Tuesday, July 22, 2014

Insider Trading and Financial Terrorism on Comex

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The first two days this week gold was subjected to a series of computer HFT-driven “flash crashes” that were aimed at cooling off the big move higher gold has made since the beginning of June. During this move higher, the hedge funds, who typically “chase” the momentum of gold up or down, built up hefty long positions in gold futures over the last 6 weeks. In order to disrupt the upward momentum in the price of gold, the bullion banks short gold in the futures market by dumping large contracts that drive down the price and make money for the banks in the process.

As we explained in previous articles on this subject, the price of gold is not determined in markets where physical gold is bought and sold but in the paper futures market where contracts trade and speculators place bets on the price of gold. Most of the contracts traded on the Comex futures market are settled in cash. The value of the contracts used to short gold and drive down the price is well in excess of the actual amount of physical gold that is kept on the Comex and available for delivery. One might think that regulators would pay attention to a market in which the value of contracts outstanding exceeds by several multiples the amount of physical gold available for delivery.

The Comex gold futures market trades 23 hours per day on a global computer system called Globex and on the NYC trading floor from 8:20 a.m. EST to 1:30p.m. EST. The Comex floor trading session is the highest volume trading period during any 23 hour trading period because that is when most of the large U.S. financial institutions and other users of Comex futures (jewelry manufactures and gold mining companies) are open for business and therefore transact their Comex business during Comex floor hours in order to achieve the best trading execution at the lowest cost.

The big hedge funds primarily trade gold futures using computers and algorithm programs. When they buy, they set stop-loss orders which are used to protect their trading positions on the downside. A “stop-loss” order is an order to sell at a pre-specified price by a trader. A stop-loss order is automatically triggered and the position is sold when the market trades at the price which was pre-set with the stop-order.

The bullion banks who are members and directors of Comex have access to the computers used to clear Comex trades, which means they can see where the stop-loss orders are set. When they decide to short the market, they start selling Comex futures in large amounts to force the market low enough to trigger the stop-loss orders being used by the hedge fund computers. For instance, huge short-sell orders at 2:20 a.m. Monday morning triggered an avalanche of stop-loss selling, as shown in this graph of Monday’s (July 14) action:

In the graph above, the first circled red bar shows the flash crash that was engineered at 2:20 a.m. EST, a typically low-volume, quiet period for gold trading. 13.5 tonnes of short-sales were unloaded into the Comex computer trading system. The second circled red bar shows a second engineered flash-crash right before the Comex floor opened at 8:20 a.m. EST. This was triggered by sales of futures contracts representing 27.5 tonnes of gold. A third hit (not shown) occurred at 9:01 a.m. This time contracts representing 40 tonnes of gold hit the market.

The banks use the selling from the hedge funds to cover the short positions they’ve amassed and book trading profits as they cover their short positions at price levels that are below the prices at which their short positions were established. This is insider trading and unrestrained financial terrorism at its finest.

As shown on the graph below, on Tuesday, July 15, another flash-crash in gold was engineered in the middle of Janet Yellen’s very “dovish” Humphrey-Hawkins testimony. Contracts representing 45 tonnes of gold were sold in 3 minutes, which took gold down over $13 and below the key $1300 price level. There were no apparent news triggers or specific comments from Yellen that would have triggered a sudden sell-off in gold — just a massive dumping of gold futures contracts. No other related market (stocks, commodities) registered any unusual movement up or down when this occurred:


Between July 14 and July 15, contracts representing 126 tonnes of gold was sold in a 14-minute time window which took the price of gold down $43 dollars. No other market showed any unusual or extraordinary movement during this period.

To put contracts for 126 tonnes of gold into perspective, the Comex is currently reporting that 27 tonnes of actual physical gold are classified as being available for deliver should the buyers of futures contracts want delivery. But the buyers are the banks themselves who won’t be taking delivery.

One motive of the manipulation is to operate and control Comex trading in a manner that helps the Fed contain the price of gold, thereby preventing its rise from signaling to the markets that problems festering in the U.S. financial system are growing worse by the day. This is an act of financial terrorism supported by federal regulatory authorities. Another motive is to help support the relative trading level of the U.S. dollar, as we’ve described in previous articles on this topic. And, of course, the banks make money from the manipulation of the futures market.

The Commodity Futures Trading Commission, the branch of government which was established to oversee the Comex and enforce long-established trading regulations, has been presented with the evidence of manipulation several times. Its near-automatic response is to disregard the evidence and look the other way. The only explanation for this is that the Government is complicit in the price suppression and manipulation of gold and silver and welcomes the insider trading that helps to achieve this result. The conclusion is inescapable: if illegality benefits the machinations of the US government, the US government is all for illegality.

Wall Street Banks Are Now Trading Their Own Stocks in Dark Pools – Unregistered Stock Exchanges

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On July 17, 1996, the U.S. Justice Department charged the biggest names on Wall Street, names like Merrill Lynch, JPMorgan and predecessor firms to Citigroup, with price fixing on the electronic stock market known as Nasdaq.

The Justice Department felt the firms were so untrustworthy to make a fair electronic marketplace that as part of its settlement it required that some traders’ phone calls be tape recorded when making Nasdaq trades and it gave itself the right to randomly show up and listen in on the traders’ calls. The scandal made headlines for years and revealed that the price fixing had been going on under the unwatchful eye of regulators for more than a decade.

Now, more than six years after the greatest Wall Street crash since 1929, the public is still learning stomach-churning details about the lingering effects of de-regulating Wall Street.

Yesterday we learned that the very same Wall Street firms charged with price fixing in the 90s have somehow conned their regulators into allowing them to own their own dark pools – effectively unregulated stock exchanges – and make markets in the stock of their very own Wall Street bank.

The Financial Industry Regulatory Authority (FINRA) – a self-regulatory Wall Street body (which under a previous name was responsible for missing the Nasdaq price fixing for more than a decade) released trading data yesterday for the dark pools operating the week of May 12 – 16. This was the first time such data has been released. The data releases are set to continue.

There are three major concerns that are immediately raised by the trading statistics: that Wall Street banks are allowed to make a market in their own stock inside an unregulated dark pool; that the other largest banks are making large markets in each other’s stocks; and why the public is just seeing a sliver of sunshine – instead of what went on in the previous 51 weeks or prior years of trading in these dark pools? Since the Wall Street firms knew this public data release was coming, it’s possible that higher trading volumes were previously occurring in their own and each other’s stocks.

Bank of America’s trading arm, Merrill Lynch, owns two dark pools, one of which is Instinct X. Last evening, FINRA data showed that during the relevant week Merrill’s dark pool, Instinct X, traded 8,207,150 shares of its own parent’s stock in a total of 16,246 trades. Merrill is now stating that it provided erroneous numbers to FINRA and the figure is really just 4,103,575 shares and 8,123 trades. A second Merrill Lynch dark pool, which goes by the letters MLVX, last evening showed it traded in its company stock to the tune of 66,200 shares in 94 trades. This morning, those figures have been cut in half.

Citigroup, which became insolvent during the 2008 crisis and required multiple bailouts from the taxpayer, owns a total of four dark pools according to a list posted at the SEC’s web site – none of which the general public has ever heard of: LavaFlow, LIQUIFI, Citi Credit Cross and Citi Cross. (The more dark pools a Wall Street firm owns the greater the concern that it could be trading between these pools to effectively paint the tape, i.e., manipulate the price of a stock.) Dark pools match buyers and sellers in the dark, without disclosing the bids and offers to the public marketplace.

According to FINRA data for the relevant week, Citigroup’s dark pool, LavaFlow, traded 645,756 shares of Citigroup stock in 1,838 trades while Citi Cross traded another 39,997 in 256 trades.

Merrill Lynch’s dark pool, Instinct X, has dramatically changed its data as to what it traded in Citigroup stock for the referenced week: last night it showed it was the largest trader among the dark pools in Citigroup stock with total shares traded of 1,791,492 in 10,282 trades. This morning those figures have been cut exactly in half, making it the seventh largest share volume trader in Citigroup for the referenced week among the dark pools. Ranking above it in share volume are, in order, the dark pools of Credit Suisse (CrossFinder), Deutsche Bank (DBAX), UBS, Goldman Sachs (Sigma-X), Barclays (LATS) and Morgan Stanley (MSPL).

Data for the same week for JPMorgan shows its dark pool, JPM-X, traded 826,614 shares of its own stock in 1,483 trades. JPMorgan ranked seventh among the dark pools for trading in its stock that week with the following dark pools trading a million or more shares of JPMorgan: Credit Suisse’s CrossFinder (1.9 million); UBS (1.57 million); Barclays LATS (1.15 million); Deutsche Bank’s DBAX (1.12 million); Goldman Sachs’ Sigma-X (1.07 million). Three of Citigroup’s dark pools — LavaFlow, LIQUIFI and Citi Cross — traded a total of 939,072 shares in JPMorgan.

Another serious concern that has arisen since the release of the book, Flash Boys, by bestselling author Michael Lewis, is the introduction of tricked up order types that let high frequency traders fleece the ordinary investor along with revelations that exchanges and dark pools are now offering payment for order flow and other cash incentives to attract trades from high frequency traders.

On September 22, 2009, Citigroup released the following press release concerning a new order type and rebate program at LavaFlow:

“Citi’s LavaFlow ECN has introduced a new order type, Hide to Comply, an execution instruction that allows liquidity providers to enter displayable limit orders at aggressive prices and obtain the best possible time priority at the order’s posted price level, all while receiving a rebate.
“Hide to Comply adjusts aggressively priced orders such that they are hidden on entry, and their limit price set to the opposite side of the national best bid and offer (NBBO). While hidden at this price, the order will be eligible for a full rebate. When the NBBO updates such that the order is no longer at a locking price, the order will be displayed at this new limit, maintaining its original time priority; the order will not be re-priced.”
We have asked the SEC to weigh in on how Wall Street banks, which caused the greatest economic collapse since the Great Depression, are allowed to make markets in their own stocks. We’ll update this article when we hear back.

Ever Wondered Why the World is a Mess?

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While the Third World War has not been formally declared, conflicts throughout the world are reaching levels unseen since 1944.

Of course, for the large majority of people throughout the world, news about these conflicts is just part of our daily news, but another share of our daily news is about the mess in our countries.

This is so complex and confusing that many people have given up the effort to attempt any form of deep understanding, so I thought it would be useful to offer ten explanations of how we succeeded in creating this mess.

Roberto Savio. Credit: IPS
1) The world, as it now exists, was largely shaped by the colonial powers, which divided the world among themselves, carving out states without any consideration for existing ethnic, religious or cultural realities. This was especially true of Africa and the Arab world, where the concept of state was imposed on systems of tribes and clans.

Just to give a few examples, none of the present-day Arab countries existed prior to colonialism. Syria, Lebanon, Iraq, the Gulf Countries (including Saudi Arabia) were all parts of the Ottoman Empire. When this disappeared with the First World War (like the Russian, German and Austro-Hungarian empires), the winners – Britain and France – sat down at a table and drafted the boundaries of countries to be run by them, as they had done before with Africa. So, never look at those countries as equivalent to countries with a history of national identity.

“Do not go with the tide ... search for the other face of the moon. And if they tell you that they know, well, just look at the results” – Roberto Savio

2) After the end of the colonial era, it was inevitable that to keep these artificial countries alive, and avoid their disintegration, strongmen would be needed to cover the void left by the colonial powers. The rules of democracy were used only to reach power, with very few exceptions. The Arab Spring did indeed get rid of dictators and autocrats, just to replace them with chaos and warring factions (as in Libya) or with a new autocrat, as in Egypt.

The case of Yugoslavia is instructive. After the Second World War, Marshal Tito dismantled the Kingdom of Yugoslavia and created the Socialist Federal Republic of Yugoslavia. But we all know that Yugoslavia did not survive the death of its strongman.

The lesson is that without creating a really participatory and unifying process of citizens, with a strong civil society, local identities will always play the most decisive role. So it will take some before many of the new countries will be considered real countries devoid of internal conflicts.

3) Since the Second World War, the meddling of the colonial and super powers in the process of consolidation of new countries has been a very good example of man-made disaster.

Take the case of Iraq. When the United States took over administration of the country in 2003 after its invasion, General Jay Garner was appointed and lasted just a month, because he was considered too open to local views.

Garner was replaced by a diplomat, Jan Bremmer, who took up his post after a two-hour briefing by the then Secretary of State, Condolezza Rice. Bremmer immediately proceeded to dissolve the army (creating 250,000 unemployed) and firing anyone in the administration who was a member of the Ba’ath party, the party of Saddam Hussein. This destabilised the country, and today’s mess is a direct result of this decision.

The current Iraqi Prime Minister, Nouri al-Maliki, whom Washington is trying to remove as the cause of polarisation between Shiites and Sunnis, was the preferred American candidate. So was the President of Afghanistan, Hamid Karzai, who is now virulently anti-American. This is a tradition that goes back to the first U.S. intervention in Vietnam, where Washington put in place Ngo Dihn Dien, who turned against its views, until he was assassinated.

There is no space here to give example of similar mistakes (albeit less important) by other Western powers. The point is that all leaders installed from outside do not last long and bring instability.

4) We are all witnessing religious fighting and Islam extremism as a growing and disturbing threat. Few make any effort to understand why thousands of young people are willing to blow themselves up. There is a striking correlation between lack of development/employment and religious unrest. In the Muslim countries of Asia (Arab Muslims account for less than 20 percent of the world’s Muslim populations), extremism hardly exists.

And few realise that the fight between Shiites and Sunnis is funded by countries like Saudi Arabia, Qatar and Iran. Those religions have been living side by side for centuries, and now they are fighting a proxy war, for example in Syria. Saudi Arabia has been funding Salafists (the puritan form of Islam) everywhere, and it has provided nearly two billion dollars to the new Egyptian autocrat, Abdel Fattah el-Sisi, because he is fighting the Muslim Brotherhood, which predicates the end of kings and sheiks and power for the people. Iraq is also becoming a proxy war between Saudi Arabia, defender of the Sunnis, and Iran, defender of the Shiites.

So, when looking at these wars of religion, always look at who is behind them. Religions usually become belligerent only if they are used. Just look at European history, where wars of religion were invented by kings and fought by people. Of course, once the genie is out of the bottle, it will take a long time to put it back. So this issue will be with us for quite some time.

5) The end of the Cold War unfroze the world, which had been kept in stability by the balance between the two superpowers. Attempts to create regional or international alliances to bring stability have always been stymied by national interests. The best example is Europe. While everybody was talking about Crimea, Ukraine and Vladimir Putin (who had been made paranoiac about Western encirclement, from the George Bush Jr. administration onwards) and how to bring him to listen to the United States and Europe, European companies continued trade in spite of a much talked about embargo. And now, Austria has quietly signed an agreement with Russia to join the South Stream, a pipeline that will bring Russian gas to Europe – so much for the unity of a Europe which has been clamouring about the need to reduce its energy dependence on Russia.

A multipolar world is in the making, but it has to be seen how stable it will be. In Asia, China and Japan are increasing their military investments, as are surrounding countries. And while local conflicts, like Syria, Iraq and Sudan, are not going to escalate into a larger conflict, this would certainly be the case in Asia.

6) In a world more and more divided by a resurgence of national interests, the very idea of shared governance is losing its strength, and not only in Europe. The United Nations has lost its significance as the arena in which to reach consensus and legitimacy. The two engines of globalisation – trade and finance – are not part of the United Nations, which is stuck with the themes of development, peace, human rights, environment, education and so on. While these issues are crucial for a viable world, they are not seen as such by those in power. Conclusion: the United Nations is sliding into irrelevance.

7) At the same time, values and ideas which were considered universal, such as cooperation, mutual aid, international social justice and peace as an encompassing paradigm are also becoming irrelevant. French President Francois Hollande meets U.S. President Barack Obama, not to discuss how to stop the genocide in Sudan, or the kidnapping of children in Nigeria, but to ask him to intervene with his Minister of Justice to reduce a giant fine on a French bank, the BNP-Parisbas, for fraudulent activities. The outstanding problem of climate control was largely absent in the last G7 meeting, not to talk of nuclear disarmament … and yet these are the two main threats to the planet!

8) After colonialism and totalitarian regimes, the key phrase after the Second World War was “implementation of democracy”. But after the end of the Cold War, democracy was taken for granted. In fact, in the last twenty years, the formula of representative democracy has been losing its glamour. Pragmatism has led to the loss of long-term vision, and politics have become more and more mere administration.

Citizens feel less and less related to parties, which have basically become self-centred and self-reliant. International affairs are not considered tools of power by parties, and decisions are taken without participation. This leads to choices which often do not represent the feelings and priorities of citizens.

The way in which the bailout of Cyprus from its financial crisis a few years ago was treated in the European Commission was widely recognised as a blatant example of lack of transparency. Few people certainly make more mistakes than many …

9) A very important element of the mess has been the growth of what its proponents, especially in the financial world, call the “new economy” – an economy that contemplates permanent unemployment, lack of social investments, reduced taxation for large capital, the marginalisation of trade unions, and a reduction of the role of the State as the regulator and guarantor of social justice. Inequalities are reaching unprecedented levels. The world’s 85 richest individuals possess the same wealth as 2.5 billion people.

10) All this brings its corollary. It is not by chance that all mainstream media worldwide have the same reading of the world. Information today has basically eliminated analysis and process, to concentrate on events. Their ability to follow the world mess is minimal, and they just repeat what those in power say. It is very instructive to see media which are very analytical about national affairs and very superficial about international issues. The media depend largely on three international news agencies, which represent the Western world and its interests. Have you read anywhere about the gas agreement between Austria and Russia?

So, a final point: never be satisfied with what you read in the newspapers, always try to get additional and opposite viewpoints through the net. This will help you to look at the world with your eyes, and not with the eyes of somebody else who is probably part of the system which has created this mess. Do not go with the tide … search for the other face of the moon. And if they tell you that they know, well, just look at the results. So, be yourself and, if you make a mistake, at least it will be your mistake.

66 Percent of Americans Now Live in a Constitution-Free Zone

Thanks to the militarization and expansion of the “border” region, 197 million Americans now live within the jurisdiction of US Customs and Border Patrol

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Shena Gutierrez was already cuffed and in an inspection room in Nogales, Arizona, when the Customs and Border Protection (CBP) agent grabbed her purse, opened it, and dumped its contents onto the floor right in front of her. There couldn’t be a sharper image of the Bill of Rights rollback we are experiencing in the US borderlands in the post-9/11 era.

Tumbling out of that purse came Gutierrez’s life: photos of her kids, business cards, credit cards and other papers, all now open to the official scrutiny of the Department of Homeland Security. There were also photographs of her husband, Jose Gutierrez Guzman, whom CBP agents beat so badly in 2011 that he suffered permanent brain damage. The supervisory agent, whose name badge on his blue uniform read “Gomez,” now began to trample on her life, quite literally, with his black boots.

“Please stop stepping on the pictures,” Shena asked him.

A US citizen, unlike her husband, she had been returning from a forty-eight-hour vigil against Border Patrol violence in Mexico and was wearing a shirt that said “Stop Border Patrol Brutality” when she was aggressively questioned and cuffed at the CBP’s “port of entry” in Nogales on that hot day in May.  She had no doubt that Gomez was stepping all over the contents of her purse in response to her shirt, the evidence of her activism.

Perhaps what bothered Gomez was the photo [3] silkscreened onto that shirt—of her husband during his hospitalization. It showed the aftermath of a beating he received from CBP agents. His head had a partially caved-in look because doctors had removed part of his skull. Over his chest and arms were bruises from Tasering. One tooth was out of place, and he had two black eyes. Although you couldn’t see them in the photo, two heavily armed Homeland Security agents were then guarding his hospital door to prevent the father of two, formerly a sound technician and the lead singer of a popular band in Los Angeles, from escaping—even in his comatose state.

Jose Gutierrez Guzman's has become an ever more common story in an American age of mass expulsions. Although he had grown up in the United States (without papers), he was born in Mexico. After receiving a letter requesting his appearance, he went to the Immigration and Customs Enforcement building in Los Angeles and was promptly arrested and deported. Customs and Border Protection agents later caught him crossing the border in San Luis, Arizona, near Yuma, in an attempt to reunite with his wife and children.

“Stop... stepping... on... the... pictures,” Shena insisted.

As she tells the story, Agent Gomez looked at her shirt for a second, then looked up at her and said, “You have that mentality about us. You think we go around abusing.”  His tone remained faux-friendly, but his boots didn’t—and neither did those cuffs another CBP agent had put on her. Forcing her hands behind her back, they cut uncomfortably into her wrists. They would leave deep red circular marks.

On display was a post-9/11 world in which the usual rights meant to protect Americans from unreasonable search and seizure and unwanted, as well as unwarranted, interrogation were up for grabs.

While such constitutionally questionable intrusions into people’s privacy have been increasing at border crossings in the post-9/11 years, this type of hardline border policing has also moved inland.  In other words, the sort of intrusions that once would have qualified as unconstitutional have moved in startling numbers into the interior of the country.

Imagine the once thin borderline of the American past as an ever-thickening band, now extending 100 miles inland around the United States—along the 2,000-mile southern border, the 4,000-mile northern border and both coasts—and you will be able to visualize how vast the CBP’s jurisdiction has become. This “border” region now covers places where two-thirds of the US population (197.4 million people) live. The ACLU has come to call it a “constitution-free zone [4].” The “border” has by now devoured the full states of Maine and Florida and much of Michigan. 

In these vast domains, Homeland Security authorities can institute roving patrols with broad, extra-constitutional powers backed by national security, immigration enforcement and drug interdiction mandates. There, the Border Patrol can set up traffic checkpoints and fly surveillance drones overhead with high-powered cameras and radar that can track your movements. Within twenty-five miles of the international boundary, CBP agents can enter a person’s private property without a warrant. In these areas, the Homeland Security state is anything but abstract. On any given day, it can stand between you and the grocery store.

“Border Patrol checkpoints and roving patrols are the physical world equivalent of the National Security Agency,” says attorney James Lyall of ACLU Arizona puts it. “They involve a massive dragnet and stopping and monitoring of innocent Americans without any suspicion of wrongdoing by increasingly abusive and unaccountable federal government agents.”

Before she was so unceremoniously stopped and held, Shena Gutierrez shared [5] the story of her husband at that forty-eight-hour vigil. It was another story of the kind of pervasive abuse reported by people in the 100-mile zone. There were no cameras that night to record how eleven agents “subdued” Jose Gutierrez Guzman, as the CBP put [6] it in its official report on the incident. Its claim: that Jose “struck his head on the ground,” a way perhaps of accounting for the hospital’s eventual diagnosis of “blunt force trauma.”

Considering the extent of Jose’s injuries, that CBP report is questionable indeed. Many Border Patrol agents now use the term “tonk [7]”—the sound a flashlight supposedly makes when it bangs against someone’s head—as their way of describing border-crossers. Jose was also repeatedly “shot” with an “electronic control device,” aka a Taser. He was so badly beaten that, more than three years later, he still suffers seizures.

“Stop stepping on my pictures!” Gutierrez insisted again. But much like the CBP’s official complaint process, the words were ignored. The only thing Gomez eventually spat out was, “Are you going to get difficult?”

When Shena Gutierrez offered me a play-by-play account of her long day, including her five-hour detainment at the border, her voice ran a gamut of emotions from desperation to defiance. Perhaps these are the signature emotions of what State Department whistleblower Peter Van Buren has dubbed [8] the “Post-Constitutional Era.” We now live in a time when, as he writes [9], “the government might as well have taken scissors to the original copy of the Constitution stored in the National Archives, then crumpled up the Fourth Amendment and tossed it in the garbage can.” The prototype for this new era, with all the potential for abuse it gives the authorities, can be found in that 100-mile zone. 

A Standing Army
The zone first came into existence thanks to a series of laws passed by Congress in the 1940s [10] and 1950s [11] at a time when the Border Patrol was just an afterthought with a minuscule budget and only 1,100 agents. Today, Customs and Border Protection has more than 60,000 employees [12] and is by far the largest federal law enforcement agency in the country.  According to author and constitutional attorney John Whitehead, the Department of Homeland Security (DHS), created in 2002, is efficiently and ruthlessly building [13] “a standing army on American soil.”

Long ago, President James Madison warned  [14]that “a standing military force, with an overgrown Executive, will not long be safe companions to liberty.” With its 240,000 employees and $61 billion budget, the DHS, Whitehead points out [13], is militarizing police units, stockpiling ammunition, spying on activists, and building detention centers, among many other things. CBP is the uniformed and most visible component of this “standing army.” It practically has its own air force and navy, an Office of Air and Marine equipped [15] with 280 sea vessels, 250 aircraft and 1,200 agents.

On the border, never before have there been so many miles of walls and barriers, or such an array of sophisticated cameras capable of operating at night as well as in the daylight.  Motion sensors, radar systems, and cameras mounted on towers, as well as those drones, all feed their information into operational control rooms throughout the borderlands. There, agents can surveil activity over large stretches of territory on sophisticated (and expensive) video walls. This expanding border enforcement regime is now moving into the 100-mile zone.

Such technological capability also involves the warehousing of staggering amounts of personal information in the digital databases that have ushered in the Post-Constitutional Era. “What does all this mean in terms of the Fourth Amendment?” Van Buren asks [16]. “It’s simple: the technological and human factors that constrained the gathering and processing of data in the past are fast disappearing.”

The border, in the post 9/11 years, has also become a place where military manufacturers, eyeing a market in an “unprecedented boom period [17],” are repurposing [18] their wartime technologies for the Homeland Security mission.  This “bring the battlefield to the border” posture [19] has created an unprecedented enforcement, incarceration, and expulsion machine aimed at the foreign-born (or often simply foreign-looking). The sweep is reminiscent of the operation that forced Japanese (a majority of them citizens) into internment camps during World War II, but on a scale never before seen in this country. With it, unsurprisingly, has come a wave of complaints [20] about physical and verbal abuse by Homeland Security agents, as well as tales of inadequate food and medical attention to undocumented immigrants in short-term detention.

The result is a permanent, low-intensity state of exception that makes the expanding borderlands a ripe place to experiment with tearing apart the Constitution, a place where not just undocumented border-crossers, but millions of borderland residents have become the targets of continual surveillance.  If you don’t see the Border Patrol’s ever-expanding forces in places like New York City (although CBP agents are certainly present at its airports and seaports), you can see them pulling people over these days in plenty of other spots in that Constitution-free zone where they hadn’t previously had a presence.

They are, for instance, in cities like Rochester, New York, and Erie, Pennsylvania, as well as in Washington State, Vermont, Florida and at all international airports. Homeland Security officials are scrutinizing people’s belongings, including their electronic devices, from sea to shining sea. Just ask Pascal Abidor, an Islamic studies doctoral student whose computer was turned on by CBP agents in Champlain, New York.

When an agent saw that he had a picture of a Hezbollah rally, she asked Abidor, a US citizen, “What is this stuff?” His answer—that he was studying the modern history of the Shiites—meant nothing to her and his computer was seized [21] for ten days. Between 2008 and 2010, the CBP searched [22] the electronic devices of more than 6,500 people. Like many of us, Abidor keeps everything, even his most private and intimate conversations with his girlfriend, on his computer. Now, it’s private no longer.

Despite all this, the message politicians and the media generally offer is that the country needs more agents, new techno-gadgets and even more walls for our “safety.” In that context, President Obama on July 7 asked Congress for an additional $3.7 billion [23] for “border security.”

Since last October, in what officials have called a “humanitarian crisis,” 52,000 unaccompanied children, mostly from Central America, have been apprehended by Border Patrol agents. News about and photos [24] of some of those children, including toddlers, parentless and incarcerated in warehouses in the Southwest, have led to a flood of articles, many claiming that border security is “strained [25].” A Border Patrol Union representative typically claimed [26] that the border is “more porous than it’s ever been.” While such claims are ludicrous, all signs point to more money being packed aboard what Whitehead has called a “runaway train.”

Make no bones about it, every dollar spent this way works not just to keep others out of this country, but to lock American citizens into a border zone that may soon encompass the whole country.  It also fortifies our new domestic “standing military force” and its rollback of the Bill of Rights.

Resistance Inside the 100-Mile Zone
The first thing Cynthia (a pseudonym) asks the supervisory agent with the green Border Patrol hat and wrap-around sunglasses who stops her car is: “Can I have your name and agent number please?” She’s been halted at a checkpoint approximately twenty-five miles north of the US-Mexican border on a road running east-west near the small town of Arivaca, Arizona, where she lives.

The agent pauses.  He looks like he’s swallowed a hornet before he barks, “We ask the questions here first, okay? Do you have some ID on you?”

This starts a tense exchange between the two of them that she videotaped [27] in its entirety. She is only one of many challenging the omnipresence and activities of the Border Patrol in the heart of the 100-mile zone. Like many locals in Arivaca, she is sick of the checkpoint, which has been there for seven years. She and her neighbors were fed up with the obligatory stop between their small town and the dentist or the nearest bookstore. They were tired of Homeland Security agents scrutinizing their children on their way to school. So they began to organize [28].

In late 2013, they demanded that the federal government remove the checkpoint. It was, they wrote in a petition [29], an ugly artifact of border militarization; it had, they added, a negative economic impact on residents and infringed on people’s constitutional rights. At the beginning of 2014, small groups from People Helping People in the Border Zone—the name of their organization—started monitoring [30] the checkpoint several days a week.

This Arivaca Border Patrol road barricade, one of at least seventy-one [31] in the Southwest, functions as a de facto enforcement zone away from the border.  In Border Patrolese [32], it’s “an additional layer in our Defense in Depth strategy.” This particular checkpoint isn’t exactly impressive—just a portable trailer with an attached tarp for shade, but it still qualifies, according to one of the patrol’s informational brochures [32], as “a critical enforcement tool for securing the nation’s borders against all threats to our homeland.”

The agents manning it stop every car on the road, do a quick visual check of its interior and ask the driver and passengers their citizenship. There are also dogs available to sniff each car for traces of drugs or explosives. “Our enforcement presence along these strategic routes reduces the ability of criminals and potential terrorists to easily travel away from the border,” the brochure explains.

The Homeland Security surveillance gaze in the Southwest is, in fact, so pervasive that it has even nabbed [33] singer Willy Nelson in Texas for marijuana possession. It detained [34] 96-year-old former Arizona governor Raul Castro and made him stand in 100-degree heat for more than thirty minutes because a dog detected the radiation from his pacemaker. In the past three years in the Tucson sector, the patrol has made more than 6,000 arrests [35] and confiscated 135,000 pounds of narcotics at checkpoints.

But this is no longer just a matter of inland areas near the Mexican Border.  A Border Patrol agent forced [37] Vermont’s senior senator Patrick Leahy from his car at a checkpoint 125 miles south of the New York State border. The ACLU of Vermont unearthed [38] a prototype plan for CBP to operate checkpoints to stop southbound traffic on all five highways through that New England border state.

On Sunday afternoons in Sodus, New York, about thirty miles east of Rochester, green-striped Border Patrol vehicles can sometimes be found [39] parked in front of a laundromat which farmworkers (many undocumented) use. In Erie, Pennsylvania, agents wait [40] at the Greyhound bus terminal or the Amtrak station to question people arriving in town. These are all places where the Border Patrol was all but unknown before 2005. In Detroit, simply being at a bus stop at four in the morning en route to work or fishing [41] in the Detroit River is now “probable cause” for an agent to question you.

Or perhaps it is simply the color of your skin. Arrest records [42] from both bus terminals and railway stations in Rochester, New York, show that of the 2,776 arrests agents made between 2005 and 2009, 71.2 percent were of  “medium” complexion (likely of Latino or Arab background) and 12.9 percent “black.” Only 0.9 percent of those arrested were of “fair” complexion.

Back in Arivaca, the agent with the wraparound sunglasses tells Cynthia that she needs to get out of her car. Much like Senator Leahy, she responds that she doesn’t “understand why.”

“You don’t have to understand,” he says. “It’s for my safety. And yours. Do you understand that?”

Then his tone gains an angry edge. He clearly doesn’t like having his authority challenged. “We don’t have time for this. We have criminals here, okay? If you have a political or an emotional situation here”—he makes an emphatic chopping motion with his hand—“I don’t want to hear about it. I want to see your ID.” He pauses. “Now!”

The adrenaline is obviously pumping and he is about to edge up on the limits of what an agent can do, even with extra-constitutional powers. He thrusts his hand through the open window and into the car and unlocks it. With a yank, he pulls the door open from the inside. When Cynthia is out of the car, he asks, his voice rising, “What do you think we’re looking for here?”

“I don’t know,” Cynthia responds.

“That’s where I’m gonna educate you a little bit. Okay?”

“Okay,” she says.

“What happens through this checkpoint is that we catch smugglers of aliens, smugglers of drugs, child molesters, murderers and everything else. Okay? Does that make sense?”

This rural area of Arizona, he insists as they stand under a vast cloudless blue sky, is infested with bandits, criminals and drug dealers. “We have methamphetamine being made and manufactured,” the agent explains. “Do you think methamphetamine is a good thing?”

“Personally, no,” she says.

“Personally, I don’t think so either. I think they’re poisoning our world, okay? So when we ask you just to do something simple, like uncover something, do it! It’s a relief for us that it’s not something dangerous or something else.”  By now, the agent is making the full-blown case for Homeland Security’s rollback of the Bill of Rights: the world’s a dangerous place, too dangerous for us not to have a free hand searching wherever we want whenever we want—and it’s your job to understand that new twenty-first-century American reality.  He ends with a final dig at her for her initial resistance: “You’re destroying your rights, because what happens is, is that the criminals take your rights away, okay?  Not us. We’re here to protect you.”

According to the ACLU’s Lyall, the fact is that the abuses of Customs and Border Protection in that Constitution-free zone are “massively underreported” and “far more prevalent than anyone has been able to document.” Many people, according to him, are simply afraid to come forward; others don’t know their rights.

In Shena Gutierrez’s case, she returned to the same Nogales “port of entry” with two other activists to lodge a complaint about the purse incident. When she refused to leave federal property (for which she now faces [43] charges), the CBP arrested and detained her for hours. This time they did what she described as “an invasive body search.”

“I told them that I had not given my consent to be touched.” They nonetheless made her take off her wedding ring “for safety.” When she resisted, they said that they “would force it off her.” Again, the handcuffs cut into her wrists.  This time, an agent kicked her in the ankle from behind. A female agent searched her thoroughly, from head to toe and in her private parts, because she “might have drugs or contraband or documents.”

As the agent groped her, she told me, she began to think yet again about what her husband had gone through. If this can happen to a US citizen, she told me, “Imagine what happens to a person without documents.”

Imagine what can happen to anyone in a realm where, increasingly, anything goes, including the Constitution.