January 31, 2009

The Collapse of the U.S. Economy and Government Finances

46 of 50 States Could File Bankruptcy in 2009-2010

January 30, 2009

Freedom Arizona - There is a high chance a majority of the States within the United States of America could file for Chapter 9 bankruptcy... It’s very possible you’ll see the end of the United States as we know it. If the Fed doesn’t bailout the States when their cash dries up and the banks don’t loan them money, then our States will be left in financial ruin. This would be a tragic and unprecedented event never experienced in the United States. No State has ever filed bankruptcy, but it could be coming to a State near you this year. We are on the brink of something far worse than the Great Depression.

GDP Sees Biggest Drop in 27 Years

January 30, 2009

Reuters - The U.S. economy shrank at its fastest pace in nearly 27 years in the fourth quarter, government data showed on Friday, sinking deeper into a recession that the White House said demands urgent action. In a report that showed a broad-based contraction across nearly all sectors, the Commerce Department said gross domestic product shrank at a 3.8 percent annual rate, the biggest contraction since the first three months of 1982.

President Barack Obama, who is pushing Congress to approve a package of spending and tax cut measures that could cost close to $900 billion, said the report highlighted the need for quick government action...

Postmaster General: Mail Days May Need To Be Cut

January 28, 2009

AP - Massive deficits could force the post office to cut out one day of mail delivery, the postmaster general told Congress on Wednesday, in asking lawmakers to lift the requirement that the agency deliver mail six days a week...

Yearly Mexican Remittances Drop for 1st Time

January 26, 2009

AP - The money sent home by Mexican migrants fell in 2008 for the first time on record, Mexico's central bank said Tuesday — part of a global trend that could worsen as emigrants from developing countries lose jobs in the global financial crisis.

Remittances, Mexico's second-largest source of foreign income after oil, plunged 3.6 percent to $25 billion in 2008 compared to $26 billion for the previous year, the central bank said. The percentage drop is nearly twice what the government had expected for the year, and central bank official Jesus Cervantes said the decline will likely continue this year.

Experts blame a crackdown on illegal immigration that has stemmed the flow of those heading north to seek work as well as the U.S. recession, in which many Mexicans, especially construction workers, have been laid off.

It was the first time remittances have fallen year-to-year since the bank starting tracking the money 13 years ago. Mexico is not alone: After several years of strong growth, remittance flows to developing countries around the world slowed in the third quarter of 2008. They are expected to drop even further this year in response to the global crisis, World Bank economist Dilip Ratha said Tuesday.

More Retail Store Closings

January 20, 2009

Forbes - Store closings and bankruptcies will hit a host of well-known stores in the coming year. Expect closings and bankruptcies to rattle the likes of Lane Bryant, Gap (nyse: GPS - news - people ), and Starbucks (nasdaq: SBUX - news - people ). It's the inevitable counterpunch to the days of retailers fighting hand over fist for market share during an era of loose credit and minuscule interest rates.

Those days are over, probably for a long time. While accelerating unemployment will only last so long, consumers' debt loads and credit access don't figure to recover to pre-party levels for quite awhile...

U.S. Losses May Reach $3.6 Trillion

January 20, 2009

Bloomberg - U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis...”

"The Market Could Tank" After the Inauguration of Obama

January 17, 2009

Most Americans have been told by the Bush administration and the talking heads that things will get worse for a couple of months, but then the economy will start to turn around and improve in the second half of 2009 after Bushco and Obamaco's bailout and stimulus programs kick in. In fact, the smart money is saying that the exact opposite will happen...

California to Suspend Welfare Checks

January 17, 2009

The state will suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, Controller John Chiang announced Friday. Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds...

Obama Says He Expects Deficit to Approach $1 Trillion

January 6, 2009

Reuters - President-elect Barack Obama said on Tuesday that he expects to inherit a U.S. budget deficit approaching $1 trillion and that his administration would have to make some tough budget choices.

Just after meeting with his economic team, Obama said it was possible that trillion-dollar deficits could stretch into coming years and that he and his team want to instill a "sense of responsibility" about future budget choices.

Obama, who takes over from President George W. Bush on Jan. 20, is seeking quick action from Congress on a package of spending and tax-cut measures that would total nearly $800 billion over next two years...

U.S. Debt Expected To Soar This Year

January 3, 2009

Washington Post - The national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world’s appetite for financing U.S. government spending.

U.S. Manufacturing at Lowest Level Since 1948

January 2, 2009

Bloomberg - The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year.

Ford Sees Sharp Drop in U.S. Sales, No Q1 Rebound

January 2, 2009

Reuters - Ford Motor Co. expects industrywide December U.S. auto sales to drop by some 35 percent from a year earlier with no sign of a turnaround in the first quarter of 2009.

Ford, the No. 2 U.S. automaker, expects that full-year industrywide sales of light vehicles in the world's largest market will drop to near 13.2 million for 2008, down from near 16.2 million in 2007, Ford's chief sales analyst George Pipas said on Friday.

The only other time the U.S. auto industry has seen a similar 3-million unit plunge in sales over the course of a single year was during 1974 in the wake of the first oil shock, Pipas told reporters. "We're not looking for the first quarter to be much different from what we saw in the fourth quarter," Pipas said in a briefing with reporters.

Holiday Sales Drop to Force Bankruptcies, Closings

December 29, 2008

U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years...

Wall Street: 2008 Year of Record Losses

December 28, 2008

NEW YORK – Investors are preparing to close out the last three trading days of 2008, a year in which Wall Street has logged its worst performance since Herbert Hoover was president.

The ongoing recession and global economic shock pummeled stocks this year, with the Dow Jones industrial average slumping 36.2 percent. That's the biggest drop since 1931 when the Great Depression sent stocks reeling 40.6 percent...

Cash-strapped States Weigh Selling Roads, Parks

December 27, 2008

ST. PAUL, Minn. – Minnesota is deep in the hole financially, but the state still owns a premier golf resort, a sprawling amateur sports complex, a big airport, a major zoo and land holdings the size of the Central American country of Belize.

Valuables like these are in for a closer look as 44 states cope with deficits.

Like families pawning the silver to get through a tight spot, states such as Minnesota, New York, Massachusetts and Illinois are thinking of selling or leasing toll roads, parks, lotteries and other assets to raise desperately needed cash.

Minnesota Gov. Tim Pawlenty has hinted that his January budget proposal will include proposals to privatize some of what the state owns or does. The Republican is looking for cash to help close a $5.27 billion deficit without raising taxes.

GOP lawmakers are pushing to privatize the Minneapolis-St. Paul International Airport and the state lottery. Both steps require a higher authority — federal legislation in the case of the airport, a voter-approved constitutional amendment for the lottery. But one lawmaker estimated an airport deal could bring in at least $2.5 billion, and the lottery $500 million.

Massachusetts lawmakers are considering putting the Massachusetts Turnpike in private hands. That could bring in upfront money to help with a $1.4 billion deficit, while also saving on highway operating costs.

In New York, Democratic Gov. David Paterson appointed a commission to look into leasing state assets, including the Tappan Zee Bridge north of New York City, the lottery, golf courses, toll roads, parks and beaches. Recommendations are expected next month.

Such projects could be attractive to private investors and public pension funds looking for safe places to put their money in this scary economy, said Leonard Gilroy, a privatization expert with the market-oriented Reason Foundation in Los Angeles. "Infrastructure is more attractive today than ever," Gilroy said. "It's tangible. It's a road. It's water. It's an airport. It's something that is — you know, you hear the term recession-proof."

Unions don't like privatization deals out of fear that worker wages and benefits will be squeezed as private operators try to boost their profit by streamlining services. Taxpayers, too, can lose out if the arrangements don't work — and sometimes even if they do, said Mark Price, a labor economist with the Keystone Research Center in Harrisburg, Pa. Higher tolls on privatized roads can push drivers onto state-operated roads, wearing them down faster and raising public costs over time. "You're privatizing some profits in this process and socializing some losses," Price said.

Selling or leasing public assets can produce an immediate infusion of cash for the state, while foisting the tough decisions, such as raising tolls, onto private operators instead of the politicians. "The downsides are often after they leave office," said Phineas Baxandall, a researcher with the consumer-oriented U.S. Public Interest Research Group in Boston. Some states struck major privatization deals well before the economic crisis hit...

Hospitals Ill from More Bad Debt, Credit Troubles

December 27, 2008

TRENTON, N.J. (AP) - Like many U.S. hospitals, Gainesville's first community hospital is being squeezed by tight credit, higher borrowing costs, investment losses and a jump in patients—many recently unemployed or otherwise underinsured—not paying their bills.

All that has begun to trigger more hospital closings—from impoverished Newark, N.J., to wealthy Beverly Hills, Calif.—as well as layoffs, other cost-cutting and scrapping or delaying building projects.

More closings and mergers are on the way, industry consultants predict. "They'll get swallowed up by somebody else, if they need to exist, and if they don't, they'll just close," said Tuck Crocker, vice president of the health care practice at management consultant BearingPoint.

Most endangered are rural hospitals and urban ones in areas with excess hospital beds and a lot of poor, uninsured patients...

Dollar Shift: Chinese Pockets Filled as Americans’ Emptied

December 26, 2008

In March 2005, a low-key Princeton economist who had become a Federal Reserve governor coined a novel theory to explain the growing tendency of Americans to borrow from foreigners, particularly the Chinese, to finance their heavy spending. The problem, he said, was not that Americans spend too much, but that foreigners save too much. The Chinese have piled up so much excess savings that they lend money to the United States at low rates, underwriting American consumption.

This colossal credit cycle could not last forever, he said. But in a global economy, the transfer of Chinese money to America was a market phenomenon that would take years, even a decade, to work itself out. For now, he said, “we probably have little choice except to be patient.”

Today, the dependence of the United States on Chinese money looks less benign. And the economist who proposed the theory, Ben S. Bernanke, is dealing with the consequences, having been promoted to chairman of the Fed in 2006, as these cross-border money flows were reaching stratospheric levels.

In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States.

China, some economists say, lulled American consumers, and their leaders, into complacency about their spendthrift ways. “This was a blinking red light,” said Kenneth S. Rogoff, a professor of economics at Harvard and a former chief economist at the International Monetary Fund. “We should have reacted to it.”

In hindsight, many economists say, the United States should have recognized that borrowing from abroad for consumption and deficit spending at home was not a formula for economic success. Even as that weakness is becoming more widely recognized, however, the United States is likely to be more addicted than ever to foreign creditors to finance record government spending to revive the broken economy...

After-Christmas Shopping Unlikely to Save Season

December 26, 2008

The holiday shopping season was one of the most dismal in years and even the after-Christmas period, when consumers normally rush to stores to use gift cards and seize on big sales, isn't expected to be enough to save retailers from a terrible year.

Holiday sales typically account for 30 percent to 50 percent of a retailer's annual total. But shoppers cut back their spending this year as they struggled with job cuts, home foreclosures, portfolio losses and other economic woes.

Analysts have kept slashing their holiday estimates. Michael P. Niemira, chief economist at the International Council of Shopping Centers, now expects that sales at established stores for November and December will fall 1.5 percent to 2 percent - which would make it the weakest holiday season since at least 1969, when the index began...

Treasury Bills Trade at Negative Rates

December 10, 2008

Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.

The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001.

“It’s the year-end factor,” said Chris Ahrens, an interest-rate strategist in Greenwich, Connecticut, at UBS Securities LLC, one of the 17 primary dealers that trade directly with the Federal Reserve. “Everyone wants to be in bills going into year-end. Buy now while the opportunity is still there.”

The benchmark 10-year note’s yield tumbled 11 basis points, or 0.11 percentage point, to 2.63 percent at 4:48 p.m. in New York, according to BGCantor Market Data. The 3.75 percent security due in November 2018 gained 31/32, or $9.69 per $1,000 face amount, to 109 23/32. The yield touched 2.505 percent on Dec. 5, the lowest level since at least 1962, when the Fed’s daily records began.

The two-year note’s yield fell 10 basis points to 0.84 percent. It dropped to a record low of 0.77 percent on Dec. 5.

If you invested $1 million in three-month bills at today’s negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56.

Now the Crunch Hits the Ivy League

December 4, 2008

America's Ivy League universities have found themselves in a financial tangle after massive bets in the markets that once made them the envy of their peers turned spectacularly sour. The elite colleges are being forced to cut costs, limit salaries, freeze staff hiring and delay major expansion projects, because the value of their multi-billion dollar endowments have plunged.

One by one, the leaders of these universities have announced austerity measures, and the capitulation of Harvard this week has put the spotlight on arch-rival Yale, which is so far holding out against the economic tide. Yale says it will re-evaluate its budgets in the New Year to reflect the unfolding economic crisis.

Harvard, meanwhile, is considering halting campus expansion plans and delaying filling academic posts after admitting its endowment fund had lost $8 billion in just the past four months, with more losses expected in the coming weeks. A fund that was $36.9 billion in June could be down 30 percent by the end of the financial year, its managers warned.

Store Closings: Symptoms of a Depressed Economy

December 2, 2008

1. Ann Taylor closing 117 stores nationwide - A company spokeswoman said the company hasn’t revealed which stores will be shuttered. It will let the stores that will close this fiscal year know over the next month.

2. Eddie Bauer to close more stores - Eddie Bauer has already closed 27 shops in the first quarter and plans to close up to two more outlet stores by the end of the year.

3. Cache closing stores - Women’s retailer Cache announced that it is closing 20 to 23 stores this year.

4. Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide - The owner of retailers Lane Bryant , Fashion Bug , Catherines Plus Sizes will close about 150 underperforming stores this year. The company hasn’t provided a list of specific store closures and can’t say when it will offer that info, spokeswoman Brooke Perry said today.

5. Talbots, J. Jill closing stores - About a month ago, Talbots announced that it will be shuttering all 78 of its kids and men’s stores. Now the company says it will close another 22 underperforming stores. The 22 stores will be a mix of Talbots women’s and J. Jill, another chain it owns. The closures will occur this fiscal year, according to a company press release.

6. Gap Inc. closing 85 stores - In addition to its namesake chain, Gap also owns Old Navy and Banana Republic. The company said the closures - all planned for fiscal 2008 - will be weighted toward the Gap brand.

7. Foot Locker to close 140 stores - In the company press release and during its conference call with analysts today, it did not specify where the future store closures - all planned in fiscal 2008 - will be. The company could not be immediately reached for comment

8. Wickes is going out o f business - Wickes Furniture is going out of business and closing all of its stores, Wickes, a 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.

9. Levitz - The furniture retailer, is going out of business. Levitz first announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910 when Richard Levitz opened his first furniture store in Lebanon , PA. In the 1960s, the warehouse/showroom concept brought Levitz to the forefront of the furniture industry. The local Levitz closures will follow the shutdown of Bombay.

10. Zales, Piercing Pagoda closing stores - The owner of Zales and Piercing Pagoda previously said it plans to close 82 stores by July 31. Today, it announc ed that it is closing another 23 underperforming stores. The company said it’s not providing a list of specific store closures. Of the 105 locations planned for closure, 50 are kiosks and 55 are stores.

11. Disney Store owner has the right to close 98 stores - The Walt Disney Company announced it acquired about 220 Disney Stores from subsidiaries of The Children’s Place Retail Stores. The exact number of stores acquired will depend on negotiations with landlords. Those subsidiaries of Children’s Place filed for bankruptcy protection in late March. Walt Disney in the news release said it has also obtained the right to close about 98 Disney Stores in the U.S. The press release didn’t list those stores.

12. Home Depot store closings - ATLANTA - Nearly 7+ months after its chief executive said there were no plans to cut the number of its core retail stores, The Home Depot Inc. announced Thursday that it is shuttering 15 of them amid a slumping U.S. economy and housing market. The move will affect 1,300 employees.

It is the first time the world’s largest home improvement store chain has ever closed a flagship store for performance reasons. Its shares rose almost 5 percent. The Atlanta-based company said the underperforming U.S. stores being closed represent less than 1 percent of its existing stores. They will be shuttered within the next two months.

13. CompUSA clarifies details on store closings - Any extended warranties purchased for products through CompUSA will be honored by a third-party provider, Assurant Solutions. Gift cards, rain checks, and rebates purchased prior to December 12 can be redeemed at any time during the final sale. For those who have a gadget currently in for service with CompUSA, the repair will be completed and the gadget will be returned to owners.

14. Macy’s - 9 stores

15. Movie Gallery - 160 stores as part of reorganization plan to exit bankruptcy. The video rental company plans to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to the 520 locations the video rental chain closed last fall.

16. Pep Boys - 33 stores

17. Sprint Nextel - 125 retail locations - New Sprint Nextel CEO Dan Hesse appears to have inherited a company bleeding subscribers by the thousands, and will now officially be dropping the ax on 4,000 employees and 125 retail locations. Amid the loss of 639,000 postpaid customers in the fourth quarter, Sprint will be cutting a total of 6.7% of its work force (following the 5,000 layoffs last year) and 8% of company-owned brick-and-mortar stores, while remaining mute on other rumors that it will consolidate its headquarters in Kansas. Sprint Nextel shares are down $2.89, or nearly 25%, at the time of this writing.

18. J. C. Penney, Lowe’s and Office Depot are scaling back.

19. Ethan Allen Interiors - The company announced plans to close 12 of 300+ stores in an effort to cut costs.

20. Wilsons the Leather Experts - 158 stores.

21. Pacific Sunwear will close its 154 Demo stores after a review of strategic alternatives for the urban-apparel brand. Seventy-four underperforming Demo stores closed last May.

22. Sharper Image - The company recently filed for bankruptcy protection and announced that 90 of its 184 stores are closing. The retailer will still operate 94 stores to pay off debts, but 90 of these stores have performed poorly and also may close.

23. Bombay Company - The company unveiled plans to close all 384 U.S.-based Bombay Company stores. The company’s online storefront has discontinued operations.

24. KB Toys posted a list of 356 stores that it is closing around the United States as part of its bankruptcy reorganization. To see the list of store closings, go to the KB Toys Information web site, and click on Press Information.

25. Dillard’s to Close More Stores - Dillard’s Inc. said it will continue to focus on closing underperforming stores, reducing expenses and improving its merchandise in 2008. At the company’s annual shareholder meeting, CEO William Dillard II said the company will close another six underperforming stores this year.

Retailers and Bankruptcy

December 2, 2008

Consumer confidence hit an all-time low in October, according to research group the Conference Board. The holidays are soon upon us, and retailers have gone bust amid these tumultuous economic times. Here's a look back at some of The Deal's retail bankruptcy coverage and thoughts on what might be in store for some not yet bankrupt but possibly teetering.

Circuit City
Claire's Stores
Fortunoff
Goody's Family Clothing
Harold's Stores
Levitz
Lillian Vernon
Linens 'n Things
Mervyn's
Pier 1
RedEnvelope
Sharper Image
Steve & Barry's
Value City
Whitehall

Sears Suffers 3Q Loss on Weak U.S., Kmart Sales

December 2, 2008

Sears Holdings Corp. said Tuesday hefty charges and weak results at its U.S. department stores and Kmart locations drove it to post a much wider-than-expected third-quarter loss, and the retailer withdrew its operating profit outlook due to the severe economic downturn.

Sears reported a loss of $146 million, or $1.16 per share, compared with year-ago profit of $4 million, or 3 cents per share. Excluding a hefty charge related to 14 store closings and gains on Sears Canada hedges, Sears posted a loss of 90 cents per share in the latest period. Revenue dropped 8 percent to $10.66 billion from $11.62 billion as Sears U.S. same-store sales slid 10.6 percent and Kmart same-store sales slipped 7 percent. Total same-store sales, or sales at stores open at least a year, a key retail gauge, fell 9 percent. Analysts surveyed by Thomson Reuters expected a much smaller loss of 49 cents per share on higher revenue of $10.93 billion.

Sears said it will take a pretax charge of $21 million in the fourth quarter, related to the closing of eight underperforming stores. The company said it will continue to evaluate additional store closings or divestitures, remodels, acquisitions and stock and debt repurchases to boost financial flexibility.

U.S. Manufacturing Hits 26-year Low

December 2, 2008

US manufacturing slumped to a 26-year low in November, highlighting the abrupt downturn in the world’s biggest economy, a survey showed Monday.

The Institute of Supply Management said its manufacturing index slumped 2.7 points to 36.2 percent, far below the 50 percent level that separates expansion and contraction. The level was the lowest since May 1982.

New orders fell even further to a level of 27.9 percent, suggesting the worst may not be over yet for the sector. "When comparing November to October, the (index) indicates a continuing rapid rate of contraction in manufacturing," said ISM survey chief Norbert Ore. "New orders have contracted for 12 consecutive months, and are at the lowest level since June 1980 when the index registered 24.2 percent."

"The manufacturing recession deepened further in November," said economist Peter Kretzmer at Bank of America. "Orders plummeted at an increasing pace, and input prices continued their accelerating pace of decline. Both import and export orders also continued to fall."

Globalist Fueled Revolution in Greece

France Responds to Economic Downturn with a General Strike

Trains, buses, airports, hospitals, schools, offices closed or in limited service

January 29, 2009

AP - France has come to a near standstill for a one-day general strike. Hundreds of thousands of people are taking to the streets, protesting that banks, not people, are being bailed out and decrying President Nicolas Sarkozy’s cost-cutting moves as unemployment creeps toward 10 per cent.
“Today is being called Black Thursday here in France, and with good reason,” Common reports. “Here’s just a partial list of the things that are closed or in limited service: the metro, buses, trains, airports, hospitals, schools, government offices, post offices — the list goes on and on...”
Thierry Dedieu, a leader of one of country's major labour groups, the Confédération Française Démocratique du Travail, put the protesters' view this way:
"We want to show that people are dissatisfied at the moment. We don't want to have to pay for a crisis that we're not responsible for."
Although general strikes are no novelty in France, this one seems to have unnerved Sarkozy, who has been uncharacteristically quiet.

France's normally irrepressible president, Nicolas Sarkozy, has had little to say about the protest.

That may be partly because the general population, for the first time in a long time, seems to support it, and partly because Sarkozy sees parallels with the May 1968 street protests that helped to push longtime president Charles de Gaulle from office, Common says.

In Paris, commuters braved freezing temperatures and biked, walked and even took boats to work, but a 2007 law ensuring minimal transport service meant that some subways, buses and suburban rail lines were operating, and they were stuffed with passengers, the Associated Press reported.
"I'm not against the fact that people demonstrate to defend their interest and their benefits, as they say, but is this really the best time to do it, considering what is going on right now with the economic crisis?" Pierre Rattier, a commuter, told APTN.

"So I really don't think it's the best time to have done this, but, well, this is typically French."
VIDEO: Riots in France January 2009
French Strikes: Violence Erupts as Thousands Gather to Protest on ‘Black Thursday’

Iceland to be Fast-tracked into European Union to Stop Economic Meltdown

January 30, 2009

Iceland is to be fast-tracked into the European Union in an attempt to stop the country going into complete financial meltdown, it emerged last night.

The small Arctic nation is expected to apply for membership within months and become the 29th member state of the EU within just two years.

Olli Rehn, the European commissioner in charge of enlargement, said: 'The EU prefers two countries joining at the same time rather than individually. If Iceland applies shortly and the negotiations are rapid, Croatia and Iceland could join the EU in parallel.
'On Iceland, I hope I will be busier. It is one of the oldest democracies in the world and its strategic and economic positions would be an asset to the EU,' he told the Guardian.
The holders of the EU presidency, the Czechs, are strong supporters of EU enlargement and will favour Iceland joining the bloc. The next holder, Sweden, is also expected to be sympathetic.

Before Iceland is in a position to join the EU, it must first fully appoint a new government.

Icelandic politicians said yesterday they were close to agreeing a deal on cabinet posts and a government policy statement, and fresh economic data on Thursday underlined the urgency of tackling the nation's crisis.

The president has asked the Social Democrats and the opposition Left-Green Party to form a new government to replace the administration of Geir Haarde, who resigned as prime minister on Monday under pressure from violent public protests. His centre-right Independence Party is not being included.
'We might present a statement of government policies and the division of offices tomorrow if all goes well,' Social Affairs Minister Johanna Sigurdardottir, a social democrat, told Reuters during a break in the talks.

'I assume there might be a formal changing of governments on Saturday,' she said.
Iceland's Minister of Social Affairs and Social Security Johanna Sigurdardottir, who is widely tipped to become the country's interim prime minister
Social Democrat leader Ingibjorg Gisladottir has proposed Sigurdardottir become prime minister in a new cabinet while Gisladottir takes sick leave to recover from a benign brain tumour.

Earlier, the central bank said the jobless rate was likely to rise to 11 per cent in the first quarter of 2010 and stay high for a longer time than it previously thought. Output is seen falling more than 10 per cent this year, the bank said, as it chose to leave interest rates unchanged at a record 18 per cent.

The global financial crisis hit Iceland in October, ending a decade of rising prosperity in a matter of days by triggering a collapse in the currency and financial system. Prior to October, unemployment had been around one percent in the small North Atlantic nation of 320,000 people.

To stay afloat, Iceland secured £7.5billion loan from the International Monetary Fund and several European countries.

The crisis sparked protests as Icelanders blamed Haarde and other top officials for failing to stave off economic mayhem.

Police used pepper spray and arrested six protesters on Wednesday evening at a demonstration outside a NATO meeting in the capital Reykjavik.

The Social Democrats were the junior party in the outgoing coalition, while the opposition Left-Greens now lead opinion polls.

The Dollar Is Doomed and America Is Dying



I believe that banking institutions are more dangerous to our liberties than standing armies. - Thomas Jefferson

Death of the American Empire

Tanya Cariina Hsu - America is dying. It is self-destructing and bringing the rest of the world down with it.

Often referred to as a sub-prime mortgage collapse, this obfuscates the real reason. By associating tangible useless failed mortgages, at least something 'real' can be blamed for the carnage. The problem is, this is myth. The magnitude of this fiscal collapse happened because it was all based on hot air.

The banking industry renamed insurance betting guarantees as 'credit default swaps' and risky gambling wagers were called 'derivatives.' Financial managers and banking executives were selling the ultimate con to the entire world, akin to the snake-oil salesmen from the 18th century, but this time in suits and ties. And by October 2008 it was a quadrillion-dollar (that's $1,000 trillion) industry that few could understand.



Propped up by false hope, America is now falling like a house of cards.

It all began in the early part of the 20th century. In 1907 J.P. Morgan, a private New York banker, published a rumour that a competing unnamed large bank was about to fail. It was a false charge but customers nonetheless raced to their banks to withdraw their money, in case it was their bank. As they pulled out their funds the banks lost their cash deposits and were forced to call in their loans. People now therefore had to pay back their mortgages to fill the banks with income, going bankrupt in the process. The 1907 panic resulted in a crash that prompted the creation of the Federal Reserve, a private banking cartel with the veneer of an independent government organisation. Effectively, it was a coup by elite bankers in order to control the industry.
When signed into law in 1913, the Federal Reserve would loan and supply the nation's money, but with interest. The more money it was able to print, the more 'income' for itself it generated. By its very nature the Federal Reserve would forever keep producing debt to stay alive. It was able to print America's monetary supply at will, regulating its value. To control valuation however, inflation had to be kept in check.

The Federal Reserve then doubled America's money supply within five years, and in 1920 it called in a mass percentage of loans; over 500 banks collapsed overnight. One year later the Federal Reserve again increased the money supply by 62%, but in 1929 it again called the loans back in, en masse. This time, the crash of 1929 caused over 16,000 banks to fail and an 89% plunge on the stock market. The private and well-protected banks within the Federal Reserve system were able to snap up the failed banks at pennies on the dollar.

The nation fell into the Great Depression, and in April 1933 President Roosevelt issued an executive order that confiscated all gold bullion from the public. Those who refused to turn in their gold would be imprisoned for ten years, and by the end of the year the gold standard was abolished. What had been redeemable for gold became paper 'legal tender,' and gold could no longer be exchanged for cash as it had once been.

Later, in 1971, President Nixon removed the dollar from the gold standard altogether, therefore no longer trading at the internationally fixed price of $35. The US dollar was now worth whatever the US decided it was worth because it was 'as good as gold.' It had no standard of measure and became the universal currency.
Treasury bills (short-term notes) and bonds (long-term notes) replaced gold as value -- promissory notes of the US government and paid for by the taxpayer. Additionally, because gold was exempt from currency reporting requirements, it could not be traced, unlike the fiduciary (i.e. that based upon trust) monetary systems of the West. That was not in America's best interest.
After the Great Depression private banks remained afraid to make home loans, so Roosevelt created Fannie Mae. A state supported mortgage bank, it provided federal funding to finance home mortgages for affordable housing. In 1968 President Johnson privatised Fannie Mae, and in 1970, Freddie Mac was created to compete with Fannie Mae. Both of them bought mortgages from banks and other lenders, and sold them onto new investors.

The post World War II boom had created an America flush with cash and assets. As a military industrial complex, war exponentially profited the US and, unlike any empire in history, it shot to superpower status. But it failed to remember that, historically, whenever empires rose they fell in direct proportion.

Americans could afford all the modern conveniences, exporting its manufactured goods all over the world. After the Vietnam War, the US went into an economic decline. But people were loath to give up their elevated standard of living despite the loss of jobs, and production was increasingly sent overseas. A sense of delusion and entitlement kept Americans on the treadmill of consumer consumption.
In 1987, the US stock market plunged by 22% in one day because of high-risk futures trading, called derivatives; and in 1989, the Savings & Loan crisis resulted in President George H.W. Bush using $142 billion in taxpayer funds to rescue half of the S&L's. To do so, Freddie Mac was given the task of giving sub-prime (below prime-rate) mortgages to low-income families.

In 2000, the "irrational exuberance" of the dot-com bubble burst and 50% of high-tech firms went bankrupt, wiping $5 trillion from their over-inflated market values. After this crisis, Federal Reserve Chairman Alan Greenspan kept interest rates so low they were less than the rate of inflation. Anyone saving his or her income actually lost money, and the savings rate soon fell into negative territory.

During the 1990s, advertisers went into overdrive, marketing an ever more luxurious lifestyle, all made available with cheap easy credit. Second mortgages became commonplace, and home equity loans were used to pay credit card bills. The more Americans bought, the more they fell into debt. But as long as they had a house, their false sense of security remained: their home was their equity, it would always go up in value, and they could always remortgage at lower rates if needed. The financial industry also believed that housing prices would forever climb, but should they ever fall the central bank would cut interest rates so that prices would jump back up. It was, everyone believed, a win-win situation.

Greenspan's rock-bottom interest rates let anyone afford a home. Minimum wage service workers with aspirations to buy a half million-dollar house were able to secure 100% loans, the mortgage lenders fully aware that they would not be able to keep up the payments.

So many people received these sub-prime loans that the investment houses and lenders came up with a new scheme: bundle these virtually worthless home loans and sell them as solid US investments to unsuspecting countries who would not know the difference. American lives of excess and consumer spending never suffered, and were being propped up by foreign nations none the wiser.
It has always been the case that a bank would lend out more than it actually had, because interest payments generated its income. The more the bank loaned, the more interest it collected even with no money in the vault. It was a lucrative industry of giving away money it never had in the first place. Mortgage banks and investment houses even borrowed money on international money markets to fund these 100% plus sub-prime mortgages, and began lending more than ten times their underlying assets.

After 9/11, George Bush told the nation to spend, and during a time of war, that's what the nation did. It borrowed at unprecedented levels so as to not only pay for its war on terror in the Middle East (calculated to cost $4 trillion), but also pay for tax cuts at the very time it should have increased taxes.

Bush removed the reserve requirements in Fannie Mae and Freddie Mac from 10% to 2.5%. They were free to not only lend even more at bargain basement interest rates, they only needed a fraction of reserves. Soon banks lent thirty times asset value. It was, as one economist put it, an 'orgy of excess'.

It was flagrant overspending during a time of war. At no time in history has a nation gone into conflict without sacrifice, cutbacks, tax increases, and economic conservation.

And there was a growing chance that, just like in 1929, investors would rush to claim their money all at once.

To guarantee, therefore, these high risk mortgages, the same financial houses that sold them then created 'insurance policies' against the sub-prime investments they were selling, marketed as Credit Default Swaps (CDS). But the government must regulate insurance policies, so by calling them CDS, they remained totally unregulated. Financial institutions were 'hedging their bets' and selling premiums to protect the junk assets. In other words, the asset that should go up in value could also have a side-bet, just in case, that it might go down. By October 2008, CDS were trading at $62 trillion, more than the stock markets of the whole world combined.

These bets had absolutely no value whatsoever and were not investments. They were just financial instruments called derivatives -- high stakes gambling, 'nothing from nothing' -- or as Warren Buffet referred to them, 'Weapons of Financial Mass Destruction.' The derivatives trade was 'worth' more than one quadrillion dollars, or larger than the economy of the entire world (in September 2008, the global Gross Domestic Product was $60 trillion).

Challenged as being illegal in the 1990s, Greenspan legalised the derivatives practise. Soon hedge funds became an entire industry, betting on the derivatives market and gambling as much as they wanted. It was easy because it was money they did not have in the first place. The industry had all the appearances of banks, but the hedge funds, equity funds, and derivatives brokers had no access to government loans in the event of a default. If the owners defaulted, the hedge funds had no money to pay 'from nothing.' Those who had hedged on an asset going up or down would not be able to collect on the winnings or losses.

The market had become the largest industry in the world, and all the financial giants were cashing in: Bear Stearns, Lehman Brothers, Citigroup, and AIG. But homeowners, long maxed out on their credit, were now beginning to default on their mortgages. Not only were they paying for their house but also all the debt amassed over the years for car, credit card and student loans, medical payments and home equity loans. They had borrowed to pay for groceries and skyrocketing health insurance premiums; to keep up with their bigger houses and cars, they refinanced the debt they had for lower rates that soon ballooned. The average American owed 25% of their annual income to credit card debts alone.

In 2008, housing prices began to slide precipitously downwards and mortgages were suddenly losing value. Manufacturing orders were down 4.5% by September, inventories began to pile up, unemployment was soaring, and average house foreclosures had increased by 121% and up to 200% in California.

The financial giants had to stop trading these mortgage-backed securities, as now their losses would have to be visibly accounted for. Investors began withdrawing their funds. Bear Stearns, heavily specialised in home loan portfolios, was the first to go in March.

Just as they had done in the 20th century, J.P. Morgan, swooped in and picked up Bear Stearns for a pittance. One year prior, Bear Stearns shares traded at $159, but JP Morgan was able to buy in and take over at $2 a share. In September, Washington Mutual collapsed, the largest bank failure in history. J.P. Morgan, again came in and paid $1.9 billion for assets valued at $176 billion. It was a fire sale.

Relatively quietly, over the summer, Freddie Mac and Fannie Mae, the publicly traded companies responsible for 80% of the home mortgage loans, lost almost 90% of their value for the year. Together they were responsible for half the outstanding loan amounts but were now in debt $80 to every $1 in capital reserves.
To guarantee they would stay alive, the Federal Reserve stepped in and took over Freddie Mac and Fannie Mae. On September 7, 2008, they were put into "conservatorship:" known as nationalisation to the rest of the world, but Americans have difficulty with the idea of any government-run industry that required taxpayer increases.

What the government was really doing was handing out an unlimited line of credit. Done by the Federal Reserve and not US Treasury, it was able to bypass Congressional approval. The Treasury Department then auctioned off Treasury bills to raise money for the Federal Reserve's own use, but nonetheless the taxpayer would be funding the rescue.
The bankers had bled tens of billions from the system by hedging and derivative gambling, and triggered the portfolio inter-bank lending freeze, which then seized up and crashed.

The takeover was presented as a government-funded bailout of an arbitrary $700 billion, which does nothing to solve the problem. No economists were asked to present their views to Congress, and the loan only perpetuates the myth that the banking system is not really dead.

In reality, the damage will not be $700 billion but closer to $5 trillion, the value of Freddie Mac and Fannie Mae's mortgages.
It was nothing less than a bailout of the quadrillion dollar derivatives industry which otherwise faced payouts of over a trillion dollars on CDS mortgage-backed securities they had sold. It was necessary, said Treasury Secretary Henry Paulson, to save the country from a "housing correction." But, he added, the $700 billion taxpayer funded takeover would not prevent other banks from collapsing, in turn causing a stock market crash.

In other words Paulson was blackmailing Congress in order to lead a coup by the banking elite under the false guise of necessary legislation to stop the dyke from flooding. It merely shifted wealth from one class to another, as it had done almost a century prior. No sooner were the words were out of Paulson's mouth before other financial institutions began imploding and with them the disintegration of the global financial system -- much modelled after the lauded system of American banking.

In September the Federal Reserve, its line of credit assured, then bought the world largest insurance company, AIG, for $85 billion for an 80% stake. AIG was the largest seller of CDS, but now that it was in the position of having to pay out from collateral it did not have, it was teetering on the edge of bankruptcy.

In October the entire country of Iceland went bankrupt, having bought American worthless sub-prime mortgages as investments. European banks began exploding, all wanting to cash in concurrently on their inflated US stocks to pay off the low interest rate debts before rates climbed higher.
The year before the signs had been evident, when the largest US mortgage lender Countrywide fell. Soon after, the largest lender in the UK, Northern Rock, went under -- London long having copied Wall Street creative financing. Japan and Korea's auto manufacturing nosedived by 37%, global economies contracting. Pakistan is on the edge of collapse too, with real reserves at $3 billion -- enough to only buy a month's supply of food and oil and attempting to stall payments to Saudi Arabia for the 100,000 barrels of oil per day it provides to the country. Under President Musharraf, who left office in the nick of time, Pakistan's currency lost 25% of its value, its inflation running at 25%.

Meanwhile energy costs had soared, with oil reaching a peak of almost $150 per barrel in the summer. The costs were immediately passed on to the already spent homeowner, in rising heating and fuel, transport and manufacturing costs. Yet 30% of the cost of a barrel of oil was based upon Wall Street speculators, climbing to 60% as a speculative fear factor during the summer months.
As soon as the financial crisis hit, suddenly oil prices slid down, slicing oil costs to $61 from a high of $147 in June, and proving that the 60% speculation factor was far more accurate. This sudden decline also revealed OPEC's lack of control over spiralling prices during the past few years, almost squarely laid on the shoulders of Saudi Arabia alone. When OPEC, in September, sought to maintain higher prices by cutting production, it was Saudi Arabia who voted against such a move at the expense of its own revenue.

Europe then decided that no more would it be ruined by the excess of America. 'Olde Europe' may have had enough of being dictated to by the US, who refused to compromise on loans lent to their own broken nations after WWII. On October the 13th, the once divided EU nations unilaterally agreed to an emergency rescue plan totaling $2.3 trillion. It was more than three times greater than the US package for a catastrophe America alone had created.
By mid October, the Dow, NASDAQ and S&P 500 had erased all the gains they made over the previous decade. Greenspan's pyramid scheme of easy money from nothing resulted in a massive overextension of credit, inflated housing prices, and incredible stock valuations, achieved because investors would never withdraw their money all at once. But now it was crashing at break-neck speed and no solution in sight. President Bush said that people ought not to worry at all because
"America is the most attractive destination for investors around the globe."
Those who will hurt the most are the very men and women who grew the country after WWII, and saved their pensions for retirement due now. They had built the country during the war production years, making its weapons and arms for global conflict. During the Cold War, the USSR was the ever-present enemy and thus the military industrial complex continued to grow. Only when there is a war does America profit.

Russia will not tolerate a new cold war build-up of ballistic missiles. And the Middle East has seen its historical ally turn into its worst nightmare, be it militarily or economically. No longer will these nations continue to support the dollar as the world's currency.
The world's economy is no longer America's to control, and the US is now indebted to the rest of the world. No more will the US be able to demand its largest Middle Eastern oil supplier open up its banking books so as to be transparent and free from corruption and terrorist connections lest there be consequences -- the biggest act of criminal corruption in history has just been perpetrated by the United States.
It was the best con game in town: get paid well for selling vast amounts of risk, fail, and then have governments fix the problem at the expense of the taxpayers who never saw a penny of shared wealth to begin with.
There is no easy solution to this crisis, its effects multiplying like an infectious disease.

Ironically, least affected by the crisis are Islamic banks.

They have largely been immune to the collapse because Islamic banking prohibits the acquisition of wealth via gambling (or alcohol, tobacco, pornography, or stocks in armaments companies), and forbids the buying and selling of a debt as well as usury. Additionally, Shari'ah banking laws forbid investing in any company with debts that exceed thirty percent.
"Islamic banking institutions have not failed per se as they deal in tangible assets and assume the risk," said Dr. Mohammed Ramady, Professor of Economics at King Fahd University of Petroleum & Minerals. "Although the Islamic banking sector is also part of the global economy, the impact of direct exposure to sub-prime asset investments has been low," he continued. "The liquidity slowdown has especially affected Dubai, with its heavy international borrowing. The most negative effect has been a loss of confidence in the regional stock markets." Instead, said Dr. Ramady, oil surplus Arab nations are "reconsidering overseas investments in financial assets" and speeding up their own domestic projects.
Eight years ago, in May 2000, Saudi Islamic banker His Highness Dr. Nayef bin Fawaaz ibn Sha'alan publicly gave a series of economic lectures in Gulf states. At the time his research showed that Arab investments in the US, to the tune of $1.5 trillion, were effectively being held hostage, and he recommended they be pulled out and reinvested in the tangibles of the Arab and Islamic markets.
"Not in stocks, however, because the stock market could be manipulated remotely, as we have seen in the last couple of years in the Arab market where trillions of dollars evaporated," he said.
He warned then that it was a certainty that the US economic system was on the verge of collapse because of its cumulative debts, ever-increasing deficit, and the interest on that debt.
"When the debts and deficits come due, they just issue new Treasury bonds to cover the old bonds due, with their interest and the new deficit too."
The cycle cannot be stopped or the debt cancelled because the US would no longer be able to borrow. The consequence of relieving this cycle would be a total collapse of their economic system as opposed to the partial, albeit massive, crash of 2008.
"Islamic banking," said Dr. Al-Sha'alan, "always protects the individuals' wealth while putting a cap on selfishness and greed. It has the best of capitalism -- filtering out its negatives -- and the best of socialism -- filtering out its negatives too." Both systems inevitably had to fail. Additionally, Europe and Japan did not need to be held accountable and indebted to America anymore for protection against the Soviets.

"The essential difference between the Islamic economic system and the capitalist system," he continued, "is that in Islam wealth belongs to God -- the individual being only its manager. It is a means, not a goal. In capitalism, it is the reverse: money belongs to the individual, and is a goal in and of itself. In America especially, money is worshipped like God."
In sum, the crash of the entire global economic system is a result of America's fiscal arrogance based upon one set of rules for itself and another for the rest of the world. Its increased creative financing deluded its people into a false sense of security, and now looks like the failure of capitalism altogether.

The whole exercise in democracy by force against Arab Muslim nations has almost bankrupted the US. The Cold War is over and the US has nothing to offer: no exports, no production, few natural resources, and no service sector economy.
The very markets that resisted US economic policies the most, having curbed foreign direct investments into America, are those who will fare best and come out ahead.

But not before having paid a very high price.

January 30, 2009

There's Hardly a Device That Isn't Being Upgraded with a GPS Chip; New RFID Technology Allows You to be Tracked WITHOUT Your Knowledge; Video Surveillance Outfit Chips Workers; Brit Police to be Microchipped

Arizona Tracking Prescription Drug Users

January 30, 2009

AP - Arizona has launched a new computer database that tracks prescription drug usage.

The information is stored in a state-managed, centralized database that can be accessed by doctors and pharmacists around the state.

The program, which was launched in December and is overseen by the Arizona State Board of Pharmacy, is designed to cut down on the persistent problem of prescription-drug abuse.

At the same time, it is raising concerns among privacy-rights groups that fear computer hackers or nosey health workers will access patients' personal information.
"There is a noble goal there, to stop the abuse of narcotic drugs," said Paul Stephens, director of policy and advocacy for the San Diego-based Privacy Rights Clearinghouse. "But obviously, any database is subject to breach."
For the most part, there has been little public outcry over the programs, Stephens said.
"They really haven't gotten much publicity," he said.
State health officials said that so far they know of no breach of any similar database in another state.

With the Arizona system, pharmacy board officials said, access to the database is recorded and limited to pharmacists and doctors.

More than 30 states have authorized or created such databases after deciding that the potential benefits outweigh privacy concerns.
"I am so excited that we are finally getting this for our state," said Dr. Stephen Borowsky, an anesthesiologist and pain-management specialist. "It's absolutely necessary. These medicines have such great potential for addiction."
The data collected includes the patient's name, date of birth, prescribing doctor, medication, the date the prescription was filled and the mailing addresses of the pharmacy and patient.

The drugs that raise the most concern include potentially addictive painkillers, sleep aids, medications that contain morphine or certain forms of codeine, and hormone drugs, including steroids.

The GPS Revolution: There's Hardly a Device That Isn't Being Upgraded with a GPS Chip

Mobile phones, cameras and wristwatches are all being equipped with GPS technology. In this brave new world, data will not only tell us where we are, but also where we can shop, eat and sleep.

Originally Published on March 3, 2007

Spiegel Online - He holds the world in his hand. The world rotates smoothly around its axis, then the breakneck nosedive begins: towards Europe, Germany, Berlin and finally Berlin's city center.

The first streets of houses become visible, and eventually the building in front of which he stands: a renovated factory from the Wilhelminian age on Invalidenstrasse. Pleased, Michael Halbherr glances down on the mobile phone that has just verified his exact position.
"That's only the beginning," Halbherr says.
His Swiss German sing-song accent and his woollen sweater make him seem almost chummy and homely. But looks can be deceptive. The 42-year-old chats with jovial serenity about how groundbreaking his system could become -- not just for users but for the entire industry.

Halbherr is the director of the Berlin-based software company Gate5, which was acquired by Nokia -- still the world's largest producer of mobile phones, with a 30 percent market share -- last autumn. The engineer is responsible for working with his team of 70 employees to make the cartographic altitude flights, that were until now mainly the domain of Internet services like Google Earth, available to mobile phone users.

The system, recently introduced at the 3GSM wireless technology conference in Barcelona, is called Nokia Maps. It is the first time a mobile phone producer is has simultaneously gone head to head with a navigation system against providers like Tom-Tom and the search engine company Google.

The results are remarkable. Even hard-boiled Google earthlings are surprised by the computer-game-like quality of the mobile phone graphics. And many people are startled upon picking up a mobile phone and seeing it automatically determine its own location -- without having been provided the name of a single street ...

New RFID Technology Allows You to be Tracked WITHOUT Your Knowledge

January 18, 2009

Industry Wizard - By invitation, I recently visited a remote facility in northern Virginia to see a demonstration of NOX - a new Intelligent Perimeter Defense system deployed by the FBI that uses covert Radio-Frequency Identification (RFID) technology to track people and assets without their knowledge.

That's right, using RFID to track people without their knowledge. This system is exactly what the privacy advocates have long feared: Big Brother tracking us with spy chips. As Orwellian as this sounds, the undisputed fact is that this system catches thieves and does so at a fraction of the cost of traditional security solutions.

NOX combines high-resolution video pictures and RFID for identification, tracking and tracing, overlaid in real time on a facility map to show the movement of people and assets. The system allows security officers to see theft as it happens, even if the stolen object is inside a briefcase, under a jacket, or stuffed inside a sock.

What makes the NOX system I saw different from traditional security systems is that it uses RFID for clandestine surveillance: RFID readers are hidden inside walls, floors, and ceilings; RFID tags are discretely placed; and only the security personnel know that the system is in place - until the thief gets caught. Then, all the thief knows is that he or she was caught in the act, on video.
"It takes a criminal twelve seconds to defeat a lock or fence. Yet, we spend hundreds of thousands of dollars to create fences that only provide an illusion of security. NOX creates a virtual perimeter that tells us who is penetrating the perimeter, when they are doing it and, where it's happening. With this information, we can respond with the appropriate level of force and prevent further penetration."
A commander with the Naval Criminal Investigative Service (NCIS), who asked to remain anonymous for this article.

There is serious motivation behind the development of NOX in both the government and private sectors. The reality is that traditional security systems are simply not proving to be effective against criminals. Beyond the obvious homeland security concerns, the NOX team places strong emphasis on the impact to our national economy. According to the American Management Association, 95 percent of all businesses are victimized by employee theft. Employees steal over a billion dollars a week from their employers and it takes $20 billion dollars in sales every week just to cover the losses. That's a yearly economic impact of one trillion dollars. Yet, most companies are embarrassed to talk publicly about how serious this issue really is. They try to deal with it quietly by spending money on traditional security systems. The most shocking statistic is that even with all the money companies spend on security, 80 percent of all employees will be tempted to steal if given the opportunity, according to the FBI.

This is also placing a huge burden on our judicial system. Public order crime is rising faster than any other type of case, as shown in the graphic at right.

Privacy advocates will have an extremely difficult argument when facing numbers that motivate government and big business like these do. The NOX Team Director commented:
"Our mission is not to invade privacy, simply protect the innocent. RFID is just a tool in our system. If RFID wasn't available, we would tag by other means such as scent, chemicals, or dyes -- and, in actuality we do. The right to privacy is important but privacy and anonymity are different. All RFID does is help prove what you did."
The NOX team has perfected dozens of methods of tagging people without their knowledge.
 
One of the more covert technologies they employ is ID-Dust, serialized dust particles that can be interrogated like a RFID tag. The NOX team can coat a person or object with it to track movement. ID-Dust can show if an item was handled or it can even be sprinkled on the floor. People unknowingly pick up the ID-Dust on their shoes as they travel through a dusted area. The software combines the video surveillance and RFID information to create an association between the ID-Dust and a person. The ID-Dust allows the person's movement to be tracked around a facility without the person ever knowing he or she is being tracked. While a criminal can easily defeat the motion sensors, the ID-Dust provides covert security with instant alerts when someone enters an area, plus a complete history of exactly where each person traveled and when.

Combining RFID and High Resolution Video Surveillance Cameras
 
The system uses video surveillance cameras mounted in obvious locations and others that are hidden. I was surprised to learn that security personnel no longer need to sit and watch the video monitors; the RFID tags provide a far superior means of triggering alerts. A tag read in a particular location automatically triggers video recording and sends an instant alert to the security personnel?s mobile devices. In my demonstration an iPhone received a high definition picture of a theft in progress.

The areas being monitored include perimeter doors, staircases, cargo bays, storage areas, and even bathrooms. These locations were identified as prime locations for The areas being monitored include perimeter doors, staircases, cargo bays, storage areas, and even bathrooms. These locations were identified as prime locations for employee theft. NOX generates a security alert when an asset enters or leaves any of these areas. Of course, not all areas use video. The bathroom is a perfect example. The NOX system sweeps the bathroom with RF to determine what went in and came out. Video is used to capture when people leave the bathroom.

The RFID tags are custom to the NOX system. All I am authorized to print is that the asset tags are small, silent until activated (either via motion or external inputs), and secure ? meaning they use encrypted RF conversations and cannot be duplicated. Certain facilities are not limited by FCC regulations, which allows NOX to overcome some of the limitations facing traditional RFID tags and equipment.

Understandably, the NOX team preferred not to answer the majority of my technical questions. They simply stated that they don't want people to know how this is being done, only that it?s being done and the motivation behind it.

NOX is currently being offered to Government agencies and select commercial companies.

Video Surveillance Outfit Chips Workers

Originally published in February 2006

The Register - A Cincinnati video surveillance company CityWatcher.com now requires employees to use Verichip human implantable microchips to enter a secure data centre. Until now, the employees entered the data centre with a VeriChip housed in a heart-shaped plastic casing that hangs from their keychain.

The VeriChip is a glass encapsulated RFID tag that is injected into the triceps area of the arm to uniquely identify individuals. The tag can be read by radio waves from a few inches away.

The news was reported by CASPIAN (Consumers Against Supermarket Privacy Invasion and Numbering), a US organisation that opposes the use of surveillance RFID cards.

Although CityWatcher does not require its employees to take an implant to keep their jobs, they won't get in the data centre without it. CASPIAN’s Katherine Albrecht says chipping sets an unsettling precedent. "It's wrong to link a person's paycheck with getting an implant,” she says.

CityWatcher argues that chipping employees is a move to increase the layer of security, as present systems can be compromised. However, CASPIAN warns that this can happen to implantable chips too. Security researcher Jonathan Westhues - author of a chapter in a book titled Hacking the Prox Card - recently demonstrated how the VeriChip can be skimmed and cloned by a hacker. A cloned chip theoretically could duplicate an individual's VeriChip implant to access a secure area.

Robocops: Brit Police to be Microchipped

April 10, 2008

Daily Mail - Every single Metropolitan police officer will be ‘microchipped’ so top brass can monitor their movements on a Big Brother style tracking scheme, it can be revealed today.

According to respected industry magazine Police Review, the plan - which affects all 31,000 serving officers in the Met, including Sir Ian Blair - is set to replace the unreliable Airwave radio system currently used to help monitor officer’s movements.

The new electronic tracking device - called the Automated Personal Location System (APLS) - means that officers will never be out of range of supervising officers...

Britons Risk “Hardwiring Surveillance” into the British Way of Life
Brit Police to Use “Mobile Urban Jails” on Street

Biometric ID and Immigration Reform

Real ID Mandate Resisted in Virginia

January 3, 2009

AP - Since the law's enactment in 2005, at least 42 states have considered anti-Real ID legislation, and more than half have passed measures either forbidding their states from participating or urging Congress to amend or repeal the law. At least five states have gone in the other direction, passing bills bringing their programs into compliance. Critics say they expect other states to join Virginia this year to fight against Real ID.

The program was born out of the commission that looked into the terrorist attacks of Sept. 11, 2001. It recommended that the U.S. improve its system of issuing identification documents because the hijackers had numerous licenses and state IDs. Congress approved legislation requiring states to issue licenses and ID cards that meet certain security standards.

The new IDs will be required for federal purposes, such as boarding an airplane or entering a federal building. Other federal identification, including passports and military IDs, also will be accepted.
“The bottom line is that citizens of states who do not move forward with the Real ID mandate from Congress will see real consequences,” said Laura Keehner, a spokeswoman for the Department of Homeland Security, which is in charge of the program.
States had until May 2008 to implement Real ID, but the department extended that until Dec. 31, 2009. If they need more time and have met certain benchmarks, states can request an extension until May 11, 2011.

The opposition has centered around cost and privacy concerns. Homeland Security originally estimated it would cost states $14 billion to implement the program, but in January it loosened the restrictions and said the added flexibility would bring the cost to under $4 billion. Homeland Security and other agencies have given out about $500 million in grants, but state officials say that’s not enough.

Critics also claim that Real ID diminishes privacy, and they object to a national ID that would have to be shown for everyday identification purposes...

Whistleblower Says NSA Monitors Everybody, Targets Reporters and Dissidents

January 27, 2009

Daily Tech - In a scenario that sounds like the ramblings of a conspiracy theorist, former NSA analyst and now-whistleblower Russell Tice unveiled a massive NSA spying and wiretap program, which he claims vacuumed up an astonishing amount of communications and financial data on journalists and innocent Americans.

The program, which he claims is a remnant of the defunded 2003 “Total Information Awareness” initiative, swept up metadata (call length, envelope information, and so on) on nearly all forms of communications in the United States, as well as full communications logs for targets selected through analysis and other methods.

Tice, who previously helped shed light on the NSA’s warrantless wiretapping facilities at AT&T switching offices, said in a Wednesday interview with MSNBC’s Keith Olbermann that the NSA “had access to all Americans’ communications — faxes, phone calls, and their computer communications.”
“It didn’t matter whether you were in Kansas, in the middle of the country, and you never made foreign communications at all. They monitored all communications.”
While working for the NSA, Tice says he was tasked with looking at U.S. news, reporting, and journalist organizations, specifically for the purpose of excluding them from NSA analysis. According to Tice, however, that order was just a cover story for something completely opposite. The news organizations he targeted were instead monitored by the NSA “24/7 and 365 days a year.”
“I started to investigate that. That’s about the time when they came after me to fire me,” he said.

“This bait and switch idea, the ‘this is the discard pile, we’re not going to look at the media’ [where] it becomes apparent to you that the ‘discard’ pile is in fact the ‘save’ pile… how did that become apparent to you?” asked Olbermann.

“Well, as I was going for support for [a] particular organization, and it sort of was dropped to me that, you know, ‘this is done 24/7’,” replied Tice. “I would say, ‘I need collection at this time, at this point, for a window of time,’ and I would say, ‘will we have the capability at this particular point?’ in positioning assets.”

“I was ultimately told, ‘we don’t have to worry about that, because we’ve got it covered all the time.’ That’s when it clicked in my head that this was not being on a one-sy basis … this is something that’s happening all the time,” he said.
In a follow-up interview aired Thursday, Tice revealed that the communications data was then “married in” with financial records and credit card transactions.
“Throwing that information in too… your credit card records, where you spent your money … do you have any idea what this stuff was used for?” asked Olbermann.

“The obvious explanation would be, if you did have a potential terrorist, you’d want to know where they’re spending money, whether they purchased an airline ticket, that sort of thing,” Tice replied.
Using criteria designed for catching terrorist-like activity – at one point, Tice speculated that if terrorists make short, 1- to 2- minute calls, then this might be a red flag applied to all such calls, such as “ordering pizza” – tens of thousands of innocent Americans were snagged into the system.
“This is garnered from algorithms that have been put together to try to just dream up scenarios that might be … associated with how a terrorist could operate,” said Tice on Thursday. “If someone just talked about the daily news and mentioned something about the Middle East, they could easily be brought to the forefront of having that little flag put by their name that says potential terrorist.”
Drawn up from anyone with a red flag, the combined communications and financial data could sit with a person for years, digitized and warehoused away.
“Then all the sudden it marries up with something else 10 years from now, and they get put on a no-fly list [without having] a clue why,” explained Tice.
In most cases, spied-upon Americans didn’t do anything overtly suspicious to trigger surveillance.

The NSA Wants to Know How and WHAT You Think
Obama’s Change: Expanding the Power of the NSC and Shadow Government
Obama's NSC Will Get New Power

The Bill Nobody Noticed: National DNA Databank

December 18, 2008

NaturalNews - In April of 2008, President Bush signed into law S.1858 which allows the federal government to screen the DNA of all newborn babies in the U.S. This was to be implemented within 6 months meaning that this collection is now being carried out. Congressman Ron Paul states that this bill is the first step towards the establishment of a national DNA database.

S.1858, known as The Newborn Screening Saves Lives Act of 2007, is justified as a "national contingency plan" in that it represents preparation for any sort of public health emergency. The bill states that the federal government should "continue to carry out, coordinate, and expand research in newborn screening" and "maintain a central clearinghouse of current information on newborn screening... ensuring that the clearinghouse is available on the Internet and is updated at least quarterly". Sections of the bill also make it clear that DNA may be used in genetic experiments and tests. Read the full bill: http://www.govtrack.us/congress/bill.xp ...

Twila Brase, president of the Citizens' Council on Health Care warns that this new law represents the beginning of nationwide genetic testing. Brase states that S.1858 and H.R. 3825, the House version of the bill, will:
  • Establish a national list of genetic conditions for which newborns and children are to be tested.

  • Establish protocols for the linking and sharing of genetic test results nationwide.

  • Build surveillance systems for tracking the health status and health outcomes of individuals diagnosed at birth with a genetic defect or trait.

  • Use the newborn screening program as an opportunity for government agencies to identify, list, and study "secondary conditions" of individuals and their families.

  • Subject citizens to genetic research without their knowledge or consent ...

How RFID Tags Could Be Used to Track Unsuspecting People

Average consumers may not realize how many RFID tags they carry around. The devices are embedded in personal items and even some clothing.
August 26, 2008

Scientific American - If you live in a state bordering Canada or Mexico, you may soon be given an opportunity to carry a very high tech item: a remotely readable driver’s license. Designed to identify U.S. citizens as they approach the nation’s borders, the cards are being promoted by the Department of Homeland Security as a way to save time and simplify border crossings. But if you care about your safety and privacy as much as convenience, you might want to think twice before signing up.

The new licenses come equipped with radio-frequency identification (RFID) tags that can be read right through a wallet, pocket or purse from as far away as 30 feet. Each tag incorporates a tiny microchip encoded with a unique identification number. As the bearer approaches a border station, radio energy broadcast by a reader device is picked up by an antenna connected to the chip, causing it to emit the ID number. By the time the license holder reaches the border agent, the number has already been fed into a Homeland Security database, and the traveler’s photograph and other details are displayed on the agent’s screen.

Although such “enhanced” driver’s licenses remain voluntary in the states that offer them, privacy and security experts are concerned that those who sign up for the cards are unaware of the risk: anyone with a readily available reader device—unscrupulous marketers, government agents, stalkers, thieves and just plain snoops—can also access the data on the licenses to remotely track people without their knowledge or consent. What is more, once the tag’s ID number is associated with an individual’s identity—for example, when the person carrying the license makes a credit-card transaction—the radio tag becomes a proxy for that individual. And the driver’s licenses are just the latest addition to a growing array of “tagged” items that consumers might be wearing or carrying around, such as transit and toll passes, office key cards, school IDs, “contactless” credit cards, clothing, phones and even groceries.

RFID tags have been likened to barcodes that broadcast their information, and the comparison is apt in the sense that the tiny devices have been used mainly for identifying parts and inventory, including cattle, as they make their way through supply chains. Instead of having to scan every individual item’s Universal Product Code (UPC), a warehouse worker can register the contents of an entire pallet of, say, paper towels by scanning the unique serial number encoded in the attached RFID tag. That number is associated in a central database with a detailed list of the pallet’s contents. But people are not paper products. During the past decade a shift toward embedding chips in individual consumer goods and, now, official identity documents has created a new set of privacy and security problems precisely because RFID is such a powerful tracking technology. Very little security is built into the tags themselves, and existing laws offer people scant protection from being surreptitiously tracked and profiled while living an increasingly tagged life.

Beyond Barcodes

The first radio tags identified military aircraft as friend or foe during World War II, but it was not until the late 1980s that similar tags became the basis of electronic toll-collection systems, such as E-ZPass along the East Coast. And in 1999 corporations began considering the tags’ potential for tracking millions of individual objects. In that year Procter & Gamble and Gillette (which have since merged to become the world’s largest consumer-product manufacturing company) formed a consortium with Massachusetts Institute of Technology engineers, called the Auto-ID Center, to develop RFID tags that would be small, efficient and cheap enough to eventually replace the UPC barcode on everyday consumer products.

But the possibility that the security of such cards could be compromised is just one reason for concern. Even if tighter data-protection measures could someday prevent unauthorized access to RFID-card data, many privacy advocates worry that remotely readable identity documents could be abused by governments that wish to tightly monitor and control their citizens.

China’s national ID cards, for instance, are encoded with what most people would consider a shocking amount of personal information, including health and reproductive history, employment status, religion, ethnicity and even the name and phone number of each cardholder’s landlord. More ominous still, the cards are part of a larger project to blanket Chinese cities with state-of-the-art surveillance technologies. Michael Lin, a vice president for China Public Security Technology, a private company providing the RFID cards for the program, unflinchingly described them to the New York Times as “a way for the government to control the population in the future.” And even if other governments do not take advantage of the surveillance potential inherent in the new ID cards, ample evidence suggests that data-hungry corporations will.

Living a Tagged Life
According to the patent, here is how it would work in a retail environment: an “RFID tag scanner located [in the desired tracking location]… scans the RFID tags on [a] person…. As that person moves around the store, different RFID tag scanners located throughout the store can pick up radio signals from the RFID tags carried on that person and the movement of that person is tracked based on these detections…. The person tracking unit may keep records of different locations where the person has visited, as well as the visitation times.”

Protecting the Public
If RFID tags can enable an amusement park to capture detailed, personalized videos of thousands of people a day, imagine what a determined government could do—not to mention marketers or criminals. That is why my colleagues in the privacy community and I have so firmly opposed the use of RFID in government-issued identity documents or individual consumer items. As far back as 2003, my organization, CASPIAN (Consumers Against Supermarket Privacy Invasion and Numbering)—along with the Privacy Rights Clearinghouse, the Electronic Privacy Information Center, the Electronic Frontier Foundation, the American Civil Liberties Union, and 40 other leading privacy and civil liberties advocates and organizations recognized this threat and issued a position paper that condemned the tracking of human beings with RFID as inappropriate.

In response to these concerns, dozens of U.S. states have introduced RFID consumer-protection bills—which have all been either killed or gutted by heavy opposition from lobbyists for the RFID industry. When the New Hampshire Senate voted on a bill that would have imposed tough regulations on RFID in 2006, a last-minute floor amendment replaced it with a two-year study instead. (I was appointed by the governor to serve on the resulting commission.) That same year a California bill that would have prohibited the use of RFID in government-issued documents passed both houses of the legislature, only to be vetoed by Governor Arnold Schwarzenegger.

On the federal level, no high-profile consumer-protection bills related to RFID have been passed. Instead, in 2005, the Senate Republican High Tech Task Force praised RFID applications as “exciting new technologies” with “tremendous promise for our economy” and vowed to protect RFID from regulation or legislation.

Meanwhile the RFID train is barreling forward. Gigi Zenk, a spokesperson at Washington’s licensing agency, recently confirmed that there are 10,000 enhanced licenses “on the street now—that people are actually carrying.” That’s a lot of potential for abuse, and it will only grow. The state recently mustered a halfhearted response, passing a law that designates the unauthorized reading of a tag “for the purpose of fraud, identity theft, or for any other illegal purpose” as a class C felony, subject to five years in prison and a $10,000 fine. Nowhere in the law does it say, however, that scanning for other purposes such as marketing—or perhaps “to control the population”—is prohibited. We ignore these risks at our peril.