lunedì 5 dicembre 2011

The Absurd Zombie Lie About the Economy





The Absurd Zombie Lie About the Economy Right-Wingers Desperately Cling To -- And Why It's Totally Wrong


Home loans didn't bring on the recession; gimmicky financial instruments bloated to 100 times their value are what caused all this pain.

Wall Street turned a few million home-loans into what Warren Buffet called "economic weapons of mass destruction," cratered the global economy and then, when the bubble burst, turned around and insisted on a massive bailout courtesy of the American tax-payer.
That rightly infuriated most Americans, but it has nonetheless become something of an article of faith among conservatives that Wall Street bears little blame for the Great Recession. The dominant narrative on the right today is that "big government" is ultimately responsible for the crash. In the words of one of Andrew Breitbart's bloggers, Democratic lawmakers like Barney Frank and Chris Dodd “brought down the banking industry by forcing banks to give loans to people who couldn’t afford them.”
That such a ludicrous claim could gain such wide traction is a testament to the intellectual debasement of modern conservative discourse. No bank was ever “forced” – or coerced or incentivized by the government in any way – to make a bad loan.
But the claim falls apart even before one digs into the particulars, for the simple reason that people's mortgages didn't bring down the banking system in the first place.
The entire subprime mortgage market was worth only $1.4 trillion in the fall of 2007and that includes loans that were up-to-date. As former Goldman Sachs trader Nomi Prins noted in her book, It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Streetthe federal government could have bought up every single residential mortgage in the country – good, bad and in between – and it would have cost a trillion less than the bailouts.
Short of that, notes Prins, if the crisis were really about people buying McMansions that they couldn't afford, “we could have solved it much more cheaply in a couple of days in late 2008, by simply providing borrowers with additional capital to reduce their loan principals. It would have cost about 3 percent of what the entire bailout wound up costing, with comparatively similar risk.”
What brought down the global economy was as much as $140 trillion worth of financial gimmickery built on top of the mortgage industry. It was the alphabet soup of the credit meltdown – the CDOs, default swaps and other derivitaves that made less than a trillion dollars of foreclosed loans into an economic weapon of mass destruction that would cost the American economy alone $14 trillion in lost wealth.
Deregulation
A fair criticism of the government's role is that it didn't “meddle” in the free market sufficiently to protect borrowers, investors and the public – that $140 trillion house of cards was built in an environment created by decades of deregulation. But that situation is also the fault of Wall Street rather than an indication of the perfidy of "big government." It was bought at great cost by the banking lobby (and as powerful chairs of congressional banking committees, the right's bogeymen, Barney Frank and Chris Dodd, are two of the financial industry's top recipients).
One could argue that the meltdown began with a chance meeting in 1997 in a line for coffee at Bank of America's Chicago headquarters. According to the Financial Times' Gillian Tett, a chance encounter brought together people working in BofA's derivatives group with another team that was packaging mortgages into securities. From that meeting, as Tett wrote, “a new game was born: bankers began to use subprime loans to create these bundles of loan default risk, now called collateralized debt obligations (CDOs) on an explosively large scale.”
Present at that meeting was Robert Reoch, a trader who had come over from JPMorgan. In the mid-1990s, JPMorgan had found itself holding an abundance of loans on its books, which made it difficult to maintain the reserves required by banking regulators. They had come up with the idea of selling some of the risk of those loans off to investors, by bundling them into mortgage-backed securities. This had two consequencs that would eventually lead to the almost universally loathed Wall Street bailouts, a massive drop in employment, the forcelosure crisis and a skyrocketing deficit.
But the real origin of the crisis took place several years earlier. In 1994, some of the first derivatives – which allowed investors to gamble on interest rates – produced massive losses when currency markets began fluctuating wildly. Calls to regulate this shadowy field of financial speculation followed, but, as Tett noted, “the International Swaps and Derivatives Association fought back furiously, arguing that a regulatory clampdown would not only run counter to the spirit of capital markets, but also crush creativity.”
On the board of ISDA – whose lobbying expenditures more than doubled in 2010 to $2.4 million, as new rules on derivatives were being hammered out by federal regulators -- sits managing directors of JPMorgan Chase, Morgan Stanley, Goldman Sachs, Citigroup and Bank of America Merrill Lynch, among other financial firms.
Its successful campaign against regulations on derivatives in the mid-1990s was only one battle in a long campaign to deregulate investment banking that dated back to the 1960s, when lobbyists reportedly bragged that the effort was putting their kids through college. Their primary target was the Glass-Steagall Act, a depression-era law that created a firewall between investment banking and the commercial banks that hold deposits and make loans. Their first victory came in 1986, when, under intense lobbying from Wall Street, the Federal Reserve reinterpreted a key section of the act, deciding that commercial banks could make up to 5 percent of their gross revenues from investment banking. After the board heard arguments from Citicorp, J.P. Morgan and Bankers Trust, it loosened the restrictions further – in 1989, the limit was raised to 10 percent of revenues; in 1996, they hiked it up to 25 percent.
According to a report by PBS Frontline, “in the 1997-98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spends more than $200 million on lobbying and makes more than $150 million in political donations. Campaign contributions are targeted to members of congressional banking committees and other committees with direct jurisdiction over financial services legislation.”
In 1999, after 12 unsuccessful attempts, Glass-Steagall, which would have made the crash of 2007-2009 impossible, was finally repealed. And it was only then that the explosion in shaky mortgage-backed securities began. “Subprime” loans made up 5 percent of the total the year before repeal, but skyrocketed to 30 percent of all mortgages at the time of the crash.
Fanny, Freddie and the Community Reinvestment Act
Jeb Hensarling, a notably obtuse Republican lawmaker from Texas, wrote that “the conservative case [against the government] is simple”:
The [Community Reinvestment Act] compelled banks to relax their traditional underwriting practices in favor of more “flexible” criteria. These subjective standards were then applied to all borrowers, not just low-income individuals, leading to a surge in lower-quality loans....Blame should [also be] directed at Fannie [Mae] and Freddie [Mac], and their thirst for weaker underwriting to help meet their federally mandated “affordable housing” goals...
This tale has everything a conservative could want: Big Government overreach and well-intentioned but out-of-touch liberals causing devastating unanticipated consequences with their social tinkering.
But, contrary to the conservative spin, University of Michigan law professor Michael Barr told a congressional committee that although there was in fact quite a bit of irresponsible lending in low-income communities in the late 1990s and the early 2000s, “More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts [subject to CRA standards].” Barr concluded, “The worst and most widespread abuses occurred in the institutions with the least federal oversight."
The reality is that no bank has ever been “forced to comply with government mandates about mortgage lending” – it's a bald-faced lie.
There are no “government mandates,” and there never were. In order to qualify for government-backed deposit insurance—a benefit that banks aren’t forced to accept but enjoy having—the Community Reinvestment Act – and similar measures designed to prevent discrimination in lending (to qualified individuals) – only encourage banks to lend in all of the areas where they do business. And Section 802 (b) of the Act stresses that all loans must be “consistent with safe and sound operations”—it’s the opposite of requiring that lenders write risky mortgages.
There are no penalties for noncompliance with CRA guidelines. The only “stick” hanging over banks that fail to meet those standards is that their refusal might be taken into account by regulators when they want to open new branches or merge with other financial institutions. What’s more, there are no defined standards for CRA compliance, and within the banking community, the loose guidelines are considered to be somewhat of a joke.
As Sheila Blair, the chairwoman of the FDIC, asked in a December 2008 speech, “Where in the CRA does it say: make loans to people who can’t afford to repay? Nowhere! And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth...pure and simple.”
Fannie and Freddie: Tempted by Easy Profits
Fannie Mae and Freddie Mac were created by an act of Congress, but they are (or were, until being taken over in the wake of the housing crash) private, for-profit entities whose dual mandate was to increase the availability of mortgages to moderate- and low-income families, and at the same time turn a profit for their shareholders. Fannie and Freddie did end up with a very large portfolio of subprime loans, with a high rate of default, but they didn’t get into the market early, or because the government mandated it. They dived in deep because there were profits to be made as the housing bubble expanded. As Mary Kane, a finance reporter for the Washington Independent, put it:
Neither the Community Reinvestment Act—the law most cited as the culprit—nor other affordable housing goals set by the government forced Fannie, Freddie or any other lender to make loans they didn’t want to. The lure of the subprime market was high yields and healthy profit margins—it’s as simple as that.
Creating a Market
None of this is to suggest that millions of Americans didn’t bite off more than they would eventually be able to chew in the housing market. A lot of people looking to turn a quick buck by capturing the booming value of real estate in the mid- to late-2000s bought property with “teaser” loans that offered very low rates for the first few years; the investors assumed they’d be able to turn a tidy profit before higher interest rates kicked in. Many of those individuals have since found themselves “under water”—owing more on their homes (and investment properties) than they’re worth.
Yet as Salon business reporter Andrew Leonard wrote, beginning in the 1990s, “The incentive for everyone to behave this way came from Wall Street...where the demand for (debt-backed securities) simply couldn’t be satisfied. Wall Street was begging the mortgage industry to reach out to the riskiest borrowers it could find, because it thought it had figured out a way to make any level of risk palatable.” He added, “Wall Street traders, hungry for more risk, fixed the real economy to deliver more risk, by essentially bribing the mortgage originators and ratings agencies to...make bad loans on purpose. That supplied (Wall Street) speculators the raw material they needed for their bets, but as a consequence threw the integrity of the whole housing sector into question.”
The bankers’ hard sell created so much demand that lenders wrote loans to just about anybody for just about anything; loans, after all, were the raw material for the alphabet soup of exotic investment vehicles: the “collateralized debt obligations (CDOs),” “credit default swaps,” and other innovative products that turned “toxic” toward the end of the decade. Wall Street had little to lose by giving investors more of these fancy new bets. Wall Street traders made their fees, and as long as the housing market—the hard assets underpinning all of the theoretical wealth that was created—held up, everyone was happy.
The most important point here is that the bankers knew they were playing with fire. The Los Angeles Times reported, “Before Washington Mutual collapsed in the largest bank failure in U.S. history, its executives knowingly created a ‘mortgage time bomb’ by making subprime loans they knew were likely to go bad and then packaging them into risky securities.”
According to the Wall Street Journal, U.S. prosecutors are, as of this writing, investigating whether Morgan Stanley misled investors about mortgage-derivatives deals it helped design and sometimes bet against.” And the Securities and Exchange Commission charged Goldman Sachs with “defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.”
They needed some help laundering the risk out of those shaky loans, and they got it. According to a Senate investigation concluded earlier this year S&P and Moody's, the two dominant ratings agencies, “issued the AAA ratings that made ... mortgage backed securities ... seem like safe investments, helped build an active market for those securities, and then, beginning in July 2007, downgraded the vast majority of those AAA ratings to junk status.” And when they did so, it “precipitated the collapse of the [mortgage-backed securities] markets and, perhaps more than any other single event, triggered the financial crisis (PDF)."
According to the Senate investigation, in the years leading up to crash, “warnings about the massive problems in the mortgage industry” — including internal warnings from their own analysts — had been ignored because of “the inherent conflict of interest arising from the system used to pay for credit ratings.” The big “rating agencies were paid by the Wall Street firms” that were making a fortune selling that glossed-up garbage to credulous investors. This, again, was Wall Street's doing rather than a result of some public policy passed by Congress.
This isn't about ideology; it's about pushing back on some notably dangerous historical revisionism. Because there is one thing that’s as sure as death and taxes: Big Finance’s lobbyists will continue to resist calls to re-regulate the financial sector. And absent effective regulation of the financial markets, we can expect to continue to suffer through an endless series of booms and busts, while the fat cats of Wall Street continue to get fatter.
Joshua Holland is an editor and senior writer at AlterNet. He is the author of The 15 Biggest Lies About the Economy: And Everything else the Right Doesn't Want You to Know About Taxes, Jobs and Corporate America. Drop him an email or follow him on Twitter.

domenica 4 dicembre 2011

Greg Palast and Lee Camp in NYC

US bankers may be jailed with no trial


No Wonder America’s Founders Distrusted Standing Armies


It is well documented that many of America’s Founding Fathers had a very real and deep-seated distrust of standing armies–and for good reason. They had just fought a costly and bloody war for independence, which had been largely predicated upon the propensities for the abuse and misuse of individual liberties by a pervasive and powerful standing army (belonging to Great Britain) amongst them. Listen to Thomas Jefferson: “I believe that banking institutions are more dangerous to our liberties than standing armies.” Note that Jefferson identified both banking institutions and standing armies as being “dangerous to our liberties.” James Madison said, “A standing army is one of the greatest mischief that can possibly happen.” Elbridge Gerry (Vice President under James Madison) called standing armies “the bane of liberty.”
For the most part, the sentiments of our founders ring hollow to modern Americans who, ever since World War II, have glorified, idolized, and practically even worshipped the standing US military. But of course, with only isolated instances (which were almost always completely covered up by the mainstream news media) of the abuse of military power being committed against US citizens, the American people, as a whole, have no point of reference directing them to the sagacity of America’s founders on the subject. Indeed, who could even imagine that US military forces would ever be used against the US citizenry? After all, the media did a masterful job of covering up the most flagrant example of US military forces being used against US citizens when US military forces assisted federal law enforcement agencies in slaughtering the Branch Davidians outside Waco, Texas, on April 19, 1993. So, most Americans simply shut their eyes against that “painful truth” and chose to ignore the fact that it even happened.
Yes, there have been isolated instances of military personnel abusing their authority against American citizens (i.e., Waco in 1993, Kent State University in 1970), but overall the founders’ deep-seated distrust of standing armies has been replaced with deep-seated trust. But were our founders right to be distrusting of standing armies? And are we wrong to be so trusting of standing armies? Consider the following report by Dr. Andrew Bosworth.
“There is a shocking piece of legislation working its way through Congress. A Defense Authorization bill for 2012 allows for military detentions of American citizens on American soil. These can be indefinite detentions, with no trial.”
Bosworth quotes an ACLU (an organization whose efforts regarding the so-called “separation of church and state” issues I strongly oppose, but whose efforts regarding issues that can only be identified as an emerging police state I strongly support) statement as saying, “The U.S. Senate is considering the unthinkable: changing detention laws to imprison people–including Americans living in the United States itself–indefinitely and without charge.
“The Defense Authorization bill–a “must-pass” piece of legislation–is headed to the Senate floor with troubling provisions that would give the President–and all future presidents–the authority to indefinitely imprison people, without charge or trial, both abroad and inside the United States.”
Especially egregious are sections 1031 and 1032. They:
1) Explicitly authorize the federal government to indefinitely imprison without charge or trial American citizens and others picked up inside and outside the United States;
(2) Mandate military detention of some civilians who would otherwise be outside of military control, including civilians picked up within the United States itself; and
(3) Transfer to the Department of Defense core prosecutorial, investigative, law enforcement, penal, and custodial authority and responsibility now held by the Department of Justice.
Bosworth also notes that, “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.”
Bosworth goes on to say, “Even mainstream, apolitical Americans would be concerned about such a provision that, on its face, is unconstitutional. Ordinary Americans are already waking up to the specter of tyranny, and the NDAA for 2012 would accelerate that process.”
Near the conclusion of Bosworth’s report, he states, “As many Americans know, for over a decade there have been dozens of pieces of legislation and executive orders that have chipped away at the US Constitution, specifically at its Bill of Rights.
“The ‘war on terror’ was originally to be waged against foreigners in far-away lands, but Rep. Ron Paul was right, the anti-terror infrastructure is swinging around to be used against American citizens.”
See Bosworth’s report at:
I well remember when my friend LT CDR Ernest “Guy” Cunningham conducted his “Combat Arms Survey” to 300 active-duty Marines at the USMC’s Air-Ground Combat Center, Twentynine Palms, California, back on May 10, 1994. A couple of questions in this survey were especially revealing (and startling). John McManus picks up the story at this point: “One of the questions asked the Marines if they would be willing to be assigned to a ‘national emergency police force’ within the U.S. under U.S. command. The survey showed that 6.0 percent strongly disagreed, 6.3 percent disagreed, 42.3 percent agreed, 43.0 percent strongly agreed, and 2.3 percent had no opinion.”
Commenting on these results, Cunningham said, “Do you realize that 85.3 percent agreed with assigning troops to a mission that violates the Posse Comitatus Act?” Remember, these were active duty Marines back in 1994.
Responses to another question were even more startling. Cunningham’s question: “Consider the following statement: I would fire upon U.S. citizens who refuse or resist confiscation of firearms banned by the U.S. government.” The result: “42.3 percent strongly disagreed with this statement; 19.3 percent disagreed; 18.6 percent agreed; 7.6 percent strongly agreed; and 12.0 percent had no opinion.” This equates to approximately 61% of Marines saying they would defy orders to turn their weapons on US citizens in order to disarm them; 26% saying they would not disobey such orders; and 12% refusing to say one way or the other, which means you could probably add them to the 26% who would not disobey orders to turn their weapons on American citizens.
See McManus’ report at:
Not too long ago, I asked a retired US Army Major General what he thought the results would be today if CDR Cunningham gave that same survey to US Marines? He said he thought that the number of those refusing such orders would be much higher and the number of those complying with such orders would be much lower. Given the Levin/McCain bill currently working its way through the US Congress, I sure hope he’s right! And I also hope that we modern Americans were not wrong to discard our founders’ distrust of standing armies.

December 6: "Occupy Our Homes"



December 6: "Occupy Our Homes" National Day of Action to Stop and Reverse Foreclosures

Tuesday, December 6 has been declared a national "Occupy Our Homes" day of action to stop and reverse foreclosures for the 99%.
MSNBC reports on the upcoming actions:
‘Occupy’ protesters and housing rights activists are planning to help families resist eviction from foreclosed homes and take control of  vacant properties in some 25 U.S. cities on Tuesday,  an effort aimed at focusing attention on the ongoing housing crisis and giving the movement a new focus after the dismantling of many of its encampments.
The protesters have been crafting proposals – often quietly to prevent police from learning about their intentions beforehand -- to defend families facing eviction or return others home. In Minneapolis, for example, they plan to help a Vietnam War veteran stay in his home, in New York, protesters will try to help a family get back into their house, and in Chicago, two sisters and their seven children will be moved into an abandoned single-family home, activists said.
"It’s part of a national day of action that we hope will kick off a wave of defenses and home re-occupations,” Max Berger, 26, told the Occupy Wall Street General Assembly late Thursday while requesting $6,400 in funding to buy tools for the project. "This is not just about one event; this is a huge frontier for us. We can do these kinds of actions all the time, and we should. And it doesn’t have to be just us. We got to do this one right so we can inspire people to do it theirselves.”
You can find out more about individual actions at the Occupy Our Homes website. And below, watch a segment from last night's Rachel Maddow Show on the burgeoning home-occupation movement.
Visit msnbc.com for breaking newsworld news, and news about the economy
By Lauren Kelley | Sourced from AlterNet 

Posted at December 3, 2011, 8:28 am

Anti-inflatocracy ads rejected by major US networks

See anti-Obama ads spiked by major networks – even Fox!
'Representation of public figures is something we try to avoid'
Posted: November 29, 2011
7:37 pm Eastern
By Jerome R. Corsi
© 2011 WND
Two television spots developed by a national investment firm specializing in U.S. gold and silver coins have been rejected by major television networks, including the Fox News Channel and the Fox Business Network, for apparently political reasons.
The ads by Phoenix-based Swiss America Trading Corp., a WND advertiser, feature President Obama and Federal Reserve Chairman Ben Bernanke as animated characters engaging in the potentially inflationary policy of printing paper money with abandon to stimulate the struggling economy.
Singer Pat Boone, a spokesman for Swiss America for more than 15 years, appears in the commercials as an animated announcer who concludes that investing in gold is a prudent strategy to diversify a portfolio in inflationary times.
Swiss America CEO Craig Smith said the intent of the ads was not to make a political statement.
The goal, he said, "was to take what we thought was a humorous approach to a timely and important economic topic in order to advertise our company and promote a new book we've recently published."
Along with Fox News and Fox Business, the two commercials have been rejected by NBC, MSNBC, CNBC, ABC, CBS, CNN/HLN and the Discovery Channel.
Comcast, in rejecting the spot, told Swiss America that it "does not meet our standards on public symbol."
Comcast's Public Symbol Policy specifies that the "use of the name or likeness of the President of the United States and/or the Presidential Seal for endorsing commercial purposes must be authorized by the White House."
Fox News said the "representation of public figures is something we try to avoid."
CNN/HLN told Swiss America the commercials were "not appropriate for the current political landscape."
"The networks' reaction shocked me," Smith said. "It's a threat to First Amendment rights when a commercial message is rejected not because it is inaccurate or misleading, but because it makes what is perceived to be a political statement the networks want to avoid."
Smith told WND he was concerned that the networks were protecting Obama and Bernanke.
"All we are saying in these two commercials is what dozens of responsible professional economists are saying every day," Smith said. "Gold investment as a responsible diversification strategy when governments printing of fiat currencies with abandon risk unleashing inflationary principles."
Only Google TV accepted the commercials, for broadcast on the DISH Network and Direct TV satellite networks.
Google TV has planned a test in which the two ads will be broadcast 1,132 times on the DISH Network and Direct TV from Dec. 5, 2011, through Jan. 12, 2012.
Ironically, the Swiss America ads will be seen nationally via Google TV on many of the major networks that have refused to air them. While cable subscribers to Fox News and CNN/HLN will not see the ads, for example, subscribers to the DISH Network or Direct TV will see them on those networks during the test period.
"The silver lining," said Smith "is that many of the television and cable networks who told us 'no' have come back saying 'yes' to Google TV, which will begin broadcasting the two commercials next week. We are very thankful to Google TV for helping us keep free speech alive on the television airwaves."
In June, Smith and co-author Lowell Ponte published "The Inflation Deception: Six Ways Government Tricks Us … and Seven Ways to Stop It!" in a paperback edition.
"Welcome to the 'inflatocracy' – our new form of government of, by, and for inflation – in which deliberately debasing our money has become a tool of mind manipulation, wealth distribution, and secret taxation," the publicity for the book on Amazon.com reads.
The first Swiss America commercial, seen below, plays off the theme "Helicopter Ben," a nickname Wall Street has conferred upon Bernanke for his reputation of "helicoptering" into financial crises to dump money on a problem.
The second Swiss America commercial, seen below, evokes imagery from the classic movie "The Wizard of Oz" to portray Bernanke and Obama as "financial wizards" hiding as "the men behind the door" in an inflationary scheme to solve economic problems by printing money.
Ray Griggs, the producer of the 2010 feature film documentary "I Want Your Money," a critical examination of the Obama administration's economic policies, produced the two Swiss America commercials.
To see original article CLICK HERE

Raw inflation via SDRs is next in central banking's scheme



Alasdair Macleod: Raw inflation via SDRs is next in central banking's scheme

 Section: 
1:10p ET Saturday, December 3, 2011
Dear Friend of GATA and Gold (and Silver):
Economist and former banker Alasdair Macleod writes today that raw monetary inflation via the cashing of Special Drawing Rights from the International Monetary Fund likely will be the next step by central banks to save bankrupt nations, last week's currency swaps having been undertaken to rescue insolvent banks. Macleod's commentary is headlined "Currency Swaps -- the Beginning of a Solution?" and it is posted at GoldMoney's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

ECB a barrier to crisis exit

ECB a barrier to crisis exit
By Ellen Brown, Asia Times, Dec 1, 2011


"To some people, the European Central Bank seems like a fire department that is letting the house burn down to teach the children not to play with matches." So wrote Jack Ewing in the New York Times last week. He went on:
"The ECB has a fire hose - its ability to print money. But the bank is refusing to train it on the euro zone's debt crisis.


"The flames climbed higher Friday after the Italian Treasury had to pay an interest rate of 6.5% on a new issue of six-month bills ... the highest interest rate Italy has had to pay to sell such debt since August 1997 ... But there is no sign the ECB plans a major response, like buying large quantities of the country's bonds to bring down its borrowing costs."
Why not? According to the November 28 Wall Street Journal,


Dilbert
  
"The ECB has long worried that buying government bonds in big enough amounts to bring down countries' borrowing costs would make it easier for national politicians to delay the budget austerity and economic overhauls that are needed." 


As with the manufactured debt ceiling crisis in the United States, the ECB is withholding relief in order to extort austerity measures from member governments - and the threat seems to be working. The same authors write:
"Euro-zone leaders are negotiating a potentially groundbreaking fiscal pact ... [that] would make budget discipline legally binding and enforceable by European authorities. ... European officials hope a new agreement, which would aim to shrink the excessive public debt that helped spark the crisis, would persuade the European Central Bank to undertake more drastic action to reverse the recent selloff in euro-zone debt markets."
The eurozone appears to be in the process of being "structurally readjusted" - the same process imposed earlier by the International Monetary Fund on Third World countries. 


Structural demands routinely include harsh austerity measures, government cutbacks, privatization, and the disempowerment of national central banks, so that there is no national entity capable of creating and controlling the money supply on behalf of the people. The latter result has officially been achieved in the eurozone, which is now dependent on the ECB as the sole lender of last resort and printer of new euros. 


The ECB serves banks, not governments
The legal justification for the ECB's inaction in the sovereign debt crisis is Article 123 of the Lisbon Treaty, signed by EU members in 2007. As Jens Eidmann, president of the Bundesbank and a member of the ECB Governing Council, stated in a November 14 interview:
"The eurosystem is a lender of last resort for solvent but illiquid banks. It must not be a lender of last resort for sovereigns because this would violate Article 123 of the EU treaty."
The language of Article 123 is rather obscure, but basically it says that the European Central Bank is the lender of last resort for banks, not for governments. It provides:
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as 'national central banks') in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.
Banks can borrow from the ECB at 1.25%, the minimum rate available for banks. Member governments, on the other hand, must put themselves at the mercy of the markets, which can squeeze them for "whatever the market will bear" - in Italy's case, 6.5%. 


The reason eurozone countries are drowning in debt
Why should banks be able to borrow at 1.25% from the ECB's unlimited fountain of euros, while the tap is closed for governments? The conventional argument is that for governments to borrow money created by their own central banks would be "inflationary". But private banks create the money they lend just as government-owned central banks do. 


Private banks issue money in the form of "bank credit" on their books, and they often do this before they have the liquidity to back the loans. Then they borrow from wherever they can get funds most cheaply. When banks borrow from the ECB as lender of last resort, the ECB "prints money" just as it would if it were lending to governments directly. 


The burgeoning debts of the eurozone countries are being blamed on their large welfare states, but these social systems were set up before the 1970s, when European governments had very little national debt. Their national debts shot up, not because they spent on social services, but because they switched bankers. 


Before the 1970s, European governments borrowed from their own central banks. The money was effectively interest-free, since they owned the banks and got the profits back as dividends. After the European Monetary Union was established, member countries had to borrow from private banks at interest - often substantial interest. 


And the result? Interest totals for eurozone countries are not readily accessible; but for France, at least, the total sum paid in interest since the 1970s appears to be as great as the French federal debt itself. That means that if the French government had been borrowing from its central bank all along, it could have been debt-free today. 


The figures are nearly as bad for Canada, and they may actually be worse for the United States. The Federal Reserve's website lists the sums paid in interest on the US federal debt for the last 24 years. During that period, taxpayers paid a total of $8.2 trillion in interest. That's more than half the total $15 trillion debt, in just 24 years. 


The US federal debt has not been paid off since 1835, so taxpayers could well have paid more than $15 trillion by now in interest. That means our entire federal debt could have been avoided if we had been borrowing from our own government-owned central bank all along, effectively interest-free. And that is probably true for other countries as well. 


To avoid an overwhelming national debt and the forced austerity measures destined to follow, the eurozone's citizens need to get the fire hose of money creation out of the hands of private banks and back into the hands of the people. But how? 


Interestingly, Paragraph 2 of Article 123 of the Lisbon Treaty carves out an exception to the rule that governments cannot borrow from the ECB It says that government-owned banks can borrow on the same terms as privately-owned banks. Many eurozone countries have publicly-owned banks; and as nationalization of insolvent banks looms, they could soon find themselves with many more. 


One solution might be for the publicly-owned banks of eurozone governments to exercise their right to borrow from the ECB at 1.25%, then use that liquidity to buy up the country's debt, or as much of it as does not sell at auction. (The Federal Reserve does this routinely in open market operations in the US.) The government's securities would be stabilized, keeping speculators at bay; and the government would get the interest spread, since it would own the banks and would get the profits back as dividends. 


Taking a stand in the class war
In a November 25 article titled "Goldman Sachs Has Taken Over", Paul Craig Roberts writes:
The European Union, just like everything else, is merely another scheme to concentrate wealth in a few hands at the expense of European citizens, who are destined, like Americans, to be the serfs of the 21st century.
He observes that Mario Draghi, the new president of the European Central Bank, was vice chairman and managing director of Goldman Sachs International, a member of Goldman Sachs' Management Committee, a member of the governing council of the European Central Bank, a member of the board of directors of the Bank for International Settlements, and chairman of the Financial Stability Board. 


Italy's new prime minister, Mario Monti, who was appointed rather than elected, was a member of Goldman Sachs' Board of International Advisers, European chairman of the Trilateral Commission ("a US organization that advances American hegemony over the world"), and a member of the Bilderberg group. 
And Lucas Papademos, an unelected banker who was installed as prime minister of Greece, was vice president of the European Central Bank and a member of America's Trilateral Commission. 


Roberts points to the suspicious fact that the German government was unable to sell 35% of its 10-year bonds at its last auction; yet Germany's economy is in far better shape than that of Italy, which managed to sell all its bonds. Why? Roberts suspects an orchestrated scheme to pressure Germany to back off from its demands to make the banks pay a share of their bailout. 


Europe is in the process of being "structurally readjusted" by a private banking cartel. If its people are to resist this silent conquest, they need to rise up and, using the ballot box and public banks, throw out the new banking hegemony before it is too late. 


Ellen Brown is an attorney and president of the Public Banking Institute. In Web of Debt, her latest of 11 books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are WebofDebt.com and EllenBrown.com. 

sabato 3 dicembre 2011

Shocking truth about the crackdown on OWS


The shocking truth about the crackdown on Occupy


The violent police assaults across the US are no coincidence. Occupy has touched the third rail of our political class's venality
Naomi Wolf: reception, responses, critics
Naomi Wolf's rebuttal of her critics
Brandon Watts lies injured as Occupy Wall Street protesters clash with police in Zuccotti Park
Occupy Wall Street protester Brandon Watts lies injured on the ground after clashes with police over the eviction of OWS from Zuccotti Park. Photograph: Allison Joyce/Getty Images
US citizens of all political persuasions are still reeling from images of unparallelled police brutality in a coordinated crackdown against peaceful OWS protesters in cities across the nation this past week. An elderly woman was pepper-sprayed in the face; the scene of unresisting, supine students at UC Davis being pepper-sprayed by phalanxes of riot police went viral online; images proliferated of young women – targeted seemingly for their gender – screaming, dragged by the hair by police in riot gear; and the pictures of a young man, stunned and bleeding profusely from the head, emerged in the record of the middle-of-the-night clearing of Zuccotti Park.
But just when Americans thought we had the picture – was this crazy police and mayoral overkill, on a municipal level, in many different cities? – the picture darkened. The National Union of Journalists issued a Freedom of Information Act request to investigate possible federal involvement with law enforcement practices that appeared to target journalists. The New York Times reported that "New York cops have arrested, punched, whacked, shoved to the ground and tossed a barrier at reporters and photographers" covering protests. Reporters were asked by NYPD to raise their hands to prove they had credentials: when many dutifully did so, they were taken, upon threat of arrest, away from the story they were covering, and penned far from the site in which the news was unfolding. Other reporters wearing press passes were arrested and roughed up by cops, after being – falsely – informed by police that "It is illegal to take pictures on the sidewalk."
In New York, a state supreme court justice and a New York City council member were beaten up; in Berkeley, California, one of our greatest national poets, Robert Hass, was beaten with batons. The picture darkened still further when Wonkette and Washingtonsblog.com reported that the Mayor of Oakland acknowledged that the Department of Homeland Security had participated in an 18-city mayor conference call advising mayors on "how to suppress" Occupy protests.
To Europeans, the enormity of this breach may not be obvious at first. Our system of government prohibits the creation of a federalised police force, and forbids federal or militarised involvement in municipal peacekeeping.
I noticed that rightwing pundits and politicians on the TV shows on which I was appearing were all on-message against OWS. Journalist Chris Hayes reported on a leaked memo that revealed lobbyists vying for an $850,000 contract to smear Occupy. Message coordination of this kind is impossible without a full-court press at the top. This was clearly not simply a case of a freaked-out mayors', city-by-city municipal overreaction against mess in the parks and cranky campers. As the puzzle pieces fit together, they began to show coordination against OWS at the highest national levels.
Why this massive mobilisation against these not-yet-fully-articulated, unarmed, inchoate people? After all, protesters against the war in Iraq, Tea Party rallies and others have all proceeded without this coordinated crackdown. Is it really the camping? As I write, two hundred young people, with sleeping bags, suitcases and even folding chairs, are still camping out all night and day outside of NBC on public sidewalks – under the benevolent eye of an NYPD cop – awaiting Saturday Night Live tickets, so surely the camping is not the issue. I was still deeply puzzled as to why OWS, this hapless, hopeful band, would call out a violent federal response.
That is, until I found out what it was that OWS actually wanted.
The mainstream media was declaring continually "OWS has no message". Frustrated, I simply asked them. I began soliciting online "What is it you want?" answers from Occupy. In the first 15 minutes, I received 100 answers. These were truly eye-opening.
The No 1 agenda item: get the money out of politics. Most often cited was legislation to blunt the effect of the Citizens United ruling, which lets boundless sums enter the campaign process. No 2: reform the banking system to prevent fraud and manipulation, with the most frequent item being to restore the Glass-Steagall Act – the Depression-era law, done away with by President Clinton, that separates investment banks from commercial banks. This law would correct the conditions for the recent crisis, as investment banks could not take risks for profit that create fake derivatives out of thin air, and wipe out the commercial and savings banks.
No 3 was the most clarifying: draft laws against the little-known loophole that currently allows members of Congress to pass legislation affecting Delaware-based corporations in which they themselves are investors.
When I saw this list – and especially the last agenda item – the scales fell from my eyes. Of course, these unarmed people would be having the shit kicked out of them.
For the terrible insight to take away from news that the Department of Homeland Security coordinated a violent crackdown is that the DHS does not freelance. The DHS cannot say, on its own initiative, "we are going after these scruffy hippies". Rather, DHS is answerable up a chain of command: first, to New York Representative Peter King, head of the House homeland security subcommittee, who naturally is influenced by his fellow congressmen and women's wishes and interests. And the DHS answers directly, above King, to the president (who was conveniently in Australia at the time).
In other words, for the DHS to be on a call with mayors, the logic of its chain of command and accountability implies that congressional overseers, with the blessing of the White House, told the DHS to authorise mayors to order their police forces – pumped up with millions of dollars of hardware and training from the DHS – to make war on peaceful citizens.
But wait: why on earth would Congress advise violent militarised reactions against its own peaceful constituents? The answer is straightforward: in recent years, members of Congress have started entering the system as members of the middle class (or upper middle class) – but they are leaving DC privy to vast personal wealth, as we see from the "scandal" of presidential contender Newt Gingrich's having been paid $1.8m for a few hours' "consulting" to special interests. The inflated fees to lawmakers who turn lobbyists are common knowledge, but the notion that congressmen and women are legislating their own companies' profitsis less widely known – and if the books were to be opened, they would surely reveal corruption on a Wall Street spectrum. Indeed, we do already know that congresspeople are massively profiting from trading on non-public information they have on companies about which they are legislating – a form of insider trading that sent Martha Stewart to jail.
Since Occupy is heavily surveilled and infiltrated, it is likely that the DHS and police informers are aware, before Occupy itself is, what its emerging agenda is going to look like. If legislating away lobbyists' privileges to earn boundless fees once they are close to the legislative process, reforming the banks so they can't suck money out of fake derivatives products, and, most critically, opening the books on a system that allowed members of Congress to profit personally – and immensely – from their own legislation, are two beats away from the grasp of an electorally organised Occupy movement … well, you will call out the troops on stopping that advance.
So, when you connect the dots, properly understood, what happened this week is the first battle in a civil war; a civil war in which, for now, only one side is choosing violence. It is a battle in which members of Congress, with the collusion of the American president, sent violent, organised suppression against the people they are supposed to represent. Occupy has touched the third rail: personal congressional profits streams. Even though they are, as yet, unaware of what the implications of their movement are, those threatened by the stirrings of their dreams of reform are not.
Sadly, Americans this week have come one step closer to being true brothers and sisters of the protesters in Tahrir Square. Like them, our own national leaders, who likely see their own personal wealth under threat from transparency and reform, are now making war upon us.
• This article was amended on 30 November 2011. The original said incorrectly that the Committee to Protect Journalists was one of the organisations that filed a Freedom of Information Act request to investigate possible federal involvement with law enforcement practices that appeared to target journalists. The article also referred to "kale derivatives"; this was a typographical error for "fake derivatives", amended on 1 December 2011