Tuesday, June 30, 2009

Betraying the Planet...Paul Krugman goes off track.

I do have a real problem with the way Paul Krugman is discussing the climate related problems. Really, are you a politician, an activist or an Nobel prize winning academic? Or are you looking for a government job? "Betraying the planet", what an emotionally charged nonsense. What a non starter. It doesn't matter who is right or wrong in this discussion, but I expect a much more intelligent take on this serious problem from Krugman. In this piece he goes completely off track and imitates the people he accuses with the same junk arguments. Betraying the planet, Pfff. I remember laughing out loud when driving behind a truck with a sticker: "Don't kill the world!" Also invented by an anal retentive person trying to play the guilt game. Next to this, there is a sense of superiority, completely unworthy of someone trying to be an academic. For me, the credit he received for opposing Bush is gone. Mr Krugman, stop you moral crap, you irritate me with your semi- religious, self-righteous populist guilt junk. CAN SOMEONE GIVE THIS MAN A HIGH JOB IN GOVERNMENT, PLEASE? Perhaps somewhere far away?

Betraying The Planet

So the House passed the Waxman-Markey climate-change bill. In political terms, it was a remarkable achievement.

But 212 representatives voted no. A handful of these no votes came from representatives who considered the bill too weak, but most rejected the bill because they rejected the whole notion that we have to do something about greenhouse gases.

And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet.

To fully appreciate the irresponsibility and immorality of climate-change denial, you need to know about the grim turn taken by the latest climate research.

The fact is that the planet is changing faster than even pessimists expected: ice caps are shrinking, arid zones spreading, at a terrifying rate. And according to a number of recent studies, catastrophe — a rise in temperature so large as to be almost unthinkable — can no longer be considered a mere possibility. It is, instead, the most likely outcome if we continue along our present course.

Thus researchers at M.I.T., who were previously predicting a temperature rise of a little more than 4 degrees by the end of this century, are now predicting a rise of more than 9 degrees. Why? Global greenhouse gas emissions are rising faster than expected; some mitigating factors, like absorption of carbon dioxide by the oceans, are turning out to be weaker than hoped; and there’s growing evidence that climate change is self-reinforcing — that, for example, rising temperatures will cause some arctic tundra to defrost, releasing even more carbon dioxide into the atmosphere.

Temperature increases on the scale predicted by the M.I.T. researchers and others would create huge disruptions in our lives and our economy. As a recent authoritative U.S. government report points out, by the end of this century New Hampshire may well have the climate of North Carolina today, Illinois may have the climate of East Texas, and across the country extreme, deadly heat waves — the kind that traditionally occur only once in a generation — may become annual or biannual events.

In other words, we’re facing a clear and present danger to our way of life, perhaps even to civilization itself. How can anyone justify failing to act?

Well, sometimes even the most authoritative analyses get things wrong. And if dissenting opinion-makers and politicians based their dissent on hard work and hard thinking — if they had carefully studied the issue, consulted with experts and concluded that the overwhelming scientific consensus was misguided — they could at least claim to be acting responsibly.

But if you watched the debate on Friday, you didn’t see people who’ve thought hard about a crucial issue, and are trying to do the right thing. What you saw, instead, were people who show no sign of being interested in the truth. They don’t like the political and policy implications of climate change, so they’ve decided not to believe in it — and they’ll grab any argument, no matter how disreputable, that feeds their denial.

Indeed, if there was a defining moment in Friday’s debate, it was the declaration by Representative Paul Broun of Georgia that climate change is nothing but a “hoax” that has been “perpetrated out of the scientific community.” I’d call this a crazy conspiracy theory, but doing so would actually be unfair to crazy conspiracy theorists. After all, to believe that global warming is a hoax you have to believe in a vast cabal consisting of thousands of scientists — a cabal so powerful that it has managed to create false records on everything from global temperatures to Arctic sea ice.

Yet Mr. Broun’s declaration was met with applause.

Given this contempt for hard science, I’m almost reluctant to mention the deniers’ dishonesty on matters economic. But in addition to rejecting climate science, the opponents of the climate bill made a point of misrepresenting the results of studies of the bill’s economic impact, which all suggest that the cost will be relatively low.

Still, is it fair to call climate denial a form of treason? Isn’t it politics as usual?

Yes, it is — and that’s why it’s unforgivable.

Do you remember the days when Bush administration officials claimed that terrorism posed an “existential threat” to America, a threat in whose face normal rules no longer applied? That was hyperbole — but the existential threat from climate change is all too real.

Yet the deniers are choosing, willfully, to ignore that threat, placing future generations of Americans in grave danger, simply because it’s in their political interest to pretend that there’s nothing to worry about. If that’s not betrayal, I don’t know what is.

Monday, June 29, 2009

BIS Urges Central Banks and Governments to Develop Exit Strategy.

BIS Urges Central Banks and Governments to Develop Exit Strategy.

The Mother of all Central Banks says in a report issued today:
  • "it is so bloody complicated, no one understands what is going on" and
  • "without a healthy banking system, forget about green shoots"
  • "the result of the change in accounting rules is for the banks to put forward losses hoping in the meantime that the economic circumstances will improve"
  • "too big to fail is too big to exists"
  • "Banks and Governments: what is your exit strategy?"

Sunday, June 28, 2009

Are You Angry? Yes? Read this. No? Read this.

Max Keiser (www.maxkeiser.com) and Stacy Herbert maintain one of the best anti-cartel sites on the internet. You want to know what is going on? Go to Maxkeiser.com. Now read the following slowly. Better: read it out loud in front of your family, colleagues and complete strangers on busses, train stations, undergrounds, churches and markets.
Do you think this is strange? Just wait for the masses to start begging for a piece of bread on busses, train stations, undergrounds...........
Max is a former Wall Street broker, TV presenter, radio host, entrepeneur, broadcaster and journalist. He lives in Paris from where he reports on a regular basis.

Are You Angry? Yes? Read this. No? Read this.

Pumping and Dumping the 401(k) Crowd


This is what we know: The fractional-reserve-banking-enabled, Fiat-currency-assisted credit derivatives bubble that grew 10 times larger than Earth’s GDP has popped.

And the collapse of this greatest global Ponzi scheme since the South Sea Bubble has taken world markets with it. It has destroyed pension funds and wiped out banks across the planet. Economies have screeched to a standstill. Trade has collapsed. Fifty million have lost their jobs. A hundred million have been pushed into hunger.

This is what we don’t know: when, or if, the banking bailouts, money printing and other wealth transfer schemes will stop.

In America, the people are mad as hell and they aren’t going to take it anymore. Or that’s what you would think if you tuned in to any cable channel spewing the new populism.

The Wall Street Journal is reporting, however, that all that televised “populism” is a whole lot of hot air: “Today’s populism has created no large scale protests in the US.”

In France, I see almost weekly small scale protests and monthly large scale ones since the global Ponzi scheme popped last year. No, the French aren’t taking this lying down:

That isn’t the case overseas. Close to one million French demonstrators on March 19 protested the government’s handling of the economic crisis, and thousands blocked London streets on April 1 during a G-20 meeting, events that dwarfed any protests in the U.S.

On top of the protests, the French have also taken to “boss napping.” Basically, when a “boss” informs employees that they are all being laid off, the workers will then hold the “boss” hostage until the boss delivers certain promises to the workers. I was on a France 24 news program last week debating the issue:

The bossnapping continues because only 7% of the French population is against the practice:

In a poll last week by the IFOP survey group for Paris Match magazine, 30% said they approved of taking managers hostage.” Another 63% said they “understood but don’t approve.” Only 7% said they “condemned” the practice. A separate poll taken a few days earlier by survey group CSA showed 45% approved of “bossnapping.”

It’s funny that many Americans will call the French cheese-eating surrender monkeys, and, yet, the French would never quietly slip away into the night to live in a carpark or a tent city while bankers get billions in taxpayer financed bonuses. So why do Americans go so quietly?

The country today is different. America has an enormous middle class that is heavily invested in the financial system and is hardly about to organize for its overthrow.

This mentality, of course, allowed for the greatest transfer of wealth in America since the pilgrims first took this country from the original inhabitants. George Bush and Hank Paulson, with the help of their friendly media barons (the same ones that are now pumping faux populism), warned the country that if they didn’t hand over $700 billion for Hank’s three-page wealth transfer plan, the markets would crash. Well, the ransom got paid, and the markets crashed regardless, but at least the financial oligarchy got their bonuses.

People who have lost half the value of their 401(k) plans, in other words, want to regain it by having the economy rebound, not by seizing the assets of ExxonMobil Corp. People who have lost a home want to rebuild their credit and buy another one, not liberate the property of the wealthy.

As a broker, these are your favorite sort of clients. Desperate to make back lost money, they will hold on to the dear end, trading in and out in a panic.

Now these 401(k)-holding, shouting-at-the-television-screen-while-waiting-for-a-market-miracle citizens are about to find themselves at the other end of Geithner’s latest wealth transfer scheme masquerading as a bank bailout, the Public-Private Investment Program. According to this Bloomberg News commentary the scheme is a potential pump and dump scam:

The main premise of Geithner’s plan is that the banks’ toxic assets are now priced at artificially low levels. As the federal bailout program’s Congressional Oversight Panel wrote in an April 7 report, “Treasury has not explained its assumption that the proper values for these assets are their book values,” rather than the prices unsubsidized investors would pay for them.

If Treasury’s premise proves false, we may end up looking back on the Public-Private Investment Program as an elaborate pump-and-dump game. Only this time, unlike with the pools that sucked in gullible investors during the 1920s, the big losers would be taxpayers — who never had the choice of not playing.

Of course, these kind of scams are easier to execute on a 401(k) crowd that has proven they will pay the ransom quickly if held hostage as with the Hank Paulson’s three page wealth transfer plan.

Thomas Jefferson would be turning over in his grave if he saw that many of his predictions of a banking oligarchy had not only come true but that the population had remained so impotent, scared and silent in the face of it.

For more information, go here.

Friday, June 26, 2009


Yip, I found the money


"They had to find the money" (translated: it takes time to print the money), said Finance Minister Bos. For more than 35 years, and supported by their natural gas find in Groningen, Holland has been known to subsidise all problems it encountered. And if the subsidy created an unintended problem, the sub-problem was also quickly subsidised. After 25 years, the sub, sub, sub, sub problems together are creating a systemic risk. Slowly the welfare state will be coming to an end as the government will be attacked financially from 2 sides: 1. less income because of company bankruptcies and 2. more expenditure because more people are claiming the generous state unemployment benefits. The miscalculation of risk is one of the sources of the financial crisis. Ask the Insurance Companies, they learned it the hard way and are now hardly insuring anymore. Not for the Dutch. Hah..! A problem! The Dutch government is adement to subsidise all problems (and let them disappear), hence a construction whereby it guarantees payment against default for orders of the private sector. They might as well hand over the money now as the depression is going to be deep and nasty with political and social unrest. State support for the private sector feels good for the politician and might gain a few votes but will only prolong the agony.

Financieel Dagblad, Holland

Free Google Translation: The government is going to guarantee payments against default for order by the private sector up to euro 1.5 billion. The Cabinet is going to decide about this insurance for the private sector today whereby it will run a risk until the end of this year of euro 40 million

Following the government's announcement, the employer associations VNO-NCW, MKB and credit insurers agreed on the credit insurance to companies.

Since the start of the credit crisis companies had the problem that credit insurers have become more cautious in ensuring their orders against default...

Let's follow the spending behaviour of the Dutch government for a few months:

  • 26th of June: Oopsie, problem: Government supports ABN Amro with € 2,5 Billion with capital injections and guarantees. ABN AMRO now Zombie Bank.
  • 27th of June: Damn, another problem. Social Affairs minister Donner wants to increase
    budget for part-time unemployment benefit with € 550 Million Rand. He found the money
  • 29th of June: Dutch Cabinet asks help of pension funds with recovery. They especially would like them to invest in the financial sector and State Bank ABN-AMRO. In this regard I urge you to look at this video until the end.
  • 30th of June: Social security benefit will increase. If you are living alone you will get € 647,54 inclusive of money for a well deserved holiday. The increase is € 5,64/month.
  • 30th of June: If you own a home you can get € 200-350 subsidy for advices to isolate your home. There is also an arrangement for lower VAT for floor and roof isolation, credit for energy savings and subsidies for double glass home isolation. Take your pick!
  • 1st of July: Christian Union wants to cancel tax on electrical cars. They government is the one which sends the message what to buy, not the consumer.
  • 2nd of July: Amsterdam city will mix "chance arm" and "chance rich" pupil in government schools by providing free education. Will cost them € 2,5 Million. They just want to make sure they both end chance arm rich.

The government knows nothing. But how come we put so much faith in the governments? Please read the following excerpt of the interview of The Daily Bell and James Turk of Goldmoney.com of July 2009:

"Daily Bell: How did we get to where we are today in terms of the current crisis?

Turk: That's a very good question. The world is in this mess because of the misplaced reliance people have placed on government. They mistakenly think government can solve all the world's problems by passing laws or redistributing wealth. Government leaders and policymakers of course believe that too, or at least tell us that they do because this unthinking reliance on government by the masses enhances politicians' power, which ultimately is derived from people willing to do what government tells them to do.

In fact, everyone should instead be relying upon the free-market process, namely, one which operates under a consistent rule of law instead of under the conditions of the way the ‘market' now exists, which is being battered by the whims and capriciousness of politicians. Governments destroy free-markets long before they ever understand how the market process works. But there is a second element to today's mess that goes beyond the misplaced faith people have placed on government."

British banks highly vulnerable bankrupt

Just be honest guys, banks are bankrupt. Leveraged with 1-2% in a declining market the proverbial s#%) has hit the fan. Spin won't work anymore. The game is over. What's left to do now is issuing statements like: "don't blame us, blame them". And "we told you so". The era of shuffling paper around has come to an end and it will be ugly. There is for instance 140 times more paper gold in this world than real physical gold. Soon, the paper traders will be running for the hills while the gullible investor will be roaming the streets, looking for the highest trees. Are you prepared? Do you have gold?

Britain's banks remain over-indebted, highly vulnerable and harbour growing funding gaps which leave them susceptible to future shocks, the Bank of England has said


In a warning to bankers and consumers after months that have seen large jumps in share prices and hopes that the banking system is recovering, the Bank used its Financial Stability Report to emphasise that the UK remains highly vulnerable to potential shocks.

With the Government poised to deliver its White Paper on financial regulation next week, the Bank also cautioned that life for financial institutions was about to change forever, with big banks facing a whole spectrum of new restraints on their size, structure, business plans and lending.

Read more

Thursday, June 25, 2009

Wall Street Decides To Improve Image. With Your Money

Perception is reality and the Networks own the perception. Thus, be afraid, very afraid. You will soon hear the Goldman Sachs salary and commissions of Hank Paulsen @ 700 Million US$ was actually "well deserved". Shouldn't we pay for the best brains in the world?

Wall Street Begins Campaign to Thwart "Populist" Overreaction


June 25 (Bloomberg) -- Wall Street’s largest trade group has started a campaign to counter the “populist” backlash against bankers, enlisting two former aides to Treasury Secretary Henry Paulson to spearhead the effort.

In memos of confidential meetings with top financial executives, the Securities Industry and Financial Markets Association said it began this month the “execution phase” of the operation, which pledges to “embrace change” and accountability. The plan targets policy makers and the media in New York, London, Washington and Brussels and calls for a “city-by-city, grass roots” approach.

The securities industry “must be perceived as part of the solution, which will allow it to better defend against populist overreaction,” the documents, prepared for a June 17 meeting of SIFMA’s board, said.

The board meeting minutes and staff-written papers, obtained by Bloomberg News, outline the program crafted by polling, lobbying and public relations companies paid at least $85,000 a month. The memos provide a glimpse, in often candid language, into how Wall Street is grappling with its pariah status.

“It is imperative that in this historic period of reform, the industry be recognized as playing a positive role in seeking change and providing solutions to the problems we face,” one of the documents said. “There is currently widespread skepticism about the industry’s commitment to this needed change.”

Lobbying Congress

The internal papers call for using regional securities firms, many of which have escaped notoriety in the financial crisis, to push the industry’s message with their local members of Congress. The plan notes that brokers across the country can also be used.

“The foot power of the private client group has proven to be effective in blunting populist messages in the past,” said board member Paul Purcell, chief executive officer of Milwaukee investment firm Robert W. Baird & Co., according to the minutes of one meeting.

To advise on the strategy, the trade group turned to a bipartisan roster of consultants. Such advice doesn’t come cheap and SIFMA is discussing dipping into its reserves to cover some of the costs, according to one memo.

Michele Davis, Paulson’s former spokeswoman, and Jim Wilkinson, his former chief of staff, are among those leading the effort. SIFMA is paying their firm, Brunswick Group LLC, a monthly retainer of $70,000, the documents show. Both Davis and Wilkinson declined to comment. Paulson left office in January.

Democratic Pollster

Assisting them is a Democratic polling company, Brilliant Corners Research and Strategies, which is paid $5,000 a month. It is run by pollster Cornell Belcher, who worked on President Barack Obama’s campaign. BKSH & Associates Worldwide, a lobbying firm chaired by Republican strategist Charlie Black, signed on for $10,000.

In response to questions about the push for an image makeover, SIFMA President Timothy Ryan said the organization has taken a lead advocating for a federal systemic risk regulator and has pushed for increased government power to wind down financial firms that don’t own banks. He also touted the group’s recently issued recommendations on executive compensation.

“This effort, which is not uncommon for a trade association, is designed to ensure our ideas for improved accountability, oversight and transparency are heard by the widest possible audience,” Ryan said.

Industry’s ‘Duty’

The industry has “a duty to help craft a solution, so we’ll continue leading by example in our efforts to properly safeguard our financial system and serve the needs of the overall economy, local communities and individual investors,” he added.

SIFMA represents about 600 securities firms, brokerages and asset-management companies. It counts among its members the biggest U.S. banks, including Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co., which have received capital injections from the $700 billion Troubled Asset Relief Program. Bloomberg Tradebook, a broker-dealer subsidiary of Bloomberg News’s parent Bloomberg LP, also belongs.

While financial companies’ lobbying clout has been reduced in the crisis, SIFMA’s memos said that Wall Street can’t afford to be left out as the Obama administration and Congress push for increased oversight, executive-pay limits and other restrictions likely to affect the industry for decades.

“The mess is so big that we all have to work together,” minutes from one meeting said.

‘Lot of Anger’

The group’s polling “indicated that there is a lot of anger out there and feelings that the industry is not focused,” the minutes said. While “Wall Street and CEOs” received low scores, local banks and brokers got better marks.

The outside consultants join SIFMA staff for a daily 10:00 a.m. conference call, “given the importance, complexity and real-time nature of the campaign style-implementation,” according to one of the memos.

Still, that kind of approach may not be enough for Wall Street to lift its reputation, said Bill Brown, a visiting professor at Duke University School of Law in Durham, North Carolina.

“It’s right for them to try to come back from this, but they have to realize that they are not going to be reborn into what they were,” said Brown, who was global co-head of listed derivatives at Morgan Stanley. “The best P.R. comes from doing good, not from having to manage your image.”

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

New York Subway Station to be Renamed: "Derivative Junk".

Not sure, or was it "We Make Trash From An Asset?

In a surprise development today it was announced that one of the busiest subway stations in Brooklyn will be called "Derivative Junk" subway. Said a senior official of the MTA, owner of New York subway stations:
"Let's be honest, there is nothing real here. The whole banking system is based on hot air. You think you buy an ounce of gold and you get a piece of paper in return, issued by criminals. We believe it is of extreme importance that we give the rights to people or companies in accordance with the heritage of the place. And that heritage is "hot air". What's wrong with that?"
His colleague, less friendly, admitted there was something wrong with the thinking of MTA. He said:
"But hey, who f*** cares. No me! I will be on a f****** pension from next month onwards. Only problem is the f******s are going to cut my monthly payment with 70%. Now p*** off!"
Other officials declined to comment.

New York Subway Station to be Renamed: "Derivative Junk".


The MTA officially has sold naming rights to one of its busiest subway stations in Brooklyn. That means McDonald's 42nd Street and Taco Bell 59th Street-Columbus Circle could be right around the corner -- or not.

Sell the name of a station to an advertiser: It's a business strategy the cash-strapped agency has been developing for years. But no one has been willing to pay up until now.

Strangely enough, it's a London-based bank that wants first dibs on subway stops at Atlantic Avenue/Pacific Street transit hub. The $4 million deal got approved today, which means all of the subway stations at the busy Brooklyn hub will have "Derivative Junk" added to their names.

Read more

Wednesday, June 24, 2009

Zombie Bank in Denial

A severe case of mortal denial came to light yesterday when Citigroup announced that it will raise the salaries of their staff with 50% "in order retain the best employees". Citigroup executives said that some workers have already left for small boutique banks or larger competitors that are not so beholden to the government.
Gutshpa, they call it, but it could also mean that Wall street did overhaul Obama instead of the other way around.
Moral of the story:
"We'll soon start to blow the next bubble with the assistance of the Treasury Department, this is the way we will get the economy going again. And when the gullible investor buys our derivative junk again we will be able to pay commissions as never before. Obama c.s. is in our pocket".
The New York Times continues:
But maybe it’s a little like the canary in the mine, and you say that things are getting better", said Alan Johnson of Johnson Associates, a compensation consulting firm. Mr Johnson is not the best man to ask as he must have seen his commissions in the banking industry take a dive with a minimum of 50%. He has a vested interest in spin. And to talk about Citigroup as if it is a canary in the mine is just the wrong remark to make to a gold bug.
Nevertheless, I wonder if somebody told Citigroup that they are bankrupt and being kept alive by taxpayer money? The denial is stupefying.
We quote Jesse: "The banks must be restrained, and the economy brought back into balance, before there can be any sustained recovery".

New York Times

Citigroup Has a Plan to Fatten Salaries

After all those losses and bailouts, rank-and-file employees of Citigroup are getting some good news: their salaries are going up.

The troubled banking giant, which to many symbolizes the troubles in the nation’s financial industry, intends to raise workers’ base salaries by as much as 50 percent this year to offset smaller annual bonuses, according to people with direct knowledge of the plan.

The shift means that most Citigroup employees will make as much money as they did in 2008, although some might earn more and others less. The company also plans to award millions of new stock options to employees in an effort to retain workers and neutralize a precipitous drop in the value of their stock holdings.

Like Citigroup, financial companies, like Bank of America and Morgan Stanley, are raising employees’ base salaries to try to shift attention away from bonuses and curb excessive risk-taking. So are banks like UBS and other European competitors.

The Citigroup proposals, discussed internally this week, present a crucial test for the Obama administration, which has vowed to rein in runaway compensation at companies that have received large taxpayer-financed bailouts. Citigroup has gotten not one but two rescues from Washington. Soon the government will assume a 34 percent stake in the company, whose share price has plunged nearly 84 percent in the last year.

Despite Washington’s new role at Citigroup, and public anger over big paydays on Wall Street, administration officials have little power to prevent the company and others in the industry from raising salaries for rank-and-file employees.

Kenneth R. Feinberg, the administration’s new “pay czar,” has the authority to set compensation for only the top 100 employees at troubled companies. The rest — which at Citigroup, means fewer than 300,000 people — can be paid as executives see fit, provided any increase does not rank them among the 100 most highly paid workers.

Outsize pay on Wall Street, particularly the industry’s bonus culture, is widely seen as having encouraged the risk-taking that led to the gravest financial crisis since the Depression. But industrywide, total compensation is expected to rise 20 to 30 percent this year, approximately to the levels of 2005, before the crisis, according to Johnson Associates, a compensation consulting firm. Total industry pay would still be below the record levels of 2007, but only a bit.

“You can say it is outrageous,” said Alan Johnson, the president of the firm. “But maybe it’s a little like the canary in the mine, and you say that things are getting better.”

Indeed, despite the simmering anger over Wall Street pay, some of the 10 big banks that repaid their federal aid this month — a big step toward disentangling themselves from the government — are gearing up to pay outsize bonuses. For many, profits are up, despite the troubled economy. On Monday, Goldman Sachs, which returned $10 billion of bailout funds, denied reports that it planned to pay out the highest bonuses in its 140-year history.

Mr. Feinberg, the special master for compensation, is the person who ensures that companies receiving federal bailout money are abiding by executive pay guidelines. This week, Mr. Feinberg, who oversaw the federal government’s compensation fund for victims of the Sept. 11, 2001, terrorist attacks, held introductory meetings with Citigroup executives and their counterparts at several other companies that have received two federal bailouts. He will start reviewing pay packages for the 25 highest-paid employees, as well as compensation formulas for the next 75, in the next two months. He declined to comment on Tuesday.

For months, Citigroup executives have sought guidance from the Treasury Department about how to alter compensation. But after reviewing the new rules, the bank determined it did not need Mr. Feinberg or other government officials to sign off on pay for the rank and file. While Mr. Feinberg can request information on the pay polices at financial companies that have received two federal bailouts, the companies can reject his guidance.

Citigroup executives are so eager to keep employees from fleeing, that in some cases, they are offering them guaranteed pay contracts. Managers began notifying bank employees of the proposed changes this week. They could take effect shortly.

For some Citigroup investment bankers and traders, the changes could mean salary increases of as much as 50 percent, depending on their position. Legal and risk management employees, as well as those in the credit card and consumer banking units, whose pay is typically skewed toward salary, rather than bonuses, are expected to receive smaller increases.

Citigroup executives said the changes were aimed at retaining employees. Some Citigroup workers have already left for small, boutique investment banks or large rivals that are not so beholden to the government.

Citigroup officials declined to discuss the issue on the record, given its sensitive nature. But they said that the changes would bring the bank’s compensation plan in line with the widespread view on Wall Street that bonuses were not one-time payouts, but rather a form of deferred salary. They said the new system would let them adjust bonuses more sharply to reflect employees’ performance.

Stephen Cohen, a Citigroup spokesman, said that any changes would be intended to adjust the balance between salaries, which are fixed, and bonuses, which vary from year to year.

Citigroup also plans to introduce a new stock option program later this year. Under the plan, it will award employees one stock option for every share of restricted stock they have accumulated. The program could open the floodgates for the release of tens of millions of stock options that could be cashed out over the next three years.

It is unclear what the strike price will be. But the hope is that the options program will give employees another incentive to stay despite offers from rivals.

  • The only Swine I see are Bankers (Bloomberg)
  • Future of free banking depends on courts (Telegraph)

Vuvuzela War in Holland!

Vuvuzela - Legendary Horn

Vuvuzela War in Holland! Noisiest WorldCup Ever!

Telegraaf, Holland

Google translation:
There is a real Vuvuzela war threat in the Netherlands. The company SoccerID reported Monday to import the controversial South African horn to Europe. Within three to four weeks the first Vuvuzela's should be for sale in the Netherlands. NoLimitation however, claims to have exclusive distribution rights for the Vuvuzela.

NoLimitation BV acquired the exclusive rights to the Vuvuzela and use of the name through Urbas Kehrberg GmbH, the German company which claims to have the rights to all EU countries. This means that, according NoLimitation, they are the only company in the Netherlands with the right to sell the three-piece horn under the name Vuvuzela.

The sound of the Vuvuzela can be compared with a huge swarm of angry bees, is the cause of annoyance and discussion at the Confederations Cup. But there is a lot of interest in the horn.

"The Vuvuzela is among the standard equipment of every South African soccer fan," says Paul Buyse, owner of NoLimitation. "The horn gets negative media attention due to its use in stadiums, but people can use them at home and in the pub. Is noise not part of a football match?

Read about the Vuvuzela in USA Today.

See also the Vuvuzela Orchestra:

Tuesday, June 23, 2009

Relax Condo Lending Standards: Barney Frank

Barney FrankImage via Wikipedia

Desperately looking for ways the blow the next bubble, Barney Frank, House Financial Services Committee Chairman, wrote a letter to the chief executives of both Fannie and Freddie, to relax the standards on mortgages for new Condo's. It is the indisputable proof that politicians have no idea what is going on; what the causes of this crisis are and who is responsible. But Barney Frank should be the one man in the US who should have a helicopter view as he is the political financial leader of the US! Should one laugh or cry?

Changes Urged to Rules on Condo Loans

Wall Street Journal

Two Democratic lawmakers are calling on Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery.

[Condo Loan]

In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70% of the units have been sold, up from 51%. Fannie Mae also won't purchase mortgages in buildings where 15% of owners are delinquent on condo association dues or where one owner has more than 10% of units, which the firm sees as signals that a building could run into financial trouble. Freddie Mac will implement similar policies next month.

In a letter to the chief executives of Fannie and Freddie, Reps. Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, and Anthony Weiner (D., N.Y.) warned that the 70% sales threshold "may be too onerous" and could lead condo buyers to shun new developments. The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos.

The political push illustrates the balancing act facing the two government-controlled mortgage-finance giants as they struggle to keep the housing market afloat without losing more money.

The two companies, along with the Federal Housing Administration, purchase or guarantee the vast majority of mortgages in the U.S. That means that any toughening of lending standards could have an outsize impact on the housing market. But setting guidelines that are too lax could saddle the companies with risky loans that ultimately stick taxpayers with a bigger bill.

In an interview, Rep. Weiner said the rules have "had a real chill on the ability to get these condos sold," at a time when prices of condos have fallen enough to attract potential buyers.

Fannie Mae officials say the new rules haven't been as taxing as some claim. The mortgage company said the 70% rule doesn't apply to loan applications submitted through an underwriting program used by major lenders, and that hundreds of projects submitted through that program since March 1 have been approved even though their sales levels are below 70%. Developers are also able to apply for exemptions to the new policies for loans that are manually underwritten. Both Fannie and Freddie say they are preparing a response to the lawmakers.

"In the absence of these changes, Fannie and Freddie would be putting good money after bad and run the risk of further increasing the building epidemic of foreclosures and dysfunctional homeowner associations in Florida and around the country," said Charles Foschini, vice chairman of CB Richard Ellis in South Florida.

The FHA requires 51% of units to be sold for developers to secure approval to offer mortgages backed by the government agency, a point the lawmakers made in their letter to Fannie and Freddie. The FHA has considered lowering its threshold, citing concerns that tighter underwriting standards could delay a recovery and pointing to its traditional role to provide stability in volatile housing markets.

Fannie and Freddie have also boosted fees on mortgages for condos. Buyers without a minimum 25% down payment have to pay closing-cost fees equal to 0.75% of their loan, regardless of their credit score, under new rules that took effect in April. Fannie has said it will drop that fee in August for cooperative apartments and detached condos.

Tighter lending standards are also creating hurdles for condo owners who want to sell their units. Richard Shepard wasn't able to sell his New Smyrna Beach, Fla., condo in April to a buyer who was prepared to put 30% down on the $216,000 unit. The buyer, a naval officer, couldn't get financing. Mr. Shepard says lenders said the condo association won't be controlled by the unit owners until July, so they wouldn't underwrite any loans for units in the building.

Mr. Shepard, a retired 67-year-old truck driver, owns free and clear his primary residence in Bridgton, Maine, and bought the Florida condo for $225,000 at an auction last year. He and his wife, who have rented out the unit, put it on the market earlier this year after higher property taxes increased his monthly mortgage payments by $350.

"This is stupid," Mr. Shepard recalls telling his lender. "We're going to possibly go into foreclosure even though we've got a buyer with excellent credit who wants to buy and who has a huge down payment."

Write to Nick Timiraos at nick.timiraos@wsj.com

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Monday, June 22, 2009

IASB: New Accounting Rules: WE'RE RICH AGAIN!!!

This was to be expected as it is part of the spin machine: the international accounting organisation (IASB) is in the process to change the accounting rules for banks so there is no crisis anymore, everybody is rich, the politicians are being voted into office again, the bankers can continue to earn commissions and the taxpayers are required to bend over. No, no, no grease this time. Do you want to invest in a stock exchange where accounting rules are misused and manipulated to suit the companies? Do you believe any financial statement?

How long are organisations allowed to manipulate? "Trust" is the only reason for their existence. Trust is what binds us. Without "trust" these organisations will evaporate, whether it is a religious -, judicial - , government -, monetary - or a supervising organisation. Ask the clowns next door (Zimbabwe).
It took Western societies centuries with wars, depressions and bankruptcies with political & social unrest to get the to point where they are now. Slowly building the trust of the public. But one cynical policy decision and the trust is gone. Start over again, right from the beginning.

This is a sign of the time: the person hailed as an example to others is not praised for trying to find the truth, but for his/her ability to find the gap in the system. Cleverness is rewarded, not sincerity or honesty. If everybody supports this way of thinking than there are only 2 ways out: war or religion. Forget about religion. Rephrase: there is only one way out: war.

Financieel dagblad, Holland

Google translation from Dutch:
Soon, there is no obligation anymore for Banks to depreciate paper losses on investments. The International Accounting Standards Board IASB prepared the finishing touches to a relaxation of the rules that led to billions in write-offs for ING and Fortis.

The new rule can be found on the website of the IASB and we received the information from concerned insiders. In July the proposals will be published.

Under the new regime, the controversial second rescue operation of ING early this year, whereby the government guaranteed risk for the bank-insurer for 22 Billion Euros, would no longer be required. Whether it can be reversed with the new rules, is still unclear.

Consideration of financial investments

The Board of IASB, meets every day to work on the changes. It revolves mainly on the treatment of financial investments such as mortgage portfolios. ............

Sunday, June 21, 2009

Goldman Sachs to make biggest bonus payout in 140 year history

Do not expect an uprising. I blogged many times before: the majority of the American population is just not interested in news like this: they want the government to fix their 401(K)'s. How the government does this is immaterial, but most likely by manipulating & bubbling the stock exchange, as is presently in progress. A record bonus pay-out is just collateral damage. However, if Geithner et all does not succeed, the baby boomers might, just might get of their couches....

The denial and ignorance on what is going on is stupefying.

Goldman Sachs to make biggest bonus payout in 140 year history


Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

Staff in London were briefed last week on the banking and securities company's prospects and told they could look forward to bumper bonuses if, as predicted, it completed its most profitable year ever. Figures next month detailing the firm's second-quarter earnings are expected to show a further jump in profits. Warren Buffett, who bought $5bn of the company's shares in January, has already made a $1bn gain on his investment.

Goldman is expected to be the biggest winner in the race for revenues that, in 2006, reached £186bn across the entire industry. While this figure is expected to fall to £160bn in 2009, it will be split among a smaller number of firms.

Barclays Capital, Credit Suisse and Deutsche Bank are among the European firms expected to register bumper profits, along with US banks JP Morgan and Morgan Stanley following the near collapse and government rescue of major trading houses including Citigroup, Merrill Lynch, UBS and Royal Bank of Scotland.

In April, Goldman said it would set aside half of its £1.2bn first-quarter profit to reward staff, much of it in bonuses. It is believed to have paid 973 bankers $1m or more last year, while this year's payouts are on track to be the highest for most of the bank's 28,000 staff, including about 5,400 in London.

Critics of the bonus culture in the City said the dominance of a few risk-taking investment banks is undermining the efforts of regulators to stabilise the financial system.

Vince Cable, the Liberal Democrat treasury spokesman, said: "The investment banks more than any other institutions created the culture of excessive leverage, excessive risk and excessive bonuses that led to the downfall of the financial system. Now they are cashing in and the same bonus culture has returned. The result must be that we are being pushed to the edge of another crash."

Goldman Sachs said it reviewed its bonus scheme last year and switched from a system of guaranteed rewards that were paid over three years to variable payments that tied staff to the firm. It told employees last year that profit-related bonuses would be delayed by 12 months.

Until the release of its first quarter profits in April, it seemed inconceivable that a firm owing the US government $10bn would be looking to break all-time records in 2009.

David Williams, an investment banking analyst at Fox Pitt Kelton, said: "This year is shaping up to be the best year ever for investment banks, or at least those that have emerged relatively unscathed from the credit crisis.

"These banks are intermediaries in the bond markets where governments and companies are raising billions of pounds of new money. There is also a lack of competition that means they can charge huge sums for doing business."

Last week, the firm predicted that President Barack Obama's government could issue $3.25tn of debt before September, almost four times last year's sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds.

Saturday, June 20, 2009


Everything is perception but CH needs a PR agency


Wikipedia: description

Wikileaks: Switzerland: a parasite feeding on the developing world

Credit writedowns.com: Switzerland threatened with bankruptcy

Publicradio.org: Come out, come out wherever you are

Video: Gold scandal - Switzerland

Wikileaks: Hiding Africa's Looted Funds - The Silence of Western Media

BBC: Switzerland agrees to tax deal with US.

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US To Trade Gold Reserves For Cash Through Cash4Gold.com

US To Trade Gold Reserves For Cash Through Cash4Gold.com

Friday, June 19, 2009

U.S. Military Set to Intercept North Korean Ship Suspected of Proliferating Missiles, Nukes

Welcome, Dear Leader

The USS John McCain, a navy destroyer, will intercept the ship Kang Nam as soon as it leaves the vicinity off the coast of China, according to a senior U.S. defense official.

Foxnews: Navy positions destroyer for possible interception...

Guardian: Navy prepares to intercept North Koren Ship

Japan Times: Ship inspection could be a recipe for conflict

Bild, Germany: Hawaii shores up missile defence

Bloomberg: Defence Officials to press China on North Korea

Youtube (video)
: Nuclear armed North Korea a grave threat

: The practicalities of intercepting WMD

Update: Vessel Kang Nam likely heading for Myanmar (Reuters). Learn about Myanmar (Burma). Study (also video) the national anthem quickly. Learn US (video) North Korean (video) national anthem; depending who wins this standoff; you never know :)

Update1: Why Myanmar (Wall Street Journal)?

Update2: Singapore will act if vessel has WMD (Reuters and The Hindu).

Update3: "we counter a pistol with a cannon, a cannon with a missile, a sanction with revenge, and a nuclear weapon with a nuclear weapon" (Korean Times)

Update4: (06/22): North Korea warns US of retaliation (Al Jazeera); says it will hit back (AFP).

Update5: (06/23) North Korea alerts Japan to offshore exercises.

Update6: (06/27)
South to Boost Surgical Strike Capability Against North Korea

Update7: (06/29) North Korean Vessel changes course, heading back

Update8: (07/03): NK fires four short -range missiles

Update9: (07/03): USA ready to intercept NK long range missile

Swine Flu and relationships

Swine Flu and relationships

Have a nice weekend. I am going to take a glass of wine!

The coming age of internet censorship

Song of the Grass-Mud Horse (Cao Ni Ma)

The coming age of internet censorship

Wikileaks; June 17, 2009

Today, Germany's lower house passed the first Western national internet censorship law. As every news organization, political newsletter and discussion between friends relocates onto the internet, censorship systems are being rolled out to interpose themselves between every communicator and their audience.

By Claire Ulrich (translated from the French, Les censeurs du net)

In Internet history, 1994-2004 was the era of the pioneers. 2004-2007 was the era of the merchants. Now we’re entering the era of the bullies. Everywhere in the world, sites are going dark, arrests are increasing, more people are going to prison. The Web just celebrated its 20th birthday. Nobody used to take it seriously, but those days are gone.

Nacer (all first names of Internet users in this article have been changed) remembers the first computer with Internet access in the national library of Damas, in Syria. A guard who didn’t speak a word of English came and sat next to you while you were at the computer, to keep an eye on this unfamiliar volatile. Those were the good old days. Today, in the comfort of their homes, Syrians surf a censored Web. However, cybercensorship, and collecting data about Internet users, are not practices limited to dictatorships.

Italy is right up there with Beijing and Shanghai, where cybercafés are required by law to check the IDs of every single client. In Kazakhstan at the moment, people are strongly advised not to publish the words “economic crisis” online. The president doesn’t want them to. This is quaint compared to the tests going on in Australia to purge the domestic Web of “pedo-pornographic content. All governments are anxious about the Hydra that is the Internet, but they all act on their concerns according to their culture. Great Britain is preparing to monitor and archive all electronic communications in the name of the War on Terror. In France, the battle between the government and Internet users is over the downloading of copyrighted material. When the dust settles on the legal battlefields, there remains an unequal power relationship: governments and Internet service providers (ISP) now have the technological means to detect and block access to sites they find objectionable on a countrywide scale. When this happens, it’s called Web “filtering.”


Web filtering is most often indicated by the “Page Not Found” message familiar to all Internet users, free or monitored. In computer lingo, it’s called a “404 error.” The 404 page has always been a problem. According to a charming tech legend, in the early days of the Web, at CERN in Switzerland, researchers who were sick of continually having to restart a failing server located in office number 404 named the failure-to-connect error after this unlucky office. Whether the story is true or not, this error page really does have bad karma.

In Oman, in Bahrain, in Dubai, the 404 page works overtime: you are redirected to a message informing you, in English and Arabic, that the site you are looking for is not authorized in the kingdom. In China, the 404 page doesn’t come with an explanation. There’s no point; the sites are censored. American soldiers in Iraq see it when they try to access YouTube while on base, which is prohibited by the US Army. They don’t have that problem in cybercafés in Baghdad. In Algeria and Egypt, it indicates an actual technical problem. The Web isn’t filtered there, though it is closely monitored. You get it in Syria if you try to go to a site that ends in .il, the top-level domain for Israel. But you’ll have no trouble getting to a porn site. And in Tunisia, the 404 page is just fake. You’ll get an Internet Explorer or Firefox page informing you that your connection failed. The only problem is that the Firefox logo displayed when you’re using Internet Explorer (or vice versa) makes it clear that you’ve landed on a phony page. In Tunisia, this gave birth to the expression a “404 bâchee” (canvas-covered) for the censored pages, a reference to the little canvas-back Peugot pickup truck so popular in Africa. Tunisian Internet users exclaim in unison, “And the driver’s name is Ammar!” Ammar, for the first letter of the ATI (Tunisian Internet Agency), an arm of the Tunisian Ministry of the Interior.


On our cruise through Censorland, we must stop over in Tunisia, the first African country to have access to the Internet, that shining gateway to a computerized citizenry and new technologies. Praised by Bill Gates (”I am amazed by Tunisia”), this country is at the forefront of cybercensorship. Back in 2000, when the blogosphere was still deserted, the country led the charge by censoring the forum Takriz.org (”fed up”.org) within its borders. That same year, its first cyber-dissident, Zouhair Yahyaoui, was arrested in a cybercafé and condemned to 18 months in prison for having published on his site, Tunezine, a survey that asked, “Is Tunisia a kingdom, a republic, a zoo, a prison?”

The 10-year marriage of the latest cyber-surveillance technologies and a police state has declined into a sad routine – imprisonment of cyber-dissidents and automatic suppression of foreign press sites if even a paragraph is deemed undesirable. Lofti, a Tunisian who lives in Europe, recalls that he was never able to connect to the site Voila.fr when he was in the country. Why? Because of the AFP dispatches published on the portal? Photos that were too sexy? Asking questions is also frowned upon. Interestingly, the ATI has always, from the beginning, been run by a woman. Khadija Ghariani, an engineer, Ecole nationale supérieure des telecommunications, Paris, class of ‘84; Feriel Béji, who has a doctorate in artificial intelligence; and Lamia Cheffai Sghaier, an electrical engineer, each took turns running the agency. Among dissidents, they’re called Ben Ali’s Angels, a local show with the tagline, “We’re here to make you hate the Internet!” Tunisia is also a master of cyber-humor.


The other old soldier of cybercensorship is China. Everyone knows that a Great Firewall shields the eyes of the Chinese from millions of sites. Accessing Web content freely is just not an option, but the Chinese don’t complain much; they’re used to it. Writing and conversing online is what they love to do. It’s ‘harmonization” that aggravates them.

Ever since the Communist Party in China decided to “construct” a “harmonious society” in 2007, the Web is not only censored there, it’s “harmonized.” An automatic filter, an invisible hand, suppresses a word here, a name there, any phrases, comments, blogs, or images that are undesirable. So they say, “I’ve been harmonized.” A little lesson learned by e-mail from Edwin, an English-Chinese interpreter who has lived in Wenzhou for a long time: “Take, for example, the name of the former president Jiang Zemin, the one of Tiananmen fame, which has been meticulously erased from the Chinese Web. If you write it on a blog or a forum, sometimes it’s automatically replaced by stars or a blank space, or it could be that you won’t even be able to send the message. It might also be removed after publication. But you just have to be a little creative. “Write ‘Ji/an/g Ze/min’ and you’re good to go.”

The censorship robots don’t understand words with slashes, paraphrases, or the double phonetic meaning of a Chinese character. What are the notorious forbidden words that they track? No one knows but the Party, which chooses them, and the ISPs, which do housework. Occasionally, a pirated list of prohibited words shows up on the Web. The latest one contained 1,041 words (chinadigitaltimes.net/tag/banned-words). These included sex, Tibet, Falun Gong (a forbidden religious movement), Tiananmen, play-boy, fuck, multiple parties, Taiwan independence, police, whore, corruption, torture, public funds, anus, Jesus Christ, riot, insurrection, air disaster, 89, tyranny, North Korea, scrotum, dictatorship, pigeon, timeshare, penitentiary, Voice of America, bra, Geneva finance, shit.

Even China is starting to have trouble managing its 300 million restless Internet users – the population of the United States – and the flood of their insolent comments, which disturb the general harmony. Why else would they have hired the “50 Cent Gang” to harmonize opinions on the Web? This mysterious group was so named because it is made up of innumerable anonymous workers who are said to be paid a half Yuan (0.05 €, the price of a subway ticket) for every pro-government comment left on forums, chat rooms, and blogs. Our man in Wenzhou confirms this by e-mail: “It’s pretty easy to spot them. When someone publishes 50 messages in the afternoon of the same day he created a profile, we assume it’s one of them.” Some of these part-timers who lack imagination even give blatant clues, choosing obvious usernames like “Morning Harmony” and “Harmony of the Geranium.”


Not all countries have the conviction, or the inexhaustible labor pool that the Chinese censorship industry has. But there is nonetheless a wide variety of techniques to choose from. Computer complexities aside, the Web can be compared to a telephone exchange. To censor it, the easiest thing to do is still to simply pull out the plug connecting the domestic Web to international traffic. This is the “Myanmar Junta Option,” used during the demonstrations in 2007.

Another method is to throttle the connection speed of individual users. In Iran, President Ahmadinejad has a blog, but only the government and the clergy have high-speed Internet access. The average Iranian has to make do with 256k/second, which makes it unlikely that he’ll be downloading racy films or speeches glorifying atheism, which he couldn’t find anyway. (Just for comparison, a basic ADSL connection in France is 10 times faster.)

Censors can also choose to place the clamp where their domestic Web meets the Worldwide Web, as they do in Saudi Arabia, in order to sift the vice from the virtue at their convenience before allowing content through. Among the techniques considered outdated today is DNS poisoning, which is practiced in Thailand. That explains why, in Bangkok, you can pull up a BBC article online and find yourself on the home page of a local government office.

But for your more modern censors, with money to invest, those days are over. Censorship is selective and flexible, recognizing and suppressing sites or domains with the help of robots that seek out keywords or entire categories of sites. To do this, of course, you need specialized software. Tools that behave like parental control software raised to the millionth power, and produce the same result. And most of these are manufactured in Western countries.


In the United States, three serious companies are on the rise, with steadily increasing sales: Secure Computing, Websense and Blue Coat. Their specialty is the security of business networks and intranets. According to the OpenNet Initiative, a collaborative research project among Harvard, Toronto, Cambridge, and Oxford Universities that studies cybercensorship, these are the three main providers of filtering tools to governments.

There’s nothing illegal about selling computer security tools. The product page of SmartFilter, the leading software product, says “SmartFilter removes all inappropriate content from the workplace and educational environment, limits your liability, manages bandwidth, and ensures protection against security risks.” It’s thanks to them that office workers can’t go to Facebook at work, and that gaming, gambling and pornographic sites can’t be accessed by computers in libraries and schools. But selling these tools to governments of countries like Iran and Saudi Arabia, which we know aren’t too concerned about human rights? Secure Computing has always denied these contracts, even going so far as to accuse Iran of “illegally acquiring” their software.

Helmi Noman, a Harvard researcher in charge of the Middle East for the OpenNet Initiative, consistently sees the signs of these filtering specialists during the tests that the organization conducts regularly in all the countries of the world. And if they’re not the culprits, their partners are. These tools are also distributed by the biggest names in the computer industry: Microsoft, Sun, Cisco, McAfee, Dell. Evidently the Emirate of Bahrain has recently done some shopping.


In this little Gulf country, described by expatriates as “pretty cool,” the rule was short and simple: don’t talk about the Emir. Since January, Bahrain has switched into high gear. Ahmed is a software engineer in Manama, the capital. He’s lived through old-school censorship and the new kind too. He likes taking risks; one of his pastimes for the last 10 years has been publishing a blog on local news, which regularly causes problems for him. The worst, in 2005, ended in 15 days of jail time because he published a photo of the Emir’s son drinking champagne at the finish line of a Formula 1 race. At times, his blog has been crudely censored, in a way that was easy to get around. Since January, and a decree promising to remove from the Web elements that are “contrary to the culture” (pornography, anti-religious material), the Web throughout the entire kingdom has been paralyzed.

According to Ahmed, up to 40% of sites are inaccessible in Bahrain, including advertising, cooking blogs, Google Translate, and technical engineering sites. It’s reached the point where foreign companies are complaining because they can’t work.

What happened? It’s a classic scenario, one that Helmi Noman has often seen when a government decides to use these tools. Overwhelmed by the power of the filtering software that the government has bought and imposed on them, the ISPs make one mistake after another. However, when it comes to one category of sites in Bahrain, there is no question of an accident on the part of the ISPs or the palace technicians. Ever since January, all Shiite sites and blogs, though hardly pornographic, have disappeared from the Sunni kingdom. Ahmed is a Shiite. He still writes on his blog occasionally, for his foreign readers, and wonders if he’ll be allowed to leave the country the next time he goes to the airport.

From Doha, in Qatar, where he’s giving a lecture, Helmi Noman warns about these false-bottomed filtering tools. “Western societies are selling ISPs not only filtering software, but also decisions about freedom of expression.” The censorship package includes the software plus a database of 20 million sites and updates that can be regularly downloaded, as with antivirus software. SmartFilter places these sites in 91 categories. It’s up to the client to choose the categories he wants to prohibit. “When an ISP buys SmartFilter, he is buying 20 million decisions and 91 categories that could be wrong.”

These “mistakes” are fairly common, according to what Helmi Noman has found. On the day that sites as varied as Orkut (a social network very popular in India and Brazil), Last.fm (online music), LiveJournal (the most popular blog platform in the former Soviet Union), and Twitter (microblogging) were labeled “dating sites” – for what reason we don’t know – it was temporarily impossible to access them from different parts of the globe. In April, 2007, the video site Dailymotion spent several days in Category V4 (pornography). Internet users in Oman, Yemen and Tunisia were the ones who felt that: no Dailymotion for them. The database that feeds the filters can be accessed online (www.trustedsource.org/urlcheck). It’s collaborative. Anyone – a company, an individual, or the league of virtue of any religion – can flag a site and label it according to his own beliefs, from anywhere in the world, anonymously.

Secure Computing isn’t feeling the recession. It was just bought by the antivirus giant, McAfee, for 465 million dollars (around 350 million Euros). The new management is noncommittal in its response to any question about government cyber-surveillance: “The governments that are our clients can use all of the categories [which we provide] to shape the Internet to suit their cultural needs. McAfee has no control over, or any say in the way an organization implements its own filtering strategy.” To be fair, Europe is doing its share too. Siemens offers a catalog of solutions for intercepting and monitoring communications. China is one of their biggest clients.


Nobody wants a Web crawling with pedophiles, terrorists and criminals. But the perfectly democratic example of Australia and its costly offensive against online pedophilia (budget: 125 million Australian dollars over four years, about 70 million Euros) got off to an appallingly amateurish start. In March, during the filtering tests, the ultra-secret blacklist of 2,395 blocked pedophile sites was leaked and ended up on the site for such slip-ups, WikiLeaks. Fortunately. The leak revealed that only half of the sites fell into that category. Some unfortunate errors: the sites of a dentist’s office, a dog boarding facility, and a travel agency were also on the list.

To create its blacklist, the Australian government – like others – relied on information from the Internet Watch Foundation (IWF), a British organization based in Cambridge that has been cataloging sites flagged as pedophile since 1995. The IWF is one of 20 such organizations around the world, subsidized mainly by players in the Internet sector. Little by little, without any oversight, or anything to recommend it but its good intentions, it has become the pedophilia police for the authorities. In December, an IWF flag resulted in the censorship in Great Britain of the Wikipedia page for Virgin Killer, an album by the German hard rock group, Scorpions. The cover of this old album, which was never the object of any legal action, shows a nude teenage girl.

The Web has no central government, no universal law, no Red Cross, no seat at the UN. Every Internet user must deal with the legal whims of his country on his own. In case of trouble, he might have recourse to a few organizations that defend freedom of expression. A worthy cause, but a luxury in time of recession. Once again, the response comes in the form of technology, and it’s Internet users the world over who come to the rescue. In Iran, photographer Hamed Saber developed, by himself, a little tool that bypasses the block on the photo site Flickr, which he then made available to the community. The Berkman Center at Harvard just launched Herdict.org, a site where anyone can flag a site that is inaccessible from a given country, so that they will have real-time data on the Web’s blind spots.


Because they are tech savvy, Edwin in China and Ahmed in the Emirates can read and write whatever they want to, while remaining under the censors’ radar. They use “proxy anonymizers,” the unattractive name for encryption tools that allow you to discreetly borrow the address of a computer somewhere else in the world just long enough to launch yourself onto the open seas of the uncensored Web. They are called Ultrareach, Psiphon, TOR, Dynaweb, Anonymizer, and they can all be downloaded.

One of the most popular and activist of these is TOR. In 2001, the US Navy released one of its tools for encrypting communications to the public domain. Robert Dingledine, then a student at MIT, has the long hair and little round glasses of freeware activists. It was he who decided to adapt the tool to the Web and distribute it for free. TOR, managed in the United States by a nonprofit organization, has been downloaded millions of times. “We don’t know where they’re downloading from, we don’t keep any data. But we estimate that at any given moment of the day, around the world, between 300,000 and half a million people use one of our connection addresses and encryption to remain anonymous.” Encrypting communications on the Web is not illegal anywhere. But the sites where you can download the “anonymizers” are often prohibited.

In Thailand, using a proxy can land you in prison. The software gets around nonetheless, on USB keys or disks, competing these days with virtual private networks (VPN), encrypted gateways that are used, for example, by multinationals for secure online communication with their foreign branches. The solution is so simple that Edwin, in Wenzhou concludes, “If we really wanted to fight cybercensorship, all we’d have to do is invest a few million dollars in a massive VPN and distribute the links and keywords for free to Internet users. End of story.”

A Thai organization, Freedom Against Censorship (FACT), is already doing that on a small scale, to give Thai Internet users a breath of fresh air. Fifty-thousand sites were shut down during the country’s various political upheavals, thanks to a legislative Trojan horse: the crime of lèse majesté (offense) against King Bhumibol. This misdeed is no joke (three to 15 years of prison) and foreigners can also be prosecuted for it. An Australian writer and a BBC journalist have had a taste of Thai prisons in the king’s name.

The free Web has many enemies, but new legions of allies are rising, and giving ministries of information pause. They are the young people, for whom life without YouTube or Facebook is inconceivable. The Web 2.0, that of social networks and photo, video and music sharing, is continually tripping up the censors, whose blunders are much too visible and very unpopular. On these gargantuan sites, where millions of people, files and links are interconnected, it’s not easy to isolate a single video, or profile, or conversation. Had the Turkish government been able to, it would have blocked only one video that was “insulting” to the national icon, Ataturk, rather than the entire YouTube site, and thus spared itself the wrath of the under 30s. In Tunis, when Facebook was completely blocked in September of 2008, it roused the population for the first time. It was unheard of; even the press talked about it.

The last weapon in the Internet users’ arsenal is humor, and it can be devastating. Ridicule always kills a policy’s credibility. In China, since February, a tough “antivulgarity” campaign for a Web without crude language or photos forced ISPs to ask public forgiveness for the “indecent content” they had provided and to sanitize thousands of sites and social networks.

It took only a few days to prepare a response. It came in the form of a little online video of a fluffy alpaca, with an exuberant children’s chorus singing about the wonders of a mythical Chinese animal, the “Grass Mud Horse” (http://www.youtube.com/watch?v=wKx1aenJK08). In Chinese, “alpaca” also means, almost to the tone, “screw your mother.” So does “grass mud horse.” “He Xie” (harmony, and therefore censorship) is phonetically very close to “river crab.” Here is the alpaca song: The “grass mud horse” (screw your mother) lives in the Ma Le desert (your mother’s twat). This creature fights the “river crabs” (harmony/censorship) in order to save the “prairies” (homonym of “freedom of expression”). It was a very crude and joyful protest. But since then, harmony reigns once more, over the living as well as the dead. Any reference to the children who died in the Sichuan earthquake last year is immediately harmonized.

Thanks to Claire Ulrich and Le Monde for covering this material. Copyright, other than the translation itself, remains with the aforementioned.