Links 3/25/11

The Inflation Debate: Is the theory at the heart of modern cosmology deeply flawed? Scientific American (hat tip reader furzy mouse)

Fukushima radioactive fallout nears Chernobyl levels New Scientist (hat tip reader furzy mouse)

Reactor Core May Be Breached at Damaged Fukushima Power Plant BusinessWeek (hat tip Richard Smith) and and Japan Raises Possibility of Breach in Reactor Vessel New York Times. The usual Tepco not being terribly clear because it does not yet have a grip on what is happening.

The New York Times’ $50 Million Paywall Crumbles With Simple Code Exploit AlterNet (hat tip reader furzy mouse)

Some European countries are in the habit of going bankrupt Telegraph (hat tip reader Richard Smith)

To value a caja, correctly FT Alphaville

Barclays probed over Libor manipulation claims New Model Advisor (hat tip reader Richard Smith)

The Austerity Delusion Paul Krugman, New York Times

Buried Provision in House GOP Bill Would Cut Off Food Stamps to Entire Families if One Member Strikes TruthOut (hat tip reader furzy mouse)

Four States Consider Legislation Barring Distressed Sales as Comparables Appraiser News Online

Shifting the Focus From “Strategic Default” to “Prudent Walkaway” Nicholas Carroll, Huffington Post

Credit Suisse caps bonus ‘clawbacks’ Financial Times. So much for pay reform

Eyes Open, WaMu Still Failed Floyd Norris, New York Times

Stock Market In A State Of Denial Comstock Partners (hat tip reader Scott)

Antidote du jour:

Screen shot 2011-03-25 at 6.53.47 AM

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  1. DownSouth

    Re: “Reactor Core May Be Breached at Damaged Fukushima Power Plant”

    BusinessWeek Two plant workers were hospitalized yesterday with radiation burns after stepping in the water, which was found to have radiation levels 10,000 times higher than water used in reactor cooling, Nishiyama said earlier today.

    You gotta love how the Japanese government is dealing with the fact that some of the 536 workers at the plant have been exposed to excessively high levels of radiation. This from CNN:

    Some 17 people already have been exposed to 100 or more millisieverts of radiation since the plant’s crisis began two weeks ago after a 9.0-magnitude earthquake and subsequent tsunami struck.

    A person in an industrialized country is naturally exposed to 3 millisieverts of radiation a year.

    But Japan’s health ministry recently raised the maximum level of exposure for a person working to address the crisis at the nuclear plant from 100 millisieverts to 250 millisieverts per year.

    So Japan’s scientist kings are every bit as corrupt, and callous, as America’s.

    I suggest we make it mandatory that all scientist kings, both Japanese and American, be shipped off to the front lines in Japan to do “grunt” work at the Fukushima Daiichi nuclear power plant.

    Scientist kings = the new chicken hawks.

    1. Richard Kline

      —And the more you read the more daffily heinous it gets. So three contractors from the power company get sent into a flooded turbine room to plug in a power cord. At Daiichi 3, the most damaged reactor with the most dangerous mix in its presumably partially melted fuel rods. Only the workmen hop out with radiation burns on their legs. How did they get burned? The water was not only far, far, more radioactive then thought, but so deep it flowed in over their boots. . . . Read that back: the guys weren’t even in full-body coverage. No one did a read on the radioactivity level of the water, or likely anything else in the turbine room. The coolant turbines are presumed to be damaged, and no one even knows whether they’ll work, but every effort is being made to restart them—rather than bring in a functional external pumping system, or at least be working on that 24/7 as a fall back plan.

      The level of functional incompetence in this effort just seems to get worse by the hour, let alone the day. I know, I know, they had a tsumani X days ago, and have a problem even feeding let alone planning for several hundred thousand people in the surrounding area. I’d like to think that someone in government over there was capable of making some crisis decisions about manpower, timeframe, and hey! objectives, rather than begging the compromised corporation to make everybody look good faster.

      But this is, really, a continuously running public service announcement for exactly why nuclear power simply can’t be tolerated. Because we, as people, just don’t respond well or quickly to the kinds of severe and fast-developing crisis nuclear fuel, waste, and their facilities can, have, and will present us. Don’t think anybody in the US would handle this much better. And as a final note: that Geiger counter for detecting terrible schemes of the corporcracy and giving them his stamp of approval for public sale Barack Obama was all for nuclear power to this point in his Administration. That about says it all . . . .

      1. LeeAnne

        This is proof that mere humans do not have the capacity to responsibly use this technology.

        There is no basis for further debate. STOP NUCLEAR NOW!

        The mission of the IAEA should now be to oversee the dismantling of all nuclear power plants or just go out of business; step aside for a new agency by the people for the people.

        Any group of small school children, given truthful information, could make better decisions than those made by the scum who have managed to rise to the top of the decision making process.

        1. Neil Anderson

          Please read the article and comments in the NS story. I am amazed at the level of proficiency that so many non scientists appear to have commenting on radiation levels and the like. I know the internet makes you think your opinion on any subject is illuminating but some of us are sick to death of reading so much ill informed crap on this nuclear incident. The earthquake was a disaster, the tsunami more so. The nuclear thing, lets agree to say we cannot tell for sure now and calm down the confirmation bias. Sheesh. Also it is kinda distasteful seeing some people foolishly trying to revel in being proved right while this is going on. just saying.

          1. LeeAnne

            What’s distasteful to you is common sense. Maybge you’re an expert or a scientist.

            If so, please tell us how to dispose of nuclear waste safely -just for starters.

          2. LeeAnne

            And, furthermore, you have no credibility. If you are so sick to death of reading this stuff, exactly why are you doing it?

            I think you owe us an explanation. Obviously you are required to read and comment viciously because you are being paid to dos o.

          3. DF

            It sounds like they’re getting mostly beta radiation burns. Basically, beta rays are fast-moving electrons that usually can’t penetrate much deeper than the skin.

            As a result, as long as they don’t take the radioactivity internally, they should be fairly okay. It might screw up their skin in different ways (skin cancer, radiodermatitis, etc.), but they should be spared the really horrible radiation sickness problems, like basically having your bone marrow liquefied.

            One thing I’ve been wondering about is why they’re not reporting the radiation in REMs. REM measurements take in account the relative harmfulness of different types of radiation to humans.

            That being said, it’s pretty tragic/ridiculous that they’re not at least wearing more protective gear.

        2. charles 2

          @ Lee ann :
          Regarding the waste, the answer is:
          one or two decades in a pool then
          separation of uranium and plutonium for reuse on one side and enclosure of the rest into a borosilicate matrix for deep burial on the other side. It is proven to work, just as the impossibility of earth-swallowing black-hole generated by CERN is proven, I.e. beyond any reasonable doubt of the small minority that made the effort to understand the proof.

          When I say small minority, it is true that these proofs cannot be understood by schoolchildren, and actually most adults. Incidentally, this is why functioning democracy is a more complex than submitting every question to popular referendum and therefore why we need rational and honest representatives in every branch of the government. To maintain a complex society, there is a “chain of trust” that is has to be maintained between the public, the government and various expert bodies. Not that we have the choice : complexity is a feature not a bug as a simple society has very low productivity and living standard. If the world was indeed understandable by schoolchildren, we would still be hunter-gatherers, with the associated low life expectancy and high violent mortality rate !

          I understand that you may not trust the expert minority in the case of nuclear power, but this is simply gilt by association. It is not because there were, maybe, some mistakes done in the certification (or recertification) process of old GE BWR reactor in the context of earthquake/tsunami prone Japan, that the people in charge of other aspects of the industry have done such kind of mistakes. It would be like inferring that the people in the banking industry who process cheques are loosing them because some people in Countrywide loose the mortgage note. It would be unfair and destructive to assume that. The only productive way to sort out the good from the bad is to use all the knowledge available rationally before we can reach a decision.

          With all due respect, your abrupt question about nuclear waste leads me to think that there is still a bit of knowledge that could absorb before submitting such a strong opinion on that question.

          1. LeeAnne

            There is no limit to the number of words a lot of people are willing to commit to to justify criminality.

          2. LeeAnne

            ” … beyond any reasonable doubt of the small minority that made the effort to understand the proof.”

            The system where this can happen, that those in charge do not ‘understand the proof’ …is the problem. So, without a moral compass, they are madmen toying with the lives of the rest of us.

            I have 3 close friends dead of breast cancer at age 61 or so; smart, beautiful, wealthy and doctored up. athletic, And another, friend of a friend, same story, after enriching the health care industry by millions for more than 10 years of treatment. Another, same story, still living, in her 80s suffers dementia while able to have a routine day dressing and cooking for herself, with the watchful eye of a health care live-in.

            Myself and many friends also have thyroid problems. Others have children with autism.

            These diseases are epidemic and caused by the chemicals including radiation put into the air secretly by people who think nothing of playing dice with the well being of humanity.

          3. charles 2

            @Lee Ann,
            Cancer is the cause of death of 25% of americans, so it is not a surprise that you know a lot of them around you, especially if you are in the 60 year old cohort as the age of your friends seems to suggest. Despite the “evil” nuclear power and industrial society, Age-adjusted death rates don’t cease to go down, even in dysfunctional healthcare USA :

        3. Cocoa Commando

          scum who have managed to rise to the top of the decision making process.


          But what is about to happen tomorrow? You can just bet that Nancy will be offering cash for Clunker Reactors just long enough to put the industry back into the black. She is most likely shipping big loads of SS, Sodium Silicate to Japan at this moment to pour into the beach-side-nuclear-complex, enough SS to insure that it cannot be resold to people at the used-reactor-lot. Oh! No! Taxpayers won’t mind at all paying for the SS shipment to Honshu. Why we taxpayers would do almost anything to keep our Nancy happy and busy again at cleaning House and cleaning Senate. She is such a busy bee. Bless her heart! Can’t you just hear her singing little pretty songs to herself as she goes about her happy day?

    2. jclass

      Calling Tepco and the government callous towards workers doesn’t jive well with abandoning the buildings for days in the middle of this crisis. With nobody inside the reactor buildings there were few means of observing what was going on in them, but they were ready to take the risk of something catastrophic happening for the sake of worker safety. Some might have gotten the impression that the Fukushima Fifty were crawling all over the place all through that time but they were actually waiting out the worst inside an on-site bunker. If that catastrophic scenario occurred they would have streamed out but they didn’t need to fortunately.

  2. DownSouth

    Re: “Shifting the Focus From ‘Strategic Default’ to ‘Prudent Walkaway’ ” Nicholas Carroll, Huffington Post

    By stopping payment on underwater mortgage and also unsecured debt, you not only do yourself a favor but your fellow Americans as well.

    Just remember, it was not you who broke the social contract. It was the banksters and their bought and paid for politicans.

    The only way to bring this corrupt system down is to stop participating in it.

    Be an American hero today and stop making your mortgage and credit card payments. With this one small step, you can do your part in restoring democracy to America.

    1. ella

      Time for the consumer to act more like big business, and breach contracts where it makes economic sense. Well drafted contracts contain clauses or are governed by law that mandates the remedies for breach. They know it and now the consumer needs to know it. First year law students learn contracts in two phases, the study of contracts and the sturdy of contract remedies.

      Could it be the Big banks behaved recklessly in part based on the knowledge that many mortgagors held a moral obligation to repay the loan? A promise must never be broken, your word is your bond … all one sided concepts that are useful to control the consumer class.

      Time to behave more like business.

    2. Karen

      NO! The way to defeat them is NOT to join them! That flirts with a future that could look a lot like Somalia today.

      Sacrificing your own integrity only adds to the problem, it doesn’t make things better. It’s lazy and self-indulgent, not heroic.

      Heroic is finding and fighting for GOOD candidates for public office, that come from outside the existing corrupt system. We need a new Ross Perot to scare the powers-that-be.

      1. DownSouth


        Refusing to cooperate in a rigged game is not “sacrificing your own integrity.”

        Here’s how the theologian Reinhold Niebuhr put it:

        Non-violence is essentially non-co-operation. It expresses itself in the refusal to participate in the ordinary processes of society. It may mean the refusal to pay taxes to the government (civil disobedience) or to trade with the social group which is to be coerced (boycott) or to render customary services (strike).


        Beginning with the idea that social injustice could be resisted by purely ethical, rational and emotional force forces (truth-force and soul-force in the narrower sense of the term), he [Gandhi] came finally to realise the necessity of some type of physical coercion upon the foes of his people’s freedom, as every political leader must.

        And the idea that one can repair what’s wrong with the American political system by “fighting for GOOD candidates for public office” is, to be quite blunt, delusional. The game is rigged.

        The technical term for what we have in America today is called “polyarchy,” described by William I. Robinson in the documentary film Lifting the Veil:

        Robinson: The definition of polyarchy that we have in the social sciences is a system where the participation of masses of people is limited to voting among one or another representatives of the elite in periodic elections. And in between elections the masses are now expected to keep quiet, to go back to life as usual while the elite make decisions and run the world until they can choose between one or another elite another four years later. So really polyarchy is a system of elite rule and a system of elite rule which is a little bit more soft-core than the type of elite rule we would see under a military dictatorship for instance. But what we see is that under a polyarchy the basic socioeconomic system does not change, it does not become democratized. Wealth is not redistributed downward. You don’t see a more equitable redistribution of wealth and resources. So that’s the key: socioeconomic dictatorship and free elections.

        The film can be viewed on the internet here. I highly recommend viewing the whole film, but for the time-challenged Robinson’s discussion of polyarchy begins at minute 01:29:00.

  3. LeeAnne

    Hate to say it, but it looks like all countries involved in the western banking system are corrupt as a result. We forget that Nomura is among the biggest ‘western’ investment banks.

    Nomura was a big loser as primarily a retail broker until the Bankers’ Goldman Sachs coup d’etat of 2008 after which Nomura, gifted with certain Lehman assets joined the TBTF category.

    Mon Jul 27, 2009 5:58pm EDT

    NEW YORK (Reuters) – The New York Federal Reserve on Monday named Japan’s Nomura Securities International as a U.S. primary dealer of Treasury securities, effective immediately.

  4. Septeus7

    So the GOP wants to cut off Food Stamps because of free speech against Corporations? What’s Next?

    Seriously, are they going to install Big Brother Cams and have special report suspicious unionizing activities snooping programs?

    It has become quite evident. The Rich will not stop will even steal even to point of starving your child. They are willing to commit violence even against an entire generation of children, It’s war. It’s them or us.

    The only solution is to Eat the Rich!

    1. Richard Kline

      Brother, I’d gag on such carcasses, but they could be recycled as manure for organic victory gardens.

    2. ella

      Oh yes, free speech for the ubers but not for you. Another fine law brought to us by the upper class. They don’t want no stinking strikers, you exist for them to exploit. Wages at $2.00 a day, no bankruptcy, multiple families to a tenement flat, no health care or pensions. Let us return to the glory of the Gilded Age.

      1. Grigor Alexandrovich

        In America, in gilded age, there is no pension, health care, many families in flat with no hot water.
        In Soviet Russia, there is pension, health care, and many families in flat with hot water. However, family owns room in flat.

    3. ella

      Wait, I think I have a solution if any business benefits from a tax subsidy, government contract, or any other government benefit must forfeit all tax deductions, lobbying or campaign contributing.

      No member of the government can take any action that will benefit a major campaign contributor, a major campaign issue advertiser, and all government advisory boards must not be major campaign contributors. Shall we make a felony, with no exemptions for members of congress?

      Umm, I am sure there are other ideas out there to limit the power of the upper class.

    4. Grigor Alexandrovich

      “Seriously, are they going to install Big Brother Cams and have special report suspicious unionizing activities snooping programs? ”

      They are like Russian KGB. They record all cell phone call, and location of call and phone. Secretly, they record all phone call which is not cell phone. They turn on cell phone microphone when inside battery is. They put camera already everywhere. They record all internet activity, and email. They come to house when you leave house to sneak and peek. They hack computer and get private file. They put id tag in passport, in clothes, in drivers license and track. They collect DNA and learn special things about you.

      Actually, KGB was not so bad.

  5. kevin de bruxelles

    In theory at least I don’t see anything wrong with the idea that strikers should not become eligible for food stamps just because of going on strike. The principle should be that the government remains neutral in labor disputes and should not subsidize either side. So by the same token the government increasing tax breaks or other forms of corporate food stamps to the management side of a strike either.

    But the headline of the article — Buried Provision in House GOP Bill Would Cut Off Food Stamps to Entire Families if One Member Strikes is misleading to the point of outright deception. The article itself contradicts this headline a little further down by saying:

    The bill also includes a provision that would exempt households from losing eligibility, “if the household was eligible immediately prior to such strike, however, such family unit shall not receive an increased allotment as the result of a decrease in the income of the striking member or members of the household.

    So families will not be “cut off”; those on food stamps STAY on food stamps. What the bill stops is them getting more because they went on strike and also forbids families BECOMING eligible because of the strike. Should strikers get unemployment as well? No, just as management shouldn’t get subsidies, unions have strike funds to help support workers during the strike.

    1. Ina Deaver

      But Kevin, only the people who go on strike are treated that way by the bill. Non-union and laid off because the plant was closed for strike? You get your food stamps. Management and don’t get paid because the plant is shut down for strike? You get your food stamps. ANYONE IN YOUR HOUSEHOLD strikes (even if the other spouse is a minimum wage laborer, nonunion)? Not you. It is a clear and unambiguous First Amendment problem.

      Historically, food stamps have been blind to the reason your income sucks: they are targeted to hunger, not political punishment. If we change how they decide who are the worthy poor for purposes of food stamps, we’re on a trajectory towards something very nasty. Of course, we’re headed there already – but this is a faster lane to the checkout.

      1. kevin de bruxelles

        But non-union people are not a party to the strike. It seems to make sense that they would get the food stamps since the strike has nothing to do with them and the government subsidizing them will not drag out the strike. As for the family issue, if a family is already on food stamps they stay on food stamps. One area that was not clear is that in a long strike if the other spouse loses their job then the family should get whatever food stamps the would be entitled to in that case. But management should NOT get any government handouts (I suspect food stamps would be the least of our worries here) since they are a party to the labour dispute.

        The potential gain for strikers is if indeed management was cut off from all subsidies (probably not part of the current law) because in the end the government will subsidize companies more than the pathetic amount of food stamps the strikers are giving up.

        Your point about being blind to the reason for a low income is strong. Normally strikes are of a fairly short duration and unions have funds that would give the strikers at least as much as food stamps would (but nowhere near what their normal salaries. I suppose where this would really become important is if a factory closed forever because of a strike. To me at that point the strike is over and the former-strikers should then become eligible. I don’t know if the law is drafted this way.

        I’ve been in strikes and they are kind of like war, very unfortunate but sometimes necessary. The government should not be subsidizing either side because this will only drag out the fight. At the most the government should be banging heads and pushing for a settlement. A clever politician on the left (probably not many in the US) would use this principle to chop away at any subsidies that management are getting because in the end the strikers themselves will be hurt more by a long drawn out strike than by not getting some food stamps.

        But to be honest the whole concept of food stamps is bizarre to me and it seems (someone correct me if I am wrong) that this is a uniquely American concept. I know in Europe, some companies give food stamps to their non-poor employees as a way of avoiding taxes but I have never heard of a government doing this outside of the US. I could almost understand if these were for people without jobs. But for working people to get food stamps means that the government is subsidizing low wages and therefore higher profits for businesses. It seems to be a repeat of the mistakes of the Speemhamland system that Karl Polanyi critiques in The Great Transformation. In the rest of the world poor people are given money; it seems that in America it is assumed the poor would just blow this money on drugs and alcohol so food stamps are required.

        1. dictateursanguinaire

          this is a really interesting point. i know in Brazil, Bolsa Familia (which is just a straight cash transfer) has been very cheap and pretty effective vs. something like food stamps. i think part of it is just that American prejudice against redistro of wealth, whereas food stamps tends to obscure what’s actually happening. and you can frame it as “helping poor families feed their kids” etc. which is a lot more acceptable to Americans vs. “helping people who the system failed.” The latter implies that we have a rigged system (which we do) and that tends to imply that people who made their money didn’t do so entirely on their own (which is true for everyone but upsetting to many Americans.)So that may have some effect

    2. DownSouth

      kevin de bruxelles said:

      In theory at least I don’t see anything wrong with the idea that strikers should not become eligible for food stamps just because of going on strike. The principle should be that the government remains neutral in labor disputes and should not subsidize either side.

      You are in denial of the critical role that necessity plays in labor negotiations. What are you advocating, to carry us back to the way it was in the late 18th and early 19th centuries? As Hannah Arendt wrote in On Revolution:

      [T]he liberation of the labourers in the initial stages of the Industrial Revolution was indeed to some extent contradictory: it had liberated them from their masters only to put them under a stronger taskmaster, their daily needs and wants, the force, in other words with which necessity drives and compels men and which is more compelling than violence.

      A much more thorough discussion of this phenomenon can be found by the historian John Manley in the documentary film Lifting the Veil:

      So for me, democratic capitalism is a contradiction of terms.

      For me, the only system of social relationships that’s consonant with democracy is a high level of economic independence and economic equality. Because without economic independence, if I’m dependent for somebody else for what I have access to in order to live, he might be a nice guy, he might employ me, but I’m weak relatively to him. I’m powerless relative to him. And he’s got the hammer on me. And I damned well better satisfy and please him or I’m in trouble. And I’m in trouble at the level of necessity, OK, of living and dying. And certainly not living well, but maybe not living at all.

      So for me, socialist democracy, or democratic socialism, is in fact the only coherent mix of political democracy and social economic equality that adds up in my mind to something that looks like democracy. So I argue that capitalist democracy is in fact a sham. It’s never going to be a real democracy because it can’t. And so the only real democracy then, at least theoretically, is a socialist democracy.

      The film can be viewed on the internet here. I highly recommend viewing the whole film, but for the time-challenged Manley’s discussion begins at minute 01:20:00.

  6. Philip Pilkington

    Uh, that Daily Telegraph article has all the worst manifestation of British Toryism. Do you hear the high-moral tone its spoken in? As if Britain’s shit never stank. Britain never defaulted on her sovereign debt – as if this had something to do with the moral standing of her people. As if Britain has always been the world’s perfect gentlemen – always trustworthy with a loan.

    What’s more the article is filled with conflicting messages. Methnks that the author, when confronted with contemporary economic problems, simply despairs. I reckon he’s one of those Tories with a serious hard-on for a nostalgic image of 19th century Britain – an image of a Britain as world leader, making its way in the world through hard currency and free-trade… an image that excludes all that nasty colonial exploitation that really lay at the heart of Britain’s economic prosperity during this era.

    Finally, as Marshall Auerback just pointed out to me, the article is just plain wrong:

    Osborne: “Events in the euro area periphery illustrate the problems that can be caused by heightened market concerns regarding fiscal sustainability. A key lesson from recent events is that once market sentiment turns against a sovereign issuer, it is extremely difficult to regain. Retaining fiscal credibility is therefore critical.”

    Marshall: “There is no “key” lesson here for anyone. Britain rejected an invitation to join the Eurozone (a wise decision) so it retained its currency sovereignty. The problems that “non-sovereign” Eurozone governments are having raising funds has no relevance for Britain.

    Market sentiment cannot dominate the fiscal capacity of a sovereign government.

    So the above statement is not only inapplicable but also plain wrong.”

    Beware the crass moralising and conflicting and inapplicable statements of The Daily Torygraph’s commentariat.

    1. Jessica6

      According to one economist I know Britain SHOULD have defaulted after WWII – they’d have been a lot better off and would have recovered much sooner. He also argued that the creation of the Church of England was essentially defaulting on debts to the Vatican (unfair as they may have been). Henry VIII also debased the currency to where Elizabeth had to issue completely new coins.
      I suppose maybe the British are just more creative about these things.

      1. Philip Pilkington

        And, of course, if we’re to take the terms of Osborne’s argument seriously – which I certainly don’t because, as Auerback shows, he doesn’t understand how money works – but if I were to take his argument seriously, I would simply point to the Quantitative Easing that was used in Britain which, again if we take his line of thinking seriously, is how Britain kept their banks solvent.

        “Aaahhh!!!” I would scream histrionically, “You’re cheating! You’re paying your debts by printing money! That’s unfair blablabla!”

        And so on. Osborne says that newspaper journalists are partially to blame for the current problem, especially in relation to how these things are presented. All I’d add to that is that Osborne – a newspaper journalist – doesn’t understand just how right he is…

  7. Elliot X

    Radioactive fallout, Reactor core breached, etc

    “These are desperate days for Entergy, the big Arkansas-based power conglomerate that owns the frail Indian Point nuclear plant, located on the east bank of the Hudson River outside Buchanan, New York—just twenty-two miles from Manhattan.

    First, a scathing report issued in 2005 by a nuclear engineer fingered Indian Point as one of the five worst nuclear plants in the United States, and predicted that its emergency cooling system “is virtually certain to fail.”

    If this happens, the cooling of the reactor fuel would stop, the radioactive core would start to melt, and the plant will belch a radioactive plume that will threaten millions downwind.

    All this would happen very fast. The Indian Point 2 reactor would exhaust all of its cooling water in less than twenty-three minutes, while the number 3 reactor would consume all of its water in only fourteen minutes. Try getting a nuclear plumber that quickly.”

  8. ocelot

    “The usual Tepco not being terribly clear because it does not yet have a grip on what is happening. ”

    How do you know they don’t know?

    My understanding of TEPCO is that they are habitual and pathological liars. These days, they are lauded for their transparency when they are purposefully vague and unclear, since it represents a step up from outright lying.

  9. MyLessThanPrimeBeef

    Regarding the cosmic inflation, I think, well, I hope, in a few centuries, people will laugh us like we laugh at Ptolemy and his equals in his time (despite the public denials, we all know we snicker at them).

    That would be progress.

    So, basically, you have to laugh at the ‘smartest’ scientists today (by envisioning yourself a few centuries in the future – i.e. be a visionary).

    If you don’t, you are implying there will be no hope, no progress.

  10. Andee

    I was disappointed the New York Times paywall was so easily hacked. The paywall promised to drive away the remaining readers and to finally cause the self-destruction of the Times.

  11. Hugh

    Not sure if cosmic inflation is deeply flawed or simply poorly understood.

    Re the Times paywall, Pinch Sulzberger is, was, and always will be an idiot. The paywall is a dumb idea but having one and it be so easy to get around is pure Pinch. There are plenty of other places on the web to get the news for free. The truth is the world can live without the Times. And too it would never occur to Pinch that, instead of restricting access and raising rates, to actually try increasing circulation by improving the quality of its news product, that is dumping its neocon foreign policy stance and its neoliberal domestic one.

    Speaking of which, Krugman points to the failures of austerism in Europe which is good but shows he hasn’t even a minimal grasp of what a fiat currency is or means, which is bad.

    Re comparables, this was predictable. Pols don’t want to take the heat for raising property tax rates so instead they try to keep property valuations jacked up in a falling market.

    Re denial in the stock markets, always important to remember that the markets are completely rigged and that the top 10% own 85% or more of them. Small investors can still get hurt by another crash but they very much are not the ones calling the shots.

  12. John Merryman

    Cosmic Inflation is a massive patch on a deeply flawed cosmology.
    The fact is that it also goes to the heart of quantum theory, since it is assumed photons are indivisible units and can only be redshifted by the recession of the source. The reality is that they are simply the smallest measurable quantity of light; that which bounces an electron to a higher energy level/orbit and there are various possibilities which might cause redshifting of light from distant sources.

    Currently the oldest discovered galaxy is at 13.2 billion lightyears. That has to be a very large galaxy to be detectable at that distance and it would have to form in 500 million years to fit within the limits of Big Bang theory. For reference, it takes our own galaxy 225 million years to make one revolution.

    The argument that space is fundamentally expandable and originated at one point is belied by the stable speed of light. According to theory, if the universe doubles in size, two galaxies x lightyears apart would be 2x lightyears apart. That is not expanding space, but simply an increased amount of stable space. The reason they argue space itself expands and not just that it is an explosion in space, is because we appear to be at the center, which would be normal if redshift is a consequence of distance, rather than recession. So in order to maintain BBT, they say space itself expands, but forgot that C proves otherwise.

    If you get into discussions with physicists about the various ideas, multiworlds, wormholes, singularities, multiverses, inflation, dark energy, etc. populating modern physics, they tell you that you just don’t understand the math. The fact is that the math worked quite well for epicycles too. The problem was trying to figure out a physical explanation. One could even devise a cosmology with oneself as the center of the universe, with the earth and everything else making loops around you and with enough work, make it as accurate as any other celestial system. But it’s math, not physics.
    The reason the Masters of the Universe/Wall St. edition went to MIT for the theoretical physicists to build their synthetic securities to hold all that synthetic wealth is because normal accounting majors know that if you mess with the math, jail is a real possibility, while these theoretical physicists think whole universes pop out of their equations.

    1. MyLessThanPrimeBeef

      The problem lies with our perception of ‘understanding’ or ‘knowing.’

      We assume what we can’t understand will not be understood.

      But as a dog does not understand 1+1=2 and can’t conceive of anyone understanding that, we can’t conceive how a being with more brain power than us will understand perfectly that 1+1=3 or some other unbelievable (to us) ‘facts.’

      (We can conceive of such of a possible being, but we can’t conceive the how – the mechanism, the reason, the logic he employs to understand those unbelievable facts. In this sense, we are at a slightly better vantage point than that of a dog relative to us.)

      So, the universe will always be full of mysteries that we are just not capable of understanding.

      Still, even if we limit ourselves to Homo Not-So-Sapiens Not-So-Sapiens, in a few hundred years, they will laugh at our own backwardness, assuming progress. For those aspiring to be visionaries, look forward and picture yourselves living in 2311. You can then look backwards in time to 2011. You will just laugh at how ignorant the best scientists today were.

      I think that ought to humble everyone.

      1. MyLessThanPrimeBeef

        Sorry, forgot to add that that was about physics, where inquiries are easier to define, relative to, say, political ‘science’ or economics which is probably best left to voodoo magicians or theologians.

      2. craazyman

        It may not be surprising but if you project your awareness to 2311 and then look back over 200 years of history you’ll see the big leap was conceptualizing things in more than 4 dimensions. Now, space is 3 dimensions and time is 4. Now It’s hard to mind-screen visualize more than 4. That will be the big breakthrough, it will be a matter of new forms of imaginary structures that will coalesce the ideation of multi-dimensional space/time in something other than a 4 dimensional cartesian-style mapping and in ways that make intuitive sense and in so doing create the perceptual frameworks that allow for breakthroughs of perception. I admit this is shallow sci-fi stuff, but that doesn’t mean it’s not true.

        1. Cedric Regula

          Well, the only thing I’m absolutely sure of is that Ben Bernanke will unequivocally deny that we have Inflationary Cosmology, while still asserting the Fed can create it at will.

          I decided long ago that nonclassical physics was a hoax created by scientists so they could make more money writing sci-fi novels and movies. But now that Wall Street is hiring all of them, I’m beginning to worry about our sci-fi supply.

          My personal theory about what is going on in the cosmos is that our solar system is in the center of a very large Imax run by space aliens. They beam radio waves and photons at us and then with high powered microscopes and radio receivers get our reactions. This is then re-broadcasted on Saturday morning to space alien kids for their entertainment.

          I have no proof, it’s just a feeling I have.

        2. craazyman

          that sounds about right to me, Cedric. The more time that goes by, the more I realize that feelings about things are every bit as accurate as the facts themselves, whatever the facts are, if they are in fact facts. It gets sort of anthropomorphic in the Kantian way. Easy to lose yourself in the whirlpool of it all, but then you start to realize that you ARE the whirlpool and everything else is water. Hard to separate form from substance, really. ha ha. And science is a very clever distraction that makes you think you can know what the whirpool is, but it’s all just a big mirror.

    2. Hugh

      There are some fundamental misunderstandings here. Bodies moving through space-time can not travel faster than the speed of light, but there is no such restriction on space-time itself. There are three commonly known examples of space-time exceeding c: cosmic inflation, Hubble expansion, and blackholes.

      Early galaxies aren’t large. What they are is very red.

      That space-time is not uniform, i.e. it can be bent was once a fairly revolutionary prediction of relativity theory. Nowadays with the Hubble telescope and other large observatories, it is easy to find pictures of multiple images of a single galaxy as they are gravity lensed around intervening objects.

      As I said in my previous comment, much of the confusion in these discussions comes from our difficulties in conceptualizing these phenomena.

      1. John Merryman

        If you read the SciAm article, it is by Paul Steinhardt, after Alan Guth, one of the original theorists who developed Inflationary cosmology. When one of the prime authors of the theory is starting to question it this seriously, it is in trouble. Which will eventually take out inflation as a source of expansion. The point I made in my comment is that the idea that redshift means space is expanding is belied by the fact that lightspeed is stable. C is the most stable measure of intergalactic space and if the space was expanding, then lightspeed would increase proportionally.
        One of the main problems with physics is how to account for time. The problem is that while we think of it in terms of series of events and thus the present moving from one to the next and modeled as such. First as Newton’s absolute flow and then as Einstein’s fourth dimension, to account for the fact that time runs at different rates, relative to velocity, gravity, acceleration. The reality is that the changing configuration of what exists turns potential into actual. To put it simply, tomorrow becomes yesterday because the earth rotates, not that we travel the fourth dimension from yesterday to tomorrow. Time is an effect of motion, not the basis for it. That has been a big stumbling block and it’s seriously affected everything built on it.

        1. Hugh

          Hubble expansion has no effect on the value of c. The effect is seen in the wavelength. Again you have to distinguish between bodies, in your case photons, moving through space-time and what space-time may be doing.

          In relativity theory, time is path dependent. That’s part of the theory. The reason we talk about space-time is that you can’t define one without the other.

          1. John Merryman

            It’s a hierarchy issue. Does motion cause time, or is time the basis of motion.. One could equally correlate temperature and volume, using ideal gas laws and say temperature is another parameter of volume.
            If you have no motion, you have no duration and no level of activity. Time is rate of change as temperature is level of activity. That faster path of time, say twins paradox, is really due to increased rate of activity. Since the effect of gravity has to be subtracted from atomic spin, a gravitational field has the effect of slowing the metabolic rate.
            Usually I debate these issues over at This sort of forum, where the thread changes every day doesn’t work well for extended discussions.

  13. Michael H

    re: The New York Times’ $50 Million Paywall

    With the paywall getting hacked so easily, Carlos Slim cannot be happy. If the Times misses one of its interest payments on the $250 million he loaned them, then this might require making a special trip all the way from Mexico to 620 Eighth Avenue, NYC.

    That is, unless he decides to send Ismael Zambada Garcia (aka “El Vicentillo”) to collect the money for him.

    1. DF

      I wonder how much money the NYT would save by firing Thomas Friedman and his bottomless expense account.

    1. psychohistorian

      Thanks for the link.

      One really wants to believe that they will bring this situation under control but it seems beyond daunting if not impossible.

      I have yet to read a Chernobyl type solution to this situation. Is there one if one or more cores breech?

      It is interesting that many think that the worst has passed.

      1. charles 2

        A core breach that melts the pressure vessel can trigger a vapor explosion through the very quick vaporisation of the hot molten corium with some water that could have accumulated at the bottom of the drywell. It can be extremely powerful and the outcome is uncertain. This being said, as long as they keep pumping water into the vessels, I don’t see that happening as all the vessels are quite cold and not subject to heavy pressure (see the data here : ). So either the vessels have been already breached, especially in reactor 3, but without an outer containment shattering scenario a la Chernobyl, or they haven’t been breached yet and are not likely to breach in the future. I tend to think it is the latter, because I can’t see how a temperature sensor at the bottom of the vessel could survive a corium cum vessel meltdown, but I am an optimist by nature !
        Anyway, as long as vessels are not breached, the solution is quite likely to seal them at some point, and cool them from the outside. That would stop radioactive release and we would then enter a one-or-two decade decommissioning process.
        You are right to point that we are not there yet.

  14. MarcoPolo

    I own part of a bank. Don’t hate me. It’s a family heirloom. My grandfather served on the Board of a bank that went through the Depression. Much later it was bought up by Banksters and that’s another story. But I’m sent an annual report which is designed not to be read and I usually don’t. This year is different. I read it. It’s really not beyond my ability, only beyond my tolerance for abuse.

    So, the mantra today, from a Board which has no experience in anything other than real estate and knows nothing else but the markets of the past, is to design a compensation package to award executives as much as possible while making a head-fake toward longer-term incentives and claw-backs. Fat chance. Now given that and given how hard it is to take Warren Buffett seriously; still, I wish he were running my bank!


  15. dbk

    Re: Peter Oborne’s piece in the Daily Telegraph (“Some European Countries are in the Habit of Going Bankrupt”), a useful counterpoint to his stance can be found e.g. in, a scholar’s discussion of Greek public debt in the 19th century. Here’s Dertilis’ take on the first loan to the incipient Greek state, made by British bankers:

    “L’utilisation des sommes reçues ne fut pas plus heureuse. La plus grande partie du capital fut dépensée avant 1827 en Grande-Bretagne pour l’achat de navires de guerre ultramodernes, dotés de moteurs à vapeur et qui n’ont jamais pu sortir de la Tamise. Une autre partie fut utilisée pour verser des commissions généreuses. Enfin, une fraction exorbitante fut dépensée à titre de salaire pour rémunérer les services de l’amiral Cochrane …. Dans ces conditions, l’impasse financière était inévitable. Dès 1827, le paiement des intérêts et la procédure d’amortissement furent interrompus. La Grèce fut exclue de facto des grandes Bourses européennes. L’«embargo» ne sera levé qu’après un demi-siècle, en 1878.”

    Plus ca change, plus c’est la meme chose …

  16. olde reb

    Dear Yves,

    I want to thank you for the support you have expressed by posting the RIP OFF BY THE FEDERAL RESERVE article of several months ago. It has inspired additional research and development of the writing.

    The conclusion of the research has surprised even me. It would previously have been considered irrational to believe the Fed reaped $8.4 trillion from their operation last year, but the conclusion appears inescapable. And the operation is a simple bookkeeping maneuver by the FRB of NY that is never exposed in the ANNUAL REPORT TO CONGRESS. The question of whether this is embezzlement is up to Congress. If the citizens express their knowledge and awareness of the blatant theft, Congress will have to investigate.

    I have pasted a copy of the recent edition of the RIP OFF article. Perhaps it may be of interest.


    Revised 3/14/2011

    PREFACE: This mathematical analysis shows how:

    1. The present practice in the U.S. of creating book-entry money via T-securities (deficit spending) in the amount of the principal of the security, with a promise to repay the principal PLUS the interest, is impossible. The interest is never created; the debt is perpetual and must continually be increased or the economy will collapse from de-leveraging;

    2. All other fiscal obligations of the nation must be curtailed while the growth in debt will escalate. The exponential growth of the interest and snow-balling debt will increase until the entire wealth of the nation, and of future generations, is inadequate to fund it;

    3. ALL money created by Treasury securities goes into the pocket of the Fed ($8.4 trillion for 2010). Not only does the Fed receive the interest (if not sold), but also the value of the security upon maturity (or by sale). Congress has temporary benefit of $1.4 trillion deficit money (until maturity) during 2010;

    4. The operation is, as in any Ponzi scheme, predestined for inherent national bankruptcy when buyers to roll over the debt cannot be found. As the scheme becomes visibly precarious, the interest rate will sky-rocket and accelerate the collapse.


    The Federal Reserve uses euphemistic smoke and mirrors to obscure their scam. With full knowledge the following is not the way the Fed/government describes the system, allow me to offer a different analysis of their operation.

    Congress can pay for federal expenses with funds collected from taxes, but Congress is never satisfied with this amount. The desire to buy votes/campaign contributions from special interest groups induces congress-critters to spend more, and this is identified as deficit spending. To create this make-believe money requires the assistance of the Federal Reserve.

    Congress will give the Fed a T-security (bill, bond, or note) and the Fed will accept the document as an asset of one of the twelve FR Banks. The Fed will then establish a line of credit for the U.S. government (a book entry) in the same amount and list the liability as Federal Reserve Notes. Voila !! Fiat money has just been created for Congress to spend. Ref: 2009 Annual Report to Congress by the Board of Governors, page 448. The accumulated securities that are not redeemed add up to the national debt.

    If the Fed retained all of the securities (assets), the public would quickly complain that interest payments (approximately $400 billion annually) are of no benefit and the inflationary pressure would also be obvious. The Fed therefore wants to sell a major portion of the securities so it has arranged with the Treasury department to act as auctioneer for selling to the Primary Dealers. The PD submit sealed bids. Since the security has a fixed face value and interest rate, the higher the bid, the lower the interest rate for the buyer.

    The Fed recently obtained $700 billion bailout funds. Secretary Paulson begged Congress, on actual bended knee, to give the Fed money and Congress gave them $700 billion in securities and the Fed swapped the securities to GSE (Freddie and Fannie)/international bankers for toxic MBS‘s—and rescued Paulson’s $800 million in Goldman stock by bailing out AIG.

    The Annual Report lists Assets of $776 billion securities and $908 billion Government Sponsored Enterprise Mortgage Backed securities out of $2.2 trillion total assets. Whether the bailout money was a quid pro quo with the PD to avoid lawsuits for fraud is beyond the scope of this writing. The International Bankers do not lightly suffer transgression. The continued mutual benefit of programs, paid for by taxpayers, should evidence Wall Street and the Fed/international bankers constitutes a Siamese twin.

    The value of any securities not sold by the Fed is still in circulation and becomes the Reserves for commercial banks. Commercial banks, as an aggregate, have no other source of reserves. All money in circulation is originated from T-securities. The reserves, derived from Treasury checks deposited throughout the world, are then multiplied via loans by commercial banks utilizing the fractional reserve practice. The System Open Market Committee (SOMC) selling and buying of securities alters the reserves–with high leverage. The Fed currently holds about $750 billion of $12.5 trillion issued securities. Ref. Chart OFS-1.

    Observe that the amount of money created by the security is the amount of the principal but the amount promised to be repaid is the principal AND the interest. The interest is never created but payment is required by the agreement. It is impossible. The linear expansion of base money via fractional reserves to create commercial loans does not change this. If, hypothetically, all money in circulation was used to pay off the securities issued by Congress, all bank reserves would be wiped out and the commercial loans would collapse—and every dollar of interest on the national debt accumulated from day one would still be due—but there would be no money outside of the Fed’s vaults to pay it.

    There are esteemed economists who contend the fractional reserve multiplier is a major cause of inflation. The concept is questionable. Assuming the amount of base money and the multiplier factor remain constant, the creation of fractional reserve money reaches a ceiling that cannot be exceeded until more base money (from T-security issues) is added. The multiplier factor is a mere linear increase of the base money that the Fed can alter by SOMC transactions.

    The debt created by usury based sovereign debt is perpetual; it can never be paid off. The contract cannot be culminated. Any contract that cannot be culminated is an act of fraud. A contract based upon fraud is invalid upon its inception. It would appear the national debt is not legally enforceable. (A debt incurred by a state or municipality is not a sovereign debt as used in this analysis. Such a debt is akin to a commercial loan and is completely repayable—but may be evidence of unwise administration and result in default.)

    There is more skullduggery involved. Let us assume a newly established sovereign nation is setting up a usury based economy and will issue 100 unit securities, a five year maturity, and an annual interest rate of 20 percent over a span of five years. The identifications of Congress and the Fed will be used to convey the images.

    Upon the issuance of the first security, Congress has 100 units to spend. At the end of the year, Congress/Treasury has to pay 20 units to the Fed for interest. If the nation had to pay off the security at the end of the first year, the bankruptcy is obvious. There have never been 120 units created. Twenty units could be removed from society but that would leave only 80 units in circulation, cause great financial hardships, and still leave an impossible obligation to redeem a 100 unit security. (This economic diminution would be akin to a contemporary balanced budget.) The solution is to put off the interest payment until the next issue of security for the second year. The interest is paid from the principal created by the second issue.

    During the second year there are 200 units in circulation but the actual rate of interest on the second issue is not 20 percent. Since 20 units had to be paid to the security holders, congress only received 180 units to spend (100 + 80) but they are committed to pay 40 units of interest on the security at the end of the second year. The interest rate of 40 divided by 180 is 22.2 percent. Considering the second year alone, the interest is 20 divided by 80 or 25 percent.

    When the security for the third year is issued, the interest of 40 units for the first two years securities will not be available for congress. Congress will receive only 60 units for public projects but will have to pay 20 units interest at the end of the year. The 240 units received by congress (100 + 80 + 60) will require 60 units of interest at the end of the third year. The cumulative interest rate (60 divided by 240) is 25 percent. The interest rate for the third year alone (20 divided by 60) is 33.3 percent.

    At the start of the fourth year, the security will have to cover the interest charge for the three prior years of 60 units. Congress will receive 40 units for government spending. The 280 units received by congress (100 + 80 + 60 + 40) will demand 80 units of interest at the end of the fourth year. The cumulative interest rate (80 divided by 280) is 28.5 percent. The interest rate for the fourth year alone (20 divided by 40) is 50 percent.

    The security issued for the fifth year will pay the 80-unit interest for the prior four years. Congress will have 20 units to splurge. The 300 units received by congress (100 + 80 + 60 + 40 + 20) will require 100 units of interest at the end of the fifth year. The cumulative interest rate (100 divided by 300) is 33.3 percent. The interest rate for the fifth year alone (20 units received–20 units in interest) is 100 percent.

    At the end of the fifth year, 100 units must be found to redeem the maturing security issued the first year (that “loaned” 100 units to the government) in addition to 100 units of interest that must be paid. Congress has an obligation to pay 200 units. This factor alone makes it obvious that more debt must be incurred to continue the scheme. The inescapable whirlpool of usury debt can only avoid obvious default by increasing the value of future securities. Increasing the value of issued securities merely postpones the inevitable result.

    As the sixth year approaches, the Fed holds 500 units of securities that must be redeemed by the Treasury before year eleven. The Fed has already received 200 units as interest while Congress retains 300 units from those securities. Before year eleven, the securities will accumulate an additional 300 units of interest payable to the Fed. That accounts for the entire 1000 units of securities and interest that have been involved over the five years. (Each of the five 100 unit securities involved 100 units of interest.)

    Do not let the subtly of the numbers escape you. As the example demonstrates, the Fed receives the total value of the security and the interest if it does not sell the security. Only 500 units were created by the securities but 1000 units were somehow acquired by the Fed. The only way for Congress to get the funding is to issue a 200 unit security at the end of the fifth and subsequent years and ALL of the value will be instantly due to the Fed. The scheme is not only perpetual but it must increase in size to continue. And of course, when the 200 unit security matures, the value will belong to the Fed. And then a larger security must be issued to pay for the 200 unit security and the accruing interest further down the road. This is the methodology of any Ponzi scheme. The increase in the required size of deficit spending must be large enough to make the interest payment a relatively acceptable percentage to minimize public hostility. (In 2009, the 200 unit roll-over value reached $7.0 trillion with an additional $1.4 trillion debt for deficit spending. Ref. Post).

    A government publication has noted the fiscal policy insecurity: “(T)his growing gap between (Government’s) receipts and total spending …cannot be sustained indefinitely.” page 3 of 12.

    If the security is sold at auction, as approximately ninety percent of them are, the Fed receives the value of the security from the Primary Dealer and the ultimate purchaser is then reimbursed by the Treasury at maturity. Either way, the Fed eventually receives the value of the security. The value of all redeemed T-securities is a clear profit for the Fed, along with the value of all securities sold to/held by Primary Dealers, funds, nations, states, or financial institutes.

    But 5 year securities are a slow game. If we shifted our attention to 13 week bills, or even four-week bills, each obligation will quickly mature and must repeatedly be rolled over. Each new issue is profit for the Fed. If time lapse between bid and issue dates are ignored, the roll-over of four week 100 unit securities can be repeated thirteen times within a year. The gain of 1300 units of profit for the Fed only involves 100 units of national debt.

    Low interest rates will reduce gain for security investors but will provide cheap money for commercial banks to loan. Much of the interest from T-securities held by the Fed must be returned to the government as a result of 1970’s legislation, so the Fed has little motivation to raise rates to make more money–they receive the value of the security.

    The total value of auctions in 2010 was $8.4 trillion. Approximately $6 trillion matured in less than one year. ; .

    The handling of auction funds is the responsibility of the Fed. Ref. GAO FINANCIAL REPORT TO SECRETARY OF TREASURY, Nov 2010, page 17. This writer concludes the sales are credited to an account of the Fed and not to an account of the Treasury. There is no inflation if it is otherwise.

    The $8.4 trillion in income does not reveal itself in the ANNUAL REPORT TO CONGRESS; Ref. Tables 10 and 11, pages 454 to 462 REPORT for 2009. Id. (Auctions are not Open Market transactions. Securities that are not sold are assigned to SOMC.) This $8.4 trillion is concealed from Congress and the public.

    The NY Fed also handles redeeming the securities. Ref. ACCOUNTING FOR TREASURY SECURITIES AT THE FEDERAL RESERVE BANK OF NEW YORK , GAO /AFMD-84-10, May 2, 1984, page 9 of 30, The report does not identify the account that is being used to redeem the securities. This writer concludes the payments are debited to an account of the Treasury and not to an account of the Fed.

    Confirmation of the Fed’s handling is found in their ANNUAL REPORT: BUDGET REVIEW 2010, “The Reserve Banks auction, issue, maintain and redeem securities…(and handle) paper U.S. savings bonds and book-entry marketable Treasury securities.” p 5.

    “Aha!” exclaims a disciple of the Fed. “The above analyze proves the fallacy of the theory. The $8.4 trillion is obviously being used to pay the redeemed securities and the sale and redemptions are off-setting.” And thus would the Fed beguile the naïve. Indeed, the Treasury’s receiving the value from auctions for that purpose is widely proclaimed in media publications. Treasury financial statements also claim “borrowing from the public” finances government operations. However, direct transfer of money from the public cannot, in any way, expand the monetary system or result in the creation of fiat money (i.e., inflation) any more than can the payment of taxes by a private entity. The label is deliberatively misleading. The confusion actually confirms the scenario developed herein.

    When $8.4 trillion in securities is transferred from the Treasury to the Fed, there is a credit on the account of the Treasury (but is considered a liability in a Fed account titled federal reserve notes) and an asset entry in an account of the Fed (titled T-securities). The Treasury’s $8.4 trillion book-entry is used to pay the $7 trillion redeemed securities with $1.4 trillion being available for deficit spending by Congress. The T-securities possessed as an asset by the Fed are sold at auction and the $8.4 trillion belongs to the Fed. Where the value from the auctions is entered into the books of the Fed, and to where the $8.4 trillion goes, is not available information. This is how the fiat money of inflation is created as detailed earlier. It is assured that the IRS knows nothing of this income.

    Similar historic banking operations declared they loaned the value of the security to the king and therefore they should receive interest from the loan. The pretense is a sham. Congress and the Fed have agreed they are going to rip-off the public by devaluating the currency. Each party acquired purchasing power from the scheme. Congress gave a promise to pay (a security) which was quickly sold by the Fed and the Fed gave a promise to pay the government’s checks with fiat book-entry money (printing press money, i.e., FRN‘s, a legal tender.). It is an acknowledgement of debt that can never be paid because there is no lawful money available; there is only more debt of an under-capitalized federal corporation.

    To get the scheme started and financed by third parties, it must have the appearance that interest is their source of profit and a gain must be made from the brokerage difference. A prime concern for the Fed under these conditions would be the difference in the value credited to the Treasury account and the value received from the auction. If the value of securities purchased by the public is transmitted directly to the Treasury, there cannot be any inflation, but then there is no gain to the Fed from book-entry money. The percentage taken by the Fed for profit can even be variable but is hidden without an audit.

    Perhaps we are catching a glimpse of how the Fed may have been started. If the Fed was created by Congress as a brokerage firm to sell government bonds to the public, it would be a simple arrangement with minimal investment or risk. The currency in circulation in 1913 was non-interest bearing U.S. Notes. After the operation has been set up and the New York Federal Bank is handling the accounting, it would be a simple shift of accounting procedures to have the T-securities accepted by the FR Bank as owner instead of as a broker. The difference allows the Bank to create fiat money (inflation or Federal Reserve Notes) as a profit for the Bank. Whether this falls within the parameters of embezzlement depends upon many conditions.

    The 1913 congressional report of objects of the legislation by Senator Glass included the statement “(3) Furnishing an elastic currency…of bank notes…” Perhaps the enumerated powers of the Federal Reserve Banks at 12 USC section 341, paragraph Eighth, might be stretched to authorize such practice. However, the courts have repeatedly concluded the profits of the Fed belong to the United States. Ref. Scott v FRB of Kansas City, 405 F3d 532, 535; In Re Hoag Ranches, 846 F2d 1227. The fact that the income is not reported is suggestive of subterfuge.

    To put $8.4 trillion in perspective, the 2010 operation of the U.S. government involved $3.4 trillion and that includes the $1.3 trillion deficit. The entire amount of taxes collected by the U.S. government was only $2.1 trillion.

    Good luck on trying to follow this sequence in the accounting records. Even Enron, World Com, and Bernie were able to cook the books—and they were audited. The annual audit of the Fed follows accounting guidelines established by the Fed. It is assured the receipts and disbursements for T-security auctions are not examined. But the methodology of the Fed may be identified: the accounting records do not reflect “securities purchased under agreements to resell.” Ref. Table 9A, note 4, Annual Report.

    If asked “Who owns the T-securities that are sold at the auctions–the Fed or the U.S. government?” a Fed representative will respond “The securities are a liability of the government.” An astute observer will note the inquiry was avoided; it was not answered.

    A high rate of interest has been selected for the example to minimize repetitive calculations. A ten percent interest rate will return 100 percent of the security value in ten years; a five percent interest rate will take twenty years. Lower rates of interest merely require more years to reach the same inherent bankruptcy. (Actually, bankruptcy occurs the first year irrespective of the interest rate, but then again, since the debt can never be paid off, the entire scheme is based upon fraud. A contract based upon fraud is void from its inception.)

    An economic scheme that utilizes later investors to pay the interest due earlier investors is identified as a Ponzi scheme. This is precisely the scheme that has been presented above.

    A newspaper article a couple of years ago informed us the annual increase in interest to be 15 percent while the budget only grew 7 percent. That reflects the exponential growth of interest. More recently the deficit has been increasing much faster to fund/conceal the rapid growth in interest requirement—and to rescue financial institutes from default. Professor Bob Blain, Southern Illinois University, Edwardsville has graphed the exponential growth in debt from 1915 to be irregular only during the 1930’s.

    In 1790 during Congress’ consideration of Alexander Hamilton’s proposal to pay the national debt with a usury based obligation placed upon the citizens, congressman James Jackson, after lengthy reflection on the devastation similar plans had imposed on European countries and cities, included the following observation to Congress:
    “Let us take warning by the errors of Europe, and guard against the introduction of a system followed by calamities so universal…The funding of the debt will occasion enormous taxes for the payment of the interest…(such a system) must hereafter settle upon our posterity a burthen (sic) which they can neither bear nor relieve themselves from.” Ref. ANNALS OF CONGRESS, Vol. 1, 1790, pp. 1141-2.

    In actual practice within the United States, a collection of taxes for part of the government spending is well known. Payment of part of the government expenses by taxation does not alter the government’s usury program; for analytical analysis they can stand alone. The current pattern of increasingly larger deficit spending is the escalation as the climax of chaos beyond description approaches.

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