There are four major sunspot cluster today and Sunspot 1476 is decaying, but it still has a
'beta-gamma-delta' magnetic field that harbors energy for X-class solar flares. On May 11th, a
coronal mass ejection from sunspot cluster 1476 raced away from the sun traveling ~1000
km/s. The fast-moving cloud will deliver a glancing blow to Earth's magnetic field on May
14th around 14:30 UT, according to a forecast track prepared by analysts at the Goddard
Space Weather Lab. Mars is also in the line of fire.
One in seven thinks end of world is coming: poll

(Reuters) - - Nearly 15 percent of people worldwide believe the
world will end during their lifetime and 10 percent think the
Mayan calendar could signify it will happen in 2012, according
to a new poll.
The end of the Mayan calendar, which spans about 5,125 years, on December 21, 2012
has sparked interpretations and suggestions that it marks the end of the world.
"Whether they think it will come to an end through the hands of God, or a natural
disaster or a political event, whatever the reason, one in seven thinks the end of the
world is coming," said Keren Gottfried, research manager at Ipsos Global Public Affairs
which conducted the poll for Reuters.
"Perhaps it is because of the media attention coming from one interpretation of the
Mayan prophecy that states the world 'ends' in our calendar year 2012," Gottfried said,
adding that some Mayan scholars have disputed the interpretation.
Responses to the international poll of 16,262 people in more than 20 countries varied
widely with only six percent of French residents believing in an impending Armageddon
in their lifetime, compared to 22 percent in Turkey and the United States and slightly
less in South Africa and Argentina.
But only seven percent in Belgium and eight percent in Great Britain feared an end to
the world during their lives.
About one in 10 people globally also said they were experiencing fear or anxiety about
the impending end of the world in 2012. The greatest numbers were in Russia and
Poland, the fewest in Great Britain.
Gottfried also said that people with lower education or household income levels, as well
as those under 35 years old, were more likely to believe in an apocalypse during their
lifetime or in 2012, or have anxiety over the prospect.
"Perhaps those who are older have lived long enough to not be as concerned with what
happens to their future," she explained.
Ipsos questioned people in China, Turkey, Russia, Mexico, South Korea, Japan, the
United States, Argentina, Hungary, Poland, Sweden, France, Spain, Belgium, Canada,
Australia, Italy, South Africa, Great Britain, Indonesia, Germany.
Rand Paul Launches Campaign to End the
TSA
Paul Joseph Watson
Infowars.com
Thursday, May 3, 2012
Senator Rand Paul has issued a press release in which he vows to lead the charge to “end the
TSA” and put a stop to the needless and humiliating groping of toddlers and grandmothers.
Earlier this year, Paul was detained by the TSA after refusing to submit to an invasive pat down
after already having passed through a body scanner. The incident prompted national headlines
and caused the Senator to miss his flight.
“It’s time to END the TSA and get the government’s hands back to only stealing our wallets
instead of groping toddlers and grandmothers,” says Paul in the statement.
The accompanying article sent out to Campaign for Liberty members encourages recipients to
sign a petition in support of Rand Paul’s ‘End the TSA’ bill.
The legislation would forcibly privatize the TSA and kick government out of airport security
entirely. A recently passed bill actually allows airports to replace TSA screeners with private
security but they have to go through a complex TSA permission process to do so, meaning only a
handful of small airports have applied to evict the TSA.
Financial contributions are also being sought to launch a “full, targeted media campaign to
convince representatives and senators to either get on board or be held responsible for this
continuing outrage.” A previous ‘End the TSA Money Bomb’ started by Congressman Ron Paul
following his son’s treatment at the hands of the federal agency has already raised over $1.6
million dollars.
The email points out that the TSA’s invasive and dangerous body scanners have been proven to
be completely useless, most recently by engineer Jon Corbett who was able to fool the device by
simply sowing an object into a side pocket.
The email lists a handful of recent TSA outrages amidst the deluge that occur on a weekly basis.
- A TSA agent patting down a young girl at New Orleans’ Louis Armstrong International Airport
in 2011. The video shows a cooperative family, and when the girl’s mother asks, “Can’t you just
re-scan her?” the agent replies, “No” and proceeds to grope the poor child;
- A cancer survivor in Charlotte was forced to remove a prosthetic breast;
- A young mother of a two-week-old infant in Florida was harassed to open the bottles of baby
formula she was traveling with on her flight, which would have spoiled the only food available
to the infant;
- Detroit TSA officers ignored a man’s warning about a colostomy bag, breaking it and forcing
him to board a plane covered in urine.
Sometimes our liberty slips away silently, and it is almost hard to notice what went wrong and
where. The one fortunate thing about the TSA is that they certainly don’t fit that definition.
The American people shouldn’t be subjected to harassment, groping, and other public
humiliation simply to board an airplane. As you may have heard, I have some personal
experience with this, and I’ve vowed to lead the charge to fight back.
Report warns of weather satellites' 'rapid decline'
By Ledyard King, Gannett Washington Bureau
Updated 18h 32m ago
Predicting the weather is tricky enough. Now a new government-sponsored report
warns that the USA's ability to track tornadoes, forecast hurricanes and study climate
change is about to diminish.
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and manipulation. It appears that the number and capability of weather
satellites circling the planet "is beginning a rapid decline" and tight budgets
have significantly delayed or eliminated missions to replace them, says a
National Research Council analysis out Wednesday.
The number of in-orbit and planned Earth observation missions by NASA and
the National Oceanic and Atmospheric Administration is projected to drop
"precipitously" from 23 this year to only six by 2020, the report found.
That means the number of instruments monitoring Earth's activity is expected
to decline from a peak of about 110 last year to fewer than 30 by the end of the
decade.
"Right now, when society is asking us the hardest questions and the most
meaningful questions, we're going to be even more challenged to answer
them," said Stacey Boland, a senior systems engineer at the Jet Propulsion
Laboratory in California and a member of the committee that wrote the report.
"We'll slowly become data-starved here."
The report credits NASA with finding creative ways to prolong the life of
existing satellites and working with international partners to fill in forecasting
gaps.
But, the authors said, glue and scissors only go so far.
When a similar analysis was issued five years ago, eight satellites were
expected to be in space by 2012 tracking a variety of conditions. Only three
are in orbit. Of the remaining five, two failed, one was canceled and two others
won't launch until at least next year.
The pipeline looks emptier over the next decade.
Of 18 missions recommended in the 2007 report through 2020, only two are
close enough to completion to register launch dates.
Dennis Hartmann, professor of atmospheric sciences at the University of
Washington, Seattle, and chair of the committee, warned that the loss of
capacity will have "profound consequences on science and society, from
weather forecasting to responding to natural hazards."
New Report May Change your Mind About Buying an Abandoned Missile Silo
You may want to reconsider purchasing a demilitarized missile silo as a safe domicile. Russia’s
most senior military officer said Thursday that Moscow would preemptively strike and destroy
U.S.-led NATO missile defense sites in Eastern Europe if talks with Washington about the
developing system continue to stall.
“A decision to use destructive force preemptively will be taken if the situation worsens,” Russian
Chief of General Staff Nikolai Makarov said at an international missile defense conference in
Moscow attended by senior U.S. and NATO officials.
The threat comes as talks about the missile defense system, which the U.S. and its allies insist is
aimed at Iranian missiles, appear to have stalled. Also, silos that the U.S. claims are no longer in
military service, but have been sold as luxury survival homes, may not have been taken off the
old Soviet target map. Wouldn’t it be ironic if the very bunker outfitted as the ultimate man cave
was still a red dot on the ICBM program. After all, who checks those old software maps to make
sure they’re updated as retired?
“We have not been able to find mutually-acceptable solutions at this point and the situation is
practically at a dead end,” Russian Defense Minister Anatoly Serdyukov said.
Ellen Tauscher, the U.S. special envoy for strategic stability and missile defense, insisted the
talks about NATO plans for a missile defense system using ground-based interceptor missiles
stationed in Poland, Romania and Turkey were not stalemated.
But she acknowledged Wednesday that the recent elections in Russia and the upcoming elections
in the U.S. make it “pretty clear that this is a year in which we’re probably not going to achieve
any sort of a breakthrough.”
She reiterated that the U.S.-built system, still in development, is being designed to shoot down
Iranian intermediate-range missiles aimed at Europe, not Russian intercontinental ballistic
missiles (ICBMs).
Russian officials insist that the system has the capability to shoot down their ICBMs, thus
robbing their nuclear deterrent of its credibility and destabilizing the Cold War-era balance of
mutually assured destruction. Of course, they are right. The folks down as Wars-R-Us are
always planning a feint within a feint within a feint to throw off the enemy. How hard is it to
have a subroutine ready to go with the flip of a code to make the entire missile defense system
anti-Russian instead of anti-Iranian? For that matter, how hard is it to flip it to a first-strike
capability. Who is madder? The hat maker or the one who wears the hat?
Neither the State Department nor the Pentagon had any immediate comment on the Russian
threat Thursday.
The Cancelled Check is in My Garage…Somewhere.
In the age of digital record keeping and commercial shredder operations popping up all over the
country, there are still more boxes of records than you can imagine. Of course, paper records are
only for the really important stuff. The stuff you don’t want anyone to be able to hack into.
Sometimes those boxes come up missing. The National Archives and Records Administration
has lost track of dozens of boxes of confidential and secret government files at its records center
just outside of Washington, the latest in a series of such incidents spanning more than a decade.
The missing classified materials include four boxes of top-secret restricted files from the Office
of the Secretary of Defense as well as records from several U.S. Navy offices, documents
obtained by The Washington Times show. Remember, HAARP is owned and operated by the
Navy. There are also records of polar undersea expeditions where information about the deep
crust of the Earth has been collected.
The problems came to light after a three-year investigation by the National Archives and Records
Administration (NARA) Office of Inspector General. While the investigation ended last year,
officials recently provided a copy of the report on their findings in response to a Freedom of
Information Act request. Of course, the information turned up missing when people went
looking for it after a Freedom of Information Act petition was made. It happened enough times
that applicants apparently filed a request to find out how many boxes are actually missing.
It’s not the first time the inspector general's office has raised concerns about missing files at the
Washington National Records Center. It’s not as though they have had much time to keep up
with this subject, what with the GSA spending millions of Vegas parties, and Presidential
ministers faking expense reports for extra spending money. According to the report, the office
conducted previous inventories of classified materials in 1998 and 2004, concluding that boxes
were missing during both of those searches. No one seemed to care enough to write a procedure
for correcting the problem. They simply admitted, “Yep, there sure are some boxes missing.”
“According to those staffers that can recall—incidentally the ones who can recall are termed
whistleblowers and prosecuted under the new NDAA as threats to national security—minimal
corrective actions were taken,” the inspector general's office noted in the report on its most
recent investigation. Those boxes are missing, and it’s in the best interest of national security if
they stay missing.
NARA officials say they cooperated with investigators and insist there is no indication that any
of the boxes were stolen. Instead, they blame the problems on “bad data” for a tiny fraction of
the millions of boxes stored in the Washington National Records Center, where 250,000 boxes
enter the Suitland facility each year. No efforts have been made to scan the and save the
documents electronically to preserve the information. When the mice, moisture, or mold
destroys them, it’s just too bad. Now, we will never know who killed Kennedy or where the
Moon landings were faked.
Joe Newman, a spokesman for the nonpartisan watchdog group Project on Government
Oversight (POGO), said the inspector general’s report raised troubling but not unexpected
questions. Looks like we need a new Inspector General; one that won’t ask so many darned
questions.
“While it’s troubling that there are boxes of top-secret and confidential materials missing, it’s not
entirely unexpected considering the sheer volume of data the National Archives and Records
Center is responsible for storing and protecting,” he said.
“The report raises some issues of careless handling and filing of materials that certainly deserve
the attention of the administration. However, these problems also raise bigger questions of how
recent budget cuts and staffing reductions have affected the ability of the National Archives to do
its job effectively. Without more money, I just don’t see it getting any better.” It is better to sell
the boxes to the highest bidder than to worry about keeping track of everything in this old dusty
place.
NARA, the nation’s official record keeper, does not own the facility where the records are
stored, instead leasing the property from the General Services Administration. GSA folks could
not be raised for comment, as they are out of town on their semi-annual awards banquet where
their six new party planners are being celebrated. The former secret service agents were
uniquely qualified after their highly publicized recent success in El Salvador. Likewise, the
boxes, which are stored in row after row of high shelves in rooms twice the size of football fields
at the facility, do not belong to NARA, either. The agency acts as the custodian and stores the
boxes temporarily until they’re either destroyed or turned over for permanent placement in the
National Archives.
William J. Bosanko, appointed last year by President Obama as NARA’s Executive For Agency
Services, said officials are continuing what he called a “very aggressive search” for boxes
reported missing in the inspector general’s investigation.
Mr. Bosanko said one measure officials think will result in better tracking is the bar coding of
boxes as they come in and out of the records center. Previously, he said, paper tracking slips,
which could detach from boxes and fall off shelves, could result in a box reported as missing
when it is still in the records center.
Another problem he cited is the fact that agencies sometimes have asked for boxes to be
returned, only to later send them back to NARA in different boxes with different so-called
“accession numbers,” which are used to track the materials.
In addition, Mr. Bosanko said, tracking information can be lost as boxes age or sustain damage.
He said the records center is an aging building that’s had troubles with leaks over the years, as
well as sustaining damage from an earthquake last year. Officials are working to replace the
building, he said
Dead Dolphins and Birds Are Causing Alarm in Peru
Mariana Bazo/Reuters

LIMA, Peru — Late last year, fishermen began finding dead dolphins, hundreds of them,
washed up on Peru’s northern coast. Now, seabirds have begun dying, too, and the
government has yet to conclusively pinpoint a cause.
w York Times
Dead animals have washed up along Peru’s northern coast.
Officials insist that the two die-offs are unrelated. The dolphins are succumbing to a virus,
they suggest, and the seabirds are dying of starvation because anchovies are in short supply.
But even three months after officials began testing the dolphins, the government has not
released definitive results, and there is growing suspicion among the public and scientists
that there might be more to the story. Some argue that offshore oil exploration could be
disturbing wildlife, for example, and others fear that biotoxins or pesticides might be
working their way up the food chain.
At least 877 dolphins and more than 1,500 birds, most of them brown pelicans and boobies,
have died since the government began tracking the deaths in February, the Environment
Ministry said last week. The dolphins, many of which appeared to have decomposed in the
ocean before washing ashore, were found in the Piura and Lambayeque regions, not far
from the border with Ecuador.
The seabirds, which seem mostly to have died onshore, have been found from Lambayeque
to Lima. “Never in my 40 years as a fisherman have I seen anything like this,” said Francisco
Ñiquen Rentería, the president of the Association of Artisanal Fishermen in Puerto Eten, in
the Lambayeque region. “Sometimes in the past, you’d randomly see a dead dolphin or a
pelican, but this, what’s happening now, is really alarming.”
“It is odd indeed,” Gabriel Quijandría, the deputy environment minister, acknowledged in
an e-mail. “But they are not related.”
The federal Ocean Institute has said that the most likely culprit in the dolphin deaths is the
morbillivirus, from a family of viruses linked to previous mass deaths of marine mammals,
Mr. Quijandría said, though officials in recent days have sounded less certain.
For the seabirds, he wrote, the “most plausible hypothesis so far” from the National
Agricultural Health Service is that they are dying from a lack of food, mainly anchoveta
(Engraulis ringens), a Peruvian anchovy, as a result of the sudden heating of coastal waters.
The Environment Ministry said the dolphin deaths had no link to fisheries, red tides or
other biotoxins, bacteria, heavy metals or pesticides. It said it had also ruled out any
connection to offshore seismic testing by companies to locate oil and gas deposits under the
seabed.
Still, fishermen, environmentalists and others suspect that government officials are not
being completely candid.
The discovery of dead animals on beaches near Lima, the capital, in recent days has
complicated matters. Over the weekend, the Health Ministry issued an alert advising people
to avoid the waters around Lima and to the north, “until we know the cause of the recent
deaths of marine species.”
It advised people not to eat raw seafood, an ingredient of the national favorite ceviche, and
recommended that people disposing of dead marine animals wear gloves and masks. The
warning sowed confusion, given earlier government statements indicating that the seabirds
were probably starving rather than falling ill from some disease.
The Peruvian coast, nourished by the cold Humboldt Current, is one of the richest marine
habitats on earth. Flowing north from Antarctic waters, the current lifts nutrients from the
ocean depths into zones nearer the surface.
So plentiful are the plankton in these waters that the area has the world’s largest fishery,
focused on the anchoveta. The fish is an important component of the diets of the dolphins,
seabirds and other predators.
The Environment Ministry says that data from the South American institute for the study of
the effect of El Niño show that coastal water temperatures have been above average in
recent months. The anchoveta prefer the colder water, and if they descend below a depth of
six or seven feet the pelicans cannot reach them.
Drug-Defying Germs From India Speed
Post-Antibiotic Era
By Jason Gale and Adi Narayan - May 7, 2012 5:00 PM ETMon May 07 21:00:00 GMT 2012
Bloomberg Markets Magazine
Lill-Karin Skaret, a 67-year-old grandmother from Namsos, Norway, was traveling to a
lakeside vacation villa near India’s port city of Kochi in March 2010 when her car collided
with a truck. She was rushed to the Amrita Institute of Medical Sciences, her right leg
broken and her artificial hip so damaged that replacing it required 12 hours of surgery.
Three weeks later and walking with the aid of crutches, Skaret was relieved to be home.
Then her doctor gave her upsetting news. Mutant germs that most antibiotics can’t kill had
entered her bladder, probably from a contaminated hospital catheter in India. She risked a
life-threatening infection if the bacteria invaded her bloodstream -- a waiting game over
which she had limited control, Bloomberg Markets magazine reports in its June issue.
Enlarge image
Klebsiella pneumoniae, the bacterium in which NDM-1 was first identified. Photograph: CDC
Klebsiella pneumoniae, the bacterium in which NDM-1 was first identified. Photograph:
CDC
May 8 (Bloomberg) -- India's overuse of antibiotics, coupled with the nation's poor
sanitation, has led to a new type of superbug, mutated bacteria that even the most highpowered antibiotics can't kill. Scientists warn this superbug is spreading faster, further and
in more alarming ways than any they’ve encountered. Bloomberg's Adi Narayan reports on
the story featured in the June issue of Bloomberg Markets magazine. (Source: Bloomberg)
Karthikeyan K. Kumarasamy in Chennai worked with international doctors to identify the NDM-1 gene
causing untreatable bacterial infections in India.
Karthikeyan K. Kumarasamy in Chennai worked with international doctors to identify the
NDM-1 gene causing untreatable bacterial infections in India. Photographer: Anay
Mann/Bloomberg Markets via Bloomberg
“I got a call from my doctor who told me they found this bug in me and I had to take
precautions,” Skaret remembers. “I was very afraid.”
Skaret was lucky. Eventually, her body rid itself of the bacteria, and she escaped harm from
a new type of superbug that scientists warn is spreading faster, further and in more
alarming ways than any they’ve encountered. Researchers say the epicenter is India, where
drugs created to fight disease have taken a perverse turn by making many ailments harder
to treat.
India’s $12.4 billion pharmaceutical industry manufactures almost a third of the world’s
antibiotics, and people use them so liberally that relatively benign and beneficial bacteria
are becoming drug immune in a pool of resistance that thwarts even high-powered
antibiotics, the so-called remedies of last resort.
Medical Tourism
Poor hygiene has spread resistant germs into India’s drains, sewers and drinking water,
putting millions at risk of drug-defying infections. Antibiotic residues from drug
manufacturing, livestock treatment and medical waste haveentered water and sanitation
systems, exacerbating the problem.
As the superbacteria take up residence in hospitals, they’re compromising patient care and
tarnishing India’s image as a medical tourism destination.
“There isn’t anything you could take with you traveling that would be useful against these
superbugs,” says Robert Moellering Jr., a professor of medical research at Harvard Medical
School in Boston.
The germs -- and the gene that confers their heightened powers -- are jumping beyond
India. More than 40 countries have discovered the genetically altered superbugs in blood,
urine and other patient specimens. Canada, France, Italy, Kosovo and South Africa have
found them in people with no travel links, suggesting the bugs have taken hold there.
Post-Antibiotic Era
Drug resistance of all sorts is bringing the planet closer to what the World Health
Organization calls a post-antibiotic era.
“Things as common as strep throat or a child’s scratched knee could once again kill,” WHO
Director-General Margaret Chan said at a March medical meeting in Copenhagen. “Hip
replacements, organ transplants, cancer chemotherapy and care of preterm infants would
become far more difficult or even too dangerous to undertake.”
Already, current varieties of resistant bacteria kill more than 25,000 people in Europe
annually, the WHO said in March. The toll means at least 1.5 billion euros ($2 billion) in
extra medical costs and productivity losses each year.
“If this latest bug becomes entrenched in our hospitals, there is really nothing we can turn
to,” says Donald E. Low, head of Ontario’s public health lab in Toronto. “Its potential is to
be probably greater than any other organism.”
Promiscuous Plasmids
The new superbugs are multiplying so successfully because of a gene dubbed NDM-1. That’s
short for New Delhi metallo-beta-lactamase-1, a reference to the city where a Swedish man
was hospitalized in 2007 with an infection that resisted standard antibiotic treatments.
The superbugs are proving to be not only wily but also highly sexed. The NDM-1 gene is
carried on mobile loops of DNA called plasmids that transfer easily among and across many
types of bacteria through a form of microbial mating. This means that unlike previous germaltering genes, NDM-1 can infiltrate dozens of bacterial species. Intestine-dwelling E. coli,
the most common bacterium that people encounter, soil-inhabiting microbes and waterloving cholera bugs can all be fortified by the gene.
What’s worse, germs empowered by NDM-1 can muster as many as nine other ways to
destroy the world’s most potent antibiotics.
Untreatable Killers
NDM-1 is changing common bugs that drugs once easily defeated into untreatable killers,
says Timothy Walsh, a professor of medical microbiology at Cardiff University inWales. Or
as in Skaret’s case, the gene is creating silent stowaways poised to attack if they find a
weakness -- or that can pass harmlessly when the body’s conventional microbes win out.
Cancer patients whose chemotherapy inadvertently ulcerates their gastrointestinal tract are
especially vulnerable, says Lindsay Grayson, director of infectious diseases and
microbiology at Melbourne’s Austin Hospital.
“These bugs go straight into their bloodstream,” Grayson says. Newborns, transplant
recipients and people with compromised immune systems are at higher risk, he says.
Six infants died in a small hospital in Bijnor in northern India from April 2009 to August
2010 after NDM-1-containing bacteria resisted all commonly used antibiotics.
India Vulnerable
India is susceptible because it has many sick people to begin with. The country accounts for
more than a quarter of the world’s pneumonia cases. It has the most tuberculosis patients
globally and Asia’s highest incidence of cholera.
Most of India’s 5,000-plus drugmakers produce low-cost generic antibiotics, letting users
and doctors switch around to find ones that work. While that’s happening, the germs the
antibiotics are targeting accumulate genes for evading each drug. That enables the bugs to
survive and proliferate whenever they encounter an antibiotic they’ve already adapted to.
India’s inadequate sanitation increases the scope of antibacterial resistance. More than half
of the nation’s 1.2 billion residents defecate in the open, and 23 percent of city dwellers have
no toilets, according to a 2012 report by the WHO and Unicef.
Uncovered sewers and overflowing drains in even such modern cities as New Delhi spread
resistant germs through feces, tainting food and water and covering surfaces in what
Dartmouth Medical School researcher Elmer Pfefferkorn describes as a fecal veneer.
Tap Water
Germs with the NDM-1 gene existed in 51 of 171 open drainsalong the capital’s streets and in
two of 50 samples of public tap water, Walsh found in 2010.
Abdul Ghafur, an infectious diseases doctor in Chennai, southern India’s largest city, sees
patients every week who suffer from multidrug-resistant infections. He and others who used
to successfully combat infections with such common antibiotics as amoxicillin now must use
more-expensive ones that target a broader range of germs but typically cause greater side
effects. Some infections don’t respond to any treatment, evading all antibiotics, he says.
That’s bad news because the more frequently the NDM-1 gene is inserted into different
bacteria, the more likely it will enter virulent forms of E. coli, sparking outbreaks that may
be impossible to subdue, says David Livermore, who heads antibiotic resistance monitoring
at the U.K.’s Health Protection Agency in London.
The Chicago Way: Justice for Sale at
Holder's DOJ
In an explosive Newsweek article set to rock official Washington, reporter Peter Boyer
and Breitbart contributing editor and Government Accountability Institute President
Peter Schweizer reveal how Attorney General Eric Holder and the Department of Justice
are operating under a “justice for sale” strategy by forgoing criminal prosecution of Wall
Street executives at big financial institutions who just so happen to be clients of the
white-shoe law firms where Holder and his top DOJ lieutenants worked.
There’s more.
Even as President Barack Obama and Holder co-opt the Occupy Wall Street rhetoric of
getting “tough” on the Big Banks and Big Finance, the Newsweek investigative report
reveals that Eric Holder has not criminally charged or prosecuted a single top executive
from any of the elite financial institutions thought responsible for the financial crash.
And why would they? As Boyer and Schweizer report, “through last fall, Obama had
collected more donations from Wall Street than any of the Republican candidates;
employees of Bain Capital donated more than twice as much to Obama as they did to
Romney, who founded the firm.”
Collecting millions from Wall Street was hardly the plan Obama and Holder telegraphed
upon entering office. In 2009, the new Attorney General said boldly:
We face unprecedented challenges in responding to the financial crisis that has gripped
our economy for the past year. Mortgage, securities, and corporate fraud schemes have
eroded the public’s confidence in the nation’s financial markets and have led to a
growing sentiment that Wall Street does not play by the same rules as Main Street.
Unscrupulous executives, Ponzi scheme operators, and common criminals alike have
targeted the pocketbooks and retirement accounts of middle class Americans, and in
many cases, devastated entire families’ futures. We will not allow these actions to go
unpunished….This Task Force’s mission is not just to hold accountable those who
helped bring about the last financial meltdown, but to prevent another meltdown from
happening.
Obama unloaded on Wall Street too. In 2009, Obama created the Financial Fraud
Enforcement Task Force and announced that its purpose was to hold “accountable those
who helped bring about the last financial crisis as well as those who would attempt to
take advantage of the efforts at economic recovery.”
But Holder and Obama’s anti-Wall Street “law and order” rhetoric has turned out to be a
smokescreen that allows the Obama campaign to talk the talk of the 99% while taking
money from Wall Street’s 1%. The result is extortion by proxy. As President Obama put
it to the Big Finance executives who met with him at the White House just two months
into his presidency, “My Administration is the only thing between you and the
pitchforks.”
Not surprisingly, of the elite bundlers who made up Obama’s 2008 campaign, the
second most represented industry after law was the securities and investment industry.
It’s a level of hypocrisy that has outraged even committed leftists. Industrial Areas
Foundation activist Mike Gecan put it squarely: “I’m from Chicago, I’ve seen this game
played my whole life."
So what have the securities and banking industries received for their political
contributions?
As Boyer and Schweizer report, Department of Justice criminal prosecutions are at 20year lows for corporate securities and bank fraud. And while large financial institutions
have faced civil prosecution, those typically end in settlement fees with the major banks
that represent a fraction of their profits, often paid through special taxes on mortgagebacked securities.
It’s the most crass and cynical brand of politics imaginable, the Chicago Way writ large:
pay to play justice from the nation’s highest law enforcement official.
Giant Strange Sea Creature Caught on Drilling Camera
TAMPA (CBS Tampa) — Did Capt. Nemo ever see anything like this when he was “20,000
Leagues Under the Sea”?
A mysterious creature was caught by underwater cameras recently during deep-sea drilling near
the United Kingdom.
The camera catches the giant blob – which looks brown in color and appears to have scales —
floating around, with organs and appendages sticking out, something rarely ever seen before.
So … should we be afraid of this new sea creature and will it take over the world?
Steven Haddock, a scientist for the Monterey Bay Aquarium Research Institute in Moss
Landing, Calif., says that the mysterious creature is a Deepstaria enigmatica jellyfish, much to
the chagrin of some Reddit users who thought it was a whale placenta.
“This bag-like jelly is not that rare, but is large, so rarely seen intact,” Haddock said on his
“JellyWatch” Facebook page. “In the video, the swirling from the sub makes the medusa appear
to undulate and it even turns inside-out.”
This type of jellyfish is usually found in the south Atlantic Ocean, some 5,000 feet below.
According to the Marine Species Identification Portal, the jellyfish has “oral arms […] terminating
in curious hook-shaped organ[s].”
JP Morgan Chase Loses $2 Billion in Bad Trading Bets
JPMorgan Chase, the biggest U.S. bank by assets, said it suffered a trading loss of at least $2
billion from a failed hedging strategy, a shock disclosure that hit financial stocks and the
reputation of the bank and its CEO, Jamie Dimon.
For a bank viewed as a strong risk manager that went through
the financial crisis without reporting a loss, the errors are
embarrassing, especially given Dimon's public criticism of the
so-called Volcker rule
to ban proprietary
trading by big banks. (Click here to see the latest quote.)
"This puts egg on our face," Dimon said, apologizing on a
Bloomberg | Getty Images
hastily called conference call with stock analysts. He conceded
the losses were linked to a Wall Street Journal report last
month about a trader, nicknamed the 'London Whale,' who,
the report said, amassed an outsized position which hedge funds
JPMorgan [JPM 37.49
-3.25 (-7.98%)
bet against.
] said in a filing with the Securities and Exchange
Commission that since end-March, its chief investment office has had significant mark-to-market
losses in its synthetic credit portfolio — these typically include derivatives in a way intended to
mimic the performance of securities.
While other gains partially offset the trading loss, the bank estimates the business unit with the
portfolio will post a loss of $800 million in the current quarter, excluding private equity results
and litigation expenses. The bank previously forecast the unit would make a profit of about $200
million.
"It could cost us as much as $1 billion or more," in addition to the loss estimated so far, Dimon
said. "It is risky and it will be for a couple quarters."
Bad Strategy
The dollar loss, though, could be less significant than the hit to Dimon and the reputation of a
bank which was strong enough to take over investment bank Bear Stearns and consumer bank
Washington Mutual when they collapsed in 2008.
JPMorgan had $2.32 trillion of assets supported by $190 billion of shareholder equity at the end
of March — an equity ratio of almost 13 percent, four times the industry mean and ahead of 1011 percent at Citigroup [C 29.66
0.19%)
-0.99 (-3.23%)
] and Bank of America [BAC 7.685
-0.015 (-
] — and has been earning more than $4 billion each quarter, on average, for the past
two years.
"Jamie has always styled himself as one of the kings of Wall Street," said Nancy Bush, a longtime
bank analyst and contributing editor at SNL Financial. "I don't know how this went so bad so
quickly with his knowledge and aversion to risk."
JPMorgan shares fell almost 7 percent after the closing bell and dragged other financial shares
lower, with Citigroup down 3.6 percent and Bank of America down 2.6 percent. FBR Capital
Markets analyst Paul Miller cut his target for the stock to $37 from $50 in response to the
disclosures. The shares were at $40.74 before the news.
Dimon said he still believes in his arguments against the Volcker rule. The problem at JPMorgan,
he said, was with the execution of the hedging strategy, which "morphed over time" and was
"ineffective, poorly monitored, poorly constructed and all of that."
On the call, Dimon said he wouldn't take questions about specific people or their specific trading
strategies. But he indicated that some people may lose their jobs as executives sort out what
when wrong. "All appropriate corrective action will be taken as necessary in the future," he said.
Definition of 'Naked Shorting'
The illegal practice of short selling shares that have not been affirmatively
determined to exist. Ordinarily, traders must borrow a stock, or determine that it
can be borrowed, before they sell it short. But due to various loopholes in the rules
and discrepancies between paper and electronic trading systems, naked shorting
continues to happen.
While no exact system of measurement exists, most point to the level of trades that
fail to deliver from the seller to the buyer within the mandatory three-day stock
settlement period as evidence of naked shorting. Naked shorts may represent a
major portion of these failed trades.
Whale of a Loss
The April Wall Street Journal report said Bruno Iksil, a London-based trader in
JPMorgan's chief investment office, nicknamed the 'London Whale,' had amassed an
outsized position that prompted hedge funds to bet against it. On an earnings
conference call last month, Dimon called the concern "a complete tempest in a
teapot." On Thursday, however, he said the bank's loss had "a bit to do with the
article in the press." He added: "I also think we acted a little too defensively to
that."
The chief investment office is an arm of the bank that JPMorgan has said is used to
make broad bets to hedge its portfolios of individual holdings, such as loans to
speculative-grade companies.
The failed hedge likely involved a bet on the flattening of a credit derivative curve,
part of the CDX family of investment grade credit indices, said two sources with
knowledge of the industry, but not directly involved in the matter. JPMorgan was
then caught by sharp moves at the long end of the bet, they said. The CDX index
gives traders exposure to credit risk across a range of assets, and gets its value
from a basket of individual credit derivatives.
Two financial industry sources in Asia said they heard the JPMorgan trader took a
position that a credit derivative curve, part of the CDX family of investment grade
credit indices, would flatten, but was caught out by sharp moves at the long end.
The CDX index gives traders exposure to credit risk across a range of assets, and
gets its value from a basket of individual credit derivatives.
"It's a pretty stunning admission for a company that prides itself on its risk
management systems and the strength of its balance sheet," said Sterne Agee
analyst Todd Hagerman. "The timing couldn't be worse for the industry. It will have
ramifications across the broker-dealer community."
Just last week Dimon and leaders of other large banks met Federal Reserve
Governor Daniel Tarullo in New York to question the way the regulators conduct
stress tests to see if banks have enough capital to withstand possible losses.
They also made arguments over trading restrictions.
Allegations that traders at the banks take outsized risks with bank capital to earn
big bonuses have been among the drivers of government regulations adopted, and
pending, since the financial crisis.
JPMorgan spokesman Joseph Evangelisti said the company uses pay formulas to
reduce the chance of that happening in the chief investment office and throughout
the bank. Except for people handling the bank's private equity investments, "no one
at JPMorgan is paid on their profits and losses," he said.
Pushing for Detail
Regulators and lawmakers are now likely to push Dimon for more details about the
trades. Those details will guide how regulators now view the issue and its impact on
the Volcker rule, said Karen Petrou, managing partner of Washington-based Federal
Financial Analytics.
If the trades were meant to hedge against specific risks as opposed to clearly being
done as a proprietary bet on the markets, it may not play as clearly into the Volcker
rule debate as supporters of the crackdown want it to, she said.
To date, the U.S. Dept of Justice has yet to prosecute one single large firm for
Naked Short Trading as a means of generating huge amounts of untaxed income.
"The question is whether this in fact was a hedge and I think that's to be
determined," she said. "That's really the heart of the matter."
But some in Washington quickly expressed views on the lessons from the episode.
Senator Carl Levin, in a statement issued two hours after the news broke, said,
"The enormous loss JPMorgan announced today is just the latest evidence that what
banks call 'hedges' are often risky bets that so-called 'too big to fail' banks have no
business making."
Air Force Document: Drones Can Be Used To
Spy On Americans
“Incidental” surveillance data can be held for 90 days
Steve Watson
Infowars.com
May 11, 2012
A newly discovered Air Force intelligence brief states that should fleets of unmanned drones
accidentally capture surveillance footage of Americans, the data can be stored and analyzed by
the Pentagon for up to 90 days.
The instruction, dated April 23, admits that the Air Force cannot legally conduct
“nonconsensual surveillance” on Americans, but also states that should the drones”incidentally”
capture data while conducting other missions, military intelligence has the right to study it to
determine whether the subjects are legitimate targets of domestic surveillance.
“Collected imagery may incidentally include US persons or private property without consent,”
the instruction states.
The Air Force can take advantage of “a period not to exceed 90 days” to use the data to assess
“whether that information may be collected under the provisions of Procedure 2, DoD 5240.1-R
and permanently retained under the provisions of Procedure 3, DoD 5240.1-R.” it continues.
The Pentagon directives cited authorize limited domestic spying in certain scenarios such as
natural disasters, environmental cases, and monitoring activity around military bases.
Should the drones capture data on Americans, the Air Force says that it should determine
whether they are, among other things, “persons or organizations reasonably believed to be
engaged or about to engage, in international terrorist or international narcotics activities.”
The instruction also states that the Pentagon can disseminate the data to other intelligence and
government agencies, should it see fit.
“Even though information may not be collectible, it may be retained for the length of time
necessary to transfer it to another DoD entity or government agency to whose function it
pertains.” the document reads.
The document was discovered by Steven Aftergood of the Federation of American Scientists.
Over 30 prominent watchdog groups have banded together to petition the FAA on the proposed
increase in the use of drones in US airspace.
The groups, including The American Civil Liberties Union, The Electronic Privacy Information
Center and The Bill of Rights Defense Committee, are demanding that the FAA hold a
rulemaking session to consider the privacy and safety threats.
Congress recently passed legislation paving the way for what the FAA predicts will be
somewhere in the region of 30,000 drones in operation in US skies by 2020.
The ACLU noted that the FAA’s legislation “would push the nation willy-nilly toward an era of
aerial surveillance without any steps to protect the traditional privacy that Americans have
always enjoyed and expected.”
In addition to privacy concerns, the groups warned that the ability to link facial recognition
technology to surveillance drones and patch the information through to active government
databases would “increase the First Amendment risks for would be political dissidents.”
GAO: Recoverable Oil in Colorado, Utah, Wyoming 'About Equal to
Entire World’s Proven Oil Reserves'
One of the things that touches peoples’ lives more than anything is the price of oil. In recent
decades we have been sort of held hostage to OPEC for pricing oil. If you will recall, back in the
early 70’s, the Arab community decided to nationalize all its oil properties. Basically, this means
that countries that were only getting a cut of the oil from oil giants who invested billions in
discovery and production equipment and manpower, decided to simply sieze everything and
reverse the arrangement. The countries owned everything, and the oil companies began
getting a cut of the oil instead.
We almost went to war over it, but president Carter’s leadership decided to call it an energy
crisis instead. Every president since Carter has done the same thing. Now, we have a unique
discovery that is about to tip the global balance. No, it isn’t electric cars.
(CNSNews.com) - The Green River Formation, a largely vacant area of mostly federal land that
covers the territory where Colorado, Utah and Wyoming come together, contains about as much
recoverable oil as all the rest the world’s proven reserves combined, an auditor from the
Government Accountability Office told Congress on Thursday.
The thing that makes this nationalization angle important is this: The GAO testimony said that
the federal government was in “a unique position to influence the development of oil shale”
because the Green River deposits were mostly beneath federal land.
It also noted that developing the oil would have an environmental impact and pose
“socioeconomic challenges,” that included bringing “a sizable influx of workers who along with
their families put additional stress on local infrastructure” and “making planning for growth
difficult for local governments.”
In other words, what has been one of the most sparsely populated regions of the country for
more than 150 years will become a boom town. Once again, Utah will compete with the large
cities of the East and Midwest for the railroad, so to speak. You may recall that Nauvoo,
Illinois was burned to the ground in the mid 1800’s because its wealth and location rivaled
Chicago for the railroad coming west.
“The Green River Formation--an assemblage of over 1,000 feet of sedimentary rocks that lie
beneath parts of Colorado, Utah, and Wyoming--contains the world's largest deposits of oil
shale,”Anu K. Mittal, the GAO’s director of natural resources and environment said in written
testimony submitted to the House Science Subcommittee on Energy and Environment.
“USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and
about half of this may be recoverable, depending on available technology and economic
conditions,” Mittal testified.
“The Rand Corporation, a nonprofit research organization, estimates that 30 to 60 percent of the
oil shale in the Green River Formation can be recovered,” Mittal told the subcommittee. “At the
midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is
an amount about equal to the entire world's proven oil reserves.”
In her oral statement before the subcommittee, Mittal said that developing the shale oil would
create wealth and jobs for the country, but also challenges for government.
“Being able to tap this vast amount of oil locked within this formation will go a long way to help
to meet our future demands for oil. The U.S. Geological Survey, as you noted, estimates that
the formation contains about 3 trillion barrels of oil of which half may be recoverable,” she said.
“As you can imagine having the technology to develop this vast energy resource will lead to a
number of important socioeconomic benefits including the creation of jobs, increases in wealth
and increases in tax and royalty payments for federal and state governments,” she said.
“While large-scale oil-shale development offers socioeconomic opportunities it also poses
certain socioeconomic challenges that also should not be overlooked,” she testified. “Oil shale
development like other extractive industries can bring a sizable influx of workers who along with
their families put additional stressed on local infrastructure. Development from expansion of
extractive industries has historically followed a boom-and-bust cycle making planning for growth
difficult for local governments.”
In her written testimony, Mittal noted that three-fourths of the Green River shale oil is under
federal land.
“The federal government is in a unique position to influence the development of oil shale
because nearly three-quarters of the oil shale within the Green River Formation lies beneath
federal lands managed by the Department of the Interior’s (Interior) Bureau of Land
Management (BLM),” she testified.
The GAO also cited potential environmental impacts from producing oil from the Green River
shale that included the need to draw large amounts of water, possible harm to water quality, and
temporary degradation of air quality and the clearing of large amounts of vegetation.
"Developing oil shale and providing power for oil shale operations and other activities will
require large amounts of water and could have significant impacts on the quality and quantity of
surface and groundwater resources," Mittal said in her written testimony. "In addition,
construction and mining activities during development can temporarily degrade air quality in
local areas. There can also be long-term regional increases in air pollutants from oil shale
processing and the generation of additional electricity to power oil shale development
operations. Oil shale operations will also require the clearing of large surface areas of topsoil
and vegetation which can affect wildlife habitat, and the withdrawal of large quantities of surface
water which could also negatively impact aquatic life."
Greece is Almost Out of Money
Speaking exclusively to The Sunday Telegraph, Theodoros Pangalos said he was "very much
afraid of what is going to happen" after Greek voters rejected the deal in elections last Sunday.
"The majority of the people voted for a very strange mental construction," he said. "We want to
be in the EU and the euro, but we don't want to pay anything for the past."
The main beneficiary of the election, the hard-Left Syriza coalition, came a startling second on a
promise to tear up the deal, which promises EU loans to keep massively-indebted Greece afloat,
but demands crippling spending cuts in return. Germany, the principal lender, has said it will
stop payments if Greece breaks its promises on spending.
Mr Pangalos warned: "There is a school of thought that says the Germans are bluffing. They
need Greece and will never throw us out of the eurozone. But what will happen, which is almost
certain, is they will not give us the money to pay our debts.
"We will be in wild bankruptcy, out-of-control bankruptcy. The state will not be able to pay
salaries and pensions. This is not recognised by the citizens. We have got until June before we
run out of money.
Related Articles
10 May 2012
"We have been spending the future for half a century. What [the anti-bailout forces] are really
asking from the EU is not just to pay our bills, but also to pay for the deficit which we are still
creating.
"I'm sure the Germans don't want Greece to leave the euro. What I don't know is how much
they're willing to pay. It depends on the German man on the street. Is he willing to pay his taxes
to save Greece? I doubt it."
After each of the top three parties at the election failed to form a government, Greece's president,
Karolos Papoulias, will on Sunday hold last-ditch talks to cobble together a national unity
coalition. The alternative is a fresh election next month which polls show Syriza is likely to win.
Mr Pangalos compared Syriza's charismatic leader, Alexis Tsipras, to Venezuela's Hugo Chavez.
"Are the Germans going to pay for a guy that wants to imitate Chavez?" he said. "Except that
Chavez has oil, and an army."
The deputy prime minister also warned that chaos could boost the neo-fascist Golden Dawn
party, which won an unprecedented seven per cent of the vote, and 21 seats, in Sunday's election.
"In the places where the police voted, the fascists got 25 per cent," he said. "They are a serious
threat. They have used violence already – you don't know where it will stop.
"You know how it happened in Germany – it started with the Jews, then the Communists, then
everybody – it could happen here. This is the country, after the Soviet Union and Germany itself,
with the biggest percentage of [Second World War] casualties in its population."
Mr Pangalos's Pasok, the Greek Socialist Party, lost three-quarters of its seats at the election after
voters blamed it for the bailout deal and the cuts, which have caused enormous hardship but
failed significantly to reduce Greece's debt.
The economy has shrunk by 8.5 per cent in the last year. More than a fifth of the population is
out of work and youth unemployment is almost 54 per cent.
Pasok, together with the main conservative party, New Democracy, previously won up to fourfifths of the vote. Last week, the two established pro-bailout parties were reduced to 32 per cent
between them.
The streets are calmer since the election. Though Greeks are fearful, there's also satisfaction at
the blow they've dealt to their former rulers.
But the casualties of the bailout are everywhere. On the pavements, junkies openly inject in the
middle of the day. And what is striking about Athens beggars is how clean and well-groomed so
many are: not stereotypical street-dwellers, but working and professional people deep down on
their luck.
As we talked to Mr Pangalos in an upmarket cafe, one man sold lottery tickets wearing a very
decent suit.
Yiannis Bournos, Syriza's European policy spokesman, told The Sunday Telegraph that Greece
could afford to reject the bailout deal because European policymakers dared not risk Greece
triggering a domino effect – and a potential depression - across Europe.
"Mr Schaeuble [Germany's finance minister] is pretending to be the fearless cowboy on the
radio, saying the euro is secure [against a Greek exit]. But there's no way they will kick us out,"
he said.
"If we left the euro, the financial markets would attack Italy. If you owe 3000 euros to the bank
and don't pay, they will kill you. If you owe 10 billion euros, they will do everything for you."
He criticised the deputy prime minister's remarks, saying: "Mr Pangalos is in his own sphere.
When reality does not agree with him, reality has a problem. It's unbelievable to see the same
representatives of the banking interests and of neoliberalism saying that nothing can change. It
reminds me of religious fundamentalism. There have been so many changes in Europe in the last
two weeks."
Mr Bournos said that even if the EU cut off payments the Greek government could still pay
salaries and pensions from its domestic tax revenues. He said the country would seek alternative
sources of financing from China, Russia and the Middle East.
Left-wingers hope that the election of a new socialist president in France, together with concerns
expressed in Italy and the Netherlands about the austerity package, will soften hearts in Berlin.
At least in public, however, German officials continued cranking up the pressure yesterday.
"If Athens doesn't stand by its word, that is a democratic decision," said the Bundesbank chief,
Jens Weidmann, in an interview with the Suddeutsche Zeitung newspaper. "But that means the
basis for further financial aid falls away."
Mr Weidmann insisted the consquences of Greece leaving the euro "would be more serious for
Greece than the rest of the eurozone".
It's still possible that everyone could pull back from the brink. The Germans could soften their
demands – next month, Greece is supposed to be outlining further billions in cuts, something
which even pro-bailout politicians are starting to balk at. The Greek Left could change its
simplistic stand. The can could be kicked down the road some more.
But the euro's fundamental problems will remain. And it's equally possible that the EU will
merely use the time to erect bigger financial walls around Greece, hoping they can leave it to its
fate.
Planning for a Greek exit, now seen as likely by many, has stepped up a gear. Vodafone, a major
presence in the Greek telecoms market, said it now sends all cash earned in Greece to the UK
"every evening."
Andrew Witty, chief executive of Glaxo SmithKline, said no cash was left in Greece or "most
European countries." Several other British multinationals have made similar statements.
Jonathan Tepper, an economist with Variant Perception, said a debt default and Greek euro exit
would happen at only moments' notice after weeks of denials by all concerned.
"To avoid immediate runs on banks, it would be done in a 'surprise' announcement over a
weekend when markets and banks are closed," he said. "If necessary, Monday and Tuesday
would be declared bank holidays as well."
During this period, diplomats in Athens have been told, cash machines would be turned off and
all banks closed. Inside, staff would be "redenominating" euro notes into the new drachma,
probably by rubber-stamping them. Capital controls would be imposed to stop Greeks
transferring money out of the country electronically and border checks would be reinstated to
prevent them taking out unstamped euros in suitcases.
Mr Tepper is one of a growing number of economists who believe that the so-called "Grexit"
might actually be better than years and years of EU-mandated misery.
"In the past century, 69 countries have exited currency areas with little downward volatility," he
says. "The experience of emerging-market countries, such as Argentina, Russia and the 'Asian
tigers,' shows that the pain of devaluation would be brief, and rapid growth and recovery would
follow."
Greece, however, is not Russia, Argentina or the Far East, with massive mineral wealth and
untapped human capital. And everyone concedes that exit would, in the short and medium term,
cause Greeks even more terrible pain.
Most economists think that a new, free-floating drachma would immediately crash by up to 50
per cent against the euro and other currencies, effectively halving the value of everyone's savings
and spelling catastrophe for those on fixed incomes, like pensioners.
EU diplomats in Athens have been warned to expect substantial disorder during this period,
which would, said one, be "a dream moment for Golden Dawn".
The Sunday Telegraph on Saturday joined the neo-fascists on "patrol" – their word – around
Attiki, a poor, inner-city Athens neighbourhood which Golden Dawn says it has "cleaned up".
"This square used to be occupied," said the patrol leader, Nassos Rendekakos. "Full of illegal
immigrants. We took it back. We just emptied the square of everyone: Greeks, foreigners,
whatever."
But what if they refused to leave?
"There's a good way and a bad way," said Mr Rendekakos. "We know both ways."
They weren't in their black T-shirts on Saturday, but they were still pretty easy to spot. Their hair
was shaved at the sides but not at the top; they wore near-identical sunglasses, plus biker jackets
and gloves, though the day was warm and sunny.
Certainly the immigrants, not that there are many on these streets just now, knew who they were,
and crossed the road or stepped quietly into doorways as they passed.
They weren't Nazis, they insisted, just nationalists.
"It's not Hitler we like," said Mr Rendekakos. "It's the way he used to make the best for his
country. Hitler took a country with so much debt, unemployment, just before the edge, as we are
here – and he managed to make that country great."
On Golden Dawn, there are signs of what might be termed buyers' remorse. The Sunday
Telegraph found a number of people who'd voted for them but claimed they now regretted it, and
their score in the latest post-election polls is down. Many other residents, however, were
genuinely grateful to the fascists.
"Six months ago, no-one could walk here," said Christos Yiannis, drinking coffee in Attiki's
main square. "Last summer, we didn't come out like this at all. The police did nothing. Golden
Dawn cleaned up the squares and made them human for people to enjoy, because the state is
absent. The state has collapsed."
As two little girls rode pink tricycles round our table, and the old men sat reading their
newspapers in the sun, it was tempting, so tempting, to believe there are easy answers to tough
problems – none tougher than the mess Greece now finds itself in.
If Greece Goes, Who Else Will Follow?
The idea of a Greek exit from the eurozone is no longer fanciful. After 70 per cent of
voters in elections on May 6 supported parties that rejected the terms under which
€174bn of international bailout loans were offered to Athens, many investors now see a
fissure in the 17-member eurozone as increasingly likely. European governments are
furiously thinking through the various scenarios, while still urging Athens to stick to its
agreements on austerity and reform. If those hopes are dashed and Greece goes, what
happens next?
1. Is Greece serious about quitting the eurozone?
Who knows? Opinion polls showing 80 per cent of Greeks in favour of staying in the
euro combine with the election result to offer a scene of confusion.
Greece’s European partners say Athens cannot have it both ways. But the siren call
from the radical left coalition Syriza, that Greece is safe in the eurozone with its
creditors poised to ease the harsh bailout, is music to the ears of hard-pressed citizens.
Popular anger is running high at the prospect of three more years of austerity while
Athens implements the rest of the reform programme agreed with the EU and
International Monetary Fund. “We desperately need a break ... If my pension is cut
again, I might as well commit suicide,” says Angelos Syrigos, 85, whose modest income
has been slashed by 30 per cent in the two years since the bailout began.
Alexis Tsipras, Syriza’s charismatic 37-year-old leader, who emerged as a kingmaker
following his party’s surge to second place at last Sunday’s inconclusive general
election, is gaining in support. Opinion polls published at the weekend showed Syriza
would win first place in a second election, with 20-25 per cent of the vote.
Mr Tsipras insists Brussels and Berlin will not force Greece out of the euro because of
the contagion effect this would have on Portugal, Ireland and Spain. He has demanded
a reversal of salary and pension cuts imposed by the bailout, as well as the hiring of
100,000 new public sector workers to reduce the impact of a
21 per cent unemployment rate.
Middle-aged Greeks are afraid of a eurozone exit, fearing a further collapse in property
values, the crumbling of the banking system and high unemployment.
“The gravity of the situation isn’t appreciated. Some people believe Syriza will change
its tune, others that the Europeans make empty threats,” says Takis Michas, a political
commentator. “The only thing that will focus minds is when the money to pay pensions
and salaries just doesn’t arrive.”
2. Is Europe ready to jettison one of its own?
Eurozone officials had prepared contingency plans for a Greek exit – or “Grexit” as
some have called it – after George Papandreou, then prime minister, proposed a
national referendum in October on euro membership. Indeed, Wolfgang Schäuble,
German finance minister, actively urged the referendum to halt the endless questioning
once and for all, according to one senior European official.
This week in the FT
Tomorrow What would be the impact of a Greek exit on the financial markets? Read the second part of our series
on the markets pages.
Even then, such officials were uncertain whether the rest of the currency union could
survive the shockwaves unleashed by a return of the drachma – particularly in bailedout countries such as Portugal and Ireland, where bank runs and market panic could
follow on the assumption that others could follow Greece out of the eurozone door.
But now, with a new, permanent €500bn rescue fund backed by the strength of an
international treaty with multiple tools to buy sovereign bonds on the open market and
inject capital into eurozone banks, some officials believe the contagion could be
contained – much as it was after Athens finally defaulted on private bondholders last
month.
“Two years ago a Greek exit would have been catastrophic on the scale of Lehman
Brothers,” says a senior EU official involved in discussions about Greece’s future. “Even
a year ago, it would have been extremely risky in terms of contagion and chain reaction
in the banking system. Two years on, we’re better prepared.”
The new eurozone firewall – now backed with additional resources for the IMF – is not
the only reason some officials are becoming increasingly sanguine about losing Greece.
Spain and Italy, they say, have taken huge steps to put their economic houses in order,
enabling them to bounce back quickly if credit markets suddenly dry up and their banks
wobble.
Still, uncertainty over how Europe’s banks would be affected has continued to be the
primary concern. Witnessing Greek bank customers suddenly having their euros turned
into drachmas overnight, depositors in other peripheral banks might suddenly withdraw
their cash and place it in seemingly safer euro accounts in Germany or elsewhere. Such
a massive run could destroy much of the eurozone periphery’s banking sector. “The ball
is genuinely in their court,” says the EU official. “Those who understand the situation
realise their room for manoeuvre is extremely limited. We simply have to wait.”
3. What would exit from the eurozone entail?
In a game of brinkmanship, neither Athens nor the rest of the eurozone would want to
take responsibility for a Greek exit from the single currency. Recriminations would fly.
Against accusations that it is imposing, in the words of Mr Tsipras, “barbarous”
demands, the core of the eurozone is already positioning itself to ensure any exit is
seen as a sovereign decision. “The future of Greece in the eurozone lies in the hands of
Greece,” Guido Westerwelle, German foreign minister, said on Friday. “If Greece strays
from the agreed reform path, then the payment of further aid tranches won’t be possible.
Solidarity is not a one-way street.”
Slippage against the agreed EU and IMF agreements would probably be accepted for a
period, so the trigger for exit would be a deliberate rejection by a new Greek
government of the requirements for austerity and structural reform in the existing
agreement that Athens signed with the “troika” of the European Commission, the
European Central Bank and the IMF in February. “It would be more of a case of Greece
walking than of Greece being pushed out,” says Willem Buiter of Citigroup.
Exit would occur because, without disbursements of additional loans, the government
would run out of money to pay social security and public sector wages. In addition, the
ECB could withhold needed funds from Greek banks, bringing them down. At this point
Athens would need to pass a new currency law, redenominate all domestic contracts in
a new drachma, impose exchange controls, secure the borders to limit capital flight and
take steps to introduce a paper currency.
Printing and distributing new notes would be no easy feat. In 2003 the US-led coalition
managed to do it in Iraq in less than three months. But that required the efforts of De La
Rue, a British speciality printer, a squadron of 27 Boeing 747s and 500 armed Fijian
guards to ease the process.
After exit, Greece would have to negotiate continued EU participation. The EU treaties
have a provision for leaving the union, but not just the eurozone. That negotiation would
be all the more difficult if new Greek authorities defaulted on debt to the European
Financial Stability Facility, the ECB and the IMF.
If the country defaulted on its IMF debts, it would join a small ignominious club of
nations – including only Zimbabwe, Somalia and Sudan – that have overdue financial
obligations to the fund.
4. What economic effects will Greece suffer?
In any exit scenario, the new drachma would depreciate rapidly. How far cannot be
predicted but the IMF estimates Greece needs at least a 15-20 per cent devaluation
against the eurozone average – and considerably more against Germany – just to
achieve a current-account balance. Currency moves tend to overshoot, and US
investment bank Goldman Sachs has estimated that to stabilise Greece’s international
debts at a reasonably low level – needed to ensure the country can insulate itself
against the risk of capital flight – a devaluation of 30 per cent is needed compared with
the rest of the eurozone, and more than 50 per cent with Germany.
Such a devaluation would restore competitiveness, but it would be far from the end of
the story. A new administration would probably repeal a law that prioritises debt interest
over other forms of government spending, and a new default would occur on the
remaining private sector debt and on official sector debt owed to European institutions
and the IMF.
Even if all interest payments were stopped, additional austerity would still be needed for
a period because Greece’s tax revenues still fall short of its public spending – a primary
deficit. The IMF estimates that even if there is no exit there will be a primary deficit of 1
per cent of national income in 2012, a figure that would almost certainly rise in a
recession deepened by uncertainties surrounding exit and a bust banking system.
There are two plausible scenarios. In the brighter one, a responsible government is able
to restart the banking system, run a balanced budget and persuade the public to accept
sharp declines in living standards as import prices rise quickly. After a period of deep
austerity, rapid growth might be possible. Under the alternative scenario, a government
takes office that seeks to use its new powers of monetary autonomy to offset the effects
of devaluation and spend its way to prosperity. The danger is that hyperinflation after
short-term relief would be followed by further currency depreciation and money printing.
5. Is Greek business ready for an exit?
The blunt warning this month from Evangelos Mytilineos to shareholders offered a rare
insight into the thinking in the boardrooms of Greek businesses with international
operations. The chief executive of Athens-based industrial group Mytilineos said that the
headquarters of Metka, a subsidiary that builds power plants in eastern Europe and the
Middle East, may be moved abroad. “Our Greek background is not very helpful when it
comes to competing internationally,” Mr Mytilineos said.
While some large businesses have prepared contingency plans in case of a “Grexit”,
medium-sized companies are waiting to see what happens, say Athens-based
consultants.
“I think it’s too early to start thinking about drachma-isation,” says a Crete-based
hotelier, citing the wildly diverging exchange rate estimates for a new currency. Last
year he rejected a contract amendment proposed by Tui, a German travel operator,
relating to financial obligations in the event of the return of the drachma.
Even those not planning to move are making sure any money earned abroad stays
there. “[One basic lesson of the crisis] has been to make sure that your receivables are
not brought back to Greece,” says one exporter. “I keep almost all my funds abroad.”
Businesses serving the domestic market are downsizing after two years of trying to
keep costs down amid a dramatic plunge in sales. “We’re planning to close half of our
outlets by the end of the year,” says the general manager of one retail chain. “If we go
back to the drachma we’ll keep only a flagship store in Athens.”
Solon Molho, an analyst, says the disastrous consequences of leaving the euro are not
yet fully appreciated. “You would most likely decide to shut down operations, sell the
business if you could find a buyer, and perhaps leave the country altogether.”
6. Can the eurozone contain the contagion?
This is the biggest unknown. If the eurozone authorities could persuade investors and
the public that Greece was a special case, the effects of an exit could be contained. If
not, a Greek exit would soon become a disorderly break-up of the euro project.
The inevitable question after a departure is: “Who’s next?” Eyes would turn rapidly to
Portugal, which followed Greece into the bailout club. Investors would sell Portuguese
bonds, seek to extract money from the country’s banks and take euros across the
border for fear of an exit and devaluation. Currency risk has been evident in the
European banking system since late last year, but the incentives to move deposits into
German banks from those in Portugal, Ireland, Spain and Italy would be clear.
If the political will to hold the single currency together exists, the eurozone has a big
weapon in its arsenal to contain the contagion: unlimited action by the ECB. It could
restart bond-buying at very high levels to limit rises in sovereign bond yields and offer
unlimited liquidity to peripheral-nation banks to offset a run on deposits. This would
worry Berlin, which feels the ECB has already gone too far in underwriting bank and
sovereign debt in peripheral countries. But the alternative is worse, as the EU has no
other sufficiently powerful defence against a systematic bank run in such nations.
The answer, therefore, is that the eurozone could limit contagion, but it is highly
uncertain whether it would. If it did not, the end of the euro would be nigh.
In either case, the outlook for the European economy is highly risky. After the Lehman
collapse in 2008, it was not a dearth of bank lending that plunged the region into its
worst recession since the second world war, but a collapse in confidence and spending
as households and companies decided simultaneously to tighten their belts in fear of
what might happen next. Unless the European authorities are extremely skilful in
ringfencing Greece, a similar scenario would be a severe danger