$14.6T is more than the rest of the world debt combined.
$750B on defense spending is more than the rest of the world combined.
We probably spend more than the rest of the world combined on healthcare, housing, political campaigns, and energy too.
GNH (gross national happiness) would suggest its a waste
INFOGRAPHIC: The American Debt Crisis
Read more at www.businessinsider.com
Luis Eugenio Todd presentó recientemente su libro Adicciones, enfermedades del siglo XXI
Esa actividad en el sistema límbico también la genera el empleo excesivo de los celulares y los videojuegos
Existen individuos más propensos genéticamente a ser adictos, expresa
Miércoles 31 de agosto de 2011, p. 2
El uso compulsivo de Internet, de teléfonos móviles y de videojuegos activa el sistema límbico del cerebro, mismo que se altera cuando se consume alguna droga (mariguana, cocaína, alcohol o tabaco). De ahí que el empleo de esas tecnologías llegue, en ocasiones, a generar adicción, expuso Luis Eugenio Todd, coordinador de Ciencia y Tecnología del gobierno de Nuevo León.
El científico, quien acaba de publicar el libro Adicciones, enfermedades del siglo XXI, que se presentó la semana pasada en Monterrey, indicó que esa región cerebral está ligada a los satisfactores, por lo que también el sexo, la comida, hacer las compras y los juegos de apuestas influyen en ella.
Aseguró que el problema de la adicción no está relacionado con las sustancias o las herramientas tecnológicas, sino que existen individuos más propensos genéticamente a ser adictos, a lo que se debe sumar la depresión y ansiedad en las que
sistema globalizado ha sumergido a la humanidad.
El cerebro, señaló, está dividido en dos partes: el sistema límbico, ligado a la supervivencia, a los instintos animales, donde se generan el miedo, el hambre, el deseo sexual y la sed, y el área cortical,
que nos diferencia de los animales, donde están los pensamientos, la razón y el conocimiento.
Todd, ex rector de la Universidad Autónoma de Nuevo León y ex subsecretario de Educación Superior de la Secretaría de Educación Pública, indicó que el cerebro humano siempre debe tener un equilibrio entre la razón y la emoción; sin embargo, cuando existe una adicción predomina la segunda.
Subrayó que la ludopatía, el uso de tecnologías de la información y la comunicación como la Internet, los teléfonos móviles, las redes sociales, las compras, el sexo e incluso comer pueden volverse adicciones si los humanos realizan estas actividades de manera compulsiva y como forma de encontrar satisfacciones que no tienen en su vida cotidiana.
Hay personas adictas a las compras, que en muchos casos son la manera que tienen de sacar su angustia y depresión. Se trata de una adicción compulsiva favorecida por el consumismo, generado por la mercantilización.
Otra de las llamadas nuevas adicciones es el uso constante de las tecnologías de la información y la comunicación (TIC).
Muchas personas han desarrollado una dependencia a estas herramientas: la Internet, el celular; ahora los muchachos son la generación Twitter. En ocasiones se les quita la computadora o el teléfono móvil y su cara muestra una angustia semejante a la que hace un alcohólico o un adicto a la cocaína cuando se le retiran esas sustancias. Sicológica y biológicamente la reacción es la misma.
Para el especialista las adicciones están relacionadas con agentes genéticos, fisiológicos y por los patrones culturales, y no necesariamente son las sustancias, las TIC o los juegos de azar los que provocan esa enfermedad. “Hay personas más propensas a caer en ello, aunque aún se estudian los porqués.
La dependencia a una droga o a las nuevas adicciones se puede acelerar cuando se presenta ansiedad o angustia, cuando el ser humano no encuentra respuestas en sus motivaciones sicológicas, espirituales, sociales y físicas. Hoy el mundo se encuentra sumergido en un capitalismo salvaje que nos ha arrancado los valores. Hay una tendencia entre las personas a buscar los satisfactores fuera de ellos; estamos en una sociedad plástica, hoy importa más lo que tienes que lo que eres. Ya no estamos dispuestos a dar por los demás, sólo queremos recibir.
Esto, dijo, ha generado que la humanidad se encuentre en una especie de depresión y ansiedad.
Hoy, los medicamentos que más prescriben los médicos tan sólo en Estados Unidos son los antidepresivos, seguidos de los ansiolíticos.
En el asunto de las drogas ilegales, Todd se pronunció por que el país se abra a un debate para evaluar los resultados de la actual política anticrimen y antidroga, pues la actual estrategia no ha funcionado.
Planteó como una medida de solución la legalización del consumo de drogas y que el Estado regule su distribución:
No podemos seguir la política de doble moral estadunidense; científicamente se ha demostrado que es más dañino el consumo de alcohol y el cigarrillo. Hay que abrirle la puerta al conocimiento y no a la sin razón de la política del poder.
How many local economies would like to separate from their national overlords? This is a common conversation in Europe. The Basque country of Spain, Catalan, for example. In the USA, succession was part of the cause of the civil war and most likely the all powerful Federal government would tell the separatists that their national security would be at risk. Exactly why many might prefer to be considered outside the USA.
Italian Town Mints Own Money to Fight Austerity
Tuesday, 30 Aug 2011 | 7:10 AM ET
A small town in central Italy is trying to go independent and mint its own money in protest at government austerity cuts.
Filettino, set in rugged hill country around 100 km (65 miles) east of Rome, is rebelling against a proposal to merge the governments of towns with fewer than 1,000 inhabitants to save money.
Filettino has only around 550 people, but instead of merging with neighboring Trevi, mayor Luca Sellari is trying to go it alone and set up a "principality" along the lines of the famous republic of San Marino to the north.
He has started minting Filettino's own bank currency, the "Fiorito," with his photo on the back, which he says is already being used by the townsfolk.
"We aim to achieve real autonomy from Italy and we have the financial resources to do it," Sellari said in an interview on the town's website www.principatodifilettino.com
There was no immediate comment from the central government in Rome.
Mayors from all over Italy are up in arms about proposals to cut local government funding and merge small towns as part of a 45.5 billion euro ($65.3 billion) austerity plan to balance the country's budget by 2013.
Mayors plan a protest in Milan Monday although media reports say the government is preparing significant changes to the budget, including a substantial dilution of the proposals on local government.
Global recession in 2012 is "65 to 75 percent certain" and could deteriorate into a lengthy depression, Roger Nightingale, economist and strategist at RDN Associates, told CNBC.
The peak rate of growth for the world's economy occurred more than 12 months ago and "it carries on going down," Nightingale said. "We are probably going into negative territory around spring of next year; it is not for certain, but that is the most likely scenario. I would say the recession is 65 percent, 75 percent certain.”
The economist warned that should recession kick in, the global economy might be too weak to generate any GDP growth for years, or even decades.
“When the downturn ends, and when the upturn begins, will it be powerful enough to take us into some sort of growth again? Or are we going to find ourselves in a protracted depression-type scenario?" he wondered.
“Seven years would be a very short depression; depressions last a lot longer than that. I would be extremely pleased if it were to only last seven years. In Japan’s case, it lasted 20 years,” he said.
Nightingale added that the US economy has “some big pluses”, but was uncertain it was strong enough to steer the world out of a recession.
“America is very competitive at the moment, and she has a lot of advantages in finance, agriculture and many other areas. There are some big pluses in the American situation, and they are causing some growth. Whether they are going to be big enough to keep the thing going, and to bail out the rest of the world, is another issue,” he said.
But Nightingale said that Europe is in, “absolutely desperate trouble”. He warned that BRIC nations China and India might be heading in a “somewhat similar way”.
The strategist also raised concerns about the German 'strong man of Europe', saying its industrial production figures would plummet with Japan’s recovery from the tsunami.
“Germany is the major beneficiary of the Japanese tsunami, and as the Japanese come back on stream and production increases again, they will take their markets back from the Germans," Nightingale said.
"Watch out very carefully for industrial production numbers falling quite significantly, perhaps from autumn of this year through to spring of next year,” he added.
http://video.cnbc.com/gallery/?video=3000041807
Global Recession Likely, Depression Possible: Economist
Tuesday, 30 Aug 2011 | 8:11 AM ET
Venezuela's state oil company PDVSA has been tasked by President Hugo Chavez in the decade since he came to power with building affordable housing, paving country roads, creating and running farms, and importing, distributing and selling food, amongst other things. On Friday, Chavez added another task: gold mining.
By Carlos Camacho
Latin American Herald Tribune
CARACAS -- In President Hugo Chavez’s Venezuela, Petroleos de Venezuela (PDVSA), the national oil company, has become the "go-to problem-solver" for all manner of troubles.
So, when the government nationalized the country’s gold industry this week, Chavez just added a new task to PDVSA’s “to do” list: gold mining. What used to be a “mere” oil company has been tasked in recent years with building affordable housing, paving country roads, creating and running farms, and importing, distributing and selling food, amongst other things. As of today, PDVSA will now hold 40% of the venture to develop the country's gold mines, including Las Cristinas and Las Brisas. Corporaction Venezolana de Guayana (CVG), the state owned heavy industry company, will hold the other 60%.
"What they are creating is a super-state. No longer is PDVSA a state within a state, but now it is becoming something above the state,” says Rafael Quiros, a professor at Central University specializing in oil economy and author of the upcoming “Marchas y Contramarchas del Petróleo en Venezuela: 1989-2001”, a book that analyzes the last few years in Venezuela’s oil policy.
Professor Quiros -- widely considered pro-Chavez in the local political divide -- is very critical of giving PDVSA tasks other than “production, refining, transportation and exporting” of oil.
“With this latest move, what the government is doing is deepening the mistake of giving PDVSA tasks and responsibilities for which it was not created."
PDVSA, Quiros says, should go back to oil, exclusively, as soon as possible.
The government of Hugo Chavez either has blind faith on the company headed by Rafael Ramirez (who is also Minister of Energy and Oil, Vice President for Territorial Development, and also National Director at Chavez’s PSUV party) or has no one else to turn to.
However, PDVSA's success rate has been less than stellar. Once thought to be one of the most professional of world's state-owned oil companies, the mission over-reach is proving to be a bit of a disaster. In 2008, PDVSA purchased over one million tons of food of which an internal audit found that only 266,000 tons ever got to the country. The cost of the one million tons of food was $2.2 billion for the period covered by the audit, implying over US$1.5 billion "disappeared."
The leaked internal PDVSA audit also found that of the food that did arrive, only 54% was actually passed on to PDVSA's distribution network, PDVAL, with the remainder found still in storage. The report concluded that “the effective distribution of food was less than 14% of the total purchased and paid for, incurred in many cases with elevated costs of acquisition and shipping and despite this, they were not managed adequately nor distributed in efficient fashion to the Venezuelan population.”In 2010, PDVSA let 130,000 tons of imported foodstuffs rot at several major Venezuelan ports, enough to feed the half the country for a month. Three PDVSA officials were arrested and demoted. Then Thursday of this week, Opposition Deputy Neidy Rosal announced that he had found a "graveyard" for more rotten food being guarded by the army, where $2 million had been spent trying to bury another 159,000 tons of rotten food with heavy machinery.
PDVSA is also being heavily criticized from abroad as well, as expropriated former international partners have filed suits against the company and Venezuela before the World Court's International Center for the Settlement of Investment Disputes (ICSID). 18 suits are currently pending by foreign oil and mining countries that Caracas economic consultants Veneconomy estimate "could cost Venezuela between $20 and $30 billion."
Indeed, one of the suits is over the Las Cristinas mine today given to PDVSA -- which may hold 27 million ounces of gold -- after Chavez took it away from Canadian gold miner Crystallex. Crystallex is now seeking $3.8 billion in damages before ICSID.
And while PDVSA's payroll has doubled in the last 5 years -- from 47,433 to 99,867 -- oil production has been declining -- from 3.5 million barrels per day (bpd) in 1998 to 2.3 million bpd in 2011. While the Venezuela government disputes this production figure and says production is around 2.9 million bpd, market watchers including OPEC and the International Energy Agency gauge Venezuela's production at 2.3 million.
After a substantial upward revision by PDVSA, OPEC and the US Geological Survey (USGS) earlier this year, Venezuela now has the largest oil reserves in the world at 296 billion barrels, so Quiros’ call of just getting busy with that makes economic sense -- especially since PDVSA is responsible for extracting the oil that provides 95% of the country’s hard-currency needs.
RT: [eksit101] Is the #ENDTHEFED victories the October surprise? Just all seems fishy. #NWO #RESTORETHEREPUBLIC http://t.co/UXpSahotsE f...
— #New World Order (@nwohashtag) October 1, 2013
Saturday, August 27, 2011 |
Borderland Beat Reporter
Ovemex
Rolling Stone Magazine
On a warm morning in May a few years ago, Edgar Valdez, a drug lord who goes by the nickname La Barbie, woke up in one of the houses he owned in the resort city of Acapulco. In the 1950s, this beautiful beach town was the premier haunt of American celebrities: Frank Sinatra used to prowl the hotel lounges, Elizabeth Taylor had her third of eight weddings here, and John F. Kennedy honeymooned on the coast with Jacqueline. The glamour started to fade in the 1980s, but the city remained a popular vacation destination until a few years ago, when the Mexican cartels transformed Acapulco from a seaside paradise into one of the most violent flash points of the drug war. As chief enforcer for the town's most powerful cartel, Barbie drove the celebrities away for good and made tourists nervous about straying too far into Acapulco when their cruise ships pulled into port. He felt bad about it, a little, but that is the way of the world, he thought – eat or be eaten.
Barbie has olive skin, but his nickname comes from his good looks and green eyes. He was known for his happy-go-lucky personality, though he could turn terrifying and bloodthirsty in an instant. At 31, he still had the strong, raw body of the linebacker he had been in high school: five feet 10, 210 pounds. Barbie kept a glass case at home filled with 60 Rolexes and diamond-studded Audemars Piguets, but unlike most narcos, he didn't grow a beard or wear flashy gold jewelry. He preferred to dress like a sophisticated South American on holiday, favoring polo jerseys with an emblem of a horseman and a stick, the kind that real Argentine jockeys wear. In fact, the myth of Barbie looms so large in Mexico that his addiction to the shirts started what's known as the Narco Polo trend, with working-class Mexicans clamoring to buy knockoff versions in street stalls. "These shirts like Barbie's have become the fashion," Mario López, the governor of the Mexican state of Sinaloa, told reporters in June. "Many young people want to emulate men like him as idols."
But his fashion sensibility wasn't the only thing that distinguished Barbie from other Mexican drug lords: He was also a gringo, a middle-class suburban jock who was born and raised in Texas. He is the only U.S. citizen known to have risen to the top of a Mexican cartel, and the only American on the State Department's list of targeted drug lords. (The U.S. government offered $2 million for information that would lead to his arrest.) For years, as drugs flowed into Acapulco from Colombia, Barbie controlled the main distribution routes out of the city, moving as much as two tons of coke – that's 2 million grams – into the U.S. every month. Most of the drugs went to Memphis and Atlanta, where Barbie is believed to have been the main supplier for several violent networks, including one run by the half brother of DJ Paul from Three 6 Mafia. Barbie cleared up to $130 million a year moving drugs in the States, but with typical boldness he made little effort to launder the money. Instead, he simply loaded the cash onto flatbed trailers and trucked it across the Mexican border.
In the lawless world of the cartels, that kind of money made Barbie a prime target. On this morning in Acapulco, he decided to eliminate the most immediate threat he faced. One of the policemen he kept on his payroll had informed him that four hit men from the Zetas – one of the most violent cartels, led by elite, American-trained soldiers who defected from the Mexican army – had been sent to Acapulco to kill him. So Barbie dispatched some of his own guys to ambush the hit men. When one of the assassins stopped in the town plaza to buy a phone card to call his sister, Barbie's men punched him in the gut and hustled him into a waiting SUV. To their surprise, however, the hit man had brought along his wife and two-year-old stepdaughter, figuring he might as well enjoy a family vacation while he was waiting to kill Barbie. Caught off guard, Barbie's men hustled them into another SUV, covering their faces with towels so they couldn't see.
The hit man and his family were taken to a house surrounded by an electric fence on the outskirts of Acapulco. According to testimony, Barbie's would-be assassin was then escorted to a bedroom upstairs, where he and his three Zeta accomplices were tied up and ordered to sit on top of a bunch of black garbage bags, which had been taped together to create a large tarp. Barbie climbed the stairs in the afternoon, carrying a video camera and a pistol tucked in his belt.
With the camera on, he began interrogating the men, asking them where they came from and what kind of work they did for the Zetas. "I have the contacts in the army to find out about the patrols," one confessed. "I am a recruiter for the Zetas," said another. "I worked as a 'hawk,'" said the third, adding that after he had kidnapped someone, his boss would tell him whether "they were going to take him to el guiso or not."
"What is el guiso?" asked Barbie.
"It's when they grab someone, they get information about moving drugs or money, they get what they want, and then, after torturing him, they execute him," the hit man said. "They take him to a ranch or one of those places, they shoot him in the head, they throw him in a can, and they burn him with different fuels like diesel and gasoline."
The words came spilling forth. As Barbie questioned them, the men told detailed stories about kidnapping rivals, killing reporters, burying people's daughters. They must have thought they were going to get some concessions for divulging so many secrets. But Barbie had other plans. He raised his gun. "And you, buddy?" he asked the fourth hit man.
The man never got a chance to answer. Suddenly, a gun entered the frame and blew the guy's head off.
The hit man's wife and stepdaughter were kept in the house overnight. The next morning, Barbie's men, whom he taught to be merciful to women, gave the little girl a bowl of cereal with a banana and let her swim in the pool out back. Later, they sent her away with her mother, giving them 1,000 pesos for bus fare. Before they left, one of Barbie's men told the wife, "Your husband said to tell you that he loves you."
Barbie believed in vengeance, and in taking care of his enemies. Over his 15 years in the drug trade, he had managed to alienate the leaders of almost every major cartel in Mexico: the Zetas, the Gulf cartel, even the Sinaloa and Beltrán-Leyva cartels he worked for. "Barbie had enemies galore," says George Grayson, a Mexico scholar at the College of William & Mary and the author of Mexico: Narco-Violence and a Failed State. "He could have set the Guinness World Record for people who wanted to kill him." Yet Barbie remained chillingly detached, unable to see the connection between his personal savagery and the way his own family and friends came to fear him. "Even with all the bad things he's done, Barbie always thought the world looked on him kindly," says a law-enforcement source familiar with Barbie. "He's just one of those blithe-living guys who thinks his life is charmed."
Like many Texans, Barbie grew up right across the border from Mexico, in the city of Laredo. The place feels like something from a Mexican postcard, with cobblestone plazas and picturesque waterfalls – except for the massive, multilane bridge to Mexico that cuts straight through town. Until the drug war, everyone in Laredo saw the two sides of the border as one; many families, after all, had blood ties in both Mexico and the States. As a kid, Barbie loved to visit Nuevo Laredo, a border town bustling with donkeys, food carts, girls in little embroidered dresses, shoeshine boys and the smell of roasting corn. It was like stepping into another world, and all you had to do was cross the bridge.
In high school, Barbie was in the popular crowd, horsing around in the breezeways outside of class and waging egg wars after school. On weekends, he went to keggers on ranches, played elaborate scavenger games and hung out with his steady sweetheart, Virginia Perez, a bubbly, blue-eyed blonde. He grew up in a middle-class development on the outskirts of Laredo, a kind of no man's land where Burger Kings didn't begin to sprout up until the Nineties. Even the people of Laredo considered it "Indian territory," an area rife with dope and illegal immigrants. Barbie's parents raised him and his five siblings in a tidy, orange-trimmed home with palm trees in the front. "They're regular Ozzie and Harriets," says Jose Baeza, a spokesman for the Laredo police department. "They're business owners, PTA, morning-jog people."
At school, Barbie was an inside linebacker on the football team in a year when the United Longhorns won the district championship. He was a solid player, getting a sack or two a game, but he was never a star. His nickname came from his coach. "We called him Ken Doll, mostly because his hair was blond and kinky like the doll's," says a friend from that time. "Then the coach upped the ante to Barbie, and it took off like wildfire." Barbie took the teasing in stride. "He was a joker with a good sense of humor, walking around in his jockstrap and snapping his towel," recalls a teammate. When he got an infection his senior year and had to be circumcised, he showed it off in the locker room, telling everyone, "Hey, look, guys, I got my turkey neck cut off."
Barbie never sold drugs in high school, according to friends, but he and his buddies engaged in a common teenage exploit in Laredo: roping cows in the middle of the night, loading them onto trailers and selling them to the highest bidder. Mostly, he liked hitting the bars across the border after a game on Friday night, and driving his Chevy with its custom red-and-gold paint job, especially on a desolate stretch of road where there was nothing but desert in the distance. One night, two months before graduation, he collided with another car. The other driver, a middle-school guidance counselor, died instantly. Barbie faced trial for criminally negligent homicide but was cleared of all charges.
"I don't know how it affected him," recalls a friend. "The weird thing is that right away, Edgar came back to football practice, and he seemed exactly like the same guy, just horsing around."
When Barbie graduated from high school soon after, his dad pushed him to go to college. But Barbie, who was a terrible student, decided to pursue a more lucrative career path – one that didn't involve hitting the books. Before long he was hanging out at border nightclubs, being flashy with his cash. "One night at Sombrero's bar in Nuevo Laredo, the bartender told me that el güero" – a white guy – "wanted to send over some bottles of alcohol," says a friend from high school. "Barbie never even came over to talk to us, but when we left we saw him outside, in a black Jeep Cherokee. He stopped to say hi, and we saw that he had bulletproof windows. We just thought he was rich."
By age 20, Barbie was deeply involved in drug dealing. Laredo is the biggest commercial land crossing on the Mexican border, and customs agents can check only a small fraction of the 8,000 trucks that pass through the town every day. Barbie knew that if he could smuggle pot from Mexico in his truck, the resale price would instantly skyrocket. He started out bringing in small quantities, just to pocket a little extra spending money. But once he realized how much there was to be made, he and a friend began smuggling as much as 150 pounds of pot over the border at a time. Eventually, they expanded into cocaine, making their initial sales by FedExing the drugs to midlevel traffickers in Louisville and Memphis.
The year Barbie turned 21, his family's fortunes took an unexpected turn when one of his sisters won $1 million in the Texas Lottery. The Valdezes began making plans to move to the ritzy part of town, and Barbie married Virginia, his high school girlfriend. But the sudden influx of cash did nothing to stem his drug dealing. He had a good eye for deals – and, even more important, for when to walk away.
"I met him at a Popeye's in town to do a deal for 300 pounds of marijuana," recalls Martin Cuellar, a sheriff in Laredo, who was working undercover at the time. "He seemed ready to work with me, but then he stopped answering his phone. I guess he smelled something." Even when those close to him got busted, Barbie always seemed to elude jail. At one point, the cops captured a trafficker in Mexico who was supplying Barbie with cocaine. When they dug up the guy's backyard, they found the bodies of a missing Texas couple.
Finally, in 1998, Barbie's luck ran out. Police succeeded in planting an informant among Barbie's men, and he and a dozen members of his crew were indicted in Laredo for shipping at least 700 pounds of marijuana to San Antonio and 133 pounds to St. Louis. Terrified, Barbie pursued the time-honored path for criminals on the lam: He fled across the border into Mexico. Instead of putting an end to his career as a drug dealer, the indictment inadvertently paved the way for his rise to the top of the Mexican cartels.
For a 25-year-old drug dealer on the run in the Nineties, Nuevo Laredo was an ideal spot to do business. The violence among the Mexican cartels had not yet exploded, and there were pockets along the border where the drug trade remained largely free from their influence. Barbie was one of about 20 independent traffickers who worked under the eye of Dionisio Garcia, an established trafficker who sold them coke and required them to pay $60,000 a month as a piso, or tax, which was used to pay off corrupt border agents.
From the start, Barbie liked operating on his own. Over the next decade, he learned how to gather intelligence on the cops and other dealers through a network of "falcons" – a league of spies composed of cab drivers, waiters and street vendors. Unlike his flashier rivals, he liked to keep a low profile, driving a Chevy Malibu and a Nissan Sentra, though he demanded that the cars be washed regularly – he hated any hint of sloppiness. Barbie's close associates didn't look like average narcos: He insisted they be polite, quiet and clean, never come to work drunk or high, and never hurt women or children.
But the calm along the border didn't last. Within a few years, the big cartels started warring for regional control, and Nuevo Laredo, one of the jewels of the trafficking trade, suddenly became too valuable to remain independent. By 2002, the Zetas began to move into the area in allegiance with the Gulf cartel, which was run by Osiel Cardenas, better known by his nickname, the Friend Killer. Cardenas' first order of business was to get rid of Garcia, who was left to die a grisly death in his red underwear. Then Cardenas took over and immediately jacked up the price of cocaine. "From now on," he told the independent suppliers, "you're going to buy coke from me, or you're going to pay me the tax."
Barbie was angry about the killing of Garcia, but all he could do was bide his time. It didn't take long for Cardenas to run afoul of the law: Within a year, he was captured by the Mexican army. With the Friend Killer gone, Barbie, then 29, staged a brazen tax revolt: He decided to stop paying the piso imposed by the cartels. "Barbie stiffed the Gulf cartel on the tax for a ton of cocaine that they had fronted him," says a law-enforcement source. "They didn't take that too kindly. It was a big moment, the one that started the cycle of violence in Laredo for the next few years."
The Zeta-Gulf alliance immediately put a price on Barbie's head, and he was forced to turn to a rival cartel for protection. Garcia had been on friendly terms with the Beltrán-Leyva cartel, which was run by four brothers – Arturo, Alfredo, Héctor and Carlos – all with the gaudy narco look that Barbie eschewed. They operated mostly in western Mexico, but they were planning to seize control of the Laredo border after aligning themselves with JoaquÃn Guzmán, the head of the Sinaloa cartel. El Chapo, as he is known, is the world's most infamous drug trafficker, the one who escaped from a maximum-security prison in a laundry cart in 2001, dug an air-conditioned tunnel between Tijuana and San Diego, and made an appearance on the Forbes list of the World's Most Powerful People. These days, he quietly directs the Sinaloa cartel from a mountainous part of Mexico where a single road goes in and out, his outer security posted hours away from his door.
When Barbie heard that Chapo had ordered the Beltráns to seize the Laredo crossing, he saw the opening he had been waiting for. He rushed to Monterrey, an industrial city a few hours south of Laredo, and made his pitch to Arturo, the fat, eccentric, cocaine-addicted head of the Beltrán clan. Arturo quickly saw the value of an American kid who knew both sides of the border, and he promised Barbie protection if he could help them win the crossing. For Barbie, the war with the Zetas was personal – he wanted to see them go down not only for blowing up his spot but for killing one of his men, a young trafficker he called his "godbrother" and considered family. Swearing revenge on the Zetas, he threw himself into directing the Beltrán forces, hoping to massacre as many of his rivals as possible.
In 2005, more than 150 murders occurred in Nuevo Laredo, a city of 350,000, and almost all of them were connected to the war between the Sinaloa and the Beltráns on one side, and the Gulf and the Zetas on the other. "Barbie would rent hotel rooms for 10 or 15 people and send them out at night to go look for Gulf-cartel members," says a law-enforcement source. "He knew that the municipal police were helping the Gulf, so he targeted them for a time, too." Barbie and Arturo even flew to Mexico City to present a $1.5 million bribe to an intelligence commander in return for protection in Nuevo Laredo. Two months later, the officer sent to protect Barbie was shot dead by the Gulf cartel. Brutal acts were committed on both sides: Barbie killed a brother of the Zetas' enforcer, who in turn murdered one of Barbie's allies and raped the man's granddaughter.
In the end, the Zetas proved too strong for Barbie. With their military expertise and connections, they were able to up the ante by detonating car bombs, and Barbie suffered a further blow when U.S. agents stopped one of his tractor-trailers on the Laredo border, seizing 949 kilos of cocaine. He had also reached a low point in his personal life. He separated from his wife, Virginia, and sent his two sons to be raised by his parents in Texas. To make matters worse, Virginia's mother was arrested while working in the drug trade when police stopped her at a private airport in Gainesville, Georgia, with more than $1 million in cash in her Cessna. The Sinaloa cartel, she told the cops, gave her $3,000 for every $100,000 in drugs she brought into the U.S.
Even though he had lost the Laredo crossing, Barbie had become extremely close to Arturo: "Arturo trusted him like a brother," said a law-enforcement source. The Beltráns decided to give Barbie a job as the manager of their enforcement wing, known as the Patrols. Barbie gave his men comical nicknames, like the Monster, the Korean and the Clown. He also moved to the Beltrán stronghold of Acapulco, where business was good and life would be a little easier. In the resort city, Barbie had time to enjoy himself. He drank Moët rosé and played a lot of tennis, Xbox and Wii, at one point giving an associate $3,000 and telling him to buy as many video games as possible.
For safety, Barbie moved around constantly between his homes on the beach, in the ranch country and in the tony Mexico City suburb of Santa Fe, where he had several apartments in different luxury complexes. He liked to call them "the offices," and he even soundproofed a "torture room" in one of them. "One time, Barbie had a guy in there who had been screaming for two days," recalls one of his associates. "Then one of Barbie's guys who was in charge of security came in with a chain saw. Barbie told us, 'Something is going to go down in there, guys. Plug your ears. Don't listen.'"
Barbie proved to have a flair for the dramatic. In a major innovation in the drug war, the videotaped murder of the Zeta hit men who had tried to kill him was mailed to the media, and eventually made its way to The Dallas Morning News, a paper read by many in Barbie's hometown of Laredo.
It was the beginning of a whole new style of publicity that would soon be adopted by all of the cartels: offing your enemies and posting the evidence online as a warning. In Barbie's warped mind, he assumed everyone would applaud his brutal actions – after all, Acapulco was his turf, and he was just trying to protect it. To bolster his popularity, Barbie placed a full-page ad in a major Mexican newspaper, blaming the Zetas for the cycle of violence. In an open letter, he implored the government to "end the great cancer of narco-kidnappers, and murderers of women and children." It was a moving note, full of emotion. "I may not be a white dove," he wrote, "but I am sure of what I have done and what I am responsible for."
The Mexican press ate Barbie up, eagerly chronicling his exploits. He bought flashy discos, closing them down a few nights a week to party in them himself. He made frequent appearances at after-hours clubs called "los afters," where he took Ecstasy. He reportedly dated a famous soap-opera star, and paid $100,000 to have a film made of his life, though he pulled out once he realized the script would implicate his friends and family.
In 2006, when Barbie turned 33, he staged his "wedding" to Priscilla Montemayor, the 17-year-old daughter of one of his partners known as El Charro. Priscilla was a beautiful Texas girl with an easy smile, and she didn't mind the narco lifestyle: Not only was her father in the life, but one of her great-uncles had been killed by the Zetas during the border war. Barbie refused to divorce Virginia, fearing she might win custody of their kids. He was older now, and family was important to him. He also announced that he didn't want to be called La Barbie anymore; rival narcos were spreading rumors about all the attention he paid to his clothes and personal appearance, whispering that he was a homosexual. From now on, he declared, he preferred to go by a more masculine-sounding nickname: El Señor, or Sir.
Things seemed to be looking up for Barbie. Business was booming, he had the protection of one of Mexico's most powerful cartels, and he felt secure in Acapulco, where the Beltrán brothers spent millions bribing cops and government officials. Then one morning in January 2008, Barbie and the Beltráns received a shock. Alfredo, "The Red Ant," the tall, handsome Beltrán brother who managed a pair of assassin squads called the Blondies and the Baldies, was ambushed and arrested by police at his apartment in Culiacán. He was led away in handcuffs, and the cops confiscated nearly $1 million in cash.
Barbie and the Beltrán brothers were enraged. They knew there was only one person with the motive and the means to take down Alfredo: Chapo, their longtime ally in the Sinaloa cartel. Chapo was reportedly displeased with the growing power the Beltráns and Barbie held over Acapulco. "Chapo doesn't run a very hierarchical cartel – his allies are more like a loose federation of warlords, like in Afghanistan," says Scott Stewart, an analyst with the intelligence firm Stratfor. "He isn't always looking over everyone's shoulder, but whenever someone starts to get too big for his britches and pose some sort of leadership challenge, that person suddenly seems to start having problems."
Chapo's perceived move against the Beltráns sparked an all-out war. A few months later, Chapo's 22-year-old son was killed by multiple gunmen on the same day that assassins ambushed Mexico's new federal police chief. Soon, corpses were turning up all along the Pacific coast. President Felipe Calderón sent in thousands of troops, but more than 580 people, including 64 policemen, died in the dispute.
If the Beltráns had a strong leader, they could probably have withstood Chapo's attack. But Arturo, the head of the cartel, was becoming more and more erratic, partying at all hours and reportedly even dabbling in cannibalism. "I was friends with Arturo," Barbie would later report. "But when he was on drugs, he wanted to kill me. And when he wasn't, everything was cool." On the verge of a paranoid break, Arturo retreated to his house in Cuernavaca, where he sat by the pool, lazily flicking $100 bills at girls he hired to entertain him. One night in December 2009, he hired 24 strippers and a Grammy-winning norteño band to come over for a party. Barbie was there too, keeping an eye on the two dozen or so bodyguards with gold-and-diamond-studded pistols who roamed the property. But just as the party was getting started, Mexican special forces suddenly stormed the house. As chaos erupted and the girls scrambled to hide from the gunfire, Arturo fled with his most trusted men to a nearby condo.
A few days later, just before Christmas, 200 government commandos descended on the condo in armored trucks and helicopters. Armed with only half a dozen men and a few grenades, Arturo barricaded himself inside, cowering next to his statue of Guadalupe. Grabbing the phone, he called Barbie. There was no way he was going to surrender, he declared. He begged his friend to send more men to back him up.
This time, though, Barbie didn't obey his boss. In fact, he didn't seem particularly interested in helping his friend and patron. He told Arturo the situation was hopeless, and urged him to turn himself in. "Why fight?" he said. "You could die."
"No way, no way," Arturo said. He was going to shoot his way out of the condo, he told Barbie, or die trying.
Within hours, Arturo's body was riddled with bullets, his face blown to smithereens. According to one law-enforcement source, the commandos had no intention of taking him alive, and he was killed in the chaos of the raid. U.S. officials considered it one of the biggest victories to date in the drug war. "Arturo wasn't a big fish," boasted Anthony Placido, the chief of intelligence for the Drug Enforcement Administration. "He was a whale."
The Beltráns wasted no time in retaliating. The night of the funeral for a commando who had been killed in the raid, assassins went to the home of the soldier's family and machine-gunned his mother, sister, aunt and brother in their sleep, leaving behind nearly three dozen spent bullet casings. The Beltráns also began to wonder if someone close to them had played a role in their brother's death. "Arturo Beltrán was very secure in that area, and had total control," says Francisco Gomez, a crime reporter with El Universal newspaper in Mexico City. "Arturo couldn't have gone down unless somebody close betrayed him."
Héctor, the Beltrán brother who took over the cartel, thought he knew who that was. Someone close to Arturo, who stood to advance from his death. Someone with no blood ties to the family. Someone who was not even Mexican. "Héctor immediately blamed Barbie," says a law-enforcement source. "He condemned Barbie, and put out the word that he wanted him killed."
Héctor decided to strengthen his ties to the Zetas. For protection, Barbie allied himself with a chiseled trafficker named the Indian, a powerful lieutenant in the Beltrán cartel. He also turned to El Charro, the father of his new wife, Priscilla, who reluctantly agreed to support his son-in-law. Barbie dreamed of fighting off the Beltráns and running his own independent operation, just as he had as a young buck back in Nuevo Laredo. He was done with the Mexican cartels, he said – too much of a headache. In 2010, he started his own outfit, the Independent Acapulco Cartel. The former linebacker from Texas was now a full-fledged Mexican drug lord.
But taking on the Beltráns meant fighting the Mexican army, whose support often went to the highest bidder. Shortly after Barbie declared his independence, the authorities raided his high-rise complex in Acapulco. Alerted by his outer security, Barbie escaped downstairs as the soldiers burst into the apartment. He fled on a motorcycle wearing a backpack full of grenades. "Look at me!" he yelled. "I'm Rambo!"
A former associate shakes his head at the story. "He was totally amped," Barbie's man recalls. "That was when we realized our boss was out of his goddamn mind."
As Barbie struggled to maintain control of Acapulco, the war with the Beltráns escalated. Decapitated bodies were hung from bridges. Thirteen people, including five police officers, were killed on a holiday weekend. An eight-year-old was gunned down during a shootout on Acapulco's main tourist drag. Hundreds of people were killed as Barbie tried to carve out his own turf. Sometimes the bloodshed was personal: When four bodies, one of them headless, were dumped on a sidewalk, a note attached to the corpses mocked Barbie for his fashion sense and fussy grooming. "Here are your homosexuals," it read. "This will happen to all the traitors and those who support you."
Just as Barbie had once failed to seize control of Nuevo Laredo from the Zetas, he now found himself losing ground against the Beltráns. He suffered a major setback when the Indian was captured by the Mexican police. His men were always making boneheaded mistakes – including one that threatened to unravel everything Barbie had worked to build.
For years, one of Barbie's best "customers" was Craig Petties, a violent cocaine dealer from Memphis accused of murdering six police informants. The half brother of DJ Paul, founder of the rap group Three 6 Mafia, Petties had fled the U.S. after he was caught with 600 pounds of marijuana in his home. In Mexico, he hung out with Barbie until he was arrested by the police for a minor infraction.
According to a source close to the case, that was when one of Barbie's assassins, Carlos Guajardo, waltzed into the prison to ask how much money the jailers wanted to spring Petties. Unfortunately for Guajardo, he happened to ask the question of an honest Mexican jailer, who promptly arrested him. When the cops ran his name, they learned that Guajardo went by the nickname the Blackboard, because he had a huge tattoo of Jesus on his back, underlined with the phrase ONLY GOD CAN JUDGE ME. They also found the U.S. warrant for Petties, which they had missed the first time. Both Petties and Guajardo were shipped back to America to stand trial.
With his allies dwindling, Barbie was once again on the run. He moved back and forth between Acapulco and Cuernavaca and Mexico City, rarely staying anywhere for more than a night, and started looking for a new country that would take him in. He wasn't comfortable as a hunted man – he couldn't enjoy his wealth, or party at nightclubs, or go to fancy restaurants. One day, desperate to go out and do something, anything, he told one of his men to put on a baseball cap and drive him to the main tourist strip in Acapulco. They bought ice cream cones and walked down the street with its T-shirt stands and tourist shops, the sun warming their faces. After a half-hour, though, Barbie started to get nervous. There, was that person looking at him, over by the street corner? Was that a sniper, there on that roof? Barbie retreated to his car, more sullen than ever.
Not long afterward, the federales showed up at one of Barbie's homes near Acapulco. He wasn't there, but they roughed up Priscilla and her mother, which scared him badly. He thought about turning himself in, but couldn't bring himself to do it. Then, a few weeks later, one of Barbie's assistants was pulled over by the police on the way to a carwash in Mexico City. Two officers jumped out of their black truck, guns drawn. "Freeze, motherfucker!" they screamed. They demanded to know where Barbie was. "Where is that son of a bitch?" one officer said. "Don't bullshit, or I'll cut off your balls and feed them to you." The cops informed the man that they had apprehended his family on their way to the vet with a sick dog. Terrified, the assistant caved. Barbie was at a ranch house on a secluded lot, he told them. Police descended on the hide-out, and Barbie was seized while he was trying to flee through a side door.
The police paraded Barbie around the station so the press could get plenty of photos, which were soon splashed all over the media. President Calderón tweeted the news, reveling in the capture: Barbie was one more name he could cross off his list of the 37 "most wanted" drug lords. For the past few years, Calderón has focused on big-name drug arrests like Barbie's, but it's unclear whether the strategy is working. To date, more than 45,000 people have been killed in Mexico's drug war, and the death toll continues to rise.
At first, Barbie was confined to a temporary holding cell in Mexico City, where his lawyer was allowed to bring him moisturizer, Crocs and fresh polo shirts. But these days, he is being held in one of the most violent prisons in Mexico, charged with murder, money laundering and trafficking illegal narcotics. He is locked in solitary confinement almost 24 hours a day, a video camera monitoring his every move. He isn't allowed visitors, nor contact with other prisoners. Once or twice a week, officers wearing ski masks and toting machine guns remove him for a shower. He gets a phone call every 10 days.
The Mexican government agreed in November to extradite Barbie to the U.S., where he faces charges in Atlanta, New Orleans and Laredo. So far, though, there's no sign he'll be handed over to the Americans anytime soon. "According to the Mexicans, he was supposed to be back in the U.S. in 60 days," says Barbie's attorney, Kent Schaffer. "But since they've consistently lied, that could be anywhere from 120 days to three years – if they don't kill him." A U.S. investigator reports that Barbie has been "severely beaten" while in custody.
Barbie was shocked to discover that his own country didn't want to save him. In his twisted self-image, he's still an all-American good guy. According to several law-enforcement sources familiar with the case, Barbie has secretly been talking to the DEA for at least two years. He was the one, it turns out, who betrayed Arturo Beltrán, telling the cops where they could find the drug kingpin. Barbie apparently wanted Arturo gone so he could take over the Beltrán cartel – but he was also trying to cut a deal with the DEA, just in case things didn't work out and he was forced to turn himself in. "He wanted to use his information as a bargaining chip," says a law-enforcement source.
Once or twice a year, Barbie would call the DEA, or his older brother, Abel, a former probation officer in Texas, would call on his behalf. In return for surrendering, Barbie wanted immunity and permission to bring $5 million into the U.S. "The DEA made overtures to Edgar, and they told him they could do all sorts of things," says Schaffer. "But they never cleared it with the Justice Department, so they didn't have the authority to do it."
Now, after years of stalling, Barbie has discovered it's too late to cut a deal. All his information is old, and much of his network has been captured or killed – even Priscilla's dad, who confessed to ordering the murders of 20 tourists last year, because he thought they were members of a rival cartel. Wherever Barbie winds up facing trial, no one expects him to receive less than life in prison. In Memphis, his old customer Petties may be willing to turn evidence against him, to avoid the death penalty for murdering four rivals.
In Laredo, Barbie's family is hopeful that he will end up in a prison near them. But since he was arrested, they have reportedly started to squabble among themselves. Barbie's parents now live in a mansion in a lovely, upscale development of Laredo, all curving streets and mowed lawns. Several Porsches and Lexuses are parked in the driveway. It's a far cry from the tiny home where they raised their son Edgar, a fun-loving kid who liked football and beer and driving too fast. His father, a lithe man with sparkling green eyes, is careful to distance himself from the boy who became La Barbie. "I'm not the judge, or the confessor," he says, a smile playing around his lips. "At this point, this is between my son and God."
Before he was captured, Barbie did have a bit of good news: He was going to have his first baby girl, his second child with Priscilla. His daughter was born in a hospital in Laredo. He couldn't be there; it was simply too dangerous for him to come to Texas. But he was glad it happened that way. He wanted her to be an American citizen.
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This is how the USG reset its debt obligations after the crash of 1929. Beware of something like this happening in 2012 and beyond.
The Gold Confiscation Of April 5, 1933
From: President of the United States Franklin Delano Roosevelt
To: The United States Congress
Dated: 5 April, 1933
Presidential Executive Order 6102
Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled
An Act to provide relief in the existing national emergency in banking, and for other purposes~',
in which amendatory Act Congress declared that a serious emergency exists,
I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order:
Section 1. For the purpose of this regulation, the term 'hoarding" means the withdrawal and withholding of gold coin, gold bullion, and gold certificates from the recognized and customary channels of trade. The term "person" means any individual, partnership, association or corporation.
Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:
(a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.
(b) Gold coin and gold certificates in an amount not exceeding in the aggregate $100.00 belonging to any one person; and gold coins having recognized special value to collectors of rare and unusual coins.
(c) Gold coin and bullion earmarked or held in trust for a recognized foreign government or foreign central bank or the Bank for International Settlements.
(d) Gold coin and bullion licensed for the other proper transactions (not involving hoarding) including gold coin and gold bullion imported for the re-export or held pending action on applications for export license.
Section 3. Until otherwise ordered any person becoming the owner of any gold coin, gold bullion, and gold certificates after April 28, 1933, shall within three days after receipt thereof, deliver the same in the manner prescribed in Section 2; unless such gold coin, gold bullion, and gold certificates are held for any of the purposes specified in paragraphs (a),(b) or (c) of Section 2; or unless such gold coin, gold bullion is held for purposes specified in paragraph (d) of Section 2 and the person holding it is, with respect to such gold coin or bullion, a licensee or applicant for license pending action thereon.
Section 4. Upon receipt of gold coin, gold bullion, or gold certificates delivered to it in accordance with Section 2 or 3, the Federal reserve bank or member bank will pay thereof an equivalent amount of any other form of coin or currency coined or issued under the laws of the Unites States.
Section 5. Member banks shall deliver alt gold coin, gold bullion, and gold certificates owned or received by them (other than as exempted under the provisions of Section 2) to the Federal reserve banks of there respective districts and receive credit or payment thereof.
Section 6. The Secretary of the Treasury, out of the sum made available to the President by Section 501 of the Act of March 9, 1933, will in all proper cases pay the reasonable costs of transportation of gold coin, gold bullion, and gold certificates delivered to a member bank or Federal reserve bank in accordance with Sections 2, 3, or 5 hereof, including the cost of insurance, protection, and such other incidental costs as may be necessary, upon production of satisfactory evidence of such costs. Voucher forms for this purpose may be procured from Federal reserve banks.
Section 7. In cases where the delivery of gold coin, gold bullion, or gold certificates by the owners thereof within the time set forth above will involve extraordinary hardship or difficulty, the Secretary of the Treasury may, in his discretion, extend the time within which such delivery must be made. Applications for such extensions must be made in writing under oath; addressed to the Secretary of the Treasury and filed with a Federal reserve bank. Each applications must state the date to which the extension is desired, the amount and location of the gold coin, gold bullion, and gold certificates in respect of which such application is made and the facts showing extension to be necessary to avoid extraordinary hardship or difficulty.
Section 8. The Secretary of the Treasury is hereby authorized and empowered to issue such further regulations as he may deem necessary to carry the purposes of this order and to issue licenses there under, through such officers or agencies as he may designate, including licenses permitting the Federal reserve banks and member banks of the Federal Reserve System, in return for an equivalent amount of other coin, currency or credit, to deliver, earmark or hold in trust gold coin or bullion to or for persons showing the need for same for any of the purposes specified in paragraphs (a), (c), and (d) of Section 2 of these regulations.
Section 9. Whoever willfully violates any provision of this Executive Order or these regulation or of any rule, regulation or license issued there under may be fined not more than $10,000, or,if a natural person may be imprisoned for not more than ten years or both; and any officer, director, or agent of any corporation who knowingly participates in any such violation may be punished by a like fine, imprisonment, or both.
This order and these regulations may be modified or revoked at any time.
/s/
Franklin D. Roosevelt
President of the United States of America
April 5, 1933
China Swoops In To Claim Lucrative Libyan Infrastructure Deals
Now Beijing seems to be positioning itself for similar deals in Libya.
In a phone call with U.S. Secretary General Ban Ki Moon, Chinese Foreign Minister Yang Jiechi said the U.N. should lead redevelopment in Libya, rather than NATO, according to Reuters. China is "willing to work alongside the United Nations to promote a rapid stabilization in Libya and a swift course towards reconciliation and reconstruction," Yang said in a ministry release.
China's Ministry of Commerce also weighed in: "We hope to play an active role in rebuilding Libya in the future, together with the international community," spokesman Shen Danyang told a news conference in Beijing.
In a U.N.-led reconstruction program, where contracts might go to the highest bidder, China would benefit greatly. China has money to spend, it knows how to work cheap and it has a huge demand for energy.
China is already investing unprecedented funds in Africa. Now check out 20 signs China is cornering the global oil market.
America is selling its national assets to pay for the spoils of war.
America for Sale: An Exclusive Excerpt from Matt Taibbi’s New Book on the Economic Meltdown
Our cash-strapped country is auctioning off its highways, ports and even parking meters, finding eager buyers in the Middle East
by: Matt Taibbi
Matt Taibbi's unsparing and authoritative reporting on the financial crisis has produced a series of memorable Rolling Stone features. He showed us how Goldman Sachs, that "great vampire squid", played a central role in creating not only the housing bubble but four other big speculative booms that filled its coffers while wrecking the American economy. He explained how Wall Street banks cooked up schemes that helped decimate municipal budgets and cost countless jobs, and how Wall Street lobbying led to a financial reform bill that won't prevent another meltdown. Taibbi builds on that eye-opening work in his new book, Griftopia: Bubble Machines, Vampire Squids, and the Long Con That is Breaking America, due out from Spiegel & Grau on November 2. In this exclusive excerpt, he describes how our cash-strapped country is auctioning off its highways, ports and even parking meters at fire sale prices — and finding eager buyers in the unregulated sovereign wealth funds of oil-rich Middle Eastern countries.
In the summer of 2009 I got a call from an acquaintance who worked in the Middle East. He was a young American who worked for something called a sovereign wealth fund, a giant state-owned pile of money that swims around the world in search of things to buy.
Sovereign wealth funds, or SWFs, are huge in the Middle East. Most of the bigger oil-producing states have massive SWFs that act as cash repositories (with holdings often kept in dollars) for the revenues generated by, for instance, state-owned oil companies. Unlike the central banks of most Western countries, whose main function is to accumulate reserves in an attempt to stabilize the domestic currency, most SWFs have a mission to invest aggressively and generate huge long-term returns. Imagine the biggest and most aggressive hedge fund on Wall Street, then imagine that that same fund is fifty or sixty times bigger and outside the reach of the SEC or any other major regulatory authority, and you've got a pretty good idea of what an SWF is.
My buddy was a young guy who'd come up working on the derivatives desk of one of the more dastardly American investment banks. After a few years of that he decided to take a step up morally and flee to the Middle East to go to work advising a bunch of sheiks on how to spend their oil billions.
Aside from the hot weather, it wasn't such a bad gig. But on one of his trips home, we met in a restaurant and he mentioned that the work had gotten a little, well, weird.
"I was in a meeting where a bunch of American investment bankers were trying to sell us the Pennsylvania Turnpike," he said. "They even had a slide show. They were showing these Arabs what a nice highway we had for sale, what the toll booths looked like . . ."
I dropped my fork. "The Pennsylvania Turnpike is for sale?"
He nodded. "Yeah," he said. "We didn't do the deal, though. But, you know, there are some other deals that have gotten done. Or didn't you know about this?"
As it turns out, the Pennsylvania Turnpike deal almost went through, only to be killed by the state legislature, but there were others just like it that did go through, most notably the sale of all the parking meters in Chicago to a consortium that included the Abu Dhabi Investment Authority, from the United Arab Emirates.
There were others: A toll highway in Indiana. The Chicago Skyway. A stretch of highway in Florida. Parking meters in Nashville, Pittsburgh, Los Angeles, and other cities. A port in Virginia. And a whole bevy of Californian public infrastructure projects, all either already leased or set to be leased for fifty or seventy-five years or more in exchange for one-off lump sum payments of a few billion bucks at best, usually just to help patch a hole or two in a single budget year.
America is quite literally for sale, at rock-bottom prices, and the buyers increasingly are the very people who scored big in the oil bubble. Thanks to Goldman Sachs and Morgan Stanley and the other investment banks that artificially jacked up the price of gasoline over the course of the last decade, Americans delivered a lot of their excess cash into the coffers of sovereign wealth funds like the Qatar Investment Authority, the Libyan Investment Authority, Saudi Arabia's SAMA Foreign Holdings, and the UAE's Abu Dhabi Investment Authority.
Here's yet another diabolic cycle for ordinary Americans, engineered by the grifter class. A Pennsylvanian like Robert Lukens sees his business decline thanks to soaring oil prices that have been jacked up by a handful of banks that paid off a few politicians to hand them the right to manipulate the market. Lukens has no say in this; he pays what he has to pay. Some of that money of his goes into the pockets of the banks that disenfranchise him politically, and the rest of it goes increasingly into the pockets of Middle Eastern oil companies. And since he's making less money now, Lukens is paying less in taxes to the state of Pennsylvania, leaving the state in a budget shortfall. Next thing you know, Governor Ed Rendell is traveling to the Middle East, trying to sell the Pennsylvania Turnpike to the same oil states who've been pocketing Bob Lukens's gas dollars. It's an almost frictionless machine for stripping wealth out of the heart of the country, one that perfectly encapsulates where we are as a nation.
When you're trying to sell a highway that was once considered one of your nation's great engineering marvels — 532 miles of hard-built road that required tons of dynamite, wood, and steel and the labor of thousands to bore seven mighty tunnels through the Allegheny Mountains — when you're offering that up to petro-despots just so you can fight off a single-year budget shortfall, just so you can keep the lights on in the state house into the next fiscal year, you've entered a new stage in your societal development.
You know how you used to have a job, and a house, and a car, and a wife and a family, and there was food in the fridge — and now you're six months into a drug habit and you're carrying toasters and TVs out the front door every morning just to raise the cash to make it through that day? That's where we are. While a lot of this book is about how American banks used bubble schemes to strip the last meat off the bones of America's postwar golden years, the cruelest joke is that American banks now don't even have the buying power needed to finish the job of stripping the country completely clean.
For that last stage we have to look overseas, to more cash-rich countries we now literally have to beg to take our national monuments off our hands at huge discounts, just so that our states don't fall one by one in a domino rush of defaults and bankruptcies. In other words, we're being colonized — of course it's happening in a clever way, with very careful paperwork, so we have the option of pretending that it's not actually happening, right up until the bitter end.
Let's go back in time, to the early seventies. It's 1973, and Richard Nixon's White House makes the fateful decision to resupply the Israelis with military equipment during the 1973 Arab-Israeli War.
This pisses off most of the oil-producing Arab states, and as a result, the Organization of the Petroleum Exporting Countries, or OPEC — a cartel that at the time included Saudi Arabia, Kuwait, the UAE, Libya, Iraq, and Iran, among others — decided to make a move.
For the second time in six years, they instituted an embargo of oil to the United States, and eventually to any country that supported Israel. The embargo included not only bans of exports to the targeted countries, but an overall cut in oil production.
The effect of the 1973 oil embargo was dramatic. OPEC effectively quadrupled prices in a very short period of time, from around three dollars a barrel in October 1973 (the beginning of the boycott) to more than twelve dollars by early 1974. The United States was in the middle of its own stock market disaster at the time, caused in part by the dissolution of the Bretton Woods agreement (the core of which was Nixon's decision to abandon the gold standard, an interesting story in its own right). In retrospect we ought to have known we were in trouble earlier that year because on January 7, 1973, then–private economist Alan Greenspan told the New York Times, "It is very rare that you can be as unqualifiedly bullish as you can be now." Four days later, on January 11, the stock market crash of 1973–74 began. Over the course of the next two years or so, the NYSE would lose about 45 percent of its value.
So we're in this bad spot anyway, in the middle of a long period of decline, when on October 6 Egypt and Syria launch an attack on the territories Israel had captured in the 1967 Six-Day War. The attack takes place on the Yom Kippur holiday and the war would become known as the Yom Kippur War.
Six days later, on October 12, Nixon institutes Operation Nickel Grass, a series of airlifts of weapons and other supplies into Israel. This naturally pisses off the Arab nations, which retort with the start of the oil embargo on October 17.
Oil prices skyrocketed, and without making a judgment about who was right or wrong in the Yom Kippur War, it's important to point out that it only took about two months from the start of the embargo for Nixon and Kissinger to go from bluster and escalation to almost-total surrender.
On January 18, 1974, Kissinger negotiated an Israeli withdrawal from parts of the Sinai. By May, Israel agreed to withdraw from the Golan Heights.
This is from the U.S. State Department's own write-up of the episode:
Implementation of the embargo, and the changing nature of oil contracts, set off an upward spiral in oil prices that had global implications. The price of oil per barrel doubled, then quadrupled, leading to increased costs for consumers world-wide and to the potential for budgetary collapse in less stable economies . . . The United States, which faced growing oil consumption and dwindling domestic reserves and was more reliant on imported oil than ever before, had to negotiate an end to the embargo from a weaker international position. To complicate the situation, Arab oil producers had linked an end to the embargo to successful U.S. efforts to create peace in the Middle East.
Hilariously, the OPEC states didn't drop the prices back to old levels after the American surrender in the Yom Kippur episode, but just kept them flat at a now escalated price. Prices skyrocketed again during the Carter administration and the turmoil of the deposition of the shah of Iran, leading to the infamous "energy crisis" with its long gas lines that some of us are old enough to remember very well.
Then, after that period, the United States and the Arab world negotiated an uneasy détente that left oil prices at a relatively steady rate for most of the next twenty-five years or so.
So now it's 2004. The United States and George W. Bush have just done an interesting thing, going off the map to launch a lunatic invasion of Iraq in a move that destabilizes the entire region, again pissing off pretty much all the oil-rich Arab nationalist regimes in the Middle East, including the Saudi despots — although, on the other hand, fuck them.
The price of oil pushes above forty dollars a barrel that year and begins a steep ascent. It's also around then that the phenomenon of the sovereign wealth fund began to evolve rapidly. According to the Sovereign Wealth Fund Institute:
Since 2005, at least 17 sovereign wealth funds have been created. As other countries grow their currency reserves, they will seek greater returns. Their growth has also been skyrocketed by rising commodity prices, especially oil and gas, especially between the years 2003–2008.
Dr. Gal Luft, director of a think tank called the Institute for the Analysis of Global Security, would later testify before the House Foreign Affairs Committee about the rise of the SWFs. This is what he told the committee on May 21, 2008:
The rise of sovereign wealth funds (SWF) as new power brokers in the world economy should not be looked at as a singular phenomenon but rather as part of what can be defined a new economic world order. This new order has been enabled by several megatrends which operate in a self-reinforcing manner, among them the meteoric rise of developing Asia, accelerated globalization, the rapid flow of information and the sharp increase in the price of oil by a delta of over $100 per barrel in just six years which has enabled Russia and OPEC members to accumulate unprecedented wealth and elevate themselves to the position of supreme economic powers. Oil-rich countries of OPEC and Russia have more than quadrupled their revenues, raking some $1.2 trillion in revenues last year alone. At $125 a barrel oil they are expected to earn close to $2 trillion in 2008.
In fact, oil would go up to $149 that summer. Luft went on:
SWF are pouring billions into hedge funds, private equity funds, real estate, natural resources and other nodes of the West's economy. No one knows precisely how much money is held by SWFs but it is estimated that they currently own $3.5 trillion in assets, and within one decade they could balloon to $10–15 trillion, equivalent to America's gross domestic product.
Luft's analysis would square with a paper written by the San Francisco branch of the Federal Reserve Bank in 2007, which concluded that "analysts put current sovereign wealth fund assets in the range of $1.5 to 2.5 trillion. This amount is projected to grow sevenfold to $15 trillion in the next ten years, an amount larger than the current global stock of foreign reserves of about $5 trillion."
The San Francisco paper noted that most SWFs avoid anything like full disclosure, and there is little information available about what they may have invested in. One source I know who works at a Middle Eastern SWF explains that this is very much part of their investment strategy.
"They don't want publicity," he says. "They just want to make the money. That's one reason why you almost always see them buying minority stakes, as majority stakes would cause some countries to make issue of foreign ownership of investments. Sometimes it's multiple SWFs buying minority stakes in the same investment. But it's always thirty percent, twenty-five percent, and so on."
We've seen how banks like Goldman Sachs and Morgan Stanley helped engineer an artificial run-up in commodity prices, among other things by pushing big institutional investors like pension funds into the commodities market. Because of this lack of transparency, we can't know exactly how much the SWFs also participated in this bubble by pouring their own money into energy commodities through hedge funds and other avenues.
The CFTC's own analysis in 2008 put the amount of SWF money in commodity index investing at 9 percent overall, but was careful to note that none of them appeared to be Arab-based funds. The oddly specific insistence in the report that all the SWF money is "Western" and not Arab is particularly amusing because it wasn't like the question of Arab ownership was even mentioned in the report — this was just the Bush administration enthusiastically volunteering that info on its own.
Adam White, director of research at White Knight Research and Trading, says not to put too much stock in the CFTC analysis, however.
"I am doubting that result because I think it would be easy for an SWF to set up another company, say in Switzerland, or work through a broker or fund of funds and therefore not have a swap on directly with a bank but through an intermediary," he says. "I think that the banks in complying with the CFTC request followed the letter of the law and not the spirit of the law."
He goes on: "So if a sovereign wealth fund has an investment in a hedge fund — which they have a bunch — and that hedge fund was then invested in commodities, I expect that a bank would report that as a hedge fund to the CFTC and not a sovereign wealth fund. And their argument would be, 'How can we know who the hedge fund's investors are?' — even if they know darn well.
"I think that this is very much a national security issue because the Arab states might be pumping up oil prices and siphoning off huge amounts of money from our economy," he adds. "A rogue state like Iran or Venezuela could use their petrodollars to keep us weak economically."
We know some things about what happened between the start of the Iraq war and 2008 in the commodities market. We know the amount of speculative money in commodities exploded, that between 2003 and 2008 the amount of money in commodities overall went from $13 billion to $317 billion, and that because virtually all investment in commodities is long investment, that nearly twenty-five-fold increase necessarily drove oil prices up around the world, putting great gobs of money into the coffers of the SWFs.
There is absolutely nothing wrong with oil-producing Arab states accumulating money, particularly money from the production of oil, a resource that naturally belongs to those countries and ought rightly to contribute to those states' prosperity. But for a variety of reasons the United States's relationship to many Arab countries is complicated and at times hostile, and the phenomenon of the wealth funds of these states buying up American infrastructure is something that should probably not happen in secret.
But more to the point, the origin of these SWFs is not even relevant, necessarily. What is relevant is that these funds are foreign and that thanks to a remarkable series of events in the middle part of the last decade, they rapidly became owners of big chunks of American infrastructure. This is a process of a country systematically divesting itself of bits and pieces of its own sovereignty, and it's taking place without really anyone noticing it happening — often not even the people asked to vote formally on the issue.
What was that process?
The explosion of energy prices — thanks to a bubble that Western banks and perhaps some foreign SWFs had a big hand in creating — led to Americans everywhere feeling increased financial strain. Tax revenue went down in virtually every state in the country. In fact, the correlation between the rising prices from the commodities bubble and declining tax revenues is remarkable.
According to the Rockefeller Institute, which tracks state revenue collection, the rate of growth for state taxes hit its lowest point in five years in the first quarter of 2008, which is when oil began its surge from around $75 to $149 a barrel.
In the second quarter the institute reported continued slowdowns, and in the third quarter, the quarter in which oil reached that high of $149, overall tax growth was more or less flat, at 0.1 percent, the lowest rate since the bursting of the tech bubble in 2001–2.
Obviously the collapse of the housing market around that time was a major factor in all of this, but surging energy prices impacting the entire economy — forcing business and consumer spending alike to retract — also had to be crucial.
Around this time, state and municipal executives began putting their infrastructure assets up to lease — essentially for sale, since the proposed leases in some cases were seventy-five years or longer. And in virtually every case that I've been able to find, the local legislature was never informed who the true owners of these leases were. Probably the best example of this is the notorious Chicago parking meter deal, a deal that would have been a hideous betrayal even without the foreign ownership angle. It was a blitzkrieg rip-off that would provide the blueprint for increasingly broke-ass America to carry lots of these prized toasters to the proverbial pawnshop.
"I was in my office on a Monday," says Rey Colon, an alderman from Chicago's Thirty-fifth Ward, "when I got a call that there was going to be a special meeting of the Finance Committee. I didn't know what it was about."
It was December 1, 2008. That morning would be the first time that the Chicago City Council would be formally notified that Mayor Richard Daley had struck a deal with Morgan Stanley to lease all of Chicago's parking meters for seventy-five years. The final amount of the bid was $1,156,500,000, a lump sum to be paid to the city of Chicago for seventy-five years' worth of parking meter revenue.
Finance Committee chairman Ed Burke had the job of informing the other aldermen about the timetable of the deal. Early that morning he called for a special meeting of the Finance Committee that Wednesday, to discuss the deal. That afternoon the mayor's office submitted paperwork calling for a meeting of the whole City Council the day after the Finance Committee meeting, on December 4, "for the sole purpose" of approving the agreement.
"I mean, they told us about this on a Monday, and it's like we had to vote on a Wednesday or a Thursday," says Colon.
"We basically had three days to consider the deal," says fellow alderman Leslie Hairston.
On that Tuesday, December 2, Daley held a press conference and said the deal was happening "just at the right time" because the city was in a budget crunch and needed to pay for social services.
He then gave them the details: he had arranged a lease deal with Morgan Stanley, which put together a consortium of investors which in turn put a newly created company called Chicago Parking Meters LLC in charge of the city's meters. There was no mention of who the investors were or who the other bidders might have been.
The next day the Finance Committee met to review the deal, and ten minutes into the meeting some aldermen began to protest that they hadn't even seen copies of the agreement. Copies were hastily made of a very short document giving almost nothing in the way of detail.
"It was like an eight-page paper," says Colon.
The Chicago Reader's write-up of the meeting describes the commotion that followed:
"We're rushing through this," says Alderman Robert Fioretti. "Why?"
"We've been working on this for the better part of a year, so we haven't been hasty," [city chief financial officer Paul] Volpe insists.
"You had a year, but you're giving us two days," says Alderman Ike Carothers.
To help aldermen understand some of the terms, Jim McDonald, a lawyer for the city, reads some legalese from the proposed agreement.
[Alderman Billy] Ocasio bellows: "What does that all mean?"
The aldermen are told by CFO Volpe that the reason the deal has to be rushed is that a sudden change in interest rates could cost the city later on, which makes one wonder about Volpe's qualifications for the CFO job — this was in the wake of the financial crash, and interest rates were at rock bottom, meaning the city stood only to lose money by hurrying. Higher interest rates would have allowed them to use the interest on the lump payment to fill their budget gaps, rather than the principal of the payment itself.
"I hear that excuse a lot whenever the mayor wants to pass something fast," says Colon. "As far as I'm concerned, I'll take that risk."
Again, the council at this time has no idea who's actually behind the deal. "We were never informed," says Hairston. "Not even later."
Nonetheless, the measure ended up passing 40–5, with Hairston and Colon being among the votes against. I contacted virtually all of the aldermen who voted yes on the deal, and none of them would speak with me.
Mayor Daley, who had already signed similar lease deals for the Chicago Skyway and a series of city-owned parking garages, had been working on this deal for more than a year. He approached a series of investment banks and companies and invited them to submit bids on seventy-five years' worth of revenue on the city's 36,000 parking meters. Morgan Stanley was one of those companies.
Here's where it gets interesting. What Morgan Stanley has to do from there is two things. One, it has to raise a shitload of money. And two, it has to find a public face for those investors, a "management company" that will be presented to the public as the lessee in the deal.
Part one of that process involved the bank's Infrastructure group going on a road tour to ask people with lots of cash to pony up. It was these guys from Morgan's Infrastructure desk who took their presentation to the Middle East and pitched Chicago's parking meters to a room full of bankers and analysts in Abu Dhabi, the Abu Dhabi Investment Authority, who ultimately agreed to purchase a large stake.
Here's how they pulled off the paperwork in this deal. It's really brilliant.
At the time the deal was voted on in December 2008, an "Abu Dhabi entity," according to the mayor's office, had just a 6 percent stake in the deal. Spokesman Peter Scales of the Chicago mayor's office has declined to date to identify which entity that was, but by sifting through the disclosure documents, we can find a few possibilities, including a group called Cavendish Limited that is headquartered in Abu Dhabi.
Apart from that, most of the investors in the parking meter deal at the time it was voted on look like they were either American or from nations with relatively uncomplicated relationships with America. The Teacher Retirement System of Texas had a significant stake in one of the Morgan Stanley funds at the time of the sale, as did the Victorian Funds Management Corporation of Australia and Morgan Stanley itself. A Mitsubishi fund called Mitsubishi UFJ Financial Group also had a stake. There were a variety of other German and Australian investors.
All of these companies together put up the $1.2 billion or so to win the bid, and once they secured the deal, they created Chicago Parking Meters LLC, a new entity, which in turn hired an existing parking management company called LAZ to run the meter system in place of cityrun parking police. The press stories about the deal invariably reported only that the city of Chicago had leased its parking meters to some combination of Morgan Stanley, Chicago Parking Meters LLC, and LAZ. A Chicago Sun-Times piece at the time read:
Under questioning from Finance Committee Chairman Edward M. Burke (14th), top mayoral aides acknowledged that the partnership that includes Morgan Stanley Infrastructure Partners and LAZ Parking recently formed a limited liability corporation in Delaware, but never bothered to register in Illinois.
But two months after the deal, in February 2009, the ownership structure completely changed. According to Scales in the mayor's press office:
In this case, after the Morgan Stanley investor group's $1.15 billion bid was accepted and approved by the City in December 2008, Morgan Stanley sought new investors to provide additional capital and reduce their investment exposure — again, not an unusual move.
So, while a group of several Morgan Stanley infrastructure funds owned 100% of Chicago Parking Meters, LLC in December 2008, by February 2009, they had located a minority investor — Deeside Investments, Inc. — to accept 49.9% ownership. Tannadice Investments, a subsidiary of the government-owned Abu Dhabi Investment Authority, owns a 49.9% interest in Deeside.
So basically Morgan Stanley found a bunch of investors, including themselves, to put up over a billion dollars in December 2008; a big chunk of those investors then bailed out to make way in February 2009 for this Deeside Investments, which was 49.9 percent owned by Abu Dhabi and 50.1 percent owned by a company called Redoma SARL, about which nothing was known except that it had an address in Luxembourg.
Scales added that after this bait and switch, the original 6 percent Abu Dhabi "entity" reduced its stake by roughly half after Tannadice got involved. According to my math, that still makes Abu Dhabi– based investors at least 30 percent owners of Chicago's parking meters. God knows who the other real owners are.
Now comes the really fun part — how crappy the deal was for other reasons.
To start with something simple, it changed some basic traditions of local Chicago politics. Aldermen who used to have the power to close streets for fairs and festivals or change meter schedules now cannot — or if they do, they have to compensate Chicago Parking Meters LLC for its loss of revenue.
So, for example, when the new ownership told Alderman Scott Waguespack that it wanted to change the meter schedule from 9 a.m. to 6 p.m. Monday through Saturday to 8 a.m. to 9 p.m. seven days a week, the alderman balked and said he'd rather keep the old schedule, at least for 270 of his meters. Chicago Parking Meters then informed him that if he wanted to do that, he would have to pay the company $608,000 over three years.
The bigger problem was that Chicago sold out way too cheap. Daley and Co. got roughly $1.2 billion for seventy-five years' worth of revenue from 36,000 parking meters. But by hook or crook various aldermen began to find out that Daley had vastly undervalued the meter revenue.
When Waguespack did the math on that $608,000 he was going to be charged, he discovered that the company valued the meters at about 39¢ an hour, which for 36,000 meters works out to $66 million a year, or about $5 billion over the life of the contract.
"When it comes to finding a figure for the citizens of Chicago, they say the meters are worth $1.16 billion," Waguespack said shortly after the deal. "But when it comes to finding a figure to cover Morgan Stanley, they say they're worth, what, $5 billion? Who are they looking out for, the residents or Morgan Stanley?"
The city inspector at the time, David Hoffman, subsequently did a study of the meter deal and concluded that Daley sold the meters for at least $974 million too little. "The city failed to make a calculation of what the value of the parking meter system was to the city," Hoffman said.
What's even worse is this — if they really needed the up-front cash, why sell the meters at all? Why not just issue a bond to borrow money against future revenue collection, so that the city can maintain possession of the rights to park on its own streets?
"There's no reason they had to do it this way," says Clint Krislov, who's suing the city and the state on the grounds that the deal is unconstitutional.
When they asked why the city didn't just do a bond issue, some of the aldermen say they never got an answer.
"You'd have to ask the mayor that," says Colon.
But the most obnoxious part of the deal is that the city is now forced to cede control of their streets to a virtually unaccountable private and at least partially foreign-owned company. Written into the original deal were drastic price increases. In Hairston's and Colon's neighborhoods, meter rates went from 25¢ an hour to $1.00 an hour the first year, and to $1.20 an hour the year after that. And again, the city has no power to close streets, remove or move meters, or really do anything without asking the permission of Chicago Parking Meters LLC.
Colon, whose neighborhood had an arts festival last year, will probably avoid festivals in the future that involve street closings.
"It's just something that's going to be hard from now on," he says.
In the first year of the deal, Alderman Hairston went to a dinner on Wacker Drive near the Sears Tower (now the Willis Tower, renamed after a London-based insurer), parked her car, and pressed the "max" button on a meter, indicating she wanted to stay until the end of that night's meter period. She got a bill for $32.50, as Chicago Parking Meters LLC charged her for parking overnight.
"There are so many problems — I've had so many problems with them," says Hairston. "It tells you you've got eight minutes left, you get back in seven, and it charges you for the extra hour. Or you don't get a receipt. It's crazy."
But to me, the absolute best detail in this whole deal is the end of holidays. No more free parking on Sunday. No more free parking on Christmas or Easter. And even in Illinois, no free parking on days celebrating, let's say, a certain local hero.
"Not even on Lincoln's birthday," laughs Krislov.
"Not even on Lincoln's birthday," sighs Colon.
Wanna take Lincoln's birthday off? Sorry, America — fuck you, pay me! And here's the last very funny detail in this whole business. It was the grand plan of CFO Volpe to patch the budget hole with the interest earned on that big pile of cash. But interest rates stayed in the tank, and so the city was forced to raid the actual principal. In a few years, the money will probably be gone.
"We did have a big hole in the budget," admits Colon. "But this didn't fix the problem. We might still have the same hole next year, and then where will the money come from?"
Bizarrely, a month and a half or so after this deal was done, a gloating Mayor Daley decided to offer some advice to the newly inaugurated President Obama, also an Illinois native. He told Obama he needed to "think outside the box" to solve the country's revenue problems.
"If they start leasing public assets — every city, every county, every state, and the federal government — you would not have to raise any taxes whatsoever," he says. "You would have more infrastructure money that way than any other way in the nation."
And America is taking Daley's advice. At this writing Nashville and Pittsburgh are speeding ahead with their own parking meter deals, as is L.A. New York has considered it, and the city of Miami just announced its own plans for a leasing deal. There are now highways, airports, parking garages, toll roads — almost everything you can think of that isn't nailed down and some things that are — for sale, to bidders unknown, around the world.
When I told Pennsylvania state representative Joseph Markosek that someone had been pitching the Pennsylvania Turnpike to Middle Eastern investors, he laughed.
"No kidding," he said. "That's interesting."
Markosek was one of the leading figures in killing Governor Ed Rendell's deal to sell off the turnpike, but even he didn't know who the buyers were going to be. He knew that Morgan Stanley was involved, but that was about it. Mostly he just thought it was a bad idea on general principle. "It would have been a bad deal for Pennsylvania," says Markosek. "There's a lot of speculation that the governor would have just taken that lump sum and used it to balance the budget this year, because he has a significant problem with the budget this year. But that would have left us with seventy-four more years on the lease."
The reason these lease deals happen is the same reason the investment banks made bad investments in mortgage-backed crap that was sure to blow up later, but provided big bonuses today — because the politicians making these deals, the Rendells and Daleys, are going to be long gone into retirement by the time the real bill comes due.
Welcome to life in the Grifter Archipelago.
From the Book, GRIFTOPIA by Matt Taibbi. Copyright © 2010 by Matt Taibbi. Reprinted by arrangement with Spiegel & Grau, an imprint of The Random House Publishing Group, a division of Random House, Inc. All rights reserved.
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