European Sovereign Debt Levels to GDP Before and After the Bank Bailouts

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Posted on 18th September 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jesse

What is even more clever than lining your pockets by ballooning the financial system into a great bubble by fraud and bad governance?

Getting the victims and bystanders to pay the price of your perfidy, and shifting the anger of the people to some unfortunates,  while ‘reforming’ the system to make it even more efficient at looting so that you can do it all over again.

No wonder that any movement that threatens the status quo in the least bit gets these white collared reivers and their pampered princes in such a lather.  It is important to make people think that no one else cares, and that they are alone.

Such a parcel of rogues in a nation.

“The sudden explosion of European sovereign debt is the direct and indisputable result of all our political parties deciding they would safeguard their mates’ and their own personal wealth (it is the top 10% who hold the bulk of their wealth in the financial products which would be destroyed in a bank collapse. NOT the rest of us!) by bailing out the private banks and piling their unpaid debts on to the public purse.

So whatever the trigger of the next crisis may be, they know any solution which saves the wealth and power of the over-class will have to involve piling new, private-bank bad-debts on to already indebted sovereigns and that, our leaders must be keenly aware, will not be easy to force on an already angry public. They know a whole range of the assurances they might like to give us about what must be done when the next crisis hits and how those things will undoubtably save us, will not be so easy to shove down people’s throats…

I think one of the cleverest things the 1% have done over the last few years is the way they have created a relentless public discourse, via their paid political front-men and women and their media empires, to insist on the need to ‘fix’ and protect the system, and the extreme danger to us all should the system not be ‘saved’. This has served as a perfect cover for making sure that not enough people have noticed that the system is, in fact, being gutted and replaced by something that better serves the interests of the 1%. We have not been fixing the banks, we have been feeding them.”

Golem XIV, The Next Crisis Part One

“Why do you think we have a winner?,” President Snow asks while cutting a white rose.
“What do you mean?,” Seneca asks.
“I mean, why do we have a winner?,” Snow repeats, before pausing. “Hope.”
“Hope?,” Seneca replies slightly bewildered.
“Hope. It is the only thing stronger than fear. A little hope is effective, a lot of hope is dangerous,” Snow declares. “A spark is fine, as long as it’s contained. So, contain it.”

Suzanne Collins, The Hunger Games

Scottish Independence, and the Growing Divide Between the Privileged Classes and the People

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Posted on 17th September 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jesse

What interested me the most in this article is not so much the information it provides on the campaign by the British establishment against the Scottish vote for independence, or the eager participants from the American members of the Anglo-American power clique as well.

Rather it is for the light that this article sheds on the behavior of the enablers of the Anglo-American establishment in the corporate media and the academy, and how rarified their experience of the daily lives of the people has become. It seems almost to be due to an imbalance of character and a fashionable failure of the national perspective. Understandable for the generation that proclaims, ‘greed is good.’

As David Brin has remarked, ‘It is said that power corrupts, but actually it’s more true that power attracts the corruptible. The sane are usually attracted by other things than power.’

I hope that whatever the result the vote turns out well for the people of Scotland. They will certainly have problems to encounter, and hardships as a people to overcome. As will we all.

There is a distance growing between the elite classes in America and England and the great majority of the people. It is palpable in the economic policies in the aftermath of the financial crisis.

I am always surprised by how little those pampered princes and princesses within the Beltway or Westminster seem to understand about their own people.  What a caricature the communication and occasional interactions between them has become. Such distance breeds both mistrust and fear. It is becoming a cultural divide. And not just for the leadership itself, but for their vast assemblage of courtiers and sycophants who act as viceroys and interpreters for them.

It does not bode well for the future.

 

How the media shafted the people of Scotland

Journalists in their gilded circles are woefully out of touch with popular sentiment and shamefully slur any desire for change

By George Monbiot
Tuesday 16 September 2014 15.03 EDT

Perhaps the most arresting fact about the Scottish referendum is this: that there is no newspaper – local, regional or national, English or Scottish – that supports independence except the Sunday Herald. The Scots who will vote yes have been almost without representation in the media.
There is nothing unusual about this. Change in any direction, except further over the brink of market fundamentalism and planetary destruction, requires the defiance of almost the entire battery of salaried opinion. What distinguishes the independence campaign is that it has continued to prosper despite this assault.

In the coverage of the referendum we see most of the pathologies of the corporate media. Here, for instance, you will find the unfounded generalisations with which less enlightened souls are characterised. In the Spectator, Simon Heffer maintains that: “addicted to welfare … Scots embraced the something for nothing society”, objecting to the poll tax “because many of them felt that paying taxes ought to be the responsibility of someone else”.

Here is the condescension with which the dominant classes have always treated those they regard as inferior: their serfs, the poor, the Irish, Africans, anyone with whom they disagree. “What spoilt, selfish, childlike fools those Scots are … They simply don’t have a clue how lucky they are,” sneered Melanie Reid in the Times. Here is the chronic inability to distinguish between a cause and a person: the referendum is widely portrayed as a vote about Alex Salmond, who is then monstered beyond recognition (a Telegraph editorial compared him to Robert Mugabe).

The problem with the media is exemplified by Dominic Lawson’s column for the Daily Mail last week. He began with Scotland, comparing the “threat” of independence with that presented by Hitler (the article was helpfully illustrated with a picture of the Führer – unaccompanied, in this case, by the Mail’s former proprietor)…

Read the entire article in The Guardian here.

 

BUBBLES KRUGMAN

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Posted on 9th September 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jesse

Learning to Love the Fed’s Bubbles Our Only Choice

Apparently today is my day to pick on poor Paul Krugman. I happened to read this today, and it was just too illustrative of a certain institutional economic mindset to go by unremarked.

Paul is responding to questions for an interview in the latest issue of Princeton Magazine.

Are bubbles good or bad and do we need them to create strong economic growth and reach higher levels of employment?

Bubbles are bad if you have an economy near full employment, where they divert resources from their proper use and set the stage for financial instability. In a depressed economy, even ill-conceived spending can help create jobs, so bubbles aren’t necessarily bad. There are reasons to believe that we’re facing an era of persistent economic weakness, which means that we’ll only feel prosperous during bubble periods.

Please comment on how artificially low interest rates have impacted the current value of baby boomers’ retirement portfolios and should this be a consideration of the Federal Reserve?

Oh, boy. What do you mean ‘artificially low’? Compared to what? The appropriate level of the interest rate, most economists would say, is the rate that gives us full employment without inflation; since we don’t have full employment, that says that rates are too high.

And no, the Fed’s job is to stabilize the economy, not to protect incomes of some groups at the expense of that mandate.

Paul Krugman, Princeton Magazine

It’s one thing to infer that the economists of the professional status quo believe these sorts of things. And its quite another to see it in print.

Paul apparently thinks that bubbles are not really a problem if you are not at ‘full employment,’ because they might be stimulus. Oh boy, what do you mean ‘full employment?’ Does that mean everyone who wants a shit job without benefits at a below poverty level wage can have one is ‘full employment?’

Or does ‘full employment’ mean a robust economic environment where people are obtaining jobs that pay living wages for families that keep up with inflation and provide affordable health benefits sufficient to keep them from falling into bankruptcy if anyone in their family sustains a serious illness?

Well, we haven’t been at ‘full employment’ since the last bubble broke, and that was six years ago. And depending on how you want to define it, we may not have been at ‘full employment’ in a very long time of stagnant median wages and a deteriorating middle class.

So I would imagine that means that Paul was ok with the housing bubble, at least while it was growing. In his defense the Fed publicly dismissed it as well. And reading this interview helps one to understand why.

But that doesn’t bother me so much, since this is the policy jargon used by economists to justify whatever policy initiative they are pumping for that day, for whatever reason. And most do it.

What does surprise is that it doesn’t seem to matter to a Nobel prize-winning economist is ok with a bubble, which by definition in the real world is a significant mispricing of risk, will almost always result in stress on the financial system, and inflicts harmful losses on less sophisticated and non-insiders.

Bubbles by their very nature are very often symptoms of lax regulation, and methods of transferring wealth from the many to the few. And they are very often a fairly thin veneer for control frauds.

Paul goes on to suggest that we are in a new normal where the bubbles that the Fed occasionally creates through its policy errors are the only times that ‘we will feel prosperous.’ So enjoy. This is preposterous humbug. It is the worst sort of excuse making for the failure of leadership.

Does he notice that this latest ‘recovery’ from the aftermath of the latest financial bubble is resulting in the greatest disparity of wealth in US since before the Great Depression? And that it is growing worse, not better?

His statement that the Fed’s overwhelming mandate to provide ‘stability,’ for which you can read the health of the banks, is superior in consideration to protecting the income (wealth) of some groups like retirees, should give you a good idea of the Fed’s actions in the future when this current asset bubble implodes, and the Banks come back to their trough again. Bail-in anyone?

Does this criticism seem harsh? I hate to pick on the establishment Democrats, since their counterparts the neo-liberal austerians are often so much worse.

But given that too large a part of the country has been enduring the equivalent of an economic ‘Death March of Bataan’ for the last seven years because the Wall Street wing of the Democratic party, which was given a mandate for reform, has perpetrated so many poorly thought out and corporate friendly economic policies, written by non-elected and barely accountable Banksters operating largely in secret, I don’t think so. And they can’t keep blaming it all on the Republicans. They are both failing, and badly.

This should give you a fairly good idea where the financiers and politicians are coming from these days. Even the so-called ‘liberals.’

Protect yourself.

 

 

Deep State, Big Lies, Organized Plunder, and the Power of the Moneyed Interests

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Posted on 5th September 2014 by Administrator in Economy |Politics |Social Issues

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Part 1

Part 2

Part 3

Part 4

QUOTES OF THE DAY

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Posted on 5th September 2014 by Administrator in Economy |Politics |Social Issues

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“Just as in previous boom-bust cycles, the seeds of destruction are sewn in the illusion of trend masquerading as truth, with momentum seeming to validate a widening gap between perception and economic reality. And just as in past cycles, the manager who doesn’t subscribe to the new rules, who goes against the grain of convention is viewed as out of touch or left behind.

Since the beginning of our fund’s drawdown in early 2012, a Bloomberg index of the “Worst Balance Sheet” companies of the S&P500 has returned to-date over +30% on an annualized basis. An MSCI index of the “Most-Shorted” companies of the Russell 3000—a proxy for the visibility of bad valuations, bad managements, and bad fundamentals—has also returned over +30% annualized. These perversions are even more pronounced within EMs, exacerbated by record fund outflows in the first half of 2014, exceeding even those of the 2008 crisis.

This dash for trash puts to shame even the speculative excesses of the dot.com era. This is a circus market rigged by HFT and other algorithmic traders who prey on the rational behavior of warm-blooded investors. They only serve to further undermine the integrity of public markets, which will ultimately bring about their rationalization.”

Andrew Cunagin, Rinehart Capital Partners LLC founder

 
“The Federal Reserve and the other public regulators are culpable for the carnival atmosphere in the US markets, in addition to the visceral and cynical pandering to greed which is the hallmark of the present day political class. At some point, someone must have the courage to stand, even if it is against the tide, for the rule of law.

These officials have taken the duties of their office and sworn to it, and thereby own the stewardship. They have systematically set the boundaries for the vital price discovery process of public markets, the protection of wealth, and of economic governance in order to favor a powerful few at the expense of their own obligations.

They cynically attempt to hide their malfeasance with a feigned ignorance and obfuscation. They pride themselves on their ability to deceive, to use words as a weapon against those that they are obliged to protect. They excuse their behavior by saying, ‘we did not know’ or ‘you did not do enough to stop us.’ By their example they sow the seeds of disorder and destruction.”

Jesse

THE LOOTING WILL CONTINUE UNTIL MORALE IMPROVES

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Posted on 2nd September 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jesse

“A man must always live by his work, and his wages must at least be sufficient to maintain him.” - Adam Smith

“The issue isn’t just jobs. Even slaves had jobs. The issue is wages.” - Jim Hightower

Some analysts are confusing higher wages with monetary stimulus. Nothing could be further from the truth, at least in the real world of today.

Monetary stimulus is what the Federal Reserve does, that is, increasing the money supply by expanding the monetary base. It is a non-organic growth of money.

I think it is a well-noted and oft-remarked upon feature that the monetary stimulus that the Fed is providing is being given directly and almost exclusive to the Banks, in order to shore up their damaged balance sheets and provide them an artificial stream of profits.

And of that stimulus, the bulk of it seems to be finding its way into financial speculation and a new bubble in paper assets, and the acquisition of more companies to build even greater monopolies.

Wage increases, that are not merely a secondary effect of a general monetary inflation, are indeed not useful, except that the workers at least keep pace with the rate of price inflation. But I don’t think that this is what anyone is recommending who talks about higher wages. The Fed is not an actor on that stage.

The currently imbalanced and distorted financial system is taking the lion’s share of all new growth, and continues to do so as it has been doing for the past twenty years. This cannot last.

When consumers purchase things, they must either use cash or credit. And to obtain the cash they can work more hours, or have more family members working. To obtain more credit, they can mortgage their house, and increase their debts.

We have seen the explosion of a consumer credit bubble in housing debt, facilitated and engineered by historic levels of financial fraud by the very Banks who are now taking their subsidies of monetary stimulus from the Fed. It happened almost six years ago, but the economy remains in ‘the new noe-feudal normal.’

At some point the long abused consumer says ‘enough’ and cuts back their purchasing to the barest of essentials. And the economy grows stagnant at home, which gives the moneyed interests a strong incentive to seek captive markets overseas. And so a new round of neo-colonialism is born. Which in turn creates its own sets of problems, lies, and economic distortions.

The data indicates that we are now, at long last, finally at that point.

And corporate profit margins are at new highs.

And the one percent has never been richer, or had more influence with the political class.

How much is enough for them? When will they be content? With them it is with wealth as it is with power.

‘Wir haben keine Hemmungen, und einen großen Magen.’

I think that the solution is rather obvious. We have been here before.

“After many requests on my part the Congress passed a Fair Labor Standards Act, what we call the Wages and Hours Bill. That Act –applying to products in interstate commerce — ends child labor, sets a floor below wages, and a ceiling over hours of labor.

Except perhaps for the Social Security Act, it is the most far-reaching, the most far-sighted program for the benefit of workers ever adopted here or in any other country. Without question it starts us toward a better standard of living and increases purchasing power to buy the products of farm and factory.

Do not let any calamity-howling executive with an income of $1,000.00 a day, who has been turning his employees over to the Government relief rolls in order to preserve his company’s undistributed reserves, tell you — using his stockholders’ money to pay the postage for his personal opinions — tell you that a wage of $11.00 a week is going to have a disastrous effect on all American industry.

Fortunately for business as a whole, and therefore for the Nation, that type of executive is a rarity with whom most business executives most heartily disagree…

Some of my opponents and some of my associates have considered that I have a mistakenly sentimental judgment as to the tenacity of purpose and the general level of intelligence of the American people.

I am still convinced that the American people, since 1932, continue to insist on two requisites of private enterprise, and the relationship of Government to it. The first is a complete honesty, a complete honesty at the top in looking after the use of other people’s money, and in apportioning and paying individual and corporate taxes (according to) in accordance with ability to pay. And the second is sincere respect for the need of all people who are at the bottom, all people at the bottom who need to get work — and through work to get a (really) fair share of the good things of life, and a chance to save and a chance to rise.

After the election of 1936 I was told, and the Congress was told, by an increasing number of politically — and worldly– wise people that I should coast along, enjoy an easy Presidency for four years, and not take the Democratic platform too seriously. They told me that people were getting weary of reform through political effort and would no longer oppose that small minority which, in spite of its own disastrous leadership in 1929, is always eager to resume its control over the Government of the United States.

Never in our lifetime has such a concerted campaign of defeatism been thrown at the heads of the President and the Senators and Congressmen as in the case of this Seventy-Fifth Congress. Never before have we had so many Copperheads among us — and you will remember that it was the Copperheads who, in the days of the Civil War, the War between the States, tried their best to make President Lincoln and his Congress give up the fight in the middle of the fight, to let the Nation remain split in two and return to peace — yes, peace at any price.

This Congress has ended on the side of the people. My faith in the American people — and their faith in themselves — have been justified. I congratulate the Congress and the leadership thereof and I congratulate the American people on their own staying power…

You will remember that from March 4, 1933 down to date, not a single week has passed without a cry from the opposition, a small opposition, a cry ‘to do something, to say something, to restore confidence.’ There is a very articulate group of people in this country, with plenty of ability to procure publicity for their views, who have consistently refused to cooperate with the mass of the people, whether things were going well or going badly, on the ground that they required more concessions to their point of view before they would admit having what they called “confidence.”

These people demanded ‘restoration of confidence’ when the banks were closed — and demanded it again when the banks were reopened.

They demanded ‘restoration of confidence’ when hungry people were thronging (the) our streets — and demanded it again now when the hungry people were fed and put to work.

They demanded ‘restoration of confidence’ when droughts hit the country — and demanded it again now when our fields are laden with bounteous yields and excessive crops.

They demanded ‘restoration of confidence’ last year when the automobile industry was running three shifts day and night, turning out more cars than the country could buy — and they are demanding it again this year when the industry is trying to get rid of an automobile surplus and has shut down its factories as a result.

But, my friends, it is my belief that many of these people who have been crying aloud for ‘confidence’ are beginning today to realize that that hand has been overplayed…”

Franklin D. Roosevelt, Fireside Chat June 24, 1937

Although they rarely mention it in the history books, it is ironic that around this time the moneyed interests and neo-cons of Roosevelt’s day were fomenting a domestic revolution, and investing heavily in European fascists whom they hoped would be obedient gangsters for crony capitalism.

 

THE NEW NORMAL

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Posted on 26th August 2014 by Administrator in Economy |Politics |Social Issues

“Now listen to the first three aims of the corporatist movement in Germany, Italy and France during the 1920s. These were developed by the people who went on to become part of the Fascist experience:

  1. shift power directly to economic and social interest groups;
  2. push entrepreneurial initiative in areas normally reserved for public bodies;
  3. obliterate the boundaries between public and private interest — that is, challenge the very idea of the public interest.

This sounds like the official program of most contemporary Western governments.”

John Ralston Saul

 

Via Jesse

A Warning From 1995 About the Repeal of Glass-Steagall

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Posted on 22nd August 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jesse

 

Here is a reprint of a warning that was published in the NY Times in 1995 about Robert Rubin’s and Alan Greenspan’s misguided attempts to overturn Glass-Steagall.
Any reasonably informed student of economic history ought to have understood this argument.
There was a well-funded, decade long campaign led by the Banks to overturn Glass-Steagall.  A lot of propaganda was written, and lot of political connections were made, and a lot of money was spent.
Too many were willfully blind. Some through their devotion to utopian ideology.  Others through devotion to their careers.  And even more just kept their heads down and hid their noses in their books and reams of irrelevant data.
And for the most part they still are, with many caught in a credibility trap.
Until the music stops.
NY Times
End Bank Law and Robber Barons Ride Again
 Sunday, March 5, 1995
To the Editor:
Re “For Rogue Traders, Yet Another Victim” (Business Day, Feb. 28) and your same-day article on Treasury Secretary Robert E. Rubin’s proposal to eliminate the legal barriers that have separated the nation’s commercial banks, securities firms and insurance companies for decades: The American Bankers Association, Senator Alfonse M. D’Amato, Representative Jim Leach and Treasury Secretary Rubin are gravely misguided in their quest to repeal the Glass-Steagall Act.
Their contention that insurance companies, commercial banks and securities firms should be freed from legislative obstructions is predicated on fallacious, historically inaccurate statements. If the Baring Brothers failure does not give them pause, a history lesson is our only hope before the Administration and bank lobby iron out their differences and set the economy back 90 years.
The argument that American financial intermediaries will become “more efficient and more internationally competitive” is false. The American financial system is the most stable, most profitable and most dynamic in the world.
The notion that Glass-Steagall prevents American financial intermediaries from fulfilling their utmost potential in a global marketplace reflects inadequate understanding of the events that precipitated the act and the similarities between today’s financial marketplace and the market nearly a century ago.
Although Glass-Steagall was enacted during the Great Depression, it was put in place because the Aldrich-Vreeland Act of 1908, the blue-sky laws following 1910 and the Federal Reserve System of 1913 failed to keep the concentration of financial power in check.The investment climate that ultimately led to Glass-Steagall was one filled with emerging markets, interlocking control of productive resources and widespread bank ownership of securities.
Ever since railroad securities began driving secondary capital markets in the late 1860′s, “emerging markets” have existed for investors looking for high-yield opportunities, and banks have been primary agents in industrial development. In the 19th century, emerging markets were scattered throughout the United States, and capital flowed into them from New York, Boston, Philadelphia and London. In the same way, capital flows from the United States, Japan and England to Latin America and the Pacific rim — today we just have more terms to define the market mechanisms.
The economy and financial markets were even more interconnected in the 19th century than now. Commercial and investment banks could accept deposits, issue currency, underwrite securities and own industrial enterprises. With Glass-Steagall lifted, we will chart a course returning us to that environment.
J. P. Morgan and Andrew Mellon made their billions through inter locking directorates and outright ownership of hundreds of nationally prominent enterprises. Glass-Steagall is one crucial piece of a litany of legislation designed to place checks and balances on the concentration of financial resources. To repeal it would be tantamount to bringing back the days of the robber barons.
The unbridled activities of those gifted financiers crumbled under the dynamic forces of the capital marketplace. If you take away the checks, the market forces will eventually knock the system off balance.
MARK D. SAMBER
Stamford, Conn.
Feb. 28, 1995
The writer is a management consultant specializing in business history.