Sunday, January 31, 2010

Back Soon ...

I am almost done with my marathon work project. I'll be back to posting later this week.

Thank you for your patience ...

Tuesday, January 26, 2010

Wall Street Journal: Ivins Not the Anthrax Killer

I noted in August 2008:

According to the FBI, Ivins made the killer anthrax in his lab at Fort Detrick all by himself in something like 12 hours (pages 8-9).

Is that plausible?

Well, one of the handful of people who actually can produce the kind of high-tech weaponized anthrax used in the attacks said:

"In my opinion, there are maybe four or five people in the whole country who might be able to make this stuff, and I'm one of them," said Richard O. Spertzel, chief biological inspector for the U.N. Special Commission from 1994 to 1998. "And even with a good lab and staff to help run it, it might take me a year to come up with a product as good."
In addition, scientists at Ft. Detrick say that no one there had the equipment or knowledge to make weaponized anthrax of the type used in the letters (more on this in a later esasy).

If it would take one of the handful of people who have the know-how and a good lab with staff a year, and if no one at Ivins’ lab knew how to do it, how could Ivins have made it all by himself in 12 hours without the proper equipment?
I wrote a couple of days later:

The chief biological inspector for the U.N. Special Commission from 1994 to 1998 - who describes himself as one of the "four or five people in the whole country" who could make the type of anthrax used in the 2001 attacks - noted in testimony to Congress:

"I have maintained from the first descriptions of the material contained in the Daschle letter that the quality appeared to be such that it could be produced only by some group that was involved with a current or former state program in recent years. The level of knowledge, expertise, and experience required and the types of special equipment required to make such quality product takes time and experimentation to develop. Further, the nature of the finished dried product is such that safety equipment and facilities must be used to protect the individuals involved and to shield their clandestine activity from discovery."
Similarly, a manufacturer of specialized anthrax equipment said:
"You would need [a] chemist who is familiar with colloidal [fumed] silica, and a material science person to put it all together, and then some mechanical engineers to make this work . . . probably some containment people, if you don't want to kill anybody. You need half a dozen, I think, really smart people."
The U.N. biologist mentioned above also said that the equipment to make such high-tech anthrax does not exist at Fort Detrick, where Ivins worked. People who work at Fort Detrick have confirmed this. In other words, a lone scientist couldn't have done it without the support of a whole government laboratory. And Fort Detrick was not one such potential laboratory.
The FBI now indirectly admits that Ivins was not the anthrax killer ... at least not alone.

Specifically, as Edward Epstein writes in a must-read article in Wall Street Journal's Opinion section:

Silicon was used in the 1960s to weaponize anthrax. Through an elaborate process, anthrax spores were coated with the substance to prevent them from clinging together so as to create a lethal aerosol. But since weaponization was banned by international treaties, research anthrax no longer contains silicon, and the flask at Fort Detrick contained none.


Yet the anthrax grown from it had silicon, according to the U.S. Armed Forces Institute of Pathology. This silicon explained why, when the letters to Sens. Leahy and Daschle were opened, the anthrax vaporized into an aerosol. If so, then somehow silicon was added to the anthrax. But Ivins, no matter how weird he may have been, had neither the set of skills nor the means to attach silicon to anthrax spores.

At a minimum, such a process would require highly specialized equipment that did not exist in Ivins's lab—or, for that matter, anywhere at the Fort Detrick facility. As Richard Spertzel, a former biodefense scientist who worked with Ivins, explained in a private briefing on Jan. 7, 2009, the lab didn't even deal with anthrax in powdered form, adding, "I don't think there's anyone there who would have the foggiest idea how to do it." So while Ivins's death provided a convenient fall guy, the silicon content still needed to be explained.

The FBI's answer was that the anthrax contained only traces of silicon, and those, it theorized, could have been accidently absorbed by the spores from the water and nutrient in which they were grown. No such nutrients were ever found in Ivins's lab, nor, for that matter, did anyone ever see Ivins attempt to produce any unauthorized anthrax (a process which would have involved him using scores of flasks.) But since no one knew what nutrients had been used to grow the attack anthrax, it was at least possible that they had traces of silicon in them that accidently contaminated the anthrax.

Natural contamination was an elegant theory that ran into problems after Congressman Jerry Nadler pressed FBI Director Robert Mueller in September 2008 to provide the House Judiciary Committee with a missing piece of data: the precise percentage of silicon contained in the anthrax used in the attacks.

The answer came seven months later on April 17, 2009. According to the FBI lab, 1.4% of the powder in the Leahy letter was silicon. "This is a shockingly high proportion," explained Stuart Jacobson, an expert in small particle chemistry. "It is a number one would expect from the deliberate weaponization of anthrax, but not from any conceivable accidental contamination."

Nevertheless, in an attempt to back up its theory, the FBI contracted scientists at the Lawrence Livermore National Labs in California to conduct experiments in which anthrax is accidently absorbed from a media heavily laced with silicon. When the results were revealed to the National Academy Of Science in September 2009, they effectively blew the FBI's theory out of the water.

The Livermore scientists had tried 56 times to replicate the high silicon content without any success. Even though they added increasingly high amounts of silicon to the media, they never even came close to the 1.4% in the attack anthrax. Most results were an order of magnitude lower, with some as low as .001%.

What these tests inadvertently demonstrated is that the anthrax spores could not have been accidently contaminated by the nutrients in the media. "If there is that much silicon, it had to have been added," Jeffrey Adamovicz, who supervised Ivins's work at Fort Detrick, wrote to me last month. He added that the silicon in the attack anthrax could have been added via a large fermentor—which Battelle and other labs use" but "we did not use a fermentor to grow anthrax at USAMRIID . . . [and] We did not have the capability to add silicon compounds to anthrax spores"...

When I asked a FBI spokesman this month about the Livermore findings, he said the FBI was not commenting on any specifics of the case, other than those discussed in the 2008 briefing (which was about a year before Livermore disclosed its results). He stated: "The Justice Department and the FBI continue working to conclude the investigation into the 2001 anthrax attacks. We anticipate closing the case in the near future."

So, even though the public may be under the impression that the anthrax case had been closed in 2008, the FBI investigation is still open—and, unless it can refute the Livermore findings on the silicon, it is back to square one.

The Wall Street Journal also points out:
No autopsy was performed, and there was no suicide note.
Given that the scientist who blew the whistle on the false claims about Saddam Hussein's WMDs is also officially claimed to have committed suicide, but vital information about his cause of death is being sealed for 70 years, isn't there something just a tad fishy going on here?

What Should We Make of Obama's "Spending Freeze"

The big news today is Obama's proposed "spending freeze".

Fiscal liberals say this cuts spending at the exact time that we most need to increase it. See this and this.

Fiscal conservatives say this doesn't go nearly far enough. See this, this and this.

But I think there's a bigger issue that deserves some inquiry: is America being turned into a third world country?

As I wrote last June:

When the International Monetary Fund or World Bank offer to lend money to a struggling third-world country (or "emerging market"), they demand "austerity measures".

As Wikipedia describes it:

In economics, austerity is when a national government reduces its spending in order to pay back creditors. Austerity is usually required when a government's fiscal deficit spending is felt to be unsustainable.

Development projects, welfare programs and other social spending are common areas of spending for cuts. In many countries, austerity measures have been associated with short-term standard of living declines until economic conditions improved once fiscal balance was achieved (such as in the United Kingdom under Margaret Thatcher, Canada under Jean Chrétien, and Spain under González).

Private banks, or institutions like the International Monetary Fund (IMF), may require that a country pursues an 'austerity policy' if it wants to re-finance loans that are about to come due. The government may be asked to stop issuing subsidies or to otherwise reduce public spending. When the IMF requires such a policy, the terms are known as 'IMF conditionalities'.

Wikipedia goes on to point out:

Austerity programs are frequently controversial, as they impact the poorest segments of the population and often lead to a wider separation between the rich and poor. In many situations, austerity programs are imposed on countries that were previously under dictatorial regimes, leading to criticism that populations are forced to repay the debts of their oppressors.

What Does This Have to Do With the First World?

Since the IMF and World Bank lend to third world countries, you may reasonably assume that this has nothing to do with "first world" countries like the US and UK.

But England's economy is in dire straight, and rumors have abounded that the UK might have to rely on a loan from the IMF.

And as former U.S. Comptroller General David Walker said :

People seem to think the [American] government has money. The government doesn't have any money.
Indeed, the IMF has already performed a complete audit of the whole US financial system, something which they have only previously done to broke third world nations.

Al Martin - former contributor to the Presidential Council of Economic Advisors and retired naval intelligence officer - observed in an April 2005 newsletter that the ratio of total U.S. debt to gross domestic product (GDP) rose from 78 percent in 2000 to 308 percent in April 2005. The International Monetary Fund considers a nation-state with a total debt-to-GDP ratio of 200 percent or more to be a "de-constructed Third World nation-state."

Martin explained:
What "de-constructed" actually means is that a political regime in that country, or series of political regimes, have, through a long period of fraud, abuse, graft, corruption and mismanagement, effectively collapsed the economy of that country.
What Does It Mean?

Some have asked questions like, "Is the goal to force the US into the same kinds of IMF austerity programs that have caused riots in so many other nations?" Some predicted years ago that the "international bankers" would bring down the American economy.

I used to think, frankly, that such kinds of talk were crazy-talk. I'm not so sure anymore.

Catherine Austin Fitts - former managing director of a Wall Street investment bank and Assistant Secretary of the Department of Housing and Urban Development (HUD) under President George Bush Sr. - calls what is happening to the economy "a criminal leveraged buyout of America," something she defines as "buying a country for cheap with its own money and then jacking up the rents and fees to steal the rest." She also calls it the "American Tapeworm" model, explaining:
[T]he American Tapeworm model is to simply finance the federal deficit through warfare, currency exports, Treasury and federal credit borrowing and cutbacks in domestic "discretionary" spending .... This will then place local municipalities and local leadership in a highly vulnerable position - one that will allow them to be persuaded with bogus but high-minded sounding arguments to further cut resources. Then, to "preserve bond ratings and the rights of creditors," our leaders can he persuaded to sell our water, natural resources and infrastructure assets at significant discounts of their true value to global investors .... This will be described as a plan to "save America" by recapitalizing it on a sound financial footing. In fact, this process will simply shift more capital continuously from America to other continents and from the lower and middle classes to elites.
Writer Mike Whitney wrote in CounterPunch in April 2005:
[T]he towering [U.S.] national debt coupled with the staggering trade deficits have put the nation on a precipice and a seismic shift in the fortunes of middle-class Americans is looking more likely all the time... The country has been intentionally plundered and will eventually wind up in the hands of its creditors This same Ponzi scheme has been carried out repeatedly by the IMF and World Bank throughout the world Bankruptcy is a fairly straightforward way of delivering valuable public assets and resources to collaborative industries, and of annihilating national sovereignty. After a nation is successfully driven to destitution, public policy decisions are made by creditors and not by representatives of the people .... The catastrophe that middle class Americans face is what these elites breezily refer to as "shock therapy"; a sudden jolt, followed by fundamental changes to the system. In the near future we can expect tax reform, fiscal discipline, deregulation, free capital flows, lowered tariffs, reduced public services, and privatization.
And given that experts on third world banana republics from the IMF and the Federal Reserve have said the U.S. has become a third world banana republic (and see this and this), maybe the process of turning first world into the third world is already complete.

Monday, January 25, 2010

Is the U.S. Looking for More Wars?

As I have previously argued, the government might start additional wars to distract people from the economy. See this and this.

Since then, the U.S. has started a war in Pakistan and one in Yemen (Yemen has some oil; Haiti allegedly has oil also, and some argue that explains the military nature of America's response).

Now, Congressman Ron Paul is saying that the "CIA is looking for more wars".

That's just terrific ...

Why is National Security Being Invoked to Keep Basic Financial Information Secret?

Reuters notes:

U.S. securities regulators originally treated the New York Federal Reserve's bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.

The national security claim may seem outlandish, but it is nothing new.

As Business Week wrote on May 23, 2006:

President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations.
In other words, national security has been discussed for years as a basis of keeping normal accounting and securities-related disclosures secret.


Thursday, January 21, 2010

I'll Believe It When I See It (In the Fine Print)

Obama has again pulled Volcker into his photo ops, and is talking tough about putting limits on the size of banks, restoring the "spirit" of Glass-Steagall, and curtailing the giant banks' prop trading operations.

I'll believe it when I see it (in the fine print).

As Yves Smith reminds us, Obama and Congress talked tough about reining in derivatives, but did nothing. See this.

They talked tough about reforming health care to make it better to the American people, but ended up crafting a bill which is a giveaway to the giant insurance companies.

I'll only get interested if I see a bill that actually does something ... and whose fine print doesn't create more loopholes than it plugs and more gifts to the financial industry than it removes.

The Second Wave of Mortgage Defaults

Credit: T2 Partners, Agora Financial

Supreme Court Ruling Guts Campaign Finance Law, "Threatens to Undermine the Integrity of Elected Institutions Around the Nation"

The long-awaited Supreme Court decision striking down most campaign finance laws - Citizens United v. Federal Election Commission - happened today.

One of the dissenting Supreme Court Justices, John Paul Stevens, wrote:

The court's ruling threatens to undermine the integrity of elected institutions around the nation.
Stevens also said that the court reached to expand beyond the scope of the case. In other words, the court acted for political reasons, not judicial reasons:
Essentially, five justices were unhappy with the limited nature of the case before us, so they changed the case to give themselves an opportunity to change the law.
This is a gigantic change, and you will see mammoth corporations - including the giant banks who have received trillions in taxpayer-funded bailouts, guarantees and other perks - inundating the airwaves with campaign blitzes to make sure that "loyal" politicians are elected.

Just watch: money which was taken from our pockets to "bail out" the too big to fails will be used to make sure that tame corporate mouthpieces are put into office.

Note: The decision also allows unions to go wild with buying campaign ads. But given that the too big to fails have unlimited access to the spigot of funds at the public trough, they will be able to outspend unions by many orders of magnitude.

Yes, I know that
the giant banks have already bought and paid for Congress and the White House. See this, this and this. The Citizens United decision will just make it cheaper and easier to buy elections.

For other horrible recent Supreme Court decisions, see this and this.

Tuesday, January 19, 2010

U.S. Military Officially Endorses Crusade

I've written numerous posts showing that the war on terror is really a religious crusade, at least for troops on the ground (I've pointed out that the officials ordering the troops into battle may not be religious at all, but may be faking religious sentiment to rally the troops).

Now, an official Pentagon spokesman is making it clear that the U.S. military endorses the crusade. As Raw Story notes:

A Pentagon spokesman says there is nothing wrong or illegal with the armed forces using rifle sights inscribed with references to biblical passages.

Air Force Maj. John Redfield, a spokesman for US Central Command, said the sights from Michigan-based Trijicon -- which are now the target of controversy following news reports earlier this week -- "don't violate the [military] ban on proselytizing because there's no effort to distribute the equipment beyond the US troops who use them," the Associated Press reports.

"This situation is not unlike the situation with US currency," Maj. Redfield said. "Are we going to stop using money because the bills have 'In God We Trust' on them? As long as the sights meet the combat needs of troops, they'll continue to be used."

Meanwhile, a lawyer and former training officer for the US Army Reserves says that any attempt by the US government to cancel its contracts with an arms supplier that enscribes biblical references on its rifle sights would be "discrimination."

Play any word games you like ... the truth is that the military has just officially acknowledged that it endorses a crusade.

Nice work creating new terrorists, you morons.

Monday, January 18, 2010

The Crusade Continues in Iraq

ABC News is reporting that U.S. military weapons are inscribed with secret 'Jesus' Bible codes:

Coded references to New Testament Bible passages about Jesus Christ are inscribed on high-powered rifle sights provided to the United States military by a Michigan company, an ABC News investigation has found.

The sights are used by U.S. troops in Iraq and Afghanistan and in the training of Iraqi and Afghan soldiers. The maker of the sights, Trijicon, has a $660 million multi-year contract to provide up to 800,000 sights to the Marine Corps, and additional contracts to provide sights to the U.S. Army ...

One of the citations on the gun sights, 2COR4:6, is an apparent reference to Second Corinthians 4:6 of the New Testament, which reads: "For God, who commanded the light to shine out of darkness, hath shined in our hearts, to give the light of the knowledge of the glory of God in the face of Jesus Christ."

Other references include citations from the books of Revelation, Matthew and John dealing with Jesus as "the light of the world." John 8:12, referred to on the gun sights as JN8:12, reads, "Whoever follows me will never walk in darkness, but will have the light of life."

Trijicon confirmed to that it adds the biblical codes to the sights sold to the U.S. military. Tom Munson, director of sales and marketing for Trijicon, which is based in Wixom, Michigan, said the inscriptions "have always been there" and said there was nothing wrong or illegal with adding them. Munson said the issue was being raised by a group that is "not Christian."The company's vision is described on its Web site: "Guided by our values, we endeavor to have our products used wherever precision aiming solutions are required to protect individual freedom." ...

A photo on a Department of Defense Web site shows Iraqi soldiers being trained by U.S. troops with a rifle equipped with the bible-coded sights.

"It's wrong, it violates the Constitution, it violates a number of federal laws," said Michael "Mikey" Weinstein of the Military Religious Freedom Foundation, an advocacy group that seeks to preserve the separation of church and state in the military.

"It allows the Mujahedeen, the Taliban, al Qaeda and the insurrectionists and jihadists to claim they're being shot by Jesus rifles," he said.

Weinstein, an attorney and former Air Force officer, said many members of his group who currently serve in the military have complained about the markings on the sights. He also claims they've told him that commanders have referred to weapons with the sights as "spiritually transformed firearm[s] of Jesus Christ."

He said coded biblical inscriptions play into the hands of "those who are calling this a Crusade."

This is an isolated incident, right?

Unfortunately not.

As I wrote on May 4th:

Conservative Christians were the biggest backers of the Iraq war ...

One of the top Pentagon officials involved in the Iraq war - General William Boykin - literally:

Sees the "war on terror" as a religious war between Judeo-Christian civilization and Satan, with Islam of course cast in the latter role.

Jeremy Scahill describes Boykin as:

A Deputy Undersecretary of Defense for Intelligence under Bush. Boykin was part of Donald Rumsfeld's inner circle at the Pentagon where he was placed in charge of hunting "high-value targets." Boykin was one of the key U.S. officials in establishing what critics alleged was death-squad-type activity in Iraq.

Boykin's crusade is also important because one of his assigned jobs was:

Speeding up the flow of intelligence on terrorist leaders to combat teams in the field so that they can attack top-ranking terrorist leaders. It can easily be speculated that it is this urgency to obtain intelligence, and an uncompromising religious outlook backed by a [crusader] mentality, that has led to the lower echelons in the US military to adopt Saddam Hussein-like brutalities.
Moreover, the U.S. military has just been busted trying to convert Afghanis to Christianity (the same thing happened in Iraq).

As Scahill notes:
What's more, the center of this evangelical operation is at the huge US base at Bagram, one of the main sites used by the US military to torture and indefinitely detain prisoners.
The bottom line is that - while torture was ordered by the highest level Bush administration officials in order to create a false link between 9/11 and Iraq - it seems like many of those who enthusiastically rallied around torture looked at it, literally, as a religious crusade.

As I wrote on May 25th:

According to French President Chirac, Bush told him that the Iraq war was needed to bring on the apocalypse:

In Genesis and Ezekiel Gog and Magog are forces of the Apocalypse who are prophesied to come out of the north and destroy Israel unless stopped. The Book of Revelation took up the Old Testament prophesy:

"And when the thousand years are expired, Satan shall be loosed out of his prison, And shall go out to deceive the nations which are in the four quarters of the earth, Gog and Magog, to gather them together to battle and fire came down from God out of heaven, and devoured them."

Bush believed the time had now come for that battle, telling Chirac:

"This confrontation is willed by God, who wants to use this conflict to erase his people's enemies before a New Age begins"...

There can be little doubt now that President Bush's reason for launching the war in Iraq was, for him, fundamentally religious. He was driven by his belief that the attack on Saddam's Iraq was the fulfilment of a Biblical prophesy in which he had been chosen to serve as the instrument of the Lord.

And British Prime Minister Tony Blair long-time mentor, advisor and confidante said:

"Tony's Christian faith is part of him, down to his cotton socks. He believed strongly at the time, that intervention in Kosovo, Sierra Leone – Iraq too – was all part of the Christian battle; good should triumph over evil, making lives better."

Mr Burton, who was often described as Mr Blair's mentor, says that his religion gave him a "total belief in what's right and what's wrong", leading him to see the so-called War on Terror as "a moral cause"...

Anti-war campaigners criticised remarks Mr Blair made in 2006, suggesting that the decision to go to war in Iraq would ultimately be judged by God.

Given that the Iraq war really was a crusade, the fact that the Pentagon is now saying that it may have to leave troops in Iraq for another decade shows that the crusade is still ongoing under Obama.
Indeed, churchgoers are more likely to back torture of suspected terrorists than atheists (and see this), and torture is apparently still continuing under the Obama administration.

Heck of a job winning hearts and minds, guys.

Sunday, January 17, 2010

How to Help Haiti

I just donated to the International Medical Corps.

IMC was in Haiti within hours of the earthquake, and has a strong history helping out in previous disasters like the 2005 Pakistan earthquake and the 2009 earthquake in Sumatra.

Unlike some groups that spend much of your donations on administrative costs, the lion's share of the donations to IMC actually go towards relief. And the group focuses on what is really needed, like food, water filtration supplies, etc.

To donate to relief efforts in Haiti, call 800-481-4462 (24 hours) or click here.

Note: There is much to be written about the threat that the IMF, World Bank and others will try to use "disaster capitalism" to profit from the Haitian crisis. And see this.

There is much to be said about how the U.S. has abused Haiti for centuries and launched a coup against the democratically-elected president of Haiti, helping to plunge the country into instability.

There is much to be discussed about how the U.S. helped make Haiti poor and that - arguably - that poverty led to substandard buildings and poor infrastructure, which made that country vulnerable to a large earthquake.

There are those who ask - given the use of the U.S. military and national guard - is it a humanitarian operation or an invasion?

But I also welcome you to donate and help the Haitian people to survive this tragedy, in addition to talking about the bigger political issues.

Note 2: If you are donating through another non-profit group, that is great. I have no connection to IMC, and am only suggesting one good group.

Saturday, January 16, 2010

A Lot To Say

I have a lot to say, but am in the middle of a huge project at work, and so will be very light on posting this weekend.

In the meantime, please read this essay by Glenn Greenwald.

Thursday, January 14, 2010

Moving Your Money Can Have a Real Effect on Big Banks

People have asked whether moving your money from your giant bank to a small community bank or credit union will have any real affect on the too big to fails, given that most of their profits come from speculative investments instead of normal banking deposits.

According to the Nation, the answer is yes:

The cynics either do not understand banking or misunderstand the widespread public anger. Dennis Santiago, [influential bank-rating firm, Institutional Risk Analytics'] CEO and managing director, explained that banks compete fiercely for the "core deposits" provided by individual and small business accounts--this stable money is their preferred base for profitable lending. Take away core deposits, and bankers feel immediate balance-sheet stress. Expand the account base for community banks, and they gain greater stability and greater lending power. "Will moving your money have an effect?" Santiago asked. "And by effect, I don't mean making a momentary political statement. I mean making a structural difference to the country's financial system. The answer is yes."
The Nation points out that a wide variety of campaigns to take back power are being launched from diverse sources:
A campaign launched by faith-based community organizations associated with the Industrial Areas Foundation identifies sky-high interest rates on credit cards and other lending as the ancient sin of usury. IAF groups are asking churches, foundations and local governments to withdraw funds from the usurious banks that profit by destroying borrowers. Organized labor, likewise, has launched an aggressive movement to insist on responsible investing values for the pension-fund wealth of working people, urging state treasurers and fund managers to invest for society's interests as well as good returns.
The Nation is right. There are numerous efforts to stand up to the giant banks.

Congresswoman Kaptur advises her constituents facing foreclosure to demand that the original mortgage papers be produced. She says that - if the bank can't produce the mortgage papers - then the homeowner can stay in the house.

Debtors are revolting against exorbitant interest rates and fees and other aggressive tactics by the too big to fail banks. See this, this and this.

Portfolio manager and investment advisor Marshall Auerback argues that a debtor's revolt would be a good thing.

Popular personal finance advisor Suze Orman is highlighting the debtors revolt phenomenon on her national tv show.

And see this and this.

What is fueling the debtor's revolt? Economic conditions are obviously a large part of it. But the fact that the big banks are not abiding by "free market rules", but are gambling with taxpayers' money on the taxpayers' dime, is a contributing factor. In other words, many people apparently feel that since the banks aren't playing fair or by the normal rules of contract, they shouldn't have to, either.

Wednesday, January 13, 2010

If Government Won't Break Up the Giant Banks, Let's Do It Ourselves

As everyone knows, the economy cannot permanently recover and truly stabilize until the giant banks are broken up. The top independent experts agree that the "too big to fails" are a drain on the economy and put the entire system at risk.

The giant banks aren't lending much to the people who need it. Fortune pointed out in February that smaller banks are stepping in to fill the lending void left by the giant banks' current hesitancy to make loans. Indeed, the article points out that the only reason that smaller banks haven't been able to expand and thrive is that the too-big-to-fails have decreased competition.

Federal Reserve Governor Daniel K. Tarullo said in June:

The importance of traditional financial intermediation services, and hence of the smaller banks that typically specialize in providing those services, tends to increase during times of financial stress. Indeed, the crisis has highlighted the important continuing role of community banks...

For example, while the number of credit unions has declined by 42 percent since 1989, credit union deposits have more than quadrupled, and credit unions have increased their share of national deposits from 4.7 percent to 8.5 percent. In addition, some credit unions have shifted from the traditional membership based on a common interest to membership that encompasses anyone who lives or works within one or more local banking markets. In the last few years, some credit unions have also moved beyond their traditional focus on consumer services to provide services to small businesses, increasing the extent to which they compete with community banks.
But the government - instead of breaking up the giant banks who aren't lending to the people who need loans - is trying to prop them up using permanent bailouts. See this, this, this, this and this.

And - instead of separating different business activities (such as depository banking functions and speculative investments) - the government is actually allowing companies to get involved in a wider variety of business activities.

For example, economist Simon Johnson points out that Goldman Sachs recently converted to a "financial holding company", allowing Goldman to borrow money from the Fed at essentially no cost, and then invest it in any thing it wants. Johnson gives an example: Goldman bought a large share of the stock of a Chinese automaker. If the investment succeeds, Goldman will reap the profits. If it fails, the American taxpayers are on the hook.

And Goldman is apparently profiting from its combination of roles as both an investment brokerage house for other investors and as a large speculative investor itself. Specifically, Goldman apparently delays trades it makes for its clients long enough to use that inside knowledge of who is buying or selling what to make speculative investments for itself, oftentimes taking the exact opposite position for itself and its largest clients as the position it is recommending to its Mom and Pop investor clients.

Why are politicians letting this happen?

Could it be because the giant banks have bought and paid for Congress and the White House? See this, this and this.

We'll Have to Do It Ourselves

If the government isn't doing anything to fix this dangerous situation, we'll have to do it ourselves.

As a start, if Congress won't reimplement the Glass-Steagall Act (the Depression-era law which previously separated depository functions from speculative investing), let's manually separate these two types of businesses.


Simple: let's pull our money out of the too big to fails and put it into small community banks and credit unions.

The giant banks may still make bucketloads of cash on their casino style speculative gambling (for now, at least), but after we've moved our deposits to more responsible, smaller banks which don't gamble as much, then we will have manually separated depository banking functions from the giant banks' speculative investing.

Get it?

The government isn't doing the job and fixing the problems which have led to the economic crisis ... so we'll have to do it ourselves.

Note: Some people say that moving our money out of the too big to fails will just mean that the government will give them more bailouts. But this misses 3 points:

  1. If the deposits are withdrawn, the giant banks will only be speculative gamblers, and at least our deposits will be safe and won't be mixed with their toxic assets

  2. The giant banks and their enablers in Washington will look even worse if they are bailing out companies that are solely and obviously gambling casinos

  3. The head of the International Monetary Fund, Dominique Strauss-Kahn, has warned:
    The public will not bail out the financial services sector for a second time if another global crisis blows up in four or five years time, the managing-director of the International Monetary Fund warned this morning.

    Dominique Strauss-Kahn told the CBI annual conference of business leaders that another huge call on public finances by the financial services sector would not be tolerated by the “man in the street” and could even threaten democracy.

    "Most advanced economies will not accept any more [bailouts]...The political reaction will be very strong, putting some democracies at risk," he told delegates.

In other words, the government - fearing revolt - might be more hesitant to give another round of bailouts than people assume.
I'm not looking at this with rose-colored glasses, and I realize that the TBTFs will act like the kid who killed his parents and then cries for pity since he's an orphan.

But I think that if the government is not doing its job, we should do it ourselves, and that a focused gesture of taking things into our own hands can only help.

Tuesday, January 12, 2010

Less Than a Tenth of Bank Of America's Assets Comes From Traditional Banking Deposits

I have long pointed out that the too big to fails make very little of their money off of traditional depository functions.

For example, last October, I argued:

Some very smart people say that the big banks aren't really focusing as much on the lending business as smaller banks.

Specifically since Glass-Steagall was repealed in 1999, the giant banks have made much of their money in trading assets, securities, derivatives and other speculative bets, the banks' own paper and securities, and in other money-making activities which have nothing to do with traditional depository functions.

Now that the economy has crashed, the big banks are making very few loans to consumers or small businesses because they still have trillions in bad derivatives gambling debts to pay off, and so they are only loaning to the biggest players and those who don't really need credit in the first place. See this and this.

So we don't really need these giant gamblers. We don't really need JP Morgan, Citi, Bank of America, Goldman Sachs or Morgan Stanley. What we need are dedicated lenders.

I just ran across an example for one of the TBTFs.

Specifically, Bank of America - the U.S. largest bank - has only $83 billion in deposit accounts (what they call "transaction accounts").

But B of A has between $1.3 and $1.5 trillion in total bulk assets and liabilities.

In other words, far less than a tenth of B of A's overall assets come from traditional banking functions.

Why do we need to save the too big to fails again?

Converting 401k and IRA Funds Into "Steady Payment Streams"

Last May, I wrote about the rumor that the Obama administration might seize funds from American's 401k and IRA accounts.

Last week, Bloomberg pointed out:

The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort...

There is “a tremendous amount of interest in the White House” in retirement-security initiatives, Borzi, who heads the Labor Department’s Employee Benefits Security Administration, said in an interview.

In addition to annuities, the inquiry will cover other approaches to guaranteeing income, including longevity insurance that would provide an income stream for retirees living beyond a certain age, she said.

“There’s been a fair amount of discussion in the literature taking the view that perhaps there ought to be more lifetime income,” Iwry, a senior adviser to Treasury Secretary Timothy Geithner, said in an interview...

One proposal raised by Iwry as co-author of a paper while at the Retirement Security Project, before joining the administration, has reached Congress. A bill requiring employers to report 401(k) savings both as an account balance and as a stream of income based on an annuity was introduced on Dec. 3 by Senators Jeff Bingaman, a New Mexico Democrat, Johnny Isakson, a Georgia Republican, and Herb Kohl, a Wisconsin Democrat.

Sounds innocuous, right?


But Karl Denninger and Jesse smell a rat.

Denninger writes:

In a short conversation this noontime ... Rick Santelli was talking about a potential to effectively force money into the Treasury market.

Where would they get this?

From your 401k and IRA accounts!...

Let me tell you what this is - it is an attempt to prevent the collapse of the Treasury market!

Forcing people into Treasuries as an "annuity" is exactly what Social Security allegedly is. Except that Treasury stole the money that was collected in FICA taxes and spent it!

Guess what? They'll do that here too - you're going to "invest" in Treasuries which of course are effectively a CALL option on the future taxing ability of the government.

The problem is that with an aging population and the immigrant problem (illegal immigrants that is), along with offshoring, the aggregate wage base will drop and thus this is the most dangerous investment of all!

What's even worse is that the government has intentionally suppressed Treasury yields during this crisis (and will keep doing so by various means, including manipulating the CPI - the "inflation index" - as they have for the last 30 years) so as to guarantee that you lose over time compared to actual purchasing power...

"Choices" have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market - so they will effectively tax you by forcing your "retirement" money to buy them!

This may be the only way for Treasury to hold down interest rates to something reasonable in the intermediate term, but doing so will instantaneously remove a major source of funding for the stock market - that is, the monthly and quarterly inflows from retirement accounts.

You can bet this won't be good for you, the ordinary American.

You can also bet that once such an "option" is made available there is a very high probability of the government doing things that either promote or simply don't stand in the way of another stock market crash as a means of "herding" your money into Treasuries - so they can blow it - all under the guise of being allegedly "safe".

Of course this begs the question - what if the government can't pay down the road when you retire, just as they can't pay on a forward basis with Social Security and Medicare?

This "proposal" can only mean one thing - Treasury smells smoke. Maybe you should pay attention to what they're huffing!

And before you say "oh they'd never do that" I want you to read this:

Here is a warning to us all. The Argentine state is taking control of the country’s privately-managed pension funds in a drastic move to raise cash.


My fear is that governments in the US, Britain, and Europe will display similar reflexes. Indeed, they have already done so. The forced-feeding of banks with fresh capital – whether they want it or not – and the seizure of the Fannie/Freddie mortgage giants before they were in fact in trouble (in order to prevent a Chinese buying strike of US bonds and prevent a spike in US mortgage rates), shows that private property can be co-opted – or eliminated – with little due process if that is required to serve the collective welfare.

Jesse has a similar take:

As a rule of thumb, the worst possible time to convert lump sum savings into a fixed income annuity would be when interest rates are historically low.

Although products may vary, this is roughly equivalent to buying long term bonds at a time when interest rates are likely to increase, substantially reducing your principal in real terms, and eroding your fixed returns through inflation.

For some reason the Obama Administration is promoting the idea now that there should be some encouragement for Americans to start converting their 401K's and IRA's into annuities, to provide themselves with lifetime income.

The effort is being spear-headed by Mark Iwry of the Treasury and Phyllis Borzi of the Department of Labor. Here is a paper written on the subject by Mark Iwry when he was at the Brookings Institution.

The essence of this paper is that distributions from IRA's and 401K's would automatically be rolled into an annuity providing a monthly income by default.

This concept is known on the Street as the handling fees for meager returns pork barrel pigfest. The Fed likes it because they will undoubtedly get a two year rolling chunk of the people's retirement cash to play with.

Perhaps just rolling those 401K's and IRA's into Social Security or the Long Bond would be what they have in mind. Somehow the panacea of TIPS with inflation defined by the government sounds probable. The drawback perhaps is that this would not generate the highest recurring fees for Wall Street and the FIRE sector, which have to be eyeing that 'cash on the sidelines' hungrily.

How about Patriot Bonds that are fully invested in Mortgage Debt formerly owned by the Fed, with some tranches of Commercial Real Estate to add some zest to the recipe? The Treasury can give this option a small tax break, which can be largely consumed by Wall Street fees and mispricing of risk returns ...

My model for thinking about this annuitization is that the government wishes to appropriate your savings for a 2.0% return, ex fees and mispriced risk and inflation, as a source of funding for the bailouts of an oversized and insolvent FIRE sector (like AIG) and the imploding pretensions of a global financial elite...

Administration Explores R Bond For Retirement Accounts - Investment News 7 June 2009
Why have a separate "R Bond" instead of those government bonds they have now called 'Treasuries?' And why have a mandatory universal retirement system when you have this thing called 'Social Security?' Think about it. Sounds like the kind of preparations governments make for things like 'new dollars' after a selective default.

Are Denninger and Jesse right?

I don't know ... we'll have to wait and see.

FDIC Votes 3-2 to Limit Banker Compensation

A source in Washington just emailed the following:

Today, the FDIC voted 3-2 to accept comments on a proposed rule to link FDIC insurance premiums to executive compensation practices. The two no votes were Comptroller John Dugan and OTS Chief John Bowman. The yes votes were Sheila Bair, Martin Gruenberg, and Thomas Curry.

3-2 votes at the FDIC are uncommon, which means that this is a significant split in the regulatory community. ..

The FDIC memo on the proposed change is here:

Dugan dissenting argument is here:

US Will Hit 94% Debt to GDP Ratio Next Year, Surpassing the Level Where Debt Starts Reducing Economic Growth

Ambrose-Evans Pritchard notes:

Fitch expects the combined state and federal debt to reach 94pc of GDP next year, up from 57pc at the end of 2007. Federal interest costs will reach 13pc of revenues, meaning that an eighth of all taxes will go to service debt.

The figure of 94% is dramatic given that two top American economists - Carmen Reinhart and Kenneth Rogoff - wrote last month :
The relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies...
Indeed, as Forbes noted in December:
Add the unfunded portion of entitlement programs and we're at 840% of GDP.
Deficits do matter.

Note 1: Reinhart and Rogoff also make it clear that the larger the ratio of external to internal debt, the greater the drag on economic growth. The U.S. had a high level of external debt, although the Fed is now covertly monetizing much of the U.S. debt. So I'm not sure what the ratio of external versus internal debt really is at the moment.

Note 2: Fitch's 94% figure includes state as well as Federal debt. I am not sure if this changes the above analysis.

Monday, January 11, 2010

"We've Never Seen this Before – Such a Huge Rally, and the Little Guy Is Out"

Joseph Stiglitz says that Wall Street is hyping up the economy to sell more stock.

Has it worked?

Well, the stock market certainly has rocketed up from its March lows.

But many investors are still avoiding equities.

As Vincent Deluard - a strategist for TrimTabs Investment Research (25% of the top 50 hedge funds in the world use TrimTabs' research for market timing) - says:

We've never seen this before – such a huge rally, and the little guy is out.
In other words, the stock market rally is due almost entirely to hedgies, pension funds, banks and other institutional investors, and not every day investors.

It is even possible that the government itself has been propping up the stock market. And Bill Gross and Nouriel Roubini say that we have a Ponzi style economy.

TrimTabs notes that small investors pulled out $14 billion net from stock mutual funds from the beginning of last year through mid-December, on top of a net $245 billion withdrawn in 2008.

Given that, at the end of September, individuals held 80% of the $19 trillion in stock in U.S. companies, both private and public - according to the Federal Reserve (see this, for example)- recovery will not happen so long as the little guys are sitting on the sidelines.

TrimTabs notes that most of $592 billion taken out of money market mutual funds last year has gone into bond and bond-hybrid funds instead.

No wonder David Rosenberg is saying:

  • "People have been lured into two bubbles seven years apart, and for a lot of them it's over."
  • "The bulls say if the market is up this much without retail investors, just watch when they come in, but it isn't going to happen."
  • Investors who have not been spooked or angered by the market are probably too poor to buy anyway.

Sunday, January 10, 2010

Torture Is Continuing Under the Obama Administration, Creating More Terrorists and Further Destabilizing the Economy

As I pointed out in May 2008:

The U.S. has imprisoned 2,500 children since 9/11 as "enemy combatants", in violation of the Geneva Convention against classifying children as POWs ...

Pulitzer-prize winning reporter Seymour Hersh says that the U.S. Government has videotapes of boys being raped at Abu Ghraib prison (and see this; see also this - General Taguba discusses the sexual humiliation of a father with his son - see this and this).

This doesn't come as a complete surprise, given that assistant deputy Attorney General John Yoo has publicly argued that the president can order the torture of a child of a suspect in custody – including by crushing that child’s testicles.

In April 2009, I noted:

Respected political scientist Michael Haas has confirmed that children were tortured, and Raw Story has explained that the newly-release Bush torture memos may corroborate claims that at least some detainees' children were tortured using insects.

The number two man at the State Department, Colonel Lawrence B. Wilkerson, said that many of those tortured at Guantanamo Bay were innocent, but that the Bush administration did not really care whether they were innocent or not.

Last December, I wrote:

Many reporters have said that the Bagram prison facility in Afghanistan is worse than Guantanamo ever was. Moreover, abuse is apparently still occurring there.

As Spiegel wrote on September 21, 2009, in an article entitled "Prisoner Abuse Continues at Bagram Prison in Afghanistan":

US President Barack Obama has spoken out against CIA prisoner abuse and wants to close Guantanamo. But he tolerates the existence of Bagram military prison in Afghanistan, where more than 600 people are being held without charge. The facility makes Guantanamo look like a "nice hotel," in the words of one military prosecutor...

Bagram is "the forgotten second Guantanamo," says American military law expert Eugene Fidell, a professor at Yale Law School. "But apparently there is a continuing need for this sort of place even under the Obama administration.

"From the beginning, "Bagram was worse than Guantanamo," says New York-based attorney Tina Foster, who has argued several cases on behalf of detainee rights in US courts. "Bagram has always been a torture chamber."

And what does Obama say? Nothing. He never so much as mentions Bagram in any of his speeches. When discussing America's mistreatment of detainees, he only refers to Guantanamo...

From the beginning, Bagram was notorious for the brutal forms of torture employed there. Former inmates report incidents of sleep deprivation, beatings and various forms of sexual humiliation [and rape with sticks]...

At least two men died during imprisonment. One of them, a 22-year-old taxi driver named Dilawar, was suspended by his hands from the ceiling for four days, during which US military personnel repeatedly beat his legs. Dilawar died on Dec. 10, 2002. In the autopsy report, a military doctor wrote that the tissue on his legs had basically been "pulpified." As it happens, his interrogators had already known -- and later testified -- that there was no evidence against Dilawar...

However attorney Tina Foster feels that the new initiative is just a cosmetic measure. "There is absolutely no difference between the Bush administration and the Obama administration's position with respect to Bagram detainees' rights," she says during an interview with SPIEGEL in her office in the New York borough of Queens.

And see this.

Moreover, Obama is still apparently allowing "rendition flights" - where prisoners are flown to countries which freely torture - to continue...

Finally, Jeremy Scahill - the reporter who broke most of the stories on Blackwater - says that some forms of torture at Guantanamo have continued under Obama, and may even have gotten worse. For example, Scahill points out that:

The Center for Constitutional Rights released a report titled "Conditions of Confinement at Guantánamo: Still In Violation of the Law," which found that abuses continued. In fact, one Guantanamo lawyer, Ahmed Ghappour, said that his clients were reporting "a ramping up in abuse" since Obama was elected.
Now, reports are circulating that boys were tortured last year - after Obama was sworn in as President - at the Bagram prison in Afghanistan:

As the Washington Post reported Friday:

The U.S. military has begun investigating allegations that two Afghan teenagers were beaten and humiliated by guards while in American custody last year at a secret detention center at Bagram air base, according to U.S. and Afghan officials.

U.S. military officials took statements from the teenagers last month and are contacting others who say they were held at what Afghans call Bagram's "black prison," a detention center run by U.S. Special Operations forces. This classified facility is separate from the main prison at Bagram, which holds about 700 detainees.

The allegations of physical violence and sexual humiliation.

And see this:


Not much ...

Way to create more terrorists and to further disrupt the civilian economy, Obama administration.

Saturday, January 9, 2010

The Military-Industrial Complex is Ruining the Economy

Everyone knows that the too big to fails and their dishonest and footsy-playing regulators and politicians are largely responsible for trashing the economy.

But the military-industrial complex shares much of the blame.

Nobel prize winning economist Joseph Stiglitz says that the Iraq war will cost $3-5 trillion dollars.

Sure, experts say that the Iraq war has increased the threat of terrorism. See this, this, this, this, this, this, this and this. And we launched the Iraq war based on the false linkage of Saddam and 9/11, and knowingly false claims that Saddam had WMDs. And top British officials, former CIA director George Tenet, former Treasury Secretary Paul O'Neill and many others say that the Iraq war was planned before 9/11. But this essay is about dollars and cents.

America is also spending a pretty penny in Afghanistan. The U.S. admits there are only a small handful of Al Qaeda in Afghanistan. As ABC notes:
U.S. intelligence officials have concluded there are only about 100 al Qaeda fighters in the entire country.

With 100,000 troops in Afghanistan at an estimated yearly cost of $30 billion, it means that for every one al Qaeda fighter, the U.S. will commit 1,000 troops and $300 million a year.
Sure, the government apparently planned the Afghanistan war before 9/11 (see this and this). And the Taliban offered to turn over Bin Laden (see this and this). And we could have easily killed Bin Laden in 2001 and again in 2007, but chose not to, even though that would have saved the U.S. hundreds of billions of dollars in costs in prosecuting the Afghanistan war. But this essay is about dollars and cents.

Increasing the Debt Burden of a Nation Sinking In Debt

All of the spending on unnecessary wars adds up.

The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.

Two top American economists - Carmen Reinhart and Kenneth Rogoff - show that the more indebted a country is, with a government debt/GDP ratio of 0.9, and external debt/GDP of 0.6 being critical thresholds, the more GDP growth drops materially.

Specifically, Reinhart and Rogoff write:

The relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies...
Indeed, it should be obvious to anyone who looks at the issue that deficits do matter.

Even the top American military and intelligence officials say that debt is the main threat to our country's national security.

A PhD economist told me:
War always causes recession. Well, if it is a very short war, then it may stimulate the economy in the short-run. But if there is not a quick victory and it drags on, then wars always put the nation waging war into a recession and hurt its economy.
You know about America's unemployment problem. You may have even heard that the U.S. may very well have suffered a permanent destruction of jobs.

But did you know that the defense employment sector is booming?

As I pointed out in August, public sector spending - and mainly defense spending - has accounted for virtually all of the new job creation in the past 10 years:
The U.S. has largely been financing job creation for ten years. Specifically, as the chief economist for BusinessWeek, Michael Mandel, points out, public spending has accounted for virtually all new job creation in the past 1o years:

Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:


Between May 1999 and May 2009, employment in the private sector sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period.

It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years. Take a look at this chart:


Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs.

But even that gives the private sector too much credit. Remember that the private sector includes health care, social assistance, and education, all areas which receive a lot of government support.


Most of the industries which had positive job growth over the past ten years were in the HealthEdGov sector. In fact, financial job growth was nearly nonexistent once we take out the health insurers.

Let me finish with a final chart.


Without a decade of growing government support from rising health and education spending and soaring budget deficits, the labor market would have been flat on its back. [120]

Raw Story argues that the U.S. is building a largely military economy:

The use of the military-industrial complex as a quick, if dubious, way of jump-starting the economy is nothing new, but what is amazing is the divergence between the military economy and the civilian economy, as shown by this New York Times chart.

In the past nine years, non-industrial production in the US has declined by some 19 percent. It took about four years for manufacturing to return to levels seen before the 2001 recession -- and all those gains were wiped out in the current recession.

By contrast, military manufacturing is now 123 percent greater than it was in 2000 -- it has more than doubled while the rest of the manufacturing sector has been shrinking...

It's important to note the trajectory -- the military economy is nearly three times as large, proportionally to the rest of the economy, as it was at the beginning of the Bush administration. And it is the only manufacturing sector showing any growth. Extrapolate that trend, and what do you get?

The change in leadership in Washington does not appear to be abating that trend...[121]
So most of the job creation has been by the public sector. But because the job creation has been financed with loans from China and private banks, trillions in unnecessary interest charges have been incurred by the U.S.
And this shows military versus non-military durable goods shipments:

[Click here to view full image.]

So we're running up our debt (which will eventually decrease economic growth), but the only jobs we're creating are military and other public sector jobs.

PhD economist Dean Baker points out that America's massive military spending on unnecessary and unpopular wars lowers economic growth and increases unemployment:
Defense spending means that the government is pulling away resources from the uses determined by the market and instead using them to buy weapons and supplies and to pay for soldiers and other military personnel. In standard economic models, defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs.
A few years ago, the Center for Economic and Policy Research commissioned Global Insight, one of the leading economic modeling firms, to project the impact of a sustained increase in defense spending equal to 1.0 percentage point of GDP. This was roughly equal to the cost of the Iraq War.

Global Insight’s model projected that after 20 years the economy would be about 0.6 percentage points smaller as a result of the additional defense spending. Slower growth would imply a loss of almost 700,000 jobs compared to a situation in which defense spending had not been increased. Construction and manufacturing were especially big job losers in the projections, losing 210,000 and 90,000 jobs, respectively.

The scenario we asked Global Insight [recognized as the most consistently accurate forecasting company in the world] to model turned out to have vastly underestimated the increase in defense spending associated with current policy. In the most recent quarter, defense spending was equal to 5.6 percent of GDP. By comparison, before the September 11th attacks, the Congressional Budget Office projected that defense spending in 2009 would be equal to just 2.4 percent of GDP. Our post-September 11th build-up was equal to 3.2 percentage points of GDP compared to the pre-attack baseline. This means that the Global Insight projections of job loss are far too low...

The projected job loss from this increase in defense spending would be close to 2 million. In other words, the standard economic models that project job loss from efforts to stem global warming also project that the increase in defense spending since 2000 will cost the economy close to 2 million jobs in the long run.
The Political Economy Research Institute at the University of Massachusetts, Amherst has also shown that non-military spending creates more jobs than military spending.

So we're running up our debt - which will eventually decrease economic growth - and creating many fewer jobs than if we spent the money on non-military purposes.

But the War on Terror is Urgent for Our National Security, Isn't It?

For those who still think that the Iraq and Afghanistan wars are necessary to fight terrorism, remember that a leading advisor to the U.S. military - the very hawkish and pro-war Rand Corporation - released a study in 2008 called "How Terrorist Groups End: Lessons for Countering al Qa'ida".

The report confirms that the war on terror is actually weakening national security. As a press release about the study states:

"Terrorists should be perceived and described as criminals, not holy warriors, and our analysis suggests that there is no battlefield solution to terrorism."

Former U.S. National Security Adviser Zbigniew Brzezinski told the Senate that the war on terror is "a mythical historical narrative". And Newsweek has now admitted that the war on terror is wholly unnecessary.

In fact, starting right after 9/11 -- at the latest -- the goal has always been to create "regime change" and instability in Iraq, Iran, Syria, Libya, Sudan, Somalia and Lebanon; the goal was never really to destroy Al Qaeda. As American reporter Gareth Porter writes in Asia Times:
Three weeks after the September 11, 2001, terror attacks, former US defense secretary Donald Rumsfeld established an official military objective of not only removing the Saddam Hussein regime by force but overturning the regime in Iran, as well as in Syria and four other countries in the Middle East, according to a document quoted extensively in then-under secretary of defense for policy Douglas Feith's recently published account of the Iraq war decisions. Feith's account further indicates that this aggressive aim of remaking the map of the Middle East by military force and the threat of force was supported explicitly by the country's top military leaders.
Feith's book, War and Decision, released last month, provides excerpts of the paper Rumsfeld sent to President George W Bush on September 30, 2001, calling for the administration to focus not on taking down Osama bin Laden's al-Qaeda network but on the aim of establishing "new regimes" in a series of states...
General Wesley Clark, who commanded the North Atlantic Treaty Organization bombing campaign in the Kosovo war, recalls in his 2003 book Winning Modern Wars being told by a friend in the Pentagon in November 2001 that the list of states that Rumsfeld and deputy secretary of defense Paul Wolfowitz wanted to take down included Iraq, Iran, Syria, Libya, Sudan and Somalia [and Lebanon].
When this writer asked Feith . . . which of the six regimes on the Clark list were included in the Rumsfeld paper, he replied, "All of them."
The Defense Department guidance document made it clear that US military aims in regard to those states would go well beyond any ties to terrorism. The document said the Defense Department would also seek to isolate and weaken those states and to "disrupt, damage or destroy" their military capacities - not necessarily limited to weapons of mass destruction (WMD)...
Rumsfeld's paper was given to the White House only two weeks after Bush had approved a US military operation in Afghanistan directed against bin Laden and the Taliban regime. Despite that decision, Rumsfeld's proposal called explicitly for postponing indefinitely US airstrikes and the use of ground forces in support of the anti-Taliban Northern Alliance in order to try to catch bin Laden.
Instead, the Rumsfeld paper argued that the US should target states that had supported anti-Israel forces such as Hezbollah and Hamas.
After the bombing of two US embassies in East Africa [in 1998] by al-Qaeda operatives, State Department counter-terrorism official Michael Sheehan proposed supporting the anti-Taliban Northern Alliance in Afghanistan against bin Laden's sponsor, the Taliban regime. However, senior US military leaders "refused to consider it", according to a 2004 account by Richard H Shultz, Junior, a military specialist at Tufts University.
A senior officer on the Joint Staff told State Department counter-terrorism director Sheehan he had heard terrorist strikes characterized more than once by colleagues as a "small price to pay for being a superpower".
If you still believe that the war on terror is necessary, please read this.

Torture is Bad for the Economy

For those who still think torture is a necessary evil, you might be interested to learn that top experts in interrogation say that, actually:

Indeed, historians tell us that torture has been used throughout history - not to gain information - but as a form of intimidation, to terrorize people into obedience. In other words, at its core, torture is a form of terrorism.

Moreover, the type of torture used by the U.S. in the last 10 years is of a special type. Senator Levin revealed that the the U.S. used torture techniques aimed at extracting false confessions.

McClatchy subsequently filled in some of the details:

Former senior U.S. intelligence official familiar with the interrogation issue said that Cheney and former Defense Secretary Donald H. Rumsfeld demanded that the interrogators find evidence of al Qaida-Iraq collaboration...

For most of 2002 and into 2003, Cheney and Rumsfeld, especially, were also demanding proof of the links between al Qaida and Iraq that (former Iraqi exile leader Ahmed) Chalabi and others had told them were there."

It was during this period that CIA interrogators waterboarded two alleged top al Qaida detainees repeatedly — Abu Zubaydah at least 83 times in August 2002 and Khalid Sheik Muhammed 183 times in March 2003 — according to a newly released Justice Department document...

When people kept coming up empty, they were told by Cheney's and Rumsfeld's people to push harder," he continued."Cheney's and Rumsfeld's people were told repeatedly, by CIA . . . and by others, that there wasn't any reliable intelligence that pointed to operational ties between bin Laden and Saddam . . .

A former U.S. Army psychiatrist, Maj. Charles Burney, told Army investigators in 2006 that interrogators at the Guantanamo Bay, Cuba, detention facility were under "pressure" to produce evidence of ties between al Qaida and Iraq.

"While we were there a large part of the time we were focused on trying to establish a link between al Qaida and Iraq and we were not successful in establishing a link between al Qaida and Iraq," Burney told staff of the Army Inspector General. "The more frustrated people got in not being able to establish that link . . . there was more and more pressure to resort to measures that might produce more immediate results."

"I think it's obvious that the administration was scrambling then to try to find a connection, a link (between al Qaida and Iraq)," [Senator] Levin said in a conference call with reporters. "They made out links where they didn't exist."

Levin recalled Cheney's assertions that a senior Iraqi intelligence officer had met Mohammad Atta, the leader of the 9/11 hijackers, in the Czech Republic capital of Prague just months before the attacks on the World Trade Center and the Pentagon.

The FBI and CIA found that no such meeting occurred.

In other words, top Bush administration officials not only knowingly lied about a non-existent connection between Al Qaida and Iraq, but they pushed and insisted that interrogators use special torture methods aimed at extracting false confessions to attempt to create such a false linkage. See also this and this.

Paul Krugman eloquently summarized the truth about the type of torture used:

Let’s say this slowly: the Bush administration wanted to use 9/11 as a pretext to invade Iraq, even though Iraq had nothing to do with 9/11. So it tortured people to make them confess to the nonexistent link.

There’s a word for this: it’s evil.
But since this essay in on dollars and cents, the important point is that terrorism is bad for the economy.

Specifically, a study by Harvard and the National Bureau of Economic Research (NBER) points out:
From an economic standpoint, terrorism has been described to have four main effects (see, e.g., US Congress, Joint Economic Committee, 2002). First, the capital stock (human and physical) of a country is reduced as a result of terrorist attacks. Second, the terrorist threat induces higher levels of uncertainty. Third, terrorism promotes increases in counter-terrorism expenditures, drawing resources from productive sectors for use in security. Fourth, terrorism is known to affect negatively specific industries such as tourism.
The Harvard/NBER concludes:
In accordance with the predictions of the model, higher levels of terrorist risks are associated with lower levels of net foreign direct investment positions, even after controlling for other types of country risks. On average, a standard deviation increase in the terrorist risk is associated with a fall in the net foreign direct investment position of about 5 percent of GDP.
So the more unnecessary wars American launches, the more innocent civilians we kill, and the more people we torture, the less foreign investment in America, the more destruction to our capital stock, the higher the level of uncertainty, the more counter-terrorism expenditures and the less expenditures in more productive sectors, and the greater the hit to tourism and some other industries.

Terrorism has contributed to a decline in the global economy (for example, European Commission, 2001).
So military adventurism and torture, which increase terrorism, hurt the world economy. And see this.

For the foregoing reasons, the military-industrial complex is ruining the economy.