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The Hidden Bailout Of $1.4 Trillion In Fannie / Freddie Credit-Default Swaps by Daniel Amerman

September 10, 2008

The Hidden Bailout Of $1.4 Trillion In Fannie / Freddie Credit-Default Swaps
by Daniel Amerman

Overview

Something extraordinary happened on Monday, September the 8th, 2008. The government takeover of Fannie Mae and Freddie Mac triggered the pending settlement of $1.4 trillion in credit-default swaps. This single event could have led to a cascading series of failures that might have bankrupted Wall Street – and much of the rest of the financial world – by the end of the week. That isn’t happening, and indeed, the media is treating this as something close to a non-event. However, a very real $1.4 trillion event happened – whose resolution effectively constitutes one of the largest government bailouts in history. Nobody noticed, for even though this is occurring in “plain sight”, the simple fact is that few people outside of the financial industry understand the $600 trillion derivative securities market. In this article, written the day after the event, we will briefly explain why this hidden, massive bailout – not of Fannie and Freddie but of the financial derivatives industry – is hugely significant, with potentially profound – and arbitragable – implications for the dollar, the markets and your personal financial future.

What Did NOT Happen

(These first several paragraphs in italics do not describe what did happen, but rather what could have happened in an alternate universe in which we actually had a free market that functioned without massive government interventions.)

The financial news of the day was that Fannie Mae and Freddie Mac were both unable to make debt payments and had defaulted on $5 trillion in bonds and mortgage-backed securities. With the US real estate market having fallen $4 trillion in the previous two years (non inflation-adjusted), it should have been no surprise that these two highly leveraged companies were not able to absorb the staggering losses. As this became clear to the markets, Fannie and Freddie lost the ability to borrow – which their survival was based upon – and actual default followed soon after. This default immediately triggered settlements on $1.4 trillion in credit-default swaps (credit derivatives), which had been entered into by major financial firms who had promised – in exchange for lucrative fee income – that if Fannie Mae or Freddie Mac were to default, these guarantor firms would make good on the defaulted bonds.

As the value of Fannie Mae and Freddie Mac debt plunged to 30 cents on the dollar, this meant that there was a 70% loss on the bonds (if one could find a buyer at all). This then triggered a call for settlement on the $1.4 trillion in credit-default swaps outstanding. Because the debt of the two former titans of the financial world was trading at a 70% discount compared to par value, this meant that total credit losses were $1 trillion ($1.4 trillion X 70% = $1 trillion). This meant $1 trillion worth of payments was due from the companies that had guaranteed the value of this debt, through their entering into credit-default swaps.

Settlement was triggered, but as the credit-default swap beneficiaries soon found out, collecting their settlements was an entirely different matter. The financial institutions around the world who had guaranteed Fannie and Freddie in exchange for lucrative corporate fee income (and multi-million dollar individual bonuses) were all highly leveraged themselves (indeed, weaker than the companies they were guaranteeing), and absolutely reliant on the day to day availability of large lines of credit and general borrowing capacity. As the creditors of these financial giants realized that a trillion dollar hit was barreling straight at them, they pulled their financing. Having to repay or replace these loans, without being able to sell massive portfolios of illiquid assets in a market suddenly devoid of buyers, left nearly every major investment bank and commercial bank in the United States and Europe unable to meet their obligations – even before settlement of their trillion dollar credit-default swap losses.

The failure of the major financial firms triggered another massive round of credit-default swap events, with amounts well over $10 trillion by Thursday, and over $20 trillion by Friday. By that time, however, no one was naïve enough to expect actual payment on those swaps, as Wall Street and the rest of the world’s financial hubs had all been insolvent since Wednesday. When the markets eventually opened for business again more than two months later, the official drop in the Dow Jones Industrial Average was over 10,000 points, meaning the index was trading at a level in the 1,000 – 1,500 range.

What Did Happen

“They say there are no atheists in a foxhole. Well, there are no libertarians in a financial crisis, either.”

Jeffrey Frankel, Harvard economist

The above scenario is what might have happened if we took the naïve perspective that markets actually function on their own without government intervention, and that corporations take the consequences for their own bad decisions, in exchange for the profits that come from their good decisions. That is of course a hypothetical world that has little to do with current global financial markets.

If you want a glimpse of the real world future, and what is happening as the same flawed business model that destroyed the $1.2 trillion subprime mortgage derivative securities market now threatens the over $60 trillion credit derivatives market, then we need to look no further than what actually happened with the $1.4 trillion worth of Fannie Mae and Freddie Mac credit default swaps. The companies were taken into conservatorship on September 6th. They have effectively failed even if legally there are some different ways of phrasing it. As reported by Bloomberg on September 8th, that led to a unanimous agreement by 13 Wall Street firms on Monday, September 7, 2008, that settlement of $1.4 trillion in credit default swaps had been triggered.

If Fannie Mae and Freddie Mac had actually failed to make payments on their debt – the consequences would have quite likely destroyed Wall Street right there. As illustrated in the scenario above, there simply isn’t a big enough capital base on Wall Street to absorb a trillion dollars in losses in a week, particularly once your creditors catch on to what is happening. Much smaller losses from subprime mortgage derivatives incrementally dribbling out over the course of the year, still might have taken down Wall Street, had it not been for the ability to hide losses in Tier Three assets (with the full complicity of the government), as well as the reassurances that the Federal Reserve provided by so swiftly bailing out Bear Stearns via JP Morgan, when a creditor driven bankruptcy (as described above) threatened to take down a major player.

Of course, the hypothetical collapse did not happen. The meltdown was averted because the federal government proactively and aggressively intervened to keep a financial disaster from taking down Wall Street (just as it did with Bear Stearns, and Long Term Capital Management the decade before). When the situation started to get bad, the federal government stepped in and – even if they still are hedging a bit legally – effectively guaranteed the debt of Fannie Mae and Freddie Mac.

Which means that they also – and this is crucial – bailed out the firms who had guaranteed the $1.4 trillion in credit derivatives. There may very well be losses, perhaps significant losses, but there would be no catastrophic loss there, that would threaten the viability of the financial system. Because what has really happened is that you have replaced a credit default swap on a quasi-governmental agency, that being Fannie Mae or Freddie Mac, with a credit default swap on the full faith and credit of the United States government. If the US guarantee had not been substituted then it would be a catastrophic failure. But because the US guarantee was substituted, it’s seemingly not a big deal, though much remains to be worked out.

In other words, the biggest beneficiaries of the $1.4 trillion Fannie and Freddie bailout were not Fannie or Freddie at all, but the Wall Street firms whose senior officers just happen to be major political contributors to both political parties – with some of those senior officers also running the Treasury Department on a revolving door basis.

How the ending valuation of the credit default swaps for settlement purposes will work out is a fascinating question. Arguably you could say that the value of Fannie and Freddie debt just rose, not only in comparison to prices during the recent financial turmoil, but also compared to par value. After all, we have just gone from quasi-governmental debt to something that is much closer to being explicitly a full faith and credit obligation of the United States Government, which means we should be losing part of the small spread that Fannie and Freddie traded at as quasi-governmental debt over direct governmental debt yields. From this perspective, one could say that the United States stepping in and taking over actually improves credit quality and the value of the bonds, so there is no loss at all – but a gain.

However there still remains a level of uncertainty, as the debt has not explicitly been made full faith and credit of the United States government. There’s a taint involved, and there could be liquidity issues – as investors typically are not too fond of even small uncertainties. So there’s a good chance the ending value will end up somewhere in the 90s – perhaps very close to par or perhaps a little bit further away. Wherever the ultimate settlement prices, however, it will not be a massive loss, because what has really happened is that a swap has indeed taken place, and the United States government bailed Wall Street out of self-inflicted credit swap-driven destruction, through preemptively swapping its guarantee for the guarantees by Fannie Mae and Freddie Mac.

The real implication of this then is that there is no danger from credit default swaps directly taking down Wall Street, so long as the federal government is willing to aggressively intervene every time there is a potential failure. I think we can see a clear path to the future here.

Where Did That Trillion Come From?

Before going any further, let’s stop and ask a simple question.

Where did the money for the bailout come from?

How did a strapped federal government come up with the trillions (if need be) to make good on all of Fannie Mae and Freddie Mac’s obligations?

How did a government that is already running over a $400 billion deficit so smoothly and easily come up with an extra trillion dollars or two, if needed? (With the $400 billion being based upon government accounting standards whose usage would get an individual or private firm thrown in prison. The deficit is far, far higher when unfunded retirement obligations are taken into account.)

And, for that matter, now that we’re on the subject – where did the government come up with the money for the $170 billion “tax rebate”?

How about that $59 trillion number for unfunded retirement related government obligations that keeps being bandied around? (The real number is a good bit higher as I cover in my article “The $2 Million Opportunity.”)

Where does the government come up with all that money, anyway?

The answer is simple – there is an unlimited supply of dollars. When you issue your own currency, and you are sufficiently determined, then there is an infinite supply of money available. Which could be a very good thing(?), for the Fannie Mae and Freddie Mac credit-default swaps are only one small part of a much larger market – and much larger risk. As we will discuss later in the article, however, while the supply of money is infinite, the value of that money is a different matter.

Taking Full Advantage Of Implicit Government Guarantees

Click Here To Learn About A Free Mini Course That Will Teach You How To Turn Inflation Into Wealth.

Once you understand that the supplyof money is effectively infinite for a sufficiently grave emergency, then you are ready for the next step in understanding some recent events which might otherwise seem indecipherable. From some perspectives, this near catastrophe which could have so easily taken down all of Wall Street (had the federal government not intervened), was not a catastrophe at all. It was instead a highly successful experiment. For the many firms which purportedly took on the risk in creating $1.4 trillion of credit-default swaps for Fannie Mae and Freddie Mac did not do so for the fun of it or out of the goodness of their hearts. They did so because they got paid enormous sums of money for purportedly taking on all those risks. With much of that money quite directly passing through to the already wealthy individuals involved.

If Fannie and Freddie had not run into problems then the guarantor financial firms would have just pocketed all of their fees, ultimately as pure profit. Instead of that, a worst case scenario occurred that arguably should have destroyed every one of the firms involved in this business – and would have likely done so if there had genuinely been a free market involved.

What the experiment proved was that as long as the risk that you take is big enough, then the federal government and your former coworkers down at the Treasury Department can be absolutely relied upon to bail you out. Now, Wall Street felt this was likely already the case. It was kind of a shame to lose a firm like Bear Stearns, but the good part about it was it proved that a major derivatives market failure wouldn’t be allowed to occur, as was remarked upon in the article from last month quoted below:

“Government intervention has saved the $62 trillion credit derivatives market from facing the nightmare of counterparty failure during the credit crisis of the past year…

After the government backed rescue of Bear Stearns, the market views other major derivative counterparties as also “too big to fail”, and this implicit support… means the credit derivatives market will likely be spared the ultimate test.”

Reuters (Karen Brettell), August 7, 2008

With the takeover of Fannie Mae and Freddie Mac, the markets have been shown to be correct, and the reliability of the government bailout occurring has now been proven on a much larger scale. If the dollar amount is great enough, then no individual firm has to go down. Instead the United States Treasury and/or Federal Reserve will preemptively step in, and effectively make every one whole (or close thereto), perhaps without even affecting Wall Street bonuses.

The principle is very simple. Take huge risks that you know cannot possibly pay out if you lose. In fact – that’s the key to the whole transaction. The risks have to be so large that you cannot afford to lose, and the economy and markets cannot afford for you to lose. Then one of two things happens. Either the risk event does not come about and you make an extraordinary amount of money as an individual and as a firm for having taken on this huge amount of risk. Or the risk happens and you have to pay out. Except you really don’t, because you can’t afford to pay out and you have effectively blackmailed the rest of the population through being too big to fail. Then the government steps in and bails you out. Except it’s not really the government, because the government can’t truly do that, it is the rest of the population which bails you out.

Situations like this are sometimes referred to as “moral hazard” – a weak and theoretical sounding term for an insider’s game of global economic blackmail that is growing at a rate much faster than the overall global economy. The cozy relationship between Wall Street and regulators is crucial, and much of the massive, hidden derivatives bailout that just occurred can be explained by looking at just who the chief “cop” is. US Treasury Secretary Henry Paulson built his half billion dollar personal fortune as the former head of Goldman Sachs, meaning he was chief executive of one of the world’s leading derivatives players.

Making Sense Of The Irrational

It is only when you understand the game that is being played, that the actions of Wall Street and much of the rest of the financial world after the subprime mortgage crisis becomes clear.

The subprime mortgage derivates experiment failed spectacularly. The firms that were creating these derivative securities and the rating firms who were rating them were making numerous and obvious mistakes. Yet once the fundamentally flawed business model was disproven – the world did not move away from derivative securities. Oh, they stopped creating new subprime mortgage derivatives, but when we look at the arguably much riskier credit derivatives market (this greater risk is explored in my article “Credit Derivatives Dangers In 2008 & Beyond – A Primer”), the market grew from $35 trillion in outstanding credit derivatives in July 2007 — the same time it was becoming clear that something was going very badly wrong in the subprime mortgage derivatives market — to a current level of about $62 trillion. In other words the market reacted to the real world proof that these things don’t actually work, by almost doubling the amount in existence in one year. Indeed, the amount of credit derivatives outstanding grew at an annual rate that was about twice the size of the entire United States economy.

Now if you are an academic modeling a hypothetical world of free markets and rational behavior by sophisticated investors keeping the markets safe and fairly valued for all involved, this would make no sense whatsoever. Rational investment firms ought to be fleeing markets like credit derivatives – not doubling up on an already failed experiment.

The reason? It’s the best game in town. Take a huge amount of risk, be paid exceedingly well for it and if you screw up — you have absolute proof that the government will come in and bail you out at the expense of the rest of the population (who did not share in your profits in the first place).

Investing For The Bailout, Not The Crisis

Once we recognize that what is happening here is not a massive credit default, but a monetization by the US government of those losses on a potentially multi-trillion dollar scale, then our investment strategy changes dramatically. We are no longer investing for the crisis – but for the bailout. The combination of this bailout and the Federal Reserves unprecedented actions in forcing interest rates so far below the rate of inflation creates a “target-rich environment” for the execution of arbitrage strategies by both corporate and individual investors.

The federal government is not going to let the financial system fail. It will create however much money needs to be created to bail out the institutions and attempt to bailout the economy, as it has already shown in real world test after test, from the so-called “tax rebate”, to Bear Stearns, to Fannie Mae and Freddie Mac. Which means that the government is prepared to destroy the dollar, and is not just prepared to, but is currently actively destroying the value of the dollar rather than let those firms fail. So the way you invest for the failure of an out of control derivatives market is to invest for the destruction of the dollar. Which means taking on new tools for a new time.

Four Steps To Creating Wealth From Catastrophe

The first step in creating wealth in an unfair world – is to avoid getting cheated. If you are investing money at short term rates of 1%, 2% or even 5%, while the value of your money is eroding at 9% a year, then you are being deliberately played for a sucker, and cheated out of the value of your money by the Federal Reserve.

Not that secret meetings are being held and an explicit agreement is being made to “get the little guys”. It’s just that sacrifices have to be made for the greater good to try to avert a catastrophic market meltdown, and that means that trusting individual investors get paid a negative interest rate on their money (after adjusting for inflation), while paying taxes on (economically) non-existent income for the privilege. Keep in mind as well that one of the purposes in destroying the value of your money is to keep the prices on financial assets propped above where they would otherwise be, if genuine market forces were setting short term interest rates. Which means that you are systematically overpaying for financial assets compared to actual fundamental values, and are getting played for a sucker there as well, to the extent that you are not being subsidized with below (real) market rates like the banks, investment banks and hedge funds. (See my article “Fed Manipulations Subsidize Wall Street & Cheat Investors” for more on this.)

The second step to turning financial catastrophe into personal wealth requires understanding one simple thing – which most investors do not. Inflation does not destroy real wealth, at least not directly. Inflation redistributes real wealth. Indeed, inflation can be used by individuals to quite directly take real wealth from both financial institutions and other individuals, as I illustrate in my (slightly twisted) morality tale “Inflation Pickpocket”. (To add insult to injury, those doing the pocket picking can often do so tax-free, even while their victims pay real taxes on illusory income.)

The third step is to understand that wealth redistribution on a massive scale creates personal opportunity on a massive scale. John Paulson (no relation to Treasury Secretary Henry Paulson) saw the crisis that was coming in subprime mortgages, researched and educated himself on this area (which had not been his field of expertise), and he turned the crisis into a $3-$4 billion personal payday in 2007. If you’re not a hedge fund manager like John Paulson, you may not have the tools that he used to turn a market crisis into personal billions. That’s OK, because Paulson didn’t start with the tools either. He started with educating himself and learning about a new area, until he came up with a novel way to profit from disaster. A method that wasn’t in the financial textbooks, and that he didn’t find by reading a financial columnist in the paper.

Next you need to understand that you personally may have more tools than you may think, some of which may surprise you. Tools which can give you the opportunity to turn financial disaster into personal net worth. There are ways you can use those tools to turn the destruction of the currency into perhaps the greatest real wealth-building opportunity of your life, on a long-term and tax-advantaged basis. But, if you want this to happen –you will need to start with learning. That is the irreplaceable fourth step. You are going to have to educate yourself, and work to not just understand, but to master some of the financial forces and methods in play here. You will have to learn how to turn the destruction of paper wealth into real wealth. With Turning Inflation Into Wealth being the key to this next step. My best wishes to you for turning this challenge into an extraordinary personal opportunity.

September 10, 2008 Posted by | Banking | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment

The Occult World of Commerce

Conspiracy Facts of Laws and there hidden meaning. There is no Law in America

August 28, 2008 Posted by | Illuminati | , , , , , , , , , , , , , | Leave a comment

JESSE VENTURA SPEAKS TRUTH

Part 1

Part 2

 

 

 

May 20, 2008 Posted by | 9/11, Conspiracies | , , , , , , | Leave a comment

Indonesia accuses US of bird flu plot

Indonesia accuses US of bird flu plot

Mark Forbes Herald Correspondent in Jakarta
February 20, 2008

Advertisement

THE Indonesian Health Minister has said the United States and the World Health Organisation are part of a global conspiracy to profit from the spread of bird flu and the US may use samples to produce biological weapons.

The views of Dr Siti Fadilah Supari, outlined in her new book, threaten to undermine efforts to control the spread of avian influenza. With 104 deaths, nearly half the world total, Indonesia is the new hotspot for the virus.

Despite claims by the minister that she has agreed to share virus samples and allow all nations access to resulting vaccines, Indonesia is still blocking sharing samples from human victims.

Applications to send more than 200 samples from chickens to an Australian laboratory had also been refused, inquiries by the Herald have revealed.

In the book, Dr Supari writes that WHO laboratories forwarded influenza viruses to Western companies so they could profit by selling vaccines back to developing countries: “The system of world health management has been very exploitative. It has been controlled by inhumanly desires, based on the greediness to raise capital and to control the world.”

Some Indonesian samples had been sent to a US Defence Department laboratory, Dr Supari says, adding that “some of our seed viruses had been in a laboratory known as a facility developing biological weapons in a superpower country”.

Privately, officials said Dr Supari’s belief that she was engaged on a God-driven crusade against an evil and “neo-colonialist” world health system – on the book’s cover she describes herself as the “divine hand behind avian influenza” – had caused her to lose touch with reality.

The President, Susilo Bambang Yudhoyono, appears to have endorsed the book, having written its introduction.

Dr Yudhoyono supports Dr Supari’s claim that the virus is under control in Indonesia, stating the “occurrence rate and the number of affected areas are decreasing”.

The WHO declined to comment and no US officials were available.

This story was found at: http://www.smh.com.au/articles/2008/02/19/1203190823829.html

February 21, 2008 Posted by | Conspiracies, Government, Health | , , , , , , , , , , | Leave a comment

Confessions of a Covert Agent: Psyops are my specialty

Confessions of a Covert Agent

Psychological Operations are my specialty

 

Global Research, December 3, 2007

 

artofmentalwarfare.com – 2007-12-02

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http://www.globalresearch.ca/index.php?context=va&aid=7525

 

The author of the text below claims to be highly experienced in covert intelligence programmes and psychological operations – psyops. Interestingly, he charges that Robert Gates personally helped rig the presidential elections of 2000 an 2004 via massive computer fraud. Stating that this opinion is taken for granted throughout the US intelligence community, the author warns against future elections manipulated via computer fraud. He paints a vivid and disturbing picture of the levels of moral depravity now surging out of the Neocon volcano.

Worth reading and remembering.

Michael Carmichael

Michael Carmichael is the Director of the Planetary Movement, a nonprofit public affairs organization based in the United Kingdom and a frequent contributor to Global Research.


The following article is excerpted from the upcoming edition of the book The Art of Mental Warfare by David Vincent.

The Art of Mental Warfare Editor’s Note

This message comes from an anonymous source believed to be within the US intelligence community. Some of the statements cannot be verified for authenticity, but the general themes and references speak for themselves. I’ve researched everything that is possible to research and it all stands up. I have no reason to believe any of this is untrue. Read it and decide for yourself.


Psychological Operations are my specialty. PsyOps

Everything I’ve done has been highly classified, all black programs and black operations. Some people I know thought I worked for the CIA, but it’s much more complicated than that. I’ve worked with people in the CIA, DIA, NSC, NSA, SAIC, Army Intel and many more lesser known agencies within the intelligence apparatus.

Before focusing on PsyOps I started out running covert combat missions, special operations. I was good at what I did and rose through the ranks fast. When the “War on Terror” started I was paid a lot of money to consult with private military contractors. When private paramilitary units needed to get the jobs done that paid the most money they would come to me with checkbooks filled with US taxpayer dough.

I’ve seen the worst things imaginable, hell on earth. Had friends die in my arms. Seen piles of rotten corpses. Seen men, women and children tortured. I’ve seen the eyes of terrified and confused children being sold into a vicious life of slavery and an early death.

I could get a lot more graphic, but you get the idea.

That was my life, and all along I was told that I was fighting for freedom and working for the “good guys.” What a ridiculous comment that is! In the black world, that is, in the covert world, there aren’t any “good guys” — just varying degrees of evil.

As Brigadier General Butler famously stated, “War is a racket.” It doesn’t have anything to do with freedom and democracy. It is not good fighting evil. There’s just a bunch of old greedy gangsta motherfuckers making obscene amounts of cash and breeding hatred, violence, terrorists and sex slaves.

The truth is, there is no oversight! Meaning, you can get away with anything, nothing is illegal because no one knows about it, or the few who do are either in on it or have a vested interest in keeping quiet. Whether you’re runnin’ guns, weapons, drugs, gold, diamonds, women, children, it just doesn’t matter. As long as the old guard gets their resources, it’s all good. And in the end, it’s all about power. The people who really run this planet know that natural resources (oil, water, coltan, cobalt, etc.) are the key. The “War on Terror” is just a front for a geo-strategic resource grab on a massive scale. Even the wars in Northern Africa are all about exploitation of resources. Once the good ole CIA boys at Bechtel did their NASA satellite studies of the Democratic Republic of Congo’s (DRC) mineral resources and discovered that it was the “richest patch of earth on the planet,” all hell broke loose! They figured out that the DRC has 80% of the world’s coltan, among many other vital resources. Without coltan, you can’t have any technology that requires a computer chip: computers, cell phones, satellites and weapon systems, of course. So Bechtel, the CitiBank boys, the World Bank, IMF and various covert elements have been supplying brutal regime after brutal regime in the region. Well over four million and counting have died there.

Same thing with oil in the Middle East. Do you think they really give a shit about Iraqi freedom? We worked hard to make you believe that, but c’mon, they don’t give a shit about the Iraqi people. They’ve killed about a MILLION of them! And that’s NOT an exaggeration! They sure as hell give a shit about Iraqi oil though. They also care about Saudi oil, and have a nice deal with a dictatorship that brutally oppresses their people. If freedom and democracy are the issue, how about freeing the Saudi people? Why do you think 15 of the 9/11 terrorists came from Saudi Arabia? We support a regime that oppresses those people. We support them because they cooperate on the oil front. So, why strike back at them? Let’s hit Iraq. They don’t give us any oil – let’s get’em!

If you look at the history of covert special operations, it’s all about securing a piece of land that has some valuable resource. Once the resource is identified, special ops figures out the most efficient way to suppress or extinguish the population that is unfortunate enough to live near it. Then the big companies come in, from the United Fruit Company to the Bechtels and Halliburtons of the world. That is the way it has been and still is, from John D. Rockefeller and Allen Dulles right through Kissinger, Bush Sr. and Cheney. Millions of innocent civilians have been slaughtered. Let me repeat that: Millions of innocent civilians have been slaughtered. And I’m not kidding you. These are evil motherfuckers and they are no friends of ours. These things don’t have anything to do with protecting the US people or standing up for freedom and democracy. They don’t give a shit about the average American. In this age of the global economy, the concept of nation state is obsolete. If only proud Americans could understand that. Pride in the American way is just another propaganda device for PsyOps agents — people like me — to use to manipulate you and make you think that black is white and white is black.

If you were to ask me who is a bigger threat to the people of the US, Cheney or bin Laden, or who has done more damage to the US, I would say Cheney without hesitation. Cheney, along with Bush Sr. and Kissinger, has been running the covert world for about 40 years now.

A little side note for you: I firmly believe Robert Gates, the current Secretary of Defense and Bush Sr.’s right-hand man in the covert world, used computer cryptography and software security assets to get Bush Jr. elected both times. I do not have direct knowledge of the operation, but research “Robert Gates,” “Bill Owens,” “electronic voting security,” “HAVA,” “VoteHere” and “Scientific Applications International Corp.” [We will post more on this in the near future.] The operation went so well that Gates was going to be made the first ever Director of National Intelligence. He turned down the job, but then took the Secretary of Defense position when Rumsfeld was removed from his public position. I don’t think there will ever be solid evidence linking directly to members of the administration; it’s all a tangled web of plausible deniability. But I do think it will eventually be proven that the elections were manipulated to deliver Bush the victory. Many people in the covert world take this for granted, as common sense. Please don’t confuse this as partisan propaganda. I don’t give a shit about the Democrat or Republican PsyOps mind-fuck dynamic. They’re just labels to divide a potentially powerful united US public.

It’s hard to get the average American to understand these things. Most everyone in this country has been mind-fucked since birth. For a very blatant example, you can look at the advertising industry and the way they have increased intensely their focus on the youth. It’s all about breeding impulsive emotionally driven consumers through repetition – over and over again – buy, buy, buy. You hear something enough and you internalize the message. It becomes something like the air you breathe, like gravity. It’s there, omnipresent, but you don’t realize it or consciously think about it. It becomes the spring from which your thoughts leap forth.

What it all boils down to is the exposure rate. You take a simple message and you repeat it over and over, such as mentioning Saddam and 9/11. You don’t have to say Saddam was involved in 9/11, because that is not true. You just have to mention Saddam and 9/11 in the same simple repetitive message thousands of times and people will support an attack on a country that didn’t have anything to do with 9/11 because they’ve been psychologically conditioned to link the two.

It’s psychological operations on a grand scale, mass psychology. The scientific art of manipulating public opinion is 100 years old now. PsyOps have evolved to the point, thanks to the all pervasive mass media, where we can make you believe, or at least passively accept, whatever we want you to. I secretly worked with the world’s most powerful media companies to get you to believe what “they” want you to believe. The media is the most efficient weapon of tyranny and oppression ever created. No need to physically control populations anymore when you can do it mentally – program it in, internalize the rules.

To give a little more background on publicly revealed psychological operations, in 1977, after the Congressional Church Committee investigated CIA manipulation of the news media, and right after George Bush Sr. left his post as the Director of the CIA, famed Watergate reporter Carl Bernstein searched a little deeper into what was known as Operation Mockingbird. He revealed that over 400 US journalists were actually carrying out clandestine CIA PsyOps services. Bernstein identified operations involving almost every major US news outlet, most notably The New York Times, CBS and Time magazine. The CIA responded to all of this with a “limited hangout.” A “limited hangout” is CIA speak for when classified information gets out and you have to make it seem as if you are “coming clean” with all the information on the operation, but in reality you are really just admitting part of the operation so you can cover up other deeper parts and continue the program. This worked very effectively for them, as the US public quickly moved on and this operation has largely been forgotten. Currently, I would estimate, with cable news and the Internet now, that there are well over a thousand covert operatives spread throughout the news media. They have a firm grip on television, newspapers, wire services, radio and magazines. However, with the Internet – that’s their weak spot – it’s too decentralized and difficult to control.

The Pentagon’s Information Operations Roadmap now describes the Internet as an enemy “weapons system.” The Pentagon doesn’t hide the fact that they want total control over information, or as they call it “information dominance.” They very plainly state that they seek to “control land, sea, space and information.” This is what they refer to as “full spectrum dominance.” If you don’t think they see this as a top priority, look at Iraq. The plan to “embed” journalists with the military in Iraq was a strategic operation that considered “journalism as part of psychological operations.” The journalists that weren’t “embedded” were considered “enemy combatants.” More journalists have been killed in Iraq than in any other war, and it is the US doing a large portion of the killing.

Before I go too far here, the point I want to make to the US public, the bottom line is that the most power crazed and greed addicted people are above the law and get away with everything. In the covert world rules do not apply. Democracy is a fairy tale. Nothing is what it seems, reality isn’t real. Through the looking glass Alice goes.

I’ve fought against it and got nowhere. I’ve informed people that I naively thought could do something, but nothing could be done. I took all the blood money I’ve made and donated it to humanitarian causes. Will it make a difference? No. Not in the grand scheme of things, but in the short run it may save a few people… maybe. And that’s all I can hope for at this point.

I’ve become so cynical! I live with guilt and cynicism weighing on my every move, my every thought.

When you’ve seen the things I have seen, been involved with the things I’ve been involved with, when you’ve spent the majority of your life living like I have, what do you do when you decide to give it up and get out? Can you ever get out?

I was able to get out, thus far, when no one I knew thought I could get out. But once you lived in the covert world, “normal” civilian life feels like a prison sentence. Then again, the covert world was a prison sentence.

I’ve been strongly advised to keep a very low profile and forget about things for a while. But I find it hard to just fade into the night when we are reaching an event horizon, a breaking point. Despite my cynicism, there is a part of me that knows I have to keep fighting. The stakes are just too high, higher then they’ve ever been. The human species is in serious trouble, facing a set of crises unlike anything we’ve ever faced before. Unless these covert forces are exposed, and ultimately eliminated, I don’t see how we can even begin to make the bold actions that we need to start making now – and I mean right fucking now! These covert forces are a root cause and driver, a cancer spreading through the system and planet.

As far as I can tell, you can’t change the system from within the intelligence community itself. This includes the Senate Intel Committee. If the urgently needed changes are ever to happen, it has to come from the US public. Now I know first hand how the American public has been conditioned to be apathetic and not get involved in politics and has been fed a steady diet of misinformation. But propaganda only works to the point where the population being propagandized is not feeling the direct impact and negative consequences on a personal level in their daily lives. That’s why the draft played a large role in bringing an end to Vietnam. We need another draft to push the mainstream over the edge and into action, but the façade is beginning to crack – 9/11 had some effect, the war in Iraq certainly, Katrina, massive job loses and an economic downturn that has really just begun have all factored into creating a critical mass. Even the most propagandized population in the history of civilization will have to act when their very survival and well- being is directly threatened and impacted. I just hope enough people will understand the need for bold decisive action now, before it’s too late.

So, to the people who have awareness of the problems facing us, if I could give advice, it would be this:

1. Try the Bush Administration for war crimes. If the case could ever be brought to court, the evidence to convict is definitely there. This is why the administration has been strongly against the International Criminal Court. If we are to begin repairing this country, and the world, we must begin by showing these power crazed and covert forces that they are accountable. If we can convict someone like Cheney, we will send a powerful message to the covert world. If we let them walk, we will keep having these problems. New people will follow them and take their place.

2. Investigate where all the military spending has been vanishing off to. There are literally trillions of taxpayer dollars unaccounted for. This money is fueling the covert world and terrorism in general. As part of this, I would include an investigation into war profiteering as well.

3. Make it mandatory that all electronic voting machines must have a 100% verifiable paper trail.

4. Get people into the Federal Communications Commission (FCC) who will smash the current media ownership rules. The concentration of media ownership is the foundation of the covert power structure. Without that, the whole thing is a house of cards. That’s why the FCC is currently trying to ram through rules that will further consolidate media ownership before the Bush administration leaves office. As part of this, it is pivotal that we protect the open architecture of the Internet. The media belongs to the people, as does the government, in theory anyway, but we need an information system that actually serves the public interest.

5. Declare a national and global emergency on the environmental front. We have already reached the breaking point. We need organized, governmental, policy driven, bold action now.

6. We need to address entities that now have power over the Constitution, such as the undemocratic and unelected corporate global governing structure – institutions like the World Trade Organization (WTO) and the International Monetary Fund (IMF) and “agreements” like NAFTA and DR-CAFTA, to name a few. Most Americans don’t even know what these power structures are, let alone that they have power that supersedes the Constitution. We must also address the National Security Act, that’s where the ultimate power of our country lies. The National Security Act has effectively made the Constitution meaningless and is the primary driver of the covert world. The PATRIOT Act and various other newly granted powers must also be drastically revised or eliminated completely in order to protect our civil liberties.

7. Lastly, we need to have publicly financed elections. As long as we have a system that requires candidates to raise tens of millions of dollars to even be considered for office, we will have politicians who bend over backwards for the richest one percent and the most powerful elements of society at the citizens’ expense. An important aspect of this has to be a requirement for large media companies to provide candidates with free airtime. Candidates have to spend the majority of their money on advertising in the mainstream media. That’s why the major news media spend so much time focusing on who is raising the most money, because they are the ones who end up with all that money. Once we have publicly financed elections and free airtime for candidates, we will get people in office who will work in the interests of the public because they are not beholden to the large and powerful entities. When you have politicians depending on the public instead of the private sector for survival, all the issues mentioned above could be addressed because they won’t have to fear the withdrawal of support from large corporations and the wealthy and powerful who do not want these things to happen. This will also enable us to eliminate tax breaks for the richest one percent, put an end to corporate welfare practices, and stop funding for obscene military and prison industrial companies that are profiting off of disasters and no longer serve security interests. Then we can redirect that money into environmental, education, health care and social security programs, to mention a few.

In the current political environment this may all sound like an unrealistic pipe dream, but these are the seven pivotal things that MUST happen. If all seven don’t happen within the next few years, we will have set the world on a disastrously irreversible course. This is “the unfortunate reality of our current situation.” It is not going to be easy, but you better start fighting for it now, while we still can.

It really does come down to us. You have to personally, in your daily life, do everything you can. With enough public pressure all of these things are achievable. Once we get a small portion of the population acting in this direction, it will quickly catch on and spread. Even though the overwhelming majority of the US population is incredibly propagandized on the surface, just underneath is the realization of the need for mass action. They just need leaders to point this out. The mainstream just needs a spark. Do what you can to set it off. It is a matter of unprecedented significance.


December 4, 2007 Posted by | Government | , , , , , , , , , | Leave a comment