Comment for Sunshine Act Sunshine Act Meeting: March 25, 2010

Comment Text:

10-005
COMMENT
CL-02569
E SEORFFARIAT
2010 Iq ? 5 PP1
April20,2010
Secretary of the CFTC
Three Lafayette Centre
1155 21st Street NW
Washington, DC 20561
RE: Position Limits for Precious Metals
Dear Sirs:
It has come to the attention of many within the precious metals industry that certain entities have
been capitalizing on excessive levels of concentration to manipulate the free-market price level
of silver. Your recent heating in March is very encouraging in this regard and I trust that your
organization will fulfill its mandate as stated on the marble slab outside your offices:
The mission of the CFTC is to protect market users and the public from fraud,
manipulation and abusive practices related to the sale of commodity futures and
options, and to foster open, competitive, and financially sound commodity futures
and option markets.
I appreciate the oppol~nity to express my concerns, and request that you protect market users
and the public from blatant fraud, manipulation and abusive practices found at COMEX. Please
establish a speculative position limit in silver of no more than 1500 contracts. Please restrict any
hedging from those limits to legitimate hedgers. And please stop the levels of concentration in
COMEX silver futures that have been experienced over the past few years on the short side of
the market. I have enclosed a copy of my special report that makes note of the circumstances
surrounding the take over of Bear Stearns back in 2008 (pp. 6, 20).
Sincerely yours,
President
CHC:pld
Encl.
20 E. White Mountain Boulevard
Building AS, Suite Number 126
Pinetop-Lakeside, AZ 85929-6891
Main Office: 1-928-7934269
Fascimile: ~-928 369 3974
[email protected]
w w w.IDPConsultingGroup.corn10-005
COMMENT
CL-02569
20 East White Mountain Boulevard, Building A-5, Suite No. 126, Pinetop-Lakeside, Arizona 85929-6891
BY CHARLES H. COPPES, AUTHOR OF AMERICA'S FINANCIAL RECKONING DAY
"I am willing to know the.whole truth; to know the worst, and to provide for it" -
Patrick Henry
Introduction
As we are all aware, our nation and financial institutions have been experiencing tremendous challenges
in recent months a~ad this conta~on has spread around the globe. According to economist Henry Liu the equity
market capitalization of all publicly-traded companies in the world lost half of their value in the final quarter of
2008 for a staggering loss of $30.9 trillion dollars! During this same period the U.S. experienced 6%
negative
growth and the NY stock exchange finished with a 40% decline wiping out all previous gains. How did all this
happen? Pundits and politicians insist it was a lack of regulation or "just old-fashioned greed." In his new book
Meltdown
author Thomas E. Woods, Jr. contends, "blaming the crisis on 'greed' is like blaming plane crashes
on gravity." He adds, "The current crisis was caused not by the free market but by the government's interven-
tion in the market.
''1
In this special report we will examine the root causes of our financial crisis and how
government bailouts will only make things worse. This will include an overview of the Wall Street meltdown,
the call for a global currency, a look at the new administration, civil unrest, and a geostrategic outlook for
America as it relates to China, Russia, the Middle East and the future of the European Union and the Eurozone.
This report will also serve as a companion to my own bookmenti0ned above
(AFRD)
and v~ill include frequ,ent
references along with various websites for your own research. This information is extremely urgent and you are
free to make copies. I have also concluded with some ideas for contingency planning that you will want to share
with your family and friends. Our day of reckoning is drawing near and you need to provide for it.
An Overview of America's Financial Crisis
Almost 100 years ago Spanish philosopher George Santayana made the famous observation that "those
who cannot remember the past are condemned to repeat it." These same words are carved into the wall of the
National Archives Building in Washington, DC. Unfortunately, they have not been inscribed on our hearts and
we are apt to repeat the same folly, failures and blunders in successive generations. So to better appreciate our
current situation it is necessary to consult the past, and draw upon historical events. Our financial problems
today are essentially rooted in a
money problem,
or the very nature of fractional reserve banking. In my book I
have traced the origin of money and the development of modem banldng, similar to British historian Niall
Ferguson's latest book
The Ascent of Money.
Today, parallels are being made to the Great Depression, but a
more accurate comparison should be noted in the bank panics of 1873, 1884, 1893 and 1907
(AFRD,
pp. 3-24).
These bank panics were the result of over-leveraged loans and deposits to bank reserves, and in each case Wall
Street bankers like J.P. Morgan.attempted to consolidate more power into their financial empires.
1 Thomas E. Woods, Jr.,
Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and
Government Bailouts Will Make Things Worse
(Washington, DC: Regnery Pub., Inc., 2009). www.thomasewoods.com.10-005
COMMENT
CL-02569
2
The Bank Panic of 1907 is better known as the "Banker's Panic" which lasted only a few weeks but its
affects remain to this very day. In October of that year, Augustus Heinze, president of the Mercantile National
Bank in New York, and his brother Otto attempted to comer the U.S. copper market. The Heinze brothers had a
majority stake in United Copper and their scheme was to purchase the remaining shares to bid up the price and
force short sellers of their stock to sell directly to them. Due to insufficient capital their bonanza of cheap stocks
failed to materialize. Within a few days shares of United Copper skyrocketed and then collapsed, thus mining
the Heinze brothers. Otto's brokerage firm, Gross & Kleeberg, went bankrupt and Augustus was promptly fired
by his board of directors. Depositors at the Mercantile National Bank were uncertain of their .exposure to this
stock collapse and they rushed to withdraw their money. Other bankers with close ties to the Heinze brothers
were Charles W. Morse, president of the National Bank of North America and New Amsterdam Bank, and
Charles T. Barney, president of the Knickerbocker Trust Company. Both were forced to resign and soon their
banks also suffered bank runs and the ensuing panic quickly spread to other banks in the New York area.
Important to note is that this panic was preceded by the great earthquake that devastated San Francisco
in April 1906. This natural disaster had caused market volatility and sharp declines in the Dow Jones in addition
to a flood of money that had left New York banks to aid in reconstruction. In this environment.many banks and
trust companies were vulnerable including the established Trust Company of America that was nearing total
collapse. Coming to the rescue was J.P..Morgan & Company who persuaded other bankers including John D.
Rockefeller to provide needed capital for the Trust Company of America. J.P. Morgan also persuaded the U.S.
Secretary of the Treasury George Cortelyou to issue $150 million in low-interest bonds which the banks could
use as collateral to create new money on the books. Finally, in an effort to avert a stock market crash Morgan
arranged for several banks to provide the enormous sum of $23 million dollars to allow the New York Stock
Exchange to continue operating. During this same period the bankers also worked hard to convince clergymen
to assure their congregations that there was no reason for further panic (the equivalent of today's mass media).
Within a short period the financial crisis subsided but the mood remained tense on Wall Street.
Similar to previous bank panics, the Banker's Panic of 1907 exposed the institutional weakness of frac-
tional reserve banking even as it does today. When banks take in deposits for safekeeping they treat them as
both a bank
asset
(to be loaned out with interest) and a
liability
(which is owed to the depositor). This form of
double book entry creates a "dual claim" that dates back to the goldsmiths in Europe and is the pattern for our
ban:Icing system today. With a typical reserve ratio of only 10% all banks are subject to a bank run if depositors
start demanding their money. This little secret can be unsettling and it can cause embarrassment to bankers who
are looked up to as pillars of high society. Instead of seeking genuine banking reform to promote sound
fiduciary policies back in 1907 the bankers in New York sought to create a central bank similar to the Bank of
England that was chartered in 1694. AsProfessor Murray Rothbard points out, "Very quickly after the panic
[of 1907], banker and business opinion consolidated on beh.alf of a central bank, an institution that could
regulate the economy and serve as a lender of last resort to bail banks out of trouble.
''2
This idea of a central
bank that could serve as "the lender of last resort" is precisely what the bankers wanted.
In !908, Congress took up the cause for banking reform under the. leadership of Senator Nelson W.
Aldrich (R-RI), head of the Senate Finance Committee and father-in-law of John D. Rockefeller, Jr. (who
married his daughter Abby). In June of 1908,. Congress passed the Aldricl~-Vreeland Act, which authorized
national banks to issue emergency "script" currency in the event of a bank run. Another provision of this Act
that received very little attention was the creation of the National Monetary Commission (NMC) that was given
two years to study and make proposals for comprehensive banking reform. Senator Aldrich was a close business
associat~ Of J.P. Morgan and he was determined that ~e NMC would represent the interests of the Morgan,
Rockefeller, Kuhn, Loeb banking cartel on Wall Street that was collectively known as the "money trust." These
were the same forces that President Andrew Jackson had fought in his two terms and Abraham Lincoln later
referredto as money powers that "...prey upon the nation in times of peace and conspires against it in times of
adversity." J.P. Morgan had come from his father's banking firm J.S. Morgan & Company in London in 1864
and he was well acquainted with central bank operations in England. He had been instrumental during the bank
panic of 1893 and was also an enthusiastic and powerful supporter for a central bank in America.
2 Murrary Rothbard,
A History of Money and Banking in the United States
(Auburn, AL: Von Mises Inst., 2002), p. 240.10-005
COMMENT
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3
In late 1910 select members from the NMC staff conducted an ultra-secret meeting in order to work on
the commission's report and draft the Aldrich Bill that would later become the Federal Reserve Act. This
meeting was held at the Jekyll Island Club on Jekyll Island, Georgia, which was an exclusive club for the
wealthy co-owned by J.P. Morgan. Historians all agree that Paul M. Warburg (Kuhn, Loeb, Schiff) was the
leading expert on the NMC staff. Warburg's brother Max Warburg was the financial advisor to the.German
Kaiser and director of Germany's own central bank known as the Reichsbank. "Because of this l~owledge, Paul
Warburg became the dominant and guiding mind throughout all the discussions," writes G. Edward Griffin in
his monumental book
The Creature from Jekyll Island.
~
The primary goals of the Wall Street money trust were
to assure their control of the new central bank, create an "elastic" currency through debt monetization and shift
bank losses to the taxpayers. From 1911 to 1913 Congress conducted the infamous "Money Trust hearings" and
the conspirators finally prevailed when the Federal Reserve Act was signed into law December 22, 1913. The
new Governor of the Federal Reserve Bank of New York (our
defacto
central bank today) was Benjamin Strong
from J.P. Morgan's Bankers Trust Company and Paul Warburg was named as Vice-Governor.
This bit of history is necessary to assign the proper blame for America's financial reckoning day where
it belongs
(AFRD,
pp. 25-52). There is no provision in the U.S. Constitution for a private banking cartel to act
as the fiscal agent for the U.S. government. The Fed is
made
to sound "federal" but only Congress has authority
"to coin money, regulate the value thereof...and fix the standard of weights and measures" (Art. 1, Sec. 8), and
this authority lies with the U.S. Treasury. What we have is a form of modem
"seigniorage"
that was practiced
by English lords.
4
By the late 18th Century th~ Bank of England had so bankrupted the British Empire that it led
to excessive taxation of the colonies and this led to our American Revolution. By allowing the Fed to control
our money supply and fund the expansion of the American Empire we are now assuring our own bankruptcy in
the 21st Century! Thomas Jefferson foresaw this inherent danger and left us with these prophetic words:
If the American people ever allow the banks to control the issuance of their currency, first by inflation,
and then by deflation, the banks and corporations that grow up around them will deprive the people of all
property, until their children wake up homeless on the continent their fathers conquered .... I sincerely.
believe the banking institutions having the issuing power of money, are more dangerous to liberty than
standing armies.
5 " '
One of the promises made by the Fed in 1913 was the ability toeliminate bank panic.s, or boom and bust
cycles. However, from 1921 to 1929 the Fed eased the discount ~ate and expande~l the money supply by. 62%.
This, of course, ignited "The Roaring 20s" and led to an orgy of speculation on Wall Street (securities dealers
grew from only 250 to 6,500!). Suddenly in October 1929 the Fed raised the discount rate and The Crash wiped
out $40 billion in market capitalization and caused the Great Depression. This process of creating inflation and
deflation is exactly what Jefferson warned about and what we have been witnessing for the past century.
In 1932, Pres. Herbert Hoover lost his reelection to Franklin D. Roosevelt. Soon after taking office FDR
forced our currency off the gold standard and signed the Glass-Steagall Act (Banking Act of t933). This l'egisla-
tion was aimed at separating commercial and investment banking activity to prevent fraud, conflicts of interest
and excessive risk-taking (as we will see in a moment this Act was repealed in 1999 and has greatly contributed
to our present crisis). This Act also created the FDIC to prevent further bank failures. From 1929 to 1933 almost
10,000 banks went out of business. Although the FDIC is. really not "deposit insurance" but a mere confidence
game it did help bring bank panics to an end. As historian William Greider relates, once the FDIC was in place
"the phenomenon of panic and collapse virtually disappeared from American economic life.". As critics have
pointed out the FDIC actually encourages moral hazard or reckless lending practices and only the larges
t
banks
that are considered "too big to fail" gain assistance. Nevertheless, had this same action been taken by the U.S.
Treasury after the bank panic of 1907 it is highly probable that the Fed may have never been created at all.
G. Edward Griffin,
The Creature from Jekyll Island
(Westlake Village, CA: American Media, 1994), p. 17. A must read!
Seigniorage - is a medieval term that refers to theprivilege of feudal lords to mint new coinage in their realm and declare
it as money. In this "inflationary" scheme the sovereigns could purchase new goods but all existing coinage was devalued.
The Writings of Thomas Jefferson
(Washington, D.C.: Jefferson Memorial Association, 1903), Volume No. XIII, p. 277.10-005
COMMENT
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4
The FDR administration introduced a string of progressive socialist programs including the Public
Works Administration, the National Industrial Recovery Act (1933), the Social Security Act (1935), the Federal
National Mortgage Association (1938) and many more. The notion of "industrial armies" and "a national bank
with State capital and an exclusive monopoly" were ideas taken directly from
The Communist Manifesto
by
Karl Marx (circa 1843). America's national bank helped finance "the New Deal" and later it would increase the
national debt from $48 billiori to $280 billion during World War II
(AFRD,
pp. 55-67). Prior to the end of the
war the allied powers met at the Bretton Woods Conference and they established the U.S. dollar as the world's
reserve currency along with the LVIF and the World Bank. The postwar period saw the rise of the military-
industrial-complex and the indigenous _warfare!welfare state of the 1960s and 1970s. In 1968, the old Federal
National Mortgage Association (or Fannie Mac) was converted to a Government Sponsored Enterprise (GSE) to
purchase home mortgages and sell them as "securitized" investments to the public. Consequently, Fannie Mac
ceased to be the guarantor of government-issued mortgages like FI-IA, HUD and VA and that responsibility was
transferred to the new Government National Mortgage Association (or Ginnie Mac). In 1970, the government
also created the Federal Home Loan Mortgage Corporation (or Freddie Mac) to compete with Fannie Mae and,
thus, facilitate, a more robust sedondary mortgage market. Although these GSEs were publicly-traded entities
they invited moral hazard since the perception by lenders was that they were government-backed and certainly
"too big to fail." We will take a closer look below at how these GSEs eventually did fail in 2008.
In 1971, a critical event occurred during the Nixon administration that will have a direct bearing on our
financial future as a nation. As indicated, the U.S. dollar was re~ogmized as the world's settlement currency for
international trade with a nominal guarantee that foreigners could exchange dollars for gold specie. During WW
]1, the U.S. Treasury had accumulated vast gold reserves from nations as repayment for war debts. By the late
1960s economies in Europe began to recover as America exported its inflation abroad to finance U.S. war and
welfare policies. Concerned about our fiscal debts and holding excess dollars, both OPEC and several nations
started exchanging dollars for gold. It is estimated that our trade liabilities totaled $36 billion against only $18
billion in gold reserves and soon it could be depleted. On August 15, 1971, President Nixon signed an executive
order that
decoupled
the dollar from the IMF gold exchange standard and created a floating exchange rate for
currencies. In reaction to this violation of the Bretton Woods agreement OPEC raised the price of crude oil by
400% to compensate for the dollar's loss of purchasing power. In 1974 the U.S. Treasury entered into a secret
arrangement with the Sandi royal family and OPEC members to recycle their6Pe.trodollars back into U.S. capital
markets in exchange for prote.ction in the Persian Gulf
(AFRD,
pp. 95-110). In more recent years this macro-
economic model of exporting our monetary inflation and recycling ou{ annual trade deficits ha
s
been sustained
by the Chinese who are growing increasingly hostile to U.S. interests, which I will cover in the next section.
An equally important developme.nt that occurred during the 1970s was the introduction of derivatives on
the Chicago Board Options Exchange. What are derivatives you a~k? These are complex financial contracts that
are used by corporations, banks and hedge funds to maximize:profits and share risk in various credit and equity
markets: Derivatives "are contracts that derive (hence their name) their value from something else," says James
Turk, "and are designed to divide the risk associated with an underlying asset into pieces, allowing them to be
sold to different people.
''7
To demonstrate the extreme volatility associated with derivatives we only need a few
examples. On October i9, 1987, a day known as Black Monday, global stock markets collapsed because equity
and derivatives markets did not work in sync causing the Dow to crash by 23%. By
1994, the
notional value of
global deriVatlves went from $1 trillion to $10 trillion. In that same year Orange County, CA faced bankruptcy
when derivative trades went bad. In 1995, London's oldest merchant bank, Barings Bank (1762), went bankrupt
when a Single rouge trader made a wrong bet. Derivative-based credit default swap contracts (CDS) caused the
1997 Asian currency crisis. In 1998, the Fed and 14 banks came tothe rescue of the infamous hedge fund Long-
Term Capital Management to prevent a complete meltdown Of U.S. financial markets. In the year 2000, these
contracts exceeded $100 trillion and were deregulated to allow over-the-counter (OTC) trading with enormous
counter-party risk causing the collapse of energy giantEnron. Finally, in 2003, Fannie Mae lost $8.4 billion in
its derivatives interest rate swaps portfolio causing its stock to plummet (FNM).
Petrodollar Warfare and Collapse of U.S. Dollar Imperialism in the 21st Century
is available at www.chuckcoppeg.com.
James Turk & John Rubino,
The Coming Collapse of the Dollar and How to Profit From It
(NY: Random, 2004), p. 25.10-005
COMMENT
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5
The introduction and use of derivatives contracts by banks, corporations and hedge funds has proved to
be very destructive, or as Warren Buffett observes they are like "weapons of mass financial destruction." In late
1999, the seeds of our own destruction were sown when l~ey provisions of the Glass-Steagall Act were rdpealed
with passage of the Gramm-Leach-Bliley Act. Co,spgnsors.of this bill were Sen. Philip Gramm (R-TX), James
Leach (R-IA) and Thomas Bliley (R-VA) who were under intense pressure from the banldng industry. Banks
wanted to remove the barrier from banking and investing so they could retain people's money during both good
times (financial services) and bad times (traditional deposits). This Act also allowed credit default swaps and
other exotic instruments to be traded. A CDS is basically an insurance contract but it is called a "swap" so as to
avoid being regulated as insurance. Invented by a team at J.P. Morgan Chase in 1997, a CDS allows a bank to
make periodic payments to a hedge fund who will finance loss if the underlying instrument defaults. In 1990 the
number of hedge funds was only 600 and by .2007 they totaled 9,800 with 90% of them located in the Cayman
Islands. In 2000, Sen, Gramm was again instrumental in the growth of the derivatives market by supporting the
Commodity Futures Modernization Act, which allowed derivative contracts to be sold OTC instead of just on
major exchanges. As chairman of the Senate Banking Committee he was sympathetic to requests by Enron in
his home state to pass this bill and to allow Enron to expand its offerings online without regulation (now known
as the Enron Loophole). Critics have noted the gross conflict of interest by Sen. Gramm whose wife Wendy Lee
Gramm was the former chairman of the CFTC i~nd who was then sitting on the board of directors for Enron.
With passage of the above legislation i
n' Congress the stage was set for the largest speculative bubble in
modem history. Key to gaining support for the Gramm-Leach-Bliley Act in Congress was the Republican com-
promise with Democrats to allow for increased enforcement of the Community Reinvestment Act of 1977. The
CRA was promoted by Jimmy Carter to encourage lending institutions to grant mortgages to families with low
credit scores, or "sub-prime" loans. As an additional incentive, the CRA allowed for tax credits for Fannie Mae
and Freddie Mac for purchasing these loans. This kind of government intervention and social engineering in the
free market is what helped fuel the recent housing boom. From 1995 to 2001, the Fed had raised interest rates
six times to 6.5%. Following the "dot-com" bubble that wiped out 50% of Interact-based companies and the
9/11 attacks in 2001, the Fed lowered interest rates from 6.5% down to 1% in 2003. During this period the
nation's banks and mortgage companies went on a lending, spree with various kinds of adjustable rate mortgages
and other forms Of creative financing. These sub-prime loans, sometimes called "liar loans," were sold off to
Fannie Mac and Freddie Mac, who in turn bundled them as mortgage-backed securities (MJ3S) and
collateralized debt obligations (CDO) and then sold them to investment banks .like Bear Steams, Goldman
Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley, who in turn sold them to investors. Moral hazard
was implicit as each participant passed along risk in this chain. In. addition, ratings agencies like Standard &
Poor' s, Moody's and Fitch competed with each other to assign AAA ratings to these toxic MBS and CDOs.
In 2003, President Bush signed the American Dream Down Payment Act, which further encouraged low
income and minority families to become homeowners (www.hud.gov). Due to this action and low interest rates
sub-prime loans surged 292% from 2003 to 2007 an.d almost 30% of all real estate activity was from speculators
who were "flipping" their properties. William Greider recounts how, "speculative bubbles all derive from one
conviction: the buyers are convinced that in a few days or weeks or months they will become Sellers.and unload
their purchase at a profit.
"8
This "wealth effect" wa~ felt from main streetto Wall Street as investment banks
sold MBS and CDO "tranches" to unwary institutional investors and foreigners. In 2004, the Fed intervened in
the market place and started raising its Fed Funds rate from 1% to 5.25% by 2007. By 2006, adjustable rate
mortgages started taking their toll on consumers as "teaser rates'" began to reset to higher rates, and this spike
continued into 2007 and 2008. By early 2007, the jig was up. Fannie and Freddie Mac began to limit their
exposure to sub-prime loans and Moody's downgrade
d
bver 100 MBS bonds
. In April of 2007, New Century
Financial, the nation's second largest sub-prime mortgage lender, filed for bankruptcy in California and 7,000
employees were let go. This bankruptcy was .followed by a cascade of failures in the industry and home .values
dropped by 10% or more. By late 2007, the Fed launched the Term Auction Facility (TAF) program t0pr0;cide
short-term lending (84 days) for banks and financial service companies, with over $500 billion used to date.
William Greider,
Secrets of the Temple: How the Federal Reserve Runs the Country
(New York: Simon & Shuster,Inc.:
1987), p. 104. Sub-prime loans came to be lcnown as "ninja" loans which stands for "no job, no income, and no assets."10-005
COMMENT
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6
In November 2007, prior to announcement of the TAF program, regulations were imposed on investment
banks to more accurately account for their balance sheets. This principle known as "mark-to-market" dates back
to the Enron scandal and tries to determine current vali)e of assets as opposed to "mark-t0-model" which is uses
financial models or predictions.
9
Because of the illiquidity of mortgage-backed securities many institutions were
slow to write down these assets. Under this enforcement firms, assumed to be well capitalized, were suddenly
faced with insolvency. On the weekend of March 14-16 2008, Bear Stearns was the first to be over exposed to
MBS and CDO deficiencies. Considered "too big. to fail" the NY Fed rushed to p¢ovide emergency lending
before the markets opened on Monday. The company could not be saved, however, and officials from the Fed
and Treasury arranged for J.P. Morgan Chase to acquire the distressed bank. A merger agreement was signed by
Bear Stearns for a stock swap of $10 a share (formerly $172) and J.P. Morgan Chase was awarded a $29 billion
dollar non-recourse loan by the Fed (on behalf ofthe taxpayers). This type of loan means that the bad assets of
Bear Stearns are used as collateral and even if they are insufficient to repay the loan J.P. Morgan Chase is not
held liable. Not a bad deal for only putting up $1.1 billion to acquire a company that once had total assets over
$350 billion! On a side note, one of the lesser reasons for bailing out Bear Stearns has come to light in recent
months. According to the CFTC, Bear Stearns had the largest concentrated short position in COMEX silver
futures at the time of its forced merger. With no legitimate backing for this short position spot silver could have
been pushed to
almost $100 an ounce.
I Will have more to say about this report in my final section.
The collapse of Bear Steams was the beginning of the end for the sub-prime pyramid, over-leveraged
banks, under-funded hedge funds, inflated stocks, GSE obsolescence and fiscal sanity. In July of 2008,
Countrywide Financial, the nation's largest mortgage lender (20% of all mortgages) was merged with the Bank
of America for $4.1 billion. That same month, IndyMac Federal Bank, a spin off of Countrywide in 1997, saw
its stock drop to 31 cents when its MBS portfolio was downgraded by Moody'S. With assets of $32 billion the
bank suffered a bank run and was taken over by the FDIC. This marked the largest bank failure in twenty years.
On July 30th, the Congress passed The American Housing Rescue and Foreclosure Prevention Act of 2008 to
reform Fannie and Freddie Mac. Unfortunately, reform could not come soon enough with 90% stock losses and
$5.5 trillion in securitized mortgage debt on the books representing
half
of all mortgages in the U.S. ! Both were
effe(tively nationalized within weeks and turned over to the Federal Housing Finance Agency (FI-WA) with a
$200 billii~n dollar bailout package from the Fed. This bailout was soon followed by $300 billion in federal loan
¯ guarantees to FHA. Next to fall was Wall Street icon Merrill Lynch with a total of $52 billion in toxic MBS and
CDO debt instruments. In early September, merger talks began
~,
with the Bank .of America and a deal was
finalized in December to acquire $1.3 trillion in assets for $50 billion, which has now made BOA the largest
financial services company in the' world with total assets of almost $3 trillion.
Continuing the slide on Wall Street was the shocking bankruptcy of Lehman Brothers on September 15,
2008 when its stock lost 90% in One day and the Dow dropped a-record 500 points. Forced to mark almost $800
billion in liabilities to market (half in credit default swaps), .Timothy Geithner, then NY Fed president, called for
J.P. Morgan Chase to provide a $138 billion loan which was later repaid by the NY Fed. The following day
Barclays PLC purchased the North American operations, for $1.35 billion and the rest was split up. The Primary
Reserve Fund, the nation's oldest money market fund, lost $785 million when bonds issued by Lehman went to
zero
causing panic withdrawals. In just three days the fund went from $62 billion to $32 billion prompting the
U.S. Treasury to offer a new program to insure $3.5 trillion in money market accounts since they are not backed
by FDIC. On September 16, insurance giant American International Group suffered a liquidity crisis after its
company had been downgraded by Standard & Poor's and Moody's and its stock dropped by 97%. With assets
¯. of $860 billion AIG needed to post more collaterai for $441 billion in CDS contracts on collateralized securities
including CDOs ($57 billion). Instead of allowing AIG to fail with only its counter-party risk the Fed provided
up to $180 billion for AIG stock warrants, which represented the largest bailout of any private company. Now
embroiled in countless lawsuits, the media has sensationalized AIG
bonuses
instead of the federal government
"nationalizing" the 18th largest company in the world. In late September, Goldmans Sachs and Morgan Stanley
were also downgraded and both have been converted from investment banks to bank holding companies.
9 On Nov. 15, 2007, the Bank of International Settlements (www.bis.org) enforced the 2004 Basel II Accord that required
banks to adjust their marketable securities based on the Financial Accounting Standards Board (FASB), Statement # 127.10-005
COMMENT
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7
As these events unfolded on Wall Street, U.S. Treasury Secretary Henry Paulson proposed a new plan
under which the U.So Treasury would acquire up to $700 billion in illiquid mortgage-backed securities which he
entitled the Troubled Asset Relief Program(TARP). This proposal was quickly introduced in Congress as the
Emergency Economic Stabilization Act of 2008 amidst a chorus of opposition and protests and the bill failed on
September 29. Unwilling to accept defeat the bill w~s reintroduced with warnings of a financial meltdown and
passed on October 3, 2008. Section 132 of the Act allowed for suspension of the mark-to-market ruling, which
was finally lifted on April 2, 2009. When
Forbes
later asked Treasury officials how they came up with $700
billion they said it was not based on a particular data point, "We just wanted to choose a
really
large number."
Investor Carl Icahn described the bailout as "inflationary hell." Commentator Jim Rogers. added that the plan
was "devastating, and very harmful for America." On the Senate floor .James Bunning {R-KY) flatly declared,
"It is financial socialism and it's un-American." Critics also noted the fact that Paulson was the former CEO of
Goldman Sachs and appointed Neel KashKari, a former VP of Goldman Sachs, to oversee the $700 billion over
at the Office of Financial Stability created by the Act..He also appointed Goldman Sachs board member Edward
M. Liddy to be the new CEO for AIG, and helped direct $20 billion in TARP money to bailout Goldman Sachs'
losses with AIG derivatives contracts - a clear conflict of interest. Ousted CEO at AIG, Robert B. Willumstad,
refused a $22 million dollar severance package (a.fter only being on the job for three months) and later told
CNBC that AIG would have been much betteroff if the government had just let it fail and rebuild.
As it soon became clear, most of the TARP money was going to bailout Wall Street and not main street.
In addition to the big banks, funds were also handed out.to GM, GM)kC Financial, Chrysler, American Express
and others. TARP money was also used to cover counter-party risk with various foreign banks that engaged in
America's speculative boom and bust. As the profligate spending in Washington continued economic conditions
worsened. On September 25, 2008, the Office of Thrift Supervision seized Washington Mutual Bank (WaMu)
and placed it in receivership with the FDIC. WaMu had suffered a massive bank run after it was .downgraded
on September 15, resulting in almost $20 billion in panic withdrawals. With combined assets of $327 billion the
bank had $248 billion in risky real estate loans. As records now reveal, the FDIC was already hit hard with the
IndyMac bailout and was too thinly capitalized to rescue WaMu. Within 24 hours, the FDIC conducted a secret
auction of the bank and awarded the bid to J.P. Morgan Chase for only $1.9 billion (similar to the acquisition of
Bear Stearns). Angry shareholders received
nothing
for their stock and immediately filed a lawsuit against the
FDIC for $40 billion for selling too cheap (www.wamustory, om). WaMu was the largest bank failure in U.S.
history and its slogan was "Simpler banking, More smiles." Today, it's J.P. Morgan Chase who is smiling. ©
The collapse and FDIC scandal at WaMu caused bank depositors around the nation to reduce their bank
holdings to $100,000 or less (called a "silent run".): Wachovia, the 4th largest bank holding company with assets
of $700 billion had $1 billion withdrawn in a single day, and its stock lost 30%. Wachovia was already in ta~s
with Citigroup and Wells Fargo for a possible bank merger. With warnings of "systemic risk" the Fed and FDIC
literally
ordered
Wacliovia to accept an offer from CitiGroup for $2.2 billion. Shareholders blocked the sale of
their bank and a few days later accepted $15 billion from Wells Fargo, creating the largest bank branch network
in the U.S. Citigroup soon filed a $60 billion dollar motion against both Wachovia and Wells Fargo for alleged
violations. Within a few more weeks ~news broke that Citigroup had to be bailed out with $45 billion in TARP
money due to poor risk management and overexposure to the sub-prime meltdown and defaults on credit cards.
Through a deal struck with the Fed, Treasury and FDIC the government would guarantee $306 billion in loans
and receive a 36% equity stake in Citigroup. The bailout of Citigroup,.however, was rather suspect since they
have close business ties to the Fed. Even the liberal
New York Times
called it "an undisguised gift" without.any
real crisis to merit the monies, which brings us to a very important observation.
The FDIC insures 8,437 banks in the U.S. with combined assets of $8.6 trillion dollars. Among these
banks, 3,190 (or 37%) are members of the Federal Reserve System, which represents a banking cartel..)krnong
these, only 22 banks have assets of $50 billion or .more and almost half are exclusive
primary dealers
,with the
Federal Reserve Bank of New York. A primarydealer is a bank or securities firm that actively purchases U.S.
Treasury securities (bills, notes, bonds) on the Federal Open Market Operations and resells them to the public
(AFRD,
pp. 37-41). In 2008 the Fed had 20 primary dealers including J.P. Morgan, Bank of America, Citigroup,
Goldman Sachs, Morgan Stanley, Cantor Fitzgerald, Merrill Lynch, Lehman Brothers, Countrywide and Bear
Steams. It is easy to see from this list that these "banks .and corporations" represent a moderu "money trust" that10-005
COMMENT
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8
have a special relationship with our central bank.
1°
We are reminded by Thomas Jefferson thatthe banks and
corporations "thgt grow up around" a central bank are more dangerous to liberty than standing armies and can
deprive people of their property. It is this kind of plutoc/acy that helped create the Fed back in 1913 and the Fed
is
the root
of our money problems today. In a letter to John Kdams, Jefferson once wrote, "All the perplexities,
confusions and distresses in America arise not from defects in the Constitution or confederation...as much from
downright ignorance of the nature of coin, credit, and circulation." A fractional reserve banking system is prone
to over-leveraged riSk, moral .hazard, boom and bust cycles, bank panics, inflation, debt and the destruction of
wealth. TheSe bank failures and mergers have merely concentrated their power and risk to the world economy.
According to the Office of the Comptroller of the Currency latest report (4Q-2008), the notional value of global
derivatives is a mind-numbing
$685 trillion dollars
with 30% of this exposure in the U.S., or $205 trillion. Of
this amount
just five
U.S. banks hold $193 trillion on their books. J.P. Morgan Chase ($88 trillion), the Bank of
America ($38 trillion), Citigioup ($32 trillion), Goldman Sachs ($30 trillion), and Wells.Fargo-Wachovia ($5
trillion). In addition, this report indicates that 82% of all U.S. banks use interest rate derivatives and are losing
billions each quarter. Can the FDIC actually prote~t deposi[ors in this environment? Hardly. The FDIC recently
raised its "deposit insurance" to $250,000, but the system is technically insolvent and depends on the Treasury
for bailouts. In early 2009, the FDIC identified 252 "troubled banks" with assets of $159 billion. According to
Weiss Research (www.moneyandmarkets.com), the actual figur
e
is closer to 1,816 banks and thrifts with total
assets of $4.67 trillion, and this figure is expected to go higher as this crisis continues.
To summarize America's financial crisis there is plenty or blame to go around, but the real fault has to
be with the interventionist policies of the Fed and political meddling. Nobel Laureate Paul Krugman identifies
former Fed chairman Alan Greenspan and Sen. Phil Gramm as the two main culprits. Attempts to micromanage
the economy and influence the marketplace is financial socialism and will produce inflationary hell. As lender
of last resort the Fed is underwriting trillions in taxpayer debt and the. economy is sinking into a second Great
Depression. According to the S&P-Schiller Index real estate values have fallen nonstop for 28 months, 41% of
all foreclosures are in California and Florida, and mortgage resets for Alt-A and option ARMs will peak
higher
in 2009-2011 than former sub-prime levels. Total consumer debt is $2.6 trillion, or $23,600 per household, and
the unemployment figure is nearing 20% (www.shadowstats.com). Consumer spending used to account for 70%
of the U.S. economy and this sudden drop. in 2008~2009 has hurt state and municipal budgets. According to the
Center on Budget and Policy Priorities (CBPP) at least 45 state~ are having fiscal difficulties and deficits could
reach $145 billion this year and $350 billion by 2011. Unlike municipalities, .states are required to balance their
budgets and are forbidden by law to allow deficits. The CBPP notes that cities across America are facing $100
billion in deficits and bond issues are going unsold due to institutions like Citigroup, Lehman and AIG dumping
their muni bonds and loss of tax receipts. On April 8, 2009, Moody's issued its first negative outlook
ever
for
the entire $2.6 trillion U.S. municipal bond sector, and defaults Could be on 'the horizon. In the next section we
will consider the negative outlook for our nation' s looming fiscal deficits and our own risk of default.
The Collapse of U.S. Dollar Imperialism
As we enter into 2009 and a new administration the spending and bailouts are continuing at an alarming
rate and this should concern all of us: During the previous Bush administration the national debt soared from $5
trillion to $11 trillion, and during Alan Greenspan's tenure (1987-2006) the Fed increased the money supply
from $3.6.trillion to. $10 trillion. In Bush's final year, the fiscal budget was $2.9 trillion resulting in a deficit of
$435 billion (a new record). The 2009 fiscal budget, is $3.9 trillion and .already the new administration has pro-
jected the deficit to be $1.84 trillion -a 400% increase:! This figure does not include implicit loan guarantees,
collaterali.zed loans, bailouts and additional-pork that some estimate to be around
$9 trillion dollars. In
February
the Congress passed the $787 billion stimulus package known as theAmerican Recovery and Reinvestment Act
aimed at creating 4.1 million new jobs, rebuilding the infrastructure and promoting green technology. As critics
10 Bear Stearns, Countrywide, Merrill Lynch and Lehman Bros. have since been absorbed by other primary dealers and the
total is now 16 including foreign banks and brokerages like HSBC, UBS Securities, BNP Paribas, Barclays, Credit Suisse,
Daiwa Securities, Mizuho Securities, Greenwich Capital, Deutsche Bank Securities, and Dresdner I~einwort Securities.10-005
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9
have pointed out, this amount would be equivalent to $187,800 for ~ach new job created, and it is the height
of bureaucratic conceit to think that the government can .create jobs better than the free market. In March, the
fiscal 2010 budget of $3.59 trillion was released by the White House and inaccurately entitled
A New Era of
Responsibility.
This budget, as all previous budgets, do~s not account for the $56 trillion in
Unfunded
liabilitieS
for Social Security and Medicare (www.pgpf.org). As I have indicated in my book, this entitlement time bomb
is always kept "off budget" and will likely be monetized by the Fed
(AFRD,
pp. 79-89).
The level of spending and waste coming out of Washington represents a new era of irresponsibility that
is unprecedented and incomprehensible. Total expenditures for 2009 could amount .to
$12.9 trillion,
and this
amount is equivalent to 90% of our annul GDP of $14.3 trillion! Already the Fed has spent billions ir~ bailing
out the private sector including the newly created Term Asset-Backed-Securities Loan Facility (TALF) that is
designed to securitize student loans, car loans, credit card loans, etc., and then loan to small businesses. Despite
these efforts there is evidence that this bailout money made available to Wall Street and commercial banks is
not being turned over, a term known as "velocity" in the monetary sciences. Why is this? The first, and obvious,
reason is that consumers are tapp.ed out and unwilling to take on new debt to "stimulate" the economy. Another
reason, reported in the
Financial Times,
is that banks and lending institutions are "hOarding" the money t
o
cover
potential losses on their credit default swaps .on collateralized securities that are still on the books. Banks and
lenders utilized these derivative contracts to mitigate counter-party risk imposed by government mandates that
compelled institutions to lend to sub-prime customers. Nevertheless, with all of this new debt and money crea-
tion there is going to be an inflationary storm and steady devaluation of the U.S. dollar, and this is beginning to
worry economists, central bankers and foreigners who hold a significant amount of U.S. debt.
According to the latest Federal Reserve Statistical Release on cumulative debt holdings (4/26/09), the
total assets held by the Fed were $883.5 billion in 2007. Of this amount, fully 90% were in AAA U.S. Treasury
securities (bills, notes, bonds). The current balance sheet has now
exploded
to $2.19 trillion in total assets and
the amount of AAA securities has been reduced to only 24%. In other words, the Fed has added $1.3 trillion in
toxic debt that includes residential and commercial mortgage-backed securities, corporate loans, GSE bonds and
contingent debt obligations from TAF, TARP, TALF and so on. What this means is that the quality of debt held
by our central bank is
deteriorating
and it may be the next "troubled" bank.. Evidence of this is the fact hSat the
premium for credit default swaps on U.S. Treasuries has increased
byf.ouriee~z~fold
from its 2007 level! Further
evidence is a warning last year .(1/7/08) and recently renewed bY Moody's that they will downgrade our nation's
credit rating on U.S. Treasuries unless we address our fiscal liabilities. In addition to these .dire circumstances,
on March 18, 2009, the Fed suddenly embarked on a policy known as "quantitative easing" in order to provide
11
liquidity and stimulate the economy. This is aprocess where the Fed goes directly to its primary dealers and
purchases U.S. debt to create money out of thin air. This is a desperate policy and can eventually lead to hyper-
inflation if not contained. Foreign creditors are nervously watching and assessing their own counter-party risk
with the U.S. As Richard Russell, financial editor of the
Dow Theory Letters,
predicted five years ago:
Somewhere ahead these same foreign creditors will look at the declining dollar [and U.S. Treasuries] and
decide that they have taken in enough. At that point, the whole picture changes. Our foreign creditors will
either halt taldng in dollars or they will halt their process of buying U.S. Treasuries.
12
Among the foreigners who hold U.S. Treasuries, China has 24%, or $739 billion;
Japan
has $634 billion;
OPEC has $186 billion; the Carfibean Centers have $176 billion; Brazil has $133; Britain has $124 billion, and
Russia has $120 billion. In 2008, China became the largest holder of U.S. Treasuries and they have become the
most vocal in their opposition to their declining assets. China has $1.9 trillion in foreign currency reserves and
most of this is in the dollar. Qu Hongbin, chief china, economist for HSBC remarks, "There is a clear sign that
China, as the largest holder of U.S. dollar financial assets, is concerned about the potential inflationary risk of
the U.S. Federal Reserve printing money." Chinese Premier Wen Jiabao, spealdng to the press, said, "We have
lent a huge amount of money to the U.S., so of course, we are concerned about the safety of our assets. Frankly
i1 The Fed becomes "the buyer of last resort" and new money is made available to commercial banks thus
easing
pressure.
12 Quoted in
The McAlvany Intelligence Advisor,
February 2004, p. 14. This is the first warning from Moody's since 1917.10-005
COMMENT
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10
speaking, I do have some worries." Commenting in the Communist Party newspaper the
People's Daily,
Professor Shi Jianxun of Tonji University criticized 'U.S. dollar hegemony'. "The U.S. dollar is losing people's
confidence," says Shi, "The world, acting democratica~iy and.lawfully through a global financial organization,
urgently needs to change the international monetary system based on U.S. global economic leadership and U.S.
dollar dominance?' The Red Chinese, along with Russia and other nations, would like to see a move away from
the U.S. dollar and they hold considerable leverage to threaten the U.S. - a geostrategic issue that I will address
in a latersection. Prior to the G-20 meeting held in London, Zhou Xiaochuan, governor of the People's Bank of
China, stated, "The outbreal~ of the [current] crisis and its spillover to the entire world reflects the inherent vul-
nerabilities and systemic risks in the existing international system." Zhou said the world needs to create a new
reserve.currency "disconnected from individual nations" and he suggested an expanded role for the Special
Drawing Rights (SDR) currency unit established and used by the IMF since
1969.
On April 2, 2009, the IMF hosted the G-20 meeting in London to discuss the global financial crisis and
the adoption of a global currency. At the original Bretton Woods Conference after wwlI, there were proposals
to create a global currency called the "bancor" or "unitas" but they.settled for the U.S. dollar tied to gold. The
dollar and gold proved inadequate for supporting trade expansion and the SDR was introduced in 1969. After
Nixon decoupled the dollar in 1971 the'SDR's role became less important.and is now used as a unit of account
for IMF members and also the Bank of International Settlements (BIS). The BIS was founded in 1930 to better
settle war reparations after WWI and they replaced the Swiss go!d franc for the SDR in 2003. Known as the
"central bank for the central banks," the BIS embraces the ide~ Of a global currency and is supported by a
financial network of central banks and sympathetic governments proposing regional currencies for world trade.
These are the perennial
money powers
that Lincoln talked about and they are represented in
every
generation. In
1966, historian and dedicated insider Professor Carroll Quigley of Georgetown University published his book
entitled
TragedY and Hope,
which documented the ultimate goal of these globalist elites:
[The network's objective is] nothing less than to create a world system of financial control in private
hands able to dominate the political system of each country and the economy of the world as a whole.
,This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert
by secret meetings and conferences. The apex of the system was to be the BIS in Basel, Switzerland.
13
The DIS is privately owned by the central banks and it is not accountable to anyone.. It operates in total
secrecy and its exclusive board members meet six times a year. The call for a ch~mge in the existing monetary
system fits very well into the overall.framework of the BIS and tMF. Following the G-20 confab in London the
delegates issued a communiqu~ for increased support of the SDR (Point #19). The U.N. Commission of Experts
on International Financial Reform also enthused, "It is a good time to move to a shared reserve currency:" The
current SDR is a basket of four key currencies consisting of.the U:S. dollar, the British sterling, the Japanese
yen and.the EU euro. The BIS decision to adopt the SDR in 20~)3 is seen by some as an important step to create
a global Federal Reserve System with a
defacto
world settlement currency, or a revised SDR.
A closer look at the SDR mix represents the .trilateral regions of Europe, Asia and the U.S., the three
largest economies ~)f the .world based on GDP. The euro is already established in Europe; the "amero" is being
proposed to serve the NAFTA region in North America (BIS Papers #17); and a third multinational currency is
being proposed in. Asia. In an article entitled "The End of National Currency," in the
Foreign Affairs
magazine
(May/June 2007), Sr. Fellow of the Council on Foreign Relations (CFR) Benn Steil instructs, "Governments
should rqplace national currencies .with the dollar, or the..euro,, or in the case of Asia, collaborate to produce a
new multinational currency over a comparably large and economically diversified area." Since its creation in
1973, the- goal of the Trilateral Commission has been the development of a New International Economic Order
that embodies this idea of three regional currencies (www.trilateral.org). The fact that Paul Volker, the former
North American chairman of the Trilateral Commission, is now-the chairman of the Obama Economic Recovery
Advisory Board should be an indication that these goals are intact. Equally important to note is Richard Haass
who is the current president of the CFR and a senior foreign policy advisor for Barack Obama.
Carroll Quigley,
Tragedy and Hope: A History of the World in our Times
(NY: The MacMillan Company, 1966), p.950.10-005
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11
According to the !MF, the SDR"s Currency composition is subject to a review every five years,
and the next i:eview is due in 2010 (www.imf.org). The l)romotion of the SDR comes at ~/rather interesting time
in the world of macroeconomics and the financial crisis that had its beginning in the U.S. A major theme in my
book is that America will be subject to a "reckoning day", that could be triggered by a default on it~ s~vereign
debt, foreigners dumping our assets, and a U.S. currency devaluation/collapseresulti!ig, in a hyperinflationary
depression
(AFRD,
p. 113). In this scenario the ]MF Currency equation could result in a diminished role for the
U.S. dollar (forced into a regional amero currency), the British sterling would be forced to join the Eurozone
enhar~.cing the euro, and the Japanese yen could participate in the ASEAN+3 Forum (10 East Asian nations with
China, Japan .and S. Korea). At the very least, the end is near for U.S. dollar imperialism, and this will have
huge geopolitical implications. As Alex Wallenwein, publisher of
The Euro vs Dollar Currency War Monitor
has stated, "Whatever the ultimate fate of the dollar will be, it already lies in the hands of foreigners,,..It is no
longer !n the power of the Federal Reserve or the U.S. government to reverse the fall of the dollar." Economic
conditions are suggesting that America's foreign creditors could create a real panic
- a central bank panic -
and
collectivist policy makers in the new Barack Obama administration are preparing us for just such a crisis.
Team Obama & The New World Order
The arrival of Barack Hussein Obama Ii11 and his meteoric rise to power on the national scene, is truly a
remarkable phenomenon in modern politics. Having served a mere 143 days in the U.S. Senate prior to forming
his exploratory committee in 2007 he has come from virtual obscurity: to celebrity status. Exactly
who.
is Obama
and
where
did he come from? A biographical Study of his life is a labyrinth of complexity and ideological con-
troversy. Beginning with his birth, he is
alleged
to be born in both Hawaii and Kenya. His mother, Stanley Ann
Dunham, was a white student attending the University of Hawaii when she met Barack Hussein Obama, Sr., a
foreign student from Kenya, in 1960. Known as a beatnik and progressive liberal, Anna was drawn to Barack's
pro-Soviet Marxism and bohemian lifestyle and became pregnant within a few months. Fortunately for Barack,
Jr., society frowned on
abortion
even more than interracial marriage and they married on February 2, 1961. She
would later learn that the father was already married and they separated in 1963. Barack, Jr. was born on August
4, 1961 and the senator claims that he was born in Hawaii as a natural born citizen (and eligible to be president).
¯ His paternal grandmother (Sarah Obama) says she witnessed his birth in Mobasa, Kenya and she has witnesses.
Even if this is not true his father was also a B.ritish citizen of Zanzibar making his son a dual' citizen, and Article
1I, Sec. 1, Clause 5 of the U.S. Constitution reads that a presidential candidate must be "a natural born" citizen,
not just a "naturalized" citizen. To this day Barack Obama will not produce an official birth
certificate.
14
In 1967, Anna married Lolo Soetoro, a Malaysian oil man, and moved from Hawaii to Indonesia. Young
Obama was enrolled in pre-school in Jakarta under-the name "Barry Soetoro" and was registered as a citizen of
Indonesia and his religion as Islam (serial #203); Bar~y's .step-father was a Muslim and Indonesia law r_equ]res
all children to be citizens (or renounce prior citizenship) to attend school. Presently, there are 16 lawsuits and a
couple Supreme Court cases challenging Barry/Barack's citizenship (notably
Phillip J. Berg v. Barack-Obama).
If Barack is a
usurper
he could be arrested and deported to Indonesia or Kenya, donors face a class action law-
suit and the DNC could be brought up on RICO statutes. Such is the sorry state of political affairs in our nation.
As far as Barack being a Muslim this is not likely. While attending Besuld Primary School in Jakarta he had to
recite the Quran (known as
mengaji)~but
he is a "secular humanist" like his mother who .later separated, from
Lolo in 1974; and he was also raised by his maternal grandparents, Stanley and Madel.yn Dunham~ who were
Unitarians. Barack's.family members in Indonesia and Kenya.are all Muslims and he has a shared empathy for
Muslims as demonstrated by his official foreign visits, comments and actions. According to his biographers
Barack replaced Muhammad for Marxism and this occurred when he returned to Hawaii to live with his grand-
parents and finish high school. His mdther Anna left him and he never saw her again after 1979:
14 Barack will not release his medical records nor his records from Occidental and H.arvard College as well. His name in
Swahili means "Blessed of God" and his middle name is from his grandfather Hussein Obama. His father' s cousin Raila
Odinga ~from the same Luo tribe) is the current Prime Minister of Kenya and is a radical socialist Muslim who wants to
suppress all Christians and impose Islamic sharia law. In 2008, Barack supported Odinga with a million dollar donation.10-005
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12
From 1970 to 1979 Barack attended Punahou - the largest private school in Hawaii. During these
years Barack was influenced by Stanley's drinking buddy .known as Frank Marshall Davis (1905-1987). Davis
wrote for the
Honolulu Record
(a Communist newspaper) and was a black member of the Communist Party
USA and singled out bythe House Un-American Activities Committee as a subversive. Davis would become
Barack's mentor and advisor during his formative years (www.discoverthenetworks.org). In his
bool~Dreams of
my Father,
Barack refers to "Frank" as a poet and influential friend. In
1979,
he attended Occidental College in.
Los AngeleS .and Barack says, "I chose my friends carefully." These included fellow foreign students, black
activists, feminists and Marxist professors. He was also mentored by a gay professor and was a member of the
radical socialist orga .nization Students for Economic Democracy until.he transferred to Columbia University in
1981. At. Columbia he majored in political science and after graduation in 1983 moved to Chicago where he
became Director of the Developing Communities Project where he honed his community organizing skills. In
his book,
The Case Aga!nst Baracl~ Obama,
David Freddoso writes that his solution to every problem was "a
distribution of government funds," and the call for "a more just and democratic society" that was firmly rooted
in the Alinsky method. Saul Alinsky is considered the founder of community activism and stressed that radicals
must "infiltrate the system within,, for real change.
~5
In his book
Rules for Radicals." A Pragmatic Primer for
Realistic Radicals
(dedicated to ~Lucifer'), Alinsky says, "Any revolutionary change must be preceded by
a...non-challenging attitude toward change among the mass of our people" (prologue). He chided the Sixties
Left and said that radicals should instead cut their hair, put on suits and "don't scare off" the middle class (p.
195). This is the kind of t~ragmatic strategy that Obama used in his "Change We Can Believe In" campaign.
In the mid-1980s Obama was the attorney for the Association of Community Organizations for Reform
Now (ACORN) and was also a trainer at their annual conferences. ACORN promotes an array of Leftist social
issues and was instrumental in enforcing the CRA that compelled loans to risky low-income families. In 1988,
Obama went back east to attend Harvard Law School and evidence suggests that his tuition was funded by a
wealthy Saudi prince. He became the first black president of the
Harvard Law Review
and returned to Chicago
to intern at Sidley & Austin law firm in 1989 where he met his wife Michelle Robinson. Following graduation
he and Michelle were married in 1992 by Rev. Jeremiah Wright at the Trinity United Church of Christ. Wright
embraces the tenets of black liberation theology and preaches the gospel of "Matthew, Marx, Luke and John" to
incite class warfare and the politics of greed and envy. After incendiary remarks and critical media attention the
White House has since distanced itself from
comrade
Wright.. From 1993 to1996 0bama joined the civil fights
law firm of Davis, Miner, Barnhill & Galland. During this period he was active .with ACORN's black voter-
registration project and law partner Judson Miner introduced him to Bill Ayers and Bernardine Dohrn, and other
members of the Leftist New Party movement. Ayers and Dohrn are former Weatherman Underground terrorists
fromthe Sixties Left and they encouraged Obama to run for Illinois state senator as a New Party member.
16
In 1995, Obama became a candidate and he won the Illinois 13th District which represented mostly poor
black voters. In 2004, Obama gained the support of Rev. Jesse Jackson's Rainbow Coalition to run for the U.S.
Senate< He also got endorsement from the
Chicago Tribune
that exposed his rival's sex scandal to clear the way
for his victory in the polls. In 2007, Senator Obama voted the liberal position on 65 of 66 key votes and he was
ranked as "the most liberal Senator of 2007" by the
National Journal.
The Americans for Democratic Action
(ADA) also assigned him a lifetime liberal rating of 90% for his progressive polities. On February 10, 2007 the
young Senator announced his presidential candidacy by. acknowledging, "I know that I have not spent a long
time learning the ways of Washington, but I have been there long enough to know that the ways of Washington
have to change." Unfortunately, . the kind of "change" Barack and Michelle Obama are talking about has its
ideological roots in neo-Marxist economic theories, hate,filled sermons and contempt for American values. In a
speech delivered on February 18,. 2008 in Milwaukee Michelle admitted, "For the first time in my adult lifetime,
I am really proud, of my country." prior to his own election, Barack was asked on Meet the Press
(10/26/08) his
views on the American flag, "My wife disrespects the flag for many personal reasons. Together she and I have
attended several flag burning ceremonies in the past, many years ago. She has her views and I have mine. Of
course, I have found myself about to become President...and
I have to put aside my hatred
(my emphasis)."
Saul Alinsky (1909-1972) criticized ~middle class values' in
Reveille for Radicals
(1946) and
Rules for Radicals
(1971).
New Party members mostly come from the Democratic Socialist of America dating back to the 1960s (www.dsansa.org)10-005
COMMENT
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13
Is it possible that Barack and Michelle Obama have "put aside" their core political beliefs and their.
own personal convictions? How is it that we have elevated a flag-burning Marxist demagogue into the highest
office in the land? Among the various reasons, ~Obamawias able to inspire the themes of hope and change as he
wrote in his book
The Audacity of Hope
(2006). Using his past organizational skills as a community activist in
South Chicago he employed the Alinsky method of working "within the system" to gain power, and in So doing
he created a personality cult, as Dr. Jerome Corsi documents in his book
The Obama Nation: Leftist Politics and
the Cult of Personality.
Put simply, Barack Obama has tried to clean up his radical past, he has exploited white
guilt, appealed to race, and promises his followers a great future with him as the Great Leader. According to Dr.
Samuel Vaknin, an authority on Narcissistic Personality Disorder (NPD), Obama projects a grandiose but false
image of himself. Somewhat impressed at first, Dr. Vaknin says, "I was put off soon, not just becatise, of his
shallowness but also because there was an air of haughtiness in his demeanor that was unsettling.
''17
Noting his
dysfunctional youth and his crowd appeal, Valcnin has compared Obama to Rev. Jim Jones with his charismatic
appeal to provide social justice, unity and equality for his co-dependent cult members. In February 2008, Nation
of Islam leader Louis Farrakhan declared that Obama is ~a herald of the Messiah." This kind of quasi-religious
appeal is disconcerting. Vaknin ~oncludes that the one thing that all narcissists strive for is -
power.
The fact
that Obama has assumed authority during a ~.~national crisis" is reason for concern since NPD has historically
been associated with the abuse of power. For more background you can visit www.theobamafile.com.
On January 20, 2009, Barack Hussein Obama II was sworn in as our 44th president. The San Francisco
Lesbian Gay Freedom Band celebrated in the inaugural parade and prayers were offered by Dr~ Ingrid Mattson,
radical leader of the Islamic Society of North America, and fellow CFR member Rev. Rick Warren. Among his
top donors were Goldman Sachs, J.P. Morgan Chase, Citigroup, Harvard University, Time Warner/CNN, and
his old law firm of Sidley & Austin. As I have indicated already, the new administration has been expanding the
role of government and is raising our national debt to new levels. Following his first 100 days, Obama reassured
the press that "We've begun the work of remaking America." Helping Obama to "remake" America is a team of
Establishment figures from both political parties who are members of the Council on Foreign Relations (CFR)
and the Trilateral Commission (TC). The CFR represents the ruling Establishment in the U.S. and was created
in 1919 by the same Wall Street conspirators who created the Fed
(AFRD,
pp. 125-127).
18
As Professor Quigley
has also pointed out it is the goal of the globalist elites "to dominate the political system of each country and the
economy, of the world as a whole'" in private hands (p. 10). Quigley said it is important that both political parties
in America should be "almost identical" so thai( there are not any "profound or extensive shifts in policy." If one
party is voted out, the new party "will still pursue, with new vigor, approximately the same basic policies.
''19
In 2008, the presidential race was never in doubt. CFR members were well represented with McCain,
Ronmey, Giuliani, Thompson, Clinton, Edwards, Dodd, and Obama. Membership in the CFR is by invitation
only and its 4,338 members are spread between business, government and "others" (WWW.cfr.org). We can be
sure that almost 500 CFR members are in the Obama administration because that is how many were in the Bush
administration. Membership in the Trilateral Commission is limited to 424 from Europe, Japan and the U.S. and
their focus is on their "shared leadership responsibilities" and "the dramatic transformation of the international
system." In other words, how the global elite can secure their place in the New World Order. Both the CFR and
the TC share a collectivist worldview that stresses "progressive regionalization" towards a world government, a
term frequently used by Zbigniew Brzezinski co-founder of the TC (www:augustreview.com). Part of this plan
is the creation of a Superstate between the U~S., Canada and Mexico known as the North American Union that I
will address in a moment. Brzezinski is a real heavYweight in the globalist fraternity and he is serving as senior
policy advisor for Barack, who was only 12 years old when Zbig was using Rockefeller money to launch the TC
and mentor Jimmy Carter. Presidents may come and go but the CFR/TC lotk continues into every-administra-
tion. As a newcomer to Washington the president is surrounded by veteran insiders to help guide his domestic
and foreign policies "with new vigor." Senator Joe Biden is former chairman of the U.S. Senate Committee on
Foreign Relations and a long time-member of the CFR who was added to the 2008 Obama ticket.
Samuel Vaknin,
Malignant Self-Love: Narcissism Revisited
(2001). Full article at www.truthorficti0n.com - ." Vaknin."
Founding members include Paul Warburg, J.P. Morgan, John D. Rockefeller, Nelson P. Aldrich, Jacob Schiff and more.
Carroll Quigley,
Tragedy and Hope,
p. 1,256. Quigley mentions how "cooperative politicians" will be rewarded, p. 950.10-005
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CL-02569
14
As we should expect, a majority of Obarna's closest advisors and cabinet are from the CFR and the
TC (10% of the U.S. membership), these include Robert Rubin, director at Goldman Sachs/Citigroup and co-
chair of the CFR in New York,
2°
National Security Advisor Thomas Donilon along with Gen. James L. Jones,
Director of National Intelligence Adm. Dennis C. Blair, Madeleine Albright, Brent Scowcroft, James Baker and
Henry Kissinger. The White House cabinet includes Secretary. of State Hillary Clinton (not a CFR member but
married to CFR member Bill Clinton whose professor at Georgetown was Carroll Quigley), Deputy Secretary of
State James Steinbe~)g, Assistant Secretary of State Kurt Campbell, State Department Special Envoys Richard
Haass, Dennis Ross, George Mitchell and Richard Holbrooke, Secretary of Defense Robert M. Gates, our U.N.
Ambassador Susan Rice, Department of Homeland Security (DHS) Janet Napolitano and Timothy F. Geithner,
Secretary i~f Treasury. Geithner's advisors include Peter G. Peterson (former CFR chairman), Paul Volker, Alan
Greenspan and Hank Paulson, E. Gerald Corrigan and John Thain, all from Goldman Sachs.
Obama is chairman of the National Economic Council formed in 1993 by Robert Rubin. Rubin was the
personal mentor of Larry Summers (CFtUTC) who is the current director of the NEC. Summers is the former
chief economist for the World Bank/IM~ and past president of Obama's
alma mater
Harvard University. He is a
former Secretary of Treasury under Bill Clinton (1999-2001), and he is best remembered for his support of the
Oramm, Leach, Bliley Act that repealed the Olass-Steagall Act, "This historic legislation will better enable U.S.
companies to compete in the new economy." Within ten years this "historic legislation" contributed to the worst
economic meltdown in modern history with massive bailouts on Wall .Street by the Fed and U.S. Treasury! Also
joining the NEC is Tim Geithner who was Under Secretary of the Treasury at the same time and later helped
with the bailouts as president of the NY Fed. Other members of the NEC include Christina Romer, chairman of
the Council of Economic Advisors in Obama's cabinet, Joe Biden and I-Iillary Clinton, whose only knowledge
of economics is
tax and spend.
With this kind of economic leadership our nation is in big trouble! In early 2009,
Obama created the Economic Recovery Advisory Board and named Paul Volker as the new chairman. This
Board is an eclectic mix from the private sector (AIG, GE, UBS, Caterpiller, Oracle) as well as academia, the
SEC and AFL-CIO. Paul Volker is also chairman of the Group of Thirty (G30), which he helped found in 1978
as trustee for the Rockefeller family. The G30 consists of 30 ultra-elite international financiers including central
banks a2ound the world (who alsO share membership with the BIS), and U.S. representatives Timothy Geithner,
Larry Summers, E. Gerald Corrigan and former Fed chairman Alan Greenspan (www.group30.org).
With his economic team, cabinet and advisors in place, Obama has set out to
remake
America with a
presumed "mandate" from the American people
(which he does not).
Upon entering office Obama has resumed
the practice of signing "executive orders" and appointing "czars, to oversee autos, borders, climate and so on.
a1
Increasingly, the executive branch has become more like an Impekial Presidency with paternalistic qualifies, and
this is not good. As David Theroux, founder of the Independent Institute, comments, "For most Americans, the
Presidency has become their sovereign king and father figure who stands above and beyond us mere citizens in
order to oversee our lives and our well-being." Seizing his own likeness to FDR, the president has assumed this
kingly image
and is proposing broad reforms like passing the American Recovery and Reinvestment Act with
the Economic Recovery Advisory Board to create jobs and economic growth. Similar to the National Industrial
Recovery.Actand National Recovery Administration created in June 16, 1933, FDR also promised economic
growth and new jobs. Th~ accepted mythology is that FDR rescued the "failed free market" in 1932 and that his
New Deal put America back to work and ended the Great Depression. Historians note that unemployment stood
at 23% in.1933, and was still 15% in 1939. It was WW~ that lowered unemployment down to a mere 1% by
1945,
no{ the government (AFRD,
pp. 57-67). It was government
intervention
that made the Great Depression
great! In
1939, Secretary of the Treasury Henry Morgenthan later confessed before a congressional committee,
"We are' spending more money than we have ever spent before and it does not work .... We have never made
good onour promises .... I say after eight years of this administration we have just a much unemployment as
when .welstarted... and an enormous debt to boot.
''~2
Read this again. For this is where we are heading.
~o The Shadows of Power: The Council on Foreign Relations and the American Decline
by James Perloff is recommended.
=1 Executive orders are much like a "king's decree" and have the force of law. EOs were rarely issued prior to 1907. Since
WWII there have been approximately 300 issued in each administration. During FRD' s entire presidency he issued
3, 728.t
22 Burton Folsom, Jr.,
New Deal Or Raw Deal?: How FDR' s Economic Legacy Has Damaged America
(NY: 2008), p. 48.10-005
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In 1932, the Hoover administration created the Reconstruction Finance Corporation (RFC) to
make government loans to banks in order to stimulate the economy. With $500 million, the RFC was also
authorized to lend directly to the railroads that were considered too big to fail. Within a year the RFC was an
abysmal failure writes one historian. "Hundreds ofmilli6n~ of dollars poured down various RFC rat-holes were
lost forever." Similarly $700 billion dollars in TARPmoney is being poured down more rat-holes today and this
too will prove to be an
abysmal
failure. Again, we are reminded of Santayana's words "that those who cannot
remember the past are condemned to repeat it." In 1935, the Supreme Court unanimously ruled
against
FDR's
National Industrial Recovery Act passed in 1933. In
Schechter Poultry Corporation..v. United States
the court
ruled that the Act "infringed upon states' authority, unreasonably stretched the Commerce Clause, and gave leg-
islative powers to the executive branch in violation of the Constitution," and further stated that "extraordinary
conditions do not create or enlarge constitutional powers.
''a3
Note here that extraordinary conditions
do not
give
the government any authority to become social engineers, or enlarge the government. As Jefferson also warned,
"To take a single step beyond the boundaries thus specially drawn around the powers of Congress is to take pos-
session of a boundless field of po~ver." Today the Imperial Presidency is supported by an enormous bureaucracy
with a boundless field of power. As some have stated, the administrative staff of the executive branch has now
become a
de facto
"fourth branch" of government. The U.S. Government Manual devotes hundreds of pages for
the executive branch and the
Federal Registe
r
regularly compiles more than 70,000 pages each year
.
So who is to Name for the exponential growth of the federal government? Critics are quick to point out
that we all are. Citizens have asked too much from their government and the states have been too eager to
receive federal grants and funding. But this is changing. On April 15, 2009 thousands of people gathered in 800
cities to protest the Bush/Obama bailouts and big government with tea parties. At the same time several states
have entered legislation asserting state's rights based on the Tenth Amendment, which reads, "The powers not
delegated to the U.S. by the Constitution...are reserved to the States respectively, or to the people." This is not
an effort for states to secede from the union, but merely an attempt to persuade the federal government to abide
by the Constitution. Oklahoma is the first state to pass this leNslation that affirms that the states should not be
treated as "agents" of the federal government. "[This] Resolution serves as notice and demand to the federal
government, as our agent, to cease and desist, effective immediately, mandates that are beyond the scope of
these constitutionally delegated powers.
''24
States have a legitimate fight to be concerned about the size Of the
federal government, but there is a real risk that this economic crisis could lead to an even
greater
crisis.
A Serious Crisis Should Never Go To Waste
Writing in
The New American
(11/10/08), Charles Scalinger says, "Few events, save possibly war, are as
susceptible to political manipulation and fear-mongering as an economic crisis." As financial events unfolded in
2008 people started to fear an economic collapse~ Speaking on the House floor in July 18, 2008, Congressman
Ron Paul addressed this issue by cautioning, "In the post- 9111 atmosphere, too many Americans are seeking
safety over freedom. Real fear of economic collapse could prompt central planners to act to such a degree that
the New Deal of the 1930s might look like Jefferson's Declaration of Independence." By late 2008, luminaries
from the Establishment elite started weighing in on the crisis at hand. Speaking at a Seattle fundraiser Joe Biden
said, "Mark my words, it will not be six months before the world tests Barack Obama." The senator mentioned
the "current economic crisis" and said it could be "international." Soon after, Madeleine Albright was joined by
Colin Powell in repeating their certainty that a larger crisis is in the making. Following his election victory the
new president acknowledged to the press, "Painful crisis also provides.us with an opportunity to transform our
economy"
(Mahchester Union Leader,
12/28/08). Obama's new Chief of Staff Rahm Emanuel was a little more
direct about the opportunity to transform the economy When he added, "You never want a serious crisis to go to
waste." Speaking before the House Armed Services Committee on March 11, 2009, CFR Chairman Richard N.
Haass was clear, "[The] current account deficit and national debt make it all but certain that down the road the
U.S. will confront not just renewed inflation
but quite possibly a dollar crisis as well
(my emphasis)."
See www.answers.com. The NI~A created an "industrial cartel" in the same way that the Fed is also a "banking cartel."
Other states are AZ,AL,AR,GA,ID,IN,IA,KS,KY,MI,MN,MS,MT,NH,NM,OH,OK,OR,PA,SC,SD,TN,TX,VA,WA,WI.10-005
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The financial difficulties that are crippling national economies is part of a larger concern that the
U.S. is facing a dollar crisis, as recent talks at the G-20 meeting suggest. As I mentioned at the beginning of this
report, our financial and economic problems are essentially rooted in a
money problem,
or the very nature of fiat
currency and fractional reserve banking. The fact that central planners from the ruling Establishment are both
aware of and anticipating a currency crisis is reason for pause since this is the kind of
opportunity
that should
never go to waste. In a recent interview on CNBC,.Henry Kissinger was asked about Obama and our financial
uncertainties, "I think that his task will be to develop an overall strategy for America in this period, when really
a New World Order can be created. It's a great opportunity. It isn't such a crisis." And just what is this New
World Orc~er? Thi~ is short for the New International Economic Order defined by the TC as a trilateral concept
for world government. As David Rothkopf, former managing director for Kissinger & Associates has said in his
new book
Superclass
the world needs "real global government" because "it is no longer possible for a nation-
state acting alone to fulfill its portion of the social contract.
''25
Speaking at the 1995 State of the World Forum,
Brzezinski laid out the strategy, "We cannot leap into world government in one quick step, the precondition for
eventual globalization - genuine .globalization -.is progressive regionalization." The blueprint for this goal is to
create trading blocs .like the EU. Here in the U.S.~ the North American Free Trade Agreement (NAFTA) has
laid the foundation for the North American Union. Kissinger predicted in
1993
that "NAFTA will represent the
most creative step toward a New World Order by any group of countries since the end of the Cold War," and is
"the architecture of a new international system" (LA
Times, 7/18/93). In
1994, David Rockefeller said in a U.N.
speech, "All we need is the right-major crisis and the nations will accept the New World Order." This idea of a
crisis is exactly what the globalist elites need to integrate the NAU and create the new amero currency. In 2002,
Dr. Robert A. Pastor (CFR), director for North American Studies at American University, wrote a paper for the
TC entitled
A North American Community
promoting this scheme. In 2005, the CFR released a study for a con-
vergence fulfillment by 2010. Recently, Dr. Pastor tipped his hand when he indicated that a major crisis, like
another 9/11, would be sufficient to create a North American Community with Canada and Mexico:
What I am saying is that a crisis is an event which can force democratic governments to make difficult
decisions
like those that will be required to create a North American Community.
It's not that I want an-
other 9/11, but having a crisis would force decisions that otherwise might not get made. When there's a
crisis, people accept pro_posals they wouldn't have otherwise accepted (my emphasis).
26
It would be hard to find a more authoritative quote than What has been said here. The NAU is part of a
government-sponsored effort to create a NAFTA perimeter (www.spp.g0v), and you can read more about this in
my book
(AFRD,
pp. 123-141) or go to www.stopthenorthamericanunion.com. The Establishment planners may
not be able to leap into world government, but they like the idea of "one quick step" to force a reNonal govern-
ment! After all, this isn't such a crisis right? No, this is
treason.
"A nation can survive its fools, and even the
ambitious," wrote Cicero, "But it cannot survive treason from within." This plot to exploit an economic crisis is
insidious. Obama's senior advisors are operating like "the Matrix" to midwife our nation into their New World
Order, and some of the American people are starting to wise up. As I have outlined in this report, the U.S. has
created massive structural imbalances in ~he economy, huge deficits and bailouts are mounting and our Treasury
bonds are about to be downgraded. According to the Bureau of Public Debt, the U.S. has started auctioning off
30-year bonds
every
month (and there are rumors of 50-year bonds]), and net borrowing is up
27-fold
from $13
billion last year to $361. in the last quarter! In May 2009, Rep. Mark Kirk (R-IL) said he was shocked "at how
much debt was being bought by the Federal Reserve due to the
absence
of foreign investors." The Fed has now
become not only the lender of last resort
.2 but the buyer Of last resort! In
October 2008, a highly-classified
document was leaked by the foreign press simply known as the "C & R Document" (www.google.com) and it is
serious stuff. The report states that if the U.S. defaults and unilaterally Cancels its debt obligations from China,
Russia and Japan, it can expec~ "Conflict" and this will lead to "Revolution" inAmerica. Managing Director of
the !MF, Dominique Strauss-Kahn has recently Warned that "advanced economies" could see violent protests.
David Rothkopf,
Superclass: The Global Power Elite and the World They are Making
(NY: Straus, 2009), pp. 315-316.
Jerome D. Corsi,
The Late Great USA: The Coming Merger with Mexico and Canada
(CA: WND Books, 2007), p. 32.10-005
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The "C & R Document" has reportedly been distributed to the highest levels of government and the
ruling superclass are preparing for the worst. Following thd financial meltdown that began in late 2008 the U.S.
Army War College's Strategic Studies Institute ran an article in
Parameters
magazine by Prof. Nathan Freier in
which he states that the U.S. military must prepare for a "violent, strategic dislocation inside the U.S." which
could be provoked by an "unforeseen economic collapse" or "loss of functioning political and legal order." This
report goes on to say that "the DoD would be an essential enabling hub for the continuity of political authority"
to control "widespread civil violence inside the U.S."27 The "continuity of government" (COG) strategy dates
back to the civil Readiness Exercise in 1984 lcnown as Rex84 under FEMA that would use Continental military
forces (CONUS) to fight civil disturbance (Operation Garden Plot, U.S. Army Manual19-15). After the events
of 9/11, the government moved quickly to enact the so-called USA PATRIOT Act in 2001, and this was
followed by the DHS in 2002 that consolidated 22 agencies, including FEMA, and CONUS was converted to a
permanent
North American command known as NORTHCOM. In October 17; 2006, Bush secretly signed the
Defense Authorization Act and the Military COmmissions Act (Public Law 109-364/366) to use the military as
domestic police and federalizing .local police,.which violates the Posse Comitatus Act of 1878 that prohibits the
military from being used as law enforcement. In 2007, Bush also signed a Presidential Directive (NSPD-51) that
created a new COG coordinator under the DHS without seeking or consulting Congress.
28
In October 2008, the
DoD ordered a recall of the 3rd Infantry's 1st Brigade Combat Team from Iraq to help local authorities in case
of terror or "other domestic catastrophe." According to the
Washington Post,
the first 4,700 troops are stationed
at Fort Stewart, Georgia and another 20,000 troops will be attached to NORTHCOM.
The "war on terror" is a useful abstraction being used to prepare the U.S. for a military police state, and
civil libertarians are taking note of this fundamental shift in national priorities
(AFRD,
pp. 117-123). After two
days in office, Obama and the 11 lth Congress introduced the National Emergency Center Establishment Act
(HR645) to create six emergency centers at existing military installations to work with the DHS. HR645 bears a
direct relationship to the economic crisis and there has been no press coverage of this bill. In 2006, Halliburton
subsidiary KBR was awarded a $385 million dollar contract with DHS to build internment facilities in the U.S.
and some estimate that there are as many as 800 such camps prepared for civil unrest (www.prisonplanet.com).
According to the DHS website there are 58 "fusion centers" gathering information on "subversives" and other
extremists and this likely inchides the kind of people who attend tea parties and gun shows. Ron Paul and his
followers have been targeted, and Paul warns that our civil liberties are being
eviscerated.
Retired CENTCOM
Gen. Tommy Franks also predicted that our Constitution could be."discarded" in favor of some form of military
government if a major crisis hits
(Time,
11/2!103). Elitist within the government-military-indusirial-complex are
sensing the end game is near and they are appealing to our sense of patriotism and the necessity for degrading
our liberties. But as William Pitt declared, "Necessity is the argument of tyrants, and the creed of slaves."
Geostrategic Trends in a Global Network" ....
As we look into our near future I will provide you with a brief analysis of some significant trends to be
aware of and I will conclude with some suggestions for your own contingency planning. Gerald Celente is the
director of the Trends Research Institute and he is a legendary forecaster. In his latest predictions he is also
forewarning of America's financial reckoning day and a hyperinflationary depression that will be followed by
widespread violence, food riots, job marches, tax rebellion and the possible breakup of the U.S. as states join in
secession (www.trendsresearch.com). Celente says that revolution and riots could start happening some~time in
2009-2010 and mercenary troops will be used to incarcer.ate people. Already there have been riots and protests
in Iceland, Greece, France, Britain, Ireland, Spain, Latvia, Bulgaria, Russia and elsewhere. For 2009, the World
Future Society has predicted food and water scarcity in the world along-with commodity shortages and renewed
tensions between the U.S. and Russia with their ally China (www.wfs.org). This is similar to the Global .Trends
2025 report from the National Intelligence Council that sees conflicts arising over food, energy and particularly
water as documented in the new book,
Water: The Final Resource
(2008). This government report also sees the
27 Known and Unknowns: Unconventional Strategic Shocks in Def Strategy Development
(www.infowars.com/?p=6821).
28 Also known as HSPD-20, this was not in compliance with the National Emergency Act of 1976 (U.S.C. 50:1601-1651).10-005
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U.S. dollar's role being diminished with both Russia and China asserting the need for a "multipolar" world
and the threat of a new "Cold War." Considered. an "arc of instability," the Middle East will see a nuclear arms
race if Iran acquires nuclear weapons, and there could be a prolife'ration after the 1991Strategic Arms Reduction
Treaty between the U.S. and Russia expires in December 2009. Andrew Krepinevich, director of the Center for
Strategiq an
d
Budgetary Assessments (a government think tank), is a military futurist and he proposes several
geopolitiealthreats in his new book
Seven Deadly Scenarios.
He mentions a global pandemic forcing a Mexican
invasion (the DoD is also predicting financial collapse in Mexico) and an early withdraw from Iraq will result in
chaos in the region. He, along with the DoD, is predicting the collapse of the Pakistani government and nuclear
weapons falling into rogue states that can be used against U.S. cities. He also sees a cyberattack against the U.S.
and according to NSA intelligence China already has the capability to shut down our Pacific naval fleet. Finally,
in another scenario, Islamic fundamentalists shut down the Persian Gulf and the Strait of Malacca forcing an oil
shock, and China, sensing America's internal strife and nnked cites, launches an all-out attack against Taiwan to
reclaim it as their 23rd province.29. China has threatened to force reunification with Taiwan across the 100-mile
Taiwan Strait since 1949 when Chiang Kai-shek and his anti-Communist forces fled the mainland.
In 1979, the U.S. established diplomatic relations with mainland China and also passed the Taiwan Rela-
tions Act, which pledges U.S. support for Taiwan and allows the sal~ of defensive arms. Since the 1990s, China
has increased its military spending and currently has 1,500 Dong Feng 11 ballistic missiles aimed at Taiwan, and
the DoD estimates that the PRC will have five Hans-class submarines equipped with JL-2 long-range nuclear
miasiles operational by 2010.
3°
In 2005, the PRC passed an anti-seccession law that gives them a legal basis to
attack Taiwan. Soon after, General Zhu Chenghu, dean of China's National Defense University, declared, "If
the Americans draw their missiles, I think we will have to respond with nuclear weapons." Since then U.S.
naval ships have been harassed and denied port calls by the Chinese. In late 2008, the U.S. announced a $6.5
billion arms package to Taiwan and Maj. Gen. Qian Lihua ordered the U.S. to "cancel its plans" and China has
now "suspended all military exchanges with the Pentagon"
(The Washington Times,
11/20/08). With things
getting tense, the Pentagon sponsored a first-of-its-kind war game at Ft. Meade, Maryland in March 2009 that
simulated economic warfare and concluded that China would be a decisive winner if they were to
dump
their
U.S. financial assets. Will China do this? In .1956, during the Suez Canal crisis the U.S. ordered Britain to with-
draw forces and threatened to
dump
Sterling bond holdings that would have devalued their currency - in three
weeks the Brits conceded and the prime minister resigned. Yes, China has this geostrategic advantage.and they
know it
(AFRD,
pp. 159-169). Interestingly, China's army literature describes their. 600 merchant ships operated
by COSCO as
zhanjian,
or "warships." U.S. trade with China has always been strategic as noted by our military
futurists. As Chairman Deng Xiaoping once confided, "we must hide our capacities and bide our time."
China and Russia are both being affected by the economic downturn, but their rigid centrally-planned
infrastructures are better prepared to control disarmed popuiations. Russian scholar Igor Panarin is dean of the
Russian. Foreign Ministry and a former KGB analyst who is predicting that America will descend into civil war
in 2009and will break up into six separate statesby 2010. An expert on U.S.-Russian relations, Panarin refers
to U.S. foreign debt (bonds) as "a pyramid scheme" that will lead to a financial collapse and says that mass im-
migration has contributed to our decline, which some see as a deliberate plot
(America's Engineered Decline).
Panarin concludes that both Russia and China will emerge stronger and check U.S. hegemony in Central Asia, a
geostrategic trend that concerns the U.S. intelligence community. In 2001, the Shanghai Cooperation Organiza-
tion was formed with China, Russia, Kazaldastan, Kyrgyzstan, Tajikistan and Uzbeldstan as a direct answer to a
corrupted and pro-western OPEC .cartel. Western analysts see this Sino-Russian alliance as a new Warsaw Pact,
or geop61itical couriterweight to U.S. oil interests around the Caspain Sea. This is a subject that Zbig Brzezinski
wrote about in
The. Grand Cheesboard,
and a more recent .account by war correspondent Lutz Kleveman in his
book
The New Great Game: Blood and Oil in centralAsia.
Kleveman points out that the "war on terror" was a
pretext for sending troops to Iraq (to secure oil) and troops to Afghanistan to rid the Taliban, who were prevent-
ing the CentGas pipline project with Ctievron-Unocal and Halliburton (Dick Cheney's old company).
29 Andrew F. Krepinevich,
7Deadly Scenarios: A Military Futurist Explores War in the 21st Century
(NY: Bantam, 2009)
3o Janes Intelligence Weekly
has captured images of a secret submarine base at the tip of Hainan Island that can conceal up
to 20 submarines and aircraft carriers to challenge U.S. naval power in the region along with new Russian SU-30MK2 jets10-005
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In 2005, the U.S. applied for observer status to the SCO and was flatly denied. In that same year,
the U.S. was asked to remove its airbase in Uzbekistan and Russia has influenced Kyrgyzstan to remove more
airbases in February 2009. Current SCO observers.include. . India, Pakistan and Iran with Venezuela seeking to
join (www.sectsco.org). Iran and Venezuela are rogii~members of OPEC, and both have joint oil ventures with
China. In 2004, Iran announced plans to open an oil bourse as a trading platform to price crude oil in eui:os
instead of dollars in an effort to strike at the U.S.
dollar pillar
to collapse the
military pillar
(the CIA refers to
this as attacking your foe's ~center of gravity'). In 2008, Iran opened this oil marker for trading and the Obama
administration is currently drawing up plans for an attack against Iran (Iraq tried switching to euros in 2000).
The Israeli government under Benjamin Netanyahu is also requesting flight codes from the U.S. to fly over Iraq
to strike at Iranian nuclear facilities. Washington has criticized Russia for helping Iran to develop their nuclear
plants and supplying TOR-M1 anti-aircraft missile systems. The fact that China-Russia-Iran has formed a
hostile troika to U.S. interests in the re,on is a geopolitical paradigm that could be a tipping point for China to
initiate economic warfare. The SCO favors a "petroeuro" pricing structure and some members of OPEC are also
-indicating the same. According to the BIS, the 0il cartel is shifting more of their currency reserves into the euro.
In early 2009, the Gulf Cooperation Council (GCC) formerly announced that they will break their dollar pegs in
favor of a new single currency called the
"khdleeji,"
which means Gulf in Arabic. The GCC has pegged their
currencies to the dollar since 1981 and cites America's "i, nappropriate monetary policies" by the Fed as a main
reason for their decision.
31
The new currency was planned for 2010, but Saudi Arabia wants it by fall 2009.
This is a major development in the Middle East and it demonstrat.es how the current economic crisis is
producing a macroeconomic paradigm in the world. The declining role of the U.S. dollar, as predicted by
futurists, forecasters, foreign analysts and government think tanks, is heightening the need for a more reliable
reserve currency as proposed by the G-20 meetings. The current proposal of an SDR comprised of the dollar,
euro, yen and pound could eventually result in
the euro
being the strong anchor as the dollar finally gives way
to a revalued dollar/amero in the NAU. According to the McKinsey Global Institute the EU has officially over-
taken the US as the world's largest economy ($18.4 trillion GDP). As T. R. Reid noted in his 2004 book
The
United States of Europe,
~the success of Europe' s common currency could bring America' s finandial house of
cards tumbling down.
''32
Currently there are 16 Eurozone member nations but some are failing to meet the 1997
Stability and Growth Pact and have more than 60% debt to GDP or 3% inflation (the U.S. has a
100-200%
debt
ratio !). According to Paul Donavan, a British economist at UBS, the economic crisis will likely cause a breakup
of the Eurozone and favor "the strongest economies over the weaker ones," perhaps rgsulting, in 10
core
nations.
In late 2008, British politicians were musing, "If we had the euro, we would have been better off." What the EU
desperately needs is "political union" and the goal is to adopt the Lisbon Treaty by late 2009, and this will also
create a new President of the EU. "We are building a new world superpower," says Tony Blair, "The European
Union is about the projection of collective power"
(AFRD,
pp. 148-158).
33
PM Gordon Brown adds that today's
challenges are merely the "birth pangs of a new gl0,bal order." Why are these important issues? The globalists
are building a New World Order and the Bible predicts that Europe will rise in world power with dxactiy 10
nations and a world leader, and this is a
major
geostrategic trend to be watching. I write more about this in my
book
(AFRD,
pp. 198-219), and you are also encouraged to subscribe to www.geostrategictrends.com.
Famed currency analyst Dr. Franz Pick once said, ~"'The fate of the nation, and the fate of the Currency
are one and the same." America is in deep trouble and people are beginning to wake up. Just as the~ government
has a color-coded national threat advisory our
economic
threat advisory is a
code red,
and it is time to seriously
make some preparations for hard times. "A prudent man sees evil and hides himself, the naive proceed an
d
pay
the penalty" (Pro. 27:12). Freeze-dried food storage and fresh water is highly recommended and you can contact
people at www.alpineairefoods.com, ~ww.freezedryguy.corri, www.nitro-pak.com, www.efoodsdirect.com .and
www.freshwatersystems.com. The largest supplier of garden seeds is www.burpee.com, or 1-800-888-1447 for
a catalog. For survival gear contact Emergency Essentials (www.beprepared.com), or call 1-800-999-1863 for a
catalog. A good source for lighting, stoves and home goods is www:lehmans.com, or 1-888-438-5346.
The GCC includes Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman and Bahrain. (Yemen is seeldng to j~in).
T.R. Reid,
The United States of Europe: The New Superpowe~ and the End of American Supremacy
(NY: 2004), p. 243.
Ibid., p. 4. The annual Bilderberg Group meeting in Vouliagmeni, Greece (May 14, 2009) focused on the Lisbon Treaty.10-005
COMMENT
CL-02569
20
Thomas Jefferson said, "When the people fear their government there is .tyranny; when the govern-
ment fears the people there is liberty." Immediately following the election of Obama, gun and amino sales rose
49%, and it is getting nearly impossible to find certain ammo. Why is this? In addition to people fearing their
government, the Feds want to restrict private gun sales (HR45), ban so-called assault weapons (HR1022), and
add a new
500%
federal excise tax on firearms (www.gunowners.org). Our 2nd Amendment rights are in grave
danger and history proves that gun
registration
usually precedes
confiscation,
as it did in the USSR (1929),
China (1935), and Germany (1938). In this current environment and the potential for financial meltdown, riots
and martial law you are urged to get armed and buy ammo (try www.ammoman.com,, www.geor~a-arms.com).
In 2001, Argentina defaulted to the IMF and suffered massive bank runs and a collapse of the social order. For a
sobering first-hand account please read "Lessons from Argentina," by searching this title at www.google.com.
If you are concerned about living in large urban centers I suggest Joel Skousen's book
Strategic Relocation
or
go to www.joelskousen.com, and for group retreats and property check out www.suvivalrealty.com.
In my book I have a final chapter that deals with precious metals, tangible assets, paper investments and
cash
(AFRD,
p. 285-318). Gold and silver have been in a bull market since 2001, and this trend will continue as
our financial crisis deepens. Despite heavy demand for metals, spot indexes have been curtailed by bankers to
help inspire confidence in their markets. As I noted earlier (p. 6), Bear Stearns had a huge short silver position
in March 2008 and J.P. Morgan Chase helped cover this commitment on COMEX. By July 2008, Countrywide,
IndyMac, Fannie and Freddie Mac all imploded and J.P. Morgan along with Goldman Sachs moved to short the
gold and silver markets by holding 6,199 silver contracts and 7,787 gold contracts. By August 2008, this figure
was increased to 33,805 silver contracts
(5-fold)
and 86,398 gold contracts
(11-fold)
- this was 88% more silver
and 46% more gold than COMEX
had in their vaults -
talk about blatant manipulation! During the final quarter
of 2008, bankers conspired to sell enough OTC gold/silver derivatives to take gold from $975 to $725 and silver
dropped from $19 to $9 an oz., such is the desperation of Wall Street. According to silver analyst Ted Butler,
this kind of manipulation should convince investors "to acquire even
more
metals" (www.butlerresearch.com).
For my clients, I recommend they place 30-50% of their liquid assets into metals with an equal amount in pure
gold and silver bullion, and I can also assist clients with retirement accounts to rollover into a Precious Metals
]2RA at Sterling Trust Company (www.sterlingtrustcompany.com). For sophisticated or high net-worth clients I
recommend depository accounts for low premiums and safekeeping. If you are interested in learning more go to
my website at www.idpconsultinggroup.com and leave your contact information, or call me at 1-928-793-4269
(12-6 MST). As someone once said, "don't wait to buy precious metals; buy precious metals, and wait."
Concerning cash and savings accounts I have noted elsewhere in this report that FDIC is a confidence
game and that commercial money market accounts can fall. In my book and website, I fist safer alternatives and
also recommend that you have a foreign curr.ency account at www.everbank.com. As far as investing in capital
markets there is considerable risk but I have some suggestions for diversification and waive my normal consult-
ing fee when you open a precious metals account. As Warren Buffet likes to say, "it wasn't raining when Noah
built the ark." For some wise counsel listen to www.financialsense.com and go to www.moneyandmarkets.com
and sign up for their daily alerts. You can also educate yourself by going to websites that I have mentioned in
this special report and books like Thomas Wood's timely treatise
Meltdown
(www.mises.org). A resource that I
highly recommend is
The New American
magazine and you can receive a free copy by calling 1-800-727-8783.
For a signed copy of my book or reports go to www.chuckcoppes.com, or call 1-208-712-0170 (PST).
In conclusion, this has been a difficult report to produce, but as I often say, I am just the messenger. Abe
Lincoln said, "America will never be destroyed from the outside. If we faker and lose our freedoms, it will be
because
we destroyed ourselves."
We seem to be at that place in history. For those who trust in Providence this
is not cause to be fearful. "Heaven is My throne, and the earth is My footstool," says the Lord. "But to this one I
will look, to him who is humble and contrite of spirit, and who trembles at My word" (Is. 66:1-2).. He has never
promised a smooth flight in this fife,
just a safe landing.
I pray that you will look to Him and trust in His word.
"God is our refuge and strength, a very present help in trouble.
Therefore we will not fear"
(Ps. 46:1).
Charles H. (Chuck) Coppes has been a licensed securities broker and is the founder and president of IDP Consulting Group, which is
an independent precious metals and consulting firm. A
summa cure Iaude
graduate with a degree in Christian Apologetics he has been
a featured guest on national radio progams. For media contact, or press kit call 1-928-369-9923, or e.mail, at [email protected]