 | | The Daily Reckoning | Friday, September 9, 2011 |
- A hyperactive gold market and a comatose stock market,
- An ex-CIA agent on the cost of living in a post-9-11 USA,
- Plus, Bill Bonner on pretending to create jobs, pretending to boost the economy and plenty more (pretending)...
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|  | | | Aiding the Success of Failure | | From Bailouts to Bubbles in a Government-Centric America | |  | | Eric Fry |
Reporting from Laguna Beach, California...
The Dow Jones Industrial Average tumbled 119 points yesterday because, according to Bloomberg News, Ben Bernanke “avoided offering new growth plans.” The Dow continued plummeting another 300+ points today because President Obama is not doing enough to “create jobs” and the European Central Bank is not doing enough to prevent a Greek default.
All-in, the Dow has shed nearly 500 points because central banks and politicians are not doing enough to fix the stuff that’s broken. (The carnage in the European stock markets has been even more grisly). Perhaps the problem is exactly the opposite — central bankers and politicians are meddling so incessantly that the stuff that’s broken has no opportunity to repair itself.
It’s true that the Federal Reserve Chairman, throughout his speech in Minneapolis yesterday, refrained from promising a new barrage of monetary stimulus measures. But he did not say he would do nothing. To the contrary, he assured his audience, “the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus... The Federal Reserve will certainly do all they can to help restore high rates of growth and employment in a context of price stability.”
The stock market did not seem to believe him...or care. But the gold market had no doubts. With every word the Chairman uttered about “additional monetary stimulus,” the gold price ratcheted higher. By the end of the New York trading day, the gold price had jumped $53 dollars an ounce to $1,870.
The comatose stock market — like the lively gold market — can trace its roots to an economy that made a few wrong turns during the last few years. The lousy stock market and robust gold market can also trace their roots to governments that refuse to let failure fail.
Instead of letting failure fail, a succession of Federal Reserve Chairmen, Treasury Secretaries, Presidents and Congressmen have chosen to help failure succeed...or at least to not hurt very much. Every time the slightest hint of adversity drifted our way, out came the rescue packages and stimulus measures to make sure that no harm came to those who deserved it.
Thus the bailout of Long-Term Capital Management in 1998 begat the Nasdaq Bubble of 1999, which begat the Housing Bubble of 2005-6. Throughout this bubble era, the US economy seemed relatively robust. So almost no one bothered to worry about the long-term side-effects of failure-prevention. And even fewer folks seemed to worry about the expanding reach of the Federal government into almost every aspect American life.
The tragedy of September 11, 2001 opened the door to this sweeping federal intrusion. And that door remains open to this day. The tentacles of state-sponsored do-gooding and we-know-what’s-best-for- you regulation are blindly flailing about in every aspect of America life and latching on to whatever happens to pass within their reach.
This coming weekend, we Americans will solemnly recall the tragic events of September 11, 2001. Ten years have passed since that infamous day, but the agony of bereavement remains as acute as ever for those who lost loved ones in the Twin Towers. No pain can compare to the pain of losing someone who had made your life worth living. It is simply a tragedy...and there were 3,497 such tragedies on 9/11.
But the tragedies of 9/11 would not end that day. Instead, they would multiply. 9/11 triggered a national response that has produced a very long and lamentable list of tragedies, great and small.
Topping the list of tragedies, 4,683 US soldiers and 100,000-plus Afghani and Iraqi civilians have perished since the launch of “Operation Enduring Freedom” on October 7, 2001. Lesser tragedies would include the death of various American civil liberties, the creation of the Transportation Safety Administration and the rebranding of the “US Customs Service” as “US Customs and Border Protection.”
“Customs Service” sounds civilized and helpful, “Customs and Border Protection” sounds savage and paranoid. Perhaps the subtle name change means nothing at all, or perhaps it means everything about where we are heading as a nation.
US customs agents strut around the baggage claim area of international flights, packing loaded SIG-Sauer P229Rs on their hip. Really? Is this necessary? When was the last time you read about a shootout at baggage claim?
Couldn’t a friendly guy or gal, armed only with a smile, get the job done just as well...or better?
Not anymore, apparently. Not in post-9/11 America.
In the article below, guest columnist, Haviland Smith, a former CIA agent, examines the US response to 9/11 from the perspective of an insider. His insights may surprise you.
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| | The Daily Reckoning Presents | | A Decade Later | |  | | Haviland Smith |
We are now getting close to the 10th anniversary of the al-Qaida attacks of 9/11. Although a decade is an insufficient period for most historians to comfortably draw firm conclusions about anything, it is possible to look at our world today and see how it appears to have been affected by that disastrous event and the ensuing decade.
It is critical to remember that terrorism is not designed to overwhelm. It is designed to undermine. In that context, whatever it does to cause or initiate anxiety in targeted populations and governments, it relies on the reaction of those populations and governments equally as much to achieve its final goals. And America has reacted in ways that have haunted us and will continue to haunt us for decades. Al-Qaida could not have wished for more.
Domestically, we have seen major changes in our lives. Think of our color-coded terrorist warning system, our current airport controls, our paranoia over anyone who “looks like a Muslim” (whatever that is), or “acts differently.” What is that paper bag doing in the subway? Airport? Train station? Movie?
In the aftermath of 9/11, Americans were clearly prepared to and ultimately did surrender their civil liberties and individual rights in the hope that doing so would add to their own physical security. We forgot Benjamin Franklin’s injunction that “they who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.”
The Patriot Act, where it was designed ostensibly to increase our security here at home, did many other things that have negatively affected the way we lead our lives. It increased the government’s ability to spy on us, to monitor our activities in a very broad and general way. It introduced warrantless wiretapping and the monitoring of fund transfers and Internet communications. It also initiated the national security letter process that required any person or organization to turn over records and data pertaining to individuals without warrant, and all this without probable cause or judicial oversight.
The other major domestic impact of the decade has been financial. During that period, we have gone from what was verging on a national surplus to a deficit that is now approaching $15 trillion and increasing at the rate of $3.95 billion every day. We got there through a combination of factors, including tax cuts, the “War on Terror,” and unfunded military operations in Afghanistan, Iraq, Pakistan and now Libya. Brown University’s comprehensive June 2011 “Costs of War” project, factoring in all the costs associated with the decade, arrives at close to $4 trillion. Tax cuts add $2.8 trillion. There seems virtually no doubt that in the absence of our reaction to 9/11, we would be fiscally relatively healthy.
In addition to the foregoing difficult domestic situation, which we largely created for ourselves in the aftermath of 9/11, the changes we have seen in our foreign policy will haunt us for years to come. In that arena, our move to military-based, unilateral policy was a radical change. Yet our invasion and defeat of Iraq and the ascendance to power of the Iranian-allied Iraqi Shiites will likely prove to be our most egregious blunder.
It’s not that Saddam Hussein’s Iraq was in any sense enlightened; it is very simply that Saddam’s Iraq was the only effective impediment to Iranian control over the Persian Gulf. From 1980-88, Iran and Iraq fought a war for supremacy in the gulf. In the absence of a clear resolution of that conflict, the fact that Iraq survived served as a critical deterrent to Iranian dreams for hegemony there.
Our invasion and defeat of Saddam’s Iraq was something the Iranians could never have accomplished on their own. With Shiites now assuming power under our new order in Iraq and Iran threatening the old Sunni positions in the Gulf States, Iran has come even closer. We have destroyed the last real impediment to Iranian dreams for the gulf.
We have had our chances to deal with 9/11 in ways that would have better favored our own national interests. Instead, we panicked, invoked questionable practices at home and became involved in military adventures abroad that will almost certainly ultimately be viewed as disasters.
Without the active, witless involvement and acquiescence of our government and Congress over the past decade, al-Qaida terrorism would have caused us far less pain than it ultimately has and we would be a great deal safer, richer, wiser and internationally more powerful and respected than is now the case.
Regards,
Haviland Smith,
for The Daily Reckoning
Ed. Note: Haviland Smith is a retired CIA station chief who served in Eastern and Western Europe and the Middle East and as chief of the counterterrorism staff. He lives in Williston.
| | | | The Secret Financial “Timebomb” Nobody’s Talking About |
Forget the DC debt circus... this secret Saudi event could double your cost of living, in more ways than one, starting as early as the end of this year.
Nobody wants to talk about it... and not Obama or Congress have any idea what to do, once this event starts to unfold. Once it does, get ready to kiss your savings goodbye.
Hear our shocking new warning in this special report...
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| | | | Bill Bonner | | Government Spending: A Novel Approach to Fixing the Economy | |  | | Bill Bonner |
Reckoning from Baltimore, Maryland...
We were talking about faithless shepherds.
Politicians who sold out the American middle class...
Banks who stabbed their clients in the back...
Even the military, pretending to defend the country...it betrays the nation’s most sacred principles...
And here we have two shepherds in front of us. One of them is supposed to look after the whole flock of Americans. The other is supposed to protect their money.
Last night, the president came out with his jobs plan, as expected...and Mr. Bernanke shirked his duty, again.
All and all, it wasn’t a bad day. Two major public figures spoke — a President and a Fed Chief. One shepherd pretended to create jobs. The other pretended to boost the economy. Neither did lasting damage, as near as we can tell.
The Bloomberg report:
Policy makers “are prepared to employ these tools as appropriate to promote a stronger economic recovery in the context of price stability,” Bernanke said today in a speech to economists in Minneapolis.
The Fed chief echoed points from his Aug. 26 speech in Jackson Hole, Wyoming, stopping short of signaling what he believes is the Fed’s best option to aid the economy. He said in previous remarks that the Fed’s measures to bolster growth include lengthening the duration of securities in its $1.65 trillion Treasury portfolio and buying more government bonds. For his part, the president of the Americans proposed spending more money now...and paying for it later. Hey, that’s a novel approach! But it was neither here nor there. Spending more money is what the feds do anyway. And a few billion more or less isn’t going to make any difference. Except that, since every penny will be borrowed, it will leave the nation that much closer to bankruptcy. The poor lambs are going to get sheared.
So, things are as they should be. God is in his Heaven. The unfaithful shepherds are thick on the ground. And the Great Correction continues unmolested by them.
And more thoughts...
Stocks sold off yesterday. The Dow was down more than 100 points. Investors were hoping Ben Bernanke would throw them a bone. They were disappointed when he didn’t.
But people are getting used to disappointment. That’s what a Great Correction does. It demolishes hopes of easy money. Everything becomes hard...
Here’s The New York Times with more news:
...When people are anxious, they pull back, which leads to a cycle of hiring freezes and further anxiety that often lasts for months.
The United States appears to have entered some version of the vicious cycle. Most ominously, job growth has slowed to a pace that typically signals the start of a recession.
Over the last 50 years, every time that job growth has been as meager as it has been over the last four months, the economy has been headed toward recession, in a recession or in the immediate aftermath of one. From early 2010 through this spring, by contrast, employment was growing fast enough to make the economy look as if it were in a recovery, albeit a modest one.
“The chances that we are in something that is going to feel like a recession are close to 100 percent,” said Joshua Shapiro of MFR Inc. in New York... Well, that was a sly way of getting around making an actual prediction. It may or may not be a recession...but it will certainly seem like a recession!
And finally, this...
CIA Has Become “One Hell of a Killing Machine,” Official Says
By Alex Newman
The Central Intelligence Agency continues to rapidly expand its global extrajudicial assassination program under the Obama administration, secretly murdering people with drones from Pakistan and Afghanistan to Somalia and Yemen. Even American citizens are fair game, according to the President.
The dramatic evolution of the agency’s priorities and operations has become so extreme that a former senior intelligence official told the Washington Post the CIA had been turned into “one hell of a killing machine.” The official, who spoke on condition of anonymity, said the paramilitary transformation was “nothing short of a wonderment.”
But the dramatic metamorphosis, detailed in a recent exposé by the Post, entitled “CIA shifts focus to killing targets,” is hardly without critics. Some experts have even warned Congress that the illegal killings may constitute war crimes.
Thousands of suspected “militants” and civilians have been executed in drone strikes so far. At least 168 children were killed by such attacks just in Pakistan over a seven year period, according to a study released last month by the London-based Bureau of Investigative Journalism. The real figure is probably even higher.
But few of the targeted suspects, if any, were formally charged with committing a crime before being blown apart — often with their entire families. Even fewer had been convicted in a court of law. Regards,
Bill Bonner
for The Daily Reckoning
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