*****WHY DEFICITS STOPPED MATTERING*****

What is the "cost" of federal deficits? The question is important because, since 1980s, the US government and the media have been claiming that "deficits don't matter". There are no negative consequences to massive federal overspending (such as the 2010 $1.29 trillion budget deficit). We can spend our way to prosperity.



However, common sense tells us that government deficits must have a cost. If that were not the case, we could eliminate all taxes, and run the entire government on money printing and borrowing.

WHEN DEFICITS STILL MATTERED

Prior to 1980, the world was simple and it made sense. When the government ran deficits, the Federal Reserve then would print money to pay for them. This money printing would cause inflation, and inflation would push up interest rates. The whole process was captured in the simple equation below.

Deficits = Money Printing = INFLATION = HIGHER INTEREST RATES

In the graph below, you can clearly see the link between deficits and money printing. Notice how every time the US runs a deficit (blue line) the money supply grows (yellow line).

Deficits = Money Printing


The next graph shows the link between government deficits and inflation pre1980. Notice the surges in inflation (yellow line) after each major deficit (blue line).

Deficits = INFLATION


Lastly, the graph below shows how inflation and interest rates move together.

INFLATION = HIGHER INTEREST RATES


The relationship between deficits and inflation was well understood

Try searching Google Archive News for deficit spending inflation and read any of the millions of article written before 1980. You might be surprised to see how universally the deficits/inflation link was accepted. Articles claiming "deficits don't cause inflation" were the lunatic fringe. Below are a sample of the articles stating the common sense link between deficits and inflation.

( Note: Some articles are disappearing from Google Archive News. Please let me know of any further links go dead. )

Deficits Create Inflation

Deficits Create Inflation
Spokesman-Review - Google News Archive - Jan 25, 1979

That the consumer price index is up about 9 percent from a year ago brings to mind two questions: How did we get in such a mess? And, how do we get out?

The first question IS EASY TO ANSWER. We are in a mess because the government spends more than it takes in every year and must print extra money to make up the deficit.

The second question is a little more complicated. ... No magic wands will do the trick. … the best way to solve the problem is to slow the rate of growth in the money supply. This can be accomplished ONLY BY CLOSING THE GOVERNMENT DEFICIT.
…

You And The Economy Dollar's Convertibility Into Gold Could Be

Dollar's Convertibility into Gold Could Be Restored, But...
Evening Independent - Google News Archive - Mar 12, 1980
DR. RONALD CAIROLL
…
The more money these deficits created, the lower was its value. The less it was worth, the more severe was the inflation. The law of supply and demand made this INEVITABLE.
…

Shifting Policies Have Sometimes Deepened Unemployment, Heightened inflation

Shifting Policies Have Sometimes Deepened Unemployment, Heightened inflation
Lakeland Ledger - Google News Archive - May 11, 1980
By Edward Cowan
…
In the view entertained by Jimmy Carter, Ronald Reagan, many other politicians, and many voters, EVERY DEFICIT IS INFLATIONARY. …
...
In the 1970's … inflation has been driven largely by … THE PERSISTENCE OF FEDERAL DEFICITS. …

The Old "Politics Of Inflation"

The connection between deficits and inflation is what shaped the debate about federal budget in the pre1980 era. On one hand you hand pressures from every direction for government spending, and on the other you hand the threat of inflation forcing restraint. Below are two of many articles demonstrating this painful political balancing act.

Spenders All

Spenders All
Montreal Gazette - Google News Archive - Nov 10, 1958

President Eisenhower's main declaration after the defeat of his party in the mid-term elections was that he would fight THE INFLATION THAT COMES THROUGH TOO MUCH GOVERNMENT SPENDING. He will take his stand against the spenders. "The Lord sparing me," he said, "I am going to fight this as hard as I know."

It is, in every way, a worthy declaration. But the difficulty is that his own record in office is one of big spending and heavy deficits — THE SORT OF FINANCING THAT HAS MADE FOR INFLATION. …

…
Nobody questions the sincerity of the President's declarations regarding economy. He is convinced that HEAVY GOVERNMENT SPENDING IS HELPING TO RUIN EVERYBODY'S DOLLARS. …

President Eisenhower, like the heads of so many nations in the world, finds that the pressures for spending come from so many peoples and groups that it is politically impossible to refuse them. …
…
Why is it, then, that people keep making these demands upon governments, WHEN THEY KNOW THAT THEY ARE WEAKEN THE BUYING POWER OF THEIR DOLLARS WHEN THEY DO SO?
…

The Politics Of Inflation

The Politics Of Inflation
Spokesman-Review - Google News Archive - Oct 8, 1967
JOSEPH KRAFF

WASHINGTON — Watching the last inning of the first game of the World Series, President Johnson pulled from his pocket a slip of paper showing the steady rise of interest rates over the last year.

That slip of paper expresses THE TRUE MEANING OF THE FIGHT IN THE CONGRESS OVER THE PRESIDENT'S PROPOSED TAX INCREASE. Basically, the Republicans are trying to delay action on the program to the point that assures a stiff dose of inflation certain to be blamed on the Democrats.

To understand what this is all about, it is first necessary to develop a sense of the way the country lines up around the proposal for a tax increase. The overwhelming evidence is that most of the country is bitterly against the tax rise.

The one big exception is the business community. Having been won over to the new economics in the last few years, business leaders have declared themselves almost UNANIMOUS FOR HIGHER TAXES AS AN ANTI-INFLATIONARY MEASURE.

…
They [Republicans] are beginning to tick of more in sorrow than in anger the numerous warnings they have issued to the administration on the matter of inflation. …

Behind this emphasis is an obvious tactic. The Republicans believe they can now head off a tax increase until next year. By that time it will probably be TOO LATE TO DAMP DOWN INFLATIONARY FORCES. And so Republicans are getting ready to tag the Democrats with blame for THE HEAVY DOSE OF INFLATION that is on the way.

Notice how everyone back in 1958 and 1967 knew that deficits had an immediate, real cost. There was none of this nonsense of "passing the cost to future generation". The price of federal deficit spending was pay by the dollar's loss of purchasing power over the subsequent 2 to 3 years.

In fact, the very idea of deficits "not mattering" used to be ridiculed…

Why Shouldn't We Spend?

Let's Get Rich
Why Shouldn't We Spend?
Ocala Star-Banner - Google News Archive - Jan 19, 1965
R HENRY J. TAYLOR

[This is one of the articles which has disappeared from Google Archive News. Click here to see image of article.]

If President Johnson is right (and we are safe) in all the spending he's proposing, what're we waiting for? Why don't we just double the national debt and everybody get rich?

…
Anyone can promise to speed up the printing presses and build up our debt. This brings happiness and security?

Governments that overspend FACE GLOBAL AND EPIDEMICAL FORCES from the outside that NO AMOUNT OF MYSTIC THEORY CAN AVOID OR KICK DOWNSTAIRS INTO THE DEEPFREEZE. …

AND THEN DEFICITS STOPPED MATTERING…

In 1981, the government declared that there was "no direct or indirect connection between deficits and inflation" and that deficits "don't matter".

Caught in a Riptide of Red Ink - TIME

Caught in a Riptide of Red Ink
TIME - Dec 21, 1981
By Walter Isaacson; David Beckwith; Neil MacNeil

… Weidenbaum and other Administration officials tried, somewhat implausibly, to downplay the traditional Republican view that DEFICITS LEAD TO SPIRALING PRICES. "There is no direct or indirect connection between deficits and inflation," CEA Member William Niskanen told a stunned audience at a seminar sponsored by the conservative American Enterprise Institute. The Administration's NEW CONTENTION that deficits need not inhibit business expansion seems shaky at best. …

Democrats ridiculed the Republican revisionism. Said House Budget Committee Chairman Jim Jones: "If someone in the Carter Administration had said that cumulative three-year deficits of $400 billion DON'T MATTER, Republicans would have called for his impeachment." …

With the threat of inflation declared dead, the US proceeded to run massive budget deficits…



…AND IT WORKED — MAGICALLY

After 1980, the old, common sense formula underwent a drastic change:

Deficits = Money Printing = NO INFLATION? = LOWER INTEREST RATES?

The link between deficits and inflation was broken. When the US ran massive deficits in the early 1980s, inflation fell.

Deficits = NO INFLATION?


Although the inflation and interest rates came down, the first part of the formula remained the same. The government never stopped printing money to finance its massive deficits.

Deficits = Money Printing


What did change was that this printed money stopped producing inflation and pushing up interest, as seen below in the chart below.

Money Printing = FALLING INFLATION? = LOWER INTEREST RATES?



Amazing isn't it? After 1980, no more painful budget decision making: the US could now print all the money it wanted without any inflationary consequences! Deficits stopped mattering.

THE MEDIA'S REACTION: IT'S DISINFLATION

The media reacted to the new phenomenon (of massive deficits and falling inflation) by labeling it disinflation and predicting that it would continue for a very long time.

(As for questions like WHY did interest rates enter into a thirty year downward trend or how the hell does this disinflation thing work, those questions have never been answered, either by the US government or the media.)

Disinflation Is Here To Stay

Disinflation is here to stay
Montreal Gazette - Google News Archive - Sep 11, 1984
By Hugh Anderson

What's the connection between the falling price of gold, the stable price of oil and the soaring U.S. dollar? And should you care?

The connection is summed up in A WORD YOU'RE GOING TO BE HEARING A LOT MORE FREQUENTLY IN THE ECONOMIC NEWS.

It's DISINFLATION, …

…
Until quite recently THE MAJORITY VIEW AMONG FINANCIAL EXPERTS was that the return of booming economic conditions in the U.S. would inevitably bring A POWERFUL RESURGENCE OF INFLATION ALONG WITH IT.

On this view, the 1980's were to be a rerun of the 1970s, only worse.

THINGS DON'T SEEM TO BE WORKING OUT THAT WAY…

… taking upswings and down-swings into account, INFLATION WILL PROBABLY BE IN A DOWNWARD TREND, which is the essence of what's meant by disinflation.
…

There is no official explanation to why deficits and money printing stopped causing inflation. The treasury's position on the matter is simply that "deficits don't matter." They used to cause inflation, and now they don't. Never mind that this defies all laws of economics and common sense. As the media continues to report, IT'S DISINFLATION. IT'S MAGIC.



The US government in 1981 declared "deficits don't matter" and then ran massive deficits without causing inflation. This is the equivalent of an African shaman declaring he has mystical powers and then levitating himself in a ring of fire (watch video). Confronted with governments/shamans claiming to defy the economic/physical laws of the universe, the alternatives involve believing in the magic (gravity and deficits "don't matter") or looking for the fraud.

For everyone who suspects that the government and the press are lying about deficits "not mattering", read on for an explanation that doesn't involve magic.

THE FRAUD THAT ENDED INFLATION

As mentioned above, the government never stopped printing money in the 1980s. What happened was the government's money printing stopped causing inflation. This leads to the question:

HOW DO YOU PRINT MONEY WITHOUT CAUSING INFLATION?

It is possible to print billions without causing inflation if those billions never enter the country's domestic money supply. For example, if the government prints 1 billion dollars and then that 1 billion disappears overseas, there would be no inflation because the amount of dollars in America remains unchanged. This is exactly what happened in the 1980s.


In 1986, the Fed admitted billions of dollars were disappearing overseas.

Fed admits dollars disappearing
Star-News - Google News Archive - Feb 11, 1986

WASHINGTON — A lot of U.S. greenbacks can't be accounted for.

A study has concluded that $136 billion in U.S. currency — 88 PERCENT OF THE TOTAL CIRCULATION — IS MISSING.

In a comprehensive look at personal money-handling habits, Federal Reserve Board economists concluded that individuals over age 18 are holding $18 billion in U.S. coins and cash. That is about $100 per person.

That is, however, only 12 percent of the $153.9 billion of cash supposedly in circulation. WHERE IS THE REST?

…
Other studies have speculated that as much as one-third to two-thirds of U.S. currency winds up in foreign hands. The Fed economists … speculated that a big part of the money is, indeed, being used by foreigners who would rather deal in the stable U.S. currency than in their own currencies.

"We do know that THERE ARE SOME VERY LARGE SHIPMENTS OF U.S. CURRENCY GOING OFFSHORE TO VARIOUS DESTINATIONS AROUND THE WORLD," Spindt [Federal Reserve economist] said.

THIS MONEY OFTEN ENDS UP IN AREAS WITH HIGH INFLATION RATES. In some Latin American nations, for instance, the citizens exchange local currency on the black market for dollars as a hedge against their own currency's being devalued.
…

The National Center for Policy Analysis (NCPA) explores the mystery of the missing currency and WHAT IT MEANS.

The Mystery of the Missing Currency

… when the Fed has attempted … to find out how much currency was actually circulating, some 80 percent of the currency thought to be in circulation had simply disappeared.

Efforts to locate this missing money have focused particularly on "exports" of U.S. dollars: money that HAS LEFT OUR SHORES and NOW CIRCULATES IN FOREIGN COUNTRIES. …
…
WHAT THIS MEANS

AT A MINIMUM, this suggests that THE MONEY SUPPLY IS MUCH LOWER THAN PUBLISHED DATA INDICATE. Economist Case Sprenkle of the University of Illinois argues: "Since foreign-held currency is not a medium of exchange for the issuing country, … The Federal Reserve and other central banks should ignore such increases as being BASICALLY IRRELEVANT TO DOMESTIC MONETARY CONDITIONS."

This could have important implications… It might mean that … THE HISTORICAL RELATIONSHIP BETWEEN GROWTH OF THE MONEY SUPPLY AND RATE OF INFLATION NEEDS TO BE REEVALUATED. …
Conclusion

Foreign holdings of U.S. dollars ARE A SIGNIFICANT AND GROWING PHENOMENON. They are now so large as to affect our basic understanding of THE RELATIONSHIP BETWEEN THE MONEY SUPPLY, INFLATION, INTEREST RATES AND OTHER ECONOMIC VARIABLES. …

The chart below shows how the domestic money supply stopped growing in 1980 because of the huge amount of dollars disappearing overseas. The yellow is cash outside the US, while the purple and blue are dollars in the US. (Currency in circulation = cash in wallets) (Reserve with F.R. Banks = cash held by US banks)



This flow of dollars oversea was UNNATURAL

According to Fed economists, the "disappearing dollars" were being used by foreigners wanting to deal in "the stable U.S. currency." However in 1981 (when the US declared "deficits don't matter"), the dollar had been experiencing double digit inflation since 1979, losing over 30 percent of its value. The US was a high inflation area! Why did foreigners start using the dollar right when it was on the verge of collapse?

Also, billions of dollars don't just "disappear" out of the wallets of American, popping up around the world "in areas with high inflation rates." First, no natural phenomenon (ie: tourists) could account for cash movements of this magnitude. Second, these billions moving overseas needed to be collected from the wallets of Americans. How was this done? Finally, moving billions of dollars in cash is not simple or cheap. So when "very large shipments" were going offshore in the 1980s, who was doing the shipping?

All this leads to two very important questions: where did all these "disappearing dollars" end up and how did they get there?



1) WHERE DID ALL THESE "DISAPPEARING DOLLARS" END UP?

Finding the missing dollars is not hard. The New York Times reported in 1990 that Nicaragua was using a new currency.

September 16, 1990
NICARAGUA USING A NEW CURRENCY
By MARK A. UHLIG, Special to The New York Times

MANAGUA, Nicaragua, Sept. 15 — In the bitterest days of the conflict between this country's former Sandinista leaders and American-backed rebels, all Nicaraguans shared one crucial piece of common ground: THEIR RELIANCE ON THE AMERICAN DOLLAR.

Against a background of economic sanctions and hyperinflation, Sandinistas and contra supporters alike SCRAMBLED TO CONVERT THEIR NICARAGUAN CORDOBAS TO AMERICAN CURRENCY. …

This leads to another question: Why did the Nicaraguan Cordoba collapse in the 1980s?

John Stockwell gives us the answer by describing the CIA's bloody campaign to destabilize Nicaragua beginning in 1981 (the year deficits "stopped mattering").

THE SECRET WARS OF THE CIA:
by John Stockwell
A lecture given in October, 1987

[John Stockwell was a former CIA Station Chief in Angola in 1976, working for then Director of the CIA, George Bush. He spent 13 years in the agency. He is the highest level CIA officer to testify to the Congress about his actions]
...
Nicaragua is not the biggest covert action, it is the most famous one. Afghanistan is, we spent several hundred million dollars in Afghanistan. We've spent somewhat less than that, but close, in Nicaragua....

[When the U.S. doesn't like a government], they send the CIA in … TO TEAR APART THE SOCIAL AND ECONOMIC FABRIC OF THE COUNTRY…

… What we're talking about is going in and deliberately creating conditions where the farmer can't get his produce to market, where children can't go to school, where women are terrified inside their homes as well as outside their homes, where government administration and programs grind to a complete halt, where the hospitals are treating wounded people instead of sick people, where international capital is scared away and the country goes bankrupt. …

TO DESTABILIZE NICARAGUA BEGINNING IN 1981, we began funding this force of Somoza's ex-national guardsmen, calling them the contras (the counter-revolutionaries). We created this force, it did not exist until we allocated money. We've armed them, put uniforms on their backs, boots on their feet, given them camps in Honduras to live in, medical supplies, doctors, training, leadership, direction, as we've sent them in to de-stabilize Nicaragua. Under our direction they have systematically been blowing up graineries, saw mills, bridges, government offices, schools, health centers. They ambush trucks so the produce can't get to market. They raid farms and villages. The farmer has to carry a gun while he tries to plow, if he can plow at all.

If you want one example of hard proof of the CIA's involvement in this, and their approach to it, dig up `The Sabotage Manual', that they were circulating throughout Nicaragua, a comic-book type of a paper, with visual explanations of what you can do to bring a society to a halt, how you can gum up typewriters, what you can pour in a gas tank to burn up engines, what you can stuff in a sewage to stop up the sewage so it won't work, things you can do to make a society simply cease to function. [Google archive news results for "The Sabotage Manual"]

Systematically, the contras have been assassinating religious workers, teachers, health workers, elected officials, government administrators. You remember the assassination manual? that surfaced in 1984. It caused such a stir that President Reagan had to address it himself in the presidential debates with Walter Mondale. They use terror. This is a technique that they're using to traumatize the society so that it can't function.

I don't mean to abuse you with verbal violence, but you have to understand what your government and its agents are doing. They go into villages… [revolting description of CIA atrocities] …

This is nobody's propaganda. There have been over 100,000 American witnesses for peace who have gone down there and they have filmed and photographed and witnessed these atrocities immediately after they've happened, and documented 13,000 people killed this way, mostly women and children. These are the activities done by these contras. The contras are the people president Reagan calls `freedom fighters'. …

…
Part of a de-stabilization is propaganda, to dis-credit the targeted government. This one actually began under Jimmy Carter. He authorized the CIA to go in and try to make the Sandinistas look to be evil. … While they set out to build 2,500 clinics to give the country something resembling a public health policy, and access to medicines, we began to label them as totalitarian dictators, and to attack them in the press, and to work with this newspaper `La Prensa', which - it's finally come out and been admitted, in Washington - the U.S. government is funding: a propaganda arm.

[Reagan and the State dept. have] been claiming they're building a war machine that threatens the stability of Central America. Now the truth is, this small, poor country has been attacked by the world's richest country under conditions of war, for the last 5 years. Us and our army - the death they have sustained, the action they have suffered - it makes it a larger war proportionally than the Vietnam war was to the U.S. In addition to the contra activities, we've had U.S. Navy ships supervising the mining of harbors, we've sent planes in and bombed the capital, we've had U.S. military planes flying wing-tip to wing-tip over the country, photographing it, aerial reconnaissance. They don't have any missiles or jets they can send up to chase us off. We are at war with them. …

[IT WASN'T JUST NICARAGUA]
…
Now, CIA destabilizations are nothing new, they didn't begin with Nicaragua. …

…
In El Salvador specifically, … the CIA helped put together the treasury police. These are the people that haul people out at night today, and run trucks over their heads. These are the people that the Catholic church tells us, have killed something over 50,000 civilians in the last 5 years. And we have testimony before our Congress that as late as 1982, leaders of the treasury police were still on the CIA payroll.

Then you have the `Public Safety Program.' I have to take just a minute on this one because it's a very important principle involved that we must understand, if we're to understand ourselves and the world that we live in. In this one, the CIA was working with policeforces throughout Latin America for about 26 years, teaching them how to wrap up subversive networks by capturing someone and interrogating them, torturing them, and then getting names and arresting the others and going from there. Now, this was such a brutal and such a bloody operation, that Amnesty International began to complain and publish reports. Then there were United Nations hearings. Then eventually our Congress was forced to yield to international pressure and investigate it, and they found the horror that was being done, and by law they forced it to stop. YOU CAN READ THESE REPORTS -- the Amnesty International findings, and our own Congressional hearings. [Google Archive News results for "Amnesty International" cia]
…
Why does the CIA run 10,000 brutal covert actions? Why are we DESTABILIZING A THIRD OF THE COUNTRIES IN THE WORLD TODAY when there's so much instability and misery already?
…

Wikipedia explains that this bloody CIA campaign was part of the Reagan Doctrine, which involved efforts to "rollback" Soviet-backed communist governments in Africa, Asia and Latin America.

Reagan Doctrine

The Reagan Doctrine … was the centerpiece of United States foreign policy from the early 1980s until the end of the Cold War in 1991.
…
Under the Reagan Doctrine, the U.S. provided overt and covert aid to democratic guerrillas and resistance movements in an effort to "rollback" Soviet-backed communist governments IN AFRICA, ASIA AND LATIN AMERICA. …

…
U.S. role in atrocities and terrorism in Central America
…

Searching Google Archive News for atrocities cia aid confirms the timing.



So now we know where the "disappearing dollars" went and why. That leaves only the second question unanswered: How did dollars travel from inside the wallets of Americans all the way to places like Nicaragua?

2) HOW DID THEY GET THERE?

Joseph D. Douglass explains the most reasonable explanation for worldwide dollarization.

Drugs and Dollars
By Joseph D. Douglass, Jr. | Published: April 10th, 2000

… Dollarization is the process whereby THE U.S. DOLLAR BECOMES THE MEDIUM OF EXCHANGE IN A FOREIGN COUNTRY, SUPPLANTING THE COUNTRY'S NATIONAL CURRENCY. The dollar has already become the de facto currency in some of these nations…
…
At least 50 percent of the deposits in Argentina are dollars; in Bolivia the figure is 80 percent; in Colombia, the deposits have been growing steadily to at least $34 billion. Russia, reportedly, has more dollars in circulation than does the U.S. WHERE DID ALL OF THE DOLLARS IN THESE COUNTRIES COME FROM? Certainly not from tourists or businesses. Nor can counterfeiting be the main source.

Allow us to offer what our research would indicate is the most reasonable explanation: DRUG MONEY LAUNDERING. …

Karen Tandy, from the Drug Enforcement Administration, explains that BULK CURRENCY SMUGGLING is the primary method for laundering drug money.

…
Bulk Currency

THE SMUGGLING OF LARGE SUMS OF CASH across our borders CONTINUES to be the primary method used to expatriate drug proceeds from the United States. …

DEA's Congressional Testimony gives us more specifics about bulk currency smuggling.

DEA Congressional Testimony
Global Security - Sep 5, 1996

… Currently, the vast majority of OUTBOUND CURRENCY attributable to the Colombian drug lords, leaves the United States either through air cargo or outbound freighter. …

… Mexican traffickers sometimes simply smuggle BULK SHIPMENTS OF CASH across the border in vehicles. Often, the same vehicles which are used to smuggle cocaine into the United States are used to transport currency back into Mexico. …

As confirmed below by the Department of Justice, Tens of billions of dollars are smuggled out of the US each year. The amount of bulk currency smuggling going on is ENORMOUS.

National Drug Intelligence Center
January 2006
…
Mexican and Colombian DTOs transport their drug proceeds principally in bulk from drug market areas to other U.S. areas and then on to foreign destinations in an attempt to repatriate their proceeds to their home nations. Recent U.S. government analyses estimate that between $5.1 billion and $17.7 billion in wholesale drug Mexico-produced marijuana, methamphetamine, and heroin is transported out of the United States annually, presumably destined for Mexico. It is further estimated that an additional $3.2 billion to $7.2 billion generated through the wholesale distribution of cocaine and South American heroin is transported out of the United States annually…

While a large percentage of wholesale drug proceeds are transported across the U.S.-Mexico border, a significant amount is transported in bulk across the U.S.-Canada border, most likely by Asian DTOs and criminal groups. Recent U.S. government analyses estimate that between $5.2 billion and $21.2 billion generated by the wholesale distribution of Canada produced marijuana is transported out of the United States annually across the U.S.-Canada border…

When did this bulk currency smuggling start and why?

Bulk currency smuggling began in the 1980s as a result of an intensifying crackdown on "Money Laundering"

Banks intensify crackdown on Money Laundering
Daily Gazette - Google News Archive - Sep 23, 1990
By James M. Odato
…
The Bank Secrecy Act of 1970 requires banks to file a Currency Transaction Report on cash transactions of more than $10,000. Banks also must file a report if it appears a customer is trying to avoid having a CTR…

… the CTRs may have cut down on some of the laundering. Other alternatives … include SMUGGLING MONEY OUT OF THE COUNTRY. …

… FEDERAL REGULATORS BEGAN FINING BANKS HEAVILY IN THE MID-'80S. … As a result, "everybody and his brother learned what money laundering was," says Byrne.
…

Every crack down on "money laundering" increases bulk currency smuggling.

Officials take aim at drug money
Sarasota Herald-Tribune - Google News Archive - Mar 11, 1997

… since last summer … a Treasury Department order imposing a $750-per-transaction limit on 1,600 remittance shops … has won a small victory in the war on drugs … FORCING the cartels to return to crude old methods of SMUGGLING MONEY IN BULK.
…
"The order has in effect shut down the money remitters as an avenue for narcotics proceeds, forcing launderers to resort to BULK CURRENCY SHIPMENTS," Andre FLores, the chief agent of the U.S. Customs Service on Long island, said in an interview Monday. "The $750 limit is a major hurdle when you have to move $500,000."
…

The amounts of cash smuggled out of the country has continued to grow.

U.S. agents focus on stopping cash at border crossings
Island Packet - Google News Archive - Jan 28, 2006

LAREDO, Texas — … with STRICTER CONTROLS on bank accounts and wire transfers, trafficking organizations are running PILES OF CASH into Mexico, in cars, trucks, boats and airplanes, and EVEN STRAPPED TO THE BODIES OF COURIERS, federal officials said.

"We're seeing bigger amounts of cash coming across, and we're seeing deeper concealment," said Hector Mancha, assistant port director for security at Laredo. "They don't just throw it in a bag in the trunk of their car anymore."

Again, searching Google archive news for "money laundering" and "drug trafficking" cash confirms the timing.





Bulk Currency Smuggling + CIA Atrocities = DOLLARIZATION

Together, the bulk currency smuggling of narcotics profits and the Reagan Doctrine's global destabilization campaign have dollarized of large part of the world.

Dollarization and the United Narcostates of America
Jaguar Press
Saturday, October 31, 2009 at 9:33pm

…
In Afghanistan right now, THE AFGHANI AND THE DOLLAR ARE PRETTY MUCH INTERCHANGEABLE. It is astounding to American personnel stationed in Afghanistan that their US dollars are just as good as at a 7-11 back home. This isn't an accident—the illicit trade in opium HAS SINGLE-HANDEDLY INTRODUCED THE DOLLAR AS A STABLE MEDIUM OF TRANSACTION IN THE REGION. It is so prominent that Karzai's government had to pass a law requiring vendors to list their prices in the native Afghani in addition to its pricing in dollars. …

Since the coca boom of the 1980's usage has risen drastically… This vast trade … has led to mass addiction and THE VICIOUS DOLLARIZATION OF LATIN AMERICA.

… US neo-colonialist policies and practice, whether carried out by government funded groups or private corporations, developed into an efficient machine for the consumption and global exportation of cocaine starting in the 1970's, while INTRODUCING THE DOLLAR TO COCA PRODUCING REGIONS AS A REPLACEMENT FOR THEIR SOMETIMES UNSTABLE NATIONAL CURRENCIES.

In 1986, it came to light that the US government had been tacitly supporting, if not directly developing massive cartel infrastructure in Central America by funding the anti-communist Contra group in Nicaragua. Thousands of tons of cocaine were brought into the American West Coast and South and the money was used not only to attempt the violent overthrow of the Sandinista government—the revolutionary group that liberated Nicaragua from American occupation in the 1930's— BUT TO INTRODUCE THE DOLLAR TO THE ENTIRE REGION.

And while the scandal has dissipated and American influence is no longer visible, the US DOLLAR IS NOW THE STANDARD CURRENCY FOR EL SALVADOR AND PANAMA. THE DOLLAR ... IS SIMPLY THE UNOFFICIAL, DE FACTO TENDER IN THE REST OF THE REGION and the cocaine trade has only grown since then.

…
That's right, NEARLY EVERY COUNTRY IN THE AMERICAS INVOLVED IN PRODUCING, TRANSPORTING AND USING COCAINE IS USING THE US DOLLAR AS A MEDIUM FOR EXCHANGE. Michael Melvin and Jerry Ladman have researched the economic structure of coca producing regions in Vol. 23 of the Journal of Money, tracing the rise of the dollarized narcostate, "Since illicit activities like smuggling are financed with currency rather than bank deposits, many people believe that MUCH OF THE U.S. DOLLAR CURRENCY CIRCULATING IN BOLIVIA, COLOMBIA, AND PERU IS EARNED FROM ILLEGAL DRUG SALES. …

If you're in Southern California you can test it, the US dollar is valid in the cities of Mexico just south of the border. As in all other opium and coca producing states from Central Asia to Latin America we see the same symptoms of US narcocolonialism—addiction, exploitation, the dollar. There are no efforts to effectively curb hard drug abuse or to curtail the trade, quite the opposite, THE US GOVERNMENT HAS SUPPORTED THE DRUG TRADE AT MANY LEVELS.
…

The Media's KEY role in "saving the dollar"

The effort to (temporarily) save the dollar would not have possible without the media's cooperation. For example in 1984, when the U.S. Congress ordered the inhumane contra intervention be stopped, the media looked the other way while the CIA illegally continued anyway. If deficits stopped mattering, it was thanks to the media role in keeping the American people misinformed.

THE MEDIA IS FUNDAMENTALLY BROKEN

This goes way beyond issues of "liberal" or "conservative" bias. Through the use of media blackouts, smear/disinformation campaigns, and false narratives, US media shields the government from all forms of accountability.

1) MEDIA BLACKOUTS

There are entire subjects of the highest importance which are being systematically ignored by mainstream media.  These topics are so toxic, the facts so damning, that no one will touch them.  The results are total media blackouts.

Below is an example of what such a blackout looks like.

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MEDIA BLACKOUT: CIA's role in contra drug trafficking

Google archive news results for contra drug trafficking

KEEP IN MIND WHEN READING: the CIA conducted an internal investigation that acknowledged in March 1998 that the agency had covered up Contra drug trafficking for more than a decade. Gary Webb's allegations have been proven true and have been acknowledge even by those who initially attacked them.

Newsmakingnews reports that the mighty wurlitzer plays on.

THE MIGHTY WURLITZER PLAYS ON
by Gary Webb
Chapter 14 from In the Buzzsaw edited by Kristina Borjesson

Webb was an investigative reporter for nineteen years focusing on government and private sector corruption and winning more than thirty journalism awards.  … Webb…was a reporter for the San Jose Mercury News where the "Dark Alliance" series broke in 1996.  Months later, Webb was effectively forced out of his job after the San Jose Mercury News retracted their support for his story.  He is now a consultant to the California State Legislature's Joint Audit Committee.

If we had met five years ago, you wouldn't have found a more staunch defender of the newspaper industry than me.  I'd been working at daily papers for seventeen years at that point, doing no-holds barred investigative reporting for the bulk of that time.  As far as I could tell, the beneficial powers the press theoretically exercised in our society weren't theoretical in the least.  They worked.

…
Bottom line: If there was ever a true believer, I was one. …

In seventeen years of doing this, nothing bad had happened to me.  I was never fired or threatened with dismissal if I kept looking under rocks.  I didn't get any death threats that worried me.  I was winning awards, getting raises, lecturing college classes, appearing on TV shows, and judging journalism contests.

… And then I wrote some stories that made me realize how sadly misplaced my bliss had been.  The reason I'd enjoyed such smooth sailing for so long hadn't been, as I'd assumed, because I was careful and diligent and good at my job.  It turned out to have nothing to do with it.  The truth was that, in all those years, I HADN'T WRITTEN ANYTHING IMPORTANT ENOUGH TO SUPPRESS.

In 1996, I wrote a series of stories, entitled Dark Alliance, that began this way:

For the better part of a decade, a Bay Area drug ring sold tons of cocaine to the Crips and Bloods Street Gangs of Los Angeles and funneled millions in drug profits to a Latin American guerilla army run by the U.S. Central Intelligence Agency, a Mercury News investigation has found.

This drug network opened the first pipeline between Colombia's cocaine cartels and the black neighborhoods of Los Angeles, a city now known as the "crack" capital of the world.  The cocaine that flooded in helped spark a crack explosion in urban America -- and provided the cash and connections needed for L.A.'s gangs to buy automatic weapons.

It is one of the most bizarre alliances in modern history: the union of a U.S. backed army attempting to overthrow a revolutionary socialist government and the Uzi-toting "gangstas" of Compton and South Central Los Angeles.

The three-day series was, at its heart, a short historical account of the rise and fall of a drug ring and its impact on black Los Angeles.  It attempted to explain how shadowy intelligence agencies, shady drugs and arms dealers, a political scandal, and a long-simmering Latin American civil was had crossed paths in South Central Los Angeles, leaving behind a legacy of crack use.  Most important, it challenged the widely held belief that crack use began in African American neighborhoods not for any tangible reason but mainly because of the kind of people who lived in them.  Nobody was forcing them to smoke crack, the argument went, so they only have themselves to blame.  They should just say no.

That argument never seemed to make much sense to me because DRUGS DON'T JUST APPEAR MAGICALLY ON STREET CORNERS IN BLACK NEIGHBORHOODS. Even the most rabid hustler in the ghetto can't sell what he doesn't have.  If anyone was responsible for the drug problems in a specific area, I thought, it was the people who were bringing the drugs in.

And so Dark Alliance was about them -- the three cocaine traffickers who supplied the South Central market with literally tons of pure cocaine from the early 1980s to the early 1990s.  What made the series so controversial is that two of the traffickers I named were intimately involved with a Nicaraguan paramilitary group known as the Contras, a collection of ex-military men, Cuban exiles, and mercenaries that the CIA was using to destabilize the socialist government of Nicaragua.  The series documented direct contact between the drug traffickers who were bringing the cocaine into South Central and the two Nicaraguan CIA agents who were administering the Contra project in Central America.  The evidence included sworn testimony from one of the traffickers -- now a valued government informant -- that one of the CIA agents huddled in the kitchen of a house in San Francisco with one of the traffickers and had interviewed the photographer, who confirmed its authenticity.  PRETTY CONVINCING STUFF, we thought. 

Over the course of three days, Dark Alliance advanced five main arguments:  First, that the CIA-created Contras had been selling cocaine to finance their activities.  This was something the CIA and the major media had dismissed or denied since the mid-1980s, when a few reporters first began writing about Contra drug dealing.  Second, that the Contras had sold cocaine in the ghettos of Los Angeles and that their main customer was L.A.'s biggest crack dealer.  Third, that elements of the U.S. government knew about this drug ring's activities at the time and did little if anything to stop it.  Fourth, that because of the time period and the areas in which it operated, this drug ring played a critical role in fueling and supplying the first mass crack cocaine market in the United States.  And fifth, that the profits earned from this crack market allowed the Los Angeles-based Crips and bloods to expand into other cities and spread crack use to other black urban areas, TURNING A BAD LOCAL PROBLEM INTO A BAD NATIONAL PROBLEM.  This led to panicky federal drug laws that were locking up thousands of small-time, black crack dealers for years but never denting the crack trade.
…
Obviously this wasn't the kind of story that a reporter digs up in an afternoon.  A Nicaraguan journalist and I had been working on it exclusively for more than a year before it was published.  And despite the topic of the story, it had been tedious work.  …

… Both before and after the [1995] prison riots, some black leaders were openly suggesting that crack was part of a broad government conspiracy that has imprisoned or killed an entire generation of young black men.

IMAGINE IF THEY WERE RIGHT.  What if the US government was, in fact, involved in dumping cocaine into California -- selling  it to black gangs in South Central Los Angeles, for instance -- SPARKING THE MOST DESTRUCTIVE DRUG EPIDEMIC IN AMERICAN HISTORY?

That's what this series is about.

With the help of recently declassified documents, FBI reports, DEA undercover tapes, … we will show how a CIA-linked drug and stolen car network -- based in, of all places, the Peninsula -- provided weapons and tons of high-grade, dirt cheap cocaine to the very person who spread crack through LA and from there into the hinterlands.

…
This is also the story of how an ill-planned and oftentimes irrational foreign policy adventure -- the CIA's "secret" was in Nicaragua from 1980 to 1986 -- boomeranged back to the streets of America, in the long run doing far more damage to us than to our supposed "enemies" in Central America. 

For, as this series will show, the dumping of cocaine on LA's street gangs was the "back-end" of a covert effort to arm and equip the CIA's ragtag army of anti-Communist "Contra" guerrillas.  While this has long been solid -- if largely ignores -- evidence of a CIA-Contra-cocaine connection, no one has ever asked the question: "Where did all the cocaine go once it got here?"

Now we know.

Moreover, we have compelling evidence that the kingpins of this Bay Area cocaine ring -- men connected to the assassinated Nicaraguan dictated dictator Anastasio Somoza and his murderous National Guard -- enjoyed a unique relationship with the U.S. government that has continued to this day.

*In a meeting to discuss the memo, I recounted to my editors the sorry history of how the Contra-cocaine story had been ridiculed and marginalized by the Washington press corps in the 1980s, and that we could expect similar reactions to this series.  If they didn't want to pursue this, now was the time to pull back, before I flew down to Central America and started poking around finding drug dealers to interview.  But if we did, we needed to go full-bore on it, and devote the time and space to tell it right.  My editors agreed.  My story memo made the rounds of the other editors' offices and, as far as I know, no one objected.  I was sent to Nicaragua to do additional reporting, and the design team at Mercury Center -- the newspaper's online edition -- began mapping our a Web page.

At the end of my memo, I'd suggested to my editors that we use the Internet to help us demonstrate the story's soundness and credibility which, based on past stories critical of the CIA, was sure to come under attack by both the government and the press.
…
Since this whole subject has such a high unbelievability factor built into it, providing our backup documentation to our readers -- and the rest of the world over the Internet -- would allow them to judge the evidence for themselves.  It will also make it all the more difficult to dismiss our findings as the fantasies of a few drug dealers.

…
After four months of writing, rewriting, editing, and reediting, my editors pronounced themselves satisfied and signed off.  The first installment of  Dark Alliance appeared simultaneously on the streets and on the Web on August 18, 1996.

THE INITIAL PUBLIC REACTION WAS DEAD SILENCE. No one jumped up to deny any of it.  Nor did the news media rush to share our discoveries with others.  The stories just sat there, as if no one seemed to know what to make of them.

Admittedly, Dark Alliance was an unusual story to have appeared in a mainstream daily newspaper…  It was not an uplifting story; it was a sickening one.  The bad guys had triumphed and fled the scene unscathed, as often happens in life.  And there was very little anyone could do about it now, ten years after the fact.

So, I wasn't really surprised that my journalistic colleagues weren't pounding down the follow-up trail.  Hell, I thought it was a strange story myself.

Had it been published even a year of two earlier, it likely would have vanished without a trace at that point.  Customarily, IF THE REST OF THE NATION'S EDITORS DECIDE TO IGNORE A PARTICULAR STORY, IT QUICKLY WITHERS AND DIES, LIKE A LIGHT-STARVED PLANT. With the exception of newspapers in Seattle, some small cities in Northern California, and Albuquerque, Dark Alliance got the silent treatment big time.  NO ONE WOULD TOUCH IT.

But no one had counted on the enormous popularity of the Web site.  Almost from the moment the series appeared, the Web page was deluged with visitors from all over the world.  Students in Denmark were standing in line at their college's computer waiting to read it.  E-mails came in from Croatia, Japan, Colombia, Harlem, and Kansas City, dozens of them, day after day.  One day we had more than 1.3 million hits.  (The site eventually won several awards from computer journalism magazines.)

Once Dark Alliance became the talk of the Internet (in large part because of the technical wizardry and sharp graphics of the Web page), talk radio adopted the story and ran with it.  For the next two months, I did more than one hundred radio interviews, in which I was asked to sum up what the three-day long series said in its many thousands of words.  …

… This was about the time I realized the wind speed of the shit storm I had kicked up.

The rumbles the series was causing from black communities was unnerving a lot of people.  College students were holding protest rallies in Washington, D.C., to demand an official investigation.  Residents of South Central marched on city hall and held candlelight vigils. … Black civil rights activists were arrested outside the CIA after sealing off the agency's entrance with yellow crime scene tape.  The story was developing  a political momentum all of its own, and it was happening DESPITE A VIRTUAL NEWS BLACKOUT FROM THE MAJOR MEDIA.
…

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The best evidence that the media is systematically blacking out certain topics is what you don't know. For example, Have you ever hear of B.C.C.I.?

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MEDIA BLACKOUT: B.C.C.I.: The Dirtiest Bank of All

Google archive news results for "BCCI"

B.C.C.I.: The Dirtiest Bank of All

Monday, Jul. 29, 1991
B.C.C.I.: The Dirtiest Bank of All
By JONATHAN BEATY and S.C. GWYNNE NEW YORK

"I could tell you what you want to know, but I must worry about my wife and family -- they could be killed."
-- a former top B.C.C.I. officer

"We better not talk about this over the phone. We've found some bugs in offices that haven't been put there by law enforcement."
-- a Manhattan investigator probing B.C.C.I.

Bank-fraud cases are usually dry, tedious affairs. NOT THIS ONE. Nothing in the history of modern financial scandals rivals the unfolding saga of the Bank of Credit & Commerce International, the $20 billion rogue empire that regulators in 62 countries shut down early this month in a stunning global sweep. Never has a single scandal involved so much money, so many nations or so many prominent people.

Superlatives are quickly exhausted: it is THE LARGEST CORPORATE CRIMINAL ENTERPRISE EVER, THE BIGGEST PONZI SCHEME, THE MOST PERVASIVE MONEY-LAUNDERING OPERATION and financial supermarket ever created for the likes of Manuel Noriega, Ferdinand Marcos, Saddam Hussein and the Colombian drug barons. B.C.C.I. even accomplished a Stealth-like invasion of the U.S. banking industry by secretly buying First American Bankshares … whose chairman is former U.S. Defense Secretary Clark Clifford.

But B.C.C.I. is MORE THAN JUST A CRIMINAL BANK. From interviews with sources close to B.C.C.I., TIME has pieced together a portrait of a clandestine division of the bank called the "black network," which functions as a global intelligence operation and a Mafia-like enforcement squad. Operating primarily out of the bank's offices in Karachi, Pakistan, the 1,500-employee black network has used sophisticated spy equipment and techniques, along with bribery, extortion, kidnapping and even, by some accounts, murder. The black network -- so named by its own members -- stops at almost nothing to further the bank's aims the world over.

The more conventional departments of B.C.C.I. handled such services as laundering money for the drug trade and helping dictators loot their national treasuries. The black network, which is still functioning, operates a lucrative arms-trade business and transports drugs and gold. According to investigators and participants in those operations, it often works with Western and Middle Eastern intelligence agencies. The strange and still murky ties between B.C.C.I. and the intelligence agencies of several countries are so pervasive that even the White House has become entangled. As TIME reported earlier this month, the NATIONAL SECURITY COUNCIL USED B.C.C.I. TO FUNNEL MONEY FOR THE IRAN-CONTRA DEALS, and THE CIA MAINTAINED ACCOUNTS IN B.C.C.I. FOR COVERT OPERATIONS. Moreover, investigators have told TIME that the Defense Intelligence Agency has maintained a slush-fund account with B.C.C.I., apparently to pay for clandestine activities.

But the CIA may have used B.C.C.I. as more than an undercover banker: U.S. agents collaborated with the black network in several operations, according to a B.C.C.I. black-network "officer" who is now a secret U.S. government witness. Sources have told investigators that B.C.C.I. worked closely with Israel's spy agencies and other Western intelligence groups as well, especially in arms deals. The bank also maintained cozy relationships with international terrorists, say investigators who discovered suspected terrorist accounts for Libya, Syria and the Palestine Liberation Organization in B.C.C.I.'s London offices.

The bank's intelligence connections and alleged bribery of public officials around the world point to an explanation for the most persistent mystery in the B.C.C.I. scandal: why banking and law-enforcement authorities allowed the bank to spin out of control for so long.

In the U.S. investigators now say openly that the Justice Department has not only reined in its own probe of the bank but is also part of A CONCERTED CAMPAIGN TO DERAIL ANY FULL INVESTIGATION. Says Robert Morgenthau, the Manhattan district attorney, who first launched his investigations into B.C.C.I. two years ago: "We have had no cooperation from the Justice Department since we first asked for records in March 1990. In fact they are impeding our investigation, and JUSTICE DEPARTMENT REPRESENTATIVES ARE ASKING WITNESSES NOT TO COOPERATE WITH US."

… according to a former operative, SOMETIME IN THE EARLY 1980S THE BLACK NETWORK BEGAN RUNNING ITS OWN DRUGS, WEAPONS AND CURRENCY DEALS. [Again, note the timing]

…
A typical operation took place in April 1989, when a container ship from Colombia docked during the night at Karachi, Pakistan. … The crates were trucked to a "secure airport" and loaded aboard an unmarked 707 jet, where an American, believed by the black-unit members to be a CIA agent, supervised the frantic activity.

The plane then departed for Czechoslovakia… "From Czechoslovakia the 707 flew to the U.S.," said the informant... "It could have been gold. It could have been drugs. It could have been guns. We dealt in those commodities," Mustafa told U.S. authorities.


Other informants with details about the black network have come forward as the banking disaster has unfolded. "B.C.C.I. was a full-service bank," says an international arms dealer who frequently worked with the clandestine bank units. …

…
U.S. intelligence agencies were WELL AWARE OF SUCH ACTIVITIES. "B.C.C.I. played an indispensable role in facilitating deals between Israel and some Middle Eastern countries," says a former State Department official. "And when you look at the Saudi support of the contras, ask yourself who the middleman was: there was no government-to-government connection between the Saudis and Nicaragua."

As an equal-opportunity smuggler, the bank dealt in arms from many countries. "It was B.C.C.I. that financed and brokered ((Chinese)) Silkworm missiles that went to Saudi Arabia," the former official says, "and those were equipped with sophisticated Israeli guidance systems. When you couldn't use direct government transfers or national banks, B.C.C.I. was there to hot-wire the connections between Saudi Arabia, China and Israel." The bank also helped transfer North Korean Scud-B missiles to Syria, a B.C.C.I. source told TIME.

Yet the bank's arms business was benign compared with the black network's other missions … paying bribes to politicians, supplying "young beauties from Lahore," moving drugs and expediting insider business deals.

When it came to recruiting and persuading, the black network usually got its way. "We would put money in the accounts of people we wanted to seduce to work for us," says Mustafa, "or we would use terror tactics," including kidnapping and blackmail. "The Pakistanis were easy to terrorize; perhaps we might send someone his brother's hand with the rings still on it." Adds Mustafa: "We were after business cooperation or military or industrial secrets that we would use or broker, and we targeted generals, businessmen and politicians. In America it was easy: money almost always worked, and we sought out politicians known to be corruptible."

The black network was the bank's deepest secret, but rumors of its activities filtered through the bank's managerial level with chilling effectiveness. Senior bankers voice fears that they will be financially ruined or physically maimed -- even killed -- if they are found talking about B.C.C.I.'s activities. High-level bank officers know what happened to a Karachi-based protocol officer whom the black network suspected of unreliability last year. "They found he had been trying to liquidate his assets and quietly sell his house," says Mustafa. "So, first they killed his brother, and then they sent brigands to rape his wife. He fled to the U.S., where he is hiding." U.S. investigators confirm the account…

Businessmen who pursued shady deals with B.C.C.I. are just as frightened. "Look," says an arms dealer, "these people work hand in hand with the drug cartels; they can have anybody killed. I personally know one fellow who got crossed up with B.C.C.I., and he is a cripple now. A bunch of thugs beat him nearly to death, and he knows who ordered it and why. He's not about to talk." Currently the black units have focused their scrutiny and intimidation on investigators. "Our own people have been staked out or followed, and we suspect tapped telephones," says a New York law-enforcement officer.

The black unit's … primary purpose was to foster a global looting operation that bilked depositors of billions of dollars. Price Waterhouse, the accounting firm whose audit triggered the worldwide seizure of B.C.C.I. assets earlier this month, says the disarray is so extreme that the firm cannot even put together a coherent financial statement. But investigators believe $10 billion or more is missing, fully half of B.C.C.I.'s worldwide assets.

…
B.C.C.I.'s downfall was INEVITABLE because it was ESSENTIALLY A PLANETARY PONZI SCHEME, a rip-off technique pioneered by American flimflam man Charles Ponzi in 1920. B.C.C.I. gathered deposits, looted most of them, but kept enough new deposits flowing in so that there was always sufficient cash on hand to pay anyone who asked for his money. During the years of its most explosive growth in the late 1970s and mid-1980s, B.C.C.I. became a magnet for drug money, capital-flight money, tax-evading money and money from corrupt government officials. B.C.C.I. quickly gained a reputation as a bank that could move money anywhere and hide it without a trace. It was the bank that knew how to get around foreign-exchange rules and falsify letters of credit in support of smuggling. Among its alleged services:

-- In Panama, … the bank systematically helped Noriega loot the national treasury. …

-- In Iraq, B.C.C.I. became one of the principal conduits for money that Saddam Hussein skimmed from national oil revenues during the 1980s. …

-- In Guatemala the collapse of B.C.C.I. has triggered a government probe into a $30 million loan that the bank extended to the country in 1988-89. Government officials told TIME they suspect that some of the money may have gone to pay bribes to stifle a four-year-old investigation of a major B.C.C.I. client, coffee smuggler and arms merchant Munther Bilbeisi…

…
B.C.C.I.'s deposits also disappeared through the black network, which used the money to pay bribes and conduct its weapons and currency deals. According to a former officer, B.C.C.I. bought virtual control of customs officials in ports and air terminals around the world. In the U.S. millions of dollars flowed through B.C.C.I.'s Washington office, allegedly destined TO PAY OFF U.S. OFFICIALS.

The bribes and intelligence connections may offer an explanation for the STARTLING REGULATORY INACTION. The Justice Department has hindered an investigation by Massachusetts Senator John Kerry, whose Subcommittee on Terrorism, Narcotics and International Operations was the first to probe B.C.C.I.'s illegal operations. According to Kerry, the Justice Department has refused to provide documents and has blocked a deposition by a key witness, citing interference with its own investigation of B.C.C.I. To date, however, the Justice Department investigation in Washington has issued only one subpoena. "We have had a lot of difficulty getting any answers at all out of Justice," says Kerry. "We've been shuffled back and forth so many times between bureaus, trying to find somebody who was accountable. These things are very serious. What's shocking is that more energy hasn't been expended. Somebody consciously or negligently took their eyes off the ball in this investigation." According to Jack Blum, Kerry's chief investigator in 1988-89, the lack of cooperation was so pervasive and so successful in frustrating his efforts to investigate B.C.C.I. that he now says he believes it was part of a deliberate strategy. Says Blum: "There's no question in my mind that it's a calculated effort inside the Federal Government to limit the investigation. The only issue is whether it's a result of high-level corruption or IF IT'S DESIGNED TO HIDE ILLEGAL GOVERNMENT ACTIVITIES."

… the evidence of a cover-up is mounting:

-- In one of the most mysterious events in the case, B.C.C.I. bank records from Panama City relating to Noriega "disappeared" in transit to Washington while under guard by the Drug Enforcement Administration. After an internal investigation, the DEA said it had no idea what had happened to the documents.

-- Lloyd's of London, which is enmeshed in a racketeering lawsuit against B.C.C.I., has fruitlessly made offers to provide evidence of bribery and kickbacks and has made "repeated pleas" to U.S. Attorneys in Miami and New Orleans to seize B.C.C.I. records. Lloyd's accuses B.C.C.I. of taking part in smuggling operations and falsifying shipping documents. The insurance underwriters offered the results of their voluminous research into the bank's illegal activities. The Justice Department attorneys ignored the offers, Lloyd's says.

-- The U.S. Attorney General has assigned only a handful of FBI agents to its Washington grand jury investigation of B.C.C.I.'s relationship to First American Bankshares. The department's main probe of B.C.C.I. itself is being handled by a sole Assistant U.S. Attorney in Tampa, who has recently been assigned another major case. Similar understaffing is evident in a Miami grand jury probe of the relationship between B.C.C.I. and the CenTrust savings and loan, whose failure is estimated to cost taxpayers $2 billion. This may help account for the fact that A 16-MONTH INVESTIGATION HAS YIELDED NO INDICTMENTS.

…
Still to be probed, with potentially explosive results, is B.C.C.I.'s Washington office. Sources have told TIME that one of B.C.C.I.'s Washington representatives distributed millions of dollars in payoffs to U.S. officials during the past decade. If that is true, THE BANKER'S BLACK BOOK MAY BE THE SINGLE HOTTEST SOURCE SINCE DEEP THROAT IN THE WATERGATE INVESTIGATION. …

IMPLICATIONS: B.C.C.I. was a FASCINATING fraud. It had EVERYTHING:

1) "A PLANETARY PONZI SCHEME"
2) Corrupt dealing with every crook on the planet (Manuel Noriega, Ferdinand Marcos, Saddam Hussein and the Colombian drug barons, etc)
3) Fraud involving high US government officials like former U.S. Defense Secretary Clark Clifford.
4) More spycraft than any James Bond movie (the CIA, the Mafia, a covert "black network", covert operations, etc…).
5) A connection to Iran-Contra.
6) Millions in bribes to politicians around the world, especially in Washington.
7) A massive, clear-as-day, government cover-up.
8) Torture, murder, spying, drug trafficking, money-laundering, and every type of crime imaginable.
9) Etc…

WHY DON'T YOU KNOW ABOUT IT?

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Media blackouts don't just cover government frauds. The basic background/historical knowledge necessary to understand the frauds is also blacked out, as is any knowledge which might undermine the dollar by suggesting future inflation (ie: how China's dollar peg works). As a result, the average American is amazingly uninformed about how the world really works. I am talking about the real mechanics behind the scenes (ie: how our monetary system works, how clearing in equity market works, who is in charge of defending the dollar (it isn't the fed), etc). This general lack of understanding makes it frustratingly difficult to have any serious discussion about government fraud (how do explain murder to someone who doesn't understand the concept of death?).

Another affect of keeping the world uninformed is that it hides the government's motive to commit fraud. Without understanding how sharply the government's self-interest diverges from their own, it is hard for people to accept government dishonesty.
Consider, for example, how the government benefits profits from the "war on drugs."

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MEDIA BLACKOUT: The profits of the "war on drugs"

Crackdown On Drugs Profitable

Crackdown on drugs profitable
Bangor Daily News - Google News Archive - Oct 19, 1982
…
Between Jan. 1, 1981. and Sept 30. 1982, US. Customs agents confiscated 699 boats, 503 cars and trucks and 271 planes worth a total of $57.5 million during drug raids in 11 Southeastern states.
…
Most of the seized goods nave been or will be sold at public auctions, said Kitty Pryor. a spokeswoman for the customs agency. THE PROCEEDS ARE THEN TUNNELED INTO THE U.S. GOVERNMENT'S GENERAL TREASURY.

"We are a MONEY-MAKING AGENCY FOR THE U.S. GOVERNMENT," Ms. Pryor said.
…

Restraining Property Seizures

Restraining Property Seizures
Published: December 17, 1993

… as the Supreme Court is beginning to suspect, such seizures can be abused to raise revenues.

Explaining the need for legal safeguards … , the high court cited a 1990 Justice Department memorandum to its far-flung agents. "We must significantly increase production to reach OUR BUDGET TARGET," the memo said. "Failure to achieve the $470 million projection would expose the Department's forfeiture program to criticism and undermine confidence in our budget projections."

When the Government has a strong economic motive to grab a person's house for budget-balancing purposes, the courts need to be vigilant…

Google Archive News results for "forfeiture program" drug



http://www.fear.org/

… Based on twelve months of covert observation from within narcotics enforcement agencies, Drug Enforcement's Double-Edged Sword: An Assessment of Asset Forfeiture Programs described forfeiture as a "dysfunctional policy" that forces law enforcement agencies to subordinate justice to profit.

The Double-Edged Sword undercover researcher observed agencies abandon investigations of suspects they knew were trafficking large amounts of contraband simply because the case was not profitable. …  The report states: "EFFICIENCY IS MEASURED BY THE AMOUNT OF MONEY SEIZED RATHER THAN IMPACT ON DRUG TRAFFICKING."

… More importantly, THE NARCOTICS UNITS STUDIED PREFERRED SEIZING CASH intended for purchase of drugs supplied by the police, RATHER THAN CONFISCATING DRUGS ALREADY ON THE STREET. …

In one case an agency … [postponed] making the bust UNTIL AFTER THE MAJORITY OF THE DRUG SHIPMENT WAS CONVERTED TO CASH. This case was only one of many in which THE GOAL WAS PROFIT RATHER THAN REDUCING THE SUPPLY OF DRUGS REACHING THE STREET. 
…

IMPLICATIONS: Once you understand all the ways the government profits from the fighting "war on drugs", the fact that the US is supervising the production of 90% of the world's heroin in Afghanistan makes a lot more sense.

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To explain government fraud today, it is first necessary to spend a considerable about of time providing missing background information (ie: deficits did matter before 1980). Only then can one seriously start talking about the actual fraud.

2) Smear/Disinformation Campaigns

Fairly oftern, as with Gary Webb's Dark Alliance series, stories developed a life of their own despite news blackouts imposed by major media. This is when smear/disinformation campaigns begin to refute reality. Undesired stories are brutally assaulted and discredited to the point where they can be ignored once again.

These disinformation campaigns make a complete mockery of the concept of a "free press". Inconvenient facts are portrayed as fiction. New "facts" and "evidence" are conjured out of the nether. The story under attack is portrayed as lunacy, and the people involved are ridiculed as conspiracy-mongers. It works pretty damn well too…

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SMEAR/DISINFORMATION: Discrediting Gary Webb and Dark Alliance.

Below is the second half of the Gary Webb's article, which describes how the "Dark Alliance" series was discredited.

…
Some Washington journalists were alarmed.  Where is the rebuttal?  Why hasn't the media risen in revolt against this story?"  CNN's  Reliable Sources, Kalb EXPRESSED FRUSTRATION THAT THE STORY WAS CONTINUING TO GET OUT DESPITE THE BEST EFFORTS OF THE PRESS TO IGNORE IT. "It isn't a story  that simply got lost" Kalb complained, during the show, "It, in fact, has resonated and echoed and echoed and the question is, Where is the media knocking it down?"

It was an interesting comment because it foretold the way the mainstream press finally did respond to Dark Alliance.  A revolt by the biggest newspapers in the country, something columnist Alexander Cockburn would later describe in his book White Out as "ONE OF THE MOST VENOMOUS AND FACTUALLY INSANE ASSAULTS...IN LIVING MEMORY."

I remember arguing with a producer at an CNN news show shortly before I was to go on the air that I didn't want him asking me to explain "my allegations" because  these stories WEREN'T my allegations.  I was a journalist reporting events that had actually occurred.  You could document them, and we had.

"Well, you got understand my position," he mumbled.  "The trafficking, CNN's position is that these events may not have happed?"  I snapped,  "What the fuck is that?  WHEN DID WE GIVE THE CIA THE POWER TO DEFINE REALITY?"

After nearly a month of silence, the CIA responded.  It admitted nothing.  It was confident that its agents weren't dealing drugs.  But to dispel all the rumors and unkind suggestions my series had raised, the agency would have its inspector general take a look into the matter.

The black community greeted this pronouncement with unconcealed contempt.  "You think you can come down here and tell us that you're going to investigate yourselves, and expect us to believe something is actually gone happen?"  one woman yelled at CIA director John Dutch, who appeared in Compote, California, in November 1996 to personally promise the city a thorough investigation.  "How stupid do you think we are?"

…
Ultimately, it was public pressure that forced the national newspapers into the fray.  Protests were held outside the building by media watchdogs and citizens groups, who wondered how the Los Angeles Times building by media watchdogs and citizens groups, who wondered how the Times could continue to ignore a story that had such an impact on the city's black neighborhoods.  In Washington, black media outlets were ridiculing the Post for its silence, considering the importance the story held for most of Washington's citizens.

When the newspapers of record spoke, THEY SPOKE IN UNISON. Between October and November, the  Washington Post,  the New York Times and the Los Angeles Times published lengthy stories about the CIA drug issue, but spent precious little time exploring the CIA's activities.  Instead, my reporting and I became the focus of their scrutiny.  After looking into the issue for several weeks, the official conclusion reached by all three papers: Much ado about nothing.  No story here.  Nothing worth pursuing.  The series was "flawed," they contended.  How?

Well, there was no evidence the CIA knew anything about it, according to unnamed CIA officials the newspapers spoke to.  …

Additionally, it was argues, this quasi-Contra drug ring was small potatoes. …  Eventually, THOSE ASSERTIONS WOULD BE REFUTED by internal records released by both the CIA and the Justice Department, but at the time they were classified.

…
Privately, though, my editors were getting nervous.  Never before had the three biggest papers devoted such energy to kicking the hell out of a story by another newspaper. …  My follow-up stories were required to contain a boilerplate disclaimer that said we were not accusing the CIA of direct knowledge, even though the facts strongly suggested CIA complicity.  …

Ironically, the evidence we were continuing to gather WAS MAKING THE STORY EVEN STRONGER.  Long-missing police records surfaced.  Cops who had tried to investigate the Contra drug ring and were rebuffed came forward.  We tracked down one of the Contras who personally delivered drug money to CIA agents, and he identified them by name, on the record.  He also confirmed that the amounts he'd carried to Miami and Costa Rica were in the millions.  More records were declassified from the Iran-Contra files, showing that CONTEMPORANEOUS KNOWLEDGE OF THIS DRUG OPERATION REACHED TO THE TOP LEVELS OF THE CIA'S COVERT OPERATIONS DIVISION, as well as into the DEA and the FBI.

But the attacks from the other newspapers had taken the wind out of my editors' sails.  Despite the advances we were making on the story, the criticism continued.  We were being "irresponsible" by printing stories … suggesting CIA complicity without any admissions of "a smoking gun."  The series was now described frequently as "discredited," even though nothing had surfaced showing that any of the facts were incorrect.  …
…
A few months later, the Mercury News officially backed away from Dark Alliance, publishing a long column by Jerry Ceppos apologizing for "shortcomings" in the series.  While insisting that the paper stood behind its "core findings," we didn't have proof that top CIA officials knew about this, and we didn't have proof that millions of dollars flowed from this drug ring, Ceppos declared, EVEN THOUGH WE DID AND WEREN'T PRINTING IT.  … The New York Times hailed Ceppos for setting a brave new standard for dealing with "egregious errors" and splashed his apology on their front page, the first time the series had ever been mentioned there.

I quit the Mercury News not too long after that.

When the CIA and Justice Department finished their internal investigations two years later, the classified documents that were released showed just how badly I had fucked up.  THE CIA'S KNOWLEDGE AND INVOLVEMENT HAD BEEN FAR GREATER THAN I'D EVER IMAGINED. The drug ring was even bigger than I had portrayed.  The involvement between the CIA agents running the Contras and the drug traffickers was closer than I had written.  And AGENTS AND OFFICIALS OF THE DEA HAD PROTECTED THE TRAFFICKERS FROM ARREST, something I'd not been allowed to print.  The CIA also admitted having direct involvement with about four dozen other drug traffickers or their companies, and that this too had been known and effectively condoned by the CIA's top brass.      

In fact, at the start of the Contra war, the CIA and Justice Department had worked out an unusual agreement that permitted the CIA not to have to report allegations of drug trafficking by its agents to the Justice Department.  It was a curious loophole in the law, to say the least.

DESPITE THOSE RATHER STUNNING ADMISSIONS, the internal investigations were portrayed in the press as having uncovered no evidence of  CIA involvement in drug trafficking …  Even though their relationship with the agency was a matter of public record, none of the press reports I saw celebrating the CIA's self-absolution bothered to address this gaping hole in the official story.  THE CIA HAD INVESTIGATED ITSELF AND CLEARED ITSELF, and THE PRESS WAS HAPPY TO LET THINGS STAY THAT WAY. No independent investigation was done.

The funny thing was, despite all the furor, the facts of the story never changed, EXCEPT TO BECOME MORE DAMNING. But the perception of them did, and in this case, that is really all that mattered.  Once a story became "discredited," the rest of the media shied away from it.  Dark Alliance was consigned to the dustbin of history, viewed as an Internet conspiracy theory that had been thoroughly disproved by more responsible news organizations.

Why did it occur?  Primarily because the series presented dangerous ideas.  It suggested that crimes of state had been committed.  If the story was true, it meant the federal government bore some responsibility, however indirect, for the flood of crack that coursed through black neighborhoods in the 1980s.  And that is something no government can ever admit to, particularly one that is busily promoting a multibillion-dollar-a-year War on Drugs.

But what of the press?  WHY DID OUR FREE AND INDEPENDENT MEDIA PARTICIPATE WITH THE GOVERNMENT'S DISINFORMATION CAMPAIGN? It had probably as many reasons as the CIA.  The Contra-drug story was something the top papers had dismissed as sheer fantasy only a few years earlier.  They had not only been wrong, they had been TERRIBLY WRONG, … Many of the same reporters who declined to write about Contra drug trafficking in the 1980s -- or wrote dismissively about it -- were trotted out once again to do damage control.

Second, … by turning on the Mercury News, the big boys were reminding the rest of the flock who really runs the newspaper business, Internet or no Internet, and the extends to which they will go to protect that power, even if it meant REARRANGING REALITY TO SUIT THEM.

Finally, as I discovered while researching the book I eventually wrote about this story, THE NATIONAL NEWS ORGANIZATIONS HAVE HAD A LONG, DISAPPOINTING HISTORY OF PLAYING FOOTSIE WITH THE CIA, printing unsubstantiated agency leaks, giving agents journalistic cover, and downplaying or attacking stories and ideas damaging to the agency.  I can only speculate as to why this occurs, but I am not naive enough to believe it is mere coincidence.

THE SCARY THING ABOUT THIS COLLUSION BETWEEN THE PRESS AND THE POWERFUL IS THAT IT WORKS SO WELL. In this case, the government's denials and promises to pursue the truth didn't work.  The public didn't accept them, for obvious reasons, an the clamor for an independent investigation continued to grow.  But after the government's supposed watchdogs weighed in, public opinion became divided and confused, the movement to force congressional hearings lost steam and, once enough people came to believe the stories were false or exaggerated, the issue could safely be put back at the bottom of the dead-story pile, hopefully never to rise again.

Do we have a free press today?  Sure we do.  It's free to report all the sex scandals it wants, all the stock market news we can handle, every new health fad that comes down the pike, and every celebrity marriage or divorce that happens.  But WHEN IT COMES TO THE REAL DOWN AND DIRTY STUFF -- stories like Tailwind, the October Surprise, the El Mozote massacre, corporate corruption, or CIA involvement in drug trafficking -- THAT'S WHERE WE BEGIN TO SEE THE LIMITS OF OUR FREEDOMS.  In today's media environment, sadly, SUCH STORIES ARE NOT EVEN OPEN FOR DISCUSSION.

Back in 1938, when fascism was sweeping Europe, legendary investigative reporter George Seldes observed (in his book, The Lords of the Press) that "IT IS POSSIBLE TO FOOL ALL THE PEOPLE ALL THE TIME -- WHEN GOVERNMENT AND PRESS COOPERATE."  Unfortunately, WE HAVE REACHED THAT POINT.

The Wikipedia entry below highlights the unfairness of the disinformation campaign against Gary Webb.

According to historian Mark Fenster, the common view among journalists and researchers who have reviewed Webb's stories and have expertise on the Contras and the CIA's role in Nicaragua is that the stories … were NEITHER FALSE NOR FANTASTIC. This is true whether the commentators are sympathetic to or critical of Webb. The historical consensus -- to the extent that such a thing is possible concerning controversial covert operations -- indicate that the basic outlines of the Mercury News stories were largely correct.

In 2006 the LA Times published The Truth in `Dark Alliance,' in which L.A. Times Managing Editor Leo Wolinsky is quoted saying "in some ways, Gary got too much blame... He did exactly what you expect from a great investigative reporter." The article surveys mainstream reporting at the time of Webb's pieces and states that while … articles by the New York Times "didn't include the success he achieved or the wrongs he righted — and they were considerable" according to Walt Bogdanich, now a New York Times editor, who had known Webb earlier.

The LA Times piece criticizes its own unfair portrayal of Webb -- "we dropped the ball" -- and notes that "spurred on by Webb's story, the CIA conducted an internal investigation that acknowledged in March 1998 that THE AGENCY HAD COVERED UP CONTRA DRUG TRAFFICKING FOR MORE THAN A DECADE " and concludes that "History will tell if Webb receives the credit he's due for prodding the CIA to acknowledge its shameful collaboration with drug dealers. …

Writing in 2005 in the Chicago Tribune, about "the Dangers of Questioning Government Actions," Don Wycliff, the Tribune's public editor, wrote, "I still think Gary Webb had it mostly right. … he got the treatment that always comes to those who dare question aloud the bona fides of the establishment: FIRST HE GOT MISREPRESENTED -- his suggestion that the CIA tolerated the Contras' cocaine trading became an allegation that the agency itself was involved in the drug trade. THEN HE WAS RIDICULED AS A CONSPIRACY-MONGER."

Media Critic Norman Solomon's analysis, "The Establishment's Papers Do Damage Control for the CIA," includes various corroborating evidence that A WITCH-HUNT TO DISCREDIT WEBB was pursued MORE VIGOROUSLY THAN THE TRUTH of some of Webb's allegations, ……

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Below are two more examples of smear/disinformation campaigns.

^^^^^^^^^^^^^
SMEAR/DISINFORMATION: Discrediting Catherine Austin Fitts and Community Wizard.

Google Archive News results for "Austin Fitts" HUD

defaults in areas where the CIA has admitted to facilitating cocaine trafficking

October 31, 2001
The Narco Money Map

…
ONE DAY I was a wealthy entrepreneur with a beautiful home, a successful business and money in the bank. I had been … Assistant Secretary of Housing-Federal Housing Commissioner during the Bush Administration. I had been invited to serve as a governor of the Federal Reserve Board and instead started my own company in Washington, The Hamilton Securities Group. …

One of my software tool innovations, Community Wizard, helped communities access data about how all the money works in their place. Accessible through the World Wide Web, Community Wizard was illuminating an unusual pattern of defaults on HUD mortgages and other government and homeowner losses IN AREAS IN WHICH THE CIA HAD ADMITTED TO FACILITATING COCAINE TRAFFICKING BY IRAN CONTRA SUPPORTERS.
...
THE NEXT DAY I was hunted, living through 18 audits and investigations and A SMEAR CAMPAIGN directed not just at me but also at members of my family, colleagues and friends who helped me. I believe that THE SMEAR CAMPAIGN originated at the highest levels. …

Community Wizard

In late 1995, The Hamilton Securities Group began work on Community Wizard…


Community Wizard Brochure
(Photo courtesy The Hamilton Securities Group)

…
As part of our efforts, we started to publish maps on the Internet of defaulted HUD mortgages in places with significant defaulted mortgage portfolios…


The Map of South Central Los Angeles, California
(Map courtesy The Hamilton Securities Group)

One of the maps we put up in the spring of 1996 showed the properties which were financed with defaulted HUD single-family mortgages in South Central Los Angeles, California. The map showed significant HUD defaults and losses in the same area as the crack cocaine epidemic described by Gary Webb in Dark Alliance. …

Fake News

Real Deal News Vs Fake News
By Catherine Austin Fitts

… In my specific case, The New York Times, the Washington Post, the Washington Times and the Wall Street Journal helped to destroy my company, my personal fortune and faciliate two and half years of physical harrasment and survillance of me. Short and sweet, they helped to try to kill me.

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^^^^^^^^^^^^^
SMEAR/DISINFORMATION: Discrediting INS agent Joe Occhipinti

Google Archive News results for "Joseph Occhipinti" Bodega

Joe vs … the CIA

Joe vs. The Volcano… and The Avalanche and The Steamroller and The Machine and City Hall and… the CIA
Drugwar.com - July, 1999
by Michael C. Ruppert

… Senior INS agent Joe Occhipinti knew that most of the drug trafficking and money-laundering by Dominicans in New York City relied upon … tiny family owned markets, known as bodegas. …

... But what he didn't know as he began … approaching bodega … was that he had taken on the Democratic political machine of New York City … and the Central Intelligence Agency.
…
… after more than forty arrests and the seizure of more than a million dollars in drug cash … Occhipinti was indicted on 25 counts of violating the civil rights of 12 plaintiffs.

Occhipinti's trial was a sham and the abuses of law were so egregious as to arouse widespread support for the beleaguered agent. Exclusionary rules were ignored. Defense witnesses were intimidated… one journalist were brutally murdered [See Archive News results for "Manuel de Dios" Occhipinti]. Conflicts of interest were overlooked. Perjured affidavits were allowed…

… the civil rights violations alleged at trial did not include A SINGLE ACT OF BRUTALITY, VIOLENCE, CORRUPTION OR DISHONESTY. … In June of 1991, Occhipinti was sentenced to a 37 month prison term for civil rights violations and thrown into a prison housing many of the Dominican drug lords he had once investigated…

We have lost the war against drugs

occhipinti got too close
by Preston Peet - October 18, 2000

… With 22 years of service, and 78 medals and commendations to his credit, Occhipinti was one of the highest decorated federal law enforcement officers in US history…

On July 27th 2000, Occhipinti testified before the House Subcommittee on Commercial and Administrative Law … A not-so-optimistic Occhipinti told the committee, "I would like to conclude by saying we have LOST THE WAR AGAINST DRUGS… My colleagues in law enforcement tell me every day that they are more afraid of being prosecuted and railroaded by the our Justice Department, then by putting their lives in harms way."

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(If this article ever gains mainstream exposure, it will be attacked in the same aggressive manner as Gary Webb's Dark Alliance.)

3) Spreading False Narratives

After suppressing undesirable realities through blackouts and smear/disinformation, the media helps rewrite history, creating false narratives friendly to the government. Crimes and suspicious events are explained using wild stories unsupported by any evidence (ie: North Korea is producing the "supernotes").

Robert Parry (who broke many of the Iran-Contra stories in the 1980s) explains the dangers of false narratives.

Why We Write
By Robert Parry
November 13, 2007

After three decades as a Washington journalist, one lesson stands out almost above all others: false narratives get good people killed…

In trying to understand what's gone wrong with the U.S. political system over those three decades, I have come to view the core problem as the use of mass media to inject Americans with a SYNTHETIC REALITY that misrepresents recent history, exaggerates external dangers and ridicules the few citizens who object.

The false narratives can establish broad themes — such as how the Cold War was "won" — or narrower questions — like whether Saddam Hussein possessed weapons of mass destruction and planned to share them with al-Qaeda.

Though it's easier to sell distortions about events overseas than those closer to home, domestic false narratives can be especially effective by concentrating derision on, say, a dissenting politician who speaks up at an inopportune time or by spreading distrust of a journalist reporting an unpopular story.

…
While this point about the danger of false narratives may seem theoretical or even esoteric to some, it is actually quite practical and immediate.

THERE IS NO MORE EFFECTIVE WAY TO SHORT-CIRCUIT DEMOCRACY than to get large segments of the population to buy into A MADE-UP REALITY, while keeping other citizens so uncertain of the truth THAT THEY ARE POLITICALLY PARALYZED.
…

Thanks to false narratives, Americans keep giving the government more power to solve "problems" largely/entirely of the government's own making. Meanwhile, the problems (drugs, terrorisms, financial crises, the economy, etc…) continue to grown worse…

^^^^^^^^^^^^^
FALSE NARRATIVE: The threat of the Soviet-juggernaut.

Below is the second half of the Robert Parry's article, which explains how the justification for the CIA's anticommunist activities, including the Nicaragua contra insurgency, was artificially manufactured.

…
At the time [1976], CIA analysts were detecting deepening economic troubles and technological failures inside the Soviet Union. One senior CIA officer told me that the agency's best assets in Moscow were describing A DYSFUNCTIONAL SYSTEM SLIDING TOWARD COLLAPSE.

… in defiance of the CIA's evidence, "Team B" reached AN ALARMIST CONCLUSION ON SOVIET CAPABILITIES AND INTENT, a view that was then popularized by the influential Committee on the Present Danger. They warned of a "window of vulnerability" through which the Soviets could launch an annihilating first strike or blackmail the United States into surrender.

…
By the 1980s, after Ronald Reagan's election, many young neocons — the likes of Elliott Abrams and Robert Kagan — were getting credentialed into the U.S. government. Meanwhile, at CIA, hard-line Cold Warrior, Director William Casey, and his deputy, Robert Gates, were PURGING THE OLD ANALYSTS WHO KEPT SEEING SIGNS OF SOVIET DECLINE.

The preferred narrative was that the Soviet juggernaut, which was supposedly encircling the United States, required a massive U.S. military build-up combined with SUPPORT FOR BRUTAL RIGHT-WING REGIMES AND INSTIGATION OF ANTICOMMUNIST INSURGENCIES AROUND THE WORLD.

So … the Reagan administration also backed "death squad" regimes in Guatemala and El Salvador, TERRORIST-STYLE INSURGENCIES IN NICARAGUA AND ANGOLA, and Islamic fundamentalists in Afghanistan …

As the Soviet Union continued its decline through the 1980s, the Reagan administration kept its eyes wide shut. The housebroken CIA analytical division knew better than to continue challenging the Soviet-juggernaut narrative.

Ironically, when the Soviet empire broke apart from 1989 to 1991, the CIA analysts came in for ridicule for "missing" the Soviet collapse.

… the accepted narrative essentially JUSTIFIED ALL THE CARNAGE AND CORRUPTION AS ESSENTIAL TO VICTORY.
…

IMPLICATIONS: The CIA "anti-communist" campaign (death squads, etc…) in the 1980s was never about fighting communism. It was done for some other purpose.

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Below is an example of how many false narratives can be found in a single news report on a serious subject.

Foxnews - We Tolerate The Cultivation Of Opium Poppies


Geraldo Rivera talks to troops in Afganistan about the cultivation of opium poppies.

Geraldo Rivera — "The marines brilliantly executed the invaded of… this town in the middle of HELMAND province… the hard part now is governing this province … A province that has become addicted to opium in many, many ways. That is the principle crop that is being grown here. The Taliban lend the farmers the money. They are indebted to the Taliban. They have to grow the opium…"

Geraldo Rivera — "Now the population … have these opium fields they have these opium fields, and we are tolerating it... We are tolerating the cultivation of the opium because we know that if we were to destroy it now, the population would turn against the marines and it would be a real security risk"

Geraldo Rivera — "Let me introduce Lieutenant Colonel Bryan Christmas. … I know that you care deeply about this contradiction, the fact that here you have one of the best fighting forces in the world ever mounted and, in a sense, you are watching as opium is being grown."

Lt. Col. Bryan Christmas — "Frankly, it's part of their culture. It's what they do. We provide them security. We provide them resources…"

Geraldo Rivera — "I fault the politicians for putting them in this position... where we can't eradicate these crops for security reasons"

  
  ^^^^^^^^^^^^^
FALSE NARRATIVE: Afghan opium production is nothing more than a "human interest" story (how marines "care deeply about this contradiction").

THE REALITY: Afghan opium production has direct impact on the lives of millions of Americans.

NOT MENTIONED: The US soldiers are helping produce most of the world's heroin (the word "heroin" is mentioned only once in the fox news report).

FACTBOX-Key facts and figures about Afghanistan
18 Jul 2010
…
* AFGHANISTAN PRODUCES 92 PERCENT OF THE WORLD'S OPIUM, a thick paste from poppy USED TO MAKE HEROIN, according to the latest U.N. Office on Drugs and Crime report.

NOT MENTIONED: This heroin is killing up to a hundred thousand people each year.

Afghan opium feeding Europe, Russia, Iran addicts
Center for Defense Information - Dec 2, 2001
By Michelle Nichols

UNITED NATIONS (Reuters) - … Heroin and opium cause up to 100,000 deaths a year and are helping spread HIV at an unprecedented rate, the [U.N. Office on Drugs and Crime] report found.
…

NOT MENTIONED: Afghanistan's opium/heroin production is skyrocketing.

Afghanistan's disturbing poppy explosion / U.N. says nation tops Colombia as capital of illicit narcotics
San Francisco Chronicle - Nov 19, 2004
By Colin Freeman,

Kabul, Afghanistan — … a report by the United Nations … says production of opium and its derivative, HEROIN, HAS ROCKETED TO NEAR RECORD LEVELS.

… AFGHANISTAN HAS SURPASSED COLOMBIA AS THE WORLD'S BIGGEST GROSS PRODUCER OF ILLICIT NARCOTICS…

NOT MENTIONED: Heroin from Afghanistan is pouring into the U.S.

Heroin From Afghanistan Is Cutting A Deadly Path
It's potent and cheap, and pouring into the U.S., so warnings go out.
Los Angeles Times - Dec 26, 2006
By Garrett Therolf

SUPPLIES OF HIGHLY POTENT AFGHAN HEROIN IN THE UNITED STATES ARE GROWING so fast that the pure white powder is rapidly overtaking lower-quality Mexican heroin, prompting fears of increased addiction and overdoses.

Heroin-related deaths in Los Angeles County soared from 137 in 2002 to 239 in 2005, A JUMP OF NEARLY 75% IN THREE YEARS…, experts said.
…
"The rise of heroin FROM AFGHANISTAN is our biggest rising threat in the fight against narcotics," said Orange County sheriff's spokesman Jim Amormino. "We are seeing more seizures and more overdoses."

According to a Drug Enforcement Administration report obtained by The Times, Afghanistan's poppy fields have become the fastest-growing source of heroin in the United States. …
…
Not only is more heroin being produced from Afghan poppies coming into the United States, it is also THE PUREST IN THE WORLD, according to the DEA's National Drug Intelligence Center.
…
This potent heroin, which the DEA says sells for about $90 a gram in Southern California, has prompted warnings from some officials who deal with addicts… An unexpectedly powerful bundle of heroin … can be deadly.
…
The Department of Homeland Security … reported skyrocketing numbers of seizures of heroin arriving at U.S. airports and seaports from India, … a major transshipment point for Afghan drugs.

The seizure of heroin packages from India increased from zero in 2003 to 433 in 2005 -- MORE THAN 80 PERCENT OF TOTAL HEROIN MAIL SEIZURES THAT YEAR.
…
"There is a different kind of heroin now," said Eric Wade, a 32-year-old recovering addict in Portland, Ore. "It is very, very strong, and it is cheaper than the other stuff. …"
…

America's Growing Heroin Problem

America's Growing Heroin Problem
Fast Company - May 25, 2010
BY Cliff Kuang



Heroin is, apparently, roaring back to life in America. …

… To start with, HEROIN REALLY IS KILLING MORE AND MORE PEOPLE ACROSS THE U.S.… And the numbers … suggest A MASSIVE INFLUX OF PURER VERSIONS OF THE DRUG:


…

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^^^^^^^^^^^^^
FALSE NARRATIVE: Afghanistan is addicted to opium ("It's part of their culture. It's what they do.")

THE REALITY: Justifying Afghanistan's opium cultivation by saying it is "part of their culture" is misleading. The opium poppy had been cultivated for centuries in virtually every country between Bulgaria and China.

… In the case of opium, the opium poppy (Papaver somniferum) had been cultivated for centuries in virtually every country between Bulgaria and China, including Pakistan, Burma, Laos, India and Afghanistan. …

So why does Alfganistan produce so much compared to all the other countries with an opium history? Well, if you remember from John Stockwell's article above, it was Afganistan, not Nicaragua, which was the largest CIA covert operation in the 1980s.

How the CIA stoked the region's heroin trade

First Published 2009-10-30
Brought to You by CIA : America's Drug Crisis
…
AN INTEGRAL part of CIA intervention in Afghanistan in the 1980s was a huge increase in the production of opium and heroin. …

... AFGHAN OPIUM PRODUCTION TRIPLED BETWEEN 1979 AND 1982. … by 1981 the Afghan heroin producers had captured 60 percent of the heroin market in Western Europe and the United States (these are UN and DEA figures).

… by 1994, Afghanistan had surpassed Burma as the world's number one supplier of raw opium. …

Before the CIA's covert war against the Soviets, Afghanistan produced little of the world's opium.



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^^^^^^^^^^^^^
FALSE NARRATIVE: The Taliban make the farmers grow the opium and use profits for terrorism.

THE REALITY: In 2001 when the Taliban were in charge, they successfully banned the production of opium.

Taliban's Ban On Poppy A Success, U.S. Aides Say
By BARBARA CROSSETTE
Published: May 20, 2001

UNITED NATIONS, May 18 — The first American narcotics experts to go to Afghanistan under Taliban rule have concluded that the movement's ban on opium-poppy cultivation appears to have WIPED OUT THE WORLD'S LARGEST CROP IN LESS THAN A YEAR, officials said today.
…
The sudden turnaround … left international drug experts stunned when reports of NEAR-TOTAL ERADICATION BEGAN TO COME IN EARLIER THIS YEAR…
…
At the State Department, James P. Callahan … described … how the Taliban had applied and enforced the ban. … ''the Taliban used a system of consensus-building.''

They framed the ban ''in very religious terms,'' citing Islamic prohibitions against drugs, and that made it hard to defy…

… farmers said they would rather starve than return to poppy cultivation -- and some of them will, experts say.
…

Google Archive News results for Taliban Ban opium production

Opium production in HELMAND province (2001 vs today)

(Fox video above is from Helmand province)

After US Invasion Afghanistan Now Produces 93% Of World's Opium
by Josh Arizona | May 21, 2010 at 03:23 pm

… The Taliban's ban on farming the opium poppy before the US invasion was so effective, that HELMAND province recorded no opium cultivation in the 2001. …

UN Horrified By Surge in Opium Trade in Helmand  

Despite 7,000 UK troops, Taliban-backed production up 48%
Buzzle - Aug 27, 2007
…
The record crop was fuelled by HELMAND, where, despite the deployment of 7,000 British soldiers and millions of pounds in development spending, opium cultivation surged by 48%. [Afghanistan's "record opium production" is not happening in Taliban controlled provinces. It is happening in US and British controlled provinces.]

Afghanistan: Heroin producer to the world  

July 5, 2007
…
In its massive 2007 World Drug Report, the UN agency says there is strong evidence of a downward trend … in the production of the world's most popular illicit drugs WITH ONE NOTABLE EXCEPTION — HEROIN, most of it flowing FROM ONE OUT-OF-CONTROL PROVINCE IN SOUTHERN AFGHANISTAN.
…

British/US controlled Helmand province in the south of Afghanistan now produces 50% of the world's opium alone.




IMPLICATIONS: If the Taliban are using heroin profits to buy all the rocket-propelled-grenades and explosives (which are killing US soldiers), why are we helping them grow all these poppies for "security reasons"?

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^^^^^^^^^^^^^
FALSE NARRATIVE: "we can't eradicate these crops for security reasons"

THE REALITY: This argument is not convincing, moral or even accurate.
IVANOV: Breaking the heroin-terror connection

IVANOV: Breaking the heroin-terror connection
Joint Russia-U.S. initiative can eradicate opium that funds extremists
Washington Times - ‎Oct 20, 2010
By Victor Ivanov

… Among NATO countries, civilian deaths from a heroin overdose are 50 times the number of military casualties in the alliance operation in Afghanistan. AFGHAN HEROIN EVENTUALLY ENDS UP IN THE UNITED STATES - RUINING LIVES, DEVASTATING AMERICAN FAMILIES.
…
Early on in their Afghan campaign, the United States and NATO made a decision not to use aerial spraying to eradicate opium plantations. That was based on the assumption that it would alienate the local population. WE CANNOT CONSIDER THE ARGUMENT - that the poppy fields are a vital economic alternative for Afghan farmers, who otherwise would remain without means of livelihood and would fall easy prey to extremists - TO BE CONVINCING, MORAL OR EVEN ACCURATE.

Recent reports by the U.N. Office on Drugs and Crime indicate THE VAST MAJORITY OF AFGHAN FARMERS GROW SOMETHING OTHER THAN POPPIES. Just 6.4 percent of the total population … is involved in poppy cultivation. …

Moscow furious, says US not pushing drug war in Afghanistan

Moscow furious, says US not pushing drug war in Afghanistan
Christian Science Monitor - May 19, 2010
By Fred Weir, Correspondent

Moscow — … "OK, we differ over whether to destroy poppy plantations," Ivanov says, "but why doesn't NATO target the laboratories? There are more than 200 giant laboratories in the Afghan mountains, which produce MORE AND MORE CONCENTRATED DRUGS, and THEY ARE NOT TOUCHED. Our conclusion is that THERE IS NO STRUGGLE AGAINST DRUG PRODUCTION GOING ON AT ALL."
…

NATO ignores Afghanistan 'heroin bomb'



vvvvvvvvvvvvv

THE ENTITY BEHIND THE CONSPIRACY

(see What I have been afraid to blog about: THE ESF AND ITS HISTORY)

In 1934, the Gold Reserve Act established the Exchange Stabilization Fund (ESF) and gave it the unreviewable authority to engage in covert actions in international finance to "stabilizing the foreign exchange value of the dollar." The fraud described above is simply the ESF doing exactly what it was designed to do: stabilizing the value of the dollar through covert actions.

Below the Cato Institute explains the Exchange Stabilization Fund's role in "foreign aid" such as Iran-contra.

…
The ESF: History, Abuse, and Partial Reform.

… By establishing the ESF, section 20 of the Gold Reserve Act gave the secretary of the treasury, … the ability to intervene in foreign exchange markets and make loans aimed at "STABILIZING THE FOREIGN EXCHANGE VALUE OF THE DOLLAR." …

… As one journalist put it, "The only limitation [on ESF spending] has been the sitting Treasury Secretary's imagination." A series of secretaries tapped the ESF to pay the salaries of Central Intelligence Agency … Apparently, spending for ANY PURPOSE REMOTELY RELATED TO THE FOREIGN EXCHANGE VALUE OF THE DOLLAR WAS CONSIDERED LEGITIMATE. …

… the ESF … undermines the separation of powers. … In fact, the Gold Reserve Act itself is of questionable constitutionality, because it gives to the executive branch UNREVIEWABLE AUTHORITY TO ENGAGE IN COVERT ACTIONS IN INTERNATIONAL FINANCE …

Foreign aid has rarely drawn much support in the United States. As a consequence, administrations have attempted to avoid approaching Congress for appropriations for such ventures -- THE IRAN-CONTRA SCHEME being a recent extreme example. The ESF has been A SOURCE OF FUNDS FOR DISCRETIONARY EXECUTIVE BRANCH SPENDING, THE LIKES OF WHICH CONGRESS SOUGHT TO PREVENT. …

Simple isn't it? The Exchange Stabilization Fund has been running the US's "black budget" since before the CIA existed. It shouldn't be surprising to see covert (ESF/CIA) operations designed at "stabilizing the dollar".

FRAUD DRIVEN BY DESPERATION, NOT PROFITS

A common mistake in reaction to all the fraud going on is thinking that it is motivated by profits (ie: greed on Wall Street). This is equivalent of looking at how handsomely Madoff's auditors profited from the Ponzi scheme and concluding that the whole thing was motivated by their greed. Of course, this is wrong. The Ponzi scheme was motivated by Madoff's desperation to avoid going to jail for the rest of his life, and the auditors were simply being bribed. This is what is happening today.

While hundreds of people on Wall Street, in the media, and elsewhere are profiting for their roles in deceiving Americans and the world, this profiting should be regarded as "bribes" for participating in the government's own massive fraud. The underlying reason for everything is the government's desire to prevent inflation (which its deficits should be causing).

"Greedy bankers" aren't corrupting Washington. Washington is corrupting (bribing) "greedy bankers". This anonymous comment from the web sums up the situation nicely.

The system is corrupted and corrupting. It is not reasonable, let alone realistic, to expect saints or martyrs, so to speak, to materialize in sufficient numbers to turn the tide. The system itself is so degenerate, so perverted, top to bottom, that it will never reform itself willingly or voluntarily, especially if the money holds up tolerably well. There is far too much in the way of vested interests, both material and psychological, for the system to face the truth (assuming it even could) and act accordingly. Lies beget more lies, and fraud begets more fraud. The system, I'm afraid, has gone past the point of no return. It must keep the game going at all costs…

THE ESF'S FRAUD WILL COLLAPSE

All ponzi schemes eventually collapse under their own weight once they reach maximum damage. For example, Madoff's fraud ended by itself when he finally ran out of money. Efforts to "stabilize the dollar" have reached this point.

IT WILL END IN A DISCONNECT

This is critical to realize. The ESF's "dollar stabilization" is the same type of fraud as Madoff's ponzi scheme ("delay the day of reckoning"-type) and it will end the same way. There will be a day where the ESF finally "gives up". The markets will freeze (a big "bank holiday"), and, once people understand what is going on, the dollar will be worthless.

By the time a Ponzi scheme is "officially confirmed", it is too late to do anything about it.

About The Fallout

James B. Thomson offers a good explanation about System Stability which gives an idea of what must happen when deficits start mattering again…

… the absence of small earthquakes along a fault line … allows stress to build up and thereby increases the probability that a major quake eventually will occur. Small quakes, like self-correcting market forces, relieve the pressures that accumulate over time. Suppression of these forces through regulatory interference allows the pressure to rise and increases THE MAGNITUDE AND VIOLENCE OF THE RESULTING ADJUSTMENT. …

The US has been suppressing "self-correcting market forces" for decades, with the hidden damage from each federal deficits slowly accumulating. The magnitude and violence of the adjustment back to reality will be a thing of legend…