"End of Wall Street Boom" - Must-read history

[JackRiddler]

^^^ See last page for lots of new posts.

Now: Must steal this from other thread!

One in three mortgage holders still underwater



Click above to see a larger, more readable image.
By John W. Schoen, Senior Producer
Got that sinking feeling? Amid signs that the U.S. housing market is finally rising from a long slumber, real estate Web site Zillow reports that homeowners are still under water.

Nearly 16 million homeowners owed more on their mortgages than their home was worth in the first quarter, or nearly one-third of U.S. homeowners with mortgages. That’s a $1.2 trillion hole in the collective home equity of American households.

Despite the temptation to just walk away and mail back the keys, nine of 10 underwater borrowers are making their mortgage and home loan payments on time. Only 10 percent are more than 90 days delinquent.

Still, “negative equity” will continue to weigh on the housing market – and the broader economy – because it sidelines so many potential home buyers. It also puts millions of owners at greater risk of losing their home if the economic recovery stalls, according to Zillow’s chief economist, Stan Humphries.

“If economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures," he said.

For now, the recent bottoming out in home prices seems to be stabilizing the impact of negative equity; the number of underwater homeowners held steady from the fourth quarter of last year and fell slightly from a year ago.

Zillow map: Where homes are underwater

Real estate market conditions vary widely across the country, as does the depth of trouble homeowners find themselves in. Nearly 40 percent of homeowners with a mortgage owe between 1 and 20 percent more than their home is worth. But 15 percent – approximately 2.4 million – owe more than double their home’s market value.

Nevada homeowners have been hardest hit, where two-thirds of all homeowners with a mortgage are underwater. Arizona, with 52 percent, Georgia (46.8 percent), Florida (46.3 percent) and Michigan (41.7 percent) also have high percentages of homeowners with negative equity.
===
http://economywatch.msnbc.msn.com/_news ... water?lite

Related:

http://www.nakedcapitalism.com/2012/04/ ... -wild.html

Monday, April 23, 2012

Michael Olenick: Rentals Gone Wild

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data

… as Winston well knew, it was only four years since Oceania had been at war with Eastasia and in alliance with Eurasia. But that was merely a piece of furtive knowledge, which he happened to possess because his memory was not satisfactorily under control. Officially the change of partners had never happened. Oceania was at war with Eurasia: therefore Oceania had always been at war with Eurasia. The enemy of the moment always represented absolute evil, and it followed that any past or future agreement with him was impossible.


George Orwell, 1984

Situated on one side of one hole of the McDowell Mountain Golf Club, on a cul-de-sac, is a 3BR, 2 bath, 2,000 square foot home for rent for the price of $2,150/mo. On the other side of the hole, on a different cul-de-sac, is a 3BR, 2 bath, 2,005 square foot house for sale with an asking price of $310,000.

Our rental, which doesn’t have a pool, is across the street from a house that sits on the golf course: it seems to have a small back yard that backs up to another house. Our house for sale sits on the golf course and seems to have a very nice pool. Public records indicate the house for sale was last sold to its current owners for $696,000 in February, 2006 whereas the house for rent was last sold for $250,749 in Dec., 1999. I’ve never been to Scottsdale but a quick check of other houses suggests both prices are reasonable.

Some quick math shows that with a 30-year loan at 4% interest the nicer house, on the golf course, would yield a monthly P&I payment of $1,183.99 after a $62,000 down-payment plus closing costs. If a buyer qualifies for a 3-percent down-payment they’d have to raise $9,300 plus closing costs which would yield a monthly payment of $1,435.59.

There’s no ambiguity: even with taxes and insurance taken into account it costs much more to rent a mediocre home in the same neighborhood than to purchase a really nice house.

Though it isn’t marked as such the home for sale screams short-sale; it’s price has been reduced and it’s being sold “As-Is.” There’s a fine chance some servicer, after a dozen rounds of “lost documents” and chain-yanking, will seize and auction it to an investor with a bundle of cash for less than the $310,000 asking price. That’s less than half the price it fetched at the height of the bubble, who will then rent it for a tidy profit while waiting for prices to increase.

News articles have been appearing all over about investors paying cash for properties in bubble-states. Phoenix-area homebuyers squeezed out by investors, reads a piece in the Arizona Republic which notes that “cash is king.” In my own backyard, here in Florida, Miami condos have apparently appreciated 49% in the last year alone according to Bloomberg, which points out about 2/3rds of all buyers pay cash.

Irrational exuberance seems to be back in vogue in the bubble states, never mind shadow inventory figures so high that nobody can grasp exactly what they are. People, probably those kicked out of these same houses, are “willing” to pay a premium for rentals, which may make sense when one considers that even inflated rental prices are still less than their bubble-era mortgage payments.

One theme we hear repeatedly is a lack of “inventory,” homes for sale, which is predictably driving up prices. Remember all that talk about foreclosures driving up home prices? Apparently the foreclosure slowdown caused by Robogate instead seems to have done exactly what Adam Smith said it would leaving bankers, economists, and investors shocked — shocked! — at the recent gains in real-estate prices. Infamous Robosigner Linda Green appears to have done more to increase home prices than every government program combined leaving investors and home flippers, reckless villains in the meltdown narrative just last year, as this year’s heroes.

It’s not only private bankers doing this: government-owned but still “private” Fannie Mae and Freddie Mac are selling properties in bulk to investors. Brazenly ignoring their Congressional mandate to minimize losses by selling to the highest bidder (rather than the friendliest), while working to promote affordable housing, they instead work to empower and subsidize high-volume property flippers and land sharks.

These artificial increases are, of course, unsustainable. I have a friend who works for one of the local towns near me here in South Florida. He’s a city employee but with budget cuts worries about his job, part of which includes boarding up empty houses. Lately, however, the empties often aren’t empty.

It’s not uncommon, he says, to board up a needle-strewn empty one month only to be called back by police to board it up again a month or two later. Except that the new occupants aren’t crack dealers: they’ve often done the servicer’s work and cleaned it up. It’s not unusual, he says, to find that they’ve done basic repairs, and one even installed new appliances. OK – that was unusual; it seems the appliance installer rented the house from a random scam artist, paying a security deposit plus first and last month’s rent. Police, of course, will do nothing.

Banks are obviously manipulating the housing supply in an attempt to reignite a bubble to hide their losses, a strategy that’s temporarily working.

Book publishers were recently sued by the Dept. of Justice for price fixing, using similar practices. But I guess they’re not too big to fail. Indeed, I’m half surprised government hasn’t labeled book publishers a national security threat given the problems we’d face if people read and educated themselves about basic economics.

So here we go again. Backyard investors will soon be saying “it’s different this time,” arguing that those rents will never fall as they sink their retirement savings into the same houses that wiped out the retirement accounts of the previous occupants. But Mr. Smith’s invisible hand always wins in the end, sometimes with a gentle nudge and sometimes with a violent smack. There are too many houses for too few people and no private funding anywhere on the horizon. As long as those basic fundamentals hold true it’s not a question of if, but only when, the rental bubble bursts and how much damage it will inflict on everybody else.

Also related:

http://www.counterpunch.org/2012/04/20/ ... bble/print

Weekend Edition April 20-22, 2012

First Time Homebuyers Tax Credit
Son of the Housing Bubble

by DEAN BAKER


It’s often said that the difference between the powerful and the powerless is that the powerful get to walk away from their mistakes while the powerless suffer the consequences. The first-time homebuyers’ tax credit provides an excellent example of the privilege of the powerful.

The first-time homebuyers tax credit was added to President Obama’s original 2009 stimulus package. It was introduced by Senator Johnny Isakson, a Republican from Georgia, but the proposal quickly gained support from both parties. The bill gave a tax credit equal to 10 percent of a home’s purchase price, up to $8,000, to first time buyers or people who had not owned a home for more than three years. To qualify for the credit, buyers had to close on their purchase by the end of November, 2009, however the credit was extended to buyers who signed a contract by the end of April, 2010.

The ostensible intention of the bill was to stabilize the housing market. At least initially it had this effect. There was a spike in home purchases that showed up clearly in the data by June of 2009. House prices, which had been falling at a rate of close to 2.0 percent a month stabilized and actually began to rise by the late summer of 2009, as buyers tried to close on a house before the deadline for the initial credit. There was a further rise in prices around the end of the extended credit in the spring of 2010.

However once the credit ended, prices resumed their fall. By the end of 2011 they were 8.4 percent below the tax credit induced peak in the spring of 2010. Adjusting for inflation, the decline was more than 12.0 percent.

The problem was that the credit did not lead more people to buy homes, it just caused people who would have bought homes in the second half of 2010 or 2011 to buy their homes earlier. This meant that the price decline that was in process in 2007-2009 was just delayed for a bit more than a year by the tax credit.

This delay allowed homeowners to sell their homes for higher prices than would otherwise have been the case. It also allowed lenders to get back more money on loans that might have otherwise ended with short sales or even defaults. The losers were the people who paid too much for homes, persuaded to get into the market by the tax credit.

This was the same story as the in the original bubble, but then the pushers were the subprime peddlers. In this case the pusher was Congress with its first-time buyer credit.

According to my calculations, the temporary reversal of the price decline transferred between $200 and $350 billion (in 2009 dollars) from buyers to sellers and lenders. Another $15-25 billion went from homebuyers to builders selling new homes for higher prices than would otherwise have been possible.

While this might look like bad policy on its face, it gets worse. The tax credit had the biggest impact on the bottom end of the market, both because this is where first-time buyers are most likely to be buying homes and also an $8,000 credit will have much more impact in the market for $100,000 homes than the market for $500,000 homes.

The price of houses in the bottom third of the market rose substantially in response to the credit, only to plunge later. To take some of the most extreme cases, in Chicago prices of bottom tier homes fell by close to 30 percent from June 2010 to December of 2011, leading to a lose of $50,000 for a buyer at the cutoff of the bottom tier of the market. The drop in Minneapolis was more than 20 percent or more than $30,000. First-time buyers in Atlanta got the biggest hit. House prices for homes in the bottom tier have fallen by close to 50 percent since June of 2010. That is a loss of $70,000 for a house at the cutoff of the bottom tier.

Many of the 11 million underwater homeowners in the country can blame the incentives created by the first-time homebuyers credit for their plight. This was really bad policy, which should have been apparent at the time. Unfortunately, it is only the victims who are suffering, not the promulgators of the policy. Welcome to Washington.


Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This article originally appeared on Huffington Post.

[2012 Countdown]

Did One Of Jamie Dimon's Closest Traders Betray Him And Cost The Firm Billions In Losses?
Submitted by Tyler Durden

As we predicted some time ago, it would be only a matter of time before the story of how one failed prop desk trader, in this case Boaz Weinstein who blew up DB Prop only to be resurrected as the successful head of Saba Capital, took down the London whale Bruno Iksil. Sure enough over the weekend, the NYT penned a largely one-sided if entertaining read: "The Hunch, the Pounce and the Kill" which begins as follows 'It was last November, and Mr. Weinstein, a wunderkind of the New York hedge fund world, had spied something strange across the Atlantic. In an obscure corner of the financial markets, prices seemed out of whack. It didn’t make sense. Mr. Weinstein pounced." The trade of course was the IG 9 -10 year which we have dissected infinitely in the past two days. And while the NYT story makes for great copy, and has a great narrative it is missing one crucial feature, namely what happened in those two crucial months before Boaz was pitching the IG9 trade, and thus during which he was establishing the position (because only those "hedge fund managers" who appear on CNBC discuss their positions if they haven't already built up their max positions). What happened is the following: "Saba Capital Management LP... hired Toby Maitland Hudson from JPMorgan Chase & Co. as the firm’s assets reach $4.1 billion, according to people familiar with the hire. Maitland Hudson, who started at Saba in New York last month, ran JPMorgan’s proprietary trading of derivatives tied to commercial-mortgage bonds and will focus on relative value trades."

So... one wonders, did Boaz hire JPM prop trader Maitland Hudson (who was also formerly a correlation trader at Credit Suisse from 2003 to 2004 per LinkedIn) in what is nothing but a fishing expedition, so well known to the hedge fund industry, where one gets a job and a guarantee in exchange for the firm's entire P&L and positional blotter? Yes, Hudson traded prop CMBS, put with all prop traders sitting next to each other, everyone knew what everyone else was doing, something we discussed back in 2009 when we demanded a seating chart of Goldman's prop and flow traders. In which case did Saba know well in advance of everyone what the biggest CIO prop bet was, allowing it to take appropriate bets? Furthermore, if Saba learned of Iksil's entire blotter by hiring one JPM trader, does he know all other JPM positions as well? And how soon until a "hedge fund syndicate" leaks to the WSJ and Bloomberg at the same time just what other Fed-backstopped market moving JPM positions need the urgent attention of the market?

Of course, all this assumes that Iksil and the CIO had the IG9 trade on in September. Which is possible because as we noted this is around the time the delta hedge started going horribly wrong for JPM and it was forced to start selling IG9 to offset its tranche exposure.

And if indeed the case, the biggest irony here is the implied one: that Jamie Dimon was ultimately betrayed by one of his own - sure he had to go on gardening leave, but with a $100 billion notional position, being out of the market for 1 month does nothing for a positional refresh - it is not like JPM could unwind that position then.

It certainly can't unwind now. And with every day that IG9-10Y leaks wider, it simply means more and more pain for JPM which allowed itself to be taken in by the oldest ruse on Wall Street.

Finally, and this is the $64K question: what other trade secrets of JPM have been leaked to the hedge fund world, which suddenly finds itself with all the leverage in taking on the TBTFs?

--
http://www.zerohedge.com/news/did-one-j ... ons-losses

[JackRiddler]

Yeah, since governments won't do it, who the hell else is going to take down the TBTFs? Only the hedge funds. They have the leverage - they'll borrow the warchest from the very same TBTFs. They possess our society's sole moral sanction - they'll be making a profit! Once the TBTF stocks crash, the same ones who set them up to fail can buy into them, and wait for the inevitable Fed rescue. Evil kills evil! Then both evils get resurrected and the only who's screwed is you.

How many more acts in this highly repetivive play?

[2012 Countdown]

TheEndGame

http://www.scribd.com/doc/95493792/The-End-Game

==

"The End Game: 2012 And 2013 Will Usher In The End" - The Scariest Presentation Ever?

Submitted by Tyler Durden on 05/31/2012

If Raoul Pal was some doomsday spouting windbag, writing in all caps, arbitrarily pasting together disparate charts to create 200 page slideshows, it would be easy to ignore him. He isn't. The founder of Global Macro Investor "previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe... Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes." It is his writing we are concerned about, and specifically his latest presentation, which is, for lack of a better word, the most disturbing and scary forecast of the future of the world we have ever seen....

And we see a lot of those.

Consider this:

full-
http://www.zerohedge.com/news/big-reset ... ation-ever

==

US job market all but stalls in May
2 hours ago
By Patrick Rizzo

The U.S. economy created a scant 69,000 jobs in May, much lower than expected and all but confirming that the U.S. economy is heading into its third consecutive spring slowdown.

The Labor Department reported Friday that the unemployment rate edged up to 8.2 percent, its first increase in 11 months, as American employers fretted over Europe, higher pump prices and the persistent problems in the housing market.

Non-farm payrolls rose by 69,000, the lowest increase in a year and well below the 150,000 jobs that economists had expected. The previous two months' numbers were also revised lower, adding to the concerns about a sputtering recovery.

"It's an awful number. Not only is it awful in its numerical terms, it comes at a very skittish time in the markets because of the European crisis," said Rick Meckler, president of Libertyview Capital Management.

"The hope for the U.S. investors had been that the U.S. economy at least could continue its growth even as Europe was declining. A number like this brings concern about a global slowdown. The time has probably come to for some new government action in the U.S., Europe and China," Meckler said.

The news came after a government report Thursday that showed the U.S. economy expanded at a 1.9 percent annualized rate in the first quarter, below the initial estimate of 2.2 percent and much slower than the 3.0 percent pace clocked in the fourth quarter. Both reports spelled trouble for President Barack Obama as he battles for re-election against former Massachusetts Gov. Mitt Romney.

"Today's weak jobs report is devastating news for American workers and American families," Romney said in a statement shortly after the data was released.

The Obama administration said that while the jobs data was unacceptable, Congress needed to act to help the economy.

--
http://economywatch.msnbc.msn.com/_news ... n-may?lite

[2012 Countdown]

Dow sinks more than 200 points on dismal jobs data
The economy added only 69,000 jobs in May, well below expectations for 150,000. Bonds and gold rally as oil sinks. World markets slump on weakness in China and Europe.

http://money.msn.com/market-news/post.a ... 9ff177c919

[JackRiddler]

Don't have time, but I wanted to see if these two different analyses of the European crisis, from Auerback and Whitney, can be resolved into something consistent that makes sense.

http://www.counterpunch.org/2012/06/01/ ... dust/print

Weekend Edition June 1-3, 2012

The European Bank Run
Another One Bites the Dust

by MARSHALL AUERBACK


It might seem strange to invoke Freddie Mercury and Queen in the context of the eurozone, but it’s the first thought that springs to mind, as Brussels and the increasingly hapless ECB, continue to mismanage their way to financial and economic catastrophe. Yesterday, there were sigs that the Spanish plan to recapitalise Bankia (which came with the implied backing of the ECB’s balance sheet) introduced a potential way out of the eurozone’s metastisizing banking crisis. Sadly, it’s another idea which will never get off the bulletin board, as the ECB bluntly rejected any proposal to use its balance sheet to indirectly fund Bankia, the troubled Spanish lender

So we’re back to floundering and the markets are reacting accordingly. What most investors, experts, and policy makers fail to realize is that this bank run is not simply a Greek problem, which will cease if and when Greece is thrown out of the euro zone. If one looks at the Target 2 balances, the ELA, and the ECB’s lender of last resort facilities, it’s clear that this has extended into all of the periphery countries, including Spain and Italy. It may well end with Germany’s banks effectively serving as the deposit base for all of Europe. See this chart,courtesy of Gavyn Davies

Perversely, the ECB and the European authorities acknowledge none of this and seem to be doing nothing about it. At least not publicly. They are like ostriches with their collective heads in the sand. If anything, “tough talk” from some of them may be escalating the bank run, rather than restoring confidence.

All of the recent talk about euro bonds, fiscal union and higher capital adequacy buffers for the banks are fine in their own right. But they do not deal with the immediate problem of deposit flight. In theory, of all the financial maladies that exist, the one with which the world has the most experience and therefore has developed the most effective tools to address is a bank run. And the experience of the US in the Great Depression illustrates that deposit insurance is a proven cost-effective way of limiting downside risk in a financial meltdown. Bank runs are liquidity problems, not solvency problems. This is important because insolvent institutions rarely fail as long as they are liquid, which generally comes through the provision of the central bank’s lender of last resort facilities.

It is not necessary to restore the solvency of an institution when a bank run develops and incur all the trouble and expense that this entails. Arguably, on any honest accounting of America’s own Systemically Dangerous Institutions, they could well be insolvent, but there are no runs here because the system is backed by a robust system of deposit insurance via the FDIC. All one need do is reassure depositors that they can get their money out of the bank whenever they like. And paradoxically, that backstop makes it less likely that they will participate in a deposit run Moreover, keeping deposits in a bank eliminates the need to liquidate the asset side of the balance sheet at fire sale prices. Even a normally solvent institution can become insolvent if it were forced to liquidate its assets too rapidly.

It is important to recall that central banks were not created to control inflation. They were created to prevent the bank runs that were so catastrophic for capitalist economies in the past. For all of its protestations to the contrary, the ECB has provided this backstop when catastrophe has loomed in the eurozone, but they have done so in a very reticent manner, undermining the effects of their action by publicly proclaiming each program to be absolute the last. So in effect, their “bazooka” becomes no more effective than a water pistol. This is encouraging the bank runs since people logically assume that their may be no one acting as the ultimate guarantor of the eurozone’s solvency.

And let’s be clear: in agreeing to the rules of the euro all members have implicitly committed to this responsibility of the ECB. Even Berlin! The fact the ECB is doing it clandestinely and via such gimmicky programs earlier such as the LTRO to such a vast extent shows that the ECB at some level knows this. Indeed, It may be that the LTRO scheme was hatched precisely because there were signs that the deposit run was in fact spreading to Italy and Spain in the second half of 2011.

But so long as there exists a healthy market skepticism that a strong supranational central bank will provide unlimited lender of last resort facilities to its weaker constituent parts, and so long as the ECB, and certain national central banks, continue to act clandestinely with a lot of threatening hard-line public talk, the runs will continue and the crisis will intensify.

Contrary to what the Germans are now indicating, a eurozone wide system of deposit insurance does NOT require the Germans guaranteeing the obligations of the Greek, Spanish, Portuguese, and Italian governments. This can and should be done by the ECB, as it is the issuer of the euro. It’s also in Germany’s massive interests to have these costs born by the central bank, rather than tainting its own credit rating via persistent bailouts of the eurozone’s weaker constituent parts. Because at the end of the day, Germany is a user of the currency as well and is trapped in the same roach motel as the Italians and the Spanish, even if it occupies the penthouse suite.


MARSHALL AUERBACK is a market analyst and commentator. He is a brainstruster for the Franklin and Eleanor Roosevelt Intitute. He can be reached at MAuer1959@aol.com

http://www.counterpunch.org/2012/06/01/ ... ship/print

Weekend Edition June 1-3, 2012

Unraveling the Welfare Safety Net
Europe Moves Closer to Banktatorship

by MIKE WHITNEY


Yields on 10-year Treasuries plunged to a record-low 1.56 percent on Thursday morning as panicky investors stormed out of European financial assets into German and U.S. government bonds. Deteriorating credit conditions, a flurry of ratings downgrades, and bank runs in Spain and Greece have triggered a flight-to-safety which has pushed the benchmark 10-year below its previous all-time low of 1.67 percent. Falling yields indicate that investors have lost confidence in the ability of EU policymakers to resolve the ongoing debt crisis, particularly as it relates to growing troubles in Greece and Spain.

The present crisis, which is largely the result of excessive credit expansion and poor risk management by EU banks, is being used by the European Commission and the ECB to establish a euro-wide ”banking union” and to impose savage cuts to social programs, health care, and pensions. The response by EU policymakers is a social counterrevolution designed to transform the 17-member monetary union into a permanent ”austerity zone” ruled by corporate elites and big finance. Here’s more from Reuters:

“The eurozone must boost growth and cut debt to regain investor confidence but it should also move towards a banking union, consider eurobonds and the direct recapitalisation of banks from its permanent bailout fund, the European Commission said on Wednesday as it laid out year-long recommendations.”

“A closer integration among the euro area countries in supervisory structures and practices, in cross-border crisis management and burden sharing, towards a “banking union”, would be an important complement to the current structure” of Europe’s economic and monetary union, the Commission said.

“In the same vein, to sever the link between banks and the sovereigns, direct recapitalisation by the European Stability Mechanism (ESM) might be envisaged,” the document said.” (“EU calls for eurozone banking union, direct bank recapitalisations”, IFR, Reuters)

The eurozone’s permanent bailout fund, the ESM, has not yet been ratified by all 17 members and already the European Commission wants to change its mandate to include direct bailouts to banks. The direct funding of underwater banks is a blatant power-grab, an attempt to establish the primacy of banks in the same way that the TARP was used to create Too Big To Fail in the US. TBTF means that the banks have merged with the state and that taxpayers provide blanket guarantees for their survival. Europe is moving fast towards this same model.

German chancellor Angela Merkel is opposed to allowing the ESM to recapitalise Spanish banks, but she’s likely to capitulate if the crisis worsens. If she does give in, then the mismanaged banks will not be required to restructure their debt, wipe out bondholders and shareholders, remove bad assets, and replace management. All of the costs for such a bailout would fall on taxpayers, which is exactly what leaders of the European Commission and the ECB want. At the same time, the deepening crisis will be used to impose more fiscal reforms, which have already pushed unemployment to 20 year highs while submerging most of the south in a severe recession. Here’s more from Reuters:

”….ministers in private are clear about their wish to see European-wide bank deposit guarantee measures put in place quickly to avoid the risk of what could be a catastrophic event. There are signs the European Central Bank favors deposit guarantees. Problems are mounting on other fronts. With the cost of borrowing heading rapidly towards 7 percent and most foreign investors already shunning Spanish debt, the government will find it increasingly difficult to refinance 98 billion euros of debt and find another 52 billion euros to fund its deficit this year. Local banks are barely lending, or offering loans at prohibitively high rates, squeezing companies and increasing the risk of a chain of bankruptcies which could send the economy into a nosedive. The banking system’s total loans to the business sector were 44.6 billion euros at the end of March half of what they were at the end of the boom in 2007, and the contraction continues almost every month, according to Bank of Spain data. Consumers are postponing big purchases and cutting back spending. Spain’s soaring borrowing costs have become a national obsession since the crisis….The government acknowledges that the situation is critical.” (“Spain cries for help: is Berlin listening ?”, Reuters)

The EU Commission and ECB are allowing the crisis to grow to achieve their goal, which is the creation of a fiscal union controlled by banks that has unlimited access to funding and the power to impose policy (“austerity”) through coercion. Here’s a clip from economist Mark Weisbrot who sees the political motive behind the debt crisis:

”I have argued for some time now that the recurring crisis in the eurozone is not driven by financial markets’ demands for austerity in a time of recession, as is commonly asserted. Rather, the primary cause of the crisis and its prolongation is the political agenda of the European authorities – led by the European Central Bank (ECB) and European commission. These authorities (which, if we included the IMF constitute, the “troika” that runs economic policy in the eurozone) want to force political changes, particularly in the weaker economies, that people in these countries would never vote for.” (“Europeans’ economic future has been hijacked by dangerous ideologues”, The Guardian)

It’s all politics. Right wing politics. 100 percent of the reputable economists that have commented on the debt crisis have criticized the way it has been handled, particularly in regards to austerity measures. Do you really think that Merkel or Draghi think that they’re smarter than Stiglitz, Krugman, Reich, Eichengreen, Thoma, Weisbrot, Galbraith, Baker, Roubini, etc. etc? No. Merkel has no background in economics at all, and Draghi was formally an investment banker for Goldman Sachs.

These people are not interested in fixing the EZ economy. They are engaged in a stealth campaign to radically restructure EU society, to unravel to welfare safety net, to roll back the progressive gains of the last century, and to reduce much of the continent to 3rd world poverty. A banking union will further solidify the power of big finance over the individual states, and that is the main objective.


MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

[seemslikeadream]

WRAPUP 3-Central banks prepare for turmoil after Greek vote

By Eva Kuehnen and Sven Egenter

FRANKFURT/LONDON, June 15 (Reuters) - Central banks from Tokyo to London checked their ammunition on Friday in preparation for any turmoil from Greece's election, with the European Central Bank hinting at an interest rate cut and Britain set to open its coffers.

Tensions were high about how to manage the euro zone's debt crisis - epitomized by Greece's bankruptcy and need for international aid - and a rare fight broke out between Germany and France, normally the glue that keeps the bloc together.

German Chancellor Angela Merkel criticised France's economic performance, effectively taking a swipe at Socialist President Francois Hollande who has called for more emphasis on economic growth and less on budget austerity.

The feeling of crisis was real. "We must do everything possible to prevent the euro zone from falling apart," Dutch Prime Minister Mark Rutte said on television.

ECB President Mario Draghi, one of many policymakers gearing up for trouble after Sunday's vote in Greece, said his bank was ready to step in and fund any viable euro zone bank that gets in trouble.

He painted a picture of a deteriorating euro zone economy with no inflation danger - conditions for monetary easing.

"There are serious downside risks here," Draghi told the annual ECB Watchers conference in Frankfurt, two days before the vote that could set Athens on a path out of the euro zone and stoke turmoil in financial markets.

"This risk has to do mostly with the heightened uncertainty."

Japan's top financial diplomat Takehiko Nakao warned that authorities in Tokyo would respond to unwelcome currency moves as appropriate, a clear threat of intervention if investors seeking safety push the yen too high.

It was an echo of strong pledges from the Swiss National Bank on Thursday that it would do what it takes to protect the franc from soaring.

The Bank of England followed up on Thursday's joint announcement with the government of a 100 billion pound ($155 billion) offer of loans to banks by saying it will start next week with a charge of just 0.75 percent.

In the United States, Treasury Under Secretary for International Affairs Lael Brainard offered assurance that Washington has a"tool kit" and stood ready to preserve market confidence.

"Everyone is well prepared, too, in the wake of the elections on Greece, to work together to make sure there is a path forward that is sustainable for Greece and bolsters confidence more broadly," she said.

GETTING READY

Officials from the G20 nations, whose leaders are meeting in Mexico next week, say numerous central banks are preparing to take steps to stabilise financial markets - if needed - by providing liquidity and prevent any credit squeeze.

European Council President Herman Van Rompuy convened a conference call on Friday afternoon with the leaders of Germany, France, Italy and Britain, officially to discuss preparations for the G20 summit, expected to be dominated by the euro zone debt crisis.

Depending on the depth of any turmoil, an emergency meeting of ministers from the Group of Seven developed nations could be held on Monday or Tuesday during the summit in Los Cabos, Mexico, sources said.

The focal point for all is Sunday's repeat general election in Greece, a knife-edge race that could be won by parties vowing to tear up the harsh economic terms that the European Union and International Monetary Fund imposed as conditions of a bailout for the near-bankrupt state.

Such an outcome could drive Greece into default and possibly out of the euro zone, a prospect that could undermine faith in the currency bloc and add to pressure on the finances of bigger economies such as Italy and Spain.

Madrid's borrowing costs rose above 7 percent on Thursday, a level that is widely considered unsustainable. They fell slightly on Friday and European shares gained on expectations of global central bank response. The euro was lower, however.

"At best, we are going to have a situation that is extremely serious on Monday," Swedish Finance Minister Anders Borg told journalists. "In all likelihood, whatever the outcome, we are going to have a government which is going to find it hard to live up to the agreements they (the Greeks) have signed up to."

WORSENING OUTLOOK

In a sign of growing strain between Europe's central powers, Merkel hit out at France in response to Hollande's proposals for joint euro zone bonds and a joint bank deposit guarantee scheme.

"Europe must discuss the growing differences in economic strength between France and Germany," Merkel said.

Responding to Hollande's call for more euro zone solidarity, she said Germany had wanted to give the European Court of Justice the power to reject national budgets that breach EU rules but others had objected. She meant France.

Draghi said the ECB was ready to provide money to solvent banks if they needed it, a clear plan to avoid the kind of credit crunch that occurred during the Lehman Brother crisis in 2008.

"The ECB has the crucial role of providing liquidity to sound bank counterparties in return for adequate collateral. This is what we have done throughout the crisis, faithful to our mandate of maintaining price stability over the medium term - and this is what we will continue to do," he said.

Draghi also said that no euro zone country faces an inflation risk, which is the bank's main concern. That gelled with comments from ECB policymakers a day earlier that the central bank might be open to cutting interest rates.

Britain did not wait for the Greek vote to announce action. Bank of England Governor Mervyn King said on Thursday the country would launch a scheme to provide cheap long-term funding to banks to encourage them to lend to businesses and consumers.

The central bank would also activate an emergency liquidity supply, King said.

King said the euro zone's problems were causing a crisis of confidence in Britain that was leading to a self-reinforcing weaker picture of growth.

"The black cloud has dampened animal spirits so that businesses and households are battening down the hatches to prepare for the storms ahead," he said.

On Friday, the bank said it will hold a first emergency liquidity operation for banks next week with at least 5 billion pounds on offer. Loans would be at a minimum of the Bank Rate, 0.5 percent, plus an additional 25 basis points.

STAND-OFF IN ATHENS

In Athens, the election was seen as too close to call. Alexis Tsipras, leader of the main anti-bailout leftist party SYRIZA, said on Thursday the deal with Greece's international lenders, which has helped push the economy into a depression, would not last beyond the weekend.

"The memorandum of bankruptcy will belong to the past on Monday," Tsipras, who has rapidly emerged from fringe politics to challenge the mainstream for power, told his last campaign rally in Athens.

European leaders, however, have warned that Greece will get no help if it reneges. Officials have also hinted that Athens might be granted more time to achieve its fiscal targets if a new government sticks to the core reforms in the programme.

French President Francois Hollande warned Greek voters about seeking what Tsipras has promised - a future in the euro while ditching the 130-billion-euro ($160 billion) bailout deal sealed earlier this year and its demands for punishing austerity policies.

Hollande said on Greek TV that he wanted the country to stay in the euro, rather than reviving its drachma currency.

"But I have to warn them, because I am a friend of Greece, that if the impression is given that Greece wants to distance itself from its commitments and abandon all prospect of recovery, there will be countries in the euro zone which will prefer to finish with the presence of Greece in the euro zone."

SYRIZA is running neck-and-neck with the mainstream conservatives for Sunday's parliamentary vote, a re-run of an election last month that produced a stalemate in which neither the pro- nor anti-bailout camps was able to form a coalition.

[Bruce Dazzling]

Matt Taibbi and Yves Smith were on Bill Moyers the other day.

[StarmanSkye]

^^^^

http://www.youtube.com/VwcpOithag0

GREAT interview of Taibbi and Smith by Moyers, really helps blow-off the lid on the apparant cover-up collusion between Congress and Wall Street as seen in the incredibly softball questions asked during Congress's recent 'investigation' of banking/finance CEOs -- which underscores how utterly corrupt and criminally-complicit the economic & political systems are. Despite the big banks systematic frauds, they continue to recieve near-zero-cost Govt. bailout funds -- while if individuals commit govt benefit frauds (like foodstamps) they LOSE their eligibility rights.

Smith follows up with a damning indictment of the arrogance of banks which shamelessly disbursed record bonuses the year AFTER their unprecedented massive fiscal failures. How DARE they reward incompetance? It was an incredibly rude, arrogant slap in the face to the public which has borne the costs & consequences of their repeated victimization by the bank's serial cheating & misfeasance.

And then too, Smith underscores that banks are (among) the biggest beneficiaries of govt protection, privelege and services -- which is frankly unconscionable. Taibbi also makes the vital observation that banks have been acting exactly like organized crime racketeers, in skimming, bid-rigging, blackmailing, bribing, outright theft, running protection rackets, strongarming ...

How much is too much?

Goddamn everytime i think about this whole issue of how the big banks and financial service industry have pillaged, defrauded & sabotaged the US (and global) economy it absolutely enrages me.

This is a very important, articulate interview that goes a long way to making some of the complex issues involved understandable to anyone.
Thanx for posting it!

[DrEvil]

What StarMan says. Watch it!

[2012 Countdown]

Young Wall Street Traitor Joins Occupy Wall Street
by Source on June 19, 2012
By John Lawrence
-
Wall Street recruits young, just out of college computer science majors and mathematicians to become “quants” whose skills are used among other things to predict when pension funds are going to make huge trades so that Wall Street can jump in ahead of them and do deals effectively raising the price the pension fund must pay or lowering the profit they might make.

One such young twenty something quant was Alexis Goldstein. Goldstein devised trading software for Deutsche Bank and Merrill Lynch. She has divulged some of Wall Street’s most closely held cultural secrets such as the phrase “rip the client’s face off” which means selling some derivative “solution” to a naive client such as a convent of nuns in Europe at a huge profit to the trader and to Wall Street while convincing the client that it’s the best deal they ever made. Sometimes they refer to these clients as “muppets.”
-

Alexis Goldstein recounted how they talk about “FU money” on Wall St. That was when you had
so much money that you could say “Fuck You” to anybody and not have there be any consequences. You are above everything and are immune from the world.

At one point in my career, I was being recruited by a hedge fund. During the recruitment process, one of my interviewers frankly described the fund’s founder—his boss’s boss—as a “spoiled brat billionaire.” My interviewer related a story about a meeting between the hedge fund and an executive at a company the fund wanted to work with. At one point, the visiting executive made statements the fund founder didn’t like. The founder turned to the visitor and said, “So, you came here just to try and fuck me over?” The visitor quickly stormed out in a rage. But the founder wasn’t satisfied just yet. He followed the man out of the room, into the elevator, shouted the entire ride down, and then yelled at him in the lobby until he finally left the building. When the founder came back upstairs to greet his shaken employees, he said, invigorated and beaming, “Wasn’t that fun?!”

This is Wall Street’s equivalent of the American Dream: to earn enough money so that you can behave in a way that makes the very existence of other people irrelevant.

-
She talks about a culture of admiring cheaters. If you do something against regulations and you only get caught once and pay a small fine, it’s worth it because the end goal is to make money no matter how. Wall Street exemplifies an ethic of profits at any cost. Finally, Goldstein said to herself, “I dont know if I can stay here and still be an ethical person.” So the ones who end up remaining on Wall Street are the ones who have the least ethical scruples, the ones like the Enron traders of a decade ago who don’t mind screwing Grandma out of her pension.

-

full-
http://sandiegofreepress.org/2012/06/yo ... ll-street/

[JackRiddler]

Alexis Goldstein will be at Occupy the Citi on Wednesday!

See
http://www.occupyastorialic.org/blog/20 ... citi-main/

Also, here's an interview that was linked as Yves Smith but goes to David Cay Johnston talking about Viagra and corporate tax evasion:

http://harryshearer.com/article/?auid=jyC4W45985z9r6H


HARRY SHEARER INTERVIEWS DAVID CAY JOHNSTON

HARRY SHEARER: This is Le Show, and it's not tax season, but on the other hand it's always tax season, and I can imagine that that has several people reaching for their dials. But don't do that. A gentleman who has been making taxes and the games played with them comprehensible to mortals like me for many years, going back to his days as the tax writer – he didn't write the tax law, he wrote about it for the New York Times – is now unveiled as a columnist for Reuters, and I wanted to catch up with him because he's an expert on something that's been catching my eye more and more. David Cay Johnston, welcome to Le Show.

DAVID CAY JOHNSTON: Well, thank you for having me on.

HARRY SHEARER: My pleasure. And the subject that I wanted to tackle with you, and it's complex but you're good at making the complex comprehensible, is this whole idea of offshoring, which you've written about. Can you explain in less than half an hour what offshoring is?

DAVID CAY JOHNSTON: It's actually quite simple conceptually. What you do, if you're a business, is you take your expenses here in the United States and then you arrange to collect your profits in a place like the Cayman Islands, Panama, Bermuda, where you will not be taxed on them.

A simple example of that is the Viagra tablet. They sell for about $18 each now, and there's a huge profit in that.

Well, when the researchers at Pfizer were working on what became Viagra, it was intended to be a heart drug, a cardiovascular drug, and some of the male researchers noticed an unusual property. The Pfizer corporation immediately packaged up the information it had at the time, which wasn't worth very much because it was still experimental, and Pfizer America sold it to Pfizer Switzerland, which in turn licensed it to Pfizer Lichtenstein, and every time somebody buys one of these $18 tablets now, the cost of manufacturing them is a tax deduction in the United States and the royalty paid on it for the ownership of the intellectual property is tax-free, collected by Pfizer in its Lichtenstein pocket.

The result is, they pay very little tax, they build up all this money offshore, and you and I have a heavier tax burden.

HARRY SHEARER: I've grasped that sort of basic scenario. But then does that money forever live in Lichtenstein?

DAVID CAY JOHNSTON: Well, seven years ago Congress passed something called the American Jobs Creation Act.

HARRY SHEARER: Well what could be wrong with that?

DAVID CAY JOHNSTON: Right. With a name like that, how could you not be in favor of it, right? And right now there is a proposed new American Jobs Creation Act. And it said, if you have offshore profits, you may repatriate them to the United States and instead of paying the 35% corporate tax, you only have to pay 5¼%.

The biggest beneficiary of this law back then was Pfizer. And Pfizer saved 11 billion dollars in taxes.

And what happened the day after they repatriated this money for very little tax? They started firing people. And they kept firing people until they fired 40,000 people. I'm not sure that they're through firing people at Pfizer. Now, not all companies did this, but they got 1/3 of the benefits and it was clearly an American jobs destruction program.

So the new bill, like the old one, actually doesn't require you to create jobs, despite its title. You can do all sorts of things with the money. You can use it to finance buybacks of your company stock. And executives, of course, like that because if there's less stock out there and the company is buying it, it tends to push up the price of the stock, and that means their stock options are worth more money – all thanks to the generosity of you and I as taxpayers.

HARRY SHEARER: Now, about a year ago there was a piece I think in the Washington Post that went into some detail on this, and I gather this is related to what we're talking about. The Double Irish with a Dutch Sandwich?

DAVID CAY JOHNSTON: (laughs) Harry, there's an enormous number of devices out there. I wrote about ones many years ago. Peter Whoriskey at the Washington Post wrote about some of these. But there's a couple of simple basic concepts. You take advantage of tax treaties.

So, I'll give you one example: An American corporation – I hope I can remember the name of it, that I wrote about years ago – legally moved its headquarters to Bermuda. All they did was rent a mailbox in Bermuda and they pay the Bermuda government $26,000 a year for the privilege of on paper being a Bermuda company. Nobody works there. They have a mailbox. And they pay some local lawyers very nicely. In order to get money to Bermuda, they take advantage of a tax treaty in Barbados, another British island down in the Caribbean. And lo and behold, to take advantage of that tax treaty, once a year the directors of the company must fly to Barbados and hold a meeting.

HARRY SHEARER: Oh the poor things!

DAVID CAY JOHNSTON: And as we all know, that's one of the worst possible places in the world to want to go, say, in the middle of January when your company's headquartered in the Northeast.

HARRY SHEARER: Yeah.

DAVID CAY JOHNSTON: And they pay effectively a 1% tax on their profits.

HARRY SHEARER: Wow. But now this Double Irish with a Dutch Sandwich – Google and a lot of companies who are heavy with intellectual property were domiciling their IP property in Ireland? And then somehow moving it – paying an affiliate in the Netherlands and then went back to Ireland and then ended up in one of the Caribbean islands – was that sort of – ?

DAVID CAY JOHNSTON: Correct. And the Dutch and Dutch banks and German banks like Deutschebank and Swiss banks are all very big players in this.

Harry, here's the fundamental difference between now and when you and I were little children, in terms of taxing businesses. When you and I were born, America was a country of big manufacturing enterprises. There were automobile factories and television factories, and in Southern California where you and I grew up big huge agricultural organizations that had oranges and whatnot.

HARRY SHEARER: And aerospace factories.

DAVID CAY JOHNSTON: Oh yes, aerospace. LA was forever and maybe still is the real center of the American war business. And when a company has a big factory, you can tax that company. It can't get up and move. That's when we made things like that.

But today in America what we principally manufacture are numbers. That's what a software is. It's an algorithm. It's a series of numbers. CDs. All sorts of things are numbers.

The other thing we manufacture are molecules. That's what the drugs we get are.

Well, the ownership of those things, and in the case of the numbers, the representation of them, you can move outside of the U.S. with a push of a button.

And so our tax system still operates as if we lived in a national industrial wage economy, when we now live in a global digital services world. And we need to have a fundamental reform of our tax system.

HARRY SHEARER: You mean like the kinds of meetings that we've been watching in recent weeks between Democrats and Republicans to craft a fundamental reform of our tax system?

DAVID CAY JOHNSTON: First of all, there's no way to fundamentally reform the tax system the way they're doing that. It's an enormous project that will take a number of years to work out. That's a game of chicken.

HARRY SHEARER: Well, chickens got to eat too. We'll be back with more of our interview with David Cay Johnston moments from now, here on Le Show.

* * * *

HARRY SHEARER: Now let's return to our conversation with tax expert David Cay Johnston.

Let's get back to offshoring. If the repatriation bills didn't pass – and I'm not enough of a naïf to think they won't pass this time, as they did last time – but if the companies can't repatriate their profits from, you know, poor old Bermuda or Cayman Islands, are they able to assert operational use of the money, even though it's never been repatriated in the United States?

DAVID CAY JOHNSTON: It's a little complicated. If you have 100 billion dollars in your offshore account, you can't go to your bankers in America and say, "Loan us $100 billion here and we'll pledge that as collateral." That's what you do when you buy your house, right? Let me live in this house and I'll pledge the house as collateral through a mortgage.

But, when you go to your banker and you say, "Look, we need to borrow some money, and by the way, you know perfectly well we have 100 billion dollars sitting over there in this tax haven, and we need to borrow 50 billion dollars to do X or Y, you can get the loan on pretty good terms. So they certainly have access to this money.

HARRY SHEARER: Well, let me just pursue that for a second. If it's so simple to just rent a mailbox and have a subsidiary in Bermuda if you had the telephone number or the e-mail address of a Bermudan lawyer, why couldn't, you know, Jim's Drug Store do that?

DAVID CAY JOHNSTON: Well, because in order to do that you've got to have, first of all, enough scale to afford the costs of it. Many of the tax shelter devices that I've exposed over the years, and they literally have totaled many hundreds of billions of dollars on a 10-year basis – in theory you and I could go do, but to do it you really have to have a huge amount of money. I mean, some of them come with, for example, a million-dollar up-front fee just for an opinion letter from a lawyer that will keep you from going to prison if the government finds out about it.

HARRY SHEARER: That's an expensive Get Out of Jail Free card, in other words.

DAVID CAY JOHNSTON: Exactly.

HARRY SHEARER: So the table stakes are high is what you're saying.

DAVID CAY JOHNSTON: Absolutely. This is not the $2 table at Binion's in Vegas. This is the $5,000 or $50,000 private room at Wynn.

HARRY SHEARER: Yeah, this is the baccarat table upstairs at Wynn.

DAVID CAY JOHNSTON: Yes.

HARRY SHEARER: So do companies get any other benefits from this offshore apparatus that extends around the world, other than tax benefits? Is it just basically done for tax dodging?

DAVID CAY JOHNSTON: It is basically a tax benefit. And the real problem these companies face, Harry, is this: They can't use that money to buy back their stock. And that's what they want to do.

One of the big stories in America that's very important to understand about why your investments are what they are and what's happening to wealth and income is that many, many companies are using most of their profits to buy back their stock, and then they issue to executives an amount of stock equal to what they bought back, and it's a way to pump up executive pay, and it damages all the rest of the investors over a long period of time.

In the case of Pfizer, where they spent their tax savings and their repatriated money almost exclusively to buy back their stock, it didn't work. The price of Pfizer has continued to fall, and I think now it's about half what it was when that Jobs Creation Act, that I call the Jobs Destruction Act, was passed seven years ago.

HARRY SHEARER: You're saying Pfizer needs Viagra for its stock price?

DAVID CAY JOHNSTON: It's exactly – ! That's very good, I wish I'd thought of that, Harry. That's why you're a comedian and I'm an investigative reporter. They need Viagra for their stock.

HARRY SHEARER: But do they get any kind of regulatory benefit from offshoring?

DAVID CAY JOHNSTON: Not really. I mean, one of the challenges I think we face is that corporations in the modern world have become so incredibly complex. What you see as the New York Times or CBS or General Motors – a company with that brand name – in fact internally is hundreds and in some cases thousands of separate little companies. Every corporate jet is its own corporation.

HARRY SHEARER: (laughs) With its own board of directors?

DAVID CAY JOHNSTON: That's – (laughs) well, technically yes.

HARRY SHEARER: Yeah.

DAVID CAY JOHNSTON: That they're internal executives, and...

So these structures, which are all designed to limit liability and limit taxes and are a full employment program for corporate lawyers – regulators really, I believe, you can't expect government-grade regulators to truly understand these things. And the IRS actually admitted, I don't know, in response to some story I wrote when I was at the New York Times, that Enron was so complicated, just that company, Enron, that they really didn't understand what was going on inside Enron.

HARRY SHEARER: Well that's the same thing we heard during the financial crisis, that regulators just couldn't keep up with the complexity of derivatives and of CDOs and CDSs and the pyramid of debt that was being built. Isn't that sort of – ?

DAVID CAY JOHNSTON: Exactly. And the few people who did get it, like Brooksley Born, of course, were immediately slapped down by politicians and told, you know, "Stay out of this, this isn't your business." When in fact that's exactly the point of regulation.

HARRY SHEARER: Yeah. So it is a jobs creation act for corporate lawyers?

DAVID CAY JOHNSTON: Oh, yes. In fact, all of the tax law changes we're making, for the last 30 years we've had this incredible growing remake of the tax code. Every year you may only hear about a few stories in the news – there are thousands of changes being made in the tax law, often to benefit one individual or handful or a small industry or to gain an advantage for one industry against another, and many of them, they don't have a label on them. If you read the thing you would never know what it means unless somebody tips somebody like me off to what it is and shows you how to walk through it. And so that's why we have this just terrible, indefensible mess of a tax code.

HARRY SHEARER: And whom did you anger when you were in school that you inherited the job of reading all this stuff and trying to figure it out?

DAVID CAY JOHNSTON: (laughs) I actually asked for this, Harry. I was, you know, 30 years ago I was the guy at the LA Times who remade the reputation of the LAPD and revealed the worldwide spying they were doing and the brutality and the failure to solve a lot of crimes, but I started to become interested in wealthy people and taxes because of two scandals in California.

One of them was the Hiltons. Conrad Hilton left his fortune to the starving children of the earth, and I exposed how his son Barron arranged to divert the money to himself, and he ultimately got about 2/3 of it.

And then the Keck brothers, as in the Keck telescope, made this deal with then candidate for governor Deukmejian, who was attorney general and who was supposed to be the guardian of charitable trusts, to get a million dollars a year in what I called anti-pauper insurance, anti-poverty insurance, from their father's charitable fund.

And that's when my eyes sort of opened up to, you know, there's more to this tax system than what I've been hearing.

HARRY SHEARER: Than – more to taxes than form 1040.

DAVID CAY JOHNSTON: And, and – yeah. And what comes out of your paycheck. And I began to realize that, you know, there are people who are getting rich off this, and what is it? It's taken me 20 years, and I assure you there's no small number of detractors out there who will tell you I have no idea what I'm doing.

HARRY SHEARER: But you do have a Pulitzer Prize to show for it, right?

DAVID CAY JOHNSTON: I do, and I also have an unusual distinction. I am not a lawyer. In fact, I'm not a college graduate, though I have a college education including graduate school, but I am a professor of law and a professor of graduate accounting at Syracuse University.

HARRY SHEARER: Wow. Without ever having graduated from college.

DAVID CAY JOHNSTON: Yeah. I have a college education –

HARRY SHEARER: Yeah, I understand.

DAVID CAY JOHNSTON: – I went to the University of Chicago graduate school but never got a diploma because I never stayed in one college long enough.

HARRY SHEARER: You and Sarah Palin!

DAVID CAY JOHNSTON: Yep. Not somebody I particularly identify with, I'm sorry.

HARRY SHEARER: You're not usually lumped in with her, but there you go.

David, anything more we need to know about this, this offshoring, that I haven't been smart enough to ask you about, in terms of how it works or whom it benefits and whom it hurts?

DAVID CAY JOHNSTON: Well, here's the other thing I think people should think about, about offshoring. The techniques that are used by wealthy Americans and large corporations offshore are the very same techniques that not nice people who want to blow people up and kill people and undertake revolutions, and people who are in the drug business, as with the incredible explosion, epidemic of murder and violence we're seeing right across the border in Mexico – they use the same techniques.

So we should be thinking about international flows of money in terms not just of tax and tax avoidance and tax evasion, but in terms of stability, in terms of avoiding war and death and conflict, and having a regulatory regime that serves the interests of stability, democracy, and the liberties of the people.

HARRY SHEARER: Thank you so much. I've read you for years and you've done the impossible, which is make me understand this stuff, and I wanted to share that gift with the audience today and it's really a treat to talk to you.

DAVID CAY JOHNSTON: Well, thank you, Harry, very much for having me on.

HARRY SHEARER: Appreciate it.

[StarmanSkye]

"So we should be thinking about international flows of money in terms not just of tax and tax avoidance and tax evasion, but in terms of stability, in terms of avoiding war and death and conflict, and having a regulatory regime that serves the interests of stability, democracy, and the liberties of the people."

Boy, that's IT in a nutshell, parsed down to basic essentials, isn't it?

But of course, the gangster-racketeers who have finangled their way to gaming politics thru exclusive membership in the ruling-elite class have the system locked in their favor and are a dozen-steps ahead of diverting any challenge to their monopoly of power & influence.

That's what makes a Revolution necessary, when government no longer is compatable with the ideals of representative democracy.

[StarmanSkye]

June 23, on CNBC's Financial Program Kudrow Report, the host and BOTH his market 'analyst' guests agreed with him that the US Public and the economy are defacto in thrall to, ie. 'owned by' the Global cartel of Central Banks.

Quite a surprising and unexpectedly frank assessment on mainstream corporate media of just how screwed-up corrupt & dysfunctional the system is -- which naturally gets the more astute wondering Whazzup? with that, what's CNBC's angle here? I hardly think it was an inadvertant blooper-type accident or quicksand-trap the host set-up for his financial anylist speakers, let alone a too-daring honest outburst by Kudrow who was skirting over the 'acceptable boundary' of media-set policy. But maybe it was a calculated risque decision by the network to tease the audience with an officially verbotten discussion & acknowledgement of what most of its audience at least suspects but seldom sees so clearly affirmed.

Might this be the beginning of a trend on at least a few 'radical' and fringe financial news programs, perhaps to test audience reaction? Or part of a broader govt or corporate-coordinated media-wide strategy to begin manipulating public opinion in advance of a next-stage psyop to pull another fast-one on the gullible hope-saturated public -- like getting the public used to the idea that the high-finance wizards and banking franchise are too powerful to buck or dehorn and so govt. needs to make an even greater effort to defer authority to them, possibly with some degree of tacit unofficial power-sharing arrangement?

Just wondering what some of the good folks here think this might be -- a fluke or innocent 'test', giving the public a tiny taste of journalistic integrity, or?
BTW: Vid image is flipped probably to skirt copyright challenge.

*******



0:04 : "Do we all work for Central Bankers? Is this Global Governance at last? Is it One World.. with the Central Bankers in charge?"
1:00 : "To answer your question: We are absolutely slave to Central Banks"
1:15 : "Markets are driven by policy now, they're not driven by market forces"
1:26 : "Fiat currency thats continually watered down.. so the markets go up and we feel good about it"
2:26 : "We are basically beholden to Central Bankers"
2:30 : "..admits (Federal Reserve) are debasing currency and borrowing our way to false prosperity"
2:48 : "Every Central Bank in the world has to devalue their currency"
3:28 : "Free markets will fight back and ultimately they'll win"

[JackRiddler]

June 23, on CNBC's Financial Program Kudrow Report, the host and BOTH his market 'analyst' guests agreed with him that the US Public and the economy are defacto in thrall to, ie. 'owned by' the Global cartel of Central Banks.

[snip]

0:04 : "Do we all work for Central Bankers? Is this Global Governance at last? Is it One World.. with the Central Bankers in charge?"
1:00 : "To answer your question: We are absolutely slave to Central Banks"
1:15 : "Markets are driven by policy now, they're not driven by market forces"
1:26 : "Fiat currency thats continually watered down.. so the markets go up and we feel good about it"
2:26 : "We are basically beholden to Central Bankers"
2:30 : "..admits (Federal Reserve) are debasing currency and borrowing our way to false prosperity"
2:48 : "Every Central Bank in the world has to devalue their currency"
3:28 : "Free markets will fight back and ultimately they'll win"

Austrian propaganda. Panic talk pitched to the right. If the Federal Reserve were following a deflationary, high-interest-rate policy, the same guys would be cheering. In reality, the central banks work for the private banks. The "we" with whom these statements identify is Wall Street and the ruling class, supposedly beleaguered by governments. The next statement would be that Obama is a socialist agent of the New World Order.

Also, this is utter nonsense: "Every Central Bank in the world has to devalue their currency." If someone's devaluing, then the value of something else is going up. Unless, of course, you live in goldbug universe.

And this: "Free markets will fight back and ultimately they'll win." Unfortunately, "free markets" have always been the winners in capitalism, and they produced what we have. These guys are hilarious because you let the behemoths run around unregulated, and they create central banks in their image and capture all the legislatures and regulatory bodies, and then you're like: golly gee, that's not a free market! Except it is. This is it. This is capitalism, this is "free market."

I think what he really means by "free markets" is "bond vigilantes." They'll "fight back" and crush those damned nations for harboring any thoughts of following a course to national development, or avoiding austerity.

It's confusionist nonsense.