International Forecaster Weekly

Elitists Leading On An Odyssey Of Economic Ruin

Prices to continue to rise, dollar devaluation threat, and a major loss of buying power is to come, Europe papers over the mess, housing bottom soon to appear, job cuts,

Bob Chapman | December 4, 2010

The price of commodities, particularly food and petroleum products, will be higher in the coming year, which will strain budgets more than ever for those who still have jobs. Unemployment will not get appreciably better and government debt will rise. Government is talking about raising the Social Security retirement age by three years, freezing payments and offering government guaranteed annuities in exchange for those of you that do have retirement plans. Two-thirds of those in and about to retire have only Social Security for 50% of their income. The money collected since 1935 is all gone, having been spent by past politicians. In fact, if you put all present and future commitments together you have a debt of $105 trillion.

The US wants to avoid default and devaluation of the dollar. They can raise taxes, cut spending or default on their Social Security and Medicare commitments, and commandeer personal retirement plans. In whole, or in part, these are options for government. If they cannot manage these changes then the Fed will have to increase money and credit, which is now euphemistically labeled quantitative easing. The powers behind government have looted the system perpetually, but particularly since August 15,1971, when the gold standard was abandoned and the result of this gutting and its consequences is about to manifest itself. Unemployment refuses to fall and little is being done to improve the situation. This year five million American workers lost extended unemployment benefits, as Wall Street, bailed out with taxpayer’s loans, is showering their employees with hundreds of billions of dollars in bonuses. There is no question these are the seeds of which revolution is born. We can as a result expect demonstrations and unrest, as we are now seeing in Europe, which could end up in rioting and other antisocial behavior.

Considering what the Federal Reserve and the US Treasury have done over many years we believe we can expect a continuation of fiscal spending and more money and credit to be injected into the economy. That will lead to higher inflation, which could lead eventually to hyperinflation. In preparation in businesses or professionally, or individually, your cost of doing business or living should be reduced and those savings should be used to purchase gold and silver bullion coins and shares. This is the only way you can protect your investable assets. Business and job opportunities have already fallen off a cliff and we believe that situation will get much worse.

Many of you have IRAs and 401Ks, which we have said your government would like to get their hands on. They are not going to stop pursuing these savings, so you have to act before they do. The government desperately needs that $6 trillion. These funds are at risk, even if all you have in these vehicles are only gold and silver coins or shares. If legislation is passed confiscating these assets and you are given a government guarantee on return, you end up with 100% of nothing. Based on that IRAs and 401Ks should be systematically liquidated with an eye toward tax consequences and penalties. Those who refuse to do so will suffer grievous losses.

If the dollar loses 50% of its value versus other major currencies or even more versus gold and silver you will suffer a major loss of buying power. Those are losses versus inflation. If we have hyperinflation the losses will be even worse. That means you have to get a loan against your 401k and invest those funds in gold and silver related assets. 401Ks and pensions are invested in stocks, bonds and other possible illiquid assets. If the stock and bond markets fall you could lose a big part of your savings. Get whatever you can out now while you still can.

Presently many of our subscribers tell us that people who they explain the problem to think gold and silver are too high. We heard the same thing when gold was $350.00 and silver was $10.00. Unfortunately, 98% of the population doesn’t have a clue to what is going on. They do not understand the massive printing of dollars and credit that has been flooding the world. The monetization is massive as is the fiscal insanity that has been going on in government over the past ten years. How can anyone even consider being long the dollar? That said, the faster one gets into gold and silver related assets the better off they will be. Those who prefer not to listen we refer you to the 60% to 95% losses absorbed during the “Great Depression” of the 1930s.

It is normal for a world reserve currency such as the dollar to be backed 25% by gold. As you all know that has not been the case since August 15, 1971. Over the 39-year period since then debt has risen exponentially, almost to the point of insanity. The world will awaken in time but the cost for not listening will be dreadful. This is why over the next several years gold will easily go to $7,700 an ounce or higher and silver will range between $100 and $500 an ounce. Remember, gold is the only real money and it does not owe anyone anything. For those of you who do not know it gold has been used as money, along with silver for 6,000 years. Do the elitists really think they can beat that kind of track record? We do not think so.

The Fed is creating money and credit at an annual clip of $1.8 trillion and is going to continue to do so. On top of that they have set interest rates at zero percent and they still cannot create a recovery. Worse they know what they are doing is not going to work. As a result inflation to 6 to 7 percent not the 1.2% government would lead us to believe. When government admits that inflation in the future is 5-1/2%, we can assure you it will really be over 14%. Overall interest rates are negative and being in dollar denominated assets is a losing experience unless you own gold and silver bullion, coins and shares. The only thing that has allowed the dollar to retain value on the USDX is that Europe’s banking system is in a state of collapse. Still, all currencies are falling versus gold. Under the circumstances Europe’s austerity measures were the wrong thing at the wrong time, because at the same time the Fed was beginning QE2 taking them in opposite directions. Next you will see new stimulus being fed into the euro zone by the ECB, the European Central Bank. It is inevitable that the euro zone and the EU will collapse and that will be the linchpin which will take the entire world down financially.

The failure of the international financial system and the inability of elitists to control it leave them open to loss and exposure of what they have been up too. Socialism in Europe was supposed to provide the gateway for a one-world government and banking system. It looks like their concept at least for now isn’t working out very well. In addition to trouble in banking and government the cost of maintaining the welfare state are now beyond Europe’s ability to pay. Demographics need to improve and that is not going to improve anytime soon. This factor alone guarantees the collapse of their welfare systems. The same is true for the US and Japan. In addition the German burden of carrying Europe cannot go on indefinitely, otherwise either German workers will revolt or Germany will financially collapse.

As we said austerity is the wrong thing at the wrong time. Tax revenues will fall and budget deficits will increase, as we have seen happen in the US. As we have often said, this condition will bring about an emergency meeting of all governments for the devaluation and revaluation of all currencies and multilateral debt default. Then either the US dollar reestablishes a gold backed world reserve currency or a group of currencies will be a gold backed international trading unit. Anything less will not work. If that does not happen every country in the world faces revolution. If that happens the elitist aristocracy will be destroyed, because today too many people know what they have been up too. The balance of power will be gone and the world will appear as it did after the French Revolution in 1799. There is no way back for the elitists this time. Nationalism will finally triumph.

All Europe is doing is papering over the mess again and trying to buy time. After the current events quiet down you can prepare yourselves for another negative episode by next June. In the meantime Greece and Ireland could have fallen into bankruptcy and Portugal will have joined the odyssey. They then should be joined by the failure of Spain. If you think gold and silver are strong now wait until you see their response to this situation. Everyone in Europe will be dumping euros and buying gold and silver related assets. As we said long ago gold and currencies have parted company, permanently. Every currency in the world is being destroyed one after another. Any recovery anywhere will be stillborn. Banks are broke and will not lend except to AAA corporations and the Fed, or some central bank. Insolvency reigns and liquidity is only being used to protect the financial sector and governments in almost every country.

The state of the world economy and financing has fallen to such depths that at the G-20 meeting the finance minister of Germany, Wolfgang Schäuble said that the Chairman of the Fed Mr. Bernanke was clueless as he commented on Fed policies. He said the US approach to urging China and Germany to reduce trade surpluses was ridiculous. Of course, this is just a game. Schäuble and all the other players all know that the strings are pulled from behind the scenes. The world, and particularly the US, is in deep trouble having created incredible debt, as a method of making their economies operate at an optimum.

We are happy to see our projections of a housing bottom three years ago are finally become apparent to other experts who tend to lag the events; they are now saying that the bottom should appear in 2012. We believe the market will bump along the bottom for at least eight years and perhaps a lot longer. This will continue to lead to insolvent banks, which face a 3.1-year total residential inventory. The Fed hopes to solve this problem with liquidity and that is not the answer. Jobs are the answer and that is not being addressed at all. Most of these people in their 40s, 50s and 60s will never work again and if they do get jobs they will pay half of what they previously made in wages. The 5 million workers who lost extended unemployment this year won’t be able to pay their mortgages and will end up losing their homes, which will add to unsaleable inventory and push house prices down further. How can households spend more with this going on? Home equity has vanished and there is nothing to replace it. Zero interest rates almost exclusively help the financial sector, which is insolvent, and not the average American. This and other policies are in the process of destroying our economic and financial structure.

A very good example of the rigging in markets was the double increases within a week of gold and silver margins on the Comex. Other commodities are going ballistic and they saw no margin increases. That is a blatant double standard, as Alex Jones says, they do not care anymore. They are out in the open and in your face. There are no rules. The rules are what they want them to be.

We would also like to salute, Max Keiser, in his campaign to break JPMorgan Chase and HSBC, who have rigged the silver market for so long. They will probably lose under $10 billion and we will have much higher, normal, silver prices and that is good, but more important is the psychological warfare aspect. We are bringing the fight to the enemy and it bothers the enemy. Let’s do this on many more issues, such as the cancellation of Jesse Ventura’s program on government interment camps and the effort by some Republicans, banking and Wall Street to deprive Ron Paul of his chairmanship. A big part of the effort is bought and paid for John Boehner. You should be calling Boehner’s office and reading him the riot act. He is at 202-225-6205. Tell his office that if Ron Paul doesn’t get his chairmanship that he will see 100,000 Americans from all over the country campaigning against his reelection in his district two years from now.

Secretary of State William F. Galvin has subpoenaed the consulting firm Guidepoint Global in connection with its dealings with a Massachusetts hedge fund, amid a widening federal probe into insider trading by hedge funds and the firms that provide them with research.

The state delivered a subpoena on Monday to the Boston office of Guidepoint, which is based in New York. The state said it learned of the contractual relationship between Guidepoint Global and a hedge fund in Massachusetts during a routine examination of the fund in May.

The state declined to name the hedge fund but said it is small, with less than $20 million in assets. Galvin’s inquiry does not involve Loch Capital Management, a Boston hedge fund that was raided by the FBI last week, along with two other hedge funds’ offices in Connecticut and New York.

Galvin cited US Attorney General Eric Holder’s comments Monday, confirming a sweeping federal investigation into so-called expert networks and their possible role in insider trading at large hedge funds and mutual fund firms.

Expert networks provide research about companies to investment firms for a fee, but regulators are looking at whether some networks go too far in giving access to executives or information, in illegal ways.

“The recent pronouncement about the role of expert consultants and hedge funds is extremely troubling,’’ Galvin said, “and it is the responsibility of my office as sole regulator of small state-registered hedge funds to fully explore and investigate the role these firms play.’’

The Securities and Exchange Commission has sued a former Deloitte Tax LLP partner and his wife for allegedly passing confidential information on upcoming mergers and acquisitions to family members.

Arnold McClellan and his wife, Annabel McClellan, told family members of at least seven confidential buyouts between 2006 and 2008 planned by Deloitte’s clients, the SEC said in a lawsuit filed in California yesterday. Their relatives made about $3 million in profits, the lawsuit said.

McClellan, who headed one of Deloitte’s regional mergers and acquisitions teams, passed information to his brother-in-law about 2007 buyouts of companies including Kronos Inc. and aQuantive Inc. and the 2008 purchase of Getty Images Inc., the SEC said.

The brother-in-law, James Sanders, co-owner of the London derivatives broker Blue Index Ltd., was charged along with two colleagues by the UK Financial Services Authority last week.

All three deny the allegations, their lawyers said.

The SEC is seeking disgorgement of ill-gotten profits and unspecified fines.

“If the allegations prove to be true, they would represent serious violations of our strict and regularly communicated confidentiality policies,’’ Deloitte spokesman Jonathan Gandal said.

Employers in the U.S. announced plans in November to cut 48,711 jobs, the most in eight months, as government agencies trimmed payrolls.

Compared with the same month last year, planned firings dropped 3.3 percent, according to Chicago-based Challenger, Gray & Christmas Inc. This month’s downsizing marks the smallest year-over-year decline since May 2009 when job cuts increased by 7.4 percent from a year earlier.

While some companies are putting fewer workers on unemployment lines, others have yet to add jobs fast enough to bring down unemployment, which is close to a 26-year high. Budget woes that have prompted state and local governments to cut staff may spur similar decisions at the federal level after President Barack Obama’s deficit-cutting commission proposed a 10 percent reduction in the workforce.

“Job cuts that have been concentrated at the state and local level could expand to include federal workers in the new year,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “Other sectors have seen significant declines in job cuts this year and, at the moment, there is little evidence of a possible resurgence in 2011.”

Compared with October, job-cut announcements rose 28 percent. Because the figures aren’t adjusted for seasonal effects, economists prefer to focus on year-over-year changes rather than monthly numbers.


State Street Corp., the third-largest custody bank, said it will cut 1,400 jobs beginning this week and trim real estate costs as interest rates near zero erode profit.

The measures, which will pare State Street’s workforce by 5 percent, are part of an effort to save as much as $625 million a year by the end of 2014, the Boston-based company said yesterday. State Street said it will book restructuring expenses of up to $450 million before taxes over four years.

“They’re feeling the effect of the low interest-rate environment, and they want to show investors they will manage expenses as astutely as they can,” Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine, said in a telephone interview.


Profit margins at U.S. banks may get a boost from increasing deposits as customers show a preference for immediate access to their money and less appetite for risk with interest rates at a record low and the economy still seeking a bounce from recession.

Commercial banks in the U.S. added $88.9 billion of so- called core deposits in the third quarter, bringing the total to $6 trillion, the most since at least 1992, according to the Federal Deposit Insurance Corp. Wells Fargo & Co., the fourth- largest lender by deposits and fifth-ranked U.S. Bancorp have said they’re competing for such funds, which include checking and savings accounts and time deposits of less than $100,000.

Banks are relying more on deposits for funding after a freeze in credit markets sparked the financial crisis and led to the bankruptcy of Lehman Brothers Holdings Inc. in September 2008. The industry must shift from raising funds in debt and securitization markets to increasing core deposits, which pay little or no interest, analysts say. The average rate of 0.80 percent on bank deposits is the lowest since at least 2000, according to Market Rates Insight in San Anselmo, California.

“Other sources of funding are drying up,” said Christopher Whalen, a former Federal Reserve analyst and co- founder of Institutional Risk Analytics in Torrance, California. “The banks that have stable funding will inherit the earth.”


The United States would be ready to support the extension of the European Financial Stability Facility via an extra commitment of money from the International Monetary Fund, a U.S. official told Reuters on Wednesday.

"There are a lot of people talking about that. I think the European Commission has talked about that," said the U.S. official, commenting on enlarging the 750 billion euro ($980 billion) EU/IMF European stability fund. "It is up to the Europeans. We will certainly support using the IMF in these circumstances."

"There are obviously some severe market problems," said the official, speaking on condition of anonymity. "In May, it was Greece. This is Ireland and Portugal. If there is contagion that's a huge problem for the global economy."

The remarks foreshadow a visit to Europe this week by a U.S. Treasury envoy who is expected to visit Berlin, Madrid and Paris to hold talks on the ramifications of the debt crisis.

The developments have echoes of the pressure applied by Washington on European capitals last May to create the near $1 trillion EFSF safety net that was last week used to rescue Ireland after its banking crisis spiraled out of control.

The IMF, whose biggest single shareholder is the United States, has committed 250 billion euros to the EFSF.

While reluctant to dictate to Europe how it should address the unfolding debt crisis, the U.S. government is growing concerned about the global fallout of Europe's predicament.

U.S. Treasurys' prices fell and the euro strengthened against the dollar on Wednesday after the news that the United States would be prepared to support an enlarged EFSF.

Germany, whose leaders have expressed frustration at the market backlash against their plans to solve the euro zone's debt problems, does not want to make the stability fund larger.

Delta Air Lines is having what might possibly be the most-popular job search in a long time: More than 100,000 people have applied for just 1,000 openings as flight attendants.

Part of the reason behind the huge turnout might be the nation's persistently high unemployment rate, but the airline says that a lot of people just want to fly.

A federal judge on Tuesday dismissed Liberty University's lawsuit challenging the Obama administration's new federal health care law, declaring that a provision requiring most individuals to obtain insurance is constitutional.

The ruling by U.S. District Judge Norman K. Moon in Lynchburg is the second court decision upholding the law, following one in Michigan in October. University law school dean Mathew Staver said in a telephone interview that he will promptly appeal the ruling to the 4th U.S. Circuit Court of Appeals in Richmond.

Attorneys general from several states have filed another lawsuit in Florida, and a separate challenge by Virginia Attorney General Kenneth Cuccinelli is pending in federal court in Richmond.

Both sides expect the issue to ultimately be decided by the U.S. Supreme Court.

The leaders of President Obama's fiscal commission released a final report Wednesday that is full of political dynamite, recommending sharp cuts in military spending, a higher retirement age and reforms that could cost the average taxpayer an extra $1,700 a year.

But as commission co-chairmen Erskine Bowles and Alan K. Simpson unveiled the plan at a Capitol Hill hearing, it was unclear whether they would be able to build a convincing bipartisan consensus before the panel's 18 members - 12 of them sitting lawmakers - are scheduled to vote on the report Friday.


The number of mortgage applications in the U.S. fell last week by the most this year as higher lending rates led to a slump in refinancing.

The Mortgage Bankers Association’s index declined 16.5 percent in the week ended Nov. 26, figures from the Washington- based group showed today. The gauge of refinancing fell 21.6 percent, the biggest drop of the year. The measure of purchases climbed 1.1 percent.

The average rate on a 30-year fixed mortgage rose to the highest level since August, an increase that follows data showing the economy gaining strength at the end of the year. With mounting foreclosures adding to inventory and unemployment near 10 percent, a sustained improvement in home sales and construction will take time to develop. “Mortgage rates are higher than they were a few weeks ago so refinancing and new purchase mortgage volumes are going to be slow, probably until we get into the new year,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report.

The share of applicants seeking to refinance a loan fell to 74.9 percent last week from 78.6 percent the prior week, today’s figures showed. The average rate on a 30-year fixed mortgage increased to 4.56 percent from 4.50 percent the prior week. Borrowing costs have been rising since reaching 4.21 percent during the week ended Oct. 8, the lowest in records going back to 1990.

At the current 30-year rate, monthly payments for each $100,000 of a loan would be about $510.26, or $14 less than a year ago when the rate was 4.79 percent.

The average rate on a 15-year fixed mortgage rose to 3.91 percent from 3.83 percent, and the rate on a one-year adjustable mortgage declined to 6.81 percent from 7.09 percent. Housing demand has resumed its decline after a tax credit worth as much as $8,000 expired. Sales of existing homes, which now make up more than 90 percent of the market, fell more than forecast in October as foreclosure moratoriums and a lack of credit disrupted real estate, figures from the National Association of Realtors showed last week. In July, sales ran at the weakest pace in a decade’s worth of record-keeping by the group. Homebuilders remain gloomy. Atlanta-based Beazer Homes USA Inc., which builds and sells entry-level homes in the South, remains “cautious” in its outlook.

“Sustained high unemployment levels and the overhang of foreclosures make it very difficult to predict when and to what extent the housing market will recover,” Ian J. McCarthy, chief executive officer at Beazer said on a conference call Nov. 5.


Tax-exempt bonds had their worst monthly returns of 2010 as rising U.S. Treasury yields and record state and local debt sales sparked withdrawals from mutual funds investing in municipal securities.

Tax-free securities lost 2.29 percent in November, the third consecutive monthly drop and the longest slide since 2004, according to the Bank of America Merrill Lynch Municipal Master Index, which accounts for price changes and interest income. Mutual funds investors pulled $5.4 billion of muni assets within two weeks last month, according to Lipper FMI, a research firm.

States and municipalities borrowed about $55.6 billion last month, the most since at least 2003, according to data compiled by Bloomberg. About $53.7 billion was sold in October, the second-most on record. The volume jump fed into price declines as mutual funds had to sell holdings to cover investor redemptions, said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.

Volume sales of foreclosed homes fell 25% from the 2nd to the 3rd quarter 31% from the 2nd quarter of 2009. Discounts on these homes have hit a 5-year high, which is real bad news for the lenders. Ever since the homebuyer tax credit ended the market has collapsed. In the 3rd quarter 25% of residential sales were foreclosures. That was 32% lower than the average sales price of properties. The bottom line is nobody has the purchasing power left to be buyers in the lower and middle sections.

Homes in foreclosure averaged $169,523, down 2.46% quarter-to-quarter and down 0.44% year-on-year.

More than 150 Newark police officers lost their jobs yesterday after negotiations between their union and New Jersey's largest city broke off, reducing the police force as violent crime has started to rise after three years of decline.

We recall taking some heat after Are Bonds About To Get Steamrolled? Commentary August 2010. The negative feedback wasn’t really surprising as many Americans remain in denial about many of global secular trends in place since 2000.

As Armstrong’s most recent commentary suggests, the bankers are neither naïve or foolish. They understand the ramifications of the trends in place and will not be the ones bearing the losses when they break.

The slow distribution process will continue to transfer ownership from the strong to weak hands. The controlled churning process will be characterized by fear-induced sucker rallies and “air-pocket style” declines.


Two Harvard Law students have filed a federal lawsuit against the Transportation Security Administration that claims the use of "nude body scanners" and new enhanced pat-down techniques at airport security checkpoints are unconstitutional. Jeffrey Redfern '12 and Anant Pradhan '12 filed the lawsuit Monday in the District Court of Massachusetts. The complaint names Secretary of Homeland Security Janet Napolitano and TSA Administrator John Pistole as defendants. Beginning in March 2010, the TSA deployed 450 full-body scanners in airports throughout the country. Boston's Logan International Airport has 17 of the full-body scanners at issue in the lawsuit, according to the TSA's website.

The lawsuit claims the mandatory screening techniques violate the students' Fourth Amendment right against unreasonable search and seizure. The suit seeks a permanent injunction against the use of either screening method without reasonable suspicion or probable cause and a declaratory judgment stating that mandatory screening using these techniques is unconstitutional where probable cause or reasonable suspicion do not exist. 

Redfern and Pradhan have also asked for an injunction that would prevent the TSA from storing any images taken using the full-body scanners except as needed to prosecute suspected terrorists. Redfern said he became interested in filing a lawsuit in early November after he first heard about the enhanced pat-downs.

"I was not happy about it, and I pretty quickly started looking into some of the law and tried to see if there was anything there," Redfern said. "Obviously, it's one thing to feel like something is frustrating and an imposition, and it's another to feel like you actually have a claim."

In November, Redfern and Pradhan flew out of Logan airport. Both refused to go through the full-body scanners. Instead they submitted to pat-downs by TSA agents. "We were protecting justiciability grounds so we wouldn't get kicked on standing or ripeness or mootness," Pradhan said.

Pradhan said a TSA agent put his fingers inside the waistband of Pradhan's pants, felt his groin, and lifted his buttocks.

"They run their hand all the way up [to a person's groin] , and they don't necessarily stop," he said. "They'll go all the way up until – well, they go all the way up." A TSA spokesperson said the agency does not comment on pending litigation.

Both the scanners and the pat-down techniques have drawn wide media attention and prompted privacy concerns from air travelers, some refusing to submit to either method of screening. Earlier in November, John Tyner , a 31-year-old software engineer, was turned away from his flight at the San Diego International Airport after he declined to go through the full-body scanner and then refused a pat-down, telling the TSA agents, "If you touch my junk, I'll have you arrested." Tyner filmed the incident and posted it on his blog. Coverage of the incident also drew attention to an online movement, which declared Wednesday, Nov. 24 "National Opt-Out Day" and urged passengers to opt out of the full-body scanners on the day before Thanksgiving, one of the busiest travel days of the year. Although TSA officials had voiced concerns that the movement would slow security screenings, no major delays were reported. At Logan airport, about 56,000 passengers were screened, and 300 passengers declined to use the full-body scanners. Those 300 were screened using the enhanced pat-down technique.

The TSA is also facing lawsuits from other fliers. At least two other lawsuits have been filed by passengers one in Florida and one in Arkansas. Two commercial airline pilots have also sued, claiming that both screening methods are unconstitutional.

Although the lawsuits have publicized the privacy concerns associated with the screening techniques, some professors at the Law School have expressed doubts that the TSA's new system could actually be declared unconstitutional.

"I'm glad that our students are learning how to be lawyers, but I wouldn't bet on their winning this lawsuit," Prof. Mark Tushnet said in an e-mail to the Harvard Law Record. "It might survive a motion to dismiss, but once the TSA puts forward something about the technology and the threats it's dealing with, the lawsuit's chances will drop precipitously." The fight will almost certainly be an "uphill battle," Orin Kerr, a professor at George Washington University Law School, told the Record in an email. Kerr is one of the authors of a leading casebook on criminal procedure and a contributor to law blog The Volokh Conspiracy, where he has written previously about the constitutionality of the TSA's new methods.

While the Supreme Court has not spoken on Fourth Amendment standards for airport security screening, the law has largely settled in the circuit courts, explained Kerr. "The basic idea is that screening to stop a terrorist attack is an 'administrative search' that is constitutional so long as it is reasonable and that it is reasonable so long as it is not overly invasive given the threat that it is designed to deter and stop," blogged Kerr. Redfern and Pradhan believe the technology is overly invasive and ineffective. Their complaint alleges that the TSA erred in justifying the new techniques by pointing to the example of Umar Farouk Abdulmutallab, the so-called "Underwear Bomber" of last Christmas, as justification for the new techniques. Rather, according to the complaint, the TSA, through a Government Accountability Office study, has found that backscatter machines would likely not have detected the plastic explosives concealed in Abdulmutallab's underwear. Moreover, the plaintiffs point to a variety of other technologies available to the TSA that are less intrusive.

Failure by Congress to extend the Bush tax cuts, especially locking in the 15 percent capital gains tax rate, will spark a stock market sell off starting December 15 as investors move to lock in gains at a lower rate than the 20 percent it would jump to next year, warn analysts.


In an unexpected development, the Fed balance sheet for the week ended on Wednesday on increased $908B despite the billions of dollars in POMOs. MBS holding declined $15.15B while the Fed monetized $16.213B of Treasuries.


This gives you an idea of what your government can do.  domain has been taken down, but it still has an IP address: