fuel consuming that will make the Earth uninhabitable to a world of renewable and sustainable energy. Klein starts by discussing the many studies that show, not only is such a transition possible, but that it can be accomplished with existing technologies and can happen very quickly, well within the time frames necessary to avoid catastrophic climate change. Great, lets get going. In fact Denmark and Germany have transformed large parts of their energy sources to wind and solar more quickly then predicted, so quickly that existing German coal burning power plants are exporting their power to other countries. Unfortunately, the reader starts to feel like cartoon character Charlie Brown. Every time he gets ready to kick the football, Luci (Klein) yanks the ball away and the reader falls flat on his back.
charlie brown lucy football
Klein start with Genesis 1:18 written about 500 B.C.

God blessed them and said to them, “Be fruitful and increase in number; fill the earth and subdue it. Rule over the fish in the sea and the birds in the sky and over every living creature that moves on the ground.

The entire Judea-Christian culture is based on the fundamental notion that the Earth and its resources were created especially for man and man is to rule over them and use them however he wishes without limit. Klein contrasts this to the typical indigenous native view that the Earth provides for all living things but man with his intelligence has a particular responsibility to care for the Earth and all living things in it. Guess which view dominates.
She then gives us a brief history of industrialization which started its unstoppable acceleration with James Watt’s invention of the steam engine in the 18th Century. Our burning of fossil fuels has been accelerating ever since. Most of the carbon in the atmosphere is the responsibility of the oldest large economies.

Klein returns to one of her favorite topics; neoliberalism (see The Shock Doctrine)

Indeed, the three pillars of the neoliberal age – privatization of the public sphere, deregulation of the corporate sector, and the lowering of income and corporate taxes, paid for with cuts to public spending – are each incompatible with many of the actions we must take to bring our emissions to safe levels.

We measure the success of our economies by the growth rate of the national GDP. A recent long term economic study by French economist Thomas Piketty shows that low GDP growth rates and low population growth has been the typical state of large economies from 1700 until 1914 (WWI) and he expects that in the 21st Century we will return to those stable states baring another major catastrophe like global climate change. But today’s capitalism puts enormous pressure on executives to grow grow grow. No wonder they will go to extreme means and measures to achieve this unnatural growth. This form of unsustainable expansive capitalism must change or the Earth will be uninhabitable.

The deregulating Clinton administration and his climate change alarmist VP Al Gore pioneered worldwide trade agreements starting with NAFTA and creating the WTO that have brought into existence a global economy based on industrial agriculture, the search for lowest labor costs, and massive increase in the need to transport the resulting products and food; in other words an explosive increase in fossil fuel consumption. These same trade agreements have been used effectively to block locally generated alternate energy projects. Clinton also introduced the cap and trade carbon system late in the Kyoto talks and Gore pushed the idea through. There is little evidence that cap and trade has done anything to reduce emissions but it has created a world wide derivatives market (think sub prime mortgages) where a company in India is paid a large sum to produce ozone destroying refrigerants banned in most countries. Figure that one out. Carbon credits and derivatives are an open invitation to game the system.

Where is the environmental movement? Big green sold out to the energy companies who use them in PR campaigns to make them appear to support alternate energy sources – but we need a “transition period”. Many of the biggest environmental groups receive most of their funding, some secretly, from big energy. The biggest, The Nature Conservatory, was given 2303 acres in southeast Texas by Mobil in 1995 to provide a preserve for the endangered Attwater prairie chicken. In 1999 the Conservatory put a gas well on the property. This was discovered and reported by the LA Times in 2002 forcing a promise not to drill again but the Conservatory put in an oil well in 2007. Big green – big carbon producer. By the way, the prairie chickens are all gone from the preserve. Guess they don’t like oil drilling. The Sierra Club (setting a few personal scandals aside), Greenpeace, and are exceptions to the sellout.

Attwater Prairie Chicken estimated 60 remain in the wild attwater prairie chicken

What do you do when your fortune and livelihood is dependent on producing a deadly product? Or you are a politician dependent on those producing that deadly product? You engage in magical thinking. Step 1 denial. The midterm election that swept Republicans into control of congress will assure that all environmental and energy committee positions will be filled with climate change deniers. Climate Denier James Inhofe new Senate Environment Chairman The alternative is that you are out of a job. Step 2 green billionaires will buy a solution. Richard Branson promised to use $3 Billion in profits from Virgin to develop alternate fuel sources. He also offered a $25 million prize for the inventor of a carbon sequestration system. Virgin flies more routes than ever, the $3 Billion never materialized and the prize has not been awarded. Brilliant PR campaign though. Gates, Pickens are others who have made some alternate energy noises, remain deeply invested in fossil fuel energy. Step 3 Bio engineer a solution (see Climate Engineering) This is the one where you put a sulphite shield in the stratosphere to simulate the cooling effects of a volcanic eruption. The effects on the climate worldwide are unknowable because you can’t experiment to try it. What is really scary is that Klein admits that if she was desperate enough she might be willing to try it.

Big energy needs to grow and to do so they need to resort to more extreme methods and to extract closer to those more able to fight them, for example attempts to frack natural gas in Ithaca, New York, home to Cornell University – Big mistake. Cornell is the originator of some of the best studies showing how dirty fracking is in the release of methane gas, pollution of water, and earthquakes.

Coal mining in Montana with plans to ship the coal to China ran into the Indian – Cowboy collation with local ranchers joining with native tribes to prevent the hauling of coal over beautiful but dangerous Highway 12, prevented the building of a special rail line and, so far the building of a big port somewhere in the Northwest. Big energy better stay away from the Northwest. Lummi Totem Kwel Hoy (We Draw the Line) traveled 1300 km to the Montana coal site. Kwel Hoy has been planted near Vancouver looking out at the Pacific.
Kwel Hoy at proposed coal port in Bellingham kwel hoy bellingham Kwel Hoy visits Seattle kwel hoy seattle

Klein is Canadian with a special interest and concern with the Alberta tar sands. She is on the board of directors of Her big hopes here are that the pipelines needed to move the oil can be stopped (choke points like the Montana coal routes). Central to these efforts are native treaty rights and a series of recent court decisions upholding the native treaty rights. It seems, at least in Canada, that the native population never gave up their rights to much of Canada beyond the reservations but agreed to share the land. How to you share something that somebody else destroyed. The liabilities for the Canadian government are in the Trillions. But when natives asked the person responsible for Canada’s AAA credit rating how this rating can be maintained in face of this liability, the individual responded basically you and what army are going to enforce those reparations? Can the native treaties be used to stop the tar sands pipelines or coal routes? We don’t know.
Alberta Tar Sands before-after-en

Klein talks about the growing divestment movement and hopes it is joined by an equally robust reinvestment in alternative energy sources. What is clear is that most of the stock value of energy companies relies on energy reserves and that extraction and use of those reserves will make the Earth uninhabitable. You can deny the science maybe but Mother Nature is non negotiable. There is now a group of divestment investors whose primary rationale is that values dependent on unusable reserves are not real and energy stock prices must crash at some point. Energy companies won’t continue to be profitable and the window of opportunity is short to use energy profits for reinvestment in alternate energy.

So lets review our situation. The dominant world culture believes that the Earth was created for us to exploit. Capitalism must grow or perish. Globalism requires exploitation of the cheapest resources wherever they are found, prevents regulation of trade, and greatly expands energy needs. Big agriculture requires massive chemical inputs and massive transport and is unsustainable. The climate gets more extreme and unpredictable and climate disasters are vastly more expensive now. Worldwide, politicians are largely neoliberal favoring austerity measures to further their agenda and dependent on corporations for their survival. Courts are largely manned by pro corporate judges. The handful of billionaires that own half the world’s wealth are insensitive to other’s suffering to the point of allowing entire nations to be drowned in the rising seas believing their wealth will protect them from anything. Klein says you can buy an apartment in NYC where you can live underwater like in a submarine if necessary. I wonder what you eat in your submarine. Most of the world’s population won’t be able to grow food or have access to clean water.

Klein is clear that a broad based worldwide grass roots populist movement is the only thing that has a chance to change things. We know the alternative is possible. We just don’t know how to force the changes needed to get there.

Put another way, only mass social movements can save us now. Because we know where the current system, left unchecked, is headed. We also know, I would add, how that system will deal with the reality of serial climate-related disasters: with profiteering and escalating barbarism to segregate the losers from the winners. To arrive at that dystopia, all we need to do is keep barreling down the road we are on. The only remaining variable is whether some countervailing power will emerge to block the road, and simultaneously clear some alternate pathways to destinations that are safer. If that happens, well, it changes everything.

Hence the title of the book. Hope you feel better.

Prospects for Democratic Redistribution of Wealth

Wednesday, 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

Friday, 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

Wednesday, 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

Saturday, 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

Wednesday, 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.