Are People Sensing Something Is Deeply Amiss?

Correspondent Bill Murath sent in these thought-provoking comments on group consciousness and the tendrils of evidence that Americans are sensing something is deeply amiss:


"It seems on a large scale people are intuiting a change. I am talking more mainstream folks. My buddy Mark whom I am working with is moving back to a farm in North Dakota in a few months. He was up visiting for his parents 50th anniversary and said a whole lot of his cousins who had left the state were moving back for no particular reason. His uncle, a vietnam vet who lost a leg there, just went out with his 2 boys and all bought pistols. For no particular reason. He never owned a firearm in his life.

People I talk to at work ("homeowners"), complete strangers when I can get a good conversation going mention uneasiness or a sense of something changing or not being right. On the one hand the masses now are sensing the change but the power structure of corporate gov't is holding on with everything they have to hold together their Ponzi illusion.

Maybe if we all pull together we can turn the ship."

Correspondent Harun I. (a U.S. Navy veteran who served many years in elite units) had these comments about the July 4th entry:

"I would also like to thank General Taguba. He sacrificed his career for something bigger than all of us, the truth.

In the context of all that is coming to light after reading about the conversations in the New Yorker article that occurred at the highest levels in our government, I wonder how can we think that we are immune to what happened in Germany? Germany was a democracy and for a time was hijacked by fascists. The names were different but they were human beings.

This is why we can’t "wait out" this administration. Waiting out this administration assumes someone better will come along. What if Rudy wins? His track record from New York reveals he has no problem trampling on civil liberties to bring about "security". He believes we should "Stay the Course" in Iraq. Can we afford another extremist in the executive office? After all, IMHO, that what this current president is. He believes that he can trample on the laws of our land because he serves God. He believes that he can launch preemptive wars against those he believes to be evil because he is on the side of God and is therefore right. So we have extremism against extremism.

We, the American people, must impeach. We must send a clear message that we demand the highest morality, ethics, and integrity in those we entrusted and have given the privilege to guard over our nation. We must send a clear message that they serve at the pleasure of the American people. We are not their servants. We must send a clear message to the world that this is a country that respects the rule of law and individual liberty. By removing this president and vice president from office we prove to the world that democracy does work.

I become incensed every time I hear someone in the news say that an American service member died protecting our freedom. Has anyone bothered to look at the relative scope of the "GWOT"? In Iraq there is maybe a handful of Al Qaeda (that weren’t there before our invasion), probably less than 10,000. The insurgency has nothing to do with terrorism, it has to do with occupation. So in Iraq we have roughly the size of a small town grinding down the most powerful military force in the history of mankind.

Globally what are the numbers of Al Qaeda militants? Once again probably less than a small town. Al Qaeda is dispersed and currently is incapable of launching another 9/11 style attack. They have been reduced to a lethal nuisance. But we have spent almost a half trillion dollars with no end in sight fighting citizens who, for the most part, do not hail from any religious or terrorist ideal, they just want us to go home. What does this have to do with American freedom? How has the death of any one of our service members in Iraq maintained or strengthened my freedom?

What happened to our president’s promise to leave when the job is done? He reversed (revealed his true scheme) when he said he wants to have the kind of troop presence we have in South Korea. This madness will lead to an endless insurgency. Perpetual warfare. Terms like the “long war” meant to psychologically prepare us for endless warfare. To what end?

Over 3500 dead in Iraq. We would have been better off spilling their blood at Tora Bora. We had Bin Ladin trapped and let him out because we didn’t want American casualties. Instead we go to war on lies, engage in "regime change" as if the world is ours to do with as we please. To what end? All of our interventions from the past have brought us to where we are today. What makes anybody think they are endowed with some wisdom to make it better tomorrow?

No, we must not wait. We cannot afford another extremist zealot in the executive office. We must send a warning to those who aspire to that high office that they will be held accountable. We have come to accept corruption as normal. This mindset is also dangerous. This is a bad trade and the only way to end the losses is to exit the trade."

Are Americans sensing something the mainstream print media and the TV propaganda machines are avoiding? Why would someone move back to the agricultural heartland of the nation? How about to be close to the food supply, or for the security/protection of a known community?

Why would a combat veteran who has never owned a firearm suddenly arm his family? Is there any reason but defense against a serious threat? And what would cause someone to fear anything in a time of "stock market hits new highs" and "global prosperity that will last for decades?"

Could all that be basically a Ponzi scheme, as Bill Murath suggests, built on a foundation of lies?

When I come across anonymous (always anonymous, it seems) defenders of this administration online, their words have the hollow ring of desperation: "I support my President." Did this individual say the same when Clinton was President? If you're pledging absolute devotion to the office, no selection is allowed: you either support the President all the way down the line or you don't. Somehow I suspect these "support the President" zealots did not support their President during the years 1992-2000 with the same absolutist fervor.

Another slice of desperados brings up Clinton's lies from 1998, as if one President's lies justify another's. Every lie is wrong. Bringing up a past lie does not justify a current lie. The people anxious to dig up past lies are like the spoiled bratty child who defends his theft of a candy bar with the words, "Johnny stole one, too!" as if others' crimes justify their own and absolve everyone of responsibility. Sorry, boys, they don't.

Correspondent Michael Goodfellow sent along this article on just how decimated those Bear Stearns hedge funds are: You know, the ones which are "contained" and "no problem"? Buyers avoid Bear Stearns' cut-priced sale:

"Investors in the worse-hit of two stricken Bear Stearns hedge funds are offering to sell their holdings for as little as 11 cents on the dollar but still finding no buyers, according to unfilled trades on Hedgebay, a secondary market for funds.

Vulture funds and others have been quick to bid for holdings in the two funds, but the best bid for Bear Stearns High-Grade Structured Credit Strategies Enhanced Leveraged Fund, the more geared of the two, is just 5 cents on the dollar.

Private sales of stakes are the only way investors can exit the two Bear funds, after the bank suspended redemptions in May amid a wave of withdrawals.

"There are buyers but they can't agree on price," said Jared Herman, co-founder of Bahamas-based Hedgebay.

The less-geared Bear Stearns High-Grade Structured Credit Strategies Fund, which the bank has rescued with a $1.6bn loan, is being offered at about 70 cents on the dollar. The fund is only attracting bidders at about 30 cents, according to people who use the system.

Market participants estimate the CDOs the Bear funds held would sell for at least 10 per cent less than the values calculated by lenders. "Where things transact is still many points below where dealers have been marking them," said one manager of CDOs and hedge funds. "That is the big ugly secret of this market."

Does any of this strike you as just a tiny wee bit worse than the mainstream U.S. press suggests? A nickel on the dollar means a 95% loss; 30 cents on the dollar for the "high quality" tranches means 70% loss. How much money do you reckon will be lost as the hedge funds, banks and pension funds reporting huge losses turn into dozens, then hundreds or even thousands?

New correspondent E.S. offers an excellent summary of what he succinctly terms "the gradual unraveling" we are now observing:

"What you write about is the gradual unraveling of what was once a great country.

There are four themes that you touch upon but which I think underlie your essays (not my original thoughts):

1) Private splendor, public squalor;
2) Socialize risk, privatize profit;
3) Malignant, narcissistic entitlement; and
4) A something for nothing attitude.

We are quickly creating a non-society, where our interests are limited to what we can get and what we can do for ourselves. This is reflected in our public spaces, in our attitudes toward our neighbors, and in our contempt for so many individuals who make up our society.

I grew up in Philadelphia and spent a great deal of time in the Commonwealth of Pennsylvania. As an example of #1, consider any smaller or mid-sized town in that state. I think of one in particular -- Bedford PA. Modest, well built homes, a small shopping district, a large and beautiful central part (with the requisite statue to the Union war dead), public accommodations (library, high school, VFW) that bespoke of pride in living in a great place -- the town had a center and a soul.

Compare that town (unfortunately dying) to a modern exurb today. Enormous, cheaply built houses (you were/are a carpenter -- I bet there's an essay in you about modern construction) with ostentatious flourishes. Large and soulless malls with thousands of square feet of homogeneous goods made by virtual slaves thousands of miles away. Roads that are over-crowded because we are unwilling to pay for roads. Schools that are an agglomeration of trailers (yes, despite of our public pronouncements that we're doing things "for the children", they are educated in surroundings that look no better than a 3rd world airport terminal). Town center -- none to speak of, aside from a ersatz town green surrounded by stores. Library, civic centers, etc. are old or non-existent.

So we go home to our GarageMahals and complain about the lack of amenities and civic life. It is a world of our own creation."

Well said, Bill, Harun and E.S.--thank you for the insightful commentaries.

Just in case you might think I am a Johnny-come-lately to the bubbles bursting and the rot at the center of our society, please glance at the following entries, and note that I only started my blog in May 2005:

Housing Bubble? What Bubble? Just Look (June 29, 2005)

The Housing Bubble III: Pop! (August 20, 2005)

Since E.S. was kind enough to mention my many years as a carpenter/wood butcher, please glance at these two entries from last year on the construction defects coming to a GarageMahal near you:

Construction Defects: The Flood to Come? (June 1, 2006)

Construction Defects, The Flood to Come, Part II (June 3, 2006)

If you have a little time on your hands, please skim the entries listed in the 2007 archives (by subject) and the 2005-2006 archives (by subject); many relate to the critically important topics raised by these correspondents.

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When Lies Become Normal, Is Truth Dead or Just in Hiding?

Correspondent James C. recently described how "fudging the numbers" is ubiquitous in our society, and how the fudging only forstalls the consequences: (emphasis added)

"Our whole society is based on fudging the numbers. Whether is be reported inflation, GDP, the value of stocks and CDO's or the efficiency of certain drugs, there is some degree of cloudiness in all the numbers. By the way, health risks are calculated the same way. If two people per thousand die of a "X" disease and some bad habit increases ones risk of dying of "X" disease by 50%, then out of 1000 people with this bad habit 3 would die of "X" disease. Hmmm, let's have a beer and enjoy life!

The one statistic that they cannot fudge on is that 100% of us are going to die of something sometime. I think Americans are too obsessed with trying to figure some way to wiggle out of this reality and are willing to place untold financial burdens on future generations in the fruitless attempt to dodge death for another few months or a few years. The medical establishment knows most of us will take about any drug/treatment that is promised to make us feel better or live longer. What a goldmine for them!! The big lie is this: if we can't afford it individually then we really can't afford it collectively. Several trillion dollars worth of debt stand as a mountain of evidence to this fact.

Additionally, insurance or socialized medicine will always create a moral hazard and in the end will raise the cost of health care for everyone. I have health insurance, but pay 90% of my own medical expenses because very few of the treatments that I take advantage of are covered by insurance.

At some point we will have to ration health care. I am not sure how Americans will accept this but probably not with a grain of salt."

James C. raises some critical, long-term issues with enormous consequences for decades to come. If a drug company misrepresents/fudges the efficacy of its "wonder drug," isn't this a lie? And if a government and/or elected Administration tells the public Medicare, or a war, or a giveaway to special interests, is "affordable," even as it saddles our children and their children with a mountain of unaffordable debt, isn't this also a lie?

And if you "fudge the income" on your "no-document" mortgage application, isn't this also a lie? And if you "fudge" the appraisal value on a property at the "request" of the lender, isn't this also a lie? And if you process this application and appraisal, than aren't you lying, too? And when a realtor assured the borrower that they could re-finance to a fixed-rate, low-interest mortgage whenever they wanted, wasn't this a lie? And when the realtor assured the buyer that "real estate never goes down, it only goes up," wasn't this a lie, too? (The statistics of the early 90s retreat in home prices is not a secret.)

And if you assign this mortgage a low-risk AA bond rating when it becomes part of a mortgage-backed security and CDO, then isn't that a lie? And when you, the broker/banker, package and sell this lie to a pension fund as a "safe, high-return" investment vehicle, isn't that a lie? And when a government agency sworn to protect consumers and provide oversight as per the law does nothing to question this contraption of lies, aren't its employees and leadership complicit in the lie?

I think you can see where this leads: the entire housing bubble is constructed on lies. The real estate, home building, lending and investment banking industries have all known the bubble was inflated with one rickety, ill-advised lie after another, as did the government agencies supposedly put in place to protect citizens from predatory lying.

Yet nothing was done or said except by a handful of skeptics in the blogosphere, all of whom were mocked as "doom and gloomers." Now the chickens are coming home to roost, and years after we raised a clarion call of doubt and skepticism, the fumbling mainstream press is suddenly alive with stories about "the subprime mess." Where were these intrepid editors and reporters two or even three years ago?

As a child, I was taught there is a sharp line between truth and lie. If you steal a candy bar, you are guilty of theft, regardless of the value. You can't fudge the theft by saying, "But it was only a candy bar," or "I didn't steal it from a person, but from a rich corporation," or "Everyone steals from the government."

If you misrepresent the truth, you're a liar. There is no "fudging" this reality. And here we have entire trillion-dollar industries built at least partly on lies--lies which are passed along because they benefit the industries' profit margins.

Now as it all unravels, I wait in vain for someone, anyone, to say something simple and direct: It was wrong. But we live in a society so debased from truth that this widespread, ubiquitous lying by realtors, lenders, government agencies, investment bankers, etc. isn't considered wrong, or a violation of the principles of honesty and trust which built the nation; lying is now seen as utterly unremarkable, as "business as usual" -- just as it is in a corrupt and venal third-world or Communist regime that we as a nation like to place ourselves above.

But does this moral superiority have any basis in reality? If business leaders like Jack Welch (former CEO of General Electric) are pleased to pontificate on the glories of American capitalism and opportunity week after nauseating week, we have to ask: does Mr. Welch feel any responsibility to excoriate the liars or "speak truth to power" about the lies at the heart of trillion-dollar industries?

Isn't his silence, and the silence of all the other puffed-up, know-it-all pundits blathering on endlessly about how great everything is and how prosperity is "different this time" feel any responsility to the truth? And since they so clearly have avoided addressing the veritable pyramid of lies this bogus "prosperity" is based on, aren't they, and the media masters who pay them for their punditry, also complicit in the lies?

Let me put it this way: if the kid you're with steals a candy bar, and gives you half, aren't you complicit in the theft? And when you lie to your Mom and Dad about where your half of the candy bar came from, aren't you a liar, pure and simple?

Ours is often categorized as a "deeply religious" nation, but this appears to be yet another self-serving fabrication. I grew up in a family where one's religious beliefs were kept ptivate, not trumpeted over the airwaves. I came from a family of missionaries, some of whom died while serving their mission in Africa. My aunts and uncle were born in El Salvador, where my grandfather and grandmother were serving as missionaries. I am not going to foist my beliefs on anyone, or parade around claiming some high righteousness; but I do know that lying is not "fudging," and "fudging the numbers" in any way, shape or form is lying. And I know that everyone down the line who knows of the lie and says or does nothing to reveal it is also a liar.

We have become a nation of self-satisfied liars, as every report out of Iraq, as every report about the lending bubble, as every report about investment bankers and rating agencies scrambling to cover their tracks, all reveal.

And every editor who plasters a story about baseball or chocolate or pets on the front cover of his/her newspaper/media outlet rather than an investigation of the lies which will bleed us for decades to come, is complicit in the lie, for he/she is the kid who's accepting the stolen half of the candy bar and saying nothing. The candy bar is real estate advertising, and retail advertising, and all the profits flowing into "corporate."

But we may find as a nation that there is a cost to blithely accepting a pyramid of lies. We may find truth hasn't been destroyed, but only driven into hiding. And when truth emerges, a hard rain is gonna fall.

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July 4th Special: The Civilian War on Military Truth

If you think this Administration is doing a peachy job managing the war in Iraq, and/or you distrust/loathe the U.S. Military, prepare for an opposing view.

Is there anyone left in the U.S. who doesn't acknowledge this war was planned, entered and executed on a foundation of knowing, calculated-to-con-us lies? Hopefully not.

Is there anyone who doesn't know the C.I.A. and other intelligence services sworn to serve the nation were pressured to either support or at least not contradict our civilian /elected administration's chosen list of lies and fabrications?

Is there anyone who doesn't know that Vietnam War veteran (wounded in combat, disabled by any standard) General Eric Shinseki was fired and then treated like scum by his civilian/elected Overlords for daring to speak the truth, that the U.S. needed 300,000 to 400,000 ground troops to pacify and control Iraq after the war--precisely what our intelligence services had concluded?

Here's my July 4th thought: our elected officials who are in charge of the nation's military--and by this I mean our Commander in Chief, former Scretary of Defense and on down the line from there-- are unworthy to lick General Shinseki's boots, much less attempt to humiliate and discredit him because his judgment on military matters was at odds with their politically calculated expediencies.

I am also offended on behalf of the many Asian-Americans who have served in this nation's Armed Forces. The 442nd Regimental Combat Team/100th Infantry Battalion, comprised of Japanese-American volunteer troops and Caucasian officers, earned the most combat decorations of any unit that served in World War II. I invite you to visit the 442nd/100th's "Go For Broke" Monument. ("Go For Broke" was the Hawaii-inspired motto of the units; many volunteers left Internment camps to join.) My wife's uncle's name is engraved on the list of those who served.

Here is a description of the unit's service:

"Composed of all volunteers, the 442nd fought in the Italian campaign. The 442nd is the most decorated unit in United States history. In less than two years of combat, the 442nd Regimental Combat Team earned more than 18,000 individual decorations including one Medal of Honor, 53 Distinguished Service Crosses, 588 Silver Stars, 5,200 Bronze Star Medals, 9,486 Purple Hearts, and eight Presidential Unit Citations (the nation's top award for combat units).

In June 2000, President Clinton awarded an additional 20 Medals of Honor to members of the 100th Battalion and 442nd Regimental Combat Team. One of these recipients was Hawaii's U.S. Senator Daniel Inouye, whose right arm was shattered by a grenade while successfully destroying three German machine gun nests. The 442nd/100th sustained 9,486 wounded and over 600 killed suffered, the highest casualty rate of any American unit during the war."

Now you can perhaps partially understand my outrage over the way General Shinseki was treated by this pathetic parade of arrogant liars, none of whom served a day in combat but who have been pleased to lecture the nation about duty and sacrifice for 7 long, hypocritical years. Meanwhile, General Shinskei is serving as the national spokesman for the Go For Broke National Education Center, furthering the nation's understanding of what sacrifice, valor and honor really mean:

"The Go For Broke National Education Center is pleased to announce that General Eric K. Shinseki (U.S. Army, Retired), a Vietnam veteran who went on to serve as the 34th Chief of Staff, United States Army, has agreed to serve as the Go For Broke National Education Center's national spokesperson. In this capacity, General Shinseki will help to ensure that the significant, but little-known, contributions of Americans of Japanese Ancestry during World War II are understood and remembered.

"There is no other story in the history of the U.S. Army like this one, and given the conditions that gave rise to the extraordinary valor of Japanese American soldiers, there may never be another story like it again," Shinseki said, referring to the valor of the 100th Infantry Battalion and the 442nd Regimental Combat Team (RCT), whose prowess in battle resulted in the award of 21 Medals of Honor."

I have many Filipino-American friends, and as a result I am also deeply offended by the way the dishonorable pack of liars in the White House and Pentagon have treated another U.S. Army general whose sworn duty was to the nation, not them: Antonio Taguba.

The entire story can be found in this New Yorker piece by Seymour M. Hersh: The General’s Report: How Antonio Taguba, who investigated the Abu Ghraib scandal, became one of its casualties.

The story is by now depressingly similar: a career Army officer fulfills his duty by telling the truth, and is promptly punished and sent packing by the arrogant politicos who have so badly mismanaged the terribly serious business of war.

here are some excerpts from the story:

"Here . . . comes . . . that famous General Taguba—of the Taguba report!" Rumsfeld declared, in a mocking voice. The meeting was attended by Paul Wolfowitz, Rumsfeld’s deputy; Stephen Cambone, the Under-Secretary of Defense for Intelligence; General Richard Myers, chairman of the Joint Chiefs of Staff (J.C.S.); and General Peter Schoomaker, the Army chief of staff, along with Craddock and other officials. Taguba, describing the moment nearly three years later, said, sadly, “I thought they wanted to know. I assumed they wanted to know. I was ignorant of the setting."

CHS: The setting being a group of political hacks who don't want the public to hear the truth about anything, lest their own lies, deceptions and dishonor be revealed.

"I’ll talk to you about discrimination," Taguba said one morning, while discussing, without bitterness, his early years as an Army officer. “Let’s talk about being refused to be served at a restaurant in public. Let’s talk about having to do things two times, and being accused of not speaking English well, and having to pay myself for my three master’s degrees because the Army didn’t think I was smart enough. So what? Just work your ass off. So what? The hard work paid off."

Taguba had joined the Army knowing little about his father’s military experience. "He saw the ravages and brutality of war, but he wasn’t about to brag about his exploits," Taguba said. On (his father) Tomas’s eightieth birthday, he was awarded the Bronze Star and a prisoner-of-war medal in a ceremony at Schofield Barracks, in Hawaii. "My father never laughed,” Taguba said. But the day he got his medal “he smiled—he had a big-ass smile on his face. I’d never seen him look so proud. He was a bent man with carpal-tunnel syndrome, but at the end of the medal ceremony he stood himself up and saluted. I cried, and everyone in my family burst into tears."

Army regulations required that the head of the inquiry be senior to the commander of the unit being investigated, and Taguba, a two-star general, was available. “It was as simple as that,” he said.

"The dirt and secrets are in the back channel," the former senior intelligence officer noted. "All this open business—sitting in staff meetings, etc., etc.—is the Potemkin Village stuff. And the good guys—like Taguba—are gone."

In some cases, the secret operations remained unaccountable. In an April, 2005, memorandum, a C.I.D. officer—his name was redacted—complained to C.I.D. headquarters, at Fort Belvoir, Virginia, about the impossibility of investigating military members of a Special Access Program suspected of prisoner abuse."


If this doesn't make you want to send the entire Administration from the President on down to Abu Ghraib for high treason, then I recommend you read the entire article--carefully.

Many of you may not know that military service has long been a proud tradition in the Filipino-American community; you may also not be aware that like African-Americans, prior to World War II, Filipinos were only allowed to serve as wardroom staff--waiters and kitchen staff. It was only after the War, and the many sacrifices made by Filipino troops--many of whom rescued or aided American soldiers and airmen fighting in the Phillipines--that these limits on service were raised.

To have such a fine, honorable citizen and Army officer denigrated and shoved into retirement by a pack of liars is more than I can stomach. I don't care who takes over as President in January 2009--I will cheer the passing of this arrogant dishonorable collection of liars and shameless political hacks. How long it will take to repair the damage they have inflicted is unknown, but it will be a long time.

No one has to serve in the U.S. Armed Forces; it requires a devotion to duty not many of us possess. To have those who have served our nation their entire lives insulted by an arrogant, smirking pack of shameless liars--I weep for our nation and those so dishonorably discredited by those unworthy of any office.

Oh, and when the global Depression grabs the U.S. by the throat in a year or two, you can thank this same pack of liars for that, too. (See previous entries for details.)

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Lies, Corruption and Deception in the Global Village

Many of our correspondents are exceptionally well-informed and experienced. One such is J.B. who had these observations on the reliabiliy of financial data from overseas firms. J.B. was responding to an entry here on tainted/defective imports from Asia; his comments reveal that all the various shades of lying--omissions, claims of ignorance, deceptions, corruption, etc.--are not limited to foodstuffs but are endemic to the world of finance as well.

"You know whenever I see a company run by anyone outside of Germans, English, Scandanavians, Canadians and English, you know I do not believe a word they say (not that the above group is exempted but let us say the degree is not quite as severe).

Editor's Note: you can find various rankings by nation for ethics/corruption on the Web. One source is Transparency International which released The 2006 Transparency International Corruption Perceptions Index. While some may jump to the conclusion that such rankings are somehow racist, note that Singapore consistently ranks high on ethics rankings. Thus it is possible for Asian nations to do business ethically and transparently but most apparently choose not to, or are incapable of doing so.

About a year ago I was hired by a Wells Fargo external attorney to testify against a New Zealand CFO for a US public company. She quite honestly was incompetent and attempted to lay off her responsibility on the auditors. Since I worked 10 years for Arthur Andersen (when it was still reputable and also the largest accounting firm in the world) as well as 8 years as CFO for public companies they thought I was the perfect witness to counter her testimony. She ended up pleading guilty after my deposition.

I spent a number of years working outside the US for AA in Australia, some Asia, Canada, the Middle East and Europe. In many countries their financials once you get below the surface scream fraud. When I was in Australia, there was a Canadian in the office who said, "he forgot how bad it was until I got there." Financial information out of China, India and Russia makes me giggle to think how unreliable it is. Work in finance there and not generate the results management wants you very likely will end up dead (I have a friend who can tell you personal experiences).

You would have to be a total moron to own stock in companies in any of those countries. Part of their culture is along the lines of, if you are so stupid to trust me and give me money, it is my duty and responsibility to take the money for myself.

It would be comical if it was not so sad!"

But isn't the entire "emerging markets miracle" of skyrocketing stock prices based on the financials of these overseas companies? What can we make of the "miracle" if the numbers are untrustworthy? By that I mean, would the financial reports of these emerging-markets high-flyers withstand a fair and honest audit performed according to the accounting standards which regulate U.S. public companies' reports?

My own reading on the subject suggests that privately, nobody with any experience in the field would stake their career or money on the reliability of most overseas companies' financials. It's just one of many "dirty little secrets" that's tolerated in order to make as much money as possible in the least amount of time, i.e. before the entire rotten structure blows up/collapses.

Moving back to food, it is worth recalling that abysmally unhealthy food processing was rampant about a century ago in the U.S. Upton Sinclair's 1906 expose, The Jungle , tore the lid off the lies and deceptive practices, and an outraged public demanded safety regulations and enforcement. (The two are not identical; you can have all the regulations in the world but if they're not enforced in a non-corrupt fashion, they are meaningless.)

Let's check back in on the latest wave of findings regarding food imports from China:

Firms increase scrutiny of Chinese ingredients: As imports climb, companies trying to head off problems

In other words: since the governments of China and the U.S. have both failed U.S. consumers, U.S. companies are finally wakig up that it's their responsibility to vouchsafe for the safety of their products.

U.S. Detains Farmed Seafood From China.

But it's all safe now. Right.

Chinese fish import ban might affect markets; Country supplies lots of frozen shrimp and catfish to U.S.

Tainted Toothpaste Found in US Prisons; safety issues widespread.

"Also Wednesday, Beijing police raided a village where live pigs were force-fed wastewater to boost their weight before slaughter, state media reported.

Plastic pipes had been forced down the pigs' throats and villagers had pumped each 220-pound pig with 44 pounds of wastewater, the Beijing Morning Post reported Thursday.

Paperwork showed the pigs were headed for one of Beijing's main slaughterhouses and stamps on their ears indicated that they already had been through quarantine and inspection, the paper said. Suspects escaped during the raid and no arrests were made, it said.

Earlier this week, inspectors announced they had closed 180 food factories in China in the first half of this year and seized tons of candy, pickles, crackers and seafood tainted with formaldehyde, illegal dyes and industrial wax.

"These are not isolated cases," Han Yi, an official with Wei's quality administration, was quoted as saying in Wednesday's state-run China Daily newspaper.

Han's admission was significant because the agency has said in the past that safety violations were the work of a few rogue operators — a claim aimed at protecting China's billions of dollars of food exports."

In other words: you can't trust Chinese suppliers, Chinese government agencies, U.S. government agencies or the U.S. companies importig the food products. What possible actions are going to establish a level of accountability and trust which would cause you to risk your life and start buying Chinese tires, toothpaste, seafood, etc. again?

Realistically speaking, the system is so broken it seems impossible that any such verifiable trust can ever be established. Think this through: The U.S. corporation insists that the products are inspected and certified. Wow, great oversight here. Ah, but the tainted/adulterated food has already been inspected and tagged as safe. How exactly do you get around this? You can't, unless you post the equivalent of an FDA inspector at every food plant in China--and the inspector would have to be a native speaker, and politically powerful enough to be protected from threats. If you think this is possible at any price, please read on: China Faces a New Worry: Heavy Metals in the Food: (Wall Street Journal, subscription required but you can always read it for free at the Library)


"Concerns are mounting internationally as China plays a growing role in the global food industry. The country's exports currently account for about 12% of global trade in fruits and vegetables. China's agricultural exports to the U.S. rose to $2.26 billion in 2006 from $133 million in 1980, according to the U.S. Department of Agriculture.

Other governments, including Hong Kong and Japan, systematically test imports from mainland China for metal contamination. But the U.S. FDA says it does virtually no routine testing of food imports for metals. Most of its standard tests on imports are aimed at identifying pesticide residues. Some state health departments and retail chains do their own testing for metals.

Foods from China containing high levels of lead have occasionally been discovered on U.S. supermarket shelves. In 2005, California issued a recall of sweet cured plums from the country after a routine spot test by state health inspectors found "excessively high levels of lead that could cause serious health problems."

Rudimentary sewage-treatment systems throughout much of China mean that organic waste is routinely mixed with industrial waste. When sewage is recycled into fertilizer, it may contain large amounts of metals and other toxic material.

China's soil is also compromised by waste from the thousands of private and public mines that dot the country.

Chinese scientists tested samples of soil and vegetables, including cabbage, chrysanthemum and spinach grown in the area around the mine, near Shaoxing in Zhejiang province. The soil's zinc level was 20 times higher, and cadmium levels 30 times higher, than the maximum heavy-metal concentrations allowed under China's national soil-quality standards."

In summary: the health of the food supply system in China is compromised at the systemic/fundamental levels of soil, water and air. The government does not have the resources to adequately test, inspect and enforce safety regulations on tens of thousands of producers.

Our own government has extensive food safety agencies--take a look at National Food Safety Programs for a complete list--but if they can't test any Chinese food products for heavy metals, it's clear they are overwhelmed by the task. And if you know the products aren't being tested by a trustworthy agency, then why put the product in your body? Is the savings (if any) worth your health?

Bottom line: hey, if you have to lie to make a buck, then you lie. The hapless consumer / investor is far, far away, and is powerless to come after you. So why stop lying?

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This Week's Theme: The Shifting Sands of Lies

An Economy and a Stock Market Built on Lies

What can you say about an economy and a stock market which depends totally and completely on the sustaining power of outright, blatant lies?

Lest you think I overstate the case, please read BusinessWeek's surprisingly candid feature, Mutually Assured Mayhem Wall Street is on edge, scrambling to buck up Bear Stearns and avert a domino-effect debacle.

Allow me to summarize: the entire credit/lending bubble which has long powered the housing, bond and stock markets is in danger of collapsing--unless the lies are maintained.

What is the lie? It's simple: what CDOs and mortgage-backed securities are actually worth. You read a lot about "mark to market" now, and all this means is that for a security which doesn't trade on the open market, any value can be claimed by the owner. Once the security is actually put on the sales block, however, a market value is quickly identified. All similar securities can then be "marked to market" i.e. assigned a true market value rather than a made-up value-- also known as a lie.

The analog might be a collection of baseball cards of varying quality and rarity--much like an MBS or CDO based on hundreds or thousands of mortgages of varying risk, interest and quality. The owner of the baseball cards can claim a value of $1 million, until such time as the collection goes up for auction. Then, experts pore over each constituent part and calculate a reasonable valuation based on similar products which have been traded.

The market value will also depend heavily on the market sentiment at the time of auction; collections which might have sold for $100,000 in a risk-averse, tight-money environment could be worth a lot more in a loose-money, euphoric environment. The reverse is also true.

Lest you think I overstate the losses, please read this report from Bloomberg: Bear Stearns Rivals Reject Fund Bailout in LTCM Redux:

Bear Stearns may dissolve the second fund after more than $600 million of investors' money dwindled to less than $200 million.
That, my friends, is a 2/3 loss.

In a desperate attempt to save themselves, other firms are piling lies on top of lies. For instance; Lehman Brothers analyst says Bear Stearns loan does not threaten earnings. Oh, really? You can suck a $400 million loss on one fund and rescue another fund with a $3 billion capital infusion, yet your earnings are unimpaired? Call the Vatican, a miracle has occurred!

Then there's a third layer of lies from the ratings agencies. To continue our baseball card analogy, the ratings companies (Moodys, Fitch, etc.) have examined your collection of cards and warrent that your cards are in excellent condition and the ballplayers' signatures are authentic, backing up your valuation estimate of $1 million.

But when the collection comes up for auction, it's quickly noted that many cards are in poor shape and the signatures suspect. In other words, the ratings agency lied about the quality and value of your card collection.

The grim blade of reality, e.g. the market at auction, is threatening to slash valuations based on lies. You might think a does of reality would be healthy for an economy and a stock market, but you'd be wrong--the halls of power are ringing with panic at the thought that the actual market value of this tottering mountain of rapidly depreciating, risk-laden debt will be revealed.


Is this fear that the lies will be torn aside defensible on any ground? The answer is resoundingly yes, on the basis of greed. Should the mountain of debt be repriced to reality (marked to market), and re-rated to its actual risk, the mighty dominoes will fall: the bankers who packaged the CDOs, the lenders who originated the mortgages, and a stock market totally dependent on the torrent of cheap, easy money needed to fund private equity buy-outs and corporate buy-backs.

Are you proud of a nation whose entire financial structure is terrified of the truth? I am ashamed of this panicked fear of truth, and of the craven greed which powers the desire to maintain the lies at any price and at any cost to the nation. Unfortunately, there is no shame on Wall Street, nor any ethics except "never give a sucker an even break."


If you reckon this a rant, then please explain to me how shamelessly stacking lies on lies to keep a rotten, corrupt edifice from falling over of its own weight is "good business," "ethical business," and "good for America."

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