Facebook isn’t Your Friend

The Unvarnished Truth
by DAVID CRONIN


A few days ago, I was told by the organisers of a “social media” festival that the hashtag was my “new best friend“. As I’ve never hugged a hashtag or cried on the shoulders of one, I felt it was important to question this “wisdom”.

Like millions of others, I’m addicted to Facebook and, to a lesser degree, Twitter. I check these websites so frequently that I often forget they are owned by vast corporations.

Some of these firms’ activities are inherently anti-democratic.

Facebook’s Brussels office is headed by Erika Mann, a former German member of the European Parliament. She has long fought to enable the interests of big business triumph over those of ordinary people.

During her 15 years as an MEP, Mann continuously advocated that the European Union should liberalise its trade with the United States.

At one point, it seemed that her calls were being ignored by political leaders on both sides of the Atlantic. All that changed in February this year, when Barack Obama expressed his support for such an agreement during his State of the Union address. Talks aimed at reaching a very broad trade and investment deal were formally launched in July.

Now wearing her Facebook hat, Erika Mann is still extolling the apparent virtues of “free” trade at every available opportunity.

In April, she spoke at a conference in Dublin, where Facebook’s international headquarters are located. Mann argued that it would be “extremely important” for an eventual deal to make the standards faced by internet companies in the EU and US “more coherent”.

While Mann claimed that she did not wish to see standards becoming “identical”, it is highly improbable that she will be pushing for more robust rules. Facebook recently submitted detailed recommendations to MEPs about how to weaken a new data protection law.

Information leaked by the courageous whistleblower Edward Snowden demonstrated that Facebook has been helping the National Security Agency to undertake espionage on a massive scale.

Before those revelations were made, Erika Mann claimed that Facebook was “leading the way” both in protecting privacy and in helping the digital sector to flourish. Her assurances now appear risible.

Facebook isn’t alone in hoping that the trade agreement will lead to “regulatory convergence” on different sides of the Atlantic. The European Commission has drawn up a paper for the talks, which indicates its willingness to copy and paste demands made by the car industry. The paper suggests that whenever either the EU or the US feels the need to have new rules on the amount of pollution vehicles may cause, they will consult each other with a view to finding a common approach.

In practice, this is a recipe for preventing Europe from having tougher emissions standards than the US.

Few qualms

Mann has few, if any, qualms about lobbying her former colleagues. She has spoken at events within the European Parliament’s buildings on a number of dossiers.

Last year, she addressed a conference on data protection organised by one of the assembly’s committees. She also spoke at a reception sponsored by the beer industry, during which she voiced support for “voluntary initiatives” undertaken by those behemoths of booze eager to portray themselves as responsible.

That wasn’t simply a case of Mann meeting some old pals for a knees-up. Facebook had clinched a huge advertising contract with Diageo – owner of Guinness and Smirnoff – a few months earlier.

Her participation in the beer-fuelled reception involved sending a signal to law-makers that they should abandon any plans they may have to ban or restrict the marketing of alcohol. The idea that the drinks industry can be expected to behave responsibly is, of course, daft. The only objective of corporations is to amass as much money as they can.

Following a scandal in 2011 in which a few MEPs were recorded stating they would be happy to receive bribes from journalists posing as lobbyists, the European Parliament drew up a code of conduct. In theory, the code applies to both sitting and former MEPs.

And yet a Parliament spokeswoman told me: “from what I gather of your description of Mrs Mann’s activities, it doesn’t seem that she has breached the code of conduct”.

The code states that former MEPs should not benefit from the Parliament’s “facilities” if they wish to engage in lobbying “directly linked” to EU law-making. According to the spokeswoman, this clause did not relate merely to accessing the Parliament’s buildings but to such perks as use of its car-parks and libraries.

If Mann is undertaking lobbying on the Parliament’s premises, there is strong prima facie evidence that she is not playing by the rules. But it seems that the Parliament’s administration is happy to overlook how former MEPs are usurping democracy by cajoling their old colleagues into tweaking laws to placate certain vested interests.

A leaked internal paper from the European Commission indicated that it plans to make extensive use of Twitter and Facebook to sell the so-called benefits of a trans-Atlantic trade deal.

Fortunately, the Commission’s officials aren’t the only people who know to tweet, share and “like”.

Given that Facebook’s Brussels office wants a trade deal to be concluded, it behoves those of us opposing the deal to flood the pages of Facebook with the unvarnished truth. We should spare no effort in calling out the lobbyists seeking to destroy the last vestiges of our democracy.

Financial Institutions Admit Austerity Failed

The Market Giveth and Taketh Away
by KEN KLIPPENSTEIN


The first part of 2013 has been something of a confessional period for the economic managerial class. The IMF’s chief economist, Olivier Blanchard, conceded that “forecasters significantly underestimated the increase in unemployment and the decline in domestic demand associated with fiscal consolidation.” (‘Fiscal consolidation’ is a polite way of saying ‘austerity’.) U.S. Treasury Secretary Jack Lew admitted that “there has to be a focus on what the impact on unemployment is” of austerity policies; also, that “you cannot be in the world where austerity just leads to more austerity”; and finally, that “the rush to do all the [austerity] front-end has actually made the problem harder in some countries.” He even suggested that “Europeans need to look as well what they can do to generate more demand in their economy.”

Managing Director of the IMF, Christine Lagarde, confessed that “we don’t see the need to do upfront, heavy duty fiscal consolidation as was initially planned”; and “the best way to create jobs is through growth.” EU Economic and Monetary Affairs Commissioner Olli Rehn said that the IMF and the US’ recent calls for less austerity “are preaching to the converted.”

Meanwhile, Carmen Reinhart and Kenneth Rogoff, the Harvard economists responsible for one of the more influential studies used to defend austerity, have admitted that “austerity is not the only answer to a debt problem.” This came after three economists at the University of Massachusetts accused them of “selective exclusion” of data. Reinhart and Rogoff have since admitted that their critics “correctly identified a spreadsheet coding error.” In my view, their most striking error is being ignored: the failure to recognize that austerity didn’t work during the Great Depression and won’t work now, during the Great Recession. Anyone can make a spreadsheet error. It takes a Harvard professor to forget basic history.

It’s not particularly interesting when doctrinal managers like Reinhart and Rogoff change positions. The ability to turn on one’s heel and switch from one ideological conviction to its opposite, like a schoolchild running the pacer test, is probably the ideological manager’s main duty. The ones who collapse from exhaustion are weeded out long before they become IMF chiefs. What’s more interesting is why the coach is having them run in the opposite direction now.

In a correspondence I had with economist Jack Rasmus, he explained the economic managerial class’ reversal:

First, it may signal a future shift to business-investor tax cuts as a preferred ‘stimulus’ (which doesn’t work either). However, since tax cuts will raise the deficit, they have to justify an increase in the deficit if they’re going to move ahead with the tax cuts. Thus, the attack on ‘austerity’ (stimulus in reverse) as not as productive as they thought is first necessary. On the other hand, it’s important to note that the shift to ‘stimulus’ doesn’t mean a shift from social spending cuts; it means a shift to more deficit via corporate tax cuts.

Second, the abandonment of austerity may represent a prelude to a still greater reliance on monetary policy. Let the central bank bear all the burden (and blame) and take the heat off politicians more visibly responsible for spending cut austerity. Monetary policy (i.e. increasing liquidity to banks, investors and businesses) has in turn two prime goals. One: to boost the stock and financial securities markets and ensure more profits for speculators, and, second, to lower their currency’s exchange value to allow competition with other currency centers…A sure sign that capitalist policymakers are getting more desperate and trying to grow by beggaring their competitors. It’s competitive devaluations—not by fiat as in the 1930s—but by liquidity-exchange rate manipulation.

Whatever the case may be, the financial institutions’ current ideological inflection should probably be regarded with suspicion. It is much too sharp an inflection to indicate any sort of honest change in thinking.

The solutions that the economic managers are advocating demonstrate a useful point. They simultaneously demand stimulus and deficit reduction. As Treasury Secretary Jack Lew put it, “We shouldn’t choose between growth and job creation and getting our fiscal house in order.” This is like a child wishing he could stay up all night and get a good night’s sleep: either choice negates the other. These mental exercises in self-contradiction further illustrate the way in which the elite must accept mutually conflicting views. Orwell called this ‘doublethink.’

Today we call it things like ‘nuance.’ Example: Reinhart and Rogoff said that “the recent debate about the global economy has taken a distressingly simplistic turn,” by which they mean austerity is finally being firmly rejected. In elite circles, ‘simplistic’ explanations are any which involve elementary truths: that authentic stimulus increases the deficit, as do corporate tax cuts; that privatization makes things unaccountable to the public; that a middle and under-class recovery requires an upper-class tax. (These simple facts are incomprehensible to the elite because they suggest a world in which extreme wealth causes injustice rather than eradicates it.) Derivatives and credit default swaps, on the other hand, are ‘nuanced’ tools which anyone without an advanced degree in finance shouldn’t comment on.

An outgrowth of this tendency toward ‘nuance’ is the peculiarly mystical tone that the economics profession has taken on. For example, the view that the business cycle will inevitably restore us to prosperity, and that the present downturn is just some sort of random misfortune. I recall a friend in university remarking that he planned to enter a PhD program in hopes of “waiting out the recession,” as though it were a spell of rain or some other act of god. The market giveth and taketh away. To suggest any sort of human agency behind these downturns—namely, a relationship between the wealth and poverty—is to commit the dreaded error of viewing economics as a zero-sum game. This of course is a fallacy, because economics is a magical process by which the concentrated wealth simultaneously diffuses its wealth (i.e. trickle-down theory).

The '147 People' Destroying the US Economy

Tuesday, March 26, 2013 by Campaign for America's Future Blog
by Richard Eskow



Can 147 people perpetuate economic injustice – and make it even worse? Can they subvert the workings of democracy, both abroad and here in the United States? Can 147 people hijack the global economy, plunder the environment, build a world for themselves that serves the few and deprives the many?

There must be some explanation for last week’s economic madness. Take a look:

Cyprus: The European Union acted destructively – and self-destructively – when it tried to seize a portion of the insured savings accounts of the citizens of Cyprus. They were telling anyone with a savings account in the financially troubled nations of the Eurozone: Forget your guaranteed deposits. If we need your money in order to bail out the big banks – banks which have already gambled recklessly with it – we’ll take it.

That didn’t just create a political firestorm in Cyprus. It threatened the European Union’s banking system, and perhaps the Union itself. The fact that the tax on deposits has been partially retracted doesn’t change the basic question: What were they thinking?

The Grand Bargain: The President and Congressional Republicans reportedly moved closer to a deal that would cut Social Security and Medicare while raising taxes – mostly on the middle class – without doing more to create jobs. A “Grand Bargain” like that would run counter to both public opinion and informed economic judgement.

Who would impose more economy-killing austerity when there’s so much evidence of the harm it does? Why would the White House want to become the face of a deal to cut Social Security, killing its own party’s political prospects for a generation?

There’s more:

Him again: Washington reporters once again sought the opinion of Ex-Wyoming senator Alan Simpson, a vitriolic blowhard with no discernible knowledge of either economics or social insurance, and then wrote up his opinions on those topics in flattering pieces like this one.

Derivatives, the Sequel: Four short years after too-big-to-fail banks nearly destroyed the world economy, as the nation continues to suffer the after-effects of the crisis they created, a Congressional committee moved to undo the already-insufficient safeguards in the Dodd/Frank law.

Within days of a Senate Report which outlined the mendacity, extreme risk, and potentiality criminality surrounding JPMorgan Chase’s “London Whale” fiasco, the House Agriculture Committee approved new bills that would legalize trades like the “London Whale.”

Above the Law: The Attorney General of the United States remained silent as the controversy continued over his recent admission that banks like Dimon’s were too big to face prosecution. And yet there were no moves to change either Holder’s policy or the size of these institutions. Politico, the Washington insiders’ tip sheet, ran a piece entitled “Why Washington won’t break up the big banks.”

Dimon Unbound: The Senate report also provided evidence that JPMorgan Chase’s CEO, Jamie Dimon, failed to manage his bank’s risk and concealed information about its losses from regulators. We learned last week that regulators lowered their rating of Dimon’s bank after chastising the bank’s leadership for management failures that included inadequate safeguards against money-laundering, poor risk management, and failure to separate the banks’ own investments from those of its customers.

Illegalities during Dimon’s tenure as CEO have cost his shareholders billions in settlements and fines. Poor risk management (and additional potential illegalities) cost it another $6.2 billion in Whale-related losses. And yet last week Dimon’s own Board “strongly endorsed” his dual role as CEO and Board Chair, an unusual concentration of power at what is (by some measurements) the world’s largest bank, and commended itself in a proxy filing for the “strength and independence” of its oversight, adding: “The Firm has had strong performance through the cycle since Mr. Dimon became Chairman and CEO.”

All this, in just seven days. Has the world gone insane? What is everybody thinking?

That’s where the number “147″ comes in.

Anthropologist Robin Dunbar tried to find out how many people the typical person “really knows.” He compared primate brains to social groups and published his findings in papers with titles like “Neocortex size as a constraint on group size in primates.”

Dunbar concluded that the optimum number for a network of human acquaintances was 147.5, a figure which was then rounded up to 150 and became known as “Dunbar’s Number.” He found groups of 150-200 in all sorts of places: Hutterite settlements. Roman army units. Academic sub-specialties. Dunbar concluded that “there is a cognitive limit to the number of individuals with whom any one person can maintain stable relationships.”

Around 150 or 200 people form a human being’s social universe. They shape his or her world view, his or her world.

That means that 147 people can change the course of history. Not necessarily the same 147 people, of course. But the small social groups which surround our world’s leaders have extraordinary power.

Economist Simon Johnson mentioned Dunbar’s Number last week in a column about incoming Treasury Secretary Jacob Lew and the new SEC chair, Mary Jo White. “The issue is not so much their track record,” Johnson wrote, “because neither has worked directly on financial-sector policy issues; it is much more about whom they know.”

“If most financial experts you know work at, for example, Citigroup,” added Johnson, “then you are more likely to see the financial world through their eyes.”

Lew is a former Citigroup executive. That mismanaged megabank is also the former corporate home of ex-Clinton Treasury Secretary Robert Rubin, and the current home of Peter Orszag, formerly President Obama’s OMB Director. For her part, White went from prosecuting criminals to defending Wall Street bankers. That was also Attorney General Eric Holder’s profession before he was appointed to his current position.

These are the people who surround our President, our Senators, our Representatives. They talk to them every day. They say, This is how the world works. They say, Everybody knows these things.

Their European counterparts saw the effects of austerity on the economies of their Union: Unemployment up. Gross domestic product down. Even the deficits, which austerity was meant to reduce, have been rising as the result of these unwise cuts.

But, they say, we know Angela Merkel. We know George Osborne and Christine Lagarde. We trust their judgement. How did the predictably disastrous plan to tax guaranteed savings accounts in Cyprus get approved? It’s not hard to imagine: “Everybody we know” thought it was a great idea.

That’s how it works here in the US, too. Larry Summers, Alan Greenspan and Robert Rubin were spectacularly wrong about everything: deregulation, the housing bubble, government spending, everything. But we know them.

Nobel Prize-winning economists like Paul Krugman and Joseph Stiglitz keep explaining why more stimulus spending is needed. But we don’t know them – not the way we know Larry, Alan, and Bob. Same for Simon Johnson, or William K. Black Jr., or Robert Johnson, or any of the other economists we don’t know very well.

And when we don’t know someone very well, their criticisms make us uncomfortable.

Bill Clinton’s “Third Way” triangulation led to welfare “reform” that’s proven disastrous. His Wall Street deregulation ruined the economy, and his brand of old-fashioned pseudo-centrism is out of touch with today’s political and economic realities. But we know him.

Bill Clinton doesn’t make us uncomfortable at all.

Investigate Jamie Dimon, or Lloyd Blankfein, or Robert Rubin? But they were our clients, and will be again once we leave government. Investigate them? We know them.

Dimon’s Board of Directors is a case study in Dunbar’s Number. It includes Honeywell CEO David Cote, who was a member of the Simpson Bowles Commission. There’s a retired senior executive with another big defense contractor, Boeing. Together with Dimon, that makes three CEOs who earn their money from government largesse.

The CEO of Comcast is on Dimon’s Board, too. (The media’s leaders are always among the 147.) One seat belongs to the head of one of the accounting groups that overlooked massive bank fraud when signing off on their annual statements. Another belongs to the former CEO of Exxon Mobil.

The “147″ run companies. They also hold fundraisers for politicians – in both parties.

When Senator Obama became President Obama, during the gravest unemployment crisis since the Great Depression, one of his first acts was to create a “Deficit Commission” instead of a “Jobs Commission.” Why? Because “147 people” thought that was the right priority. Then he appointed the dyspeptic, unlikable, and uninformed Sen. Simpson to co-chair it.

You see, the “147 people” in Washington’s political and media circles like Alan Simpson. To them he’s not an embarrassment to his President, a paid pitchman for billionaire Pete Peterson’s anti-Social Security jihad. (We know Pete!) To them Simpson’s not an ill-informed and misogynistic bully who taunts women with comments about “310 million tits.” To them he’s Al. They know him. They say he’s a lot of fun when you get to know him.

They really say that.

Then there are the news anchors and journalists who say things like this: Everybody knows that we need to cut Social Security. Everybody knows the deficit is our most urgent problem.
Everybody knew that Saddam had weapons of mass destruction, too.

Everybody understands that the right-wing, anti-government Simpson Bowles plan represents the “political center,” although it’s far to the right of public opinion – even of Republican or Tea Party voters’ opinion – on issues that range from job creation to increasing Social Security benefits.

You can’t fit millions of frustrated voters into a social group of 147 people.

When Teddy Roosevelt became President, J.P. Morgan (the person, not the bank) suggested he “send your man to my man and they can fix it up.” He was shocked that the new President chose instead to operate outside the Circle in order to create real change. And when Franklin D. Roosevelt became President he brought in new faces, new voices, new ideas. He broke the social circle that had paralyzed government and the economy.

But the circle of right-wing Republicans and corporatist Clintonite Democrats is still intact. That means Barack Obama, Nancy Pelosi and other Democratic leaders will keep on promoting the right-wing agenda known as Simpson Bowles until their party loses all its political power at the polls.

It also means that Republican extremism will still be reported with straight-faced gravity.Congressional committees will keep deregulating big banks, the Justice Department will avoid prosecuting them, and their Boards of Directors will keep rewarding their executives. They’ll all keep doing exactly what they’re doing – until the economy blows up again, perhaps with far worse consequences than the last time.

And when the next crisis comes, “147 people” will react to it exactly the same way they reacted to the last one. You can almost hear them now, can’t you? You can’t blame us, they’ll say. Nobody could’ve seen this coming. How do we know that?

Because we asked everybody we know.

EU Defeats ACTA

Wednesday, July 4, 2012 by Common Dreams

European Parliament votes against controversial Anti-Counterfeiting Trade Agreement

ACTA, the controversial online piracy treaty, was dealt a blow on Wednesday when the European Parliament voted overwhelmingly to reject it.

The European Parliament voted 478 to 39 against the Anti-Counterfeiting Trade Agreement, which was drawn up in secret and had been protested by hundreds of thousands across the EU who saw the treaty as an infringement on internet freedom.

President of the European Parliament Martin Schulz welcomed the decision and stated that "ACTA is the wrong solution to fight online piracy." He said that the treaty negotiations had lacked transparency and acknowledged the massive public mobilizations against the treaty.

"The majority of the parliament is of the opinion that ACTA is too vague - leaving room for abuses and raising concerns about its impact on privacy and civil liberties, on innovation, creativity and the free flow of information," wrote Schulz.

"We have to take all possible measures to fight piracy, but this should never be done at the cost of what has made the internet one of the most revolutionary technologies in history: the EP wants the web to remain free and open," he added.

Civil liberties advocates including Pirate Party leader Loz Kaye also welcomed the decision. "The European Parliament vote is a triumph of democracy over special interests and shady back-room deals. This is a significant victory for digital rights, and it's thanks to the tireless work of activists and grass roots organizations, including the Pirate Party world wide. Without this opposition, our representatives would have waved this agreement through. It is now clear that it is becoming increasingly politically poisonous to be 'anti-internet'," Kaye said.

With this vote, there is no possibility of EU ratification, leaving the future of the treaty uncertain.

The Austerity Theory is a Big Lie

by BuzzFlash on Wed, 05/09/2012
STEPHEN PIZZO
You know that something is seriously out of whack when those who made a bundle, and then some, with financial black magic, nearly bringing down the entire industrial world, insist they be allowed to not only keep their booty but that the 99% who ate it in the shorts thanks to their skullduggery, should be forced to go on a fiscal diet. 

That, in a nutshell, describes the so-called "austerity" programs sweeping western economies.
Even liberal politicians are caving into this mind-bending logic. Give less to those who already have less, while making sure those with the most are allowed to keep more of whatever they can milk out of the system in the future.

I gotta tell ya folks, this stuff ranks right up there with other conservative nostrums such as:

• To reduce the deficit, slash taxes.
• War is the path to peace
• For a bright energy future, "Drill baby, drill."
• The right way to deal with climate change is to ignore it.

The austerity theory of recovery has two pieces to it. First, of course, everyone except the rich need to tighten their belts another few notches. 

The second part involves the opposite for the rich. It goes like this:

"The more money you allow the rich to keep for themselves by not taxing it, the more jobs they create."

Really? So we are supposed to believe, for example that Apple Computer would not have become what it is today if it's founder, Steve Jobs, had only been allowed to amass a multi-million dollar personal fortune, rather than a multi-billion dollar fortune? Or that Facebook would not have become a company worth billions if its founder, young Mark Zuckerberg, had only been incentivized by being allowed to amass hundreds of millions dollars in his personal checking account, rather than billions.

Really? Is that it? That's the reason why everyone else needs to tighten their belts now? Because few dozen future entrepreneurs will need a multi-billion dollar carrot at the end of the career-path stick because they just won't settle for a few hundred mil?

Now don't get me wrong. I've run a few of my own small businesses, and I know it's not that simple. Companies require operating income, capital investment money for future growth, etc. And I am not suggesting businesses per se be taxed so much they can't grow or even survive. But money spent on such things is already tax deductible as a business expense. What I am talking about here is personal wealth - and how it's taxed.

The austerity movement is not only unwise and grossly unfair, but nations adopting it are playing with fire. It's the ever so thinly disguised 21st-century version of "Let-em eat cake."

It's a slap in the face to populations which have already had the fiscal crap beat out of them. It's an affront, an insult implying that somehow the rest of us are at fault for all this and deserving of being taught a lesson.

Speaking of the French revolution, the French just threw one of these austerity-fascists out of office and elected a socialist President.

Austerity is a dirty word in Europe but what next? The Greeks are itching to do the same.

Still the momentum continues to favor austerity, punishing the already punished while rewarding the actual fiscal muggers.

Economists use a term to describe this kind of perverse incentive: moral hazard. In layperson's language it means creating a dynamic where, for a few, the rules are, "Heads we win. Tails someone else loses."

The austerity movement is the Mother of All Moral Hazards. And, this time around, the losers see it, feel it, and are in an ugly mood about it. Those in power who continue pushing austerity for their monied interests are playing with fire.

And, unless a genuinely fair and balance program of shared sacrifice doesn't appear, and soon, there will be fire.

Our Chemical Cocktail Evaluated in New Report

Friday, April 20, 2012 by Civil Eatsby Paula Crossfield

When it comes to the chemicals used in food packaging, there is much we still don’t know. After a recent U.S. Food & Drug Administration (FDA) decision last month to not put further restrictions on bisphenol-A (BPA), a new report today in the Washington Post takes a closer look at studies that reveal that such endocrine-distrupting chemicals are not only ubiquitous, they might also be harmful at much lower doses than previously thought.

The FDA allows around 3,000 chemicals, including BPA and phthalates–a family of chemicals used in lubricants and solvents and to make polyvinyl chloride pliable–at low doses, long considering them additives though they migrate from the packaging instead of being purposefully added by the food manufacturer. But these chemicals are notoriously hard to trace, and have not been studied for their cumulative effects.

“Finding out which chemicals might have seeped into your groceries is nearly impossible, given the limited information collected and disclosed by regulators, the scientific challenges of this research and the secrecy of the food and packaging industries, which view their components as proprietary information,” writes Freinkel, author of Plastic: A Toxic Love Story, who wrote this story in collaboration with the Food & Evironment Reporting Network. “Although scientists are learning more about the pathways of these substances–and their potential effect on health–there is an enormous debate among scientists, policymakers and industry experts about what levels are safe.”

What has scientists worried is the fact that endocrine disrupters like these interfere with the body’s natural hormone system. Animals studies on BPA, for example, have found that doses of the chemical below the FDA-approved threshold administered during critical stages of development can effect behavior, breast and prostate cells, and brain structure and chemistry. According to recent studies, around 90 percent of Americans have BPA inside their bodies.

Freinkel explains how plastic food packaging is a major source of these potentially harmful chemicals. Other studies have shown phthalates passing into food from processing equipment and food-prep gloves, gaskets and seals on non-plastic containers, inks used on labels–which can permeate packaging–and even the plastic film used in agriculture.

The report highlights an upcoming study that found a particular phthalate, called DEHP, in many of the 72 different grocery items evaluated. Studies have associated low-dose exposure to this chemical with male reproductive disorders, thyroid dysfunction, and subtle behavioral changes.
Last month, the FDA denied a petition to ban BPA, saying in a statement that while “some studies have raised questions as to whether BPA may be associated with a variety of health effects, there remain serious questions about these studies, particularly as they relate to humans and the public health impact.”

You can read the full report here on the Food & Environment Reporting Network’s Web site, which also features additional reporting on the topic.

France Bans Monsanto the devil's Genetically Modified Corn

Friday, March 16, 2012 by Common Dreams
French PM said decision was "to protect the environment"

France has announced today that it is imposing a new temporary ban on Monsanto the devil's MON810 maize in the interests of protecting the environment.

The announcement comes from French Agricultural Minister Bruno Le Maire who said the decision was a "precautionary measure."

The move restates a 2008 ban, which was overturned by the country's highest court in November.

Last month France asked the European regulators to suspend the authorization to plant Monsanto the devil's genetically modified MON810 corn saying the decision was based on studies showing GM crops "pose significant risks for the environment."

* * *

According to the official statement from the government on the ban of the cultivation of MON810, the Minister of Agriculture decided to take the conservative measure on the temporary ban of maize MON810 today due to the closeness of the sowing season in order to protect the environment.

* * *

Agence France-Presse reports:

France bans strain of Monsanto the devil GM maize 

[...] France's top administrative court in November overturned a government order banning French farmers from planting genetically modified crops from Monsanto the devil. [...] 

France's agriculture ministry imposed a ban in February 2008 amid concerns over public safety, but the French State Council said the government had failed to prove that Monsanto crops "present a particularly elevated level of risk to either human health or the environment". [...] 

"If the European Union does not act, we can invoke the safeguard clause" which allows EU nations to independently restrict or prohibit the sales of products, the French agricultural ministry said. 

* * *

Reuters adds:

France restores ban on GMO maize crops
[...] The government had immediately said it would "examine all ways" to maintain it despite the decision. 

The decree banning MON810 was due to be published on Sunday, likely in time to prevent sowings as maize plantings are only starting in France. Farmers also expressed fears of having their fields ransacked by anti-GMO activists like in 2007, the year before the previous ban. 

France, which holds a presidential election next month and where public opinion is fiercely opposed to genetically modified organisms (GMO), had asked the European Commission last month to suspend the authorisation to sow the maize (corn), the only GMO crop allowed for cultivation in the European Union. 

The French government's request to the EU Commission was based on "significant risks for the environment" shown in recent scientific studies, it said. 

With maize sowing getting underway in France, anti-GMOs had called on the government to act quickly, concerned that farmers may sow the plants sometimes dubbed as "Frankenstein foods".

The Economic Crisis and Iran

Regenerating Global Capitalism

by BEN SCHREINER

On February 21, to great media fanfare, the Dow Jones Industrial Average surpassed the 13,000 mark for the first time since the 2008 collapse. Appearing on NBC’s Today Show the following morning, Jim “Bear Sterns is not in trouble” Cramer jubilantly prophesied “the future is better than the past.” A more ominous indication of lurking economic peril is perhaps difficult to imagine.

Indeed, for despite growing optimism on Wall Street (where profits have been ascendant through the course of the Great Recession), the economy remains teetering precariously on the precipice. The potential collapse of the eurozone, along with mounting signs of a bursting Chinese growth bubble both still loom along the horizon. Each of which could threaten to send the world economy barreling toward the abyss. Hardly indicative of what one might deem a better future.

In fact, given the protracted nature of the current crises, it is increasingly evident that we are in the thralls of a systemic crisis. That is to say, we are in the midst of a crisis that can no longer be resolved within the present neoliberal framework—try as one might.

Nowhere is this more apparent than Greece. For as the “market” (i.e., the transnational financial elite) dictates a neoliberal inspired cocktail of deeper and deeper austerity as a way out of the crises, Greece becomes further ensnared in a downward spiral of unending economic depression and societal unrest.

To glimpse the utter failure of such bankrupt policies one need look no further than Greece’s burgeoning youth unemployment. Staggeringly, nearly one out of every two Greeks under 25-years of age is currently without a job. Although, Greece is by no means alone, as equally high youth unemployment now menaces Italy, Portugal, Spain, and beyond.

Of course, much the same is unfolding, albeit on a lesser magnitude, the world over. Seen from the push to privatize education in Chile to the attack on public sector workers in the United States. Needless to say, imposing such economic despair is simply unsustainable. Hence, the correspondent worldwide revolts seen from the Indignatos to the Occupy movement.

Yet, as the system falters, and popular unrest mounts, the ruling elites have largely remained blinded by their neoliberal thinking, leaving them incapable of offering any viable solutions for resolving the entrenched global economic crisis.

Still, there remains one last means left for global capitalism’s regeneration. For as Marx and Engels wrote in the Communist Manifesto, along with heightening levels of exploitation, the capitalist class can always resort to the “enforced destruction of a mass of productive forces.” In other words, the capitalism can ultimately be renewed via war.

Regenerating Capitalism Through War
War functions as a bailout of sorts for the system of capitalism on two levels. First, war unleashes the power of what Joseph Schumpeter so fondly deemed “creative destruction.” For by destroying capital—i.e., crudely addressing the chronic affliction of overproduction—war creates the opportunity for renewed growth. As General Smedley Butler famously argued (and the likes of Lockheed Martin know all too well): war is a racket.

Second, and perhaps most important in the minds of the ruling classes, war functions to quell domestic social unrest. For war paves the way for both domestic repression and the ultimate fracturing of the working class itself. The former is seen in measures dating from the Espionage Act of 19 17 to the latest National Defense Authorization Act. The latter occurs once elements of the working class, particularly elements directly benefiting from increased military spending, eagerly rally to the flag. The resultant splintering of the working class between such opportunists on one side and the more politically advanced on the other renders it as a whole rather impotent.

And so it is that we now see a growing war fever gaining traction amongst the capitalist class, as they search for a way out of the present crisis. And in this regard, all eyes are cast towards Iran.

Target Iran
Iran, of course, has been on the imperial hit list since 1979, when it first broke free from its U.S. shackles. Something all war lusting neocons have not since forgot. As they are known to proclaim: real men go to Tehran.

We are now told, however, that the present belligerence towards Iran is solely related to its nefarious nuclear program. But such claims are merely ruses—disputed by no less than both the U.S. and Israeli intelligence communities—and are posited in an attempt to shroud imperial motivations. It’s a ploy we have all seen before (most recently in regards to Iraq).

The targeting of Iran is really then a byproduct of both the opportunity it presents and the great economic potential it holds in regards to regenerating global capitalism. For sitting atop vast energy reserves, Iran possesses the world’s third largest oil reserves, and the world’s second largest natural gas reserves. And according to investment bank Goldman Sachs (the Mecca of U.S. capitalism), Iran is one of the 11 countries outside of the BRICs (Brazil, Russia, India, and China) forecast to drive world economic growth.

Therefore, the aim in the escalating showdown with Iran is to ultimately seize control of the country’s sizable energy reserves, and envelop its largely un-integrated economy more fully into the global capitalist system. And least one wonders, concerns over the inevitable human carnage of a potential conflict factor little into any such calculus. The system of capitalism simply must be saved, whatever the costs.

The only hope then, if one truly seeks a future better than our past, is for the working classes within the U.S. (the locus of global capitalism) to transform any impending imperial war against Iran into, as Lenin would no doubt argue, a class struggle between the ruling elite and the working class at home—into a struggle between the 1-percent and the 99-percent.

Perhaps not much in the way of hope, but it’s certainly high time the American working class came to realize that all wars are class wars.

EU suspends ACTA ratification, refers treaty to court

RT | 22 February, 2012

The EU has suspended the ratification of the Anti-Counterfeiting Trade Agreement (ACTA) and referred the text to the European Court of Justice to investigate possible rights breaches.

The European Commission decided on Wednesday to ask the EU's top court "to clarify that the ACTA agreement and its implementation must be fully compatible with freedom of expression and freedom of the internet."

The ACTA debate "must be based upon facts and not upon the misinformation or rumor that has dominated social media sites and blogs," says EU Trade Commissioner Karel De Guch. The EU will not ratify the international treaty until the court delivers its ruling, he added.

De Guch insists the treaty will change nothing in the bloc, but help protect the creative economy.

European countries were quick to sign US- and Japan-lobbied ACTA agreement in Tokyo just a month ago. Ratification of the controversial agreement, however, is not going so smoothly.

ACTA faced fierce opposition by the Europeans, who saw it as an anti-democratic move. People took their anger to the streets in a synchronized protest, saying it violates their rights. About 200 cities participated in an anti-ACTA march on February 11.

The initial goal authorities pursued was to protect intellectual property and copyright, but human rights activists fought to prove its bias in favor of those in power. They argue it violates freedom of expression on the internet and allows unprecedented control of people’s personal information and privacy.

Some critics have been saying ACTA is a somewhat-disguised  SOPA (Stop Online Piracy Act).

ACTA has so far been signed by the EU as a bloc, 22 EU members as individual states, and also by the USA, Canada, Japan, Australia, South Korea and some other countries. The total number of signatories to the treaty is 31.

The European Parliament is set to vote on ACTA in June. In parallel, the accord has to be ratified by all the 27 EU member states. Germany, the Netherlands, Cyprus, Estonia and Slovakia have not put individual signatures under the treaty as such and, in the wake of the mass anti-ACTA protests in Europe, are not eager to proceed with it.Bulgaria, the Czech Republic and Latvia suspended the ratification process, while Poland on the second thought refused to ratify the accord all together.

Wednesday's decision means ACTA's ratification in the EU could be delayed for months.

Rob Beschizza, the managing director of online magazine and group blog Boing Boing, says nothing can stop Internet file swapping.

“What the industry needs to do when it considers how it makes entertainment products – music, movies and so on – available, is make it so that people can easily buy them. People don’t want to be thieves. They don’t want to take things they are not entitled to,” he told RT.

Beschizza believes that legislative initiatives like ACTA never do anything to stop piracy.

“The way the Internet works [is], as long as two computers can connect to each other, people are going to find a way to share files. The Internet works by copying data,” he said. “So what we foresee is when these laws are passed, there’ll be all this social harm and there’ll be no actual prevention of piracy.”

On the Brink: Fiscal Austerity Threatens a Global Recession

Friday, February 24, 2012 by The Real News Network

Dr. Heiner Flassbeck, Director, Division on Globalization and Development Strategies, UNCTAD: European austerity policies past the point of no return, driving global economy towards deep and lengthy recession.

  More at The Real News

Pain Without Gain

By PAUL KRUGMAN - New York Times

Published: February 19, 2012
Last week the European Commission confirmed what everyone suspected: the economies it surveys are shrinking, not growing. It’s not an official recession yet, but the only real question is how deep the downturn will be.

And this downturn is hitting nations that have never recovered from the last recession. For all America’s troubles, its gross domestic product has finally surpassed its pre-crisis peak; Europe’s has not. And some nations are suffering Great Depression-level pain: Greece and Ireland have had double-digit declines in output, Spain has 23 percent unemployment, Britain’s slump has now gone on longer than its slump in the 1930s.

Worse yet, European leaders — and quite a few influential players here — are still wedded to the economic doctrine responsible for this disaster.

For things didn’t have to be this bad. Greece would have been in deep trouble no matter what policy decisions were taken, and the same is true, to a lesser extent, of other nations around Europe’s periphery. But matters were made far worse than necessary by the way Europe’s leaders, and more broadly its policy elite, substituted moralizing for analysis, fantasies for the lessons of history.

Specifically, in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.

Now the results are in — and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.

Furthermore, bond markets keep refusing to cooperate. Even austerity’s star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.

Meanwhile, countries that didn’t jump on the austerity train — most notably, Japan and the United States — continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.

Now, not everything has gone wrong. Late last year Spanish and Italian borrowing costs shot up, threatening a general financial meltdown. Those costs have now subsided, amid general sighs of relief. But this good news was actually a triumph of anti-austerity: Mario Draghi, the new president of the European Central Bank, brushed aside the inflation-worriers and engineered a large expansion of credit, which was just what the doctor ordered.

So what will it take to convince the Pain Caucus, the people on both sides of the Atlantic who insist that we can cut our way to prosperity, that they are wrong?

After all, the usual suspects were quick to pronounce the idea of fiscal stimulus dead for all time after President Obama’s efforts failed to produce a quick fall in unemployment — even though many economists warned in advance that the stimulus was too small. Yet as far as I can tell, austerity is still considered responsible and necessary despite its catastrophic failure in practice.

The point is that we could actually do a lot to help our economies simply by reversing the destructive austerity of the last two years. That’s true even in America, which has avoided full-fledged austerity at the federal level but has seen big spending and employment cuts at the state and local level. Remember all the fuss about whether there were enough “shovel ready” projects to make large-scale stimulus feasible? Well, never mind: all the federal government needs to do to give the economy a big boost is provide aid to lower-level governments, allowing these governments to rehire the hundreds of thousands of schoolteachers they have laid off and restart the building and maintenance projects they have canceled.

Look, I understand why influential people are reluctant to admit that policy ideas they thought reflected deep wisdom actually amounted to utter, destructive folly. But it’s time to put delusional beliefs about the virtues of austerity in a depressed economy behind us.

The Divine Right of Money

Is Western Democracy Real or a Facade?
by PAUL CRAIG ROBERTS

The United States government and its NATO puppets have been killing Muslim men, women and children for a decade in the name of bringing them democracy. But is the West itself a bastion of democracy?

Skeptics point out that President George W. Bush was put in office by the Supreme Court and that a number of other elections have been decided by electronic voting machines that leave no paper trail. Others note that elected officials represent the special interests that fund their campaigns and not the voters. The bailout of the banks arranged by Bush’s Treasury Secretary and former Goldman Sachs chairman, Henry Paulson, and Washington’s failure to indict any banksters for the fraud that contributed to the financial crisis, are evidence in support of the view that the US government represents money and not the voters.

Recent events in Greece and Italy have created more skepticism of the West’s claim to be democratic. Two elected European prime ministers, George Papandreou of Greece and Silvio Berlusconi of Italy, were forced to resign over the sovereign debt issue. Not even Berlusconi, a billionaire who continues to lead the largest Italian political party, could stand up to the pressure brought by private bankers and unelected European Union officials.

Papandreou lasted only 10 days after announcing on October 31, 2011, that he would let the Greek voters decide in a referendum whether or not to accept the austerity being imposed on the Greek people from the outside. Austerity is the price charged by the EU for lending the Greek government the money to pay to the banks. In other words, the question was austerity or default. However, the question was decided without the participation of the Greek people.

Consequently, Greeks have taken to the streets. The conditions accompanying the latest tranche of the bailout have again brought large numbers of Greeks into the streets of Athens and other cities. Citizens are protesting a 20 per cent cut both in the minimum wage and in pensions larger than 12,000 euros ($15,800) annually and more cuts in public sector jobs. Greek taxes were raised 2.3 billion euros last year and are scheduled to rise another 3.4 billion euros in 2013. The austerity is being imposed despite Greece’s unemployment rate of 21 per cent overall and 48 per cent for those under the age of 25.

One interpretation is that the banks, which were careless in their loans to governments, are forcing the people to save the banks from the consequences of their bad decisions.

Another interpretation is that the European Union is using the sovereign debt crisis to extend its power and control over the individual member states of the EU.

Some say that the EU is using the banks for the EU’s agenda, and others say the banks are using the EU for the banks’ agenda.

Indeed, they may be using each other. Regardless, democracy is not part of the process.

Greece’s appointed–not elected–prime minister is Lucas Papademos, He is a former governor of the Bank of Greece, a member of Rockefeller’s Trilateral Commission, and former vice president of the European Central Bank. In other words, he is a banker appointed to represent the banks.

On February 12 the appointed prime minister, whose job is to deliver Greece to the banks or to Brussels, failed to see the irony in his statement that “violence has no place in a democracy.” Neither did he see any irony in the fact that 40 elected representatives in the Greek parliament who rejected the bailout terms were expelled by the ruling coalition parties. Violence begets violence. Violence in the streets is a response to the economic violence being committed against the Greek people.

Italy has formed a second democratic government devoid of democracy. The appointed prime minister, Mario Monti, doesn’t have to face an election until April 2013. Moreover, according to news reports, his “technocratic cabinet” does not include a single elected politician. The banks are taking no chances: Monti is both prime minister and minister of economics and finance.

Monti’s background indicates that he represents both the EU and the banks. He is former European advisor to Goldman Sachs, European chairman of the Trilateral Commission, a member of the Bilderberg Group, a former EU Commissioner, and a founding member of the Spinelli Group, an organization launched in September 2010 to facilitate integration within the EU, that is, to advance central power over the member states.

There is little doubt that European governments, like Washington, have been financially improvident, living beyond their means and building up debt burdens on citizens. Something needed to be done. However, what is being done is extra-democratic. This is an indication that Western elites–the Trilateral Commission, the Council on Foreign Relations, Bilderberg Group, the EU, transnational corporations, oversized banks, and the mega-rich–no longer believe in democracy.

Perhaps future historians will conclude that democracy once served the interests of money in order to break free of the power of kings, aristocracy, and government predations, but as money established control over governments, democracy became a liability. Historians will speak of the transition from the divine right of kings to the divine right of money.

A World in Denial of What It Knows

Sunday, January 1, 2012 by the New York Times
by Geoffrey Wheatcroft

COULD there be a single phrase that explains the woes of our time, this dismal age of political miscalculations and deceptions, of reckless and disastrous wars, of financial boom and bust and downright criminality? Maybe there is, and we owe it to Fintan O’Toole. That trenchant Irish commentator is a biographer and theater critic, and a critic also of his country’s crimes and follies, as in his gripping if horrifying book, Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger.

He reminds us of the famous if gnomic saying by Donald H. Rumsfeld, then the United States secretary of defense, that “There are known knowns... there are known unknowns ... there are also unknown unknowns.” But the Irish problem, says Mr. O’Toole, was none of the above. It was “unknown knowns.”

What he means is something different from denial, or evasion, irrational exuberance or excess optimism. Unknown knowns were things that were not at all inevitable, and were easily knowable, or indeed known, but which people chose to “unknow.”

Unknown knowns were everywhere, from Wall Street to Brussels, from the Pentagon to Penn State. Ireland merely happened to offer an extreme case, where “everyone knew.”

They just chose to forget that they knew — about the way that Irish banks ran wild, how easy credit fueled a monstrous explosion of property prices and speculative house-building. Bertie Ahern, the Irish prime minister at the time of the rapid economic growth, merely boasted, “The boom is getting boomier,” preferring to unknow the truth that booms always go bust.

Beginning in 2008, the skies were lighted up by financial conflagrations, from Lehman Brothers to the Royal Bank of Scotland. These were dramatic enough — but were they unforeseeable or unknowable? What kind of willful obtusity ever suggested that subprime mortgages were a good idea? An intelligent child would have known that there is no good time to lend money to people who obviously can never repay it.

Or recall how we were taken into the Iraq war. That was the origin of Mr. Rumsfeld’s curious words 10 years ago. When he murmured about “things we do not know we don’t know,” he was touching on the unconventional weapons that Saddam Hussein might — or might not — have held.

In a sense, Mr. Rumsfeld was more right than he realized. Those of us who opposed the war may be asked to this day whether we knew what weaponry Iraq possessed, to which the answer is that of course we didn’t. Nor, as it transpired, did President George W. Bush, Vice President Dick Cheney, Mr. Rumsfeld or Prime Minister Tony Blair of Britain.

But that was the wrong question. It should have been not “what weaponry does Saddam Hussein possess?” but “Is Saddam Hussein’s weaponry, whatever it may be, the real reason for the war, or is it a pretext confected after a decision for war had already been taken?” The answer to that was obvious and could have been known to all, but too many people chose to unknow it.

Then there was another unknown known: the likely consequences of an invasion. Shortly before it began, Mr. Blair met President Jacques Chirac of France. As well as reiterating his opposition to the coming war, Mr. Chirac offered the prime minister specific warnings. Mr. Blair and his friends in Washington seemed to think that they would be welcomed with open arms in Iraq, Mr. Chirac said, but that they shouldn’t count on it. It was foolish to think of creating a modern democracy in an artificial country with a divided society like Iraq. And Mr. Chirac asked whether Mr. Blair realized that, by invading Iraq, they might yet precipitate a civil war.

This has been described in a BBC documentary by someone present, Sir Stephen Wall, a Foreign Office man then attached to Downing Street. As the British team was leaving, Mr. Blair turned and said, “Poor old Jacques, he just doesn’t get it,” to which Sir Stephen now adds dryly that he turned out to get it rather better than “we” did.

At that time, Mr. Chirac was reviled in America, and his career has just ended in disgrace, with a court conviction for embezzlement. But who was right about Iraq? All the calamities that followed the invasion were not only foreseeable, they were foreseen. And yet for Mr. Blair, as well as Washington, they were unknown knowns.

One more such, bitter as it is to say so when many people have been ruined, was the Bernard L. Madoff fraud. For years, his investors gratefully and unquestioningly accepted returns that were strictly incredible. Loud warning voices sounded. Harry Markopolos, a former investment officer, exhaustively back-analyzed Mr. Madoff’s supposed figures by computer. He spent nearly nine years repeatedly trying to explain to the Securities and Exchange Commission that these figures were not merely incredible but mathematically impossible. And still the SEC chose to unknow it. Leos Janacek wrote a harrowing opera called “The Makropulos Affair”; Peter Gelb at the Met should commission someone to write “The Markopolos Affair” as a fable for our times.

In a very different kind of scandal, not everyone at Penn State, and certainly not every fan, knew what had happened in the showers. But quite enough was known by people who could have acted. They chose instead to unknow. And so to another classic unknown known, the euro. The recent summit in Brussels turned into a silly melodrama, with a British prime minister, David Cameron this time, once more playing the pantomime villain. But Mr. Cameron was right, if for the wrong reasons, to oppose the European Union’s latest frantic (and doomed) plan to prop up the euro.

If truth be told (but it so rarely is!), the euro cannot work and could never have worked. That is, a single currency embracing countries as diverse in social culture, productivity, work practices and taxation as Germany and Greece, or the Netherlands and Portugal, is economically impossible without much closer fiscal and financial union — which is politically impossible. Anyone could have known that at the time the euro was introduced, but for the rulers of the European Union it was their very own unknown known.

“The Cloud of Unknowing” is a medieval classic of mystical writing, and unknowing still hangs over us. It will be a happier new year if we can dispel some of that cloud, try to unknow less, and know a little more.

Failure to Reflate

The Coming Credit Crunch

by MIKE WHITNEY

 

 

For the second time in three years, the banking system has collapsed, which means that the banks are no longer able to fund themselves through the normal means, the wholesale markets. This same thing happened in July 2007 when two Bear Stearns hedge funds defaulted and trillions of dollars of mortgage-backed securities–which US banks had been holding–began to sharply decline in value. In a matter of months, most of America’s big-name banks were technically insolvent although the charade continued for a full year before Lehman Brothers blew up and the rot within the system became apparent to everyone. Now the same thing is taking place in Europe.

The banks do not get the bulk of their funding through their regulated activities of taking deposits and issuing loans, but by exchanging assets for short-term loans. Naturally, when doubts arise about the quality of these assets, then trading slows to a crawl and the banks are left high-and-dry. In other words, banking has transformed itself into an unregulated multi-trillion dollar pawn shop that can shut down at a moment’s notice leaving the entire industry dead-in-the-water.

When crisis strikes, alarms go off at the central banks who then ride to the rescue with lavish taxpayer-funded bailouts. We’ve seen this play many times before, the script never changes. The central bank chiefs claim that they are just offering liquidity assistance for “temporarily” impaired assets, but, of course, that’s not true. Two years after the Fed began its purchases of toxic MBS from US banks, all of those same assets are still on the Fed’s balance sheet. The Fed’s has become a “bad bank” where the stinkpile of unmarketable dreck the banks created via financial alchemy is housed. Eventually, the losses will be passed on to the taxpayers.

Imagine if the $350,000 home that you bought at the peak of the bubble in 2005 was suddenly “unsellable” at any price. This is the situation EU banks are in. No one wants to do business with them because there are doubts about their solvency as well as questions about the value of their assets. So, the system has shut down forcing the banks have to depend more and more on funding from the ECB. Of course, it doesn’t work this way for the average working guy. When the value of his house falls or his credit score gets slashed, he just has to suck-it-up and live on less because no one will give him a loan. It’s different for bankers.

EU Banking System: How bad is it?
Last week, the ECB lent 523 banks a total of 489 billion euros for three years at 1 percent. On Wednesday, those same banks parked all of the money they borrowed (except 37 billion euros) back at the ECB in overnight deposits. (That’s 452 euros, a new record) Think about that for a minute. In other words, the system is not just broken; it is completely broken.

There’s no lending,  no exchange of assets for short-term loans,  no credit expansion, no nothing. Zilch. All there is is hoarding and a lot of PR gibberish about “emergency liquidity”, “long-term refinancing”, blah, blah, blah. The average Joe doesn’t want a bunch of excuses; they want the facts. And the fact is, this unregulated, volatile, crisis-prone system has collapsed for a second time in three years which is why the central banks are committing trillions (just look at the ECB’s exploding balance sheet) in public money to bailout speculators who’ve gamed the system. That’s all people want to know.

So what is the ECB trying to achieve by pumping all this money into the banking system?
First of all, ECB chief Mario Draghi is trying to reflate the bubble in the bond market. You see, during the boom years, capital flows into Greece, Portugal, Spain etc, boosted the value of the sovereign debt by many orders of magnitude. The main buyers of these bonds were EU banks, so they are loaded to the gills with this junk-paper. Since Greece started teetering, the value of these bonds has plunged leaving many of these banks in the red.

And the situation is even worse than it sounds, because the banks have borrowed more money than the original value of the bonds themselves. In other words, they have posted this same collateral many times over greatly increasing their leverage and their exposure. It would be like if you or I took our prize racing bike down to the pawn shop and exchanged it for a short-term loan of $3,500. Only–in this case–the pawn shop owner allowed us to hold on to the bike. Then we went to another pawn shop, and a third and a forth; posting the same bike for the same short-term loan over and over again. Pretty soon, the debt is so huge, that any disruption in the flow of business, and the whole Ponzi-debt pyramid comes tumbling down. Presently, the ECB is trying to keep that pyramid in place by inflating the value of the dodgy bonds with injections of 3-year liquidity. These loans will never be repaid.

Now take a look at this from the Wall Street Journal:

“Even after the European Central Bank doled out nearly half a trillion euros of loans to cash-strapped banks last week, fears about potential financial problems are still stalking the sector. One big reason: concerns about collateral.

The only way European banks can now convince anyone—institutional investors, fellow banks or the ECB—to lend them money is if they pledge high-quality assets as collateral.

Now some regulators and bankers are becoming nervous that some lenders’ supplies of such assets, which include European government bonds and investment-grade non-government debt, are running low.

If banks exhaust their stockpiles of assets that are eligible to serve as collateral, they potentially could encounter liquidity problems. That is what happened this fall to Franco-Belgian lender Dexia SA, which ran out of money and required a government bailout.” (“European Bank Worry: Collateral”, Wall Street Journal)

So, the banks don’t have money and they don’t have good collateral. And the reason they don’t have good collateral is because they’ve been posting the same collateral over and over again to increase leverage. So, it’s all a sham; they’re upside down and headed for trouble. Here’s more from the same article:

“In addition to fears that the banks might simply run out of eligible collateral, some bankers and regulators worry that the banks’ growing reliance on “secured lending” will make it harder for the industry to return to its past practice of funding itself by issuing unsecured bonds. That could result in a permanent funding scarcity…..

Since this summer, it has been virtually impossible for banks to issue unsecured bonds, because investors view European banks as risky investments.

In the second half of 2011, European banks issued a total of about $80 billion of senior unsecured bonds, according to data provider Dealogic. That compares to $240 billion in the same period last year and $257 billion in 2009.” (“European Bank Worry: Collateral”, Wall Street Journal)

Financial journalists love to make this stuff sound harder than it really is. Look, this is simple. No one is trading with the banks because everyone knows they’re broke. When the author says that the banks’ “growing reliance on “secured lending” will make it harder for the industry to return to its past practice of funding itself by issuing unsecured bonds”; what he means is that the banks funding-model is kaput, because the bonds the banks own are losing value and no sane person will accept them in exchange for cash-money. So, the banksters are out of luck; they have to take their begging bowl to the ECB for handouts. And that’s where we are right now.

So, what’s the bottom line? What do these new developments (Draghi’s $600B Long-Term Refinancing Operation) tell us about the condition of the EU banking system and the probability of another financial crisis?

That’s the question I asked a friend of mine who works in the credit markets. Here’s what he said:

“Ask yourself one question, what has materially changed relating to solvency issues for banks in Europe in general and solvency issues for European countries in particular?

Nothing.

A credit crunch is unavoidable, and a meltdown is a possibility.”

You can’t sum it up any better than that.

One Bank to Rule Them All

This isn't a Crisis; It's Blackmail

by MIKE WHITNEY

 

 

On Wednesday, the Federal Reserve and the central banks of Canada, England, Japan, Switzerland, and Europe launched a coordinated monetary intervention aimed at easing interbank lending in the eurozone. While the emergency action sent stocks into the stratosphere, it did not relieve tensions in the markets or increase trust between the banks.

In fact, on Thursday, banks stashed €313.763 billion at the European Central Bank’s overnight deposit facility, a new high for the year. Banks leave money with the ECB overnight when they are too worried about counterparty risk to lend to other banks. At the same time, the amount of money that EU banks are borrowing from the ECB, continues to rise, indicating their inability to raise money in the capital markets. These signs of growing distress show that the hoopla surrounding the central bank action are unwarranted.

Conditions in the eurozone continue to deteriorate.

Many of Europe’s biggest banks are loaded with sovereign bonds that have lost much of their value since the crisis began. Crashing collateral values have gummed up the funding apparatus and cast doubt on the solvency of the EU banking system. This same type of thing thing happened in July 2007, when 2 Bear Stearns hedge funds defaulted. The incident sent shockwaves through Wall Street as trillions of dollars in dodgy mortgage-backed securities (MBS) were downgraded leaving most of the country’s biggest banks underwater. The Lehman implosion merely exposed the extent of the damage. The capital-depleted system was bankrupt and had to be rebuilt with trillions in loans, subsidies and bailouts from the Fed and Congress. (TARP) Europe now faces a similar crisis.

While Wednesday’s CB intervention provides EU banks with cheaper access to dollar funding, it doesn’t address any of the existential problems facing the eurozone. In fact, its effects should be quite small. Here’s how Paul Krugman summed it up on his blog Conscience of a Liberal:

“So this looks to me like a non-event. Yet markets went wild. Are they taking this as a signal that substantive actions — like the ECB finally doing what has to be done — are just around the corner? Are they misunderstanding the policy? Was this cheap talk that nonetheless moved us to the good equilibrium? (If so, not enough: Italian bonds still at more than 7 percent)” (New York Times)

The Guardian provides an interesting graph that explains why the Fed acted. Here’s the link.

EU banks are in the throes of a vicious credit crunch which is deepening the debt crisis and hurtling the EZ towards a long-term slump. Bank funding costs are rising while the value of collateral (sovereign bonds) continues to fall. At the same time, the European Banking Authority (EBA) has ordered banks to increase their core-capital to a minimum 9 percent, even though credit markets are in turmoil and balance sheets are dripping red. All of this is leading to a sharp cutback in lending which will show up in slower growth and higher unemployment. This is from Forbes:

“Bank lending standards have tightened, Barclays suggests, and debt funding costs have risen sharply, both for financials and non-financials. “Historically, such a tightening of lending standards has presaged economic weakness and a consequent rise in high yield corporate credit default rates, typically with a 12-month lag,” wrote the analysts….” (“European Credit Crunch Starting As Crisis Spreads To Private Sector, Forbes)

The only way for banks to raise capital in the current environment is by shrinking their balance sheets which means that they will be forced to dump their assets on the market pushing prices down further. Here’s an excerpt from an article in International Financing Review:

“Banks are feeling pain on both sides of the balance sheet,” said Alberto Gallo, head of European credit strategy at RBS. “On the one side you have a funding squeeze with banks unable to raise cash in the capital markets. At the same time, many of the assets they hold are deteriorating in quality.”

“Banks need to reduce their balance sheets as much as €5trn in assets over the next three years or so,” he added. “The problem is that there just aren’t enough buyers. Most banks will be forced to hold on to much of this stuff to maturity, which will affect their ability to lend and impact on the real economy.”

People involved in asset sale talks say price is the major sticking point. Lenders want only to sell higher-quality assets near to par value so as to avoid huge write-downs, which would erode capital further. By contrast, potential buyers want high-yielding investments and are offering only knock-down prices.”…(European banks’ asset sales face disastrous failure, IFR)

So, EU banks are on the ropes. Their asset base is wasting away with every downgrade and they no longer have the option of raising capital through the conventional means, by issuing equity or increasing deposits. Unless the ECB launches an emergency rescue effort, it’s only a matter of time before one of the larger banks defaults and the dominoes start to tumble through the financial system.

So, how would a major bank failure in the EZ effect things in the US? That’s a question the Economist answers in a recent article. Here’s a clip:

“Financial markets are far more integrated than product markets, and they acted as a conduit of contagion from the American banking system to banks abroad. Falling asset prices in one place impact the balance sheet of leveraged institutions in another place. This transmits the crisis, which then impacts the real economy….

Should trouble in the euro zone lead the European banking system to freeze up entirely, the crisis will quickly be transmitted to America’s economy; credit will dry up to American firms, and the real economy will lurch downward. That is the big risk to most large, non-European economies. Trade accounts for too little activity in big economies for a European collapse to be too disruptive; the financial spillover, on the other hand, will be dreadful. Where the Federal Reserve could do quite a lot to shield the American economy from the drop in European demand stemming from a deep euro-zone recession, it is more difficult for the central bank to provide insulation against an all-out banking panic.” (“US will not decouple from eurozone”, The Economist)

So, what should be done?

The simplest remedy–as most of the experts have noted–would be for the ECB to step in as lender of last resort and buy enough Italian and Spanish debt to keep interest rates at a manageable level. That, in turn, would put a floor under the value of the assets on banks balance sheets, so they wouldn’t be dipping deeper into the red. And this is exactly what new ECB chief Mario Draghi–former managing director of Goldman Sachs– intends to do, as soon as he creates a big enough crisis for him to impose the terms of the settlement on the member states. That’s the real goal, to reshape the EZ so it best fits the objectives of finance capital.

So what does Draghi want?

He wants his ministers to control national budgets, he wants more money diverted from working people into an over-bloated financial system, he wants his own appointments in positions of power (ie–check Italy and Greece’s new “technocratic” governments), he wants to dictate economic policy, he wants to abolish the welfare state and the social safety net, he wants to keep Europe in a permanent state of Depression (“austerity measures”) so more of the EZ’s wealth flows to the 1 percent at the top. Here’s an excerpt from a Thursday article on Dow Jones:

“European Central Bank President Mario Draghi called Thursday for a recommitment in the euro zone to sound fiscal policy. Speaking to the European Parliament, the new president said the euro zone needed a “new fiscal compact.”

The compact would be “a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made,” Draghi said…. “a fiscal compact would enshrine the essence of fiscal rules and the government commitments taken so far, and ensure that the latter become fully credible, individually and collectively.” (“ECB’s Draghi Calls For New Euro Zone Fiscal Compact”, Dow Jones)

And what will this new “fiscal compact” look like?

Well, it’s probably going to look a lot like the German plan for enforcing the EU’s Stability and Growth Pact. Here’s a summary from the Financial Times blogsite:

1. All planned deficits in excess of 3 per cent of GDP should require unanimous approval across euro area governments. All planned deficits in excess of a country’s medium term objective (but less than 3 per cent of GDP) have to be approved by qualified majority.
2. A commitment to correct past fiscal slippages with essentially no room for discretion: countries to adopt national “debt brake” rules.
3. A country requiring assistance under the ESM (note: European Stability Mechanism–a permanent bailout facility) is placed in financial receivership if its adjustment programme fails to remain on track, with the planning and execution of budgets requiring the agreement of the appointed financial receiver. This is necessary “where countries have no political consensus in support of reforms” to mitigate risks of countries failing to comply or defaulting.
4. Automatic fines and sanctions upon breach of the 3 per cent deficit limit.
5. All national countries introduce an independent budget office to produce budgetary forecasts, create an independent entity at European level to monitor national policies and administer ESM programmes.” (“Europe’s grand bargain”, FT Alphaville)

Take a good look: This is the future of European democracy; one country after another stuffed into a fiscal straitjacket while their public assets are privatized, their unions are crushed, and their sovereignty is surrendered to unelected bankers and eurocrats.

Europe is being handed over to big finance on a silver platter. This isn’t a crisis; it’s blackmail.

The Roads To War And Economic Collapse

Standing Up to Tyranny

by PAUL CRAIG ROBERTS

 

November 23, 2011: The day before the Thanksgiving holiday brought three extraordinary news items.  One was the report on the Republican presidential campaign debate. One was the Russian President’s statement about his country’s response to Washington’s missile bases surrounding his country. And one was the failure of a German government bond auction.

As the presstitute media will not inform us of what any of this means, let me try.

With the exception of Ron Paul, the only candidate in either party qualified to be the president of the US, the rest of the Republican candidates are even worst than Obama, a president who had the country behind him but sold out the American people to the special interests.

No newly elected president in memory, neither John F. Kennedy nor Ronald Reagan, had the extraordinary response to his election as Barak Obama. A record-breaking number of people braved the cold to witness his swearing in ceremony. The mall was filled with Americans who could not see the ceremony except as televised on giant screens.

Obama had convinced the electorate that he would end the wars, stop the violation of law by the US government, end the regime of illegal torture, close the torture prison of Guantanamo, and attend to the real needs of the American people rather than stuff the pockets of the military/security complex with taxpayers’ money.

Once in office, Obama renewed and extended the Bush/Cheney/neoconservative wars.

He validated the Bush regime’s assaults on the US Constitution. He left Wall Street in charge of US economic policy, he absolved the Bush regime of its crimes, and he assigned to the American people the financial cost necessary to preserve the economic welfare of the mega-rich.

One would think such a totally failed president would be easy to defeat.  Given an historic opportunity, the Republican Party has put before the electorate the most amazingly stupid and vile collection of prospects, with the exception of Ron Paul who does not have the party’s support, that Americans have ever seen.

In the November 22 presidential “debate,” the candidates, with the exception of Ron Paul, revealed themselves as a collection of ignorant warmongers who support the police state. Gingrich and Cain said that Muslims “want to kill us all” and that “all of us will be in danger for the rest of out lives.”

Bachmann said that the American puppet state, Pakistan, is “more than an existential threat.”  The moron Bachmann has no idea what is “more than an existential threat.”

However, it sounded heavy, like an intellectual thing to say for the candidate who previously declared the long-defunct Soviet Union to be today’s threat to the US.

Any sentient American who watched or read about the Republican presidential debate must wonder what there is to be thankful for as the national holiday passes.

The Russian government, which prefers to use its resources for the economy rather than for the military, has decided that it has been taking too many risks in the name of peace. The day before Thanksgiving, Russian President Dmitry Medvedev said, in a televised address to the Russian people, that if Washington goes ahead with its planned missile bases surrounding Russia, Russia will respond with new nuclear missiles of its own, which will target the American bases and European capital cities.

The President of Russia said that the Russian government has asked Washington for legally binding guarantees that the American missile bases are not intended as a threat to Russia, but that Washington has refused to give such guarantees.

Medvedev’s statement is perplexing. What does he mean “if Washington goes ahead?”  The American missile and radar bases are already in place. Russia is already surrounded.  Is Medvedev just now aware of what is already in place?

Russia’s and China’s slow response to Washington’s aggression can only be understood in the context of the two countries’ experience with communism. The sufferings of Russians and Chinese under communism was extreme, and the thinking part of those populations saw America as the ideal of political life. This delusion still controls the mentality of progressive thinkers in Russia and China.  It might prove to be a disaster for Russia and China that the countries have citizens who are aligned with the US.

Belief in Washington’s trustworthiness even pervades the Russian government, which apparently, according to Medvedev’s statement, would be reassured by a “legally binding guarantee” from Washington.  After the massive lies told by Washington in the 21st century–”weapons of mass destruction,” “al Qaeda connections,” “Iranian nukes”–why would anyone put any credence in “a legally binding guarantee” from Washington? The guarantee would mean nothing. How could it be enforced?  Such a guarantee would simply be another deceit in Washington’s pursuit of world hegemony.

The day prior to Thanksgiving also brought another extraordinary development–the failure of a German government bond auction, an unparalleled event.

Why would Germany, the only member of the EU with financial rectitude, not be able to sell 35 per cent of its offerings of 10-year bonds?  Germany has no debt problems, and its economy is expected by EU and US authorities to bear the lion’s share of the bailout of the EU member countries that do lack financial rectitude.

I suspect that the answer to this question is that the failure of the German government’s bond auction was orchestrated by the US, by EU authorities, especially the European Central Bank, and private banks in order to punish Germany for obstructing the purchase of EU member countries’ sovereign debt by the European Central Bank.

The German government has been trying to defend the terms on which Germany gave up control over its own currency and joined the EU. By insisting on the legality of the agreements, Germany has been standing in the way of the ECB behaving like the US Federal Reserve and monetizing the debt of member governments.

From the beginning the EU was a conspiracy against Germany. If Germany remains in the EU, Germany will be destroyed. It will lose its political and economic sovereignty, and its economy will be bled in behalf of the fiscally irresponsible members of the EU.

If Greeks will not submit to the tyranny, why should Germans?