The Presidential Slush Fund

The Presidential Slush Fund
The International Economy – Sept, 2000

The inside story of how the fund established to help stabilize the dollar, supplemented by enemy assets during World War II, financed the first U.S. coven operations after the Cold War.

Over the centuries, as every graduate student of history knows, presidents and potentates have had their slush funds to carry out discreet activities of statecraft that they would prefer not to explain in public. In the United States, the practice started with George Washington himself, and for his purposes he seemed to manage quite well with disbursements in the hundreds of dollars.

By the middle of the twentieth century, with the United States emerging as a global power and heading into a cold war with international communism, the covert doings of ages past were growing into an art form of intelligence — and a major arm of foreign policy. On June 18, 1948, the National Security Council of the Truman administration secretly approved its Directive 10/2, a clandestine program for infiltration, sabotage, and subversion of the newly imposed communist regimes of Eastern Europe.

Since both the new Central Intelligence Agency, established barely a year before, and the Joint Chiefs of Staff were skittish about entering into the uncharted waters of covert action on such a scale, Truman’s NSC created a new government agency to do the job that the top policymakers felt had to be done if the world was to be saved from communism.

The new creation was called the Office of Policy Coordination (OPC), an opaque label for the command headquarters running operations for which, the NSC mandated, the United States government could “plausibly disclaim any responsibility.” (This was the origin of the doctrine, later infamous as its cynicism became all too evident, of “plausible deniability.”) Recruitment of agents to parachute behind the Iron Curtain, their training, and logistical support became the secret mission assigned to a creative and energetic New York lawyer and World War II intelligence veteran named Frank G. Wisner.

Wisner’s obvious first task, before any of the skullduggery could be mounted, was to scrounge up the cash to pay for it all. For this, the NSC blithely had made no provision. And it had to be cash on trust; the purposes for which it would be disbursed could not be openly described. “The heart and soul of covert operations” Wisner learned from his savvy legal counsel, Lawrence Houston, is “provision of unvouchered funds, and the inviolability of such funds from outside inspection.” Thus was the notion of a slush fund expressed in bureaucratic parlance.

Traditionally, appropriations for secret operations are buried on innocuous lines of other agencies’ budgets as submitted to Congress. The semblance of legal accountability is preserved, without wide disclosure of exactly how these funds are to be used. In 1948, with Truman and his NSC pressing him for immediate action, Wisner could not wait for a congressional appropriation procedure, however circumspect. The State and Defense departments, for all their endorsement of Wisner’s mission, were not about to part with any of their own appropriated funds for some nefarious new venture.

Wisner cobbled together what his officers called “tenuous understandings” with key members of Congress, the General Accounting Office, and other government departments to locate obscure accounts that his agency could draw upon without having to answer for it in public.

He found his first tempting target in an extraordinary and (at the time) little-noted account accumulating out of sight in the Department of the Treasury known as the Exchange Stabilization Fund (ESF). Established in 1934, this ESF had provided the then extravagant fund of $2 billion in working capital before World War II, for short-term currency trading to stabilize the value of the dollar in world trade. Then, in 1941, War Powers legislation designated this convenient accounting device as the holding pool for captured enemy assets and other monies being smuggled out of Europe.

After the war, the bulk of the ESF was transferred to the new International Monetary Fund as America’s capital contribution. But a relatively small portion, $200 million, was retained in the Treasury. As Congress was much later told, this would serve to help in the “reconstruction and rehabilitation of war-torn countries.” Exactly how it would so help was not specified, nor indeed, under the founding mandate, did it have to be.

One special feature about the ESF was particularly enticing to Wisner and his financial officers, and their counterparts in Truman’s White House, as they scoped out possibilities for seed money to get the OPC’s clandestine operations up and running. From its origin, the ESF had been endowed with a provision which made financial sense at the time, but was also well suited to the funding of secret operations, never contemplated when the measure was enacted.

Currency trading and hedging tactics required “a high degree of flexibility and discretion,” Congress noted in setting up the fund. “Operations for the account of the ESF are likely to be highly sensitive, requiring a substantial degree of confidentiality.” Thus, Congress placed the fund “under the exclusive control of the Secretary of the Treasury, with the approval of the President, whose decisions shall be final and not be subject to review by any other official.”

For Wisner and his OPC, THIS EXTRAVAGANT FREEDOM FROM SCRUTINY, ENSHRINED IN LAW, WAS NOTHING SHORT OF IDEAL.

A reported $10 million was quickly signed over to the OPC; no outside accounting was required or made. Lest this old device ever be challenged, Wisner sought the specific concurrence of the NSC after his first year of operations that financial measures could “jolt” the communist bloc, with repercussions “bound to be felt in the political, military and cultural spheres.” Use of the ESF was thus brought within the OPC purview.

Since Congress had already stated that ESF disbursals were not proper subjects for scrutiny, neither the Senate nor the House of Representatives bothered to hold any hearings in the formative years of the Cold War ON THE CONFIDENTIAL ACCOUNTS OF THE EXCHANGE STABILIZATION FUND.

… IT WAS THE SLUSH FUND ESTABLISHED TO HELP STABILIZE THE DOLLAR IN WORLD TRADE, then supplemented by enemy assets during World War II, THAT STARTED THE UNITED STATES OFF ON THE FIRST COVERT OPERATIONS OF THE COLD WAR.

My reaction: When you realize that the Exchange Stabilization Fund runs the CIA’s black budget, a lot of things start to make sense. Some of the big implications of this:

1) Without covert financing provided through the ESF, there is no covert wing of the CIA.
2) The CIA’s worst secrets are buried in the ESF, and the fate of covert wing of CIA and ESF are therefore linked
3) By arranging covert funding and keeping its secrets, the ESF exerts enormous influence on the CIA.
4) The resources of the CIA, such as the propaganda networks set up during the cold war, are therefore at the disposal of the ESF.

Conclusion: The Exchange Stabilization Fund, operating through New York Fed with the CIA at its command, is the most powerful institution in the world.

I was travelling during yesterday and am still pretty jetlagged. Here is an interesting article for now.

Newsmakingnews reports that the mighty wurlitzer plays on.

THE MIGHTY WURLITZER PLAYS ON
by Gary Webb
Chapter 14 from In the Buzzsaw edited by Kristina Borjesson

Webb was an investigative reporter for nineteen years focusing on government and private sector corruption and winning more than thirty journalism awards. He was one of six reporters at the San Jose Mercury News to win a 1990 Pulitzer Prize for general news reporting for a series of stories on Northern California’s 1989 earthquake. He also received the 1997 Media Hero Award from the 2nd Annual Media & Democracy Congress, and in 1996 was named Journalist of the Year by the Bay Area Society of Professional Journalists. In 1994, Webb won the H. L. Mencken Award given by the Free Press Association for a series in the San Jose Mercury News on abuses in the state of California’s drug asset forfeiture program. And in 1980, Webb won an Investigative Reporters and Editors (IRE) Award for a series that he coauthored at the Kentucky Post on organized crime in the coal industry. Prior to 1988, Webb worked as a statehouse correspondent for the Cleveland Plain Dealer and was a reporter for the San Jose Mercury News where the “Dark Alliance” series broke in 1996. Months later, Webb was effectively forced out of his job after the San Jose Mercury News retracted their support for his story. He is now a consultant to the California State Legislature’s Joint Audit Committee.

If we had met five years ago, you wouldn’t have found a more staunch defender of the newspaper industry than me. I’d been working at daily papers for seventeen years at that point, doing no-holds barred investigative reporting for the bulk of that time. As far as I could tell, the beneficial powers the press theoretically exercised in our society weren’t theoretical in the least. They worked.

I wrote stories that accused people and institutions of illegal and unethical activities. The papers I worked for printed them, often unflinchingly, and many times gleefully. After these stories appeared, matters would improve. Crooked politicians got voted from office or were forcibly removed. Corrupt firms were exposed and fined. Sweetheart deals were rescinded, grand juries were impaneled, indictments came down, grafters were bundled off to the big house. Taxpayers saved money. The public interest was served.

It all happened exactly as my journalism-school professors had promised. And my expectations were pretty high. I went to journalism school while Watergate was unfolding, a time when people as distantly connected to newspapering as college professors were puffing out their chests and singing hymns to investigative reporting.

Bottom line: If there was ever a true believer, I was one. My first editor mockingly called me “Woodstein,” after a pair of Washington Post reporters who broke the Watergate story. More than once I was accused of neglecting my daily reporting duties because I was off “running around with your trench coat flapping in the breeze.” But in the end, all the sub rosa trench coat-flapping paid off. The newspaper published a seventeen-part series on organized crime in the American coal industry and won its first national journalism award in half a century. From then on, my editors at that the subsequent newspapers allowed me to work almost exclusively as an investigative reporter.

I had a grand total of one story spiked during my entire reporting career. That’s it. One. (And in retrospect it wasn’t a very important story either.) Moreover, I had a complete freedom to pick my own shots, a freedom my editors wholeheartedly encouraged since it relieved them of the burden of coming up with story ideas. I wrote my stories the way I wanted to write them, without anyone looking over my shoulder or steering me in a certain direction. After the lawyers and editors went over them and satisfied themselves that we had enough facts behind us to stay out of trouble, they printed them, usually on the front page of the Sunday edition, when we had our widest readership.

In seventeen years of doing this, nothing bad had happened to me. I was never fired or threatened with dismissal if I kept looking under rocks. I didn’t get any death threats that worried me. I was winning awards, getting raises, lecturing college classes, appearing on TV shows, and judging journalism contests.

So how could I possibly agree with people like Noam Chomsky and Ben Bagdikian, who were claiming the system didn’t work, that it was steered by powerful special interests and corporations, and existed to protect the power elite? Hell, the system worked just fine, as far as I could tell. It encouraged enterprise. It rewarded muckraking.

And then I wrote some stories that made me realize how sadly misplaced my bliss had been. The reason I’d enjoyed such smooth sailing for so long hadn’t been, as I’d assumed, because I was careful and diligent and good at my job. It turned out to have nothing to do with it. The truth was that, in all those years, I HADN’T WRITTEN ANYTHING IMPORTANT ENOUGH TO SUPPRESS.

In 1996, I wrote a series of stories, entitled Dark Alliance, that began this way:

For the better part of a decade, a Bay Area drug ring sold tons of cocaine to the Crips and Bloods Street Gangs of Los Angeles and funneled millions in drug profits to a Latin American guerilla army run by the U.S. Central Intelligence Agency, a Mercury News investigation has found.

This drug network opened the first pipeline between Colombia’s cocaine cartels and the black neighborhoods of Los Angeles, a city now known as the “crack” capital of the world. The cocaine that flooded in helped spark a crack explosion in urban America — and provided the cash and connections needed for L.A.’s gangs to buy automatic weapons.

It is one of the most bizarre alliances in modern history: the union of a U.S. backed army attempting to overthrow a revolutionary socialist government and the Uzi-toting “gangstas” of Compton and South Central Los Angeles.

The three-day series was, at its heart, a short historical account of the rise and fall of a drug ring and its impact on black Los Angeles. It attempted to explain how shadowy intelligence agencies, shady drugs and arms dealers, a political scandal, and a long-simmering Latin American civil was had crossed paths in South Central Los Angeles, leaving behind a legacy of crack use. Most important, it challenged the widely held belief that crack use began in African American neighborhoods not for any tangible reason but mainly because of the kind of people who lived in them. Nobody was forcing them to smoke crack, the argument went, so they only have themselves to blame. They should just say no.

That argument never seemed to make much sense to me because DRUGS DON’T JUST APPEAR MAGICALLY ON STREET CORNERS IN BLACK NEIGHBORHOODS. Even the most rabid hustler in the ghetto can’t sell what he doesn’t have. If anyone was responsible for the drug problems in a specific area, I thought, it was the people who were bringing the drugs in.

And so Dark Alliance was about them — the three cocaine traffickers who supplied the South Central market with literally tons of pure cocaine from the early 1980s to the early 1990s. What made the series so controversial is that two of the traffickers I named were intimately involved with a Nicaraguan paramilitary group known as the Contras, a collection of ex-military men, Cuban exiles, and mercenaries that the CIA was using to destabilize the socialist government of Nicaragua. The series documented direct contact between the drug traffickers who were bringing the cocaine into South Central and the two Nicaraguan CIA agents who were administering the Contra project in Central America. The evidence included sworn testimony from one of the traffickers — now a valued government informant — that one of the CIA agents huddled in the kitchen of a house in San Francisco with one of the traffickers and had interviewed the photographer, who confirmed its authenticity. Pretty convincing stuff, we thought.

Over the course of three days, Dark Alliance advanced five main arguments: First, that the CIA-created Contras had been selling cocaine to finance their activities. This was something the CIA and the major media had dismissed or denied since the mid-1980s, when a few reporters first began writing about Contra drug dealing. Second, that the Contras had sold cocaine in the ghettos of Los Angeles and that their main customer was L.A.’s biggest crack dealer. Third, that elements of the U.S. government knew about this drug ring’s activities at the time and did little if anything to stop it. Fourth, that because of the time period and the areas in which it operated, this drug ring played a critical role in fueling and supplying the first mass crack cocaine market in the United States. And fifth, that the profits earned from this crack market allowed the Los Angeles-based Crips and bloods to expand into other cities and spread crack use to other black urban areas, turning a bad local problem into a bad national problem. This led to panicky federal drug laws that were locking up thousands of small-time, black crack dealers for years but never denting the crack trade.

It wasn’t so much a conspiracy that I had outlined as it was a chain-reaction–bad ideas compounded by stupid political decisions and rotten historical timing.

Obviously this wasn’t the kind of story that a reporter digs up in an afternoon. A Nicaraguan journalist and I had been working on it exclusively for more than a year before it was published. And despite the topic of the story, it had been tedious work. Spanish-language undercover tapes, court records, and newspaper articles were laboriously translated. Interviews had to be arranged in foreign prisons. Documents had to be pried from unwilling federal agencies, or specially declassified by the National Archives. Ex-drug dealers and ex-cops had to be tracked down and persuaded to talk on the record. Chronologies were pieced together from heavily censored government documents and old newspaper stories found scattered in archives from Managua to Miami.

In December 1995, I wrote a lengthy memo to my editors, advising them of what my Nicaraguan colleague and I had found, what I thought the stories would say, and what still needed to be done to wrap them up. It also to help my editor explain our findings to her bosses, who had not yet signed off on the story, and most of whom had no idea I’d been working on it.

**Two months ago, in an unheard-of response to a Congressional vote, black prison inmates across the country staged simultaneous revolts to protest Congress’ refusal to make sentences for crack cocaine the same as for powder cocaine. Both before and after the prison riots, some black leaders were openly suggesting that crack was part of a broad government conspiracy that has imprisoned or killed an entire generation of young black men.

Imagine if they were right. What if the US government was, in fact, involved in dumping cocaine into California — selling it to black gangs in South Central Los Angeles, for instance — sparking the most destructive drug epidemic in American history?

With the help of recently declassified documents, FBI reports, DEA undercover tapes, secret grand jury transcripts and archival records from both here and abroad, as well as interviews with some of the key participants, we will show how a CIA-linked drug and stolen car network — based in, of all places, the Peninsula — provided weapons and tons of high-grade, dirt cheap cocaine to the very person who spread crack through LA and from there into the hinterlands.

A bizarre — almost fatherly — bond between an elusive CIA operative and an illiterate but brilliant car thief from LA’s ghettos touched off a social phenomenon — crack and gang-power — that changed our lives in ways that are still to be felt. That day these two men met was literally ground zero for California’s crack explosion, and the myriad of calamities that have flowed from it (AIDS, homelessness, etc.)

This is also the story of how an ill-planned and oftentimes irrational foreign policy adventure — the CIA’s “secret” was in Nicaragua from 1980 to 1986 — boomeranged back to the streets of America, in the long run doing far more damage to us than to our supposed “enemies” in Central America.

For, as this series will show, the dumping of cocaine on LA’s street gangs was the “back-end” of a covert effort to arm and equip the CIA’s ragtag army of anti-Communist “Contra” guerrillas. While this has long been solid — if largely ignores — evidence of a CIA-Contra-cocaine connection, no one has ever asked the question: “Where did all the cocaine go once it got here?”

Now we know.

Moreover, we have compelling evidence that the kingpins of this Bay Area cocaine ring — men connected to the assassinated Nicaraguan dictated dictator Anastasio Somoza and his murderous National Guard — enjoyed a unique relationship with the U.S. government that has continued to this day.

*In a meeting to discuss the memo, I recounted to my editors the sorry history of how the Contra-cocaine story had been ridiculed and marginalized by the Washington press corps in the 1980s, and that we could expect similar reactions to this series. If they didn’t want to pursue this, now was the time to pull back, before I flew down to Central America and started poking around finding drug dealers to interview. But if we did, we needed to go full-bore on it, and devote the time and space to tell it right. My editors agreed. My story memo made the rounds of the other editors’ offices and, as far as I know, no one objected. I was sent to Nicaragua to do additional reporting, and the design team at Mercury Center — the newspaper’s online edition — began mapping our a Web page.

At the end of my memo, I’d suggested to my editors that we use the Internet to help us demonstrate the story’s soundness and credibility which, based on past stories critical of the CIA, was sure to come under attack by both the government and the press.

**I have proposed to Bob Ryan [director of Mercury Center] that we do a special Merc Center/World Wide Web version of this series. The technology is extant to allow readers to download the series’ supporting documentation through links to the actual text. For example, when we are quoting grand jury testimony, a click of the mouse would allow the reader to see and/or download the actual grand jury transcript.

Since this whole subject has such a high unbelievability factor built into it, providing our backup documentation to our readers — and the rest of the world over the Internet — would allow them to judge the evidence for themselves. It will also make it all the more difficult to dismiss our findings as the fantasies of a few drug dealers.

To my knowledge, this has never been attempted before. It would be a great way to showcase Merc Center and, at the same time use computer technology to set new standards for investigative reporting.

* The editors jumped at the idea. From our perch as the newspaper of Silicon Valley, we could see the future the World Wide Web offered. Newspapers were scrambling to figure out a way to make the transition to cyberspace. The Mercury’s editors were among the first to do it right, and were looking for new barriers to break. A special Internet version of Dark Alliance was created as a high-profile way of advertising the Mercury’s Web presence and bringing visitors into the site. Plus, the newspaper could boast (and later did) that it had published the first interactive online expose in the history of American journalism.

I remember being almost giddy as I sat with Merc Center’s editors and graphics designers, picking through the pile of once-classified information we were going to unleash on the world. We had photos, undercover tape recordings, and federal grand jury testimony. In addition, we had interviews with guerrilla leaders, tape-recorded Supreme Court files, Congressional records, and long-secret documents unearthed during the Iran-Contra investigation. For the first time, any reader with a computer and a sound card could see what we’d found — could actually read it for themselves — and listen in while the story’s participants plotted, scheme, and confessed. And they could do it from anywhere in the world, even if they had no idea where San Jose, California, was.

After four months of writing, rewriting, editing, and reediting, my editors pronounced themselves satisfied and signed off. The first installment of Dark Alliance appeared simultaneously on the streets and on the Web on August 18, 1996.

THE INITIAL PUBLIC REACTION WAS DEAD SILENCE. No one jumped up to deny any of it. Nor did the news media rush to share our discoveries with others. The stories just sat there, as if no one seemed to know what to make of them.

Admittedly, Dark Alliance was an unusual story to have appeared in a mainstream daily newspaper, no just for what it said, but for what it was. It wasn’t a news story per se; nearly everything I wrote about had happened a dozen years earlier. Because my editors and I had sometimes vehemently disagreed about the scope and nature of the stories during the writing and editing process, the result was a series of compromises, an odd mixture of history lesson, news feature, analysis, and expose. It was not an uplifting story; it was a sickening one. The bad guys had triumphed and fled the scene unscathed, as often happens in life. And there was very little anyone could do about it now, ten years after the fact.

So, I wasn’t really surprised that my journalistic colleagues weren’t pounding down the follow-up trail. Hell, I thought it was a strange story myself.

Had it been published even a year of two earlier, it likely would have vanished without a trace at that point. Customarily, IF THE REST OF THE NATION’S EDITORS DECIDE TO IGNORE A PARTICULAR STORY, IT QUICKLY WITHERS AND DIES, LIKE A LIGHT-STARVED PLANT. With the exception of newspapers in Seattle, some small cities in Northern California, and Albuquerque, Dark Alliance got the silent treatment big time. No one would touch it.

But no one had counted on the enormous popularity of the Web site. Almost from the moment the series appeared, the Web page was deluged with visitors from all over the world. Students in Denmark were standing in line at their college’s computer waiting to read it. E-mails came in from Croatia, Japan, Colombia, Harlem, and Kansas City, dozens of them, day after day. One day we had more than 1.3 million hits. (The site eventually won several awards from computer journalism magazines.)

Once Dark Alliance became the talk of the Internet (in large part because of the technical wizardry and sharp graphics of the Web page), talk radio adopted the story and ran with it. For the next two months, I did more than one hundred radio interviews, in which I was asked to sum up what the three-day long series said in its many thousands of words. Well, I would reply, it said a lot of things. Take your pick. Usually, the questions focused on the CIA’s role, and whether I was suggesting a giant CIA conspiracy. We didn’t know the CIA’s exact role yet, I would say, but we have documents and court testimony showing CIA AGENTS WERE MEETING WITH THESE DRUG TRAFFICKERS TO DISCUSS DRUG SALES AND WEAPONS TRAFFICKING. An so, figure it out. Did the CIA know or not? The response would come back — So you’re saying that the CIA “targeted” black neighborhoods for crack sales? Where’s your evidence of that? And it would go on and one.

There were other distractions as well. Film agents and book agents began calling. One afternoon Paramount Studios whisked me down to have lunch with two of the studio’s biggest producers, the men who brought Tom Clancy’s CIA novels to the screen, to talk about “film possibilities” for the still-unfolding story. This was about the time I realized the wind speed of the shit storm I had kicked up.

The rumbles the series was causing from black communities was unnerving a lot of people. College students were holding protest rallies in Washington, D.C., to demand an official investigation. Residents of South Central marched on city hall and held candlelight vigils. The Los Angeles City Council soon joined the chorus, as did both of California’s U.S. senators, the Oakland city council, the major of Denver, the Congressional Black Caucus, Jesse Jackson, the NAACP, and at least a half dozen congressional members, mostly African American women whose districts included crack-ridden inner cities. Black civil rights activists were arrested outside the CIA after sealing off the agency’s entrance with yellow crime scene tape. The story was developing a political momentum all of its own, and it was happening DESPITE A VIRTUAL NEWS BLACKOUT FROM THE MAJOR MEDIA.

Some Washington journalists were alarmed. Where is the rebuttal? Why hasn’t the media risen in revolt against this story?” CNN’s Reliable Sources, Kalb EXPRESSED FRUSTRATION THAT THE STORY WAS CONTINUING TO GET OUT DESPITE THE BEST EFFORTS OF THE PRESS TO IGNORE IT. “It isn’t a story that simply got lost” Kalb complained, during the show, “It, in fact, has resonated and echoed and echoed and the question is, Where is the media knocking it down?”

It was an interesting comment because it foretold the way the mainstream press finally did respond to Dark Alliance. A revolt by the biggest newspapers in the country, something columnist Alexander Cockburn would later describe in his book White Out as “ONE OF THE MOST VENOMOUS AND FACTUALLY INSANE ASSAULTS…IN LIVING MEMORY.”

I remember arguing with a producer at an CNN news show shortly before I was to go on the air that I didn’t want him asking me to explain “my allegations” because these stories WEREN’T my allegations. I was a journalist reporting events that had actually occurred. You could document them, and we had.

“Well, you got understand my position,” he mumbled. “The trafficking, CNN’s position is that these events may not have happed?” I snapped, “What the fuck is that? WHEN DID WE GIVE THE CIA THE POWER TO DEFINE REALITY?”

After nearly a month of silence, the CIA responded. It admitted nothing. It was confident that its agents weren’t dealing drugs. But to dispel all the rumors and unkind suggestions my series had raised, the agency would have its inspector general take a look into the matter.

The black community greeted this pronouncement with unconcealed contempt. “You think you can come down here and tell us that you’re going to investigate yourselves, and expect us to believe something is actually gone happen?” one woman yelled at CIA director John Dutch, who appeared in Compote, California, in November 1996 to personally promise the city a thorough investigation. “How stupid do you think we are?”

The conservative press and right-wing political organizations were equally hostile to the idea of a CIA crack investigation, but for different reasons. It meant the story was gaining legitimacy, and might lead to places that supporters of the Regain and Bush administrations would rather not see it go. John Dutch was blasted on the front page of the Washington Times (which had also helped finance the Contras, hosting fundraisers and speaking engagements for Contra leaders while supporting their cause editorially) as a dangerous liberal who was undermining morale at the CIA by even suggesting there might be truth to the stories.

Ultimately, it was public pressure that forced the national newspapers into the fray. Protests were held outside the building by media watchdogs and citizens groups, who wondered how the Los Angeles Times building by media watchdogs and citizens groups, who wondered how the Times could continue to ignore a story that had such an impact on the city’s black neighborhoods. In Washington, black media outlets were ridiculing the Post for its silence, considering the importance the story held for most of Washington’s citizens.

When the newspapers of record spoke, THEY SPOKE IN UNISON. Between October and November, the Washington Post, the New York Times and the Los Angeles Times published lengthy stories about the CIA drug issue, but spent precious little time exploring the CIA’s activities. Instead, my reporting and I became the focus of their scrutiny. After looking into the issue for several weeks, the official conclusion reached by all three papers: Much ado about nothing. No story here. Nothing worth pursuing. The series was “flawed,” they contended. How?

Well, there was no evidence the CIA knew anything about it, according to unnamed CIA officials the newspapers spoke to. The drug traffickers we identified as Contras didn’t have “official” positions with the organization and didn’t really give them all that much drug money. This was according to another CIA agent, Adolfo Calero, the former head of the Contras, an the man whose picture we had just published on the Internet, huddled in a kitchen with one of the Contra drug traffickers. Calero’s apparent involvement with the drug operation was never mentioned by any of the papers; his decades-long relationship with the CIA was never mentioned either.

Additionally, it was argues, this quasi-Contra drug ring was small potatoes. One of the Contra traffickers had only sold five tons of cocaine during his entire career, the Washington Post sniffed, badly misquoting a DEA report we’d posted on the Web site. According to the Post’s analysis, written by a former CIA informant, Walter Pincus, who was then covering the CIA for the Post, this drug ring couldn’t have made a difference in the crack market because five tons wasn’t nearly enough to go around. Eventually, those assertions would be refuted by internal records released by both the CIA and the Justice Department, but at the time they were classified.

“I’m disappointed in the ‘what’s the big deal’ tone running through the Post’s critique,” Mercury News editor Jerry Ceppos complained to the Post in a letter it refused to publish. “If the CIA knew about these illegal activities being conducted by its associates, federal law and basic morality required that it notify domestic authorities. It seems to me that this is exactly the kind of story that a newspaper should shine a light on.” Ceppos posted a memo on the newsroom bulletin board, stating that the Mercury News would continue “to strongly support the conclusions the series drew and will until someone proves them wrong.” It was remarkable, Ceppos wrote, that the four Post reporters assigned to debunk the series “could not find a single significant factual error.”

Privately, though, my editors were getting nervous. Never before had the three biggest papers devoted such energy to kicking the hell out of a story by another newspaper. It simply wasn’t done, and it worried them. They began a series of maneuvers designed to deflect or at least stem the criticism from the national media. Five thousand reprints of the series were burned because the CIA logo was used as an illustration. My follow-up stories were required to contain a boilerplate disclaimer that said we were not accusing the CIA of direct knowledge, even though the facts strongly suggested CIA complicity. But those stunts merely fueled the controversy, making it appear as if we were backing away from the story without admitting it.

Ironically, the evidence we were continuing to gather was making the story even stronger. Long-missing police records surfaced. Cops who had tried to investigate the Contra drug ring and were rebuffed came forward. We tracked down one of the Contras who personally delivered drug money to CIA agents, and he identified them by name, on the record. He also confirmed that the amounts he’d carried to Miami and Costa Rica were in the millions. More records were declassified from the Iran-Contra files, showing that contemporaneous knowledge of this drug operation reached to the top levels of the CIA’s covert operations division, as well as into the DEA and the FBI.

But the attacks from the other newspapers had taken the wind out of my editors’ sails. Despite the advances we were making on the story, the criticism continued. We were being “irresponsible” by printing stories suggesting CIA complicity without any admissions or printing stories suggesting CIA complicity without any admissions of “a smoking gun.” The series was now described frequently as “discredited,” even though nothing had surfaced showing that any of the facts were incorrect. At my editor’s request, I wrote another series following up on the first three parts: a package of four stories to run over two days. They never began to edit them.

Instead, I found myself involved in hours-long conversations with editors that bordered on the surreal.

“How do we know for sure that these drug dealers were the first big ring to start selling crack in South Central?” editor Jonathan Krim pressed me during one such confab. “Isn’t it possible there might have been others before them?”

“There might have been a lot of things, Jon, but we’re only supposed to deal in what we know,” I replied. “The crack dealers I interviewed said they were the first. Cops is South Central said they were the first. and that they controlled the entire market. They wrote it in reports that we have. I haven’t found anything saying otherwise, not one single name, and neither did the New York Times, the Washington Post or the L.A. Times. So what’s the issue here?”

“But how can we say for sure they were the first?” Krim persisted. “Isn’t it possible there might have been someone else and they never got caught and no one ever knew about them? In that case, your story would be wrong.”

I had to take a deep breath to keep from shouting. “If you’re asking me whether I accounted for people who might never have existed, the answer is no,” I said. “I only considered people with names and faces. I didn’t take phantom drug dealers into account.”

A few months later, the Mercury News officially backed away from Dark Alliance, publishing a long column by Jerry Ceppos apologizing for “shortcomings” in the series. While insisting that the paper stood behind its “core findings,” we didn’t have proof that top CIA officials knew about this, and we didn’t have proof that millions of dollars flowed from this drug ring, Ceppos declared, EVEN THOUGH WE DID AND WEREN’T PRINTING IT. There were gray areas that should have been fleshed out more. Some of the language used could have led to misimpressions. And we “oversimplified” that outbreak of crack in South Central. The New York Times hailed Ceppos for setting a brave new standard for dealing with “egregious errors” and splashed his apology on their front page, the first time the series had ever been mentioned there.

When the CIA and Justice Department finished their internal investigations two years later, the classified documents that were released showed just how badly I had fucked up. THE CIA’S KNOWLEDGE AND INVOLVEMENT HAD BEEN FAR GREATER THAN I’D EVER IMAGINED. The drug ring was even bigger than I had portrayed. The involvement between the CIA agents running the Contras and the drug traffickers was closer than I had written. And AGENTS AND OFFICIALS OF THE DEA HAD PROTECTED THE TRAFFICKERS FROM ARREST, something I’d not been allowed to print. The CIA also admitted having direct involvement with about four dozen other drug traffickers or their companies, and that this too had been known and effectively condoned by the CIA’s top brass.

In fact, at the start of the Contra war, the CIA and Justice Department had worked out an unusual agreement that permitted the CIA not to have to report allegations of drug trafficking by its agents to the Justice Department. It was a curious loophole in the law, to say the least.

Despite those rather stunning admissions, the internal investigations were portrayed in the press as having uncovered no evidence of CIA involvement in drug trafficking and no evidence of a conspiracy to send crack to black neighborhoods, which was hardly surprising since I had never said there was. What I had written — that individual CIA agents working within the Contras were deeply involved with this drug ring — was either ignored or excised from the CIA’s final reports. For instance, the agency’s decade-long employment of two Contra commanders –Colonel Enrique Bermudez and Adolfo Calero–was never mentioned in the declassified CIA reports, leaving the false impression that they had no CIA connection. This was a critical omission, since Bermudez and Calero were identified in my series as the CIA agents who had directly involved with the Contra Drug pipeline. Even though their relationship with the agency was a matter of public record, none of the press reports I saw celebrating the CIA’s self-absolution bothered to address this gaping hole in the official story. THE CIA HAD INVESTIGATED ITSELF AND CLEARED ITSELF, and THE PRESS WAS HAPPY TO LET THINGS STAY THAT WAY. No independent investigation was done.

The funny thing was, despite all the furor, the facts of the story never changed, EXCEPT TO BECOME MORE DAMNING. But the perception of them did, and in this case, that is really all that mattered. Once a story became “discredited,” the rest of the media shied away from it. Dark Alliance was consigned to the dustbin of history, viewed as an Internet conspiracy theory that had been thoroughly disproved by more responsible news organizations.

Why did it occur? Primarily because the series presented dangerous ideas. It suggested that crimes of state had been committed. If the story was true, it meant the federal government bore some responsibility, however indirect, for the flood of crack that coursed through black neighborhoods in the 1980s. And that is something no government can ever admit to, particularly one that is busily promoting a multibillion-dollar-a-year War on Drugs.

But what of the press? WHY DID OUR FREE AND INDEPENDENT MEDIA PARTICIPATE WITH THE GOVERNMENT’S DISINFORMATION CAMPAIGN? It had probably as many reasons as the CIA. The Contra-drug story was something the top papers had dismissed as sheer fantasy only a few years earlier. They had not only been wrong, they had been terribly wrong, and their attitude had actively impeded efforts by citizens groups, journalists, and congressional investigators to bring the issue to national attention, at a time when its disclosure may have done some good. Many of the same reporters who declined to write about Contra drug trafficking in the 1980s — or wrote dismissively about it — were trotted out once again to do damage control.

Second, the San Jose Mercury News was not a member of the club that sets the national news agenda, the elite group of big newspapers that decides the important issues of the day, such as big newspapers that decides the important issues of the day, such as which stories get reported and which get ignored. Small regional newspapers aren’t invited. But the Merc had broken the rules and used the Internet to get in by the back door, leaving the big papers momentarily superfluous and embarrassed, and it forced them to readdress an issue they’d much rather have forgotten. By turning on the Mercury News, the big boys were reminding the rest of the flock who really runs the newspaper business, Internet or no Internet, and the extends to which they will go to protect that power, even if it meant rearranging reality to suit them.

Finally, as I discovered while researching the book I eventually wrote about this story, the national news organizations have had a long, disappointing history of playing footsie with the CIA, printing unsubstantiated agency leaks, giving agents journalistic cover, and downplaying or attacking stories and ideas damaging to the agency. I can only speculate as to why this occurs, but I am not naive enough to believe it is mere coincidence.

THE SCARY THING ABOUT THIS COLLUSION BETWEEN THE PRESS AND THE POWERFUL IS THAT IT WORKS SO WELL. In this case, the government’s denials and promises to pursue the truth didn’t work. The public didn’t accept them, for obvious reasons, an the clamor for an independent investigation continued to grow. But after the government’s supposed watchdogs weighed in, public opinion became divided and confused, the movement to force congressional hearings lost steam and, once enough people came to believe the stories were false or exaggerated, the issue could safely be put back at the bottom of the dead-story pile, hopefully never to rise again.

Do we have a free press today? Sure we do. It’s free to report all the sex scandals it wants, all the stock market news we can handle, every new health fad that comes down the pike, and every celebrity marriage or divorce that happens. But WHEN IT COMES TO THE REAL DOWN AND DIRTY STUFF – stories like Tailwind, the October Surprise, the El Mozote massacre, corporate corruption, or CIA involvement in drug trafficking — THAT’S WHERE WE BEGIN TO SEE THE LIMITS OF OUR FREEDOMS. In today’s media environment, sadly, SUCH STORIES ARE NOT EVEN OPEN FOR DISCUSSION.

Back in 1938, when fascism was sweeping Europe, legendary investigative reporter George Seldes observed (in his book, The Lords of the Press) that “IT IS POSSIBLE TO FOOL ALL THE PEOPLE ALL THE TIME — WHEN GOVERNMENT AND PRESS COOPERATE.” Unfortunately, WE HAVE REACHED THAT POINT.

Gary Webb

Fed admits dollars disappearing.
Star-News – Google News Archive – Feb 11, 1986

WASHINGTON — A lot of U.S. greenbacks can’t be accounted for.

This money often ends up in areas with high inflation rates. In some Latin American nations, for instance, the citizens exchange local currency on the black market for dollars as a hedge against their own currency’s being devalued.
…

What This Means

NCPA reports that Foreign Dollar Holdings and the U.S. Money Supply.

Foreign Dollar Holdings and the U.S. Money Supply

One of the most important of all economic indicators is the money supply. Most economists believe that it plays a major role in the level of interest rates, inflation and real growth in the economy. The Federal Reserve controls the money supply through various policy instruments.

The Mystery of the Missing Currency

Since currency is such an important component of the money supply, it obviously is very important to have an accurate measure of it. In practice, the Fed assumes that all the money ever printed is still in circulation, less only that which has been officially withdrawn from circulation or is known to have been destroyed. However, when the Fed has attempted to survey banks, businesses and households to find out how much currency was actually circulating, some 80 percent of the currency thought to be in circulation had simply disappeared.

Efforts to locate this missing money have focused particularly on “exports” of U.S. dollars: money that has left our shores and now circulates in foreign countries. …

What This Means

At a minimum, this suggests that the money supply is much lower than published data indicate. Economist Case Sprenkle of the University of Illinois argues: “Since foreign-held currency is not a medium of exchange for the issuing country, increases in currency in the hands of the public in developed countries then should not be considered as money supply increases for monetary policy decisions. The Federal Reserve and other central banks should IGNORE SUCH INCREASES AS BEING BASICALLY IRRELEVANT TO DOMESTIC MONETARY CONDITIONS.”

This could have important implications for Federal Reserve policy and monetary analysis. It might mean that Fed policy is much tighter than the Fed thinks it is and that THE HISTORICAL RELATIONSHIP BETWEEN GROWTH OF THE MONEY SUPPLY AND RATE OF INFLATION NEEDS TO BE REEVALUATED. …

Conclusion

Foreign holdings of U.S. dollars are a significant and growing phenomenon. They are now so large as to affect our basic understanding of the relationship between the money supp]y, inflation, interest rates and other economic variables. The phenomenon may be causing the Federal Reserve to run a tighter monetary policy than it intends, with important implications for economic growth, unemployment and the standard of living of all Americans.

Answer to the Mystery of the Missing Currency
A Torrent of Dirty Dollars – TIME

A Torrent of Dirty Dollars
TIME – Sunday, June 24, 2001
By JONATHAN BEATY AND RICHARD HORNIK

…
Much is at stake as the powerful flow of narcodollars is recycled through the world’s financial system. Drug lords and other lawbreakers are believed to be buying valuable chunks of the American economy, but clever Dutch sandwiches and other subterfuges make it almost impossible for U.S. authorities to track foreign investors. A case in point: blind corporations based in the Netherlands Antilles control more than one-third of all foreign-owned U.S. farmland, many of the newest office towers in downtown Los Angeles and a substantial number of independent movie companies producing films like Sylvester Stallone’s Rambo pictures.

…
The money-laundering process, especially in the drug trade, begins with greenbacks. MUCH OF THE CASH SIMPLY LEAVES THE U.S. IN LUGGAGE, since departing travelers are rarely searched. Larger shipments are flown out on private planes or packed in seagoing freight containers, which are almost never inspected. THAT EXPLAINS, in part, WHY U.S. OFFICIALS ARE UNABLE TO LOCATE FULLY 80% OF ALL THE BILLS PRINTED BY THE TREASURY. Once overseas, the cash is easy to funnel into black markets, especially in unstable economies where the dollar is the favored underground currency.
…

Three main components of the U.S. dollarization strategy:

1) Forcing drug money out of the U.S.
2) Facilitating drug trafficking
3) Destroying foreign currencies

——————————–

1) Forcing drug money out of the U.S.

Seizure of Assets Presses Drug Suspects

April 29, 1988
Seizure of Assets Presses Drug Suspects
By MARK A. UHLIG

In seizing the apartment leases of two suspected drug dealers in New York City Wednesday, Federal authorities broke new legal ground in their fight against illicit drug trafficking by tenants of public housing projects.

Officials take aim at drug money

Officials take aim at drug money
Sarasota Herald-Tribune – Google News Archive – Mar 11, 1997
Faced with controls on electronic transfers, officials say, cartels returned to smuggling money in bulk.

N.Y. TIMES NEWS SERVICE

NEW YORK — For years, drug cartel money-launderers in New York have been sending up to $1.3 billion a year back to Colombia through storefront shops, many of them in Queens, that immigrants use to wire cash home.

The major restraint on this electronic smuggling has been a federal requirement that transactions of more than $10,000 be reported to the government.

But since last summer, drug busters will tell Congress today, a Treasury Department order imposing a $750-per-transaction limit on 1,600 remittance shops suspected of wiring most of the illicit money has won a small victory in the war on drugs, sharply cutting the electronic transfers to Colombia and forcing the cartels to return to crude old methods of smuggling money in bulk.

Faced with the alternative of wiring fortunes in penny-ante increments or submitting picture-identity cards with their transactions, cartel operatives have gone back to stashing cash in coffins, bowling balls and other hiding places, investigators said Monday.
…

Banks Intensify Crackdown On Money Laundering

Banks intensify crackdown on money Laundering
Daily Gazette – Google News Archive – Sep 23, 1990
By JAMES M. ODATO Gaz’tte Rport.’r

The cash comes from criminals, or those dodging taxes. Frequently, it comes from drug deals. And there is lots of it.

To hide its sources, drug dealers and other illegal enterprisesuse money launderers — people whose Job it is to get the currency into such legitimate places as banks — to make it more difficult to trace.

For a while, those launderers could walk into banks with cardboard boxes bulging with cash, and no one would bunk an eye.

That’s all changed.

Banks have gotten tougher, as federal authorities have put more pressure on them to report transactions that appear suspicious.

In fact, following the declaration of a “war on drugs” and the threat of whopping fines, banks began filing reports by the millions — seven million were filed last year alone.

Some of those helped federal investigators convict drug dealers and uncover other illegal enterprises.

But federal officials estimate $110 billion is still being laundered, undetected, each year across the country.

…
For instance, Key Bank of Eastern New York has two officials working full time to ensure that the bank complies with the rules. Last year, the Albany-based bank filed 20,000 reports, said spokesman Peter D. La- Fleche.

“It takes 37 minutes to properly fill out the forms, according to the Federal Reserve,” says James Smith, Key Corp’s compliance chief. “If one files 10,000 currency transaction reports times 37 minutes times 5 per hour … We’re doing a lot.”

The Bank Secrecy Act of 1970 requires banks to file a Currency Transaction Report on cash transactions of more than $10,000. Banks also must file a report if it appears a customer is trying to avoid having a CTR’filed by staying below the $10,002 thresh- old or for suspicious behavior. such as trading $2000 in twenty-dollar bills for 20 one-hundred dollar bills.

And, as of last month, banks must also report to federal authorities any transactions involving purchases of at least $3000 of money orders, checks, traveler’s checks or bank drafts in aggregate by a customer.

The CTR gives investigators another tool to use against drug dealers.

“Banks are very necessary to the chain of laundering. The majority of the money is going to financial institutions and then wired out of the country,” says Charles 0. Slmonsen, chief of currency investigations of the US. Customs Service.

He said legislation has been proposed to require reports when money is wired.

From bank to bank

Once the laundered money gets to a bank, be said, it can be “layered,” or moved from bank to bank, so that it gets farther away from the source.

He said the CTRs may have cut down on some of the laundering. OTHER ALTERNATIVES FOR LAUNDERERS, he said, INCLUDE SMUGGLING MONEY OUT OF THE COUNTRY. A report is required by customs, and failure to file it can result in prosecution.

…
He said that since 1986, the IRS has initiated more than 4,200 criminal eases on money launderers, with more than a quarter of them started this year alone.

Preferred Target

Banks are the preferred target of money launderers, Hanson, and other say, because of the low risk involved in investing cash with them.

“We report so much it’s a risky proposition” says John Byrne, a legIMauve counsel with the American Bankers Association. “Also (some) banks now have software to show you’ve had multiple transactions in a day and we’ll file a report on you.”

Byrne admits that banks were part of the money laundering problem because they failed to submit forms. In 1977, just 34,000 CTRs were filed by banks.

Last year, banks spent an estimated $160 million complying with The Bank Secrecy Act.

Part of the reason for the vigilance is the fear of liability. Federal regulators began fining banks heavily in the mid-’80s. Bank of Boston paid 1500,000 in 1985 while Bank of New England paid a $1.24 million f inc in 1986. As a result, “everybody and his brother learned what money laundering was,” says Byrne.
…

http://www.fear.org/

…
The Double-Edged Sword undercover researcher observed agencies abandon investigations of suspects they knew were trafficking large amounts of contraband simply because the case was not profitable. Agents routinely targeted low level dealers rather than big traffickers, who are better able to insulate themselves and their assets from reverse sting operations. The report states: “Efficiency is measured by the amount of money seized rather than impact on drug trafficking.”

A reverse sting operation, where the officer becomes the seller who encourages the suspect to commit a crime, “was the preferred strategy of every agency and department with which the researcher was associated because it allowed agents to gauge potential profit prior to investing a great deal of time and effort.” More importantly, the narcotics units studied preferred seizing cash intended for purchase of drugs supplied by the police, RATHER THAN CONFISCATING DRUGS ALREADY ON THE STREET. When asked why a search warrant would not be served on a suspect known to have resale quantities of contraband, one officer responded:

“Because that would just give us a bunch of dope and the hassle of having to book him (the suspect). WE’VE GOT ALL THE DOPE WE NEED IN THE PROPERTY ROOM, just stick to rounding up cases with big money and stay away from warrants.”

In one case an agency instructed the researcher to observe the suspect’s daily transactions reselling a large shipment of cocaine so that officers could postpone making the bust UNTIL AFTER THE MAJORITY OF THE DRUG SHIPMENT WAS CONVERTED TO CASH. This case was only one of many in which THE GOAL WAS PROFIT RATHER THAN REDUCING THE SUPPLY OF DRUGS REACHING THE STREET.
…

——————————–

2) Facilitating drug trafficking

Dollarization and the United Narcostates of America

Dollarization and the United Narcostates of America
Jaguar Press
Saturday, October 31, 2009 at 9:33pm

…
In America the number of people who use cocaine regularly is higher than 3.6 million, including crack users, while heroin abusers are untallied, though invariably over a million in this country. There are also millions more heavy-narcotic consumers worldwide, concentrated in Europe, Central Asia, and Latin America. The millions of domestic users form the base from which profits are taken, in the form of drug money, US dollars, in order to fund pro-US governments abroad and expand the influence of the dollar.

I—Opium

From the first economic contact between the British East India company and poppy producing regions in Asia, opium has become a major narcotic in the Western and world markets, both legally and illegally. Wars have been fought over the importation of opium in Asia, and at every step of the way, Western powers have been vitally involved in its production and distribution. These cartel-like military incursions have developed into extremely lucrative and subversive markets that introduce the US dollar into foreign economies.

In Afghanistan right now, the Afghani and the dollar are pretty much interchangeable. It is astounding to American personnel stationed in Afghanistan that their US dollars are just as good as at a 7-11 back home. This isn’t an accident—the illicit trade in opium has single-handedly introduced the dollar as a stable medium of transaction in the region. It is so prominent that Karzai’s government had to pass a law requiring vendors to list their prices in the native Afghani in addition to its pricing in dollars. The use of the dollar abroad means not only increased security for the US Treasury, but also a guaranteed trade partner in the dollarized nation.

…
II—Coca

If you’re in Southern California you can test it, the US dollar is valid in the cities of Mexico just south of the border. As in all other opium and coca producing states from Central Asia to Latin America we see the same symptoms of US narcocolonialism—addiction, exploitation, the dollar. There are no efforts to effectively curb hard drug abuse or to curtail the trade, quite the opposite, the US government has supported the drug trade at many levels.

Addiction growing at home, economic desperation abroad, and international confidence in the US dollar continues to grow as it becomes the global currency of so-called illicit business. …

Brought to You by CIA : America’s Drug Crisis

First Published 2009-10-30
Brought to You by CIA : America’s Drug Crisis

The real story here is that where the US goes, the drug trade soon follows, and the leading role in developing and nurturing that trade appears to be played by the Central Intelligence Agency, notes Dave Lindorff.

…
How the CIA stoked the region’s heroin trade

AN INTEGRAL part of CIA intervention in Afghanistan in the 1980s was a huge in-crease in the production of opium and heroin. David Musto, a member of the Strategic Council of Drug Abuse, warned therethe administration that the mujahideen inwere heavily involved in drug production. The “I told the Council that we were going into Afghanistan to support the opium growers in their rebellion against the Soviets.”1 But Musto’s warnings were deliberately ignored. According to Alexander Cockburn and Jeffrey St. Clair: trade

The DEA [Drug Enforcement Agency] was well aware that the mujahideen rebels were deeply involved in the opium trade. The drug agency’s reports in the 1980s showed that Afghan rebel incursions from their Pakistan bases into Soviet-held posi- tions were “determined in part by opium planting and harvest seasons.” The numbers were stark and forbidding. Afghan opium production tripled between 1979 and 1982. There was evidence that by 1981 the Afghan heroin producers had captured 60 percent of the heroin market in Western Europe and the United States (these are UN and DEA figures).2

Trucks and mules supplied by the CIA to transport arms into Afghanistan were used on the way out to bring opium to heroin laboratories along the Afghan-Pakistan border.3 U.S. officials turned a blind eye toward what was going on:

The DEA had evidence of over forty heroin syndicates operating in Pakistan in the mid-1980s during the Afghan war, and there was evidence of more than 200 heroin labs operating in northwest Pakistan. Even though Islamabad houses one of the largest DEA offices in Asia, no action was ever taken by the DEA agents against any of these operations. An Interpol officer told the journalist Lawrence Lif- schultz, “It is very strange that the Americans, with the size of their resources, and political power they possess in Pakistan, have failed to break a single case. The explanation cannot be found in a lack of adequate police work. They had some excellent men working in Pakistan.” But working in the same offices as those DEA agents were five CIA officers who, so one of the DEA agents later told the Washington Post, ordered them to pull back their operations in Afghanistan and Pakistan for the duration of the war. 4

In 1993, a DEA official quoted in the Los Angeles Times, described Afghanistan as the new Colombia of the drug world,5 and by 1994, Afghanistan had surpassed Burma as the world’s number one supplier of raw opium.6 According to some estimates, it now accounts for 75 percent of world production.7
…

Contras Thwarted By Disputes, Reports Say

Contras Thwarted By Disputes, Reports Say
Ocala Star-Banner – Google News Archive – May 19, 1986

FORT LAUDERDALE (AP) — The Contras struggling against the leftist government of Nicaragua are hobbled by Inner disputes that could ruin their political base, a newspaper reported after interviewing past and present freedom fighters and U.S. citizens who have been close to them.

“To date we have received substantial corroboration of these activities, some of which shock the conscience.”

Drug Enforcers Losing Nation’s Cocaine War Massive Government

Drug Enforcers Losing Nation’s Cocaine War
Massive Government Eradication Efforts Are `Overwhelmed by the Bad Guys,’
Los Angeles Times – ProQuest Archiver – Sep 21, 1986
By Bill Farr; Carol McGraw

The economics of cocaine have changed so radically that it is no longer restricted to the well-to-do. The processing of crystallized cocaine as “rock” or “crack” has so lowered the price—and increased the availability—that junior high school students are pooling their lunch money, “share cropping,” as one sheriff’s deputy called it, to buy cocaine from schoolyard dealers. In some areas of Los Angeles, the scene resembles a public market, with competing dealers loudly hawking their wares on the sidewalk, telling passers—by that their cocaine is better than the next dealer’s. In some areas, armed dealers make house calls in pickup trucks equipped with telephones to take orders.
…

——————————–

3) Destroying foreign currencies

Living with Dollarization and the Route to Dedollarization

2. Dollarization Trends in Latin America: Some Stylized Facts

Dollarization of private and public sector assets and liabilities is widespread throughout Latin America. As part of a comprehensive set of structural reforms—some which came in the aftermath of financial crisis and hyperinflation—many Latin American countries liberalized and reformed their financial markets. In the process, strong linkages to the US dollar were developed, frequently through the adoption of strong pegs or quasi-fixed exchange rate arrangements, in a context of increased capital mobility. In many countries, restrictions on holding financial assets abroad, moving assets freely across the border, or issuing liabilities in foreign currency both locally or across the border, were lifted and competition between domestic and foreign currencies increased. In many cases this led to the dollarization of deposits and loans in the domestic financial system, to significant holdings of financial assets abroad, and in general to the issuance of foreign-denominated liabilities of the private and public sectors.

Philadelphia Inquirer, The : US USED SECRET GLOBAL NETWORK TO ARM AFGHANS

U.S. USED SECRET GLOBAL NETWORK TO ARM AFGHANS
Philadelphia Inquirer – NewsBank – Feb 29, 1988

After the Soviet Union invaded Afghanistan, the CIA responded by making money. Counterfeit Afghan currency. The intelligence agency also made weapons. Counterfeit Soviet weapons. The bogus money and copied weapons became part of a vast cache filled by the CIA’s global gun-running operation for the Afghan resistance. Over the last eight years, the CIA’s efforts for the Afghan rebels grew to become the biggest covert operation in the agency’s history …

Fake-Money Flood Is Aimed At Crippling Iraq’s Economy

May 27, 1992
Fake-Money Flood Is Aimed At Crippling Iraq’s Economy
By YOUSSEF M. IBRAHIM,

AMMAN, Jordan, May 24— Iraq’s economy is the target of an American-led destabilization campaign to pour vast amounts of counterfeit currency into the country, Arab and Western officials here say.

Over the last few months, the destabilization efforts seem to have shifted into high gear, officials here say, particularly after the United States was reported in February to have authorized full-fledged covert operations against Iraq.

…

Counterfeit money was dropped by United States helicopters in the southern marshland areas, in Mandali and in al-Tib in the Maysan governorate, said the letter from the Iraqi Foreign Minister, Ahmad Hussein.

The letter, reported by the Iraqi press agency and reprinted in Iraqi newspapers, said counterfeit money was entering the country through the Turkish and Jordanian borders as well.

Stiff Punishment Imposed

A Saudi official, who insisted on not being identified, concurred with the reports, saying that “all borders are being used.”

Similarly, a senior Jordanian official agreed with the report, saying Jordan “does not approve of it, but we can do little to stop it”.
…

Contra War Fuels `Crazy’ Nicaraguan Inflation

Contra War Fuels `Crazy’ Nicaraguan Inflation
Los Angeles Times - Sep 20, 1987
By RICHARD BOUDREAUX

In a July speech, [Daniel Ortega] said U.S. “aggression” has cost Nicaragua $2.8 billion since 1980. His calculation included direct damages and production losses caused by the war as well as favorable trade opportunities and dollar credits cut off by the 2-year-old U.S. embargo.

…

Once every few months, they get $100 or so from one of [Patricia Chavez]’s brothers in the United States. And every payday, Chavez takes black-market jeans, cosmetics, shoes and purses to the office to sell to co-workers in her typing pool. This earns her an extra 200,000 cordobas a month, an income that rises faster than her wages.

http://www.mtholyoke.edu/courses/sgabriel/brazil.htm

Briefing on Brazil’s Economic Crisis
by Satya Gabriel
January 14, 1999, 4 p.m. (e.s.t.)

…
The widespread devaluations of currencies against the U.S. dollar has acted as a virus in the global economy since the Mexican peso devaluation at the end of 1994 (and, perhaps, since the Chinese devaluation earlier in that same year). Particularly in many less industrialized nations, wealth has vanished overnight. Holders of U.S. dollars have found themselves in increasingly privileged positions, able to gobble up cheap assets from Mexico to Thailand. The virus has now clearly taken hold of Brazil.

The World: Was the U.S. Involved? – TIME

The World: Was the U.S. Involved?
TIME - Monday, October 01, 1973

The U.S. has a long and mostly inglorious history of meddling in the internal affairs of Latin American nations. Thus it came as no surprise to Washington that the Chilean junta’s overthrow of President Salvador Allende sparked a flurry of angry charges that either the CIA or the White House had somehow engineered the coup. At a special meeting of the United Nations Security Council called by Cuba to protest attacks by Chilean troops on its embassy in Santiago during the coup, Cuban Ambassador Ricardo Alarcón y Quesada charged: “The trail of blood spilled in Chile leads directly to the dark dens of the Central Intelligence Agency and the Pentagon.”

Vigorena’s charges seemed to be bolstered by Washington’s lack of concern at Allende’s fall. President Nixon sent no message of condolence to Allende’s widow—a customary gesture on the death of an elected head of state. Nor did the Administration lament the demise of the democratically elected government in Chile. “We will have to work with the generals,” said a State Department spokesman, “and it makes no sense to issue some moral statement about democracy.” On top of all that, world suspicions were aroused by the department’s admissions that it had known beforehand about rumors of a possible coup—not that this would have been much of a surprise to anyone, presumably including Allende.
…
Charges have been made, however, that Washington played a large and possibly crucial role in Chile’s economic difficulties. Pressure from Washington on such institutions as the World Bank seriously aggravated Chile’s fiscal crises. As Latin American Experts James F. Petras and Robert LaPorte Jr. noted in Foreign Policy magazine, “Dominican style ‘gunboat diplomacy’ has been replaced by ‘credit diplomacy.’ “ …

…

PURE PROPAGANDA: U.S. as an island of supply

The High Plains Journal reports that the U.S. is an island of supply for world grain demand.

The U.S. is an island of supply for world grain demand
August 16, 2010

U.S. grain farmers are in the middle of a unique situation with record crop production and record crop demand.

The U.S. Department of Agriculture’s National Agricultural Statistics Service Aug. 12 crop report was up across the board for corn, soybeans, and wheat. Corn production was up two percent, soybeans up two percent, and all wheat up two percent.

The big news was in the wheat market and the situation in Russia where the worst drought in 130 years has decimated their spring wheat crop.

“The Former Soviet Union numbers today were breathtaking,” said Jerry Gidel, North American Risk Management Services, speaking from the Chicago Mercantile Exchange. “We have not seen that kind of adjustment from USDA in quite some time.”

USDA dropped the projected Russian wheat crop by 8 million metric tons, a record drop from July to August crop reports. The Ukraine crop was downgraded by 3 million tons.

“This was a very interesting report that really shows the U.S. as an island of supply,” said Dan Basse, AgResource Company, also speaking from a press conference at the CME.

“We have a record large corn yield, record large soybean yield and they will be needed,” Basse said. “At the same time USDA raised the U.S. spring wheat yield and gave us an additional 48 million bushels bumping up that crop.”
…

The Delta Farm Press reports about record corn and soy crops.

Record corn, soy crops: USDA
Aug 12, 2010 9:14 AM, By Elton Robinson, Farm Press Editorial Staff

Corn production is forecast at a record high 13.4 billion bushels, up 2 percent from the previous record set in 2009. Soybean production is forecast at a record high 3.43 billion bushels, up 2 percent from last year.

USDA is projecting record production the U.S. corn and soybean crops, with several states reporting record highs for yield.

In its Aug. 12 Crop Production report, USDA also projected a U.S. cotton crop of 18.5 million bales, based on a record crop developing in Texas.

Corn

Corn production is forecast at a record high 13.4 billion bushels, up 2 percent from the previous record set in 2009. Based on conditions as of Aug. 1, yields are expected to average a record high 165 bushels per acre, up a fraction of a bushel from last year’s record of 164.7 bushels.
…

Soybeans

Soybean production is forecast at a record high 3.43 billion bushels, up 2 percent from last year. Based on Aug. 1 conditions, yields are expected to average 44 bushels per acre, unchanged from last year’s record high yield. …

Cotton

Cotton production is forecast at 18.5 million bales, up 52 percent from last year’s 12.2 million bales. Yield is expected to average 837 pounds per harvested acre, up 60 pounds from last year. Upland cotton production is forecast at 18 million bales, 53 percent above 2009. …

Rice

U.S. rice production is projected 245.88 million hundredweight, an 11 percent increase over last season. Average yields are projected at 7,039 pounds per acre. Yields are projected higher than last year for all the Mid-South states, while lower yields are projected for Texas and California.

Peanuts

Peanut production is estimated at 4.04 billion pounds, a 9 percent increase over last season. Yields are projected to average 3,204 pounds per acre on 1.26 million acres.

Wheat

Wheat production, at 2.26 billion bushels, is up 2 percent from the July forecast and up 2 percent from 2009. Winter wheat production is forecast at 1.52 billion bushels, up 1 percent from last month and up slightly from 2009.

Jump In Estimate Soybean Production

Table below shows USDA’s huge jump in estimate soybean production between July and August.

Table 07: Soybeans: World Supply and Distribution

Thousand Metric Tons
Date Created 8/12/2010 11:50:38 AM

The Reality

Business Week reports that corn and soybean crops may miss forecasts.

Corn, Soy Crops May Miss Forecasts After Too Much Heat, Rain
August 16, 2010, 12:54 PM EDT
By Jeff Wilson

Aug. 16 (Bloomberg) — U.S. corn and soybean crops, the world’s largest, may be smaller than the government estimated because of unusual weather across the Midwest, said Mark Schultz at Northstar Commodity Investment Co. in Minneapolis.

In Iowa, the biggest U.S. corn- and soybean-producing state, June was the wettest on record, July was the fifth- wettest, and the first 13 days of August had more than 10 inches (25 centimeters) of rain in some areas, or four times normal, the Iowa State Climatologist said. Parts of the growing region had the second-hottest start to August since 1960, after a month of mostly dry weather, T-Storm Weather LLC said.

“The crops are smaller because of the flooding in the northern Midwest, and the hot, dry weather across the south” that reduced ear size and soybean pods, said Schultz said from Minneapolis on Aug. 13. “The extreme weather caused more variable crops and not record yields.”

Corn futures have jumped 19 percent since the end of May, touching a 13-month high on Aug. 5, and soybeans rallied 11 percent, even as the U.S. Department of Agriculture forecast the biggest harvests ever.

…
Reduced Yield Potential

Corn plants that farmers will begin harvesting next month are maturing 25 percent faster than the five-year average, and the rate of pod development by soybeans is 4 percentage points above normal, USDA data show. Rapid development reduces yield potential, Schultz said.

Midwest temperatures have averaged more than 6 degrees Fahrenheit (10.8 degrees Celsius) above normal in the past 30 days, according to the High Plains Regional Climate Center in Lincoln, Nebraska.

That hot weather probably prevented corn plants from turning sugars into kernel starch and damaged pod filling for soybeans, said Terry Jones, who farms more than 6,000 acres near Williamsburg, Iowa, and is vice president of Russell Consulting Group in Panora, Iowa.

The average number of ears in the 10 largest producing states was the second highest behind the record plant populations in 2009, USDA said Aug. 12. The government’s implied average weight for corn ears is too high, and flooding has stunted late development and increased plant diseases in both corn and soybean crops, Jones aid.

Smaller Ears

“The ear length has tipped back,” reducing the number of kernels on each cob, Jones said. “The biggest weather problems are centered in the biggest producing states,” reducing the chances that farmers will get record yields for a second straight year, Jones said.

…

[It is really annoying to hear about horrendous crop losses and record harvests in the same article.]

Record Crops

The USDA predicted a corn crop of 13.365 billion bushels, based partly on surveys of farmers in July and August and field observations. That’s up 1.9 percent from last year’s record harvest of 13.11 billion, when cool temperatures boosted yields. Corn yields will rise to 165 bushels an acre from 164.7 bushels last year, the department said Aug. 12.

Production of soybeans, the second-largest U.S. crop after corn, will reach a record 3.43 billion bushels, up 2 percent last year, the USDA said. A record 77.7 million acres was planted this year. The USDA said yields will be 44 bushels an acre, the highest-ever August prediction by the government and the same as last year’s record.

The U.S. corn crop was valued at $48.6 billion in 2009, followed by soybeans at $31.8 billion, government figures show. The U.S. is the world’s biggest exporter of both crops.

Whig.com reports that Illinois wheat harvest one of smallest in state’s history.

Illinois wheat harvest one of smallest in state’s history
Published: 8/13/2010 Updated: 8/13/2010
By DEBORAH GERTZ HUSAR
Herald-Whig Staff Writer

Russia’s worst drought in a century has pushed U.S. wheat prices to a two-year high, but Illinois farmers produced one of the smallest wheat crops in history.

“It was probably the worst I’ve ever seen,” said Mike Roegge, crop systems educator in the University of Illinois Extension Adams/Brown Unit.

Wet weather last fall triggered problems that lasted throughout the growing season. With delays in harvesting corn and soybeans, “very few acres got planted,” Roegge said. “When you seed late, you don’t get a lot of tillering in the fall. If there’s not a lot of tillering, there’s not a lot of heads for yield.”

Sunny spring conditions could have spurred more tillering, but instead, it rained and rained. The rain spurred disease in what heads were on the crop which decreased potential yield, lowered test weights and cost farmers at the elevator.

“It wasn’t pretty for guys who had wheat,” said Quincy farmer Kent Deege, who hasn’t planted wheat in at least six years.

Wheat acreage statewide fell to 350,000 acres this year down from 850,000 in 2009 because of the harvest delays, but many Illinois farmers already bypass wheat in the crop rotation.

…
[AGAIN, It is really annoying to hear about horrendous crop losses and record harvests in the same article.]

Sanow expects the United States, which will produce about the same amount of wheat it did last year on fewer acres, and countries such as Argentina to make up for the drop in exports from Russia on the world market. “There’s plenty of wheat. We can make up for the losses from Russia,” he said.

But U.S. bread prices and other wheat-related products could still see a price increase in the near future. “It just depends on how long the price increases (on wheat) continue,” Sanow said.

Kansas City reports that despite heat, record kansas corn crop likely.

Despite heat, record Kansas corn crop likely
The Associated Press

TURON, Kan. For some Kansas farmers, this year’s fall harvest will be either feast or famine.

Sure, Kansas is looking to become a corn state, with farmers expected to harvest the biggest corn crop ever with 692.2 million bushels, according to the Kansas Agricultural Statistics Service. Moreover, some of the state’s elevators could bin more corn than the state’s staple crop of wheat this year.

…
The Kansas Agricultural Statistics Service also reported last week that fall crop conditions continue to decline because of the heat and lack of moisture. The corn crop, 15 percent ahead of the five-year average, is rated as 9 percent poor, 28 percent fair and 63 percent good to excellent by the KASS. About 60 percent of the soybeans and milo are estimated at good to excellent.

“There are some areas where the corn is burning up and the grain sorghum is showing signs of intense heat stress,” said Kent Martin, a southwest Kansas agronomist with Kansas State University Research and Extension. “What hurt us the worst with a lot of these crops, when we were pollinating a lot of these crops it was in the 100-degree weather.”

The heat stress could mean lower test weights, he said.

While some corn and grain sorghum crops are hanging on, Martin noted soybeans are suffering.

Tom Giessel, who farms in Pawnee County, said the last decent rain came Fourth of July weekend when his fields received 1.40 inch. A sporadic rain left about a half inch on some fields mid-July.

“But we’re going a month now without rain combined with 100-degree temperatures and scalding winds,” he said.

…
The 2010 Kansas wheat crop is pegged at 369 million bushels. Farmers are expected to reap a record 692.2 million bushels of corn, which would surpass last year’s record crop of 598.3 million bushels, according to KASS.
…

Agriculturecom reports about corn inventories shrinking.

Corn inventories shrinking
Dow Jones Newswires 08/17/2010 @ 5:20pm
DJ US Cash Grain Review: Corn Inventories Shrinking
Gary Wulf – DJ – 1 hr 2 mins ago

CHICAGO (Dow Jones)– Commercial inventories of cash corn are shrinking as bullish farmers forestall old-crop sales in the midst of a steady price rally that has already driven the value of the nation’s most important feed grain to 8-month highs.

The USDA said stockpiles of cash corn at surveyed grain elevators, terminals, ports and warehouses dropped more than 6% during the past week, standing in sharp contrast to expanding supplies of wheat, soybeans and sorghum.

Cash corn basis has climbed at the U.S. Gulf grain market this week, commensurate with the drawdown in pipeline supplies.

Although official USDA figures show CIF bids for immediate deliveries of corn to New Orleans area ports only 3-5 cents a bushel higher on the week, premiums jumped up to 12 cents per bushel at isolated ports, to premiums of as much as 58 cents over September CBOT corn futures Tuesday. Barge basis bids have also risen by 2 cents for soybeans and 5 cents for grain sorghum, but have declined by 5 cents for soft red winter wheat on the week.

Cash contracts of U.S. corn and soybean futures settled 7 1/2 and 11 1/2 cents higher, respectively, on Tuesday, although spot wheat futures were off almost 5-13 cents.

Doane Agricultural Services pointed out that USDA crop condition reports published this week in both Iowa and Illinois mentioned observations of sudden death syndrome disease in local soybeans.

“Agronomists at Iowa State [University] are noting that they are finding the prevalence [of the fungus] to be the first or second most, since it was first identified in 1994,” said the service. “That and other diseases may expand rapidly under the current weather conditions, resulting in some disappointment in yields versus earlier expectations. This news is getting more market attention, and likely contributed to gains today.”

The disease routinely reduces yields in severely affected fields by 10 to 30 bushels an acre.
…

The Delta Farm Press reports about soybeans pressed by heat and worms.

Soybeans pressed by heat, worms
Aug 10, 2010 2:10 PM, By David Bennett, Farm Press Editorial Staff

Some Arkansas soybean fields are experiencing a bollworm outbreak. Some growers have had to spray twice and are likely going to have to treat a third.

Into the second week of August, there are two big things facing Arkansas’ soybean farmers.

“First, is the high heat,” says Jeremy Ross, Arkansas Extension soybean specialist. “Usually, 86 degrees is optimum for soybeans. We’ve been well above that for several weeks — 20 degrees in some places.

“Even though a lot of our acreage is irrigated, it’s still susceptible to heat stress. With irrigation, you’re able to eliminate a bit of that stress but it’s still evident, especially once temperatures are over 100 degrees. I’ve had calls from farmers worrying about blooms and smaller pods being shed.

“Second, fields are experiencing a bollworm outbreak. Some growers have had to spray twice and are likely going to have to treat a third. The bollworms have been very bad.”

…
What about yield outlook?

“I got a report on some beans already harvested a few days ago out of Chicot County. That was a dryland field, an early Group 4, that made around 35 or 40 bushels. [USDA predicts average yields of 44 bushels]

“Balance that out with a couple of calls I got a week ago from producers wondering about the best way to plant so late. If they go through with it, it’ll be November before those beans will even be close to done. That means harvest will be spread out over several months.

…
“It would be so beneficial if we could just get some rain and break this cycle of 95-plus degree days.”

Benzinga reports about a bull market no one is talking about.

A Bull Market No One is Talking About?
By optionsXpress_
Created 08/09/2010 – 09:55

Fundamentals

With Wheat futures grabbing all the headlines this summer, as the severe drought in eastern Europe and Russia have severely lowered the potential output from this year’s Wheat harvest, another member of the grains complex, Soybeans, is also participating in a bull market run. New-crop November Soybeans are hovering near their highest levels of the year, somewhat on the back of Wheat’s rapid climb, but also due to their own bullish fundamentals. Well above normal temperatures in the southern sections of the Soybean growing regions of the U.S. have arrived during the key pod setting stage. Too much heat during this stage can ultimately affect yields and force traders to lower production estimates. Even a slight decline in average yields could greatly affect the upcoming season’s carryout totals, which is especially important given the current tight old crop Soybean inventories in the U.S. Soybean exports have remained solid, with a weaker Dollar and strong Chinese demand keeping bean exporters busy. Increases in demand for soy products such as meal and oil could also lend support to Soybean prices, with production issues for the oil seed crop in Eastern Europe and Canada potentially increasing U.S. bean oil exports. Soybean meal futures have been trading in a backwardation term structure, where nearby futures are trading at a premium to the more deferred futures all the way out to the May 2011 contract, which is viewed as a bullish signal to many long-time grain traders who follow the adage “to never sell short a market that moves into a backwardation”. …

Newagtalk.com provides pictures of just how bad things look.

Bottom of Form

dgv959
Posted 8/16/2010 16:34 (#1318187)
Subject: crop pics from air today

Washington, IA

Freind of mine who farms, also has crop dusting license has been telling me we gotta go up so I can see just how bad things look. 07,08 and 09 seia recieved around 150% normal precip and sound N management gave us above trend corn yields. Thats not gonna be the case this year. Since May 1st I’ve recorded 37.1″ of rain, 14.1″ in June alone which is really what did us in. Most of the N applied before July 1 was gone. Fields that looked great June 1st turned yellow in July and is now canniblizing sp? itself. I am not a “glass is half empty” kind a guy but I would estimate 90% of corn fields in seia are showing serious N defficiancy and will major dissapoint at harvest. Play around tilting your screen for best results.

——————————– ——————————–

pics 6&7 tipical not the exeption like most years

9 lots of these in seia

10 yes this 40 was planted although we saw some PP fields

11 severe N def

12 wettness severe enough to kill the corn

13 more N def

14 not even pattern tile helped

15 very tipical of whats out there

17 yellow sb strips- roundup “flash” from sprayer overlap

18 1 round too many with that tank of pre-plant Nh3

20 Skunk river between Brighton and Coppock

21 SDS is gonna take its toll in seia this year

(2010_0816summer2010cropsarial0006 (Small).JPG)

(2010_0816summer2010cropsarial0007 (Small).JPG)

(2010_0816summer2010cropsarial0009 (Small).JPG)

(2010_0816summer2010cropsarial0010 (Small).JPG)

(2010_0816summer2010cropsarial0011 (Small).JPG)

(2010_0816summer2010cropsarial0012 (Small).JPG)

(2010_0816summer2010cropsarial0013 (Small).JPG)

(2010_0816summer2010cropsarial0014 (Small).JPG)

(2010_0816summer2010cropsarial0015 (Small).JPG)

(2010_0816summer2010cropsarial0017 (Small).JPG)

(2010_0816summer2010cropsarial0018 (Small).JPG)

(2010_0816summer2010cropsarial0020 (Small).JPG)

(2010_0816summer2010cropsarial0021 (Small).JPG)

Pakistan’s monsoon floods one of the worst natural humanitarian disasters in modern history

The Vancouver Sun reports that floods threaten fabric of the Pakistan state.

Floods threaten fabric of the Pakistan state
As 14 million people lose their homes and disease lurks, anger grows toward a government ill-equipped to handle crisis
By Jonathan Manthorpe, Vancouver Sun August 11, 2010

As local and international agencies struggle to comprehend the magnitude of the humanitarian crisis caused by Pakistan’s monsoon floods, there is as much concern for the potentially explosive political effects in the strife-rived country at the hub of a volatile part of the world.

At least 14 million of the country’s 170 million people have been made homeless and 1,500 killed as flood waters fuelled by torrential monsoon rains have raged down river valleys, overwhelmed dikes, destroyed much of the agricultural heartland and left huge swaths of the country submerged in foul and murky water.

The United Nations says it is one of the worst natural humanitarian disasters in modern history, eclipsing the 2004 Asian tsunami and the recent Haiti earthquake put together.

And it seems there is more to come.

While the misery, lack of food, water and shelter and the impending threats of starvation and disease grow more pressing by the hour for the millions struggling to survive the flood waters, forecasts are for more heavy rain, especially in northwestern Pakistan from where it will cascade down into the central and southern plains.
…

2010 Food Crisis

Glgroup.com asks that How Long Will Food Prices Rise – And How High?

How Long Will Food Prices Rise – And How High?
August 16, 2010

Summary

Wheat prices have shot up. Is this a permanent increase or just a short, quick burst in prices that should settle down soon? While there’s no doubt that long-term demand for wheat and other agricultural products is increasing, it’s not clear how successfully supply will be able to keep up. And if people perceive that supply won’t keep up, we could even face a panic.

Analysis

Wheat Prices just increased the most in 51 years. This isn’t just a temporary spike. It’s because of increasing demand as well as reduced supply.

China, India and other emerging markets are growing and demand for more and better food is on the rise on the part of the people living there. In addition, weather has not cooperated in many parts of the world, most especially in Russia and China. In fact, Russia has suspended exports of grain, because they are concerned they will soon need it to feed their own citizens. Their reduced crop production means supply may not meet domestic demand.

The biggest increase in demand comes from China. And recently – for the first time – China became an importer of wheat. As their economy grows and they become more prosperous, their people want to eat better. Part of eating better means more meat. And grains are used to feed animals. So the pressure builds for more grains not only to directly feed the people, but also to feed more animals to provide the meat people desire.

As a result, on a trend basis, we’re looking at long-term increasing demand. And in the short to longer term, reduced supply.

Before we get too panicky, let’s think back a couple of years to the last spike in agriculture prices. Food prices didn’t go up as much as some people said they would a couple of years ago. Not that food doesn’t cost more than it used to. It’s just that what people perceive and what’s really going on are sometimes two different things.

…
Will we see prices shoot up, then fall back quickly? Well, because of the permanently increasing demand, we may be looking at a serious and permanent rise in prices. How much prices rise depends on the ability of producers and distributors to keep up with the demand. Again, remember, wheat and other grains are used to make not only products like bread and cereal, but it’s also used for feeding animals. That covers a big part of our total food supply.

Now, food prices haven’t significantly reacted to all this yet. It may take weeks, maybe months, assuming these skyrocketing wheat prices hold up.

But there is one worry here we need to keep our eyes on. The way prices work has as much to do with perception and anticipation as it does with the actual supply and demand. It’s not just a matter crunching numbers: so much supply/so much demand. If people begin to fear that wheat prices – and other grains – are going to continue to rise, possibly rise dramatically, then consumer food prices may soar.

So while logic tells us not to panic, it’s important to remember that logic doesn’t always rule people’s emotions. And while logic ultimately should determine prices, it’s equally true that people’s emotions can drive prices far higher and for far longer than might make any kind of sense.

If we base what’s happening now on what happened a couple of years ago, we may face a shorter-term spike in prices driven by emotion. On the other hand, if emotions get carried away and supply really can’t keep up with demand over the short term, we may have a more serious situation on our hands.
…

Bloomberg reports that Wheat, Corn Stockpiles Dwindle as Russia Drought Curbs Output.

Wheat, Corn Stockpiles Dwindle as Russia Drought Curbs Output
By Jeff Wilson and Whitney McFerron – Aug 12, 2010

The world’s appetite for meat, flour and ethanol is expanding faster than the supply of the crops needed to produce them, eroding inventories and increasing the chance of accelerating food prices.

…
“The world doesn’t have enough exportable supplies to meet demand” for wheat and feed grains, said John Macintosh, 61, a vice president at Rand Financial Services Inc. in Chicago who has been trading agricultural commodities since he was with Continental Grain in 1973.

Russia, the third-largest wheat exporter last year, will ban shipments starting Aug. 15 after concluding that its grain harvest may plunge 38 percent this year to 60 million metric tons. Dmitry Rylko, a director at the Moscow-based Institute for Agricultural Market Studies, said yesterday that the estimate may be cut further because of the worsening drought.

…
Food Crisis

Pakistan may be forced to import more grain as the deadliest floods in the nation’s history damaged more than a million acres of sugar cane, cotton and rice fields and caused 250 billion rupees ($2.9 billion) of agricultural losses, including losses of wheat, animal fodder and livestock.

“We might see higher grain trade across the globe” as Pakistan steps up purchases, said Amol Tilak, a senior research analyst at Kotak Commodity Services Ltd. in Mumbai.

Another global food crisis is possible if wheat drives the prices higher for other staples, according to Franciscus Welirang, chairman of the Flour Mills Association in Indonesia, the nation’s largest buyer of the grain.

“There will be a domino reaction, and we expect corn demand will rise, pushing prices higher, and feed industries will buy more corn and soybeans,” Welirang said on Aug. 6. “It’s the end of cheap wheat.”

…
Miracle Needed

“It has the potential to be very explosive the next five weeks because by then we will know if Russia gets enough rain to plant its winter-grain crops,” Rand Financial’s Macintosh said. “It will take a miracle for Russia to get enough rain to get winter crops fully established” before freezing temperatures arrive at the end of September, he said.

“Russia is not going to let any food out of the region,” he said. “Wheat, barley, corn, oilseeds, hay or potatoes that were going to be harvested from July to October have been severely damaged. No one is prepared for this shortfall.”
…

The Market Oracle reports that soaring wheat price lifting the whole global grains market higher.

Soaring Wheat Price Lifting the Whole Global Grains Market Higher
Aug 16, 2010 – 04:53 PM
By Ned W Schmidt

…
Real cause of higher wheat prices, as well as higher grain prices in general, is world’s just in time inventory approach to Agri-Food. Most nations and food businesses operate as if the world was awash in Agri-Food. Just in time inventory management works with continuous manufacturing processes. It is doomed to regular failure given annual batch production of Agri-Food.
…
We need to acknowledge some realities of Agri-Food. The world does not have as much Agri-Food as many believe. In less than a month without wheat production somewhere in the world, shortages would develop. Given the current situation, wheat shortages are possible at the beginning of the new year. Second, while technology can enhance Agri-Food production, it cannot make wheat grow without water. Third, the iPad is cool, but it cannot produce food.

At what price will wheat sell in ten years? Is US$18 a bushel possible? Corn perhaps at $11? In a price inelastic world such as is now the case for Agri-Food, prices will be far higher than historical precedent suggests. Many remain mired in the eras of bounty now part of history. Let your thinking become freer by reading The Joy of Agri-Food Price Inelasticity. Perhaps then you will be able to feed your family when palm oil is US$2,100 a ton and eggs are US$2.50 a dozen at wholesale.

Fox News reports that record number of Americans are receiving food stamp benefits.

Record Number of Americans Receiving Food Stamp Benefits
Published August 05, 2010 FoxNews.com

The number of Americans receiving federal aid through the Supplemental Nutrition Assistance Program, commonly known as food stamps, soared to a record 40.8 million in May, according to government data released shortly before the Senate voted to cut billions from the food stamps budget.

The Senate voted Thursday to cut $12 billion from the program in order to help fund a $26 billion package to help states avoid teacher layoffs.

But according to U.S. Department of Agriculture figures, the number of people on the food stamp rolls has been growing to record levels for 18 straight months. Nearly $5.5 billion in aid went out to beneficiaries in May alone. The number of May recipients marked a 19 percent increase from a year ago.

“That is a historic high,” USDA spokeswoman Jean Daniel said.

The sustained increase in food stamp recipients coincides with sustained high unemployment. The jobless rate dipped to 9.5 percent in June, but has hovered above 9 percent since mid-2009.

Daniel said the food program was intended to take in lots of people during times of economic hardship.

“That’s exactly the way the program was designed many years ago — it was designed to expand and contract based on economic conditions,” she said.

Daniel said the department does not have projections showing when the increase might level off, but he cautioned that reductions in enrollment typically lag behind changes in the unemployment rate. If the jobless rate goes down, it could take several months before the number of food stamp recipients falls accordingly.

Daniel said many of the recipients are unemployed and have never gone on food stamps before in their lives.

“This is really low-income and people who are very much in need,” she said.
…

The Huffington Post reports that one of every seven Americans on Food Stamps.

‘No Precedent’ For Proposed Cuts To Food Stamp Benefits
First Posted: 08-17-10 10:16 AM

To help prevent a pair of domestic spending bills from adding to the national budget deficit, Democratic leaders in the Senate have proposed cuts to future food stamp funding, saving $14.1 billion over 10 years.

…

In April 2009, the American Recovery and Reinvestment Act boosted monthly benefits under the Supplemental Nutrition Assistance Program (formerly known as the Food Stamp Program) by 13.6 percent. As economic misery has worsened, participation in SNAP has risen since then from 34.4 million to 40.8 million as of May 2010. That’s one of every seven Americans.
…

My reaction: The world is at the edge of disaster and most people don’t have a clue.

I have been publishing my “major article” on http://www.thefinalfraud.com.

Two important points:

1) It is not free. It is $15 for limited access (the first third) and $50 for full access.

2) It is not yet finished. Most of the material is up, but it needs to be organized. It will probably take another week of updates to be done.

——————————– ——————————–

As soon as I feel it is finished, I will make another update on MarketSkeptics.com

I have been publishing my “major article” on http://www.thefinalfraud.com.

Two important points:

1) It is not free. It is $15 for limited access (the first third) and $50 for full access.

2) It is not yet finished. Most of the material is up, but it needs to be organized. It will probably take another week of updates to be done.

——————————– ——————————–

As soon as I feel it is finished, I will make another update on MarketSkeptics.com

I have been publishing my “major article” on http://www.thefinalfraud.com.

Two important points:

1) It is not free. It is $15 for limited access (the first third) and $50 for full access.

2) It is not yet finished. Most of the material is up, but it needs to be organized. It will probably take another week of updates to be done.

——————————– ——————————–

As soon as I feel it is finished, I will make another update on MarketSkeptics.com

The New York Times reports about S.& P. and Moody’s use of inaccurate rating models.

Documents Show Internal Qualms at Rating Agencies
By SEWELL CHAN
Published: April 22, 2010

… A Senate panel will release 550 pages of exhibits on Friday — including these and other internal messages — at a hearing scrutinizing the role S.& P. and the ratings agency Moody’s Investors Service played in the 2008 financial crisis. …

The investigation, which began in November 2008, found that S.& P. and Moody’s used inaccurate rating models in 2004-7 that failed to predict how high-risk residential mortgages would perform; allowed competitive pressures to affect their ratings; and failed to reassess past ratings after improving their models in 2006.

The companies failed to assign adequate staff to examine new and exotic investments, and neglected to take mortgage fraud, lax underwriting and “unsustainable home price appreciation” into account in their models, the inquiry found.

By 2007, when the companies, under pressure, admitted their failures and downgraded the ratings to reflect the true risks, it was too late.
…

NPR reports about blaming the credit ratings agencies.

Economy Got You Down? Many Blame Rating Firms
Alex Blumberg and David Kestenbaum
June 5, 2009

If you’re looking for someone to blame in the collapse of the global economy, one popular punching bag is the credit ratings agencies. Firms like Moody’s, Fitch and Standard and Poor’s are supposed to let investors know whether bonds are particularly risky or relatively safe.

Ratings agencies gave their triple-A rating, the highest ranking, to many bonds backed by home mortgages — the same bonds we now call toxic assets. Grouping those bonds among the safest investments allowed trillions of dollars to flow into the housing market, which in turn created the housing bubble.

It’s hard to overstate the ratings agencies’ role in the worldwide financial system. They’ve been around for a century, assigning a letter grade to everything from railroads to school districts, even entire countries. …

Those Marvelous Ratings

Jim Finkel also wondered about those computer models and the ratings they helped produce. He works for a company called Dynamic Credit and helped put together complex bonds called collateralized debt obligations, which were made up of mortgages. Finkel profited from the AAA ratings, but he says the ratings agencies’ blessings seemed too good to be true.

“They should have just said, ‘You know what? We just don’t have enough information about this stuff to ascribe a rating to it,’ ” he says. “There were ratings that we saw that made no sense to us.. We marveled at the ratings that all of these CDO products got.”
…

THE REALITY: Up until 1994, Rating agencies were extremely conservative in their estimates. However, RTC and FDIC, in an effort to sell billions in toxic mortgage-backed securities, devised their own overly optimistic method estimating defaults. Inaccurate rating models came straight from the federal government, and rating agencies adopted them because they didn’t have a choice.

The proof of this reality comes directly from the FDIC’s website

After the savings and loan crisis, the FDIC conducted a study on the challenges faced by the FDIC and the RTC in resolving troubled banks and thrifts during the financial crisis of the 1980s and early 1990s. The result was a two book publication, Managing the Crisis.

Managing the Crisis: The FDIC and RTC Experience

www.FDIC.gov/bank/historical/managing/history1-16.pdf

(If link goes dead, I will replace it)

Given the importance of careful auction planning, coupled with the need to accurately determine risk exposure, the RTC devised a method to project each transaction termination date and to estimate realized losses. A model was developed to project cash flows for each transaction using available information on prepayments, delinquencies, defaults, and losses. It provides an estimate of credit reserve losses, termination dates, year-by-year cash flows, reserve funds, and residual values for each securitization. …

At the time of the closing, loss estimates for each securitization were provided by the RTC-FDIC financial adviser and by the rating agencies. In 1994, the RTC began to generate loss estimates using the model. In May 1996, the FDIC compared actual and expected loss estimates from the various sources. The comparison showed that the rating agencies were extremely conservative in their estimates, when compared to estimates by the model and the financial adviser. For example, rating agency-expected losses on the Multi-Family Securitization Program as a percentage of unpaid principal balances averaged approximately 29 percent, the FDIC model loss estimates averaged 12 percent; the financial adviser estimated losses to be 7 percent, and the actual realized losses were approximately 7 percent. Overall, the losses and recovery rates that were initially estimated by the rating agencies were severely overstated for the RTC-FDIC securitization program, …

Will finish tomorrow. The website where I am going to publish final paper is:

http://www.thefinalfraud.com

… What is going to happen next is simple:

A) Prices will rise driven by growing shortages.
B) The fear of price collapse in soybeans will fade away and doubts about the USDA will grow (ie: “if the USDA’s numbers are right, why are prices still going up?”). As end-users try to get out of their underbought and oversold positions, the price rises will accelerate.
C) Panic explodes as faith in USDA numbers collapse. Everyone becomes a spot buyer.

Stage A of the food crisis (shortage-driven price spike) has occurred. Now we are entering stage B (confusion, growing doubts in government estimates, accelerating price rises). This is confirmed by Kory Melby, who asks the question I have been waiting for: Where Are the Soybeans?

Where Are the Soybeans?
29 Jul 10

Cash soybean bids remain firm in the interior of Brazil.

Soybean crushers do not have enough soybeans to make it until November.

Soybean crushers are bidding a negative margin to secure cash soybeans.

Exciting Stuff Happening In Grain Markets
Modbee reports that wheat prices surged in July by the biggest amount in a half-century.

DROUGHT SENDS WHEAT SKYROCKETING
last updated: July 30, 2010 11:05:52 PM

Wheat prices surged in July by the biggest amount in a half-century as severe drought in Russia and other former Soviet republics destroyed grain crops.

• Wheat prices rose $1.97 a bushel, or 42 percent, this month and are at their highest level since September 2008.
…

Agweb reports about exciting stuff happening in grains.

Strong Market Closes Mark Uptrend
7/31/2010
By Linda H. Smith

“We have exciting stuff happening in grains,” says Jerry Gulke of the Gulke Group. “You almost have to see it on paper to believe it. I don’t remember when I’ve seen all commodities look this bullish at once.”

Gulke learned long ago that you can’t argue with the technicals—the charts often tell you something is going on in the markets that you can’t readily appreciate in the fundamentals. The charts for wheat, corn, soybeans, bean oil and maybe bean meal all are now long on both a weekly and monthly basis, he says. “This generally means we will see an upward bias for the next 12 to 18 months.”

“It could be we are in about the same situation we were in 2008,” says Gulke. “Now, we need something catastrophic to happen to not be in a bull market.”
…

AP reports that wheat prices end July with huge monthly gain.

Wheat prices end July with huge monthly gain
By TALI ARBEL (AP) – July 30, 2010

NEW YORK — Wheat prices surged in July by the biggest amount in more than a half century as severe drought conditions in Russia and other former Soviet republics destroyed grain crops.

If the gains continue, U.S. shoppers could see a bump up in prices of cereals, breads and pastas made with wheat. American wheat farmers, meanwhile, are going to get a boost in income, said Scott Irwin, professor of agriculture at the University of Illinois, Urbana-Champaign.

Wheat prices have risen $1.97 a bushel, or 42 percent, this month and are at their highest level since September 2008. Its the biggest gain for wheat contracts according to records dating back to 1959, according to the Chicago Board of Trade.

With no immediate end in sight for the drought in Russia, wheat prices could continue to rally. That makes it more likely that the surging wheat could wind up affecting prices for bread, said Ephraim Leibtag, an economist with the USDA’s Economic Research Service.

The lack of rain and extreme heat in Russia has already destroyed about 20 percent of the country’s grain crop in key growing regions, according to Russian officials. Russia is a major exporter, but analysts say there are rumors that the country may cut off its exports, boosting demand for the remaining grain stocks in the U.S. and other major grains producers.

Droughts are also afflicting Kazakhstan and parts of Ukraine, while heavy rains have damaged the Canadian wheat crop. The Canadian Wheat Board estimated that the 2010-11 yield would be the lowest since 2002 because about 13 million acres were either left unseeded or destroyed by heavy rains.

Expectations for a global wheat crop smaller than last year’s helped propel prices for wheat up by 5.4 percent on Friday alone. September wheat rose 34 cents to settle at $6.615 a bushel.
…
“Undoubtedly this will be good news in Nebraska, out there in the West, on the Great Plains,” Irwin said. If farmers switch acreage from soybeans and corn to wheat, that could also drive an increase in the price of those commodities as supply shrinks, ultimately leading to higher meat prices for livestock producers and shoppers, he said.
…

Below is the latest from Nogger. (Again, visit Nogger’s blog to keep up to date about the 2010 food crisis. It has great coverage of everything agriculture.)

Friday, 30 July 2010
German Production Estimates Cut

Hamburg-based Toepfer have reduced their German crop production estimates quite sharply from last month saying that the cold winter delayed crop maturity. In addition “dry conditions in the last six weeks and the extremely high daytime temperatures have affected the yield potential of crops in many places,” they add.
…

Friday, 30 July 2010
Ukraine To Import Wheat In 2010/11?

Reports suggest that Ukraine will only manage to harvest “a maximum” of 8 MMT of milling wheat this year, well below domestic consumption of 11-12 MMT.

Having aggressively marketed and exported wheat of all grades throughout 2009/10 it will come as no surprise to hear that official records of milling wheat ending stocks from last season appear to have got lost in the post.

One report I am reading suggests that the cash-strapped Ukraine’s already have commitments to export 3 MMT of milling wheat this season.

The maths on this one certainly don’t add up. Even is this week’s hastily introduced new regulations on exports effectively bars this 3 MMT from leaving Ukraine will clearly run out of milling wheat by spring.

The country is estimated to produce 38-40 MMT of grains this year, down 13-17% from last season’s 46 MMT. …

Friday, 30 July 2010
What Will This Afternoon Bring?

You’d have expected a profit-taking month-end sell off normally, but things suddenly aren’t “normal” any more. Early calls for CBOT this afternoon are higher: corn up 2-4c, wheat up 8-10c, soybeans up 6-8c. …

Friday, 30 July 2010
What Will Tomorrow Bring?

Sharply higher global wheat plantings based on these prices that’s for sure. Is anyone reading this old enough to remember the dim and distant past of 2007/08? What a year that was, you’ll never believe it right, what happened was prices went through the roof just like now. …

Friday, 30 July 2010
IGC Issue Revised Export Figures

[Propaganda efforts are getting increadibly desperate and obvious.]

The senile old duffers at the IGC have revised yesterday’s export numbers before the ink has even had time to dry.

They’ve just heard that there’s a drought going on in Russia, which they seem to think might have a negative import on exports out of the region this year.

They didn’t hear about the drought until today as the regular carrier pigeon they usually use is on holiday, and they’ve got a student in to cover for him.

They’ve dropped their July 2010-June 2011 Russian grain export estimate from yesterday’s 15.8 MMT to 13.4 MMT today. To help balance that they’ve upped US exports by 2.5 MMT to 82.9 MMT.

… Can you smell something funny?”

[USDA-lead propaganda is falling apart in the face of reality…]

Saturday, 31 July 2010
Wheat Monthly/Weekly Stats

It’s been a stunning month for wheat, with Friday’s impressive CBOT close apparently pushing wheat there to its largest monthly gain since 1959, with London and Paris wheat not too far behind:

Commodity Month Fri Cls Weekly Gain Monthly Gain
——————————————————————–
CBOT wheat Sep10 661.50 +65.25 (+10.9%) +181.25 (+37.7%)
Paris wheat Nov10 195.25 +15.50 (+ 8.6%) + 49.50 (+34.0%)
London wheat Nov10 142.50 + 8.55 (+ 6.4%) + 35.25 (+32.9%)
——————————————————————–
Paris corn Nov10 178.50 +10.50 (+ 6.3%) + 29.25 (+19.6%)
Paris rapeseed Nov10 367.25 + 0.50 nominal + 37.50 (+11.4%)
Paris barley Nov10 201.00 +11.00 (+ 5.8%) + 38.50 (+23.7%)
——————————————————————–

World buyers are having flashbacks to 2007 and 2008
Agweb reports that world buyers are having flashbacks to 2007 and 2008.

…
Wheat, once again posted the largest percentage gains overall in our table. Continued weather problems in the FSU and Europe are still fueling the rally in wheat. Now that the spec funds have painfully bought back all of their short positions in wheat, some have “got religion” and are aggressively buying the market in an attempt to make back the money they lost. World buyers are also having flashbacks to 2007 and 2008, when hoarding behaviors by net exporter countries made food staples like wheat and rice very expensive and hard to buy. On paper the world stocks of wheat are still much above 2007 levels, but once burned is twice shy as they used to say. …

Weather Woes Around the World

Agrimoney reports about signs of crop damage and lower yields in German.

German yield fears help wheat prices to new highs
By Agrimoney.com – Published 22/07/2010

Wheat prices hit their highest for nigh on two years in Europe, and rose above \$6 a bushel in Chicago, after farmers reported fears of yield losses of up to 20% in Germany because of dry weather.

Farming association Deutschen Bauernverbandes, or DBV, said that wheat yields in the European Union’s second-ranked producer of the grain would be “10-20% down on the year”.

Initial harvest results had shown signs of crop damage and lower yields, notably in areas with lighter soils, where the impact of this year’s prolonged dry weather had been particularly severe.

While the DBV did not make a production estimate, the decline implied by the data is greater than many of the forecasts so far being factored in. FO Licht analysts earlier this month estimated the German wheat crop at 24.86m tonnes, only 300,000 tonnes lower than last year’s.
…

Agrimoney reports that Argentine wheat joins list plagued by dry weather.

Argentine wheat joins list plagued by dry weather
By Agrimoney.com – Published 26/07/2010

Argentina has emerged as the latest country to face potential setbacks over wheat, with adverse weather threatening its recovery from a century-low in plantings.

“A new concern is bubbling up in Argentina. It is dry,” US broker US Commodities said, noting that 79% of the South American country’s intended wheat acreage had been planted as of last week. Typically, farmers have all but finished sowings by now.

The concerns were echoed by Rabobank analysts, who warned of a “great deal of uncertainty” regarding Argentina’s wheat crop, South America’s biggest, and one typically drawn on by regional importers such as Brazil.

“Dry conditions in some areas of the country, especially in the south and west of the wheat region, might prevent planting intentions from being fully realised,” the bank said.

Dry weather has already cut hopes for crops in the European Union, Western Australia and, in particular, Kazakhstan and Russia, sending wheat prices jumping on international markets.
…
More hot weather

… Russia and Kazakhstan, and potentially eastern Ukraine, are set for further hot and dry weather, with some areas forecast to receive temperatures of up to 108 degrees Fahrenheit (42 degrees Celsius).

“The forecast for the week does not remain optimistic… with a further rise of expected temperatures,” Agritel, the Paris-based consultancy, said, adding that temperatures in Russia had hit record highs on Saturday.
…

Benzinga reports that problems in grain producing regions.

… Corn/Wheat/ Soybeans are all trading significantly higher as the drought conditions in southern Russia continue and with little if any prospects of relief in the very near future. Summer crops require rain however, in Russia’s case, and in the case of Kazakhstan and the Ukraine the lack of grain during July has put the summer grain crops there in very real danger.

China and Canada have a very different problem which is the exact opposite of drought, these two countries have suffered heavy rains in the grain producing regions, which has limited farmer activity or has devastated what was planted. The strange weather patterns have succeeded in tightening world grain supplies. The grain market bears argue that there is a vast supply enough in fact to meet global demand and they are correct, for now. As long as there are no other problems regarding logistics, the industrialised world and I include the 2nd tier nations in this, will be able to feed themselves. There will not be a famine [Talk of famine means that stage C of the 2010 food crisis (Panic) is growing nearer]. However the important point I wish to make is that these reserves will be drawn down, taking the world into 2011 with limited grain reserves and high and rising prices. …

Abnormal US Weather Continues in 2010

In 2009, Farmers experienced the worst weather “Ever Seen” (see *****Worst Harvest Season Ever Seen***** ). The worst weather “Ever Seen” means exactly what it sounds like: the worst in living memory or recorded history. Reading about the 2009/10 harvest was a long series of horror stories. Farmers saw the worst drought ever seen, the most rain ever seen, the worst hail ever seen, the worst flooding ever seen, the earliest snow ever seen, etc…

Well, 2009’s abnormal weather continues in 2010. Bloomberg reports about the weather threat to U.S. crops.

Soybeans Rally to 12-Week High, Corn Gains as Dry Spell Hurts World Crops
By Jeff Wilson – Jul 30, 2010

…
Weather Threat

Prices also rose as heat and excessive rain threaten U.S. crops, Schultz said.

From Texas to Pennsylvania, temperatures will be as much as 6 degrees Fahrenheit higher than normal over the next two weeks, increasing stress on plants, said Gail Martell, the president of MartellCropProjections.com in Whitefish Bay, Wisconsin.

In the Midwest, the main U.S. growing region, the total rainfall during the past two months was probably the highest since 1960, after as much as 6 inches (15 centimeters) of rain moved east from South Dakota to Illinois in the past 24 hours, said Mike Tannura, the president of T-Storm Weather in Chicago.

The data point to the warmest and wettest June-July period since 1960, Tannura said today in a report to clients. With forecasts for a hot August, there is increasing potential for large swings in yields, he said.

“Too much rain and warm evening temperatures have caused widely variable crop conditions across the Midwest and in individual fields,” Northstar Commodity’s Schultz said. “It’s still going to be a good crop, but not as big as farmers were hoping for just three weeks ago.”
…

Agweb reports about the record breaking Midwest heat.

Strong Market Closes Mark Uptrend
7/31/2010
By Linda H. Smith
…
Behind the rally may be the hot summer nights, he adds. “Illinois has had the most consecutive 80-degree or more days in history, and it’s not cooling off at night. We are hearing from Drew Lerner (Global Weather) and Elwynn Taylor (Iowa State University) that it is hot nights that corn really doesn’t like. And there’s a chance of hot, dry weather in August. Trim 5% yield potential and that is a 650-million-bushel loss…

Beatrice Daily Sun reports that lush fields of corn and soybeans were reduced to dying stalks and shoots in a matter of minutes.

From the ground up
By Chris Dunker/Daily Sun staff writer Posted: Saturday, July 31, 2010 6:00 am

Nearly six weeks ago, lush fields of corn and soybeans across four Nebraska counties were reduced to dying stalks and shoots in a matter of minutes.

According to the U.S. Department of Agriculture’s Farm Service Agency, 125,000 acres of crops were destroyed during the June 20 hail storm across areas of Gage, Lancaster, Johnson and Pawnee Counties.
…
Harms watched his maturing corn crop be destroyed by golf ball and tennis ball-sized hail from his home on June 20.

He, like most other farmers, remarked that he had never seen anything like it as entire fields were destroyed, some with little evidence of a crop left behind.
…
Hasenkamp said the Gage County area has had yearly experience with severe hail damage to crops over the past four to five years.

“I’d say we’re more educated on what to expect because of our experience with it,” Hasenkamp said. “But this is by far the worst I’ve ever seen in my lifetime.”
…

Rapid City Journal reports about the worst grasshopper infestation ever seen.

Heavy outbreak of grasshoppers at work on West River fields
Jomay Steen, Journal staff
Tuesday, July 20, 2010 6:00 am

Every morning Doug Hlavka surveys the damage that a newly hatched plague of grasshoppers has set upon his cornfield and pastures.

“This is the worst infestation that I’ve ever seen,” Hlavka said.
…
Hlavka, 56, noticed the first hatchings about two weeks ago. The hoppers quickly moved into his pastures and fields to begin their ravenous work, he said.

“I lost 40 acres of alfalfa that I didn’t cut. I had 80 acres of corn that they’re eating up real fast. I’ve sprayed around its edges, but I’m waiting for an airplane to spray it,” he said.

His wife, Val, lost her flower and vegetable gardens to the insects. He estimates that in certain areas on his ranch, there are 30 grasshoppers resting on each square foot of land. They have covered the sides of his home, outbuildings and fence posts.

“My mother’s 84, and she says they’re the worst she’s ever seen,” Hlavka said.
…

The balance of power is shifting to exporters

Agrimoney reports that the balance of power is shifting to exporters.

Opinion: Egypt’s tiny wheat reversal is a big deal
23:37 GMT, Wednesday, 28^th July 2010, by Agrimoney.com

The wheat market just crossed a rubicon.

Ever since the grain’s last rally petered out two years ago, weakened by a bumper crop and global recession, importers have held all the cards. It is less than two months Chicago wheat slipped below $4.30 a bushel, nearly its lowest for three years, as buyers sat on their hands.

Egypt’s relaxtion of import rules only introduced last year shows that the balance of power has shifted a long way back to exporters.

Allowing France to ship in 30,000-tonne volumes rather than the 60,000-tonne panamax standard is a more significant reversal than it first appears.

Why the concession?

…
What Cairo’s move does show is that it wants to make life easier for France’s merchants.

And that’s quite a shift for a buyer which focused, as importers’ power grew, very much on getting value for money.
…

…it doesn’t look like Egypt is taking any chances with its supplies. And if the world’s biggest wheat buyer is hedging its bets, the rest of the market should take note.

Soybean Rally Surprises World

Commodity Online reports that soybean overcomes bearish trend.

Soybean overcomes bearish trend
Published on July 30, 2010 16:10:00 IST

After witnessing a long bearish phase, finally soybean prices recovered during July month. NCDEX futures market prices increased nearly 8.1 % during this period.

In fact, till last month, it was the general opinion that world oilseeds market would witness further fall in prices due to comfortable supply as Brazil, Argentina and US which are the major soybean producers harvested a bumper crop this year.
…

Cash Premiums Driving Soybean Market Higher

Premiums in the cash market are forcing soybean futures higher. Despite prices jumping to a six-month high, the premium for soybeans delivered in August is still 74 cents to 75 cents a bushel above August futures on the Chicago Board of Trade. Basically, while August Soybean futures have rallied to $10.53 per bushel, the real, cash price of soybeans is 74 cents higher at $11.27 per bushel.

USDA reports the Gulf Export basis for grain.

BG_GR110
Baton Rouge, LA Fri Jul 30, 2010 USDA-LA Dept of Ag Market News

Gulf Export bids and basis for grain delivered to gulf export elevators, barge to Louisiana Gulf (Mississippi River), prompt or 30 day shipments, dollar per bushel, except sorghum per cwt.

…
Midday bids and basis for US 1 Yellow Soybeans
Cash Bids Change Basis Change
Aug= 11.2650 – 11.2750 up 24.75 +74 Q to +75 Q dn 1
Sep= 10.8300 – 10.9000 up 17 +78 X to +85 X unch
Oct= 10.7900 – 10.8000 up 17 +74 X to +75 X unch
Nov= 10.8000 – 10.8300 up 17 +75 X to +78 X unch
Dec= 10.7900 – 10.8000 no comp +74 X to +75 X no comp

This intense backwardation (where cash prices are higher than futures) is evidence of shortages and is the driving force behind the grain rally.

What Happens Next

Things are getting really interesting in agricultural markets. As for what happens next, I will point to my first entry on Soybean Overconsumption:

What this means

The soybean prices are going way up. How high they go depends on how long the current overconsumption lasts. In other words, right now it would take a 50 to 80 percent rise in prices to ration demand until next harvest. However, with two or three months more of the current overconsumption [TOO LATE], soybeans prices will have to double or triple to ration demand.

Watch for the USDA’s Madoff Moment

As his ponzi scheme collapsed due to withdrawal requests, Madoff had to face reality and shocked the world by admitting the truth. Investors who believed they owned billions found they had a little over 100 million to divide among themselves. The USDA, in the next [month] three to four months, will also have to face the reality and admit that the world is missing ten to twenty million metric tons of soybeans. The news should be as well received as Madoff’s announcement.