February 09, 2014
by Nicole Foss
Everyone has heard of pyramid, or Ponzi schemes.
In their simplest form, Ponzi schemes are short-lived frauds where a small number of existing members are paid from the buy-in of a larger number of new members until the supply of new members is exhausted, whereupon they collapse.
Typically, the founders and a few others who got in early and out before it was too late, make a lot of money at the expense of later entrants, who end up holding the empty bag.
There are always many more losers than winners in a Ponzi scheme.
What most do not realize is that Ponzi dynamics are far more pervasive than people think. Many human systems ultimately rest on the buy-in of new entrants, and every one of them will ultimately meet the same fate.
What allows a more complex pyramid to last longer than is a supplementary source of funds to pay members, aside from the buy-in of new members. The more such sources there are, legitimate or otherwise, the longer it will last.
Following the collapse of communism in Eastern Europe, there was a spate of such schemes – notably MMM in Russia, Caritas in Romania, Jugoskandic and Dafiment Bank in Serbia, TAT in Macedonia, and VEFA Holdings, Xhafferi, Populli, Gjallica and several others in Albania.
All of these lasted for quite a long time, and some paid out spectacular returns for much of that time. They were able to do this because the income from the buy-in of new entrants was supplemented by revenue from drug smuggling, oil sanctions busting, money laundering, gun running, human trafficking and a thriving trade in car theft from across Europe.
Approximately 80% of the Albanian population was drawn into the pyramids, often selling their only real property in order to invest and then depending on the pyramids for all their income.
People believed, erroneously, that there was an implicit guarantee from the government, which was entwined with the activities of the various funds. When the inevitable happened, the vast majority of the Albanian population was completely dispossessed.
Large economic bubbles, typically formed in dominant economies during periods of manic optimism have the same underlying dynamic.
Without continual buy-ins from new investors, or more money from existing investors, economic bubbles cannot grow. When they can no longer grow, they will collapse.
In the terminal phase, there is the appearance of great wealth, but it is extremely ephemeral. The last step is implosion, as claims to wealth generated through leverage that exceed the amount of underlying real wealth are extinguished en masse.
At the largest scale, empires are also grounded in pyramid dynamics, which is why they too have a limited lifespan.
Empires grow by assuming control, politically or economically, of new territories. They position themselves to cream off surpluses from an ever-expanding geographical area in a form of involuntary buy-in.
In the past, political control through invasion or physical colonization was more common, but globalization has enabled the development of a sophisticated system of economic control based on international debt slavery, supplemented with economic colonization for the purpose of resource extraction.
Resources, and financial surpluses in the form of perpetual interest payments, could be extracted from the periphery and accumulated at the center, where they led to the development of an unprecedented level of socioeconomic complexity.
Wealth conveyors that favor the economic center at the expense of the hinterland are the very heart of empire. But without continual expansion, they eventually fail, leaving the center unable to sustain its existing complexity level.
As the hinterland is stripped of wealth and resources, and burdened with the increasing environmental impact of its own exploitation, an increasing fraction of it is left too impoverished to sustain a minimum level of internal order.
In modern times, we speak of “failed states” without realizing why many of these states are failing, or the impact that an increasing number of failed states will ultimately have on our own standard of living.
The wealth conveyors are now breaking down.
No amount of financial squeezing of the population in the central economies can compensate for the loss of the ability to accumulate wealth from virtually the whole world.
The vast majority of the central population will be brutally squeezed as the elites try to hang on to their own privileged position. But this can only sustain a very small and rapidly shrinking fraction of the population, and at great cost.
We are living through the collapse of the final – and all-consuming – economic bubble at the end of the American empire.
February 28, 2014
Instability starts on the periphery and moves into the core.
While it is clear that the instability in periphery nations is arising from dynamics unique to each nation, there is one unifying causal factor. The spoils system in each nation is breaking down.
Every nation-state, from brutal dictatorships to nominal democracies, ultimately depends on a spoils system that provides the various factions and classes with sufficient material and status benefits to accept the status quo.
The more that a regime relies on oppression for its legitimacy, the greater is its vulnerability to erosion in the spoils system, which naturally favors the military and the elites.
In broad brush strokes, the spoils available for distribution are surpluses generated by the national economy. A common source of surplus is oil or some other desirable commodity.
The vast majority of surpluses outside of the oil exporting nations have been generated by three factors: cheap energy, rising productivity and the expansion of credit. Look at Europe and the U.S. in the 1950s and 60s, Japan in the 1960s and 70s, and China in the 1980s and 90s for example.
Any reversal in these factors reduces the surplus and the spoils available to be distributed.
Sharply higher energy costs crimp profits and cause recessions. Stagnating productivity leads to near-zero growth, and credit contraction leads to recession and the destruction of malinvestments.
Since ruling elites are by definition constantly picking winners and losers, any status quo operated by elites is systematically malinvesting on a gargantuan scale.
Prudent elites set aside enough surpluses to distribute as spoils to purchase the complicity of key sectors, classes, and factions. Imprudent elites don’t last long – the spoils system is quite Darwinian.
In the U.S., the spoils system is almost unlimited: corporate welfare, food stamps and SSI for the proletariat, big-bucks jobs in the State, in finance, in think tanks and elite universities.
A variety of lower-level positions are provided for enforcers, lackeys, apparatchiks and factotums, and a smattering of tax subsidies (mortgage interest deductions, etc.) is given to placate the middle class.
The spoils system is not only the foundation of every elites’ political legitimacy, it is the thin layer of plaster that covers all of the longstanding ethnic, regional, linguistic, religious, and political fault lines that run beneath nation-states.
The spoils system can crack for two reasons: either the national surplus declines so that there aren’t enough spoils left to keep everyone placated, or the diverting of spoils to elites and their cronies exceeds the tipping point of legitimacy.
Greece and Venezuela are examples of the first dynamic, and Ukraine is an example of the second.
In Ukraine, the plundering of the national surplus by oligarchs finally exceeded the threshold of legitimacy. Once the armed forces and police refused to murder their cousins, brothers, nieces and nephews in the streets, the status quo arrangement collapsed.
Why is the periphery crumbling?
The conditions that enabled rising surpluses and the distribution of spoils is breaking down for three reasons:
1. Energy is no longer cheap compared to past prices.
2. The low-hanging fruit of high productivity has been plucked.
3. The flood of cheap, limitless credit is drying up.
As regimes discover that surpluses and credit are contracting, their ability to placate every key group with spoils is also declining, and conflicts between these groups can no longer be patched over with bribery or brutality.
This erosion of the spoils system has a peculiar characteristic.
Once the old system cracks and collapses, it cannot be put back together. A new arrangement arises, despite the self-serving efforts of the current elites.
March o3, 2013
So now we are threatening to start World War Three because Russia is trying to control the chaos in a failed state on its border – a state that our own government spooks provoked into failure?
There is a list of countries that the USA sent troops, armed ships, and aircraft into recently, and for reasons similar to Russia’s in Crimea: the former Yugoslavia, Somalia, Afghanistan, Iraq, Libya. None of them were anywhere close to American soil.
The phones at the White House and the congressional offices ought to be ringing off the hook with angry US citizens objecting to the posturing of our elected officials. There ought to be crowds with bobbing placards in Farragut Square reminding the occupant of 1400 Pennsylvania Avenue how ridiculous this makes us look.
The saber-rattlers at The New York Times were sounding like the promoters of a World Wrestling Federation stunt when they said in a Page One story:
“The Russian occupation of Crimea has challenged Mr. Obama as has no other international crisis, and at its heart, the advice seemed to pose the same question: Is Mr. Obama tough enough to take on the former K.G.B. colonel in the Kremlin?”
Are they out of their chicken-hawk minds?
What the USA and its European factotums ought to do is mind their own business and stop issuing idle threats.
They set the scene for the melt-down by trying to tilt the Ukrainian government their way, only to see their sponsored dissidents give way to armed neo-Nazis whose first official act was to outlaw the use of the Russian language in a country with millions of Russian speakers.
Secretary of State John Kerry – a haircut in search of a brain – is winging to Kiev to pretend that the USA has a direct interest in what happens there.
America can’t even manage its own affairs. We ignore our gathering energy crisis, telling ourselves the fairy tale that shale oil will allow us to keep driving to WalMart forever.
We paper over all of our financial degeneracy and wink at financial criminals. Our infrastructure is falling apart. We’re constructing an edifice of surveillance and social control that would make the late Dr. Joseph Goebbels turn green with envy.
The Russians, on the other hand, have every right to protect their interests along their own border. They also have to contend with the bankruptcy of Ukraine, which may be the principal cause of its current crack-up.
Ukraine is deep in hock to Russia, but also to a network of Western banks. It remains to be seen whether or not the failure of these linked obligations will lead to contagion throughout the global financial system.
Welcome to the era of failed states.
We’ve already seen plenty of action around the world, and we’re going to see more, as resource and capital scarcities drive down standards of living and lower the trust horizon.
The world is not going in the direction that the globalists thought.
Anything organized at the giant scale is now in trouble nation – states in particular. The USA is not immune to this trend, whatever we imagine about ourselves.
February 24, 2014
– by Glenn Greenwald
One of the many pressing stories that remain to be told from the Edward Snowden archive is how western intelligence agencies are attempting to manipulate and control online discourse with extreme tactics of deception and reputation destruction.
Over the last several weeks, I worked with NBC News to publish a series of articles about “dirty trick” tactics used by JTRIG (Joint Threat Research Intelligence Group), a previously secret unit of Britain’s Government Communications Headquarters (GCHQ).
These articles were based on four classified GCHQ documents presented to the NSA and the other three partners in the English-speaking “Five Eyes” alliance.
Today, we at the Intercept are publishing another new JTRIG document, in full, entitled “The Art of Deception: Training for Online Covert Operations.”
Our NBC reporting highlighted some key revelations: the monitoring of YouTube and Blogger, the targeting of Anonymous with the very same DDoS attacks they accuse “hacktivists” of using, the use of “honey traps” (luring people into compromising situations using sex), and destructive computer viruses.
But here I want to focus and elaborate on the overarching point revealed by all of these documents. These agencies are attempting to control, infiltrate, manipulate, and warp online discourse, and in doing so, they are compromising the integrity of the internet itself.
Among the core self-identified purposes of JTRIG are two tactics:
(1) inject all sorts of false material onto the internet in order to destroy the reputation of its targets
(2) use social sciences and other techniques to manipulate online discourse and activism to generate outcomes it considers desirable.
To see how extremist these programs are, consider the tactics they boast of using to achieve those ends.
These tactics include “false flag operations” (posting material and falsely attributing it to someone else), fake victim blog posts (pretending to be a victim of the individual whose reputation they want to destroy), and posting “negative information” on various forums.
The targets for this deceit and reputation destruction extend far beyond the customary roster of normal spy craft. They include hostile nations and their leaders, military agencies, and intelligence services.
The discussion of many of these techniques occurs in the context of using them in lieu of traditional law enforcement against people suspected (but not charged or convicted) of ordinary crimes – or of “hacktivism” (use of online protest activity for political purposes).
Government plans to monitor and influence internet communications, and covertly infiltrate online communities in order to sow dissension and disseminate false information, have long been the source of speculation.
But these GCHQ documents are the first to prove that a major western government is using some of the most controversial techniques to disseminate deception online and to harm the reputations of targets.
Then there is the use of psychology and other social sciences to shape and control how online activism and discourse unfolds.
Today’s newly published secret document touts the work of GCHQ’s Human Science Operations Cell, which is devoted to “online human intelligence” and “strategic influence and disruption.”
Under the title “Online Covert Action,” the document details a variety of means used to engage in “influence and info ops,” as well as “disruption and computer net attack,” and details how human beings can be manipulated using “leaders, trust, obedience and compliance.”
Who would possibly trust a government to exercise these powers at all, let alone to do so in secret, with virtually no oversight, and outside of any cognizable legal framework?
During the Cold War, the ECHELON surveillance system was initially developed by the FVEY to monitor the communications of the former Soviet Union and the Eastern Bloc. It was later used to monitor billions of private communications worldwide. Since 2001, the FVEY expanded their surveillance capabilities, with emphasis placed on monitoring the World Wide Web.
Former NSA contractor Edward Snowden described the Five Eyes as a “supra-national intelligence organisation that doesn’t answer to the laws of its own countries.”
Despite the impact of Snowden’s disclosures, the general consensus among experts in the intelligence community is that no amount of global outrage will affect the Five Eyes relationship, which is the most powerful espionage alliance in world history.
February 19, 2014
When King Louis XVI was informed in 1789 that the French people had stormed the Bastille, he asked a duke: ‘Is it a revolt?’
“No, sire,” the duke replied, “it is a revolution.”
People in Ukraine and Thailand have reached their breaking points. In Ukraine especially, economic conditions have deteriorated in spectacular form.
History is packed with examples of how people rise up in the streets whenever economic conditions deteriorate.
The French Revolution in 1789 is one famous example. The French people finally reached their breaking points after nearly starving to death. The 2011 Egyptian Revolution and the entire Arab Spring movement is a similar example.
A 2011 study from the New England Complex Systems Institute shows a clear correlation between social unrest and food prices. The higher food prices get, the greater the chances of riots and revolution.
This is not a condition that is exclusive to the developing world. It is a fundamental human trait to provide for one’s family.
While human beings will take a lot of crap from their governments – stupid regulations, higher taxes, erosion of freedom, and even inflation – the moment that a person is no longer able to put food on the table for his family, then revolution foments.
Europe and the US are not immune, with their deteriorating wealth gaps, 50% youth unemployment, unchecked government power, and a system that favors the elite.
The main difference is that Westerners have been brainwashed into believing that the civilized people voice their grievances in a voting booth rather than doing battle in the streets. It’s a false premise.
Unfortunately, revolution is also a false premise.
Whether violent or non-violent, whether in a voting booth or on the streets, revolutions put a country right back where it started.
In the French revolution, the people traded absolute monarch Louis the XVI for genocidal dictator Robespierre, for military dictator Napoleon.
In 1917, the Russians traded Tsarist autocracy for Communist autocracy.
In 2011, Egyptians traded Hosni Mubarak for Mohamad Hussein Tantawi (who suspended the Constitution), for Mohamed Morsi (who awarded himself unlimited powers as president), followed by yet another coup d’etat.
All of this is because of a false premise – ‘if our country is having major problems, then we should throw the bums out and let the man on the white horse take over.’
This creates a never-ending cycle in which the fundamental problems perpetuate.
It’s not about any single person or group of people. It is the system itself that needs changing.
In our system, we award a tiny elite with the power to kill, steal, wage war, educate our children, and conjure unlimited quantities of paper money out of thin air.
This is antiquated and just plain silly. We’re not living in the Middle Ages anymore.
We don’t need kings to tell us what to do, knights to keep the peace, and serfs to do all the work and enrich the nobles. Yet this is not too far from the system we have today.
The real answer is within ourselves.
Become less dependent on the government, and more self-reliant. This idea is beginning to resonate with more and more people who are increasingly disgusted with the system, and with all political parties.
February 21, 2014
According to the latest study by the Financial Stability Board (FSB) the unregulated $72 Trillion Global Shadow Banking System is now larger than the global regulated banking system.
How could an unregulated and opaque industry, which is larger than the entire world’s GDP, operate with so little attention?
Even the FSB is not a government entity and operates under the auspices of an entity with a highly checkered and mysterious background – The Bank of International Settlements (BIS) in Basel Switzerland.
The FSB has had only two Chairmen since its inception who were able to see the full extent of the operations of this global industry: Mario Draghi who is now head of the European Central Bank (ECB), and Mark Carney who is now the Governor of the Bank of England (BOE).
A tipping point for the 2008 Financial Crisis was short term lending problems associated with Asset Backed Commercial Paper (ABCP) liquidity, which was used to fund the Shadow Banks Structures Investment Vehicles (SIVs).
This short term funding was used to buy what is now euphemistically referred to as ‘toxic waste’ (eg: Credit Default Obligations or CDOs, etc.).
The Dodd-Frank Bill has done absolutely nothing to change any of this. What has changed is that the Shadow Banking System, with policy makers turning a blind eyed, has morphed into something far more dangerous.
Global Gross Domestic Product (GDP) is now smaller than the Shadow Banking System. How can a $72 Trillion banking function go unregulated? How can a $700 trillion SWAPS market go unregulated?
It’s 1999, the tail end of the Clinton years. Congress is feverishly crafting what could yet prove to be one of the most transformational laws in the history of the U.S. economy – a law that would make possible a broader concentration of financial and industrial power than we’ve seen in more than a century.
Bank lobbyists were pushing for a new law designed to wipe out 60-plus years of bedrock financial regulation.
The key was repealing the famed Glass-Steagall Act separating bankers and brokers, which had been passed in 1933 to prevent conflicts of interest within the finance sector that had led to the Great Depression.
Now, thanks to the Financial Services Modernization Act of 1999, commercial banks would be allowed to merge with investment banks and insurance companies to create powerful financial megafirms.
But it would take half a generation to understand the most explosive part of the bill which legalized new forms of monopoly, allowing banks to merge with heavy industry.
Today, banks like Morgan Stanley, JPMorgan Chase and Goldman Sachs own oil tankers, run airports and control huge quantities of coal, natural gas, heating oil, electric power and precious metals.
They likewise can now be found exerting direct control over the supply of a whole galaxy of raw materials crucial to world industry, including everything from food products to metals like zinc, copper, tin, nickel, and aluminum.
And they’re doing it not just here but abroad as well.
In Denmark, thousands took to the streets in protest in recent weeks, vampire-squid banners in hand, when news came out that Goldman Sachs was about to buy a 19 percent stake in a national electric provider. The furor caused the mass resignations of ministers from the government’s ruling coalition.
But banks aren’t just buying stuff – they’re buying whole industrial processes.
They’re buying oil that’s still in the ground, the tankers that move it across the sea, the refineries that turn it into fuel, and the pipelines that bring it to your home.
Then they’re also betting on the timing and efficiency of these same industrial processes in the financial markets – buying and selling oil stocks on the stock exchange, oil futures on the futures market, swaps on the swaps market, etc..
Allowing one company to control the supply of crucial physical commodities, and also trade in the financial products that might be related to those markets, is an open invitation to commit mass manipulation.
In just the past two years, fines in excess of $400 million have been levied against both JPMorgan Chase and Barclays for allegedly manipulating the delivery of electricity in several states, including California.
And last summer, Goldman Sachs was caught systematically delaying the delivery of metals out of a network of warehouses it owned in order to boost prices.
Goldman Sachs, an investment bank just five years removed from a federal bailout, with no industrial expertise, now stores and controls enough of America’s aluminum supply to affect world prices.
Banks in America were never meant to own industries. This principle has been part of our culture practically from the beginning of our history.
The Great Depression and years of brutal legislative trench warfare brought the banks to heel with the same kind of anti-trust concepts that stopped the robber barons of the late 1800s who were swallowing markets whole and dictating the price of everything from products to labor.
Then, with a few throwaway lines in a 1999 law, that whole struggle went up in smoke. And here we are, waiting for the next fully legal catastrophe to unfold.
February 14, 2014
– by Justin Raimondo
The movement to end the Surveillance State is finally getting serious.
With the failure by Congress to rein in the NSA, activists on the state level are mounting a campaign that promises to hit Big Brother where it really hurts – by cutting off the NSA’s water supply at its Bluffdale, Utah, Data Center.
A bill introduced in the Utah legislature by state representative Marc Roberts (R) would cut off the water supply to the NSA’s massive facility, which will gobble up 1.7 million gallons of water per day in a state already hit hard by a region-wide drought.
To cool the mega-computers housing the NSA’s huge store of intercepted data – virtually all of the emails transmitted in the country and beyond, including phone calls and “meta data.”
The heavily fortified Bluffdale Data Center will store all this purloined information in four halls, each 25,000 square feet, with an additional 900,000 square feet for administrative and technical support. The electricity bill alone is estimated at $40 million annually.
The people of Utah, however, are having second thoughts about having this monster in their midst. “If you want to spy on the whole world and American citizens, we’re not going to help you,” said representative Roberts.
The Roberts bill is part of a nationwide “Nullify the NSA” campaign spearheaded by the OffNow Coalition, a politically diverse group that is pushing model legislation already introduced in fifteen states and counting.
If passed, these bills would not only forbid local publicly owned water utilities from servicing the NSA, but would also stop any sort of cooperation with or state subsidies to the NSA.
This is the Achilles heel of the Surveillance State.
Iowa state senator Jake Chapman (R) has introduced the Fourth Amendment Protection Act, which directs state agencies not to “provide material support or assistance to any federal agency (for) the collection of electronic data…that is not based on a warrant that describes the person, place or thing to be searched for or seized.”
“We have learned in recent months that the NSA is collecting and storing nearly 30 percent of all Americans’ call records, that they collect and store over 200 million text messages daily, and that they are tracking Americans through social media and GPS,” senator Chapman said. “We must not trade freedom for security.”
Forget dealing with this in Washington, D.C., which is the corrupt capital of a world empire that has no regard for the Constitution or the opinions of the people they supposedly represent.
The only way to dismantle the monstrous Panopticon that is being built in secret by our rulers is to subvert it at the local level.
Let the battle cry go up: Turn it off!
Link to source.