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Obama Economic Recovery Was America’s Weakest

Eric Zuesse The following graph of “Non-farm Payroll Jobs in United States" shows America’s economic recoveries from recession, in numbers of jobs, and indicates very...
video

Video: Greek Austerity Leading to Brain Drain with No Economic Recovery in Sight

Dimitri Lascaris says the latest unemployment figures in Greece show the indifference of the EU elite to the hardships of austerity and the democratic...

Economic Update: False Economic Recovery, True Journalism

This episode provides updates on "carrried interest" tax loopholes, state subsidies for businesses, negative interest rates and bank "bail-ins" versus "bailouts." Finally,...

Economic Recovery? 13 Of The Biggest Retailers In America Are Closing Down Stores

Michael Snyder Barack Obama recently stated that anyone that is claiming that America’s economy is in decline is “peddling fiction“.  Well, if the economy is...

US states face wide budget deficits 6 years into economic recovery

Many American states are still facing significant budget deficits even though the US economy is in its sixth year of recovery from the Great...

The Economic Recovery’s Missing Ingredient

JARED BERNSTEIN and DEAN BAKER Federal Reserve Chairman Janet Yellen gave a speech a few weeks ago that was doubly unusual. First, she provided a welcome...

Forget George Osborne’s Spin, Here’s The Truth About The ‘Economic Recovery’

Asa Bennett George Osborne welcomed a "double dose of economic good news" after the Office for National Statistics' upgraded its estimates on how fast the UK...

The “Economic Recovery” Continues: Businesses Are Being Destroyed Faster Than They Are Being Created

Michael T. Snyder  RINF Alternative News What would you say about an economy where businesses are shutting down faster than they are opening? Well, a shocking...

The “Economic Recovery” Continues: Businesses Are Being Destroyed Faster Than They Are Being Created

What would you say about an economy where businesses are shutting down faster than they are opening?  Well, a shocking new study released by the Brookings Institution indicates that this is exactly what is happening in the United States.  We are absolutely killing small businesses and the entrepreneurial spirit in this country, and as you [...]

Fiscal-Policy Obstruction to Economic Recovery

Seymour Patterson  RINF Alternative News Janet Yellen, the new chairwoman of the Federal Reserve Banking system (Fed)--she replaces Ben Bernanke, said the Fed will taper quantitative...

Obama’s Fake Economic Recovery

Obama's Fake Economic Recoveryby Stephen LendmanShortly after he took office in 2009, headlines touted recovery. It never began. It doesn't exist. Protracted Main Street Depression conditions affect growing millions.Things go from bad to worse. Human s...

Worst US jobs report in three years shatters claims of economic recovery

Andre Damon RINF Alternative News The US employment report for December, released Friday by the Labor Department, is a shattering exposure of the Obama administration's claims...

Alleged Economic Recovery: No Jobs For Americans

Wholesale and retail trade accounted for 70,700 of these jobs or 95.5%. It is likely that the December wholesale and retail hires were...

The Elusive Economic Recovery. The “Tide of Cheap Money”

Prof Prabhat Patnaik RINF Alternative News The world capitalist crisis which began in 2008 not only persists but is worsening. The second half of the current...

The Case of the Missing Economic Recovery

Have you seen the economic recovery? I haven't either. But it is bound to be around here somewhere, because the National Bureau...

The Economic Recovery is a “Statistical Illusion”: More Misleading Official Employment Figures

The payroll jobs report for November from the Bureau of Labor Statistics says that the US economy created 203,000 jobs in November. As it...

37 reasons US economic recovery is a lie

“If you repeat a lie often enough, people will believe it.” Sadly, that appears to be the approach that the Obama administration and the...

37 Reasons Why “The Economic Recovery Of 2013″ Is A Giant Lie

Michael SnyderEconomic CollapseDecember 9, 2013 “If you repeat a lie often enough, people will believe it.” Sadly, that appears to be the approach that...

37 Reasons Why “The Economic Recovery Of 2013″ Is A Giant Lie

"If you repeat a lie often enough, people will believe it."  Sadly, that appears to be the approach that the Obama administration and the mainstream media are taking with the U.S. economy.  They seem to believe that if they just keep telling the American people over and over that things are getting better, eventually the [...]

Meet One Of The Victims Of Obama’s “Economic Recovery”

Michael Snyder Economic Collapse November 12, 2013 Have you ever cried yourself to sleep because you had no idea how you were going to pay the bills...

Economic Recovery Exposed As Propaganda (Video)

By Susan Duclos



World leaders have been talking about the so-called economic "recovery" that never was and in the video report below from X22 Report exposes those lies as the propaganda it was and is. Housing, unemployment, retail, etc... has been hyped as improving, but as they point out, that has always been the case right before massive economic collapses in history.

Politicians and leaders are always talking about raising taxes, but what they don't speak about, the secret hidden in plain sight is that without workers paying into the system, no amount of raising anyone elses taxes can sustain the spending, so unemployment is the key. Put people to work, you have money fed into the system, put people out of work, you have less going in, but far more spent on unemployment insurance, EBT and food stamps, and all the other welfare benefits allotted to those people.

Bottom line, tax increases aren't needed, jobs are.

On a semi-related note because it certainly deals with the national and global economy, a must-read piece from this morning at Before it's News should be seen and paid attention to, titled "Dr. Jim Willie Drops Gold Bombshell – World Bank Whistleblower Karen Hudes Is Right!"






Cross posted at Before It's News



US economic recovery may take 30 yrs.

Study: Å“Beginning of the longest period of economic decline in American history”Economists will often argue that booms and busts are cyclical. Every depression or...

The Stop-Go US Economic Recovery

For the past several years, the US press, pundits, and apologists for both liberal and conservative politicians in the US have jumped at every...

Economic Recovery by Statistical Manipulation

Facing the prospect of a 2nd quarter GDP report showing economic growth less than 1% (some professional forecasting services predict as low as 0.5%),...

Federal Reserve: rising inequality jeopardizes economic recovery

A top ranking member of the United States Federal Reserve cautioned economists this week that growing inequality within the US was worsening the odds...

Turning “Mirage Recovery” into a Real Economic Recovery

Recently, news reporters have been sounding almost giddy, saying that unemployment is dropping, housing prices are rising and the stock market is growing to...

The Missing Economic Recovery

Officially, since June 2009 the US economy has been undergoing an economic recovery from the December 2007 recession. But where is this recovery? I cannot find it, and neither can millions of unemployed Americans.

Why Has Iceland Experienced a Strong Economic Recovery after Complete Financial Collapse in 2008?

iceland

Iceland’s President Olafur Ragnar GRIMMSON was interviewed over the weekend (26./27.01.2013) at the World Economic Forum in Davos on why Iceland has enjoyed such a strong recovery after it’s complete financial collapse in 2008, while the rest of the Western world struggles with a recovery that has no clothes.

Grimsson gave a famous reply to the financial MSM reporter, stating that Iceland’s recovery was due to the following primary reason:

„… We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing here in Europe. …“

When asked whether Iceland’s policy of letting the banks fail would have worked in the rest of Europe, Grimsson replied:

„… Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and tele-communication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail-out banks is a theory that you allow bankers enjoy for their own profit their success, and then let ordinary people bear their failure through taxes and austerity. 
People in enlightened democracies are not going to accept that in the long run. …“

The whole interview with Grimmson (02:56 min) is available – see:

www.youtube.com/watch?v=51-Jfh6ADH0

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Copyright © Martin Zeis, Global Research, 2013
video

Video: Obama’s Economic Legacy: Recovery for the Architects of Financial Crisis (2/2)

Underpinning people's rage towards the establishment is the sense that modern capitalism is no longer working, says economist Richard Wolff Help support The ... Via...

US economic “recovery” dominated by low-wage jobs

Andre Damon  RINF Alternative News A disproportionate number of jobs created during the so-called economic “recovery” pay less than about $13 per hour, according to a...

Americans don’t buy Obama’s talk of economic ‘recovery’

washingtonexaminer.comDecember 3, 2013 President Obama regularly touts what he calls the “economic recovery” supposedly prompted by his policies, including the creation of 7.5 million jobs,...

Obama touts economic “recovery,” steps up assault on workers

24 July 2013 One day before President Barack Obama kicked off a speaking tour aimed at presenting himself as the champion of a “thriving middle...

Wealth from Economic “Recovery” has gone to the Richest Americans

A new study from the St. Louis Federal Reserve documents the vast disparity in the fortunes of American families since the financial crisis of...

What Recovery? Across America, People in Distressed Cities and Small Towns Face Economic Catastrophe

It's time for a new economic approach that brings jobs and hope to the places left behind.

Photo Credit: Shutterstock.com

March 18, 2013  |  

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The US economy, many believe, is turning a corner.  Maybe so, but for much of the country, what lies around the corner is a dead end.  In far too many places, high levels of unemployment still exist, and joblessness has been the norm for years, even decades. Unless we try something different, these places will once again be left behind as more prosperous areas recover.

In over 200 metropolitan and micropolitan areas, the jobs crisis dominates everyday life, but these communities were experiencing high levels of unemployment long before the Great Recession. They are “distressed areas,” which we define as areas where the unemployment rate has been at least 2 percentage points higher than the national average for at least five years—in some places, for over 20 years.

We usually assume that economically distressed areas exist only in inner-city slums or rural backwaters. But areas plagued by persistent high unemployment almost never fit into conventional categories. Distressed areas share characteristics that make them unlikely to recover if the remedies offered rely only on the standard approaches to boosting the economy.

In distressed areas , government aid provides nearly one-third of residents’ incomes, compared to 17% nationwide. Upwards of 40 percent of the population in these areas lives on $30,000 a year or less, and the workforces there have low educational-achievement rates, with more than half possessing just a high-school degree or less. Most jobs are in low-end service industries, especially prisons, casinos, nursing homes, and retail. Such jobs offer few chances for upward mobility or skill enhancement.

For instance, unemployment in Yakima, Washington, has averaged 4 percentage points above the national average over the past 20 years—57 percent of its adult residents have only a high school degree or less. Similarly, in Rockford, Illinois, where the average unemployment rate has been 2.4 percentage points above the national standard for over 10 years, 53 percent of the population has no education past high school. To take one more example, a staggering 62 percent of the population in Danville, Virginia, has only a high school degree or less, and its unemployment rate has hovered 2.1 percentage points above the national average over the past five-plus years. In the country as a whole, by comparison, 43.3 percent of the adult population has no post-secondary education; in some thriving areas, the figure is much lower—for instance, Cambridge, MA (22.7 percent) and Seattle, WA (25.8 percent).

What distressed areas need is a new approach to reducing joblessness and building sustained prosperity. Efforts to promote industrial development, either by the Chamber of Commerce or through targeted government grants and subsidies, are no longer enough.  Worker-training programs are also insufficient, since trainees often discover after completing such programs that the hoped-for jobs do not materialize. The challenge is even greater for those who have been out of work for extended periods of time.

The dire conditions confronting jobless American workers in distressed areas won’t go away if we just wait for the long-anticipated increase in economic growth. These places have been struggling through both booms and busts; they offer proof that, unfortunately, a rising economic tide does not lift all boats. We need new approaches to reverse the long-term trends in unemployment.  

One approach that might bring about job growth is to expand access to startup capital for small businesses. Distressed areas lack the capacity to support new businesses. Moreover, existing businesses are unlikely to expand into distressed areas.

Report after report notes the number of unemployed workers in their 40s to early 60s who face poor prospects of restarting their work lives in their previous career field. In addition, there are countless younger workers who want to pursue new opportunities but can’t find any in the distressed areas where they live. For many of them, moving is not an option—they simply can’t afford it .

Mr. President, Be Careful What You Wish for: Higher Interest Rates Will Kill the...

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Can Capitalists Afford a Trumped Recovery?

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The Economics of the Future

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How We the People Were Screwed by Obama’s Bogus “Recovery”

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Video: How EU Policies Have Fueled Economic Stagnation

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The Unreported Economic Decline: 1 In 5 Young Adults Drowning in Debt

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Economic Disinformation Keeps Financial Markets Up – Paul Craig Roberts

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The post Economic Disinformation Keeps Financial Markets Up — Paul Craig Roberts appeared first on PaulCraigRoberts.org.

Ultra-Secrecy Surrounds Barack Obama’s New Global Economic Treaty

Barack Obama is secretly negotiating a global economic treaty which would destroy thousands of American businesses and millions of good paying American jobs.  In other words, it would be the final nail in the coffin for America’s economic infrastructure.  Obama knows that if the American people actually knew what was in this treaty that they [...]

The post Ultra-Secrecy Surrounds Barack Obama’s New Global Economic Treaty appeared first on The Economic Collapse.

Economic growth? Obama shoots himself in the foot

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Obama’s Secret Treaty Would Be The Most Important Step Toward A One World Economic...

Michael T. Snyder  RINF Alternative News Barack Obama is secretly negotiating the largest international trade agreement in history, and the mainstream media in the United States...

Billionaire to Clueless CEOs: Stop Your Greedy Economic Policies

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No significant recovery in world economy, says US Fed official

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IMF report: No end to economic breakdown

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Austerity and the “Economic Destabilization Agenda”. Impoverishing America’s Middle Class

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Retail Apocalypse Hits The US – There Is No Recovery!

By Susan Duclos


The next time Barack Obama or one of his talking heads spew nonsense about an economic "recovery," remember the numbers you will read in this article and hear about in the video below.


There is no recovery, it was all an illusion and it is coming crashing down at this very moment. 


Statistics below, with links, via News Watch:


• JC Penney, which lost $586 million in three months in 2013, is planning to close 33 stores in 19 states and lay off 2,000 people. JC Penney’s stock has lost 84 percent of its value since February 2012.
• Sears has decided to shut down its flagship store in Downtown Chicago, and it has closed 300 stores in the United States since 2010. Stock analyst Brian Sozzi noted that Sear’s inventory levels have fallen by 23.7 percent since 2006. He also noted that Sears had $4.4 billion in cash and equivalents in 2005 but $609 million in cash and equivalents in 2012. Sozzi, who calls himself a guerrilla analyst, has a blog full of disturbing pictures of empty Sears stores.
• Macy’s, one of the few retail success stories, is planning to close five stores and eliminate 2,500 jobs.
• Radio Shack is preparing to close 500 stores, according to The Wall Street Journal.
• Best Buy recently closed 50 stores and eliminated 950 jobs at stores in Canada.
• Target announced plans to eliminate 475 jobs and not fill 700 empty positions to reduce costs.
• Aeropostale is planning to close 175 stores.
• Blockbuster has closed down all of its stores.


Anyone still think we are in some type of economic "recovery?"





Cross posted at Before It's News

Why The Three Biggest Economic Lessons Were Forgotten

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Why The Three Biggest Economic Lessons Were Forgotten

Why has America forgotten the three most important economic lessons we learned in the thirty years following World War II?


Before I answer that question, let me remind you what those lessons were:


First, America’s real job creators are consumers, whose rising wages generate jobs and growth. If average people don’t have decent wages there can be no real recovery and no sustained growth.


In those years, business boomed because American workers were getting raises, and had enough purchasing power to buy what expanding businesses had to offer. Strong labor unions ensured American workers got a fair share of the economy’s gains. It was a virtuous cycle.


Second, the rich do better with a smaller share of a rapidly-growing economy than they do with a large share of an economy that’s barely growing at all.


Between 1946 and 1974, the economy grew faster than it’s grown since, on average, because the nation was creating the largest middle class in history. The overall size of the economy doubled, as did the earnings of almost everyone. CEOs rarely took home more than forty times the average worker’s wage, yet were riding high.


Third, higher taxes on the wealthy to finance public investments — better roads, bridges, public transportation, basic research, world-class K-12 education, and affordable higher education – improve the future productivity of America. All of us gain from these investments, including the wealthy.


In those years, the top marginal tax rate on America’s highest earners never fell below 70 percent. Under Republican President Dwight Eisenhower the tax rate was 91 percent. Combined with tax revenues from a growing middle class, these were enough to build the Interstate Highway system, dramatically expand public higher education, and make American public education the envy of the world.


We learned, in other words, that broadly-shared prosperity isn’t just compatible with a healthy economy that benefits everyone — it’s essential to it.


But then we forgot these lessons. For the last three decades the American economy has continued to grow but most peoples’ earnings have gone nowhere. Since the start of the recovery in 2009, 95 percent of the gains have gone to the top 1 percent.

What happened?


For starters, too many of us bought the snake oil of “supply-side” economics, which said big corporations and the wealthy are the job creators – and if we cut their taxes the benefits will trickle down to everyone else. Of course, nothing trickled down.


Meanwhile, big corporations were allowed to bust labor unions, whose membership dropped from over a third of all private-sector workers in the 1950s to under 7 percent today.


Our roads, bridges, and public-transit systems were allowed to crumble under the weight of deferred maintenance. Our public schools deteriorated. And public higher education became so starved for funds that tuition rose to make up for shortfalls, making college unaffordable to many working families.


And Wall Street was deregulated — creating a casino capitalism that caused a near meltdown of the economy six years ago and continues to burden millions of homeowners. CEOs began taking home 300 times the earnings of the average worker.


Part of the reason for this extraordinary U-turn had to do with politics. As income and wealth concentrated at the top, so did political power. The captains of industry and of Wall Street knew what was happening, and some played leading roles in this transformation.


But why didn’t they remember the lessons learned in the thirty years after World War II – that widely-shared prosperity is good for everyone, including them?


Perhaps because they didn’t care to remember. They discovered that wealth is also relative: How rich they feel depends not just on how much money they have, but also how they live in comparison to most other people.


As the gap between America’s wealthy and the middle has widened, those at the top have felt even richer by comparison. Although a rising tide would lift all boats, many of America’s richest prefer a lower tide and bigger yachts.

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Looking Back on Five Years of Economic Turmoil: Heart Burn or Heart Attack?



When significant US economic markets went haywire in the summer and fall of 2008, a fear, even panic, struck those charged with developing and implementing economic policy. The prevailing thinking-- unbridled capitalism with near-religious confidence in market mechanisms-- appeared to be in irreversible retreat.
The housing market cooled, home values shrank, and the financial structure built around home ownership began to collapse. As the stock market fell freely from previous highs, led by the implosion of bank stocks, investors withdrew dramatically from the market. Credit froze and consumption slowed. Thus began a downward spiral of employee layoffs, reduced consumption, capital hoarding, and retarded growth, followed by more layoffs, etc. etc.
As fear set in, policy makers scrambled to find an answer to a crisis that threatened to deepen and spread to the far reaches of the global economy. With interest rates near zero, they recognized that the monetarist toolbox, in use since the Carter administration, offered no answer.
At the end of the Bush administration, bi-partisan leaders approved the injection of hundreds of billions of public dollars into the financial system with the hope of stabilizing the collapsing market value of banks, a move popularly dubbed a “bailout.”
Early in the Obama administration, Democratic Party administrators crafted another recovery program totaling about three-quarters of a trillion dollars, a program involving a mix of tax cuts, public-private infrastructure projects, and expanded direct relief. Economists generally viewed this effort as a “stimulus” program designed to trigger a burst of economic activity to jump-start a stalled economic engine. Dollar estimates of aggregate US Federal bailouts and stimuli meant to overcome the crisis rose as high as the value of one year's Gross Domestic Product in the early years after the initial free fall. The Federal Reserve continues to offer a $75 billion transfusion every month into the veins of the yet ailing US economy.
Bad Faith
The last three decades of the twentieth century brought forth a new economic consensus of not merely market primacy, but total market governance of economic life. Regulation of markets was believed to destabilize markets and not correct them. Public ownership and public services were seen as inefficient and untenable holdouts from market forces. Public and private life beyond the economic universe were subjected to markets, measured by market mechanisms, and analyzed through the lens of market-thought. Indeed, market-speak became the lingua franca unifying all of the social sciences and humanities in this era. With the fall of the Soviet Union, capital and its profit-driven processes penetrated every corner of the world. Only independent, anti-imperialist, market-wary movements like those led by Hugo Chavez, Evo Morales, and a few others gained some political success against the unprecedented global dominance of private ownership and market mechanisms.
While capitalism in its most unadorned, aggressive form enjoyed the moments of triumph, forces were at play undermining that celebration. Those forces crashed the party in 2000 in the form of a serious economic downturn, the so-called “Dot-com Recession” featuring a $5 trillion stock market value loss and the disappearance of millions of jobs. Economists marveled at how slowly the jobs were returning before the US and global economy were hit with another, more powerful blow in 2008. Clearly, the first decade of the twenty-first century will be remembered as one of economic crisis and uncertainty, a turmoil that continues to this day.
Apart from the human toll-- millions of lost jobs, poverty, homelessness, lost opportunities, destruction of personal wealth-- the crisis-ridden twenty-first century challenged the prevailing orthodoxy of unfettered markets and private ownership. Even such solid and fervent advocates of that orthodoxy as the Wall Street Journal, The Economist, and The Times were rocked by the crisis, questioning the soundness of classical economic principles. No principle is more dear and essential for the free marketeers than the idea that markets are self-correcting. While there may be short-term economic imbalances or downturns, free-market advocates believe that market movement always tends towards balance and expansion in the long run. Thus, a persistent, long term stagnation or decline is thought to be virtually impossible (with the caveat that there are no restrictions imposed on the market mechanism).
So when perhaps the greatest era of extensive global open-market economy experienced the most catastrophic economic collapse since the Great Depression, serious doubts arose about the fundamental tenets of market ideology. And during the darkest days of 2008 and 2009, a veritable ideological panic swept over pundits and experts of the Right and the “respectable” Left. Some rehabilitated an out-of-fashion economist and spoke of a “Minsky moment.” Liberals proclaimed the death of neo-liberalism (the popular term for the return to respectability of classical economics that began in the late 1970s). And still others foresaw a restoration of the interventionist economics represented by John Maynard Keynes, the economic theories that guided the capitalist economy through most of the post-war period. Even the most conservative economists conceded that market oversight, if not regulation, was both necessary and forthcoming.
Yet, change has not come forth. Despite over five years of decline and stagnation, despite a continued failure of markets to self-correct, free-market ideology continues to dominate both thinking and policy, clearly more faith-based than reality-based. In part, the resilience of open-market philosophy emanates from the shrewd manufacture of debt-fear by politicians and debt-mongering by financial institutions. By raising the shrill cry of exploding debt and impending doom, attention was diverted from the failings of the unfettered market and towards government austerity and massive debt reduction.
Diagnosis?
Clearly all the Nobel Prize-winning mathematical economic models thought to capture economic activity failed to predict and explain the 2008 crash. No amount of faith could disguise the monumental failure of raw, unregulated markets and the policies that promoted them. Two competing, sharply contrasting, and simplistic explanations came forward.
Defenders of free markets shamelessly, brazenly argue that government meddling thwarted the full and free operation of market mechanisms, thus, exacerbating what would have been a painful, but quickly resolved correction. Following the metaphor alluded to in this article’s title, heartburn was misdiagnosed, treated with radical surgery, only to create a life-threatening condition.
Of course this is self-serving nonsense.
Whatever else we may know about markets, we know this: since the process of deregulating markets began in earnest in the late 1970s, crises have only occurred more frequently, with greater amplitude, and harsher human consequences. Before that, and throughout the earlier post-war period, government intervention and regulation tended to forestall downturns, moderate their nadir, and soften the human toll. And a glimpse at an earlier period of market-friendly policy– the early years of the Great Depression-- demonstrates the folly of simply waiting for the promised correction: matters only grew worse. Then, as now, life proved to be a hard taskmaster; when market mechanisms really go awry, no one can afford to wait for self-correction.
Liberal and soft-Left opponents of an unfettered market offer a different argument. They saw the crisis as, not the absence of free markets, but the failure to oversee and regulate markets adequately. On this view, shared by nearly all liberals and most of the non-Communist Left, markets are fundamental economic mechanisms-- essential, if you will-- but best shepherded by government controls that steer markets back when they threaten to run amok.
Thus, the 2008 crisis would have been averted, they believe, if rules and regulations remained in place that were previously designed and implemented to protect the economy from market excesses; if we had not loosened the rules and regulations, we would never have experienced the disaster of 2008.
This view is bad history and even worse economics.
While liberals would like to believe that regulations and institutions spawned by the New Deal of the 1930s stabilized capitalism and tamed markets, the truth is otherwise. The massive war spending initiated sometime before the US entry into World War II solved the problems of growth and excess manpower associated with the long decade of stagnation, hesitant recovery, retreat, and further stagnation that befell the economy beginning in 1929.
Capitalism gained new momentum with post-war reconstruction. Productive forces were restored where they had been destroyed, refreshed where they were worn, and improved in the face of new challenges. This broad restructuring of capitalism produced new opportunities for both profit and growth. At the same time, the lesson of massive socialized, public, and planned military spending were not lost. New threats were conjured, new fears constructed. The hot war in Korea and the ever-expanding Cold War fueled an unprecedented US expansion. It is not inappropriate to characterize this post-war expansion as a period of “military-Keynesianism.” That is, it was an era of Keynesian policies of planned, extensive government spending married to military orders outside of the market. Insofar as it transferred a significant share of the capitalist economy to a command, extra-market sector, it marked a new stage of state-monopoly capitalism, a stage embracing some of the features of socialism.
But by the mid-1960s this “adjustment” began to lose its vitality. Profit growth, the driving force of capitalist expansion, started a persistent decline (for a graphic depiction of this trend, see the chart on page 103 of Robert Brenner's The Economics of Global Turbulence (New Left Review, May/June 1998).
The falling rate of profit coupled with raging inflation by the middle of the 1970s. The military-Keynesian solutions to capitalist crisis were spent, exhausted, proving inadequate to address a new expression of the instability of capitalism. Perhaps nothing signaled the bankruptcy of the prevailing (Keynesian) orthodoxy more than the desperate WIN campaign-- Whip Inflation Now of the Gerald Ford presidency, an impotent attempt to stem the crisis with mass will-power where intervention failed.
Contrary to the claims of liberals, social democrats and other reform-minded saviors of capitalism, the resultant shift in orthodoxy was notmerely a political coup, a victory of retrograde ideology, but instead it was an unwinding of the failed Keynesian policies of the moment. Thus, the Thatcher/Reagan “revolution” was only the vehicle for a dramatic adjustment of the course of capitalism away from a spent, ineffective paradigm.
With Paul Volker assuming the chairmanship of the Federal Reserve and the beginnings of systematic deregulation, the Carter administration planted the seeds of the retreat from the old prescriptions. Volker, with his growth-choking interest rates, ensured a recession that would sweep away any will to resist belt-tightening. But it took the election of the dogma-driven Ronald Reagan to emulate the UK's Margaret Thatcher and use the occasion to eviscerate wages and benefits in order to pave the way for profit growth.
The cost of restoring life to the moribund capitalist economy was borne by the working class. Foolishly, the stolid, complacent labor leadership had banked on the continuation of the tacit Cold War contract: Labor supports the anti-Communist campaign and the corporations honor labor peace with consistent wage and benefit growth. Instead, profit growth was restored by suppressing the living standards of labor-- cutting “costs.” A vicious anti-labor offensive ensued.
While the loyal opposition insists on portraying the break with Keynesian economics as something new (commonly dubbed “neo-liberalism”), it was, in fact, a surrender to the old. The bankruptcy of bourgeois economics could offer no new, creative answer to capitalist crisis; it could only cast off a failed approach and restore profits by relentlessly squeezing the labor market.
This response could and only did succeed because of the extraordinary weakness of the labor movement. As the profit rate began to rebound, labor lacked the leadership and will to not only secure a share of productivity increases, but to even defend its previous gains.
Thus, capitalism caught a second wind by retreating from the post-war economic consensus and reneging on the implicit labor peace treaty. Profit growth returned and the system sailed on.
But the continuing advance of deregulation and privatization brought with it a return to the unbuffered anarchy of markets. The Savings and Loan crises of the 1980s and 1990s and the stock market crash of October 1987 were all harbingers of things to come and reflections of deeper instability.
With the fall of the Soviet Union and Eastern European socialism, a huge new market was delivered to the global capitalist system, a market that further energized the opportunities for capital accumulation and expanded profits. Millions of educated, newly “free” (free of security, safe working conditions, legal protection, and organization) workers joined reduced-wage and low-wage workers from the rest of the world to form a vast pool of cheap labor. From the point of view of the owners of capital, paradise had truly arrived. Thus, an immense, one-sided class war and the wage-depressing integration of millions of new workers set capitalism on a profit-restoring path to health, putting the now impotent Keynesian orthodoxy in the rear-view mirror. Few would guess that this trip would endure for less than two decades before capitalism would again encounter serious crises.
Significant economic growth in a period of weak labor necessarily produces galloping inequality. With corporate and wealthy-friendly tax policies, many government redistribution mechanisms are starved or dismantled. The flow of wealth accelerates to corporations and the super-rich and away from those who work for a living. The coffers of the investor class swell with money anxious for a meaningful, significant return on investment. As the process of capital accumulation intensifies, fewer and fewer safe, high-yield productive investment opportunities arise to absorb the vast pool of ever-expanding wealth concentrated in the hands of a small minority.
In a mature capitalism, new, riskier avenues-- typically removed from the productive sector-- emerge to offer a home for capital and promise a return. Bankers and other financial “wizards” compete ferociously to construct profit-generating devices that promise more and more. These instruments grow further and further from productive activity. Moreover, their resultant “profits” are ever further removed from real, tangible, material value. Instead, they virtually exist as “hypothetical” capital, or “counter-factual” capital, or “future-directed” capital, or “contingent” capital. Some Marxists rush to label this product of speculation as “fictitious,” but that obscures its ultimate origin in exploitative acts in the commodity-production process. It is this expansion of promissory capital that fuels round after round of speculative investment lubricated with greater and greater debt.
Metaphors abound for the end game of this process: “bubbles,” “house of cards,” etc. But the ultimate cause of crisis is the failure to satisfy the never ending search for return. That is, the cause of crisis resides in the process of accumulation intrinsic to capitalism and the inability to sustain a viable return on an ever enlarging pool of capital and promissory capital. Capitalists measure their success by how their resources are fully and effectively put to use to generate new surpluses. That is the deepest, most telling sense of “rate of profit.” It is the gauge guiding the capitalist-- an effective rate of profit based on accumulated assets. Apart from official and contrived measures of profit rates, the growth of accumulated capital, weighed against the available investment opportunities, drives future investment and determines the course of economic activity.
In 1999, the profitability of the technology sector dropped precipitously as a result of the unrealizable investment of billions of yield-seeking dollars in marginal Dot.com companies and internet services. As an answer to the problem of over-accumulation, investing in the fantasies of 20-year-old whiz kids proved to be as irrational as sane observers thought it to be. The crash followed.
And again in the heady days of 2005, buying bizarre securities packed with the flotsam and jetsam of mortgage shenanigans seemed a way of finding a home for vast sums of “unproductive” capital. After all, capital cannot remain idle; it must find a way to reproduce itself. But what to do with the earnings from reselling the demand-driven securities? More of the same? More risk? More debt? And repeat?
The portion of US corporate profits “earned” by the financial sector grew dramatically from 1990 until the 2008 crash, touching nearly 40% in the mid-2000s and demonstrating the explosion of alternative investment vehicles occupying idle capital. It is crucial to see a link, an evolutionary necessity, between the restoration of profitability, intense capital accumulation, and the tendency for profitability to be challenged by the lack of promising investment opportunities. It is not the whim of bankers or the cleverness of entrepreneurs that drives this process, but the logical imperative of capital to produce and reproduce.
Some Comments and Observations
There are other theories of crisis offered by the left. One theory, embraced by many Communist Parties, maintains that crisis emerges from over-production. Of course, in one sense, over-accumulation is a kind of overproduction, an overproduction of capital that lacks a productive investment destination. But many on the left mean something different. They argue that capitalism produces more commodities in the market place than impoverished, poorly paid workers can purchase. There are two objections to this: one theoretical, one ideological.
First, evidence shows that a slump in consumption or a spike in production does not, in fact, precede economic decline in our era. If overproduction or its cousin, under-consumption, were the causeof the 2008 downturn, data would necessarily show some prior deviation from production/consumption patterns. But there are none. Instead, the reverse was the case: the crisis itself caused a massive gap between production and consumption, exacerbating the crisis. The threat of oversupply lingers in the enormous deflationary pressure churning in the global economy. Despite the fact that consumer spending is such a large component of the US economy, the effects of its secular stagnation or decline has been largely muted by the expansion of consumer credit and the existence, though tenuous, of social welfare programs like unemployment insurance.
Second, if retarded or inadequate consumption were the cause of crises, then redistributive policies or tax policies would offer a simple solution to downturns, both to prevent them and reverse them. Thus, capitalism could go on its merry way with little fear of crisis. Certainly this is the ideological attraction of overproduction explanations of crises: they allow liberals and social democrats to tout their ability to manage capitalism through government policies.
However they cannot manage capitalism because crises are located, not in the arena of circulation (matching production and consumption), but in the profit-generating mechanism of capitalism, its veritable soul.
Because of the centrality of profit, the over-accumulation explanation has an affinity with another theory of crisis: Marx's argument for the tendency of the rate of profit to fall. In fact, it can be viewed as a contemporary version of the argument without nineteenth-century assumptions.
Happily, many commentators today have revisited the theory outlined in Volume III of Capital, finding a relevance ignored throughout most of the twentieth century. Only a handful of admirers of Marx's work kept the theory alive in that era, writers like Henryk Grossman, John Strachey, and Paul Mattick. Unfortunately, today's admirers, like the aforementioned predecessors, share the flaw of uncritically taking Marx's schema to be Holy Grail. For the most part, Marx used very occasional formalism as an expository tool and not as the axioms of a formal system. Those trained in modern economics are prone to leap on these formulae with an undergraduate zeal. They debate the tenability of a model that depicts the global economy as a collection of enterprises devouring constant capital at a greater rate than employment of labor and mechanically depressing the rate of profit. This is to confuse simplified exposition with robust explanation. Much can be learned from Marx's exposition without turning it into a scholastic exercise.
Among our left friends, it has become popular to speak of the crisis and era as one of “financialization.” This is most unhelpful. Indeed, the crisis had much to do with the financial sector; indeed, the financial sector played and is playing a greater role in the global economy, especially in the US and UK; but conjuring a new name does nothing to expose or explain the role of finance. Like “globalization” in an earlier time, the word “financialization” may be gripping, fashionable, and handy, but it otherwise hides the mechanisms at work; it’s a lazy word.
*****
There is a point to this somewhat lengthy, but sketchy journey through the history of post-war capitalism. Hopefully, the journey demonstrates or suggests strongly that past economic events were neither random nor simply politically driven. Instead, they were the product of capitalism's internal logic; they sprang from roadblocks to and adjustments of capitalism's trajectory. As directions proved barren, new directions were taken. While it is not possible to rule out further maneuvers addressing the inherent problem of over-accumulation, the problem will not go away. It will return to haunt any attempt that presumes to conquer it once and for all. And if capitalism carries this gene, then it would be wise to look to a better economic system that promises both greater stability and greater social justice. Of course, finding that alternative begins with revisiting the two-hundred-year-old idea long favored by the working class movement: socialism. Affixed to that project is the task of rebuilding the movement, the political organization needed to achieve socialism.
As things stand in today's world, there are most often only two meager options on the regular menu: one, to save and maintain capitalism with the sacrifices of working people and the other, to save and maintain capitalism with the sacrifices of working people and a token “fair share” sacrifice on the part of corporations and the rich. Neither is very nourishing.
The first option is based on the thin gruel of “trickle down” economics and the nursery-rhyme wisdom of “a rising tide raises all boats.” It is the prescription of both of the major US political parties, Japan's Abe, the European center parties, and UK Labour.
The second option promises to save capitalism as well, but through a bogus fair distribution of hardship across all classes. This is the course offered by most European left parties and even some Communist Parties.
But a system-- capitalism-- that is genetically disposed to extreme wealth distribution and persistent crisis does not make for an appetizing meal. Instead, we need to dispense with programs that promise to better manage capitalism, as Greek Communists (KKE) like to say. That is for others who are at peace with capitalism or underestimate its inevitable failings.
The only answer to the heart failure of capitalism is to change the diet and put socialism on the menu.

Zoltan Zigedy

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US Hegemony and Puerto Rico’s Economic Crisis

Timothy Alexander Guzman, Silent Crow News – A major economic crisis is looming in the Caribbean.  Puerto Rico, a US Commonwealth will be the center of attention in the world of finance in the coming months ahead.  Puerto Rico’s economy has been in a recession since 2006 and its bonds are close to junk status.  Puerto Rico is facing an alarming economic downturn that is clearly unsustainable.  The economy is headed for a major collapse, one not seen since the great depression, this time it could be far worse.  Puerto Rico has $70 billion in debt and an underfunded government pension system that will be eventually face cuts which only adds to more economic uncertainties for the population.  Unemployment levels are at 14.7 percent and a mass migration of the Puerto Rican people to the United States in search of better opportunities has taking hold.  Puerto Rico’s economy is dependent upon the United States government and its corporations, which many are pharmaceutical conglomerates.  It is politically and socially a “Colonial Possession” of the United States since the Spanish-American war of 1898.  However, Puerto Rico is not alone.  The United States has other colonial possessions namely Guam, American Samoa in the Pacific and the U.S. Virgin Islands.  France and Great Britain also has “Colonial Possessions” or “Overseas Territories” in a number of regions throughout the world.  Puerto Rico is no exception to the rule; it is a colony that has been exploited politically and economically for more than a century under US rule.

Puerto Rico’s economy is in a dire situation. As of October 2013, the official number of people who are unemployed is at 14.7 percent, perhaps a lot higher if you count those that have dropped out of the labor force because they are no longer looking for employment opportunities.  The Public debt is currently at $70 Billion and increasing daily. Early this month an article written by Justin Velez-Hagan who is executive director of The National Puerto Rican Chamber of Commerce for Forbes magazine titled ‘Default: Puerto Rico’s Inevitable Option’ describes what lead to Puerto Rico’s debt crises:

With triple tax exemption (federal, state, and local), combined with higher-than-average yields, Puerto Rican bonds became so popular in recent years that it was able to rack up $70 billion of debt now held by institutional investors and mutual funds alike. The debt-to-GDP ratio is now nearly 70% and growing, not including pension obligations, which raises the ratio to over 90%. With a per capita debt load of $19,000 and growing, Puerto Ricans shoulder almost 4 times the burden of U.S. leader Massachusetts which carries a deficit of $5,077 per citizen

Puerto Rico’s debt is 4 times larger than Massachusetts who Velez-Hagan acknowledges as the most indebted state per citizen with $19,000. The Washington Post also sounded alarm bells concerning Puerto Rico’s economic crises. In ‘Puerto Rico, with at least $70 billion in debt, confronts a rising economic misery’ Michael A. Fletcher describes what the commonwealth faces with cuts to pensions and government jobs and a rise in taxes all across the board including small and big businesses causing a migration of Puerto Ricans to major US cities:

The economy here has been in recession for nearly eight years, crimping tax revenue and pushing the jobless rate to nearly 15 percent. Meanwhile, the government is burdened by staggering debt, spawning comparisons to bankrupt Detroit and forcing lawmakers to severely slash pensions, cut government jobs and raise taxes in a furious effort to avert default.

The implications are serious for Americans outside Puerto Rico both because a taxpayer bailout would be expensive and a default would be far more disruptive than Detroit’s record bankruptcy filing in July. Officials in San Juan and Washington are adamant that a federal bailout is not on the table, but the situation is being closely monitored by the White House, which recently named an advisory team to help Puerto Rican officials navigate the crisis.

The island’s problems have ignited an exodus not seen here since the 1950s, when 500,000 people left for jobs on the mainland. Now Puerto Ricans, who are U.S. citizens, are again leaving in droves.  They are choosing the uncertainty of the job market in Orlando or New York City or Philadelphia over what they view as the certainty that their dreams would be crushed by the U.S. territory’s grinding economic problems.

Bloomberg Businessweek also published an article with concerns affecting the “Muni-Bond Market” that can rattle Wall Street’s Mutual Fund companies. ‘Puerto Rico’s Borrowing Binge Could Rock the Muni-Bond Market’ stated the facts:

The island’s plight affects almost anyone with a mutual fund invested in the municipal-bond market. Exempt from local, state, and federal taxes in the U.S., Puerto Rican bonds are held by 77 percent of muni funds, according to research firm Morningstar (MORN). About 180 funds, including ones run by OppenheimerFunds, Franklin Templeton Investments (BEN), and Dreyfus (BK), have 5 percent of their assets or more in Puerto Rican bonds.

General-obligation bonds, or GOs, which account for about 15 percent of the commonwealth’s public debt, carry the lowest investment-grade rating from Moody’s Investors Service (MCO) and S&P. A downgrade could force many mutual funds to sell part of their Puerto Rican holdings, flooding the market. “Puerto Rico could represent a systemic issue for the municipal-bond market,” says Carlos Colón de Armas, an economist and former official of the Government Development Bank, which conducts the island’s capital-markets transactions. “We are now in a situation where the bonds are trading like junk. I think the ratings agencies have been careful not to lower the GOs further, to avoid creating havoc in the muni-bond market.”

The Obama administration is sending a team of economic advisors according to Bloomberg News last month “With a $70 billion debt load and a substantially underfunded government pension system, the island has fueled market speculation it may need a bailout from Washington.” The report also stated what was on the agenda:

Most of the group’s work will focus on improving Puerto Rico’s management of federal funds to ensure officials are getting the amounts they are entitled to and putting them to effective use, according to the officials.  “There is less here than some people think,” said Jeffrey Farrow, who served as the Clinton White House’s liaison on Puerto Rican affairs. “This is pretty straightforward and an extension of what they have been doing in the past, but more intense, formalized and public.”

The first team of officials was scheduled to be from the Environmental Protection Agency and the Health, Education and Housing and Urban Development departments, officials said.  Puerto Rico’s education, health and housing departments are among of the biggest recipients of federal funding and have also been responsible for past Puerto Rico budget shortfalls.

The EPA’s intervention may stem from concerns regarding the ability of the Puerto Rico Electric Power Authority to comply with new federal air quality regulations that take effect in 2015.

The Environmental Protection Agency (EPA) is one of the agencies participating under Washington’s request. Washington has required that the Puerto Rico government and the Puerto Rico Electric Power Authority (PREPA) comply with new federal air quality regulations by 2015. The online news source Caribbean Business reported back on July 11th, 2013 ‘PREPA falling behind on 2015 EPA Deadline’ that Puerto Rico is in a race to meet Washington’s air-quality standards by 2015:

A high-ranking regulatory official is concerned that the Puerto Rico Electric Power Authority (Prepa) isn’t moving fast enough to comply with strict federal air-quality standards taking effect in two years, as industry sources told CARIBBEAN BUSINESS that key decisions on the compliance process won’t be taken until next spring.  Prepa plans to either close or convert most of its oil-firing units to natural gas to comply with the new air-quality standards, but it won’t select a liquefied natural gas (LNG) supplier and decide on a method to deliver the gas to north-coast plants until March 2014, according to industry sources. That means the final contracts would probably not be enacted and finalized until the fourth quarter of 2014, they added.

Meanwhile, Prepa has an agreement with Texas-based Excelerate Energy to construct an offshore LNG terminal to feed the massive Aguirre powerplant in Guayama. A formal application with the Federal Energy Regulatory Commission was filed in April and the project remains in the permitting phase. Excelerate officials have said they expect the facility to be in service in early 2015, but that outlook depends on getting timely federal approval on its environmental impact statement and several permits.

Puerto Rico’s plan to convert most of its oil-firing units to natural gas will have an impact on its economy. Puerto Rico Electric Power Authority (PREPA) does not have the economic capacity to invest in the construction of new plants that would supply natural gas. “While the cash-strapped public utility can’t afford to build its own plants, there is interest from large energy companies to construct new generation units through public-private partnerships (P3s)” the report stated. “That is especially the case because the move to natural gas isn’t just about compliance, but about bringing down power costs.” Caribbean Business said that Edgardo Fábregas, a former member of PREPA’s board confirmed that the public utility is considering a plan to construct a gas-fired plant “The former Prepa board member said the public utility was considering a longer-term plan to construct, through a P3 initiative, a massive natural gas-fired plant, probably on the site of Arecibo’s Cambalache plant, which is rarely used.” The report also said that Fábregas admitted to the costs associated with the project:

To do a project right, building a plant that could “flex up or down” rapidly and would have the capacity to power the entire north coast, would cost $7 billion, and take six years to build. The project would allow for the elimination of the Palo Seco and San Juan plants, Fábregas said. “We have to move to natural gas as soon as we can, but at the end of the day, you have to renew your system. I understand the cost and time implications involved, but if we don’t start, we will never finish,” he added.

According to Robert Bryce, a senior fellow with the Center for Energy Policy and the Environment at the Manhattan Institute for Policy Research, a conservative think tank based in New York City produced a report called ‘The High Cost of Renewable-Electricity Mandates’. He wrote about the effects of Washington’s new air-quality proposal:

Motivated by a desire to reduce carbon emissions, and in the absence of federal action to do so, 29 states (and the District of Columbia and Puerto Rico) have required utility companies to deliver specified minimum amounts of electricity from “renewable” sources, including wind and solar power. California recently adopted the most stringent of these so-called renewable portfolio standards (RPS), requiring 33 percent of its electricity to be renewable by 2020.  Proponents of the RPS plans say that the mandated restrictions will reduce harmful emissions and spur job growth, by stimulating investment in green technologies.

But this patchwork of state rules—which now affects the electricity bills of about two-thirds of the U.S. population as well as countless businesses and industrial users—has sprung up in recent years without the benefit of the states fully calculating their costs.  There is growing evidence that the costs may be too high—that the price tag for purchasing renewable energy, and for building new transmission lines to deliver it, may not only outweigh any environmental benefits but may also be detrimental to the economy, costing jobs rather than adding them.  The mandates amount to a “back-end way to put a price on carbon,” says one former federal regulator. Put another way, the higher cost of electricity is essentially a de facto carbon-reduction tax, one that is putting a strain on a struggling economy and is falling most heavily, in the way that regressive taxes do, on the least well-off among residential users.

To be sure, the mandates aren’t the only reason that electricity costs are rising—increased regulation of coal-fired power plants is also a major factor—and it is difficult to isolate the cost of the renewable mandates without rigorous cost-benefit analysis by the states.

The new mandate is called Renewable Portfolio Standards (RPS) that automatically “require electricity providers to supply a specified minimum amount of power to their customers from sources that qualify as “renewable,” a category that includes wind, solar, biomass, and geothermal.” The report clarified what the results of the new energy plan would bring:

The federal Environmental Protection Agency (EPA) is similarly bullish on the state programs. The RPS rules are designed “to stimulate market and technology development,” the agency says, “so that, ultimately renewable energy will be economically competitive with conventional forms of electric power. States create RPS programs because of the energy, environmental, and economic benefits of renewable energy.”[4]

Although supporters of renewable energy claim that the RPS mandates will bring benefits, their contribution to the economy is problematic because they also impose costs that must be incorporated into the utility bills paid by homeowners, commercial businesses, and industrial users. And those costs are or will be substantial. Electricity generated from renewable sources generally costs more—often much more—than that produced by conventional fuels such as coal and natural gas. In addition, large-scale renewable energy projects often require the construction of many miles of high-voltage transmission lines. The cost of those lines must also be incorporated into the bills paid by consumers.

What Edgardo Fábregas forgets to mention is that Bryce’s analysis on the price of producing electricity through renewable energy sources can be astronomical. It is an amazing prediction given by the EPA under the Obama administration’s directives. It is important to note that the major players in the RPS programs are connected to Wall Street and major banks that includes Goldman Sachs who is one of President Obama’s major campaign contributors. Author and journalist Matt Taibbi wrote an article on the history of Goldman Sachs and the US government’s relationship for Rolling Stone magazine called ‘The Great American Bubble Machine’. Taibbi explains how Goldman Sachs would benefit from Washington’s air-quality mandates:

The new carbon credit market is a virtual repeat of the commodities-market casino that’s been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won’t even have to rig the game. It will be rigged in advance.

Here’s how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy “allocations” or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.

The feature of this plan that has special appeal to speculators is that the “cap” on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison’s sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion.

One other important factor to consider regarding Puerto Rico’s energy demands in the future is the supply of natural gas. Puerto Rico is hoping to secure a steady supply of natural gas from the United States for the next 100 years. “A key part of the plan is to secure a long-term LNG contract with the U.S., which has the most economical prices in the world, the result of a boon in U.S. natural gas exploration, which has unearthed a supply that experts say will last a century” according to the Caribbean Business report.  In the 2012 State of the Union Address, US President Barack Obama said “We have a supply of natural gas that can last America nearly 100 years, and my administration will take every possible action to safely develop this energy.” F. William Endahl, a research associate at Global Research wrote a ground breaking report, ‘The Fracked-up USA Shale Gas Bubble’ wrote that the 100 year supply of natural gas is in fact an inaccurate prediction:

In a sobering report, Arthur Berman, a veteran petroleum geologist specialized in well assessment, using existing well extraction data for major shale gas regions in the US since the boom started, reached sobering conclusions. His findings point to a new Ponzi scheme which well might play out in a colossal gas bust over the next months or at best, the next two or three years. Shale gas is anything but the “energy revolution” that will give US consumers or the world gas for 100 years as President Obama was told.

Berman wrote already in 2011, “Facts indicate that most wells are not commercial at current gas prices and require prices at least in the range of $8.00 to $9.00/mcf to break even on full-cycle prices, and $5.00 to $6.00/mcf on point-forward prices. Our price forecasts ($4.00-4.55/mcf average through 2012) are below $8.00/mcf for the next 18 months. It is, therefore, possible that some producers will be unable to maintain present drilling levels from cash flow, joint ventures, asset sales and stock offerings.” [16]

Berman continued, “Decline rates indicate that a decrease in drilling by any of the major producers in the shale gas plays would reveal the insecurity of supply. This is especially true in the case of the Haynesville Shale play where initial rates are about three times higher than in the Barnett or Fayetteville. Already, rig rates are dropping in the Haynesville as operators shift emphasis to more liquid-prone objectives that have even lower gas rates. This might create doubt about the paradigm of cheap and abundant shale gas supply and have a cascading effect on confidence and capital availability.” [17]

What Berman and others have also concluded is that the gas industry key players and their Wall Street bankers backing the shale boom have grossly inflated the volumes of recoverable shale gas reserves and hence its expected supply duration. He notes, “Reserves and economics depend on estimated ultimate recoveries (EUR) based on hyperbolic, or increasingly flattening, decline profiles that predict decades of commercial production. With only a few years of production history in most of these plays, this model has not been shown to be correct, and may be overly optimistic….Our analysis of shale gas well decline trends indicates that the Estimated Ultimate Recovery per well is approximately one-half the values commonly presented by operators.” [18] In brief, the gas producers have built the illusion that their unconventional and increasingly costly shale gas will last for decades.

However, Caribbean Business says that “Prepa has invited several suppliers to bid on a project to supply the north-coast plants with natural gas. It is spelling out its gas needs at its Palo Seco and San Juan plants, letting the energy companies decide the best way to supply the natural gas” and that “Prepa has made some progress on its natural gas conversion plan, which energy experts say is the only way to bring down the high cost of electricity.” Allowing energy companies decide how to supply gas would add to the price in the long run. Russia Today recently reported that “fracking technology” is causing major environmental problems within the United States. Since 2008, the state of Texas has been experiencing more earthquakes than ever before:

Between 1970 and 2007, the area around the Texas town of Azle (pop. 10,000) experienced just two earthquakes. The peace and quiet began to change, however, at the start of 2008, when 74 minor quakes were reported in the region. Now an increasing number of people, including scientists, are speculating that natural gas production by fracking – a process that forces high pressure water and chemicals into rock in order to extract natural gas reserves – is the culprit. The problem, however, is proving the claims.

Cliff Frolich, earthquake researcher at the University of Texas, said waste water injection wells from fracking could be responsible for the recent spate of earthquake activity. “I’d say it certainly looks very possible that the earthquakes are related to injection wells,” he said in an interview with KHOU television.

Frolich left room for doubt when he said thousands of such wells have operated in Texas for decades with no quakes anywhere near them. Frolich co-authored a 2009 study on earthquake activity near Cleburne, just south of Azle, which concluded: “The possibility exists that earthquakes may be related to fluid injection.” A recent government study lent credence to Frolich’s findings.

There have been Anti-fracking protests around the world. Fracking or “hydraulic fracturing” is a water-intensive process where millions of gallons of water, sand, and chemicals combined are injected underground with intensive pressure to fracture rocks that surround an oil or gas well. This process then releases extra oil and gas from the rock which flows into the well. “Fracking Technology” is proving to be environmentally dangerous for the health and safety of communities located in close proximity to these well sites. It causes many problems for the air we breathe and long-term environmental damage. For example, water can become contaminated from the toxins fracking has caused. It is an environmental hazard.

EPA rules and regulations also have the potential to impose a “carbon tax option” for states according to The Hill, A Washington D.C. based daily newspaper reported last month that Brookings Institution economist Adele Morris said that a carbon excise tax can be imposed on states:

Morris, a carbon tax supporter, argues that a carbon excise tax could be part of the “menu of specific approaches” that the agency gives states that will craft plans to meet the federal guidelines. Morris suggests that the EPA could “allow states to adopt a specific state-level excise tax or fee on the carbon content of fuels combusted by the power plants regulated under this rule.”

In other words, an excise tax associated with renewable energy supplies can be added only leading to higher energy costs for households, businesses and major industries. It would also allow Puerto Rico to contribute to the environmental degradation because of its future demands of natural gas which has no guarantee of supplies for the next 100 years. It is a recipe for disaster for both the economy and the environment.

 Will new EPA rules bankrupt farmers?

It is estimated that Puerto Rico imports at least 85% of the food supply from the United States according to the Latin American Herald Tribune. ‘Puerto Rico Imports 85 Percent of Its Food’ stated that “Puerto Rico imports 85 percent of the food its residents consume due to the lack of competitiveness among companies in this U.S. commonwealth, Agriculture Secretary Javier Rivera told Efe.” Agriculture Secretary Rivera admits that the majority of food is imported from the United States even though Puerto Rico has the capability to produce its own food, but cannot compete with US food suppliers. Rivera continued “Although we have the technical capacity, we’re not able to produce competitively” Why? “The secretary attributed the drop in production to the high operating costs of growing food on the island, which are, in turn, a result of high labor costs, as well as rising energy and fertilizer prices. Rivera acknowledged that therefore many farmers – of which there are fewer than 2,000 on the island, according to recent statistics – have come to depend on government subsidies to stay in business.” With new EPA regulations, remaining farmers will bear higher-energy costs because of the EPA’s new federal air quality regulations that will start in 2015. Agriculture on the island would be affected and farmers would be economically bankrupt when energy prices begin to rise.

From the 1929 Great Depression to the Recession of 2014

Looking back to the 1930’s, Puerto Rico was in economic despair due to the effects of the Great Depression. In 1940, the Popular Democratic Party (PPD) under the leadership of Washington’s puppet governor Luis Munoz Marin came to power with 37.9% of the vote compared to 39.2% of the Republican-Socialist coalition. The PPD also won the 1944 elections with 64.8% of the vote. The PPD was determined to transform Puerto Rico’s economy from an Agricultural farm-based to an export-driven modern industrial economy.

The US and Puerto Rico governments wanted to fast track the urbanization in many areas from a rural society to a modern, industrial urban center that would resemble New York City’s economy. For a short period of time, the project did increase living wages, improved housing conditions, health care and education. It also led to equitable land reforms,. At the same time the plan increased unemployment rates because many Puerto Ricans were unqualified for the types of jobs the new Industrial economy provided. It increased the migration levels to the United States, namely New York, New Jersey and Pennsylvania.

Puerto Rico became more dependent on U.S. markets and created more public and private debts. The most important aspect of US economic and political control of Puerto Rico was the cultural transformation of the population. It became what sociologist call “Americanization”. They were subjected to American culture, media, laws, and even its foods under Washington’s economic and social plan. In ‘Economic History of Puerto Rico: Institutional Change and Capitalist Development’ by James L. Dietz, professor of economics and Latin American studies at California State University wrote:

Industrialization and the accompanying decline of agriculture after the late 1940s did nothing to expand and make permanent the relative autonomy of the early 1940s. Instead, the PPD program had just the opposite result: it laid the foundation for increased dominance by U.S. capital from the 1950s to the present. The PPD’s goal of eventual political independence, after the attainment of social justice and a solution to the island’s economic problems, faded further into the future and eventually disappeared altogether. It may be that Munoz and the PPD never really were committed to independence, as many have suggested, but it is more likely that, as the PPD’s redirection of the economy under Munoz’s leadership tied its destiny ever closer to that of the United States, what they had became what they wanted as what they had wanted slipped further and further from their grasp

In ‘How an Economy Grows and why it Crashes’ author and economist Peter Schiff stated that “The evidence supporting these claims is largely emotional. What is far more certain is that the government’s monopoly control of public projects and services almost always leads to inefficiency, corruption, graft, and decay.” Puerto Rico’s economy was under US control then as it is now. Dietz says that “From 1941 to 1949, the government followed a program of land reform, control over and development of infrastructure and institutions, administrative organization, and limited industrialization through factories owned and operated by the government.” Comparing to what Peter Schiff said the Puerto Rican government’s control of certain economic sectors led to numerous “inefficiencies” and “Decay.” The bleak economic growth of Puerto Rico did not improve through a program called ‘Operacion Manos a la Obra’ or ‘Operation Bootstrap’ in English. It was known as “Industrialization by Invitation” to attract foreign investment. It failed in the long-run. Dietz further wrote:

“Yet Operation Bootstrap made it difficult for Puerto Ricans to improve their standard of living through their own efforts, since it put control over that process in the hands of U.S. firms, whose interests did not necessarily coincide with those of the majority on the island. It is likely that no one consciously intended such results from a development program that seemed so promising, but Puerto Rico’s colonial relation with the United States prevented, or at a minimum made more difficult, a more independent existence for the economy and society”

Puerto Rico’s dependence on the US mainland became evident as the years went by, but right from the beginning of World War II, Puerto Rico’s economy suffered.  “The war shut Puerto Rico off from its primary export market and source of imported goods, and meanwhile, there were no war industries to absorb surplus labor; consequently, unemployment increased” according to Dietz.  Today, Puerto Rico is suffering from a recession that started in 2006. In another report by Caribbean Business ‘PR reverses growth forecast, now predicts another year of recession’ and stated the dire predictions by the government of Puerto Rico, “The Puerto Rico government has dropped expectations for economic growth this fiscal year as the island struggles to pull out of a marathon downturn dating back to 2006. The Planning Board said Friday it is now projecting that the economy will shrink by 0.8 percent in fiscal 2014, dropping its previous forecast for razor-thin growth of 0.2 percent.” Puerto Rico’s economy will continue to decline as the US economy continues with its own economic problems. It will become more difficult as time progresses for Puerto Rico.

The Collapsing US Dollar and the Fall of Rome   

The US Dollar as a the world’s reserve currency is in its last stages because the US owes trillions of dollars in household, corporate and financial debt and future underfunded welfare liabilities.  The demand for U.S. dollars kept prices and interest rates low. It allowed the U.S. government to acquire the economic power it needed to dominate the world economically. It allowed the Federal Reserve Bank to print dollars unconditionally. Although the US dollar is still dominate with more the 50% of foreign currency reserves in the world, a gradual transition for other currencies is coming in the near future. The dollar will eventually lose its value. Interest rates on every loan and credit card will rise.

This is a recipe for disaster, because if a country such as Puerto Rico cannot produce its own food and is dependent on a foreign source that is the most indebted nation in world history with more than $17 trillion dollars in debt which continues to increase each passing day is a serious problem for Puerto Rico’s future. Tyler Durden of zerohedge.com provided a chart in 2012 to show the fiscal danger the United States faces in the near future. Durden explains:

We present the following chart showing total US Federal debt/GDP as well as Deficit/(Surplus)/GDP since inception, or in this case as close as feasible, or 1792, which appears to be the first recorded year of historical fiscal data. We can see why readers have been so eager to see the “real big picture” – the chart is nothing short of stunning.

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The Labour has lost its lead over the Conservatives with both parties now tied on 35%, according to a poll published on Thursday.

The Ipsos MORI survey for the Evening Standard will worry Ed Miliband as it suggests the rise in fortunes for David Cameron is linked to a tentative economic recovery.

It is the first time Labour and the Conservatives have been tied in an Ipsos MORI poll since January 2012. The parties were also shown to be level in a YouGov poll in mid-September before the party conference season got underway.

Gideon Skinner, Head of Political Research at Ipsos MORI said: "The dividing lines between the leaders are a bit clearer after conference season, and they have all shored up their support – especially Ed Miliband, who has given more confidence to his own supporters. At the same time we have seen the Conservatives’ vote share rise in recent months in line with economic optimism. The public’s view is fascinatingly poised."

Despite the overall figures being worrying for Miliband, the poll does contain some good news. The Labour leader's signature policy of freezing energy bills until 2017 was the most popular proposal announced during the party conferences - with 62% saying it is the best for them personally and 50% seeing as the best for the country.

Miliband also received the biggest boost in personal support of all the main party leaders. Six in ten (61%) Labour supporters are now satisfied with the way he is performing as Labour leader, this is the highest Ipsos MORI has recorded since his first month in office.

George Osborne’s announcement of a freeze on petrol duty for 18 months was the second most popular confrence policy with 56% saying it is best for them, and 44% best for the country.

And Nick Clegg’s plan to raise the tax-free earnings threshold for people on the minimum wage came third, with 40% saying it would be good for them, and 44% good for the country.

The poll also showed the public increasingly see dividing lines between Labour and the Tories as the 2015 election approaches.

As many people think Cameron is either “right wing” or “right of centre” (57%) as think Miliband is “left wing” or “left of centre” (54%). These figures represent an increase of 8 points for Cameron and 10 points for Miliband since October 2010.

The survey also showed that a majority (30%) believe Clegg is in the centre ground - a finding that will please the Lib Dems as the party made a concerted effort at its conference to paint itself as the only centrist party.

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How California Turned Its Own Sequester Into Higher Taxes and Economic Growth

How California Turned Its Own Sequester Into Higher Taxes and Economic Growth

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Posted on Mar 4, 2013
Neon Tommy

California Gov. Jerry Brown.

If President Obama follows the example of Gov. Jerry Brown in California, he can use devastating budget cuts to deal conservatives a crushing blow, argues David Sirota.

Although Democrats have a tight grip on the Golden State, Republican lawmakers have historically been able to keep taxes low thanks to a hocus pocus budgeting process and the anti-tax fervor of residents.

Gov. Jerry Brown, who campaigned on the promise to restore adult supervision to the budget, was faced with the choice of making tough cuts or papering over California’s shortfalls. Brown made the cuts, but he also made the case that Republicans were to blame, and he used austerity as a teaching moment (at the expense of the most vulnerable Californians, it must be said) and was able to persuade voters to pass their own tax increases to help fund popular programs like education.

The results are in, writes Sirota:

Last month, California budget officials reported a surplus. Meanwhile, following the tax hikes, Reuters reports that the state’s “job growth tops the national average, unemployment has fallen to below double-digit levels for the first time in nearly four years.” Meanwhile, Bloomberg reports that “California’s credit rating on its general-obligation bonds was raised by Standard & Poor’s for the first time since 2006.”

These results, if they hold, come with the prospect of tectonic political change because they so clearly counter the standard GOP talking points about budgets and taxes. Yes, rather than tax hikes harming the economy, the tax hikes and California economic recovery are happening simultaneously (and Brown’s poll numbers have hit a record high).

The Salon scribe (and syndicated columnist) says President Obama now faces his Jerry Brown moment: “Will Obama and congressional Democrats follow the Brown model? Will they cite the cuts to fundamentally challenge the anti-tax zeitgeist that has dominated American politics since the 1980s? Will they, in short, maximize the opportunity?”

—Posted by Peter Z. Scheer. Follow him on Twitter: @peesch.

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‘UK AAA rating recovery, long battle’

Former British Conservative Chancellor Ken Clarke warns that it will take Britain several years before it manages to raise its credit rating back to the AAA level though he claims London’s austerity measures are fine.

Credit ratings agency Moody’s downgraded the British government’s bond rating from the top AAA to AA1 last week due to the country’s rising debt and slowing growth.

Moody’s decision meant none of the major ratings agencies, which also include Standard & Poor’s and Fitch, is now giving Britain an AAA rating.

Clarke, who is now a member of the coalition government’s cabinet as the minister without portfolio, excused the situation as a consequence of the global economic crisis proving worse than initially expected.

“The Americans have already lost their AAA rating and, like us, they are going to have to persist with sensible policies combining getting rid of debt and deficit, at the same time stimulating growth and having an industrial strategy,” Clarke told the Sky News.

“It’s going to take several more years of this in order to get back not just our credit rating, which we will get back eventually, but to get back to sensible economic growth,” he added.

This comes as the situation on the ground questions Clarke’s comments that the government’s spending cuts is the right way forward.

The coalition government billed its £50-billion austerity program, launched in 2010, as a push to decrease the national debt that stands at £1 trillion, equal to 70 percent of the GDP, by 2015.

But the austerity has failed to pay back. As Moody’s said after demoting British credit rating, they expect the national debt to worsen to 96 percent of the GDP by 2016.

AMR/HE

Obama’s State of the Union: The Economic Dimensions

economics

Obama proclaimed in the State of the Union was that the economy was getting stronger even though the last quarter showed a shrinking GDP not an expanding one, the last month showed a rise in unemployment and a report issued last week showed two-thirds of Americans teeter on the edge of an economic abyss. These facts, along with rising poverty and senior citizens who are barely avoiding poverty, were nowhere mentioned in SOTU.  All this adds up to a potential double-dip recession but that sour did not go with the sweet saccharin, so it was left unsaid.

A Couple of Positive Developments

Most of the speech was filled with policies we have heard before, but there were a couple of surprises:

Minimum Wage Hike: The president called for an increase in the minimum wage, saying both he and Romney supported it.  He urged an increase to $9 an hour from the current $7.50. In 2008, candidate Obama called for an increase to $9.50; and Senator Harkin has introduced a bill that calls for an increase to $9.80.  Ralph Nader points out that a rise to $10.25 is needed to get low-wage workers up to the equivalent of inflation-adjusted 1968 pay. No doubt more would be needed to achieve a living wage. There has been tremendous growth in the economy since the 1960s, but the Obama proposal would mean low-wage workers would not benefit from this much larger and more productive economy.

Raising the minimum wage would be good for the economy.  Research makes it clear that increasing the minimum wage is a job creator because low-wage workers will spend the money on necessities and spur the economy; and will rely less on government programs like food stamps.

Pre-School for All: Education is one of those areas where, if you know what the president’s programs actually do, his speech was saccharin, i.e. sweet but poses a risk of cancer.  Whenever Obama talks about education people should be wary and look at the details.  Bruce Dixon of Black Agenda Report makes the point:

“. . . the gap between popular perceptions of the president’s policies and the actual content of those policies is nowhere wider than in public education. While the president pays lip service to the centrality of public education, teachers and parent input, his Race To The Top is paving the road to privatization, closing more public schools and firing more teachers than any president in US history.”

Privatization and Corporatization

The Race to the Top is greater privatization, corporatization and testing of students, all issues teachers, parents and students are revolting against. Dixon goes on to point out that Obama’s policies are George W. Bush’s policies in overdrive, and Rob Delany makes the same point in Salon:

“President Obama should junk the Race to the Top plan immediately. It is a deeply flawed reworking of George W. Bush’s test-based, pro-charter school No Child Left Behind Act. Obama and Secretary of Education Arne Duncan should change course dramatically and publicly admit Race to the Top doesn’t and can’t work and then craft a new plan that doesn’t treat education like an industry and coerce teachers to ‘teach to the test,’ while marching toward education privatization.”

While the idea of pre-school for all and expanded all-day kindergarten sound sweet, this has to be approached with caution due to the president’s privatizing and test-based education policies.Not mentioned by the president in his speech was the sour, an increase in poverty. This is very relevant to education, as poverty undermines efforts to improve educational achievement among low-income and minority students. We must address poverty to improve education.

Jobs, the Hollow Centerpiece of Obama’s Plans

Obama had to fudge statistics to make his jobs numbers look good. Obama has been president for four years, but in reporting on manufacturing jobs he only mentioned the last three; as Politico points out: “When Obama took office in January 2009, the economy had 604,000 more manufacturing jobs than it does now.”

Obama was right to focus on jobs.  If there is one thing that is critical to getting out of economic collapse and reducing the deficit, it is jobs. For 60 years there has been a consistent pattern: when unemployment drops, the deficit as a percentage of GDP drops. When unemployment rises, the deficit rises. The solution to our economic problems is striving toward a full employment economy.

But, the words “full employment” are never mentioned in Washington, DC.  Labor economist Jack Rasmus points out that what we heard in the State of the Union were the same old minimal job programs from Obama – nothing that will come close to providing the jobs we need.  At a time when we need bold action on jobs, we got a non-jobs program.

One of the false solutions Obama put forward, saccharin that risks cancer, were trade agreements. The Trans-Pacific Partnership has been negotiated in secret for three years by Obama, except for the 600 corporate advisors who tell the US what to put in the agreement. The TPP is not a jobs creator, but a jobs destroyer.  NAFTA cost the United States five million jobs. The TPP is known as NAFTA on steroids. The cancer of the TPP is not only going to be to loss of jobs and lowered wages, but increased corporate power. This global corporate coup will make corporations more powerful than governments. Obama also announced a corporate trade agreement with the European Union.  Hopefully, this gets activists in Europe working to oppose it and gets Americans fighting the anti-democratic “fast track” in Congress. Obama needs fast track to pass the TPP because if the issue is debated it will be widely opposed.

Another false solution to jobs is immigration reform.  While immigration reform is much needed, the versions being considered include the gift of indentured servitudeto big business in the United States, in the form of a new warmed-over Bush idea, a “guest-worker program.” Obama did not talk specifics in SOTU, but this provision should be opposed by all Americans and loudly rejected by Obama.

The Big Missed Opportunities

Two big issues that could radically change the debate in Washington, DC were not discussed by the president.

First, with all this talk of sequestration, President Obama should point out that right now the United States is seeing the most rapid decline in government spending since World War II and looking to the future an “unprecedented” decline in government spending is being predicted – not even counting sequestration or any “Grand Bargain.” In fact January actually saw a federal spending surplus for the first time in five years.

We don’t need to speed up this decline in spending.  In fact doing so, especially when there are signs of another recession, risks another economic collapse. Great Britain, the poster child for austerity, seems to be beginning its third recession in four years.  Our own history shows that cutting government spending in a time of collapse causes recession. We should have learned this lesson from the “Roosevelt Recession “of 1937-38 rather than risking an Obama Recession of 2013-2014.

As Nobel Laureate Paul Krugman recently pointed out this is a uniquely bad time for austerity.  In fact a top banker in Britain revived Milton Friedman’s idea of dropping money from helicopters.  Sadly, President Obama did not make this case, so if a recession hits he will appropriately be blamed for it, rather than Congress. Instead Obama put cuts to Social Security and Medicare, his “Grand Bargain,” on the table again. This is the wrong medicine.  More and more people recognize we need to increase Social Security to end poverty retirement and expand an improved Medicare for all to not only provide health care to all but also to control health care spending.

Second, there was no discussion of the wealth divide which plagues the nation and prevents economic recovery.  Even people in favor of the market are making the case for taxing the super-rich, but President Obama seems unable to do so. And, the news on the wealth divide got worse yesterday with a report that showed the richest 1 percent gobbled up 121% of income gains; how? They essentially put everyone else back into recession with shrinking incomes. Obama could have shocked the nation with that fact!

The wealth divide goes hand-in-hand with the concentrated wealth of the big banks but, the idea of breaking up the big banks, banks which have grown even bigger during Obama’s time in office, is not discussed by President Obama. The case for breaking up the big banks is evenbeing made by conservatives like George Will.  But, President Obama insteadappoints an SEC head who was a lawyer for the big banks and a Treasury Secretary who worked for a big bank and kept money in the Cayman Islands.

So, the concentration of wealth, which has grown under Obama, and the wealth divide will continue under the second term agenda announced in SOTU.

War and ‘Democracy’

Of course, we are pleased to hear that President Obama is finally moving toward a possible end of the Afghan War, the longest in US history.  Of course, not mentioned is the troops that he is removing are ones he added in the failed surge.  And, this exit will not be a complete exit, as he said in SOTU. The US will not leave Afghanistan in 2014 but will stay to train Afghan troops and fight terrorists.  As a result, despite a national security budget of over $1 trillion, there is no talk of cutting the bloated national security budget.  The president has not told us how many troops will be staying in Afghanistan after the so-called “end of the war.”

Finally, it was good to hear President Obama mention the need to fix US democracy. As I recently wrote with Margaret Flowers, we live in a mirage democracy.  US democracy is really a “managed democracy” where voters pick from two candidates approved by Wall Street who will not challenge the power of concentrated wealth.  President Obama in SOTU certainly showed he is doing nothing to start the transformation needed.

There is much needed to correct US democracy, here’s the top of my list: (1) universal voter registration so everyone of age can vote, (2) get money out of politics and provide public funding for public elections, (3) remove ballot access obstacles so Americans get more choices, (4) open the debates so candidates on enough ballots to win can be heard, and (5) improve the voting process so vote counts can be easily verified and voters can vote in a half an hour.

I’m sure by now the saccharin is wearing off. The antidote for the sour taste in your mouth is to get active.  Let’s follow the lead of Indians in Canada and the US and be idle no more.  It is evident from the State of the Union that we cannot count on the elected “leaders” in Washington to get the country back on track – we must do it ourselves.

Kevin Zeese co-hosts ClearingtheFOGRadio.org on We Act Radio 1480 AM Washington, DC and on Economic Democracy Media, co-directs It’s Our Economy and was an organizer of the Occupation of Washington, DC. His twitter is @KBZeese.

The Impossibility Of Economic Calculation In A Fiat World

via Alasdair Macleod, originally posted at GoldMoney.com,

The purpose of keeping accurate accounts is to quantify net worth at any given point in time – as well as the change from a prior date. It goes without saying that the measure used, money, should be constant if comparisons over time are to mean anything. Only then do prices of capital goods, consumer goods and services truly reflect their changing values, giving important signals to businessmen. With unstable fiat money market signals lose much of their meaning.

It is not normal for businessmen to fret over this. They tend to work from management accounts which are usually prepared monthly, and over that time-scale a depreciating currency is unnoticed – except in the case of monetary extremes. However, businessmen should pay attention to the problem, because the accumulation of entrepreneurial wealth is achieved over many years; its productive value can be significantly altered by fluctuations in the purchasing power of unstable money.

Governments in countries like the United Kingdom have destroyed much of their manufacturing industry through currency depreciation, while Germany contrasts with a history of engineering excellence and a firm currency. The German business owner in the post-war years had relative certainty of economic calculation, allowing him to build up his productive wealth; while the British business lobby resorted to encouraging successive governments to keep costs down by devaluing the pound, rather than investing their own resources in more efficient production.

Reducing costs by managing the currency is, to put it less politely, all about robbing the workforce of the purchasing power of its wages. But the workforce is, in economic terms, made up of individual entrepreneurs selling their skills and labour to employers. They are the unconscious victims of devaluation as indeed are small businesses, but at least in the short-term the central planners manipulating fiat money congratulate themselves that jobs have been saved.

The cost comes later, as consumers – who in turn are also entrepreneurs and savers – pay the bill through higher prices and lose on their savings through lower interest rates and monetary value. So where’s the benefit?

None. The history of nations whose governments respect sound money, such as Germany and Japan in the post-war years, has been one of persistent economic progress, despite otherwise economically incompetent governments. This is in contrast with the UK and some European countries, whose continual devaluations were always accompanied by economic underperformance. Since then all governments have increased their currency debasement efforts. Nevertheless, it is striking that businesses do better with a stable currency in the long run than with the supposed benefits of these continual devaluations.

This lesson is not so clear to today’s economists, because Japan blew up over 20 years ago; Germany ditched her currency for the euro; and now we have a worse set of problems. But those of us who understand that currency devaluation only serves to defraud the majority of society must be alarmed that the governments of nearly all the advanced economies are racing each other to rob their citizens in this way.

Instead of bringing about a Lazarene recovery in the economy, this approach is already failing, because the very basis of economic calculation is being destroyed. Who knows the value of anything anymore? We do however know the inevitable outcome of this lunacy, and it is not good.

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Imagining a ‘Just Recovery’ from Superstorm Sandy

Three months have passed since Hurricane Sandy battered New York and trashed the New Jersey coastline, and she hasn’t left. She’s still stalking the landscape strafed with mold and broken homes, and local activists worry that the government’s promises of tens of billions of dollars in federal funding will flood the storm-battered regions with further political turmoil.Occupiers and other activists say city officials aren't doing enough to aid Hurricane Sandy survivors. Michael Fleshman / Flickr / Creative Commons

Beyond the initial trauma of power outages and waterlogged houses, longer-term struggles still loom over communities like the Rockaways and the Staten Island coast. With recovery funding finally trickling down from Capitol Hill after weeks of gridlock, activists hope the resources won’t be exploited by predatory businesses and politicians, but rather channeled toward creating more inclusive, healthy communities.

In some ways, the grassroots recovery advocates have gotten a head start. Many of the early relief efforts have been radically volunteer-driven, and the Occupy Wall Street offshoot Occupy Sandy has often proven more effective and efficient than the bumbling “official” response by FEMA and other authorities. But how will the Occupiers fare in the impending scramble for contracts, grants and loans while businesses, organizations and government agencies all try to impose corporate visions for reconstruction on the storm-ravaged landscape?

Last weekend, the People’s Recovery Summit brought together a group of organizers and community members to discuss their ideas for a just recovery at the Church of St. Luke & St. Matthew in Brooklynthe organizational hub of Occupy Sandy relief projects. Small committees drafted lists of concerns and goals: People wanted to see resources prioritized for poor communities, immigrants, people of color and other vulnerable populations. Wary of the lessons of Hurricane Katrina (which became notorious for corruption and wholesale displacement of poor and black residents), some called for maximum transparency in the planning and financing process. Some wanted assurances that contracts would go to local businesses, or perhaps promote grassroots worker-run cooperatives. Generally they wanted power to be distributed “horizontally”avoiding the top-down hierarchies controlled by large charities and corporations.

But one young Brooklynite and Occupy activist interjected with a mix of eagerness and frustration, “When are we really going to talk about things that are more concrete,” instead of just “vision?” He noted that the authorities have benefited indirectly from the labor donated by volunteers, but would the volunteerism lead to more local hiring as recovery projects get serious? “If you’re to make us work, at least pay us,” he said.

But what kind of jobs are we talking about? With the media’s attention already dissipating, can Sandy still spur a sea change in the dynamics of public investment and labor in an über-capitalist city?

One thing that's clear is that conventional disaster responses have been insufficient and sometimes even counter-productive, especially for residents struggling to clear the scourge of mold from their homes and businesses. Residents have reported inconsistencies in the city’s “Rapid Repairs” program, which is supposed to fast-track the rebuilding.

Cynthia Scarcella, an activist with Make the Road New York and resident of Oakwood Beach, Staten Island, said at a rally at City Hall:

I have not been able to return home to Oakwood Beach, Staten Island, since Hurricane Sandy because my house is infested with mold and completely uninhabitable... Contractors can be expensive. I’ve tried calling Rapid Repairs and have relied on the help of volunteers to help me clean, but the mold keeps coming back.

Deep-rooted inequities surface in the recovery work as well. According to Eli Kent, director of organizing for Laborers International Union of North America Local 78, which represents mold remediation workers, respect for basic labor standards might vary widely from worksite to worksite:

We've seen that in one building, our members are working and their safety is protected, and they're getting at least a living wage and they're getting health care for their families. And in the next building over, there are workers doing the same jobs, the same exact work, and are getting paid $10 an hour with no benefits at all, and often being paid off the books, which means that their employers are not paying payroll taxes, not paying into unemployment insurance or workers comp insurance, which cheats all New Yorkers.

Though Mayor Michael Bloomberg just rolled out a $15 million mold assistance program, community advocates say it’s far too little to help all the homes in need. This week, the mayor announced a general plan for the first $1.8 billion tranche of federal relief funds through Community Development Block Grants, but details on how the loans and grants will be allocated to homes and businesses are not yet clear.

A coalition of community-based groups has mapped out a model for a “just recovery” with the Back Home Back to Work program for mold remediation. Described as “a systematic and cost-effective way that goes block-by-block rather than one house or one business at a time,” the program would provide for assessment and remediation coordinated with “qualified contractors.” Unions would put professionals to work while also hiring and training non-union workers (such as immigrant day laborers) and “prioritizing the hiring and placement of local workers from Sandy-impacted communities and other vulnerable local groups.” Safety training would be systematized to help both residents and workers avoid environmental hazards related to mold contamination. 

Matt Ryan, executive director of Alliance for a Greater New York, says the initiative represents a holistic effort to envision ways “to chart long-term priorities around the rebuild, and also how we influence, hopefully, the state's commitment to dealing with long-term climate change issues, in a way that's equitable and fair for working people."

No one knows exactly what the right balance is. Economic interestsnamely rebuilding quickly and expansivelymay clash with environmental concerns about climate justice, or chafe against communities worried that they’ll be shut out of the promised job or housing opportunities, or that they won’t have a say in the planning. The need to address such tensions through dialogue, Ryan says, is “why having an alliance across community, labor and faith is so critical.”

For now, Occupy Sandy continues its mutual aid projects, delivering basic supplies and providing rebuilding assistance to stricken neighborhoods in Staten Island, the Rockaways and other struggling areas. But if the ethos of mutual aid is, as activist Damien Crisp recently blogged, to demonstrate that “horizontal organization is an alternative to top-down power structures,” the Occupiers now face the challenge of bringing that system to scale and absorbing the influx of recovery funds before they’re hijacked by the establishment. Sandy dealt a cruel blow to New York, but for already-embattled communities, the flood left in its wake a chance to correct the political course, on their own terms.

© 2012 In These Times

Michelle Chen

Michelle Chen is a contributing editor at In These Times. She is a regular contributor to the labor rights blog Working In These Times, Colorlines.com, and Pacifica's WBAI. Her work has also appeared in Common Dreams, Alternet, Ms. Magazine, Newsday, and her old zine, cain.

The Real “Recovery”: Welcome to the Network of Global Corporate Control

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How have your personal finances been since the global economic crisis began in 2008? Are you in debt? Unemployed? Struggling? Are you below the poverty line? Has your standard of living stagnated – or declined? Turns out, it doesn’t matter how the population is doing, because, we are told, we are in an “economic recovery,” or haven’t you heard?

Why is this a “recovery”? It’s simple: because global banks and corporations are making record profits, obviously everything is "back on track."

Despite international turmoil in financial markets, a collapsing Europe, natural disaster in Japan, and increased food and fuel prices spurring social unrest and poverty, global corporations had a wonderful year in 2011.

The Global 500 posted record revenues for 2011 at $29.5 trillion, up 13.2% from 2010. Eight of the top 10 conglomerates were in the energy sector, receiving “an extra boost... as average oil prices reached their highest inflation-adjusted level since the 1860s.” The oil industry alone generated $5 trillion in sales, roughly 17% of the total sales of the Global 500.

Commercial banks emerged as the second largest industry on the Global 500, “thanks largely to lending in new markets,” such as Latin America, certain parts of Europe, the Middle East, and Africa. The auto industry was the third largest industry on the Global 500, taking in a total of $2.4 trillion in sales, up 14.6% from 2010.

In 2011, as bank profits in the United States and Europe were increasing, the very same banks recording billions in quarterly profits were announcing cuts to thousands of jobs. In April of 2012, the Wall Street Journal reported that three of Europe’s largest banks, Barclays, Deutsche Bank and Banco Santander, had reported major profits for the first quarter, “even during a financial crisis.”

As the banks in Europe were worried about their ability to continue reporting profits, they employed a new method to ensure continued plundering: buying back their bonds (government debts) at cheap rates. Thus, not only are they able to increase quarterly profits, but they are able to ensure that the crisis continues and deepens by perpetuating the problems that created it (and profiting along the way).

Major banks like Société Générale, Commerzbank AG, Banco Santander and others have opted for choosing short-term profits at the expense of long-term stability. Reports over the summer of 2012 suggested that global corporate profits were lagging due to the economic crisis in Europe. But not to worry, they’re still doing much better than you ever will.

In the wake of the 2008 financial crisis, corporations began implementing massive layoffs to keep their profits up; interest rates remained low, which kept the costs of borrowing very low and, as the Financial Times reported in early 2012, “U.S. corporate profits are higher, as a share of gross domestic product, than at any time since 1950.”

According to a 2011 study from Northeastern University, since the Second World War, “there’s never been a worse recovery for jobs and worker pay,” and at the same time, “never a better one for corporate profits.” The economic “recovery” was said to have begun in June of 2009, but how is “recovery” defined? After all, people are still struggling, more than ever in recent history; unemployment is high, job losses soar, poverty spreads and insecurity reigns supreme.

So why, then, has it been said that the United States entered a “recovery”? Well, as the study pointed out, since June of 2009, 88% of all U.S. growth went to corporate profits, while wages and salaries represented 1% of growth. Compared to previous economic crises, the situation is much worse than ever before.

At the end of the recession in the early 1990s, 50% of U.S. growth went to worker pay, while corporate profits had actually declined by 1%. Following the dot-com bust in 2001, worker pay and jobs accounted for 15% of U.S. growth, while 53% of growth was accounted for by corporate profits.

In the recoveries of the 1973-75 and 1981-82 recessions, worker pay and jobs accounted for 30% of U.S. growth. In the midst of the current “recovery,” where 88% of growth is in corporate profits and 1% is in worker pay, employees have been roughly 6% more productive, working longer hours. As the study noted: “The only major beneficiaries of the recovery have been corporate profits and the stock market and its shareholders.”

Corporate profits in 2010 were 17% higher than in 2009, and when financial firms are included, the rate goes even higher. An analyst with Citigroup explained that roughly 90% of the growth in corporate profits “has come from cost-cutting,” largely facilitated by layoffs and hoarding cash.

As the Department of Commerce reported, corporate profits accounted for 14% of the national income over 2010, “the highest proportion ever recorded,” while the share of national income from smaller businesses fell to a 17-year low.

As profits soared, not only at multinational corporations, but at the major banks which caused the crisis in the first place, they continued to undertake massive layoffs. The Northeastern University report on corporate profits also noted that one of the main causes of the crisis in the first place was the relationship between increased corporate profits and decreased worker wages and benefits. Thus, without a hint of irony, the same things that created the crisis are exacerbated and made worse after the crisis: and this is what is called a “recovery.”

The Commerce Department revised its reporting of corporate profits from 2008, 2009, and 2010, noting that they were actually $343 billion higher than they had originally estimated. Over the same three-year period, personal income of American families was $265 billion lower than had been previously estimated. In late 2012, worker wages (as a total of U.S. GDP) reached an all-time low, while corporate profits reached an all-time high.

In fact, late 2012 saw corporate profits increase by 18.6% from the previous year, what Forbes reported was “the largest after-tax profit quarter in the nation’s history.” American worker wages, as a percentage of national GDP, had been – until 1975 – almost always at least half of U.S. GDP, and as recently as 2001, accounted for 49% of GDP. In 2012, they hit an “all-time low” at 43.5% of GDP. Further, CEO pay has also been rising 27 times faster than worker pay since 1978.

Of course, it’s not merely corporations raking in record profits, as the banks are not to be left behind. In the United States, second quarter profits for big banks in 2012 were at $34.5 billion, an increase of nearly $6 billion from the same time the previous year. Banks were making profits not seen since 2007, just before the financial crisis struck. Part of the reason for increased bank profits had to do with dramatic cuts in jobs and sales of assets.

In 2007, financial institutions in the United States employed over 2.2 million full-time employees, and in 2012 there were 100,000 fewer employees and 14% fewer banks. With help from the Federal Reserve, which provided immense funds for the financial industry (called “quantitative easing”) while maintaining very low interest rates, banks have been able to take in more profits from mortgages as the Fed continues to purchase bad mortgages from the big banks.

This is, of course, merely doing the same thing that created the financial crisis in the first place, but calling it a “solution.” Not to mention that the bill gets handed to the population.

In December of 2012, bank profits increased by 9.4% from the previous quarter, “the best quarterly performance in six years,” according to the Federal Deposit Insurance Corporation (FDIC). Banks thus had a combined profit of $37.6 billion in the third quarter of 2012, the highest total profit since the $38 billion profit recorded in the third quarter of 2006, during the height of the housing bubble.

Welcome to the “economic recovery,” where the big banks and corporations that created the global economic crisis – with the servile participation of our elected governments – are doing better than ever before, making record profits while poverty hits record levels. This is what we call “democracy.”

Perhaps it is time people begin to redefine the words “recovery” and “democracy," unless we want to see more of the same.

The Real “Recovery”: Welcome to the Network of Global Corporate Control

How have your personal finances been since the global economic crisis began in 2008? Are you in debt? Unemployed? Struggling? Are you below the poverty line? Has your standard of living stagnated – or declined? Turns out, it doesn’t matter how the population is doing, because, we are told, we are in an “economic recovery,” or haven’t you heard?

Why is this a “recovery”? It’s simple: because global banks and corporations are making record profits, obviously everything is "back on track."

Despite international turmoil in financial markets, a collapsing Europe, natural disaster in Japan, and increased food and fuel prices spurring social unrest and poverty, global corporations had a wonderful year in 2011.

The Global 500 posted record revenues for 2011 at $29.5 trillion, up 13.2% from 2010. Eight of the top 10 conglomerates were in the energy sector, receiving “an extra boost... as average oil prices reached their highest inflation-adjusted level since the 1860s.” The oil industry alone generated $5 trillion in sales, roughly 17% of the total sales of the Global 500.

Commercial banks emerged as the second largest industry on the Global 500, “thanks largely to lending in new markets,” such as Latin America, certain parts of Europe, the Middle East, and Africa. The auto industry was the third largest industry on the Global 500, taking in a total of $2.4 trillion in sales, up 14.6% from 2010.

In 2011, as bank profits in the United States and Europe were increasing, the very same banks recording billions in quarterly profits were announcing cuts to thousands of jobs. In April of 2012, the Wall Street Journal reported that three of Europe’s largest banks, Barclays, Deutsche Bank and Banco Santander, had reported major profits for the first quarter, “even during a financial crisis.”

As the banks in Europe were worried about their ability to continue reporting profits, they employed a new method to ensure continued plundering: buying back their bonds (government debts) at cheap rates. Thus, not only are they able to increase quarterly profits, but they are able to ensure that the crisis continues and deepens by perpetuating the problems that created it (and profiting along the way).

Major banks like Société Générale, Commerzbank AG, Banco Santander and others have opted for choosing short-term profits at the expense of long-term stability. Reports over the summer of 2012 suggested that global corporate profits were lagging due to the economic crisis in Europe. But not to worry, they’re still doing much better than you ever will.

In the wake of the 2008 financial crisis, corporations began implementing massive layoffs to keep their profits up; interest rates remained low, which kept the costs of borrowing very low and, as the Financial Times reported in early 2012, “U.S. corporate profits are higher, as a share of gross domestic product, than at any time since 1950.”

According to a 2011 study from Northeastern University, since the Second World War, “there’s never been a worse recovery for jobs and worker pay,” and at the same time, “never a better one for corporate profits.” The economic “recovery” was said to have begun in June of 2009, but how is “recovery” defined? After all, people are still struggling, more than ever in recent history; unemployment is high, job losses soar, poverty spreads and insecurity reigns supreme.

So why, then, has it been said that the United States entered a “recovery”? Well, as the study pointed out, since June of 2009, 88% of all U.S. growth went to corporate profits, while wages and salaries represented 1% of growth. Compared to previous economic crises, the situation is much worse than ever before.

At the end of the recession in the early 1990s, 50% of U.S. growth went to worker pay, while corporate profits had actually declined by 1%. Following the dot-com bust in 2001, worker pay and jobs accounted for 15% of U.S. growth, while 53% of growth was accounted for by corporate profits.

In the recoveries of the 1973-75 and 1981-82 recessions, worker pay and jobs accounted for 30% of U.S. growth. In the midst of the current “recovery,” where 88% of growth is in corporate profits and 1% is in worker pay, employees have been roughly 6% more productive, working longer hours. As the study noted: “The only major beneficiaries of the recovery have been corporate profits and the stock market and its shareholders.”

Corporate profits in 2010 were 17% higher than in 2009, and when financial firms are included, the rate goes even higher. An analyst with Citigroup explained that roughly 90% of the growth in corporate profits “has come from cost-cutting,” largely facilitated by layoffs and hoarding cash.

As the Department of Commerce reported, corporate profits accounted for 14% of the national income over 2010, “the highest proportion ever recorded,” while the share of national income from smaller businesses fell to a 17-year low.

As profits soared, not only at multinational corporations, but at the major banks which caused the crisis in the first place, they continued to undertake massive layoffs. The Northeastern University report on corporate profits also noted that one of the main causes of the crisis in the first place was the relationship between increased corporate profits and decreased worker wages and benefits. Thus, without a hint of irony, the same things that created the crisis are exacerbated and made worse after the crisis: and this is what is called a “recovery.”

The Commerce Department revised its reporting of corporate profits from 2008, 2009, and 2010, noting that they were actually $343 billion higher than they had originally estimated. Over the same three-year period, personal income of American families was $265 billion lower than had been previously estimated. In late 2012, worker wages (as a total of U.S. GDP) reached an all-time low, while corporate profits reached an all-time high.

In fact, late 2012 saw corporate profits increase by 18.6% from the previous year, what Forbes reported was “the largest after-tax profit quarter in the nation’s history.” American worker wages, as a percentage of national GDP, had been – until 1975 – almost always at least half of U.S. GDP, and as recently as 2001, accounted for 49% of GDP. In 2012, they hit an “all-time low” at 43.5% of GDP. Further, CEO pay has also been rising 27 times faster than worker pay since 1978.

Of course, it’s not merely corporations raking in record profits, as the banks are not to be left behind. In the United States, second quarter profits for big banks in 2012 were at $34.5 billion, an increase of nearly $6 billion from the same time the previous year. Banks were making profits not seen since 2007, just before the financial crisis struck. Part of the reason for increased bank profits had to do with dramatic cuts in jobs and sales of assets.

In 2007, financial institutions in the United States employed over 2.2 million full-time employees, and in 2012 there were 100,000 fewer employees and 14% fewer banks. With help from the Federal Reserve, which provided immense funds for the financial industry (called “quantitative easing”) while maintaining very low interest rates, banks have been able to take in more profits from mortgages as the Fed continues to purchase bad mortgages from the big banks.

This is, of course, merely doing the same thing that created the financial crisis in the first place, but calling it a “solution.” Not to mention that the bill gets handed to the population.

In December of 2012, bank profits increased by 9.4% from the previous quarter, “the best quarterly performance in six years,” according to the Federal Deposit Insurance Corporation (FDIC). Banks thus had a combined profit of $37.6 billion in the third quarter of 2012, the highest total profit since the $38 billion profit recorded in the third quarter of 2006, during the height of the housing bubble.

Welcome to the “economic recovery,” where the big banks and corporations that created the global economic crisis – with the servile participation of our elected governments – are doing better than ever before, making record profits while poverty hits record levels. This is what we call “democracy.”

Perhaps it is time people begin to redefine the words “recovery” and “democracy," unless we want to see more of the same.

Krugman: The Threat to the Recovery is Washington

(h/t Karoli for the video)

The threat to the recovery is Washington.

There is more truth in those seven words than in the entire 11.5 hours of Sunday news programming we monitor put together.

We were at the precipice of a global economic catastrophe, thanks directly to Republican policies, at the time that Barack Obama was inaugurated. While it's difficult to gauge success from the absence of devastation, there is no argument that the preemptory measures taken in the early days of the first Obama term did slowly turn the economy around. There's far to go still, especially when it come to jobs, but we're at least moving away from the cliff.

But...

If Republicans still take their marching orders from deep thinkers like Rush that could change. And Carly Fiorina shows the same fundamental understanding of the drivers of the economy that enabled her as a CEO to drive two major American corporations into the ground. For her, we have to keep cutting federal spending because...bureaucrats!

FIORINA: I think it's important to remember when we talk about the economy that a private-sector job and a public-sector job are not the same things. They're not equivalent. I'm not saying public-sector jobs aren't important, but a private sector job pays for itself. A private-sector job creates other jobs. A public-sector job is paid for by taxpayers.

The government does not spend and invest money as efficiently as the private sector. There's all kinds of data to support that. So it isn't simply a matter of saying, well, whatever job is created out there, if it's a bureaucrat in Washington, D.C., or a small-business owner hiring another employer, those are not equivalent thing.

(CROSSTALK)

KRUGMAN: ... when you say public-sector jobs, it is not a bureaucrat in Washington, D.C.

FIORINA: Oh, it is, actually.

KRUGMAN: When we talk about public-sector jobs, we look at the public-sector jobs that have been lost in large numbers in this, it's basically school teachers. Don't think about bureaucrats. It's school teachers. What we've laid off is hundreds of thousands of school teachers.

And we talk about the cuts in public spending that have happened, they are not, you know, some god-awful who-knows-what. It's actually public investment. It's largely fixing potholes and repairing bridges. So, you know, you have this image of these wasteful bureaucrats doing god knows what. What we've actually seen is an incredible drought of basic infrastructure...

FIORINA: And it is a fact...

KRUGMAN: ... and -- and laying off hundreds of thousands of school teachers.

FIORINA: It is a fact that virtually every department in every organization in Washington, D.C., has seen its budget increase for the last 40 years. That money is being paid to hire people. The number of people who are -- of course there are some teachers...

KRUGMAN: Almost -- almost no...

FIORINA: Of course there are some police officers. I'm not saying that.

KRUGMAN: ... the vast bulk of -- the vast bulk of public-sector employees are at the state and local level. They are largely school teachers, plus police officers, plus firefighters.

(CROSSTALK)

KRUGMAN: And your notion that it's all these bureaucrats, that's a myth that is used to...

(CROSSTALK)

FIORINA: It's a fact. It's not a myth. It's a fact.

Words have meanings. Fiorina needs to understand that the word "fact" has a specific definition which is not "partisan talking point" or "my opinion". There is little question that there is bloat in the bureacracies of federal offices. But that isn't where the cutting is happening.

A notable aspect of the July employment report is the decline in public-sector employment. In fact, public-sector employment (i.e. federal, state, and local government jobs) declined in 10 of the past 12 months, in sharp contrast to 29 consecutive months of private-sector job growth. Indeed, falling public employment has been among the largest contributors to unemployment in the United States since the end of the Great Recession.

In this month’s employment analysis, The Hamilton Project examines public-sector employment trends over the last three decades and finds that government employment contracted, both in absolute numbers and as a share of the population, during the Great Recession and throughout the current recovery.

Additionally, we report on the results of a new analysis that finds that the cuts in public school teachers are projected to reduce the future earnings of today’s students by more than five times as much as the current budget savings.[..]

Total government (i.e., the sum of state, local, and federal) employment has decreased by over 580,000 jobs since the end of the recession, the largest decrease in any sector since the recovery began in July 2009. State and local governments, faced with tough choices imposed by the confluence of balanced-budget requirements, falling tax revenues, and greater demand for public services, have been forced to lay off teachers, police officers, and other workers.

[..]In raw numbers, the largest cuts were to teachers, but of these occupations, the largest percentage decline was among emergency responders.

Transcripts below the fold:

STEPHANOPOULOS And, Paul Krugman, I want to come to you with this. We saw the Dow hit 14,000...

KRUGMAN: Right.

STEPHANOPOULOS: ... on Friday, capping just a torrid January, five straight weeks of gains. This comes on top of some encouraging news on jobs...

KRUGMAN: Right.

STEPHANOPOULOS: ... some encouraging news on housing and manufacturing, and I was struck by a line in the Washington Post that said the biggest threat now to the recovery may be Washington, D.C.

KRUGMAN: Well, that's been true all along. I mean, what we've actually been seeing is -- let's put it this way. We've seen falling government spending, particularly spending -- purchases of goods and services, actually government buying stuff, an unprecedented decline in that. And that's the biggest threat to the recovery.

STEPHANOPOULOS: And cause GDP slippage in the fourth quarter.

KRUGMAN: That's right, the GDP slippage in the fourth quarter was partly just statistical illusion, but partly defense spending, which for some reason had a big negative blip. But, you know, I've actually been doing some numbers on this. If spending had grown in this business cycle the way it did in the last one, under Bush, or under Reagan, we would probably have an unemployment rate that was not much above 6 percent right now.

So it's this Washington craziness, the -- and, of course, the threat of the sequester that is the biggest threat. This recovery is actually -- you know, it should be much, much faster. We still have more than 3 million people who've been out of work for more than a year. That's terrible. But we are, in fact, gaining momentum. Housing is recovering. The labor market is slowly recovering. Yeah, Washington may mess it up.

STEPHANOPOULOS: Do you agree?

FIORINA: I think it's important to remember when we talk about the economy that a private-sector job and a public-sector job are not the same things. They're not equivalent. I'm not saying public-sector jobs aren't important, but a private sector job pays for itself. A private-sector job creates other jobs. A public-sector job is paid for by taxpayers.

The government does not spend and invest money as efficiently as the private sector. There's all kinds of data to support that. So it isn't simply a matter of saying, well, whatever job is created out there, if it's a bureaucrat in Washington, D.C., or a small-business owner hiring another employer, those are not equivalent thing.

(CROSSTALK)

KRUGMAN: ... when you say public-sector jobs, it is not a bureaucrat in Washington, D.C.

FIORINA: Oh, it is, actually.

KRUGMAN: When we talk about public-sector jobs, we look at the public-sector jobs that have been lost in large numbers in this, it's basically school teachers. Don't think about bureaucrats. It's school teachers. What we've laid off is hundreds of thousands of school teachers.

And we talk about the cuts in public spending that have happened, they are not, you know, some god-awful who-knows-what. It's actually public investment. It's largely fixing potholes and repairing bridges. So, you know, you have this image of these wasteful bureaucrats doing god knows what. What we've actually seen is an incredible drought of basic infrastructure...

FIORINA: And it is a fact...

KRUGMAN: ... and -- and laying off hundreds of thousands of school teachers.

FIORINA: It is a fact that virtually every department in every organization in Washington, D.C., has seen its budget increase for the last 40 years. That money is being paid to hire people. The number of people who are -- of course there are some teachers...

KRUGMAN: Almost -- almost no...

FIORINA: Of course there are some police officers. I'm not saying that.

KRUGMAN: ... the vast bulk of -- the vast bulk of public-sector employees are at the state and local level. They are largely school teachers, plus police officers, plus firefighters.

(CROSSTALK)

KRUGMAN: And your notion that it's all these bureaucrats, that's a myth that is used to...

(CROSSTALK)

FIORINA: It's a fact. It's not a myth. It's a fact.

(CROSSTALK)

STEPHANOPOULOS: ... clearly going to happen on March 1st now is this sequester.

FIORINA: It's not a myth. It's a fact. We don't have enough private-sector job creation.

STEPHANOPOULOS: We heard from Harry Reid that he's hoping the sequester doesn't kick in, but, Congressman, I've noticed some top Republican leaders seem to be accepting the fact that we're going to have these across-the-board budget cuts on March 1st. Talking to White House officials, you get the sense that they are prepared to go through with it, as well, and that could be a big hit on the economy.

BARLETTA: I do believe that my sense is the sequester is going to go through. It was put in place to -- so we didn't get to this point, but it is, it's a law, and I believe we understand, it's not what we want on our side. I know the defense cuts are very hard for many of us to swallow. But at the end of the day, Washington needs to do something about its spending. We are spiraling out of control. This country can't survive. We can't sustain the spending that's going on.

STEPHANOPOULOS: Matthew, what's your sense of what the public reaction is going to be? Because it does appear that the sequester is going to hit for at least a period of time, these across-the-board budget cuts, maybe even a government shutdown the end of March.

DOWD: Well, I think the fundamental problem, I think, that exists today is long before all this is -- the public looks at Washington as completely out of sync with where they are in their life. They think Washington's totally dysfunctional. They don't trust anything that comes out of Washington.

Wherever they -- whether they're progressive or whether they're conservative, they do not trust Washington. And until that trust is rebuilt, part of it has to do with the fiscal mess, part of it has to do with the lack of leadership, but as they watch Washington, day in and day out, you look at the number of trust in Washington. FDR understood this. If you go back and look at FDR and you look at John F. Kennedy and all the folks -- John F. Kennedy, all the folks that basically said we want government to be even more involved, they understood that the people have to trust government before you get government more involved. And that's a huge part of the problem.

(CROSSTALK)

RAMOS: ... might lead to -- to another recession. I don't know. You know much more about that, but that's a problem.

KRUGMAN: There is an important thing to say here, though, that the sequester is not nearly as scary as the debt ceiling debate was.

FIORINA: Clearly.

KRUGMAN: If we fail to make payments on debt, even for a day, nobody knew what would happen. We thought the whole world financial system might collapse. If we go a month into the sequester, it's not a big deal. It's going to be painful; it's going to be a big debate; it'll slow growth in that quarter. But this is something where actually -- my understanding is the White House thinks that this -- they will win this, that if it happens, that, you know, everybody will look bad, but the Republicans will look worse, and in the end, they will fold.

The Latest Jobs Report and Why the Recovery Has Stalled

The Latest Jobs Report and Why the Recovery Has Stalled

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Posted on Feb 1, 2013
Flickr / edEx

By Robert Reich

This post originally ran on Robert Reich’s Web page, www.robertreich.org

We are in the most anemic recovery in modern history, yet our political leaders in Washington aren’t doing squat about it.

In fact, apart from the Fed – which continues to hold interest rates down in the quixotic hope that banks will begin lending again to average people – the government is heading in exactly the wrong direction: raising taxes on the middle class, and cutting spending.

The Bureau of Labor Statistics reported Friday that American employers added only 157,000 jobs in January. That’s fewer than they added in December (196,000 jobs, as revised by the Bureau of Labor Statistics). The overall unemployment rate remains stuck at 7.9 percent, just about where it’s been since September.

The share of people of working age either who are working or looking for jobs also remains dismal – close to a 30-year low. (Yes, older boomers are retiring, but the major cause for this near-record low is simply the lack of jobs.)

And the long-term unemployed, about 40 percent of all jobless workers, remain trapped. Most have few if any job prospects, and their unemployment benefits have run out, or will run out shortly.

Close to 20 million Americans remain unemployed or underemployed.

It would be one thing if we didn’t know what to do about all this. But we do know. It’s not rocket science.

The only reason for employers to hire more workers is if they have more customers. But American employers have not had enough customers to justify much new hiring.

There are essentially two sources of customers: individual consumers and the government. (Forget exports for now; Europe is contracting, Japan is a basket case, China is slowing, and the rest of the world is in economic limbo.)

American consumers – whose purchases constitute about 70 percent of all economic activity – still can’t buy much, and their purchasing power is declining. The median wage continues to drop, adjusted for inflation. Most can’t borrow because they don’t have a credit record sufficient to allow them to borrow much.

And now their Social Security taxes have increased, leaving the typical worker with about $1,000 less this year than last.

The Conference Board reported last Tuesday consumer confidence in January fell its lowest level in more than a year. The last time consumers were this glum was October 2011, when there was widespread talk of a double-dip recession.

The only people doing well are at the top – but they save a large part of what they earn instead of spending it.

Overall personal income soared by 8 percent in the final three months of 2012 compared to an increase of just over 2 percent in the third quarter, but this income didn’t go into the pockets of the middle class. It went into the pockets of people at the top.

Wages and salaries grew a measly six-tenths of one percent.

Most of the rise in personal income in the last quarter was from companies rushing to pay dividends before taxes were hiked in 2013, and from an upturn in personal interest income. Both these sources of income went mostly to the well-to-do.

This explains why consumer spending is dropping. The Commerce Department said Thursday consumers’ spending rose 0.2 percent last month. That’s slower than the 0.4 percent increase in November.

So if we can’t rely on consumers to stoke the economy, what about government? No chance. Government spending is dropping, too.

The major reason the economy contracted between the start of October and end of December 2012 was a major reduction in government spending in the fourth quarter.

Government spending has declined in nine of the last ten quarters, but it took a precipitous drop in the last quarter. This was mainly because military spending fell 22.2 percent. That’s the largest fall-off since 1972 (mainly due to reduced spending on the war in Afghanistan, and worries by military contractors about further pending cuts). State and local spending also continued to fall.

Personally, I’m glad we’re spending less on the military. It’s the most bloated part of the government. Major cuts are long overdue. But the military is America’s only major jobs program. Cutting the military without increasing spending on roads, bridges, schools, and everything else we need to do simply means fewer jobs.

What’s ahead? More of the same. So what possible reason do we have to suspect the recovery will pick up speed? None.

Don’t count on consumer spending. Wages and benefits continue to drop for most people, adjusted for inflation. States are hiking sales taxes, which will hit the middle class and the poor hardest. Deficit hawks in Washington are contemplating additional tax hikes on the middle class.

Housing prices are stabilizing, thankfully. But one out of five homeowners is still underwater, and the ranks of people renting rather than owning are rising. Health-care costs are also rising for most people in the form of higher co-payments, deductibles, and premiums.

Don’t count on government, either. Government spending continues to head downward. The White House has already agreed to major spending cuts, some to go into effect this year. Coming showdowns over the next fiscal cliff, appropriations to fund government operations, and the debt ceiling will likely result in more cuts.

More jobs and faster growth should be the most important objectives now. With them, everything else will be easier to achieve – protection against climate change, immigration reform, long-term budget reform. Without them, everything will be harder.

Yet we’re moving in the opposite direction — following Europe’s sorry example of failed austerity economics.

Robert B. Reich, chancellor’s professor of public policy at UC Berkeley, was secretary of labor in the Clinton administration. Time magazine named him one of the 10 most effective Cabinet secretaries of the last century. He has written 13 books, including the best-sellers “Aftershock” and “The Work of Nations.” His latest, “Beyond Outrage,” is now out in paperback. He is also a founding editor of The American Prospect magazine and chairman of Common Cause.


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The US Economy in Crisis: Recovery is an Illusion

economy

Headlines flashed warning signs. Commentaries downplayed them. A Wall Street Journal editorial headlined “As Contractions Go….”

US Q IV GDP shrank, “but not to worry. The report is better than it sounds, the stock market is rocking, and (the Fed will) keep both feet pressed firmly on the monetary accelerator.”

The Financial Times headlined “US outlook still clear despite shower,” saying:

Predicting recession “based on (-0.1% GDP decline) “is a bit like expecting rain because somebody threw a bucket of water out the window.”

The wildcard is “if Congress decides to dump water out the window every month, via across-the-board ‘sequester’ cuts” expected soon.

According to Bloomberg, “R-Word For US Economy in 2013 is Rebound Not Recession.”

According to JP Morgan Chase, Bank of America, and Morgan Stanley economists, America’s economy “will bounce back in (Q I) after plunging defense spending and dwindling inventory growth” hurt Q IV.

Not according to economist John Williams. Recovery is illusory, he says. It’s fake. Phony government numbers conceal weakness. Growth hasn’t occurred since 2006/2007.

Earlier Williams said:

“Indeed, the ‘recovery’ is an illusion that has been created as a direct result of methodological changes in government inflation reporting of recent decades.”

They “resulted in an artificial lowering of official rates of inflation.  The faux growth problem is in the use of understated inflation estimates in deflating a number of economic series.”

“Major economic series that have no underlying pricing base – such as housing starts, payroll employment and consumer confidence – correspondingly do not require inflation adjustment to put them on a consistent theoretical basis with the concept of real (inflation-adjusted) GDP.”

“Those series confirm a history of business activity in recent years that shows a plunge in the economy from 2006/2007 into late-2008/mid-2009, followed by a period of protracted, low-level stagnation, or bottom-bouncing, instead of ‘recovery.’ ”

Williams expects double-dip recession in 2013. It likely began in 2012 Q II or III, he believes.

Last August, market analyst Marc Faber rated odds for global recession at 100%. Little or nothing ahead looks promising. Corporate profits will disappoint.

The Fed can do so much and no more. Money printing has limits. It’s not magic. On January 31, Faber repeated earlier warnings.

“When you print money,” he said, it “doesn’t flow evenly into an economy. It flows to some people or to sectors first, and in this case, it flowed into equities, and until about five months ago into bonds.”

“I believe that markets will punish central banks at some state through an accident.”

Stocks could hit bubble levels and pop. Rising interest rates could collapse bonds.

“For the first time in four years, since the lows in March 2009, I love this market because the higher it goes, the more likely we will have a nice crash, a big time crash.”

He thinks weak global growth and disappointing corporate profits will trigger trouble.

Fed governors are cautious. On January 3, FOMC minutes said:

“With regard to the possible costs and risks of purchases, a number of participants expressed the concern that additional purchases could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation, for example, by potentially causing inflation expectations to rise or by impairing the future implementation of monetary policy.”

“Participants also discussed the implications of continued asset purchases for the size of the Federal Reserve’s balance sheet. Depending on the path for the balance sheet and interest rates, the Federal Reserve’s net income and its remittances to the Treasury could be significantly affected during the period of policy normalization.”

“Participants noted that the Committee would need to continue to assess whether large purchases were having adverse effects on market functioning and financial stability.” ”

“They expressed a range of views on the appropriate pace of purchases, both now and as the outlook evolved. It was agreed that both the efficacy and the costs would need to be carefully monitored and taken into account in determining the size, pace, and composition of asset purchases.”

Governors are conflicted. They have reason to worry. They’re questioning excessive longterm money printing benefits. Artificial schemes don’t work. They cause more harm than good.

Eventually they end. What can’t go on forever won’t. They’ll have to decide when. Economic and market consequences will follow.

Newly released Q IV GDP data showed growth contracted 0.1%. Sequestered deficit cutting suggests further declines. Consumer confidence is low for good reason. Europe, China, Japan, and other major world economies show weakness.

Is America on track for double dip trouble? In Q IV, government and business inventory spending declined. Auto sales alone drove consumer spending gains. Deep discounts, near zero interest rates, and Hurricane Sandy affected purchases stimulated sales.

Exports were down. Weak global manufacturing and trade affected them. Healthcare spending slowed noticeably. US economic growth ground to a halt. Doing so suggests weakness going forward.

Artificial stimulus works only so long. Q III included record defense spending. It accounted for over a third of GDP growth. It followed two years of reduced government spending.

Q III data were released days before November elections. Good news benefited Obama.

True Q III GDP growth was misreported. It wasn’t 3%. When accurately adjusted, it was 1 – 1.5%. It’s been that way for two years. Day of reckoning signs appeared in Q IV.

Multiple quantitative easing rounds barely held economic growth above water. Money printing madness substituted for stimulative growth. Central bank intervention repeated what hasn’t before worked.

European economies are troubled. America shows weakness. Force-fed austerity doesn’t work. Decline replaces prosperity. Living standards deteriorate. Households have less to spend.

Production and consumption suffer. So does the real economy. Financial war helps speculators alone benefit. Eventually expect systemic crisis. It could take months or years to arrive.

Market manipulation delays day of reckoning time. It can’t prevent it. Q IV GDP suggests 2013 weakness. Headwinds may be stiffer than expected.

Payroll tax increases cuts $100 billion from GDP. It does so when stimulus is needed. Consumer sentiment and spending are weak.

Expect sequestered/largely discretionary $1.2 trillion cuts by end of March. Stiff 10 – 20% health insurance premium hikes impact healthcare spending.

Business spending spiked in Q IV. It did so ahead of expected tax law changes. Expect it to slow in Q I. Manufacturing is weak. Housing remains troubled. So is America’s economy. Odds favor double-dip trouble.

Five years after economic collapse, virtually zero growth was achieved. Wall Street was bailed out. Main Street was sold out. Ellen Brown does some of the best financial writing.

Last September, she said America’s economy needs “a good dose of ‘aggregate demand.’ ” It needs money put in people’s pockets.

QE for Wall Street won’t jumpstart the economy. It won’t “reduce unemployment.” It’s stuck at 23%. It’s the highest since Great Depression levels.

QE puts no “money in the pockets of consumers.” It doesn’t “reflate the money supply.”

“(S)ignificantly lower interest rates for homeowners” aren’t achieved. Other consumer purchases don’t benefit.

QE helps bankers, other speculators and investors. Ordinary people are harmed. Economic growth is taxed. It’s monetary poison. It’s harming the dollar.

Finance is a new form of warfare. Money printing madness is based on the wrong-headed notion that Fed-supplied liquidity encourages bank lending to stimulate growth.

Despite multi-trillions of dollars in free zero interest rate money, bank lending to small/medium sized businesses and households is too little to help.

No loans mean no investment, no hiring, and no money in people’s pockets. At the same time, US corporate giants hoard enormous amounts of cash. Estimates range up to $5 trillion.

Fed reports downplay what’s held. Their data include only domestic cash reserves, Treasuries, other bonds, and bank accounts.

Foreign holdings aren’t included. Global trillions aren’t invested. They’re used for salaries, huge bonuses, dividends, stock buybacks, and speculation.

At the same time, inflation-adjusted consumer disposable income declined for decades. Post-9/11, it’s been especially hard hit.

Spending growth is largely credit driven. Insufficient income retards it. Households are debt-entrapped. Eventually they’ll be unable to assume more.

Progressive Radio News Hour regular Jack Rasmus discusses America’s “epic recession.” For five years, its economy “bumped along the bottom.” Conditions ahead look worse, not better.

Fed gamesmanship puts international finance at risk. Economies haven’t been healed. They’ve been wrecked. QE is a zero sum game. It’s financial terrorism.

It sacrifices growth for Wall Street. It hangs ordinary people out to dry. It promises protracted hard times. It leaves growing millions on their own sink or swim.

Let-eat-cake economics doesn’t work. It never did. It doesn’t now. It sparks decline and revolutions, not growth and prosperity.

Stephen Lendman lives in Chicago and can be reached at [email protected] 

His new book is titled “Banker Occupation: Waging Financial War on Humanity.”

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour

http://www.dailycensored.com/us-economy-troubled-or-alls-well/

Greek finance minister trumpets recovery in 2014

Greek Finance Minister Yannis Stournaras (AFP Photo / Angelos Tzortzinis)

Greek Finance Minister Yannis Stournaras (AFP Photo / Angelos Tzortzinis)

"The probability of Greece leaving the euro - Grexit - is now very small", says Yannis Stournaras, the Greek Finance Minister. His words come when anti-austerity protests are intensifying, with farmers due to strike following public transport.

"Towards the last quarter of 2013, we are going to have recovery," Stournaras told BBC News.

"We have managed to turn the economy around. From the markets, there's much more optimism. Deposits are coming back to banks, the government is paying its arrears to the private sector and there is a change in how Europe sees us. So, all the leading indicators are positive. We are two-thirds of the way towards our target. So people can have hope," Stournaras added.

The optimism comes at a time when general expectations for the Greek economy remain muted: analysts see its GDP contracting by about 4 – 4.3% in 2013, with a 2014 figure going down 2-3%.

As real economic indicators remain dulled in Greece, analysts are skeptical about the bold announcement. “Optimism is a good and pleasant thing, though these announcements look quite funny in the wake of the current state of the Greek economy and its perspectives that are not that positive,” Anna Bodrova of Investcafe wrote in an e-mail.

“Counting on the end of a recession in 2013 is still premature for the Athens, but doesn’t everybody have a right for hope?” Bodrova concluded.

Unemployment in Greece now remains the highest in Europe – at 26.8%, with the debt level at a sky- high 180% of GDP. Under the game plan Greece is seeking to cut it to 124% of GDP by 2020, which is expected to be reached mostly through a massive austerity package passed last year.

As for concrete measures that should help Greece realize its “economic miracle”, the Greek Finance Minister remained very diplomatic. "I would welcome a reduction of the level of debt – but there are many ways to achieve that", he said "but it should happen in a way that minimises the loss to other parties," Stournaras said.

Past November Greece agreed to implement a set of severe measures, including tax hikes and a 25% cut in the minimum wages in the public sector, which is expected to save Greece up to $3 billion in 2013.

After international creditors saw actual steps by Greece, they agreed to release another €34bn in bailout money to the crisis–stricken economy at the end of 2012. The European Central Bank (ECB) also kicked off a buy-out of sovereign bonds of eurozone countries to cut their yields and prevent sovereign defaults. This is smoothened analysts fears of Greece leaving the euro, with Olli Rehn, EU Commissioner saying in early January this year that “the danger of the eurozone’s split is over.”

The measures have just disguised problems of the eurozone, with Greece, Spain and Portugal still likely to leave the currency bloc according to Russia’s ex- Finance Minister Aleksey Kudrin speaking at the World Economic Forum in Davos. “Nothing has been settled, everything has been postponed. The thing is that this time will give the opportunity to these countries to get their act together, consolidate and finally settle the problems. So far it hasn’t been the case,” Kudrin concluded.

The people in Greece continue to demonstrate their anger at the sharp austerity package the country adopted last year. Most of the striking transport workers have ended their industrial action; farmers are expected to strike over changes in their tax status, the Guardian reports.

Farmers are being “eradicated” by increased taxes and higher production costs, according to Kostas Lioliopoulos of the farmers union talking to the Guardian.

“The economic crisis is killing us,” he said, adding that farmers from the region of Evros in the north to Crete in the south would wreak havoc if the governing coalition did not back down.

“The country will be paralysed if there is no progress,” said Lioliopoulos.

Electricity workers may also announce a strike, reports say.The country's main power company, the Public Power Corporation, will strike on Thursday in support of public transport employees who were forced back to work at the end of last week, The Guardian says.

Public transport in Greece has been on strike for more than 10 days, with drivers ignoring a court ruling against the strikes. The court had ruled the strike, which stopped buses and trolleybuses in Athens, was illegal. The workers were protesting a cut in salaries, as well as show solidarity with the metro workers who terminated their nine-day protest last week after the government announced civil mobilization.

Meanwhile Yannis Stournaras says it’s necessary to bit the bullet and live through 2013."If we implement this year's reform programme, there will be no more austerity packages", the Finance Minister told, "No more cuts in wages, benefits and pensions," the minister concluded.

On Jobs and Economic Justice, Will We Lead or Be Lulled By the Speech?

The President gave a terrific speech. But if great speeches could heal our economic wounds, if they could repair the ever-increasing gap between the rich and the rest of us, if they could re-open the closing doors of opportunity for the young, the African-American, the Hispanic, and the graying members of our workforce, we’d be living in a different country today.(Carolyn Kaster/AP)

We must never forget that in a democracy it’s the people, not their elected officials, who lead. This speech leaves progressive Americans, and that great American majority that agrees with them on economic issues, with a choice:

Will we be pacified with rhetoric, or will we demand – and take – action? Will we lead?

Words

The speech included stirring, if vague, statements about economic fairness. “Our country cannot succeed when a shrinking few do very well and a growing many barely make it,” said the President. “We believe that America’s prosperity must rest upon the broad shoulders of a rising middle class.”

That’s certainly true, for all the reasons laid out by economist Joseph Stiglitz his New York Times op-ed of last week. But the President offered no specifics about the growing wealth inequality that has allowed the wealthiest to take more and more of the national income while the rest of the nation. That inequality is truly stunning, and (as polls have shown) is far worse than the American people realize.

This was an opportunity to teach the American people. It was an opportunity to make the case for government job creation, to talk about the need for good jobs at good wages.

It was not taken.

The President also said: “We know that America thrives when every person can find independence and pride in their work; when the wages of honest labor liberate families from the brink of hardship.”

But the ranks of the “working poor” continue to increase and wages for most Americans continue to fall. This was an opportunity to tell the American people these things.  It was not taken.

The Sounds of Silence

The speech’s real strengths extended to what it left out. There was no mention, direct or indirect, of the hard-right agenda known as “Simpson Bowles” – or, for that matter, of deficit reduction in general. There was no suggestion that Social Security contributes to the government deficit (it doesn’t). There were no amplifications of right-wing rhetoric about downsizing government.

But not all of the omissions were wise. There was also nothing specific about creating jobs for a nation desperately in need of them. There were no cold facts and figures about the millions of Americans who don’t have a job, of the millions working below their skill level or stuck with part-time employment when they need to work full-time.

Every American family that can’t make ends meet is a tragedy. A very specific tragedy.

Connect the Dots

You could find the outline of a just economic program in the President’s speech by playing connect-the-dots:

“A modern economy requires railroads and highways to speed travel and commerce …” That sounds like a program to rebuild our infrastructure. That would require several hundred billion dollars in government investment, but it would be repaid several times over with economic growth and would create a wave of well-paying jobs in construction and beyond.

But he didn’t say that.

“A modern economy requires … schools and colleges to train our workers.” That sounds like a program to create a new cadre of primary and secondary school teachers a new commitment to higher education, perhaps even a program to make college affordable again.

But he didn’t say that.

“A free market only thrives when there are rules to ensure competition and fair play.” That almost sounds he’s saying we need to do more to rein in the job-killing lawlessness and cheating on Wall Street and among our largest corporations.

But he didn’t say that.

The Empire Strikes Back

We shouldn’t have to connect the dots. A Presidential speech shouldn’t be a Rorschach test onto which each listener projects his own desires. This one’s vagueness gives the forces of corporate self-interest an opportunity to connect the dots their way for the President and his team, to whom they have great access, using the self-serving mythologies of the past as a stencil:  

We can “create jobs” through deregulation, Mr. President. We can create those well-paying jobs if you’ll just lower our taxes.

We can be sure that the lobbyists, CEOs, titans, tycoons and campaign contributors are already hard at work doing just that. Time and time again their influence has prevailed upon this President, just as it did upon his Democratic predecessor Bill Clinton, with disastrous economic consequences for the rest of us.

Stars In Our Eyes

It’s time for citizens to fight those forces without discouragement or distraction. Far too often, stirring rhetoric has evaporated in the relentless heat of big-money influence. Only action will prevent that from happening again.

This President’s first term was marred by a shocking refusal to hold Wall Street criminals legally accountable for fraud, or even for laundering drug money for killer cartels. Those same Wall Street criminals destroyed millions of jobs and trillions in middle-class wealth, yet presume to lecture the President and the nation on the need for Social Security and Medicare cuts to fix the economy.

Perhaps the greatest tragedy of the first Obama Administration, and its core error, was the President’s decision to lean on former President Bill Clinton and his team. Clinton’s a very popular figure personally, but his economic team were the GOP’s co-conspirators and co-architects in the design of our current economic misery.

This week the President proved again that he is a star, every bit Clinton’s media equal. But neither he nor Clinton have reliably acted in the nation’s best interests without pressure from a truly independent, galvanized progressive movement. That means it’s our turn. We must take action in the face of economic injustice: writing to our leaders, supporting activist groups, and taking to the streets when necessary. But we won’t do that if we’re blinded by the stars in our eyes.

The President has issued a declaration of values. It’s to insist that those values be honored with action – his, and ours. Good speeches are the beginning, not the end, of the struggle.

© 2012 Campaign for America's Future

Richard Eskow

Richard (RJ) Eskow is a well-known blogger and writer, a former Wall Street executive, an experienced consultant, and a former musician. He has experience in health insurance and economics, occupational health, benefits, risk management, finance, and information technology. Richard has consulting experience in the US and over 20 countries.

On Jobs and Economic Justice, Will We Lead or Be Lulled By the Speech?

The President gave a terrific speech. But if great speeches could heal our economic wounds, if they could repair the ever-increasing gap between the rich and the rest of us, if they could re-open the closing doors of opportunity for the young, the African-American, the Hispanic, and the graying members of our workforce, we’d be living in a different country today.(Carolyn Kaster/AP)

We must never forget that in a democracy it’s the people, not their elected officials, who lead. This speech leaves progressive Americans, and that great American majority that agrees with them on economic issues, with a choice:

Will we be pacified with rhetoric, or will we demand – and take – action? Will we lead?

Words

The speech included stirring, if vague, statements about economic fairness. “Our country cannot succeed when a shrinking few do very well and a growing many barely make it,” said the President. “We believe that America’s prosperity must rest upon the broad shoulders of a rising middle class.”

That’s certainly true, for all the reasons laid out by economist Joseph Stiglitz his New York Times op-ed of last week. But the President offered no specifics about the growing wealth inequality that has allowed the wealthiest to take more and more of the national income while the rest of the nation. That inequality is truly stunning, and (as polls have shown) is far worse than the American people realize.

This was an opportunity to teach the American people. It was an opportunity to make the case for government job creation, to talk about the need for good jobs at good wages.

It was not taken.

The President also said: “We know that America thrives when every person can find independence and pride in their work; when the wages of honest labor liberate families from the brink of hardship.”

But the ranks of the “working poor” continue to increase and wages for most Americans continue to fall. This was an opportunity to tell the American people these things.  It was not taken.

The Sounds of Silence

The speech’s real strengths extended to what it left out. There was no mention, direct or indirect, of the hard-right agenda known as “Simpson Bowles” – or, for that matter, of deficit reduction in general. There was no suggestion that Social Security contributes to the government deficit (it doesn’t). There were no amplifications of right-wing rhetoric about downsizing government.

But not all of the omissions were wise. There was also nothing specific about creating jobs for a nation desperately in need of them. There were no cold facts and figures about the millions of Americans who don’t have a job, of the millions working below their skill level or stuck with part-time employment when they need to work full-time.

Every American family that can’t make ends meet is a tragedy. A very specific tragedy.

Connect the Dots

You could find the outline of a just economic program in the President’s speech by playing connect-the-dots:

“A modern economy requires railroads and highways to speed travel and commerce …” That sounds like a program to rebuild our infrastructure. That would require several hundred billion dollars in government investment, but it would be repaid several times over with economic growth and would create a wave of well-paying jobs in construction and beyond.

But he didn’t say that.

“A modern economy requires … schools and colleges to train our workers.” That sounds like a program to create a new cadre of primary and secondary school teachers a new commitment to higher education, perhaps even a program to make college affordable again.

But he didn’t say that.

“A free market only thrives when there are rules to ensure competition and fair play.” That almost sounds he’s saying we need to do more to rein in the job-killing lawlessness and cheating on Wall Street and among our largest corporations.

But he didn’t say that.

The Empire Strikes Back

We shouldn’t have to connect the dots. A Presidential speech shouldn’t be a Rorschach test onto which each listener projects his own desires. This one’s vagueness gives the forces of corporate self-interest an opportunity to connect the dots their way for the President and his team, to whom they have great access, using the self-serving mythologies of the past as a stencil:  

We can “create jobs” through deregulation, Mr. President. We can create those well-paying jobs if you’ll just lower our taxes.

We can be sure that the lobbyists, CEOs, titans, tycoons and campaign contributors are already hard at work doing just that. Time and time again their influence has prevailed upon this President, just as it did upon his Democratic predecessor Bill Clinton, with disastrous economic consequences for the rest of us.

Stars In Our Eyes

It’s time for citizens to fight those forces without discouragement or distraction. Far too often, stirring rhetoric has evaporated in the relentless heat of big-money influence. Only action will prevent that from happening again.

This President’s first term was marred by a shocking refusal to hold Wall Street criminals legally accountable for fraud, or even for laundering drug money for killer cartels. Those same Wall Street criminals destroyed millions of jobs and trillions in middle-class wealth, yet presume to lecture the President and the nation on the need for Social Security and Medicare cuts to fix the economy.

Perhaps the greatest tragedy of the first Obama Administration, and its core error, was the President’s decision to lean on former President Bill Clinton and his team. Clinton’s a very popular figure personally, but his economic team were the GOP’s co-conspirators and co-architects in the design of our current economic misery.

This week the President proved again that he is a star, every bit Clinton’s media equal. But neither he nor Clinton have reliably acted in the nation’s best interests without pressure from a truly independent, galvanized progressive movement. That means it’s our turn. We must take action in the face of economic injustice: writing to our leaders, supporting activist groups, and taking to the streets when necessary. But we won’t do that if we’re blinded by the stars in our eyes.

The President has issued a declaration of values. It’s to insist that those values be honored with action – his, and ours. Good speeches are the beginning, not the end, of the struggle.

© 2012 Campaign for America's Future

Richard Eskow

Richard (RJ) Eskow is a well-known blogger and writer, a former Wall Street executive, an experienced consultant, and a former musician. He has experience in health insurance and economics, occupational health, benefits, risk management, finance, and information technology. Richard has consulting experience in the US and over 20 countries.

The Curious Case of Japan’s Economic Stimulus

(Image: CartoonArts International / The New York Times Syndicate)(Image: CartoonArts International / The New York Times Syndicate)Is Japan the country of the future again?

In the broad sense, surely not, if only because of demography: the Japanese combine a low birth rate with a deep cultural aversion to immigration, so the future role of Japan will be severely constrained by a shortage of Japanese people.

But something very odd is happening on the short- to medium-term macroeconomic front. For the past three years macro policy across the developed world has been dominated by Austerian orthodoxy; even where there haven’t been explicit austerity policies, as in the United States, fear of deficits has led to de facto fiscal tightening, while monetary policy has fallen far short of the kind of dramatic expectation-changing moves theoretical analysis suggests are crucial to an economy trying to gain traction in a liquidity trap.

Now, one country seems to be breaking with the orthodoxy — and it is, surprisingly, Japan. According to a recent New York Times article: “The Japanese government approved emergency stimulus spending of ¥10.3 trillion Friday, part of an aggressive push by Prime Minister Shinzo Abe to kick-start growth in a long-moribund economy.

“Mr. Abe also reiterated his desire for the Japanese central bank to make a firmer commitment to stopping deflation by pumping more money into the economy, which the prime minister has said is crucial to getting businesses to invest and consumers to spend.”

This is especially remarkable because Japan has been held up so often as a cautionary tale: Look at how big their debt is!

Disaster looms! Indeed, back in 2009 there were many stories to the effect that the long-awaited Japanese debt catastrophe was finally coming.

But, actually, not. Japanese long-term interest rates rose in the spring of 2009 because of hopes of recovery, not fear of bond vigilantes. And when those hopes faded, rates went back down, and are currently well under 1 percent.

Now comes Shinzo Abe. As Noah Smith, the blogger and writer for The Atlantic, informs us, he is nobody’s idea of an economic hero; he’s a nationalist, a denier of World War II atrocities, a man with little obvious interest in economic policy. If he’s defying the orthodoxy, it probably reflects his general contempt for learned opinion rather than a considered embrace of heterodox theory.

But that may not matter. Mr. Abe may be ignoring the conventional wisdom on spending, and bullying the Bank of Japan, for all the wrong reasons — but the fact is that he is actually providing fiscal and monetary stimulus at a time when every other advanced-country government is too much in the thrall of the Very Serious People to do something different. And so far the results have been entirely positive: no spike in interest rates, but a sharp fall in the yen, which is a very good thing for Japan.

It will be a bitter irony if a pretty bad guy, with all the wrong motives, ends up doing the right thing economically, while all the good guys fail because they’re too determined to be, well, good guys.

But that’s what happened in the 1930s, too.

Paul Krugman Explains the Keys to Our Recovery

Bill Moyers: Welcome. Just before the holidays, we asked you, our viewers, to recommend the one book you thought President Obama should read as he prepares himself for his second term in office. As ever, your suggestions were thoughtful, provocative and eclectic – from books by authors who have appeared as guests on this broadcast, to works by the late John Steinbeck and A. A. Milne, the creator of Winnie-the-Pooh. You can see a list at our website, BillMoyers.com.

Many of you asked for my choice, too. This is it – Paul Krugman's End This Depression Now! It's both prescription and warning: our current obsession with slashing the deficit and avoiding that well-known and worn fiscal cliff is killing us, Krugman writes, getting in the way of what really needs to be done – which is dedicating government to creating jobs and getting us back to full employment. He blames not only Congress but the White House.

Paul Krugman is professor of economics and international affairs at Princeton University. Since 1999, he's been an op-ed columnist at The New York Times and now also writes a blog for the paper titled "The Conscience of a Liberal." According to the search engine Technorati, it's the most popular blog by an individual on the internet. Author or editor of some twenty books and more than 200 professional papers, Krugman is a thinker so esteemed and widely known in his field he's become an icon. Not only has he won the Nobel Prize in Economics, he's also the subject of this song by the balladeer Loudon Wainwright III...

Loudon Wainwright III: I read the New York Times that's where I get my news Paul Krugman's on the op-ed page that's where I get the blues 'Cause Paul always tells it like it is we get it blow by blow...

Bill Moyers: As if being immortalized by the blues isn't enough, there was even an unofficial campaign and petition in the last few days urging President Obama to make Paul Krugman the next Secretary of the Treasury. It was an honor, as Shakespeare would say, that Mr. Krugman dreams not of.

Paul Krugman, welcome.

Paul Krugman: Hi there.

Bill Moyers: So, like William Tecumseh Sherman you refuse to be drafted.

Paul Krugman: Well, you know, fortunately it hasn't come to that point. But I think I probably would.

Bill Moyers: But you remember what General Sherman said when there was a movement to run him for president. "I will not accept if nominated and will not serve if elected." That was the Sherman like statement you issued.

Paul Krugman: That's, well, I'm not quite up to Sherman's standards and I don't think I'm quite ready to lay waste to Georgia either. But a good, good man I admire actually.

Bill Moyers: But the grassroots campaign in your behalf, unofficial, was serious. I mean, over 235,000 people signed on. You broke their hearts. Any regrets?

Paul Krugman: No, because I probably have more influence than I, doing what I do now than I would if I were inside trying to, you know, do the court power games that come with any White House, even the best, which I don't think I'd be any good at. So no, this is fine. And what the president needs right now is he needs a hardnosed negotiator. And rumor has it that's what he's got, so.

Bill Moyers: In Jack Lew?

Paul Krugman: That's right. The president can't pass major new legislation. He can't formulate major new programs right now. What he has to do now is bargain down or ride over these crazy people in the Republican Party. And we what we need now is not deep thinking from the treasury secretary. If the president wants deep thinkers, he can call Joe Stiglitz, he can call other people. What he needs from the Treasury secretary is somebody who's going to be very effective at dealing with these wild men and making sure that nothing terrible happens.

Bill Moyers: I understand that Jack Lew has Depression art on his, the wall of his office, art done by the Works Progress Administration. Which would be a good sign for someone like you who believes the Depression is back.

Paul Krugman: That's, I have to say, the most reassuring thing I've heard about him. WPA, you know, they produced a lot of art, which I think it's almost inconceivable now. But also the WPA was one of the really good moments in American policy. In a time of economic disaster, hiring people, giving them jobs to do things that are good, much of which survives and is an important part of our physical planet today. This is great. And the fact that he thinks well of and admires what the WPA did, that's a very hopeful sign.

Bill Moyers: What could Jack Lew do as Treasury secretary that would make you think he's a kindred spirit?

Paul Krugman: Campaign against this austerity obsession. We're not going to get a big new stimulus package, much as I would like to see it. No, we're not going to get it this year, anyway. But I'd like to see him saying when somebody says, "Well, we need to slash here, we need to slash there." And he would say "Why would we want to be doing that now? That's actually going to hurt the economy."

Bill Moyers: But hasn't our economy changed so much since Franklin Roosevelt simply put people on the government payroll?

Paul Krugman: It's, economics, the underlying rules change a lot more slowly than people imagine. People look and they say, "Oh, you know, back then they were taking ocean liners and now we fly jet airplanes." Or, "Back then we didn't have a global economy." Actually, we did. It's a little bit fancier now. But the basic rules are not are not much changed. It takes hundreds of years for those to change a whole lot. And this is, I can pretty easily assemble a bunch of headlines from the 1930s and they will sound like they're right out of today's headlines. This is the same kind of animal that we confronted in the '30s. This is depression economics. And the nature of the solution is not really very different now from what it was then.

Bill Moyers: What do you mean, depression economics?

Paul Krugman: Well, two things really. One is, a recession is when the economy's going down. A depression is when the economy is down. So, you know, the U.S. economy was actually expanding through most of the 1930s, after a terrible big slump at the beginning and another slump later in the '30s. And then it was expanding in between. But we call that whole episode the Great Depression because it was all a period of high unemployment and a lot of suffering.

And, of course, we're in that now. It's not as bad as the Great Depression. You know, it's a great recommendation. Not as bad as the Great Depression. It's terrible. We have a persistently depressed economy, persistent lack of jobs. So in that sense, it's a depression. And there's also a more technical meaning. Depression economics is when the normal things you do to boost the economy, have the Federal Reserve cut interest rates a little bit, are no longer available or effective. It's a situation where the normal rules of what you-- of economic policy, have to be put on hold, and you really need to do extraordinary stuff.

Bill Moyers: Well, the Fed has kept the interest late very low. And it has made a big difference, has it?

Paul Krugman: I think it actually has. If they hadn't kept the interest rate low, things would be much, much worse. Meaning--

Bill Moyers: More people out to work.

Paul Krugman: That's right. We, you know, this is not as bad as the Great Depression. Again, our famous last words. But part of the reason is that the Fed did learn something from the 1930s. It's learned that raising interest rates to stabilize the price of gold is a really bad idea in times like this. But the trouble is that zero, which is as low as it can get, is not low enough. And we actually know pretty well what you need to do.

Bill Moyers: The other side of it is that people have been told so long, "Save money. Save money. Americans were not saving." Now if they save money, they make no money from their savings.

Paul Krugman: That's right. And, actually the truth is right now saving hurts us. It's because what, another way, yet another way to think about depression economics, depression economics is a situation where the total amount that people want to save is less than the amount that businesses are willing to invest. You can think of that as being the result, a lot of it is because of this overhang of personal household debt from the past.

We had a housing bubble that burst, leaving us with too much construction. We have a financial system that's disrupted. But all of that leads to the fact that there's, the amount that businesses are willing to invest is less than the amount that collectively we all want to save, including corporations that are trying to retain earnings.

Which means that we're awash in excess savings. And if you decide to save more, it's not actually going to help society. I mean, things add up. If there's a crucial, one crucial thing to understand about all this it is that the global economy, money moves around in a circle. And my spending is your income, and your spending is my income. And if all of us try to spend less because we want to save more, we don't succeed. All we end up doing is creating a global depression.

Bill Moyers: So your prescription in this book, and the book is an argument for the prescription, is that the government should spend more so that people can buy more. In other words, creating demand that will drive the economy. That's the chief argument in here.

Paul Krugman: That's right. There are some other things you can do. Debt relief, where you can do it, will help because it will make people able to spend more. There're some things that the, maybe the Federal Reserve can do, even though interest rates are zero. But the core thing, the thing that we know works, the thing that all the evidence of history says works in a situation like this is the private sector won't spend, government can step in and provide the spending that we need in order to keep this economy afloat.

Bill Moyers: As you know, there is an argument on the other side that says that Roosevelt, in spending in the '30s, did not really bring us out of the Depression. It was, and you acknowledge this in the book, the war, in which so much money was spent, you couldn't help but put people to work.

Paul Krugman: That's right. But the fact that it was a war that finally got the U.S. government to spend enough is not an argument against spending. It's an argument about politics. It's saying that then, as now, lots of people were saying, "Oh, it would be irresponsible to spend," and it wasn't until something external came along that the political restraints were released.

And then, we didn't, we actually were, we had recovered from the Great Depression before Pearl Harbor, because the U.S. economy really went to war in 1940. And presto. I mean, lots of people said, "Oh, spending more can't produce recovery." And then we started our military buildup because war had broken out in Europe. And suddenly, we had recovery.

I made it as a joke, but if we discovered a threat from space aliens and decided that to deal with that threat, we needed to actually, somehow or other we needed to do a lot of infrastructure spending. We needed to build roads and high-speed rail. We would have full employment.

Bill Moyers: By full employment, you mean?

Paul Krugman: Something like 5 percent unemployment.

Bill Moyers: There essentially will always be a certain number of people who are not working for one reason or another.

Paul Krugman: Yeah. It's a dynamic economy. There's always going to be companies failing. There's always going to be people quitting a job and taking some time to find a new one. There's a lot of friction in the economy. So the fact of the matter is that normal, a normally pretty full employment economy is still going to have 5 percent measured unemployment. That's okay. But there's a world of difference between that and right now the official number is in the high sevens. But a lot of measures suggest it's a lot worse than that. I mean, and most important, we have four million who've been out of work for more than a year, which is unprecedented since the 1930s.

Bill Moyers: Yeah, you write that we are in a depression that is essentially gratuitous. We don't need to be suffering so much pain and destroying so many lives.

Paul Krugman: Gratuitous in the sense that there's nothing, the only obstacles to putting people to work, to having those lives restored, to producing hundreds of billions, probably 900 billion a year or so of extra valuable stuff in our economy, is in our minds.

If I could somehow convince the members of Congress and the usual suspects that deficit spending, for the time being, is okay, and that what we really need is a big job creation program. And let's worry about the deficit after we've had a solid recovery, it would all be over. It would be no problem at all, which is what, that's the lesson of 1940, 1941.

Bill Moyers: Which is?

Paul Krugman: You can find all kinds of people explaining what was fundamentally wrong with the U.S. economy in 1940, that technology makes it impossible, workers don't have the right skill. Then along came a war in Europe and we started spending. Actually, at that point, spending a lot on infrastructure because we were getting ready for a war. And all of a sudden--

Bill Moyers: Building harbors, building all kinds of--

Paul Krugman: And camps, training camps, there are a lot--

Bill Moyers: --training--

Paul Krugman: The first thing that happened actually was a lot of construction spending on the giant new camps that the Army was going need. And all of a sudden, all of those unemployable workers turned out to be extremely productive, if you gave them a job. All of those, you know, total inability to get the economy moving turned out to be totally easy to get the economy moving. And we're basically in that situation right now. All the productive capacity is there. All that's lacking is the intellectual clarity and the political will.

Bill Moyers: You make this so clear in the book, that's why I recommended that President Obama read this book as the one book I would like to see him read before the inauguration next week. If he read it, what would you hope he would fasten on?

Paul Krugman: I would hope that he would fasten on the notion, you know, he faces real political constraint. So we understand, he can't just pass legislation. But that the most important thing, his policy priority right now should be doing whatever he can to at least move in the direction of the kinds of policies that we want for full employment, that we need for full employment. And that the obsessions of Washington about a grand bargain on the deficit are really pretty much beside the point right now. That, if given a choice between doing something that will help the economy in the next two years, and something that will allegedly settle our budget problems for all, you know, for all time, which is wouldn't, that he should go for the stuff that will help the economy now. That he should not bend on that point.

Bill Moyers: I can imagine that if you were sitting across the table with him, he might reply, "Look, Krugman, we've got a recovery coming on. Jobs are being created more steadily than ever. Measured unemployment is falling. Households are shaking off their burden of debt. I can see light at the end of the tunnel. I don't think this is the time to do what you're saying."

Paul Krugman: I think he might have said that two, three years ago. I don't think that president, you know, we happen to have a very intelligent man as president. He's for real. And he does understand. You can have real discussions with him. And I think he understands that, although things have improved some. We actually have had some progress on the economy in the past year. It's a glacial pace, compared with the way we should be. You can do this various ways. But if you think about the plunge that we took and you look at measures like the labor force, a fraction of prime age workers employed, whatever, we have maybe made up a quarter of the ground we lost in that great plunge in 2008, 2009. And it'll take years and years to get back to anything that looks like prosperity at this rate.

Bill Moyers: What makes this a depression? You know, my generation remembers the photographs of those long lines of people looking for jobs, men and women both. Remembers the sad eyes, the hungry stomachs. Remembers that men were becoming so desperate they were becoming militant. But today, even though you say the situation, in terms of joblessness, is like the 1930s, you can't obviously, you can't transparently look around and see the evidence of a depression.

Paul Krugman: That's right. It's, and partly that it's not as bad. So by modern concepts the Great Depression had unemployment rates that were as high as 20something percent by modern measures. And even in 1937, when things had improved, before we went into the second leg of the Great Depression, it was still probably about a nine percent unemployment rate by modern standards. And we've got a seven point something, eight percent, whatever. So things are not as bad. But I think a lot of it is just that the optics have changed.

Bill Moyers: Optics?

Paul Krugman: The optic, the misery is there. I mean, is there anybody, I guess if you live in very rarified circles you don't know people who are desperate right now. But I live in pretty rarified circles and I do. I know, I have relatives, friends people I know who have, men my age who've lost jobs and see no prospect of getting another job and are just desperately trying to hang in there until they can collect their social security and get on Medicare. There are young people whose lives have collapsed. You know, they graduate and there's nothing there.

Bill Moyers: Yeah, you make a very powerful point in here of the impact of being out of work now on the lifetime career of a young person who has no job at the moment.

Paul Krugman: We have pretty good evidence on, you know, how long does it take to make up for the fact that you happen to graduate from college into a bad labor market. And the answer is forever. You will never recover.

Bill Moyers: How so, what do you mean?

Paul Krugman: You will never get, you'll miss years getting onto the career ladder. By the time you get a chance to get a job that makes any sense, you know, that makes any use of your skills, you will already be tarred as somebody, "Well, you're 28 years old and you haven't held a responsible position?" "Well, yeah, I couldn't because there were no jobs." It just shadows your whole life. And it's very clear in the evidence from past recessions, which have been nowhere near as bad as this one.

The other thing I think I want to say here is that we have, in some ways, made things more civilized but also more invisible. Somebody said that food stamps are the soup kitchens of the modern depression. That there're a lot of people who would be standing in line to get that soup, who are instead, and it's a good thing, who are instead getting, I guess it's now called SNAP, Supplementary Nutritional Assistance Program, but who are getting those debit cards, and are getting essential food stuffs. And they're at the grocery store and they look like anybody else. But the fact of the matter is they are still as desperate, they're getting by day to day with the aid of a trickle of government aid, just like the people who were on, standing in line at the soup kitchens in the '30s, but they're not visible. They, we don't have guys selling apples in street corners partly because, you know, the city licensing wouldn't allow that anymore.

But we do have, again, we've got four million people who've been out of work for more than a year. The U.S. social system is not designed to take care of somebody who's been out of work. We have unemployment insurance that's intended to deal with short spells of unemployment. So there's an enormous amount of misery, but it is mostly hidden.

Bill Moyers: So that's why you refer to it, even though the optics have changed, as a quote "Vast, unnecessary catastrophe"?

Paul Krugman: Yeah. The amount of damage that's being done is enormous. The amount of suffering of people is enormous. And if it isn't out there, visible on the streets, if it's dispersed across a suburban you know, if you see a house with a for sale sign that's been sitting there for a while, you may not know the story about the family that was driven from its house because they, one or both spouses lost jobs and couldn't find others. Or, and they were foreclosed on. But it's a real story, all the same. And there's lots of that going around. And none of this needs to be happening.

Bill Moyers: And you argue that this could actually be solved in two years?

Paul Krugman: That's right. And that's not a number plucked out of thin air. That's a guess at how long it would take to get a serious spending program going. And we could actually make a lot of difference in it even quicker than that because the fact of the matter is, far from having effective job creation program, we've actually been pulling back. We've seen state and local governments lay off hundreds of thousands of school teachers. We've seen public investment in basic stuff like road repair cut way back. If we just went back to normal rates of filling potholes and normal rates of employment of school teachers, that could be done in months.

Bill Moyers: You wonder why, given the suffering, Congress and the White House haven't acted.

Paul Krugman: Well, there are I think two, two levels of opposition. And one of them is just raw politics. We have a powerful political movement in this country that has a longstanding goal of rolling back all of the social programs, all the safety net that we've created. They want smaller government. They want reduced public services. Even the idea of public schools is very much under attack. They want it all to be switched to a system of vouchers. And they see this, you and I see a disaster, they see an opportunity. Here we have cash strapped state and local government. Good. Forced to cut back in government. They don't want to do anything that will make it easier for them to, for government as we know it to continue. That movement controls one political party. And that political party controls one house of Congress. And that is enough to stand in the way of a lot of things we ought to be doing. Then there's the second level, which is this odd coalescence of, I picked up the phrase from other people. Actually, from the blogger Duncan Black. "Very Serious People," capital V, capital S, capital P.

Bill Moyers: You're always writing that these Very Serious People. Who are they?

Paul Krugman: Yeah. The notion that someone, well, you can look are your random set of, you know Erskine Bowles and Alan Simpson would be the quintessential Very Serious People. The editorial, practically the whole op-ed page, not all of them, but most of "The Washington Post." People for whom this, it's axiomatic that the budget deficit is the most important problem. And that what we really, really need to do right now at a time of mass unemployment is worry about the debt to GDP ratio ten years from now. And it's a very hard thing to crack, partly because it's not actually a rational argument. You very rarely, very rarely see on the Sunday talk shows, people asking, "Why exactly are you so concerned about the deficit right now?" That's sort of a given. That's a starting point. Everybody serious understands that, except that if you ask them why exactly, they can't give you a very good answer.

Bill Moyers: What is the answer?

Paul Krugman: It's partly that this is, it sounds serious. Never you know, never underestimate the importance of just plain what comes across. Start so it's partly just it sounds serious, it's the kind of thing that people who wear good suits are likely to talk about. Partly it is actually, of course, a deliberate pressure campaign.

Bill Moyers: For example, Pete Peterson, Nixon's Secretary of the Commerce, billionaire several times over has set up this Fix the Debt campaign and is said to be putting half a billion dollars into trying to influence the public.

Paul Krugman: Yeah, actually it's not just Fix the Debt, that's just the latest incarnation. There's also the Committee for a Responsible Federal Budget, there's the newspaper "The Fiscal Times," there's several others. It's a whole portfolio. They all are Peterson Foundation money at the roots, but they're all out there. And yeah, serious attempts to influence public debate are not, by and large, a very lavishly funded enterprise.

Bill Moyers: But in this case?

Paul Krugman: But in this case, you've got so half a billion dollars, $500 million of spending with one agenda is going to have a huge impact. You know, policy intellectuals, by and large come cheap. A few hundred thousand in consulting contracts could do a lot there.

Bill Moyers: Do you think some of them are serious about the debt leading to a loss of confidence on the part of investors in foreign governments? I mean, even three years ago Barack Obama expressed concern about the long term debt and the confidence of people in the U.S. government. Take a listen.

Barack Obama: There may be some tax provisions that can encourage businesses to hire sooner rather than sitting on the sidelines. So we're taking a look at those. I think it is important, though, to recognize that if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the US economy in a way that could actually lead to a double-dip recession.

Paul Krugman: I remember that well. And at the time it was going on, I do occasionally find myself in meetings with Very Serious People myself. I guess I am personally one now and then. There was this widespread view among people, and not all of it venal, not all of it self-interested, that somehow things were hanging by a thread. That any day now we could have a run on U.S. government debt, which was wrong.

But, okay, I can see how people could for a while have believed that. But a lot of time has gone by since then. And I hope that at least some people have learned better. But it's amazing how little the continued failure of these warnings to actually be vindicated by anything has...how little of that's actually affected the debate.

And there's a special issue here, which I've actually tried to get across now, and I find that I get resistance even from people who are, I would've hoped were more flexible. It's even very hard to tell the story about how this loss of confidence is supposed to work. I mean, it's the United States is not like a European country that doesn't have its own currency.

The U.S. government cannot run out of cash unless Congress prevents it, you know creates an entirely self-inflicted shortage through the debt ceiling. How is it exactly that we're supposed to have this crisis that leads to a double dip recession? It really doesn't even make sense as a story. And yet it is one of those things that people say and by and large, are not contradicted on.

Bill Moyers: We keep hearing from the right that we're here on the path to becoming Greece, and you say that that's impossible?

Paul Krugman: Yeah. We, even if, suppose that people decided, investors decided they don't like U.S. government debt, it can't cause a funding crisis because the U.S. government prints money. It's even hard to see how it can drive up interest rates because the Fed sets interest rates at the short end, and why exactly would the long run rates go up if you don't expect the Fed to raise rates? It could lead to a weakening of the U.S. dollar against other currencies.

But that's actually a good thing. That would make U.S. exports more competitive. That would actually boost our economy. So it's, actually impossible to tell that story, as far as I can tell. And yet, it's not, again we're mostly not in the realm of rational discourse here. It's one of those things where people say it, they hear other people saying it. And they don't actually try to work it through.

And it plays a big role, I'm sorry, in influencing our public discussion. Interestingly, people who actually have money on the line, that is people who are buying bonds, just keep on driving U.S. interest rates ever lower. So actual investors don't care about this stuff. But our political class does.

Bill Moyers: Why don't they care?

Paul Krugman: Because first of all, because I think at some level investors understand what I'm saying. That it's very difficult to see any reason why the Fed would raise short term rates, which is controls for years to come. And in that case, long term debt even at a pretty low interest rate is a reasonable investment. Hard to see how a financial crisis actually develops against the United States, U.S. government, which is in this you know, has all the luxury of printing its own currency.

And investments are always about compared to what, right? If you if you say, "Well, the U.S. is a dangerous place to invest," I don't think it is, but particularly where is the safe place that people are going to invest? You know, what is this other asset that they're going to buy? And it doesn't really exist.

Bill Moyers: You say we're in a liquidity trap. I don't understand that.

Paul Krugman: Basically, a liquidity trap is we're, back up for a second. How do we normally deal with a recession? How do we deal with a garden variety recession like the 2001 after the dot com bubble burst, or 1991? The answer is that basically the Fed, the Federal Reserve goes out there and prints money.

Or strictly speaking credits banks, you know, credit banks with that extra reserves and buys treasury bills. And that normally starts a chain of events where, okay, the banks have got extra reserves, they lend them out. They, that drives down interest rates, leads to a whole series of events, which ends up with the economy picking up some steam. And what the Fed is doing in that case, it's supplying extra liquidity to the system.

Paul Krugman: But now we're in a situation, we're awash in liquidity. We've already got, I mean, interest rates are zero. And so anybody you say, "Well, we're going to give you some more cash and you're going to go lend it out," and banks, everybody's going to say, "Well, why would I want to do that? I mean, interest rates are zero. It's, there's no particular incentive for me not to just sit on this cash."

So you pour this extra liquidity into the economy and it just sits there. And that's the liquidity trap. It's a situation in which the ordinary monetary policy thing doesn't work.

A side consequence of that is it also means that if the government goes out and borrows more, it's not going to drive up interest rates because there's all this cash sitting out there looking for a place to go.

So the rules change. And liquidity traps are really rare. I mean, we had one in the 1930s and we've had another one since 2008. And aside from that, we had one in Japan in the 1990s, and that's about it. But when they happen, boy, they change all the rules. You find yourself in a different universe for economics.

Bill Moyers: And they're not putting people to work.

Paul Krugman: That's right. A liquidity trap is a situation where the economy can stay depressed and there's no natural, certainly no fast natural route to recovery.

Bill Moyers: So why would you be calling for more spending, given that reality?

Paul Krugman: Oh, but that's the point, then the equation, what we're looking for always, the problem...Basically all recessions are a problem of not enough spending in the economy. There are a few exceptions, basically, what we call a recession is, a case where there's not enough spending, and so there's not enough jobs. Normally, however, you can deal with that in a very narrow technocratic fashion, which is that the Federal Reserve cuts interest rates and stuff happens.

Now that doesn't work because we're in a liquidity trap. And so, this is where you say, "Okay, we need something else that's going to work, and it's very hard to come up with anything that is clearly effective, other than having the government go out and spend the money that the private sector won't." And this is why it, you know, this is, monetary policy is the aspirin of economic ailments. Take a couple whenever you're feeling that you have a headache. Now we had the over the counter remedy doesn't work and we need the, the heavy duty prescription medicine, and that's what I'm arguing for.

Bill Moyers: Interesting you say that because I tried to condense to one sentence the message and argument of your book. And I wrote down, "The answer is simple. Increase spending and boost consumption because the fundamental problem at the root of this crisis is a lack of demand."

Paul Krugman: That's it. Now you can say that all crises', or most crises' anyway, most recessions are a lack of demand. But this is an intractable lack of demand. And so, we, we need we need government action of a type that most, at any point during the past 70 years, except this one, I would have said, "No, let's leave it up to my former colleague, Ben Bernanke." But he can't do the job right now. And so, we need the government.

Bill Moyers: And if the president were sitting across the table from you and asking, "Where would you spend this money, Paul?" What would your answer be?

Paul Krugman: Right now it's easy because right now we can do it very quickly simply by restoring the spending cuts that have already happened. If you gave me unlimited carte blanche in terms of spending, I would want to go beyond that. I'd want to talk about and pretty straightforward things, even so. We have you know, fix the sewer lines. I mean, we have, we have a lot of, a lot of basic infrastructure needs that are worth doing in any case.

But right now you can get a quick boost just by rehiring those school teachers and filling those potholes. We are something like $300 billion a year short of the spending that we should be undertaking just for the normal business of government. And that extra $300 billion a year would be a really big deal for the economy if we could do it right now.

Bill Moyers: Would it bring us to what you call full employment?

Paul Krugman: Probably not. Probably bring us down to an unemployment rate that was more in the 6 to 6.5 percent.

Bill Moyers: How much would it add to the long term deficit?

Paul Krugman: Actually, nothing to the long term deficit, or almost nothing because this would not be a permanent set of measures. This would be something we'd do now. It would add headline suppose we spend $300 billion a year right now, additional. That's not $300 billion a year in extra debt because it's, the economy will be stronger, which means more revenue, which means less spending on unemployment benefits.

So it's probably under $200 billion a year in immediate borrowing. And there's a lot of reason to think that would actually, having a stronger economy now would actually strengthen the economy in the long run as well. Or put it this way, the other way, that having a really weak economy now is damaging our future and not just our present. Think about all college graduates who will never get the job they all should get.

That's not just harm for them, that's a future economy that is weaker than it should've been because it's wasting a lot of our talent. And there's a pretty good case, actually a pretty strong case, that if you think about the long run fiscal impact, spending more right now is actually positive even in terms of the long run budget situation because a stronger future economy will mean stronger revenue down the pike.

And the debt we incur right now, well, you know, the interest rate on U.S. long term debt is under 2 percent. Inflation protected U.S. long term debt has a negative interest rate. There's almost no, there's even, on purely fiscal terms, it's arguable that we should be spending more just to strengthen our long run budget position.

Bill Moyers: Is there a limit to how much we can keep borrowing?

Paul Krugman: There may be, although all that we know, all of the evidence says it's a lot further away than conventional wisdom has it. I mean, like a lot of people, including Ben Bernanke, I got into all of these things by looking at Japan in the '90s. And Japan famously has run deficits year after year. And it has a level of debt that is about twice what we've got as a share of GDP.

And people have been predicting financial catastrophe for Japan year after year for ten years or more. They've had downgrades. Their debt was downgraded in 2002 by the major rating agencies. And everybody who believed those warnings and everybody -- has lost a lot of money. So it turns out that if you're an advanced country with its own currency and a reasonably stable government, you have a lot of running room on these things.

So am I worried? Yeah, I mean, I am worried about the U.S. fiscal situation 20 years from now. We do have a problem of health care costs and so on. But, you know, I'm worried about a lot of other things 20 years as well. I'm not sure that even if you take that long term perspective, that the budget should be at the top of your list of things to be afraid of.

I'm a lot more afraid, actually, of the great -- the entire southwest of the United States turning into a dustbowl because of climate change, right? So sure, by all means, let's think about it. But it should not be dominating our policy discussion now.

Bill Moyers: As you know, we're heading toward another knockdown, drag out, shoot it out at the O.K. Corral fight over raising the debt ceiling in a few weeks. President Obama has already said he will not negotiate on raising the debt ceiling. Here's what he said.

Barack Obama: I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up through the laws that they passed. Let me repeat. We can't not pay bills that we've already incurred.

Bill Moyers: And here's the response he got the next day from Republican Senator Pat Toomey of Pennsylvania.

Pat Toomey: Our opportunity here is on the debt ceiling. The president's made it very clear; he doesn't even want to have a discussion about it, because he knows this is where we have leverage. We Republicans need to be willing to tolerate a temporary partial government shutdown, which is what that could mean, and insist that we get off the road to Greece, because that's the road we're on right now. We only can solve this problem by getting spending under control and restructuring the entitlement programs. There is no tax solution to this; it's a spending solution. And if this president doesn't want to go there, we're going to have to force it and we're going to have to force it over the debt ceiling.

Paul Krugman: This is a guy walking into a crowded room and saying, "I have a bomb strapped to my chest, and if you don't give me what I want, I'm going to blow up everybody, including myself." And is that a credible threat? Well, there're some pretty crazy people there. And it might be that they're willing to do it.

But by the same token, Obama cannot get into this because then you have government in the hands of -- never mind the Constitution, the government is run by whoever is most willing to wreak havoc with our whole system of -- with the nation. We cannot allow ourselves to be blackmailed into spending cuts, partly because blackmail should not be part of how the U.S. operates, and partly because spending cuts would be disastrous right now. So Obama's right to say he doesn't negotiate. I'd like to know exactly what he will do if it turns out that there is not a quorum of sane people in the Republican party.

Bill Moyers: If you were Secretary of the Treasury, what would you recommend he do?

Paul Krugman: I'm for whatever gimmick works. So the most dignified is to say, "Look, this is ridiculous. You are giving the president -- effectively Congress is giving the president inconsistent instructions. It's passed bills mandating spending. It's passed bills that give us inadequate revenue to cover that spending which requires that we borrow. And then you're saying, 'I can't borrow.' Well, you know.

And my reading of the Constitution is I have to obey the due legislative process and go ahead and do this borrowing to meet the bills that we've already incurred, as the president said." That's sort of what people are calling the Fourteenth Amendment solution, that basically it's unconstitutional to give into this debt limit thing. I guess that's your best solution. They don't think that that's workable then you go for anything at hand. And there is this wonderful bit about the platinum coin.

Bill Moyers: I don't understand that.

Paul Krugman: In a 1997 act amended in 2000 which covers issuance of coins and stuff like that. There's one clause that says that the Secretary of the Treasury shall have the right to mint and issue platinum coins in any denomination that he so chooses. Clearly, the intent was commemorative coins. You're going to strike a coin to commemorate whatever, Mother's Day.

But it doesn't say that. And as far as legal scholars have been able to make out, there's no reason why the Secretary of the Treasury can't order the minting of a coin that says this coin is worth $1 trillion, which need bear no relationship to the actual value of the platinum in it. It has to be platinum, however. And walk that coin over to the Federal Reserve.

Deposit it in and have the Federal Reserve create a bank account for the federal government based on that coin of whatever. It could be one coin for $1 trillion, it could be a thousand coins of a billion each, whatever. And then the government can pay its bills by drawing on that bank account. And it's crazy, it's an accounting gimmick, but then this whole thing is crazy. And if that lets you bypass this nonsense about the debt limit, fine.

There are other routes. I mean, it's possible the government could issue coupons that look like debt and function like debt, but says, "No, they're not debt." They could say, "This -- we have no legal obligation to pay this. We are, in fact, going to pay it, but we have no legal obligation to pay it." That's another alternative. They could--

Bill Moyers: This is what you'd call--

Paul Krugman: I'd call it moral obligation coupons.

Bill Moyers: Moral obligation because the government is morally obligated to pay that at some point, right? That's what--

Paul Krugman: That's right.

Bill Moyers: --you mean by that?

Paul Krugman: Yeah. So, but it's a moral obligation. We can say it's not a legal obligation so that -- you know, all of this is of course, this is all word games. But then that's not to play games would be irresponsible at this point.

Bill Moyers: So you would encourage, if you were Secretary of the Treasury, the president to call the Republican bluff?

Paul Krugman: Yes. I think, now, I think you probably don't commit to doing that until we actually hit the limit. You say what the president is now saying. There is no alternative but for Congress to do the responsible thing and raise this debt limit.

But you don't rule out these alternatives and you make sure that the Republicans know you haven't ruled it out so that it stands ready, and in fact it's what you do. Hostage negotiations, you have to -- you have to have some credible alternative to giving into the hostage takers demands, and that's where we are right now.

Bill Moyers: You've confessed before to an occasional sinking feeling that you can count on President Obama to wimp out. And that's your term, "to wimp out" when it matters.

Paul Krugman: Yeah. The 2011 debt ceiling fight was deeply disheartening because he should not have negotiated on the debt ceiling at all. Same argument as now. This is not how you do it. It is not a legitimate tactic of politics to threaten to destroy the country if you don't get what you want. And people who make that demand have no standing. You should not give them anything.

But he did. He actually did, in fact, make some significant concessions on spending, in order to get a rise in the debt limit. He blinked a little bit on the fiscal cliff. Not as badly as some of us feared, but he did not, in fact, hold out for the full revenue package. And so, some of us are worried. Now, I have to say, I mean, I'm reading my own stage directions here.

People like me are, in part, going after him, warning about the wimping out thing in order to turn that into a self-denying prophesy. That the idea is to make a situation where the president will be aware what people will say about him if he does give in here so it doesn't happen.

Bill Moyers: More than many economists I read, you keep politics at center stage in writing about the economy. Those are two different narratives in one sense. And yet, you intertwine them as you keep writing and analyzing our situation today. Why is that?

Paul Krugman: I think we've reached a moment in our history where the extreme nature of our politics and the extreme nature of the economic situation has converged. You know, here we are, on one side we have a once-in-three-generations economic crisis. Right, this is -- starting in 2008, we've been experiencing the crisis that has haunted the nightmares of macro economists since the 1930s. And here it is again.

And this is as dramatic as it gets. It's a situation where you really have to throw out the business as usual. And on the other side, you have this extreme political situation, where a radical movement has taken over one of our two great political parties. And does not-- does not practice politics as usual. Anyone who talks about, "Well, we should make deals the way we used to. What about the Tax Reform of 1986? Why can't we do that again?" And the answer is, well, that might make sense to you if you've been in a Buddhist monastery for the past 20 years.

But that's not today's Republican party. You can't make that kind of deal with them. And so, how can you write about the economics? If you write about economics right now and implicitly adopt the perspective, "Well, let's get reasonable people together in Washington and reach a solution here," you know, you're paying no attention to reality. And, of course, if you talk about the politics without talking about the economics, you're also missing everything. So how could I not be writing about both?

Bill Moyers: You begin one chapter of your book with a quote from your intellectual mentor, John Maynard Keynes, who writes in his masterpiece The General Theory of Employment, Interest and Money, "The outstanding faults of the economic society in which we live--" and this was the '20s and '30s, "are its failure to provide for full employment. And its arbitrary and inequitable distribution of wealth and incomes." Well, we don't have full employment today and we have gross inequality in income. So which is failing us, capitalism or democracy or both?

Paul Krugman: I guess I have a -- here's where I guess I am an optimist, which is that I believe that you can fix both capitalism and democracy. Not to produce a utopia, but to produce a workable solution. And the reason I believe that is we did that for a pretty long stretch.

Western economies in 1933 and western societies in 1933 were in a pretty horrible state. Mass unemployment, gross inequality, collapse of democracy in a number of places. And in the end, by the time 1950 had rolled around, we had managed to create a more equitable, not totally equal, but a more equitable society, with reasonably full employment.

And that solution lasted for half a century, which is all you can ever expect in human affairs. Nothing is permanent. So I do believe that we can do that again. So it's not that we have to ditch capitalism. I think a market economy is -- this is probably Churchill, right, it's the worst solution except for all the others. And democracy is the worst system, except for all the others.

But it's going to take some work. It's not -- the idea that you can just let markets rip and that you don't need to worry about the state of your democracy, that's wrong. But I'm actually, in a way, a conservative on these things. But a conservative, not -- what we now call conservatives are actually radicals who want to tear down the structure that we built, starting with FDR. And I want to rebuild something like that, a modernized, a twenty-first century version of that system. But it's not out of reach. It's not something that can't be done.

Bill Moyers: Paul Krugman, "End This Depression Now." Thank you very much for this conversation.

Paul Krugman: Thank you.

Does This Look Like A Recovery?

A few years ago back when I used to watch an occasional bit of television, I would always have an internal debate with myself: which was more funny– Comedy Central, or CNBC?

Global Economic Crisis: Europe Slides Deeper into Recession

EUflag

According to figures released Monday by the European Union statistics agency, Eurostat, industrial output across the 17 countries of the euro zone fell in November for the third successive month.

The 0.3 percent decline for November was worse than forecast by financial analysts, who had anticipated a slight recovery. Compared to the same month in 2011, industrial production in the euro zone was down by 3.7 percent.

Separate figures released Monday revealed that Europe’s biggest economy, Germany, suffered a sharp contraction in the final quarter of 2012. The German economy, which accounts for 28 percent of all gross domestic product (GDP) in the euro zone, contracted by 0.5 percent. This slashed Germany’s growth rate for all of 2012 to just 0.7 percent, down sharply from the country’s growth rate of 3.0 percent in 2011.

The most significant expression of the economic downturn in Germany is the slump in investment by German companies in plant and machinery. Despite benchmark interest rates close to zero as set by the European Central Bank, investment in plant and machinery fell by 4.1 per cent during 2012. This compares to a 7.3 percent growth in such investment one year earlier.

In line with the latest figures, the German government has cut its forecast for economic growth in 2013 from an already meager 1.0 percent to just 0.4 percent.

The decline in investment in plant and machinery is the clearest indication that German executives expect the contraction in the country’s key economic markets in Europe to continue and deepen. German exports to Europe declined by 2.0 percent in 2012. A full-scale disaster was prevented only by increased German exports to North America, Mexico and the Far East.

Germany’s export industry is also threatened by the rise in the value of the euro, which has gained 8 percent against the US dollar in the past six months. At a meeting of business leaders in Luxembourg at the start of this week, the outgoing head of euro-area finance ministers, Jean-Claude Juncker, expressed concern over the rise in the value of the euro for European exports.

Germany is currently the only major European country to be experiencing even a minimal level of growth. According to figures from the French Central Bank, the continent’s second largest economy, France, barely avoided sinking officially into recession by posting 0.1 growth in the third quarter of 2012. In both the second and fourth quarters the national economy contracted.

Inside the euro zone itself, seven countries are officially in recession, with Greece, Portugal, Spain and Italy mired in deep slumps. Outside the euro zone, Great Britain is expected to slide into a “triple dip” recession in 2013.

The increasingly precarious nature of the European economy is underscored by the situation of one of its key industries—auto. Although some German companies, in particular Volkswagen, were able to expand their sales in some parts of the world, auto markets in Europe are shrinking dramatically. VW sales dropped by 6.5 percent in Western Europe, excluding Germany.

According to the region’s biggest car makers, new car registrations in the European Union fell by 8.2 percent in 2012 to a little more than 12 million units, the lowest level since 1995. In Germany, the drop in car sales was relatively modest—2.9 percent in 2012 compared with the previous year, but in other European countries the slump was far more pronounced.

Auto sales in Spain fell by 13.4 percent, in France by 13.9 percent and in Italy by 19.9 percent. Auto registrations in Greece slumped by over 40 percent compared to 2011.

The recession in the auto industry is worsening. December was the worst month for new car registrations in 2012, declining by 16.3 percent across the EU. Auto sales have now been falling for the past 15 months.

Auto makers have responded to the downturn in sales with a new wave of job cuts. A month ago, GM-Opel announced it was winding down its operations at its German plant in Bochum.

Just last week France’s Peugeot-Citroen reported a 16.5 percent fall in sales worldwide, blaming “the crisis affecting the European automobile market,” and on Tuesday, Renault announced plans to cut 7,500 jobs in France by 2016.

Across the channel, the Japanese carmaker Honda issued a statement Friday announcing 800 job cuts at its UK plant near Swindon, citing the fall in demand across Europe.

The economic and social catastrophe enveloping Europe is being intensified and exploited by the European ruling class to slash the wages and social conditions of the continent’s workers to a level approaching those in the special economic zones of China and the Far East.

Fully aware of the dire social implications, European leaders are determined to intensify austerity measures. In his discussions Monday with Alexis Tsipras, leader of the Greek SYRIZA movement, German Finance Minister Wolfgang Schäuble declared once again that there is no alternative to austerity in Europe.

The lack of profitable returns in European industry combined with the readiness of the world’s leading central banks to make virtually interest-free credit available to the banks is fueling a new junk bond bubble. The Financial Times on Monday noted that the year 2012 was characterized by a “dash for trash in global markets,” and, in a reference to the financial crash of 2008, evoked a “sense of déjà vu.”

Un-Recovery Continues As Beige Book Lives Up To Its Name

In its somewhat typical fashion, the Beige Book was dominated by the four 'M' words 'mixed', 'moderate', 'measured', and 'modest' as any weakness was blamed on fiscal cliff uncertainty (even though macro data and the market itself seems to have shrugg...

Why the Housing Recovery is Nearly Homeowner-Less

An Inequitable Housing Recovery

Darwin Bond-Graham

 The financial crisis of 2008 was terrible for homeowners saddled with heavy mortgage payments, especially the millions of low-income, first-time buyers who were tempted to buy in with deceptive loans during the height of the housing bubble. About 4 million foreclosures have been completed since the financial crisis of 2008, according to CoreLogic, a data provider to the real estate industry. Since 2006, when subprime loans first began to default in large numbers, there have been 9.4 million foreclosures initiated, according to the Federal Reserve Bank of New York (US Fed). To a select group of hedge fund and investment bankers the financial crisis that pivoted on these foreclosures was the opportunity of a lifetime. They made billions from the crash by wagering against the stability of the US housing market.

Now some of the same elite investors are tacking backward and betting on a recovery of the housing market. It's a strange recovery though, propelled not so much by families seeking their own piece of the American dream, but instead by the US Fed's monetary policies. Low-interest rates fostered by the Fed are causing big-money investors to purchase foreclosed single-family homes in blocks of hundreds, even thousands. Expected gains in home prices are also leading hedge funds and investment bank traders to gamble on housing derivatives.

Like the so-called jobless recovery, characterized by rising business earnings in the midst of high unemployment, the nascent housing recovery is not propelled by a rise in homeownership rates, employment and incomes. Instead, foreclosure rates remain high, as does do unemployment figures, and there's a big backlog of bank-owned properties that have yet to hit the market. Meanwhile, many former homeowners have been relegated to the status of renters. If home prices are truly embarked on a sustained rise, the big gains in any new equity created will likely accrue to a smaller number of owners, many of them corporate investor-landlords, and to a few elite financial speculators positioned to make complex derivatives bets on housing bonds. That's how it's playing out so far.

2007's "Big Short"

To understand the current dynamics in the housing market, it helps to go back in time just before the crash. The collapse of the US housing market was the catalyst of the global financial crisis of 2008, and the root source of the last five years of economic stagnation. It was skyrocketing real estate prices that facilitated the inflation of the largest debt bubble in history, allowing Americans to take out unsustainable consumer loans so long as the equity in their homes grew. The bubble burst because real wages continued to decline, total consumer debts continued to grow, and many of Wall Street's derivative innovations turned out to be cynical products designed merely to package up unsustainable obligations and offload them onto some other sucker's books. The rest is history. Millions were foreclosed on, and the economy hemorrhaged jobs.

[Insert graph of delinquent debt balances by loan type]

A few prescient investors saw it coming and wagered that the US housing market would collapse. They made billions on that bet, literally sucking money from the accounts their counterparties - banks and insurance companies who believed that a decline in home prices across all US regions was impossible.

The mechanics of the bet were conceptually simple, if technically complex: Bearish speculators identified mortgage bonds they thought were toxic, comprised of thousands of individual home loans that were sure to default if interest rates rose or if the unprecedented rise in home prices even just slowed a little. These few contrarian investors then purchased credit default swap (CDS) contracts, synthetic derivative products created to insure an investor against the possibility of defaulting mortgage bonds.

CDSs had two sides, the buyer and seller, and involved a zero sum wager. If homeowners continued to make payments on subprime mortgages, then the buyer of CDS insurance merely paid out a small premium each year. However, if the market stumbled and mortgages within the bonds that comprised larger mortgage-backed securities began to default in large numbers, then the seller of the CDS would owe huge sums of money to the buyer.

Author Michael Lewis called this the "Big Short" in his book of the same title because it involved a monumental short-selling strategy. Derivatives made short-selling a strategic possibility with the new multi-trillion-dollar global market of US mortgage credit. Investors had no need to actually own subprime mortgaged bonds, or to borrow these assets, as is traditionally required in the short-selling strategies of the pre-derivatives revolution. Instead, an investor could “synthetically gain exposure" to subprime risk, as they say in Wall Street parlance, simply by entering into a free-standing swap contract with a willing counterparty.

Another popular means of shorting housing was to make directional bets on the price of subprime mortgage-backed securities through the ABX.HE Index. "ABX" stands for asset-backed security, and "HE" stands for home equity, denoting to an investor that the index tracks the value of credit default swaps tied to subprime mortgage bond securities. The biggest investment banks involved in creating subprime mortgage-backed securities like collateralized mortgage obligations (CMOs) and collateralized debt obligations (CDOs) created the ABX.HE Index in 2006, just in time for short-sellers to game it to their advantage.

A managing director at Goldman Sachs, one of the firms instrumental in launching the ABX.HE Index, explained that it was designed to provide investors with "a simple and efficient way to gain or hedge exposure to home equity asset-backed

Like other derivatives, however, the ABX.HE would actually become a tool for highly leveraged speculation by hedge funds, many of which had no real holdings of the housing assets from which the indices' value and cash flows derived. One could simply enter into a trade requiring the exchange of cash flows that changed depending on the value of referenced securities, in this case, the value of credit default swaps tied to subprime debt that was only financially viable if home prices continued to rise and create homeowner equity.

After news began to spread within Wall Street's upper echelons that subprime mortgage bonds were beginning to turn sour, more and more traders sought ways to bet against the entire market. Goldman Sachs quickly used the ABX.HE to establish short positions for the bank's proprietary funds, and for several favored clients.

According to Richard Stanton and Nancy Wallace, scholars at the UC Berkeley Haas Business School who have studied pricing and trade patterns of credit derivatives, "trading in the ABX.HE index CDS delivered two of the largest pay-outs in the history of financial markets: The Paulson & Co. series of funds secured $12 billion in profits from a single trade in 2007; and Goldman Sachs generated nearly $6 billion of profits (erasing $1.5 to $2.0 billion of losses on their $10 billion subprime holdings) in 2007."

[Insert graph of the ABX.HE Index collapse] 

NOTE: "Markit" appears to be misspelled in graph. Should be "Market"; also should be comma after "January 9, 2006"/ pmf

Goldman Sachs' and  Paulson & Co.'s earnings became the source of an investigation by the SEC. The bank created subprime mortgage-backed securities and sold them to several German banks, but then, along with the Paulson & Co. hedge fund, bet against these very same securities. The SEC fined Goldman Sachs $550 million (a mere fraction of the profits). Paulson & Co. paid no such fine and admitted no wrongdoing.

Other beneficiaries of the foreclosure crisis included Kyle Bass, the Dallas hedge fund manager who also shorted subprime mortgage-backed assets using credit default swaps. Bass's Hayman Capital reportedly reaped half a billion dollars.

Greg Lippman, a trader with Deutsche Bank in 2006, pestered dozens of hedge funds and other wealthy investors in a sales blitz to convince clients on his similarly designed bet to short US home prices. According to Michael Lewis, who interviewed dozens of people who put on the "Big Short" trade, Lippmann had distilled his strategy into a data-rich presentation titled "Shorting Home Equity Mezzanine Tranches."

All of the derivative tools used by speculators to short the market before the financial crisis still exist. Few regulatory changes were made to reign in this kind of high-stakes gambling using the synthetic exposure of derivatives, indices and short-selling techniques.

Fed Creates Opportunities to "Go Long"

Like the jobless recovery in corporate profits that began in 2010, the housing market's current recovery is characterized by rebounds in securities prices that do not necessarily reflect any widely shared economic improvements for most Americans. Instead, the recovery seems to be propelled by federal monetary policy.

The US Federal Reserve's purchase of billions of mortgage-backed securities is most responsible for the nascent housing recovery, say many analysts. The Fed has committed to buying upwards of $40 billion a month into 2015 (totaling anywhere from $480 to $960 billion) in mortgage-backed securities. The effect of the Fed's purchases is to drive up the price of mortgage bonds, which inversely reduces the yields on the bonds, and eases credit, theoretically making home loans cheaper and inducing more prospective home buyers to dive into the market. That's the logic the Fed's board is ostensibly using at least.

Home prices have decidedly responded. The Case-Shiller Index, which tracks changes in home values in major cities, showed definite increases in year-over-year values from 2011 to 2012. CoreLogic's Home Price Index showed a similar rise, with home values up more than 6 percent in October 2012, compared with the prior year.

Skepticism abounds, however. "The reality is that quantitative easing has made it cheaper for the government to borrow, has artificially propped up the housing market (making it take longer to recover), and has dramatically manipulated the distribution of capital in financial markets," said Anthony Randazzo, director of economic research at the Reason Foundation. "And the economy has not been in recovery." Randazzo said the Fed's mortgage-backed securities purchases are mostly benefitting the top 10 percent of Americans who own the bonds and stocks that are rising in price as a result of the Fed's purchases.

Even economists within the Federal Reserve are noting that while the government's mortgage securities purchases are lifting home prices, they are not necessarily helping the average American buy a house. Michael Bauer of the Federal Reserve Bank of San Francisco noted in a May 2012 report, "the link between rates on mortgage-backed securities and actual mortgage rates has weakened in the wake of the financial crisis." In other words, the Fed's ability to stimulate lending and get houses into the hands of individual home buyers isn't working as planned, but still home prices are rising.

Foreclosure to Rental Mills

There are buyers ready and able to take advantage of the Fed's macro-economic influence on home prices: large investors seeking to buy up what they've identified as a "new-asset class," single-family residential homes in select suburban housing markets.

Some of these companies have already amassed portfolios of thousands of foreclosed and short-sale homes at historically low prices and are busy converting them into rentals. The eventual increase in the value of these homes is an added enticement. Projected yields are high enough to justify purchases of single-family homes as an asset that will inflate greatly in value. If prices continue to increase, private equity buyers could hold the properties for a few years and then make an "exit," as they say in the industry, and book a big profit.

Some companies like WayPoint of Oakland, California, already own portfolios of thousands of homes purchased at dramatically low prices, most of them obtained after heavily indebted owners were forced to abandon them. WayPoint's holdings are concentrated in the San Francisco Bay Area, Los Angeles, Phoenix, Chicago and Atlanta, according to the company's web site. Menlo Park private equity firm GI Partners has committed over $1 billion to fund Waypoint's expansion.

Others have copied WayPoint's foreclosure-to-rental model and are buying up tens of thousands of distressed properties across the US to convert vast stocks of residential homes into rental housing. The Blackstone Group private equity fund has already spent $1 billion to buy up over 6,500 single family homes in multiple markets, assembling these into what the firm is calling its "single-family rental home platform." In a public relations video Blackstone created for its real estate management company, Invitation Homes, the firm's head of global real estate, Jon Gray, says, "I think at its heart we're making a bet on America with this investment strategy. We're betting that housing prices are going to begin to recover."

McKinley Capital, another Oakland private equity real estate investor, is buying foreclosed single family homes at prices discounted up to 80 percent of their 2006 high in California's hard-hit Central Valley. "McKinley plans to resell the houses in about five years for double what it paid and is targeting 20 percent annualized returns for its investors, which include wealthy individuals," according to a report in the Wall Street Journal on the foreclosure-to-rental business.

Another foreclosure-to-rental mill, Silver Bay Realty Trust, described its business strategy in a December 2012 prospectus issued to investors: "As the housing market recovers and the cost of residential real estate increases, so should the underlying value of our assets. We believe that rental rates will also increase in such a recovery due to the strong correlation between home prices and rents. This trend also leads us to believe that the single-family residential asset class will serve as a natural hedge to inflation. As a result, we believe we are well positioned for the current economic environment and for a housing market recovery."

Silver Bay owns more than 2,450 houses and plans to invest a quarter-billion dollars to obtain another 3,100 homes in Arizona, California, Florida, Georgia, Nevada, North Carolina and Texas, according to the company's SEC filings.

Mike Orr, director of the Center for Real Estate Theory and Practice at Arizona State University's Carey School of Business, reported investors are buying up as much as a third of the homes selling in the greater Phoenix market today. "I know of a normal home that recently received 95 written offers, 51 from investors and 44 from owner occupiers," said Orr. "You can take away the 51 investors and you still have 44 owner occupiers trying to buy one home. However, investors are buying with cash, so they usually win these competitive situations, leaving owner occupier buyers frustrated." Orr believes that the presence of investors is causing prices to rise in Phoenix because of their buying power.

Atlanta Realtor Bruce Ailion also believes investors are not just responding to the Fed's stimulus, but that the presence of large investors is further increasing home prices. "In my market, private equity and hedge funds are driving up prices," Ailion recently told reporters with CBS News.

The end result is that many housing markets have already consolidated around fewer landlord-owners and an increased number of renters whose economic situations still prevent them from buying a home.

Derivatives Bets on the Recovery

Some of these same speculators who shorted subprime housing debt in 2006 and 2007 have already tacked a complete opposite bet, expecting home prices to rise due to the Fed's mortgage bond purchases. Investors like former Goldman Sachs trader Josh Birnbaum, who now runs the Tilden Park hedge fund, are telling clients to put their money behind subprime mortgage bonds, many of which are rising in value. According to a recent Bloomberg News report, Birnbaum's firm is posting a 30 percent gain in 2012, mostly from bets favoring price increases in subprime mortgage bonds that lost upwards of 80 percent of their value during the financial crisis.

Birnbaum was one of the architects of Goldman Sachs' big short bet against subprime housing in 2006 through the ABX.HE Index. According to William Cohan, author of Money and Power: How Goldman Sachs Came to Rule the World, Birnbaum quit the investment bank after a $10 million bonus check left him feeling shorted himself for putting on the firm's big short bet. Birnbaum's hedge fund is reportedly using the same index this time around to gain the opposite kind of exposure to housing debt.

Joining Birnbaum's hedge fund in this strategy is John Paulson's firm, Paulson & Co., which posted the biggest gains of all thanks to the housing meltdown five years ago. Paulson's fund reportedly began buying housing mortgage securities back in 2008 and 2009, just after they'd collapsed in price.

In a letter to his investors earlier this year, Kyle Bass of Hayman Capital wrote that, with respect to subprime housing debt, "the stars are aligned for a continued recovery of this asset class today."  Bass told reporters recently that more than half of Hayman Capital's funds are currently invested in subprime mortgage bets.

Greg Lippmann, the architect of Deutsche Bank's $1.5 billion big short bet, is now running a hedge fund that is going long on US subprime debt. Libremax Capital, which is said to manage about half a billion dollars, mostly sourced from wealthy investors, is said to be investing in subprime mortgage bonds of early 2005 "vintages," which have already purged many of the delinquent debts from their rolls. "We believe securitized [home mortgage] products are fundamentally cheap to broader markets," Lippman told reporters last year when asked about his fund's strategy. (http://www.efinancialnews.com/story/2011-02-18/greg-lippmann-goes-long-on-sub-prime-bonds)

The biggest hedge fund winner in 2012 is the New York-based Metacapital. Its “Mortgage Opportunities Fund” has squeezed a 520 percent profit on the year by betting on housing price increases owing to the Fed’s purchase of Fannie Mae and Freddie Mac mortgage bonds.

A Home Owner-less Housing Recovery?

According to data from the Federal Reserve Bank of St. Louis, homeownership rates have plummeted by 3 percent nationally since 2004, falling to a low not seen since the mid-1990s. The backlog of delinquent mortgage loans and in-process foreclosures means that millions more will lose their homes and become renters, couch-surfers or homeless in the next few years.

[Insert USFRB St. Louis FRED data on homeownership rate decline here]

While the foreclosure rate may be dropping nationally, it remains extremely high compared to historical averages. Approximately 186,000 homes, or one in every 706 units of housing, were foreclosed on in October, 2012. There have been about 5 million bank repossessions of housing between 2006 and 2012, according to RealtyTrac.

According to economists with the Federal Reserve Bank of San Francisco, only 10 percent of homeowners who lose their houses because of default on mortgage payments will regain access to mortgage markets in the next 10 years. This means that there are now millions of Americans who will be closed out of the housing market during not only this peculiar recovery phase, characterized by a rise in prices and private equity buyers acquiring much of the inventory, but also likely locked out of the housing market down the road, long after homes have regained much of their value.

Complex Chavez Recovery

Stephen Lendman. rinf.com | Major surgery for any reason is daunting. Imagine four times in 18 months for the same illness. On December 11,...

UK Elections: Business As Usual Triumphs

UK Elections: Business as Usual Triumphs

by Stephen Lendman

May 7 general elections approach. Britain is like America. It's all over before polls open. Monied interests win every time.

Ordinary people lose out more than ever in modern memory. It shows in opinion polls. 

Only 16% of voters trust politicians. Why anyone besides well-off Brits do they'll have to explain.  

It doesn't matter who wins on Thursday. Torries and New Labour are even in polls. They're like Republicans and Democrats in America - two sides of the same coin, not a dime's worth of difference between them.

Neither major party is expected to win a majority. Expect coalition government with smaller parties to follow. They largely support the same regressive policies.

All politicians lie. Nothing they say can be believed. New Labour leader Ed Miliband maintained the standard saying Britain's "clear choice on Thursday (is) between a Labour government that will put working people first or a Tory government that will only ever work for the privileged few."

Britain's "clear choice" is none at all. Monied interests run things. Bankers top the pecking order.

Politicians come and go. One major party or the other wins. Things stay the same.

Neoliberal harshness, financialization, weak unions, offshoring manufacturing, privatizing state enterprises, deregulation, and disappearing social justice characterize Britain's economy.

London's Guardian warned of a "hit list of (more) welfare cuts" coming.

Voltaire once explained British society saying its people "are like their own beer; froth on top, dregs at bottom, the middle excellent."

Today's froth never had it better. Poor Brits are enduring their hardest times since post-WW II recovery.

Middle class society is fast disappearing - like in America. Britain's weekly Spectator magazine says it's "shrinking and sinking."

"The lifestyle that the average earner had half a century ago -  reasonably sized house, dependable healthcare, a decent education for the children and a reliable pension - is becoming the preserve of the rich." 

"Middle-class pensioners look on amazed at how their children, now into adulthood, seem to have a far harder time."

Rich elites run things more than ever. They doubled their wealth since 2009. The average worker earns less when adjusted for inflation and wage cuts.

Former Bank of England governor Mervyn King said middle class society is enduring the longest squeeze in living memory. Rich folks never had it better.

London is unaffordable to live in. House prices average over $750,000. The average wage is less than $50,000.

In January, thousands participated in a March for Homes rally. They demanded solutions to unaffordable housing prices - worsening as they escalate.

They carried banners saying "People before profit." Build council homes (reasonably priced ones for working class people)." "Take the wealth of the 1%."

Rents surged an average 13% annually since 2010. So have repossessions and evictions. Britain increasingly is unfit to live in - just like America.

New Labour claiming "Britain can be better" rings hollow for millions enduring increasing hardships.

They're "all the same," growing numbers of voters say about a system increasingly ignoring their needs.

They promise one thing. They do another. Serving monied interests and allying with Washington's war machine matter most.

Respect Party Bradford West MP George Galloway is running for reelection. He calls himself "your traditional, much-loved black cab."

"You don't know what you've got until it's gone. There are not a lot of us black cabs around any more."

His constituency is one of Britain's poorest. It's struggling to reinvent itself. Despite his best  best efforts, he's up against a corrupted, uncaring system.

He's one of 650 House of Commons members. "Recovery, what recovery," he asks?

"We keep hearing that the economic recovery is better in Britain than in any other European country."

"Well it may be in London and the Home Counties, but it certainly isn't here" and most other places in Britain.

Millions are suffering. Food banks are proliferating, Galloway explained. "Can you imagine what the country will look like by 2020 if these barbarians are returned" to power, he stressed.

"We need investment in jobs and infrastructure…But it won't come under the Tories or this miserable local Labour administration." Or New Labour if it bests the Torries nationwide.

Social justice is fast disappearing. Force-fed austerity is official UK policy. 

So is growing wealth inequality. It's risen four times faster since 2008 compared to the seven preceding years.

It bears repeating. Britain is like America - governed of, by and for its privileged elites alone.

It's corrupt, fundamentally unfair and ruthlessly anti-democratic. Young people have no futures.

An entire generation is lost. Social welfare cuts hits Britain's most disadvantaged hardest.

Inequality is booming. Politicians able to make a difference don't care. Increasing amounts of public wealth in private hands is a slippery slope to third world status.

Margaret Thatcher escalated inequality. She oversaw one of the greatest ever transfers of wealth to British society's most well-off.

David Cameron is worse. New Labour's Ed Miliband is no better. Robbing poor Peter to pay rich Paul is official bipartisan policy.

It's endorsed by Liberal Democrats, Britain's third ranked party. It's neither liberal nor democratic. It's hard right like the rest.

On Thursday, voting options are death by hanging or firing squad. Ballot choices exclude government serving everyone equitably.

Stephen Lendman lives in Chicago. He can be reached at [email protected] 

His new book as editor and contributor is titled "Flashpoint in Ukraine: US Drive for Hegemony Risks WW III."

http://www.claritypress.com/LendmanIII.html

Visit his blog site at sjlendman.blogspot.com. 

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.


It airs three times weekly: live on Sundays at 1PM Central time plus two prerecorded archived programs. 

Can Malaysia withstand the next financial crisis?

As developed economies of the world still continue their struggle to recover from the global financial crisis in 2008, the lack of confidence in global economic stability has placed greater demand on emerging markets to cushion themselves for the next crash. While woefully unsustainable debt levels deepen and weak regulatory oversight persist, the lack of tangible reforms creates an imperative for countries like Malaysia to stay ahead of the curve.

This was the theme of the Perdana Leadership Foundation’s sixth CEO Forum held in Kuala Lumpur last week, where more than thirty panelists analyzed the shaky state of the global economy and offered insights into Malaysia’s strengths and vulnerabilities, as well as the country’s susceptibility to external economic turbulence. In addition to market-related vulnerabilities, panelists also identified inter-religious anxieties between communities as factors that could put national unity and political stability at risk. 

Tan Sri Dato’ Dr. Lin See Yan, a trustee of the Tan Sri Jeffrey Cheah Foundation, identified how high fences built to withstand economic shocks and de-risk the financial system are seldom designed for all possibilities. He branded the European Union as the weakest link in the global financial system, noting that the bloc’s debt problems kept growing, austerity has proven to be counter productive, the euro currency remains overvalued, and the European Central Bank (ECB) has stagnated in the midst of its bond-buying strategy.

Lin also noted the possibility of another crisis originating from within the United States due to vulnerabilities posed by the country’s ballooning $17 trillion debt levels, the growing housing bubble, and the persistence of trading high-risk financial products backed by complex securitizations. He also raised concerns over recent data on the Chinese economy, which has shown a decline in fixed asset investments, raising speculation about whether or not the Chinese authorities would introduce a stimulus package. 

Tan Sri Azman Yahya, executive chairman of Symphony Life, believes that growth in China will continue to be on the upswing despite concerns of deceleration, even without significant investment, by virtue of Beijing’s prudent economic reforms. China has already announced at the recent G20 meeting of finance ministers that it will not make major policy adjustments in the form of stimulus despite slightly lower growth indicators. Reforms will be prioritized to stabilize employment and contain systemic risks such as widespread default. 

High government deficits, unprecedented government and private sector debt levels, and low household savings are deeply worrying trends in mature economies, according to Yahya, who claims that eventual tapering by the US Federal Reserve to cease quantitative easing (QE) measures could trigger a loss of confidence in the US dollar, causing an offloading and crash of US securities capable of tanking global markets. 

Yahya identified the risks posed by the lack of tangible financial sector reforms, the unsustainable US debt bubble, the growing loss of confidence in the US dollar, and surmised that the next crisis may strike within five years. He identified the high growth levels of Asia-Pacific countries as a buffer to crises emanating from stagnate western economies, noting how China’s middle class is set to expand to one billion by 2025, while growth will be increasingly be powered by consumption. 

Panelists at the forum generally agreed that the Asia-Pacific region is in a far healthier state today in comparison to the 1997 crisis, as China’s growth strategy moves away from the investment-driven template to more sustainable consumption-led expansion. Countries in the ASEAN region are also cooperating at higher levels. Analysts agree that Malaysia has proven to be fairly resilient and adept at crisis management, as it managed to navigate through treacherous economic periods while retaining consistently healthy growth levels over the past two decades. 

The country defied the IMF’s economic orthodoxy and introduced capital control measures during the 1997 Asian financial crisis to counter the short selling of the Malaysian ringgit by currency speculators, which triggered dramatic depreciation and rapid falls in stock market capitalization. Malaysia recovered faster than its neighbors and consolidated its banking system, putting buffers in place by introducing broader market regulations and strengthening banks to withstand shocks. 

During the global financial crisis in 2008, triggered by the bursting of the US housing bubble and the subsequent collapse of large financial institutions trading toxic mortgage-related financial products, the country found itself better prepared. The way the crisis struck in 1997 took Malaysian policymakers totally off guard. The country’s economy was highly stable and experiencing growth at 8 percent; loans were being repeatedly prepaid and Malaysia was stepping in rescue Thailand after attacks on the baht.

The current scenario also demands that countries expect the unexpected. The general consensus among panelists the Perdana forum was that a new financial crisis could present itself at some point within the next eighteen months to five years, with the potential for several mini-crises to bubble up and trigger recessionary depression. It is nearly impossible to accurately pinpoint when the next crisis will hit, but there are numerous flashpoints to consider.

In addition to vulnerabilities stemming from uncontrolled derivative trading and speculative hot money flows, debt and bubbles loom. During the 2008 crisis, insolvent private banks and lending institutions were deemed too-big-to-fail, but today, central banks are on the road to inheriting that status. Debt levels have ballooned to unprecedented levels driven by QE and low interest rates. Stagnate wages and easy credit has goaded consumers to keep borrowing to maintain consumption.

Both the United States and the United Kingdom are experiencing high unemployment levels and dramatic income inequality, giving rise to greater levels of social unrest while the stock markets of both countries have performed above par – surpassing the highs of pre-crisis levels. The sharp ascent of share prices, which has been heralded as proof of an economic recovery, does not correlate with rising activity in the productive economy or with per capita income.

The distinguished economist Ha-Joon Chang has referred to these developments as ‘the biggest stock market bubble in modern history.’ It is clear that share prices do not reflect real economic activity. The core of the problem is that successive rounds of QE have increased liquidity rates and fuelled asset bubbles rather than being channeled into productive assets.

Panelists addressed how many of the new jobs being created in mature economies are low-wage positions that offer little career mobility. The broad appeal of protest campaigns organized by fast-food workers to demand a living wage is a testament to the strains on ordinary people who are unable to meet the cost of living. Americans are pessimistic about their nation’s economic recovery policies because many find themselves facing more trying domestic circumstances.

Tun Dr. Mahathir Mohamad attended the Perdana forum to give the closing keynote address, where he likened the implementation of solutions to avert economic crises to a medical doctor treating a patient, stressing the need to understand the systemic contradictions of the global financial system. Dr. Mahathir denounced fractional reserve banking practices, which result in banks lending far greater amounts of money than they actually possess in cash reserves, and the leveraging practices taken advantage of by currency speculators and hedge funds.

The former Malaysian prime minister accused Europe and the US of being in a state of denial as to how markets are manipulated, primarily because the political classes themselves benefit from speculation. Dr. Mahathir believes that the role of the financial sector is overemphasized in national economies and advised greater market regulation. Governments must be ready to step in to limit the abuses of the banking system, according to Mahathir, who characterized the inherent inequality of the modern age as one where 99 percent of people are beholden to the ultra-wealthy 1 percent, citing the slogan popularized by the Occupy Wall Street protest movement.

Mass protest movements demanding accountability from Wall Street have remained potent because the underlying conditions that generated the crisis have not been addressed in any meaningful way. Instead of steering monetary policies in a sensible direction and broadening regulatory oversight to identify risky financial products and prevent predatory speculation, the banking lobby has strong-armed western politicians into accepting a growth model where short-term profits for the few take precedence over long-term investments in productive assets for the many.

Elsewhere in the world, the economic power and political autonomy of BRICS countries and their plans to establish a development bank to finance infrastructure growth throughout the developing world offers a far more sustainable investment model. To offset the risks of future crises, it is imperative to find the political courage to reduce the importance of the non-productive financial sector in national economies in favor of investments into productive assets that create infrastructure and job opportunities.

Panelists at the Perdana forum argued that even if measures are taken to bolster productive assets, financial and economic crises may strike in unexpected ways: resulting from cyber threat vulnerabilities, sudden geopolitical instability, conflicts over resources and the pricing of resources, and complications that can result from the use of non-traditional currencies.

Malaysia is considered a safe investment destination due to its political stability and imperviousness to natural disasters; the country’s competent young workforce is eager to enter innovative service sector positions, a major asset in contrast to other Asian countries struggling to maintain population growth. To meet the present development aspirations, it is necessary for the country to protect against both external and internal crises.

The Malaysian leadership faces a difficult balancing act on all fronts. It must do more to improve inter-communal harmony without rolling back civil liberties. Despite the country’s strong performance legitimacy, trust and confidence in the government and the integrity of institutions remains low due to endemic corruption. There is a need for a comprehensive social safety net system to address rising income inequality on a needs-basis.

Simultaneously, economic circumstances demand that developing countries remove energy and social subsidies in order to increase efficiency and become a more attractive destination for capital. Navigating through the crises ahead will require bold leadership. Malaysia will be in a better position to withstand turbulence if it takes meaningful steps to reduce income disparities and pursues inclusive social policies that will restore grassroots trust in the leadership.

This article appeared in the September 29, 2014 print edition of The Malaysian Reserve newspaper.

Nile Bowie is an independent journalist and political analyst based in Kuala Lumpur, Malaysia. His articles have appeared in numerous international publications, including regular columns with Russia Today (RT) and newspapers such as the Global Times, the Malaysian Reserve and the New Straits Times. He is a research assistant with the International Movement for a Just World (JUST), a Malaysian NGO promoting social justice and anti-hegemony politics. He can be reached at [email protected].

Real Business Leaders Want to Save Capitalism

A few weeks ago I was visited in my office by the chairman of one of the country’s biggest high-tech firms who wanted to talk about the causes and consequences of widening inequality and the shrinking middle class, and what to do about it.

I asked him why he was concerned. “Because the American middle class is the core of our customer base,” he said. “If they can’t afford our products in the years ahead, we’re in deep trouble.”

I’m hearing the same refrain from a growing number of business leaders.

They see an economic recovery that’s bypassing most Americans. Median hourly and weekly pay dropped over the past year, adjusted for inflation. 

Since the depths of the Great Recession in 2009, median real household income has fallen 4.4 percent, according to an analysis by Sentier Research. 

These business leaders know the U.S. economy can’t get out of first gear as long as wages are declining. And their own businesses can’t succeed over the long term without a buoyant and growing middle class.

They also recognize a second danger.

Job frustrations are fueling a backlash against trade and immigration. Any hope for immigration reform is now dead in Congress, and further trade-opening agreements are similarly moribund. Yet the economy would be even worse if America secedes into isolationism.

Lloyd Blankfein, CEO of Goldman Sachs, warned recently on “CBS This Morning” that income inequality is “destablilizing” the nation and is “responsible for the divisions in the country.” He went on to say that “too much of the GDP over the last generation has gone to too few of the people.” 

Blankfein should know. He pulled in $23 million last year in salary and bonus, a 9.5 percent raise over the year before and his best payday since the Wall Street meltdown. This doesn’t make his point any less valid. 

Several of business leaders are suggesting raising the minimum wage and increasing taxes on the wealthy.

Bill Gross, Chairman of Pimco, the largest bond-trading firm in the world, said this week that America needs policies that bring labor and capital back into balance, including a higher minimum wage and higher taxes on the rich. 

Gross has noted that developed economies function best when income inequality is minimal.

Several months ago Gross urged his wealthy investors, who benefit the most from a capital-gains tax rate substantially lower than the tax on ordinary income, to support higher taxes on capital gains. “The era of taxing ‘capital’ at lower rates than ‘labor’ should now end,” he stated. 

Similar proposals have come from billionaires Warren Buffett and Stanley Druckenmiller, founder of Duquesne Capital Management and one of the top performing hedge fund managers of the past three decades. Buffett has suggested the wealthy pay a minimum tax of 30 percent of their incomes.

The response from the denizens of the right has been predictable: If these gentlemen want to pay more taxes, there’s nothing stopping them. 

Which misses the point. These business leaders are arguing for changes in the rules of the game that would make the game fairer for everyone. They acknowledge it’s now dangerously rigged in the favor of people like them.

They know the only way to save capitalism is to make it work for the majority rather than a smaller and smaller minority at the top.

In this respect they resemble the handful of business leaders in the Gilded Age who spearheaded the progressive reforms enacted in the first decade of the twentieth century, or those who joined with Franklin D. Roosevelt to create Social Security, a minimum wage, and the forty-hour workweek during the Depression.

Unfortunately, the voices of these forward-thinking business leaders are being drowned out by backward-lobbying groups like the U.S. Chamber of Commerce that are organized to reflect the views of their lowest common denominator.

And by billionaires like Charles and David Koch, who harbor such deep-seated hatred for government they’re blind to the real dangers capitalism now faces.

Those dangers are a sinking middle class lacking the purchasing power to keep the economy going, and an American public losing faith that the current system will deliver for them and their kids.

America’s real business leaders understand unless or until the middle class regains its footing and its faith, capitalism remains vulnerable.

Seattle is Right

By raising its minimum wage to $15, Seattle is leading a long-overdue movement toward a living wage. Most minimum wage workers aren’t teenagers these days. They’re major breadwinners who need a higher minimum wage in order to keep their families out of poverty.

Across America, the ranks of the working poor are growing. While low-paying industries such as retail and food preparation accounted for 22 percent of the jobs lost in the Great Recession, they’ve generated 44 percent of the jobs added since then, according to a recent report from the National Employment Law Project. Last February, the Congressional Budget Office estimated that raising the national minimum wage from $7.25 to $10.10 would lift 900,000 people out of poverty.

Seattle estimates almost a fourth of its workers now earn below $15 an hour. That translates into about $31,000 a year for a full-time worker. In a high-cost city like Seattle, that’s barely enough to support a family.

The gains from a higher minimum wage extend beyond those who receive it. More money in the pockets of low-wage workers means more sales, especially in the locales they live in – which in turn creates faster growth and more jobs. A major reason the current economic recovery is anemic is that so many Americans lack the purchasing power to get the economy moving again.

With a higher minimum wage, moreover, we’d all end up paying less for Medicaid, food stamps and other assistance the working poor now need in order to have a minimally decent standard of living.

Some worry about job losses accompanying a higher minimum wage. I wouldn’t advise any place to raise its minimum wage immediately from the current federal minimum of $7.25 an hour to $15. That would be too big a leap all at once. Employers – especially small ones – need time to adapt.

But this isn’t what Seattle is doing. It’s raising its minimum from $9.32 (Washington State’s current statewide minimum) to $15 incrementally over several years. Large employers (with over 500 workers) that don’t offer employer-sponsored health insurance have three years to comply; those that offer health insurance have four; smaller employers, up to seven. (That may be too long a phase-in.)

My guess is Seattle’s businesses will adapt without any net loss of employment. Seattle’s employers will also have more employees to choose from – as the $15 minimum attracts into the labor force some people who otherwise haven’t been interested. That means they’ll end up with workers who are highly reliable and likely to stay longer, resulting in real savings.

Research by Michael Reich (no relation) and Arindrajit Dube confirms these results. They examined employment in several hundred pairs of adjacent counties lying on opposite sides of state borders, each with different minimum wages, and found no statistically significant increase in unemployment in the higher-minimum counties, even after four years. (Other researchers who found contrary results failed to control for counties where unemployment was already growing before the minimum wage was increased.) They also found that employee turnover was lower where the minimum was higher.

Not every city or state can meet the bar Seattle has just set. But many can – and should.

The Global Banking Game Is Rigged, and the FDIC Is Suing

Taxpayers are paying billions of dollars for a swindle pulled off by the world’s biggest banks, using a form of derivative called interest-rate swaps; and the Federal Deposit Insurance Corporation has now joined a chorus of litigants suing over it. According to an SEIU report:

Derivatives . . . have turned into a windfall for banks and a nightmare for taxpayers. . . . While banks are still collecting fixed rates of 3 to 6 percent, they are now regularly paying public entities as little as a tenth of one percent on the outstanding bonds, with rates expected to remain low in the future. Over the life of the deals, banks are now projected to collect billions more than they pay state and local governments – an outcome which amounts to a second bailout for banks, this one paid directly out of state and local budgets.

It is not just that local governments, universities and pension funds made a bad bet on these swaps. The game itself was rigged, as explained below. The FDIC is now suing in civil court for damages and punitive damages, a lead that other injured local governments and agencies would be well-advised to follow. But they need to hurry, because time on the statute of limitations is running out.

The Largest Cartel in World History

On March 14, 2014, the FDIC filed suit for LIBOR-rigging against sixteen of the world’s largest banks – including the three largest US banks (JPMorgan Chase, Bank of America, and Citigroup), the three largest UK banks, the largest German bank, the largest Japanese bank, and several of the largest Swiss banks. Bill Black, professor of law and economics and a former bank fraud investigator, calls them “the largest cartel in world history, by at least three and probably four orders of magnitude.”

LIBOR (the London Interbank Offering Rate) is the benchmark rate by which banks themselves can borrow. It is a crucial rate involved in hundreds of trillions of dollars in derivative trades, and it is set by these sixteen megabanks privately and in secret.

Interest rate swaps are now a $426 trillion business. That’s trillion with a “t” – about seven times the gross domestic product of all the countries in the world combined. According to the Office of the Comptroller of the Currency, in 2012 US banks held $183.7 trillion in interest-rate contracts, with only four firms representing 93% of total derivative holdings; and three of the four were JPMorgan Chase, Citigroup, and Bank of America, the US banks being sued by the FDIC over manipulation of LIBOR.

Lawsuits over LIBOR-rigging have been in the works for years, and regulators have scored some very impressive regulatory settlements. But so far, civil actions for damages have been unproductive for the plaintiffs. The FDIC is therefore pursuing another tack.

But before getting into all that, we need to look at how interest-rate swaps work. It has been argued that the counterparties stung by these swaps got what they bargained for – a fixed interest rate. But that is not actually what they got. The game was rigged from the start.

The Sting

Interest-rate swaps are sold to parties who have taken out loans at variable interest rates, as insurance against rising rates. The most common swap is one where counterparty A (a university, municipal government, etc.) pays a fixed rate to counterparty B (the bank), while receiving from B a floating rate indexed to a reference rate such as LIBOR. If interest rates go up, the municipality gets paid more on the swap contract, offsetting its rising borrowing costs. If interest rates go down, the municipality owes money to the bank on the swap, but that extra charge is offset by the falling interest rate on its variable rate loan. The result is to fix borrowing costs at the lower variable rate.

At least, that is how it’s supposed to work. The catch is that the swap is a separate financial agreement – essentially an ongoing bet on interest rates. The borrower owes both the interest onits variable rate loan and what it must pay out on this separate swap deal. And the benchmarks for the two rates don’t necessarily track each other. As explained by Stephen Gandel on CNN Money:

The rates on the debt were based on something called the Sifma municipal bond index, which is named after the industry group that maintains the index and tracks muni bonds. And that’s what municipalities should have bought swaps based on.

Instead, Wall Street sold municipalities Libor swaps, which were easier to trade and [were] quickly becoming a gravy train for the banks.

Historically, Sifma and LIBOR moved together. But that was before the greatest-ever global banking cartel got into the game of manipulating LIBOR. Gandel writes:

In 2008 and 2009, Libor rates, in general, fell much faster than the Sifma rate. At times, the rates even went in different directions. During the height of the financial crisis, Sifma rates spiked. Libor rates, though, continued to drop. The result was that the cost of the swaps that municipalities had taken out jumped in price at the same time that their borrowing costs went up, which was exactly the opposite of how the swaps were supposed to work.

The two rates had decoupled, and it was chiefly due to manipulation. As noted in the SEUI report:

[T]here is . . . mounting evidence that it is no accident that these deals have gone so badly, so quickly for state and local governments. Ongoing investigations by the U.S. Department of Justice and the California, Florida, and Connecticut Attorneys General implicate nearly every major bank in a nationwide conspiracy to rig bids and drive up the fixed rates state and local governments pay on their derivative contracts.

Changing the Focus to Fraud

Suits to recover damages for collusion, antitrust violations and racketeering (RICO), however, have so far failed. In March 2013, SDNY Judge Naomi Reece Buchwald dismissed antitrust and RICO claims brought by investors and traders in actions consolidated in her court, on the ground that the plaintiffs lacked standing to bring the claims. She held that the rate-setting banks’ actions did not affect competition, because those banks were not in competition with one another with respect to LIBOR rate-setting; and that “the alleged collusion occurred in an arena in which defendants never did and never were intended to compete.”

Okay, the defendants weren’t competing with each other. They were colluding with each other, in order to unfairly compete with the rest of the financial world – local banks, credit unions, and the state and local governments they lured into being counterparties to their rigged swaps. The SDNY ruling is on appeal to the Second Circuit.

In the meantime, the FDIC is taking another approach. Its 24-count complaint does include antitrust claims, but the emphasis is on damages for fraud and conspiring to keep the LIBOR rate low to enrich the banks. The FDIC is not the first to bring such claims, but its massive suit adds considerable weight to the approach.

Why would keeping interest rates low enrich the rate-setting banks? Don’t they make more money if interest rates are high?

The answer is no. Unlike most banks, they make most of their money not from ordinary commercial loans but from interest rate swaps. The FDIC suit seeks to recover losses caused to 38 US banking institutions that did make their profits from ordinary business and consumer loans – banks that failed during the financial crisis and were taken over by the FDIC. They include Washington Mutual, the largest bank failure in US history. Since the FDIC had to cover the deposits of these failed banks, it clearly has standing to recover damages, and maybe punitive damages, if intentional fraud is proved.

The Key Role of the Federal Reserve

The rate-rigging banks have been caught red-handed, but the greater manipulation of interest rates was done by the Federal Reserve itself. The Fed aggressively drove down interest rates to save the big banks and spur economic recovery after the financial collapse. In the fall of 2008, it dropped the prime rate (the rate at which banks borrow from each other) nearly to zero.

This gross manipulation of interest rates was a giant windfall for the major derivative banks. Indeed, the Fed has been called a tool of the global banking cartel. It is composed of 12 branches, all of which are 100% owned by the private banks in their districts; and the Federal Reserve Bank of New York has always been the most important by far of these regional Fed banks. New York, of course is where Wall Street is located.

LIBOR is set in London; but as Simon Johnson observed in a New York Times article titled The Federal Reserve and the LIBOR Scandal, the Fed has jurisdiction whenever the “safety and soundness” of the US financial system is at stake. The scandal, he writes, “involves egregious, flagrant criminal conduct, with traders caught red-handed in e-mails and on tape.” He concludes:

This could even become a “tobacco moment,” in which an industry is forced to acknowledge its practices have been harmful – and enters into a long-term agreement that changes those practices and provides continuing financial compensation.

Bill Black concurs, stating, “Our system is completely rotten. All of the largest banks are involved—eagerly engaged in this fraud for years, covering it up.” The system needs a complete overhaul.

In the meantime, if the FDIC can bring a civil action for breach of contract and fraud, so can state and local governments, universities, and pension funds. The possibilities this opens up for California (where I’m currently running for State Treasurer) are huge. Fraud is grounds for rescission (terminating the contract) without paying penalties, potentially saving taxpayers enormous sums in fees for swap deals that are crippling cities, universities and other public entities across the state. Fraud is also grounds for punitive damages, something an outraged jury might be inclined to impose. My next post will explore the possibilities for California in more detail. Stay tuned.

______

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

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20 Facts About The Great U.S. Retail Apocalypse That Will Blow Your Mind

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US hypocrisy over ‘Russian aggression’ in Ukraine

As divisions deepen between the eastern and western regions of Ukraine, the backers of the putsch regime in Kiev portray Russia as a reckless aggressor to absolve their own responsibility for engineering the crisis.

While denunciations of Moscow have streamed out of western capitals in recent days over the standoff in Crimea, it should be understood that the political crisis currently unfolding in Ukraine could have been wholly avoided. In attempts to defuse unrest and maintain legal and societal order, ousted President Yanukovich offered remarkable concessions in his proposal to install opposition leaders in top posts in a reshaped government, which was rejected.

Russia expressed readiness to engage in tripartite negotiations with Ukraine and the European Union with the hope that both Moscow and Brussels could play a positive role in Ukraine’s economic recovery, but the EU was unwilling to accept such a proposal. The February-21 agreement was mediated by Russia, France, Germany and Poland and aimed to end the bloodshed in Kiev by reducing presidential powers and establishing a framework for a national unity government, in addition to electoral reform, constitutional changes, and early elections.

There was clearly no shortage of opportunities to ease the polarization of the Ukrainian state through an inclusive political solution, and yet the opposition failed to uphold its responsibilities, resulting in the ouster of Ukraine’s democratically elected leader to the detriment of the country’s political, economic, and societal stability.

As the new self-appointed authorities in Kiev dictate terms and push legislation through a rump parliament, the reluctance of western capitals to address the clearly dubious legitimacy of the new regime suggests that the US and EU condone what is effectively a coup d’état with no constitutional validity.

Read the full story on RT.com

Nile Bowie is a Malaysia-based political analyst and a columnist with Russia Today. He can be reached at [email protected].

No Janet Yellen, The Economy Is NOT “Getting Better”

On Tuesday, new Federal Reserve Chairman Janet Yellen went before Congress and confidently declared that "the economic recovery gained greater traction in the second half of last year" and that "substantial progress has been made in restoring the economy to health".  This resulted in glowing headlines throughout the mainstream media such as this one from [...]

Obama’s Abominable State of the Union

Obama's Abominable State of the Union

by Stephen Lendman

Obama's State of the Union address reflected beginning-to-end empty rhetoric. More on his comments below. 

Throughout five years in office, he's been consistent. Duplicity defines his agenda. He says one thing. He does another. 

In his first State of the Union address, he promised "to get our economy growing again, save as many jobs as possible, and help Americans who'd become unemployed."

He called jobs creation his "number one focus." He promised tax relief for ordinary Americans. He promised help for "8 million Americans paying for college."

Graduates are more indebted than ever. Outstanding debt tops $1 trillion. It's second only to mortgage debt. 

For millions of young Americans, it represents many years of debt bondage. For too many, it reflects lifetime debt.

Obama's been more a jobs destroyer than creator. Phantom numbers conceal today's reality. Official ones are statistical illusions.

Real unemployment exceeds 23%. Longterm unemployment is at record levels.

Over 100 million working-age Americans have no jobs. It's 10 million more than when Obama took office.

In December, 74,000 new jobs were created. Five times that number "left the labor force." They can't find work. 

They're nonpersons. They're ignored. They're not counted. They don't exist. America's official unemployment rate is 7.3%. It's one of many Big Lies.

So is job quality. Most high-pay/good benefit/full-time jobs no longer exist. Part-time/low-pay/poor or no-benefit jobs replaced them.

Many pay poverty or sub-poverty wages. Obama waged war on organized labor. Permanent job losses, rotten ones created, gutted work rules, forfeited security and lost futures followed.

Decades of hard-won gains were lost. Industry got major concessions. Workers were entirely left out. They're worse off today than in generations. They're entirely without rights.

Obama's economic program is no banker left behind. Or war profiteer. Or other corporate favorites. Or America's super-rich.

So-called economic recovery is fake. Protracted Main Street Depression conditions persist. Hard times get increasingly harder.

Millions struggle to get by. Obama ignores America's most disadvantaged. Anti-populism defines him. 

He's beholden to monied interests. Neoliberal harshness is official policy. Force-fed austerity reflects it. Safety net protections eroded on his watch. They're disappearing when most needed.

Obama wants social America destroyed. He cut many vital programs. He wants Medicare and Social Security privatized en route to eliminating them altogether.

He wants America's wealth shifted to its privileged class. Inequality today is unprecedented.

He wants Americans left on their own sink or swim. He pretends otherwise. His rhetoric belies his policies.

His first State of the Union address promised "slash(ed) tax breaks for companies that ship our jobs overseas." Corporate America got new ones instead.

He asked for "a jobs bill on my desk without delay." His plan involved corporate tax cuts. His 2009 $787 stimulus bill handed them $400 billion. 

Doing so didn't create jobs. Through December 2010, more were lost than created. Rotten ones replaced good ones.

Bush and Obama are two sides of the same coin. Their policies benefitted corporations and super-rich elites hugely. They never had it better.

Obama heads a rogue administration. Bipartisan complicity created the greatest wealth disparity in US history. 

Half or more of US households are impoverished or bordering it. Good jobs are disappearing in plain sight. 

Nearly 50 million Americans need food stamps to eat. In November, $11 billion in SNAP benefits were cut through 2016. 

Average households of three lost $29 a month. It's the equivalent of 16 monthly meals. SNAP aid is less than $1.40 per person per meal. 

On Monday, bipartisan complicity agreed on $8.7 billion more SNAP cuts. Expect quick congressional passage. Expect Obama enacting greater harshness into law.

Feeding hungry Americans no longer matters. Before Obama leaves office, SNAP benefits may disappear altogether. 

He demands gutting vital social programs. His rhetoric claims otherwise. It rings hollow.

His policies throughout five years in office reflects reality. He's no friend of ordinary Americans. He's mindless of those most disadvantaged.

Hard times are getting harder. Needy households are increasing exponentially. At the same time, corporate profits are higher than ever.

Obama's annual State of the Union addresses reflect an exercise in empty rhetoric. He's a fraud. He's a moral coward.

He's a serial liar. Nothing he says can believed. Americans are tired of broken promises. 

Over 60% lack confidence in his intention to serve them responsibly. Over 80% distrust political Washington.

Obama's presidency reflects duplicity. It reflects promises made and broken. It reflects public betrayal.

Voter confidence in him is polar opposite from when he took office. He represented hope and change. He delivered business as usual. 

His Tuesday night address was a litany of lies and false promises.

He lied calling "the state of our union strong." America is in protracted decline. It's losing its economic and political dominance. It's been this way for decades. It accelerated under Obama. 

He lied claiming the "lowest unemployment rate in over five years." It's higher than when he took office.

He lied claiming "the United States is better-positioned for the 21st century than any other nation on earth."

China's growth rate heads toward overtaking America. Perhaps by 2020 or earlier. Other BRICS countries (Brazil, Russia, India and South Africa) are some of the world's fastest growing.

China is the world's largest exporter. India is an information technology powerhouse. Brazil is a dominant agricultural exporter. 

Russia is oil and gas rich. South Africa holds resources worth an estimated $2.5 trillion. Other developing nations way outpace US growth.

Obama lied about being "committed to making Washington work better, and rebuilding the trust of the people who sent us here."

His agenda throughout five years in office destroyed it altogether. Political Washington is beyond fixing. Tinkering around the edges won't work. Nor rhetorical promises made to be broken.

Obama lied about "the budget compromise…leav(ing) us freer to focus on creating new jobs, not...new crises."

In December, bipartisan complicity struck a budget deal no responsible government would accept. Monied interests are served.

War profiteers benefit enormously. Cuts target vital social programs. They're too important to lose. Deficit reduction is too meager to matter.

Obama acknowledged inequality. He stopped short of accepting responsibility for accelerating America's unprecedented wealth disparity. A race to the bottom continues.

He lied saying "(o)ur job is to reverse these trends." He's gone all out to sustain them. He's destroying middle America.

He lied about "build(ing) new ladders of opportunity into the middle class." He'll act unilaterally if Congress won't, he claimed.

"(T)hat's what I'm going to do," he said. He's done nothing throughout five years. Expect pathetically little ahead. Expect same old, same old.

He lied about wanting to close "wasteful, complicated (tax) loopholes." They benefit monied interests he supports.

He lied about "transition(ing) to tax reform to create jobs rebuilding our roads, upgrading our ports, unclogging our commutes..."

Finance reform masqueraded as change. It was business as usual. Wall Street crooks wrote the legislation. Their interests are well served. Ordinary Americans got scammed.

He lied about his energy policy "creating jobs and leading to a cleaner, safer planet." He's beholden to Big Oil. 

He supports dangerous nuclear power. He largely ignores clean energy.

He lied claiming "new partnerships in trade with Europe and the Asia-Pacific will help create more jobs." 

The so-called Trans-Pacific Partnership (TPP) is a secretive, multi-nation agreement. It's a jobs destroyer. It force-feeds corporate intellectual property rules.

It supranational. It tramples on national sovereignty. It destroys privacy and other personal freedoms. The Trans-Atlantic Free Trade Agreement (TAFTA) is its US/European equivalent.

Obama lied about "fix(ing) our broken immigration system." Throughout his tenure, he waged war on undocumented immigrants. His policy is racist.

He deported more migrants than any previous administration. He exceeded the worst of George Bush.

He inflicts harshness indiscriminately. His policies are irresponsible. Militarizing Mexico's border is prioritized. So is increasing Border Patrol staff by thousands.

Obama's pathway to citizenship excludes most immigrants. Qualifying means waiting 13 years or longer. Hurdles imposed are enormous. 

Immigration reform reflects business as usual. Comprehensive reform is a convenient illusion. "(L)et's get immigration reform done this year," said Obama.

He lied claiming "ideas (he) outlined can speed up growth and create more jobs." They haven't so far. They won't going forward.

He lied about wanting to restore benefits 1.3 million jobless workers lost the week before Christmas. In 2014, millions more will lose theirs. Rhetorically he opposes it. He proposed nothing to prevent it.

He lied about wanting "every child (to have) access to a world-class education." Throughout his tenure, he waged war on public education. 

He wants it privatized. He wants it made another business profit center. He cut Pell Grants. He supports America's student loan racket. 

His so-called Race to the Top sacrifices quality education. It mandates marketplace rules. It lets Washington bureaucrats decide what's best for children. It's another black mark on his legacy.

His American dream promise is empty. He lied saying "hard work pays off for every American." They're worse off today than in modern memory.

"In the coming weeks, I will issue an Executive Order requiring federal contractors to pay their federally-funded employees a fair wage of at least $10.10 an hour - because if you cook our troops' meals or wash their dishes, you shouldn't have to live in poverty," he said.

Note: $10.10 x 40 hours a week x 52 weeks = $21,000. The federal poverty level for a family of four is $23,500.

It's woefully below reality. It's based on a decades old guideline. Households need at least double that amount to avoid poverty.

They don't need minimum wage protection. They need guaranteed living wages. Enough to cover all essential expenses. Enough to live like most working Americans did decades ago.

Obama's plan is deplorable. Whether or not it becomes policy doesn't matter. 

What about all public employees. What about state and local ones. What about private sector workers. What about restoring lost benefits.

"Give America a raise," said Obama. His rhetoric rings hollow. Working American wages eroded for decades. Inflation adjusted, they decline annually. Real inflation is multiples higher than fake numbers.

Obama touted his Affordable Care Act. "That's what (healthcare) reform is all about," he claimed.

ACA is a healthcare rationing scheme. It enriches insurers, drug companies and large hospital chains. 

It scams millions of Americans. It's polar opposite what's needed. Obama's agenda abhors fairness.

He ignored his multiple war crimes. He lied about exiting Afghanistan. America came to stay. Permanent occupation is planned. So is his war on peace, stability and security.

He lied about terrorist threats. "(T)hat danger remains," he claimed. "We have to remain vigilant."

"We must fight the battles that need to be fought."

Hegemons operate this way. America's only threats are ones it invents. 

Permanent war is official policy. Unchallenged global dominance is sought. Obama didn't explain. His rap sheet is blood-drenched.

He's waging war on Syria. He's destroying another country. He's doing it lawlessly.

He lied about "preventing Iran from obtaining a nuclear weapon." No program exists to do so.

Whether or not he lied about vetoing possible legislation imposing new sanctions remains to be seen. Earlier promised vetoes were hollow.

He lied about Hezbollah "threaten(ing) our allies." Israel is the region's only existential threat.

He lied about "the ideals we stand for and the burdens we bear to advance them."

Imperial lawless reflects official US policy. Obama's police state apparatus targets homeland resisters.

Mass surveillance watches everyone. Whistleblowers and activists are considered existential threats.

America's state of the union is deplorable. Obama's entire address reflected empty rhetoric. It's an annual duplicitous exercise. Expect business as usual to continue.

Stephen Lendman lives in Chicago. He can be reached at [email protected] 

His new book is titled "Banker Occupation: Waging Financial War on Humanity."

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com. 

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.

It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.


http://www.progressiveradionetwork.com/the-progressive-news-hour

Economy ‘Illusion’ To Collapse – X22 Report

By Susan DuclosThe X22 Report explains how the so-called economic recovery is an illusion being perpetrated by the Federal Reserve, the US government, and corporate media, with reports on stocks rising, holiday sales being up, unemployment down, etc......

A Century of War

A Century of War

by Stephen Lendman

July 29 marks WWI's 100th anniversary. It was called the war to end all wars. Never again was heard.

In 1928, Kellogg-Briand policy renounced aggressive wars. The UN Charter's Preamble states:

"We the Peoples of the United Nations Determined to save succeeding generations from the scourge of war, which twice in our lifetime has brought untold sorrow to mankind..."

America, key NATO partners and Israel wage them on humanity. They're ongoing in multiple theaters. They cause horrific human suffering.

America waged wars at home and/or abroad every year in its history. They began long before the republic's inception. 

It's an unparalleled record. It's shocking. It's deplorable. It continues out-of-control. Peace never had a chance. It's more endangered than ever.  

Wars assure more of them. America by far is the world's leading offender. Israel, Britain, France and other key NATO partners are willing partners. So are other rogue states.

Barbara Tuchman's "The Guns of August" recounted WW I horrors. Events were fast-moving. Things spun out-of-control.

Over 20 million died. Many more were wounded or disabled. An entire generation of young men was lost.

Two decades later it repeated threefold. Never again became permanent war. It rages on humanity. Both world wars were preludes for what followed.

All wars include horrendous atrocities. America's tortured past reflects some of the worst.

They predate the republic. Accused 17th century Salem witches faced horrific abuse. Trials were grueling. They excluded fairness. Death by hanging awaited those convicted. 

One or more victims were crushed under heavy boulders. It's unknown if any were burned alive.

Native Americans were mass-murdered. Columbus exterminated Hispaniola's population.

He did so by by torture, mass-murder, forced labor, starvation, disease, despair, stabbing natives for sport, dashing babies' heads on rocks, letting children be eaten by dogs, beheadings, and burning people at the stake among other atrocities.

Ward Churchill documented America's genocide. Native peoples were reduced to at most 3% of their original numbers.

According to Churchill:

Millions were "hacked apart with axes and swords, burned alive and trampled under horses, hunted as game and fed to dogs, shot, beaten, stabbed, scalped for bounty, hanged on meathooks and thrown over the sides of ships at sea, worked to death as slave laborers, intentionally starved and frozen to death during a multitude of forced marches and internments, and, in an unknown number of instances, deliberately infected with epidemic diseases."

America's genocide remains unparalleled in history. It repeats in new forms. It did so throughout the last century. It continues now.

A century of war begot a second one. New millennium conflicts rage. They show no signs of ending. They're ongoing in multiple theaters.

Torture and atrocities are weapons of war. John Dower's "War Without Mercy" documented viciousness by both sides in the Pacific. America is as unprincipled as the worst of its adversaries.

US forces mutilated Japan's war dead. They did so for souvenirs. They sank hospital ships. They shot sailors trying to abandon them.

They murdered pilots who bailed out. They killed wounded soldiers. They tortured prisoners. They killed them in cold blood.

They buried combatants alive. They attacked civilians. Hiroshima and Nagasaki are two of history's greatest crimes. 

Gratuitous slaughter describes them. They had nothing to do with defeating Japan. Nor did firebombing Tokyo. America bears full responsibility for numerous crimes of war, against humanity and genocide.

Post-9/11, some of the worst occurred. Others happened earlier. Millions of North Koreans and Southeast Asians were slaughtered. 

Air war alone killed millions of civilians. North Korea became rubble. Virtually everything in northern and central areas were destroyed. Napalm, cluster bombs, chemical and biological weapons, as well as other terror ones were used.

US forces dropped threefold the amount of WW II tonnage on Southeast Asia. Agent Orange's deadly legacy remains.

Dioxin is one of the most deadly known substances. It's a potent carcinogenic human immune system suppressant. Minute amounts cause serious health problems and death.

Agent Orange causes congenital disorders and birth defects. It causes cancer, type two diabetes, and numerous other diseases.

It remains toxic for decades. It killed millions of Southeast Asians. Many others were disabled and/or suffer from chronic illnesses. Future generations are affected like earlier ones.

Around three million US servicemen and women were harmed. So were many American civilians. Many died. Living victims endure diseases, birth defects, and other ill effects.

New generations of terror weapons replaced earlier ones. US wars are merciless. Fundamental laws are ignored. Anything goes is policy. 

Civilians suffer most. America considers them legitimate targets. 
Obama's Asia pivot perhaps intends repeating the worst of past and current conflicts. They're ongoing in multiple war theaters.

Washington's new millennium wars killed millions. Many more victims die daily. Wherever America shows up, mass slaughter, destruction and human misery follow.

War without mercy describes them. America is a killing machine. Making the world safe for war profiteers is policy. So is committing genocidal crimes.

The measure of national policy is its respect for life, liberty, equity and justice. America deplores them. It scorns them. It ruthlessly seeks unchallenged global dominance.

It thrives on war. It wages permanent ones. Its culture reflects violence, unfairness, cruelty and intolerance. It punishes its own. It does so like others abroad.

Torture is official policy. It's practiced worldwide. It operates the world's largest gulag. Thousands of political prisoners suffer inside. Anyone challenging US lawlessness is vulnerable.

So are America's poor, people of culture, others most disadvantaged, and human rights advocates championing their rights.

America is a dystopian wasteland. Millions are denied fundamental rights. Growing poverty, unemployment, underemployment, hunger and homelessness reflect horrific conditions.

Hot wars rage abroad. Financial ones cause more harm than standing armies. Bipartisan complicity wages war on fairness. 

America's social contract is on the chopping block for elimination. Growing millions face protracted Depression conditions. 

Families struggle to pay rent, provide sustenance, and handle other essential expenses. Harvard Magazine's January-February 2014 issue featured Elizabeth Gudrias' article.

It headlined "Disrupted Lives." It discussed Harvard Sociology Professor Matthew Desmond's research. His academic interests include poverty, race, ethnicity, organizations and work, social theory and ethnography.

He studied how evictions impact America's poor. It's a story raw datta hide. Sheriffs arrive disruptively. They've come to evict. Loud knocks announce them. If no one's inside they "kick the door in."

Desmond studies how poverty, housing and eviction affects America's most disadvantaged. Millions are horrifically harmed. 

He captured an important snapshot. He did it through original research. It reflects hard times getting harder. It's ongoing out of sight and mind.

It's longstanding. It's raged since 2008 crisis conditions emerged. For growing millions, it never ends.

Imagine living life on the edge. Imagine it without house or home. Desmond witnessed what happened to Danielle Shaw and her partner, Jerry Allen.

"(D)eputies swept into (their) apartment," said Gudrias. They took over. They "briskly outlined" their intentions.

"The couple could choose to put their belongings in storage at the moving company’s warehouse - and pay a fee to retrieve them - or the movers would leave everything on the curb."

The couple had little advance notice. They learned only days before eviction. They had little time to plan.

Desmond's research showed "how common eviction is in the lives of poor people," said Gudrias.

Inner city people of color are harmed most. They have no recourse. Their lives are involuntarily disrupted.

Desmond studied inner city Milwaukee. He analyzed formal eviction court records. Others take place off the books.

Some landlords are adversarial. They cut off electricity. They stop  heat in winter. They remove front doors. They use other ways to evict tenants.

Desmond found almost one in eight Milwaukee renters were evicted or involuntarily relocated. For blacks, it was one in seven. For Hispanics, it was one in four.

Many end up homeless. Some live on streets. Others end up in shelters. Ones finding substitute housing "are limited to decrepit units in unsafe neighborhoods." 

Transient existence affects children's emotional well-being. Their school performance suffers.

Adults endure "depression and subsequent job loss, material hardship, and future residential instability," said Desmond.

Eviction compounds poverty and racial discrimination. "We are learning that (it) is a cause, not just a condition, of poverty," he said.

It gets little public attention. Most often it gets none at all. Imagine millions suffering enormous hardships. Imagine federal, state and local governments doing practically nothing to help.

Imagine media scoundrels ignoring what need to be headlined. Imagine a growing problem across America.

"The average cost of rent, even in high-poverty neighborhoods, is quickly approaching the total income of welfare recipients," said Desmond.

"The fundamental issue is this: the high cost of housing is consigning the urban poor to financial ruin."

Desmond was a University of Wisconsin-Madison doctoral student. Eviction "brings together poor and nonpoor people - tenants, their families, landlords, social workers, lawyers, judges, sheriffs - in relationships of mutual dependence and struggle," he explained.

He learned how little eviction was studied. No national data exist. He constructed Milwaukee facts and figures on his own.

He did it by examining tens of thousands of Milwaukee County eviction records.

He interviewed 250 tenants in eviction court. He conducted over 1,000 others with affected households.

He calls evictions and incarceration twin destructive forces. They relate to each other. They affect millions of inner-city lives. 

They're out of sight and minds. They're nameless, faceless victims society forgot.

Many prior inmates can't find work. Others don't earn enough to live on. Criminal records are marks of cain. They're permanent. They affect victims for life.

Their ability to rent is hampered. Desmond lived in poor neighborhoods he studied. He learned human suffering firsthand. He explained, saying:

"I sat beside families at eviction court; helped them move; followed them into shelters and abandoned houses; watched their children; ate with them; slept at their houses; attended church counseling sessions, Alcoholics Anonymous meetings, and Child Protective Services appointments with them; joined them at births and funerals; and generally embedded myself as deeply as possible into their lives."

He discovered numerous cases where victims don't know their rights. They don't understand the process. They're given conflicting, inaccurate information.

They lack legal help. They're on their own. They're up against an unforgiving system. Disadvantaged people endure what America's privileged avoid. 

Poverty is a process, he says. It involves victims, a system creating them, people benefitting from it, and society overall not caring.

Sociology Professor Eric Klinenberg admires his writing skill. It's "deceptively simple but devastatingly sharp," he said.

He's a voice for the voiceless. He lets them be heard. He explains their humanity. It needs to be known. 

He hopes to make a difference. Disadvantaged households need all the help they can get.

America's wars include waging them on poor people. They're increasingly deprived. Force-fed austerity inflicts greater harm. It's ongoing when help is most needed.

Main Street economic recovery is nowhere in sight. Hard times for millions keep getting harder. 

Federal, state and local governments dismissively ignore them. Today's America is the United States of I Don't Care.

Stephen Lendman lives in Chicago. He can be reached at [email protected] 

His new book is titled "Banker Occupation: Waging Financial War on Humanity."

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com. 

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.

It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.


http://www.progressiveradionetwork.com/the-progressive-news-hour

Crucible of Resistance: Class struggle over ways out of the crisis.

Many commentators make Greece and other peripheral EU members responsible for the sovereign debt crisis. People in these countries would have lived above their means and it was only right that they should tighten their belts now, the argument goes. Having postponed the necessary restructuring for too long, austerity would be the only solution to enforce liberalization and deregulation from the outside. In their impressive book Crucible of Resistance: Greece, the Eurozone and the World EconomicCrisis (Pluto Press, 2013), Christos Laskos and Euclid Tsakalotos challenge these understandings and reveal the class dynamics underlying the crisis. In this blog post, I will provide a critical review of this book including also a discussion of potential ways out of the crisis. I will argue, in contrast to Laskos and Tsakalotos, that successful resistance may well start at the Greek, national level rather than the European level.  



The neo-liberal restructuring of Greece


Mainstream explanations of the crisis argue that a ‘productive and efficient North had to bail out a South that was determined to keep its more consumer-oriented and leisurely lifestyle. The reforms necessary for challenging this state of affairs had not gone far enough – they never do in neoliberal accounts – and thus the crisis must be used to complete the reform agenda’ (P.80). Laskos and Tsakalotos successfully challenge the idea that Greece had not liberalized enough. In fact, neo-liberal restructuring had been implemented across the economy ‘after 1996 under the leadership of PASOK’s new leader Kostas Simitis’ (P.22).


Importantly, however, and perhaps not surprisingly, neo-liberal restructuring did not include any kind of new social contract, ensuring some degree of wealth redistribution. Instead, ‘modernizing strategies were crafted onto existing clientelistic arrangements rather than replacing them’ (P.4), thereby guaranteeing some kind of redistribution and social stability. ‘All capitalist social formations need mechanisms to spread the gains of the market to some less privileged social groups, and the clientelistic state was the preferred option of elites in Greece’ (P.41), the authors argue. In other words, rather than being an obstacle to neo-liberalism, clientelism has been an essential part of restructuring in Greece.


Overall, the social consequences of restructuring were dramatic even before the crisis. ‘Promoting some of the key features of neoliberalism, in a society already ridden with unacceptable levels of inequality, was to lead not just to an accentuation of social problems, but also to a crisis of a political system seemingly unable to respond to the needs of ever wider sections of the population’ (P.24).



Causes of the crisis and the austerity response


Rather than locating the causes of the crisis within Greece itself, Laskos and Tsakalotos identify problems in the global economy in general, and the unevenness within the European Union (EU) in particular. The role of Germany and its export-led growth strategy is clearly at the heart of the problem. ‘Germany depends quite heavily on demand generated within the rest of the European Union’, the authors point out. ‘In 2007, when the trade account was 8.15 per cent of GDP, some 4.44 per cent of GDP (i.e. 63.4 per cent of the trade account surplus) originated in Germany’s surplus arising from its export of goods to other EU countries’ (P.86). Importantly, this not because Germany’s production was based on higher levels of productivity based on new technology and working practices. ‘In Greece productivity increases actually outstripped those in Germany, especially in the later period. Rather, it is the German restrictive wages policy after 2000 that made it almost impossible for the periphery to compete’ (P.83).

When Greece faced bankruptcy in 2010 and 2012, bailout packages were provided, but they came at the cost of permanent austerity imposed by the Troika consisting of the European Central Bank, the Commission and IMF. As the authors make clear, austerity has not solved the economic crisis. Instead, a vicious circle of austerity-recession-more austerity commenced, undermining further Greece’s productive capacities. ‘Industrial production (manufacturing, mining, electricity) fell by 23.3 per cent between October 2008 and October 2012, widening the gap between Greece and its EU partners’ (P.104). Moreover, ‘between 2010 and 2012 almost 60,000 enterprises closed down each year’ (P.106). If economic recovery was not achieved, why was austerity continued? What was the real purpose behind austerity?


Laskos and Tsakalotos convincingly demonstrate that austerity has ultimately been a class project. It was used as opportunity by capital to strengthen its position vis-à-vis labour. It was used ‘as opportunity to finish the neoliberal modernizing project in terms of reducing wages and pensions, dismantling labour protection, and undertaking an even more radical program of privatization’ (P.103). The external role by the IMF, in co-operation with local elites, is crucial. ‘By the time of the second austerity programme, the IMF was making it clear that Greece should consider its competitors to include countries such as Bulgaria, and that consequently wage levels in the private sector still had some way to fall’ (P.111). An already highly unequal society was pushed into further inequality. ‘The adjustment programmes have raised inequality and poverty to new heights’ (P.131).



Moments of resistance


And yet, crises are also always moments of opportunity for progressive forces from the left. Resistance against austerity is noticeable in Greece. ‘Especially after 2010, social resistance to austerity included diverse forms of solidarity and initiatives to set up a parallel social economy: from social clinics and pharmacies to social groceries, and from the movement to cut out the intermediaries in agricultural production to various cooperative ventures’ (P.143).


At the organizational level, the authors highlight SYRIZA’s success at uniting large parts of the left on the basis of their strong engagement with social movements and concrete local struggles. SYRIZA’s ‘increasing engagement with the European Social Forum, and its support for Left unity to overcome the divisions of the past, provided the basis for a leftwards trajectory in which leftist Eurocommunist ideas played an increasingly significant part (P.128). While Laskos and Tsakalotos highlight the dangers of an authoritarian turn, they also see the possibility of transcending capital. ‘For the first time in many generations the Left has a convincing interpretation of the present crisis, and that this can become a materialist force breaking old social alliances and forming new ones in favour of a strategy that begins the transcendence of capitalism itself’ (P.12). 

In order to be able to balance capital’s class power, ‘this time round’, they argue, we need a Left which is more democratic, more participatory, and more aware that supranational problems need supranational responses’ (P.15). This requires new alliances across borders as well as the formation of broader movements. ‘Left strategies need to build on the experience of the labour, feminist, anti-racists and other movements such as those struggling against the commodification of social and public goods’ (P.142).



What level of resistance?


The authors firmly look to the European, supranational level for resisting austerity and transforming capitalism. And I agree, a strong and united left European movement for ‘Another Europe’ would be the most desirable development. Unfortunately, however, this united movement at the European level has not emerged yet. The European Social Forum process has run out of steam and been discontinued. The Alter Summit process with a first meeting in Athens in June 2013 has not yet attracted a large following. The European trade unions led by the European Trade Union Confederation (ETUC) have finally agreed on a joint demonstration for 4 April 2014 and put forward their own plan for sustainable growth and quality jobs (see ETUC, 18/12/2013). In general, however, the ETUC is tied up in a social partnership ideology and working within the existing European institutions. Transcending capitalism is certainly not on its agenda.



The question then is why wait for a European level response, when perhaps the Greek national level offers a more immediate solution? Costas Lapavitsas and colleagues have put forward the strategy of a debtor-led default by Greece including also an exit from the Eurozone. Critics of this strategy argue that while a depreciating new currency after the exit may boost exports, it would also imply that state debt denominated in Euros would rocket sky high aggravating an already difficult situation (e.g. Toporowski, 2013). And yet, these critics overlook Lapavitsas et al’s flanking measures.  Key policies of such a programme would include: (1) a unilateral suspension of payments; (2) a public audit of debt following suspension of payments to identify which part of national debt is actually legitimate; (3) a deep ‘haircut’ for lenders (Lapavitsas et al, 2012: 130-1) and (4) an expansion of the tax base to include the rich and capital more generally (Lapavitsas et al, 2012: 135). To avoid an immediate crisis of the financial system, ‘there would have to be extensive and decisive government intervention. In Greece this would certainly mean extending public ownership and control over banks, thus protecting the banks from collapse and preventing depositor runs. Under public ownership, the banks could act as levers for root and branch transformation of the economy in favour of labour’ (Lapavitsas et al, 2012: 132; see also Crisis in the Eurozone, Part II - progressive ways out of the crisis!).

Alternatively, what would happen if resistance in Greece itself is so strong that the government, together with the Troika, is unable to enforce austerity further? It is foreign banks, especially German and French private banks, which are heavily exposed to Greek debt. A stop to austerity in Greece would first and foremost threaten these banks and then the overall European financial system. The whole strategy of austerity would suddenly be questioned and may well unravel. Could we not envisage a chain reaction in such a situation where resistance elsewhere may be encouraged and then eventually lead to a European-wide movement?


Ultimately, these questions will be decided by concrete practice, by class struggle. The clarity with which Laskos and Tsakalotos present their analysis and outline the challenges is impressive, their discussion of ways forward highly stimulating. I strongly recommend this book for reading to all those interested in moving towards ‘Another Europe’.  



References


Lapavitsas, Costas et al (2012) Crisis in the Eurozone. London/New York: Verso.


Toporowski, J. (2013) ‘International credit, financial integration and the euro’, Cambridge Journal of Economics, Vol.37: 571–84.

Bracing for An Eventual Day of Reckoning

Bracing for An Eventual Day of Reckoning

by Stephen Lendman

Financial markets today reflect a total disconnect from reality. Former Reagan administration Office of Management and Budget director, David Stockman, calls the Fed "a serial bubble machine."

"It's only a question of time before central banks lose control," he warns. He expects "panic when people realize that (market) values are massively overstated."

They're "extremely dangerous, unstable, and subject to serious trouble and dislocation in the future," he stresses.

The Fed is responsible for "exporting lunatic policies worldwide." All bubbles burst. They end badly. For sure this one. It's a whopper. It's just a matter of time until all hell breaks lose.

Market analyst Graham Summers sees dangerous equity market topping signs. They include:

  • margin debt hitting new all-time highs;

  • bearish sentiment at all-time lows;

  • market leaders peaking or approaching it;

  • declining market breadth;

  • earnings are falling; and

  • equities "diverg(ing) dramatically from earnings and revenues.

Topping takes longer than many people expect, said Summers. Recent market movements aren't "promising."

"(F)or certain we are in a bubble. It's just a question of when it bursts."

Economic Collapse blog.com discussed 2014 forecasts by noted analysts. They warn about next year "shak(ing) America to the core." They may be right or wrong.

Money printing madness kept party time going longer than most analysts expected. Eventually good times end. 

On December 13, the Wall Street Journal headlined "Markets Get Set to Lose a Crutch," saying:

"Investors are bracing for the Federal Reserve to reduce its market-boosting stimulus as soon as the coming week..."

Next Wednesday, Fed governors meet. They'll "decide the fate of (their) $85 billion monthly bond-buying" binge. 

So-called tapering may be announced. If not now, perhaps early next year.

Harry Dent expects "another slowdown and stock crash accelerating between very early 2014 and early 2015." He expects more trouble later on.

Marc Faber warned investors early. He did so numerous times before. He's doing it again, saying:

"You have to say that we are again in a massive financial bubble in bonds, in equities, in (other) asset prices that have gone up dramatically."

Mike Maloney calls the 2008 crash "a speed bump on the way to the main event." The consequences will be "horrific," he warns.

"(T)he rest of the decade will bring us the greatest financial calamity in history."

Jim Rogers said "what happened in 2008-2009 (was) worse than the previous economic setback."

It's because "debt was so much higher." Now it's "staggeringly much higher."

Whenever the next market disruption comes, it's "going to be worse than in the past," he stresses.

It's "because we have unbelievable levels of debt, and unbelievable levels of money printing all over the world."

"Be worried and be prepared," he warns. He doesn't know when trouble will arrive, he says. "(B)ut when it comes, be careful."

Robert Shiller is worried. At the same time, he's "not sounding the alarm yet." Stock price levels are high. So are other financial assets. Things "could end badly," Shiller warns.

Economics Professor Laurence Kotlikoff said:

"Eventually somebody recognizes (what's happening), and starts dumping their bonds, and interest rates go up, and inflation takes off, and were off to the races."

Michael Pento said Washington "brought us out of the Great Recession, only to set us up for the Greater Depression, which lies on the other side of interest rate normalization."

Russel Napier believes we're "on the eve of a deflationary shock…" It'll "likely reduce equity valuations from very high to very low levels."

Market strategist Robert Farrell is best remembered for his "10 Market Rules to Remember:"

Number one: markets (always) return to their mean average over time.

Number two: excesses in one direction lead to opposite ones.

Number nine: when conventional wisdom agrees, "something else is going to happen."

Gerald Celente publishes his annual top 10 trends. He calls 2014 "a year of extremes." His number one trend is "March Economic Madness."

Timing is one of the toughest aspects of forecasting, he said. No one knows precisely when things will happen. Often they're when few expect them.

Celente "missed the mark with (his) Crash of 2010 prediction," he admitted. Why, he asked? Because of worldwide money printing madness.

It was unprecedented. Who could have predicted it? It can't last. Celente believes "around March, or by the end of" 2014 Q II, "an economic shock wave will rattle" world equity markets. It remains to be seen if he's right this time.

Market analyst Market Weiss calls the US economy so addicted to Fed money printing madness "that just the thought of withdrawal (causes) market convulsions."

Since crisis conditions erupted in 2008, Bernanke made one excuse after another. He did so irresponsibly. 

He "smash(ed) the 100-year Fed prohibition against running the money printing presses 24/7," said Weiss.

First he claimed conditions left him no choice, saying:

"Unless we flood the banking system with money, megabanks will fail and global financial markets will collapse in a heap of rubble."

When the worst of crisis conditions eased, his "new rationale" was "trillion-dollar federal budget deficits year after year," said Weiss.

Former Troubled Asset Relief Program (TARP) head Neil Barofsky believes Wall Street perhaps got around $23 trillion. 

Hundreds of billions more went to troubled European banks. Perhaps they're still getting plenty. Open checkbook Fed policy assures Wall Street whatever it wants.

Fed policy reasons that "(u)nless we buy Treasuries (and mortgage-backed) securities by the truckload, the deficits will smash the bond markets and sabotage the economic recovery?"

What recovery? It landed on Wall Street. It benefitted America's super-rich. It missed Main Street. Protracted Depression era trouble persists. 

Ordinary people struggle daily to get by. Many never had things worse. Improvement is nowhere in sight. 

A "long line-up of excuses" kept Fed policy "pedal to the metal on its giant money presses," said Weiss. Fed chairwoman elect Janet Yellen promises more of the same.

Things improved from earlier, she said. They haven't done so "enough." The "not improved enough" mantra is the theme heading into next year.

Before Lehman Brothers collapsed in 2008, the Fed's monetary base was $849.8 billion. On October 30, 2013, it exceeded $3.6 trillion.

It expanded over threefold in six years. It did what no one thought possible. It did what honest analysts called irresponsible. According to Weiss:

If the Fed expanded the monetary base at the same pace it's done since 1961, "it would have taken nearly 150 years to come this far."

Pre-2008, expanding the monetary base rapidly occurred only two other times:

  • ahead of potential Y2K trouble; and

  • post-9/11.

So far, post-2008 monetary madness exceeded Y2K expansion 43-fold. It's nearly 70 times larger than post-9/11 policy.

Most alarming, said Weiss, is that the Fed hasn't "begun to resolve the underlying diseases" responsible for earlier crises. It "merely papered over their symptoms." 

They fester and grow. They're worse than ever. They assure eventual day of reckoning trouble. 

The 2008 crisis resulted from excessive debt, derivatives and other toxic financial assets, unprecedented wealth concentration among powerful institutions, and reckless speculation fueled by monetary madness and near-zero interest rates.

Total credit market debt keeps rising. In 2008, it was $53.5 trillion. Through 2013 Q II, it's $57.6 trillion.

The notional value of derivatives held by US banks grew from $175.8 trillion in September 2008 to $231.6 trillion this year.

According to the Office of the Comptroller of the Currency (OCC):

"Derivatives activity in the US banking system continues to be dominated by a small group of large institutions."

It names four megabanks. They include JP Morgan Chase, Bank of America, Citibank and Goldman Sachs. They control 93% of all banking industry derivatives.

Massive federal deficits persist. So does Europe's debt crisis. Money printing madness doesn't resolve things. 

It kicks the can down the road. It does so irresponsibly. It creates greater problems ahead. It papers over what desperately needs addressing now. It needed it years ago.

Weiss thinks the only Fed solution is "panicky retreat." Consider history, he says. Fed policy created bond market trouble in the 1970s.

In 1979, Treasury bonds rose to 13% yields. T-bills to 17%, and the prime rate to 21%.

In the early 1990s, Fed policy kept short rates lower than normal. In 1994, things changed. The largest ever modern era calendar year decline in bond prices occurred.

Alan Greenspan wasn't noted for accurate forecasts. Weeks before the 2000 market peak, he claimed:

"The American economy was experiencing a once-in-a-century acceleration of innovation, which propelled forward productivity, output, corporate profits and stock prices at a pace not seen in generations, if ever." 

It was reminiscent of noted economist Erving Fisher. Shortly before the 1929 crash, he fell from grace. He did so claiming economic fundamentals were strong.

Stock market prices were undervalued, he said. An unending era of prosperity lay ahead. It took over a decade to arrive. It took WW II to deliver it.

For years into the new millennium, Greenspan let growing financial trouble fester. In January 2006, he retired. 

Ben Bernanke replaced him. Business as usual continued. Lehman Brothers collapse followed. So did hard times for millions. Things were never better for Wall Street.

Money printing madness continues. How will things change this time? Watch for telltale signs, Weiss advises. 

He promised to discuss them as they occur. The moment of truth approaches. No one knows for sure when it'll arrive. It always did before. It will this time.

Watch bond prices. They're experiencing the biggest interest rate reversal in 37 years, says Weiss. Yields are rising. 

How high remains to be seen. If history is a guide, the worst is yet to come. 

Rising bond yields spell trouble for stocks. It remains to be seen how bad things eventually get.

Note: On December 17, Fed governors announced tapering. Monthly bond buying will be reduced from $85 billion to $75 billion on January 1. 

Interest rates will remain near zero. Whether further tapering continues next year remains to be seen. So will how markets react going forward.

Wednesday they celebrated. Bubbles have a way of bursting when least expected. This one imploding is long overdue.

Stephen Lendman lives in Chicago. He can be reached at [email protected] 

His new book is titled "Banker Occupation: Waging Financial War on Humanity."

http://www.claritypress.com/LendmanII.html

Visit his blog site at sjlendman.blogspot.com. 

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.

It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour


http://www.dailycensored.com/bracing-eventual-day-reckoning/

The U.S. Labor Force Participation Rate Is At A 35 Year Low

The percentage of Americans that are participating in the labor force is the lowest that it has been in 35 years.  During the 70s, 80s and 90s, the labor force participation rate consistently rose as large numbers of women entered the workforce.  It peaked at 67.3 percent in early 2000, and just before the last recession it was sitting at about 66 percent.  Since the start of the last recession, the labor force participation rate has not stopped falling and it is now at a 35 year low.  In September, 11,255,000 Americans were considered to be "unemployed", and an astounding 90,609,000 Americans were considered to be "not in the labor force".  The number of Americans "not in the labor force" has increased by more than 10 million since Barack Obama entered the White House.  When you add the number of unemployed Americans to the number of Americans "not in the labor force", you come up with a grand total of more than 101 million working age Americans that do not have a job.

The Obama administration and the mainstream media continue to insist that we are in the midst of an "economic recovery", but that is a total joke.  Does the chart posted below look like a recovery to you?...

Americans are leaving the labor force in droves.  If the labor force participation rate was at the same level that it was when Obama first became president, the official unemployment rate would be up around 10 percent and everyone would be wondering when the "economic depression" would finally end.

It is funny how our perceptions of reality are so greatly shaped by what our televisions tell us to think.

Below I have posted a chart of the "inactivity rate" of U.S. men in the 25 to 54-year-old age group.  As you can see, the percentage of men in their prime working years that are not employed and not considered to be unemployed either has been rising steadily...

We have millions upon millions of men just sitting around and doing essentially nothing.  Not that women are doing so much better.  In fact, the labor force participation rate for women is at a 24 year low.

Some people may be tempted to think that all of this is happening because more Americans are choosing to stay home and raise children.  But that is not the case at all.  In fact, in a previous article I showed that the marriage rate in the U.S. is at an all-time low and the birth rate for young women in this country is also at an all-time low.

People are not staying home because of family obligations.  Rather, people are staying home because there aren't enough jobs available.

And when Americans that are actually employed do lose their jobs, it is taking them a very, very long time to find another one.  Just check out the following chart...

Once again, I must ask - does that look like a "recovery" to you?

Obama can say the word "recovery" as much as he would like, but that does not make it a reality.

So is anyone out there actually doing well?

Yes, as I have talked about frequently, some pockets of the country are doing quite nicely.  In fact, government workers (think Washington D.C.) and finance workers (Wall Street, etc.) are tied for the lowest rates of unemployment in the nation (3.9 percent).

But for almost everyone else, things are very hard right now and poverty continues to grow.

Just today, I came across a recent study that discovered that nearly half of all public students in the United States come from low income homes.

That is an incredible number.

But this is just the beginning of our problems.  Our debt continues to grow by leaps and bounds and our big banks are engaging in extraordinarily reckless behavior.  As Richard Russell recently discussed, it is only a matter of time before this entire house of cards comes tumbling down...

In this whole process, debt has been created to an extent never seen before in history.  So far, the debt has been managed with super-low interest rates and borrowing.  But the compounding process goes on, and the debt mountain continues to grow.  So, to be brief, I see the theme of today as the “haves” doing whatever they have to -- to remain in power.

The dangers in the background for the haves are the possibilities that (1) interest rates will begin to advance, and (2) inflation will rise and be so visible that even the common man will recognize it, and begin to protest, or even revolt and (3) the whole debt structure will rise so high that it will topple over of its own weight and take down the entire world economy with it.

So as bad as things are today, the truth is that they are far, far better than what is eventually coming.

If you want to get a glimpse of the future of the U.S. economy, just check out what has happened to Greece...

Greeks are on average almost 40 percent poorer than they were in 2008, data indicated, laying bare the impact of a brutal recession and austerity measures the government may be forced to extend into next year.

Gross disposable incomes fell 29.5 percent between the second quarters of 2008 and 2013, statistics service ELSTAT said on Tuesday. Adding in cumulative consumer price inflation over the same period takes the decline close to 40 percent.

As you can see from the charts posted above, our economy has never even come close to getting back to the level that we were at before the last financial crisis.

And now the next wave of the economic collapse is approaching.

Right now, Spain has an unemployment rate that is above 26 percent and Greece has an unemployment rate that is above 27 percent.

We will eventually be heading up toward those levels.

As millions of good paying jobs continue to be shipped overseas, and as technology continues to eliminate millions of our jobs, the unemployment situation in this country will continue to grow even worse.

And whenever the next great financial crisis inevitably strikes, that will greatly accelerate our employment problems.

If you can move toward becoming more independent of the "system", now would be a good time to do so.  The job that you have today may not be there next month or next year.

We are moving into the greatest period of economic instability in U.S. history.

Get ready for it while you still can.

Italy: Strike, Nationwide Protests Against Latest Austerity Budget

Fire-fighters holding flags of the USB trade union association are reflected in the helmet of a fellow fire-fighter during a protest against the government in downtown Rome October 18, 2013. Civil servants, hospital staff and transport workers went on strike on Friday, in the first of two days of planned protests against Italian Prime Minister Enrico Letta's government, causing disruptions in Rome and across the country. Letta's 2014 budget, unveiled on Tuesday, has become a focal point of discontent, with unions complaining about freezes on public sector salaries and what they say is an insufficient easing of the tax burden on workers. (Photo: Reuters/Alessandro Bianchi)A twenty-four hour strike accompanied large-scale protests in Italy on Friday, as transportation workers and angry citizens marched against the continued austerity policies found in the government's latest budget proposals.

Centered in Rome, where more than 20,000 estimated protesters gathered, the anti-austerity movement and union organizers say that increased cuts are stifling economic recovery and doing long-term damage to Italian workers and their families.

As Agence France-Presse reports:

Thousands of people protested against economic austerity in Rome Friday as partial transport strikes across the country cancelled dozens of flights and snarled buses and trains.

Italy is struggling to shake off a two-year recession that has pushed unemployment to record highs and parliament is discussing a draft budget for next year that includes more cuts.

"We're giving money to the bankers! We're like a car going down a cliff," Paolo Ferrero, leader of the Communist Refoundation party, said at a demonstration by the USB union association in Rome.

Firefighters, steel workers, civil servants and students were among a few thousand people who took part in the protest march through central Rome.

Demonstrators gather in Rome's Piazza San Giovanni. (Photo: Getty images)And Euronews adds:

As part of the protest, a transport strike was called in the city. It hit trains, buses and Rome’s airport, forcing easyJet to cancel 56 flights.

One protester told euronews: “I’m here to protest because it’s always the same people paying for the crisis, always the workers. It has been happening for many, many years. Centre right, centre left. All the measures, liberal or social democratic, have all been unsuccessful.”

The hostile domestic reaction to Italy’s budget may pose a new threat to the stability of Enrico Letta’s government, just weeks after the prime minister defeated Silvio Berlusconi’s attempt to topple him.

A further general anti-austerity protest is expected on Saturday in Rome.

Demonstrators applaud during the left-wing Italian metalworkers' union FIOM rally in downtown Rome Piazza San Giovanni on May 18, 2013. AFP PHOTO / Filippo MONTEFORTE (Photo: FILIPPO MONTEFORTE/AFP/Getty Images)EN also posted this video:

And RT.com offered this report:

_________________________________________

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

Italy: Strike, Nationwide Protests Against Latest Austerity Budget

Fire-fighters holding flags of the USB trade union association are reflected in the helmet of a fellow fire-fighter during a protest against the government in downtown Rome October 18, 2013. Civil servants, hospital staff and transport workers went on strike on Friday, in the first of two days of planned protests against Italian Prime Minister Enrico Letta's government, causing disruptions in Rome and across the country. Letta's 2014 budget, unveiled on Tuesday, has become a focal point of discontent, with unions complaining about freezes on public sector salaries and what they say is an insufficient easing of the tax burden on workers. (Photo: Reuters/Alessandro Bianchi)A twenty-four hour strike accompanied large-scale protests in Italy on Friday, as transportation workers and angry citizens marched against the continued austerity policies found in the government's latest budget proposals.

Centered in Rome, where more than 20,000 estimated protesters gathered, the anti-austerity movement and union organizers say that increased cuts are stifling economic recovery and doing long-term damage to Italian workers and their families.

As Agence France-Presse reports:

Thousands of people protested against economic austerity in Rome Friday as partial transport strikes across the country cancelled dozens of flights and snarled buses and trains.

Italy is struggling to shake off a two-year recession that has pushed unemployment to record highs and parliament is discussing a draft budget for next year that includes more cuts.

"We're giving money to the bankers! We're like a car going down a cliff," Paolo Ferrero, leader of the Communist Refoundation party, said at a demonstration by the USB union association in Rome.

Firefighters, steel workers, civil servants and students were among a few thousand people who took part in the protest march through central Rome.

Demonstrators gather in Rome's Piazza San Giovanni. (Photo: Getty images)And Euronews adds:

As part of the protest, a transport strike was called in the city. It hit trains, buses and Rome’s airport, forcing easyJet to cancel 56 flights.

One protester told euronews: “I’m here to protest because it’s always the same people paying for the crisis, always the workers. It has been happening for many, many years. Centre right, centre left. All the measures, liberal or social democratic, have all been unsuccessful.”

The hostile domestic reaction to Italy’s budget may pose a new threat to the stability of Enrico Letta’s government, just weeks after the prime minister defeated Silvio Berlusconi’s attempt to topple him.

A further general anti-austerity protest is expected on Saturday in Rome.

Demonstrators applaud during the left-wing Italian metalworkers' union FIOM rally in downtown Rome Piazza San Giovanni on May 18, 2013. AFP PHOTO / Filippo MONTEFORTE (Photo: FILIPPO MONTEFORTE/AFP/Getty Images)EN also posted this video:

And RT.com offered this report:

_________________________________________

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

Italy: Strike, Nationwide Protests Against Latest Austerity Budget

Fire-fighters holding flags of the USB trade union association are reflected in the helmet of a fellow fire-fighter during a protest against the government in downtown Rome October 18, 2013. Civil servants, hospital staff and transport workers went on strike on Friday, in the first of two days of planned protests against Italian Prime Minister Enrico Letta's government, causing disruptions in Rome and across the country. Letta's 2014 budget, unveiled on Tuesday, has become a focal point of discontent, with unions complaining about freezes on public sector salaries and what they say is an insufficient easing of the tax burden on workers. (Photo: Reuters/Alessandro Bianchi)A twenty-four hour strike accompanied large-scale protests in Italy on Friday, as transportation workers and angry citizens marched against the continued austerity policies found in the government's latest budget proposals.

Centered in Rome, where more than 20,000 estimated protesters gathered, the anti-austerity movement and union organizers say that increased cuts are stifling economic recovery and doing long-term damage to Italian workers and their families.

As Agence France-Presse reports:

Thousands of people protested against economic austerity in Rome Friday as partial transport strikes across the country cancelled dozens of flights and snarled buses and trains.

Italy is struggling to shake off a two-year recession that has pushed unemployment to record highs and parliament is discussing a draft budget for next year that includes more cuts.

"We're giving money to the bankers! We're like a car going down a cliff," Paolo Ferrero, leader of the Communist Refoundation party, said at a demonstration by the USB union association in Rome.

Firefighters, steel workers, civil servants and students were among a few thousand people who took part in the protest march through central Rome.

Demonstrators gather in Rome's Piazza San Giovanni. (Photo: Getty images)And Euronews adds:

As part of the protest, a transport strike was called in the city. It hit trains, buses and Rome’s airport, forcing easyJet to cancel 56 flights.

One protester told euronews: “I’m here to protest because it’s always the same people paying for the crisis, always the workers. It has been happening for many, many years. Centre right, centre left. All the measures, liberal or social democratic, have all been unsuccessful.”

The hostile domestic reaction to Italy’s budget may pose a new threat to the stability of Enrico Letta’s government, just weeks after the prime minister defeated Silvio Berlusconi’s attempt to topple him.

A further general anti-austerity protest is expected on Saturday in Rome.

Demonstrators applaud during the left-wing Italian metalworkers' union FIOM rally in downtown Rome Piazza San Giovanni on May 18, 2013. AFP PHOTO / Filippo MONTEFORTE (Photo: FILIPPO MONTEFORTE/AFP/Getty Images)EN also posted this video:

And RT.com offered this report:

_________________________________________

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

Abenomics in 14 Words

Ferrari sales are going gangbusters in Japan, but beer sales have started to fizzle. That’s all you really need to know about Abenomics.

According to Bloomberg: “Ferrari said sales in Japan will rise by 30 percent this year….(Sales have already) increased 28 percent in the first six months. Lamborghini sales are also soaring. According to “Lamborghini SpA Chief Executive Officer Stephan Winkelmann…. the automaker is very happy with Japan. “It’s coming back big time,”….Deliveries of Lamborghini in Japan increased 13 percent to 142 units in the first nine months, according to Japan Automobile Importers Association.” (“Ferrari Says Sales in Japan to Rise 30% as Abe Revives Spending“, Bloomberg)

In contrast, Beer shipments dropped by nearly 3 percent “in August to their lowest level for the month since comparable data became available in 1992, figures from major brewers show….Asahi Breweries Ltd. and Kirin Brewery Co. logged declines, chiefly due to weak beer sales.” (Beer, near-beer shipments fall 2.8%“, Japan Times)

How do you like that?

So, Abenomics works much like Bernankenomics, Draghinomics (EU), Harpernomics (Canada), Cameronomics (UK), and now Abbottnomics (Australia). In every case, looser monetary policies and tighter fiscal policies have generated more wealth for the 1 percenters while working stiffs take it in the stern sheets. You can call it QE or Abenomics or LTRO or monetary easing or quantitative jabberwocky. It doesn’t really matter what you call it, because it all amounts to the same thing: Ferraris for the rich fu**ers and bupkis for everyone else. Get it?

In the US, the Federal Reserve has provided “unlimited” low cost funding for the big Wall Street banks while pumping up financial markets by more than $3 trillion. So, naturally, conditions have improved dramatically for wealthy speculators. As for the other 99 percent? Not so much. They’re still struggling with high unemployment, droopy wages, falling incomes, sizable household debt, dwindling disposable income, and a stimulus-starved economy that’s still sputtering along at half speed. Other than that, things are just groovy.

Five years into the so called “recovery” and the Feds funds rate is still locked at zero, which means that economy is still so weak that the Fed can’t raise rates by even 1 measly percentage point without fear that the whole house of cards will come crashing to earth. By every standard of measurement, QE has been a failure. It has, however, turbo-charged stock prices, pushed bank and corporate profits to record highs, greatly exacerbated inequality, and made some very rich people richer still. In other words, the policy is working just fine, thank you very much.

In Japan, the results are basically the same though you wouldn’t know it by reading the papers. The media characterizes Abenomics as a smashing success which has raised GDP, boosted exports, sent stock prices skyrocketing and slashed the value of the yen. It’s true, too, to some extent. Like Bernanke’s QE, Abenomics has made some very rich people even richer. Unfortunately, the view from below is quite a bit different. Retirees, savers and working people have seen conditions steadily deteriorate due to stagnant or falling wages, higher inflation, zero interest gains on their investments, and higher taxes. You read that right, Abe actually raised the sales tax to 8 percent, putting the economy at risk of another slump just to placate the IMF and to reward his right-wing corporate base. Japan’s top earners wanted proof that Abe was committed to shifting more of the nation’s prodigious debtload onto the shoulders of working people, which cheerily he did by jacking up the sales tax. Here’s the story from Bloomberg:

“Japanese Prime Minister Shinzo Abe proceeded with an April sales-tax increase….The levy will rise to 8 percent from 5 percent now, Abe, 59, said in Tokyo today, the first increase since 1997. …

With households already hit by a rising cost of living and declines in pay, proceeding with the higher levy enacted by the previous government poses the biggest risk yet to Abe’s efforts to end two decades of Japanese stagnation. …

The economy will contract an annualized 4.5 percent in the three months after the sales tax is increased in April before returning to growth, according to the median calculation of economists surveyed by Bloomberg News. For the 2014 calendar year, the expansion is seen slowing to 1.6 percent from 1.9 percent this year, the median estimates show.” (“Abe Orders Japan’s First Sales-Tax Increase Since ’97: Economy“, Bloomberg)

What does it tell you when the country’s top policymaker is willing to raise taxes even though he knows the cost of living is already going up, wages are still going down, and the economy is set to contract (by 4.5 percent) as soon as the tax goes into effect? Does that sound like a leader who is genuinely interested in growing the economy and ending deflation? Or does it sound like another chiseling phony using his office to skim bigger profits for his parasite banker friends?

Wages are going down in Japan. DOWN. How do you build a recovery on crappy wages that are progressively getting crappier? You can’t, which is why Abenomics is all smoke and mirrors. Take a look at this:

“Wages in Japan decreased to 407.34 JPY THO in July of 2013 from 531.11 JPY THO in June of 2013. Wages in Japan is reported by the Ministry of Health, Labour and Welfare, Japan. Japan Wages averaged 317.62 JPY THO from 1970 until 2013, reaching an all time high of 883.79 JPY THO in December of 1997 and a record low of 52.91 JPY THO in February of 1970.” (“Japan Wages“, Trading Economics)

This is the official data, not some gibberish you read in the mainstream media where Abenomics is celebrated as the second coming of Daruma. When wages drift lower, people spend less, consumption dwindles and the economy shrinks. Everyone knows this, which is why the clever Abe frontloaded his economic recovery program with $100 billion in plain old fiscal stimulus, mainly infrastructure spending. The idea was to give the economy a big freaking jolt that the media would attribute to the Bank of Japan’s madcap money printing. But money printing is not the cause. Fiscal stimulus is the cause. And when the stimulus runs out (next year), the economy will tank. Because QE doesn’t increase production, boost GDP, reduce unemployment, raise inflation, or create a strong, sustainable recovery. It pushes up stock prices, inflates asset bubbles and, most important, makes some very rich MF’s richer still. That’s what it does everywhere it has been implemented, and that’s what it is doing now in Japan.

But at least consumer confidence is rising, right? Isn’t that what the pundits in the media keep telling us?

Wrong. Confidence is eroding, because people are making less which makes it harder to stretch their paychecks due to rising inflation. Check this out:

“Japanese consumer confidence worsened from three months ago for the first time in three quarters as more people reported their income shrank from a year earlier, according to the results of the Bank of Japan’s quarterly survey released on Wednesday. The data also showed that more people said prices had risen from a year earlier, indicating that higher utility charges and food prices may be decreasing the average household’s disposable income while base wages remain depressed….

More people expect their income will fall in the next 12 months…

The average household spending fell a real 1.6% on year in August, marking the first y/y drop in two months after a 0.1% gain in July. The average real income of salaried workers’ households fell a real 0.9% on year in August, the first fall in six months while their disposable income also posted the first drop in six months, down 1.4%.” (“BOJ Poll: Japan Consumer Confidence Slips on Lower Income”, MNI Market News)

The Bank of Japan’s (BoJ) crackpot governor, Haruhiko Kuroda, is on track to double the money supply in next two years in an effort to reach his inflation target of 2 percent. Unfortunately, higher inflation does not guarantee more activity or growth unless wages rise too. Which they aren’t. Wages are falling in Japan, so the plan is ridiculous. Check this out from Financial News:

“There is no evidence that inflation will help consumption. Growth requires higher household incomes or lower savings. Inflation tends to push up prices faster than wages and thus depresses household real incomes. Savings rates have been falling steadily as inflation has turned to deflation. …

It is also argued that inflation will reduce the burden of the national debt, by increasing the rate of growth of nominal GDP. This would be true if we were looking at hyper-inflation. However, as the bond market’s response shows, moderate inflation may well make matters worse, not better, by pushing up bond yields’ rates even faster than inflation.” (“Abenomics should take aim at structural reform”, Financial News)

Fed chairman Ben Bernanke has encountered the same problem in the US. Five years of zero rates and $3 trillion of asset purchases (QE) have not brought him any closer to hitting his inflation target of 2 percent. Thus, it would be reasonable to assume that QE doesn’t raise inflation and that stuffing the banks with excess reserves and juicing stock prices really won’t achieve the intended objective. Unless, of course, the real objective is to make rich speculators even richer, which it appears to be doing quite well.

Abenomics has shown some progress in spurring credit growth and personal consumption. But, once again, these positive signs are mainly attributable to the one-time-only $100 billion burst of fiscal stimulus. When that runs out in mid 2014, we’ll see that boosting base money does not lead to more spending, a broader credit expansion, or greater business investment. Instead, it leads to stock buybacks, excessive margin debt, asset bubbles, and other misallocations into thoroughly unproductive areas of yield-seeking speculation. Kuroda and pal Bernanke are, in effect, pumping petrol directly into the car’s carburetor expecting the vehicle to run smoothly. After 5 years of applying the same flawed theory, we can surmise that their confidence is misplaced.

Like QE, Abenomics is a public relations moniker that conceals the way the policy really works. “Check kiting” would probably be a more accurate designation, since the two central banks are in fact engaged in a form of fraud in which funds are drawn from an overdrawn account. Naturally, the losses from this paper hanging exercise will eventually be passed along to unwitting taxpayers in the form of inflation.

But Abenomics is not merely monetary flim-flam disguised as economic policy. It is also a straightforward attack on worker protections, progressive institutions and vital safetynet programs. For example, Abe is also pushing for “special economic zones” where he can test his theories on radical deregulation. In the words of the far-right Economist magazine, the zones would allow “Big companies… to have more freedom to fire full-time workers, which is almost impossible in Japan….(and) “to create a giant special agricultural zone on the island of Hokkaido, where firms would be allowed to own farmland.”

How is “greater freedom to fire workers” good for the economy? Personal consumption is weak already. Will it improve by hiring more low wage workers?

No, of course not. And what about the “special agricultural zones”? Does anyone really believe that you can strengthen a recovery by allowing the behemoth multinational agribusinesses to run roughshod over Japan’s many mom and pop farmers who are fighting for survival?

No, again. The idea is laughable. Needless to say, none of Abe’s “reforms” are directed at the many overbloated and underwater “zombie” financial institutions that are responsible for the lion’s share of the bulging national debt. Regulation does not apply to these bloodsuckers who own the system and whose money puts flunkies like Abe in power.

Abe’s other “reforms” include lowering corporate taxes, bigger out-of-pocket medical payments, a rise in the retirement age, and “the largest-ever cut to welfare benefits.” The common thread in Abe’s so called reforms is not hard to sort out; It’s tax breaks and subsidies for the rich, and austerity for everyone else.

And that’s why Ferrari sales are red-hot, but beer sales are in the dumps.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. Whitney’s story on declining wages for working class Americans appears in the June issue of CounterPunch magazine. He can be reached at [email protected].

A Nation Brought to the Verge of Ruin

In the Hands of a Moneyed Oligarchy

Recently on his syndicated talk show, the power-worshipping interviewer of influential elites Charlie Rose worried that Washington’s latest fiscal crisis sends the world the message that “democracy doesn’t work as well as we thought it did.” [1]

What American “democracy” was Charlie Rose talking about? As John Bellamy Foster and Robert W. McChesney noted four years ago, explaining why there would be no New Deal under Barack Obama, “The United States, despite its formally democratic character, is firmly in the hands of a moneyed oligarchy, probably the most powerful ruling class in history.” [2]

By Noam Chomsky’s account two years later, writing in the wake of the first elite-manufactured debt-ceiling crisis that nauseated the nation and mystified the world, “Corporate power, by now largely financial capital has reached the point that both political organizations, which now barely resemble traditional parties, are far to the right of the population on the major issues under debate.”[3]

Evidence in support of these statements is voluminous. On issue after issue, public opinion is irrelevant (or very close to it) in the realm of serious politics and policy, controlled by the nation’s “unelected dictatorship of money (Edward Herman and David Peterson’s phrase). Take health care coverage. Most Americans have long favored a single-payer national health insurance plan on the Canadian model. Their preference for such substantive, seriously social-democratic health reform has found no representation among the corporate- and Wall Street-captive lobbyists and politicians who pushed for big business-friendly versions of “health insurance reform. The version that finally passed in 2009, the so-called Affordable Health Care Act, is a monument to corporate and financial plutocracy. The business right wing FOX News and talk radio propaganda machine calls “Obamacare” socialism. It did not inform those it eggs into dread that the president’s measure is based on corporate-friendly prescriptions developed by the right wing Heritage Foundation in the 1990s and that his notion of “change” leaves giant insurance and drug companies free to extract massive profits that drive the nation’s health care costs to the breaking point.

The U.S. could eliminate its much-bemoaned fiscal deficit by replacing the nation’s highly dysfunctional privatized and largely employment-based health insurance system with a universal public model similar to what exists in other industrial nations – with a system that would cut health costs in half and yet deliver superior outcomes. But that’s irrelevant under the rules imposed by the reigning “plutonomy,” wherein “the financial institutions and Big Pharma are far too powerful for such options even to be considered.”[4]

The Deficit Over Jobs

“The deficit” is itself another case in point. The populace tells pollsters that government’s main priority ought to be job creation, not deficit reduction. As Demos magazine noted last December, 2011 and 2012 polls found that “the public remained focused on jobs and the economy over the deficit by two-to-one margins or more.” Surveys undertaken after Obama’s reelection last November found that “49 percent thought the election was a mandate for job creation while only 22 percent said that the President’s mandate was for deficit reduction.” NBC’s exit poll showed that “only 15 percent of voters thought the deficit was the biggest problem facing the country” A majority supported “spending money to invest in infrastructure/public sector hiring, like teachers and firemen, versus cutting to reduce the deficit.”

So what? Who cares? As Demos writer J. Mijin Cha explained, “The ‘donor class’ – the segment of the population that donates to political campaigns – is disproportionately comprised of affluent Americans.” This “donor class” (predominantly from households in the top income quintile) “does not prioritize policies to create jobs and economic growth.” It is “twice as likely to name the budget deficit as the most important issue in deciding how they would vote than middle- or lower-income respondents.” It strikingly and overwhelmingly rejects federal government action to help create jobs. Just 19% of the nation’s affluent households think the government in Washington should “see to it that everyone who wants to work can find a job” – a statement favored by 68 percent in the public. A tiny 8 percent of the wealthy think that government “should provide jobs for everyone able and willing to work cannot find a job in private employment” – something a majority (53%) of Americans support.

The “donor class” has won the policy argument, in defiance of majority sentiments. “Austerity dominates the current political debate” in ways that reflect “the influence of money in our political system…as evidenced in how well the interests and priorities of the affluent class are represented in Congressional action – even when they run counter to the wishes of most Americans” – and, we might add, counter to the requirements of meaningful economic recovery.[5] 

Demos might have added “as represented in presidential action” and in the behavior of both of the nation’s reigning political parties. The president has already made significant reductions to the highly popular Medicare and Social Security programs in the deceptive name of “deficit reduction” and he is promising to make more in the name of his neoliberal “grand bargain” (really a Great Betrayal) – with little opposition from fellow dismal dollar Democrats.

We’ve Seen This Movie (Dance) Before

The latest crisis in Washington is yet another in a series of plutocratic fiscal dramas illustrating the irrelevance of public opinion under the “unelected dictatorship.” Like the debt-ceiling fiasco of 2011 and the fiscal cliff freak show of 2012, it will end with a bipartisan deal the advances the financial elite’s drive for more austerity and do nothing to addresses the nation’s interrelated and ongoing crises of poverty, joblessness, and inequality (the latter problem so savagely advanced now that 400 Americans have more wealth than half of all Americans) With the Teapublicans’ “defund [supposedly socialist and in fact corporatist] Obamacare” having been taken off the table (it was never serious[6]), the two wings of the single corporate party” have begun to hammer out a deal that will, as the left economist Jack Rasmus predicts:

“result in more spending cuts, especially Social Security, Medicare and Medicaid, as well as an understanding and consensus to cut corporate taxes when the tax code overhaul bill comes to votes in Congress and for Obama’s signature…… The deal may include some token concessions to Teapublicans in the House…. Perhaps the already offered repeal of the medical device tax. Perhaps some further exemptions to Obamacare for business and wealthy individuals. A long list of such concessions to exempting and postponing parts of Obamacare have already been unilaterally made by Obama since the beginning of this year. Difficulties in the rollout of Obamacare may encourage him to agree to more. There may even be a short delay of a few months in the implementation deadline for the Obamacare act….But the final deal to be struck in 2013 will appear more like the prior 2011-2012 deal of spending cuts and tax largesse for the wealthy. This time seniors and retirees will be the primary target of the spending cuts, while corporations get the tax cuts instead of wealthy individuals.”[7]

“We’ve seen this movie before, we know how it’s going to end.” So said Donald T. Ellenberger, the “head of multisector strategies” at the giant financial services firm Federated Investors, last week, explaining why the financial markets were responding with cautious calm in response to the threat of default.[8] Rasmus prefers a different metaphor: dance, as in a “well-orchestrated dance” in which corporate-captive elites in both of the leading parties align with the mass media in whipping up fears of government and economic collapse to advance the neoliberal austerity agenda favored by political and economic investor class.

So what if this deal has nothing to do with – and in fact coldly defies – majority popular sentiments? We the not-so sovereign shock-doctrined [9] people are supposed to be so relieved that the bipartisan plutocrats in Washington have decided “at the last minute” not to throw the already weak recovery and savagely unequal economy into catastrophic decline (something that no Washington players beyond a part of the GOP.’s proto-fascistic Tea Party faction might seriously seek or welcome) that we are ready to accept whatever regressive bargain is worked out supposedly on our behalf. We are expected to direct our ire at one or both of the two dominant political organizations, and/or at government and politics and “Washington” in general, but not at the real power behind the outwardly reigning parties and state – the nation’s hidden senate of corporate and financial wealth, which has trumped democracy with plutocracy for quite some time now.

“Wall Street Owns the Country”

It’s not exactly new. Listen to how the great Kansas populist orator Mary Ellen Lease put things to an angry crowd in 1890, one hundred and twenty-one years before Occupy Wall Street (OWS) launched its remarkable but short-lived, police state-dismantled encampment in lower Manhattan:

 “Wall Street owns the country. It is no longer a government of the people, by the people, and for the people, but a government of Wall Street, by Wall Street, and for Wall Street….Our laws are the output of a system which clothes rascals in robes and honesty in rags….There are thirty men in the United States whose aggregate wealth is over one and one-half billion dollars. And there are half a million looking for work….The people are at bay, let the bloodhounds of money who have dogged us thus far beware.”[10]

Another sterling populist speaker of the time spoke in similar and hauntingly Occupy-foreshadowing terms, adding a critique of the two dominant parties’ (Republicans and Democrats) shared subservience to the moneyed power. As Ignatius Donnelly noted at the People’s Party national convention on July 4th, 1892, in terms that seem hauntingly familiar in our current New Gilded Age:

 “We meet in the midst of a nation brought to the verge of moral, political, and material ruin. Corruption dominates the ballot-box, the Legislatures, the Congress, and touches even the ermine of the bench. The people are demoralized…The newspapers are largely subsidized or muzzled, public opinion silenced, business prostrated, homes covered with mortgages, labor impoverished, and the land concentrating in the hands of capitalists….The urban workmen are denied the right to organize for self-protection, imported pauperized labor beats down their wages, a hireling standing army, unrecognized by our laws, is established to shoot them down….The fruits of the toil of millions are badly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind; and the possessors of these, in turn, despise the Republic and endanger liberty…We have witnessed for more than a quarter of a century the struggles of the two great political parties for power and plunder, while grievous wrongs have been inflicted upon the suffering people. We charge that the controlling influences dominating both these parties have permitted the existing dreadful conditions to develop without serious effort to prevent or restrain them…. …They propose to sacrifice our homes, lives, and children on the altar of mammon; to destroy the multitude in order to secure corruption funds from the millionaires….” [11]

 Sound familiar? “Wall Street owns the country.” Encouraged by the original well-orchestrated first debt-ceiling dance in the summer of 2011, that was the lesson drawn and disseminated with no small initially favorable public response by OWS and its many hundreds of imitators across the country two years ago. That left-led populist movement (or moment) was crushed by predominantly Democratic mayors and city councils with no small help from a coordinated federal (Obama administration) campaign of repression. It is long past time for a popular grassroots re-occupation seeking among other things to bring about a semblance of actual popular sovereignty to an ever more authoritarian and Orwellian, state-capitalist America.

As I write this (in the early afternoon of Wednesday, October 16, 11 hours before the debt-ceiling deadline, I see from the AP wire that the “last minute” deal in the “well-orchestrated dance” is being cut.

Postscript: “The Ultimate Green Party” (Thursday morning, October 17):

As this latest fiscal crisis dance winds down (there are others scheduled for the future) with the interim resolution predicted by the financial markets, I would imagine that the president is denouncing out-of-control “partisanship” in the nation.  It is a good time to look at Mark Leibovich’s bestselling expose on the money soaked bipartisan orgy that is Washington D.C.: This Town: Two Parties and a Funeral Plus Plenty of Valet Parking (New York: Blue Rider Press, 2013). “In recent years,” Leibovich writes, “Washington has defied the national economic slump and become the richest metropolitan area in the country.  Getting rich became the great bipartisan ideal: ‘No Democrats and Republicans in Washington anymore, only millionaires,’ goes the maxim. The ultimate Green Party.  You still hear the term ‘public service’ thrown around, but often with irony and full knowledge that ‘self-service’ is now the real insider play.” (p.9)

“Much of the Washington economy – lobbying, consulting, and cable news – is predicated on the perpetuation of conflict, not the resolution of problems….All of the shouting partisanship that we see on television is just winking performance art….Off-air, everyone in Washington is joined in a multilateral conga line of potential business partners” (p.98).

Beneath all the drama about “the Tea Party’s” defeat and the Democrats’ “victory,” a Bloomberg Businessweek item this morning reports that “Obamacare aside, events have actually gone the [Tea Party] movement’s way ever since Republicans wrested control of the House of Representatives in the 2010 midterm elections. Discretionary spending has been falling. Federal-employee head count is down. And since 2010, deficit reduction has been more rapid than in any three-year period since the demobilization following World War II… The nonpartisan Congressional Budget Office projects that, under current law, by 2038 total spending on everything other than the major health-care programs, Social Security, and interest will decline to the smallest share of the economy since the 1930s.”
See http://www.businessweek.com/articles/2013-10-17/tea-partys-victory-against-government-spending-comes-at-high-price?campaign_id=yhoo.
Of course, what Bloomberg describes here as a “pyrrhic victory” for the so-called Tea Party’s so-called movement is in fact the triumph of richly bipartisan neoliberalism and the financial and corporate elite, whose wealth and power continue to concentrate while millions of Americans struggle to stay afloat

Paul Street’s next book is They Rule: The 1% v. Democracy (Paradigm. January 2014).

Notes

1. “U.S. Government Shutdown: Wolf, Mallaby, Osnos,” October 15

w-10-16-jFJwWPc7R_G831yY2kch~A.htmlww.bloomberg.com/video/u-s-government-shutdown-charlie-rose 8:15

2. J.B. Foster and R.W. McChesney, “A New Deal Under Obama?” Monthly Review, February 2009, 7).

3. Noam Chomsky, “American Decline: Causes and Consequences,” Alakhbar English, August 24, 2011.

4. N. Chomsky, “Americain Decline,” New York Times Syndicate, August 5, 2011).

5. J. Miljin Cha, “Why is Washington Reducing the Deficit Instead of Creating Jobs?” Demos, December 7, 2012.

6. Jack Rasmus, “The Coming Debt Ceiling Settlement: The Well-Orchestrated Dance, 2.0,” (October 15, 2013), As Rasmus ads, “The recent Teaparty grandstanding on Obamacare has been for the media and public, with the goal of enhancing their 2014 midterm election results within the Republican party as well as in general. They have now accomplished this. The Obamacare issue was never a serious possibility. They will now retreat.”

7. One should not forget that Obama has been, and continues to be, a strong advocate of cutting the corporate tax rate from 35% to 28% and providing ‘relief’ for multinational corporations’ tax rates. Obama has also already indicated cuts of $630 billion in social security and medicare in his 2014 budget. This is the starting point for the ‘original process’ negotiations that have been temporarily derailed by Teapublican grandstanding, now coming to an end.

8. N. Popper, “Little Fear On Wall St. Of Default, At Moment,” New York Times, October 8, 2013, B5.

9. Noami Klein, The Shock Doctine: The Rise of Disaster Capitalism (New York: Metropolitan, 2007).

10. Howard Zinn, A People’s History of United States (New York, 1980), 288.11. Larry Goodwyn, The Populist Movement (New York: Oxford University Press, 1978), 167-168. Emphasis added.

Stockman’s Rant




On the rare occasion, an article appears in the mainstream press that takes a deeper, more thoughtful view of human affairs, a document that gives a hint or glimpse of an unspoken truth beyond the pablum that occupies media puppets. Such an occasion was the publishing of The New York Times opinion piece entitled “State Wrecked: The Corruption of Capitalism in America” (3-31-2013) and authored by former Reaganite budget director, David Stockman.

Now Stockman is a renegade from corporate Republicanism; he actually believes in the ancient principles put forward by Adam Smith and other classical capitalist thinkers. While corporate Republicans cozy up to their party’s ugly, fascistic outliers, they always, in the end, make their bed with the rich and powerful. Stockman, on the other hand, actually embraces the mythical virtues of small business ownership and town hall democracy. In classical Marxist terms, he represents the ideology of the petite-bourgeoisie.
In the swamp occupied by Democratic and Republican politicos—the breeding ground for conventional politics—such views are unwelcome. Principled politics from the right or the left are alien equally to the snakes and the rats that prey on the cognitively weak and unwary.
Stockman is in a panic because he sees beyond the stock market euphoria and Pollyanna commentaries that have induced the mass delusions of the last several months. And what he sees angers him.
Stockman constructs an indictment, a list of charges against the current US economy: growth of output is woefully inadequate, jobs are both indecently scarce and low paying, the incomes and the net worth of “ordinary” citizens are dropping while poverty is on the rise. To anyone with a grip on reality, these are not signs of real economic recovery or systemic success. He notes that “we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.” And yet imagine the toll if no remedial action had been taken! Surely, this unintended critique of eighty years of state-monopoly governance counts as a devastating charge against modern capitalism. If the era of state-monopoly capitalism can do no better than produce the sad state outlined by Stockman, it is decidedly a failure.
Stockman dares speak the truth so discomforting to liberals and social democrats: [World War II] “did far more to end the Depression than the New Deal did,” though he misleadingly praises the Eisenhower years for its “sound money and fiscal rectitude.” Perhaps he is too young to remember the massive increases in military spending, the ambitious interstate highway system, and the enormous growth of public spending brought on by the Cold War and the Sputnik panic. In any case, the dose of war socialism and the “frenetic… activism” of state-monopoly capitalism kept the capitalist ship afloat, though with fewer and fewer rewards for the majority of US citizens.
Stockman correctly sees that the remedies pursued by US state-monopoly capitalism directed more and more of the lubricant of public funds towards the financial sector over the last decades: the Greenspan “put,” the Long-Term Capital Management bailout, extended ultra-low interest rates, TARP, Fed purchases of bank junk, the support of federal bond prices, and support for equity markets. He calls this, not incorrectly, “Keynesianism—for the wealthy.”
And this is a salient point. It is commonplace to express the differences between Democratic and Republican policy makers since the Reagan era as pro- and anti-Keynesianism. But this is wrong. Ironically, it was only during the Clinton administration that growth of government spending was at all curtailed and today fiscal and monetary expansion remains a ready tool of the ruling class well after Reagan's departure. Certainly Keynesian pump priming has taken new and evolving forms over decades: direct job creation, military spending, massive space programs, infrastructure projects, public-private partnerships, repair of financial institutions, and stimulation of financial demand. While one or the other may be the favored priming tool of rulers at any given time, the similarities of the forms are far more important to recognize than their differences. State intervention in markets continues to be at the core of contemporary state-monopoly capitalism. Stockman sees this; others don't.
In Stockman's account, the enabler of pump priming in all of its forms has been debt. Borrowing or printing money is the means to continue the regimen of “frenetic fiscal and monetary policy activism.” But, in his view, this regimen is running out of steam. “The future is bleak.” And the “Fed has incited a global currency war (Japan just signed up, the Brazilians and Chinese are angry, and the German dominated euro zone is crumbling) that will soon overwhelm it...”
A bleak picture indeed, but one entrenched in reality.
So if modern capitalism-- in its state-monopoly form-- is a disaster, does that mean that Stockman advocates socialism?
Definitely not. Instead he holds out for a nostalgic return to the gold standard. Avoiding what he calls “end-state metastasis,” “would necessitate a sweeping divorce of the state and the market economy [the wholesale rejection of state-monopoly capitalism! ZZ]. It would require a renunciation of crony capitalism and its first cousin: Keynesian economics in all its forms. The state would have to get out of the business of imperial hubris, economic uplift and social insurance and shift its focus to managing and financing an effective, affordable, means-tested safety net.”
 In short, Stockman advocates going back to a conjured idyllic time before state-monopoly capitalism, a time imagined by the petite-bourgeoisie as one of healthy competition, entrepreneurship, and opportunity. For him, the golden age of capitalism would be the pre-depression era of small town USA, family farms, vibrant and expansive industry and foreign policy isolationism. Of course any pretense of continuity or viability of that era was dashed by the Great Depression. In fact, the policies decried by Stockman (and associated by Marxists with state-monopoly capitalism) served as a temporary backstop to the further contraction of the capitalist system produced by that fantastic era.
Stockman may wish for a return to an earlier time just as others may wish to time travel back to the court of Louis XIV, but it isn’t going to happen. Capitalism, like any organism, has its own life span, its own history. Saved from a critical illness, capitalism passed from its laissez faire period to a period of intensifying state intervention and management. Today, that phase of capitalism’s development—state-monopoly capitalism-- is also threatened with a critical illness. I would not be so bold as to predict capitalism’s imminent death, but certainly it will not be revived by reliving its past as Stockman fantasizes.
At a time when liberals and conservatives argue pathetically over the right mix of austerity and stimulus, Stockman is a welcome mainstream herald of the profound crisis pummeling global capitalism. His anxiety and anger reflect a deeper understanding of the contradictions of the moment. His rant, spiked with sarcasm and vitriol, stands in stark relief against the smugness of the lap dog punditry.
Krugman Strides into the Ring
 The Stockman screed generated a storm of opposition. Liberals and the fuzzy, mushy left were particularly affronted. Unlike Stockman, they would like to only turn the clock back to the early seventies, another supposedly “idyllic” time when business unionism was generating satisfactory contracts, the “Great Society” programs were blooming, and war in Vietnam was winding down (at least for US combatants). The fruits of the civil rights struggles and urban uprisings were realized in the creation of programs, bureaucracies, and other buffering agents against domestic insurgency. Jobs servicing the Great Society generated a stratum of social liberals who matured into the base of a social democratic left inside and outside of the Democratic Party. For them, the world turned evil and foreboding with the Reagan “revolution,” a movement they characterize as neo-liberalism.
In the dust-up with Stockman, Paul Krugman, columnist for The New York Times, assumed the role of savior and protector of their interests and perspective. Krugman, the darling of the “respectable” left, attacked Stockman for his audacious critique of the track record of state intervention in the capitalist economy. Anyone who follows Krugman knows that his response to the crisis is a simple solution: spend more public funds and spend freely until growth perks up. The soft left finds this an agreeable solution because it promises to save capitalism (and forestall socialism!) while creating a potential material basis for pet welfare programs. It is simply the fantasy of another New Deal. And never mind that Krugman doesn’t share the fantasy!
Apparently, the Stockman-Krugman battle merited a major media appearance before the Sunday morning gasbags, the big stage for what our media passes off as intellectual fare. While I lacked the stomach to watch the sparring between the two, refereed by the likes of Huffington, van Sustern, and Will, I would commend an entertaining account of the match by Mike Whitney in Counterpunch (Krugman vs. Stockman, April 11, 2013).
The merit of Stockman’s account is that he is righteously indignant with an economic system that has failed the great majority of people and inflicted great pain and uncertainty. He goes beyond the dominant rhetoric of “we are all in this together” and “we are all at fault” to find systemic rot in capitalism. He correctly places the blame for this at the doorstep of state-monopoly capitalism, the stage of capitalism evolved to rescue the system from the accumulated contradictions of laissez faire capitalism, contradictions brought to light by the Great Depression. But he cannot go where logic would take him. He cannot entertain options that would transcend capitalism. Thus, he is resigned to a pathetic nostalgia for a bygone era where the contradictions of capitalism did not appear in such sharp focus. While he stretches the bounds of mainstream thinking, he can not see beyond markets and private ownership; he cannot see socialism.
Krugman and most of the US left are thoroughly conventional in their thinking—they offer a more “enlightened” management of the economic system and a cheerful capitalism with a human face. They would be hard pressed to point to a period when capitalism bore a human face, however. Nonetheless, they are undaunted before a rising tide of interest in the socialist option. They are resolute in their fear and rejection of real socialism.
Pressured by five years of relentless economic crisis and increasing signs of favor towards socialism, especially with the young, our feckless left offers a cold plate of empty slogans of localism, anti-consumerism, platitudinous “participatory” democracy, cooperatives, and a vacuous “new” economy. As if these are answers to the $17 trillion dollar US multinational, monopoly capital behemoth. In truth, these are simply evasions and dissemblance. 
If Stockman is right and capitalism is “state-wrecked,” then its time to leave the wreckage and turn to socialism. 
Zoltan Zigedy


UBS’ George Magnus Asks “Why Are The European Streets Relatively Quiet?”

The wave of social unrest that rumbled across Europe between 2008 and 2011 has become less intense. This has come as a cause for relief in financial markets, as it has helped to underpin the marginalization of ‘tail risk’ already addressed by the ECB and the Greek debt restructuring. And yet the latest crisis over the Cyprus bail-out/bail-in not only shoots an arrow into the heart of the principles of an acceptable banking union arrangement, if it could ever be agreed, but also signifies the deep malaise in the complex and fragile trust relationships between European citizens and their governments and institutions. Some people argue that protest, nationalist and separatist movements are just ‘noise’, that the business of ‘fixing Europe’ is proceeding regardless, and that citizens are resigned to the pain of keeping the Euro system together. UBS' George Magnus is not convinced, even if public anger is less acute now than in the past, it is far from dormant, and its expression is mostly unpredictable. So is the current lull in social unrest a signal that the social fabric of Europe is more robust than we thought, or (as we suggested 14 months ago) is the calm deceptive?

Social unrest is a systemic phenomenon, which, according to an OECD report, meets two principal criteria. It is highly uncertain, complex and ambiguous; and it is highly likely to generate ripple effects into other sectors of the economy and society, possibly leading to the toppling of governments, or even political systems. Although European social unrest since the crisis in Greece began has claimed a small number of fatalities and considerable damage to property, it has been notable more for the public expression of lack of trust in the institutions of government, including in Brussels. If a rising number of people give up on the willingness and ability of their institutions to address grievances, then the lull is most likely deceptive.

We have been here before. The economic and political context of the 1930s was, of course, different. Then there was much historical and unresolved geo-political baggage, and a rupture of the political centre as two radically different ideological veins erupted from the backlash against free trade and the gold standard. One championed radical social reform, the other what may be euphemistically called ‘nation-building’ 5 . And there was no EU. But the problem today, as then, is the same, namely the inadequacy of mainstream, political channels to address rising public concern about the loss of economic security, social stability and, yes, cultural identity6. How else to explain both the rise of Spain’s indignados, and other similar national protest movements in Europe, and the increase in nationalist, populist and separatist sentiment, and representation in national parliaments from Greece, France, and Spain to Finland and the Netherlands, and now Italy?

...

Still an austerity zone

Even though the financial crisis in Europe has faded, for the time being at least, the economic stress nurturing protest movements hasn’t. The best that can be said is that the incidence of austerity may not be as significant as it was in 2010-11

...

Backlash link to austerity

Let’s assume nothing changes, and that while European elites debate how – or if – they can build strong European banking, fiscal and economic institutions, with the required transfer mechanisms between creditors and debtors, the economic lot of European citizens, an unhappy one for five years now, shows no improvement. This seems a decent assumption.

...

The principal economic lesson is that an austerity regime with recurring reductions in public outlays won’t work a) when the private sector is trying to delever and shrink liabilities at the same time b) when it is a generic phenomenon and c) when its principal impact is to depress the level of money GDP and sustain the economy in a liquidity trap. But thanks to some interesting empirical work, another lesson concerns the corrosive and dangerous effects of large and sustained austerity in creating a social backlash that results in greater uncertainty, and therefore inertia, when it comes to corporate hiring and capital spending. As a result, output and public sector tax revenues suffer, reinforcing the negative dynamic between debt and the economy.

...

when expenditure cuts, specifically, rise to more than 2% of GDP, and particularly when they rise towards or over 5% of GDP, the number and the severity of incidents of unrest rise sharply.

...

Self-evidently, there have been heightened levels of social unrest and shocks to the political system in Greece, Spain, Portugal and Italy, but not in the UK or Ireland, or in the US, for that matter, though neither the US nor the UK, for example, have been immune to social unrest, sometimes requiring the force of the state to suppress it.12. But the main difference between many incidents of social unrest and the ones that damage the social fabric and the economic environment is the impact (sometimes more perceived than real, perhaps) of highly restrictive budgetary measures. Some governments may be better able to implement and absorb them, and sustain the trust or belief in citizens in perseverance. Mostly, this comes down to the robustness of local institutions, and the performance of leaders, as well as culture and history.

The most fundamental manifestation of this damage is, of course, unemployment. But this is only the most visible sign of the upheaval in Europe’s famed social model, and overlooks other important social and economic fault lines, including stagnant or declining real wages, rising income inequality, levels of youth unemployment of between 25% and 50%, and the rise in the numbers of long-term unemployed.

These phenomena didn’t begin with the financial and Euro crises, of course, but they have certainly been exacerbated by it and by the response of governments, and citizens are certainly making the connection, regardless.

So why are the streets relatively quiet?

The short answer is we don’t know. None of the reasons we can think of add up to much, but judge for yourself. It could have something to do with Europe’s rapid ageing demographic transition. The proportion of young adults, aged 15-24 has already been falling from peak levels seen in the mid 1980s, and is on track to decline further in the next 20 years. The proportion of 15-59 year olds, or what we might imagine as the part of the population most likely to express non-voting anger, is peaking now, but a significant decline is predicted. Perhaps the baby boomers have expended their protest energy!

Rapid growth in, and a rising proportion of, the numbers of young people, say aged 15-29, certainly feed the potential for social protest and upheaval. But they also need a catalyst, which could be the emergence of high inflation.

Empirically, there is an unequivocal association, but this is best applied, in contemporary times at least, to the experience of emerging and developing countries, for example, as in the Arab Spring. Although the European upheavals in the 1960s and 1970s were set against a backdrop of rising inflation, those in the 1930s and today are the product of depression and awkward questions of self-determination, not inflation.

Perhaps the relative calm in Europe has something to do with European family structures. The Bank Credit Analyst recently published a chart, emphasizing the role of the family as a shock absorber. The authors suggest that the countries with the highest youth unemployment rates are also those with the highest proportion of young adults living with their parents, who fulfill the role of effecting transfers and economic and social support.

We are not sure about this one either, although having an extended family structure on which to rely is clearly a mitigating factor against poverty and social exclusion. But the two variables may simply be spuriously correlated since both represent symptoms of a depressed economy. In any event, those countries with the highest youth unemployment and numbers living at home have already claimed the bragging rights for anti-austerity protest, while six of the other eight countries have been characterized by fallen or weakened governments, and the rise of nationalist and anti-immigrant political parties and policies.

A conclusion to this discussion is not possible.

In a benign outcome, the potential for social disorder will be defused by a new approach to economic burden-sharing, a re-sequencing of the pursuit of austerity and growth objectives, and steady progress towards the establishment of credible and trusted European banking, economic and political institutions, including financial transfer mechanisms. Motherhood, to be sure, and this has at least two vital caveats, namely the willingness of Germany and other northern European countries to accept significant sovereignty compromises, and the implications for the EU project, if this level of integration proves a bridge too far for UK voters in the promised 2017 referendum.

Social and political upheavals would doubtless haunt the worst-case outcome, where muddling through leads nevertheless to a fragmentation of the Eurozone, or, in extremis, a collapse, in spite of OMTs and the like. The possible consequences, including for the social fabric of Europe, have been well aired in the last couple of years.

The middle way, so to speak, is a muddling through that never scales the successful outcome hurdles, but carries on regardless. Political bonds, maybe fear, sustain the Euro system, but European leaders are unable to reach an agreed and acceptable framework for durable economic recovery and full integration. This outcome describes the status quo, and is the base case for most people. But it is also about stagnant, low growth, persistent high unemployment, retreating targets for debt sustainability, more bail-outs and bail-ins, latent financial instability, and likely sovereign default. The current Eurozone news could not be more apt, and doesn’t seem like the ideal scenario in which to expect European social unrest and political turbulence to fade away.

Budgets Votes in House Cast Long Shadow as ‘Grand Bargain’ Looms

The budget put forth by the Progressive Caucus (CPC) in the House went down in expected defeat on Wednesday with a vote of 84-327.

In this March 18, 2013 file photo, House Budget Committee Chairman Rep. Paul Ryan, R-Wis. is seen on Capitol Hill in Washington. It's not this man, however, that progressives should be most worried about. It's Democrats and what they're willing to do in the name of 'compromise.' (Photo: AP) “The Back-to-Work budget is common sense, and it reflects the values of the American people," said CPC co-chair Rep. Raul Grijalva from the floor ahead of the vote. "It recognizes the realities of our economic and social times. This budget is about investment, and the greatest resource we have in this country is the American people, we need to invest in them."

It was not to be.

The Senate budget, approved by the Democratic-controlled upper-chamber, was also voted down in the House by a margin of 154-261. Among those who voted against it were 35 Democrats.

Also struck down was the the budget proposed by the Congressional Black Caucus (CBC). That vote was 105-305, with Democrats split with 105 in favor and 80 voting against it.

A vote on the Republican House budget, authored by Rep. Paul Ryan, is expected for a vote on Thursday. It will likely pass, of course, but will be dead on arrival in the Senate.

"Before we pass a grand bargain, we have got to take a hard and sober look at what’s happening economically in our country today." - Sen. Bernie Sanders

All votes more or less expected, but the story their failures reveal is one of continued budgetary gridlock in a split Congress and a country stuck in an economic crisis that continues to pit the good of all against the interest of the wealthiest few.

Above all, the failure to pass a budget agreement in Congress pushes President Obama to stay on a trajectory to willingly foster cuts—in the name of "compromise" and "shared sacrifice"—to key social programs like Social Security, Medicare, and Medicaid as he succumbs to the invented mantra that instead of a massive crisis of unemployment and income inequality, the US economy is suffering from annual deficits or a tax code not preferential enough to corporate interests.

In the name of this 'fabricated crisis,' Obama and other Democrats, according to economists and progressive critics, are falling victim (or willingly playing along) to the Republican budget intransigence that has been their hallmark since Obama first took office in 2008.

As recently as last week, House Minority Leader Nancy Pelosi (D-Calif.) said she would be willing to consider the 'chained CPI', which economists widely agree is fundamentally a cut to Social Security. She also said she would consider means-testing Medicare, a shift that could undermine the public support it has long enjoyed.

It's not the first time the Democrats have toyed with cutting program their constituents widely support, as economist and former Labor Secretary Robert Reich points out Thursday, but the Party's current willingness to "lead with compromise" is particularly unwise and harmful.

"If there was ever a time for the Democratic Party to champion working Americans and reverse these troubling trends, it is now," argues Reich. The Democrats should be "forging an alliance between the frustrated middle [class] and the working poor" and arguing that even the rich would be doing better "with a smaller share of a rapidly-growing economy than a ballooning share of one that’s growing at a snail’s pace."

"The modern Democratic Party [is] too dependent on the short-term, insular demands of Wall Street, corporate executives, and the wealthy." - Robert Reich

Unfortunately and frustratingly, however, Reich continues, "the modern Democratic Party can’t bring itself to do this. It’s too dependent on the short-term, insular demands of Wall Street, corporate executives, and the wealthy."

And independent Senator from Vermont Bernie Sanders, who has repeatedly vowed to protect Medicare and Social Security and other earned benefit programs, warned Obama on Wednesday that a 'Grand Bargain' with Republicans should really be seen as a 'Grand Sellout.'

Writing in The Hill newspaper, Sanders said:

At a time when the middle class is disappearing, 46 million Americans are living in poverty and the gap between the very rich and everyone else is growing wider, we need a “grand bargain” that protects struggling working families, not billionaires.

With corporate profits at record-breaking levels while the effective corporate tax is at its lowest level since 1972, and 1 out of 4 profitable corporations pays nothing in federal income taxes, we need a grand bargain that ends corporate loopholes and demands that corporate America starts helping us with deficit reduction. We must not balance the budget on the backs of the elderly, the children, the sick and the poor. We must not cut Social Security, disabled veterans’ benefits, Medicare, Medicaid, education and other programs that provide opportunity and dignity to millions of struggling American families.

Before we pass a grand bargain, we have got to take a hard and sober look at what’s happening economically in our country today. In doing so, we must acknowledge that the United States has the most unequal distribution of wealth and income of any major country on earth and that inequality is worse today than at any time since the late 1920s. Today, the wealthiest 400 individuals in this country own more wealth than the bottom half of America — 150 million Americans. The top 1 percent owns 38 percent of all financial wealth, while the bottom 60 percent owns just 2.3 percent. Incredibly, the Federal Reserve reported last year that median net worth for middle-class families dropped by nearly 40 percent from 2007-2010. That’s the equivalent of wiping out 18 years of savings for the average middle-class family.

And Isaiah Poole, writing about the defeated 'Back to Work Budget'—which his Campaign for America's Future fought hard to support—said:

Though this push has ended, the fight is not over. There will be other battles ahead in the coming weeks in which Congress will be forced to choose priorities, and the Back to Work Budget has made one thing clear: There is a right road to economic recovery and eventual deficit reduction, and progressives have it. Millions of Americans agree, and their representatives have been put on notice.

Stating clearly his priorities going forward, Sen. Sanders said:

We need a budget that puts millions of Americans back to work in decent-paying jobs by rebuilding our crumbling infrastructure and transforming our energy sector away from fossil fuels and into renewable energy and energy efficiency.

We need a budget that keeps the promises we have made to our seniors, veterans and the most vulnerable by protecting Social Security, Medicare and Medicaid benefits.

We need a budget that makes sure that the wealthiest Americans and most profitable corporations pay their fair share of taxes. We must end corporate loopholes that allow Wall Street banks, large corporations and the wealthy to avoid more than $100 billion a year in federal taxes by stashing their profits in the Cayman Islands and other tax havens.

And Reich concludes by arguing that the false narrative that the US is financially "broke" must be upended:

We are the richest nation in the history of the world — richer now than we’ve ever been. But an increasing share of that wealth is held by a smaller and smaller share of the population, who have, in effect, bribed legislators to reduce their taxes and provide loopholes so they pay even less.

The budget deficit “crisis” has been manufactured by them to distract our attention from this overriding fact, and to pit the rest of us against each other for a smaller and smaller share of what remains. Democrats should not conspire.

Needy children should be getting far more help, better pre-school care, better nutrition. Seniors need better healthcare coverage and more Social Security. All Americans need better schools and improved infrastructure.

The richest nation in the history of the world should be able to respond to the legitimate needs of all its citizens.

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NAFTA at 20: The New Spin

Intel engineers test new microprocessors at Intel's research unit in Guadalajara, Mexico's second largest city on July 23, 2008. (Photo: Janet Jarman / The New York Times)Intel engineers test new microprocessors at Intel's research unit in Guadalajara, Mexico's second largest city on July 23, 2008. (Photo: Janet Jarman / The New York Times)Only a few years ago, analysts were warning that Mexico was at risk of becoming a “failed state.” These days, the Mexican government appears to be doing a much better PR job. 

Despite the devastating and ongoing drug war, the story now goes that Mexico is poised to become a “middle-class” society. As establishment apostle Thomas Friedman put it in the New York Times, Mexico is now one of “the more dominant economic powers in the 21st century.”

But this spin is based on superficial assumptions. The small signs of economic recovery in Mexico are grounded largely on the return of maquiladora factories from China, where wages have been increasing as Mexican wages have stagnated. Under-cutting China on labor costs is hardly something to celebrate. This trend is nothing but the return of the same “free-trade” model that has failed the Mexican people for 20 years. 

The North American Free Trade Agreement (NAFTA), which was ratified in 1993 and went into effect in 1994, was touted as the cure for Mexico’s economic “backwardness.” Promoters argued that the trilateral trade agreement would dig Mexico out of its economic rut and modernize it along the lines of its mighty neighbor, the United States.

The story went like this:

NAFTA was going to bring new U.S. technology and capital to complement Mexico’s surplus labor. This in turn would lead Mexico to industrialize and increase productivity, thereby making the country more competitive abroad. The spike in productivity and competiveness would automatically cause wages in Mexico to increase. The higher wages would expand economic opportunities in Mexico, slowing migration to the United States.

In the words of the former President Bill Clinton, NAFTA was going to “promote more growth, more equality and better preservation of the environment and a greater possibility of world peace.” Mexico’s president at the time, Carlos Salinas de Gortari, echoed Clinton’s sentiments during a commencement address at MIT: “NAFTA is a job-creating agreement," he said. "It is an environment improvement agreement.” More importantly, Salinas boasted, “it is a wage-increasing agreement.” 

As the 20th anniversary of NAFTA approaches, however, the verdict is indisputable: NAFTA failed to spur meaningful and inclusive economic growth in Mexico, pull Mexicans out of unemployment and underemployment, or reduce poverty. By all accounts, it has done just the opposite.

The Verdict Is In 

Official statistics show that from 2006 to 2010, more than 12 million people joined the ranks of the impoverished in Mexico, causing the poverty level to jump to 51.3 percent of the population. According to the United Nations, in the past decade Mexico saw the slowest reduction in poverty in all of Latin America. 

Rampant poverty in Mexico is a product of IMF and World Bank-led neoliberal policies—such as anti-inflationary policies that have kept wages stagnant—of which “free-trade” pacts like NAFTA are part and parcel. Another factor is the systematic failure to create good jobs in the formal sectors of the economy. During Felipe Calderon’s presidency, the share of the Mexican labor force relying on informal work—such as selling chewing gum and other low-cost products on the street—grew to nearly 50 percent.

Even the wages in the manufacturing sector, which NAFTA cheerleaders argued would benefit the most from trade liberalization, have remained extremely low. According to the Bureau of Labor Statistics, Mexican manufacturing workers made an average hourly wage of only $4.53 in 2011, compared to $26.87 for their U.S. counterparts. Between 1997 and 2011, the U.S.-Mexico manufacturing wage gap narrowed only slightly, with Mexican wages rising from 13 to 17 percent of the level earned by American workers. In Brazil, by contrast, manufacturing wages are almost double Mexico’s, and in Argentina almost triple. 

Mexico’s stagnant wages are celebrated by free traders as an opportunity for U.S. businesses interested in outsourcing. According to one report by the McKinsey management consulting firm, “for a company motivated primarily by cost, Mexico holds the most attractive position among the Latin American countries we studied. … Mexico’s advantages start with low labor costs.” 

But even as the damning evidence against NAFTA continues to roll in, entrenched advocates of the trade agreement have been busy crafting new arguments. In his recent book, Mexico: A Middle Class Society, NAFTA negotiator Luis De la Calle and his co-author argue that the trade agreement has given rise to a growing Mexican middle class by providing consumers with higher quality, U.S- made goods. The authors proclaim that “NAFTA has dramatically reduced the costs of goods for Mexican families at the same time that the quality and variety of goods and services in the country grew.” 

Most of the economic indicators included in the book conveniently fail to account for the 2008-2009 financial crisis, which hit Mexico worse than almost any other Latin American country. The result has been skyrocketing inequality. As the Guardian reported last December, “ever more Mexican families have acquired the trappings of middle-class life such as cars, fridges, and washing machines, but about half of the population still lives in poverty.”

The indicators of consumption that suggest the rise of Mexico’s middle class also exclude the dramatic increase in food prices in recent years, which has condemned millions of Mexicans to hunger. Twenty-eight million Mexicans are facing “food poverty,” meaning they lack access to sufficient nutritious food. According to official statistics, more than 50,000 people died of malnutrition between 2006 and 2011. That’s almost as many as have died in Mexico's drug war, which dramatically escalated under Calderon and has continued under President Enrique Peña Nieto. 

The food crisis has coincided with the “Walmartization” of the country. In 1994 there were only 14 Walmart retail stores in all of Mexico. Now there are more than 1,724 retail and wholesale stores. This is almost half the number of U.S. Walmarts, and far more than any other country outside the United States. The proliferation of Walmart and other U.S. big-box stores in Mexico since NAFTA came into effect has ushered in a new era of consumerism—in part through an aggressive expansion built on political bribes and the destruction of ancient Aztec ruins.  

The arguments developed prior to the signing of NAFTA focused primarily on the claim that the trade agreement would make Mexico a nation of producers and exporters. These initial promises failed to deliver. Throughout the NAFTA years, the bulk of Mexico’s manufacturing “exports” have come from transnational car and technology companies. Not surprisingly, Mexico’s intra-industry trade with the United Sates is the highest of any Latin American country. Yet the percentage of Mexican companies that are actually exporters is vanishingly small, and imports of food into Mexico have surged.

Same Snake Oil, Different Pitch 

Because their initial promises utterly failed to deliver, the NAFTA pushers are now hyping “consumer benefits” to justify new trade agreements, including the Trans-Pacific Partnership. One of the most extreme examples of this spin is an article in The Washington Post that celebrates a “growing middle class” in Mexico that is “buying more U.S. goods than ever, while turning Mexico into a more democratic, dynamic and prosperous American ally.” Devoid of all logic, it goes on to say that “Mexico's growth as a manufacturing hub is boosted by low wages.” How can low wages make people more prosperous? 

The Post also boasts that in “Mexico’s Costco stores, staples such as tortilla chips and chipotle salsa are trucked in from factories in California and Texas that produce for both sides of the border.” Is this something to celebrate? The influx of traditional Mexican food staples, starting with maize, and goods from the United States has displaced and dislocated millions of Mexican small-scale farmers, producers, and small businesses. And not only that, Mexicans’ increasing consumption of processed foods and beverages from the United States has made the country the second-most obese in the world. 

In essence, NAFTA advocates have been reduced to saying: “so maybe NAFTA didn’t help Mexico reduce poverty or increase wages. But hey! At least it gave it Walmart, Costcos, and sweat shops.”

The bankruptcy of NAFTA’s promises is only compounded by the poverty of this consolation.

Welcome to Ayn Rand Planet: Why the Rich Prosper from the Stock Market While...

On Planet Rand, the stock-market boom is a wonderful thing precisely because it rests upon the recent rise in corporate profits.

March 11, 2013  |  

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This morning I received an email blast form Amazon. It was pushing The Fountainhead and Atlas Shrugged, the old and new testament of the Ayn Rand nation, which includes much of the Tea Party and its Republican allies.

How appropriate to be promoting Ayn Rand books just as the stock market and corporate profits both reached record highs. How appropriate to think of the infamous John Galt withdrawing from society in comfort while the rest of us face high unemployment, oppressive student loans, increasing healthcare costs, upside-down mortgages, and declining real incomes. But, according to Rand's philosophy, this is as it should be -- the wealthy getting all the rewards while the rest of us get nothing.

None of this is accidental. Our two-tiered economic recovery is the direct result of policies, or the lack thereof, that flow directly from Randian principles. If we don't do something soon, we'll all be living on Planet Rand.

Who Owns the Stock Market?

Before exploring this Randian policy coup, let's be clear on who owns how much stock in America, and therefore who is benefiting most from the record rise in the equity markets.

As of 2010, the top 1 percent of households owned 35 percent of all the stocks in America while the bottom 80 percent of us owned only 8 percent. These percentages include both direct ownership of stock shares and indirect ownership through mutual funds, trusts, and IRAs, Keogh plans, 401(k) plans, and other retirement accounts. (See " Wealth, Income and Power" by G William Domhoff.) So the current market boom is extremely profitable for the well-to-do, especially the super-rich, which is precisely what an Ayn Rand true-believer would cherish. Why is that?

On Planet Rand, each individual pursues his or her own rational self-interest. That is the definition of morality. It excludes altruism, which is posited as a negative, guilt-driven trait that should be avoided at all costs. Yes, this sounds selfish, but that's a good thing on Planet Rand, because acting in your own rational self-interest leads to improvement, success, fulfillment and happiness. That's how you can become a "maker" instead of a spineless moocher. (When I hear all this talk about the "makers," the Yiddish word macher always comes to mind -- a word used to describe an ambitious, puffed-up schemer. )

So on Planet Rand, the stock-market boom is a wonderful thing precisely because it rests upon the recent rise in corporate profits. (The New York Times reports that corporate profits as a share of national income are at their highest levels since 1950.) Aren't those corporations run by the smart, successful CEOs who are society's "makers"? Aren't those CEOs applying Randian reason in pursuit of their self-interest? Surely, this is why these makers deserve everything they can get.

Why Are We Being Left Behind?

It's easy to see why the Randians would adore the super-rich. After all they're not alone in their idolization of the wealthy. It's seems like most of Congress adores the super-rich as well. But why do the Randians refer to everyone else as moochers? Why be so hard on the rest of us?

This becomes clearer when we look at two kinds of answers to the question of why most of us have been left out of the current economic recovery. The first set of answers comes from a straightforward analysis about how our economy works, and doesn't work:

  • High unemployment depresses wages of low- and middle-income wage-earners

  • Increases in the use of advanced technologies allow corporations to produce more with less labor, thereby keeping unemployment high

One Economy, Two Americas

Cleveland is one of the cities hit hardest by the foreclosure crisis. (AP Photo/Jamie-Andrea Yanak)Before you gulp down your favorite champagne to celebrate Wall Street’s new stock market highs, remember that we are two Americas: The nation’s economic divide is costing us all dearly in terms of lost jobs and growth and is fueling the angry, gridlocked politics in Washington.

As The New York Times reported Monday, corporate profits have been skyrocketing ever since 2008 -– rising an average of 20.1 percent a year for four years in a row. But out on Main Street, average household incomes have risen only 1.4 percent a year. CEOs and big investors have been hogging the profits.

And while the stock market is roaring upward thanks largely to corporate profits earned overseas, 24 million Americans are still out there hunting for full-time jobs, month after month. But our economy is not generating many new jobs. In fact, Congress has just added to unemployment. With the sequester in force, we are going to lose a net of 750,000 jobs this year, according to the Congressional Budget Office.

This disconnect between Wall Street and Main Street, between profits and wages, between the winnings of the 1% and the stagnation of the 99% — what I call “wedge economics” — has been the prevailing pattern in the American economy for the past three decades. And it has been financially killing the American middle class and stealing the American Dream from average people.

Right now, “wedge economics” is mangling America’s economic recovery. Anyone who has taken Economics 101 knows that what drives growth is not high stock gains for the 1% (who capture more than half of the capital gains from the market) but the power of mass consumer demand.

Economists call that the “virtuous circle of growth.” What they mean is that when CEOs share more of corporate profits with their workers and pay higher wages instead of imposing wage freezes, tens of millions of Americans head for Costco or Home Depot or the local car dealer to buy. Their purchases, multiplied by the millions, is what creates the incentives for business to expand, to build new plants, buy new equipment and hire more workers.

Consumer demand is the essential job creator in the American free enterprise system. Without strong demand, built on an ample supply of good jobs and good pay, businesses simply sit on their money, as they have done for most of the past four years, hoarding $2 trillion in accumulated cash.

Old-time CEOs like Charlie Wilson, the former head of General Motors, Reginald Jones, the former chief of General Electric, or Frank Abrams, the former boss of Standard Oil of New Jersey, understood that they could drive economic growth by sharing more of the wealth. They considered it their job to take care of all the stakeholders in the corporation, not just shareholders but all the groups with a stake in the company’s success.

It was the sacred trust of corporate management, as Abrams put it, “to maintain an equitable and working balance among the claims of the various directly affected interest groups…stockholders, employees, customers, and the public at large.” In others words, some profits go to shareholders but another big chunk goes to employees.

But U.S. business leaders moved away from that idea starting in the 1980s and turned to cutting jobs, holding down wages, and focusing on high profits and even higher CEO pay. In 2011, the top 1% got all the gains from U.S. economic growth and the bottom 99% literally went backwards – they saw their collective incomes fall.

More broadly, “wedge economics” have brought us very slow economic growth, much slower than under the old business philosophy. We’ve seen ever-deeper recessions, ever-longer jobless recoveries. With lopsided winnings to the top 1%, dominated by CEOs, the drive has gone out of economic growth.

In fact, economists like Nobel laureate Joseph Stiglitz of Columbia University tell us bluntly that America’s current gaping inequalities of income are bad for economic growth. ”Inequality stifles, restrains and holds back our growth,” Stiglitz asserts. Others agree. The International Monetary Fund has documented that high levels of income equality can be “destructive” to sustained growth and that the best condition for long-term growth is “more equality in the income distribution.”

In short, what Wall Street is celebrating today may cause joy among the 1%, but unless business shares more of its gains, a booming market spells bad news for average Americans.

© 2013 BillMoyers.com

Hedrick Smith

Hedrick Smith is a Pulitzer prize winning journalist and the former Washington bureau chief of The New York Times. Today’s record stock prices and roaring corporate profits reflect the trends of the past three decades captured in his current bestseller, Who Stole the American Dream?

The Sequester’s Hidden Danger

The sequester is dangerous, but not for the reasons we think. Contrary to what some alarmists predicted, there is little evidence that the automatic, across-the-board cuts to the US budget that went into effect on Friday are causing cataclysmic harm. The stock market has risen slightly to near record heights, and most economists agree that the $85 billion down payment this year on about $1 trillion in cuts over the next ten will not trip the economy into recession. Recent polls, meanwhile, indicate that a large part of the electorate has no opinion on the sequester, which is still poorly understood—making it perhaps less of a political liability for either party than some anticipated.Felix Vallotton

But what makes the sequester threatening is not that it will plunder the economy in 2013. Rather, it is that these arbitrary cuts are exactly the opposite of what the economy needs both in the short run, and—if the promised $1 trillion in further cuts over ten years is made—in the long term. In the coming months, it will make it difficult for the president to cut the unemployment rate from current levels around 8 percent, a fact that Republicans must enjoy since it reduces their chances of losing the House in 2014, and raises their chances of winning the presidency in 2016 if they can continue to cut spending.

And the sequester will be painful. Educational and housing subsidies will be cut, as will unemployment insurance and research spending. More than $40 billion will be cut from the defense budget, music to my ears, but not to those who will lose jobs at defense contractors. Above all, claims that economic growth down the road will be spurred by reducing the federal deficit through spending cuts are not credible.

Indeed, the real danger of the sequester lies in the misguided deficit-cutting mania that created it in the first place. Put in place by Congress with the president’s approval and encouragement in 2011, the idea of automatic sequestration came out of the same obsession with austerity measures that has put much of Europe into recession and prevented the US economic recovery from fulfilling its potential. Deficit reduction has wide support in Washington and its most active promoters are financed by some of the nation’s wealthiest citizens, who argue that it is a far better alternative than asking them to contribute more in taxes. We must cut deficits now, even before we have a full economic recovery, the thinking goes, to deal with rapidly rising healthcare costs that will drive up the government’s Medicare and Medicaid expenses beginning twenty-five years from now.

This approach to economic policy has no sound basis in either historical experience or current economic analysis. Washington’s austerity economics—the notion that you can induce economic recovery in a weak economy simply by cutting government expenditures—willfully ignores, denies, or declares nonsense the true lessons of the Great Depression, which demonstrated precisely the opposite. More or less since Adam Smith, economists had argued you must increase savings to increase investment, which in turn drove economic growth and produced rising incomes. One way to do this is to get federal deficits down as a percent of GDP. But in the 1930s, it was clear that government efforts to save money had not prevented the global economy from tumbling into severe depression. To the contrary, they helped create the depression of the early 1930s and then a second major downtown in 1937. This is around the time that John Maynard Keynes had the dramatic insight that it wasn’t savings that led to investment but the other way around: more government spending raises incomes and therefore savings, from which more investment is made.

It is true that Keynesian stimulus was derided by economists beginning in the 1970s. Only monetary stimulus—that is, cutting interest rates—was thought to matter. But now rates have been brought so low that they do far less than hoped. And in truth there has been a growing recognition that monetary policy is not by itself adequate to assure a strong economy. Meantime, a “new” Keynesianism developed among some but by no means all mainstream economists, who support the view that modest government stimulus is sensible. But this general approach is a pallid version of the original and still holds, I think too strongly, that reducing deficits is necessary to assure adequate savings.

We need not go back to the Great Depression to understand the dangers of austerity and deficit mania. In our own time, the abysmal performance of austerity-bound European economies have demonstrated the same problem. Take the case of Britain. After the recent global economic crisis, David Cameron, Britain’s Conservative Prime Minister, and George Osborne, his absurdly overconfident chancellor of the Exchequer, repudiated Keynes’ central insight. Two years ago, with the British economy just coming out of recession, these men raised taxes and cut social spending in order to reduce the British deficit and, they claimed, enable newly confident businesses to use all that savings to invest and re-charge the economy. It was pure anti-Keynesianism. The chancellor promised that the budget deficit would fall nicely as a percent of gross domestic product. Thus, a path would be cleared for more capital investment by otherwise “crowded out” private companies.

None of that has come close to happening. Britain is now probably entering its third recession since 2009. With such slow growth, tax revenue is dismal, and the country’s deficit, excluding interest payments, remains the highest, by percentage of GDP, of any European nation. And what of all that promised investment that was predicted? Not only did a chunk of new savings fail to materialize, capital injections in the economy have been weak. They contributed only 0.4 percent to economic growth in 2012, half of the government’s forecast. As for exports, which the government also insisted would rise as the value of the pound fell, the nation’s current account deficit, the excess of its imports (plus investment income) over exports, is now no better than in 2009.

Despite these dismal results, the British citizenry apparently still think the policies are sensible. They have not thrown Cameron and Osborne out. But what is driving Britain’s growth is consumer spending and government spending, not business investment and exports as the austerity advocates forecast. And consumer spending alone is just not strong enough to produce adequate growth. It is Keynes who was right, not Osborne. Meanwhile, economies in Europe’s southern tier, including Spain, Portugal, Italy, and Greece, are mired in recession.

These policies are an appalling intellectual failure. Yet our current leaders in Washington seem unable to learn this lesson, even in the face of such stark examples of Britain and other European countries. Though he backed the stimulus in early 2009, Barack Obama had already displayed a sympathy for deficit reduction policies before he took office, and he subsequently appointed the Bowles-Simpson commission to suggest ways to balance the budget as soon as possible. He did not accept their proposals, but the austerity advocates quickly gained the upper hand.

Many may wonder why it is so easy to renounce the remarkable Keynes. In part, it is because he so deeply challenged Smith’s Invisible Hand itself, that almost religiously held principle that markets themselves are self-adjusting as prices change to make demand and supply equal.

We all know that austerity economics rules in Europe, but it also rules in the US where the damage done will be considerable if less obvious. Even policymakers who are sympathetic to Keynesianism for the most part propose only moderate stimulus. As a result of Washington’s refusal to raise taxes to cut deficits, the government will not invest adequately in infrastructure, green technologies, public research, pre-k education, and in many other areas of critical need—all in order to meet spurious deficit cutting goals. It also finds expression in a greater willingness to cut needed programs, mostly for the poor, who will suffer as a result. At some point, such mean-spiritedness must take a toll on a nation’s moral confidence. And the budget battles may only just be beginning.

The economy would have been significantly stronger already had there been not been $1.5 trillion in earlier budget cuts. And it may yet improve once we digest the latest round of cuts. But let’s not mistakenly attribute future improvement in the economy to austerity policies. It will be in spite of them.

© 2013 NYR Blog

Jeff Madrick

Jeff Madrick teaches at Cooper Union. His latest book is Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present.

On the News With Thom Hartmann: Swiss Voters Approve Measure to Check CEO Pay,...

In today's On the News segment: Obama pardons 17 common criminals but White House won't comment on why he won't pardon a political prisoner, and more.

Thom Hartmann here – on the news...

You need to know this. President Obama is negotiating with economic terrorists. Reuters' reports that Obama may give in to GOP budget demands by offering cuts to our social safety net. In calls with lawmakers over the weekend, Obama said he will cut programs like Social Security, Medicare, and Medicaid in exchange for a so-called compromise to replace the sequester, as long as Republicans agree to more tax increases. This is not a compromise. The Republicans have held our economy hostage, and pushed their austerity measures, so they could force Obama's hand in the budget debate. Because of the GOP's economic terrorism, and refusal to end tax breaks for millionaires and billionaires, our nation will face cuts to programs many of us depend on. A new report from Alternet outlines several of the most devastating cuts we now face, like a $199 million cut to public housing, a $633 million cut from Special Education programs, and nearly a $1 billion cut to FEMA disaster relief. And now the President is offering more cuts in hopes that Republicans will negotiate? This is insane. We shouldn't have allowed any cuts in the first place. No nation, in the history of the world, has ever cut it's way to prosperity, but for some unknown reason Congress and the President think austerity will succeed this time. We need to band together and fight back against these Republican austerity measures, and against the Administration's purposed cuts to our vital social safety net. Let's remind them they work for us. Call Congress and the White House and tell them to stop this economic terrorism now.

In screwed news... If you take a look at the Stock Market, you'd think we have a strong economic recovery in our country. But as it turns out, it's only been good for corporations and the super wealthy. The rest of us continue to struggle, while greedy corporations soak up huge economic gains. According to the New York Times, the Stock Market is approaching a record high, but the wealth gap between workers and their employers has continued to widened during the recovery, and could get even worse as Republican austerity measures kick in. Just since 2008, corporate profits have risen nearly 20% per year, while workers saw yearly disposable income gains of just 1.4%. According to Dean Maki, chief U.S. Economist at Barclays, "There hasn't been a period in the last 50 years where these trends have been so pronounced." With profits like these, it's hard to understand how Republicans can justify keeping corporate tax rates at historic lows. It's time to make corporations pay for the use of our commons, and for the huge sums of cash they've made off hard-working Americans. It's a privilege to do business in our nation, and it's about time we demand corporations pay for the right to operate here.

In the best of the rest of the news...

The Swiss have said "No" to corporate fat-cat greed. Voters in that nation recently approved a measure which gives shareholders veto power over executive salaries, compensation packages, and huge bonuses. The so-called "fat cat initiative" will be written into the Swiss constitution, and all companies listed on the Swiss stock exchange will be required to comply. BBC News reports that 68% of voters supported the plan, which accounts for 1.6 million votes, and it was supported in all 26 Swiss cantons. One of the referendum's organizers, Brigitte Moser Harder, said the plan got broad support because of the growing income gap in that nation. She said, "It's also a social problem because the high wages got higher, and the small ones sometimes just got lower." A similar measure was recently approved in the European Union, which will cap bankster's bonuses throughout the EU. We should take a cue from Switzerland and the E.U., and take on the billionaires in our country as well. We can start by making it illegal to hoard huge sums of cash. Let's outlaw billionaires. Join the movement at NoBillionaires.com.

Last Friday, President Obama issued 17 pardons for people convicted of various crimes, that ranged from altering a money order to possession of an illegal firearm. Before the list was announced, the President had only pardoned 22 other people, and had denied over 1,000 requests from others. Compared to President George W. Bush, who pardoned 189 people during his two terms in office, President Obama has made little use of his clemency powers. According to the Associated Press, the White House hasn't offered any explanation about the reason these particular people were selected by the President, or supplied any details as to why other pardon requests were denied. And there's one request that the Progressive community is especially curious about – the still-unanswered request to pardon former Alabama Governor Don Siegleman. If the President is willing to release drug dealers, counterfeiters, and gun-toters, why won't he pardon a United States political prisoner? It's time to free Don Siegleman. Sign the petition and spread the word... go to Free-Don.org.

And finally... Holy Smokes Batman, a caped crusader is solving crimes in Britain. Reuters reports that closed-circuit television shows a man, in a full Batman costume – gloves, mask, cape, and all – brought in a 27 year old man for handling stolen goods and committing other fraud-related offenses. But Batman didn't stick around to receive any praise from the Police. A spokeswoman for the West Workshire Police said, "The person who brought the wanted man into the station was dressed in a full Batman outfit. His identity, however, remains unknown." There's no report of how Batman managed to capture the criminal, but his crime-fighting skills did lead to the arrest. Perhaps the superhero rushed out to avoid being identified, or maybe the batmobile was double-parked.

And that's the way it is today – Monday, March 4, 2013. I'm Thom Hartmann – on the news.

Greek Military Prepares for Mass Repression

GREECE

Former high-level Greek diplomat Leonidas Chrysanthopoulos told the UK’s New Statesman last week that discussions had taken place between senior Greek politicians and the armed forces on the military’s response to what Chrysanthopoulos described as an “explosion of social unrest” expected to occur “quite soon.”

Chrysanthopoulos said that in the coming months, “There will be further increases in armed actions. There will be bloody demonstrations.”

Without giving details, he said, “There are contacts by certain politicians with elements in the armed forces to guarantee that in the event of major social unrest, the army will not intervene.”

This last claim was likely made for public consumption. Even if such a request had been made, any assurances from the Greek military would be worthless given the recent history of the country, in which the “regime of the colonels” seized power in a military coup in 1967 that lasted until 1974. Since the onset of mass austerity in Greece in 2010 there have been constant rumours of coup discussions among high-ranking military personnel.

The most significant aspect of Chrysanthopoulos’ interview is the revelation of discussions between politicians and the military on how to respond to the threat of social revolution.

Greek ruling circles are working on the assumption that insurrectionary struggles are inevitable because of the intolerable level of suffering they have imposed on the working class. Within less than four years, the social position of the Greek working class has been reduced to levels not seen since the Nazi occupation during World War II.

Brutal poverty is a fact of life for millions. One major aspect of the assault on living conditions is the removal of public health provisions.

More than 50 pharmaceutical conglomerates have either halted or savagely cut supplies to Greece—citing concerns for their profits. The dangerous shortage of hundreds of basic medicines is resulting in chaotic scenes of patients rushing from one pharmacy to another in search of vital drugs, while public hospitals lack adequate supplies of drugs to dispense.

Such conduct is not confined to the big pharmaceutical companies. On Tuesday it emerged that the Swiss Red Cross, a non-profit relief agency, is set to slash the number of blood donor packets it supplies to Greece. It cited concerns that it has not received full payment for previous allocations and announced that beginning in 2015 the number of blood donor packets it sends to Greece will be halved from the current annual level of 28,000.

As a result of the austerity policies demanded by the “troika” (the International Monetary Fund, European Central Bank and European Union), a staggering 4.65 million people are now either unemployed or economically inactive. There are 450,000 households in which no one is employed. Of the 2.6 million people employed in the private sector in 2010, 900,000 have been laid off. Because the duration of benefits has been slashed, just 225,000 of the unemployed now receive unemployment pay.

In the private sector, just 600,000 workers (from a total 1.6 million) now work a regularly paid eight-hour day. Professor Savas Robolis of the University of Panteion in Athens recently said, “The remainder—a million workers—have had their hours cut or are getting paid late, four or five months late. They are in a state of desperation.”

This week’s annual report by the Bank of Greece found that 23 percent of the population lived below the poverty line in 2012, compared to 16 percent in 2011. Also noted was the exponential increase in child poverty, with the rate of families at risk reaching 31 percent in just one year (2010-2011). In the period 2010-2012, the average gross salary in the country was cut by 20.6 percent and labour costs for employers decreased by 18.5 percent.

Given the austerity measures already in place, there will be an overall reduction in labour costs in Greece for the period 2012-2014 of 17.6 percent. So savage are these measures that they are set to surpass the 15 percent reduction in overall costs demanded by the troika.

Presenting the report, the bank’s chairman, George Provopoulos, claimed that economic recovery would be achieved by means of austerity and demanded that even harsher measures be imposed. “Now that the finishing line is finally visible,” he said, “we ought to intensify efforts, to quicken our pace to cover the final stretch and ensure that citizens’ sacrifices have not been in vain…”

Speaking of the victims of these policies, he declared, “Extreme and unreasonable demands from social groups do not contribute towards this goal.”

The bank’s report was issued as representatives of the troika once again converged on Athens to monitor the implementation of the programme agreed with the New Democracy/PASOK/Democratic Left government.

Among the issues to be settled is how steeply this year’s pharmaceutical budget is to be slashed. As a result of previous troika demands, the budget was cut from €3.7 billion to €2.4 billion last year. Reports suggest it could be cut to €2 billion this year.

With pharmaceutical firms already withholding many drugs, this is a prescription for a health catastrophe and many needless deaths.

The troika is also set to demand a speedup in the layoff of 25,000 public sector workers this year (half by June) in order to meet the agreed 150,000 redundancies by 2015. If Athens were to fail to impose the cuts to the troika’s satisfaction, two tranches of loans for March and April totalling €8.8 billion would be withheld or much reduced. Failure to receive the finance would result in Greece defaulting on its entire debt.

By promising if elected to reverse the austerity programme, SYRIZA (Coalition of the Radical Left) won nearly 30 percent of the vote in last year’s election. It is put forward by a host of pseudo-left organizations as a progressive alternative to the pro-austerity governing parties and the means for countering the growth of the fascist Golden Dawn movement.

In reality, SYRIZA is no less a creature of the ruling elite than the right-wing New Democracy party, and is no less wedded to the austerity agenda. This week, SYRIZA press spokesman Panos Skourletis stated, “We do not have a magic wand that will improve and change the situation from one day to the next… We must realize that with every day this policy is applied, things grow worse. This devastation is incalculable and, therefore, restoration of the repercussions of this policy becomes even more difficult.”

The meaning of such comments—that it is impossible to reverse the austerity programme—is unmistakable. SYRIZA is readying its arguments and preparing for what it will be called on to carry out if it achieves its goal of entering a future anti-working class government.

Fukushima: A Nuclear War without a War: The Unspoken Crisis of Worldwide Nuclear Radiation

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GLOBAL RESEARCH ONLINE INTERACTIVE READER SERIES

The Unspoken Crisis of Worldwide Nuclear Radiation

Michel Chossudovsky (Editor)

I-Book No. 3, January 25  2012

Global Research’s Online Interactive I-Book Reader brings together, in the form of chapters, a collection of Global Research feature articles and videos, including debate and analysis, on a broad theme or subject matter. 

In this Interactive Online I-Book we bring to the attention of our readers an important collection of articles, reports and video material on the Fukushima nuclear catastrophe and its impacts (scroll down for the Table of Contents).

To consult our Online Interactive I-Book Reader Series, click here.

INTRODUCTION

The World is at a critical crossroads. The Fukushima disaster in Japan has brought to the forefront the dangers of Worldwide nuclear radiation.

The crisis in Japan has been described as “a nuclear war without a war”. In the words of renowned novelist Haruki Murakami:

“This time no one dropped a bomb on us … We set the stage, we committed the crime with our own hands, we are destroying our own lands, and we are destroying our own lives.”

Nuclear radiation –which threatens life on planet earth– is not front page news in comparison to the most insignificant issues of public concern, including the local level crime scene or the tabloid gossip reports on Hollywood celebrities.

While the long-term repercussions of the Fukushima Daiichi nuclear disaster are yet to be fully assessed, they are far more serious than those pertaining to the 1986 Chernobyl disaster in the Ukraine, which resulted in almost one million deaths (New Book Concludes – Chernobyl death toll: 985,000, mostly from cancer Global Research, September 10, 2010, See also Matthew Penney and Mark Selden  The Severity of the Fukushima Daiichi Nuclear Disaster: Comparing Chernobyl and Fukushima, Global Research, May 25, 2011)

Moreover, while all eyes were riveted on the Fukushima Daiichi plant, news coverage both in Japan and internationally failed to fully acknowledge the impacts of a second catastrophe at TEPCO’s (Tokyo Electric Power Co  Inc) Fukushima Daini nuclear power plant.

The shaky political consensus both in Japan, the U.S. and Western Europe is that the crisis at Fukushima has been contained.

The realties, however, are otherwise. Fukushima 3 was leaking unconfirmed amounts of plutonium. According to Dr. Helen Caldicott, “one millionth of a gram of plutonium, if inhaled can cause cancer”.  

An opinion poll in May 2011 confirmed that more than 80 per cent of the Japanese population do not believe the government’s information regarding the nuclear crisis. (quoted in Sherwood Ross, Fukushima: Japan’s Second Nuclear Disaster, Global Research, November 10, 2011)

The Impacts in Japan

The Japanese government has been obliged to acknowledge that “the severity rating of its nuclear crisis … matches that of the 1986 Chernobyl disaster”. In a bitter irony, however, this tacit admission by the Japanese authorities has proven to been part of  the cover-up of a significantly larger catastrophe, resulting in a process of global nuclear radiation and contamination:

“While Chernobyl was an enormous unprecedented disaster, it only occurred at one reactor and rapidly melted down. Once cooled, it was able to be covered with a concrete sarcophagus that was constructed with 100,000 workers. There are a staggering 4400 tons of nuclear fuel rods at Fukushima, which greatly dwarfs the total size of radiation sources at Chernobyl.” ( Extremely High Radiation Levels in Japan: University Researchers Challenge Official Data, Global Research, April 11, 2011)

Fukushima in the wake of the Tsunami, March 2011

Worldwide Contamination

The dumping of highly radioactive water into the Pacific Ocean constitutes a potential trigger to a process of global radioactive contamination. Radioactive elements have not only been detected in the food chain in Japan, radioactive rain water has been recorded in California:

“Hazardous radioactive elements being released in the sea and air around Fukushima accumulate at each step of various food chains (for example, into algae, crustaceans, small fish, bigger fish, then humans; or soil, grass, cow’s meat and milk, then humans). Entering the body, these elements – called internal emitters – migrate to specific organs such as the thyroid, liver, bone, and brain, continuously irradiating small volumes of cells with high doses of alpha, beta and/or gamma radiation, and over many years often induce cancer”. (Helen Caldicott, Fukushima: Nuclear Apologists Play Shoot the Messenger on Radiation, The Age,  April 26, 2011)

While the spread of radiation to the West Coast of North America was casually acknowledged, the early press reports (AP and Reuters) “quoting diplomatic sources” stated that only “tiny amounts of radioactive particles have arrived in California but do not pose a threat to human health.”

“According to the news agencies, the unnamed sources have access to data from a network of measuring stations run by the United Nations’ Comprehensive Test Ban Treaty Organization. …

… Greg Jaczko, chair of the U.S. Nuclear Regulatory Commission, told White House reporters on Thursday (March 17) that his experts “don’t see any concern from radiation levels that could be harmful here in the United States or any of the U.S. territories”.

The spread of radiation. March 2011

Public Health Disaster. Economic Impacts

What prevails is a well organized camouflage. The public health disaster in Japan, the contamination of water, agricultural land and the food chain, not to mention the broader economic and social implications, have neither been fully acknowledged nor addressed in a comprehensive and meaningful fashion by the Japanese authorities.

Japan as a nation state has been destroyed. Its landmass and territorial waters are contaminated. Part of the country is uninhabitable. High levels of radiation have been recorded in the Tokyo metropolitan area, which has a population of  39 million (2010) (more than the population of Canada, circa 34 million (2010)) There are indications that the food chain is contaminated throughout Japan:

Radioactive cesium exceeding the legal limit was detected in tea made in a factory in Shizuoka City, more than 300 kilometers away from the Fukushima Daiichi nuclear power plant. Shizuoka Prefecture is one of the most famous tea producing areas in Japan.

A tea distributor in Tokyo reported to the prefecture that it detected high levels of radioactivity in the tea shipped from the city. The prefecture ordered the factory to refrain from shipping out the product. After the accident at the Fukushima nuclear power plant, radioactive contamination of tea leaves and processed tea has been found over a wide area around Tokyo. (See 5 More Companies Detect Radiation In Their Tea Above Legal Limits Over 300 KM From Fukushima, June 15, 2011)

Japan’s industrial and manufacturing base is prostrate. Japan is no longer a leading industrial power. The country’s exports have plummeted. The Tokyo government has announced its first trade deficit since 1980.

While the business media has narrowly centered on the impacts of power outages and energy shortages on the pace of productive activity, the broader issue pertaining to the outright radioactive contamination of the country’s infrastructure and industrial base is a “scientific taboo” (i.e the radiation of industrial plants, machinery and equipment, buildings, roads, etc). A report released in January 2012 points to the nuclear contamination of building materials used in the construction industry, in cluding roads and residential buildings throughout Japan.(See  FUKUSHIMA: Radioactive Houses and Roads in Japan. Radioactive Building Materials Sold to over 200 Construction Companies, January 2012)

A “coverup report” by the Ministry of Economy, Trade and Industry (May 2011), entitled Economic Impact of the Great East Japan Earthquake and Current Status of Recovery  presents “Economic Recovery” as a fait accompli. It also brushes aside the issue of radiation. The impacts of nuclear radiation on the work force and the country’s industrial base are not mentioned. The report states that the distance between Tokyo -Fukushima Dai-ichi  is of the order of 230 km (about 144 miles) and that the levels of radiation in Tokyo are lower than in Hong Kong and New York City.(Ministry of Economy, Trade and Industry, Impact of the Great East Japan Earthquake and Current Status of Recovery, p.15). This statement is made without corroborating evidence and in overt contradiction with independent radiation readings in Tokyo (se map below). In recent developments, Sohgo Security Services Co. is launching a lucrative “radiation measurement service targeting households in Tokyo and four surrounding prefectures”.

A map of citizens’ measured radiation levels shows radioactivity is distributed in a complex pattern reflecting the mountainous terrain and the shifting winds across a broad area of Japan north of Tokyo which is in the center of the of bottom of the map.”

“Radiation limits begin to be exceeded at just above 0.1 microsieverts/ hour blue. Red is about fifty times the civilian radiation limit at 5.0 microsieverts/hour. Because children are much more sensitive than adults, these results are a great concern for parents of young children in potentially affected areas.

SOURCE: Science Magazine

The fundamental question is whether the vast array of industrial goods and components “Made in Japan” — including hi tech components, machinery, electronics, motor vehicles, etc — and exported Worldwide are contaminated? Were this to be the case, the entire East and Southeast Asian industrial base –which depends heavily on Japanese components and industrial technology– would be affected. The potential impacts on international trade would be farreaching. In this regard, in January, Russian officials confiscated irradiated Japanese automobiles and autoparts in the port of Vladivostok for sale in the Russian Federation. Needless to say, incidents of this nature in a global competitive environment, could lead to the demise of the Japanese automobile industry which is already in crisis.

While most of the automotive industry is in central Japan, Nissan’s engine factory in Iwaki city is 42 km from the Fukushima Daiichi plant. Is the Nissan work force affected? Is the engine plant contaminated? The plant is within about 10 to 20 km of the government’s “evacuation zone” from which some 200,000 people were evacuated (see map below).


Nuclear Energy and Nuclear War

The crisis in Japan has also brought into the open the unspoken relationship between nuclear energy and nuclear war.

Nuclear energy is not a civilian economic activity. It is an appendage of the nuclear weapons industry which is controlled by the so-called defense contractors. The powerful corporate interests behind nuclear energy and nuclear weapons overlap.

In Japan at the height of the disaster, “the nuclear industry and government agencies [were] scrambling to prevent the discovery of atomic-bomb research facilities hidden inside Japan’s civilian nuclear power plants”.1  (See Yoichi Shimatsu, Secret Weapons Program Inside Fukushima Nuclear Plant? Global Research,  April 12, 2011)

It should be noted that the complacency of both the media and the governments to the hazards of nuclear radiation pertains to the nuclear energy industry as well as to to use of nuclear weapons. In both cases, the devastating health impacts of nuclear radiation are casually denied. Tactical nuclear weapons with an explosive capacity of up to six times a Hiroshima bomb are labelled by the Pentagon as “safe for the surrounding civilian population”.

No concern has been expressed at the political level as to the likely consequences of a US-NATO-Israel attack on Iran, using “safe for civilians” tactical nuclear weapons against a non-nuclear state.

Such an action would result in “the unthinkable”: a nuclear holocaust over a large part of the Middle East and Central Asia. A nuclear nightmare, however, would occur even if nuclear weapons were not used. The bombing of Iran’s nuclear facilities using conventional weapons would contribute to unleashing another Fukushima type disaster with extensive radioactive fallout. (For further details See Michel Chossudovsky, Towards a World War III Scenario, The Dangers of Nuclear War, Global Research, Montreal, 2011)

The Online Interactive I-Book Reader on Fukushima: A Nuclear War without a War

In view of the official cover-up and media disinformation campaign, the contents of the articles and video reports in this Online Interactive Reader have not trickled down to to the broader public. (See Table of contents below)

This Online Interactive Reader on Fukushima contains a combination of analytical and scientific articles, video reports as well as shorter news reports and corroborating data.

Part I focusses on The Fukushima Nuclear Disaster: How it Happened? Part II  pertains to The Devastating Health and Social Impacts in Japan. Part III  centers on the “Hidden Nuclear Catastrophe”, namely the cover-up by the Japanese government and the corporate media. Part IV focusses on the issue of  Worlwide Nuclear Radiation and Part V reviews the Implications of the Fukushima disaster for the Global Nuclear Energy Industry.

In the face of ceaseless media disinformation, this Global Research Online I-Book on the dangers of global nuclear radiation is intended to break the media vacuum and raise public awareness, while also pointing to the complicity of  the governments, the media and the nuclear industry.

We call upon our readers to spread the word.

We invite university, college and high school teachers to make this Interactive Reader on Fukushima available to their students.

Michel Chossudovsky, January 25, 2012

_______________________________________________________________________________________________________

TABLE OF CONTENTS

PART I

The Fukushima Nuclear Disaster: How it Happened

The Fukushima Nuclear Disaster: What Happened on “Day One”?
– by Yoichi Shimatsu – 2011-04-16
Fukushima is the greatest nuclear and environmental disaster in human history
- by Steven C. Jones – 2011-06-20

Nuclear Apocalypse in Japan
Lifting the Veil of Nuclear Catastrophe and cover-up
- by Keith Harmon Snow – 2011-03-18

Humanity now faces a deadly serious challenge coming out of Japan — the epicenter of radiation.

VIDEO: Full Meltdown? Japan Maximum Nuclear Alert
Watch now on GRTV
-by Christopher Busby- 2011-03-30

Fukushima: Japan’s Second Nuclear Disaster

- by Sherwood Ross – 2011-11-10

Secret Weapons Program Inside Fukushima Nuclear Plant?
U.S.-Japan security treaty fatally delayed nuclear workers’ fight against meltdown
- by Yoichi Shimatsu – 2011-04-12

The specter of self-destruction can be ended only with the abrogation of the U.S.-Japan security treaty, the root cause of the secrecy that fatally delayed the nuclear workers’ fight against meltdown.

Fukushima: “China Syndrome Is Inevitable” … “Huge Steam Explosions”
“Massive Hydrovolcanic Explosion” or a “Nuclear Bomb-Type Explosion” May Occur
- by Washington’s Blog – 2011-11-22

Accident at Second Japanese Nuclear Complex: The Nuclear Accident You Never Heard About

- by Washington’s Blog – 2012-01-12

VIDEO: New TEPCO Photographs Substantiate Significant Damage to Fukushima Unit 3
Latest report now on GRTV
- by Arnie Gundersen – 2011-10-20

PART II

The Devastating Health and Social Impacts in Japan

VIDEO: Surviving Japan: A Critical Look at the Nuclear Crisis
Learn more about this important new documentary on GRTV
- by Chris Noland – 2012-01-23

Fukushima and the Battle for Truth
Large sectors of the Japanese population are accumulating significant levels of internal contamination
- by Paul Zimmerman – 2011-09-27

FUKUSHIMA: Public health Fallout from Japanese Quake
“Culture of cover-up” and inadequate cleanup. Japanese people exposed to “unconscionable” health risks
- by Canadian Medical Association Journal – 2011-12-30

FUKUSHIMA: Radioactive Houses and Roads in Japan. Radioactive Building Materials Sold to over 200 Construction Companies

- 2012-01-16

VIDEO: Cancer Risk To Young Children Near Fukushima Daiichi Underestimated
Watch this important new report on GRTV
- by Arnie Gundersen – 2012-01-19

VIDEO: The Results Are In: Japan Received Enormous Exposures of Radiation from Fukushima
Important new video now on GRTV
- by Arnie Gundersen, Marco Kaltofen – 2011-11-07

The Tears of Sanriku (三陸の涙). The Death Toll for the Great East Japan Earthquake Nuclear Disaster

- by Jim Bartel – 2011-10-31

The Severity of the Fukushima Daiichi Nuclear Disaster: Comparing Chernobyl and Fukushima

- by Prof. Matthew Penney, Prof. Mark Selden – 2011-05-24

Uncertainty about the long-term health effects of radiation

Radioactivity in Food: “There is no safe level of radionuclide exposure, whether from food, water or other sources. Period,” – by Physicians For Social Responsibility – 2011-03-23

71,000 people in the city next to the Fukushima nuclear plant “We’ve Been Left to Die” - 2011-03-19

Tokyo Water Unsafe For Babies, Food Bans Imposed – by Karyn Poupee – 2011-03-23

 

PART III

Hidden Nuclear Catastrophe: Cover-up by the Japanese Government and the Corporate Media

VIDEO: Japanese Government Insiders Reveal Fukushima Secrets
GRTV Behind the Headlines now online
- by James Corbett – 2011-10-06

Fukushima and the Mass Media Meltdown
The Repercussions of a Pro-Nuclear Corporate Press
- by Keith Harmon Snow – 2011-06-20

Scandal: Japan Forces Top Official To Retract Prime Minister’s Revelation Fukushima Permanently Uninhabitable

- by Alexander Higgins – 2011-04-18

Emergency Special Report: Japan’s Earthquake, Hidden Nuclear Catastrophe
- by Yoichi Shimatsu – 2011-03-13

The tendency to deny systemic errors – “in order to avoid public panic” – is rooted in the determination of an entrenched Japanese bureaucracy to protect itself…

VIDEO: Fukushima: TEPCO Believes Mission Accomplished & Regulators Allow Radioactive Dumping in Tokyo Bay
Learn more on GRTV
- by Arnie Gundersen – 2012-01-11

The Dangers of Radiation: Deconstructing Nuclear Experts
- by Chris Busby – 2011-03-31

“The nuclear industry is waging a war against humanity.” This war has now entered an endgame which will decide the survival of the human race.

Engineers Knew Fukushima Might Be Unsafe, But Covered It Up …
And Now the Extreme Vulnerabilty of NEW U.S. Plants Is Being Covered Up
- by Washington’s Blog – 2011-11-12

COVERUP: Are Fukushima Reactors 5 and 6 In Trouble Also?
- by Washington’s Blog – 2011-11-14

Fukushima’s Owner Adds Insult to Injury – Claims Radioactive Fallout Isn’t Theirs

- by John LaForge – 2012-01-17

PART IV

The Process of Worldwide Nuclear Radiation

VIDEO: Japan’s Nuclear Crisis: The Dangers of Worldwide Radiation

- by Dr. Helen Caldicott – 2012-01-25

An Unexpected Mortality Increase in the US Follows Arrival of Radioactive Plume from Fukushima, Is there a Correlation?
- by Dr. Joseph J. Mangano, Dr. Janette Sherman – 2011-12-20

In the US, Following the Fukushima fallout, samples of radioactivity in precipitation, air, water, and milk, taken by the U.S. government, showed levels hundreds of times above normal…

Radioactive Dust From Japan Hit North America 3 Days After Meltdown
But Governments “Lied” About Meltdowns and Radiation
- by Washington’s Blog – 2011-06-24

VIDEO: Fukushima Will Be Radiating Everyone for Centuries
New report now on GRTV
- by Michio Kaku, Liz Hayes – 2011-08-23

Fukushima: Diseased Seals in Alaska tested for Radiation

- 2011-12-29

Radiation Spreads to France

- by Washington’s Blog – 2011-11-15

Radioactive rain causes 130 schools in Korea to close — Yet rain in California had 10 TIMES more radioactivity

PART V

Implications for the Global Nuclear Energy Industry

Science with a Skew: The Nuclear Power Industry After Chernobyl and Fukushima
- by Gayle Greene – 2012-01-26

After Fukushima: Enough Is Enough

- by Helen Caldicott – 2011-12-05

VIDEO: Radiation Coverups Confirmed: Los Alamos, Fort Calhoun, Fukushima, TSA
New Sunday Report now on GRTV
- by James Corbett – 2011-07-04

VIDEO: Why Fukushima Can Happen Here: What the NRC and Nuclear Industry Don’t Want You to Know
Watch now on GRTV
- by Arnie Gundersen, David Lochbaum – 2011-07-12

VIDEO: Safety Problems in all Reactors Designed Like Fukushima
Learn more on GRTV
- by Arnie Gundersen – 2011-09-26

VIDEO: Proper Regulation of Nuclear Power has been Coopted Worldwide
Explore the issues on GRTV
- by Arnie Gundersen – 2011-10-05

VIDEO: New Nuclear Reactors Do Not Consider Fukushima Design Flaws
Find out more on GRTV
- by Arnie Gundersen – 2011-11-24

Nuclear Energy: Profit Driven Industry
“Nuclear Can Be Safe Or It Can Be Cheap … But It Can’t Be Both”
- by Washington’s Blog – 2011-12-23

VIDEO: Fukushima and the Fall of the Nuclear Priesthood
Watch the new GRTV Feature Interview
- by Arnie Gundersen – 2011-10-22

Why is there a Media Blackout on Nuclear Incident at Fort Calhoun in Nebraska?

- by Patrick Henningsen – 2011-06-23

Startling Revelations about Three Mile Island Disaster Raise Doubts Over Nuke Safety

- by Sue Sturgis – 2011-07-24

Radioactive Leak at Fort Calhoun Nuclear Power Station

- by Rady Ananda – 2011-07-01

VIDEO: US vs Japan: The Threat of Radiation Speculation
Dangerous double standards examined on GRTV
- by Arnie Gundersen – 2011-06-25

Additional articles and videos on Fukushima and Nuclear Radiation are available at Global Research’s Dossier on The Environment


TEXT BOX

 Nuclear Radiation: Categorization

At Fukushima, reports confirm that alpha, beta, gamma particles and neutrons have been released:

“While non-ionizing radiation and x-rays are a result of electron transitions in atoms or molecules, there are three forms of ionizing radiation that are a result of activity within the nucleus of an atom.  These forms of nuclear radiation are alpha particles (α-particles), beta particles (β-particles) and gamma rays (γ-rays).

Alpha particles are heavy positively charged particles made up of two protons and two neutrons.  They are essentially a helium nucleus and are thus represented in a nuclear equation by either α or .  See the Alpha Decay page for more information on alpha particles.

Beta particles come in two forms:  and  particles are just electrons that have been ejected from the nucleus.  This is a result of sub-nuclear reactions that result in a neutron decaying to a proton.  The electron is needed to conserve charge and comes from the nucleus.  It is not an orbital electron.  particles are positrons ejected from the nucleus when a proton decays to a neutron.  A positron is an anti-particle that is similar in nearly all respects to an electron, but has a positive charge.  See the Beta Decay page for more information on beta particles.

Gamma rays are photons of high energy electromagnetic radiation (light).  Gamma rays generally have the highest frequency and shortest wavelengths in the electromagnetic spectrum.  There is some overlap in the frequencies of gamma rays and x-rays; however, x-rays are formed from electron transitions while gamma rays are formed from nuclear transitions. See the Gamma Rays  for more” (SOURCE: Canadian Nuclear Association)

A neutron is a particle that is found in the nucleus, or center, of atoms. It has a mass very close to protons, which also reside in the nucleus of atoms. Together, they make up almost all of the mass of individual atoms. Each has a mass of about 1 amu, which is roughly 1.6×10-27kg. Protons have a positive charge and neutrons have no charge, which is why they were more difficult to discover.” (SOURCE: Neutron Radiation)

“Many different radioactive isotopes are used in or are produced by nuclear reactors. The most important of these are described below:

1. Uranium 235 (U-235) is the active component of most nuclear reactor fuel.

2. Plutonium (Pu-239) is a key nuclear material used in modern nuclear weapons and is also present as a by-product in certain reprocessed fuels used in some nuclear reactors. Pu-239 is also produced in uranium reactors as a byproduct of fission of U-235.

3. Cesium (Cs-137 ) is a fission product of U-235. It emits beta and gamma radiation and can cause radiation sickness and death if exposures are high enough. …

4. Iodine 131 (I-131), also a fission product of U-235, emits beta and gamma radiation. After inhalation or ingestion, it is absorbed by and concentrated in the thyroid gland, where its beta radiation damages nearby thyroid tissue  (SOURCE: Amesh A. Adalja, MD, Eric S. Toner, MD, Anita Cicero, JD, Joseph Fitzgerald, MS, MPH, and Thomas V. Inglesby MD, Radiation at Fukushima: Basic Issues and Concepts, March 31, 2011)


Michel Chossudovsky is an award-winning author, Professor of Economics (Emeritus) at the University of Ottawa. He is the Founder and Director of the Centre for Research on Globalization (CRG), Montreal and Editor of the globalresearch.ca website. He is the author of The Globalization of Poverty and The New World Order (2003) and America’s “War on Terrorism”(2005). His most recent book is entitled Towards a World War III Scenario: The Dangers of Nuclear War (2011). He has taught as Visiting Professor at universities in Western Europe, South East Asia, Latin America and The Pacific, acted as adviser to governments of developing countries and as a consultant to several international organizations. Prof. Chossudovsky is a signatory of the Kuala Lumpur declaration to criminalize war and recipient of the Human Rights Prize of the Society for the Protection of Civil Rights and Human Dignity (GBM), Berlin, Germany. He is also a contributor to the Encyclopaedia Britannica. His writings have been published in more than twenty languages.

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Ouput vs. Employment: America’s Disappearing Jobs

jobs

After his State of the Union, President Obama took a jobs tour to call for growth in the manufacturing base where only 6% of US jobs exist.  This was a charade.  It would be like a president touring horse, buggy and blacksmiths in search of jobs when Henry Ford was mass producing cars. 

Real manufacturing output today is near an all-time high. What’s dropped precipitously in recent decades is manufacturing employment.

The technology of automation and robotics is ending manufacturing jobs. The president was on a quest for jobs where none exist, will not exist and should not exist. The US with 4% of the world’s population is responsible for 20% of manufacturing output. More manufacturing is not coming to the United States. – See more at: http://www.globalresearch.ca/ouput-vs-employment-americas-disappearing-jobs/5324614#sthash.WuAZAUmP.dpuf

See also: http://www.bea.gov/iTable/index_industry.cfm and http://research.stlouisfed.org/fred2/series/MANEMP

Too Big to Make Money?

Both the president and Mitt Romney embraced the tar sands and pipelines as job sources, but they bring a false promise with devastating consequences for the environment and economy.  It will take only 20 people to run the notorious Keystone XL pipeline once it is completed and estimates vary widely as to how many temporary jobs it will create from 2,500 to 20,000. That is not many jobs. The project is bad for the economy; it will increase the likelihood of climate change, continues to rely on the old carbon market that is cutting jobs and misses an opportunity to build a new sustainable energy economy that will create jobs.

Other policies inadvertently create lousy jobs and underemployment.  The Affordable Care Act is having that effect as employers seek to evade the health insurance requirements by reducing workers hours primarily in retail, food and university sectors. If the US had adopted a single payer Medicare for all system, a 2009 study found it would have created a net 2.2 million jobs.

As we have noted previously, austerity will destroy jobs and send the economy into recession. The most recent study on the sequester shows up to 2.14 million jobs at risk. And, with two-thirds of the Progressive Caucus refusing to sign a letter to protect Social Security and Medicare from cuts, a “Grand Bargain” solution to the sequester could make things even worse. This all comes on top of a rapid decline in government spending that is preventing economic recovery.

The lack of concern for US workers can be found in a report this week that 40% of Americans now earn less than the 1968 minimum wage. If the minimum wage had kept up with productivity, it would be $16.50 not $7.25. In fact, half the population of the US has slipped into poverty or is barely making enough to get by.

While Americans sink into poverty and underemployment with shrinking incomes, the government continues to reward big business interests.  Bloomberg editors last week criticized the fact that taxpayers provide banks with subsidies amounting to $83 billion each year.

David Cay Johnston, a top tax and finance policy expert, reports that tax havens for the wealthy cost states $38 billion annually.  Another tax haven sham involving billions of dollars highlighted last week is reinsurance in Bermuda. Send your money to the reinsurnance company and it sends almost all of it back, cleansing the money of tax consequences.

So, what should the US be doing about disappearing jobs?

John Walsh suggests that Americans should be mobilizing for a shorter work week with no cut in pay. He urges “32 hours work for 40 hours pay. For a work force of 139 million as in 2010, that translates into 34.8 million additional jobs, i.e., 25% more jobs.”

Not only should there be no reduction in income, but the minimum wage should be raised.  This would boost the economy and create jobs.

Clean energy advocates urge building a sustainable clean energy economy noting that the solar industry creates jobs six times faster than the overall job market and a clean energy economy could create millions of jobs without the environmental risks of tar sands, fracking or nuclear energy.

As we point out above, a single payer Medicare for all health system would create 2.6 million jobs, netting 2.2 million after the insurance industry lost jobs.

And, getting money back into the system by closing corporate tax loopholes, like some of the tax havens described here as well as putting a small tax on Wall Street’s speculative transactions, would raise  $1 trillion per year as is being done in Europe. This money could be used to fund much needed programs such as building a new energy infrastructure, hiring teachers and other state and local workers while at the same time reducing the wealth divide.

This review of the week’s news contains just a few suggestions consistent with the agenda of It’s Our Economy. Think of the side effects: more leisure time, less poverty, a cleaner environment, health care for all, a shrinking wealth divide and less speculation on Wall Street.  As we have noted before creating jobs has many positive side effects, yet neither party has put forward a serious jobs program or mentions a full employment economy.

That’s why it is up to us to democratize the economy and push for real solutions to our crises. The first step is awareness of the possibilities. Please forward this email to others who might be interested. And visit the website for information about the upcoming Participatory Budgeting and Public Banking Conferences. Mark your calendars for the Democracy Convention Aug. 7 to 11 in Madison, WI.

This article is based on the weekly free newsletter of It’s Our Economy. You can sign up to receive the newsletter here.

Kevin Zeese JD and Margaret Flowers MD co-host Clearing the FOG on We Act Radio 1480 AM Washington, DC and on Economic Democracy Media, co-direct It’s Our Economy and are organizers of the Occupation of Washington, DC. Their twitters are @KBZeese and @MFlowers8.

Mehdi’s Morning Memo: ‘Shall We Leave It At That?’

The ten things you need to know on Wednesday 27 February 2013...

1) 'SHALL WE LEAVE IT AT THAT?'

The Rennard affair rumbles on - with more and more seemingly contradictory statements being issued by the various Lib Dem players. Consider this story on the front of the Telegraph:

"Nick Clegg was personally warned by one of his MPs that a senior figure in the Liberal Democrats might be sexually molesting female members of staff, The Daily Telegraph can disclose.

"Sandra Gidley, a former MP and party spokesman, said she told Mr Clegg about the allegations surrounding Lord Rennard, the party's former chief executive, after he was elected as Lib Dem leader in 2007.

"... Asked by The Daily Telegraph whether she told Mr Clegg 'face–to–face' about the allegations concerning Lord Rennard, she said: 'Yes, that is true but at this point I don't want to go any further. I am hoping his memory might be jogged. Shall we leave it at that?'"

Well, um, er, no. Especially since Clegg and Danny Alexander have both claimed that the latter once confronted Rennard over those 'general' allegations while Rennard himself issued a statement yesterday, via a spokesperson, saying "in 27 years of working for the Liberal Democrats he received no complaint or allegation about his behaviour".

As my colleague Ned Simons notes, they can't both be right, can they?

(On a side note, Ned also tried tracking down the seven female Lib Dem MPs to ask them why they've been so conspicuously silent on the Rennard allegations... check out what he discovered here.)

2) GOING NEGATIVE

Who says policy-makers are running out of ideas to prompt a much-needed economic recovery? From the Express:

"Interest rates could be slashed to below zero to kick–start Britain's economy, the Bank of England's Deputy Governor has suggested.

"Paul Tucker admitted his idea was 'extraordinary' but said radical steps were needed to encourage banks to lend more.

"If rates went below zero, in effect becoming negative, the main fi