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When Net Neutrality Becomes Programmed Censorship Washington’s Blog

When Net Neutrality Becomes Programmed Censorship Washington’s Blog.

Guest Post By Sartre, BATR.

The worst fears of all free speech proponents are upon us. The Verizon suit against the Federal Communications Commission, appellate decision sets the stage for a Supreme Court review. The Wall Street Journal portrays the ruling in financial terms: “A federal court has tossed out the FCC’s “open internet” rules, and now internet service providers are free to charge companies like Google and Netflixhigher fees to deliver content faster.”

In essence, this is the corporate spin that the decision is about the future cost for being connected.

“The ruling was a blow to the Obama administration, which has pushed the idea of “net neutrality.” And it sharpened the struggle by the nation’s big entertainment and telecommunications companies to shape the regulation of broadband, now a vital pipeline for tens of millions of Americans to view video and other media.

For consumers, the ruling could usher in an era of tiered Internet service, in which they get some content at full speed while other websites appear slower because their owners chose not to pay up.

“It takes the Internet into completely uncharted territory,” said Tim Wu, a Columbia University law professor who coined the term net neutrality.”

What the Journal is not telling you is that this “uncharted territory” is easy to project. If ISP’s will be able to charge varied rates or decide to vary internet speed, it is a very short step towards selectively discriminate against sites based upon content. Do not get lulled into thinking that constitutional protective political speech is guaranteed.

Once again, the world according to the communication giants paint a very different interpretation as the article, Verizon called hypocritical for equating net neutrality to censorship illustrates.

“Verizon’s argument that network neutrality regulations violated the firm’s First Amendment rights. In Verizon’s view, slowing or blocking packets on a broadband network is little different from a newspaper editor choosing which articles to publish, and should enjoy the same constitutional protection.”

The response from advocates of the Net Neutrality standard, that is about to vanish, sums up correctly.

“The First Amendment does not apply, however, when Verizon is merely transmitting the content of third parties. Moreover, these groups point out, Verizon itself has disclaimed responsibility for its users’ content when it was convenient to do so, making its free speech arguments ring hollow.”

Prepare for the worst. The video, Prepare To Be Robbed. Net Neutrality Is Dead!, which includes frank language and expletives, provides details that place the use of internet access into question coming out of this appellate decision.

Analyze the implications logically. It is one thing to charge a for profit service like Netflix a higher fee to transverse the electronic bandwidth of a communication network. Selling a membership to an end user is the source of their cash flow. However, most activist political sites usually provide internet users free access to their particular viewpoint and source links.

Your internet service provider controls the pipeline that feeds your devices and data connection. No matter which company you pay for this service, you are dependent upon this union. A free WiFi link may well become a memory. Beaming a satellite signal, mostly is an alternative, when DSL, cable or other broadband is not available.

No matter what method is used to surf the net, this decision clearly implies that internet access is now a privilege, at the effective discretion, if not mercy; of a provider that allow an account for service.

Next, consider the implication that search engines will use this decision to re-work their algorithms lowering their spider bots selection of sites that challenge the “PC” culture. Restrictive categorization used for years by Google, Yahoo and Bing can use this decision as cover to purge dissenting sites even more from their result rankings.

It is common knowledge that YouTube censors and targets certain uploads. One particular subject that experiences technical glitches is Fukushima. The video You Tube Censoring Truther Channels explains the drill. Add to the frustration are the ads, especially the ones with no skip option and imagine future requirements for uploading approval. What is next, a paid subscription to use and upload to the service?

Yes, the Ending Net Neutrality Signals A Digital Paradigm Shift. It also means that they could unfairly push sites like (add the name of your favorite sites) out of the way of users if they (the “PC” protectors) didn’t like them, acting as effective censors.

Stephen Lendman writes in Digital Democracy vs. Corporate Dominance: R.I.P. Internet Neutrality?

“Without Net Neutrality, ISPs will be able to devise new schemes to charge users more for access and services, making it harder for us to communicate online – and easier for companies to censor our speech.”

Corporate gatekeepers will control “where you go and what you see.”

Verizon, AT&T, Comcast and Time Warner Cable “will be able to block content and speech they don’t like, reject apps that compete with their own offerings, and prioritize Web traffic…”

They’ll be able to “reserve the fastest loading speeds for the highest bidders (while) sticking everyone else with the slowest.”

Doing so prohibits free and open communications. Censorship will become policy. Net Neutrality is too important to lose.”

Ready yourself for the inevitable results! According to Michael Hiltzik, Net neutrality is dead. Bow to Comcast and Verizon, your overlords.

“In the U.S., there’s no practical competition. The vast majority of households essentially have a single broadband option, their local cable provider. Verizon and AT&T provide Internet service, too, but for most customers they’re slower than the cable service. Some neighborhoods get telephone fiber services, but Verizon and AT&T have ceased the rollout of their FiOs and U-verse services–if you don’t have it now, you’re not getting it.

Who deserves the blame for this wretched combination of monopolization and profiteering by ever-larger cable and phone companies? The FCC, that’s who. The agency’s dereliction dates back to 2002, when under Chairman Michael Powell it reclassified cable modem services as “information services” rather than “telecommunications services,” eliminating its own authority to regulate them broadly. Powell, by the way, is now the chief lobbyist in Washington for the cable TV industry, so the payoff wasn’t long in coming.”

In a digital environment, access to an internet that provides uncensored content at the lowest costs is a direct threat to the corporate economy. Innovation and creative cutting-edge services are clearly marked as competing challenges to the Amazon jungle of merchandising. The big will just get bigger.

Then the unavoidable effects from the “all the news fit to report” mass medium, intensifies their suppression of honest investigative journalism. Filtering out the alternative and truth media is the prime objective of this ruling. Eliminating political dissent from the internet is the ultimate implication. What would the net be like without access to the Drudge Report?

When the cable or satellite services bundle their programming into a “take it or leave it” format, the choices for the consumer becomes a major financial burden just to watch the few channels that have interest. Applying this pattern to the internet will cause even greater resentment.

Just look at the disaster from the Yahoo retooling. That Ms. “wicked witch” MM have pushed up the stock price, but ask any yahoo group member what they think of the new format. This is a classic example of how to turn off users and ruin your product.

Subscription services are playing with fire. With the collapse of the main street economy, the added fees to access content that is mediocre at best, is the actual fallout. Like the dinosaur TV networks, the corporatist sites risk total rejection from internet visitors.

Totalitarian culturalists are rejoicing with this latest damper on free speech. News by way of government press releases is pure propaganda. How did this happen?

For a short explanation history, Nilay Patel writes in The Wrong Words: How The FCC Lost Neutrality And Could Kill The Internet.

“The FCC tried to appease the out-of-control corporate egos of behemoths like Verizon and Comcast by pretending internet providers were special and classifying them as “information service providers” and not “telecommunications carriers.” The wrong words. Then, once everyone was wearing the nametag they wanted, the FCC tried to impose common carrier-style telecommunications regulations on them anyway.”

Credo Action believes that “FCC Chairman Tom Wheeler can undo the Bush-era decision to deregulate broadband Internet providers and allow them to operate outside of the legal framework that has traditionally applied to companies that offer two-way communication services.”

Such optimism seems naive in light of the real controllers of policy, much the same, for the Supreme Court coming to the rescue. Mark this court decision as the strategic destruction of the internet as a beacon of unfeigned free expression of information and open political speech. The programmers will be working overtime to set up layers of tasks, restrictions and huddlers to jump over. If you think Facebook censorship is bad, get ready for a purely governmental approved net along the Chinese model.

Sprott: “Manipulation Of Gold By Central Banks Cannot Continue In 2014” | Zero Hedge

Sprott: “Manipulation Of Gold By Central Banks Cannot Continue In 2014” | Zero Hedge.

With Deutsche Bank quitting the price-setting panel for gold and Bafin bearing down on the manipulators, Eric Sprott provides some more color on where the manipulation in the precious metals markets is underway (and when it will end)…

Submitted by Eric Sprott of Sprott Global Resource Investments,

Introduction

As we very well know, 2013 was a difficult but also puzzling year for precious metals investors. The price of gold, silver and their related equities declined by a significant amount while demand for physical bullion from emerging markets and their Central Banks was exceptionally strong.

A common argument that has been made to explain the precipitous decline of the price of precious metals in 2013 is of investors’ disenchantment with precious metals, which had been piling up in exchange traded products as a way for investors to gain exposure to the metals. Proponents of this theory point to the large declines in the total holdings of those ETFs as evidence of investors fleeing the precious metal trade. As shown in Figure 1, the price of both gold and silver suffered very significant declines throughout 2013. Therefore, if this explanation is correct, one would expect the total ETF holdings of both metals to be lower as well.

However, this is not the case. As shown in Figure 2 gold ETFs suffered large redemptions whereas silver ETFs saw their holdings remain more or less constant throughout the year, and this without any observable change in trading patterns in the two largest ETFs; GLD and SLV (Figure 3 shows the ratio of the trading values in the ETFs over time). If redemptions are a symptom of investors’ disenchantment with precious metals as an investment, shouldn’t silver have suffered the same fate as gold? Indeed it should have, but we think the reason silver ETFs were not raided like gold was that Central Banks do not have a silver supply problem, they have a gold problem. As we have argued before, the raiding of gold ETFs is bullish for gold because it reflects an imbalance in the physical market.1

Figure 1: Gold and Silver prices declined significantly in 2013
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Source: Bloomberg

Figure 2: ETF Holdings – Troy oz (millions)
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Source: Bloomberg, tickers ETSITOTL & ETFGTOTL

In this article, we further argue that the April raid on gold and gold ETFs almost backfired by creating a tsunami of buying in India and increased demand to unsustainable levels. In May 2013 alone, Indians imported 162 tonnes2 of gold in a market where monthly global mine production is about 182 tonnes. A continuation of this trend, coupled with strong buying from other Emerging Markets and their Central Banks, would have been overwhelming. But, the response was swift. We suspect that, at the behest of Western Central Banks, the Reserve Bank of India reacted by enacting, in incremental steps, restrictive measures to prevent gold imports (See Figure 4 for a timeline of the major changes made by the Indian Government).3

Figure 3: Traded Value – Ratio of SLV to GLD
maag-01-2014-3.gif
Source: Bloomberg. Traded Value is calculated by taking the total trading volume for a quarter and multiplying it by the average price over that quarter. A ratio of 1 indicates that SLV traded as much, in $ terms, as GLD.

Figure 4: Efforts to Curb Indian Gold Imports
maag-01-2014-4.gif
Source: Bloomberg, Economic Times

 

Supply and Demand Imbalances: The Indian Effect 

We have already discussed at length the supply and demand imbalance in an Open Letter to the World Gold Council, asking them to revise their methodology because it grossly understates the amount of demand coming from emerging markets.4 Our gold supply and demand table (Table 1) reflects the latest available data (2013 Q3 in most cases). World mine production, excluding Chinese and Russian production still stands at about 2,100 tonnes a year. Chinese net imports most likely exceeded 1,700 tonnes for 2013 (81% of world mine production) and demand from the rest of the world is rather stable.5

The overall picture has not changed much since our last article, with the exception of Indian imports. As of the second quarter of 2013, India had cumulative net gold imports of 551 tonnes, which annualizes to 1,102 tonnes.6 However, Q3 data shows net imports of only 31 tonnes (for a total of 582 tonnes YTD), which annualizes to 776 tonnes.

This incredible loss of momentum for “official” gold imports was the result of concerted actions by the Reserve Bank of India and the Indian Government. While the “official” justification for those restrictions is the large Indian current account deficit, this argument makes little sense. According to government officials, Indian’s taste for gold and the corresponding imports worsens the country’s trade balance, worsens its current account deficit and puts downward pressure on their currency, the Rupee.

But, without going into too many details, the classification of gold as a “good” in the trade balance is at best misleading. Since gold is more of an investment vehicle and is not “consumable” per se, it should instead be accounted for in the capital account of the balance of payments instead of the current account. Indeed, Switzerland, which is a large net importer of gold, reports its trade balance “without precious metals, precious stones and gems as well as art and antiques” to reflect fact that those are “investments” rather than consumption goods.9 In this case, why should India be any different and report their trade data excluding gold? To us, all the fuss about gold imports by the Indian Government is a red herring.

So, without the intervention in the Indian gold market, the shortage of gold would have wreaked havoc in the market, a situation that Western Central Banks could not tolerate.

Table 1: World Gold Supply and Demand 2013, in Tonnes
maag-01-2014-5.gif
Sources: GFMS data comes from the WGC’s “Gold Demand Trends” publications for 2013 Q1, Q2 & Q3. Chinese mine supply comes from the China Gold Association and is up to October 2013, the annualized number is a Sprott estimate.8 Russian mine supply comes from the Union of Gold Producers and is up to 2013 Q3. Chinese data is taken from the Hong Kong Census and Statistics Department and covers the period Jan.-Nov. 2013 and is annualized to account for the missing month. Changes in Central Bank gold reserves are taken from the IMF’s International Financial Statistics, as published on the World Gold Council’s website for 2013 Q1, Q2 & Q3 and include all international organizations as well as all central banks. Net imports for Thailand, Turkey and India come from the UN Comtrade database and include gold coins, scrap, powder, jewellery and other items made of gold. The data is for 2013 Q1, Q2 & Q3. ETFs data comes from GFMS as well.

 

Conclusion and Outlook for 2014

As demonstrated in our Open Letter to the World Gold Council, there was a large supply-demand imbalance in 2013. The evidence presented here suggests that the decline in the price of gold in mid-2013 and the subsequent raid of gold ETFs (but not silver ETFs) was engineered by Western Central Banks to help solve their physical gold supply problem. However, the resulting increase in Indian gold demand exacerbated the problem. The solution was to restrict Indians from importing gold by all means possible in order to help the Western Central Banks regain control of the gold market.

However, the rate of drain in gold ETFs cannot continue forever; at the current pace of 930 tonnes/year, there are less than two years of gold left in ETFs. Moreover, Indians have proved highly creative at finding ways around import restrictions.10 Smuggling is on the rise and will most likely increase as smugglers become more sophisticated. Overall, we believe that interest in physical gold from emerging markets will remain a driving force.

Besides, mine production is unlikely to grow, as reflected by the significant decrease in capital expenditures expected for the major gold producers (Figure 5).

Accordingly, we believe that the manipulation of gold prices by central banks, as demonstrated by the above analysis, cannot continue in 2014. Therefore, we expect substantial increases in the price of precious metals as the true shortages become obvious.

Figure 5: Capital Expenditures ($mm) – XAU Index Members
maag-01-2014-6.gif
Source: Bloomberg. Consensus analyst estimates are used for years 2013-2015.

 

P.S. Due to recent developments, we would also like to highlight some related media stories

Jan. 17, 2014: Germany’s top financial regulator said possible manipulation of currency rates and prices for precious metals is worse than the Libor-rigging scandal

Jan. 17, 2014: Deutsche quits gold price-setting as regulators investigate fix (Did the regulators ask them to?)

Dec. 13, 2013: Bafin Said to Interview Deutsche Bank Staff in Gold Probe

Nov. 26, 2013: U.K., German Regulators Scrutinize Gold, Silver Pricing

Sept. 9, 2013: Sprott Thoughts: A Leaky Fix

 

1 See, for example, “Redemptions in the GLD are, oddly enough, Bullish for Gold”.
2 http://in.reuters.com/article/2013/06/03/gold-india-imports-idINDEE95207H20130603
3 See “Do the Western Central Banks have any gold left?”. Sprott Asset Management LP, Markets at a Glance May 2013.
4 See the full article at: http://www.sprott.com/markets-at-a-glance/open-letter-to-the-world-gold-council/
5 As a reminder, because of our methodology which uses net imports as a proxy for total demand in countries that do not re-export gold, we exclude the “total industrial demand” estimate from the GFMS to avoid double counting. Thus, we underestimate total gold demand because we do not include industrial demand from the countries other than China, India, Turkey and Thailand.
6 As reported by the UN Comtrade Statistics. We use the total dollar amount reported and average quarterly prices to infer the total amount of gold imported and exported.
7 This is calculated by taking the total consumer demand for jewellery, coins and bars for 2013 Q1 & Q2 from table 10 of the WGC’s “Gold Demand Trends” and subtracting from it demand from the individual countries we have listed in the table (China/Hong Kong, India, Turkey, Russia and Thailand).
8 http://translate.google.ca/translate?hl=en&sl=zh-CN&u=http://www.cngold.org/&prev=/search%3Fq%3Dcngold.%26client%3Dsafari%26rls%3Den
9 See the Swiss Customs Administration website: http://www.ezv.admin.ch/themen/04096/04101/index.html?lang=en
10 See, for example: http://www.thestar.com/business/economy/2013/12/27/insatiable_appetite_for_gold_fuels_indias_smuggling_industry.html http://in.reuters.com/article/2013/12/03/india-gold-smuggling-idINDEE9B20HY20131203 http://articles.timesofindia.indiatimes.com/2013-12-29/chennai/45674552_1_airline-staff-gold-smuggling-flight-attendant

Vince Cable: interest rates may have to rise to combat housing boom | Business | theguardian.com

Vince Cable: interest rates may have to rise to combat housing boom | Business | theguardian.com.

Vince Cable<br />

Vince Cable has again called for the government to rethink its help to buy scheme. Photograph: David Cheskin/PA

The business secretary, Vince Cable, has warned that interest rates may have to rise to constrain a “raging housing boom” in London and the south-east.

Speaking on BBC1’s Andrew Marr Show, he said if interest rates were not increased by the Bank of England, there was a danger that large parts of London could be inhabited only by foreigners and bankers as house prices spiralled.

He added that, on the other hand, if interest rates were increased it would have a negative impact on UK manufacturing since exchange rates would rise, making exports harder.

It is the first time Cable has spoken so openly about the possibility of interest rates rising due to the imbalance in the economic recovery.

He again called for the government to rethink its Help to Buy scheme, which he said was conceived in entirely different circumstances. He also hinted strongly he did not want to follow the Conservative path on spending cuts after the election in 2015, saying the social fabric was under strain.

Cable said: “There is a raging housing boom in London and the south-east, and not in other parts of the country. The danger of raising interest rates is that you hit those parts of the country which are not yet fully recovered, you push up the exchange rate and that hits manufacturing. We don’t want that. On the other hand, if you do not increase interest rates – if that is the way the governor and the Bank of England go – then this boom that is taking place in housing prices gets out of control and the only people that can afford to live in large parts of London are foreigners and bankers, and we don’t want that either.”

He said the government needed to look again at the Help to Buy scheme, which involves government backing for mortgages so that buyers do not have to provide such a large deposit, saying “it was conceived in very different circumstances”.

Cable also said he noted the rating agency Standard & Poor’s hadreaffirmed the UK’s AAA rating, but had expressed concerns about imbalance in the UK economy.

He said: “We have got to have a sensible balance on public spending cuts – which is getting very severe. Some very good services are now being seriously affected.”

 

Is Bitcoin Bringing The “Dark Web” Into The Light? | Zero Hedge

Is Bitcoin Bringing The “Dark Web” Into The Light? | Zero Hedge.

Despite the best efforts of the search engines, the majority of the Internet is unsearchable with estimates of this “Unlit” Web as high as 90%. As ConvergEx’s Nick Colas notes, some of this content (no one knows how much) is dark for a reason – hosting every form of criminal behavior known to man – but the rest from the increasing interest in anonymous Internet use in light of widely publicized government surveillance.

Among the least well understood emerging themes in technology, Colas points out, is the “Dark Web”, adding that Oscar Wilde famously opined that “All human beings have three lives: public, private and secret.”  The existing structure of the Internet handles the first two very well.  The Dark Web is, apparently, for the third. The first innovation to move from “Dark” to “Lit” Web is bitcoin, but it certainly won’t be the last.

Via ConvergEx’s Nick Colas,

If you are a fan of the movie The Princess Bride, you might recall the character of Dread Pirate Roberts.  His was as inherited position, with one man handing down the job to a worthy apprentice when he grew tired of the pirating game.  This approach allowed a series of people to benefit from the efforts of many predecessors rather than having to build up their own “Brand” on the high seas.

I am sorry to report that the name Dread Pirate Roberts is now not just a memory from a delightful book and movie, but the nom du guerre of a man accused of running a real life drug website and attempting to arrange several contract killings.  His real name is Ross Ulbricht, and these are the particulars of his case:

According to Federal prosecutors, the FBI arrested Ulbricht at the Glen Park branch of the San Francisco Public Library on October 1st.  They confiscated his laptop computer, where they noted he was logged into a website call Silk Road as an administrator. This was a popular site for the sale and distribution of illegal drugs and other contraband.  The FBI had successfully tracked the operation of the site to Ulbricht, according to court documents related to the case.

In documents found on the seized computer, investigators found a journal, which they claim chronicles Ulbricht’s own development of the site back to its founding in 2010.  This included the odd fact that he had grown several kilos of hallucinogenic mushrooms so the site would have something to sell when it went live but before other sellers began to offer their own illegal drugs.

As if running an online portal for illicit drugs wasn’t bad enough, Ulbricht also allegedly tried to arrange six murders-for-hire.  The reported targets, all of who are still apparently alive, ranged from blackmailers to fraudulent sellers on the site.  These presumably eroded Silk Road’s reputation and user trust.

As of this writing, Ulbricht is being held without bail.  The Federal government confiscated 144,000 bitcoins as part of the investigation, worth $122 million as of today.  Several press accounts of the case theorize that this stash was only part of Ulbricht’s total holdings and that, if true, would give him access to hundreds of millions of dollars in notional wealth with which to flee the country.

The bitcoin piece of this story got some press, given all the recent interest in the online “Currency”; what got lost in the wash was the presence of the “Dark Web” – a parallel, if much larger Internet, to the one we all use every day.  A brief description here:

Google, Yahoo and Bing, among other search engines, only track part of the Internet – essentially the bits that website owners want the public to see.  Business owners strive to optimize their sites to appear on pages 1 or 2 of a given search, knowing that most users will not travel farther.  Time magazine recently ran a cover article on the “Deep Web”, essentially the Internet which search engines do not reach, and estimated that +90% of online content cannot be found by the typical search engines we all use every day.  Wired magazine puts the number at 99%.  Either way, most of the Internet is essentially “Dark”.

A large chunk of this “Missing” data must come from its formatting, unfriendly to Google/Yahoo/Bing search algorithms.  Just consider all the economic data available through the Federal Reserve’s datasets.  Typing “FRED inflation” into Google does get you to the St. Louis Fed’s excellent database of economic indicators, but from there you have to enter exactly what you want.  Google, among others, is busy trying to integrate this information; there is a link after the text to a paper describing this effort.  Another example of the Dark Web: your financial information at your bank or broker, held behind security firewalls but available to you with an ID and password.

Then there is the part of the Internet that doesn’t want to be found, and where the “Dark Web” means something else.  Silk Road is one example, and even though that site is now shuttered there are other places on the Dark Web where users can purchase illegal drugs.  From there, it gets a lot worse.  There are sites advertising contract killings, illegal pornography, money laundering, and stolen financial information.  Some press reports link global terrorism to the Dark Web.

Now, you won’t find the Dark Web on your Explorer, Safari or Firefox browser.  To find these sites you’ll need something called Tor, short for “The Onion Router”, or other software which essentially makes you anonymous online.  These browsers route your heavily encrypted traffic through a rabbit warren of servers around the world, making it nearly impossible to connect your computer to any individual site you might visit.  Tor was actually developed by the U.S. Navy for secure communication, but the software is available for free here: https://www.torproject.org

Secure and anonymous access to the Internet is becoming a growth business, and Tor is one of the hottest tickets to that show.  The Google search phrase “Tor search” has tripled in the last year, and the query “Tor” is up 100% over the same period.  Like most fashion-forward tech trends, searches for Tor cluster on the coasts, in Oregon, Washington state, California and New York.  Since search engine capability doesn’t reach the Dark Web – by design, of course – TorSearch is now available for users, with a reported 130,000 sites listed and something like a tripling of use in the last few weeks, according to media accounts.

There is an obvious tension between a growth opportunity for business and the need for society to regulate and control the illegal use of any technology. A few points here:

Aside from search engine companies, there is not much academic research dedicated to the Dark Web.  We spent the better part of day trolling the usual scholarly sites, with little success.

Law enforcement seems poorly equipped to handle the challenge.  There was one high profile takedown of a server hosting a range of illegal activities in Ireland over the summer (link below), but its success seems to have been caused by a flaw in the Firefox browser software used by Tor.  The flaw has since been fixed.  It wasn’t a technical gltich that brought down Silk Road – one of the supposed hitmen contracted for the murder-for-hire plot was an undercover agent.

We did find one consumer product offering related to Tor – something called pogoplug – which directs your web traffic into the anonymous network.  It cost $49 and has wifi for your cell phone.  The downside: Tor is slower than conventional access since your information transits through more connections than the customary point-to-point process.

All that said, we do have one innovation – bitcoin – that successfully made the transition from Dark to “Lit” web.  Silk Road was clearly an early enabler of the online “Currency” but it now has the tacit recognition of everyone from the Federal Reserve to business television. Like the Dark Web, its early appeal was anonymity, but its low cost utility for money transfer should allow it to survive increasing regulatory scrutiny.  It won’t be a flawless transition, considering its birth in the primordial ooze of the Dark Web, but it seems well on its way.

Can there be other innovations, developed in the shadows of the Dark Web, which hit the mainstream? It seems inevitable.  Revelations of government spying around the world provide the notional demand for anonymous Internet use.  Oscar Wilde famously opined that “All human beings have three lives: public, private and secret.”  The existing structure of the Internet handles the first two very well.  The Dark Web is, apparently, for the third.

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GM Channel Stuffing Surges To Second Highest Ever | Zero Hedge

GM Channel Stuffing Surges To Second Highest Ever | Zero Hedge.

Confused why the various US manufacturing indices have been on a tear in the past few months? Perhaps the fact that GM dealer lots are so full of cars they just couldn’t wait for even more deliveries has something to do with it. Which is also why in addition to reporting sales numbers for November that were largely in line with expectations, amounting to 212,060 (even if total Chevy Volts sold YTD of 20.7K were -0.6% less than in the same period in 2012), or 13.7% more than last year (estimated called for 13.% increase), of which a whopping 51,705 was in the form of “channel stuffed” units to be parked on dealer lots.

In fact, as the chart below shows, in the past three months, GM channel stuffing has exploded and soared by 150K units (the most ever for a 3 month period) from 628.6K to 779.5K. This represents the second highest amount of channel stuffing and is lower only compared to the 788.2K units “stuffed” exactly one year ago.

And while the topic of channel stuffing is not new here, as we have been covering it closely for the past three years, it is of note that even “serious” media such as Bloomberg pointed out yesterday that across the entire US car industry, and not just GM, channel stuffing is now the highest it has been since 2005. Surely all this pent up demand is there for a reason: after all, as in every centrally-planned economy, if you build it they will surely come…

 

The Hidden Secrets Of Money Part 5: When Money Is Corrupted | Zero Hedge

The Hidden Secrets Of Money Part 5: When Money Is Corrupted | Zero Hedge.

Having exposed the “biggest scam in history” is Part 4 (following Part 1Part 2, and Part 3), Mike Maloney’s fifth episode serves as an ideal primer for those waking up to the monetary matrix around them, as it clearly shows the history of true money and why it so important to our freedom. The quality of a society is directly proportional to the quality of its money. Debase a currency for long enough, and you end up with dangerous deficits, debt driven disasters, and eventually…delusional dictators. History proves this to be true.

 

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Is Hyperinflation Just Around the Corner? | The Exchange – Yahoo Finance

Is Hyperinflation Just Around the Corner? | The Exchange – Yahoo Finance.

By Laurence Kotlikoff

In his parting act, Federal Reserve Chairman Ben Bernanke has decided to continue printing some $85 billion per month (6 percent of GDP per year) and spend those dollars on government bonds and, in the process, keep interest rates low, stimulate investment, and reduce unemployment.

Trouble is, interest rates have generally been rising, investment remains very low, and unemployment remains very high.

Bernanke’s dangerous policy hasn’t worked and should be ended. Since 2007 the Fed has increased the economy’s basic supply of money (the monetary base) by a factor of four! That’s enough to sustain, over a relatively short period of time, a four-fold increase in prices. Having prices rise that much over even three years would spell hyperinflation.

The Treasury dance

And while Bernanke says this is all to keep down interest rates, there is a darker subtext here. When the Treasury prints bonds and sells them to the public for cash and the Fed prints cash and uses it to buy the newly printed bonds back from the public, the Treasury ends up with the extra cash, the public ends up with the same cash it had initially, and the Fed ends up with the new bonds.

Yes, the Treasury pays interest and principal to the Fed on the bonds, but the Fed hands that interest and principal back to the Treasury as profits earned by a government corporation, namely the Fed. So, the outcome of this shell game is no different from having the Treasury simply print money and spend it as it likes.

The fact that the Fed and Treasury dance this financial pas de deux shows how much they want to keep the public in the dark about what they are doing. And what they are doing, these days, is printing, out of thin air, 29 cents of every $1 being spent by the federal government.

QE an unsustainable practice

I have heard one financial guru after another discuss Quantitative Easing and its impact on interest rates and the stock market, but I’ve heard no one make clear that close to 30 percent of federal spending is now being financed via the printing press.

That’s an unsustainable practice. It will come to an end once Wall Street starts to understand exactly how much money is being printed and that it’s not being printed simply to stimulate the economy, but rather to pay for the spending of a government that is completely broke — with long-term expenditures obligations that exceed its long-term tax revenues by $205 trillion!

This present value fiscal gap is based on the Congressional Budget Office’s just-released long-term Alternative Fiscal Scenario projection. Closing this fiscal gap would require a 57 percent immediate and permanent hike in all federal taxes — starting today!

Prices will rise

When Wall Street wises up to our true fiscal condition (and some, like Bill Gross, already have), it will dump long-term bonds like hot potatoes. This will lead interest rates to jump and make people and banks very reluctant to hold money earning no return. In trying to swap their money for goods and services, the public will drive up prices.

As prices start to rise and fingers start pointing at the Fed for fueling the inflation, QE will be brought to an abrupt halt. At that point, Congress will have to come up with an extra 6 percent of GDP on a permanent basis either via huge tax hikes or huge spending cuts. Another option is simply to borrow the 6 percent. But this would raise the deficit, defined as the increase in Treasury bonds held by the public, from 4 to 10 percent of annual GDP if we take 2013 as the example. A 10 percent of GDP deficit would raise even more eyebrows on Wall Street and put further upward pressure on interest rates.

What are we waiting for?

But why haven’t prices started rising already if there is so much money floating around? This year’s inflation rate is running at just 1.5 percent. There are three answers.

First, three quarters of the newly created money hasn’t made its way into the blood stream of the economy – into M1 – the money supply held by the public. Instead, the Fed is paying the banks interest not to lend out the money, but to hold it within the Fed in what are called excess reserves.

Since 2007, the Monetary Base – the amount of money the Fed’s printed – has risen by $2.7 trillion and excess reserves have risen by $2.1 trillion. Normally excess reserves would be close to zero. Hence, the banks are sitting on $2.1 trillion they can lend to the private sector at a moment’s notice. I.e., we’re looking at a gi-normous reservoir filling up with trillions of dollars whose dam can break at any time. Once interest rates rise, these excess reserves will be lent out.

The fed says they can keep the excess reserves from getting lose by paying higher interest on reserves. But this entails poring yet more money into the reservoir. And if interest rates go sufficiently high, the Fed will call this practice quits.

As excess reserves are released to the economic wild, we’ll see M1, which was $1.4 trillion in 2007, rise from its current value of $2.6 trillion to $5.7 trillion. Since prices, other things being equal, are supposed to be proportional to M1, having M1 rise by 219 percent means that prices will rise by 219 percent.

But, and this is point two, other things aren’t equal. As interest rates and prices take off, money will become a hot potato. I.e., its velocity will rise. Having money move more rapidly through the economy – having faster money – is like having more money. Today, money has the slows; its velocity – the ratio GDP to M1 — is 6.6. Everybody’s happy to hold it because they aren’t losing much or any interest. But back in 2007, M1 was a warm potato with a velocity of 10.4.

If banks fully lend out their reserves and the velocity of money returns to 10.4, we’ll have enough M1, measured in effective units (adjusted for speed of circulation), to support a nominal GDP that’s 3.5 times larger than is now the case. I.e., we’ll have the wherewithal for almost a quadrupling of prices. But were prices to start moving rapidly higher, M1 would switch from being a warm to a hot potato. I.e., velocity would rise above 10.4, leading to yet faster money and higher inflation.

No easy exit

I hope you’re getting the point. Having addicted Congress and the Administration to the printing press, there is no easy exit strategy. Continuing on the current QE path spells even great risk of hyperinflation. But calling it quits requires much higher taxes, much lower spending, or much more net borrowing (with requisite future repayment) from the public. Yet weaning Uncle Sam from the printing press now is critical before his real need for a fix – paying for the Baby Boomers’ retirement benefits – kicks in.

The one caveat to this doom and gloom scenario is point three – increased domestic and global demand for dollars. The Great Recession put the fear of God into savers worldwide. And the fact that U.S. price level has risen since 2007 by only 15 percent whereas M1 has risen by 88 percent reflects a massive expansion of domestic and foreign demand for “safe” dollars. This is evidenced by the velocity of money falling from 10.4 to 6.6. People are now much more eager to hold and hold onto dollars than they were six years ago.

If this increased demand for dollars persists, let alone grows, inflation may remain low for quite a while. But our ability to get Americans and foreigners to hand over real goods and services in exchange for very few green pieces of paper is hardly guaranteed once everyone starts to understand the incredible rate at which Uncle Sam is printing and spending this paper. Once everyone gets it into their heads that prices are taking off, individual beliefs will become collective reality. This brings me to my bottom line: The more money the Fed prints, the more it risks everyone starting to expect and, consequently produce, hyperinflation.

Laurence Kotlikoff is Professor of Economics at Boston University and co-author of The Clash of Generation and author of Jimmy Stewart Is Dead.

 

 

Germany Advises Journalists To Stop Using Google Over US Spying Concerns, May Ask Snowden To Tesity Against NSA | Zero Hedge

Germany Advises Journalists To Stop Using Google Over US Spying Concerns, May Ask Snowden To Tesity Against NSA | Zero Hedge. (source)

The spat between the US and Germany is getting worse by the minute. Following yesterday’s meaningless escalation by the Treasury accusing, via official pathways, Germany of being the main culprit for Europe’s lack of recovery (andGermany’s subsequent retaliation), it is Germany’s turn now to refocus public attention on Big Brother’s spying pathology when a union representing Germany’s journalists advised its members earlier today to stop using Google and Yahoo because of the latest report implicating the NSA ineavesdropping on Google and Yahoo.

From Reuters:

“The German Federation of Journalists recommends journalists to avoid until further notice the use of search engines and e-mail services from Google and Yahoo for their research and digital communication,” the union said in a statement.

It cited “scandalous” reports of interception of both companies’ web traffic by the U.S. National Security Agency (NSA) and Britain’s GCHQ.

“The searches made by journalists are just as confidential as the contact details of their sources and the contents of their communication with them,” said Michael Konken, head of the union which represents about 38,000 journalists. He said there were safe alternatives for both searches and email.

And while in the US having one’s dirty laundry is almost perceived as a status symbol by a culture that encourages online exhibitionism via Facebook and other social media (so what if some bureaucrat in Virginia knows more than what is public), in Germany privacy is actually taken seriouysly.

The German government said last week it had evidence that Chancellor Angela Merkel’s mobile phone had been monitored by U.S. intelligence.Government snooping is especially sensitive in Germany, which has among the strictest privacy laws in the world, since it dredges up memories of eavesdropping by the Stasi secret police in former communist East Germany.

Earlier this month, Deutsche Telekom said it wanted German companies to cooperate to shield local internet traffic from foreign intelligence services, although experts believe this could be an uphill battle.

In August, Deutsche Telekom and its partner United Internet launched an initiative dubbed “E-mail made in Germany” to protect clients’ email traffic.

And in other news, it is increasingly looking likely that none other than Ed Snowden will be called to testify against the NSA in a German court of law. Germany’s ARD reported that Snowden is willing in principal to help shed light on U.S. spying but outlined his complicated legal situation. As we noted earlier, German Greek politician Stroebele proposed possible safe conduct to Berlin, and granting Snowden a residence permit that would prevent extradition. Snowden attorney Anatoly Kutscherena earlier said he wouldn’t comment on alleged NSA spying on Angela Merkel.

Ironically, this follow news that Snowden would take a position with Russian Internet company Vkontakte, a local analogue to Facebook, to develop major website, according to his lawyer.

So if Obama was hoping that all the late summer scandals that have taken his reptuation to an all time low would at least push the NSA spying scandal away from the front page, he may need some additional fabricated and YouTube-validated false flag wars very soon.

 

Germany Wants A German Internet To Keep The NSA Out | Zero Hedge

Germany Wants A German Internet To Keep The NSA Out | Zero Hedge. (source)

As the ‘diplomatic’ debacle continues to rage between the US and Europe (most loudly France and Germany) over the Obama administration’s ongoing eavesdropping on its allies’ cell phones, Reuters reports that (state-backed) Deutsche Telekom is calling for German comms companies to cooperate to shield local internet traffic from foreign intelligence services. “It is internationally without precedent that the internet traffic of a developed country bypasses the servers of another country,” notes one academic, warning that if more countries wall themselves off, it could lead to a troubling “Balkanisation” of the Internet, crippling the openness and efficiency that have made the web a source of economic growth. Despite Obama’s denials, the situation is not fading away, and Germany and France continue to demand a “no spying” agreement.

Via Reuters,

As a diplomatic row rages between the United States and Europe over spying accusations, state-backed Deutsche Telekom wants German communications companies to cooperate to shield local internet traffic from foreign intelligence services.

More fundamentally, the initiative runs counter to how the Internet works today – global traffic is passed from network to network under free or paid-for agreements with no thought for national borders.

If more countries wall themselves off, it could lead to a troubling “Balkanisation” of the Internet, crippling the openness and efficiency that have made the web a source of economic growth, said Dan Kaminsky, a U.S. security researcher.

Controls over internet traffic are more commonly seen in countries such as China and Iran where governments seek to limit the content their people can access by erecting firewalls and blocking Facebook and Twitter.

“It is internationally without precedent that the internet traffic of a developed country bypasses the servers of another country,” said Torsten Gerpott, a professor of business and telecoms at the University of Duisburg-Essen.

“The push of Deutsche Telekom is laudable, but it’s also a public relations move.”

Government snooping is a sensitive subject in Germany, which has among the strictest privacy laws in the world, since it dredges up memories of eavesdropping by the Stasi secret police in the former East Germany, where Merkel grew up.

The issue dominated discussions at a European summit on Thursday, prompting Merkel to demand that the U.S. strike a “no-spying” agreement with Berlin and Paris by the end of the year.

Brazil’s President Dilma Rousseff, angered by reports that the U.S. spied on her and other Brazilians, is pushing legislation that would force Google, Facebook and other internet companies to store locally gathered or user-generated data inside the country.

 

The World Complex: Should Canada and the US merge . . . (updated)

The World Complex: Should Canada and the US merge . . . (updated). (source)

. . . like Diane Francis asks?

No.

Sure, I could use the money. But I think in her calculations she has neglected to consider the extra costs to Canadians, like having to roughly double our per capita medical expenditures. Not to mention we might have to start pulling our weight in military adventurism around the globe. We might have to close our embassy in Cuba.

There’s an old song I remember hearing from way back. The words used to be on the internet years ago, but I can’t find them now. Unfortunately, on my copy the first line is garbled, so I’m not sure of the wording.

There’s a fine country called America don’t you know,
Just take a look at your atlas, it’s the one that’s down below.
There’s fifty states in the union and something should be done,
To forget the war of 1812 and make it fifty-one.

There’ll be colour television,
Social security,
Racial segregation and the Birch Society;
You can take the fifth amendment,
You can vote for LBJ,
You can even burn your draft card when we’re Canada, USA.

Now some folks think we’re English, which isn’t true at all;
And some t’ink we’re a colony that’s run by Charles de Gaulle;
But we’re looking up to greater things upon the glorious day,
When the capitol of our little state is Ottawa, CA.

There’ll be colour television,
Social security,
Racial segregation and the Birch Society;
You can cheer for Jimmy Hoffa,
You can join the Klan today;
You can even be a Commie when we’re Canada USA.

There’s a bunch of stripes and fifty stars upon the Yankee flag,
There’s gonna have to be fifty one when Canada’s in the bag,
But when we see the flag unfurl, we’ll know we’ve won the fight,
We’ll be just before Connecticut in the third row from the right.

There’ll be colour television,
Social security,
Racial segregation and the Birch Society;
You can take the fifth amendment,
You can vote for LBJ,
You can even burn your draft card when we’re Canada, USA.

We’ll all be much more affluent in the Great Society,
Their buck is worth $1.10 in Canadian currency,
The economy’s going to get a boost for it’s very evident,
That it costs us more to feed a Queen than pay a President.

There’ll be colour television,
Social security,
Racial segregation and the Birch Society;
You can cheer for Jimmy Hoffa,
You can join the Klan today;
You can even be a Commie when we’re Canada USA.

There’ll be no more selling prairie wheat to all the commie crew,
There’ll be no more Cuban sugar–that’s very naughty too,
But think of all the benefits that surely have to come
When we’re citizens of a country that’s got the atom bomb!

There’ll be colour television,
Social security,
Racial segregation and the Birch Society;
You can take the fifth amendment,
You can vote for LBJ,
You can even burn your draft card when we’re Canada, USA.

Update: Just need to update that last chorus a bit:

There’ll be welfare cheques and foodstamps,
Homeland Security,
The NSA on Google
And the end of privacy,
You can take the fifth amendment,
Get Obamacare today,
You can even shoot Iraqis when we’re Canada, USA!

 

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