Back In April 2010, the world was stunned when in what would be the first major case dealing with the fallout from the endemic fraud prevalent during the last housing and credit bubble, the SEC charged Goldman Sachs and Paulson with securities fraud over the infamous Abacus CDO, which was subsequently featured in Michael Lewis' Big Short book and movie. There was also hope that for the first time, bankers - ostensibly from the company that does "God's work" - would go to prison. None of that happened, and instead just a few months later Goldman walked away with a $550 million slap on the wrist, while a young Goldman banker, French citizen Fabrice Tourre, who was in his late 20's when Goldman was quietly colluding with Paulson to package a "time bomb" CDO it knew would explode in just a few months, was the only Goldman banker prosecuted. In 2013, Fabrice Tourre, a low-ranking trader,  was found liable for violating securities laws and ordered to pay more than $850,000. He also avoided prison time and is now a Ph.D. candidate at the University of Chicago.

He was the only banker who was named in the entire Abacus fraud, something which we laughed at long and hard in 2010 because according to the SEC, this meant the 20-year old was the mastermind behind all of Goldman wrongdoing; nobody else at the firm was aware of what had been going on.

But what was most appalling and what made it clear that the SEC is a captured organization, was not only that no other banker at Goldman was named, but that absolutely everyone avoided prison time setting a disastrous precedent which demonstrated that when it comes to criminal liability, Wall Street will henceforth have a permanent get out of jail free card.

Earlier today, ProPublica's Jesse Eisinger published a story that looks at the evolution of the SEC's collapse, and how from a regulatory agency meant to defend investors, it instead mutated into a captured, crony, revolving door (whose employees all too frequently end up working for the same companies they should be prosecuting) farce, whose only purpose is to protect criminal bankers from prison while handing out paltry fines which ultimately are paid by the company's shareholders while management walks away free.

Eisinger tells the story of one SEC lawyer, perhaps the last SEC lawyer with a conscience, James Kidney, who joined the agency in 1986. "He was thirty-nine at the time, having first worked a stint as a journalist. The “steam was elevated” at the agency when he started there, he said. Young lawyers were expected to go after the big names, and they did: the junk-bond king Michael Milken, the insider trader Ivan Boesky, the investment banker Martin A. Siegel."

As a trial lawyer, Kidney’s job was to develop a compelling narrative that could be presented to a jury of laymen unfamiliar with the intricacies of finance. “Jim was a great attorney. A lawyer’s lawyer. Sound legal mind, excellent writer, and a true trial lawyer,” said Terence Healy, the vice-chair of securities enforcement practice at Hughes Hubbard and a former colleague of Kidney’s at the SEC. But Kidney also exasperated some staffers who thought he wasn’t detail-oriented and didn’t grasp nuances.

More importantly, Kidney provided Eisinger "with a cache of internal documents and emails about the Abacus investigation" which demonstrate conclusively just how "captured" the securities regulator truly is. 

Kidney was assigned to take SEC's investigation against Goldman (and Paulson) and bring the case to trial. But, as Eisinger writes, "tight away, something seemed amiss. He thought that the staff had assembled enough evidence to support charging individuals. At the very least, he felt, the agency should continue to investigate more senior executives at Goldman and John Paulson & Co., the hedge fund run by John Paulson that made about a billion dollars from the Abacus deal. In his view, the SEC staff was more worried about the effect the case would have on Wall Street executives, a fear that deepened when he read an email from Reid Muoio, the head of the SEC’s team looking into complex mortgage securities."

This is where the email trail proving the SEC should be immediately disbanded and its tasks handed off to an impartial, third-party, ideally private agency, begins: 

Muoio, who had worked at the agency for years, told colleagues that he had seen the “devasting [sic] impact our little ol’ civil actions reap on real people more often than I care to remember. It is the least favorite part of the job. Most of our civil defendants are good people who have done one bad thing.”

In this case, Muoio is referring to career criminals who have violated securities laws on countless ocasions, but for whatever reason, he believes that bringing justice to these "real people" is the "least favorite part of the job." Incidentally bringing justice to criminals is the only part of his job, but he believes they deserve a chance because they have "done one bad thing."

This attitude agitated Kidney, and he felt that it held his agency back from pursuing the people who made the decisions that led to the financial collapse.

To be sure, Kidney has criticized the SEC publicly in the past, and the agency’s handling of the Abacus case has been previously described, most thoroughly in a piece by Susan Beck, in The American Lawyer, but the documents provided by Kidney offer new details about how the SEC handled its case against Goldman. As ProPublica writes, the SEC declined to comment on the emails or the Abacus investigation, citing its policies not to comment on individual probes. In a recent interview with me, Muoio stood by the agency’s investigation and its case. "Results matter. It was a clear win against a company and culpable individual. We put it to a jury and won,"he said.

Kidney, for his part, came to believe that the big banks had “captured” his agency — that is, that the SEC, which is charged with keeping financial institutions in line, "had become overly cautious to the point of cowardice." He is right.

ProPublica writes that soon after he joined the case, Kidney believed that the evidence the SEC staff had assembled justified charges against more people and he argued for, at the very least, an investigation of higher-level executives.

The SEC team had not interviewed Tourre’s direct superior, Jonathan Egol. Nor had they questioned top bankers in Goldman’s mortgage businesses or any of the bank’s senior executives. Even more surprising to Kidney, the agency had not taken testimony from John Paulson, the key figure at his eponymous hedge fund. It seemed to Kidney, as he reviewed the case materials, that the agency had spent more time and effort investigating much smaller insider-trading cases. Just two weeks after he joined the case, on August 14th, Kidney urged the team to broaden its investigation and issue key participants in the Abacus deal what are known as Wells notices — official notification that the SEC is considering charges.

Specifically, Kidney - just like us 6 years ago - could not understand why SEC staffers were reluctant to investigate Tourre’s bosses at Goldman or anyone at Paulson. Charging only Goldman, he said, would send exactly the wrong message to Wall Street. "This appears to be an unbelievable fraud," he wrote to his boss, Luis Mejia. “I don’t think we should bring it without naming all those we believe to be liable.”

His boss, and virtually everyone else at the SEC, disagreed. This is what happened next:

Kidney’s view of the case put him at odds with Muoio, who was widely respected at the agency for his analytical abilities. Kidney said that he was aghast when, in an email sent a month later congratulating his team on their work investigating Tourre, Muoio described potential targets of SEC charges as “good people who had done one bad thing,’’ and he did little to hide his irritation.

 

“I am in full agreement that when we sue it can be devastating, and that we have sued little guys way too often on flimsy charges or when they have been punished enough,’’ he wrote back. “But I’m not at all convinced that Tourre alone is sufficient here.”

 

Kidney later explained to Muoio that he was pushing for a more assertive approach because he believed that the SEC had grown too passive in its oversight of Wall Street. “The damage to the reputation of the [SEC] in the last few years and the decline of the institution are very troubling to me,” he wrote.

 

Kidney and Muoio battled for months. Kidney felt that the agency was overly dependent on the kind of direct evidence it had against Tourre. Part of the problem was that high-level Goldman executives had been savvier in how they communicated: when topics broached sensitive territory in emails, they would often write “LDL” — let’s discuss live.

Not only was SEC employee Reid Muoio against persectuing bankers, he was actively working against the case.

Kidney pressed the team to take what he thought were obvious investigative steps. He had been told by a staff attorney in the group that Muoio had vetoed the idea of calling Paulson to testify, and the agency hadn’t subpoenaed Paulson’s emails initially, relying mainly on the voluntary disclosure of documents. “We didn’t get subpoena power until late in the investigation,” a staff attorney acknowledged to Kidney in an email sent late in August of 2009.

As the year ended, Muoio remained opposed to bringing charges against anyone but Tourre. In a December 30th email, sent to the entire group investigating the deal, Muoio offered an explanation for what had happened during the bubble years: “Now that we are gearing up to bring a handful of cases in this area, I suggest that we keep in mind that the vast majority of the losses suffered had nothing to do with fraud and the like and are more fairly attributable to lesser human failings of greed, arrogance and stupidity of which we are all guilty from time to time.”

And that right there is the smoking gun strawman: ignore the "one off" crime because most of the fraud took place because someone was really just too stupid to know otherwise. Even if that someone worked for the firm which prides itself on having a more strict acceptance ratio than Harvard, and where figuring out how to outsmart everyone else on Wall Street, not to mention Congress and Main Street, is a key ingredient of successfully advancing to partner level.

Kidney pressed on and pushed the agency to bring charges against Egol, Tourre’s superior at Goldman, arguing that the SEC should at least interview him. According to Kidney, Muoio once again hindered the investigation and dismissed the idea, saying that the agency knew what Egol would say. “That’s a cardinal sin in an investigation,’’ Kidney said that he told Muoio. “You can’t assume what somebody will say.”

Kidney also wanted to go after those who made the most money on the Abacus fraud: John Paulson and more importantly, the person who invented the trade that made John Paulson a billion dollars, Paolo Pellegrini.  In late October of 2009, Kidney circulated a long memo arguing that the SEC should consider charging Paulson & Co., John Paulson himself, and Paolo Pellegrini, who was the hedge fund executive who worked on the Abacus deal.

“Each of them knowingly participated, as did Goldman and Tourre, in a scheme to sell a product which, in blunt but accurate terms, was designed to fail,” Kidney’s memo said. “In other words, the current pre-discovery evidence suggests they should be sued for securities fraud because they are liable for securities fraud.”

Once again, Muoio intervened:

Some of Kidney’s colleagues initially supported his idea to pursue scheme liability, but Muoio seemed to think that doing so would hurt the agency’s solid but narrower case against Goldman. “I continue to have serious reservations about charging Paulson on our facts,’’ Muoio wrote. “And I worry that doing so could severely undermine and delay our solid case against Goldman.”  He was, of course, referring to the "case" in which not a single Goldman banker would be charged criminally, and only a 20 year old trader would see a civil lawsuit filed against him. Muoio’s viewpoint, again, prevailed.

* * *

Muoio, defended himself to ProPublica, and in an interview with Eisinger dismissed Kidney’s complaints. “I cannot imagine any basis for claiming ‘regulatory capture,’ given that I have never worked in industry or finance and given the cases I have made, including very significant cases against banks, auditing firms, companies and senior executives," he said.

Well, the basis is the glowing trail of evidence that Muoio, and the SEC, are clearly corrupt, and only a society that is too stupid, or too captured itself, is unwilling to accept it.

Kidney, clearly the only lawyer at the SEC with any integrity did not give up:

Even after he lost the debate over scheme liability, Kidney continued to argue for charging Jonathan Egol with securities-law violations. One staffer wrote that the SEC had testimony, but little documentary evidence, proving that Egol had reviewed the Abacus documents. “The law surely imposes liability on others besides the literal scrivenor [sic], or we are in big trouble,” Kidney shot back in an email. “Why are we working so hard to defend a guy who is now a managing director at Goldman so we can limit the case to the French guy in London?”

 

“I am sure you are not suggesting we charge Egol because of his position within the company,” Muoio replied. “Nationality is also clearly irrelevant and I hope that’s the last we hear from you on that subject. Tourre admits he was principally responsible for the problematic disclosures.”

 

Members of the SEC staff finally interviewed Egol in January. Muoio would later tell the SEC inspector general: “We didn’t lay a glove on him.” But Kidney felt differently. As he saw it, Egol had acknowledged reviewing all the documents that the SEC had deemed misleading.

And then, a miracle happened: someone at the SEC actually did their job and on January 29, 2010, after months of investigation and debate, the SEC provided a Wells notice to Jonathan Egol. 

Once again, enter banker defendant #1, SEC employee Reid Muoio:

In March, Muoio wrote an email arguing against charging Egol, saying that, among other reaons, he “will strike most jurors as nice, likable, down-to-earth family man.” 

And then another familiar name emerged:

On the afternoon of March 22nd, the team gathered in the office of Robert Khuzami, the SEC’s director of enforcement, for a meeting. Kidney, Lorin Reisner, and one other lawyer present were in favor of suing Egol; Muoio remained implacably against, as did others. Most of the lower-level staffers stayed quiet.

Ah yes, our good old friend, Robert Khuzami, star of such posts as SEC Whistleblower Blows the Whistle on Revolving Door Fraud (Khuzami: You're Outed), Circle Jerk 101: The SEC's Robert Khuzami Oversaw Deutsche Bank's CDO, Has Recused Himself Of DB-Related Matters, the same Khuzami who was General Counsel of one of the the most criminal banks in the world, Deutsche Bank, during the time when Deutsche Bank Hid $12 Billion In Losses To Avoid A Government Bail-Out,
and of course the same Robert Khuzami Who Stands To Lose Up To $250,000 If He Pursues Action Against Deutsche Bank.

In the matter of SEC litigation against DB, Khuzami had no choice but to recuse himself. Against Goldman, however, he made it clear whose interests he protects:

The following day, Khuzami emailed the group with his decision: “I am a no on Egol. An extremely difficult call,” he wrote. “The lack of consensus among our group is itself, for me, confirmation of this conclusion.” Khuzami did not respond to a request for comment for this article.

Kidney had lost. "He was offered the job of handling the expert witnesses for the trial but knew what that meant — that he was getting demoted. He declined."

And just like that, the only person who actually fought to put criminal bankers behind bars was kicked out of the SEC. He retired in 2014 after becaming disillusioned. Upon retiring, in 2014, he gave an impassioned going-away speech, in which he called the SEC “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors.”

* * *

As for Goldman, on July 15, 2010, the SEC settled with Goldman for $550 million. Goldman Sachs did not admit any wrongdoing. The SEC wrung an apology out of the bank, which the agency perceived as scoring a victory that critics called inadequate.

It would be the only SEC action brought against the bank for its actions in this corner of the mortgage securities markets just before the meltdown, although a Senate investigation uncovered questionable behavior related to other Goldman mortgage securities. The Justice Department recently settled a case with Goldman that charged that the bank had misrepresented mortgage-backed securities. The bank had to pay on the order of $5 billion. The Justice Department did not charge any individuals.

To this day, not a single banker has gone to prison for crimes during the last credit bubble.

* * *

In the conclusion to the Propublica piece, Kidney reflected on why the SEC has so miserably failed in its mission.

The oft-cited explanations — campaign contributions and the allure of private-sector jobs to low-paid government lawyers — have certainly played a role. But to Kidney, the driving force was something subtler. Over the course of three decades, the concept of the government as an active player had been tarnished in the minds of the public and the civil servants inside working inside the agency. In his view, regulatory capture is a psychological process in which officials become increasingly gun shy in the face of criticism from their bosses, Congress, and the industry the agency is supposed to oversee. Leads aren’t pursued. Cases are never opened. Wall Street executives are not forced to explain their actions.

And why is that? The answer, of course, came from the very top. In this case Eric Holder who admitted on the record that banks are simply "Too Big To Prosecute"

GRASSLEY: On the issue of bank prosecution, I'm concerned that we have a mentality of too-big-to-jail in the financial sector of spreading from fraud cases to terrorist financing and money laundering cases -- and I cite HSBC. So I think we're on a slippery slope.

 

HOLDER: The concern that you have raised is one that I, frankly, share. And I'm not talking about HSBC now. That (inaudible) 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.

This is better known as the "send one banker to jail, and the financial system crashes"defense.

Sadly, since nothing will change and the system is broken beyond repair and more corrupt with every day, it is an excuse that will be used extensively following the next, and far greater, financial crash.

Submitted by John Whitehead via The Rutherford Institute,

“Of all tyrannies a tyranny sincerely exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”—C.S. Lewis

Fool me once, shame on you.

“You” in this case is the government that keeps violating the sacred trust of its citizenry.

Fool me twice, shame on me.

“Me” in this case is the collective “we the people” who should have learned early on that a government that repeatedly lies, breaks the laws, overreaches its authority and abuses its power can’t be trusted.

Fool me over and over and over again, shame on both of us.

Shame on every politician, bureaucrat and technician who is a shill for the U.S. government’s abuses and lies, and shame on every gullible American who keeps buying into the government’s propaganda, believing that it has our best interests at heart.

Unfortunately, as I point out in my book Battlefield America: The War on the American People, the government has seldom had our best interests at heart.

The government didn’t have our best interests at heart when it propelled us into endless oil-fueled wars and military occupations in the Middle East that wreaked havoc on our economy, stretched thin our military resources and subjected us to horrific blowback.

There is no way the government had our best interests at heart when it passed laws subjecting us to all manner of invasive searches and surveillance, censoring our speech and stifling our expression, rendering us anti-government extremists for daring to disagree with its dictates, locking us up for criticizing government policies on social media, encouraging Americans to spy and snitch on their fellow citizens, and allowing government agents to grope, strip, search, taser, shoot and kill us.

Certainly the government did not have our best interests at heart when it turned America into a battlefield, transforming law enforcement agencies into extensions of the military, conducting military drills on domestic soil, distributing “free” military equipment and weaponry to local police, and desensitizing Americans to the menace of the police state with active shooter drills, color-coded terror alerts, and randomly conducted security checkpoints at “soft” targets such as shopping malls and sports arenas.

It would be a reach to suggest that the government had our best interests at heart when it locked down the schools, installing metal detectors and surveillance cameras, adopting zero tolerance policies that punish childish behavior as harshly as criminal actions, and teaching our young people that they have no rights, that being force-fed facts is education rather than indoctrination, that they are not to question governmental authority, that they must meekly accept a life of censorship, round-the-clock surveillance, roadside blood draws, SWAT team raids and other indignities.

One would also be hard-pressed to suggest that the American government had our best interests at heart when it conducted secret experiments on an unsuspecting populace—citizens and noncitizens alike—making healthy people sick by spraying them with chemicals, injecting them with infectious diseases and exposing them to airborne toxins. The government reasoned that it was legitimate to experiment on people who did not have full rights in society such as prisoners, mental patients, and poor blacks.

The mindset driving these programs has, appropriately, been likened to that of Nazi doctors experimenting on Jews. As the Holocaust Museum recounts, Nazi physicians “conducted painful and often deadly experiments on thousands of concentration camp prisoners without their consent.” These unethical experiments ran the gamut from freezing experiments using prisoners to find an effective treatment for hypothermia, tests to determine the maximum altitude for parachuting out of a plane, injecting prisoners with malaria, typhus, tuberculosis, typhoid fever, yellow fever, and infectious hepatitis, exposing prisoners to phosgene and mustard gas, and mass sterilization experiments.

It’s easy to denounce the full-frontal horrors carried out by the scientific and medical community within a despotic regime such as Nazi Germany, but what do you do with a government that claims to be a champion of human rights all the while allowing its agents to engage in the foulest, bases and most despicable acts of torture, abuse and human experimentation?

In Alabama, for example, 600 black men with syphilis were allowed to suffer without proper medical treatment in order to study the natural progression of untreated syphilis. In California, older prisoners had testicles from livestock and from recently executed convicts implanted in them to test their virility. In Connecticut, mental patients were injected with hepatitis.

In Maryland, sleeping prisoners had a pandemic flu virus sprayed up their noses. In Georgia, two dozen “volunteering” prison inmates had gonorrhea bacteria pumped directly into their urinary tracts through the penis. In Michigan, male patients at an insane asylum were exposed to the flu after first being injected with an experimental flu vaccine. In Minnesota, 11 public service employee “volunteers” were injected with malaria, then starved for five days.

In New York, dying patients had cancer cells introduced into their systems. In Ohio, over 100 inmates were injected with live cancer cells. Also in New York, prisoners at a reformatory prison were also split into two groups to determine how a deadly stomach virus was spread: the first group was made to swallow an unfiltered stool suspension, while the second group merely breathed in germs sprayed into the air. And in Staten Island, children with mental retardation were given hepatitis orally and by injection to see if they could then be cured.

As the Associated Press reports, “The late 1940s and 1950s saw huge growth in the U.S. pharmaceutical and health care industries, accompanied by a boom in prisoner experiments funded by both the government and corporations. By the 1960s, at least half the states allowed prisoners to be used as medical guinea pigs … because they were cheaper than chimpanzees.”

Moreover, “Some of these studies, mostly from the 1940s to the '60s, apparently were never covered by news media. Others were reported at the time, but the focus was on the promise of enduring new cures, while glossing over how test subjects were treated.”

Media blackouts, propaganda, spin. Sound familiar? How many government incursions into our freedoms have been blacked out, buried under “entertainment” news headlines, or spun in such a way as to suggest that anyone voicing a word of caution is paranoid or conspiratorial?

Unfortunately, these incidents are just the tip of the iceberg when it comes to the atrocities the government has inflicted on an unsuspecting populace in the name of secret experimentation.

For instance, there was the U.S. military’s secret race-based testing of mustard gas on more than 60,000 enlisted men. As NPR reports, “All of the World War II experiments with mustard gas were done in secret and weren't recorded on the subjects' official military records. Most do not have proof of what they went through. They received no follow-up health care or monitoring of any kind. And they were sworn to secrecy about the tests under threat of dishonorable discharge and military prison time, leaving some unable to receive adequate medical treatment for their injuries, because they couldn't tell doctors what happened to them.”

And then there was the CIA’s MKULTRA program in which hundreds of unsuspecting American civilians and military personnel were dosed with LSD, some having the hallucinogenic drug slipped into their drinks at the beach, in city bars, at restaurants. As Time reports, “before the documentation and other facts of the program were made public, those who talked of it were frequently dismissed as being psychotic.”

Now one might argue that this is all ancient history and that the government today is different from the government of yesteryear. But has the U.S. government really changed?

Has the government become any more humane, any more respectful of the rights of the citizenry? Has it become any more transparent or willing to abide by the rule of law? Has it become any more truthful about its activities? Has it become any more cognizant of its appointed role as a guardian of our rights?

Or has the government simply hunkered down and hidden its nefarious acts and dastardly experiments under layers of secrecy, legalism and obfuscations? Has it not become wilier, more slippery, more difficult to pin down? Having mastered the Orwellian art of Doublespeak and followed the Huxleyan blueprint for distraction and diversion, are we not dealing with a government that is simply craftier and more conniving that it used to be?

Consider this: after revelations about the government’s experiments spanning the 20^th century spawned outrage, the government began looking for human guinea pigs in other countries, where “clinical trials could be done more cheaply and with fewer rules.”

In Guatemala, prisoners and patients at a mental hospital were infected with syphilis, “apparently to test whether penicillin could prevent some sexually transmitted disease.” More recently, U.S.-funded doctors “failed to give the AIDS drug AZT to all the HIV-infected pregnant women in a study in Uganda even though it would have protected their newborns.” Meanwhile, in Nigeria, children with meningitis were used to test an antibiotic named Trovan. Eleven children died and many others were left disabled.

The more things change, the more they stay the same.

Case in point: it has just been announced that scientists working for the Department of Homeland Security will begin releasing various gases and particles on crowded subway platforms as part of an experiment aimed at testing bioterror airflow in New York subways.

The government insists that these gases being released into the subways by the DHS are nontoxic and do not pose a health risk. It’s in our best interests, they say, to understand how quickly a chemical or biological terrorist attack might spread. And look how cool the technology is—say the government cheerleaders—that scientists can use something called DNATrax to track the movement of microscopic substances in air and food. (Imagine the kinds of surveillance that could be carried out by the government using trackable airborne microscopic substances you breathe in or ingest…)

Mind you, this is the same government agency that has been likened to a “wasteful, growing, fear-mongering beast” by the Washington Post.

This is the same government that in 1949 sprayed bacteria into the Pentagon’s air handling system, then the world’s largest office building. In 1950, special ops forces sprayed bacteria from Navy ships off the coast of Norfolk and San Francisco, in the latter case exposing all of the city’s 800,000 residents. In 1953, government operatives staged “mock” anthrax attacks on St. Louis, Minneapolis, and Winnipeg using generators placed on top of cars. Local governments were reportedly told that “‘invisible smokescreen[s]’ were being deployed to mask the city on enemy radar.” Later experiments covered territory as wide-ranging as Ohio to Texas and Michigan to Kansas. In 1965, the government’s experiments in bioterror took aim at Washington’s National Airport, followed by a 1966 experiment in which army scientists exposed a million subway NYC passengers to airborne bacteria that causes food poisoning.

And this is the same government that has taken every bit of technology sold to us as being in our best interests—GPS devices, surveillance, nonlethal weapons, etc.—and used it against us, to track, control and trap us.

So when so-called conspiracy theorists—including the late rock musician Prince and civil rights activist Dick Gregory—suggest that those streaks crisscrossing the sky are chemtrails laced with behavior-modifying chemicals, you might want to tamp down on that kneejerk reaction that chalks them up as nuts. After all, the government has done it before, lacing the fog over San Francisco with bioweapons (delivered by Navy ships moored nearby). In fact, not that long ago, the Obama administration declared by way of executive order that federal agencies are now authorized to conduct behavioral experiments on U.S. citizens in order to advance government initiatives?

Are you getting my drift yet?

What kind of government perpetrates such horrific acts on human beings, whether or not they are citizens? Is there any difference between a government mindset that justifies experimenting on prisoners because they’re “cheaper than chimpanzees” and a government that sanctions jailhouse strip searches of individuals charged with minor infractions simply because it’s easier on a jail warden’s workload?

And when all is said and done, what kind of people rationalize, write off, or just turn a blind eye to such monstrous acts of inhumanity?

Shame on the government, yes, but shame on us for blindly trusting that the government’s motives and priorities have changed.

Shame on us for believing that the government’s bloody wars on terror are keeping us safe in any way. Shame on us for placing greater value on the government’s phantom promises of security over our own hard-won freedoms. Shame on us for allowing our government, our freedoms and the rule of law to be held hostage at the end of a military-issued gun.

Shame on us for letting ourselves be played for fools by individuals who care nothing for us, our our health, our happiness, our welfare, our livelihood, our property or our freedoms. Shame on us for letting ourselves be bamboozled about the war on terror, deceived about the need to trade our freedoms for greater security, and conned into believing that turning America into a battlefield will actually make us safer. Shame on us for letting ourselves be double-crossed by politicians who promise change and reform and hoodwinked into believing that politics is the answer to what ails the nation. Shame on us for not doing a better job of ensuring that future generations have some hope for a better, freer future.

Most of all, shame on us that even after being repeatedly tricked, deluded, misled, swindled and betrayed by government officials, even after learning about the many ways in which we have been duped and deluded, shame on us for still falling for the government’s trickery, chicanery, hocus-pocus, scams and lies.

Shame on us, yes, but still, the question remains: why? What’s in it for the government?

Perhaps the answer lies in The Third Man, Carol Reed’s influential 1949 film starring Joseph Cotten and Orson Welles. In the film, set in a post-WW II Vienna, rogue war profiteer Harry Lime has come to view human carnage with a callous indifference, unconcerned that the diluted penicillin he’s been trafficking underground has resulted in the tortured deaths of young children.

Challenged by his old friend Holly Martins to consider the consequences of his actions, Lime responds, “In these days, old man, nobody thinks in terms of human beings. Governments don’t, so why should we?”

“Have you ever seen any of your victims?” asks Martins.

“Victims?” responds Limes, as he looks down from the top of a Ferris wheel onto a populace reduced to mere dots on the ground. “Look down there. Tell me. Would you really feel any pity if one of those dots stopped moving forever? If I offered you twenty thousand pounds for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare? Free of income tax, old man. Free of income tax - the only way you can save money nowadays.”

In other words, we are citizens of a government that has dehumanized us and reduced us to little more than faceless numbers, statistics and economic units.

What’s in it for the government? Money and power. Or as John Lennon summed it up, “I think we’re being run by maniacs for maniacal ends and I think I’m liable to be put away as insane for expressing that.”

The billion dollar baby has now, officially, gone bye bye.

Just when you thought that the biggest ever "multi-billion" private company that also happens to be an utter fraud, would quietly disappear before it risked attracting even more unwarranted attention from regulators, enforcers, and criminal investigators which could potentially lead to prison time for "billionaire" Elizabeth Holmes, here she comes again reminding everyone of her fallen from grace presence, in this case with what should be the terminal news for this company, namely that as the WSJ reports (and as the company confirms) Theranos has told federal health regulators that the company voided and revised two years of results from its Edison blood-testing devices and has issued tens of thousands of corrected reports to doctors and patients.

As a reminder, the basis for Theranos ludicrous $9 billion valuation which it appears was achieved without anyone doing any actual due diligence, were the "Edison" machines which were touted as revolutionary - not just by Holmes but by the fawning media and even the Clintons. Theranos has now told regulators that it threw out all Edison test results from 2014 and 2015, effectively confirming it has no proprietary technology, and also validating that its valuation should be zero.

Worse, Theranos has told regulators that it used the Edison for 12 types of tests out of more than 200 offered to consumers and stopped using the devices altogether in late June 2015. In other words, Theranos' insane "valuation" was achieved on the basis of doing only 6% of blood tests in house (all of them erroneously we now learn), and outsourcing 94% to companies whose products actually worked and many of whom likely had a far lower valuation than the one at which a bunch of idiot billionaires "valued" Holmes' worthless company.

In the process of commiting fraud and building up her valuation, Holmes repeatedly gambled with people's lives, sending them clearly wrong results. As a result some patients have received erroneous results that might have thrown off health decisions made with their doctors, the WSJ reports. All this is needed is one death and there is a criminal case.

So why come clean now?

The move is part of Theranos’s attempt to persuade the agency not to impose stiff sanctions it threatened in the aftermath of its inspection of the company’s Newark, Calif., laboratory. The voided and revised test results are one of the most dramatic steps yet taken by Theranos.

 

Company records reviewed during the inspection showed that the California lab ran about 890,000 tests a year. The inspection found that Edison machines in the lab often failed to meet the company’s own accuracy requirements.

In other words, Theranos may have put as many as 890,000 lives per year in jeopardy with its fake technology.

The good news, this is now officially game over for if not Elizabeth Holmes, then certainly her company:

“There have been massive recalls of single tests in the past, but I’m not aware of one where a company recalled the entirety of the results from its testing platform,” said Geoffrey Baird, associate professor in the department of laboratory medicine at the University of Washington in Seattle. “I believe that’s unprecedented.”

The company also commented:

In response to questions from The Wall Street Journal about the blood-test corrections, Theranos spokeswoman Brooke Buchanan said: “Excellence in quality and patient safety is our top priority and we’ve taken comprehensive corrective measures to address the issues CMS raised in their observations. As these matters are currently under review, we have no further comment at this time.”

That's rich, pardon the pun. Less rich, if only on paper, will be Holmes who will have ample opportunity to make numerous comments during trial.

* * *

Finally, the question everyone should be asking is who enabled this fraud for so many years? The simple answer: everyone, and especially those who have an agenda to conduct one endless infomercial for a product that ended up being an epic fraud. Here is a sample (courtesy of Bruce Quinn).

August 30, 2013
"Theranos: The Biggest Biotech You've Never Heard of."
San Francisco Business Times. By Ron Leuty.  Here.

September 8, 2013
"Elizabeth Holmes: The Breakthrough of Instant Diagnosis."  

Video interview with Pattie Sellers.  Here.
For further details, see here.

December 8, 2014
"Here's How the World's Youngest Self-Made Female Billionaire Shows People She's In Charge."
Business Insider.  By Richard Feloni.  Here.

December 8, 2014
"The New Yorker on the Promise, the Secrecy, and the Challenges of Super-Startup Theranos."
MedCityNews.  by Meghana Keshavan.  Here.

December 12, 2014
"Behind the Curtain at Theranos."
NBC News. (Video).  Interview with Ken Auletta.  Here.
For more detail, see here.

December 14, 2014
"Blood Test Innovation: Less Cost, No Big Needle"
Information Week/Healthcare.  By Larry Stofko.  Here.

* * *

Finally here is Draper ssociates' Tim Draper - board member and first investor in Theranos - explaining why "the company is fantastic...I believe 100 % in Elizxabeth Holmes and her company," blaming the recent turmoil on media backlash and the status quo pushing back against someone who is 'disrupting' - which we now know is entirely 100% false as Holmes' just admitted her company's 'product' is a fraud...

And that, ladies and gentlemen, is how you get to be worth $9 billion on a "technology" that was nothing but fraud.

Following the demise of the thousand year-long tradition of Swiss banking secrecy, crushed virtually overnight by Barack Obama's demands to make the central European nation's banking industry transparent, one of the major consequences was the shift in money laundering from Geneva and Zurich to the latest and greatest "anonymous" banking and tax evasion hub located halfway around the world, namely Singapore. And overnight, we got the first shot across the bow of the city state's "Swiss banking model", when Singapore ordered the closure of Swiss private bank BSI SA’s unit as criminal proceedings were started against the firm as part of global investigations into a the troubled Malaysian 1MDB state fund.

As Bloomberg reports, in an unprecedented until now move, the Monetary Authority of Singapore said it will withdraw BSI Bank's status as a merchant bank for breaches of money laundering rules as the Swiss Attorney General said it was taking legal action based on information from criminal probes into 1Malaysia Development Bhd, or 1MDB. EFG International AG said it received approval on Tuesday from the Swiss authorities to take over BSI and still expects the transaction to be completed, although at a reduced price.

Over one year after the collapse of 1MDB, aided and abetted by none other than Goldman Sachs, officials have finally started to piece together the fund flows, and BSI was the first casualty: "BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector,"Ravi Menon, managing director of MAS, said in the statement. “It is a stark reminder to all financial institutions to take their anti-money laundering responsibilities seriously."

But why when the US NAR has an explicit exemption from AML responsibilities courtesy of the US government just to make money laundering in US real estate that much easier. Oh wait, now we get it...

The crackdown is part of the global money laundering and embezzlement investigations surrounding 1MDB. As reported before, a Malaysian parliamentary committee identified at least $4.2 billion of irregular transactions by the state fund, and recommended the advisory board headed by Prime Minister Najib Razak be disbanded. BSI’s Group CEO Stefano Coduri resigned as the Swiss regulator said it will seize 95 million Swiss francs ($96 million) from the firm and start enforcement procedures against two former bank employees.

1MDB didn’t immediately reply to a request for comment on its links to BSI. Both 1MDB and Najib have consistently denied wrongdoing. BSI said Tuesday that it has cooperated fully with the investigations into 1MDB by the Singapore and Swiss authorities. BSI remains well capitalized, it said.

As Bloomberg adds, Singapore’s central bank said it will allow the transfer of the BSI Singapore unit’s assets and liabilities to the Singapore branch of EFG or to the parent entity BSI SA. The MAS will also impose S$13.3 million ($9.6 million) in financial penalties on the BSI unit for 41 breaches, including its failure to conduct due diligence on high-risk accounts and monitor suspicious customer transactions.

What is more troubling, if only to the local bankers, is that someone may actually go to prison over this latest tax evasion: the central bank has referred six senior BSI executives to the public prosecutor, including the Swiss private bank’s former Singapore chief executive officer and his deputy. The prosecutor will assess if there were any criminal offenses. It’s the first time Singapore has withdrawn a license from a merchant bank since 1984.

Meanwhile, the Swiss Attorney General said the criminal proceedings are based on information gathered in the course of its investigation and from Finma, Switzerland’s financial regulator. BSI "ignored clear warning signals," about the risk of some of its transactions as it pursued higher-margin returns, Finma CEO Mark Branson told reporters on a conference call Tuesday. The regulator has investigated other Swiss banks related to 1MDB and started proceedings against some, he said.

Maybe Finma can take a look at some other, more prominent banks who have done all that and much worse in their pursuit of "higher margin returns."  But then again, "developed nations" central bankers may frown upon such an exercise.

Will the historic crackdown on BSI impact local tax evasion? It is doubtful, unless someone actually does go to jail. Others are less pessimistic.

“This will send a chilling effect to banks and financial institutions to make sure that they have robust anti-money laundering and countering the financing of terrorism programs, as their regulatory licenses could be at risk," Nizam Ismail, head of banking regulatory practices in Singapore at law firm RHTLaw TaylorWessing, said by e-mail. “Worse, there is also the real threat of personal criminal liability.”

As regards BSI specific violations, Bloomberg reports that the private bank had introduced 1MDB to a Cayman Islands fund which received a $2.32 billion investment, according to a report from a Malaysian parliamentary hearing. That investment and transactions related to it are the subject of criminal probes, including those conducted in Singapore.

However, one thing is almost certain: someone will go to jail, if only for the bank's heads to avoid prison time: there has to be a scapegoat.

BSI is conducting an internal inquiry into its employees and their dealings related to 1MDB, Bloomberg News reported last week, citing people familiar with the matter. The probe centers on Kevin Swampillai, who’s been suspended as head of wealth-management services and named as one of the six individuals by the MAS. Swampillai was the manager of Yeo Jiawei, the first banker to be charged in global probes into 1MDB. Swampillai’s lawyer Kenneth Pereira declined to comment.

Yeo, who has been held on remand since April 15, is scheduled to return to a Singapore court today. His lawyer has said several BSI employees are in a similar position and can answer queries by the authorities.

That was Singapore. As for Europe, we look at the stock of Deutsche Bank which is modestly up today following headlines such as:

• DB Downgraded by moodys
• Reopened SEC investigation
• Latam CEO leaves
• Libor lawsuits are back

In other words, all is well in the world, aside from one soon to be corrected glitch.

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

At the beginning of this year, Attorney General Eric Holder attempted to close an exploitable loophole in asset forfeiture laws. State and local law enforcement agencies often sought federal “adoption” of seizures in order to route around statutes that dumped assets into general funds or otherwise limited them from directly profiting from these seizures. By partnering with federal agencies, local law enforcement often saw bigger payouts than with strictly local forfeitures.

 

The loophole closure still had its own loopholes (seizures for “public safety,” various criminal acts), but it did make a small attempt to straighten out some really perverted incentives. But deep down inside, it appears the DOJ isn’t really behind true forfeiture reform. In fact, it seems to be urging local law enforcement to fight these efforts by pointing out just how much money these agencies will “lose” if they can’t buddy up with Uncle Sam.

 

– From the post: How the Department of Justice is Actively Trying to Prevent Civil Asset Forfeiture Reform

It’s been a while since I’ve reported on the lawless and barbaric practice of civil asset forfeiture. However, just because it hasn’t been a focus doesn’t mean it isn’t happening. Indeed, it appears the same federal agencies that couldn’t find a bank executive they didn’t want to coddle, take particular pleasure in harassing and abusing average Americans generally, and small businesspeople in particular.

The following case highlighted by the Huffington Post is an extremely sad and sobering expose. Below are some excerpts, but you can read the whole thing here: IRS Returns Bakery’s Money After 3 Years. Now It Wants To Put The Owners In Prison.

In May 2013, David Vocatura watched $68,000 disappear.

 

He was at his family’s bakery in Norwich, Connecticut, when a squad of armed IRS agents filed into the store. The agents wanted to know if Vocatura and his brother Larry were trafficking drugs or running a prostitution ring. The brothers had no idea what they were talking about.

 

The IRS refused to believe Vocatura’s Bakery was operating on the up and up. Agents said the business raised red flags because of a series of cash deposits in sums under $10,000, the amount at which banks are required to report transactions to the federal government. They said this behavior was consistent with a crime known as structuring, which the IRS defines as making calculated financial transactions in order to skirt reporting requirements. The agents had no evidence of other wrongdoing, but thanks to a controversial law enforcement tool known as civil asset forfeiture, they didn’t need any to seize every penny in the Vocaturas’ bank account: $68,382.22.

 

Under the practice of civil forfeiture, authorities can move to permanently take property they suspect of being linked to criminal activity, without obtaining a conviction — and, in cases like the Vocaturas’, without even charging the owner with a crime.

USA! USA!

For the past three years, the brothers have been fighting to get their money back, maintaining they’d done nothing wrong. The IRS has responded by subjecting David, 53, and his brother Larry, 69, to a series of increasingly aggressive legal maneuvers — including threats of significant prison time and additional fines — in an attempt to strong-arm them into permanently forfeiting their assets.

 

On Tuesday, the Institute for Justice, a libertarian public interest law firm, filed a lawsuit in U.S. District Court for the District of Connecticut on behalf of Vocatura’s Bakery, demanding that the IRS promptly return their money. The suit argued that the Vocaturas were just the latest example of the government hastily seizing property, and then going to extreme and even unconstitutional lengths to justify it after the fact.

 

Hours after the suit was filed, the IRS said it would finally give the Vocaturas their money back. But the prosecutor didn’t drop the case. Instead, he now plans to mount an expansive investigation into the bakery’s finances, looking for a reason to bring criminal charges against the brothers.

 

At issue in the Vocaturas’ case are hundreds of deposits between March 2007 and April 2013 that ranged from $7,000 to $9,900 — a total of around $2.8 million. The Vocaturas say the deposited money was from the bakery’s sales, as they were doing mainly cash business at the time, and they have a less suspicious explanation for why the deposits were so close to the reporting limit. David Vocatura says a representative from their local bank told him that an employee had to fill out forms each time they brought in more than $10,000, so he decided to make life easier for the bank attendants by making smaller, more frequent deposits.

 

If the IRS has proof that the Vocaturas were deliberately structuring payments or hiding illicit proceeds, it hasn’t provided it.

 

Earlier this month, Peter S. Jongbloed, assistant U.S. attorney for the District of Connecticut, served the Vocaturas a grand jury subpoena calling for them to turn over every financial record from the six years between March 2007 and April 2013, so the agency could finally begin investigating the business’s tax and regulatory compliance. At the time, it was the latest reminder that the government was intent on taking the brothers’ assets, even if it had to change its approach three years after the fact.

 

The Institute for Justice argues that the subpoena is an attempt to retroactively justify an improper seizure and punish the Vocaturas for not rolling over.

 

“At this point, the government is in so deep, they’ve put these guys through three years of hell — and held onto their money for three years — and so they feel like they need to justify it,” said Robert Everett Johnson, an attorney for the Institute for Justice who is representing the Vocaturas. “So now they’re going to conduct this investigation into the bakery in some effort to try to find something that will make it look like they were doing the right thing all along.”

Yes, my fellow Americans, this is your government.

The government’s seizure of the Vocaturas’ account is part of a broader pattern of concerns about the use of civil asset forfeiture, a practice that brings in billions of dollars each year to federal, state and local law enforcement agencies.

 

Critics say each step of the process is ripe for abuse. Authorities frequently base seizures on weak circumstantial evidence. In some of the most publicized civil asset forfeiture cases, the mere presence of cash has constituted enough probable cause to justify a seizure. In cases like the Vocaturas’, the act of depositing cash isn’t necessarily illegal on its own, but authorities are quick to treat anyone who does it like a criminal.

 

Once the government seizes property, it’s difficult to get back. Unlike in criminal trials, where suspects are considered innocent until proven guilty, property owners must often prove their innocence in civil forfeiture cases.

 

Once someone’s assets are forfeited, those proceeds go to the agency that made the seizure — and there is very little oversight of how that money can be used. Critics of civil asset forfeiture say this dynamic incentivizes law enforcement officials to bring in as much money as possible, creating a motive to “police for profit” rather than for public interest or safety.

 

The IRS has used structuring allegations to seize hundreds of millions of dollars through civil asset forfeiture in recent years, some of which has been funneled directly into the agency’s coffers. A report from the Institute for Justice put the total value of forfeitures — money the government kept in IRS structuring cases — at nearly $125 million between 2006 and 2013.

 

Of the more than 2,500 seizures in the report, at least one-third involved no claims of criminal activity beyond the cash transactions themselves. Only 1 in 5 were ultimately prosecuted as a criminal structuring case. The numbers also show that the IRS failed to keep seized money in many cases, which could be a troubling sign of over-prosecution.

 

The Vocaturas’ home state of Connecticut is a hotbed for structuring-based seizures, according to IRS data provided to the Institute for Justice through a public records request. Among states with a single U.S. attorney, Connecticut ranks third worst for these sorts of seizures. Between 2005 and 2013, federal prosecutors in the state approved 9.2 seizures for suspected structuring for every 10,000 businesses in the state — a rate that the Institute for Justice says is dramatically higher than other states.

 

In February, 33 months after the bakery’s bank account was seized, Jongbloed broke his silence. He offered the Vocaturas an opportunity to end their ordeal, while also preventing the public backlash that had impeded recent structuring cases.

 

Though the federal government had still not filed criminal charges against the brothers, Jongbloed wanted them to plead guilty to structuring, a felony, and admit that they’d “acted with the intent to evade the reporting requirement.” By doing so, the Vocaturas would be subject to a potential four-year prison sentence and would have to agree to forfeit both the initial $68,000 and an additional $160,000 in personal assets between them. 

 

But by getting the Vocaturas to admit guilt, the IRS would also have been able to keep the brothers from speaking out about their case. The plea deal would have served as an admission that the government had some cause to take their money. Nobody could accuse the government of once again abusing civil forfeiture if the victims ultimately handed over the money as punishment for a crime they had copped to.

 

Jongbloed noted that sanctions could be harsher if the case went to trial, and encouraged the Vocaturas to take the deal. The brothers, who still insist that they’ve done nothing wrong, rejected that offer.

 

On May 10, Jongbloed responded by demanding more than six years of business records documenting all of the bakery’s dealings. He finally wants to figure out if the Vocaturas had actually broken the law when IRS agents raided their account.

 

While the government is finally giving the Vocaturas their money back, the fact that they were able to hold it for so long without taking concrete action shows how much leeway they have in these cases.

 

As long as the current system of civil asset forfeiture remains intact, new federal guidelines or policy are unlikely to be effective, said Steven L. Kessler, a New York attorney who has defended a number of clients in high-profile forfeiture cases. He believes clear legislative action is needed to keep the government from compromising people’s property rights in the hunt for money.

 

“When the government says they’re going to do that on their own, they’re going to make the change, everyone is very happy and we move on to the next story,” said Kessler. “Rarely does anything change, because we’re dealing with a guideline — we’re dealing with something that is within the full discretion of the government.”

 

There are some rumblings in Congress for a legal overhaul.

 

Last week, Rep. Jim Sensenbrenner (R-Wis.) and a bipartisan group of co-sponsors introduced a bill to rein in civil asset forfeiture. Among the most significant measures, the Deterring Undue Enforcement by Protecting Rights of Citizens from Excessive Searches and Seizures Act of 2016, or the DUE PROCESS Act, would shift the burden of proof from the property owner to the government, and raise the standard needed to validate a forfeiture. If passed, the new law would require the government to provide “clear and convincing” evidence that property was substantially connected to criminal activity — still below the “beyond a reasonable doubt” standard for criminal convictions.

This needs to pass.

These legislative fixes would do little for Vocatura’s Bakery, however.

 

While their legal saga began as a civil forfeiture case, the IRS has now decided to pursue criminal forfeiture against them. That isn’t addressed in the DUE PROCESS Act, which only deals with civil cases.

 

Nor is it assumed that these bills will pass. Civil asset forfeiture reform has hit snags in Congress before, in part due to aggressive lobbying from law enforcement groups intent on preserving the practice.

Yep. Recall: Land of the Unfree – Police and Prosecutors Fight Aggressively to Retain Barbaric Right of “Civil Asset Forfeiture”

“The way you would expect the criminal justice system to work if you were reading your high school civics textbook is that you’d expect the government first to investigate people, then to obtain an indictment if they think something wrong has happened, and then to obtain a conviction and then finally to punish them,” he said.

 

“But in this case that all has happened exactly backwards,” Johnson continued. “The government first punished the Vocaturas by taking their property, then they tried to get them to plead guilty to charges, and only when they refused to plead guilty did the government investigate.”

This is not what freedom looks like.

Submitted by David Stockman via Contra Corner blog,

Since last Friday’s phony jobs report the casino has become so unhinged that analysis is beside the point. A picture worth an eventual thousand point drop on the S&P 500 will do the job.

While we are waiting it might be wondered, however, whether nearly two decades of central bank financial repression have not merely destroyed honest price discovery on Wall Street. Perhaps it has actually extinguished brain function entirely among the corporal’s guard of carbon units that remain.

Yes, it is not surprising at all that the robo-machines are now gunning for the 2200 point on the S&P 500 charts. That’s what they do.

What defies explanation, however, is that the several dozen humans left on Wall Street who apparently talk to Bob Pisani are actually attempting to rationalize this “breakout” of, well, madness.

According to JPMorgan’s latest thoughts, for example, it’s all explained by Mr. Market hard at work discounting a meme called “17x/$130”.

Market update – more of the same for this market. The 17x/$130 argument continues to resonate (that combination of numbers points to 2200). It’s still very, very early in the CQ2 season but the indications so are more positive than negative (AA, Daimler, PEP, Samsung, SIMO, STX, WDC, etc) and that is helping investors look past the earnings recession and is bolstering confidence in a ~$130 number for next year.

Let’s see. Before we get to whatever massaged and medicated version of “earnings” JPM is talking about with its $130 per share number, it would be useful to start with reality.

According, to Howard Silverblatt, the S&P’s authority on these matters, reported (GAAP) earnings for the March LTM finally came in at $86.44 per share.

So barring some near-term earnings miracle, the market is now valued at a nosebleed 24.9X. The last time it was near that level outside of outright recession was on May 16, 2008.

At that point, March 2008 LTM earnings on a GAAP basis had posted at $60.39 per share. So when the market hit an intraday high of 1430 the implied multiple was nearly 24X.

Needless to say, it was a long way down from there. In fact, ten months later the market was 53% lower, and S&P reported earnings actually bottomed that quarter at $6.86 per share, or 90% lower.

But then, of course, who would credit GAAP?

That is, besides the the several thousand white collar “criminals” domiciled in Federal hospitality facilities who undoubtedly rue the day they violated it; or the tens of thousands of bureaucrats at the SEC, DOJ and state attorneys general offices who make a living enforcing it; or the far greater numbers of white collar defense attorneys who make an even better living parsing its fine points.

Then again, you don ‘t have to make a fetish of GAAP, even if several billion dollars annually of law enforcement and regulatory intrusion insist upon it. In fact, back in May 2008—–at a time that even the White House council of economic advisers said there was no recession in sight and Bernanke was preaching mainly blue skies ahead—-LTM operating earnings had posted at $76.77 per share, according to Howard Silverblatt.

So even using the ex-items style of earnings, the market was trading at a pretty sporty 18.6X.

Alas, a recession had already been underway for six months, but no one had bothered to tell the Eccles Building and their Wall Street acolytes. The latter are otherwise known as “street economists” and “equity strategists” of the JPMorgan ilk quoted above.

Here’s the thing. Even the LTM “operating earnings” number at the time was down by 16% from its cyclical high of $91.47 per share that had posted three quarters earlier (June 2007 LTM). But like now, the street insisted that the “earnings bottom” was in, and that 2008 profits would come in at over $100 per share or 30% higher than the March 2008 LTM actual.

At it happens, Silverblatt’s certified operating earnings number for the March 2016 LTM period was $98.61per share.

That means that today’s market traded at 21.8X Wall Street’s preferred earnings measure. That’s even above the 18.6X delusion back in May 2008, and also something more.

Like eight years ago, the March operating earnings number is down 14% from its peak of $114.50 posted for September 2014. And also like back in 2008, expected forward earnings of $130 per share are 30% above current levels.

In truth, all of this is worse than deja vu. That’s because the casino’s financial narrative has been so corrupted by recency bias and accounting promiscuity that it has no idea what the profits picture really is or where it is going.

In a moment we will put a bullet through JPM’s $130 per share fantasy. But it is worth reiterating just how far the “earnings” narrative has departed from GAAP, and that near the end of a cycle this GAAP gap becomes especially wide.

As the WSJ recently documented,  Wall Street’s ex-items or pro forma  version of S&P 500 earnings came in at $1.040 trillion in CY 2015 compared to GAAP earnings of $787 billion. It would appear that CEOs and CFO’s who filed their SEC statements on penalty of prison time, averred that their actual profits were exactly $256 billion smallerthan what they told their investors.

As it happens, that quarter trillion dollar fib is exactly the size of the ex-items charade back in 2007. It seems as if companies actually need a periodic recession so that they can toss into the kitchen sink the write-offs for all the dumb deals and investment mistakes they made while the bubble was still inflating.

In any event, not only are Wall Street’s hockey sticks extremely crooked from an accounting point of view, but they are also egregiously predictable in the magnitude by which they deflate as one-year forward estimates are eventually overtaken by reality.

To wit, in March 2014, the one-year forward estimate for CY 2015 came in at $135per share of “operating earnings” for the S&P 500. At length, CY 2015 unfolded—-bringing with it a collapse of oil and materials prices and a sharp slowdown of global growth that came as a big surprise to Wall Street.

Accordingly, Silverblatt now certifies that actual operating earnings for CY 2015 came in at $100.45 per share. Apparently, in a world where “one-timers” don’t count, that gigantic 26% miss doesn’t count, either.

That’s because in March 2015, the street “bottoms up” consensus for 2016 was pegged at, yes, $135 per share, again.

The problem is that the 2015 hockey stick has already been rolled-down to just $114 per share as of June. Yet even if Q2 comes in at the current estimate of $28 per share and there is no further earnings decline in Q3 and Q4, earnings will total just $100 per share for 2016. That would be another 25% miss.

Never fear. The street consensus estimate for 2017 as of this March was $136per share for the third year in a row.

That JPMorgan has already walked it down to $130 per share, therefore, is not the least bit surprising. Walking it back is what equity analysts do.

Then again, according to Howard Silverblatt, operating earnings for the current LTM period (June 2016) are expected to come in at just $100.55 per share.

Yet why is the implicit 30% climb from here to get to JPM’s magic “17X” on next year’s earnings any more plausible than was the outlook back in July 2014?

Back then, LTM operating earnings posted at $112 per share and the expectation was for a 20% gain on a year forward basis for 2015.

In fact, since July 2014 total business sales in the US economy have declined by 6% and the inventory to sales ratio has soared from an already high 1.3X sales to 1.41X. That’s recession territory.

In the case of wholesale sales as reported today, Jeff Snider notes in a nearby post that the warning signs of recession are flashing even brighter. At 1.44X, the non-petroleum inventories-to-sales ratio is heading for the highs of the Great Recession.

Likewise, unlike the BLS’s monthly random numbers generator, the treasury tax collections do not lie. And they do not reflect taxes paid by real world employers for phantom workers on account of seasonal maladjustments, birth-death imputations or trend-cycle adjustments to actual payroll records.

As we showed last week, the 90-day moving average of payroll tax collections in June had dropped from last year’s 5-6% Y/Y trend to barely 3%. This means that after allowance for average hourly pay gains of 2.6% since last June,  labor hours worked in the US economy are evidently at stall speed.

That probability is reinforced by two other straws in the wind.

First, total Federal tax collections—-including upper income estimated payments, corporate taxes and excise taxes—-at $181 billion in June were flat over prior year. That’s a radical departure from the hefty gains registered since anti-recession tax cuts expired in 2013.

Likewise, the recovery of incomes among the top 10%-20% of households since 2009 has generated solid gains in restaurant and bar sales. During the seven years after the May 2009 bottom, sales growth averaged 5.5% per annum.

But in June, the Knapp Track data for the core fast casual sector showed that traffic was down 4.8% compared to last year and sales were down 2.3%.

In a similar matter, the Cass freight index is now running sharply lower than at any time since 2013, meaning the pace of business activity in the US economy is cooling rapidly.

At the end of the day, the “17x/$130” meme is not even a case of eye’s wide shut daredevilry.

That is, not in a world with $13 trillion in subzero sovereign debt, liquidity soaked markets riddled with FEDs (financial explosive devices), the Red Ponzi teetering more dangerously every week, the Italian and European banking system slinking toward the brink, crude oil heading back down for the count, Japan contemplating fiscal hari kari, and countless more.

It’s also an insult to intelligence in a world where bulging inventories remind that the business cycle has not been abolished, where faltering US exports matter on the margin, where 90% of households are tapped out and where corporate America is buying back its stock, not investing in maintenance of the capital stock, let alone improvement and growth.

To say the least, there is no reason whatsoever to believe that the domestic and global economies will come bounding back anytime soon. A 30% gain in corporate profits during the next 18 months is not even a remote possibility.

Actually, the latter proposition is proof positive that the casino has been largely emptied of human intelligence. It apparently remains occupied by a motely assembly of brigands and snake oil vendors who are calling the greater fools to one final slaughter.

Given the evident facts of life, you can’t say the latter don’t deserve exactly the condign punishment the economic gods surely have in store.

Submitted by Ryan McMaken via The Mises Institute,

The debate over the shooting of Philando Castile has ignited the debate over the way the police, generally speaking, often enforce petty, small-time offenses with often overwhelming force. In the case of Castile, the controversy hinges partially on whether or not Castile was being detained as a suspect in a real crime (such as armed robbery), or if he was being stopped and harassed for a small-time non-violent infraction such as drug possession or a broken tail light. 

People instinctively know there is a real difference between the situations. Moreover, it is a safe assumption that in the case of armed robbery, someone has actually requested the services of the police, while it is extremely unlikely that any citizen complained about, or was harmed by, a broken tail light or the possession of marijuana. If it proves to be true that Castile was, in fact, stopped for a small-time infraction, then the escalation to a situation in which Castile was shot dead can be shown to be all the more unnecessary and needlessly violent. 

But, of course, we don't need the Castile case to prove our point. Everyday, people are stopped and detained by police for what should be regarded as peaceful non-criminal activities. But those situations often escalate to tense confrontations, and even in some cases to violent interactions. 

It doesn't have to be this way.

Police Didn't Always Patrol Areas Looking for People to Arrest  

Modern policing is largely a nineteenth-century invention, and prior to modern urban police forces, state agents were generally called in to deal only with episodes of general social unrest. 

Prior to the age of the modern police patrol in English-speaking countries, state agents — often a sheriff-like official — were used primarily to compel named defendants to appear in court when another citizen had made a complaint in court against that person, usually to demand restitution for some wrong inflicted. It wasn't until the twentieth century that police agents routinely patrolled an area looking for places to intervene. In the United States, for example, as Jack Greene notes, "the American police service was originally cast as a reactive force, not as a preventive of interdicting force. ... America's police were to provide assistance on request, not to proactively intervene in the lives of the community." 

In England, the tradition of legal action only beginning in response to a private complaint is very old, and law enforcement agents were expected to act only in response to court orders. Michael Giuliano writes: 

Since early medieval England, long before the Norman invasion of England, criminal actions had been instituted by aggrieved private parties. They were primarily settled by compensation or restitution, and not imprisonment, capital punishment, or even the blood-feud that was common in much of Europe. For most offenses, specific civil fines and compensation were established. ... The affirmative role of the victim or next of kin initiated the legal process. Particularly heinous offenses requiring more than “mere” intentional homicide, were often excluded from the realm of compensatory remedy. As process, judges were appointed to preside over the courts and enforce the decisions made by the assembled freemen of a district. Policing and law bore elements of democracy.

This reliance on a private restitution-based model continued into the late nineteenth century, and was hotly defended by many of the English on the presumption that a shift to "public" prosecutions — prosecution initiated by the state itself — would lead to a destruction of English civil liberties. Giuliano continues: 

The formal transition from private to public prosecution in England did not occur until 1879 and years passed before it could be implemented in practice. The English gentry had long been suspicious of both a public prosecution system and a professional police force.

 

Indeed, the private initiation of criminal prosecution in England was a curiosity to visitors. Among them was the French jurist Charles Cottu, who like many was unaware of the “traditional arguments of English gentlemen against a constabulary and state prosecution,” according to legal historian Douglas Hay. Those Englishmen believed, in Hay’s characterization, that the power of prosecutorial institutions could lead to a “political police serving the Crown.” This opposition to public prosecution has been cast by law professor Bruce P. Smith as an example of old England's “national commitment to civil liberties.”

Obviously, today, we see few traces of a legal system that even resembles the English Common Law system that relied on there being an actual victim for a crime to have taken place. Today, police actively patrol neighborhoods looking for potential offenders even if no one has requested the "service."

In response, this has led to some observers to suggest that the police should function instead on a "fire department model" in which police respond only to actual complaints, rather than seek out "offenders" on their own. 

Certainly, this could potentially be a step in the right direction, but the larger problem lies in the fact that not only can arrests and prosecutions be initiated in the absence of any complaint or victim, but the list of offenses for which a person can be arrested and imprisoned has grown disastrously long. 

Every Police Encounter Is an Opportunity for Arrest and Criminal Prosecution 

Dealing with violent crime constitutes only a small minority of what police deal with on a daily basis. For example, in 2014, out of 11,205,833 arrests made nationwide (in the US), 498,666 arrests were for violent crimes and 1,553,980 arrests were for property crime.

That means 82 percent of arrests were made for something other than violent crime or property crime. 

Moreover, many of these non-violent offenses — such as drug use, liquor violations, carrying an illegal knife, or other infractions that should be regarded as small-time offenses can result in serious jail time or prison time, as well as steep fines and lost earnings. 

For instance, the highly publicized death of Eric Garner at the hands of police officers was a conflict precipitated by the sale of untaxed cigarettes by Garner. The police officers who killed Freddie Gray in custody in Baltimore later claimed the arrest was necessary because Gray possessed a knife that violated city ordinances. 

And then there are the countless cases of non-criminals who have been stopped, searched, arrested and imprisoned for petty drug offenses such as possession. 

Indeed, police departments spend an immense amount of time and resources on these non-violent offenses. In their book, The Challenge of Crime, Henry Ruth and Kevin Reitz observe: 

[W]e do know that the effort to stem the tide of illicit drugs has been massive — and expensive. On the local level, 93 percent of county police agencies and 82 percent of all municipal agencies with more than one hundred police officers contained a full-time drug enforcement unit, as did about 60 percent of the state police agencies, and almost 70 percent of all sheriffs' departments. New York City alone in 1997 reported over 2,500 police officers dedicated to drug units and task forcese. More than 90 percent of all these police agencies received money and property forfeited by drug sellers for use in law enforcement opertations. ...

 

State and local police made about 1.6 million arrests for drug abuse violations in 2000, four-fifths of them for drug possession. ... And in 1998, drug offenders were 35 percent of all felons convicted in state courts.

In Gangs and Gang Crime, Michael Newton Reports: "In 1987, drug offenses produced 7.4 percent of all American arrests, nearly doubling to 13.1 percent by 2005."

As Ruth and Reitz note, there are financial incentives to police agencies to pursue drug offenders. The nature of drug offenses also gives the police more reason to make arrests in general. As explained by Lawrence Travis in Introduction to Criminal Justice:

With increased emphasis on drug crimes, agents and agencies of the justice system have uncovered offenses that have been present for years. Because drug offenses have gone unreported in the past, Zeisel (1982) noted that they present an almost limitless supply of business for the police. changing public perceptions of the seriousness of drug offenses has supported increased drug enforcement efforts.

 

[Peter] Kraska observed that with drug offenders, police "can seek actively to detect drug crimes, as opposed to violent and property crimes, for which they have little choice but to react to complaints." Thus, the volume of drug offenders entering the justice system is more a product of police activity than is that of violent or property offenders.. Political pressure to treat drug offenses more seriously, coupled with giving incentives such as profit from seizing the property of drug offenders, spurs more aggressive police action."

In other words, rather than react to complaints about violent crime or property crime, drug enforcement provides the police with nearly limitless opportunities to search, question, and arrest suspects for any number of offenses related to drugs. Moreover, if the police attempt to stop and search a person, and the person becomes uncooperative, police may then be able to justify an arrest for "resisting arrest" or similar offense even if no drugs are found. 

Arrests in turn then bolster a police officer's career, even though little time has been spent on investigating violent crime or recovering stolen property. 

The results of this emphasis among law enforcers can be seen in the incarceration data. Erinn Herbermann and Thomas Bonczar report that, of the 3,910,647 adults on probation in the US at the end of 2013, 25 percent (approximately 977,662 people) had a drug charge as their most serious offense.

According to the Justice Policy Institute: "approximately one-quarter of those people held in U.S. prisons or jails have been convicted of a drug offense. The United States incarcerates more people for drug offenses than any other country. With an estimated 6.8 million Americans struggling with drug abuse or dependence, the growth of the prison population continues to be driven largely by incarceration for drug offenses."

Consequently, more than one-fifth of prisoners (21 percent) in state prisons are held due to drug violations, while more than half (55 percent) of prisoners in federal prisons are held due to drug violations. This does not include offenders in county jails for shorter non-prison sentences. 

The Effects of an Expansive Criminal Code on Police-Suspect Interactions 

The effects of these trends should be predictable. 

Imagine, for example, a world in which the only offenses that brought significant jail terms or large fines were violent criminal acts and property crimes. Obviously, in this case, the range of action open to the police would be greatly reduced, and citizens stopped by the police would have little to worry about in terms of stiff jail sentences. The possession of a switchblade or a certain type of cigarette would be of little concern to either the police or the suspect. Even if policymakers could not bring themselves to legalize these activities but only de-criminalize them, the stakes would be much lower in police-citizen interactions when citizens fear only a citation and fine instead of prison time for any offense that does not involve thievery, fraud, violence, or destruction of property. 

When suspects know they are unlikely to be arrested or face a serious criminal charge, they are unlikely to panic and resist the police in a way that may lead to escalation of violence. 

Moreover, given the relative rarity of real crime versus mere drug offenses and other small-time violations, police would be forced to concentrate their efforts on violent crime and property instead.

After all, given the reality of scarce resources for any endeavor, including policing, the opportunity cost of pursuing drug offenses leads to fewer police resources being devoted to recovering stolen property and pursuing violent criminals.

Contrary to un-serious and absurd claims that the police "enforce all laws," police use their discretion all the time as to what laws to enforce and which to not enforce. Those laws that are enforced are often laws that can lead to profit for the police department — such as drug laws which leads to asset forfeiture — or laws that can make for easy arrests — such as loitering and other small time laws — which improve a police officers' arrest record.

If we want to be serious about scaling back the degree to which police interactions with the public can lead to violent escalations, we must first scale back the number of offenses that can lead to serious fines and imprisonment for members of the public, while shifting the concentration of police efforts to violent crime and property crime. The emphasis must return to crimes that have actual victims and which are reported by citizens looking for stolen property and violent criminals. Not only will this increase the value of policing, but will also improve relations with most of the public while reducing the footprint of the state in the lives of ordinary people.

Submitted by Carey Wedler via TheAntiMedia.org,

“By means that could be termed dishonest, deceitful and corrupt, they manufactured 7.2 billion euros in deposits by obvious sham transactions,” Judge Martin Nolan of Ireland said as he convicted three top bankers on Friday for their role in the 2008 financial crisis. They are among the first in the world to be sent to prison for their involvement in the global meltdown eight years ago.

The longest-ever criminal trial in Ireland lasted 74 days and led to convictions for former Irish Life and Permanent Bank Chief Executive Denis Casey; former finance director at the failed Anglo Irish Bank, Willie McAteer; and former head of capital markets at the Anglo Irish Bank, John Bowe. They received sentences ranging between two-and-a-half to three-and-a-half years.

As light as those sentences may seem considering the dire effect bankers’ actions had on the Irish economy, U.S. and English bankers have evaded convictions altogether. Though banks in those countries have since paid out billions of dollars in settlements to regulators for their role in the 2008 crash, no one from those companies has been sentenced to prison.

Reutersreported on the different approach used by Ireland:

“All three were convicted of conspiring together and with others to mislead investors, depositors and lenders by setting up a 7.2-billion-euro circular transaction scheme between March and September 2008 to bolster Anglo’s balance sheet.

 

“Irish Life placed the deposits via a non-banking subsidiary in the run-up to Anglo’s financial year-end, to allow its rival to categorize them as customer deposits, which are viewed as more secure, rather than a deposit from another bank.

 

” Defense attorneys for the bankers claimed the scheme was prompted by Irish regulators’ demands at the time that Irish banks “support one another as the financial crisis worsened” in a program called the “green jersey agenda.”

But Judge Nolan maintained they had committed a “very serious crime,” adding, “The public is entitled to rely on the probity of blue chip firms. If we can’t rely on the probity of these banks we lose all hope or trust in institutions.” A blue chip firm is a “nationally recognized, well-established and financially sound company,” according to Investopedia. Nolan also called Anglo Irish“‘probably the most reviled institution in the state,’” noting it was “put into liquidation in 2013 and remains subject to other criminal trials,” Reuters reported.

In recent years, the Irish population has grown increasingly angry over the lack of prosecutions for financial dealings that cost taxpayers “64 billion euros — almost 40 percent of annual economic output — after a property collapse forced the biggest state bank rescue in the euro zone,” Reuters noted. By 2011, Irish taxpayers had bailed out banks five times, and the Irish finance ministry said last month it could take up to 15 years to recoup the money pumped into those banks.

Willie McAteer, the former finance director at Anglo Irish, was previously convicted of “illegal lending and providing unlawful assistance to investors,” in 2014, but he was sentenced only to community service after a judge ruled he was “led into error and illegality” by Irish regulators.

Two top bankers from Anglo Irish Bank — chief operations officer Tiarnan O’Mahoney and former company secretary Bernard Daly — were convicted and sentenced in 2015 for crimes that preceded the 2008 crisis, but both were released from prison on appeal earlier this year after spending several months behind bars. O’Mahoney could still face a retrial.

The government’s lenient treatment of O’Mahoney and Daly leaves uncertainties regarding whether or not this week’s convictions will translate into actual prison time for the bankers or an upheaval of the current system; the Irish financial system’s corruption extends far beyond the activities of the recently convicted bankers.

Similarly, Iceland, which received widespread praise last year for sentencing over two dozen bankers to prison for their role in the global banking crisis, released three of them in April — years before their sentences were officially up.

In spite of the questions surrounding whether or not convictions like those issued Friday will produce tangible change, the symbolism of bankers actually being held accountable for the destruction caused by their schemes is sure to resonate with Irish citizens, as well as observers from around the world.

Meanwhile, in America, the political party vowing to end the banking oligarchy held its convention at the Wells Fargo center for a candidate bankrolled by Goldman Sachs.

Submitted by John Whitehead via The Rutherford Institute,

“The people who cast the votes decide nothing. The people who count the votes decide everything.”—Joseph Stalin, dictator of the Soviet Union

No, America, you don’t have to vote.

In fact, vote or don’t vote, the police state will continue to trample us underfoot.

Devil or deliverer, the candidate who wins the White House has already made a Faustian bargain to keep the police state in power. It’s no longer a question of which party will usher in totalitarianism but when the final hammer will fall.

Sure we’re being given choices, but the differences between the candidates are purely cosmetic ones, lacking any real nutritional value for the nation. We’re being served a poisoned feast whose aftereffects will leave us in turmoil for years to come.

We’ve been here before.

Remember Barack Obama, the young candidate who campaigned on a message of hope, change and transparency, and promised an end to war and surveillance?

Look how well that turned out.

Under Obama, government whistleblowers are routinely prosecuted, U.S. arms sales have skyrocketed, police militarization has accelerated, and surveillance has become widespread. The U.S. government is literally arming the world, while bombing the heck out of the planet. And while they’re at it, the government is bringing the wars abroad home, transforming American communities into shell-shocked battlefields where the Constitution provides little in the way of protection.

Yes, we’re worse off now than we were eight years ago.

We’re being subjected to more government surveillance, more police abuse, more SWAT team raids, more roadside strip searches, more censorship, more prison time, more egregious laws, more endless wars, more invasive technology, more militarization, more injustice, more corruption, more cronyism, more graft, more lies, and more of everything that has turned the American dream into the American nightmare.

What we’re not getting more of: elected officials who actually represent us.

The American people are being guilted, bullied, pressured, cajoled, intimidated, terrorized and browbeaten into voting. We’re constantly told to vote because it’s your so-called civic duty, because you have no right to complain about the government unless you vote, because every vote counts, because we must present a unified front, because the future of the nation depends on it, because God compels us to do so, because by not voting you are in fact voting, because the “other” candidate must be defeated at all costs, or because the future of the Supreme Court rests in the balance.

Nothing in the Constitution requires that you vote.

You are under no moral obligation to vote for the lesser of two evils. Indeed, voting for a lesser evil is still voting for evil.

Whether or not you cast your vote in this year’s presidential election, you have every right to kvetch, complain and criticize the government when it falls short of your expectations. After all, you are overtaxed so the government can continue to operate corruptly.

If you want to boo, boycott, picket, protest and altogether reject a corrupt political system that has failed you abysmally, more power to you. I’ll take an irate, engaged, informed, outraged American any day over an apathetic, constitutionally illiterate citizenry that is content to be diverted, distracted and directed.

Whether you vote or don’t vote doesn’t really matter.

What matters is what else you’re doing to push back against government incompetence, abuse, corruption, graft, fraud and cronyism.

Don’t be fooled into thinking that the only road to reform is through the ballot box.

After all, there is more to citizenship than the act of casting a ballot for someone who, once elected, will march in lockstep with the dictates of the powers-that-be. Yet as long as Americans are content to let politicians, war hawks and Corporate America run the country, the police state will prevail, no matter which candidate wins on Election Day.

In other words, it doesn’t matter who sits in the White House, who controls the two houses of Congress, or who gets appointed to the Supreme Court: only those who are prepared to cozy up to the powers-that-be will have any real impact.

As Pulitzer Prize-winning journalist Chris Hedges points out:

The predatory financial institutions on Wall Street will trash the economy and loot the U.S. Treasury on the way to another economic collapse whether Donald Trump or Hillary Clinton is president. Poor, unarmed people of color will be gunned down in the streets of our cities whether Donald Trump or Hillary Clinton is president. The system of neoslavery in our prisons, where we keep poor men and poor women of color in cages because we have taken from them the possibility of employment, education and dignity, will be maintained whether Donald Trump or Hillary Clinton is president. Millions of undocumented people will be deported whether Donald Trump or Hillary Clinton is president. Austerity programs will cut or abolish public services, further decay the infrastructure and curtail social programs whether Donald Trump or Hillary Clinton is president. Money will replace the vote whether Donald Trump or Hillary Clinton is president. And half the country, which now lives in poverty, will remain in misery whether Donald Trump or Hillary Clinton becomes president. This is not speculation. We know this because there has been total continuity on every issue, from trade agreements to war to mass deportations, between the Bush administration and the administration of Barack Obama.

In other words, voting is not the answer.

As I document in my book Battlefield America: The War on the American People, the nation is firmly under the control of a monied oligarchy guarded by a standing army (a.k.a., militarized police. It is an invisible dictatorship, of sorts, one that is unaffected by the vagaries of party politics and which cannot be overthrown by way of the ballot box.

“Total continuity” is how Hedges refers to the manner in which the government’s agenda remains unchanged no matter who occupies the Executive Branch. “Continuity of government” (COG) is the phrase policy wonks use to refer to the unelected individuals who have been appointed to run the government in the event of a “catastrophe.” You can also refer to it as a shadow government, or the Deep State, which is comprised of unelected government bureaucrats, corporations, contractors, paper-pushers, and button-pushers who actually call the shots behind the scenes.

Whatever term you use, the upshot remains the same: on the national level, we’re up against an immoveable, intractable, entrenched force that is greater than any one politician or party, whose tentacles reach deep into every sector imaginable, from Wall Street, the military and the courts to the technology giants, entertainment, healthcare and the media.

This is no Goliath to be felled by a simple stone.

This is a Leviathan disguised as a political savior.

So how do we prevail against the tyrant who says all the right things and does none of them? How do we overcome the despot whose promises fade with the spotlights? How do we conquer the dictator whose benevolence is all for show?

We get organized. We get educated. We get active.

If you feel led to vote, fine, but if all you do is vote, “we the people” are going to lose.

If you abstain from voting and still do nothing, “we the people” are going to lose.

If you give your proxy to some third-party individual or group to fix what’s wrong with the country and that’s all you do, then “we the people” are going to lose.

If, however, you’re prepared to shake off the doldrums, wipe the sleep out of your eyes, turn off the television, tune out the talking heads, untether yourself from whatever piece of technology you’re affixed to, wean yourself off the teat of the nanny state, and start flexing those unused civic muscles, then there might be hope for us all.

For starters, get back to basics. Get to know your neighbors, your community, and your local officials. This is the first line of defense when it comes to securing your base: fortifying your immediate lines.

Second, understand your rights. Know how your local government is structured. Who serves on your city council and school boards? Who runs your local jail: has it been coopted by private contractors? What recourse does the community have to voice concerns about local problems or disagree with decisions by government officials?

Third, know the people you’re entrusting with your local government. Are your police chiefs being promoted from within your community? Are your locally elected officials accessible and, equally important, are they open to what you have to say? Who runs your local media? Does your newspaper report on local events? Who are your judges? Are their judgments fair and impartial? How are prisoners being treated in your local jails?

Finally, don’t get so trusting and comfortable that you stop doing the hard work of holding your government accountable. We’ve drifted a long way from the local government structures that provided the basis for freedom described by Alexis de Tocqueville in Democracy in America, but we are not so far gone that we can’t reclaim some of its vital components.

As an article in The Federalistpoints out:

Local government is fundamental not so much because it’s a “laboratory” of democracy but because it’s a school of democracy. Through such accountable and democratic government, Americans learn to be democratic citizens. They learn to be involved in the common good. They learn to take charge of their own affairs, as a community. Tocqueville writes that it’s because of local democracy that Americans can make state and Federal democracy work—by learning, in their bones, to expect and demand accountability from public officials and to be involved in public issues.

To put it another way, think nationally but act locally.

There is still a lot Americans can do to topple the police state tyrants, but any revolution that has any hope of succeeding needs to be prepared to reform the system from the bottom up. And that will mean re-learning step by painful step what it actually means to be a government of the people, by the people and for the people.

Following yesterday's WSJ report that Valeant is the target of a criminal investigation by the the AG office in the Southern District of NY, which sent the stock of the troubled, overindebted pharmaceutical plunging over 10%, and which was down 9.5% in the premarket, overnight Valeant issued the following response:

Valeant Pharmaceuticals International, Inc. today issued the following statement regarding the ongoing investigation being conducted by the U.S. Attorney's Office for the Southern District of New York:

 

"Valeant previously disclosed in October 2015 that the United States Attorney's Office for the Southern District of New York commenced an investigation involving Valeant. We have been fully cooperating with the authorities throughout the investigation, and we are in frequent contact and continue to cooperate with the U.S. Attorney's Office for the Southern District of New York.  We do not comment on rumors about investigations, and cannot comment on or speculate about the possible course of any ongoing investigation.

 

"Valeant takes these matters seriously and intends to uphold the highest standards of ethical conduct as we move forward with our mission to improve people's lives with our healthcare products."

While Valeant's promises of high standards of "ethical conduct" are admirable, perhaps they should have taken place several years ago when Valeant was covertly rolling out its "Philidor" mail-order pharmacy operation, which now threatens not only the company's financial future, but may lead to prison time for disgraced former CEO Michael Pearson, who is now set to be dragged right back into a scandal he thought he may have successfully dodged.

The top political news on Friday was the unexpected resignation of Trump campaign chairman, Paul Manafort, which was the result of emerging revelations that his political consulting firm, DMP International, had orchestrated a covert Washington lobbying operation in the period 2012-2014 on behalf of Ukraine's then ruling political party, attempting to sway American public opinion in favor of the country's pro-Russian government (which was overthrown in a CIA-orchestrated coup in early 2014).

As the AP reported yesterday, the lobbying included attempts to gain positive press coverage of Ukrainian officials in The New York Times, The Wall Street Journal and The Associated Press. Another goal: undercutting American public sympathy for the imprisoned rival of Ukraine's then-president. At the time, European and American leaders were pressuring Ukraine to free her. Furthermore, under the U.S. Foreign Agents Registration Act (or FARA), US entities who lobby on behalf of foreign political leaders or political parties must provide detailed reports about their actions to the Justice Department.

The 1938 U.S. foreign agents law is intended to track efforts of foreign government's unofficial operatives in the United States. A violation is a felony and can result in up to five years in prison and a fine of up to $250,000.

The issue is that neither Paul Manafort, nor his deputy, Rick Gates, disclosed their work as foreign agents as required under federal law. "There is no question that Gates and Manafort should have registered along with the lobbying firms," said Joseph Sandler of Sandler Reiff Lamb Rosenstein & Birkenstock, a Democratic-leaning Washington law firm that advises Republican and Democratic lobbyists.

Now if this was the extent of the violations, it would be an open and shut case of potential non-disclosure of lobbying on behalf of a foreign (soon to be overthrown) government, one which could result in felony charges and potential prison time for employees of DMP International, up to and including Manafort. Which is why it is clear why Trump had to quickly get rid of Manafort as his ongoing presence was a major risk factor overhanging the entire Trump campaign, one which could even lead to incarceration and ongoing accusations of pro-Russian influence.

It also explains why as CNN reported yesterday, the FBI and DOJ prosecutors have started a probe into possible US ties to alleged corruption of the former pro-Russian president of Ukraine, including the work of Paul Manafort's firm, according to multiple US law enforcement officials. "The investigation is broad and is looking into whether US companies and the financial system were used to aid alleged corruption by the party of former president Viktor Yanukovych."

* * *

However, where things get trickier is that in addition to Manafort and his deputy Rick Gates, other, far more prominent firms are also implicated, chief among them the Podesta Group, headed by Tony Podesta - the brother of Hillary Clinton campaign chairman John Podesta.

Tony Podesta, the Podesta Group

As reported yesterday, emails obtained by the Associated Press showed that Gates personally directed two Washington lobbying firms, Mercury LLC and the Podesta Group, between 2012 and 2014 to set up meetings between a top Ukrainian official and senators and congressmen on influential committees involving Ukrainian interests. Gates noted in the emails that the official, Ukraine's foreign minister, did not want to use his own embassy in the United States to help coordinate the visits.

The emails further illustrate how Gates worked with Mercury and the Podesta Group on behalf of Ukrainian political leaders. None of the firms, nor Manafort or Gates, disclosed their work to the Justice Department counterespionage division responsible for tracking the lobbying of foreign governments.

And this is where the plot thickens, because while the bulk of the press has so far spun the entire Ukraine lobbying scandal, which led to Manafort's resignation, as the latest "proof" that pro-Moscow powers were influencing not only Manafort but the Trump campaign in general (who some democrats have even painted of being a Putin agent), the reality is that a firm closely tied with the Democratic party, the Podesta Group, is just as implicated.

As AP further adds, the European Center for a Modern Ukraine, a Brussels-linked nonprofit entity which allegely ran the lobbying project, paid Mercury and the Podesta Group a combined $2.2 million over roughly two years. In papers filed in the U.S. Senate, Mercury and the Podesta Group listed the European nonprofit as an independent, nonpolitical client. The firms said the center stated in writing that it was not aligned with any foreign political entity.

Sure enough, the chairman of the Podesta Group, Tony Podesta, brother of Clinton campaign chairman John Podesta, repeated the excuse and said his firm believed Gates was working for the nonprofit. Podesta said he was unaware of the firm's work for the Ukraine's Party of Regions, led by Yanukovych. On Thursday, his firm said it had nothing new to add. As BuzzFeed added yesterday, Podesta Group CEO Kimberly Fritts also said in a statement on Thursday that “we were not aware that Rick Gates was a Party of Regions consultant at the time he introduced us to the Centre. We believed he was working for the Centre, as we were hired to do.”

Now political consultants are generally leery of registering under the FARA, and disclosing foreign government clients, because their reputations tends to suffer once they are on record as accepting money to advocate the interests of foreign governments - especially if those interests conflict with America's. Moreover, registering under the law would have required Gates, Manafort or the lobbying firms to disclose the specifics of their lobbying work and their efforts to sway public opinion through media outreach.

However, now that the FBI is involved, Podesta Group has quickly lawyered up and as a statement by CEO Fritts reveals, the firm has hired an outside legal counsel in anticipatory defense for what may be a significant legal battle for the pro-democratic think tank:

“The firm has retained Caplin & Drysdale as independent, outside legal counsel to determine if we were misled by the Centre for a Modern Ukraine or any other individuals with regard to the Centre’s potential ties to foreign governments or political parties. When the Centre became a client, it certified in writing that ‘none of the activities of the Centre are directly or indirectly supervised, directed, controlled, financed or subsidized in whole or in part by a government of a foreign country or a foreign political party.’ We relied on that certification and advice from counsel in registering and reporting under the Lobbying Disclosure Act rather than the Foreign Agents Registration Act. We will take whatever measures are necessary to address this situation based on Caplin & Drysdale’s review, including possible legal action against the Centre.”

A quick primer on Tony Podesta: born 1943, he is an American lobbyist best known for founding the Podesta Group. Podesta has lobbied for a variety of groups, including Bank of America, BP, and Egypt in addition to political campaigns such as Ted Kennedy, George McGovern, Michael Dukakis, and Bill Clinton. More recently, he has worked for Pennsylvania Democratic representatives Joe Sestak, Chris Carney, and Patrick Murphy, and chaired former Pennsylvania Gov. Ed Rendell's reelection campaign.  He is closely connected with the Barack Obama White House and has repeatedly been named one of Washington's most powerful lobbyists and fundraisers.

An interesting tangent on the power of the Podesta Group was revealed back in 2009 in a brief US News expose:

When the White House proved true to its promise of full disclosure by releasing a list of recent West Wing visitors, the headlines went to the big donors like George Soros, the big movie stars like George Clooney, and the mega-union bosses like Andy Stern of the Service Employees International Union.

 

But to insiders, the list showed something else: The power of the Podesta family. Between them, Obama adviser and former Clinton Chief of Staff John Podesta; his brother, lobbyist Tony Podesta; and Tony's lobbying wife Heather made 25 visits. By comparison, House Speaker Nancy Pelosi made one visit.

 

For John Podesta, the rise as one of Washington's influentials is richly deserved. He runs the Center for American Progress, which has become a very influential policy shop for the Democrats. He also was Obama's transition chief. According to the White House list, he met with the president twice and Chief of Staff Rahm Emanuel three times. As for the Podesta lobbying husband-and-wife team, their legendary influence has now been stamped with the White House seal of approval.

The Democratic White House's seal of approval that is. Some other examples of Podesta Group clients lientele over the years according to Open Secrets: BAE Systems, BP, Credit Suisse Group, Financial Industry Regulatory Authority, General Electric, KKR & Co, Lockheed Martin, Monsanto Co, Wal-Mart Stores and Wells Fargo. Of course, this is just a small fraction and you can examine the entire list here.

Where things get even trickier is when looking at recent disclosures of who we know the Podesta Group has received substantial cash from. Namely Saudi Arabia. Recall from an April 2016 article in The Hill, discussing the fallout from the disclosure of Saudi ties in the Sept 11 terrorist attack, which as reported previously, was initially heavily frowned upon by the Saudis:

Five of the firms work for the Saudi Arabia Embassy, while another two — Podesta Group and BGR Group — have registered to represent the Center for Studies and Media Affairs at the Saudi Royal Court, an arm of the government.

* * *

The dispute is causing a diplomatic storm for the Obama administration; Saudi Arabia has long been an ally of the U.S. despite the country’s history of abusing human rights.

 

The country has some top-flight representation in Washington — at a hefty price tag.

 

The Podesta Group is billing Saudi Arabia $140,000 a month for its public relations services. During the last few months of 2015, it sent 27 emails, had two phone calls and one meeting with lawmakers and staffers, journalists, and organizations including Human Rights Watch and the Center for American Progress, disclosure forms show.

Most recently, however, the Podesta Group made a curious appearance in early June, when the website Middle-East Eye caught a shocking statement by the Jordan News Agency (Petra), revealed that the Saudi Deputy Crown Prince Mohammed bin Salman made various traditionally diplomatic statements about the US ahead of his visit to the US, which also included the stunning claim that Riyadh has provided 20% of the total funding to the prospective Democratic candidate's campaign, something which is considered illegal. This is what bin Salman was quoted as saying:

"Saudi Arabia always has sponsored both Republican and Democratic Party of America and in America current election also provide with full enthusiasm 20 percent of the cost of Hillary Clinton’s election even though some events in the country don’t have a positive look to support the king of a woman (sic) for presidency."

Below is a screenshot of the English report published, and which then was quickly deleted, by the Petra News Agency

However, according to an update by MEE just the next day, a spokesperson for the Podesta Group contacted MEE to say that they work with the Saudi Royal Court and to request a correction to the earlier story that said the Jordanian news agency had deleted the quotes from Prince Mohammed.

Senior global communications specialist Will Bohlen - who, prior to joining Podesta, was chief researcher for a best-selling history of Bill Clinton's presidency - sent a link to a clarification issued by the Petra News Agency which said it was "totally false and untrue" that they had published then deleted the quotes from Prince Mohammed about funding the Clinton campaign.

 

"A technical failure on Petra ’s website occurred for a few minutes on Sunday evening, 12 June 2016," the Jordanian news agency said. "Protection systems at the agency as well as the technical department noticed that and therefore, they suspended the transmission system and the electronic site and moved to the alternative website.

 

"Later, it became clear that the technical failure that occurred was an attempt to hack the agency’s transmission system and its website. The agency was surprised to see some media outlets as well as the social media publishing false news that were attributed to Petra. They said that Petra transmitted a news item related to the deputy crown prince of Saudi Arabia and later deleted this news item. This is totally false and untrue."

As we said at the time, "one can see why Podesta would be worried: it is illegal in the United States for foreign countries to try and influence the outcome of elections by funding candidates. Naturally, Bohlen said he could confirm that Saudi Arabia has provided no funding to Hillary Clinton's presidential campaign. The question is now that the cat is out of the bag, can others?"

For the record, we find the story that someone would hack the Jordanian News Agency to insert a boring interview with a Saudi crown prince, hard to believe and if anything, the involvement of the Podesta Group dramatically increases the odds that what the Saudi prince revealed may have been the unvarnished truth.

We concluded by saying that "we leave it up to readers to decide how credible the Podesta-inspired explanation by Petra is that someone would hack the Jordanian news agency just to insert an interview with the Saudi deputy crown prince, which said nothing inflamatory, or defamatory, but merely made reference to just how much money the Saudis had spent on getting Hillary elected. In many other nations, merely these revelations should have been sufficient for the mainstream media to probe and inquire further to find out just how much of the Podesta statement is a lie, how deep are the inherent, and allegedly illegal, conflicts of interest if indeed Saudi Arabia has been funding a potential future US president, both directly and indirectly,  and how much money the Saudis have spent on Hillary's presidential campaign: an easy check by the authorities who monitor every wire transfer out of the Kingdom and its agents."

* * *

For now, the Clinton campaign has avoided any outside focus whether the Saudis have indeed ilegally funded it by millions of dollars, meaning the Podesta Group has done its job. However, the ironic twist is that with Manafort having become the fall guy for the Ukraine lobbying and corruption scandal, the very Podesta Group which is the stalwart defender of Hillary's presidential campaign, run incidentally by the brother of the firm's founder, is now being investigated in a totally separate matter.

Alas, if the recent interaction between the FBI and Hillary Clinton is any indication, we doubt much more will be revealed, and this latest scandal will quickly quiet down, even if it appears that Democrats were as involved in Ukraine illegal lobbying as Paul Manafort himself.

Finally, we wonder if now that the media is so clearly focused on Ukrainian money flows into the US, if it will just as ardently pursue a story first reported last March by the WSJ which revealed that the Clinton Foundation had received millions of dollars from a Ukrainian oligarch who between 2009 and 2013 had been pushing for closer ties to the European Union:

Between 2009 and 2013, including when Mrs. Clinton was secretary of state, the Clinton Foundation received at least $8.6 million from the Victor Pinchuk Foundation, according to that foundation, which is based in Kiev, Ukraine. It was created by Mr. Pinchuk, whose fortune stems from a pipe-making company. He served two terms as an elected member of the Ukrainian Parliament and is a proponent of closer ties between Ukraine and the European Union.

 

In 2008, Mr. Pinchuk made a five-year, $29 million commitment to the Clinton Global Initiative, a wing of the foundation that coordinates charitable projects and funding for them but doesn’t handle the money. The pledge was to fund a program to train future Ukrainian leaders and professionals “to modernize Ukraine,” according to the Clinton Foundation. Several alumni are current members of the Ukrainian Parliament. Actual donations so far amount to only $1.8 million, a Pinchuk foundation spokesman said, citing the impact of the 2008 financial crisis.

 

The Pinchuk foundation said its donations were intended to help to make Ukraine “a successful, free, modern country based on European values.” It said that if Mr. Pinchuk was lobbying the State Department about Ukraine, “this cannot be seen as anything but a good thing.”

In 2014, the well-funded wishes of the Pinchuk Foundation were ultimately realized when Ukraine, with the help of the US State Department (recall from February 2014: ""F**k The EU" - US State Department Blasts Europe; Revealed As Alleged Mastermind Behind Ukraine Unrest"), underwent a violent presidential coup, which led to the exile of then-president Viktor Yanukovich, a far "closer" relationship between Ukraine and Europe, the appointment of Joe Biden's son, Hunter, on the board of Ukraine energy giant Burisma Holdings, and the ongoing conflict between Ukraine and Russia.

Alas, we doubt that anyone in the media will pursue allegations that a Ukraine billionaire was funding the Clinton Campaign - with a very specific goal in mind - with the same effort as it did to show how Paul Manafort had been in bed with Pinchuk's number one opponent.

Submitted by Jake Anderson via TheAntiMedia.org,

I’m worried about Julian Assange. This is not a maternal instinct, but rather, a pragmatic one. The increasingly hostile statements made by top state officials and their surrogates show a widespread condemnation of whistleblowers in the halls of government. President Obama set the tone early in his administration.

In the case of WikiLeaks founder Julian Assange, the rhetoric goes well beyond condemnation of methodology and straight to advocating for his brutal murder.

We already know that Obama, Clinton, Sanders, and Trump have all said they would prosecute Assange. Clinton, to get more specific, wants him extradited from Ecuador, prosecuted for espionage, and his WikiLeaks removed from the Internet. Her desire to charge him with espionage is only a little ironic considering the Clinton Foundation’s Pay-to-Play system arguably warrants an espionage indictment, as does Clinton’s storing of Special Access Program intelligence on an unencrypted private server.

Meanwhile, over in the Trump Tower of Mordor, the business mogul’s draconian approach to just about everything includes a ruthless hatred of all journalists, and most certainly whistleblowers. Trump has indicated his treatment of an extradited Assange or Snowden would be severely harsh. Snowden, in particular, would be assassinated if Trump had his way. I can only shiver imagining how a President Trump would react to a major leak from the inner chambers of his new political empire.

The transition from authorities’ vows of prosecution to their use of surrogates who openly call for Assange’s assassination is highly disturbing, to say the least.  Granted, Assange supposedly has his ‘thermonuclear’ device— a 1.4 GB cache of files containing the identity of spies, military secrets, and unredacted documents from Bank of America and BP that can be unencrypted and released upon his death or arrest — but with a large faction of the mainstream media acting as a bullhorn for state propaganda, any damage inflicted by Julian’s ‘insurance’ packet could likely be mitigated by some social engineering. Remember the Panama Papers? A couple months ago people were saying it was the biggest leak in human history. Have you heard even a nostalgic reference to it since?

All this wouldn’t be quite as surprising — or alarming — if the anti-democratic venom hadn’t trickled down into the daily talking points of media figures and network journalists (whom I affectionately refer to as the State Department’s paid interns). Voices from across the political spectrum have repeated the claim that Russia has ‘weaponized’ Wikileaks. Sometimes they pose the conspiracy theory as a question. “Has Russia weaponized Wikileaks to disrupt a U.S. election?”My question in response would be: has the U.S. media questionized State Department propaganda in order to deflect attention away from a rigged primary and a political power structure that is rotten to the core? It’s actually a brilliant little piece of state agitprop. They managed to turn the public’s attention away from one of the most egregious examples of election fraud in recent history and demonize both Russia and Wikileaks in one fell swoop.

Such blatant propaganda is to be expected from the government. But coming from a journalistic establishment that is ostensibly there to dig for the truth, it’s rather shocking to see rampant election tampering from a major American political party get trumped by an unproven accusation toward a foreign country. Regardless of one’s conspiratorial appetite, seeing the 4th estate function as the infotainment branch of the State Department, parroting its every chirp of propaganda, should be profoundly distressing.

Let me give you a couple of examples, first from a mainstream right-of-center publication, then from a wildly popular left-of-center ideologue. In the former, we have TIMEMagazine, which has had the hickeys of state propaganda on its neck for decades. On August 12th, 2016, TIME published an article called “WikiLeaks Is Getting Scarier Than the NSA.” I’ll let that sink in for a moment. I don’t even have the emotional bandwidth to explain why that title earns the ‘Psyop of the Century’ award. Just. . . remember to be scared.

On the left, we have Bill Maher, whose excoriations of hypocritical Republicans can be extremely entertaining and perceptive. Like The Daily Show, Maher functions as the liberal end of what some cultural philosophers think of as a manufactured spectrum of acceptable discourse. When Maher, who claims solidarity with Assange and the cause of WikiLeaks, repeats the same government talking point that Russia is tampering with our elections, it kind of forces you to consider that all corporate media — left or right — operates under the same tent.

The anti-WikiLeaks propaganda wouldn’t feel so existential if I didn’t believe anti-whistleblower messaging is soon going to escalate into an actual long-term military campaign against leakers and hacktivists around the world. In the near future, don’t be surprised if there is some ‘event’ that catalyzes a mobilization of military campaigns against targets that are deemed ‘a danger to our democracy because of their unlawful disclosures of matters of national security.’ This would almost assuredly include symbolic targets like Julian Assange and Edward Snowden to achieve a “chilling effect.” We’ve already seen Intercept writer Barrett Brown receive prison time for essentially hyperlinking to leaked information in an article. Add to this the fact the Obama Administration has used the Espionage Act to prosecute twice as many defendants as all previous administrations combined, and you get a sense of how power structures are increasingly criminalizing the dissemination of information.

Now back to my non-maternal worrying over Julian’s safety. Recently, in a stunning interview (above) with Dutch television program Nieuwsuur, Assange may have underhandedly confirmed that the recently murdered DNC operative Seth Rich was the leaker of the 3,000 emails that showed the DNC colluded with the Clinton camp, the implication being he was killed either out of revenge for the leak or to prevent future leaks. He didn’t state this explicitly but his abrupt and completely random reference to the murder in the context of assessing the dangers faced by WikiLeaks sources doesn’t make sense unless that was his way of ‘accidentally’ signaling a connection.

The interviewer picked up on that and asked him, “Why make the suggestion of a young guy being shot in the streets of Washington?”

The fact that Wikileaks posted a $20,000 reward for any information on Seth Rich’s murder suggests they do not believe it was a random robbery, which is further evidenced by the fact that his wallet, credit cards, and phone were not taken.

It is also certainly a bit coincidental that within days of the conspiracy going viral, Seth Rich’s family made a public statement asking for rumors about his death to stop. On a likely related note, their new family spokesman is none other than Brad Bauman, who is a Democrat ‘crisis communications’ consultant with the Pastorum Group. According to his LinkedIn profile, Brad’s job is “providing strategic communications advice to Democratic candidates.”

Disputes over this conspiracy persist, but there is no hard evidence linking his death to a politically motivated act of violence by DNC or Clintonian operatives. However, one can surely admit it is unusual for a family to hire a high-powered PR firm that provides “public relations for progressive candidates.” One logical explanation is that the Clinton campaign realized suspicions would surface after Seth Rich was found murdered and immediately started damage control. If Pastorum hadn’t only been created last year, it might not seem so peculiar. And if their web page had any content on it whatsoever, it would be possible for people to easily learn about the origins of their creation. But, like Russia’s connection to the DNC leak, it’s just a theory.

Again, the assertion that a whistleblower was murdered by an operative for a major political party cannot be proven at this time. Nor can the assertion that the murders of five people (in two months) who were going to testify against Clinton had any connection with Clinton operatives.

What can be proven, and what should be taken far more seriously, is the metamorphosis of the state’s rhetoric against Wikileaks from hostile to downright war-like. Not vitriolic, but war-like — as in quite literally the kind of rhetoric that leads to actual war with tanks, guns, and bomber planes — or, in this case, maybe just a bomb robot or a stealthy climber.

It’s a worrisome time for Assange supporters. The last two weeks, in particular, have been downright surreal. First, Obama hagiographer Michael Grunwald tweeted with maniacal delight his support of Assange being killed in a drone strike. Then, Clinton strategist Bob Beckel went on Fox News and jumped up and down in his seat begging for someone to “illegally shoot the son of a bitch…[because] a dead man can’t leak stuff.”

Hillary Clinton strategist Bob Beckel called for WikiLeaks editor Julian Assange to be assassinated. #DNCLeakpic.twitter.com/9L2ixl24Er

— WikiLeaks (@wikileaks) August 10, 2016

These two men, Democrat luminaries regularly featured on POLITICO and CNN, advocated the extrajudicial killing of a whistleblower to millions of people.

The stigmatization and demonization of whistleblowers and hacktivists come after a decade in which the U.S. government’s civil liberty abuses have been laid bare for all to see. Snowden’s history-altering revelations about the NSA set the precedent that in the information age, state abuses can be illuminated for citizens to see. Transparency doesn’t bode well for Big Brother.

Notably, the NSA leaks facilitated by WikiLeaks are still pouring out. The Intercept recently began publishing internal NSA newsletters written by and circulated among its critically important Signals Intelligence Directorate, or SIGINT. Intercept writer Micah Lee spoke to Anti-Media about the SIDtoday articles.

“Besides the hundreds of small, but significant, individual revelations about the NSA,” he said, “the SIDtoday articles as a whole describe a secret history of the United States’s response to the terrorist attacks on 9/11. Until Snowden leaked documents, the public didn’t understand, or consent to, what America’s spies were doing, but SIDtoday tells the story of how and why it came it be.”

Micah says the Intercept has only published 9% of what it has, which will amount to around 4,500 articles. Micah acknowledged the dangerous environment in which whistleblowers now find themselves.

“No matter [who is elected], it will be an uphill battle for whistleblowers, but I doubt that will stop them.”

It is my assertion that both Trump and Clinton are likely to engage in specific military operations to dismantle organizations responsible for high-level leaks. It could very well be the next ubiquitous war.

Clinton has cultivated a well-documented track record of pro-war ideologies, not the least of which is her perpetual use of the War on Terror to trigger fear and trauma in the minds of voters. Who could forget the primary debate in which she used 9/11 imagery to defend her Wall Street connections?

An example that may have flown under the radar was the Clinton Foundation’s advertisement for the 2014 exhibit “Spies, Traitors, and Saboteurs: Fear and Freedom in America.” It was a featured installation at the William J. Clinton Presidential Center in my hometown of Little Rock, Arkansas.

According to the Clinton Foundation’s site:

“Americans have endured thousands of incidents of terror, violence, or subversion right here at home by domestic terrorists and foreign agents, militant radicals and saboteurs, traitors and spies…Theexhibition reminds us that Americans have known and dealt with acts of terror since the founding days of the republic and will continue to face these challenges in the years ahead.”

For Clinton (and assuredly Trump, too) war is a permanent fixture in the American empire, as it was for Bush, Obama, and virtually all presidents before them. But the enemies are scattered and amorphous now. Radical jihadists are not like traditional standing armies; their prosecution requires a global, never-ending ubiquitous brand of war that is encoded into the very structure of American foreign policy. A widespread declared war against hackers, hacktivists (Anonymous), whistleblower organizations (WikiLeaks) and individual whistleblowers (Snowden, Chelsea Manning, etc.) would be similar. The empire’s enemy would be scattered, and tracking them would require that the tentacles of the security state slither further into every home and digital device.

For the empire, these leaks are a direct assault on the power and hegemony of the ‘deep state,’ the synergistic nexus of state diplomats and officials, defense contractors, financial institutions, surveillance courts, and the military-industrial complex that together forms the connective tissue holding together a globalist oligarchy.

They stand to lose too much from hacked information showing their improprieties. And the rhetoric continues to accelerate. Guccifer 2.0’s recent hack of Congresswoman Nancy Pelosi’s computer provoked her to use the phrase “electronic Watergate.”

It will be a bipartisan war, and the battle lines will be drawn harshly. In the same vein as Bush’s “you’re either with us or against us” axis of evil, the umbrella of terrorism will expand to include any organizations that leak classified information, any group that publishes the information, and eventually, any journalist that links to a publication containing the information. Barrett Brown, currently serving 63 months for linking to a leak, may agree with me.

Whatever administration is in office will, of course, invoke national security as the pretext for the War on Leaks.

Maybe a giant financial institution is hacked, and the information released is said to be the catalyst for an economic downturn; then another leak is blamed for a terrorist attack that kills hundreds of innocent people; then several more major corporations have their entire systems compromised; then an individual hacker releases 50 million social security numbers; celebrities see more of their lascivious sex acts on TMZ (maybe a couple of A-listers are outed).

Soon the entire country agrees: we must go to war with hackers and organizations that leak information.

After years of hating the government, Americans welcome Big Brother back into their lives as the protector of information. They need the state.

As a result of the ongoing "massive" customer fraud scandal at Wells Fargo, which culminated not with prison time for anyone but with a $125 million bonus for the executive who oversaw the criminal practice,  life for CEO John Stumpf, who as reported yesterday lost the top market cap spot for a US bank to JPM, just got more complicated, because not only is he set to testify in Congress in a few days, but as Dow Jones reports the Feds are now involved.

From the WSJ:

Federal prosecutors are in the early stages of an investigation into sales practices at Wells Fargo & Co. that led to the bank being hit last week with a $185 million fine, according to people familiar with the matter.

 

The investigation is being conducted by the U.S. Attorney’s Offices for the Southern District of New York and the Northern District of California, these people said. Prosecutors have yet to decide if any case, should they decide to pursue one, would be along civil or criminal lines, the people said. Prosecutors have issued a subpoena to the bank for documents and materials, the people added. 

 

While in early stages, the investigation is focusing on whether someone senior within the bank directed employees to falsify documents in conjunction with the opening of accounts and products without consumers’ knowledge or authorization. 

 

Prosecutors are also focusing on whether there was willful blindness to sales practices on the part of executives at the bank, these people said.  Wells Fargo has acknowledged that it fired 5,300 employees over a five-year period related to improper sales practices. Chief Executive John Stumpf in an interview with The Wall Street Journal Tuesday said there were employees in the bank who didn’t “honor” the company’s values and so had to be let go.

To be sure, all that will take for the Federal prosecutors to back off is a quick conversation Bill Clinton and Loretta Lynch on some tarmac, somewhere, but in case that doesn't happen, we wonder if that paragon of virtue, Warren Buffett, will be true to his famous words when he said that "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently", and actually do something different and for once live up to his ideals by selling his WFC stake?

Last week we wrote about a mass shooting at the Cascade Mall in Burlington, Washington about 65 miles north of Seattle that left 5 people dead (see "Five Killed At Washington State Mall; Manhunt For Gunman Continues").  The shooter fled the scene but was later captured and identified to be 20 year old Arcan Cetin a "legal, permanent resident" of the United States who immigrated from Turkey.

As it turns out, Cetin may be facing more charges than just 5 counts of murder as NBC News is reporting that investigators have discovered he voted in the past three election cycles, including the May presidential primary, despite the fact that he is not a U.S. citizen.  Apparently the state of Washington frowns upon anyone other than U.S. citizens voting...that kind of behavior is only tolerated in swing states like Ohio and Florida. 

Cetin, who immigrated to the United States from Turkey as a child, is a permanent U.S. resident but not a U.S. citizen which technically makes it a federal crime for him to participate in elections.  While voters must attest to citizenship upon registering to vote, Washington state doesn't technically require proof of citizenship as the election system operates, more or less, "under an honor system".

As explained by Washington Secretary of State, Kim Wyman, there is no provision in Washington state law that allows election officials to verify someone's citizenship.  The penalty for voting as a non U.S. citizen could result in five years
of prison time and a $10,000 fine...though we suspect that's the least of his concerns.  

"We don’t have a provision in state law that allows either county elections officials or the Secretary of State's office to verify someone’s citizenship.  So, we’re in this place where we want to make sure we’re maintaining people’s confidence in the elections and the integrity of the process, but also that we’re giving this individual, like we would any voter, his due process. We’re moving forward, and that investigation is really coming out of the investigation from the shootings."

 

"The penalties are very serious. That’s why we want to make sure we’re very measured, and this is why we want to make sure we’re very calm and purposeful in how we move forward.  The stakes are very high on both sides. You want to keep the confidence level high, but you also want to protect the voting rights of everyone."

 

"Our hands are kind of tied, but make no mistake, we want to make sure that everybody has confidence that people casting ballots are eligible. This is certainly going to be a topic at next legislation."

Of course, why would you need to verify someone's citizenship before allowing them to vote?  This all sounds like some alt-right, "xenophobic" conspiracy.

Back in April, when we first reported that Deutsche Bank had agreed to settle allegations it had rigged the silver market in exchange for $38 million, we revealed something stunning: "in a curious twist, the settlement letter revealed that the former members of the manipulation cartel have turned on each other", and that Deutsche Bank would provide docments implicating other precious metals riggers. To wit: "In addition to valuable monetary consideration, Deutsche Bank has also agreed to provide cooperation to plaintiffs, including the production of instant messages, and other electronic communications, as part of the settlement. In Plaintiff’s estimation, the cooperation to be provided by Deutsche Bank will substantially assist Plaintiffs in the prosecution of their claims against the non-settling defendants."

Overnight we finally got a glimpse into what this "production" contained, and according to documents filed by the plaintiffs in the class action lawsuit, what Deutsche Bank provided as part of its settlement was nothing short of "smoking gun"proof that UBS Group AG, HSBC Holdings Plc, Bank of Nova Scotia and other firms rigged the silver market. The allegation, as Bloomberg first noted, came in a filing Wednesday in a Manhattan federal court lawsuit filed in 2014 by individuals and entities that bought or sold futures contracts.

In the document records surrendered by Deutsche Bank and presented below, traders and submitters were captured coordinating trades in advance of a daily phone call, manipulating the spot market for silver, conspiring to fix the spread on silver offered to customers and using illegal strategies to rig prices.

“Plaintiffs are now able to plead with direct, ‘smoking gun’ evidence,’ including secret electronic chats involving silver traders and submitters across a number of financial institutions, a multi-year, well-coordinated and wide-ranging conspiracy to rig the prices,” the plaintiffs said in their filing.

The latest evidence is critical because as the plaintiffs add, the new scheme “far surpasses the conspiracy alleged earlier.” As a result, the litigants are seeking permission to file a new complaint with the additional allegations, i.e., demand even more reparations from the defendants who have not yet settled, and perhaps even more evidence of ongoing market rigging. Their proposed complaint broadens the case beyond the four banks initially sued to include claims against units of Barclays Plc, BNP Paribas Fortis SA, Standard Chartered Plc and Bank of America Corp.

Representatives of UBS, BNP Paribas Fortis, HSBC, Standard Chartered and Scotiabank didn’t immediately respond to e-mails outside regular business hours seeking comment on the allegations. Barclays and Bank of America declined to immediately comment.

The Deutsche Bank documents show, among other things, how two UBS traders communicated directly with two Deutsche Bank traders and discussed ways to rig the market. The traders shared customer order-flow information, improperly triggered customer stop-loss orders, and engaged in practices such as spoofing, all meant to destabilize the price of silver ahead of the fix and result in forced selling or buying. It is also what has led on so many occasions to the infamous previous metals "slam", when out of nowhere billions in notional contracts emerge, usually with the intent to sell, to halt any upside moment in the precious metals/ 

"UBS was the third-largest market maker in the silver spot market and could directly influence the prices of silver financial instruments based on the sheer volume of silver it traded," the plaintiffs allege. "Conspiring with other large market makers, like Deutsche Bank and HSBC, only increased UBS’s ability to influence the market."

Some examples of the chats quoted are shown below. In the first example a chart between DB and HSBC traders in which one HSBC trader says "really wanna sel sil[ver" to which the other trader says "Let's go and smash it together."

Another chat transcript from May 11, 2011 reveals a Deutsche Bank trader telling a UBS trader that the cartel "WERE THE SILVER MARKET"(sic) based on feedback from outside traders to which UBS replies, referring to the silver market "we smashed it good", leading to the following lament "fking hell UBS now u make me regret not joining."

Finally, for all those traders who wonder what happened to their stops as a result of dramatic moves in the price, here is the answer: a June 2011 chat between a UBS and a DB trader comes down to the following: "if you have stops... who ya gonna call... STOP BUSTERS"

If the plaintiff request for an expanded lawsuit is granted, we expect many more fireworks as other banks rush to settle on their own and provide even more documentary proof of unprecedented precious metal market manipulation, until there is just one bank left standing, ostensibly the one slammed with the biggest fine of all, perhaps even leading to prison time for some of the market riggers.

The full filings from the case (London Silver Fixing Ltd. Antitrust Litigation, 1:14-md-02573 U.S. District Court, Southern District of New York (Manhattan) are provided below:

Several days ago, Merkel may have walked on her own into one a potentially career-ending, political traps as she prepares to runs for her fourth term as Chancellor in 2017, when she said  has said "it would be particularly repulsive if a refugee, seeking protection in Germany, was the perpetrator"of the Monday Christmas market terrorist attack. Alas, despite having already been slammed by her political opponents, such as AfD's Frauke Petry, who have long claimed that any and all terrorist attacks on German soil are the direct result of Merkel's open door policies (the AfD and other anti-immigrant groups held a silent vigil outside Merkel's office in Berlin on Wednesday night to protest her refugee policies), it looks as if by even Merkel's own admission her government failed at every step to capture the Tunisian terrorism suspect - who we know by now was indeed a refugee seeking protection in Germany, even if it was not granted - despite having had ample opportunities. 

As Bloomberg followed up overnight on just this issue, "critics are lambasting her for allowing hundreds of thousands of asylum-seekers to enter the country, allegedly without proper security checks."

After German media published photos of Anis Amri, federal prosecutors issued a public appeal for information along with the promise of a 100,000-euro ($105,000) reward for his arrest. Within hours it emerged that the man authorities warned could be "violent and armed" had in fact been known to them for months as someone with ties to Islamic extremists who used at least six different names and three different nationalities.

Even the German police union is starting to turn on Merkel: "People are rightly outraged and anxious that such a person can walk around here, keep changing his identity and the legal system can't cope with them,"said Rainer Wendt, the head of a union representing German police.

According to Ralf Jaeger, the interior minister of North Rhine-Westphalia state, Amri arrived in Germany in July 2015 as the influx of asylum-seekers was nearing its peak. Although registered in the west of the country, near the Dutch border, Amri had moved around Germany regularly since February, living mostly in Berlin, said Jaeger. Within months of his arrival, authorities had added Amri to a growing list of potentially violent Islamic extremists, not all of them asylum-seekers.

"Security agencies exchanged information about this person in the joint counter-terrorism center, the last time in November," said Jaeger.

State prosecutors in Berlin even launched an investigation of Amri on March 14 following a tip from federal security agencies, who warned that he might be planning a break-in to finance the purchase of automatic weapons for use in a possible future attack. Surveillance showed that Amri did deal drugs in a notorious Berlin park and was involved in a bar brawl, but no evidence was found to substantiate the original warning.

Adding to the Merkel's headaches is the latest report from ABC, Anis Amri was known to U.S. intelligence agencies. The fact that the US and Germany, whose "intimate" relationship when it comes to surveillance is well-known courtesy of Edward Snowden, failed to communicate about the suspected truck killer, will be a major source of criticism in the upcoming political campaign.

As we noted yesterday, Amri - whose fingerprints were found on the door and inside the cabin of the truck used in the attack - had been under covert German surveillance after a tip earlier this year, but the surveillance ended in September when nothing materialized, according to The Associated Press. The intelligence painted a picture of a criminal involved in drug deals and the occasional bar brawl, but not necessarily a terrorist. Police said they were gathering a criminal case against Amri, and the last time information was exchanged regarding his case was as recently as November.

Previously, Amri who had a very troubled past, served a four-year jail term in Italy after being sentenced for charges of arson on the Italian island of Lampedusa in the Mediterranean, the closest European Union destination for migrants and refugees embarking from North Africa. He lived in the town of Kleve in North Rhine-Westphalia before moving to Berlin, Germany's capital, in February and his asylum application was rejected in July of this year. However, Amri was not deported to his home country of Tunisia because authorities couldn't verify his identity without the proper paperwork.

The Italian news agency ANSA reported that Amri was ordered expelled after his prison time in Italy. However, Tunisian authorities didn't finish all the paperwork in the required time, so Amri never was sent back to Tunisia, it reported.

Futhermore, Spiegel today reported that Amri had offered himself as a suicide bomber to radical preachers who were being monitored by the police months ago. But his messages were encoded in such a way that they weren't sufficient for an arrest.

As a result of these troubling discoveries, confirming just how easy it was for the terrorist suspect to slip between the cracks, German lawmakers have called for consequences regardless of whether Amri turns out to have been behind the wheel of the truck in Berlin.

"In my view we experienced a major shift on Monday," said Stephan Mayer, a member of Merkel's center-right bloc. "Terrorism has reached a new level in Germany. It's shaken the nation and citizens are worried. I think citizens wouldn't accept it if we simply returned to the political order of the day."

Mayer proposed extending the period that people can be held in detention prior to deportation, to give authorities more time to gather the necessary paperwork. He said authorities should also be able to deport people deemed a threat to public order.

Germany's Federal Criminal Police Office currently considers 549 Islamic extremists capable of committing "politically motivated crimes of considerable significance."

Wendt, the police union official, said keeping tabs on all of these people was a major challenge. "From a manpower perspective it would ... be unimaginable to keep all potential threats under police surveillance round the clock," he said.

Meanwhile, late on Thursday, German Chancellor Angela Merkel said Thursday she was proud of the calm public response to the deadly attack. "In the past few days I have been very proud of how calmly most people reacted to the situation," she said about Monday's attack.

"I am certain we will meet this test we are facing."

Perhaps she is right, but with the German people, which now includes the police and even members of her own political party, already infuriated with Germany's now obvious inability to deal with the fallout of admitting over a million refugees, of whom hundreds are potential terrorists, the real test facing Merkel in the coming year - the upcoming election - is one which she may not survive. All it would take for the tipping point to be reached, is a few more terrorist attacks on German soil...

Submitted by Dave Collum via PeakProsperity,

A downloadable pdf of the full article is available here, for those who prefer to do their power-reading offline.

Background: The Author

I never would have believed it—not in a million years—but it happened: the Cubs won the World Series, and The Donald is our new president. Every December, I write a Year in Review¹ that’s first posted on Chris Martenson’s & Adam Taggart’s website Peak Prosperity² and later at Zero Hedge.³ What started as a few thoughts posted to a handful of wingnuts on Doug Noland’s Prudent Bear message board has mutated into a detailed account of the year’s events. Why write this beast? For me, it puts the seemingly disconnected events that pass through my consciousness, soon to be lost forever, into a more organized and durable form. Somebody said I should write a book. I just did. In a nutshell, this is a story of human follies and bizarre events. There are always plenty of those. Let others tell the feel-good stories.

Figure 1. Malcolm McDowell as Alex in A Clockwork Orange.

I try to identify themes that evolve. This year’s theme was obviously defined by the election, which posed a real problem. I struggled to detect the signals through the noise. Many of my favorite analysts from whom I extract wisdom and pinch cool ideas spent the year trying to convince the world that one or more of the presidential candidates was an unspeakable wretch. I was groping for a metaphor to capture our shared experiences, rummaging through Quentin Tarantino scripts and Hieronymus Bosch landscapes for inspiration. “Rise of the Deplorables” was tempting. Then it clicked. The term “clockwork orange” is a Cockney phrase indicating a bizarre incident that appears normal on the surface. The phrase was commandeered as the title of a 1971 dystopian film in which Malcolm McDowell’s character Alex is brainwashed by being forced to watch the most grisly and horrifying of spectacles (Figure 1). For us, it was the 2016 presidential election, which created a global mind-purging brain enema. The horror! The horror! (Oops. Wrong movie.)

I knew in January that by mid-November we would be unified by our collective distrust of the Leader of the Free World, who would be surrounded by a dozen chalk outlines corresponding to political corpses that nobody wished to resurrect. I have done my best to not marinate you—too much—in tales of sociopathic felons or stumpy-fingered, combed-over letches. I do, however, eventually enter the Swamp.

By way of introduction, my lack of credentials—I am an organic chemist—has not precluded cameos in the Wall Street Journal,⁴ the Guardian,⁵Russia Today,^6,7,8 a plethora of podcasts,¹ and even a couple investment conference talks. Casting any pretense of humble bragging aside, let’s just post this year’s elevator résumé and a few endorsements to talk my book.

One of the high-water marks was sharing the spotlight with Mark Cuban in a Wall Street Journal article by Ben Eisen on nouveau gold buggery:¹⁰

Podcasts in 2016 included Wall St. for Main St.,¹¹Macro Tourist Hour (BTFD.TV),¹²The Kunstlercast,¹³Five Good Questions,¹⁴FXStreet,¹⁵ and, of course, Peak Prosperity.¹⁶ Dorsey Kindler, of a small-town newspaper, the Intelligencer (Doylestown, PA), interviewed me about college in an article titled, “The New McCarthyism” and, in an ironic twist, was soon thereafter fired and his content purged.¹ An interview for the Cornell Review, a right-wing student newspaper considered a “rag” by the liberal elite, probed college life and the new activism.¹⁷ A cross-posting at Zero Hedge got the Review’s click counts soaring.¹⁸ Finally, I chatted on local radio about real estate, the bond market, Hillary, and other rapidly depreciating assets.¹⁹

Contents

Footnotes appear as superscripts with hyperlinks in the Links section. The whole beast can be downloaded as a single PDF xxhere or viewed in parts via the linked contents as follows:

Part 1

• Background: The Author
• Contents
• Sources
• On Conspiracy Theorizing
• Investing
• U.S. Economy
• Broken Markets
• Cash on the Sidelines
• Pharma Phuckups
• Gold
• Energy
• Real Estate
• Debt
• Pensions
• Inflation/Deflation
• The Bond Caldera
• ZIRP and NIRP
• War on Cash
• Banks and Bankers
• The Fed
• European Central Bankers
• Europe
• Brexit
• Refugee Crisis
• References Part 1 

Part 2

• Putin and Russia
• South America
• China
• Japan
• Middle East
• Government Folly
• Panamania
• Human Achievement
• Human Folly
• Civil Liberties
• Campus Politics
• Elections
• Rigged Primaries: RNC Division
• Rigged Primaries: DNC Division
• Bernie
• Hillary Clinton
• Trump
• Media
• Conclusion
• Books
• Acknowledgments
• References Part 2

For historical reasons, the review begins with a survey of my perennial efforts to fight the Fed. I am a fan of the Austrian business cycle theory and remain hunkered down in a cash-rich and hard-asset-laden Bunker of Doom (portfolio). The bulk of the review, however, is really not about bulls versus bears but rather human folly. The links are as comprehensive as time allows. Some are flagged as “must see,” which is true only for the most compulsive readers. The quote porn is voluminous: I like capturing people’s thoughts in their own voices while they do the intellectual heavy lifting.

I try to avoid themes covered amply in previous reviews. Some topics resolve themselves. Actually, none ever do, but they do get boring after a while. Others reappear with little warning. Owing largely to central banking largesse, the system is so displaced from equilibrium that something simply has to give, but I say that every year. We seem to remain on the cusp of a recession and the third, and hopefully final, leg of a secular bear market that began in 2000. Overt interventions have kept the walking dead walking. The bulls call the bears Chicken Littles and remind us what didn’t happen. One of my favorite gurus reminds us of a subtle linguistic distinction:

I finish with synopses of books I’ve read this year. They are not all great, but my limited bandwidth demands selectivity . They are all nonfiction (to varying degrees). I don’t have time to waste on 50 Shades of Garbage.

Sources

With some notable exceptions, the mainstream media has degenerated into a steaming heap of detritus that is so bad now that it gets its own section. A congenital infobesity has morphed into late-stage disinfobesity. Enter social media—the fever swamp—to fill the void. As we shall see, however, all is not well there either. I sift and pan, looking for shiny nuggets of content that reach the high standards of a rant. Shout-outs to bloggers would have to include Michael Krieger, Charles Hugh Smith, Peter Boockvar, Bill Fleckenstein, Doug Noland, Jesse Felder, Tony Greer, Mike Lebowitz, Mish Shedlock, Charles Hugh Smith, and Grant Williams. News consolidators and new-era media include Contra Corner,²⁰Real Vision,²¹Heatstreet,²² and Automatic Earth.²³ A carefully honed Twitter feed is a window to the world and the road to perdition. My actions speak to my enthusiasm for Chris Martenson and Adam Taggart at Peak Prosperity.²⁴ However, if you gave me one lens through which to view the world, I would have to choose Zero Hedge (or maybe LadySonya.com).

On Conspiracy Theorizing

Every year I shout out to conspiracy theorists around the world. I am not talking about abductions by almond-eyed aliens with weaponized anal probes (which really hurt, I hasten to add) but rather the simple notion that sociopathic men and women of wealth and power conspire. Folks who could get through 2016 without realizing this are imbeciles. I am talking totally blithering idiots. Markets are rigged. Government stats are cooked. Interest rates are set by fiat. Polls are skewed. E-mails are destroyed. Cover-ups abound. Everybody has an agenda. Watch this d-bag at one of the neocon think tanks—somehow so stupid as to not realize he’s being recorded—talk about how false-flag operations are commonplace.²⁵ Meanwhile, the media conspires to convince us to the contrary. The folks who really piss me off, however, are the glib intellectuals—Nassim Taleb calls them “intellectuals yet idiots” (IYIs)—who suggest that conspiracy theorists are total ret*rds.²⁶ (Saved by the asterisk, which baffles the sh*t outta me why that works.) Does it seem odd that the world’s most prominent detractor of conspiracy loons, Harvardian Cass Sunstein,²⁷ is married to neocon Samantha Power,²⁸ one of the great conspirers? It does to me, but I am susceptible to such dietrologie.

Many will try to shut down open discussions of ideas displaced from the norm by using the word “conspiracy” pejoratively. Their desire for the world to be normal is an oddly child-like cognitive dissonance. In that event, lean over and whisper in their ears, “Keep your cognitive dissonance to yourself, dickweed” while gently nudging them in the groin with your knee. Now, let’s pop a few Tic Tacs, grab a clowder, and get on with the plot, but first . . .

Investing

Read that over and over until you understand it. Changes in my 2016 portfolio were more abrupt than those from other years but still incremental. I resumed purchasing physical gold in 2015 after a decade-long hiatus. In 2016, I bought aggressively in January (the equivalent of half an annual salary) and continued incremental buying throughout the year (another half salary). My total tonnage (OK, poundage) increased by an additional 5% of my assets. My cash position shrunk by about 5% accordingly but remains my largest holding. I am in no rush to alter the cash position. For a dozen years, I have been splitting my retirement contributions into equal portions cash and natural gas equities. The latter keeps failing to attain an approximate percentage goal of 25–30% of my assets owing to market forces. My approximate positions are as follows:

The S&P, despite a late year rally incorrectly attributed to the Trump victory, appears to be running on fumes or, as the big guns say, is topping. The smart guys (hedge fund managers) continue to underperform, which means the dumb money must be overachieving (blind nuts finding squirrels). This is never a good sign.

Figure 2. Performances of GLD, SLV, XAU, XLE, XNG, and S&P.

After a few years of underperformance resulting from the oil and gold drubbing, large gains in the gold equities (60%), gold (6%), silver (15%), generalized energy equities (10%), and natural gas equities (48%) shown in Figure 2 were attenuated by the huge cash position to produce a net overall gain in net worth of 9%. This compares to the S&P 500 (+10% thanks to a hellacious late year rally) and Berkshire Hathaway (25%, wow). (Before you start brain shaming me, that same cash buffer precluded serious percentage losses during the hard-asset beatings in the preceding years.)

The most disappointing feature of the year was in the category of personal savings. I have managed net savings every year, including those that included paying for college educations. This year, however, began poorly when my gold dealer got robbed and lost my gold. My losses paled in comparison to his; he committed suicide. I discovered maintenance needs on my house that got really outta control, and a boomerang adult child ended up costing me a bit. All told, I forked over 50% of my annual salary to these unforseeables, which turned overall savings negative (–20% of my salary) and eroded a still-decent annual gain in net worth. Oh well, at least I have my health. Just kidding. I have a 4 centimeter aortic aneurysm, am pissing sand, and have mutated into Halfsquatch owing to congenital lymphedema (Figure 3). (I live-Tweeted a cystoscopy—likely a first for social media.) I have to keep moving here to finish before I pass my expiration date.

Figure 3. Sand and Stump.

In a longer-term view, large gains in total net worth (>300%) since January 1, 2000 are still fine. I remain a nervous secular precious metal bull and confident equity secular bear. I intend to put the cash to work when Tobin’s Q, price-to-GDP, price-to-book, and Shiller PE regress to and through the mean. When this will occur is anybody’s guess, especially with central bankers determined to make me pay for “fighting the Fed.” I will start buying after a 40% correction brings the S&P to fair value, keep buying as it drops below fair value, and wish I had saved my money by the secular bottom. We return to all this in Broken Markets.

Here’s what my dad taught me: you need cash at the bottom to buy up cheap assets. Few will have cash because you have to go to cash at the top, and precious few have the capacity to shake recency bias and exit positions that have performed well. Just like a toaster, your sell order has only two settings: too soon and too late. My far greater concern is that bear markets are as much about time as they are about inflation-adjusted price. The Fed is determined to burn the clock. Nobody wins if we imitate Japan’s 25-year lost decade.

U.S. Economy

Unemployment is at 4.9%—what’s not to like? Economists have even claimed the “labor market is getting tight.” I scoff. The labor participation rate shows that 38% of working-age adults are not working (Figure 4). Apparently, 33% of working-age adults are neither employed nor unemployed. Hmmm . . . even that’s a little optimistic given that only 50% of adults are employed full-time. The millennials are getting whacked by the boomers who refuse to die (sorry, retire).

Figure 4. Unemployment (left; official stats in red; Shadowstats in blue) and labor force participation rate (right).

The wealth for middle-class households has dropped 30% since 2000;²⁹ One in five kids lives in poverty,³⁰ 46 million folks are on food stamps;³¹ 20% of the families have nobody employed³² (despite the 4.9% number); and almost 50% of all 25-year-olds are living with mom and dad unable to translate that self-exploration major into a job.³³ Half of all American workers make less than $30,000 a year.³⁴ The once-industrial-juggernaut Rochester of Kodak/Xerox fame has more than 30% of residents living in poverty and another 30% living with government assistance.³⁵ Very Detroit-like but without the Aleppo motif.

You can see it in the micro if you drill down. Deindustrialization has been occurring steadily since the late 90s.³⁶ The mining industry lost more this year than it made in the last eight years.³⁷ Sales of industrial-strength trucks have been “dropping precipitously.”³⁸ Sales in general are looking very ’09-ish. Factory orders and freight shipping (Cass Freight Index) have been dropping for two years.³⁹ Catherine Mann of the OECD says that “In terms of actual trade growth, it is extremely grim.” The CEO of Caterpillar finally cashed in his chips after 45 contiguous months of dropping sales.⁴⁰ Commercial bankruptcies are up 38% year over year,⁴¹ whereas 62% of Americans have less than $1,000 in savings.⁴² It seems unlikely the consumer will be buying bulldozers and 18 wheelers in the near future.

The economy is in the weakest post-recession recovery in half a century despite protestations to the contrary by Team Obama.⁴³ The 2%-ish growth rate since ‘09 feels like a recession, especially given specious inflation adjustments to get 2%. There isn’t a wave of job cuts yet, but some signs are worrisome. Cisco Systems laid off 20% of its workforce.⁴⁴ GE cut 6,500 jobs.⁴⁵ Despite gains in non-GAAP earnings, GE’s GAAP earnings—the non-fabricated earnings—plunged.⁴⁶ Intel dumped 11% of its workforce but faked a win by dropping its assumed tax rate by 7%.⁴⁷ This tactic smacks of the same old financial engineering, but maybe it is headed for nonprofit status. One bright spot: the $15 billion vibrator industry is set to grow to $50 billion,⁴⁸ satisfying consumers in a manufacturing–service industry combo.

Speaking of stimulus, what the hell went awry? The Feds drilled the rates to zero (creating a ginormous bond bubble; vide infra) to encourage consumers to do the one thing they cannot afford to do—consume. Global central bankers have cut rates every 3 days since 2008 according to Grant Williams.⁴⁹ The central bankers dumped tens of trillions of dollars—trillions with a “t” that comes right before gazillions with a “g”—into the global economy. The answer is simple and foreshadowed above: once you blow up a credit bubble, you cannot force consumers to spend. Have ya heard people talking about pulling equity out of their houses lately? Didn’t think so. That numbnut idea proferred by the incoherent Alan Greenspan left consumers with the same houses and twice the debt while poverty-stricken old age looms large.

How could the economists have been so wrong? I have a remarkably simple theory: their models are wrong. They suffer so badly from Friedrich Hayek’s “fatal conceit” that they have become functional nitwits. That’s the best I’ve got. One could argue we have a secular economic problem. As a nation, we exploited cheap labor overseas through immigration during the 16th–20th centuries. The immigrants worked like dogs, got paid squat, and saved so furiously that it became a lot more than squat. Thomas Sowell explains this brilliantly in his writings.⁵⁰ For the last few decades, however, we exploited cheap overseas labor by exporting jobs. They too worked like dogs, got paid squat, and saved furiously. But that wealth is not here; it’s over there (pointing east). Will new and improved trade policies solve our (U.S.) problems? I don’t think so. As long as there are folks overseas willing to work harder for less, we have some correcting left to do. With that said, I am a free-trade guy and particularly like the trade agreement painstakingly crafted by Mish Shedlock:

How about some more Keynesianism? Former economist Paul Krugman, whose op-eds read like episodes of Drunk History, would say we simply haven’t done enough. (Paul: you have done more than enough.) Modern-day Keynesianism has mutated way past Maynard’s original idea into an unrecognizable metaphysical glob of thinking that boils down to the notion that government knows how to spend better than the private sector does. Is this the same government that included Anthony Weiner, Rick Santorum, and Barbara Boxer?

Here is Keynesianism I could live with. Government should spend as little as possible, but there are legitimate roles to be played. Imagine if governments at all levels would simply act like financially interested parties—as a collective, not as slovenly greedy, bribery-prone individuals—and buy necessary goods and services when they are cheap and stop buying when the private sector has bid them up. We would get maximum bang for the tax buck. It would also quite naturally achieve the much ballyhooed counter-cyclicality. But, alas, the moment they start talking “stimulus,” the pay-to-play crowd turns it into a fiasco. As my dad once said, “Never ask government to do anything they don’t have to do, because they will do a terrible job.” Words from the wise.

Broken Markets

Whomever @TheEuchre is, I think that is a provocative alternative theory of Fed motivation. Moving along, we seemed to be on the cusp of a recession last year with a number of valuation indicators pointing to a +40% correction simply to regress to the mean. In the absence of such a correction (check) and the absence of explosive growth (check), we are still looking over the precipice (check). Luminaries like Stanley Druckenmiller, George Soros, Sam Zell, and Bill Gross are calling for a zombie apocalypse at some unknowable future date. Paul Tudor Jones appears to be wrapping up in a way that smacks of Julian Robertson’s Tiger Management hedge fund liquidation in ’99. Harvard’s Martin Feldstein says asset prices are “dramatically out of line.” Credit Suisse sees analogies to the tech bubble, whereas Ned Davis Research suggests, “on a revenue basis, U.S. stocks are as expensive as they have ever been.” Chart guru Doug Short created a simple model that averages four common equity valuation techniques (Figure 5). Based on his analysis, the market is 76% overvalued compared with the average dating back to 1900. (Note: a 76% overvaluation is regressed to the mean by a 43% correction, which will be as pleasant as baptizing a cat.)

Figure 5. Doug Short composite valuation model.

At these valuations, a few shanks at the start of the year were scary, but soon the markets entered the tightest 40-day trading range (2.27%) in more than 100 years—the Horse Latitudes.⁵¹ There were a few goofy IPO crack-ups but they stayed subclinical. Even flash crashes raised only a few eyebrows. Knee-slappers elsewhere included a crash of the British pound in the forex markets in under a minute owing to Brexiteers⁵² (vide infra) and a 6.7% crash in China in less than a minute.⁵³ The misnamed Trump rally—misnamed because it began three days before the election—left some serious skid marks, elevating the market 8% in only a few weeks. This was a short squeeze in conjunction with . . . I don’t really know.

It is suggested that central banks and programmed investing have pushed a wall of money at the markets. This credit-based splooge corresponds to debts to be paid back later, but who cares? Over 10,000 mutual funds and exchange-traded funds (ETFs) are feeding off only 2,800 issues on the NYSE. There are now almost twice as many hedge funds as there are Taco Bells⁵⁴ (which won’t be growing under a Trump presidency). I get a little confused as reported outflows in both equity funds and money market funds argue the contrary. (Even these claims are confusing given that buyers necessarily match sellers; vide infra.)

Stock buybacks—in many cases leveraged stock buybacks—continue to levitate the markets. For those not paying attention, companies borrow money to buy back shares to prop up share prices, which serves the dual role of maximizing year-end bonuses and wards off balance sheet crises. Now my head hurts. Baker Hughes announced a $1.5 billion share buyback and $1 billion of debt issue. In the first half of 2016, S&P 500 companies “returned” 112% of their earnings through buybacks and dividends.⁵⁵ Returned? There is some evidence that buybacks may be subsiding. When they stop buying shares at all-time highs—“buying high”—and their investment unwinds while crushing corporate debt persists, companies will be doing “dilutive share issuance” at fire sale prices—“selling low.” For now, corporate balance sheets hold the dumb money.

There are instances of generic idiocy emblematic of deep problems. Eighty-five percent of traders on Wall Street have less than 15 years of experience. Synthetic securitizations are returning.⁵⁶ Are buyers being paid for the risk? Some have suggested that retail investors should stay away from these (and Fukushima). A managed futures fund was launched by a 17-year-old kid who may not have made it to third base yet.⁵⁷ A 28-year-old Ukrainian hacker got caught making over $30 million on insider information.⁵⁸ If he were a bank, he’d have been fined $100K. The “head” of the collapsed Visium Asset Management hedge fund killed himself by slicing his own neck.⁵⁹ Right. Platinum Partners appears to have been running a Ponzi scheme.⁶⁰ Vegan food start-up Hampton Creek used $90 million in “seed” money to buy its own products (probably seeds) to generate fake “organic growth.”⁶¹ Nintendo spiked on the release of Pokémon, which caused hoards of idiots to chase digital critters to stupid places.⁶² Even though Nintendo fessed up that their bottom line would not be improved by the craze, some of the gains have stuck as investors keep chasing those digital share prices to stupid places.

Cash on the Sidelines

In 2011, I used that quote in a different context, but it is a great articulation of the Law of Conservation of Mass.⁶³ There are a lot of memes in the investing community—pithy phrases and ideas for which tangible support is weak or nonexistent. One is the merits of “cash on the sidelines” and its kissing cousin, money “flowing” in and out of asset classes. In the late ‘90s, I tried to ascertain how much cash was generated in sell-offs and soon realized the answer was zero. Others such as Lance Roberts,⁶⁴ John Hussman,⁶⁵ Cliff Asness,⁶⁶ and Mish Shedlock⁶⁷ have dismembered putty-headed thinking underlying cash on the sidelines. However, there are pockets of holdouts (mostly on CNBC) who subscribe to the flow model. You can hear Maria saying it: “There is so much cash on the sidelines waiting to go into equities.” I am going to take one last crack at it with the aid of some graphical wizardry and grotesque oversimplification.

Here is the problem with the meme in a nutshell: If I buy, somebody must sell. It’s the Law of Conservation of Cash. If I grab a stack of Tubmans ($20 bills) and buy NFLX, the former owner of NFLX now has the Tubmans, and I have the overpriced shares. Do that all day long, and the cash on the sidelines doesn’t change; it moves around like the bathtub ring. Mutual funds insert middlemen to skim cash, but still no money is destroyed or created. Breathless claims that money is flowing in or out of mutual funds sounds important, but where in this model is cash created or destroyed? The percentage of cash, however, is a huge issue.

Let’s look at this graphically and restrict it to a simple binary model (Figure 6). Imagine there is $100 trillion in cash globally and $100 trillion of market cap in equities. Of course different investors have different allocations, but investors have collectively decided that they wish to own 50% cash and 50% equities (labeled 50:50).

Figure 6. Equity-to-cash allocations in a non-inflationary world.

In a non-inflationary banking system, the cash is static. Along comes legendary wise man John Bogle declaring equities reward risk taking, we should weight our portfolios 60:40, and the world agrees. Investors will bid up equities to higher valuations until, collectively, equities reach the 60:40 proportion for a satisfying 50% gain exclusively through expansion of the numerator. Legendary raging bull Laszlo Birinyi, guided by recency bias, convinces the world stocks are great investments and suggests 80:20 as the right allocation. Investors collectively agree, and they bid shares higher, which completes an overall 300% equity gain from the conservative days of 50:50 allocations. Now we’re rocking! We are just beginning to pull stupidity forward. Jeremy Siegel, self-appointed guru and demagogue, says you simply can’t lose, so you should be 90% stocks, and the world listens because this particular baitfish-smart analyst stays at Holiday Inns and is from Yale! The market has now lost all moorings, pushing the overall gains to 800%! Of course, now cash is trash and investors strive to be 100% in equities. Equity investors now “reach out and touch the face of God” because the prices are heading for infinity. Alas, The Bear appears before that can happen—it always does. It doesn’t have to be an axle-breaking speed bump. The proximate trigger is not important. Spooked investors drop their allocations back to 60:40 and, in the depths of despair, back to 50:50. You will then scoop up cheap equities with inverted baggies from disembowled, toe-tagged investors who need cash.

We gave the gains all back . . . or did we? During this round trip, society collectively learned to make goods and provide services much more efficiently. The same amount of effort—the same amount of cash—corresponds to a much higher standard of living. This is good deflation, the kind that James Grant describes because he reads the dusty archives from bygone eras. Most economists nowadays endorse low inflation that roughly matches productivity growth, which causes both the cash and the market cap (equities) to drift gently upward in a feel-good money illusion.⁶⁸

Don’t we need inflation for growth? Only if you believe the industrial revolution of the nineteenth and early twentieth century was disappointing. For the first half of the twentieth century, the DOW rose 1.3% nominally per annum. However, the modern banking system is most definitely inflationary. Money is created by increased leverage of all kinds—sovereign debt, consumer debt, quantitative easing (QE), and helicopter money all grow the money supply. They grow the denominator (cash) in Figure 6, which is inflation. The overarching model guiding the Fed’s policies seems to be that increasing the denominator will nonlinearly increase the numerator. As inflation lifts equities, animal spirits take hold (the Wealth Effect) and lift them even more. We will go through the four stages of bullishness: Bogle-Birinyi-Siegel-God. The gains will be illusory because real wealth is manufactured, farmed, mined, and maybe programmed. Central bankers will always do something; sitting on their hands (or thumbs) is unnatural. When the markets de-lever, however, cash leaves the system. Business and investing models demanding inflation begin to break. This is bad deflation. It is harsh, abrupt, and dreaded by central bankers, because it is largely their doing.

Pharma Phuckups

There seemed to be an epidemic of flatliners in the pharmaceutical industry requiring quarantine (its own section). The big one was Theranos, a company based on miraculously effective lab tests that turned out not to really work.⁶⁹ The company was quietly outsourcing to labs whose tests did work. When the scam was revealed, the wunderkind CEO, Elizabeth Holmes, watched her Forbes-estimated net worth drop from $4.5 billion in 2015 to “$0” in 2016.⁷⁰ The corporate digital exam would be familiar to her distant relative John Holmes.

Mylan suffered an optics problem when the disappearance of a key competitor allowed it to take a cue from pharma scoundrel Martin Shkreli⁷¹ and jack up its EpiPen price 500%,⁷² which smacked of price gouging. Mylan was protected by government intervention when Teva was denied rights to make a competing product.⁷³ Such mischief in the generic drug market is real. The feds also mandated stocking EpiPens in all schools.⁷³ A million bucks of lobbying money well spent.⁷⁴

Valeant Pharmaceuticals also reported big losses following big gains. Criminal investigations into Valeant took it 90% off its recent highs (a “tenth bagger”).⁷⁵ Meanwhile, drug giant Eli Lilly’s share price Felt the Bern in the fall when Bernie Sanders tweeted concerns about the price of insulin rising 700% in 20 years.⁷⁶ The big-cap drug scoundrels have also been accused of fabricating an ADHD epidemic and causing a global prescription drug addiction. A drum beat to restrain pain meds is getting very loud. Chronic pain patients watch with angst.

Oh, those bastards, right? Well, maybe not. I’m gonna take a crack at defending the industry. Mylan has been dead money for 20 years—zero percent return ex-dividends and ex-inflation. The same is true for Merck, Pfizer, Eli Lilly . . . I could go on. Former antimicrobial juggernauts Eli Lilly and Bristol-Myers Squibb are exiting the antibiotic market because they can’t pay the utility bills with the proceeds. You should worry.

Where are all the revenues going? Really expensive research and development. Better meds make the world a better place. The life expectancies of AIDS patients with treatment are now three years below those of their uninfected peers. Wow. New-era cancer cures are off-the-charts effective. Pharma creates wealth in the purest sense and employs millions of people. On my consulting gigs, I can see researchers diligently trying to cure major diseases. Operationally, however, big-cap pharmas have been not-for-profit organizations for investors for several decades. When you see the prices get jacked up, don’t mindlessly assume it’s to line the pockets of management or investors.

It is claimed rather convincingly that the per-unit cost of health care has not risen, but the volume has soared. My stump/bladder sand /aneurysm mentioned above burned through a lot of health care. Why is health care so cheap elsewhere? My son broke his foot while in Vietnam weeks ago. X-rays, an MRI, surgery with titanium pins, and casting: $1,000. Three days in the hospital: $30 per day. Being invited to stay with the surgeon’s family for two weeks to convalesce: priceless. For a total of about $1,600, my son flew to Vietnam, got excellent surgery, and flew home. That is the essence of the rapidly growing medical tourism industry.

How is that possible? The doctor in Vietnam is not wealthy and probably demands few material goods. Torte reform is not needed because caveat emptor reigns. There might even be some Gates Foundation money thrown in. Most important, the profoundly expensive research and development was all done in developed countries and paid for by large revenue streams.

Gold

Nailed it! That was the bottom. I expect some checks in the mail from nouveau riche gold bugs who got 60% on their XAU-tracking investments. Despite weakness of late, the case for gold is now in place: European and Chinese banking risks, negative interest rates, a war on cash, and omnipresent risks of a hot war in the borderlands of the Middle East and Europe. Estimates suggest 0.3% of investors’ assets are in gold.⁷⁷ Traditional portfolio theory recommends 5%, offering a better than 15-fold relative performance en route. (Recall that discussion of “flow” from above.)

Let’s check in on what some of the wingnuts on the fringe of society are chortling about now:

James Grant also went on to say that “gold is like a monetary tonsil,” leading some to speculate that his son, Charley (WSJ), slipped him a pot brownie. Let’s see if we can get the goofs too.

We’ll begin by blowing out a few ideas I do not subscribe to. I keep hearing from smart guys that gold is in short supply in the Comex or Shanghai gold exchange, you name it. These stories almost never play out. I am also a huge fan of Rickards and Maloney, but the saying “gold is money” and the notion that its price is actually the movement of the value of the dollar don’t work for me: prices of everything I buy follow the dollar, not gold, on the currency timescales. On long timescales, their assertion may be correct. Someday their assertion may even be correct on short timescales, but that isn’t right now.

What a year: I got as many electoral delegates as the bottom ten republican candidates combined, ate python, and own as much gold as the Central Bank of Canada. Per the Bank of Canada, it finished selling off all of its gold,⁷⁸ probably to ensure that the U.S. didn’t attack. You think I jest? A WikiLeaked e-mail by Sid Blumenthal to Hillary Clinton revealed that France whacked Libya to make sure North Africa distanced itself from a gold dinar currency.^79,80 Germany supposedly has half of its requested gold repatriated from the U.S. and France,⁸¹ which could be bullish or bearish on the half-full/half-empty logic. Venezuela repatriated 100 tons of gold a few years ago and was squeezed to sell it all back in the heat of a currency crisis.⁸² The Dutch depatriated their gold this year after repatriating it not long ago.⁸³ The reasons are unclear. Alexei Ulyukayev, first deputy chairman of Russia’s central bank, assured us Russia will continue to buy gold (Figure 7), presumably as a defense against interventions from inside the beltway. Of course, the Fed is silent on the “metal whose name shall never be spoken.”

Figure 7. Russian gold reserves.

In a shockingly quiet year given how much gold moved to the upside before the post-election monkey hammering, we probably should finish with some generic goofiness. On a few occasions, gold took the beatings that are familiar—huge futures dumps in the illiquid wee hours of the morning when no price-sensitive investor would ever consider selling. It dropped $30 in seconds late on the day before Thanksgiving when nobody was paying much attention. Another hammering came from a $2.25 billion sale⁸⁴ and another $1.5 billion sale,⁸⁵ both of which occurred in under 1 minute. Nanex concluded that the algo “gold spoofer” was at play,⁸⁶ but the 2016 poundings were transitory and toothless compared with their brethren in 2011–2015. Trouble in the ETF market was revealed when BlackRock was overwhelmed by GLD buying.⁸⁷ It was forced to create more shares in February than it had in a decade. I retain previously stated convictions that GLD is a scam—fractional-reserve gold banking. Deutsche Bank was overwhelmed by requests for physical gold.⁸⁸ It tried to shake the hook by demanding that such a request must be made at a participating bank.⁸⁹ Deutsche Bank, the location of the request, is not a participating bank? I imagine it doesn’t have the gold, consistent with its troubles outlined below. A Swedish precious metal vault got its payment mechanism terminated without explanation.⁹⁰

We can’t close without talking about gold’s kissing cousin—silver. The silver market gets its share of muggings and sustained bashings, at times spanning several weeks. The silver sellers didn’t get full traction either, however, bringing silver off a 50% gain but leaving it up 15% year to date. Silver market treachery got some attention. The London Silver Fix—truth in advertising—at times deviated markedly from the spot price,⁹¹ causing consternation among those attempting to fix the price. Deutsche Bank agreed to settle litigation over allegations it illegally conspired with Scotiabank and HSBC Holdings to fix silver prices at the expense of investors.⁹² A class action suit against Scotiabank suggested that the conspiracy spanned 15 years.⁹³ JPM was cleared of silver manipulation in three lawsuits—all dismissed with prejudice, an altogether different form of “fix.”⁹⁴ The only remaining question is why they are stockpiling huge stashes of physical silver.⁹⁵

I’m as sanguine as ever holding large precious metal positions. Gold bugs are reminded, however, of what a big victory will feel like:

Energy

You could almost hear the bell ringing on that one. The price of oil promptly went on a 50% rip to the upside. Generally, however, energy was boring (to me) this year, but I keep investing in it. Of course, lower energy prices were hailed as great tax breaks for the consumer, ignoring those who say the economy drives commodity prices not vice versa. Like every other market, however, has been totally financialized. The supply/demand market got replaced with a casino-based futures market, and we know that casinos are trouble. Then there’s that whole petrodollar thingie wherein our alliances in the Middle East keep the dollar at reserve currency status and allow us to sell debt. It also seems to be the proximate cause for bombing vast numbers of Arab countries, but I’m ahead of myself.

A few corporation-specific problems gurgled to the surface. Chesapeake Energy got indicted for energy market manipulation, prompting the CEO to off himself in a one-car accident.⁹⁶ He probably never realized it was a self-driving car (wink). Petrobras canned 11,700 workers.⁹⁷ Norway’s sovereign wealth fund started tapping principle because Statoil got crushed.⁹⁸ Statoil says it will pay a dividend . . . by issuing new shares.⁹⁹ Maybe it should hire more petroleum engineers and fewer financial engineers. The world’s biggest developer (SunEdison) of the world’s most expensive energy (clean energy) had accrued $12 billion in debt after a two-year asset-buying binge. Liquidation revealed a complex web of Ponzi financing.¹⁰⁰

Here’s a funny little nugget for intellectually molesting people at cocktail parties: Edward Longshanks outlawed the burning of coal in 1306 because of pollution. Apparently, Hillary was not the first to try to put a few coal miners out of jobs. Coal is truly hated, and the industry is getting annihilated by the switch to natural gas, which is getting annihilated by fracking-based oversupply.¹⁰¹ The mega-miner Arch Coal got oxidized in the energy rout, ironically leaving little residue.¹⁰² It’s probably time to invest in coal miners once the market’s beta corrects. (That’s code for a market-wide sell-off.) All of my ideas are contingent on a prefacing market drop in the throes of a recession. One will come like night follows day, and then the merits of cash will be unambiguous.

Energy companies getting whacked wouldn’t be so bad if it weren’t for the debt. Life insurers have huge energy-based junk bond exposure.¹⁰³ Of course, the banks will allow them to hang on to greater risk by not calling in their chits rather than face reality. Zero Hedge reported that the Dallas Fed was telling banks not to push bankruptcy on energy companies.¹⁰⁴ Denial by the Dallas Fed confirmed the story.¹⁰⁵ (Thou doth protest too much.) Wells Fargo is committed to $72 billion if oil companies draw down their lines of credit,¹⁰⁶ and that is just the beginning of its problems (vide infra). Wells Fargo, Bank of America, and JPM all have spiking numbers of bad energy-sector loans.¹⁰⁷

I keep investing in energy, providing my own little Wall of Money to elevate the markets. In 20 years, I’ll know if it’s a smart move. A subset of this plan includes Russia, Iran, coal, and even uranium. Y’all can keep the new-fangled green energy; it’s too political for my tastes.

Real Estate

Thank God the real estate bust is over. That got outta hand fast, but we’ve learned our lesson (sigh.) Of course, it’s not over, and we learned nothing durably. Stupidity doesn’t just rhyme; it repeats. I must confess that I’m unsure how they cleaned up the ’09 bust. Where did the massive inventory go? Some did the full cycle (ashes to ashes). I suspect that many former foreclosures are rentals (Figure 8). Although single-family rentals are a lousy business and represent a dangerous shadow inventory, soaring rental rates may actually make them profitable in the medium term. The authorities also didn’t really clean up the financial mess. Fannie Mae and Freddie Mac—the two toxic government sponsored enterprises (GSEs) that nearly destroyed us in ’09—are being considered for bailouts again.¹⁰⁸ What? Didn’t we drive wooden stakes through their hearts? No. They got placed in the government protection program under the pseudonym Karen Anne Quinlan living on Maiden Lane.

Figure 8. Renter-occupied versus owned houses.

Some bubbles didn’t even burst in ’09. Vancouver real estate went bonkers with the influx of Chinese money. The cost of a single-family home in Vancouver surged a record 39% to $1.2 million by midsummer. Mansions were being bought and abandoned (Figure 9). Shacks (tear downs) were selling for millions. Thomas Davidoff, erudite professor  at the University of British Columbia, noted, “These prices are getting pretty freaking nuts.”

Figure 9. Abandoned $17.5 mansion,¹⁰⁹ $7.2 million mansion for sale,¹¹⁰ and $2.4 million starter home in Vancouver.

People were getting rich buying Vancouver houses, but I’ve seen this plot before and know the ending. With everybody on the same side of the boat (boot), it would soon be listing starboard. Is that a blow-off top in Figure 10? Not really. The authorities aggressively scuttled it with a 15% housing tax¹¹¹ to “cool off the market” (real estate’s version of the ice bucket challenge.) Sales dropped 96% year over year while prices dropped 20% in the blink of an eye.¹¹² Where’d the buyers go? Toronto!¹¹³ I suspect Vancouver will retrace a decade (or more) of gains.

Figure 10. Vancouver real estate prices 1977–2016. Blue is “detached” in so many ways.

Legendary real estate analyst Mark Hanson sees a few frothy domestic markets, too (Figure 11).¹¹⁴ Bloomberg reports that $0 down, 30-year, adjustable-rate, jumbo mortgages are being given to youngsters in Silicon Valley, all backed by stock options.¹¹⁵ The San Francisco Federal Credit Union calls the program POPPY, or Proud Ownership Purchase Program for You because, as Zero Hedge notes, “Steaming Pile of Shit” lacks panache.¹¹⁶ Alan Cohen, former Ithacan and current Florida county planner, told me the Florida real estate bubble was back and bloated. A $95 million tear down in Palm Beach was the sound of a bell ringing.¹¹⁷ Prices of luxury condo sales in Miami have been cut in half.¹¹⁸ A busting golf course bubble is causing problems in Florida and other sand states because the courses are embedded in neighborhoods.¹¹⁹ Smacks of time-share-like legal problems. Some may also recall that a Florida real estate bust prefaced the ’29 collapse.¹²⁰ Even in New York City the market is softening, as is its bedroom community, Greenwich, CT.¹¹⁷ And $100 million condos are showing evidence of being overpriced.¹¹⁸ Whocouldanode. Aspen witnessed the largest drop—a double-black diamond “freefall”—in years.¹¹⁹

You want some entertainment? Check out this critique of the architectural wizardry behind the ever-popular MacMansion.¹²⁰

Figure 11. Domestic real estate markets.

According to Christie’s International Real Estate, $100 million homes were piling up by mid-year.¹²¹ It appears that the UK market (especially London) may finally be softening or, as they say at Bloomberg, “tanking.”¹²² The largest property fund had to stop redemptions.¹²³ Ironically, they’ll have to sell assets, which I’m sure won’t help the market as the virtuous cycle turns vicious. Prime properties have also dropped in Paris, Singapore, Moscow, and Dubai.¹²⁴ Some say the global high-end market has completely stalled.¹²⁵ Australia seems to remain in a bubble.¹²⁶

You know the picnic is over for the commercial markets when the seven-story office building in Figure 12 gets stale on the market.¹²⁷ The real estate bears have taken notice. (That was inexcusable.)

Debt

Federal debt has climbed 8% annually since 2000,¹²⁸ but who cares because we have the reserve currency, can print the garbage at will, and are assured by the highest authorities that inflation is good and high inflation is even better. Meanwhile, friend and market maven Grant Williams has created a masterpiece of analysis of our debt problems.¹²⁹ In the absence of a deflationary collapse, debt is reconciled to the downside at a geologic pace; it almost never happens. (Supposedly the Brits did it in the mid-nineteenth century.¹³⁰) The problem is exacerbated by an inherently inflationary banking system that requires monotonically rising debt to survive. Where do you think the interest paid on savings comes from (when there is interest, that is)? Despite the current calm—possibly the eye of the storm—there are newsworthy events in the world of debt.

The consumer is stretched by having no savings and gobs of debt—huge net debt (Figure 13). An estimated 35% of Americans have debt that is more than 180 days past due.¹³¹ They are now buying used cars with 125% loans,¹³² presumably to cover the negative equity from their previous loan and help pay for repairs. The used car market is priced poorly owing to the overdeveloped credit machine created to sell the trade-ins from rentals.

Figure 13. Consumer debt (credit).

One of the most oppressive of all debts, high-interest credit card debt, now exceeds $16,000 per household.¹³³ The $2500 per annum interest payments are a death spiral for the average consumer earning less than $30,000 per year. The collective tab is nearing $1 trillion.¹³⁴ Larry Summers blames the high debt-to-income ratio for the stagnant consumer.¹³⁵ He may be missing the superimposed realization that they have no pension either (vide infra).

Non-dischargeable student loans continue to climb, now exceeding $1.3 trillion (Figure 14). Can anybody picture the millennials paying this off? A comprehensive White House report lays out the stark details.¹³⁶ Student debt has grown linearly since ’09—suspiciously linearly. In fact, I don’t trust linearities like that:

I suspect that the federal government is using student loans as a monetary policy tool to methodically jam money into the system not unlike its bond-buying spree in which Andy Husar was instructed to buy $8 billion a day, every day, without fail. Curiously, the White House (metonymically speaking) thinks “student debt helps, not harms, the U.S. economy.” That idea reflects the IQ expected of a house.

Figure 14. Just student loans or monetary policy?

There are rumors of arrests of student debtors—Operation Anaconda.¹³⁷ It sounds like Dickensian debtors’ prisons if true. I think it more likely that we are slowly heading toward some form of debt jubilee. It will be highly politicized and unfairly distributed. Hints of one come in the form of disability relief for almost 400,000 students who are said to be disabled but unable to prove it.¹³⁸ If, however, ADHD or a damaged frontal cortex that allows one to spend $200,000 on an unmarketable education is a disability, 400,000 is an underestimate. Hillary publically promised to give free tuition to students while privately getting caught on a hot mic referring to the millennials’ hopes of free education as “delusional.”¹³⁹ This point is now moot.

Corporate debt continues to give me fits as companies blow up their balance sheets to buy back shares and pay dividends. This is not self-extinguishing debt. You hear about corporate cash on balance sheets from the media. That cash is stored in metaphorical crocks, because the story is bogus. The top 1% of companies has 50% of the net cash on the balance sheets. (Kinda sounds like the wealth disparity pitch all over again, eh?) Apple, Microsoft, Google, Cisco, and Oracle account for 30% of it. The journalists squealing about “cash to be put to work” often fail to look at the net cash (cash minus debt). Total debt on the balance sheets doubled from $2.5 trillion in 2007 to over $5 trillion by early 2016 (Figure 15). That’s 7% per annum according to the 72 rule (interest rate x doubling time ? 72). Meanwhile the cash on the balance sheet rose by a paltry $600 billion. I get lost in the big numbers, but that is a $2 trillion rise in net debt. They’ve got to keep growing it, however, to buy back shares if they wish to prevent their share prices from collapsing.

Figure 15. Corporate debt.

Isn’t debt a zero-sum game? We owe it to ourselves? In a sense, yes. But when all this debt comes due, we will discover that our shiftless counterparty (us) doesn’t have any money. All that money you think you’ve saved is owed to the millions of people comprising “ourselves.” How much do we owe ourselves? Unfunded liabilities come to a total of $2 million per viable taxpayer ($200 trillion total). You know what you are owed, but do you know how much you owe to the rest of us? Got gold?

Pensions

Everybody passes pickles over the social security trust fund when, in fact, it doesn’t exist and never did. It is a mathematical certainty that we will default on our obligations, but it will occur in some way invisible to most people, probably via cost of living adjustments that fail to track inflation, means testing, and just printing money. I signed my wife up for social security early (62) on a bet that they would renege somehow. She didn’t earn much; I did. What started as a small payment turned miniscule. Here is her statement:

Really? $411 per month was whittled down to $63 per month? The part I cut off was the final clause that said, “Don’t spend it all in one place, bitch.”

The risk is in the substrata of the pension system in which bankruptcy and insolvency are smash-mouth realities. I didn’t mention state debt in the previous section because much of it is hiding as unfunded obligations to pensioners. Paying state and municipal employees with pension promises was such an easy way to compensate people without raising the money. Enter reality: public pensions are now $3 trillion in the hole.¹⁴⁰ How long would it take to make up $3 trillion? Noooo problem! Simply pay off a million dollars a day for 8,200 years (assuming 0% interest.) Some examples are in order. Oregon’s public employee retirement system has a $21 billion unfunded liability (6 years of payouts), and it’s growing as returns of 2% somehow fall short of assumed returns of 7.7%.¹⁴¹ Those assumed 7–8% returns have never been accurate over the long term when adjusted for inflation, fees, and taxes. Connecticut, Kentucky, and Hawaii have similar problems.¹⁴² Illinois is the gold standard of insolvency. The Illinois Teachers Retirement System is only 40% funded and currently assumes annual returns of 7.5%.¹⁴³ How did this happen? For starters, the employees are the best compensated in the Union, including free health care for life.¹⁴⁴ Wrap your brain around that: they work for 20–30 years and get free health care for up to 50–60 more years? Meanwhile, state labor unions are asking for raises out of “fairness.”

As you drill down, you find bloodbaths pretty much everywhere in municipalities. Chicago’s pensions in aggregate are 20–30% funded depending on whom you ask.¹⁴⁵ Pending legislation, however, will allow the insolvent state of Illinois to bail out the insolvent city of Chicago.¹⁴⁶

Isn’t there something you can do? Even if we get serious about savings among, say, the boomers, many are way past their fail-safe points. You can hear the barn door slam. At least those with defined benefit pensions are safe because they are protected by contractual obligations. Legal schmegal: there is no god-damned money! Pension cuts are just beginning but could accelerate. The Teamsters’ Central States Pension Fund is looking to cut 400,000 pensions by 55% or go flat broke—zero dollars—by 2026.¹⁴⁷ Recent rulings preventing pension cuts are, in my opinion, the courts simply stating that it is illegal to avoid bankruptcy through selective nonpayments. Bankruptcy is about distributing remaining assets in a fair and equitable way to all creditors when there is not enough to go around.

There is evidence of an old-school-style run on pensions: workers are retiring in serious numbers to remove their assets from faltering pension programs. I hear rumors of University of Illinois faculty moving to other institutions—five to Georgia Tech alone—to remove their pensions at full value from the Illinois system while it’s still possible. Dallas police and firefighters are leaving the job to grab their full pensions from a dwindling stash.¹⁴⁸ It turns out there was also a bit of a Ponzi scheme going on, which caused the mayor to propose a 130% increase in property tax.¹⁴⁹ I don’t see a reelection in your future, Mr. Mayor. As seasoned public servants, they might be able to move to Austin or Houston. There is now evidence the withdrawals in Dallas are being shut down.¹⁵⁰ I could even imagine claw backs of the rolled-out funds.

At the personal level, self-directed defined contribution plans paint a clockwork orange big time. Gundlach says the 40–50 crowd is “broke.” Well he exaggerated: the average American household has $2,500 saved, and the average couple consisting of two 45-year-olds has $5,000.¹⁵¹ Technically speaking, they are not broke, but they are totally screwed. Across all working-age families, more than 50% have no savings whatsoever,¹⁵² which is one way to render low returns moot. The 55- to 60-year-olds are positioned closer to the pearly gates but have median retirement nest eggs of $17,000.¹⁵³ Assuming a couple eats six cans of dog food per day (2 × 3) and they have no other bills, the couple will run out of money in 11 years (which, on the bright side, will seem like eternity). The top 10% have less than $300K.¹⁵⁴ The numbers could be skewed to the optimistic side: 20% of all eligible 401(k) participants have loans outstanding against their 401(k) accounts.¹⁵⁵ This practice is so egregious that some companies are offering alternative payday loans to their employees, albeit with elevated interest rates, of course.¹⁵⁶ I remember reading about company towns in West Virginia coal country paying their employees in company scrip. The practice was outlawed.

Of course, I’ve just described a potpourri of anecdotes in the U.S. Maybe it’s better in other countries. Right off our coast we have the tropical paradise of Puerto Rico, which is so up to its ass in debt that creditors essentially own the island.¹⁵⁷

What about Europe? There’s where it gets fugly. The markets in pretty much everything that is bought and sold are at nosebleed valuations. There is little or no room left for gains through changes in valuation. Interest rates on bonds are miniscule, even negative (vide infra.) You won’t make anything on those bonds, but you could lose enormous principle when—not if—interest rates normalize after a 40-year downward march. There is some evidence that the reversal has now started. Equity markets also have a mean regression in their future despite what the proponents of the mathematically sophisticated Greater Fool Theory espouse. If the markets correct—they always do—you can adjust all those numbers I just cited by an arithmetically simple factor of 0.5. Could an industrial revolution save us? The most stupendous industrial revolution in history—the U.S. juggernaut in the twentieth century—returned an inflation-adjusted 4–5% including dividends using the Dow index as a proxy. Unfortunately, I do not believe those returns are corrected for management fees and taxes. I’m thinking 3% is optimistic. I’m thinking Illinois and the rest of the world are still toast.

Inflation/Deflation

The central bankers and macroeconomists all want inflation. There are media pundits who buy into this metaphysical notion that inflation is good (no offense to the metaphysicists). Dispelling the notion that this quest for inflation is just hyperbole calls for some quotes to capture pundit sentiment:

They may believe that by generating small positive inflation levels that seem to accompany strong economic growth, they will somehow create that growth. More likely, they fear no inflation in an inherently inflationary credit-based banking system. If central bankers furiously debase their currencies with an inflationary tailwind and deflation appears nonetheless, then somebody screwed up (them). I buy this latter thesis. Of course, the measure of inflation has been debated ad nauseam in the context of stats rendered dubious by hedonic adjustments, substitutions, unvarnished fraud, and adjustments based on reading goat entrails. I discussed these frauds years ago.¹⁵⁸ Inflation is certainly not 2% but some number much higher if one is measuring what Joe Six-pack is shelling out to exist.¹⁵⁹ (Anticipating squeals about MIT’s Billion Price Project, I discussed it in last year’s review: I think it’s bogus.)

The fear of deflation is fear of asset deflation. With huge leverage in the system, a collapse in asset prices becomes insolvency and cardiac arrest. The problem is that the Fed’s inflation policies are the root cause of the deflationary risk. To me, the existential risk is hyperinflation, which is in full bloom in Venezuela¹⁶⁰ and germinating in Nigeria.¹⁶¹ Closer to home (for Americans), rents have been soaring—13.2% per year in Boston since 2010, for example.¹⁶² Health plans are rising double digits per year, looking to jump more than 15% next year.¹⁶³ College tuition is on a headline-making inflationary trajectory of 6% per annum above the rate of the admittedly dubious inflation rate.

The Bond Caldera

Sounds a little ominous. He also notes that “global yields are the lowest in 500 years of recorded history.” Alas, there are other bond doomsters. Paul Singer says “the bond market is broken . . . the biggest bubble in the world . . . never-before seen asymmetry between potential further reward and risk.” Former punk rocker and newly crowned Bond King Jeff Gundlach now moves the markets with his pronouncements. Jeff wails that the current market for 10-year treasuries is the worst opportunity in its long history. He calls it “mass psychosis . . . not guided by the markets.” With a little math wizardry that only a bond king could muster, Jeff says, “a 1% increase in the rates would result in up to $2.4 trillion of losses.”¹⁶⁴ I’m not sure investors hiding in the safe haven of bonds are quite ready for those losses. They’re betting that rates will never rise 1%. As I type, that is proving to be wrong—possibly dead wrong.

At some point, this party has (had) to end. In 2014, James Grant of the legendary Interest Rate Observer described three bond bulls in America during the past 150 years—“1865–1900, 1920–1946, and 1981 to the present.” The first two did indeed end, and probably unexpectedly given how long they lasted and investors’ willingness to extrapolate to infinity. The third will end too. The bond market is like the Atlantic conveyor that must keep moving currents around the Atlantic Ocean.¹⁶⁵ When the conveyor sputters, we get an ice age. When the bond market sputters, we will get the credit market analogue of an ice age.

What’s different this time—a dangerous choice of words—is that the highly financialized markets are not only huge but also highly correlated. The correlation reaches way beyond the conventional debt markets into the shadow debt markets and the $1 quadrillion derivatives market—a quadrillion dollars of the most screwed-up, leveraged investments based on blind faith and confidence the world has ever witnessed. No problemo, say the optimists. We will “net” those puppies. Netting is when you round up investments on each side of the bet and simply cancel them out (like from either side of an equal sign.)¹⁶⁶ Ya gotta wonder which genius is going to net $1 quadrillion dollars of derivatives in the midst of a raging inferno. It didn’t work in ’09, and it won’t work the next time, especially in a market so large Avogadro might wince.

How crazy has the bond market become? The French sold 50-year bonds.¹⁶⁷ Ireland sold its first so-called century bond less than three years after it exited an international bailout program.¹⁶⁸ Spanish 10-year interest rates are below those of the U.S., prompting James Grant to suggest “a return to the glory of Rome.” The Eurowankers (European bankers) are monetizing debt by buying corporate bonds to jam money into (1) a system that doesn’t need any more, and (2) the pockets of cronies who always demand more. Shockingly, the cronies front-ran the purchase program by buying existing corporate debt¹⁶⁹ and creating new types of corporate debt, all for a tidy profit . . . for now. Taking a cue from the U.S. postal service, Japan is offering “forever bonds”: you get interest—a low 1% interest at that—but you never get paid back your principle.¹⁷⁰ The idea that inflation will never rear its ugly head seems presumptuous, even preposterous. It would be safer loaning money to your adult children, who will never pay you back either. You know to the penny your return on that investment.

Alas, as is often the case, CNBC isn’t even right on what would be a truism in any other era. I could go on talking about ridiculously low yields, but now we get “the rest of the story.”

ZIRP and NIRP

On April 1, 2006, an article appeared endorsing zero-coupon perpetual bonds.¹⁷¹ You give somebody your money, and they pay you no interest and you don’t get your money back. Irate readers forced this hooligan to “politely point out to them the date of publication” (April 1st). Did you know the word gullible is not in the dictionary?

Unbeknownst to the author, the article wasn’t satire; it was foreshadowing. There is no endeavor in which men and women of enormous intellectual power have shown total disregard for higher-order reasoning than monetary policy. We are talking “early onset” something. I am not an economist, but my pinhead meter is pegging the needle. Let’s hop right over ZIRP (zero interest rate policy) because it is so 2014 and head right into NIRP (negative interest rate policy). NIRP is where you pay people to lend them money. (Check the date: it’s December, not April.) You heard that right: you give them money, and they give you back less.

Capitalism progressed for 5,000 years without interest rates ever stumbling on the negative sign (which, by the way, was invented by the Arabs more than a millennium ago). You can no longer simply say that bonds are at multi-century highs; it is mathematically impossible to bid rates on normal bonds into negative territory. It takes a special kind of monetary fascism to create negative rates.

Japan is at the vanguard. Eight days after Hiruhiko Kuroda, head of the Bank of Japan (BoJ), announced he was not considering negative interest rates, he jammed rates negative.¹⁷² That was like a knuckleball from the famous pitcher Hiroki Kuroda. Nearly 80% of Japanese and German government bonds are now offering negative yields (whatever “yield” now means).¹⁷³ Fifty-year Swiss debt has gone negative.¹⁷⁴ Early this year, negative yielding global sovereign debt surpassed $10 trillion “for the first time.”¹⁷⁵ Really? For the first time? Sovereign debt first dipped below zero only two years ago. An estimated $16 trillion (30%) of sovereign debt is now under the auspices of NIRP (Figure 17).¹⁷⁶ Over a half-trillion dollars of corporate debt is also at negative rates.¹⁷⁷ Reaching for yield in corporate debt markets always seemed risky, but that’s nuts. By now it could be $1 trillion. I’ve lost track. NIRP has infected the consumer debt market: Denmark and Belgium are offering negative interest rate mortgages.¹⁷⁸ (I just soiled my thong.) By the way, you folks with big credit card debt will likely have to wait for relief; your rates are pegged above 20%. Maybe you’ll get some helicopter money.

Figure 17. Negative yielding debt with a subliminal flare.

These Masters of the Universe, economists and bankers extraordinaire, and their enthusiastic supporters of modern-day monetary theory certainly didn’t leap into the NIRP abyss casually. Let’s listen to the justification in their own voices. While reading, rank their comments as (1) pragmatic resignation, (2) dubious, or (3) delusional rants of the clinically insane:

So these paternalistic libertarians are doing it for the children. What’s the problem? Let’s start with savings. There is no income left in fixed income. All those unresilient consumers are getting zip on what money they have. The low rates are designed to get them to spend their paltry savings. Peachy. A USA Today headline read, “How to break Americans of shortsighted saving habits.” Let’s start by giving them a return on their savings, for Pete’s sake. Giving them negative returns, however, in a twisted way is forcing them to save like their parents. Maybe I’ve misunderstood the headline. Maybe it’s excoriating the public for their growing addiction to saving, causing the wholly ludicrous and intellectually impoverished Paradox of Thrift.¹⁷⁹

This naturally leads back to the inflation/deflation debate. The inflation that the Fed desires comes, at least in part, from inherently inflationary fractional reserve banking in which interest rates demand net dollars to increase. Negative rates, by contrast, are inherently deflationary. Every year the banking system has less. This doesn’t seem that hard to grasp.

Low and negative rates are destroying pension management, insurance, and even banking industries. When your business model is to take in money, make decent returns, pay out a little less, and skim off the difference, then negative, zero, or even low interest rates are deadly. The model fails. This doesn’t seem hard to grasp either.

Finally, low interest rates actually hurt the economy by keeping the weak alive, preventing the much needed creative destruction. Unviable companies on the life support of loose credit cannibalize serious businesses measurably, sometimes even fatally. You must cull the herd of the sick and weak.

The big credibility problem is that I’m just a chemist “identifying” as a pundit going toe-to-toe with some serious paid-to-play central bankers and their groupies. To rectify that, let’s listen to some critics of NIRP with gravitas in their own words:

What’s the end game? My best guess is that the system blows up and a lot of bankers find themselves seriously upside down . . . like Mussolini. The silent bank run is already happening. In a free market, NIRP is precluded by cash and hard assets. NIRP in Japan caused a run on safes for hoarding cash.¹⁸⁰ A headline announced, “German Savers Lose Faith in Banks, Stash Cash at Home.”¹⁸¹ I was told by a high-level source that one of the world’s largest insurers was renting vaults to store physical currencies. Commerzbank was considering hoarding billions to avoid European Central Bank (ECB) charges.¹⁸² Mark Gilbert of Bloomberg notes that storing $100 million as stacks of bills would basically take a vault the size of a large closet.¹⁸³ See the theme? The financial intermediaries are storing hard cash. Alas, our central banker overlords won’t stand for it.

War on Cash

You ever notice the War on Anything never works? Whether it be drugs, terror, poverty, Christmas, hunger, you name it, it becomes an interminable, profoundly costly adventure. Now we have the War on Cash. OK, millennials, listen up. You might like paying for everything with your Swiss Army phones. There are rumors you can even swipe G-strings on pole dancers with your phones, which means you’ve totally lost the plotline. If we go to cashless, you won’t have the scratch needed to buy a cell phone before long. These globalists wish to remove your right to an important civil liberty—to hold and spend wealth outside the view of the government and beyond the control of the banks.

The global elite want to eliminate cash so that they can inflict monetary policy without restraint. As Rogoff says, cash gums up the system. When the former secretary of the treasury, Larry Summers, starts supporting the elimination of cash because it will “combat criminal activity . . . for the interests of ordinary citizens” you should sit up and pay attention. He says we “are essentially on a fairly dangerous battlefield with very little ammunition.” He is not talking about the War on Crime but rather efforts to fight the market forces attempting to curb the global banking cartel. Ex-Fedhead Kocherlakota tried to get coy using reverse psychology on free marketeers by arguing that “governments issuing cash . . . is hardly a free market.” As the story goes, the libertarians should support a cashless society by letting currencies compete in the marketplace.¹⁸⁴ Very clever, Yankee dog! Of course, he forgot to mention that the government would then shut competitors down like they did to Bernard von NotHaus, who got his assets seized and went to prison for offering such competition. Satoshi Nakamoto, Bitcoin founder, is on the lam.¹⁸⁵ Your arguments are specious, NK.

Ken Rogoff carried the standard in the War on Cash this year by hawking his new book, The Curse of Cash. He tirelessly tried to make the case for a cashless, bank-rich society, arguing that “paper currency facilitates racketeering, extortion, drug and human trafficking, the corruption of public officials not to mention terrorism.” He argues that “cash is not used in ordinary retail transactions.” Really? What do stores put in the cash registers, coupons (which are going digital)? To say he supports the termination of cash is not quite fair: he endorses using only low denominations such as $10 bills, which buy you a pack of cigarettes (maybe). Don’t spend it all in one place. On noticing that hundreds of commenters in a Wall Street Journal editorial¹⁸⁶ showered him with suggestions on how to render him testicle free, I suggested in a brief e-mail that people are clearly stating that the idiosyncrasies of cash are a small price to pay for personal freedom. He, in turn, suggested I read his book. Not likely. There was pushback, however. Jim Grant used his sharp wit to get Ken halfway to eunuch status.¹⁸⁷

When the globalists left Davos,¹⁸⁸ the War on Cash seemed to accelerate almost overnight:

• Deutsche Bank CEO John Cryan predicted that cash won’t exist in 10 years.
• Norway’s biggest bank, DNB, called for an end to cash.
• Bloomberg published an article titled “Bring On the Cashless Future.”
• A Financial Times op-ed titled “The Benefits of Scrapping Cash” advocated the elimination of physical money.
• Harvardian and ex-Harvard president Peter Sands wrote a paper titled “Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes” in which he waxed on about fighting wars—wars on crime, drugs, and terror.
• Mario Draghi, head of the ECB, phased out the €500 note—30% of the physical euro notes in circulation: “We want to make changes. But rest assured that we are determined not to make seigniorage a comfort for criminals.”
• The New York Times called for the termination of high-denomination notes.

Again, all of this was within a month of the shrimpfest at Davos. You and your banking buddies are the criminals and seem quite uncomfortable with cash. If you really care about crime, shut down HSBC:

With physical cash curtailed, JPM estimates the ECB could ultimately bring interest rates as low as negative 4.5%.¹⁸⁹ (Two decimal point precision: nice.) Phasing out the $100 bill would eliminate 78% of all U.S. currency in circulation.¹⁸⁹ Hasbro announced that the game Monopoly will replace cash with special bank cards (special drawing rights?) in which players buy and sell with handheld devices. More recently, Prime Minister Narendra Modi of India withdrew all high-denomination bills essentially overnight.¹⁹⁰ The results were predictable for a society in which cash really is king: the system shut down. Nearly instantaneously, India’s trucking industry—millions of trucks—were parked on the roadside: out of cash means out of gas.¹⁹¹ As I type, the chaos continues.

There are, thankfully, influential supporters of cash. Bundesbank board member Carl-Ludwig Thiele warned that the attempt to abolish and criminalize cash is out of line with freedom.¹⁹² Bundesbank president Jens Weidmann said it would be “disastrous” if people started to believe cash would be abolished: “We don’t want someone to be able to track digitally what we buy, eat and drink, what books we read and what movies we watch.”¹⁹³ Austrian economist Frank Shostak, by no means influential because Austrians are considered to be insane, reminds us that “abolishing cash to permit the central banks to lower interest rates into deeper negative territory will lead to the destruction of the market economy and promote massive economic impoverishment.”¹⁹⁴

Maximum mirth came when Jason Cummins, chief U.S. economist and head of research at hedge fund Brevan Howard, stood up at a meeting littered with devout globalists and denounced the War on Cash and quest for inflation as stemming from the “Frankenstein lab of monetary policy.”¹⁹⁵ Jason went on a rant: “You are not going to have independent central bankers in the next 10 years if you keep on this path. The economy has rolled over and died in an environment when financial conditions have never been easier. . . . People aren’t consuming, businesses aren’t investing, they aren’t buying houses even with a 3.5% mortgage rate. . . . The maestro culture created by Greenspan has been one of the worst features of central banking. . . . My biggest worry is that the public will conclude that . . . capitalism is just socialism for the rich.” Oops. Too late, dude.

Arguments about the insecurity of cash seem specious when you look at how the digital world has fared lately. The thriving sovereign state of Bangladesh was raided for a cool $100 million by a series of unauthorized withdrawals using the global SWIFT check-clearing system.¹⁹⁶ One could imagine that third-world safeguards against such a heist might be lax, but the hackers removed the booty from the New York Federal Reserve. A Fed spokesperson offered the official response: “Sorry. Our bad.” Apparently, the Fed has been hacked more than 50 times since 2015. Gottfried Leibbrandt, the CEO of SWIFT, has expressed grave concern about the threat hackers pose to the banking system.¹⁹⁷ Ya think?

On a more micro scale, six of my colleagues got their paychecks phished. They were tricked into signing into their financial home page. With the passwords in hand, the Nigerian princes rerouted their direct-deposited paychecks. Food stamp computers went down for over a week in June.¹⁹⁸ An Ecuadorean bank got clipped for $12 million, blaming Wells Fargo for not plugging a leak.¹⁹⁹ It’s probably in the Clinton Foundation. The risks of cash in society seem to pale in comparison with the risks of digits in the banking system.

The termination of cash is all some dystopian futuristic abstraction that won’t come to pass, right? No. Brits are complaining that they are being stopped from withdrawing amounts ranging from £5,000 to £10,000: “When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.”²⁰⁰ The phrase, “give me my goddamned money before I jump the counter and beat the crap out of you” comes to mind. Better yet, say it’s for Zika medication and start coughing. The €500 note did indeed get abolished.²⁰¹ Angela Merkel put caps on bank withdrawals. ²⁰² I heard from a friend that Wells Fargo was obstinate about a large money transfer. (We return to Wells Fargo’s disasters in the banking section.) Some restaurants are refusing cash.²⁰³ What does “all debts public and private” mean?

Nightmare scenarios in a cashless society include: (1) negative interest rates of any magnitude; (2) civil asset forfeiture (but I repeat myself); (3) bank bail-ins; (4) getting booted from or locked out of the system—by mistake or otherwise; (5) sovereigns getting booted from the SWIFT check-clearing system (just ask Pootin); (6) outlawing gold (again); and (6) hackers! We could see a black market based on S&H Green Stamps.

Banks and Bankers

The banking system was not fixed in ‘09. The putrid wound was stitched up without disinfectant by a cabal of bankers and regulators, all agreeing that the system had to retain its current form. The assets of the 10 largest banks—greater than $20 trillion—grew 13% per year in the last 10 years. This is not my idea of mitigating systemic risk. Now we are near the top of an aging business cycle where bad loans start unwinding and bad ideas begin to die. Gangrene is beginning to show. Collateralized debt is picking up because the uncollateralized refuse starts piling up like during a NYC garbage strike.²⁰⁴ Collateralized loan obligations—the dreaded CLOs—are starting to liquidate.²⁰⁵ Banks are rebuilding teams for debt restructurings.²⁰⁶ As noted above, the Dallas Fed is attempting to extend and pretend energy loans.²⁰⁷ Does this kind of crackpottery ever work? Citigroup failed—as in big fat F-like failed—its stress tests.²⁰⁸ Those were the Kaplan practice tests. Many banks will fail when the real stress test arrives. Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, thinks we will unwind banks in an orderly process.²⁰⁹ Of course he does, and of course I don’t.

Although huge problems could be triggered by a default almost anywhere in the system—an internal hedge fund or even an unusual presidential election—the disaster will be global. The first raging inferno is most likely to burn in Europe and will undoubtedly include Deutsche Bank (DB). DB was the most putrid of the ’09 wounds; it never really healed. In 2014, it was forced to raise additional capital by selling stock at a 30% discount. But why?²¹⁰ This year DB sold $1.5 billion in debt at junk rates (admittedly a paltry 4.25% in this era).²¹¹ German Finance Minister Wolfgang Schäuble said he has “no concerns about Deutsche Bank,”²¹² which means they are in deep trouble. By early 2016, the scheisse was hitting the lüfter. In March, DB was again told to grow its capital base.²¹³ In April, DB settled its LIBOR manipulation suit ($2.1 billion in fines) along with its silver manipulation charge.²¹⁴ By May, one of the two CEOs—one CEO too many—decided to spend time with his family and the other was given emergency authority for “crisis” management. Soon both CEOs had become stay-at-home dads.²¹⁵

A missed debt payment by Greece in June suggested a full default,²¹⁶ which correlated with the S&P lowering DB’s bond rating to “junk-lite” (three notches above “junk”).²¹⁷ DB refused to deliver physical gold to customers (shades of MF Global),²¹⁸ and later in the fall settled a gold-rigging suit.²¹⁹Business Insider suggested that DB “is coming unglued,” which is a pathetic euphemism for defaulting on interest payments.²²⁰ Bond downgrades often foreshadow more downgrades. Twenty percent of DB’s workforce was sent home to family.²²¹ A few weeks after the EU slapped Apple with a $14 billion surcharge for “back taxes,”²²² the U.S. slapped DB with a $14 billion fine for doing what banks do.²²³ Seems oddly coincidental. A $14 billion fine may also seem quaint in a world of trillions (and now quadrillions) but not with a market cap of $17 billion. Rumors that the fine was markedly reduced proved to be hedge fund hijinks.²²⁴ A putative Qatarian bailout was also profitable fiction.²²⁵ John Mack of Morgan Stanley suggested all is hunky-dory because DB will be propped up by the Fatherland.

The problem in a nutshell is that DB has a nosebleed 26× leverage according to Hussman. It has $70 trillion in notional derivatives looking for safety netting. If it starts triggering credit default swaps (CDSs), it’ll be like a kangaroo in a minefield, and CDSs began spiking in September.²²⁶ Rumors of cash restrictions and defaulting contingent convertible (CoCo) bonds abound.²²⁷ Raoul Pal of Real Vision says CoCo bonds are the crisis.²²⁸ They turn into equity near the strike price, which then drives equity prices down and destroys the bank . . . like the doomsday machine in Doctor Strangelove.²²⁹

The Italians are in a world of pain. Italy’s third largest bank, Monte Paschi, failed in 2012,²³⁰ but it got worse this year.²³¹ Worse than failing? Trading was halted on it after falling only 7%.²³² Italy banned short selling, which is the last refuge of interventionists before the inevitable failure.²³³ Italy’s major banks are bleeding losses and have been sold off more than 50% this year. George Friedman, founder of Stratfor, tells us that the Italian banks have been buying crap loans from Europe since the crisis and are heading for bail-ins (vide infra).²³⁴ He goes on to say that a U.S. recession could trigger systemic failure and ensuing nationalism. Italy cannot inject government funds into its banking system until it has first forced a trauma-inducing “bail-in” at any bank getting aid. A €5 billion bailout fund created in Italy this year took over Veneto Banca after a €1 billion capital increase failed to get bids.²³⁵ The idea was to channel private sector money into rescuing the banks. Wanna bet the private philanthropists laundered public money? As I put this document to bed, a big vote in Italy essentially to leave the EU may have just nuked the Italian bond market.²³⁶

The Swiss National Bank (SNB) says UBS and Credit Suisse will have to raise more than 10 billion Swiss francs in capital.²³⁷ A loss in a single quarter at Credit Suisse wiped out years of profit.²³⁸ Spain’s Banco Popular, looking for €2.5 billion in capital, offered low interest loans provided to . . . wait for it . . . purchase the bank’s newly issued shares.²³⁹ The €29 billion Bremen Landesbank is teetering on failure, dropping 50% market cap in a heartbeat.²⁴⁰ Needless to say, investors owning European bank ETFs are experiencing Dresden-like firestorms.

On this side of the pond, we have issues, but they don’t seem systemic yet. Citigroup, the U.S.’s largest derivatives holder, bought $2.1 trillion of notional credit derivatives from DB and Credit Suisse.²⁴¹ I guess Citi has been designated a “bad bank” (drew the short straw) kinda like Santander in ’09. Its failed stress test caused authorities to rhetorically ask, “Why not give them the mine tailings?” Goldman, a bank since ’09, settled for a $5.1 billion payment for dubious deeds with no guilt, no jail time, and probably low payments after tax credits.²⁴² Settling was a prescient call if the alternative was to wait and bribe President Clinton.

JPM underwrote an equity offering for Weatherford International—sporting the great stock symbol WTF—to help raise money from investors to pay back debt to JPM.²⁴³ No conflict there, eh? I think that is called “catfishing”. Banks appear to be doing this in large numbers. We found out that JPM knew about Bernie Madoff’s Ponzi scheme for 20 years.²⁴⁴ That’s like driving the getaway car. Bruno Iksil, the London Whale, broke silence by claiming he was a patsy.²⁴⁵ No, really? JPM announced a share buyback one month after Jamie Dimon bought 500,000 shares to catch the gain.²⁴⁶ A letter from the Fed seems to suggest that JPM could destroy the U.S. in the event of another financial crisis.²⁴⁷ Thank God that’ll never happen again.

The award for Biggest Scandal goes to Wells Fargo, the pride and joy of the Orifice of Omaha. Wells Fargo employees secretly created millions of unauthorized bank and credit card accounts beginning in 2011.²⁴⁸ Funds from customers’ existing accounts were moved to the newly created accounts without knowledge or consent. Customers were not happy with the overdraft fees. Even CNN expressed awareness and shock. As usual, the $185 million fine doesn’t begin to address the problem,²⁵⁰ especially given that the prosecutors, happy to absolve the executives of wrongdoing, were overheard muttering “fine by me.” Wells Fargo employees terminated for not reaching their fraud quotas are suing for $2.6 billion.²⁵¹ For the second time, my colleague Robert Hockett has prompted me to post a quote:

What I haven’t been able to figure out is whether duplicated charges for campaign donations to Hillary that funneled through Wells Fargo are somehow connected.²⁵² Even when the duped Hillary supporters discovered their $25 donations were being replicated without consent, they couldn’t seem to stop them.²⁵³

Of course, these scandals pale in comparison to Wells Fargo’s scandal for laundering drug money for which it was fined in 2014. If Wells Fargo were taken behind the Eccles Building and shot, it would be . . . fine by me.

The Federal Reserve

Kashkari is a questionable Fed governor but was great in The Mummy (Figure 18). The Fed governors have noticed that healthy economies often cause inflation. In what seems like an utterly simplistic failure to understand causality and correlation, they have concluded that causing inflation will make the economy healthy. That’s like warming a corpse to 98.6 degrees (maybe even a few tenths warmer) to bring it to life. Hey guys: try jolting it with electricity while rubbing your palms together and cackling. I’m sure it will work.

Figure 18. Neel Kashkari.

Many economists, especially Fed economists, have transitioned from trying to understand the economy—a daunting task indeed—to being self-appointed economic overlords in charge of controlling the economy. This Hayekian fatal conceit has required some serious fibbing and self-delusions, which include endorsing:

(1) adjustable-rate mortgages when rates were at record lows;

(2) equity withdrawal from one’s house to spend on lattes;

(3) pulling consumption forward, flipping off the future;

(4) protecting bad businesses with ultra-loose credit;

(5) bailing out other sovereign states;

(6) dropping interest rates—bleeding the patient—to elicit spending;

(7) printing money to pay off debt;

(8) changing perception—the wealth effect—to change reality;

(9) printing our way to prosperity;

(10) falling prices (deflation) as bad;

(11) helicopter money as not entirely insane;

(12) no prison time for thefts in excess of $1 billion.

You guys don’t control the economy any more than your children steer shopping carts disguised as race cars. As Art Linkletter would say, Fed governors can say the darnedest things. From the mouths of boobs:

They like to intervene, but no self-respecting central bankers would take it upon themselves to intervene in the equity markets. The majority of central bankers, however, certainly would. The Fed professes to have resisted the siren call of buying private assets, but unlike Jason (of Argonaut fame), the Fed is unrestrained to any mast. It intervenes indirectly by flooding money into the system on an industrial scale during market stress. As bearish Matt King of Citigroup says, “we are fighting all CBs, not just the Fed.” The head Ewoc, citing the work of leading economists—sheesh—appears to be planning to go to the Dark Side to buy equities. Entering a wormhole—an event horizon—into the NIRP nebula is dangerous. Yellen estimates that “overcoming the effects of the zero lower bound during a severe recession would require about $4 trillion in asset purchases.”

That is some serious neofeudal thinking. The poor are saddled with a heap of underpriced assets? Multiple Fed governors have discussed unconventional methods that include NIRP, more QE, and a variety of tricks that are well documented at xHamster.com. Helicopter money—a construct of Milton Friedman—involves making everybody richer by just handing over money directly via metaphorical helicopter drops. (Pause for chuckling to subside.) Loretta Mester of the Cleveland Fed said that it “would be sort of the next step if we ever found ourselves in a situation where we wanted to be more accommodative.” You’ve been accommodative enough, Ms. Mester.

The Fed has managed to pull off one rate hike in 10 years, prompting Steve Liesman to pronounce, “I think the first rate hike cycle is over” (face in palm). What are they waiting for? There are two impediments. First, they are “data dependent,” which is a euphemism for a highly reactionary policy that responds to every sneeze and sniffle of the U.S. or global economy as well as events that have nothing to do with economics. They tapped the brakes on rate-hiking plans with Brexit as well as after a “plunge in stock prices” in March, when Punxsutawney Phil died in February (“distortions you can only see after the fact”—Phil’s shadow), and after “the market reaction to April FOMC minutes,” which “convinced the committee to do nothing after all.” Jerome Powell at Jackson Hole (A-Holes at the J-Hole) urged, “We should be on a program of gradual rate increases. We can afford to be patient.”

Yellen noted that the “best policy now is greater gradualism.” Bloomberg announced that “Federal Reserve officials signaled a slower pace of rate increases.” One 25-basis point hike in 10 years—2.5 basis points per year—and they need greater gradualism? These guys are the Ents in Lord of the Rings. They hear the Ghost of Christmas Past (1938), when the Fed popped an equity bubble it created owing to seriously dubious attempts to pull us from the Great Depression² and scrooged the economy. The countdown-clock LEDs are flashing, and these folks won’t know whether to cut the red wire or blue wire. “Not a problem: we’ll just wait for more data.”

The second impediment to Fed movement is its detractors. Clean the snot off your screen and stay with me here. The Fed has been so ridiculed that it will do anything to avoid a cacophony of I told you so’s. They look at Greenspan and think, “I don’t want to be stuck with that clown’s legacy.” Who are these detractors who question The Great Oz’s too-low-for-too-long policies demanding they “Put ‘em up”! Put ‘em up!? The Joe Sixpacks of finance like Rick Santelli suggest the Fed buying stocks will “completely and utterly and in every possible way destroy value in the marketplace.” Albert Edwards of SocGen notes that “these central bankers will destroy the enfeebled world economy.” There are some, however, on the Fed’s own team questioning their sanity:

Until the next crisis, they are working the Shake Weights and brandishing Fleshlights in their fortress made of sofa cushions. In the interim, from within their lair, they came up with the fabulous idea of launching a Facebook page,²⁵⁴ which promptly got eviscerated.²⁵⁵ The American Banker proclaimed “this PR attempt was such a debacle.”²⁵⁶ Nobody thought to #askJPM? I am sure their newest, remarkably simple trick for energizing the economy will work . . .

NB-That “. . .” thingie, by the way, is called a semaphorism, which suggests you have even more to say but…

European Central Bankers

There have been almost 700 rate reductions globally since the Lehman failure.²⁵⁷ Maybe another 700 will finally bring it home, but the skeptics say no. I collected 15 pages of notes on European central bankers, and I realized that they were 80% scorn from detractors.

Central bankers-turned-metaphysicists proffer models and theories that cannot be refuted because they all include provisions for interventions until they work. Period. Foreign central banks have bought most of the U.S. treasuries to inflate this bond caldera.²⁵⁸ They are printing money ex nihilo (out of nothing), but it doesn’t stop there. Walls of money with no organic demand keep dying companies alive to parasitize viable companies. Wealth creators, the folks we should be focusing on, have no idea how to use the credit. Money velocity has plummeted because the oceans of liquidity are not moving. Mervyn King, the Baron of Lothbury and former governor of the Bank of England, calls the short-term gains at the cost of long-term pain the “paradox of policy.” Paradoxes never obstruct metaphysicists peddling their bullshit.

Super Mario Draghi, head of the European Central Bank and ringleader of the Eurowankers, banged out $90 billion a month—$1 trillion a year—in bond-buying QE.²⁵⁹ Mario went full monetaristic BDSM by announcing a corporate bond-buying program. It’s not hard to imagine that politically connected megacorporations are megabenefactors. Before a single bond was purchased, corporate bond prices soared (yields dropped) as speculators Hoovered up the extant supply.²⁶⁰ The banks helped them create new offerings to sell to Mario.²⁶¹ With a dollop of delusion, one might justify a little blue-chip QE, but Mario went straight to the junk bond market—steamy piles of Eurodregs.²⁶² Mario has even bought bonds directly from the companies—private placements.²⁶³ I’m sure Friends of Mario did quite well.

Bank of England took a culinary approach—threw in the “kitchen sink”—by cutting rates to a record low 0.25%, boosting QE, and announcing corporate bond purchases.²⁶⁴ Not to be outdone, SNB began printing money and buying U.S. equities.²⁶⁵ Think about that one: it created counterfeit money to buy U.S. corporations. Oddly enough, SNB is a GSE like Fannie Mae and Freddie Mac in that a minority ownership trades as shares publically.²⁶⁶ Because it’s pushing up shares of the stocks it’s buying (shades of Janus during the tech bubble), the shares of SNB are up as well . . . for now.

Helicopter money refers to the giving of money to the populace and has been expanded to include direct debt monetization. Somehow it is viewed as different from the monetary napalm described above, but I can’t see it. Regardless, Deutsche Bank predicts the choppers will be fired up in the next recession and then waxes optimistically.²⁶⁷ These trial balloons are all designed to soften our brains to the point of acceptance. The head of Riksbank has discussed it.²⁶⁸ Bernanke has discussed it in the context of “perpetual bonds” (no maturity date). I suspect even normal bonds will fail to reach their maturity date . . . the hard way. Helicopter money marks the end of the road to perdition. How pundits talk about it without calling “bullshit” is beyond me. Bank of England economists advocate for central banks to issue their own digital currency.²⁶⁹ Ummm . . . I think they already have.

Europe

George Friedman, the founder of Stratfor, is the Stephen King of geopolitics. In his latest thriller Flashpoints (see “Books”), he describes Europe as an eclectic mix of sovereign states—tribes if you will—separated by volatile borderlands. Borderlands are like the bars in Star Wars movies. The singular goal of Europe since World War II has been to not massacre each other again. The Tribes of Europe have a long history of warfare and long memories. In lieu of a durable unification, we get conflagration.

Current problems emanate from sagging economies. Unemployment in the Club Med southern region is soaring. Attempts to solve this problem with monetary policy have created €1 in GDP growth for every €18 of QE.²⁷⁰ That’s what you get trying to print your way to prosperity. Skirmishes between sovereigns and the companies of their opponents are now common, putting megacorporations like Apple, Volkswagen, and Deutsche Bank in the crosshairs. Walls are going up across Europe whether European Unionists like it or not.

The president of the European Commission, Jean-Claude Juncker, has decided to teach European youth the principles of integration Brussels-style.²⁷¹ It will mobilize unemployed youngsters to volunteer for civic projects across the continent: “Youngsters would also be drafted to help police the migrant crisis.” I’m guessing they’ll be given “brown shirts” to wear.

France’s far-right National Front party leader and strong poller for the 2017 presidential election, Marine Le Pen, said “I believe that the European Union is in the process of collapsing on itself for one simple reason. The two pillars on which it’s founded—Schengen and the euro—are in the process of crumbling.” She went on to say Hillary would be a disaster, but the Yanks solved that problem for her. A few pissed-off French protested against new anti-worker laws that are designed to protect and enrich the wealthy elite at the expense of ordinary people.²⁷² Here is a picture of them singing “Kumbaya” (in French, of course):

Christine Lagarde, head of the International Monetary Fund (IMF), is facing charges in France for embezzlement and a £315 million kickback to a buddy.²⁷³ She could get a decade in prison. Maybe France is cleaning out the Augean stables, but it sounds hauntingly similar to the execution-style exit of the previous IMF head, Dominique Strauss-Kahn, on a rape charge.²⁷⁴ Old-school Russians are familiar with this form of transfer of power.

Greece never seems to get a reach around by its more powerful partners in Europe. This year, a WikiLeaked plan of the Troika to elicit a Greek credit crisis left the Greeks feeling violated.²⁷⁵ There are rumors of a wealth tax to solve the problems, but the country has little tradition of tax collection.²⁷⁶ Historically, it has been a lot easier to borrow what’s needed. Greece is usually in default and perpetually in ruins.

The Swiss had a referendum to vote themselves richer. Why didn’t I think of that? In any event, they wanted guaranteed income sans work—up to $90K per year for a family of four.²⁷⁷ Sounds like a Karl Marx–Robin Hood–Paul Krugman combo platter. Amazingly, they voted it down.

Of course, Germany is always at the center of any European event. The year started off edgy when authorities suggested citizens stockpile food and water “in case of an attack or catastrophe.”²⁷⁸ The authorities muttered a few things about “bringing back nationwide conscription in times of crisis to . . . defend NATO’s external borders.”²⁷⁹ I betcha sauerkraut has quite the shelf life. Volkswagen got a serious dose of Fahrvergnügen by cheating on its emissions test.²⁸⁰ Of course, no other manufacturer did this, said nobody.

You thought I forgot about Brexit and the refugee crisis? Sheesh. These get their own sections.

Brexit

The British exit from the European Union—the omnipresent Brexit—may either prove to be a historically profound event or illustrate that events are rarely profound. Brexit seems so logical. The Limeys had one foot out the door by not signing onto the euro currency regime in the first place. Hundreds of CEOs argued sovereignty has is merits.²⁸¹ As the vote approached, European banks were circling the drain, and a refugee crisis that does look profound (vide infra) had caused unusual immigration patterns in Great Britain. Why the hell wouldn’t you grab the first lifeboat? Demographics had a familiar ring: country folk wanted to leave, whereas the so-called “remains” were largely in the cities. John Authers of the Financial Times described it as “the breakdown in trust . . . a revolt of the masses . . . one in which those who have shaped policies over the past twenty years are more remote from reality than the ordinary men and women at whom they like to sneer.” Populism is used by establishment thinkers to describe people they do not understand.

The prophets of doom denounced Brexit as the end of the civilized world. According to George Soros, “If Britain leaves, it could unleash a general exodus, and the disintegration of the European Union will become practically unavoidable.” Of course, George is a globalist hankerin’ to shape the world.²⁸² European Council President Donald Tusk feared that “Brexit could be the beginning of the destruction of not only the EU but also of western political civilization in its entirety.” Sounds bad.

Most global elites seemed confident, but the thumb screws were being cranked on the Brits. The French threatened to empty “The Jungle” (refugee camps) into Britain (wrapped in Ebola blankets).²⁸³ President Obama noted with respect to trade that “the UK is going to be in the back of the queue” and that a UK/U.S. trade agreement is “not going to happen anytime soon . . . not because we don’t have a special relationship.”²⁸⁴ Very special. Next time the U.S. wants a partner to bomb Middle Eastern countries for no apparent reason, I’m not sure the Brits will be so willing. Also, whaddaya bet President Trump has other plans? Jean-Claude Juncker promised, “I’m sure the deserters will not be welcomed with open arms”.²⁸⁵ I bet he can spell douche without using Google.

On the night of the vote, British elites watched at the headquarters of the European Commission with a Clintonesque cautious optimism. Also in a Clintonesque fashion, the mood changed, and the tears started. The hooligans voted Brexit! Google reported a post-vote spike in UK-based searches for “What happens if we leave the E.U.?” as well as “What is the E.U.?” Seemed a little late for that.²⁸⁶

The financial consequences were immediate and titanic. European bank shares got clubbed 24% in two days. RBS and Barclays dropped 37% and 34%, respectively.²⁸⁷ Two trillion dollars got wiped off global equity markets.²⁸⁸ The vote occurred at the start of a 45-day quiet period in which companies were not allowed to manipulate their share prices with buybacks.²⁸⁹ The pound got clobbered—pounded even—11% to a 30-year low.²⁹⁰ Now I’m confused: doesn’t modern Bad News/Good News (BNGN) economic theory say that destroying your currency will stimulate your economy? Bank of England Governor Mark Carney lowered capital requirements (lowered the cash buffer) to keep credit flowing, ironically at the precise moment a bank might need a cash buffer.²⁹¹ Various central banks stood ready to unleash ungodly sums of money to constrain the free market from true price discovery.²⁹²

Within a few days, the first bank keeled over.²⁹³ A few property funds collapsed within a week.²⁹⁴ In the spirit of never letting a crisis go to waste, Italy announced a €40 billion rescue of its financial system as Italian bank shares collapsed.²⁹⁵ There were also calls for a moratorium of so-called bail-in rules and bondholder write-downs. Bail-ins and write-downs are fine, but only in the abstract.

Longer-term effects are not predictable. Many are apoplectic. I am not convinced. In the shorter term, walls of money from central banks have generated hellacious equity rallies that are commonplace when bankers get nervous. The architects of Brexit, Nigel Farage and Boris Johnson, bailed on the whole game, writing “former politician” on their résumés.²⁹⁶  Nigel is rumored to have muttered, “We broke the eggs; you make the omelet.” He is also looking at U.S. real estate. Author Stephen King is rumored not to know the ending of a novel until he gets to it. Sounds like Brexit.

I was amazed that Brexit happened; the people outvoted the elites. But then I had a passing thought: maybe the authorities did want Brexit but needed an excuse—a patsy. The younger generation wishing to remain accused the old guard for selfishly ignoring the future.²⁹⁷ I think the old coots might disagree.

Refugee Crisis

I find the refugee crisis in Europe to be paradoxical on so many levels. Most European countries are nations of immigrants. In historical battles of “us” versus “them,” their ancestors were, at one point, “them.” But that was then, and this is now. The crisis appears to be a true existential risk for many institutions within the European Union. The magnitude is breathtaking. German authorities estimate that up to 3.6 million refugees will enter Germania by 2020.²⁹⁸ Handfuls (thousands) have been positioned for deportation, but even that is on hold.²⁹⁹ The solutions often seem morally or politically untenable. There are no simple or safe paths forward. Of course, this too shall pass—everything does—but sometimes living through historical events sucks. One pithy Norwegian referred to this clash of cultures as “Odin versus Allah.”³⁰⁰ The notion of a Norwegian Crusade was unthinkable.

It is hard to assess the magnitude of the violence—the media is known to overstate such things—but the images of refugees assaulting Europeans and the entropy at the street level are vivid.³⁰¹ A hotel bell captain described his horror: “These people that we welcomed just three months ago with teddy bears and water bottles . . . started shooting at the cathedral dome and started shooting at police.” New Year’s Eve attacks in Cologne by thousands of “Northern Africans” are believed to have been organized non-spontaneously.³⁰² Immigrants razed a hotel that had been converted to an asylum center because they “didn’t get a wake-up call for Ramadan.”³⁰³ A compendium of assaults tied to the recent wave of immigrants gives you a feeling for what Europe may be confronting.³⁰⁴

As usual, authorities offered calming voices. “Islamist terror in Germany wasn’t imported with refugees,” assured Angela Merkel. She has taken on the politically challenging task of supporting the process:

As you might expect, the pushback has been equally determined. French citizens blockaded Calais, demanding the demolition of the migrant Jungle camp.³⁰⁵ Germany ran out of pepper spray after a 600% increase in sales,³⁰⁶ although it is unclear how well Mace works in a mob. Rampaging teen refugees in Sweden were met by angry Swedish men.³⁰⁷ That probably left an impression as the Swedes tapped their inner Vikings.

Of course, the next step is nationalism. The Schengen area—the 26 European countries that have abolished border controls—is said to be at risk as border checkpoints to curb refugee movements are being put into place. Walls go up; goods and services cease to move seamlessly. French far-right leader Marine Le Pen promised an Islamic crackdown and a “Frexit” referendum as she launched her bid to be president.³⁰⁸ Hungarian voters rejected Brussels’ quota of refugees but failed to meet the 50% quorum.³⁰⁹ I’m not sure the refugees will be met with teddy bears this time. Horst Seehofer, Bavaria’s prime minister, suggested the refugee problem “is too big. . . . [A] solution thus far [is] unsatisfactory. Restrictions on immigration are a condition for security in this country.” The Greeks, still upset that the IMF plotted an existential “credit event”, is “tasked with one of the most complex and legally dubious international border policing missions in modern history.” It’s looking for some debt relief to play along.³¹⁰

The economic failures are difficult to assess but acute in some countries. Recall that the 200,000 Goths swarming across the Danube did not sack Rome; they overwhelmed it. Northern Europe is getting seriously whacked. Muslims are roughly 5% of Belgium’s population yet consume 40–60% of its welfare budget.³¹¹ The 92% male refugees (some 20- and 30-somethings claiming to be children)³¹² in Sweden are an enormous financial hardship. Sweden’s tourism industry has been crushed as hotels have been converted to refugee hostiles (errata: hostels).³¹³ Of course, cottage industries designed to pick up the government giveaways are flourishing.³¹⁴ Merkel is taking heat for encouraging German companies to hire refugees.³¹⁵ Germany took 1.5 billion euros—1,000 per refugee—from the public health care fund (10 billion euros in total) for refugee assistance.³¹⁶

What about the U.S.? Can’t we relieve some of the pressure? We are, as many like to say, a nation of immigrants. This is another paradox for me. I have openly blamed U.S. foreign policy for causing this problem. Our Crusades in the Middle East are destabilizing. However, and this is a very big however, immigrants of yore came here looking to embrace the American dream. The idea of bringing angry 20-something men we just bombed the crap out of strikes me as demanding an extra layer or two of checks and balances at the border. Of course, I’m sure our new president has strong opinions on immigration and even a few tweets up his sleeve:

I was just messin’ with ya. Those were excerpts from Bill Clinton’s 1995 State of the Union Address.³¹⁷

Unbeknownst to many, we are already accepting Syrian refugees piecemeal. A local Ithaca diocese has agreed to sponsor 50 in Ithaca alone.³¹⁸ The question I still find myself asking is blunt, even a bit raw: if this doesn’t work out well—if, for example, the lovely walking mall in downtown Ithaca becomes a no-go zone like those in Sweden—will that diocese fix the problem? Recall the woman who adopted a Russian orphan—undoubtedly one whose biochemically induced sociopathy would glow on an fMRI scan—and sent him back to Russia? Her name was Mud.

Putin and Russia

“Today, the danger of some sort of a nuclear catastrophe is greater than it was during the Cold War and most people are blissfully unaware of this danger.”

~William Perry, former secretary of defense

“You people . . . do not feel a sense of the impending danger. This is what worries me. How do you not understand that the world is being pulled in an irreversible direction? . . . I don’t know how to get through to you anymore.”

~Vladimir Putin

Russia is the huge topic ignored by most. A potential Russian/American conflict presents significant risk of a New Cold War and potentially a hot war. This markedly shaped my view of the U.S. elections, with eye toward Russian-American relations under Clinton and Trump. I viewed Trump’s agnosticism toward Putin—what the left might call cozying up to him—as a strong positive. When the Cold War archives were pried open after the collapse of the Soviet Union, we found that Russia was perennially responding to us, not provoking.³¹⁹ History may be repeating. A media that is bought and paid for by the “deep state” is telling us the Ruskies are bad. I am deeply troubled by the relentless hawkish rhetoric coming from Washington.

Pat Buchanan describes Putin as “a nationalist who looks out for Russia first.”³²⁰ Putin also gets along with Netanyahu,³²¹ which flies in the face of rhetoric about Putin’s pro-Arab stances. When asked by Fareed Zakaria whether there would be another cold war, Putin destroyed him in a must-watch video.³²² A Putin interview with a panel of journalists left me similarly impressed that he understands risks in the Middle East that the American public hasn’t a clue about.³²³ George Friedman, however, thinks Putin has serious internal political problems:³²⁴“I suspect that Putin will survive until the end of his elected term. But fear makes politics unpredictable, and geopolitical analysis doesn’t work on the thinking of worried men drinking vodka to calm their nerves.”

“We never poke our noses into others’ affairs, and we really don’t like it when people try to poke their nose into ours. The Americans need to get to the bottom of what these e-mails are themselves and find out what it’s all about.”

~Dmitry Peskov, Kremlin spokesman

We’ll probably never know what role Russian hackers played this year, but it is interesting that in midsummer they were rumored to have hacked the Democratic National Committee (DNC), ⁵²⁵ which promptly denied it. The eventual onslaught of WikiLeaks forced a change in tactics from denial to hang everything on Putin and his love child, Donald Trump.³²⁶ Stephen Cohen, Russian studies expert at Princeton, calls bullshit on CNN’s assertions that Russian hacking is about Putin wanting to start a new cold war in cahoots with Trump. I’m inclined to side with anybody who calls CNN a shill.

Hurling flaming balls of rhetoric at the Russians is dangerous, and the election didn’t help. James Clapper, director of national intelligence, was “somewhat taken aback by the hyperventilation” on the hacks and wasn’t even convinced the hackers were Russian.³²⁷ Impartial observers argued that Crimea became a political football for the Clintons with a U.S.-initiated overthrow of a democratically elected president in 2014.¹ Crimean citizens voted to legally reunite with Russia on March 18.³²⁸

“We know perfectly well that candidates in the heat of a pre-election struggle say one thing, but that later, when under the weight of responsibility, their rhetoric becomes more balanced.”

~Dmitry Peskov

“[G]rave accusations [are] . . . fabricated by those who are now serving an obvious political order in Washington, continuing to whip up unprecedented anti-Russian hysteria. . . . Unfortunately, we see less and less common sense in the actions of Washington and Paris.”

~Sergei Ryabkov, Russian deputy foreign minister, on hacking

Evidence of the New Cold War is everywhere. The news network RT got its accounts blocked in the UK,³²⁹ causing an RT spokesperson to declare on Twitter, “Long live freedom of speech!” The hot war is heating up, too. Russian jets have been buzzing U.S. naval ships.³³⁰ The U.S. and NATO conducted the “largest war games in Eastern Europe since the end of the Cold War” that included 31,000 troops (lots of Americans) and thousands of combat vehicles from 24 nations.³³¹ Meanwhile, China and Russia are doing joint military exercises in the South China Sea.³³²

“We’re not concerned about the safety of U.S. vessels in the region as long as interactions with the Chinese remain safe and professional, which has been the case in most cases.”

~Josh Earnest, White House spokesman

We haven’t exactly been voices of reason. A cease-fire in Syria was broken by U.S. bombing, prompting Russia to call for a UN Security Council meeting.³³³ Obama considered an unprecedented cyberattack against Russia in retaliation for alleged Russian interference in the American presidential election.³³⁴ U.S. Secretary of State John Kerry said that Russia and Syria should face a war crimes investigation for their attacks on Syrian civilians.³³⁵ The hypocrisy is killing me (and them). There is even evidence that the Germans are preparing to go to war against Russia.³³⁶ Alexei Pushkov, head of the Foreign Affairs Committee of the Russian State Duma, tweeted “The decision of the German government declaring Russia to be an enemy shows Merkel’s subservience to the Obama administration.”³³⁷ Is the next war going to be brought to you on Twitter?

As I am putting this annual survey to bed, I am hearing shrill screams about all of our intelligence agencies now agreeing that the Russian hackers are a problem. I don’t believe them. It’s not about faith in the Russians but a lack of faith in U.S. propaganda with a decidedly domestic agenda.

South America

“Thanks Hugo Chavez for showing that the poor matter and wealth can be shared. He made massive contributions to Venezuela and a very wide world.”

~Jeremy Corbyn (@jeremycorbyn), leader of Britain’s Labor Party on 5/3/13

.@jeremycorbyn Thanks to Chavez we don’t have electricity, water, food, even toilet paper.

Guillermo Amador (@modulor)

What a difference three years and a brain stem make. Let’s do a quick trip south of the border to remind us we face first-world problems. Venezuela is in total collapse, suffering hyperinflation at 500% per annum and projected by the IMF to hit 1600% next year.³³⁸ Like clockwork (orange), there were food shortages (starvation) and even condom shortages (insert tasteless joke here.) People get grumpy when pushed to the edge; sexual deprivation and unwanted kids are past the edge. A Venezuelan mob beat and burned a $5 thief to death . . . although he might not have actually stolen anything.³³⁹ Venezuelan clocks were moved forward by 30 minutes to save power and alleviate an electricity crisis.³⁴⁰ That’s the solution? Daylight savings time? Ya also gotta wonder what role John Perkins-like jackals played in this one.

Argentina is the bond fiasco capital of the world. Singer and company are still trying to get paid for their Argentinian bonds,³⁴¹ which are still being ring-fenced by whomever is tasked with ring fencing bonds. Meanwhile, a new Argentine bond issuance was announced.³⁴² Private buyers should be subjected to mandatory head CT scans and, if necessary, euthanasia. (Bankers are exempted because they always get bailed out.) The demand for the $15 billion offering was strong. What is that definition of insanity again about repeating something over and over? Never mind.

Brazil has been hobbled by the energy crisis. Petrobras dropped 11,700 workers.³⁴³ Being South American, they are, almost by definition, hobbled by debt, too. As Bill Gross said, “No country over time can issue debt at 6–7% real interest rates with negative growth. It is a death sentence.” Brazil auto sales plummeted 31% in January. Another BRIC added to the Global Wall of Worry. And, of course, the Zika virus showed up. The effects on fetuses are horrendous, reminding me of the 1932 movie Freaks. This one is moving around the globe. I sweated bullets over Ebola, only to find out the secret is hydration and bed rest. I’ll do a wait-and-see.

Of course, Brazil was the site of the 2016 Summer Olympics. Any economist knows how much wealth is created for the host country: none. They are total money pits. I return to them below.

China

“We are in a down cycle that will end with crisis and calamity. China in today’s cycle is what U.S. housing was during the financial crisis in 2008.”

~Felix Zulauf, president of Zulauf Asset Management

China has enjoyed a half century of explosive growth, not unlike the U.S. from 1870–1930 and Japan from 1945–1989, but now it suffers from Osgood–Schlatter disease—its joints are beginning to ache—and it seems unlikely to be only economic growing pains. China’s imports have been dropping for 18 months.³⁴⁴ Its exports are dropping double digits as the debt-laden, stagnating global economy ceases to be a consumer of any resort. Richard Duncan provides stunning stats on China’s impending hard landing.³⁴⁵ Reduced consumption is crushing Ferrari sales (and they have leaves in their swimming pools). China is planning for 1.8 million unemployed workers, but that’s only 0.2% of the population. A serious downturn would involve many more. Its current economic model of development for the sake of employment—Potemkin Villages—is burning through its foreign reserves. China’s credit-fueled expansion was exemplified by a 27-story high-rise building completed in 2015 and demolished in 2016 because it was “left unused for too long.”³⁴⁶ Bastiat’s broken-window fallacy has been operating on a grand scale.

“We are at the atrophy level in China.”

~Kyle Bass, Hayman Capital

Of course, credit-based booms stress and eventually break banking systems, and it’s always entertaining to get Kyle Bass’s take on disasters before they occur. Kyle says the $3 trillion corporate bond market is “freezing up. . . . [W]e’re starting to see the beginning of the Chinese machine literally break down.” He estimates that a 10% loss in bank assets would cost China $3.5 trillion.³⁴⁷ Some fund managers predict a $500 billion bank bailout. Bass sees $10 trillion (and dead people). Money has been steadily laundered out of China. The China Banking Regulatory Commission is trying not to cut off troubled companies by “evergreening” bad loans—extending their duration to infinity, which is a long time.

“If I don’t issue more loans, then my salary isn’t enough to repay the mortgage and car loan. It’s not difficult to issue more loans, but lets say in a year’s time when the loan is due, if the borrower defaults, then I won’t just see a pay cut, I’ll be fired and still be responsible for loan recovery.”

~Chinese loan officer

Plunging commodity prices and highly levered corporations struggling to make interest payments are causing business failures and defaults.³⁴⁸ Nonperforming loans are up to 20%.³⁴⁹ Evergreening doesn’t stop this part. The housing bubble finally popped. China forex reserves (as noted last year) are depleting unsustainably.³⁵⁰ So much for forex superpower status. Contrary to popular opinion, high forex reserves correlate with crisis (U.S. in 1929 and Japan 1989). Additional risks include debt equaling 300% of GDP.³⁵¹ Everything is big in China.

Equities (the SSE) are 40% off all-time highs aided by a feeble dead panda bounce. Its draconian 2015 measures—arresting sellers to arrest the selling—have worked for now,³⁵² but bodies are starting to surface. A Madoff-like fraud in China caused angst.³⁵³ A 7% 30-minute flash crash-ette was saved by state-sponsored buyers. The sell-off was blamed on ???, which loosely translates “fat fingers.”³⁵⁴ Andy Xie, fired from Morgan Stanley for his candor,³⁵⁵ sees a ’29-style crash in China’s future:³⁵⁶“The government is allowing speculation by providing cheap financing . . . terrified of a crash. So it keeps pumping cash into the economy. It is difficult to see how China can avoid a crisis.” It took 50 years, but another emerging market has become an emergent market.

Geopolitical risks have been growing for years. China dumped low-cost steel, killing global steel industries.³⁵⁷ India cranked up production to protect debt-laden domestic steelmakers.³⁵⁸ The U.S. imposed a 256% tariff on Chinese steel imports, 522% on cold-rolled steel used in automobiles.³⁵⁹ Let the trade wars begin, but they often mutate into conventional wars. China is rumored to have hacked the Federal Deposit Insurance Corporation: “Nothin’ here.”³⁶⁰ Team Obama had a diplomatic bar fight with Chinese officials on the tarmac in China. Team Obama got dissed, big time.³⁶¹ Obama was then called a “son of a bitch” by the president of the Philippines³⁶² and decided to grab his ball(s) and come home a little early.

I wish I understood “special drawing rights.” They appear to be supranational fiat currencies that are every bit as dubious as other fiat currencies, yet they pose risk to the dollar’s reserve currency status. China authorized a lender to issue a pile of these puppies. “Major financial institutions and other international institutions also intend to issue SDR-denominated bonds on the Chinese inter-bank market.” Why is this important? Simple: we bomb countries that try to dethrone King Dollar.

And if all that weren’t enough, there are potential range wars ahead owing to water rights.³⁶³ Asia’s 10 major rivers provide water to more than a fifth of the world’s population. The lack of clear rules to regulate shared water sources could cause problems.

Japan

“When central banks have bought up all the world’s stocks and bonds, and transferred all the wealth into the pockets of the 1%, the confusion will finally end.”

~Zero Hedge

Japan is, for the second year in a row, not that interesting. Of course, I should care. As Bill Gross says, Japan is “the world’s largest aging demographic petri dish,” and demographics will drive markets and economies in coming decades. Japan’s labor participation rate is dropping just like ours but is more centered on an aging population.²⁶⁴ According to Tim Price, “Japan has been the dress rehearsal; the rest of the world will be the main event.” Japan is also at the vanguard of monetary policy, intervening in virtually all markets at unimaginable levels.

“Bank of Japan Risk: Running Out of Bonds to Buy”

~Wall Street Journal headline

BoJ redirected its focus from expanding the money supply to controlling interest rates, which smacks of desperation to some (and a crock to others). The effects of its interventions are breathtaking. The yields of 40-year government bonds reached 0.3% last I looked, and the 10-year bond went negative. BoJ underwrote government bonds and converted them into zero-coupon perpetual bonds in the secondary market.³⁶⁵ These are bonds that pay nothing and last forever. Gillian Tett reminded us that Japan tried this crap in the ‘30s. How’d that work out? Oh, right. The bear market ended badly in 1945.

There is hope. A Bloomberg headline suggested that the rates were “nearing levels too low for BoJ comfort.” Nobody told the head of BoJ, apparently:

“[A] reduction in the level of monetary policy accommodation . . . will not be considered. There aren’t any such things as a quantitative limit or anything, any numbers we can’t overcome.”

~Hiroki Kuroda, governor and head monopsonist at the Bank of Japan

Well what the hell are they gonna buy, ETFs? Exactly. Japan’s $1.1 trillion government pension fund is being used to push the Nikkei higher.³⁶⁶

“BoJ is nationalizing the stock market.”

~Nicholas Smith, CLSA’s Japan strategist

“The BoJ is basically declaring that Japan will need to fix its long-term problems by 2018, or risk becoming a failed nation.”

~Takuji Okubo, chief economist at Japan Macro Advisors

Yasuhide Yajima, chief economist at NLI Research Institute, suggests even greater boldness: “What’s certain is that Kuroda has to do something extreme or unthinkable if he wants to surprise.”³⁶⁷ Apparently, the crap they’ve been doing isn’t officially unthinkable or extreme. Ya had me at negative rates.

What does any of this have to do with rejuvenating an economy, and how is it working? Nothing and not well. Japan has been stagnant for 25 years and counting (Figure 19). Can you imagine your portfolio dropping for 25 years? Occasionally the Nikkei seems to show a pulse—the corpse twitches a bit—but then it falls back. I was watching the 15K line in the sand this year, waiting for it to break. Miraculously, the Wall of Money appeared at 15K to bump it back up. Go figure. It’s time to get bold, Kuroda-san. Do something really extreme.

Figure 19. Nikkei.

A little bookkeeping is in order before leaving the island. Fukushima is still a disaster. Mutations are starting to appear in flora and fauna.³⁶⁸ Massive storage tanks continue to be filled. It turns out the tanks were not up to spec to store radioactive water, so they’re decaying and leaking.³⁶⁹ Attempts to form an ice dam failed.³⁷⁰ Seemed harebrained anyway. The Tokyo aquifer is still at risk. The day I am typing this rough draft, the Ring of Fire is alive with earthquakes. Sounds like a sci-fi thriller to me. Armageddon 2.0.

Middle East

“I think this is a very hard choice, but we think the price was worth it.”

~Madeleine Albright in 1996 on 500,000 dead children in the Iraq War³⁷¹

It is possible that the authorities and private-sector intelligence gurus like George Friedman understand the Middle East. One Sunday morning I got an hour-long tutorial from Nassim Taleb. He seemed to understand it, but it flew right over my head like a drone. I asked a former Trident submarine captain with time in the Pentagon what was behind our Syrian policy, and he professed “not a clue.” Eight years ago, we elected a liberal democrat who won a Nobel Peace Prize prenatally. I was sure he would have a more humble Middle East policy than Bush Jr., but then he bombed the hell out of half the countries in the Middle East and caused what I think will prove to be a historically important refugee crisis in Europe. (Bombings, by the way, are now euphemistically called “kinetic scenarios.”) Maybe our current president will unify the whole region and call it Trumpistan. I just hope he lays low.

“We never saw a secular Arab regime that we didn’t want to overthrow.”

~Peter Ford, UK ambassador in Syria, 2003–2006

One could argue that the Middle East and the West will never share common values. At great risk of becoming a shot messenger, I offer the results of a global Pew Foundation poll—the gold standard of polls:³⁷²

Figure 20. Pew Foundation poll.

Those numbers prompted Ian Bremmer, president of Eurasia Group, to tweet, “Islam has a problem.” The King of Jordan on 60 Minutes assured us that only 2% of the world’s Muslims are radical jihadists. Two percent of 1.8 billion is 36 million. I feel much better now. Leaving aside whose worldview is right, maybe we should stay in our respective regions until we find a little more common ground. That means we must leave them alone to fight among themselves. A study at Brown University (for what it’s worth) claims that our Middle East adventures since 9/11 have cost us $5 trillion,³⁷³ which accounts for a large percentage of our national debt accrued over that same period. The indirect costs are incalculable. Millions have died either directly or owing to the unrest and instability. I am compelled to look at a few low-water marks in this gigantic real and metaphorical desert.

“For us to control all the air space in Syria would require for us to go to war against Syria and Russia. That’s a pretty fundamental decision that certainly I’m not gonna make.”

~General Joseph Dunford, testifying to the Senate

I’ve written before about our 10-year effort to overthrow Assad.³⁷⁴ We have failed, producing a complete wasteland. Footage of Damascus and Aleppo (or, as Gary Johnson calls it, Whatsaleppo) shows mind-boggling carnage.³⁷⁵ Martha Raddatz, in a Republican presidential debate, had the temerity to ask, “What if Aleppo falls?” Martha: it’s a total pile of rubble; it’s gone (Figure 21). The absurdity of our foreign policy is exemplified by reports that “CIA-armed militias are shooting at Pentagon-armed ones in Syria.”³⁷⁶ Fifty State Department officials urged military strikes against Assad for persistent cease-fire violations.³⁷⁷ We are going to bomb them because we are in their country bombing them and they are fighting back? We should never forget, however, the massive casualties we’ve taken at the hands of the Syrians. Which ones? I’m still working on that.

Figure 21. Aleppo, Syria.

“It’s a bad strategy, it’s the wrong strategy, and maybe I would tell the president that he would be better served to find somebody who believes in it, whoever that idiot may be.”

~General Anthony Zinni and former head of U.S. Central Command on Obama’s ISIS policy

Turkey is a key borderland, the gateway between Europe and the Middle East. It got a little more exciting when the populace rose up against bad-boy Prime Minister Erdogan in a palace coup. But soon it started smelling of the CIA, and the Turkey coop quickly became the Bay of Goats. Erdogan was never at risk; he used this false flag (or at least pathetic effort)³⁷⁸ to scrub out the riffraff in his country (teachers).³⁷⁹ The tally could exceed a hundred thousand. When a German comic mocked Erdogan, the crazy Turk demanded retribution under a German law that prohibits “offending foreign heads of state or members of government.”³⁸⁰ The Germans complied,³⁸¹ which immediately triggered a retaliatory “Erdogan Offensive Poetry Competition.”³⁸²

What is Erdogan’s leverage? Millions of Syrian refugees are camped at the Turkish border waiting for Erdogan to open the floodgates. He reiterated his threat in late November. He has the cowbell.

I suspect you can’t understand the U.S./Iran nuke deal without top security clearance. The White House got caught airlifting $1.7 billion—pallets of cold cash—to ensure the deal went through.³⁸³ They also got caught hitting the Buy-Now button on a couple of captives for $400 million (free shipping)—enough to ensure that more captives will be taken. Oddly enough, I think Iran is an interesting place to invest (when sanctions preventing it are dropped) owing to a >90% literacy rate.³⁸⁴ I sense that U.S. dollars—fully documented dollars—may be allowed into Iran soon. On the fateful Friday that everyone was grousing about Trump’s “grab the pussy” fiasco, Obama quietly eased sanctions on Iran.³⁸⁵

Saudi Arabia never changes (SNAFU). On New Year’s Day, they chopped the heads off 47 men, including a prominent Shia cleric.³⁸⁶ The Saudi head-slicers recently got a seat on the UN Human Rights Council. The Saudis also got three demerits for violating children’s rights—their right to live—in Yemen. A little retribution could “be headed” their way, as the Senate passed a bill and overrode the veto to release secret files showing Saudi involvement in 9/11.³⁸⁷ For years, there was no direct evidence of Saudi involvement . . . unless, of course, you include the fact that the friggin’ terrorists flying the planes were Saudis. The first lawsuit by a 9/11 widow was filed days later.³⁸⁸ The concern—a significant concern—is that millions of recipients of our wrath will sue us for killing people. That could keep folks at The Hague busy for a while.

Good news: Pakistan passed a law against honor killings after a famous Pakistani woman was killed by her brother for dishonoring her family.³⁸⁹ The bad news is that it was legal until this year.

Government Folly

“In a state where corruption abounds, laws must be very numerous.”

~Tacitus

Some libertarians think any government is bad. Human beings have been offered the option of having governing bodies and appear to have chosen government every time. The issues pertain to the size and scope of government. An insider instrumental in the post-9/11 bailouts of insurance companies and airlines described in a Davy Crockett-esque way the dangers of publically funded compensations.³⁹⁰ Peter Dale Scott’s treatises on the deep state are worthy and scholarly descriptions of the notion that underneath the veneer of democracies lie forces that shape history but not always for the good.³⁹¹ Mike Lofgren spoke about the deep state with Bill Moyers.³⁹² Occasionally a window opens, and we get a glimpse of the deep state before it closes. Video footage from inside SOFEX, the world’s largest trade show for military gear, shows bad guys from bad places shopping for the firepower needed to become really lethal bad guys.³⁹³

In a year dominated by WikiLeaks and fiascos of a higher order, events occurred that seem minor in comparison but still make you sit up and say, “WTF?” Here are a few.

• The Obama administration told New Balance to shut up about the Trans-Pacific Partnership trade agreement in return for lucrative shoe contracts . . . and then got stiffed.³⁹⁴ A New Balance spokesman suggested “the chances of the Department of Defense buying shoes that are made in the USA are slim to none.”
• An aide to Boston Mayor Marty Walsh withheld permits from organizers of a music festival to force them to use of union stagehands, which is a federal crime.³⁹⁵
• The supreme Allied commander in Europe gets $600K per year as “senior veteran’s advisor” to the company and penny stock Grilled Cheese Truck, Inc. (NASDAQ:GRLD).³⁹⁶ Its pulled-pork sandwich is popular.
• The CIA’s inspector general accidentally deleted the only copy of a 6,700-page classified Senate report on interrogation techniques.³⁹⁷ Stating the obvious, Eddie Snowden said, “when the CIA destroys something, it’s never a mistake.” I think he meant “by mistake.”
• Six billion dollars in cash—bundles of printed bills—have disappeared from the State Department in recent years.³⁹⁸ This is the best argument for a cashless society and why it may not happen.
• A congressman’s Yahoo screen viewed on TV showed his porn tabs. Critics decried, “nobody uses Yahoo.”³⁹⁹
• A congressman—I missed his name—on The O’Reilly’s Factor actually thought the Germans bombed Pearl Harbor. Graduated from Belushi–Trump University.
• Philadelphia lawmakers want to add a soda tax of 1.5 cents per ounce.⁴⁰⁰ Revenues will be used for projects that employ union laborers. Is that a federal crime, too?
• A person-to-person loan company called “Hard Lending Club” is backed by John Mack, Larry Summers, Mary Meeker, and others.⁴⁰¹ This smells of government folly.
• A lawsuit alleges that Obama’s top aides quietly claimed the power to spend $178 billion over the next decade to reimburse health insurers and bribe them to participate in the Affordable Care Act.⁴⁰² Not a problem: it will soon mutate into something unrecognizable called TrumpCare.
• The Obama administration and the UN announced a global police force to fight “extremism” in the U.S.⁴⁰³ They better up their budget if that becomes common knowledge.
• Obama snuck in his 300^th round of golf as president long before he became a lame duck (hook) with free time.⁴⁰⁴ Appallingly, he’s still a duffer.
• An impoverished congresswoman built a multimillion-dollar nest egg from day-trading on insider information while serving her term, which is legal.⁴⁰⁵
• Congresswoman Nancy Pelosi’s husband made some serious money on the ramp-up of SunEdison, buying with impeccable timing before a big acquisition.⁴⁰⁶
• A federal court found that the IRS is still targeting tea partyers.⁴⁰⁷ I’m suspecting our new POTUS has some issues with the IRS.
• Recall the congressman suspected of killing Chandra Levy until police caught the real killer? The case fell apart.⁴⁰⁸
• Among 2,000 pages of new rules are minimum and maximum diameters of potatoes that are sold in Colorado.⁴⁰⁹ It’s creating angst among salt potato enthusiasts, which are great if you’re stoned.
• The NSA got hacked.⁴¹⁰ Snowden thinks it’s a message from the Ruskies.⁴¹¹
• Reuters says the Army made $6.5 trillion in accounting adjustments in one year to balance its books.⁴¹² It couldn’t find receipts and invoices—billions of them.
• There are 10 million more workers in government than in manufacturing.⁴¹³
• Boehner cashed in his chips, taking the revolving door to a lobbying firm.⁴¹⁴
• The White House spent $1.5 billion for public relations.⁴¹⁵
• I’ve noticed that radio is all public service announcements (seat belts, car seats, stroke detection, etc.) Who is paying?
• Thousands of price gouging complaints were made after Hurricane Matthew. The folly part of this story is that price gouging is a government construct anathema to free markets. If you want plywood (or flood insurance), buy it before the storm. It’s expensive to be shortsighted and stupid.⁴¹⁶
• Obama warned us to prepare for emergencies.⁴¹⁷ What do they know? One theory is that there is a coronal hole in the sun. I think he knew one of the two candidates would win the election.

And for some quotes that rock . . .

“When I saw corruption, I was forced to find truth on my own.”

~Barry White

“The duty of youth is to challenge corruption.”

~Kurt Cobain

“The government is so out of control. It is so bloated and infested with fraud and deceit and corruption and abuse of power.”

~Ted Nugent

Panamania

“A Key Similarity Between Snowden Leak and Panama Papers: Scandal Is What’s Been Legalized”

~Glenn Greenwald, The Intercept

Well before the pre-election deluge from WikiLeaks, we had the publication of the Panama Papers—Panamania.⁴¹⁸ On April 3, somebody leaked 40 years of data from a Panamanian law firm, Mossack Fonseca, that specializes (specialized) in offshore bank accounts and money laundering.⁴¹⁹ Some suspected the Ruskies, while others suspected the Americans.⁴²⁰ It is oddly coincidental that HSBC CEO Stuart Gulliver and Chairman Douglas Flint got grilled by Congress on Mossack Fonseca money laundering schemes a month before release of the Panama Papers.⁴²¹ Hillary Clinton supported legislation in 2008 that fostered Panamanian money laundering.⁴²² Why?

The papers showed hundreds of thousands of people, including plenty of politicians, stashing cash offshore.⁴²³ HSBC and Credit Suisse, two egregiously lawless banks, led mega-banks in hiding clients via Panama.⁴²⁴ The Clintons and the Trumps showed up on the guest list of 18,000 account holders domiciled at the same address.⁴²⁵ The prime minister of Iceland resigned the day the Panama Papers were released.⁴²⁶ Undoubtedly, more resignations went unnoted. The Naval War College’s Thomas Barnett once said (paraphrased), “I read stuff in the NY Times that I’ve known for five years.” Nothing should surprise us, not even the connection made between the Clintons and the Kremlin revealed by Panamania.⁴²⁷ And, of course, this sordid affair is already forgotten.

Human Achievement

Every year, oddities capture my attention but don’t fit neatly into any category. Seems a shame to waste them. Before hitting the loopy stuff, let’s look at a few positives with a sports theme.

The high points of the 2016 Summer Olympics in Brazil (from the Yankee perspective) were Michael Phelps winning his 300^th Olympic medal (OK, 28^th).⁴²⁸ The Baltimore Ravens stopped a preseason game so that fans and players could watch him race.⁴²⁹ The women’s gymnastic team was referred to by Slate as “the indomitable, world-destroying, medal-hoovering Team USA.”⁴³⁰ Speaking of hardened gymnasts, 41-year-old Oksana Chusovitina (nicknamed Grandma) deserves a solid-gold participation trophy.⁴³¹ Britain’s Mo Farah fell in the 10,000 meter and still won gold (his second).⁴³² Those Brits might sound like wusses, but that was true grit. Skeet shooter Kim Rhode became the first athlete to win a medal in six consecutive Summer Olympic Games.

The Cubs won the World Series after 108 years. Mohammad Ali threw his final punch, but not without us understanding the totality of his greatness both in and out of the ring. It took me a better part of my lifetime to comprehend this. And then there was the 12-year old kid who got to play in the inaugural round of a new golf course with Tiger Woods. The kid aced the first hole.⁴³³

Human Folly

Of course, the Olympics had its darker moments but far fewer than many expected in a bankrupt country. CNN never published a story about skeet shooter Rhode’s historic 6 contiguous olympics with medals. Reporters, however, hounded her that she “must deal with the reality of mass shooting.”⁴³⁴ What a bunch of dorks. A guy with a broken leg got dropped off the gurney for all to see. Everybody knows the diving pool turned green.⁴³⁵ It was said to be safe, despite the “smell of farts.”⁴³⁶ The chemical explanation finally agreed upon was, in my humble opinion, total nonsense. A kayaker was rumored to have hit a submerged sofa on the Olympic kayak course. It is also rumored to have been a rumor, but everybody bought it (or so they say).⁴³⁷ A judo bronze medalist was arrested after “losing a fight” with a receptionist at his hotel.⁴³⁸ She was a very tough receptionist. Of course, Ryan Lochte lost millions in endorsements by pretending to lose a fight (get robbed) and then later being shown to suffer from terminal douchebaggery.⁴³⁹

“Places where what can go wrong will go wrong, had gone wrong, and yet in the end, had delivered me in one piece with a deepening situational awareness (though not a perfect science) of available cautions within the design in chaos.”

~Sean Penn (or Thomas Friedman)

One of Hollywood’s brightest bulbs, Sean Penn, interviewed drug kingpin El Chapo, estimated to have murdered more than 100,000 people.⁴⁴⁰ The interview led to El Chapo’s arrest and a scramble to put Sean’s life insurance policy into a risk pool.

Now let’s look into the shallowest end of the gene pool, which is teeming with lower carbon-based life forms:

• A movie about Michael Jackson has cast Joseph Fiennes—a white guy.⁴⁴¹
• Ernie Els seven-putted from 3 feet at the first hole of the Masters.⁴⁴² Mickelson lost a ton betting he could make it in five.
• Mega drought continues to ravage California and the Southwest,⁴⁴³ leading some to speculate that high-density developments in deserts are ill-advised.
• Lake Mead hit its lowest level in history, dropping a dozen feet per year.⁴⁴⁴ Soon it will be renamed Lake Mud.
• For four hours during a debate, more people were searching online for info on our future leaders than for porn. USA! USA!⁴⁴⁵
• Anthony Weiner sexted a 15-year-old that he would “bust that tight pussy so hard and so often that you would be limp for a week.”⁴⁴⁶ With the help of Donald Trump, “pussy” is now common usage, leading some to speculate the “C-word” is not far behind.
• LinkNYC removed web browsing from Wi-Fi kiosks after an epidemic of porn and masturbation.⁴⁴⁷ Anthony Weiner declined comment.
• “Neighbors 2” hired consultants to ensure the plot would not offend women.⁴⁴⁸
• Bob Dylan won the Nobel Prize in Literature.⁴⁴⁹ Hillary is rumored to be rigging the Grammy voting for best swan song.
• A gold dildo was sold for $15,000.⁴⁵⁰ The price reflected the high mileage.
• An app turns your smartphone into a vibrator.⁴⁵¹ Careful: it sends your habits back to the company.
• Annaliese Nielsen berated a Lyft driver over a dashboard hula girl bobblehead as a “cultural appropriation” from the “continent of Hawaii.”⁴⁵² It went viral, Annaliese turns out to be a madam, and she is now busted.⁴⁵³
• Joey Chestnut regained the Nathan’s Famous Hot Dog Eating Contest title, downing 70 hot dogs and buns in 10 minutes.⁴⁵⁴
• KFC introduced sunscreen that smells like fried chicken.⁴⁵⁵
• A mother waterboarded her 13-year old son.⁴⁵⁶ Apparently time-outs weren’t working.
• Antonin Scalia was discovered dead in bed with a pillow over his head and unwrinkled clothes.⁴⁵⁷ No autopsy was performed.
• Steve Harvey crowned the wrong Miss Universe.⁴⁵⁸ Awkward. Her forced smile won her an Academy Award.
• CBS News says Caitlyn Jenner is rumored to be considering de-transitioning.⁴⁵⁹ I resisted thinking it was a stunt.
• Liberals expressed outrage over a story that the Trump boys killed a triceratops.⁴⁶⁰
• Rage disorder has been linked to a parasite in cat feces.⁴⁶¹ All these years we have been going catshit, not batshit.
• A Swedish soccer player was kicked out of a game for “provocatively farting.”⁴⁶² The perpetrator who pulled his finger was fined with no admission of guilt.
• Measles brought in by an inmate at a federal immigration detention center is spreading through the anti-vaxxer community.⁴⁶³
• A U.S. man has publicly condemned the actions of his mother, who married his sister after a previous relationship with his brother was annulled.⁴⁶⁴
• A girl got investigated for counterfeiting because she used a $2 bill in the school cafeteria to buy lunch.⁴⁶⁵
• The Brits were allowed to pick the name for a new research vessel, but authorities ruled that Boaty McBoatface would not be used despite the landslide victory.⁴⁶⁶
• The Flint water supply became toxic because a municipal bean counter decided to save “$80 to $100 a day” on the treatment.⁴⁶⁷ A woman leading the drive to sue the Michigan government was shot and killed in her home (died of lead poisoning).⁴⁶⁸

NFL quarterback Colin Kaepernick was brought behind the woodshed when he “took a knee” for the national anthem.⁴⁶⁹ The perfect alibi is that he is a vegan⁴⁷⁰ with a job that demands protein—lots of protein—and has some form of induced dementia. Despite predictable public outcry, some consequences were unforeseeable. Veterans began Tweeting his right to protest. I’m not sure his for-profit employer would agree. This public form of protest developed meme status. He won my heart with an explanation that the left-leaning media largely ignored:

“You have Hillary, who has called black teens or black kids super predators. You have Donald Trump, who is openly racist. We have a presidential candidate who has deleted e-mails and done things illegally. That doesn’t make sense to me. If that was any other person, you’d be in prison. So what is this country really standing for?”

~Colin Kaepernick, speaking truth

Civil Liberties

“Tyranny derives from the oligarchy’s mistrust of the people; hence they deprive them of arms, ill-treat the lower class, and keep them from residing in the capital. These are common to oligarchy and tyranny.”

~Aristotle

“I am not for the death penalty. . . . Illegally shoot the son of a bitch.”

~Bob Beckel, liberal commentator, on Julian Assange

“WikiLeaks is Getting Scarier Than the NSA”

~Time magazine headline, missing the irony of why WikiLeaks exists

I got lit up on the civil liberties issue a few years ago watching a kid go to prison on what I believe was a fabricated he said/she said conviction. I tried to help, speaking with family members, the accused, and even a friend who is a prison counselor, but I achieved nothing in the end. I continue to speak out against breaches in civil rights out of a primal need. In this section, I look at the generic stuff and save the breaches stemming from politics and militant political correctness for later. It is my strongest conviction, however, that the heckler’s veto by small numbers, what Taleb calls “minority rule,” risks our civil liberties, as does the majority remaining cowardly silent.⁴⁷¹ For the record, I am not a huge fan of guns, but I get the heebie-jeebies when constitutionally granted rights come under fire.

We begin with a stream-of-consciousness collection of random breaches of civil liberties. Some inspire disgust, whereas others just make you think:

• The United States Preventive Services Task Force wants mandatory depression screening for everybody to create a database.⁴⁷² Why? To ensure anyone labeled “mentally ill” can’t own firearms.
• A teacher who desecrated the American flag inside a North Carolina classroom wants the student who photographed him to be punished.⁴⁷³
• A proposed Kentucky law demands users of Viagra and other wood-hardeners to get spousal permission and “make a sworn statement with his hand on a Bible that he will only use a prescription for erectile dysfunction when having sexual relations with his current spouse.”⁴⁷⁴
• The FBI used Cellebrite to hack an iPhone. It was hoping to force Apple to give up data to set precedent.⁴⁷⁵
• Criminals are now being paid not to commit crimes.⁴⁷⁶ Destitute taxpayers are being forced into lives of crime.
• The use of echo parentheses—(((echo)))—refers to Coincidence Detector, a Google Chrome extension that was being used by white supremacists to track Jews . . . until it turned into a meme on social media.⁴⁷⁷
• San Francisco requires all sign-based advertising of sugary drinks to warn people that drinking such beverages causes obesity, diabetes, and tooth decay.⁴⁷⁸ First they come for your Pepsi, and they will not stop until they reach for your pork rinds.
• Here is a list (by state) of where it is legal to record phone calls.⁴⁷⁹ My advice: apologize later.
• One million people petitioned to boot a judge who gave the Stanford swimmer/rapist a light sentence: right or wrong, is crowd-sourced sentencing where we are headed?⁴⁸⁰
• Trapped drivers and truckers in Charlotte, North Carolina, plead with 911 operators for help as mobs looted backs of trucks. Blogger Glenn Reynolds got serious grief from his university and Twitter for advising to “run them down.”⁴⁸¹ That’s wrong, of course; you should leave the vehicle and give free hugs.
• A Bundy-Ranch-like militia standoff at an Oregon wildlife refuge got really weird when the matronly host of Democracy Now, Amy Goodman, was arrested and charged with inciting riots.⁴⁸² Apparently, 20 years of airtime, a camera crew, and actually reporting on a story does not make you a journalist, according to local authorities.
• The Department of Justice’s Operation Chokepoint shuts off the bank accounts of businesses such as gun dealers and check cashers because they are deemed to be immoral.⁴⁸³ Our new POTUS may have an opinion on that, too.
• That same Department of Justice says firing immigrant workers with expired papers is discrimination (and immoral).⁴⁸⁴
• Social workers were called on a woman whose kids played in the backyard while she did dishes.⁴⁸⁵
• A woman got sent to court without pants, three days without hygiene products, and a 75-day sentence requested for a first-time shoplift. Judge was PO’d at her treatment.⁴⁸⁶
• According to Albany Chief of Police, kids under 16 should be supervised.⁴⁸⁷

If you follow a few of the legal beagles, you’ll find that the courts deliver up occasional surprises. I’m sure there are other sides to the stories, and some leave me ambivalent, but . . .

• Recording police on your camera is not a First Amendment right.⁴⁸⁸
• A judge ordered a defendant to be tased in court.⁴⁸⁹
• Bribery has been declared free speech (and, no, this is not about Hillary).⁴⁹⁰
• The Supreme Court ruled medical marijuana can stay illegal.⁴⁹¹
• The First Amendment does not protect your job from dumb tweets.⁴⁹² (Oh, shit: I’ll be right back!)
• The Supreme Court ruled that police can seize evidence from an unconstitutional search provided the suspect has one or more outstanding arrest warrants.⁴⁹³
• The Massachusetts attorneys general subpoenaed Alex Epstein, a climate change denier at the Center for Industrial Progress, prompting Epstein (likely not on the advice of counsel) to respond: “Fuck off, fascists.”⁴⁹⁴
• A federal ban on the sale of guns to medical marijuana cardholders does not violate the Second Amendment, prompting thousands to say, “Wait! What? Hold my goddamned beer.”⁴⁹⁵

Every year I take a serious swipe at the police for unnecessary violence against the populace. I continue to do so but have had a minor epiphany, however, realizing that they are (1) undertrained, and (2) put in unusually stressful situations far too often. I’ll get to that, but let’s look at the bad stuff first.

Civil asset forfeiture has been a hot topic for me;¹ there are only a few things to say this year that have not been said already. The Atlantic Monthly reminded us that when your belongings, including your wallets, are entered as any kind of evidence, you are unlikely to see them again. They quote one lawyer who said, “If our clients were doing what the police are doing, it’d be called robbery.” The police now have wireless mechanisms to swipe cards in your wallet and retrieve assets ranging from Starbucks gift cards to bank debit cards.⁴⁹⁶ We learned that the government stole more assets from citizens than the property stolen by every thief and felon combined ($4.5 billion).⁴⁹⁷ Let’s say that again for the casual browsers:

“The government stole so much private property from its citizens that the total amount exceeded the value of all property stolen by every thief and felon in America combined.”

~Simon Black, blogger

Simon says (argh) the cops now watch for evidence of future travel deemed suspicious.⁴⁹⁸ Oh, come on: That’s Minority Report, starring Tom Cruise. California authorities opposed legalized pot because it will cut off federal support for the hapless war on drugs and cut way back on civil asset forfeitures.⁴⁹⁹ (Actually, the latter is incorrect because they don’t need to charge you with a crime to seize your assets . . . seriously . . . no snark.)⁵⁰⁰

“If you can prove that you have a legitimate reason to have that money, it will be given back to you. And we’ve done that in the past.”

~Oklahoma Highway Patrol Lieutenant John Vincent

We had the usual seemingly senseless cop-on-citizen violence. A therapist helping an autistic guy got surrounded by police, laid on the ground, put his hands up, explained he was an unarmed therapist, and then got shot.⁵⁰¹ Police killed a couple on a date . . . while they slept in a car.⁵⁰² A video showed a guy getting shot in his car for what appears to be no reason.⁵⁰³ The cop was obviously very jumpy (maybe a rookie).

It’s not just guys. Three years ago, a woman at the U.S. border got a total cavity search, including a vagina-sniffing dog (quite the rarity—I’ve got two), X-ray, and CT scan. All came up total goose egg.⁵⁰⁴ She refused to sign a retroactive permission slip and got billed $5,000 for her “exam.” The $475,000 settlement covered incidentals. A disabled woman was beaten bloody by federal agents—actually, TSA guys—during an airport security screening while on her way to undergo treatment for a debilitating and behavior-altering brain tumor.⁵⁰⁵ A drug-addled chemist—another rarity—admitted to being totally “baked” every day for eight years (including on acid) while processing forensic evidence for judicial authorities.⁵⁰⁶ Appeals are pending.

“Only in a police state is the job of a policeman easy.”

~Orson Welles

Now for the other side of the story. Cops in Dallas, Philadelphia, Fort Worth, Texas, and elsewhere were getting shot by snipers this year. I predicted it in previous reviews, but it is not good. The cops who died weren’t culpable for any of the sins of others. It’s worth a gander at what cops face on patrol. Korryn Gaines was pulled over and apparently ended up dead.⁵⁰⁷ The backstory is that she opposed the police’s repeated and quite civil overtures for a half hour. She died during a fatal standoff at her house. She was looking for a fight the whole way, and she got one. A Chicago officer was beaten nearly to death out of fear to use her gun.⁵⁰⁸ Riots broke out over the shooting of a Keith Lamoat Scott in Charlotte, North Carolina.⁵⁰⁹ Video shows he had a gun. Arrest records from the riot show that the instigators were 70% out-of-towners (shipped in by buses.)⁵¹⁰

Alton Sterling was shot while in a tussle with cops on the ground. Video footage was unclear as to what happened.⁵¹¹ Public outcry and violence ensued. What did surface was a picture of Alton with his 8-year-old son (Figure 22). You’ve got to wonder if the cop brandishing his weapon knew Alton was dangerous. Here is some incredibly raw video showing the violence that cops face on a daily basis.⁵¹²

Figure 22. Alton Sterling and son (unconfirmed by Snopes).⁵¹³

A close friend of my family—a straight-A high school student with a drug problem—ended up in prison, which piqued my interest in the prison–industrial complex. One in four prisoners worldwide are housed in U.S. prisons.⁵¹⁴ The prison population rose 1600% beginning in 1990.⁵¹⁵ The female prison population has risen over 800%, of which more than 60% have juvenile children in the outside world (but not for long, perhaps).⁵¹⁶ More than 50% of juvenile facilities are for-profit. I was a big fan of privatization movements, but when providers are private and the payers are the government, graft flourishes. Private probation companies have proliferated, too.⁵¹⁷

When you get out of prison, you have paid your debt to society, but you have other debts to pay—legal financial obligations (LFOs)—including prison debts and pricey halfway houses.⁵¹⁸ A substance-abusing Jersey man got 36 months in prison and racked up $35,000 in debt to the state.⁵¹⁹ Meanwhile, his résumé isn’t a fast track to riches, especially since a driver’s license is out of the question. If you don’t pay, you go back to prison. Sounds all very Dickensian to me. There are horrific tales of traffic violations that turn into losing battles with the prison system.⁵²⁰ Curiously, private prisons are being phased out.⁵²¹ It may turn into yet another lobbyist employment program. We shall see.

Campus Politics

“It is your responsibility as educators to listen to student voices. We have spoken. We are speaking. Pay attention.”

~Yale student to an administrator

“We’ve sold them a bill of goods about how they should be treated.”

~Traevena Byrd, general counsel at Towson University

College is a period of werewolf-like changes. Students enter as teenagers and leave as adults. It is a period of great intellectual growth, questioning social norms, developing a sense of self, getting wasted, having sex, and having more sex. None of that is new. My generation grew our hair, gobbled drugs, protested the Vietnam War, and wore bell-bottoms. Every generation suffers from an epidemic of dead grandparents around exam time.⁵²² That said, it seems to be getting just a little weird of late.

There is a small but increasingly vocal gaggle of activists that is raising holy hell on college campuses. The rules of behavior are in flux; free speech is anything but free. The risk of committing a pronoun faux pas is huge, and the punishment severe. Maybe this is just the same old craziness in new garb, but there are cringeworthy aspects. I see a much larger geopolitical power play, masterminded and fueled by the ultraleft (alt-left), that has commandeered the machinery of government. Obama’s Department of Education is at the vanguard, pushing their “Dear Colleague” letters (vide infra). Faculty political leanings have shifted severely left in recent years.⁵²³ The politcally  are now completely muzzled. College presidents walk on eggshells;⁵²⁴ the lead activists—the social justice warriors (SJWs) to some and the more pejorative “snowflakes” to others—have been described as “addicted to indignation.”

“There is a kind of creeping totalitarianism in terms of what kind of ideas are acceptable and are debatable on college campuses. . . . I worry very much that if our leading academic institutions become places that prize comfort over truth. . . . a great deal will be lost.”

~Larry Summers

I highly recommend a lecture by Professor Jon Haidt describing how destructive victimhood is to its participants.⁵²⁵ For those pining for more basal entertainment, Triumph, the Insult Comic Dog at the University of New Hampshire may be more to your liking.⁵²⁶ Meanwhile, I take refuge in bulleted lists to convey the absurdities that many boomers will find largely unfamiliar to their own experiences in college but are actually the products of their own rearing practices. When everybody is a winner, nobody learns how to lose. Did boomers hurt their children by overprotecting them? I think so. Let’s see what has been wrought.

• Johns Hopkins students claim letter grades for freshman will cause a mental health crisis.⁵²⁷
• A CUNY professor was accused of sexual harassment because his syllabus contained a 10% effort grade, the assumption being that “effort” was code for sexual favors.⁵²⁸
• The Cornell student assembly pushed for race-based elections of representatives.⁵²⁹
• A transgender speaker at Brown University canceled a visit owing to opposition by a leftist group because she was invited by the Jewish students of Hillel.⁵³⁰
• An African-themed dinner at Cambridge brought on pestilence and plague because it was deemed to be “cultural appropriation.”⁵³¹
• A white student drew ire for “appropriating” black culture by having dreadlocks.⁵³²
• Protesters at St. Catherine University—97% women—denounced its “toxic rape culture.”⁵³³
• Students at universities across the country complained about chalk messages supporting Trump, causing “chalkenings” to reach meme status.⁵³⁴
• Student activists at Brown University complained of emotional stress and poor grades after months of protesting and blame the school for insisting that they complete their coursework.⁵³⁵
• A peace vigil honoring the victims of the Orlando terror attack degenerated into a verbal brawl between mourners and Black Lives Matter activists at the University of Missouri.⁵³⁶
• Madeleine Albright was protested as a speaker at Scripps College because she’s a white feminist.⁵³⁷
• University of Oregon students demanded removal of the Martin Luther King Jr. quote, “I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin, but by the content of their character” because it wasn’t inclusive enough.⁵³⁸
• Students at University of Iowa viewed a controversial sculpture as a “threat,” apparently suffering from Ghostbuster Trauma Syndrome (GTS).⁵³⁹
• Tulane students filed a complaint against a fraternity that posted a sign that said “Make America Great.”⁵⁴⁰
• Lebanon Valley College students demanded the school change the name of “Lynch Memorial Hall.”⁵⁴¹ Professor Richard Titball at University of Exeter had no comment.
• UC Berkeley wanted to rename Barrows Hall after Black Panther member Assata Shakur, who was convicted for the murder of a New Jersey state trooper and multiple other felonies.⁵⁴² I think Boaty McBoatface Hall would be better.
• Amherst students called for a speech code that would have sanctioned students for making an “All Lives Matter” poster.⁵⁴³
• A Dartmouth fraternity tradition of holding a “Phiesta” on Cinco de Mayo was canceled because the made-up word was deemed “cultural appropriation” and “a seriously phucked up idea.”⁵⁴⁴
• Christine Lagarde, head of the IMF, bailed on a speech at Smith College owing to Facebook protests against her.⁵⁴³
• The N.Y. Federation of College Republicans revoked recognition of the Cornell chapter after it endorsed libertarian Gary Johnson.⁵⁴⁵ High ranking sources—I have them—say they were getting death threats because of Trump.
• Colorado college students claimed that teaching students about healthy lifestyles was tantamount to “body shaming” and “body privilege.”⁵⁴⁶ That’s phat!
• A poll showed that more than 50% of students nationwide support campus speech codes.⁵⁴⁷
• Activists want athletes to play for whichever team they identify with according to gender. Meanwhile, women on steroids get disqualified.⁵⁴⁸ Rumors of East German female athletes⁵⁴⁹ coming out of retirement are unconfirmed.
• Students at one school called for a police investigation over a Post-it with words “Get over it, pussies” inscribed on it. (I’m surprised Post-its, bearing several deeply embedded subliminal messages, are allowed on campus.)
• The Vagina Monologues, the legendary feminist monolog, was canceled at Mount Holyoke because it was deemed offensive to “women without vaginas.”⁵⁵⁰
• A student was kicked out of college for “lung-shaming a smoker.” OK. I lied. You get to piss all over smokers on college campuses.
• Young Harvardians expressed their outrage over the low return on their schools endowment…sowing the first seeds of mediocrity and evils of inbreeding.⁵⁵¹

“Discriminatory policies of gender dichotomized bathrooms need to end. . . . [W]e wish to erode and subvert the gender binary.”

~Vassar activist on same-sex bathrooms

“Protest what is truly egregious, not what qualifies as simply real life.”

~John McWhorter, Columbia University professor

Students are raising hell, but that’s their job. What’s the problem? In short, the problem lies with adults: they are failing to bring voices of reason (as I see it, at least). Problems appear in many ways. At the lowest level, they are what one might call goofy stuff with little or no lasting effects, but some are oppressive. In many instances, adults needed to bring some judgment and gravitas but failed. You are entering the no-spine zone:

• The University of Houston’s student government vice president must undergo mandatory diversity training for tweeting “Forget #BlackLivesMatter; more like AllLivesMatter.”⁵⁵²
• More than half of America’s colleges and universities now have restrictive speech codes.⁵⁵³
• Springtime—the commencement-speech time of year—is now dubbed “disinvitation season.”⁵⁵⁴
• Students filing a sexual harassment grievance can now ask for extra time on tests because they are impaired. (I refuse to name the school.)
• Professors across the country gave students safe spaces after the trauma of the presidential elections. Cry-ins and coloring sessions are a few examples.⁵⁵⁵
• Schools across the country are providing rules for microaggressions, which include phrases like, “I love your shoes” that emphasize appearance over substance.⁵⁵⁶
• The president of Northwestern University says that anyone who opposes “trigger warnings” or dismisses those who oppose safe spaces an “idiot” and a “lunatic.”⁵⁵⁷ Excuse me, President Hypocrite, but aren’t those microaggressions?
• Three students at the University of Wisconsin–Platteville wearing “three blind mice” Halloween costumes were punished because the costumes were deemed offensive . . . to the blind . . . who can’t see them . . . and probably couldn’t care less.⁵⁵⁸
• Maryland University (Towson) had a lecture titled “White People are a Plague to the Planet.”⁵⁵⁹
• A professor at the University of Wisconsin–Milwaukee is calling for the complete “abolition of whiteness.”⁵⁶⁰
• Barry University banned its golf team from using a Trump golf course to practice.⁵⁶¹
• The president of Emory University said students are scared and “in pain” after someone wrote “Trump 2016” in chalk on campus during the primaries.⁵⁶²
• Skidmore College banned the phrase “Make America Great Again.”⁵⁶³ (Problem solved.)
• Princeton published a guide to political correctness.⁵⁶⁴
• A recent Knight Foundation survey of students nationwide found that 63% favor schools banning costumes and half believe that news reporting on campus protests should be prohibited.⁵⁶⁵
• A University of Northern Colorado campaign, #LanguageMatters, warned students against offensive language like “crazy,” “poor college student,” and “hey, guys.”⁵⁶⁶ (I once was admonished by some rabid moms for using “ladies” and was told to use “guys.”)
• Administrators at the University of Northern Colorado post signs around campus warning against “offensive” speech and have a “bias response team” that takes swift action against transgressions.⁵⁶⁷

“It appears University of Northern Colorado leadership has decided that so-called tolerance and diversity is justification for intolerance and intimidation.”

~Senator John Cooke, University of North Carolina graduate and member of the Senate Judiciary Committee

“I’m hoping we’ll get a little respite while we get our act together about how we are going to handle this better in the future.”

~Kay Norton, president at the University of Northern Colorado

The student demands listed above suggest academic damage might be close behind. In some cases, the damage is real and careers destroyed because cowardly adults fail to say “no” or “stop” or even “go back to the library.”

• A DePaul president stepped down under pressure because he let Milo Yiannopoulos speak on campus.⁵⁶⁸
• The University of Iowa announced it will now offer a degree in social justice, which is fine provided nobody pays >$100,000 to get one.⁵⁶⁹
• Seattle University caved to student activists and put a dean on administrative leave because the liberal arts curriculum focused too much on classical Western history and philosophy.⁵⁷⁰
• The two Yale profs in the middle of the epic shitstorm over Halloween costumes resigned from their duties as live-in faculty in student housing.⁵⁷¹ More video shows what happened.⁵⁷²
• An Asian female gender studies professor at Dartmouth was denied tenure, and protests ensued.⁵⁷³ Careful here, Dartmouth: you could cross the academic Rubicon and start crowd-sourcing your tenure decisions. (Point of interest: Dartmouth College was the first institution in the country to be declared by the Supreme Court to have constitutional rights normally granted only to citizens.⁵⁷⁴)
• SUNY Binghamton has a “StopWhitePeople2K16” course focusing on how to deal with white privilege.⁵⁷⁵
• Wayne State is swapping the math requirement with a diversity requirement.⁵⁷⁶
• Barnard College is replacing a language requirement with a course called How to Think (a guide to political correctness).⁵⁷⁷
• Pomona College’s faculty voted to change the criteria for tenure to specifically require candidates to be “attentive to diversity in the student body.”⁵⁷⁸
• Cal Tech will allow students to take either quantum mechanics or statistical thermodynamics to be more inclusive. (Sorry, I made that one up.)

“It’s a bizarre experience to watch a documentary that expects the viewer to root for a bunch of accused rapists.”

~Christina Cauterucci, Slate, on the Duke University lacrosse case about falsely accused rapists

Title IX, the brainchild of the Obama Department of Education, at the outset had the admirable goal of protecting students (mostly women) from violence on campuses.⁵⁷⁹ Colleges receive “Dear Colleague” letters, which are thinly veiled threats to ensure they are punishing misbehaving young men, and they scare the bejesus out of legal counsels and administrators alike.⁵⁸⁰ The activism is occurring with increasing zeal, demanding social norms and actions that have shaken administrations to their foundations. It seems to stem from a study reporting that 20% of women experience sexual assault.⁵⁸¹ The Department of Justice says 0.6%.⁵⁸² My math says that the disagreement is outside the error bars.

Misbehaving covers the gamut from sexual attacks worthy of leg irons to a much more gray area covering dubious actions. The legality of “Dear Colleague” letters is working through the courts,⁵⁸³ but for the time being, we find underqualified academics adjudicating cases with highly variable understandings of due process and what constitutes a punishable offense. Some college administrators reach deep to try to find the truth, whereas others bring social agendas or act out of fear of looking too timid. The mess-ups undermine the intent and occasionally destroy lives. Would you want Christina Cauterucci adjudicating your son’s case? Suicides of the accused are rumored to be nontrivial. I’ve written about it before; here are a few more low-water marks.

• An Auburn University student got cleared in court, but the school had already booted him.⁵⁸⁴
• A female student admitted to lying about an Auburn football player, but he got kicked off the team for good measure.⁵⁸⁵ When in doubt . . .
• A guy falsely accused of rape killed himself, then his mom killed herself.⁵⁸⁶
• A Yale student was expelled when his girlfriend’s roommate, a year later, asserted that their sex was not consensual. The putative victim and attacker both vehemently denied it. He got expelled.⁵⁸⁷
• An accused student who was suspended for sexual assault settled out of court when the accuser admitted she “may have stretched the truth” because she was “pissed off” when she realized he’s "just another douchey frat dude.”⁵⁸⁸ And what happened to her?
• A double amputee at Augustana University was accused of rape. The cops said no way within 24 hours. The school kicked him out.⁵⁸⁹ There must be something more to this story.
• Due process suits are piling up and settlements out of court are plummeting.⁵⁹⁰
• A Title IX official resigned after being accused of sexual assault, which could be both true and ironic.⁵⁹¹
• A black Roanoke College student was acquitted of raping a white student by a jury in 25 minutes as well as by an on-campus tribunal, but activists demanded removal from campus.⁵⁹²
• UC San Diego was discovered to have routinely hidden the identity of witnesses from those accused of wrongdoing to render the defenses of the accused more challenging.⁵⁹³
• University of Texas guidelines on sexual assault cases were found to explicitly eliminate (rather than underscore or resolve) contradictions and inconsistencies.⁵⁹⁴
• A USC couple dated for months. A paper trail of text messages showed that she was going to falsely accuse him of rape. On a call that was not disconnected, the investigator and Title IX person were documented referring to the accused as a “motherfucker.”⁵⁹⁵
• And in the youth division, a dozen teenage girls charged a boy with sexual assault. Appears to be a case of “dog piling”.⁵⁹⁶ Text messages show they schemed to get him.⁵⁹⁷ What do you do with those dozen girls on a rocky road to what is probably a normal adulthood?

“America’s universities are in the grip of a dangerous presume-guilt-and-rush-to-judgment culture.”

~George Will, conservative columnist

“Some say government must be involved in this issue in order to ensure that private businesses do not violate individual rights. Those who make this claim are accepting the idea that rights are no more than a gift from the government that can be revoked at the will and whim of legislators and bureaucrats.”

~Ron Paul

Books about the epidemic of political correctness are being written as I type. Some might be, paradoxically, bestsellers and very unpopular. In the extreme, you have characters like Milo Yiannopoulos, a British gay provocateur with an odd mix of refined rhetorical skills and social graces that would make Trump blush.⁵⁹⁸ In the category of “way over the top,” one university president noted that “This is hard for you because you think of the students as cuddly bunnies, but you can’t. You just have to drown the bunnies . . . put a Glock to their heads.”⁵⁹⁹ I’m not sure he was cut out for that job anyway. Whereas some administrators display an odd mix of fear and bad judgment, others stand boldly for free speech. When students protested the Trump chalkening, Emory University President James Wagner chalked the words, “Emory stands for free expression!” The University of Chicago tells freshman not to expect safe spaces and trigger-free existences.⁶⁰⁰ A “Take Back Dartmouth” petition got 1,300 signatures in three days.⁶⁰¹ We will find the requisite happy medium where the rights of everybody are protected.

“There is clearly an element of irrationality in political correctness. It is a form of censorship without a censor; we impose it on ourselves. Yet, it keeps us away from the reasoned discussion of social issues which everybody can see are important, consequential, and desperately in need of wide-ranging analysis.”

~Howard Schwartz, professor emeritus of Oakland University

This section wins the award for the most edgy. I comment further on this point in the conclusion.

Elections

We started this gigantic November Madness Bracket with 100–200 million eligible candidates for the presidency and, through a grueling process, whittled it down to just over a dozen truly uninspired choices. It was obvious to anybody with half a brain that it would become a rematch of the Battle of the Dynasties, Bush versus Clinton—that is, until the unexpected collapse of the House of Bush. Nonetheless, we managed to identify two candidates that unified the nation in the common belief that we could really be screwed. Of course, you could vote for Gary Johnson with his catchy “Feel the Johnson” slogan or Jill Stein hugging a spotted-owl-infested tree with one hand and fund-raising with the other, but that seemed pointless for most. We’re told that a vote for a third party is a vote for somebody who won’t win to justify voting for a loser.

“My advice to both candidates is basically the same, with different punctuation: 1) Don’t choke, Hillary; and 2) Don’t choke Hillary.”

~@DaveedGR

Through a colossal waste of brain cells, millions of Americans sought the Holy Grail—identifying the lesser of two evils. The question seemed to boil down to how we define morality: is it about a candidate who seemed capable of repudiating all social norms (see Andrew Dice Clay) and a penchant for absurd behavior or is it about a particularly unlikeable one with a wanton disregard for the law? We all know the outcome, but the path was gruesome. With unusual reservations, I offer a few thoughts on the Electoral Borg that devoured 2016.

“And how many more of these stinking double-downer sideshows will we have to go through before we can get . . . a chance to vote for something, instead of always being faced with that old familiar choice between the lesser of two evils?”

~Hunter S. Thompson, 1972, who died without an answer

The next two sections consider the role of rigged primaries. Rigging is not quite the right term. We the People have this quaint notion that the primaries are part of the Great Democratic Experiment, but that is not even remotely true. The two parties are not-for-profit organizations—let’s just leave it at tax-exempt at least—playing a gigantic game of capture the flag. Primaries are about the parties handing us candidates of their choosing, unfettered by any constitutional mandate for fairness. As political pundit Samantha Bee said astutely, “They can pick a candidate with a Ouija board.” Even after a contentious Nevada Democratic primary, a judge ruled that Samantha Bee was right: the parties can do anything they damn well please.⁶⁰² Their only restraint is to ensure that John Doe and Jane Roe believe that this professional wrestling match is real, a critical prerequisite to retaining wealth and power. Despite having a deep bench of players, the Republican National Committee (RNC) fielded a remarkably weak team. That’s a good place to start.

“Now it’s just an oligarchy, with unlimited political bribery being the essence of getting the nominations for president or to elect the president. And the same thing applies to governors, and U.S. senators and Congress members.”

~Former President Jimmy Carter, 2016

Rigged Primaries: RNC Division

“Congratulations to the Republican party and its nomination process; it’s all going great. Keep it up.”

~President Barack Obama at the White House Correspondents Association dinner

The #neverTrump campaign was launched in the first primary debate when Megyn Kelly asked him what it would take to make him drop out. Seems a little off in retrospect. I return to that in the section on Trump. We also learned in the first debate that “excuse me” is debate speak for “shut the hell up because I am talking, and you are an insignificant twit.”

“His poll numbers tanked—that’s why he is on the end.”

~Donald Trump on John Kasich

Week after week, the media regaled one of the dozen right wingnuts as lurching into the lead—trial balloons that all burst. Trump knocked off Little Marco, Low Ebb Jeb (my name, actually), Ugly Carly, and the rest of the dirty dozen like it was a game of Whack-A-Mole. Ben Carson begged somebody to attack him in the debates. Ben: They thought you were dozing. It’s also hard to take a guy seriously whose answers included, “The fruit salad of their life is what I would look at.” Jeb was wobbling but went down for the count the day he was at a rally, delivered what should have been a punchy phrase, and felt compelled to say, “Please clap.” Jeb will not be back. Cruz and Kasich colluded to knock off Trump, a marriage of necessity that was annulled within 24 hours.⁶⁰³ Eventually the party and the media put all its eggs in the Cruz basket.

“As a moral question it is straightforward. The mission of any responsible Republican should be to block a Trump nomination and election.”

~Washington Post

Cruz was by no means the perfect candidate. By all reckoning, nobody liked him. His college roommate wrote screeds about the wretch.⁶⁰⁴ He had a half dozen sex scandals, baffling all in light of his total lack of sex appeal.⁶⁰⁵ His stances were extreme: in opposition to the use of dildos (ironically), he noted that “There is no substantive due process right to stimulate one’s genitals for nonmedical purposes,” which prompted a campaign to legalize medical masturbation. He was rumored to have appeared on Maury in drag (and was rather ugly . . . not to face-shame him.)⁶⁰⁶ He was rumored to be Canadian,⁶⁰⁷ nearly causing an international incident. A poll showed that 38% of the population of Florida thought he was the Zodiac Killer.⁶⁰⁸ Trump was ruthless with him, however, noting that not one senator endorsed him because they didn’t like him. The Donald went on to say that “If I can’t beat [Hillary], you’re going to get killed.” It was probably right at this moment that the RNC wondered why it didn’t back Rand Paul.

Trump began the morning of the Kansas primary with a “double-digit lead” over Cruz according to a prominent polling group⁶⁰⁹ and then lost to Cruz by “double digits.” Huh? Trump was polling at a 12% lead heading into Oklahoma ⁶¹⁰ and lost that one too. (His campaign spelling it Oaklahoma didn’t help,⁶¹¹ even though few noticed). Cruz threw an air ball in the Indiana Hoosier Dome by drawing attention to the height of the “basketball ring.”⁶¹² Tennessee started screwing around with the number of at-large delegates to help him.⁶¹³ The Wall Street Journal noted that Cruz would end up with more delegates from Louisiana than Trump despite Trump’s win, prompting a few choice tweets.⁶¹⁴ Colorado and Wyoming said “screw it,” cancelled the non-binding straw polls, and gave all their votes to Cruz, prompting a full-blown tweet storm.⁶¹⁵ The State of Washington gave Cruz 40 of 41 delegates weeks after Cruz dropped out.⁶¹⁶ Rick Santorum managed to win Iowa—forgot about him, didn’t ya—prompting the San Francisco Fed to tweet, “Rick Santorum didn’t win . . . anything that matters. Iowa is . . . Iowa,”⁶¹⁷ which then prompted a quick deletion and an apology.

“Trump may be a rat, but I have no desire to copulate with him.”

~Ted Cruz

None of this mattered. Trump took ’em down like a gangster. Cruz finally quit the same day Trump accused his father, Rafael Cruz, of assassinating JFK. Did Cruz quit by using the insanity defense? More on that below. After Trump won the nomination, one of my colleagues referred to his “incompetent tactics.” Um . . . didn’t he just win the nomination against insurmountable odds?

Rigged Primaries: DNC Division

“Unpledged delegates exist really to make sure that party leaders and elected officials don’t have to be in a position where they are running against grassroots activists.”

~Debbie Wasserman Schultz, chair of the DNC (at the time)⁶¹⁸

The Democratic primary was produced by Quentin Tarantino and filmed using authentic Russian dash cams. Early in the game, a notoriously effective Latin American election rigger—the big leagues of election rigging—said he had signed with an undisclosed team.⁶¹⁹ My money is on Team Clinton. Volumes have been and will continue to be written on the transparently crooked Democratic primaries. Anything and everything involving chicanery that seemed vaguely criminal at the time eventually was confirmed by WikiLeaks—a treasure trove documenting despicable behavior that became so voluminous we all stopped paying attention.

Let’s flesh out Debbie Whatshername Schultz’s quote with some additional clarification:

“The Democratic Party benefits from the current system of unpledged delegates to the National Convention by virtue of rules that allow members of the House and Senate to be seated as a delegate without the burdensome necessity of competing against constituents for the honor of representing the state during the nominating process. . . . We passed a resolution in our caucus that we would vehemently oppose any change in the superdelegate system because members of the CBC might want to participate in the Democratic convention as delegates, but if we would have to run for the delegate slot at the county level or state level or district level, we would be running against our constituents, and we’re not going to do that.”

~Debbie Wasserman Schultz, former chair of the DNC⁶²⁰

Leaked memos showed that Debbie rigged the primaries for Hillary. After getting booed off the stage at the Democratic National Convention,⁶²¹ Debbie stepped down as the DNC chair. As a free agent, she was immediately picked up by Team Clinton, having already co-chaired Hillary’s 2008 campaign. Then she became a casualty of the collapse of the Clinton Dynasty. Fear not—Debbie is still a congresswoman from Florida and will be kept plenty busy crowdsourcing her retirement domestically using Wells Fargo and Panamanian banks. As we all know, Debbie was replaced by Donna Brazile, an A-team election rigging workhorse or, as Hillary called her, a “brain-dead buffalo” (vide infra).

The ruse began when Hillary took half the delegates from New Hampshire despite getting her ass kicked in the actual vote. The so-called “super delegates”—a collection of politicians, lobbyists, and big donors constituting 20% of the total—essentially all went to Hillary. The media stopped reporting on them because the ruse was becoming too transparent for comfort.⁶²²

Soros’s cronies were said to be deeply embedded in the Utah primaries.⁶²³ Hillary stole the Arizona primary using fairly standard tactics: (a) long lines favored Hillary because the early voters were older women supporting her; (b) limited polling access was provided in Hillary’s weaker districts; and (c) with lines around the block that, ironically, looked like a Trump rally, her media cronies announced victory based on 1% of the vote, which helped to shrink the lines.⁶²⁴ Michael Krieger summarized the shenanigans in the New York Democratic primary involving various forms of voter suppression.⁶²⁵ A video of the Nevada primary showed pandemonium as verbal votes were obviously going to Bernie and yet were declared to be going to Hillary.⁶²⁶ The chairwoman, dazed and confused, carried out her role with yeoman resolve.

“This was not supposed to be a democratic process.”

~Chris Wicker, vice chair of the Nevada convention

Hillary won six precincts in Iowa by six consecutive coin tosses.⁶²⁷ Leaving aside why a primary has coin tosses, what were the odds? One in 64: try to keep up. It just wasn’t Bernie’s day. One surreal video shows overcounting in an Iowa precinct when the vote counters repeatedly called out, “Are there any more Clinton voters?” and, miraculously, more hands would shoot up each time.⁶²⁸ Angry Bernie supporters were told to “take it up with the election commission.” Hillary declared Iowa a victory and escaped by helicopter under sniper fire.

The Big Rig was the California primary. It was clear that Hillary was well ahead of Bernie nationally, but California looked like it could be Bernie’s, which would cause a critical loss in momentum for the Clintonostra. The day before the primary, the Associated Press (AP) announced that Hillary had won the nomination.⁶²⁹ As DNC confetti flew and Wellesley College fired off an exceedingly well-produced and very well-presented speech from Hillary’s college days,⁶³⁰ the Sanders camp’s Feeling the Bern was really more akin to an STD. Even mainstream media outlets found the AP report to be astonishingly unprofessional. Only John Harwood defended it, noting that “the Associated Press is not rigged.” WikiLeaks showed that John was in on the rig.⁶³¹

In my opinion, the story that got missed was that the premature announcement was not made to bias the primary the next day. It’s not even obvious which team would become more fired up to get to the polls. The announcement was a cover story to hide massive vote rigging. I was as positive as can be without a shred of data. I tweeted that day that the AP announcement was a decoy:

Of course, Hillary won by a landslide the next day, and nobody asked why an estimated 20–30% of Bernie voters simply disappeared.

“The DNC is rigged.”

~Donald Trump (@realDonaldTrump)

“Presenting your favorite conspiracy theorist . . . the Republican nominee for President.”

~Debbie Wasserman Shultz (@DWStweets), head DNC conspirator

“The democratic leadership used its power to prevent a fair and democratic process from taking place.”

~Bernie Sanders, nouveau conspiracy theorist

Eventually WikiLeaks showed the underbelly of the DNC. Mark Paustenbach, the DNC’s national press secretary, described in detail how they would use anti-Semitism to Do the Jew.⁶³² There are nice compilations of damning DNC emails.⁶³³

“The Democratic Party got exactly the ending it deserved.”

~Glenn Greenwald, founder of The Intercept (@theintercept)

Bernie

“We’ve got the bright new face of the Democratic Party, Bernie Sanders.”

~Barack Obama at the White House Correspondents Association dinner

A 75-year-old Brooklyn Jew—a self-professed socialist—proved to be the purest, most endearing candidate of the 2016 elections. He could have won it all running a clean campaign. Leaks showed that Bernie agreed to lay off Hillary’s bank speech transcripts⁶³⁴ and not mention her massive and completely disreputable wealth accumulation.⁶³⁵ But then he hit the Clinton Political Machine, run by folks with what Peggy Noonan referred to as “the soul of an East German border guard.” E-mail leaks told the story: Bernie was a team player, and Hillary and the DNC carried out a political execution. They overtly persecuted him without a sense of remorse or irony.

“Bernie Sanders, to me, is almost more stunning than some of what’s going on in the Republican side. How is that happening, why is that happening?” 

~Steve Schwartzman, billionaire

Bernie was never supposed to win anything. He was a sparring partner, a prop for fake Democratic debates. The angry public, however, had different plans for Bernie. They wanted an outsider. Jill Stein offered for Bernie to take over her ticket to run as an independent,⁶³⁶ but Bernie played for the team. Insiders say his wife begged him not to endorse Hillary.⁶³⁷ I’m not sure it mattered; voters feeling the Bern may not have rallied behind Hillary after she finished ravaging his carcass. Your politics suck, Bernie, but you are an honest and heroic figure—a socialist people could like. I joined you as you teared up at the national convention. You became a rock star and you don’t have to be president. Mazel tov.

“And when you watch these Republican debates you know why we need to invest in mental health.”

~Bernie Sanders

Hillary Clinton

“[S]he has lied so many times, about so many things, that most Americans no longer believe a word she says—even if she’s telling the truth.”

~Marc A. Thiessen, Washington Post

“You know that Donald Trump is an unstable imbecile. But this knowledge doesn’t oblige you to discover new qualities in the bottomlessly cynical, power-mad grifter Hillary Clinton.”

~Michael Brendan Dougherty, This Week

In the olden days, Supreme Court nominee Douglas Ginsberg was disqualified because he smoked pot in college.⁶³⁸ Gary Hart became unelectable because of a photograph showing a little monkey business with a blonde.⁶³⁹ Howard Dean yelled too loud at a rally.⁶⁴⁰ Edmund Muskie bailed after breaking down (weeping) from total exhaustion on the campaign trail.⁶⁴¹ Dig long and hard enough and you eventually find the bottom of the barrel. The Clintons are a family of revenants, showing us that career-ending screw-ups are quaint notions.⁶⁴² That said, the Clintons created a top-heavy edifice of fibs, lies, inconsistencies, and hypocrisies.⁶⁴³ The Clinton Bubble had to pop. They desperately tried to push the reckoning day past the elections, hoping for an Obama pardon if needed. Indeed, the bubble was popped not by the FBI, a vast right-wing conspiracy, the alt-right, Congressional investigators, election hackers, WikiLeakers, fake news, poor handlers, or a the beast with a bad comb-over. It was the Clintons themselves.

“Everything HRC touches she kind of screws up with hubris.”

~Colin Powell, leaked e-mail

I have an indigestible 62 single-spaced pages of notes, quotes, and links on the Clintons destined for recycling. The plotline can be followed through compilations of Clintonobilia focusing on Hillary’s lying, cackling, coughing, falling, fainting, hectoring, perjuring, deleting, stealing, pandering, dying, and even assassinating plastered across Youtube.^644,645,646

“Americans of all political persuasions are coming to the sad realization that our first lady—a woman of undoubted talents who was a role model for many in her generation—is a congenital liar.”

~William Safire, 1996

Some voted for Hillary out of fear of Trump. I get that. Others desperately wanted to see a female president. I view that as misguided but still get it. (Did y’all support Sarah Palin for VP?) There are those, however, who think Hillary is a good person and great for the country. I can’t fathom that one. All year long the media played Marco Polo trying to find Hillary and get her in front of a microphone to answer a few questions. Some suspected the DNC was playing a Breakfast at Bernie’s scam on us, ironic title and all. Others started scanning milk cartons and post offices for her image. Even supporters were calling for a shot clock on press conferences. With the press AWOL and the Republicans ambivalent about whom to support, it took the likes of Guccifer, DCLeaks, Julian Assange, and, yes, maybe even the Russians to provide answers to pressing questions.

“We’ll have a press conference when we want to have a press conference.”

~Joel Benenson, senior Clinton strategist

I took my best shot at Hillary and her foundation last year,¹ so the details emerging this year did not shock me and, on some level, are unworthy of repeating. The volume of the skeletons coming out of the closet, however, was so staggering that we were soon plunged into a vat of lidocaine. I can’t do more than a cursory overview of Hillary’s Wild Ride, but here goes. Buckle up.

“Hillary can change her issue positions as frequently and as totally as she changes her hairstyle. She can flip on the Keystone Pipeline and flop on the Trans-Pacific trade deal. But she cannot go back and delete her lies, evasions, half-truths, and distortions.”

~Dick Morris, former head strategist for Bill Clinton

Let’s start with a physical checkup. We’re all dying—nobody gets outta this one alive—but Hillary appeared to have a commanding lead.^647,648 Over 70% of the surgeons in the Association of American Physicians and Surgeons surveyed called Hillary’s health problems “serious.”⁶⁴⁹ The coughing fits were frequent and protracted.⁶⁵⁰ The collapse at the 9/11 memorial service was clearly serious,⁶⁵¹ and nobody bought the pneumonia story pitched by media cronies.⁶⁵¹ The footage of her spitting phlegm into a glass of water was,⁶⁵³ in my opinion, spitting out a cough drop. She took a dive into an airplane that could easily have been just a stumble,⁶⁵⁴ but stairs were not her friends all year. My theory is that she needed a Kaine—vice-presidential nominee Tim Kaine, who was so oddly non-left wing (pro-life, for example)⁶⁵⁵ that the republicans could support him to defeat Trump if Hillary faltered physically.

Figure 22. Hillary helping Secret Service agents up stairs and without her goggles.

A putative seizure caught on film was said to be real by many doctors,⁶⁵⁶ but I’m dubious. That said, an undenied blood clot in her head attributed to a fall at home (but rumored to stem from a plane crash in Iran)⁶⁵⁷ was real. Neurologists identified the beer goggles with gratings as needed to solve that lazy eye problem.⁶⁵⁸ When Dr. Drew Pinsky was interviewed on talk radio to dismiss these concerns as conspiracy theory, he shocked everybody by saying she looked “brain damaged” and was getting barbaric treatment (medical, that is.)⁶⁵⁹ The next week, CNN canceled Dr. Pinsky’s weekly gig to allow him time to pursue other interests . . . like finding another gig.⁶⁶⁰ He was not the only CNN reporter released to the wild for breaking from the script.

The plotlines wouldn’t die when she gave a couple of post-collapse press conferences looking to be on horse tranquilizers in one⁶⁶¹ and crystal meth in another.⁶⁶²“Why aren’t I 50 points ahead?” she exclaimed with a crazed look in her eye (the good eye). Bill slipped up and admitted she spent months recovering from the clot.⁶⁶³ He seems to be doddering to me, prompting the alt-right to hurl epithets about late-stage syphilis (of which many have considerable experience).

Figure 23. Beer goggles with gratings.

“The Clinton Foundation is, by all accounts, a big force for good in the world.”

~Paul “Don’t Ever Change” Krugman

Sure, Paul. After signing a memorandum of understanding with the Obama administration promising not to rape and pillage the world with her foundation, Hillary welched on that promise almost immediately.⁶⁶⁴ Calling the Clinton Foundation a conflict of interest is like calling Jeffrey Dahmer a glutton. I see no evidence that legal actions against the foundation are off the table during the Trump administration, so we may learn a lot more before it’s over. Peter Schweizer delineated profound conflicts in Clinton Cash that are said to have been used as a road map by the FBI.⁶⁶⁵ Charles Ortel picked up the baton in a series of detailed reports.^666,667 He claims the quoted numbers backing the foundation are low by multiple decimal points, running upwards of $100 billion.

“Do I have a problem when a sitting secretary of state and a foundation run by her husband collect many, many dollars from foreign governments—governments which are dictatorships? Yeah, I do have a problem with that. Yeah, I do.”

~Bernie Sanders on CNN

Here are just a handful of the problems that surfaced owing to a tsunami of leaks. Many of these were known, but they offer a glimpse of the foundation’s modus operandi.

• One hundred eighty-one Clinton Foundation donors simultaneously lobbied the State Department.⁶⁶⁸
• Hillary put a Wall Street trader on the federal board that regulates nuclear weapons because of a big donation to the Clinton Foundation.⁶⁶⁹
• The Crown Prince of Bahrain got access to the secretary of state after pledging $32 million to the Clinton Global Initiative.⁶⁷⁰
• The State Department showed favoritism to FOB (Friends of Bill) in its $10 billion Haiti fund.⁶⁷¹
• Hillary supported a $29 billion military arms deal with Saudi Arabia but only after the Saudis donated $10 million to the Clinton Foundation. Boeing tossed in another $900K.⁶⁷²
• Australia and Norway ceased donations in the millions the week after Hillary lost the election. What about the children?⁶⁷³
• Bill Clinton was an honorary chairman of Laureate Education. The Clinton State Department provided $55.2 million in grants to Laureate; Bill collected $16.5 million in fees.⁶⁷⁴

There are hundreds of such examples. Critics argue there is no evidence of quid pro quo. Yeah? Money changed hands—proof enough.⁶⁷⁵ Intrepid reporters and investigators have a treasure trove of e-mails for building a case against the Clintons (but probably won’t) and Clinton Foundation (possibly will). I imagine many books will be written detailing the sordid plotlines. There is one e-mail, however, that is the Rosetta Stone to the corruption. After throwing a fit about Chelsea sticking her nose into foundation business where it shouldn’t oughtta be,⁶⁷⁶ Doug Band, president of consulting firm Teneo and foundation operative, wrote a 13-page screed describing how he redirected tens of millions of foundation donations to Bill’s personal coffers.^677,678 Marcia Clark could win this prosecution.

E-mailgate was a total mess. The evidence that Hillary breached national security laws was overwhelming.⁶⁷⁹ The investigation started out looking authentic: 147 FBI agents chasing down leads.⁶⁸⁰ Head of the FBI, James Comey, seemed like a stand-up guy, having been confirmed with a 97:1 vote of confidence from the Senate. Who didn’t vote for him? Rand Paul.⁶⁸¹ Maybe Rand remembered Comey’s background at Bridgewater Associates⁶⁸² or that Comey was involved in the Clinton Whitewater investigation 20 years back that came up with nothing. In the theater of the absurd, Comey squared off against Clinton Whitewater lawyer Loretta Lynch.⁶⁸³ It was clear, however, that the public was only partially engaged, but Hillary was methodically digging a very deep hole with specious protestations.

The FBI was ready to make the call about prosecution that, ironically, was not theirs to make, when Attorney General Loretta Lynch and Bill Clinton by chance ran into each other on a tarmac, which was witnessed only by chance. They were just two old snakes on a plane chatting about grandchildren.⁶⁸⁴ Soon thereafter, Comey stood in front of the world and delineated Hillary’s transgressions in lurid detail.⁶⁸⁵ It was as though he had collected her disclaimers—I’m confident he did—and then nuked every single one of them. Hillary was toast. He gets to the climax and—convictus interruptus—a political dirty Sanchez. He announced there was nothing whatsoever to prosecute and scampered off the stage (under sniper fire). A couple days later, he testified to Congress confirming how much Hillary had lied, providing plenty of treasons to indict.

Here was my initial take on it. Comey took the bullet for Lynch. Lynch is required by law not to prosecute long shots. Is there anybody who thinks Lynch could get a 12:0 vote out of a jury against what would likely be a sitting president years later? They had to let her walk, but before doing so, Comey convicted her in the Court of Popular Opinion. In return, the Republicans attacked the decision but passed on every opportunity to attack Comey.

But then it got weird. Rumors of a coup d’état within the FBI rank and file came via leaks. They pointed to obstructionism by Comey and Lynch the whole way.^686,687 The DoJ let key witness Cheryl Mills serve as Hillary’s lawyer, which allowed her to avoid being deposed.⁶⁸⁸They allowed Team Clinton to destroy evidence.⁶⁸⁹ That sent Hillary on a frozen rope straight to Pennsylvania Avenue! Yeee-haawwww!

“How does it feel for a much younger, younger generation, you will be their first white president?”

~Zack Galifianakis to Hillary on “Between Two Ferns”

But then it got really weird. An altogether independent investigation of Anthony Weiner’s sex offense blew 650,000 of Huma Abedin’s e-mails into the public eye. I suspect that Huma backed them up on the horned toad’s computer as a life insurance policy; she knew how Clintons dealt with threats. Comey announced the Hunt for Hillary was back on. They finally had her. A week later, in yet another Roseanne Roseannadanna moment, Comey said, “Never mind.” Hillary was stumbling toward Pennsylvania Avenue with only two days before the election.  At this point, Comey was probably planning quality time with his family.

I cannot skip the darkest part of the Clinton mystique—the Clinton body count. Rumors of dead enemies have dogged the Clintons for years. It’s not just Vince Foster.⁶⁹⁰ Almost 50 people are on an admittedly generous list of victims.⁶⁹¹ (I’m guessing the Carter body count is less impressive.) I don’t know if any of the stories are true, but they are disturbing. At one point this year, five people who were explicitly dangerous to the Clinton campaign died in only six weeks.⁶⁹² The most notable was Seth Rich, shot to death with no motive identified on the morning he was to testify against the Clintons.⁶⁹³ WikiLeaks confirmed he was a DNC insider who had turned.⁶⁹⁴ Assange offered a reward for more information on Seth’s death.⁶⁹⁵ Ironically, a cat burglar was chased off the Ecuadorian embassy in the wee hours.⁶⁹⁶ It’s not hard to imagine what (or whom) he was looking for.

What astonished me watching Hillary weave and bob to avoid problems of her own creation was the totality of her hypocrisy. Of course, the web has a long memory, so it didn’t take long to recall that Hillary was actively pushing the birther story in ’08⁶⁹⁷ as well as the Obama-in-a-turban photo.⁶⁹⁸ Few know that Bill and Hillary, to their credit, used the “Make America Great” slogan years before Trump.⁶⁹⁹ Her heroic efforts to summon federal aid for earthquake-ravaged Haiti was eventually shown to be a slovenly grab of lucrative contracts by friends of Bill and Hillary, who then proceeded to do almost nothing for the Haitians.⁷⁰⁰ The Clinton Foundation had boots on the ground in Haiti again after the hurricane, going door-to-door soliciting donations of any size (please laugh). The family’s speaking fees fetched them a cool $200 million net worth as civil servants in what was undeniably a pay-to-play scam of monumental proportions.

Hillary’s profound hypocrisy is most easily conveyed, however, by letting her speak for herself:

“A man with this much contempt and disrespect for women has no business becoming president.”

~Hillary Clinton

“Every survivor of sexual assault deserves to be heard, believed, and supported.”

~Hillary Clinton

“Go fuck yourself.”

~Hillary to her secret service agent in response to “Good morning.”

“What we have here is pretty much what I have been saying throughout this whole year, and that is that I never sent or received anything that was marked classified.”

~Hillary Clinton

“You stare at the wall like a brain-dead buffalo while letting fucking Lauer get away with this betrayal? Get the fuck to work janitoring this mess: do I make myself clear?”

~Hillary Clinton to Donna Brazile

“You wanted it, didn’t you?”

~Young Hillary Clinton to a now-sterile 12-year-old rape and beating victim on the witness stand (after exiting the coma)

“But if everybody’s watching, you know, all of the backroom discussions and the deals . . . you need both a public and a private position.”

~Hillary Clinton, on the Goldman tapes

“I have a lot of experience dealing with men who sometimes get off the reservation.”

~Hillary Clinton

“It is one of the most important challenges the next president is going to face.”

~Hillary Clinton on cybersecurity

“The real key to cybersecurity rests with you. Complying with department computing policies and being alert to potential threats will help protect all of us.”

~Hillary Clinton to her staff

“This is a man who says . . . women don’t deserve equal pay unless they do as good a job as men.”

~Hillary Clinton, first presidential debate

“I want the Iranians to know that, if I’m president, we will attack Iran.”

~Hillary Clinton

“I’ve been the most transparent public official in modern times.”

~Hillary Clinton

“I often feel like there’s the Hillary standard and then there’s the standard for everybody else.”

~Hillary Clinton

“We are going to write fairer rules for the middle class, and we are going to raise taxes for the middle class.”

~Hillary Clinton, probably just garbling her words owing to brain trauma

“Name one thing anybody has influenced me on.”

~Hillary Clinton

“The company you keep says a lot about you.”

~Hillary Clinton

“We did not lose a single American in that action.”

~ Hillary Clinton on Libya

“I do not believe that they did anything that they believed was in any way inappropriate.”

~Hillary Clinton, supporting those who sent e-mails to her insecure server

“There’s just a deep desire to believe that we can have free college. . . . I don’t want to overpromise. I don’t want to tell people things that I know we cannot do.”

~Hillary Clinton, on a Goldman Sachs video after publically promising free college

“As the FBI said, everything that I’ve said publicly has been consistent and truthful with what I’ve told them.”

~Hillary Clinton

“Can’t we just drone this guy?”

~Hillary Clinton on Julian Assange

“Anyone not willing to accept the result of an election is a danger to democracy.”

~Hillary Clinton

Besides what appears to me to be a lifetime of criminal behavior befitting that of a clinical sociopath, what were Hillary’s biggest mistakes? I view three as truly colossal screw-ups by an otherwise coldly calculating political veteran.

(1) Hillary called approximately 25% of the voters (half of Trump’s supporters) a “basket of deplorables.” You attack the candidate but never the voters. What was so egregious was that she turned them into nouns. They were not deplorable but rather deplorables. You could actually hear her minions after the fact trying to reverse that grammatical subtlety. The noun form was dehumanizing. Hillary was dehumanizing. 

(2) Hillary feigned interest in the environment—her first loyalty remains to her—supporting green energy as preferable to coal. Her enormous mistake was that she told the most downtrodden working class in America—coal miners—that she was going to put them out of work. It revealed a lack of compassion—a monumental political blunder.

(3) She and her team rigged the polls and controlled the media. The control was absolute, because the media (even Fox News) had turned on Trump. The blunder was that she then believed the media reports and the polls showing she was winning. Team Clinton lied to itself on a grand scale. Meanwhile, she slowly but ever so steadily lost the millennials, the Bernie supporters, and even minorities in significant numbers. I return to the minority shift in the next section. It’s important.

Figure 24. Poll showing Clinton lead on November 7^th.

Before closing, I must mention Huma and the Weiner, which refers not to a sitcom but to Huma Abedin and her sex-crazed husband and former politician Anthony Weiner. I am confident that Huma’s moral bar is at the wrong level.⁷⁰¹ The scandals about her 10-year stint as the associate editor of the Journal of Muslim Minority Affairs are innuendo but remain disquieting.⁷⁰² Maybe JMMA is just the Saudi comeback to Cosmo, but maybe not. The e-mail leaks from the DNC and ultimately from the Weiner clearly showed that Huma played a key and dubious role in what I believe will prove to be the largest scandal

Figure 25. Caption contest.

of them all, the Clinton Foundation. The close affiliation with Hillary Clinton is condemning. But here is the impressive part: Huma’s role as Hillary’s chief of staff—a role that demanded dealing with unimaginable pressures daily—tells me that she must be working at the highest possible level of competence. Huma has gravitas. Somebody will hire her and get their money’s worth, even if there is a little interim time spent in public housing—orange is the new black—or in a witness protection program.

Trump

“This year represents a paroxysm in the political system that is rejecting the attempts to control the election from the halls of power. . . . They might find a way to take Trump down, but he’s not going down easy.”

~David Collum, BTFDtv, January 2016

The media and two parties beat Trump unceasingly. Even the Hillary-hating ultra-right power brokers Bill Kristol, George Will, and Mitt Romney supported Hillary. Ruth Bader Ginsberg, breaking federal law precluding a sitting Supreme Court justice from making political statements, noted, “I can’t imagine what the country would be with Donald Trump as our president. . . . He is a faker.” The Donald fired back, “Her mind is shot. She should resign.” They could both be correct. Conservative pundit Andrew Sullivan referred to a Trump presidency as an “extinction-level event.”⁷⁰³ Ex-CIA head Michael Hayden suggested the troops would not follow his orders, which sounds very Roman. Of course, Wall Street veterans like Buffett and Paulson hated him because he might not even be for sale, let alone have bargain-basement price tag of $200,000 and a Buy-Now button at Amazon.

“If trump wins the election I am moving out of the country goodbye America hello Hawaii”

~@BasedPaco

We just witnessed a victory that was every bit as improbable as the 1980 U.S. hockey team winning the gold in Lake Placid (albeit lacking the universal appeal . . . except, ironically, from the Russians). How did this happen?

I’m not going to pile on. I am trying to avoid being one of the billions who underestimated the man. Admittedly, Trump has a huge error bar tattooed on his ass, and I could be doing some serious mea culpas in the future. Some may be irritated if not appalled that I am writing past his obvious flaws this year and looking at his achievements; next year there will be some serious hard data to work with. I am, however, optimistic that he is in this for real and that there is a chance—possibly a long shot, mind you—that he will be transformational. The single best source of upbeat analysis of Trump came from cartoonist Scott Adams of Dilbert fame. He opened with a snarky endorsement of Hillary noting, “I’ve decided to endorse Hillary Clinton for President, for my personal safety.”⁷⁰⁴ Later blogs, however, supported The Donald and dissected his tactics. While most heard Trump babbling simple, mind-numbing platitudes, Adams witnessed somebody using classic linguistic ploys to win—as you might expect from a guy who wrote The Art of the Deal and has been closing deals for his entire life. I was reminded of sections of the classic book Influence, in which Robert Cialdini describes how we are influenced by others.

“It turns out that Trump’s base personality is “winning.” Everything else he does is designed to get that result.”

~Scott Adams (@ScottAdamsSays)

At the outset, a meeting of the Clintons and Trump before he threw his hat in the ring convinced me Trump was a stalking horse for Hillary—a decoy to disrupt the Republican nominating process. National Review suggested he might be a “Manchurian candidate.”⁷⁰⁵ Maybe this was true, or maybe, just maybe, he was setting Hillary up for The Sting. No matter, soon he smelled blood like Bruce the Shark in Finding Nemo, and the hunt for the presidency was on.

Megyn Kelly opened the debates asking Trump what it would take to get him to drop out. Was he below the minimum standard that was obviously quite low, or had he already scared the establishment? My wild-ass theory is that he and Megyn choreographed a highly visible Battle Royale to advance both of their goals: The Kelly/Trump fight was staged. Cui bono? Both. Trump is now president and Megyn is looking at a $20 million annual salary. That would be classic Trump. From there, he proceeded to emasculate and then defeat a bevy of losers in the Republican debates. He then set his sights on Hillary.

Trump was so totally unconventional. He spent little on campaign ads, instead relentlessly baiting the media into reporting anything he said. He would tweet 140 characters, and the media would write volumes and talk about it incessantly. He called a press conference under a false pretense and then presented them with whatever he had on his mind. They called it getting “rickrolled,” and it got huge coverage.⁷⁰⁶ While Hillary was a mediaphobe, Trump was a mediaphile. While Hillary ducked press conferences, Trump held over a dozen, taking all questions and answering them with highly quotable zingers.⁷⁰⁷

His penchant for throwing out wild-eyed conspiracy theories had his opponents and the media apoplectic. The funny part is that despite protestations to the contrary, his exaggerated and hyperbolic assertions always had shards of truth. His accusation that Obama and Hillary played a role in creating ISIS is considered common knowledge by many.⁷⁰⁸ He accused a Mexican-American judge of bias. If you read the analyses, Trump was a nutty racist bigot. If you actually watch the video,⁷⁰⁹ however, you see a well-presented assertion (whether true or false) that his plan to build The Wall was compromising the judge’s impartiality. Ironically, several judges, including former Attorney General Alberto Gonzalez, jumped to Trump’s defense.⁷¹⁰ It was said that “Trump’s prediction of a ‘massive recession’ puzzles economists.”⁷¹¹‘Nuff said by me on that one.

“Just getting nasty with Hillary won’t work. You really have to get people to look hard at her character.”

~Trump (way before the first debate)

Trump resurrected the Vince Foster death as “very fishy,” which again brought the media into a frenzy over a long since “debunked” conspiracy theory.⁷¹¹ Vince’s death was indeed profoundly fishy,⁷¹² as was the Clintons’ behavior after his death. How about that loopy claim that Ted Cruz’s father, Rafael, assassinated JFK? The media declared that one beyond the pale. Curiously, that rumor has been working the back channels for years.⁷¹³ Rafael was a politically active Cuban national at the right time and place. A video shows Oswald and another man handing out pamphlets.⁷¹⁴ The other man is said to be Rafael. I can’t tell, but Trump’s claim was not completely out of thin air, and a frustrated Lyin’ Ted quit the day Trump made the accusation.

“That would be impossible.”

~George Bush Sr. on Trump’s offer to be his VP

Trump’s rallies were spectacles. There was serious violence. After getting pelted with eggs by anti-Trump forces,⁷¹⁵ a blonde Trump fan suggested, “Maybe I egged them on.” This is a surprisingly witty comeback for a subhuman, alt-right Trump supporter.⁷¹⁶ One rally was canceled owing to the violence.⁷¹⁷ In others, cars were tipped over.⁷¹⁸ Shockingly, this all got hung on Trump by the media, somehow not noticing that the Trump supporters were boisterous but largely nonviolent. Oh, right: it was his rhetoric.

“Figure out how to extract yourself and your car or truck from an angry mob before you confront the problem. Your options are limited, and time will be short.”

~Me channeling Reginald Denny

What was suspected and eventually confirmed by a combination of WikiLeaks and an undercover video by Project Veritas was that the violence was orchestrated and paid for by the DNC.⁷¹⁹ The guy who admitted on camera to doing it, Robert Creamer, also happened to have visited the White House 340 times, including more than 40 trips to see President Obama.⁷²⁰ Robert may do some serious jail time before the next administration is done with him. The DNC, by contrast, came out unscathed, albeit totally discredited. Euthanasia seems appropriate to me. Give the egg lady a bat and 10 minutes with Creamer and you might get some justice.

The other noteworthy feature of the rallies was that they were huge. While Hillary was having fake rallies with hundreds, The Donald was filling arenas with lines stretching for blocks. The rallies were this era’s Woodstock. While the crowd chanted “lock her up” and “drain the swamp,” the master showman would use phrases like, “It’s just me up here. Just you and me.” He hammered foreigners, but he gave nothing but big hugs to Americans. It was declared racist, Islamophobic, xenophobic, and bigoted, but many Americans liked the general message.

“No one ever went broke underestimating the intelligence of the American public.”

~P. T. Barnum

Trump’s truly momentous scam was classic Trump and nobody noticed: he threw the first debate against Hillary. What? He threw the friggin’ debate? Pundits breathlessly reported on the day of the long-awaited political event that “insiders” were saying he “wasn’t ready.” Don’t be so gullible, dudes: real insiders tell you only what they want you to hear. In the debate, he looked terrible. Hillary landed body blow after body blow on his support for the Iraq war (which was oddly ambiguous⁷²¹) and his tax returns, and he didn’t even throw a real punch. How did he let himself get caught on the ropes so badly? The media declared the election was over. Trump was incompetent and unpresidential. (The two are not the same.)

Here’s your homework assignment: List Hillary’s 15 biggest scandals—The Donald had them committed to memory—and then go back and watch Debate I. How many did Trump attack her on? None. Nada. Zero. There were some minor slip-ups, but he left those skeletons securely in the closet. Why? When I pointed that out to friends, they would declare he was simply that stupid.

Tweeter @JPCompson and I, in a series of private messages, saw it as a classic rope-a-dope. In round I, he took her best shots without returning her volley. He was saving himself for Debates II and III, because once you’ve attacked her, it becomes unusable old news. We were positive he would knock her out in Debate II. Unfortunately, “grab them by the pussy” appeared the week before this debate, so we’ll never know what his original plan was: now he had to knock her out. Meanwhile, Hillary thought she would spend the evening having her way with this ball-gagged, pussy-grabbing sexual predator. Indeed, Trump spent the first five minutes of Debate II defending his groin against an assault, looking for metaphorical and literal castration, and then he destroyed her. She was dazed and confused the remainder of the night. He even managed to play a seemingly losing hand on abortion by describing Hillary as a baby killer. He hung late-stage, third-trimester abortions around Hillary’s neck by the umbilical cords. You’d swear Hillary actually ran an abortion clinic. There was one exchange, however, that took top billing in the Debate Hall of Fame:

Hillary: “You know it is just awfully good that someone with the temperament of Donald Trump is not in charge of the law in this country.”

Trump: “Because you’d be in jail.”

But wait a minute there, Sparky. Didn’t the widely (universally) cited CNN poll show she won 51% to 39%. Yes, it did, but the polls were as fabricated as the election coverage, which was also ultimately outed by WikiLeaks. I knew Trump won big using my own lying eyes and by a simple survey. I searched “who won” on Twitter—a nonpartisan Boolean search covering the entire political spectrum without bias. In 27 spot polls, he destroyed her in many and, most important, he beat her in 25 of the 27 polls. Meanwhile, the voters kept getting told by all the major news outlets that Hillary won.

From the outset, Anne Coulter defiantly declared that Donald Trump would be the next president.⁷²² People laughed at her like she was Peter Schiff declaring there was a huge real estate bubble. Right-wing pundit Sean Hannity stepped into the right-wing buzz saw to give him fair treatment. It was hard to find them, but Trump supporters in prominent places slowly crawled out of their safe spaces. Eventually Gingrich and Giuliani jumped into the fray. Wall Streeters Peter Thiel and Jeff Gundlach lent support. A month before the election, I sat at a table with a dozen highly educated, affluent friends from college and was shocked to discover 100% supporting Trump. This is inconsistent with the storyline about his base being wife-beating, alt-right sexual predators. Closet Trump supporters were coming out of their closets.

“No, I would not vote for Hillary Clinton . . . and Trump is not the typical detached, corrupt, greedy, globalist U.S. president we’ve become so accustomed to. This is precisely what his supporters are picking up on and why they love him.”

~Jim Webb, Democratic presidential hopeful

The weirdest subplot of them all is still off most radars and may never fully take form: minorities seemed to move toward Trump. Mind you, it was just a flicker, but The Donald courted them as the democrats lethargically assumed they would lose zero votes from the minority community from here to eternity. Trump, of course, had given plenty of reasons for Hispanics to dislike him, but black Americans were visibly showing support.⁷²³ Blacks for Trump rallies were appearing:⁷²⁴ I don’t remember Blacks for Mitt. Ice Cube articulated Trump’s appeal, falling short of endorsing him.⁷²⁵ Dave Chapelle, before his legendary post-election SNL appearance⁷²⁵ seemed intriqued with Trump.⁷²⁶ Shaquille O’Neal, Mike Tyson, 50 Cent, Sean Diddy Combs, and other prominent blacks openly supported Trump.⁷²⁷ Football legend Jim Brown said Trump “is going to be for all the people.”⁷²⁸ Malik Obama, Barack’s brother, supported Trump.⁷²⁹ Quanell X, the head of the New Black Panther Party, told us to ignore the package and listen to the message.⁷³⁰ Quanell X’s message was simple: we have given the Democrats our love for a half a century, and what do we have to show for it? The head of Blacks for Bernie, undoubtedly still smarting from the abuse Bernie took from Team Clinton, threw his support for Trump.⁷³¹

Is it possible that, much the way Southern Democrats morphed into Southern Republicans (for admittedly different reasons), black Democrats are shifting their allegiance? Some of the post-election stats hint at this, but one can find many more stating the opposite. It would, however, be a sea change of unimaginable political consequence. A lot will depend on the next four years.

“You’re living in poverty, your schools are no good, you have no jobs, 58 percent of your youth is unemployed. What the hell do you have to lose?”

~Donald Trump to African Americans

Media

“The mainstream media bet the farm on Hillary Clinton, confident that their dismissal of every skeptical inquiry as a ‘conspiracy’ would guarantee her victory. It now appears they have lost their bet.”

~Charles Hugh Smith, OfTwoMinds

Let me be clear to the mainstream media as a collective: you guys suck. I’m talking really suck. A Gallup poll showing your credibility dropping to single digits—below the percentages who believe in Sasquatch—says I am not alone in my disdain.⁷³² I know some great reporters; painting everybody with a big brush is not fair, but I would slather most of the news organizations with tar, throw some feathers on them, and wait for Chapter 7 liquidation. One side of my brain says, go ahead. Define your media niches. If it destroys your brands, that was a business decision. You will be replaced by an honest (digital) product that people demand. The other lobe worries that Big Money will just keep buying up or, if necessary, sabotaging new media. As fledgling outlets emerge (think Huffington Post), they get swallowed by the Borg Collective. Is this really free press? Are there analogues of Woodward and Bernstein? We desperately do not need whores and gigalos groping people in power simply to gain access. It’s showtime: risk your access or risk your role in a democratic society.

I’m sure this problem is bipartisan, but fear of Trump and agenda-driven support for Hillary caused a political lopsidedness. Emblematically, the winner of the election didn’t get a single endorsement—not a one—from the top 100 media outlets.⁷³³ Maybe Hillary should have batted 0 for 100 as well. WikiLeaks showed that hundreds of reporters were in cahoots—had their noses right up the butts of Team Clinton to a shocking degree.⁷³⁴

“We couldn’t help [Hillary] any more than we have.”

~ Chris Cuomo, CNN correspondent

First off, quit donating to campaigns and crime syndicates masquerading as nonprofit foundations. Time Inc. was a big Hillary donor.⁷³⁵ Politico reported—thank you, Politico—that NBC Universal, News Corporation, Turner Broadcasting, and Thomson Reuters are among the many media organizations that donated to the Clinton Foundation.⁷³⁶

The network that took the absolute worst beating this year was CNN—the Clinton News Network. Time Warner, owner of CNN, was Hillary’s seventh largest donor.⁷³⁷ At the microscopic level, you could see it. CNN reporters criticizing Hillary would be cut off mid-broadcast.⁷³⁸ You also should probably stop firing reporters for content that you find inconsistent with your endorsed candidate’s views.⁷³⁹ You let Team Clinton feed you questions for interviews,⁷⁴⁰ and you fed them questions for the debates:⁷⁴¹you rigged the debates.

Thank God for the wild free-speech zone offered by social media, where everything and anything can be said. In one 24-hour period, I chatted with the former president of Microsoft, countless journalists and hedgies, a vice president of the St. Louis Fed, and one of Bill Clinton’s rape victims. (Wouldn't want to skip the Oxford comma in that sentence.) I taught Juanita Broaddrick how to “pin” a Tweet, and she pinned a zinger:

There were some funny mishaps. Rumsfeld hit Twitter endorsing a flat tax, but it quickly turned into a war crime Tweet-A-Thon.⁷⁴² TayTweets, an artificial intelligence (AI) program designed by Microsoft to interact with people on Twitter, was pulled when it began spewing anti-semitic hate speech and pro-Donald Trump campaign slogans.⁷⁴³ It has the AI guys and the AI debate on the DEFCON scale. As noted above, the NY Fed thought exposing itself to the Fever Swamp was a swell idea. Shoulda listened to Geraldo when he advised not to tweet late at night shirtless.

“[I]t takes a special kind of asshole to actually get banned from Twitter.”

~New York magazine

A decidedly unfunny covert war is being fought against the openness of it all. The major tech companies are beginning to sift through content and decide what is right or wrong. I reiterate, I support the right of these companies to destroy themselves, but I think something much more sinister is going on. Facebook, Google, and Twitter all showed a distinct bias against right-leaning content. Polarizing figures were getting banned and their content blocked.⁷⁴⁴ Facebook deleted highly popular pro-Trump pages in social media’s variant of the Night of the Long Knives.⁷⁴⁵ YouTube blocked some content providers at the cash register—prevented ad revenue—when the content didn’t fit its definition of what’s right and wrong.⁷⁴⁶ The techies profess to be saving us from being subjected to hurtful ideas. Although this year was anti-right-wing bias, I suspect it’s a less partisan content control bias. It’s wrapped in a protective cloak with an anti-terrorism or anti-hate-speech logo, but it’s about suppressing free speech.

A few random flesh wounds and head shots to and from the media are summarized as Bad Bullets:

• The New York Times dropped superdelegates from its tabulations to protect the DNC.⁷⁴⁷
• The AP announced Hillary’s victory in the Democratic primaries before it was hers and specifically timed the announcement to influence the impact of the California primary (vide supra).
• An Obama aide was hired and fired by NBC/MSNBC on the same day when it was discovered that she was helping him get his Supreme Court nominee through the system.⁷⁴⁸ Nice stick save.
• Chuck Johnson, right-wing investigative reporter, was the first to be banned from Twitter and warned Breitbart tech analyst Milo Yiannopolous he would be banned.⁷⁴⁹
• Milo Yiannopoulus was first unverified (which is just weird) and then banned from Twitter for what was clearly polarizing content that would be constitutionally protected in a public setting.⁷⁵⁰
• Twitter CEO Jack Dorsey claims Twitter censors nothing.⁷⁵¹
• An ex-CIA guy who had been on Fox News for years turned out to be a total fake, getting him 33 months in prison.⁷⁵² What happened to the other fakes?
• A former Zero Hedge employee outed marginally concealed ZeroHedge founders in Bloomberg and then discovered the hard way that he’d left a paper trail of his personal misdeeds a mile long.⁷⁵³
• CNN reported that 200 million people died from 65 million surgeries.⁷⁵⁴
• Michael Savage’s radio show got blacked out in a number of cities when he started talking about Hillary’s health.⁷⁵⁵
• Headline: Game Developer Mark Kern Banned On Twitter For Saying Radical Mosques Should Be Surveilled—even though they are being surveilled. We all are.⁷⁵⁶
• Scott Adams got “shadow banned” on Twitter, which meant that, unbeknownst to him, his tweets weren’t showing up.⁷⁵⁷
• Roger Ailes of Fox News got accused of “grabbing the pussy” of aspiring female journalists, generating a digital exam of his own genitalia.⁷⁵⁸
• Michael Isikoff unsuccessfully called for the unedited Juanita Broaddrick interview, including the deleted part wherein she hammered Hillary.⁷⁵⁹
• Christina Hoff Sommers was silenced on YouTube for anti-feminist views.⁷⁶⁰
• RBS shut down the banking functions of RT, backing down eventually but showing a totalitarian side.⁷⁶¹ The irony is palpable.
• The Economist tweeted, “Donald Trump must be stopped before it’s too late,” showing that it’s not only their coverage of economics that is dubious.⁷⁶²
• When Trump pulled into the lead, Reuters changed its polling methods.⁷⁶³
• Lester Holt was so bad in the first debate he got nicknamed “The Third Debater.”⁷⁶⁴
• Martha Raddatz “lost her shit” and started arguing in a debate . . . and then cried when Hillary lost.⁷⁶⁵
• Searches for the “Clinton AP story” gave results limited to stories from left-wing publications discrediting the story.⁷⁶⁶ (I checked; it was true when reported.)
• Chris Wallace shined.

Pamela Geller, after some boots and bans owing to what was deemed anti-Islamic content, has filed a joint lawsuit against Attorney General Loretta Lynch and tech giants Facebook, Twitter, and YouTube for “unlawful discrimination based upon their religious and political beliefs and views.”^767,768

“The Watts case involved a young man who claimed that if he was drafted and made to carry a rifle, then ‘the first man I want to get in my sights is L. B. J.’ The Court found seemingly violent ‘hyperbole’ is constitutionally protected.”

~Glenn Reynolds (@Instapundit), about a bygone era

Conclusion

And in a flash, it was over—the election, the year, a clockwork orange. Newsweek released the results in a commemorative issue just a wee bit too early. Time waited and got it right. The gravity and despair on the left was often captured by images of Hillary supporters crying, but the most poignant image might have been that of John Podesta walking into the arena the night of the election. He was to announce that the dreams of a Clinton presidency—of the first female president—were dashed and that their candidate would not be coming out that night. John’s burden is palpable. Despite my disdain for the Clinton political machine and even his role, I can feel his pain. Another oddly moving experience for me was listening to Kate McKinnon in her role as Hillary Clinton on Saturday Night Live singing “Hallelujah.”⁷⁴⁸

Trump was not a cause but rather an effect. For me the wildly uplifting nonpartisan message is that we threw the bums out. The voters took the wretched candidates offered by the two political parties and said, “No. We will be choosing our own president this time, warts and all.” The risk to the elites is that the movement is global. Britain and Italy voting to leave the EU is the same plot.⁷⁴⁹

“Trump’s election is going to be the biggest fuck you ever recorded in human history, and it will feel good.”

~Michael Moore

One might ask whether transformative change really required someone as extreme as Donald Trump? My answer is a resounding yes. No other candidate could challenge the system so profoundly and defeat it. To shake a rotten system to its foundations truly required an unprecedented performance. I encourage you to hold your doomsday prophecies for some data.

“You can’t always get what you want. But you just might find you get what you need.”

~Rolling Stones

Amazingly, nobody can see past February. Even Trump supporters are watching quizzically. I am guardedly optimistic that Trump is more cunning and calculating than his political foes realize. The post-election press conference in which he denounced the press as liars and scoundrels was, like Trump, paradoxical. On the one hand, it was seriously ham-fisted. On the other, many are lying scoundrels. We have the right to a free press, which is slipping through our fingers because the press forgot to do the job that is so important in a functioning democracy. Without a strong First Amendment, the populace will naturally turn to its backup—the Second Amendment.

I am confident that Trump plays to win. Trump the candidate will not be the same competitor as President Trump because the task is different. The Carrier jobs move, calls to Taiwan, and Stinger missiles shot at Boeing are consistent with a simple message from the pre-POTUS: he is not going to take any guff. Of course, there will be some yuge missteps. Some say his political appointees are a disaster. I submit that they are not so nuts if his goal is to shrink the footprint of government.

I don’t worry about Trump as much as I worry about the abrogation of free speech. From my vantage point, the alt-left seems more dangerous than the alt-right because the former is charging at our right to free speech with venomous aggression. Recent moves to censor and eliminate “fake news” are not just political footballs. They are attacking the most fundamental right of our democracy—the right to free speech. Give that up and you give up everything. I can ignore Nazis, communists, cultists, and fringe elements of almost all kinds provided they come as a consequence of free speech. Aristotle said that an educated person—actually, he said educated man—can entertain an idea without endorsing it. We should be careful not to give up the right to entertain all ideas.

I have a solid record as a college professor. I get good teaching reviews in courses, have not been rejected on a federal grant since 1987, publish in the best journals, have served as the associate editor of a prominent scientific journal for 20 years, and have held administrative positions of some importance for 15 years. I have helped coach two sports at the collegiate level, advised a number of clubs, and fallen on my sword in more ways than I can say in public (including one right now). Nonetheless, writing this review poses unknowable risk. In the midst of a very left-leaning faculty discussion, I got a text from a high-ranking administrator that stated succinctly, “Dave: you need to speak up.” I did not say a word. That was a small moment of shame—a microshame.

I am reminded of the universal maxim “this too shall pass.” Randy Pausch’s wife once said that when you start obsessing just say to yourself, “this is not helping.” Mark Twain or Will Rogers suggested that “Worry is the interest you pay on a debt you may not owe.” And lest we forget, there are always more elections to worry about:

Books

“Books serve to show a man that those original thoughts of his aren’t very new after all.”

~Abraham Lincoln

Every year I attempt to attenuate the growth of my 35-page wish list on Amazon by reading a handful of books, but I am losing the fight. I choose carefully owing to limited bandwidth. The books end up being an eclectic mix with one unbroken theme: they all profess to be nonfiction. I am not spending good money without attaining personal growth loosely referred to as knowledge. Novels just don’t cut it for me. Here is my 2016 reading list for what it’s worth.

Destiny and Power: The American Odyssey of George Herbert Walker Bush by Jon Meacham

This book is the amazingly uplifting story of a humble, very sensitive, family-oriented guy who lived a very moral existence. The occasional mishaps hurt him deeply. He created wealth, not (just) inherited it. His loss in the second term stemmed, in part, from ambivalence about whether he really wanted it. You get some minor but telling views about his opinion of the Clintons and absolute respect and loyalty to Reagan. The book seemed a little too supportive of GW’s presidency (through the fuzzy eyes of a proud father.) Overall, I finished with a substantially amplified opinion of GHWB.

The Kennedy Men: 1903–1963 by Laurence Leamer

This book is an oddly imbalanced mix of the Kennedy men including Joe Sr., Joe Jr., John, Robert, and Teddy. The description of the kids in childhood was all about Joe Jr. and John. Bobby gets short shrift. That said, Bobby is depicted as a total hothead. Teddy is an afterthought. There is quite a bit on the womanizing but not so much that it risks being just salacious garbage. I enjoyed the book, but the imbalances and dubious organization made it less than it could have been.

Moonwalking with Einstein: The Art and Science of Remembering Everything by Joshua Foer

Foer describes the odd world of memory experts—the guys who learn how to memorize vast quantities of often worthless information in very short order. (Homer is a great example of one of the original memory junkies.) What makes the story interesting is that Foer taught himself how to do it and excelled. I had seen Foer speak and was captivated by the idea. I gotta confess that (a) the book did not move along fast enough for my tastes, and (b) I didn’t finish it. It conveyed the ideas, but I was not getting to the question of how. It may just have been my impatience. The two-star reviews at Amazon (checked after writing this review) confirm that others had similar problems, although the overall rating is high.

Malcolm X: A Life of Reinvention by Manning Marable

Manning tells the transformational tale of Malcolm X. In some odd way, this book is a follow-up to the original Alex Haley version. In Marable’s version, Haley is actually part of the plot. It is a story of redemption. A young man—a caricature of sorts—heading to nowhere but a life of crime and prison becomes one of a transformational characters of the twentieth century. While Martin Luther King Jr. was rallying the rural South, Malcolm was more militantly rocking the cities. The role of Islam (the Nation of Islam) in his metamorphosis is profound and compelling. I would’ve loved to see what he’d have done had he lived his full life. The only downside is that the book, like so many historical treatises, is filled with characters that, despite some memorable ones (Mohammad Ali, Louis Farrakhan), are simply not of interest to the general readership. You can’t live with ‘em but ya can’t live without ‘em.

The Catholic Church: A History by William Cook

I’m a huge fan of The Teaching Company’s audio series: college-level, trimester-length courses on interesting subjects taught by talented lecturers. This course was exactly what I had hoped for—a historical rather than religious look at the role of the Catholic Church in society through the years. The origins and early history in the ancient era was the best part. The more modern periods were of far less interest to me. The course is not about God or Christ but rather about the institution we call the Church (capital C).

The New Case for Gold by James Rickards

Jim is an occasional acquaintance and frequent e-quaintance with a common interest in gold as a means of wealth preservation. His book is an easy read that will be enjoyed by gold fans but is really more important for neophytes interested in wrapping their brains around gold. I have only one disagreement: I do not buy the notion that gold is money and that its price represents the price of the dollar denominated in gold. The prices of goods and services denominated in dollars are, in the short term, stable. By contrast, goods and services priced in gold vary daily with the price of gold. By this standard, gold is not yet money. It is, however, a store of wealth in the long term.

Why We Make Mistakes: How We Look Without Seeing, Forget Things in Seconds, and Are All Pretty Sure We Are Way Above Average by Joseph T. Hallinan

This book is one of many, many neuropsychology books on biases. It’s sort of Gladwellian. I’m not sure I can recall what was in it, nor can I recall why I read yet another. I remember it being enjoyable, but I can lip-synch this genre now.

Flashpoints by George Friedman

As the former CEO and founder of Stratfor, George is on the front lines of the geopolitical world. He describes Europe as a series of regions (tribes) with long memories surrounded by “borderlands” that reminds one of the bar in Star Wars—huge opportunities for a brawl. The tribalism has lead to huge numbers of wars and will continue to do so. George doesn’t see a conflagration but would be even more shocked if we avoided a generic shitstorm. He does not spend a lot of time on the recent immigrants, but I bet he would have if the book had been written a year later.

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip

Greg does a credible job of describing the ages old maxim that stability breeds instability in financial markets. He draws ample analogies to excessive risks that appear with overly aggressive fire prevention, financial intermediation, and car safety. There was some dry discussion of the financial crisis (blah, blah, blah . . . like I need more of that). Unfortunately, he gives the Fed a pass for the most part, ignoring its role and simply pointing out why it did what it did. I would recommend passing on this book.

Rome and the Barbarians by Kenneth Harl

This audiobook is another Teaching Company trimester-length collegiate course in audio. These courses are, almost without fail, exceptional. Harl does a great job of describing in a relatively chronological order the expansion of the Roman Empire and the various “barbarians” confronted along the way. I enjoyed it immensely.

The Professor and the Madman: A Tale of Murder, Insanity, and the Making of the Oxford English Dictionary by Simon Winchester

I’ve always wondered how one would ever create a monumental body of work like the World Book Encyclopedia in this era . . . and along came WikiLeaks. You crowdsource it! But what about the past? The story of the creation of the Oxford English Dictionary with in excess of a million entries is actually quite similar: it was crowdsourced using thousands of people globally over a 70-year period. The great historical storyteller Simon Winchester describes the creation of the monumental, first-of-a-kind compilation of words and definitions. The plot within the plot is the specific role of a crazy bastard in a sanitarium. For 20 of those years, he contributed profoundly, yet nobody knew he was completely nuts. (He requested and received zinc-plated floors to keep demons from climbing up through the floorboards at night and having sex with him.) It’s an entertaining tale, although in a bit of irony, one could get the basic story by simply going to Wikipedia.

Crisis of Character: A White House Secret Service Officer Discloses His Firsthand Experience with Hillary, Bill, and How They Operate by Gary J. Byrne

Gary Byrne was a Secret Service agent charged with protecting the Clintons for eight years. To the dismay of millions of alt-righters, he was very good at his job. Of course, if you hadn’t figured it out by now, I read this book simply because I find Hillary to be a deplorable human being with no socially redeeming qualities. Unfortunately, the book was disappointing. He hammers Hillary but very nondescriptly. At its release, I’d hoped Hillary would “feel the Byrne.” Little did I know that she would deflect much, much worse. Bill Clinton takes a beating as Gary describes relentless examples of bimbo-banging in the Oval Office and the icky cleanup after the fact. He describes testifying to Congress under oath, during which he was precluded from telling the truth (and we don’t get that part either). Monica comes off as a stalker-level groupie. It’s also disconnected, with a lot of chapters about the author’s life away from the Clintons.

Prosper!: How to Prepare for the Future and Create a World Worth Inheriting by Chris Martenson and Adam Taggart

I’ve watched most of Chris Martenson’s metamorphosis into town crier about disaster coming our way. I tuned into Crash Course when the sections were still incomplete. It was great. This book is about the transition from panic to relative tranquility that comes through preparing oneself for coming adversity. It’s about prepping, but it transcends the apocalyptic version and provides a more measured version in which you simply organize your life for a sustainable existence that is not reliant on fragile support systems that could give way to serious problems. (Only two days before my typing the first draft of this review, the Internet experienced a significant denial-of-service hack attack.)

America’s Bank: The Epic Struggle to Create the Federal Reserve by Roger Lowenstein

Roger is best known for his description of the Long-Term Capital Management collapse in When Genius Failed. Presenting a polar opposite view of The Creature from Jekyll Island, Lowenstein describes the creation of the Federal Reserve in the most favorable light possible. It is absolutely clear that Roger is a big Fed fan and thinks its detractors are idiots or, even worse, conspiracy theorists. After the insults, I found the book to be an enlightening read in which the author convinced me of the problems of the fragmented banking industry of the nineteenth century and the merits of a collective approach (a cabal if you wish). If only the Fed could be a more humble institution unfettered by the Hayekian fatal conceit.

Origins of Great Ancient Civilizations by Kenneth W. Harl

In yet another Teaching Company trimester-length course, Kenneth Harl describes a number of ancient civilizations. I love this stuff even though I have trouble remembering any of it for more than a few weeks after listening.

Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burrough and John Helyar

The authors describe the pandemonium that results when hot money chases overvalued assets driven by testosterone-infested money guys (KKR). The story dates to the 1980s—in the wake of disco, to place it in context. I found it interesting, but the magnitude seems quaint in light of the modern-day barbarians. Still, it was an enjoyable read, albeit non-technical.

“Read the best books first, or you may not have a chance to read them at all.”

~Henry David Thoreau

Acknowledgments

This manuscript sits on the shoulders of diligent individuals providing fresh content as well as invaluable sifting through extant content. We all crowdsource news now. There are individuals who make my personal pursuits to understand the world very special. Of course, Adam Taggart and Chris Martenson deserve hearty thanks for allowing me to provide content as well as giving a healthy dose of their own. Zero Hedge, supposedly one of the primary sources of “fake news” according to the alt-left and the elites, provides content that is remarkably useful given its putative total lack of authenticity. Guys I interacted with this year include some regulars as well as some newcomers. Although their exchanges are not always voluminous, they generously include me in their sphere. They include Stephen Roach, Nassim Taleb, Mark Gilbert, Grant Williams, Michael Krieger, Benn Steil, Steve Hanke, Sean Corrigan, Catherine Austin Fitts, Jack Barnes, Jim Kunstler, Dale Pinkert, Jacob Taylor, Dorsey Kindler, Sam Kitterman, John Rubino, Dorsey Kindler, Susan Lustick, David Einhorn, Tony Deden, Steve Ellis, and the boys at Zero Hedge. Twitter is an amazing source of anything you want. With great hesitation, I mention a few of the people I follow, recognizing that many will be left off. In many cases, the connection is almost illogically strong given that I’ve never met them and don’t always know their names or backgrounds:

@RudyHavenstein

@TheLimerickKing (Robert Frost?)

@dandolfa (David Andolfatto)

@nntaleb (Nassim Taleb)

@Scouseview (Mark Gilbert)

@EmanuelDerman

@RaoulGMI (Raoul Pal)

@mikehalen

@DowdEdward

@CGrantWSJ (Charley Grant)

@BrendanEich

@JPCompson

@jamessaft

@scott_segal

@cgarrett101 (Cynthia Garrett)

?@JoshCrumb

@stevesi (Steve Sinofsky)

@tkinder (Terry Kinder)

@iuubob (Bob Lehmann)

@TFMkts (Peter Tchir)

@timfprice

@reinman_mt

@rcwhalen (Chris Whalen)

@JoelHeyman

@AutomaticEarth

@ddobell

@StockCats

@MarketWeight

@DividendMaster

@Smaulgld

@BamaTrader

@chigrl

@GreenMonsterah

@BennSteil

@ollieblog

@cate_long

@pkedrosky

@cabaum1 (Caroline Baum)

@azizonomics (John Aziz)

@Stevephenni (Steve Henningsen)

@credittrader (Tim Backshall)

@vexmark (Mark Constantine)

@JamesGRickards (Jim Rickards)

@PopescuCo (Dan Popescu)

@nanexllc (Eric Hunsader)

@addictiondocMD (Howard Wetsman)

When ZeropointNow posted the absurd video of a white man being tortured by retrogrades, now known to be mentally disabled, people in the comments section didn't believe it was real. For one, they didn't think the criminals who conducted the live torture were that stupid to actually livestream it, effectively assuring themselves prison time. And secondly, people doubted their fellow human beings could be so cruel.

Enter the degenerate Don Lemon, excusing evil and cruelty on bad parenting.

The vast majority of humans are stuck in a loop of daily routines: eat, shit, make money, watch porn. Some of us deviate and create excellence, making society a better place to live in. Others live their pathetic, retrograde, lives to hurt others, rip apart society in the hopes of watching it burn. With this in mind, there's very little difference between head cutting members of ISIS and these poorly trained 'teens' from Chicago, other than the severity of their crimes.

The world isn't as genteel and soft as CNN pretends it is. Not everyone is gentrified, immersed with the knowledge of the singularity. There are vast swaths of shit people out there who want your little pencil necks in a noose. They're evil, if there is such a thing. I like to call it 'the very worst humanity has to offer' for my fellow atheist friends out there.

Submitted by Duane via Free Market Shooter blog,

Yesterday, President Trump met with the National Sheriff’s Association at the White House.  Like so many Trump comments, this one took a strange turn when Trump (jokingly or not) threatened to “destroy the career” of a Texas state Senator:

During the meeting, Rockwall County, Texas, Sheriff Harold Eavenson told President Trump about a piece of asset forfeiture legislation he believes would aid Mexican drug cartels…here’s the full conversation:

 

Eavenson:  “There’s a state senator in Texas that was talking about legislation to require conviction before we could receive that forfeiture money.”

 

Trump:  “Do you believe that?”

 

Eavenson:  “And I told him that the cartel would build a monument to him in Mexico if he could get that legislation passed.”

 

Trump:  “Who is that state senator? I want to hear his name. We’ll destroy his career…”

Though the major point of conversation was about Trump’s threat to a state legislator, the bigger story should be the implicit support Trump gave to civil asset forfeiture, whether he realized it or not.  And if you are not aware what civil asset forfeiture is, it is (surprisingly) something that is agreed by both sides of the aisle to be unjust and unconstitutional, and rightfully so.

Civil asset forfeiture is defined by Wikipedia as “a controversial legal process in which law enforcement officers take assets from persons suspected of involvement with crime or illegal activity without necessarily charging the owners with wrongdoing.”  The practice is commonplace in the war on drugs, but it can be extended to almost anything.

What it means is that the government can essentially seize any of your assets it can find (be it in a bank account, or cash/gold/whatever you have in a safe or under the mattress), label them a part of a “criminal investigation,” and keep them indefinitely, without sufficient due process for the citizen to challenge the seizures, and whether you are ultimately charged with a crime or not.

Martin Armstrong of Armstrong Economics explains how police have every reason to seize assets, largely because these civil asset forfeitures are literally funding police departments:

Between 1989 and 2010, U.S. attorneys seized an estimated $12.6 billion in asset forfeiture cases. The growth rate during that time averaged +19.4% annually. In 2010 alone, the value of assets seized grew by +52.8% from 2009 and was six times greater than the total for 1989. Then by 2014, that number had ballooned to roughly $4.5 billion for the year, making this 35% of the entire number of assets collected from 1989 to 2010 in a single year. According to the FBI, the total amount of goods stolen by criminals in 2014 burglary offenses suffered an estimated $3.9 billion in property losses. This means that the police are now taking more assets than the criminals.

 

The police have been violating the laws to confiscate assets all over the country. A scathing report on California warns of pervasive abuse by police to rob the people without proving that any crime occurred. Even Eric Holder came out in January suggesting reform because of the widespread abuse of the civil asset forfeiture laws by police.

 

Bloomberg News has reported now that Stop-and-Seize authority is turning the Police Into Self-Funding Gangs. They are simply confiscating money all under the abuse of this civil asset forfeiture where they do not have to prove you did anything. Prosecutors are now instructing police on how to confiscate money within the grey area of the law.

 

A class action lawsuit was filed against Washington DC where police were robbing people for as little as having $100 in their pocket.  This is getting really out of hand and it has indeed converted police into legal criminals or “gangs” as Bloomberg News calls them.

And Mike Krieger of Liberty Blitzkreig even cites the Huffington Post, of all places, which detailed the case of two bakers who did not commit any crime, but had their assets (and lives) ruined by the IRS, because they were able to legally seize the business’s assets by just believing that they may have been engaging in criminal activity, with absolutely no evidence to support their claim:

South Korea's disgraced president struck a defiant tone on Friday morning when a constitutional court unanimously upheld the decision to impeach Park Guen-hye: she did not appear in court and a spokesman said she would not be making any comment nor would she leave the  presidential Blue House residence on Friday. "For now, Park is not leaving the Blue House today," Blue House spokesman Kim Dong Jo told Reuters. That changed on Sunday, when Park Geun-hye, 65, who has become South Korea's first democratically elected leader to be forced from office, left the official presidential Blue House residence on Sunday in a motorcade of fast-driving black cars, flanked by police motorbikes.

And, like Friday, the former president who now faces life as a private citizen and the possibility of prison time, was likewise defiant upon arriving at her private home in the Gangnam district of the capital, Seoul: "I feel sorry that I could not finish the mandate given to me as president," a spokesman for Park, member of parliament Min Kyung-wook, quoted her as saying. "It will take time, but I believe the truth will be revealed," Park said in her first public comments since her dismissal.

It was not the first time the former president has had to leave the Blue House compound of traditional-style buildings at the foot of a hill in Seoul.

In 1979, after a nine-day funeral following the assassination of her father, the young Park left the Blue House with her siblings for a family home. She had been acting first lady after her mother was shot and killed in an earlier failed assassination attempt on her father. Now, having lost presidential immunity, she could face criminal charges over bribery, extortion and abuse of power in connection with allegations of conspiring with her friend, Choi Soon-sil. Both women denied wrongdoing.

In a departure from her recent stubborn refusal to accept responsibility for the events that culminated with Friday's Constitutional Court on Friday upholding a parliamentary impeachment vote over an influence-peddling scandal that has shaken the political and business elite, without blaming outside intervention, like for example Russian hacking.

"I take responsibility for the outcome of all this," Min quoted her as saying according to Reuters.

A snap presidential election will be held by May 9. Her dismissal followed months of political paralysis and turmoil over the scandal that also landed the head of the Samsung conglomerate in jail and facing trial. The crisis has coincided with rising tension with North Korea and anger from China over the deployment in South Korea of a U.S. missile-defense system.

Meanwhile, throngs of flag-waving supporters crowded the street outside Park's home as she arrived there about 30 minutes after leaving the presidential palace. She waved through her car's tinted window as it inched its way down the street, with security men in suits walking alongside. She stepped out smiling, the public's first glimpse of her since her dismissal, and greeted supporters.

Supporters of the now former president gather at her Seoul residence on Sunday

According to Korea Herald, loyalists to former President Park Geun-hye flocked nearby her private residence in southern Seoul late Sunday, seeking to bid farewell to the state chief who faced an earlier-than-expected end of her tenure upon impeachment.

Park Geun-hye smiles to her supporters in front of her old home in Samseong-dong

The residential neighborhood in Samseong-dong was crammed with hundreds awaiting the retreat of the former president to her home. In addition to some 800 police officers who kept guard at the scene, a considerable number of Park supporters, including ranking pro-Park lawmakers, former secretariat chiefs and members of the anti-impeachment civic group, were present. Police said over 1,000 gathered.  A smiling Park shook hands and exchanged greetings with her former aides and political allies in front of her home, as her followers shouted messages of encouragement.

Rep. Cho Won-jin, a former public affairs strategist of the party and ranking Park aide, was the first to arrive at the scene earlier in the afternoon. Reps. Yoon Sang-hyun, Kim Jin-tae and Park Dae-chul, who have participated in the Taegeukgi rallies to oppose Park‘s impeachment, were also there. “The intention is not so much to offer consolation, but to bid farewell,” said one of the pro-Park lawmakers.

While lawmakers and former secretariat officials retained composure, preparing for Park’s arrival, members of Parksamo -- the official group of Park’s supporters -- let out enraged responses. After Cheong Wa Dae confirmed Park’s departure at 7:16 p.m., some 800 Park supporters became restless, shouting out the former president’s name and cursing the Constitutional Court for its impeachment ruling.

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Elsewhere, the liberal politician likely to become the next president, Moon Jae-in, promised to work for justice and common sense. "We still have a long way to go. We have to make this a country of justice, of common sense through regime change," Moon, who advocates reconciliation with North Korea, told a news conference.

Moon is leading in opinion polls, which show South Koreans are likely to throw out the conservatives after nearly a decade in power and turn to a liberal leader. Moon called on Park to publicly accept the court ruling, which she now appears to have done, however the transition did not come without a tragedy. On Friday, two Park supporters were killed as they tried to break through police lines outside the court, shortly after the verdict. One was believed to have had a heart attack and the other died as the Park supporters attacked police buses. A third, a man aged 74, suffered a heart attack and died on Saturday.

Thousands of Park's opponents celebrated in Seoul on Saturday, where they have been gathering every weekend for months, and demanded that she be arrested. The former president's conservative supporters also took to the streets not far away, though fewer in number. Police were out in force but there was no trouble.

The chaos in South Korea's political establishment comes at a sensitive time for the nation: the country's northern neighbor, North Korea, has been acting in an increasingly irrational fashion in recent weeks, and according to the Predata-Beyond Parallel think tank the odds of a North Korean WMD attack in the next month have topped 60%.

Another ballistic missile launch could provoke an armed response by both Japan and China, and potentially see the deployment of the controversial THAAD missiles recently deployed by the US in South Korea which could further escalate the tension in the region.