FTW ECONOMIC ALERT #4 

THE ABYSS AWAITS

With Special Update

by

Michael C. Ruppert

© Copyright 2006, From The Wilderness Publications, www.copvcia.com. All Rights Reserved. This story may NOT be posted on any Internet web site without express written permission. Contact admin@copvcia.com. May be circulated, distributed or transmitted for non-profit purposes only.

“Organized crime is now officially legal and combined with the stock and capital markets -- all enforced by force and rigged profits. This is the economic infrastructure for fascism.” – Catherine Austin Fitts

June 14th 2006, 12:59pm [PST] – On three prior occasions in its eight and a half year history (2001, 2002, 2004) From The Wilderness has issued economic alerts to its subscribers. Two of those alerts (2001, 2002) proved to be astonishingly accurate.

Two days after our first alert was issued on September 9th, 2001, the “terror” attacks of 9/11 shut down Wall Street and allowed the government to open the US Treasury to flood massive amounts of taxpayer money directly into the hands of corporations that were on the brink of a major liquidity crisis. (FTW has never asserted that this was the primary motive for US government participation in the attacks. It was one of many motives as described in Crossing the Rubicon; chief of which was Peak Oil). 

Just days after our second economic alert in 2002 a collapse of US financial markets began which saw the Dow drop by 1400 points and more than one trillion dollars in shareholder equity wiped out. We called that one perfectly.

And while the events predicted in our third December, 2004 economic alert did not transpire as predicted, I am perhaps most proud of having written and published this one. Because in it I wrote an almost clairvoyant description of the political, ecological, energy and economic worlds in which we live eighteen months later -- today.

The reasons why the events predicted in the third alert did not take place have to do with what my dear friend and colleague Catherine Austin Fitts calls the Tapeworm Economy; the ability of financial and criminal elites to manipulate the rapidly-hollowing shell and façade of a financial system destined to collapse. They do this while keeping appearances (controlled by major media) as normal as possible so that the “suckers” (you) will keep trusting and spending your money in ways that hurt you and progressively wither your needed survival skills and resources.

This is the way that all parasites function until they kill their hosts and move on.

“Fast Crash or Slow Burn?” – Irrelevant!

This apparent longevity of a doomed system has led Fitts and me to agree to disagree about how things are likely to play out in the Empire’s final days or years. I believe that a fast-burn crash is likely (or at least must be prepared for). Fitts thinks it more likely that the elites, using technology like PROMIS software, their total control (ownership) of all branches of government, and a dozen other factors will be able to pull rabbit-after-shrinking rabbit out of the hat until the incremental “bust-out” liquidation of the American economy produces a final whimper in the last-remaining “I-still-believe” consumer. It doesn’t matter that each successive rabbit will be smaller and weaker. What does matter is the pathological willingness of most people to believe that – because a thimbleful of water is produced – a mighty conflagration might still be extinguished.

Fitts and I do agree that a fast burn (crash) would be much better than a slow burn. This is because a sudden slap in the face would leave individuals and families with more resources and tools available to adapt once they had relinquished their vision of a world that no longer exists.

The first thing that must be liberated in an emergency is the mind: so that it can see the emergency. Remember the old maxim about how easy it is to cook a frog by turning up the heat in tepid water slowly versus throwing a frog into boiling water. In the first case the frog just sits patiently and waits to be cooked. In the second case, recognizing the emergency, it jumps out immediately.

Taking into account a multitude of factors such as: unpredictable collapses of large oil fields (e.g. Burgan in Kuwait); global warming and hurricanes; rapidly spreading geopolitical instability; the collapsing housing bubble; soaring bankruptcies; exploding military budgets; the continuing ascendancy of nations like Venezuela, Iran, Russia and China; earthquakes; volatile insurgencies in West Africa; declining global food production and many others, I see things that the elites cannot control. These are (to one degree or another) wildcards that could leap into the game at any time, triggering chaos, war and/or collapse.  The elites can influence these factors but there’s a big difference between influence and control. History has demonstrated a perfect batting average when it comes to the inevitable fate of empires in decline and their inability to control events.

This fourth-ever economic alert will be different from the previous ones because rather than describing predicted events, it describes a state of affairs which is – in and of itself – so alarming that we no longer care about the “when.” What we are warning about now is the certainty of the “what” and the necessity of being prepared to manage successfully in the face of a “fast burn,” a “slow burn,” and the wildcards.

To sum it up, large highly centralized corporations and banks – particularly those dependent on US government finances – are no longer worthy of investment.

No one reads tea leaves perfectly and no sound byte encompasses all realities. But if I were to sum up how I think a slow burn is being engineered, I would say that the two biggest manmade factors controlling the crash of the American economy are the Chinese and US governments. I sense a quiet consensus among and within all the economic powers-that-be that as long as the Federal Reserve agrees to the slow strangulation of the economy by continuing to raise interest rates, the Chinese will incrementally respond by continuing, in small increments, to float the Yuan free from its dollar peg. This will allow a semi-orderly transfer (looting) of the most wealth (into gold, oil reserves, the Euro, the Ruble and the Yuan) while keeping suckers in the game.

More than any other two factors, the dollar and the Yuan are the ones which, if they get “sideways,” could cause a crash, collapse or chaos at any minute. But these are only the human-controlled variables.

As it was with Robert Rubin in the Clinton years, Goldman Sachs has again acquired the “franchise” to operate the Treasury under its new Secretary Hank Paulson. Paulson will continue Treasury’s role as a key member of the Plunge Protection Team to manipulate the markets, hide fatal maladies, manipulate investor confidence, and assure that the largest number of people continue to stay roped into the system until it is too late to avoid going down the drain in the largest organized crime bust-out in history.

To sum it up, the American economic system – as a result of recent developments – has become a parasitic Zombie that cannot and should no longer be trusted under any circumstances. It has become lethal, venal and – for lack of a better term – the enemy.

DEVELOPMENT NUMBER ONE – John Negroponte and the SEC

In Godfather Government, published at FTW just days ago, Carolyn Baker described one of the most significant and ominous developments in the continuing devolution of American government into a pure organized crime operating system.

Baker wrote:

… Business Week Online has just reported that George W. Bush on May 5 signed a memo entitled “Assignment Of Function Relating To Granting Of Authority For Issuance Of Certain Directives: Memorandum For The Director Of National Intelligence.” In the document, Bush assigned intelligence czar, John Negroponte, the task of waiving Securities and Exchange Commission rules, established in 1934, pertaining to accounting disclosures by publicly traded companies. As a result of no longer needing to reveal financial information to shareholders in the name of national security, the cloning of Enron, having been in process for several years, is now complete. Instead of being required to disclose valid accounting ledgers, U.S. corporations have now been given carte blanche to maintain fiduciary legerdemain. I must ask: How can any sane human being persist in believing that a legitimate government exists in the United States?

Let me describe exactly what this means more succinctly.

The BusinessWeek article reported the following:

Now, the White House’s top spymaster can cite national security to exempt businesses from reporting requirements.

President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the federal register.

Unbeknownst to almost all of Washington and the financial world, Bush and every other President since Jimmy Carter have had the authority to exempt companies working on certain top-secret defense projects from portions of the 1934 Securities Exchange Act. Administration officials told BusinessWeek that they believe this is the first time a President has ever delegated the authority to someone outside the Oval office. It couldn’t be immediately determined whether any company has received a waiver under this provision...

The timing of this move is intriguing. On the same day the President signed the memo, Porter Goss resigned as director of the Central Intelligence Agency amid criticism of ineffectiveness and poor morale at the agency. Only six days later, on May 11, USA Today reported that the National Security Agency had obtained millions of calling records of ordinary citizens provided by three major US phone companies. Negroponte oversees both the CIA and the NSA in his role as the administration’s top intelligence official.

FEW ANSWERS. White House spokeswoman Dana M. Perino said the timing of the May 5 Presidential memo had no significance…

AUTHORITY GRANTED. William McLucas, the Securities & Exchange commission’s former enforcement chief, suggested that the ability to conceal financial information in the name of national security could lead some companies “to play fast and loose with their numbers.” McLucas, a partner at Wilmer Cutler Pickering Hale and Dorr in Washington added: “It could be that you have a bunch of books and records out there that no one knows about.”

The memo Bush signed on May 5, which was published seven days later in the Federal Register, had the unrevealing title “Assignment of Function Relating to Granting of Authority for Issuance of Certain Directives: Memorandum for the Director of National Intelligence.” In the document, Bush addressed Negroponte saying: “I hereby assign to you the function of the President under section 13(b)(3)(A) of the Securities Exchange Act of 1934, as amended.”

A trip to the statute books showed that the amended version of the 1934 act states that “with respect to matters concerning the national security of the United States, “the President or the head of an Executive Branch agency may exempt companies from certain legal obligations.” These obligations include keeping accurate “books, records, and accounts” and maintaining a system of internal accounting controls sufficient “to ensure the propriety of financial transactions and the preparation of financial statements in compliance with “generally accepted accounting principles.”

FTW made a little trip to the statute books also. This is section 13(b)(3)(A) of the Securities Exchange Act:

With respect to matters concerning the national security of the United States, no duty or liability under paragraph (2) of this subsection shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives. Each directive issued under this paragraph shall set forth the specific facts and circumstances with respect to which the provisions of this paragraph are to be invoked. Each such directive shall, unless renewed in writing, expire one year after the date of issuance.

This is Paragraph 2

Every issuer which has a class of securities registered pursuant to section 12 and every issuer which is required to file reports pursuant to section 15(d) shall--

A. Make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

B. Devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that—

i. transactions are executed in accordance with management’s general or specific authorization;

ii. transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets;

iii. access to assets is permitted only in accordance with management's general or specific authorization; and

iv. the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and

C. notwithstanding any other provision of law, pay the allocable share of such issuer of a reasonable annual accounting support fee or fees, determined in accordance with section 109 of the Sarbanes-Oxley Act of 2002.

In other words, the Bush administration has not opened the barn door, it has burned down the barn. Delegating the authority to Negroponte provides Bush with plausible deniability and a scapegoat, if needed.

How Do We Know If It’s Been Used?

FTW placed calls to both the offices of the National Intelligence Director (DNI) and the SEC. We were told in both cases that no public announcements would be made indicating which companies had received such exemptions. The only way to determine whether this enormous loophole has been opened, therefore, would be to obtain a list of all defense contractors (estimated in the thousands) and then perform a search of all SEC records listed in the Edgar data base to see which companies had submitted all required disclosure forms and which had not. The task would be further complicated by the fact that in many cases only certain forms might be excluded (see below).

A spokesman for the DNI told FTW, “We’re not going to acknowledge in a public way which companies are involved. We don’t expect such a list will ever be published.”

A spokesman for the SEC said, “I’m not aware of any plans to disclose anything.” When asked in more detail about how the mechanism would work, seemingly unable to answer, the SEC spokesman suggested that FTW contact a securities law professor.

That’s exactly what we did.

Professor Stephen Bainbridge of UCLA Law is one of the nation’s most-respected authorities on securities law. He shed some light on our questions.

If John Negroponte has this authority to entirely exempt companies from reporting requirements it could have a deleterious impact on the markets. It could prevent investors from making informed decisions.

However, he added that:

My understanding is that John Negroponte will not blanketly exempt corporations from all filings, but merely certain lines [portions] of business 10Q and 10K filings. Some of these are intended to have management describe, in a narrative fashion what their companies do. If they have the common sense God gave gravel they would do it that way.

The Bush administration has played anything involving national security close to the vest. A lot of pros at SEC are going to be not too happy with this instruction.

Bainbridge added that he expected Negroponte’s authority to include the withholding of certain information from outside auditors which publicly traded corporations rely on to certify their own reports as a means of protecting stockholders.

At the same time however, Professor Bainbridge agreed that partial exemptions (from any portion of required filings) could conceal a multitude of sins, especially money laundering.

The problem is that any time the government allows non disclosure it is fraught with the potential for abuses such as hiding losses and expenses. Your money laundering example is quite a good one.

Bainbridge then added that he hoped congressional oversight would prevent abuses. [FTW will attempt to see what, if anything, congress is contemplating or aware of and report back to you.]

REMEMBERING THE PAST

Over many years FTW has documented for you the theft of more than $4 trillion dollars from the US Treasury. We have exposed how key internal accounting systems have been turned over to corporations such as Lockheed-Martin, CSC-DynCorp, AMS and others which function in the organized crime model so well described by Catherine Austin Fitts.

We have also described how Enron – now fading from memory – operated more than 700 subsidiaries of its electronic trading company Enron Online in the Cayman Islands (where there is no oil or gas) but where there is a lot of drug money.

Most will have forgotten that Enron, WorldCom, Reliant, Qwest, Tyco, Adelphia, Global Crossing, El Paso, Motorola, ImClone, Martha Stewart and Merck were all accused of cooking their books in 2002 and after. What this presidential directive does is open the door for it all to become virtually undetectable in the future for companies who are “partnered” with whatever administration is in office.

Whether it’s drug money, US Treasury money, or a silent selling off and transfer of assets out of the country before the crash (which will leave stockholders holding the bag again), we now live in a government of the corporations, by the corporations and for the corporations.

Fitts Reacts, “Get Your Money Out Now”

I have known former Assistant Housing Secretary Catherine Austin Fitts since 1998. I consider the Wharton MBA holder and former managing Director of Dillon Read to be perhaps the most accomplished and innovative financial/economic mind I have ever met. Never have I seen her write anything as emphatic, direct and unequivocal as what she wrote for FTW in response to the SEC changes.

“The use of national security law to create exceptions to the SEC law requiring books, records and transparency means that the basic  conditions of markets are now gone. The black budget can now be the official budget for both government and private banks and corporations.

“Organized crime is now officially legal and combined with the stock and capital markets -- all enforced by force and rigged profits. This is the economic infrastructure for fascism.”

The End of Financial Markets?

It's pretty much a steady story. Gold and silver prices – despite their wild volatility -- are on a long term trend up, the Dollar and the Dow are on a long term trend down. Real things count, Ponzi schemes don't.  

Large corporations and banks have had an amazing run. The Fed and the Treasury have stood ready to print money and securities to pump up the economy and profits with government contracts, credit supports and all sorts of financial shenanigans. Indeed, these days it seems like the entire federal credit mechanism exists to serve the pump-and-dump of capital markets and to take responsibility for the failures, liabilities and ongoing droppings of corporate and banking dinosaurs.

After 9/11, the government, heretofore uncomfortable about their refusal to produce audited financial statements as required by law, adopted the attitude that it was just going to ignore the laws requiring books and records and a lawful basis for expenditures. This would make it easier to pump out more and more government largesse to large corporations, banks and defense contractors.

I have wondered how in the world corporations were going to account for this enormous flow of unaccountable money moving through their operations. Watching the news, there seem to be any number of strategies. One is to take large corporations private. Watch the news for more and more leveraged buyout deals banked by firms such as Goldman Sachs, KKR and Carlyle. (To see more about how this works, see my description of the RJR buyout by KKR in my latest, Dillon Read & the Aristocracy of Prison Profits).

The coup de grâce in creating black budgets for corporations and therefore the unified black budget GNP -- the required financial infrastructure for fascism -- came last week with the scoop by BusinessWeek that President Bush had delegated to the National Intelligence Director the power to excuse private companies from reporting requirements.

What this means is that private investors can take our tax dollars and our investment dollars to create and subsidize companies that have no fundamental economic or social purpose other than the cash flows they rig through governments and the control they exercise in the name of government and provide no financial transparency to their investors.

They have no obligation to provide the books and records that are the basis of accountability and the basic building block of liquid financial markets.

This is the real result of the Enron verdict. The politicians who enjoyed Enron's largess have created a mechanism where "it can't happen again."

The losing of the largess, that is.

Alas, our taxes and US treasury and agency security purchases have become a cash flow dedicated to financing Washington's shift of our assets into a few private global hands. Our investments in large corporate stocks and bonds do the same. We are financing our enemies to execute a coup d'etat against us.

What this means to you is that if you have money invested in large corporations and deposits remaining at large banks, you need to withdraw them and switch to companies, banks and jurisdictions that continue to practice transparency, accountability and the rule of law.

The end of financial markets is not when governments and the private interests who control them exercise absolute power against our interests. The end of financial markets is when we continue to bank and invest in companies, governments and leadership who have proven themselves incapable of practicing, applying or succeeding at producing real products and competing in a real market.

It's up to you. Get your money out of large corporations, banks and governments now. The players who depend on the US governmental mechanism can fool some of the investors all of the time and all of the investors some of the time. They can not, however, fool all of the investors all of the time.

Get your money out now. Invest in life -- especially your own.

DEVELOPMENT NUMBER TWO – Alan Greenspan Introduces Peak Oil to the Markets

In another important development, for the first time – to FTW’s knowledge – a Fed Chairman (either current or former) has acknowledged Peak Oil in congressional testimony.

On June 7, 2006 the International Herald Tribune reported:

Alan Greenspan, the former Federal Reserve chairman, offered a grim view on Wednesday of the world's rising vulnerability to high crude oil prices, saying he was skeptical that oil producers could pump enough crude to meet future demand.

Since the 1940s, U.S. consumers have shown an uncanny ability to shoulder rising energy prices, but consumers' immunity to oil price shocks was running out, Greenspan said.

"The United States, especially, has been able to absorb the huge implicit tax of rising oil prices so far," Greenspan told the Senate Foreign Relations Committee in his first congressional testimony since leaving the U.S. central bank earlier this year. "However, recent data indicate we may finally be experiencing some impact."…

No kidding, Alan. It could be argued that you meant only that enough wells haven’t been drilled yet, but even for all your decades of irrationally exuberant word bending, this is a pretty clear and direct statement.

Peak Oil has just been acknowledged in both the financial markets and in congress. I consider this to be a very ominous development that is sure to start having a real effect on shareholder equity by the end of the summer.

Perhaps everyone should think of it this way. From a financial standpoint, people starting to torch their SUVs to get out from under the payments and gas prices is just the beginning of the financial collapse that is sure to accelerate the coming, broader societal collapse.

AMERICA: FROM FREEDOM TO FASCISM

In just a little over a month, Aaron Russo’s new documentary, America: From Freedom to Fascism will open in selected theaters in just a few states. A popular movement is growing to raise funds to expand the number of screens where it will show. It was just rated “Four-Star” by CBS and described as making Fahrenheit 911 look like Bambi. Catherine Austin Fitts is in this movie and so am I and a great many other American economic heroes, teachers and liberators. I have seen the film twice and am eagerly awaiting a final cut.

If what you read here is not enough to make you take action of some kind then this film all by itself would make a dead man get out of the grave to take action. Its subject matter is the private ownership of the Federal Reserve, its illegality and the fact that the 16th Amendment (income taxes) was never legally ratified by the states. It will lead you from there into a mind-bending experience of fascism as you are experiencing it today and will be tomorrow. There is no provision anywhere in the tax code which allows the US government to impose a direct, unapportioned tax on the people.

What you are facing now is open criminality which you must either choose to accept or oppose. It is the way money works that enables all of this malevolence to grow and prosper. Only you can change the way money works. Forget about writing letters to your congressperson. Forget about letters to the editor. As Thomas Jefferson reminded us, a little revolution is a good thing every now and again.

There are many ways to revolt but the simplest will not impose upon you the discomfort of actually talking to other people. God forbid. What you can do, what you must do to start your own personal revolution and liberation is to:

It doesn’t sound so revolutionary, does it? But in reality it is. Perhaps it sounds like too much work.

You have been warned and there probably won’t be a serious opportunity to issue another one.

The criminals are the government. As Mussolini once remarked, and as I quoted him in Crossing The Rubicon, “Fascism should more properly be called corporatism, because it is the perfect merger of power between the corporation and the state.”

The more you disengage now, the less likely will it be for you to find yourself on the way to the ovens or – having gotten there – realizing that it was you, yourself who financed them and made them possible.

UPDATE – June 14, 1200 hrs

After this alert had been finalized another breaking story added to our concerns. The following has been extracted from an email dialogue with Catherine Austin Fitts as we prepared our selected stories for today’s “Key stories from around the world” service for paid subscribers. It meshes perfectly with what we have written above.

Add these developments to what we already know and the warning lights flash clearer and brighter.

[Catherine Austin Fitts’ brilliant observation on a story from yesterday’s Financial Times.]

The economy can be hollowed out without a collapse. That is the nature of slow burn. It is the Orwellian scenario. The middle class is slowly drained of equity and political influence....but the process is managed. -- Catherine

Mike Ruppert wrote: http://news.ft.com/cms/s/aa447f34-f973-11da-8ced-0000779e2340,s01=1.html

[MCR - COMMENT]

Omigod! Fitts drew my attention to this story with the comment that IBM was calling for the elimination of white-collar jobs. She’s absolutely right. But what we see here is so utterly revealing. These then, must be the last stages of the looting before the collapse. Why? When the white collar jobs start leaving, a lot of money (cash) stops circulating. How many jobs does a spending millionaire support? One of the main reasons why bubbles burst, I believe, is because of unemployment. The housing bubble is already bursting and when big-dollar homes start defaulting en masse it’s like waving a red flag in front of a bull.

But that’s not all that’s being moved. The intellectual capital is going also. The equity is going.

In other words, the rats are starting to leave the ship. -- MCR

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