s I watch the latest polls from Germany there are numerous outcomes, none of which will be pleasing to chancellor Angela Merkel, except outright victory by CDU/CSU +- FDP.
If anything but a CDU/CSU +- FDP majority happens, the chancellor will face seriously unwelcome choices.
For example: Reader Bernd pinged me with this comment yesterday "I just watched the last TV discussion. SPD has made it clear that EUROBONDS will be part and parcel of the package, if they come in with a coalition. Merkel was dead set against those up to now. Grand Coalition ??"
Indeed. Recall that Merkel is dead set against Eurobonds. Also recall eurobonds are against the German constitution.
And what is the price to pay for other coalitions?
Grand Coalition or Grand Fantasy?
A close friend continually points out: the German population wants a "Grand Coalition". And I agree with his assessment. But politically speaking, how stable would it be?
That is Merkel's concern, and that is why she is on a public campaign for voters to not split their votes.
But what if that is not good enough?
Here are the latest polls.
As INSA reports things, there are numerous possibilities.
Give or take a mere 1-2% there are many possibilities.
The only coalition that does not pose serious problems for Merkel is #3: CDU/CSU + FDP.
Mainstream Media Finally Catches On!
I have been talking about these issues since March. On September 19, CNBC finally reports Anti-euro party powers ahead as German elections near.
With just days to go until Germans head to the polls, the likelihood of Chancellor Angela Merkel retaining her crown grows ever larger. But Germany's establishment could still be in for a shock.
On Thursday, the anti-euro Alternative fur Deutschland (AfD) hit the 5 percent threshold for the first time that parties need to gain a seat in parliament, according to an INSA poll. The poll suggested Merkel may not be able to re-form her center-right coalition with the liberal FDP.
The poll gave Merkel's CDU/CSU coalition 38 percent of the vote, while the FDP got 6 percent. Their combined 44 percent would not give them a majority in parliament.
If the AfD makes it into parliament and the current liberal coalition partners don't, the party could prove a headache for Merkel. She will be faced with tough talks to form a new "grand" coalition and would have to join forces with Steinbrueck's SPD.
The margin of error on these polls is +-3% and given the 5% threshold, that makes many of the polls useless.
But notice the trend. And the trend by media was to completely ignore the possibility that AfD would make it into parliament.
The secondary trend assumption was that a "Grand Coalition" was likely.
While a "Grand Coalition" is possible, it is not a given, just as I have stated. And if it does happen, it will not be stable, as demand after demand will be placed on Merkel.
Biggest Political Chameleon in History
Of course Merkel could be ready and willing to sell voters straight down the river. Otherwise, some major compromises are in store.
The above discussion assumes that Merkel is really against Eurobonds except as a matter of political expediency. Is she? Or will the biggest political chameleon in history change colors once again?
Barring an outright majority by CDU/CSU + FDP, we may soon find out.
Mike "Mish" Shedlock
Steen Jakobsen, Chief economist at Saxo Bank in Denmark, pinged me today with his thoughts on "the morning after" and "price discovery".
In my opinion these two paragraphs of the FOMC Statement are the key ones:
- The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market.
- The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.
#1 – Tighter monetary conditions clearly concerns them – the only reason for forward guidance as per Vice-chairman Yellen is to “direct market” to FOMC central projection – this got out of control and we now effectively have not only a put on the stock market, but also a put on the bond market. The whole financial market is now “government controlled” – Price discovery has been reduced close to ZERO – as even the term-premium (expected rate expectations) is ignored and considered invalid by Fed and its merry men.
# 2 – The wording is mild, but it’s a real concern. I have no doubt inflation, or lack of, played bigger role than anything else in taking decision to not taper. An economy with weak inflation, is an economy with excess capacity – An economy with excess capacity is not an economy healing and creating jobs – hence – Fed also de facto yesterday stated: the unemployment rate is invalid to use as gauge for future monetary policy but also as statistical indicator.
Whole Financial Market Government Controlled
In regards to Steen's comments "The whole financial market is now “government controlled” – Price discovery has been reduced close to ZERO", I agree 100% (for now).
But will "control" last forever? If you think it will, then why did we have a housing and stock market crash?
In regards to inflation, I have to shake my head. Inflation is not a good thing, not now, not ever. And with so many boomers headed into retirement on fixed income with few assets, inflation is even more crippling.
I have a question: Does the following chart look like price stability?
Inflation Targeting at 2% a Year
The next chart will show you what happens when wages do not keep up with prices.
Real Disposable Personal Income Per Capita Detail
The above two charts from my post Huge Problem With Bernanke's 2% Inflation Target Explained in Pictures.
Click on the link for still more charts.
Is Inflation Really Under 2%?
I think not. In fact I know it isn't. You just have to know where to look.
Inflation is only under 2% if you ignore soaring money supply, the stock market bubble, bond market bubbles, a reblowing of the housing bubble, and other global bubbles.
And what is so magical about 2% anyway? Why not 1%, 3%, 5% or some other number?
Actually any price-inflation target is ridiculous. Price targets of any kind cannot accurately be measured precisely because price targets, by definition, ignore asset bubbles (including housing, which is not directly a part of the CPI).
And didn't we go down this path before? Twice?
Yes we did: first with a dot-com stock market bubble, then with an even bigger credit-housing bubble.
Was there anything stable about that? Indeed not. The Fed has a history of blowing bubbles of increasing amplitude over time.
Ridiculous Comment of the Day Revisited
Yesterday in Ridiculous Comment of the Day, I took exception to statement made by Paul Denoon, head of emerging-market debt at AllianceBernstein Holding LP (AB), who regarding the Fed's decision not to taper said "This creates stability."
My reply ...
Really? The Fed buying $85 billion in assets a month creates stability? Denoon must live in Bizarro World along with Ben Bernanke and the rest of the Fed.
In Fed Bizarro World; One-Sided Risk Assessment; The $64 Trillion Question I asked "How in the hell is the Fed going to normalize interest rates with a recovery in full bloom, with interest rates three or four full percentages points below normal?"
Some people prefer short-term stability even when the outcome is long-term disaster.
Is the Fed doing all of this on purpose? I think not. For further discussion, please see Purposeful Class Warfare? Breathing Room for Rupee? Sheer Stupidity?
Not My Fault Says Bernanke
Whether on purpose or not (and I strongly suggest "not"), the result is the same and it looks like this comic from Merk Investments, via email from Steen.
Bernanke Wants 2% Inflation in a Deflationary World
Here's the problem in a nutshell: Bernanke Wants 2% Inflation in a Deflationary World; Who Pays the Price?
Asset bubbles and massive income inequality are the direct results of Fed policies.
For still more reading, or in case you are unconvinced about who is to blame, please see Reader Asks Me to Prove "Inflation Benefits the Wealthy" (At the Expense of Everyone Else).
Even though the problem is the Fed (central banks in general), coupled with fractional reserve lending and pseudo-money created out of thin air, many seriously misguided souls (including Keynesian high-priest Paul Krugman) think the answer is a destabilizing rise in the minimum wage and still more inflation!
Mike "Mish" Shedlock
The quote of the day goes to David Stockman. In a Bloomberg video, Stockman claims (and I agree) "Bubbles Ben to be Replaced by Calamity Janet".
They are stumbling into the endgame of this whole misbegotten spree of QE, ZIRP, and massive manipulation of financial markets.
We are going to basically replace bubbles Ben with calamity Janet.
She has no clue how to wean wall street from the pathetic addiction to this massive stimulus, easy money that has been going on for the entire century.
I backed that up because she has spent her whole life as a monetary bureaucrat in the Fed system, and has no clue what honest capital and genuine free markets are about.
[She] believes the entire system has to be run by a monetary politburo, turning all the dials and short-term interest rates and yield curves and the entire financial system.
She is part of group-think, part of the Keynesian consensus that 12 people are running at $16 trillion economy.
They are delusional.
Link if video does not play: Yellen Has No Clue How To Run the Fed
David Stockman was Ronald Reagan's Budget director.
Stockman is also the author of The Great Deformation: The Corruption of Capitalism in America and the #1 New York Times bestseller The Triumph of Politics: Why the Reagan Revolution Failed.
For more on Stockman, please see ...
End of U.S. Imperium—Finally!?
Heart of the War-Mongering Hypocrisy
Stockman nails the heart of US war-mongering hypocrisy with this question [on Syria]:
"After having rained napalm, white phosphorous, bunker busters, drone missiles, and the most violent machinery of conventional warfare ever assembled upon millions of innocent Vietnamese, Cambodians, Serbs, Somalis, Iraqis, Afghans, Pakistanis, Yemeni, Libyans, and countless more, Washington now presupposes to be in the moral-sanctions business?"
There is much more in the article. Please take a look.
Mike "Mish" Shedlock
On September 16, Spain's economy minister, Luis de Guindos, said Spain on Track to Meet Budget.
Spain is on track to meet the 2013 budget deficit target it agreed on with its European Union partners and should emerge from recession before the end of the year, the economy minister said on Monday.
After the financial crisis burst Spain’s construction bubble in 2008, “no doubt 2014 will be the first year when Spain will have some recovery,” the minister said.
Given the depth of Spain’s recession, the European Commission agreed in May to give Madrid more time to reach its budgetary targets. Mr. de Guindos said he expected Spain’s deficit to fall to the new target of 6.5 percent of gross domestic product — rather than the initial target of 4.5 percent — from 7 percent last year.
Although officials from the International Monetary Fund and other creditors started another review of Spain’s banking progress on Monday, Mr. de Guindos suggested that “Spanish banks don’t have an important capital need,” implying that Spain would not require an extension of its bank bailout.
How many lies and distortions can one man present in a few short paragraphs?
If by some miracle Spain meets this year's target, it is only because the target changed 4 times in the past two years.
Yet, I still have to ask: how likely is that?
Spain Budget Deficit Soars
On September 17, Dow Jones Business News reported Spain Budget Deficit Soars
Spain's government said late Monday the country's budget deficit stood at 5.3% of gross domestic product in the first seven months of the year, an indication that the euro zone's fourth-largest economy may miss its deficit target for the fourth consecutive year.
Spain is looking to bring its budget deficit to 6.5% of GDP this year, down from 10.6% last year. The target, set by the European Union Commission, was already relaxed earlier this year from a previous 6.3% of GDP, but many economists say even the easier target may be hard to attain, as the economy was in recession at least until the second quarter, and only moderate economic growth is anticipated in the second half, which should keep tax receipts at low levels.
Just Monday, think tank Funcas said 19 economists surveyed were expecting, on average, that the economy will grow 0.1% in the third quarter from the second, and Spain will post a budget deficit of 6.7% of GDP for the full year. The economists surveyed are also expecting that Spain will miss next year's deficit target, of 5.5% of GDP.
This is important because a string of large deficits has driven Spain's government debt to the highest level in over a hundred years. Last week, the country's central bank said debt stood at 92.2% of GDP as of June--well above the year-end target of 91.4% of GDP.
This reinforces the view held by many private sector economists, and the International Monetary Fund, that Spain's government debt will rise significantly above 100% of GDP before it peaks, despite government assurances to the contrary.
Spain's Budget Deficit €54 Billion Through July
Via translation from Guru's Blog, please consider Spain's Budget Deficit Rises to €54 Billion Through July.
Let's try not to lose the debt and deficit data since our politicians have a special ability to change forecasts as if nothing had happened.
The deficit totaled €54.293 billion in the first seven months of the year, and representing 5.27% of GDP against a target of 6.5% set for the full year, according to the latest data released Monday by the Ministry Finance and Public Administration.
The odds of meeting the deficit target, barring last-minute window dressing is quite low.
Total government debt is €947.184 billion, a new record. The ratio of public debt to GDP level is 92.6%, according to the Bank of Spain.
Recall that in September 2012, the government forecast for year-end 2013 was debt-to-GDP ratio 90.5%. Unless miracles, we will be well above that figure.
By the way, the total debt of €87.660 billion in short-term securities matures within one year.
Is Spain going to meet even four-times reduced targets? I highly doubt it.
Mike "Mish" Shedlock
Anyone smart enough to withdraw from the race to replace Ben Bernanke
as next Fed chairman must have something on the ball, at least
The Larry Summers' haters got their wish today as Summers withdrew his name from consideration.
Summers called president Obama, then issued a a formal withdrawal letter stating "I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation's ongoing economic recovery."
In response, the White House issued a statement "Earlier today, I spoke with Larry Summers and accepted his decision to withdraw his name from consideration for Chairman of the Federal Reserve. Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today. I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future."
Barry Ritholtz at the Big Picture mocked the withdrawal with a spoof Translated into Truth: On Summers Withdrawing Name
“Earlier today, I spoke with Larry Summers and accepted his decision to withdraw his name from consideration for Chairman of the Federal Reserve.Will Yellen Be Any Better?
Larry was a critical contributor to the radical deregulation that was one of many causes of the worst economic crisis since the Great Depression. It was in no small part because of his lack of expertise, false wisdom, and inept leadership that the economy crashed and burned and even today is still failing to be to back to its full growth potential.
As Treasury Secretary, he helped to pass the Commodity Futures Modernization Act. This turned derivatives into a unique financial instrument with no oversight, reserve requirements, mandated disclosures, or listing minimums. The CFMA all but guaranteed that Derivatives would eventually implode. Summers further contributed to the crisis by Summers by overseeing the repeal of Glass Steagall. With this firebreak between Wall Street and Main Street effectively removed, the financial conflagration of 2008 spread from Wall Street to every corner of the economy.
Further, his terrible advice and lack of insight is in large part the reason we see so little progress being made today — the lack of economic growth, the concentrated bank power, the still dangerous financial system and of course, the sub par job creation.
I will always blame Larry for the way he damaged my presidency. To anyone who to seek his guidance and counsel in the future, please don’t make the same naive errors I did.
The Detractors WinYellen 100% Assured to Make a Mess
The detractors win both sides. Neither Yellen nor Summers is qualified. In fact, there is not a single person who would take the job that is qualified. There should not be a Fed at all.
The idea that a group of economic wonks can sit down and micromanage the economy to health is preposterous. Central bank clowns have proven time and time again they have no idea what the interest rate should be.
A massive bubble in dotcom stocks followed by a massive bubble in housing is proof enough. And this Fed on which Yellen sits has triggered asset bubbles in stocks and bonds and she cannot even see it.
Crisis Management Needed
Curiously, lots of analysts suggest we do not need Larry Summers because there is not going to be another crisis.
Rest assured there will be another crisis, and much sooner than most think. But that does not make Summers qualified. His role is to help create crises, not stop them.
Tweedle Dum vs. Tweedle Dee
The only candidate that makes sense is the candidate who will set a target date to end the Fed. Unfortunately, no such candidate is on the short list.
The choice is between Tweedle-Dee who rates to slosh money around even more than Bernanke in a futile effort to create jobs, and Tweedle-Dum who will do whatever Wall Street wants.
Practically speaking, is there really a difference?
France operates an “immense” surveillance system of telephone, email and internet traffic similar to the US operation revealed last month by whistleblower Edward Snowden, Le Monde newspaper reported on Thursday."Margins of Legality"
Like the systems apparently operated by the National Security Agency in the US, the DGSE surveillance covers the identity, place, date, duration and “weight” of telephone calls, but not the content.
Similarly, the “metadata” of text messages, faxes, emails and “all internet activity” on networks run by companies such as Google, Facebook, Microsoft, Apple and Yahoo are collected, Le Monde said.
President François Hollande reacted sharply to Mr Snowden’s allegations that the NSA had spied on EU and European offices, including the French embassy in Washington.
He said such activities were “unacceptable” and should “cease immediately”. He has called for a full explanation from the US government, linking any progress on key EU-US trade talks due to start next week to full disclosure from Washington.
Paris insisted it does not spy on its allies, but Mr Hollande’s outburst raised some sceptical eyebrows among the diplomatic community in the French capital.
Le Monde said the DGSE system was conducted with “complete discretion, at the margins of legality and outside all serious control”.
It quoted Bernard Barbier, technical director of the DGSE, as saying at public seminars that France “probably has the biggest information centre in Europe after the English”.
If the revelations about the U.S. spying program Prism led a chorus of indignation in Europe , France, she did minor quibbles. For two good reasons: Paris already knew. And does the same thing.Don't Worry It's Only "Alegal"
The World is able to prove that the Directorate General for External Security (DGSE, the services special) systematically collect electromagnetic signals from computers or phones in France, as well as flows between French and abroad: all our communications are spied. All e-mails, text messages, telephone records, access to Facebook , Twitter , are then stored for years.
If this huge database was used by the DGSE who officiates as outside French borders, the case is already illegal. But six other intelligence services, including the Central Directorate of Internal Intelligence (DCRI), customs or Tracfin service fight against money laundering, including the data that draw interest daily. Discreetly on the sidelines of the legality and beyond serious control. Political know perfectly, but the secret is the rule.
An Illegal Device
This Big Brother French, brother of U.S. services is illegal. However, its existence appears discreetly in parliamentary documents.
The Target: "Metadata"
DGSE and collecting the phone records of millions of subscribers - the identifier of the calling and called the place, date, time, the weight of the message. Same for mail (with possibility to read the mail subject), SMS, fax ... And all Internet activity, which involves Google , Facebook, Microsoft , Apple , Yahoo! ... This is what the parliamentary delegation intelligence rightly calls "the signals intelligence" (SIGINT), translation of SIGINT (signal intelligence) of the NSA.
Supercomputer at Boulevard Mortier
DGSE and collecting trillions of data compressed and stored in Paris, on three levels, boulevard Mortier, in the basement of the headquarters of the DGSE.
Bernard Barber then spoke of the "development of a computer-based FPGAs" (programmable logic circuits), which is "probably the biggest center computer in Europe after the English ", able to handle tens of petabytes of data - that is to say tens of millions of gigabytes. The heat generated by the computers enough to heat buildings DGSE ...
Lack of Control
The device is completely illegal - "a-legal", corrects one of the bosses of the intelligence agencies "The legal regime for security intercepts prohibited implementation by the intelligence services of such a procedure. Prism that ensures the National Commission on Informatics and Liberties ( CNIL ). Each requisition for data or interception is targeted and can not be done on a massive scale, as quantitatively as temporally. Such practices would therefore legally unfounded.
An unambiguously wrong, disruptive and often deliberately committed act for which there is not yet a specific law making that act expressly illegal. (See Extralegal) Financial and white collar crimes, such as offshore banking, misrepresenting the value of investments and temporarily selling 'junk' assets to create cashflow are prime examples of "a"legal activities. Alegality is a corollary of the distinction between amoral and imoral reasoning as applied to legality.Mish Definition of Alegal
Broker#1: We're putting together a portfolio of failing investments so we can sell it investors then short against it and make a killing.
Broker#2: Isn't that illegal?
Broker#1: Nope, just alegal... Now lets get some lattes.
With 2016 in his sights, Rand Paul is distancing himself from some of his father's more extreme views. David Catanese on why the apple must fall just far enough from the tree.Reflections on Pandering
Standing in front of more than 100 South Carolina GOP activists in West Columbia Friday night, the Kentucky senator largely steered clear of the week's two dominant, divisive issues that are tying his party in knots: Gay rights and immigration reform.
Instead, he diverted from his early presidential-primary-state speech script and went for the jugular on a topic that, while not necessarily timely, would surely please a military-friendly crowd: A full-throated defense of profiling.
“After 9-11 we had a special program for student visas . . . Why?" Paul asked. "Because 16 of the 19 hijackers were overstaying their students visas. Was it targeting? Was it profiling? Yes. Because only certain people are attacking us. Why don’t we use some brain sense to go after the people who are attacking us?"
The guests ate it up, rewarding Paul with sustained thunderclaps. It was one of his biggest applause lines of the night. But it was also a curious statement from a likely 2016 White House contender who built his brand on a libertarian approach to government. This, from the same guy who stood on the Senate floor for 14 hours to protest the potential use of drones to target Americans?
The address was almost exclusively devoted to foreign affairs and tactics employed in the country’s struggle against terrorism -- a marked change from his previous early state primary speeches and a subtle acknowledgment that he must prove he’s no softy when it comes to national security.
It's not that Paul walked away from his core libertarian philosophy. He stood by his belief that even those charged with the most heinous, evil crimes --- like the Boston bombing -- deserve a day in court.
“You may not all agree on this but it’s worth thinking about,” Paul cautioned before explaining his rationale to halt indefinite detentions of possible terrorists.
When he bravely posited his idea of a full audit of the Pentagon, he was met with complete silence. But he strived to emphasize that greater oversight of the military isn’t incongruent with support for troops on the ground.
Hogan Gidley, a former state party official who advised Rick Santorum’s 2012 presidential bid, said it was evident Rand’s mission was to wipe away any perception that he was weak on defense.
“His father, rightly or wrongly, was saddled with being anti-military. I think he wanted to say, ‘I’m a little tougher’ from the foreign policy standpoint. South Carolinians love that stance. He wanted to get out front of being outflanked on the right on military issues,” Gidley said.
It’s a thin line to walk for a candidate-in-the-making whose libertarian streak helped define his identity, but could ultimately limit his ambitions. He is astute enough to address his vulnerabilities with large sections of the party. But with every speech or position that’s calibrated to win converts and broaden his appeal, there’s the risk that he could end up losing part of the fervent base built for him by his father.
Rep. Mick Mulvaney, a close friend of Rand’s who jogs and plays baseball with him, said he believes what most significantly separates the senator from his father is his ability to crisply articulate his ideas in a marketable fashion.
“Rand knows how to deliver the libertarian-leaning conservative message better than anybody, at least as well as anybody,” praised Mulvaney. “Some folks might’ve looked at Ron Paul and dismiss him out of hand because he was far too extreme to them. They’ll not be able to do the same thing with Rand after they meet him. If you sit and talk to Rand, he comes across as extremely bright, extremely articulate and the farthest thing from crazy or extreme.”
The speech in South Carolina offers an acute example of Paul’s crafty approach to winning over a room -- with some instant evidence of success. But ironically, it simultaneously exposes the outline of a potential attack that could be used against him by a 2016 rival: That Paul has morphed into a panderer, all too willing to tweak his positioning in the pursuit of politics.
Europeans are furious. Revelations that the US intelligence service National Security Agency (NSA) targeted the European Union and several European countries with its far-reaching spying activities have led to angry reactions from several senior EU and German politicians.Evidence Overwhelming
"We need more precise information," said European Parliament President Martin Schulz. "But if it is true, it is a huge scandal. That would mean a huge burden for relations between the EU and the US. We now demand comprehensive information."
Schulz was reacting to a report in SPIEGEL that the NSA had bugged the EU's diplomatic representation in Washington and monitored its computer network (full story available on Monday). The EU's representation to the United Nations in New York was targeted in a similar manner. US intelligence thus had access to EU email traffic and internal documents. The information appears in secret documents obtained by whistleblower Edward Snowden, some of which SPIEGEL has seen.
The documents also indicate the US intelligence service was responsible for an electronic eavesdropping operation in Brussels. SPIEGEL also reported that Germany has been a significant target of the NSA's global surveillance program, with some 500 million communication connections being monitored every month. The documents show that the NSA is more active in Germany than in any other country in the European Union.
German Justice Minister Sabine Leutheusser-Schnarrenberger, who has been sharply critical of the US since the beginning of the Prism scandal, was furious on Sunday. "If media reports are correct, then it is reminiscent of methods used by enemies during the Cold War," she said in a statement emailed to the media. "It defies belief that our friends in the US see the Europeans as their enemies. There has to finally be an immediate and comprehensive explanation from the US as to whether media reports about completely unacceptable surveillance measures of the US in the EU are true or not. Comprehensive spying on Europeans by Americans cannot be allowed."
Elmar Brok, chairman of the Foreign Affairs Committee in European Parliament added his opprobrium. "The spying has reached dimensions that I didn't think were possible for a democratic country. Such behavior among allies is intolerable." The US, he added, once the land of the free, "is suffering from a security syndrome," added Brok, a member of Chancellor Angela Merkel's conservative Christian Democrats. "They have completely lost all balance. George Orwell is nothing by comparison."
Green Party floor leader in European Parliament Daniel Cohn-Bendit went even further. "A simple note of protest is not enough anymore. The EU must immediately suspend negotiations with the US over a free trade agreement," he said. "First, we need a deal on data protection so that something like this never happens again. Only then can we resume (free-trade) negotiations."
The US has thus far declined to respond to the revelations printed in SPIEGEL. "I can't comment," Deputy National Security Advisor Ben Rhodes told journalists on Saturday in Pretoria, according to the German news agency DPA.
A diplomatic row over communications surveillance deepened as European ministers reacted with disbelief and fury to reports that EU offices were bugged by US intelligence services.
Der Spiegel said it had gained partial access to a NSA document dated 2010, which was obtained by Edward Snowden, the NSA contractor turned whistleblower.
The document revealed the NSA had placed bugs and tapped into internal computer networks at the EU’s offices in Washington, as well as at the EU’s mission to the UN, according to Der Spiegel. The White House declined to comment.
In Germany, especially, where sensitivities over spying remain acute because of large amounts of snooping conducted before 1989 by the Stasi, the East German secret police, the revelations about extensive US surveillance have caused a political furore.
“It defies all belief that our friends in the US see Europeans as enemies,” Ms Leutheusser-Schnarrenberger said. “If EU offices in Brussels and Washington were indeed monitored by US intelligence services, that can hardly be explained with the argument of fighting terrorism.”
Although Germany and the US co-operate extensively on intelligence matters, the partnership is not as deep as that between the US and UK. Together with Australia, New Zealand and Canada, the UK enjoys a privileged status. However, Germany is classified as a “third-class” partner.
“We can attack the signals of most foreign third-class partners, and we do it too,” Der Spiegel quoted a passage in an NSA document as saying.
Meanwhile, Rafael Correa, Ecuadorean president, said on Sunday that Mr Snowden’s fate was in the hands of Russian authorities. The man who first brought the snooping allegations out in the open is thought to still be in a Moscow airport transit zone awaiting news of his asylum request from the South American country.
The National Security Agency’s recently revealed surveillance programs undermine the purpose of the Foreign Intelligence Surveillance Act, which was established to prevent this kind of overreach. They violate the Fourth Amendment’s guarantee against unreasonable search and seizure. And they underscore the dangers of growing executive power.
The intelligence community has a history of overreaching in the name of national security. In the mid-1970s, it came to light that, since the 1940s, the NSA had been collecting international telegraphic traffic from companies, in the process obtaining millions of Americans’ telegrams that were unrelated to foreign targets. From 1940 to 1973, the CIA and the FBI engaged in covert mail-opening programs that violated laws prohibiting the interception or opening of mail. The agencies also conducted warrantless “surreptitious entries,” breaking into targets’ offices and homes to photocopy or steal business records and personal documents. The Army Security Agency intercepted domestic radio communications. And the Army’s CONUS program placed more than 100,000 people under surveillance, including lawmakers and civil rights leaders.
After an extensive investigation of the agencies’ actions, Congress passed the 1978 Foreign Intelligence Surveillance Act (FISA) to limit sweeping collection of intelligence and create rigorous oversight. But 35 years later, the NSA is using this law and its subsequent amendments as legal grounds to run even more invasive programs than those that gave rise to the statute.
We’ve learned that in April, the Foreign Intelligence Surveillance Court (FISC) ordered Verizon to provide information on calls made by each subscriber over a three-month period. Over the past seven years, similar orders have been served continuously on AT&T, Sprint and other telecommunications providers.
Another program, PRISM, disclosed by the Guardian and The Washington Post, allows the NSA and the FBI to obtain online data including e-mails, photographs, documents and connection logs. The information that can be assembledabout any one person — much less organizations, social networks and entire communities — is staggering: What we do, think and believe.
To the extent that the FISC sanctioned PRISM, it may be consistent with the law. But it is disingenuous to suggest that millions of Americans’ e-mails, photographs and documents are “incidental” to an investigation targeting foreigners overseas.
Congress didn’t pass Section 215 to allow for the wholesale collection of information. As Rep. F. James Sensenbrenner Jr. (R-Wis.), who helped draft the statute, wrote in the Guardian: “Congress intended to allow the intelligence communities to access targeted information for specific investigations. How can every call that every American makes or receives be relevant to a specific investigation?”
THE twin revelations that telecom carriers have been secretly giving the National Security Agency information about Americans’ phone calls, and that the N.S.A. has been capturing e-mail and other private communications from Internet companies as part of a secret program called Prism, have not enraged most Americans. Lulled, perhaps, by the Obama administration’s claims that these “modest encroachments on privacy” were approved by Congress and by federal judges, public opinion quickly migrated from shock to “meh.”Criminal is Correct Viewpoint
It didn’t help that Congressional watchdogs — with a few exceptions, like Senator Rand Paul, Republican of Kentucky — have accepted the White House’s claims of legality. The leaders of the Senate Intelligence Committee, Dianne Feinstein, Democrat of California, and Saxby Chambliss, Republican of Georgia, have called the surveillance legal. So have liberal-leaning commentators like Hendrik Hertzberg and David Ignatius.
This view is wrong — and not only, or even mainly, because of the privacy issues raised by the American Civil Liberties Union and other critics. The two programs violate both the letter and the spirit of federal law. No statute explicitly authorizes mass surveillance. Through a series of legal contortions, the Obama administration has argued that Congress, since 9/11, intended to implicitly authorize mass surveillance. But this strategy mostly consists of wordplay, fear-mongering and a highly selective reading of the law. Americans deserve better from the White House — and from President Obama, who has seemingly forgotten the constitutional law he once taught.
Edward J. Snowden, the former N.S.A. contract employee and whistle-blower, has provided evidence that the government has phone record metadata on all Verizon customers, and probably on every American, going back seven years. This metadata is extremely revealing; investigators mining it might be able to infer whether we have an illness or an addiction, what our religious affiliations and political activities are, and so on.
The law under which the government collected this data, Section 215 of the Patriot Act, allows the F.B.I. to obtain court orders demanding that a person or company produce “tangible things,” upon showing reasonable grounds that the things sought are “relevant” to an authorized foreign intelligence investigation. The F.B.I. does not need to demonstrate probable cause that a crime has been committed, or any connection to terrorism.
Even in the fearful time when the Patriot Act was enacted, in October 2001, lawmakers never contemplated that Section 215 would be used for phone metadata, or for mass surveillance of any sort.
Representative F. James Sensenbrenner Jr., a Wisconsin Republican and one of the architects of the Patriot Act, and a man not known as a civil libertarian, has said that “Congress intended to allow the intelligence communities to access targeted information for specific investigations.” The N.S.A.’s demand for information about every American’s phone calls isn’t “targeted” at all — it’s a dragnet. “How can every call that every American makes or receives be relevant to a specific investigation?” Mr. Sensenbrenner has asked. The answer is simple: It’s not.
Let’s turn to Prism: the streamlined, electronic seizure of communications from Internet companies. In combination with what we have already learned about the N.S.A.’s access to telecommunications and Internet infrastructure, Prism is further proof that the agency is collecting vast amounts of e-mails and other messages — including communications to, from and between Americans.
The government justifies Prism under the FISA Amendments Act of 2008. Section 1881a of the act gave the president broad authority to conduct warrantless electronic surveillance. If the attorney general and the director of national intelligence certify that the purpose of the monitoring is to collect foreign intelligence information about any non¬American individual or entity not known to be in the United States, the Foreign Intelligence Surveillance Court can require companies to provide access to Americans’ international communications. The court does not approve the target or the facilities to be monitored, nor does it assess whether the government is doing enough to minimize the intrusion, correct for collection mistakes and protect privacy. Once the court issues a surveillance order, the government can issue top-secret directives to Internet companies like Google and Facebook to turn over calls, e-mails, video and voice chats, photos, voice¬over IP calls (like Skype) and social networking information.
Leave aside the Patriot Act and FISA Amendments Act for a moment, and turn to the Constitution.
The Fourth Amendment obliges the government to demonstrate probable cause before conducting invasive surveillance. There is simply no precedent under the Constitution for the government’s seizing such vast amounts of revealing data on innocent Americans’ communications.
One of the most conservative justices on the Court, Samuel A. Alito Jr., wrote that where even public information about individuals is monitored over the long term, at some point, government crosses a line and must comply with the protections of the Fourth Amendment. That principle is, if anything, even more true for Americans’ sensitive nonpublic information like phone metadata and social networking activity.
We may never know all the details of the mass surveillance programs, but we know this: The administration has justified them through abuse of language, intentional evasion of statutory protections, secret, unreviewable investigative procedures and constitutional arguments that make a mockery of the government’s professed concern with protecting Americans’ privacy. It’s time to call the N.S.A.’s mass surveillance programs what they are: criminal.
Senator Rand Paul told CNN yesterday that NSA whistleblower Edward Snowden will be historically viewed as a truth teller whereas Obama national security director James Clapper will be judged as a liar for telling Congress that the NSA was not spying on Americans.So, who is the criminal here, and who is the hero? One is wanted on charges of treason, the other is not wanted or charged with anything.
“I would say that Mr. Snowden hasn’t lied to anyone,” Paul told CNN’s Candy Crowley. “He did break his oath of office, but part of his oath of office is to the Constitution, and he believes that, when James Clapper came in March, our national director of intelligence came and lied, that he [Snowden] was simply coming forward and telling the truth that your government was lying. This is a big concern of mine, because it makes me doubt the administration and their word to us when they talk to us, because they have now admitted they will lie to us if they think it is in the name of national security.”
Paul is referring to Clapper’s March testimony in front of the Senate intelligence committee, during which he claimed that the National Security Agency did “not wittingly” collect data on Americans’ communications.
Following Snowden’s revelations about the PRISM program, Clapper tried to clarify his remarks by stating, “I responded in what I thought was the most truthful, or least untruthful, manner by saying ‘no.’”
“Mr Clapper lied in Congress in defiance of the law in the name of security – Mr. Snowden told the truth in the name of privacy, so I think there will be a judgment because both of them broke the law and history will have to determine,” added Paul.