Friday, March 29, 2013

Life, Liberty and the Pursuit of Happiness



Life, Liberty and the Pursuit of Happiness

"Man (and woman) always wants most what they cannot have."

By J.M. Hamilton 3-30-13


Jefferson's words to this very day give us hope.  In his manifesto against King George, he defiantly wrote: 

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness."

We often forget that the price for writing these treasonous words was quite possibly finding oneself on the wrong end of a hemp made rope.  The Declaration of Independence being merely a political document, Mr. Jefferson's words had to be codified into constitutional law, via the fifth and fourteenth amendments.  It was decided on the heals of Mr. Lincoln's emancipation proclamation that in order to protect the slaves from the predations of others, Mr. Jefferson's point had to be driven home, again, with the fourteenth amendment:

"Nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws."

From this, we quickly learn that happiness and property ownership are quite possibly one in the same.  And given our collective attraction to the material, does anyone doubt it?

To a libertarian, and more than a few liberals, those few words must bring solace and joy... for what could be simpler, government is there to protect, and presumably facilitate, life, liberty and happiness/property.  What more need be said.  In my mind, our nation's Jeffersonian law would be simple:  man is free to do whatever he wants, as long as it does not threaten the lives, or life, or property, of his fellow man, period.  It is due to man's hubris, a professional legal class, and the desire of one class of citizens to control, subjugate, or gain advantage over, another class of citizens, that we have volumes upon volumes of legal books outlining state law, rules, regulations, constitutional law, and judicial rulings.  In effect, turning the Jeffersonian ideal on its head.

However, lately many a western government has been complicit with the major banking institutions of the world in depriving persons of both property, and we might safely add: life, liberty and happiness.  Just as J.M.H. predicted in my write up, Thinking the Unthinkable, Western Government's have begun to back off bailing out banks on the backs of the poor, via austerity, and - having exhausted monetary and fiscal policy - are starting to apply haircuts to the bank bondholders, the rich, and the elite.  First it was Iceland, then Greece, and now Cyprus.  Who's next, Italy or perhaps Spain?  The longer this four year financial crisis drags out, the longer the pain and suffering will continue.  Now everyone, rich man and poor man, will likely begin to feel the pain, equally, as capital controls come into play, and wealth confiscation gathers steam.

Seems as though the rich man can't catch a break, and neither can the poor or the middle class.  Now, there is no succor, or safe haven... one might as well park one's money in a mattress or multiple mason jars within the second chalet's backyard.  Besides, what interest are you earning at the bank?

Even Mr. Buffett appears to be having his doubts.... as reported in Barron's this week, the King of Capitalism decided not to double down on Goldman Sachs.  As evidence, he did not execute upon all his Goldman warrants, earned for helping to bailout Goldman at the height of the financial crisis (circa 2008).  Of course, as Barron's goes on to note, Berkshire is quite heavy in the banking sector, already - with substantive ownership in American Express, Wells Fargo, U.S. Bancorp and Bank of America.  Surely, Mr. Buffett knows that many of these institutions are tied, directly or indirectly, to Europe via bonds, derivatives and CDS.  And surely, Mr. Buffett knows that Chairmen Bernanke can't possibly print enough money to bail them out, all over again. 

Or can he?

Either way, Mr. Buffett appears to have hedged his bets on Government Sachs, at least for the moment, or maybe - just maybe, Mr. Buffett doesn't want to be deprived of liberty and equity in the event of yet another crash.  This blog has pointed out that politicians are often owned by the banks, but that sword also cuts both ways; the mega-banks are often wards of the state, and dependent upon the state for backstop and support.  Truly a symbiotic relationship.  This means that when ordered by the state (as we saw in Cyprus), the cartel  will have no problem dipping into your accounts to garnish your money on the state's behalf.  And what a perfect vehicle for doing so, after all the banks have been helping themselves to your funds for years, in the form of outrages fees and charges, and interest rate suppression.  Who knows, the cartel may actually charge an administrative fee for taking your funds out of checking or savings, and for turning same over to the government.  Just one more privation we have to look forward to.

As I wrote earlier in this piece, man seems to have an insatiable desire to imposes one's will upon another, via the laws of the land.  Rather than keeping it simple, as Mr. Jefferson wrote, the citizens of this nation have been in effect under the laws of the puritanical Taliban, since its founding.  All the way to the present day, in the form of religious right and their representative body, the Republican Party, religion - particularly Christian religion - has been used to justify all manner of intolerance and codify this intolerance in countless  laws; many of these laws, beliefs and values cast a direct assault on the liberty, freedom and happiness of others. Victimless crimes, like drug possession, have allowed America, the land of the free, to have the highest incarceration rate in the world.

Rather than respect the rights of persons, religious bigotry has been utilized to impress the majority's values upon the whole of the country, often upon long suffering minorities, such as gay persons.  But there's new hope that Jefferson's ideal may actually be coming to the fore.  The old order appears to be demographically fading away, thank God; and a more tolerant and relaxed younger generation appears to taking over.

This is best exemplified by the pending SCOTUS decision, and the hearing this week to allow gay marriage, and by a conservative court, no less.  If SCOTUS decides in the gay community's favor, their victory is a victory for us all; it is a victory for civil rights; and the gay community's win is a victory for tolerance and hope.  But above all, this is a win for freedom.  No longer will persons be persecuted under the law, for loving another adult.  No longer will persons be deprived, under the law, of life, liberty and happiness in the institution of marriage, and the numerous state and private sector benefits that come with that institution. 

BUT... there is a dark side, if the gay community wins.  
I have often written about unintended consequences, and to be careful for what one wishes for.  I don't know who first said, "man wants most what he cannot have," but I would take this line a step further and say, "man wants most what he cannot have - until he catches it by the tail, and the beast turns and badly mauls him." 

The Supreme Court, which consists exclusively of attorneys, may have another motive if they ultimately approve gay marriage.  There's a whole pack of wolves waiting on the sidelines salivating, watching, pacing... perhaps even praying for the high courts decision, not in your favor, but their favor.  These wolves, consisting of attorneys, judges, therapist, psychologist, parenting coordinators, guardian ad litems, etc, etc, etc.... make up the probate industrial complex.  And abandon all hope ye who enter here.  For these bastards will rob you blind, take away your children, and your futurity, and rend your very soul. 

Not that I'm speaking from experience, or maybe I am, but you might have possibly read it here first, a whole new body of case law will be developed, centered around gay parenting and gay probate matters, if the supreme court's decision comes through.  Millions and billions in attorney and doctor fees will be made in this endeavor by the probate industrial complex, and it will be the gay community's loss.  And the lives of gay parents, and the children of gay parents, will be sacrificed on the altar of this endeavor.

Perhaps I am stereotyping, but I have often found many of my gay neighbors to be a little brighter or certainly more worldly, and sometimes wise... an obvious generalization.  My guess is many will avoid the institution, like the plague.  Before you get married, gay or straight, please do the cost benefit analysis, sign a prenup, and think twice before you have children within the marriage.   Better to adopt, or have children directly or through a surrogate, as a single adult, or even before you get married  ---  than to pro-create, or adopt, within the institution of marriage, or prior to the marriage with your future spouse.  Men, in particular, take note!

Some might think me mad for writing such things but I have a divorce rate and actuarial tables to back me up, and I have seen an ocean of sorrow and tears emanating from these courts; and I can assure you my thinking in these matters is already quite prevalent, among many of the nation's youth.  Marriage is fleeting, divorce is for life.  Sadly, marriage is a decaying institution in rapid decline, and the attorneys - indeed a whole probate industry - are looking for fresh meat and SCOTUS just might provide.  The probate industrial complex is killing the institution of marriage, for both straights, and soon enough, the gay community.   And they have wreaked havoc on the lives of children, for generations, by playing God.

There is perhaps no political group, or judicial body, more anathema to the Jeffersonian ideal than the probate court and the practitioners operating within that court.  Corruption abounds.

You see, there is no such thing as life, liberty or happiness for those who enter the probate court system.  And win, lose or draw, you can kiss your property goodby, because a great deal of it will end up in the attorney's or judge's pockets.  Of that, I can assure you. 

The tail the gay community is presently holding onto is not the tail of the institution of marriage, but the devil's tail issuing forth from a probate judge's black robes.  

P.S.   A good read for anyone interested in learning how our probate system works, click here.


Copyright JM Hamilton Publishing 2013

Tuesday, March 19, 2013

A Golden Curtain: Mr. Churchill's "Iron Curtain" Speech...


A Golden Curtain has descended across the West…?

 “I’d rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University.”   – William F. Buckley

By J.M. Hamilton   (7-4-2011)

Per the NY Times obituary on Mr. Buckley, we the get the following:  “All great biblical stories begin with Genesis,” George Will wrote in National Review in 1980. “And before there was Ronald Reagan, there was Barry Goldwater, and before there was Barry Goldwater there was National Review, and before there was National Review there was Bill Buckley with a spark in his mind, and the spark in 1980 has become a conflagration.”

To which this blog responds, what hath Mr. Buckley wrought?

As the political architect of the Reagan Revolution, the father of the paleo-Tea Bag movement (i.e. political conservatism), and after more than a quarter century of free market ideology and deregulation, Mr. Buckley, presumably, might have some misgivings about the way things have turned out.   One thing is for sure, there were some positives about the man, and his political knowledge and debating skills were something to be feared.  In reading the above quote, one wonders if Mr. Buckley was more upbeat about the prospect of the first 400 people within the Boston phone directory running the affairs of the nation, or was he merely slamming the Harvard faculty?   My guess is a little of the both, because say what you will about the man, Mr. Buckley generally argued from a position of Christian altruism, the likes of which are rarely, if ever, heard in present Republican Party leadership.  I would like to believe Mr. Buckley, a well known Libertarian, was also a populist at heart, who genuinely believed that his brand of free market ideology would be a boon to all.

History has yet to write Mr. Buckley’s final epitaph; the political and economic wave he helped to unleash, more like a tsunami, is still very much with us – its troubled waters have yet to fully recede.  Still one can’t help but admire the man; and at the end the day, he was not a doctrinaire adherent to the political and economic ideology he helped mold and shape.   After all, any Republican who was not in favor of the Iraq war and who was not a fan of President Bush (W.) certainly deserves our acknowledgement, if not our respect; and any man who would sail into international waters to smoke a joint, so as to avoid breaking U.S. law certainly is, if nothing else, interesting.

Damn, I miss Firing Line.

But we move on, and deal with the wreckage of our present economy, and what a week it was.  Bloomberg released a story highlighting that the revolving door between the most nefarious bank known to mankind, Goldman Sachs, and Western Governments continues unabated.  Goldman not content to rule the known financial universe must also control the highest chambers of government and central banks.  Proving that we do, indeed, live under a bankocracy.  Mr. Forsyth of Barron’s Magazine wrote, if I may have license to paraphrase, that the banks of the E.U., particularly those in France and Germany, are being propped up on the shoulders of the poor of Greece and what remains of their middle class, come to think of it not unlike what has transpired in the U.S.  since 2008.  Austerity, a shrinking economy, and low employment prospects are what await Greece and the West, that is as long as our political elite remain slavishly devoted to propping up the banks.

And it doesn’t look like it’s going to get better any time soon.  Christian Lagarde will head up the IMF. And while it is wonderful that a woman will finally run the IMF, she most certainly will continue the policies that have indentured 99% of us to the banks, many of which are insolvent.  And Tim Geithner, it appears, will stay on at the Treasury for the “foreseeable future,” perhaps the worst news we received all week.

Charles Munger, the Vice Chairmen of Berkshire Hathaway (the bastion of all things Ayn Rand) had an epiphany of Tourettes, when he offered up the following gems, as reported in Bloomberg:

“The bubble in America was caused by some combination of megalomania, insanity and evil in, I would say, investment banking, mortgage banking.”

“Alan Greenspan is a smart man,” Munger said. “He just totally overdosed on Ayn Rand at a young age.”

“I would guess that Dick Fuld has not a single ounce of contrition wherever he sits today.”
Mr. Munger, the story goes on to report, is a fan of Elizabeth Warren.

My guess is the “Morning with Charlie” show will be permanently cancelled.  Mr. Munger is a reported Republican, and the Republican Leadership must be foaming at the mouth over these “revelations.”

Might have Mr. Buckley have also thought along the lines of Mr. Munger had he lived through our present financial crisis?  Quite possibly so.

But are the Democrats really any better?   This week we learn in the NY Times that Democrats and the Obama administration were about to sell out the American worker once again, with proposed passage of several Bush era free trade agreements; that is as long as Republicans were going to aid and abet this catastrophe by expanding the welfare state for all the displaced American workers, who would lose their jobs as a result of the wage, tax, and regulatory arbitrage that is “free trade.”  Of course, as this blog has written there is absolutely nothing free about “free trade.”  A friendly note to the Democratic Party:  America needs jobs, not an expansion of the deficit and more welfare programs, so that your party can appease the chamber of commerce, multi-national manufacturing and banking interests.

Do you ever get the feeling that we live in a one party state?  With both parties pandering to Wall Street, both parties propping up the banks, at the expense of us all…. If you think about it, we really aren’t that dissimilar to the Greeks who felt betrayed by their own elected officials this week, or the upset German populace, who will now have to bailout E.U. periphery nations, not to mention their own banks, again and again and again….

Of course the banks, always several steps ahead, are international in scope, hire the best and brightest, make them rich, and turn them out to run our “democracies,” perhaps to circle back again for more tax payer funded loot.  Meanwhile the G20 and the IMF (and I might add Basel), as written about by Barry Eichengreen in voxeu.org, just can’t seem to get it together long enough to thwart the interests of the Wall Street cartel, always dissolving into petty recriminations, disputes,  and bickering, not unlike a bad marriage counseling session, as Mr. Eichengreen observes

On March 5th 1946, Winston Churchill gave a famous speech in Fulton, Missouri.  At the time the speech was dismissed as more war mongering from the often bellicose and belligerent Mr. Churchill; but Mr. Churchill turned out to be quite right because an Iron Curtain was indeed descending across the continent of Europe, and much of the world, that would form the basis of the cold war for the next forty years or more.  Behind the curtain was the unfathomable, but we now know, as Mr. Buckley may have observed, it was one vast gulag archipelago, complete with slave labor, backward and underperforming economies, and absolutely miserable human right conditions.  Most importantly, personal, economic, religious and political freedom were crushed under the boot heals of communist masters.  It took the likes of Messrs. Churchill, Reagan, Buckley and Truman, with a whole lot of help and sacrifice from the West, to bring down the Soviet empire (in of all places a small country at the cross roads of the world, Afghanistan).

Today, if Mr. Churchill were alive might he warn of a Golden Curtain descending across the Western democracies?    This curtain is made of gold for our elected officials, and the insiders and banking interests protected from within.  Outside the curtain, the middle class is crumbling, unemployment and inflation are rising, and U.S. and European economies are in shambles.   And the liberty we take for granted is under threat from within.  In Greece, and coming soon to a country near you, order and peace are at a premium, as are jobs.  Crony capitalism, like some defunct Soviet era economy, is often how business gets done; likewise Monopolies, or put another way socialism by private proxy, prey upon the population with taxation without representation.  And seemingly no elected official or appointee has the political will to, consistently, say or do what is right.  Where is FDR, a traitor to his class, when you need him?   Where is Teddy Roosevelt the trust buster?   Where is Harry Truman?

Political economist will tell you that black markets are dangerous things because they offer unregulated and unsafe products, and make obscene profits, which can in turn be used to subvert democratic governments, institutions, and elected officials.  But Mexican drug cartels cannot hold a candle to the banking interests who traffic in the ultimate narcotic, money!  It is banking and shadow banking, armed with a Citizens United supreme court decision and the unlimited flow of money, that has woven the golden curtain that separates us from the our elected leaders, and perverts our democratic institutions.

P.S.
On this Fourth of July weekend, a few lines from Mr. Jefferson, who had quite a disdain for monarchs, like the Kings who rule us all on Wall Street:

“He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.”- Declaration of Independence
“A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.” – Declaration of Independence

“He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:   For imposing Taxes on us without our Consent (In the modern day this would be monopolistic profits and usurious interest rates).” - Declaration of Independence

“And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”- Jefferson’s letter to the political philosopher, John Taylor.

Copyright JM Hamilton Publishing 2013

Sunday, March 10, 2013

Three days after the Sept. 11, 2001, terrorist attacks, Congress approved the Authorization for Use of Military Force.

March 9, 2013/NYTIMES

Repeal the Military Force Law

Three days after the Sept. 11, 2001, terrorist attacks, Congress approved the Authorization for Use of Military Force. It was enacted with good intentions — to give President George W. Bush the authority to invade Afghanistan and go after Al Qaeda and the Taliban rulers who sheltered and aided the terrorists who had attacked the United States.

But over time, that resolution became warped into something else: the basis for a vast overreaching of power by one president, Mr. Bush, and less outrageous but still dangerous policies by another, Barack Obama.

Mr. Bush used the authorization law as an excuse to kidnap hundreds of people — guilty and blameless people alike — and throw them into secret prisons where many were tortured. He used it as a pretext to open the Guantánamo Bay camp and to eavesdrop on Americans without bothering to obtain a warrant. He claimed it as justification for the invasion of Iraq, twisting intelligence to fabricate a connection between Saddam Hussein and the 9/11 attacks.

 


The right solution is for Congress to repeal the 2001 authorization. It could wait to do that until American soldiers have left Afghanistan, which is scheduled, too slowly, for the end of 2014. Better yet, Congress could repeal it now, effective upon withdrawal.






A government of the banks, by the banks, and for the banks....

Up and Down Wall Street/ Barron's

 | SATURDAY, MARCH 9, 2013 

Too Big to Jail

U.S. attorney general admits to concern about impact on markets of prosecuting bankers and banks suspected of violating the law.

"All animals are equal, but some animals are more equal than others," George Orwell famously wrote in his allegory on totalitarianism, Animal Farm.

Mammoth banks have been more equal than others for some time. Ever since the bailout of Continental Illinois, which, in an ironically Orwellian twist, took place in 1984, megabanks have been deemed "too big to fail" because of the feared impact of the failure of any one big link in the financial daisy chain.

After all, one institution's liabilities are the assets of others, the realization of which can spread a run on one to the entire system. The recent financial crisis made the implicit backing of too-big-to-fail institutions explicit with the passage of the Troubled Assets Relief Program, which originally slated $700 billion of taxpayer money to be invested in banks and other institutions.

But the bailouts have left the bankers who caused the crisis largely blameless, which last week puzzled Senator Charles Grassley, the Iowa Republican who has long had an interest in financial matters. In a hearing of the Senate Judiciary Committee on Wednesday, he expressed concern to Attorney General Eric Holder that some institutions had become "too big to jail," even HSBC (ticker: HBC), the U.K.-based bank that agreed last year to a record $1.9 billion penalty to settle money-laundering charges.

According to the transcript of the hearing: "I don't have a recollection of [the Department of Justice] prosecuting any high-profile financial criminal convictions in either companies or individuals. Assistant...Attorney General Breuer said that one reason why DOJ has not brought these prosecutions is that it reaches out to, quote-unquote, experts to see what effect the prosecutions would have on the financial markets."

In a stunning response, Holder agreed: "The concern that you have raised is one that I frankly share. And I'm not talking about HSBC now, because that may not be appropriate. But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large."

In other words, the nation's chief law-enforcement official admitted the decision to prosecute depends not on the law, but the impact on the financial markets and the domestic and global economy from these megabanks.

While Holder's admission might give new impetus to legislation to break up the banks, it is unlikely to get anywhere. After all, the big banks could point to their healthy scores last week on the latest "stress tests," which critics suggest aren't stressful enough. Of the 18 biggest U.S. banks, only Ally Financial, the former GMAC, which still is a ward of the state, failed the stress test. The main criterion was that the banks still had a 5% buffer of primary capital, even after a set of hell-or-high-water catastrophes, including a 50% drop in the stock market, a decline of more than 20% in the housing market, and an unemployment rate of 12.1%. So, even if these banks are bigger than they were before the 2007-09 near meltdown, they are at least better capitalized.

That these banks could survive such dire circumstances owes a lot to the capital that regulators forced them to raise. But due credit ought to be paid to the Fed's policies of holding short-term rates near zero and its bond purchases, which have combined to restore the health of the credit markets, pull the housing market out of its tailspin, and boost other asset prices, not the least pushing the Dow Jones Industrial Average to a record last week.

This recovery raised households' net worth by some $1.17 trillion in the fourth quarter, to $66.07 trillion, the highest since 2007, just before the housing meltdown, according to data released last week by the Fed. That's all good news. But not if it's perceived to be the result of action by a government of the banks, by the banks, and for the banks.

 

She declined to be interviewed but, through a colleague, provided a list.

March 9, 2013/NYTIMES

Corralling Mobsters, if Not Many Big Banks

EVERYONE knows about the mobsters and terrorists that Mary Jo White successfully put behind bars during her nine years as United States attorney for the Southern District of New York. Less well-known is Ms. White’s record bringing cases against large financial institutions during her stint as the top criminal prosecutor in New York.

Ms. White, who has been nominated to become the chairwoman of the Securities and Exchange Commission, ran the Justice Department’s unit in the Southern District, which includes Manhattan, from 1993 until January 2002. She is expected to appear at a confirmation hearing before the Senate Banking Committee on Tuesday.

Ms. White’s recent work as a partner at Debevoise & Plimpton, where she represented JPMorgan Chase, Morgan Stanley and other companies, has come under scrutiny. Her record as a federal prosecutor of financial crime has received less attention.

Given that regulating financial firms will become her purview if she heads the S.E.C., assessing her pursuit of financial fraud as a prosecutor may provide clues to how she would run the agency.
Let’s just say her prosecutorial stint did not include a lot of cases against large United States financial institutions.

Last week, I asked Ms. White which large financial institution cases she was most proud of prosecuting. She declined to be interviewed but, through a colleague, provided a list.
First on that list was a 1996 case against Daiwa Bank, a Japanese institution that lost its license to do business in the United States after Ms. White’s office indicted it for fraud. Daiwa pleaded guilty and paid a fine of $340 million, then a record for a financial institution.

Another case she cited was the 2001 fraud case against Republic Securities, a unit of Republic Bank, which generated $600 million in restitution for clients whose accounts had been valued improperly by bank employees. It, too, pleaded guilty.

A third highlight on Ms. White’s list was a 1999 prosecution of Bankers Trust for misappropriating $19 million from dormant customer accounts. The bank pleaded guilty and paid more than $60 million in fines.

Those are considerable victories. Four other cases she cited through her colleague involved Ponzi schemes and fraud by small investment advisory firms, not household-name Wall Street or financial firms.

A review of her years in the Southern District also turned up several intriguing cases that Ms. White and her colleagues did not pursue or turned away. All three of these matters involved large and prestigious financial companies headquartered in the United States.

A big question mark, federal investigators say, still hangs over the decision by Ms. White’s office not to prosecute Citibank in the mid- to late 1990s for a possible role in questionable money transfers that benefited Raúl Salinas de Gortari, the brother of the former president of Mexico. Between 1992 and 1994, Mr. Salinas, a consultant to a Mexican antipoverty agency whose annual salary never exceeded $190,000, somehow moved almost $100 million from Citibank accounts in Mexico and New York to Citibank accounts in London and Switzerland.

 



Follow J.M.H. on Twitter...

@jmhamiltonblog

 

@jmhamiltonblog

 

Saturday, March 9, 2013

KABUL, Afghanistan

March 5, 2013/NYTIMES

Trail of Fraud and Vengeance Leads to Kabul Bank Convictions

KABUL, Afghanistan — If Kabul Bank’s founder, Sherkhan Farnood, had not decided on a summer day three years ago that revenge was worth self-incrimination, he might never have seen the inside of a courtroom.

But the halting and often obstructed investigation he helped fuel that day culminated on Tuesday with the first convictions in the Kabul Bank fraud scandal, a spectacular implosion of corruption that has undermined the credibility of the Afghan government and its Western benefactors.

Mr. Farnood was one of 21 people found guilty on Tuesday. But it was specifically his conviction and that of his chief executive and former bodyguard, Khalilullah Frozi, that American and European officials had warned would be necessary if billions of dollars of international aid was to continue to flow to Afghanistan. The two masterminds were convicted of a crime akin to fraud, sentenced to five years in prison and fined hundreds of millions of dollars, considerably lesser results than prosecutors had sought.

The path to those verdicts had been laid out in dozens of interviews since Kabul Bank nearly collapsed in 2010, with the main players offering details of the fraud scheme and their decision-making, including Mr. Farnood, shareholders and Afghan, American and European officials.
In the summer of 2010, Mr. Farnood stood atop a huge pyramid of fraudulent loans and kickbacks. But things were beginning to crumble, threatened by a perilously overstretched balance sheet and a power struggle for control of the bank among Mr. Farnood, Mr. Frozi and two other major shareholders.

Mr. Farnood was losing.

The enmity had become so great that Mr. Farnood was telling friends that he would rather bring down the bank than let his rivals have it.

In July, he got his chance when two American law enforcement agents investigating the mysterious flight of billions of dollars in cash from Afghanistan walked through the doors of his office in Dubai. Kabul Bank appeared to play only a tangential role in the cash smuggling. But the investigators had heard about the power struggle at the bank. They had a hunch that Mr. Farnood might talk.
He did more. Mr. Farnood, who had once won an event at the World Series of Poker Europe, went all in.

Within days, he was telling the Americans how the bank was basically a Ponzi scheme. Depositors put in money, and its owners took it out through fraudulent loans, lining the pockets of a narrow clique tied to President Hamid Karzai and his first vice president, Muhammad Qasim Fahim.



Suicide bomber kills nine Afghans

Suicide bomber kills nine Afghans in Kabul during Hagel visit

5:08am EST
By Mirwais Harooni and Phil Stewart

KABUL (Reuters) - A suicide bomber blew himself up at a Defence Ministry gate in Kabul on Saturday killing nine civilians during a visit to Afghanistan by U.S. Defense Secretary Chuck Hagel, underlining the insurgent threat as NATO troops prepare to leave.
Hagel was nowhere near the explosion, said a spokesman for Afghanistan's NATO-led International Security Assistance Force (ISAF). A U.S. defense official said Hagel was in a safe location at an ISAF facility.

An Afghan Defence Ministry official said at least nine people, all civilians, were killed. Fourteen people were wounded in the attack, carried out by an insurgent on a bicycle.
Roads around the ministry building, which is near the presidential palace, were closed as emergency officials cleared the area of debris and washed blood from the street. A wall surrounding the ministry was pockmarked with shrapnel.

The Afghan Taliban claimed responsibility for the attack and said the ministry was the target. They said in a statement the attack "is a kind of message" for Hagel.
The blast underscored the security challenges facing Afghanistan as U.S.-led NATO forces prepare to leave the country by the end of 2014.

Some Afghans fear that another civil war could erupt or the Taliban will make a push to take control of the country again after Western combat troops withdraw.

In the eastern province of Khost, a suicide bomber attacked a joint Afghan and foreign patrol, killing seven civilians and a policeman, the provincial governor's office said in a statement.
After the blast in Kabul, the defense secretary flew to Bagram Air Base near Kabul for meetings with commanders.




Dien Bien Phu & the Last Empire

Dien Bien Phu & the Last Empire

by J.M. Hamilton (Originally Published 12-25-11)

“Colonial policy is the daughter of industrial policy.” – French P.M. Jules Ferry

Lost in the fog of war and the mists of time is a long forgotten battle. A battle fought on the other side of the world, between the French and a proud and indigenous people, who wanted nothing more than their freedom from colonial rule. The U.S., at that time, pumped what would be considered an exceptional amount of money into the French military. Fought in the decade following WWII, and with the Korean War very much on the minds of U.S. policy makers, surely the French could defeat this revolutionary tribe. But it was not meant to be, the French decided to roll the dice within Indochina’s isolated hill country, near the enemy’s Laotian supply line. The French opposition knew the importance of this battle, as international negotiations were underway in Geneva over the regions future. The French, who had brought with them into battle mobile bordellos, were caught off guard when they found themselves surrounded by captured artillery pieces and anti-aircraft guns, strategically placed on higher ground. The subsequent battle of Dien Bien Phu ended French colonial rule in Southeast Asia, and became a rallying cry globally for nationalist movements seeking independence from occupying western powers. The country was subsequently divided in two at Geneva, and Ho Chi Minh was given a foothold in North Vietnam and international legitimacy, with which to launch a civil war that would eventually end in American defeat two decades later.

The New York Times reported on 5-9-54 the following: “The fall of Dien Bien Phu marks the end of an era. The ultimate military, political and psychological reactions may either make or break the anti-Communist front in the Far East and France as a great power… A lost battle has tipped the scales of history in the past; Dien Bien Phu may prove, in future accountings, to be the balance point in contemporary history.” - After Dien Bien Phu, What?

Could the Iraq war be America’s Dien Bien Phu?

Before answering that question, let’s take a look at the similarities and differences between America’s wars in Iraq and Indochina. And then let’s examine the cost allocation of war.

History repeats. Both wars, Vietnam and Iraq, were started at a time when the American public was hyper vigilant about a perceived and real menace in the world: Communism and Radical Islam. In both wars, political authorization for U.S. involvement was obtained under dubious and questionable circumstances: In Vietnam it was the Gulf of Tonkin incident that provided a catalyst, and in Iraq it was concern over weapons of mass destruction. In both wars the political goals and objectives were nebulous over time, and finally denigrated into “nation building;” and in both wars, America was either forced to leave the battlefield or requested to leave… no longer wanted, and leaving under less than auspicious circumstances. Time would also show that the twin threats of Communism and Arab Radicalism would dissolve considerably with the collapse of the Soviet Union and the rise of the Arab Spring/pro-democracy movements.

And as Vietnam proved, and as pointed out by Alan Abelson in last weeks Barron’s, Americans will not know the true cost of the Iraq war for many decades. The Iraq war will more than likely exceed a trillion is net cost, but that doesn’t begin to account for the tremendous forgone opportunity costs incurred by the nation, when we consider that Iraq war debt could have been allocated to helping Americans achieve a higher education, or if said funds were allocated to paying down the national debt, or not expanding same. Even by today’s standards, a trillion dollars is still real money. Nor does this begin to factor in the additional economic burden placed upon ordinary Americans, and returning soldiers, post war, when monetary policy inevitably swings towards war debt monetization – resulting in inflation and lower living standards.

That the real political achievement of the Iraq war was the permanent removal of Saddam Hussein calls into question the efficacy of Executive Order 12333, which supposedly forbids the assassination of foreign heads of state. The reality is there are plenty of exemptions to Executive Order 12333, and so if we compare the cost of the Iraq war to say, the cost of the mission to eliminate Osama bin Laden, well there really is no comparison. What’s the nominal cost of a bullet or a drone, versus the extraordinary cost of Iraq War…. all to remove one man? To push the point a step further, compare the cost, in blood and treasure, to remove Col. Gaddafi versus Saddam Hussein?

Separately, “nation building” (code for we no longer know what the freak we are doing here, so we have turned this mission into a philanthropic enterprise) was a failure in Vietnam, and only time will tell if it will prove successful in Iraq. Recent actions by the Iraqi prime minister, like issuing an arrest warrant for the Iraqi Vice President and further consolidating his hold on power, already call into question whether or not a nascent Iraqi democracy will flower and grow. What nation building really has come to symbolize is a run up of conflict costs and expenditures, and a financial “pig-out” by private contractors and commercial interests within a war zone, all at U.S. tax payer expense.

Despite many similarities, a key difference between both wars was the utilization of conscription by U.S. forces fighting in Vietnam, versus an all volunteer military fighting force in the Iraq War, and the resulting passive objection to the Iraq war by U.S. society, versus the near public rebellion over the Vietnam war. Some how it makes it more acceptable to some Americans if the poor and the down trodden are voluntarily sacrificed upon the altar of war, instead of the sons and daughters of the wealthy and the middle class, via the draft. And the military industrial complex (MIC) knows this. Former Defense Secretary Robert Gates warned of a separation in society between an elite warrior class and ordinary Americans.

Also of critical importance, we can see a tremendous disconnect in the way the costs of war are passed onto society as whole, in lieu of armed conflict’s true beneficiaries. J.M.H. argues that because of this, wars have a tendency to drag on indefinitely. In other words if the true costs of the war were allocated correctly, than wars would become more efficient, cost effective, produce swifter results with less loss of human life, and pull out and withdrawal would become more rapid. More thought might also be given to entering into war in the first place.

So who or what truly benefited then from the removal of Saddam Hussein, aside from the Shia majority inside Iraq? Well as clearly alluded to by French Prime Minister Jules Ferry, commercial interests clearly benefit from war without end, colonization, and/or nation building. Big Oil was clearly chomping at the bit to return to Iraq. And of course the U.S. military industrial complex expanded and grew, significantly, over the last decade, more than doubling in budgetary outlays. Not surprisingly banks benefit with the issuance of martial debt and financing. The fact that the U.S. government spends more on defense than the G-20 combined says it all.

As with all wars, there are often unintended consequences. An unintended beneficiary of Mr. Hussein’s removal was Iran; and Iran has been working to obtain a foothold inside Iraq, with success, ever since the U.S. lead invasion.

America has to figure out a way to be less subservient to what President Eisenhower referred to in his farewell address to the nation as the military industrial complex; failure to do so may mean that Iraq could become America’s Dien Bien Phu. How then might America control the costs of war, and prevent taxpayer money, sometimes with good intentions, from being wasted on nation building? If the cost of Iraq war was amortized over the costs of the products and services produced by the MIC, and passed onto foreign consumers (America being the largest arms dealer on the planet), the price of a prolonged and protracted war would become too great for the MIC to endure and would make MIC products and services considerably less competitive. Likewise, if the price of the Iraq war were presented as a cost of doing business to Big Oil or mining interests, they would balk at the cost; and maybe the Iraq war truly would have ended when Mr. George Bush landed on the deck of the aircraft carrier, USS Abraham Lincoln, with the now infamous sign, “Mission Accomplished.” Thanks to the manner in which American wars are presently billed, there is no financial incentive to rein in the cost, since the U.S. has been living on a credit card economy for decades, and the MIC, via its all volunteer military, has all but eliminated serious protest.

Ultimately, if America is unsuccessful in reining in MIC costs, it could result in a threat to national security, the loss of international prestige, as well as, possibly cause unmitigated hardship here at home, as defense spending takes away government services from the 99% and ultimately leads to an increase in taxation upon all Americans, the 100%. (By way of example, take a look at the financial situation of the so-called PIIGS in Europe… and ask yourself, are these nations in any kind of financial condition to fight a war on terror or handle any other sovereign threat?  The PIIG’s fiscal policy, and deficit spending, is a threat to their very own national security.)  Equally tragic, back in America, nation building exercises may leave the MIC winded and the public less likely to support the use of force in the future, when the U.S. may actually have very good reasons for going to war.

“Of all the enemies to public liberty war is, perhaps, the most to be 
dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes … known instruments for bringing the many under the domination of the few.… No nation could preserve its freedom in the midst of continual warfare.”
— James Madison, Fourth President of the U.S.

There is some reason for optimism however. Not everyone who enters the White House is an opportunist or a poor war strategist. Look at George H.W. Bush and his management of the first Gulf War; this was a war that was fought with great precision, finite goals and objectives, and clearly big oil and the House of Saud were among the beneficiaries of that war, not to mention the Government of Kuwait. Arguably, the U.S. should have submitted a substantive portion of the bill for that war to the various governments in the Middle East and to commercial oil concerns operating in the region.

Better yet, observe President Obama and his deft and expert management of the overthrow of the Libyan dictator, Colonel Gaddafi. These are excellent examples of where the U.S. military was utilized for its intended use, as opposed to an unending nation building exercise that only served to enrich the private contractors of war, and the commercial interests that sweep in post-war – all at the expense of the American people and the men and women who serve. Are we naive enough to believe that these same commercial interests, in our present form of democracy, do not have a considerable say in how and when America goes to war? Do foreign governments and the MIC lobby the congress? Assuredly and big time!

To be sure, there are many reasons to go to war, and American leaders may in fact have the best of intentions and the highest of ideals ( humanitarian, the spread of democracy, and otherwise), but our leaders nor the American people should never lose sight of the fact that there are tremendous profits to be made in war, as well as, many interested parties and unintended consequences and expense.  

J.M.H. is a fan of President Obama’s foreign policy, and the world owes him a debt for his substantial contribution towards the Libyan dictators removal; and America owes the President another debt for finally extricating our service men and women from the Iraq war.

That said, it appears that we plan on colonizing Afghanistan for years to come, in yet another nation building exercise. Witness last Wednesday’s NY Times story, which quotes a U.S. general as stating that America may be in Afghanistan beyond 2014. How ironic that Afghanistan, under Americas watch, has been and remains the worlds foremost opium purveyor. Americans, fiscal conservatives, and liberals, who find endless war objectionable, or too damn corrupt and expensive, may find that Republican Presidential Candidate Ron Paul provides sharp and welcome contrast to mainstream political pandering to the MIC. Perhaps Mr. Paul can help drag the mainstream towards his line of thinking?

J.M.H. is grateful for the men and women who serve their country. And Americans, as responsible participants in our democracy, owe it to our armed forces to make sure that when our elected officials send these men and women into harms way – it truly is for the advancement and protection of the national interest, and not just another nation building exercise. These men and women would also be better served if the true costs of U.S. involvement in armed conflict were allocated to commercial entities and foreign governments, with vested economic and political interests, when and where possible.

After all, blood and nation building are a huge expense.

P.S. 
“The most powerful weapon on earth is the human soul on fire.” -Ferdinand Foch

Americans should not confuse a quick willingness to go to war with patriotism, or subservience to the MIC as a rational political agenda.  Ronald Reagan, who never started a hot war in his two terms in office, is model for current political leadership to emmulate, in this regard.

A very happy holidays!

Copyright JM Hamilton Publishing 2013