Brendan Hoffman/Bloomberg NewsSteven L. Rattner agreed to pay $10 million to settle charges brought by the New York attorney general.
Retiring New Hampshire Senator Judd Gregg, one of the Federal Reserve’s most stalwart Republican supporters, showed up for a meeting at the central bank in November bearing a surprising gift: a box of End the Fed books. As he handed out the 2009 best seller by Representative Ron Paul, a longtime Fed critic, Gregg told the gathering it would be worth reading to see what the other side is plotting.
Fed Lent Early And Often On Easy Terms – Frank Partnoy, Financial Times
America Bails Out a Thankless World – Editorial, Investor’s Business Daily
Ron Paul’s Moment Arrives – Schmidt & Mattingly, Bloomberg BusinessWeek
After China, the Fed’s Now the Largest Owner of US Treasuries
Deflation-Inflation-Stagflation, Dismal Science-Ignorant Scientists?, Economic Analysis Isn't Science, Federal Reserve-Discussion, Is The Market Rally Real?, Let's Call What It Is - DEPRESSION, Monetary Policy - Discussion, Political Chaos, TARP fruit loops, The American Financial Oligarchy, The Arrogance of Power, The Consequences of Greed, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The Obama OMG magic factory, The Sorry State Of American Manufacturing, The Suffering Poor, Unemployment Catastrophe, Unindicted Co-Conspiritors, Unintended Consequences, US Trade Imbalance, USA Is the New Japan, Wage Deflation, Want To Buy A Car?, Watch The China Market, We Are All Cooked, We Have Become Beggars To The World, Who Guarantees the Guarantor?-You Do!, Who owns Congress-Still!
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Oct 102010
10/09/10 Stockholm, Sweden – Just this week an inevitable milestone came to pass, the Federal Reserve surged ahead of Japan as the second largest owner in the world of US debt… second only to China. Of course, the funds used to generate that massive debt position have only been made possible through the smoke and mirrors of quantitative easing. Zero Hedge notes this, and two other generally under-reported US debt facts, in a recent post.
Here’s the short version:
“#1: The US Fed is now the second largest owner of US Treasuries… Setting aside the fact that this is abject lunacy, this policy is trashing our currency which has fallen 13% since June… as in four months ago…
“#2: ‘There are only about $550 billion of Treasuries outstanding with a remaining maturity of greater than 10 years.’ [...] the US has entered a debt spiral: a time in which fewer and fewer investors are willing to lend to us for any long period of time… at the exact same time that we must roll over trillions in old debt and issue an additional $100-150 billion in NEW debt per month in order to finance our massive deficit… So we’re talking about TRILLIONS of old debt coming due in the next decade…
“#3: The US will Default on its Debt… either that or experience hyperinflation. There is simply no other option. We can NEVER pay off our debts. To do so would require every US family to pay $31,000 a year for 75 years… Obviously that ain’t going to happen…”
The last point should be no surprise to any regular…Read more…
Related Article:
Let Them Eat Credit
A Growing List Of One Term Presidents, A Moral Question - Not A Political One, A State of Distress, AIG and all that....., Audit the auditors?, “the Greenspan doctrine”, Bilderbergers 1 USA 0, Catholic Social Teaching, China and the Treasuries - A Dependency Relationship, Collateral Damage, Coming Social Unrest, Constitutional Questions, Consumption Ran the Old Economy, Coup d'etat in America, Death of the Dollar, Deficit Death Spiral, Deflation-Inflation-Stagflation, Derivatives Reform, Did they ever hear of GAAP?, Dismal Science-Ignorant Scientists?, Economic Analysis Isn't Science, Federal Reserve-Discussion, Greenspan is kind of stupid, It Is Nice To Be Part of the Elite!, It Is Supposed to be a Republic!, Let's Call What It Is - DEPRESSION, Monetary Policy - Discussion, Moral Hazard, No Bank Is Indispensable, Obama Bingo, Obama's Hypocrisy, Our phony middle class, Patience is a virtue...Delusion is a vice, Political Chaos, Political Implications, Regulatory Failures, Subsidiarity, TARP fruit loops, The American Financial Oligarchy, The Consequences of Greed, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The Judeo-Christian Political Coalition, The New American Socialism, The Obama OMG magic factory, The Sorry State Of American Manufacturing, The Suffering Poor, Unemployment Catastrophe, Unintended Consequences, We Have Become Beggars To The World
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Aug 292010
By most counts, the U.S. economy started growing in the middle of last year. For many Americans, though, it does not feel as if the Great Recession has ended—unemployment and underemployment are still alarmingly high, and job growth is weak. Many causes have been suggested for both the economic collapse and mediocre recovery, but one that is hardly ever mentioned is income inequality. This is a mistake. Growing income inequality in the United States and the policy responses it has spawned have done tremendous damage to our economy. And because we continue to ignore this underlying problem, the risks of our policies leading to another calamity will not go away, no matter what we do to reform the financial sector.
Since 1968, income inequality has been steadily increasing in the United States. I am not referring to the Croesus-like income of a John Paulsen, the hedge fund manager who in 2008 netted over $3 billion, about 75,000 times the average household income. I refer to a more worrying everyday phenomenon that confronts most Americans, the disparity in income growth rates between a manager at the local supermarket and the typical factory worker or office assistant. Since the 1970s, the wages of the former, typically workers at the 90th percentile of the wage distribution in the United States, have grown much faster than the wages of the latter, the typical median worker. Or consider the table below, which shows that the wages of occupation groups that are paid more than the national average in 2002 have grown much faster since then than the wages of occupation groups below the average:
The Inequality Gap Is Ruining the American Economy—and Bernanke Is Just Making it Worse Raghuram G. Rajan
How Carl Levin Got Goldman Sachs’s Goat
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May 012010
(Fortune) — At Tuesday’s epic Goldman Sachs hearing, Senator Carl Levin of Michigan led a public grilling of Wall Street not seen by a government panel since the Depression-investigating Pecora Commission. Fortune wanted to know what Levin thought of the answers he got from executives, including CEO Lloyd Blankfein, whether Goldman can save its reputation, and what his committee has learned from its hearings on the financial crisis.
It was surprising how much the Goldman Sachs (GS, Fortune 500) executives talked. How did you get them to reveal what they did?
By confronting them with their own documents. A lot of time and work goes into getting huge amounts, literally millions, of documents … I think when people are confronted by their own documents by someone who’s really studied those documents; it’s easier to force them to respond.
They obviously were trying to delay and evade answering. We had a willingness to take them on and not let them talk forever, telling them, “Hey we’ll stay here all night if we have to, but we’re going to get the information we want.”
And when they did answer?
When they did answer, some people have asked me, “Were they telling you the truth?” The answer is yeah, and that’s what’s even more troubling than the evasions — they are defending what most people would say are indefensible actions. They shouldn’t be betting against what they’re selling at the same time they’re telling you: “Here, these are our securities, our names are on the prospectus.”
I think people think that someone selling something believes their product needs to succeed in some general way; that they want it to succeed. But [Goldman Sachs] are betting against [their product] and basically say they are going to profit from its failure. At that point, in most people’s minds, clearly in mine, there’s a conflict of interest. You’re betting against a product that you’re holding out to the public, by fair assumption, as a good product.
They were trying to turn this into, “We can’t guarantee that people are making money,” but that’s not the point. The point is that at the same time you’re holding this thing out as something that presumably you’d like to see provide something good for your customer, you’re betting against it and making a heck of a lot of money by its failure. And you’re not disclosing that.
To add insult to injury, in those emails that call it “junk” that they’re selling, “crap,” and I won’t get into the “shitty” word but anyway, that adds insult to injury. When you’re putting together a product, hold that out and then are betting against that same product, I think it’s a conflict and at minimum you have to tell people, not some boilerplate that you might be on the other side, but in clear language that you’re betting against [the security].
Regulators have taken a lot of blame for the crisis but doesn’t part of this come from the laws — or lack of laws — surrounding these activities? Goldman seemed to testify that its actions were unseemly but not illegal.
The reaction of one guy when I asked about his reaction to his emails was, “That shouldn’t have been in an email.” There are two different worlds here. My reaction was, “You shouldn’t believe that, you shouldn’t feel that.”
I could have understood the reaction [by Goldman] that they should not be selling stuff that they’re betting against and think is junk, but they don’t say that because they don’t believe it. They think they can do anything they want, that it’s a dog-eat-dog market and all these sophisticated buyers know they disagree. The sophisticated buyers see an AAA rating on something: they’re not then going to go into the 500 mortgages referred to in a synthetic CDO. There’s no way they can. They’re not the underwriter, they haven’t put it together Of course with Abacus, when you have the fact that [John Paulson]., who was betting against it, helped put the referenced mortgages together, that’s just a second insult.
It’s not just Wall Street, it’s upstream: We spent a long time getting into the Washington Mutual issue as an example of lenders putting together shoddy mortgages, securitizing them and getting them off their books. These are mortgages, which never should’ve been issued where the regulator failed to enforce the laws in this case.
The regulators pointed out things in emails and visits to the bank … but they never enforced it. There’s a failure to stop the abuses. Then you have credit rating agencies susceptible to pressure, acknowledge it in emails, and are involved in an inherent conflict of interest. They’re being pressured to put higher ratings on financial documents by the people who will benefit from those ratings and they’re being paid by those people. You have the problem of the person who pays the fiddler calling the tune.
Then you get down to Wall Street with their vacuuming up these securities and getting the risk off their books without disclosing it. It’s not limited to Wall Street’s unbridled greed, it comes all the way from upstream.
How Carl Levin Got Goldman Sachs’s Goat – Paul Smalera, Fortune
Apr 242010
From Jesse: http://jessescrossroadscafe.blogspot.com/2010/04/financial-oligarchy-in-us.html
If you do nothing else this week, read the transcript or watch this video.
I have a serious difference of opinion with the speakers with regard to Robert Rubin and his role, but they make up for it with their description of Jamie Dimon as close to the White House and one of the most dangerous men in America today.
And I thought it was interesting that Simon Johnson would say openly that the ONLY Senator who is speaking the truth plainly is Ted Kaufman from Delaware.
Other than that they are substantially putting out a very sound and realistic view of the root of the problems that created the financial crisis, and what requires to be done to rebalance the system and create a sustainable recovery.
BILL MOYERS: And you say that these this oligarchy consists of six megabanks. What are the six banks?
JAMES KWAK: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.
BILL MOYERS: And you write that they control 60 percent of our gross national product?
JAMES KWAK: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.
BILL MOYERS: And what’s the threat from an oligarchy of this size and scale?
SIMON JOHNSON: They can distort the system, Bill. They can change the rules of the game to favor themselves. And unfortunately, the way it works in modern finance is when the rules favor you, you go out and you take a lot of risk. And you blow up from time to time, because it’s not your problem. When it blows up, it’s the taxpayer and it’s the government that has to sort it out.
BILL MOYERS: So, you’re not kidding when you say it’s an oligarchy?
JAMES KWAK: Exactly. I think that in particular, we can see how the oligarchy has actually become more powerful in the last since the financial crisis. If we look at the way they’ve behaved in Washington. For example, they’ve been spending more than $1 million per day lobbying Congress and fighting financial reform. I think that’s for some time, the financial sector got its way in Washington through the power of ideology, through the power of persuasion. And in the last year and a half, we’ve seen the gloves come off. They are fighting as hard as they can to stop reform.
The Financial Oligarcy in the US – Bill Moyer’s Journal
Wall Street Big Fish Stink From The Head Down
The American Financial Oligarchy, The excellent adventures of Ben Bernanke, The Financial Elite, The Geithner Resignation Watch, The Habits of Hedge Funds, The Importance of Strategic Planning, The Intrusion of UNLAWFUL Authority, The Summers Exit Watch, THEY ARE ALL THE SAME, Those Quarky Accounting Rules, Time For A New Third Party, Truth In Charity, Who Guarantees the Guarantor?-You Do!
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Apr 242010
Obama’s financial reform will fail because all the masters of the universe know how to do is make money.
Wall Street’s Big Fish Stink From The Head Down – Robert Lenzner, Forbes
Howdy, Neighbor!
A State of Distress, A Time To Repent, Collateral Damage, Coming Social Unrest, Coup d'etat in America, Greenspan is kind of stupid, Insolvency, Let's Call What It Is - DEPRESSION, Our phony middle class, Patience is a virtue...Delusion is a vice, Political Chaos, Ron Paul Stands Tall, Stress Test Mess, Subsidiarity, TARP fruit loops, The Austrian School of Economics, The Consequences of Greed, The Democrats Blew It Again, The Economics of Schumpeter, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Geithner Resignation Watch, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The New American Socialism, Those Quarky Accounting Rules, Unemployment Catastrophe, Unindicted Co-Conspiritors, We Are All Cooked, We Are All Guilty, We Have Become Beggars To The World, Who owns Congress-Still!
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Apr 102010
When asked what advice he would give to residents of Ashtabula County Ohio because of cutbacks in official law enforcement budgets, Judge Alfred Mackey said they should:
“arm themselves. Be very careful, be vigilant, get in touch with your neighbors, because we’re going to have to look after each other.”
http://jessescrossroadscafe.blogspot.com/2010/04/ohio-judge-tells-residents-to-arm.html
The Independence of the Fed
Political Chaos, Regulatory Failures, Ron Paul Stands Tall, Securitization, Small Business-Bedrock of America, Smaller Can Be Better, Stress Test Mess, TARP fruit loops, The Consequences of Greed, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The New American Socialism, Time For A New Third Party, Unindicted Co-Conspiritors, Who Guarantees the Guarantor?-You Do!, Who owns Congress-Still!
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Mar 212010
There is a thesis that the banks are in control of the Fed and as a result have gained control over the issuance of the currency of the United States. This thesis is based on the fact that the shares of the Federal Reserve Bank are held by these private banks. Does that mean that the private banks own the Fed?
The short answer is yes, but it is a hollow ownership with very restricted rights. This ownership basically exists to give credence to the claim that the fed is independent. It is appropriately described as follows in the Fed’s own publication “Federal Reserve System Purposes & Functions”:
The holding of this stock, however, does not carry with it the control and financial interest conveyed to holders of common stock in for-profit organizations. It is merely a legal obligation of Federal Reserve membership, and the stock may not be sold or pledged as collateral for loans. Member banks receive a 6 percent dividend annually on their stock. (p. 12)
This is exactly the manner in which Special Purpose Vehicles (or Special Purpose Entities) are created in the corporate world. There is usually a promoter who does not wish to be seen to own an entity but who wishes to derive some benefit from the existence of such an entity. Usually, overt ownership would adversely impact the presentation of the promoter’s financial reporting.
The authorities and regulators, including the Fed, are very aware of these Special Purpose structures, as is the accounting profession. Rules have been devised and implemented to assess any such arrangement in order to establish its true nature. It is therefore appropriate to assess the Fed’s independence — or, alternatively, interdependence — according to the very rules that it uses to assess Special Purpose Entities. First, let’s draw the simple ownership structure.
Anyone with a rudimentary knowledge of accounting principles would know that ownership of an entity without control over that entity requires further investigation. Consolidation of a group of companies can become complex when ownership and control are split. The GAAP (Generally Accepted Accounting Principles) method in this case disregards ownership and focuses on control.
For example, a right to appoint the majority of the board of directors even in the absence of ownership would trigger a consolidation of that entity. Thus the controller and the entity would be seen as part of a group and collectively as a single interdependent consolidated entity. It follows that the simple structure of the Federal Reserve Banks drawn above is a split structure, where “ownership” is of limited significance and “control” must be established. Control will tell us whether the entities are independent or interdependent.
All regulation targets “control,” not just the legal form of ownership. Accounting principles of consolidation have evolved from Special Purpose Vehicles, to Special Purpose Entities, and very lately — with the revision in June 2009 for implementation in January 2010 of Financial Accounting Standard 46(R) (“FIN 46(R)”) — they have evolved into the concept of a “Variable Interest Entity.”
In effect, the test of whether one organization is a “Variable Interest Entity” controlled by another organization is similar to a DNA test to determine whether two people are members of the same family. FIN 46 (R) defines a “variable interest” as follows:
The enterprise with a variable interest or interests that provide the enterprise with a controlling financial interest in a variable interest entity will have both of the following characteristics:
a. The power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance
b. The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. (par. 1A)[1]
The first test is to check for “the power to direct the activities.” Who exactly holds that power?
Here we turn to the Federal Reserve Act, which instructs the Regional Federal Reserve Banks to each elect their own board of directors, of which the chairman and vice chairman of the regional board will be appointed by the Board of Governors of the Federal Reserve System. The regional boards must have nine directors in three classes of three each (A, B and C directors): three A directors chosen by the stockholders; three B directors to represent the “public”; and three C directors to be appointed by the Board of Governors of the Federal Reserve System. The Board of Governors of the Federal Reserve System will appoint the chairman and vice chairman from the ranks of the three C directors.
The Board of Governors of the Federal Reserve System seems to have powers that could indicate “control,” including the appointment of the power positions of chairman and vice chairman. However, we must also ask whether the regional boards have the independent powers normally associated with ownership and control, or if their powers are restricted and controlled in any manner.
The answer again lies in the Federal Reserve Act:
Said board of directors shall administer the affairs of said bank fairly and impartially and without discrimination in favor of or against any member bank or banks and may, subject to the provisions of law and the orders of the Board of Governors of the Federal Reserve System, extend to each member bank such discounts, advancements, and accommodations as may be safely and reasonably made with due regard for the claims and demands of other member banks, the maintenance of sound credit conditions, and the accommodation of commerce, industry, and agriculture. The Board of Governors of the Federal Reserve System may prescribe regulations further defining within the limitations of this Act the conditions under which discounts, advancements, and the accommodations may be extended to member banks. (section 3, par.
The regional boards are limited in their ability to perform the primary functions of the Regional Federal Reserve Bank by the terms of the act and by the control of the Board of Governors of the Federal Reserve System. It is clear from the Federal Reserve Act that control does not rest in the Regional Federal Reserve Boards, nor are they independent, but they take instruction and are controlled by the Board of Governors of the Federal Reserve System.
It is now appropriate to update the simplified structure drawn above, in order to add these two steps of control.
The question of who has control is not yet resolved; the nature of the Board of Governors of the Federal Reserve System must be investigated next. Is the Board of Governors of the Federal Reserve System an independent body or beholden to another entity?
The “Purposes & Functions” document describes the nature of the Board of Governors of the Federal Reserve System:
The Board of Governors of the Federal Reserve System is a federal government agency. The Board is composed of seven members, who are appointed by the President of the United States and confirmed by the U.S. Senate.
The Chairman and the Vice Chairman of the Board are also appointed by the President and confirmed by the Senate. The nominees to these posts must already be members of the Board or must be simultaneously appointed to the Board. (p. 4)
The Board of Governors of the Federal Reserve System is a federal government agency. The power to appoint its members, chairman, and vice chairman is vested in the president of the United States, with the Senate having a veto power over any appointment.
The first requirement for a “variable interest,” “the power to direct the activities” is fulfilled: the federal government at the presidential level holds “the power to direct activities.”
The final version of the structure of control is as follows:
The next requirement that must be met for a “variable interest” is either an “obligation to absorb losses” or a “right to receive benefits.”
I would argue that the Fed’s right to create currency, together with the vested interests of federal government, are more than sufficient to infer an “obligation to absorb losses.” The Federal Reserve Act adds a complication to this argument by holding the shareholders responsible to the extent of their stockholding for the liabilities of the Regional Federal Reserve Banks. However, the “obligation to absorb losses” is not a requirement that needs to be met so long as the alternative, the “right to receive benefits” requirement, is met. Since the obligation is not clear cut, it is better to concentrate on the right. Note that neither the obligation nor the right need to be absolute.
Again we can turn to the two sources, the Federal Reserve Act and the Fed publication “Federal Reserve System Purposes & Functions” for guidance.
Federal Reserve Act:
Dividends and Surplus Fund of Reserve Banks
(a)
- After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders of the bank shall be entitled to receive an annual dividend of 6 percent on paid-in capital stock.
- The entitlement to dividends under subparagraph (A) shall be cumulative.
- That portion of net earnings of each Federal reserve bank which remains after dividend claims under subparagraph (1)(A) have been fully met shall be deposited in the surplus fund of the bank.
(b) Transfer for fiscal year 2000.
- The Federal reserve banks shall transfer from the surplus funds of such banks to the Board of Governors of the Federal Reserve System for transfer to the Secretary of the Treasury for deposit in the general fund of the Treasury, a total amount of $3,752,000,000 in fiscal year 2000.
- Of the total amount required to be paid by the Federal reserve banks under paragraph (1) for fiscal year 2000, the Board shall determine the amount each such bank shall pay in such fiscal year.
- During fiscal year 2000, no Federal reserve bank may replenish such bank’s surplus fund by the amount of any transfer by such bank under paragraph (1). (section 7)
“Federal Reserve System Purposes & Functions”:
The income of the Federal Reserve System is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. Other major sources of income are the interest on foreign currency investments held by the System; interest on loans to depository institutions; and fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations.
After it pays its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury. About 95 percent of the Reserve Banks’ net earnings have been paid into the Treasury since the Federal Reserve System began operations in 1914. (Income and expenses of the Federal Reserve Banks from 1914 to the present are included in the Annual Report of the Board of Governors.) In 2003, the Federal Reserve paid approximately $22 billion to the Treasury. (p. 11)
The statement that “about 95% of the Reserve Banks’ net earnings have been paid into the Treasury since the Federal Reserve System began operations in 1914″ says it well enough. It is an irrefutable fact that the federal government possesses the overwhelming “right to receive benefits.”
The outright, indisputable conclusion is that the Fed, when tested against GAAP as the Fed itself uses it in the Fed’s assessments of those it regulates, is a Special Purpose Entity of the federal government (or, according to the latest definition, is a Variable Interest Entity of the federal government). The rules of consolidation therefore apply, and the Fed must be seen as controlled by federal government, making it indivisibly part of the federal government. The pretence of independence is no more that that, a pretence.
There is, however, no denying that the banks have tremendous vested interest in influencing the policies of the Fed, nor that the power being so narrowly vested in the president makes him a special target for influence. Still, the power to control the Fed is not in the hands of its “owners” but firmly in the hands of the federal government and the president of the United States.
Sarel Oberholster is a South African living in Johannesburg, Gauteng province. He is an economist by training, a specialist financial engineer by craft, and an inquisitive spirit by nature. He has been involved in banking for over 30 years. His quest for understanding complex economic phenomena is his muse for writing and he shares his insights on his blog.
Notes
[1] Financial Accounting Standards Board of the Financial Accounting Foundation; Connecticut, No 311; June 2009, Statement of Financial Accounting Standards No 167.
Does It Make Sense to Resurrect the Glass-Steagall Act?
A Growing List Of One Term Presidents, A Moral Question - Not A Political One, A Shareholder-Not Just a "Stakeholder", A State of Distress, A Time To Repent, AIG and all that....., Audit the auditors?, “the Greenspan doctrine”, Back to the basics, Bank Failures, Banks - Crisis Discussion, Collateral Damage, Consumption Ran the Old Economy, Coup d'etat in America, Figures don't lie but Liars can figure, Negative Cash Flow, No Bank Is Indispensable, Our phony middle class, PANDEMIC, Regulation - the Discussion, Regulatory Failures, The Consequences of Greed, The Democrats Blew It Again, The excellent adventures of Ben Bernanke, The Financial Elite, The Geithner Resignation Watch, The Importance of Strategic Planning, The Joy of Being A Bank
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Feb 202010
In the present system, the more unrestricted the banks are, the more money they can generate “out of thin air,” and the more damage they can inflict upon the wealth-generation process. FULL ARTICLE by Frank Shostak
Sic transit America?
A Growing List Of One Term Presidents, A State of Distress, A Time To Repent, AIG and all that....., “the Greenspan doctrine”, Back to the basics, Collateral Damage, Coming Social Unrest, Commercial Real Estate Bust, Consumption Ran the Old Economy, Coup d'etat in America, Death of the Dollar, Deflation-Inflation-Stagflation, Devaluation, Dismal Science-Ignorant Scientists?, Even the Terminator Can't Help California, Federal Reserve-Discussion, Figures don't lie but Liars can figure, Integrity and Responsibility, Is The Market Rally Real?, It Is Nice To Be Part of the Elite!, It starts with a foundation, IT'S ALL ABOUT POWER AND MONEY, Monetary Policy - Discussion, Our phony middle class, Patience is a virtue...Delusion is a vice, Political Chaos, Politicians, Prostitutes and Pimps All Rhyme, Small Business-Bedrock of America, Sub-Prime anytime, TARP fruit loops, The Arrogance of Power, The Consequences of Greed, The Democrats Blew It Again, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Global Economy, The Habits of Hedge Funds, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The Judeo-Christian Political Coalition, The New American Socialism, The Sorry State Of American Manufacturing, Time For A New Third Party, Truth In Charity, Unemployment Catastrophe, US Trade Imbalance, USA Is the New Japan, We Are All Cooked, We Are All Guilty, We Have Become Beggars To The World
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Jan 162010
 |
| Flagging: a US sailor stands on the flight deck of the aircraft carrier USS George Washington |
If a week is a long time in politics, a decade is starting to look like an age in geopolitics. Comparing the America that began the 21st century with the America of today is to witness a country that has in some ways quite radically altered its view of itself and its relationship to the world.
In short, the metallic rust of decline has crept into the American soul. “You could argue that the first decade of the 21st century was the last decade of the American century,” says David Rothkopf, a former Clinton administration official and student of US foreign policy. “We are now entering the multipolar century.”
Self-doubt tarnishes Brand America
London, of all places, is leading the battle against exaggerated banker bonuses. And leaders from all over the world are discussing how they can put an end to the banking practices that caused the global economic crisis. They are also considering ways for banks to compensate for the damage they caused.
Can Europe Be Saved?
Paul Krugman does an excellent job of summarizing the genesis of the current crisis:
THERE’S SOMETHING peculiarly apt about the fact that the current European crisis began in Greece. For Europe’s woes have all the aspects of a classical Greek tragedy, in which a man of noble character is undone by the fatal flaw of hubris.
Alfredo Falvo/Contrasto/Redux
ROME Students protested planned changes in the university system on Dec. 22 in Italy, where youth unemployment is about 25 percent.
Not long ago Europeans could, with considerable justification, say that the current economic crisis was actually demonstrating the advantages of their economic and social model. Like the United States, Europe suffered a severe slump in the wake of the global financial meltdown; but the human costs of that slump seemed far less in Europe than in America. In much of Europe, rules governing worker firing helped limit job loss, while strong social-welfare programs ensured that even the jobless retained their health care and received a basic income. Europe’s gross domestic product might have fallen as much as ours, but the Europeans weren’t suffering anything like the same amount of misery. And the truth is that they still aren’t.
Yet Europe is in deep crisis — because its proudest achievement, the single currency adopted by most European nations, is now in danger. More than that, it’s looking increasingly like a trap. Ireland, hailed as the Celtic Tiger not so long ago, is now struggling to avoid bankruptcy. Spain, a booming economy until recent years, now has 20 percent unemployment and faces the prospect of years of painful, grinding deflation.
The tragedy of the Euromess is that the creation of the euro was supposed to be the finest moment in a grand and noble undertaking: the generations-long effort to bring peace, democracy and shared prosperity to a once and frequently war-torn continent. But the architects of the euro, caught up in their project’s sweep and romance, chose to ignore the mundane difficulties a shared currency would predictably encounter — to ignore warnings, which were issued right from the beginning, that Europe lacked the institutions needed to make a common currency workable. Instead, they engaged in magical thinking, acting as if the nobility of their mission transcended such concerns.
The result is a tragedy not only for Europe but also for the world, for which Europe is a crucial role model. The Europeans have shown us that peace and unity can be brought to a region with a history of violence, and in the process they have created perhaps the most decent societies in human history, combining democracy and human rights with a level of individual economic security that America comes nowhere close to matching. These achievements are now in the process of being tarnished, as the European dream turns into a nightmare for all too many people. How did that happen?
THE ROAD TO THE EURO
It all began with coal and steel. On May 9, 1950 — a date whose anniversary is now celebrated as Europe Day — Robert Schuman, the French foreign minister, proposed that his nation and West Germany pool their coal and steel production. That may sound prosaic, but Schuman declared that it was much more than just a business deal.
For one thing, the new Coal and Steel Community would make any future war between Germany and France “not merely unthinkable, but materially impossible.” And it would be a first step on the road to a “federation of Europe,” to be achieved step by step via “concrete achievements which first create a de facto solidarity.” That is, economic measures would both serve mundane ends and promote political unity.
The Coal and Steel Community eventually evolved into a customs union within which all goods were freely traded. Then, as democracy spread within Europe, so did Europe’s unifying economic institutions. Greece, Spain and Portugal were brought in after the fall of their dictatorships; Eastern Europe after the fall of Communism.
In the 1980s and ’90s this “widening” was accompanied by “deepening,” as Europe set about removing many of the remaining obstacles to full economic integration. (Eurospeak is a distinctive dialect, sometimes hard to understand without subtitles.) Borders were opened; freedom of personal movement was guaranteed; and product, safety and food regulations were harmonized, a process immortalized by the Eurosausage episode of the TV show “Yes Minister,” in which the minister in question is told that under new European rules, the traditional British sausage no longer qualifies as a sausage and must be renamed the Emulsified High-Fat Offal Tube. (Just to be clear, this happened only on TV.)
The creation of the euro was proclaimed the logical next step in this process. Once again, economic growth would be fostered with actions that also reinforced European unity.
The advantages of a single European currency were obvious. No more need to change money when you arrived in another country; no more uncertainty on the part of importers about what a contract would actually end up costing or on the part of exporters about what promised payment would actually be worth. Meanwhile, the shared currency would strengthen the sense of European unity. What could go wrong?
Red the entire article at NYT:
Can Europe Be Saved?
By PAUL KRUGMAN
Is there any way to save Europe’s democracies from sinking together in the ill-conceived currency union?