Monday, October 19, 2009

Microsoft bans unofficial Xbox 360 memory units Latest 360 update shuts out third-party carts

Microsoft bans unofficial Xbox 360 memory units
Latest 360 update shuts out third-party carts
By Adam Hartley

7 hours ago | Tell us what you think [ 0 comments ]
microsoft-bans-use-of-third-party-unofficial-memory-carts-on-xbox-360

Microsoft bans use of third-party unofficial memory carts on Xbox 360

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If you are using an unofficial memory unit with your Xbox 360 then you had better back up your data onto an authorised Microsoft 360 storage device quick sharp, as the next 360 update will shut-out third party devices from working with your console.

The new update is set to add a range of new features to your Microsoft console, including Last.fm, Facebook, Twitter and more.

Major Nelson advises

Xbox Live's Major Nelson blogs: "When Preview Program members start receiving the Xbox 360 system update next week, one of the changes is that unauthorized Memory Units will no longer work with the Xbox 360. If you've moved your profile or saved games onto one to "back it up," you'd better move it back onto an authorized Xbox 360 storage device prior to taking the update.

"If you continue to use an unauthorised Memory Unit after the update, you will not be able to access your stored profile or saved games."

If you want to know more about officially licensed Xbox 360 storage devices or accessories you can read more about the licensed accessories program on Xbox.com

So there you go. Consider yourself 'advised'...

in reference to:

"Microsoft bans unofficial Xbox 360 memory units
Latest 360 update shuts out third-party carts
By Adam Hartley

7 hours ago | Tell us what you think [ 0 comments ]
















Microsoft bans use of third-party unofficial memory carts on Xbox 360





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If you are using an unofficial memory unit with your Xbox 360 then you had better back up your data onto an authorised Microsoft 360 storage device quick sharp, as the next 360 update will shut-out third party devices from working with your console.The new update is set to add a range of new features to your Microsoft console, including Last.fm, Facebook, Twitter and more.Major Nelson advisesXbox Live's Major Nelson blogs: "When Preview Program members start receiving the Xbox 360 system update next week, one of the changes is that unauthorized Memory Units will no longer work with the Xbox 360. If you've moved your profile or saved games onto one to "back it up," you'd better move it back onto an authorized Xbox 360 storage device prior to taking the update. "If you continue to use an unauthorised Memory Unit after the update, you will not be able to access your stored profile or saved games." If you want to know more about officially licensed Xbox 360 storage devices or accessories you can read more about the licensed accessories program on Xbox.comSo there you go. Consider yourself 'advised'..."
- Microsoft bans unofficial Xbox 360 memory units | News | TechRadar UK (view on Google Sidewiki)

Tuesday, August 11, 2009

My 1933 Nightmare


by David Michael Green and Daniel Saltman

The events of recent decades have been ominous.

The events of recent weeks more so.

It's not so much, I guess, the visage of obese, over-fifty, white men angrily wrecking even the tattered remnants of the democratic process in this country that is most disturbing. We've seen that before.

I think it's the willful ignorance translated into incoherent, and in fact ironically self-defeating, rage that I find most discouraging. Can we really live in a country populated by so many fools, people who can so readily, proudly and belligerently be made into tools of their own destruction? Can the greatest political, economic, cultural and military power on the world's stage possibly be so incredibly backward at its core?

Consider this passage: "The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama's 'death panel' so his bureaucrats can decide, based on a subjective judgment of their 'level of productivity in society,' whether they are worthy of health care. Such a system is downright evil."

These words were written by a person who might well now be vice-president of the United States, had the economic crash of our time come a few months later. And who, had that in fact transpired, and had one old man named McCain sometime later then met his actuarially not-improbable death, could have become the American president and leader of the free world.

So, okay, maybe that horror scenario is not so novel. After all, Nixon was in the White House for six years. And what was George W. Bush, really, other than Sarah Palin in trousers?

But what seems to me new about this moment is the political road rage, the thuggishness of masses of Americans who not only are venting about insane nonsense, not only are undermining their own interests acting as marionettes of laughing corporate predators, and not only are taking down democracy around themselves in order to do so, but are in fact also destroying the entire Enlightenment project of rationality-based management of public affairs as well. The single most frightening characteristic of this movement, to my mind, is that fact that no amount of evidence or logic could persuade these folks to abandon the lies they've attached themselves to, like a pit bull clamped to the leg of some poor SOB's pants.

What does it take to get someone to the point that they believe that the US Congress is passing a healthcare reform bill that will allow the government to exterminate seniors? What does it take for them to impute that motive to a president from the feeble Democratic Party? And, at that, one of the most Milquetoastian creatures to hit Washington since Hubert Humphrey ran for president acting like he was a guy named Hubert Humphrey? From Minnesota, no less.

What do you have to do to humans to get them so stupefied that they believe Obama's Hawaiian birth was some sort of conspiracy, replete with fake 1961 newspaper announcements? What sort of powerful drugs does one have to be on to make the argument that this rather considerably conservative president is a socialist? And then to call him a fascist in your next breath, blissfully unaware that the chasm separating the two ideologies not only makes them wholly different, but, indeed, oppositional. (You know, like in World War II. Maybe they've even heard of that.)

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In fact, this is not a matter of stupidity, though there's loads of that to go around. But I bet that when it comes to finding arcane deductions to insert into their tax forms, these folks are actually quite clever. I bet a lot of them could reel off sports statistics or bible verses that would put your head in a fog. No, it's not stupidity. Something else is going on here.

It's certainly not a matter of factuality, either. It's astonishing to imagine that anyone might perceive the hopelessly flimsy Obama administration – even if it wasn't directly following the folks who brought you the Dick Cheney vision of executive power – as some sort of dictatorial Bonapartist project. Are we even talking about the same human being here? Do they really mean the Obama who keeps trying to be bipartisan while Republicans trash him viciously at every juncture (including even members of Congress questioning the legitimacy of his American birth)? Do they really mean the guy who continually defers to Congress to shape the major legislative initiatives he claims to be in favor of? Are talking about the dude who lets a handful of Blue Dog Democrats roll him at every turn? This, even after eight years of Bush, we're supposed to believe is some sort of totalitarian imperial president hell-bent on bringing fascism to America???

No, this isn't about lack of intellect or the remotest correspondence to reality. It seems pretty clear to me that this is almost entirely about fear. This is the empire crashing, and the former master class within it crashing as well. Both are falling to ordinariness and worse. They always were ordinary, of course, and always tools for exploitation by economic predators, but at least back in the day it wasn't such a struggle to be middle class. And, most importantly, they could always feel good by telling each other that at least they were better than the hated bitches, darkies and fags. Oh, and Arabs. Beating them up, literally and figuratively, was (and remains) a good way to remind yourself of that superiority.

But now even that small bit of compensation is gone. Your country can't win a war against a bunch of third world ragheads. Your boss is cutting your salary again. The womenfolk have their own source of income now, and no longer have to put up with your blundering sexual advances to keep a roof over their heads. Perverts are marrying each other left and right. And now – WTF? – there's some Harvard-educated spade in the White House, along with, even worse, his uppity-looking Harvard-educated all-superior-like even spadier woman.

Of course, this has been going on since the 1970s, as America's post-war hegemony began to erode internationally, and within the country white males were being challenged for their domestic dominance as well. These "Reagan Democrats" – i.e., consummately selfish pricks who were happy to take government largesse when it was helping to bring them into the middle class, but then immediately pulled the ladder up behind themselves afterwards, demanding tax cuts – began to lash out politically, responding to any line of crap that would harmonize with their embarrassing victimization trope by promising a feel-good response offering the muscular bludgeoning of women and dark people, both at home and abroad. In reality, of course, they were voting for a political movement that was talking tough-guy nationalism and scapegoating gays and other out-groups, but purely as a mask for further savaging the prosperity of these very idiot voters supporting their own undoing. In exchange for some cheap rhetoric and the occasional third-world war, they lost their unions, they lost their good jobs to cheap overseas (and, of course, violently non-organized) labor, they lost government benefits like inexpensive higher education, and they lost a society where the gap between the middle class and economic elites wasn't on the order of a standard-issue banana republic.

So what's different today? I think there are big differences – at least of degree – on six fronts.

First, there is a marriage of convenience today between the economic oligarchy and regressive politicians which makes the era of Dwight Eisenhower look like Sweden by comparison. I would say the single most fundamental fact of American politics in our time is that economic elites have walked away from the long-standing grand bargain of the 1930s through the 1970s. They are, simply put, no longer satisfied to be ridiculously wealthy, and now demand to be obscenely so. Instead of looking at the middle class as a source of national pride, it is for them an irritant to see even that small pittance of money in other people's hands. And, thus, they are trying (and succeeding) at reversing the basic deal that brought so much prosperity to so many American families in the mid-twentieth century, seeking a return to the good old days of Herbert Hoover and Calvin Coolidge. Today's Republican Party has become simply an instrument of that process – all the rest is window-dressing for marketing purposes. Perhaps the best exemplar of this imperative was the (so far) unsuccessful play at privatizing Social Security. Wall Street looks at that sitting mountain range of money – within view, but just beyond reach – in sheer ball-busting frustration. It is one of the few government activities (as opposed to healthcare, military hardware, prisons, etc. etc.) that the overclass hasn't yet been able to profitize. Why should seniors have that money, they growl over brandy and cigars, when billionaires could instead? In short, the whole purpose of the political right has shifted dramatically in the past three decades. Now, it's entirely about the money.

Second, the level of deceit has grown exponentially. Americans are now being told lies of astonishing proportions, as both the ‘birther' and ‘deather' movements of recent weeks make plain. Before those it was Obama the socialist, Obama the fascist, Obama the sell-out apologist for America, Obama the secret Muslim, Obama the underminer of national security, Obama the pal of terrorists, and so on, and so on. It's to the point now that I feel sorry for satirists (including me). What can you possibly make up to top these amazing idiocies? Obama the Martian imposter of a homo sapien? Obama the JFK assassin? Obama the twentieth 9/11 hijacker? (Who secretly parachuted out at the last moment, and was picked up in the Hudson by a nuclear-powered speedboat driven by Saddam, and then transferred onto a black helicopter that landed minutes later on the roof of the UN!)

Third, the sophistication of presentation has grown dramatically. The right has really learned how to market its nonsense in a barrage that only enhances credibility from repetition. You get it on the radio, on TV, from politicians, at church, on your computer and cell phone, in your mailbox and at the school board meeting. This is a full-court press by clever people who know how to market soap flakes and the human kind as well. There are many examples of this, but one of the most clever has been the defining of wholly corporate center-right political figures like Bill Clinton or Barack Obama as extreme leftists, and the defining of the mainstream media as hopelessly biased toward liberalism. Perhaps as much as any other factors, these moves have employed framing and intimidation to effectively eliminate any real progressive ideas from the national political discourse. Bravo, boys. If it all wasn't so sickeningly pernicious, I'd have to give them a standing ovation for cleverness and, sadly, success.

Fourth, the level of credulity is breathtaking. In the past, you could understand why a few crackers in ‘Bama, third-grade education and all, could be seduced into blamin' the niggrahs for their lousy low-rent lives and joining up with the KKK. But look at the audiences today for Limbaugh, Beck, Hannity and the rest of the scary monsters all over television and radio. These are giant crowds of tens of millions, especially collectively counted, and I don't think these people are watching and listening just to laugh at the bozos on the air.

Speaking of whom, what in the world are these freaks doing on the air? What in the world happened to this country such that, fifth, all this massive deceit has gone mainstream in the media and the Republi-con Party? It's astonishing today, from the perspective of prior decades, what comes out of the mouths even of leadership figures in one of America's two major political parties, and what goes unchallenged as conventional wisdom. There have always been regressive predators about in American politics, to be sure. But in years past they would have been identified as such and marginalized accordingly. Today, they are more likely to become president or Speaker of the House, and a slavishly obedient media dares not correct even the most obscene lies having the most dangerous consequences (can you say "Iraq"?).

Finally, unlike prior decades, the progressive counter-narrative has all but vanished from the mainstream. The Democratic Party is nothing more than the sorta not-Republican Party, and stands for nothing other than a quieter and more slowly-unfolding version of the GOP's crimes. Nobody ever votes Democratic anymore. They vote against the Republicans when they rise to their very most noxious worst behavior. We have a president who is supposed to be a radical leftist, and says almost nothing to combat the fascist tide of thuggery now threatening the country. Instead, he continues to seek approval from Republicans who never give it to him, game him at every turn, and repay his conciliatory efforts by asking for investigations into his birth certificate. Senator Chris Dodd responded to last week's Reichstag-burning events with this helpful bromide: "It's a challenge, no question about it, and you've got to get out there and make the case. This is not the time for the faint-hearted." After which he continued to lead the very faintest-of-heart in their deafening silence. Even supposedly liberal activist groups don't demand very much anymore, other than the protection of the status quo. For example, there is pretty much no serious player in or out of government right now talking about a single-payer system at this once-per-century occasion of momentous potential change in the American healthcare system.

The upshot of all this is a predatory-when-not-defunct political system going so far off the rails that it is now migrating from insanity to violent insanity. Just ask your (former?) local abortion provider. Just ask your congressional representative, if you can penetrate the police escort now necessary to keep these people from becoming the victims of mob rule.

This should not be taken lightly. There is huge anger out there, being stoked incessantly by those who profit from it, in one way or another. Most frightening of all, it is, as far as I can see, completely impervious to rational discourse. Suppose you could put a mountain of indisputable evidence in front of the eyes of those who believe Obama is seeking to murder seniors. Does anyone think any of these folks could actually be persuaded to abandon that shockingly absurd fallacy?

And this is, at the end of the day, the scariest aspect of all concerning the current political moment. America now possesses a massive cohort of people who have simply transcended rational discourse – the sine qua non of democracy, and the real deity worshiped by Enlightenment figures like those who founded the country. Two-and-a-half centuries later, and we're moving rapidly backwards, toward the seventeenth century, and away from democracy, rule of law and the marketplace of ideas, debated and thoughtfully considered.

Everybody talks about fascism nowadays, not least those on the right who remarkably manage to call Barack Obama a fascist in the same breath as they label him a socialist. The term has been beaten into near meaninglessness from ubiquitousness of application. (Could this be another extremely clever semantics ploy of the right-wing marketing machine, taking the term out of use now that it is legitimately applicable, by over- and ab-using it? Damn, these guys are good.)

Still, I've seen the video clips from the congressional constituent meetings last week. I saw the ones from the Sarah Palin rallies in 2008. I remember the 2000 Brooks Brothers riot, one of the most despicable acts in American history, which resulted – because of one of the most cowardly acts in American history – in shutting down vote-counting in Miami. I saw at least two purple-hearted American war heros turned into national security threats by a team of cowards who avoided war when it was their turn. None of the rabble on the right could make the Grand Canyon size leap to see that for what it plainly was. Today I see the incoherent rage, the senseless foaming at the mouth that not only doesn't fit reality, but in fact runs completely contrary to it. I see the current attempts to intimidate the government and to shut down the discussion of issues.

And I have to ask, do those people not resemble Brown Shirts more than anything else one can bring to mind?

And is our current political moment not beginning to stink of Berlin, 1933?

David Michael Green is a professor of political science at Hofstra University in New York. He is delighted to receive readers' reactions to his articles (mailto:dmg@regressiveantidote.net), but regrets that time constraints do not always allow him to respond. More of his work can be found at his website, www.regressiveantidote.net.

Friday, July 24, 2009

The Democrats: Fake Party of Compassion


Posted by Kevin Carson on Jul 24, 2009 in CommentaryNo comments

Last week, we examined the Republican Party’s claims to be the party of small government, personal responsibility, free markets, and strict constitutionalism–and found it wanting.

But the same is true of the Democratic Party’s claims to be the “party of compassion” or to have a special regard for the welfare of “America’s working families.”

The Democratic Party, historically, has represented one faction of the corporate ruling elite. As described by sociologist G. William Domhoff and historian Thomas Ferguson, its primary constituency is large-scale, capital-intensive, high-tech, and export-oriented business. Far from being a “constraint” or “countervailing power” against Big Business, the twentieth century regulatory-welfare state was created primarily to serve corporate capital. As Murray Rothbard put it, “our corporate state uses the coercive taxing power either to accumulate corporate capital or to lower corporate costs.” Or in the equally apropos words of Roy Childs, “liberal intellectuals” have been “the ‘running dogs’ of big businessmen.”

That FDR was hardly the “traitor to his class” of official mythology is suggested by the role of General Electric CEO Gerard Swope in the New Deal economic agenda, and by the army of corporate lawyers and investment bankers in the Roosevelt “brain trust.”

Take, for example, the National Labor Relations (or Wagner) Act. The sectors of the corporate economy that supported FDR were capital-intensive, with long planning horizons that required stability and predictability, and hence extremely vulnerable to disruption. But labor costs were a modest part of the total cost structure of such capital-intensive industry. So the leaders of heavy industry were willing to offer workers significantly improved wages and benefits, in return for coopting the leadership of the labor movement and creating a class of union bureaucrats that would stamp out wildcat strikes and enforce contracts against the rank and file.

If the Republicans were originally the party of protectionism, the Democrats were historically the party of what William Appleman Williams called “Open Door Empire.” That policy led to the creation of a de facto corporate world government under the Bretton Woods institutions, after WWII, with the U.S. military as enforcer. Open Door Empire was the basis for the system of global corporate-state collusion popularly (and wrongly) known today as “free trade,” and more accurately as neoliberalism. The only thing it has in common with genuine free trade is the removal of tariff barriers. But in its reliance on “intellectual property” and other statist measures, it is if anything more genuinely protectionist than anything the GOP was doing a century ago.

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The National Security State and permanent war economy were created by good liberal Democrats: FDR and Truman. The archipelago of military bases and garrisons around the world, and the grand tradition of CIA-engineered coups (who was President when Diem and Sukarno were overthrown, I wonder?) , are very much a bipartisan creation.

Much of the legal framework for neoliberalism was constructed in Bill Clinton’s watch (y0u know, that “peace and prosperity” Carville is so partial to). NAFTA, the Uruguay Round of GATT, the Digital Millennium Copyright Act–you’d almost get the idea global corporate rule didn’t start with Bush.

And if that’s not enough to get your head around, the Bush police state didn’t start with Bush, either. Some of Bush’s most objectional dictatorial powers resulted, not from the USA PATRIOT Act, but from “counter-terror” legislation passed under Clinton after the Oklahoma City bombing. A good example is the power to declare organizations “terrorist” by executive fiat and seize their assets without due process–thank Clinton for that. And some of the worst stuff in USA PATRIOT was originally proposed–unsuccessfully–in the Clinton legislation. That Chuck Schumer played a major role in crafting both pieces of legislation bears more than passing significance as well, I think.

Today, despite all the soccer mom rhetoric about “working families,” the leopard hasn’t changed its spots. The role of Robert Rubin (he of Goldman-Sachs and Citigroup) in Democratic policy circles should tell you as much. Nancy Pelosi, whose family net worth is $18 million thanks to her marriage to an investment banker, is only the 17th richest member of Congress; that should tell you something.

The Obama-Geithner TARP policy, despite some symbolic tinkering with executive compensation, is in its essentials a direct continuation of the Bush-Paulson version. It’s the ultimate in neo-Hamiltonianism, saddling taxpayers with interest-bearing debt in order to buy up the banks’ bad assets and reinflate them to something approximating their pre-collapse face value, so that just maybe the banks will use some of the resulting liquidity to start lending money back to the public at interest.

The Democrats, if anything, are more in collusion with the Copyright Nazis of the RIAA, MPAA and Microsoft than are the Republicans–and that’s saying a lot.

Wednesday, May 27, 2009

This is Not a Bull Market: Stocks Are Not Up, and They’re Headed Even Lower


How do you measure wealth generation?

1) Average annual gains?

2) Gains relative to an underlying index (the S&P 500)?

3) Gains relative to inflation?

Of these three, the last is the only real means of gauging wealth creation or destruction. Commentators have been going bananas over the fact that stocks are up 20%+ since their bottom of 666. No one mentions that this rally may actually be induced by the Federal Reserve pumping trillions of dollars into the financial system.

Similarly, no one mentions that adjusted for inflation, stocks are still WAY down from their peak during the Tech bubble.


As you can see, stocks entered a bear market in earnest following the Tech Crash. Yes, in number or nominal terms, the Dow has risen. But you have to remember the dollar lost roughly a third of its value from 2001 to today. Measuring stocks or anything in dollars between now and then was like measuring with a ruler that was continually shrinking.

Also, bear in mind that the above chart is using the Government’s phony measure of inflation: the Consumer Price Index [CPI] which DOESN’T include food or energy prices. Using accurate inflationary data, stocks are down even more in real terms.

My main point is this: inflation is an ever-present reality in the post WWII era. Investors need to be protecting themselves from this beast at all costs. You can do this by:

  • Buying gold
  • Buying commodities or real assets
  • Buying companies that can offset inflationary costs by raising the price of their products

I suggest having some money in all three. It’s the only certain way to protect your wealth from inflation. The Feds are cooking up an inflationary storm of epic proportions, pumping TRILLIONS of dollars into the financial system. Stocks may rally like a rocket-ship from here. But in real terms they’re still tanking.

After all, if the Dow hits 30,000, but you’re celebrating by drinking a $150.00 coke… are you really any richer?

Man Faces Life in Prison for Paying Employees in Gold Coins

Man Faces Life in Prison for Paying Employees in Gold Coins

goldcoin

Robert Kahre, who owns numerous construction businesses in Las Vegas, is standing trial on 57 counts of income tax evasion, tax fraud and criminal conspiracy. If convicted on most counts, he could live out his life in prison.

But attorney William Cohan paints Kahre as an American “hero” who believes his payroll system helped keep the U.S. monetary system sound, and was also a form of legal tax avoidance.

A self-made entrepreneur, Kahre, 48, paid his workers in gold and silver coin, and said they could go by the coins’ face value — rather than the much higher market value of their precious metal content — for federal tax purposes. He did not withhold taxes from their wages, and he provided the same payroll system to 35 outside clients, which were other local businesses.

Judge David Ezra is presiding over the criminal trial, which began May 19 in U.S. District Court. Joining Kahre as defendants are his longtime girlfriend, a sister who works in his businesses, and a former business assistant.

Three of the four present defendants were among the nine people tried on similar charges two years ago, but no convictions resulted. In the 2007 trial, four others of the nine defendants, including Kahre’s mother, were entirely acquitted. Two individuals were only partially acquitted, but dropped from the indictment that forms the basis for the trial before Ezra.

This time around, the only new defendant is Danille Cline, Kahre’s girlfriend of 19 years, and the stay-at-home mother of his four children. The government claims she obstructed the Internal Revenue Service by allowing Kahre to place several homes in her name, thus attempting to conceal his assets.

Cline’s former brother-in-law, Thomas Browne, also was indicted this time, for his role as broker in some of the real estate transactions, but has since reached a plea bargain. He is expected to testify against the defendants.

“This is a case about money, greed and fraud.” The line appeared on screen in court during the government’s opening statement by Christopher Maietta, a trial lawyer from the Washington, D.C., office of the Department of Justice.

According to the government, Kahre and others concocted a fraudulent cash payroll “scheme” and then peddled it to other Las Vegas contractors. Defendants did not report to the IRS any payments made to workers, “either at the true amount or at the bogus amount, … being the face value of the coin or coins,” according to the indictment.

The now-suspended payroll service handled about $114 million over six years, according to court records. Between 17 and 25 percent of that went to Kahre or his workers; the rest went to the 35 client businesses to pay their workers, court records show.

2007_coin_marketThe government did not indict most of the outside businesses or their personnel as co-conspirators with Kahre; although on May 6, Daniel McCartan of Action Concrete, which was one of Kahre’s payroll clients, was finally sentenced in connection with a plea agreement reached in December 2006. McCartan received five months in prison and five months of home detention for one count of tax evasion.

Kahre contends his workers had agreed to be independent contractors, so he did not have to withhold taxes for them. His six businesses are in the trades of painting, drywall, tiling, plumbing, heating-cooling and electrical work.

Further, the $50 gold coins and the silver dollars Kahre used for payroll are designated by Congress as legal tender, so people are entitled to value them at their stamped denominations, he also contends. Taken at face value, each defendant’s annual coin income placed him below the threshold for filing a federal tax return.

Earlier cases on the question of how to value gold or silver coins have focused on collectible coins that had been pulled from circulation but still have value as property, according to the defense. Kahre used coins minted after 1985, which are allowed to circulate.

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“It’s not whether what Mr. Kahre did was legal under the law,” defense attorney Michael Kennedy told the jury in his opening statement. “It’s whether he believed what he did was legal,” in the absence of explicit instructions by the IRS — on its Web site, in its publications or in response to written correspondence from Kahre — on how to value post-1985 gold or silver coins.

“We’re not here to determine if moneys are owed,” said Kennedy on behalf of his client, Lori Kahre, who had relied on her brother’s tax theory. A tax mistake is different from a tax crime, so the IRS can still use administrative channels to force the defendants to pay back taxes, Kennedy has noted in the past.

A sincere, but mistaken understanding of the tax-filing process is different from adopting a “pretextual” belief system in order to dodge taxes, Ezra acknowledged in court Wednesday.

Cohan described Kahre’s payroll system as a “boycott of the Federal Reserve.” But when the lawyer attempted to elaborate on Kahre’s view that the nation has debased its paper currency by abandoning its former gold standard, Ezra added, “We’re not here to convince the jury that the … (U.S.) monetary system belongs to an international cabal.”

Contact reporter Joan Whitely at jwhitely@reviewjournal.com or 702-383-0268.

Friday, May 15, 2009

Diamonds pile up worldwide as consumers finally realize their worthlessness.

Diamonds pile up worldwide as consumers finally realize their worthlessness.

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By ANDREW E. KRAMER May 11, 2009

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Each day, the contents of the bags spill into the stainless steel hoppers of the receiving room. The diamonds are washed and sorted by size, clarity, shape and quality; then, rather than being sent to be sold around the world, they are wrapped in paper and whisked away to a vault — about three million carats worth of gems every month.

“Each one of them is so unusual,” said Irina V. Tkachuk, one of the few hundred people, mostly women, employed to sort the diamonds, who sees thousands of them every day.

“I’m not a robot. I sometimes think to myself ‘wow, what a pretty diamond. I would like that one.’ They are all so beautiful.”

It could be years before another woman admires that stone. Russia quietly passed a milestone this year: surpassing De Beers as the world’s largest diamond producer. But the global market for diamonds is so dismal that the Alrosa diamond company, 90 percent owned by the Russian government, has not sold a rough stone on the open market since December, and has stockpiled them instead.

As a result, Russia has become the arbiter of global diamond prices. Its decisions on production and sales will determine the value of diamonds on rings and in jewelry stores for years to come, in one of the most surprising consequences of this recession.

Largely because of the jewelry bear market, De Beers’s fortunes have sunk. Short of cash, the company had to raise $800 million from stockholders in just the last six months.

The recession also coincided with a settlement with European Union antitrust authorities that ended a longtime De Beers policy of stockpiling diamonds, in cooperation with Alrosa, to keep prices up.

Though it is a major commodity producer, Russia has traditionally not embraced policies that artificially keep prices up. In oil, for example, Russia benefits from the oil cartel’s cuts in production, but does not participate in them.

Diamonds are an exception. “If you don’t support the price,” Andrei V. Polyakov, a spokesman for Alrosa, said, “a diamond becomes a mere piece of carbon.”

In an attempt to carefully calibrate its re-entry on the global market, without forcing prices still lower, Russia is relying on two things: the Soviet-era precious gem depository — created to hold jewelry confiscated from the aristocracy after the 1917 revolution — and capitalist investors, whom Alrosa hopes will buy diamonds as an investment, like gold.

Russia is taking a leadership role in other ways, too.

diamonds

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Sergei Vybornov, Alrosa’s chief executive, said that he had helped persuade the central bank of Angola — which, like Russia, is still relatively flush with oil money — to buy 30 percent of the production of Angola’s diamond mines, keeping these stones off the market.

And last fall, Alrosa began what it called the St. Petersburg Initiative, along with De Beers and other large producers, to invest collectively in generic diamond advertising, akin to De Beers’s promotion of the slogan “Diamonds are forever.” Russia assumed the task as De Beers has principally shifted to promoting its own branded gems.

Still, it is a precarious time for the Russian diamond company to assume leadership of the industry.

Until last year, De Beers produced about 40 percent of the global rough stone supply, and Alrosa 25 percent. But De Beers, which is prohibited under its European Union antitrust agreement from stockpiling, closed mines in response to the glut in rough stones. Russia is loath to do that, as authorities in Moscow, gravely concerned about potential unrest by disgruntled unemployed workers, try to keep workers on the payroll.

In the first quarter, De Beers reduced output by 91 percent compared with the previous year. The diversified mining companies Rio Tinto and BHP Billiton also curbed production.

Meanwhile, the market for wholesale polished diamonds, worth about $21.5 billion, is expected to fall to about $12 billion in 2009, according to Polished Prices, an analytical service for the industry.

Rough diamond prices have fallen even more, as much as 75 percent since their peak last July at some auctions.

diamonds3

The two markets are distinct. Typically, about 60 percent of a rough diamond is lost as dust or shavings in the cutting process.

Mr. Vybornov blames diamond traders who pledged diamond stocks as loan collateral for part of the world glut. When credit dried up last fall, banks and other creditors seized those gems and sold them, he says, flooding the market. By December, his company decided to withdraw entirely from the market rather than further erode prices.

Russia historically remained mostly a behind-the-scenes player, perhaps because Soviet authorities would have had to perform some ideological gymnastics to promote a product consumed principally by the rich of the capitalist world.

Instead, twisting politics, the Soviets concluded a semisecret agreement with apartheid-era De Beers to sell Siberian diamonds in a way that would not undercut the market.

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After the collapse of the Soviet Union, the Russian diamond industry created a formal alliance with De Beers, selling the South African company half of each year’s production at a discount intended to subsidize De Beers’s generic diamond advertising undertaken in the 1990s, mostly in the United States.

Now, the Russians are in the driver’s seat.

Charles Wyndham, a former De Beers evaluator and co-founder of Polished Prices, said Russia had thus far managed the transition well: withholding gems to make more money in the long run rather than further depressing the market.

“Whatever one wants to say about the Russians, they certainly aren’t stupid,” Mr. Wyndham said.

Alrosa is seeking to jump-start demand by selling gems under long-term contracts to wholesale buyers in Belgium, Israel, India and elsewhere. Under these contracts, six of which have been signed, prices are set at a midpoint between the peak last August and this winter, and fixed for a period of several years.

“A diamond ring should not cost $100,” Mr. Vybornov said. “We don’t want that type of client.”

Alrosa is also working with a Moscow investment bank, Leader, a subsidiary of the Russian natural gas monopoly Gazprom, to market diamonds to investors. Under the plan, investors would buy diamonds but the gems would not be released to jewelers for several years.

It is a program, essentially, of outsourcing the stockpiling function to investors in exchange for the chance to profit from a possible recovery in the market.

At one of Alrosa’s cutting shops in one of Moscow’s outer districts, Aleksandr A. Malinin, an adviser to the president of Alrosa, showed a typical collection that might become the basis for such an investment vehicle.

The gems fit in a felt box about the size of a laptop computer.

The larger stones, a circular-cut 10 carat flawless white and a princess-cut yellow, were estimated at about $400,000. The smaller ones ranged from $16,000 to $100,000. But the value of the box, while surely several million dollars, is something of a mystery just now given the depressed market.

How the buy-in price for the stones will be set, and how the company will determine when the price goes up and down, is unclear, Mr. Malinin said.

“We have to tell people that diamonds are valuable,” he said. “We are trying to maintain the price, just as De Beers did, as all diamond producing countries do. But what we are doing is selling an illusion,” meaning a product with no utility and a price that depends on the continued sense of scarcity where there is none.

At the Alrosa unit that receives diamonds, called the United Selling Organization, where about 90 percent of the output of the Siberian mines arrives for processing, Elena V. Kapustkina pours about 45,000 carats of diamonds though a stainless steel sieve every day to sort them by size.

“It’s just a job,” she said.

When asked whether diamonds had lost their romance for her, Ms. Kapustkina paused, looked down at the pile of gems on her table and blushed.

In fact, she said, her husband, a truck driver, gave her a half-carat ring 22 years ago. “Of course I love it,” she said. “It’s from my husband.”

Thursday, May 7, 2009

Nearly one in three US homeowners owe more on mortgage than their home is worth


[UNDER]

The downturn in home prices has left about 20% of U.S. homeowners owing more on a mortgage than their homes are worth, according to one new study, signaling additional challenges to the Obama administration’s efforts to stabilize the housing market.

The increase in the number of such “underwater” borrowers comes amid signs that falling prices are making homes more affordable for first-time buyers and others who have been shut out of the housing market. But falling prices also make it more difficult for homeowners who get into financial trouble to refinance or sell their homes, and for others to take advantage of lower interest rates.

For instance, fewer will qualify to take advantage of a key component of the Obama administration’s plan to stabilize the housing market. Under the plan, announced in February, as many as five million homeowners whose loans are owned or guaranteed by government-controlled mortgage giants Fannie Mae and Freddie Mac can refinance their mortgages, but only if the mortgage loan is a maximum of 105% of the home’s value.

Government officials are considering an increase in that limit. “It’s a question that we’re looking at,” said James Lockhart, director of the Federal Housing Finance Agency, which regulates Fannie and Freddie.

Real-estate Web site Zillow.com said that overall, the number of borrowers who are underwater climbed to 20.4 million at the end of the first quarter from 16.3 million at the end of the fourth quarter. The latest figure represents 21.9% of all homeowners, according to Zillow, up from 17.6% in the fourth quarter and 14.3% in the third quarter.

“What’s going on here is that you don’t have any markets that have turned around and you have new markets, like Dallas, that have joined the ranks” of communities where home prices have fallen, said Stan Humphries, a Zillow.com vice president.

Borrowers who owe far more than their home is worth may also be less likely to participate in another part of the government’s housing plan, which provides incentives for mortgage companies to modify loans to make payments more affordable. Thomas Lawler, an independent housing economist, said borrowers who owe 30% more than their homes are worth are far more likely to walk away from their property than those who owe just 5% or 10% more and expect prices to rebound. More than one in 10 borrowers with a mortgage owed 110% or more of their home’s value at the end of last year, according to First American CoreLogic.

There are some recent indications that the housing market could be beginning to stabilize. The National Association of Realtors pending home-sales index, for instance, increased 3.2% in March.

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Just how many borrowers are underwater is a matter of some dispute, with the answer depending in part on assumptions regarding home values and mortgage debt outstanding. Variations in home-price estimates can make a major difference in the number of borrowers who are underwater. In addition, borrowers who are already in the foreclosure process may be counted as being underwater if the title to their property hasn’t changed hands.

Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, said underwater estimates can be too high if they use price data that includes a large number of foreclosures. Foreclosed homes tend to sell at a discount, he said, making it appear that prices have fallen more than they actually have.

Moody’s Economy.com estimates that of 78.2 million owner-occupied single-family homes, 14.8 million borrowers, or 19%, owed more than their homes were worth at the end of the first quarter, up from 13.6 million at the end of last year.

Part of the reason Zillow’s numbers are higher may be that it looks at mortgage debt taken out at the time the home was purchased and doesn’t adjust for any payments since made toward the outstanding mortgage balance. It also assumes that borrowers who took out home-equity lines of credit at the time of purchase have fully tapped the amount they can borrow. That approach can overstate the portion of borrowers who are underwater, Mr. Zandi said.

Mr. Humphries of Zillow calls his methodology conservative and said Zillow’s use of pricing for individual homes provides a better measure of home valuations than Mr. Zandi’s approach, which relies on market-level estimates of home values. He adds that Zillow doesn’t include foreclosures in its pricing models.

Write to Ruth Simon at ruth.simon@wsj.com and James R. Hagerty at bob.hagerty@wsj.com