George Washington's Blog

The FBI says that the anthrax case is closed, and that they have proved that Dr. Bruce Ivins did it.

But Congress is not convinced.

On March 3, 2010, Representative Holt called for a new investigation:

Maryland Republican Congressman Roscoe Bartlett and other congressmen have also joined in the call for a new investigation.

The value of a new investigation, of course, entirely depends on whether or not those appointed are independent scientists. If they are instead employed by a facility such as Dugway Proving Grounds, then they may not be very neutral. Specifically, Dugway is where the anthrax originated, and Dugway has substantial experience working with weaponized anthrax (see this and this). Ivins did not.

82% of the American public wants tougher regulation of Wall Street.

Most top independent financial experts say that we need to break up the big banks and otherwise rein in the financial giants in order to save the economy.

But Summers, Geithner, Bernanke and Congress like things just the way they are.

Of course they do ... they're bought and paid for:

• Lobbyists from the financial industry have paid hundreds of millions to Congress and the Obama administration. They have bought virtually all of the key congress members and senators on committees overseeing finances and banking. The Congress people who receive the most money from lobbyists are the most opposed to regulation. See this, this, this, this, this, this, and this.

• Obama received more donations from Goldman Sachs and the rest of the financial industry than almost anyone else

• Summers and the rest of Obama's economic team have made many millions - even in the first few months of being appointed, or right beforehand - from the financial industry

• Two powerful congressmen said that banks run Congress

• Two leading IMF officials, the former Vice President of the Dallas Federal Reserve, and the the head of the Federal Reserve Bank of Kansas City have all said that the United States is controlled by an oligarchy

• The chairman of the Department of Economics at George Mason University (Donald J. Boudreaux) says that it is inaccurate to call politicians prostitutes. Specifically, he says that they are more correct to call them "pimps", since they are pimping out the American people to the financial giants:

  Real whores, after all, personally supply the services their customers seek. Prostitutes do not steal; their customers pay them voluntarily. And their customers pay only with money belonging to these customers.

  In contrast, members of Congress routinely truck and barter with other people's property...

  Members of Congress are less like whores than they are like pimps for persons unwillingly conscripted to perform unpleasant services.

  ***
  
  Politicians force taxpayers to pony it up -- just as the services rendered for a pimp's customers are rendered not by that pimp personally, but by the ladies under his charge. The pimp pockets the bulk of each payment; he's pleased with the transaction. His customer gets serviced well in return; he's pleased with the transaction. The only loser is the prostitute forced to share her precious assets with strangers whom she doesn't particularly care for and who care nothing for her.

  Also like the ladies under pimps' power, taxpayers who resist being exploited risk serious consequences to their persons and pocketbooks. Uncle Sam doesn't treat kindly taxpayers who try to avoid the obligations that he assigns to them. Government is a great deal more powerful, and often nastier, than is the typical taxpayer. Practically speaking, the taxpayer has little choice but to perform as government demands.

  So to call politicians "whores" is to unduly insult women who either choose or who are forced into the profession of prostitution. These women aggress against no one; like all other respectable human beings, they do their best to get by as well as they can without violating other people's rights.

  The real villains in the prostitution arena are those pimps who coerce women into satisfying the lusts of strangers. Such pimps pocket most of the gains earned by the toil and risks involuntarily imposed upon the prostitutes they control. No one thinks this arrangement is fair or justified. No one gives pimps the title of "Honorable." Decent people don't care what pimps think or suppose that pimps have any special insights into what is good or bad for the women under their command. Decent people don't pretend that pimps act chiefly for the benefit of their prostitutes. Decent people believe that pimps should be in prison.

  Yet Americans continue to imagine that the typical representative or senator is an upstanding citizen, a human being worthy of being feted and listened to as if he or she possesses some unusually high moral or intellectual stature.

  It's closer to the truth to see politicians as pimps who force ordinary men and women to pony up freedoms and assets for the benefit of clients we call "special-interest groups."

Congress voted down a resolution to pull out of Afghanistan today.

"Conventional wisdom" among many Americans - and congress members - is that we need to be in Afghanistan to protect our national security.

And the government apparently could have killed Bin Laden in 2001 and AGAIN in 2007, but failed to do so.

Indeed, the goal seems to have more to do with being a superpower (i.e. an empire) than stopping terrorism.

As Porter writes:

Most who realize that America's Afghan strategy has been poor still think we're stuck there until we clean up the mess and stabilize the region.

In fact, however, Obama has never really given a reason for continuing the Afghan war.

Psychologists and sociologists show us that people will rationalize what their leaders are doing, even when it makes no sense. For example, as I pointed out in November:

Sociologists from four major research institutions investigated why so many Americans believed that Saddam Hussein was behind 9/11, years after it became obvious that Iraq had nothing to do with 9/11.

The researchers found, as described in an article in the journal Sociological Inquiry (and re-printed by Newsweek):

• Many Americans felt an urgent need to seek justification for a war already in progress

• Rather than search rationally for information that either confirms or disconfirms a particular belief, people actually seek out information that confirms what they already believe.

• "For the most part people completely ignore contrary information."

• "The study demonstrates voters' ability to develop elaborate rationalizations based on faulty information"

• People get deeply attached to their beliefs, and form emotional attachments that get wrapped up in their personal identity and sense of morality, irrespective of the facts of the matter.
  

• "We refer to this as 'inferred justification, because for these voters, the sheer fact that we were engaged in war led to a post-hoc search for a justification for that war.

• "People were basically making up justifications for the fact that we were at war"

• "They wanted to believe in the link [between 9/11 and Iraq] because it helped them make sense of a current reality. So voters' ability to develop elaborate rationalizations based on faulty information, whether we think that is good or bad for democratic practice, does at least demonstrate an impressive form of creativity.

The Sept. 11 Commission, too, found no such link, the subjects were told.

"Well, I bet they say that the commission didn't have any proof of it," one subject responded, "but I guess we still can have our opinions and feel that way even though they say that."

Reasoned another: "Saddam, I can't judge if he did what he's being accused of, but if Bush thinks he did it, then he did it."

Others declined to engage the information at all. Most curious to the researchers were the respondents who reasoned that Saddam must have been connected to Sept. 11, because why else would the Bush Administration have gone to war in Iraq?

The desire to believe this was more powerful, according to the researchers, than any active campaign to plant the idea.

Such a campaign did exist in the run-up to the war...

He won't credit [politicians spouting misinformation] alone for the phenomenon, though.

"That kind of puts the idea out there, but what people then do with the idea ... " he said. "Our argument is that people aren't just empty vessels. You don't just sort of open up their brains and dump false information in and they regurgitate it. They're actually active processing cognitive agents"...

The alternate explanation raises queasy questions for the rest of society.

"I think we'd all like to believe that when people come across disconfirming evidence, what they tend to do is to update their opinions," said Andrew Perrin, an associate professor at UNC and another author of the study...

"The implications for how democracy works are quite profound, there's no question in my mind about that," Perrin said. "What it means is that we have to think about the emotional states in which citizens find themselves that then lead them to reason and deliberate in particular ways."

Evidence suggests people are more likely to pay attention to facts within certain emotional states and social situations. Some may never change their minds. For others, policy-makers could better identify those states, for example minimizing the fear that often clouds a person's ability to assess facts ...

The Alternet article links to a must-read interview with psychology professor Sheldon Solomon, who explains:

A large body of evidence shows that momentarily [raising fear of death], typically by asking people to think about themselves dying, intensifies people's strivings to protect and bolster aspects of their worldviews, and to bolster their self-esteem. The most common finding is that [fear of death] increases positive reactions to those who share cherished aspects of one's cultural worldview, and negative reactions toward those who violate cherished cultural values or are merely different.

The same is true for Afghanistan. People tend to rationalize justifications for the war, even though Obama has not given any.

But Don't We Have to Clean Up the Mess Now?

Americans assume that we need to continue the Afghan war to stop terrorists in Afghanistan and Pakistan.

But newly-declassified government documents show that the Taliban might not have supported Bin Laden or Al Qaeda's terorrorist activities.

And as I pointed out in October, the rational for a large-scale war in Afghanistan doesn't make sense:

The U.S. admits there are only a small handful of Al Qaeda in Afghanistan. As ABC notes:

Unemployment rates worsened in 30 states in January:

Jobless rates decreased in nine states, according to the Labor Department's monthly report on state unemployment. Eleven states reported no change.

In December, 43 states reported monthly jobless rate increases.

Better in February?

Joe Weisenthal, using the following 3 charts from Gluskin Sheff, argues that the jobs picture improved in February, leading to a permanent rebound in jobs:

Image: Gluskin-Sheff

Image: Gluskin-Sheff

Image: Gluskin-Sheff

What Does It Mean?

Preface: If you are (1) an atheist and believe that religion is crazy or (2) of a faith that doesn't value the Bible, please remember that the overwhelming majority of Americans identify themselves as Christian, and that most people make decisions and process information based on their beliefs. As I pointed out last month:

As James 2:20 reminds us:

Pulitzer Prize-winning author Chris Hedges points out that:

• Blessed are they who maintain justice . . . . (Psalm 106:3)

• This is what the LORD says: Maintain justice and do what is right . . . . (Isiah 56:1)

• This is what the LORD says: Do what is just and right. (Jeremiah 22:3,13-17)

• Follow justice and justice alone. (Deuteronomy 16:19, 20)

• For the LORD is righteous, he loves justice . . . . (Job 11:5,7)

• Learn to do right! Seek justice . . . . (Isaiah 1:17)

Glenn Beck said last week on his eponymous show that Christians should leave churches that preach “social justice.” Mr. Beck equated the desire for a just society with—wait for it—Nazism and Communism.

I'm begging you, your right to religion and freedom to exercise religion and read all of the passages of the Bible as you want to read them and as your church wants to preach them . . . are going to come under the ropes in the next year. If it lasts that long it will be the next year. I beg you, look for the words 'social justice' or 'economic justice' on your church Web site. If you find it, run as fast as you can. Social justice and economic justice, they are code words. Now, am I advising people to leave their church? Yes.

Of course this means that you would have to leave the Catholic Church, which has long championed that aspect of the Gospel. The term “social justice” originated way back in the 1800s (and probably predates even that), and has been continually underlined by the Magisterium and popes since Leo XIII, who began the modern tradition of Catholic social teaching with his encyclical on capital and labor, Rerum Novarum in 1891. Subsequent popes have built on Leo’s work, continuing the church’s meditation on a variety of issues of social just in such landmark documents as Pope Pius XI’s encyclical on "the reconstruction of the social order," Quadregismo Anno (1931), Paul VI’s encyclical "on the development of peoples," Populorum Progressio (1967) and John Paul II’s encyclical "on the social concerns of the church" Sollicitudo Rei Socialis (1987). Social justice also undergirds much of Catholic social teaching on peace. “If you want peace,” said Pope Paul VI, “work for justice.”

The Compendium of the Social Teaching of the Church, published by the Pontifical Council for Justice and Peace, says this:

The Church's social Magisterium constantly calls for the most classical forms of justice to be respected: commutative, distributive and legal justice. Ever greater importance has been given to social justice., which represents a real development in general justice, the justice that regulates social relationships according to the criterion of observance of the law. Social justice, a requirement related to the social question which today is worldwide in scope, concerns the social, political and economic aspects and, above all, the structural dimension of problems and their respective solutions....

Justice is particularly important in the present-day context, where the individual value of the person, his dignity and his rights — despite proclaimed intentions — are seriously threatened by the widespread tendency to make exclusive use of criteria of utility and ownership.

Oh, and social justice is not just some silly foreign idea. American Catholics know that the U.S. Conference of Catholic Bishops have an Office of Justice, Peace and Human Development. On that website the U.S. bishops say: “At the core of the virtue of solidarity is the pursuit of justice and peace. Our love for all our sisters and brothers demands that we promote peace in a world surrounded by violence and conflict.” I.e., social justice.

Okay, you get it, right? Social justice is an essential part of Catholic teaching. It's part of being a Catholic. So Glenn Beck is, in essence, saying “Leave the Catholic church.” Or, if you like, the Catholic church is a Nazi church. (Which would have surprised Alfred Delp or Rupert Mayer or Maximilian Kolbe.) Or a Communist one (Which would have suprised Jerzy Popieluszko and Karol Wojtyla).

But Glenn Beck is saying something else, which might get lost in the translation: "Leave Christianity." ...

Our responsibility to care for “the least of these” does not end with simple charity. Giving someone a handout is an important part of the Christian message. But so is advocating for them. It is not enough simply to help the poor, one must address the structures that keep them poor. Standing up for the rights of the poor is not being a Nazi, it’s being a Christian. And Communist? It’s hard not to think of the retort of the great apostle of social justice, Dom Helder Camara, archbishop of Recife, “When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist." ...

Ignoring the poor, and ignoring what keeps the poor, is, quite simply, unchristian. For the poor are the church in many ways. When St. Lawrence, in the fourth century, was ordered by the prefect of Rome to turn over the wealth of the church, he presented to him the poor.

Glenn Beck's desire to detach social justice from the Gospel is a subtle move to detach care for the poor from the Gospel. But a church without the poor, and a church without a desire for a just social world for all, is not the church. At least not the church of Jesus Christ.

Churches working for social and economic justice are also speaking out:

Bread for the World, a Christian group devoted to eradicating world hunger, has started a petition to demand that Beck stop spreading "misinformation and fear" through his radio and TV broadcasts.

"Economic and social justice are central to the gospel of Jesus Christ," the petition reads. "Quit using your bully pulpit to spread misinformation and fear by comparing faithful Christians who care 'for the least of these' to Nazis and communists."

The New Evangelical Partnership for the Common Good ... has started a campaign to raise money towards a video rebuking Beck's assertion.

"We are launching a campaign to reclaim love of neighbor, especially the least, last, and lost, as an Evangelical Christian value. We believe love is central to everything Jesus taught, and we think Glenn Beck needs to hear about it," the group stated on its Web site.

There are at least 6 theories about why the stock market has rallied some 70% off its lows a year ago, even though nothing has been done to actually address the root causes of the financial crisis.

What The Dumb Money Believes

The dumb money believes what CNBC and their trusty stock churner ... er, broker ... says: that the government has fixed the economy but it just has to "kick in" (and that unemployment is just a lagging indicator, nothing important. See this, this, this and this).

Therefore, these folks believe that stocks are hugely undervalued, and that if they buy while most people are still afraid, they'll make a killing when the market goes to the moon.

Temporary Juice

The Situation is Inflation

Machines Run Amok

Fed Futures

Fraud Central

That’s the value the bank had them on their books on their year-end financials, but the true value is much less. It is similar to someone in Las Vegas saying that their house is worth $300,000 because that’s what they paid for it three years ago, but the reality is, if they had to sell it in today’s market, they’d only get $250,000 for it. The FDIC has to sell assets in today’s market...

Or tomorrow's market.

The simple fact of the matter is that there it is, right in front of you.

A raw admission that the banks are carrying these loans at dramatically above their actual value.

Yes, this means that essentially all balance sheets must now be considered fraudulent, and thus the valuations assigned by the market to them are also fraudulent.

Extending this to the stock market as a whole you now have a market that is intentionally overvalued as a direct and proximate consequence of fraud, permitted and endorsed by the government, of somewhere between 25-40%.

Now you know why the market rallied off the SPX 666 lows to where it is now. 1139 (where we are now) * .60 (a 40% haircut) = 683.40, or awfully close to that 666 bottom.

Of course this "valuation" expressed in the market can only be maintained for as long as the fraud is. If the ability to maintain that fraud is lost for any reason then values will instantly collapse back to reflect reality.

Note: Obviously, I believe this is a bear market rally which will eventually fizzle out. If the bulls are instead right, then that will make me the dumb money. But I think it much more likely that the rally will change direction in the not-too-distant future.

Most Americans don't know what kind of people 9/11 truthers really are. So they can't figure out whether or not they are dangerous.

Below is a list of people who question what our Government has said about 9/11.

The list proves - once and for all - that people who question 9/11 are dangerous.

Email this list to everyone you know, to prove to them that 9/11 truthers are all dangerous nut cases.

• Former military analyst and famed whistleblower Daniel Ellsberg said that the case of a certain 9/11 whistleblower is "far more explosive than the Pentagon Papers". He also said that the government is ordering the media to cover up her allegations about 9/11. And he said that some of the claims concerning government involvement in 9/11 are credible, that "very serious questions have been raised about what they [U.S. government officials] knew beforehand and how much involvement there might have been", that engineering 9/11 would not be humanly or psychologically beyond the scope of the current administration, and that there's enough evidence to justify a new, "hard-hitting" investigation into 9/11 with subpoenas and testimony taken under oath (see this and this).

• A 27-year CIA veteran, who chaired National Intelligence Estimates and personally delivered intelligence briefings to Presidents Ronald Reagan and George H.W. Bush, their Vice Presidents, Secretaries of State, the Joint Chiefs of Staff, and many other senior government officials (Raymond McGovern) said “I think at simplest terms, there’s a cover-up. The 9/11 Report is a joke”, and is open to the possibility that 9/11 was an inside job.

• A 29-year CIA veteran, former National Intelligence Officer (NIO) and former Director of the CIA's Office of Regional and Political Analysis (William Bill Christison) said “I now think there is persuasive evidence that the events of September did not unfold as the Bush administration and the 9/11 Commission would have us believe. ... All three [buildings that were destroyed in the World Trade Center] were most probably destroyed by controlled demolition charges placed in the buildings before 9/11." (and see this).

• A number of intelligence officials, including a CIA Operations Officer who co-chaired a CIA multi-agency task force coordinating intelligence efforts among many intelligence and law enforcement agencies (Lynne Larkin) sent a joint letter to Congress expressing their concerns about “serious shortcomings,” “omissions,” and “major flaws” in the 9/11 Commission Report and offering their services for a new investigation (they were ignored)

• 20-year Marine Corps infantry and intelligence officer, the second-ranking civilian in U.S. Marine Corps Intelligence, and former CIA clandestine services case officer (Robert David Steele) stated that "9/11 was at a minimum allowed to happen as a pretext for war", and it was probably an inside job (scroll down to Customer Review dated October 7, 2006).

• A decorated 20-year CIA veteran, who Pulitzer-Prize winning investigative reporter Seymour Hersh called "perhaps the best on-the-ground field officer in the Middle East”, and whose astounding career formed the script for the Academy Award winning motion picture Syriana (Robert Baer) said that "the evidence points at" 9/11 having had aspects of being an inside job
  

• The Division Chief of the CIA’s Office of Soviet Affairs, who served as Senior Analyst from 1966 - 1990. He also served as Professor of International Security at the National War College from 1986 - 2004 (Melvin Goodman) said "The final [9/11 Commission] report is ultimately a coverup."

• Professor of History and International Relations, University of Maryland. Former Executive Assistant to the Director of the National Security Agency, former military attaché in China, with a 21-year career in U.S. Army Intelligence (Major John M. Newman, PhD, U.S. Army) questions the government's version of the events of 9/11.

• According to the Co-Chair of the Congressional Inquiry into 9/11 and former Head of the Senate Intelligence Committee, Bob Graham, an FBI informant had hosted and rented a room to two hijackers in 2000 and that, when the Inquiry sought to interview the informant, the FBI refused outright, and then hid him in an unknown location, and that a high-level FBI official stated these blocking maneuvers were undertaken under orders from the White House (confirmed here)

• Current Democratic U.S. Senator Patrick Leahy said "The two questions that the congress will not ask . . . is why did 9/11 happen on George Bush's watch when he had clear warnings that it was going to happen? Why did they allow it to happen?"

• Current Republican Congressman Ron Paul calls for a new 9/11 investigation and states that "we see the [9/11] investigations that have been done so far as more or less cover-up and no real explanation of what went on"

• Current Democratic Congressman Dennis Kucinich hints that we aren't being told the truth about 9/11

• Current Republican Congressman Jason Chafetz says that we need to be vigilant and continue to investigate 9/11

• Former Democratic Senator Mike Gravel states that he supports a new 9/11 investigation and that we don't know the truth about 9/11

• Former Republican Senator Lincoln Chaffee endorses a new 9/11 investigation
  

• Former U.S. Democratic Congressman Dan Hamburg says that the U.S. government "assisted" in the 9/11 attacks, stating that "I think there was a lot of help from the inside"

• Former U.S. Republican Congressman and senior member of the House Armed Services Committee, and who served six years as the Chairman of the Military Research and Development Subcommittee Curt Weldon has shown that the U.S. tracked hijackers before 9/11, is open to hearing information about explosives in the Twin Towers, and is open to the possibility that 9/11 was an inside job

9/11 Commissioners:

• The Commission's co-chairs said that the 9/11 Commissioners knew that military officials misrepresented the facts to the Commission, and the Commission considered recommending criminal charges for such false statements (free subscription required)

• 9/11 Commission co-chair Lee Hamilton says "I don't believe for a minute we got everything right", that the Commission was set up to fail, that people should keep asking questions about 9/11, and that the 9/11 debate should continue
  

• 9/11 Commissioner Timothy Roemer said "We were extremely frustrated with the false statements we were getting"
  

• 9/11 Commissioner Max Cleland resigned from the Commission, stating: "It is a national scandal"; "This investigation is now compromised"; and "One of these days we will have to get the full story because the 9-11 issue is so important to America. But this White House wants to cover it up"
  

• 9/11 Commissioner Bob Kerrey said that "There are ample reasons to suspect that there may be some alternative to what we outlined in our version . . . We didn't have access . . . ."
  

• And the Senior Counsel to the 9/11 Commission (John Farmer) - who led the 9/11 staff's inquiry - recently said "At some level of the government, at some point in time...there was an agreement not to tell the truth about what happened". He also said "I was shocked at how different the truth was from the way it was described .... The tapes told a radically different story from what had been told to us and the public for two years.... This is not spin. This is not true."

• U.S. General, Commanding General of U.S. European Command and Supreme Allied Commander Europe, decorated with the Bronze Star, Silver Star, and Purple Heart (General Wesley Clark) said "We've never finished the investigation of 9/11 and whether the administration actually misused the intelligence information it had. The evidence seems pretty clear to me. I've seen that for a long time."

• Former Deputy Secretary for Intelligence and Warning under Nixon, Ford, and Carter (Morton Goulder), former Deputy Director to the White House Task Force on Terrorism (Edward L. Peck), and former US Department of State Foreign Service Officer (J. Michael Springmann), as well as a who's who of liberals and independents) jointly call for a new investigation into 9/11

• Former Federal Prosecutor, Office of Special Investigations, U.S. Department of Justice under Presidents Jimmy Carter and Ronald Reagan; former U.S. Army Intelligence officer, and currently a widely-sought media commentator on terrorism and intelligence services (John Loftus) says "The information provided by European intelligence services prior to 9/11 was so extensive that it is no longer possible for either the CIA or FBI to assert a defense of incompetence."

• The Group Director on matters of national security in the U.S. Government Accountability Office said that President Bush did not respond to unprecedented warnings of the 9/11 disaster and conducted a massive cover-up instead of accepting responsibility

• President of the U.S. Air Force Accident Investigation Board, who also served as Pentagon Weapons Requirement Officer and as a member of the Pentagon's Quadrennial Defense Review, and who was awarded Distinguished Flying Crosses for Heroism, four Air Medals, four Meritorious Service Medals, and nine Aerial Achievement Medals (Lt. Col. Jeff Latas) is a member of a group which doubts the government's version of 9/11

• Deputy Assistant Secretary of Defense under President Ronald Reagan (Col. Ronald D. Ray) said that the official story of 9/11 is "the dog that doesn't hunt"

• The former director of the FBI (Louis Freeh) says there was a cover up by the 9/11 Commission

• Director of the U.S. "Star Wars" space defense program in both Republican and Democratic administrations, who was a senior air force colonel who flew 101 combat missions (Col. Robert Bowman) stated: "If our government had merely [done] nothing, and I say that as an old interceptor pilot—I know the drill, I know what it takes, I know how long it takes, I know what the procedures are, I know what they were, and I know what they’ve changed them to—if our government had merely done nothing, and allowed normal procedures to happen on that morning of 9/11, the Twin Towers would still be standing and thousands of dead Americans would still be alive. [T]hat is treason!"

Tim Geithner claims:

Simon Johnson wrote: a more accurate essay entitled:

We think it is time, maybe, that we turn our focus to Main Street ...

Unfortunately, the President has an adviser from Wall Street, Larry Summers, and a Treasury Secretary from Wall Street, Timmy Geithner, who don't like that idea. They want to keep the TARP money either to continue to bail out Wall Street...or to pay down the deficit. That's absurd...

"[Obama] is being failed by his economic team ... We may have to sacrifice just two more jobs to get millions back for Americans.

William White - former head BIS economist, currently chair of the OECD's Economic and Development Review Committee - is again schooling Ben Bernanke on economic fundamentals.

In an article published in the December-January OECD Observer, White wrote:

If it is not obvious that White is saying that Bernanke (and most other central bankers) are using inaccurate economic theories, and that we need to learn about the danger of bubbles from Austrian economics, listen to what White recently said at a talk at India's central bank:

• Everyone knows that excessive credit was at the heart of the "big mess" we're in

• The Fed has set up a straw man against the argument that central banks should act to moderate bubbles while they are being blown. Specifically, Bernanke says that you can't lean against asset prices, because it's not clear how to measure asset price bubbles or which asset prices to target
  

• But the proper question is whether we lean against the credit bubble itself and its underlying symptoms. Specifically, if credit is the underlying problem, it manifests itself in various imbalances in asset prices, crazy spending patterns like we've seen in the U.S., or crazy investing patterns as we've seen in China. That's easy to spot
  

• Economists have no insight into the effect of the unprecedented monetary easing measures recently undertaken

• The Fed says that it is always possible to clean up a bubble after it bursts, because it worked in the past (in 1987, 1991, 1997- 1998, and 2001-2003). But underneath it all, there is a "growing headwind of debt". This works for a while, but then it won't work forever.
  

• Economists have to learn that things work differently than we've been taught. The ideas that the economy is self-stabilizing and follows rational expectations are wrong

• Economists and central banks need to incorporate Austrian economic theory on supply side economics

In a pointed attack on the US Federal Reserve, it said central banks would not find it easy to "clean up" once property bubbles have burst...

Nor does it exonerate the watchdogs. "How could such a huge shadow banking system emerge without provoking clear statements of official concern?"

"The fundamental cause of today's emerging problems was excessive and imprudent credit growth over a long period. Policy interest rates in the advanced industrial countries have been unusually low," he said.

The Fed and fellow central banks instinctively cut rates lower with each cycle to avoid facing the pain. The effect has been to put off the day of reckoning...

"Should governments feel it necessary to take direct actions to alleviate debt burdens, it is crucial that they understand one thing beforehand. If asset prices are unrealistically high, they must fall. If savings rates are unrealistically low, they must rise. If debts cannot be serviced, they must be written off.

"To deny this through the use of gimmicks and palliatives will only make things worse in the end," he said.

Joseph Stiglitz - former head economist at the World Bank and a nobel-prize winner - said yesterday that the very structure of the Federal Reserve system is so fraught with conflicts that it is "corrupt" and undermines democracy.

Stiglitz said:

Stiglitz pointed out that - if another country had presented a plan to reform its financial system, and included a regulatory regime that copied the makeup of the Federal Reserve system - "it would have been a big signal that something is wrong."

Stiglitz stressed that the Fed banks have clear conflicts of interest, since the banks are largely governed by a board of directors that includes officers of the very banks they're supposed to be overseeing:

As I wrote in January:

Last May, I wrote about the rumor that the Obama administration might seize funds from American's 401k and IRA accounts.

Last week, Bloomberg pointed out:

The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort...

There is “a tremendous amount of interest in the White House” in retirement-security initiatives, Borzi, who heads the Labor Department’s Employee Benefits Security Administration, said in an interview.

In addition to annuities, the inquiry will cover other approaches to guaranteeing income, including longevity insurance that would provide an income stream for retirees living beyond a certain age, she said.

“There’s been a fair amount of discussion in the literature taking the view that perhaps there ought to be more lifetime income,” Iwry, a senior adviser to Treasury Secretary Timothy Geithner, said in an interview...

One proposal raised by Iwry as co-author of a paper while at the Retirement Security Project, before joining the administration, has reached Congress. A bill requiring employers to report 401(k) savings both as an account balance and as a stream of income based on an annuity was introduced on Dec. 3 by Senators Jeff Bingaman, a New Mexico Democrat, Johnny Isakson, a Georgia Republican, and Herb Kohl, a Wisconsin Democrat.

Washington is developing plans for your retirement savings.

BusinessWeek reports that the Treasury and Labor departments are asking for public comment on "the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams."

In plain English, the idea is for the government to take your retirement savings in return for a promise to pay you some monthly benefit in your retirement years.

They will tell you that you are "investing" your money in U.S. Treasury bonds. But they will use your money immediately to pay for their unprecedented trillion-dollar budget deficits, leaving nothing to back up their political promises, just as they have raided the Social Security trust funds.

This "conversion" may start out as an optional choice, though you are already free to buy Treasury bonds whenever you want. But as Karl Denninger of the Market Ticker Web site reports: " "Choices' have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market--so they will effectively tax you by forcing your "retirement' money to buy them."

Moreover, benefits based on Treasury bond interest rates may be woefully inadequate compensation for your years of savings. As Denninger adds, "What's even worse is that the government has intentionally suppressed Treasury yields during this crisis (and will keep doing so by various means, including manipulating the CPI inflation index) so as to guarantee that you lose over time compared to actual purchasing power."

This proposal follows hearings held last fall by House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., of the Ways and Means Committee focusing on "redirecting (IRA and 401 k) tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute," as reported by InvestmentNews.com.

The hearings examined a proposal from professor Teresa Ghilarducci of the New School for Social Research in New York to give all workers "a $600 annual inflation-adjusted subsidy from the U.S. government" in return for requiring workers "to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration."

Argentina provided a precedent in 2008, taking over that country's private retirement accounts for forced investment in government bonds to cover spiraling deficits. Ambrose Evans-Pritchard editorialized at the time in Britain's Daily Telegraph that this may be "a foretaste of what may happen across the world as governments discover . . . that the bond markets are unwilling to plug the (deficit) gap. . . . My fear is that governments in the U.S., Britain and Europe will display similar reflexes."...

Congressional Republicans should introduce legislation to block the government from ever proceeding with anything like this. Call it the "Keep Your Hands Off My 401(k) Act of 2010."

Hope In a Time of Hopelessness

Several long-time activists have told me recently they are overwhelmed, worried, and think that we may be losing the struggle ....

One very smart friend asked me if there is any basis for hope.

But hope is an act of will, not a passive mood. Admittedly, things are easier when circumstances bring hope to us, and we can just receive the hopeful and inspiring news.

But if we care about winning, we have to be able to decide to have hope even when outer circumstances aren't so positive.

I have children who are counting on me to leave them with a reasonably safe and sane planet. As I've said elsewhere, "I care too much about my kids and my freedom to be afraid. I care enough about them that it gets my heart beating, connects me to something bigger than myself, and that gives me courage, even when the chips are down."

If I allowed myself to lose hope about exposing falsehoods, about protecting our freedom and building a hopeful future, I would be dropping the ball for my kids. I would be condemning them to a potentially very grey world where bigger and worse things may happen, where their liberties and joys are wholly stripped away, where every ounce of vitality is beholden to joyless and useless tasks.

Many of us may be motivated by other things besides kids .... Only you can know what that is. But we each must dig down deep, and connect with our most powerful motivations to win the struggle for freedom and truth.

I don't know about you . . . but I don't have the luxury of giving up hope. When I get depressed, overwhelmed or exhausted by the stunning acts of savagery, treason, and disinformation carried out by the imperialists, or the willful ignorance of many Americans, I will myself into finding some reason to have hope.

Because the struggle for liberty is too important for me to give up.

If you lose hope, somehow you lose the vitality that keeps life moving, you lose that courage to be, that quality that helps you go on in spite of it all. And so today I still have a dream.
- Martin Luther King, Jr.

Do not let your fire go out, spark by irreplaceable spark, in the hopeless swamps of the approximate, the not-quite, the not-yet, the not-at-all. Do not let the hero in your soul perish, in lonely frustration for the life you deserved, but have never been able to reach. Check your road and the nature of your battle. The world you desired can be won. It exists, it is real, it is possible, it is yours.
- Ayn Rand

Hope is like a road in the country; there was never a road, but when many people walk on it, the road comes into existence.
- Lin Yutang

Hope is passion for what is possible.
- Soren Kierkegaard

Turn your face to the sun and the shadows fall behind you.
- Maori Proverb

I steer my bark with hope in the head, leaving fear astern. My hopes indeed sometimes fail, but not oftener than the forebodings of the gloomy.
- Thomas Jefferson

He who does not hope to win has already lost.
- Jose Joaquin Olmedo

When you do nothing, you feel overwhelmed and powerless. But when you get involved, you feel the sense of hope and accomplishment that comes from knowing you are working to make things better.
- Pauline R. Kezer

Hope is a state of mind, not of the world. Hope, in this deep and powerful sense, is not the same as joy that things are going well, or willingness to invest in enterprises that are obviously heading for success, but rather an ability to work for something because it is good.
- Unknown

We should not let our fears hold us back from pursuing our hopes.
- John Fitzgerald Kennedy

Your hopes, dreams and aspirations are legitimate. They are trying to take you airborne, above the clouds, above the storms, if you only let them.
- William James

Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence.
- Helen Keller

The capacity for hope is the most significant fact of life. It provides human beings with a sense of destination and the energy to get started.
- Norman Cousins

When I despair, I remember that all through history the way of truth and love has always won. There have been tyrants and murderers and for a time they seem invincible but in the end, they always fall -- think of it, ALWAYS.
- Mahatma Gandhi

We must accept finite disappointment, but we must never lose infinite hope.
- Martin Luther King, Jr.

There is no medicine like hope, no incentive so great, and no tonic so powerful as expectation of something better tomorrow.
- Orison Marden

Difficulties are meant to rouse, not discourage. The human spirit is to grow by conflict.
- William Ellery Channing

Hope is medicine for a soul that's sick and tired.
- Eric Swensson

Hope has two beautiful daughters. Their names are anger and courage; anger at the way things are, and courage to see that they do not remain the way they are.
- Augustine of Hippo

What oxygen is to the lungs, such is hope to the meaning of life.
- Emil Brunner

The very least you can do in your life is to figure out what you hope for. And the most you can do is live inside that hope. Not admire it from a distance but live right in it, under its roof.
- Barbara Kingsolver

Hope is not the conviction that something will turn out well, but the certainty that something makes sense regardless of how it turns out.
- Vaclav Havel

Hope is the companion of power, and mother of success; for who so hopes strongly has within him the gift of miracles.
- Samuel Smiles

Of all ills that one endures, hope is a cheap and universal cure.
- Abraham Cowley

Every area of trouble gives out a ray of hope; and the one unchangeable certainty is that nothing is certain or unchangeable.
- John Fitzgerald Kennedy

Let perseverance be your engine and hope your fuel.
- H. Jackson Brown Jr

Develop sincere desire for the goal. Out of fire of desire comes success.
- Unknown

You must not lose faith in humanity. Humanity is an ocean; if a few drops of the ocean are dirty, the ocean does not become dirty.
- Mahatma Gandhi

Everything that is done in the world is done by hope.
- Martin Luther King, Jr.

Don't lose hope. When it gets darkest the stars come out.
- Unknown

Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.
- Dale Carnegie

The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty.
- Winston Churchill

The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function. One should, for example, be able to see that things are hopeless and yet be determined to make them otherwise.
- F. Scott Fitzgerald

It is from numberless diverse acts of courage and belief that human history is shaped. Each time a man stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he sends forth a tiny ripple of hope, and crossing each other from a million different centers of energy and daring, those ripples build a current that can sweep down the mightiest walls of oppression and resistance.
- Robert F . Kennedy

Courage

It all comes down to courage . . .

If you have courage, then you're willing to face that really stinky mess in the garage and clean it up.

You have faith you can clean it up, because you've cleaned up other really stinky messes, or seen other people do it. In other words, you have faith because you have experience of succeeding in the past.

Fat and Happy

We Americans have led a very pampered life for the past couple of decades. Sure, there has been inequality and exploitation, and some have had it a lot worse than others. But, other than stopping extreme forms of racism (Ku Klux Klan, etc.), we haven't had to defend our borders or our liberties.

Basically, we complain if our tv goes on the fritz, or our team loses the game, or we can't afford that new, nicer whatzit, or if our boss is mean. We think those are big, Earth-shattering, history-changing events. But they are quite small in the grand scheme of things

And even those of us who think of ourselves as brave heroes usually only act like that when we know it is within the bounds of safety, within the limits of what we can handle. "Tough guys" tend to turn into meek mice whenever they are really threatened.

So we're basically lazy and timid, but we don't know or admit it. We like to pretend we are like the Founding Fathers or John Wayne (at least the cowboys had to rough it a little).

But we have no experience of successfully standing up to tyrants, so we have no faith that it can be done, and while the evidence is right before our noses that our current leaders are tyrants, we're so terrified that we have our knickers in a bunch.

What Would They Do?

Even if you haven't experienced success in standing up to tyrants, remember that the Founding Fathers did just that. They were just men, not gods. Sure, they were too persistent and stubborn to give up, but that's because they CARED about something: freedom and the possibility of a better life.

They may have lived hundreds of years before our time, but that doesn't matter -- we can still learn from their experience as if it were happening now. Time is an illusion, since human nature is the same now as it was then. Just as many people of faith ask "what would Jesus do?", we can also ask "what would the founding fathers do?" If they could do it, we can do it.

Take Heart

There is a real misunderstanding of what it means to be courageous. In America, courage is often thought of as a testosterone-driven toughness. There's nothing the matter with testosterone. Masculinity is a great thing. But many American men secretly fear that they don't have sufficient testosterone to really be brave when the chips are down. As I said above, even those of us who think of ourselves as brave men usually only act like that when we know it is within the bounds of safety, within the limits of what we can handle.

We might jump in a bar room brawl to protect our buddy, but that's because we know we're only going to get knocked around a little bit -- nothing but bruises that will go away in a little while. The stakes just aren't that high.

But most American men secretly doubt whether they are macho enough to pull it off under fire. They may watch alot of action movies, and talk tough, and stand up when its not really dangerous (or when they clearly outgun the other guy), but they are secretly terrified that they don't have quite enough backbone to pull it off against the big boys, such as tyrants.

I would argue that this view fundamentally misunderstands the nature of courage, and ensures that we will never have true courage when it counts.

By way of analogy, the word "discipline" comes from "disciple". If you are a true "disciple" of an idea of a plan or a strategy or a religion, then you will stick to it and "have discipline" to reach your goal. It is not just a matter of willpower; it is also devotion to something bigger than ourselves.

Similarly, the word "courage" comes from the French "with heart". Why does it have this root meaning? Because it takes heart to act bravely. That's how my childhood Karate teacher used the word: when I was practicing with courage, power and focus, he would say "you have alot of heart today" (indeed, many old-school warriors use the phrase "fighting with heart" in that way).

If courage is acting "with heart", we've lost heart. And without heart, we cannot face the truth.

So how do we regain our heart? Well, let's start with what gets our hearts beating.

Remember that the mother bear is one of the fiercest animals of all. Just get between a mother bear and her cub and you'll see what I mean. It is her love of her cub which gives her the heart to face any enemy when her cub is threatened. It is not her level of testosterone, but rather her love for her cub which makes her so fierce.

Just as discipline is more than just willpower, courage stems from something bigger than just cajones. In fact, the strongest courage comes from the love of something we care about, since our heart will sustain us even when the chips are really down and we are really up against a tyrant. As the ancient Chinese philosopher Lao Tzu said: "Being deeply loved by someone gives you strength, while loving someone deeply gives you courage. "

In addition, we're no longer living in the old west. Individualism is very important in numerous ways, but we can only win against the tyrants as a team, as a community, as a nation. And only by opening our hearts to what matters will we be able to work together, to fight for all of our kids, and all of our freedom. Only then will we be able to put the crooks and the looters and the tyrants back in the box.

Do we care about our kids, our significant others, our parents, our friends? Do we care about the freedom to choose what we want, instead of having our "great leader" choose for us?

If not, what DO we care about? Because if that is where your heart is, that is what will give you courage.

I care too much about my kids and their future to be afraid. I care enough about them that it gets my heart beating, connects me to something bigger than myself, and that gives me courage, even when the chips are down.

Courage is an innate human quality. It is within each of us, waiting to reveal itself when we open our hearts. When we act with heart, by definition, we are courageous.

It is not because things are difficult that we do not dare; it is because we do not dare that they are difficult.
- Seneca

Those who would trade safety for freedom deserve neither.
– Thomas Jefferson

Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure, or nothing.
- Hellen Keller

Whatever you can do or dream you can, begin it. Boldness has genius, power, and magic in it.
- Goethe

Courage is not the absence of fear, but rather the judgment that something else is more important than fear.
- Ambrose Redmoon

Courage is an everyday thing. When we look reality squarely in the eye and refuse to back away from our awareness, we are living courage.
- Anonymous

To have courage for whatever comes in life - everything lies in that.
- Mother Teresa

It is from numberless diverse acts of courage and belief that human history is shaped. Each time a man stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he sends forth a tiny ripple of hope, and crossing each other from a million different centers of energy and daring, those ripples build a current that can sweep down the mightiest walls of oppression and resistance.
- Robert F . Kennedy

Courage is the first of human qualities because it is the quality which guarantees the others.
- Aristotle

Courage is being scared to death but saddling up anyway.
- John Wayne

Courage is doing what your afraid to do. There can be no courage unless you're scared.
- Eddie Rickenbacker

Courage is fear holding on a minute longer.
- George Patton

One man with courage makes a majority.
- Andrew Jackson

Be bold and courageous. When you look back on your life, you'll regret the things you didn't do more than the ones you did.
- H. Jackson Brown, Jr.

You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face.
— Eleanor Roosevelt

Within each of us is a hidden store of energy. Energy we can release to compete in the marathon of life Within each of us is a hidden store of courage. Courage to give us the strength to face any challenge Within each of us is a hidden store of determination. Determination to keep us in the race when all seems lost.
- Roger Dawson

We must never despair; our situation has been compromising before; and it changed for the better; so I trust it will again. If difficulties arise; we must put forth new exertion and proportion our efforts to the exigencies of the times.
- George Washington

We must remember that one determined person can make a significant difference, and that a small group of determined people can change the course of history.
-Sonia Johnson

Never doubt that a small, group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.
- Margaret Mead

I've read countless news headlines recently about how economists are "surprised" over an "unexpectedly bad" economic indicator.

But it's not surprising at all. It's no mystery.

The government hasn't taken the necessary actions, and has instead been doing all of the wrong things.

Let's recap.

The leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith agree. They say that the government's attempts to prop up the price of toxic assets no one wants is not helpful.

The Bank for International Settlements – often described as a central bank for central banks (BIS) – slammed the easy credit policy of the Fed and other central banks, the failure to regulate the shadow banking system, "the use of gimmicks and palliatives", and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts "will only make things worse".

BIS also cautioned that bailouts could harm the economy (as did the former head of the Fed's open market operations).

And BIS warned that the Fed and other central banks were simply transferring risk from private banks to governments, which could lead to a sovereign debt crisis.

Virtually all leading independent economists have said that the too big to fails must be broken up, or the economy won't be able to recover (and see this). Instead, they have been allowed to get even bigger (and see this and this).

While modern economic theory shows that debts do matter (and see this), the U.S. is spending on guns and butter like debts are a good thing.

Nobel prize winning economist George Akerlof predicted in 1993 that credit default swaps would lead to a major crash, and that future crashes were guaranteed unless the government stopped letting big financial players loot by placing bets they could never pay off when things started to go wrong, and by continuing to bail out the gamblers. (Not only has the government rewarded the gamblers, bailed them out and let them engage in a new round of risky betting, but it hasn't even reined in credit default swaps.)

And instead of trying to restore trust in our financial system - which is a prerequisite for any sustainable economic recovery - Summers, Geithner, Bernanke and the boys have tried to sweep the problems under the rug and con the public into believing that everything is okay and that no real reform is needed.

As I wrote in October:

William K. Black - professor of economics and law, and the senior regulator during the S & L crisis - says that that the government's entire strategy now - as during the S&L crisis - is to cover up how bad things are ("the entire strategy is to keep people from getting the facts").

Indeed, as I have previously documented, 7 out of the 8 giant, money center banks went bankrupt in the 1980's during the "Latin American Crisis", and the government's response was to cover up their insolvency.

Black also says:

PhD economist Dean Baker made a similar point, lambasting the Federal Reserve for blowing the bubble, and pointing out that those who caused the disaster are trying to shift the focus as fast as they can:

***

Time Magazine called Tim Geithner a "con man" and the stress tests a "confidence game" because those tests were so inaccurate.

William Black said:

And see this.

The government has committed to give trillions to the financial industry. President Obama's stimulus bill was $787 billion, which is less than a tenth of the money pledged to the banks and the financial system. [106]

Of the $787 billion, little more than perhaps 10% has been spent as of this writing. [107]

The Government Accountability Office says that the $787 billion stimulus package is not being used for stimulus. [108] Instead, the states are in such dire financial straights that the stimulus money is instead being used to "cushion" state budgets, prevent teacher layoffs, make more Medicaid payments and head off other fiscal problems. So even the money which is actually earmarked to help the states stimulate their economies is not being used for that purpose.

Indeed, much of the $787 billion was earmarked pork [109], not for anything which could actually stimulate the economy. [110]

Mark Zandi - chief economist for Moody's - has calculated which stimulus programs give the most bang for the buck in terms of the economy:

[111]

But very little of the stimulus funds are actually going to high-value stimulus projects.

Indeed, as the Los Angeles Times points out:

Even as many Americans still struggle to recover from the country's worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.

In the report, the panel, that includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high risk investing that precipitated the near collapse of the U.S. economy in 2008.

The report warns that the country is now immersed in a "doomsday cycle" wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management – and when the risks go wrong, the banks receive taxpayer bailouts from the government.

"Risk-taking at banks," the report cautions, "will soon be larger than ever."

Without more stringent reforms, "another crisis – a bigger crisis that weakens both our financial sector and our larger economy – is more than predictable, it is inevitable," Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute.

The institute's chief economist, Nobel Prize-winner Joseph Stiglitz, calls the report "an important point of departure for a debate on where we are on the road to regulatory reform."

The report blasts some of Washington's key players. Johnson writes, "Our government leaders have shown little capacity to fix the flaws in our market system." Two other panelists, Simon Johnson, a professor at MIT, and Peter Boone of the Centre for Economic Performance, voiced similar criticisms.

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner "oversaw policy as the bubble was inflating," write Johnson and Boone, and "these same men are now designing our 'rescue.'"

The study says that "In 2008-09, we came remarkably close to another Great Depression. Next time we may not be so 'lucky.' The threat of the doomsday cycle remains strong and growing," they say. "What will happen when the next shock hits? We may be nearing the stage where the answer will be – just as it was in the Great Depression – a calamitous global collapse."

***

Frank Partnoy, a panelist from the University of San Diego, claims that "the balance sheets of most Wall Street banks are fiction." Another panelist, Raj Date of the Cambridge Winter Center for Financial Institutions Policy, argues that government-backed mortgage giants Fannie Mae and Freddie Mac have become "needlessly complex and irretrievably flawed" and should be eliminated. The report also calls for greater competition among credit rating agencies and increased regulation of the derivatives market, including requiring that credit-default swaps be traded on regulated exchanges.

With the Senate Banking Committee, led by Chris Dodd, D-Conn., poised to unveil its financial regulatory reform proposal sometime in the next week, the report calls on Congress to enact reforms strong enough to prevent another meltdown.

"Sen. Dick Durbin once said the banks 'owned' the Senate," says Johnson. "The next few weeks will determine whether or not that statement is true."

(Here is the Roosevelt Institute report.)

Heck of a job, guys.

As Bloomberg notes:

While the international aspect of Fisher's proposal may be unusual, other Fed officials have also called for breaking up the TBTFs, including:

• Former chairman of the Federal Reserve, Alan Greenspan

• Former chairman of the Federal Reserve, Paul Volcker

• President of the Federal Reserve Bank of Kansas City, Thomas Hoenig (and see this)

As I noted in October, many others have also called for breaking up the banking giants:

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashio

• Nobel prize-winning economist, Joseph Stiglitz

• Nobel prize-winning economist, Ed Prescott

• Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard

• Simon Johnson (and see this)

• Deputy Treasury Secretary, Neal S. Wolin

• The President of the Independent Community Bankers of America, a Washington-based trade group with about 5,000 members, Camden R. Fine

• The Congressional panel overseeing the bailout (and see this)

• The head of the FDIC, Sheila Bair

• The head of the Bank of England, Mervyn King

• The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz

• Economics professor and senior regulator during the S & L crisis, William K. Black

• Economics professor, Nouriel Roubini

• Economist, Marc Faber

• Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales

• Economics professor, Thomas F. Cooley

• Former investment banker, Philip Augar

• Chairman of the Commons Treasury, John McFall

Even the Bank of International Settlements - the "Central Banks' Central Bank" - has slammed too big to fail. As summarized by the Financial Times:

The report was particularly scathing in its assessment of governments’ attempts to clean up their banks. “The reluctance of officials to quickly clean up the banks, many of which are now owned in large part by governments, may well delay recovery,” it said, adding that government interventions had ingrained the belief that some banks were too big or too interconnected to fail.

House majority leader Steny Hoyer - a close ally to President Obama - says the U.S. needs to raise taxes and cut spending .

As Agence France-Presse reports:

The United States must embrace a blend of tax increases and spending cuts to rein in its deficit or face a potentially crippling debt crisis like the one in Greece, a top US lawmaker warned Monday.

"It is enough to look across the Atlantic at Greece's extreme economic crisis and understand: It can happen here. If we don't change course, it will happen here," said Democratic House Majority Leader Steny Hoyer...

"It seems to me that the only solution that can win the support of both parties is a balanced approach: one that cuts some spending and raises some revenue while avoiding extremes in either direction," he said.

Of course, many others have warned of the massive debt overhand in the U.S. as well.

But why aren't our government "leaders" talking about slashing the military-industrial complex, which is ruining our economy with unnecessary imperial adventures?

And why aren't any of our leaders talking about stopping the permanent bailouts for the financial giants who got us into this mess? And see this.

And why aren't they taking away the power to create credit from the private banking giants - which is costing our economy trillions of dollars (and is leading to a decrease in loans to the little guy) - and give it back to the states?

If we did these things, we wouldn't have to raise taxes or cut core services to the American people.

You know the big banks have gotten bigger.

As Rolfe Winkler noted last September:

For the big have gotten even bigger since the start of the financial crisis. At the end of 2007, the Big Four banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo — held 32 percent of all deposits in FDIC-insured institutions. As of June 30th, it was 39 percent.

But Simon Johnson gives an even broader perspective on how big the too big to fails have gotten:

Johnson also points out that:

As I've previously noted, the government created the mega-giants (they are not the product of free market competition), and their very size destroys the real economy like a massive black hole destroys the matter around it.

And as Johnson and many others have pointed out, the very size of the giant banks enables them to easily capture politicians ... about as easily as the Great Attractor captures galaxies.

Free market capitalism is based on the idea that "the invisible hand" of the market will create the best possible outcome for the most people.

But as I noted a couple of weeks ago, the man who came up with idea of the invisible hand did not believe in unrestrained free market capitalism:

Americans have traditionally believed that the "invisible hand of the market" means that capitalism will benefit us all without requiring any oversight. However, as the New York Times notes, the real Adam Smith did not believe in a magically benevolent market which operates for the benefit of all without any checks and balances:

Smith worried about the encroachment of government on economic activity, but his concerns were directed at least as much toward parish councils, church wardens, big corporations, guilds and religious institutions as to the national government; these institutions were part and parcel of 18th-century government...

Smith was sometimes tolerant of government intervention, ''especially when the object is to reduce poverty.'' Smith passionately argued, ''When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.'' He saw a tacit conspiracy on the part of employers ''always and everywhere'' to keep wages as low as possible.

As Paul Krugman writes:

Moreover, as I pointed out in September:

One of the leaders of the new science of financial modeling - Rama Cont - points out that Adam Smith was wrong about the "Invisible Hand".

Specifically, investors in financial markets rationally pursuing individual profit can produce outcomes that are bad for almost everyone.

As an article in City Journal notes:

Does this mean that free market capitalism is dead?

No. And I'm not sure that there is any better alternative.

But capitalism has to grow up and become less naive, relying less on a blind faith in "the invisible hand" and more on an understanding of human nature, including insights from the field of behavioral economics.

It must include sophisticated checks and balances to make sure that thesystem is not gamed, instead of childish ideas about the "inherent stability" of the market.

And it must make sure that the poker game doesn't suddenly end when one of the players gets all of the chips.

Of course, with high-frequency trading dominating the market (and see this), frontrunning, permanent bailouts (and see this), government-sponsored credit rating scams and enterprises, the creation and maintenance by the government of banks so big that their very size warps the entire system, socialism for the big boys, and all of the other shenanigans going on, we don't currently have free market capitalism.

I have repeatedly argued that naked credit default swaps should be banned. See this and this.

Savvy commentators like Wolfgang Munchau and Yves Smith are saying the same thing.

As I wrote last July:

Obama's regulation of credit default swaps leave loopholes large enough to drive the biggest trucks through. Specifically, it forces over-the-counter credit default swap transactions to be traded through an exchange unless it is a non-standard cds. So all that the "financial innovators" who melted down the economy have to do is get a little creative in drafting their cds' - or just to tell regulators "oh no, that wasn't a standard contract", and they are excepted from the regulation.

Similarly, the Obama administration has just passed a new set of regulations "getting tough" on the naked short selling of stocks, which independent economists say can manipulate stock prices and bring down otherwise healthy companies.

But the regulation will exempt hedge funds, and allow them to continue hiding their shorts from regulators.

As I wrote last September:

Now, the head of credit strategy at investment giant UniCredit is saying the same thing:

Bernanke is now joining Rosenberg, Ferguson and Faber, Edwards, Grice and many others in warning that the debt crisis rearing its head in Greece may spread to America, causing U.S. interest rates to climb.

As the Washington Times wrote yesterday:

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.

"It's not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee. "It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today."

Yes, massive debt overhangs do matter.

Contrary view: A very smart financial expert disagrees, telling me:

Fed chair Ben Bernanke is nicknamed "Helicopter Ben" because of his 2002 speech recommending that money be dropped from a helicopter in order to prevent deflation (and then actually doing it).

Similarly, I think we should nickname Secretary of Treasury Tim Geithner "Pallet Tim".

As I wrote last July:

A soon-to-be released report by special inspector general Neil Barofsky finds:

[The banks have also distributed] bailout money to pay executives fat bonuses which they used to buy gold toilets and prostitutes, and to lobby Congress to stop any meaningful reform.

The report by the special inspector general also calls on the Treasury Department to require regular, more detailed information from banks about their use of federal aid provided under the Troubled Asset Relief Program.

According to the Post, the Treasury has refused to collect such information, and:

In July 2009, Congressman Henry Waxman stated:

The Los Angeles Times reported at the time:

Rep. Paul Hodes, D-N.H., claimed that recent college graduates with Republican ties were sent to Iraq instead of experienced government personnel.

Rodes challenged, "I want to know why half the U.S. staff had never been outside of the country before and had to get a passport for the first time?"

$2.4 billion of these $100 dollar bills were loaded onto pallets, put on C-130s and shipped to Iraq in June 2004:

Then, when the shipment date changed, officials had to scramble to line up U.S. Air Force C-130 cargo planes to hold the money. They did, and the $2,401,600,000 was delivered to Baghdad on June 22, 2004.

Yup ... Pallet Tim.

Note: I am not implying that the Fed's shipment to Iraq were illegal (they were apparently part of a UN-sponsored Iraqi oil revenue arrangement). And I am not implying that Geithner is responsible for the theft of billions of dollars by defense contractors or others - he was never asked to oversee distribution of the funds once they arrived in Iraq, and he wasn't head of the New York Fed when the shipments started.

I am simply saying that Geithner has long been a yes-man to the powers-that-be, who ships pallets of money wherever he is told without question or any follow-up or tracking whatsoever.