Back to the Dark Ages of Feudalism

The Crushing Force of Capitalism
by GILBERT MERCIER


History never repeats itself, but from time to time, consciously or not, some influential men attempt to force us into the monstrosity of their imaginary time machines to try to reverse decades, and in the case of feudalism, almost a millenium of social progress. The mid-20th century brought the years of collective psychosis of Adolf Hitler’s “thousand year Reich,” and more recently what can be viewed as the United States of America’s imperialist manifesto or so-called “Project for the New American Century”, concocted in 1997 but still in effect today under the current administration, with the self-proclaimed objective to “promote American global leadership” resolutely and by military force, if necessary.

Montesquieu and his colleagues of the mid-18th century, such as Voltaire, Diderot and Rousseau of the Age of Enlightenment, denounced feudalism as being a system exclusively dominated by aristocrats who possess all financial, political and social power. During that time, which incubated the French Revolution and built its ideological foundations, feudalism became synonymous with the French monarchy. To the Enlightenment writers, feudalism symbolized everything that was wrong with a system based on birth privilege, inequality and brutal exploitation. In August 1789, shortly after the takeover of La Bastille on July 14, one of the first action of the Assemblee Constituante was to proclaim the official abolition of the “feudal regime.”

Ironically, feudalism is making a comeback in the latest evolution and under the impulse of predatory global capitalism. After all, Karl Marx, in the mid-19th century, considered feudalism to be a precursor of capitalism. Typically a feudal system can be defined as a society with inherited social rank. In the Middle Ages, wealth came exclusively from agriculture: the aristocracy strictly assumed ownership of the land while the serfs provided the labor.

The feudal system of the Dark Ages was the social and economic exploitation of peasants by lords. This led to an economy always marked by poverty, sometimes famine, extreme exploitation and wide gaps between rich and poor. The feudal era relation of a serf to his lord is essentially identical to the relation of a so-called WalMart associate to a heir of the Walton family. If one looks objectively at the power stratum in the US circa 2013, and the one of, let’s say, France circa 1750, it is hard to ignore the startling similarity. For example, attendance at Ivy-League schools in the US is principally an inherited privilege; the same can be said for elected positions in Congress. The concept of dynasties rules, not personal merit.

A powerful network of oligarchs worldwide seems to be pursuing the objective to set back the social clock to before the era of Enlightenment so as to return us to the Dark Ages of lords and serfs: a new era of global slavery to benefit Wall Street’s “masters of the universe.” Compared to the Middle Ages, today’s servitude is more insidious: the International Monetary Fund (IMF), World Bank, and many private banks operate like mega drug dealers. The IMF and World Bank do so with countries, while the banks do so with individuals. Once Greece, Detroit or John Doe is addicted to its fix — loans in this case — the trick is done. After a while, money must be borrowed even to service the debt.

In a recent cynical opinion piece titled “Detroit, the New Greece”, New York Times columnist and Nobel-prize winning economist Paul Krugman reasoned more like a callous Wall Street operator than someone with the self-proclaimed humanist “conscience of a liberal” by casually calling Detroit a “victim of market forces.”

“Sometimes the losers from economic change are individuals whose skills have become redundant; sometimes they are companies serving a market niche that no longer exist; and sometimes they are whole cities that lose their place in the economic ecosystem,” writes Krugman, forgetting Greece in his laundry list of “innocent victim of these mysterious “market forces.” Krugman concludes his paragraph with: “Decline happens,” as if this is a physical phenomenon, like gravity or magnetism. Like most of the leading international economists, Krugman has adamantly supported the North America Free Trade Agreement (NAFTA) and the World Trade Organization (WTO). Detroit and Greece are not some sort of collateral damage of “market forces” in Krugman’s “decline happens” scenario. Detroit was demolished wholesale by NAFTA, and Greece was enticed to borrow money to join the EURO zone.

The IMF itself recently conceded that the policies it has implemented for Greece resulted in “notable failures.” The IMF failed to push for an immediate restructuring of Greece’s debt, but didn’t prevent money owed by the country before 2010 to private-sector creditors from being fully repaid at the onset of the fiscal crisis. Greece’s overall debt level remained the same, except it was now owned to the Euro-zone taxpayers and the IMF instead of banks and hedge funds. Both Greece and Detroit were targets of a predatory capitalism that sought to downgrade and then shut down all public sectors of an economy.

The “market forces” are not physical phenomena; they are the hyenas and vultures from Wall Street who dismantle and then feed on the carcasses of a city or country. Decline does not just happen; it is engineered by the corporate entities of global capitalism to maximize profit without regard for human costs. It is ultimately up to us, for the common good of human kind, to put wrenches into the well-oiled wheels of this global corporate machine that is breaking our backs by grinding and crushing our accomplishments of more than 250 years to return us to the servitude of feudalism.

The Great Economic Misdirection

Off With Their Heads, Redux

by ROB URIE

 

A central challenge for left critiques of capitalism as it exists today is the distance between the mythologies that craft understanding of the issues for the great majority and more probable explanations based on examination and analysis. The issues are that concentrated wealth is claims on social resources; that wealth ‘creation’ is an artifact of particular arrangement of social circumstances / relations and that wealth distribution is the social distribution of economic and political power. Concentrated wealth as it exists is hardly likely to distribute this power away from itself. And conspicuously missing is class-consciousness in any revolutionary sense amongst the poor and middle classes whose circumstances in the ‘developed’ West are in rapid decline. Taken together this is a formula for escalating consolidation of economic and political power against people who have little apparent understanding of the economic forces that are overtaking them. Were it not for the risk of growing political and economic dysfunction and its likely effects in social and environmental catastrophes— wars for resources to benefit the residual plutocracy, the inability to address global warming because doing so lowers corporate ‘profits’ and the increasing immiseration of a broadening swath of the socially dis-empowered, concern might rightly be considered effete.

For instance, a survey of public perceptions of wealth distribution undertaken by Michael Norton and Dan Ariely in 2011 found wide disparities between wealth distribution as it is perceived and as it actually is. Even that study grossly understated the concentration of income and wealth because the researchers were working with overly broad categories—quintiles, or fifths, of wealth distribution when the real concentration is at the very top. On the other side of public perceptions is the tiny group of very wealthy who see their wealth, even inherited wealth, as deserved, and who frame challenges to the idea that it is in psychological terms, as ‘envy.’ Adding to social misdirection is the mainstream economic frame that views concentrated ‘capital’ in some confused conflagration of money, quasi-money and things as the prerequisite to economic production. The predominant economic mythologies surrounding income and wealth distribution clearly work the service of the very rich.

Graph (1) above: Most people have no conception of how concentrated incomes and wealth are at the very top. When Norton and Ariely (link above) asked people what they believed this concentration to be respondents tended to underestimate concentration in the top 20%. Illustrated above is that even within the top 10% of incomes average executive compensation is so great that the average top incomes are barely visible. With the extremes illustrated in this graph as evidence, looking at the issue in quintiles, as Norton and Ariely did, obscures more than it illuminates. But this written, the authors found that even when viewed in quintiles there was broad objection to such concentrated incomes and wealth. One can only imagine responses if the issue were more precisely framed. Sources are the Federal Reserve Survey of Consumer Finances and Forbes. Units are in thousands of dollars.

Capitalist mythology has it that incomes and wealth are largely ‘earned.’ This myth unites the wages of the poor and middle classes in social understanding with those of the very wealthy in a hierarchy of justly differentiated outcomes—the incomes and wealth of hedge fund managers and corporate executives are perceived to be analogous to the paychecks received by truck drivers and service workers, only larger. In fact, through expression of social power in ‘public’ policies that decide which industries get subsidized and bailed out and through granting monopoly and cartel privileges to favored industries and industrialists, the incomes and wealth of the wealthy are not commensurate with the wages of labor in either type or scale. The contrived division of economic and political power that is a central precept of capitalist democracy serves to hide the role of concentrated wealth in crafting ‘political’ decisions that benefit the already wealthy. This is the central factor driving perceptions of political dysfunction in the West when the political system is working just as the plutocracy wishes it to work.

Graph (2) above: The growth of finance and the rise in financial asset prices has played a large role in inflating executive compensation. Captive Boards of Directors grant huge stock options to corporate executives who now earn hundreds of times more than their workers do. The mythology that the stock market reflects the ‘true’ value of companies ignores the role of the Federal government and the Federal Reserve in subsidizing corporate profits and in raising stock prices through monetary policies specifically designed to do so. Source: Forbes.

One reasonably well-known example of the public sources of corporate ‘profits’ is Wal-Mart, which is dependent upon government subsidies of both its customers and its employees. The heirs to the Wal-Mart ‘fortune’ are individually amongst the richest people in the world. Wal-Mart employees are the largest beneficiaries of Medicaid and food stamp expenditures in a number of states and the company has admitted (link above) that its sales and revenues are dependent on food stamp (SNAP– Supplemental Nutrition Assistance Program) payments to its customers. Another way of saying this is that many Wal-Mart employees couldn’t afford to work for the company if Federal and state governments weren’t subsidizing their paychecks and many of its customers couldn’t afford to shop at Wal-Mart if they didn’t receive food assistance. Left un-addressed is the use of coerced and / or sweatshop labor to manufacture the products Wal-Mart and the rest of ‘retail’ America sells. The use of overseas labor requires a subsidized global infrastructure for the transfer of resources, a standing army to assure repatriation of profits and the social means of coercing labor at ‘profitable’ wages. Historical examples of this latter tendency can be seen in U.S. military invasions throughout Central and South America and Haiti when the institution of higher minimum wages was threatened.

Graph (3) above: The pretense / premise of Western economics is that ‘we are all in this economy together.’ This was / is the improbable foundation that has kept variations on ‘trickle-down’ economics alive in economics departments across the West. Without apparent irony or much public comment is that executive compensation and the need for food assistance have risen in tandem since the 1980s. The need for food assistance is evidence of severe poverty. Not illustrated is the rapid increase in those living at half of the poverty level or less since financial asset prices and executive compensation began to ‘recover’ in 2009. Sources: U.S. Department of Agriculture and Forbes.

As can be seen in Graph (2) above, in addition to government bailouts, subsidies and protections that boost corporate profits, a rising stock market also contributes to inflated executive compensation. Many people believe / assume that the stock market is unaffected by ‘external’ factors and therefore reflects ‘true’ market values for company stock. In fact, in recent decades the ‘monetary’ policies of the Federal Reserve have been designed to inflate the values of financial assets.  Low interest rates affect the price of the borrowing (leverage) used to buy financial assets on margin and quantitative easing (QE) is the direct purchase of financial assets by the Federal Reserve. Interest rates intentionally kept low by former Fed Chair Alan Greenspan inflated the dot-com and housing bubbles and the policies of subsequent Fed Chairs Ben Bernanke and Janet Yellen have re-inflated financial asset prices since 2009. There is nothing ‘natural’ about these sequential bubbles. Through the role that rising stock prices play in inflating executive compensation and the salaries and bonuses of bankers and hedge fund managers a tiny group of connected insiders has been made wealthy beyond the conception of most people. And the low interest rate policies of the Federal Reserve can also be seen as a subsidy of corporate profits through lowering the borrowing costs of corporations.

Graph (4) above: There are multiple ways of valuing the stock market. Most of those in use today incorporate the extreme valuations of the dot-com bubble of the 1990s and 2000s thereby making recent valuations appear more typical than they really are. When compared to long term corporate earnings (CAPE—Cyclically Adjusted Price Earnings) ‘cycles’ over one-hundred and thirty-five years of stock market history today’s valuations are very far above typical valuation levels and are currently at levels only seen a few times before in history at bubble peaks. With executive compensation coming from bubble level stock market valuations corporate executives can try to claim that they’ve ‘earned’ their compensation. But the more plausible explanation is that the Federal Reserve and a financial system run amok are far more responsible for it. Source: Robert Shiller.

Graph (5) above: Part of the explanation that the Federal Reserve gives for policies favoring the rise in financial asset prices is the ‘wealth effect,’ the tendency for people to spend more because they feel richer when stock prices rise. While some statistical analyses suggest that this may be true, who benefits from rising stock markets are the people who own stocks. As is illustrated above, the richest twenty-percent of households own almost all of the stock market. Again, as with income distribution, the true concentration of ownership of financial assets is at the very top of the top ten percent. Federal Reserve policies to raise stock prices overwhelmingly benefit already wealthy households. As Graph (3) illustrates, the contention that everyone benefits from policies to make the rich richer faces the reality that extreme poverty is rising as the rich are being made richer.

The great misdirection of Western economics in recent decades is conflation of financial wealth with economic ‘value’ creation. Apparently left unconsidered by much of the ‘income inequality’ crowd is that were financial asset prices to implode, as they did in 2001 and again in 2008, some fair proportion of the mechanism of concentrated income and wealth distribution would implode with it. This goes far in explaining the complete devotion of the political and financial establishments to resurrecting banking and finance since 2008 while ignoring the plight of the vast majority on the other side of this system. Many of the homes of the housing boom and bust are still standing but under new ownership by the financiers who took them, the role of finance in economic production exists as facilitator and not as producer. The role of facilitator could come straight from Western governments through their ability to create and distribute fiat currency ‘out of thin air.’ That this wasn’t the route taken from 2008 forward illustrates the control that the existing plutocracy has over ‘political’ policies. The real tragedy is still underway— the incapacity for social and environmental reconciliation without major social upheaval. Anyone who doubts this should spend time with the flaccid hallucinations posed as economic ‘explanation’ coming from the banker ghettoes in New York and London.

The Next Big Economic Bubble Is About to Pop

February 25, 2014 | Guardian
By Ha-Joon Chang

According to the stock market, the U.K. economy is in a boom. Not just any old boom, but a historic one. On 28 October 2013, the FTSE 100 index hit 6,734, breaching the level achieved at the height of the economic boom before the 2008 global financial crisis (that was 6,730, recorded in October 2007).

Since then, it has had ups and downs, but on Feb. 21, 2014 the FTSE 100 climbed to a new height of 6,838. At this rate, it may soon surpass the highest ever level reached since the index began in 1984 — that was 6,930, recorded in December 1999, during the heady days of the dotcom bubble.

The current levels of share prices are extraordinary considering the U.K. economy has not yet recovered the ground lost since the 2008 crash; per capita income in the U.K. today is still lower than it was in 2007. And let us not forget that share prices back in 2007 were themselves definitely in bubble territory of the first order.

The situation is even more worrying in the U.S. In March 2013, the Standard & Poor 500 stock market index reached the highest ever level [4], surpassing the 2007 peak (which was higher than the peak during the dotcom boom), despite the fact that the country's per capita income had not yet recovered to its 2007 level. Since then, the index has risen about 20 percent, although the U.S. per capita income has not increased even by two percent during the same period. This is definitely the biggest stock market bubble in modern history.

Even more extraordinary than the inflated prices is that, unlike in the two previous share price booms, no one is offering a plausible narrative explaining why the evidently unsustainable levels of share prices are actually justified.

During the dotcom bubble, the predominant view was that the new information technology was about to completely revolutionise our economies for good. Given this, it was argued, stock markets would keep rising (possibly forever) and reach unprecedented levels. The title of the book, Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market, published in the autumn of 1999 when the Dow Jones index was not even 10,000, very well sums up the spirit of the time.

Similarly, in the runup to the 2008 crisis, inflated asset prices were justified in terms of the supposed progresses in financial innovation and in the techniques of economic policy.

It was argued that financial innovation — manifested in the alphabet soup of derivatives and structured financial assets, such as MBS, CDO, and CDS — had vastly improved the ability of financial markets to "price" risk correctly, eliminating the possibility of irrational bubbles. On this belief, at the height of the U.S. housing market bubble in 2005, both Alan Greenspan (the then chairman of the Federal Reserve Board) and Ben Bernanke (the then chairman of the Council of Economic Advisers to the President and later Greenspan's successor) publicly denied the existence of a housing market bubble — perhaps except for some "froth" in a few localities, according to Greenspan.

At the same time, better economic theory — and thus better techniques of economic policy — was argued to have allowed policymakers to iron out those few wrinkles that markets themselves cannot eliminate. Robert Lucas, the leading free-market economist and winner of the 1995 Nobel prize in economics, proudly declared in 2003 that "the problem of depression prevention has been solved." In 2004, Ben Bernanke (yes, it's him again) argued that, probably thanks to better theory of monetary policy, the world had entered the era of "great moderation", in which the volatility of prices and outputs is minimised.

This time around, no one is offering a new narrative justifying the new bubbles because, well, there isn't any plausible story. Those stories that are generated to encourage the share price to climb to the next level have been decidedly unambitious in scale and ephemeral in nature: higher-than-expected growth rates or number of new jobs created; brighter-than-expected outlook in Japan, China, or wherever; the arrival of the "super-dove" Janet Yellen [5] as the new chair of the Fed; or, indeed, anything else that may suggest the world is not going to end tomorrow.

Few stock market investors really believe in these stories. Most investors know that current levels of share prices are unsustainable; it is said that George Soros has already started betting against the U.S. stock market [6]. They are aware that share prices are high mainly because of the huge amount of money sloshing around thanks to quantitative easing (QE), not because of the strength of the underlying real economy. This is why they react so nervously to any slight sign that QE may be wound down on a significant scale.

However, stock market investors pretend to believe — or even have to pretend to believe — in those feeble and ephemeral stories because they need those stories to justify (to themselves and their clients) staying in the stock market, given the low returns everywhere else.

The result, unfortunately, is that stock market bubbles of historic proportion are developing in the U.S. and the U.K., the two most important stock markets in the world, threatening to create yet another financial crash. One obvious way of dealing with these bubbles is to take the excessive liquidity that is inflating them out of the system through a combination of tighter monetary policy and better financial regulation against stock market speculation (such as a ban on shorting or restrictions on high-frequency trading). Of course, the danger here is that these policies may prick the bubble and create a mess.

In the longer run, however, the best way to deal with these bubbles is to revive the real economy; after all, "bubble" is a relative concept and even a very high price can be justified if it is based on a strong economy. This will require a more sustainable increase in consumption based on rising wages rather than debts, greater productive investments that will expand the economy's ability to produce, and the introduction of financial regulation that will make banks lend more to productive enterprises than to consumers. Unfortunately, these are exactly the things that the current policymakers in the U.S. and the U.K. don't want to do.

We are heading for trouble.

A Clear and Present Danger to Financial Stability

The Fed's Taper Sends Global Shares and Emerging Markets Tumbling
by MIKE WHITNEY


The selloff that began in May 2013, when the Fed announced its plan to scale back its asset purchases, resumed with a vengeance on Monday as global shares were slammed in heavy trading sending the Dow Jones for a 326 point-loss on the day. The proximate cause of the rout was a worse-than-expected manufacturing report and sluggish construction spending, but the underlying source of the trouble was the Fed’s decision to wind down QE which, according to Bloomberg news, “helped drive the S and P 500 up 157 percent from a 12-year low in 2009.” The Fed’s tightening has reversed the dynamic that pushed equities into the stratosphere and generated an unprecedented boom in the emerging markets. Now capital is fleeing the EMs to the safety of US Treasuries while jittery investors ditch stocks and wait to see if the storm passes or gradually gains strength.

The mood on Wall Street has turned bearish overnight as markets in Europe and Asia continue to hemorrhage led by another bloodletting on Japan’s Nikkei which has slumped by a full a 14 percent since its Dec. 30 peak. Societe Generale’s emerging market strategist, Benoit Anne, summed up the mood in a terse note to her clients saying, “There is no point spending too much time trying to pick and choose when faced with a severe market crisis like the one we are witnessing in front of our screens. Right now, sell everything.”

Markets have entered a new phase in the ongoing financial crisis, a crisis which originated on Wall Street where trillions of dollars of fraudulently-manufactured “toxic” assets were produced by a criminal bank cartel and sold to unsuspecting investors around the world. Rather than write down the losses and restructure the banking system, policymakers at the Central Bank and US Treasury opted to conceal the damage with massive bailouts, financial repression, zero rates and regular infusions of liquidity, all of which helped to hide the rot at the heart of the system. The Fed’s plan to taper has removed the veil and exposed the weakness of an undercapitalized system that has been made more unstable by 5 years of misguided policy. This is real source of the problem.

Just as the Fed’s uber-accommodationist policy lifted stocks to record highs in the months preceding its taper announcement, so too, the withdrawal of central bank support is likely to increase the pace of the decline. That is why we expect the taper to be implemented in a stutter-step manner, stopping and starting sporadically depending on conditions in the market. Naturally, this will undermine the Fed’s attempts to send investors a clear message about the direction of policy. It also means that new Fed chairman Janet Yellen is going to spend less time trying to maintain the Fed’s mandate of “price stability and full employment” then simply putting out fires. Here’s a clip from Naked Capitalism with some background on the turmoil:

“Since Bernanke started talking about “tapering off” Quantitative Easing, the bond markets have freaked out. This is a very logical reaction….Bernanke and other Federal Reserve economists appear bewildered by this phenomenon. The impression one gets from their follow-up comments is that they wished they could ask bond speculators “did you read the damn speech?” The answer, of course, is no and for good reason.

All investors need to know is the conditions under which QE … will be pursued has changed. Now the substantive change may actually be relatively minor, but that’s irrelevant to speculators. The reason is very simple: those holding assets with longer maturities will take huge capital losses with relatively small changes in interest rates ……It is better to exit now when those future changes are uncertain then take even more massive losses.” (“Market rout continues, proving abject failure of Fed’s forecasts and policies”, Naked Capitalism)

This is the logic of selling early even though the reduction of asset purchases is still in its opening phase. There’s no sense in waiting until the last minute and taking a chance of getting trampled in the stampede to the exits. Just cash in and relax.

The Fed’s trillion cash injections have created a fantasy world of ever-rising stock prices that’s gradually giving way to the emerging reality of dismal earnings, chronic-high unemployment, droopy incomes, stagnant wages, swollen P/E ratios and a bloated financial sector that requires a larger and larger share of the nation’s wealth to avoid another devastating collapse. This is the situation we find ourselves in today, a situation that is papered over with propaganda about meaningless data points that fail to identify the real source of the problem, which is the gigantic capital hole created by the toxic assets that have not yet been written down, but are still sucking the life out of the bedraggled economy via debt servicing, rate and liquidity subsidies, and the reshaping of economic policy to preserve zombie institutions which need to be euthanized.

The problem is not hard to grasp, in fact, most people will understand what’s going on by just reading this two-paragraph excerpt from an article which appeared in Forbes magazine back in February, 2009. Here’s a clip from the piece titled “Zombie Firms and Zombie Banks”:

”Beginning in 1991, Japan experienced a financial crisis that has been documented and studied by many. Japan’s crisis was triggered by a real estate and equity price bubble followed by a collapse of equity and real estate prices. But unlike the examples I cited above, Japanese policymakers met the crisis with prolonged denial and then, when conditions forced recognition of the severity of the problem, very halting steps to address it. Banks were not forced to recognize the condition of their balance sheets and were encouraged to continue lending to firms that were themselves unprofitable. Anil Kashyap labels these “zombie firms.”

Zombie banks continued to direct capital to zombie firms. This charade continued for more than a decade, with the result that the once-powerful Japanese economy was completely stagnant for that period. The government’s main response was to dramatically increase spending on infrastructure and frantically try to get Japanese households to save less and consume more. The resulting “lost decade” of economic growth cost Japan more than 20% of GDP.” (“Zombie Firms And Zombie Banks”, Thomas F. Cooley, Forbes)

Sound familiar? This same phenom is playing out in the US today. The Fed has spared no expense to perpetuate the illusion that the zombie banking system is solvent and that the trillions of dollars in losses from worthless assets has somehow vanished into thin air. But they haven’t vanished. They are either hidden-away via accounting trickery, passed off to gullible, yield-crazed investors, or transferred onto the Fed’s bulging balance sheet. In any event, the debts are real, they’re impeding the recovery, they’re sucking the life’s blood out of the economy, and they’re clear and present danger to financial stability.

The red ink has to be purged, just as the rickety, Potemkin banking system has to be put out of its misery. We need a fresh start.

The New Wave of Financial Instability

Is This the Big One? 
by MIKE WHITNEY

Global stocks were hammered on Friday for a second straight day on news of a slowdown in China and turbulence in emerging markets. The Dow Jones Industrials suffered its worse drubbing in more than two years, tumbling 318 points on Friday to end a 490 point two-day rout. Emerging markets currencies were whipsawed by capital flight as foreign investors fled to the safety of U.S. Treasuries. Turkey’s lira and the Argentine peso were particularly hard hit setting record lows in the 48 hour period. The scaling back of the Fed’s $85 billion per month asset purchase program, called QE, has altered the dynamic that made emerging markets the “engines for global growth”. The policy reversal has triggered a selloff in risk assets and sent EM currencies plunging. Here’s a summary from Bloomberg:

“The worst selloff in emerging-market currencies in five years is beginning to reveal the extent of the fallout from the Federal Reserve’s tapering of monetary stimulus, compounded by political and financial instability.

Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.” (“Contagion Spreads in Emerging Markets as Crises Grow,” Bloomberg)

Paradoxically, Bloomberg editors blame the victims of the Fed’s failed policy for the current ructions in the markets. In an article titled, “What’s Behind the Emerging-Market Meltdown” the editors say,”emerging-market governments … should recognize that this week’s financial-market turmoil was, to varying degrees, their own fault.” … “the best way for emerging-market governments to restore confidence would be to improve their policies.”

Logically, one would assume that the editors would throw their support behind capital controls or other means of stemming the destructive flow of speculative capital into domestic markets. But that’s not the case. What the editors really want, is policies that trim deficits, slash public spending, and allow foreign investors to continue to wreak havoc on vulnerable economies that follow their free market diktats. The article is a defense of the status quo, of maintaining the same ruinous policies so that profit-taking can continue apace.

The Fed was warned early on that its uber-accommodative monetary policy was spilling over into emerging markets and creating conditions for another financial crisis. Take a look at this excerpt from an article in Bloomberg back in 2010 where Nobel prize winning economist, Joseph Stiglitz, explicitly warns the Fed of the dangers of QE.

Bloomberg:

“The U.S. Federal Reserve’s plan to boost purchases of bonds poses “considerable” risks by increasing capital inflows to emerging markets, Nobel Prize- winning economist Joseph Stiglitz said in Santiago today.

“All this liquidity that they’re creating is not going back to grow the American economy and is going to Asia and other emerging markets where it’s not wanted,” Stiglitz said…..Increased capital inflows could cause emerging market currencies to appreciate and could create asset bubbles, he said.” (“Stiglitz Says Fed Stimulus Poses `Considerable’ Risks for Emerging Markets,” Bloomberg, Dec 2010)

Events have unfolded exactly as Stiglitz predicted they would, which means the Fed is 100% responsible the carnage in the stock and currencies markets.

The policy has pumped nearly “$7 trillion of foreign funds” into EMs since QE was first launched in 2009. According to the Telegraph’s Ambrose Evans-Pritchard, “much of it “hot money” going into bonds, equities and liquid instruments that can be sold quickly….Officials are concerned that this footloose capital could leave fast in a crisis, setting off a cascade effect,” Pritchard adds ominously.

Whether last week’s bloodbath was just a prelude to a bigger crash is impossible to say, but it is worth noting that the Fed has only reduced its purchases by a mere $10 billion per month while still providing $75 billion every 30 days. That suggests that markets will probably face greater turmoil in the months ahead. Check out this clip from USA Today:

“Emerging markets need the hot money but capital is exiting now,” says (Blackrock’s Russ) Koesterich. “What you have is people saying, ‘I don’t want to own emerging markets.’…

The bigger fear is if the current crisis in currency markets morphs into a full-blown economic crisis and leads to financial contagion, says Matthias Kuhlmey, managing director of HighTower’s Global Investment Solutions.

“The currency story is fascinating and can be a slippery slope – be cautious,” says Kuhlmey, adding that the Asian crisis in the summer of 1997 that started with a sharp drop in the value of Thailand’s baht, turned into a broader economic crisis that engulfed Indonesian, South Korea and a handful of other countries. It also rocked financial markets.” (“Why emerging markets worry Wall Street,” USA Today)

So, is this the Big One, the beginning of the next financial crisis?

It’s too early to say, but investors and analysts are worried. Fed tightening (via “taper”) will be felt in markets around the world. The trouble in emerging markets will intensify deflationary pressures in the Eurozone and put a damper on China’s growth. Slower global growth, in turn, will create balance sheets problems for undercapitalized and over-leveraged banks and other financial institutions which will increase the probability of another Lehman Brothers-type default.

According to Reuters, a normalizing of interest rates in the US, (which most analysts expect) “could cut financial inflows to developing countries by as much as 80 percent for several months. In such a case, nearly a quarter of developing countries could experience sudden stops in their access to global capital, throwing some economies into a balance of payments or financial crisis, the Bank said.” (“Rout in emerging markets may only be in Phase One,” Reuters)

Clearly, the potential for another financial meltdown is quite real.

For more than four years, the Fed has buoyed stock prices and increased corporate margins through massive injections of free cash into the financial markets. Now the Central Bank wants to change the policy and ease its foot off the gas pedal. That’s causing investors to rethink their positions and take more money off the table. What started as a selloff in emerging markets could snowball into a broader panic that could wipe out the gains of the last four years.

The Federal Reserve is entirely responsible for this new wave of financial instability.

"Stagnation in middle-class wages is an economic problem" says Eric Schmidt

by Henry Blodget, Business Insider
Jan. 23, 2014


Google Chairman Eric Schmidt gave a "fireside chat" in Davos, Switzerland, at the World Economic Forum.

In the context of talking about global inequality, which Schmidt thinks is partly the result of technology and is going to get worse before it gets better, Schmidt revealed a critical truth about the economy that few other successful investors and executives appear to understand (or at least admit):

The stagnation in middle-class wages is not just a middle-class problem. It's an economic problem. And it's one of the main reasons that global economic growth is so lousy.

Why do stagnant middle-class wages hurt the economy?

Because the middle-class folks whose wages are stagnant are the global economy's biggest spenders.

And when they don't have money to spend, their lack of spending hurts not just them but all the companies that depend on them for revenue.

Including, Schmidt pointed out, Google.

Put differently, one company's expenses (wages) are another company's revenues. So, collectively, when companies are cutting wages, they're also cutting their own future revenue growth.

Right now, companies are so focused on cutting wages — by paying their employees as little as possible and replacing them with technology whenever possible — that wages as a percent of the economy are now near an all-time low (see chart below). And this weakness in wages is the big reason demand in the economy is so weak.

Wages as a percent of GDP.

Very few corporate executives and investors seem to understand this.

Instead, they act like it's a law of economics that they have to pay their employees as little as possible, so they can "maximize profit."  And, in the process, they hobble the economy.

Global Elites Getting Nervous About Skyrocketing Inequality...

...But Won't Spare a Nickel to Fix It

December 2013 | Alternet

Global elites are getting a bit antsy these days.

A new study by the World Economic Forum based on a survey of 1,592 leaders from academia, business, government, and the non-profit world suggests that all is not cheery at the top. It seems that elites believe that the second biggest problem facing Planet Earth in 2014 is widening income disparities (unrest in the Middle East and North Africa is their top worry). When it comes to economic issues, elites and ordinary folks are often at odds, but according to a recent Pew survey , they converge on identifying the gap between rich and poor as a major flaw in the system.

What’s clear is that the schemes elites have supported, from austerity policies to financial predation, are driving inequality to such extreme levels that everybody is now talking about it. The Pope is talking about it . Robert Reich made a movie about it. All over the world, people having been protesting and rioting in rolling demonstrations about it. An ugly resurgence of fascist elements in Europe is capitalizing on it. Even folks like Larry Summers, who promoted policies that stoke inequality, are publicly lamenting it.

The global elites are sittting on piles of obscene wealth, but they also have two big problems:

1. Soft demand: When people are too poor to buy goods and services, businesses suffer and the whole economy lags.
2. Prospects of increasing social unrest: When people are so squeezed that they think they have nothing to lose by taking to the streets, the wealthy have to hide behind barricades.

The global situation is crazy and probably unstable, and the 0.01 percent knows it. The question is, what are they prepared to do about it?

Not much — not yet, anyway. You can peruse the top mainstream newspapers to get a sense of how most elites feel about the growing gap between haves and have-nots. Lately there’s been quite a bit of handwringing and an uptick of articles on subjects directly related to inequality, but precious few signs that any substantial changes are on the horizon.

Case in point: Just after Thanksgiving, New York Times readers found a moving article  in the business section detailing the plight of unfortunate retail workers who don’t get paid enough to make ends meet. The author noted the hardship of food stamp cuts and described a situation so bad that companies had set up food drives for low-wage workers and dispensed tips on how to apply for public assistance (independent websites like AlterNet had been all over this story for weeks).

For a human touch, the NYT author quoted a depressed mom who works at Sears selling toys that she could never afford to buy for her own children. The author duly noted that Americans support raising the minimum wage by an overwhelming majority, but in typical mainstream media fashion, took a stance of faux neutrality and provided the opinions of two mainstream economists who disagreed on whether raising minimum wage was a good idea or not. Overall, the article seemed cautiously in favor of something that American voters overwhelmingly say they want.

Conclusion: Some elites might be willing to raise the minimum wage just a bit.

But a couple of weeks earlier, the Washington Post ran a widely reviled editorial on Social Security that showed the limits of elite concern. The vast majority of Americans, aware of an oncoming train wreck of a retirement crisis, are against cuts to Social Security, but the editorial board at the Post made it clear that elites are not on their side and laid out various specious arguments, including an irrational appeal to deficit hysteria (the deficit is actually decreasing ), to bolster its antisocial perspective. Elizabeth Warren, increasingly a thorn in the side of greedy elites, blasted the Post.

Conclusion: Elites are not really willing to pay taxes, and financiers wish to charge more fees on private retirement accounts, ergo Social Security must be cut. (Erskine Bowles and Alan Simpson, the co-chairs of Obama’s Deficit Commission, are the standard-bearers for this line, along with their backer, Wall Street billionaire Pete Peterson.)

You can also look to top establishment politicians for insight into just how much elites are willing to do to solve the inequality problem.

For instance, there’s the little matter of a giant loophole in the tax code that favors the rich. The “carried interest” loophole allows financiers like hedge fund managers, venture capitalists and partners in real estate investment trusts to pay a lower tax rate on their profits than working people pay on their earnings. It’s an unjust handout to the wealthy, and again, the American people are clear on how they feel about the tax code : the rich don’t pay their fair share.

The GOP is vehemently against closing the loophole. But despite the fact that Democrats raged against it last year to defeat Mitt Romney, it is Dems themselves who are standing in the way of getting anything done. As the Boston Globe noted in a recent article, Democrats are worried that “crusading against the ‘carried interest’ loophole at this stage would inflame an important source of campaign contributions for Democrats.”

Back when he was in the Senate, John Kerry did an elaborate dance around the issue, using his influential post on the Senate Finance Committee to seed skepticism and parrot industry warnings of dire “unintended consequences’’ and unnamed risks to the economy if the loophole were closed, even while voting in favor of the change. With Kerry now at the helm of the State Department, a host of other prominent Democrats, including President Obama and Senator Chuck Schumer, have been quietly working to see that nothing much will be done.

Conclusion: Filling campaign coffers is more important than dealing with grossly unfair policies that contribute to dangerous inequality.

So there you have it. Global elites know that they have a vital interest in solving the problem of inequality, but few are willing to pay a dime or accept substantive changes to our economic system in order to solve it.

Perhaps the megarich will simply take shelter in armed and gated communities and continue to thumb their noses at the 99 percent until a mass movement rises to stop them. But many have a vague recollection of what happened in the French Revolution. At a certain point, the barricades don’t hold.

The Greatest Debt Crisis The World Has Ever Seen Is Coming

September 17th, 2013

By Michael Snyder

The largest mountain of debt in the history of the world just continues to grow even larger, and everyone knows that this colossal debt spiral is not going to end well. But we all keep playing along because nobody wants the party to end. Right now, there is an unprecedented ocean of red ink covering the planet. Globally, governments have never been in so much debt, corporations have never been in so much debt and consumers have never been in so much debt. But every time someone suggests that this is a problem and that we should at least try to get debt levels to settle down a bit, people start screaming that “austerity” will hurt the global economy. And of course it will. But we can’t continue to live way, way above our means indefinitely. Well, we can try, but at some point this entire house of cards is going to come crashing down and we are going to be facing the greatest economic crisis the world has ever seen.

It is kind of like watching a slow-motion train wreck that you have no chance of possibly stopping that you know will end up killing lots of innocent people. This debt crisis is going to end up destroying the global financial system, but there is not a thing that you or I can do to prevent it from happening. The unprecedented debt binge that we are witnessing right now is going to continue until someday we hit a brick wall of financial disaster. We can yell and we can scream, but it isn’t going to stop what is happening.

As the Telegraph recently noted, even the Bank for International Settlements is warning that debt levels are way too high. According to the BIS, total public and private debt levels are now 30 percent higher than they were in 2008…

“This looks like to me like 2007 all over again, but even worse,” said William White, the BIS’s former chief economist, famous for flagging the wild behavior in the debt markets before the global storm hit in 2008.

“All the previous imbalances are still there. Total public and private debt levels are 30pc higher as a share of GDP in the advanced economies than they were then, and we have added a whole new problem with bubbles in emerging markets that are ending in a boom-bust cycle,” said Mr White, now chairman of the OECD’s Economic Development and Review Committee.

The BIS can see the disaster coming, but even they have no chance of preventing it.

For the rest of this article, I am going to focus on government debt, but please keep in mind that corporate debt and consumer debt are also totally out of control globally. It would be very hard to overstate the nightmare that we are facing.

But of course national governments are the biggest offenders when it comes to debt…


Asia

Japan now has a debt to GDP ratio of more than 211 percent, and as Simon Black of the Sovereign Man blog recently detailed, they are rapidly heading toward a national financial meltdown…

Looking purely at the numbers, Japan’s medium-term fundamentals are among the bleakest in the world.

Total government debt amounts to over 200% of the country’s entire GDP– a figure so large that the Japanese government spends 51.5% of the 43 trillion yen ($430 billion) they collect in tax revenue just to pay interest!

Perhaps even more astounding is that ‘primary balance expenses,’ i.e. normal government expenditures, totaled 70.3 trillion yen, or 163% of tax revenue.

The only way they’ve managed to stay afloat is by issuing more debt, which makes the problem even worse. In fact, 46% of the 2013 budget is being financed by debt.

These guys are running out of rope. And fast.

China is facing a different sort of a problem. In that nation, the growth of private domestic debt is wildly out of control.

According to a recent World Bank report, private domestic debt in China has grown from 9 trillion dollars in 2008 to 23 trillion dollars today.

There is no way that is sustainable, and at some point that massive bubble is going to burst.


Europe

Even though some European nations have supposedly implemented “austerity measures” in recent years, debt levels continue to rise rapidly. The following are some numbers that were recently released which show that government debt to GDP ratios for some of the most financially troubled nations in Europe are absolutely soaring…

• Euroarea: 92.2%, up from 88.2% a year ago
• Greece: 160.5%, up from 136.5% a year ago
• Italy: 130.3%; up from 123.8% a year ago
• Portugal: 127.2%, up from 112.3% a year ago
• Ireland: 125.1%, up from 106.8% a year ago
• Spain: 88.2%, up from 73.0% a year ago
• Netherlands: 72.0%, up from 66.7% a year ago

Anyone that tells you that the crisis in Europe is “over” is lying to you. The debt crisis is getting worse, not better.




The United States

The biggest mountain of debt of all can be found in the United States.

30 years ago, the national debt was a little bit above a trillion dollars.

Today, it is rapidly approaching 17 trillion dollars.

At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain. And since Barack Obama entered the White House, the debt to GDP level has soared to unprecedented heights…

Sadly, this is just the beginning.

One reason for this is that the U.S. is facing some tremendous demographic challenges in the years ahead.

In other words, our population is getting older.

It is being projected that the number of Americans on Social Security will rise from 57 million today to more than 100 million in 25 years.

How in the world are we possibly going to pay for that?

Already, we are very heavily dependent on foreigners to pay our bills.

According to the U.S. Treasury, foreigners hold approximately 5.6 trillion dollarsof our debt at this point.

China and Russia account for about one-fourth of that total. Right now, China owns approximately 1.275 trillion dollars of our debt, and Russia owns approximately 138 billion dollars of our debt.

So what would happen if we went to war with Syria and they decided to quit borrowing from us and they started dumping our debt instead?

That is a very good question.

And actually, according to Zero Hedge foreigners have already started to dump a little bit of our debt…

Today’s TIC data showed something disturbing: for the fourth month in a row, foreigners were net sellers of US Treasury paper in July, as total foreign holdings declined from $5.600 trillion to $5.590 trillion which represents 49% of total marketable debt (including the debt owned by the Fed of course). In other words, since peaking at $5.724 trillion in March, foreign-held debt has declined by $134 trillion, at a time when yields have surged on fears the Fed’s tapering of its own purchases of bonds will mean less Fed frontrunning opportunities.

We certainly cannot afford for that to continue, because we desperately need other nations to finance our reckless spending.

Our debt is wildly out of control, and the only way we can keep the entire system from collapsing is to go into even more debt.

As I noted recently, if the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.

That is a whole lot of money.

But most Americans do not consider it to be a problem because disaster has not struck yet.

Unfortunately, they simply don’t understand how quickly an exponential problem can overwhelm you. I think that the following illustration from Simon Black is particularly helpful…

Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room.

Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry.

But let’s assume that it’s an exponential leak.

At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.

By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.

For nearly half an hour, it all seemed safe and manageable.People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes.

By the time that our politicians and the talking heads on the mainstream media admit that we have a debt emergency on our hands, it will probably be far, far too late.

The greatest debt crisis the world has ever seen is coming, and there is nothing that anyone can do to stop it.

But you can take measures to get prepared for it.

Please get prepared while you still can.

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.

The Growing Wealth Gap Is Unsustainable

The ever-increasing many who are struggling cannot support a structure that favours a tiny number of the very rich 
Sunday, February 3, 2013 by The Observer/UK
Observer Editorial

Antony Jenkins, chief executive of Barclays, who appears before MPs and peers on the banking standards commission this week, has removed one issue from the agenda, namely his right to a bonus of more £1m. The bank has been fined £290m for rigging the benchmark Libor rate, has set aside £2bn to pay claims for mis-selling payment protection insurance and faces an official investigation by the Serious Fraud Office and the Financial Services Authority into its dealings with Qatar at the height of the 2008 financial crisis. So this is the least Jenkins could do. The announcement of his monetary self-denial on Friday signals a belated sensitivity on the part of those who have benefited most from one of the least attractive sides of capitalism.

Jenkins acknowledges that Barclays has "…multiple issues of our own making". And, he added: "I think it only right that I bear an appropriate degree of accountability and I have concluded that it would be wrong for me to receive a bonus for 2012 given those circumstances." His references to "right", "wrong and "accountability" are presumably what David Cameron was seeking when he said four years ago: "We must shape capitalism to suit the needs of society; not shape society to suit the needs of capitalism." Then in opposition, he advocated "capitalism with a conscience". More recently, Ed Miliband has – so far hazily – tried to define "responsible capitalism".

What's missing is how both concepts translate into practical governance, for instance in regulation, taxation and the allocation of sparse resources. As a result, many bankers, among the notorious "1%" of the richest and most powerful, continue to rule very much OK – for now. But an awareness is growing across the political spectrum, and on both sides of the Atlantic, that a radical recalibration of capitalism is essential, not least because the wealthiest and least productive are in danger of allowing their own avarice to sabotage the very system on which they have become so hideously bloated.

Last month, Barack Obama, on his re-election to a country with 42 million living in poverty, warned: "America cannot succeed when a shrinking few do very well and a growing many barely make it." At the World Economic Forum in Davos, its founder, Klaus Schwab, said: "Capitalism in its current form no longer fits the world around us." How badly it "fits" is powerfully demonstrated in Inequality for All, a documentary made by Jacob Kornbluth, that recently won the special jury prize at the Sundance festival. As discussed in today's New Review, the film "stars" Robert Reich, professor of public policy at Harvard, prolific author, campaigner, former labour secretary under Bill Clinton, a charismatic man whose lectures are renowned for the way he surgically dismembers the mutant capitalism that has taken hold in the US over the past 40 years.

While the debate in the UK is mostly focused on growth and how best to engender it, Reich explains in chilling detail why growth alone may not be enough. For too many, he explains, social mobility has begun to slide backwards. A small but growing band of global pirates – billionaires all, without allegiance to community or country, devoid of civic responsibility – accrue wealth from the continued immiseration of the squeezed majority. These hugely rich are fawned over and subsidised by governments even as inequality widens to a chasm that may yet produce social unrest.

Reich's analysis is similar to that of the UK thinktank, the Resolution Foundation. It launches its definitive study of low- to middle-income families, Squeezed Britain, this week. Britain has more than 10 million adults living on between £12,000 and £30,000 gross, the majority in work. However, this squeezed middle is fast becoming the squeezed majority, with even those on £50,000 seeing their children's prospects decline. The cause, Reich points out, is that while wages have flattened for years, the cost of living has spiralled and the richest have accelerated away. In the US, in 2008, 400 billionaires were "worth" more than 150 million of the US population. British housing statistics published last week indicated a similar contemptible polarisation under way here. The 10 most expensive boroughs in London, packed with Russian oligarchs, have a combined property "value" of £552bn, identical to that of Wales, Scotland and Northern Ireland combined.

Over the past few decades, average families have coped by more women going into employment, by working longer hours and by credit. But since 70% of the US economy is based on consumer spending, a lack of surplus cash means the engine is running out of fuel. The rich are small in number and don't spend nearly as much as the majority. "Free" markets with the rules written by the richest result in a shrinking public sector, deregulation, unemployment, low taxes for the most affluent and the threat of globalisation, depressing wages still further. The sum impact isn't "bad" capitalism, it is modern-day capitalism. How it changes, and how rapidly, is a challenge to its own survival. Once, the advancement of the employee was a part of the social contract. Under Thatcher, the aspiration of the average citizen was central via shareholding and home ownership. Now, a more brutal set of priorities pushes the requirements of "the little man" aside, while those who have money buy the influence that unjustly shapes the world in which we live. So how do we forge again the link between morality and the markets?

Iceland, post 2008, forced the resignation of the government, refused to bail out the banks and placed 200 "banksters' under investigation. In 2011, its economy grew by 2.9%. Would a similarly tough approach persuade some of today's pirates that the much mocked habits of the bourgeoisie do have a value that also matters: moderation; giving something back; a sense of civic duty. In that context, Apple would desist from legitimately funnelling more than a billion dollars' worth of iTunes sales through the tax haven of Luxembourg, while the British Virgin Islands would no longer be home to 30,000 people but a staggering 457,000 companies legally siphoning money that could build sustainable communities.

Reich's agenda for positive change includes more jobs; greater investment in skills and higher education; a just taxation regime; strong unions; investment in public infrastructure; a living wage and a narrowing of the earnings gap. Reich ends with a warning: "We are losing the moral foundation stones on which our democracy is built," he says. How much more evidence do we need?

No Austerity Has Helped Any Economy

Sunday, 03 February 2013
By Gaius Publius, America Blog | News Analysis

Paul Krugman’s recent column looks at the romance between the “austerians” — the promoters of austerity for economically troubled nations — and the need to inflict pain to get economic gain. His bottom line — no country that has tried austerity has seen a major economic benefit.

My bottom line — add “to its people” to the end of Krugman’s bottom line and you’ve got it exactly. There is an obvious economic benefit, but only for a few.

Let’s start with Krugman. He begins:

Looking for Mister Goodpain

Three years ago, a terrible thing happened to economic policy, both here and in Europe. Although the worst of the financial crisis was over, economies on both sides of the Atlantic remained deeply depressed, with very high unemployment. Yet the Western world’s policy elite somehow decided en masse that unemployment was no longer a crucial concern, and that reducing budget deficits should be the overriding priority.

That’s a familiar story, one we’ve detailed before. The answer to economic crisis is always budget cuts and austerity. Then he pivots to austerian attempts to find an example.

In recent columns, I’ve argued that worries about the deficit are, in fact, greatly exaggerated — and have documented the increasingly desperate efforts of the deficit scolds to keep fear alive. Today, however, I’d like to talk about a different but related kind of desperation: the frantic effort to find some example, somewhere, of austerity policies that succeeded. For the advocates of fiscal austerity — the austerians — made promises as well as threats: austerity, they claimed, would both avert crisis and lead to prosperity.

The column is interesting because it lays out that history. First the example was Ireland, which the head of the European Central Bank said in 2010 was “the role model for all of Europe’s debtor nations.” But events proved them wrong; Ireland is worse off today than it was back then. So then the U.K. became the touted model, until it wasn’t. Then little Latvia, which has recovered some, was pushed forward; but Latvia still has 14% unemployment. Hmm.

Krugman’s conclusion — nowhere in the world is there an example of austerity that works as the austerians said it would. The policy is “wrong on all fronts.” Yet they (Our Betters) still promote it.
 
“All your money are belong to us” — the song of the predator class

Krugman stops there, but I’ll continue with the obvious question. Why do they still promote it? Krugman’s answer, from elsewhere, is the Beltway Bubble and its international equivalent:

my side of the debate is actually paying attention both to the numbers and to the arguments of the other side, while the Very Serious People only listen to each other.

In other words, the poor darlings are just deluded, bubbled, sealed from understanding.

Those whom he calls Very Serious People, I call Our Betters. This difference in language (between his and mine) is indicative of the difference in analysis between Krugman and people like me. The language “Very Serious People” speaks to their role as pundits, opinion-generators and insider-echoists. “Our Betters” speaks about their power role — the role these people play in running our lives (at the Obama and Robert Rubin level) or in serving those who run our lives (at the David Gregory and Joe Scarborough level).

In other words, it’s certainly true that the baronial class and its servants and administrators listen only to each other, and thus reinforce in each other the comforting cover story that they’re only doing what’s in our ultimate good.

But the baronial class is also the predator class and they know precisely where the benefit (for them) always lies. This is the predator class in operation:

The Predator Class in action. If you added the Top .001% to this chart, it would have to be taller than you are.

If you added the Top .1%, the Top .01% and the Top .001% to that chart, you’d need a chart as tall as your room. What the chart calls the “Highest Fifth” includes what I call the “retainers” — administrators, enablers (that’s you, CNN producers) and professionals needed to keep the system working. Everyone else is workers, and look what their hard work got them.

All of the gains of worker productivity (the harder smarter computer-enabled work of the lowest four-fifths) have gone into the pockets of the highest fifth and especially the very top earners. Note that these are individual incomes, not corporate incomes; as I’ve argued elsewhere, the corporation is just the collection device, the force extender, for the CEO class that wholly controls it; shareholder-ownership is the comforting cover story.

This is what James Galbraith calls “the predatory state” — and he means that economically. The predatory state is a state that enables and is controlled by economic predators, extremely wealthy vampires who feed on their fellow citizens. Galbraith (my emphasis):

That the looming debt and deficit crisis is fake is something that, by now, even the most dim member of Congress must know. The combination of hysterical rhetoric, small armies of lobbyists and pundits, and the proliferation of billionaire-backed front groups with names like the “Committee for a Responsible Federal Budget” is not a novelty in Washington. It happens whenever Big Money wants something badly enough.

Big Money has been gunning for Social Security, Medicare and Medicaid for decades – since the beginning of Social Security in 1935. The motives are partly financial: As one scholar once put it to me, the payroll tax is the “Mississippi of cash flows.” Anything that diverts part of it into private funds and insurance premiums is a meal ticket for the elite of the predator state.

By “elite” of the predator state, Galbraith means “owners” of the predator state, the top predators themselves. It’s that predatory feeding that produces policies, promises and pronouncements like these that Krugman describes:

Not only have we been ruled by fear of nonexistent threats, we’ve been promised rewards that haven’t arrived and never will.

They’ll say and do anything to get at more dollars; they’ll destroy the planet’s ability to support life itself, all for more dollars. Look again at the chart above. They’ve been looting the country, the government, the schools, the pension plans, your wages, the equity in your home, everything they can get their hands on since Reagan Days. Their only goal — All your money are belong to us. These are true monomaniacs, in the clinical sense.

So yes, they’re self-deluded. But like every feral beast, they also know where the food is. That food is us unless we stop them. And stopping them starts (in my most humble opinion) with naming them and shaming them.

An example of naming — does Obama serve the predators who finance his elections and his looming Legacy & Library Project or does he serve the people who elected him? Ask it loud and proud. The “debt ceiling–sequester” deal is his next chance to show us. As is Keystone, for those who are watching at home. But he can’t show us if we don’t ask him to, and in no uncertain terms.

My advice — dare to be bold, progressives. This game has a fourth quarter, and we’re in it. At some point, the predator will destroy all the prey and then die. Justice for the beast perhaps, but no fun for the already dead.

Project Censored: Top 10 under reported stories from 2012

The expanding police state tops the annual list of stories underreported by the mainstream media
By Yael Chanoff

People who get their information exclusively from mainstream media sources may be surprised at the lack of enthusiasm on the left for President Barack Obama in this crucial election. But that’s probably because they weren’t exposed to the full online furor sparked by Obama’s continuation of his predecessor’s overreaching approach to national security, such as signing the 2012 National Defense Authorization Act, which allows the indefinite detention of those accused of supporting terrorism, even U.S. citizens.

We’ll never know how this year’s election would be different if the corporate media adequately covered the NDAA’s indefinite detention clause and many other recent attacks on civil liberties. What we can do is spread the word and support independent media sources that do cover these stories. That’s where Project Censored comes in.

Project Censored has been documenting inadequate media coverage of crucial stories since it began in 1967 at Sonoma State University. Each year, the group considers hundreds of news stories submitted by readers, evaluating their merits. Students search Lexis Nexis and other databases to see if the stories were underreported, and if so, the stories are fact-checked by professors and experts in relevant fields.

A panel of academics and journalists chooses the Top 25 stories and rates their significance. The project maintains a vast online database of underreported news stories that it has “validated” and publishes them in an annual book. Censored 2013: Dispatches from the Media Revolution will be released Oct. 30.

For the second year in row, Project Censored has grouped the Top 25 list into topical “clusters.” This year, categories include “Human cost of war and violence” and “Environment and health.” Project Censored Director Mickey Huff told us the idea was to show how various undercovered stories fit together into an alternative narrative, not to say that one story was more censored than another.

In May, while Project Censored was working on the list, another 2012 list was issued: the Fortune 500 list of the biggest corporations, whose influence peppers the Project Censored list in a variety of ways.

Consider this year’s top Fortune 500 company: ExxonMobil. The oil company pollutes everywhere it goes, yet most stories about its environmental devastation go underreported. Weapons manufacturers Lockheed Martin (58 on the Fortune list), General Dynamics (92), and Raytheon (117) are tied into stories about U.S. prisoners in slavery conditions manufacturing parts for their weapons and the underreported war crimes in Afghanistan and Libya.

These powerful corporations work together more than most people think. In the chapter exploring the “global 1 percent,” writers Peter Philips and Kimberly Soeiro explain how a small number of well-connected people control the majority of the world’s wealth. In it, they use Censored story number 6, “Small network of corporations run the global economy,” to describe how a network of transnational corporations are deeply interconnected, with 147 of them controlling 40 percent of the global economy’s total wealth.

For example, Philips and Soeiro write that in one such company, BlackRock Inc., “The 18 members of the board of directors are connected to a significant part of the world’s core financial assets. Their decisions can change empires, destroy currencies and impoverish millions.”

Another cluster of stories, “Women and Gender, Race and Ethnicity,” notes a pattern of underreporting stories that affect a range of marginalized groups. This broad category includes only three articles, and none are listed in the top 10. The stories reveal mistreatment of Palestinian women in Israeli prisons, including being denied medical care and shackled during childbirth, and the rape and sexual assault of women soldiers in the U.S. military. The third story in the category concerns an Alabama anti-immigration bill, H.B. 56, that caused immigrants to flee Alabama in such numbers that farmers felt a dire need to “help farms fill the gap and find sufficient labor.” So the Alabama Department of Agriculture and Industries approached the state’s Department of Corrections about making a deal where prisoners would replace the fleeing farm workers.

But with revolutionary unrest around the world, and the rise of a mass movement that connects disparate issues together into a simple, powerful class analysis — the 99 percent versus the 1 percent paradigm popularized by Occupy Wall Street — this year’s Project Censored offers an element of hope.

It’s not easy to succeed at projects that resist corporate dominance, and when it does happen, the corporate media is sometimes reluctant to cover it. Number seven on the Top 25 list is the story of how the United Nations designated 2012 the International Year of the Cooperative, recognizing the rapid growth of co-op businesses, organizations that are part-owned by all members and whose revenue is shared equitably among members. One billion people worldwide now work in co-ops.

The Year of the Cooperative is not the only good-news story discussed by Project Censored this year. In Chapter 4, Yes! Magazine’s Sarah Van Gelder lists “12 ways the Occupy movement and other major trends have offered a foundation for a transformative future.” They include a renewed sense of “political self-respect” and fervor to organize in the United States, debunking of economic myths such as the “American dream,” and the blossoming of economic alternatives such as community land trusts, time banking and micro-energy installations.

As Dr. Nafeez Mosaddeq Ahmed writes in the book’s foreword, “The majority of people now hold views about Western governments and the nature of power that would have made them social pariahs 10 or 20 years ago.”

Citing polls from the corporate media, Mosaddeq writes: “The majority are now skeptical of the Iraq War; the majority want an end to U.S. military involvement in Afghanistan; the majority resent the banks and financial sector, and blame them for the financial crisis; most people are now aware of environmental issues, more than ever before, and despite denialist confusion promulgated by fossil fuel industries, the majority in the United States and Britain are deeply concerned about global warming; most people are wary of conventional party politics and disillusioned with the mainstream parliamentary system.”

“In other words,” he writes, “there has been a massive popular shift in public opinion toward a progressive critique of the current political economic system.”

And ultimately, it’s the public — not the president and not the corporations—that will determine the future. There may be hope after all. Here’s Project Censored’s Top 10 list for 2013:

1. Signs of an emerging police state

President George W. Bush is remembered largely for his role in curbing civil liberties in the name of his “war on terror.” But it’s President Obama who signed the 2012 NDAA, including its clause allowing for indefinite detention without trial for terrorism suspects. Obama promised that “my administration will interpret them to avoid the constitutional conflict” — leaving us adrift if and when the next administration chooses to interpret them otherwise. Another law of concern is the National Defense Resources Preparedness Executive Order that Obama issued in March 2012. That order authorizes the president, “in the event of a potential threat to the security of the United States, to take actions necessary to ensure the availability of adequate resources and production capability, including services and critical technology, for national defense requirements.” The president is to be advised on this course of action by “the National Security Council and Homeland Security Council, in conjunction with the National Economic Council.” Journalist Chris Hedges, along with co-plaintiffs including Noam Chomsky and Daniel Ellsberg, won a case challenging the NDAA’s indefinite detention clause on Sept. 1, when a federal judge blocked its enforcement, but her ruling was overturned on Oct. 3, so the clause is back.

2. Oceans in peril

Big banks aren’t the only entities that our country has deemed “too big to fail.” But our oceans won’t be getting a bailout anytime soon, and their collapse could compromise life itself. In a haunting article highlighted by Project Censored, Mother Jones reporter Julia Whitty paints a tenuous seascape — overfished, acidified, warming — and describes how the destruction of the ocean’s complex ecosystems jeopardizes the entire planet, not just the 70 percent that is water. Whitty compares ocean acidification, caused by global warming, to acidification that was one of the causes of the “Great Dying,” a mass extinction 252 million years ago. Life on Earth took 30 million years to recover. In a more hopeful story, a study of 14 protected and 18 non-protected ecosystems in the Mediterranean Sea showed dangerous levels of biomass depletion. But it also showed that the marine reserves were well-enforced, with five to 10 times larger fish populations than in unprotected areas. This encourages establishment and maintenance of more reserves.

3. U.S. deaths from Fukushima

A plume of toxic fallout floated to the U.S. after Japan’s tragic Fukushima nuclear disaster on March 11, 2011. The U.S. Environmental Protection Agency found radiation levels in air, water and milk that were hundreds of times higher than normal across the United States. One month later, the EPA announced that radiation levels had declined, and they would cease testing. But after making a Freedom of Information Act request, journalist Lucas Hixson published emails revealing that on March 24, 2011, the task of collecting nuclear data had been handed off from the U.S. Nuclear Regulatory Commission to the Nuclear Energy Institute, a nuclear industry lobbying group. And in one study that got little attention, scientists Joseph Mangano and Jeanette Sherman found that in the period following the Fukushima meltdowns, 14,000 more deaths than average were reported in the U.S., mostly among infants. Later, Mangono and Sherman updated the number to 22,000.

4. FBI agents responsible for terrorist plots

We know that FBI agents go into communities such as mosques, both undercover and in the guise of building relationships, quietly gathering information about individuals. This is part of an approach to finding what the FBI now considers the most likely kind of terrorists, “lone wolves.” Its strategy: “seeking to identify those disgruntled few who might participate in a plot given the means and the opportunity. And then, in case after case, the government provides the plot, the means, and the opportunity,” writes Mother Jones journalist Trevor Aaronsen. The publication, along with the Investigative Reporting Program at the University of California-Berkeley, examined the results of this strategy, 508 cases classified as terrorism-related that have come before the U.S. Department of Justice since the 9/11 terrorist attacks of 2001. In 243 of these cases, an informant was involved; in 49 cases, an informant actually led the plot. And “with three exceptions, all of the high-profile domestic terror plots of the last decade were actually FBI stings.”

5. Federal Reserve loaned trillions to major banks

The Federal Reserve, the U.S.’s quasi-private central bank, was audited for the first time in its history this year. The audit report states, “From late 2007 through mid-2010, Reserve Banks provided more than a trillion dollars ... in emergency loans to the financial sector to address strains in credit markets and to avert failures of individual institutions believed to be a threat to the stability of the financial system.” These loans had significantly less interest and fewer conditions than the high-profile TARP bailouts, and were rife with conflicts of interest. Some examples: the CEO of JP Morgan Chase served as a board member of the New York Federal Reserve at the same time that his bank received more than $390 billion in financial assistance from the Fed. William Dudley, who is now the New York Federal Reserve president, was granted a conflict of interest waiver to let him keep investments in AIG and General Electric at the same time the companies were given bailout funds. The audit was restricted to Federal Reserve lending during the financial crisis. On July 25, 2012, a bill to audit the Fed again, with fewer limitations, authored by Rep. Ron Paul, passed the House of Representatives. H.R. 459 was expected to die in the Senate, but the movement behind Paul and his calls to hold the Fed accountable, or abolish it altogether, seem to be growing.

6. Small network of corporations run the global economy

Reporting on a study by researchers from the Swiss Federal Institute in Zurich didn’t make the rounds nearly enough, according to Censored 2013. They found that, of 43,060 transnational companies, 147 control 40 percent of total global wealth. The researchers also built a model visually demonstrating how the connections between companies — what it calls the “super entity” — works. Some have criticized the study, saying control of assets doesn’t equate to ownership. True, but as we clearly saw in the 2008 financial collapse, corporations are capable of mismanaging assets in their control to the detriment of their actual owners. And a largely unregulated super entity like this is vulnerable to global collapse.

7. The International Year of Cooperative

Can something really be censored when it’s straight from the United Nations? According to Project Censored evaluators, the corporate media underreported the U.N. declaring 2012 to be the International Year of the Cooperative, based on the co-op business model’s stunning growth. The U.N. found that, in 2012, 1 billion people worldwide are co-op member-owners, or one in five adults over age 15. The largest is Spain’s Mondragon Corporation, with more than 80,000 member-owners. The U.N. predicts that by 2025, worker-owned co-ops will be the world’s fastest growing business model. Worker-owned cooperatives provide for equitable distribution of wealth, genuine connection to the workplace, and, just maybe, a brighter future for our planet.

8. NATO war crimes in Libya

In January 2012, the BBC “revealed” how British Special Forces agents joined and “blended in” with rebels in Libya to help topple dictator Muammar Gadaffi, a story that alternative media sources had reported a year earlier. NATO admits to bombing a pipe factory in the Libyan city of Brega that was key to the water supply system that brought tap water to 70 percent of Libyans, saying that Gadaffi was storing weapons in the factory. In Censored 2013, writer James F. Tracy makes the point that historical relations between the U.S. and Libya were left out of mainstream news coverage of the NATO campaign; “background knowledge and historical context confirming Al-Qaeda and Western involvement in the destabilization of the Gadaffi regime are also essential for making sense of corporate news narratives depicting the Libyan operation as a popular ‘uprising.’”

9. Prison slavery in the U.S.

On its website, the UNICOR manufacturing corporation proudly proclaims that its products are “made in America.” That’s true, but they’re made in places in the U.S. where labor laws don’t apply, with workers often paid just 23 cents an hour to be exposed to toxic materials with no legal recourse. These places are U.S. prisons. Slavery conditions in prisons aren’t exactly news. It’s literally written into the Constitution; the 13th Amendment, which abolished slavery, outlaws “slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted.” But the articles highlighted by Project Censored this year reveal the current state of prison slavery industries, and its ties to war. The majority of products manufactured by inmates are contracted to the Department of Defense. Inmates make complex parts for missile systems, battleship anti-aircraft guns and landmine sweepers, as well as night-vision goggles, body army and camouflage uniforms. Of course, this is happening in the context of record high imprisonment in the U.S., where grossly disproportionate numbers of African Americans and Latinos are imprisoned, and can’t vote even after they’re freed. As psychologist Elliot D. Cohen puts it in this year’s book: “This system of slavery, like that which existed in this country before the Civil War, is also racist, as more than 60 percent of U.S. prisoners are people of color.”

10. H.R. 347 criminalizes protest

H.R. 347, sometimes called the “criminalizing protest” or “anti-Occupy” bill, made some headlines. But concerned lawyers and other citizens worry that it could have disastrous effects for the First Amendment right to protest. Officially called the Federal Restricted Grounds Improvement Act, the law makes it a felony to “knowingly” enter a zone restricted under the law, or engage in “disorderly or disruptive” conduct in or near the zones. The restricted zones include anywhere the Secret Service may be — places such as the White House, areas hosting events deemed “National Special Security Events,” or anywhere visited by the president, vice president and their immediate families; former presidents, vice presidents and certain family members; certain foreign dignitaries; major presidential and vice presidential candidates (within 120 days of an election); and other individuals as designated by a presidential executive order. These people could be anywhere, and NSSEs have notoriously included the Democratic and Republican National Conventions, Super Bowls and the Academy Awards. So far, it seems the only time H.R. 347 has kicked in is with George Clooney’s high-profile arrest outside the Sudanese embassy. Clooney ultimately was not detained without trial — information that would be almost impossible to censor — but what about the rest of us who exist outside of the mainstream media’s spotlight?