Saturday, November 23, 2013
Wednesday, November 20, 2013
North Texas Drivers Stopped at Roadblock Asked for Saliva, Blood
Fort Worth police apologize for its role in federal survey
By Scott Gordon | Tuesday, Nov 19, 2013
Some drivers along a busy Fort Worth street on Friday were stopped at a police roadblock and directed into a parking lot, where they were asked by federal contractors for samples of their breath, saliva and even blood.
It was part of a government research study aimed at determining the number of drunken or drug-impaired drivers.
"It just doesn't seem right that you can be forced off the road when you're not doing anything wrong," said Kim Cope, who said she was on her lunch break when she was forced to pull over at the roadblock on Beach Street in North Fort Worth.
The National Highway Traffic Safety Administration, which is spending $7.9 million on the survey over three years, said participation was "100 percent voluntary" and anonymous.
But Cope said it didn't feel voluntary to her -- despite signs saying it was.
"I gestured to the guy in front that I just wanted to go straight, but he wouldn't let me and forced me into a parking spot," she said.
Once parked, she couldn't believe what she was asked next.
"They were asking for cheek swabs," she said. "They would give $10 for that. Also, if you let them take your blood, they would pay you $50 for that."
At the very least, she said, they wanted to test her breath for alcohol.
She said she felt trapped.
"I finally did the Breathalyzer test just because I thought that would be the easiest way to leave," she said, adding she received no money.
Fort Worth police earlier said they could not immediately find any record of officer involvement but police spokesman Sgt. Kelly Peel said Tuesday that the department's Traffic Division coordinated with the NHTSA on the use of off-duty officers after the agency asked for help with the survey.
"We are reviewing the actions of all police personnel involved to ensure that FWPD policies and procedures were followed," he said. "We apologize if any of our drivers and citizens were offended or inconvenienced by the NHTSA National Roadside Survey."
NBC DFW confirmed that the survey was done by a government contractor, the Pacific Institute for Research and Evaluation, which is based in Calverton, Md.
A company spokeswoman referred questions to the National Highway Traffic Safety Administration.
An agency spokeswoman sent an email confirming the government is conducting the surveys in 30 cities across the country in an effort to reduce impaired-driving accidents.
She did not respond to another email from NBC DFW asking specific questions about the program..
But a Fort Worth attorney who is an expert in civil liberties law questioned whether such stops are constitutional.
"You can't just be pulled over randomly or for no reason," said attorney Frank Colosi.
He also noted the fine print on a form given to drivers informs them their breath was tested by "passive alcohol sensor readings before the consent process has been completed."
"They're essentially lying to you when they say it's completely voluntary, because they're testing you at that moment," Colosi said.
He also questioned the results of the "voluntary" survey -- speculating that drivers who had been drinking or using drugs would be more inclined to simply decline to participate.
Cope said she is troubled by what happened.
"It just doesn't seem right that they should be able to do any of it," she said. "If it's voluntary, it's voluntary, and none of it felt voluntary."
Asked Tuesday if she accepted the police department's apology, Cope said she would wait to see what the review showed.
"They need to make sure this doesn't happen again," she said.
RT also reported the story:
Texas drivers pulled over at random, told to turn over blood, saliva samples
By Scott Gordon | Tuesday, Nov 19, 2013
Some drivers along a busy Fort Worth street on Friday were stopped at a police roadblock and directed into a parking lot, where they were asked by federal contractors for samples of their breath, saliva and even blood.
It was part of a government research study aimed at determining the number of drunken or drug-impaired drivers.
"It just doesn't seem right that you can be forced off the road when you're not doing anything wrong," said Kim Cope, who said she was on her lunch break when she was forced to pull over at the roadblock on Beach Street in North Fort Worth.
The National Highway Traffic Safety Administration, which is spending $7.9 million on the survey over three years, said participation was "100 percent voluntary" and anonymous.
But Cope said it didn't feel voluntary to her -- despite signs saying it was.
"I gestured to the guy in front that I just wanted to go straight, but he wouldn't let me and forced me into a parking spot," she said.
Once parked, she couldn't believe what she was asked next.
"They were asking for cheek swabs," she said. "They would give $10 for that. Also, if you let them take your blood, they would pay you $50 for that."
At the very least, she said, they wanted to test her breath for alcohol.
She said she felt trapped.
"I finally did the Breathalyzer test just because I thought that would be the easiest way to leave," she said, adding she received no money.
Fort Worth police earlier said they could not immediately find any record of officer involvement but police spokesman Sgt. Kelly Peel said Tuesday that the department's Traffic Division coordinated with the NHTSA on the use of off-duty officers after the agency asked for help with the survey.
"We are reviewing the actions of all police personnel involved to ensure that FWPD policies and procedures were followed," he said. "We apologize if any of our drivers and citizens were offended or inconvenienced by the NHTSA National Roadside Survey."
NBC DFW confirmed that the survey was done by a government contractor, the Pacific Institute for Research and Evaluation, which is based in Calverton, Md.
A company spokeswoman referred questions to the National Highway Traffic Safety Administration.
An agency spokeswoman sent an email confirming the government is conducting the surveys in 30 cities across the country in an effort to reduce impaired-driving accidents.
She did not respond to another email from NBC DFW asking specific questions about the program..
But a Fort Worth attorney who is an expert in civil liberties law questioned whether such stops are constitutional.
"You can't just be pulled over randomly or for no reason," said attorney Frank Colosi.
He also noted the fine print on a form given to drivers informs them their breath was tested by "passive alcohol sensor readings before the consent process has been completed."
"They're essentially lying to you when they say it's completely voluntary, because they're testing you at that moment," Colosi said.
He also questioned the results of the "voluntary" survey -- speculating that drivers who had been drinking or using drugs would be more inclined to simply decline to participate.
Cope said she is troubled by what happened.
"It just doesn't seem right that they should be able to do any of it," she said. "If it's voluntary, it's voluntary, and none of it felt voluntary."
Asked Tuesday if she accepted the police department's apology, Cope said she would wait to see what the review showed.
"They need to make sure this doesn't happen again," she said.
****
RT also reported the story:
Texas drivers pulled over at random, told to turn over blood, saliva samples
Monday, November 4, 2013
Friday, November 1, 2013
The Republic of Denial
Ignored Reality Is Going To Wipe Out The Human Race
by PAUL CRAIG ROBERTS
To inform people is hard slugging. Everything is lined up against the public being informed, or the policymakers for that matter. News is contaminated by its service to special interests and hidden agendas. Many scientists or their employers are dependent on federal money. Even psychologists and anthropologists were roped into the government’s torture and occupation programs. Economists tell lies for corporations and Wall Street. Plant and soil scientists tell lies for agribusiness and Monsanto the devil. Truth tellers are slandered and persecuted. However, persistence can eventually win out. In the long-run, truth sometimes emerges. But not always. And not always in time.
I have been trying to inform the American people, economists, and policymakers for more than a decade about the adverse impacts of jobs offshoring on the US economy.
The word has eventually gotten out. Last week I was contacted by 8th grade students competing for their school in CSPAN’s StudentCam Documentary Contest. They want to interview me on the subject of jobs offshoring for their documentary film.
America is a strange place. Here are eighth graders far ahead of the economics profession, the President, the Congress, the Federal Reserve, Wall Street, and the financial press in their understanding of one of the fundamental problems of the US economy. Yet, people say the public schools are failing. Obviously, not the one whose students contacted me.
Is it too late? I know much, but not all. So this is not the final word. I think it might be too late. When skilled jobs are sent abroad, the skills disappear at home. So do the supply chains and the businesses associated with the skills. Things close down, and abilities are lost. Why take a major in collage for a job that is offshored. A culture disappears.
But we can start them back up, right? Perhaps not. When a First World country exports its technology and know-how abroad to a Third World country in order to benefit from lower cost labor, how does the First World country get the work back? Living standards and the cost of living in Third World countries are much lower than in First World countries. The populations of First World countries cannot pay their mortgages, car payments, student loans, medical care, and grocery bills with the wages of Third World countries.
When First World wages drop, mortgage, car, credit card, and student loan payments do not drop. Americans cannot live on Chinese, Indian, and Indonesian wages. Once the technology and know-how is transferred, the low wage country has the advantage in the absence of tariff protection.
For America to revive, our economy would have to be walled off with high tariffs, and subsidies would have to be provided in order to recreate US industry and manufacturing. But many corporations now produce offshore, and America is broke. The government has been $1 trillion dollars in the hole each year for the last 5 years.
Jobs offshoring diminished the US tax base. When a job is sent abroad, so is that job’s contribution to US GDP and tax base. When millions of jobs are sent abroad, US GDP and tax base cannot support government spending levels. To the extent that there are any replacement jobs, they are in lowly paid domestic services, such as waitresses, bartenders, retail clerks, and hospital orderlies. These jobs do not provide a tax base or consumer spending power comparable to manufacturing jobs and tradable professional services such as software engineering and information technology.
Republicans and increasingly Democrats, as both parties are dependent on the same sources of campaign contributions, blame “entitlements.” By entitlements they mean welfare.
In fact, entitlements consist of Social Security and Medicare. Entitlements are funded by the payroll tax, approximately 15% of payroll. The fact that a person pays the payroll tax all his working life is why the person is entitled to Social Security and Medicare if they live to retirement age. Welfare, such as food stamps and housing subsidies, are a small part of the federal budget and are not entitlements.
Every since President Reagan was betrayed three decades ago by Alan Greenspan and David Stockman, both of whom sold out to Wall Street and raised the Social Security payroll tax above what was needed to pay Social Security benefits in order to protect Wall Street’s stock and bond portfolios from exaggerated deficit fears, Social Security payroll tax revenues have exceeded Social Security payments. As of today, Social Security revenues exceed payments to beneficiaries by an accumulated $2 trillion. The money was used by the federal government to pay for its wars and other spending programs. The Social Security Trust Fund holds non-marketable IOUs from the Treasury. These IOUs can only be made good from an excess of tax revenues over expenditures or by the Treasury selling $2 trillion in bonds, notes, and bills and paying off its IOUs to the Social Security Trust Fund. This is not going to happen.
The Federal Reserve could not care less about the US population. The Fed was established for the purpose of protecting and aiding banks. Currently, the Fed, as if America were a Banana Republic which America appears to be becoming, is printing one thousand billion dollars per year in order to support the banks and to finance the federal deficit.
This is bad news for Americans, as it means that their fiat money is being created at a far greater rate than the demand for the dollar. The implication for our future is a drop in the dollar’s value. As there are no jobs, a drop in the dollar’s value means high inflation on top of unemployment and double the misery of the Great Depression.
As bad as this is, it is minor compared to the destruction of the planet’s environment. Online information shows that the Gulf of Mexico ecosystem is in crisis after the BP spill and use of Corexit, a dispersant used to hide, not clean up, the spilled oil. The Fukushima catastrophe has hardly begun. Yet already the radioactive water pouring into the Pacific Ocean has made fish dangerous to eat unless a person is willing to accept a higher risk of cancer.
Fukushima has the potential of making Japan uninhabitable and of polluting the air, water, and soil of the US with radioactivity. Yet the crisis is seldom mentioned in the US media. In Japan the government just passed a law that could be used to imprison Japanese journalists who report truthfully on the dire situation.
Take the time to familiarize yourself with the online information about Fukushima.. According to the presstitute media, Americans face threats from Iran and Syria and from whistleblowers such as Edward Snowden. The real threats are simply not in the news.
If you search Fukushima, you will find information that the presstitute media hides from you. See for example, http://www.globalresearch.ca/28-signs-that-the-west-coast-is-being-absolutely-fried-with-nuclear-radiation-from-fukushima/5355280
There are a number of other threats to the environment on which our lives depend. One is the effort to extract more productivity from the soil by use of GMOs. Monsanto has altered the genes of several crops so that the crops can be sprayed with RoundUp to eliminate weeds. The results have been to deplete the soil of nutrients, to destroy the micro-biology of the soil so that new plant diseases and funguses are activated, and to produce superweeds that require heavier doses of the glyphosate in RoundUp. The heavier dose of RoundUp worsens the aforementioned problems. US agricultural soil is losing its potency.
Now we come to chemtrails, branded another “conspiracy theory.” http://en.wikipedia.org/wiki/Chemtrail_conspiracy_theory However, the US government’s efforts to geo-engineer weather as a military weapon and as a preventative of global warming appear to be real. The DARPA and HAARP programs are well known and are discussed publicly by scientists. See, for example, http://news.sciencemag.org/2009/03/darpa-explore-geoengineering Search Chemtrails, and you will find much information that is kept from you. See, for example, http://www.globalresearch.ca/chemtrails-a-planetary-catastrophe-created-by-geo-engineering/5355299 and http://www.geoengineeringwatch.org
Some describe chemtrails as a plot by the New World Order, the Rothchilds, the Bilderbergers, or the Masons, to wipe out the “useless eaters.” Given the amount of evil that exists in the world, these conspiracy theories might not be as farfetched as they sound.
However, I do not know that. What does seem to be possibly true is that the scientific experiments to modify and control weather are having adverse real world consequences. The claim that aluminum is being sprayed into the atmosphere and when it comes to earth is destroying the ability of soil to be productive might not be imaginary. Those concerned about chemtrails say that weather control experiments have deprived the western United States of rainfall, while sending the rain to the east where there have been hurricane level deluges and floods.
In the West, sparse rainfall and lightening storms without rain are resulting in forests drying out and burning down. Deforestation adversely affects the environment in many ways, including the process of photosynthesis by which trees convert carbon dioxide into oxygen. The massive loss of forests means more carbon dioxide and less oxygen.
Watershed and species habitat are lost, and spreading aridity further depletes ground and surface water. If these results are the consequences of weather modification experiments, the experiments should be stopped.
In North Georgia where I spend some summers, during 2013 it rained for 60 consecutive days, not all day, but every day, and some days the rainfall was 12 inches–hurricane level–and roads were washed out. I received last summer 4 automated telephone warnings from local counties not to drive and not to attempt to drive through accumulations of water on the highways.
One consequence of the excess of water in the East is that this year there are no acorns in North Georgia. Zilch, zero, nada. Nothing. There is no food for the deer, the turkeys, the bear, the rodents. Starving deer will strip bark from the trees. Bears will be unable to hibernate or will be able only to partially hibernate, forced to seek food from garbage. Black bears are already invading homes in search of food.
Unusual drought in the West and unusual flood in the East could be coincidental or they could be consequences of weather modification experiments.
The US, along with most of the world, already had a water problem prior to possible disruptions of rainfall by geo-engineering. In his book, Elixir, Brian Fagan tells the story of humankind’s mostly unsuccessful struggle with water. Both groundwater and surface water are vanishing. The water needs of large cities, such as Los Angeles and Phoenix, and the irrigation farming that depends on the Ogallala aquifer are unsustainable. Fagan reminds us that “the world’s supply of freshwater is finite,” just like the rest of nature’s resources. Avoiding cataclysm requires long-range thinking, but humanity is focused on immediate needs. Long-range thinking is limited to finding another water source to deplete. Cities and agriculture have turned eyes to the Great Lakes.
Los Angeles exists because the city was able to steal water from hundreds of miles away. The city drained Owens Lake, leaving a huge salt flat in its place, drained the Owens Valley aquifer, and diverted the Owens River to LA via aqueduct. Farming and ranching in the Owens Valley collapsed. Today LA takes water from the Colorado River, which originates in Wyoming and Colorado, and from Lake Perris 440 miles away.
Water depletion is not just an American problem. Fagan reports that “underground aquifers in many places are shrinking so rapidly that NASA satellites are detecting changes in the earth’s gravity.”
If the government is experimenting with weather engineering, scientists are playing God when they have no idea of the consequences. It is a tendency of scientists to become absorbed by the ability to experiment and to ignore unintended consequences.
Readers have asked me to write about Fukushima and chemtrails because they trust me to tell them the truth. The problem is that I am not qualified to write about these matters with anything approaching the same confidence that I bring to economic, war and police state matters.
The only advice I can give is that when you hear the presstitute media smear a concern or explanation as “conspiracy theory,” have a closer look. The divergence between what is happening and what you are told is so vast that it pays to be suspicious, cynical even, of what “your” government and “your” presstitute media tell you. The chances are high that it is a lie.
by PAUL CRAIG ROBERTS
To inform people is hard slugging. Everything is lined up against the public being informed, or the policymakers for that matter. News is contaminated by its service to special interests and hidden agendas. Many scientists or their employers are dependent on federal money. Even psychologists and anthropologists were roped into the government’s torture and occupation programs. Economists tell lies for corporations and Wall Street. Plant and soil scientists tell lies for agribusiness and Monsanto the devil. Truth tellers are slandered and persecuted. However, persistence can eventually win out. In the long-run, truth sometimes emerges. But not always. And not always in time.
I have been trying to inform the American people, economists, and policymakers for more than a decade about the adverse impacts of jobs offshoring on the US economy.
The word has eventually gotten out. Last week I was contacted by 8th grade students competing for their school in CSPAN’s StudentCam Documentary Contest. They want to interview me on the subject of jobs offshoring for their documentary film.
America is a strange place. Here are eighth graders far ahead of the economics profession, the President, the Congress, the Federal Reserve, Wall Street, and the financial press in their understanding of one of the fundamental problems of the US economy. Yet, people say the public schools are failing. Obviously, not the one whose students contacted me.
Is it too late? I know much, but not all. So this is not the final word. I think it might be too late. When skilled jobs are sent abroad, the skills disappear at home. So do the supply chains and the businesses associated with the skills. Things close down, and abilities are lost. Why take a major in collage for a job that is offshored. A culture disappears.
But we can start them back up, right? Perhaps not. When a First World country exports its technology and know-how abroad to a Third World country in order to benefit from lower cost labor, how does the First World country get the work back? Living standards and the cost of living in Third World countries are much lower than in First World countries. The populations of First World countries cannot pay their mortgages, car payments, student loans, medical care, and grocery bills with the wages of Third World countries.
When First World wages drop, mortgage, car, credit card, and student loan payments do not drop. Americans cannot live on Chinese, Indian, and Indonesian wages. Once the technology and know-how is transferred, the low wage country has the advantage in the absence of tariff protection.
For America to revive, our economy would have to be walled off with high tariffs, and subsidies would have to be provided in order to recreate US industry and manufacturing. But many corporations now produce offshore, and America is broke. The government has been $1 trillion dollars in the hole each year for the last 5 years.
Jobs offshoring diminished the US tax base. When a job is sent abroad, so is that job’s contribution to US GDP and tax base. When millions of jobs are sent abroad, US GDP and tax base cannot support government spending levels. To the extent that there are any replacement jobs, they are in lowly paid domestic services, such as waitresses, bartenders, retail clerks, and hospital orderlies. These jobs do not provide a tax base or consumer spending power comparable to manufacturing jobs and tradable professional services such as software engineering and information technology.
Republicans and increasingly Democrats, as both parties are dependent on the same sources of campaign contributions, blame “entitlements.” By entitlements they mean welfare.
In fact, entitlements consist of Social Security and Medicare. Entitlements are funded by the payroll tax, approximately 15% of payroll. The fact that a person pays the payroll tax all his working life is why the person is entitled to Social Security and Medicare if they live to retirement age. Welfare, such as food stamps and housing subsidies, are a small part of the federal budget and are not entitlements.
Every since President Reagan was betrayed three decades ago by Alan Greenspan and David Stockman, both of whom sold out to Wall Street and raised the Social Security payroll tax above what was needed to pay Social Security benefits in order to protect Wall Street’s stock and bond portfolios from exaggerated deficit fears, Social Security payroll tax revenues have exceeded Social Security payments. As of today, Social Security revenues exceed payments to beneficiaries by an accumulated $2 trillion. The money was used by the federal government to pay for its wars and other spending programs. The Social Security Trust Fund holds non-marketable IOUs from the Treasury. These IOUs can only be made good from an excess of tax revenues over expenditures or by the Treasury selling $2 trillion in bonds, notes, and bills and paying off its IOUs to the Social Security Trust Fund. This is not going to happen.
The Federal Reserve could not care less about the US population. The Fed was established for the purpose of protecting and aiding banks. Currently, the Fed, as if America were a Banana Republic which America appears to be becoming, is printing one thousand billion dollars per year in order to support the banks and to finance the federal deficit.
This is bad news for Americans, as it means that their fiat money is being created at a far greater rate than the demand for the dollar. The implication for our future is a drop in the dollar’s value. As there are no jobs, a drop in the dollar’s value means high inflation on top of unemployment and double the misery of the Great Depression.
As bad as this is, it is minor compared to the destruction of the planet’s environment. Online information shows that the Gulf of Mexico ecosystem is in crisis after the BP spill and use of Corexit, a dispersant used to hide, not clean up, the spilled oil. The Fukushima catastrophe has hardly begun. Yet already the radioactive water pouring into the Pacific Ocean has made fish dangerous to eat unless a person is willing to accept a higher risk of cancer.
Fukushima has the potential of making Japan uninhabitable and of polluting the air, water, and soil of the US with radioactivity. Yet the crisis is seldom mentioned in the US media. In Japan the government just passed a law that could be used to imprison Japanese journalists who report truthfully on the dire situation.
Take the time to familiarize yourself with the online information about Fukushima.. According to the presstitute media, Americans face threats from Iran and Syria and from whistleblowers such as Edward Snowden. The real threats are simply not in the news.
If you search Fukushima, you will find information that the presstitute media hides from you. See for example, http://www.globalresearch.ca/28-signs-that-the-west-coast-is-being-absolutely-fried-with-nuclear-radiation-from-fukushima/5355280
There are a number of other threats to the environment on which our lives depend. One is the effort to extract more productivity from the soil by use of GMOs. Monsanto has altered the genes of several crops so that the crops can be sprayed with RoundUp to eliminate weeds. The results have been to deplete the soil of nutrients, to destroy the micro-biology of the soil so that new plant diseases and funguses are activated, and to produce superweeds that require heavier doses of the glyphosate in RoundUp. The heavier dose of RoundUp worsens the aforementioned problems. US agricultural soil is losing its potency.
Now we come to chemtrails, branded another “conspiracy theory.” http://en.wikipedia.org/wiki/Chemtrail_conspiracy_theory However, the US government’s efforts to geo-engineer weather as a military weapon and as a preventative of global warming appear to be real. The DARPA and HAARP programs are well known and are discussed publicly by scientists. See, for example, http://news.sciencemag.org/2009/03/darpa-explore-geoengineering Search Chemtrails, and you will find much information that is kept from you. See, for example, http://www.globalresearch.ca/chemtrails-a-planetary-catastrophe-created-by-geo-engineering/5355299 and http://www.geoengineeringwatch.org
Some describe chemtrails as a plot by the New World Order, the Rothchilds, the Bilderbergers, or the Masons, to wipe out the “useless eaters.” Given the amount of evil that exists in the world, these conspiracy theories might not be as farfetched as they sound.
However, I do not know that. What does seem to be possibly true is that the scientific experiments to modify and control weather are having adverse real world consequences. The claim that aluminum is being sprayed into the atmosphere and when it comes to earth is destroying the ability of soil to be productive might not be imaginary. Those concerned about chemtrails say that weather control experiments have deprived the western United States of rainfall, while sending the rain to the east where there have been hurricane level deluges and floods.
In the West, sparse rainfall and lightening storms without rain are resulting in forests drying out and burning down. Deforestation adversely affects the environment in many ways, including the process of photosynthesis by which trees convert carbon dioxide into oxygen. The massive loss of forests means more carbon dioxide and less oxygen.
Watershed and species habitat are lost, and spreading aridity further depletes ground and surface water. If these results are the consequences of weather modification experiments, the experiments should be stopped.
In North Georgia where I spend some summers, during 2013 it rained for 60 consecutive days, not all day, but every day, and some days the rainfall was 12 inches–hurricane level–and roads were washed out. I received last summer 4 automated telephone warnings from local counties not to drive and not to attempt to drive through accumulations of water on the highways.
One consequence of the excess of water in the East is that this year there are no acorns in North Georgia. Zilch, zero, nada. Nothing. There is no food for the deer, the turkeys, the bear, the rodents. Starving deer will strip bark from the trees. Bears will be unable to hibernate or will be able only to partially hibernate, forced to seek food from garbage. Black bears are already invading homes in search of food.
Unusual drought in the West and unusual flood in the East could be coincidental or they could be consequences of weather modification experiments.
The US, along with most of the world, already had a water problem prior to possible disruptions of rainfall by geo-engineering. In his book, Elixir, Brian Fagan tells the story of humankind’s mostly unsuccessful struggle with water. Both groundwater and surface water are vanishing. The water needs of large cities, such as Los Angeles and Phoenix, and the irrigation farming that depends on the Ogallala aquifer are unsustainable. Fagan reminds us that “the world’s supply of freshwater is finite,” just like the rest of nature’s resources. Avoiding cataclysm requires long-range thinking, but humanity is focused on immediate needs. Long-range thinking is limited to finding another water source to deplete. Cities and agriculture have turned eyes to the Great Lakes.
Los Angeles exists because the city was able to steal water from hundreds of miles away. The city drained Owens Lake, leaving a huge salt flat in its place, drained the Owens Valley aquifer, and diverted the Owens River to LA via aqueduct. Farming and ranching in the Owens Valley collapsed. Today LA takes water from the Colorado River, which originates in Wyoming and Colorado, and from Lake Perris 440 miles away.
Water depletion is not just an American problem. Fagan reports that “underground aquifers in many places are shrinking so rapidly that NASA satellites are detecting changes in the earth’s gravity.”
If the government is experimenting with weather engineering, scientists are playing God when they have no idea of the consequences. It is a tendency of scientists to become absorbed by the ability to experiment and to ignore unintended consequences.
Readers have asked me to write about Fukushima and chemtrails because they trust me to tell them the truth. The problem is that I am not qualified to write about these matters with anything approaching the same confidence that I bring to economic, war and police state matters.
The only advice I can give is that when you hear the presstitute media smear a concern or explanation as “conspiracy theory,” have a closer look. The divergence between what is happening and what you are told is so vast that it pays to be suspicious, cynical even, of what “your” government and “your” presstitute media tell you. The chances are high that it is a lie.
The Corporate State of Surveillance
Opting Out
by RALPH NADER
America was founded on the ideals of personal liberty, freedom and democracy. Unfortunately, mass spying, surveillance and the unending collection of personal data threaten to undermine civil liberties and our privacy rights. What started as a necessary means of reconnaissance and intelligence gathering during World War II has escalated into an out-of-control snoop state where entities both governmental and commercial are desperate for as much data as they can grab. We find ourselves in the midst of an all-out invasion on what’s-none-of-their-business and its coming from both government and corporate sources. Snooping and data collection have become big business. Nothing is out of their bounds anymore.
The Patriot Act-enabled National Security Agency (NSA) certainly blazed one trail. The disclosures provided by Edward Snowden has brought into light the worst fears that critics of the overwrought Patriot Act expressed back in 2001. The national security state has given a blank check to the paranoid intelligence community to gather data on nearly everyone. Internet and telephone communications of millions of American citizens and millions more citizens and leaders of other countries. Even friendly ones such as Germany, France and Brazil have been surveillance targets –over 30 foreign leaders such as German Chancellor Angela Merkel and Brazilian president Dilma Rousseff have reportedly been targeted by this dragnet style data-collecting. More blatantly, covert devices were reportedly placed in European Union offices and earlier by Hillary Clinton’s State Department on the United Nations to eavesdrop on diplomats. World leaders are not pleased, to put it mildly.
Many Americans are not pleased either. And while most of the recent public outrage in the U.S. has been directed at instances of government snooping, giant private corporations are equally as guilty of the troubling invasion of peoples’ selves. Companies such as Google, Apple, Microsoft and Facebook blatantly collect and commercialize personal data — often covering their tracks with complicated fine-print user agreement contracts that most people, whose property it is, “agree” to without any consideration. Clicking “I agree” on an expansive, non-negotiable user agreement for a website or a software program is, to most people, just another mindless click of the mouse in the signup process.
These “take-it-or-leave-it” contracts leave the consumer with little power to protect their own interest. (See here for our extensive work on this issue. Also, visit “Terms of Service; Didn’t Read” for a valuable resource that summarizes and reviews online contracts so that users can have a better understanding of what they are agreeing to.)
Just last week, news broke that Google plans to roll out a new advertising feature called “Shared Endorsements.” This policy allows Google the right to create user endorsements in online advertisements. So, if a Googler happens to share their preference for a particular product online, his or her endorsement might end up featured in an ad without any notice or compensation. Of course, users are welcome to “opt-out” of this program — but how many millions will remain ignorant of the fact that they unwillingly opted-in by clicking their consent to contract terms they did not bother to read out of habit. (Google’s official statement claims the move is to “ensure that your recommendations reach the people you care about.”)
Opting-out should be the default option for all these types of agreements.
School children are also being targeted by mass data collectors. InBloom, a nonprofit organization based in Atlanta, offers a database solution for student records between grades K-12. In theory, this service is supposed to make it easier for teachers to utilize emerging educational products and tools. But in practice, many parents are concerned about how this data will be used — in one instance, for example, student social security numbers were uploaded to the service. One parent told the New York Times:
Facebook poses another data mining risk for young children. Although Facebook does not currently allow children younger than 13 to join — the Children’s Online Privacy Protection Act prevents the online collection of data of children without parental permission — reportedly more than five million underage children use the social media website anyway. This exposes them (and their personal information) to thousands of advertisers that use Facebook to collect marketing data and promote their products. See the Center for Digital Democracy’s recent report “Five Reasons Why Facebook is Not Suitable For Children Under 13.” Notably, Facebook recently changed their privacy policy to allow teenagers between the ages of 13 and 17 to opt-in to sharing their postings with the entire world, as opposed to just their “friend network.”
The insatiable appetite for data is reaching beyond the digital realm, as well.
The Washington Post recently reported that Mondelez International, the company behind snack brands like Chips Ahoy and Ritz, has plans to deploy electronic camera sensors in snack food shelves to collect shopper data. These “smart shelves” can scan and save a customer’s facial structure, age, weight and even detect if they picked something up off the shelf. The device can then use that gathered data to target the consumers with “personalized ads.” For example, at the checkout line, a video screen might offer you 10 percent off the box of cookies you picked up but ultimately chose not to purchase. The Post reports: “The company expects the shelf to help funnel more of the right products to the right consumers, and even convince undecideds to commit to an impulse buy.”
The smart shelf builds on the Microsoft “Kinect” camera technology, which has the ability to scan and remember faces, detect movement and even read heart beats. Microsoft developed the Kinect camera as a video game control device for the home. In light of Microsoft’s reported connection to the NSA PRISM data gathering program, why would anyone willingly bring such a sophisticated spy cam into their living room?
Along the same lines, certain retailers are using smart phones to track the movement of customers in their store to gather information on what products they look at and for how long — similar to how Amazon tracks online shopper habits so it can direct them to other products that algorithms determine they might be interested in. Sen. Chuck Schumer (D-NY) has called on the Federal Trade Commission to regulate this disturbing practice. He recently announced a deal with eight analytic companies to institute a “code of conduct” for utilizing this seemingly Orwellian technology. Sen. Schumer told the Associated Press: “When you go into your store for your Christmas shopping, there’ll be a sign out there that says that you’re being tracked and if you don’t want to be, you can very simply opt out.” The details on how exactly one opts-out of this invasive technology, short of leaving their cell phone at home, is not yet clear.
With all these instances of Big Brother encroachment, one might want to opt out of the digital world entirely, and avoid supermarkets and retail chains that spy on customers. Unfortunately, that is becoming more and more difficult in an increasingly technology-obsessed world.
It’s time for citizens to stand up and demand their right to privacy, which is a personal property. Mass surveillance and rampant data collection are not acceptable and should not be the status quo. Recall that there was once a time when the federal government could defend our nation without limitless access to computer records, emails, online search histories and wiretapping phone calls without open judicial authorization. Businesses could be successful without tracking and saving your shopping habits and student records were not commodities to be traded away. Why do they now do what they do? Because they can.
Remember, what you allow to be taken from you by the private companies can also end up in the files of government agencies.
This Saturday, a coalition of groups including the ACLU, Public Citizen, the Electronic Privacy Information Center (EPIC), the Libertarian Party and many more are gathering on the National Mall to protest mass surveillance by the National Security Agency. This is a positive first step in letting our elected officials know that ceasing the collection of private personal information about you is important and mass surveillance should be prohibited. Visit here for more information about this weekend’s rally. Join the movement to end these burgeoning, tyranny-building abuses by runaway federal agencies.
by RALPH NADER
America was founded on the ideals of personal liberty, freedom and democracy. Unfortunately, mass spying, surveillance and the unending collection of personal data threaten to undermine civil liberties and our privacy rights. What started as a necessary means of reconnaissance and intelligence gathering during World War II has escalated into an out-of-control snoop state where entities both governmental and commercial are desperate for as much data as they can grab. We find ourselves in the midst of an all-out invasion on what’s-none-of-their-business and its coming from both government and corporate sources. Snooping and data collection have become big business. Nothing is out of their bounds anymore.
The Patriot Act-enabled National Security Agency (NSA) certainly blazed one trail. The disclosures provided by Edward Snowden has brought into light the worst fears that critics of the overwrought Patriot Act expressed back in 2001. The national security state has given a blank check to the paranoid intelligence community to gather data on nearly everyone. Internet and telephone communications of millions of American citizens and millions more citizens and leaders of other countries. Even friendly ones such as Germany, France and Brazil have been surveillance targets –over 30 foreign leaders such as German Chancellor Angela Merkel and Brazilian president Dilma Rousseff have reportedly been targeted by this dragnet style data-collecting. More blatantly, covert devices were reportedly placed in European Union offices and earlier by Hillary Clinton’s State Department on the United Nations to eavesdrop on diplomats. World leaders are not pleased, to put it mildly.
Many Americans are not pleased either. And while most of the recent public outrage in the U.S. has been directed at instances of government snooping, giant private corporations are equally as guilty of the troubling invasion of peoples’ selves. Companies such as Google, Apple, Microsoft and Facebook blatantly collect and commercialize personal data — often covering their tracks with complicated fine-print user agreement contracts that most people, whose property it is, “agree” to without any consideration. Clicking “I agree” on an expansive, non-negotiable user agreement for a website or a software program is, to most people, just another mindless click of the mouse in the signup process.
These “take-it-or-leave-it” contracts leave the consumer with little power to protect their own interest. (See here for our extensive work on this issue. Also, visit “Terms of Service; Didn’t Read” for a valuable resource that summarizes and reviews online contracts so that users can have a better understanding of what they are agreeing to.)
Just last week, news broke that Google plans to roll out a new advertising feature called “Shared Endorsements.” This policy allows Google the right to create user endorsements in online advertisements. So, if a Googler happens to share their preference for a particular product online, his or her endorsement might end up featured in an ad without any notice or compensation. Of course, users are welcome to “opt-out” of this program — but how many millions will remain ignorant of the fact that they unwillingly opted-in by clicking their consent to contract terms they did not bother to read out of habit. (Google’s official statement claims the move is to “ensure that your recommendations reach the people you care about.”)
Opting-out should be the default option for all these types of agreements.
School children are also being targeted by mass data collectors. InBloom, a nonprofit organization based in Atlanta, offers a database solution for student records between grades K-12. In theory, this service is supposed to make it easier for teachers to utilize emerging educational products and tools. But in practice, many parents are concerned about how this data will be used — in one instance, for example, student social security numbers were uploaded to the service. One parent told the New York Times:
It’s a new experiment in centralizing massive metadata on children to share with vendors… and then the vendors will profit by marketing their learning products, their apps, their curriculum materials, their video games, back to our kids.
Facebook poses another data mining risk for young children. Although Facebook does not currently allow children younger than 13 to join — the Children’s Online Privacy Protection Act prevents the online collection of data of children without parental permission — reportedly more than five million underage children use the social media website anyway. This exposes them (and their personal information) to thousands of advertisers that use Facebook to collect marketing data and promote their products. See the Center for Digital Democracy’s recent report “Five Reasons Why Facebook is Not Suitable For Children Under 13.” Notably, Facebook recently changed their privacy policy to allow teenagers between the ages of 13 and 17 to opt-in to sharing their postings with the entire world, as opposed to just their “friend network.”
The insatiable appetite for data is reaching beyond the digital realm, as well.
The Washington Post recently reported that Mondelez International, the company behind snack brands like Chips Ahoy and Ritz, has plans to deploy electronic camera sensors in snack food shelves to collect shopper data. These “smart shelves” can scan and save a customer’s facial structure, age, weight and even detect if they picked something up off the shelf. The device can then use that gathered data to target the consumers with “personalized ads.” For example, at the checkout line, a video screen might offer you 10 percent off the box of cookies you picked up but ultimately chose not to purchase. The Post reports: “The company expects the shelf to help funnel more of the right products to the right consumers, and even convince undecideds to commit to an impulse buy.”
The smart shelf builds on the Microsoft “Kinect” camera technology, which has the ability to scan and remember faces, detect movement and even read heart beats. Microsoft developed the Kinect camera as a video game control device for the home. In light of Microsoft’s reported connection to the NSA PRISM data gathering program, why would anyone willingly bring such a sophisticated spy cam into their living room?
Along the same lines, certain retailers are using smart phones to track the movement of customers in their store to gather information on what products they look at and for how long — similar to how Amazon tracks online shopper habits so it can direct them to other products that algorithms determine they might be interested in. Sen. Chuck Schumer (D-NY) has called on the Federal Trade Commission to regulate this disturbing practice. He recently announced a deal with eight analytic companies to institute a “code of conduct” for utilizing this seemingly Orwellian technology. Sen. Schumer told the Associated Press: “When you go into your store for your Christmas shopping, there’ll be a sign out there that says that you’re being tracked and if you don’t want to be, you can very simply opt out.” The details on how exactly one opts-out of this invasive technology, short of leaving their cell phone at home, is not yet clear.
With all these instances of Big Brother encroachment, one might want to opt out of the digital world entirely, and avoid supermarkets and retail chains that spy on customers. Unfortunately, that is becoming more and more difficult in an increasingly technology-obsessed world.
It’s time for citizens to stand up and demand their right to privacy, which is a personal property. Mass surveillance and rampant data collection are not acceptable and should not be the status quo. Recall that there was once a time when the federal government could defend our nation without limitless access to computer records, emails, online search histories and wiretapping phone calls without open judicial authorization. Businesses could be successful without tracking and saving your shopping habits and student records were not commodities to be traded away. Why do they now do what they do? Because they can.
Remember, what you allow to be taken from you by the private companies can also end up in the files of government agencies.
This Saturday, a coalition of groups including the ACLU, Public Citizen, the Electronic Privacy Information Center (EPIC), the Libertarian Party and many more are gathering on the National Mall to protest mass surveillance by the National Security Agency. This is a positive first step in letting our elected officials know that ceasing the collection of private personal information about you is important and mass surveillance should be prohibited. Visit here for more information about this weekend’s rally. Join the movement to end these burgeoning, tyranny-building abuses by runaway federal agencies.
Thursday, October 31, 2013
Five Lessons From the Battles Against GMOs
High-Stakes Battle in Washington
by RONNIE CUMMINS
Twenty years after the controversial introduction of unlabeled and untested genetically engineered foods and crops, opposition to GMOs (Genetically Modified Organisms) and Monsanto the devil has created one of the largest netroots-grassroots movements in the U.S.
There are arguably more important issues facing us today than the battle against Frankenfoods. The climate crisis and corporate control over [the] government and media come to mind. But the rapidly growing anti-GMO Movement illustrates the powerful synergy that can develop from the combined use of social media, marketplace pressure and political action. Recent developments in this sector indicate that out-of-control corporations, media, politicians and the proverbial “1 percent” can be outsmarted and outmaneuvered. And quite possibly defeated.
In the wake of high-stakes multi-million dollar GMO labeling ballot initiatives in California in 2012, and Washington State in 2013, an army of organic food and natural health activists have put Corporate America and the political elite on the defensive. We’ve [demonstrated] that aggressive populist issue-framing; unconventional “inside-outside” coalition-building; marketplace pressure; and online list-building, mobilization and fundraising – strategically channeled into local and state-based political action – can begin to even up the odds between David and Goliath.
Here are five strategic lessons from the ongoing battle against GMOs in the U.S, lessons that may be applicable to a broad range of political issues.
by RONNIE CUMMINS
Twenty years after the controversial introduction of unlabeled and untested genetically engineered foods and crops, opposition to GMOs (Genetically Modified Organisms) and Monsanto the devil has created one of the largest netroots-grassroots movements in the U.S.
There are arguably more important issues facing us today than the battle against Frankenfoods. The climate crisis and corporate control over [the] government and media come to mind. But the rapidly growing anti-GMO Movement illustrates the powerful synergy that can develop from the combined use of social media, marketplace pressure and political action. Recent developments in this sector indicate that out-of-control corporations, media, politicians and the proverbial “1 percent” can be outsmarted and outmaneuvered. And quite possibly defeated.
In the wake of high-stakes multi-million dollar GMO labeling ballot initiatives in California in 2012, and Washington State in 2013, an army of organic food and natural health activists have put Corporate America and the political elite on the defensive. We’ve [demonstrated] that aggressive populist issue-framing; unconventional “inside-outside” coalition-building; marketplace pressure; and online list-building, mobilization and fundraising – strategically channeled into local and state-based political action – can begin to even up the odds between David and Goliath.
Here are five strategic lessons from the ongoing battle against GMOs in the U.S, lessons that may be applicable to a broad range of political issues.
- Aggressive populist issue-framing works.
The desire to know what’s in our food, coupled with a growing concern for food safety and a distrust of large chemical companies, the mass media, Congress and federal regulatory agencies, is a hot-button issue that unites the majority of Americans – Democrats, Republicans, Greens, Libertarians and Independents alike.
Forty percent of consumers believe that unlabeled genetically engineered foods and crops are unsafe. Another 40 percent are unsure. These numbers terrify large supermarket chains, biotech companies and food corporations. So does the notion that states such as Washington, Connecticut, Maine and Vermont will soon require mandatory labeling of GMOs – which will likely drive these controversial foods and crops off the market, just as labeling laws have already done in Europe.
Anti-GMO campaigners have gained the support of millions of consumers and voters by framing] food safety as a populist issue. And by relentlessly and aggressively challenging the opposition – big-name companies that include Monsanto, Coca-Cola, Pepsi, Nestlé, General Mills and others.
- Unconventional “inside-outside” coalition-building builds critical mass.
After 20 years of grassroots public education and advocacy, the organic and natural health movements, led by a hybrid coalition of non-profit public interest groups, such as the Organic Consumers Association and Food Democracy Now, and green businesses, including Mercola.com, Dr. Bronner’s, and Nature’s Path, are approaching something like critical mass.
Over 100 million U.S. consumers are now regularly shopping for organic and natural foods, nutritional supplements and other products, giving rise to a rapidly growing $80 billion-a-year market for organic and natural products. One of the most important accomplishments of the right-to-know, anti-GMO movement has been to unite the advocacy and fundraising efforts of non-profit groups and health and green-minded for-profit businesses. After 20 years of often operating on shoestring budgets, activist groups (the “outsiders”) are now increasingly joining hands with a number of profitable organic/green/Fair Trade businesses (the “insiders”). This inside-outside strategy has managed to raise a not insignificant war chest of almost $20 million to support the state GMO labeling ballot initiatives in California and Washington in 2012 and 2013, while simultaneously pressuring major brands, such as Whole Foods Market, Trader Joe’s and Chipotle, to embrace GMO labeling.
At the same time activist groups with a more radical message (“outsiders”) are learning that you must, for maximum impact, work with more moderate groups (the “insiders”), and vice-versa. This ecumenical “inside-outside” strategy has allowed the more radical organic and natural health groups and scientists to highlight the alarming human health and environmental hazards of GMOs, and carry out boycotts, street demonstrations and direct action, while the less radical campaign groups and coalitions meanwhile appeal to a more moderate demographic with the mainstream message that consumers have the right to know what’s in their food.
- Marketplace pressure and political action must go hand-in-hand.
Anti-GMO campaigners have now learned that marketplace pressure and political action go hand-in-hand. It’s not enough to just vote with your pocketbook for organic and non-GMO foods and products, to reward good companies and brands and punish the bad ones. We must get political, and vote for a healthy, climate-friendly food and farming system in the voting booth as well. If we want to drive GMO foods off the market, we must not only walk our talk in the marketplace and in our everyday lives, but also “get political” and mobilize our base to get involved in legislative battles and political campaigns.
One important consequence of marketplace pressure and boycotts is their potential to gradually divide our opponents. In the case of the anti-GMO movement, we’ve begun to drive a wedge between the biotech/industrial agriculture corporations, and their erstwhile allies, food manufacturers and supermarket chains. In the wake of the California GMO labeling ballot initiative (Proposition 37), the Organic Consumers Association and our allies launched a nationwide boycott of Traitor Brands, the organic and natural brands whose parent corporations spent $20 million [along with the biotech industry’s $30 million] to defeat Prop 37.
We sabotaged several dozen corporate Facebook pages, tarnishing brand names such as Kashi, Cascadian Farm, Honest Tea, Naked Juice, Silk, Horizon, and Ben and Jerry’s, to depress sales. This caused several large multinationals, including Unilever, parent company of Ben and Jerry’s, and Mars, parent company of Seeds of Change, to back off from anti-labeling activities. Other retail and food giants, including Wal-Mart, fearing an escalation in consumer activism, have begun lobbying the FDA to implement federal GMO food labels.
- Sophisticated online list-building, mobilization and fundraising are key.
Anti-GMO campaigners are rapidly becoming more sophisticated in terms of building broad coalitions, using online petitions to build large email lists, pooling national email lists, segmenting national lists in order to target state and local constituencies, using Facebook, Twitter and other social media for network-building and mobilization, setting up c4 lobbying organizations to complement c3 non-profit groups, and raising funds online.
In the recent GMO ballot initiative campaigns in California and Washington, as well as state legislative campaigns for labeling in several dozen other states, right-to-know supporters have been able to send coordinated or complementary email messages to over 10 million people at once. Over the past 12 months groups like the Organic Consumers Association, Mercola.com, Food Democracy Now, Natural News, Alliance for Natural Health, Center for Food Safety, Just Label It, Environmental Working Group, Cornucopia, Friends of the Earth, CREDO, and MoveOn have been able to send out anti-GMO or pro-labeling messages to literally millions of consumers and voters on a regular basis, generating thousands of grassroots volunteers, organizing thousands of local events and protests, and raising over $20 million, mainly in small donations. The anti-GMO movement may not have the deep pockets or the advertising and PR clout of the biotech and Big Food lobby when it comes to the corporate media, but we are rapidly developing our own mass media on the Internet and Facebook.
- Local and state political action is more effective than campaigns that target federal laws and lawmakers.
The anti-GMO movement, like other social change movements, has learned the hard way that corporations and the wealthy elite control not only the mass media, but the federal government, Supreme Court, and regulatory agencies such as the FDA, USDA, and EPA. After decades of sending petitions and lobbying the White House, Congress and the FDA, to no avail, it has become clear that the political elite, including President Obama, care more about their wealthy campaign contributors than they do about their constituents, including the 93 percent who, according to a recent New York Times poll, support mandatory labeling of genetically engineered foods.
As a consequence the anti-GMO movement has moved its focus away from the unfavorable terrain of Washington D.C., and instead turned its attention to marketplace pressure, and state, county and local political campaigns, especially ballot initiatives. Citizen ballot initiatives are legal in 24 states and approximately 1,000 counties and municipalities. This form of direct democracy gives voters the power to enact labeling laws, bans or regulatory and zoning restrictions on biotech corporations and Big Ag, bypassing indentured politicians and federal bureaucrats. A number of California and Washington State counties over the last decade have moved beyond just labeling to outright bans on GMO crops, thanks to citizen-driven local political action. In 2014, four Oregon counties will have ballot initiatives calling for bans on GMO crops.
Win or lose in Washington State on November 5, the anti-GMO Movement has evolved into a savvy army of grassroots activists who are committed to the ongoing battle to reclaim our food and farming systems, part of a larger battle to transform the entire political and economic system.
Thursday, October 24, 2013
How Unregulated Banking Triggered the Crash of '08
Repo, Baby, Repo
by MIKE WHITNEY
Subprime mortgages did not cause the financial crisis, nor did the housing bubble or Lehman Brothers. The financial crisis originated in a corner of the shadow banking system called the repo market. That’s where the bank run occurred that froze the secondary market, sent prices on mortgage-backed assets plunging, and pushed the financial system into a death spiral. In the Great Crash of 2008, repo was ground zero, the epicenter of the global catastrophe. As analyst David Weidner noted in the Wall Street Journal, “The repo market wasn’t just a part of the meltdown. It was the meltdown.”
Regrettably, the Federal Reserve’s nontraditional monetary policies (ZIRP and QE) have succeeded in restoring the repo market to it’s precrisis level of activity, but without implementing any of the changes that would have made the system safer. Repo is as vulnerable and crisis-prone today as it was when the French bank PNB Paribas stopped redemptions in its off-balance sheet operations in 2007 kicking off the tumultuous bank run that would eventually implode the entire system and push the economy into the deepest slump since the Great Depression. By failing to rein in repo, the Fed has ensured that financial crises will be a regular feature in the future occurring every 15 or 20 years as was the case before banks were more strictly regulated and government backstops were put in place. Repo returns us to Wild West “anything goes” banking.
Why would the Fed be so reckless and pave the way for another disaster? We’ll get to that in a minute, but first, let’s give a brief explanation of repo and how the system works.
Repo is short for repurchase agreement. The repo market is where primary dealers sell securities with an agreement for the seller to buy back the securities at a later date. This sounds more complicated than it is. What’s really going on is the seller (primary dealers) are getting short-term loans from money market funds, securities firms, banks etc in order to maintain a position in securities in which they’re suppose to make markets. So, repo is like a loan that’s secured with collateral. (ie–the securities) It is a “funding mechanism”.
What touched off the Crash of 2008, was the discovery that the collateral that was being used for repo funding was “toxic”, that is, the securities were not Triple A after all, but subprime mortgage-backed gunk that would only fetch pennies on the dollar. So, when PNB Paribas stopped redemptions in its off-balance sheet operations on August 9, 2007, the rout began. Cash-heavy investors (like money markets) turned off the lending spigot, which reduced trillions of dollars of MBS to junk-status, precipitated massive fire sales of distressed assets that were dumped on the market pushing prices further and further down wiping out trillions in equity and reducing the financial system to a smoldering pile of rubble. That’s why the Fed stepped in, backstopped the system with explicit guarantees for both regulated and unregulated financial institutions and set about to reflate financial asset prices to their precrisis highs.
Newly appointed Fed chairman Janet Yellen summarized what happened in the panic in a speech she gave earlier this year. She said:
In other words, the crisis began in repo. Unfortunately, Wall Street has fended off all attempts to fix the system, because repo is a particularly lucrative area of activity. And we are talking serious money here, too. Tri-party repo alone–which is a small subset of the larger repo market–represents “about $1.6 trillion in outstanding repos daily.” That means that the prospect of a big dealer dumping his portfolio of securities on the market at a moment’s notice igniting another panic, is never far away.
Why do banks borrow in the unregulated, shadow system instead of conducting their business in the light of day where regulators can check the quality of the underlying collateral, oversee the various transactions on public trading platforms, and make sure that capital requirements are maintained?
It’s because the banks want to deploy all their capital, leverage up to their eyeballs and play fast-and-loose with the rules. Here’s what the New York Fed has to say on the topic:
In other words, the banks are conducting their operations in the shadows because it’s cheaper. That’s what this is all about. Here’s more from the same report:
Okay, so when there’s a run on the local bank, the bank may have to offload some of its illiquid assets (real estate, commercial property, etc) to meet the increased demand of depositors who want their money, but they can also rely on government backing. (deposit insurance). But with shadow banking–like repo– it’s a bit different; the problem is fire sales. For example, when repo lenders–like the big money markets–demanded more collateral from the banks in exchange for short-term funding; the banks were forced to dump more of their assets en masse pushing prices lower, eroding their equity and leaving many of the banks deep in the red. This is how the panic wiped out Wall Street and cleared the way for the $700 TARP bailout. It all started in repo.
The point is, had the system been adequately regulated with the appropriate safeguards in place, there would have been no fire sales, no panic, and no crisis. Regulators would have made sure that the underlying collateral was legit, that is, they would have made sure that the subprime borrowers were creditworthy and able to repay their loans. They would have made sure that repo borrowers (the banks) had sufficient capital to meet redemptions if problems arose. And regulators would have limited excessive leveraging of the securitized assets.
Regulation works. It provides safety, stability, and security as opposed to panic, bankruptcy and severe recession which is the scenario that Wall Street’s profiteers seem to prefer. Now check this out from the NY Fed:
How’s that for progress, eh? So, Bernanke’s reflation efforts have effectively restored the same shabby, poorly designed system to its former glory putting all of us at risk again. Here’s more:
Great. So now we are seeing the same problems that emerged in 2004 and 2005 with subprime mortgages, that is, there’s so much liquidity in the system–thanks to the Fed’s zero rates and QE– that investors are dabbling in all-types of risky garbage that you wouldn’t normally touch with a 10 foot dungpole. Check this out from Testosterone Pit:
Nice, eh? So the big boys are planning to vamoose before the whole house of cards comes tumbling down. Meanwhile, Mom and Pop are about to get reamed for the umpteenth time when the Fed “tapers” and these covenant lite IEDs blow up in their face taking another sizable chunk out of their retirement savings. Way to go, Bernanke. Here’s more from the NY Fed report:
So now the shadow players are generating more than half of all the nation’s credit via their dodgy, unregulated operations. Why? So a handful of ravenous banks can make bigger profits.
According to the Financial Stability Board (FSB) “credit intermediation that takes place in an environment where prudential regulatory standards and supervisory oversight are either not applied or are applied to a materially lesser or different degree than is the case for regular banks engaged in similar activities.” (FSB, 2011).
Read that over again. What they’re saying is that it’s a completely ridiculous, insane system. We’ve given the banks this outrageous privilege of creating private money out of thin air, (credit) and they spit in our face. They won’t even follow a few simple rules that would make the process safer for everyone. Keep in mind, that Dodd Frank does nothing to remedy the problems in repo.
One last thing (from the NY Fed):
Repeat: “liquidity creation comes at the cost of financial fragility as fluctuations in uncertainty cause a flight to quality from shadow liabilities to safe assets.”
Can you believe it? The Fed doesn’t even try to deny what’s going on. They admit that letting the banks ratchet up their leverage increases “financial fragility ” which could precipitate another crash. (“flight to quality from shadow liabilities to safe assets.”) In other words, the Fed KNOWS the system is nuts, just like they know that it’s only a matter of time before the whole bloody thing blows up again and the economy goes off the cliff. Still, they’re not going to lift a finger to change the system.
Why?
You know why.
Because a few fatcats at the top like the way things are now, that’s why.
If that doesn’t make your blood boil, I don’t know what will.
by MIKE WHITNEY
“Repo has a flaw: It is vulnerable to panic, that is, ‘depositors’ may ‘withdraw’ their money at any time, forcing the system into massive deleveraging. We saw this over and over again with demand deposits in all of U.S. history prior to deposit insurance. This problem has not been addressed by the Dodd-Frank legislation. So, it could happen again.”
–Gary B. Gorton, Professor of Management and Finance, Yale School of Management (lifted from Repowatch)
Subprime mortgages did not cause the financial crisis, nor did the housing bubble or Lehman Brothers. The financial crisis originated in a corner of the shadow banking system called the repo market. That’s where the bank run occurred that froze the secondary market, sent prices on mortgage-backed assets plunging, and pushed the financial system into a death spiral. In the Great Crash of 2008, repo was ground zero, the epicenter of the global catastrophe. As analyst David Weidner noted in the Wall Street Journal, “The repo market wasn’t just a part of the meltdown. It was the meltdown.”
Regrettably, the Federal Reserve’s nontraditional monetary policies (ZIRP and QE) have succeeded in restoring the repo market to it’s precrisis level of activity, but without implementing any of the changes that would have made the system safer. Repo is as vulnerable and crisis-prone today as it was when the French bank PNB Paribas stopped redemptions in its off-balance sheet operations in 2007 kicking off the tumultuous bank run that would eventually implode the entire system and push the economy into the deepest slump since the Great Depression. By failing to rein in repo, the Fed has ensured that financial crises will be a regular feature in the future occurring every 15 or 20 years as was the case before banks were more strictly regulated and government backstops were put in place. Repo returns us to Wild West “anything goes” banking.
Why would the Fed be so reckless and pave the way for another disaster? We’ll get to that in a minute, but first, let’s give a brief explanation of repo and how the system works.
Repo is short for repurchase agreement. The repo market is where primary dealers sell securities with an agreement for the seller to buy back the securities at a later date. This sounds more complicated than it is. What’s really going on is the seller (primary dealers) are getting short-term loans from money market funds, securities firms, banks etc in order to maintain a position in securities in which they’re suppose to make markets. So, repo is like a loan that’s secured with collateral. (ie–the securities) It is a “funding mechanism”.
What touched off the Crash of 2008, was the discovery that the collateral that was being used for repo funding was “toxic”, that is, the securities were not Triple A after all, but subprime mortgage-backed gunk that would only fetch pennies on the dollar. So, when PNB Paribas stopped redemptions in its off-balance sheet operations on August 9, 2007, the rout began. Cash-heavy investors (like money markets) turned off the lending spigot, which reduced trillions of dollars of MBS to junk-status, precipitated massive fire sales of distressed assets that were dumped on the market pushing prices further and further down wiping out trillions in equity and reducing the financial system to a smoldering pile of rubble. That’s why the Fed stepped in, backstopped the system with explicit guarantees for both regulated and unregulated financial institutions and set about to reflate financial asset prices to their precrisis highs.
Newly appointed Fed chairman Janet Yellen summarized what happened in the panic in a speech she gave earlier this year. She said:
“The trigger for the acute phase of the financial crisis was the rapid unwinding of large amounts of short-term wholesale funding that had been made available to highly leveraged and/or maturity-transforming financial firms.”
In other words, the crisis began in repo. Unfortunately, Wall Street has fended off all attempts to fix the system, because repo is a particularly lucrative area of activity. And we are talking serious money here, too. Tri-party repo alone–which is a small subset of the larger repo market–represents “about $1.6 trillion in outstanding repos daily.” That means that the prospect of a big dealer dumping his portfolio of securities on the market at a moment’s notice igniting another panic, is never far away.
Why do banks borrow in the unregulated, shadow system instead of conducting their business in the light of day where regulators can check the quality of the underlying collateral, oversee the various transactions on public trading platforms, and make sure that capital requirements are maintained?
It’s because the banks want to deploy all their capital, leverage up to their eyeballs and play fast-and-loose with the rules. Here’s what the New York Fed has to say on the topic:
“One clear motivation for intermediation outside of the traditional banking system is for private actors to evade regulation and taxes. The academic literature documents that motivation explains part of the growth and collapse of shadow banking over the past decade…
Regulation typically forces private actors to do something which they would otherwise not do: pay taxes to the official sector, disclose additional information to investors, or hold more capital against financial exposures. Financial activity which has been re-structured to avoid taxes, disclosure, and/or capital requirements, is referred to as arbitrage activity.” (“Shadow Bank Monitoring“, Federal Reserve Bank of New York Staff Reports, September, 2013)
In other words, the banks are conducting their operations in the shadows because it’s cheaper. That’s what this is all about. Here’s more from the same report:
“While the fundamental reason for commercial bank runs is the sequential servicing constraint, for shadow banks the effective constraint is the presence of fire sale externalities. In a run, shadow banking entities have to sell assets at a discount, which depresses market pricing. This provides incentives to withdraw funding—before other shadow banking depositors arrive.”
Okay, so when there’s a run on the local bank, the bank may have to offload some of its illiquid assets (real estate, commercial property, etc) to meet the increased demand of depositors who want their money, but they can also rely on government backing. (deposit insurance). But with shadow banking–like repo– it’s a bit different; the problem is fire sales. For example, when repo lenders–like the big money markets–demanded more collateral from the banks in exchange for short-term funding; the banks were forced to dump more of their assets en masse pushing prices lower, eroding their equity and leaving many of the banks deep in the red. This is how the panic wiped out Wall Street and cleared the way for the $700 TARP bailout. It all started in repo.
The point is, had the system been adequately regulated with the appropriate safeguards in place, there would have been no fire sales, no panic, and no crisis. Regulators would have made sure that the underlying collateral was legit, that is, they would have made sure that the subprime borrowers were creditworthy and able to repay their loans. They would have made sure that repo borrowers (the banks) had sufficient capital to meet redemptions if problems arose. And regulators would have limited excessive leveraging of the securitized assets.
Regulation works. It provides safety, stability, and security as opposed to panic, bankruptcy and severe recession which is the scenario that Wall Street’s profiteers seem to prefer. Now check this out from the NY Fed:
“While leveraged lending collapsed in 2008 from a peak of $680 billion in 2007, it has rebounded very quickly, and is now at record levels of volume, projected to be larger than $1 trillion in 2013…” (NY Fed)
How’s that for progress, eh? So, Bernanke’s reflation efforts have effectively restored the same shabby, poorly designed system to its former glory putting all of us at risk again. Here’s more:
“One area of concern, however, is the significant increase in the fraction of covenant lite loans, which have increased dramatically from 0 percent in 2010 to 60 percent in 2013. This deterioration in loan underwriting has come hand-in-hand with an increased presence of retail investors in the leveraged loan market, through both CLOs and prime funds, as relatively sophisticated investors, like banks and hedge funds, are exiting the asset class.” (New York Fed)
Great. So now we are seeing the same problems that emerged in 2004 and 2005 with subprime mortgages, that is, there’s so much liquidity in the system–thanks to the Fed’s zero rates and QE– that investors are dabbling in all-types of risky garbage that you wouldn’t normally touch with a 10 foot dungpole. Check this out from Testosterone Pit:
“Shadow banking loans are estimated to have reached $15 trillion in the US. And among them is a particularly hot category: lending to highly leveraged companies with junk credit ratings. … the NY Fed found that these loans are increasingly issued in a loosey-goosey manner, with low underwriting standards. And issuance has soared...
Layered into these crappy and risky loans are the crappiest and riskiest of all loans, namely “covenant-lite” loans. Their covenants are so watered down and so full of holes that investors have few if any protections in case of default. If the Fed ever allows reality to set, and these companies stumble under their load of debt or can’t refinance it at ridiculously low rates, investors can kiss their money goodbye.” …
these desperate small investors…have unknowingly made a quantum leap in risk – allowing the smart money, which hears the hot air hissing from the credit bubble, to bail out. This must be one of the proudest moments in Chairman Bernanke’s glorious tenure.” (“Fed: Hedge Funds, Banks Sell Crappiest Debt To Small Investors (Before Credit Bubble Blows Up) ” Testosterone Pit)
Nice, eh? So the big boys are planning to vamoose before the whole house of cards comes tumbling down. Meanwhile, Mom and Pop are about to get reamed for the umpteenth time when the Fed “tapers” and these covenant lite IEDs blow up in their face taking another sizable chunk out of their retirement savings. Way to go, Bernanke. Here’s more from the NY Fed report:
“Shadow credit transformation increased from only 5 percent of total credit transformation in 1945 to a peak amount of 60 percent in 2008 before declining to 55 percent in 2011.”
So now the shadow players are generating more than half of all the nation’s credit via their dodgy, unregulated operations. Why? So a handful of ravenous banks can make bigger profits.
According to the Financial Stability Board (FSB) “credit intermediation that takes place in an environment where prudential regulatory standards and supervisory oversight are either not applied or are applied to a materially lesser or different degree than is the case for regular banks engaged in similar activities.” (FSB, 2011).
Read that over again. What they’re saying is that it’s a completely ridiculous, insane system. We’ve given the banks this outrageous privilege of creating private money out of thin air, (credit) and they spit in our face. They won’t even follow a few simple rules that would make the process safer for everyone. Keep in mind, that Dodd Frank does nothing to remedy the problems in repo.
One last thing (from the NY Fed):
“Intermediaries create liquidity in the shadow banking system by levering up the collateral value of their assets. However, the liquidity creation comes at the cost of financial fragility as fluctuations in uncertainty cause a flight to quality from shadow liabilities to safe assets. The collapse of shadow banking liquidity has real effects via the pricing of credit and generates prolonged slumps after adverse shocks.”
Repeat: “liquidity creation comes at the cost of financial fragility as fluctuations in uncertainty cause a flight to quality from shadow liabilities to safe assets.”
Can you believe it? The Fed doesn’t even try to deny what’s going on. They admit that letting the banks ratchet up their leverage increases “financial fragility ” which could precipitate another crash. (“flight to quality from shadow liabilities to safe assets.”) In other words, the Fed KNOWS the system is nuts, just like they know that it’s only a matter of time before the whole bloody thing blows up again and the economy goes off the cliff. Still, they’re not going to lift a finger to change the system.
Why?
You know why.
Because a few fatcats at the top like the way things are now, that’s why.
If that doesn’t make your blood boil, I don’t know what will.
Wednesday, October 23, 2013
As Ye Sow, So Shall Ye Reap
Paul Craig Roberts
The year 2014 could be shaping up as the year that the chickens come home to roost.
Americans, even well-informed ones, don’t know all of the mistakes made by neoconized and corrupted Washington in the past two decades. However, enough is known to see that the US has lost economic and political power, and that the loss is irreversible.
The economic cost of this lost will be born by what remains of the middle class and the increasingly poverty-stricken lower class. The one percent will have offshore gold holdings and large sums of money in foreign currencies and other foreign assets to see them through.
In the political arena, the collapse of the Soviet Union presented Washington with the grand opportunity to reallocate the Pentagon budget to other uses. Part of the reduction could have been returned to taxpayers for their own use. Another part could have been used to improve worn out infrastructure. And another part could have been used to repair and improve the social safety net, thus insuring domestic tranquility. A final, but perhaps most important part, could have been used to begin repaying the Treasury IOUs in the Social Security Trust Fund from which Washington has borrowed and spent $2 trillion, leaving non-marketable IOUs in the place of the Social Security payroll tax revenues that Washington raided in order to fund its wars and current operations.
Instead, influenced by neoconservative warmongers who advocated America using its “sole superpower” status to establish hegemony over the world, Washington let hubris and arrogance run away with it. The consequence was that Washington destroyed its soft power with lies and war crimes, only to find that its military power was insufficient to support its occupation of Iraq, its conquest of Afghanistan, and its financial imperialism.
Now seen universally as a lawless warmonger and a nuisance, Washington’s soft power has been squandered. With its influence on the wane, Washington has become more of a bully. In response, the rest of the world is isolating Washington.
The prime minister of India, Manmohan Singh, recently declared China and Russia to be India’s “most important partners” with whom India shares “common strategic interests.” Prime Minister Singh said: “ India and Russia have always had a convergence of views on global and regional issues, and we value Russia’s perspective on international developments of mutual interest.”
India joined China in expressing concerns about the Federal Reserve’s practice of printing money in order to cover Washington’s vast red ink. The BRICS (Brazil, Russia, India, China, South Africa) are taking steps to create their own method of settling trade accounts in order to protect themselves from the looming dollar implosion,
China has forcefully called for a “de-Americanized world.” After watching the “superpower” offshore a large part of its GDP to China and then add to the diminished tax base the burden of $6 trillion in wars that brought no booty and served no US interest, China has concluded that American power is spent. The London Telegraph thinks “it is only a matter of time before the renminbi replaces the dollar as the primary currency for trading commodities and resources.”
The Obama regime attempted to attack Syria based on the sort of lies that the Bush regime used to invade Iraq, only to be slapped down by the British Parliament and Russian government. This rebuke was followed by the childishness of the government shutdown and threat of default. Consequently, the Washington morons have lost their monopoly on economic and political leadership. A few days ago the British government announced a historic agreement that permits British investors direct access to China’s markets and allows Chinese banks to expand their operations in Great Britain.
In Australia, the US dollar will no longer be used as the currency in which to settle the Australian trade accounts with China. Instead of dollars, trade will be settled in the Chinese currency.
Washington served as cheerleader, as did most economists and libertarians, while US corporations, greedy for short-term profits and executive bonuses, offshored US industry and manufacturing, calling it free trade. The obvious and predicted result is that China’s demand for resources needed to fuel its industrial and manufacturing power now dominates markets. This means that the US dollar is being displaced as world currency. The only market that America dominates is the market for financial fraud.
When industrial, manufacturing, and tradeable professional service jobs are offshored, they take US GDP and tax base with them. The foreign country gets the benefit of the relocated economic activity. Due to the revenues lost from jobs offshoring, there is a large gap between federal revenues and federal expenditures. As Washington’s irresponsible behavior has raised so many doubts about the dollar’s value and the government’s commitment to stand behind its massive debt, foreign countries with trade surpluses with the US are less and less willing to recycle those surpluses into the purchase of US Treasury debt.
Today the two largest holders of US Treasury debt are not investors or even foreign central banks. The two largest holders are the Federal Reserve and the Social Security Trust Fund.
As for those $6 trillion wars, that’s to pay for national defense to protect us from women, children, and village elders in far away countries devoid of air forces and navies, and to provide those recycled taxpayer monies from the military/security complex that find their way into political contributions.
The Wall Street gangsters sighed for relief over the last minute debt ceiling agreement. This shows how short-term Wall Street’s outlook is. All the October agreement did was to push off the crisis to January and February. The “debt ceiling agreement” did not produce a new debt ceiling that would last beyond February, and it did not resolve the large difference between federal revenues and expenditures. In other words, the can was again kicked down the road. A repeat of the October fiasco won’t play well.
Obamacare is causing the premiums on private insurance polices to rise substantially, almost doubling in some situations unless people move to the uncertain exchanges, and Obamacare’s raid on Medicare payroll tax revenues has resulted in a cut in Medicare payments to health care providers. The result is a further reduction in consumer discretionary income and a further drop in the economy.
This in turn means a larger federal budget deficit and the need for the Federal Reserve to purchase more debt.
Another reason the Federal Reserve is faced with increasing, not tapering, quantitative easing (money printing) is the decline in foreign purchases of US Treasury bills, notes, and bonds. As the instruments pay interest that is less than the rate of inflation, holding Treasury debt makes no sense when the dollar’s value and the potential of default are open questions.
According to reports, not only are foreign governments, such as China, ceasing to buy US Treasury debt, China has started to sell off its holdings, substituting gold in the place of US Treasury debt.
This means that the bonds must be purchased by the Fed or interest rates will rise as the increased supply of bonds on the market drives down bond prices. The only way the Fed can purchase a larger supply of bonds is by printing more money, that is, by more quantitative easing.
With the world moving away from using the dollar to settle international accounts, as the Fed prints more dollars the rate at which foreign holders of dollar assets sell off their holdings will rise.
To get out of dollars requires that the dollar proceeds from selling Treasuries, US stocks and US real estate be sold in the currency markets. The selling of dollars drives down the exchange value of the US dollar and results in rising US inflation. The Fed can print money with which to purchase Treasury debt, but it cannot print foreign currencies with which to purchase dollars.
The decline in the dollar’s exchange value and the domestic inflation that results will force the Fed to stop printing. What then covers the gap between revenues and expenditures? The likely answer is private pensions and any other asset that Washington can get its hands on.
Initially, private pensions will be taxed at a rate to recover the tax-free accumulation in the pensions. The second year a national emergency will be used to confiscate some share of pensions. Those relying on the pensions will find themselves with less income. Consumer spending will decline. The economy will worsen. The deficit will widen.
You can see where this is going, and there seems to be no way out. Policymakers, economists, and corporation executives are in denial about the adverse effects of offshoring, which they still, despite all the evidence, maintain is good for the economy. So nothing will be done about offshoring. Republicans will blame the budget deficit on welfare and entitlements, and if those are cut consumer spending will decline further, widening the budget deficit. Inflation will rise as incomes fall, and social cohesion will break down.
Now you know why Homeland Security purchased 1.6 billion rounds of ammunition, enough ammunition to fight the Iraq war for 12 years, has its own para-military force and 2,700 tanks. If you think the “terrorist threat” in America warrants a domestic armed force of this size, you are out of your mind. This force has been assembled to deal with starving and homeless people in the streets of America.
September employment report: According to the Bureau of Labor Statistics (BLS), September brought 148,000 new jobs, enough to keep up with population growth but not reduce the unemployment rate. Moreover, John Williams (shadowstats.com) says that one-third of these jobs, or 50,000 per month on average, are phantom jobs produced by the birth-death model that during difficult economic times overestimates the number of new jobs from business startups and underestimates job losses from business failures.
The BLS reports that 22,000 of September’s jobs were new hires by state governments, which seems odd in view of the ongoing state budgetary difficulties.
In the private sector, wholesale and retail trade produced 36,900 new jobs, which seems odd in light of the absence of growth in real median family income and real retail sales.
Transportation and warehousing produced 23,400 new jobs, concentrated in transit and ground passenger transportation. This also seems odd unless the price of gasoline and pinched budgets are forcing people onto public transportation.
Professional and business services accounted for 32,000 jobs of which 63% are temporary help jobs.
So here you have the job picture that the presstitutes, hyping “the jobs gain,” don’t tell you. The scary part of the September job report is that the usual standby, the category of waitresses and bartenders, which has accounted for a large part of every reported jobs gain since I began reporting the monthly statistics, shows job loss. Seven thousand one hundred waitresses and bartenders lost their jobs in September. If this figure is not a fluke, it is bad news. It signals that fewer Americans can afford to eat and drink out.
The unemployment rate that is reported is the rate that does not count as unemployed discouraged workers who are unable to find jobs and cease to look. This favored rate, the darling of the regime in power, the presstitutes, and Wall Street, also is not adjusted for the category of “involuntary part-time workers,” those whose hours have been cut back or because they are unable to find a full-time job. Obamacare, as is widely reported, is causing employers to shift their work forces from full time to part time in order to avoid costs associated with Obamacare. The BLS places the number of involuntary part-time workers at 7,900,000.
The announced 7.2% unemployment rate is a meaningless number. The rate can decline for no other reason than people unable to find jobs drop out of the work force. You are not counted in the work force if you are discouraged about finding a job and no longer look for a job.
The phenomena of discouraged workers shows up in the measure of the labor force participation rate, which has declined in the 21st century. The opportunities for American labor are so restricted that a rising percentage of the working age population have given up looking for jobs.
Yet, the Obama regime, the Wall Street gangsters, and the pressitute media tell us how much better the economic situation is becoming as more small businesses close, as memberships decline in golf clubs, as more university graduates return home to live with their parents, who are drawing down their savings to live, as Fed Chairman Bernanke has made it impossible for them to live on interest payments on their savings.
According to the US census bureau, real median household income in 2012 was $51,017, down 9% from $56,080 in 1999, 13 years ago. In contrast, annual compensation in 2012 for US CEOs broke all records. Two CEOs were paid more than $1 billion, and the worst paid among the top ten took home $100 million. When the presstitutes speak of economic recovery, they mean recovery for the one percent.
America is in the toilet, and the rest of the world knows it. But the neocons who rule in Washington and their Israeli ally are determined that Washington start yet more wars to create lebensraum for Israel.
Early in the 21st century the liberal Democrat Senator from New York, Chuck Schumer, and I coauthored an article in the New York Times about the adverse effects on the US economy of jobs offshoring. The article caused a sensation. The Brookings Institution in Washington quickly convened a conference which was covered by C-SPAN. C-SPAN rebroadcast the conference several times. During the conference I said that if jobs offshoring continued, the US would be a third world economy in 20 years.
Wall Street quickly shut up Senator Schumer, but I am sticking by my forecast. Indeed, I think we are already there.
The year 2014 could be shaping up as the year that the chickens come home to roost.
Americans, even well-informed ones, don’t know all of the mistakes made by neoconized and corrupted Washington in the past two decades. However, enough is known to see that the US has lost economic and political power, and that the loss is irreversible.
The economic cost of this lost will be born by what remains of the middle class and the increasingly poverty-stricken lower class. The one percent will have offshore gold holdings and large sums of money in foreign currencies and other foreign assets to see them through.
In the political arena, the collapse of the Soviet Union presented Washington with the grand opportunity to reallocate the Pentagon budget to other uses. Part of the reduction could have been returned to taxpayers for their own use. Another part could have been used to improve worn out infrastructure. And another part could have been used to repair and improve the social safety net, thus insuring domestic tranquility. A final, but perhaps most important part, could have been used to begin repaying the Treasury IOUs in the Social Security Trust Fund from which Washington has borrowed and spent $2 trillion, leaving non-marketable IOUs in the place of the Social Security payroll tax revenues that Washington raided in order to fund its wars and current operations.
Instead, influenced by neoconservative warmongers who advocated America using its “sole superpower” status to establish hegemony over the world, Washington let hubris and arrogance run away with it. The consequence was that Washington destroyed its soft power with lies and war crimes, only to find that its military power was insufficient to support its occupation of Iraq, its conquest of Afghanistan, and its financial imperialism.
Now seen universally as a lawless warmonger and a nuisance, Washington’s soft power has been squandered. With its influence on the wane, Washington has become more of a bully. In response, the rest of the world is isolating Washington.
The prime minister of India, Manmohan Singh, recently declared China and Russia to be India’s “most important partners” with whom India shares “common strategic interests.” Prime Minister Singh said: “ India and Russia have always had a convergence of views on global and regional issues, and we value Russia’s perspective on international developments of mutual interest.”
India joined China in expressing concerns about the Federal Reserve’s practice of printing money in order to cover Washington’s vast red ink. The BRICS (Brazil, Russia, India, China, South Africa) are taking steps to create their own method of settling trade accounts in order to protect themselves from the looming dollar implosion,
China has forcefully called for a “de-Americanized world.” After watching the “superpower” offshore a large part of its GDP to China and then add to the diminished tax base the burden of $6 trillion in wars that brought no booty and served no US interest, China has concluded that American power is spent. The London Telegraph thinks “it is only a matter of time before the renminbi replaces the dollar as the primary currency for trading commodities and resources.”
The Obama regime attempted to attack Syria based on the sort of lies that the Bush regime used to invade Iraq, only to be slapped down by the British Parliament and Russian government. This rebuke was followed by the childishness of the government shutdown and threat of default. Consequently, the Washington morons have lost their monopoly on economic and political leadership. A few days ago the British government announced a historic agreement that permits British investors direct access to China’s markets and allows Chinese banks to expand their operations in Great Britain.
In Australia, the US dollar will no longer be used as the currency in which to settle the Australian trade accounts with China. Instead of dollars, trade will be settled in the Chinese currency.
Washington served as cheerleader, as did most economists and libertarians, while US corporations, greedy for short-term profits and executive bonuses, offshored US industry and manufacturing, calling it free trade. The obvious and predicted result is that China’s demand for resources needed to fuel its industrial and manufacturing power now dominates markets. This means that the US dollar is being displaced as world currency. The only market that America dominates is the market for financial fraud.
When industrial, manufacturing, and tradeable professional service jobs are offshored, they take US GDP and tax base with them. The foreign country gets the benefit of the relocated economic activity. Due to the revenues lost from jobs offshoring, there is a large gap between federal revenues and federal expenditures. As Washington’s irresponsible behavior has raised so many doubts about the dollar’s value and the government’s commitment to stand behind its massive debt, foreign countries with trade surpluses with the US are less and less willing to recycle those surpluses into the purchase of US Treasury debt.
Today the two largest holders of US Treasury debt are not investors or even foreign central banks. The two largest holders are the Federal Reserve and the Social Security Trust Fund.
As for those $6 trillion wars, that’s to pay for national defense to protect us from women, children, and village elders in far away countries devoid of air forces and navies, and to provide those recycled taxpayer monies from the military/security complex that find their way into political contributions.
The Wall Street gangsters sighed for relief over the last minute debt ceiling agreement. This shows how short-term Wall Street’s outlook is. All the October agreement did was to push off the crisis to January and February. The “debt ceiling agreement” did not produce a new debt ceiling that would last beyond February, and it did not resolve the large difference between federal revenues and expenditures. In other words, the can was again kicked down the road. A repeat of the October fiasco won’t play well.
Obamacare is causing the premiums on private insurance polices to rise substantially, almost doubling in some situations unless people move to the uncertain exchanges, and Obamacare’s raid on Medicare payroll tax revenues has resulted in a cut in Medicare payments to health care providers. The result is a further reduction in consumer discretionary income and a further drop in the economy.
This in turn means a larger federal budget deficit and the need for the Federal Reserve to purchase more debt.
Another reason the Federal Reserve is faced with increasing, not tapering, quantitative easing (money printing) is the decline in foreign purchases of US Treasury bills, notes, and bonds. As the instruments pay interest that is less than the rate of inflation, holding Treasury debt makes no sense when the dollar’s value and the potential of default are open questions.
According to reports, not only are foreign governments, such as China, ceasing to buy US Treasury debt, China has started to sell off its holdings, substituting gold in the place of US Treasury debt.
This means that the bonds must be purchased by the Fed or interest rates will rise as the increased supply of bonds on the market drives down bond prices. The only way the Fed can purchase a larger supply of bonds is by printing more money, that is, by more quantitative easing.
With the world moving away from using the dollar to settle international accounts, as the Fed prints more dollars the rate at which foreign holders of dollar assets sell off their holdings will rise.
To get out of dollars requires that the dollar proceeds from selling Treasuries, US stocks and US real estate be sold in the currency markets. The selling of dollars drives down the exchange value of the US dollar and results in rising US inflation. The Fed can print money with which to purchase Treasury debt, but it cannot print foreign currencies with which to purchase dollars.
The decline in the dollar’s exchange value and the domestic inflation that results will force the Fed to stop printing. What then covers the gap between revenues and expenditures? The likely answer is private pensions and any other asset that Washington can get its hands on.
Initially, private pensions will be taxed at a rate to recover the tax-free accumulation in the pensions. The second year a national emergency will be used to confiscate some share of pensions. Those relying on the pensions will find themselves with less income. Consumer spending will decline. The economy will worsen. The deficit will widen.
You can see where this is going, and there seems to be no way out. Policymakers, economists, and corporation executives are in denial about the adverse effects of offshoring, which they still, despite all the evidence, maintain is good for the economy. So nothing will be done about offshoring. Republicans will blame the budget deficit on welfare and entitlements, and if those are cut consumer spending will decline further, widening the budget deficit. Inflation will rise as incomes fall, and social cohesion will break down.
Now you know why Homeland Security purchased 1.6 billion rounds of ammunition, enough ammunition to fight the Iraq war for 12 years, has its own para-military force and 2,700 tanks. If you think the “terrorist threat” in America warrants a domestic armed force of this size, you are out of your mind. This force has been assembled to deal with starving and homeless people in the streets of America.
September employment report: According to the Bureau of Labor Statistics (BLS), September brought 148,000 new jobs, enough to keep up with population growth but not reduce the unemployment rate. Moreover, John Williams (shadowstats.com) says that one-third of these jobs, or 50,000 per month on average, are phantom jobs produced by the birth-death model that during difficult economic times overestimates the number of new jobs from business startups and underestimates job losses from business failures.
The BLS reports that 22,000 of September’s jobs were new hires by state governments, which seems odd in view of the ongoing state budgetary difficulties.
In the private sector, wholesale and retail trade produced 36,900 new jobs, which seems odd in light of the absence of growth in real median family income and real retail sales.
Transportation and warehousing produced 23,400 new jobs, concentrated in transit and ground passenger transportation. This also seems odd unless the price of gasoline and pinched budgets are forcing people onto public transportation.
Professional and business services accounted for 32,000 jobs of which 63% are temporary help jobs.
So here you have the job picture that the presstitutes, hyping “the jobs gain,” don’t tell you. The scary part of the September job report is that the usual standby, the category of waitresses and bartenders, which has accounted for a large part of every reported jobs gain since I began reporting the monthly statistics, shows job loss. Seven thousand one hundred waitresses and bartenders lost their jobs in September. If this figure is not a fluke, it is bad news. It signals that fewer Americans can afford to eat and drink out.
The unemployment rate that is reported is the rate that does not count as unemployed discouraged workers who are unable to find jobs and cease to look. This favored rate, the darling of the regime in power, the presstitutes, and Wall Street, also is not adjusted for the category of “involuntary part-time workers,” those whose hours have been cut back or because they are unable to find a full-time job. Obamacare, as is widely reported, is causing employers to shift their work forces from full time to part time in order to avoid costs associated with Obamacare. The BLS places the number of involuntary part-time workers at 7,900,000.
The announced 7.2% unemployment rate is a meaningless number. The rate can decline for no other reason than people unable to find jobs drop out of the work force. You are not counted in the work force if you are discouraged about finding a job and no longer look for a job.
The phenomena of discouraged workers shows up in the measure of the labor force participation rate, which has declined in the 21st century. The opportunities for American labor are so restricted that a rising percentage of the working age population have given up looking for jobs.
Yet, the Obama regime, the Wall Street gangsters, and the pressitute media tell us how much better the economic situation is becoming as more small businesses close, as memberships decline in golf clubs, as more university graduates return home to live with their parents, who are drawing down their savings to live, as Fed Chairman Bernanke has made it impossible for them to live on interest payments on their savings.
According to the US census bureau, real median household income in 2012 was $51,017, down 9% from $56,080 in 1999, 13 years ago. In contrast, annual compensation in 2012 for US CEOs broke all records. Two CEOs were paid more than $1 billion, and the worst paid among the top ten took home $100 million. When the presstitutes speak of economic recovery, they mean recovery for the one percent.
America is in the toilet, and the rest of the world knows it. But the neocons who rule in Washington and their Israeli ally are determined that Washington start yet more wars to create lebensraum for Israel.
Early in the 21st century the liberal Democrat Senator from New York, Chuck Schumer, and I coauthored an article in the New York Times about the adverse effects on the US economy of jobs offshoring. The article caused a sensation. The Brookings Institution in Washington quickly convened a conference which was covered by C-SPAN. C-SPAN rebroadcast the conference several times. During the conference I said that if jobs offshoring continued, the US would be a third world economy in 20 years.
Wall Street quickly shut up Senator Schumer, but I am sticking by my forecast. Indeed, I think we are already there.
Tuesday, October 22, 2013
The Triumph of the Right
Conservative Republicans have lost their fight over the shutdown and debt ceiling, and they probably won’t get major spending cuts in upcoming negotiations over the budget.
But they’re winning the big one: How the nation understands our biggest domestic problem.
They say the biggest problem is the size of government and the budget deficit.
In fact our biggest problem is the decline of the middle class and increasing ranks of the poor, while almost all the economic gains go to the top.
The Labor Department reported Tuesday that only 148,000 jobs were created in September — way down from the average of 207,000 new jobs a month in the first quarter of the year.
Many Americans have stopped looking for work. The official unemployment rate of 7.2 percent reflects only those who are still looking. If the same percentage of Americans were in the workforce today as when Barack Obama took office, today’s unemployment rate would be 10.8 percent.
Meanwhile, 95 percent of the economic gains since the recovery began in 2009 have gone to the top 1 percent. The real median household income continues to drop, and the number of Americans in poverty continues to rise.
So what’s Washington doing about this? Nothing. Instead, it’s back to debating how to cut the federal budget deficit.
The deficit shouldn’t even be an issue because it’s now almost down to the same share of the economy as it’s averaged over the last thirty years.
The triumph of right-wing Republicanism extends further. Failure to reach a budget agreement will restart the so-called “sequester” — automatic, across-the-board spending cuts that were passed in 2011 as a result of Congress’s last failure to agree on a budget.
These automatic cuts get tighter and tighter, year by year — squeezing almost everything the federal government does except for Social Security and Medicare. While about half the cuts come out of the defense budget, much of the rest come out of programs designed to help Americans in need: extended unemployment benefits; supplemental nutrition for women, infants and children; educational funding for schools in poor communities; Head Start; special education for students with learning disabilities; child-care subsidies for working families; heating assistance for poor families. The list goes on.
The biggest debate in Washington over the next few months will be whether to whack the federal budget deficit by cutting future entitlement spending and closing some tax loopholes, or go back to the sequester. Some choice.
The real triumph of the right has come in shaping the national conversation around the size of government and the budget deficit – thereby diverting attention from what’s really going on: the increasing concentration of the nation’s income and wealth at the very top, while most Americans fall further and further behind.
Continuing cuts in the budget deficit – through the sequester or a deficit agreement — will only worsen this by reducing total demand for goods and services and by eliminating programs that hard-pressed Americans depend on.
The President and Democrats should re-frame the national conversation around widening inequality. They could start by demanding an increase in the minimum wage and a larger Earned Income Tax Credit. (The President doesn’t’ even have to wait for Congress to act. He can raise the minimum wage for government contractors through an executive order.)
Framing the central issue around jobs and inequality would make clear why it’s necessary to raise taxes on the wealthy and close tax loopholes (such as “carried interest,” which enables hedge-fund and private-equity managers to treat their taxable income as capital gains).
It would explain why we need to invest more in education – including early-childhood as well as affordable higher education.
This framework would even make the Affordable Care Act more understandable – as a means for helping working families whose jobs are paying less or disappearing altogether, and therefore in constant danger of losing health insurance.
The central issue of our time is the reality of widening inequality of income and wealth. Everything else — the government shutdown, the fight over the debt ceiling, the continuing negotiations over the budget deficit — is a dangerous distraction. The Right’s success in generating this distraction is its greatest, and most insidious, triumph.
Lobbyists Will Win and We Will Lose If TPP Trade Deal Goes Through
Civil Liberties
Something very important happened last week.
For the first time, Presidents and Prime Ministers of several countries met with industry lobbyists to discuss the Trans-Pacific Partnership (TPP) on the sidelines of the annual Asia-Pacific Economic Cooperation (APEC) summit in Bali, Indonesia. Although U.S. President Obama suddenly announced he would not [3] be joining these discussions, industry lobbyists are hoping to push through [4] TPP talks to finalize the agreement.
What exactly is the TPP? It’s been called one of the most significant international trade agreements since the creation of the World Trade Organization [5]- but you’d be forgiven for not knowing about it. Discussions about this monumental agreement have been so secret that the little we know about the text is from leaked documents [6]- documents that show we have grave reason to be concerned.
One of its most troubling chapters includes an extreme Internet censorship plan that could break your digital future. Here are the top five ways the TPP censors the Internet and why it should concern you:
Here’s the bottom line: The TPP is a secretive and extreme agreement that could break our digital future. It could change how we behave online, threaten our freedom of expression by promoting an extreme Internet censorship plan, and invade our privacy. The TPP will stifle creativity and innovation, hinder our ability to access information and organize, and criminalize our Internet use. The TPP is an affront to global Internet freedom.
Over 100,000 people have said no [18] to the TPP’s extreme Internet censorship plan and several thousand have put forward their vision of a fair digital future [19]. Join them and make your voice heard – the time is now [20].
Links:
October 18, 2013 |
Something very important happened last week.
For the first time, Presidents and Prime Ministers of several countries met with industry lobbyists to discuss the Trans-Pacific Partnership (TPP) on the sidelines of the annual Asia-Pacific Economic Cooperation (APEC) summit in Bali, Indonesia. Although U.S. President Obama suddenly announced he would not [3] be joining these discussions, industry lobbyists are hoping to push through [4] TPP talks to finalize the agreement.
What exactly is the TPP? It’s been called one of the most significant international trade agreements since the creation of the World Trade Organization [5]- but you’d be forgiven for not knowing about it. Discussions about this monumental agreement have been so secret that the little we know about the text is from leaked documents [6]- documents that show we have grave reason to be concerned.
One of its most troubling chapters includes an extreme Internet censorship plan that could break your digital future. Here are the top five ways the TPP censors the Internet and why it should concern you:
5.The TPP could criminalize small-scale copyright infringement
The next time you want to share a song or a recipe online, you’d have to ask yourself: Am I a criminal? Interested in writing some fan fiction based on your favourite detective series and sharing it online? Ask yourself that very same question. That’s how TPP provisions could characterize you based on what we know about its Intellectual Property chapter.
According to the leaked drafts, unauthorized small-scale downloading or sharing of copyrighted material could result [7] in severe fines and criminal penalties. Law enforcement could even seize your computer and send you to jail for minor copyright infringement.
4. The TPP could prohibit blind and deaf users from breaking digital locks to access their content
Under the TPP, attempts to circumvent digital locks in order to use your paid-for and legally-acquired media may become illegal. If you are blind, this means you could be criminalized [8] for circumventing digital locks on your purchased e-books and other digital materials in order to convert text to braille, audio, or other accessible formats. If you are a librarian, it may become very difficult to share [9] excerpts of content with students for education purposes, lend out material to the public, or even gain full access to purchased content; and as a consumer of digital media, attempts to [10] make backup copies of that DVD you purchased or transfer your legally-purchased e-book on a different device would become unlawful.
3. The TPP could lead to excessive copyright terms
Copyright, which was originally intended to promote the creation of new works by giving authors certain exclusive rights for a limited time, may be threatened [11] by excessive terms and a rigid system that could stifle creativity and innovation under the TPP.
Under the TPP, excessive copyright terms [10] could be created beyond internationally-agreed upon periods; it could also lengthen terms for corporate-owned works. Despite the strong and growing body of evidence demonstrating the importance of a rich commons [12] in creating new works, such a rigid copyright regime would stifle creativity and innovation. It would also restrict [13] the limitations and exceptions that member countries could enact, ensuring that countries enact compliant laws in order to avoid trade sanctions.
2.The TPP may regulate temporary copies at the cost of innovation and freedom
Temporary copies, or the small copies that your computer needs to make in order to move data around, are being targeted by TPP lobbyists who are attempting to redefine the very meaning of the word “copy”. The very notion of regulating temporary copies is ludicrous given how basic [14] the creation of temporary copies of files and programs is to computer functioning and the Internet. As the Electronic Frontier Foundation notes [14]:
This proposal may seem absurd to you. It should. Given how crucial the storage of “temporary copies” of digital files is to the functioning of our devices, the inclusion of unfettered provisions to regulate it is purely backward, especially given the supporters’ failure to justify a legitimate purpose for imposing a burden without a balance.
If lobbyists have their way, anyone viewing content on any device could potentially be committing copyright infringement. Companies like Wikipedia and Connexions would face serious difficulty [14] in hosting and storing user-generated content. Ultimately, this provision could make it more expensive for you to access licensed content, make you more vulnerable to liability, require you to purchase licenses from copyright-holders for transactions, and hinder your ability to use and create online content.
1. The TPP could kick you off the Internet
The TPP will place the burden [15] of monitoring copyright infringement on your Internet Service Provider (ISP), potentially resulting in the blocking of entire websites. Your ISP would have to institute what’s called a “three-strike rule [15]” – a rule that would kick you and your whole family off the internet after three infringement accusations by copyright holders.
It would also force websites to police user-contributed material.. Not only would this mean added financial burden [16], which could lead to the stifling of technology startups, it would also result in websites having to actively monitor for banned links – forcing the creation of a stringent Internet censorship regime. If ISPs are incentivized to remove content because of the resource-heavy nature of investigating copyright infringement complaints, such immediate takedown could censor time-sensitive news, including information to facilitate social organization, protest, and community-building.
It would also break your right to privacy [17] by forcing your ISP to share your private sensitive information with law enforcement in order to investigate your alleged copyright crimes.
Here’s the bottom line: The TPP is a secretive and extreme agreement that could break our digital future. It could change how we behave online, threaten our freedom of expression by promoting an extreme Internet censorship plan, and invade our privacy. The TPP will stifle creativity and innovation, hinder our ability to access information and organize, and criminalize our Internet use. The TPP is an affront to global Internet freedom.
Over 100,000 people have said no [18] to the TPP’s extreme Internet censorship plan and several thousand have put forward their vision of a fair digital future [19]. Join them and make your voice heard – the time is now [20].
Links:
[1] http://alternet.org
[2] http://admin.alternet.org/authors/noushin-khushrushahi
[3] http://www.bbc.co.uk/news/world-asia-24424552
[4] http://www.freeenterprise.com/international/us-chamber-s-donohue-trade-deal-good-pacific-economies-video
[5] http://www.nytimes.com/2013/06/03/opinion/obamas-covert-trade-deal.html?_r=1&
[6] http://keionline.org/sites/default/files/tpp-10feb2011-us-text-ipr-chapter.pdf
[7] http://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1179&context=njtip
[8] http://publicknowledge.org/blog/failing-understand-needs-21st-century-tpp%E2%80%99s-f
[9] http://www.academia.edu/4255123/Digital_locks_and_Canadian_research_library_collections_Implications_for_scholarship_accessibility_and_preservation
[10] https://www.eff.org/deeplinks/2012/08/all-nations-lose-tpps-expansion-copyright-terms
[11] https://openmedia.org/blog/copyright-creativity-not-criminalization
[12] http://whiterabbitisme.wordpress.com/tag/why-is-creative-commons-important/
[13] http://www.dailydot.com/opinion/international-trade-agreements-threaten-internet/
[14] https://www.eff.org/deeplinks/2012/07/temporary-copies-another-way-tpp-profoundly-disconnected
[15] https://www.eff.org/deeplinks/2012/08/tpp-creates-liabilities-isps-and-put-your-rights-risk
[16] https://www.eff.org/deeplinks/2013/05/copyright-provisions-tpp-would-stifle-innovation-and-impede-economy
[17] http://www.gizmodo.com.au/2011/03/secret-copyright-treaty-wants-to-make-isps-liable-for-piracy/
[18] https://openmedia.org/Censorship
[19] https://openmedia.org/DigitalFuture
[20] https://openmedia.org/censorship
[21] http://admin.alternet.org/tags/internet-0
[22] http://admin.alternet.org/tags/tpp
[23] http://admin.alternet.org/tags/censorship
[24] http://admin.alternet.org/%2Bnew_src%2B
Wednesday, October 16, 2013
Sunday, October 13, 2013
The Economic Consequences of US Debt Default
Teapublican Fantasies
by JACK RASMUS
The economic ignorance of the Teapublican faction of the Republican party in the US House and Senate is perhaps exceeded only by the similar ignorance of its economic advisers.
Appearing in the public press in recent days is the latest ‘brilliant’ Teapublican view that a default by the US government on paying interest on its debt would not have a negative impact on the US or global economy.
Both the US and global economies are already slowing noticeably, with the Federal Reserve in the US continuing to downgrade and lower its estimates of future US growth, and the IMF doing the same for growth rates in China and the rest of the world. The Teapublicans claim a US debt default would not impact these already negative trends.
While it is true that the US government will not completely run out of money with which to pay its debts on October 17, 2013, as Treasury Secretary, Jack Lew, has publicly stated, it is equally true that it will definitely do so sometime between October 24 and early November. Thereafter, some funds will continue to come into the government, but not nearly enough to pay all its bills. That will force the Obama administration to choose between what it will pay: either bondholders who own US debt or grandma and grandpa on social security. Teapublicans no doubt want to force Obama to make that ‘Hobsons’ Choice’ (i.e. damned if you do and damned if you don’t). Teapublicans will argue he should pay the bondholders first, and forego paying social security. It’s their way to start cutting social security before they even negotiate an official reduction in it with Obama.
To quote one Teapartyer’s statement today, Republican Representative, Joe Barton, of Texas: “We have more than enough cash flow to pay interest on the public debt, so there is no way we’re gong to default on the public debt unless the president of the United States intentionally does so”.
Such statements by lesser known Teapublicans were followed up today in the business press with an article by Teapublican notable, Paul Ryan. Ryan made it clear that the focus of the debt ceiling discussion was to provoke further concessions by Obama on Social Security-Medicare cuts. US House radicals thus are attempting to put Obama in a negotiating box: either he agree to cut Obamacare or to cut Social Security-Medicare.
What the Teapublican faction in all their economic ignorance don’t understand, however, is that the psychological effects of a default—or even a near default—on the US and global economy will prove significant. One does not have to wait for a complete default for that to happen.
What then are some of the possible impacts?
First is the prospect of rising interest rates. Interest rates have already begun to rise, starting on a base that has already risen since the US Federal Reserve’s bungled attempt to signal over the past summer its intent to begin reducing (tapering) its Quantitative Easing (QE) $85 billion a month liquidity injections. That Fed ‘faux pas’ has already driven up long term rates by more than 1%, thereby causing an abrupt halt to a very timid US housing recovery earlier this year. In the past month banks and mortgage servicing companies have already announced thousands of layoffs in their mortgage departments, signaling the virtual end of that housing recovery. Further interest rate hikes, short and long term, on top of the Fed’s recent bungling—which will now certainly occur as the default approaches—will all but ensure the end of any housing recovery in the US.
Short term rate increases will most likely accelerate further throughout the month of October. That includes, in particular, Treasury bill rates which will in turn impact other rates. ‘Other rates’ include the critically important ‘Repo Market’ rates. Destabilizing the repo market is a dangerous game. It is likely the locus for the next financial crash, the analog to the subprime market that was the center of the last financial crash. Teapublicans are thus playing a dangerous game, one that may well in a worst case scenario precipitate another financial instability event on the scale of 2008.
Rising interest rates also mean the end of the latest stock price and junk bond booms. In itself, that doesn’t affect average folks much. But the psychological impact of a rapid decline in asset prices can, and does, spill over to consumer and business spending. That leads to layoffs, in a US job market that is, at best, producing only part time, temp, and low paid jobs as it is.
Rising rates and an even weaker job market in November-December will translate into slowing consumption, which is already showing signs of weakness in August-September. Retail sales in general will weaken still further as a consequence of the debt ceiling default, as will an already ‘long in the tooth’ auto sales cycle.
The negative impact of debt default on consumption is already becoming evident in recent weeks. A Gallup Poll in recent days showed consumer confidence dropping precipitously. While some argue confidence surveys are typically volatile and unreliable as indicators of consumer spending, that is not as true for abrupt and significant movements in confidence indicators. That may now be happening, as the public begins to focus on the dual crises events.
The recent Gallup poll in question fell to -35 from a prior -15. This compares to -56 during the August 2011 worst period of that prior debt ceiling debacle. During the worst period of October 2008 the index was -66. Already falling significantly early in the current crisis, one can estimate where the -35 current poll will be by October 17-24 should the crisis not be resolved by then. We will almost certainly be in the August 2011 territory, when the third quarter US GDP nearly went negative (and did so if the GDP deflator was substituted with the CPI index for that quarter).
Globally, the approaching debt ceiling crisis has already provoked widespread public responses by foreign governments, warning a potential default by the US would have dire consequences for US debt holdings and future purchases. China, Japan, and the IMF have all raised warnings in recent days. If default occurs, then US bond rates will rise even further and faster than at present, raising a real question whether they will continue to purchase US Treasury debt when the price of their holdings are declining significantly in the wake of a default.
There are also important implications of a default (or even near default) for the Eurozone’s own current economic recovery and its still very fragile banking system.
Yet another negative impact globally will be a decline in Euro exports. A default situation would result in the US currency losing value, causing a further rise in the already fast appreciating Euro currency. That trend would challenge German and Euro export growth and therefore that region’s tepid 0.3% last quarter’s recovery.
Another problem potentially to grow worse is the Euro banking system. The Eurozone’s version of QE-the LTRO liquidity injection policy of the past year amounting to more than $1.5 trillion-will soon need another LTRO II injection by the European Central Bank in a matter of months. In addition, more than $1 trillion of the LTRO I will need to be refinanced soon. Nearly all the major banks in Italy, for example, have yet to repay anything of their share of the LTRO $1.5 trillion and will need further liquidity in coming months. Rising interest rates from a debt default in the US will spill over to Europe, thus raising the costs of LTRO II, as well as the financing of much of LTRO I. That will cause further fragility in the Euro banking system and economic recovery there, especially for the highly fragile Italian banks.
For Japan, its recent export gains would also slow, at a time when it has decided to raise taxes while suspending structural economic reforms.
Currency volatility in emerging markets would also intensify from a debt default in the US, likely causing a retreat once again in real growth in those markets, just a few months after their recent ‘stop-go’ provoked by US Fed QE policy uncertainties this past summer.
Throughout the past 18 months, this writer has forewarned that a fragile US economic and global recovery-not nearly as robust as some maintain-is susceptible to a ‘double dip’ recession in 2013-14 should one or more of the following negative ‘tail events’ occur: first, a renewed banking crisis in the Eurozone or elsewhere; second, significant further deficit cutting in the US; and thirdly a continued drift upward in US long term interest rates as a consequence of QE tapering or other events. While it appears the Euro banking crisis has temporarily stabilized—except for Italian banks perhaps—the deficit cutting and interest rate trajectory in the US are very real and serious trends that may yet precipitate a descent into a double dip condition in the US economy.
And if the Teapublican faction in the US House of Representatives managers to prevent a resolution of the debt ceiling issue into the latter part of October, then the economic consequences for both the US and global economies will be severe, and may even prove sufficienet to precipitate a double dip recession in the US.
by JACK RASMUS
The economic ignorance of the Teapublican faction of the Republican party in the US House and Senate is perhaps exceeded only by the similar ignorance of its economic advisers.
Appearing in the public press in recent days is the latest ‘brilliant’ Teapublican view that a default by the US government on paying interest on its debt would not have a negative impact on the US or global economy.
Both the US and global economies are already slowing noticeably, with the Federal Reserve in the US continuing to downgrade and lower its estimates of future US growth, and the IMF doing the same for growth rates in China and the rest of the world. The Teapublicans claim a US debt default would not impact these already negative trends.
While it is true that the US government will not completely run out of money with which to pay its debts on October 17, 2013, as Treasury Secretary, Jack Lew, has publicly stated, it is equally true that it will definitely do so sometime between October 24 and early November. Thereafter, some funds will continue to come into the government, but not nearly enough to pay all its bills. That will force the Obama administration to choose between what it will pay: either bondholders who own US debt or grandma and grandpa on social security. Teapublicans no doubt want to force Obama to make that ‘Hobsons’ Choice’ (i.e. damned if you do and damned if you don’t). Teapublicans will argue he should pay the bondholders first, and forego paying social security. It’s their way to start cutting social security before they even negotiate an official reduction in it with Obama.
To quote one Teapartyer’s statement today, Republican Representative, Joe Barton, of Texas: “We have more than enough cash flow to pay interest on the public debt, so there is no way we’re gong to default on the public debt unless the president of the United States intentionally does so”.
Such statements by lesser known Teapublicans were followed up today in the business press with an article by Teapublican notable, Paul Ryan. Ryan made it clear that the focus of the debt ceiling discussion was to provoke further concessions by Obama on Social Security-Medicare cuts. US House radicals thus are attempting to put Obama in a negotiating box: either he agree to cut Obamacare or to cut Social Security-Medicare.
What the Teapublican faction in all their economic ignorance don’t understand, however, is that the psychological effects of a default—or even a near default—on the US and global economy will prove significant. One does not have to wait for a complete default for that to happen.
What then are some of the possible impacts?
First is the prospect of rising interest rates. Interest rates have already begun to rise, starting on a base that has already risen since the US Federal Reserve’s bungled attempt to signal over the past summer its intent to begin reducing (tapering) its Quantitative Easing (QE) $85 billion a month liquidity injections. That Fed ‘faux pas’ has already driven up long term rates by more than 1%, thereby causing an abrupt halt to a very timid US housing recovery earlier this year. In the past month banks and mortgage servicing companies have already announced thousands of layoffs in their mortgage departments, signaling the virtual end of that housing recovery. Further interest rate hikes, short and long term, on top of the Fed’s recent bungling—which will now certainly occur as the default approaches—will all but ensure the end of any housing recovery in the US.
Short term rate increases will most likely accelerate further throughout the month of October. That includes, in particular, Treasury bill rates which will in turn impact other rates. ‘Other rates’ include the critically important ‘Repo Market’ rates. Destabilizing the repo market is a dangerous game. It is likely the locus for the next financial crash, the analog to the subprime market that was the center of the last financial crash. Teapublicans are thus playing a dangerous game, one that may well in a worst case scenario precipitate another financial instability event on the scale of 2008.
Rising interest rates also mean the end of the latest stock price and junk bond booms. In itself, that doesn’t affect average folks much. But the psychological impact of a rapid decline in asset prices can, and does, spill over to consumer and business spending. That leads to layoffs, in a US job market that is, at best, producing only part time, temp, and low paid jobs as it is.
Rising rates and an even weaker job market in November-December will translate into slowing consumption, which is already showing signs of weakness in August-September. Retail sales in general will weaken still further as a consequence of the debt ceiling default, as will an already ‘long in the tooth’ auto sales cycle.
The negative impact of debt default on consumption is already becoming evident in recent weeks. A Gallup Poll in recent days showed consumer confidence dropping precipitously. While some argue confidence surveys are typically volatile and unreliable as indicators of consumer spending, that is not as true for abrupt and significant movements in confidence indicators. That may now be happening, as the public begins to focus on the dual crises events.
The recent Gallup poll in question fell to -35 from a prior -15. This compares to -56 during the August 2011 worst period of that prior debt ceiling debacle. During the worst period of October 2008 the index was -66. Already falling significantly early in the current crisis, one can estimate where the -35 current poll will be by October 17-24 should the crisis not be resolved by then. We will almost certainly be in the August 2011 territory, when the third quarter US GDP nearly went negative (and did so if the GDP deflator was substituted with the CPI index for that quarter).
Globally, the approaching debt ceiling crisis has already provoked widespread public responses by foreign governments, warning a potential default by the US would have dire consequences for US debt holdings and future purchases. China, Japan, and the IMF have all raised warnings in recent days. If default occurs, then US bond rates will rise even further and faster than at present, raising a real question whether they will continue to purchase US Treasury debt when the price of their holdings are declining significantly in the wake of a default.
There are also important implications of a default (or even near default) for the Eurozone’s own current economic recovery and its still very fragile banking system.
Yet another negative impact globally will be a decline in Euro exports. A default situation would result in the US currency losing value, causing a further rise in the already fast appreciating Euro currency. That trend would challenge German and Euro export growth and therefore that region’s tepid 0.3% last quarter’s recovery.
Another problem potentially to grow worse is the Euro banking system. The Eurozone’s version of QE-the LTRO liquidity injection policy of the past year amounting to more than $1.5 trillion-will soon need another LTRO II injection by the European Central Bank in a matter of months. In addition, more than $1 trillion of the LTRO I will need to be refinanced soon. Nearly all the major banks in Italy, for example, have yet to repay anything of their share of the LTRO $1.5 trillion and will need further liquidity in coming months. Rising interest rates from a debt default in the US will spill over to Europe, thus raising the costs of LTRO II, as well as the financing of much of LTRO I. That will cause further fragility in the Euro banking system and economic recovery there, especially for the highly fragile Italian banks.
For Japan, its recent export gains would also slow, at a time when it has decided to raise taxes while suspending structural economic reforms.
Currency volatility in emerging markets would also intensify from a debt default in the US, likely causing a retreat once again in real growth in those markets, just a few months after their recent ‘stop-go’ provoked by US Fed QE policy uncertainties this past summer.
Throughout the past 18 months, this writer has forewarned that a fragile US economic and global recovery-not nearly as robust as some maintain-is susceptible to a ‘double dip’ recession in 2013-14 should one or more of the following negative ‘tail events’ occur: first, a renewed banking crisis in the Eurozone or elsewhere; second, significant further deficit cutting in the US; and thirdly a continued drift upward in US long term interest rates as a consequence of QE tapering or other events. While it appears the Euro banking crisis has temporarily stabilized—except for Italian banks perhaps—the deficit cutting and interest rate trajectory in the US are very real and serious trends that may yet precipitate a descent into a double dip condition in the US economy.
And if the Teapublican faction in the US House of Representatives managers to prevent a resolution of the debt ceiling issue into the latter part of October, then the economic consequences for both the US and global economies will be severe, and may even prove sufficienet to precipitate a double dip recession in the US.
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