JFK’S Secret Societies Speech
JFK Addresses American University- Peace Speech
The Truth about the Kennedy Assassination & Obama
As told by Mu’ ammar Al’ Gadaffi
JFK’S Secret Societies Speech
JFK Addresses American University- Peace Speech
The Truth about the Kennedy Assassination & Obama
As told by Mu’ ammar Al’ Gadaffi
Thanks for the support. I have been suggesting the same. I have reblogged you. Keep up the fine work.
Now we Know Why ISIS/L is Destroying Iraq and not Defending Palestine*
Not that ISIS/L is capable of defending anything, for that requires a deep sense of justice and respect for all life, but the simple fact that while Israel was and has been destroying Palestine while ISIS/L has been destroying Iraq and Syria from the east of the Asian continent, and the Zionist Ukraine – NATO has been on a destructive path from the west (Eastern Europe) of the Asian continent points strongly to a common agenda…
By Jonathan Cook
An image speaks a thousand words – and that is presumably what Israel’s supporters hoped for with their latest ad in the New York Times.
Two photographs are presented side by side. One, titled ISIS, is the now-iconic image of a kneeling James Foley, guarded by a black-hooded executioner, awaiting his…
View original post 2,080 more words
By MONEY MORNING STAFF REPORTS
Is the Federal Reserve covering up a dangerous crisis that threatens to bring down, not just the United States, but the entire global economy?
According to two men, one a high-ranking member of the U.S. Intelligence Community, and the other, a 2016 Presidential hopeful, the answer is yes.
They both believe the world’s most powerful central bank is secretly bankrupt and Fed Chairwoman Janet Yellen will do whatever it takes to keep the public in the dark about this startling situation.
If they’re correct, every American should fear the unavoidable endgame their evidence is predicting.
Recently, in an emotional speech from the Senate floor, Senator Rand Paul declared that the Federal Reserve is now “insolvent.”
Senator Paul has long been an advocate of an official audit of the Fed’s books, which polls show 74% of the American people agree with.
And in a separate statement he explained why.
“The Fed’s operations under a cloak of secrecy have gone on too long and the American people have a right to know what the Federal Reserve is doing with our nation’s money supply,” Senator Paul declared.
And an unlikely ally has stepped forward to help him provide the public with the answers they are seeking.
Unfortunately, they are downright frightening.
Jim Rickards is the CIA’s Financial Threat and Asymmetric Warfare Advisor.
In an exclusive interview with Money Morning, Rickards revealed that he and his team have detected a series of dangerous economic signals that predict a fast-approaching $100 trillion meltdown.
And they believe it will lead to an event more severe than the 1930s.
A 25-year Great Depression.
Their estimated date for this catastrophe is March 12, 2015.
Making matters worse, they believe it is impossible to stop.
Rickards shared an alarming collection of charts in the discussion that proved our country has secretly reached, or exceeded, crisis levels in our stock market, with our dollar, and banking system that are more severe than in 1929.
He examined two charts in particular that specifically place much of the blame for this on the Federal Reserve.
“What you can see from this first chart is that for over a decade the Federal Reserve steadily grew its capital reserves. Even after the recession struck, on the surface at least, they kept strengthening their financial backing,” he explained.
“And today they have over $56.2 billion of cash on hand. $56.2 billion sounds like a lot of money, but it’s not the full picture.”
“You have to compare the cash the Federal Reserve has on hand with the debt they’ve taken on since the recession. And when you do the picture becomes a lot scarier, because that figure is $4.3 trillion,” Rickards continued.
“So you have $56.2 billion propping up $4.3 trillion worth of debt. That means the Fed is leveraged 77-1. Prior to our 2008 meltdown that was only 22-1.”
“To folks like me at the CIA that says one thing, the whole thing is unstable and it’s ready to explode,” he warned.
Rickards then cited two private meetings he held with Federal Reserve officials that suggested they know this too.
“I spoke to a member of the Board of Governors of the Federal Reserve, (name withheld), and said to her I think the Fed is insolvent,” Rickards revealed.
“She refused to answer the question directly initially, but I pressed her and she said, ‘we are but it doesn’t matter’.”
Rickards’ second meeting explained why this high-ranking Fed board member came to that conclusion.
“I was at a recent conclave in the Rocky Mountains with officials from the Federal Reserve and the Bank of England. They’ll say things in private that they won’t admit publicly,” Rickards explained.
“They handed me a copy of Janet Yellen’s playbook. And while a lot of Americans have no idea what her big plans are, this playbook revealed everything. It’s more of the same. She’s going to just keep printing money.”
“Don’t ever think the Fed knows what they’re doing. They can print all the money they want, but if people aren’t using it in the economy than it is going to collapse.”
What makes Rickards’ and Paul’s alliance so unusual is that Senator Paul is no fan of the CIA.
During a marathon, 13-hour filibuster he successfully halted the appointment of the new director of the Central Intelligence Agency. He cited the public’s need to be made aware of the White House and intelligence community’s use of drones as the reason for his actions.
However, this has not stopped Rickards and Paul from uniting on what Rickards believes is the greatest threat to our country.
In fact, in a Treasury meeting, Rickards accused both the Fed and Treasury of being more dangerous to the United States’ national security than Al-Qaeda or any rival nation.
And Senator Paul has cited Rickards’ work in numerous speeches and in his official budget proposal for the year where he warned that our central bank was leading us towards a “Roman Empire-like collapse.”
Which is a conclusion that Rickards and many of his colleagues agree with.
A startling report containing the consensus view of all 16 branches of the U.S. Intelligence Committee has revealed that these agencies have begun to estimate the impact of “The fall of the dollar as the global reserve currency.”
And our reign as the leading superpower being annihilated in a way “equivalent to the end of the British Empire in the post-World War II period.”
The question we should all be asking ourselves now is “what if they’re right?”
My name is Steve Meyers.
And I want to thank you for taking part in this exclusive Money Morning interview with Jim Rickards, the Financial Threat and Asymmetric Warfare Advisor for both the Pentagon and CIA.
Recently, all 16 branches of our Intelligence Community have come together to release a shocking report.
These agencies, that include the CIA, FBI, Army, and Navy, they’ve already begun to estimate the impact of the fall of the dollar as the global reserve currency.
And our reign as the world’s leading super power being annihilated in a way equivalent to the end of the British Empire, post-World War II.
And the end game could be a nightmarish scenario, where the world falls into an extended period of global anarchy.
One that will ignite a 25-year Great Depression.
Today, we’re going to examine everything he’s uncovered because the bedlam could begin within the next six months.
Which is why every American should hear his warnings before it’s too late.
Jim Rickards, thank you for joining us.
It’s my pleasure, Steve. Glad to be with you.
In the early ’80s, you were a member of the team that helped negotiate an end to the Iran hostage crisis.
In the late ’90s, when it was discovered that the Wall Street firm Long-Term Capital Management was about to cause a total collapse of the financial markets, the Federal Reserve had to turn to you in order to stop this catastrophe from plunging America into a recession.
And then, after 9/11, you were tasked by the CIA with investigating potential insider trading that took place prior to the terrorist attacks.
That’s exactly right.
The problem was the CIA didn’t have any capital markets expertise.
And why should they?
Prior to the beginning of globalization, capital markets weren’t really part of the battle space.
So the CIA engaged in some outreach, they recruited certain people, myself included, to bring the Wall Street expertise to the agency.
This Led to Project Prophecy
So, what the CIA said was, well, if there’s going to be another spectacular attack…
Using price signals to determine the actions of participants in the market, whether it be terrorists, or strategic rivals of the United States…
Could you spot it?
Could you get the information, and actually break up the plot, and save American lives?
This system you built with Project Prophecy actually predicted a terrorist attack that was thwarted in 2006.
On August 7, 2006, I got an email from my partner.
She said, “Jim, we’ve got a bright signal on American Airlines.
It looks like a possible terrorist attack.”
We documented that.
I was up at 2:00 in the morning in my study, watching CNN, and all of a sudden MI-5 and New Scotland Yard emerged to break up this terrorist attack.
They were arresting suspects and removing files.
So this showed that the system worked.
However, it’s not just good for predicting terrorist attacks, but also strategic attacks by rivals and enemies of the United States.
For years now, you’ve been helping the Pentagon and CIA prepare for a rise in asymmetric warfare and financial threats, because today there are immense fears we’ll be struck by – as you’ve described it before – a financial Pearl Harbor.
There’s now concern in different branches of the U.S. government…
Historically in Washington, the Treasury and the Fed take care of the dollar.
The Pentagon and the Intelligence Community take care of other threats, but what happens when the dollar IS the threat?
Americans generally know that:
What are those?
Medicare, Medicaid, Social Security, student loans, Fannie Mae, Freddie Mac, FHA.
You go through the whole list and it goes on and on and on.
There’s no way to pay it.
During the boom years of the 1950s and 1960s, every dollar of debt that was created, we got $2.41 worth of economic growth.
So that was pretty good bang for the buck.
But by the “stagflation” of the late 1970s that relationship had actually collapsed.
So now for a dollar of debt in the late 1970s, we were only getting $.41 in growth, so, obviously, that’s a huge drop-off.
So we’re piling on the debt, but we’re getting less and less growth.
As the trend goes from $2.41 to $.41 to $.03…
It’s soon going to go negative.
This really speaks to what you wrote about in your new book, The Death of Money, the title strongly alludes to this, the hourglass is now empty.
You warn we’re about to fall into a 25-year Great Depression…
That the stock market could plunge overnight 70%.
You know, when I use the phrase 25-year depression, it sounds a little extreme, but historically it’s not.
We had a 30-year depression in the United States from about 1870 to 1900. Economists actually call it the Long Depression.
That was before the Great Depression. The Great Depression lasted from 1929 to 1940, so that was quite long.
The U.S. is in a Depression Today
A lot of folks might disagree with you that we’re currently in a depression.
That word brings to mind images of the 1930s and soup kitchens.
Well, we have soup kitchens today…
They’re just at Whole Foods and your local supermarket, because 50 million Americans are on food stamps.
It’s not that we don’t have distress.
We have enormous distress, but it’s being hidden in different ways.
And you point the finger right at the Fed, Congress, and the White House.
I was in a meeting in the Treasury and I said:
“The Fed and the Treasury are the greatest threats to national security, not Al- Qaeda.”
Right here in this building with this group…
You people are destroying the dollar and it’s just a matter of time before it collapses.
And I testified before the United States Senate about this.
I warned the Senate, maybe we can’t stop earthquakes on the San Andreas Fault…
But nobody thinks it’s a good idea to send the Army Corps of Engineers out there to make the San Andreas Fault bigger.
But by money printing, credit creation, and reckless monetary policy by the Fed, we’re making the San Andreas Fault bigger every day.
And when you make a complex system bigger – the risk doesn’t go up a little bit – it goes up exponentially. So the risk is unimaginable at this time.
The collapse hasn’t happened yet, but the forces are building up and it’s just about to snap.
Editor’s Note: Because the revelations in Jim Rickard’s book are so important to the everyday lives of Americans, Money Morning is sending free copies of The Death of Money to people who want to get this intellidence in their hands.
Jim, your take, and that of many in the Intelligence Community…
Is much different than what we’re hearing out of Capitol Hill.
Which is why the allegations you make in this book are causing quite a controversy in Washington.
I was at a recent conclave in the Rocky Mountains with a couple central bankers, one from the Federal Reserve and one from the Bank of England.
They’ll say things privately that they won’t say publicly.
And I was handed a copy of Janet Yellen’s playbook.
The Fed is trying to kind of use propaganda…
Lie to us about economic prospects, talk about green shoots, use happy talk to try to get us to spend our money.
The Fed doesn’t know what they’re doing.
Don’t ever think that they know what they’re doing.
You can print all the money you want, but if people are not borrowing it, if they’re not spending it, then your economy is collapsing, even with money printing.
So you can understand it this way…
Let’s say I go out to dinner and I tip the waiter.
And the waiter takes my tip and he takes a taxicab home.
And the taxi driver takes the fare and puts some gas in her taxicab.
Well, in that example, my dollar had the velocity of three.
$1 supported $3 of goods and services: the tip, the taxi ride, and the gasoline.
But, what if I don’t feel great? I stay home, and watch television.
I don’t spend any money.
Well, that money now has a velocity of zero.
I leave my money in the bank, but I don’t spend it.
Let’s look at what’s actually happening with the velocity of money.
It’s plunging… It’s going down very rapidly.
But compare this decline of velocity today to what we saw leading up the Great Depression.
Now, in the depths of the Great Depression velocity was even lower…
So, it doesn’t matter how much money the Fed prints.
Think of it as an airplane that’s coming in for a nosedive.
It’s crashing… crashing… getting closer to the ground.
The Fed is trying to grab the joystick and pull the plane up out of the nosedive and get it back in the air…
But, unfortunately, it’s not working, we’re heading for a crash.
We’ve just covered a lot of these startling numbers, these signals of this coming Great Depression.
Let me see if I can quickly put it all together.
Nobody denies that we have a debt crisis in this country, but you’re saying we can no longer grow our debt without causing our economy to aggressively slow down.
We’re barely above water now.
So that’s signal number one.
Signal number two is this dangerous slowdown in our velocity of money.
It’s already plummeting to levels not witnessed since the Great Depression in the 1930s.
Are there any other signals the Intelligence Community is monitoring that suggest this collapse is right around the corner?
Editor’s Note: Jim Rickards reveals the early warning signs the U.S. Intelligence Community is tracking in advance of this coming 25-year Great Depression in his book, The Death of Money.
Money Morning believes this is a must-read for every American. So you can have a copy rushed to you for free.
There are, Steve.
There are a lot of signals out there and they’re very, very troubling.
One of the ones I’m watching closely, and I know people in the Intelligence Community focus on also, because it covers so much ground, is called the Misery Index.
The Misery Index = Real Inflation Rate + Real Unemployment Rate
If you look at the Misery Index today compared to the period of stagflation in the late 1970s and early ’80s that Americans remember so well…
It’s actually worse.
This can lead to social instability…
Take this back to the Great Depression… The Misery Index in the Great Depression was 27.
Today it’s 32.89.
Believe it or not, it’s worse today than it was during the Great Depression.
What happens as a depression worsens?
Businesses can’t pay their debts. The bad losses fall on the banks. The banks ultimately fail.
That’s happened before.
The Fed has had to bail out the banks.
But what happens when the Fed, itself, is in jeopardy?
Based on these signals you’ve been tracking, the Federal Reserve is going to fail?
The Federal Reserve actually, in some ways, already has failed.
I spoke to a member of the Board of Governors of the Federal Reserve and I said, “I think the Fed is insolvent.”
This Governor first resisted and said, “No, we’re not.”
But, I pressed her a little bit harder and she said, “Well, maybe.”
And, then, I just looked at her and she said, “Well, we are, but it doesn’t matter.”
In other words, here’s a Governor of the Federal Reserve admitting to me, privately, that the Federal Reserve is insolvent, but said, it doesn’t matter, because central banks don’t need capital.
Well, I’m going to suggest that central banks do need capital.
Look at this chart.
What it shows you is that the Fed has increased its capital they currently have about $56 billion.
That sounds good.
You say, “gee, $56 billion is a lot of money, that’s a pretty good capital base.”
But That’s Not the Whole Story
You have to compare the capital to the balance sheet.
How much in the way of assets and liabilities is that amount of capital supporting.
When you look at that it’s a much scarier picture, because the actual liabilities, or debt, if you will, on the Fed’s books is $4.3 trillion.
So you’ve got $4.3 trillion sitting on this little skinny capital base of $56 billion…
That’s very unstable.
Prior to 2008, the Fed’s leverage was about 22 to 1.
Meaning they had $22 in debt on their books for every $1 of capital.
Today, that leverage is 77 to 1.
So, yes, the capital has increased, but the debt and the liability has increased much more.
Your warnings haven’t gone completely ignored.
In the budget he presented this year, Senator Rand Paul cited your work and how we’ve driven our economy to the edge of a Roman Empire-like collapse.
In fact, we have footage of Senator Paul instructing Americans to listen to your warnings.
SENATOR RAND PAUL:
Jim Rickards notes the Fed is insolvent on a mark-to-market basis.
The Fed has wiped out its capital on a mark-to-market basis.
Of course, the Fed carries these notes on its balance sheet at cost and does not mark them down to market.
But if they did, they would be broke.
First of all, I give Senator Rand Paul credit.
He’s one of the few people who understand the dangers here.
But, the problem is not limited to the Fed.
It’s infecting the private banking system as well.
There’s about $60 trillion of debt on the balance sheets of our banking system.
For a long time, debt and the banks grew at about two times the rate of growth in the economy.
But lately, this has exploded.
Today it’s up to 30 to 1.
The Whole Thing is Unstable
I can give you a very good example of this and this actually comes from physics.
If you had, let’s say, a 35-pound block of uranium shaped like a cube, it would actually be fairly harmless.
It’s what we call sub-critical. It’s radioactive, but it’s kind of tame.
But now imagine you engineer it.
You take that 35-pound block.
You take one piece and shape it into something about the size of a grapefruit.
Take another piece, shape it into something like a bat.
Put the ball and the bat in a tube and fire them together with high explosives.
That sets off a nuclear detonation.
That destroys a city.
The way it’s been shaped and configured is what takes it from what we call sub-critical to super-critical.
Jim, are you seeing any signs that our stock market has reached a super-critical state?
Well, unfortunately, yes.
We’re seeing a lot of signs of this.
One of the signs that’s really fundamental, and really important, is the ratio of stock market capitalization to GDP.
Because, remember, the value of all the stocks in the stock market, that’s supposed to represent the fundamental economy.
It’s not supposed to be off in a world of its own.
But if you look at what’s been happening to that ratio recently, it’s going sky-high.
Just prior to the recession…
That number was 183%.
Go back to the famous tech bubble, the dot com implosion of 2000.
At that time, it was 204%.
And if you want the scariest news of all…
Just prior to the Great Depression that number was 87%.
In other words…
So, that’s a really good metric for saying, “Hey, is the stock market heading for a crash?”
All the data says, “Yes, we are.”
But there’s another metric, another warning sign, if you will, that’s even more frightening, which is the Gross Notional Value of Derivatives.
There are a certain number of shares of IBM that are outstanding, but we know what that number is.
But there’s no limit on the derivatives.
I can write options and futures on IBM stock all day long and all the other stocks on the stock market.
And that’s what’s been going on.
Now, the Gross Notional Value of Derivatives in the world today is over $700 trillion. Not billion.
That’s ten times the global GDP.
This collapse is unavoidable.
So, we ask ourselves, how bad can this be?
Well, what happened in 2007, 2008 when the markets collapsed…
We all remember the value of stocks going down…
Real estate going down, housing going down…
All that lost wealth was $60 trillion.
We’re in this critical state, getting close to the super-critical state where the system implodes.
But it takes a catalyst, it takes a flashpoint.
There are a number of potential flashpoints I’ve investigated.
Editor’s Note: Jim Rickards’ book, The Death of Money, provides specific guidance that can protect your wealth from this coming collapse.
Jim, in a few moments I want to discuss the steps Americans need to take with their investments and personal finances to prepare for everything you and your colleagues are predicting.
But now let’s quickly focus on some of these major flashpoints.
One of the key flashpoints we’re looking at is foreign ownership of U.S. government debt.
Now, this is a very important thing to understand.
We all know that the Treasury has issued over $17 trillion worth of debt, the question is who buys it?
A lot of U.S. debt is owned by foreigners. Who owns it?
China, Russia, other countries…
Countries that are not necessarily our friends.
But they can dump it when they want to.
Well, guess what, that’s actually what’s been going on.
But it gets even more interesting than that.
We talked earlier about the project I did for the CIA…
And we said, you can see not only market action, but rivals, enemies, terrorists and others, operating in financial markets.
So, we all know that Russia invaded Crimea in the spring of 2014.
Let’s say you’re Putin. You know you’re going to invade Crimea. You can expect U.S. financial sanctions.
So what do you do?
You basically mitigate the impact of the sanctions, start dumping treasuries in advance so that when you make your move and the Treasury tries to come against you, you’ve insulated yourself.
That was a clear signal that they were getting ready to do something…
To engage in financial warfare against the United States.
We know the Russians and Chinese are working together.
So is it any surprise that when the Russians started dumping…
The Chinese started dumping also?
Does the Intelligence Community have the ability to defend our country in the event that this escalates even further?
Believe it or not, there’s an intelligence unit inside the Treasury.
And they actually have a war room.
That tells you that financial warfare is here and it’s real.
So if the Russians are dumping…
The Chinese are dumping…
Who is going to buy all this debt?
Well, a mystery buyer has shown up.
Recently, Belgium has bought enormous amounts…
In the hundreds of billions of dollars of U.S. government securities.
So Belgium started loading up on treasuries, coincidentally at the exact same time Russia and China began dumping theirs?
It’s not the Belgians.
These amounts are bigger than the Belgian current account surplus.
These are not Belgian dentists who are buying these things.
Belgium is a Front
You know, could it be the Fed itself?
That’s the point.
Maybe the public doesn’t know who the mystery buyer is, but the national security community does.
Now, the Treasury, operating through this war room, and the Fed – the mystery buyer in Belgium…
For now, they have managed to prop up the treasury market.
It hasn’t collapsed yet.
But they’re not going to be able to keep pulling these rabbits out of a hat, there’s a limit.
This should be very scary, because if the Fed is tapped out – we talked earlier about how the Fed is leveraged 77 to 1.
So the Fed is at the limit of what they can do.
The foreigners are now dumping treasuries and if no one buys it, guess what, interest rates go up.
That’ll sink the stock market, that’ll sink the housing market.
Higher interest rates mean the debt gets higher, so interest rates go up some more.
An attack on our treasury market is obviously a very serious flashpoint that could ignite this Great Depression you predict in your book.
Let’s talk about another flashpoint.
What I call flashpoint number two has to do with the petrodollar.
Can you explain what you mean by the petrodollar?
It’s basically a system whereby oil exports are priced in dollars.
Oil doesn’t have to be priced in dollars.
It could be priced in euros, Japanese yen, Swiss francs, gold.
It could be priced in a lot of things.
But, in fact, the whole global oil market is priced in dollars.
My first visit to the White House on official business was in 1974, with a small group, about five of us.
We met with Helmut Sonnenfeldt, who was the Deputy National Security Advisor at the time.
He was the number two to Henry Kissinger.
And, this was at a time you have to remember…
At the beginning of the ’70s oil was $2 a barrel.
At the end of the ’70s, oil was $12 a barrel.
This Was an Oil Shock
The price of oil was skyrocketing.
Inflation was getting out of control.
There were gas lines.
You know, a certain generation of Americans remembers this very well.
We were in the White House talking about what to do about this.
One of the scenarios we discussed was the U.S. military would invade Saudi Arabia.
We would secure the oil fields and create a military perimeter around them.
We would pump the oil and set it at a price that was favorable to us.
Now, we would give the money to the Saudis.
We didn’t want to steal their money.
We didn’t want to steal their oil.
We just wanted to set the price.
Now, fortunately, that plan was not carried out.
But it shows you how desperate things were at the time.
But what did happen?
Why did we not invade Saudi Arabia?
Well, the answer is Kissinger and the Saudis worked out a deal.
And the Saudis said, “Okay, we’ll price oil in dollars, so that secures the role of the dollar as the global reserve currency.”
But there was a quid pro quo.
We agreed to guarantee the continuation of the House of Saud, the royal family of Saudi Arabia.
And by extension, the national security of Saudi Arabia.
Because they’re a relatively weak military power.
And it’s a bad neighborhood – a lot of enemies in the region starting with Iran and others.
So the question would be, obviously, did this petrodollar deal work?
And it ABSOLUTELY did work.
Once it kicked in, the dollar roared.
This was the period – sometimes people call it the king dollar period, the strong dollar period.
This was after Volcker and Reagan in the 1980s.
But this only continued up to a certain period of time…
Up until around 2000.
And since then, the dollar has been in a decline.
Well, we’re seeing it in real time.
Think of the petrodollar, or the dollar as the global reserve currency…
Think of it as a three-legged stool.
So, here’s the stool and it’s got three legs.
As long as the legs are standing, the foundation is firm and the dollar will remain as a global reserve currency.
But, one by one, those legs are being pulled out.
What are the legs?
Well, the first one is Saudi Arabia.
That was where the petrodollar deal began.
Our side of the deal was we would guarantee the national security of Saudi Arabia.
But lately – going back to December of 2013…
You know, the President has been withdrawing American power from around the world and his view is, well, we’ll leave a friendly cop on the beat.
Every sort of bad neighborhood around the world will have a cop on the beat.
The President has decided that Iran is going to be the cop on the beat in the Middle East.
They’re going to be the heavyweight regional power.
Where does that leave Saudi Arabia? Out in the cold.
So now Saudi Arabia is saying…
“Wait a second, you’ve undermined our national security, you’ve reneged on your side of the petrodollar deal, why should we hold up our end?
Maybe we’ll start pricing oil in gold or euros or maybe Chinese yuan.”
Because now, increasingly, Saudi Arabia is selling more and more oil to China.
So, the first leg of the stool has been pulled out.
The Saudis are going to back away from the petrodollar, because we are no longer guaranteeing their security – we’re playing footsie with Iran.
Now, Russia is not a member of OPEC, but they are the world’s largest oil exporter, one of the world’s largest energy exporters, actually bigger than Saudi Arabia.
So even though they’re not a member of OPEC, they also price oil in dollars.
So, they’ve signed onto the petrodollar deal in their own way.
But, we’re now engaged in financial warfare, Russia is ready to fight back.
And this is not classified information.
This is being said publicly.
Andrei Kostin, President and Chairman of Russia’s VTB Bank, it’s one of the largest banks in Russia, he recently said…
“It’s time to change the entire international financial system that considers the dollar the key reserve currency. The world has changed.”
A member of the Russian Parliament, he said…
“The dollar is evil.
We will sell rubles to consumers that rely on gas and later we’ll exchange the rubles for gold.
If they don’t like this, let them not do it.
Let them freeze to death.”
So, two of the legs of the stool, Saudi Arabia and Russia, have already been pulled out.
The third leg is China.
And that is coming out too.
As far as Russia and China’s role in taking down the petrodollar…
This recent $400 billion energy alliance they signed, is that the purpose of it?
Russia is the world’s largest energy exporter, China is the fastest growing economy in the world, they need energy.
So this is a natural partnership between the two. But the dollar is out in the cold.
And, China is actually putting these yuan bilateral trade agreements in place all over the world.
They’re doing them one-by-one.
But once there’s enough trade and enough volume in a certain currency, it can become a reserve currency.
These are all straws in the wind, leading to the collapse of the dollar as the global reserve currency.
Jim, in your book, you investigate how nations are now using gold as a financial weapon.
Is this one of the most dangerous flashpoints?
It’s absolutely one of the most dangerous flashpoints and, here’s why…
A lot of people look at the dollar and say, “Look, you may not like the dollar, you may worry about the dollar, but you’ve got nowhere else to go.”
But there is another place to go, which is gold.
You don’t have to buy treasuries, you can buy gold.
And countries are actually doing that.
So this is basically a global rebalancing of gold reserves.
This is one of the things that the Intelligence Community is watching most closely.
And China is our number one case.
Here’s why: China has acquired more than 3,000 tons in the past four years.
Now they lie about this.
They officially say they have 1,054 tons.
The reason is, China is using their own military and their own intelligence assets to acquire some of this gold in stealth.
Secure logistics that means these are people who operate vaults and armored cars.
So they handle the physical metal.
They’re not central banks.
They’re not government agencies.
These are Brinks and G4S and ViaMat.
These are the big players in this field.
One of these officials said he recently brought gold into China at the head of an armored column of the People’s Liberation Army.
In other words, he was in an armored car and they had Armored personnel vehicles bringing gold into China.
I guarantee that did not show up in the official Hong Kong import figures.
Now, why is China doing this?
A lot of people speculate that they want to launch their own gold-backed reserve currency, to take the Chinese yuan, back it with gold, make it a global reserve currency.
That’s extremely unlikely.
That’s not what China is doing.
What they are trying to do is hedge against the collapse of the dollar.
China can’t prevent that from happening.
What they can do is build up the gold reserves.
This is known to the Intelligence Community.
This is NOT publicly revealed.
What if it were publicly revealed?
Here’s what global gold reserves would look like if the amount that China owns were actually suddenly revealed.
Editor’s Note: Jim Rickards’ book, The Death of Money, will help you prepare for the frightening American economic collapse many in the U.S. Intelligence Community fear is at our doorstep.
Jim, so far all of these flashpoints have involved China.
Isn’t this an economic suicide mission to attack America?
There’s something else here, another flashpoint that could meltdown the global financial system.
What if the U.S. doesn’t bring the entire pyramid crashing down, what if it’s China?
Well, it could very well be.
They have a highly leveraged banking system.
But the banking system is just the beginning.
There’s also something called a shadow banking system.
This is now a $7.5 trillion industry and it’s up 4,067% since 2005.
This term shadow banking, it’s starting to get play in the press.
How would you explain it?
If you put your money in the bank in China, they – it’s just like the United States.
They pay you nothing, zero maybe, one quarter of one percent, something pathetically small.
But, they’re offering these wealth management products that pay five, six, seven percent.
Well, what are they?
Well, they’re actually – they take the money and they buy mortgages on worthless assets, inflated assets and bubble assets that are going to crash.
Before the crash in the United States, before 2008, new construction, as a percentage of GDP growth, that was about 16%.
16% is a pretty big slice.
But, look at China.
In each of the last three years, construction has been 50% of GDP growth.
They’re building white elephants, they’re building trophy projects, they’re building ghost cities.
I’ve been to China – I was with the Communist Party officials and provincial officials, they were trying to get me to bring some businesses there.
I went to one place near Nanjing.
They weren’t building seven buildings, they were building seven cities.
Every city had a whole cluster of skyscrapers, luxury hotels, athletic facilities, housing facilities, high-end shopping, metro stops, highway access…
And an airport to service all seven of these cities.
This construction was going on as far as the eye can see.
It was all empty.
All of it.
Now, here’s the point.
In the U.S. before the crash, it took about 4.3 years of income to buy the typical house .
In China, it takes 18 years of income.
If they’re building apartments, co-ops and condos, and people can’t afford them, you know their prices are going to collapse.
One of the senior banking officials in China said, “This is a Ponzi scheme.”
Those are his words, not my words.
I happen to agree.
Once you have enough collapses, there’s going to be a run on the banks.
The bankers are going to say sorry, we can’t pay you, it’s not our problem.
Well, that’s not going to be good enough.
Riots are going to break out.
What does it mean when the world’s second largest economy hits the brakes?
That’s going to be disastrous to global growth; it’s going to pull the rug out from under the sky-high valuations we’re seeing in the U.S. stock market.
Jim, there’s one more flashpoint I’d like to talk about.
It has to do with a premeditated plan you believe exists inside the IMF, and it involves high-ranking U.S. officials…
To replace the dollar as the world’s reserve currency.
It’s not just my belief.
This is actually documented.
It’s a ten-year plan to replace the dollar as the global reserve currency.
The IMF released a report this year, it was called – and get this title – “The Dollar Reigns Supreme By Default.”
And here’s a direct quote…
“The aggressive use of unconventional monetary policies by the Federal Reserve, the U.S. central bank, has increased the supply of dollars and created rifts in the financial system. The dollar status should be in peril.”
Reserves are nothing more than a savings account for a country.
That’s the amount of money they’ve saved.
But, the problem is, when you have it you have to decide what to do with it.
You can’t just stick it under a mattress, so to speak.
A lot of people think that the dollar will prevail because there are no good alternatives.
That’s not true.
Imagine if that continued.
The euro comes up.
Swiss franc comes up.
Some of the other currencies come up.
That’s one outcome.
But, there’s another outcome, that’s probably coming a lot sooner.
We have a financial panic in the world.
If a central bank has to re-liquefy the world, where is that money going to come from?
It can’t come from the Fed, they’re leveraged 77-to-1.
There’s only one clean balance sheet left in the world… the IMF’s.
The IMF, believe it or not, is only leveraged 3-to-1.
When the next crisis comes, it’s going to be bigger than the Fed.
The only source of liquidity in the world is going to be the IMF.
Think of it this way.
The Federal Reserve has a printing press, they can print dollars.
The European central bank has a printing press, they can print euros.
The IMF, the International Monetary Fund, has a printing press too.
They can print something called the Special Drawing Right, or the SDR for short.
These SDRs can come along as a new reserve currency.
The reason they came up with the name Special Drawing Right is because if they called it “world money” that would sound a little spooky and scary.
But that’s exactly what it is.
Here’s the point.
This may be a ten-year plan.
We’re not going to make it ten years.
This collapse will happen a lot sooner than that.
So they’re going to have to dust off this playbook and run out these SDRs and print trillions of them to prop up the system.
Now, if the Fed bailed out private credit in 2008…
And the IMF now bails out the Fed in the next financial panic…
Who runs the IMF? Who’s really in charge?
Well, it’s a nice crowd.
We’ve got kings, dictators, communists…
They’re unelected, unaccountable.
And this is the next flashpoint, really, the IMF taking over the world monetary system and becoming the central bank of the world…
Printing “world money” called the SDR.
Jim, these flashpoints…
The attacks on our treasury market and petrodollar…
China’s stealth gold run…
China’s inevitable collapse…
Even this alarming inside job to take down our dollar that’s escalating at the IMF…
You’ve only scratched the surface of what you reveal in your book.
However, the most important message I took away from The Death Of Money is:
Regardless of which flashpoint unleashes the 25-year Great Depression, folks need to understand it’s coming, and coming quick.
Steve, that’s exactly right.
There is a mission in this book and it’s urgent and it’s important.
We’re talking about:
A prolonged depression…
This could all start within the next six months.
Look at it this way.
Americans right now are standing at the very bottom of a tall mountain… Mt. Everest, Mt. Kilimanjaro.
About halfway up the mountain, there’s a catastrophic avalanche barreling down towards us.
Determining the one snowflake…
The one flashpoint that’s going to speed this chaos up shouldn’t be our focus.
Recognizing the severity of the situation and moving to safety should be.
So, mission one is helping people hold on to what they’ve got.
That’s going to be more than half the battle ahead.
Jim, as you know, Money Morning believes so much in your book…
As well as your mission to warn the public…
That we’d like to send free copies of The Death of Money: The Coming Collapse of the International Monetary System, to everyone who is watching this interview.
Now, it’s on bookshelves, it’s being sold for about $28.
But, I want to point this out.
The version we’re sending folks is different than the one being sold in stores.
And the reason why is simple.
What we’re talking about today is not light reading material.
The book investigates everything thoroughly, except for one part.
It’s what our government calls – and to be clear, this is what they call it – “the Day After Plan”.
This describes what America and our government will be like when our economy collapses.
Now, I have an unpublished chapter that does outline this situation, it’s called The Day After Plan Declassified.
I didn’t put it in the book that was originally released, because it is controversial.
The picture I paint is far from pretty.
But I am going to include this chapter here…
Because folks watching this interview are more prepared to see this intelligence and these scenarios.
You also took another step with this version of the book…
You created a six-part video series you’re calling, The Death of Money Digital Debriefing.
Here’s why I put that together.
It’s impossible for anyone, me or anyone else in my line of work, to give you an exact day and time this collapse will begin.
We just know it’s coming and coming soon.
However, there are crystal clear warning signs that will appear in our economy and in our markets.
This is certain.
So, across this video series I walk folks through the seven major signs.
I give you the exact signals to watch for.
I share the charts.
The announcements you’ll hear from certain world governments and the Federal Reserve.
I examine, even further, the flashpoints that could ignite this nuclear meltdown in our economy.
I explore the secret bubbles nobody is talking about.
I share more findings from the Intelligence Community about Russian, Chinese, and Iranian activities against America.
This is very important…
Across this video series I help folks analyze their investment portfolios.
I show them how to adjust their allocations accordingly for numerous scenarios that could unfold, because this is a fluid situation – it’s volatile.
So, I review how much of your portfolio should be in certain sectors of the stock market, precious metals, income opportunities…
Where folks should be looking overseas to invest. It’s a point-by-point examination of each of these areas.
Jim, we’d like to rush copies of your book, the unpublished chapter, and this six -art digital debriefing out to everyone watching.
It’s part of a bold initiative you’re taking on, what you’re calling:
You helped lead a CIA mission called “Project Prophecy.”
The goal was to identify the signals in the financial markets and economy that threatened our country.
With this re-launch of Project Prophecy here, you’re applying this same methodology to helping everyday folks build this unbreakable wall around their wealth.
Let’s talk about what you’ve created.
Editor’s Note: Jim Rickards has prepared a comprehensive package that will give you the real story and real solutions for these troubling times ahead.
Steve, I realize much of what I’ve revealed today is a shock to the system.
America is facing one of its darkest periods.
There’s no escaping that.
And some of the measures folks are going to need to take to protect themselves may be outside of their comfort zones.
So, I’m going to take a hands-on approach here.
My book, the unpublished chapter, and digital debriefing will give them the big picture.
But, folks also need to know the exact investments to target and the ones to avoid.
They need to rethink how they handle their personal finances.
To help them I’ve prepared a set of intelligence briefings.
The first is called, The Project Prophecy Wealth Defense Blueprint: The Four Directives.
And, with each directive, I have specific investments targeted.
Let’s examine each of them.
Seek Shelter From the Dollar’s Fall
The next time the dollar falls – it won’t be the first time.
The dollar almost collapsed completely in the late 1970s.
Between 1977 and 1981, a five-year period, cumulative inflation was 50%.
If you had insurance, annuities, any kind of fixed income, retirement income, savings in the bank, you lost half your wealth in a very short period of time.
What we’re talking about now could be a 70 or 80% collapse, maybe even more.
The best way to handle the dollar’s fall – and this is what I focus on in the briefing – is to invest in the euro.
What people have to understand is the euro is not an economic project.
It’s a political project.
And if the political will is there, directed from Germany, the euro is going to hang together.
We have a chart actually showing the euro’s rise against the dollar.
So just imagine all the talk about the collapse of the euro and yet the euro is actually getting stronger.
And, by the way, everyone knows that the United States has 8,000 tons of gold.
Well, Europe has 10,000 tons of gold.
Europe is the largest gold holder in the world.
So, they actually have the gold to back up the euro.
Now, you don’t have to open a foreign bank account to invest in the euro.
In this Project Prophecy Wealth Defense Blueprint, I’m recommending a specific fund that rises twofold as the dollar falls against the euro.
This is a very strong defense play because you are getting twice the return from both the dollar’s fall and the euro’s rise.
So walk us through this second directive in this briefing.
Always Have an Insurance Plan For a Market Collapse
The stock market is going to fall 70%.
Now, does that mean you shouldn’t hold stocks?
Folks should make that decision for themselves.
But, there are ways to use the market itself as a safety net.
I’m recommending we target the sector that will experience the most severe consequences of this collapse, the financial sector.
The companies that are holding all these stock derivatives.
These are going to fall harder and faster than anything else.
So, I examine a specific fund in this briefing that is heavily weighted against the financial sector.
It rises 3% for every 1% the financial sector pulls back.
So, a 25% pull back, that’s a 75% return from this fund.
If it falls 70%, now you’re looking at a 210% return.
What this fund allows you to do is use a small amount of capital to multiply your protection against a market crash.
It’s excellent insurance.
So, take us through the third directive.
Invest in What People Can’t Live Without
When America experiences this worst case scenario we are predicting in the Intelligence Community, people won’t stop needing food.
They won’t stop using energy.
They won’t stop using essential goods and services.
This is where folks should be looking now.
So in the briefing I’m recommending water investments, because you can’t live without water.
And we’re already seeing water investments begin to take off.
This sector has been surging since 2009. It’s up about 200%.
I’m targeting a water processing company that operates 47,000 miles of water pipelines across 16 states and 1500 communities.
Now, this is a sleeping giant income play.
This water processor’s dividend has grown every year.
It’s up 55% already.
And, income is something we can’t live without either.
And, besides water, the briefing also focuses on a company that provides emergency medical supplies, because that’s also a necessity.
Jim, you have one more directive in this briefing.
Yes, Warren Buffet’s secret weapon.
Target Companies Who Control Hard Assets
You know Warren Buffet has this reputation as the avuncular oracle of Omaha, the stock market investor’s best friend.
But, I say when it comes to billionaires, don’t listen to what they say, watch what they do.
Warren Buffet’s recent acquisitions have been very revealing.
A few years ago he bought the Burlington Northern Santa Fe Railroad.
He bought the whole railroad.
He actually took it private.
But what is a railroad?
A railroad is nothing but hard assets.
They have right-of-ways, mining rights adjacent to the right-of-ways, rail rolling stock, yards, switches, signals; it’s all hard assets.
How does a railroad make money?
It moves hard assets in the form of freight, coal, wheat, corn, steel, cattle, etc.
So a railroad is the ultimate hard asset play. It’s hard assets making money moving hard assets.
What was Warren Buffet’s next big acquisition? He bought oil and natural gas resources, another hard asset.
And by the way, he can move his oil on his own railroad.
He doesn’t need the Keystone Pipeline.
When you line up 100 tanker cars on a railroad, that’s a pipeline on wheels.
So Warren Buffet is a guy who’s dumping paper money, getting hard assets in the form of railroads, oil, natural gas.
If it’s good enough for Warren Buffet, it’s good enough for everyday Americans.
This is the most important of the directives, so I have the top six companies who have built these hard asset escape plans into their business models.
Take us through this.
Steve, during the original Project Prophecy for the CIA we built a tracking system, a watch list of the 400 stocks most likely to signal a coming attack on America.
But, in the years that followed, we kept modifying its capabilities so it could identify the companies that were in danger of collapsing.
This intelligence briefing reveals the 30 stocks that are now at the top of that list.
Now, when folks see these stocks, it may shock them.
These aren’t micro caps or small caps, because they don’t have the capability to do widespread damage.
These are 30 of the most widely held stocks in the retirement accounts and 401ks of everyday Americans.
Most are large blue chip.
That means everybody watching today is probably holding one, two, or more of them.
And they are vulnerable to complete annihilation.
Now, inside this list of 30 I’ve singled out the 10 that are currently at a red alert status.
This means if you were holding them today you need to not be holding them tomorrow, because the clock is running out on them.
They’re already at risk of failure before the worst of what’s coming appears.
I’m advocating people – if they aren’t already and they have the means to do so – to start exploring adding hard assets to their overall portfolio.
This intelligence briefing covers them all, from land, including farmland, to certain antiquities and art that holds value, as well as physical currencies and precious metals.
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Some of America’s top corporations are parking profits overseas and ducking hundreds of billions in taxes. And how’s Congress responding? It’s rewarding them for ripping us off
By Tim Dickinson | August 27, 2014
In July, the American pharmaceutical giant AbbVie, maker of the world’s top-selling drug – the arthritis treatment Humira – reached a blockbuster deal to acquire European rival Shire, best known for the attention-deficit medication Adderall. The merger was cheered by Wall Street, not for what the deal will do to advance pharmaceutical science, but because it will empower the bigger firm, AbbVie, to renounce its U.S. citizenship. Related Tea Party The Nonexistent Case for Never Raising Taxes The Nonexistent Case for Never Raising Taxes At $55 billion, the AbbVie deal is the largest in a cavalcade of corporate “inversions.” A loophole in American tax law permits companies with just 20 percent foreign ownership to reincorporate abroad, which means that if a big U.S. firm acquires a smaller company located in a tax haven, it can then “invert” – that is, become a subsidiary of its foreign-based affiliate – and kiss a huge share of its IRS obligations goodbye.
AbbVie shareholders will continue to control 75 percent of the company, which will still be managed by executives outside Chicago. But the merged company will now file its tax returns on the island of Jersey – a speck of land in the English Channel, where Shire is incorporated. AbbVie, which racked up more than $10 billion in Humira sales last year, will slash its effective corporate tax rate from 22 percent to 13. The cost to the U.S. Treasury? Possibly as much as $1.3 billion by the year 2020.
Companies striking deals to become technically foreign can be found in all corners of American business, from California computer-equipment manufacturer Applied Materials to Minnesota medical-device giant Medtronic to North Carolinabased banana behemoth Chiquita. Little is changing in the core business of these firms. They will just pay less in taxes – and to a foreign government, often Ireland or the Netherlands. These tax turncoats have drawn the ire of President Obama. “I don’t care if it’s legal,” he declared this summer. “It’s wrong.” These inverted companies, he said, “don’t want to give up . . . all the advantages of operating in the United States. They just don’t want to pay for it.” With Congress gridlocked, Obama is vowing to tackle the problem on his own – as he has done to advance his agenda on LGBT equality and immigration reform.
In August, he threatened “quick” executive action to “at least discourage” inversion schemes. But pressed for specifics, the president conceded the White House has no silver bullet. In fact, Treasury Secretary Jacob Lew had declared only weeks earlier, “We do not believe we have the authority to address this inversion question through administrative action. If we did, we would be doing more.” Over the next decade, corporate inversions could cost the U.S. Treasury nearly $20 billion – revenues that could otherwise pay for Head Start programs, to rebuild roads and bridges, or just bring down the deficit. The wave of inversions is threatening “to hollow out the U.S. corporate income tax base,” Lew warned in a July letter to the chief tax writers in the House and Senate. But inversions are just the tip of the iceberg. The crisis of corporate tax avoidance is far more pervasive – and destructive – than either Obama or Lew is letting on. At a moment when Congress appears impossibly divided, a strong, bipartisan consensus has, in fact, emerged in Washington: The world’s richest corporations will get away with fleecing hundreds of billions of tax dollars from the rest of us. In public, Democratic politicians blast corporate tax dodgers. But the party’s most viable comprehensive “reform” proposals would reward the crooked accounting of U.S.-based multinationals. Republican backed legislation – no surprise – would only make the crisis worse.
Why? “It’s not rocket science; it’s money and politics,” says Jared Bernstein, former top economic adviser to Vice President Joe Biden. “Concentrated wealth is buying the policy agenda it likes, and blocking one it doesn’t.” Last year the IRS finally collected more in tax receipts than it did before the crash in 2007. But dig a little deeper into the numbers and it is clear we haven’t returned to normal: Corporations paid nearly $100 billion less in federal income taxes last year than before the Great Recession – down nearly 40 percent as a share of GDP. In fact, corporate profits and corporate tax collections are now trending in opposite directions. Profits were up $93 billion last year – to a high of $2.1 trillion, according to the Commerce Department. Yet corporate tax payments actually fell last year by more than $15 billion. How is this possible? It goes way beyond inversion. The top names in American business – from Apple to Xerox – have joined in the greatest tax dodge in world history. Using clever accounting games, these corporations have siphoned majestic sums out of the country and into tax-haven shell companies – where the money is untouchable by the IRS.
The numbers are staggering. More than $2 trillion in U.S.-based multinational profits currently sit in offshore accounts, representing, by credible estimates, in excess of $500 billion in unpaid taxes. If that money were deposited in federal coffers tomorrow, it would wipe out the deficit for 2014. And every year that Congress dithers on a crackdown, America is forfeiting an approximate $90 billion in revenue.
The Great American Bubble Machine The details of corporate tax avoidance can be dizzyingly complex. But the broad strokes are simple. For more than a century, American corporations have been required to pay taxes on their global income. There’s no double taxation problem; companies receive credit for taxes paid over to other governments. The logic of our system is straightforward: U.S. corporate citizens enjoy benefits that aren’t cabined inside our borders. The U.S. Navy secures shipping lanes needed to transport goods from Chinese factories to ports around the world. The American legal system protects corporate patents and other intellectual property worldwide. U.S. taxpayers fund the R&D that makes many of these corporations profitable in the first place. There is one odd hitch in our system of global taxation. The corporate tax bill – nominally 35 percent – is not due in America until the foreign profits come home.
In the jargon of the corporate world, the taxes are “deferred” until the profits are “repatriated.” Until then, the offshore cash can be invested and grow U.S.-tax-free, not unlike your 401(k). “The deferral tax break really highlights how broken our tax code is,” says Ron Wyden, the Oregon Democrat who chairs the Senate Finance Committee. “When you park a big chunk of cash overseas, you get a huge tax break for it.” In reality, much of the untaxed income is actually earned in the United States before elaborate accounting schemes siphon it overseas.
The racket is simplest for tech and pharmaceutical companies, whose value is tied to intellectual property. According to David Cay Johnston, author of Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich – and Cheat Everybody Else, Pfizer provides a prime example. When the company was developing Viagra, it transferred the economic rights to its intellectual property abroad, ultimately to a shell company in Liechtenstein – an infamous European tax haven. On each sale of the drug here, the European subsidiary charged the U.S. parent company a steep royalty – payment of which moved the profit from high-tax America to low- to zero-tax Liechtenstein.
Adding insult to injury, this self-dealing creates a phantom business expense in the United States. “They get a tax deduction in America while they pile up the money in another country, tax-free,” says Johnston. Contrary to what the term “offshore” might suggest, these untaxed profits are not stranded. “There’s this false notion that these funds are locked in a strongbox somewhere,” says Edward Kleinbard, a former chief of staff for Congress’ Joint Committee on Taxation. In reality, these untaxed foreign profits are often banked, by the offshore subsidiaries themselves, in Manhattan – where they’re used to invest in stocks and U.S. Treasury bonds. “The money,” says Kleinbard, “is already back in the U.S. economy.” Worse, equally convoluted accounting sleights of hand can be used to make the untaxed income – or at least its financial power – available to fund daily corporate operations in the U.S., or just enrich shareholders. The ratings agency Standard & Poor’s recently coined a term to describe this practice: “synthetic cash repatriation.”
Take Apple, which wanted to reward investors last year with a $60 billion stock buyback that would boost the company’s share price. Apple did not have enough cash in its American accounts to complete the deal. And the company couldn’t legally tap its “offshore” billions (reportedly banked in Manhattan) without paying U.S. taxes. To sidestep the law, Apple borrowed the cash, using the largest corporate bond offering in history to raise $17 billion in the States. Thanks to the massive piles of offshored cash and securities on its books – presently more than $137 billion – Apple’s net cost of borrowing was minuscule, about 1.57 percent. Apple liked this trick so much it repeated it – raising another $12 billion in April this year. Shareholders got their reward. Only Uncle Sam was cut out of the deal. The crisis in multinational corporate tax avoidance is growing exponentially.
According to an analysis by Audit Analytics, the indefinitely reinvested foreign earnings of the firms in the Russell 1000 Index surged from $1.1 trillion in 2008 to more than $2.1 trillion in 2013. That latter figure is greater than the GDP of Russia. The analysis reveals that the biggest names in corporate America are boycotting the U.S. tax system, en masse. Top offenders include giants from high-tech (Microsoft, $76 billion); Big Pharma (Pfizer, $69 billion); Big Oil (ExxonMobil, $47 billion); investment banks (Goldman Sachs, $22 billion); Big Tobacco (Philip Morris, $20 billion); discount retailers (Wal-Mart, $19 billion); fast-food chains (McDonald’s, $16 billion) – even heavy machinery (Caterpillar, $17 billion). General Electric has $110 billion stashed offshore, and enjoys an effective tax rate of four percent – 31 points lower than its statutory obligation to the IRS. “The things these companies are doing, 20 years ago would almost certainly have been illegal,” says Bob McIntyre, president of Citizens for Tax Justice. “But now you’ve got so many big, powerful corporations doing it that it’s the norm.”
Systematic avoidance helps explain why corporate income taxes – one-third of federal revenue in the 1950s – have now dropped below 10 percent of Treasury receipts today. Many in corporate America justify this rampant tax dodging by arguing that the 35 percent corporate tax rate in the U.S. is too high. In reality, our system offers big corporations so many other tax favors that the effective tax multinationals pay on their U.S. profits is often lower than what the same companies pay in other developed nations. “The constant corporate whining that they’re overtaxed in the United States,” McIntyre says, “is bullshit.” America confronted – and largely dealt with – the issue of international tax loopholes once before. A half-century ago, the Kennedy administration understood that American corporations were using accounting gimmicks to shift untaxed profits overseas.
“Deferral has served as a shelter for tax escape through the unjustifiable use of tax havens,” President Kennedy said in 1961.
Congress eventually agreed on new laws that drew a sharp line between “active” income – earned from selling real-world goods and services – and “passive” income, the easily manipulated paper profits generated from financial transactions. The former would still qualify for the deferral tax break; the latter would be taxed immediately. The Kennedy-era reforms kept corporate tax avoidance substantially in check through both Democratic and Republican administrations. Even Reagan cracked down on multinational tax dodgers with the tax reform of 1986. But changes in recent years – including one in 1997 and another in 2006 – have, according to a recent Senate investigation, “nearly completely undercut” the ability of the Treasury to tax the paperwork profits of multinationals.
The original sin was committed by the Clinton Treasury – then led by Robert Rubin, later a top executive at Citigroup and a major player in the subprime mortgage crisis. In 1997, Treasury changed regulations to permit corporations to decide for themselves which subsidiaries were relevant for tax purposes, simply by ticking off a box on a tax form. But these changes, intended to simplify the tax code, also opened a colossal loophole. By telling the IRS to treat certain offshore subsidiaries as “disregarded entities” – a.k.a. “tax nothings” – corporate accountants could divert and mask passive income, making it untaxable abroad. “I don’t think they realized how much check-the-box would lubricate international tax avoidance,” says Kleinbard. Corporate accountants were gleeful. Tax watchdogs were horrified. “The stupid Clinton Treasury,” McIntyre says bitterly. “They were warned about this before they put out the regulations. Then they discovered that all the people who were telling them they were idiots were right.” For a brief moment, Treasury sought to reverse course. But lobbyists from firms including Monsanto, Morgan Stanley, IBM and Philip Morris locked arms to defend their de facto tax cut. The Clinton Treasury backed down. Soon, some administration officials took a spin through the revolving door – raising troubling questions about the relationship between corporate America and its regulators. William Morris, who became the Clinton Treasury’s associate international tax counsel around the time the regulations were enacted, jumped to GE, where today he orchestrates the firm’s global tax policy.
The great corporate tax dodge exploded under the presidency of George W. Bush. By 2004, American multinationals had siphoned hundreds of billions of dollars offshore. Far from cracking down, the Republican Congress rewarded corporate tax dodgers with a “repatriation tax holiday.” Multinationals were invited to bring home their overseas earnings – to be taxed at a measly 5.25 percent. Related The Vampire Squid Strikes Again This tax giveaway was part of Bush’s American Jobs Creation Act and sold to the public as a way to provide a shot in the arm to the U.S. economy. More than $300 billion came home – nearly 80 percent of it from locations the U.S. government considers tax havens. But the tax holiday didn’t spur investment, growth or jobs. In fact, the top 15 participants, after bringing home a collective $150 billion, proceeded to slash 20,000 jobs. The act did little more than make rich investors even richer. A huge proportion of each repatriated dollar – between 60 and 92 cents – wound up in the hands of shareholders. The Bush tax holiday also “dangled in front of every CFO in America the expectation that there would be another tax holiday, and another after that,” says Kleinbard. Eager to reassure corporate America that pipelining profits offshore was now kosher, Congress enacted little debated legislation in 2006 that codified tax exclusions enabled by the decade-old check-the-box rules. The accounting boondoggle was now doubly entrenched – in law and regulation. The impact was stark: In 2006, corporations held roughly $600 billion offshore. That sum would soon double, then triple.
In his first campaign for president, Barack Obama called for “ending tax breaks for companies that ship jobs overseas” – shorthand for repealing tax deferrals on offshored corporate profits. But upon taking office in 2009, Obama lowered his sights, proposing more modest reforms, including elimination of check-the-box and a limit on tax deductions linked to offshore profits. Despite preserving deferral, these reforms were still projected to raise $210 billion over a decade. And Obama continued to talk tough. In May of that year, he denounced our “broken tax system, written by well connected lobbyists,” and promised to “restore fairness and balance to our tax code.” But even these proposals ran into a corporate buzz saw. Around 200 multinationals, including top backers of Democrats, had joined forces in a campaign spearheaded by the Business Roundtable and the U.S. Chamber of Commerce. Ken Kies, a top lobbyist for companies including GE and Microsoft, told reporters, “This is going to be the biggest fight for the corporate community in the next two years.” The corporate blitz worked. The new president, who’d won more votes than Ronald Reagan, backed down. “We were doing the Recovery Act, health care reform and financial reform,” says Bernstein, Biden’s former economic adviser. “Adding a massive fight with multinational corporations just wouldn’t have been smart.” Far from ending the abuses of corporate tax avoidance, the Obama administration has since become complicit. The president has twice signed legislation reauthorizing the Bush law that effectively codifies check-the-box. The provision is among a package of “tax extenders” – including loopholes favored by both parties – that Congress habitually tacks on to other, must-pass legislation. These corporate giveaways were last rubber-stamped in the 2013 bill that pulled America back from the “fiscal cliff.” Without meaningful resistance from Congress, corporations are pressing forward with abusive tax schemes.
Two recent Senate investigations offer a window into the dark arts of corporate America’s tax avoidance. Apple’s tax strategies in particular have come under the microscope. On a recent earnings call, the Silicon Valley giant announced it has parked $137.7 billion offshore. In its own SEC filings, Apple has revealed it would have to pay nearly 33 percent in U.S. tax – some $45 billion – to repatriate those offshored earnings. That would be more than enough to fund NASA for the next two years. According to Senate investigators, Apple makes use of “ghost companies,” incorporated in Ireland as “a conduit for shifting billions of dollars in income from the U.S.” From 2009 to 2012, Apple booked $30 billion in income to a subsidiary called Apple Operations International, an entity with no official employees. But thanks to overlapping loopholes in Irish and American tax law, AOI has not been forced to declare itself a tax resident of either country. As a result, for the past five years, it filed no returns, and its profits weren’t taxed by any government. “Apple sought the Holy Grail of tax avoidance,” said Sen. Carl Levin, D-Mich., chairman of the Permanent Subcommittee on Investigations. Apple, for its part, insists that its accounting practices are legitimate. “We pay all the taxes we owe,” said CEO Tim Cook, testifying before Congress in May 2013. While tech firms and Big Pharma have long made use of accounting tricks to offshore profits, big industrial concerns have not, historically, been able to play games to the same degree. That’s no longer true. Starting about 15 years ago, heavy-equipment manufacturer Caterpillar paid accounting firm PricewaterhouseCoopers $55 million to create a scheme to “migrate profits” from the U.S. to Switzerland. With no change to its core business, Caterpillar began booking earnings from its U.S.-managed parts business in Geneva – after first negotiating a deal with Swiss authorities to tax those earnings at four to six percent. From 2000 to 2012, Caterpillar shifted more than $8 billion in taxable income to Europe, deferring $2.4 billion in U.S. taxes. “In the fantasyland that is international tax law,” Levin said, “tax lawyers waved a magic wand to make millions of dollars in U.S. taxes disappear.” The real problem with multinational corporate tax avoidance is not that the firms are breaking the law. It’s that the law itself is broken.
“Most of what they’re doing is completely legal,” says a top Senate tax staffer. “The problem is with the system that allows them to do it.”
Democratic Senate Finance Chairman Ron Wyden has long sought to overhaul the corporate tax system. Wyden talks like a progressive champion, likening the current tax code to “a rotten carcass that the special interests feast on.” He has introduced legislation that would eliminate deferral for all international corporate profits, which would be a huge victory for taxpayers. According to a Joint Committee on Taxation estimate, forcing companies to pay taxes on their profits as they’re earned would raise around $600 billion over 10 years. If only Wyden had stopped there. In an attempt to draw support from tax-phobic GOP lawmakers, Wyden would actually give away all that revenue – plus $200 billion more over the first decade, according to the Tax Policy Center – by slashing the U.S. corporate tax rate to just 24 percent. Wyden insists that this low rate would both keep high-skill, high-wage jobs at home and deter companies from “manipulating the tax code to set up shop overseas.” “The morons in Congress are either unbelievably disingenuous,” H. David Rosenbloom, who directs the international tax program at NYU’s law school, says, “or too stupid to understand this.” There’s no way the U.S. can set its tax rates low enough to compete with tax-haven nations like Ireland, he says, and still run a global superpower. Wyden has also called for a repeat of the 2004 tax holiday – allowing offshored cash to come at the discounted rate of just 5.25 percent. On $2.1 trillion in offshored earnings, that could give these companies close to a half-trillion-dollar tax break. Wyden calls the corporate giveaway “a sensible transition.” The best that can be said of Wyden’s approach is that by ending deferral and making schemes to offshore U.S. profits moot, it would stop the bleeding. In contrast, the top Republican proposal, developed by House Ways and Means Chairman Dave Camp, would rip open new arteries. Like Wyden, Camp would also slash the overall corporate tax rate – to 25 percent. In lieu of a tax holiday, he would impose a “transition tax” on offshore profits, from 8.75 percent to as low as 3.5 percent. Camp’s legislation “solves” the problem of deferred offshore profits by largely surrendering the United States’ right to tax corporate earnings booked abroad – making our international tax system “even more of a mess than it is now,” writes McIntyre.
This is the reality of our political system in 2014: In what should be a titanic battle between multinational corporate power and federal power, our elected representatives are hardly putting up a fight.
Obama has been a sharp critic of corporate tax avoidance. Yet the offshore corporate earnings stash has nearly doubled on his watch. Senate Majority Leader Harry Reid has unleashed blistering attacks on corporations like Walgreens that have threatened to renounce their U.S. citizenship for tax purposes. And he has said he’s “ready to roll” on a vote for a (sure-to-fail) Democratic bill that seeks a two-year moratorium on inversions. Yet Reid has also been shopping a stand-alone tax-holiday proposal, rewarding multinational tax avoiders with a 9.5 percent rate. Reid’s partner in this effort?
Kentucky Republican Rand Paul – who’s been courting right-wing billionaire David Koch. “Rand’s got good ideas,” Koch told The Wichita Eagle in July.
The American people want change: Two-thirds of Americans believe large corporations should be paying higher taxes, and 80 percent believe corporate loopholes should be closed. But Washington isn’t listening.
The kid-glove treatment of corporate tax offenders by both parties is exhibit A in America’s shift from a functioning democracy to a nascent oligarchy.
It aligns with a recent study conducted by Princeton and Northwestern that concluded “organized groups representing business interests have substantial independent impacts” on federal decision making, while the interests of average Americans “appear to have only a minuscule, statistically nonsignificant impact.” “Corporate tax breaks are beloved by those who take advantage of them,” says Bernstein. “You’re not going to change that without realigning a lot of politics.” Until that day comes, we’ll be living with the tax policy that multinational corporations have bought and paid for. Which means that you and I are stuck with the bills.
From The Archives Issue 1217: September 11, 2014 Read more: http://www.rollingstone.com/politics/news/the-biggest-tax-scam-ever-20140827#ixzz3CFupPQkp Follow us: @rollingstone on Twitter | RollingStone on Facebook
President Barack Obama officially demanded that Syrian President Bashar Assad resign for the sake of his own people, saying he was no longer fit to lead after “imprisoning, torturing, and slaughtering his own people” during a crackdown on pro-reform protesters.
Most of the arms shipped at the behest of Saudi Arabia and Qatar to supply Syrian rebel groups fighting the government of Bashar al-Assad are going to hard-line Islamic jihadists, and not the more secular opposition groups that the West wants to bolster, according to American officials and Middle Eastern diplomats.
Now, after careful deliberation, I have decided that the United States should take military action against Syrian regime targets. . . . [W]e are the United States of America, and we cannot and must not turn a blind eye to what happened in Damascus.
President Obama has authorized surveillance flights over Syria, a precursor to potential airstrikes there, but a mounting concern for the White House is how to target the Sunni extremists without helping President Bashar al-Assad. . . . The flights are a significant step toward direct American military action in Syria, an intervention that could alter the battlefield in the nation’s three-year civil war. . . .
On Monday, Syria warned the White House that it needed to coordinate airstrikes against ISIS or it would view them as a breach of its sovereignty and an “act of aggression.” But it signaled its readiness to work with the United States in a coordinated campaign against the militants.
It was not even a year ago when we were bombarded with messaging that Syrian President Bashar al-Assad is a Supreme Evil and Grave Threat, and that military action against his regime was both a moral and strategic imperative. The standard cast of “liberal interventionists” – Tony Blair, Anne-Marie Slaughter, Nicholas Kristof and Samantha Power – issued stirring sermons on the duties of war against Assad. Secretary of State John Kerry actually compared Assad to (guess who?) Hitler, instructing the nation that “this is our Munich moment.” Striking Assad, he argued, “is a matter of national security. It’s a matter of the credibility of the United States of America. It’s a matter of upholding the interests of our allies and friends in the region.”
U.S. military action against the Assad regime was thwarted only by overwhelming American public opinion which opposed it and by a resounding rejection by the UK Parliament of Prime Minister David Cameron’s desire to assume the usual subservient British role in support of American wars.
Now the Obama administration and American political class is celebrating the one-year anniversary of the failed “Bomb Assad!” campaign by starting a new campaign to bomb those fighting against Assad – the very same side the U.S. has been arming over the last two years.
It’s as though the U.S. knew for certain all along that it wanted to fight in the war in Syria, and just needed a little time to figure out on which side it would fight. It switched sides virtually on a dime, and the standard Pentagon courtiers of the U.S. media and war-cheering foreign policy elites are dutifully following suit, mindlessly depicting ISIS as an unprecedented combination of military might and well-armed and well-funded savagery (where did they get those arms and funds?). Something very similar happened in Libya: the U.S. spent a decade insisting that a Global War on Terror – complete with full-scale dismantling of basic liberties and political values – was necessary to fight against the Unique Threat of Al Qaeda and “Jihadists”, only to then fight on the same side as them, and arming and empowering them.
Nobody disputes the brutality and extremism of ISIS, but that is a completely different question from whether the U.S. should take military action against it. To begin with, the U.S. not only ignores, but actively supports, all sorts of brutal and extreme parties in the region.
More important, what are air strikes going to accomplish? All one has to do is look at the horrific chaos and misery in Libya – the Successful Humanitarian Intervention™ – to know that bombing Bad People out of existence accomplishes little in the way of strategic or humanitarian value. If one really wants to advocate that the U.S. should destroy or at least seriously degrade ISIS, then one should honestly face what that actually entails, as detailed by the New America Foundation’s Brian Fishman:
No one has offered a plausible strategy to defeat ISIL that does not include a major U.S. commitment on the ground and the renewal of functional governance on both sides of the Iraqi-Syrian border. And no one will, because none exists. . . .
Bombing ISIL will not destroy it. Giving the Kurds sniper rifles or artillery will not destroy it. A new prime minister in Iraq will not destroy it. . . . [W]ar makes the jihadist movement stronger, even in the face of major tactical and operational defeats.
The conflicts in Syria and Iraq strengthen ISIL because war is the only force terrible enough to hold together a broad and extreme enough Sunni coalition to be amenable to ISIL. Abu Mus’ab al-Zarqawi recognized this in 2004 and built a strategy of provoking Shia militias in order to consolidate fearful Sunni groups. . .
Without war, ISIL is a fringe terrorist organization. With war, it is a state. . . . This is where I am supposed to advocate a brilliant strategy to defeat ISIL by Christmas at some surprisingly reasonable cost. But it won’t happen. The cost to defeat ISIL would be very high and would require a multi-year commitment. . . .
The country must be ready to accept the sacrifices necessary to achieve grand political ends. Until then, any call to “defeat ISIL” that is not forthright about what that will require is actually an argument for expensive failure.
If you like running around sermonizing on the need to destroy ISIS, at least be honest enough to acknowledge what that will really require and then advocate that. Anything short of that is just self-glorifying deceit: donning the costume of Churchillian Resolve and Moral Purpose without any substance.
It seems pretty clear at this point that U.S. military action in the Middle East is the end in itself, and the particular form it takes – even including the side for which the U.S. fights – is an ancillary consideration. That’s how the U.S., in less than a year, can get away with depicting involvement in the war in Syria – on opposite sides – as a national imperative. Ironically, just as was true of Al Qaeda, provoking the U.S. into military action would, for the reasons Fishman explained, help ISIS as well.
But the only clear lesson from all of this is that no matter the propagandistic script used, U.S. military action in that region virtually never fulfills the stated goals (nor is it intended to do so), and achieves little other than justifying endless military action for its own sake. How long before we hear that U.S. military action is needed (again) in Libya to restrain the chaos and extremism unleashed by the NATO intervention in Libya? Does anyone really believe that “limited” bombing of Syria and Iraq in a rage against ISIS will result in anything other than more justifications for military action in that region?
UPDATE: The U.S. “is sharing intelligence about jihadist deployments with Damascus through Iraqi and Russian channels,” the Agence France-Presse reports today, citing one source as saying: ”The cooperation has already begun.”
From The New Hitler (back) to U.S. Partner in less than a year: an impressive feat for both Assad and U.S. propaganda.
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Who Paid the Piper: The Cultural Cold War1
by Frances Stoner Saunders
Granta Publications (199)
Who Paid the Piper: The Cultural Cold War is about the covert “cultural” propaganda the CIA carried out between 1950 and 1967. The Congress for Cultural Freedom, the centerpiece of this operation, had offices in 35 countries, published over 20 magazines, held art exhibitions and provided major financial support for American artists, poets, authors and playwrights. Its primary purpose was to “nudge” the intelligentsia of Western Europe away from Marxism and communism towards a more accommodating view of US interests.
At the end of World War II, Europeans tended to view the US as “a culturally barren nation of gum chewing, Chevy driving, Dupont-sheathed Philistines.” To counteract this stigma, Truman issued an appendix to executive order NSC-4A, directing the CIA director to undertake covert psychological activities in support of American anti-Communist policies.
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On a December night in 2011, a terrible thing happened on Mount Cudi, near the Turkish-Iraqi border. One side described it as a massacre; the other called it an accident.
Several Turkish F-16 fighter jets bombed a caravan of villagers that night, apparently under the belief that they were guerilla fighters with the separatist Kurdistan Worker’s Party (PKK). The group was returning from northern Iraq and their mules were loaded down with fuel canisters and other cargo. They turned out to be smugglers, not PKK fighters. Some 34 people died in the attack.
An American Predator drone flying overhead had detected the group, prompting U.S. analysts to alert their Turkish partners.
The reconnaissance flight—which was first reported by the Wall Street Journal in 2012—and its tragic consequences provided an important insight into the very tight working relationship between American and Turkish intelligence services in the fight against Kurdish separatists. Although the PKK is still considered a terrorist organization by the United States and the European Union, its image has been improved radically by its recent success in fighting ISIS in northern Iraq and Syria. PKK fighters—backed by U.S. airstrikes—are on the front lines against the jihadist movement there, and some in the West are now advocating arming the group and lifting its terrorist label.
Documents from the archive of U.S. whistleblower Edward Snowden that Der Spiegel and The Intercept have seen show just how deeply involved America has become in Turkey’s fight against the Kurds. For a time, the NSA even delivered its Turkish partners with the mobile phone location data of PKK leaders on an hourly basis. The U.S. government also provided the Turks with information about PKK money flows, and the whereabouts of some of its leaders living in exile abroad.
At the same time, the Snowden documents also show that Turkey is one of the United States’ leading targets for spying. Documents show that the political leadership in Washington, D.C., has tasked the NSA with divining Turkey’s “leadership intention,” as well as monitoring its operations in 18 other key areas. This means that Germany’s foreign intelligence service, which drew criticism in recent weeks after it was revealed it had been spying on Turkey, isn’t the only secret service interested in keeping tabs on the government in Ankara.
Turkey’s strategic location at the junction of Europe, the Soviet Union, and the Middle East made the future NATO member state an important partner to Western intelligence agencies going back to the very beginning of the Cold War. The Snowden documents show that Turkey is the NSA’s oldest partner in Asia. Even before the NSA’s founding in 1952, the CIA had established a “Sigint,” or signals intelligence, partnership with Turkey dating back to the 1940s.
During the Cold War, the U.S. used bases in Turkey primarily to conduct surveillance against the “underbelly of the Soviet beast,” as one NSA document puts it. Today, it targets Russia and Georgia from Turkish soil, collecting information in “near real time.” Since the outbreak of its civil war, Turkey’s neighbor Syria has become a central focus of NSA surveillance.
U.S. secret agents have also provided support to the Turkish government in its battle against the Kurdish separatists with the PKK for years. One top-secret NSA document from January 2007, for example, states that the agency provided Turkey with geographic data and recordings of telephone conversations of PKK members that appear to have helped Turkish agents capture or kill the targets. “Geolocations data and voice cuts from Kurdistan Worker Party communications which were passed to Turkey by NSA yielded actionable intelligence that led to the demise or capture of dozens of PKK members in the past year,” the document says.
The NSA has also infiltrated the Internet communications of PKK leaders living in Europe. Turkish intelligence helped pave the way to the success by providing the email addresses used by the targets.
The exchange of data went so far that the NSA even gave Turkey the location of the mobile phones of certain PKK leaders inside Turkey, providing updated information every six hours. During one military operation in Turkey in October 2005, the NSA delivered the location data every hour.
In May 2007, then-Director of National Intelligence Mike McConnell signed a “memorandum” pledging deeper intelligence support for Turkey. A report prepared on the occasion of an April 2013 visit by a Turkish delegation to NSA headquarters at Fort Meade indicates that cooperation in targeting the PKK had “increased across the board” since then. That partnership has focused overwhelmingly on the PKK—NSA assets in Turkey collected more data on PKK last year than any other target except for Russia.
It resulted in the creation of a joint working group called the Combined Intelligence Fusion Cell, a team of American and Turkish specialists working together on projects that included finding targets for possible Turkish airstrikes against suspected PKK members. All the data for one entire wave of attacks carried out in December 2007 originated from this intelligence cell, according to a diplomatic cable from the WikiLeaks archive.
The deep working relationship has continued under Barack Obama’s presidency. In January 2012, U.S. officials proposed supporting Turkey in their fight against the PKK with diverse measures, including access to a state-of-the-art speech recognition system that enabled real-time analysis of intercepted conversations. The system can even search for keywords and identify the person speaking if a voice sample of that individual has been stored.
The NSA offered to install two such systems for Turkey’s intelligence service. In exchange, the Turks would provide voice samples for a number of Kurdish activists. Given its close and enduring relationship with the NSA, agency authorities wrote, they saw little risk in providing the technology. The only thing NSA experts didn’t feel comfortable entrusting to Turkey was the automatic keyword search function.
The partnership is managed through the NSA’s Special Liaison Activity Turkey (SUSLAT) office, which is based in Ankara. In addition to data, the Americans provide their Turkish partners with complete interception systems, decryption assistance, and training.
Using its internal “follow the money” reconnaissance unit, the NSA also tracks PKK’s cash flows in Europe. The Turks reciprocate by providing the U.S. agents with written transcripts of telephone calls made by PKK leaders, as well as intelligence insights about Russia and Ukraine.
But in true “Spy v. Spy” fashion, Turkey is itself is the target of intense surveillance even as it cooperates closely with the U.S.— one NSA document describes the country bluntly as both a “partner and target.” The very politicians, military officials, and intelligence agency officials with whom U.S. officials work closely when conducting actions against the PKK are also considered legitimate spying targets by the NSA. To that end, in addition to the official SUSLAT liaison office and the intelligence workers it has cleared with the Turkish authorities, the U.S. has two secret branch offices, operating Special Collection Service listening stations in both Istanbul and the capital city of Ankara.
The degree to which the NSA surveils its partner is made clear in the National Intelligence Priorities Framework (NIPF), a document establishing U.S. intelligence priorities. Updated and presented to the president every six months, the NIPF shows a country’s “standing” from the perspective of the U.S. In the April 2013 edition, Turkey is listed as one of the countries most frequently targeted by Washington for surveillance, with U.S. intelligence services tasked with collecting data in 19 different areas of interest.
The document places Turkey at the level of Venezuela—and even ahead of Cuba—in terms of U.S. interest in intelligence collection. Information about the “leadership intention” of the Turkish government is given the second-highest priority rating, and information about the military and its infrastructure, foreign policy goals, and energy security are given the third-highest priority rating. The same framework also lists the PKK as an intelligence target, but it is given a much lower priority ranking.
Beginning in 2006, the NSA began a broad surveillance operation–a joint effort by several NSA units—aimed at infiltrating the computers of Turkey’s top political leaders. Internally, officials called the effort the “Turkish Surge Project Plan.” It took six months for the team to achieve its goal. One document celebrates the discovery of the “winning combination” and reports that collection had begun: “They achieved their first-ever computer network exploitation success against Turkish leadership!”
It goes without saying that the U.S. intelligence services also had Turkish diplomats in their sights, particularly those stationed in the United States. A classified document from 2010 states that the NSA surveilled the Turkish embassy in Washington, D.C., under a program codenamed “Powder.” A similar project for monitoring Turkey’s representation to the United Nations operated under the codename “Blackhawk.”
Analysts had access to the telephone system in the Turkish embassy and could tap content directly from computers. In addition, they infected computer systems used by the diplomats with spyware. The NSA also installed trojan software at Turkey’s U.N. representation in New York. According to the NSA document, it even has the capability of copying entire hard drives at the U.N. mission.
The NSA shared many of its spies’ insights with its “Five Eyes” partners—the British, Canadian, Australian, and New Zealand intelligence services. Within that group, the British had already developed their own access to Turkey, with its GCHQ spy agency monitoring political targets in Turkey as well as elements in the energy sector.
One classified British document states that in October 2008, GCHQ tasked agents with improving access to the Turkish Energy Ministry, as well as enterprises including the Petroleum Pipeline Corporation, the Turkish Petroleum Corporation, and the energy company Calik Enerji. The assignment also included a list of the names of 13 targets, including then-Turkish Energy Minister Hilmi Güler.
In 2008, GCHQ analysts began reviewing satellite images of the rooftops of ministries and companies to assess what types of communications systems they were using and the possibilities for infiltrating them. The documents do not indicate whether those efforts bore fruit.
Turkish Finance Minister Mehmet Simsek is also explicitly named in documents as a GCHQ “target,” despite the fact that he is a dual Turkish-British citizen. Nevertheless, a surveillance order against him includes, among other things, two mobile phone numbers as well as his private Gmail address. When questioned by reporters for Der Spiegel, GCHQ officials said they do not comment on the details of operations.
When The Guardian newspaper ran a story last summer about a planned spying operation against the Turkish finance minister during his visit to London in the run-up to the G-20 summit in 2009, officials in Ankara were so angered that the Foreign Ministry summoned the British ambassador and criticized the “scandalous” and “unacceptable” operation. Contacted for a response to the surveillance operations conducted by the NSA and GCHQ, a spokesman for the Turkish Foreign Ministry said “such things” would only be discussed at the diplomatic level.
This story was reported and published in a collaboration between Der Spiegel and The Intercept. Additional research by Peter Maass.
Photo credits: Burak Kara/Getty Images; David Furst/AFP/Getty Images; Burhan Ozbilici/AP
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with Chris Hedges
LeighaCohen on Aug 28, 2014
A meeting of 8 diverse panelists met on August 27th 2014 at Project Reach located in NYC to discuss Strategies for the Revolution. The meeting by Deep Green Resistance of New York.
In this much edited video version of the entire 2 hour event, I feature Chris Hedges. The Panel discussion touched on topics such as Strategies for a revolution, the role of woman and indigenous people in a revolutionary struggle, and a view of the inherent failures associated with Capitalism.
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