Size and Scope of Money Laundering by U.S. Banks from La Journada [Mexico], 2005.01.19

by James Petras - Professor of Sociology, Binghamton University

 

There is a consensus among U.S. Congressional Investigators, former bankers and international banking experts that U.S. and European banks launder between $500 billion and $1 trillion of dirty money each year, half of which is laundered by U.S. banks alone. As Senator Carl Levin summarizes the record: "Estimates are that $500 billion to $1 trillion of international criminal proceeds are moved internationally and deposited into bank accounts annually. It is estimated that half of that money comes to the United States".

 

Over a decade then, between $2.5 and $5 trillion criminal proceeds have been laundered by U.S. banks and circulated in the U.S. financial circuits. Senator Levin's statement however, only covers criminal proceeds, according to U.S. laws. It does not include illegal transfers and capital flows from corrupt political leaders, or tax evasion by overseas businesses. A leading U.S. scholar who is an expert on international finance associated with the prestigious Brookings Institute estimates "the flow of corrupt money out of developing (Third World) and transitional (ex-Communist) economies into Western coffers at $20 to $40 billion a year and the flow stemming from mis-priced trade at $80 billion a year or more. My lowest estimate is $100 billion per year by these two means by which we facilitated a trillion dollars in the decade, at least half to the United States. Including the other elements of illegal flight capital would produce much higher figures. The Brookings expert also did not include illegal shifts of real estate and securities titles, wire fraud, etc.

 

In other words, an incomplete figure of dirty money (laundered criminal and corrupt money) flowing into U.S. coffers during the 1990s amounted to $3-$5.5 trillion. This is not the complete picture but it gives us a basis to estimate the significance of the "dirty money factor" in evaluating the U.S. economy. In the first place, it is clear that the combined laundered and dirty money flows cover part of the U.S. deficit in its balance of merchandise trade which ranges in the hundreds of billions annually. As it stands, the U.S. trade deficit is close to $300 billion. Without the "dirty money" the U.S. economy external accounts would be totally unsustainable, living standards would plummet, the dollar would weaken, the available investment and loan capital would shrink and Washington would not be able to sustain its global empire. And the importance of laundered money is forecast to increase. Former private banker Antonio Geraldi, in testimony before the Senate Subcommittee projects significant growth in U.S. bank laundering. "The forecasters also predict the amounts laundered in the trillions of dollars and growing disproportionately to legitimate funds." The $500 billion of criminal and dirty money flowing into and through the major U.S. banks far exceeds the net revenues of all the IT companies in the U.S., not to speak of their profits. These yearly inflows surpass all the net transfers by the major U.S. oil producers, military industries and airplane manufacturers. The biggest U.S. banks, particularly Citibank, derive a high percentage of their banking profits from serving these criminal and dirty money accounts. The big U.S. banks and key institutions sustain U.S. global power via their money laundering and managing of illegally obtained overseas funds.

 

U.S. Banks and The Dirty Money Empire

Washington and the mass media have portrayed the U.S. as being in the forefront of the struggle against narco trafficking, drug laundering and political corruption: the image is of clean white hands fighting dirty money. The truth is exactly the opposite. U.S. banks have developed a highly elaborate set of policies for transferring illicit funds to the U.S., investing those funds in legitimate businesses or U.S. government bonds and legitimating them. The U.S. Congress has held numerous hearings, provided detailed exposés of the illicit practices of the banks, passed several laws and called for stiffer enforcement by any number of public regulators and private bankers. Yet the biggest banks continue their practices, the sum of dirty money grows exponentially, because both the State and the banks have neither the will nor the interest to put an end to the practices that provide high profits and buttress an otherwise fragile empire.

 

First thing to note about the money laundering business, whether criminal or corrupt, is that it is carried out by the most important banks in the USA. Secondly, the practices of bank officials involved in money laundering have the backing and encouragement of the highest levels of the banking institutions - these are not isolated cases by loose cannons. This is clear in the case of Citibank's laundering of Raul Salinas (brother of Mexico's ex-President) $200 million account. When Salinas was arrested and his large scale theft of government funds was exposed, his private bank manager at Citibank, Amy Elliott told her colleagues that "this goes in the very, very top of the corporation, this was known...on the very top. We are little pawns in this whole thing" (p.35).

 

Citibank, the biggest money launderer, is the biggest bank in the U.S., with 180,000 employees world-wide operating in 100 countries, with $700 billion in known assets and over $100 billion in client assets in private bank (secret accounts) operating private banking offices in 30 countries, which is the largest global presence of any U.S. private bank. It is important to clarify what is meant by "private bank."

 

Private Banking is a sector of a bank which caters to extremely wealthy clients ($1 million deposits and up). The big banks charge customers a fee for managing their assets and for providing the specialized services of the private banks. Private Bank services go beyond the routine banking services and include investment guidance, estate planning, tax assistance, off-shore accounts, and complicated schemes designed to secure the confidentiality of financial transactions. The attractiveness of the "Private Banks" (PB) for money laundering is that they sell secrecy to the dirty money clients. There are two methods that big Banks use to launder money: via private banks and via correspondent banking. PB routinely use code names for accounts, concentration accounts (concentration accounts co-mingles bank funds with client funds which cut off paper trails for billions of dollars of wire transfers) that disguise the movement of client funds, and offshore private investment corporations (PIC) located in countries with strict secrecy laws (Cayman Island, Bahamas, etc.).

 

For example, in the case of Raul Salinas, PB personnel at Citibank helped Salinas transfer $90 to $100 million out of Mexico in a manner that effectively disguised the funds' sources and destination thus breaking the funds' paper trail. In routine fashion, Citibank set up a dummy offshore corporation, provided Salinas with a secret code name, provided an alias for a third party intermediary who deposited the money in a Citibank account in Mexico and transferred the money in a concentration account to New York where it was then moved to Switzerland and London.

 

The PICs are designed by the big banks for the purpose of holding and hiding a person's assets. The nominal officers, trustees and shareholder of these shell corporations are themselves shell corporations controlled by the PB. The PIC then becomes the holder of the various bank and investment accounts and the ownership of the private bank clients is buried in the records of so-called jurisdiction such as the Cayman Islands. Private bankers of the big banks like Citibank keep pre-packaged PICs on the shelf awaiting activation when a private bank client wants one. The system works like Russian Matryoshka dolls, shells within shells within shells, which in the end can be impenetrable to a legal process.

 

The complicity of the state in big bank money laundering is evident when one reviews the historic record. Big bank money laundering has been investigated, audited, criticized and subject to legislation; the banks have written procedures to comply. Yet banks like Citibank and the other big ten banks ignore the procedures and laws and the government ignores the non-compliance.

 

Over the last 20 years, big bank laundering of criminal funds and looted funds has increased geometrically, dwarfing in size and rates of profit the activities in the formal economy. Estimates by experts place the rate of return in the PB market between 20-25% annually. Congressional investigations revealed that Citibank provided "services" for 4 political swindlers moving $380 million: Raul Salinas - $80-$100 million, Asif Ali Zardari (husband of former Prime Minister of Pakistan) in excess of $40 million, El Hadj Omar Bongo (dictator of Gabon since 1967) in excess of $130 million, the Abacha sons of General Abacha ex-dictator of Nigeria - in excess of $110 million. In all cases Citibank violated all of its own procedures and government guidelines: there was no client profile (review of client background), determination of the source of the funds, nor of any violations of country laws from which the money accrued. On the contrary, the bank facilitated the outflow in its prepackaged format: shell corporations were established, code names were provided, funds were moved through concentration accounts, the funds were invested in legitimate businesses or in U.S. bonds, etc. In none of these cases - or thousands of others - was due diligence practiced by the banks (under due diligence a private bank is obligated by law to take steps to ensure that it does not facilitate money laundering). In none of these cases were the top banking officials brought to court and tried. Even after arrest of their clients, Citibank continued to provide services, including the movement of funds to secret accounts and the provision of loans.

 

Correspondent Banks: The Second Track

The second and related route which the big banks use to launder hundreds of billions of dirty money is through "correspondent banking" (CB). CB is the provision of banking services by one bank to another bank. It is a highly profitable and significant sector of big banking. It enables overseas banks to conduct business and provide services for their customers - including drug dealers and others engaged in criminal activity - in jurisdictions like the U.S. where the banks have no physical presence. A bank that is licensed in a foreign country and has no office in the United States for its customers attracts and retains wealthy criminal clients interested in laundering money in the U.S. Instead of exposing itself to U.S. controls and incurring the high costs of locating in the U.S., the bank will open a correspondent account with an existing U.S. bank. By establishing such a relationship, the foreign bank (called a respondent) and through it, its criminal customers, receive many or all of the services offered by the U.S. big banks called the correspondent.

 

Today, all the big U.S. banks have established multiple correspondent relationships throughout the world so they may engage in international financial transactions for themselves and their clients in places where they do have a physical presence. Many of the largest U.S. and European banks located in the financial centers of the world serve as correspondents for thousands of other banks. Most of the offshore banks laundering billions for criminal clients have accounts in the U.S. All the big banks specializing in international fund transfer are called money center banks, some of the biggest process up to $1 trillion in wire transfers a day. For the billionaire criminals an important feature of correspondent relationships is that they provide access to international transfer systems - that facilitate the rapid transfer of funds across international boundaries and within countries. The most recent estimates (1998) are that 60 offshore jurisdictions around the world licensed about 4,000 offshore banks which control approximately $5 trillion in assets.

 

One of the major sources of impoverishment and crises in Africa, Asia, Latin America, Russia and the other countries of the ex-U.S.S.R. and Eastern Europe, is the pillage of the economy and the hundreds of billions of dollars which are transferred out of the country via the corresponding banking system and the Private Banking system linked to the biggest banks in the U.S. and Europe. Russia alone has seen over $200 billion illegally transferred in the course of the 1990s. The massive shift of capital from these countries to the U.S. and European banks has generated mass impoverishment and economic instability and crises. This in turn has created increased vulnerability to pressure from the IMF and World Bank to liberalize their banking and financial systems leading to further flight and deregulation which spawns greater corruption and overseas transfers via private banks as the Senate reports demonstrate.

 

The increasing polarization of the world is embedded in this organized system of criminal and corrupt financial transactions. While speculation and foreign debt payments play a role in undermining living standards in the crisis regions, the multi-trillion dollar money laundering and bank servicing of corrupt officials is a much more significant factor, sustaining Western prosperity, U.S. empire building and financial stability. The scale, scope and time frame of transfers and money laundering, the centrality of the biggest banking enterprises and the complicity of the governments, strongly suggests that the dynamics of growth and stagnation, empire and re-colonization are intimately related to a new form of capitalism built around pillage, criminality, corruption and complicity.

 

-- James Petras is a Professor of Sociology at Binghamton University in Binghamton, New York. He is the author of 57 books. His latest is "Globalization Unmasked: Imperialism in the New Millennium."

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For further reading:

 

 

Declassified Radio Interview: Covert Crime
by Matt Ehling, declassifiedradio@yahoo.com 12:15am Fri Jan 4, 2002 

 

"Declassified" radio presents an interview with former military criminal investigator and Iran-Contra whistle-blower Gene Wheaton.

 

In this episode, Wheaton reflects on the Iran-Contra scandal, and on ongoing covert crimes of the executive branch.

 

Declassified Transcript: "Covert Crime"

 

(Music cue)

 

GENE WHEATON: When Harry Truman signed the National Security Act creating the CIA, he specifically stated in that act that they could not have any police powers, and they could not operate domestically in the United States, because he feared a secret police coup. By creeping in a little at a time, that coup has taken place.

 

NARRATOR: You are listening to "Declassified", an ongoing interview and documentary series dealing with America's national security establishment. In this episode, "Declassified" discusses covert operations and covert crime with former military criminal investigator, Gene Wheaton.

 

(Music out)

 

At the end of World War II, the United States government reorganized its military bureaucracy, restructuring the armed forces under the newly created Department of Defense. It also created an entirely new federal bureaucracy -- a collection of agencies that has come to be informally known as the intelligence community. This new bureaucracy was initially centered around the CIA, or Central Intelligence Agency -- an offshoot of the World War II Office of Special Services -- which coordinated intelligence gathering and clandestine operations. With the growth of the Cold War, the intelligence community grew to include numerous other agencies, including the National Security Agency, or NSA, tasked with electronic eavesdropping, and the National Reconnaissance Office, which operates America's satellite reconnaissance network.

 

The intelligence establishment took on two distinct functions during and after the Cold War. The first was intelligence gathering, which had existed under the auspices of various federal offices for many years previous. The second, and more controversial function, was participation in covert operations, which included propaganda, paramilitary operations, and assassinations. These covert functions were widely employed during the Cold War, and their use continues today.

 

The intelligence establishment was designed to operate under a veil of official secrecy, in order to make its functions opaque to foreign espionage. A body of secrecy laws and protocols grew up around these agencies, shielding them from foreign spies, but also from scrutiny by much of the American public. Congressional oversight of the intelligence establishment is limited to a select few committee members, intelligence budget information is restricted and classified, and even the existence of entire agencies, such as the NSA, has been hidden from the public at various time in the past.

 

Critics of the intelligence community have long contended that the institutional secrecy these agencies operate under allows them too much latitude, and too little oversight. This secrecy, they contend, has led to violations of the Constitution, and to violations of the law. The Pike and Church Committee hearings of the 1970s revealed broad-based abuses of the intelligence community, including CIA surveillance of legal American political groups, and CIA sponsored mind-control experiments performed on unwilling subjects. The Iran-Contra hearings of the 1980s uncovered a massive operation that involved illegally selling weapons to avowed enemies of the United States, and the arming of paramilitary militias in violation of laws passed by Congress.

 

Congressional oversight of the intelligence community was increased after the Pike and Church hearings of the 1970s, but in the wake of the September 11th terrorist attacks, many of the restrictions placed on America's intelligence agencies are being lifted. Civil libertarians and intelligence agency critics have been quick to warn that an increase of secret police powers in the United States will do little to defend the country against terrorism, but will do much to erode traditional constitutional protections.

 

One such critic is Gene Wheaton, a former military criminal investigator and security contractor, who has worked as a counter-terrorism consultant for Rockwell Corporation, the Saudi Royal Family, and the Shah of Iran. Gene Wheaton was also recruited into the early stages of the Iran-Contra enterprise, and he is best known for his role in exposing elements of the Iran-Contra affair during the mid-eighties.

 

In this episode of "Declassified", Gene Wheaton shares his reflections on the Iran-Contra affair, and his critique of how elements of the intelligence community have come to undermine American democracy. Gene Wheaton:  

 

WHEATON: I've served in the Marine Corps, the Air Force, and the Army, primarily as a criminal investigator and counter-intelligence agent. After Marine service I went back to my hometown of Tulsa, Oklahoma and was a police officer there for a couple of years, and then came back into the service as an OSI agent in the Air Force, and served about nine years in the Air Force that way. And then during the build-up for the Vietnam war, by the time I got enough university credits to get a commission, I was too old for it, so the army offered me an inter-service transfer if I would transfer from the Air Force to the Army as a CID agent, Criminal Investigation Division. So I switched from the Air Force to the Army and served at Fort Ord California, and in Vietnam. In '71, my family and I were transferred to Iran where I was the narcotics and counter-terrorism advisor to the Shah of Iran, and was on the embassy staff as the ambassadors' back-door liaison with the Iranian police intelligence agency. I came back from Iran in '73, was stationed in Chicago till '75, retired from the army and went back to Iran as a civilian working on contract doing generally the same stuff -- counter-terrorism and security on major projects. My last assignment was in Iran...for two years I was the executive assistant to one of the vice presidents of the Rockwell Corporation, and director of security for a program over there called the IBEX program; it was an airborne electronic intelligence program plus, uh, mountaintop border sites to monitor the airwaves of the neighbors...I was brought on board after the assassination of three Rockwell managers on the program. It was a billion-dollar program, and if any more of their people died, they were going to cancel the whole program. Rockwell was fronting for the CIA on this program with the Iranian government.

 

I have worked on and off on projects with CIA people because of being a military investigator. I consider myself a policeman, not an intelligence agent. But in the 70s... when I was advisor...I was in civilian clothes...I wore civilian clothes for 20 years even though I was a military man, and I carried federal agent's credentials. But in Iran, when I was the narcotics and counter-terrorism advisor to governments over there, I got very close with people in the CIA. I was a Farsi linguist, and I had Iranian security clearances and American security clearances and I just ran with that crowd, and they just sort of adopted me into their subculture. And that's how I became an insider with these people was because of all of that.

 

When I went back to Iran in '75 after I retired from the army, I went back with a, I guess you could say, an electronic handshake: some people in the agency in Washington told people over there I was coming and that I was one of the good guys and an insider, and had these clearances, and they set me up for a point of contact in the embassy if I ever needed their help, and on the outside if they ever needed mine. Mutual back scratching type thing. I've never in my life worked for the agency per se; the closest thing was working for Rockwell as a contractor, and I had a CIA security clearance at that time.

 

My really broad-based knowledge of the covert operations peaked out when I was really brought into the inner circle of these covert operators in the mid 80s. I had been in different compartments of the same batch of people, where even their own people -- a lot of them didn't know the big picture -- but I was considered a fair-haired boy with Middle East background and aviation background, and different cells in the intelligence community needed me for different things, and I was so close to a bunch of these people, that I was gradually, I was almost considered one of them. They treated me just like I was a CIA covert operator.

 

While running back and forth to Saudi Arabia and Pakistan and Egypt in the '80s, early, mid 80s...I kept my contacts with the embassies around the world and with the State Department, and with the Agency, so that I could get quicker access into countries whenever I got a project that I could work on. In 1985 I became the vice-president of a cargo airline called National Air. It was during that period, summer of '85, that some of my old CIA contacts -- who were no longer full-time employees of the agency -- but when they retire these guys they usually give them a contract as an outside contractor on the side, and then they have deniability for working for the agency. They can say, "No, he's not an employee of the agency," but in fact they are contractors and they still carry security clearances and have to be polygraphed once in a while. I was recruited into Ollie North's network by that group during the summer of '85 because they wanted my airplanes for missions to the Contras, and they wanted my Middle East background for helping devise a plan for movement of weapons to the Mujahadin in Afghanistan. I had traveled across Afghanistan before, and again, I speak the language, and had been in and out of in Afghanistan and Pakistan more so than anybody they could find within the agency.

 

The guys that I had known for several years, uh, primarily Carl Jenkins, who was a long-time career CIA paramilitary mercenary operator, uh, probably the most highly respected of those people in that division of the agency...he was the commander of the biggest CIA base in Laos while Shackley was over there, and while Bill Sullivan was over as ambassador. Carl and I became very close friends in the early 80s, to the point where I would keep a bedroom in his home in Washington with clothes and papers and things so I didn't have to carry them from California. I was commuting regularly back and forth when I was going overseas, and Carl and his wife, who was an active super-grader in the agency -- he was her case officer and she had been his interpreter, and then he got her a master's degree and then she got her Ph.D. She went on to head one of the branches of the agency -- we became like brothers and sisters, between me and them.

 

So I was back in Washington trying to drum up business for this little cargo airline, and Carl agreed to be my Washington representative, uh, for marketing purposes to open doors for me in Washington, D.C....to see if I could get some cargo contracts. It was in that vein that Carl told me it was time...that the guys in the national security council wanted to bring me into the inner circle. And that's where I sort of got at the very national level of this. I had previously attended some black-tie functions with Bill Casey and the veterans of the OSS; had been invited to a party where the guest of honor was Vice President Bush. My wife and I were invited. We were running with a fairly high-level crowd. In December of, uh, '85 was the scheduled time for me to actually meet with Ollie North, so they had a black-tie dinner at the Palm Restaurant in Washington D. C. on the 4th of December. It was the day that Bud McFarland resigned as national security advisor.

 

At that black tie party at the Palm Restaurant on the 4th of December in 1985, I was specifically invited by Neil Livingston and to come in and meet Ollie North, and it was a party to promote Neil Livingston's book, called "Fighting Back", and the subtitle was "The War on Terrorism". He and a State Department/CIA spook by the name of Terry Arnold wrote that book together and this was the coming-out party for the book, and all the covert operations community, the real snake eaters, were going to be there with black ties. Ollie North was there and Bud McFarland and I don't know, 75 or 100 people in black ties, having drinks and dinner and hobnobbing and they felt like...the atmosphere at that party was one of 'We are the shadow government running the United States.' It was almost like a diplomatic party or a State Department coming out party for a regime. These guys were in charge, and that was how they presented it.

 

There was a plan that was approved later on by the Congress in August, no, excuse me, October of 1985 -- Congress was going to vote in 27 million dollars in non-lethal aid for the Contras and it was going to be a legitimate but covert, uh, program to supply the Contras with everything from medicines to tents and uniforms and food and whatever else they might need that was non-lethal, but as it turned out, that program became a lethal one too, because they would ship what they would laughingly refer to as hard rice, meaning weaponry, in with the $27 million worth of stuff.

 

Carl took me to the, what they called the Humanitarian Aid Office for the State Department in Roslyn, Virginia, and I met with Chris Arcos who was the deputy for that program to a guy, an Ambassador Dumeling. We were trying to get some of the 27 million dollars of cargo to haul to Honduras for the Contras that Congress had approved, and we were told several times in no uncertain terms that the only way we could do it was to work through Dick Secord and that aviation supply route, and I refused to do that because I knew that Secord had an unsavory reputation; he been forced into retirement out of the Air Force as a major general in '83 over the Ed Wilson scandal in Libya. So I was advising the people around Ollie North, the liaison people between me and him, that they were dealing with a bunch of unsavory characters that had a reputation, an official public reputation, of causing extreme embarrassment to the government. At that time I didn't...I thought the contractors -- Secord and that group -- I thought they had a legitimate covert contract with the government, but they were also diverting aircraft and hauling illegal cargo on the side, and I was receiving direct information about their movement.

 

Well, in May of '86, I personally briefed CIA director Bill Casey, and of course he looked startled. I had no idea at the time that he was one of the masterminds behind all this illegal stuff, but he said he'd look into it and get back to me. And he said he had to leave the country the next day, and would be back in touch with me in two or three weeks. It was exactly the same weekend, or the week, I think the 30th of May, when I met with him, or the 31st, when Ollie North was on that secret trip with Bud McFarland to Tehran. So I suppose Casey was going over to Israel to brief them about it. I didn't know that at the time. Casey sent a message to me after he got back saying that the agency wasn't involved in any of this stuff, and that the government wasn't involved in this illegal diversion, and "If you think you can do anything about it, let the chips fall where they may," as a bluff. I'm just a raggedy little old Oklahoma country boy, retired chief warrant officer, and I guess he figured I couldn't do it.

 

Anyway, as result of those briefings in the summer of '86, and I was kind of – this struck me as being treason and grand larceny on a major scale, stealing from the taxpayers' money, -- and having been a cop all my life, I thought it was kind of wrong. So I got with a couple of Washington D.C. journalists that I knew. And one of them was a two-time Pulitzer prize winning journalist by the name of Newt Royce. And Newt Royce and Mike Icoca, who was a free-lancer who was writing with him – Newt at that time was with the Hearst newspaper chain in Washington D. C., with their bureau. I had information -- direct knowledge from the Saudi royal family -- that kickbacks were being, from the Saudi AWACS program, were being used to help fund the Contras, to buy weapons from different countries around the world. And I furnished Newt with the names of other people that could back up what I was saying, and that this was a scam because Secord, who was on active duty after the Iranian revolution, was the chief architect of the Saudi AWACS program. The Saudi AWACS program was identical to our Iran IBEX program that we had to close down in Iran. They just moved it across the Persian Gulf to Saudi Arabia and renamed it. It was an 8 billion dollar program, and those guys were talking about 10 % or 15%, so you're talking about an 800 million dollars minimum, estimate, that that these guys could get whenever they wanted it, out of the bag.

 

And Newt and Mike Icoca wrote it up on the wire service for Hearst newspaper chain, and it went out on the wires and was made a front page headline of the San Francisco Examiner on the 27th of July of 1986. As a result of that article in August of '86, Congressman Dante Facell wrote a letter to then secretary of defense Casper Weinberger asking him if it was true that foreign money, kickback money on programs, was being used to fund foreign covert operations. And in September of '86 Cap Weinberger wrote a letter back to Facell denying that it was being done by the U.S. government, with any knowledge of it being kickback money. That eventually, one of George Bush's last acts -- and Larry Walsh, the special prosecutor, indicted Weinberger as a result of that correspondence -- and Bush pardoned him as one of his last acts. And that's how this whole mess got started.

 

The covert operations subculture and the pyramid system of it is difficult for the average citizen to understand. And I understand it because I saw it, but it's awfully hard to describe. This stuff goes back to the scandals of the 70s...of Watergate and Richard Helms, the CIA director, being convicted by Congress of lying to Congress, of Ted Shackley and Tom Clines and Dick Secord and a group of them being forced into retirement as a result of the scandal over Edmond P. Wilson's training of Libyan terrorists in conjunction with these guys, and moving C-4 explosives to Libya. They decided way back when, '75-'76, during the Pike and Church Committee hearings, that the Congress was their enemy. They felt that the government had betrayed them and that they were the real heroes in this country and that the government became their enemy. In the late 70s, in fact, after Gerry Ford lost the election in '76 to Jimmy Carter, and then these guys became exposed by Stansfield Turner and crowd for whatever reason...there were different factions involved in all this stuff, and power plays...Ted Shackley and Vernon Walters and Frank Carlucci and Ving West and a group of these guys used to have park-bench meetings in the late 70s in McClean, Virginia so nobody could overhear their conversations. They basically said, "With our expertise at placing dictators in power," I'm almost quoting verbatim one of their comments, "why don't we treat the United States like the world's biggest banana republic and take it over?" And the first thing they had to do was to get their man in the White House, and that was George Bush.

 

Reagan never really was the president. He was the front man. They selected a guy that had charisma, who was popular, and just a good old boy, but they got George Bush in there to actually run the White House. They'd let Ronald Reagan and Nancy out of the closet and let them make a speech and run them up the flagpole and salute them and put them back in the closet while these spooks ran the White House. They made sure that George Bush was the chairman of each of the critical committees involving these covert operations things. One of them was the Vice President's Task Force On Combating Terrorism. They got Bush in as the head of the vice president's task force on narcotics, the South Florida Task Force, so that they could place people in DEA and in the Pentagon and in customs to run interference for them in these large-scale international narcotics and movement of narcotics money cases. They got Bush in as the chairman of the committee to deregulate the Savings and Loans in '83 so they could deregulate the Savings and Loans, so that they would be so loosely structured that they could steal 400, 500 billion dollars of what amounted to the taxpayers' money out of these Savings and Loans and then bail them out. They got hit twice: they stole the money out of the Savings and Loans, and then they sold the Savings and Loans right back to the same guys, and then the Federal Deposit Insurance Corporation -- the taxpayers money -- paid for bailing out the Savings and Loans that they stole the money from...and they ran the whole operation, and Bush was the de facto president even before the '88 election when he became president.

 

See, when Harry Truman signed the National Security Act creating the CIA, he specifically stated in that act that they could not have any police powers. And they could not operate domestically in the United States, because he feared a secret police coup. By creeping in a little at a time, that coup has taken place.

 

This crowd really believes that the unwashed masses are ignorant, that we are people who are not capable of governing ourselves, that we need this elitist group to control the country, and the world -- these guys have expanded. They look at the United States not as a country, not in any kind of patriotic mode now, but they look on it as a state within a world that they control. And that's this attitude that they have. They're not unlike any other megalomaniac in the world. They're nutty as a fruitcake, but they've got distinguished gray hair, three-piece dark suits and they carry briefcases, and they'll stand up and make speeches just as articulate as anybody in the world, but they don't socialize and function outside their own little clique. My experience with them is that they could be certified as criminally insane and put away in a rubber room and have the key thrown away. That's how dangerous they are. But they're powerful, and they're educated. And that makes them twice as dangerous. And that's basically what's running the world right now.

 

If I had not been part of this, and hadn't seen it first hand, I would not believe a word I'm saying. You couldn't convince me that something like this -- and the American people will not believe it. Because you can't get the average citizen...I've talked to judges and lawyers who have invited me in to talk to them. Some of them really patriotic concerned people. It turns them off, because it changes their entire life experience, and the reason that they have existed, and the things they have believed in all their life if you tell them this.

 

I have sat on the banks of the Potomac in restaurants with 75 and 80-year-old retired CIA people and retired generals, West Point graduates, honorable people...these old men have sat with tears in their eyes and told me that, "Gene, what you're into, you understand it more than we did, and it's absolutely true, but it's just so big you can't do anything about it." I guess if I believed that, I'd go off to some South Sea island and drink a few Cuba Libres laying in the sand or something, but somebody has to keep charging in there, you know. The biggest chink in their armor -- and it would take somebody smarter than me to figure out how to exploit it -- is their insecurity. They are afraid of a peasant with a pitchfork. And the reason they react so strongly and violently against anybody who opposes them, is because they're afraid someone will grab a thread and unravel it, and their whole uniform will come unraveled...

 

The only way I can think of to get this thing exposed, would be to coordinate with all of the different independent small newspapers and radio stations in the United States -- and television networks -- and get them to start blasting this thing -- and some universities -- because the major media's not going to do anything about it.  

 

NARRATOR: You have been listening to "Declassified", an ongoing interview and documentary series dealing with America's national security establishment. Copies and transcripts of this program are available at www.declassifiedradio.com. That's www.declassifiedradio.com. Please refer to "Covert Crime" when ordering this episode.

 

END.

 

 

 
"Economic hit men (EHMs) are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign "aid" organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet's natural resources. Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization. I should know; I was an EHM."
 
John Perkins should know — he was an economic hit man. His job was to convince countries that are strategically important to the U.S. — from Indonesia to Panama — to accept enormous loans for infrastructure development, and to make sure that the lucrative projects were contracted to U. S. corporations. Saddled with huge debts, these countries came under the control of the United States government, World Bank and other U.S.-dominated aid agencies that acted like loan sharks — dictating repayment terms and bullying foreign governments into submission for access to natural resources, military cooperation, and political support.
 
This extraordinary real-life tale exposes international intrigue, corruption, and little-known government and corporate activities that have dire consequences for American democracy and the world.
 
In this riveting personal story, John Perkins tells of his own inner journey from willing servant of empire to impassioned advocate for the rights of oppressed people. Covertly recruited by the United States National Security Agency and on the payroll of an international consulting firm, he traveled the world — to Indonesia, Panama, Ecuador, Colombia, Saudi Arabia, Iran and other strategically important countries. His job was to implement policies that promoted the interests of the U.S. corporatocracy (a coalition of government, banks, and corporations) while professing to alleviate poverty — policies that alienated many nations and ultimately led to September 11 and growing anti-Americanism.
 
Perkins' story illuminates just how far he and his colleagues — self-described as economic hit men — were willing to go. He explains, for instance, how he helped to implement a secret scheme that funneled billions of Saudi Arabian petrodollars back into the U. S. economy, and that further cemented the intimate relationship between the Islamic fundamentalist House of Saud and a succession of American administrations. Perkins reveals the hidden mechanics of imperial control behind some of the most dramatic events in recent history, such as the fall of the Shah of Iran, the death of Panamanian president Omar Torrijos, and the U.S. invasions of Panama and Iraq.
 
Confessions of an Economic Hit Man, which many people warned Perkins not to write, exposes the little known inner workings of a system that fosters globalization and leads to the impoverishment of millions of people across the planet. It is a compelling story that also offers hope and a vision for realizing the American dream of a just and compassionate world that will bring us greater security.
 
Within a few weeks of its release, Confessions of an Economic Hit Man landed on The New York Times Bestseller List, then 19 other bestseller lists including the Los Angeles Times, San Francisco Chronicle, USA Today, Wall Street Journal, and Washington Post. The author has been interviewed repeatedly on national radio and television shows, including Amy Goodman's Democracy Now, CSPAN's Book TV, and PBS' Now with David Brancaccio. And now the book is being published in 9 languages around the world. According to John Perkins, "It is accomplishing an important objective in inspiring people to think and talk and to know that we can change the world."
 
Official website for the book "Confessions of an Economic Hit Man":

http://www.economichitman.com/
http://www.economichitman.com/pix/authormessage.pdf
http://www.powells.com/biblio/7-1576753018-1
 
...
 
Confessions of an Economic Hit Man
How the US Uses Globalization to Cheat Poor Countries Out of Trillions
Interview with John Perkins by Amy Goodman
SENTIENT TIMES February/March 2005

http://www.sentienttimes.com/05/feb_mar05/confessions.html
 
John Perkins, who worked from 1971 to 1981 for the international consulting firm of Charles T. Main, has written a book entitled Confessions of an Economic Hit Man. A former respected member of the international banking community, Perkins describes how as a highly paid professional, he helped the US cheat poor countries around the globe out of trillions of dollars by lending them more money than they could possibly repay and then taking over their economies. Perkins, who started writing the book twenty years ago, writes, “The book was to be dedicated to the presidents of two countries, men who had been clients whom I respected and thought of as kindred spirits—Jaime Roldós, president of Ecuador, and Omar Torrijos, president of Panama. Both had just died in fiery crashes. Their deaths were not accidental. They were assassinated because they opposed that fraternity of corporate, government, and banking heads whose goal is global empire. We economic hit men failed to bring Roldós and Torrijos around, and the other type of hit men, the CIA-sanctioned jackals who were always right behind us, stepped in.”
 
John Perkins goes on to write: “I was persuaded to stop writing that book. I started it four more times during the next twenty years. On each occasion, my decision to begin again was influenced by current world events: the US invasion of Panama in 1980, the first Gulf War, Somalia, and the rise of Osama bin Laden. However, threats or bribes always convinced me to stop.”
 
Amy Goodman: It is a remarkable story that you tell. Why don’t you start at the beginning, about how you came to be recruited first by the National Security Agency—far larger than the CIA—and then this international consulting firm of Charles T. Main.
 
John Perkins: It was in 1968. I was a student at business school and was recruited by the National Security Agency. They ran me through a series of tests—personality tests, lie detector tests—very sensitive testing. And during that process, they discovered that I would be a great candidate for an economic hit man. And also they discovered a number of weaknesses in my character. I think I have weaknesses that are pretty typical of our culture, the three big drugs of our culture: money, power and sex. And they discovered these weaknesses in me. Then they encouraged me to go into the Peace Corps. I lived in Ecuador for three years as a Peace Corps volunteer with indigenous people there, who today are at war with the oil companies. We were starting that process then, so I got some very good on-the-job training, so to speak. While I was still in Ecuador in the Peace Corps, a vice president from this private consulting firm in Boston that worked closely with the National Security Agency and the other intelligence communities came to Ecuador and continued my recruitment. When I got out of the Peace Corps, he recruited me. I went to work for his company in Boston, Charles T. Main, and went through an extensive training program there with a remarkable woman who was extremely intelligent, extremely sharp, extremely seductive, and she hooked me. She knew exactly how to hook me. She benefited from all the tests that I’d gone through, knew my weaknesses. She first of all hooked me into becoming an economic hit man and at the same time, warned me that this is a very dirty business and you must be completely committed to it or you shouldn’t take your first assignment.
 
Explain what you mean by an “economic hit man.”
 
Over the past 30 to 40 years we economic hit men have created the largest global empire in the history of the world. There are many ways to do this, but a typical one is that we identify a third-world country that has resources, which we covet. And often these days that’s oil, or it might be the canal in the case of Panama. In any case, we go to that third-world country and we arrange a huge loan from the international lending community; usually the World Bank leads that process. So, let’s say we give this third-world country a loan of $1 billion. One of the conditions of that loan is that the majority of it, roughly 90%, comes back to the United States to one of our big corporations, the ones we’ve all heard of recently, like Bechtel, Halliburton. And those corporations build in this third-world country large power plants, highways, ports, or industrial parks—big infrastructure projects that basically serve the very rich in those countries.
 
The poor people in those countries and the middle class suffer; they don’t benefit from these loans, they don’t benefit from the projects. In fact, often their social services have to be severely curtailed in the process of paying off the debt. What also happens is that this third-world country is then saddled with a huge debt that it can’t possibly repay. For example, today Ecuador’s foreign debt, as a result of the economic hit man, is equal to roughly 50% of its national budget. It cannot possibly repay this debt, as is the case with so many third-world countries. So, now we go back to those countries and say, look, you borrowed all this money from us, and you owe us this money, you can’t repay your debts, so give our oil companies your oil at very cheap costs. And in the case of many of these countries, Ecuador is a good example here, that means destroying their rain forests and destroying their indigenous cultures. That’s what we’re doing today around the world. It began shortly after the end of World War II and it has been building up over time until today where it’s really reached mammoth proportions, where we control most of the resources of the world.
 
Talk about your experience in Panama. You had the opportunity to meet the Head of Panama before he was killed, Omar Torrijos. How did you end up there?
 
Panama was one of these pivotal countries at the time and Omar Torrijos, who was the President of Panama, followed a long line of oligarchy dictators that basically were puppets of the US government that we had installed 50 years prior when we took over the country. Omar Torrijos was the first one to break that cycle, and he was a very, very popular president. He was popular throughout much of the world. Many people believed he should have won the Nobel Peace Prize and might have had he not died or been killed. He protected the downtrodden everywhere. At the time President Carter was negotiating a new Canal treaty with Torrijos and ultimately that Canal treaty went through. But it caused a tremendous amount of turmoil in our own country. In fact, it was passed in Congress by only one vote. So, we economic hit men were really looking beyond that process, at how we could win Panama over regardless of what happened to the Canal Treaty. I was there before the treaty was signed in 1972 and I was trying to bring Torrijos around. I was trying to catch him. I was trying to get him. I was trying to hook him the way we hooked everybody else. He arranged for me to meet with him in this private bungalow one day, and what he said to me is, Look, I know the game you guys are playing. I know what you’re trying to do here. You’re trying to saddle us with huge debts. You’re trying to make us totally dependent upon you, and you’re trying to corrupt me. I know what this game is and I’m not playing. I don’t need the money. I’m not looking to get personally wealthy out of this. I want to help my poor people. I want you to build the projects that you’re supposed to build, that you build in other countries, but I want you to build them for our poor people, not for our rich people.
 
And he said, if you do that, I’ll see to it that you and your company get a lot more work in this country. Good work that will help our people. Well, I was really conflicted at this because, as an economic hit man, I was supposed to get him under our control. I was supposed to hook him. But as a partner in this company and as the chief economist for this firm, I also wanted to get the work for the firm, and in this case it was very obvious that the economic hit men weren’t going to get through to Torrijos, so I went along with him. But at the time, I was deeply concerned because I knew that this system is built on the assumption that leaders like Torrijos are corruptible and they are all over the world for the most part. When one stands up to the system as Torrijos was doing, it’s not only a threat in his country, like Panama, that we’re not going to get our way there, but it also may be seen as setting a very bad example for the rest of the world once one leader stands up—and at that time there was another leader standing up, too, who was the President of Ecuador, Jaime Roldos. They were both standing up to the US government, to the oil companies and the economic hit men, and it was a very big concern to me. I knew in my heart that if this continued, something was going to give. Of course, it did. Both of these men were assassinated by what we call the jackals, CIA-sanctioned assassins.
 
In the conversation you had with Omar Torrijos he talked about the overthrow of the democratically elected leader Arbenz in Guatemala by United Fruit and the CIA-backed coup there in 1954, about George Bush’s company Zapata Oil eventually taking over United Brands, which was United Fruit, and then he talked about giving your company the business, saying that he believed the Japanese would finance the canal that would be built, though turning to your company. He said “They provide the money, they will do the construction.” And you wrote, “It struck me, Bechtel will be out in the cold.” Bechtel’s President was George Schultz, Nixon’s Secretary of the Treasury—Bechtel was loaded with Nixon, Ford, and Bush cronies. Torrijos had been told that the Bechtel family pulled the strings of the Republican Party.
 
Yes. Well, it got worse, of course. At that time, George Schultz was President of Bechtel. Casper Weinberger was their Chief Counsel, a senior officer in the corporation. They were opposed to Torrijos, not only on the US turning the Canal over to Panama, but even more importantly perhaps because Torrijos was actively negotiating with the Japanese to build a new sea level canal. As you know, the current canal is based on locks and the larger ships in the world can’t go through it. So, the idea was to build a sea level canal where every ship could go through, and the Japanese were offering to finance this. But if they financed it, it would be their construction companies, their engineering companies that would build it. Bechtel was incensed over this. They absolutely could not tolerate the idea of this happening. We knew this very strongly, we had to win Torrijos over.
 
And then Schultz became Secretary of State and Casper Weinberger became Secretary of Defense under Reagan. They were the heads of Bechtel Corporation.
 
Yes. Carter negotiated the treaty and then lost the election, partly because of this treaty, partly because of what happened in Iran, which is another story that I was involved in. And then when Reagan became President, Schultz went from President of Bechtel to Secretary of State and Weinberger went from Chief Counsel of Bechtel to Secretary of Defense. They went back to Panama and said, Okay, Omar, now let’s talk. We want the canal back, we want the military bases back in the canal zone and more than anything, we want you to stop talking to the Japanese. And Torrijos said, No, I’m a sovereign country. I am not opposing the United States. I’m not a socialist, I’m not a communist, I’m not siding with Cuba or Russia or China, I’m simply standing up for the rights of my people. We have the right to negotiate with whoever can build us the best canal. I have the right to negotiate with the Japanese.
 
He took a very strong stand and within a few months, his plane blew up and crashed into a mountain, and it was very strong evidence that it had been blown up by a tape recorder which was handed to him at the end that was full of explosives. There is no question in my mind and in the mind of much of the world that this was the jackals, the CIA-sanctioned assassins. I’ve seen them work in many places. Just a couple of months before that, they had done the same thing to Jaime Roldos, President of Ecuador, the first democratically elected president of Ecuador in decades, who had replaced a military junta, democratically elected, and who had stood up to the US oil companies. We economic hit men couldn’t get through to him and his helicopter blew up then and there.
 
Why was he standing up to US oil companies?
 
Because he ran in the first democratic elections in Ecuador in many decades on a platform of sovereignty for his country. If there is oil in Ecuador, he said, the Ecuadoreans should benefit from it. Once he became president, he began to introduce this. He set up a Hydrocarbons Act, he called it, which was basically a petroleum act that would ensure that if oil came out of Ecuador, the majority of the funds from that oil would go to his people. The oil companies would get a reasonable payment, but the majority would go to his people. He was setting a precedent that the oil companies couldn’t stand, because throughout the world, they were exploiting countries, as they still are. And Roldos said, I’m not going to let that happen to my country. The oil companies couldn’t bear to see that, not just because of Ecuador but, again, because of the precedent this would establish. And Roldos and Torrijos were really partners in a way. At the same time, they were supporting each other, and they both had to go. And they both went.
 
And what were your thoughts at the time? I mean, you continued doing this work.
 
It was a very pivotal point for me. Throughout my work, as I describe in the book, my conscience was torn. And to me this is one of most interesting parts of my own personal story. I think of myself as a pretty good person. I grew up a Yankee Calvinist in Vermont and New Hampshire. I come from a very patriotic background. I grew up in a very strictly Republican family, very conservative. I have very strong values. I’m very loyal to my country.
 
You’re a descendant of Tom Paine and Ethan Allen?
 
They’re distant relatives. And my parents steeped me in American history and in the values of the founding fathers of our country. Life, liberty, and the pursuit of happiness for all people, all over the world. I believed very strongly in this. And yet at the same time, I was very seduceable to money, power, sex. All these things came my way, and I was doing things that I was patted on the back for by the president of the World Bank, Robert MacNamara. And I was Chief Economist of a big consulting firm in Boston. I had 50 people working for me, PHDs, MBAs. I was doing work that macroeconomics in college had taught me was good work to do. It’s all a scam.
 
Why have very few people heard of this company, Main?
 
We were a very quiet company. We had about 2,000 professional employees, which is not small. We were a closely held company, that means we were owned like a partnership, about 5% of us owned the company so we didn’t have to disclose our books to the SEC or anybody. We were a very private, very quiet company and we were serving the interests of empire. The company no longer exists. In the early 1980s, the partners sold out to a larger engineering construction firm, and so the company essentially went out of existence at that point. I think it was getting a little too hot for us at this point. But it was intentional. We were very strictly forbidden from talking to the press. I broke that rule at one point. I wrote an op-ed piece on the Panama Canal for the Boston Globe and was severely chastised within the company. So, it was intentional that we were very quiet.
 
I want to ask you about Robert MacNamara. As you talk about the corporatocracy, certainly he embodied that, from becoming CEO of Ford to Secretary of Defense, and ultimately the President of the World Bank.
 
I think that what we have here is a world empire that’s controlled by a very few men, and these are the heads of the big corporations, big banks and government, and they tend to be the same person. They jump across the lines and MacNamara is a great example of that. He was president of Ford and then he became Secretary of Defense under Kennedy and Johnson and then he became president of the World Bank. And in all three roles, his main job was to promote American business, to promote the corporatocracy, to bring the goodies home, to exploit the world. And he was in democratic regimes, Kennedy and Johnson. Today we’ve got Dick Cheney who’s basically in the same picture. We had George Schultz under the former President Bush. Condoleezza Rice under the current Bush administration. Government is filled with these people. But it is not just a Republican issue. It’s a bipartisan issue. It goes across all the lines, and MacNamara is a very good example of that. I think, at the same time, MacNamara was one of the most important people in terms of framing the new economics, what he called aggressive management, and it was aggressive about going out and basically taking the world and bringing it to us.
 
Today out of the 100 largest economies in the world, 52 are corporations. 47 are US corporations. They’re not countries, they’re corporations. Here we are 5% of the world’s population reaching out like a great octopus and sucking in 25% or more of the world’s resources. But it’s not really 5% of the world’s population, the American people. 1% of the American population owns more of the material wealth than 90% of our population. So, it’s that 1% that are the corporatocracy that are sucking all this in and the rest of us are supporting it through our taxes, through our purchases, through our silence, through going along with this system. Like me, as an economic hit man, I went along with the system. I did more than go along with the system, I promoted the system. But I did so legally, for the most part, and I did so while being patted on the back by all the people that I was taught to look up to.
 
You begin your book in Indonesia. Talk about your training there and what you were trying to accomplish.
 
I was in Indonesia in 1970, 1971. We know that at this point Vietnam is going to go. The people at the top knew we were going to lose, although they weren’t admitting it. The theory was if Indonesia went, the rest of Southeast Asia would go—like dominos one country at a time. And Indonesia was seen as the key to stopping that process. We didn’t want communism to go there. Also, Indonesia happened to have a lot of oil, which we needed or wanted, and it had the largest Muslim population of any country in the world. So, if we could win Indonesia over and basically get Indonesia as our slave in our clutches, we’d accomplish a lot. So I was sent there to make that happen, to arrange a huge loan to Indonesia for Indonesia to build a big electrical system or several large electrical systems that would serve the very wealthy people of Indonesia—didn’t help the poor much at all—and to make very inflated forecasts so that we would build a huge system, much bigger than anybody could possibly have imagined. Java is the most heavily populated piece of real estate in the world, but we were building this huge electrical system and it served industry, but it didn’t serve the people. At the same time, it put Indonesia in tremendous debt to us, a debt that it would have a hard time getting out of, and therefore, would cause it to become part of our empire.
 
Shoring up Suharto, the dictator there for so many years.
 
Right. An interesting aspect of that whole thing was at that time I was part of a team of 11, and the other 10 men on that team had no idea that we were doing the economic hit man thing. They were engineers. They were designing transmis-sion lines, fuel systems to bring the fuel into the power plants. They were designing the power plants, big power plants, distribution lines. I was the one that made the forecast. I was the one that said that the electrical demand was going to grow at 17% a year for 20 years, which is unheard of, but that was my job—to inflate these numbers as much as I possibly could. I mean, that’s a huge number when you compound it annually. And they were just going along. You know, for them it was great. They get to design this huge, amazing system, an engineer’s dream.
 
You replaced a man who had warned you not to make economic forecasts that you couldn’t support, that it was a con game, that it would destroy the country. But he was taken out.
 
Right. Howard Parker retired from the New England Electric System. He saw what was going on, but he was also a very bitter man, and nobody really got along very well with Howard. My job was to forecast the economy of the country. His job was then to forecast the electrical needs of the country. But the two are very highly correlated, so if I would come up with 17 or 18% economic growth in the economic sector, then his load forecast for the electricity would have to be roughly the same, and he told me I’m not going to go along with this. This is a scam. You are buying into the system. This is all based on greed and I’m not going along with it. And in a way that let me off the hook. I felt very relieved. At one point, I realized, my gosh, I can do what my handlers have trained me to do, what Claudine has told me I must do, and that is come up with these high electrical load forecasts, but my conscience is going to be clear, because Howard is not going to pay any attention to them anyway. He’s going to come up with much lower electric load forecasts so we’re really not going to scam the country. And then, of course, when I get back to Boston, I found that my boss had fired Howard, called me into the office, said Howard didn’t do his job. He has got these ridiculous low forecasts. We fired him. We’re going to give you his job as well as your own. We’re going to make you a department head. You’re going to get rich. But you have got to come up with the kind of forecast that we were looking for from him and we know you can do that because you do that for the economy.
 
What about Iran?
 
Iran is where economic hit men really got started because in the early 1950s, Iran democratically elected a man named Mossadeq as premier. He was Time magazine’s man of the year in 1951. And he was held out for the hope of the Middle East and, in fact, the whole world of democratically elected president. But as soon as he got into power, he went up against the oil companies. And fore-shadowing what Roldos and Torrijos would do later on, he really stood up for his people. And he said, particularly to British Petroleum, if you are going to be here, you are going to give your fair share to our people. The oil companies were very upset, so the United States made the decision to go in and do something about this. At the time, we were terrified of nuclear war—Russia was the enemy after World War II, and Iran is on the Russian border—so we didn’t dare send in troops to get rid of Mossadeq. Although he was a demo-cratically elected president, the US decided to get rid of him because he opposed the oil companies. Instead of sending in the troops, Kermit Roosevelt—a CIA agent who happened to be Teddy’s grandson—was sent in with a few million dollars, and he managed to create riots, protest, havoc, and he overthrew Mossadeq and brought the Shah back into power. One of the lessons learned, however, was that Kermit Roosevelt, as a CIA agent and government employee, would have gotten the government in trouble had he been found out. So, shortly after that, the decision was made that economic hit men needed to be hired by private firms. The NSA, the CIA could identify us, could run all the tests on us, could hook us, but in the end, we had to work for private companies so that if we were caught, it would be chocked up to corporate greed, rather than government policy.
 
Deniability. So Kermit Roosevelt goes from Iran to Guatemala a year later to help overthrow Arbenz by the Dulles brothers, and he refuses. But that happens. And the next coup the next year is the overthrow by United Fruit and the CIA of Arbenz in Guatemala, so the model got started.
 
The model got started and continued to grow tremendously. By the time I got to Iran, which was in the early 1970s, it was a pivotal country for us. Its location on the Russian border was very important, and it had all this oil which we wanted to control. We wanted desperately to control all the Middle Eastern oil. We saw the Shah as being the person who could make this happen for us. The plan was that the Shah would help take over the rest of the Middle East, including Syria and Iraq. From the very beginning, the idea was to become allies with the Shah. We did everything we could to shore him up. And at the same time, we realize that he had a lot of oil money and so our companies were benefiting tremendously. Once again, all those engineering firms that we’ve talked about, my own, Charles T. Main, and Bechtel and Halliburton, and everybody else who was in there building cities, building power plants, building highways, getting very, very, rich and making tremendous numbers of people—a lot of Muslims around the world and many others in the Middle East—very angry. Even to this day Osama bin Laden cites how we overthrew Mossadeq and brought the Shah in as one of the reasons for his anger.
 
Mossadeq went after Anglo American saying this is our oil and we should control it. Anglo American, the British govern-ment, did not allow for any Iranian ownership, but then forced Anglo Amer-ican eventually into becoming British Petroleum?
 
Yes, I believe the numbers were that 85 cents of every dollar of oil drilled in Iran went out of the country to Anglo American or BP. And, of course, Mossadeq was incensed by this, as he should have been. There’s no reason why the people who sit on the resources, whose land is being drilled to provide it, shouldn’t get the lion’s share of what comes out of it, and that’s what he was fighting for, as Torrijos did later, as Arbenz did in Guatemala as Allende did in Chile.
 
If I remember correctly, Truman refused to be a part of this, but then Eisenhower came in and decided to support Britain in this.
 
That’s correct. Truman took a very integritous stand. He said we’re not going to mingle in these affairs. This is a democratically elected premier, Mossadeq, and he is doing what he’s doing, and we’re not going to step in on the side of private industry. But very shortly after that, he was out of office and Eisenhower came into office, and he went along with the CIA’s plan to overthrow Mossadeq and replace him with the Shah.
 
Oil is the source of so much pain.
 
Every country in the world that has major supplies of oil has suffered. Oil is not a benefit for these countries. It’s a benefit for a few of the very wealthy people at the top of the economic totem pole in these countries. But for everybody else, it’s a curse. Oil is a curse to the world. It may be the greatest curse the world has ever experienced. It’s destroying our environ-ment, it’s destroyed a lot of world economies, it’s destroyed tremendous numbers of indigenous people who are suffocating from the results of the carbon dioxide that oil has produced. It’s amazing. And isn’t it also amazing, Amy, that when the first President Bush went into Iraq in 1990, we were importing about eight million barrels of oil a day. When the second President Bush went in, that had gone up by 50% to twelve. In that period of time, our imports had increased.
 
What about Saudi Arabia?

 

Well, Saudi Arabia was our greatest success as economic hit men. I mean, that’s how we judge ourselves. In the early 1970s, OPEC really flexed its muscle. It didn’t like US policies supporting Israel, and decided to do something about it. So it shut down oil production significantly. And as a result, the US economy went into a tail spin. There were long lines of cars at gas stations, many of us still remember that. And we were afraid that it was going to be another crash like 1929 as a result of OPEC. And so the treasury department came to me and some other economic hit men and said this must never happen again. You have got to devise a plan. What are you going to do about this? How can you make sure this never happens? And we knew the key was Saudi Arabia. For one thing, it had more oil than anybody else. Even at that point in time, the Shah was getting a little bit shaky, and we’d seen that he probably wasn’t going to take over the rest of the Middle East. We knew that the House of Saud, the royal Saudi family, was corruptible. They were corrupt, they are corrupt, and they were corruptible.
 
So, to make a long story short, we put together this deal whereby the House of Saud agreed to send most of their petro dollars, the money we paid for petroleum, back to the United States and invest it in US securities. The interest from those securities would be dealt out by the treasury department to US engineering construction firms to build Saudi Arabia in the Western image, to build huge cities out of the desert, which we’ve done—power plants, highways, McDonald’s, the whole works—to make Saudi Arabia a very westernized country. And the House of Saud would guarantee to keep oil prices within acceptable limits, limits acceptable to us, and we would guarantee to keep the House of Saud in power.
 
And we have done all those things since the early 1970s. The policy still holds. Even to the point where, you know, we know that the House of Saud supports Osama bin Laden, supported him at our encourage-ment, of course, in Afghanistan, continues to support him and a lot of terrorist movements. We knew that the House of Saud provided sanctuary to Idi Amin, the Hitler of Africa. In fact, that’s where he spend the last years of his life, living in a mansion, he just died a little over a year ago there. We’ve supported the House of Saud throughout all of this, despite the fact they’ve done a lot of things that ostensibly we disagree with, but they have provided us with stabilized oil prices and a huge market for our engineering construction companies.
 
You tried to write this book over several decades. What happened?
 
It always bothered my conscience, what I was doing, and I really wanted to expose it because I didn’t like what was going on in the world, what I saw my country doing. And I’m a very loyal American and I believe very deeply in the principles of this country, the founding fathers. And as time went on, I began to see how we were cheating those principles, how we were distorting them, how we’re losing our sense of democracy almost completely and becoming such a capitalistic corporatocracy-oriented country, a great empire, an imperialistic country. We’ve created this empire in the most subtle way possible, other empires have been created militarily and everybody in the country knows the armies are going out there and creating empire. But this one has been done so subtly that most Americans have no idea that it is going on.
 
Although it’s not so subtle anymore, which interestingly, at least at the beginning, is why some of corporate America was actually opposed to the invasion of Iraq, because it’s not so subtle anymore.
 
That’s right. It’s coming out more and more. And probably that’s one of the reasons why I could write the book, too. When I first started writing it I was interviewing others to get their assistance in certain details, and I received subtle threats, but more importantly, bribes. So in the early 1990s, for example, when I started writing the book called Conscience of an Economic Hit Man, a large engineering company, Stoner-Webster Corporation, also of Boston, came to me and basically gave me about a half a million dollar bribe with a complete understanding I wouldn’t write the book and I wouldn’t have to do much work at all. I would be on their roster.
 
Why did Stoner-Webster care?
 
Because they were very much involved in the business, too, and many of the people who had left Charles T. Main at that time, my old company which had been bought out, had gone to work for Stoner-Webster. And they were very much involved in doing the same thing. It’s all part of the family. And I call it a bribe, but legally speaking it isn’t a bribe. I was hired to be a consultant to them, paid the fee to be a consultant with a very strong understanding that I was not to talk about my former life in this business or my current life at that time. I used a lot of that money to form a nonprofit organization called Dream Change that helped indigenous people in many of the countries that I had screwed as an economic hit man. So I used this money that I was making to assuage my guilt and to do good things—things I’m very, very proud of.
 
How much money were you making?
 
I ended up taking about a half a million dollars from Stoner-Webster over a period of several years, basically for doing nothing. But I didn’t write the book. I went off and had a few dinners in Rio de Janeiro and other places with some of their clients. Tough assignment. Flew around in a corporate private jet a few times. Although I always justified on one level that I was using this money to do good work in the nonprofit sector, which was true, I knew deep in my heart I needed to write this book. I needed to expose the truth behind what’s going on in the world. I could justify not writing this book on many, many levels—and I was sworn to secrecy on it.
 
Then 9/11 struck. I was in the Amazon, but I came up here a few weeks later and sat close enough to where I could still smell the burning flesh and see the smoke coming out of the hole, and I sat there and I knew that I had to take responsibility for what had happened there. I knew that I had to expose the truth because what happened is a direct result of the empire building, of what we economic hit men did, and I knew as I sat there that if we don’t do something to change the course we’re on in the world, my daughter basically has no future and certainly her children don’t, and I’m leaving them a much worse world than the one I inherited. So at that point, I knew that no matter what the consequences, no matter how big a noose I was sticking my head into, I had to expose what’s been going on in the world. This empire that we’ve created has made so many people around the planet angry, and has resulted in destitution for billions of people—24,000 people starve to death every day, 30,000 children die every day from lack of medicines for diseases that could be cured—we have to take responsibility for that. We can change that and we will change it. But we’ll only change it when we really come to understand what’s going on.
 
You write about a top corporate publisher who was interested in the manuscript.
 
The president of one of the major publishing houses invited me to New York, he said this is a great book, it’s riveting, it’s very well-written, it’s a story that needs to be told, but I can’t tell it because I’m owned by a major international corporation that doesn’t want this kind of story getting out there. I have a very good New York literary agent who submitted this book to all the major publishing houses and got back letters that said things very much like that—this is a really good book, we really enjoyed it, but it is not for us right now.
 
So, this major publisher offered to publish one of your books, but said it had to be fictionalized?
 
Right. He said, Why don’t you fictionalize this book, why don’t you be John LeCarre or Graham Green or Dan Brown with The Da Vinci Code, fictionalize it, then we can consider publishing it. And I am considering fictionalizing it, I think it would make a good novel, but what that said to me was what kind of a country is this that we’re in where the press, where the main publishers won’t publish the truth when it’s written as the truth, they’ll only publish it if it’s fictionalized? What does that say about our freedom of the press? And, of course, subsequently a very brave publisher, a family-owned firm in San Francisco, Berrett-Koehler, published the book. But it has been very interesting that I still haven’t been on what we call the mainstream press. Kudlow & Cramer and a number of other programs invited me on, but at the last moment, told me I’m uninvited. They didn’t like the politics. Somebody, an advertiser, objected. I don’t know the details behind it, but I was yanked off at the last minute.
 
But as a chief economist of the Main international consulting firm, you were the type that usually gets on these shows.
 
I was, but now I’m dangerous, you know? And the truth is coming out—I was on your show about a month ago and the next day the book went to number one on Amazon.com, and what that said to me is once people know that this story is out there to be told, they want to read it. It’s now gone on to the New York Times best seller list. In its fifth week of publication, it went into its fifth printing. I mean, the publisher hasn’t been able to keep up.
 
Yet no major corporate network has interviewed you.
 
Exactly. Nobody who is owned by a big corporation or depends on big corporations for their advertising has interviewed me at this point. Isn’t that interesting?
 
How does that fit into the stories you have told us during this interview?
 
Well, Iraq followed Saudi Arabia. After our tremendous success in Saudi Arabia, we decided we should do the same thing in Iraq. We figured that Saddam Hussein was corruptible. Of course, we had been involved with Saddam Hussein anyway for some time, so the economic hit men went in and tried to bring Saddam Hussein around, tried to get him to agree to a deal like the royal House of Saud had agreed to. When he didn’t we sent in the jackals to try to overthrow him or to assassinate him. They couldn’t. His Republican Guard was too loyal and he had all these doubles. We couldn’t do it. So, when the economic hit men and the jackals both failed, then the last line of defense that the United States, the empire, uses these days, is the military. We send in our young men and women to die and to kill, and we did that in Iraq in 1990. We thought Saddam Hussein at that point was sufficiently chastised that now he would come around, so the economic hit men went back in in the 1990s, failed once again. The jackals went back in, failed once again, and so once again the military went in—the story we all know—because we couldn’t bring him around any other way. Iraq had become very, very important to us for many reasons. Its strategic location, the fact it controls a great deal of the water of the Middle East—the Tigris and Euphrates both flow through and out of Iraq—and, of course, its oil.
 
But now we’re not so sure we can keep the House of Saud in control. It’s become extremely unpopular amongst its own people. Over 100 assassinations this year. The US Consulate was recently attacked in Saudi Arabia. The House of Saud is losing control. It’s very unpopular, partly because it accepted this deal with the West. It did a lot like what the Shah of Iran has done. And Osama bin Laden, of course, is very against it. But so are a tremendous number of Muslims around the world. The seat of the Muslim faith, Mecca, is in Saudi Arabia, very upset with what the House of Saud has done. We’ve been afraid that we’re going to lose the grip on the House of Saud, and one way to protect against that is by taking over Iraq oil fields, which may be larger than those in Saudi Arabia. We’re not sure exactly how large they are.
 
Your job as an economic hit man was to convince countries that are strategically important to the US to accept enormous loans for infrastructure development and to make sure that the lucrative projects were contracted to US corporations. Saddled with huge debts, these countries came under the control of the US government, the World Bank, and other US-dominated aid agencies that acted like loan sharks, dictating repayment terms and bullying them into submission. You work with a lot of people in other countries and in international financial institutions, like the World Bank. What do they say? What understanding do they have? Do a lot of people feel the same way you do?
 
That’s a good question. It’s hard to answer for a lot of other people. Within those organizations, most of the people don’t realize what’s going on. The engineers at Bechtel and Halliburton and the financial specialists at the World Bank don’t really realize what’s going on. They should. They ought to look into it and find out. But there is every excuse not to on their part. They do their job. My father-in-law was chief architect at Bechtel Corporation. He has since retired, and you know he built big cities in Saudi Arabia. He was in charge of that. For him, it was a plum. He was an architect. To be given, basically, all the money that he wanted to build huge cities out of the desert was a dream for an architect. He never thought what was going on beneath the surface, and unfortunately, too many of us don’t.
 
I’m struck by the fact that as I travel around the world—I just got back recently from Nepal and Tibet, I travel a lot to South America—how many people in these countries, even people we consider illiterate, question their government. They assume their government is corrupt, they assume ours is corrupt, but we don’t. It is amazing to me how many of us don’t, at least not openly. And as I speak, I’ve been on tour with this book for the last month, people keep saying, gee, I knew that was going on. Some place in my heart, I knew that was going on, but I really didn’t understand it. And the fact is that Americans, for the most part, we don’t really want to know, I’m afraid, what’s going on. But we need to. We really need to question that. So within these organizations, you’ve got tremendous numbers of people that are just going along with the system, getting paid really well to do it, and getting jobs that they were trained to do. But then you always have a number of people like me at the top of the organizations that know what’s going on. They are part of this and they use every means they can to keep the system moving.
 
This interview first aired on Democracy Now! - http://www.democracynow.org

 

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For further reading:

 

 

Featuring Bernard Lietaer

 

Few people have worked in and on the money system in as many different capacities as Bernard Lietaer. He spent five years at the Central Bank in Belgium, where his first project was the design and implementation of the single European currency system.

 

He was president of Belgium's Electronic Payment System, and has developed technologies for multinational corporations to use in managing multiple currency environments.

 

He has helped developing countries improve their hard currency earnings and taught international finance at the University of Louvain, in his native Belgium.

 

Bernard Lietaer was also the general manager and currency trader for one of the largest and most successful offshore currency funds.

 

He is currently a fellow at the Center for Sustainable Resources at the University of California at Berkeley.

 

YES! editor Sarah van Gelder talked to Bernard about the possibilities for a new kind of currency better suited to building community and sustainability. He can be reached to discuss this topic via an Internet conference at: http://www.transaction.net/money

 

SARAH: Why do you put so much hope into the development of alternative currencies?

 

BERNARD: Money is like an iron ring we've put through our noses. We've forgotten that we designed it, and it's now leading us around. I think it's time to figure out where we want to go - in my opinion toward sustainability and community - and then design a money system that gets us there.

 

SARAH: So you would say that the design of money is actually at the root of much else that happens, or doesn't happen, in society?

 

BERNARD: That's right. While economic textbooks claim that people and corporations are competing for markets and resources, I claim that in reality they are competing for money - using markets and resources to do so. So designing new money systems really amounts to redesigning the target that orients much human effort.

 

Furthermore, I believe that greed and competition are not a result of immutable human temperament; I have come to the conclusion that greed and fear of scarcity are in fact being continuously created and amplified as a direct result of the kind of money we are using.

 

For example, we can produce more than enough food to feed everybody, and there is definitely enough work for everybody in the world, but there is clearly not enough money to pay for it all. The scarcity is in our national currencies. In fact, the job of central banks is to create and maintain that currency scarcity. The direct consequence is that we have to fight with each other in order to survive.

 

Money is created when banks lend it into existence (see article by Thomas Greco on page 19). When a bank provides you with a $100,000 mortgage, it creates only the principal, which you spend and which then circulates in the economy. The bank expects you to pay back $200,000 over the next 20 years, but it doesn't create the second $100,000 - the interest. Instead, the bank sends you out into the tough world to battle against everybody else to bring back the second $100,000.

 

SARAH: So some people have to lose in order for others to win? Some have to default on their loan in order for others to get the money needed to pay off that interest?

 

BERNARD: That's right. All the banks are doing the same thing when they lend money into existence. That is why the decisions made by central banks, like the Federal Reserve in the US, are so important - increased interest costs automatically determine a larger proportion of necessary bankruptcies.

 

So when the bank verifies your "creditworthiness," it is really checking whether you are capable of competing and winning against other players - able to extract the second $100,000 that was never created. And if you fail in that game, you lose your house or whatever other collateral you had to put up.

 

SARAH: That also influences the unemployment rate.

 

BERNARD: It's certainly a major factor, but there's more to it. Information technologies increasingly allow us to attain very good economic growth without increases in employment. I believe we're seeing one of the last job-driven affluent periods in the US right now. As Jeremy Rifkin argues in his book, The End of Work, jobs are basically not going to be there anymore, even in "good times."

 

A study done by The International Metalworkers Federation in Geneva predicts that within the next 30 years, 2 or 3 percent of the world's population will be able to produce everything we need on the planet. Even if they're off by a factor of 10, we'd still have a question of what 80 percent of humanity will do.

 

My forecast is that local currencies will be a major tool for social design in the 21st century, if for no other reasons than employment. I don't claim that these local currencies will or should replace national currencies; that is why I call them "complementary" currencies. The national, competition-generating currencies will still have a role in the competitive global market. I believe, however, that complementary local currencies are a lot better suited to developing cooperative, local economies.

 

SARAH: And these local economies will provide a form of employment that won't be threatened with extinction?

 

BERNARD: As a first step, that is correct. For example, in France, there are now 300 local exchange networks, called Grain de Sel, literally "Grain of Salt." These systems - which arose exactly when and where the unemployment levels reached about 12 percent - facilitate exchanges of everything from rent to organic produce, but they do something else as well. Every fortnight in the Ariege, in southwestern France, there is a big party. People come to trade not only cheeses, fruits, and cakes as in the normal market days, but also hours of plumbing, haircuts, sailing or English lessons. Only local currencies accepted!

 

Local currency creates work, and I make a distinction between work and jobs. A job is what you do for a living; work is what you do because you like to do it. I expect jobs to increasingly become obsolete, but there is still an almost infinite amount of fascinating work to be done.

 

For example, in France you find people offering guitar lessons and requesting lessons in German. Neither would pay in French francs. What's nice about local currency is that when people create their own money, they don't need to build in a scarcity factor. And they don't need to get currency from elsewhere in order to have a means of making an exchange with a neighbor.

 

Edgar Cahn's Time Dollars are a classical example. As soon as you have an agreement between two people about a transaction using Time Dollars, they literally create the necessary "money" in the process; there's no scarcity of money. That does not mean there's an infinite amount of this currency, either; you cannot give me 500,000 hours - nobody has 500,000 hours to give. So there's a ceiling on it, yes, but there's no artificial scarcity. Instead of pitting people against each other, the system actually helps them cooperate.

 

SARAH: So you're suggesting that scarcity needn't be a guiding principle of our economic system. But isn't scarcity absolutely fundamental to economics, especially in a world of limited resources?

 

BERNARD: My analysis of this question is based on the work of Carl Gustav Jung because he is the only one with a theoretical framework for collective psychology, and money is fundamentally a phenomenon of collective psychology.

 

A key concept Jung uses is the archetype, which can be described as an emotional field that mobilizes people, individually or collectively, in a particular direction. Jung showed that whenever a particular archetype is repressed, two types of shadows emerge, which are polarities of each other.

 

For example, if my higher self - corresponding to the archetype of the King or the Queen - is repressed, I will behave either as a Tyrant or as a Weakling. These two shadows are connected to each other by fear. A Tyrant is tyrannical because he's afraid of appearing weak; a Weakling is afraid of being tyrannical. Only someone with no fear of either one of these shadows can embody the archetype of the King.

 

Now let's apply this framework to a well-documented phenomenon - the repression of the Great Mother archetype. The Great Mother archetype was very important in the Western world from the dawn of prehistory throughout the pre-Indo-European time periods, as it still is in many traditional cultures today. But this archetype has been violently repressed in the West for at least 5,000 years starting with the Indo-European invasions - reinforced by the anti-Goddess view of Judeo-Christianity, culminating with three centuries of witch hunts - all the way to the Victorian era.

 

If there is a repression of an archetype on this scale and for this length of time, the shadows manifest in a powerful way in society. After 5,000 years, people will consider the corresponding shadow behaviors as "normal."

 

The question I have been asking is very simple: What are the shadows of the Great Mother archetype? I'm proposing that these shadows are greed and fear of scarcity. So it should come as no surprise that in Victorian times - at the apex of the repression of the Great Mother - a Scottish schoolmaster named Adam Smith noticed a lot of greed and scarcity around him and assumed that was how all "civilized" societies worked. Smith, as you know, created modern economics, which can be defined as a way of allocating scarce resources through the mechanism of individual, personal greed.

 

SARAH: Wow! So if greed and scarcity are the shadows, what does the Great Mother archetype herself represent in terms of economics?

 

BERNARD: Let's first distinguish between the Goddess, who represented all aspects of the Divine, and the Great Mother, who specifically symbolizes planet Earth - fertility, nature, the flow of abundance in all aspects of life. Someone who has assimilated the Great Mother archetype trusts in the abundance of the universe.

 

It's when you lack trust that you want a big bank account. The first guy who accumulated a lot of stuff as protection against future uncertainty automatically had to start defending his pile against everybody else's envy and needs. If a society is afraid of scarcity, it will actually create an environment in which it manifests well-grounded reasons to live in fear of scarcity. It is a self-fulfilling prophecy!

 

Also, we have been living for a long time under the belief that we need to create scarcity to create value. Although that is valid in some material domains, we extrapolate it to other domains where it may not be valid. For example, there's nothing to prevent us from freely distributing information. The marginal cost of information today is practically nil. Nevertheless, we invent copyrights and patents in an attempt to keep it scarce.

 

SARAH: So fear of scarcity creates greed and hoarding, which in turn creates the scarcity that was feared. Whereas cultures that embody the Great Mother are based on abundance and generosity. Those ideas are implicit in the way you've defined community, are they not?

 

BERNARD: Actually it's not my definition, it's etymological. The origin of the word "community" comes from the Latin munus, which means the gift, and cum, which means together, among each other. So community literally means to give among each other. Therefore I define my community as a group of people who welcome and honor my gifts, and from whom I can reasonably expect to receive gifts in return.

 

SARAH: And local currencies can facilitate that exchange of gifts.

 

BERNARD: The majority of the local currencies I know about have been started for the purpose of creating employment, but there is a growing group of people who are starting local currencies specifically to create community.

 

For example, I would feel funny calling my neighbor in the valley and saying, "I notice you have a lot of pears on your tree. Can I have them?" I would feel I needed to offer something in return. But if I'm going to offer scarce dollars, I might just as well go to the supermarket, so we end up not using the pears. If I have local currency, there's no scarcity in the medium of exchange, so buying the pears becomes an excuse to interact.

 

In Takoma Park, Maryland, Olaf Egeberg started a local currency to facilitate these kinds of exchanges within his community. And the participants agree that is exactly what has been happening.

 

SARAH: That raises the question of whether local currencies can also be a means for people to meet their basic needs for food and housing, or would those sectors remain part of the competitive economy?

 

BERNARD: There are lots of people who love gardening, but who can't make a living from it in the competitive world. If a gardener is unemployed, and I'm unemployed, in the normal economy we might both starve. However with complementary currencies, he can grow my salads, which I pay for in local currency earned by providing another service to someone else.

 

In Ithaca, "Hours" are accepted at the farmer's market; the farmers can use the local currency to hire someone to help with the harvest or to do some repairs. Some landlords accept Hours for rent, particularly if they don't have a mortgage that must be paid in scarce dollars.

When you have local currency, it quickly becomes clear what's local and what's not. K-Mart will accept dollars only; their suppliers are in Hong Kong or Singapore or Kansas City. But Ithaca's local supermarket accepts Hours as well as dollars. By using local currencies, you create a bias toward local sustainability.

 

SARAH: Local currencies also provide communities with some buffering from the ups and downs of the global economy. You've been in the business of monitoring, dealing in, and even helping to design the global finance system. Why would communities want to be insulated from it?

 

BERNARD: First of all, today's official monetary system has almost nothing to do with the real economy. Just to give you an idea, 1995 statistics indicate that the volume of currency exchanged on the global level is $1.3 trillion per day. This is 30 times more than the daily gross domestic product (GDP) of all of the developed countries (OECD) together. The annual GDP of the United States is turned in the market every three days!

 

Of that volume, only 2 or 3 percent has to do with real trade or investment; the remainder takes place in the speculative global cyber-casino. This means that the real economy has become relegated to a mere frosting on the speculative cake, an exact reversal of how it was just two decades ago.

 

SARAH: What are the implications of this? What does it mean for those of us who aren't transacting deals across international boundaries?

 

BERNARD: For one thing, power has shifted irrevocably away from governments toward the financial markets. When a government does something not to the liking of the market - like the British in '91, the French in '94 or the Mexicans in '95 - nobody sits down at the table and says "you shouldn't do this." A monetary crisis simply manifests in that currency. So a few hundred people, who are not elected by anybody and have no collective responsibility whatsoever, decide what your pension fund is worth - among other things.

 

SARAH: You've also talked about the possibility of a crash in this system...

 

BERNARD: Yes, I see it now as about a 50/50 chance over the next five or 10 years. Many people say it's 100 percent, and with a much shorter time horizon. George Soros, who's made part of his living doing what I used to do - speculating in currencies - concluded, "Instability is cumulative, so that eventual breakdown of freely floating exchanges is virtually assured."

 

Joel Kurtzman, ex-editor at the Harvard Business Review, entitles his latest book: The Death of Money and forecasts an imminent collapse due to speculative frenzy.

 

Just to see how this could happen: all the OECD Central Banks' reserves together represent about $640 billion. So in a crisis situation, if all the Central Banks were to agree to work together (which they never do) and if they were to use all their reserves (which is another thing that never happens) they have the funds to control only half the volume of a normal day of trading. In a crisis day, that volume could easily double or triple, and the total Central Bank reserves would last two or three hours.

 

SARAH: And the outcome would be?

 

BERNARD: If that happens, we would suddenly be in a very different world. In 1929, the stock market crashed, but the gold standard held. The monetary system held. Here, we are dealing with something that's more fundamental. The only precedent I know of is the Roman Empire collapse, which ended Roman currency. That was, of course, at a time when it took about a century and a half for the breakdown to spread through the empire; now it would take a few hours.

 

SARAH: So local currencies could provide some resilience for a community that could help it survive a currency melt-down or some other international breakdown. You've also mentioned that local currencies help promote sustainability. What's the connection?

 

BERNARD: To understand that, we need to see the relationship between interest rates and the ways we discount the future.

 

If I ask, "Do you want $100 now or $100 a year from now," most people would want the money now simply because one can deposit money risk-free in a bank account and get about $110 a year later. Another way of putting it is that if I were to offer you $100 a year from now that would be about equal to offering you $90 today. This discounting of the future is referred to as 'discounted cash flow'.

 

That means that under our current system it makes sense to cut down trees and put the money in the bank; the money in the bank will grow faster than trees. It makes sense to "save" money by building poorly insulated houses because the discounted cost of the extra energy over the lifetime of the house is cheaper than insulating.

 

We can, however, design a monetary system that does the opposite; it actually creates long-term thinking through what is called a "demurrage charge." The demurrage charge is a concept developed by Silvio Gesell about a century ago. His idea was that money is a public good - like the telephone or bus transport - and that we should charge a small fee for using it. In other words, we create a negative rather than a positive interest rate.

 

What would that do? If I gave you a $100 bill and told you that a month from now you're going to have to pay $1 to keep the money valid, what would you do?

 

SARAH: I suppose I would try to invest it in something else.

 

BERNARD: You got it. You know the expression, "Money is like manure; it's only good when it's spread out." In the Gesell system, people would only use money as a medium of exchange, but not as a store for value. That would create work, because it would encourage circulation, and it would invert the short-term incentive system. Instead of cutting trees down to put the money in the bank, you would want to invest your money in living trees or installing insulation in your house.

 

SARAH: Has this ever been tried?

 

BERNARD: There are only three periods I have found: classical Egypt; about three centuries in the European Middle Ages, and a few years in the 1930s.

 

In ancient Egypt, when you stored grain, you would receive a token, which was exchangeable and became a type of currency. If you returned a year later with 10 tokens, you would only get nine tokens worth of grain, because rats and spoilage would have reduced the quantities, and because the guards at the storage facility had to be paid. So that amounted to a demurrage charge.

 

Egypt was the breadbasket for the ancient world, the gift of the Nile. Why? Because instead of keeping value in money, everybody invested in productive assets that would last forever - things like land improvements and irrigation systems.

 

Proof that the monetary system had something to do with this wealth is that it all ended abruptly as soon as the Romans replaced the Egyptian 'grain standard' currency with their own money system, with positive interest rates. After that, Egypt ceased being the grain-basket, and became a "developing country" as it is called today.

 

In Europe during the Middle Ages - the 10th to 13th centuries - local currencies were issued by local lords, and then periodically recalled and reissued with a tax collected in the process. Again, this was a form of demurrage that made money undesirable as a store of value. The result was the blossoming of culture and widespread well-being, corresponding exactly to the time period when these local currencies were used.

 

Practically all the cathedrals were built during this time period. If you think about what is required as investment for a small town to build a cathedral, it's extraordinary.

 

SARAH: Because cathedrals take generations to build?

 

BERNARD: Well, not only that. Besides the obvious symbolic and religious roles - which I don't want to belittle - one should remember that cathedrals had an important economic function; they attracted pilgrims, who, from a business perspective, played a similar role to tourists today. These cathedrals were built to last forever and create a long-term cash flow for the community.

 

This was a way of creating abundance for you and your descendants for 13 generations! The proof is that it still works today; in Chartres, for instance, the bulk of the city's businesses still live from the tourists who visit the cathedral 800 years after it was finished!

 

When the introduction of gunpowder technology enabled the kings to centralize power in the early 14th century, the first thing they did was to monopolize the money system. What happened? No more cathedrals were built. The population was just as devoutly Christian in the 14th or 15th century, but the economic incentive for collective long-term investments was gone.

 

I use the cathedral simply as an example. Accounts from 12th century estates show that mills and other productive assets were maintained at an extraordinary level of quality, with parts replaced even before they wore out.

 

Recent studies have revealed that the quality of life for the common laborer in Europe was the highest in the 12th to 13th centuries; perhaps even higher than today. When you can't keep savings in the form of money, you invest them in something that will produce value in the future. So this form of money created an extraordinary boom.

 

SARAH: Yet this was a period when Christianity was supreme in Europe and so presumably the Great Mother archetype was still being repressed.

 

BERNARD: Well, actually a very interesting religious symbol became prevalent during this time: the famous "Black Madonna." There were hundreds of these statues during the 10th to 13th centuries, which were in fact statues of Isis with the child Horus sitting on her lap, directly imported from Egypt during the first Crusades. Her special vertical chair was called the "cathedra" (which is where the word cathedral comes from) and interestingly this chair was the exact symbol identifying Isis in ancient Egypt.

 

The statues of the Black Madonnas were also identified in medieval time as the "Alma Mater" (literally the "Generous Mother," an expression still used in America to refer to someone's 'mother university').

 

The Black Madonnas were a direct continuity of the Great Mother in one of her most ancient forms. She symbolized birth and fertility, the wealth of the land. She symbolized spirit incarnate in matter, before the patriarchal societies separated spirit from matter. So here we have a direct archetypal linkage between the two civilizations that spontaneously created money systems with demurrage charges while creating unusual levels of abundance for the common people: ancient Egypt and 10th-to-13th century Europe. These money systems correspond exactly to the honoring of that archetype.

 

SARAH: How interesting! What potential do you see for local currencies to bring this Great Mother archetype of abundance and generosity into our economic system today?

 

BERNARD: The biggest issues that I believe humanity faces today are sustainability and the inequalities and breakdown in community, which create tensions that result in violence and wars. We can address both these issues with the same tool, by consciously creating currency systems that will enhance community and sustainability.

 

Significantly, we have witnessed in the past decades a clear re-awakening of the feminine archetype. It is reflected not only in the women's movement, in the dramatic increase in ecological concerns, or in new epistemologies reintegrating spirit and matter, but also in the technologies that enable us to replace hierarchies with networks (such as the Internet).

 

Add to these trends the fact that for the first time in human history we have available the production technologies to create unprecedented abundance. All this converges into an extraordinary opportunity to combine the hardware of our technologies of abundance and the software of archetypal shifts.

 

Such a combination has never been available at this scale or at this speed: it enables us to consciously design money to work for us, instead of us for it.

 

I propose that we choose to develop money systems that will enable us to attain sustainability and community healing on a local and global scale. These objectives are in our grasp within less than one generation's time. Whether we materialize them or not will depend on our capacity to cooperate with each other to consciously reinvent our money.

 

...

 

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19 March 2005
NewScientist.com news service
Michael Brooks
 
=== 1 The placebo effect ===
DON'T try this at home. Several times a day, for several days, you induce pain in someone. You control the pain with morphine until the final day of the experiment, when you replace the morphine with saline solution. Guess what? The saline takes the pain away.
 
This is the placebo effect: somehow, sometimes, a whole lot of nothing can be very powerful. Except it's not quite nothing. When Fabrizio Benedetti of the University of Turin in Italy carried out the above experiment, he added a final twist by adding naloxone, a drug that blocks the effects of morphine, to the saline. The shocking result? The pain-relieving power of saline solution disappeared.
 
So what is going on? Doctors have known about the placebo effect for decades, and the naloxone result seems to show that the placebo effect is somehow biochemical. But apart from that, we simply don't know.
 
Benedetti has since shown that a saline placebo can also reduce tremors and muscle stiffness in people with Parkinson's disease (Nature Neuroscience, vol 7, p 587). He and his team measured the activity of neurons in the patients' brains as they administered the saline. They found that individual neurons in the subthalamic nucleus (a common target for surgical attempts to relieve Parkinson's symptoms) began to fire less often when the saline was given, and with fewer "bursts" of firing - another feature associated with Parkinson's. The neuron activity decreased at the same time as the symptoms improved: the saline was definitely doing something.
 
We have a lot to learn about what is happening here, Benedetti says, but one thing is clear: the mind can affect the body's biochemistry. "The relationship between expectation and therapeutic outcome is a wonderful model to understand mind-body interaction," he says. Researchers now need to identify when and where placebo works. There may be diseases in which it has no effect. There may be a common mechanism in different illnesses. As yet, we just don't know.
 
=== 2 The horizon problem ===
OUR universe appears to be unfathomably uniform. Look across space from one edge of the visible universe to the other, and you'll see that the microwave background radiation filling the cosmos is at the same temperature everywhere. That may not seem surprising until you consider that the two edges are nearly 28 billion light years apart and our universe is only 14 billion years old.
 
Nothing can travel faster than the speed of light, so there is no way heat radiation could have travelled between the two horizons to even out the hot and cold spots created in the big bang and leave the thermal equilibrium we see now.
 
This "horizon problem" is a big headache for cosmologists, so big that they have come up with some pretty wild solutions. "Inflation", for example.
 
You can solve the horizon problem by having the universe expand ultra-fast for a time, just after the big bang, blowing up by a factor of 1050 in 10-33 seconds. But is that just wishful thinking? "Inflation would be an explanation if it occurred," says University of Cambridge astronomer Martin Rees. The trouble is that no one knows what could have made that happen.
 
So, in effect, inflation solves one mystery only to invoke another. A variation in the speed of light could also solve the horizon problem - but this too is impotent in the face of the question "why?" In scientific terms, the uniform temperature of the background radiation remains an anomaly.
 
=== 3 Ultra-energetic cosmic rays ===
FOR more than a decade, physicists in Japan have been seeing cosmic rays that should not exist. Cosmic rays are particles - mostly protons but sometimes heavy atomic nuclei - that travel through the universe at close to the speed of light. Some cosmic rays detected on Earth are produced in violent events such as supernovae, but we still don't know the origins of the highest-energy particles, which are the most energetic particles ever seen in nature. But that's not the real mystery.
 
As cosmic-ray particles travel through space, they lose energy in collisions with the low-energy photons that pervade the universe, such as those of the cosmic microwave background radiation. Einstein's special theory of relativity dictates that any cosmic rays reaching Earth from a source outside our galaxy will have suffered so many energy-shedding collisions that their maximum possible energy is 5 × 1019 electronvolts. This is known as the Greisen-Zatsepin-Kuzmin limit.
 
Over the past decade, however, the University of Tokyo's Akeno Giant Air Shower Array - 111 particle detectors spread out over 100 square kilometres - has detected several cosmic rays above the GZK limit. In theory, they can only have come from within our galaxy, avoiding an energy-sapping journey across the cosmos. However, astronomers can find no source for these cosmic rays in our galaxy. So what is going on?
 
One possibility is that there is something wrong with the Akeno results. Another is that Einstein was wrong. His special theory of relativity says that space is the same in all directions, but what if particles found it easier to move in certain directions? Then the cosmic rays could retain more of their energy, allowing them to beat the GZK limit.
 
Physicists at the Pierre Auger experiment in Mendoza, Argentina, are now working on this problem. Using 1600 detectors spread over 3000 square kilometres, Auger should be able to determine the energies of incoming cosmic rays and shed more light on the Akeno results.
 
Alan Watson, an astronomer at the University of Leeds, UK, and spokesman for the Pierre Auger project, is already convinced there is something worth following up here. "I have no doubts that events above 1020 electronvolts exist. There are sufficient examples to convince me," he says. The question now is, what are they? How many of these particles are coming in, and what direction are they coming from? Until we get that information, there's no telling how exotic the true explanation could be.
 
=== 4 Belfast homeopathy results ===
MADELEINE Ennis, a pharmacologist at Queen's University, Belfast, was the scourge of homeopathy. She railed against its claims that a chemical remedy could be diluted to the point where a sample was unlikely to contain a single molecule of anything but water, and yet still have a healing effect. Until, that is, she set out to prove once and for all that homeopathy was bunkum.
 
In her most recent paper, Ennis describes how her team looked at the effects of ultra-dilute solutions of histamine on human white blood cells involved in inflammation. These "basophils" release histamine when the cells are under attack. Once released, the histamine stops them releasing any more. The study, replicated in four different labs, found that homeopathic solutions - so dilute that they probably didn't contain a single histamine molecule - worked just like histamine. Ennis might not be happy with the homeopaths' claims, but she admits that an effect cannot be ruled out.
 
So how could it happen? Homeopaths prepare their remedies by dissolving things like charcoal, deadly nightshade or spider venom in ethanol, and then diluting this "mother tincture" in water again and again. No matter what the level of dilution, homeopaths claim, the original remedy leaves some kind of imprint on the water molecules. Thus, however dilute the solution becomes, it is still imbued with the properties of the remedy.
 
You can understand why Ennis remains sceptical. And it remains true that no homeopathic remedy has ever been shown to work in a large randomised placebo-controlled clinical trial. But the Belfast study (Inflammation Research, vol 53, p 181) suggests that something is going on. "We are," Ennis says in her paper, "unable to explain our findings and are reporting them to encourage others to investigate this phenomenon." If the results turn out to be real, she says, the implications are profound: we may have to rewrite physics and chemistry.
 
=== 5 Dark matter ===
TAKE our best understanding of gravity, apply it to the way galaxies spin, and you'll quickly see the problem: the galaxies should be falling apart. Galactic matter orbits around a central point because its mutual gravitational attraction creates centripetal forces. But there is not enough mass in the galaxies to produce the observed spin.
 
Vera Rubin, an astronomer working at the Carnegie Institution's department of terrestrial magnetism in Washington DC, spotted this anomaly in the late 1970s. The best response from physicists was to suggest there is more stuff out there than we can see. The trouble was, nobody could explain what this "dark matter" was.
 
And they still can't. Although researchers have made many suggestions about what kind of particles might make up dark matter, there is no consensus. It's an embarrassing hole in our understanding. Astronomical observations suggest that dark matter must make up about 90 per cent of the mass in the universe, yet we are astonishingly ignorant what that 90 per cent is.
 
Maybe we can't work out what dark matter is because it doesn't actually exist. That's certainly the way Rubin would like it to turn out. "If I could have my pick, I would like to learn that Newton's laws must be modified in order to correctly describe gravitational interactions at large distances," she says. "That's more appealing than a universe filled with a new kind of sub-nuclear particle."
 
=== 6 Viking's methane ===
JULY 20, 1976. Gilbert Levin is on the edge of his seat. Millions of kilometres away on Mars, the Viking landers have scooped up some soil and mixed it with carbon-14-labelled nutrients. The mission's scientists have all agreed that if Levin's instruments on board the landers detect emissions of carbon-14-containing methane from the soil, then there must be life on Mars.
 
Viking reports a positive result. Something is ingesting the nutrients, metabolising them, and then belching out gas laced with carbon-14.
So why no party?

Because another instrument, designed to identify organic molecules considered essential signs of life, found nothing. Almost all the mission scientists erred on the side of caution and declared Viking's discovery a false positive. But was it?
 
The arguments continue to rage, but results from NASA's latest rovers show that the surface of Mars was almost certainly wet in the past and therefore hospitable to life. And there is plenty more evidence where that came from, Levin says. "Every mission to Mars has produced evidence supporting my conclusion. None has contradicted it."
 
Levin stands by his claim, and he is no longer alone. Joe Miller, a cell biologist at the University of Southern California in Los Angeles, has re-analysed the data and he thinks that the emissions show evidence of a circadian cycle. That is highly suggestive of life.
 
Levin is petitioning ESA and NASA to fly a modified version of his mission to look for "chiral" molecules. These come in left or right-handed versions: they are mirror images of each other. While biological processes tend to produce molecules that favour one chirality over the other, non-living processes create left and right-handed versions in equal numbers. If a future mission to Mars were to find that Martian "metabolism" also prefers one chiral form of a molecule to the other, that would be the best indication yet of life on Mars.
 
=== 7 Tetraneutrons ===
FOUR years ago, a particle accelerator in France detected six particles that should not exist. They are called tetraneutrons: four neutrons that are bound together in a way that defies the laws of physics.
 
Francisco Miguel Marquès and colleagues at the Ganil accelerator in Caen are now gearing up to do it again. If they succeed, these clusters may oblige us to rethink the forces that hold atomic nuclei together.
 
The team fired beryllium nuclei at a small carbon target and analysed the debris that shot into surrounding particle detectors. They expected to see evidence for four separate neutrons hitting their detectors. Instead the Ganil team found just one flash of light in one detector. And the energy of this flash suggested that four neutrons were arriving together at the detector. Of course, their finding could have been an accident: four neutrons might just have arrived in the same place at the same time by coincidence. But that's ridiculously improbable.
 
Not as improbable as tetraneutrons, some might say, because in the standard model of particle physics tetraneutrons simply can't exist. According to the Pauli exclusion principle, not even two protons or neutrons in the same system can have identical quantum properties. In fact, the strong nuclear force that would hold them together is tuned in such a way that it can't even hold two lone neutrons together, let alone four. Marquès and his team were so bemused by their result that they buried the data in a research paper that was ostensibly about the possibility of finding tetraneutrons in the future (Physical Review C, vol 65, p 44006).
 
And there are still more compelling reasons to doubt the existence of tetraneutrons. If you tweak the laws of physics to allow four neutrons to bind together, all kinds of chaos ensues (Journal of Physics G, vol 29, L9). It would mean that the mix of elements formed after the big bang was inconsistent with what we now observe and, even worse, the elements formed would have quickly become far too heavy for the cosmos to cope. "Maybe the universe would have collapsed before it had any chance to expand," says Natalia Timofeyuk, a theorist at the University of Surrey in Guildford, UK.
 
There are, however, a couple of holes in this reasoning. Established theory does allow the tetraneutron to exist - though only as a ridiculously short-lived particle. "This could be a reason for four neutrons hitting the Ganil detectors simultaneously," Timofeyuk says. And there is other evidence that supports the idea of matter composed of multiple neutrons: neutron stars. These bodies, which contain an enormous number of bound neutrons, suggest that as yet unexplained forces come into play when neutrons gather en masse.
 
=== 8 The Pioneer anomaly ===
THIS is a tale of two spacecraft. Pioneer 10 was launched in 1972; Pioneer 11 a year later. By now both craft should be drifting off into deep space with no one watching. However, their trajectories have proved far too fascinating to ignore.
 
That's because something has been pulling - or pushing - on them, causing them to speed up. The resulting acceleration is tiny, less than a nanometre per second per second. That's equivalent to just one ten-billionth of the gravity at Earth's surface, but it is enough to have shifted Pioneer 10 some 400,000 kilometres off track. NASA lost touch with Pioneer 11 in 1995, but up to that point it was experiencing exactly the same deviation as its sister probe. So what is causing it?
 
Nobody knows. Some possible explanations have already been ruled out, including software errors, the solar wind or a fuel leak. If the cause is some gravitational effect, it is not one we know anything about. In fact, physicists are so completely at a loss that some have resorted to linking this mystery with other inexplicable phenomena.
 
Bruce Bassett of the University of Portsmouth, UK, has suggested that the Pioneer conundrum might have something to do with variations in alpha, the fine structure constant (see "Not so constant constants", page 37). Others have talked about it as arising from dark matter - but since we don't know what dark matter is, that doesn't help much either. "This is all so maddeningly intriguing," says Michael Martin Nieto of the Los Alamos National Laboratory. "We only have proposals, none of which has been demonstrated."
 
Nieto has called for a new analysis of the early trajectory data from the craft, which he says might yield fresh clues. But to get to the bottom of the problem what scientists really need is a mission designed specifically to test unusual gravitational effects in the outer reaches of the solar system. Such a probe would cost between $300 million and $500 million and could piggyback on a future mission to the outer reaches of the solar system (www.arxiv.org/gr-qc/0411077).
 
"An explanation will be found eventually," Nieto says. "Of course I hope it is due to new physics - how stupendous that would be. But once a physicist starts working on the basis of hope he is heading for a fall." Disappointing as it may seem, Nieto thinks the explanation for the Pioneer anomaly will eventually be found in some mundane effect, such as an unnoticed source of heat on board the craft.
 
=== 9 Dark energy ===
IT IS one of the most famous, and most embarrassing, problems in physics. In 1998, astronomers discovered that the universe is expanding at ever faster speeds. It's an effect still searching for a cause - until then, everyone thought the universe's expansion was slowing down after the big bang. "Theorists are still floundering around, looking for a sensible explanation," says cosmologist Katherine Freese of the University of Michigan, Ann Arbor. "We're all hoping that upcoming observations of supernovae, of clusters of galaxies and so on will give us more clues."
 
One suggestion is that some property of empty space is responsible - cosmologists call it dark energy. But all attempts to pin it down have fallen woefully short. It's also possible that Einstein's theory of general relativity may need to be tweaked when applied to the very largest scales of the universe. "The field is still wide open," Freese says.
 
=== 10 The Kuiper cliff ===
IF YOU travel out to the far edge of the solar system, into the frigid wastes beyond Pluto, you'll see something strange. Suddenly, after passing through the Kuiper belt, a region of space teeming with icy rocks, there's nothing.
 
Astronomers call this boundary the Kuiper cliff, because the density of space rocks drops off so steeply. What caused it? The only answer seems to be a 10th planet. We're not talking about Quaoar or Sedna: this is a massive object, as big as Earth or Mars, that has swept the area clean of debris.
 
The evidence for the existence of "Planet X" is compelling, says Alan Stern, an astronomer at the Southwest Research Institute in Boulder, Colorado. But although calculations show that such a body could account for the Kuiper cliff (Icarus, vol 160, p 32), no one has ever seen this fabled 10th planet.
 
There's a good reason for that. The Kuiper belt is just too far away for us to get a decent view. We need to get out there and have a look before we can say anything about the region. And that won't be possible for another decade, at least. NASA's New Horizons probe, which will head out to Pluto and the Kuiper belt, is scheduled for launch in January 2006. It won't reach Pluto until 2015, so if you are looking for an explanation of the vast, empty gulf of the Kuiper cliff, watch this space.
 
=== 11 The Wow signal ===
IT WAS 37 seconds long and came from outer space. On 15 August 1977 it caused astronomer Jerry Ehman, then of Ohio State University in Columbus, to scrawl "Wow!" on the printout from Big Ear, Ohio State's radio telescope in Delaware. And 28 years later no one knows what created the signal. "I am still waiting for a definitive explanation that makes sense," Ehman says.
 
Coming from the direction of Sagittarius, the pulse of radiation was confined to a narrow range of radio frequencies around 1420 megahertz. This frequency is in a part of the radio spectrum in which all transmissions are prohibited by international agreement. Natural sources of radiation, such as the thermal emissions from planets, usually cover a much broader sweep of frequencies. So what caused it?
 
The nearest star in that direction is 220 light years away. If that is where is came from, it would have had to be a pretty powerful astronomical event - or an advanced alien civilisation using an astonishingly large and powerful transmitter.
 
The fact that hundreds of sweeps over the same patch of sky have found nothing like the Wow signal doesn't mean it's not aliens. When you consider the fact that the Big Ear telescope covers only one-millionth of the sky at any time, and an alien transmitter would also likely beam out over the same fraction of sky, the chances of spotting the signal again are remote, to say the least.
 
Others think there must be a mundane explanation. Dan Wertheimer, chief scientist for the SETI@home project, says the Wow signal was almost certainly pollution: radio-frequency interference from Earth-based transmissions. "We've seen many signals like this, and these sorts of signals have always turned out to be interference," he says. The debate continues.
 
=== 12 Not-so-constant constants ===
IN 1997 astronomer John Webb and his team at the University of New South Wales in Sydney analysed the light reaching Earth from distant quasars. On its 12-billion-year journey, the light had passed through interstellar clouds of metals such as iron, nickel and chromium, and the researchers found these atoms had absorbed some of the photons of quasar light - but not the ones they were expecting.
 
If the observations are correct, the only vaguely reasonable explanation is that a constant of physics called the fine structure constant, or alpha, had a different value at the time the light passed through the clouds.
 
But that's heresy. Alpha is an extremely important constant that determines how light interacts with matter - and it shouldn't be able to change. Its value depends on, among other things, the charge on the electron, the speed of light and Planck's constant. Could one of these really have changed?
 
No one in physics wanted to believe the measurements. Webb and his team have been trying for years to find an error in their results. But so far they have failed.
 
Webb's are not the only results that suggest something is missing from our understanding of alpha. A recent analysis of the only known natural nuclear reactor, which was active nearly 2 billion years ago at what is now Oklo in Gabon, also suggests something about light's interaction with matter has changed.
 
The ratio of certain radioactive isotopes produced within such a reactor depends on alpha, and so looking at the fission products left behind in the ground at Oklo provides a way to work out the value of the constant at the time of their formation. Using this method, Steve Lamoreaux and his colleagues at the Los Alamos National Laboratory in New Mexico suggest that alpha may have decreased by more than 4 per cent since Oklo started up (Physical Review D, vol 69, p 121701).
 
There are gainsayers who still dispute any change in alpha. Patrick Petitjean, an astronomer at the Institute of Astrophysics in Paris, led a team that analysed quasar light picked up by the Very Large Telescope (VLT) in Chile and found no evidence that alpha has changed. But Webb, who is now looking at the VLT measurements, says that they require a more complex analysis than Petitjean's team has carried out. Webb's group is working on that now, and may be in a position to declare the anomaly resolved - or not - later this year.
 
"It's difficult to say how long it's going to take," says team member Michael Murphy of the University of Cambridge. "The more we look at these new data, the more difficulties we see." But whatever the answer, the work will still be valuable. An analysis of the way light passes through distant molecular clouds will reveal more about how the elements were produced early in the universe's history.
 
=== 13 Cold fusion ===
AFTER 16 years, it's back. In fact, cold fusion never really went away. Over a 10-year period from 1989, US navy labs ran more than 200 experiments to investigate whether nuclear reactions generating more energy than they consume - supposedly only possible inside stars - can occur at room temperature. Numerous researchers have since pronounced themselves believers.
 
With controllable cold fusion, many of the world's energy problems would melt away: no wonder the US Department of Energy is interested. In December, after a lengthy review of the evidence, it said it was open to receiving proposals for new cold fusion experiments.
 
That's quite a turnaround. The DoE's first report on the subject, published 15 years ago, concluded that the original cold fusion results, produced by Martin Fleischmann and Stanley Pons of the University of Utah and unveiled at a press conference in 1989, were impossible to reproduce, and thus probably false.
 
The basic claim of cold fusion is that dunking palladium electrodes into heavy water - in which oxygen is combined with the hydrogen isotope deuterium - can release a large amount of energy. Placing a voltage across the electrodes supposedly allows deuterium nuclei to move into palladium's molecular lattice, enabling them to overcome their natural repulsion and fuse together, releasing a blast of energy. The snag is that fusion at room temperature is deemed impossible by every accepted scientific theory.
 
That doesn't matter, according to David Nagel, an engineer at George Washington University in Washington DC. Superconductors took 40 years to explain, he points out, so there's no reason to dismiss cold fusion. "The experimental case is bulletproof," he says. "You can't make it go away."
 
From issue 2491 of New Scientist magazine, 19 March 2005, page 30
http://www.newscientist.com/channel/space/mg18524911.600