No Change From Bernanke on Monetary Policy....

No Change From Bernanke on Monetary Policy



Federal Reserve Chairman Ben Bernanke held a rare press conference immediately following a meeting addressing US monetary policy.
Just prior to the meeting on April 25the US dollar fell to new lows against the British Pound and Euro and even managed to fall to its lowest level ever against the Swiss Franc and Australian dollar on an expectation the Fed would announce little or no changes to America’s weak monetary policy and resistance to raising interest rates.
Karl Denninger from The Market Ticker explained that Bernanke plans to sacrifice the US dollar in favor of his preferred policies.
“He’s [Bernanke] allowed the federal government to run an enormous deficit,” Denninger said. “As long as that policy continues, when you dilute something and have more of it, the value of it goes down. That’s what’s happening with the dollar.”
He explained US monetary policy continues to hurt the market and damage the US dollar against other major currencies.
“While Ben was speaking gasoline prices in the futures market went up six cents,” Denninger noted.
“Monetary manipulation is actually opposite of what capitalism is all about. You can’t fix interest rates. Look at the last three years – no new jobs, still 33 million people unemployed, the money now sits in the reserves and now is leaking out and going into commodities and now we have inflation,” Republican Congressman Ron Paul said speaking on CNBC critiquing the Fed.
The press conference, although what was said was not what most wanted to hear, is a positive step in transparency argued some. But, it is only transparent if the Fed is honest, said Denninger.
“He testifies in front of Congress twice a year too, and yet he says things that are later proven not to be the case,” Denninger said.
The press conference does not change how the Fed operates. The US Congress controls the Fed, explains Denninger, it created the Fed and can take its power away.
“The idea that the Federal Reserve acts on its own is absolute lunacy,” he remarked.
Gerald Celente, the director of the Trend Research Institute in New York said the rise in gold and silver prices following the press conference says everything Americans need to know about Fed policy – the dollar is going to suffer.
“It’s the devaluation of the dollar,” he said. “Anybody who would believe anything that Bernanke says should have his head examined.”
Bernanke boasts a record of failure and inaccuracy, Celente explained. His policies routinely drive the dollar down and scare investors away.
The press conference is all talk, he said. It’s just being used to placate the American people.

African American Unemployment at Depression Levels.....

African American Unemployment at Depression Levels.....

Courtesy of rt.com

Educated, experienced and talented African Americans are finding it hard to secure employment in America. In some cities, black unemployment has reached Great Depression levels.
America’s overall unemployment rate hovers around 8.8 percent. The unemployment rate among white Americans is 7.9 percent; the rate for African Americans is nearly 21 percent.
Approximately 12 percent of all Americans are African American, yet, they represent a disproportionate number of America’s unemployed.
“Over the course of the recession, the unemployment disparity between college educated blacks and whites actually widened,” economist Algernon Austin, director of the Race, Ethnicity, and Economy program at the Economic Policy Institute in Washington told The Huffington Post. “If black workers who are the most prepared to compete and work in the new economy can’t find jobs, that’s something that we as a country have to take seriously.”
Stats from the Bureau of Labor Statistics showed that an epidemic of joblessness has undone years of economic and social progress for African Americans.
The report highlights both Detroit and Las Vegas the rates have gone even higher, hitting Great Depression levels. African American unemployment hit 25.7 percent in Detroit in 2010 and rose to 20.1 percent in Vegas.
In Birmingham, Alabama, where the unemployment rate for blacks was 5.3 percent in before the recession – it reached 14.5 percent in 2010. In Miami the rate jumped from 6.7 percent in 2006 to 17.2 percent in 2010 and in Los Angeles from 8.6 percent in 2006 to 19.3 in 2010. In Charlotte the rate grew from 4.9 percent to 19.2 percent.
“That’s had a devastating effect on Charlotte and the people who live here,” Mayor Anthony Foxx said. “We are working very hard to do all that we can to attract companies that might replace those jobs. But certainly the job needs remain real and, in some communities, intense.”
In cities with large African American populations this has dramatically changed the economic landscape. Cities are suffering budget cuts, while their people suffer from a lack of income. Most cities are unable to cope with higher social program demands.
Cities across America’s south are all experiencing these issues as thousands of manufacturing jobs simply no longer exist – leaving a massive amount of laborers without work. Meanwhile, no new jobs or industries are moving in to replace them.
In the past race played less of a role because labor demand was so high, now, argue some experts, race has reentered the hiring process because employers can be more choosy.

Numbers Racket:

Why The Economy Is Worse Than We Know

By Kevin P. Phillips

Almost four decades have passed since the United States scrapped its last currency ties to precious metals. Our copper and nickel coinage still retains some metallic value, but not nearly enough for the purpose of currency tampering—the historic temptation of inflation-plagued or otherwise wayward governments, including, at times, our own. Instead, since the 1960s, Washington has been forced to gull its citizens and creditors by debasing official statistics: the vital instruments with which the vigor and muscle of the American economy are measured. The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed. If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is.

The corruption has tainted the very measures that most shape public perception of the economy—the monthly Consumer Price Index (CPI), which serves as the chief bellwether of inflation; the quarterly Gross Domestic Product (GDP), which tracks the U.S. economy’s overall growth; and the monthly unemployment figure, which for the general public is perhaps the most vivid indicator of economic health or infirmity. Not only do governments, businesses, and individuals use these yardsticks in their decision-making but minor revisions in the data can mean major changes in household circumstances—inflation measurements help determine interest rates, federal interest payments on the national debt, and cost-of-living increases for wages, pensions, and Social Security benefits. And, of course, our statistics have political consequences too. An administration is helped when it can mouth banalities about price levels being “anchored” as food and energy costs begin to soar.

The truth, though it would not exactly set Americans free, would at least open a window to wider economic and political understanding. Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3–4 percent range). We might ponder as well who profits from a low-growth U.S. economy hidden under statistical camouflage. Might it be Washington politicos and affluent elites, anxious to mislead voters, coddle the financial markets, and tamp down expensive cost-of-living increases for wages and pensions?

Let me stipulate: the deception arose gradually, at no stage stemming from any concerted or cynical scheme. There was no grand conspiracy, just accumulating opportunisms. As we will see, the political blame for the slow, piecemeal distortion is bipartisan—both Democratic and Republican administrations had a hand in the abetting of political dishonesty, reckless debt, and a casino-like financial sector. To see how, we must revisit forty years of economic and statistical dissembling.

A short history of “pollyanna creep”

This apt phrase originated with John Williams, a California-based economic analyst and statistician who “shadows,” as he puts it, the official Washington numbers. In a 2006 interview, Williams noted that although few Americans ever see the fine print, the government “always footnotes the changes and provides all the fine detail. Nonetheless, some of the changes are nothing short of remarkable, and the pattern over time is what I call Pollyanna Creep.” Williams is one of the small group of economists and analysts who have paid any attention to the phenomenon. A few have pointed out the understatement of the Consumer Price Index—the billionaire bond manager Bill Gross has described it as an “haute con job,” and Bloomberg columnist John Wasik has dismissed it as “a testament to the art of spin.” In 2003, a University of Chicago economist named Austan Goolsbee (now a senior economic adviser to Barack Obama’s presidential campaign) published an op-ed in the New York Times pointing out how the government had minimized the depth of the 2001–2002 U.S. recession, having “cooked the books” to misstate and minimize the unemployment numbers. Unfortunately, the critics have tended to train their axes on a single abuse, missing the broad forest of statistical misinformation that has grown up over the past four decades.

The story starts after the inauguration of John F. Kennedy in 1961, when high jobless numbers marred the image of Camelot-on-the-Potomac and the new administration appointed a committee to weigh changes. The result, implemented a few years later, was that out-of-work Americans who had stopped looking for jobs—even if this was because none could be found—were labeled “discouraged workers” and excluded from the ranks of the unemployed, where many, if not most, of them had been previously classified. Lyndon Johnson, for his part, was widely rumored to have personally scrutinized and sometimes tweaked Gross National Product numbers before their release; and by the 1969 fiscal year, Johnson had orchestrated a “unified budget” that combined Social Security with the rest of the federal outlays. This innovation allowed the surplus receipts in the former to mask the emerging deficit in the latter.

Richard Nixon, besides continuing the unified budget, developed his own taste for statistical improvement. He proposed—albeit unsuccessfully—that the Labor Department, which prepared both seasonally adjusted and non-adjusted unemployment numbers, should just publish whichever number was lower. In a more consequential move, he asked his second Federal Reserve chairman, Arthur Burns, to develop what became an ultimately famous division between “core” inflation and headline inflation. If the Consumer Price Index was calculated by tracking a bundle of prices, so-called core inflation would simply exclude, because of “volatility,” categories that happened to be troublesome: at that time, food and energy. Core inflation could be spotlighted when the headline number was embarrassing, as it was in 1973 and 1974. (The economic commentator Barry Ritholtz has joked that core inflation is better called “inflation ex-inflation”—i.e., inflation after the inflation has been excluded.)

In 1983, under the Reagan Administration, inflation was further finagled when the Bureau of Labor Statistics decided that housing, too, was overstating the Consumer Price Index; the BLS substituted an entirely different “Owner Equivalent Rent” measurement, based on what a homeowner might get for renting his or her house. This methodology, controversial at the time but still in place today, simply sidestepped what was happening in the real world of homeowner costs. Because low inflation encourages low interest rates, which in turn make it much easier to borrow money, the BLS’s decision no doubt encouraged, during the late 1980s, the large and often speculative expansion in private debt—much of which involved real estate, and some of which went spectacularly bad between 1989 and 1992 in the savings-and-loan, real estate, and junk-bond scandals. Also, on the unemployment front, as Austan Goolsbee pointed out in his New York Times op-ed, the Reagan Administration further trimmed the number by reclassifying members of the military as “employed” instead of outside the labor force.

The distortional inclinations of the next president, George H.W. Bush, came into focus in 1990, when Michael Boskin, the chairman of his Council of Economic Advisers, proposed to reorient U.S. economic statistics principally to reduce the measured rate of inflation. His stated grand ambition was to move the calculus away from old industrial-era methodologies toward the emerging services economy and the expanding retail and financial sectors. Skeptics, however, countered that the underlying goal, driven by worry over federal budget deficits, was to reduce the inflation rate in order to reduce federal payments—from interest on the national debt to cost-of-living outlays for government employees, retirees, and Social Security recipients.

It was left to the Clinton Administration to implement these convoluted CPI measurements, which were reiterated in 1996 through a commission headed by Boskin and promoted by Federal Reserve Chairman Alan Greenspan. The Clintonites also extended the Pollyanna Creep of the nation’s employment figures. Although expunged from the ranks of the unemployed, discouraged workers had nevertheless been counted in the larger workforce. But in 1994, the Bureau of Labor Statistics redefined the workforce to include only that small percentage of the discouraged who had been seeking work for less than a year. The longer-term discouraged—some 4 million U.S. adults—fell out of the main monthly tally. Some now call them the “hidden unemployed.” For its last four years, the Clinton Administration also thinned the monthly household economic sampling by one sixth, from 60,000 to 50,000, and a disproportionate number of the dropped households were in the inner cities; the reduced sample (and a new adjustment formula) is believed to have reduced black unemployment estimates and eased worsening poverty figures.

Despite the present Bush Administration’s overall penchant for manipulating data (e.g., Iraq, climate change), it has yet to match its predecessor in economic revisions. In 2002, the administration did, however, for two months fail to publish the Mass Layoff Statistics report, because of its embarrassing nature after the 2001 recession had supposedly ended; it introduced, that same year, an “experimental” new CPI calculation (the C-CPI-U), which shaved another 0.3 percent off the official CPI; and since 2006 it has stopped publishing the M-3 money supply numbers, which captured rising inflationary impetus from bank credit activity. In 2005, Bush proposed, but Congress shunned, a new, narrower historical wage basis for calculating future retiree Social Security benefits.

By late last year, the Gallup Poll reported that public faith in the federal government had sunk below even post-Watergate levels. Whether statistical deceit played any direct role is unclear, but it does seem that citizens have got the right general idea. After forty years of manipulation, more than a few measurements of the U.S. economy have been distorted beyond recognition.

America’s “opacity” crisis

Last year, the word “opacity,” hitherto reserved for Scrabble games, became a mainstay of the financial press. A credit market panic had been triggered by something called collateralized debt obligations (CDOs), which in some cases were too complicated to be fathomed even by experts. The packagers and marketers of CDOs were forced to acknowledge that their hypertechnical securities were fraught with “opacity”—a convenient, ethically and legally judgment-free word for lack of honest labeling. And far from being rare, opacity is commonplace in contemporary finance. Intricacy has become a conduit for deception.

Exotic derivative instruments with alphabet-soup initials command notional values in the hundreds of trillions of dollars, but nobody knows what they are really worth. Some days, half of the trades on major stock exchanges come from so-called black boxes programmed with everything from binomial trees to algorithms; most federal securities regulators couldn’t explain them, much less monitor them.

Transparency is the hallmark of democracy, but we now find ourselves with economic statistics every bit as opaque—and as vulnerable to double- dealing—as a subprime CDO. Of the “big three” statistics, let us start with unemployment. Most of the people tired of looking for work, as mentioned above, are no longer counted in the workforce, though they do still show up in one of the auxiliary unemployment numbers. The BLS has six different regular jobless measurements—U-1, U-2, U-3 (the one routinely cited), U-4, U-5, and U-6. In January 2008, the U-4 to U-6 series produced unemployment numbers ranging from 5.2 percent to 9.0 percent, all above the “official” number. The series nearest to real-world conditions is, not surprisingly, the highest: U-6, which includes part-timers looking for full-time employment as well as other members of the “marginally attached,” a new catchall meaning those not looking for a job but who say they want one. Yet this does not even include the Americans who (as Austan Goolsbee puts it) have been “bought off the unemployment rolls” by government programs such as Social Security disability, whose recipients are classified as outside the labor force.

Second is the Gross Domestic Product, which in itself represents something of a fudge: federal economists used the Gross National Product until 1991, when rising U.S. international debt costs made the narrower GDP assessment more palatable. The GDP has been subject to many further fiddles, the most manipulatable of which are the adjustments made for the presumed starting up and ending of businesses (the “birth/death of businesses” equation) and the amounts that the Bureau of Economic Analysis “imputes” to nationwide personal income data (known as phantom income boosters, or imputations; for example, the imputed income from living in one’s own home, or the benefit one receives from a free checking account, or the value of employer-paid health- and life-insurance premiums). During 2007, believe it or not, imputed income accounted for some 15 percent of GDP. John Williams, the economic statistician, is briskly contemptuous of GDP numbers over the past quarter century. “Upward growth biases built into GDP modeling since the early 1980s have rendered this important series nearly worthless,” he wrote in 2004. “[T]he recessions of 1990/1991 and 2001 were much longer and deeper than currently reported [and] lesser downturns in 1986 and 1995 were missed completely.”

Nothing, however, can match the tortured evolution of the third key number, the somewhat misnamed Consumer Price Index. Government economists themselves admit that the revisions during the Clinton years worked to reduce the current inflation figures by more than a percentage point, but the overall distortion has been considerably more severe. Just the 1983 manipulation, which substituted “owner equivalent rent” for home-ownership costs, served to understate or reduce inflation during the recent housing boom by 3 to 4 percentage points. Moreover, since the 1990s, the CPI has been subjected to three other adjustments, all downward and all dubious: product substitution (if flank steak gets too expensive, people are assumed to shift to hamburger, but nobody is assumed to move up to filet mignon), geometric weighting (goods and services in which costs are rising most rapidly get a lower weighting for a presumed reduction in consumption), and, most bizarrely, hedonic adjustment, an unusual computation by which additional quality is attributed to a product or service.

The hedonic adjustment, in particular, is as hard to estimate as it is to take seriously. (That it was launched during the tenure of the Oval Office’s preeminent hedonist, William Jefferson Clinton, only adds to the absurdity.) No small part of the condemnation must lie in the timing. If quality improvements are to be counted, that count should have begun in the 1950s and 1960s, when such products and services as air-conditioning, air travel, and automatic transmissions—and these are just the A’s!—improved consumer satisfaction to a comparable or greater degree than have more recent innovations. That the change was made only in the late Nineties shrieks of politics and opportunism, not integrity of measurement. Most of the time, hedonic adjustment is used to reduce the effective cost of goods, which in turn reduces the stated rate of inflation. Reversing the theory, however, the declining quality of goods or services should adjust effective prices and thereby add to inflation, but that side of the equation generally goes missing. “All in all,” Williams points out, “if you were to peel back changes that were made in the CPI going back to the Carter years, you’d see that the CPI would now be 3.5 percent to 4 percent higher”—meaning that, because of lost CPI increases, Social Security checks would be 70 percent greater than they currently are.

Furthermore, when discussing price pressure, government officials invariably bring up “core” inflation, which excludes precisely the two categories—food and energy—now verging on another 1970s-style price surge. This year we have already seen major U.S. food and grocery companies, among them Kellogg and Kraft, report sharp declines in earnings caused by rising grain and dairy prices. Central banks from Europe to Japan worry that the biggest inflation jumps in ten to fifteen years could get in the way of reducing interest rates to cope with weakening economies. Even the U.S. Labor Department acknowledged that in January, the price of imported goods had increased 13.7 percent compared with a year earlier, the biggest surge since record-keeping began in 1982. From Maine to Australia, from Alaska to the Middle East, a hydra-headed inflation is on the loose, unleashed by the many years of rapid growth in the supply of money from the world’s central banks (not least the U.S. Federal Reserve), as well as by massive public and private debt creation.

The U.S. economy ex-distortion

The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today’s U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession. If what we have been sold in recent years has been delusional “Pollyanna Creep,” what we really need today is a picture of our economy ex-distortion. For what it would reveal is a nation in deep difficulty not just domestically but globally.

Undermeasurement of inflation, in particular, hangs over our heads like a guillotine. To acknowledge it would send interest rates climbing, and thereby would endanger the viability of the massive buildup of public and private debt (from less than $11 trillion in 1987 to $49 trillion last year) that props up the American economy. Moreover, the rising cost of pensions, benefits, borrowing, and interest payments—all indexed or related to inflation—could join with the cost of financial bailouts to overwhelm the federal budget. As inflation and interest rates have been kept artificially suppressed, the United States has been indentured to its volatile financial sector, with its predilection for leverage and risky buccaneering.

Arguably, the unraveling has already begun. As Robert Hardaway, a professor at the University of Denver, pointed out last September, the subprime lending crisis “can be directly traced back to the [1983] BLS decision to exclude the price of housing from the CPI. . . . With the illusion of low inflation inducing lenders to offer 6 percent loans, not only has speculation run rampant on the expectations of ever-rising home prices, but home buyers by the millions have been tricked into buying homes even though they only qualified for the teaser rates.” Were mainstream interest rates to jump into the 7 to 9 percent range—which could happen if inflation were to spur new concern—both Washington and Wall Street would be walking in quicksand. The make-believe economy of the past two decades, with its asset bubbles, massive borrowing, and rampant data distortion, would be in serious jeopardy. The U.S. dollar, off more than 40 percent against the euro since 2002, could slip down an even rockier slope.

The credit markets are fearful, and the financial markets are nervous. If gloom continues, our humbugged nation may truly regret losing sight of history, risk, and common sense.

The Fall of an Empire....

IMF bombshell: Age of America nears end

Commentary: China’s economy will surpass the U.S. in 2016

By Brett Arends, MarketWatch

This column has been updated to include a reaction from the IMF.

BOSTON (MarketWatch) — The International Monetary Fund has just dropped a bombshell, and nobody noticed.

For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.

And it’s a lot closer than you may think.

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.

Put that in your calendar.

It provides a painful context for the budget wrangling taking place in Washington right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.

According to the IMF forecast, which was quietly posted on the Fund’s website just two weeks ago, whoever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.

Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.

China’s economy will be the world’s largest within five years or so.

But they’re miscounting. They’re only comparing the gross domestic products of the two countries using current exchange rates.

That’s a largely meaningless comparison in real terms. Exchange rates change quickly. And China’s exchange rates are phony. China artificially undervalues its currency, the renminbi, through massive intervention in the markets.

The comparison that really matters

In addition to comparing the two countries based on exchange rates, the IMF analysis also looked to the true, real-terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.

Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.

Just 10 years ago, the U.S. economy was three times the size of China’s.

Naturally, all forecasts are fallible. Time and chance happen to them all. The actual date when China surpasses the U.S. might come even earlier than the IMF predicts, or somewhat later. If the great Chinese juggernaut blows a tire, as a growing number fear it might, it could even delay things by several years. But the outcome is scarcely in doubt.

Victor Cha, senior adviser on Asian affairs at Washington’s Center for Strategic and International Studies, told me China’s neighbors in Asia are already waking up to the dangers. “The region is overwhelmingly looking to the U.S. in a way that it hasn’t done in the past,” he said. “They see the U.S. as a counterweight to China. They also see American hegemony over the last half-century as fairly benign. In China they see the rise of an economic power that is not benevolent, that can be predatory. They don’t see it as a benign hegemony.”

The rise of China, and the relative decline of America, is the biggest story of our time. You can see its implications everywhere, from shuttered factories in the Midwest to soaring costs of oil and other commodities. Last fall, when I attended a conference in London about agricultural investment, I was struck by the number of people there who told stories about Chinese interests snapping up farmland and foodstuff supplies — from South America to China and elsewhere.

This is the result of decades during which China has successfully pursued economic policies aimed at national expansion and power, while the U.S. has embraced either free trade or, for want of a better term, economic appeasement.

“There are two systems in collision,” said Ralph Gomory, research professor at NYU’s Stern business school. “They have a state-guided form of capitalism, and we have a much freer former of capitalism.” What we have seen, he said, is “a massive shift in capability from the U.S. to China. What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That’s very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages.”

The next chapter of the story is just beginning.

U.S. spending spree won’t work

What the rise of China means for defense, and international affairs, has barely been touched on. The U.S. is now spending gigantic sums — from a beleaguered economy — to try to maintain its place in the sun. See: Pentagon spending is budget blind spot .

It’s a lesson we could learn more cheaply from the sad story of the British, Spanish and other empires. It doesn’t work. You can’t stay on top if your economy doesn’t.

Equally to the point, here is what this means economically, and for investors.

Some years ago I was having lunch with the smartest investor I know, London-based hedge-fund manager Crispin Odey. He made the argument that markets are reasonably efficient, most of the time, at setting prices. Where they are most likely to fail, though, is in correctly anticipating and pricing big, revolutionary, “paradigm” shifts — whether a rise of disruptive technologies or revolutionary changes in geopolitics. We are living through one now.

The U.S. Treasury market continues to operate on the assumption that it will always remain the global benchmark of money. Business schools still teach students, for example, that the interest rate on the 10-year Treasury bond is the “risk-free rate” on money. And so it has been for more than a century. But that’s all based on the Age of America.

No wonder so many have been buying gold. If the U.S. dollar ceases to be the world’s sole reserve currency, what will be? The euro would be fine if it acts like the old deutschemark. If it’s just the Greek drachma in drag ... not so much.

The last time the world’s dominant hegemon lost its ability to run things singlehandedly was early in the past century. That’s when the U.S. and Germany surpassed Great Britain. It didn’t turn out well.

Updated with IMF reaction

The International Monetary Fund has responded to my article.

In a statement sent to MarketWatch, the IMF confirmed the report, but challenged my interpretation of the data. Comparing the U.S. and Chinese economies using “purchase-power-parity,” it argued, “is not the most appropriate measure… because PPP price levels are influenced by nontraded services, which are more relevant domestically than globally.”

The IMF added that it prefers to compare economies using market exchange rates, and that under this comparison the U.S. “is currently 130% bigger than China, and will still be 70% larger by 2016.”

My take?

The IMF is entitled to make its case. But its argument raises more questions than it answers.

First, no one measure is perfect. Everybody knows that.

But that’s also true of the GDP figures themselves. Hurricane Katrina, for example, added to the U.S. GDP, because it stimulated a lot of economic activity — like providing emergency relief, and rebuilding homes. Is there anyone who seriously thinks Katrina was a net positive for the United States? All statistics need caveats.

Second, comparing economies using simple exchange rates, as the IMF suggests, raises huge problems.

Currency markets fluctuate. They represent international money flows, not real output.

The U.S. dollar has fallen nearly 10% against the euro so far this year. Does anyone suggest that the real size of the U.S. economy has shrunk by 10% in comparison with Europe over that period? The idea is absurd.

China actively suppresses the renminbi on the currency markets through massive dollar purchases. As a result the renminbi is deeply undervalued on the foreign-exchange markets. Just comparing the economies on their exchange rates misses that altogether.

Purchasing power parity is not a perfect measure. None exists. But it measures the output of economies in terms of real goods and services, not just paper money. That’s why it’s widely used to compare economies. The IMF publishes PPP data. So does the OECD. Many economists rely on them.

Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for The Wall Street Journal.

Prerequisites of War: A Pretext For WWIII.....

Strategies of War
There has been much talk of shared values and responsibility to protect the growing and developing world from imminent danger and threats. Presumably this responsibility falls upon the United States and thier allies in NATO as they have dubbed themselves leaders and protectors of the free world. In November of 2010 NATO leaders met in Lisbon, Portugal for what was given the dubious title "NATO's Strategic Concept" to discuss a range of topics including cyber warfare, climate change, high tech missile defense systems, nuclear armaments, and of course the war on terror. The title "NATO's Strategic Concept" is clearly dubious because NATO has no strategy of its own, the strategical plan of NATO is to abide by the rules of Washington D.C. NATO seems to be laying claim the job of the United Nations with a harsher more aggressive undertone. The only strategy of the United States and NATO is to make way for American hegemony as Zbigniew Brzezinski most blatantly ascertained in his 1993 book The Grand Chessboard. This chessboard is the world map and the U.S. has pawns aplenty.

Finding a Culpable Threat

The United States government lays claim to being progenitors of freedom, but this freedom as the government boldly professes only comes through democratic means. Thus, the U.S. and its allies in NATO under the guise of international law have created neverending pretexts invading sovereign countries, often rewriting its own rules on a whim. Case in point being the Kosovo war in 1999, when the U.S. and Nato bombed Yugoslavia, defying international law, the United Nations, and its own rules, regulations, and charter. NATO did this by waging a war of aggression outside of its defensive perimeters, therefore making the pact of nations an offensive machine. In this war, NATO committed quite a few acts of aggression that many believed to be contrary to the Geneva Convention, namely killing innocent refugees, bombing hospitals, churches, and nurseries, along with foreign embassies. What should have been defined as ethnic clashes in a sovereign nation became a pretext for aggression and war mongering. The same culpability has occured in Libya, as NATO has once again reared its head and bombed a country under the guise of saving lives. NATO has expanded its powers to go far beyond its call of duty and is now policing  piracy, cyber security, climate change, extreme weather events such as catastrophic storms and flooding, rising sea levels, large-scale population movement into inhabited areas, sometimes across borders, water shortages, droughts, decreasing food production, global warming, CO2 emissions, the retreat of Arctic ice uncovering hitherto inaccessible resources, fuel efficiency and dependence on foreign sources, etc. None of which require military operations, but due to NATO's need for pretexts of war, they can produce some form of conflict through their "Strategic Concept".

An End To Diplomacy

NATO is becoming an ever increasing threat to the world because of its lust for power and non-diplomatic rhetoric and actions. Military campaigns have become the norm for NATO as they have continuously adopted a 2PAC bomb first ask questions later approach to dealing with dissenting countries, military force has become the bargaining chip. Many of the new threats to NATO as outlined by Anders Fogh Rasmussen should be addressed by the international community and not an alliance of military powers. The pentagon has relinquished the state deparment in its negotiating role therefore you have military rhetoric instead of peaceful talks when dealing with countries with contrary views to NATO. In a military state of mind, diplomacy is seen as weakness and despised as such. The pentagon has quietly became the negotiator in world affairs due to the militarys' vast expansion across the seas, spanning many countries. This military-industrial complex by the U.S. has gave way to a very dangerous game with other major world powers, namely China and Russia. By belittling the U.N. and what that amalgamation of countries supposedly stand for, the U.S. is now using NATO is a substitute with a no-diplomacy insistence.

The Military-Industrial Complex

The United States of America has built a vast military at the expense of its citizens.  The country accounts for a little over fifty percent of all the world's military spending. Meaning that the U.S. spends the same amount of money on defense as the rest of the 194 countries in the world combined.  It is said that the U.S. has between 700 to 1000 military bases in over 130 countries throughout the world, that's astounding when there are approximately 195 countries in the world. So, the question is to what honor do all of these countries owe such a great prescence of militray personnel. The answer presumably is the "Strategic Concept" of U.S. domination and conquest. These various military bases provide a pretext for wars with dissenting countries most notably Russia and China as well, as they are often provocations. Evidence of a provocation came in November 2010 when military exercises by South Korea near the Korean border sparked the shelling of an island by North Korea killing and injuring civilians. While the U.S. was not directly involved in the military exercises, the North has often considered the South a puppet regime following orders from the U.S. due to the large number of U.S. military personnel, bases and camps surrounding South Korea. It must be noted that the Korean peninsula is a very strategic point if the U.S. and China were to ever clash. Provocative measures against China and Russia are evidenced in the encircling and flanking of these two powers by the U.S. with the numerous bases and camps in various countries, along with the ratcheting up of military exercises in plain view, often off the coasts of major Chinese and Russian cities. The average American citizen is pobably unaware of what is happening but to others such as myself we know what's going on. As well, the war on terror must be thrown in the mix, as it has provided the pentagon with a blank check. The terrorist threat propaganda has provided certain cover for the pentagon to bomb a country without explicit permission from congress.

Throwing Rings Around Russia to get to China

Ultimately, the major threat to the U.S. is China. WWIII will be so much more than a militarily fought war. It will also be a war of economics, which the United States is losing and badly. The U.S. deficit has breached the debt ceiling which is over 14 trillion dollars. To what has to be the chagrin of the Russian government, the U.S. and NATO has shwon great "interest" in areas in the Black Sea, the Baltic and the Arctic circle. Countries such as Ukraine have shown a taste of naivete, allowing NATO to be placed as a pawn on the chessboard, although it is said that the vast majority of Ukranians are against joining NATO. Too, being used as a pawn is Georgia, who were delivered from the detructive forces of Russia's army a couple of years ago. To put this all in context, the first element to consider is the enlargement of NATO as an instrument of American projection of power and the re-emergence of Russia's instinctive fears since the days of the Tsar of being encircled by hostile powers. Moscow observes and apprehends the series of existing or developing American strategic partnerships and alliances encasing its territory. This encase starts with the Baltic states and Poland, passes by the NATO protectorate of Kosovo, then Turkey, Israel, Georgia, the occupation of Iraq, the NATO military presence in Afghanistan, the growing ties with India, to finally end with Japan and South Korea. As the 1980's came to an end, President H.W. Bush promised Mikhail Gorbachev that NATO would not entice Warsaw Pact members in Eastern Europe to join NATO and peace negotiations would give way to the breaking up of the trans-Atlantic alliance. H.W. must have had his fingers crossed, because President Bill broke that promise as soon as he began seeking NATO membership to the eastern parts of Europe all the way to Russia's borders, deliberately and blatantly taunting Moscow. Recently, the U.S. has been trying to establish a missile defense system in strategic points around the world. The one is most concern happens to be in Poland, very close to Russia. Although Washington claims the missile defense system is a deterrent from missile capabilities and threats from Iran, the Russians aren't buying it. Clearly, Iran does not have those capabilities, neither has Iran ever threatened the U.S. If and when Iran does get long range ballistic missiles in its arsenal, they would presumably be used as protection from Israel who has been a known aggressor towards its enemies. The Russians percieve this as an imminent threat and an attack on their defenses. The ballistics deterrent system will surround Russia and render its own defense missiles useless giving the U.S. even more incentive to attack Russia knowing they could not retaliate. It must be said that scientists aren't sure if the system even works due to all of the tests conducted being in a very controlled environment. Seemingly, U.S. policy is to encircle and intimidate Russia to such an extent that it accepts a semi-satellite status that neutralizes it in the anticipated future conflict with China.

Neutralizing China the Big Fish In a Little Pond

U.S. relations with China have seemed to be continuously deterriorating, whether it be due to conflicts about territories, human rights, or the evaluation of currency, the tension can be spread on a slice of bread. And thus again the "Strategic Concept" comes into play. The United States' strategy for China is seemingly the same as its strategy for Russia, surround, beseige, and lay the foundation for internal chaos and disorder. Except in the case of China, the U.S. is trying to control and disrupt China's flow of resources, chiefly its oil supply. This is the cause for so much of the disorder and chaos in the Middle East and North Africa, and Thailand and Myanmar in South East Asia. China has been developing infrastructure throughout Southeast Asia with major plans to build highspeed railways connecting Thailand, Singapore, and Laos. In Myanmar China is developing a deep sea port, an oil pipeline and a highway network that runs from parts of Myanmar to its border with China. The West in response to China's growing influence in the region has deferred to the "String of Pearls" strategy and is attempting to contain China by fostering instability in both Myanmar and Thailand. This attempts to install servile, pro-Western regimes and by doing so, the globalists would be able to sever China's newly proposed links and force it to continue relying on the Malacca Strait.
Disrupting China's oil supply, encircling them with a wave of destabilization along with stoking domestic tension internally, all aims at frustrating their ambitions as a sovereign nation . As the globalists build financial networks of fiat paper, the Chinese are building networks of high-speed rail throughout their nation and beyond their borders. They are building real, tangible infrastructure from neighboring Laos to the continent of Africa. With the United States and its allies in NATO playing these war games with China and Russia, the world may very well be on the brink of WWIII....



 

The Kill Team: How U.S. Soldiers in Afghanistan Murdered Innocent Civilians

Plus: An exclusive look at the war crime images the Pentagon tried to censor

Courtesy of Rolling Stone.com
By Mark Boal

Early last year, after six hard months soldiering in Afghanistan, a group of American infantrymen reached a momentous decision: It was finally time to kill a haji.

Among the men of Bravo Company, the notion of killing an Afghan civilian had been the subject of countless conversations, during lunchtime chats and late-night bull sessions. For weeks, they had weighed the ethics of bagging "savages" and debated the probability of getting caught. Some of them agonized over the idea; others were gung-ho from the start. But not long after the New Year, as winter descended on the arid plains of Kandahar Province, they agreed to stop talking and actually pull the trigger.

Bravo Company had been stationed in the area since summer, struggling, with little success, to root out the Taliban and establish an American presence in one of the most violent and lawless regions of the country. On the morning of January 15th, the company's 3rd Platoon – part of the 5th Stryker Brigade, based out of Tacoma, Washington – left the mini-metropolis of tents and trailers at Forward Operating Base Ramrod in a convoy of armored Stryker troop carriers. The massive, eight-wheeled trucks surged across wide, vacant stretches of desert, until they came to La Mohammad Kalay, an isolated farming village tucked away behind a few poppy fields.

To provide perimeter security, the soldiers parked the Strykers at the outskirts of the settlement, which was nothing more than a warren of mud-and-straw compounds. Then they set out on foot. Local villagers were suspected of supporting the Taliban, providing a safe haven for strikes against U.S. troops. But as the soldiers of 3rd Platoon walked through the alleys of La Mohammad Kalay, they saw no armed fighters, no evidence of enemy positions. Instead, they were greeted by a frustratingly familiar sight: destitute Afghan farmers living without electricity or running water; bearded men with poor teeth in tattered traditional clothes; young kids eager for candy and money. It was impossible to tell which, if any, of the villagers were sympathetic to the Taliban. The insurgents, for their part, preferred to stay hidden from American troops, striking from a distance with IEDs.

While the officers of 3rd Platoon peeled off to talk to a village elder inside a compound, two soldiers walked away from the unit until they reached the far edge of the village. There, in a nearby poppy field, they began looking for someone to kill. "The general consensus was, if we are going to do something that fucking crazy, no one wanted anybody around to witness it," one of the men later told Army investigators.

The poppy plants were still low to the ground at that time of year. The two soldiers, Cpl. Jeremy Morlock and Pfc. Andrew Holmes, saw a young farmer who was working by himself among the spiky shoots. Off in the distance, a few other soldiers stood sentry. But the farmer was the only Afghan in sight. With no one around to witness, the timing was right. And just like that, they picked him for execution.

He was a smooth-faced kid, about 15 years old. Not much younger than they were: Morlock was 21, Holmes was 19. His name, they would later learn, was Gul Mudin, a common name in Afghanistan. He was wearing a little cap and a Western-style green jacket. He held nothing in his hand that could be interpreted as a weapon, not even a shovel. The expression on his face was welcoming. "He was not a threat," Morlock later confessed.

Morlock and Holmes called to him in Pashto as he walked toward them, ordering him to stop. The boy did as he was told. He stood still.
The soldiers knelt down behind a mud-brick wall. Then Morlock tossed a grenade toward Mudin, using the wall as cover. As the grenade exploded, he and Holmes opened fire, shooting the boy repeatedly at close range with an M4 carbine and a machine gun.
Mudin buckled, went down face first onto the ground. His cap toppled off. A pool of blood congealed by his head.
The loud report of the guns echoed all around the sleepy farming village. The sound of such unexpected gunfire typically triggers an emergency response in other soldiers, sending them into full battle mode. Yet when the shots rang out, some soldiers didn't seem especially alarmed, even when the radio began to squawk. It was Morlock, agitated, screaming that he had come under attack. On a nearby hill, Spc. Adam Winfield turned to his friend, Pfc. Ashton Moore, and explained that it probably wasn't a real combat situation. It was more likely a staged killing, he said – a plan the guys had hatched to take out an unarmed Afghan without getting caught.

Back at the wall, soldiers arriving on the scene found the body and the bloodstains on the ground. Morlock and Holmes were crouched by the wall, looking excited. When a staff sergeant asked them what had happened, Morlock said the boy had been about to attack them with a grenade. "We had to shoot the guy," he said.

It was an unlikely story: a lone Taliban fighter, armed with only a grenade, attempting to ambush a platoon in broad daylight, let alone in an area that offered no cover or concealment. Even the top officer on the scene, Capt. Patrick Mitchell, thought there was something strange about Morlock's story. "I just thought it was weird that someone would come up and throw a grenade at us," Mitchell later told investigators.

But Mitchell did not order his men to render aid to Mudin, whom he believed might still be alive, and possibly a threat. Instead, he ordered Staff Sgt. Kris Sprague to "make sure" the boy was dead. Sprague raised his rifle and fired twice.

As the soldiers milled around the body, a local elder who had been working in the poppy field came forward and accused Morlock and Holmes of murder. Pointing to Morlock, he said that the soldier, not the boy, had thrown the grenade. Morlock and the other soldiers ignored him.

To identify the body, the soldiers fetched the village elder who had been speaking to the officers that morning. But by tragic coincidence, the elder turned out to be the father of the slain boy. His moment of grief-stricken recognition, when he saw his son lying in a pool of blood, was later recounted in the flat prose of an official Army report. "The father was very upset," the report noted.

The father's grief did nothing to interrupt the pumped-up mood that had broken out among the soldiers. Following the routine Army procedure required after every battlefield death, they cut off the dead boy's clothes and stripped him naked to check for identifying tattoos. Next they scanned his iris and fingerprints, using a portable biometric scanner.

Then, in a break with protocol, the soldiers began taking photographs of themselves celebrating their kill. Holding a cigarette rakishly in one hand, Holmes posed for the camera with Mudin's bloody and half-naked corpse, grabbing the boy's head by the hair as if it were a trophy deer. Morlock made sure to get a similar memento.

No one seemed more pleased by the kill than Staff Sgt. Calvin Gibbs, the platoon's popular and hard-charging squad leader. "It was like another day at the office for him," one soldier recalls. Gibbs started "messing around with the kid," moving his arms and mouth and "acting like the kid was talking." Then, using a pair of razor-sharp medic's shears, he reportedly sliced off the dead boy's pinky finger and gave it to Holmes, as a trophy for killing his first Afghan.

According to his fellow soldiers, Holmes took to carrying the finger with him in a zip-lock bag. "He wanted to keep the finger forever and wanted to dry it out," one of his friends would later report. "He was proud of his finger."

After the killing, the soldiers involved in Mudin's death were not disciplined or punished in any way. Emboldened, the platoon went on a shooting spree over the next four months that claimed the lives of at least three more innocent civilians. When the killings finally became public last summer, the Army moved aggressively to frame the incidents as the work of a "rogue unit" operating completely on its own, without the knowledge of its superiors. Military prosecutors swiftly charged five low-ranking soldiers with murder, and the Pentagon clamped down on any information about the killings. Soldiers in Bravo Company were barred from giving interviews, and lawyers for the accused say their clients faced harsh treatment if they spoke to the press, including solitary confinement. No officers were charged.

But a review of internal Army records and investigative files obtained by Rolling Stone, including dozens of interviews with members of Bravo Company compiled by military investigators, indicates that the dozen infantrymen being portrayed as members of a secretive "kill team" were operating out in the open, in plain view of the rest of the company. Far from being clandestine, as the Pentagon has implied, the murders of civilians were common knowledge among the unit and understood to be illegal by "pretty much the whole platoon," according to one soldier who complained about them. Staged killings were an open topic of conversation, and at least one soldier from another battalion in the 3,800-man Stryker Brigade participated in attacks on unarmed civilians. "The platoon has a reputation," a whistle-blower named Pfc. Justin Stoner told the Army Criminal Investigation Command. "They have had a lot of practice staging killings and getting away with it."

From the start, the questionable nature of the killings was on the radar of senior Army leadership. Within days of the first murder, Rolling Stone has learned, Mudin's uncle descended on the gates of FOB Ramrod, along with 20 villagers from La Mohammad Kalay, to demand an investigation. "They were sitting at our front door," recalls Lt. Col. David Abrahams, the battalion's second in command. During a four-hour meeting with Mudin's uncle, Abrahams was informed that several children in the village had seen Mudin killed by soldiers from 3rd Platoon. The battalion chief ordered the soldiers to be reinterviewed, but Abrahams found "no inconsistencies in their story," and the matter was dropped. "It was cut and dry to us at the time," Abrahams recalls.

Other officers were also in a position to question the murders. Neither 3rd Platoon's commander, Capt. Matthew Quiggle, nor 1st Lt. Roman Ligsay has been held accountable for their unit's actions, despite their repeated failure to report killings that they had ample reason to regard as suspicious. In fact, supervising the murderous platoon, or even having knowledge of the crimes, seems to have been no impediment to career advancement. Ligsay has actually been promoted to captain, and a sergeant who joined the platoon in April became a team leader even though he "found out about the murders from the beginning," according to a soldier who cooperated with the Army investigation.

Indeed, it would have been hard not to know about the murders, given that the soldiers of 3rd Platoon took scores of photographs chronicling their kills and their time in Afghanistan. The photos, obtained by Rolling Stone, portray a front-line culture among U.S. troops in which killing Afghan civilians is less a reason for concern than a cause for celebration. "Most people within the unit disliked the Afghan people, whether it was the Afghan National Police, the Afghan National Army or locals," one soldier explained to investigators. "Everyone would say they're savages." One photo shows a hand missing a finger. Another depicts a severed head being maneuvered with a stick, and still more show bloody body parts, blown-apart legs, mutilated torsos. Several show dead Afghans, lying on the ground or on Stryker vehicles, with no weapons in view.

In many of the photos it is unclear whether the bodies are civilians or Taliban, and it is possible that the unidentified deaths involved no illegal acts by U.S. soldiers. But it is a violation of Army standards to take such photos of the dead, let alone share them with others. Among the soldiers, the collection was treated like a war memento. It was passed from man to man on thumb drives and hard drives, the gruesome images of corpses and war atrocities filed alongside clips of TV shows, UFC fights and films such as Iron Man 2. One soldier kept a complete set, which he made available to anyone who asked.

The collection also includes several videos shot by U.S. troops. In a jumpy, 30-minute clip titled "Motorcycle Kill," soldiers believed to be with another battalion in the Stryker Brigade gun down two Afghans on a motorcycle who may have been armed. One of the most chilling files shows two Afghans suspected of planting an IED being blown up in an airstrike. Shot through thermal imaging, the grainy footage has been edited into a music video, complete with a rock soundtrack and a title card that reads 'death zone.'

Even before the war crimes became public, the Pentagon went to extraordinary measures to suppress the photos – an effort that reached the highest levels of both governments. Gen. Stanley McChrystal and President Hamid Karzai were reportedly briefed on the photos as early as May, and the military launched a massive effort to find every file and pull the pictures out of circulation before they could touch off a scandal on the scale of Abu Ghraib. Investigators in Afghanistan searched the hard drives and confiscated the computers of more than a dozen soldiers, ordering them to delete any provocative images. The Army Criminal Investigation Command also sent agents fanning out across America to the homes of soldiers and their relatives, gathering up every copy of the files they could find. The message was clear: What happens in Afghanistan stays in Afghanistan.

By suppressing the photos, however, the Army may also have been trying to keep secret evidence that the killings of civilians went beyond a few men in 3rd Platoon. In one image, two dead Afghans have been tied together, their hands bound, and placed alongside a road. A sign – handwritten on cardboard from a discarded box of rations – hangs around their necks. It reads "Taliban are Dead." The Pentagon says it is investigating the photos, but insists that there is little more investigators can do to identify the men. "It's a mystery," says a Pentagon spokesman. "To be perfectly honest, I'm not sure they know where to take it next. All we have is two apparently dead Afghans handcuffed to each other against a mile marker. We don't know much beyond that. For all we know, those two guys may have been killed by the Taliban for being sympathizers."

But such statements suggest that the Pentagon isn't following every lead. A Stryker vehicle in the photos, for example, bears identifying marks that are clearly visible in the image. And according to a source in Bravo Company, who spoke to Rolling Stone on the condition of anonymity, the two unarmed men in the photos were killed by soldiers from another platoon, which has not yet been implicated in the scandal.

"Those were some innocent farmers that got killed," the source says. "Their standard operating procedure after killing dudes was to drag them up to the side of the highway."

Army prosecutors insist that blame for the killings rests with a soldier near the bottom of the Stryker Brigade's totem pole: Calvin Gibbs, a three-tour veteran of Iraq and Afghanistan who served as a squad leader in 3rd Platoon. Morlock and five soldiers charged with lesser crimes have pleaded guilty in exchange for testifying against Gibbs, who faces life in prison for three counts of premeditated murder.

The 26-year-old staff sergeant has been widely portrayed as a sociopath of Mansonesque proportions, a crazed killer with a "pure hatred for all Afghans" who was detested and feared by those around him. But the portrait omits evidence that the Army's own investigators gathered from soldiers in Bravo Company. "Gibbs is very well-liked in the platoon by his seniors, peers and subordinates alike," Spc. Adam Kelly reported, adding that Gibbs was "one of the best NCOs I've ever had the pleasure of working with in my military career. I believe that because of his experience, more people came back alive and uninjured than would have without him having been part of the platoon." Another soldier described Gibbs as an "upbeat guy, very funny. He was one of those guys you could talk to about anything and he would make you feel better about the situation."

At six-feet-four and 220 pounds, Gibbs could certainly intimidate those around him. Growing up in a devout Mormon family in Billings, Montana, he had dropped out of high school to get an equivalency degree and enlist in the Army. He plunged into soldiering, accumulating a slew of medals in Iraq, where the line between legitimate self-defense and civilian deaths was often blurry at best. In 2004, Gibbs and other soldiers allegedly fired on an unarmed Iraqi family near Kirkuk, killing two adults and a child. The incident, which was not prosecuted at the time, is now under investigation by the Army.

Before he joined Bravo Company in November 2009, Gibbs worked on the personal security detail for one of the top commanders in Afghanistan, a controversial, outspoken colonel named Harry Tunnell. Tunnell, who at the time was the commander of 5th Stryker Brigade, openly mocked the military's approach to counterinsurgency – which emphasizes the need to win the support of local civilians – as better suited to a "social scientist." "Political correctness dictates that we cannot talk about the oppressive measures employed during successful counterinsurgency campaigns," he wrote. Tunnell also pushed his men to go after "guerrilla hunter killers," insisting that the enemy "must be attacked relentlessly."

When Gibbs left Tunnell's detail and arrived at the front, he quickly became an extreme version of a relentless attacker. After he took command, Gibbs put a pirate flag on his tent. "Hey, brother," he told a friend. "Come down to the line and we'll find someone to kill." A tattoo on his left shin featured a pair of crossed rifles offset by six skulls. Three of the skulls, colored in red, represented his kills in Iraq. The others, in blue, were from Afghanistan.

By the time Gibbs arrived, morale in the Stryker Brigade had hit rock bottom. Only four months earlier, the unit had been deployed to Afghanistan amid a chorus of optimism about its eight-wheeled armored vehicles, a technological advancement that was supposed to move infantry to the battlefield more quickly and securely, enabling U.S. troops to better strike against the Taliban. By December, however, those hopes had dissolved. The Taliban had forced the Strykers off the roads simply by increasing the size and explosive force of their IEDs, and the brigade had suffered terrible casualties; one battalion had lost more soldiers in action than any since the start of the war. Gibbs, in fact, had been brought in after a squad leader had his legs blown off by an IED.

The soldiers were bored and shellshocked and angry. They had been sent to Afghanistan as part of a new advance guard on a mission to track down the Taliban, but the enemy was nowhere to be found. "To be honest, I couldn't tell the difference between local nationals and combatants," one soldier later confessed. During the unit's first six months in Afghanistan, the Taliban evaded almost every patrol that 3rd Platoon sent out. Frustrations ran so high that when the unit came across the body of an insurgent killed by a helicopter gunship in November 2009, one soldier took out a hunting knife and stabbed the corpse. According to another soldier, Gibbs began playing with a pair of scissors near the dead man's hands. "I wonder if these can cut off a finger?" Gibbs asked.

The Pentagon's top command, rather than addressing the morale problems, actually held up the brigade as a media-worthy example of progress in the war. The month after the helicopter incident – only four weeks before the killings began – the chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, paid a heavily publicized visit to the area. The military's strategy of counterinsurgency, he reminded members of 5th Stryker Brigade, required them to win hearts and minds by protecting the population. "If we're killing local civilians," he cautioned, "we're going to strategically lose."

Gibbs had a different idea about how to breathe new life into 3rd Platoon. Not long after he arrived, he explained to his fellow soldiers that they didn't have to wait passively to be attacked by the enemy's IEDs. They could strike back by hitting people in towns known to be sympathetic to the Taliban. "Gibbs told everyone about this scenario by pitching it – by saying that all these Afghans were savages, and we had just lost one of our squad leaders because his legs got blown off by an IED," Morlock recalled. Killing an Afghan – any Afghan – became a way to avenge the loss.

The members of Bravo Company began to talk incessantly about killing Afghans as they went about their daily chores, got stoned or relaxed over a game of Warhammer. One idea, proposed half in jest, was to throw candy out of a Stryker vehicle as they drove through a village and shoot the children who came running to pick up the sweets. According to one soldier, they also talked about a second scenario in which they "would throw candy out in front and in the rear of the Stryker; the Stryker would then run the children over." Another elaborate plan involved waiting for an IED attack, then using the explosion as an excuse to kill civilians. That way, the soldiers reasoned, "you could shoot anyone in the general area and get away with it."

"We were operating in such bad places and not being able to do anything about it," Morlock said in a phone interview from the jail at Joint Base Lewis-McChord in Washington state. "I guess that's why we started taking things into our own hands."

After killing the Afghan boy at La Mohammad Kalay, members of 3rd Platoon were jubilant. "They were high-fiving each other about having killed the guy," one soldier recalled. They put the corpse in a black body bag and stowed it on top of their Stryker for the ride back to FOB Ramrod. No sooner had they arrived at the base than they were recounting the tale to soldiers they barely knew.

A few hours after the shooting, during a routine checkup at the base's clinic, Holmes and Morlock bragged about having killed an insurgent to Alyssa Reilly, a fair-skinned, blond medic who was popular among the men in the unit. Reilly later paid the soldiers a social visit, and they all sat around playing spades. When it came time for their wager, Morlock and Holmes said they would bet a finger. Then they tossed the finger that Gibbs had sliced from Mudin's body on the card pile. "I thought it was gross," Reilly told investigators.

Morlock was particularly eager to volunteer the truth to his fellow soldiers, evidently unconcerned about how they would react to his having murdered an unarmed Afghan. The same evening he shot Mudin, several members of Bravo Company convened in the privacy of a Stryker vehicle for a nightcap of hashish, a common activity among the unit. Hash supplied by Afghan translators was a major part of the daily lives of many soldiers; they smoked up constantly, getting high in their vehicles, their housing units, even porta-potties. Now, in the tanklike interior of the Stryker, surrounded by its mesh of wires and periscopes and thermal-imaging computers, Morlock passed the hash and recounted the killing in detail, even explaining how he had been careful not to leave the grenade's spoon and pin on the ground, where they might have been used as evidence that a U.S. weapon had been involved in the attack. For the same reason, he'd also been careful to brush away traces of white explosive powder around Mudin's body.

Before the military found itself short of troops in Afghanistan and Iraq, Morlock was the kind of bad-news kid whom the Army might have passed on. He grew up not far from Sarah Palin in Wasilla, Alaska; his sister hung out with Bristol, and Morlock played hockey against Track. In those days, he was constantly in trouble: getting drunk and into fights, driving without a license, leaving the scene of a serious car accident. Even after he joined the Army, Morlock continued to get into trouble. In 2009, a month before he deployed to Afghanistan, he was charged with disorderly conduct after burning his wife with a cigarette. After he arrived in Afghanistan, he did any drug he could get his hands on: opium, hash, Ambien, amitriptyline, flexeril, phenergan, codeine, trazodone.

As Morlock bragged about the killing, word of the murder spread back home to families and friends. Soldiers e-mailed photos to their buddies and talked about the killing during visits home. On February 14th, three months before the Army launched its investigation, Spc. Adam Winfield sent a Facebook message to his father, Chris, back in Cape Coral, Florida. A skinny, bookish 21-year-old, Winfield was pissed off at being disciplined by Gibbs. "There are people in my platoon that have gotten away with murder," he told his father. "Everyone pretty much knows it was staged. . . . They all don't care." Winfield added that the victim was "some innocent guy about my age, just farming."

During Facebook chats, Winfield continued to keep his father in the loop. "Adam told me that he heard the group was planning on another murder involving an innocent Afghanistan man," Chris Winfield, himself a veteran, later told investigators. "They were going to kill him and drop an AK-47 on him to make it look like he was the bad guy." Alarmed, the elder Winfield called the command center at Joint Base Lewis-McChord, and told the sergeant on duty what was going on. But according to Winfield, the sergeant simply shrugged it off, telling him that "stuff like that happens" and that "it would be sorted out when Adam got home." Tragically, commanders at the base did nothing to follow up on the report.

Back in Afghanistan, Winfield was having second thoughts about reporting the incident. He believed the killings were wrong, but he had finally earned a place in the "circle of trust" erected by Gibbs, who had started off thinking of him as too "weak" to belong to the kill team. Reversing course, he begged his father to stop contacting the Army, saying that he feared for his life. Winfield said Gibbs had warned him that if he told anyone about the murder, he would "go home in a body bag." His father agreed to keep the matter quiet.

Given the lack of response from their superiors, the soldiers of 3rd Platoon now believed they could kill with impunity – provided they planted "drop weapons" at the scene to frame their victims as enemy combatants. The presence of a weapon virtually guaranteed that a shooting would be considered a legitimate kill, even under the stricter rules of engagement the military had implemented as a key element of counterinsurgency. A drop weapon was the ultimate get-out-of-jail-free card. And in the chaotic war zone, they were easy to find.

The military keeps close track of the weapons and ammunition it issues to soldiers, carefully documenting every grenade exploded, every magazine expended. So Gibbs made it his business to gather "off the books" weapons through a variety of channels. He got friendly with guys in the Afghan National Police and tried to trade them porn magazines in exchange for rocket-propelled grenades; he cajoled other units to give him munitions; he scrounged for broken and discarded UXO – unexploded ordnance – until he had collected a motley arsenal of random weaponry, old frag grenades, bent RPG tails, duct-taped claymore mines, C-4, mortar rounds. His best find was a working AK-47 with a folding butt stock and two magazines, which he pulled from the wreckage of an Afghan National Police vehicle that had been blown up near the base's gate. Gibbs placed the AK-47 and the magazines in a metal box in one of the Strykers. Later, a corporal named Emmitt Quintal discovered the gun and wondered what it was doing there. As he recalled, Staff Sgt. David Bram "sat me down and explained to me that it was basically to cover our ass if anything happened."

Two weeks after the murder of Gul Mudin, something did.

It was the night of January 27th and the platoon was driving along the highway near their forward operating base. Suddenly, through their thermal imaging, they spotted a human heat signature on the side of the road – a potentially suspicious sign, since the Taliban often operate at night, using the cover of darkness to plant IEDs.

The patrol stopped 100 yards away from the man, and a handful of soldiers and an interpreter got out of their vehicles. They could see that the man was crouched down, or curled up like a ball close to the ground. As they approached, the man stood up and held his arms in front of his chest. To the soldiers, the motion was either an indication that he was cold, or that he was hiding a suicide-bomb vest.

Shouting to the man in Pashto, the soldiers illuminated him with intense, high-power spotlights and ordered him to lift up his shirt. But the man began to pace back and forth in the blinding white light, ignoring their calls. "He was acting strange," recalls a soldier. For several minutes the man shuffled around as the soldiers fired warning shots at him. The bullets skipped around him.

Then – ignoring the warnings – the man began walking toward the troops. "Fire!" someone yelled. Gibbs opened fire, followed by at least five other soldiers. In the course of a few seconds, they expended approximately 40 rounds.

The man's body lay on the ground. He turned out to be completely unarmed. According to official statements made by several soldiers, he also appears to have been deaf or mentally disabled. Above his beard, a large portion of his skull was missing, blown away by the hail of bullets. Spc. Michael Wagnon collected a piece of the skull and kept it as a trophy.

It was the team's second killing of an unarmed man in as many weeks, and the second time they violated a body. But rather than investigate the shooting, the platoon's officers concentrated on trying to justify it. When 1st Lt. Roman Ligsay radioed Capt. Matthew Quiggle, the platoon's commanding officer, and informed him that the same unit had shot an unarmed Afghan male, the captain was furious. "He strongly believed that we had illegitimately killed a local national," recalls Quintal.

Quiggle ordered Ligsay to search until they found a weapon. "Lt. Ligsay was pretty freaked out," Quintal recalls. "He was positive he was going to lose his job." For the next hour the platoon swept the area with their flashlights looking for weapons, but they couldn't find anything.

Then Staff Sgt. Bram ordered Quintal to hand him the AK-47 magazine that Gibbs had stowed in the metal box in the Stryker. A private named Justin Stoner passed it down. A few minutes later, a voice called out in the darkness. "Sir!" Bram yelled. "I think I found something."

Lt. Ligsay walked up and saw the black magazine lying on the ground. He called it in, and the platoon breathed a sigh of relief. The members of the kill team knew it was a drop magazine, but it turned the shooting into a legitimate kill.

"The incident was staged to look like he may have had a weapon," Stoner told investigators. "Basically, what we did was a desperate search to justify killing this guy. But in reality he was just some old, deaf, retarded guy. We basically executed this man."

Under the rules of engagement, however, the U.S. military still considers the man responsible for his own death. Because he ignored the platoon's warnings and moved in their direction, no one has been charged in his killing – even though the Army now knows he was gunned down by soldiers intent on shooting unarmed civilians for sport.

Within a month, according to the Army, Gibbs executed another civilian and planted a weapon on the body. It was during Operation Kodak Moment, a routine mission to photograph and compile a database of the male residents of a village called Kari Kheyl. On February 22nd, the day of the mission, Gibbs hid the AK-47 he had stolen from the Afghan National Police in a black assault pack. As the platoon made its way through the village, he went to the hut of Marach Agha, a man he suspected of belonging to the Taliban, and ordered him outside.

First Gibbs fired the AK-47 into a nearby wall and dropped the weapon at Agha's feet. Then he shot the man at close range with his M4 rifle. Morlock and Wagnon followed up with a few rounds of their own. With the scene staged to his satisfaction, Gibbs called in a report.

Staff Sgt. Sprague was one of the first to respond. Gibbs claimed that he had turned a corner and spotted the man, who had fired at him with the AK-47, only to have the rifle jam. But when Sprague picked up the Kalashnikov, it seemed to be in perfect operating condition. A short time later, as he walked down a dusty alley in the village, Sprague himself came under attack from small-arms fire. He responded instinctively by squeezing the trigger on the AK-47 – and the gun fired "with no problems at all."

Sprague reported the discrepancy to Lt. Ligsay. When the body was identified, relatives also reported that Agha was a deeply religious man who would never have taken up arms. He "did not know how to use an AK-47," they told Ligsay. Once again, however, no action was taken, nor was Gibbs disciplined.

With their commanding officers repeatedly failing to investigate, the kill team was starting to feel invulnerable. To encourage soldiers in other units to target unarmed civilians, Gibbs had given one of the "off the books" grenades he had scrounged to a friend from another battalion, Staff Sgt. Robert Stevens. "It showed up in a box on my desk," recalled Stevens, a senior medic. "When I opened the box, I saw a grenade canister, which had a grenade in it and a dirty green sock." Figuring the sock was some kind of joke, Stevens threw it away. Later, when he saw Gibbs, he mentioned getting the grenade.

"Did you get the other thing?" Gibbs asked.

"What, the sock?" Stevens said.

"No, what was in the sock," Gibbs replied.

Inside the sock, Gibbs had placed a severed human finger.

Stevens got the message. On March 10th, as his convoy was driving down Highway 1, the central road connecting Kandahar to the north, Stevens stuck his head out of his Stryker's open hatch and tossed the grenade. It detonated a few seconds later than he had anticipated, and when it blew, it thudded into the vehicle. Stevens immediately began firing at a nearby compound of huts, yelling at another platoon member to do the same. "Get the fuck up, Morgan!" he screamed. "Let's go, shoot!"

No casualties were reported from the incident, but it earned Stevens an Army Commendation Medal and a Combat Medical Badge. Stevens later admitted that he had concocted the ambush not only because he wanted to get rid of the illegal grenade but because he "wanted to hook up the guys in the company" with their Combat Infantryman Badges, 14 of which were awarded in the aftermath of the shooting. All of the awards were revoked when the Army learned the attack had been faked.

The assault staged by Stevens suggested a new way to target Afghan civilians. In addition to approaching targets on foot, Gibbs decided to use his Stryker as a shooting platform, affording greater mobility with the protection of armor. In a perverse twist, the vehicle that had proved ineffective at combating the Taliban was about to be turned on the very people it was supposed to defend.

On March 18th, during a maintenance run to Kandahar Airfield, the unit drove past a populated area of the city. According to one soldier, Gibbs opened the hatch of the moving Stryker and tossed out a grenade. As it exploded with a loud bang, shrapnel hit the Stryker. "RPG!" Gibbs shouted. "RPG!" Sgt. Darren Jones, who had discussed faking attacks with Gibbs, opened fire indiscriminately on the local residents, who frantically scrambled to avoid the incoming rounds. Gibbs raised his M4 and laid down fire as well.

There is no way to know how many, if any, casualties resulted from the fusillade. Lt. Ligsay, who was in the same Stryker with Gibbs and Jones, maintains that he mistakenly believed the attack to be genuine and ordered the convoy to keep moving. The platoon did not return to the area to conduct a battle damage assessment, and no charges were ever filed in the incident.

A few weeks later, sometime in late March or early April, members of 3rd Platoon fired on unarmed civilians twice on the same day, indicating a growing sense of their own invincibility. Five soldiers were part of a patrol in a grape field in the Zhari District when they spotted three unarmed men. According to Stevens, Gibbs ordered the soldiers to open fire, even though the men were standing erect and posed no threat. All five soldiers fired their weapons at the men, but they managed to escape unscathed. Gibbs was not pleased. "He mentioned that we needed to work on our accuracy," Stevens recalled, "because it did not appear that anyone was hurt."

That same evening, while manning a guard tower overlooking a field in the Zhari District, soldiers from 3rd Platoon were directly told not to shoot at an elderly farmer who had been granted permission to work his land nearby. Despite the warning, two soldiers reportedly shot at the farmer as if he were an armed combatant. They once again failed to hit their target, but the officer in charge was furious. "This farmer has never been a problem," he later told investigators. "He's 60 to 70 years old."

One morning that spring, Gibbs approached Morlock flashing what looked like a small metal pineapple. "Hey, man, I've got this Russian grenade," he said. Gibbs added that the weapon would be the perfect tool to fake another attack, since the Taliban were known to carry Russian explosives. Morlock liked the idea. The night before, talking with a bunch of soldiers outside their bunk rooms, he had announced that he was looking to kill another haji, a pejorative term that U.S. troops in Iraq and Afghanistan use for Muslims. One soldier who took part in the conversation dismissed it as idle talk. "I didn't really think anything of it," he told investigators, "because soldiers say stuff like that all the time."

The morning of May 2nd, the platoon was on a routine patrol in a village called Qualaday, a few miles from base. Following standard procedure, the unit's leaders entered a house to talk with a man who had previously been arrested for having an IED. That inadvertently left the rest of the platoon free to roam the village looking for targets, without having to worry about an officer's supervision.

Outside the house, Morlock was overheard instructing Winfield in how a grenade explodes, cautioning him to remain on the ground during the blast. Then the two soldiers moved off with Gibbs. Nearby, in a compound filled with children, they picked out a man with a white beard and escorted him outside. "He seemed friendly," Winfield recalled. "He didn't seem to have any sort of animosity toward us."

Gibbs turned to his men. "You guys want to wax this guy or what?" he asked. Morlock and Winfield agreed that the man seemed perfect.

Gibbs walked the Afghan to a nearby ditch and forced him to his knees, ordering him to stay that way. Then he positioned Morlock and Winfield in a prone position behind a small berm no more than 10 feet away. "To be honest," Morlock later told investigators, "me and Winfield thought we were going to frag ourselves, 'cause we were so fucking close."

With everyone in position, Gibbs took cover behind a low wall and chucked a grenade toward the Afghan. "All right, dude, wax this guy!" he shouted. "Kill this guy, kill this guy!"

As the grenade went off, Morlock and Winfield opened fire. Morlock got off several rounds with his M4. Winfield, who was armed with the more powerful SAW machine gun, squeezed off a burst that lasted for three to five seconds.

Gibbs shouted for Morlock to proceed with the next stage of the plan. "Get up there and plant that fucking grenade!"

The man lay where he had fallen. One of his feet had been blown off by the blast; his other leg was missing below the knee. Morlock ran up and dropped the Russian pineapple grenade near the dead man's hand. Gibbs walked up to the body, stood directly over it, and fired twice into the man's head, shattering the jaw.

Later, when the scene had calmed down – after soldiers had pushed away the dead man's wife and children, who were screaming, hysterical with grief, and Morlock had spun the story to the higher-ups – Gibbs took out a pair of medical shears and cut off the corpse's left pinky finger, which he kept for himself. Then, wearing a surgical glove, he reached into the dead man's mouth, pulled out a tooth and handed it to Winfield.

Winfield held the tooth for a while. Then he tossed it aside, leaving it behind on the ground at Qualaday.

This time, though, the villagers refused to be placated. The dead man, it turned out, was a peaceful cleric named Mullah Allah Dad. Two days later, the murder provoked an uproar at a districtwide council attended by Capt. Quiggle, the unit's commanding officer. The district leader launched into a blistering attack of the platoon. "He pretty much told us that we planted the grenade in order to shoot the guy," recalled 1st Lt. Stefan Moye, who escorted Quiggle to the meeting.

But the next day, instead of launching an inquiry into the platoon's behavior, Quiggle dispatched Moye to the scene of the shooting to do damage control. With Gibbs hovering nearby, the lieutenant found two elderly villagers who claimed to have seen Mullah Allah Dad with a grenade. Relieved, Moye urged them to spread the word. "This is the type of stuff that the Taliban likes to use against us and try to recruit people to fight against us," he said.

His mission accomplished, Moye left the village feeling that the platoon could return to its usual rhythms. "After that," he said, "everything was normal."

Things might have remained "normal," and the killings might have continued, if it hadn't been for what began as a trivial spat between bunkmates. Around midnight, the same evening that Moye returned from pacifying village elders, Pfc. Stoner walked into the company's tactical operations center to register a complaint. Stoner, who had helped plant the AK-47 magazine on the civilian murdered by the highway, said he was sick and tired of other soldiers in the unit using his room as "a smoke shack for hash." Worried that the lingering odor would get him busted, he had asked them to find another place to get stoned. They had refused, pausing only to remove the battery from the room's smoke detector.

"They baked the room many times until it stank constantly," Stoner said. "I was worried for my own job." Emphasizing that he wasn't a snitch, Stoner told the sergeant on duty that he didn't want to get his fellow soldiers in trouble. Then, growing emotional, he mentioned that "he and a bunch of other guys had executed a local national out on Highway 1." The sergeant didn't take the story seriously enough to report it up the chain of command. "I thought he was just upset and needed to talk to someone about the incident," he later recalled. Instead of alerting his superiors about the murder allegation, the sergeant simply assured Stoner that the matter of hash smoking in his room would be handled quietly, and that his identity would be kept confidential.

But discretion wasn't exactly the unit's strong suit. By the next day, everyone knew that Stoner had ratted them out. "Everyone began to panic," Quintal recalls. Gibbs, who didn't care for hashish, gathered members of the kill team in his room. "We need to address the situation with Stoner," he reportedly said. "Snitches get stitches."

On May 6th, Gibbs and six other soldiers descended on Stoner's room, locking the door behind them, and attacked Stoner while he was sitting on his bed. Grabbing him by the throat, they dragged him to the floor and piled on, striking him hard but taking care to avoid blows to the face that might leave visible bruises. "I've been in the Army four years," Morlock said as he pummeled Stoner in the stomach. "How could you do this to me?" Before leaving, they struck Stoner in the crotch and spit in his face.

A few hours later, Gibbs and Morlock returned to Stoner's room. As Stoner sat on his bed, still dazed from the assault, Morlock explained that the beating would not happen again, so long as Stoner kept his mouth shut "from fucking now on." If Stoner were disloyal again, Gibbs warned, he would be killed the next time he went out on patrol. "It's too easy," he added, explaining that he could hide Stoner's body in a Hesco barrier, one of the temporary structures used to fortify U.S. positions.

Then Gibbs reached into his pocket and took out a bit of cloth. Unfolding it, he tossed two severed fingers on the floor, with bits of skin still hanging off the bone. If Stoner didn't want to end up like "that guy," Morlock said, he better "shut the hell up." After all, he added, he "already had enough practice" at killing people.

Stoner had no doubt that Morlock would follow through on the threat. "Basically, I do believe that Morlock would kill me if he had the chance," he said later.

But the beating proved to be the kill team's undoing. When a physician's assistant examined Stoner the next day, she saw the angry red welts covering his body. She also saw the large tattoo across Stoner's back. In gothic type, beneath a grinning red skull flanked by two grim reapers, it read:

what if im not the hero

what if im the bad guy

Stoner was sent to talk to Army investigators. In the course of recounting the assault, he described how Gibbs had thrown the severed fingers on the floor. The investigators pressed him about how Gibbs came by the fingers. Stoner told them it was because the platoon had killed a lot of innocent people.

At that point, the investigators asked Stoner to start from the beginning. When had the platoon killed innocent people? Bit by bit, Stoner laid out the whole history, naming names and places and times.

As other members of the platoon were called in and interviewed, many confirmed Stoner's account and described the shootings for investigators. Morlock, who proved particularly gregarious, agreed to speak on videotape. Relaxed and unconcerned in front of the camera, he nonchalantly described the kills in detail.

Morlock's confession kicked off an intense search for evidence. When the Army's investigators were dispatched to FOB Ramrod, they went straight to the top of a Hesco barrier near Gibbs' housing unit. Right where Morlock said it would be, they found the bottom of a plastic water bottle containing two pieces of cloth. Inside each piece of cloth was a severed human finger. But then a strange thing happened. When investigators compared prints of the two fingers to those in the company's database, the prints didn't match up. Either the records were screwed up, which was quite possible, or there were more dead guys out there who were unaccounted for.

Last week, on March 23rd, Morlock was sentenced to 24 years in prison after agreeing to testify against Gibbs. "The Army wants Gibbs," says one defense lawyer. "They want to throw him in jail and move on." Gibbs insists that all three killings he took part in were "legitimate combat engagements." Three other low-level soldiers facing murder charges – Winfield, Holmes and Wagnon – also maintain their innocence. As for the other men in Bravo Company, five have already been convicted of lesser crimes, including drug use, stabbing a corpse and beating up Stoner, and two more face related charges. In December, Staff Sgt. Stevens was sentenced to nine months in prison after agreeing to testify against Gibbs. He was stripped to the lowest service rank – private E-1 – but over the protests of military prosecutors, he was allowed to remain in the Army.

So far, though, no officers or senior officials have been charged in either the murders or the cover-up. Last October, the Army quietly launched a separate investigation, guided by Brig. Gen. Stephen Twitty, into the critical question of officer accountability. But the findings of that inquiry, which was concluded last month, have been kept secret – and the Army refuses to say whether it has disciplined or demoted any of the commanders responsible for 3rd Platoon. Even if the commanding officers were not co-conspirators or accomplices in the crimes, they repeatedly ignored clear warning signs and allowed a lethally racist attitude to pervade their unit. Indeed, the resentment of Afghans was so commonplace among soldiers in the platoon that when Morlock found himself being questioned by Army investigators, he expressed no pity or remorse about the murders.

Toward the end of Morlock's interview, the conversation turned to the mindset that had allowed the killings to occur. "None of us in the platoon – the platoon leader, the platoon sergeant – no one gives a fuck about these people," Morlock said.

Then he leaned back in his chair and yawned, summing up the way his superiors viewed the people of Afghanistan. "Some shit goes down," he said, "you're gonna get a pat on the back from your platoon sergeant: Good job. Fuck 'em."