International Forecaster Weekly

The FBI Listens To Your Conversations

The FBI listens to your conversations, $190 Billion for Iraq, derivatives volumes have massive growth, median home price shrinks, the risk of great amounts of personal debt, reasons for an interest rate increase. 

Bob Chapman | September 29, 2007

The FBI has built a sophisticated, point-and-click surveillance system that performs instant wiretaps on almost any communications device. It is called DCSNET, for Digital Collection Services Network, which connects FBI rooms to switches controlled by traditional landline operators, internet-telephone providers and cellular companies. It is far more intricately woven into the nation’s telecom infrastructure than anyone expected. It collects, sifts, and stores telephone numbers, calls and text messages.

An agent in New York, for example, can remotely set up a wiretap on a cell phone based in Sacramento, Ca., and immediately learn the phone’s location, then begin receiving conversations, text messages and voicemail pass codes in New York. With a few keystrokes, the agent can route the recording to language specialists for translation.

The numbers dialed are automatically sent to FBI analysts trained to interpret phone call patterns, and are transferred nightly, external storage devices, to the bureau’s Telephone Application Database, where they are subjected to a type of data mining called link analysis.

There are 57 FBI endpoints. There were 1,839 criminal wiretaps in 2006, a 60% jump and of those 92% were cell phones. The law that allows this was put in place by the Clinton administration. It is the Communications Assistance for Law Enforcement Act, or CALEA, of 1994, which mandated backdoors in US telephone switches. The voice-over-Internet companies, such as Vonage have to retrofit as well. The FBI has spent almost $500 million so they can spy on you.

It just never ends. Defense Secretary Gates wants another $190 billion for Iraq, so we can continue the quest to steal Iraq’s oil for US and British oil interests.

Global volumes in credit derivatives grew 32% in the first half of 2007 and are up 75% on the year. Volumes surged to $45.46 trillion, from $34.42 trillion at the end of 2006. Interest rate derivatives also grew 21% with volumes increasing 38% to some $285.73 trillion. Volumes in equity derivatives grew 39% in the first half of the year, and are up 57% over the past year to $10.01 trillion.

As new home sales fell 4.3% in August, the median home price fell from $228,700 to $224,500, down 0.2% yoy. Inventory is 10-months, a new record since 1992, when data began. The inventory of single-family homes was 9.8-months. The record is 10.2-months in February 1988. Lennar’s average price of a home delivered was $296,000, down from $316,000 yoy. Lennar also said subprime loans are 1% of total loan volume. ALT-A was 25% of third quarter volume and 88% of originations were at fixed rates.

The CDX North American Investment Grade Index Series 9, a benchmark for the cost to protect bonds from default, rose 3.5 BPS to 53 BPS after the Lennar housing data was released.

$31.8 billion worth of ARMs were reset this month. This is the highest one-month amount due to reset for this housing cycle. By December, resets will fall to $25.2 billion per month for a year.

The Conference Board’s Consumer Confidence Index declined a large 5.8 points in September from 105.6 to 99.8. Present situations fell from 130.1 to 121.7. Expectations fell 4 points from 89.2 to 85.2.

Weekly fails to receive Treasuries by dealer banks rose as high as $124 billion in the week to August 24th, but have since declined to $44.1 billion.

As long as the US fails to address its savings problem its large balance of payments deficit will persist and the dollar will keep dropping and as long as interest rates are not raised inflation will flourish. The American consumer is at great risk, due to personal debt. Consumption expenditures currently account for a record 72% of GDP, a number unmatched in the annuals of modern history of any nation.

Home prices are headed lower and they will stay that way for years. Recession and weaker employment will put pressure on income and debt, the days of open-ended consumption expenditures are at an end.

What has previously saved the US in its current account deficit has been the ability to finance the deficit by borrowings denominated in its own currency. This has been what prevented the death spiral where interest payments on debt got more and more difficult to service. Real return to finance US debt for foreigners is negative and they are in the process of withdrawing from US debt markets. Eventually this will force interest rates higher. If that doesn’t happen the Fed will monetize the paper, creating more inflation as well as simultaneously increasing money and credit, M3.