Brazil Sending the U.S. a Strong Message About NSA Surveillance

Brazilian President Dilma Rousseff doesn’t approve of the U.S. National Security Agency’s surveillance techniques. She’s making that much clear by overseeing the construction of a $185 million overseas fiber-optic cable which will stretch across the Atlantic Ocean from Fortaleza, Brazil to Lisbon, Portugal. The Brazilian government won’t ask for the help of any U.S. companies during its development so as to not give the U.S. National Security Agency any opportunities to intercept its data or communications. The Brazilian state-owned telecommunications company Telecomunicacoes Brasileiras SA, or Talebras, that’s overseeing the 3,500-mile cable project said it will only partner with European, Asian and local partners to help with construction.

Recording Shows Reagan Apologizing to Thatcher over 1983 U.S. Invasion of Grenada

A 30-year-old audio recording has been released publicly for the first time that captures then U.S. President Ronald Reagan apologizing to British Prime Minister Margaret Thatcher over the U.S. invasion of Grenada. The United States invaded the small Caribbean nation in 1983 after the assassination of leftist President Maurice Bishop. Within months, a pro-U.S. government was installed. While the fighting was still underway, Reagan called Thatcher to apologize for not warning her in advance of his plan to invade Grenada, which is part of the British Commonwealth. Reagan went on to apologize for any “embarrassment” caused to Britain.

Controversial vaccine studies

In 2009, several schools for tribal children in Khammam district in Telangana — then a part of undivided Andhra Pradesh — became sites for observation studies for a cervical cancer vaccine that was administered to thousands of girls aged between nine and 15. The girls were administered the Human Papilloma Virus (HPV) vaccine in three rounds that year under the supervision of state health department officials. The vaccine used was Gardasil, manufactured by Merck. It was administered to around 16,000 girls in the district, many of whom stayed in state government-run hostels meant for tribal students.

Months later, many girls started falling ill and by 2010 five of them died. Two more deaths were reported from Vadodara, Gujarat, where an estimated 14,000 children studying in schools meant for tribal children were also vaccinated with another brand of HPV vaccine, Cervarix, manufactured by GSK. Earlier in the week, the Associated Press reported that scores of teenaged girls were hospitalised in a small town in northern Colombia with symptoms that parents suspect could be an adverse reaction to Gardasil.

A standing committee on health and family welfare that investigated the irregularities pertaining to the observation studies in India tabled its report a year ago, on August 30.

The committee found that consent for conducting these studies, in many cases, was taken from the hostel wardens, which was a flagrant violation of norms. In many other cases, thumbprint impressions of their poor and illiterate parents were duly affixed onto the consent form. The children also had no idea about the nature of the disease or the vaccine. The authorities concerned could not furnish requisite consent forms for the vaccinated children in a huge number of cases.

The committee said it was “deeply shocked to find that in Andhra Pradesh out of the 9,543 [consent] forms, 1,948 forms have thumb impressions while hostel wardens have signed 2,763 forms. In Gujarat, out of the 6,217 forms 3,944 have thumb impressions and 5,454 either signed or carried thumb impressions of guardians. The data revealed that a very large number of parents or guardians are illiterate and could not even write in their local languages, Telugu or Gujarati.”

Earlier this month, taking a serious view of the death of seven tribal girls in the context of the observation studies, the Supreme Court asked the Drug Controller General of India (DCGI) and the Indian Council of Medical Research (ICMR) to explain how permissions were given.

The SC bench of justices Dipak Misra and V Gopala Gowda asked the Centre to produce relevant files that pertained to the grant of licence for trial of the HPV vaccine in India. The court also asked the Centre to appraise it of steps taken on the report of the parliamentary committee.

Shoddy Investigations

When a team of health activists from an NGO that specializes in women’s health named Sama visited Khammam in March 2010 on a fact-finding mission, they were told that as many as 120 girls experienced adverse reactions such as epileptic seizures, severe stomach ache, headaches and mood swings. The Sama report also said there had been cases of early onset of menstruation following the vaccination, heavy bleeding and severe menstrual cramps among many students. The standing committee pulled up the relevant state governments for the shoddy investigation into these deaths. It said it was disturbed to find that “all the seven deaths were summarily dismissed as unrelated to vaccinations without in-depth investigations…the speculative causes were suicides, accidental drowning in well (why not suicide?), malaria, viral infections, subarachnoid hemorrhage (without autopsy) etc.”

The committee said that in the context of deaths of girls classified as suicide, the role of the “HPV vaccine as a possible, if not probable, cause of suicidal ideation cannot be ruled out.”

It said that an American NGO — Program for Appropriate Technology in Health (PATH) — had carried out the studies.

The committee found that the objective behind the observation studies in India primarily was to collect and record data on the effect of the vaccines on the minor subjects. Another objective was to help the relevant authorities in India make an informed opinion on introducing the vaccine into India’s immunization programme. Providing a background, the report states that on June 1, 2006, American drug regulator, the US Food and Drug Administration (USFDA) approved the first vaccine — Gardasil — to prevent HPV. According to the World Health Organisation (WHO), two HPV types causes 70% of cervical cancers. In the very same month, PATH embarked upon a large-scale, five-year project that involved observation studies, covering Peru, Vietnam and Uganda, apart from India.

— source

Think Tank Memories

Karl Fitzgerald: This week on the Renegade Economists we’re joined by Professor Michael Hudson, the author of The Bubble & Beyond, Super Imperialism, and a host of other books. You can read his work at Certainly our favourite guest here on the Renegade Economists and Michael, today we’re going to have a look at the role of think tanks in sculpting the American mind and the public policy that flows from that. What’s your take on the role of think tanks in American economic history?

Michael Hudson: Well, today they’ve become basically public relations organisations and they’re subsidised by groups with political agendas. The first major think thank was in the 1930s and it was a very good one at that time: the Brookings Institution, headed by Harold Moulton. They wrote America’s Capacity to Produce & to Consume which, without being Keynesian, made the same points that Keynes was making about the need for consumer spending and the need for economic revival. And that was really the main think tank one heard about during the 1930s and even the ‘40s.

Later, think tanks began to be formed on the right-wing. A military think tank, the RAND Corporation, was founded in California. Herman Kahn came from there, and then the Department of Defense funded his ideas at the Hudson Institute at Croton-on-Hudson, New York. He was the model for Dr Strangelove. I joined him as the number two man and economist in 1972, just as my Super-Imperialism was published. It proved to be a big hit with the Defense Department in Washington, which used it as a “How to do it” book. My first job was to explain just how America was using monetary imperialism to get a free ride from other countries. Herman said that this was part of the “good news” that he wanted to spread.

Herman and I actually disagreed on almost every policy. We’d go around the country together arguing. He’d talk about the glass being half-full and he said I talked about it being half-empty, but I said, “No, you guys are peeing in it.” So then he talked about the economy being an expanding pie – he was into calculating GDP growth at doubling times to show that in time every economy could become a leisure economy. My job was to ask, “Who’s actually making the pie? And who’s going to eat it?” He didn’t focus much on distribution and polarization of wealth.

I ended up getting a number of the Institute’s corporate customers as clients, because they sensed that my warnings were right with regard to the financial squeeze that was coming. So Herman added Henry Kaufman and Al Wojnilower to a presentation one time, and said that we all shared a central European/Jewish outsiderness doubting that the core would be able to manage the economy well. In my case I was a Trotskyist, and Herman cultivated followers of Max Shachtman because he knew we could be trusted to be anti-Soviet. I had no trouble getting a Top Secret security clearance, much to my chagrin.

After the mid-‘70s, right-wingers and left-wingers formed their own think tanks. The left-wing think tanks were not very successful. The right-wing think tanks had much more money, especially from the Koch brothers. First was the American Heritage Foundation in 1973 by the beer brewer Joseph Coors and a few other extremists. Their aim was to fight against everything that most Americans stood for – equality, democracy and freedom from oligarchy. Then, in 1974, the Koch brothers established a propaganda institute named after a Roman hero, Cato, to help establish a right-wing oligarchy by fighting democratic government in the name of “personal liberty.” I’m told that the Koch Brothers made a fortune by extracting oil without paying from the native American reservations, so that’s basically their idea of what liberty is all about – a denial that there’s any such thing as crime or a free lunch.

Karl: Yeah, I was surprised to see that Charles Koch founded the Cato Institute, which here in Australia has quite some influence.

Michael: It was originally the Koch Institute but then he thought, instead of naming it after himself, to get prestige he’d name it after a mythical Roman farmer who was very patriotic. Of course, Koch isn’t really patriotic at all. He wants to abolish the existing government and turn it over to him and his cronies to create a kleptocracy, much as neoliberals have done in Russia which is now the basic libertarian model – just the opposite of Cato. So if you’re going to dismantle government and privatise it and turn it over to the kleptocrats, of course you want to name it after someone who’s a great patriot and wants to do the exact opposite.

Karl: And listeners, if you ever need motivation on why you should continue studying in this sort of area, the topics that Michael and I talk about, go to the staff page for the Cato Institute and have a look at some of those cheesy mug shots there. It’s probably some of the best motivation to say hang on a minute, these aren’t the sort of people I want sculpting public policy. And the size of some of these institutes and the staff they employ, I mean, Cato is one of the small ones at probably 100 staff members there, but the RAND Institute you were mentioning before, that has 1,700 people working for it.

Michael: That’s largely in national security issues. It was formed essentially to advise the Defense Department. It was there that Herman Kahn wrote on thermonuclear war. His principle was if there is a thermonuclear war, some people will survive. That’s why Dr Strangelove made such fun of the sort of Kahn/Kissinger figure of Peter Sellers saying, “Look, we’ll have caves and we’ll need to have attractive women in the caves to help us breed well”. But Herman said he wanted to be right under the atom bomb. He didn’t want to live in that kind of society, but he said at least you could have a survival. Then he moved to the east coast and formed the Hudson Institute in 1961. However, that later went broke. Many critics got so angry at him for writing on thermonuclear war that he started the Corporate Environment Study. That is the second reason why I was brought in. He wanted to advise corporations as a futurist, but he kept talking about the whole world being very positive and having economic growth. Most people knew that wasn’t going to take place. Interest rates were on their way up, rising to 20% by the end of the 1970s.

The Hudson Institute went broke by the time Herman died in 1983, and was sold to the Lily-Tulip Corporation and other right-wingers in Indianapolis, Indiana – one of the most Bible thumping, right-wing cities in the United States. Hardly anybody I knew there went along, so it became much more right-wing and neo-con. So think tanks do go broke when their job is merely thinking rather than lobbying. Once they’re up for sale, any ideology can buy them and use them as a lobbying organization. That’s really what these so-called think tanks are in today’s world. You could say that their role is to prevent thought, to prevent people from thinking. The aim is Orwellian: to craft a rhetoric to replace thinking with a deceptive set of labels, so that they don’t understand what’s going on. The right-wing institutions that dominate today’s think-tank world (as they do academic economics departments and business schools) promote the fantasy that turning over the government property to wealthy kleptocrats is the way for everybody to get rich. The reality, of course, is robbery. For instance, I had a pension agreement with the old Hudson Institute. The first thing the right-wingers in Indianapolis did was steal the pensions from the former employees, and give it to themselves and other right-wingers. That was their idea of a free market – just as Wall Street and the 1% are scaling back or stealing pensions in the economy at large today. For them, “wealth creators” are those able to take the most from other people, from nature and from the economy at large. In other words, most think tanks have become an arm of the rentier class.

Most think tanks are run by right-wing kleptocrats who want to enable their donors to get a tax deduction. Instead of saying, “Here’s political lobbying” they can get a tax deduction for paying people to pretend to be objective and to give policy papers that are put on the desks of senators and representatives and politicians all over the world. In that sense think tanks are like business schools have become, broadcasting a bland ideology that there’s no such thing as unproductive labour; no such thing as unearned income. Everybody earns what they get, so the 1% actually get their 60% of all the income in America because they’re so productive, as if they’re job creators rather than job destroyers by imposing austerity and debt deflation in an increasingly monopolized economy. The reality, of course, is that they’re reducing jobs by imposing austerity on the rest of society on behalf of the 1%.

So when you look at a think tank you have to say, “What is it that they want me to believe?” They begin with a policy and then reason back to craft a logic that will lead to this policy. This logic usually involves a tunnel-vision, taking for granted the existing unfair way in which the world works. What they think about is not how to make the future better, or to forecast existing trends (which would mean debt deflation, monopoly and economic polarization), but “How do we develop a rhetoric that can make this policy that serves us instead of the people seem good – as if it benefits the population at large?” They’re like politicians, the church or the universities. You can think of the church as a think tank. You can think of universities as think tanks. They’re all representing an ideology.

Karl: Back to your buddy Herman Kahn and the RAND Corporation. How did he see the role of the military in encouraging peace?

Michael: He looked at the world as a Cold War almost abstractly – “us versus them”. In his mind the problem was simply one of “How do you beat the other side,” whoever the other side might be. He was a brilliant military tactician. He was like a fat kid in high school who spends his time thinking about military and tanks. Also, he had a very quick abstract mathematical mind. I remember on one occasion he invited me to dinner with the General who, I was told, had been in charge of killing more than anyone else. Herman said, “You know, there’s one thing: I invite you for dinner, you won’t insult him”. So I thought, “What am I going to do? I can’t insult him”. Then I listened to him and he sounded more coherent than any peace leader I’d met. Herman had said, “Look, we can divide all of Vietnam into canals. We can cut everything into canals and put fences and nobody can communicate and that way we can prevent the country from doing anything”. And the General explained why the Vietnam War had to be lost. It wasn’t a war against communism. Over thousands of years, North Vietnam wanted most of all to be independent from China. American policy was completely miscast. I was pleasantly amazed.

Herman didn’t pay much attention to the politics. There was a song by Tom Lehrer about Wernher von Braun: “I send the bombs go up but don’t care where they come down; that’s not my department, said Wernher von Braun”. That’s what Herman was like. He could think of a tactic without really thinking of it being in the service of good or bad. He was just a very patriotic American – except that his main loyalty was to Israel. When we went to Canada he was not able to get a security clearance there because he said his loyalty was to Israel. I was actually the person who had the security clearance, ironically enough with my background.

Karl: You’re on 3CR’s Renegade Economist, this week with Professor Michael Hudson, author of The Bubble & Beyond, Super Imperialism, and hundreds and hundreds of articles on that are sure to give you a new outlook to life on Planet Earth. Michael, how about the Heritage Foundation? These guys had unprecedented access to Ronald Reagan and seem to have fed into the Bush leadership realm there. What dirt do you have on the Heritage Foundation?

Michael: It’s like the Cato Institute, an ultra-right-wing institute whose party line is that government is the enemy, you have to stop government planning. Of course, every economy is planned by someone or other. If you oppose government planning, that role shifts to Wall Street. The Koch family is rich enough that, essentially, they want to be the planners. Their plan is essentially fossil fuels, oil, and everything that the greens and the left-wing are against. The right-wing of the Republican Party in America has left enough leeway for the Democratic Party under Obama to move hard-right, neo-con and pro-Wall Street. And Obama, as you know, is supporting the tar sands in Canada, which are the dirtiest source of oil in the world.

The first large contract I worked on at the Hudson Institute in 1973 and ’74 was on the gasification and liquefaction of the tar sands, for ERDA, the Energy Research Defense Agency. They asked the Hudson Institute to do an economic analysis. I found that in the analysis the government gave me, they had the price of water at zero. Of course, oil gasification makes gas out of water, and this is much more the case for the tar sands. This drive went on into the Carter administration. Herman and I went to the White House and it was explained to me, that this was the whole idea of tar sands. The aim is to use so much water that it creates a drought in America. The drought was seen as doubling or quadrupling grain prices. In essence, the idea was for America to pay for higher priced oil with higher priced grain. This would support the balance of payments enough to finance U.S. military power throughout the world. In the process, of course, it would starve as much as a quarter of the population of Africa and Latin America.

Today’s gasohol is having this effect. It is diverting farmland away from food production to gasohol. In the process, it is driving down the world oil price, and thus hurting Russia’s balance of payments, while increasing food export prices for the United States. American foreign policy has almost always been based on agricultural exports, not on industrial exports as people might think. It’s by agriculture and control of the food supply that American diplomacy has been able to control most of the Third World. The World Bank’s geopolitical lending strategy has been to turn countries into food deficit areas by convincing them to grow cash crops – plantation export crops – not to feed themselves with their own food crops.

I made a write up of coal and tar sands liquefaction based on what the water really would cost. They never released my original report. The government re-wrote it, putting in the price of water at zero cost. Just like in the case of atomic energy for power, they treat atomic waste as having no cost, as if you can just dump it in the river – meaning in practice that you pay a lot of money to the mafia and they dump it in the river.

Karl: Yes, and same for the access to water through the Artesian Basin here in Australia for the uranium mining, they use thousands and thousands of litres of water each day at no cost. So Michael, that’s staggering to hear some of these stories, but worse yet is just the state of democracy around the planet and the fact that politicians have to pawn their policies to pay for advertising on what was once known as the “public airwaves”. Now, I was surprised to see recently that some 95% of US candidates are decided by whoever has the most campaign contributions. That is a pretty harrowing level of control the corporate interests have over what should be this fundamental human right.

Michael: Well, that’s what democracy is Karl: democracy of money, $1 per vote. Just as it was in Rome. The richest citizens were able to vote first. If you look at the Roman constitution it was biased in favour of wealth. Essentially, democracy means every person has an equal ability to finance the candidate of their choice and whoever raises the most money buys the most TV time, gets to present themselves in the biggest rhetorical hit to the population at large. We’re in a celebrity culture and neither party really is talking much about economics. They’re talking about cultural issues primarily, family issues, ethnic issues, sexual preference, but the one thing left out of account is the economic dimension. Only the right wing seems to be talking about it. As you’re seeing in Europe, French and other right-wing parties are gaining votes because the left has agreed not to talk about economics, but left that to the central planners on Wall Street or the city of London or Frankfurt. Herman found this already in 1972, when only the “Southern cracker” George Wallace was talking about the real economic issues. He was shot.

Karl: There seems to be a new US trend where corporations are setting up their own teaching streams through universities that they fund and are training students into their particular processes, so when they graduate they go straight in the system, they already know the invoicing, they know the project management software, they know their management standards.

Michael: This may be in some schools, but it’s not in most. For instance, in economics, which is my field, it was hard to get a job. Even in the 1960s when I got my degree, corporations said they only valued an economics PhD because it showed that the prospective employee was willing to work very hard, and if they’d work hard for something as silly as an economics PhD, they’d work hard for anything the corporation wanted them to do, and would say anything that in order to get ahead, because that’s how they had to get their economics PhD. You’re talking more as if there’s a technical school going on, and I haven’t been following that.

Karl: Yes, well, it’s a new development so we’ll keep our eye on that because it sounds like another layer of blinkers to keep on students. Michael, it’s interesting that the poor have been convinced that it’s more within their interests to vote along the racist-type line with this new sort of far right angle than to vote along their economic interests. The think tanks have been very good at sculpting these sort of values to come through their various press releases and the memes they develop through society.

Michael: Well, most of the poor people don’t vote. There’s very low turnout and the Republican Party in America is trying to make sure that even if they try to vote, they’re not permitted to, because it’s requiring all sorts of public identification. In order to get it, there’ll be a police record searched, there will be a search for fines, anything from jaywalking to jail fines. There’s been an intimidation against the poor, on the ground that they may not vote in the right way. Of the poor that do vote, they tend to watch Fox News. I guess that’s the equivalent of your Sky News in Australia. This is ultra-right-wing. It presents a right-wing economic platform of individualism as if it were somehow democratic and populist. Populism has always been right-wing economics wrapped in a left-wing kernel of personality. Most electioneering in the United States is personal attack on the opponent. The question is, who can you attack more? Very much like the American legal system in court: The aim to discredit the witness or the plaintiff. Insurance companies, for instance, try to defend themselves by discrediting claimants, asking the jury, “Should this person, whose life we’ve just shown you isn’t very nice, really get paid for the insurance he’s taken out?”

The idea of politics here is to discredit any candidate on the other side. I learned this when I was in my 20s. The Catholic Church was funding my early critique of American foreign aid as being imperialist. I asked whether they thought I should go into politics. They said, “No, you’d never make it”. And I said, “Why?” and they said, “Well, nobody has a police record or any other dirt on you.” I asked what they meant. They said, “Unless they have something over you to blackmail you with, you’re not going to be able to get campaign funding. Because they believe that you might do something surprising,” in other words, something they haven’t asked you to do.

So basically throughout politics, on both sides of the spectrum, voters have candidates who are funded by backers who have enough over them that they can always blackmail. But then the other side gets this blackmail. For instance, when President Clinton was being impeached the Koch brothers, I’m told, went to the Democratic Party and said, “Okay, look, we will drop the impeachment against President Clinton if you will let us drop your law suit against us for stealing $5 billion and basing our fortune on the oil that we’ve illegally stolen from the Navaho and the other Indians”. So Clinton is reported to have said, “Okay, I get to screw my interns and you get to steal the oil on the Republican side”. That’s how politics are done over here.

Karl: Michael Hudson, that’s quite a story. Change is finally occurring in the global macroeconomic agenda with Janet Yellen, Federal Reserve, indicating that interest rate signals will change in the near term, so it looks like next year interest rates may start to increase in America. That’s leading to some very interesting developments in the bond market. What are you seeing play out?

Michael: Nobody can tell. You just had Bill Gross leave the largest bond fund, the Pimco bond fund, because he said that he didn’t think the Federal Reserve was going to be able to raise interest rates on a 10 year bond over 2%. He lost money because a lot of other funds have made money gambling on corporate junk bonds that are yielding about 6.5% now. He said, “Look, there’s a great over-extension in the junk bond market, they’re going to go down”. So he played it safe, put his money in two-percenters and basically was forced out because he didn’t make as much money as the people who were saying, “Maybe we can make another year’s profit off our junk bonds, more than the Treasury can pay”. So there are billions of dollars on every side. It’s a gamble, and nobody really has a clue.

Karl: Do you think what Gross was saying – and I knew there was some serious politics behind him resigning there – is that interest rates are dead in the water as a housing market tool? Peoples’ debt levels are so high now that here in Australia once interest rates start increasing, which is not far away, this is going to put incredible stress on families and who knows what sort of debt defaults will result?

Michael: Has the suicide rate gone up yet?

Karl: I haven’t been checking that metric Michael, no.

Michael: There’s a basic rule: you don’t know how far you can push somebody until you actually have a reaction. So they can continue to indebt Australians more and more, they can continue to tighten the screws. Until there are suicides and people going postal and being violent, you don’t how far you can push them.

Karl: Well, we do live in a very lucky country here and they call it the “great Australian economic miracle” is struggling along, we’re now in our 22nd year I think since we’ve had a recession.

Michael: I don’t think you’re lucky at all. The person who told me they were lucky was a Central Banker in Australia who said, “We’re lucky because we live right near China and we can export iron ore and other raw materials”. But he also said, “We’re so lucky that we don’t need industry” and he confided to me, “In fact, we really don’t need employees. We don’t need industry, we don’t need employees; all we need is iron ore,” that is, to make a big hole in the ground. If you think that’s lucky then 90% of the Australian population should either emigrate or expect to be financially squeezed.

Karl: Yeah, well, we do have good education, good health, a strong democracy. We’ve learnt from some of the mistakes of other nations so that we do have things like compulsory voting, so people are at least encouraged to pretend they have an interest in politics on some front or another.

Michael: So you get to choose between “yes”, “yes please” or “yes, thank you”?

Karl: That’s right, yeah, Tweedledum, Tweedledee. But we’ve got record debt to GDP levels now and one of the trends that I’m always tracking is the level of investors in the land game, the housing market. And in your excellent book The Bubble & Beyond you remind us how rent is now for paying interest. What we call interest-only loans here account for some 60% of all investment loans. All speculators need do is pay the interest, and then they pay off the principal when they flip the property in a couple of years. So Michael, how are these interest-only loans playing out in America and around the world?

Michael: There haven’t been that many interest-only loans here anymore. Also, there are not many 100% loans either. Banks are insisting on larger down payments, and higher incomes by buyers, with no fictitious income statements like the “Liars’ loans” which mortgage brokers filled out. (The “liars” in question usually were the bankers and their brokers, rarely the hapless borrowers.) So they’re becoming much more conservative in the United States.

The problem with interest-only loans when you’re not paying down the principal, is that if and when real estate prices go down, the debts remain in place. The home owner is left with negative equity. In America you’re allowed to walk away from the property and leave the bank holding the property and absorbing a loss on the loan. But I think in other countries, maybe Australia, if you walk away you still owe the money, so the debt will follow you for all of your life.

Karl: Yeah, that’s right, that’s one of the big stressors we have here for sure. And these higher down payment rates you’re talking about, some people are calling it the next big thing in terms of public policy and that’s this macroprudential policy. There are various ways to do it, but one of the ways is to ensure that there’s, for example, a 20% deposit before people can access a housing loan. Do you see much validity in such a policy as a way of pulling out the speculative heat?

Michael: In principle, it makes sense. In America what happens is the banks that would make the mortgage, they’d say, “Okay, we’ll lend you 80% as a mortgage loan and we’ll give you 20% as a personal loan”. So a lot of buyers would buy the property with a personal loan to make up the 20% down payment. So the banks can get around it. The big thing to remember is that it’s the banks that are the crooks, not the borrowers.

The banks are trying to get around the regulations. You have to be willing to throw the bankers in jail for cheating, and make a law saying that if a banker makes a loan to a property without knowing how the borrower can pay back the loan, the loan is declared fraudulent and is annulled. You have to have a fraudulent conveyance law to prevent predatory loans enabling a bank to say, “Okay, here’s an interest only loan. We know you can’t pay it, but we don’t care because we’ll get to claim whatever you had for all your life. And if everything goes wrong, we’ll tell the government you have to bail us out because otherwise we go broke and we’ll starve the economy of credit and there won’t be any more cash in the ATM machines”. That’s essentially what the American banks did in 2008.

So you have to have some way of controlling the banks. I don’t see any group in Australia that’s really talking about this.

Karl: I agree Michael, more needs to be said on this topic. But my concern with macroprudential is that it will lock out first home owners even further and enable those who already have capital to provide that 20% down payment, so they’re the ones who get the loans and not those who are scraping together their two-bobs to access a housing loan. So that’s my concern with macroprudential is that it’s another sort of diversion from looking at the serious issue of distribution and taxing these rentier gains, these immense capital gains that occur from ownership of any portion of the earth.

Michael: Well, in order to make a judgment on what you said, one would have to know how much it costs to rent a home or a place to live, compared to how much to buy it. In America, in many cases it’s much cheaper to rent. Many people prefer to rent, because they want to avoid buying an over-priced property and then taking a big loss. They would rather rent and wait for the prices to come down. A lot of people are still doing that.

Karl: Yeah, well that’s certainly the case here in Australia, but the problem is investors are basically pushing renters out every couple of years as they flip the property. The new price that the next greater fool has agreed to is so high that the current renters have little capacity to pay a rent that gets even close to justifying the new purchase price. The norm is that new renters are ushered in, people who have no idea what the past renters were paying. This is a way to keep under wraps the impact of rent as a secret tax the wealthy charge the poor. So there’s problems with renting, it’s hard to find a long term rental agreement.

Michael: Oh, what’s long term? In New York the leases were usually two or three years.

Karl: Yeah, well, I wish you could get that. You basically become month-on-month after you’ve been there a year or two. You can’t get a six or seven year lease, like you can in Germany.

Michael: That’s crazy.

Karl: Hmmm. Now, what about these Rental-Backed Mortgage Securities, Michael? Are you tracking those yet?

Michael: They’ve not really taken off yet. Essentially, the worry is it’s another junk mortgage bubble and nobody can really tell.

Right after the 2008 crash a lot of hedge funds got into the real estate market and bought up all these properties that were being foreclosed upon in places like Charlotte, North Carolina. Interest rates went all the way down to about 1% and 1/10th of a percent on government bonds, so the hedge funds said, “Look, we’re going to buy property for all cash. We’re not going to debt leverage. We’re going to do exactly the opposite of debt leveraging. We’re going to buy all cash properties and get rent and make a much higher rate of return”. They’ve done that. And they bought so many foreclosed properties from the banks, buying them literally by the hundreds at a time, that now they say, “Okay, now we’ve bought out these properties, the property prices have gone up largely because we’ve bid them up by buying them. Now let’s cash out, we’ve made all that we can make on the rental income. Now let’s go public and cash out and sell it to the investors and leave them holding the bag, and take our money and run”.

Karl: Well, I’m going to be interested to see what happens because from what I’m reading here it’s still booming ahead and the returns are immense, some 25% return year-on-year when you include the economic rent with the extortive rents they’re charging. So I think it’s only just beginning and this really worries me, because we’re going to see the corporatisation of the rental market as well as the mortgage market and that’s something that may well be the next tier in this neo-serfdom era.

Michael: I think that’s right. You’ve put your finger on it, the corporatisation of rents. In the past most rental properties were run by either mom or pop or by maybe real estate corporations, but now that they’re issuing stock they’re becoming a very large absentee owner block.

Karl: Michael, there seems to have developed a minimum wage sense of competition between Seattle and California, and probably into other states now, where the push is on to raise minimum wages. Isn’t that a good thing for property investors throughout America?

Michael: Well, that’s a good thing period. The question is what’s going to happen to the recipients of the minimum wage? Are they going to be able to use it to stay out of debt? What are they going to use it for? Are they all going to simply have to pay it in higher rent and higher living costs or are they going to use it by keeping their current living standards and simply paying off their credit cards? It’s just beginning here so one doesn’t have a clue. But I think so many families in America are one paycheque away from homelessness. Even if they’re home owners, they’re one paycheque away from missing a mortgage payment or even if you miss an electric bill then the rate on your credit card goes way up because you’ve become so-called “more risky”.

So people are absolutely strapped here, and I don’t know what they’ll do with the minimum wage. Right now many people who get minimum wage also get public assistance. So if you work, for instance, in a hamburger joint, you’re also allowed to get food stamps and to get public aid. The public is subsidising the low-paying industries. So we don’t know whether a higher minimum wage will just mean they don’t get food stamps anymore. There are so many different ways this can turn out.

Karl: Michael, I’m surprised to hear you, one of the world’s leading economists, say you don’t have a clue on a number of these issues what’s going to happen. Is that because you’re wary of what these think tanks will roll out as a way to continue to push public policy in favour of the rentier interests who make so much easy money through the various monopolies?

Michael: Well, they’re all pro-rentiers. The question is at which point does the rentier strategy become self-defeating? There are what we call inner contradictions and so many things are right near the breaking point that you can’t tell just when the breaking point will come – until there’s actually a break in the chain of payments. That may be some big fraud somewhere, it may be a bankruptcy, it may be an insolvency. There’s no way of knowing. But everything is stretched so thin right now that there’s an enormous amount of money going into government bonds, short term bonds that pay only 1/10th of 1% interest because the big money can’t decide what’s happening. The big investors are getting out of the stock market in this country and it’s the small investors that are getting in. When the small investors and the Canadians get in, you know it’s time to bail out. So there must be some reason all the smart guys are bailing out.

Karl: Michael, if you were to give our listeners one piece of homework, what would it be?

Michael: Homework? Well, you know how self-interested I am. I’d say I’ve tried to outline these ideas in my book The Bubble & Beyond and the other book, Finance Capitalism & Its Discontents and Super Imperialism. I write books trying to explain how to think about the economy, in a way that’s alternative to the mainstream status-quo economics sponsored by the think tanks and academics we mentioned above.

Karl: Well, it’s such an interesting manner you write, I implore listeners to pick up The Bubble & Beyond. Michael, thanks so much for joining us on this extended Renegade Economist interview.

Michael: Thanks a lot. I’ve talked to the publisher and I think in about a month my book should be available in Australia through Amazon.

Karl: Fantastic buddy, excellent, excellent mate. Now, I just wanted to tidy up, there was one section there where you were talking about visiting the White House and the price of water.

Michael: They wanted totally deprive agriculture of water to create an artificial drought in order to use the water to make gasohol and liquefy the tar sands instead of growing crops. That’ll lead to a crop shortage and that will lead to much higher priced crops and that will lead to much better balance of payments of America.

Karl: That comes back to this sovereignty over our resources and the ability to look after ourselves that an effective tax system with low land prices enables.

Michael: Well, even if you have sovereignty over your resources, if you decide I’m going to make more money by growing gasohol instead of crops, even more money by making plantation export crops and sugar instead of feeding ourselves, then you’re going to be in danger of America saying, “Well, we don’t like what you’re doing politically, so we’re going to stop our crop exports to you and you have a choice: you can either join NATO, our strategy, or you can starve”.

— source

Missing Students

Protests continue in the southern Mexican state of Guerrero over the disappearance of 43 teachers’ college students missing for more than two weeks following a police ambush. More than 20 police have been detained and accused of collaborating with a drug gang, Guerreros Unidos, that has ties to the city’s mayor, who has fled. Fears over the students’ fate have escalated following the discovery of 10 mass graves. But on Tuesday, Mexican Attorney General Jesús Murillo said DNA tests showed none of the 28 bodies tested so far belong to the missing students. “This particular attack reflects … decades of criminalization of these schools, and a situation where in the current Mexican government it is really hard to tell where the state begins, and where drug cartels end,” says Tanalís Padilla, associate professor of Latin American history at Dartmouth College, who is writing a book on the history of rural normal schools in Mexico. Padilla says the schools offer education to low-income students unserved by the public school system, and have a legacy of political radicalism that has prompted political crackdowns in the past. We are also joined by Valeria Hamel, an activist and law student at Mexico City, where students have launched a 48-hour strike, calling for the students to be returned alive. “These students were politically involved in their communities, so that makes us think this is political,” Hamel says.

This school, in particular, they’re teachers’ colleges, rural teachers’ colleges, where students come from like peasant families and villages around the area, really like rather poor people who go here to be teachers, because it gives them a stable job opportunity. And these are kids who are good at school, and they want to teach their communities. Most of them get also taught to be bilingual teachers, indigenous—both indigenous and Spanish teachers, which is also really interesting how this works.

And these schools, they are really politically organized. They have been so for many, many years. One of the main leaders of the ’70s guerrilla thing, war between the government and the rural areas, came from this school. And since then, they’ve been really organized. There is a big federation of these schools, who are—who claim that they’re socialists. And they are also really—rather, they do extreme measures in their way of doing politics, because they have been pushed to that, because they come from really difficult communities. The government is constantly trying to criminalize them, is constantly trying to take away the funds of these schools. In 2011, two students from this same school were murdered by policemen. So, these students, their reaction is to fight back somehow and to also teach in their schools political knowledge. Not only do they become teachers, but they become also like social fighters.

the political history, the social history of these schools is really significant for 20th century Mexico. They stem from the social reforms implemented in the 1930s that resulted from the revolution that took place between 1910 and 1920, and were one of the few avenues where peasants could have an education. And so, they were, in one sense, validating the agrarian experience, because at these schools students were also taught or encouraged to cultivate the land and have all sorts of cooperative projects, while at the same time receiving an education. And so, for decades, these schools have sought to preserve the spirit of these social reforms. And after the 1930s, after President Lázaro Cárdenas left office, they have been, as Valeria already noted, either abandoned or outwardly attacked. So, to the extent that they are radical hubs or radical hubs of political organizing, I think must be understood, and to the extent to which the state has abandoned its commitment to education, a commitment that under the constitution it’s supposed to have. And these rural normales constitute part of that larger social program of public education and commitment to the countryside.

I think these last attacks, these latest attacks, which, again, are not a new attack on normales rurales—they have been criminalized for decades—are basically the logical culmination of, on the one hand, the criminalization of these schools, in which their students are constantly seen not as students but as political agitators—sometimes that’s the best case. Sometimes they’re just seen as people who are kids who just want to destroy public property and sabotage the social order, who are not committed to studying. That’s the way they’re portrayed in the media. So, the fact that this creates a narrative under which they can be attacked by impunity, whether it be the government or whether it be criminal organization, so this particular attack, I think, reflects that logical culmination of the decades of criminalization of these schools and a situation in which the current Mexican government, it’s really hard to tell where the state begins and where drug cartels end.

The role of police here is very significant. Again, historically, when students mount any sort of social mobilization here, to just demand simple things like food for these schools, an increase in scholarships, the protection of the infrastructure for these schools, they’re instantly seen as criminals, and the police is then charged with attacking them. And in this last—or containing their mobilization, which often involves attacking them. In this particular mobilization, it’s really significant to see that it was the police who first shot at them, the police who first detained these students and took them, and then, it looks like, handed them over to a criminal organization or to a drug cartel.

— source

Tanalís Padilla, associate professor of Latin American history at Dartmouth College. She is currently a visiting lecturer at University College London. Padilla is the author of Rural Resistance in the Land of Zapata. She is currently writing a book on the history of rural normal schools in Mexico, which is called The Unintended Lessons of Revolution.

Valeria Hamel, human rights activist and student organizer. She is a law student at ITAM University in Mexico City.

Ukraine opens up for Monsanto, land grabs and GMOs

Hidden from mainstream media exposure, the World Bank and IMF loan has opened up Ukraine to major corporate inroads, writes Joyce Nelson. Loan conditions are forcing the deeply indebted country to open up to GMO crops, and lift the ban on private sector land ownership. US corporations are jubilant at the ‘goldmine’ that awaits them.

Finally, a little-known aspect of the crisis in Ukraine is receiving some international attention.

The California-based Oakland Institute recently released a report revealing that the World Bank and the International Monetary Fund (IMF), under terms of their $17 billion loan to Ukraine, would open that country to genetically-modified (GM) crops and genetically-modified organisms (GMOs) in agriculture.

The report is entitled ‘Walking on the West Side: the World Bank and the IMF in the Ukraine Conflict’.

In late 2013, the then president of Ukraine, Viktor Yanukovych, rejected a European Union association agreement tied to the $17 billion IMF loan, whose terms are only now being revealed.

Instead, Yanukovych chose a Russian aid package worth $15 billion plus a discount on Russian natural gas. His decision was a major factor in the ensuing deadly protests that led to his ouster from office in February 2014 and the ongoing crisis.

According to the Oakland Institute, “Whereas Ukraine does not allow the use of genetically modified organisms (GMOs) in agriculture, Article 404 of the EU agreement, which relates to agriculture, includes a clause that has generally gone unnoticed: it indicates, among other things, that both parties will cooperate to extend the use of biotechnologies.

“There is no doubt that this provision meets the expectations of the agribusiness industry. As observed by Michael Cox, research director at the investment bank Piper Jaffray, ‘Ukraine and, to a wider extent, Eastern Europe, are among the most promising growth markets for farm-equipment giant Deere, as well as seed producers Monsanto and DuPont’.”

Ukrainian law bars farmers from growing GM crops. Long considered ‘the bread basket of Europe’, Ukraine’s rich black soil is ideal for growing grains, and in 2012 Ukrainian farmers harvested more than 20 million tonnes of corn.

Monsanto’s ‘non-GMO’ $140m investment

In May 2013, Monsanto announced plans to invest $140 million in a non-GMO corn seed plant in Ukraine, with Monsanto Ukraine spokesman Vitally Fechuk confirming that “We will be working with conventional seeds only” because “in Ukraine only conventional seeds are allowed for production and importation.”

But by November 2013, six large Ukrainian agriculture associations had prepared draft amendments to the law, pushing for “creating, testing, transportation and use of GMOs regarding the legalization of GM seeds.”

The president of the Ukrainian Grain Association, Volodymyr Klymenko, told a Nov. 5 press conference in Kiev:

“We could mull over this issue for a long time, but we, jointly with the [agricultural] associations, have signed two letters to change the law on biosecurity, in which we proposed the legalization of the use of GM seeds, which had been tested in the United States for a long time, for our producers.”

(Note: actually, GM seeds and GMOs have never undergone independent, long-term testing in the US.)

Creating a ‘favorable environment’ – for Monsanto

The agricultural associations’ draft amendments coincided with the terms of the EU association agreement and IMF/World Bank loan.

The website – which tracks GMO news worldwide – immediately slammed the agricultural associations’ proposal, with director Henry Rowlands stating:

“Ukraine agriculture will be seriously damaged if the Ukrainian government legally allows GM seeds in the country. Their farmers will find their export markets reduced due to consumers’ anti-GMO sentiments both in Russia and the EU.”

Rowlands said that Monsanto’s investment in Ukraine “could rise to $300 million within several years. Does Ukrainian agriculture want to totally rely on the success or failure of one US-based company?”

On December 13, 2013, Monsanto’s Jesus Madrazo, Vice President of Corporate Engagement, told the US-Ukraine Conference in Washington, DC that the company sees “the importance of creating a favorable environment [in Ukraine] that encourages innovation and fosters the continued development of agriculture.

“Ukraine has the opportunity to further develop the potential of conventional crops, which is where we are currently concentrating our efforts. We also hope that at some point biotechnology is a tool that will be available to Ukrainian farmers in the future.”

Just a few days before Madrazo’s remarks in Washington, Monsanto Ukraine had launched its “social development” program for the country, called ‘Grain Basket of the Future’. It provides grants to rural villagers so they can (in Monsanto’s words) “start feeling that they can improve their situation themselves as opposed to waiting for a handout.”

Actually, the real “handout” is the one going to Big US Agribusiness through the terms of the IMF / World Bank loan, which besides opening the country to GM crops, will also further lift the ban on the sale of Ukraine’s rich agricultural lands to the private sector.

As Morgan Williams, president and CEO of the US-Ukraine Business Council, told International Business Times in March, “Ukraine’s agriculture could be a real gold mine.”

But he added that there are “many aspects of the [Ukraine] business climate that need to be changed. The major item would center around getting the government out of business … “

The WikiLeaks Cables – lobbying for GMO

In August 2011, WikiLeaks released US diplomatic cables showing that the US State Department has been lobbying worldwide for Monsanto and other biotechnology corporations like DuPont, Syngenta, Bayer and Dow.

The US non-profit Food & Water Watch, after combing through five years of these cables (2005-2009), released its report ‘Biotech Ambassadors: How the US State Department Promotes the Seed Industry’s Global Agenda’ on May 14, 2013.

The report showed the US State Department has “lobbied foreign governments to adopt pro-agricultural biotechnology policies and laws, operated a rigorous public relations campaign to improve the image of biotechnology, and challenged commonsense biotechnology safeguards and rules – even including opposing laws requiring the labeling of genetically-engineered (GE) foods.”

According to (March 16, 2014), Morgan Williams is at “the nexus of Big Ag’s alliance with US foreign policy.”

Besides being president and CEO of the US-Ukraine Business Council, Williams is Director of Government Affairs at private equity firm SigmaBleyzer, which touts Williams’ work with “various agencies of the US government, members of Congress, congressional committees, the Embassy of Ukraine to the US, international financial institutions, think tanks and other organizations on US-Ukraine business, trade, investment and economic development issues.”

The US-Ukraine Business Council’s 16-member Executive Committee is packed with US agribusiness companies, including representatives from Monsanto, John Deere, DuPont Pioneer, Eli Lilly, and Cargill.

The Council’s 20 ‘senior Advisors’ include James Greene (Former Head of NATO Liason Office Ukraine); Ariel Cohen (Senior Research Fellow for The Heritage Foundation); Leonid Kozachenko (President of the Ukrainian Agrarian Confederation); six former US Ambassadors to Ukraine, and the former ambassador of Ukraine to the US, Oleh Shamshur.

Shamshur is now a senior advisor to PBN Hill + Knowlton Strategies – a unit of PR giant Hill + Knowlton Strategies (H+K). H + K is a subsidiary of the gargantuan London-based WPP Group, which owns some dozen big PR firms, including Burson-Marsteller (a long-time Monsanto advisor).

Hill + Knowlton Strategies

On April 15, 2014 Toronto’s Globe & Mail newspaper published an op-ed piece by H+K assistant consultant Olga Radchenko. The piece railed against Russian President Vladimir Putin and “Mr. Putin’s PR machine” and stated that

“Last month [March 2014 – a month after the coup], a group of Kiev-based PR professionals formed the Ukraine Crisis Media Centre, a voluntary operation aimed at helping to communicate Ukraine’s image and manage its messaging on the global stage.”

The PBN Hill + Knowlton Strategies website states that the company’s CEO Myron Wasylyk is “a Board member of the US-Ukraine Business Council”, and the company’s Managing Director/Ukraine, Oksana Monastyrska, “leads the firm’s work for Monsanto.” Monastyrska also formerly worked for the World Bank’s International Finance Corporation.

According to the Oakland Institute, the terms of the World Bank/IMF loan to Ukraine have already led to “an increase in foreign investment, which is likely to result in further expansion of large-scale acquisitions of agricultural land by foreign companies and further corporatization of agriculture in the country.”

Meanwhile, Russia’s Prime Minister Dmitry Medvedev stated in April: “We don’t have a goal of developing GM products here or to import them. We can feed ourselves with normal, common, not genetically modified products. If the Americans like to eat such products, let them eat them. We don’t need to do that; we have enough space and opportunities to produce organic food.”

Hill + Knowlton, with its Kuwait ‘incubator babies atrocities’ falsehood, was instrumental in getting the American public to back the first Gulf War on Iraq in the early 1990s.

Now the company is involved in fomenting a Cold War 2 or worse, and on behalf of Monsanto – recently voted the “most evil” corporation on the planet.

That’s something to recall in the midst of the extensive mainstream media demonizing of Putin.

— source

Salute to James Risen

In 2006, Risen won a Pulitzer Prize for his reporting about warrantless wiretapping by the National Security Agency. His story would have come out right before the 2004 presidential election of President Bush over John Kerry. It might have changed the outcome of that election. But under government pressure, The New York Times refused to publish the story for more than a year, until James Risen was publishing a book that would have had the revelations in it. He’s since been pursued by both the Bush and Obama administrations in a six-year leak investigation into that book, State of War: The Secret History of the CIA and the Bush Administration.

James Risen now faces years in prison if he refuses to testify at the trial of a former CIA officer accused of giving him classified information. In June, the Supreme Court turned down his appeal of a court ruling forcing him to testify in the criminal trial of ex-CIA analyst Jeffrey Sterling, who prosecutors believe gave him information on the agency’s role in disrupting Iran’s nuclear program. In State of War, Risen showed that instead of hampering Iran’s efforts, the CIA effectively gave Iran a blueprint for designing a bomb. James Risen has vowed to go to jail rather than testify at Sterling’s trial, which is set to begin in January.

the Obama administration must now decide if it will try to force James Risen’s testimony and risk sending one of the nation’s most prominent national security journalists to jail. President Obama has already developed a reputation as the most aggressive in history when it comes to targeting whistleblowers. His Justice Department has brought eight cases so far, more than all previous administrations combined. On Friday, federal prosecutors hinted they may decide not to press for Risen’s testimony, under new guidelines issued earlier this year that make it harder to subpoena journalists for their records.

James Risen talking:

since 9/11. We’ve paid an enormous price in the name of what we—we started this war after 9/11, this global war on terror, in order to seek justice or retribution or whatever you—however you want to characterize the attitude of America right after 9/11. But today it’s become essentially a search for cash, and there’s lots of people involved in the war on terror today who are doing it because they’re ambitious, because they want status or power or money. And I think of it kind of in the historical sense. The historical context is kind of like in the Middle Ages when you had the Thirty Years’ War or the Hundred Years’ War in Europe, where you developed a whole new class of mercenary soldiers, who all they did their entire careers is go from one country to another to fight wars for money.

It’s my job. You know, it’s what keeps me sane, is to keep going. If I just gave in to them, then I would be, you know, failing in what I want to do. I want to keep finding out the truth. It’s the thing I’ve tried to do my whole life, is be a reporter and be a writer. It’s the only thing I know how to do.

We, in 2004, Eric Lichtblau and I, had a number of different sources who began to tell us early on in 2004 that they were very—they knew something really big, they knew the biggest secret in the government, but they couldn’t tell us, because they were so nervous. They were very tortured by what they knew. And it took months of kind of patience and talking and reporting for Eric and I to figure out exactly what it was that they were talking about, and finally we were able to piece it all together. And in the fall of 2004, we had the story ready to go.

I had a great confrontation over the telephone with Michael Hayden, who you just saw, where I read him the—I got him on the phone kind of by bluffing the PR person at the NSA and said, “I need to talk to him right now.” And I was shocked that he got on the phone. And I read him the top of the draft of the story, and he goes, “[gasps].” And that’s when I knew we had it. And so, we had the story ready. But then, by, you know, then, Hayden and the government started to crack down on The New York Times and pressured them to hold the story ’til—even though it was ready about two or three weeks before the election, in mid-October 2004.

usually what they ask is for us to go to them. The first meeting was between—I think it was probably early October, late September of 2004, between me and the Washington bureau chief at the time, Phil Taubman, and John McLaughlin, who was then the acting CIA director, and his chief of staff, John Moseman. And we met at the CIA director’s downtown office at the old executive office building. And it was a very funny meeting, because at that time they didn’t want to acknowledge that the story was right. They didn’t want to officially acknowledge. And so, they had all these hypothetical—we had this very weird hypothetical conversation, where they kept saying, “Well, if you were to—if the government was doing what you say they were doing, it would be very bad for you to reveal that.” And then they—then, that was just the beginning of a whole series of meetings with the editors and us, the reporters, in which they said that this is the crown jewel of the U.S. counterterrorism operation, and that if you reveal this, this will damage national security. And so, that was essentially the argument that they used then and they used throughout the entire process.

it kept going higher and higher and higher. they met with Taubman and Keller. And then we had—you know, we in the newspaper, the editors and reporters—met to discuss the story, and Bill Keller decided to hold it. so he decided to not run it before the election.

Basically, the story was that we found out that the U.S. was spying on Americans—the NSA was spying on Americans electronically, listening to their phone calls, international phone calls, back and forth with people overseas, and gathering lots of—doing lots of data mining on their phone and email, and also getting the content of their email, and doing that without court approval. They were going around the FISA court, the Foreign Intelligence Surveillance Act court, which had been set up specifically for that purpose of providing secret warrants for spying on—for eavesdropping on spies and terrorists or suspected spies and terrorists. And the government had decided to go around the law, go around the courts, and not tell anyone else that they were doing that, except a couple hand-picked people in Congress, who were like the chairmen of the intelligence committees. And they were keeping this secret from everyone so they could do it on a vast scale. And we believed that what we were—the people who talked to us about it believed that it was unconstitutional. And that’s why we were pursuing it.

I have a chapter in my new book about the NSA whistleblowers early on, including William Binney and Diane Roark and Tom Drake and some of the others. And it’s remarkable what happened to them at the NSA. What we found out, years later—I did not know Bill, I didn’t know Diane or Tom. They were never our sources. But what we found out was, the government thought that they were our sources for our New York Times story, and they were persecuted as a result, even though they had never come to the press. And I detail in the new book, Diane Roark, in particular, suffered amazing persecution. And she tried—even though she tried to go through the channel—

Diane Roark—along with Bill, Diane Roark was the House Intelligence Committee staffer in charge of oversight of the NSA, and right at the time of 9/11. And Bill, right after he found out about this new program, went to her, her house in suburban Washington, and told her what he had heard about. And Diane was outraged and shocked, and she couldn’t believe that it was authorized. She thought this must be some kind of rogue program that nobody really knew about. And so, she went to the chairman of the—she went to her bosses, the staff director of the House Intelligence Committee and the minority staff director, to warn them that they’ve got to tell the chairman and the vice chairman of the committee what’s going on.

And then she gets this message back: “Don’t talk about this anymore. Don’t investigate it. And keep your mouth shut.” And she realizes that the chairman and the vice chairman already know about it and are keeping it secret. And so, she then tries to—goes on this long odyssey within the government of going to all these powerful people that she knows inside the government to try to warn them about this illegal and unconstitutional program. And every time she goes to someone that she respects and who is very powerful, she realizes they already know, they’re in on the secret, and they’re keeping their mouths shut. And finally, about a year later—a couple years later, after our story comes out, the government thinks that she’s our source, and they raid her house, and they raid Bill’s house and a few other people, like Tom Drake.

we convinced the editors, well, if you’re not going to run it now, let us try again after the election. And so, after the election, they said OK. And so Eric and I go start working on the story again. We get it re-edited by our editor, Rebecca Corbett, and we have it all ready to go again. You know, we do a lot more reporting. I remember we, Eric and I, knocked on doors, and we went to this one guy who we knew, at his house late at night right before Christmas—we knew he knew about this, and we knock on his door, and he just starts yelling at us for bothering him. And he was clearly scared. He didn’t want to talk. But we had the story ready to go by mid- to late December of 2004, and then the editors killed it again for the same reasons, that it’s national security.

And so, by that time, the story was dead. I knew it was—they were not going to run it at all. And so, I had a previously scheduled book leave to work on my book, State of War, and so I decided I’m going to put it in my book. And so I did. And then, when I came back from book leave in the summer—spring or summer of 2005, you know, and I finished the book throughout the summer, and I think by late summer, I told the editors, “It’s going to be in my book, so you should think about running it.”

we had lots of talks over about 14 months. And actually, their talks—you know, the talks we had, me and Eric had, with the editors were very high-minded. It was an interesting debate. And we debated kind of this issue of national security versus civil liberties in a lot of ways. I always thought afterwards, you know, you could have put those debates we had inside the paper on television. They were pretty interesting. But ultimately, what really, I think, convinced Bill was, in the fall of 2005, when they were—after I told them it was going to be in my book, and they decided to re-engage on the story—

It’s going to be very embarrassing— as their top national security reporter reveals his revelations not in the pages of the Times, but in a book.

what they said was, “We’ll think about putting”—after I told them it was going to be in my book, in the late summer of 2005, what they said was, “OK, we’ll think about putting it in the paper.” But they weren’t committed to it. They wanted to negotiate again with the government. And so, there were a whole series of new meetings with the government, and which was very frustrating to me. What the government told them that fall was: “Risen and Lichtblau have it wrong. We’re not listening to anybody’s phone calls. We’re only getting the metadata, you know, the calling data.” And when the editors came back and told us that, we told—Eric and I said, “They’re lying to you.” And finally, after a while, Eric and I were able to convince them, you know, that they were being lied to, and I think that had a major impact on their final decision to run the story.

There was another story, a CIA operation involving the Iran nuclear weapons program, in which the CIA had used a Russian defector to give nuclear blueprints to the Iranians. And the idea was that they were supposed to be flawed blueprints that would then send the Iranians down the wrong track on building a bomb. But the Russian told them immediately, “Oh, I can see the flaws,” because he was a scientist, he was a nuclear scientist. He says, “I can see the flaws. The Iranians are going to see the flaws.” And then he sent a letter. When he gave the blueprints to the Iranians, he gave a letter to the Iranians saying, “You’re going to see that there are problems in these blueprints.” And so, it’s quite possible that the Iranians were able to—by being tipped off, were able to find good information in them and ignore the bad information.

And that was in my book. I had written that for the paper in—before, and the editors had decided not to run it because the White House asked them not to on national security grounds. And after my book came out, the government began leak investigations of both the NSA story and other things in my book, including that story. I think they finally decided not to come after The New York Times on the NSA story, because it would have meant a major constitutional showdown. And I think they decided to find something else in my book to come after me on, to isolate me from The New York Times. And they picked the Merlin operation. they want to know who my sources are for that story.

I thought that once the Obama administration came into office, that the whole thing would be dropped. And I was very surprised that the Obama administration continued to pursue the case, when, in 2009, they issued a new subpoena. And they’ve continued to pursue this ever since.

President Obama is “the greatest enemy of press freedom in a generation”. I think that his record speaks for itself. He’s gone after—he’s prosecuted more whistleblowers and gone after more journalists than any president in history. He’s done—I think that record is going to be a major part of his legacy, of trying to erode press freedom in the United States.

you cannot have aggressive investigative reporting in America without confidential sources. And without aggressive investigative reporting, we can’t really have a democracy, because the only real oversight for the government is an independent and aggressive press. And I think that’s what the government really fears more than anything else, is an aggressive investigative reporting in which we shine a light on what’s going on inside the government. And we can’t do that without maintaining the confidentiality of sources.

to me, what the war on terror became, as I said earlier, this enormous search for power and status and cash. And I began to realize that what we had in the war on terror was we had deregulated national security. That’s essentially what Dick Cheney meant when he said the gloves come off. That means deregulating the whole national security apparatus, taking all the limits off of what we can do in national security. At the same time, we poured hundreds and hundreds of billions of dollars into brand-new counterterrorism programs. And the FBI, the CIA and the new Homeland Security department, all the—and the Pentagon, they all had more money than they knew what to do with. And so, they began—to me, it’s kind of like the banking crisis. You had enormous money going into a deregulated industry, meaning the counterterrorism industry, and you had lots of unintended and bizarre consequences. And so, that’s what I’ve found, is the crazy programs that developed; the bizarre nature of the whole war on terror, if you pull up the hood and look inside of it, is just stunning.

And I open the book with this, to me, kind of a metaphor for everything that we have, what’s going on now, is, in 2009, there was a small ceremony at Arlington National Cemetery in Section 60, which is where the dead of the Iraq War lay buried. And it was a small group of pro-war people who were celebrating the sixth anniversary of the fall of Baghdad, and which they—what they call Iraq Liberation Day. It’s the day that the statue of Saddam was pulled down in Firdos Square. And I saw Paul Wolfowitz there. And the woman who ran that—who was sponsoring that day’s ceremony was Viola Drath, who was an aging Georgetown socialite. And she was very pro-Iraq War. And then, two years later, she was found murdered in her apartment—in her house in Georgetown. And her husband, who had been going around Washington dressed as a general in the Iraqi army, was arrested for her murder. He had claimed that he had been named a general in the Iraqi army by Prime Minister Nouri al-Maliki. And after he was arrested, the police found a receipt from a printing place in Washington where he had counterfeited the letter and the certificate of being a general in the Iraqi army. And he was a total fraud. He’s now been convicted of her murder. And I thought that was a metaphor for the fact that this war on terror is—a lot of it is just a fabrication, that we are now trying to unravel and deal with.

And so, I began to look and to see all of the various things that have happened in this war. One of the first things I came across was how the United States had airlifted billions of dollars to Iraq for use by the Iraqi—the new Iraqi government, and billions had been stolen and moved to Lebanon by Iraqi leaders. It was stolen from Baghdad and moved secretly to a bunker in Lebanon, where it was being held by wealthy and powerful Iraqis, because they wanted to steal it and use it for themselves, and also probably with some Lebanese money launderers who were watching over it. it was actually Iraqi government money that had been held in the United States, but the U.S. government was airlifting it by the U.S. Air Force. So, it was just a—you know, no one was doing any oversight of any of these programs.

Then I began to look at the case of Dennis Montgomery. Dennis Montgomery is a fascinating character, who—he was a computer software person, self-styled expert, who developed what he said was special technology that would allow him to do things with computers that other people couldn’t do. One of the things that he developed was this imaging technology that he said he could find images on broadcast network news tapes from Al Jazeera. He said that he could read special secret al-Qaeda codes in the banners on the broadcasts of Al Jazeera. And the CIA believed this. And he was giving them information based on watching hours and hours of Al Jazeera tapes, saying that “I know where the next al-Qaeda attack is going to be based—is going to happen.” And the Bush administration and the CIA fell for this.

if you talk to him, he argues, well, they—that’s what they were looking for. You know, they convinced him to look for this. You know, it depends on who you talk to. But it was one of the great hoaxes of the war on terror, where they actually grounded planes in Europe, the Bush administration, based on information they were getting from Dennis Montgomery’s so-called decryption of Al Jazeera broadcasts.

And then there’s a whole number of other things, like Alarbus, which was this covert program at the Pentagon where a Palestinian involved in that was actually trying to use the bank account set up by the secret program, Pentagon program, to launder hundreds of millions of dollars. And the FBI investigated this, but then tried to keep the whole thing quiet.

U.S. government give Millions of dollars to Dennis Montgomery. And then he used—he was a heavy gambler and eventually, I think, had a lot of financial problems as a result of that. So, it’s a strange—to me, the Dennis Montgomery story is one of the strangest, because what it shows is, early on in the war on terror, as I said, the CIA and all these other agencies had so much money to spend on counterterrorism that they were willing to throw it at everything. They were so afraid of the next terrorist attack that they were willing to believe anybody who came up with some idea. And I called that chapter about Montgomery, you know, “The Emperor of the War on Terror,” because nobody wanted to say that the emperor had no clothes.

There were planes grounded. International flights between the United States and Europe and Mexico were grounded. There was talk at the White House even of shooting down planes based on this information. it was crazy. It was absolutely insane.

the U.S.—the CIA and the Bush administration didn’t want to tell anybody what was really happening, where they were getting this information. You know, “This supersecret information about Al Jazeera, we can’t tell you.” And finally, the French intelligence service and the French government said, “You know, you’re grounding our planes. You’ve got to tell us where you’re getting this information.” And they got—they finally shared the information with them, and the French got a French tech firm to look at this, and they said, “This is nuts. This is fabrication.” And after a while, the CIA was finally convinced maybe the French were right, and they stopped talking about it. They didn’t do anything else. They just like shut it down eventually, but never wanted to talk about what had really happened.

Dennis Montgomery actually got more contracts after that, with the Pentagon and other agencies. And he continued to operate for a long time. You know, he kind of went from one agency to the other.

[becoming a target, not only of the Bush administration, but of the Obama administration, for year after year, right through to today. He could face years in jail for not revealing a source on one of the stories that he has exposed around a program called Merlin and the U.S. giving flawed blueprints for a nuclear trigger to Iran. This issue of facing years in jail]

I’ve had a lot of time to think about it. And it bothered me a lot more at first. I was more nervous about it when it first started. But now it’s just like kind of background noise in my life, and so I’m just kind of used to it now, because I know exactly—I have no doubts about what I’m going to do, and so that makes it pretty easy.

[you’re covering the very people who could put you in jail.]

As I said earlier, that’s the only way to deal with this, is to keep going and to keep—the only thing that the government respects is staying aggressive and continuing to investigate what the government is doing. And that’s the only way that we in the journalism industry can kind of force—you know, push the government back against the—to maintain press freedom in the United States.

I really respect whistleblowers much more. They face much more than I ever do. They’re much more courageous, I think, than we reporters are, you know, especially me. I mean, Diane Roark, who I talked about a little bit before, is really one of my heroes. She went—she did everything that you would expect someone to do in the government. And to me, her case is a perfect example of why Edward Snowden had to do what he did, that he could never have gone through the system. People say, “Oh, why didn’t he go through the system?” She tried to go through the system and was persecuted for it.

Edward Snowden is a whistleblower, you know, and I think he’s in the same tradition of whistleblowers. it’s just a simple fact. He has revealed lots of information that’s led to a national debate about the extent of electronic surveillance in the United States, and has, you know, paid a heavy price for it. He’s had to go into exile. And I think anyone who thinks he could have done what he’s done and stayed in the United States is fooling themselves.

he has sparked a new national debate over the extent of surveillance. What I think he contributed was—you know, in our stories and other people’s stories early on about the NSA, we revealed the framework, the framework for what the Bush administration had done, that they had turned the NSA on the American people. What I think Snowden revealed, the basic thing that I think he revealed, is that under Obama and in the years since we had first written about it, the American people had become much more online, an online citizenry. We were now completely digital, with Facebook and Twitter and all of these things. And as a result, the NSA had grown dramatically in their ability to watch the online presence of Americans, much more than they had just a few years earlier in the Bush administration. And so, what I think he revealed was the dramatic expansion, in just a few short years, of the NSA’s ability to shadow the online presence of Americans. And that was a real contribution.

I want to have a free press. I want to have him—I want it to be where he can still develop sources and do aggressive reporting in the same way I did throughout my career. I don’t want young reporters to face a situation or a climate where they’re much more constrained in what they can write about than I had in my career.

I am willing to go to jail for this. I think that’s the one thing I can leave to my son.

— source

James Risen, an investigative journalist with The New York Times. In 2006, he won a Pulitzer Prize for his stories about warrantless wiretapping by the National Security Agency. He has been pursued by both the Bush and Obama administrations as part of a six-year leak investigation into his previous book, State of War: The Secret History of the CIA and the Bush Administration. His new book is Pay Any Price: Greed, Power, and Endless War.