Category Archives: Economy

Reverse Robin Hood: Six Billion Dollar Businesses Preying on Poor People

Bank of Japan’s shock stimulus further destabilizes global economy

By Nick Beams

3 November 2014

It is indicative of the breakdown of the global capitalist economy that measures taken by the world’s major central banks to boost their own national economies contribute to growing instability internationally.

Last Wednesday, the US Federal Reserve announced the ending of its program of asset purchases as a step towards a return to a more normal monetary regime. But one of the likely effects of this move will be to promote the shift of volatile financial capital out of so-called emerging markets that have been the main source of economic growth since the financial crisis of 2008.

Likewise, Friday’s shock decision by the Bank of Japan to increase its purchases of government bonds in an attempt to lift the country out of its deflationary spiral, moving in the opposite direction to the Fed, will impact adversely on economies in the Asian region, notably South Korea and China, and will also hit the euro zone.

One of the immediate effects of the stepped-up Japanese version of “quantitative easing” will be to further push down the value of the yen, which has fallen markedly in the past three years. The currency hit a seven-year low against the dollar last Friday and has fallen 40 percent against the dollar, euro and Korean won since mid-2012, and 50 percent against the Chinese yuan.

Hans Redeker, who is in charge of Morgan Stanley’s foreign exchange strategy, told the London-based Telegraph that Japan was exporting its deflationary pressures to other countries.

“It is not clear whether other countries can cope with this,” he said. “There have been a lot of profit warnings in Korea. The entire region is already in difficulties with overcapacity and a serious debt overhang. Dollar-denominated debt has risen exponentially to $2.5 trillion from $300 billion in 2005, and credit efficiency is declining.”

Other analysts point to the danger of currency wars as Japan seeks to get out of its deflationary trap by exporting deflation to other countries.

On Friday, following a narrow 5-4 decision on the Bank of Japan governing board, bank Governor Haruhiko Kuroda announced that the central bank would buy enough assets, mainly government bonds, to lift its expansion of the monetary base from the present level of between 60 and 70 trillion yen ($539-$629 billion) to 80 trillion a year, equivalent to $721 billion.

The decision came as a shock because previously Kuroda had claimed that the program of asset purchases, initiated in April 2013 as part of “Abenomics”, was working. But data on the Japanese economy indicate that after providing an initial boost, asset purchasing has failed to break the deflationary cycle.

After rising to 1.5 percent in April, Japan’s core consumer inflation rate dropped to just 1 percent in September, casting doubt over the Bank of Japan’s goal of reaching a 2 percent inflation rate by next April. The economy is experiencing little or no growth and contracted by more than 7 percent in the second quarter, largely as a result of an April increase in the country’s consumption tax from a rate of 5 percent to 8 percent. The rise more than cancelled out a growth rate of over 6 percent in the first three months of the year.

While growth is expected to resume, the rebound in the third quarter is expected to be lower than previously anticipated, with Bank of Japan economists halving their own growth forecasts for the 2014 fiscal year to just 0.5 percent. Weak production and retail data for July and August have exacerbated fears of lower growth, with one source close to Prime Minister Abe telling the Financial Times that “all the economic indicators are going south.”

Announcing the central bank decision, Kuroda said that Japan, which is the world’s third largest economy, had reached a “critical moment” in its struggle to break the grip of deflation. “There was a risk that despite having made steady progress, we could face a delay in eradicating the public’s deflation mindset,” he said.

Relative to the size of the Japanese economy, the central bank’s latest measures are even bigger than the asset-purchasing program of the US Fed. The Bank of Japan will now increase its balance sheet by the equivalent of 15 percent per annum. This is three times the rate of increase under the Fed’s quantitative easing program.

Under its expanded market intervention, the Bank of Japan will now buy the equivalent of more than twice the new bonds issued by the government to finance its fiscal debt.

This has raised concerns about the stability of public finances. In order to allay them, the government, with Kuroda’s backing, appears set to proceed in October with the second tranche of the consumption tax rise, from 8 percent to 10 percent. If the rise is cancelled, or even delayed, questions will begin to be raised about the financing of Japan’s government debt, which, at $11 trillion, or 240 percent of Japan’s gross domestic product, is the highest of any country in the world.

However, a further increase in the consumption tax will dampen economic activity in Japan, further adding to the deflationary pressures that the central bank is trying to counteract through its stepped-up asset-purchasing program.

So far, government debt has been financed by internal sources, including the country’s massive insurance funds, but analysts maintain there is a limit to how far this process can go without causing a crisis.

The narrowness of the vote on the bank’s governing board, in contrast to previous decisions for which Kuroda has secured a large majority, indicates that these concerns have extended to the Bank of Japan itself. Bank officials and observers of the central bank said they could not recall such a narrow vote in the bank’s history.

In another reflection of the growing irrationality, not to speak of insanity, prevailing in the global economy, while virtually all analysts were noting that the Bank of Japan move pointed to mounting problems, the financial markets indulged in an orgy of celebration.

Last Friday, US stock prices surged, with both the Dow and the S&P 500 closing at record highs as a result, at least in part, of the Bank of Japan’s decision. Earlier in the day, Japan’s Nikkei index had risen by nearly 5 percent to reach its highest level in 7 years. These results further indicate that stock markets have become global casinos in which the “house”, in the form of the major central banks, supplies endless amounts of cheap cash to finance speculation. However, these measures themselves have the potential to set off a financial crisis.

As Financial Times columnist John Authers noted: “As the response by share prices shows, markets like QE (Quantitative Easing). But the broader perspective is alarming. Sharp shifts in currencies are perilous, particularly when so many different countries attempt to perform the same trick at the same time.”

The impact of the Japanese move is certain to be under discussion at the next meeting of the European Central Bank (ECB), scheduled for Thursday, where Governor Mario Draghi will be under increased pressure from financial markets to step up his own version of quantitative easing.

In a comment published on Monday, Washington Post economic commentator Robert Samuelson started with a question: “Can Mario Draghi save Europe?” The fact that the question was even being raised, he wrote, was an “unsettling reminder” that the European crisis, once declared to be over, was anything but. Europe resembled a patient with a chronic condition, sometimes improved, sometimes worse, whose “illness persists and constantly threatens to cause acute, possibly catastrophic crisis.”

Europe’s economy has experienced two recessions since 2008 and is considered to be on the verge of a third. Output in the euro zone is still 2 percent below where it was in 2008 and investment has fallen 15 percent.

These problems will only have been worsened by last week’s decisions by the Japanese central bank.

A deepening global economic and financial breakdown

War Creates Massive Debt and Makes the Banks Rich

Dead Dollar Walking: The Facts About US Government Debt

Video By Stefan Molyneux

Global government debt has reached over one hundred trillion dollars. But where has all of that money really gone?

There will be no economic recovery. Prepare yourself accordingly.

Posted March 20, 2014


Financial Explosion: Global Debt Crosses the $100 Trillion Mark

Has Risen by $30 Trillion Since 2007; $27 Trillion Is “Foreign-Held”

By Tyler Durden

Global Research, March 12, 2014

money-2While the US may be rejoicing its daily stock market all time highs day after day, it may come as a surprise to many that global equity capitalization has hardly performed as impressively compared to its previous records set in mid-2007. In fact, between the last bubble peak, and mid-2013, there has been a $3.86 trillion decline in the value of equities to $53.8 trillion over this six year time period, according to data compiled by Bloomberg. Alas, in a world in which there is no longer even hope for growth without massive debt expansion, there is a cost to keeping global equities stable (and US stocks at record highs): that cost is $30 trillion, or nearly double the GDP of the United States, which is by how much global debt has risen over the same period. Specifically, total global debt has exploded by 40% in just 6 short years from  2007 to 2013, from “only” $70 trillion to over $100 trillion as of mid-2013, according to the BIS’ just-released quarterly review.

It should come as no surprise to anyone by now, but the only reason why global stocks haven’t plummeted since the Lehman collapse is simple: governments have become the final backstop for onboarding risk, with a Central Bank stamp of approval – in other words, the very framework of the fiat system is at stake should global equity levels collapse. The BIS admits as much: “Given the significant expansion in government spending in recent years, governments (including central, state and local governments) have been the largest debt issuers,” according to Branimir Gruic, an analyst, and Andreas Schrimpf, an economist at the BIS.

It should also come as no surprise that courtesy of ZIRP and monetization of debt by every central bank, debt has itself become money regardless of duration or maturity (although recent taper tantrums have shown what will happen once rates start rising across the curve again), explaining the mindblowing tsunami of new debt issuance, which will certainly never be repaid, and whose rolling will become impossible once interest rates rise. But of course, under central planning that is not allowed. As Bloomberg reminds us, marketable U.S. government debt outstanding has surged to a record $12 trillion, up from $4.5 trillion at the end of 2007,  according to U.S. Treasury data compiled by Bloomberg. Corporate bond sales globally jumped during the period, with issuance totaling more than $21 trillion, Bloomberg data show.

And as we won’t tire of pointing out, China’s credit expansion over this period is easily the most important, and overlooked one. Which is why with China out of the epic debt issuance picture, and with the Fed tapering, all bets are slowly coming off.

Bloomberg also comments, humorously, as follows: “concerned that high debt loads would cause international investors to avoid their markets, many nations resorted to austerity measures of reduced spending and increased taxes, reining in their economies in the process as they tried to restore the fiscal order they abandoned to fight the worldwide recession.” Of course, once gross government corruption and incompetence made all attempts at austerity futile, and with even the austere nations’ debt levels continuing to breach record highs confirming there was never any actual austerity to begin with, the push to pretend to reign debt in has finally faded, and the entire world is once again engaged – at breakneck speed – in doing what caused the great financial crisis in the first place: the issuance of record amounts of unsustainable debt.

All of the above is known. What may not be known is just who is issuing, and respectively, purchasing, this global debt-funded spending spree, especially in a world in which one’s debt is another’s asset. Here is the BIS’s answer to that question:

Cross-border investments in global debt markets since the crisis

Branimir Grui? and Andreas Schrimpf

Global debt markets have grown to an estimated $100 trillion (in amounts outstanding) in mid-2013 (Graph C, left-hand panel), up from $70 trillion in mid-2007. Growth has been uneven across the main market segments. Active issuance by governments and non-financial corporations has lifted the share of domestically issued bonds, whereas more restrained activity by financial institutions has held back international issuance (Graph C, left-hand panel).

Not surprisingly, given the significant expansion in government spending in recent years, governments (including central, state and local governments) have been the largest debt issuers (Graph C, left-hand panel). They mostly issue debt in domestic markets, where amounts outstanding reached $43 trillion in June 2013, about 80% higher than in mid-2007 (as indicated by the yellow area in Graph C, left-hand panel). Debt issuance by non-financial corporates has grown at a similar rate (albeit from a lower base). As with governments, non-financial corporations primarily issue domestically. As a result, amounts outstanding of non-financial corporate debt in domestic markets surpassed $10 trillion in mid-2013 (blue area in Graph C, left-hand panel). The substitution of traditional bank loans with bond financing may have played a role, as did investors’ appetite for assets offering a pickup to the ultra-low yields in major sovereign bond markets.

Financial sector deleveraging in the aftermath of the financial crisis has been a primary reason for the sluggish growth of international compared to domestic debt markets. Financials (mostly banks and non-bank financial corporations) have traditionally been the most significant issuers in international debt markets (grey area in Graph C, left-hand panel). That said, the amount of debt placed by financials in the international market has grown by merely 19% since mid-2007, and the outstanding amounts in domestic markets have even edged down by 5% since end-2007.

Who are the investors that have absorbed the vast amount of newly issued debt? Has the investor base been mostly domestic or have cross-border investments grown at a similar pace to global debt markets? To provide a perspective, we combine data from the BIS securities statistics with those of the IMF Coordinated Portfolio Investment Survey (CPIS). The results of the CPIS suggest that non-resident investors held around $27 trillion of global debt securities, either as reserve assets or in the form of portfolio investments (Graph C, centre panel). Investments in debt securities by non-residents thus accounted for roughly one quarter of the stock of global debt securities, with domestic investors accounting for the remaining 75%.

The global financial crisis has left a dent in cross-border portfolio investments in global debt securities. The share of debt securities held by cross-border investors either as reserve assets or via portfolio investments (as a percentage of total global debt securities markets) fell from around 29% in early 2007 to 26% in late 2012. This reversed the trend in the pre-crisis period, when it had risen by 8 percentage points from 2001 to a peak in 2007. It suggests that the process of international financial integration may have gone partly into reverse since the onset of the crisis, which is consistent with other recent findings in the literature.

This could be temporary, though. The latest IMF-CPIS data indicate that cross-border investments in debt securities recovered slightly in the second half of  2012, the most recent period for which data are available.

The contraction in the share of cross-border holdings differed across countries and regions (Graph C, right-hand panel). Cross-border holdings of debt issued by euro area residents stood at 47% of total outstanding amounts in late 2012, 10 percentage points lower than at the peak in 2006. A similar trend can be observed for the United Kingdom. This suggests that the majority of new debt issued by euro area and UK residents has been absorbed by domestic investors. Newly issued US debt securities, by contrast, were increasingly held by cross-border investors (Graph C, right-hand panel). The same is true for debt securities issued by borrowers from emerging market economies. The share of emerging market debt securities held by cross-border investors picked up to 12% in 2012, roughly twice as high as in 2008. *

Source: BIS

John Perkins : The Economic Hitmen


A great illustration on how corporations take control of countries, and how capitalism drives the expansion of the Military Industrial Complex. Made by Studio Joho who have allowed me to upload their video. Check out their website –

Posted November 28, 2013

The Money Changers Serenade: A New Plot Hatches

By Paul Craig Roberts

November 23, 2013 “Information Clearing House –  Former Treasury Secretary Timothy Geithner, a protege of Treasury Secretaries Rubin and Summers, has received his reward for continuing the Rubin-Summers-Paulson policy of supporting the “banks too big to fail” at the expense of the economy and American people. For his service to the handful of gigantic banks, whose existence attests to the fact that the Anti-Trust Act is a dead-letter law, Geithner has been appointed president and managing director of the private equity firm, Warburg Pincus and is on his way to his fortune.

A Warburg in-law financed Woodrow Wilson’s presidential campaign. Part of the reward was Wilson’s appointment of Paul Warburg to the first Federal Reserve Board. The symbiotic relationship between presidents and bankers has continued ever since. The same small clique continues to wield financial power.

Geithner’s career is illustrative. In the 1980s, Geithner worked for Kissinger Associates. In the mid to late 1990s, Geithner served as a deputy assistant Treasury secretary. Under Rubin and Summers he moved up to undersecretary of the Treasury.

From the Treasury he went to the Council on Foreign Relations and from there to the International Monetary Fund (IMF). From there he was appointed president of the Federal Reserve Bank of New York, where he worked to make banks more profitable by allowing higher ratios of debt to capital, thus contributing to the financial crisis.

Geithner arranged the sale of the failed Wall Street firm of Bear Stearns, helped with the taxpayer bailout of AIG, and rejected saving Lehman Brothers from bankruptcy in order to create the crisis atmosphere needed to more fully subordinate US economic policy to the needs of the few large banks.

Rubin, a 26-year veteran of Goldman Sachs, was rewarded by Citibank for his service to the banks while Treasury Secretary with a $50 million compensation package in 2008 and $126,000,000 between 1999 and 2009.

When a person becomes a Treasury official it is made clear that the choice is between serving the banks and becoming rich or trying to serve the public and becoming poor. Few make the latter choice.

As MIchael Hudson has informed us, the goal of the financial sector has always been to convert all income, from corporate profits to government tax revenues, to the service of debt. From the bankers standpoint, the more debt the richer the bankers. Rubin, Summers, Paulson, Geithner, and now banker Treasury Secretary Jack Lew faithfully serve this goal.

The Federal Reserve describes its policy of Quantitative Easing — the creation of new money with which the Fed purchases Treasury debt and mortgage backed securities — as a low interest rate policy in order to stimulate employment and economic growth. Economists and the financial media have parroted this cover story.

In contrast, I have exposed QE as a scheme for pumping profits into the banks and boosting their balance sheets. The real purpose of QE is to drive up the prices of the debt-related derivatives on the banks’ books, thus keeping the banks with solvent balance sheets.

Writing in the Wall Street Journal (“Confessions of a Quantitative Easer,” November 11, 2013), Andrew Huszar confirms my explanation to be the correct one. Huszar is the Federal Reserve official who implemented the policy of QE. He resigned when he realized that the real purposes of QE was to drive up the prices of the banks’ holdings of debt instruments, to provide the banks with trillions of dollars at zero cost with which to lend and speculate, and to provide the banks with “fat commissions from brokering most of the Fed’s QE transactions.” ( )

This vast con game remains unrecognized by Congress and the public. At the IMF Research Conference on November 8, 2013, former Treasury Secretary Larry Summers presented a plan to expand the con game.

Summers says that it is not enough merely to give the banks interest free money. More should be done for the banks. Instead of being paid interest on their bank deposits, people should be penalized for keeping their money in banks instead of spending it.

To sell this new rip-off scheme, Summers has conjured up an explanation based on the crude and discredited Keynesianism of the 1940s that explained the Great Depression as a problem caused by too much savings. Instead of spending their money, people hoarded it, thus causing aggregate demand and employment to fall.

Summers says that today the problem of too much saving has reappeared. The centerpiece of his argument is “the natural interest rate,” defined as the interest rate at which full employment is established by the equality of saving with investment. If people save more than investors invest, the saved money will not find its way back into the economy, and output and employment will fall.

Summers notes that despite a zero real rate of interest, there is still substantial unemployment. In other words, not even a zero rate of interest can reduce saving to the level of investment, thus frustrating a full employment recovery. Summers concludes that the natural rate of interest has become negative and is stuck below zero.

How to fix this? The way to fix it, Summers says, is to charge people for saving money. To avoid the charges, people would spend the money, thus reducing savings to the level of investment and restoring full employment.

Summers acknowledges that the problem with his solution is that people would take their money out of banks and hoard it in cash holdings. In other words, the cash form of money provides consumers with a freedom to save that holds down consumption and prevents full employment.

Summers has a fix for this: eliminate the freedom by imposing a cashless society where the only money is electronic. As electronic money cannot be hoarded except in bank deposits, penalties can be imposed that force unproductive savings into consumption.

Summers’ scheme, of course, is a harebrained one. With governments running huge deficits, who would purchase bonds at negative interest rates? How would pension and retirement funds operate? Would they also be subject to an annual percentage confiscation?

We know that the response of consumers to the long term decline in real median family income, to the loss of jobs from labor arbitrage across national borders (jobs offshoring), to rising homelessness, to cuts in the social safety net, to the transformation of their full time jobs to part time jobs (employers’ response to Obamacare), has been to reduce their savings rate. Indeed, few have any savings at all. The US personal saving rate is currently 2 percentage points, about 30%, below the long term average. Retired people, unable to earn any interest on their savings from the Fed’s zero interest rate policy, are being forced to draw down their savings in order to pay their bills.

Moreover, it is unclear whether the savings rate is an accurate measure or merely a residual of other calculations. With so many people having to draw down their savings, I wouldn’t be surprised if an accurate measure showed the personal savings rate to be negative.

But for Summers the plight of the consumer is not the problem. The problem is the profits of the banks. Summers has the solution, and the establishment, including Paul Krugman, is applauding it. Once the economy officially turns down again, watch out.

Copyright © 2013. The Trends Research Institute

Share selloff points to new crisis

The Rational Market Myth

What’s Really Driving the Crashing Markets?

The Big Plunge
By Mike Whitney
June 21, 2013 “Information Clearing House – Normally, stocks don’t fall off a cliff unless the economic data suddenly turns south or there are signs of an emerging crisis, like a run on the shadow banking system or threat to Middle East oil supplies. But neither of these played a part in this week’s equities massacre where the Dow Jones Industrial Average (DJIA) plunged 560-plus points in just two sessions and indices around the globe dipped deep into the red. What triggered this week’s selloff was an announcement from the Federal Reserve that it was planning to scale down it’s asset purchases (QE) in the latter part of 2013, and probably end the program sometime in the middle of 2014. Here’s the offending paragraph in the FOMC’s statement that lit the fuse:
“If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year. And if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear. In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7%, with solid economic growth supporting further job gains, a substantial improvement from the 8.1% unemployment rate that prevailed when the committee announced this program.” (FOMC)
Now–unless you think that Fed chairman Ben Bernanke is a complete idiot–then you can assume that he knew what the reaction on Wall Street would be. After all, stock prices have more than doubled in the last 4 years mainly due to the Fed’s lavish liquidity spree. So any announcement that the program is “going away” was sure to send traders racing for the exits. Which it did. Traders were not having a “hissy fit” as many in the financial media have said. They were acting rationally. Absent the Fed’s turbo-charged monetary stimulus, stocks will go down, there’s no question about it. Current prices do not reflect fundamentals nor do they reflect the true health of the economy. They reflect a couple trillion dollars worth of UST and MBS purchases that have goosed stock prices dramatically. Traders know this, which is why they cashed in and walked away when Bernanke announced the prospective end of the program. They acted rationally.
But why would Bernanke want to throw a bucket of cold water on the markets now? Is it because he really believes that the economy is gaining momentum and the labor market is steadily improving?
Hell no, that’s pure baloney. Again, Bernanke is not a moron. He sees what everyone else sees, that the headline unemployment number (7.6%) is rubbish that doesn’t reveal the rot beneath the surface; the abysmal participation rate, the sharp uptick in part-time workers, and the lousy starvation-wage positions that have replaced the good paying jobs. Trust me on this; Bernanke knows how to read a freaking jobs report. He knows the economy is crap and that people still can’t find work. Just look at this clip from the SF Fed’s own report on the condition of the economy. It will help you see that Bernanke really doesn’t believe the green shoots hype at all:
“Federal fiscal policy during the recession was abnormally expansionary by historical standards. However, over the past 2½ years it has become unusually contractionary as a result of several deficit reduction measures passed by Congress. During the next three years, we estimate that federal budgetary policy could restrain economic growth by as much as 1 percentage point annually beyond the normal fiscal drag that occurs during recoveries….
CBO projections and our estimate based on the countercyclical history of fiscal policy suggest that federal budget trends will weigh on growth much more severely over the next three years. The federal deficit is projected to decline faster than normal over the next three years, largely because tax revenue is projected to rise faster than usual. …The rapid decline in the federal deficit implies a drag on real GDP growth about 1 percentage point per year larger than the normal drag from fiscal policy during recoveries.” (“Fiscal Headwinds: Is the Other Shoe About to Drop?”, FRBSF)
See? So things are bad and they’re going to get worse. This isn’t a secret. Fiscal policy is DESIGNED to make things worse. It’s deliberate! It’s all there in black and white, read it again.
So what’s really going on here? Why is Bernanke pretending that the future is looking so rosy, when the exact opposite is closer to the truth? Why is he announcing the end of a program that may never end? Just look at the rate of inflation, fer chrissakes! We are in a deflationary cycle. Inflation has been dropping for 3 straight months and–according to Bloomberg–” is at 53-year low, the lowest inflation since JFK was in office.” That means that the Fed will not hit its 2.5% inflation target and the bond buying will continue indefinitely. Guaranteed. Now, no matter how stupid or incompetent you may feel Bernanke is, I assure you, the Fed watches inflation like a hawk, and when the arrow starts to point down, they do everything in their power to get things going in the right direction again. They are always looking for the sweet spot because that’s the rate at which their constituents can rake in the biggest profits. In other words, they take inflation (or deflation) seriously.
But if that’s so, then why did Bernanke hardly mention inflation in the FOMC’s announcement?
He didn’t mention it because he’s trying to buffalo investors into thinking that QE is going to end sometime in the near future. But how can he end it, after all, unemployment is still high (and likely to go higher when the budget cuts kick in), GDP and output are weak, wages are flatlining, capital investment is non existent, corporations and financial institutions have money piled up around their eyeballs with nothing to invest in, middle class households have seen nearly half their wealth wiped out in the last five years, and the banks have a couple trillion more in deposits than loans because no one in their right mind is borrowing money in the middle of an effing Depression. If any of this sounds like an economic rebound, then maybe Bernanke is actually telling the truth and really plans to terminate QE next year. But I think that’s pretty bad bet, all things considered.
So let’s cut to the chase: The reason Pavlov Bernanke took away the punch bowl on Thursday and put markets into a tailspin, was because stocks are overheating and because his goofy printing operations have generated all kinds of risky behavior. Keep in mind, that it was Bernanke who said that he thought that goosing stock prices would create the “wealth effect” that would lead to a broader recovery in the real economy. Just as it was Bernanke who signaled that he would keep stocks from breaking lower. (The “Bernanke Put”). In other words, investors have just been following their Master’s lead, which is why they loaded up on stocks to begin with. And that’s why junk bond yields dropped to record lows. And that’s why margin debt climbed to record highs. And that’s why all the big corporations have been buying back their own shares hand over fist. And that’s why the financial markets are riddled with bubbles. It’s because Bernanke tacitly implied that he would support rising stock prices with lavish infusions of funny money NO MATTER WHAT.
Well, guess what? Now Bernanke is worried. He’s worried that the real economy is still in the doldrums while bubbles are popping up everywhere in the financial markets; in stocks and bonds, CLOs, CDOs, MBS and every other dodgy debt instrument, derivative or swap. It’s all getting very frothy thanks to the Bernanke.
So, how does the Fed chair intend to “contain” the emergent asset bubble until he retires at the end of the year and returns to blissful academia?
He’s going to keep doing what he’s doing right now; cherry-picking the data so he can rattle Wall Street’s cage every so often and keep stocks from zooming too far into the stratosphere. That’s the plan. Of course, he could just tell the truth–that QE has been great for Wall Street but done jack for anyone else. But I wouldn’t count on that.
Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. Whitney’s story on declining wages for working class Americans appears in the June issue of CounterPunch magazine. He can be reached at
This article was originally published at Counterpunch

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Panic deepens on world financial markets

By Andre Damon 
21 June 2013
Global stocks plunged Thursday in the biggest one-day sell-off so far this year, after Federal Reserve Chairman Ben Bernanke said the US central bank might consider paring back its cash infusions into the financial markets within the next six months.
The panic in stock and bond markets sparked by the remarks of Bernanke, who on Wednesday suggested the Fed might start winding down its $85 billion per month in asset purchases, was compounded by the release of data on Thursday showing that Chinese manufacturing activity hit its lowest level in nine months.
These developments point to two fundamental facts about the current economic situation: the continuing slump in the real economy and the extreme dependence of global financial markets on virtually free credit from the Federal Reserve and other central banks.
In the United States, the Dow Jones Industrial Average fell 353 points, or 2.34 percent, in its biggest drop since November 2011. This followed a 206 point drop on Wednesday. The Standard & Poor’s 500 index fell by 2.5 percent, and the Nasdaq Composite Index fell by 2.3 percent. All ten sectors of the S&P 500 fell by more than two percent.
The drop in US financial markets followed a panicky sell-off in Europe and Asia earlier in the day. The United Kingdom’s FTSE 100 index lost 2.98 percent and the German Dax lost 3.28 percent. In Asia, Hong Kong’s Hang Seng index dropped by 2.88 percent and Japan’s Nikkei fell by 1.1 percent.
Asian markets declined further at their opening Friday morning, with the Nikkei down by 2 percent, the Hang Seng down by 1.75 percent, and the Australian All Ordinaries index down by 0.70 percent in early trading.
All major commodities were hit by Thursday’s sell-off, with gold futures dropping below $1,300 per ounce, the lowest level in two-and-a-half years. Silver dropped by 9.7 percent during the day before recovering slightly, hitting its lowest level since 2010. Prior to Thursday’s sell-off, gold prices were already down by 18 percent, in what may become the first yearly decline in the value of gold since 2000.
Every asset class, including bonds of every duration and quality, fell sharply. Yields on ten-year US Treasury notes went as high as 2.47 percent during the day, up from 1.61 percent in May, before retreating as the stock sell-off intensified.
Emerging market currencies continued to plunge against the dollar. The Indian rupee fell 2 percent to a new low, and the Turkish lira fell 1.8 percent. The US dollar rose more than one percent against the Korean, Russian, Polish and South American currencies.
A preliminary reading of HSBC’s Purchasing Managers’ Index (PMI) for China, a measure of manufacturing activity, fell to 48.3 this month, down from 49.2 in May. This was the lowest reading in nine months. The Chinese economy slowed to a growth rate of 7.7 percent in the first quarter and is expected to continue slowing in the second.
The Markit Flash euro zone PMI, also released Thursday, while slightly improved, nevertheless indicates that the European economy remains stagnant.
The economic slowdown and bond sell-off have sparked a credit crunch in China, where overnight inter-bank lending rates hit 13.1 percent, the highest on record and up from the previous day by 5.98 percentage points.
Data in the United States was little better. The day after Fed Chairman Bernanke reported an improved outlook for the US economy and the jobs market, the Labor Department said initial applications for unemployment benefits rose unexpectedly last week by 18,000, to 354,000.
The plunging bond market hit junk bonds especially hard, raising the prospect of troubled companies becoming insolvent. The iShares iBoxx High Yld Corp Bond, the largest junk bond fund, fell 1.5 percent.
“All these people who lined up to buy high-yield bonds, only looking to get that extra yield and not paying much attention to the credit quality of these companies, are now just trying to get out,” Adrian Miller of GMP Securities told the Financial Times .
Bond prices have been plunging since May 22, when Bernanke indicated in congressional testimony that the Fed might slow asset purchases “in the next few meetings” if economic conditions continued to improve.
In revised economic projections released Wednesday, the Fed’s policy-making Federal Open Market Committee (FOMC) lowered its 2013 unemployment rate forecast from 7.4 percent to 7.25 percent and concluded that economic growth would be 2.45 percent in 2013 and 3.25 percent in 2014, significantly higher than current market expectations.
While the Fed’s official projections were upbeat, significant sections of the US ruling class are increasingly concerned about signs of a global slump, particularly in Asia and Europe, and the specter of deflation in the US economy. Wall Street, on the other hand, looks with dread on any significant improvement on economic growth and employment prospects, for fear the Fed will turn off the spigot of limitless and ultra-cheap cash, which is subsidizing super profits and rising executive pay packages.
Behind the Federal Reserve’s hints that it may wind down its asset-purchasing program lie worries that the vast amounts of cash that have been pumped into the financial system have created a speculative bubble of vast proportions, threatening a financial collapse that could dwarf that of 2008.
The fall in global markets on Wednesday and Thursday is an expression of the fear and panic that predominate on financial markets amid mounting concerns that the asset bubble is beginning to burst.
The market panic of the past two days demonstrates that none of the underlying issues that led to the 2008 financial meltdown have been addressed, let alone resolved. Far from engineering any real economic recovery, governments and central banks have merely papered over the contradictions in the global economy while further enriching the financial elite, on the one hand, and brutally attacking the working class, on the other.
The response of the ruling class to the latest eruption of the financial crisis will be to intensify the assault on social programs and workers’ jobs, wages and pensions.

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Global stock sell-off amidst signs of deepening slump

By Andre Damon 
6 June 2013
Global stock markets plunged Wednesday following the release of negative economic indicators pointing to a deepening slump in the United States, Europe and Asia and statements by US Federal Reserve officials suggesting a pull-back in monetary stimulus.
Japan’s stock market in particular, which had soared as a result of the Bank of Japan’s massive yen-printing program, suffered a sharp sell-off, falling 3.8 percent on Wednesday. The Nikkei Index was up 80 percent over the past year before it plunged more than 15 percent in the last ten trading days. Wednesday marked the index’s fifth daily fall of over three percent in two weeks.
The Japanese sell-off was followed by further stock losses in Europe, where the British FTSE 100 fell by 2 percent, the French CAC 40 declined 1.9 percent, the German DAX dropped 1.2 percent and the pan-European Eurofirst 300 index fell 1.5 percent.
In the United States, the Dow Jones Industrial Average lost 215 points, or 1.42 percent, closing below 15,000 for the first time in a month. The index has posted losses in four out of the past six trading days. The Standard and Poor’s 500 Index fell 21 points, or 1.3 percent, while the NASDAQ was down 43 points, or 1.27 percent.
The extreme volatility in financial markets reflects the artificial and unsustainable character of the rise in asset prices, which is entirely dependent on the continued pumping of trillions of dollars of virtually free credit into the banking system by the Federal Reserve and other major central banks. Meanwhile, the real economy in the US, Europe and much of Asia continues to stagnate or contract under the impact of austerity measures aimed at impoverishing the working class.
Wednesday’s sell-off came amid warnings by Wall Street insiders that the combination of vast cash infusions by central banks and anemic growth in the real economy will likely lead to a catastrophic collapse of the stock market.
Economist Gary Shilling noted that investors have been “paying little attention to weak and declining economies around the world, and concentrating on the flood of money being created by central banks.” The vast infusions of cash have created an explosion of toxic debt, “the zeal for yield, amidst low interest rates, benefited junk bonds and other low-quality debt,” he said.
William Gross, the cofounder of bond-trading firm PIMCO, warned earlier this year of a “credit supernova” and noted, “Investment banking, which only a decade ago promoted small business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi finance.”
As stocks plunged Wednesday, the Financial Times reported that many of the largest global hedge funds have suffered huge losses as a result of a general sell-off in the bond market, rooted in fears that the Federal Reserve will wind down its asset-purchasing program. Yields on Treasury bills have surged in recent weeks, hitting 2.23 percent last week, up from 1.61 percent in early May. Bond prices move in the opposite direction from bond yields.
“Since mid-May it has been a perfect storm of some of the biggest trends in markets reversing all at once,” one fund manager told the Financial Times. The newspaper noted that the $16 billion hedge fund AHL lost more than 11 percent of its total assets in the last two weeks as a result of the bond sell-off. This triggered a 15 percent drop in the stock value of the hedge fund’s parent company, the Man Group.
Particularly unsettling for the markets were indications of a slowdown in the US. On Monday, the Institute for Supply Management said its manufacturing activity index fell to 49 in May, down from 50.7 in April, the third consecutive monthly fall for the manufacturing index.
The reading was the lowest in four years and the first time that the measure fell below 50, which indicates a contraction, since November. The Institute for Supply Management index of new orders also fell, as did its measures of production and employment.
On Wednesday, ADP, the payrolls processing firm, reported that the US private sector created, on net, only 135,000 new jobs in May, less than the 165,000 economists had predicted. The report showed a drop of 6,000 manufacturing positions.
“The number was weak,” Mark Zandi, chief economist at Moody’s Analytics, told Reuters. “The ADP is suggesting instead of job growth stepping up, it’s actually stepping down as we move into the summer months,” he added.
The ADP figures led economists to lower their expectations for the Labor Department’s official employment report for May, which is due Friday, as well as projections of economic growth in the second quarter of the year.
The meager ADP payroll figure was echoed by the Federal Reserve’s beige book report, which showed only tepid growth in business activity in the period from early April to late May.
The drop in US manufacturing activity is linked to a fall in global demand resulting from the ongoing slump in Europe and slowdown in growth in China and other Asian countries. Eurostat, the European statistics agency, said Wednesday that retail sales in the European Union fell by 0.7 percent in April.
HSBC Bank said earlier this week that its China Purchasing Managers’ Index (PMI) fell to 49.2 percent from 50.4 in April, the lowest reading since October of last year.
“This is not a good moment for the world economy,” David Bloom, currency chief at HSBC, told the British Telegraph. “The manufacturing indices came in weaker than expected in China, Korea, India and Russia, and then we got America’s ISM.”
The current infusion of cash by central banks into the financial system follows the multitrillion-dollar bailout of the banks by governments in the US and Europe. These policies, dictated by the global financial elite, have further enriched those parasitic social layers that were responsible for the crisis in the first place, while the full burden of the crisis has been placed on the international working class.
Five years after the Wall Street crash, the ruling classes of the world have demonstrated their inability to revive the real economy, underscoring the fact that the current crisis is not merely a recession, but rather a breakdown of the world capitalist system.
The disconnect between the wild rise on stock markets, which have been surging for four years, and the moribund condition of the global economy is setting the stage for a financial collapse on the scale of, or even greater than, the meltdown of September 2008.

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Trillions hidden in tax havens by super-rich, corporations

By Julien Kiemle 
30 May 2013
The ultra-wealthy, banks and corporations from around the globe have some $32 trillion of wealth hidden in off-shore tax havens, according to a cache of information leaked by the International Consortium of Investigative Journalists (ICIJ) in April of this year.
The hidden wealth, consisting mostly of financial assets and bank accounts but also including assets like mansions and yachts, amounts to 44 percent of world GDP, or $4,600 for every person on earth.
This amount is nearly triple the figure of $11.5 trillion from 2005. Taxation justice activist groups previously estimated, although lacking direct proof, that the figure was between $20 trillion and $30 trillion.
Some 2.5 million leaked files trace the outlines of a largely secret section of the world economy. The files were reviewed and published in a sprawling report by the ICIJ, a watchdog organization reporting on corruption and accountability, after over a year of research.
According to the ICIJ, “The leaked files provide facts and figures–cash transfers, incorporation dates, links between companies and individuals–that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike.”
Their reporting has focused primarily on the tax revenue lost by governments, although it is difficult to estimate what the totals are. Even though much of the wealth belongs to individuals and banks from North America and Europe, developing countries mired in widespread poverty are likely the hardest hit by the loss of tax revenue. Corrupt government bureaucrats from around the third world are well-represented in the list of tax evaders.
The issue of lost tax revenue is legitimate, especially at a time when vicious austerity programs are justified with the excuse that “there is no money.” Far from this being true, documents released by the ICIJ reveal that the overflowing wealth of the world’s richest individuals has grown to proportions never seen before.
Some of the premier tax havens include the Cayman Islands, Cook Islands, Liechtenstein and Bermuda, with the British Virgin Islands described as the “epicenter” of the hidden wealth industry.
The clients of these offshore tax havens include the super-rich from nearly every country. The clientele ranges from American billionaires to Russian oligarchs, Hong Kong property developers, corrupt government bureaucrats, and gangsters. According to the leaked documents, about $10 trillion is the property of a mere 100,000 individuals. On average, this tiny sliver of the global population is hoarding $100 million each.
Enormous banking institutions like Deutsche Bank, UBS, the Swiss private bank Clariden, ING, and ABN Amro have actively worked to set up tax evasion schemes for their clients in offshore hiding places. JP Morgan, linked inconclusively by leaked documents to a number of tax evasion schemes, has 50 subsidiaries in Bermuda, the Bahamas, and similar “treasure islands.”
Dozens of examples of high-profile fraud are presented by the ICIJ in explicit detail, including:
• Swedish real estate tycoon Han Thulin, who had around $17 million stashed away in the South Pacific, even as he owes massive outstanding debts to the Swedish government.
• Banco Amambay, owned by Paraguayan presidential candidate Horacio Manuel, which operates secret financial institutions in South Pacific tax havens. Both Manuel and Banco Amambay have previously been investigated in connection with money laundering.
• Two French banks, BNP Paribas and Credit Agricole, which specialize in creating “quick” foreign companies in under 48 hours, to be used for hiding money in a pinch.
Although the entire process reeks of criminality, most countries make it relatively easy to legally secret away enormous fortunes in unaccountable mini-nations.
The fact that stock-trading billionaires and outright gangsters stash their loot in the same places suggest the true nature of the former. Indeed, ICIJ notes that since the money of drug lords and underworld kingpins intertwines with deposits from “legitimate” businessmen, it is difficult in many cases to delineate the dividing line between the two.
But despite the talk of tax evasion, much of this wealth is spirited away from the public reach through entirely legal channels. George Kaiser, an American billionaire, provides a prime example. Kaiser started a tax-exempt non-profit called the George Kaiser Family Foundation, which owns $3.4 billion in assets. The “charity” bought a $110 million dollar natural gas tanker and gave control of it to Excelerate Energy LLC, which Kaiser also controls. As a result, Kaiser realizes the profits from his capital tax-free.
Although the ICIJ had hoped to elicit a broad response, governments have demonstrated their effective acceptance of tax evasion by the wealthy. So far, no one has been prosecuted in response to the information in these leaked documents, as much of the evasion was carried out through legal or quasi-legal means.
The announcement by five European countries that they would begin exchanging tax receipt information to catch evaders is an empty gesture. As the details of the report make clear, tax evasion is systemic in the business world and receives the tacit approval of governments.
According to ICIJ, the British government has an even larger store of leaked information which it is reviewing at its own discretion.
The ICIJ report does not probe the question of why tax and revenues authorities did not launch their own investigations of offshore banking, instead leaving it to independent journalists. In fact, governments are actively abetting theft from the public treasury, in the form of endless injections by governments into the banks.

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The 15,000 Dow

9 May 2013
On Tuesday, Wall Street celebrated a new milestone. The Dow Jones Industrial Average crashed through the 15,000 plateau, setting yet another record in a dizzying climb that has seen the benchmark index rise by almost 15 percent since the beginning of the year.
It took just two months after recovering all of its losses from the financial crash of September 2008 for the Dow to breach the 15,000 barrier. It rose 1,000 points from the 14,000 level in just 66 days.
The Standard & Poor’s 500 stock index also hit a new record Tuesday, having gained 199 points since January. The Nasdaq Composite index closed at its highest point since November of 2000. The manic rise in US stocks is part of a global phenomenon. The FTSE All-World equity index on Tuesday rose to its highest level since June 2008.
The current explosion of stock prices expresses two essential tendencies. First, the disconnect between the process of wealth accumulation by the corporate-financial elite and the creation of real value through the production of goods has reached unprecedented heights. A financial aristocracy is concentrating ever more obscene levels of personal wealth in its hands entirely on the basis of financial speculation and manipulation, while the real economy continues to stagnate and decline.
The stock and bond markets are themselves mechanisms for economic parasitism and the further transfer of social wealth from the bottom to the top.
Second, the fundamental drive of capitalism, as Marx explained 146 years ago, to pile up wealth at one pole of society and poverty, misery and degradation at the other, is operating almost without restraint. The current stock bonanza reflects an explosive intensification of class tensions.
In the midst of the worst economic crisis since the Great Depression of the 1930s, the Dow has gained over 8,500 points, surging nearly 130 percent since it bottomed at 6,547 on March 9, 2009. That period of three years and two months has been an unmitigated disaster for the bulk of humanity, including the broad mass of working people in the United States.
The social disaster has worsened this year even as stock markets in the US and around the world continued their manic rise. Economic growth and job creation in the US have slowed from their already anemic pace, condemning millions of workers and youth to permanent unemployment or sweatshop jobs at poverty-level wages.
Unemployment in Europe, already at postwar record highs, continues to rise to levels unseen since the 1930s. With the economy of much of the continent contracting, unemployment in Greece and Spain is officially at 27 percent, and youth unemployment is nearing 60 percent. Economic growth is slowing in China and most other so-called “developing” economies, as governments turn to austerity measures and exports are hit by the deepening slump in the West.
The staggering growth of social inequality—with poverty, homelessness, hunger and desperation taking an ever greater toll among the masses of people, while corporate profits, CEO pay and the stock portfolios of the rich soar ever higher—is the result of brutal class war policies being carried out by governments around the world.
These policies have two sides: ruthless budget- and wage-cutting for the working class, and the pumping of trillions of dollars by the central banks into the markets for the benefit of the financial elite. This year, the Obama administration has overseen $85 billion in so-called “sequester” cuts, including cuts in benefits for the long-term unemployed. These are only a down payment on historic cuts in the bedrock social programs dating from the 1930s and 1960s, Social Security and Medicare.
At the same time, the Federal Reserve is printing $85 billion every month to buy Treasury bills and mortgage-backed securities while keeping interest rates at near zero. Similar measures are now being carried out by the European Central Bank, the Bank of England and the Bank of Japan. This policy is intended to channel speculative funds into the stock markets, inflating share prices and guaranteeing massive profits for the rich and the super-rich, who own the vast bulk of such assets.
It is a continuation and intensification of the basic policy pursued since the Wall Street crash by governments and central banks. They have concentrated all their efforts on protecting the wealth of the ruling classes and insuring that the losses they suffered in the meltdown triggered by their own recklessness and greed are recouped many times over.
State treasuries were emptied to pay off the bad debts of the banks, and mass layoffs, wage cuts and attacks on social welfare programs were carried out to make the working class foot the bill. The current Wall Street boom reflects the progress, to date, of this program of social counterrevolution. The working class all over the world has sought to fight back, but it has been blocked and sabotaged by the trade unions, which have done all in their power to dissipate resistance and prevent it from assuming an independent, revolutionary form. The unions have been aided by the various pseudo-left organizations, which demand that workers remain trapped in these right-wing corporatist organizations.
But the frenzied rise of stock prices is, in its own way, a sign that this stage of the crisis is coming to an end. The financial bubble that has been inflated is unsustainable. Like all previous bubbles—including the bubble of 1999-2000, the subprime mortgage bubble that imploded in 2008—this far larger bubble must explode, creating a new and even more catastrophic financial crisis.
This time, it is not individual corporations or banks that face collapse, or even individual sovereign states, but the central banks that have been printing worthless dollars, pounds, euros and yen to underwrite the plundering of society by the ruling elites. In the process, they have undermined the world currency system, setting off a chain reaction of currency and trade wars that can lead only to a further collapse of the real economy.
Working class opposition and anger have grown more intense. The past five years of depression for the masses and super-profits for the corporate elite have not been lived in vain. There is a growing sense that the entire system is economically unviable, intrinsically unjust, and morally indefensible, i.e., that capitalism has failed and must be replaced.
The trade unions, the right-wing “labor” and social democratic parties, the pseudo-left organizations of the upper-middle class that are allied to them—SYRIZA in Greece, the New Anti-capitalist Party in France, the Left Party in Germany, the Socialist Workers Party in Britain, the International Socialist Organization in the US—are being exposed as agencies of the ruling class and discredited in the eyes of the workers.
Out of this historic breakdown of the capitalist system a new period of social revolution is emerging. The urgent task of the hour is the building of the Socialist Equality Party as the new leadership of the working class to arm the coming struggles with a revolutionary socialist program.
The task is not to “occupy” Wall Street. It is to shut it down, redirect the vast resources that are squandered in the operations of this gigantic gambling casino to meeting social needs, and take the banks and corporations out of private hands so they can be run democratically for the benefit of society.
Barry Grey

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The riddle of capitalism

Before the Collapse, A Call to Action

By Kevin Zeese and Margaret Flowers
April 18, 2013 “Information Clearing House” – The economic news in the last two weeks points to bad news for the economy and a reason for people to mobilize and demand change. We want to emphasize that as bad as the situation looks, there are solutions and ways to protect ourselves. The time to act is now.
Before we get to the impact of the Obama budget, let’s explode a critical myth: there is no recovery (at least for the 99%). Last month’s unemployment numbers revealed the fraud of the unemployment rate. Even though the country produced less than 90,000 new jobs, when over 120,000 are needed to keep up with growth, the unemployment rate declined. Why? Because hundreds of thousands are giving up on work each month and they don’t get counted.
At present, over 100 million working age Americans do not have a job that is 41.5%. And, for some groups, African Americans and youth in particular, this is a persistent jobs crisis that ensures low incomes and little wealth for the future. And, workers who do have jobs are paid way too little, about half of the value of what they actually produce. There will be no recovery until these fundamentals change.
The combination of poor federal economic policy – which is getting more off-track – and a corrupt economy is bringing on the next crash. In an article in Truthout last week, we point out the deep corruption of the finance system, which dominates the economy. Security fraud expert Bill Black told us that the evidence shows that fraud is “pervasive” among the “most elite financial institutions,” yet the Obama government policy was no prosecution. The Economic Collapse Blog points out there are 11 crashes going on right now: gold, silver, bitcoins, consumer confidence, 401(k) retirement accounts, casino gambling, Greek employment, European financial stocks, Spanish bankruptcies and energy demand; and predicts the bloated US stock market is next.
As we approach the next crash, the government’s across the board sequester is beginning to have big impacts on people’s lives and will lead to further shrinking of the economy. Here are 100 cutbacks that are affecting people as of early April and the pace is picking up. These impacts are very real, thousands of Medicare patients with cancer are being turned away at health clinics because of sequester cut-backs. And, at a time of increasing poverty, Greg Kaufman writes the sequester means: “up to 140,000 fewer low-income families receiving housing vouchers, more children exposed to lead paint, higher rent for people who can’t afford it and a rise in homelessness.”
If either President Obama’s or Paul Ryan’s budget, or some of each, is enacted, and they will since these are what DC is considering, the economy will get even worse. The bipartisans have fully embraced austerity and are being cheered on by the corporate media andwealth-funded think tanks, as Margaret Flowers found when she debated two on the Marc Steiner Show, one from a “liberal” Democrat think tank, the other a conservative Republican – they agreed while Margaret had to correct their false statements.
The president has shown his embrace of austerity by proposing unilateral budget cuts to Social Security and Medicare that will shrink benefits and increase the cost of health care. After four years of seeking to cut these programs, the “Grand Obama Betrayal” has arrived. Economist Jack Rasmus describes this as a “grand collusion” between the bipartisan corporatists and big business interests. The president did not put forward any plans to solve the jobs crisis, shrink the wealth divide, build a new economy – instead he embraced a mistaken mission of austerity.
The embrace of austerity does not apply to the military, whose sequester cuts were restored with the administration even funding a missile defense program that Congress de-fundedas the military continues to be well-funded. When it comes to people’s needs, Obama put forward an approach that intentionally ignores the real living costs of the elderly and instead relied on a fake inflation rate that economist Michael Hudson calls “catfood reform.” Obama and the bipartisans want Americans to think these cuts are necessary, but in fact, they aren’t.
Obama is not only hurting the middle class, poor, elderly and veterans with these cuts, but his budget continues to give gifts to big business. Obama’s budget is proposing to sell the Tennessee Valley Authority to big energy interests. This will ensure consumers pay the highest rates possible. As food safety gets worse, Obama’s budget will cut chicken inspectors and let the industry inspect itself. And, Obama, who has always been well-funded by the nuclear industry, revised rules to dramatically raise permissible radioactive levels in drinking water and soil following “radiological incidents,” such as nuclear power-plant accidents and dirty bombs.
These wins for industry are losses to the health and welfare of Americans. Congress does its job for big business well; research shows big payoffs for members who vote to deregulate the deeply corrupt finance industry. And, agribusiness food giant Monsanto was able to get the Monsanto Protection Act passed, which prevents regulation of GMO’s and even prevents courts from intervening.
The corruption of Congress and the president were on display this week when they repealed the STOCK Act, designed to prevent insider trading by high government officials by requiring them to disclose their financial investments in a searchable format. The Senate passed the repeal in 10 seconds, the House in 14, both by unanimous consent – not one member spoke up to oppose the repeal. President Obama quickly and quietly signed the law. His repeal was accomplished more quietly than when Obama signed the STOCK Act a year ago, saying how important it was for elected officials to live within transparent rule of law. Speaking of corrupt secrecy, the Federal Reserve argues that the widespread corrupt mortgage practices are trade secrets and should not be disclosed. Is this mafia capitalism at work?
It is now clear that Americans who deposited money in big banks could suffer the same result as the people of Cyprus, remember the lessons of the Depression, and have their deposits seized and turned into bank stock. Ellen Brown reports this is part of the “too big to fail” banks plan to withstand the next collapse. In fact, massive and risky derivatives investments, almost as large as the US economy, would receive more protection than depositors. It could happen here in a collapse, and it would be fast and furious, with the banks or the FDIC writing down deposits to save the banks at the expense of consumers. And, if you can’t pay your bills, be wary of debtor’s prison.
Every tax year, we are reminded how unfair the tax system is and how the big banks and wealthy avoid taxes by hiding money off-shore, claiming loses in the USand profits abroad. One report indicates that these off-shore havens cost the average taxpayer $1,000 annually. This year, a cache of 2.5 million files containing the secrets of more than 120,000 offshore companies and trusts that wereanalyzed by the International Consortium of Investigative Journalists exposed hidden dealings of politicians, criminals, business people and the mega-rich the world over totaling up to $32 trillion hidden off-shore.
As we get closer to the full implementation of ObamaCare the legislation is looking more expensive and less beneficial to consumer. Obama met with the insurance industry at the White House to discuss their partnership in implementing the law. The law is getting more costly to implement so Obama is pulling back on its promises. Already rising health care costs are resulting in people cutting back on their prescription drugs to save money – this will not be good for health or for the cost of healthcare. And, Obama is moving to quietly ruin Medicare with cuts while at the same time increasing funding for the more expensive and less efficient private insurance for seniors, Medicare Advantage. This is part of the privatization of the most successful part of US healthcare, Medicare, made worse by the nomination of a former executive for Hospital Corporation of America to run Medicare. Marilyn Tavenner promises to run Medicare as a business, just the opposite of what it should be, a necessary public service.
The political and economic mess of Washington and Wall Street, the foundering economy and threat of another collapse, are leading more and more people to question the viability of big finance capitalism; with criticism ranging beyond its traditional critics. More and more call for breaking up the big banks and tougher enforcement against banksters. But, others are calling for more structural changes. In an article that will be published in Truthout tomorrow, we discuss how to transform the Federal Reserve to make it transparent, democratic and responsive to the economy; the creation of public banks in every state and major cities as well ways to opt-out of the Wall Street economy.
The crisis of the US economy and government are upon us. The only way we will stop the cuts to necessary social services, the continued privatization of public services and government gifts to big business is to mobilize to stop business as usual in Washington, DC. Beyond that, it is important for all of us to envision and begin to create the new economy as the old one collapses. There is more information about the new economy and links to resources at
The future is ours to define. Now is the time to for action!
This article is based on our weekly newsletter for To subscribe to this free publication, click here.
Kevin Zeese JD and Margaret Flowers MD co-host ClearingtheFOGRadio.orgon We Act Radio 1480 AM Washington, DC and on Economic Democracy Media,co-direct It’s Our Economy and are organizers of the Occupation of Washington, DC.Their twitters are @KBZeese and @MFlowers8.

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The Attack on Gold

Gold price fall points to global deflation

Another bumper year for hedge fund billionaires

The Gold Price Crash is Further Evidence of Market Rigging

The Assault On Gold Update

By Paul Craig Roberts
April 14, 2013 “Information Clearing House” – I was the first to point out that the Federal Reserve was rigging all markets, not merely bond prices and interest rates, and that the Fed is rigging the bullion market in order to protect the US dollar’s exchange value, which is threatened by the Fed’s quantitative easing. With the Fed adding to the supply of dollars faster than the demand for dollars is increasing, the price or exchange value of the dollar is set up to fall. 
A fall in the dollar’s exchange rate would push up import prices and, thereby, domestic inflation, and the Fed would lose control over interest rates. The bond market would collapse and with it the values of debt-related derivatives on the “banks too big too fail” balance sheets. The financial system would be in turmoil, and panic would reign. 
Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession. Short sales that drive down the price trigger stop-loss orders that automatically lead to individual sales of bullion holdings once their loss limits are reached.
According to Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500 tons of naked shorts. Normally, a short is when an investor thinks the price of a stock or commodity is going to fall. He wants to sell the item in advance of the fall, pocket the money, and then buy the item back after it falls in price, thus making money on the short sale. If he doesn’t have the item, he borrows it from someone who does, putting up cash collateral equal to the current market price. Then he sells the item, waits for it to fall in price, buys it back at the lower price and returns it to the owner who returns his collateral. If enough shorts are sold, the result can be to drive down the market price.
A naked short is when the short seller does not have or borrow the item that he shorts, but sells shorts regardless. In the paper gold market, the participants are betting on gold prices and are content with the monetary payment. Therefore, generally, as participants are not interested in taking delivery of the gold, naked shorts do not need to be covered with the physical metal.
In other words, with naked shorts, no physical metal is actually sold.
People ask me how I know that the Fed is rigging the bullion price and seem surprised that anyone would think the Fed and its bullion bank agents would do such a thing, despite the public knowledge that the Fed is rigging the bond market and the banks with the Fed’s knowledge rigged the Libor rate. The answer is that the circumstantial evidence is powerful.
Consider the 500 tons of paper gold sold on Friday. Begin with the question, how many ounces is 500 tons? There are 2,000 pounds to one ton. 500 tons equal 1,000,000 pounds. There are 16 ounces to one pound, which comes to 16 million ounces of short sales on Friday. 
Who has 16 million ounces of gold? At the beginning gold price that day of about $1,550, that comes to $24,800,000,000. Who has that kind of money? 
What happens when 500 tons of gold sales are dumped on the market at one time or on one day? Correct, it drives the price down. Investors who want to get out of large positions would spread sales out over time so as not to lower their sales proceeds. The sale took gold down by about $73 per ounce. That means the seller or sellers lost up to $73 dollars 16 million times, or $1,168,000,000.
Who can afford to lose that kind of money? Only a central bank that can print it.
I believe that the authorities would like to drive the gold price down further and will, if they can, hit the gold market twice more next week and put gold at $1,400 per ounce or lower. The successive declines could perhaps spook individual holders of physical gold and result in actual net sales of physical gold as people reduced their holdings of the metal. 
However, bullion dealer Bill Haynes told that last Friday bullion purchasers among the public outpaced sellers by 50 to 1, and that the premiums over the spot price on gold and silver coins are the highest in decades. I myself checked with Gainesville Coins and was told that far more buyers than sellers had responded to the price drop. 
Unless the authorities have the actual metal with which to back up the short selling, they could be met with demands for deliveries. Unable to cover the shorts with real metal, the scheme would be exposed.
Do the authorities have the metal with which to cover shorts? I do not know. However, knowledgeable dealers are suspicious. Some think that US physical stocks of gold were used up in sales in efforts to disrupt the rise in the gold price from $272 in December 2000 to $1,900 in 2011. They point to Germany’s recent request that the US return the German gold stored in the US, and to the US government’s reply that it would return the gold piecemeal over seven years. If the US has the gold, why not return it to Germany?
The clear implication is that the US cannot deliver the gold.
Andrew Maguire also reports that foreign central banks, especially China, are loading up on physical gold at the low prices made possible by the short selling. If central banks are using their dollar holdings to purchase bullion at bargain prices, the likely results will be pressure on the dollar’s exchange value and a declining market supply of physical bullion. In other words, by trying to protect the dollar from its quantitative easing policy, the Fed might be hastening the dollar’s demise.
Possibly the Fed fears a dollar crisis or derivative blowup is nearing and is trying to reset the gold/dollar price prior to the outbreak of trouble. If ill winds are forecast, the Fed might feel it is better positioned to deal with crisis if the price of bullion is lower and confidence in bullion as a refuge has been shaken. 
In addition to short selling that is clearly intended to drive down the gold price, orchestration is also indicated by the advance announcements this month first from brokerage houses and then from Goldman Sachs that hedge funds and institutional investors would be selling their gold positions. The purpose of these announcements was to encourage individual investors to get out of gold before the big boys did. Does anyone believe that hedge funds and Wall Street would announce their sales in advance so the small fry can get out of gold at a higher price than they do? 
If these advanced announcements are not orchestration, what are they?
I see the orchestrated effort to suppress the price of gold and silver as a sign that the authorities are frightened that trouble is brewing that they cannot control unless there is strong confidence in the dollar. Otherwise, what is the point of the heavy short selling and orchestrated announcements of gold sales in advance of the sales?
Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

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Winner Takes All: The Super-priority Status of Derivatives

Why Derivatives Threaten Your Bank Account

By Ellen Brown

April 10, 2013 “Information Clearing House” -”  Cyprus-style confiscation of depositor funds has been called the “new normal.”  Bail-in policies are appearing in multiple countries directing failing TBTF banks to convert the funds of “unsecured creditors” into capital; and those creditors, it turns out, include ordinary depositors. Even “secured” creditors, including state and local governments, may be at risk.  Derivatives have “super-priority” status in bankruptcy, and Dodd Frank precludes further taxpayer bailouts. In a big derivatives bust, there may be no collateral left for the creditors who are next in line.

Shock waves went around the world when the IMF, the EU, and the ECB not only approved but mandated the confiscation of depositor funds to “bail in” two bankrupt banks in Cyprus. A “bail in” is a quantum leap beyond a “bail out.” When governments are no longer willing to use taxpayer money to bail out banks that have gambled away their capital, the banks are now being instructed to “recapitalize” themselves by confiscating the funds of their creditors, turning debt into equity, or stock; and the “creditors” include the depositors who put their money in the bank thinking it was a secure place to store their savings.

The Cyprus bail-in was not a one-off emergency measure but was consistent with similar policies already in the works for the US, UK, EU, Canada, New Zealand, and Australia, as detailed in my earlier articles here and here.  “Too big to fail” now trumps all.  Rather than banks being put into bankruptcy to salvage the deposits of their customers, the customers will be put into bankruptcy to save the banks.

Why Derivatives Threaten Your Bank Account

The big risk behind all this is the massive $230 trillion derivatives boondoggle managed by US banks. Derivatives are sold as a kind of insurance for managing profits and risk; but as Satyajit Das points out in Extreme Money, they actually increase risk to the system as a whole.

In the US after the Glass-Steagall Act was implemented in 1933, a bank could not gamble with depositor funds for its own account; but in 1999, that barrier was removed. Recent congressional investigations have revealed that in the biggest derivative banks, JPMorganand Bank of America, massive commingling has occurred between their depository arms and their unregulated and highly vulnerable derivatives arms. Under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured. In a major derivatives fiasco, derivative claimants could well grab all the collateral, leaving other claimants, public and private, holding the bag.

The tab for the 2008 bailout was $700 billion in taxpayer funds, and that was just to start. Another $700 billion disaster could easily wipe out all the money in the FDIC insurance fund, which has only about $25 billion in it.  Both JPMorgan and Bank of America have over $1 trillion in deposits, and total deposits covered by FDIC insurance are about $9 trillion. According to an article on Bloomberg in November 2011, Bank of America’s holding company then had almost $75 trillion in derivatives, and 71% were held in its depository arm; while J.P. Morgan had $79 trillion in derivatives, and 99% were in its depository arm. Those whole mega-sums are not actually at risk, but the cash calculated to be at risk from derivatives from all sources is at least $12 trillion; and JPM is the biggest player, with 30% of the market.

It used to be that the government would backstop the FDIC if it ran out of money. But section 716 of the Dodd Frank Act now precludes the payment of further taxpayer funds to bail out a bank from a bad derivatives gamble. As summarized in a letter from Americans for Financial Reform quoted by Yves Smith:

Section 716 bans taxpayer bailouts of a broad range of derivatives dealing and speculative derivatives activities. Section 716 does not in any way limit the swaps activities which banks or other financial institutions may engage in. It simply prohibits public support for such activities.

There will be no more $700 billion taxpayer bailouts. So where will the banks get the money in the next crisis? It seems the plan has just been revealed in the new bail-in policies.

All Depositors, Secured and Unsecured, May Be at Risk

The bail-in policy for the US and UK is set forth in a document put out jointly by the Federal Deposit Insurance Corporation (FDIC) and the Bank of England (BOE) in December 2012, titled Resolving Globally Active, Systemically Important, Financial Institutions.

In an April 4th article in Financial Sense, John Butler points out that the directive does not explicitly refer to “depositors.”  It refers only to “unsecured creditors.”  But the effective meaning of the term, says Butler, is belied by the fact that the FDIC has been put on the job. The FDIC has direct responsibility only for depositors, not for the bondholders who are wholesale non-depositor sources of bank credit. Butler comments:

Do you see the sleight-of-hand at work here? Under the guise of protecting taxpayers, depositors of failing institutions are to be arbitrarily, de-facto subordinated to interbank claims, when in fact they are legally senior to those claims!

. . . [C]onsider the brutal, unjust irony of the entire proposal. Remember, its stated purpose is to solve the problem revealed in 2008, namely the existence of insolvent TBTF institutions that were “highly leveraged and complex, with numerous and dispersed financial operations, extensive off-balance-sheet activities, and opaque financial statements.” Yet what is being proposed is a framework sacrificing depositors in order to maintain precisely this complex, opaque, leverage-laden financial edifice!If you believe that what has happened recently in Cyprus is unlikely to happen elsewhere, think again. Economic policy officials in the US, UK and other countries are preparing for it. Remember, someone has to pay. Will it be you? If you are a depositor, the answer is yes.

The FDIC was set up to ensure the safety of deposits. Now it, it seems, its function will be the confiscation of deposits to save Wall Street. In the only mention of “depositors” in the FDIC-BOE directive as it pertains to US policy, paragraph 47 says that “the authorities recognize the need for effective communication to depositors, making it clear that their deposits will be protected.” But protected with what? As with MF Global, the pot will already have been gambled away. From whom will the bank get it back? Not the derivatives claimants, who are first in line to be paid; not the taxpayers, since Congress has sealed the vault; not the FDIC insurance fund, which has a paltry $25 billion in it. As long as the derivatives counterparties have super-priority status, the claims of all other parties are in jeopardy.

That could mean not just the “unsecured creditors” but the “secured creditors,” including state and local governments. Local governments keep a significant portion of their revenues in Wall Street banks because smaller local banks lack the capacity to handle their complex business. In the US, banks taking deposits of public funds are required to pledge collateral against any funds exceeding the deposit insurance limit of $250,000. But derivative claims are also secured with collateral, and they have super-priority over all other claimants, including other secured creditors. The vault may be empty by the time local government officials get to the teller’s window. Main Street will again have been plundered by Wall Street.

Super-priority Status for Derivatives Increases Rather than Decreases Risk

Harvard Law Professor Mark Row maintains that the super-priority status of derivatives needs to be repealed. He writes:

. . . [D]erivatives counterparties, . . . unlike most other secured creditors, can seize and immediately liquidate collateral, readily net out gains and losses in their dealings with the bankrupt, terminate their contracts with the bankrupt, and keep both preferential eve-of-bankruptcy payments and fraudulent conveyances they obtained from the debtor, all in ways that favor them over the bankrupt’s other creditors.

. . . [W]hen we subsidize derivatives and similar financial activity via bankruptcy benefits unavailable to other creditors, we get more of the activity than we otherwise would. Repeal would induce these burgeoning financial markets to better recognize the risks of counterparty financial failure, which in turn should dampen the possibility of another AIG-, Bear Stearns-, or Lehman Brothers-style financial meltdown, thereby helping to maintain systemic financial stability.

In The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences, David Skeel agrees. He calls the Dodd-Frank policy approach “corporatism” – a partnership between government and corporations. Congress has made no attempt in the legislation to reduce the size of the big banks or to undermine the implicit subsidy provided by the knowledge that they will be bailed out in the event of trouble.

Undergirding this approach is what Skeel calls “the Lehman myth,” which blames the 2008 banking collapse on the decision to allow Lehman Brothers to fail. Skeel counters that the Lehman bankruptcy was actually orderly, and the derivatives were unwound relatively quickly. Rather than preventing the Lehman collapse, the bankruptcy exemption for derivatives may have helped precipitate it.  When the bank appeared to be on shaky ground, the derivatives players all rushed to put in their claims, in a run on the collateral before it ran out. Skeel says the problem could be resolved by eliminating the derivatives exemption from the stay of proceedings that a bankruptcy court applies to other contracts to prevent this sort of run.

Putting the Brakes on the Wall Street End Game

Besides eliminating the super-priority of derivatives, here are some other ways to block the Wall Street asset grab:

(1) Restore the Glass-Steagall Act separating depository banking from investment banking. Support Marcy Kaptur’s H.R. 129.

(2) Break up the giant derivatives banks.  Support Bernie Sanders’ “too big to jail” legislation.

(3) Alternatively, nationalize the TBTFs, as advised in the New York Times by Gar Alperovitz.  If taxpayer bailouts to save the TBTFs are unacceptable, depositor bailouts are even more unacceptable.

(4) Make derivatives illegal, as they were between 1936 and 1982 under the Commodities Exchange Act. They can be unwound by simply netting them out, declaring them null and void.  As noted by Paul Craig Roberts, “the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system.”

(5) Support the Harkin-Whitehouse bill to impose a financial transactions tax on Wall Street trading.  Among other uses, a tax on all trades might supplement the FDIC insurance fund to cover another derivatives disaster.

(5) Establish postal savings banks as government-guaranteed depositories for individual savings. Many countries have public savings banks, which became particularly popular after savings in private banks were wiped out in the banking crisis of the late 1990s.

(6) Establish publicly-owned banks to be depositories of public monies, following the lead of North Dakota, the only state to completely escape the 2008 banking crisis. North Dakota does not keep its revenues in Wall Street banks but deposits them in the state-owned Bank of North Dakota by law.  The bank has a mandate to serve the public, and it does not gamble in derivatives.

A motivated state legislature could set up a publicly-owned bank very quickly. Having its own bank would allow the state to protect both its own revenues and those of its citizens while generating the credit needed to support local business and restore prosperity to Main Street.

For more information on the public bank option, see here. Learn more at the Public Banking Institute conference June 2-4 in San Rafael, California, featuring Matt Taibbi, Birgitta Jonsdottir, Gar Alperovitz and others.

Ellen Brown is an attorney, chairman of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are and

The Assault On Gold

By Paul Craig Roberts

April 05, 2013 “Information Clearing House” – For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices.

When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than 8 months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the US dollar losing value so rapidly compared to the world standard for money, the Federal Reserve’s policy of printing $1 trillion annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger. Who could believe the dollar’s exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver.

The Federal Reserve realized that its massive purchase of bonds in order to keep their
prices high (and thus interest rates low) was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Federal Reserve was concerned that large holders of US dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the US dollar, thus ending in the fall of the dollar’s foreign exchange value and thus decline in US bond and stock prices.

Intelligent people could see that the US government could not afford the long and numerous wars that the neoconservatives were engineering or the loss of tax base and consumer income from offshoring millions of US middle class jobs for the sake of executive bonuses and shareholder capital gains. They could see what was in the cards, and began exiting the dollar for gold and silver.

Central banks are slower to act. Saudi Arabia and the oil emirates are dependent on US protection and do not want to anger their protector. Japan is a puppet state that is careful in its relationship with its master. China wanted to hold on to the American consumer market for as long as that market existed. It was individuals who began the exit from the US dollar.

When gold topped $1,900, Washington put out the story that gold was a bubble. The presstitute media fell in line with Washington’s propaganda. “Gold looking a bit bubbly” declared CNN Money on August 23, 2011.

The Federal Reserve used its dependent “banks too big to fail” to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Federal Reserve was able to drive the price of gold down to $1,750 and keep it more or less capped there until recently, when a concerted effort on April 2-3, 2013, drove gold down to $1,557 and silver, which had approached $50 per ounce in 2011, down to $27.

The Federal Reserve began its April Fool’s assault on gold by sending the word to brokerage houses, which quickly went out to clients, that hedge funds and other large investors were going to unload their gold positions and that clients should get out of the precious metal market prior to these sales. As this inside information was the government’s own strategy, individuals cannot be prosecuted for acting on it. By this operation, the Federal Reserve, a totally corrupt entity, was able to combine individual flight with institutional flight. Bullion prices took a big hit, and bullishness departed from the gold and silver markets. The flow of dollars into bullion, which threatened to become a torrent, was stopped.

For now it seems that the Fed has succeeded in creating wariness among Americans about the virtues of gold and silver, and thus the Federal Reserve has extended the time that it can print money to keep the house of cards standing. This time could be short or it could last a couple of years.

However, for the Russians and Chinese, whose central banks have more dollars than they any longer want, and for the 1.3 billion Indians in India, the low dollar price for gold that the Federal Reserve has engineered is an opportunity. They see the opportunity that the Federal Reserve has given them to purchase gold at $350-$400 an ounce less than two years ago as a gift.

The Federal Reserve’s attack on bullion is an act of desperation that, when widely recognized, will doom its policy.

As I have explained previously, the orchestrated move against gold and silver is to protect the exchange value of the US dollar. If bullion were not a threat, the government would not be attacking it.

The Federal Reserve is creating $1 trillion new dollars per year, but the world is moving away from the use of the dollar for international payments and, thus, as reserve currency. The result is an increase in supply and a decrease in demand. This means a falling exchange value of the dollar, domestic inflation from rising import prices, and a rising interest rate and collapsing bond, stock and real estate markets.

The Federal Reserve’s orchestration against bullion cannot ultimately succeed. It is designed to gain time for the Federal Reserve to be able to continue financing the federal budget deficit by printing money and also to keep interest rates low and debt prices high in order to support the banks’ balance sheets.

When the Federal Reserve can no longer print due to dollar decline which printing would make worse, US bank deposits and pensions could be grabbed in order to finance the federal budget deficit for couple of more years. Anything to stave off the final catastrophe.

The manipulation of the bullion market is illegal, but as government is doing it the law will not be enforced.

By its obvious and concerted attack on gold and silver, the US government could not give any clearer warning that trouble is approaching. The values of the dollar and of financial assets denominated in dollars are in doubt.

Those who believe in government and those who believe in deregulation will be proved equally wrong. The United States of America is past its zenith. As I predicted early in the 21st century, in 20 years the US will be a third world country. We are halfway there.

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

Financial Wars: Attack is the Best Form of Defense

By Alexander GOROKHOV 
March 31, 2013 “Information Clearing House” -“STF” – The history of financial wars is in no way shorter than the history of conventional wars. However, although many have understood the power of money to subordinate nations, using it as a full-fledged alternative to the use of ordinary weapons began just a century ago. American bankers played a decisive role in the process, initially subordinating themselves to the USA through the creation of the Federal Reserve System (FRS), and then encroaching upon the rest of the world by succeeding in getting approval of the Bretton-Woods Agreements on the dollar as a means of settling international payments. An equally important outcome of these agreements was the creation of the International Monetary Fund, controlled by the FRS. 
As with conventional wars, the aim of financial wars is either the subordination of the state as a whole, or the establishment of partial control over it. The only difference is that with financial wars, physical control over territories is far from obligatory, although in terms of degrees of disruptiveness, financial wars are no less formidable than conventional ones. 
As with the major battles of conventional wars, the most spectacular and decisive events of financial wars are crises. The most significant crisis of the 20th century, the Great Depression, allowed all the banks’ gold in the United States to be concentrated in the Federal Reserve and FRS member banks to establish control over the lion’s share of American industry. The financial crisis established in Great Britain in 1992 by currency speculator George Soros, who was closely connected to bankers from the FRS, not only enabled him to earn 1 billion dollars in a single day, but also caused the devaluation of a dozen European currencies, as well as delay the introduction of a single European currency for six years. Most importantly, however, was that it significantly increased America’s influence on the European economy through Americans buying up drastically cheaper shares in European businesses.
Soros was also one of the initiators of the 1995 crisis in Mexico which shelved plans for the construction of an intero-ceanic canal that would have rivaled the Panama Canal controlled by the Americans. In the same year, Soros dealt a blow to Japan, as the rapid growth of the country’s currency was threatening to transform it into a global financial centre, a rentier state whose yen-denominated loans were ensuring an explosive increase in the economy of Southeast Asia as a whole. Immediately afterwards, with the support of FRS member banks, Soros brought down the financial systems of Indonesia, South Korea, Thailand, Malaysia, Thailand and Hong Kong – all the “Asian Tigers” were firmly shown their place in the cage, having been forced to tie their economies to the US dollar. Taking advantage of a fall in shares of these countries’ electronic companies and the resulting fall in the Dow Jones Index, American high-tech corporations – IBM, Intel, Motorola, Compaq, Dell and Hewlett Packard – bought up a considerable amount of these shares, as well as their own shares that had been “dumped” by third party investors.
Mention of George Soros stirs up more than just his role in organizing the crises. Even with several billion dollars available, he would not be able to organize crises without enormous preparatory work. Part of this involves shaping the opinions of those involved in the financial market regarding the inevitability of a particular crisis emerging. After which, even a relatively small amount (to the tune of several billion dollars) is enough to spark off panic in the financial market, which would then devalue the currency and shares of a country’s key enterprises, if not the whole region.
By keeping a close eye on statements made by Soros, publications produced by media companies he controls and the actions of other companies financed by his Foundation, it is not difficult to see who the next victim of these financial wars is going to be – Europe. Since 2012, the threat of the disintegration of the eurozone has increased. In the country most affected by the financial crisis, Greece, they have been talking about rejecting the single European currency, which would undoubtedly lead to a serious weakening of the euro. 
As well as the psychological excitation – spreading the idea that the collapse of the European currency is inevitable – there is other preparatory work to be carried out. Other the last few months, the US has been using its best endeavors to create a Free Trade Zone with the European Union with a view to finally removing the remaining barriers to the penetration of American capital into Europe and, after engineering the collapse of the euro, to buy up Europe’s tastiest morsels using vastly inflated dollars under the pretext of saving the EU’s economy… Or crush any attempts made by the EU to carry out reindustrialization and increase its global influence. 
One could argue that the USA simply does not have the money for such a large-scale operation. In point of fact, it is true that the government does not have enough. The Federal Reserve System does, however, shown by the scandal that recently broke out in the States regarding the FRS providing secret loans to “loyal” banks totaling almost three trillion dollars. The banks that were lent the money used it to buy up shares in promising businesses throughout the world from private banks not part of the FRS and in a difficult financial position as a result of the 2008 crisis. The money obtained from the sale of shares went back to the buyer as debt repayments and back to the FRS. As a result, such huge loans did not cause hyperinflation for one simple reason: the money did not end up in the real economy. Nevertheless, “electronic zeros” taken from a “bottomless pocket” materialised as real authority over actual large-scale businesses.
On the financial battlefield, which the world turned into long ago, there is a rigid division between those who create financial capital and those who import and earn this capital. So, for example, the price of Russian money, which is orders of magnitude higher than the cost of the dollar, the euro and other currencies purchased to guarantee the stability of the ruble. And the build-up of Russian currency reserves only promotes multiple profit increases for the issuers of these currencies. Roughly speaking, the issue of rubles for one billion dollars ensures the emission of not one billion US dollars, but ten billion. The issue of roubles for two billion would guarantee the emission of 20 billion by the Federal Reserve System.
There is one way out of this situation: to turn into the country that is creating, rather than earning, the money. In other words, Russia would guarantee the stability of the ruble using its own resources, the level of its industrial and financial development, rather than its reserves of foreign currency.
How does one get away from supporting one’s own money using foreign currency?
The history of money backed by nothing except public consent on its circulation extends back over the last 200 years. From 1837-1866, there were nearly 8,000 different types of “private money” being circulated in the US, issued by a variety of companies, banks and even private individuals. Some of these even became fairly widespread until they were officially prohibited. At the height of the crisis at the end of the 1920s-beginning of the 1930s, a municipality issued its own money which was only circulated within the Austrian town of Wörgl. Surprisingly, circulation of the “Wörgl Shilling” led to a rapid growth in the town’s economy, which had a population of 3,000 inhabitants. 
A similar thing happened in the American town of Ithaca. The town’s local currency, the “Ithaca Hours”, is still in operation today, promoting internal trade. The same is happening in the English city of Bristol: the “Bristol Pound” is not only found in paper form, but is also available to use electronically. During the hardest times at the beginning of the 1990s, many Russian businesses had their own “currencies” enabling workers who were not receiving their wages in rubles to survive thanks to goods being sold to them in exchange for this surrogate money. There are also many “electronic currencies” serving as a means of payment for a variety of products and services on the Internet, for the most part by public consent.
Nevertheless, all issuers of this “unreal” money have been watched closely and the volume of emissions preventing their devaluation and ensuring a special rate of exchange for “regular” money is being monitored. However, in the first place they are intended to have an extremely limited range of use and, in the second, they are completely unsuitable for trade with the outside world, since for those kinds of transactions, neither an honest word from the finance minister nor his seal are sufficient.
Some Arab countries have found their own path which is based on a hard peg to gold and silver and are gradually introducing the “gold dinar”, a currency whose value strictly corresponds to reserves of gold deposits, for payments among themselves. However, the gold dinar is still an arbitrary way of clearing payments, replacing national currencies only when compensating the balance of payments. National currencies are still in circulation within the countries taking part in this project, many of which are tightly tied to the dollar. And for the additional issuance of gold dinar, they must purchase dollars for oil in order to exchange this money for precious metal. Which is to say that they are still earning money, rather than creating it.
As a measure capable of protecting a number of developing countries’ national currencies from the influence of the dollar and the euro, some experts are suggesting that a BRICS Bank, a BRICS Stabilization Fund and a BRICS Reserve Currency be created based on the currency basket of these countries. There is only one thing this suggestion does not take into account: that all these currencies are backed by reserves of money and securities denominated in major reserve currencies. It is “inferior” and “earned” money, in other words, rather than money that has been created. Massive speculative interventions by those in charge of “bottomless pockets”, meanwhile, could easily bring down any of these monetary systems with the exception, perhaps, of China, whose issuers of reserve currencies are insistently demanding the liberalization of the Yuan. Why this is happening is clear if you understand the nature of created and earned money. And although the leadership of the People’s Republic of China has still not made any concessions to this pressure, Beijing recently announced plans to relax state control over the national currency.
So it seems that there is a way out of this vicious circle and, what is more, it is relatively simple – if the means to back a new currency for payments between BRICST (why not invite Turkey to join the club?) is not foreign money and securities denominated in this money, but the natural resources, industrial potential and reserves of precious metals present in the member countries of this union.
The first step, in any event, would be for member countries to set up a mutual recognition agreement on the use of a provisional industrial-resource equivalent (PIRE) issued by the project’s General Bank. As security for the PIRE, each of the member countries would place mortgage deeds in the General Bank for carefully valued industrial facilities in their own countries; proven reserves of mineral resources; part of their gold reserves; land, forest and water resources; municipal facilities etc. Since the volumes and objects of the mortgage could easily change with the replacement of mortgage deeds either to decrease a country’s share or increase it, member countries would have the opportunity to vary not only the exchange ratio of local currencies to the PIRE, but also the volume of emissions as and when needed. An emission centre represented by a General Bank would be a “bottomless pocket” of created (rather than earned) money, backed one hundred percent, unlike the dollar and the euro, by the most valuable resources that exist today. It would also be backed by industrial potential.
The power of the economies of the BRICS(T) countries and the volume of their natural resources would theoretically allow PIRE to turn into an extremely attractive unit of international payments in a relatively short time, and the project’s member countries to change from countries earning money to countries creating money and receiving the maximum profit from emissions.
© Strategic Culture Foundation

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Obey: The Routine Of Obedience

The Corporation State

Video Documentary

“We’re an animal of habit, we live, fight and ultimately die for our habits.”

This is a film based on the book “Death of the Liberal Class” by journalist and Pulitzer prize winner, Chris Hedges.

It charts the rise of the Corporate State, and examines the future of obedience in a world of unfettered capitalism, globalisation, staggering inequality and environmental change.

The film predominantly focuses on US corporate capitalism, but it is my hope that the viewer can recognise the relevance of what is being expressed with regards to domestic political and corporate activity.

It was made completely of clips found on the web.

Posted February 21, 2013

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The Magic Of The Market Subprime Banking Mess

Humor – Video

John Bird and John Fortune (the Long Johns) brilliantly, and accurately, describing the mindset of the investment banking community in this satirical interview.

Broadcast February, 2008

From Detroit to Cyprus, Banksters in Search of Prey

By Glen Ford

March 23, 2013 “Information Clearing House –Black Agenda Report” – From Nicosia, Cyprus, to Detroit, Michigan, the global financial octopus is squeezing the life out of society, stripping away public and individual assets in a vain attempt to fend off its own, inevitable collapse. The bankers “troika” that effectively rules Europe prepares to reach into the individual accounts of ordinary depositors on the island nation of Cyprus to fund the bailout of their local banking brethren. Across the Atlantic, a corporate henchman makes arrangements to seize the assets and abolish the political rights of a Black metropolis. The local colorations may vary, but the crisis is the same: massed capital is devouring its social and natural environment. Either we liquidate the banksters, or Wall Street will liquidate us.

The proposed seizure of a big chunk of every ordinary Cypriot depositors’ accounts, in the guise of a one-time “tax,” was shocking even by the standards of the Euro Zone’s overlords: the International Monetary Fund, European Central Bank and European Commission. The original diktat to finance new lines of credit for Cyprus’s over-extended banks called for snatching 6.75 percent of the cash of customers with balances below 100,000 euros ($129,500), and 9.9 percent above that threshold. When the public went berserk, it was proposed that depositors with 20,000 euros or less be spared – but Cypriot lawmakers balked. The banks are now closed, to prevent people from withdrawing their money. But Europe’s ruling triumvirate at the bankers’ lair in Brussels continues to demand that the public-at-large pay to keep the global criminal financial enterprise humming, or be starved out. “In the absence of this measure, Cyprus would have faced scenarios that would have left deposit-holders significantly worse off,” they said – disaster banksterism.

A rapscallion Black lawyer for the notorious corporate law firm Jones Day delivered the bankers’ ultimatum to Detroit. Emergency financial manager Kevyn Orr, anointed by Michigan’s Republican governor, is a bankruptcy specialist whose mission is to liquidate the assets of the 82 percent Black city, especially the revenue-producing Water and Sewerage Department. Orr’s firm’s clients – which, according to their website, include “more than half of the Fortune 500 companies” – have plenty of experience at liquidating in Detroit. Butch Hollowell, general counsel for the local NAACP, says Wells Fargo has “done more foreclosures in Detroit and the state of Michigan than any other firm,” and is Detroit’s number one property tax scofflaw. Jones Day also represents Bank of America, JP Morgan Chase and CitiGroup.

“These are firms that not only got billions in TARP bailouts, but they’re also the same ones that defrauded people into signing these predatory leases which cause the crash of the housing market,” said Hollowell. “Detroit has been hit harder than anyplace in the country on that score” – hugely aggravating the city’s money problems. Financial manager Kevyn Orr’s job is to extract more booty from Detroit for the bankers’ vaults.

To facilitate the theft of the city’s property, its citizens must first be stripped of their political and civil rights, through the neutering of their elected officials. Orr looks forward to the project. “While I understand there’s a lot of concern and emotion behind the concept that I’m depriving people of certain rights,” he said, “actually it’s very consistent with both the history of this country and specifically in this state.” What he’s about to do “is democracy in action.”

This corporate concept of democracy has already devalued the franchise of the 49 percent of Michigan’s Black population that live in municipalities and school districts under the thumb of outside financial managers, a violation of both the Voting Rights Act and the one man-one vote rule embodied in the 14th Amendment, says the NAACP’s Hollowell.

Black Baptist pastors and the AFSCME and UAW unions will join the NAACP’s planned legal action against the “hostile takeover” of Detroit – which is fine, as a civil rights response. But this is a much bigger battle.

Detroit and the people of Cyprus share the same enemy, a class that is beyond the reach of simple civil rights suits. The Lords of Capital on Wall Street and the City of London and the Federal Reserve in Washington and in the “troika” at Brussels confront their own existential crisis, which compels them to liquidate the public sector so that it can eventually be transferred to their own balance sheets. There are many ways to accomplish this, through privatization of existing public institutions, or by simply blowing a hole in public services and allowing privateers to fill the void, subsidized by public funds. However, nothing can save the banksters from inevitable, and increasingly imminent, collapse. Ever-increasing profit margins must be achieved, somehow, or the system implodes. Hundreds of trillions of notional dollars in derivatives must be serviced and fed by a class that makes nothing and can only survive by chicanery and coercion by governments under their control.

In Cyprus, they are prepared to brazenly snatch euros directly from working and retired people’s accounts to fund a bank bailout, without even bothering to construct a convoluted pathway from the victims’ accounts to their own. They have reached the point of outright confiscation, and will not stop until they have stripped society of the potential to save itself from the ruins.

We have no choice but to confiscate them – to destroy them utterly as a class.

BAR executive editor Glen Ford can be contacted at

© 2013 Black Agenda Report

If Corporations Don’t Pay Taxes, Why Should You?

By Robert Scheer

March 12, 2013 “Information Clearing House –TruthDig –  Go offshore young man and avoid paying taxes. Plunder at will in those foreign lands, and if you get in trouble, Uncle Sam will come rushing to your assistance, diplomatically, financially and militarily, even if you have managed to avoid paying for those government services. Just pretend you’re a multinational corporation.

That’s the honest instruction for business success provided by 60 of the largest U.S. corporations that, according to a Wall Street Journal analysis, “parked a total of $166 billion offshore last year” shielding more than 40 percent of their profits from U.S. taxes. They all do it, including Microsoft, GE and pharmaceutical giant Abbott Laboratories. Many, like GE, are so good at it that they have avoided taxes altogether in some recent years. 

But they all still expect Uncle Sam to come to their aid with military firepower in case the natives abroad get restless and nationalize their company’s assets. We still have a blockade against Cuba because Fidel Castro more than a half century ago dared seize an American-owned telephone company. During that same period, we have consistently intervened to maintain the lock of U.S. corporations on the world’s resources, continuing to the present task of making Iraq and Libya safe for our oil companies. 

America’s multinational corporations still need the Navy to protect shipping lanes and the Commerce Department to safeguard U.S. copyrights. They also expect the Federal Reserve and Treasury Department to intervene to provide bailouts and cheap money when the corporate financial swindlers get into trouble, like GE, which almost went aground when its GE Capital financial wing got caught in the great banking meltdown. 

They want a huge U.S. government to finance scientific breakthroughs, educate the future workforce, sustain the infrastructure and provide for law and order on the home front, but they just don’t feel they should have to pay for a system of governance, even though it primarily serves their corporate interests. The U.S. government exists primarily to make the world safe for multinational corporations, but those firms feel no obligation to pay for that protection in return.

Think of that perfectly legal and widespread racket when you go to pay your taxes in the next weeks, and consider that you have to make up the gap left by the big boys’ antics. Also, when you contemplate the painful cuts coming because of the sequester that undoubtedly will further destabilize the economy, remember that, as the Wall Street Journal estimated, the tax savings of just 19 of those companies would more than cover the $85 billion in spending reductions triggered by the congressional budget impasse.

The most skilled at this con game are the health care and technology companies, which, as a Senate investigation last year revealed, have become quite expert at shifting marketing rights and patents offshore to low-tax countries. Microsoft boosted its foreign holdings by $16 billion last year, and by the end of the company’s fiscal year on June 30, 2012, had $60.8 billion stashed internationally. Through creative accounting, Microsoft was able to claim that only 7 percent of its pretax profit last year was domestically generated.

Oracle increased its foreign holdings by one-third, including new subsidiaries in low-tax Ireland, and thereby was able to add a cool $272 million to the company’s bottom line by avoiding U.S. taxes. Abbott estimates that it saved $1.6 billion in U.S. taxes through its operations in more than a dozen countries. By moving $8.1 billion of its profits overseas, Abbott was able to claim a pretax loss on its U.S. operations. Johnson & Johnson, another health industry giant, has almost all of its cash—$14.8 billion out of $14.9 billion—abroad, yet still claims to be a U.S. company. 

One of the longtime leaders in offshore tax avoidance has been that once-American-as-apple-pie company GE, which in a more innocent time hired Ronald Reagan to advertise its wares. Now GE has nearly two-thirds of its jobs abroad, avoided U.S. taxes in the previous two years and has $108 billion stashed overseas.

Two years ago, President Obama appointed GE CEO Jeffrey Immelt to chair his Jobs Council, despite the fact that Immelt had cut his company’s U.S. workforce by a fifth. GE’s expertise is no longer in appliance manufacturing, a division Immelt has tried to shed, but rather in financial manipulation. 

GE Capital was a leader in the financial scams that still haunt the U.S. economy, and Immelt has been most effective in lobbying Washington politicians to rig the tax laws to benefit his and other multinational corporations. He has created some jobs, but unfortunately, they are abroad, along with his company’s untaxed profits. 

For all these multinational corporations, the love of profit trumps loyalty to country.

The financial aristocracy and the growth of working class struggle

4 March 2013

Last year, nine executives at four major private equity companies received a combined total of $1 billion in pay and dividends in what was likely the largest payout in the companies’ histories.

This extraordinary fact was reported in an article in the weekend edition of the Wall Street Journal. The article noted that dividend payouts alone amounted to more than $100 million each for Stephen Schwarzman, CEO of Blackstone Group LP; Henry Kravis and George Roberts, the co-founders of KKR; and Leon Black of Apollo Global Management LLC. All of these men were already billionaires, with Schwarzman worth $5.2 billion, followed by Kravis at $4 billion, Roberts at $3.7 billion, and Black at $3.5 billion.

The average payout for each of the nine executives was about 2,000 timesthe median household income in the United States.

This report is another example of the obscene concentration of wealth in America that has raised inequality to a level not seen in more than a century. Wages for workers in the United States are at their lowest level since the 1950s.

Meanwhile, massive cuts are being implemented at every level of government, justified by the claim that “there is no money” for health care, education or other basic social needs.

The same day that the Journal reported the income of the Wall Street private equity executives, the federal government began the implementation of $1.2 trillion in “sequester” budget cuts, and Michigan Governor Rick Snyder announced that he would appoint an emergency financial manager with dictatorial powers to impose cuts in Detroit.

The Obama administration has indicated that the brutal cuts under the “sequester” will not be reversed. The across-the-board cuts in social spending are the outcome of calculated maneuvers by the Democrats and Republicans to impose extremely unpopular measures that both parties support. Among the many consequences, those receiving long-term unemployment benefits will see their weekly income fall 11 percent to $260. The weekly take of each of the Wall Street executives cited by the Journalwas more than 7,000 times this amount.

These figures point to the overwhelmingly dominant factor of American life: social inequality. Repeated surveys have shown that the great mass of the people significantly underestimate the scale of the wealth concentrated in the hands of the financial elite. It is little talked about in the media, and for most people the sums of wealth controlled by this layer are simply incomprehensible.

An immense and unbridgeable chasm exists between the conditions of life for masses of people—suffering from the greatest economic and social crisis since the 1930s—and a ruling class whose wealth is almost entirely divorced from productive activity in the real economy.

In terms of the political response, the contrast to the 1930s is instructive. In introducing the Revenue Act of 1935, which increased tax rates on high incomes and estates, President Franklin D. Roosevelt stated, “Great accumulations of wealth cannot be justified on the basis of personal and family security.”

Such a conception—advanced by Roosevelt as part of the effort to save capitalism from the threat of social revolution—belongs to another age. It is completely outside of the boundaries of contemporary bourgeois politics. Now the watchword is for ever greater attacks to make the working class pay for the crisis of the capitalist system.

The American ruling class bears all the hallmarks of an aristocracy, with all that implies for social and political stability. When the existence of the ruling class and the economic system upon which it is based become inimical to any progressive development—when instead they become the driving force for an immense historical retrogression—society is on the verge of revolution. This was true in France before 1789 and Russia before 1917, and it is true in the United States today.

For 30 years, the American ruling class has built up its wealth through a process of financialization, in which the productive forces of the economy were steadily undermined. This process led to the Wall Street collapse of 2008, which has become the occasion for an even more frenzied orgy of speculation.

Definite policies have been pursued, first under Bush and then vastly expanded under Obama, to ensure that this process continues. The financial elite is addicted to an unending stream of virtually free money pumped into the markets by the US Federal Reserve. After a quick fix of bailouts in the wake of the 2008 crash, the American central bank is mainlining a steady supply of dollars by means of asset purchases on the order of $85 billion a month.

This is what is behind the massive rise in stock prices upon which the wealth of the private equity executives is based, and it is the reason why the Dow Jones Industrial Average is within a few percentage points of setting a new record, even as economic growth stalls and begins to go in reverse.

The malignant character of social relations infects every political institution. The entire organism stinks of corruption. Both political parties, the Democrats and Republicans, function as direct instruments for the enrichment of the ruling class.

Nothing can be changed through this political system. Social struggle is required. The working class must fight back, countering the dictates of the ruling elite through collective action. Social conflict is, indeed, inevitable. It has already begun to emerge in explosive forms in countries around the world, and the first signs of the coming eruption can be seen in the United States itself.

For these struggles to succeed, however, opposition must be based on a clearly worked out political program—one that is directed against the entire structure of the existing social system. Capitalism is historically bankrupt. It must be replaced by a new and higher organization of society—socialism.

The Socialist Equality Party is leading the fight to build a working class movement to overturn the capitalist system and reorganize society on the basis of social need, not private profit. We propose the following measures:

* The taxation of all income over $1 million at a rate of 90 percent. An increase in taxation to this level would only return tax rates to where they stood in the 1950s. However, this measure is completely excluded by the existing political system, in which the two parties haggle over whether to raise the top rate a couple of percentage points while plotting to slash corporate taxes.

* The confiscation of all wealth accumulated through financial speculation. The members of the financial aristocracy should be treated as what they are: social criminals. They should face prosecution, along with those who have abetted their crimes.

* The nationalization of the banks and major corporations—with compensation for small shareholders—and their transformation into public utilities run in the interest of social need, not private profit. The wealth they produce must be utilized for the betterment of society.

Through such measures, the resources can be found to meet the basic needs of society and secure the social rights of the working class, including the right to a job at a decent income and the right to housing, health care, education and a comfortable retirement.

The socialist transformation in the United States must be part of an international movement. All around the world, the same basic questions are posed. We urge all those who agree with these demands to contact and join the Socialist Equality Party and fight to popularize this program among working people and youth.

Andre Damon and Joseph Kishore

The 40% Revolution Hidden Secrets of Money: Mike Maloney

“We are entering the greatest financial crisis the world has ever known.”
Your true wealth is your time and freedom, money is just a tool for trading your time.

Who is Mike Maloney? Mike Maloney is the author of the world’s best selling book on precious metals.

Posted March 02, 2013

Israeli Ministry launches ‘Palestinians only’ buses: Several bus drivers told Ynet that Palestinians who will choose to travel on the so-called “mixed” lines, will be asked to leave them.

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Corrupt Capitalism – The Denial of Equality of Opportunity

By Dr Adnan Al-Daini
February 25, 2013 “Information Clearing House” – (Huffington Post) – Those who have been successful in society anywhere in the world either in business, the professions, academia or political achievements fall into two categories: either they consider themselves fortunate, or attribute their achievements to their hard work and relentless drive.
If they belong to the first they will show compassion and concern, and endeavour to be fair in their dealings with those of modest achievement. Those who belong to the second tend to be dismissive of the economic plight of the poor and vulnerable, and put the entire blame at their door.
Let us put the morality of these two positions aside and look at the evidence to see which view is supported by the facts. How good is Britain in providing equal opportunities to its citizens? An OECD study examines this issue through a measure termed “intergenerational social mobility” defined as:
“[Intergenerational social] mobility reflects the extent to which individuals move up (or down) the social ladder compared with their parents. A society can be deemed more or less mobile depending on whether the link between parents’ and children’s social status as adults is looser or tighter. In a relatively immobile society an individual’s wage, education or occupation tends to be strongly related to those of his/her parents.”
Where does Britain come under the above definition? The report compares twelve developed OECD countries. Britain comes out as the most socially immobile country, followed closely by Italy and USA. Denmark has the best intergenerational social mobility, and the two countries closest to Denmark are Australia and Norway. The figures show that a child growing up in a poor family in Denmark has three times the chance of doing better than his/her parents than a child growing up in Britain, USA or Italy.
A child does not choose his/her parents; a fair society is one that gives him/her the opportunity to have a life economically more rewarding than the parents; it is also a waste of the latent talent in society. A country competing in the world to bring prosperity to its people cannot afford not to fully utilize their talents.
Of course, exceptional people with a bit of luck may break through barriers, achieving greatly in spite of the weight of disadvantage and deprivation on their shoulders, but such people are the exception.
The report identifies education as the means through which those of poor background can break through the disadvantage barrier. However, policies enacted by this government are making this harder.
Alan Milburn, the government’s social mobility tsar, condemned the abolition of the education maintenance allowance that was designed to help poor students access further education. The hike in university fees is already disproportionately putting off many poor talented students from going to university.
The policies of austerity and cuts that are predominantly impacting the poor and vulnerable are accelerating income and wealth inequalities in our society.
The dire position of Britain with regard to social mobility is being worsened with time, deepening and entrenching divisions, and diminishing equality of opportunity for all. For Britain to succeed economically our politicians should be striving to improve our position and not make it worse. This corrupted form of capitalism is unjust, unfair, and bad for the economy.
If you want to know what privilege is, you need look no further than the influence of top private schools in Britain. The statistics given in the report by the all-party parliamentary group on social mobility say it all:
“24% of vice-chancellors, 32% of MPs, 51% of top medics, 54% of FTSE-100 chief execs., 54% of top journalists, [and] 70% of High Court judges went to private school. Though only 7% of the population do.”
Mr. Cameron said: “I am not here to defend privilege; I am here to spread it”. This is akin to saying – I want everyone to win the lottery – and just as meaningless.
Action may only follow if those privileged realize their good fortune to be born with “a silver spoon in their mouth”. Only then do they feel the need to address the inequalities in opportunity embedded in our society. Can it be done? If Denmark, Australia and Norway can do it, why can’t we!
Dr Adnan Al-Daini took early retirement in 2005 as a principal lecturer in Mechanical Engineering at a British University. His PhD in Mechanical Engineering is from Birmingham University, UK. He is a British citizen born in Iraq. Since retirement he has devoted his time and energy to building bridges and understanding between minority communities, particularly the Muslim community and the wider community in the South West of England. 
Follow Adnan Al-Daini on Twitter:
This article was originally posted at Huffington Post

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The corporate buyout surge and economic parasitism

22 February 2013

This month has seen a surge in corporate mergers and acquisitions on a scale not seen since before the 2008 financial meltdown. Last Thursday, Berkshire Hathaway, led by multi-billionaire Warren Buffett, announced plans to buy H. J. Heinz, the food condiment maker, for $23 billion. The same day, American Airlines and US Airways announced plans for an $11 billion merger.

The previous week Michael S. Dell and a group of private equity backers announced plans to buy out computer maker Dell Inc. for $24 billion, and Liberty Global agreed to a $16 billion deal to buy British cable television provider Virgin Media.

The list goes on. This week, CVC Capital Partners, a British private equity company, announced it is preparing the largest leveraged buyout in continental Europe since the 2008 crash.

So far this year, US mergers and acquisitions have totaled $158.7 billion, double the figure for the same period last year.

These buyouts, despite coming amidst a string of indices showing a further weakening of the real economy, have prompted much talk in the media of an economic turnaround. “Mergers Make Comeback: Market Rises and Economy Strengthens,” declared a front page headline of the New York Times last Friday. The claim was rendered particularly absurd by the fact that on the previous day the euro zone had reported its worst quarterly economic contraction since 2009.

Far from heralding a genuine economic recovery, these mergers and acquisitions are entirely parasitic. They do not add one iota of real value to the economy; they do not expand the productive capacity of society; they do not provide new jobs. They are purely financial operations enabling speculators to grow richer through an expansion of paper values that only add to the already existing mountain of debt.

The actual economic and social impact of these types of mergers and buyouts is destructive. They are the prelude to downsizing and cost-cutting involving the closure of facilities and elimination of jobs, inevitably accompanied by new demands for wage cuts and speedups.

These financial manipulations are the means by which the ruling class redistributes wealth from the bottom to the top of society. The ballooning debt that sustains the obscene personal fortunes of the financial aristocrats must, in the end, be paid back. And it is the working class that is to be made to do the paying—through brutal austerity policies backed up by state violence and repression.

The renewed surge in the most predatory forms of speculation is not simply the result of impersonal economic forces. It is, rather, the intended outcome of definite policies pursued by governments and central banks throughout the world, led by the Obama administration and the Federal Reserve in the US. They are seeking to inflate the prices of financial assets—stocks, bonds, derivatives—while they prosecute an economic war against working people.

The first step in this process was the bailout of the banks following the 2008 financial crash. Then came the turn to austerity to make the working class pay the bill for the debts that had been shifted from the banks to the public treasury. This has been supplemented by a policy of monetary stimulus—the printing of trillions of dollars—to pump virtually unlimited funds into the banks and financial markets. These institutions are being subsidized with virtually free credit, which they can use as they see fit to reap super profits.

One of the means of leveraging this cheap credit into mega-profits is to buy up corporations, banks, etc., get control of their cash hoards, load the merged company up with debt, and ruthlessly slash the jobs and wages of the workers.

The souped-up prices on global stock markets facilitate such deal-making, which, in turn, tends to propel stock prices even higher. Global equities hit a new record Wednesday, and the NASDAQ, having fully recovered its losses from 2008, has hit highs not seen since the dot-com bubble at the beginning of the 2000s.

Further contributing to the wave of buyouts is the vast hoard of cash sitting unused on corporate balance sheets. In the third quarter of 2012, corporations held $1.7 trillion in cash, according to the Federal Reserve. But investment in productive activity is contracting. Last quarter, the US economy shrank and business investment seized up even further.

The very fact that four-and-a-half years after the crash, under conditions where there has been no recovery in the real economy, the speculative frenzy is reaching new heights, not just in one or another country, but all over the world, points to the fact that this type of parasitism is integral to the capitalist system, and not a mere blemish on an otherwise healthy organism.

One might add the fact that not a single executive of any major financial institution responsible for plunging the world into the economic abyss has been held accountable. Why? Because this parasitic financial elite exerts a de facto dictatorship over governments and official institutions, and is, in practice, above the law.

All talk of reining in financial speculation while retaining the framework of capitalism, or reforming the system to make it more rational and just, is the product either of naivety, self-delusion or deliberate deception. The system cannot be reformed. It must be replaced.

The current financial boom cannot last. It rests on foundations of sand. A vast edifice of speculative and financial manipulation, sustained by constant injections of central bank cash, bestrides a stricken economy that is sinking further into the abyss. The house-of-cards character of the situation is seen in the panicky response of the markets this week to the publication of Federal Reserve minutes reflecting concerns over the massive expansion of the central bank’s balance sheet. Any hint of a slowdown in the mainline injections of cash sends shudders throughout the financial system.

The most basic social needs of the working class, whose labor is the real source of all wealth, are incompatible with a continuation of this system and the rule of financial parasites. This fact is increasingly making itself felt in the consciousness of the working class.

In the great class battles ahead, the program of socialist revolution—breaking the dictatorship of the financial elite and reorganizing economic life on the basis of social equality and the common good—must become the guiding principle of the struggle of working people all over the world.

The authors also recommend :

The capitalist crisis and the return of history
[26 March 2009]

Andre Damon and Barry Grey

Money Is A Form Of Social Control

Financial Suicide

Most Of Us Spend Our Entire Lives Trapped In An Endless Cycle of Debt That We Never Escape Until We Die, Those That Own Our Debts Keep Getting Richer!

By Michael Snyder

February 20, 2013 “Information Clearing House” – Is America really “the land of the free”?  Most people think of money as simply a medium of exchange that makes economic transactions more convenient, but the truth is that it is much more than that.  Money is also a form of social control.  Just think about it.  What did you do this morning?  Well, if you are like most Americans, you either got up and went to work (to make money) or to school (to learn the skills that you will need to make money).  We spend a great deal of our lives pursuing the almighty dollar, and there are literally millions of laws, rules and regulations about how we earn our money, about how we spend our money and about how much of our money the government gets to take from us.  Not that money is a bad thing in itself.  Without money, it would be really hard to have a modern society.  Unfortunately, our money is based on debt, and debt levels in the United States have exploded to absolutely unprecedented levels in recent years.  The borrower is the servant of the lender, and if you are like most Americans, nearly every major purchase that you make in your life is going to involve debt.  Do you want to get a college education so that you can get a “good job”?  You are told to get a student loan.  Do you want a car?  You are encouraged to get an auto loan and to stretch out the payments for as long as possible.  Do you want a home?  You are probably going to end up with a big fat mortgage.  And of course I could go on and on and on.  The cold, hard truth of the matter is that most Americans are debt slaves.  Most of us spend our entire lives trapped in an endless cycle of debt that we never escape until we die, and meanwhile our years of hard labor are greatly enriching those that own our debts.

Have you ever found yourself wondering why you can never seem to get ahead financially no matter how hard you work?

Well, it is probably because you have gotten yourself enslaved to debt.

Just consider the following example about credit card debt from aformer Goldman Sachs banker

On the debt side of things, how much does your credit card company earn if you carry just an average of a $5,000 credit card balance, paying, say, 22% annual interest rate (compounding monthly) for the next 10 years?

In your mind you owe a balance of only $5,000, which is not a huge amount, especially for someone gainfully employed.  After all, $5,000 is just a quick Disney trip, or a moderately priced ski-trip, or that week in Hawaii.  You think to yourself, “how bad could it be?”

The answer, including the cost of monthly compounding, is $44,235, or about 9 times what it appears to cost you at face value.

But a large percentage of Americans never pay off their credit cards at all.  They make small payments each month, but then they just keep on adding to their balances.

In the end, that is financial suicide.

If you carry an “average balance” on your credit cards each month, and those credit cards have an “average” interest rate, you could end up paying millions of dollars to the credit card companies by the end of your life…

Let’s say you are an average American household, and you carry an average balance of $15,956 in credit card debt.

Also, as an average American household, let’s assume you pay an average current rate of 12.83%.

Finally, let’s assume you carry this average balance for 40 years, between ages 25 and 65.  How much did your credit card company make off of you and your extreme averageness?

Answer: $2,629,618.64

Sadly, approximately 46% of all Americans carry a credit card balance from month to month.

How stupid can we be as a nation?

When you become enslaved to the credit card companies, your toil and sweat makes them much wealthier.  It is a form of slavery that does not require anyone pointing a gun at you.

But we never seem to learn.  Incredibly, 43 percent of all American families spend more than they earn each year.

As the chart below demonstrates, consumer credit actually declined for a short while during the last recession, but now it has turned around and the growth of consumer credit is on the same trajectory as it was before the last economic crisis…

Consumer Debt

Today, the total amount of consumer credit in the United States is 15 times larger than it was 40 years ago.

And every major “milestone” in our lives typically involves even more debt.

-The total amount of student loan debt in the United States recently passed a trillion dollars, and approximately two-thirds of all college students graduate with student loan debt at this point.

-Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago, and mortgage debt as a percentage of GDP has more than tripled since 1955.

-Car loans just keep getting longer and longer, and approximately 70 percent of all car purchases in the United States now involve an auto loan.

-Want to get married?  That average cost of a wedding is now $26,989which is probably going to mean even more debt unless you have wealthy parents.

-Do you have a serious medical problem?  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.

Are you starting to understand why approximately half of all Americans die broke?

And I have not even begun to talk about our collective debts yet.

Government debt is a collective form of debt.  You may not have voted for any of the politicians that have been racking up debt in your name, but part of it still belongs to you.

Since the year 2000, state and local government debt has more than doubled.  These are collective debts for which we are all responsible…

State And Local Government Debt

And of course the biggest collective debt of all is the U.S. national debt.

In a previous article, I discussed how the national debt has exploded out of control in recent years.  If you can believe it, the U.S. debt to GDP ratio has increased from 66.6 percent to 103 percent since 2007, and the U.S. government accumulated more new debt during Barack Obama’s first term than it did under the first 42 U.S. presidents combined.

When you break things down by household, the numbers look even more frightening.

During Barack Obama’s first four years in the White House, the amount of new debt accumulated by the federal government breaks down to approximately $50,521 for every single household in the United States.

And as I have mentioned previously, if you started paying off just the new debt that the federal government has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.

Well, you might argue, none of that debt will ever be paid off in our lifetimes.

And you would be right.

But what we are doing is consigning our children, our grandchildren and all future generations of Americans to a lifetime of debt slavery.

How nice of us, eh?

Over the past 10 years, the U.S. national debt has grown by an average of 9.3 percent per year, but the overall U.S. economy has only grown by an average of just 1.8 percent per year.

How do we expect to continue doing this?

Fortunately, more Americans are starting to wake up to how foolish all of this is.

For example, the following is what Home Depot Founder Kenneth Langone told CNBC on Tuesday…

“The fundamentals haven’t changed … And we don’t know when the storm is going to hit,” he predicted. “It has to happen.If you look at our debt to GDP, eventually you reach a point where there’s no turning back.”

He used an analogy to make his point. “If you had one meal left, and you had your grandchild with you, would you eat if or give it to your grandchild?”

He said all people would say “give it to my grandchild.”

But pursuing the president’s vision, he argued, “[Is] eating the grandchildren’s breakfast, lunch and dinner right now. And the [grandchildren] haven’t been born yet.”

What we are doing to our children and our grandchildren is beyond criminal.  We are selling away their futures in order to make our lives more pleasant.

Right now, we are stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day.

So where is the outrage over this theft?

Sadly, most Americans don’t even realize that all of this is by design.  When the Federal Reserve system was created back in 1913, it was designed to get the U.S. government trapped in an endless spiral of debt.

And it worked.  Today, the U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created.

Our society has become addicted to debt, and that means that we have become addicted to slavery.

We are not the “land of the free”.  The truth is that we are now the “land of the servants”.

Over the past 40 years, the total amount of debt owed in the United States (government, business, consumer, etc.) has grown from less than 2 trillion dollars to more than 55 trillion dollars…

Total Credit Market Debt Owed

So who benefits from all of this?

I talked about this in a previous article.  The ultra-wealthy and the international bankers make enormous profits by lending money to all the rest of us.

According to a stunning report that was released last summer, the global elite have up to 32 trillion dollars stashed away in offshore tax havens around the globe.

How did they get so much money?

The borrower is the servant of the lender.  They have gotten rich at our expense.

But most people live their entire lives without ever understanding how the game is being played.

Today, most Americans see that the Dow is back above 14,000 and they hear the mainstream media telling them that happy days are here again and so they just believe that things are going to turn out okay somehow.

And it certainly does not help that most people seem to let others do their thinking for them.  In fact, about 23% of all Americans can’t even read at this point.

So is there any hope for us?

Please feel free to post a comment with your opinion below…

This article was originally posted at The Economic Collapse

While Left And Right Fight, Power Wins

By Paul Craig Roberts

February 16, 2013 “Information Clearing House” –  My experience with the American left and right leads to the conclusion that the left sees private power as the source of oppression and government as the countervailing and rectifying power, while the right sees government as the source of oppression and a free and unregulated private sector as the countervailing and rectifying power. Both are concerned with restraining the power to oppress, but they take opposite positions on the source of the oppressive power and remedy.

The right is correct that government power is the problem, and the left is correct that private power is the problem. Therefore, whether power is located within the government or private sectors cannot reduce, constrain, or minimize power.

How does the progressive Obama Regime differ from the tax-cut, deregulation Bush/Cheney Regime? Both are complicit in the maximization of executive branch power and in the minimization of citizens’ civil liberties and, thus, of the people’s power. Did the progressive Obama reverse the right-wing Bush’s destruction of habeas corpus and due process? No. Obama further minimized the people’s power. Bush could throw us in prison for life without proof of cause. Obama can execute us without proof of cause. They do this in the name of protecting us from terrorism, but not from their terrorism.

Americans who have no experience with, or knowledge of, tyranny believe that only terrorists will experience the unchecked power of the state. They will believe this until it happens to them, or their children, or their friends.

The view of human nature held by the right and the left depends on whether the human nature is located in the private sector or the government sector (“public sector”). For the right (and for libertarians) human nature in the private sector is good and serves the public; in the government sector human nature is evil and oppressive. For the left, it is the opposite. As the same people go back and forth from one sector to the other, one marvels at the transformations of their character and morality. A good man becomes evil, and an evil man becomes good, depending on the location of his activities.

One of my professors, James M. Buchanan who won a Nobel Prize, pointed out that people are just as self-serving whether they are in the private sector or in government. The problem is how to constrain government and private power to the best extent possible.

Our Founding Fathers’ solution was to minimize the power of government and to rely on contending factions among private interests to prevent the rise of an oligarchy. In the event that contending private interests failed, the oligarchy that seized the government would not have much public power to exercise.

The Founding Fathers’ design more or less worked except for interludes of civil war and economic crisis until the cold war built up the power of government and the deregulation of the Clinton and Bush presidencies built up the power of private interests. It all came together with the accumulation of new, dictatorial powers in the executive branch in the name of protecting us from terrorists and with deregulation’s creation of powerful corporations “too big to fail.”

Now we have a government, whose elected members are beholden to a private oligarchy, consisting of the military/security complex, Wall Street and the financial sector, the Israel Lobby, agribusiness, pharmaceuticals, and the energy, mining, and timber businesses, with the power to shut down people’s protests at their exploitation by robber barons and government alike.

Vast amounts of government debt have been added to taxpayers’ burdens in order to fight wars that only benefit the military/security complex and the Israel Lobby. More vast amounts have been added in order to force taxpayers to cover the reckless gambling bets of the financial sector. Taxpayers are denied interest on their savings in order to protect the balance sheets of a corrupt financial sector. Legitimate protestors are brutalized by police and equated by Homeland Security with “domestic extremists,” defined by Homeland Security as a close relation to terrorists.

Today Americans are not safe from government or private power and suffer at the hands of both.

What can be done? From within probably very little. The right blames the left, and the left blames the right. The two sides are locked in ideological combat while power grows in the private and public sectors, but not the benevolent power that the two ideologies suppose. Instead, a two-headed power monster has risen.

If the power that has been established over the American people is to be shattered, it will come from outside. The Federal Reserve’s continuing monetization of the enormous debt that Washington is generating can destroy the dollar’s exchange value, sending up interest rates, collapsing the bond, stock, and real estate markets, and sinking the economy into deep depression at a time in history when Americans have exhausted their savings and are deeply in debt with high levels of joblessness and homelessness. The rise in import prices from a drop in the dollar’s exchange value would make survival an issue for a large percentage of the population.

Overnight the US could transition from superpower to third world penitent begging for a rescue program.

Who would grant it? The Russians encircled by US military bases and whose internal serenity is disrupted by inflows of American money to dissident groups in an effort to destabilize the Russian State? The Chinese, the government of which is routinely denounced by a hypocritical Washington for human rights abuses while Washington surrounds China with newly constructed military bases and new deployments of troops and naval vessels? South America, a long-suffering victim of Washington’s oppression? Europe, exhausted by conflicts and by Washington’s organization of them as puppet states and use of them as mercenaries in Washington’s wars for hegemony?

No country, except perhaps the bought-and-paid-for puppets of Britain, Canada, Australia, and Japan, would come to Washington’s aid.

In the ensuing collapse, the power of Washington and the power of the private robber barons would evaporate. Americans would suffer, but they would be rid of the power that has been established over them and that has changed them from a free people to exploited serfs.

This is, perhaps, an optimistic conclusion, but those relatively few Americans who are aware need some hope. This is the best that I can do. The majority of Americans remain trapped in their unawareness, which implies a bleak future. The insouciance of the American population is its downfall.

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following.

30 Major U.S. Companies Spent More on Lobbying than Taxes

By Eamon Murphy

February 15, 2013 “Information Clearing House” – Thirty large American corporations spent more money on lobbying than they paid in federal taxes from 2008 to 2010, according to a report from the nonpartisan reform group Public Campaign.

All of the companies were profitable at the time. In spite of this, and the massive federal budget deficit, 29 out of the 30 companies featured in the study managed through various legal tax-dodging measures to pay no federal income taxes at all from 2008 through 2010. The lone exception, FedEx (FDX), paid a three-year tax rate of 1%, nowhere near the 35% called for by the federal tax code.

In fact, the report explains, the 29 companies that paid no tax actually received tax rebates over those three years, “ranging from $4 million for Corning (GLW) to nearly $5 billion for General Electric (GE).” The total value of the rebates received was nearly $11 billion; combined profits during the same period were $164 billion.

The amounts spent on lobbying ranged from $710,000 by Intergrys Energy Group to $84 million by General Electric. Others that spent heavily on lobbyists were PG&E (PCG), Verizon (VZ), Boeing (BA) and FedEx. It all added up to a total of almost half a billion dollars — $476 million — over three years. Or, as the report notes, “in other words, roughly $400,000 each day, including weekends.” The same firms spent an additional $22 million on donations to federal campaigns. Logically enough, the two biggest contributors were defense contractors: Honeywell International (more than $5 million) and Boeing ($3.85 million). General Electric wasn’t far behind ($3.64 million).

For a complete list of the companies surveyed, as well as information on executive compensation, read the full report.

This article was originally posted at DailyFinance

“Financial Crime”


Financial Crime—of, by, and for our Predatory Capitalists

Posted February 13, 2013

“Financial Crime”

An Economic Alternative to Exploitative Free Market Capitalism

By Thomas Hedges

February 02, 2013 “Information Clearing House” – In 1649, a group of English communists started fighting the notion of private property in what became known as the commons movement. They were using the unstable period in England’s history to introduce a new economy, one that would see land, wells and other means of wealth as shared resources. This group would prevent a small class of people from collecting and consolidating the rights to basic human life, such as water and food. In an annual celebration that doubled as a protest, they would circle the village commons and level or dig up any hedges and fences that designated spots of private ownership. They became known as the “levelers” or “diggers.”

The movement, which was subsequently quelled in 1651 by landowners and the Council of State, has seen a revival in the past decade. It remained dormant for so many years because of its fundamental threat to modern economics, putting community needs at the center of society rather than those of the individual.

The commons protects large resources from privatization, such as the lobster fisheries in Maine or grassland management in Mongolia, and allows collectives to regulate extraction. Exploitation is avoided because no one individual has more of a right to the source than any other.

“[The commons]” is “an intellectually coherent way of talking about inalienable value, which we don’t have a vocabulary for,” David Bollier, author of “The Wealth of the Commons” said in a conference Tuesday at the Heinrich Böll Foundation in Washington, D.C.

It is a way, Bollier says, of formally introducing the “political, public policy, cultural, social, personal, even spiritual” aspects of life into our economic system, which now, he says, can deal only with monetary value.

“You could say that it’s a different metaphysics than that of the modern liberal state,” he says, “which looks at the individual as the sole agent.”

The commons movement is a reaction to exploitative free market capitalism. It rejects the notion that resources, spaces and other assets are purely a means to wealth. It condemns the privatization of public works, such as the parking meters in Chicago, which allows the sovereign wealth fund that controls it to increase the rates.

When an economy allocates wealth to private entities, Bollier says, those property rights inevitably get consolidated until a few large institutions control its means.

Instead, he says, we need to protect the commons with rules that bar individual ownership of that property. It is not, however, a space that is left as a free-for-all; it still has regulations and state recognition that prevent private groups from exploiting it.

The commons introduces a “role for organized self-governance as opposed to government,” Bollier says, “although they can be made complimentary.” The community manages the resource and has an involved interest in keeping others from decreasing its supply, he says, because the license belongs to the public.

But the commons is not restricted to natural resources—it extends to the Web, science and other technologies.

The Internet has become the setting for a fierce battle between public advocates that would like to designate forums as open and free, and companies that seek to control more of its content through bills like the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA). Many programmers have handed over their copyright ownership to the public in the form of General Public Licenses and Creative Commons licenses, which allow the public to use and contribute to forums without having to pay for usage. It also keeps companies from using personal information, as with Facebook, to target potential consumers.

Additionally, one-fifth of the human genome is privately owned through patents. Salt Lake City-based Myriad Genetics, for example, owns the breast cancer susceptibility gene, which guarantees monopoly control over research into cancer. It discourages many other researchers from exploring treatment, something that could ultimately stunt our capacity for medical advances.

The issue extends further: Monsanto uses Genetically Modified Organisms to displace natural seeds, multinational water bottle companies are privatizing groundwater, and software companies retain copyrights on mathematical algorithms that others then cannot use.

“Enclosure,” Bollier says about patents and private ownership, “is about dispossession. It’s a process by which the powerful convert a shared community resource into a market commodity … This is known as development.

“The strange thing about the commons is that it’s invisible because it’s outside of the market and the state,” Bollier says. “It’s not seen as valuable and isn’t recognized because it has little to do with property rights for markets or geopolitical power … but there’s an estimated 2 billion people around the world whose lives depend upon commons like fisheries, forests, irrigation water and so forth.”

The neoliberal market does not, paradoxically, grasp the purpose behind the commons. Our current system is one-dimensional, Bollier says, and is designed to attach a price to everything.

For years, sustainability experts have sought ways to incorporate moderation and conservation into the neoliberal model through such incentives as cap and trade. But companies, Bollier says, will pay the extra fees until it is no longer economically viable, proving that in a system of privatization, people are willing to shell out penalty payments as long as they do not disrupt their profits.

“There’s an allure in trying to meet microeconomics and neoliberal economics on its own ground,” says Carroll Muffett, moderator of the discussion and president of the Center for International Environmental Law, “to say ‘if you want to put a price on everything, here’s the price for this and look how massive the price is,’ whether it’s access to water or it’s pollination … but for me the danger is: Is meeting them on their own ground what we should be doing? Is there an inherent compromise in there that risks giving up something that ultimately cannot have a value put on it?”

Until recently, Bollier and Muffett say, there has been much wiggle room for the free market to expand. But as the basic needs of fresh water, energy and food are being overproduced or vanishing because of climate change, companies are finding that their only options are to draw from the scant resources of Third World communities to meet their profit margins. It is a test to see what, in the end, neoliberalism holds higher in value: money or life.

Muffett says that question has already been answered in the building of the coal-fired Medupi Power Station in South Africa. An assessment of the power station projected that there wouldn’t be enough water to keep the plant operating and meet the needs of the local community. The watershed adjacent to the plant is already so overtaxed that it doesn’t reach the sea. The company, Eskom, proposed to reroute water from another watershed for its main operation and use the local supply for its filtration system. It would raise the price of water for the community to keep “poachers” from draining the source.

“The water that’s being poached,” Muffett says, “is to give people access to fresh water and to water their crops for subsistence living.

“Putting a price on that for a community is ultimately missing the point. The water isn’t fungible. If I give you my gallon of water and you give me $1,000, I can’t drink the thousand dollars.”

Both Bollier and Muffett say this is the result of an economy based on the philosophies of Thomas Malthus and John Locke, whose models do not guarantee the right of existence. To exist, one must have money. It becomes the defining characteristic of life.

“That’s the risk in the natural capital approach,” Muffett says. “It’s saying ‘if you give me a thousand dollars, that’s a substitute for my bees, my pollinators, for the land where my ancestors are buried.’ And there is no substitute for that.”

Thomas Hedges, Center for Study of Responsive Law

This article was made possible by the Center for Study of Responsive Law.

This article was originally posted at TruthDig

To End Extreme Poverty, Let’s Try Ending Extreme Wealth

The world’s wealthy gathered in the Alps again last week to discuss how to ‘solve’ the world’s problems. The world’s biggest problem, suggests one top global anti-poverty outfit, may be their fortunes.

By Sam Pizzigati

January 29, 2013 “Inequality” — Apologists for inequality have a standard retort to anyone who calls for a more equal distribution of the world’s treasure. If you took all the wealth of the wealthy and divvied it up equally among all the poor, the retort goes, no one would gain nearly enough to accomplish much of anything.

Oxfam International, one of the world’s premiere anti-poverty charitable organizations, would beg to differ. The world’s top 100 billionaires now hold so much wealth, says a new Oxfam report, that just the increase in their net worth last year would be “enough to make extreme poverty history four times over.”

“Oxfam’s mission is to work with others to end poverty,” Oxfam analyst Emma Seery noted last week. “But in a world with limited resources, this is no longer possible without an end to extreme wealth.”

Oxfam timed its new analysis, The cost of inequality: how wealth and income extremes hurt us all, to appear right on the eve of last week’sWorld Economic Forum in Davos, Switzerland. This earnest “issues” confab annually brings together a glittering array of global business and political leaders.

The world’s corporate and financial elites began this January trek into the Alps back in 1971. But the Davos sessions really didn’t start grabbing big-time global media attention until the go-go 1990s.

“Throughout the boom years,” as a UK Guardian profile last week noted, “chief executives would gather every winter high up in the Swiss Alps to discuss in a lordly fashion the world economy and how it could be revised to suit their objectives and views.”

But in these days of deep global economic uncertainty, the power suits that frequent Davos have lost their mojo — and even feel pressured to address the global economic inequality they’ve so long tried to sweep under the rug.

That pressure last week came from figures like Christine Lagarde, the former French finance minister who now directs the International Monetary Fund. Lagarde blasted outsized executive pay in high finance, attacked bankers for lobbying against new regulation, and called for more “robust social safety nets.”

Oxfam, for its part, is calling for much bolder steps to narrow the stunning gap between the global uber rich and everyone else. The group is urging world leaders to “commit to reducing inequality to at least 1990 levels.”

Meeting that goal, the new Oxfam report relates, would require a wide range of measures, everything from far more steeply graduated income tax rates to actual pay caps that limit how much corporate executives can take home to a multiple of what the lowest-paid workers in the firms they run are making.

Oxfam is also emphasizing the importance of cracking down on offshore tax havens. As much as a quarter of global wealth now sits shielded offshore.

But don’t hold your breath waiting for the Davos crowd to buy into any of this bolder agenda. Even the modest reforms that the IMF’s Lagarde urged last week found no wide support among the corporate and banking movers and shakers who ambled up to the Alps for this year’s Davos gathering.

One American on hand for the 2013 Davos festivities, JPMorgan Chase chief exec Jamie Dimon, made no move to hide his distaste for reformers. Bank regulators, he charged, were “trying to do too much, too fast” — and spreading “huge misinformation” about the noble work underway at banks like his.

“We’re doing the right thing,” Dimon assured his fellow Davos notables.

Other global corporate notables at Davos sang a similar tune. Azim Premji, the chairman of the Bangalore-based Indian high-tech giant Wipro, admitted that the new Oxfam data — on how the richest 100 people in the world are earning much more than enough to end the world’s worst poverty — do “sadden” him.

But Premji declined in an interview to term the incredible concentration of the world’s wealth in any way “unethical.” We need not waste time, he suggested, worrying about “redistribution.” We need instead to help the rich grasp their “obligation,” their “trusteeship responsibility,” to wield their wealth for good.

Trust the rich, in other words, to solve our problems.

Not on your life, says Oxfam.

In a world where even basic resources such as land and water are increasingly scarce,” Oxfam’s Jeremy Hobbs sums up, “we cannot afford to concentrate assets in the hands of a few and leave the many to struggle over what’s left.”

Veteran labor journalist Sam Pizzigati, an Institute for Policy Studies associate fellow, writes widely about inequality. His latest book, The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, has just been published.

Wrist Slap for ‘Too Big to Fail or Jail’ JPMorgan Chase

By Tom Burghardt

January 22, 2013 “Information Clearing House” -With money laundering “lapses” and CEO mea culpas all the rage on Wall Street and the City of London, you would think that Hope and Change™ grifter Barack Obama’s Justice and Treasury Departments would want to send a strong message to banksters who break the law.

You’d be wrong of course.

‘There’s Nothing to See Here…’

While the financial press is all aflutter over news that JPMorgan Chase (JPMC) CEO Jamie Dimon had his annual pay package cut by 50 percent, from $23 million (£14.5m) to $11.5 million (£7.25m) over $6.2 billion (£3.91bn) in losses in the risky derivatives market, you’d almost believe that Dimon was lining up for food stamps or hunting down mittens to stave off New York’s bone-chilling winter.

Despite allusions to what are euphemistically called “bad bets” by JPMC trader Bruno Iksil, the so-called “London Whale” on the hook for proverbial “shitty deals” that cost shareholders billions, Bloomberg News reported that JPMC’s “fourth-quarter profit rose 53 percent, beating analysts’ estimates as mortgage revenue more than doubled on record-low interest rates and government incentives.”

Incentives? Now there’s a polite word for a megabank with more than $2.3 trillion (£1.45tn) in assets handed some $600 billion (£378.24bn) in TARP funds, which included Federal Reserve engineered deals for their buy-out of Bear Stearns and Washington Mutual that wiped out shareholder equity as the capitalist system threatened to implode in 2008.

Adding to the sleaze factor, it emerged in 2011 that JPMC had wrongfully overcharged thousands of military families on their mortgages, including active duty personnel serving in Afghanistan. As a result of a class-action lawsuit, the bank was forced to admit they had illegally overcharged 6,000 active duty military personnel, had seized the homes of 18 military families and then paid out $27 million (£17.05m) in compensation. At a shareholder’s meeting later that year Dimon “apologized” for the “error” and lending chief David Lowman fell on his sword as he was shown the door.

Talk about stand-up guys!

And never mind, as Rolling Stone’s Matt Taibbi pointed out, “at the same moment that leading banks were taking trillions in secret loans from the Fed, top officials at those firms were buying up stock in their companies, privy to insider info that was not available to the public at large.”

While drug-tainted Citigroup’s former CEO Vikram Pandit “bought nearly $7 million in Citi stock in November 2008, just as his firm was secretly taking out $99.5 billion in Fed loans,” that other paragon of banking virtue, Jamie Dimon, who “respects” the JPMC board’s decision to slice his pay in half “bought more than $11 million in Chase stock in early 2009, at a time when his firm was receiving as much as $60 billion in secret Fed loans.”

Such “stock purchases by America’s top bankers,” Taibbi wrote, “raise serious questions of insider trading.” Yet not a single bankster has been seriously investigated let alone held to account, by the Justice Department.

How sweet a year was it for JPMorgan Chase? Pretty sweet by all accounts.

Overall, Bloomberg reported, “revenue increased 10 percent to $23.7 billion [£14.96bn] from $21.5 billion [£13.57bn] in the fourth quarter of 2011. Annual revenue was $97 billion [£61.23bn], down from $97.2 billion [£61.35bn] the prior year.” This included investment banking fees which jumped 54 percent to $1.7 billion (£1.07bn) and revenue in the commercial banking sector which rose to $1.75 billion (£1.1bn). And with the formation of a new housing bubble due to taxpayer-subsidized record low interest rates, JPMC’s profits in the mortgage writing mill rose to $418 million (£263.5m) in 2012, compared to losses which topped $263 million (£165.8m) a year earlier.

But far from being a sign that the economic black hole opened by 2008’s financial collapse has contracted, there’s bad news on the horizon for distressed homeowners and taxpayers who will be forced to pay the piper for the next round of predatory loans.

As analyst Mike Whitney recently pointed out in CounterPunch a new rule defining a “qualified mortgage” by the US Consumer Financial Protection Bureau “creates vast new opportunities for the nation’s biggest banks to engage in predatory lending practices with impunity.”

According to Whitney, while the financial press have described the rule “as an attempt to protect borrowers from the risky types of loans that caused the financial crisis, the opposite is true. The real purpose of the rule is to provide legal protection for the banks from homeowner lawsuits, and to lay the groundwork for more reckless lending that could inflate another housing bubble.”

“In other words,” Whitney noted, “the rule was designed to serve the interests of the banks and the banks alone. This is why bankers everywhere are celebrating the final draft.”

Never mind that leading financial institutions were forced to cough up $25 billion (£15.76bn) in a settlement with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve over shady foreclosure practices and wrongful homeowner evictions that ruined millions of lives.

JPMC’s $2 billion (£1.26bn) portion of the settlement, which included “a one-time pretax charge [write down] of $700 million [£441.77m] in the fourth quarter to cover the costs associated with [the] settlement” according to Bloomberg, was a pittance compared to the trillions of dollars in assets controlled by the bank.

‘A Trillion Here, a Trillion There…’

But as bad as these gift horses are, they pale in comparison with federal government inaction when it comes to policing financial predators who inflate their balance sheets with laundered drug money and loot derived from terrorist financing and organized crime.

As Yury Fedotov, the Executive Director of the United Nations Office on Drugs and Crime (UNODC), pointed out in that agency’s 2011 report, <a “=” href=” http:=”””&#8221; documents=”” data-and-analysis=”” studies=”” illicit_financial_flows_2011_web.pdf”=””>Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organized Crime: “Prior to this report, perhaps the most widely quoted figure for the extent of money laundering was the IMF’s ‘consensus range’ of between 2-5 per cent of global GDP, made public in 1998. A study-of-studies, or meta-analysis, conducted for this report, suggests that all criminal proceeds are likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009.”

The UNODC research team averred: “If only flows related to drug trafficking and other transnational organized crime activities were considered, related proceeds would have been equivalent to around US$650 billion per year in the first decade of the new millennium, equivalent to 1.5% of global GDP or US$870 billion in 2009 assuming that the proportions remained unchanged. The funds available for laundering through the financial system would have been equivalent to some 1% of global GDP or US$580 billion in 2009.”

However you slice these grim estimates, it should be obvious that banks have every incentive to remain key players in the transnational narcotics complex and will continue to do so thanks to the federal government.

Last week, the Office of the Comptroller of the Currency (OCC) released their cease-and-desist order against JPMC.

Unlike other drug money laundering banks such as Wells Fargo-owned Wachovia Bank, which agreed to a mere $160 million (£100.86m) settlement in 2010 in a deferred prosecution agreement (DPA) after admitting to laundering upwards of $368 billion (£231.99bn) for Colombian and Mexican drug cartels or the recent $1.9 billion (£1.2bn) DPA with Britain’s HSBC global financial empire, the OCC’s consent order didn’t even impose a fine on JPMC for money laundering “lapses.”

Now that’s juice!

Though short on details the order however, is a damning indictment of JPMC “indiscretions” when it comes to drug and other criminal money laundering. Keep in mind this is an institution that was slapped with an $88.3 million (£55.66m) fine less than 18 months ago for shipping a ton of gold bullion to Iran in breach of harsh Treasury Department sanctions. (I neither endorse nor support draconian sanctions imposed by the imperialists on the Islamic Republic, my purpose here is to point out the double standards which would land the average citizen in the slammer under “material support” statutes for trading with Iran). The January 2013 Consent Order stated although the Comptroller found serious “flaws” in their accounting practices, “the Bank neither admits nor denies” the following:

(1) The OCC’s examination findings establish that the Bank has deficiencies in its BSA/AML [Bank Secrecy Act/anti-money laundering] compliance program. These deficiencies have resulted in the failure to correct a previously reported problem and a BSA/AML compliance program violation under 12 U.S.C. § 1818(s) and its implementing regulation, 12 C.F.R. § 21.21 (BSA Compliance Program). In addition, the Bank has violated 12 C.F.R. § 21.11 (Suspicious Activity Report Filings).

(2) The Bank has failed to adopt and implement a compliance program that adequately covers the required BSA/AML program elements due to an inadequate system of internal controls, and ineffective independent testing. The Bank did not develop adequate due diligence on customers, particularly in the Commercial and Business Banking Unit, a repeat problem, and failed to file all necessary Suspicious Activity Reports (“SARs”) related to suspicious customer activity.

(3) The Bank failed to correct previously identified systemic weaknesses in the adequacy of customer due diligence and the effectiveness of monitoring in light of the customers’ cash activity and business type, constituting a deficiency in its BSA/AML compliance program and resulting in a violation of 12 U.S.C. § 1818(s)(3)(B).

Wait a minute, if these were “previously identified systemic weaknesses” and if JPMC “failed to adopt and implement a compliance program” that would shield the American financial system from a tsunami of drug-tainted cash annually washing through the economy, especially “in light of the customers’ cash activity and business type,” why then has OCC issued another toothless Consent Order rather than forcing the bank to comply with the law? Accordingly, federal regulators charge:

(4) Some of the critical deficiencies in the elements of the Bank’s BSA/AML compliance program, resulting in a violation of 12 U.S.C. § 1818(s)(3)(A) and 12 C.F.R. § 21.21, include the following:

(a) The Bank has an inadequate system of internal controls and independent testing.
(b) The Bank has less than satisfactory risk assessment processes that do not provide an adequate foundation for management’s efforts to identify, manage, and control risk.
(c) The Bank has systemic deficiencies in its transaction monitoring systems, due diligence processes, risk management, and quality assurance programs.
(d) The Bank does not have enterprise-wide policies and procedures to ensure that foreign branch suspicious activity involving customers of other bank branches is effectively communicated to other affected branch locations and applicable AML operations staff. The Bank also does not have enterprise-wide policies and procedures to ensure that on a risk basis, customer transactions at foreign branch locations can be assessed, aggregated, and monitored.
(e) The Bank has significant shortcomings in SAR decision-making protocols and an ineffective method for ensuring that referrals and alerts are properly documented, tracked, and resolved.

(5) The Bank failed to identify significant volumes of suspicious activity and file the required SARs concerning suspicious customer activities, in violation of 12 C.F.R. § 21.11. In some of these cases, the Bank self-identified the issues and is engaged in remediation.

(6) The Bank’s internal controls, including filtering processes and independent testing, with respect to Office of Foreign Asset Control (“OFAC”) compliance are inadequate.

How large were the “significant volumes” of “suspicious activity” alluded to opaquely? Where did they originate? Who were the “suspicious customers” and why did JPMC not have “enterprise-wide policies and procedures” after being previously ordered to do so to ensure that said “suspicious customers” at foreign bank branches didn’t include drug lords or terrorist financiers? All of these are unanswered questions for which the Obama administration should be held to account.

In fact, according to OCC’s own regulations, 12 C.F.R. § 21.21 clearly states that the federal government “requires every national bank to have a written, board approved program that is reasonably designed to assure and monitor compliance with the BSA.”

At a minimum, an anti-money laundering program “must” (this is not optional): “1. provide for a system of internal controls to assure ongoing compliance; 2. provide for independent testing for compliance; 3. designate an individual responsible for coordinating and monitoring day-to-day compliance; and 4. provide training for appropriate personnel. In addition, the implementing regulation for section 326 of the PATRIOT Act requires that every bank adopt a customer identification program identification program as part of its BSA compliance program.”

Keep in mind that Wachovia and HSBC under terms of their DPA’s were forced to admit that illegal transactions “ignored the money laundering risks associated with doing business with certain Mexican customers and failed to implement a BSA/AML program that was adequate to monitor suspicious transactions from Mexico.”

Furthermore, those risks were compounded, wilfully in this writer’s opinion, in order to inflate bank balance sheets with drug money, through their failure to correct “systemic deficiencies in its transaction monitoring systems, due diligence processes, risk management, and quality assurance programs.”

On every level, JPMorgan Chase failed to comply with existing rules and regulations that have earned penny-ante offenders terms in federal prison.

In fact, just last week Los Angeles-based “G&A Check Cashing, its manager, Karen Gasparian, and its compliance officer, Humberto Sanchez” were sentenced by US Judge John Walker to stiff prison terms, The Wall Street Journal reported. For violating the Bank Secrecy Act, Gasparian was “ordered to prison for five years and Sanchez for eight months.”

Are you kidding me! The Journal averred, “While it is common for banks to face scrutiny from the U.S. for complying with the Bank Secrecy Act, it is rare for authorities to pursue check-cashing businesses for anti-money laundering compliance issues, as they are often used by the poor, who may not have the funds to maintain a bank account.”

In full clown-car mode, Assistant Attorney General Lanny Breuer, Obama’s chieftain over at the Justice Department’s Criminal Division, who last month refused to file criminal charges against drug-money laundering banksters at HSBC said in a statement: “Karen Gasparian, Humberto Sanchez and their company G&A Check Cashing purposefully thwarted the Bank Secrecy Act, making it easier for others to use G&A to commit illegal activity. They knew they were required to report transactions over $10,000, but deliberately failed to do so.”

Although the OCC Consent Order does not spell out who benefited from JPMC’s “systemic weaknesses” when it came to lax drug money laundering controls, the suspicion persists that somewhere fugitive billionaire drug lord Chapo Guzmán is smiling as he enlarges his stable of thoroughbreds.

Tom Burghardt is a researcher and activist based in the San Francisco Bay Area. His articles are published in many venues. He is the editor of Police State America: U.S. Military “Civil Disturbance” Planning, distributed by AK Press.

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