Today’s News May 31, 2015

• DoPe

  

  
  
  

  

• This Is How Little It Cost Goldman To Bribe America's Senators To Fast Track Obama's TPP Bill

  It took just a few days after the stunning defeat of Obama’s attempt to fast-track the Trans Pacific Partnership bill in the Senate at the hands of his own Democratic party, before everything returned back to normal and the TPP fast-track was promptly passed. Why? The simple answer: money. Or rather, even more money.

  Because while the actual contents of the TPP may be highly confidential, and their public dissemination may lead to prison time for the “perpetrator” of such illegal transparency, we now know just how much it cost corporations to bribe the Senate to do the bidding of the “people.” In the Supreme Court sense, of course, in which corporations are “people.”

  According to an analysis by the Guardian, fast-tracking the TPP, meaning its passage through Congress without having its contents available for debate or amendments, was only possible after lots of corporate money exchanged hands with senators. The US Senate passed Trade Promotion Authority (TPA) – the fast-tracking bill – by a 65-33 margin on 14 May. Last Thursday, the Senate voted 62-38 to bring the debate on TPA to a close.

  Those impressive majorities follow months of behind-the-scenes wheeling and dealing by the world’s most well-heeled multinational corporations with just a handful of holdouts.

  Using data from the Federal Election Commission, the chart below (based on data from the following spreadsheet) shows all donations that corporate members of the US Business Coalition for TPP made to US Senate campaigns between January and March 2015, when fast-tracking the TPP was being debated in the Senate.

  The result: it took a paltry $1.15 million in bribes to get everyone in the Senate on the same page. And the biggest shocker: with a total of $195,550 in “donations”, or more than double the second largest donor UPS, was none other than Goldman Sachs.

  

  The summary findings:

  • Out of the total $1,148,971 given, an average of $17,676.48 was donated to each of the 65 “yea” votes.
  • The average Republican member received $19,673.28 from corporate TPP supporters.
  • The average Democrat received $9,689.23 from those same donors.

  The amounts given rise dramatically when looking at how much each senator running for re-election received.

  Two days before the fast-track vote, Obama was a few votes shy of having the filibuster-proof majority he needed. Ron Wyden and seven other Senate Democrats announced they were on the fence on 12 May, distinguishing themselves from the Senate’s 54 Republicans and handful of Democrats as the votes to sway.

  • In just 24 hours, Wyden and five of those Democratic holdouts – Michael Bennet of Colorado, Dianne Feinstein of California, Claire McCaskill of Missouri, Patty Murray of Washington, and Bill Nelson of Florida – caved and voted for fast-track.
  • Bennet, Murray, and Wyden – all running for re-election in 2016 – received $105,900 between the three of them. Bennet, who comes from the more purple state of Colorado, got $53,700 in corporate campaign donations between January and March 2015, according to Channing’s research.
  • Almost 100% of the Republicans in the US Senate voted for fast-track – the only two non-votes on TPA were a Republican from Louisiana and a Republican from Alaska.
  • Senator Rob Portman of Ohio, who is the former US trade representative, has been one of the loudest proponents of the TPP. (In a comment to the Guardian Portman’s office said: “Senator Portman is not a vocal proponent of TPP – he has said it’s still being negotiated and if and when an agreement is reached he will review it carefully.”) He received $119,700 from 14 different corporations between January and March, most of which comes from donations from Goldman Sachs ($70,600), Pfizer ($15,700), and Procter & Gamble ($12,900). Portman is expected to run against former Ohio governor Ted Strickland in 2016 in one of the most politically competitive states in the country.
  • Seven Republicans who voted “yea” to fast-track and are also running for re-election next year cleaned up between January and March. Senator Johnny Isakson of Georgia received $102,500 in corporate contributions. Senator Roy Blunt of Missouri, best known for proposing a Monsanto-written bill in 2013 that became known as the Monsanto Protection Act, received $77,900 – $13,500 of which came from Monsanto.
  • Arizona senator and former presidential candidate John McCain received $51,700 in the first quarter of 2015. Senator Richard Burr of North Carolina received $60,000 in corporate donations. Eighty-one-year-old senator Chuck Grassley of Iowa, who is running for his seventh Senate term, received $35,000. Senator Tim Scott of South Carolina, who will be running for his first full six-year term in 2016, received $67,500 from pro-TPP corporations.

  “It’s a rare thing for members of Congress to go against the money these days,” said Mansur Gidfar, spokesman for the anti-corruption group Represent.Us. “They know exactly which special interests they need to keep happy if they want to fund their reelection campaigns or secure a future job as a lobbyist.

  “How can we expect politicians who routinely receive campaign money, lucrative job offers, and lavish gifts from special interests to make impartial decisions that directly affect those same special interests?” Gidfar said. “As long as this kind of transparently corrupt behavior remains legal, we won’t have a government that truly represents the people.”

  In other news, following last week’s DOJ crackdown on now openly criminal FX market manipulation and rigging by the big banks, in which precisely zero bankers have been arrested, we are happy to announce that “transparently corrupt behavior” in the Senate, and everywhere else, will remain not only legal, but very well funded.

  But what is truly scariest, is just how little it costs corporations to bribe America’s “elected” politicians, and make them serve the best interests of a few billionaire shareholders over the grave of what once used to be America’s middle class.

  

  

  
  
  

  

• Russia Wards Off "Provocative And Aggresive" US Warship In Black Sea

  While we are used to hearing of the 100s of “close encounters” between NATO and Russian planes,but, as reported by state news agency RIA – citing an anonymous source in Russia’s armed forces, Russian military aircraft were scrambled to head off a U.S. warship that was acting “aggressively” in the Black Sea.

  We are used to plane-on-plane “close encounters”…

   

  

   

  And now, as The Daily News reports, Russian attack jets were sent to warn off the American warship USS Ross from near the country’s territorial waters in the Black Sea, 

  The source was quoted as saying that the U.S. destroyer Ross was moving along the edge of Russia’s territorial waters and heading in their direction.

   

  

   

  “The crew of the ship acted provocatively and aggressively, which concerned the operators of monitoring stations and ships of the Black Sea Fleet,” RIA quoted the source as saying.

   

  “Su-24 attack aircraft demonstrated to the American crew readiness to harshly prevent a violation of the frontier and to defend the interests of the country.”

   

  “Apparently, the Americans have not forgotten the April 2014 incident when one Su-24 practically ‘blacked out’ all of the electronics on board the newest American destroyer Donald Cook,” the source said.

   

  Russia’s Defence Ministry was not immediately available to comment on the report.

  As RT notes,

  Saturday’s incident is the latest in a series of border surveillance confrontations between Russia and the West. Europeans, especially the Baltic states, have repeatedly sounded the alarm over Russian jets coming close to their borders.

   

  The US is rotating several warships in and out of the Black Sea, where Russia’s naval bases are located. The USS Vella Gulf, USS Ross, USS Truxton, and the USS Taylor – as well as warships from other NATO member states – were spotted in the area over the past few months.

  *  *  *

  This appears to be the first reported ship-to-plane ‘encounter’ and,
  just as US and China tensions are escalating in the South China Sea, it
  appears US and Russian military ‘discussions’ are shifting from words
  and proxy-fighting.

  

  

  
  
  

  

• For Greece, This Is What Hell Looks Like

  As previously reported by both IMF and Greek sources, Greece now has less than a week before it defaults on its June 5 payment to the IMF, a payment which it can’t make simply because it run out of money even before its last “payment” to the IMF on May 12.

  To be sure, Greece does have two options to kick the can yet again: one, of course, is to get a deal done in the coming 5 days although that is virtually impossible; the other is to bundle all June payments into the last one for the month, thus buying three additional weeks of time. This outcome now looks almost certain especially since two days ago the Greek government spokesman Sakellaridis said the Greek government denied planning to bundle the IMF payment, which essentially assures it.

  However, even if Greece manages to kick the can for the n^th time for the past five years, it has a lot of cans left to kick for the remainder of 2015.

  

   

  So let’s say that somehow Greece kicks every can left until the end of 2015. Surely Greece will be out of the woods then, right.

  Wrong. Because for Europe’s most devastated country, it is only then that the debt nightmare officially begins.

  Below are all upcoming Greek debt payments until 2057, also known as the first, ninth and all circles of Greek hell inbetween:

  

  But at least it will have the Euro.

  

  

  
  
  

  

• When The "Sharing" Economy Goes Too Far: Syphillis Cases Soar 79% In A Year

  “What’s mine is yours, for a fee,” is the mantra of the new normal “sharing economy,” as various segments of our heretofore under-utilized assets are variously ‘rented’ out for the enjoyment of others. However, as a report by the Rhode Island Department of Health suggests, perhaps we are sharing just a little too much. Sexually transmitted diseases are on the rise in the US, with health officials pointing the finger at casual sex arranged through social media as “the perfect storm.” With gonorrhea up 30%, HIV infections up by 33%, and syphilis soaring a shocking 79% in the last year alone, perhaps they have a point.

  The report notes that “new cases of HIV and syphilis continued to increase among gay, bisexual, and other men who have sex with men at a faster rate than in other populations,” adding that “infection rates of all STDs continued to have a greater impact on the African-American, Hispanic, and young adult populations.” As RT reports,

  While better testing partly explains the increase, health officials also highlighted “high-risk behaviors that have become more common in recent years,” such as “using social media to arrange casual and often anonymous sexual encounters.”

   

  Other risky behavior factors were: “Having sex without a condom, having multiple sex partners, and sex while under the influence of drugs or alcohol.”

   

  Rhode Island officials say their alarming STD rates are part of a trend throughout the US. Although the latest statistics from the Centers for Disease Control and Prevention (CDC) are from 2013, there have been reports of spikes in HIV and syphilis from New York and Texas to Utah.

  An STD clinic in Salt Lake County, Utah, has started asking patients about specific contact apps. Lynn Beltran, an epidemiologist at the clinic, told ABC she was not surprised to see a rise in STDs.

  “It’s been the perfect storm,” said Beltran. “Our attitude kind of shifted, where it became more acceptable to engage in casual sex.”

   

  Beltran said she had seen an uptick in syphilis and gonorrhea rates, and that many of the newly diagnosed patients said they were sexually active through dating apps.

  Finally, and rather interestingly, RT adds,

  Between 2003 and 2009, when prostitution wasn’t illegal in Rhode Island due to a clerical error, the state registered a 39-percent decrease in gonorrhea infections among women. A 2014 study by the National Bureau of Economic Research also found a 31-percent decrease in the number of rapes reported to the police.

  *  *  *

  So too much of a good thing is bad for you…which reminds us…

  What’s dangerous and eats nuts?

  …

  …

  Syphillis.

  

  

  
  
  

  

• Russian Pivot: Greece Will "Probably" Join BRICS Bank, Official Says

  Greece has very little in the way of bargaining power with European creditors.

  Outside of gimmicks like tapping its SDR reserves, Athens has no cash to make payments to the IMF in June and, perhaps more importantly, there’s very little in the way of wiggle room when one looks at revenues versus spending (see below), meaning Greece will also struggle to pay public sector employees which, in combination with Greeks’ consternation about the safety of their deposits, could contribute to social unrest and put unwelcome political pressure on PM Alexis Tsipras and his Syriza party that swept to power just five months ago on a defiant (and apparently naive) anti-austerity platform. 

  

  The troika (and Germany) knows this of course and they are also acutely aware that Spain’s Podemos and Portugal’s Socialists are watching the Greek drama closely for the slightest indication of concessions from the IMF or from the EU. In other words, the standoff is now just as much about politics as it is about economics, and the ‘institutions’ do not want any Syriza sympathizers to be able to say that Greece made anyone blink by threatening an exit from the currency bloc. 

  What all of the above means is that for better or worse, Greece has essentially no leverage because for many European officials, trading austerity concessions for the right to maintain the idea of euro indissolubility is no longer a desirable outcome as it could embolden anti-austerity governments in larger, more influential countries. 

  All of that said, Greece still has one card to play: the so-called ‘Russian pivot’. Over the course of negotiations between Syriza and the troika Moscow has, at various times, sought to take advantage of the hostilities between Athens and Brussels by making a series of overtures including the possibility of a €5 billion advance on Greece’s portion of the Turkish Stream natural gas pipeline and an invitation for the country to join the BRICS bank, a possibility Goldman’s Jim O’Neill wrote off as a politically-motivated “joke.”

  But Vladimir Putin isn’t fond of joking (unless he’s participating in his yearly town hall meeting with the Russian people) and sure enough, less than two months ahead of this year’s BRICS Summit in Ulfa, it appears Greece may accept Moscow’s invite. 

  Enikos has more:

  Greece is preparing and will probably submit a request to participate in the new development bank for BRICS countries and has secured Russia’s support on the issue, Productive Reconstruction, Environment and Energy Minister Panagiotis Lafazanis told ANA-MPA news agency on Friday evening.

   

  “During my meeting with Russian Deputy Finance Minister Sergey Storchak, we secured the decisive Russian support to Greece’s request for participation in the new development bank of BRICS countries. The relevant request for Greece’s participation…will be symbolic and will be paid in installments, while right after operations begin, it will be able to accept financial support,” the minister said.

   

  Lafazanis added that technical details were also discussed on how to submit the request so that it will be accepted after discussions within the Greek government conclude.

   

  He also noted that he also discussed the credit facility that will be provided by Russian banks to the Greek company which will undertake the construction of the new gas pipeline which will cross Greece.

   

  “Repayment of the Russian loan will be achieved by the profits made through the operation of the pipeline and this facility is not related to loans or economic assistance between states,” he said.

  As mentioned above, this comes as Russia, Brazil, India, China, and South Africa are set to officially launch the BRICS bank and a related reserve pool when the group of emerging powers convenes on July 8-9 in Russia. It also comes as Moscow looks set to put plans for a Eurasian currency bloc into motion and as the Central Bank of Russia explores the possibility of establishing a BRICS-associated alternative to SWIFT.

  Additionally, China’s recent $50 billion commitment to Brazil underscores the degree to which BRICS nations are expanding their economic and political cooperation in the face of declining Western hegemony. The BRICS bank speaks to the idea that the world’s most influential emerging markets now feel it necessary to support each other in the face of what they view as a half-hearted attempt on the part of the world’s existing multilateral institutions to serve EM interests or even to give them representation that’s comparable to their place in the world economy. Here’s what we said on Friday:

  Much like the China-led AIIB, the BRICS bank is in many ways a response to the failure of US-dominated multilateral institutions to meet the needs of modernity and offer representation that’s commensurate with the economic clout of its members.

  Why would Russia want Greece to join the bank? The motivation is clearly geopolitical consdering that Greece is broke, and what’s interesting about the statement from Lafazanis is that it appears to suggest that Greece’s paid in capital would come in installments while Athens would immediately be eligible for a loan from the bank. 

  In short, Putin would like nothing better than to establish a symbolic relationship with the first country to break from the supposedly indissoluble currency bloc, especially given the situation in Ukraine. Meanwhile, Greece is out of leverage, especially now that recent regional and municipal elections in Spain have proven to Athens’ EU creditors that the austerity (or, ‘fauxterity‘ as we’re fond of calling it) revolt is very real. We’ll see what, if any, impact this latest Russian pivot trial balloon has on Greek debt deal negotiations.

  

  

  
  
  

  

• When, Not If

  It's just a matter of time…

  Risk wil only remain repressed for so long…

  

  Source: @Not_Jim_Cramer

   

  Especially as valuations surge…

  

   

  But it's not just equities – everything is expensive…

  

   

  "rich" and getting richer…

  

   

  and when it mean-reverts, it will be painful for the massed crowds on one side of the ship… after all they don't call it "nice"-reversion do they?

  

  

  
  
  

  

• "Ferguson Effect" Triggers Nationwide "Crime Wave"

  Two weeks ago, we took a look at Baltimore in the aftermath of violent protests that left the city in ashes late last month. The astonishing statistic: from April 27 to May 14, there were 23 homicides in the city, for an average of 1.3 each day. 

  

  We summed up the situation as follows: “But out of sight, out of mind for the rest of the country and we imagine that just as high crime rates and a generalized sense of despair were ignored before the riots, so too will they be ignored now that the media spectacle has died down … at least until the next “purge.”

  In fact, May was the city’s bloodiest month since 1999 with more than 30 people shot on Memorial Day weekend alone. Here, courtesy of The Baltimore Sun, is a recap of those who were murdered in Baltimore from May 17 through May 25 alone:

  Shaquil Hinton, 21, was killed at 12:29 a.m. Monday in the 800 block of W. Fayette St. in Poppleton, police said. He lived in the same block according to police.

   

  Charles K. Jackson Jr., 32, was killed at 12:51 a.m. Sunday in the 900 block of Ducatel St. in Reservoir Hill, police said. Jackson lived nearby, in the 2300 block of Callow Ave., police said.

   

  Hassan Fields, 20, was killed at 9:06 a.m. Saturday in the 100 block of S. Augusta Ave. in Irvington, police said. Fields lived in the 3700 block of W. Franklin St. in Allendale. When reached by phone, Fields’ father declined to comment.

   

  Umika Smith, 24, was killed at 1:28 p.m. Saturday in the 2000 block of Hollins St. in Boyd-Booth. No phone number was listed for her address in the same block. A double shooting happened nearby the following day, injuring a man and a woman, police said.

   

  Bruce Fleming Jr., 23, was killed at 2 p.m. Saturday in the 2800 block of St. Lo Drive in Clifton Park, near Heritage High School, police said. Police said he lived in the 4800 block of Harford Road in Lauraville.

   

  Tyrin Diggs, 19, was killed at 11:06 p.m. Friday in the first block of Benkert Ave. in Saint Josephs, police said. Diggs lived on the 700 block of E. Pontiac Ave. in Brooklyn, police said.

   

  James Mckoy, 21, was killed at 11:51 p.m. Friday in the 1900 block of Wilhelm St., in Carrollton Ridge, police said. He lived in the 300 block S. Monroe St. in the same neighborhood, police said.

   

  Kelvin Warfield, 25, was killed at 4:50 p.m. on Sunday, May 17, in the 100 block of S. Arlington Ave. in Hollins Market, police said. Warfield lived in the 2500 block of W. Fayette St., police said.

   

  Additionally, a 9-year-old shot in the leg was among the victims in the shootings that took place over Memorial Day weekend, Baltimore police said.

  Baltimore is not alone. 

  The racially charged protests and demonstrations that have swept the country as a result of perceived police misconduct involving African American “suspects” has created what St. Louis police chief Sam Dotson calls “The Ferguson Effect”, whereby law enforcement are now more reluctant to use force to counter illegal activity for fear of prosecution or, more poignantly, for fear of finding themselves cast as the villain that catalyzes widespread civil unrest. This effect, some say, has led to a dramatic increase in violent crime throughout the country. 

  Via WSJ:

  In Milwaukee, homicides were up 180% by May 17 over the same period the previous year. Through April, shootings in St. Louis were up 39%, robberies 43%, and homicides 25%. “Crime is the worst I’ve ever seen it,” said St. Louis Alderman Joe Vacarro at a May 7 City Hall hearing.

   

  Murders in Atlanta were up 32% as of mid-May. Shootings in Chicago had increased 24% and homicides 17%. Shootings and other violent felonies in Los Angeles had spiked by 25%; in New York, murder was up nearly 13%, and gun violence 7%.

   

  Those citywide statistics from law-enforcement officials mask even more startling neighborhood-level increases. Shooting incidents are up 500% in an East Harlem precinct compared with last year; in a South Central Los Angeles police division, shooting victims are up 100%.

   

  By contrast, the first six months of 2014 continued a 20-year pattern of growing public safety. Violent crime in the first half of last year dropped 4.6% nationally and property crime was down 7.5%. Though comparable national figures for the first half of 2015 won’t be available for another year, the January through June 2014 crime decline is unlikely to be repeated…

   

  Almost any police shooting of a black person, no matter how threatening the behavior that provoked the shooting, now provokes angry protests..

   

  Acquittals of police officers for the use of deadly force against black suspects are now automatically presented as a miscarriage of justice…

   

  This incessant drumbeat against the police has resulted in what St. Louis police chief Sam Dotson last November called the “Ferguson effect.” Cops are disengaging from discretionary enforcement activity and the “criminal element is feeling empowered,” Mr. Dotson reported. Arrests in St. Louis city and county by that point had dropped a third since the shooting of Michael Brown in August. Not surprisingly, homicides in the city surged 47% by early November and robberies in the county were up 82%.

   

  Similar “Ferguson effects” are happening across the country as officers scale back on proactive policing under the onslaught of anti-cop rhetoric. Arrests in Baltimore were down 56% in May compared with 2014.

   

  “Any cop who uses his gun now has to worry about being indicted and losing his job and family,” a New York City officer tells me. “Everything has the potential to be recorded. A lot of cops feel that the climate for the next couple of years is going to be nonstop protests.”

  And while Heather Mac Donald — the author of the WSJ piece, Thomas W. Smith fellow at the Manhattan Institute, and the author of “Are Cops Racist?” — may be correct to say that “contrary to the claims of the ‘black lives matter’ movement, no government policy in the past quarter century has done more for urban reclamation than proactive policing. Data-driven enforcement, in conjunction with stricter penalties for criminals and “broken windows” policing, has saved thousands of black lives, brought lawful commerce and jobs to once drug-infested neighborhoods and allowed millions to go about their daily lives without fear,” it certainly seems reasonable to suggest that the logic behind the following statement from an NYPD officer Mac Donald interviewed for her piece seems questionable at best:

  “Does an officer need to be unconscious before he can use force? If someone is willing to fight you, he’s also willing to take your gun and shoot you. You can’t lose a fight with a guy who has already put his hands on you because if you do, you will likely end up dead.”

  Whatever position you care to take on the above, what’s clear is that race relations in America are deteriorating, as are class relations with policy decisions at the highest levels serving only to exacerbate the divide between the rich and the poor (as discussed in “America’s Class Segregation Problem In Four Charts“), thus creating still more tension in poor communities that have already sufferred from a lack of real opportunities for decades.

  Does the recent wave of protests and demonstrations mark an epochal shift in American society or will this all be quietly swept under the rug in order to maintain the appearance of social stability?

  

  

  
  
  

  

• 1812: The Inconsequential War That Changed America Forever

  Submitted by Jim Quinn via The Burning Platform blog,

  WHY SHOULD I CARE?

  Most adult Americans today are unaware of what caused the War of 1812, who started it, what the outcome was, or even who the belligerents were. If I recall correctly, my grade school / high school History Class covered The War Of 1812 — aka America’s Second War Of Independence, or America’s Forgotten War — for a total of maybe one week. And what a worthless week it was. Like most history teachers I’ve ever had, they turned an exciting story into a dry bundle of boring crap … focusing on memorizing dates and random events without getting to the real story behind the story; i.e. why did it happen, how does the war affect us today, and what can we learn from it?  This is a crying shame because the war had a tremendous impact on American political development, territorial expansion, and national identity.

  A 19^th century French historian said, “History studies not just facts and institutions, its real subject is the human spirit.” The word ‘history’ comes from the Greek, and literally means “knowledge acquired by investigation”. So, let us investigate the War Of 1812, and the spirit of humanity which caused it … and changed America forever.

  OVERALL SUMMARY

  There were two major reasons given for the war.

  First, Britain was at war with France since 1793. For twenty years the British claimed they had the right – as a legitimate and necessary wartime measure — to intercept American ships on the high seas, seize and keep their cargoes, and search the crews for British navy deserters. The British between 1807 and 1812 seized some 400 American ships and cargoes worth millions of dollars.

  

  Second, was the British practice of ‘impressment’. A chronic manpower shortage in the Royal Navy led the Brits to stop American merchant vessels on the high seas and remove seamen. Between 1803 and 1812 the Brits captured an estimated six to nine THOUSAND Americans in its dragnet. These men were subjected to all the horrors of British naval discipline—enforced with the cat-o’-nine-tails—and made to fight a war that was not their own.

  America felt this violated its rights as a neutral and sovereign nation. So, we declared war against the Brits in 1812.

  THE END OF THE REVOLUTIONARY WAR SEEDED THE WAR OF 1812

  Isn’t that often the case … that the end of one war, and the demands of the victor, eventually leads to yet another war? The war for American Independence lasted until 1783 when the peace treaty with the British was signed. Imagine the giddy feeling you would have had at that time. Freedom! Independence! But the rational exuberance was met with irrational naivete.

  The American populace, including its politicians, assumed that the British would continue to allow access to British ports …. as if nothing at all happened! America assumed that the Brits needed our wheat, the British Navy needed our timber, hemp, and tar, and British colonies in the West Indies needed our fish, wheat, and salt to feed their slaves. This was a big miscalculation.

  Canada and Ireland delivered most of the same goods. In fact, America needed the Brits more than they needed us as we depended on British manufacturing goods. America had zero leverage, and it was Britain that dictated foreign policy. They admitted American raw materials on a case-by-case basis, excluded manufactured goods altogether from entering England, and closed West Indian ports to American goods. Bullocks to America! What could America do? Nothing. We had no navy to back up our demands.

   

  1801 – A PIVOTAL YEAR

  George Washington negotiated the Jay Treaty in 1795. The Brits negotiated from a position of strength, and conversely, America from weakness. In a nutshell, the treaty granted the Brits virtually unlimited access to American markets in exchange for limited access to British markets in the West Indies. It also allowed British creditors to recover debts owed by Americans.

  In 1801, Thomas Jefferson was elected president and James Madison was named his secretary of state. They quickly abrogated the treaty.

  Madison took a hard-line approach towards the Brits. Even back in 1790, as a Congressman from Virginia, he championed the idea of countering British trade restrictions with a series of discriminatory tariffs via import taxes. George Washington and John Adams rejected the idea. Now, however, as Secretary of State, Madison hoped to implement what he believed was a long overdue aggressive trade policy against Britain. But, he shot himself in the foot big time …. by reversing the naval-building policies of John Adams

  John Adams succeeded in his priority of strengthening the United States Navy. When he was elected in 1796, the navy had only three battleships. Five years later, in 1801, the navy had fifty … more than enough to defend America’s coastline and maintain a viable presence in the Caribbean.

  Jefferson, and Madison, undid all this for several reasons. They felt maintaining a navy was too expensive. As Republicans they believed in frugal, tax-cutting government. And they believed that a large military posed a domestic threat in that the officer corps could harbor aristocratic ambitions and become a tool for would-be tyrants. Lastly, they felt navies led countries into unnecessary foreign entanglements. As such, Jefferson invested only in small gunboats for coastal patrols. The battleships atrophied. By 1812, the United States had only a dozen seaworthy battleships of any size.

  Jefferson and Madison certainly were not stupid men. Yet, one must wonder “What were they thinking??” With no leverage (military power) to bring to the negotiating table, did they expect the Brits to just quietly and unquestioningly bend to American demands? Hardly! As should have been expected, Britain continued to apply both its commercial and naval power to dictate — by force as necessary —  trade and maritime policy to the United States.

  MORE HALF-ASSED DECISIONS AND ERRONEOUS BELIEFS

  All governments do dumb-shit things, even that of our Founding Fathers.

  So, in 1807 Jefferson tried to pressure the Brits and French by convincing Congress to secure a radical embargo against all foreign trade. (Embargo!!! Our government still loves them to this very day. When will we ever learn?) American ships were forbidden from trading overseas. The embargo only hurt America. It was quickly scrapped.

  It was replaced with the Non-Intercourse Act. This act had nothing to do with the cessation of attacking the pink fortress. It allowed trade with all countries except Britain and France. It also allowed the President to restore trade with either country IF either belligerent ended its maritime harassment. That only intercoursed the American people, and didn’t work out either.

  So, in 1810 Madison signed the ridicules Macon’s Bill No.2. Even he didn’t like it, but he could not yet get Congress to pass a war resolution. The bill authorized Madison to impose trade restrictions against one offending country if the other lifted its trade restrictions against the United States. In other words, the United States would commercially punish country A if country B agreed to allow America to trade freely. Pitting two countries against each other didn’t work either.

  What was the result of all these half-assed measures to intimidate the British? They shopped elsewhere! For example, between 1808-1812 the Canadian timber industry exploded with its exports to England, increasing by 500%. Canadian agricultural production also increased greatly. The Brits were eating beef, Americans were eating crow.

  Madison was getting desperate. He was conjuring up even more rigorous measures against the British fearing that the window of opportunity for gaining concessions through commercial pressure would soon close forever. His conjuring included plans for war.

  He figured it would be a little war, and a quick one. (How many times have our Dear Leaders told us that? Especially since 1960?)  Most of the British army and navy were bogged down in Europe, fighting a brutal war with Napoleon. The French controlled most of Europe, and the little Frenchie dictator assembled a 700,000-man army for an invasion of Russia. All Madison wanted was the right to trade freely and, gain the respect owed to the United States as an independent nation. He calculated that since he wasn’t seeking territory or conquest, that Britain would surely be willing to negotiate rather than have to deploy valuable ships and troops thousands of miles away from the war in Europe. Madison miscalculated. Madison was wrong to believe that the British would rush to negotiate with him. The British even refused Tsar Alexander I’s invitation to mediate in 1813.

  Britain’s commitment to battle only strengthened over the first two years of the war. Madison was even wrong about the impact of the European war on America. He felt that when the European war ended, that the British would send the bulk of their armies to battle the United States. When you need popular support for a quick and easy war, you still need a little fear-mongering. “The British will come!!”  One reason the Brits didn’t redeploy their troops was that American military incompetence at the beginning of the war made it unnecessary. More fortuitously, after more than two decades of continual war, the Brits had had enough, and by 1814 were more than happy to soften their demands. (The British Invasion finally took place about 150 years later. But with guitars and drums.)

  THE FRENCH CONNECTION — TAKING ADVANTAGE OF MACON’S BILL

  The Brits had the world’s strongest navy, and couldn’t be coerced into lifting its restrictions. France, on the other hand, had everything to gain. Their Berlin (1806) and Milan (1807) decrees imposed severe trade restrictions against any country trading with Britain. But France’s navy was not sufficiently powerful enough to enforce these decrees. So, in compliance with Macon’s Bill, France could force the United States to restrict itself. In other words, France repealed its restrictions against the United States, thus forcing the United States to suspend its trade with Great Britain. Thus, on August 5, 1810 the French lifted the Berlin and Milan decrees. Madison, in turn, ended all trade with Britain on Feb. 2, 1811.

  The New England Federalists — who were dependent upon trade with Britain for their economic sustenance — immediately attacked the announcement. The claimed Napoleon could not be trusted, and that it would lead America into war. They were correct. Napoleon refused to release American ships already held in French ports, and continued to harass American shipping. America would declare war on June 18, 1812.

  MADISON FINALLY GETS HIS WAR

  It’s not entirely fair to say, as some do, that this was strictly Madison’s war. He had help. The Speaker of the House of Representatives, Henry Clay of Kentucky, his principal assistant, John C. Calhoun of South Carolina, and other southern and western representatives were collectively known as “Warhawks” and pressured Madison into asking Congress to declare war against Great Britain.

  

  The United States in 1812

   

  MILITARY COMPARISONS

  When the war started, the American army consisted of 7,000 regulars. (Theoretically, there were also thousands of citizen soldiers in the militia. While the Constitution granted the president the authority to call them into service to suppress insurrections and repel invasions … the legal consensus was that state militia could only be ordered to meet these duties in their own states). Anyway, the military was poorly trained. The army’s officer corps was a ragtag outfit …most had never seen combat … and the ones that did were old, having last seen service in the Revolution, thirty years earlier. West Point, established ten years earlier, had fewer than one hundred graduates ready to assume command. The navy, as mentioned above, was a puny force. By 1812, the US Navy counted only twelve ships of any size, and only three fully dressed battleships.

  The Brits had 250,000 battle-hardened men in uniform. True, the bulk of those were in Europe. Nevertheless, 6,000 were stationed in Canada … augmented by 2,000 Canadians, and roughly 3,000 Indians. The British Navy consisted of 500 ships …. 80 of them permanently stationed in the West Atlantic between Canada and the Caribbean. It should have been a rout.

  THE CANADIAN DEBACLE

  In the long run, the American navy could not possibly defeat their British counterparts. American politicians concluded the most realistic path to pressuring Britain was by targeting Canada …. which seemed like an easy target with a population of only 500,000 compared to 7.7 million in the United States in 1812. Virginia Congressman John Randolph even stated the conquest of Canada would be “a holiday campaign … with no expense of blood or treasure on our part”.  (You know … just like that quick war in Iraq and Afghanistan which we were promised.)

  Madison grossly miscalculated support from the Canadian populace. He believed the Canadians wished to be liberated from Britain … that they wanted their own 1776 moment. Why not? About two-thirds of the Canadian population had migrated there from the United States. So, the grand plan was to invade Canada when war broke out. The US Army would capture British territory, quickly, and force Britain to the negotiating table. After all, Britain certainly would not want to lose this colony, and they certainly would not divert troops from the European war, and therefore they would be delighted to negotiate favorable maritime rights America had been pursuing. In exchange, America would give Canada back (although there were some who wanted to make Canada part of America). Sounds logical. But, the devil is in the details, and this plan was SNAFU right from the get go.

  The correct military strategy was to attack the British at Montreal. A concentrated force sailing up the Hudson River and over Lake Champlain probably could have captured the city. However, recall that the New England Federalists strongly opposed the war. Madison greatly feared that New England’s militias, most necessary to a concentrated attack on Montreal, would simply refuse to turn out for battle! On to to crappy Plan B!

  Madison decided to launch a three-pronged northern invasion; 1) attack Montreal, 2) attack Fort Detroit in the far west, and 3) a third army would leave from Fort Niagara and into Canada at the western end of Lake Ontario. America lost the battle of Detroit without firing a shot. The Fort Niagara campaign was divided amongst two generals, neither had military experience, both were appointed political dogs who argued with each other and refused support at critical times, and out of 1,300 men, 900 were captured. The battle for Canada ended about as soon as it started.

  Yes, folks, one can make the case that Canada — with a little help from their friends — defeated the United States in the War Of 1812. The immediate impact of the war was to strengthen Canada’s loyalty to England. The United States still had interest in conquering Canada – more half-assed ideas, really – but, by the 1890’s the two nations formed a permanent bond. For all practical purposes, the War Of 1812 was Canada’s war of independence, and they won.

  A BRIEF REPRIEVE – US NAVAL VICTORIES

  

  Old Ironsides defeats HMS Guerriere

   

  Out-gunned and out-manned the US Navy did achieve some clear victories, even early in the war.  In 1812, the USS Constitution —aka, “Old Ironsides” — defeated HMS Guerriere in a ferocious battle off the coast of Nova Scotia. In the same year, the USS United States captured HMS Macedonian, a fully dressed 38-gun battleship. In September 1813, the United States achieved further naval success on Lake Erie. Also in 1813, Commander Perry’s fleet of ten ships outmaneuvered a squadron of six British ships despite being outgunned by the much larger enemy vessels. The same Perry who left Americans with a memorable line: “We have met the enemy and they are ours.” A month later, William Henry Harrison – yes, the future president – crossed Lake Erie and defeated the British and their Indian allies in the Battle of the Thames. Tecumseh — leader of the pan-Indian confederation – was killed in that battle. Many of Britain’s Indian allies subsequently abandoned the alliance, and America’s northwest frontier was secured.

  MORE BAD NEWS ON THE POLITICAL FRONT

  On the political front there was much bad news. Commander Perry – the navy’s best field officer – was “promoted” to a desk job. William Harrison was accused by Secretary Of War, John Armstrong, of financial impropriety, and Harrison, another excellent field commander, was forced to resign.

  The cost of the war broke the Treasury. By 1814, $34 million dollars (a hefty sum in its day) was borrowed to finance the war.

  Madison sent a delegation (including John Quincy Adams) to meet with Czar Alexander in St. Petersburg, but the British left before the delegation arrived and the whole thing was an embarrassment.

  Madison probably suffered a severe anxiety attack on May 30, 1814 — the day the French signed a peace treaty with Britain and its allies. Madison strongly believed that a good portion of Britain’s 250,000 troops would make their way to Canada.

  THE HOUSE, THE HOUSE, THE HOUSE IS ON FIRE!!!

  Madison didn’t have wait long for some of his fears to come to fruition. Two months after the French-British peace treaty Royal Navy ships carrying about 6,000 British regulars sailed into Chesapeake Bay. Secretary of War, John Armstrong, did not believe the Brits would attack the swampy and forest-shrouded city of Washington … that the British had more interest in the coastal cities. Bad call, muchacho! American forces actually outnumbered the Brits. However, poor intelligence – such as Americans being badly deployed – and a multitude of errors, and many American deserters, led to the British marching virtually unchallenged into the city. Then the Brits burned all public buildings except the Patent Office …. and the White House.

  

  BASTARDS !!!!!!!!!!!!

   

  [Worthy Of Further Study: Dolley Madison, the greatest First Lady of them all. Thomas Jefferson spent few resources on the presidential mansion, believing it would detract from the emphasis of a simple and frugal government. He also avoided elaborate social gatherings at the White House, as he believed they “stank” of the aristocratic courts of Europe. As such, when the Madisons moved into the White House in 1809, the building itself was in disrepair. Dolly established a new philosophy … that the White House should be decorated in a manner appropriate to the dignity of the office it represented. So, she completely refurnished the White House and transformed it into a compelling symbol for the new nation — not nearly as ostentatious as found in European palaces, but rather a quiet dignity within the framework of American political ideology. But, it was more than just a symbol. Dolly also turned it into an arena of governance. The many social events she planned were done with the intention of placing the White House at the center of Washington society … with her husband at the center of policy decisions and deal making. And as her beloved White House burned to the ground, she risked her life gathering up critical White House documents … as well as the great Gilbert Stuart portrait of President George Washington, and carried them away to safety.] 

  SIZE MATTERS!!

  To his credit (I suppose) Madison never wavered that the United States would eventually achieve victory. Where did that confidence come from? Let’s recap:

  —— the Treasury is depleted, the Canada campaign was a disaster, the Navy which actually won battles has its best commanders sitting behind a desk, military desertions are significant, military ineptness abounds, New England not only won’t help the cause but it threatening to secede while at the same time trying to negotiate a separate peace deal with the Brits, even as 7,500 British soldiers were headed towards New Orleans, and now his capital is burned! Hooahhh!!

  To understand the source of his confidence one must look thirty years earlier. During debates over the suitability of a republican form of government to a country as large as America, Madison argued that America’s size would prevent any faction or narrow interest group from dominating the government. Now he believed that the United States could absorb battles lost at Detroit, Niagara, and even Washington, and that it could prevail despite the disloyalty of the Federalists in New England. The United States was simply too large, and consequently, too resilient, to be defeated. In other words, America was too big to fail!

  HOW DID THE SUPERIOR BRITS MANAGE TO F*** THIS UP?

  It seems, at least in this instance, that Madison was right about America’s size. British fortunes suddenly turned for the worse.

  After burning (and looting) the capital, the Brits marched to Baltimore … and met a different fate at the hands of a more skillfully deployed American force of both militia and army regulars. American sharpshooters picked off one-by-one the British division approaching the city from the south. Meanwhile, the big guns at Fort McHenry prevented the British fleet from entering the city’s harbor. By September, the British were forced to withdraw and abandon their campaign in the Chesapeake. Simultaneously, American forces stationed on Lake Champlain turned back a British invading army and 11,000 British troops were forced to retreat back into Canada. Mid-1814 ended relatively well for the Americans.

  More importantly, back in England, British leaders lost the hearts & minds of their subjects. After 20 years of fighting France, and before that, fighting in the American Revolution … well, the people were simply fed up with war. The British became much more preoccupied in rebuilding Europe after the final defeat of Napoleon. A London newspaper even harshly criticized the burning of Washington. On top of all that, even military leaders were questioning whether victory was possible. The Duke of Wellington, the hero of Waterloo, was offered command of the British force in North America … and, he declined, saying the American continent could never be subdued. The loud drums of war fell deadly quiet.

  WE WON! WE WON!!! Ummmmmm …. WHAT DID WE WIN?

  This combination, military defeats in America and the loss of will to fight back in England, led to a peace treaty being signed in Ghent, Belgium on Dec. 24, 1814. The war would officially end in February 1815 after ratification by both governments.

  However, the Ghent talks actually started earlier in the year in August 1814. Madison sent five delegates – including John Quincy Adams and John Clay – and amongst American demands were the end of impressment ….  and turning over Canada to the United States. Madison had balls! The Brits made even more ridicules demands; a new Canadian border located farther to the south, the creation of an independent Indian state in the northwest, British navigation rights on the Mississippi River, the exclusion of American fishing boats from the Grand Banks and the the exclusion of the American Navy from the Great Lakes. The Brits had no brains!

  But, in Ghent by December 1814 all parties dropped their aggressive demands. A simple ceasefire was proposed, prisoners of war would be exchanged, and captured territories from both sides would be returned.

  STUNNINGLY, impressment – one of the two major reasons for going to war in the first place — was not even mentioned. Maritime issues and trade policies – the other major reason for going to war – was mentioned, but only that it would be addressed at some future conference¹.

  Strangely, the American diplomats were ecstatic. Why??? After all that bloodshed and destruction, the Ghent Treaty insured that both sides gained absolutely nothing … as if the war never happened. A Canadian historian wrote;

  “It was as if no war had been fought, or to put it more bluntly, as if the war that was fought was fought for no good reason. For nothing has changed; everything is as it was in the beginning save for the graves of those who, it now appears, have fought for a trifle.”

  [¹NOTE: By Dec 1814 the British practice of impressment had all but ended. And, since France was no longer an enemy of Britain, the Royal Navy no longer needed to stop American shipments to France. Nevertheless, the United States and Britain would argue about trade restrictions and access to markets for the next fifteen years after Ghent!  By 1830, the West Indies were far less important to American exporters than new markets in Latin America. Also by 1830, Britain’s commitment to mercantilism had been replaced internally by support for free trade. In other words, the issues that so bothered Madison would have been resolved of their own accord in due time … WITHOUT A WAR. The War of 1812 wasn’t concluded at Ghent …. it died of old age.]

  INJUN INTERLUDE #1: UP A CREEK

  Worthy of much further study than I have room for here, is the significant victory by Jackson over the Creek Nation. At one time or another the Brits, French, Spanish, and even other Indian Nations (Tecumseh and his Shawnee) aligned with various factions within the Creeks to make war against the United States. The war against the Creeks officially ended in the Treaty of Fort Jackson just five months before the war’s final battle at New Orleans.

  A couple staggering statistics; 1) about 15% of the Creek population was decimated and, 2) the treaty resulted in an enormous land grab as the Creeks lost 36,000 square miles of their territory (half of Alabama, and southern Georgia).

  The Creeks, and to a lesser extent other Indian tribes, were to play a significant role in the British alliance to attack New Orleans. Had the Creeks won their war, the combined forces might very well have overcome Jackson’s army, and New Orleans might have been lost.

  INJUN INTERLUDE #2: TECUMSEH, THE GREAT SHAWNEE WARRIOR

  

  Tecumseh was sick and tired of seeing the social and cultural deterioration, inter-tribal conflict, and white encroachment on Indian lands. So, he developed a plan. Indians needed to restore control over their lives. The only way to do this, he said, was to be unified, to overcome tribal differences, rebuild their integrity, and create a Pan-Indian alliance strong enough to defeat the military forces supporting white expansion. Starting in 1807, he and his brother (Tenskwatawa – “The Prophet”) traveled throughout the interior of America building this alliance of Indian tribes. The obstacles were huge, especially overcoming the decades of inter-tribal prejudices, fears, and wars. But, Tecumseh was a powerful and compelling orator.

  In village after village he preached unity to a dispirited people. He urged them to reject the pollutants of the white man; alcohol, European dress, Christianity. He also preached great patience. He said they must avoid all confrontations with the whites until the confederation was large and strong enough to effectively resist the power of white armies. Isolated skirmishes would only weaken them. They must wait until the time was right,

  Legend has it that Tecumseh said he would send a message when the time was right. He would stamp his foot—and when he did, the earth would shake, the buffalo would stampede, the skies would become dark with birds taking flight, huge cracks would open in the earth’s surface, and the great river would flow backwards.

  But, his brother, the Prophet, couldn’t wait. He launched into a fiery oratory and convinced his followers of his own bullshit – that the white man’s bullets could not harm them. So, in Nov. 1811 the Prophet battled an American force led by William Henry Harrison at Tippecanoe Creek. The Prophet lost, and the dream of a Pan-Indian alliance died with it. Tecumseh would go on to align his small remnant of the Indian confederation with the British, fought in the battle of Detroit, and was killed at the Battle of the Thames in 1813, disbanding the alliance forever.

  Most interestingly though, on Dec. 16, 1811, just over a month after the disaster at Tippecanoe, a great earthquake shook Arkansas and was felt throughout the Mississippi Valley, from Canada to the Gulf of Mexico – the New Madrid earthquake. According to eyewitnesses, buffalo stampeded, the skies became dark with birds taking flight, huge cracks opened in the earth’s surface, and the great Mississippi River flowed backward.

  Tecumseh’s prophecy had come to pass …. just not the way he expected.

  WHAT THE HELL …. LET”S HAVE ONE MORE BATTLE IN NEW ORLEANS

  The popular opinion amongst historians is that there simply wasn’t enough time to cross the oceans to stop the British attack on New Orleans. I don’t buy it.

  The Ghent Peace Treaty was signed on Dec.24, 1814. On Dec. 13th, a British fleet had landed about forty miles east of New Orleans. It must have taken at least a month to get there. The Brits commenced fire on January 8, 1815. The British Commanders and Generals surely must have known that peace talks were in process. So, a prudent thing to do would have been to at least wait to see the results.

  And don’t forget that the Ghent talks were initiated way back in August. Even during those negotiations the dastardly Brits had four invasions planned or underway; 1) the destruction of Washington, 2) the destruction of Baltimore, 3) the Battle of Plattsburgh – where 10,000 British troops tried to cut off New England, and 4) and the Battle Of New Orleans. The treacherous British had an Olive Branch in one hand, and a Murderous Dagger in the other.

  Two things made this battle so important. First, a victory in New Orleans would have been a major boon for the British giving them access to the interior of the U.S. via the Mississippi River. Secongly, it would have given the Brits greater ability for their desire to seal off the United States from the Gulf of Mexico, further isolating the nation. (Furthermore — and this is my pure conjecture — it could have led to a reversal of the Louisiana Purchase, cutting the size of the United States in half.) But, this much is absolutely certain; it would have given the Brits a major trump card in negotiating the Ghent Treaty.

  A popular opinion is that the British would have honored the Ghent Treaty even if they won the battle. Of course, we’ll never know but, I find that opinion enormously preposterous. The Brits, still butt-sore about the beating they took in the Revolutionary War – a war they still would not admit they lost in 1814 – hated America and wanted revenge and destruction. And what history is there of Britain – or any country – winning a huge major battle and then just walking away from it? None. A major victory such as New Orleans would absolutely have resulted in the United States being forced into major concessions. If fact, I wouldn’t be surprised if it would have led to an outright abrogation of the treaty. The Brits were ruthless bastards when it suited them, and never forget, they really hated America.

  What should be crystal clear is that far from being a senseless battle, a British victory at New Orleans would have drastically changed the future of America. But, they didn’t win. They were annihilated. Let’s look at some interesting details.

  THE BATTLE OF NEW ORLEANS …. ONE OF AMERICA’S MOST IMPORTANT VICTORIES EVER

  On the other hand, if you want to skip this section, just watch this 3 minute song by Johnny Horton — he does a fine job ‘splaining it! Nice pics too!

  The British force consisted of roughly 8,000 troops — including Royal Fusiliers, Highlanders, Light Infantry, and Light Dragoons — disciplined troops with plenty of battle experience, having just defeated the French.

  Why capture New Orleans? Lord Castlereagh, the British foreign secretary, said that once the large seaport towns of America were “laid in ashes” and New Orleans captured, that the British would have command of “all the rivers of the Mississippi valley and the Lakes … the Americans would be little better than prisoners in their own country.” The Brits also intended to prevent America from having any access to all of the Gulf Of Mexico.

  General Andrew Jackson first had to prepare the city’s defenses … not an easy task. New Orleans had a very diverse population and resisted organization. So, Jackson threatened to blow up the provincial legislature if it did not comply with his demands, one of which was to suspend habeas corpus. So, he declared martial law, turned the city into a military camp, and took over complete control of the city’s resources. This got their attention.

  He organized all available manpower—frontiersmen, militiamen, regular soldiers, Indians, slaves, townspeople including the city’s unusually large population of free blacks and even the famous river pirate, Jean Lafitte — about 4,000 in total. And then he built the “Jackson Line” –a defensive line between the city and the approaching British forces. Rodriguez Canal was a ten-foot-wide millrace located just off the Mississippi River. Using local slave labor, Madison widened the canal into a defensive trench. He then built an eight foot tall earthen rampart, twenty feet wide in parts, buttressed with timber, and protected by eight artillery batteries When completed, it stretched nearly a mile from the east bank of the Mississippi to a nearly impassable marsh. Jackson told his men “Here we shall plant our stakes and not abandon them until we drive these red-coat rascals into the river, or the swamp.”

  

  The British commander, Cochrane, felt the area could be taken with minimal forces with the help of the Spanish, Indians, and even the people of New Orleans who he felt would welcome the British as liberators. In retrospect, fairly idiotic assumptions.

  The bottom line; it was a hopeless tactical situation for the British with a swamp to the east of the American lines, and the Mississippi River to west. This left the British with only one route of attack—straight into the guns of the American forces tucked inside a dry canal.

  Tennessee and Kentucky riflemen laid withering fire against the advancing British lines, killing or wounding more than 2,000 British soldiers, including three generals and seven colonels, in less than an hour. One British veteran of the Napoleonic Wars claimed it was “the most murderous fire I ever beheld before or since.” American casualties were about 13 killed, and 39 wounded.

  [NOTE: Considerably more Americans were killed in the skirmishes leading up to the final battle. For example, 6,000 British troops snuck into the British headquarters at Villeré’s plantation. Jackson resolved to attack immediately before the British advance was reinforced and organized. He assembled 1,800 men in a battle called “Night Attack”, and repelled the British, but not before suffering 215 casualties.)

  New Orleans was a tremendous victory—one which made Andrew Jackson a national hero, and propelled him into the office of President. And, regardless of the reason for the battle, whether or not it was necessary, Madison certainly knew the fine art of Presidential spinning; — necessary war, reluctantly entered, rights, patriotism, and heroes – all in one brief sentence. (He might as well have been talking about Iraq.)

  “the late war, although reluctantly declared by Congress, had become a necessary resort to assert the rights and independence of the nation. It has been waged with a success which is the natural result of the wisdom of the legislative councils, of the patriotism of the people, of the public spirit of the militia, and of the valor of the military and naval forces of the country Peace.”

  A good detailed account of the battle can be found here: http://www.the-american-interest.com/2014/10/10/the-battle-for-the-big-easy/

  *  *  *

  THE AFTERMATH AND LEGACIES: 10 LESSONS

  1)- First and foremost, let’s be brutally frank about the REAL reason for this war; PRIDE and PATRIOTISM! The Brits didn’t respect our independence. The French didn’t. Spain didn’t. Most of the world thought it was just a fluke. Madison was convinced the country had to prove to the rest of the world, as well as to itself, that this new experiment in republican government was a permanent fixture in the family of nations. And the way to go about that was to confront Britain – the world’s most powerful nation – that violating American rights would not go unchallenged or unpunished. Unbridled Patriotism …so sweet in the Revolutionary War, souring in the War Of 1812, and look where it got us today.

  2)- The war reinforced the Executive branch’s de facto monopoly over foreign policy. When all’s said and done, this was Madison’s war. Another example: John Quincy Adams would defend Gen. Andrew Jackson’s invasion of Spanish Florida in the undeclared war on the Seminoles. Dissenting members of Congress could do nothing but gripe.

  3) A NEW way of looking at the Constitution emerged. Henry Clay said (emphasis mine); —

  “A new world has come into being since the Constitution was adopted. Are the narrow, limited necessities of the old thirteen states … as they existed at the formation of the present Constitution, forever to remain a rule of its interpretation? Are we to forget the wants of our country? I trust not, sir. I hope for better and nobler things.” Evidently, the concept of a Living Constitution took root a long, long time ago.

  4)- The war changed how Americans viewed the military. The Army and Navy became professional. The State Militia took a back seat. Now the nation embraced military spending as a necessity … even during times of peace.

  “The most painful, perhaps the most profitable, lesson of the war was the primary duty of the nation to place itself in a state of permanent preparation for self-defense” —— future President John Quincy Adams

  Many learned that connection with the military is great for one’s political career. Of the eleven presidents between Madison and Lincoln, seven of them got their start in public life or boosted their public careers during the War of 1812.

  It only took 29 years after the end of the Revolutionary War for America to declare its first war. Strangely enough, this war was a complete and utter waste of human and capital resources. The precedent was set. It wouldn’t be the last such time America fought such a war.

  5)—Politicians learned that with proper spin and propagandizing the people can be rallied to LOVE A GOOD WAR. Precious few citizens were in strong favor of the war when it first started. But, at war’s end, the people were ecstatic. A common refrain throughout the country is depicted in this piece written in 1815 by a group known as “republican citizens of Baltimore” stating that the war;

  “ … has revived, with added luster the renown which brightened the morning of our independence: it has called forth and organized the dormant resources of the empire: it has tried and vindicated our republican institutions: it has given us that moral strength, which consists in the well earned respect of the world, and in a just respect for ourselves. It has raised up and consolidated a national character, dear to the hearts of the people, as an object of honest pride and a pledge of future union, tranquility, and greatness.”

  War is good for slogans and jingoes. “Don’t give up the ship” and “We have met the enemy and they are ours” and “Uncle Sam” and cute names for war equipment “Old Ironsides”, and populist songs abounded. Symbols, slogans, songs and sayings; that’s how you condition people’s minds as to what it means to be an American. Mold ‘em like clay into whatever form you want. At least there’s no record of Madison proclaiming “America is the greatest country in the world!!”.

  6)- The war permanently changed America’s economic model. Previous presidents, especially Jefferson, championed an agrarian economy. He hoped that commerce would not dominate America or its politics since that preoccupation would inevitably draw the country into perpetual international turmoil. Shortages caused by the various embargos, as well as the war itself, led to the fast growth of the manufacturing sector in the United States. Manufactures wanted protection from foreign competition once peace was restored, even forming the ‘American Society of the Encouragement of American Manufacturers’, a pro-tariff group. Active promotion of commerce required further expansion of American military strength. In other words, America would promote “free trade” with the government’s help in aggressively opening foreign markets ….. and threatening retaliation in the case of uncooperative regimes by displaying the military card. It wasn’t all that long before “free trade” gave way to mercantilism — a special-interest economic protectionism.

  7)- The devious and greedy amongst us started to notice that war is damn good racket. Shortly after the war, in 1817, the New York Stock Exchange was founded … born in a bubble created by the war. One year later the bubble burst in The Panic Of 1818. The war showed that hard money was for weenies. Paper money was the way to go, and reams of it was printed so the government could borrow it and finance the war. Note-issuing banks spread like wildfire. Once the war ended, imports swelled which led to falling commodity prices which led to big trouble for war-grown manufacturers. Businesses went bust while simultaneously some became filthy rich.    See book —- > https://mises.org/library/panic-1819-reactions-and-policies

  8)- Politicians learned that war makes government more powerful … and a great way to increase taxes.  Albert Gallatin, secretary of the Treasury from 1801 to 1814, said that because of the war, the “people are more American; they feel and act more as a nation ….. the war has laid the foundation of permanent taxes and military establishments, which the Republicans had deemed unfavorable to the happiness and free institutions of the country.”

  9)- The war ended a political party. The Federalist Party, the party of Washington and Adams, the party that had dominated national affairs during the 1790s, was all but dead after the war. They were staunchly against the war. They were even ready to introduce legislation requiring a two-thirds vote of approval for all future declarations of war, and that legislation restricting trade, such as the embargo, should also require a two-thirds vote. That is, until the stunning news of Jackson’s victory at New Orleans arrived in Washington. They picked the wrong cause. The country was in no mood for an anti-war party. And, within a few years of the war, they just faded into oblivion.

  10)- Expansionism. The victory over not only the Brits, but also over the Indians in the Northwest and Southwest, opened up the West as never before, and resulted in huge territorial gains. Westward expansion, in turn, indirectly led to the Civil War forty six years later because it was bitter disagreement about the expansion of slavery, rather than its existence in the Old South, which was a key reason for the War of Northern Aggression.

  GOOD, BAD, or UGLY?

  I originally titled this article “1812: The War That Changed America Forever For Worse”. I’m not sure whether or not that conclusion is 100% accurate. The “inconsequential” war certainly and drastically changed America, of that there is no doubt. Whether for the good, or bad, you’ll have to decide for yourself.

  On the positive side, the war did cement American independence. It proved that to defeat America on its home ground, a very, very large army, and a great commitment to prolonged and bloody war, was going to be needed. At the start of the war even Americans wondered whether the republic could survive a real crises. Many felt with Governor Morris did, that — ‘it was as vain to expect the permanency of democracy as to construct a palace on the surface of the sea.’ Now they had their answer.

  Americans would no longer be oriented towards Britain. We achieved freedom from Europe. We would turn to developing our own vast resources, and forget about Europe. Our National Government was here to stay.

  The end of the war led to a burst of patriotism in the USA as evidenced, in part, by the immediate and widespread popularity of “The Star Spangled Banner” The Nile Register wrote — “Who would not be an American? Long live the republic! All hail! Last asylum of oppressed humanity!”   Such a comment would have never been made before the war. A whole new national identity arose in “the dawn’s early light”.

  On the negative side; the war left the country with constitutional revisionism, centralized power, protectionism, mercantilism, expansionism, blind patriotism, and militarism. That decentralist small-government thingy conceived by the Founding Fathers didn’t last very long, did it? One must wonder “War, what is it good for? Was it all worth it?”

  *  *  *

  Most excellent resource — War Of 1812 Website

  

  

  
  
  

  

• Mapping An ISIS Advance: Syria On The Brink

  Recently, calls for US ‘boots on the ground’ in Syria have gotten louder after ISIS captured a UNESCO World Heritage site in Syria, overran Ramadi in Iraq, and took credit for a suicide bombing in a Saudi mosque. 

  The US is now reportedly looking at its options including sending so-called “spotters” to Iraq who will help to make US airstrikes more effective and meanwhile, uber hawks like Senator John McCain (who has himself had a bit of trouble shaking rumors that he was once photographed with the same ISIS forces he now wants to annihilate) saying that as many as 10,000 US troops are necessary to turn the tide. From Bloomberg:

  Arizona Republican Senator John McCain, chairman of the Senate Armed Services Committee, speaks during panel discussion at regional security summit in Singapore.

   

  Islamic State is winning in Iraq, Syria: McCain

   

  Air strikes without foreign troops on the ground providing real time targeting information aren’t effective: McCain.

   

  McCain says he blames President Barack Obama’s decision to withdraw troops from Iraq for emergence of Islamic State.

  Here’s a bit of color from Stratfor on the current situation on the ground:

  Last week, the Islamic State seized the ancient city of Palmyra from Syrian President Bashar al Assad’s forces. The city’s capture adds to the many defeats Damascus has suffered over the past six months, compounding its problems as it faces threats on multiple fronts.

   

  The Islamic State’s victory in Palmyra is notable for two reasons. First, it has completely isolated loyalist forces in Deir el-Zour province, including the 137th Mechanized Brigade and the elite 104th Republican Brigade. Second, Palmyra’s location — a critical crossroads in the center of Syria — gives the Islamic State a strategic base from which it can launch attacks on key locations in the surrounding area.

   

  The Islamic State’s maneuvers in Homs province, where Palmyra is located, denote a shift in its strategy in Syria. Previously, the Islamic State fought against the People’s Protection Units in Kobani and al-Hasaka while maintaining its positions in Aleppo province.

   

  Earlier in the conflict, Damascus removed its forces from Homs province and deployed them against the growing rebel threat of Jaish al-Fateh in Idlib province. The redeployment, which transferred the elite Tiger Forces and Desert Falcons away from the Islamic State’s area of operations, will now be seen as a mistake. The elite forces have been unable to halt rebel advances in Idlib, and their departure from Homs has left the government highly vulnerable on its eastern flank.

   

  The Islamic State now threatens the Syrian government’s core territory, which stretches from Damascus to Aleppo. It is likely that the government will try to take the fight to Islamic State forces stationed in Palmyra, if not to recapture the city then to pin the group down in a single location and keep it from spreading to other strongholds. Either way, any action al Assad takes in response to the Islamic State’s success in Homs will expose Damascus on other fronts.

  Here are the visuals…

  

  

  *  *  *

  Indeed it appears as though President Bashar al-Assad is well on his way to losing control. We’ll close with what we said last week:

  As you can see, there are now plenty of excuses to put boots on the ground first in Iraq, and then in Syria. Put simply: if there was ever an opportune time to play the ISIS card on the way to ousting Assad and securing a route for Qatari natural gas to flow to Europe thus breaking Gazprom (and Putin’s) stranglehold, this is surely it. 

  

  
  
  

  

• Was Charlie Hebdo A "Convenient" Incident For Policymakers?

  Submitted by Claudio Grass via Acting-Man.com,

  Many Questions

  On the 7th of January two gunmen attacked the office of Charlie Hebdo, a French weekly magazine. The shooters were two brothers who belonged to the Yemeni branch of the Islamist terrorist organization Al-Qaeda. The attack resulted in 11 casualties and many injured, while the shooters were shot a few days later in an exchange of fire with the police. Charlie Hebdo is a satire magazine, and its jokes and cartoons and its secular approach are widely considered anti-religious. Social media went into a frenzy with the hashtag “Je suis Charlie”. Four days later two million people including tens of world leaders participated in a rally for national unity in Paris, and over three million participated across France. A lot of questions were raised by this tragic event and its aftermath that we will look at in this article.

   

  

  The gunmen who attacked Charlie Hebdo and their get-away car

  Photo via Reuters TV

  How Free Should Free Speech be When it Comes to Religion?

  Let’s start with the obvious: What was the motive of the shooters? According to witness reports of the attack, one of the shooters said “You are going to pay for insulting the Prophet”. Charlie Hebdo’s cartoons and jokes are regarded as quite controversial, as they mock all religions, whether Islam, Christianity or Judaism. When respect to Islam, they repeatedly published cartoons of Mohammed, which infuriated Muslim communities worldwide as images of the Prophet are not allowed to be depicted according to Islamic teachings. Not only was the magazine sued for this, its editor-in-chief, who was killed in the attack, had been on the hit list of the Al-Qaeda branch in Yemen for some time.

  Certainly these attacks have added to a climate of tension and fear, and many would classify Charlie Hebdo’s satire as hate speech or a discriminatory form of expression. But the bottom line is that it is an opinion, which you can choose to agree or disagree with. To redress an opinion with a barrel of a gun is never the right answer. Freedom of speech has been widely established, but is constantly under attack. Even after having codified freedom of speech and expression into their constitutions, many Western countries have introduced contradictory defamation laws. The line has clearly not been drawn. However, why should there be a line in the first place?

  In my view, the right to speak freely should be absolute, and shouldn’t be restricted in any way. The essence of liberty lies in freedom from restrictions and control by an external entity. Ideas and thoughts are entitled to be expressed and circulated freely to whoever wishes to listen to them. This is what distinguishes democracies from authoritarian regimes. But what should govern controversial ideas, particularly when it comes to “sensitive” subjects like religion? Like the free market, free speech will govern itself and find its own equilibrium. In a society that upholds the right to free speech, there will be disagreements and these disagreements will lead to debate between the conflicting parties. The significance however lies in that these parties agree to disagree, and are willing to defend the right to free speech and expression at all costs.

   

  

  Cartoon by David Pope

  Renowned economist and strong advocate for libertarianism, Murray N. Rothbard, offers an interesting perspective, as he argues that free speech is connnected with where we can exercise this right. In other words, the right to speak is connected with the right to property. A man can exercise his right of free speech within the parameters of his own property, or within the property of someone who has willingly agreed to allow him to exercise this right on his premises. According to Rothbard:

  “A person does not have a “right to freedom of speech”; what he does have is the right to hire a hall and address the people who enter the premises. He does not have a “right to freedom of the press”; what he does have is the right to write or publish a pamphlet, and to sell that pamphlet to those who are willing to buy it (or to give it away to those who are willing to accept it).”

  Because it is a matter of property rights, you can exercise your right within your own property, but others can restrict you from exercising it on their property. At the end of the day, if you watch a show on TV that you disagree with, you can simply turn it off, and should you find an interesting article you can choose to read it or not. It is this freedom that should be and deserves to be defended!

  I recently read an interesting article by Hans-Hermann Hoppe, which contained the following paragraph:

  “The State in its long history has made some people richer and others poorer than they would have been otherwise. It killed some people and let others survive. It moved people around from one place to another. It promoted some professions, industries or regions and prevented or delayed and changed the development of others. It awarded some people with privileges and monopolies and legally discriminated against and disadvantaged others, and on and on. The list of past injustices, of winners and losers, perpetrators and victims, is endless.”

  Although he wasn’t discussing freedom of speech in his article, I think the above is applicable to our discussion here. Even if a case could be made for limiting freedom of speech in certain cases such as discrimination or inciting violence, do we really want to entrust the government, historically the biggest killer and discriminator, with the task of defining where these limitations should lie?

   

  

  Research into democide by R.J. Rummel suggests that governments killed altogether 262 million people in the last century.

   

  Is Charlie Hebdo a “Convenient” Incident for Policymakers?

  Since 9/11 the global war on terror was used to “justify” excessive legislation that restricted many basic and fundamental civil liberties and legitimized violation of privacy by the State. States have and will continue to misuse such incidents to further violate the civil liberties of citizens. By fueling hatred and anger against different religions and ethnic groups, states are very much applying the old political strategy of divide and conquer. The war on terror wouldn’t have gained this much support if it weren’t for fueling anger against Islam worldwide (let’s not forget that the US conveniently allied with Osama Bin Laden and his followers against the Soviets in Afghanistan in the 1980s).

  It is astonishing how states get their way when tying their policies to emotionally-driven topics linked to identity and human life. The American public suddenly gave away its right to privacy through the Patriot Act, which was introduced under the pretext of deterring terrorism and to better support the authorities in finding and hunting down criminals that are targeting the American public. This leads us to recall our recent interview with former Czech President Mr. Václav Klaus, who made a rather honest and realistic statement:

  “We experienced it in 2001 in America and it had very negative repercussions for us in Europe. I am afraid there will be a new wave of attempts to limit our personal freedom due to the so-called war against terrorism.”

  Looking back on the interview his fears were more than justified, as we are now seeing similar developments such as in the US after 9/11! The lower house of parliament in France just passed a bill that has already been dubbed the “French Patriot Act”. Due to the huge majority in the lower house we expect it to pass the upper house as well. This bill lays down the rules regarding surveillance of all forms of communication without prior approval by a judge.

   

  

   

  Furthermore, starting in September of this year, there will be massive new restrictions on the use of cash in France. Cash transactions over 1,000 Euro will no longer be allowed (down from 3,000 Euro). Foreign exchange transactions over 1,000 Euro will have to be recorded with an ID or passport of the person in question (down from 8,000 Euro). All cash deposits or withdrawals higher than 10,000 EUR per month will have to be reported to the anti fraud and money laundering agency. I think these developments only a few months after the Hebdo attack show clearly how this event is being misused to implement further restrictions on the civil liberties of the French population.

   

  How Selective is Media Coverage in Connection with Acts of Terrorism and Violence?

  Charlie Hebdo remained a focal topic in the media, the march in Paris was widely celebrated, and “Je suis Charlie” was everywhere on Facebook and Twitter. Other attacks did not receive this much attention, although they were equally gruesome and violent. Between the 3rd and 7th of January (the same day as the Charlie Hebdo attack) there were mass killings by Boko Haram in Nigeria. Boko Haram is a violent militia group that operates in northeastern Nigeria since 2009. In these four days it burned down 16 towns and villages, and overran the headquarters of the joint task force. The estimated number of casualties was ranging between hundreds and thousands.

   

  

  Boko Haram djihadists in Nigeria

  Photo credit: AP

  How can such a mass killing be ignored? Isn’t terrorism a violation of human rights everywhere? On February 11^th a gunman shot three citizens, a young Muslim couple and the woman’s sister, in the US town of Chapel Hill. The motive? Apparently it was a dispute over a parking issue. Meanwhile the families of the victims labeled it a hate crime. However, an article published in the British Independent newspaper put the real issue at the forefront:

  “Would the media have covered the tragedy if Twitter didn’t exist, and what would have happened if the murderer was Muslim?”

  What about hate crimes after Charlie Hebdo? France saw more attacks following the incident, which were not widely covered in the media, and certainly the list goes on around the world. An article in the UK’s Telegraph was entitled “’We’re leaving Britain – Jews aren’t safe here anymore’”. Yes, we knew racial and religious profiling was a problem, but how many of us knew that it has become so bad that people felt threatened and at constant risk? The article cited figures from the Community Security Trust (CST), which monitors anti-Semitism in Britain, which revealed a record 1168 incidents of anti?Semitism in 2014, which more than doubled from just a year earlier.

  Where are the media reports on all this? What is at issue here is the selectivity of media coverage. Why do some stories deserve more coverage than others? We’ve established our case that free speech should be free from restrictions, but we also argue that media outlets should not be exploited for pushing certain political agendas.

   

  Where Would we be if it Weren’t for Social Media and the Internet?

  It takes revolutionary means to promote revolutionary ideas. The invention of the first European movable printing type with the Gutenberg Press was a revolutionary discovery which played a significant role during the time of reformation, as it enabled the mass-exposure of the ideas and concepts of the protestant faith, and the case for religious decentralization and secularism that threatened the power of political and religious authorities.

   

  

  Johannes Gutenberg inspects the output from the movable type printing press he invented in the mid 15^th century. It would prove to be a truly revolutionary invention

  Image via Bettman-Corbis

  Then why shouldn’t we be able to make the best out of today’s mass media and social networks – to exercise our right to post our opinions online with no Big Brother watching over our shoulders controlling what or what we cannot say on the worldwide web? Whether Charlie Hebdo, or other cases of religious violence, all have certainly put media coverage in the spotlight. If it weren’t for social media, we may not have noticed the biased mainstream coverage or how states are manipulating racial profiling to satisfy their agendas. The media and the State are under great scrutiny nowadays. Ever since Western countries have signed up for the global war on terror, they have willingly and knowingly aggravated and encouraged more and more discrimination, while further infringing on the very civil liberties they claim to be protecting.

  For me, the most important takeaway from the tragic events in France is that we need to stay as vigilant as ever in defending our freedoms. As the aftermath of the Hebdo attack has shown, governments will misuse any opportunity they see to further restrict our freedom and arrogate more power to themselves. This is especially easy when people are faced with an understandably emotionally tense situation like 9/11 or other terrorist attacks. However, thanks to the Internet we are less prone to accept State propaganda and are able to get a more objective view of what is really happening in the world around us.

  

  

  
  
  

  

• Something Smells Fishy

  Submitted by Jim Quinn of The Burning Platform

  

  Something Smells Fishy

  It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.

  Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.

  This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing. We now know who was responsible. Greenspan and Bernanke were at least 75% responsible for the housing bubble and its eventual implosion, which essentially destroyed our economic system. They purposely kept interest rates at obscenely low levels, encouraging every Tom, Dick and Julio to buy a home with a negative amortization, no doc, nothing down, adjustable rate mortgage, so they could live the American dream of being in debt up to their eyeballs.

  Greenspan and Bernanke were also responsible for regulating the Wall Street banks. They allowed them to leverage themselves 30 to 1. They allowed them to create fraudulent high risk mortgage products. They looked the other way as Wall Street sliced and diced these guaranteed to default mortgages into AAA rated derivatives that were then spread throughout the global financial system like ticking time bombs. As home prices rose three standard deviations above the long term average, these Ivy League educated geniuses cheered it all on. Bernanke saw no bubble, just as it was bursting. He saw no mal-investment or systematic risk from this orgy of greed and fraud. And then it all blew up in our faces, while the perpetrators walked away unscathed to pillage and rape once more.

  

  And now we come to present day and something really smells fishy again. Home prices crashed by 40% between 2005 and 2012, putting prices back to 1978 on an inflation adjusted basis. All of the bubble gains were wiped out in the blink of an eye. Bernanke and his Wall Street owners had a real problem with this development. Wall Street banks had/have billions in toxic mortgages on their books and only accounting fraud by not having to mark them to market has kept these banks from having to declare bankruptcy. Bernanke, Geithner, and the Wall Street banks hatched their master plan to save themselves at the expense of young people in 2011/2012.

  We know for a fact that real median household income is still 7% below 2007 levels and sits at the same level as 1989. We know for a fact that wages have been stagnant since 2007. We know for a fact GDP has barely broken 2% since 2009. We know for a fact the price of healthcare, food, energy, tuition, rent, and a myriad of other daily living expenses are dramatically higher since 2009. We know mortgage originations are at 1997 levels. We know housing starts are 60% below the 2005 highs and at levels seen during the 1991 and 1981 recessions. Existing home sales are 30% below the 2005 high, only up 10% from 2012 levels, and sitting at levels reached in 1999 before the boom.

  A critical thinking person might wonder how median single family home prices could possibly skyrocket by 37% in the last three years when household incomes are falling, living expenses rising, and the number of houses being sold are at recessionary levels. The stinking rotting fish again sits in the hallways of the Eccles Building in Washington D.C. Janet “Yellowfish” Yellen has inherited the bubble blowing machine from Ben “Blowfish” Bernanke and has continued to inflate a new housing bubble, because one housing bubble just isn’t enough.

  

  There is nothing free market about the 37% increase in home prices. It has absolutely nothing to do with supply and demand. It has nothing to do with normal families looking for a home. It has everything to do with the Federal Reserve’s 0% interest rates, the $3.5 trillion of QE injected into the economic gambling system, Wall Street banks withholding foreclosures from the market, hedge funds buying up tens of thousands of foreclosed homes and renting them out to the former middle class, Fannie and Freddie guaranteeing 70% of all sales, the government encouraging 3.5% subprime loans again, Chinese and Russian billionaires parking their ill gotten wealth in US real estate, and flippers reappearing in the same old places (Las Vegas, Phoenix, Florida, California).

  The Federal Reserve created the last housing bubble and they’ve created the new housing bubble, along with stock and bond bubbles, with their easy money policies designed to enrich their Wall Street owners and the parasites who feed off the financial industry. Their entire plan smells to high heaven. They have thrown young people and most of the middle class overboard, while the bankers, billionaires, politicians, and connected cronies party like it was 2005 on their $250 million yachts.

  

  Now what? The Fed says they are going to raise rates. The QE spigot has been turned off. The hedge funds are selling their buy and rent hovel investments, cash buyers are dwindling, the flippers who appeared in 2005 are back, Boomers are looking to sell and downsize, young people are already in debt up to their eyeballs thanks to the government doling out student loans like candy, the number of full-time good paying jobs continue to dwindle, and the rigged 37% price increase has priced millions of people out of the market.

  The good news is the Wall Street banks have inflated their balance sheets and celebrated by giving themselves $20 billion in bonuses for a job well done. If mortgage rates rise to 4% or God forbid 5%, the entire housing complex would implode faster than a blowfish out of water. If you’ve bought in the last two years you will be underwater sleeping with the fishes like Luca Brasi in the not too distant future.

  

  

  

  
  
  

  

• What's Holding Back America?

  Just a little more hope… and some change…

   

  

   

  Source: Investors.com

  

  

  
  
  

  

• Euro-sclerosis

  Submitted by Alasdair Macleod via GoldMoney.com,

  There appears to be little or nothing in the monetarists' handbook to enable them to assess the risk of a loss of confidence in the purchasing power of a paper currency. Furthermore, since today's macroeconomists have chosen to deny Say's Law, otherwise known as the laws of the markets, they have little hope of grasping the more subtle aspects of the role of money in price formation. It would appear that this potentially important issue is being ignored at a time when the Eurozone faces growing systemic risks that could ultimately challenge the euro's validity as money.

  The euro is primarily vulnerable because it has not existed for very long and its origin as money was simply decreed. It did not evolve out of marks, francs, lira or anything else; it just replaced the existing currencies of member states overnight by diktat. This contrasts with the dollar or sterling, whose origins were as gold substitutes and which evolved in steps over the last century to become standalone unbacked fiat. The reason this difference is important is summed up in the regression theorem.

  The theorem posits that money must have an origin in its value for a non-monetary purpose. That is why gold, which was originally ornamental and is still used as jewellery endures, while all government currencies throughout history have ultimately failed. It therefore follows that in the absence of this use-value, trust in money is fundamental to modern currencies.

  The theorem explains why we can automatically assume, for the purposes of transactions, that prices reflect the subjective values of the goods and services that we buy. This is in contrast with money that is not consumed but merely changes hands, and both parties in a transaction ascribe to money an objective value. And this is why the symptoms of monetary inflation are commonly referred to as rising prices instead of a fall in the purchasing power of money.

  The European Central Bank (ECB) is plainly assuming the euro is money on a par with any other major currency with a longer history. Despite caution occasionally expressed by sound-money advocates in Germany's Bundesbank, the ECB is aggressively pursuing monetary policies designed to weaken its currency. For example, it has reduced its deposit rate for Eurozone banks to minus 0.2%. This is wholly unnatural in a world where possession of money is always more valuable than an IOU. Furthermore banks are encouraged to limit their customers' cash withdrawals, often under the guise of fighting tax evasion or money laundering. But in Greece restrictions on cash withdrawals are clearly designed to protect the banks.

  So far, there is nothing identified in this article that actually points to a destabilisation of the euro, other than it's generally a bad idea to fool around with peoples' rights to it. But lets assume for a moment that Greece defaults. In that case the Greek banking system would certainly collapse (assuming the ECB suspends its emergency liquidity assistance (ELA) because bad debts already on their balance sheets exceed tangible equity by a substantial margin. If that assistance is withdrawn, some €80bn of ELA will be lost. Furthermore, TARGET2 2 settlement imbalances at the other Eurozone central banks, which have arisen through capital flight from Greece and which are guaranteed by the ECB, total a further €42bn. This leaves the ECB in the hole for €122bn. Unfortunately, the ECB's equity capital plus reserves total only €96bn, so a Greek default would expose the euro's issuing bank to be woefully under-capitalised.

  Therefore, if Greece defaults we would at least expect the validity of this relatively new euro to be challenged in the foreign exchange markets. Even if the ECB decided to rescue what it could from a Greek default by rearranging the order of bank creditors in its favour through a bail-in, it would still have to make substantial provisions from its own inadequate capital base. For this reason, rather than risk exposing the ECB as undercapitalised, it seems likely that Greece will be permitted to win its game of chicken against the Eurozone, forcing the other Eurozone states to come up with enough money to pay off maturing debt and cover public sector wages. So will that save the euro?

  Perhaps it will, but if so maybe not for long. If the Eurozone's finance ministers give in to Greece, it will be harder for other profligate nations to impose continuing austerity. Anti-austerity parties, such as Podemas in Spain, are increasingly likely to form tomorrow's governments, and Spain faces a general election later this year. Prime Minister Renzi and President Hollande in Italy and France respectively are keen to do away with austerity and increase government spending as their route to economic salvation. Unfortunately for both the undercapitalised ECB and its young currency, they are increasingly likely to be caught in the crossfire between the Northern creditors and the profligate borrowers in the South.

  Even if Greece is to be saved from default, the ECB will need to strengthen the Greek banks. This is likely to be done in two ways: firstly by forcing them to recapitalise with or without bail-ins, and secondly to restrict money outflows through capital controls and harsh limits on depositor withdrawals if need be. Essentially it is back to the Cyprus solution.

  Whichever way Greece is played, Eurozone residents will see themselves having a currency that is becoming increasingly questionable. The bail-in debacle that was Cyprus is still etched in depositors' minds. Cyprus certainly has not been forgotten in Greece, where ordinary people are now resorting to buying mobile capital goods that can be easily sold, such as German automobiles, with the bank balances that cannot be withdrawn in cash and are otherwise at risk from a Cyprus-style bail-in. Greek depositors have realised that euro balances held in the banks are not reliably money. Folding cash is still money, but that is all, and furthermore the folding stuff is rationed.

  The next blow for the euro could come from the exchange rate. If the euro continues to lose purchasing power on the foreign exchanges, it is likely to undermine confidence on the ground. And when that happens it will be increasingly difficult for the ECB to retrieve the situation and maintain the euro's credibility as money. It just doesn't seem sensible to take such enormous risks with a currency that has existed for only thirteen years.

  

  

  
  
  

  

• Seymour Hersh And The Dangers Of Corporate Muckraking

  By Mark Ames, originally posted on Pando Daily

  Seymour Hersh And The Dangers Of Corporate Muckraking

  

   

  “The Times wasn’t nearly as happy when we went after business wrongdoing as when we were kicking around some slob in government.” — Seymour Hersh

   

  In its original meaning, “muckraking journalism” was all about exposing the awful power that corporations, trusts, and monopolies exercised over people and the broader public interest. So why doesn’t Seymour Hersh, considered the premiere “muckraker” of the past few decades, turn his fearless muckraking guns on private corporate power?

  Ida Tarbell dug deep into Rockefeller’s Standard Oil empire and all the ways it exercised a kind of private government tyranny over huge swathes of public life; Tarbell’s work directly influenced the antitrust breakup of Standard Oil in 1911. Upton Sinclair exposed brutality in the meatpacking industry — on its workers, the slaughtered animals, and the diseased, rat-infested meats that eventually wound up in consumers’ homes — leading to the Meat Inspection Act and the Food and Drug Administration. Other muckraking exposés led to state-level child labor and workers’ comp laws, the progressive income tax amendment, and laws placing vast expanses of land and forests under federal protection from rapacious robber barons.

  But Hersh and others we today call “muckrakers” focus almost exclusively on taking on government power and the national security state power — not the power of private governments (corporations, oligopolies) that exert so much mundane existential power over our mundane little existences. To the extent that muckrakers today do delve into concentrated private power, it’s usually to expose the influence of corporate money in government, which reinforces the basic operating assumptions today that power is in the hands of public government, and that corporate power is only a problem when it co-opts government power.

  The nearly exclusive focus on fighting government power started with the baby boomers in the mid-late 1970s, as they retreated from politics and labor unions, and ditched the sort of university Marxist rhetoric that filled the pages of old Ramparts magazine issues.

  There are a lot of reasons for this trend in muckraking journalism over the past few decades, away from fighting private corporate power, in favor of fighting government power — but the most obvious reason of all is the one you won’t hear about much because it’s not very glamorous or heroic: It’s better for your journalism career — and easier — to take on the government leviathan, than it is to take on private corporate power.

  The best illustration of this is what happened when Seymour Hersh once tried his hand at corporate muckraking — and failed. The reasons he failed offer important lessons for anyone interested in understanding why investigative journalism chooses to emphasize and amplify some stories over others.

  Before getting into the story, it’s important to situate Hersh’s politics back in the 1970s, when he first rose to fame exposing the horrific My Lai massacre and the massive illegal CIA domestic spying programs. Back in the mid-70s, when they were muckraking rivals, Bob Woodward described Hersh as “an old line radical . . . interested more in the abuse of really big power, concentrated power, in the military and international capitalism.” In the New York Times newsroom, editor Abe Rosenthal used to affectionately refer to Hersh as “my little commie.”

  In 1975, Hersh was at the very top of his game. As I wrote about earlier this month, Hersh’s bombshell story in the New York Times exposing the massive CIA domestic spying program MH-CHAOS — which the Times dubbed “son of Watergate” — led to an entire year of Congressional committees and White House investigations into US intelligence abuses, followed by a rash of reforms, some serious, some half-baked.

  That same year, as Hersh’s colleagues jumped on the muckraking-government bandwagon exposing intel agency abuses (after initially attacking Hersh’s CIA reporting), Hersh himself decided that it was time for a shift — to focus on fighting private corporate power and abuses. As Hersh told NY Times editor Abe Rosenthal:

  “The biggest story in the next ten years is going to be corporations.”

  After years in Washington, Hersh had moved to New York in 1975 and spent three years there because that’s where his wife was going to medical school. Moving from the capital of government power to the capital of capitalism helped focus Hersh on this other source of huge and often unaccountable power: corporations.

  In principle, the New York Times agreed with Hersh’s idea — as managing editor Seymour Topping said in 1977,

  “There is no reason why we should not scrutinize the private sector as we have government in the Watergate affair.”

  But as the Times would find out when they tried this out, it’s a lot more dangerous and tricky to put a bug up private power’s ass than government power’s.

  It started in 1976, when Hersh did a groundbreaking series of articles on perhaps the most powerful (and scary) mob attorney of the 20th century: Sidney Korshak, who served everyone from Al Capone, Sam Giancana and Jimmy Hoffa, to Hollywood-Vegas moguls Lew Wasserman and Kirk Kerkorian. Hersh’s story included allegations that Korshak had planted a camera and a call girl in Senator Estes Kefauver’s hotel room to blackmail him into halting an investigation into the mob, which Kefauver suddenly and unexpectedly did halt; and that many years later, it was thanks to a phone call from Korshak that Al Pacino was released from his MGM contract so that he could play the role of Michael Corleone in Paramount Pictures’ The Godfather.

  But Korshak was not the type of guy people — journalists — felt comfortable writing about publicly. He once told a former New York Times journalist turned budding film producer,

  “Do you know what’s the best insurance policy in the world that absolutely guarantees continued breathing? Silence.”

  The ex-journalist, Peter Bart, immediately burned his notes, and went on to a successful career in Hollywood.

  So it’s a wonder that Hersh and his collaborator on the Korshak articles, Jeff Gerth (now at ProPublica), didn’t find themselves in the obit pages shortly afterwards, their careers tragically cut short in mysterious car crashes or suicide overdoses. . . .

  Instead, Hersh smelled blood: the Korshak articles opened his eyes to a company that was, in the 1970s, the symbol of aggressive, shady corporate power: Gulf & Western. Most people have probably forgotten Gulf & Western, once considered the most aggressively acquisitive conglomerate in the US, so aggressive that even Wall Street nicknamed the company “Engulf & Devour” (immortalized as the evil corporation in Mel Brooks’ “Silent Movie”). G&W’s best known subsidiary was Paramount Pictures, which Gulf & Western bought in the mid-1960s during its massive acquisition spree, underwritten by easy money from banking giants Chase Manhattan and Manufacturers Hanover.

  Under Gulf & Western, Paramount made some classic films including Chinatown, The Godfather, Airplane!, and Three Days of the Condor. G&W also made the career of future media tycoon Barry Diller, who was named Paramount’s CEO and chairman in 1974 and served there for a decade.

  Mob attorney Korshak was so integral to Gulf & Western’s Paramount subsidiary, he was known as the film company’s “consigliere,” and rumored to be the model for Robert Duvall’s consigliere character in Paramount’s “The Godfather.” Two years after acquiring Paramount in 1968, G&W pulled off a mind-boggling transaction with notorious Sicilian mafia financier Michele Sindona, who oversaw the mafia’s global heroin money laundering operations, managed the Vatican’s global portfolio (earning the nickname “God’s banker”), and helped the CIA move money around the globe. Somehow, Gulf & Western managed to exchange reams of worthless commercial paper in a broke subsidiary, Commonwealth United, at a vastly inflated price in exchange for a 10.5% stake in Sindona’s investment empire, Societa General Immobilaire — which was followed by another shady transaction giving half of Paramount Studio’s movie lot to Sindona’s mafia bank. Sindona explained the transaction thus:

  “I always sell a company for less than it is worth to someone I want to please.”

  In the mid-1970s, Sindona’s investment empire collapsed, triggering what was then the largest US bank failure in history — eventually leading to Sindona’s arrest and extradition to Italy, where was poisoned to death with cyanide.

  G&W acquired so many companies in its mad buying spree in the late 60s and early 70s that by the time Hersh took the company on, it was the 19th largest employer in the USA. One of its subsidiaries was the Dominican Republic’s sugar monopoly, whose assets included the largest sugar refinery in the world. That made Gulf & Western the largest employer and taxpayer in the Dominican Republic, home to all sorts of American interventions over the years, and led to a scandal in which G&W and the Dominican Republic’s central bank secretly helped cook each other’s books through illicit transfers.

  G&W’s chairman — and Hersh’s nemesis — was Charles Bluhdorn, the “Mad Austrian” and one of the most infamous names in the business world in his day. In the 1990s, years after Bluhdorn’s early demise by heart attack, he was described by the New Yorker as “the most ruthless conglomerateur of them all” and “the last of the great business eccentrics.”

  But Hersh saw Bluhdorn in less flattering terms, telling his Times editors:

  “If your local butcher pulled some of the acts these corporations pulled, he’d be in jail.”

  To his editor Abe Rosenthal, Hersh insisted that Gulf & Western would be the Big Business Story of the decade: “I’ve been trying to get into big business stories since coming to NY, and this one is the ultimate,” Hersh wrote in a memo. He believed an exposé on Gulf & Western would “help explain how things work in this nation,” describing G&W as “almost an archetype of what is wrong, or suspected to be wrong, about modern big-time conglomerates,” a company that “grows bigger not by building better products, but by playing the stock market.” Indeed in many ways, the opportunities for fraud and abuse of power that a conglomerate as huge and murky as Gulf & Western were many. And some of its schemes used to hide or transfer losses and inflate earnings by moving assets between subsidiaries, and the ways in which Bluhdorn was able to milk the conglomerate as his own personal ATM machine by commingling personal loans with the conglomerate’s banks and its assets foreshadowed some of the fraudulent accounting and bonus schemes used by the big banks in our times, with catastrophic results for the global economy.

  This backdrop to Hersh’s one foray into corporate muckraking is explained in Robert Miraldi’s 2012 biography on Hersh.

  Hersh’s massive Gulf & Western exposé was published in the Times in 1977 — 13,000 words long, in three parts, revealing a private labyrinth of corporate fraud, abuse, tax avoidance schemes, and mobbed-up malfeasance. And yet — in spite of all the pre-publication hype, the story landed with a whimper. Something Hersh wasn’t at all used to. For one thing, the article’s language was unusually cautious and dull for a Hersh scoop. As New York magazine quipped,

  [T]he general reaction has been a big yawn.

   

  “I expected a lot more explosive stuff,” commented a former G. & W. executive.

  The reason was pretty straightforward: unlike Hersh’s stories going after the CIA and the military, the Times was far more afraid, and careful, of the consequences of taking on a powerful private company (Gulf & Western) and getting sued out of existence. Unlike Hersh’s muckraking stories about illegal CIA spying and military massacres, the Times saddled Hersh with a team of editors and lawyers to vet his reporting, sucking the life out of the piece until it was almost unreadable. Among other things, the Times cut out all the colorful anonymous quotes that made his muckraking bombshells on the CIA (and more recently, on the Osama Bin Laden killing) such memorable reads.

  Why? Again, because legally, you can get away with saying much more about government, spy agency, and military abuses without worrying about the legal consequences than you can about private corporations. And the flipside: private corporations have much more legal leeway to go vicious and dirty at a journalist and a publication than the government, which is constrained by the Constitution. It’s one of the benefits of contracting government work out to private contractors and agencies — they can legally get away with doing some of the dirty work that the government is barred from doing.

  Again, from New York magazine’s postgame commentary:

  We hear that the Hersh series may have been toned down considerably by some very tough letters to Times management from Martin Davis, a G. & W. executive vice-president, hinting at legal action.

   

  …The overall impact of the series on the company’s stock was indeed minimal. The G. & W. stock dropped about 1-1/4 points—less than 10 percent in a very sharply declining market.

  So not only was taking on private sector power more difficult and dangerous — it had far less impact and almost zero payoff for the ego, making it doubly unappealing for a blood-hungry muckraker like Hersh.

  Afterwards, Hersh described G&W’s abusive efforts to kill or derail his story as unlike anything he’d ever experienced.

  “I’ve never felt such personal animosity in all of my career, and that includes all of the reporting I’ve done [on the CIA and FBI].”

  G&W vice president Charles Davis was assigned the role of company front man dealing with Hersh and the Times, and he was savage. He tried to go over Hersh’s head to the Times management and editors, complaining about what he described as Hersh’s “sick, twisted, malicious, hateful tactics.” G&W taped Hersh’s phone calls to them, recording Hersh calling Davis a “son of a bitch” and playing it back to his editors. They also claimed that Hersh had threatened to have them jailed if they didn’t answer his questions. The purpose was to drive a wedge between Hersh and his editors and management. They didn’t succeed in getting the story killed; but their relentless attacks did help influence the final flaccid outcome on paper and ensure that down the line, neither Hersh nor the Times had the will to repeat the miserable experience that comes with muckraking a corporate leviathan.

  Finally, Hersh and his collaborator Jeff Gerth managed to arrange a sit-down interview with Davis and Gulf & Western lawyers. Afterwards, Hersh told his managing editor that their three hour meeting was “the most distressing interview I’ve had in more than 17 years in the business. These two men repeatedly insulted us and directly threatened us with legal action.” G&W wasn’t afraid of going low and dirty, threatening their families. At a followup meeting a week later between Hersh and G&W’s Davis, Hersh was told that company investigators had dug up “damning evidence” about Gerth’s father. (Shades here of Uber executive Emil Michael’s threats against Pando editor Sarah Lacy’s family.)

  They could get away with this, again, because they’re a private company, not the government.

  What also made the story so problematic for Hersh was the intense editing and vetting, which he didn’t have to deal with when writing on the CIA or military. From Miraldi’s biography:

  [T]he accusations that Hersh made, based on the government probes that were under way, were dense, complicated, tedious, and difficult to follow. Probably the very tight editing by a wary band of editors and lawyers neutered some of the better material. Lee [the Times editor] made the reporters kill anonymous quotes, which Hersh always used to brighten up his stories (and irk Rosenthal).

  A Washington Post profile on Hersh in 2001 also describes the problems Hersh faced taking on private power versus government power, saying that the Gulf & Western series,

  caused them nothing but grief in the editing process. Part of the problem was that it was about the abuse of private power, a much dicier subject for many editors even than the CIA. “He had a story that were it about a public institution would have been in the paper the first time he wrote it, the first way he wrote it,” Kovach [Hersh’s former New York Times editor] says.

  A few weeks after the Gulf & Western series was published, Newsweek published a more serious analysis at the difficulties Hersh and the Times had in doing the story, and how the experience had already turned off both Hersh and the New York Times from repeating anything like it:

  The Hersh project provided a case-book study of the problems in investigating corporate affairs. First, the cost is high because of the time and expertise required; Hersh, 40, worked six months on the series with free-lance investigator Jeff Gerth, 32, a former business student. It may also be harder to find leaks in big corporations than in government, and Hersh fell back frequently on government sources.

   

  Actually writing the story can be as much of a hassle as getting it. Many private citizens and businesses are in a stronger position than public officials to sue for damages and apply pressure. A Gulf & Western director repeatedly protested to Times executives about Hersh’s investigation while it was going on (his requests for a meeting were turned down), and editing and legal clearance took more than a month. The Times felt obliged to add so much background and legal qualification as to render some readers numb; many newspapers that take the Times news service found the stories too long or dull to run.

   

  Even the appearance of impropriety can prompt a public official to resign, but businessman have rarely been held to that standard of public trust. And stories like Hersh’s may not involve such dramatic wrongdoings as payoffs to politicians.

  And Newsweek interviewed Hersh himself, getting his own despondent thoughts on corporate muckraking in the modern era:

  “It’s a gray area – what’s right, what’s wrong, what’s established practice,” Hersh himself conceded. “I don’t know if it was worth the effort, but these are issues people should be thinking about.”

   

  …As for the Times, it has started a weekly “enterprise meeting” to coordinate and possibly cut off future investigations, and thus avoid – in Topping’s words – “frittering away our resources.”

  The closest Hersh ever came to anything like corporate muckraking again was his 2001 New Yorker story on Mobil Oil’s role in the corrupt world of oil acquisitions in Kazakhstan and the Caspian Sea basin. It was a story about oil geopolitics and third world corruption, not about private corporate power; and yet even even this story, “owing to the complexity of the material, lacked the color and narrative momentum” (quoting the Columbia Journalism Review) of Hersh’s blockbuster a year earlier on Gen. Barry McCaffrey’s massacre of retreating Iraqi troops in the first Gulf War.

  Finally, there’s this depressing update from Hersh’s biographer, from an interview he gave last year, on the question of whether reporting on private sector power today is harder or easier than when Hersh tried and failed:

  Q: In discussing Hersh’s exposé of Gulf & Western in the 1970s, you talk about the complexity of reporting on business, noting that “disagreement begins…when it comes to [journalism’s] role vis-à-vis the private sector.” In today’s era of government bailouts of private enterprise, Occupy Wall Street, and reduced corporate regulation, do you think that views on business journalism have changed? If Hersh’s Gulf & Western piece were to be published today, do you think modern audiences would be more sympathetic and receptive than his readers were in the 1970s?

   

  A: I suspect the opposite — that the early 1970s was a time when people were more inclined to distrust business. Corporate might is more entrenched today than ever. I don’t know if a publication today would allow a reporter to take apart a modern corporation the way the Times allowed Hersh and Jeff Gerth to go after G&W. It was really quite remarkable. Hersh chose the topic and then went after the company like a prosecutor seeking indictments. He was a brazen foe of GW. No one went to jail after the stories, but the company quickly lost its way and was gobbled up.

  After that exhausting and brutalizing experience taking on private corporate power, Hersh threw in the towel on the private sector, and spent the next several years working on a scathing book taking down the most powerful “government slob” of the 1970s: Henry Kissinger. And Hersh has been making life hard on “government slobs” ever since — much to the slobs’ displeasure, and much to the relief of America’s all-powerful corporate tycoons.

  [Sources include: Robert Miraldi’s biography “Seymour Hersh: Scoop Artist”; Kathryn Olmsted’s “Challenging the Secret Government”; “Taking on Big Business,” Newsweek, Aug 8, 1977; “The Last Business Eccentric,” New Yorker, Dec 16, 1996.]

  

  

  
  
  

  

• What Do Falling Corporate Profits Mean With Stocks Near Their Highs?

  Via Dana Lyons' Tumblr,

  If you’ve followed our commentary for awhile, you may have noticed that we don’t cover fundamental or economic data too often. That is for a good reason: we don’t use it, at all. Occasionally, however, a data point will cross the radar that piques our interest for whatever reason. So it is with the current state of U.S. Corporate Profits. The U.S. Bureau of Economic Analysis released the latest data today revealing that Corporate Profits (after Tax with Inventory Valuation Adjustment and Capital Consumption Adjustment) were down 9% for the 1st quarter and are now down 16% from their peak in the 3rd quarter of 2013.

  Perhaps we don’t run in the right circles but we haven’t heard much regarding the significance of this trend on the stock market, which continues to trade near its all-time highs. Perhaps that’s a good thing considering we’ve found scant profitable uses for fundamental data in our investment approach (which is why we don’t use it). So we decided to take a look at it ourselves to see what effect similar historical precedents, assuming there were any, may have had on the stock market. This is what we looked for:

  1. Quarters when Corporate Profits were down at least 12% from their 2-year high, and
  2. the S&P 500 made a 2-year high at some point within the same quarter.

  As it turns out, there have been 21 quarters meeting that criteria since 1960.

  

   

  Many of the occurrences came in clusters in 1980, 1986-1987 and 1998-2000. There were also single occurrences in 1961, 2007, 2011 and the 1st quarter of last year. Without going into great depth of analysis, one can tell by the inauspicious dates that these circumstances have not worked out well in the past. The stock market may not have rolled over immediately in every occasion (e.g., 1986, 1998, 2014), but it usually ended up paying the piper.

  Specifically, the average drawdown over the 2 years following these quarters was -18.6%. This compares with an average 2-year drawdown of -7.3% following all quarters since 1960.

  We don’t follow economic and fundamental data too often since we’ve never found it very helpful in our investment decision-making process. At times, however, a certain data series will garner our attention. Often times, as is the case with Corporate Profits presently, it grabs our attention because it is receiving very little attention elsewhere. From just a cursory look at the current trend of falling Corporate Profits, however, it would appear to be a potential negative influence on the stock market that is trading near its all-time highs – if not immediately, then eventually.

  

  

  
  
  

  

• Creator Of Infamous "Hope" Poster Lashes Out At Obama, Calls Americans "Ignorant And Lazy"

  Before the people realized that behind the “most transparent administration ever” there was nothing but double seasonal adjustments, drones and an impenetrable layer of propaganda and lies, there was…

  

  And change, of course.

  Sadly, at some point over the past six years the hope died, first for the people (if not the bankers), and then for the creator of the infamous “Hope” poster himself, Shepard Fairey who told Esquire magazine in an interview that Obama has not come even close to embodying the break with the past administration that Fairey and so many voters hoped he would.

  “I mean, drones and domestic spying are the last things I would have thought [he’d support].”

  But support them he did while crushing the much promised transparency and freedom for the masses, for one simple reason: money, the same reason why Fairey is almost willing to give Obama a pass, again. Money, and of course, power and control of the masses by the select few.

  Still, the confused artist still isn’t fully ready to throw away all his idealism just yet:

  I’ve met Obama a few times, and I think Obama’s a quality human being, but I think that he finds himself in a position where your actions are largely dictated by things out of your control.

  A “quality human being” he may be, but when it comes to personal motives, money always wins. Just ask the Clinton Foundation. Even Fairey, who says he “agrees with Hilary on most issues” finally grasps that now:

  … campaign finance structure makes me very angry, because it means that politicians are going to have to raise a huge amount of money, which narrows the field dramatically. There are only certain kinds of people that either have the preexisting resources or the willingness to work in way that will get them a lot of money from donors. That narrows the field right there. Then there’s the idea that the people who you are going to have to listen to are the people that are going to give you the biggest donation. That means lobbyists, special interest groups, and corporations are going to have politicians eager, disproportionally.

  He adds: “I’m not giving him a pass for not being more courageous, but I do think the entire system needs an overhaul and taking money out of politics would be a really good first step.“

  A systemic overhaul by whom? The same politicians who are nothing but “whores” to corporate lobby interests?

  Or maybe the infamous artist should just blame the American public for agreeing to be swindled and manipulated by one liar after another, all of whom promise change yet end up merely perpetuating the broken, corrupt system they inherit from their predecessor and make it even worse.

  Actually, that’s precisely what Fairey did. This is what he told Esquire:

  We also need a public that isn’t so uneducated and complacent. I hate to say Americans are ignorant and lazy, but a lot of them are ignorant and lazy.… When you live in a place that has a lot of good things that make life easier, it’s easier to take them for granted. But what frustrates me to no end are people who want to blame Obama or blame anything that is something that if they were actually doing anything as simple as voting, it might not be as bad as it is. There’s a lot of finger pointing and very little action and very little research into the dynamics that created the situation that they’re unhappy about.

  Actually, about that he’s quite accurate

  However his message will be diluted and ignored, and the media will do is what it always does when facing a threat to the status quo: crush the messenger.

  And conveniently, Fairey made it very easy for them: after all, and quite amusingly, his Hope poster itself was a fraud.

  The artist was recently sentenced to two years of probation and fined $250,000 in 2012 for destroying documents and concealing others in an attempt to hide that he had used an Associated Press photograph as the basis for his “Hope” poster. And even more ironic, as Gawker wrote in 2009, Fairey himself was  “lawsuit happy to artists who ape or parody his stuff.”

  Unfortunately, in retrospect Fairey’s story is one of “tidiest little package” summaries of the banana republic status the US, and its leadership, has devolved to.

  

  

  
  
  

  

• Why the Fed will change its exit strategy…again

  This blog entry was originally posted at Bawerk.net you may also follow us on Twitter

  In a press release
  dated September 17, 2014 the Federal Reserve updated their “policy normalization
  principles”  that was laid out in 2011 when our
  monetary masters first flirted with the idea of “green shoots”
  turning into “escape velocity.” As mission got closer to completion
  eternal bliss for all subjects lucky enough to be under the reign of
  enlightened central planners was clearly within reach. Without the steady
  guidance and micromanagement of the Politburo we would all be jumping off the
  nearest high-rise as approximately 37 per cent of the US population apparently
  did in the 1930s.

  Now,
  it did not quite work out that way and the normalization plan has been just as
  dormant as the economic promised land. Maybe, just maybe hope is not a
  viable long term plan after all. If household spending behaviour is really caused by perceptions about the future,
  neatly discounted into a surging Russell 2000, then, and only then, would our
  Ivory Tower economists be right. However, if that was the case there would be
  no need for scarcity in this world and we could essentially return to the
  Garden of Eden and live happily ever after.

  The
  real world is unfortunately more complex and as shown by Ludwig von Mises, in
  his article of 1920 called “Economic Calculation in the Socialist
  Commonwealth,” there cannot be a pricing mechanism in a centralised
  society without a free market and if there is no mechanism for honest
  pricing there cannot be rational economic calculation.

  In
  this light, isn’t the whole purpose of Federal Reserve, and their brethren’s,
  market interventions attempts, so far successfully, to impose upon free society
  a pricing structure that differs from the free market outcome?

  Prices
  are like traffic signals, guiding resource flows, but if for some reason
  resources starts to flow in a direction that does not fit with some grand
  master plan our self-proclaimed money masters have laid out, they find it
  fitting to change its direction at their own discretion.

  Who,
  in their right mind, would suggest  that in a free market the most
  insolvent government on the planet, Japan, can fund itself for mere basis
  points when they have an explicit strategy to debase their currency by two per
  cent annually?

  Have
  we not taken a giant step towards the society Mises suggest cannot perform
  rational economic calculation? And if we have, does this not mean vast amounts
  of resources are routinely being misallocated?

  If
  resource flows have become distorted from all the monetary shenanigans
  witnessed over the last years it is a safe bet to assume it will resume its
  original, or intended rather, flow as central bank excesses are reversed.

  And
  this brings us back to the press release which clearly states that the “…committee expects to cease
  or commence phasing out reinvestments” of securities
  holdings currently on the Federal Reserve balance sheet after it raises
  interest rates.

   

  Now,
  we assume that the first 25 basis points to the Federal Fund Target Rate will
  come in September, the Fed should stop their reinvestments shortly after. By
  looking through the Federal Reserve balance sheet by CUSIP we can calculate the
  current maturity profile of both TSYs, TIPS, Agencies and MBSs which is
  provided in the chart below.

  

  While there is no
  problem for 2015, by 2018 over 30 per cent of TSYs will have disappeared from
  the Federal Reserve’s balance sheet assuming no reinvestments. Since the US
  government is running a deficit, this means the reduction in Federal Reserve
  TSY holdings can be considered net supply of TSYs because the US Treasury
  will have to issue bonds to repay the Fed, and these bonds must be absorbed by
  the private sector.

  With
  good collateral being in short supply these days added bonds will probably get
  bid within a reasonable, but presumably lower, price than today, but
  funding for extra TSY flow will come by through reallocation of existing
  private portfolios.

  From
  the chart we see there will be a spike in H1 2016 and then the run-rate drops
  to around USD50bn per quarter until another spike in 2018.

  With
  expected return on risk being what it is, one should not be surprised to see
  increasing market volatility as the Fed withdraws and the private sector tries
  to take up the slack.

   

  Unless
  the economy tanks completely (more on this in a upcoming post) and added QE is
  felt necessary the Fed will be forced to continue to roll-over TSYs in
  perpetuity with the odd attempt to scale down the reinvestments to, say, 90 per
  cent of par, then 80 and so on.

  

  
  
  

  

• Are All Central Bankers Idiots?

  Submitted by Bill Bonner via Bonner & Partners,

  Yes, there’s no point in hiding it. We would like to see a depression. Short, swift, and decisive – a quick and sharp end to the biggest credit expansion in all of history.

  As secretary of the Treasury Andrew Mellon said after the 1929 stock market crash:

  Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.

  Credit Cannot Increase Forever

  “It’s unbelievable,” said colleague Merryn Somerset Webb. Merryn is the editor of MoneyWeek magazine in London. “London property prices just keep going up and up. It’s so expensive our writers can’t afford to live here anymore. I’m thinking of moving the business to Edinburgh.”

  You can’t build a solid economy on the jelly of unaffordable housing, unpayable debts, and unsustainable asset prices. But that’s what we’ve got. The only way to get down to something more reliable… more real… and healthier… is to wash away the financial glop and goo that has accumulated during the last 30 years.

  One way or another, the credit expansion that began after War World II must come to an end. About that we have no doubt. Contrary to the evidence of the last half-century, credit cannot increase faster than income forever. It is mathematically, economically, and financially impossible.

  But when will it stop? “The trouble with you guys,” says a loyal reader (or words to this effect), “is that you are generally right… but you are always early.” Early? Certainly. In the case of the credit bubble, we were nearly 40 years ahead of the curve. We saw the handwriting on the wall back in the 1970s! We thought it said, “The End Is Nigh for the Paper Money System.” After all, no paper money ever lasted for very long.

  Not All Central Bankers Are Idiots…

  But we misread the graffiti… We don’t know where “nigh” is, but we’re pretty sure the end wasn’t close to it. Because, here we are four decades later, and the paper money system is still going strong.

  And guess what? We are still sure that it is headed for a debacle.

  But when? “It could take another two or three decades.” That was the answer we got from a top central banker. We had the rare treat of dining with one last night. We’ll keep his identity to ourselves, to protect his job and the reputation of the central bank. But he was a breath of fresh air. And a relief. Now, we can say with confidence: Not all central bankers are idiots.

  Here’s what he told us:

  It is doomed, of course. But not necessarily soon. As long as the major tendency of the economy is toward deflation, central banks can print money without causing consumer price inflation. They can buy bonds and keep buying them.

   

  When they buy bonds, they tend to lower interest rates. They also finance government deficits. And, from Japan’s example, it looks as though they can do it almost indefinitely.

  That’s right: They can keep this gig going… until they can’t. When it ends is anybody’s guess. It is in the future, where no man goeth with GPS or map in hand…

  Who Wants a Depression?

  And we goeth there only in hopes of discovering a depression. Everyone else hopes to discover many more years of asset price inflation, boom, bubble, and central bank management. This distinction is an important one. At least WE think so.

  Everyone in government, industry, commerce, and academia has an unspoken prejudice for the bubble. Wall Street wants to sell you stocks and bonds. Industry and commerce have products to unload… not to mention mergers and acquisitions to finance. And governments all over the planet are running deficits and counting on low interest rates to pay for their zombie wars and crony programs.

  Who speaks for the future? Who stands up for a healthy, sane, and real economy? Who champions the cause of the little guy… the small investor… the small businessman… the ordinary working stiff?

  Who wants a depression?

  

  

  
  
  

  

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