Wednesday, November 30, 2011

Daniel Little discusses David Graeber's Debt at Understanding Society

Good review. Prof. LIttle promises more on Graeber.

Read it at Understanding Society
David Graeber's reflections on money, debt, and violence
by Daniel Little
(h/t Kevin Fathi)

Who owns the Fed? — Prof. Bill Woolsey

Prof. Bill Woolsey teaches economics at The Citadel in Charleston, S.C. He wrote an article several years ago on the ownership of the Fed, addressing claims that it is privately owned.

Prof. Woolsey concludes:
Who owns the Fed? The owners of a business typically have ultimate authority over operations and serve as residual claimant. Stockholders elect directors, who appoint top management. Stockholders receive the profits — excess revenues after all other claims on funds are paid.
For the Fed, final authority is in the hands of the politicians. They appoint the Board of Governors, who dominate the Federal Reserve banks. Further, any earnings of the Federal Reserve banks beyond expenses, including the 6% dividend to the member banks, goes to the U.S. Treasury. Since the U.S. government has final authority and serves as residual claimant, the most reasonable view is that the Federal Reserve system is government-owned.
The conspiracy theorists' claim that private owners of the Fed are making bundles of money is false. The conventional view among economists (including libertarian ones) that the Fed is a government operation that partially finances fiscal deficits by money creation is fundamentally correct. The live question among libertarians is how to get the government out of the banking system — perhaps by truly privatizing the Fed's operations — in a way that prevents inflation and macroeconomic instability.
Bill Woolsey – October 1, 2004 - The Heartland Institute

Prof. Woolsey is a member of the Libertarian Party.
Libertarian Bill Woolsey elected Mayor in SC

It should be noted, however, that the regional federal reserve banks are privately owned by their member banks. However, it is erroneous to equate them with other private corporations in that they do not function according to the same institutional rules.

The ECON4 Network for Innovative Economics Teaching

Economics for our times and for our shared future requires profound departures from the orthodox economics of the past. We need an economics for the 21st century. is your guide to new ways of thinking about economics.

ECON4 — 4 the people, 4 the planet, 4 the future
(h/t paulie46 in the comments)

Is the Fed "Independent"?

The idea of whether or not the US Fed is an "independent" entity is one that is often discussed and published views about this can often range to the conspiratorial level that somehow the Fed is not only independent but is some sort of a private entity. What does the Fed say about itself on this issue? Here from the Fed's own  Purposes and Functions Manual, Section 1:

Soon after the creation of the Federal Reserve, it became clear that the act had broader implications for national economic and financial policy. As time has passed, further legislation has clarified and supplemented the original purposes. Key laws affecting the Federal Reserve have been the Banking Act of 1935; the Employment Act of 1946; the Bank Holding Company Act of 1956 and the amendments of 1970; the International Banking Act of 1978; the Full Employment and Balanced Growth Act of 1978; the Depository Institutions Deregulation and Monetary Control Act of 1980; the Financial Institutions Reform, Recovery, and Enforcement Act of 1989; the Federal Deposit Insurance Corporation Improvement Act of 1991; and the Gramm-Leach-Bliley Act of 1999. Congress has also adopted legislation defining the primary objectives of national economic policy, including the Employment Act of 1946; the Federal Reserve Reform Act of 1977; and the Full Employment and Balanced Growth Act of 1978, which is sometimes called the Humphrey-Hawkins Act, after its original sponsors. These objectives include economic growth in line with the economy’s potential to expand; a high level of employment; stable prices (that is, stability in the purchasing power of the dollar); and moderate long-term interest rates. The Federal Reserve System is considered to be an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive branch of government. The System is, however, subject to oversight by the U.S. Congress. The Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government; therefore, the description of the System as “independent within the government” is more accurate.
So there you have it from the Fed itself; the Fed is part of the government sector. Checkmate. Except for morons.

"Deflation is coming " at Zero Hedge

The inflationists getting nervous?

Read it at Zero Hedge
Deflation is coming
contributed by South of Wall Street

Shades of 1968 Chicago?

The Washington arm of the Occupy Wall Street movement plans to target a high-dollar Democratic fundraiser near the group's McPherson Square encampment Thursday night. The cost of attending the dinner for the Democratic Congressional Campaign Committee is a pricey $5,000 to $75,000 a plate.
"This elitist event is indicative of how the Democrats represent a major part of our government's failure to represent 99% of its citizenry," reads an Occupy DCaction alert.
By marching on the Frontline Member Holiday Reception, the protesters seek to send a message to the Democratic Party that its reliance on corporate contributions makes it part of the problem -- or all the problems.
Read the rest at The Huffington Post
Occupy DC Plans To Target High-Dollar Democratic Fundraiser
by Ryan Grim

Sending a message. Are you listening, Dems? The GOP obviously isn't.

Meet His Majesty, the King of New York City

“I have my own army in the NYPD, which is the seventh biggest army in the world,” he said. “I have my own State Department, much to Foggy Bottom’s annoyance. We have the United Nations in New York, and so we have an entree into the diplomatic world that Washington does not have."
  — Michael Bloomberg
Read the rest at Raw Story
Mayor Bloomberg calls the NYPD ‘my own army’
 by Eric W. Dolan

Gives new meaning to the 1%.

You can't make this stuff up.

FYI — Important discussion of MMT at Winterspeak's

To Read:

The run up is here in the comments.

Ron Paul's statement on latest Fed moves

Statement on the Fed's Continued Euro Bailout
(h/t Zero Hedge)

The Fed's latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed.  Under current law Congress cannot examine these types of agreements.

Agree. The rest is standard Paul on "sound money."

Michael Hudson makes Zero Hedge

Zero Hedge provides a link to Michael Hudson on YouTube, "The Super Committee and the Attack on Labor"

Zero Hedge: Systemic Deficit Strategy

Michael Hudson is really getting around these days.

Pushback in US against rule of the 1%

Al Jazeera: Police arrest hundreds of Occupy LA activists

Huffington Post: Occupy LA Raid: Police Arrest Protesters Who Defied Eviction Notice 

The right to freedom of assembly is constitutionally guaranteed in the US — unless it conflicts with local ordinances.

First Amendment: Freedom of Speech, Press, Religion and Petition 
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Pushback in UK against austerity

Many schools and hospitals closed as workers take to the streets in protest against changes to their pensions.
Read the rest at Al Jazeera (with video)
Huge public-sector strike hits the UK

Difficult to marginalize these folks as DFH's.

Things are pretty much on schedule in the UK as MMT'er predicted upon election of the Cameron government. "Expansionary fiscal austerity" is an oxymoron. The deficit is ballooning in spite of austerity, as MMT foresaw.

Next installment of Randy Wray on the Fed is up

Read it at Economonitor

MORE SECRETS OF THE TEMPLE: Time to Demand Transparency and Accountability of Our Public Stewards
by L. Randall Wray

Greeks rediscover barter

It's Sunday in Volos, a fishing village nestled in a large bay in central Greece, and fishermen display their daily catch, which this day includes codfish, sardines and octopus.
Prices have been slashed, but customers are few.Fisherman Christos Xegandakis laughs bitterly. He says business is so bad, it's time to start swapping goods."Give me two kilos of potatoes, and I give you a kilo of fish," he says. "Why not?
Indeed, many in debt-ridden Greece — where radical austerity measures have led to soaring unemployment, business closures and a credit crunch — are doing just that: turning to a simpler form of commerce, bartering.And in Volos, a barter system is also fostering a new sense of community.
Read the rest or listen to the piece at NPR
Modern Greeks Return To Ancient System Of Barter
by Sylvia Poggioli

Barter was resorted to in the WWII and post-war years in many countries in Europe. Those memories are being revived.

From the comments — Money as information

Shaun Hingston wrote in the comments:

Another MMT mind bug.

Why do most MMTers dismiss the notion of 'means of exchange'? The MMT line is that money is a creature of the state. I think that this is inadequate.

What about gold? What about time-sharing systems existing within a normal economy? I think that "means of economic information exchange" should be the correct term. All 'money things' fall into the superset defined by 'economic information exchange'.

Means of Economic Information Exchange

What is it? Any token-system that facilitates the flow of economic information, and can be used to make economic decisions(i. e transactions).

What is a token-system? From an MMT perspective it is defined by everything that is involved in the flow of tokens between economic participants. So that would mean Consolidated Govt. Sector, markets and the 'money supply'. If we are talking about gold, then it really only means the physical gold, markets, and the 'natural sources' of gold.

What makes one token-system better than another?
This is defined by its ability to transfer economic information between participants. This is in both quality & quantity.

Why is state money better than gold?
Generally speaking, it is easier to transfer economic information, it can be manipulated in such a way that maintains reasonably stable prices, prices in a state money system are more indicative of participants wants and desires than those participating in a gold system.

Right, so your saying that it all comes down to a token-system's ability to transfer economic information. Why don't people start up their own currencies?
Token systems transmit the wants and desires of individuals to each other. The overall strength of a token-system is determined by its ability to statisfy wants and desires against the external world. There are individuals within each token system that can manipulate prices greater than others. They may have this power legitimately or not. If adversaries are able to influence the system enough, then they can distort prices enough to obtain more of what they desire. If another token-system is created, then it will most likely threaten this position of privilege. Therefore adversaries will respond in such a way to manipulate prices so that the new currency is threatened. This is generally the reason why new currencies have a difficult time establishing themselves.

Why do you think this is more consistent with empirical observations?
According to the MMT definition of State Money, then a lot of items currently being used to facilitate economic information exchange would be excluded, for no reason. For example, there are time-banks being used in parts of the world, but they are not subject to taxation, or spent into existence like MMT defined currency, so what are they? But what they do facilitate is the exchange of needs & desires between individuals.

What do you define as the optimum?
The ultimate economic output that can be possibly achieved will occur when a token-system most accurately reflects the wants and desires of economic participants.... This would be the hypothetical situation of when everyone can simultaneously communicate with each other, everywhere. It is meant to indicate what is the 'optimum state', not what is actually meant to happen, but what possible token-systems should be measured against.

Time for a new kind of money

Since I have ‘joined’ the MMT community, I have watched as MMT has discussed headlines and challenged the contempory economic thought. But one thing has frustrated me, the lack of creativity. As the world plunges into chaos I am surprised by the lack of creative solutions offered by the MMT community. This to me is an opportune time for MMT to show the world an alternative to the current arrangement.

As stated earlier I have argued that token-system is best able to transfer the needs and desires of participants will prevail. This in itself is something that can be offered to the OWS protestors.

I suggest that MMTers work towards a new token-system that can be offered to OWS protestors as a way for them to exchange their needs and desires. Ultimately I think that this system will either force the current system to reform itself to survive or will become inferior.

What is needed?

– A system to transmit tokens. – A system that manages the creation of tokens. – A system that facilitates the exchange of prices. – A system that measures the needs & wants of individuals.

Why will it work?

Because it will transmit needs & wants better than the current system. There are many different strategies to gain acceptance. A pool of donations could be used to support an exchange rate for the token-system. This will give the token system some underlying support while it gains acceptance. A job guarantee like system could be used initially to disburse initial funds into the economy. This could be used to coordinate the efforts of OWS. Sooner or later businesses will start to see the participants of the OWS as a labour force. They will then start to purchase tokens, which will create a pseudo-permanent state of support for the currency.

At this point, it is likely that the supply of tokens will need to be inflated. This situation is good for everyone. People participating within the OWS will start to gain jobs, the current lack of expansion in money supply of U. S.D would be somewhat offset by the expansion of the OWS token-system.

The token-system will then most likely start to become threatened by those with a vested interest of the U. S.D. The will need to increase spending in order to support their attack on the token-system or to encourage businesses to use U. S.D. Either way even if the token-system is defeated, unemployment will be fixed. There will be a population of individuals educated in MMT, and this group will act as an inoculation against any attempts by powerful morons to drive up unemployment.

Consequently it will be imperative that legislation be changed to allow, groups within the U.S.A to create their own free-floating currencies.

Immediate Suggestions

-Warren, Mike, Bill, and anyone else, should immediately issue 10,000 tokens and disburse them into the OWS movement. At the same time, they should offer at some cost to be paid in those credits, the opportunity for OWS to post on their blogs.

-Then, the Job Guarantee could be formed by paying those OWS participants that promote verifiable material that promotes the MMT agenda.

-After a series of donations have been collected, this could be used to fund a lottery/payment of which tickets can only be purchased using the OWS credits.

The whole world is short dollars!

Today, like so many times in the past three years, we see the Fed stepping in and providing dollar liquidity to the world's central banks.

How many times do we have to see this?

The whole world is short dollars.

Let's face it...without the Fed’s intervention the dollar would soar to levels that no one would believe. It would restore American purchasing power, lower inflationary pressures, improve our real terms of trade and by so doing, raise our standard of living.

But what does the Fed do instead?

It “sells” the dollar on the cheap, to central banks that have every capability to sell their own currencies to provide dollar funding for their own, domestic needs.


Tuesday, November 29, 2011

Connecting the dots about Libertarianism-Anarchism

Hint — one of the problems stems from economic rent

Read the post at Angry Bear
A Though Experiment: What Would a Perfect Libertarian State Look Like a Hundred Years Later?
by Mike Kimel
(h/t Kevin Fathi)

Washington's Blog — DHS advisor on mayors' phone call

There has been some controversy about claims that DHS was involved in coordinating the crackdown on Occupy groups. No hard evidence has been forthcoming, but Washington's Blog posted today on a close connection.

Department of Homeland Security Adviser Helped Coordinate Police Crackdowns on Protests in 18 Cities

Favorite quote from the post:

“(We) have to be careful not to allow this movement to get any legitimacy. I’m taking this seriously in that I’m old enough to remember what happened in the 1960′s when the left-wing took to the streets and somehow the media glorified them and it ended up shaping policy. We can’t allow that to happen.”— Congressman Peter King, Head of the House Homeland Security Subcommittee.

Occupy Foreign Affairs

It's not the topic of George Packer’s latest essay that's particularly surprising. Inequality, he writes, is undermining democracy. Progressives have been hammering home this message for years if not decades.
Nor is the choice of publication necessarily a shocker. Foreign Affairs is the flagship publication of the elite that runs American foreign policy. But it is no longer the exclusively center-right publication of the Cold War years. After all, it has published the likes of former Institute for Policy Studies staffers Michael Klareand Julia Sweig as well as my predecessor at Foreign Policy In Focus John Gershman.
No, it’s the prominent placement of the Packer essay that merits attention. It's the lead article of the November/December issue. And it comes with the bold headline, “Is America Over?"
When Foreign Affairs puts inequality on its cover – and hosts adebate on the topic at the tony offices of the Council on Foreign Relations – the Occupy Wall Street movement has achieved a major victory that eclipses even the generally favorable coverage in liberal bastions such as The New York Times, The New York Review of Books, and The New Yorker. It's also a sign that a profound anxiety gnaws at the foreign policy elite in this country. The question is: why are foreign policy mandarins suddenly so fretful? Or, put another way, why does Foreign Affairs want its readers to take this issue so seriously? (emphasis added)
Read the rest at TruthOut
Occupy Foreign Affairs
by John Feffer, Foreign Policy in Focus | OP-Ed

This is a big deal. Foreign Affairs is a mouthpiece of the deep ruling elite and the message here is clear: Beware of overreach.

Protestors march on Washington State capitol

This week, the Washington state legislature is holding a special session to deal with issues related to the state’s budget. Gov. Christine Gregoire (D) has called on the legislature to cut $2 billion from the discretionary budget of $8.7 billion. Many worry that these cuts will come at the expense of the poor and middle class, and will not ask any sacrifices from those who are well-off. As the Olympia Newswire’s Trevor Griffey notes, this unbalanced approach has been the norm over the past few years: “During the two years that Democrats held a supermajority in the legislature (2009-10), they faced a combined set of budget deficits of $13 billion. They filled 46 percent of the budget hole ($5.9 billion) with spending cuts, and only 7 percent ($920 million) with revenue increase.”
So yesterday, nearly two thousand 99 Percenters descended on the state capitol in an event they dubbed “Occupy The Capitol.” As thousands marched outside the building, dozens encamped themselves inside, where they performed a “Mic Check” calling for fairness. Other demonstrators infiltrated the legislative meeting itself, disrupting it as three activists were tased and 30 were evicted.
Read the rest at Think Progress (with video)
Thousands March On Washington State Capitol As Attitudes Shift Towards Fairness
By Zaid Jilani

Occupy focuses on foreclosures

As the Occupy movement enters its third month, it is moving into a new phase. Colder weather in the north, combined with aggressive push back from city officials around the country, is requiring the movement to adopt new, innovative approaches that include, but transcend, public presence as protest.
Pundits are wondering aloud whether Occupy is through. But this young movement is just getting started. An exciting piece of evidence to that effect is a new focus on foreclosures.
Alongside its call for job creation, corporate accountability, and relief from crushing student loan debt is a growing demand that Wall Street and Washington make right the disaster that their greed and neglect respectively caused. The movement has deemed December 6th a National Day of Action to Stop and Reverse Foreclosures.
Read the rest at TruthOut

The Occupy Movement Focuses on Foreclosures
by Alan Jenkins, Campaign for America's Future | Op-Ed

See also:

Vets levy charge that the 1% profit from their sacrifice

Veterans are a part of the 99%. 
Most of our military is made up of the 99%.  We join the military for many reasons.  Some join because of family tradition or a sense of patriotism.  Others join for citizenship, education or to escape poverty or violence in our homes and neighborhoods. Many service members realize the wars we fight contribute to poverty and violence in Iraq and Afghanistan communities. We are coming home to a broken economy where veterans have higher unemployment, incarceration, suicide and homelessness than the national average.
The 1% is profiting from of our sacrifices.
Our nation’s leaders have betrayed us. We have been asked to risk our lives and mental health for the defense of our country and the well being of foreign allies. The causes for military conflict have proven false while corporations profit. The military industrial complex continues to grow in wealth while the rest of the world pays for it in dollars and blood.
Instead of increasing programs to attempt to repair damages, many schools, hospitals, and social services are shutting down.  Programs for veterans are inadequate and are leaving us physically, mentally, and emotionally bankrupt.
Veterans have a history of effective grassroots organizing.  IVAW has been a voice for veterans and their grievances since our founding in 2004.  We understand that change comes about when people speak up, organize, and demand justice. Veterans and active-duty service members have a history of organizing, from the Bonus March to the Vietnam War. Iraq and Afghanistan veterans have an important contribution to make to this movement. 
As veterans and members of the 99% we stand in solidarity with the Occupy Movement.
As service members we are told that we fight for human rights and democratic freedoms. However, these rights seem to be continually denied at protests across the nation, often times by police using excessive force and violent tactics.  We support our members, fellow veterans and members of this movement who have been subjected to this gross contradiction, and who have refused to remain silent.
We are the 99%.
Iraq Veterns Board Of Directors Statement On The Occupy Movement: We Are The 99%

American Airlines Files Chapter 11

American Airlines and its parent company are filing for bankruptcy protection as they try to cut costs and unload massive debt built up by years of high fuel prices and labor struggles. There will no impact on travelers for now.
The nation's third-largest airline also said Tuesday that CEO Gerard Arpey stepped down and was replaced by company president Thomas W. Horton.
AMR Corp. has continued to lose money while other U.S. airlines returned to profitability in the last two years.
Read the rest at The Huffington Post
American Airlines Bankruptcy: Carrier And Parent Company File For Chapter 11 Protection

Grayson — Fed played Russian roulette

Former U.S. congressman Alan Grayson (D-FL) appeared on Countdown Monday evening to discuss how an audit of the Federal Reserve revealed the private bank giving $26 trillion to U.S and foreign banks without Congress’ authorization.
“For the first time in history, I’m talking the 100 year history of the Federal Reserve, they played favorites,” Grayson told host Keith Olbermann. “They said we’ll give a hundred billion to this institution, another hundred billion to this institution, and so on down the line, when you and I couldn’t even come close to accessing that kind of money of those terms.”
Grayson mentioned the leniency the Fed had with giving money to the banks.
“They lend out this money at 0.01 percent interest,” he said. “Go try to get a loan like that from your bank. It was corporate welfare, pure and simple, and what they were doing is they were playing around with the value of the money in your pocket, and the money in my pocket.”
“They were taking the U.S dollars and playing Russian Roulette with it, giving it out in enormous staggering sums in the hope that they might get it back. They did get most of it back, but what about next time.”
 Read the rest at Raw Story with video
Grayson: Fed played ‘Russian roulette’ with U.S. money
by Andrew Jones

Grayson points out that these decisions were made by the Federal Reserve Bank of New York. The FRBNY is a private corporation, as are all the regional Federal Reserves banks. That means that they are under the control of the financial sector rather than of elected officials accountable to the public.

Big leap up in consumer confidence

Read the whole post with charts at Zero Hedge (very short)

Consumer Confidence Jumps Most In Eight Years, More Than 4 Standard Deviations

Thom Hartmann — End coporate personhood to develop new economy

The prevalence of the corporation in America has led men of this generation to act, at times, as if the privilege of doing business in corporate form were inherent in the citizen; and has led them to accept the evils attendant upon the free and unrestricted use of the corporate mechanism as if these evils were the inescapable price of civilized life, and, hence, to be borne with resignation.Throughout the greater part of our history a different view prevailed.
Although the value of this instrumentality in commerce and industry was fully recognized, incorporation for business was commonly denied long after it had been freely granted for religious, educational, and charitable purposes.
It was denied because of fear. Fear of encroachment upon the liberties and opportunities of the individual. Fear of the subjection of labor to capital. Fear of monopoly. Fear that the absorption of capital by corporations, and their perpetual life, might bring evils similar to those which attended mortmain [immortality]. There was a sense of some insidious menace inherent in large aggregations of capital, particularly when held by corporations.— U.S. Supreme Court Justice Louis Brandeis, 19331
Read the rest at TruthOut
by Thom Hartmann

That Chief Justice Brandeis was a prescient guy.


Not just the Fed

Bloomberg: How Paulson Gave Hedge Funds Advance Word

Alternative finance

MÁLAGA, Spain, Nov 29, 2011 (IPS) - On the first Sunday of every month, Abdoulaye Fall, from Senegal, meets a group of people in Barcelona, to contribute money to a common fund or to take out a loan. This is one of 60 self-financed communities in Spain, an alternative to traditional banking systems that is having a powerful social effect.
"I'll contribute 20 euros (27 dollars)," says one of the 15 Senegalese members of the Axell (which means "providence" in Wolof, the dominant language in Senegal) self-financing community (SFC). "I'll put in 100 (133 dollars)," says the person sitting next to him. The accountant writes down the amounts and the treasurer puts the money into a box, from which loans approved by the meeting will be made later. 
SFCs are community financial organisations in which members are at once owners of the capital and loan customers, borrowers as well as lenders of credit, with a flat interest rate of one percent in most groups. 
Fall told IPS that the communities grant loans to fill small urgent or unforeseen needs, such as a trip, a health emergency or payment of a fine, and they are not devoted to creating businesses.
Read the rest at Inter Press Service
Self-Financed Communities "A Tool for Building Trust"
By Inés Benítez

Bottom not in on housing

Prices are now falling again, and the Case-Shiller Composite 20 (SA) hit a new post-bubble low.
Read the whole thing at Calculated Risk

Case Shiller: Home Prices decline in September


Fitch: Foreclosure rates are now twice last year's
by The Associated Press via Bloomberg Business Week
Foreclosures on delinquent U.S. mortgages have almost doubled from this time last year, according to the latest reading from Fitch Ratings.
The higher foreclosure rates mean U.S. housing prices will probably fall another 10 percent before stabilizing, the ratings agency said Monday.

Calculated Risk looks at housing in real terms.

Real House Prices and House Price-to-Rent
In real terms - and as a price-to-rent ratio - prices are mostly back to 2000 levels and will probably be back to 1999 levels in the next few months.

Graeber: Occupy Wall Street's anarchist roots

David Graeber, who has been publishing a lot about the OWS situation, has a post out on Al Jeerzera (short) on how the OWS movement is based on classical anarchist principles.  Graeber is an anthropologist scholar and has a tremendous knowledge of the history of human political movements.  This is an interesting excerpt:
The easiest way to explain anarchism is to say that it is a political movement that aims to bring about a genuinely free society - that is, one where humans only enter those kinds of relations with one another that would not have to be enforced by the constant threat of violence. History has shown that vast inequalities of wealth, institutions like slavery, debt peonage or wage labour, can only exist if backed up by armies, prisons, and police. Anarchists wish to see human relations that would not have to be backed up by armies, prisons and police. Anarchism envisions a society based on equality and solidarity, which could exist solely on the free consent of participants.
I would never have thought about it that way, I perhaps have thought that anarchism was a "technique" of sorts to bring about a political change, not necessarily already possessing a singular specific political system as an outcome.

I believe MMT shows how "modern" free-floating, non-convertible state currency systems rely on the coercive force of taxes to ultimately impart value on the currency, perhaps violating Graeber's definition of a "free society" here: "...that would not have to be enforced by the constant threat of violence...... prisons..."

I would like to see how Graeber would address this fact with a view towards what he believes is the OWS anarchists desire for a "free society" with no human relations that rely on a constant threat of prison.

Is the fact that "modern" monetary systems are ultimately very authoritarian in nature, as the value of the currency is imparted ultimately by the threat of incarceration due to non-payment of taxes, incompatible with the OWS movement?

Matt Taibbi on judge's smack down of SEC deal with Citi

Matt Taibbi of Rolling Stone discussed Monday on Countdown with Keith Olbermann the “unusual” decision of a judge to reject settlement Citigroup made with U.S. regulators over its marketing of mortgage securities.
New York federal court judge Jed Rakoff scolded the Securities and Exchange Commission (SEC) for agreeing to a deal that he called inadequate and not in the public interest.
“He came out basically and said that the SEC and Wall Street have been in a wink-wink, nudge-nudge arrangement for years,” Taibbi explained.
“For Judge Rakoff to not only reject the settlement but to reject it in such an aggressive fashion with this very strong rebuke and very strong ruling is very sobering for the SEC,” he added.
Read the rest and watch video at Raw Story
by Eric W. Dolan

Ron Paul on returning to the gold standard

 "We know what to do - we did it once after the Civil War period, we went from a paper standard back to the gold standard, and the event wasn't that dramatic. But today the big problem is that both the conservatives and liberals have an big apetite for big government for different reasons, therefore they need the Fed to tie them over and monetize the debt. So if you don't get rid of that appetite it's going to be more difficult, but the transition isn't that difficult. You have to get your house in order; you have to balance the budget, you have to not run up debt, and you have to promise not to print any more money... I would like to have a transition period and just legalize gold money, gold and silver as legal tender, and work our way back... We want to legalize the use of gold and silver as the constitution dictates, rather than punishing the people who try to do that... I am quite convinced that the system we have will not be maintained - that's what these last 4 years was all about, and that's what the turmoil in Europe is all about. The question is are they going to move toward a constitutional form of money. or are we going to go another step further into international money - instead of having an international gold standard based on the market, are we going to go toward a UN, IMF standard where they are going to control with the use of force another fiat standard. I consider that a very, very dangerous move."
Read the rest at Zero Hedge (video too)

Ron Paul Explains His Plan For "Monetary Freedom" And Returning To The Gold Standard


Why Do Young Voters Love Ron Paul?
(h/t Keven Fathi via email)

It's not because they're potheads. It's because they're sick of America's militaristic misadventures.

Monday, November 28, 2011

Credit crunch developing?

Europe’s worsening sovereign debt crisis has spread beyond its banks and the spillover now threatens businesses on the Continent and around the world.
From global airlines and shipping giants to small manufacturers, all kinds of companies are feeling the strain as European banks pull back on lending in an effort to hoard capital and shore up their balance sheets.
The result is a credit squeeze for companies from Berlin to Beijing, edging the world economy toward another slump....
Read the rest at The New York Times
Crisis in Europe Tightens Credit Across the Globe
by Eric Dash and Nelson D. Schwartz
(h/t Calculated Risk)

Joined at the hip

Bottom Line:  Don't take US resilience for granted this time around - Europe is getting ugly, and it is far too late to prevent severe recession.  The best policymakers can hope for at this point is too avoid a depression.

Read the whole post (short) at Tim Duy's Fed Watch
Can the US Decouple From the Eurozone?

If the US and EZ go down, can the rest of the world be far behind?

Dean Baker on why deficits don't matter

The country is still celebrating the inability of the supercommittee to cut Social Security and Medicare, but it is important to move on from this victory to retake control of the political debate from the One Percent. As it stands, the One Percent are insisting that the country genuflect over the non-problem of the budget deficit, at a time when tens of millions of workers are unemployed or underemployed, millions of people are facing the loss of their homes and tens of millions of baby boomers are approaching retirement with little other than their Social Security to support them.
The deficit is the agenda of the One Percent. There is no reason that the rest of us should be concerned about budget deficits when the rest of the country is struggling with the economic disaster created by the greed and incompetence of the One Percent.
This is not a statement of morality; it is a statement based on economic reality. Budget deficits can be a problem when an economy is near full employment and the deficit can be pulling resources away from private investment, thereby slowing growth. However, it is not a problem with large numbers of unemployed workers and vast amounts of excess capacity.
This is what the financial markets are telling us every day as interest rates on long-term government bonds hover near 2.0 percent. If deficits were really crimping the economy, we would be seeing interest rates of 6 or 7 percent, or even higher. The deficit hawks do not have an economic case to support their argument, just money and influence. (emphasis added)
Read the whole post at The Huffington Post
Time to Retake Politics From the One Percent in Both Political Parties
by Dean Baker

Baker finishes strong with a free market proposal to reduce US medical costs.
If we can't immediately change the system, then why not take advantage of the gains from trade? If we change rules to make it possible for Medicare beneficiaries to buy into the health care systems in other countries or make it easier for patients to have medical procedures done at far lower cost elsewhere, it should be an enormous win-win, offering gains that could be in the trillions of dollars. And what free-market fundamentalist can argue against the principle of giving people a choice?
In fact, conservatives and self-described free traders run screaming from the idea of opening medical care to trade. They want trade that will lower the wages of auto workers and textile workers by putting them in direct competition with low-paid workers in the developing world; they hate trade when it threatens to reduce the income of the pharmaceutical industry, the insurance industry, and others in the One Percent.

Dean Baker calls on Fed to intervene in EZ by guaranteeing sovereign debt

Yes, you read that right.

Fortunately, the Fed has the tools needed to prevent this sort of meltdown. It can simply take the steps that the ECB has failed to do. First, and most importantly, it has to guarantee the sovereign debt of eurozone countries. The Fed simply has to commit to keep the interest rate yields on debt from rising above levels where it risks creating a self-perpetuating spiral of higher debt leading to higher interest rates, which in turn raises the deficit and debt. (emphasis added)
Read the whole op-ed at Al Jazeera
by Dean Baker
(h/t Kevin Fathi)

Washington's Blog — The revolution put to music

Washington's blog has links to Miley Cyrus's latest and other OWS music.

Miley Cyrus Releases Occupy Wall Street Song and Video

Popular music powerfully drives developing trends. This is the next iteration, and this time it is going to go viral on the Internet instead of with bands playing in the park. Woodstock will be on the Web.

Tom Englehardt — Is America an incipient police state?

In the United States, increasingly, those in power no longer observe the law.  Instead, they make it up to suit their needs.  In the process, the streets where you demonstrate, as (New York’s mayor keeps telling us) is our “right,” are regularly transformed into yet more fenced-in, heavily surveilled Zuccotti Prisons....
In twenty-first-century America, “rights” are increasingly meant for those who behave themselves and don’t exercise them.  And if you happen to be part of a government in which no criminal act of state -- torture, kidnapping, the assassination of U.S. citizens abroad, the launching of wars of aggression -- will ever bring a miscreant to court, only two crimes evidently exist: blowing a whistle or expressing your opinion.
Read the whole post at AlterNet
How Zuccotti Park Became Zuccotti Prison: Is America Becoming a Police State?
by Tom Englehardt

The 99% movement is now turning from a denunciation of economic inequality to an indictment of political repression as the concern shifts from economic crisis to neo-fascism as ordinary Americans begin to discover for themselves the dark side of the Empire.

Are Lucas and Tolkien turning out to be the literary predecessors of Batra and Strauss & Howe? It seems that no one who has seen Star Wars and LOTR can fail to make the obvious connections based on the graphics.

Jeffrey Sachs gets one (mostly) right

A recent Wall Street Journal article by Arthur C. Brooks on the Occupy Movement and fairness ("Fairness and the 'Occupy' Movement, November 25) says some interesting things about potential common ground between free-market ideas and the Occupy movement. Yet Brooks also commits some very important errors. Perhaps with clearer facts there could be more common ground on reforming the economy and politics.
Read the rest in The Huffington Post
Fairness and the Occupy Movement Revisited
by Jeffrey Sachs

The problem "bringing both sides together" with Sachs proposals is that his post underlines the differences between OWS and the 99% movement and the Tea Party.
Today's free-marketers are different. They downplay the suffering of the poor and the extent of inequality. They deny the science of climate change. They stand by as the public infrastructure collapses. They disdain the hallowed tradition of federal support for science and education.
They subscribe instead to the ugly philosophy of Ayn Rand, who preached that there is no such thing as society or social responsibility, only a collection of individuals. Rand's philosophy is a tribute to greed, hate, and ruthlessness. Smith, Hayek, and Friedman would have been aghast. So are most Americans.
That's heresy on the far right.

But it is nice to see neoliberals like Sachs in the corner of the left on the side of"fairness and justice" instead of on the side of  "freedom for just us."

Sunday, November 27, 2011

Germany, France examine radical push for eurozone integration

Story out of Reuters. Excerpt:

" in meetings with EU leaders in recent weeks, it has become clear to both German Chancellor Angela Merkel and French President Nicolas Sarkozy that it may not be possible to get all 27 countries on board, EU sources say.

Even if that were possible, it could take a year or more to secure the changes while market attacks on Italy, Spain and now France suggest bold measures are needed within weeks.

As a result, senior French and German civil servants have been exploring other ways of achieving the goal, one being an agreement among just the euro zone countries.

"The goal is for the member states of the common currency to create their own Stability Union and to concentrate on that," German Finance Minister Wolfgang Schaeuble told ARD television on Sunday.

Another option being explored is a separate agreement outside the EU treaty that could involve a core of around 8-10 euro zone countries, officials say."
It looks like the current government funding crisis is indeed accelerating the consideration of further European political integration. The only question now continues to be whether the new political (and hence fiscal) arrangements will include the whole of current members of the currency union, or "a core" of those countries.

Saturday, November 26, 2011

Neo-fascism alive and well — in the US Senate

While nearly all Americans head to family and friends to celebrate Thanksgiving, the Senate is gearing up for a vote on Monday or Tuesday that goes to the very heart of who we are as Americans. The Senate will be voting on a bill that will direct American military resources not at an enemy shooting at our military in a war zone, but at American citizens and other civilians far from any battlefield — even people in the United States itself.
Senators need to hear from you, on whether you think your front yard is part of a “battlefield” and if any president can send the military anywhere in the world to imprison civilians without charge or trial.
The Senate is going to vote on whether Congress will give this president—and every future president — the power to order the military to pick up and imprison without charge or trial civilians anywhere in the world. Even Rep. Ron Paul (R-Texas) raised his concerns about the NDAA detention provisions during last night’s Republican debate. The power is so broad that even U.S. citizens could be swept up by the military and the military could be used far from any battlefield, even within the United States itself.
The worldwide indefinite detention without charge or trial provision is in S. 1867, the National Defense Authorization Act bill, which will be on the Senate floor on Monday.The bill was drafted in secret by Sens. Carl Levin (D-Mich.) and John McCain (R-Ariz.) and passed in a closed-door committee meeting, without even a single hearing.
I know it sounds incredible. New powers to use the military worldwide, even within the United States? Hasn’t anyone told the Senate that Osama bin Laden is dead, that the president is pulling all of the combat troops out of Iraq and trying to figure out how to get combat troops out of Afghanistan too? And American citizens and people picked up on American or Canadian or British streets being sent to military prisons indefinitely without even being charged with a crime. Really? Does anyone think this is a good idea? And why now?
The answer on why now is nothing more than election season politics. The White House, the Secretary of Defense, and the Attorney General have all said that the indefinite detention provisions in the National Defense Authorization Act are harmful and counterproductive. The White House has even threatened a veto. But Senate politics has propelled this bad legislation to the Senate floor.
But there is a way to stop this dangerous legislation. Sen. Mark Udall (D-Colo.) is offering the Udall Amendment that will delete the harmful provisions and replace them with a requirement for an orderly Congressional review of detention power. The Udall Amendment will make sure that the bill matches up with American values.
In support of this harmful bill, Sen. Lindsey Graham (R-S.C.) explained that the bill will “basically say in law for the first time that the homeland is part of the battlefield” and people can be imprisoned without charge or trial “American citizen or not.” Another supporter, Sen. Kelly Ayotte (R-N.H.) also declared that the bill is needed because “America is part of the battlefield.”
The solution is the Udall Amendment; a way for the Senate to say no to indefinite detention without charge or trial anywhere in the world where any president decides to use the military. Instead of simply going along with a bill that was drafted in secret and is being jammed through the Senate, the Udall Amendment deletes the provisions and sets up an orderly review of detention power. It tries to take the politics out and put American values back in.
In response to proponents of the indefinite detention legislation who contend that the bill “applies to American citizens and designates the world as the battlefield,” and that the “heart of the issue is whether or not the United States is part of the battlefield,” Sen. Udall disagrees, and says that we can win this fight without worldwide war and worldwide indefinite detention.
The senators pushing the indefinite detention proposal have made their goals very clear that they want an okay for a worldwide military battlefield, that even extends to your hometown. That is an extreme position that will forever change our country.
Now is the time to stop this bad idea. Please urge your senators to vote YES on the Udall Amendment to the National Defense Authorization Act.
Senators Demand the Military Lock Up American Citizens in a “Battlefield” They Define as Being Right Outside Your Window
Posted by Chris Anders, Washington Legislative Office, on the ACLU Blog of Rights

Crisis mode

British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.
Read the rest at The Telegraph (UK)
Prepare for riots in euro collapse, Foreign Office warns
by James Kirkup

What ever happened to Iceland? Here's what happened

This is an old story (August 15, 2011) but it just came up on Truthout. It's short and worth a minute to see what happens when the 99% put their foot down. Of course, the 1% don't want anyone to know about this, so you won't read about in the media or see it on TV.

Why Iceland Should Be in the News, But Is Not
by Deena Stryker

The 1%'s answer to the 99%'ers — capital strike?

On September 15, House Speaker John Boehner announced that the nation’s “job creators” — a flattering euphemism for “business owners” — were on strike. This was the proximate cause of the nation’s unemployment woes, Boehner maintained. Until those business owners received the low-tax, deregulated world they wanted, they would continue to keep their wallets in their pockets.
Boehner is not the first to imagine a strike by society’s well-to-do, but he is certainly the first conservative political leader to make a formal statement on the matter. In times past, a “capital strike” was a thing to deplore, not something to be announced proudly with the obvious expectation that the world would promptly surrender to capital’s demands. But times have changed.
Herewith, a brief history of the capital strike....
Read the rest at Harper's
by Thomas Frank

You probably saw this reported last week:
A west Georgia business owner has been deluged with calls and emails after posting signs on his company's trucks that say he's not hiring anyone until President Barack Obama leaves office.
Bill Looman, Georgia Business Owner, Draws Fire For 'Not Hiring Until Obama Is Gone'

Detroit Police Department teaches a lesson — Good on them; Wayne State University Police. Not

Police departments around the country could learn a few things from the Detroit police.   Many of these cities have had bloody confrontations with Occupiers including mass arrests, beatings and pepper spraying by police.  Meanwhile the Occupy Detroit group has enjoyed a unique, peaceful relationship with police.   During the five weeks the group camped out in Grand Circus Park in downtown Detroit there has not been a single arrest by that city’s Police.  And recently the Chief of Police, Ralph Godbee, praised occupiers “for working with DPD to truly maintain peace and exercise free speech in a manner we all should be proud of!”
Like similar groups Occupy Detroit engaged in their share of unlawful behavior.  For one thing, they shut down rush hour traffic across the Ambasssador bridge linking the US and Canada.  The bridge carries 10,000 trucks a day and OD demonstrators formed a human chain closing it on the Detroit side.  The police waited out the demonstrators and did nothing.  After an hour the demonstration ended with no arrests.
On another occasion the Occupiers staged an anti-foreclosure demonstration and marched, without a permit, to the downtown offices of Bank of America, shutting down traffic.  Police responded by blocking all on-coming traffic, allowed the demonstrators to occupy the street despite the lack of a permit and did not harass any of the 500 protestors, many of whom were UAW members.
A few days later Occupy members marched to Wayne State University in Detroit’s mid-town area and protested the presence of Duncan Niederauer, CEO of Euronext and leader the New York Stock Exchange since 2007.  Neiderauer was in town for a video taping of a program, “Leaders on Leadership” at the University.  Detroit Police sat in their cars, watched the demonstrators and did nothing.
When two OD members in the studio audience asked Neiderauer why he had not been punished for “his role” in America’s economic crisis they were arrested and charged with disorderly conduct, not by Detroit Police, but by Wayne State University police.  Outraged, the demonstrators laid siege to the University police station demanding the release of the OD members....
Read the rest at CounterPunch
Detroit Police and the Occupy Movement
by George Corsetti

The mayor of Detroit, Dave Bing, also deserves credit.

In contrast, Corseeti notes,
In the Occupy arrests in New York or other places what you see is essentially a police riot with self-induced chaos.  Instead of calm self assurance on the part of the police there is anger that their authority is being challenged and a lashing out at anyone who happens to be nearby.
Unprofessional police leadership and rogue cops, or Mayor Bloomberg?

Naomi Wolf picks up where Naomi Klein left off

Naomi Wolf on the next iteration of Naomi's Klein's exposé of disaster capitalism. Now it's on steroids as it comes home to roost in the US after having been tested and improved abroad. What did you think that the Patriot Act, DHS, and militarizing the police were for anyway? Fighting terrorists in Peoria?

Read the whole post at The Guardian (UK)
The shocking truth about the crackdown on Occupy
by Naomi Wolf
(h/t  wilwon32 in the comments)

It's clear from the comments at The Guardian that this suppression of first amendment rights is trashing US moral authority abroad and showing up the US as a hypocritical rogue state that doesn't practice what it preaches and violates its own ideals as it finds convenient. This is going to have international repercussions for a long while.

UPDATE: The other side of the story from an OWS supporter

Naomi Wolf’s ‘Shocking Truth’ About the ‘Occupy Crackdowns’ Offers Anything but the Truth
When you don’t “connect” wholly disparate “dots,” what you get is far less dramatic. Mayors in a handful of cities, responding to local political pressures, decided to break up their local occupations — decisions that were announced to the press well in advance — and were advised as to how best to do so.

Ralph Nader on Occupy's demands

It has been said repeatedly that the Occupy Wall Street movement has no specific agenda. Look at their signs and banners. It is obvious; they want IN. They no longer want to be excluded, disrespected, unemployed, defrauded, impoverished, betrayed and in big and small ways OUT.

They want justice, opportunity and, as the ancient Roman lawyer Marcus Cicero advocated for, the freedom to participate in power.

Read the whole post at CounterPunch (short)
by Ralph Nader

Mike Whitney — "The nightmare scenario is beginning to unfold"

“We are caught, it seems, in one of those self-reinforcing loops that almost always presage a collapse.”– Michael Pettis, China Financial Markets
Germany’s “failed” bund auction on Wednesday was a real gamechanger. It means that Europe’s biggest and most powerful economy will not escape the contagion that’s swept across the south. Germany’s borrowing costs will rise and it’s finances will be put under a microscope. But that’s just the half of it. What’s roiling the markets is that investors are now pricing in the probability of a eurozone breakup. That’s what all the commotion is about; the nightmare scenario is beginning to unfold....
Read the rest at CounterPunch
by Mike Whitney

Note: Whitney. who is usually in paradigm with MMT, cites James K Galbraith

Paul B. Farrell summarizes Gary Shilling

In short, expect a very rough decade for the economy, the market, and the taxpaying public. Here’s Shilling’s history of past cycles that run 15- to 20-year log bull and bear cycles the past 60 years:
1949-1968: 19-year secular bull market
The great Post-WWII expansion: “The 1949-1968 secular bull market was driven by postwar economic growth, fading deflation fears, low inflation, the institutionalization of equity and the resulting leap in P/Es.” For me a great time: high school, Marines, Korea, plus a great education on the GI Bill.
•1968-1982: 14-year secular bear market
Shilling says “inflation caused by huge Vietnam and Great Society spending dominated the 1968-1982 secular bear market as it pushed interest rates up and P/Es and productivity down.” Remember the oil crisis, recession and a long sideways stock market for over a decade. I was on Wall Street with Morgan Stanley working on troubled banks, corporate and developer restructurings. Evaluated the collapse of the Federal New Towns Development Program for HUD. Long recession. No fun for most investors
•1982-2000: 18-year secular bull market
With Reaganomics: “The unwinding of inflation generated the 1982-2000 secular bull market, aided by the consumer spending spree and, finally, dot-com speculation,” says Shilling. And oh how we loved stocks with 30%-plus returns, some even posting 300% annual returns. We went crazy. “This time it was different.” Barbers offered investment advice and neighborhood barbecues were abuzz with early retirement plans.
•2000-2020: Yes, a 20-year secular bear market till 2020
Shilling says “the speculative investment climate spawned by the dot-com nonsense survived. It simply shifted from stocks.” Our retirement, “pension and endowment funds have been increasing their exposure to alternative investments such as commodities, foreign currencies, hedge funds, private equity, emerging-market equity and debt and real estate” in recent years. Yes, the ‘90s insanity did survive, like Frankenstein, transplanted in a new body by the White House, Treasury, the Fed, Wall Street, and our dogmatic, self-destructive conservative politicians obsessed about tax-cuts-for-the-very-rich.
Shilling sees “a secular bear market really started in 2000 and may persist for a decade as a result of slower GDP growth,” yes, persist till 2020 “with 2% to 3% deflation.”
Read the whole post at MarketWatch
Very slow growth 2012 then long bear to 2020
by Paul B. Farrell

US 10 year breaks 2%

US bond yields fall to historical lows. Rating agencies continue to be out to lunch and don't notice that the bond vigilantes are ignoring them.

Bloomberg: Treasury 10-Year Yield Below 2% as Europe Debt Crisis Fuels Refuge Demand

Scott Turow — Suggestion for Occupy

Now that the Occupy Wall Street protesters have been driven from many of their encampments, I have an unusual suggestion for how they should next deploy their considerable energies: work across the nation for a constitutional amendment requiring Congress to regulate the expenditure of private money on elections.
Let me connect the dots. The heart of the protests is a lament about widening income inequality in the U.S., brought about, in part, by a government that seems to favor disproportionately wealthy interests. The Occupiers have focused their outrage on the bailout of banks that reaped huge profits on mortgage-backed securities and are now profitable again, while millions of homeowners have been foreclosed upon or lost their jobs.
The best antidote to this imbalance of income and influence would be to greatly reduce the role of private funding in our elections. Nothing is more empowering to the well-heeled -- corporations, unions, lobbyists, political-action committees, trade associations and bundlers -- than our political leaders’ need to come to them hat in hand for the money to get elected....
Read the rest at Bloomberg
How Occupy Wall Street Can Restore Clout of the 99%: Scott Turow

I agree that this is absolutely top priority. Without getting the money out of politics and locking the revolving door for good, nothing substantial will change and if it does, it will undermined in committee with loopholes or soon be reversed if made law that has teeth.

OccupyLA gets eviction notice from mayor

AP via Google News:
Mayor Antonio Villaraigosa gave a lengthy tribute to Occupy LA protesters on Friday before telling them they must leave their encampment on the lawn of City Hall by 12:01 a.m. Monday, citing public health and safety concerns.
Villaraigosa, who has expressed sympathy for the protest’s aims from its beginning seven weeks ago, announced the ouster at an afternoon news conference with police Chief Charlie Beck. He said the movement that has spread in two months from New York to numerous other U.S. cities has “awakened the country’s conscience” — but also trampled grass at City Hall that must be restored....
Read the rest at Google News

UPDATE: Philadelphia mayor gives ‘Occupy Philly’ eviction notice
by Andrew Jones (Raw Story)

Anyone see a pattern here?

The History of Bitcoin

All about the ups and downs of the alternative digital currency operation called Bitcoin.

Read the whole article at Wired Magazine

The Rise and Fall of Bitcoin
by Benjamin Wallace
(h/t Kevin Fathi)

Friday, November 25, 2011

Randy Wray takes on the Fed

I must admit that I’ve long been skeptical of [President Andrew] Jackson’s followers, who insist we’d be better off without a central bank. Surely we need someone to set the overnight interest rate, we need check clearing, and we need a lender of last resort. But maybe it’s time to think about an alternative to the Fed.
Read the whole post at Economonitor
Time to Abolish the Fed? Maybe Andrew Jackson Was Right, After All

For the record: Some MMT proponents have been recommending for some time that the central bank and treasury functions be formally consolidated under the Department of the Treasury.

An open letter to the CME

Since MF Global was a clearing member of the CME it is likely that the CME knew about the firm's financial difficulties and its positions and did nothing about it.

Here is a pretty hard hitting letter written by someone named Warren Pollock:

Open Letter to the CME
To: Terrence A Duffy, Chairman CME Group

As illustrated by the failure of MF Global, I am of the opinion that, the CME has not met its basic obligations to the marketplace as a “public fiduciary.”

Our society depends on “basic finance” to provide “utility function” such as banking, hedging, insurance, and/or capital formation. Presently, we have an “innovative system” that degrades the integrity needed for “basic finance” to perform as required in a well-structured economy.

Worse yet, our “innovative” financial system impedes the effectiveness of the greater “physical economy.” The “physical economy,” consisting of all those individuals and entities tasked with meeting actual need. The "physical economy" consists of many of your customers including farmers, manufactures and electric companies.

Our society needs people working in the "physical world" to create jobs more desperately than it needs the continuity of the CME. Must we endure another market catastrophe to figure this out?

Read rest of the letter here.

Has the CME become more of a liability than an asset to our financial system? I am speaking here as a former member of the exchange.

Is Pimco about to lose big again?

We know that Bill Gross made a disastrous move shorting US Treasuries earlier this year. It put his fund at the bottom of all bond funds at least in terms of performance.

Bill Gross may be in for another, big loser. That’s because he has been saying for a long time that he is overweight German bonds (and underweight US) because German bonds were “the safest.”

Once again Gross displays a total lack of understanding when it comes to sovereign bonds and sovereign credit: Countries that don’t issue their own currency—like Germany—are INFINITELY more risky than countries that do—like the United States.

That’s because non-currency-issuing nations are credit sensitive. They NEED the money to pay their debt service, etc. Currency issuing nations pay in their own money of issue, so there is NEVER a solvency problem. (Someone please inform the rating agencies of that!)

From what I can determine, Pimco is heavily long German bonds and the German bond market is starting sell off hard now. Take a look at the yield spread between German 10-year bonds and US 10-year Treasuries. Germany yields are now surging above their German counterparts.

Don’t be surprised if you start hearing some more big loss stories coming out of Pimco!

Thursday, November 24, 2011

China PMI breaks 50

China's factory sector shrank the most in 32 months in November on signs of domestic economic weakness, a preliminary PMI survey showed, reviving worries that China may be slipping toward a hard landing and fuelling fears of a global recession.
The steep fall in the HSBC flash purchasing managers' index (PMI) to 48 in November from 51 in October largely reflected domestic weakness as both output and new orders shrank even as export orders continued to grow.
The flash PMI, the earliest readout of China's industrial activity, was the lowest since March 2009 and suggests the factory sector contracted during the month. A PMI reading of 50 demarcates expansion from contraction.
Read the rest at The Huffington Post (Retuers article)
China's Slowing Factory Production Fuels Fears Of Global Recession

Moody's gets moody

Moody's Investors Service on Wednesday warned that its top credit rating for the United States could be in jeopardy if lawmakers backtrack on $1.2 trillion in deficit cuts planned over 10 years.
The ratings firm said the failure of a U.S. congressional committee to reach an agreement on deficit reduction did not affect the Aaa rating, but any pullback from agreed automatic cuts to take effect starting in 2013 could prompt it to take action.
"While a change in the composition of the spending cuts would not be a major rating consideration, a reduction in the total amount that would increase the projected increase in federal debt over the coming decade could have negative rating implications," Moody's said in a statement.
Read the rest at The Huffington Post (Reuters article)

Someone wake up the bond vigilantes and tell them that Moodys is concerned.

Hello, yields are hitting historical lows.

I sure hope the folks at the rating agencies don't trade bonds. Or maybe they do and are sowing disinformation. Pathetic. Looks like they are spending so much time over at Zero Hedge they are unable to distinguish reality anymore.

Time for someone to start a pawn shop franchise?

Pawn shops are beckoning from the shadows.
At a time when banks have shut their doors on those with bad credit, a growing number of borrowers are pawning their jewelry, electronics and other valuables to make ends meet.
Consumer advocates say the development is concerning because the interest rates on loans from pawn shops can be as high as 20 percent a month. But pawn shop operators say they provide a critical lifeline to a group with few other options.
"It's a short-term loan – it's designed to bail someone out and be done with it," said Ed Bean, who owns Suffolk Jewelry & Pawnbrokers in Boston....
Read the rest at The Huffington Post
by Candice Choi

Is offshoring the problem it is made out to be?

In the last decade, U.S.-based multinational companies have been on a hiring spree, adding over 2 million new jobs. They're just not adding them in the United States.
In the last decade, U.S.-based multinational corporations cut nearly 864,000 jobs in the United States, according to a new report from the Commerce Department's Bureau of Economic Analysis. At the same time, they added 2.87 million jobs outside the country, including 1.61 million jobs in Asia and the Pacific region.
Multinational companies are focusing their hiring largely in emerging markets, where economic growth has been faster than in other regions. China, which grew at an average 10.3 percent per year between 1999 and 2009, was the country that enjoyed the most job growth from U.S.-based multinational companies, with 691,100 jobs added, according to the report.
In India, where the economy grew an average 7.2 percent per year during that time frame, U.S.-based multinational corporations added 425,800 jobs. The U.S. economy, in contrast, grew an average 1.7 percent per year.
U.S.-based multinational corporations also added 532,300 jobs in Latin America, the study found. Economies in the region have been growing nearly four percent per year on average, according to the Conference Board.
"They're going abroad mainly to sell their products," said BEA economist Raymond Mataloni, who co-authored the report. "Most of the sales in these emerging markets are to local customers."
Read the rest at The Huffington Post
by Bonnie Kavoussi

This headline is somewhat misleading. It suggests that the US lost workers bu offshoring production, whereas the numbers indicate that US multinationals not only produced but also sold more products abroad. This is going to be an increasing feature of the global economy as the emerging economies continue to grow rapidly. Viewing it as a bug is counter-productive, and this will only serve to disadvantage US multinationals in the arena of global competition. Scapegoating "big corporations" is not the way to go here, as intuitive as it may seem.

The problem is not as much offshoring US jobs as the US technocrati being unable to understand that the real issue is lagging demand, largely due to flat worker incomes and excessively high taxation, FICA in particular. 

It is true that corporations have been allocating a larger share of revenue to profit at the expense of wages. However, worker compensation has remained pretty stable over this time. While wages have been stagnant to falling in real terms, benefits have been rising, driven by exploding health care costs and rising insurance premiums. This has meant a transference of revenue to FIRE, along with interest and mortgage payments. As a result, the proportion of GDP garnered by FIRE has increased dramatically.

Demand was supported for a time through credit-based consumption, which finally reached unsustainable levels when private debt ballooned, hit historically high levels.

The solution is not bringing "back the jobs." Rather, it lies in an understanding that the real issue is effective demand and that this can be addressed fiscally through the sectoral balance approach and functional finance, as recommended by MMT.

Some will counter with the rising level of imports and assert that the US needs to grow it export market to take back jobs. MMT economists point out, however, that imports are favorable in real terms of trade, whereas exporting involves domestic workers using national resource to supply foreigners rather than the country's own nationals.

As long as the issue is understood correctly and the sectors kept in balance at full employment, there is no problem with multinationals producing and selling abroad, or the country running a persistent current account deficit as long as other countries want to save in its courrency.

More pushback as Portugal heats up

A general strike against austerity measures grounded flights and paralysed public transport in Portugal Thursday as workers protested a tough 2012 budget aimed at helping the country pay its debt.
Authorities cancelled nearly all flights in and out of the nation’s main airports, the Lisbon metro came to a standstill and ferries across the capital’s Tagus River functioned only intermittently in what unions said was a necessary bitter pill.
“The strike is a sacrifice for the good of the country,” said Manuel Carvalho da Silva, secretary general of the CGTP union, which along with Portugal’s other main union the UGT had called the strike action.
“It is a red card to the government for its actions that are driving the country to poverty,” da Silva said as he stood in front of a billboard listing cancelled flights at Lisbon’s airport....
Read the rest at Raw Story
Portuguese workers strike over austerity measures
by Agence France Presse

Happy Thanksgiving

Remember, now, all you need is love.

How a Job Guaranty Led to Thanksgiving

Last year around this time I did a post addressing what I perceived to be some falsehoods promulgated by John Stossel and Rush Limbaugh about the economic details and progression of events leading up to the first Thanksgiving in the New England Colony of Plymouth. HuffPo also addressed the Limbaugh thing last year here.

Long story short: Limbaugh goes out every year at this time and claims that the system in the Colony was first "socialism" and that was failing and then they converted to "capitalism" or a "free market" and they lived happily ever after; then last year apparently Stossel glommed onto this Limbaugh thing and did his own twisted take on it. Here is a link to my write up last year and I still stand by my take there for the most part.

So I had hoped to revisit this issue this year at this time and have been reading a bit from the actual account of Governor Bradford of the Plymouth Colony; there is a free Google book online. The government and economic arrangements in the Colony do not appear to be as simple as most apparently believe. It reads like there were several settlements within the overall Colony that had some autonomy in how they arranged their own economies. So there was not just some sort of homogeneous group of "Pilgrims" who all lived in the same community and ran things one certain way, which is what you have to believe if you believe the Limbaugh/Stossel story, in addition to believing that they all only wanted to eat "corn on the cob".

So if you look at the post I put up here last year, there indeed was a point where government leadership intervened and changed the arrangements within one of the settlements that was under the leadership of a Mr. Weston that was failing, to one where each family was allotted land on which for them to grow corn (which I surmised could have been both used as food and a feedstock). This is the event that Limbaugh/Stossel seizes on as a transition from "socialism" to "capitalism"; I'm sorry Rushbo, but if you read Bradford's complete account surrounding this event, it looks like it was in some ways almost exactly the opposite!

You can read this portion of Bradford's account here for yourself; but apparently the subject settlement was in the former case operating in quite a "free market" of chaos. Here's an excerpt:

It may be thought Strang that these people* should fall to these extremities in so short a time, being left competently provided when ye ship left them, and had an addition by that moyetie of corn that was got by trade, besids much they gott of ye Indans wher they lived, by one means & other. It must needs be their great disorder, for they spent excesseivly whilst they had, or could get it; and, it may be, wasted parte away among ye Indeans (for he yl was their cheef was taxed by some amongst them for keeping Indean women, how truly I know not). And after they begane to come into wants, many sould away their cloathes and bed coverings; others (so base were they) became servants to ye Indeans, and would cutt them woode & fetch them water, for a cap full of corne; others fell to plaine stealing, both night & day, from ye Indeans, of which they greevosly complained. In ye end, they came to that misery, that some starved & dyed with could & hunger. One in geathering shell-fish was so weake as he stuck fast in ye mudd, and was found dead in ye place. At last most of them left their dwellings & scatered up & downe in ye [94] woods, & by ye water sids, wher they could find ground nuts & clames, hear 6. and ther ten. By which their cariages they became contemned & scorned of ye Indeans, and they begane greatly to insulte over them in a most insolente maner; insomuch, many times as they lay thus scatered abrod, and had set on a pot with ground nuts or shell-fish, when it was ready the Indeans would come and eate it up; and when night came, wheras some of them had a sorie blanket, or such like, to lappe them selves in, the Indeans would take it and let ye other lye all nighte in the could; so as their condition was very lamentable. Yea, in ye end they were faine to hange one of their men, whom they could not reclaime from stealing, to give ye Indeans contente.*
* That is, Weston's people. — Ed.

It certainly looks like it was quite a "free market" of chaos in the 'Weston' settlement complete with gluttony, kept native women, theft, deaths due to exposure, malnutrition, lynching, depression, lack of a coherent plan, etc. How would they escape these dire conditons? Well it's a good thing that Limbaugh wasn't in charge and would have "let the free market work", rather we pick up the account whereby:

All this whille no supply was heard of, neither knew they when they might expecte any. So they begane to thinke* how they might raise as much corne as they could, and obtaine a beter crope then they had done, that they might not still thus languish in miserie. At length, after much debate of things, the Govr (with ye advise of ye cheefest amongest them) gave way that they should set corne every man for his owne perticuler,f and in that regard trust to them selves; in all other things to goe on in ye generall way as before. And so assigned to every family a parcell of land, according to the proportion of their number for that end, only for present use (but made no devission for inheritance), and ranged all boys & youth under some familie. This had very good success;
I don't know about you, but this reads to me like an enlightened government had to intervene and wade into the utter chaos, and implement some judgement.

And in a move that reads like it came right out of the God of Israel's playbook from thousands of years before, assigned an allotment of land to the families in corresponding measure with their number and ability, with no ownership rights to private property. From the scriptures:

"To a larger group give a larger allotment, and to a smaller group a smaller one; each is to receive its allotment according to the number of those listed."
(Numbers 26:53-55)
The leadership of the Plymouth colonists were deeply devout and extremely well read into the Sacred Scriptures, as evidenced by Bradford's writings in this account, and apparently used the economic arrangements the God of Israel gave to them in that day as a basis to impose a system on this 'Weston' settlement that was intended to deliver the best economic results for they also. In fact if you continue to read the account, the author goes on to write:

The experience that was had in this coihone course and condition, tried sundrie years, and that amongst godly and sober men, may well evince the vanitie of that conceite of Platos & other ancients, applauded by some of later times; —that ye taking away of propertie, and bringing in coihunitie into a confone wealth, would make them happy and florishing; as if they were wiser then God.

So it is indeed deceptive to depict these events in any other light today. What was done was that the enlightened Plymouth government created legal arrangements whereby no settler could be separated from direct legal access to a means of subsistence, access to agricultural land was guaranteed to each family unit and no property ownership rights were conveyed. This was to, in effect, implement a "Job Guaranty" in Plymouth's agricultural based economy, as in a similar way, MMT proposes today to implement one in our contemporary multi-faceted, integrated economy.

The implementation of this Job Guaranty is what actually led to economic bounty and hence a "Thanksgiving".

The actual participants in these very serious life or death events here in North America hundreds of years ago, looked upon the choice of economic systems as NOT between one of "socialism" and "free market capitalism", but rather, a choice between an enlightened approach designed in accord with the action of the economic laws of the God of Israel vs. one that they looked upon as a Platonic approach of collectivism.

There is a BIG difference if you have been given eyes to see it.