Friday, May 27, 2011

Dollar End Game

From zero hedge this powerful analysis of severe troubles still to come for the US dollar.they seem inescapable.

For nearly 30 years we have had two Global Strategies working in a symbiotic fashion that has created a virtuous economic growth spiral. Unfortunately, the economic underpinnings were flawed and as a consequence, the virtuous cycle has ended. It is now in the process of reversing and becoming a vicious downward economic spiral. One of the strategies is the Asian Mercantile Strategy. The other is the US Dollar Reserve Currency Strategy. These two strategies have worked in harmony because they fed off each other, each reinforcing the other. However, today the realities of debt saturation have brought the virtuous spiral to an end. One of the two global strategies enabled the Asian Tigers to emerge and grow to the extent that they are now the manufacturing and potentially future economic engine of the world. The other allowed the US to live far beyond its means with massive fiscal deficits, chronic trade imbalances and more recently, current account imbalances. The US during this period has gone from being the richest country on the face of the globe to the biggest debtor nation in the world... So what could possible stop this ideal symbiotic relationship from continuing to feed on itself? A number of factors, all of which are now coming together to end this Virtuous Cycle.


The Asian Mercantile Strategy started with the emergence of Japan in the early 1980s, expanded with the Asian Tigers in the 90s and then strategically dominated with China in the first decade of this century.

Initially, Japan's products were poor quality and limited to cheap consumer products. Japan as a nation had neither the raw materials, capital markets, nor domestic consumption market to compete with the giant size of the USA.

To compensate for its disadvantages, Japan strategically targeted its manufacturing resources for the US market. By doing this, the resource poor island nation took the first step in becoming an export economy - an economy centered on growth through exports versus an economy like the US, where an excessive 70% of GDP is dependent on domestic consumption.

The strategy began to work as Japan took full advantage of its labor differential that was critical in the low end consumer product segment, which it initially targeted. Gradually, as capital availability expanded, Japan broadened its manufacturing scope, moving into higher levels of consumption products requiring higher levels of quality and achieving brand recognition.

Success soon became a problem as the Yen began to strengthen. To combat this the Japanese implemented the second critical component of what became the Asian Mercantile Strategy template. It began to manipulate its currency by aggressively intervening in the forex market to keep the yen weak.

Further success forced Japan to move to a more aggressive forex strategy to maintain a currency advantage. It was strategically decided that Japan's large and growing foreign reserves were to be re-invested back into the US. By buying US Agency and US Treasury debt instruments it kept the dollar strong relative to the Yen. The more successful Japan became, the more critical this strategy became. In the 80s Japan dominated global expansion as it brought US automotive and consumer electronics' manufacturing to its knees.

By the early 90s the Japanese labor advantage was quickly being lost to the Asian Tigers because the Yen versus the Asian Tiger currencies was too strong. The Asian Tigers were following the Japanese model. The Asian Crisis in 1997 re-enforced to all Asian players the importance of holding large US dollar denominated reserves. This further accelerated and reinforced the strategy of purchasing US Treasury and Agency debt.

With China's acceptance into the World Trade Organization (WTO), China emerged on the scene in full force. Armed with the lessons of the last twenty years, China took the Asian Mercantile Strategy to another level in its ongoing evolution.

The results were one of the largest and fastest transfers of industrial power ever to occur in history. In ten years, China assumed the role of the world's undisputed industrial powerhouse in the world.

The virtuous cycle further accelerated as Asia became more dominant because its reserves, reinvested back in the US, began to have a larger and larger impact. The more Asia bought US Treasury and Agency debt, the lower US interest rates were forced, allowing Americans to finance more and more consumption. The more Asia bought US securities, the stronger the US dollar was against Asian currencies, and therefore the cheaper Asian products were relative to US manufactured products. It was a self reinforcing Virtuous Cycle.

The result was a staggering 46,000 factories transferred from the US to Asia over the same 10 year period. The transfer set the stage for chronic unemployment and public funding problems, but it was temporarily hidden by equally massive increases in debt spending.

The low interest rate driven housing bubble, being of historic proportions, made Americans feel richer than they were. They took on excess debt in various forms such as Home Equity Loans (HELOCs) at unprecedented levels. The acceleration of debt materially impacted both the GDP and employment of the nation through Real Estate, Construction and Mortgage Finance job growth further hiding underlying problems.


Since President Richard Nixon took the US off the Gold Standard in 1971, the US has adopted what I refer to as the US Dollar Reserve Strategy. After the Second World War, at the Bretton Woods Conference, the US dollar was accepted as the world's reserve currency and as such was pegged to Gold at a fixed rate of $35/oz. due to massive Vietnam war costs and President Johnson Great Society, the US could no longer honor its agreement. In 1971, when France demanded conversion payment in Gold, the US refused. At this point the US become a fiat currency, not backed by anything other than the full faith and credit of Washington politicos.

What were other countries to do in retaliation? What quickly became evident was there was little they could do. The fact was that international trade was conducted in US dollars as a matter of necessity due to the dominance of US export trade; and as such, nations were forced to have US dollars to transact international trade.

Additionally, the US established agreements with oil producing Middle East countries that oil could only be sold in US dollars. Since energy is a dominant import cost for most nations, this secured the strategic position and requirement that the US dollar would be maintained as the preeminent reserve currency by trading nations.

What this strategy meant to the US was that it could now print money, and effectively export the potential inflationary consequences of its actions. The 1970s were initially marked by dramatic increases in US inflation as the strategy took hold and was implemented. By the time of President Reagan's presidency, the strategy was working thanks to some herculean efforts by Chairman Volker at the Federal Reserve. This well executed strategy is what I refer to as the US Reserve Currency Strategy.

The strategy allowed Regan to implement 'Reaganomics' and his new Supply Side economic policies which launched the longest bull market in US history. Further enhanced by an extremely loose monetary policy under Greenspan, relaxed reserve requirements under Clinton, and tax cuts under George Bush II, the US moved quickly from being the world's richest country to being the world's largest debtor.

Historic debt growth was built up without the disease of inflation infecting the US economy. This is explained by inflation that was effectively exported whenever increasing levels of US dollars were printed by the US Treasury.

Any threat to this strategy was rapidly challenged by US military power. As an example, when Saddam Hussein, President of Iraq, decided to sell Iraq oil denominated in Euros, he was invaded by US forces three months later and removed from power. When Libyan leader Muammar Gaddafi wanted gold in exchange for Libyan oil, he almost immediately found himself the target of US planned military intervention.

Presently, oil is still sold only in US dollars, but more and more trade deals are being negotiated between China and its trading partners. This is a serious threat to the US and the US Dollar Reserve Strategy.


One of the reasons the US Reserve Strategy has worked for as long as it has, is because there was an incentive by other countries to sterilize the US dollars they received. This, in the case of Asia, was because of the Asian Mercantile Strategy they were executing. By sterilizing US dollars, they held down their currency's exchange rate, which helped their exports though creating potential domestic inflation. Until recently, these inflation pressures have been manageable.

In the case of Europe, the Euro was only coming into existence in the late 90s, but then quickly moved from well below par to nearly 1.50 to the US dollar, causing competitive problems for European export trade for many peripheral countries (PIIGS).

The Asian Export Strategy and the US Reserve Dollar Strategy were symbiotic for a number of reasons:

1. Though the Asian Export Strategy was an Export Trade Imbalance game and the US Dollar Reserve Strategy a Volume Trade game, both were centered on global trade. The US won by increased global trading and the growing requirement for the US dollars it required - dollars that could be increased to pay for the military industrial complex without increasing taxation and used as reserves for global banking growth. Asia won by getting an ever increasing share of a growing volume of trade.

2. The US as a 70% consumption economy needed cheap financing to sustain its insatiable consumption. Asia needed consumption to absorb its growing exports.

3. The US needed a strong dollar to attract financing for its debt. Asia saw US debt as a store for its growing reserves that additionally reduced financing costs for its export products. In a way Asia was offering a form of vendor financing or 'lay away' financing.

4. US corporations saw 'off-shoring', 'outsourcing' and 'rightsizing' as major productivity improvements. The Asian Mercantile Strategy offered American corporations an opportunity to significantly increase profitability while Asia needed every increasing and larger market segments to penetrate. US corporations brought know-how, branding and capital to the Asian economies who desperately needed these strengths to employ unskilled populations, increase standards of living and reduce the always present and potential social unrest.

5. The US economy which had shifted from an industrial economy to a services economy was quickly becoming a financial economy with 44% of the stock market being financials. The financial economy needed increasing capital inflows to sustain itself.


So what could possible stop this ideal symbiotic relationship from continuing to feed on itself?

A number of factors, all of which are now coming together to end this Virtuous Cycle.


I recently authored a paper entitled Debt Saturation & Money Illusion , that if you have not read, I encourage you to read since it would take up too much space here. It makes the case that the global economy has reached the point where annual debt costs are now outstripping the global economy's ability to support the exponentially increasing burden.

Additionally, stimulus spending by governments has now reached the point where it is actually counterproductive.

Even using government numbers for inflation (which are disgracefully inadequate and understated) the real rates in the old industrialized economies are negative. By contrast, rates in emerging economies are positive.

This means central banks are effectively paying banks to take money, yet commercial banks cannot find sufficient investments to actually absorb the money. Like pushing on a string, the global economy simply cannot absorb debt at the levels required to sustain required growth rates which must exceed inflation rates.

The level of nonperforming bank assets is growing at such a rate that global banks have serious concerns with their existing loans and potentially their own solvency.


I found a recent article entitled: Technology firms struggle to cover interest payments in the Korean Times to be very instructive. Despite Asian economies growing rapidly and now dominating the global electronics industry, the study by the Korean Times found alarmingly that:

a. One in three firms traded on the Kosdaq stock exchange failed to earn sufficient money to cover their interest payments in 2010.

b. 280 out of 876 Kosdaq-listed corporations, or 32 percent, could not reach the benchmark reading of one in the interest coverage ratio. The interest coverage ratio, otherwise dubbed times interest earned (TIE), refers to the measure of a firm’s ability to honor its debt payments.

This is classic mal-investment in the truest sense of the Austrian School of Economcis.

Corporations now have balance sheets so leveraged with debt that their business models are barely able to cover debt payments even when interest rates are at historic lows. What does this suggest for possible debt default and forced unwinding going forward?

Private Equity corporations with leveraged takeovers and buyouts dominated the US financial landscape for years. These takeovers left corporate balance sheets severely damaged and barely able to pay the debt burdens they were forced to assume.

Additionally, we have learned since the days of Enron, there are significant amounts of debt held off balance sheets today in Special Purpose Entities (SPEs). There is no investor transparency to these obligations. This debt and other forms of 'contingent liability' reporting presently allow corporations to assume ever larger amounts of debt without impacting their corporate credit ratings. Everything works fine until growth slows.

Corporations over the last decade are acting more as highly leveraged hedge funds with the consequential exposure of margin or collateral calls. This is a highly risky and unstable situation in the longer term.


Another factor causing the unwind is a tapped out US consumer. This has been forecast for over a decade as an eventuality, but the US consumer continued to surprise everyone with their willingness to consume and take on debt. However, since the 2008 financial crisis things have changed. The US real disposable income has fallen and US consumer debt loads are now impacting their ability to consume.

Consumption growth rates in the US have slowed. The Asian economies have consumption rates below forty percent. The consumption growth rates of these Asian economies, though growing, are increasing from a much smaller absolute size. This imbalance is placing further pressures on the symbiotic relationship.


Slowly, the cycle is reversing. What was once a virtuous cycle is now a potentially vicious downward spiral.

The death knell for the cycle will be:

1. A deteriorating US dollar,

2. Rising US interest rates,

3. Sustained and chronic US unemployment,

4. Asian inflation, especially in food where 60% of Asian disposable income is spent.

5. Pressures on Asian currency pegs

6. Collapsing values of US Reserve holdings.


I recently published another paper entitled BERNANKE'S QEx BOX! where I argued what Chairman Ben Bernanke was likely to do at his critical April 27th FOMC 'Signal' meeting. I was proven right as he delivered precisely on cue. It was not a difficult call.

The reason I was so sure is because the real problem was clear. It is about what the Basel BIS (Bank of International Settlements) Bankers are more than aware of.

As I point out in Debt Saturation & Money Illusion, the Shadow Banking liabilities have fallen by $5 Trillion since the financial crisis, which is a crushing blow to global liquidity and in fact global financial banking solvency.

An analysis of data by Fathom Consulting for the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England, showed their assets swelled from around $4 trillion at the start of 2006 to just short of $9 trillion by the end of February this year. The increase in the size of G4 central bank balance sheets since mid-07 has ALSO been around $5 trillion to end February 2011, or 8 percent of global GDP.

It is my view that the Basel BIS Bankers have orchestrated their balance sheet growth to offset the contracting Shadow Banking System liabilities. For those that are not aware, Federal Reserve Chairman Ben Bernanke, Bank of England Governor Mervyn King, ECB President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa all sit as Board Members and meet regularly.


To do this the central bankers have increased their balance sheets to their political limits which can be seen in the following Federal Reserve chart from Zeal.

In the case of the US Federal Reserve, this has meant such significant changes that effectively the Fed's dual mandate has now expanded to three. Besides the official mandates of Full Employment and Price Stability, a third has been added: Asset Appreciation.

The Federal Reserve is no longer the "Lender of Last Resort"

The Federal Reserve is now the "Buyer of First Resort"


There can be little doubt, despite Federal Reserve rhetoric, that Quantitative Easing , ZIRP (Zero Interest Rate Policy) and negative real interest rates have caused a surge in global inflation rates.

Recently Oil was at a 31 Month high and up 22 percent Year-on-Year. Corn was up 90 percent, Wheat and Soybeans up 45 percent and Rice at yet another high.

This inflation has been acutely felt throughout Asia which has to combat this in parallel with trying to keep their currencies competitive as part of their Asian Mercantile strategy.

Across Asia, interest rates and bank reserve requirements have been increased, and in some instance capital control restrictions implemented. Pressures are such that many, including China, are now at the point of surrendering sacrosanct currency appreciation.

The problem is food inflation. Food must be imported and a stronger currency would help avoid consumer sensitive food inflation, at the expense of assisting with its own export strategy.

Sixty percent of disposable income in Asia, according to the Asian Development Bank (ADB) in a major report entitled: Global Food & Price Inflation & Developing Asia, is spent on food. Food is presently expected to average 10 percent inflation in 2011. This has created tremendous pressures on the population and potential social unrest for Asian governments.

64 Million people have already been moved into the category of poverty, which the ADB classifies as below $1.25/day. With 3.5 Billion consumers, it is expected that 190 Million will be pushed into poverty if food inflation continues. Food prices were up 30% in February's report, so the 10 percent Asian food inflation is no doubt seriously too low.


The efforts to fight inflation are now impacting the 7.8% Asian growth rate, which is now demonstrating the expected signs of slowing.

US Gross domestic product was recently reported as rising only 1.8 percent from January through March, after a 3.1 percent pace in the last three months of 2010. Taking out inventory builds this number as only 0.8 percent.

Britain reported 0.5 percent growth and is now on the edge of a double dip.

The Federal Reserve and most economists are all revising 2011 GDP growth lower, as a steady stream of negative news hits the markets.

If GDP numbers were adjusted for true inflation, rather than the suspect government CPI distortions, real GDP would be negative. Considering government deficit spending is now 20-25 percent of the US economy, can there be any question that we have effectively very negative economic growth?

The Basel BIS Bankers are acutely aware of this.

QEX WILL HAPPEN - 'The Risk-Off that Refreshes'

So what is to be done?

I believe a decision has been taken to temporarily remove some of the pressures off increasing money supply before resuming expansion of money and credit later in Q3 or Q4. There is little choice.

Make no mistake about it however, central bank money printing must continue and at an accelerated rate. I suspect it will emerge not as QE III, but in another form to address the massive and growing problems with non-performing assets, foreclosures and REOs occurring at Fannie, Freddie and the FHA.

Don't get fooled. Watch the balance sheets of the central banks. They will by necessity continue to grow to stop the vicious spiral from accelerating.


The Basel BIS Bankers fully understand the underpinnings of the shift from a Virtuous Cycle to a Vicious Spiral presently underway.

They are doing everything within their power to offset it. Policies of "extend and pretend" and "kick the can down the road" are all just attempts at buying time.

Unfortunately time is working against them, as existing debt only increases as interest owed is relentlessly and cumulatively added.

The Basel BIS Bankers have no real answers. The eventuality of a fiat currency crisis is ordained and has been since the early warnings in 2007 of the Financial Crisis. The roadmap has been clear to all that actually wanted to look.

Thursday, May 26, 2011

Lawmakers Free Health Care

From the Huffington Post this display of crass self interest, Republican style in the health care debate even as Vermont moves toward single payer coverage for it's 620,000 residents.

WASHINGTON -- Moments after preaching extreme self-reliance to one of his constituents, a Georgia Republican told a gathering in his district that he will continue to rely on government-subsidized health care "because it's free."

Freshman Rep. Rob Woodall (R-Ga.), who served as chief of staff to his predecessor, made national news earlier this week for comments he made, captured on video by, to a retired constituent who told him her company does not provide retiree benefits.

"Hear yourself, ma'am. Hear yourself," Woodall told the woman. "You want the government to take care of you, because your employer decided not to take care of you. My question is, 'When do I decide I'm going to take care of me?'"

The exchange continued. In video provided to HuffPost by another constituent, Woodall was asked why -- if he believes in such self reliance -- he doesn't forgo his government health care plan.

"I have a question about taking care of you. You have government subsidized health care, but you are not obligated to take that if you don't want to. Why aren't you going out on the fee market in the state where you're a resident and buy your own health care? Be an example," said a constituent in the new video.

"Your question is," Woodall responded, "my government's willing to give me lots and lots of stuff for free and why don't I take it?"

The woman followed up. "Why aren't you leading by example, and go and get it in a single-subscriber plan, like you want everybody else to have, because you want to end employer-sponsored health plans and government-sponsored health plans. You said so in a letter to me, that your goal is to get rid of the employer-sponsored health care [system]. So why aren't you leading by example and go out yourself, decline the government health plan and go to Blue Cross/Blue Shield or whoever, and get one for yourself and see how tough it is," she said. "You don't have any pre-existing conditions, I guess, you haven't had any life-threatening illnesses like I had last year."

Woodall responded that "this is why it's good to have these conversations, because there's some bad information out there."

But his constituent presses him further. "Answer the question: Why haven't you gone out and got it?"

"Oh, I'm sorry. I thought I did. It's because it's free. It's because it's free," he said. "The same reason I went out to Walgreen's and bought ActivOn and I don't have any arthritis pain: Because it's free. Folks, if you give people things for free, don't blame them for taking them."

On Tuesday, Sen. Chuck Schumer (D-N.Y.) responded to the initial Woodall video by telling the Washington Post that the congressman "lays bare" the GOP approach to health care. "No matter how hard you've worked your whole life, no matter how severe your medical hardship, the Republican motto is clear: You're on your own. This lays bare the ideology behind their goal of ending of Medicare as we know it," he said.

Democrats are seizing on Woodall's comments. The Democratic National Committee made sure that national reporters were aware of his remarks on Tuesday.

While Woodall is committed to accepting coverage as long as taxpayers provide it, HuffPost asked him whether he thinks members of Congress should not get health care benefits as a matter of policy. "Absolutely, federal health care options in Congress should mirror those offered in the private sector," said Woodall in an e-mailed response to HuffPost. "If these options are not available in the private sector, then folks working for the federal government should not have them either. There are bills being discussed to raise the amount that Members of Congress pay in to their benefits and I support these pieces of legislation. You might also be interested to know--and if you watched the entire Town Hall video you would have heard this as well--that I chose the cheapest health care plan available to Members of Congress--meaning that this is the plan in which the least amount of taxpayer money will be on the line for my health benefits."

When asked what he would say to a person 54 or under who didn't have a private or government retirement health care plan and was left to search the market with a voucher covering only a portion of costs if Paul Ryan's Medicare plan was enacted, Woodall responded: "The House-passed FY2012 Budget Resolution does two very important things: it ensures that seniors 55 and older will continue to receive the same Medicare benefits they received in 2010, and it ensures Medicare for individuals under age 55 by saving Medicare from insolvency and providing, for the first time, a real choice for the future."

Friday, May 20, 2011

Public Banking

This essay discusses an idea whose time has come but of course it is an idea too public spirited and likely to be too successful for our leaders to adopt it- especially here in Florida. That we live in a time where only the private sector gets public acknowledgement is no good thing. I wonder why the private sector isn't stepping up to the plate and hiring people as our unemployment rate toils miserably on. Public banking should be adopted immediately by every state. Here's why:

"Ford to New York: Drop Dead," said a famous headline in 1975. President Ford had declared flatly that he would veto any bill calling for "a federal bail-out of New York City." What he proposed instead was legislation that would make it easier for the city to go bankrupt.

Now the Federal Treasury and Federal Reserve seem to be saying this to the states, which are slated to be the first ritual victims in the battle over the budget ceiling. On May 2, Treasury Secretary Timothy Geithner said that the Treasury would stop issuing special securities that help state and local governments pay for their debt. This was to be the first in a series of "extraordinary measures" taken by the Treasury to avoid default in the event that Congress failed to raise the debt ceiling on May 16. On May 13, the Secretary said these extraordinary measures had been set in motion.

The Federal Reserve, too, has declared that it cannot help the states with their budget problems -- although those problems were created by the profligate banks under the Fed's purview. The Fed advanced $12.3 trillion in liquidity and short-term loans to bail out the financial sector from the 2008 banking collapse, 64 times the $191 billion required to balance the budgets of all 50 states. But Fed Chairman Ben Bernanke declared in January that the Fed could not make the same cheap credit lines available to state and local governments -- not because the Fed couldn't find the money, but because it was not in the Fed's legislative mandate.

The federal government can fix its own budget problems by raising its debt ceiling, and the too-big-to-fail banks have the federal government and Federal Reserve to fall back on. But these options are not available to state governments. Like New York City in 1975, many states are teetering on bankruptcy.

A Beacon in the Storm

Many states are in trouble, but not all. North Dakota has consistently boasted large surpluses, aided by a state-owned bank that is showing landmark profits. On April 20, the Bank of North Dakota (BND) reported profits for 2010 of $62 million, setting a record for the seventh straight year. The BND's profits belong to the citizens and are produced without taxation.

Inspired by North Dakota's example, twelve states have now introduced bills to form state-owned banks or to study their feasibility. Eight of these bills have been introduced just since January, including in Oregon, Washington State, Massachusetts, Arizona, Maryland, New Mexico, Maine and California. Illinois, Virginia, Hawaii and Louisiana introduced similar bills in 2010.

The Center for State Innovation, based in Madison, Wisconsin, was commissioned to do detailed analyses for Washington and Oregon . Their conclusion was that a state-owned bank on the model of the Bank of North Dakota would have a substantial positive impact on employment, new lending, and government revenue in those states.

The BND partners with local banks in providing much-needed credit for local businesses and homeowners. It also helps with local government funding needs. When North Dakota went over-budget a few years ago, according to the bank's president Eric Hardmeyer, the BND acted as a rainy day fund for the state; and when a North Dakota town suffered a massive flood, the BND provided emergency credit lines to the city. Having a cheap and readily available credit line with the state's own bank reduces the need for massive rainy-day funds that are a waste of capital and are largely invested in out-of-state banks at very modest interest.

What States Can Do with Their Own Banks

North Dakota has a population that is less than 1/10th the size of Los Angeles. The BND produced $62 million in revenue last year and $2.2 billion in loans. Larger states could generate much more.

Banks create "bank credit" from capital and deposits, as explained here. The Bank of North Dakota has $2.7 billion in deposits, or $4000 per capita. The majority of these deposits are drawn from the state's own revenues. The bank has nearly the same sum ($2.6 billion) in outstanding loans.

You can get a rough idea of what a state bank could do for your state, then, by multiplying the population by $4,000. California, for example, has 37 million people. If it had a state-owned bank that performed like the BND, it might amass $148 billion in deposits. This $148 billion could then generate $142 billion in credit for the state, assuming the bank could come up with $12 billion in capital to satisfy the 8% capital requirement imposed on banks.

Note that this capital would not be an expenditure. It would just be an investment; and like any capital investment, it would actually make money for the state. The Bank of North Dakota has had a return on equity in recent years of 25-26%, and a major portion of this has been returned to the state treasury. All states have massive rainy day funds of various sorts. Some of this money could simply be shifted into equity in the state's own bank.

There are many options for using the state's credit power, but here is one easy alternative that illustrates the cost-effectiveness of the approach. Assume California's state-owned bank invested $142 billion in municipal bonds at 5% interest. This would give the state $7 billion annually in interest income. California has outstanding general obligation bonds and revenue bonds of $158 billion, and $70 billion goes for interest. If California had been funding its debt through its own bank for the last decade or two, it would have saved $70 billion on its bonded debt and would be that much richer today.

In a futile attempt to "balance the budget" in a shrinking economy, we have been pressured into a self-destructive economic model in which the only alternatives are said to be to slash services, raise taxes, and sell off public assets. These are not our only alternatives. What destroyed our local economies was not excess government spending but was a credit crisis on Wall Street. We can restore the prosperity we lost by restoring credit in the state; and we can do that by taking our deposits out of Wall Street banks and putting them in our own state-owned bank, to be leveraged into credit for local purposes.

Ellen Brown is an attorney and author of 11 books, including "Web of Debt: The Shocking Truth About Our Money System," She is president of the Public Banking Institute,

Wednesday, May 11, 2011

Winter Park Vs The Union

From AlterNet this report on the spate of union busting here in Florida. I can't understand how unions are anathema to working people. While it's true unions have made mistakes and have been corrupted by money and influence overall the benefit to working people has been immense. Clearly that is the case; why else would republicans be fighting unions so rabidly? I'm a Teamster and i have been for years here and in California and I'm happy to pay my dues.

All over the country, right-wing lawmakers are waging a war on Main Street America’s labor rights, purporting to do so out of a desire for fiscal restraint (while also backing budget-busting tax breaks for the wealthiest among us).

Now, the city of Winter Park, Florida, is going to new lengths to stop nearly 150 city workers from joining a union. Apparently more concerned with stopping the union than saving money, Winter Park hired consultants at Kulture LLC, “a firm specializing in labor relations” at the rate of $2,500 a day to persuade workers to vote against organizing this summer:

Winter Park is paying a consultant $2,500 a day to help the city’s staff dissuade about 150 city workers from joining a union. Employees in the public works, parks, fleet maintenance and water departments are likely to vote in June or July on whether to join the American Federation of State, County and Municipal Employees, known as AFSCME. In the past few years, the city has done away with longevity bonuses and pay increases because of the economy. Members of AFSCME have criticized the use of tax money to pay a group that they say has a politically right-leaning agenda.

A spokesman for the city told the Orlando Sentinel that it didn’t “do a political background check” on Kulture before hiring the firm and that the city just wants to inform workers about their options. Yet a cursory look at Kulture and the activities it conducts shows what the firm is all about: union-busting.

Kulture’s website is replete with right-wing ideology. It hosts op-eds claiming that sweatshops are an opportunity for the “third world poor” and bragging that the “labor movement is dead.” Its webpages direct users to far-right sources of information such as the Ayn Rand Institute and The Federalist Society. It also hosts the anti-union, which hosts anti-labor articles and a monthly “anti-union report.” The organization’s CEO, Peter A. List, has said that “unions are a by-product of a bad relationship.”

“We’re basically hiring them to make sure that factual, accurate information is given to our employees before they make a vote on whether or not to join a union,” says Winter Park spokeswoman Clarissa Howard. But one has to wonder how hiring a radical, Ayn Rand-promoting anti-union organization will do anything but try to scare workers into submission.

Sunday, May 8, 2011

Bin Laden As Media Spectacle

This provocative essay on the recent killing of Osama Bin Laden is by Danny Schechter whose work I read frequently on Global Research. This one was published by AlJazeera English and it attempts to answer those persistent questions that already pile up around the attack in Pakistan. I'm not sure he's correct in all details but I like being forced to think and I sure don't have better answers. So I'm thinking about this angle:

The tip on bin Laden's whereabouts came in back in 2010. You have to assume the house was under surveillance. If they thought they "bagged him" they would be watching closely and choosing the right time to deep six the target (I actually wrote this lead paragraph sentence before reading this "Breaking News" from the Washington Post: "CIA had secret outpost in Abbottabad").

"The CIA maintained a safe house in the Pakistani city of Abbottabad for a small team of spies who conducted extensive surveillance over a period of months on the compound where Osama bin Laden was killed by US special operations forces this week (US officials)," the newspaper reported.

Both Afghan agents and Pakistani intelligence now say they told the US about the house as early as 2009.

So, they knew he was there. That was a reason drones weren't used.

The CIA wanted a more controlled high profile and dramatic intervention for public consumption, for what, in the end, was a marketing campaign – marketing the centrality of the agency's role in a war whose main audience is not on the battlefield, but in the homeland.

They needed a heroic narrative to revive support for a war they have been losing, and a scalp to sell to a conflict-weary and disillusioned population. It is no surprise that the Seals labelled OBL "Geronimo", reviving memories of fighting guerrilla-style Indian wars. Muslim renegades are apparently our new "savages".

The Native Americans took their enemy's head and hair – Donald Trump, beware; we shoot out their eyes and waterboard their brains.

The target was not "the terror mastermind" but the American people. It was an exercise in political mobilisation and perception management. It was the ultimate media operation, relying on many of the tactics used in Iraq that I document in my film "WMD: Weapons of Mass Deception".

We are as conscious about what we say as what we do, we always fashion a propaganda storyline demonising the enemy who is often compared to Hitler. Bin Laden lived in a "million dollar mansion" (it cost $48,000 to buy six years ago). He was heavily armed (he wasn't). He hid behind female human shields (he didn't). Who cares about facts... this was a TV orchestrated event. The Daily Mail in London complained that their raising questions led to being derided as "cheese eating surrender monkeys".

They could have captured him, but that would lead to the hassle of putting him on trial. Besides, what if he revealed his long connection with the CIA and US officials? Can't have that. So the kill order was given, along with a quick disposal of the body, mafia-style (as in "sleeping with the fishes").

The legal justification was self-defence, an argument that any government can use to dispatch its enemies.

Timing is everything

Why was it done, and why now?

It was certainly not because al-Qaeda is ascendant. Our experts believe only 100 of them remain in Afghanistan, where their capacity has been diminished. Remember: al-Qaeda is not a centralised top-down machine but a decentralised and sophisticated network.

We can only surmise all the factors, but the larger context here has fallen away with the focus on the narrowness of the dirty details, many calculated to inspire enthusiasm for the bravery and heroism of the death squad, but not any reflection of the strategy and larger context of the events.

Even as the cover stories about what happened fell away into the foggy soup of covert action and its contradictions, it devolved into to a case of excuses about haste – 'he said that but didn't mean it'. Even as the raid inspires mass euphoria and self-righteous blood lust, the full meaning of it is missing in a media that is much better at the how than the why.

First of all, this operation reflected the reorganisation of the national security state with the CIA taking over from the soldiers. This operation was Leon Panetta's last hurrah as Spook-in-Chief before he uses his covert ops portfolio to take over the Pentagon.

Second, that most hyped soldier's soldier, Generalissimo David Petraeus, who has failed to end the insurgency in Afghanistan (and who is now warring on Pakistan) is being moved into Panetta's job. A Navy Seal Commander has now been promoted to the Central Command.

The bottom line: public accountability and open disclosure has become a thing of the past. No wonder the ongoing campaign to 'get WikiLeaks' before it exposes more secrets.

Creating an image

As the military privatises wars, and, in effect, goes underground, there is a recognition that, despite the size of our forces and the power of our technology, we have, in effect, been losing to peasants with suicide belts and unconventional tactics we continually underestimate.

Writes former assistant Treasury secretary Paul Craig Roberts:

Americans are too busy celebrating to think, a capability that seems to have been taken out of their education.

Americans are so enthralled over the death of bin Laden that they do not wonder why information gleamed years ago would take so long to locate a person who was allegedly living in a million-dollar building equipped with all the latest communication equipment next to the Pakistani Military Academy. Allegedly, the "most wanted criminal" was not moving from hide-out to hide-out in desolate mountains, but ensconced in luxury quarters in broad daylight. Nevertheless, despite his obvious location, it took the CIA years to find him after claiming to have gained information of his whereabouts out of captives in secret prisons. This is the image of the CIA as the new Keystone Cops.

Like the Canadian Mounties, in the end, Navy Seal Unit 6, armed with lethal weapons and an attack dog, got their man – with not inconsiderable collateral damage – in what the New York Times called an "extremely one-sided encounter".

It was, let's admit, a liquidation, right out of the KGB playbook.

Politically – and yes, there was a political agenda here too – the bin Laden operation was part of a chain of calculated presidential promoting exercises including the announcement of his re-election campaign and massive fund-raising effort, his deals with the Repubs on the budget, the release of his birth certificate, his interview with Oprah, his shakeup of sorts of the Pentagon, his bringing the CEO of GE and William Daley into the White House, on and on.

The "new" Obama wants to be seen as a warrior, not a wuss, as long as he is not forced to go after Wall Street. Right now, his victory is viewed widely for what it is; vengeance. Or in the words of the street, "payback."

Nailing bin Laden has to be seen in the context of his Spring offencive grounded in symbolic advances, to get his poll numbers up and his campaign rolling, to make him look invincible, and to "triangulate" by moving to the centre and pre-empting/co-opting the right. He now has Bush and Cheney praising him.

Concludes Roberts:

Obama needed closure of the Afghan war and occupation in order to deal with the US budget deficit. Subsequent statements from Obama regime officials suggest that the agenda might be to give Americans a piece of war victory in order to boost their lagging enthusiasm. The military/security complex will become richer and more powerful, and Americans will be rewarded with vicarious pleasure in victory over enemies.

Adds Tom Engelhardt:

Consider it an insult to irony, but the world bin Laden really changed forever wasn't in the Greater Middle East. It was here. Cheer his death, bury him at sea, don't release any photos, and he'll still carry on as a ghost as long as Washington continues to fight its deadly, disastrous wars in his old neighbourhood.

Disclaimer: In case you wonder, I am not now nor have I ever been a supporter, sympathiser or rationaliser of Osama bin Laden's violent jihad. The fact that I feel I have to even write this should give readers insight into the climate of permissible discussion. I am not unhappy to see OBL moving on to the next world. Good riddance, but we need to analyse this event more closely. Will it help end the war or will "our success" convince the Pentagon it needs to be expanded? The issues of the raid's legality need to be discussed.

News Dissector Danny Schechter edits

Friday, May 6, 2011

Government Assistance

It is said the number of US millionaires will double by 2020, if we let it. Meanwhile according to this report from more and more Americans rely for survival on more and more help from the Government, that much hated much maligned, much depended on organization. It boggles my mind that Republicans can seriously suggest slashing pensions and medicare while saying nothing about constant warfare and piling on the pain by demanding we cut top tax rates from 35% to 25%. Income inequality is bad for everyone especially at this Third World levels.

Government social benefits accounted for nearly 20 percent—or 20 cents of every dollar—of Americans' disposable income in March, a figure that's been growing amid a weak economy, stubbornly high unemployment, and an aging population.

As recently as the 1980s, that figure was closer to 12 or 13 percent, according to the U.S. Bureau of Economic Analysis. "That [20 percent] is a pretty big chunk of what people have as their disposable income," says Chris Christopher, economist at IHS Global Insight.

Government benefits—also called transfer payments—are made to citizens by federal, state, and local governments through programs such as Social Security, Medicare, unemployment insurance, and disability insurance.

Not surprisingly, the recession has further accelerated Americans' dependence on government transfer payments. In this sputtering job market, many Americans are getting most, if not all, of their income from unemployment benefits. "The economy has been weak for the last three or four years, so more people are collecting unemployment benefits, and they're collecting them for longer," says Russ Koesterich, iShares global chief investment strategist and author of The Ten Trillion Dollar Gamble.

While the Great Recession can be blamed for the relatively recent spike in transfer payments as a proportion of disposable income, it doesn't account for the general upward trend seen since the late 1950s, the earliest data available from the Bureau of Economic Analysis. In January 1959, government social benefits accounted for about 6.7 percent of disposable income, on average. Twenty years later, that figure jumped to almost 13 percent.

Thursday, May 5, 2011

Dead Not Alive

From zero hedge a fascinating discussion about the sickness and death of the terrorist mastermind, killed but not captured in his dialysis fastness in Pakistan. So, why won't they release the death photos of the mastermind? National security is given as the reason. At every level and in every way President Obama continues to disappoint. Leon Panetta, my former Congressional Representative had said that he thought the pictures would be released but apparently thehead of the CIA isn't in the loop. Every single thing to do with Al Quaeda becomes a conspiracy theory. It's almsot as though had our dear leaders not had this shadowy organization to use to scare us, they'd have had to invent them...

I'm as happy as the next red-blooded American that Bin Laden is dead.

For more than a decade, the government has said that Bin Laden is the world's worst terrorist, a terrorist kingpin, the head of the worst terrorist group in the world.

But if we captured and interrogated him, he could have spilled a lot of beans which would help prevent future terrorist attacks.


But as the Atlantic reports today:

There's one option the administration appears to have never seriously considered: taking bin Laden alive.

The administration had made clear to the military's clandestine Joint Special Operations Command that it wanted bin Laden dead, according to a senior U.S. official with knowledge of the discussions. A high-ranking military officer briefed on the assault said the SEALs knew their mission was not to take him alive.

The White House now admits that Bin Laden wasn't armed, so why wasn't he captured? The government now says that the Seals who entered the compound thought he was reaching for a weapon.

That might be true, although Bin Laden wasn't exactly a healthy spring chicken. Indeed, Bin Laden was already pretty sickly by late 2001. (Don't worry: This post won't go down any rabbit holes regarding claims that Bin Laden died years ago.)

As CNN terrorism analyst Peter Bergen - who met Bin Laden and studied Bin Laden and his operation for many years - told CNN in 2002:

He's aged enormously between '97 and October of last year.

This is a man who was clearly not well. I mean, as you see from these pictures here, he's really, by December he's looking pretty terrible. But by December, of course, that tape that was aired then, he's barely moving the left side of his body. So he's clearly got diabetes. He has low blood pressure. He's got a wound in his foot. He's apparently got dialysis ... for kidney problems.

I mean, this is a man who has a number of health problems, apart from the fact that anybody running around the Afghan mountains is not going to be in great shape.

Indeed, the oldest - and second-largest - French newspaper claims that Bin Laden was in the hospital for kidney failure two months before 9/11. As the Guardian notes:

Two months before September 11 Osama bin Laden flew to Dubai for 10 days for treatment at the American hospital, where he was visited by the local CIA agent, according to the French newspaper Le Figaro.

The disclosures are known to come from French intelligence which is keen to reveal the ambiguous role of the CIA, and to restrain Washington from extending the war to Iraq and elsewhere.

Bin Laden is reported to have arrived in Dubai on July 4 from Quetta in Pakistan with his own personal doctor, nurse and four bodyguards, to be treated in the urology department.

Bin Laden has often been reported to be in poor health. Some accounts claim that he is suffering from Hepatitis C, and can expect to live for only two more years.

According to Le Figaro, last year he ordered a mobile dialysis machine to be delivered to his base at Kandahar in Afghanistan.

Even CBS news reported that Bin Laden was ill on September 10, 2001, being treated in a Pakistan hospital with kidney dialysis.

In addition, it is rumored that Bin Laden had Marfan Syndrome - a disorder of the connective tissue, which usually shortens the life span (Abraham Lincoln had Marfan).

As Salon noted in November 2001:

Judging by photos and the FBI's physical records, Osama bin Laden could be a candidate for the diagnosis. He is said to be between 6 foot 4 inches and 6 foot 6, which is apparently unusual for his family. He is thin, bony and has little muscle; he weighs only 160 pounds. And he uses a cane -- possibly the result of connective tissue or back problems. Other information about the leader of al-Qaida suggests he may have a heart condition. His facial structure also resembles that of people with Marfan.

"He is Marfanoid," says Dr. Richard Devereux, a clinician who treats patients with the illness at the Weill Cornell Medical Center in New York. "He seems to have long fingers and long arms. His head appears to be elongated and his face narrow ... It's certainly conceivable that he has the Marfan syndrome and could be evaluated for it."

Though people have long speculated about bin Laden having Marfan, federal officials won't answer questions about his health. "We don't discuss the medical conditions of our enemy commanders," says Maj. Jay Steuck, a Defense Department spokesman. And a Central Intelligence Agency spokesman says, "We don't do unclassified medical summaries."

Yossef Bodansky, staff director of the House Task Force on Terrorism, told the New York Post: "We are getting a lot of reports and rumors. By all accounts, bin Laden is not a healthy man and is under a lot of stress."

David K. Schenker, a research fellow at the Washington Institute for Near East Policy, agrees that bin Laden's size is atypical for his surroundings. "I lived in the Middle East, and I never ran into anyone that tall," he says.

Should bin Laden have Marfan syndrome, the stress of cave-hopping and trying to outrun Allied cruise missiles could prove deadly. "People with the disease are told not to engage in heavy exercise," says Dr. Darwin Prockop, director of the Center for Gene Therapy at Tulane University. "If Osama bin Laden has Marfan, he is in danger of sudden rupture of the aorta and sudden death."

Again, this post will not go down the rabbit hole to ask whether Bin Laden died prior to Sunday's raid. I am only focusing on the fact that Bin Laden was probably not a healthy young bad guy when he was thought to be reaching for a gun.

Bin Laden’s 12 year old daughter purportedly claims that Bin Laden was successfully captured alive first and then later summarily executed by the troops. Hopefully, this isn't true.

But assuming the government's version of events is true, why didn't the seals use knock-out gas and capture him? Even common thugs use knock out gas. For example, the U.S. state department warns:

Do not accept food or drink from strangers. Criminals have been known to drug food or drink offered to passengers. Criminals may also spray sleeping gas in train compartments. Where possible, lock your compartment. If it cannot be locked securely, take turns sleeping in shifts with your traveling companions. If that is not possible, stay awake. If you must sleep unprotected, tie down your luggage and secure your valuables to the extent possible.
(Be careful if you take any night trains in Italy).

If common hoodlams knock out their victims, you know that the U.S. military has stuff they can easily lob in and knock everyone out. Why didn't the government knock out Bin Laden and then hall him off to the interrogation room?

Indeed, the U.S. may have gotten the clue about Osama bin Laden's Abbottabad location in 2008. As the Guardian notes:

US may have got Osama bin Laden's Abbottabad clue in 2008 – WikiLeaks

Courier's interrogation at Guantánamo revealed network of messengers that US traced to track down the al-Qaida leader

The US may have obtained a clue three years ago that Osama bin Laden was hiding in Abbottabad, according to information gathered by interrogators at Guantánamo.


WikiLeaks released the report last week, prompting speculation that the US, afraid that its planned raid might be pre-empted, brought forward its attack.
So the U.S. could have knocked him out in 2008 and interrogated him.

As I've pointed out before, the U.S. had multiple opportunities to get Bin Laden in 2001 and 2007:

According to the U.S. Senate - Bin Laden was "within the grasp" of the U.S. military in Afghanistan in December 2001, but that then-secretary of defense Rumsfeld refused to provide the soldiers necessary to capture him.

This is not news: it was disclosed in 2005 by the CIA field commander for the area in Afghanistan where Bin Laden was holed up.

In addition, French soldiers allegedly say that they easily could have captured or killed Bin Laden in Afghanistan, but that the American commanders stopped them.


A retired Colonel and Fox News military analyst said that the U.S. could have killed Bin Laden in 2007, but didn't:

We know, with a 70 percent level of certainty — which is huge in the world of intelligence — that in August of 2007, bin Laden was in a convoy headed south from Tora Bora. We had his butt, on camera, on satellite. We were listening to his conversations. We had the world’s best hunters/killers — Seal Team 6 [Note: this is the exact same team that is credited with killing Bin Laden yesterday] — nearby. We had the world class Joint Special Operations Command (JSOC) coordinating with the CIA and other agencies. We had unmanned drones overhead with missiles on their wings; we had the best Air Force on the planet, begging to drop one on the terrorist. We had him in our sights; we had done it ....Unbelievably, and in my opinion, criminally, we did not kill Usama bin Laden.
Indeed, a United States Congressman claims that the Bush administration intentionally let Bin Laden escape in order to justify the Iraq war.

Moreover, as I've previously noted, capturing Bin Laden and taking down Al Qaeda was never the real priority:

American historian, investigative journalist and policy analyst Gareth Porter writes in the Asia Times:

Feith's book, War and Decision, released last month, provides excerpts of the paper Rumsfeld sent to President George W Bush on September 30, 2001, calling for the administration to focus not on taking down Osama bin Laden's al-Qaeda network but on the aim of establishing "new regimes" in a series of states...

If we had really wanted to get Bin Laden, we would have gotten him in 2001 (indeed, the Taliban offered to turn him over), or 2007.
And Gareth Porter reported yesterday that the U.S. didn't even consider capturing Bin Laden as part of its Afghanistan war strategy:

The absence of any military planning to catch bin Laden was a function of Bush's national security team, led by Vice-President Dick Cheney and Secretary of Defence Donald Rumsfeld, which had firmly opposed any military operation in Afghanistan that would have had any possibility of catching bin Laden and his lieutenants.

Rumsfeld and the second-ranking official at the Pentagon, Paul Wolfowitz, had dismissed CIA warnings of an al Qaeda terrorist attack against the United States in the summer of 2001, and even after 9/11 had continued to question the CIA's conclusion that bin Laden and al Qaeda were behind the attacks.

Cheney and Rumsfeld were determined not to allow a focus on bin Laden to interfere with their plan for a U.S. invasion of Iraq to overthrow the Saddam Hussein regime.

Even after Bush decided in favour of an Afghan campaign, CENTCOM commander Tommy Franks, who was responsible for the war in Afghanistan, was not directed to have a plan for bin Laden’s capture or to block his escape to Pakistan.

We tortured a bunch of innocent farmers, children, and grandparents ... supposedly to get information about Bin Laden. But it doesn't seem like the government was very interested in actually interrogating Bin Laden himself.

Tuesday, May 3, 2011

Osama Bin Laden 1957-2011

The BBC's obituary.

Osama Bin Laden came to the world's attention on 11 September 2001, when the attacks on the United States left more than 3,000 people dead and hundreds more injured.

In a matter of three years, the Saudi-born dissident had emerged from obscurity to become one of the most hated and feared men in the world.

Osama Bin Laden was born in 1957, apparently the 17th of 52 children of Mohamed Bin Laden, a multimillionaire builder responsible for 80% of Saudi Arabia's roads.

His father's death in a helicopter crash in 1968 brought the young man a fortune running into many millions of dollars, though considerably less than the widely published estimate of $250m.

Frank Gardner

BBC security correspondent

Osama Bin Laden has gone to his grave with some of his life's aims achieved, and some frustrated.

Following the 9/11 attacks he said he did not care if his life ended now because his "work was done", having "awoken Muslims around the world to the injustices imposed upon them by the West and Israel".

But al-Qaeda and its affiliates have failed to remove any Arab "apostate" regimes, nor instigated a transnational conflict between mainstream Muslims and the West. The global jihadist movement has been sidelined by this year's largely secular revolutions in the Middle East.

With Iraq now calmer and with Nato forces helping anti-Gaddafi rebels in Libya, al-Qaeda's world view of perpetual confrontation with all non-Muslims is holding a diminishing appeal.

All the more reason, say experts, to be vigilant for desperate acts of violence by hardcore extremists in the movement's dwindling ranks.
While studying civil engineering at King Abdul Aziz University in Jeddah, Saudi Arabia, Bin Laden came into contact with teachers and students of the more conservative brand of Islam.

Through theological debate and study, he came to embrace fundamentalist Islam as a bulwark against what he saw as the decadence of the West.

The Soviet invasion of Afghanistan in December 1979 changed Bin Laden's life forever. He took up the anti-communist cause with a will, moving to Afghanistan where, for a decade, he fought an ultimately victorious campaign with the mujahideen.

Intelligence experts believe that the US Central Intelligence Agency played an active role in arming and training the mujahideen, including Bin Laden. The end of the war saw a sea change in his views.

Lucrative investments

His hatred of Moscow shifted to Washington after 300,000 US troops, women among them, were based in Saudi Arabia, home of two of Islam's holiest places, during the 1991 Gulf War against Iraq. Bin Laden vowed to avenge what he saw as blasphemy.

Along with many of his mujahideen comrades, he brought his mix of fighting skills and Islamic zeal to many anti-US factions within the Middle East.

American pressure ended brief sojourns in Saudi Arabia - which removed his citizenship in 1994 - and then Sudan, and Bin Laden moved back to Afghanistan in January 1996.

Bin Laden was the chief suspect behind the Nairobi embassy bomb The country, in a state of anarchy, was home to a diverse range of Islamic groups, including the fundamentalist Taliban militia, which captured the capital, Kabul, nine months later.

Though geographically limited, Bin Laden's wealth, increasing all the time through lucrative worldwide investments, enabled him to finance and control a continuously shifting series of transnational militant alliances through his al-Qaeda network.

Sometimes he worked as a broker, organising logistics and providing financial support. At other times, he would run his own violent campaigns.

In February 1998, he issued a fatwa - or religious edict - on behalf of the World Front for Jihad Against Jews and Crusaders, stating that killing Americans and their allies was a Muslim duty.

'Most wanted'

Six months later, two bombs rocked the US embassies in Kenya and Tanzania. Some 224 people died and nearly 5,000 were wounded. He was indicted as chief suspect, along with 16 of his colleagues.

The 9/11 attacks targeted New York's financial district Almost overnight, Bin Laden became a major thorn in the side of America. A byword for fundamentalist Islamic resistance to Washington, he soon appeared on the FBI's "most wanted" list, with a reward of up to $25m (£15m) on his head.

The US fired 75 sea-launched cruise missiles into six training camps in eastern Afghanistan in a failed attempt to kill him. They missed their target by just one hour.

As well as the African bombings, Bin Laden was implicated in the 1993 bombing of the World Trade Center in New York, a 1995 car bomb in the Saudi capital Riyadh and a truck bomb in a Saudi barracks, which killed 19 US soldiers.

"I always kill Americans because they kill us," he said. "When we attack Americans, we don't harm other people."

In the case of the bombs in Nairobi and Dar es Salaam, his words rang hollow. The vast majority of the dead and injured were African, not American.

The arrogance of wealth saw Bin Laden make the government of Kazakhstan a multi-million dollar offer to buy his own tactical nuclear weapon.

It comes as no surprise, then, that both the US and Israel are believed to have sent assassination squads after him.

Cult status

Then came the events of 11 September 2001. Two hijacked aircraft smashed into, and destroyed, the twin towers of the World Trade Center in New York.

Bin Laden exhorted all Muslims to wage war against America Another aircraft ploughed into the Pentagon in Washington and a fourth crashed in a field in Pennsylvania. Altogether more than 3,000 people died in the attacks, which led to the US-led operation against the Taliban.

Allied forces moved into Afghanistan late in 2001. At the time, it was believed that Bin Laden might have been killed during the battle for the Tora Bora cave complex.

In reality, he had slipped across the border into Pakistan, a country in which he achieved the sort of cult status usually reserved for pop stars or film actors.

In February 2003, an audio tape, purporting to be of Bin Laden, was delivered to the al-Jazeera television company.

Of the impending US-led invasion of Iraq, the voice said: "This crusaders' war concerns, first and foremost, all Muslims, regardless of whether the Iraqi socialist party or Saddam remain in power.

"All Muslims, especially those in Iraq, should launch a holy war."

The US conceded that the voice was probably Bin Laden's.

Careful timing

The last known sighting of Bin Laden by anyone other than his very close entourage remains in late 2001 as he prepared to flee from his Tora Bora stronghold.

In Pakistan, he was given hospitality and shelter by some local Pashtun tribesmen loyal to the Taliban and opposed to their own government then led by President Pervez Musharraf.

Bin Laden has carefully timed his media appearances The hunt for Bin Laden took a dramatic turn with the arrest in Pakistan, in 2003, of Khalid Sheikh Mohammed.

The head of al-Qaeda's operations and the suspected mastermind of the Twin Towers attack, it seemed as though the net had begun to close in on Bin Laden himself.

A major offensive to capture Bin Laden was launched by the Pakistani army along the Afghan border in May-July 2004.

But a year later, Mr Musharraf admitted the trail had gone cold.

Though al-Qaeda has been prolific in issuing audio messages, often on the internet and featuring the network's second-in-command, Ayman al-Zawahiri, videos of Bin Laden himself have been rare.

His appearances have been carefully timed and aimed, analysts say, at influencing Western public opinion by driving a wedge between citizens and their leaders.

One such video was issued in 2004 - the same year as the Madrid bombings - and days before the US election.

A second surfaced as the sixth anniversary of the 11 September attacks approached, timed to quell rumours that he had been dead for some time.

To his supporters, Bin Laden was a fighter for freedom against the US and Israel, not, as he was to many in the West, a terrorist with the blood of thousands of people on his hands.