Wednesday, 29 September 2010

mi6 spy death: inside job or foreign involvement?


FBI joins investigation into MI6 spy's death

The FBI has joined the hunt for the mystery 'Mediterranean' couple linked to the death of the MI6 spy found dead in his London safe house.

Gordon Thomas and Patrick Sawer
25 Sep 2010

The bureau has employed face recognition technology at US airports in a bid to establish whether Gareth Williams travelled in and out of the US any stage with a couple answering the description of two people Scotland Yard have appealed to come forward in connection with his death.

The couple, of 'Mediterranean' appearance, were thought to have visited Mr Williams's flat in Pimlico sometime in June or July. Scotland Yard believes the pair, in their thirties, were known to Mr Williams since neighbours do not recall buzzing them into the address.

So far no trace of the couple has been found and detectives believe they could be significant to the inquiry.

Mr Williams, a computing and maths prodigy whose funeral on Friday was attended by Sir John Sawers, the head of MI6, had made regular trips to the United States, where he worked on secondment to the US National Security Agency (NSA) in Fort Meade, Maryland, helping to create defences against cyberattack on banking and infrastructure systems.

His last trip back to London from Washington was on Tuesday, August 10, following a holiday in the US. On August 15 CCTV showed him shopping at Harrods, eight days before his body was found at his flat in Pimlico.

The Sunday Telegraph understands that FBI agents have questioned baggage handlers at Washington's Dulles International Airport. None of them recall loading a large North Face holdall of the type in which Mr Williams's decomposing body was later discovered in the bath of his flat.

CCTV camera tapes at the airport have been subjected to FBI "Face Recognition" analysis to establish if Mr Williams arrived alone for his departure flight – or whether he was at any stage accompanied by the Mediterranean looking man and woman being sought by the Metropolitan Police.

Agents have also searched an apartment in the US used by Mr Williams close to the offices of the NSA, in a bid to establish if his death presents a threat to their own national security.

The 31-year-old, who had been on secondment to MI6 from the GCHQ listening centre in Cheltenham for a year, is understood to have lived in the flat while working at the NSA.

Agents have also interviewed a number of Mr Williams's colleagues and associates in the US in their attempt to discover if security has been disrupted by his death. The FBI has also checked with Internal Security at the NSA to see if the description of the couple fitted any of the small circle of friends which Williams had developed while working there.

Given his known enthusiasm for cycling the FBI has made checks along the trails through the popular Appalachian Mountains close to Washington, to see if Mr Williams had rented a bicycle in the area or travelled there during his visits.

Intelligence sources say nothing compromising has been found during either the search or the interviews, however the revelations have focused attention on Mr Williams's work in the US and his links to American security agencies.

Mr Williams is understood to have been a key member of a joint team assembled by MI6, GCHQ and the NSA at Fort Meade, where he was helping create defences for both Britain and the US against cyber attack by hostile countries.

He was given his own work station, equipped with a supercomputer with a secure link to GCHQ and MI6.

According to an intelligence source "his clearance was so high that he had access to over 30 categories of information which NSA had gathered". From Fort Meade he would also visit the Pentagon, the headquarters of the US Department of Defence.

Harry Ferguson, a former MI6 officer, said Mr Williams would have been a high-value asset if he had been recruited by a foreign agency.

It is understood that his remit at the NSA was to develop new defences that he would introduce to his post at GCHQ's Office of Cyber Security (OCS) on his return.

The FBI declined to confirm or deny whether its agents had searched Mr Williams's apartment. A spokesman at its Baltimore office, which covers the State of Maryland, said: "We don't discuss ongoing investigations."

Mr Williams's body was found in a state of advanced decomposition in the large North Face holdall, which had been padlocked from the outside and left in the bath of his flat at 23 Alderney Street, on August 23. Detectives have played down speculation that Mr Williams could have closed the padlock around the two zip handles from inside the bag. Officers are understood to believe someone else was involved in the death.

Two separate autopsies have failed to establish the cause of death and tests for other rare toxins which may evade initial examination continued last week on Mr Williams's body. A Home Office pathologist has already established that he was not stabbed, shot or strangled.

The continuing mystery over Mr Williams's death – along with the speculation, often lurid, surrounding it – has made it difficult for his parents Ian and Ellen to come to terms with the loss of their son. Mr and Mrs Williams, along with his sister Ceri, led mourners at his funeral at the Bethel Methodist Chapel in Anglesey before retreating their home in the village of Valley, overlooking the Irish Sea.

Mr Williams's uncle, William Hughes, a farmer and Plaid Cymru county councillor, said: "It's very tough for them at the moment. They are struggling to come to terms with what has happened. The fact no one yet seems to know how or why Gareth died makes it very difficult. He was a wonderful boy and Ian and Ellen were very proud of him."

Give us Gareth's body back: Dead MI6 spy's family demand independent tests to find out truth

Sam Greenhill and Charlotte Gill
11th September 2010

The family of murdered MI6 spy Gareth Williams have demanded his body back, it emerged last night.

They would like to commission their own post-mortem examination, it is understood.

It is a clear sign they are rapidly running out of patience with the police investigation into his death.

The coroner in charge of the case has consistently refused to release the codebreaker's body because detectives have still to discover exactly how he died.

But this delay is infuriating the brilliant mathematician's relatives in North Wales.

They have not been able to hold a funeral and are equally unhappy about the apparent lack of progress into explaining what happened to the 31-year-old.

Yesterday a source close to the family said: 'It is becoming very frustrating trying to get to the bottom of whatever has happened. 'There are just so many things we still don't know.

'We have made it clear to the police that we want the body back as soon as possible.'

It is more than three weeks since detectives began investigating the murder.

Mr Williams's naked body was found in a sports bag in the bath of his top-floor London flat near MI6 headquarters on August 23.

There were no obvious signs of an intruder or clues to how he died and it was later revealed the bag had been padlocked.

Police have announced that the first postmortem examination, carried out two days after Mr Williams's body was found, and toxicology tests were inconclusive.

There was no outward sign that he met a violent death and there was no trace of drugs or alcohol in his blood.

Intriguingly, a further 'examination of the body' was undertaken last week but investigators have refused to reveal why the procedure was carried out or what it revealed.

Pathologists have been searching for signs of whether a rare drug or poison was used.

Gareth Williams
Gareth Williams

Mr Williams's naked body was found in a sports bag in the bath of his top-floor London flat near MI6 headquarters on August 23. Police have released CCTV images of his last known movements

Last Monday, in their first public appeal, police announced they were seeking a man and a woman, both of Mediterranean appearance, who called at No. 36 Alderney Street in June or July, late one evening, and were let into the communal front door.


Police have released CCTV images of Gareth Williams entering London's Holland Park Tube station on August 14

The images show Gareth Williams entering London's Holland Park Tube station on August 14

'They wanted to have their own tests carried out.'

The source said the family was considering paying for an independent pathologist to conduct an examination.

Detectives are struggling to piece together what happened to Mr Williams between the last time he was seen, captured on CCTV on August 15 shopping at Harrods, and eight days later when he was found.

Uniformed officers discovered his body that afternoon after being alerted by friends, family and MI6 that he was missing and not responding to calls.

Mr Williams worked for the Government's eavesdropping service GCHQ. He was an expert on ciphers and had been on a secondment to MI6 in London.

He had just returned from the U.S, where police said he had been on holiday, coming back to Britain on August 11.


Concern grows over foreign involvement in spy's death

Concern is growing within the intelligence community that the MI6 spy found dead in his London flat may have been the victim of a professional hit by a foreign power.

Patrick Sawer and Gordon Thomas
11 Sep 2010

Sources have told this newspaper that Britain's intelligence services – MI6, MI5 and GCHQ – are liaising closely to establish whether Gareth Williams was targeted by a foreign power.

The 31-year-old was seconded from GCHQ to work on top-secret systems to defend British banks and transport infrastructure from cyber attack and to eavesdrop on terrorist communications.

As a result he may have come to the attention of foreign intelligence agencies.

Security service sources suggest that the most likely explanation for Mr Williams's death is still to be found in his private life, but they admit they are not yet certain and are considering a range of explanations.

Some officials are starting to believe the way the killing was carried out – leaving few, if any, immediate clues as to the cause of death – could point to a professionally-carried-out assassination.

Scotland Yard, which is leading the investigation into his death, said: "We're not at the stage where we can pinpoint how Mr Williams died and all avenues in this investigation remain open. We are keeping an open mind."

It is feared that by the time of his death last month Mr Williams's presence in London had become known to foreign spies, despite the fact he was living in a MI6 safe house with an alarm system linking him to nearby MI6 headquarters.

"It would have been part of their brief", said a British intelligence officer.

The 31-year-old maths and computer expert would have been regarded as a valuable asset for his knowledge of the inner-workings of GCHQ, the government's listening post in Cheltenham, and for his work on preventing cyber attacks on the banking and transport infrastructure.

It is understood Mr Williams's job at the time of his death was creating computer defences in the City of London. Williams would have had access to information which other countries would want to obtain.

The intelligence source said: "His job was to defend the banking system on which Britain's banking, commerce and all our public services depend. It was the kind of work that would have made him prime target for recruitment.

"He was also in a position to know about huge money transfers out of the Middle East which were linked to terror groups. It would be priceless data."

One theory being examined is that Mr Williams may have had an approach from a rival agency, and either rebuffed it without informing his superiors or initially agreed to co-operate then got cold feet.

If such an approach had been exposed there would have been severe political and diplomatic repercussions, making it expedient for Mr Williams to be killed.

It can be revealed that Williams had also played an important role in creating signal intelligence equipment, known as sigint, to listen to Taliban communications in Afghanistan.

He had helped in fitting out three Brittan-Norman Islander aircraft with this equipment to be used as airborne-listening stations.

Based at RAF Northolt in West London since 2007 they have flown over selected British cities searching for communications between suspected terrorists.

A key part of the equipment is the wide-band recorders that Mr Williams helped to develop. Each has the capacity to vacuum up continuous mobile phone traffic in a city the size of Bradford.

The "product" is then downloaded to GCHQ where state-of-the-art computers analyse the voices using voice-recognition software.

Mr Williams's knowledge of US intelligence agencies would have also been valuable. He spent several months at Menwith Hill, the secret listening station in Yorkshire used by the United States to intercept coded messages, and Fort Meade in Maryland, the home of the US's National Security Agency.


Scotland Yard say detectives are now awaiting the result of toxicology tests.

These would establish whether Mr Williams was poisoned using a deadly toxin such as strychnine, cyanide or thallium, administered in such a way as to leave no mark visible to the naked eye.

Sources state that Home Office pathologists are also looking for evidence that Mr Williams was smothered to death, a method that can leave no trace and is extremely hard to detect.

Concern about the possible involvement of a foreign agency has increased further following a public appeal issued last week [Monday, September 7] by Scotland Yard detectives, who are taking the lead in the investigation.


September 6, 2010


There are, however, increasing signs that the GCHQ scientist’s murder was carried out in a professional manner, possibly by a member of a rival intelligence agency. A further clue pointing to this possibility is that Williams’ body, which was found stuffed in a padlocked sports bag placed inside a bathtub in his apartment, had been submerged into some sort of fluid. This was reported by police officers who were first on the murder scene. But the liquid substance, which was neither blood nor water, has yet to be precisely identified. There are suspicions that it was employed to hasten the decay of Williams’ body and to erase possible toxicological clues as to the former scientist’s time and cause of death. In the past few days, it has also become known that Williams, who had received top security clearance from the British government, had recently returned from an MI6 mission to Bulgaria.

01 Sep 2010


Remembered by school mates as a “maths genius”, Mr Williams was on a one-year secondment to MI6 from GCHQ, the government’s “listening post” in Cheltenham, Glos, where he worked for almost a decade.

His position regularly took him to the US where he liaised with the National Security Agency and the CIA and he is also reported to have made a number of visits to Afghanistan.



Gareth Williams was a UK spy "who made regular trips to the US National Security Agency."

On 23 August 2010, the police found his body in an MI6 flat near to MI6 HQ in London.

According to "a source" Mr ­Williams’ body was found ­during a "welfare check" by ­police following a call from one of his colleagues at GCHQ (Government Communications Headquarters) in Cheltenham. (DEAD SPY GARETH WILLIAMS A)

According to Nicholas Anderson, a Former MI6 agent, "It took nearly two weeks for the FCO (Foreign & Commonwealth Office) employee assistance head to follow up on why he hadn't been at work." (MI6 death: Murder most strange)

1. Reportedly he had been dead for weeks.

Jenny Elliott said: 'He definitely wasn't on annual leave as the security services woman who came to see me after they found his body told me that he wasn't on holiday." (The Daily Mail. )

How did MI6 not notice that one of its Agents was missing ? (MI6 inquiry will ask why it took two weeks to find murdered officer )

And how did they not notice he was in one of their own safe houses ? (Murdered British Spy Found Stuffed Into Sports Bag in Bath of ...)

2. Five weeks before Gareth Williams' death, Gareth Williams' 'best friend' was suddenly posted to Denver, Colorado on secret duties.

"A source claimed detectives have been ‘blocked’ from interviewing several potentially crucial witnesses.

"Mr Williams’s ‘best friend’, a female colleague at the Government’s listening post, was posted to work for an intelligence agency linked to the Pentagon in the U.S. five weeks ago.

"The 25-year-old woman and her husband, who also knew Mr Williams, both worked at GCHQ in Cheltenham and were ‘suddenly’ transferred to Denver, Colorado, on secret duties.

Murder squad detectives are keen to speak to her in case she can offer any clues to why someone would want Mr Williams dead. (Gareth WIllams: Riddle of murder spy's money trail Mail Online)

"Mr Williams was a top-level cryptologist helping to oversee a network called Echelon, which links satellites and super-computers in Britain and the US with those of other key allies.

"Echelon now eavesdrops on terror suspects and drug dealers, and searches for other political and diplomatic intelligence." (Investigation into death of British spy Gareth Williams takes ...)

"Diana, Princess of Wales may have come under ECHELON surveillance before she died." (NSA Watch Echelon FAQ)

According to Roger Graef, broadcaster and criminologist, "if he was such a hot shot at code breaking then presumably he'd have been protected." (MI6 death: Murder most strange)


4. On 28 August 2010, at This is Gloucestershire, (THE former landlady of dead GCHQ spy Gareth Williams.‎) we learn that Jenny Elliott, the former landlady of the dead British spy Gareth Williams, says she is baffled about the lack of a police approach to her.

Jenny Elliott said she had not been contacted since Dr Williams' body was discovered on Monday 23 August 2010.


James Rusbridger, who worked for MI6, was found dead at his home near Bodmin in the UK. "He was dressed in a green protective suit... His face was covered by a gas mask and he was also wearing a sou-wester. His body was suspended from two ropes, attached with shackles fastened to a piece of wood across the open loft hatch, and was surrounded by pictures of men and mainly black women in bondage." (Animal Rites: Beast of Bodmin)


James Mossman was a BBC reporter, interviewer and former MI6 agent. He committed 'suicide' in his cottage in Norfolk. It was reported that he was gay.

James Rusbridger, an ex-MI6 agent, and writer about spying, died in mysterious circumstances. (Sean Copland Dot Com - Spies - MI5 Murder British Author.)

His book "The Intelligence Game" is a source for:

The Hilda Murrel Story, detailing MI5's alleged role in the murder of an old lady.

The CIA Middle East car bomb, where the CIA detonated a car bomb in a packed Middle Eastern street killing 80, and maiming a further 200.

The failed Mossad plan to bomb London, where they hoped to leave enough forensic evidence to blame the Arabs, thereby ruining British-Syrian relations.

And also, the Madeline Haigh story, detailing how a housewife found herself on MI5's subversive list after writing a letter.

Stephen Milligan, was a Tory MP and Parliamentary Private Secretary to Jonathan Aitken. On February 7, 1994, Milligan was allegedly discovered bound to a chair with a plastic bag over his head and a satsuma [mandarin orange] stuffed in his mouth. (British Pol Ties to Auto-Erotic Deaths )

Aitken "was chairman of a secretive right-wing think tank known as Le Cercle, established after World War II and which was funded by the CIA, the Ford Foundation, and the Rothschilds" (echkelon)

Jonathan Moyle was in MI6 (Investigation into death of British spy.)

On March 31st 1990, Jonathan Moyle, the editor of the magazine Defence Helicopter World, Moyle was in Chile looking into a story about a Chilean firm, Industrias Cardoen which intended to convert US civilian helicopters into gunships for sale to Iraq.

"It has long been believed that Mark Thatcher, the son of the British Prime Minister Margaret Thatcher, was mixed up in surreptitious weapons agreements with Chile.

"Originally, Moyle's family was informed that he had passed away as he was masturbating while hanging inside a closet in a hotel room in Chile. He was discovered suspended by his shirt with a pillow case over his head.

"As per a report in The Guardian on February 28th 1998, Moyle seemed to have been sedated. A needle mark on his leg may have indicated this." (British Pol Ties to Auto-Erotic Deaths )

"In 2005, the commander of British forces in Gibraltar, Royal Navy Commander David White, was found dead and fully clothed in his swimming pool in The Rock section of Gibraltar. White had been ordered to return to Britain and go on mandatory leave by Britain's Ministry of Defense.

"After his death, police said White had been under investigation for possession of child pornography. White, whose job put him in command of a GCHQ SIGINT installation in the British colony, was determined to have committed suicide and that there was no sign of foul play." - (echkelon)

Gareth Williams: 'backroom boy' spy was really a high-flier

The MI6 worker found dead last week was at the cutting edge of espionage technology, says Gordon Thomas

29 Aug 2010

The Government Communications Headquarters in Cheltenham is Britain’s last great secret. Now it is in the focus of intense speculation among its stunned staff. Never before has one of their own been murdered. In GCHQ’s cafés, the seating area around the lawn at the core of the doughnut-shaped building and behind anonymous doors simply marked “No admission”, the same question continues to be asked: who murdered Gareth Williams – and why?

Despite his widow’s-peak haircut and geeky smile, he worked at the cutting edge of computer technology. His mathematical brain made him a vital tool in the fight against terrorism and cyber warfare. Yet the security services are anxious to play down his role, so as not to alarm the world over his importance to anyone involved in his murder.

In 2000, Williams left his Cambridge University course in advanced mathematics because he had already learned all he could. By then, he had also been “tapped” – recruited by GCHQ scouts, who tour universities looking for talent.

No one can be certain why he signed up. It wasn’t the salary. His £40,000 a year was far less than he could have earned in industry. But it is very likely that, like so many of his young colleagues at GCHQ, he was attracted by the challenges, the excitement of working at the centre of events that he would often know about before even the Prime Minister.


When Williams joined in 2001, he found himself among the largest group of mathematicians gathered within one UK organisation, along with hundreds of cryptologists and analysts. It’s a big operation: the electricity required to run GCHQ’s supercomputers would light a small town. He became part of a world where computers were linked to storage systems, each holding a petabyte of data – eight times more than the entire word count of the British Library. Soon, he found himself working in the Super Computer Centre, developing techniques to speed up data encryption.

A former GCHQ employee recalled last week that staff would boast that when one of its female employees became pregnant, “our computers could capture the first birth cry of her baby and follow the infant through life to its death, no matter where on earth it happened”.

Gareth Williams died without leaving such a trace. Last year, his section leader had told him he was being seconded to the London headquarters of MI6. It was a further sign of his steady progress up the hierarchy at GCHQ.

In 2003, he spent six months at Menwith Hill, the ultra-secret RAF station in Yorkshire. In reality, it is a transplant of the United States; the only connection with Britain is the detachment of Ministry of Defence police that patrols the perimeter.

It was here that Williams learned how to analyse the findings from Menwith Hill’s radomes – the imposing white structures resembling gigantic golf balls that intercept coded messages from satellite communication systems, which are then broken before being sent to GCHQ for further analysis.

In 2006, Williams also spent time at Fort Meade in Maryland, home of the United States’ National Security Agency, GCHQ’s partner in global surveillance. As GCHQ gathers secret intelligence from Europe, Africa and Russia west of the Ural Mountains, NSA covers east of the mountains, including Japan and China, the Pacific and South America. As a new arrival, Williams was invited to listen to recordings of Osama bin Laden talking to his mother on his satellite phone in the aftermath of 9/11.

With his tenure at MI6 coming to an end, Williams was told that he would rejoin GCHQ in a new department, the Cyber Security Operations Centre, a team of traffic analysts tracking the threat posed by would-be cyber terrorists to Britain’s banks and infrastructure. He died before he could take up this promotion.

A further sign of Williams’s importance was that he had been assigned to live at 36 Alderney Street – a high-security apartment in Pimlico that MI6 would have previously used to debrief one of its agents or a defector. Like all safe houses, it was functionally furnished – but with a direct phone line to MI6 headquarters less than a mile away. Williams would have been cautioned about who he was allowed to entertain at home.

In the days since his body was discovered last Monday, conspiracy theorists have filled the internet with claims that Williams had been stabbed and poisoned; that he was the victim of a sex attack; that he was either homosexual or transvestite; that sado-masochistic bondage gear had been found in the flat; that he was murdered because he had threatened to expose a cabal of gays in the intelligence world. All such possibilities are being examined this weekend by MI6 and MI5 working with Scotland Yard detectives.

Investigators have already discounted a theory that Williams was killed elsewhere and brought back to the apartment in the sports bag. But they are investigating whether a second key was cut for the apartment; locksmiths across London are being checked. CCTV footage at nearby Victoria station, as well as other London railway terminals, is under review for images of Williams returning from a recent holiday. He is known to have been back in London since August 11, and that a sighting was made on August 15 – one of the few details police have released.

As well as having trouble gathering evidence, police are finding it difficult to discover the exact nature of Williams’s work. They have been briefed that, despite earlier denials, it “impinged on national security”.

An intelligence officer close to the investigation confirmed: “He was not just a cog in the wheel. He had an important part in making the wheel go round.”

On Tuesday, a second post-mortem will be held: an initial post-mortem proved inconclusive, ruling out stabbing or shooting, with toxicology results still pending. I have been told that the Home Office forensic pathologist will be looking for evidence that Williams was neither stabbed nor poisoned, but smothered to death.

Dr Fawzi Renomran, the London-trained pathologist who conducted the autopsy on the body of Mahmoud al-Mabhouh, the Hamas terrorist who was killed in Dubai earlier this year, concluded that he had been smothered by a Mossad hit team. “It was a difficult form of murder to prove,” he said.

But, apart from Mossad, there are other intelligence services with experts in murder by smothering. They include the Russian SVR and the Chinese Secret Intelligence Service. Terrorist groups are also known to have used the method.

Until the next autopsy report becomes public, those two key questions – who murdered Gareth Williams, and why? – will continue to echo around GCHQ.

Gordon Thomas is the author of 'Inside British Intelligence: 100 years of MI5 and MI6’ (JR Books)

August 26, 2010

Gareth Williams murder story represents an old British intelligence modus operandi

by courtesy of Wayne Madsen

The discovery of the body of 31-year old British Government Communications Headquarters (GCHQ) officer Gareth Williams in a posh flat in Pimlico, just a mile from the "Ziggurat" headquarters of the British MI-6 Secret Intelligence Service headquarters along the banks of the Thames in Vauxhall, bears all the markings of a British intelligence hit.

Williams, who had frequently traveled in the past to visit his counterparts at the National Security Agency (NSA) in Fort Meade, Maryland and was due to return home to Cheltenham, the headquarters of the signals intelligence (SIGINT) agency GCHQ, was found stuffed in a bag in the flat's bathroom. Police estimated Williams, whose body was decomposed and reportedly, dismembered, had been dead for some two weeks.

Several cell phone and SIM cards were found neatly arranged in the flat.

There was no sign of a break-in at the flat on Alderney Street, where two former British Home Ministers, Michael Howard and Lord Brittan, also reside, and police report that Williams may have known his murderer or murderers. The flat property is owned by a company called New Rodina [Rodina is Russian for "new motherland"], said to be a Russian company registered in the British Virgin Islands. However, the reported presence of retina scanners on the flat's lock suggests the flat was used by MI-6 as a safe house of some sort. There is little known about New Rodina because of British Virgin Islands company secrets laws. New Rodina bought the property in 2000 with a mortgage from the Royal Bank of Scotland and The Guardian has reported that the agent for the property was the law firm Park Nelson, which had offices off Fleet Street in London. "New Rodina" is a term used by British intelligence members to refer to being stationed in London. It is a term used by Russian exiles living abroad -- "new motherland."

British media are now reporting that Williams was a gay transvestite who, because of the reported "Russian" connection to the flat owners, was somehow involved in a Russian gay sex plot. However, this fits a long pattern with British intelligence. Past deaths of male British officials have seen post-mortem reports of women's underwear and clothing being discovered, as well as child pornography. The resulting embarassment to the families of the deceased prevents them from seeking a wider investigation and the cases simply fade away from the public's attention. It is classic British intelligence trade craft to cover up murders carried out by British intelligence or other agents acting on their behalf.

The Sun of London is reporting that police discovered women's clothing of Williams's size in the Pimlico flat. The Sun is owned by neocon publisher Rupert Murdoch.

In March 1994, former British MI-agent James Rusbridger was found hanging in his home in Cornwall. Rusbridger's body was found suspended from two ropes and dressed in an NBC (nuclear-biological-chemical) protective suit and a rain coat. Rusbridger was wearing rubber gloves and a gas mask. Police reported they found sexual bondage photos and magazines scattered around Rusbridger's hanging corpse and they later concluded Rusbridger killed himself accidentally while engaged in a sexual strangulation act. Rusbridger was found with his legs bound at the ankles, knees, and upper thighs. Police also reported that Rusbridger was lonely, unhappy, and in financial distress.

Rusbridger was the cousin of retired MI-5 agent Peter Wright, whose book "Spycatcher" resulted in then-Prime Minister Margaret Thatcher seeking to ban its publication in Britain and abroad due to damaging revelations that British intelligence bugged Commonwealth conferences, tried to assassinate Egyptian President Gamal Abdel Nasser, and failed the investigate Sir Roger Hollis, director of MI-5 as a Soviet mole.

Rusbridger, who, like Wright, was an author of intelligence books, was investigating the death of Conservative Member of Parliament Stephen Milligan, whose body was found naked, except for wearing a pair of women's stockings, in his west London home just a month before Rusbridger was found hanging in Cornwall. Milligan, a former journalist and rising political star in the Conservative Party, was parliamentary private secretary to junior defense minister Jonathan Aitken in the Tory government of British Prime Minister John Major. There were reports that Millgan had been been found gagged and bound in addition to wearing a pair of women's stockings.

Aitken was sentenced to prison in 1999 after he was convicted of perjury for his testimony in an investigation of a British arms scandal involving Matrix Churchill, the Saudis, and arms sales to Saddam Hussein. While Chief Secretary to the Treasury, Aiken signed a "gag order" preventing evidence to be revealed in the 1992 trial of Matrix Churchill for weapons sales to Iraq. Aitken had been a director of BMARC, a subsidiary of the Swiss firm Oerlikon, which stood accused of indirectly supplying anti-aircraft systems to Saddam Hussein during the 1980s. BMARC was a subject of the Matrix Churchill investigation.

Aitken was also chairman of a secretive right-wing think tank known as Le Cercle, established after World War II and which was funded by the CIA, the Ford Foundation, and the Rothschilds.

In 2005, the commander of British forces in Gibraltar, Royal Navy Commander David White, was found dead and fully clothed in his swimming pool in The Rock section of Gibraltar. White had been ordered to return to Britain and go on mandatory leave by Britain's Ministry of Defense. After his death, police said White had been under investigation for possession of child pornography. White, whose job put him in command of a GCHQ SIGINT installation in the British colony, was determined to have committed suicide and that there was no sign of foul play.

UPDATE 1X. Although Williams is reported to have orignally been from Holyhead in Anglesey, Wales, WMR has learned from a boyhood friend that he grew up in Pwlhelli, north Wales. WMR has also learned that Williams was a veteran of the elite British Special Air Service (SAS) commandos.

My so-called life as a spy

The murder of MI6 operative Gareth Williams last week has turned the spotlight on the shady world of espionage. Here, a former intelligence offer for MI5 explains why the life of a British spy is an insular one

Annie Machon
29 Aug 2010

Annie Machon, former intelligence officer for MI5
Annie Machon, former intelligence officer for MI5: 'I couldn't talk to my friends freely about my life, so they felt increasingly shut out' Photo: BRIAN SMITH

Spies have always loved living in Pimlico: a civilised area in central London, handy for strolling to the office, and wonderfully convenient for that midnight dash to work if your operation suddenly goes live. Plus, the local pubs are pretty good for the customary after-work moan.

I lived there myself when I worked as an intelligence officer for MI5 in the 1990s, so the murder of Gareth Williams in a nearby street gave me a bit of a jolt. While his death remains shrouded in mystery, what has been reported of his life sounds like classic GCHQ.

There are distinct cultures within each of the three major UK spy agencies: MI5, the UK domestic security service; MI6, the overseas intelligence organisation; and GCHQ, the Government Communications HQ.

MI6 officers, as people who may have to work independently and undercover abroad, tend to be confident, individualistic and “ethically flexible”, while MI5 officers need to co-ordinate a broad range of resources and people to run an operation, which requires greater team-building. Of the three agencies, GCHQ remains the most secretive and inward-looking, and is staffed predominantly with “boffin” types. Williams, with his mathematical skills and loner tendencies, would be a typical employee.

Despite the intelligence community presenting a united front to the outside world, culture clashes between the three agencies are commonplace. Staff on secondment between agencies – as Williams was, from GCHQ to MI6 – can have a rough time fitting into a new environment, working with colleagues who eye them with suspicion, as the divisions jockey for power, prestige and resources within Whitehall.

So what is life like working as a spy? The world of intelligence is not so much isolating as insulating. Even as you proceed through the convoluted recruitment process, you find yourself entering a parallel universe, one that exists alongside your everyday life.

From that first, exploratory meeting with an intelligence officer in an unmarked building in central London, you have to withdraw a little from your old existence. You are asked not to tell your family and friends, and immediately have to sign a notification of the rigorous terms of the Official Secrets Act, whereby if you talk about your work, you risk imprisonment.

The process of induction into this world is intriguing, flattering and seductive. The agencies tend to avoid the James Bond wannabes, and those inspired by the fake glamour of Spooks. The key motivation is generally wanting to do a job that can make a difference, protect the country and potentially save lives. The secret element adds spice and perhaps compensates for the anorexic pay. When I started working for MI5 in 1991, at the fast-track graduate level, the starting salary was £14,500 pa – a good £5,000 less than my peer group from Cambridge earned in their blue-chip jobs. The pay has improved somewhat since then, but you don’t become a spy for the money.

The vetting process is protracted. For MI5, MI6 and GCHQ, officers are required to have the highest clearance – Developed Vetting. This begins with a home visit. Disconcertingly, I soon found myself in the family sitting room being grilled about my sex life by a little, grey-haired lady who looked just like a favourite grandmother, until you looked into her eyes.

Then the process widens. I had to nominate four friends who were willing to be interviewed about me, and they were asked to suggest yet more people… so secrecy becomes impossible. One friend, of a Left-wing hue, disapproved of my recruitment; even those who were supportive were reluctant to ask me too much. As I couldn’t talk to them freely about my life, they felt increasingly shut out, so I lost old friends along the way.

Unsurprisingly, new officers begin to socialise increasingly with their colleagues, and close friendships grow rapidly. Within this clique, we could talk shop at dinner parties, use the same slang and terminology, discuss our work, and whinge about our bosses. With outsiders, we could never be fully ourselves. This, inevitably, often led to more than friendships. What might otherwise be called office romances flourished. I met my former partner, David Shayler, when we were both in our first posting in MI5.

Such relationships were not exactly encouraged, but were generally seen as a good thing by management – unless, of course, it was a clandestine matter that could leave the officer vulnerable to blackmail. Such affairs were seen as vetting offences.

Among spies, an old double standard held firm. There was one couple who were caught in flagrante in the office, not once but twice. The male officer was put on “gardening leave” for six months; the woman was sacked.

For the first few weeks in the job, the feeling of unreality and dislocation is strong. The only solid information you have about your new position, as you walk into the office for the first time, is the grade at which you will be working – nothing else.

My first posting was to the small counter-subversion section, F2. Even though it was a desk job, the information I was dealing with came from sensitive sources: intercepted communications, reports from agents who had penetrated target groups, police reports. And yet, within a few weeks, the handling of such secret and intrusive information became entirely normal.

Investigations can be very fast-paced, particularly in the counter-terrorism sections. Generally, officers work regular hours but occasionally, if an operation goes live, you work around the clock. If it proves a success, there might be a news item on the television about it – but obviously without the full back story. That can be a surreal experience. You feel pride that you’ve achieved what you signed up to do, but you cannot discuss it with anybody outside the office. At such moments, the disconnect from mainstream life is intensely sharp.

However, when something goes wrong – a bomb goes off in which civilians die – the feelings are even more intense. Guilt, anger, frustration, and a scramble to ensure that the blame doesn’t attach to your section. The official motto of MI5 is Regnum Defende – defence of the realm. Staff mordantly used to joke that it should more accurately be Rectum Defende.

Personal security also ensures that there is a constant barrier between you and the normal world. If you meet someone interesting at a party, you cannot say too much about what you do, and such reticence can appear unfriendly. The cover story that MI5 officers use is that they work as civil servants at the Ministry of Defence; for MI6, it is the Foreign Office. This usually stops people from asking too much more, either through discretion or, frankly, boredom. Once or twice, people pushed me for more information, and my paranoia antennae immediately began to twitch: why are they so interested? Are they spies or, God forbid, journalists?

I had the misfortune once of using this cover story at a party, only to find my interlocutor actually worked for the real Ministry of Defence, and wanted to know which section I worked in, who my colleagues were, how long I had been there… Thankfully, the magic word “Box” – slang used to describe MI5 within Whitehall, derived from the organisation’s old PO Box 500 number – brought that line of conversation to an abrupt halt.

As an intelligence officer, you quickly learn to be discreet on the telephone and in emails. Oblique conversations become the norm, and this bleeds into your personal life, too, much to the frustration of friends and family.

The internet is another challenge. As a “spook”, the last thing you want to see is your photograph on a friend’s Facebook page. Or, even worse, holiday snaps showing you in your Speedos, as the current head of MI6, Sir John Sawyer, found to his cost last year.

And what about when you come to leave the intelligence service, as I did after five years. Can you ever really have a normal life afterwards, and shake off the mindset?

Many of my former colleagues have left and built careers in a wide variety of areas. But I wonder how many still look automatically over their shoulders as they put their key in the front door; how many tear up paper before throwing it in the bin; and how many are reflexively reticent about their personal life?

Would I want to be a spy these days? No, thank you. I’m happier in the real world.

* Annie Machon is the author of Spies, Lies and Whistleblowers (Book Guild)

Tuesday, 28 September 2010

iran s-300: "niet!" risks antagonizing the muslims


"In the Interests of Israel": Why Russia will not sell the S-300 Air Defense System to Iran

Has Moscow switched to the camp of its foes?

Gen. Leonid Ivashov
September 23, 2010
Russian army chief of staff Gen. N. Makarov broke the news on September 22 that Russia will not sell the S-300 air defense systems to Iran. Regardless of official explanations, it does not take an expert to realize that as a purely defensive system designed to shield a country from aircraft and cruise missile attacks the S-300 complexes cannot pose a threat to any country unless it attacks the one owning them.

As for the standoff between Iran and Israel, Tehran is constantly confronted with threats of massive air strikes, and taking steps to prevent the aggression is a must for any country seeking to sustain peace, especially for a permanent UN Security Council member sharing the responsibility for global security. Aggression is least likely in the situation of military parity or if the potential victim is able to inflict unacceptable damage on the aggressor. Iran's possession of the S-300 complexes could expose Israel's air forces to the risk of unacceptable damage in case the letter choses to attack the former. Denying Iran the right to efficient means of self-defense is tantamount to encouraging aggression against it. Isn't Russia thus helping to unleash a disastrous war in the proximity of its own borders, a war against a country which, by the way, hosts a large colony of Russian specialists? On top of that, the refusal to supply the S-300 complexes to Iran clearly hurts Russia's political and economic interests.

What could be the motivation behind Russia's recent decision? Obviously, it stems from several regards. Ostensibly unaware of the existence of Israel' nuclear arsenal, Moscow has for years been playing the game of taming Iran's alleged nuclear ambitions and voted for sanctions against the country in the UN Security Council. Actually, Tehran proposed a number of times to turn the Middle East into a nuclear-free zone. The plan was welcomed by the majority of the Arab world but seems to be a taboo for Russia's foreign ministry. Now, why is that?

Igor Yurgens, chief of the Institute of Contemporary Development, a well-connected Russian thinktank, said at the Nixon Center Russia-US roundatable on July 28, 2010 that not everybody in Russia regards the collapse of the USSR as a geopolitical catastrophe (as Russia's former president and current prime minister V. Putin described the historical development). Yurgens went on to assert that the goal of those who don't is to integrate Russia into the Euro-Atlantic security architecture and to eventually bring the country to NATO. He praised Russian defense minister A. Serdyukov's military reform and told that in the nearest future Russia would ­ oddly enough - be importing at least 30% of the weapons and equipment for its army from Israel and NATO countries. Another roundtable speaker from Russia - Gen. V. Dvorkin who, incidentally, paid a visit to Israel a short time ago - urged US senators to OK launching an attack against Iran as soon as possible and even presented a computer model of the conflict to US partners.

Defense ministers of Russia and Israel A. Serdyukov and Ehud Barak signed a first-ever agreement on the military cooperation between the two countries on September 6, 2010. The sides went so far as to include intelligence data swaps in the package, leaving it open to interpretation whether from now on Russia is going to spy on Arab countries, Turkey, and Iran and pass sensitive information to Israel. Whereas in the past the Russian administration sought consensus with Tel Aviv to sell weapons to Middle Eastern countries, currently the impression is that it needs Israel's explicit sanction for such deals. A similarly absurd arrangement was in effect in the days of the Gore-Chernomyrdin commission when Moscow did not even dare to supply ordinary mechanical equipment to Iran unless Washington greenlighted the deal.

It is an open secret that Israel assisted in organizing and launching the August, 2008 unprovoked Georgian aggression against South Ossetia and the deadly raid against the Russian peacekeepers deployed in the republic. Israeli advisers are in part responsible for the bloodshed, but one gets an impression that these days for Moscow no sacrifices are too great a price for an entry ticket to the Judo-Atlantic civilization.

Decisions like the one announced by Gen. N. Makarov undermine Russia's prestige and erode its security, making the world less safe for every one of us. At the moment the Islamic world has reasons to believe that Moscow has switched to the camp of its foes. Given the facts that Russia is locked in a protracted conflict in the Muslim part of the Caucasus and that over a million Muslims reside in Moscow, antagonizing Muslims worldwide is the last thing the country needs.

On the whole, Serdyukov's military reform ­ the structural overhaul, the introduction of the brigade system, the acquisitions of Israeli and NATO weapons, joint Russia-West exercises in the US and in Europe, and the tide of military college closures ­ lead watchers to conclude that the broader plan behind it is to build what still remains of Russia's army and navy into the US and NATO expedition corps.
Shall we really be taking the riskiest roles in the military escapades of the Anglo-Saxons and of the Israeli Zionist leadership in the name of the shadowy financial oligarchy's global dominance? Let others judge what authors of the plan deserve.

Gen. Leonid Ivashov is the President of the Academy of Geopolitical Problems

gladio implique dans un attentat contre turgut ozal


source: reseau Voltaire

28 septembre 2010

L’OTAN a t-elle tenté d’assassiner le président turc Turgut Özal ?

Ahmet Özal, fils de l’ancien président turc Turgut Özal (1927-1993), a déposé plainte contre le général Sabri Yirmibeşoğlu, ancien secrétaire général du Conseil turc de sécurité nationale et ancien commandant du Département des opérations spéciales.

M. Özal accuse le général Yirmibeşoğlu d’avoir organisé, le 18 juin 1988, une tentative d’assassinat de son père qui était alors Premier ministre.

Depuis plusieurs années la rumeur s’est répandue que le président Özal ne serait pas mort d’une crise cardiaque, le 17 avril 1993, mais aurait été assassiné par le Gladio, c’est-à-dire des agents turcs opérant pour le compte de l’OTAN.

Le général Yirmibeşoğlu a démenti les accusations dont il fait l’objet. Cependant, répondant aux questions de la presse, il a admis que son service menait des opérations secrètes incluant de graves manipulations. Par inadvertance, il a reconnu avoir fait brûler une mosquée à Chypre, en 1974, pour manipuler les Chypriotes turcs (majoritairement musulmans) et les dresser contre leurs compatriotes Chypriotes grecs (majoritairement orthodoxes).

Le général Yirmibeşoğlu avait déjà reconnu que son service était impliqué dans les émeutes des 6 et 7 septembre 1955. A l’époque ses agents, travaillant sous l’autorité du Gladio, perpétrèrent un attentat contre le musée consacré à Mustafa Kemal à Thessalonique (Grèce). Ce sacrilège suscita la colère d’extrémistes turcs qui s’en prirent aux Grecs d’Istanbul et d’Izmir. Les pogroms firent 16 morts et 32 blessés graves ; environ 200 femmes furent violées.

Le président Turgut Özal était partisan d’une politique étrangère eurasiste qui préfigure l’actuelle politique néo-ottomane. Durant 50 ans, le Royaume-Uni et les Etats-Unis, via le Gladio, n’ont cessé d’organiser des attentats sous fausse bannière pour dresser leurs alliés grecs et turcs les uns contre les autres et les affaiblir.

updated 29 September 2010

Did NATO attempt to assassinate Turkish President Turgut Özal?

Ahmet Özal, son of former Turkish president Turgut Özal (1927-1993), registered a complaint against General Sabri Yirmibeşoğlu, former secretary-general of the National Security Council and Commander of the Special War Department.

M. Özal has accused General Yirmibeşoğlu of having conducted an assassination attempt, on 18 June 1988, on the life of his father who was Prime Minister at the time.

For many years, the rumor has circulated that President Özal did not die of a heart attack on 17 April 1993, but was assassinated by Gladio; that is to say, Turkish agents operating under NATO’s orders.

General Yirmibeşoğlu denied the accusation. However, in responding to the press, he acknowledged that his services had taken part in covert operations, including some grievous manipulations. He inadvertently confessed to having ordered the burning of a mosque in Cyprus, in 1974, to manipulate the Turkish Cypriots (mainly Muslim) and pit them against their Greek orthodox compatriots.

The retired general had already admitted that his services were implicated in the 6-7 September 1955 riots in Istanbul. His agents, acting under the authority of Gladio, perpetrated an attack against the museum dedicated to Mustafa Kemal in Thessalonica, Greece. The attack, perceived as a sacrilege, inflamed Turkish extremists who took it out on the Greek communities in Istanbul and Izmir. The progroms claimed 16 lives and left 32 people seriously injured; some 200 women were sexually assaulted.

President Turgut Özal advocated a eurasist foreign policy that foreshadowed the neo-ottoman policy currently in place. For fifty years the United Kingdom and the United States have used Gladio to systematically orchestrate false-flag attacks to set up their Greek and Turkish allies against each other in order to weaken them.

ergenekon "stay behind" in many countries

Prime Minister Turgut Ozal, the leader of the Motherland Party, from which many AKP leaders began their political careers, narrowly survived an assassination attempt by a Gladio assassin on June 8, 1988. A shooter narrowly missed Ozal's head but he was struck in the finger. The assassination attempt was linked to the head of the Ergenekon nest, the National Security Council. Ozal became President of Turkey in 1989. Ozal died of a suspicious heart attack on 17 April 1993. Ozal's wife Semra, claimed Ozal was poisoned by lemonade. There was no autopsy and blood samples taken from his body disappeared.

biz updates: shut down the fed / world depression...


Shut Down the Fed (Part II)

see part I

Ambrose Evans-Pritchard
September 27th, 2010

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.

We now learn from last week’s minutes that the Fed is willing “to provide additional accommodation if needed to … return inflation, over time, to levels consistent with its mandate.”

NO, NO, NO, this cannot possibly be true.

Ben Bernanke has not only refused to abandon his idee fixe of an “inflation target”, a key cause of the global central banking catastrophe of the last twenty years (because it can and did allow asset booms to run amok, and let credit levels reach dangerous extremes).

Worse still, he seems determined to print trillions of emergency stimulus without commensurate emergency justification to test his Princeton theories, which by the way are as old as the hills. Keynes ridiculed the “tyranny of the general price level” in the early 1930s, and quite rightly so. Bernanke is reviving a doctrine that was already shown to be bunk eighty years ago.

Inflation targeting: is Bernanke the new Von Havenstein, head of the Weimar Reichsbank?

Inflation targeting: is Bernanke the new Von Havenstein, head of the Weimar Reichsbank?

So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control.

The sophisticates at banking conferences in London, Frankfurt, and New York who aplogized for this primitive monetary creationsim – as I did – are the ones who lost the plot.

My apologies. Mercy, for I have sinned against sound money, and therefore against sound politics.

I stick to my view that Friedmanite QE ‘a l’outrance‘ is legitimate to prevent a collapse of the M3 broad money supply, and to prevent outright deflation in economies with total debt levels near or above 300pc of GDP. Not in any circumstances, but where necessary, and where conducted properly by purchasing bonds outside the banking system (not the same as Bernanke “creditism”).

The dangers of tipping into a debt compound trap – as described by Irving Fisher in Debt-Deflation Theory of Great Depresssions in 1933 – outweigh the risk of an expanded money stock catching fire and setting off an inflation surge later. Debt deflation is a toxic process that can and does destroy societies as well as economies. You do not trifle with it.

But deliberately creating inflation “consistent” with the Fed’s mandate – implicitly to erode debt – is another matter. Nor can this be justified at this particular juncture. M3 has been leveling out. M2 has begun to rise briskly. The velocity of money has picked up. The M1 monetary mulitplier has jumped.

We have a very odd world. The IMF has doubled its global growth forecast to 4.5pc this year, and authorities everywhere have ruled out a serious risk of a double dip recession.

Yet at the same time the Bank of Japan has embarked on unsterilised currency intervention, which amounts to stimulus, and both the Fed and the Bank of England are signalling fresh QE.

You can’t have it both ways. If the US is not in deep trouble, the Fed should not be thinking of extra QE. It should step back and let the economy heal itself, if necessary enduring several years of poor growth to purge excess leverage.

Yes, U6 unemployment is 16.7pc. But as dissenters at the Minneapolis Fed remind us, you cannot solve a structural unemployment crisis with loose money.

Fed is trying to conjure away the hangover from the last binge (which Greenspan/Bernanke caused, let us not forget), as if to vindicate its prior claim that you can always clean up painlessly after asset bubbles.

Are the Chinese right? Are the Americans and the British now so decadent that they will refuse to take their punishment, opting to default on their debts by stealth?

Sooner or later we may learn what the Fed’s hawkish bloc of Fisher, Lacker, Plosser, Hoenig, Warsh, and Kocherlakota really think about this latest lurch into monetary la la land, with all that it implies for moral hazard and debt contracts.

If I have written harsh words about these heroic resisters, I apologise for that too.


Gold is the final refuge against universal currency debasement

States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s.

Ambrose Evans-Pritchard
26 Sep 2010

“We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself,” said former Fed chair Paul Volcker in Chris Whalen’s new book Inflated: How Money and Debt Built the American Dream.

“It is a serious question. We are no longer talking about a single country having a big depression but the entire world.”

The US and Britain are debasing coinage to alleviate the pain of debt-busts, and to revive their export industries: China is debasing to off-load its manufacturing overcapacity on to the rest of the world, though it has a trade surplus with the US of $20bn (£12.6bn) a month.

Premier Wen Jiabao confesses that China’s ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs,” he said.

Plead he might, but tempers in Washington are rising. Congress will vote next week on the Currency Reform for Fair Trade Act, intended to make it much harder for the Commerce Department to avoid imposing “remedial tariffs” on Chinese goods deemed to be receiving “benefit” from an unduly weak currency.

Japan has intervened to stop the strong yen tipping the country into a deflation death spiral, though it too has a trade surplus. There is suspicion in Tokyo that Beijing’s record purchase of Japanese debt in June, July, and August was not entirely friendly, intended to secure yuan-yen advantage and perhaps to damage Japan’s industry at a time of escalating strategic tensions in the Pacific region.

Brazil dived into the markets on Friday to weaken the real. The Swiss have been doing it for months, accumulating reserves equal to 40pc of GDP in a forlorn attempt to stem capital flight from Euroland. Like the Chinese and Japanese, they too are battling to stop the rest of the world taking away their structural surplus.

The exception is Germany, which protects its surplus ($179bn, or 5.2pc of GDP) by means of an undervalued exchange rate within EMU. The global game of pass the unemployment parcel has to end somewhere. It ends in Greece, Portugal, Spain, Ireland, parts of Eastern Europe, and will end in France and Italy too, at least until their democracies object.

It is no mystery why so many states around the world are trying to steal a march on others by debasement, or to stop debasers stealing a march on them. The three pillars of global demand at the height of the credit bubble in 2007 were – by deficits – the US ($793bn), Spain ($126bn), UK ($87bn). These have shrunk to $431bn, $75bn, and $33bn respectively as we sinners tighten our belts in the aftermath of debt bubbles.. The Brazils and Indias of the world are replacing some of this half trillion lost juice, but not all.

East Asia’s surplus states seem structurally incapable of compensating for austerity in the West, whether because of the Confucian saving ethic, or the habits of mercantilist practice, or in China’s case by the lack of a welfare net. Their export models rely on the willingness of Anglo-PIGS to bankrupt themselves.

So we have an early 1930s world where surplus states are hoarding money, instead of recycling it. A solution of sorts in the Great Depression was for each deficit country to devalue, breaking out of the trap (then enforced by the Gold Standard). This turned the deflation tables on the surplus powers – France and the US from 1929-1931 – forcing them to reflate as well (the US in 1933) or collapse (France in 1936). Contrary to myth, beggar-thy-neighbour policy was the global cure.

A variant of this may now occur. If China continues to hold down its currency, the country will import excess US liquidity, overheat, and lose wage competitiveness. This is the default cure if all else fails, and I believe it is well under way.

The latest Fed minutes are remarkable. They add a new doctrine, that a fresh monetary blitz – or QE2 – will be used to stop inflation falling much below 1.5pc. Surely the Fed has not become so reckless that it really aims to use emergency measures to create inflation, rather preventing deflation? This must be a cover-story. Ben Bernanke’s real purpose – as he aired in his November 2002 speech on deflation – is to weaken the dollar.

If so, he has succeeded. The Swiss franc smashed through parity last week as investors digested the message. But the swissie is an over-rated refuge. The franc cannot go much further without destabilizing Switzerland itself.

Gold has no such limits. It hit $1300 an ounce last week, still well shy of the $2,200-2,400 range reached in the late Medieval era of the 14th and 15th Centuries.

This is not to say that gold has any particular "intrinsic value"’. It is subject to supply and demand like everything else. It crashed after the gold discoveries of Spain’s Conquistadores in the New World, and slid further after finds in Australia and South Africa. It ultimately lost 90pc of its value – hitting rock-bottom a decade ago when central banks succumbed to fiat hubris and began to sell their bullion. Gold hit a millennium-low on the day that Gordon Brown auctioned the first tranche of Britain’s gold. It has risen five-fold since then.

We have a new world order where China and India are buying gold on every dip, where the West faces an ageing crisis, and where the sovereign states of the US, Japan, and most of Western Europe have public debt trajectories near or beyond the point of no return.

The managers of all four reserve currencies are playing fast and loose: the Fed is clipping the dollar; the Bank of England is clipping sterling; the European Central Bank is buying the bonds of EMU debtors to stave off insolvency, something it vowed never to do just months ago; and the Bank of Japan has just carried out two trillion yen of “unsterilized” intervention.

Of course, gold can go higher.


EU austerity policies risk civil war in Greece, warns top German economist Dr Sinn

Greece’s austerity measures cannot prevent default and will lead to a breakdown of the political order if continued for long, a leading German economist has warned.

Ambrose Evans-Pritchard in Cernobbio, Italy
03 Sep 2010

“This tragedy does not have a solution,” said Hans-Werner Sinn, head of the prestigious IFO Institute in Munich.

“The policy of forced 'internal devaluation', deflation, and depression could risk driving Greece to the edge of a civil war. It is impossible to cut wages and prices by 30pc without major riots,” he said, speaking at the elite European House Ambrosetti forum at Lake Como.

“Greece would have been bankrupt without the rescue measures. All the alternatives are terrible but the least terrible is for the country to get out of the eurozone, even if this kills the Greek banks,” he said.

Dr Sinn said Greece is an entirely different case from Spain and Portugal, which still have manageable public debts and can bring their public finances back into line with higher taxes.

“Greece would have defaulted in the period between April 28 and May 7, had the money not been promised by the European Union,” he said, describing the failure of the EU’s bail-out strategy to include a haircut for the banks as an invitation to moral hazard.

“There should be a quasi-insolvency procedure for countries. Creditors have to accept a haircut before any money flows for rescue plans, otherwise we’ll never have debt discipline in the eurozone,” he said.

Greek society has so far held together well, despite a wave of strikes and street violence in the early months of the crisis. However, unemployment is rising fast and political fatigue with such austerity policies typically sets in the second year.

Under the rescue deal, the eurozone pledged €80bn of new loans at 5pc interest and the International Monetary Fund offered a further €30bn.

The joint bail-out was hoped to safeguard Greece against the pressure from global capital markets for two and half years, but the relief rally proved short. Spreads on longer-term Greek government debt have surged back to crisis levels of about 800 basis points, implying a high risk of default.

“We are in the second Greek crisis right now, today,” said Dr Sinn.

Greece is undergoing what amounts to an IMF austerity package but without the IMF cure of debt restructuring or devaluation that usual for a country with a spiralling public debt and a chronic loss of competitiveness.

The IMF says Greece’s debt will rise to 150pc by 2013-2014 even if Athens complies fully, a strategy viewed as self-defeating by several ex-IMF officials. There is a strong suspicion that the real objective is to bail-out North European banks with heavy exposure to Southern Europe, rather help Greece.

Dr Sinn said the Germany is now was super-competitive after clawing back 18pc in competitiveness during its long slump. “We’re in a new phase of history. The toggle switch has turned and we are going to see a mirror image of the last 15 years. This time it is Germany that will have an internal boom,” he said.

Germans will not recyle their savings in the Club Med region. They will invest at home.

The Death of Paper Money

As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974.

Ambrose Evans-Pritchard Published
25 Jul 2010

Ebay is offering a well-thumbed volume of "Dying of Money: Lessons of the Great German and American Inflations" at a starting bid of $699 (shipping free.. thanks a lot).

The crucial passage comes in Chapter 17 entitled "Velocity". Each big inflation -- whether the early 1920s in Germany, or the Korean and Vietnam wars in the US -- starts with a passive expansion of the quantity money. This sits inert for a surprisingly long time. Asset prices may go up, but latent price inflation is disguised. The effect is much like lighter fuel on a camp fire before the match is struck.

People’s willingness to hold money can change suddenly for a "psychological and spontaneous reason" , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money.

"Velocity took an almost right-angle turn upward in the summer of 1922," said Mr O Parsson. Reichsbank officials were baffled. They could not fathom why the German people had started to behave differently almost two years after the bank had already boosted the money supply. He contends that public patience snapped abruptly once people lost trust and began to "smell a government rat".

Some might smile at the Bank of England "surprise" at the recent the jump in Brtiish inflation. Across the Atlantic, Fed critics say the rise in the US monetary base from $871bn to $2,024bn in just two years is an incendiary pyre that will ignite as soon as US money velocity returns to normal.

Morgan Stanley expects bond carnage as this catches up with the Fed, predicting that yields on US Treasuries will rocket to 5.5pc. This has not happened so far. 10-year yields have fallen below 3pc, and M2 velocity has remained at historic lows of 1.72.

As a signed-up member of the deflation camp, I think the Bank and the Fed are right to keep their nerve and delay the withdrawal of stimulus -- though that case is easier to make in the US where core inflation has dropped to the lowest since the mid 1960s. But fact that O Parsson’s book is suddenly in demand in elite banking circles is itself a sign of the sort of behavioral change that can become self-fulfilling.

As it happens, another book from the 1970s entitled "When Money Dies: the Nightmare of The Weimar Hyper-Inflation" has just been reprinted. Written by former Tory MEP Adam Fergusson -- endorsed by Warren Buffett as a must-read -- it is a vivid account drawn from the diaries of those who lived through the turmoil in Germany, Austria, and Hungary as the empires were broken up.

Near civil war between town and country was a pervasive feature of this break-down in social order. Large mobs of half-starved and vindictive townsmen descended on villages to seize food from farmers accused of hoarding. The diary of one young woman described the scene at her cousin’s farm.

"In the cart I saw three slaughtered pigs. The cowshed was drenched in blood. One cow had been slaughtered where it stood and the meat torn from its bones. The monsters had slit the udder of the finest milch cow, so that she had to be put out of her misery immediately. In the granary, a rag soaked with petrol was still smouldering to show what these beasts had intended," she wrote.

Grand pianos became a currency or sorts as pauperized members of the civil service elites traded the symbols of their old status for a sack of potatoes and a side of bacon. There is a harrowing moment when each middle-class families first starts to undertand that its gilt-edged securities and War Loan will never recover. Irreversible ruin lies ahead. Elderly couples gassed themselves in their apartments.

Foreigners with dollars, pounds, Swiss francs, or Czech crowns lived in opulence. They were hated. "Times made us cynical. Everybody saw an enemy in everybody else," said Erna von Pustau, daughter of a Hamburg fish merchant.

Great numbers of people failed to see it coming. "My relations and friends were stupid. They didn’t understand what inflation meant. Our solicitors were no better. My mother’s bank manager gave her appalling advice," said one well-connected woman.

"You used to see the appearance of their flats gradually changing. One remembered where there used to be a picture or a carpet, or a secretaire. Eventually their rooms would be almost empty. Some of them begged -- not in the streets -- but by making casual visits. One knew too well what they had come for."

Corruption became rampant. People were stripped of their coat and shoes at knife-point on the street. The winners were those who -- by luck or design -- had borrowed heavily from banks to buy hard assets, or industrial conglomerates that had issued debentures. There was a great transfer of wealth from saver to debtor, though the Reichstag later passed a law linking old contracts to the gold price. Creditors clawed back something.

A conspiracy theory took root that the inflation was a Jewish plot to ruin Germany. The currency became known as "Judefetzen" (Jew- confetti), hinting at the chain of events that would lead to Kristallnacht a decade later.

While the Weimar tale is a timeless study of social disintegration, it cannot shed much light on events today. The final trigger for the 1923 collapse was the French occupation of the Ruhr, which ripped a great chunk out of German industry and set off mass resistance.

Lloyd George suspected that the French were trying to precipitate the disintegration of Germany by sponsoring a break-away Rhineland state (as indeed they were). For a brief moment rebels set up a separatist government in Dusseldorf. With poetic justice, the crisis recoiled against Paris and destroyed the franc.

The Carthaginian peace of Versailles had by then poisoned everything. It was a patriotic duty not to pay taxes that would be sequestered for reparation payments to the enemy. Influenced by the Bolsheviks, Germany had become a Communist cauldron. Spartakists tried to take Berlin. Worker `soviets' proliferated. Dockers and shipworkers occupied police stations and set up barricades in Hamburg. Communist Red Centuries fought deadly street battles with right-wing militia.

Nostalgics plotted the restoration of Bavaria’s Wittelsbach monarchy and the old currency, the gold-backed thaler. The Bremen Senate issued its own notes tied to gold. Others issued currencies linked to the price of rye.

This is not a picture of America, or Britain, or Europe in 2010. But we should be careful of embracing the opposite and overly-reassuring assumption that this is a mild replay of Japan’s Lost Decade, that is to say a slow and largely benign slide into deflation as debt deleveraging exerts its discipline.

Japan was the world’s biggest external creditor when the Nikkei bubble burst twenty years ago. It had a private savings rate of 15pc of GDP. The Japanese people have gradually cut this rate to 2pc, cushioning the effects of the long slump. The Anglo-Saxons have no such cushion.

There is a clear temptation for the West to extricate itself from the errors of the Greenspan asset bubble, the Brown credit bubble, and the EMU sovereign bubble by stealth default through inflation. But that is a danger for later years. First we have the deflation shock of lives. Then -- and only then -- will central banks go to far and risk losing control over their printing experiment as velocity takes off. One problem at a time please.

It pays to riot in Europe

Ambrose Evans-Pritchard
August 25th, 2010

Ireland must now pay more than Greece to borrow.

Dublin has played by the book. It has taken pre-emptive steps to please the markets and the EU. It has done an IMF job without the IMF. Indeed, is has gone further than the IMF would have dared to go.

It has imposed draconian austerity measures. The solidarity of the country has been remarkable. There have no riots, and no terrorist threats.

Protesters attack riot police in Athens over harsh austerity measures

Protesters attack riot police in Athens over harsh austerity measures

Yet as of today it is paying 5.48pc to borrow for ten years, or near 8pc in real terms once deflation is factored in. This is crippling and puts the country on an unsustainable debt trajectory if it lasts for long.

Yet Greece is able to borrow from the EU at 5pc and from the IMF at a staggered rate far below that (still too high for the policy to work, but that is another matter). These were the terms of the €110bn joint bail-out.

To add insult to injury Ireland is having SUBSIDIZE Greece to meet its share of the rescue fund.

I am sure you can all see the absurdity of this. It has moral hazard written all over it, and shows what happens once a dysfunctional system twists itself into ever greater knots rather confronting the core issue.

Yes, I know that the Irish and Greek maturities are different but the fact is that Greece has extracted better terms by letting matters get further out of hand.

George Papandreou’s PASOK has benefitted from dilly-dallying on the first set of austerity measures, and – not to be too diplomatic about it – by insulting the Germans with demands for war reparations. Hotheads also set fire to downtown Athens and Thessaloniki, improving the effect.

If I were Irish – (and I suppose in a sense I am: Sir John Parnell was my great, great, great grandfather) – I would be a little annoyed.


China’s young officers and the 1930s syndrome

Ambrose Evans-Pritchard
September 7th, 2010

I try to remain optimistic that the US and China will work out a more or less amicable way to run the world for the next half century, a “Chimerica” of interwoven superpowers.

But it was slightly disturbing to hear the warnings of a distinguished China-watcher at a closed-door session of the annual Ambrosetti conference on Lake Como.

(This gathering of the global policy elites at Villa D’Este is a hardship assignment for Telegraph hacks. It fell to me again this year, but somebody has to do it.)

“China’s military spending is growing so fast that it has overtaken strategy,” said Professor Huang Jing from the Lee Kwan Yew School of Public Policy in Singapore. (He kindly let me quote his remarks.)

“The young officers are taking control of strategy and it is like young officers in Japan in the 1930s. They are thinking what they can do, not what they should do. This is very dangerous.

“They are on a collision course with a US-dominated system”.

Harvard Professor Niall Ferguson rattled me even further with a talk warning that the Chimerica marriage of the last generation is “on the rocks”.

“China gets 10pc growth: the US gets 10pc unemployment. That doesn’t seem the basis for a happy marriage,” said Prof Fergusson, – who used to sit next to me at the Telegraph as a young leader writer almost 20 years ago, before he went on to become one of the 100 most influential people on the planet (Time magazine).

China’s trade surplus is surging back to near record levels, yet the yuan has barely moved against the dollar since the fixed peg ended in June. It has actually fallen against a trade-weighted basket of currencies.

This is not an accident. The exchange rate is controlled. The yuan must rise – ceteribus paribus – unless the central bank prevents it doing so by purchasing foreign assets.

Prof Ferguson said naval rivalry is passé – cyberwarfare is the issue of the future, and he advises the West to be a little more careful about its reliance on Chinese-manufactured microchips.

Be that as it may, the current flash-point is a very old fashioned showdown between gunboats in the Yellow Sea and the South China Sea (the latter now a “core interest” of China along with Tibet and Taiwan), also claimed in part by a ring of other nations who are not pleased.

related post: china: territorial waters / leading energy demand

In late July, the chairman of US chiefs of staff, Admiral Mike Mullen, said he had moved from being “curious” about what the Chinese were doing, “to being concerned about what they’re doing. They seem to be taking a much more aggressive approach.”

“I see a fairly significant investment in high-end equipment – satellites, ships … anti-ship missiles, obviously high-end aircraft and all those kinds of things. They are shifting from a focus on their ground forces to focus on their navy, and their air force.”

Last week this little spat escalated to the point where a Chinese submarine erected a Chinese flag on the seabed of the South China Sea, 4,000 meters below the surface.

China has a perfect right to develop a blue-water navy and to make its presence felt in the region. The question in such matters is judging the purpose and precise circumstances, and I must confess that Prof Huang’s comments were slightly disturbing, always bearing in mind that he has a Singapore (Chinese diaspora) perspective.

Let it be said in China’s defence that it occupies no overseas military bases, and has no modern history of projecting imperial power.

On balance, I remain hopeful that country with a one-child policy, an aging crunch from Hell, and a chronic dearth of young people, will show an enormous reluctance to support military adventurism. Losing an only child is especially cruel.

Let us hope that the Communist hierachy in Beijing can rein in those young officers. But as Dr Huang said, they can no longer control much of anything, least of all the 17m-strong base of the Communist Party.

“The empire has lost control of its officials, which is how Chinese empires have always fallen in history.”

This needs watching, I fear.

Is China's Politburo spoiling for a showdown with America?

The long-simmering clash between the world's two great powers is coming to a head, with dangerous implications for the international system.

Ambrose Evans-Pritchard
14 Mar 2010

U.S. President Obama shakes hands with Chinese ambassador to the U.S. Zhou as U.S. ambassador to China Huntsman looks on during a tour of the Great Wall of China in Badaling
US President Barack Obama shakes hands with Chinese ambassador to America Zhou Wenzhong on the Great Wall of China Photo: Reuters

China has succumbed to hubris. It has mistaken the soft diplomacy of Barack Obama for weakness, mistaken the US credit crisis for decline, and mistaken its own mercantilist bubble for ascendancy. There are echoes of Anglo-German spats before the First World War, when Wilhelmine Berlin so badly misjudged the strategic balance of power and over-played its hand.

Within a month the US Treasury must rule whether China is a "currency manipulator", triggering sanctions under US law. This has been finessed before, but we are in a new world now with America's U6 unemployment at 16.8pc.

"It's going to be really hard for them yet again to fudge on the obvious fact that China is manipulating. Without a credible threat, we're not going to get anywhere," said Paul Krugman, this year's Nobel economist.

China's premier Wen Jiabao is defiant.

"I don’t think the yuan is undervalued. We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency," he said yesterday. Once again he demanded that the US takes "concrete steps to reassure investors" over the safety of US assets.

"Some say China has got more arrogant and tough. Some put forward the theory of China's so-called 'triumphalism'. My conscience is untainted despite slanders from outside," he said

Days earlier the State Council accused America of serial villainy. "In the US, civil and political rights of citizens are severely restricted and violated by the government. Workers' rights are seriously violated," it said.

"The US, with its strong military power, has pursued hegemony in the world, trampling upon the sovereignty of other countries and trespassing their human rights," it said.

"At a time when the world is suffering a serious human rights disaster caused by the US subprime crisis-induced global financial crisis, the US government revels in accusing other countries." And so forth.

Is the Politiburo smoking weed?

I let others discuss the rights and wrongs of this, itself a response to the US report card on China. Clearly, Beijing is in denial about is own part in the global imbalances behind the credit crisis, specifically by running structural trade surpluses, and driving down long rates through dollar and euro bond purchases. No doubt the West has made a hash of things, but the Chinese view of events is twisted to the point of delusional.

What interests me is Beijing's willingness to up the ante. It has vowed sanctions against any US firm that takes part in a $6.4bn weapons contract for Taiwan, a threat to ban Boeing from China and a new level of escalation in the Taiwan dispute.

In Copenhagen, Wen Jiabao sent an underling to negotiate with Mr Obama in what was intended to be - and taken to be - a humiliation. The US President put his foot down, saying: "I don't want to mess around with this anymore." That sums up White House feelings towards China today.

We have talked ourselves into believing that China is already a hyper-power. It may become one: it is not one yet. China is ringed by states - Japan, Korea, Vietnam, India - that are American allies when push comes to shove. It faces a prickly Russia on its 4,000km border, where Chinese migrants are itching for Lebensraum across the Amur. Emerging Asia, Brazil, Egypt and Europe are all irked by China's yuan-rigged export dumping.

Michael Pettis from Beijing University argues that China's reserves of $2.4 trillion - arguably $3 trillion - are a sign of weakness, not strength. Only twice before in modern history has a country amassed such a stash equal to 5pc-6pc of global GDP: the US in the 1920s, and Japan in the 1980s. Each time preceeded depression.

The reserves cannot be used internally to support China's economy. They are dead weight, beyond any level needed for macro-credibility. Indeed, they are the ultimate indictment of China's dysfunctional strategy, which is to buy $30bn to $40bn of foreign bonds every month to hold down the yuan, refusing to let the economy adjust to trade realities. The result is over-investment in plant, flooding the world with goods at wafer-thin export margins. China's over-capacity in steel is now greater than Europe's output.

This is catching up with China, in any case. Professor Victor Shuh from Northerwestern University warns that the 8,000 financing vehicles used by China's local governments to stretch credit limits have built up debts and commitments of $3.5 trillion, mostly linked to infrastructure. He says the banks may require a bail-out nearing half a trillion dollars.

As America's creditor - owner of some $1.4 trillion of US Treasuries, agency bonds, and US instruments - China can exert leverage. But this is not what it seems. If the Politburo deploys its illusiory power, Washington can pull the plug on China's export economy instantly by shutting markets. Who holds whom to ransom?

Any attempt to retaliate by triggering a US bond crisis would rebound against China, and could be stopped - in extremis - by capital controls. Roosevelt changed the rules in 1933. Such things happen. The China-US relationship is no doubt symbiotic, but a clash would not be "mutual assured destruction", as often claimed. Washington would win.

Contrary to myth, the slide to protectionism after the 1930 Smoot-Hawley Tariff Act did not cause the Depression. Trade contracted more slowly in the 1930s than this time. The Smoot-Hawley lesson is that tariffs have asymmetrical effects. They devastate surplus countries: then America. Deficit Britain did well by retreating into Imperial Preference.

Barack Obama has never exalted free trade. This orthodoxy is, in any case, under threat in the West. His top economic adviser Larry Summers let drop in Davos that free-trade arguments no longer hold when dealing with "mercantilist" powers. Adam Smith recognized this too, despite efforts by free-trade ultras to appropriate him for their cause.

China's trasformation has been remarkable since Deng Xiaoping unleashed capitalism, but as ex-diplomat George Walden writes in China: a Wolf in the World? you cannot feel at ease with a regime that still covers up Mao's murderous nihilism. He reminds us too that China has never forgiven the humilations inflicted by the West when the two civilizations collided in the 19th Century, and intends to exact revenge. Handle with care.


August 20, 2010
Kyle Stock

Wall Street Drug Use: Employees Giving Up Cocaine for Pot and Pills

The credit crisis appears to have sobered up Wall Street in more ways than one.

A review of drug-test data compiled by drug testing firm Sterling Infosystems Inc., shows that cocaine is losing its favor among investment professionals. What drug is their choice? Marijuana.

Last year, cocaine showed up in 7% of the positive tests at Wall Street firms, down from 16% in 2007, according to Sterling, a New York-based firm that screens about 5,900 employees a year for some 270 finance shops.

Meanwhile, the prevalence of marijuana in failed tests jumped from 64% to 80% between 2007 and 2009.

“I think the incidence of hard drug use is lower today than it was 10 or 15 years ago,” says Adam Zoia, CEO of executive recruiting firm Glocap Search LLC. “The banks, in particular, are pretty persnickity on background checks.”

In all, finance seems to be a relatively clean profession. Only 2% of the industry failed drug tests last year, compared with 3.6% of the working world at-large, according to Sterling. Retail workers, in comparison, were red-flagged 4.1% of the time.

The highest levels of abuse seem to be at real estate investment trust companies, a sector that, incidentally, does more random testing than others.

But the test results generally capture drug use among new hires, candidates who knew that they would likely be tested. Random drug testing is rare, according to a spokesman for a bulge-bracket bank who asked to remain unnamed.

Among existing employees, psychologists and counselors said that drug abuse has not slackened. Some even said it is peaking, exacerbated by the credit crisis and the volatile and tenuous recovery that has ensued.

Seabrook House, a 24-bed luxury rehab facility in Pennsylvania, has been crammed with Wall Street refugees in recent months, according to Clinical Director William Heran. They are paying $24,000 for a three-month program to get clean.

Mr. Heran has been around long enough to discern a forex trader from an M&A banker. He says the rage these days is a Pez dispenser with the head of a red devil. Inside? Pills of Oxycodone or Percocet.

“We’re in crisis mode,” he says. “Many of these drugs are so accessible to the average person, let alone the person who is well-spoken and professional.”

Indeed, amphetamines seem to be gaining cache, showing up in 10% of Sterling’s positive tests this year, compared with 3% in 2007.

Across the U.S., cocaine and marijuana use has been static since 2002 at least, according to federal Health Department data. But New York is a hot-bed for illicit drugs and Manhattanites are particularly heavy users.

In a 2001 survey, 9.6% of Manhattan residents said they had used marijuana in the previous year, compared with 6% of people across the country; 5% of the island’s residents had done cocaine in the previous month, compared with 2.3% U.S.-wide.

Turning Point For Leaders, a Connecticut-based intervention and rehab company, is also seeing a steady stream of clients from Wall Street. Robert Curry, who founded the business, says that the industry is still a hot bed of abuse.

“Investment bankers — gunslingers, as we call them — are highly prone to addiction,” he explained. “And there’s a lot of denial among employers. The attitude is: ‘If they can’t fix themselves, then they’re going to have to live with it. We’re not going to put any time and effort into it.’”

Many counselors says that finance workers feel entitled to illicit drugs, given their paychecks and stress of their jobs. They are also allegedly very good at masking their addictions, the counselors say.

Heavy users, however, are seldom fooling their employers, says Brad Lamm, president of New York-based Intervention Specialists. Lamm has also seen a surge in substance abuse on Wall Street – in his words “a lot of crack and coke.”

“The titans of Wall Street normalize crazy behavior all the time,” he says. “If somebody’s delivering and showing up and doing the work, they almost have to catch on fire for someone to sound the alarm.”

The upside is that none of Mr. Lamm’s clients has been fired for abuse. In fact, he typically contacts the employer before an intervention with a sort of mantra that he uses to get through to both the user and the boss: “Dead guys don’t bonus.”

Kyle Stock writes for FINS, Dow Jones’ finance career site.