Corruption, Fraud and Thuggery by an Out of Control Montreal STM

UPDATE: 2014 August 03 (See bottom of story for update)

 



Is the Montreal Transit Authority’s Claim of “OPUS Card Fraud” a Fraud itself and a Pretext to More Draconian Legislation in the Near Future? A look at Montreal’s STM (RFID) OPUS Cards, Fraud Claims, STM Security, and What Comes Next.

By: Stewart Brennan

World United News

In 2008, the Montreal Transit Commission (STM) adopted a new system for their monthly bus passes and single fare ticketing from European corporation “Calypso Networks Association” (C.N.A.) with, the integration corporation “Spirtech” assisting in the implementation and engineering of C.N.A. software. 

Montreal had jumped into the RFID OPUS technology for monthly bus passes while also using a magnetic strip card reader for single transit fares. We were told then that the reason they were moving to this new $219 Million dollar system was to prevent Bus pass fraud in the old system.

On the surface it seemed that there wouldn’t be too many problems associated with this new technology, with the exception of the STM’S South Shore “Longueuil Metro Station” which did not, and still does not accept STM Magnetic cards bought anywhere else but in the Longueuil metro station. Not good if you prepaid all your STM trips somewhere else and do not have any money left to pay for an additional one…which did happen to me the first time I used the system going home from the South Shore. It was a very frustrating experience that I wont get into here.

The STM, Fraud, & OPUS Cards

Since 2009, Michele Labrecque has been the chairman and the primary representative of the STM. He oversees the performance and execution of the STM’s functions and powers…and, in agreement with other board members, sets corporate orientations. He also chairs the Board’s public meetings and approves the agenda in collaboration with the STM’s Chief executive officer and is the Transit Users’ Representative…

Recently, Michele Labrecque estimated that the STM saves $12 million a year on fraud by using the OPUS Card technology but did not give any details on how they do this exactly. His statement raised a lot of unanswered questions to say the least.

When you invest 219 million dollars of taxpayers money into a NEW system that is supposed to be Fraud proof and a benefit to the citizens, you certainly wouldn’t want to skip out on purchasing the Fraud Detection Option when purchasing this system…especially when stopping Fraud is the reason they bought the system in the first place. So it is very strange and disturbing to see more and more STM Security Inspectors harassing passengers for their tickets and bus passes in the name of Fraud.

These STM directives and security actions clearly state that either the system they bought is totally useless in detecting Fraud, that someone grossly incompetent is responsible for not acquiring the proper equipment and programming, or there is corruption happening inside the STM.

Regardless of the answer, the people of Montreal and the surrounding communities should not have to be shoulder the Orwellian directives by Government & Corporate decisions that harass the public, especially when the STM are to blame in the first place.

“Spirtech” an OPUS Technology engineering firm and partner with Calypso Networks claims that their system is virtually Fraud proof. Who am I to believe? (http://www.spirtech.com/products/fraud-detector)

If Fraud is not a problem with this new technology, then why do we need STM Security checking everyone’s Monthly OPUS Bus passes and Magnetic Strip single fare tickets?

If indeed the STM has reduced Fraud by 12 million dollars as per MICHEL LABRECQUE, why is the STM giving themselves huge pay raises as stated in an article by the Montreal Gazette on July 25^th, 2013 to the tune of millions of dollars? And WHY have they hired an army of bus pass inspectors?

Does this 12 million dollar savings at the STM mean that STM management get to pocket this money? Are the STM Security Army, who also received big raises, becoming the cash cow tool of the STM’s corporate management? (See Gazette Report for security personnel salaries)

Court Orders STM to pay $123,000.00 in back pay to STM Security Officers

http://www.montrealgazette.com/news/Court+orders+back+security+officers/7840875/story.html

Failure to show these STM Inspectors your ticket will land you a huge fine and in the hospital if you refuse to budge, as was the case with me on August 03^rd, 2013. One might look at it as strong-armed tactics by the STM to ensure every passenger obays whatever they are told by STM Security or face being roughed up and fined without any recourse to challenge them…because the STM Board of Directors, who are also municipal legislators, passed a municipal law that grants this corporation police powers.

As stated in the Montreal Gazette on July 25^th, 2013 the STM gave themselves big pay raises. I wonder where they got the money to inflate their already massive salaries?

STM Got Big Pay Raises

http://www.montrealgazette.com/business/managers+raises/8703628/story.html

When the size of your STM Salary is dependent on growth and there are no other means to create that growth how exactly does one create growth and give themselves large pay increases?  All the pay increases of the STM payroll have to come from somewhere…and a job needs to be a benefit to the corporation for profitability. So I wonder why they have hired more people in the STM Security department?

The STM’s Michel Labrecque also stated that they want a 40% increase in rider-ship by 2020…in my opinion, harassing and beating up their customers is certainly not the way to go. If they keep up their current pace by treating everyone as a potential criminal, more people will stop using their system.

Coming to Montreal by 2015 OPUS 2.0

During his opening remarks for AQTR’s conference on Urban mobility in the age of electronic payment (Feb 25, 2012), the president of the STM’S governing board Michel Labrecque stated, “We transport millions of people…soon we will get to know who they are.” What Mr. Lebreque was referring to was the implementation of OPUS 2.0 and having access to all your personal information in the future on the Montreal Transit Bus Pass. Security related? Fraud free?

OPUS Background Info

The OPUS card uses RFID (Radio-frequency identification) technology which can be read by anyone with an RFID transmitter / receiver. The OPUS card technology is owned by “Calypso Networks Association”; this European company’s primary goal is to use this technology on all digital transactions worldwide and to eventually replace the worlds currencies to become the Global technology and system for all monetary transactions. We are already seeing this technology being used by the Banks through Debit Cards, and Credit Cards, but we are also seeing this technology on Medicare cards, Drivers Licenses, passports, and soon there will be an upgrade to the Transit Authority’s OPUS 2 Cards.

Is there OPUS Card Fraud in Montreal?

So if this OPUS card fraud is real then what makes the Bankcards safe and the Bus Pass not safe? The bigger question is, of course, why are we allowing our governments to bully us into this RFID technology if it isn’t reliable? On a larger scale, We are talking about a massive corporation merger interconnected with many national governments, banks, and powerful shareholders that have the potential to end all national sovereignty by economic merger when financial controls of this technology are in place. “Spirtech” is the company being used to help engineer the OPUS RFID technology merger between corporations, banks, and governments. So their claim to be a safe system certainly needs to be proven since it conflicts with the STM’s assessment…but then it’s all about control, money and security isn’t it; but security for who?

Is it really necessary for Montreal’s STM Security to harass transit passengers because THEY SAY there is fraud in the OPUS system? If the answer is yes, then what about debit cards, credit cards, and Medicare Cards? Are these same technology cards at risk of fraud as well? And if so are we to expect a future where security people threaten debit and credit card holders to show ID and threaten us with arrest if we do not show them what they want?

As far as “Spirtech” is concerned, programming is all that is required to secure the cards…If that is so, why is Montreal’s STM spending Millions of Taxpayers dollars to hire an army of security inspectors to harass the public, instead of fixing the system?

The South Shore Transit System (RTL)

The South Shore of Montreal has a different Transit System (RTL), which also adopted the OPUS card and has a combination OPUS card with the STM for passengers requiring both transportation systems. However the RTL did not choose to adopt the single transit fare magnetic strip cards, so there is no proof of payments or transfers for single use. Even still there doesn’t seem to be a breach of security with their OPUS cards nor do they employ an army of security people to harass their passengers.

The RTL does have an OPUS card for occasional RTL riders who can’t purchase a monthly rechargeable OPUS card. The commuter can choose to load 6, 12, 18 or 24 RTL trips on a Solo card at the regular rate ($3.25 each x number of trips). Valid on all RTL buses, where a transfer is automatically issued on the Solo card. But they do not have a single fare proof of purchase to issue a passenger when they pay $3.25 on the bus.

Although the Quebec Government represents both transit systems (RTL & STM) together for a better price when approaching corporations for retrofits or Spare Parts such as implementing the new OPUS technology, the “South Shore Transit Commission” (RTL), chose not to use the exact same system as the STM. The only difference is the magnetic strip single fare cards…and the number of security personnel hired…

RTL & Municipal Governments

I’ve learned that at the municipal council level of government on the South Shore there are Paid RTL representatives that receive a minimum $15,000.00 just for being an RTL corporate representative. In my opinion there is a huge conflict of interest here since the money comes from the citizen’s taxes to pay them this bonus over and above the salary they receive for being on the council. Those chosen to represent the RTL are usually favoured by the Mayor of the specific community, if, of course, they do not claim the bonus for themselves.

This got me to thinking, “Does the STM also Pay the City Councillors in Montreal and the West Island a Bonus”?

If we take a look at who is on the STM Corporate Board of Directors and the STM Committees the answer is “YES”. The same people are on both Corporate and government posts. My question is how much are these municipal government reps being paid just to rubber stamp their STM corporate directives? Am I wrong to think this is corruption?

STM – Members of the Board of Directors

https://www2.stm.info/English/en-bref/a-ca_membres.htm

Attacked By STM Security Agents

On Saturday August 3^rd, 2013, STM Security attacked me for not showing them the magnetic strip bus pass I received after paying for a single fare on Bus #204 in the West Island of Montreal. They put me in the hospital. The incident is an ongoing nightmare for me now because I will not take public transport for fear of a repeat performance by the STM Security. It also stops me from visiting my 87-year-old mother on the South Shore who needs help because of her complications from dementia. I don’t have a car nor do I know anyone here that can take me to the South Shore once a week so I will need to find a way to rectify this. I will not bow to this authoritarian minded corporation, nor will I allow my dignity as a human being to be trampled on.

One of my fears is based on being singled out by STM security personnel with the Security software programs the STM have installed with all of the security cameras throughout the transit system. “Facial Recognition Technology” allows the STM Security Inspectors to profile passengers at will and is reason enough for me to stay away from ever taking the bus again simply because I feel I will be targeted and because my plea for justice has fallen on deaf ears by the STM, Municipal Governments, Gazette, CBC, CTV and other mainstream media. The NEWS mediums simply have not done their jobs in investigating and bringing the public’s attention to the ongoing conflicts of interest, corruption, and unjust laws that enable thuggery by the STM and its security apparatus.

According to Calypso Network Association, the creators of the OPUS technology and the engineering group Spirtech that works with C.N.A., there is no Fraud with their system…but the STM hires security to run around all day long harassing passengers by insisting on checking everyone’s OPUS cards and magnetic strip single fare cards…In my opinion, the STM, which is a merger of government and corporation is a completely corrupt organization operating as a parasite on the tax payers of Montreal and the citizens of the surrounding service area’s. The STM and all it’s Board members need to be investigated through a public inquiry including a forensic audit investigation of their books. The Harassment by STM Security on the population using public transit has to stop!  

My Personal Request to the STM

I want an apology from the STM for their security personnel roughing me up and putting me in the hospital because I wouldn’t show them the ticket I had just paid for. I want a complete stop to the STM security’s harassment of the public. I want the $333.00 fine they imposed on me for not showing them my ticket to be dropped, and I want the STM to pay for the damages inflicted on me by their security personnel.

Stewart Brennan

---------------------------

UPDATE: 2014 August 03

It has been one year to the day since the violent incident involving the STM and their belligerent security thugs who accosted me on Bus number 204 and put me in the hospital. Here’s what I hope will be my final update on this matter:

I challenged the ticket issued to me by the STM in court and won, in fact the judge shook her finger at the STM representatives for their brutality and warned that she hopes there will not be anymore incidents like this in the future by the STM and its security…not long afterwards the STM security blended into the background and stopped pulling busses over; this is a “Victory” for the citizens who use public transport in Montreal. We all win when a bully is put in its place. Stand up and don’t back down when you have been wronged. There are still some credible people within the justice system that know the difference between right and wrong. Peace!

Links:

Calypso Networks Association

http://www.calypsonet-asso.org/
Spirtech
http://www.spirtech.com/spirtech-consulting/calypso-networks-association
OPUS 2.0 Urban Mobility in the Age of Electronic Payment
http://spacing.ca/montreal/2012/02/23/opus-2-0-urban-mobility-in-the-age-of-electronic-payment/
Court Orders STM to pay $123,000.00 in back pay to STM Security Officiers
http://www.montrealgazette.com/news/Court+orders+back+security+officers/7840875/story.html
STM Got Big Pay Raises
http://www.montrealgazette.com/business/managers+raises/8703628/story.html
STM – Members of the Board of Directors
https://www2.stm.info/English/en-bref/a-ca_membres.htm
Calypso Networks Association & STM – (PDF File)
http://www.calypsonet-asso.org/downloads/open_session_2012/2012%2011%20STM.pdf
NOVA Bus
http://www.novabus.com/transit-solutions/service.html
RFID
http://en.wikipedia.org/wiki/Radio-frequency_identification
Metro Security think they are Policemen
http://archemdis.com/2010/04/08/montreal-metro-security-thinks-they-are-policemen/
Woman Fined $219.00 for not paying bus fare with exact change
http://www.cbc.ca/news/canada/montreal/story/2013/08/02/montreal-stm-verdun-pauline-tantost-fine.html
Montreal’s STM Transit Security is Violently Out of Control
http://worldunitednews.blogspot.ca/2013/08/montreals-stm-transit-security-are.html

 

Eurozone finance ministers approve bailout deal for Cyprus

 

French minister of Economy, Finances and Foreign Trade Pierre Moscovici (R) and International Monetary Fund chief Christine Lagarde (L) chat next to EU Commissioner for Economic and Monetary Affairs Olli Rehn (C) prior to an extraordinary Eurozone meeting on March 24, 2013 at the EU Headquarters in Brussels (AFP Photo / John Thys)

Source: Russia Today

http://rt.com/news/cyprus-eu-imf-bailout-764/

The Eurogroup has approved a deal on a 10 billion-euro bailout for Cyprus, struck early Monday in Brussels. Cyprus avoids exiting the eurozone, but will have its second largest bank closed with heavy losses expected for big depositors.

“The size of financial assistance will amount to 10 billion euro,” Eurogroup president Jeroen Dijsselbloem has announced at a press conference in Brussels after the eurozone finance ministers swiftly endorsed the plan.

“With this agreement we’ve put an end to the uncertainty that has affected Cyprus and the euro area over the last few days,”he added.

The new deal agreed between Cyprus and the Troika of international lenders - the EU, the ECB and the IMF - will set up a "good bank" and a "bad bank" and will mean that the country’s second largest bank Laiki will effectively be shut down.

Deposits below 100,000 euros will be shifted from Laiki to the Bank of Cyprus to create a “good bank.” Deposits larger than 100,000 euros will be frozen and used to resolve debts. It remains unclear how large the write-down on those funds will be.

The decision comes hours before the Monday deadline set by the European Central Bank, following heated talks between President Nicos Anastasiades and the Troika.

Earlier on Sunday the central bank in Cyprus has imposed an ATM withdrawal limit of 100 euros per day for the island's two biggest banks, in order to prevent a run on lenders.

Warren Pollock - market analyst and financial adviser says the financial turmoil in Cyprus is part of a broader crisis.

“In reality this is a global problem which has not been addressed since 2007-2008 and previous to that with the issuance of huge amounts of debt and leverage into the system both in Europe and in the United States,” he told RT.


“And when that debt goes bad, the only recourse which exists is to tap remaining collateral in the system which is the savings.”


Pollock believes that sooner or later this “sort of stealing” of savings may result in popular unrest. “We can definitely see smaller countries being the test to see whether savings could be stolen on a wider scale.”

Cyprus imposes ATM withdrawal limit of €100 per day for island's two largest banks

 

People queue to withdraw their savings at a Cypus Popular Bank (Laiki Bank) ATM in Athens on March 22, 2013. (AFP Photo)

Source: Russia Today

http://rt.com/business/cyprus-bailout-withdrawal-banks-756/

The central bank in Cyprus has imposed an ATM withdrawal limit of 100 euros per day for the island's two biggest banks, in order to prevent a run on lenders.

A spokesman for the country's second largest lender, Cyprus Popular Bank, told Reuters that the new measure began at 1pm local time (11am GMT) and would remain in place until the bank reopens, or until confirmation of continued emergency funding from the European Central Bank. Cyprus Popular Bank had previously limited withdrawals to 260 euros per day.

A government official said the restriction also applied to the Bank of Cyprus.

It was initially reported that the measure was implemented on all banks in Cyprus, although it has now been confirmed that only the island's two biggest banks have been affected.

The news comes after Cypriot President Nicos Anastasiades took part in last-minute crisis talks with international lenders on Sunday, in an attempt to save the country from financial meltdown. The negotiations in Nicosia to seal a bailout from the EU and International Monetary Fund failed to reach a solution.

Anastasiades then headed to Brussels to hold talks with EU, European Central Bank and IMF leaders ahead of a crunch meeting of eurozone finance ministers.

Government spokesman Christos Stylianides said in a statement on Sunday that Anastasiades and his team have a "very difficult task to accomplish to save the Cypriot economy and avert a disorderly default if there is no final agreement on a loan accord."

The news comes just one day after Cyprus and the Troika agreed to a 20 per cent tax on deposits over 100,000 euros at the Bank of Cyprus and 4 per cent on deposits held at other banks.

"Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available. Today, there are only hard choices left," European Union Economic and Monetary Affairs Commissioner Olli Rehn said in a Saturday statement.

Cyprus is scrambling to come up with €5.8 billion by Monday, or face being kicked out of the Eurozone. The cash is a prerequisite for a further €10 billion in bailout funds.

Lawmakers' rejection of a previous proposal to tax all bank deposits prompted the European Central Bank to threaten to cut off emergency funding to Cypriot banks unless a deal was reached by March 25. Banks have been shut all week, and are due to reopen on March 26.

On Saturday, at least 1,000 bank workers in Cyprus hit the streets of the country’s capital of Nicosia. The demonstrators marched against the latest bailout measures taken by the country’s central bank.

Protesters carried banners that read, “Hands off provident funds” and “No to the bankruptcy of Cyprus.”

Turkey sends ‘stern warning’ to Cyprus over gas reserves

Meanwhile, Turkey has warned Greek Cyprus against using hydrocarbon reserves off the island to overcome its debt crisis without the consent of Turkish Cypriots. Ankara says such a move could result in an end to efforts to reunite Cyprus’ Turkish and Greek zones.

Turkey has contacted the US and plans to take the issue to the European Union, Today’s Zaman reported.

Ankara “had to issue a stern warning” regarding attempts to offer natural resources in exchange for foreign loans, a Turkish official said on Sunday.

Turkey has repeatedly warned the Greek Cypriot government against unilateral moves to extract natural gas and oil reserves off Cyprus, saying that Turkish Cypriots also have a say on the reserves.

The dispute recently escalated when reports surfaced that hydrocarbon exploration rights were part of Russia-Greek Cyprus talks last week over a possible deal which includes Russian financial help. However, the talks did not produce an agreement.

Russian Prime Minister Dmitry Medvedev expressed doubt on the inclusion of hydrocarbon reserves as a loan deal, saying there are concerns surrounding commercial viability and questions stemming from Turkish objections.

 

Greek journalist acquitted of breach of privacy for Lagarde list

 

Greek editor of "Hot Doc" weekly magazine Kostas Vaxevanis waits outside a courthouse in Athens November 1, 2012 (Reuters / Yorgos Karahalis)

Source: Russia Today

http://rt.com/news/greek-journalist-acquitted-list-787/

Greek journalist Kostas Vaxevanis has been acquitted of breach of privacy. He was arrested after publishing a list of 2,000 Greeks with Swiss bank accounts in his Hot Doc magazine.

­His trial began earlier on Thursday for publishing the so called 'Lagarde list'.

Vaxevanis' defense centered around claims that he published the same list as the one that French authorities handed over to their Greek counterparts two years ago. His legal team also argued that no one had complained of privacy violation.

The Greek authorities said that there was no evidence that names mentioned in the list, businessmen, politicians and high-ranking officals, did actually break the law.

While the case was wrapping up, another journalist Spiros Karatzaferis, was also arrested in Athens.

His detention comes after threats to expose damaging allegations about the country’s economy. He claimed to have proof that the Greek deficit, which forced the embattled country to seek bailouts, was fraudulent. Karatzaferis insists he received this information from the hacker group Anonymous.

Two TV presenters were also recently suspended for criticizing authorities on-air.

Cases of what local journalists call increasing government censorship has sparked mass protest, started by state television staff.

Greek editor Kostas Vaxevanis makes statements outside a courthouse in Athens November 1, 2012 (Reuters / Yorgos Karahalis)

‘Journalists arrested for doing their job’- editor

­Before Kostas Vaxevanis was acquitted, RT talked to editor Tim Gopsill, who said that journalists in Greece are simply trying to do their job and are being arrested for it.

­RT:In light of these arrests, do you see a problem with media freedom brewing in Greece?

Tim Gopsill: I would say so, journalists in Greece are absolutely doing their job. The country is in crisis, people need to know what is going on.

RT:Do you think the quick and heavy-handed response of Greek authorities – when one of these journalists didn't even get to reveal the information he claims to have – proves that they have something they want to keep hidden?

TG: I would say so, yes. They are trying to close it down, aren’t they? Because what these journalists are doing is trying to reveal to the public the important information relating to the economic crisis. Kostas Vaxevanis’s exposé relates to the real crisis in Greece and in other countries too, which is tax avoidance and the export of capital, the taking the money out of the country, which is what happened to the Greek economy.

RT: Are you surprised by all this?

TG: Well, I am not surprised that the government is in absolute crisis in Greece. The economy is tottering, it is the most terrible social deprivation. It is a terrible time for Greek people and they are being treated very badly, not only by the Greek government but the whole EU financial establishment. They need to know the truth, but the thing is that avoiding the tax and taking money off the country is one of the main causes of the crisis. It is absolutely right that it should be publicized.

RT:Both these journalists were arrested within days of each other, while two TV presenters were also suspended for criticizing on -air the authorities. What can we read into the timing of all this?

TG: The timing is related to the economic position. It is getting closer and closer to a confrontation between Greece and the EU and eurozone. The eurozone is showing very little mercy to the suffering people. The bailout to Greece is not going to people’s pockets or to the income of the livelihood of the people. It is going to the banks, who rather rashly lent Greece money in the past.

RT: The journalists strike left Greeks with no news for 24 hours on Wednesday. That's when the politicians were debating new cuts for next year's budget. Was it playing into the lawmakers hands, as the public were left with no information on this divisive issue?

TG: What else can they do? All they can do is try to do their job, to tell the truth. But when they do they get arrested.

RT: But should they go on strike?

TG: Yes, I think so. They have got to put pressure on the government.

RT: All these events have drawn attention to the situation of media freedom in Greece. Have the authorities' efforts at guarding any secrets been counterproductive?

TG: I don’t see how they can get way with prosecuting these people. It is actually going to be a very interesting test of freedom in Greece, not just the press, but the court. I would expect that these journalists under what is the Greek version of the Human rights legislation that we have in this country, that we have around Europe, and the European convention and so on, will make sure that the court don’t convict them.

RT: Are other countries suffering from the crisis going to see more of this?

TG: If things get worse, yes.

 

Moody's warns it may put top Canadian banks on downgrade watch

 

A Moody's sign on the 7 World Trade Center tower (file photo)

Source: Press TV

http://www.presstv.ir/detail/2012/10/27/268966/canada-banks-at-risk-of-being-downgraded/

Moody’s Investors Service has warned that it could slash the credit ratings of five top Canadian banks as the country is increasingly feeling the pinch of global financial crisis.

The rating agency said on Friday that the possible lowering of the banks’ rating by one notch is due to “concerns about high consumer debt levels and elevated housing prices.”

According to fresh official figures, Canadian consumer debt has increased to record highs in recent months as the ratio of household debt-to-income reached 163.4 percent in the second quarter of 2012, up from 161.8 percent in the first quarter.

“Domestically, we're concerned about the high and increasing levels of consumer indebtedness and elevated housing prices, and we feel that they may tend to leave the Canadian banks more vulnerable to downside risks to the economy than they have been in the past,” said David Beattie, Moody's vice president and senior credit officer.

Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce (CIBC), and the National Bank of Canada are the ones that may be downgraded by the rating agency.

The Bank of Montreal's current Moody's rating is Aa2, the Bank of Nova Scotia's is Aa1, the CIBC's Aa2, the National's Aa2 and the Toronto-Dominion's, Aaa.

In a similar move in July 2012, Standard & Poor's (S&P) Ratings Services also put several Canadian banks on “negative outlook,” citing rising consumer debt and elevated housing prices

What is behind the global stock market rally?

 

By: Andre Damon

Source: Global Research

http://www.globalresearch.ca/what-is-behind-the-global-stock-market-rally/

Despite a string of disastrous economic figures, stock markets throughout the world are surging.

In the past year, the US Dow Jones Industrial Average and the British FTSE 250 have each risen by 20 percent, while the German DAX has shot up by 39 percent. The NASDAQ, consisting mainly of US-based technology companies, has already eclipsed its previous record, set in November 2007, while the Dow is within 600 points of its previous high.

The continued rise on stock exchanges comes as manufacturing activity in Europe, China and the United States slumps to its lowest level in three years. The European economy as a whole is contracting. In the latest raft of dire economic data, released Thursday, US durable goods orders recorded their sharpest fall since 2009. US economic growth for the second quarter was revised downward from an already anemic 1.7 percent to 1.3 percent.

How is one to explain the meteoric rise in stock values even as the global economy is sliding into a deeper slump?

The boom in stock prices is an expression of a global redistribution of wealth from the bottom to the top. The social conditions of the working class have been driven relentlessly downwards, while trillions of dollars have been turned over to the banks, mainly for the purpose of financial speculation.

This process is particularly evident in the United States, the center of world capitalism and the center of the global economic crisis.

The three major stock indexes have nearly doubled in value since 2009, and the fortunes of the super-rich have risen accordingly. The richest 400 billionaires in the US had a net worth of $1.27 trillion in 2009. This already obscene figure shot up to $1.7 trillion in this year’s list, an increase of 33 percent in just three years.

CEO pay has followed a similar course. The average CEO of one of the 350 largest US companies took home $12.14 million in 2011, up from $12.04 million in 2010 and $10.36 million in 2009, according to the Economic Policy Institute.

But for the working population, the situation is exactly the opposite. Between 2009 and 2011, the most recent year for which figures are available, the number of people in poverty in the United States grew by 2.6 million, to 49 million. Mass unemployment has been utilized as a lever to impose wage cuts in every sector of the economy.

Since the official end of the recession, in June of 2009, the average duration of unemployment has nearly doubled from 23 weeks to 38 weeks. The percentage of the working-age population that is employed has fallen, as anemic job growth barely keeps pace with the increase in the population and hundreds of thousands of laid-off people give up looking for work.

For those workers who still have a job, real hourly wages have fallen by about 1.0 percent. The earnings of a typical household fell by 1.7 percent in 2010 alone.

The increase in the rate of exploitation of workers has translated into huge cost savings for corporations and record profits in every year since 2009, further swelling the incomes of the super-rich.

In addition to the direct impoverishment of the work force, stock markets have been buoyed by the influx of cash from the world’s central banks.

Within the last month, the US Federal Reserve, the European Central Bank and the Bank of Japan have all taken new measures to pump hundreds of billions of dollars into the financial markets. The US Fed took the most dramatic step of the three, initiating an open-ended program to buy $40 billion in mortgage-backed securities every month, taking these toxic assets off of the banks’ balance sheets.

The ostensible purpose of these moves is to lower interest rates, revive the housing market, and increase the amount of money available for corporations to expand and hire new workers. But instead of productively investing the money, the corporations and banks are either hoarding it or pouring it into the stock market and other forms of speculation.

The total amount of cash held by major US corporations stood at $1.7 trillion in the second quarter of this year. Apple, the technology giant, is a case in point. It held $98 billion in the first quarter of this year, $110 billion in the second, and $117 billion in the third. Meanwhile, its market valuation keeps expanding and there is already talk that the company, which is currently valued at over $600 billion, will become the world’s first $1 trillion corporation.

The enormous sums of money being pumped into the financial system are inflating asset values and bankrolling record payouts for executives, whose compensation is often tied to share prices.

The inflation of asset values cannot continue indefinitely amid the deepening economic slump. The growth of share values and other financial assets, based mainly on a near-zero interest-rate policy and virtually free money from the central banks, is inflating a new and even more gigantic speculative bubble than the one that burst in September of 2008.

The upsurge in stock values does not reflect a healthy economy, but one that is deeply diseased, in which the intractable contradictions of the capitalist system are exacerbated by a ruthless and avaricious financial aristocracy that dictates policy in the United States and internationally.

The US ruling class, first under Bush and then under Obama, responded to the crash of 2008, which was the inevitable outcome of the financialization of American capitalism, by handing over trillions of dollars in public funds to the banks. The aim was to reflate the values of financial assets in order to maintain and increase the wealth of the financial aristocracy.

World governments have followed suit, with each bailout of the banks accompanied by an ever more ferocious attack on workers. Everything must be cut: wages, pensions, health care, education—everything, that is, but the wealth of those responsible for the crisis.

The financial vultures who control the main investment houses send stock markets soaring with each new assault on jobs and social programs—as they did Friday after the Spanish government, presiding over a country in deep recession, unveiled a draft budget that slashes spending by $51 billion next year.

The key to the “success” of finance capital to this point has been its ability to isolate and quash outbreaks of working class resistance, relying on the services of the trade union apparatuses and their allies among the various pseudo-left organizations (the New Anti-capitalist Party in France, the Socialist Workers Party in the UK, the Left Party in Germany, SYRIZA in Greece, the International Socialist Organization in the US).

However, the actions of the central banks and governments have resolved nothing. The euphoria on the stock exchanges rests on rotten foundations. The rising markets are one expression of an unprecedented intensification of social tensions that are already beginning to erupt in the form of explosive class struggles on a world scale. A new, revolutionary leadership must be built in every country to unite these struggles and arm them with a socialist and internationalist program.

 

As Popular Opposition Grows Austerity Budgets imposed across Europe

By: Alex Lantier

Source: Global Research

http://www.globalresearch.ca/as-popular-opposition-ggrows-austerity-budgets-imposed-across-europe/

The French, Spanish and Greek governments all announced multibillion-euro austerity plans yesterday in the face of massive popular opposition.

The French budget presented by the Socialist Party (PS) government of President François Hollande is the harshest since the austerity budgets of the early 1980s under PS President François Mitterrand. It calls for €30 billion (US$38.6 billion) in deficit cuts, including €20 billion in tax increases and €10 billion in spending cuts.

The Spanish budget calls for €13.4 billion in spending cuts in the fourth major package of austerity measures passed this year following the election of the conservative Popular Party (PP) last November. The ministries whose budgets will be most severely cut include Agriculture, Industry and Education.

Greece’s coalition government—which includes the right-wing New Democracy (ND), the social democratic PASOK, and the Democratic Left (DIMAR)—announced that it will unveil a plan Monday for €11.5 billion in spending cuts. Plans for these cuts were first announced in July, but the government initially failed to reach an agreement on how to distribute them.

In each country, the new austerity measures are being pushed through in defiance of public opinion. On Wednesday, millions of workers throughout Greece walked off the job and hundreds of thousands protested in a one-day national strike. On Tuesday, tens of thousands of protesters opposed to the cuts marched to the parliament in Madrid and were brutally attacked by riot police.

In France, Hollande’s popularity ratings have fallen to 43 percent as job losses and austerity measures antagonize voters who elected him in May.

These events demonstrate the impossibility of fighting social austerity in Europe by supporting the bourgeois “left” parties, the European Union (EU), or European capitalism. In a matter of months, the promises made by the official parties have proven worthless.

Hollande cynically promised that “austerity is not an unavoidable destiny.” The Greek coalition government received the tacit support of the bourgeois “left” SYRIZA party, which ran against it ostensibly on an anti-austerity platform, but then pledged to be a “responsible” opposition that would not call strikes and would continue to support the European Union.

As for the PP—elected on the basis of mass hostility to the austerity policies of the previous social democratic Spanish Socialist Workers Party (PSOE) government—its pretense that it would not pursue Greek-style austerity in exchange for an EU bailout of its banks is fast evaporating.

The PP’s cuts to pensions and social spending and its attacks on labor rights are the most severe since the collapse of the fascist Franco dictatorship. Reductions in national state spending of €16.5 billion, €27 billion and €65 billion passed in January, April and July—combined with deep cuts in regional government spending—are sinking Spain’s economy.

One quarter of Spanish workers and 52.9 percent of Spanish youth are unemployed, and despite pledges for bank bailouts the economy is contracting. The International Monetary Fund anticipates a 1.2 percent contraction of Spain’s economy, though the government’s cuts are based on apparently overoptimistic projections of a 0.5 percent contraction.

Spain now pays more to service its debt than it spends on unemployment benefits or the budgets of its national ministries. Since the global economic crisis began in 2008, its public debt has more than doubled, jumping from 35.5 percent to 75.9 percent of gross domestic product (GDP), and the interest rate it pays on its debt has surged as a result of speculation against Spanish bonds by the banks and finance houses.

Spain’s banks are poised to request another €60 billion bailout as the Spanish real estate collapse continues to undermine their balance sheets.

The effect of such policies is most clearly seen in Greece, whose economy is now projected to plunge by 7 percent this year, instead of the previously projected 4.7 percent. Since the Greek debt crisis began in 2009, its economy has contracted by roughly one quarter.

Der Spiegel reported that, due to this continuing collapse, EU authorities expect Greece’s budget shortfall to reach €20 billion. They will then demand more cuts in Greece beyond the €11.5 billion Athens is currently proposing. As laid out in July, these include €5 billion in cuts to the Labor Ministry budget (mainly to pensions) and attacks on Greece’s devastated public hospitals.

These massive cuts—the corresponding amounts would be $802 billion in the United States, £82 billion in Britain and €136 billion in Germany—will ravage a society in which those workers who have managed to keep their jobs have already seen wage cuts of 30-50 percent.

The negotiation of the cuts will place take amid deepening conflict within Greece’s political elite. There is speculation that DIMAR might collapse, as at least three of its 17 parliamentarians have declared they plan to vote against the cuts.

Greece’s Financial Crimes Squad (SDOE) recently released a list of thirty politicians, including former ministers and top parliamentarians of ND, PASOK and SYRIZA, who are suspected of tax evasion or other forms of fraud.

France’s austerity package cuts €10 billion from the national budget of €376 billion by imposing a wage and hiring freeze on public sector workers, imposing a 5 percent across-the-board cut in the ministries’ projected budgets, and cutting €2.7 billion in health care spending. The Defense, Finance and Ecology ministries are reportedly particularly hard hit, with losses respectively of 7,234, 2,353 and 1,276 jobs.

As for the €20 billion in tax increases, half are to be achieved by closing certain corporate loopholes, and half by increasing taxes on individual households.

The PS government and the media have trumpeted the fact that roughly half of the individual tax increases will be borne by “affluent” households. This is an attempt to obscure the anti-working class character of the Socialist Party’s policies. The tax rate for the top income tax bracket is to be raised to 45 percent, and yearly wage income over €1 million is to be taxed at 75 percent.

To seriously examine these measures, one must briefly enter the realm of French tax policy—which means confronting what Karl Marx, in The Class Struggle in France, called the “sheer swindling” that characterizes France’s financial affairs.

In 2010, the top 1 and 10 percent of the French population took in €181 billion and €515 billion, respectively. Nonetheless, the increase in the top tax bracket and the tax on wage income over €1 million combined will raise only €530 million nationwide. The total of €6 billion raised by increasing taxes on the affluent, including by closing some corporate loopholes, does not amount to a substantial portion of their income.

In part, this is because of a complex system of tax exemptions that Hollande’s measures do not seriously touch. These exemptions allowed billionaire Liliane Bettencourt to pay a 9 percent effective tax rate in 2010 on the hundreds of millions of euros she earned on her $24 billion fortune.

In part, also, it is because most income in the ruling class is interest income on capital holdings, not wages—which means that Hollande’s “75 percent tax” does not seriously impact most members of the financial aristocracy.

Nonetheless, the austerity budget was denounced by sections of the press, with Figaro Magazine titling its lead article “Enough is Enough.”

Sections of the bourgeoisie supporting the PS are arguing that the current austerity budget is only a down payment on deeper attacks on the working class being prepared by the PS government. These include proposals for labor market “reforms” to facilitate hiring, firing and forcing workers into short-time work, as well as for €30-50 billion in cuts to corporate funding of social security.

An editorial in Le Monde stressed the need for a “true ‘competitiveness shock’ in our country.” It stated: “The 2013 budget does not really contribute to it. Promised cuts in the labor market and the financing of social spending will be decisive in this regard. Today’s budget shock will only be meaningful if it is rapidly complemented by a powerful competitiveness shock to give France the electroshock therapy it needs.”

 

Super rich stash 21 trillion in offshore havens

Alex Wong / Getty Images / AFP

Source: Russia Today

http://www.rt.com/news/overshore-economy-trillions-report-789/

Wealthy tax evaders, aided by private banks have exploited loopholes in tax legislation and stashed over $21 tn in offshore funds, says a report. The capital drained from some developing countries since 1970 would be enough to pay off national debts.

­The findings show the gap between the haves and the have-nots is much larger than previously thought.

The document, entitled The Price of Offshore Revisited, was commissioned by The Tax Justice Network campaign group and leaked to the Guardian. The report provides the most detailed valuation of the offshore economy to date.

"The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments," wrote James Henry, expert on tax havens and former chief economist at consultancy McKinsey in his report.

The document cites the world’s leading private banks as cherry-picking from the ranks of the uber-rich and siphoning their fortunes into tax-free havens such as Switzerland and the Cayman Islands.

The wealth of the super-rich is "protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy."

Henry writes that a large part of the trillion dollar hoard belongs to around 92,000 individuals, an elite class of super-rich who make up 0.001 percent of the global population.

"These estimates reveal a staggering failure: inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people," said John Christensen of the Tax Justice Network.

The report records the flow of capital from countries into offshores over the past few decades. Saudi Arabia saw almost $300 billion drained from their economy since the 1970s, while Russia saw almost $800 billion leave its economy in hidden assets since the fall of the Soviet Union. Nigeria issued a loss of $300 billion since the mid-1970s.


Henry points the finger at the world’s top ten private banks, among them UBS and Credit Suisse, for aiding wealthy clients to dodge taxes.

According to Henry’s figures, the top financial leaders processed more than $6 trillion in funds in 2010, more than double the previous year.

Banking system – rotten to the core

Last week the US Senate released a report damning the actions of the UK bank HSBC. The report highlighted evidence of the bank’s laх security policies leading to money laundering cases.

It referenced $7 billion in cash that had crossed the Mexican border into the US and been deposited in HSBC from 2007 to 2008. The report suggests that the billions of dollars could have come from drug sales in Mexico.

The probe also shed light on a number of other instances when the bank bypassed US safeguards, potentially bankrolling terrorists and drug lords in the process.

The bank had previously had to pay out $1bn to US authorities for money laundering offenses committed between 2004 and 2010.

The G20 has repeatedly made calls to end tax-free havens since the beginning of the financial crisis in 2008, but these plans have not yet come to fruition.

Financial Collapse At Hand: When is "Sooner or Later"?

By: Dr. Paul Craig Roberts

Source: Global Research
http://www.globalresearch.ca/index.php?context=va&aid=31272

Ever since the beginning of the financial crisis and Quantitative Easing, the question has been before us: How can the Federal Reserve maintain zero interest rates for banks and negative real interest rates for savers and bond holders when the US government is adding $1.5 trillion to the national debt every year via its budget deficits? Not long ago the Fed announced that it was going to continue this policy for another 2 or 3 years. Indeed, the Fed is locked into the policy. Without the artificially low interest rates, the debt service on the national debt would be so large that it would raise questions about the US Treasury’s credit rating and the viability of the dollar, and the trillions of dollars in Interest Rate Swaps and other derivatives would come unglued.

In other words, financial deregulation leading to Wall Street’s gambles, the US government’s decision to bail out the banks and to keep them afloat, and the Federal Reserve’s zero interest rate policy have put the economic future of the US and its currency in an untenable and dangerous position. It will not be possible to continue to flood the bond markets with $1.5 trillion in new issues each year when the interest rate on the bonds is less than the rate of inflation. Everyone who purchases a Treasury bond is purchasing a depreciating asset. Moreover, the capital risk of investing in Treasuries is very high. The low interest rate means that the price paid for the bond is very high. A rise in interest rates, which must come sooner or later, will collapse the price of the bonds and inflict capital losses on bond holders, both domestic and foreign.

The question is: when is sooner or later? The purpose of this article is to examine that question.

Let us begin by answering the question: how has such an untenable policy managed to last this long?

A number of factors are contributing to the stability of the dollar and the bond market. A very important factor is the situation in Europe. There are real problems there as well, and the financial press keeps our focus on Greece, Europe, and the euro. Will Greece exit the European Union or be kicked out? Will the sovereign debt problem spread to Spain, Italy, and essentially everywhere except for Germany and the Netherlands?

Will it be the end of the EU and the euro? These are all very dramatic questions that keep focus off the American situation, which is probably even worse.

The Treasury bond market is also helped by the fear individual investors have of the equity market, which has been turned into a gambling casino by high-frequency trading.

High-frequency trading is electronic trading based on mathematical models that make the decisions. Investment firms compete on the basis of speed, capturing gains on a fraction of a penny, and perhaps holding positions for only a few seconds. These are not long-term investors. Content with their daily earnings, they close out all positions at the end of each day.

High-frequency trades now account for 70-80% of all equity trades. The result is major heartburn for traditional investors, who are leaving the equity market. They end up in Treasuries, because they are unsure of the solvency of banks who pay next to nothing for deposits, whereas 10-year Treasuries will pay about 2% nominal, which means, using the official Consumer Price Index, that they are losing 1% of their capital each year. Using John Williams’ http://www.shadowstats.com/ (shadowstats.com) correct measure of inflation, they are losing far more. Still, the loss is about 2 percentage points less than being in a bank, and unlike banks, the Treasury can have the Federal Reserve print the money to pay off its bonds. Therefore, bond investment at least returns the nominal amount of the investment, even if its real value is much lower. ( For a description of High-frequency trading, see: http://en.wikipedia.org/wiki/High_frequency_trading )

The presstitute financial media tells us that flight from European sovereign debt, from the doomed euro, and from the continuing real estate disaster into US Treasuries provides funding for Washington’s $1.5 trillion annual deficits. Investors influenced by the financial press might be responding in this way. Another explanation for the stability of the Fed’s untenable policy is collusion between Washington, the Fed, and Wall Street. We will be looking at this as we progress.

Unlike Japan, whose national debt is the largest of all, Americans do not own their own public debt. Much of US debt is owned abroad, especially by China, Japan, and OPEC, the oil exporting countries. This places the US economy in foreign hands. If China, for example, were to find itself unduly provoked by Washington, China could dump up to $2 trillion in US dollar-dominated assets on world markets. All sorts of prices would collapse, and the Fed would have to rapidly create the money to buy up the Chinese dumping of dollar-denominated financial instruments.

The dollars printed to purchase the dumped Chinese holdings of US dollar assets would expand the supply of dollars in currency markets and drive down the dollar exchange rate. The Fed, lacking foreign currencies with which to buy up the dollars would have to appeal for currency swaps to sovereign debt troubled Europe for euros, to Russia, surrounded by the US missile system, for rubles, to Japan, a country over its head in American commitment, for yen, in order to buy up the dollars with euros, rubles, and yen.

These currency swaps would be on the books, unredeemable and making additional use of such swaps problematical. In other words, even if the US government can pressure its allies and puppets to swap their harder currencies for a depreciating US currency, it would not be a repeatable process. The components of the American Empire don’t want to be in dollars any more than do the BRICS.

However, for China, for example, to dump its dollar holdings all at once would be costly as the value of the dollar-denominated assets would decline as they dumped them. Unless China is faced with US military attack and needs to defang the aggressor, China as a rational economic actor would prefer to slowly exit the US dollar. Neither do Japan, Europe, nor OPEC wish to destroy their own accumulated wealth from America’s trade deficits by dumping dollars, but the indications are that they all wish to exit their dollar holdings.

Unlike the US financial press, the foreigners who hold dollar assets look at the annual US budget and trade deficits, look at the sinking US economy, look at Wall Street’s uncovered gambling bets, look at the war plans of the delusional hegemon and conclude: “I’ve got to carefully get out of this.”

US banks also have a strong interest in preserving the status quo. They are holders of US Treasuries and potentially even larger holders. They can borrow from the Federal Reserve at zero interest rates and purchase 10-year Treasuries at 2%, thus earning a nominal profit of 2% to offset derivative losses. The banks can borrow dollars from the Fed for free and leverage them in derivative transactions. As Nomi Prins puts it, the US banks don’t want to trade against themselves and their free source of funding by selling their bond holdings. Moreover, in the event of foreign flight from dollars, the Fed could boost the foreign demand for dollars by requiring foreign banks that want to operate in the US to increase their reserve amounts, which are dollar based.

I could go on, but I believe this is enough to show that even actors in the process who could terminate it have themselves a big stake in not rocking the boat and prefer to quietly and slowly sneak out of dollars before the crisis hits. This is not possible indefinitely as the process of gradual withdrawal from the dollar would result in continuous small declines in dollar values that would end in a rush to exit, but Americans are not the only delusional people.

The very process of slowly getting out can bring the American house down. The BRICS--Brazil, the largest economy in South America, Russia, the nuclear armed and energy independent economy on which Western Europe ( Washington’s NATO puppets) are dependent for energy, India, nuclear armed and one of Asia’s two rising giants, China, nuclear armed, Washington’s largest creditor (except for the Fed), supplier of America’s manufactured and advanced technology products, and the new bogyman for the military-security complex’s next profitable cold war, and South Africa, the largest economy in Africa--are in the process of forming a new bank. The new bank will permit the five large economies to conduct their trade without use of the US dollar.

In addition, Japan, an American puppet state since WW II, is on the verge of entering into an agreement with China in which the Japanese yen and the Chinese yuan will be directly exchanged. The trade between the two Asian countries would be conducted in their own currencies without the use of the US dollar. This reduces the cost of foreign trade between the two countries, because it eliminates payments for foreign exchange commissions to convert from yen and yuan into dollars and back into yen and yuan.

Moreover, this official explanation for the new direct relationship avoiding the US dollar is simply diplomacy speaking. The Japanese are hoping, like the Chinese, to get out of the practice of accumulating ever more dollars by having to park their trade surpluses in US Treasuries. The Japanese US puppet government hopes that the Washington hegemon does not require the Japanese government to nix the deal with China.

Now we have arrived at the nitty and gritty. The small percentage of Americans who are aware and informed are puzzled why the banksters have escaped with their financial crimes without prosecution. The answer might be that the banks “too big to fail” are adjuncts of Washington and the Federal Reserve in maintaining the stability of the dollar and Treasury bond markets in the face of an untenable Fed policy.

Let us first look at how the big banks can keep the interest rates on Treasuries low, below the rate of inflation, despite the constant increase in US debt as a percent of GDP--thus preserving the Treasury’s ability to service the debt.

The imperiled banks too big to fail have a huge stake in low interest rates and the success of the Fed’s policy. The big banks are positioned to make the Fed’s policy a success. JPMorganChase and other giant-sized banks can drive down Treasury interest rates and, thereby, drive up the prices of bonds, producing a rally, by selling Interest Rate Swaps (IRSwaps).

A financial company that sells IRSwaps is selling an agreement to pay floating interest rates for fixed interest rates. The buyer is purchasing an agreement that requires him to pay a fixed rate of interest in exchange for receiving a floating rate.

The reason for a seller to take the short side of the IRSwap, that is, to pay a floating rate for a fixed rate, is his belief that rates are going to fall. Short-selling can make the rates fall, and thus drive up the prices of Treasuries. When this happens, as the charts at http://www.marketoracle.co.uk/Article34819.html illustrate, there is a rally in the Treasury bond market that the presstitute financial media attributes to “flight to the safe haven of the US dollar and Treasury bonds.” In fact, the circumstantial evidence (see the charts in the link above) is that the swaps are sold by Wall Street whenever the Federal Reserve needs to prevent a rise in interest rates in order to protect its otherwise untenable policy. The swap sales create the impression of a flight to the dollar, but no actual flight occurs. As the IRSwaps require no exchange of any principal or real asset, and are only a bet on interest rate movements, there is no limit to the volume of IRSwaps.

This apparent collusion suggests to some observers that the reason the Wall Street banksters have not been prosecuted for their crimes is that they are an essential part of the Federal Reserve’s policy to preserve the US dollar as world currency. Possibly the collusion between the Federal Reserve and the banks is organized, but it doesn’t have to be. The banks are beneficiaries of the Fed’s zero interest rate policy. It is in the banks’ interest to support it. Organized collusion is not required.

Let us now turn to gold and silver bullion. Based on sound analysis, Gerald Celente and other gifted seers predicted that the price of gold would be $2000 per ounce by the end of last year. Gold and silver bullion continued during 2011 their ten-year rise, but in 2012 the price of gold and silver have been knocked down, with gold being $350 per ounce off its $1900 high.

In view of the analysis that I have presented, what is the explanation for the reversal in bullion prices? The answer again is shorting. Some knowledgeable people within the financial sector believe that the Federal Reserve (and perhaps also the European Central Bank) places short sales of bullion through the investment banks, guaranteeing any losses by pushing a key on the computer keyboard, as central banks can create money out of thin air.

Insiders inform me that as a tiny percent of those on the buy side of short sells actually want to take delivery on the gold or silver bullion, and are content with the financial money settlement, there is no limit to short selling of gold and silver. Short selling can actually exceed the known quantity of gold and silver.

Some who have been watching the process for years believe that government-directed short-selling has been going on for a long time. Even without government participation, banks can control the volume of paper trading in gold and profit on the swings that they create. Recently short selling is so aggressive that it not merely slows the rise in bullion prices but drives the price down. Is this aggressiveness a sign that the rigged system is on the verge of becoming unglued?

In other words, “our government,” which allegedly represents us, rather than the powerful private interests who elect “our government” with their multi-million dollar campaign contributions, now legitimized by the Republican Supreme Court, is doing its best to deprive us mere citizens, slaves, indentured servants, and “domestic extremists” from protecting ourselves and our remaining wealth from the currency debauchery policy of the Federal Reserve. Naked short selling prevents the rising demand for physical bullion from raising bullion’s price.

Jeff Nielson explains another way that banks can sell bullion shorts when they own no bullion. http://www.gold-eagle.com/editorials_08/nielson102411.html Nielson says that JP Morgan is the custodian for the largest long silver fund while being the largest short-seller of silver. Whenever the silver fund adds to its bullion holdings, JP Morgan shorts an equal amount. The short selling offsets the rise in price that would result from the increase in demand for physical silver. Nielson also reports that bullion prices can be suppressed by raising margin requirements on those who purchase bullion with leverage. The conclusion is that bullion markets can be manipulated just as can the Treasury bond market and interest rates.

How long can the manipulations continue? When will the proverbial hit the fan?

If we knew precisely the date, we would be the next mega-billionaires.

Here are some of the catalysts waiting to ignite the conflagration that burns up the Treasury bond market and the US dollar:

A war, demanded by the Israeli government, with Iran, beginning with Syria, that disrupts the oil flow and thereby the stability of the Western economies or brings the US and its weak NATO puppets into armed conflict with Russia and China. The oil spikes would degrade further the US and EU economies, but Wall Street would make money on the trades.

An unfavorable economic statistic that wakes up investors as to the true state of the US economy, a statistic that the presstitute media cannot deflect.

An affront to China, whose government decides that knocking the US down a few pegs into third world status is worth a trillion dollars.

More derivate mistakes, such as JPMorganChase’s recent one, that send the US financial system again reeling and reminds us that nothing has changed.

The list is long. There is a limit to how many stupid mistakes and corrupt financial policies the rest of the world is willing to accept from the US. When that limit is reached, it is all over for “the world’s sole superpower” and for holders of dollar-denominated instruments.

Financial deregulation converted the financial system, which formerly served businesses and consumers, into a gambling casino where bets are not covered. These uncovered bets, together with the Fed’s zero interest rate policy, have exposed Americans’ living standard and wealth to large declines. Retired people living on their savings and investments, IRAs and 401(k)s can earn nothing on their money and are forced to consume their capital, thereby depriving heirs of inheritance. Accumulated wealth is consumed.

As a result of jobs offshoring, the US has become an import-dependent country, dependent on foreign made manufactured goods, clothing, and shoes. When the dollar exchange rate falls, domestic US prices will rise, and US real consumption will take a big hit. Americans will consume less, and their standard of living will fall dramatically.

The serious consequences of the enormous mistakes made in Washington, on Wall Street, and in corporate offices are being held at bay by an untenable policy of low interest rates and a corrupt financial press, while debt rapidly builds. The Fed has been through this experience once before. During WW II the Federal Reserve kept interest rates low in order to aid the Treasury’s war finance by minimizing the interest burden of the war debt. The Fed kept the interest rates low by buying the debt issues. The postwar inflation that resulted led to the Federal Reserve-Treasury Accord in 1951, in which agreement was reached that the Federal Reserve would cease monetizing the debt and permit interest rates to rise.

Fed chairman Bernanke has spoken of an “exit strategy” and said that when inflation threatens, he can prevent the inflation by taking the money back out of the banking system. However, he can do that only by selling Treasury bonds, which means interest rates would rise. A rise in interest rates would threaten the derivative structure, cause bond losses, and raise the cost of both private and public debt service. In other words, to prevent inflation from debt monetization would bring on more immediate problems than inflation. Rather than collapse the system, wouldn’t the Fed be more likely to inflate away the massive debts?

Eventually, inflation would erode the dollar’s purchasing power and use as the reserve currency, and the US government’s credit worthiness would waste away. However, the Fed, the politicians, and the financial gangsters would prefer a crisis later rather than sooner. Passing the sinking ship on to the next watch is preferable to going down with the ship oneself. As long as interest rate swaps can be used to boost Treasury bond prices, and as long as naked shorts of bullion can be used to keep silver and gold from rising in price, the false image of the US as a safe haven for investors can be perpetuated.

However, the $230,000,000,000,000 in derivative bets by US banks might bring its own surprises. JPMorganChase has had to admit that its recently announced derivative loss of $2 billion is more than that. How much more remains to be seen. According to the Comptroller of the Currency the five largest banks hold 95.7% of all derivatives. The five banks holding $226 trillion in derivative bets are highly leveraged gamblers. For example, JPMorganChase has total assets of $1.8 trillion but holds $70 trillion in derivative bets, a ratio of $39 in derivative bets for every dollar of assets. Such a bank doesn’t have to lose very many bets before it is busted.

Assets, of course, are not risk-based capital. According to the Comptroller of the Currency report, as of December 31, 2011, JPMorganChase held $70.2 trillion in derivatives and only $136 billion in risk-based capital. In other words, the bank’s derivative bets are 516 times larger than the capital that covers the bets.

It is difficult to imagine a more reckless and unstable position for a bank to place itself in, but Goldman Sachs takes the cake. That bank’s $44 trillion in derivative bets is covered by only $19 billion in risk-based capital, resulting in bets 2,295 times larger than the capital that covers them.

Bets on interest rates comprise 81% of all derivatives. These are the derivatives that support high US Treasury bond prices despite massive increases in US debt and its monetization.

US banks’ derivative bets of $230 trillion, concentrated in five banks, are 15.3 times larger than the US GDP. A failed political system that allows unregulated banks to place uncovered bets 15 times larger than the US economy is a system that is headed for catastrophic failure. As the word spreads of the fantastic lack of judgment in the American political and financial systems, the catastrophe in waiting will become a reality.

Everyone wants a solution, so I will provide one. The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream and yell about the sanctity of contracts. However, a government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security.

Dr. Roberts was Assistant Secretary of the US Treasury, Associate Editor of the Wall Street Journal, columnist for Business Week, and professor of economics. His book, Economies In Collapse, is being published in Germany this month.