Prescription Drugs: Cure or Curse?

Prescription Drugs:? Cure or Curse?
by Jodie Gilmore exclusively for

The report, ?Health, United State, 2004,? published by the National Center for Health Statistics, claims that 44 percent of? U.S. citizens take at least one prescription drug; for the elderly, the number climbs to more than 80 percent. In fact, an increasing dependence on prescription drugs permeates much of the civilized world. In an article by Dr. Tony Vendryes, the Jamaican Gleaner Online stated, ?We warn our youngsters and athletes about the danger of illegal drugs but turn a blind eye to the harsh reality that legally-prescribed drugs kill and harm vast numbers of innocent victims every day?Jamaican men, women and children are consuming more prescription drugs than ever before.?

We?ve been trained to trust doctors ? after all, they have gone through rigorous training and must obtain and maintain a license to practice medicine. And until recently, most people considered approval by the Federal Drug Administration (FDA) a sign that a drug was safe and effective. But many patients have abdicated their own responsibility to educate themselves, and often critical information about prescription drugs is not made available. The hard truth is, just because the FDA approves a drug, or a doctor prescribes a drug, doesn?t mean it is safe.

Are prescription drugs really a problem?

The phrase ?drug problem? usually conjures images of cocaine addicts, meth labs, empty syringes in the gutter, and crime waves. But illegal drugs are not the only ?drug problem? this world faces ? prescription drugs are fast becoming an even bigger health problem than illegal drugs. Even the Journal of the American Medical Association (JAMA) admits that the third leading cause of death in the U.S. is doctor-induced disease. Yep ? that?s right. Except for heart disease and cancer, the thing that poses the most risk to your health is doctors, with at least 225,000 deaths occurring per year ? just in hospitals![1] ?

Another study, published in 1998, rated adverse drug reactions as between the fourth and sixth leading cause of death in the U.S, saying reactions killed upwards of 100,000 people in 1994, and seriously injured another 2.2 million. This study also restricted its data to hospitals, and did not include prescription errors.[2]

Other sources, such as Dr. Gary Null and colleagues, who published ?Death by Medicine? in 2003, estimate that more than 700,000 people die each year due to medical mistakes. (This number includes problems with prescription drugs, but also includes unnecessary surgeries, bedsores, and malnutrition, among other problems).

These are scary statistics, even if the exact number of deaths due to prescription drugs is impossible to pinpoint. The numbers cited above are almost certainly low, considering that most of the above data relates only to hospital deaths (what about people who die at home or at work?), and that many adverse drug reactions are not reported (either the patient fails to report them, or the doctor does). Even scarier is that most people seem unaware of the problem; and those who know about it try to keep it a secret.

This article explores the various facets that comprise the prescription drug problem, citing examples, exploring causes, and offering some possible directions for solutions.

What can go wrong?

First, why should people be concerned about prescription drugs? The answer is because they pose a number of serious health risks that are not properly explained to consumers by most doctors. These health risks include the following:

  • adverse reactions (including death) to a single drug
  • adverse drug interactions in ?drug cocktails?
  • nutritional depletion
  • prescription errors (from doctor, at pharmacy, or in hospital)
  • off-label prescriptions
  • abuse.

Let?s look at some examples of how each of these risks manifests itself.

??????????? Adverse reactions:? Most people consider antibiotics to be ?safe.? But one, Floxin? (one of a group of antibiotics called fluoroquinolones), has an overall 11 percent adverse reaction rate and is well-known for causing serious side effects including tendon ruptures and neuropathy issues, seizures, anxiety, cognitive changes, depression, dream abnormality, and hallucinations (among others). Other fluoroquinolones include Cipro?, Penetrex?, Maxaquin?, and Noroxin?. In August 2006, the FDA received a request for a black box warning for all fluoroquinolones.[3] According to an article by Dr. Jay S. Cohen in the Annals of Pharmacotherapy, ?fluoroquinolone-associated demyelinating peripheral neuropathies have not previously been appreciated or listed in the drug-prescribing information.?[4] A recent check of the listed side effects of Floxin revealed that tendonitis/tendon rupture was listed ? but was buried in the ?worldwide post-marketing? section, which is much farther than most consumers would read.

Another commonly prescribed group of drugs are psychiatric drugs ? and they are increasingly being prescribed for children, with horrific results. In well over half of the school shootings that have occurred since 1998 (and maybe in all of them), the child wielding the gun was on psychiatric drugs.[5] ?

Great Britain’s Department of Health issued a report that said studies based on more than 1,000 children show the rate of self harm and potentially suicidal behavior increases in those under 18 taking Paxil?, one of several SSRI (selective serotonin reuptake inhibitors) antidepressants (other SSRIs include Prozac?, Luvox?, and Seroxat?). British health regulators recently issued a warning that said ?It has become clear that the benefits of Seroxat in children for the treatment of depressive illness do not outweigh these risks.? The FDA and Irish health officials have also issued a similar warning for Paxil.

According to a story on USA TODAY Online, some antipsychotic drugs can also be dangerous when given to children. The article stated that ?[A] study of FDA data collected from 2000 to 2004 shows at least 45 deaths of children in which an atypical antipsychotic was listed in the FDA database as the ?primary suspect? for cause of death. No one seems to be taking notice of such data, however. In fact, during the period from 1995 to 2002, said the article, ?outpatient prescriptions for kids ages 2 to 18 leaped fivefold ? from just under half a million to about 2.5 million,? which means about 4 out of every 100 children are taking such drugs, despite the fact that the drugs are not labeled for pediatric use.[6]?

Painkillers are also commonly prescribed. Most people know that NSAIDs such as ibuprofen can cause stomach bleeding. And in 2004, another painkiller, Vioxx?, skyrocketed to the top of the media coverage. Vioxx was taken off the market in 2004, because researchers discovered that long-term users of Vioxx (25 mg/day) showed an increase in the incidence of heart attacks and strokes. After Vioxx was pulled from the U.S. market, other countries, such as New Zealand and Germany, restricted the use of Vioxx and similar drugs (called COX-2 inhibitors). Dr. David Graham, an employee of the FDA and the main ?whistleblower? on the dangers of Vioxx, said in an interview that because the FDA ignored data that pointed to increased risk of heart attack in users of Vioxx, that ?the FDA is responsible for 140,000 heart attacks and 60,000 dead Americans. That?s as many people as were killed in the Vietnam War?[Americans] should be screaming because this can happen again.?? Estimates place worldwide deaths caused by Vioxx at 150,000 to 200,000 ? but these figures have not been confirmed officially.

Indeed, it seems Dr. Graham was right in his warning that it ?could happen again.? An FDA advisory panel recently voted to approve Vioxx?s return to the market, and Merck (the manufacturer of Vioxx) is seeking FDA approval for a very similar drug, Arcoxia? (already available in 62 countries worldwide).

Another drug, Tysabri?, was recalled in 2005, after only about a year of being on the market. Why?? According to the warning now required to be on the drug, which was reinstated in 2006, ?TYSABRI increases the risk of progressive multifocal leukoencephalopathy (PML), an opportunistic viral infection of the brain that usually leads to death or severe disability. Although the cases of PML were limited to patients with recent or concomitant exposure to immunomodulators or immunosuppressants, there were too few cases to rule out the possibility that PML may occur with TYSABRI monotherapy.?

Some people are now asking ?is no drug too dangerous for FDA approval?? and ?Can doctors and patients competently weigh the risks versus the benefits of such drugs??

??????????? Drug cocktails: According to the National Center for Health Statistics, 16.5 percent of Americans take three or more prescriptions at one time. This is often referred to as a ?drug cocktail.? Each of these drugs has its own effect on the body ? but together, the potential for danger is even greater, as many drugs interact negatively with one another. The online reference,, which lists known drug interactions, says that there are at least 11,500 potential prescription drug interactions, then adds this caution: ?Not all drug interactions are known or reported in the literature, and new drug interactions are continually being reported.? Some drugs are worse than others in this regard. JAMA recently reported that ?there are probably more potential drug interactions between warfarin and other prescription drugs than [with] any other prescription product.? Warfarin (aka Coumadin?) is a blood thinner commonly prescribed for heart patients.

Adding to the potential danger are possible interactions between prescription drugs and ?natural? substances like herbs. In countries where treatment with herbal medicines is common, such as Ethiopia, these sorts of interactions pose a significant threat. Fekadu Fullas, Rph, Phd, has written a book, Interactions of Ethiopian Herbal Medicines and Spices with Conventional Drugs: A Practical Guide. Other researchers should follow Fallas? example and publish similar guides for other countries.

??????????? Nutritional depletion: Some prescription drugs pose a different kind of danger. Instead of directly killing you, or directly causing behavioral anomalies, they interfere with the natural levels of various nutrients or other substances in your body. This depletion, over time, may make it more likely that you will succumb to other ailments besides the one the prescription drug was supposed to fix. The simplest and possibly most common depletion is the effect of antibiotics on the digestive system. Most antibiotics can cause diarrhea, but many people don?t know why that is. In most cases, it is because the antibiotics are doing their job ? only too well. They kill off not only the harmful bacteria that is making you sick, but also the beneficial ?flora and fauna? that naturally inhabit your digestive tract; this lack of normal digestive bacteria, in turn, causes diarrhea (it can also cause women to be prone to yeast infections). The simple precaution of taking a ?probiotic? ? usually acidophilus bacteria, and sometimes others as well ? along with the antibiotic can generally prevent diarrhea. But a great many people are never advised to do this by their doctors.

Antibiotics are generally taken for a short time, and digestive bacteria can usually repopulate themselves without aid ? but there are other, more long-term and dangerous depletions caused by prescription drugs.? Statins, used to lower cholesterol, deplete or interfere with the absorption of several chemicals necessary for continued health. In particular, statins are well-known for causing severe muscle damage (rhabdomyolysis), extreme weakness, muscle pain, severe memory loss, liver and kidney problems, and depletion of CoQ10.[7]

Some blood pressure medicines can also significantly reduce the levels of CoQ10, which helps maintain cellular energy and is an important antioxidant. Many drugs, including some blood pressure medicines, estrogen replacement therapy, and antibiotics can deplete various B vitamins (e.g., B-2, B-6, and B-12).

Because doctors are not highly aware of these side-effects of the drugs they prescribe (after all, the pharmaceutical companies do not trumpet the information from the rooftops), many patients assume that the hair loss, memory impairment, weakness, depression, and a host of other symptoms are part of what the doctor is treating ? not an effect of the treatment itself!

??????????? Prescription errors: ?According to the Nov. 14, 2006 issue of the Jamaican Gleaner Online, the president of the Nurses Association of Jamaica (NAJ), Edith Allwood-Anderson, said ?Medication errors by local doctors are a cause for concern.? She also stated that ?The standard of prescription orders is insufficient and needs to be monitored.?

A 2004 study in Norwich, England revealed that 24 critical-care units, over a four-week period, wrote an average of approximately 15 prescriptions per patient. Fifteen percent of those prescriptions contained at least one error; 19.6 percent of those errors were considered ?significant, serious or potentially life threatening.?[8]

Even if the doctor writes the correct prescription, things can still go wrong at the pharmacy.

One tragic example is the death of five-year-old Brendan Ward, who died in 2004 due to a ?typo? in his prescription for imipramine, a medication that helps with bedwetting. The technician typed ?250 milligrams/teaspoon? instead of ?50 milligrams/teaspoon.? Imagine the horror and grief when Brendan?s mother found him stone-cold dead in his (dry) bed the next morning.

The National Association of Boards of Pharmacy estimates that in 2004, incorrect prescriptions caused as many as 7,000 deaths in the United States. Of the more than 4 billion prescriptions filled each year, as many as 5 percent are incorrect. Exacerbating the problem is a trend toward a decreasing number of pharmacists ? a recipe for more errors than ever.

??????????? Off-label prescriptions: It is common practice for doctors to prescribe medications for conditions for which the medication is not approved by the FDA. Sometimes, this is a good idea ? if clinical observation and scientific studies indicate such a use poses concrete benefits and little risk to the patient. The problem is, according to a study from the Stanford University School of Medicine, doctors don?t always use such criteria to prescribe a drug ?off label.?

The study looked at prescriptions for 160 drugs during 2001. Out of a total of 725 million prescriptions, 21 percent were off-label. What?s worse, 73 percent of these off-label prescriptions had little or no evidence that the off-label use would be of benefit. For example, 83 percent of the prescriptions for a drug called gabapentin (also known as Neurontin?) were off-label; but in 66 percent of these cases, the scientific evidence (such as that published in DRUGDEX) did not support gabapentin?s use.[9]

Sometimes off-label prescriptions don?t just not work, they are downright dangerous. With regard to prescribing psychiatric drugs for children, John March, chief of child and adolescent psychiatry at Duke University School of Medicine, says ?We have no evidence about the safety of these agents or their effectiveness in controlling aggression. Why are we doing this??[10]

As another example, Gabitril? is a drug that is used successfully to treat some forms of epilepsy. But this drug is also commonly prescribed for other conditions, such as psychiatric illnesses ? with an unexpected effect: at least 30 patients for whom Gabitril was prescribed, but who did not have epilepsy, suffered seizures.[11]? Now, these patients? doctors were probably as dismayed as their patients at the negative effect of the prescription ? and who would have thought a medicine used to treat seizures would cause them? But this just underscores how unsafe and/or untested many prescription drugs are, and illustrates the dangers of off-label prescriptions.

??????????? Abuse: Prescription drugs are also becoming the drug of choice for teenagers seeking a quick buzz, according to the 2003 Monitoring the Future survey, conducted by the University of Michigan Institute for Social Research. The survey revealed that one in ten high school seniors had used Vicodin? (without a prescription). Similar usage numbers were revealed for Ritalin?, while 6 percent had used tranquilizers (such as Valium?). Four and a half percent had used OxyContin?, a powerful painkiller. ?These drugs can be highly addictive if they?re used on an ongoing basis, and the person can become physically, psychologically and behaviorally addicted to them,? said Maher Karam-Hage, M.D., who is medical director of the Chelsea Arbor Treatment Center (operated by Univ. of MI).

As more and more parents fall into the trap of listening to the pharmaceutical companies? and doctors? mantra of ?you need more drugs!? they are unwittingly putting their children at risk by storing these theoretically ?safe? medications in their homes.

Where to lay the blame?

It is tempting to lay the blame for this whole mess at the feet of one or other of the players ? the pharmaceutical companies, the FDA, or the doctors. And each of these definitely deserves some of the blame.

??????????? Big Pharma: Pharmaceutical companies often downplay research trials that do not show the drug in question in a positive light. Statin drugs, for example, are marketed as lowering cholesterol which in turn is supposed to lead to better cardiovascular health. But in September 2004, JAMA published a study that showed that high doses (80-mg/d) of one statin drug (simvastatin, better known as Zocor?) not only failed to lower risk of cardiac events (heart attack, stroke, or cardiac death), it also caused an unacceptable high rate of myopathy. And in the analysis of the study, it was stated that

[I]n 1997 the manufacturer undertook a development program to study 2 higher doses of simvastatin (80 mg/d and 160 mg/d). ?Although a favorable report appeared in the medical literature, development of the 160-mg/d dose was abandoned due to high muscle toxicity. Although never reported in the scientific literature, the financial community was informed that the rate of muscle-related symptoms was 5.7% for the 160 mg/d dose?

There are several lessons to be learned from these events. The failure of the 160-mg/d dose of simvastatin and the enhanced toxicity ? should probably have served as a warning that the 80-mg/d dose of simvastatin might border on a toxic threshold. Relatively minor differences in the rate of elimination, a low body mass index, mild renal insufficiency, or other unknown factors appear capable of pushing simvastatin blood levels into the toxic range. The failure to publish the actual results of studies using the 160-mg/d dose (negative publication bias) arguably prevented the medical and scientific community from fully appreciating the myopathic potential of high-dose simvastatin.[12]
(emphasis added)

Of course, you can?t single out cholesterol drugs. According to Dr. Julian Whitaker,

A minimum of five studies on the use of [Paxil, an antidepressant] for children and adolescents have been conducted, and four of them showed that not only did it not work but also suggested increased risk of suicide. However, just one study ? the only one that showed partially favorable result ? was published.[13]

Dr. Richard Friedman, director of the psychopharmacology clinic at Weill Medical College of Cornell University, wrote in the New York Times, ?For too long, drug companies have been allowed to tell us only the good news about their products. Now we’re ready for the whole story.?[14]

In late October 2006, GlaxoSmithKline PLC (based in London) agreed to a $63.8 million settlement for claims that it allegedly promoted its antidepressant drug Paxil for use by children and adolescents while withholding negative information about the medication’s safety and effectiveness. Although GlaxoSmithKline denies the lawsuit?s claims, they settled to avoid any further litigation costs.[15]

A British newspaper, The Independent, reported in June 2005 that ?vital data on prescription medication found in millions of British homes has been suppressed by the powerful U.S. drug regulators, even though the information could potentially save lives.? The paper said 28 pages of data had been removed from the FDA files.

In addition to ?negative publication bias,? the pharmaceutical companies also seed governmental and research groups with panel members who have financial ties with the pharmaceutical companies themselves. Talk about conflict of interest!? Is it surprising, for instance, that an ?expert? panel voted for new, lower cholesterol guidelines (thereby creating a new pool of cholesterol-lowering drug users), when eight out of the nine members of the panel were involved financially with the statin drug-producing companies?

Dr. Whitaker claims that ?three quarters of the clinical studies in the top medical journals such as The Lancet, The New England Journal of Medicine, and JAMA are commercially funded.?[16]

Pharmaceutical companies also market their drugs aggressively. Now, there?s nothing illicit about marketing, per se. But two marketing techniques used by the drug companies are of questionable ethics. One is their direct-to-consumer ads, such as on TV. These ads clearly portray certain drugs? benefits, while downplaying risks. The list of side effects is often read at ?auctioneer? speed right at the end of the commercial, making it hard to hear and understand. Prior to 1997, direct-to-consumer advertising by drug companies was illegal.?

Drug companies also target doctors specifically, using a variety of techniques ranging from free samples to ?continuing education? classes that push certain drugs to flying doctors to exotic locations for ?conferences? about a particular drug. Doctors, of course, claim they are unaffected by all the attention paid to them by the drug companies ? that they prescribe based on science not advertising. However, in 2005, a small study published in JAMA showed an interesting result:? people who specifically named a drug (by referring to a TV commercial for Paxil) during a doctor?s visit were five times as likely to be given a prescription for antidepressants than those who did not name the drug.[17] One could infer from this study that drug ads affect consumers, who in turn affect doctors? decisions ? possibly leading to over-prescription of the advertised drugs.

Matthew Hollon, an internist at the University of Washington, called direct-to-consumer advertising by drug companies a ?haphazard approach to health promotion that is driven primarily by the pharmaceutical industry?s interest in turning a profit.? Hollon also claimed that 80% of physicians believe that direct-to-consumer drug ads cause patients to request medications they do not need.

A study conducted at Brandeis University and published in Psychiatric Services claims that after direct-to-consumer advertising was legalized in 1997, pharmaceutical companies increased their TV advertising budget 600 percent, reaching a total of $1.5 billion in 2000.[18] During a similar time frame, the incidence of prescriptions of psychotropic drugs (such as those used to treat ADHD and depression) increased significantly. By 2001, said the study, ten percent of doctor?s office visits by adolescent boys resulted in a prescription for such a drug.[19] According to a June 2006 article in The Guardian (a British publication), the marketing budget for drug companies worldwide in 2005 was $60 billion ? twice as much as they spent on research.[20]

Pointing to the fact that misconduct on the part of drug companies is not just a U.S. issue, the world federation of consumer organizations, called Consumers International, wrote in its report, ?Branding the Cure: A consumer perspective on Corporate Social Responsibility, Drug Promotion and the Pharmaceutical Industry in Europe,? that ?irresponsible marketing practices form a serious, persistent and widespread problem among the entire pharmaceutical industry.?[21]?

??????????? Federal Drug Administration: The FDA takes its share of the blame, as well. Dr. Graham said flatly that the FDA is ?serving industry rather than the public.? In other words, it is a common opinion that the FDA is in the pocket of the drug companies, and no longer considers the American people its primary client or concern. Writing for, columnist Mike Adams wrote in? June, 2006 that the FDA had passed a Final Rule that states ?consumers can no longer sue drug companies for the harm caused by any FDA-approved drug, even if the drug?s manufacturer intentionally misled the FDA by hiding or fabricating clinical trial data.? Although this blatant power grab by the FDA is unlikely to go unchallenged ? it has little or no basis in law ? it certainly clearly delineates the FDA?s position of being a cozy bedfellow of ?big pharma.?

??????????? Physicians: Doctors, too, can be at fault for inculating or exacerbating some of the problems with prescription drugs. For example, GlaxoSmithKline (which is Great Britain?s largest drug company, and the second-largest in the world) is being investigated by authorities in Germany and Italy for allegedly corrupting doctors by distributing illegal gifts worth up to E228 million during the years 1999 to 2002. Now, while you could make the case that this is a drug company problem, you can just as easily make the case that it is a doctor problem ? they didn?t HAVE to accept those gifts!

What?s a patient to do?

But laying the blame at others? doors is not the whole answer. Citizens ? whether of the U.S., Britain, or other countries, have a responsibility to educate themselves and to demand changes in the obviously faulty prescription drug system. Here are some positive steps citizens can take to safeguard their own health and the health of others:

  • Work with government and advocacy groups to untangle the regulatory aspect of drugs from the research and marketing aspects.
  • Support legislation that requires drug companies to publish the results from all studies in a public database.
  • Push for more user-friendly drug documentation that clearly lists the side-effects of drugs (in something larger than 4-point type); encourage doctors to discuss these possible health threats with their patients so that patients can make an informed benefit vs risk decision.
  • Similarly, work to separate the prescribing process (doctors) from the marketing tentacles of the pharmaceutical companies.
  • Work to change from a ?fix the symptoms? health perspective to a ?find the causes? perspective.
  • Protect yourself from prescription errors by reviewing the prescription with your doctor, and comparing the prescription to the bottle of medication you receive from your pharmacist.
  • Educate yourself about your condition and all possible treatments ? prescription drugs and otherwise.
  • Learn to ask your doctor for supporting evidence when he or she prescribes a drug for a specific condition, especially if it is an off-label prescription.

One way to educate yourself about the dangers of prescription drugs and the relationship between Big Pharma, doctors, and the FDA, is to read books. There are a number out there; here are just a few to get you started:

  • Overdosed America by Dr. John Abramson, M.D.
  • The Drug-Induced Nutrient Depletion Handbook by Ross Pelton et al.
  • Bitter Pills: Inside the Hazardous World of Legal Drugs by Stephen Fried.
  • The Truth about the Drug Companies: How They Deceive Us and What to Do about It by Dr. Marcia Angell

Note: None of the information in this article is intended to be or should be construed as medical advice.

? By Jodie Gilmore 2006.

Reprint of web pages are only allowed with explicit permission. Please request our permission by emailing us with a complete description of the intended use.


[1] Starfield, Barbara. ?Is US Health Really the Best in the World?? Journal of the American Medical Association (JAMA) 284 (July 26, 2000): 483-485.

[2] Lazarou , Jason; Pomeranz, Bruce H.; and Corey, Paul N. ?Incidence of Adverse Drug Reactions in Hospitalized Patients: A Meta-analysis of Prospective Studies.? JAMA. 279 (April 15, 1998): 1200-1205.

[3] Online:?

[4] Cohen, J.S. ?Peripheral neuropathy associated with fluoroquinolones.? Annals of Pharmacotherapy 35 (December 2001): 1540-1547.

[5] Whitaker, Julian. Health & Healing 15 (May 2005): 1.

[6] Elias , Marilyn. ?New antipsychotic drugs carry risks for children.? USA TODAY online, May 2, 2006:

[7] Whitaker, Julian. Health & Healing, 14? (April 2004): 5.

[8] Ridley, S. A., et al. ?Prescription errors in UK critical care units.? (Anaesthesia 59 (December 2004): 1193-1200. You can see the abstract of this article online at;jsessionid=FgvLhd1BG1gynC2dvFC246083MmJ8ShC1hQvQRklttP2J2NDCKh3!-676649506!-949856144!8091!-1.

[9] Radley, David C.; Finkelstein, Stan N.; Stafford, Randall S. ?Off-label Prescribing Among Office-Based Physicians.? Archives of? Internal Medicine 166 (May 8, 2006): 1021-1026.

[10] USA TODAY, ibid.? See note #6.

[11] Online:?

[12] Nissen, Steven E. ?High-Dose Statins in Acute Coronary Syndromes.? JAMA 292 (Sept. 15, 2004): 1365-1367.

[13] Whitaker, Julian. Health & Healing 14 (Dec. 2004): 2-3.

[14] Cohen, J.S. ?Suicides and Homicides in Patients Taking Paxil, Prozac, and Zoloft: Why They Keep Happening — And Why They Will Continue.? Online:

[15] Online:

[16] Whitaker, Julian. Health & Healing, 16 (June 2006): 2.

[17] Kravitz, Richard L.? Influence of Patients? Requests for Direct-to-Consumer Advertised Antidepressants: A Randomized Controlled Trial.? JAMA.293 (April 27, 2005):1995-2002.

[18] Parks Thomas, Cindy; Conrad, Peter; Casler, Rosemary; and Goodman, Elizabeth. ?Trends in the Use of Psychotropic Medications Among Adolescents, 1994 to 2001.? Psychiatric Services 57 (Jan. 2006): 63-69.

[19] Psychiatric Services, ibid.

[20] Boseley, Sarah. ?Drug firms a danger to health – report.? The Guardian online, June 26, 2006:,,1806084,00.html

[21] ?Branding the Cure: A consumer perspective on Corporate Social Responsibility, Drug Promotion and the Pharmaceutical Industry in Europe.? Consumers International, June 2006: page28. You can view the report online at

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Euro notes with mint sauce Part 5

Sent as “News Flash 8.2.12 Euro notes with mint sauce” from

“Excited Delirium” is a new medical condition that leads to sudden death.

The WHO has no knowledge of it and does not list it under its endless list of new diseases, yet.

Luckily Excited Delirium was discovered in hundreds of cases by medical geniuses in the USA. From there it found its way to the UK where 17 cases are well documented. The latest case being that of Jacob Michael, a 25 year old from Cheshire. Jacob Michael was beaten up by 11 police officers of the Cheshire constabulary during arrest and by a further 4 officers while in custody.

The coroner concluded that Jacob’s broken ribs and torn liver as well as all the other symptoms consistent with “excessive restraint treatment” did not contribute to his death,
the cause of death is “Excited Delirium”.

There is no definition for “Excited Delirium” and it only affects people in police custody.
Hence we must be eternally grateful to these talented medical professionals to have spotted this rare disease as a vaccine can now be developed which will become a prerequisite for when you apply for a protesters or occupiers license.

It should be noted at this point that there is no CAM therapy that will prevent death from “Excited Delirium”.

On a completely different note:

Can you imagine 150.000 government regulated allopathic doctors or general practitioners, GP, treating patients with more than 350 different CAM therapies?

This is hardly imaginable in the Anglo-American sphere, but this is the case in Germany.

Every employee needs to have health insurance by law, GKV, and self-employed have approximately the same called PKV. There are 150 insurers covering GKV and PKV.
These are combined in an association which regulates what kind of medicine they pay for.
The insurance premiums are the same (15.5% of salary) for employees with all of them, so competition exists only due to the different treatments they cover.

For example:
All cover Acupuncture for backpain and arthrosis of the knee. But if you want Acupuncture treatment for headaches then cover is not compulsory but some insurers will cover it.
If it is not covered you can pay the GP privately. The costs for Acupuncture range from 25 to 60 Euros per session.

It is in the interest of GP that insurers cover as little as possible as the patient will gladly pay privately – or go to a hospital where every treatment is free when indicated.
The private charges are always higher for the same treatment than the costs the association of insurers will negotiate. The insurer aims to cover as much as possible in order to get the competitive advantage.

Bach Flower therapy can cost up to 200 Euros including examinations and diagnosis. It’s the GP’s favorite and more than 50% of the 150.000 GP offer it. You need to buy your bottles from the pharmacy, the same licensed pharmacy that sells all prescription drugs.

Biofeedback costs between 8 and 20 Euros per session.

Light therapy 7 to 13 Euros only.

Insurers scan worldwide databases for clinical trials of therapies to help them evaluate therapies they may want to cover. There are plenty of European/German databases but they also look at these:

These two institutions of the NHS in UK
Centre for Reviews and Dissemination (CRD),.
National Institute for Health and Clinical Excellence (NICE),

and the Agency for Healthcare Research and Quality“(AHRQ) in USA,
as well as Medline and Cochrane databank.

On top of this insurers examine feedback from GP and make their own studies.
For example Electro-Convulsion-Therapy for depression:
50% of patients improve,
side effects are nosea and memory loss,
mortality rate is 1 in 75.000 (patients with heart problems).
There were 800 patients treated in 1985 and 5000 in 2011.

Sleep Deprivation or Awake Therapy shows 60% short term success and 15% long term benefits for depression.
You get up at 02:00h, cook in groups or do other group activities that stop you from falling asleep, no naps or sleep for at least 22 hours.

German companies export the machines to China with which the Chinese produce the consumer goods destined for USA and rest of world. These German companies also build the entire factories and attached towns for workers. Fully equipped hospitals, equipped with “German medicine” are included. To start with workers are treated with TCM at the ground floor and “German medicine” is reserved for management at the upper floors.

This makes workers believe that “German medicine” is superior to TCM and hence more desirable. It becomes a perk for every worker to be treated at the upper floor. This is the most effective marketing technique which eliminates the need to convince a patient about efficacy of a treatment. When it is good for management it is good for us, that’s the general perception.

We must keep in mind that Chinese workers have no health insurance and depend on health services provided by the company they work for. The days of Old China where a person would pay his physician while healthy and stop paying when ill until he has been cured have long gone.

There are 100+ therapies in the directory of and 100+ under “Categories under review”. Very few of the 350 therapies available through the German health system are featured. Their creators often contend that there is one empirical medicine which comes in many forms only, that the term CAM was created in the countries of medical fascism in order to discriminate against certain forms of medicine and protect capitalistic interests.
Hence most object to marketing their therapies to US and UK as they do not want to deal with ineffable hostility, discrimination and persecution.

There is a world market for medicine after all, as illustrated by the China example above.
I’ll elaborate on this subject in further News Flashes. My predictions of how these markets will develop are in my ebook “2012/20 Capitalism Endgame” which you can order by sending me an email to with “2012/20” in subject. The price is $12.20 (or 12.20 in any currency exchangable for organic food) and you’ll receive the chapters as I write them.

One therapy to have a worldwide impact will be IAVH by Elizabeth Joyce as it enhances all existing therapies. Sometimes a treatment does not generate the result hoped for – add IAVH and see the difference.

Elizabeth holds introduction seminars to IAVH for therapists and other medical professionals in Doylestown, PA, USA. Dates are 17-19 Feb and 13-15 April, so book your place now and become part of this medical revolution.

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Euro notes with mint sauce Part 4

David Cameron, prime minister of the United Kingdom, made a speech about the crisis of capitalism last Thursday. Here are excerpts:

“We get the free market. We know its failings as well as its strengths. No true Conservative has a naive belief that all politics has to do is step back and let capitalism rip.”

“Uncontrolled globalisation can slide into monopolisation, sweeping aside the small, the personal and the local.”

He claimed Labour feared standing up to the City and mistook the interests of big business for those of the economy.

“The City, which should have been a powerhouse of competition and creativity, became instead a byword for a sort of financial wizardry that left the taxpayer with all the risk, and a fortunate few with all of the rewards. So instead of popular capitalism we ended up with unpopular capitalism.”

He also promised to “bust open the cosy collusion between big business and big government that locks small businesses out of public sector contracts – a market worth GBP150bn a year”.

He pointed out he had, at the start of his leadership, argued that the previous government’s turbo-capitalism turned a blind eye to corporate excess.

Labour, by contrast, had made a Faustian pact with the City encouraging a debt-crazed economy to fund its welfare bill, he said.

Hmmm…….this does sound good, doesn’t it?

A speech by the same man who used Britain’s veto powers in the European Union to protect the interests of the City. Is this a change of heart or speech writers?

Or has he read Goethe’s Faust “now that you’ve called the devils you can’t get rid of them”.

Well, he obviously has not read my ebook “2012/20 Capitalism Endgame”, yet, or he would not be talking about “turbo-capitalism, popular and unpopular capitalism”.

It is your privilege to read it first. The price is 12.20 or 20.12 in any currency, may this be Sterling, Euros or US$ or any other that can be exchanged for organic food. Send me an email to to order it.

The ebook format has no electronic protection and you are welcome to send it as present to friends or let them borrow it, just as you would do with a printed book.

I’ll release the chapters as I write them. Here is an excerpt:

” Capitalism is a form of human energy, the most destructive form of energy on this planet.

Capitalism adheres to the laws of nature, it is a pleomorphic process.

In order to understand Capitalism we need to understand Pleomorphism.

I have detailed Pleomorphism from Claude Bernard to Guenter Enderlein in chapters 32 to 35. For this intro we need to understand the principle only.

You observe pleomorphic processes under a greyfield microscope, you won’t see anything under an electron microscope as this manipulates the very natural phenomena you want to see.

The basis of life is the “protit”, Guenter Enderlein called it “spermite” in German which got translated to protit in English publications.

The protit takes on a form of life according to the environment it encounters. When it encounters a ph value of 7.3 in humans it takes on the life form of life-sustaining bacteria. When this environment changes to ph 6, for example, it changes to a life-threatening bacteria like Cholera, etc. When this bacteria gets attacked by antibiotics the protit morphs into a virus and goes inside a cell where it is save from the environment of the plasma.

Capitalism thrives in any environment, then it changes this environment so it can become the dominant ideology.

Capitalism works in conjunction with any ideology, it has been tried with fascism, communism, catholicism and always manages to dominate these, democracy and egoism are the most successful breeding grounds for capitalism.”

Having observed the GOP candidates in South Carolina I wondered if their conditions are treatable, so I asked Elizabeth Joyce, the creator of

Inter-Dimensional Ascencion Vibrational Healing, IAVH, for her opinion.

That’s what she said:

” You can always apply the seals to “clean and clear ” the surrounding atmosphere. You don’t have to direct it to a person, direct it to a situation and wonders happen.

Ask for all to be cleared for the highest good. You can never clear a Soul against their will, but when you clear the situation, the stuck or stubborn person is shown up and can truly be embarrassed.

Remember when all is cleared, the truth comes out and “dark” energies are cleared away and exposed.”

Elizabeth is holding seminars in February and April in Doylestown, PA.

These are aimed at therapists wishing to become IAVH-therapists with a view of advancing to IAVH-tutor. Details are here:

and here:

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Euro notes with mint sauce Part 3

On December 29th 2011 Hugo Chavez, President of Venezuela, made the following statement:

“It’s difficult to explain, at this point, what is happening to some of us in Latin America. It’s strange that [Paraguayan president Fernando] Lugo, [Brazilian president] Dilma [Rousseff], and then myself, and a few days later [ex Brazilian president Luiz Inacio] Lula [Da Silva] and now Cristina [Fernandez-Kirchner, President of Argentina] have contracted cancer”.

“Would it be strange if the U.S had developed the technology to induce cancer? I don’t know, I leave it to be reflected on,” he added.

“I don’t want to make any reckless accusations, but just a while ago I heard president Alvaro Colom [of Guatemala] telling the United States that it should accept its responsibility and seek forgiveness from the Guatemalan people, because it was shown, fifty years later, that they ran a biological and chemical operation, venereal diseases included, in the country, for scientific tests,” Chavez added.

Does Chavez have a point?

Is it possible now or will it be possible in the near future to induce cancer selectively?

In Part7 of “Dollar notes without ketchup” I wrote on 17th Nov 2011:

” 2. Economic system:

Various industries compete for the money of the consumer.
a. the Financial industry with its subsidiaries Media, Nuclear, Narcotics, Energy including Global Warming and Weapons.
b. Health industry
c. Food industry
d. Raw materials
e. construction, textiles, transport and a multitude of essential goods
f. gadgets and widgets

All these industries have their limitations, you can only eat so many portions of lentils, wear so many clothes, drive so many cars, but there is no limit to how ill you can get, how many diseases you can develop and how much capital the consumer needs to treat these.

Hence the Health industry provides the key to capitalistic success, “Capitalistic Medicine” will replace all other forms of medicine as a result, a fundamental necessity. I shall elaborate on this issue in later parts. I shall detail how the control over food production decides who is to live and for how long, at what level of health and for what purpose.”

The creation of diseases takes up several chapters in my book “2012/20 Capitalism Endgame” which you can order by sending me an email to Details are in “Dollar notes without ketchup Part 9” and “Euro notes with mint sauce Part 1”.

So for now let’s concentrate on Chavez and cancer. Otto Warburg, head of Max Planck Institute in Germany, discovered the causes of cancer and received the Nobel in 1931.

He explained the slowly developing cancers that account for 80% of all cancers.

In 1982 Dr R G Hamer, head of internal medicine at the university of Tuebingen, Germany, explained the spontaneous cancers which account for the remaining 20%. None of the over three thousand cases he documented could be refuted. He did not get the Nobel but was persecuted instead. (I was in Tuebingen at the time)

All the South American presidents have the spontaneous type.

Let’s assume for the moment that you can manipulate DNA in way so that a cell forgets that it lives on oxygen and changes its metabolism to glucose. This by definition makes it a cancerous cell, it devides quickly shouting “help, I need oxygen”. Modern oncology has concluded that such a distressed cell needs to be killed.

Chemo will do the killing. This method has been perfected during its development in Auschwitz. Radio will do the killing. Radioactivity will kill or mutate any cell. Naturally this applies to “bad radioactivity” only, “good radioactivity” derived from melting down or well functioning nuclear plants, depleted uranium weapons and radiotherapy equipment constitutes the “natural background radiation” and is no threat to your health.***

*** For a split second I was under the spell of the Anglo-American media and acclaimed health experts, so please disregard the last sentence.

When you put oxygen into the cell it will revert back to being a healthy, normal cell. This works as long as the cell remembers that it is a cell and how it is supposed to function as cell. This knowledge seems to be stored in DNA..

So if you can manipulate DNA in one direction (illness) you should also be able to manipulate it in the other direction (health).

Elizabeth Joyce holds seminars for therapists in Doylestown, PA, to introduce Inder-dimensional Access Vibrational Healing, IAVH. As IAVH enhances other healing modalities and makes them work in cases where these do not work on their own, one could try it on these spantaneous cancers as well.

The presidents of Bolivia, Uruguay and Ecuador have not got cancer, yet. Hence the proof that cancer is caused by a “left wing dictatorial gene” has not been established.

The Vatican counts most South Americans as catholics. South America still has a very low number of cancer incidences. People often believe that cancer is a divine wish. Should Obama be able to prove that he can cause cancer he would be elevated to status of god.

On a different note:

Last Friday, a few hours after I’d sent out “Euro notes with mint sauce Part 2”, the vulture-capitalists seem to have had a change of underwear and instructed the rating agencies to downgrade Europe immediately.

I did not expect this to come in the middle of the night at the beginning of a weekend, I expected it on Monday morning while the auction of French bonds was going on. France lost its treasured triple A – 8.5bn of short term bonds were oversubscribed and sold at around 0.4%, just a bit lower than last year.

So much to the power of S&P and Moodys. Fitch did not participate in the downgrade, a group of French investors now holds 60% of Fitch.

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Euro notes with mint sauce Part 2

Yesterday, Thursday 12.1.12 will go into history as the Black Thursday before Friday 13th.

Italy and Spain had to refinance 12bn and 5bn respectively for which they had to pay yields of 6% and 5% on their bonds last year.

In the run up to this auction the value of CDS went up indicating that Italy and Spain would have to pay way above 7%. This 7% marker has been proclaimed by the financial media as the breaking point that would lead to default – a bankrupt Italy, a bankrupt Spain and a destroyed European Union.

These bonds are traded in the City of London exclusively, so are the CDS, the insurances against defaults (explained in “Dollar notes without ketchup”).

The auction started at 9:30, the capitalists (UK and US banks, hedge fonds, insurers, etc) bid 9% > 8.75%.
At that point the City was to gain billions, possibly trillions through CDS. The Murdoch media had prepared its headlines – it was expected that the auction would be undersubscribed leaving Italy and Spain short of cash and the bit they would raise at an unsustainable yield would set the tone for later auctions – the bets on the demise of the European Union would have paid off. British bookmakers had quoted odds-on and the odds were shortening.

At 9:45 not a single bit had been accepted, neither by Italy nor Spain. Then the Bundesbank bid 2.735% for all 12bn worth of Italian bonds. This bid was accepted by Italy.
The Bundesbank made further bids at 1.644% for short term capital – a nail into the coffin of capitalism.

Then the Bundesbank bought the 5bn of Spanish bonds at 3.38%, and to rub salt into the wounds of vultures doubled the bid to 10bn which Spain accepted.

Before 10:00 the battle between capitalism and social market economy was over. It was more than a first round victory, it was a knock-out in the first. The “Markets” are left in no doubt that there will be no rounds to be won.

The Bundesbank has lots of profits but does not need them as these get transfered to the government only and politicians have a tendency to squander these anyway.

It has been calculated that Germany needs to add a 4% “EU solidarity surcharge” on top of the existing 5% “East Germany solidarity surcharge” on income tax to cover all Southern European bonds due this year. The German taxpayer will moan as usual and pay as usual.

This will hardly become necessary as Germany can borrow at a negative interest rate. Their last week bond auction for 6-month money of 7bn was oversubscribed and they have to repay 999 for 1000 borrowed. The “market” trusts that they can repay any amount at that rate.

A few weeks ago Monti was still regarded by many Italians as being more German than Germans and the German insistance of replacing the mafia was seen as unacceptable interference in sovereign matters. On New Years Eve Monti placed thousands of tax inspectors in restaurants. Their turnover tripled, four-folded to six-folded.

For those not familiar with Italy:
A company will take its employees to lunch which takes several hours and business gets discussed, this is a daily routine, the restaurant sends a monthly bill which is a tax deductable expense hence the restaurant needs to declare this turnover. A private luncher needs to be billed and is required to carry this bill with him by law. This requirement lasts until you get into your car – then you hand the bill back to the restaurant employee that accompanies you to the car.

Nobody pays taxes for the very reason that nobody pays and you don’t want to be the odd one out. If everybody pays then you’ll pay as well. There is a big mood swing in this direction now. Monti is no longer regarded as “loss of democracy”.

Against the Italian debt of 1.9bn stand unmortgaged privately owned properties of 8.5bn.
An enforced mortgage of 15.000 Euros per property on average would eliminate all debt.

Norther Italy is the most prosperous region of Europe. Drive down the A1 from Milan to Bologna, passing Piacenca, Parma, Reggio Emilia, Modena, and you see the reality of Italy, modern industries – and many of these companies have Swiss, Austrian and German partners. You’ll hardly find a mid-sized company in Germany without a presence in Northern Italy.

Only the most ineffable capitalist (may I remind you that the term ineffable does not mean clever, knowledgable or intelligent but inexplicable) believes that you can attack Italy without attacking Germany.

These ineffable capitalists are now holding an emergency meeting to work out their losses.
Billions or trillions worth of CDS have become worthless within minutes and need to be written down to zero. I predict they’ll arrive at the same sum that Bundesbank chief Weidmann and finance minister Schaeuble have had on their tables for weeks.

Fortunately for the former mentioned they have the benevolent American and British citizens who will bail them out.

Their next line of attack will be the use of rating agencies. All European countries getting downgraded. This means no more than shouting “mint sauce” at sheep, the “markets” have become irrelevant and no longer determine interest rates when it comes to Euro denominated bonds.

Is there still any justification for trading these in the City?
In an election year where Paris and Milan would rather have those jobs?
Not forgetting the arguments that Franfurt puts forward!

So Murdoch had to scrap his headlines yesterday, the auction results were placed on page three in the financial section without any further comment.

Murdoch will recover his losses, the public always buys his papers and watches Fox.

You get a deeper insight from my book “2012/20 Capitalism Endgame”. You get chapter for chapter as I write it via email. It sets you back GBP 12,20 or Euro 12,20 or US$ 12,20 or any currency – forget about the comma when you pay in Yen or Rupees. You may also switch the figures round to 20,12 – there is no limit to your creativity.

Let me close for today by enlarging Jacques Delors’ statement from Part 1:

“Not all believe in god, nobody should believe in Murdoch, but all believe in the Bundesbank”

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Euro notes with mint sauce Part 1

On 31.12.2011 President Obama signed National Defense Authorization Act (H R 1540) into law.

This NDAA enables the military to indefinitely detain any citizen of any country including US citizens. This means you can be detained without any legal representation. Your embassy does not get informed, nobody knows where you are. Not even the fact that you have been detained by the US military needs to be acknowledged, you have been disappeared just like the 30.000 were disappeared during the military dictatorship in Argentina.

Indefinite detention implies that you can become executed.

The world has entered the Post Democratic Period, PDP, happy 2012!

Obama obviously took guidance from the “Reichstagsbrandverordnung” of 27.2.1933 in Germany which revoked civil liberties including the Habeas Corpus rights. It gave Adolf Hitler the very same powers that Barack Obama enjoys now. It violated the 1919 Weimar constitution in the same manner as H.R.1540 violates the US constitution. Only seven senators opposed H.R.1540 hence we can call the USA a Post Democratic Mono State System, PDMSS.

In a PDMSS all political forces join ranks to concentrate all powers in one person in order to “protect freedom and democracy”.

The USA have been in a presidentially declared state of emergency since 14.9.2001 which has a two year limitation. Obama renewed it in September of 2011, so it is still in effect today. The powers grabbed through the NDAA now are a logical consequence of a military dictatorship cloaked as democracy.

A PDMSS is the result of a failed state that has failed economically, socially and politically.

When we define a failed economy we first need to define what constitutes a sound economy. I illustrate a sound economy with this simplified example:

A shoemaker produces and sells a pair of boots for $100. The state adds 20% Value added tax, VAT, so the price to the consumer is $120.

The shoemaker has costs of $30 with 20% VAT added and a further $45 that do not have VAT. VAT received is $20 and VAT paid out is $6, the difference of $14 is state revenue.

He makes a profit of $25. He pays 20% income tax, that’s another $5. This leaves him with $20 net earnings and the state with $19. The relation of 20 to 19 is about average of economies in Western democracies. The result is a sound economy that covers the state’s expenses and does not require any borrowing.

Now let’s examine the method that capitalism uses to attack and destroy this sound economy:

The capitalist produces a pair of boots for $10 in a third world country where workers are enslaved without rights and no taxes are due but a few bribes to the elements that operate that country.

The capitalist transfers the boots to his offshore entity from where he sells it for $60 to his entity in the sound economy state. VAT on entry is 20% = $12. Then he sells the boots for $50 + $10 VAT = $60. This generates operating losses of 10 which he covers by introducing capital from his offshore entity which harbours the 50 profits.

The sound economy state also refunds him $2 as his VAT receipts are $10 and VAT paid out upon import is $12.

This loss of $2 for the state constitutes the first item in the list of losses. The shoemaker goes bankrupt and the state looses $19 in tax revenue which is accounted for already. The state now has to support the shoemaker and pays him $11 in unemployment benefits.

For the state $19 in revenue have turned to zero revenue and $32 in expenditure. These $32 need to be borrowed by issueing sovereign bonds. The “Market” is the capitalist’s money in the offshore account. The “Market” demands an interest rate on the bonds which reflects the creditworthiness of the state. The more the state has been plundered by the capitalist the higher the interest rate. The interest over time will exceed the principal.

Alternatively the state can raise taxes from its citizens to cover those $32. This option is unpopular with the citizen, hence politicians wishing to become reelected disregard this option.

The capitalist aims to exercise total control over the state which requires the state to be indebted to him. Hence the capitalist provides further credit which the politician uses to enhance his power base.

For example: Great Britain used to be full of decent people up to the mid-1970s serving as councillors. Councillors did not get paid, it was an honour to serve and a service to society.

Today councillors draw salaries – over half of all chief councillors have salaries higher than that of the prime minister, some double and triple that of the prime minister. When this happens as an isolated case it is corruption, when it occurs on the British scale corruption has become systemic, enshrined in society – a failed society.

In a failed society people no longer take any interest in the state and the people representing them. Elections offer two sides of the same coin. The powers of this coin are beyond the control of the people.

The shoemaker in the example above would have retired sometime and would have been replaced by a youth. Today his job no longer exists and the youth becomes unemployed or unempoyable from the start.

An economy has failed when it does not provide jobs for the youth that are its future. When the youth unemployment rate reaches 10% we can declare this economy to be a failed economy, when it reaches 20% as it does in UK or 40 to 50% like in the cases of Greece and Spain we can declare a disaster. The economy no longer sustains its citizens, the citizens have no future.

The “Markets” demand higher interest, interest so high that the accrued interest still provides a return for the depreciated principal. This is due to the knowledge that future, unemployed generations will never be able to service the loans.

Before joining the European Union Portugal, Spain and Greece had to pay between 12% and 20% interests on their bonds. All were military dictorships.

The Greek military junta (1967-73) enjoyed the support (caefully formulated understatement) of the USA. Athens became the base of the 6th US fleet. The US paid the bills and provided credits and the junta created endless government jobs, well paid jobs that drove a division through society. Collaborateurs filled their pockets while the music of Mikki Theodorakis was outlawed – many Greeks fled to France, the only country not in NATO at the time.

Franco of Spain, former ally of Hitler, was now propped up by the USA in return for military bases. Democratic movements were persecuted and a return to democracy was possible after Franco’s death only. A fragile democracy under imminent threat of a military coup.

The “Carnation revolution” in Portugal enabled a peaceful transition from military dictatorship to democracy.

None of those three countries had an economy to speak of when they joined the EU.
It was clear from day one that existing EU members would have to foot the bill for their integration. Footing the bill is not restricted to financial aide, a political union is needed to prevent military juntas to take them over.***

*** Note: on 1.11.11 then prime minister Georgios Papandreou sacked the top generals to prevent a military coup. This eluded most of the Anglo-Saxon press.

So when the three joined the EU some creative accounting was applied to make their economies look not quite as bad and more ingenious accounting was required to meet the criteria for joining the Euro. This was neither fraud nor deception of any party involved.
It served the purpose of throwing these states a lifeline. The interest rates on their bonds dropped from near 20% to below 5% as the “Markets” concluded that the rich members of a currency union could not allow their poor members to fail. These savings should have helped the three to reform their economies. Portugal and Spain made considerable progress while Greece made none. Greece effectively replaced the “$-gifts” with the ability to borrow Euros to pay for their overblown administration and loss-making government owned companies.

So when you want to solve the debt crisis you need to solve the issue of youth unemployment at the same time. If you don’t generate employed, tax-paying youth you cannot borrow on their behalf.

Germany has debts of 2.1tn Euros now. 1.5tn of these are “reunification costs”. Germany pays for these by adding a 5% “reunification surcharge” called “solidarity loan” to income tax, a loan given to the state by its people – but everybody knows that they will never get this back, it is a tax cloaked as loan. They all moan about it for the last 20 years but get told by all parties “that’s what reunification costs and you’ve got to pay, period”.

Germans can be treated like that, but Greek, Spaniards and Portuguese can not. That’s why the “crisis” will continue until the big bond quantities need to be refinanced and they have no choice but to accept German terms. (I have outlined these and their consequences for the European and world economies in my book “2012/20 Capitalism Endgame”).

Due to widespread moaning about having to pay for “Southern Europe” the German finance minister, Schaeuble, had to come clean last week. Germany has been buying bonds to keep Italian bonds below the 7% yield mark, Spanish ones below 5.5%, etc.

This bond buying amounts to 0.5tn of the 2.1tn German sovereign debt. Germany borrows at zero percent interest and loans to Southerners at 3 to 7%. Not a bad profit margin for the Bundesbank. (the Bundesbank transfers its profits to the government). So the “crisis” has not cost the German taxpayer anything so far. Jacques Delors once said “not all believe in god, but all believe in the Bundesbank”.

For the first time German exports have gone through the trillion mark. They would like to improve on this figure which requires the Euro to fall, the original rate of $1.18 at the Euro’s launch would be desirable. It would also eliminate the French trade deficit and a rate of $1.15 would turn a trade deficit into a surplus.

Bringing the Euro down requires a concerted effort by capitalist and Britain could play a major part sacrificing her exports in the wake of it. Murdoch has certainly bought USD and Sterling options by now, he owns the British media and the writings of his financial experts indicate an interest in the fall of the Euro.

Welsh sheep farmers have always alledged that English tourists shout “mint sauce” at their sheep believing this will scare them to death.

I close for today by quoting from my last news flash:

I am writing my book “2012/20” Capitalism Endgame. The price is 12,20 in any currency you like to pay in. For purely sentimental reasons I prefer Sterling (economical truth) but would not object to Euro, USD or anything that can be exchanged for organic food.

I’ll publish as e-book and you get to read the chapters as I write them. So start paying as long as you’ve still got some money. Send me an email to to order 2012/20 and put 2012/20 in subject.

You have read “Dollar notes without ketchup Part 1 to 9” as News Flash via email or online at and you know what to expect from 2012/20.

China will break up and evolve into different systems ruled by powers beyond current imagination.

Europe 2 will quickly become replaced by Europe 3 where regions represent themselves directly and nation states are reduced to resorts like art and sports. This will become the opportunity for Scotland and Wales to join. Who will be in E3 and the process that leads to its creation will even fascinate those not interested in politics – there are more aspects than politics only.

The demise of the USA and its resurrection ……. hmmm!

England to emerge as one of the world’s superpowers…….surprising skeptics?

South America united through its common currency, the Sucre.

Africa and India with its combined 2.2bn population will spring another surprise.

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Dollar notes without ketchup Part 9

Britain celebrates Cameron’s glorious victory, 26:1, 26 losers and 1 winner.

Let’s take a brief look at the path to this victory.

Thatcher had a clear and firm position:
We are not European, we are British and see no point in joining a talking shop.
It cannot be more than a talking shop as we’ll throw spanners in the works of everything leading to binding agreements.
But if you want us to join anyway you have to pay, and naturally we get the right to opt out of everything.

Europe wanted Britain and Europe paid. Britain got a 60% reduction off its dues and opted out of everything that was relevant regards further integration, the whole point of creating the EU.

Europe made these concessions in the hope that there will be a government with a different attitude sometime in the foreseeable future.

For almost four decades the British public told the press what they wanted to read and the press obliged. Thatcher and all following administrations understood the British public, Europeans did not.

Even before Cameron moved into No.10 did he remove his MEPs from the conservative faction of the European parliament and joined a group of right wing extremists from Eastern Europe that nobody in his right mind wants to be associated with as their declared aim is to destroy Europe.

He could not have insulted Merkel, Sarkozy, and all the conservatives in Europe more than he did. This action was a clear statement saying “I am out of Europe”.

Last week the 26 agreed to creating a fiscal and political union, Europe 2. There was nothing to negotiate, it was a matter of either in or out. Europe 2 should have happened long time ago, it is an essential consequence of having a mutual currency.

Europe 2 was negotiated by the 26 in the run up to the summit. Everybody knew that Britain was out but the British public. As Merkel stated “Cameron was never at the table”.

Cameron’s appearance was nothing more but a publicity stunt for the benefit of Britain.
Hailed as the man who saved Britain he now commands the opinion polls and will become reelected with a landslide majority.

Today Britain is one of the top ten industrial nations. The steel industry employs some twenty thousand people, so owned by Indian, Spanish and other conglomerates.
The steel works in Port Talbot, Wales, for example, export 80% to Europe. All contracts are done exclusively in Euros. The British public may not have the Euro but British industry has.

Assume the Pound gets pushed up in relation to the Euro. These steel works will receive less Pounds – production will be no longer feasable and the jobs will be lost.

The same applies to any other industry. About 40% of British exports go to Europe.

Assume the Pound falls. Exports will become more profitable and jobs are safe. Imported goods become dearer and inflation spirals upwards, so the consumer looses out unless wages go up at the same rate.

History shows that wages are always behind prices, then they overtake prices – cause production costs to become uncompetitive and jobs are lost as a result. This kind of instability is avoided by having a common currency.

British politics never bothered with stability, it was always bust and boom, always hyper inflation caused by government spending resulting in debt that could be managed through devaluation only. In the 1950s a Pound was worth 20 Deutschmark, in the ’60s 12 DM, in the ’70s 8 DM, in ’80s 5 DM, in the ’90s 3 DM and now 2.30 DM = 1.15 Euro.

Britain never met the criteria for joining the Euro due to budget deficits and total sovereign debt. Budgets have to be balanced and allow a deficit of up to 3% in exceptional circumstances. In Europe 2 this is reduced to 0.5%. Britain runs a deficit of above 10%.

Total sovereign debt should not exceed 60% of GDP under EU rules. This is the most manipulatable figure.
A conference in China in May this year aimed to set standards for calculating GDP, to no avail. For example, a car produced in Germany and sold to UK will add 20.000 to German GDP. It gets sold by the manufacturer to the dealer for 30.000, to the leasing company to the end user and may end up adding 90.000 or more to British GDP.

The scope for manipulation gets bigger in the City of London. How do you evaluate an automated trade that sells the same stock a few times in a day? Has GDP really improved by millions? This leads to creative accounting that renders government figures worthless.

You could meassure total incomes of employed and self-employed, then relate to incomes of government employees and unemployed as well as pensions. It would create a meaningful figure but a too embarassing one for most governments including the British.

The City accounts for about one third of British GDP. I am inclined to doubt the value of this third. GDP per capita is supposed to be $34.800. Is it really that much for every woman, man and child on the island? How much would sovereign debt be in relation to GDP if these figures would be scrutinized?

There is no way for Britain to comply with Europe 2, so the only option is to go it alone.
This has the benefit of unlimited US support. As I reported previously the FED supplies unlimited $loans, the auction in October filled UK banks to a degree that they all pass the “stress test” now. The next audit will reveal how many dollars have been printed, or electronically generated. The last audit found $15tn of secret dollars of which a few hundred billions were unaccounted for. This audit is in the public domain for everybody to see, I reported this with reference previously in Part 4..

In a decent democracy such a revelation would have lead to questions being asked and answers demanded. Not so in the USA, in spite of all politicians being aware of the US constitution there appears to be not a single guy interested in protecting it. One may conclude that they all have personal interests to protect, after all hundres of $billions go a long way when the need to sharing them arises.

Is British corruption really restricted to buying flak-jackets for garden gnomes and charging those to the tax payer?

The attraction of the City of London lies in its deregulation or lack of regulations. It allows you to deal anonymously and connects you to offshore banks. Why should anyone want to deal in Frankfurt or Paris where every deal is observed by the fiscal eye. Hence only institutions with nothing to hide use those facilities. Hence all the big banks of this world are present in the City where they can serve the needs of the savvy investor. It’s a place that capitalism cannot do without and it is hardly a coincidence that it exists in London. The great British public will endure any sacrifice to protect the interests of the the City of London.

So some backbenchers admit that it was a mistake to grant this colony, the USA, its independence as this colonial Wall Street seeks to outperform the City. Their only comfort is derived from the fact that the expression “Liberal” is synonymous for incompetence and cowardness and used as insult in USA, a view Britain is about to share.

The foundations of what the world will look like in 2020 will be laid in 2012. When you study the events and evolution of societies leading up to 2012, when you are able to see and understand what you see, you are in a position to make fairly accurate predictions.

When you need a clean bucket of drinking water and Cameron asks to pee in it he will be ordered to relieve himself somewhere else, that’s a prediction based on having evaluated Cameron’s intentions.

When a Welsh farmer discusses the market of lamb chops with his sheep it will inspire the rams to work harder and the ewes to produce more triplets. This prediction may make sense to a large part of the British public but make no sense to others.

I am writing my book “2012/20” Capitalism Endgame. The price is 12,20 in any currency you like to pay in. For purely sentimental reasons I prefer Sterling (economical truth) but would not object to Euro, USD or anything that can be exchanged for organic food.

I’ll publish as e-book and you get to read the chapters as I write them. So start paying as long as you’ve still got some money and don’t wait ’til after x-mas. Send me an email to to order 2012/20 and put 2012/20 in subject.

You have read “Dollar notes without ketchup Part 1 to 9” as News Flash via email or online at and you know what to expect from 2012/20.

China will break up and evolve into different systems ruled by powers beyond current imagination.

Europe 2 will quickly become replaced by Europe 3 where regions represent themselves directly and nation states are reduced to resorts like art and sports. This will become the opportunity for Scotland and Wales to join. Who will be in E3 and the process that leads to its creation will even fascinate those not interested in politics – there are more aspects than politics only.

The demise of the USA and its resurrection ……. hmmm!

England to emerge as one of the world’s superpowers…….surprising skeptics?

South America united through its common currency, the Sucre.

Africa and India with its combined 2.2bn population will spring another surprise.

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Dollar notes without ketchup Part 8

In the previous seven parts I have argued that we do not have a debt crisis the way it is portrait by the media..

Instead we have entered into the endgame of capitalism. The remaining capital of the many is to be transferred to the few.

My argument is best supported by indisputable facts:

1. Add up all the claims of economical growth and values of the top companies around the world and these would have doubled in 7 to 10 years. Inflation has doubled prices in 10 to 11 years, so the top companies always beat inflation.

Now let’s look at reality, I have taken the top industrial indexes of November 1999 and compared to November 2011:

Dow Jones went from 10.800 to 11.500
S&P 1.400 > 1.200
NASDAQ 3.300 > 2.500

FTSE 100 6.800 > 5.200
DAX 5.900 > 5.600
CAC 40 5.300 > 2.900

Nikkei 18.600 > 8.400

The Euro and the US$ were at parity in 11/99, today EUR = $1.35.
Pound Sterling was worth 1.57 of each, today it still buys the same amount of US$, but EUR1.15 only.

So today, 12 years later, you’d expect FTSE to be above 14.000 and an extra one third higher to compensate for the devaluation of Sterling. But in reality you get one quarter only of the near 20.000 you’d expect.

You can do the same calculation for the US values and you get the same result. The German and French values should be above 10.000, but they are also worth less than twelve years ago, by half or two thirds respectively.

All the governments lie every day in the face of irrefutable facts that are there for everybody to see. There has been no growth but an incredible shrinkage, only government expenditures have grown, they are obviously believing their own lies when they claim that they can balance budgets in the near or distant future.

Does this continuously increasing debt really matter?

Japan’s sovereign debt stands at 233% of GDP, the highest debt ratio in the world, and it doesn’t matter a bit, because all debt is owned by its own people. There is no international market holding this debt, so credit ratings become irrelevant. When it comes to debt Japan has opted out of capitalism.

Sovereign debt is nothing else but uncollected taxes. Instead of paying taxes people buy government bonds. If the tax rates were higher the government would not have to issue bonds. So the balance between taxation and bonds becomes a tool for stimulating and regulating the economy. When you tax high people have less money to spend and the economy shrinks, when you tax low it increases spending power and demand increases.

In the case of Japan, however, people seem to have all they need and demand does not increase, so they save their money. They save in secure investments – Japanese bonds, hence the Japanese government issues more bonds to meet demand and increases its debt ratio as a result. Funds from these bonds are invested in infrastructure, hospitals, roads, etc.

What works for Japan would not work for USA or Europe. Here people don’t buy their own government bonds but spend every Euro, Dollar or Pound on consumer goods. Then they elect the government that promises the lowest taxes. So all governments are underfunded and rely on “the markets” to provide the necessary capital.

The process of raising capital creates competition between states, who can raise the most at the lowest possible interest rate. All administrations adhere to the same principle of “as we can’t raise the funds from our own people we might as well create an overblown administration and raise that little bit (or a lot) more”. In the wake of this debt mountains are generated that no population can ever repay, so the children and grand children act as collateral.

So who provides this capital?
The capitalist.

Where does the capitalist get the capital from?
Look at the above stockmarket figures and you can conclude that a large proportion has been siphoned off into the pockets of a few. How this has been done I’ll explain in detail in a further part.***

*** Briefly: The 3rd world has the raw materials and the 1st world the capital. The 1st world installs puppet regimes in the 3rd world that shares revenue from the exploitation of resources 2 to 98 in favor of the capital. The puppet regime uses its 2% to buy million pound homes in London in to invest in the City. The multi-national companies of the 1st world sell those raw materials to their off-shore subsidiaries at 100, and the off-shore unit sells at 500 to the HQ in 1st world. The bit that is added above the level of 500 is reflected in stockmarket values, and the 400 siphoned off is the capital that controls banks and governments. (Note: figures are for illustration purposes only).

In the endgame that has started now states will pay higher and higher interest rates on more and more debt – thus transferring the remaining capital of the many to the few.

2. Euro-zone refuses to surrender to capitalism.

Capitalism requires Euro-bonds which would transform the Euro into the same kind of currency as the $US – money just gets printed and people and states deeper enslaved in debt. The $US volume amounts to 60% of all currency reserves held by the world’s central banks and the Euro to 26%, when both are managed in the same way you have one currency adding up to 86%, so remaining currencies become irrelevant and can be manipulated or crushed at will.

It took one man only in 1992 to crush Sterling within hours just by selling it short. This incident should always serve as a reminder of the power of capitalism.

The next two days will lay the foundations for a new Europe, a monetary union with common fiscal and economic policies and laws. It will comprise the 17 countries that have the Euro plus 9 EU members that do not have the Euro yet.

Cameron no longer pretends to represent the British people but will use his veto powers in the interest of the City of London.

Why should a country that does not have the Euro be able to veto the Euro?
The new EU treaty will require a 85% majority decision of those who have the Euro,
veto powers are abolished.

Why should bonds of sovereign European nations donated in Euros be exclusively traded in the City?
Because the City permits CDS and other “financial tools” that have been outlawed in France and Germany as of this month, so the banks prefer the City where they can execute their predatory instincts.

Cameron’s veto won’t even buy time for the City. The 17 Euro countries will have to sell their bonds to their own population first, then the rest to other Euro members, this will create conditions similar to Japan – no capitalist investors and no City needed.

Rating agencies will loose their power over Euro countries.

There are forces in Europe that consider it an eyesore to be indebted to capitalism, to international investment funds. Society cannot be at the mercy of rating agencies and markets if it wants to create a stable economy.

The Social Market Economy (Soziale Marktwirtschaft) of Germany works on these principles:

a. The central bank, Bundesbank, is independent of the government and has the constitutional duty to safeguard the value of the currency.

b. A network of local banks is licensed and controlled by the Bundesbank. These are the Kassen (and Volksbanken as competitors). The Kassen give credits to local companies and local people only, they are not allowed to engage in any “external activities”. All people have their wages and savings deposited there and all small and medium sized companies use them exclusively. This generates assets called “Bodensatz” which in turn determines how much the Kassen can borrow from the Bundesbank.

Kassen have low overheads and lend with minimal margins. Hence big commercial banks cannot compete and never got a foot in this market. The Kassen system was considered to violate EU treaties as it prohibits the participation of the “free market”. The big banks got their way and laws were revised to let Kassen take part in the “free market”. Those who did needed to be bailed out in 2008.

c. The Kassen also provide mortgages and control the property market. You take out a mortgage contract for 100.000 Euros, then you have to save up 40% over 7 years and get 2% interest. When the contract matures you get a 60% loan at 4% over 11 years. Interest rates are enshrined by law and never change. There are tax advantages which make your monthly payments for the 60% no higher than what you paid during the saving period. Hence there are no defaults and no repossessions. Should you become unemployed your mortgage is paid as unemployment benefit.

d. Workers Unions invest in local companies and thereby assert their influence. When they call for strike they have to pay the worker’s wages. The workers don’t loose out. If the unions were companies quoted on the stockmarket they would be the largest companies in Germany.

The “German Economic Miracle” was no miracle at all, but the result of plenty and cheap capital available to local businesses and employer-employee relations that made them all sit in the same boat.

The Europe of the future will be an enlarged Germany – or it will become crushed by capitalism.

The media has been feeding us with data about sovereign debt. This on its own shows a fraction of the whole picture only. You need to look at the debt of banks, private people and companies to get the true picture of the state of a country.

These figures will be on the table in Brussels on Thursday and Friday:
I have composed them by country as a percentage of GDP in 5 colums, total, government, banks, private, companies:

Germany 321% gov 83% ba 98% pr 60% co 80%

France 449% 87% 151% 61% 150%

Italy 377% 121% 96% 50% 110%

The low private debt enables a shift from government to private, so the citizens can buy their own bonds and there is no need for “exposure to markets”.

Looking at UK figures gives us a different picture:

UK 847% banks 547%, gov 81%, pr 101%, co 118%

A large proportion of bank dept needs to be added to private and government debt as both have aquired a considerable stake through bailouts. This situation is beyond remedy – Britain is the first European victim of capitalism.

Unless citizens have stashed huge amounts under their mattresses that they are willing to give to the banks, the Pound Sterling is worth no more than 20 Euro cents. Private debt at 101% has reached a level that prevents the purchase of their own sovereign bonds, so the UK remains at the mercy of the markets and the City – you need the money of the third world dictators and equivalent elements to keep Britain afloat. The interest on this further drains Britain, un upward spiral that can be brought to a halt through massive devaluation only.

Now let’s take a look at those EU countries that are supposed to have a problem:

Spain 457% gov 67% only, pr 87% only, co a massive 192%, banks 111%

Portugal 422% gov 106%, pr 106%, co 149%, banks 61% only.

Greece 333% gov 166%, pr 71% only, co 74% only, banks 22% only.

Spain has an economic crisis only caused by insolvent property companies sitting on unsellable and overvalued property. This in turn killed the jobs in construction. But sovereign dept is low enough and Spain can get back on its feet through investing in other industries that create jobs.

The same applies to Portugal, more or less.

Greece does have a sovereign debt crisis, but their other debt is a clear indication that Greece could solve its problem on its own. To the low private debt you need to add the private bank accounts of Greeks in other countries. More than anything else it is the political will to make their citizens pay up.

Last not least:

Ireland 1166% banks 689%, pr 123%, co 245%, gov 109%.

This is another victim of capitalism. Ireland needs to be bailed out as a matter of European solidarity. The actual figure of 170bn Euros of government debt for a nation of 4.5m people is peanuts – bailing out the banks is a different issue, their exposure to US derivatives caused the mess, so let Obama write a cheque.

To complete the picture:

Japan 641% banks 188%, pr 77%, co 143%, government 233%.

No problem as debt is held by Japanese citizens as I explained above.

USA 376% banks 94% (after bailout), pr 92%, co 90%, gov 100% which does not include a further 95% found by the audit as I reported earlier. The secret printing of money will continue, the people have lost control and the few at the top are helping themselves to whatever they feel like. Of the $16tn official debt China holds over $5tn. This could become a headline of the near future:

Scandal! – China copies financial crisis.

The next few days will shape Europe, the new Europe.

Capitalism will throw its spanners into the wheels.
Will Europe survive and introduce Social Market Economy or will it succumb to capitalism?

Should the latter be the case their figures will soon look like those of UK and Ireland today.

There is always a choice for individuals, nobody forces you to live in a particular system.
Your alternative could be Permaculture Paraguay

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Dollar notes without ketchup Part 7

Capitalism is more than an economic system, it is a form of life, a religion and an art form.

In capitalism many create wealth in order to transfer it to a few, this is the systemic purpose.

Capitalism destructs itself by design in order to rise again like Phoenix from the Ashes.
Then the few use this capital concentration to repeat the process and concentrate the capital into the hands of fewer with each repetition. The current form is often called “Neo-Capitalism”, a rather deceiving expression.

Let’s take a look at the legs that capitalism stands on and its tools for predetermined selfdestruction, it will help us to assess the current situation:

1. Religion:

Money shall be your god and you shall not have any other gods besides it, except those that can print money and determine interest rates. Interest rates are devine blessings.***

***Note: There were early attempts in the Middle East in the 8th century to abolish interest.
Islamic banking forbids the charge of interest. Banks would invest in caravans of merchants against a share of profits, so when the caravan got plundered by Alibaba and the 40 robbers the banks lost their capital. Other religions in that area did not have this flawed form of banking, they charged the merchants interest and reassured themselves by financing Alibaba and the 40 robbers. These were the origins of hedgefunds. Some of the 40 robbers were bankers which lead to the creation of the term “bankster”, alledgedly.

2. Economic system:

Various industries compete for the money of the consumer.
a. the Financial industry with its subsidiaries Media, Nuclear, Narcotics, Energy including Global Warming and Weapons.
b. Health industry
c. Food industry
d. Raw materials
e. construction, textiles, transport and a multitude of essential goods
f. gadgets and widgets

All these industries have their limitations, you can only eat so many portions of lentils, wear so many clothes, drive so many cars, but there is no limit to how ill you can get, how many diseases you can develop and how much capital the consumer needs to treat these.

Hence the Health industry provides the key to capitalistic success, “Capitalistic Medicine” will replace all other forms of medicine as a result, a fundamental necessity. I shall elaborate on this issue in later parts. I shall detail how the control over food production decides who is to live and for how long, at what level of health and for what purpose.

3. Art forms:

.1 The teachings of financial genius Charles Ponzi. Born in Parma, Italy in 1882, he founded the Securities Exchange Company, SEC, in Boston in 1920. In his honour institutions of today use the same initials and even a car manufacturer uses them as suffix for designated models (Mercedes 600 SEC, etc) popular in financial centres around the world. Many people in power seem to name their firstborn after him.

Charles developed the theory of “Exponential growth of money masses” expressed in the formula f = m3 (financial energy = money exponent 3). His SEC doubled investors’ money in 90 days. Nobels were still difficult to obtain at the time and Albert Einstein was never accused of plagiarism when he concluded that ordinary energy must be m2.

Charles died in an institution for the poor in Rio in 1949, posthumously elevated to martyr status, I guess.

.2 Credit Default Swaps, CDS. These work like this: There is a house, somebody else owns this house, you do not own it, but you take out insurance on it, so do hundreds of others, or thousands or more. Nobody can tell the exact amount of policies existing for that house, they are traded in the City of London.

The more policies exist, the likelier it will burn down.

This likelyhood determines the premium. Rumours can raise this premium from 0.2% to 0.4% in minutes. While our dear Charles still worked on the basis of doubling capital in 90 days modern capitalism can do this in minutes, that’s the beauty of it.

Now replace “the house” with Italian sovereign bonds, the insurance premiums are CDS.
Last week Italian bonds climbed to 7.5% interest and the CDS for those to 5.39%.
(see Part 6) Within hours profits of many hundreds and thousands of percents were made.

What caused this historically unprecedented event?
Rumours that Italy could go bankrupt and default. In that case it is better to pay 5.39% than to loose 100 or 50 through a haircut.

What are the risks of buying, trading in or issuing CDS?

a. Should the European Central Bank, ECB, underwrite all Italian bonds then the CDS become worthless. This can happen within seconds, but it also cannot happen as it would mean the end of the City of London as the ECB cannot favor Italy but would have to underwrite all EU bonds. Some 30% of Britain’s GDP comes from the City and CDS are the City’s prime product. Britain would be back to food stamps and Europe would loose a treasured customer, a paying consumer it cannot afford to loose.

b. Italy defaults, the CDS mature and all the banks are bust needing to be bailed out. Again this cannot happen. Should it happen we would be back to food stamps and the rest as for a.

c. Keep the zombie walking. As long as CDS can be traded you transfer capital from the poor, the tax payers of Italy and all other countries that need to serve their debt, to the rich. This is the preferred option of capitalism, you only pull the plug when the poor have no money left.

What does it take to bring a country down?
Take Greece as an example. It takes two players. No.1, the sovereign credit analyst of S&P, Marko Mrsnik, a Slovenian with office at Canary Wharf and responsible for evaluating Greece and No.2, Mohamed El-Erian, an Egyptian and ceo of Pacific Investment Company, PIMCO, in California.

PIMCO is the largest of a handful of investment companies that represent the rich, they play with $1.3tn (1300 billion) officially, the unofficial reserves are not known.

So when a small country (or larger one) plans to issue bonds its finance minister (or president) requests an audience with Mohamed. If Mohamed buys then Marko issues a credit rating accordingly. This rating determines the value of those bonds and assures that Mohamed has made a sound investment. Naturally the official path is Marko first and Mohamed thereafter.

The relation between Mohamed and countries also works the other way round. When Mohamed picks up the phone and says “Angela, I’ve got some uninvested $400bn sitting here that require a safe harbour”, then Angela will oblige and take the burden off Mohamed at 0.08% interest and no CDS needed. (see Part 6)

When Greece was downgraded by Marko in April 2010 PIMCO had sold all its Greek bonds by the end of 2009 already.

.3 What happened with Italy last week?

Berlusconi’s companies lost about 3bn Euros in value since the attack on Italy began.
Berlusconi decided to recover his losses. As president and head of the secret service he was certainly aware of the impending downgrade of Italy. Making a few hundred percent for himself and his masters became a formality. Pushing the price up to 5.39% was a performance that earns the respect of any capitalist.

This is absolutely legal, the state of Italy is not his private company, hence insider regulations do not apply. No politician of any country has ever been charged for equal actions.

Italy needs to refinance 307bn Euros worth of bonds in 2012, about half of this between February and April. These will become interesting times, not the time to be president and face an angry population. No doubt Berlusconi will be back thereafter for his 4th presidency.

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Dollar notes without ketchup Part 6

Or should I say “Euro notes with whipped cream”?

This week interest on German bonds has fallen to 0.08%, that’s as good as free money for Germany. They took this opportunity to increase their national debt from 1.8bn Euros to 2.1bn. Who can blame them when you get money for free.

Naturally a small percentage of those 300bn raised goes toward some populist social programms and the lion share into pockets of the rich in form of tax reductions.

Germany announced record exports of 792bn for the third quarter and forecasts to go through the trillion mark at the end of year.

The world understands, in time of crisis you put your money where it is safe, and that is Germany. It doesn’t matter that you don’t get any interest, you are scared enough to want your money to be safe only.

Bluntly speaking, it pays to create a “crisis” when you can predict how the markets will react. I have detailed this in previous parts with the “dropping a cent” example.

So we can turn to the next act of the “crisis theatre”, Italy. As of today they have to pay 7.5% interest, up from 6.59% yesterday and below 6% on Monday. Italian sovereign debt stands at 1.9bn which is no problem at a low interested rate, I elaborated on the reasons in previous parts.

Why the concerted attack on Italy now?

Italy has had some 60 governments in the past 65 years. Each and everyone was associated with the mafia, even the socialist government of Bruno Craxi. Craxi escaped to Tunisia in 1994 to avoid prison in Italy and died in exile in 2000.

Craxi was the man who turned Silvio Berlusconi from a singer on cruise ships into the owner of construction companies with government contracts, owner of government licenses for tv stations and other media. How this meteoric rise to Italy’s richest man was possible remains a mystery.

Since 1994 Italy is governed by Berlusconi with a few interuptions. Like any other government on the globe Italy has never had any intentions of repaying any debt. This has not been a problem for the past 17 years under Berlusconi, so why now?

Sovereign bonds have default insurance. This is usually such a minute percentage behind the dot that it hardly ever gets mentioned by the financial media, it is money straight into the pockets of the rich as there is no risk involved as governments do not default. In the case of Italy today this insurance rocketed to 5.36% on their 7.5% interest bonds – an indicator that something is more than foul.

These insurances are traded as so called credit default swaps (CDS), so when a government can’t pay the bank holding the CDS pays. About 550bn worth of CDS for Italian debt are held by US banks.

Should Italy default those US banks will pay up (if they have enough which they have not) and the US government will bail them out thereafter as they will all be bust. Aren’t you getting used to this cycle, yet?

Imagine all people walking into the big banks tomorrow, 11.11.11 at the 11th hour and demanding their money in cash, not transfer to another account or bank, but cash.
Wouldn’t it be nice to see this happen?

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