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

[JackRiddler]

The Wall Street Thread --- PAGE 50!
A Few Recent Highlights

This thread, dating back to Nov. 16, 2008, compiles finds on the financial crash and economic crisis -- how the system works, its history -- and a blow-by-blow as the capitalist mayhem unfolds globally.

To commemorate the 50th page, here are some highlights from the last 20-odd pages, corresponding to the past year. Below, I'm also reposting the index of earlier RI threads on the crisis. (At the end of this post, don't miss the three excellent short-video summaries of how the 2008 crisis happened, assuming you haven't seen them already).

vanlose kid, SLAD, wombat, justdrew and all others who have been active, if you're so inclined, I invite you also to add links to what you feel were the highlights from the whole thread to this page.


Back on Page 1 we began with what was then the best account I knew of the subprime-to-derivatives-to-crash mechanics, and a piece of great writing by
Michael Lewis, "End of the Wall Street Boom"
http://www.portfolio.com/news-markets/n ... rint=true#


Page 44: Richard Heinberg argues the crisis ultimately has an ecological basis (peak oil), while speculative economics exploit and exacerbate an inevitable collapse.
"Temporary recession or the end of growth?"
viewtopic.php?f=8&t=21495&start=645
original http://www.postcarbon.org/article/13059 ... the-end-of


Page 43: Possibly my favorite collection of stuff on one page.
From Krugman vs. Hudson Smackdown on QE2 through another round of deflation vs. inflation vs. hyperinflation to Taibbi on Goldman and much more.
viewtopic.php?f=8&t=21495&start=630


Scenario for an anti-dollar:
viewtopic.php?f=8&t=21495&start=615#p367537

Probably the most indispensable article for understanding the big picture that I have posted here:

"Alternatives to Economic Globalization"
viewtopic.php?f=8&t=21495&start=600#p366222

Prior to the election in 2008, "recovering trade attorney" Lori Wallach lectured at Iowa State University and outlined what I will coin as the True World Order (The TWO!) of the IMF, WTO, World Bank, NAFTA and other globalization authorities. (No satanic magic required, just capitalism.) Since the crises of the 1970s the transnational corporations and financial capital have commandeered the offices of the powerful states led by the US to impose, through obscure and voluminous "trade agreements" mostly unrelated to trade, a neoliberal policy wish-list on almost all of the world's countries. The system intensifies labor exploitation and suppression, overturns national legal codes, accelerates and practically requires all the familiar economic and ecological disasters, and reduces nations to little more than servile bidders for capital. The point is not only to maximize profit but in effect to require states to guarantee and insure it. In just one hour Wallach reviews the history, structure of the system, global impacts, many typical cases of WTO and NAFTA rulings, and examples of successful resistance. (I was pleased to recall the protests that stopped MAI back in the 1990s.)

The video aired on Iowa PBS in Dec. 2008. I found a transcript in a single block-paragraph, so I edited it to add paragraphs and correct some obvious mistakes.

Full transcript:
viewtopic.php?f=8&t=21495&start=600#p366222

Unfortunately it doesn't contain the slides and I don't feel like capturing them off the video.

So watch.
http://www.iptv.org/video/detail.cfm/31 ... 081220_155

!!!

"Table 7.11 of the National Income and Product Accounts (NIPA) reports that total monetary interest paid in the U.S. economy amounted to $3,240 billion in 2009."

!!!

Mortgage Paper - They Did This On Purpose:

STIGLITZ: We Have To Throw Bankers In Jail Or The Economy Won't Recover

David Harvey: The Enigma of Capital and the Crisis This Time
viewtopic.php?f=8&t=21495&start=540#p355531

Big Picture: US Interest Rates, FF, postwar

"The Best Place in History (for this Commission) Would be No Place At All."

Galbraith suicide-bombs the Catfood Commission:
viewtopic.php?f=8&t=21495&start=525#p346405

Financial Con of the Decade (explained in steps), Dynasty Trusts, "Aristocracy of the Dead"
viewtopic.php?f=8&t=21495&start=525#p348328


A Community Currency Proposal
viewtopic.php?f=8&t=21495&start=510#p345225


A Look at the Goldman-AIG Bustout
viewtopic.php?f=8&t=21495&start=510#p346068

Calvini: "No, this is not about making profit from weapon sales. It's about control."

Eleanor: "Control the flow of weapons, control the conflict?"

Calvini: "No. No No. The IBBC is a bank. Their objective isn't to control the conflict, it's to control the debt that the conflict produces. You see, the real value of a conflict - the true value - is in the debt that it creates. You control the debt, you control everything. You find this upsetting, yes? But this is the very essence of the banking industry, to make us all, whether we be nations or individuals, slaves to debt."

http://kpfa.org/archive/id/61702

"The Financial Hijacking of America" with author, Ellen Brown

Perhaps I’ve said this several times on this thread about other items, but this really is the best summary of the banking system, the financial crisis and its solution you are going to find in a one-hour format.

Ellen Brown spoke in May at the “Understanding Deep Politics” conference in California, and an edited version of her talk was broadcast this week on Guns and Butter. I looked around for video (she used slides) but that’s not out yet and there may be a $10 charge for it when it arrives. No matter, you don't need the charts to understand what she's saying.

Notes on her lecture here:
viewtopic.php?f=8&t=21495&start=480

And now for a trip into mainstream economics.

http://www.cceia.org/resources/transcripts/0244.html
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

I’m posting the following in part because of its compact summaries of the major mainstream economists and their influence to this day.

1) ADAM SMITH: The best results for all will be produced by rational actors pursuing their own interest in a free market. Attempts to interfere in the process will backfire, since central planning cannot account for all factors in the same way as the free market. A free market of profit-seeking private entities in competition will promote efficient division of labor and incentivize “innovation” (always a term that demands definition).

2) KEYNES: Introduced self-reflexivity, as we might call it today. Everyone’s aware of what Smith said, so in speculating what best to do each tries to guess what the market will do, independently of what they think is logical. The market becomes a consciously irrational beast.

3) PIGOU: Introduced the concept of externalities. What matters for a player in market economics is the costs they actually pay for, not the costs that are externalized to nature, the workers, the social sphere, or future generations. E.g., health and environmental costs and obligations pushed off into the future. (Only the state or some other collective mechanism can actually force an accounting of these costs in price, artificially through charges.)

Naturally he leaves out our friend Uncle Karl.

4) MARX: The centrality of class conflict. Actors act according to interest. Imbalance of wealth and power favors the owners of capital, who use their position to exploit the producers much as they can. The state is a tool of capital (nowadays they have merged). Profit is an imperative and the most profitable actors win and push out the rest. Profit rates always run into limits, necessitating more and more losers, monopolies and cartels and ever-greater imbalances, inability to absorb overproduction, perpetual crisis.

Now join me as I read Cassidy for a second time. (You should perhaps in fairness follow the link and read him without my comments.)

How Markets Fail: The Logic of Economic Calamities

John Cassidy , Joanne J. Myers

Continued... full transcript with comments...
viewtopic.php?f=8&t=21495&start=480#p342721

July 2010: The current Harper’s magazine has a story of such importance, about a crime against humanity greater than any other we have discussed on this thread, that I’m going to post a copy here. And I will beg you all to go out and buy the magazine, or better yet, subscribe at harpers.org. ... hundreds of millions of people were unable to afford bread because of yet another bankster perpetual-money-motion scheme that added no value to anything other than their bonuses. It makes the subprime securitization scams look very minor by comparison, except that the subprime scams crashed the rest of the world, with similarly dire consequences in suffering and blood.

FROM HARPER’S MAGAZINE, JULY 2010 $6.99

THE FOOD BUBBLE
How Wall Street Starved Millions and Got Away with It
viewtopic.php?f=8&t=21495&start=480#p342988

Jack Riddler Deconstructs Carmen Reinhart

A second public meeting was held on May 26 of the “National Commission on Fiscal Responsibility,” which is referred to above as the "Kill Social Security Commission" because of its high proportion of members who have long sought to turn the supposed "crisis of entitlements" into the nation’s number one source of panic...

The session started with a genuinely interesting presentation by economist Carmen Reinhart. It was interesting for two reasons. First, because her work with Ken Rogoff attempts a broad, comparative, aggregate analysis of financial crises of different kinds over more than a century’s time. The results are worth a look.

Second, it is interesting because the questions and her responses made clear the limits imposed by ideology and capitalist euphemisms. At times Reinhart appeared not just unwilling but constitutionally unable to state clearly what her own data suggested, insofar as this wasn’t what the panel (or other adherents of mainstream finance beliefs) wanted to hear.

One of the most obvious examples of the euphemistic language is in the contrast between the concept of "financial innovation," which refers to the bankster scams in bubble times that Reinhart and her interlocutors seem freely to accept as the generators of financial crisis; and that of "financial repression," which refers to government policies that roll back "innovation" and regulate what the banksters can do (e.g., limiting how much interest they charge and to what purpose they may lend).

...

Complete transcript of Reinhardt's presentation, with Riddler comments:
viewtopic.php?f=8&t=21495&start=480#p343261

(To create this chart, someone helpfully plugged in the numbers from the table at Federal Reserve, "Flow of Funds Accounts of the United States," Release Z.1, March 2010: Table D3, "Debt Outstanding by Sector" (1978-2009). The full report is at http://www.federalreserve.gov/releases/ ... ent/z1.pdf)

Highly Instructive In A Way No Merely Suspicious Death Can Be

One of the most important underreported and decisive steps in protecting the banksters came with the prosecution by the Justice Department of Bradley Birkenfeld - the whistleblower who single handedly broke open the UBS tax evasion complex (which may bring billions in revenues to the US government).

He's the only person serving time in that case. THIS SENDS A MESSAGE TO ALL OTHER WHISTLEBLOWERS. That's regardless of intent. Why should anyone ever again do what he did?

Continued
viewtopic.php?f=8&t=21495&start=420#p337651

A couple of recent article-equivalents I've written for this thread (like the compulsive maniac I am).

Ratings Agency Launches Renewed Terror Attack, Now On Spain
viewtopic.php?f=8&t=21495&start=465#p339038


My guess: Big US economy crash in December will coincide with release of "Kill Social Security" report
viewtopic.php?f=8&t=21495&start=465#p339334
(This one still applies for the same reasons, but December was too soon. I always do that. The big austerity push is looking more like April.)

Real change will never happen except by socialism. Start by expropriating the banks.

Some news we can all feel good about!!!! The top 400 families are making more than ever!!!!
And the taxes they are paying are at record lows!!!!!!
http://www.democraticunderground.com/di ... id=7775796





It occurred to me while highly informative, these charts on their own may actually cause one to underestimate the wealth and the power of the superrich class!

Continued
viewtopic.php?f=8&t=21495&start=420#p337657

Dean Baker & Michael Hudson
Both Predicted the Subprime Crash in Detail

Baker did so already in 2004 in an article in The Nation. He was right about what was going to happen, and why, and explained why it was obvious and necessary given the policy being followed.

Hudson had a huge cover story in the May 2006 Harper's laying out in the course of 20 highly informative graphics exactly what was about to happen with the housing bubble and mortgage market.

Both stories in full (with graphics) here:
viewtopic.php?f=8&t=21495&start=435#p338004

Historians will tell you there is often a time-lag between the onset of economic disaster and the accumulation of social fury. In act one, the shock of a crisis initially triggers fearful disorientation; the rush for political saviours; instinctive responses of self-protection, but not the organised mobilisation of outrage…

Act two is trickier. Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations. What happened to the march of income, the acquisition of property, the truism that the next generation will live better than the last? The full impact of the overthrow of these assumptions sinks in and engenders a sense of grievance that “Someone Else” must have engineered the common misfortune….At the very least, the survival of a crisis demands ensuring that the fiscal pain is equitably distributed. In the France of 1789, the erstwhile nobility became regular citizens, ended their exemption from the land tax, made a show of abolishing their own privileges, turned in jewellery for the public treasury; while the clergy’s immense estates were auctioned for La Nation. It is too much to expect a bonfire of the bling but in 2010 a pragmatic steward of the nation’s economy needs to beware relying unduly on regressive indirect taxes, especially if levied to impress a bond market with which regular folk feel little connection. At the very least, any emergency budget needs to take stock of this raw sense of popular victimisation and deliver a convincing story about the sharing of burdens. To do otherwise is to guarantee that a bad situation gets very ugly, very fast.

And, finally, this whole post deserves repeating:

William Black - Truthtelling Giant

http://fdlaction.firedoglake.com/2010/0 ... ankruptcy/
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

Bill Black Testimony on Lehman Bankruptcy
By: Jane Hamsher Tuesday April 20, 2010 2:28 pm

FDL Contributor Bill Black scorched everyone with his testimony on the failure of Lehman Brothers before the House Financial Services Committee today.



CHAIRMAN KANJORSKI: And now we’ll hear from Mr. William K. Black, Associate Professor of Economics and Law, the University of Missouri, Kansas City School of Law. Mr. Black.

BILL BLACK: Members of the Committee, thank you.

You asked earlier for a stern regulator, you have one now in front of you. And we need to be blunt. You haven’t heard much bluntness in hours of testimony.

We stopped a nonprime crisis before it became a crisis in 1991 by supervisory actions.

We did it so effectively that people forgot that it even existed, even though it caused several hundred million dollars of losses — but none to the taxpayer. We did it by preemptive litigation, and by supervision. We broke a raging epidemic of accounting control fraud without new legislation in the period of 1984 through 1986.

Legislation would’ve been helpful, we sought legislation, but we didn’t get it. And we were able to stop that because we didn’t simply consider business as usual.

Lehman’s failure is a story in large part of fraud. And it is fraud that begins at the absolute latest in 2001, and that is with their subprime and liars’ loan operations.

Lehman was the leading purveyor of liars’ loans in the world. For most of this decade, studies of liars’ loans show incidence of fraud of 90%. Lehmans sold this to the world, with reps and warranties that there were no such frauds. If you want to know why we have a global crisis, in large part it is before you. But it hasn’t been discussed today, amazingly.

Financial institution leaders are not engaged in risk when they engage in liars’ loans — liars’ loans will cause a failure. They lose money. The only way to make money is to deceive others by selling bad paper, and that will eventually lead to liability and failure as well.

When people cheat you cannot as a regulator continue business as usual. They go into a different category and you must act completely differently as a regulator. What we’ve gotten instead are sad excuses.

The SEC: we’re told they’re only 24 people in their comprehensive program. Who decided how many people there would be in their comprehensive program? Who decided the staffing? The SEC did. To say that we only had 24 people is not to create an excuse — it’s to give an admission of criminal negligence. Except it’s not criminal, because you’re a federal employee.

In the context of the FDIC, Secretary Geithner testified today that this pushed the financial system to the brink of collapse But Chairman Bernanke testified we sent two people to be on site at Lehman. We sent fifty credit people to the largest savings and loan in America. It had 30 billion in assets. We had a whole lot less staff than the Fed does.

We forced out the CEO. We replaced the CEO. We did that not through regulation but because of our leverage as creditors. Now I ask you, who had more leverage as creditors in 2008? The Fed, as compared to the Federal Home Loan Bank of San Francisco, 19 years earlier? Incomprehensible greater leverage in the Fed, and it simply was not used.

Let’s start with the repos. We have known since the Enron in 2001 that this is a common scam, in which every major bank that was approached by Enron agreed to help them deceive creditors and investors by doing these kind of transactions.

And so what happened? There was a proposal in 2004 to stop it. And the regulatory heads — there was an interagency effort — killed it. They came out with something pathetic in 2006, and stalled its implication until 2007, but it ’s meaningless.

We have known for decades that these are frauds. We have known for a decade how to stop them. All of the major regulatory agencies were complicit in that statement, in destroying it. We have a self-fulfilling policy of regulatory failure
because of the leadership in this era.

We have the Fed, the Federal Reserve Bank of New York, finding that this is three card monty. Well what would you do, as a regulator, if you knew that one of the largest enterprises in the world, when the nation is on the brink of economic collapse, is engaged in fraud, three card monty? Would you continue business as usual?

That’s what was done. Oh they met a lot — they say “we only had a nuclear stick.” Sounds like a pretty good stick to use, if you’re on the brink of collapse of the system. But that’s not what the Fed has to do. The Fed is a central bank. Central banks for centuries have gotten rid of the heads of financial institutions. The Bank of England does it with a luncheon. The board of directors are invited. They don’t say “no.” They are sat down.

The head of the Bank of England says “we have lost confidence in the head of your enterprise. We believe Mr. Jones would be an effective replacement. And by 4 o’clock that day, Mr. Jones is running the place. And he has a mandate to clean up all the problems.

Instead, every day that Lehman remained under its leadership, the exposure of the American people to loss grew by hundreds of millions of dollars on average. Auroroa was pumping out up to 30 billion dollars a month in liars’ loans. Losses on those are running roughly 50% to 85 cents on the dollar. It is critical not to do business as usual, to change.

We’ve also heard from Secretary Geithner and Chairman Bernanke — we couldn’t deal with these lenders because we had no authority over them. The Fed had unique authority since 1994 under HOEPA to regulate all mortgage lenders. It finally used it in 2008.

They could’ve stopped Aurora. They could’ve stopped the subprime unit of Lehman that was really a liar’s loan place as well as time went by.

(Kanjorski bangs the gavel)

Thank you very much.

--------

YOU WILL WANT MORE!
90-minute lecture by William Black

https://webdisk.lclark.edu/econ/steinha ... t2010.html

This year's Department of Economics sponsored lecture, The Steinhardt, features Dr. William Black, University of Missouri-Kansas City. It occurred Thursday, Feb. 18th, 2010, 7:30-9:00 PM, at the Council Chamber. The title of Dr. Black's talk is: Why Elite Frauds Cause Recurrent, Intensifying Economic, Political and Moral Crises.

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... In the Holy Name of Thread Consolidation ...


A Roughly Chronological Index
of (Many) Financial Crisis Threads at RI
& Three Introductory Videos

.

Started By You:


Classic started by antiaristo back during the early months of the crash in Oct. 2007, still continuing at 38 pages:
Federal Reserve losing control
viewtopic.php?t=14190&postdays=0&postorder=asc&start=0


NY Governor Spitzer Linked to Prostitution Ring
Jeff: Mon Mar 10, 2008 -- See RI cooperative research unfold! Rough consensus is that he was taken down by an investigation targeted at him (and never mind that he was at fault) to remove possible threat to finance scam players, for example after his column denouncing them in February... scandal coincided with threat of crash that week averted by $200B Fed cash injection.
viewtopic.php?t=16590&start=0


The Vampire, Struck by Sunlight
chlamor: Fri Sep 19, 2008 -- Simplicity and directness would appear to be advisable, as we are all buried in a torrent of irrelevancies, self-justifications, explanations which explain nothing and serve only to confuse everyone (which is precisely their aim), and an unending stream of lies and half-truths. Perhaps it would be easier to think of it in the following terms, for vampire stories are very popular. The economy of the United States is disintegrating in the same way a vampire does when exposed to sunlight, and for the same reason.
viewtopic.php?t=20406


Now is the Time to Resist Wall Street's Shock Doctrine
American Dream: Wed Sep 24, 2008 -- By Naomi Klein... the dumping of private debt into the public coffers is only stage one of the current shock. The second comes when the debt crisis currently being created by this bailout becomes the excuse to privatize social security, lower corporate taxes and cut spending on the poor. A President McCain would embrace these policies willingly. A President Obama would come under huge pressure from the think tanks and the corporate media to abandon his campaign promises and embrace austerity and "free-market stimulus."
viewtopic.php?t=20498


The Plunge Protection Team
chiggerbit: Sun Sep 28, 2008 -- The article that coined the phrase from the Washington Post of Feb. 23, 1997 and an RI discussion: What is its impact today?
viewtopic.php?t=20547


Why Bail? The Banks Have a Gun Pointed at Their Head and Are Threatening to Pull the Trigger
American Dream: September 29, 2008 -- I've heard lots of phony stories... There is no plausible scenario under which the no bailout scenario gives us a Great Depression. There is a more plausible scenario (but highly unlikely) that the bailout will give us a Great Depression. There is no way that the failure to do a bailout will lead to more than a very brief failure of the financial system. We will not lose our modern system of payments.
viewtopic.php?f=8&t=20578


A primer on the Wall Street meltdown
chlamor: Sat Oct 04, 2008 -- By Walden Bello, Focus on the Global South September 25, 2008 -- The Wall Street meltdown is not only due to greed and to the lack of government regulation of a hyperactive sector. It stems from the crisis of overproduction that has plagued global capitalism since the mid-seventies.
viewtopic.php?t=20676


Dow gains 800 points in less than one hour...
MacC: Fri Oct 10, 2008 -- after having lost that amount in the course of the day -- interesting case study showing evidence of high-level market manipulation.
viewtopic.php?t=20812


The $55 trillion question
chlamor: Oct 12, 2008 -- The financial crisis has put a spotlight on the obscure world of credit default swaps - which trade in a vast, unregulated market that most people haven't heard of and even fewer understand.
viewtopic.php?t=20852


Wall Street's 'Disaster Capitalism for Dummies'
Ninakat: Thu Oct 23, 2008 -- What's most amazing about this piece is that it appeared in the mainstream media by one of the regulars at MarketWatch.com.
viewtopic.php?t=21033


The One Hundred Items To Disappear Off The Shelves First
MOST USEFUL OF ALL THREADS -- Thanks to anothershamus: Wed Oct 22, 2008 --
viewtopic.php?t=21020


30 'leading edge' indicators of the coming Great Depression 2
whipstitch: Mon Nov 17, 2008 -- Nice blow-by-blow set of headlines, basically.
viewtopic.php?t=21516


The Two Trillion Dollar Black Hole (articles by Pam Martens & Bloomberg...)
American Dream: Thu Nov 13, 2008 -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return...
viewtopic.php?p=229226
More on same:
http://rigorousintuition.ca/board/viewtopic.php?t=21376


U.S. Pledges Top $7.7 TRILLION to Ease Frozen Credit
brekin: Nov. 24 (Bloomberg) -- The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.
viewtopic.php?t=21625
More on same:
viewtopic.php?t=21619


MADOFF SCHEME.
Byrne: Mon Dec 15, 2008 -- Former chairman of Nasdaq stock exchange arrested. Banks hit worldwide by US 'fraud'
viewtopic.php?t=21938&highlight=madoff


Graphing the economic crisis, notice a trend?
Probably the PRETTIEST, also thanks to anothershamus: Wed Jan 07, 2009 -- Here are some graphs, find some more and post here.
viewtopic.php?t=22279


How many billionaires have to die?
anothershamus: Wed Jan 07, 2009 -- Rash of suicides and accidents hits billionaires.
http://www.rigorousintuition.ca/board2/ ... hp?t=22273


Inflationists vs. Deflationists
ninakat: Mon Jan 19, 2009
viewtopic.php?t=22507
prompted by her long list of competing quotes in this one:
INFLATIONISTS vs. DEFLATIONISTS -- a compendium in progress
viewtopic.php?t=22506


Capitalism's Self-Inflicted Apocalypse (Parenti)
American Dream: Wed Jan 21, 2009
viewtopic.php?t=22538


"Dubai is a giant ponzi scheme"
jingofever: Sun Jan 25, 2009 -- So says "a hot tip from within the international intelligence community":
viewtopic.php?t=22594


C.A. Fitts on "Financial Coup d'Etat"
vigilant: Feb. 02, 2009
viewtopic.php?t=22772


$50 Billion Stolen in Iraq? A 'fraud' bigger than Madoff.
americandream: Feb. 16, 2009 -- Senior US soldiers investigated over missing Iraq reconstruction billions. By Patrick Cockburn in Sulaimaniyah, Northern Iraq
viewtopic.php?t=22927


ALLEN STANFORD
jingofever: Feb. 18, 2009 -- Another ponzi scheme, likely CIA asset/drug money launderer.
viewtopic.php?t=22982


IEA Projections and Peak Oil Politics
viewtopic.php?f=8&t=25812


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Past threads started by me:


Dow at 36,000
Sun Jun 29, 2008
viewtopic.php?t=18960


The Terrorists Still at Ground Zero, 7 World Trade Center
Sun Feb 17, 2008 -- Cockburn article on the ratings scammery and global protection rackets run by Moody's, S&P, Fitch, plus discussion...
viewtopic.php?t=16227&highlight=spitzer


Lehman files! BoA buys Lynch! AIG begging Fed!
Sun Sep 14, 2008 -- All right now on CNBC.... the crash is on TODAY and 90 percent aren't really aware of it.
viewtopic.php?t=20309


Now I'm confused. Inflation, deflation or what?
Fri Sep 19, 2008 -- So, the government kind of just nationalized the financial sector, at any rate took on its debt with plenty of room to use its assets as collateral. You'd think that guarantees US government insolvency, foreign flight from T-bills, ultimately monetization of US government obligations, a dollar crash, and thus strong drivers toward hyperinflation. Possibly, commodity pricing in euros to follow. Meanwhile, the shell game with the real money has ended up with the richest few holding it, as expected. They don't want hyperinflation. In the real world, most people will be crushed under debt, unemployment will rise, consumer demand will fall, thus demand for commodities also. Investment in production will decline. Asset prices, such as on real estate, will continue to decline. This points to deflation. (SNIP etc.) So what's going to happen now? Inflation? Deflation?[/quote]
viewtopic.php?p=216868#216868


Why do bailout supporters hate the dollar?
Oct 01, 2008 --Support the bailout (plunder plan) or credit will immediately freeze forever and the world will promptly end and it will be your fault for having desired a crash and a great depression, you'll all be thrown out into the street, etc. etc. ... The scaremongering has gone entirely to the favor of the plunder plan, with warnings that credit markets will collapse overnight, Sonic won't get credit, etc. etc. But the far likelier fear scenario is that the dollar will receive a deathblow thanks to the bailout.
viewtopic.php?f=8&t=20610


Crisis a cover for mob-style "bust-out" by spooks?
Sun Oct 05, 2008 -- Well, the likely answer is: no shit! Anyone remember this item from Business Week more than two years ago? The White House authorized the intelligence czar (Negroponte at the time) discretion to grant secret waivers on all SEC rules for any company. National security apparently requires money laundering and cooked books. That would give incredible advantages to such a company in its dealings on the closed markets of derivatives. Wonder if any of the heavyweights involved in the current crisis are among the beneficiaries, and what impact this may have had? Was this the beginning of plunder operations in advance of the inevitable crash? Can companies who received such waivers still present cooked books as the derivatives now unwind? Will the DNI have the authority to block investigations of criminal behavior by protected financial players?
viewtopic.php?p=220561#220561


History of Crude Oil Price, 1948-2008
Sat Oct 11, 2008
viewtopic.php?t=20836&highlight=oil+dollar


Hudson sums up crisis, plunder & bank takeover of US
Mon Oct 20, 2008 -- Licensed Kleptocracy for Years to Come -- The ABCs of Paulson's Bailout
viewtopic.php?t=20964


Meet Government Sachs
Wed Oct 22, 2008 -- NYT article on who is running the show, and never mind the spin, just check out at all those names from Goldman Sachs. The Treasury, the New York Federal Reserve and the financial crisis management are all run officially by a tight group of old friends from one company at the center of the crisis, and noting this in public now qualifies you as a "conspiracy theorist." The current CEO claims G-S is actually disadvantaged by having G-S people running the government? Incroyable!
viewtopic.php?t=21000


Dollar rising strongly - what does it mean?
Sat Oct 25, 2008 -- In the midst of a world crisis based on a debt-induced meltdown within the US FIRE sector, capital has been moving out of the securities markets but also showing a net movement into the dollar region, which now stands at 1.26 against the euro. The yen has also risen, however. What's going on?
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NYT: JPM to use bailout cash for acquisitions, not loans
Sat Oct 25, 2008 -- NYT reporter Joe Nocera spied in on JPM Chase conference call. Some juicy new details that may surprise no one here, but it's always good to see the inevitable documented when it happens...
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The Crisis - Three Short Intro Videos:


The Crisis of Credit Visualized
http://crisisofcredit.com/
http://video.google.com/videoplay?docid ... 2410693117
(See the actual site, but you can download it at the google link.)
Blow-by-blow pictogram animation summary (nice music) of the mechanics and money flows from 2002-2008. Most important to you media-addicted animals: FUN! Explains leveraging, CDOs, tranches, etc. Best of all is at the end, how the default wave starts and propagates. Guy did it as his graphics thesis, best I've seen for beginners. Rather unpleasant in its brief depiction of the poor "unreliable" families who get the subprime mortgages. Mostly ignores the deregulation that preceded and touched it all off, or the politics, thus too faux-neutral and respectful about motives and scammery. Which is why we have the following:


How Subprime Works in Stick Figures - Powerpoint
http://docs.google.com/TeamPresent?doci ... pauth=true
45 slides, very funny, ends with a big "fuck you" all around.


The Story of Stuff
http://www.storyofstuff.com/
Can also be downloaded at above as .mov, or below as .mp4.
http://video.google.com/videoplay?docid ... 6656656736
I can't recommend enough, because it summarizes the production economy and its relationship to ecology in 20 minutes, and for our purposes underlines the ultimate cause of all contemporary economic crisis: GROWTH IS NOT ETERNAL. You can't have that on the planet, and you only compound the crisis when you try to substitute for economic growth by the miracle of compound interest.

.

[JackRiddler]

http://www.counterpunch.org/nasser01112011.html

January 11, 2011
The Curse of the First American Austerity Generation
The Student Loan Debt Bubble

By ALAN NASSER and KELLY NORMAN

It was announced last summer that total student loan debt, at $830 billion, now exceeds total US credit card debt, itself bloated to the bubble level of $827 billion. And student loan debt is growing at the rate of $90 billion a year.

There are far fewer students than there are credit card holders. Could there be a student debt bubble at a time when college graduates' jobs and earnings prospects are as gloomy as they have been at any time since the Great Depression?

The data indicate that today's students are saddled with a burden similar to the one currently borne by their parents. Most of these parents have experienced decades of stagnating wages, and have only one asset, home equity. The housing meltdown has caused that resource either to disappear or to turn into a punishing debt load. The younger generation too appears to have mortgaged its future earnings in the form of student loan debt.

The most recent complete statistics cover 2008, when debt was held by 62 percent of students from public universities, 72 percent from private nonprofit schools, and a whopping 96 percent from private for-profit ("proprietary") schools.

For-profit school enrollment is growing faster than enrollment at public schools, and a growing percentage of students attending for-profit schools represent holders of debt likely to default. In order to get a better handle on the dynamics of student debt growth, it is helpful to sketch the connection between the current crisis in public education and the recent rapid growth of the for-profits.

Crisis of Public Education Precipitates Private Growth

Since the most common advise to the unemployed is to "get a college education", and tuition at public institutions is at least half or less than private-school rates, public higher education institutions have been swamped with an influx of out of work adults. This has resulted in enrollment gluts at many state colleges. At the same time, tuition is increasing just when household income and hence the affordability of higher education are declining.

Here is how this scenario unfolds:

With few exceptions, state-funded colleges and universities set tuition rates based on policy and budget decisions made by state legislatures. High and increasing unemployment and declining wages have resulted in declining public revenues. This in turn leads to budget cut directives from legislative bodies to public higher education institutions, often accompanied by the authority to increase tuition.

For example, a 14 percent budget cut to an institution may be "offset" by giving the governing boards of the school the authority to raise tuition by a maximum of 7 percent. Often the imbalance created by a cut to the base budget and an increase in tuition is made worse by limits on enrollment. A state legislative body may cut an institution's budget, allow it to increase tuition, but not provide per-student funding increases to keep pace with the accelerating enrollment demand.

This affects tuition rates at for-profit institutions. More students who would otherwise attend a state institution or a private, non-profit school are finding themselves without a seat at over-enrolled campuses. More students are pushed into the online and for-profit sectors, and proprietary schools sieze the day by inflating their tuition costs.

Because online colleges lack the enrollment constraints of a physical campus, they are uniquely poised to capture huge proportions of the growing higher education market by starting classes in non-traditional intervals (the University of Phoenix, for example, begins its online classes on a 5-week rolling basis) and without regard to space, charging ever-increasing rates to students who have no other choice.

Instead of waiting for an admissions decision or a financial aid package from a traditional college, students can enroll immediately online. This ease of use and accessibility to any student has allowed the for-profit sector to capture a growing portion of the higher education market and a growing proportion of education-targeted public money. Enrollments at for-profit colleges have increased in the last ten years by 225 percent, far outpacing public institution increases.

Thus, the neoliberal assault on public education not only tends to push more students into private institutions, it also generates upward pressure on tuition costs. This results in growing pressure on enrollees at proprietary schools to take on student loan debt.

How Healthy Are Student Loans?

The extraordinary growth of student debt paralleled the bubble years, from the beginnings of the dot.com bubble in the mid-1990s to the bursting of the housing bubble. From 1994 to 2008, average debt levels for graduating seniors more than doubled to $23,200, according to The Student Loan Project, a nonprofit research and policy organization. More than 10 percent of those completing their bachelor's degree are now saddled with over $40,000 in debt.

Are student loans as financially problematic as the junk mortgage securities still held by the biggest banks? That depends on how those loans were rated and the ability of the borrower to repay.

In the build-up to the housing crisis, the major ratings agencies used by the biggest banks gave high ratings to mortgage-backed securities that were in fact toxic. A similar pattern is evident in student loans.

The health of student loans is officially assessed by the "cohort-default rate," a supposedly reliable predictor of the likelihood that borrowers will default. But the cohort-default rate only measures the rate of defaults during the first two years of repayment. Defaults that occur after two years are not tracked by the Department of Education for institutional financial aid eligibility. Nor do government loans require credit checks or other types of regard for whether a student will be able to repay the loans.

There is about $830 billion in total outstanding federal and private student-loan debt. Only 40 percent of that debt is actively being repaid. The rest is in default, or in deferment (when a student requests temporary postponement of payment because of economic hardship), which means payments and interest are halted, or in forbearance. Interest on government loans is suspended during deferment, but continues to accrue on private loans.

As tuitions increase, loan amounts increase; private loan interest rates have reached highs of 20 percent. Add that to a deeply troubled economy and dismal job market, and we have the full trappings of a major bubble. As it goes with contemporary bubbles, when the loans go into default, taxpayers will be forced to pick up the tab, since just about all loans made before July 2010 are backed by the federal government.

Of course the usual suspects are among the top private lenders: Citigroup, Wells Fargo and JP Morgan-Chase.

Financial Aid and Subprime Lending

A higher percentage of students enrolled at private, for-profit ("proprietary") schools hold education debt (96 percent) than students at public colleges and universities or students attending private non-profits.

Two out of every five students enrolled at proprietary schools are in default on their education loans 15 years after the loans were issued.
In spite of this high extended default rate, for-profit colleges are in no danger of losing their access to federal financial aid because, as we have seen, the Department of Education does not record defaults after the first two years of repayment.

Nor have the disturbing findings of recent Congressional hearings on the recruitment techniques of proprietary colleges jeopardized these schools'
access to federal funds. The hearings displayed footage from an undercover investigation showing admissions staff at proprietary schools using recruitment techniques explicitly forbidden by the National Association of College Admissions Counselors. Admissions and enrollment employees are also shown misrepresenting the costs of an education, the graduation and employment rates of students, and the accreditation status of institutions.

These deceptions increase the likelihood that graduates of for-profits will have special difficulties repaying their loans, since the majority enrolled at these schools are low-income students. (Forbes magazine, Oct. 26, 2010, "When For-Profits Target Low-Income Students", Arnold L. Mitchem)

A credit score is not required for federal loan eligibility. Neither is information regarding income, assets, or employment. Borrowing is still encouraged in the face of strong evidence that the likelihood of default is high.

Loaning money to anyone without prime qualifications was "subprime lending" during the ballooning of the housing bubble, when banks were enticing otherwise ineligible candidates to buy houses they could not afford.

Shouldn't easy lending without adequate credit checks to college students with insecure credit also be considered "subprime lending"?

Government Bias Toward Private Education

In 2009 President Obama initially pledged $12 billion in stimulus funds to help community colleges through the economic crisis. Last March that sum was slashed to $2 billion. The umpteenth example of a broken Obama promise.

We see a drastic cut in federal stimulus funding even as state funding for higher education is expected to fall even further. At a time when community colleges across the country are overflowing with returning students seeking new skills and high school graduates who can't afford ever-rising tuition rates at many four-year schools, the majority of education-bound stimulus funds are going to for-profit institutions, not community colleges. (Our home state of Washington illustrates the general direction of the administration's "reform" of higher education: for the first time in the state's history, public funds no longer pay the majority of higher education costs.)

Apart from stimulus funding, overall government student aid is disproportionately aimed at those attending proprietary schools. Nearly 25 percent of federal financial aid is spent on students attending for-profit colleges, even though these colleges enroll less than 10 percent of the nation's college students.

Proprietary schools now rely on federal financial aid – PELL Grants and federal loans – as their primary source of revenue.

Even the most profitable proprietary schools receive the majority of their funding from federal financial aid programs. According to a U.S.-Senate-sponsored study, The University of Phoenix, the largest private university in North America, receives 90 percent of its funding from the federal government. Not-so-incidentally, proprietary schools are among the largest donors to Education Committee members.

Proponents of the system defend it by pointing out that public colleges also rely on taxpayer subsidies for the majority of their revenue. But this overlooks a decisive difference: what proprietary schools don't have that public schools do, is an obligation as a state agency to deliver a high quality education to its students. Instead, proprietary schools have a legal fiduciary duty to their stockholders, like any other for-profit enterprise. As a result, according to a PBS Frontline investigation, the sector spends 20 to 25 percent of its budget on marketing and only 10 to 20 percent on faculty.

The Track Record of For-Profit Colleges

The track record of for-profit colleges does not justify their disproportionate share of government largesse.

Drop out rates are higher than they are at public and non-proprietary private schools, often as high as 50 percent. Irrespective of whether a student drops out, the for-profit college has already pocketed tuition and fees. The student is left still burdened with a substantial loan obligation.

As for graduation rates, a 2008 report by the National Center for Education Statistics puts the graduation rate for students at for-profits beginning their studies in 2002 at 22 percent, an 11 percent drop from students enrolling in 2000. The same cohort attending public and private non-profits graduated at rates of roughly 54 percent and 64 percent, respectively. Graduate or not, the debt burden remains.

Suppose the student either seeks to transfer to a public or another non-profit, or completes her studies and enters the job market with a proprietary degree? Many students assume that credits are transferable to a public or nonprofit, but they aren't, so they pay twice to attain their degree. The school holds out the lure of high-paying jobs upon graduation, but either no such jobs exist or they require education or experience beyond what the school provided. Congressional studies have shown that the earnings of proprietary graduates are the lowest of all graduates. According to a 2009 Bloomberg report on salary comparisons between traditional and online degree-holders, graduates with bachelor's degrees from traditional colleges earn a median salary of $55,200, while those with degrees from the University of Phoenix earn only $50,500, and $43,100 from for-profit American Intercontinental.

On top of these earnings and job-prospect disadvantages, proprietary graduates bear the heaviest academic debt burden. The Education Department reports that 43 percent of those who default on student loans attended for-profit schools, even though only 26 percent of borrowers attended such schools. Many of those who attended for-profits don't earn enough to repay their loans. It's not uncommon for a student who either paid out of pocket or took out a loan for a $30,000 degree to find herself stuck in a $22,000 a year job. This only adds insult to injury: a Government Accounting Office study reports that "A student interested in a massage therapy certificate costing $14,000 at a for-profit college was told that the program was a good value. However, the same certificate from a local community college cost $520.00." (GAO, "For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices", Nov. 30, 2010)

Paying back student loans out of low income and over a long period of time can rule out the possibility of making other financial investments required for the vanishing American Dream, such as buying a house, or saving for retirement or for one's children's education.

All in all, the for-profits' track record is more than dismaying. In too many cases, students leave proprietary schools in worse financial shape than they were in before they enrolled. The problem is not limited to proprietary graduates: this generation of college grads now possesses more debt than opportunity.

You might think that the unflattering record of for-profit schools would restrain government gift-giving. After all, the Obama administration's current education policy would punish "underperforming" public schools and teachers. But these policies target the public sector exclusively: the aim is to undermine teachers' unions and encourage privatization by boosting charter schools. It is entirely consistent with Washington's agenda that the dismal performance of proprietary schools does not jeopardize their future access to public financial aid funds - as long as the student does not default on their loan within two years of dropping out.

The Career College Association, the lobbying arm of publicly traded colleges, finds all this irrelevant. It relies on a different type of indicator from the rest of the higher education sector to measure the success of its for-profit colleges: stock prices. Remarkable. We see the disproportionate flourishing of "schools" whose primary concern has nothing to do with education.

The Private Lenders: Securitization As Usual

The two largest holders of student loans are SLM Corp (SLM) and Student Loan Corp (STU), a subsidiary of Citigroup. SLM -Sallie Mae- was originated as a Government Sponsored Enterprise (GSE) in 1972. The idea was to prime it for eventual privatization. In 2002 Sallie Mae shed the its GSE status and became a subsidiary of the Delaware-chartered publicly traded holding company SLM Holding Corporation. Finally, in 2004 the company officially terminated its ties to the federal government.

As the nation's largest single private provider of student loan funding, SLM has to date lent to more than 31 million students. In 2009 it lent approximately $6.3 billion in private loans and between $5.5 billion and $6 billion in 2010.

In the 1990s, well before its full privatization, Sallie's operations were increasingly swept into the financialization of the economy. It jumped whole hog onto the securitization bandwagon, lumping together and repackaging a large portion of its loans and selling them as bonds to investors. SLM created and marketed its own species of asset-backed securitized student loans, Student Loan Asset Backed Securities (SLABS). When derivatives trading went through the roof following the 1998 repeal of Glass-Steagal, increasingly diverse tranches of Sallie-Mae-backed SLABS entered the market. The company is now also buying and selling the obligations of state and nonprofit educational-loan agencies.

Student loans were included in the same securities that are blamed for the triggering of the financial crisis, and financial products containing these same student loans continue to be traded to this day. The health of these tranches and securities is, as we have seen, highly suspect.

SLM's risk was minimized as long as the feds guaranteed its loans. But as part of last March's health care legislation, starting in July 2010 federally subsidized education loans were no longer available to private lenders. What do education loans have to do with health care? Since the government took federal loan originations in-house, making them available only through the Department of Education, it no longer has to pay hefty fees (acting as the guarantee) to private banks. The Obama administration expects to save $68 billion between now and 2020. $19 billion of this will be used to pay for the $940 billion health care bill.

While there is scant relief for student borrowers, private banks manage to survive apparent setbacks just fine. SLM will do quite well despite the withdrawal of government backing. The company anticipated the change in government lending policy by executing an ingenious trick as a borrower. Early last year it made its insurance subsidiary a member of the Federal Home Loan Bank of Des Moines, which agreed to lend to big-borrower SLM at the extraordinary rate of .23 percent. And anyhow, subsidized loans are almost always insufficient to cover the entire cost of a college degree. For a while the student gets to enjoy the benefits of a government loan. Interest rates are lower and during deferment interest does not accrue. But eventually many students must also take out a private loan, usually in larger amounts and with higher interest rates which continue to mount during deferment.

The Worst-Case Scenario: Going Bankrupt

Credit card and even gambling debts can be discharged in bankruptcy. But ditching a student loan is virtually impossible, especially once a collection agency gets involved. Although lenders may trim payments, getting fees or principals waived seldom happens.

The Wall Street Journal ran a revealing report on the kinds of situation that can lead to financial catastrophe for a student borrower. ("The $550,000 Student Loan Burden: As Default Rates on Borrowing for Higher Education Rise, Some Borrowers See No Way Out", Feb. 13, 2010) Here is an excerpt illustrating the toll that forced indebtedness can take on the student borrower:

"When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

Although Bisutti's debt load is unusual, her experience having problems repaying isn't. Emmanuel Tellez's mother is a laid-off factory worker, and $120 from her $300 unemployment checks is garnished to pay the federal student loan she took out for her son.

By the time Tellez graduated in 2008, he had $50,000 of his own debt in loans issued by SLM... In December, he was laid off from his $29,000-a-year job in Boston and defaulted.

Heather Ehmke of Oakland, Calif., renegotiated the terms of her subprime mortgage after her home was foreclosed. But even after filing for bankruptcy, she says she couldn't get Sallie Mae, one of her lenders, to adjust the terms on her student loan. After 14 years with patches of deferment and forbearance, the loan has increased from $28,000 to more than $90,000. Her monthly payments jumped from $230 to $816. Last month, her petition for undue hardship on the loans was dismissed."

The First Austerity Generation's Job Prospects

Most of those affected by the meltdown of 2008 had completed their education and were either employed or retired. The student loan debt bubble signals a generation that enters the work of paid work cursed with what is more likely than not to be a life of permanent indebtedness and low wages.

The current cohort of indebted students will face earnings prospects far poorer than what job seekers could expect during the period of the longest wave of sustained economic growth and the highest wages in US history, 1949-1973. The present generation will experience the indefinite extension of Reagan-to-Obama low wage neoliberalism.

According to the National Association of Colleges and Employers more than 50 percent of all 2007 college graduates who had applied for a job had received an offer by graduation day. In 2008, that percentage tumbled to 26 percent, and to less than 20 percent in 2009. And a college education has been producing diminishing returns. For while a college degree does tend to correlate with a relatively high income, during the last eight to ten years the median income of highly educated Americans has been declining.

Every two years the Bureau of Labor Statistics issues projections of how many jobs will be added in the key occupational categories over the next ten years. The projected future jobs picture indicates that the grim employment situation is not merely a temporary reflection of the current unusually severe downturn. But you miss this if you get your news only from mainstream sources. The New York Times's report on the most recent BLS projections, released in December 2009, paints an unduly optimistic picture of future employment opportunities. (Catherine Rampell, "Where the Jobs Will Be", Dec. 15, 2009) Here is how a misleading report can be produced without falsifying the facts:

BLS releases two job projections, on the Fastest Growing Occupations and on Occupations With the Largest Job Growth. The Times focuses on the former, where the two fastest growing occupations, biomedical engineers and network systems and data communications analysts, require a college degree. The Times echoes BLS's comment that occupations requiring postsecondary (a bachelor's degree or higher) credentials will grow fastest. This is redolent of the ideology of the "New Economy" : the US is turning into a society of professionals and knowledge workers, and the key to success in this upgraded economy is a college education.

But we need more information, about the degree requirements of the total number of job categories listed in both projections, and about the number of new jobs expected to materialize in each projection.

Of the total jobs listed, only one of five require a postsecondary degree. By far the fastest growing category is biomedical engineers, projected to grow 72.02 percent, from 16,000 in 2008 to 27, 600 in 2018. That's 11,600 new jobs. Is that a lot? Well, compared to what? The percentage figure, 72.02, is high, but what about the number of new jobs? Let's compare that Fastest Growing occupation with retail salespersons, the occupation fifth down on the Largest Growth list. Retail sales workers will grow by a mere 8.35 percent. But that amounts to almost 375,000 new jobs, an increase from 4,489,000 jobs in 2008 to 4,863,000 jobs in 2018. Compare that to the 11,600 new jobs at the top of the Fastest Growing list. Just do the simple math on all the categories on both lists: the great majority of new jobs will be low-paying.

This is a nation of knowledge workers? Most new jobs will offer the kind of wage we would expect from an economy in which, according to one of Obama's most repeated mantras, "we" will "consume less and export more". BLS avers as much when it projects that fewer than 12 million of the 51 million "job openings due to growth and replacement needs" will require a bachelor's degree.

Our first austerity generation will be in debt to its teeth and stuck with low-wage work. The relative penury will require more debt still. Michael Hudson calls this debt peonage. Not to sound like a broken record, but we need to get off our asses and begin taking seriously political organization that goes beyond the ballot box. Not that voting is entirely irrelevant. We can imitate those activists -bankers, hedge fund managers, and corporate CEOs- who stoutly refuse to support, financially or at the ballot box, candidates who will not give them what they want. These days, those folks always get what they want. Liberals and too many Leftists have not learned that elementary political lesson.


Alan Nasser is professor emeritus of Political Economy at The Evergreen State College in Olympia, Washington. He can be reached at nassera@evergreen.edu.

Kelly Norman is an independent researcher, a graduate student in Public Administration, and works for Admissions at Evergreen.

[JackRiddler]

http://www.twnside.org.sg/title2/resurg ... over01.htm

TWN | THIRD WORLD RESURGENCE | ARCHIVE
THIRD WORLD RESURGENCE

Massive bank and hedge fund speculation causes food prices to soar

The recent steep rise in wheat prices has raised fears of another global food crisis. As Tim Jones explains, it is the banks and hedge funds speculating on the price of food that are primarily responsible for this spike in prices.


IN just one month in July 2010, the price of wheat increased by 60%. The huge increase in the price has already led to people across the world paying more for the staple food. The sudden change in the price of wheat has had knock-on effects on other crops. The global maize price increased by 40% between the start of July and the end of August.

At the end of August, demonstrations against rising food and fuel prices were held in Maputo, capital of Mozambique. 'I can hardly feed myself. I will join the protest because I'm outraged by this high cost of living,' said Nelfa Temoteo, who lives in Maputo's crowded Malhazine suburb. Protesters particularly complained of a sharp increase in the price of bread made from wheat. Mozambique tends to import between 200,000 and 400,000 tonnes of wheat a year.

Drought and the consequent fall in Russia's wheat crop were quickly blamed for the spike in prices. Yet the United Nations Food and Agriculture Organisation (FAO) pointed out that despite events in Russia there was still plenty of wheat in the world.1 The US in particular was producing a bumper wheat harvest. Hussein Allidina, head of commodity research at the bank Morgan Stanley, said: 'Fundamentals do not seem to support the rally, with inventories, especially in the US, abundant and poised to increase with the arrival of a good spring wheat crop.'2

The real reason for the large and rapid increase in wheat price lay in banks trading in exchanges in Chicago, US. Away from the wildfires of Russia, hot money flooded into the wheat markets in July 2010, betting on an increase in prices. Dan Basse of AgResource Co. in Chicago said historically low US interest rates were helping to fuel massive speculation in wheat contracts as financial institutions 'look for investable markets' amid concerns that Western economies might suffer a double-dip recession in the coming months.

The ugly face of banks and hedge funds speculating on the price of food had raised its head once again.

Speculation in derivatives

Financial speculation in food began in the 1800s when so-called 'futures contracts' were created for agricultural products traded in the United States. These contracts allow farmers to agree a guaranteed price for their next harvest well in advance, giving them greater certainty of income when planting crops.

However, in the early 1900s futures contracts started to be bought and sold by financial speculators who had nothing to do with the physical production, processing or retailing of food. This activity began to affect the actual prices of foodstuffs, causing them to become more volatile and to rise and fall more sharply. Following the Wall Street crash, the Roosevelt government in the United States recognised this problem, and introduced regulations to prevent excessive speculation.

In the 1990s and early 2000s these regulations were weakened in the face of intense lobbying by the financial industry. For instance, in 1991 lobbying by Goldman Sachs exempted many commodity speculators from the limits on trading created in the 1930s. At the same time, new and more complicated contracts, collectively known as derivatives, were created based on the price of food. Derivatives in food, just as in property and shares, expanded massively. Further deregulation in 2000 exempted many commodity derivatives from any regulation at all.

The number of derivatives contracts in commodities increased by more than 500% between 2002 and mid-2008. The US subprime mortgage crisis and following credit crunch led many financiers to take their money out of property and put it into commodities instead. The fuel and food price spikes of 2007 and 2008 were born.

From early 2007 to the middle of 2008 there was a huge spike in food prices. Over the period there was more than an 80% increase in the price of wheat on world markets. The price of maize similarly shot up by almost 90%. Prices then fell rapidly in a matter of weeks in the second half of 2008. There are various reasons to explain a general increase in food prices over this time. But only financial speculation can explain the extent of the wild swings in the price of food.

Jayati Ghosh, Professor of Economics at Jawaharlal Nehru University, New Delhi, says: 'From about late 2006, a lot of financial firms -banks and hedge funds and others -realised that there was really no more profit to be made in the US housing market, and they were looking for new avenues of investment. Commodities became one of the big ones - food, minerals, gold, oil. And so you had more and more of this financial activity entering these activities, and you find that the price then starts rising. And once, of course, the price starts rising a little bit, then it becomes more and more profitable for others to enter. So what was a trickle in late 2006 becomes a flood from early 2007.'3

Many investors such as pension funds have made little if any return on the money they have put into commodity markets. The main beneficiaries have been banks which charge fees for arranging derivative contracts. They then use the information gained from their central role in commodities trading to gamble with their own money, often betting against their own clients. The World Development Movement has estimated that Goldman Sachs made a $1 billion profit in 2009 from speculating on food.

The UN Commission of Experts on Reforms of the International Monetary System, chaired by Joseph Stiglitz, concluded that: 'In the period before the outbreak of the [financial] crisis, inflation spread from financial asset prices to petroleum, food, and other commodities, partly as a result of their becoming financial asset classes subject to financial investment and speculation.'4

This analysis is widely shared within the financial industry itself. As early as April 2006, Merrill Lynch estimated that speculation was causing commodity prices to trade at 50% higher than if they were based on fundamental supply and demand alone.5 At the start of the 2007 and 2008 food price boom, one hedge fund manager told the Financial Times: 'There is so much investment money coming into commodity markets right now that it almost does not matter what the fundamentals are doing. The common theme for why all these commodity prices are higher is the substantial increase in fund flow into these markets, which are not big enough to withstand the increase in funds without pushing up prices.'6

The impacts of commodity speculation

The increase in the price of food has been disastrous for people across the world. There were 75 million more hungry people in 2007 and a further 40 million in 2008.7 The latest estimate by FAO in June 2009 was that over one billion people are now chronically malnourished due to 'the global economic slowdown combined with stubbornly high food prices'.8

But the impact of high prices goes well beyond not getting enough to eat. Poor households in Southern countries tend to spend between 50% and 90% of their income on food, compared to an average of 10-15% in Northern countries.9 It is estimated that the food price spike increased the number living in poverty by between 100 and 200 million.10 As well as eating less food, households have been forced to:

* Eat less fruit, vegetables, dairy products and meat in order to afford staple foods.

* Reduce any savings, sell assets or take out loans.

* Reduce spending on 'luxuries' such as healthcare, education or family planning.11

Women tend to manage the food budget and often bear much of the suffering. Women may also try to increase income through taking on insecure and risky employment such as becoming domestic workers, mail-order brides and sex workers.12

High food prices affect poor farmers as well as the urban poor. A high percentage of rural households are net buyers of staple foods. In Kenya and Mozambique, around 60% of rural householders are net buyers of maize.13 Very few poor farmers produce a significant surplus to sell.14 In Zambia, 80% of farm households grow maize, but fewer than 30% sell any.15 In addition, any increase in income was for many producers negated by increasing costs of farm inputs such as oil and fertiliser. The cost of fertiliser almost doubled in 2007 and 2008.16

Furthermore, in general terms wild price swings make it difficult for farmers to make decisions about what crops to grow and in what they should invest precious resources. As Prof. Jayati Ghosh says: 'The world trade market in food has started behaving like any other financial market: it's full of information asymmetry . So farmers think, "Well, wow, the price of sugarcane is really high," and they go out there and cultivate lots of sugarcane. By the time their crop is harvested, the price has collapsed. So you get all kinds of misleading price signals. Farmers don't gain.'17

Volatility of prices is a huge problem for countries, whether importing or exporting commodities. FAO says: 'The wider and more unpredictable the price changes in a commodity are, the greater is the possibility of realising large gains by speculating on future price movements of that commodity. Thus, volatility can attract significant speculative activity, which in turn can initiate a vicious cycle of destabilising cash prices.'18

Pedro Paez, former Economy Minister in Ecuador, says both high and low prices are a bad thing: 'The oil price because of speculation on futures went as high as $150 per barrel, and then due to short-selling dropped in four weeks to less than $40. How, as an importer or exporter, can you plan a sustainable economy under those conditions?'

The food price spike is not over

Whilst food prices fell rapidly in mid-2008, they have still generally remained higher than before the 2007 and 2008 food price crisis. During 2010 food prices have shot up again, most notably wheat which has had knock-on impacts on crops such as maize.

However, other crops have also been subject to speculation. During the spring and early summer of 2010 a British hedge fund called Armajaro bought huge numbers of cocoa bean contracts, pushing prices up to a record 33-year high. Armajaro even went as far as buying real food, purchasing 7% of global cocoa production for storage in European warehouses.

Armajaro was attempting to manipulate the market, hoarding a huge amount of cocoa now to push up the price and profit later. In July 2010, 16 European traders said they were 'shocked with what is happening on the London cocoa market', claiming it was causing havoc for producers and consumers. The Association of the German Confectionery Industry said: 'What we are experiencing today is clearly a manipulation of the contract which is bringing the London market into disrepute, and which, we believe, should not be allowed.'

Another cash crop, coffee, has also been subject to big swings in price. The price of coffee traded in London shot up by 20% in just three days in early June 2010, yet there was no news about big falls in coffee production, or increases in coffee consumption. Instead, hedge funds had been betting on the price of coffee falling. This betting or speculation had depressed the price. When a large trader called the hedge funds on their bet, they were forced to buy back contracts they had sold, leading to a large and sudden increase in prices.

Response to the speculation problem

Government officials from several Northern countries have recognised the problem of commodity speculation. Gary Gensler, head of the US government commodity regulator, says: 'I believe that increased speculation in energy and agricultural products has hurt farmers and consumers.'19

Michel Barnier, European Commissioner for the internal market, told the European Parliament: 'Speculation in basic foodstuffs is a scandal when there are a billion starving people in the world. We must ensure markets contribute to sustainable growth. We have to look at derivatives. Speculation is linked to derivatives which are linked to raw materials. That is something we want to regulate very carefully in order to tackle speculation in raw materials.'20

The US financial reform act passed in July 2010 contained measures to counter the deregulation of the previous two decades, including forcing far more commodity derivatives to be traded on regulated exchanges, and setting limits on the amount of speculation financial actors can undertake. Whilst the rules on how these regulations will work are yet to be agreed, Dave Kane from the Maryknoll Office for Global Concerns says the act 'contains reforms that will help stabilise global food and energy prices - changes that will especially benefit the poorest communities around the world'.

Despite the sentiments of Commissioner Barnier, the European Union is yet to take action on commodity regulation. The European Commission will make proposals on regulating commodity derivatives by the end of 2010, which will then be debated between the European Parliament and EU member state governments.

The European Parliament's key economic and monetary committee has called for 'the planned regulation of derivatives to include rules relating to the banning of purely speculative trading in commodities and agricultural products, and the imposition of strict position limits especially with regard to their possible impact on the price of essential food commodities in developing countries and greenhouse gas emission allowances'.21

Unfortunately the Commission's proposals are not currently expected to go as far as the European Parliament has called for. Some member states are thought to be resistant to commodity regulation, particularly those such as the UK where the government is highly susceptible to lobbying by the financial industry. London is the largest centre for commodity trading outside the US, and contains 80% of EU-based hedge funds.

Ideally action to regulate commodities would be agreed at the global level but the summits of the Group of 20 (G20) major economies have yet to agree on strong coordinated action on commodity speculation. However, at the end of August 2010, President Sarkozy of France said a key theme of France's Presidency of the G20 in 2011 would be to seek coordinated regulation of commodity derivatives. In September 2010, President Medvedev from fellow-G20 government Russia condemned 'speculators' for forcing up food prices. There is a growing momentum to take action against commodity speculators, which could turn into action in G20 summits next year.

With discussions on how to implement the US's new commodity regulations, proposals on commodity regulation in the EU, and the potential for coordinated action in the G20, 2011 will be a key opportunity to regulate commodity derivatives to stop banks gambling on food and hunger. Yet the lobbying of the financial industry threatens to derail the chance of achieving meaningful regulations.

Campaigners and social movements have begun to coordinate joint plans and activities. Strong country and global campaigns are needed to stop the recurring cycle of food and commodity price spikes.


Tim Jones is a Policy Officer with the World Development Movement, a UK-based anti-poverty campaigning organisation.


More information on WDM's campaign on food speculation is at http://www.wdm.org.uk/food-speculation. For more details on the campaign or to link into regional and global activities, contact WDM campaign officer, Gary Dunion <gary.dunion@wdm.org.uk>. WDM's report 'The great hunger lottery' is at: http://www.wdm.org.uk/food-speculation/ ... er-lottery.

Endnotes

1 http://www.independent.co.uk/news/business/news/
russian-wheat-export-ban-threatens-higher-inflation-and-food-riots-2044769.html

2 Seib, C. (2010). Russia's scorched earth causes sharp increase in price of wheat. The Times. London. 03/08/10.

3 Ghosh, J. (2010). Interview with therealnews.com 05/05/10. http://therealnews.com/t2/index.php?opt ... tent&task=
view&id=31&Itemid=74&jumival=5067

4 Stiglitz, J.E. et al. (2009). Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System. United Nations. New York. 21/09/09. http://www.un.org/ga/econcrisissummit/d ... rt_CoE.pdf

5 Thornton, E., Henry, D. and Carter, A. (2006). Inside Wall Street's Culture of Risk. Business Week. New York. 12/06/06. http://www.businessweek.com/magazine/co ... 988004.htm

6 Financial Times. (2006). 10/04/06.

7 World Food Programme. http://www.wfp.org/hunger/stats

8 FAO. (2009). One sixth of humanity undernourished - more than ever before. FAO. 19/06/09. http://www.fao.org/news/story/en/item/20568/icode/

9 http://www.imf.org/external/pubs/ft/weo ... x1_1_2.csv

10 Delgado, C. (2010). Food security: The need for multilateral action. Paper presented at the Korea-World Bank High Level Conference on Post-Crisis Growth and Development, co-organised by the Presidential Committee for the G-20 Summit and the World Bank with the support of the Korea Institute for International Economic Policy. June 2010.

11 Wiggins, S., Compton, J. and Keats, S. (Undated). Food price crisis FAQs. Overseas Development Institute and Department for International Development. London. And Holmes, R., Jones, N. and Marsden, H. (August 2009). Gender vulnerabilities, food price shocks and social protection responses. Overseas Development Institute: London.

12 Holmes, R., Jones, N. and Marsden, H. (August 2009). Gender vulnerabilities, food price shocks and social protection responses. Overseas Development Institute: London.

13 Jayne, T., Chapoto, A., Minde, I. and Donovan, C. (2008). Presentation at African Agricultural Markets Policy Workshop. Nairobi. Kenya. 11/12/08. http://www.aec.msu.edu/fs2/outreach/
Jayne_COMESA-AAMP-Dec_11_08.pdf

14 Wiggins, S., Compton, J. and Keats, S. (Undated). Food price crisis FAQs. Overseas Development Institute and Department for International Development. London.

15 FAO. (2009). The state of agricultural commodity markets: High food prices and the food crisis - experiences and lessons learned. ftp://ftp.fao.org/docrep/fao/012/i0854e/i0854e.pdf

16 FAO. (2009). The state of agricultural commodity markets: High food prices and the food crisis - experiences and lessons learned. ftp://ftp.fao.org/docrep/fao/012/i0854e/i0854e.pdf

17 Ghosh, J. (2010). Interview with therealnews.com 05/05/10. http://therealnews.com/t2/index.php?option=com_content&
task=view&id=31&Itemid=74&jumival=5067

18 FAO. (2009). The state of agricultural commodity markets: High food prices and the food crisis - experiences and lessons learned.

19 Gensler, G. (2009). Nominee for Chairman of the CFTC statement before the US select committee on agriculture, nutrition and forestry. 25/02/09.

20 Reuters. (2010). EU executive to target derivatives speculation. Brussels. 13/01/10.

21 Committee on Economic and Monetary Affairs. (2010). Report on derivatives markets: Future policy actions. Committee on Economic and Monetary Affairs of the European Parliament. Rapporteur: Werner Langen. 07/06/10.

*Third World Resurgence No. 240/241, August-September 2010, pp 20-23
TWN | THIRD WORLD RESURGENCE | ARCHIVE

[JackRiddler]

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http://bollier.org/marginalization-comm ... o-about-it

The Marginalization of the Commons and What To Do About It

Friday, January 14, 2011

I delivered the following remarks -- "The Marginalization of the Commons and What To Do About It" -- at the 13th Biennial conferece of the International Association for the Study of the Commons, in Hyderabad, India, on January 12, 2001.

The commons is of keen interest to me because of its great potential to transform how we talk about economics, politics, governance and culture. Or more to the point, it can be an active, creative force for positive change in people’s lives.

The focus of the conference today is the structural forces that are marginalizing the commons and disempowering commoners. Why is it that the commons is so often excluded from official policy discussions about how to manage resources and improve people’s lives? Why are the State and the Market seen as the only two serious realms of action – while the commons is often patronized or dismissed as inconsequential, if it is considered at all?

Another question, perhaps the most important: What are we going to do about this state of affairs? How can we be more effective in bringing the commons paradigm to the attention of politicians and the media, and advocacy groups and commoners themselves?

I think it’s useful to address these questions from two perspectives. First, we must consider the factors external to commons that either ignore them or seek to eliminate or marginalize them. I’m talking about the whole cultural narrative of capital-driven markets, mainstream economics and consumerism. None has any great interest in the commons. In fact, most have trouble comprehending the very idea of the commons because its logic and categories of thought are just too alien. On the other hand, sometimes political elites in these fields comprehend the commons all too well and believe it must be fought.

The second perspective we must consider is the factors internal to commons themselves that may cause them to fail. Are the legal structures, management practices, alignment with local circumstances, and so forth, appropriate? This, of course, is the chief focus of this conference, and it is a very complicated question. But clearly our imperative is to learn how to “build a better commons.” We must find ways to make public policy become more attentive to this challenge.

Let me begin by considering the external forces that work to marginalize or dismiss the commons.

We must first recognize that the commons inhabits a political environment that is often quite hostile to it. In fact, the State and Market often have their own very good reasons for disliking the commons. For one thing, both are hungry for the revenues that come from exploiting the commons -- and both State and Market often find it useful to support each other’s political objectives.

The market/state duopoly, as I sometimes call it, has another reason for disliking the commons: The commons often requires significant transfers of power to the commoners and new forms of social equity. So there is often a shared political interest for doing the wrong thing – that is, to enclose the commons.

Now that’s a word that I don’t encounter very much in the academic literature – perhaps because the term is seen as prejudicial and provocative, and therefore suspect. But we can’t avoid talking about enclosure. Many common pool resources are being privatized and commodified because corporations see them as cheap or free fodder for the voracious market machine. At the same time, common pool resources represent a cheap and convenient waste dump – a place to get rid of all the nasty externalities that businesses don’t want to internalize into their cost structures.

If we are going to raise awareness of the commons and make it a serious element in policy discussions, then we are going to have to talk more aggressively about enclosure. I know that some people prefer to talk about “privatization” or “commercialization” or even “development pressures.” But for me, none of these terms truly captures the disenfranchisement of people or the destruction of community that “enclosure” conveys.

Having said this, we commoners need to do a better job of articulating and advancing what I call the value proposition of the commons. Here’s what I mean by that. The market has its own well-developed, aggressively promoted story about how material wealth is created and human progress is advanced. It’s a story about how private property rights, money and market exchange generate wealth. It’s a process that considers Gross Domestic Product a proxy for happiness. The market story is a story of bigger, better and faster, and it is the dominant norm of our time, a global religious catechism that is only now starting to come unraveled, thanks to the economic crisis of 2008.

The commons is a very different narrative – one that fills out that picture that this mainstream economic narrative omits. The value proposition of the commons cannot be expressed as a “bottom line” because it’s all about community empowerment and social equity and ecological security. Unfortunately, this is a fuzzy and complex storyline in the public mind, at least right now.

Let me add, I don’t consider the commons narrative to be anti-market or anti-business. It is, however, about re-embedding business activity within new systems of accountability and it’s about setting new limits on commercial activity. Markets serve many important functions – but the wealth they generate is frequently offset by the huge costs and risks that they displace onto the commons, and onto future generations.

Some other reasons that the commons narrative has trouble going mainstream have everything to do with the intrinsic nature of the commons. So let me talk about those reasons for a moment.

Unlike the market narrative, which presumes to be standard and universal, the commons consists of countless distinctive and locally rooted examples, each different. The market celebrates quantitative measures of its performance, and so comparisons about who’s best, who’s richest, and so forth, are easy. By contrast, the value of the commons tends to be qualitative, social, spiritual, ecologically complex and long term. Needless to say, these values cannot be plugged into a spreadsheet and put into rankings, like the “Commons 500.” As a result, the commons is harder to see and name as a distinct sector – and therefore, it can be harder to reclaim a commons or build one from scratch.

In addition, the commons storyline is relational, not transactional. While markets are focused on individual initiative, conflicts and competition and winners and losers, the commons is focused on stewardship, community benefit and sustainability. Guess which narrative is more dramatic and gripping to the media?

Paradoxically, the commons does all sorts of work that markets depend upon -- but this work usually goes unacknowledged. The “caring economy” and other so-called “women’s work” is part of a vast, off-the-books shadow economy that invisibly props up the formal market economy. Nature is also part of this shadow economy. So is the public domain of information and culture. It tells you something about the vaunted “productivity” of the formal economy that it quietly relies upon so many invisible commons-based subsidies!

Of course, many leaders of the market/state duopoly are not troubled by this. They prefer to keep the commons in the shadows. Why call attention to a valuable off-the-books subsidy? By keeping the commons unnamed, it is easier to neutralize it as a competitive power base. Without a vocabulary for naming the commons, the commons can be used and abused with impunity. It becomes harder to organize a community to defend it. Commons-based alternatives that might disrupt the status quo can be safely ignored.

Going mainstream with the commons discourse is difficult in many countries – most notably, the United States – because it clashes with the basic premises of laissez-faire individualism. When the U.S. Government tried to vanquish Native Americans in the 1800s, for example, the first thing that it insisted upon, as a legal precondition for U.S. citizenship, was that Native Americans abandon their common ownership regimes and assign individual property rights to everyone. I can think of no better way of destroying a people.

This enclosure dynamic plays itself out repeatedly today. The strategy is: Disassemble the connections that a community has to itself, its resources and its social traditions and rules. Convert commoners into individual consumers and producers for the market system, and make them more dependent on the money economy. We must frankly recognize that “free markets” may entail a cultural agenda and identity shift.

Now, the argument is often made that the commons is simply a vestigial, pre-modern throwback. They say it’s impractical, it’s inefficient, it’s a “tragedy.” With the failures of communism and state socialism still hanging in the air, the claim is made that self-organized collective action threatens “freedom.” We need to fight these myths by asserting the real value-proposition of the commons.

I will concede, the critics get it partly right: the commons has pre-modern origins. I’ll go a step further. I’m convinced that the commons is as old as the human species. It predates the modern marketplace and state – and as the great historian of the commons Peter Linebaugh has put it, the commons is “independent of the temporality of the law and state.”

Evolutionary biologists, geneticists and anthropologists now tell us that cooperation is hard-wired into the human species. It is, they say, an “evolutionary stable strategy” – one that confers competitive advantages on homo sapiens in its ongoing struggle to survive. Scientists say that such evolutionary innovations as language, agriculture, altruism and even the whites of our eyes, reflect our natural propensity to cooperate and develop social trust.

As social order has evolved, so have the institutions that can protect our collective interests. In Roman times, the Emperor Justinian famously established several categories of law to reflect collective ownership. Things were considered res communes if they were owned in common by everyone as a whole. The Code of Justinian states: “By the law of the nature these things are common to mankind – the air, running water, the sea and consequently the shores of the sea.” Another category of property was things that belonged to the State – res publicae. Things that belonged to no one – such as wild animals and abandoned property – were considered res nullius.

Another landmark in the history of the commons was the adoption of the Magna Carta in 1215 A.D. and a few years later, the Charter of the Forests. A series of conflicts and civil wars between the commoners and barons and the king eventually forced King John to formally recognize commoners’ rights – from due process rights and habeas corpus to the right to use the forest commons to supply their primary subsistence needs -- for food, firewood and building materials.

I recall this history because it is another reason why the commons has been marginalized. Much of its history has been forgotten or bastardized. Consider our skewed remembrance of John Locke, who is responsible for the most celebrated and enduring theories of private property. Locke considered it a divine right for people to claim private property rights in things that they made with their own labor. What is usually omitted from Locke’s formulation of this right is his significant qualification – “…so long as there is enough, and good left in common for others.”

In other words, private property rights can be justified only if the common pool resource is preserved intact. That often requires a commons. Let’s just say that the Wall Street Journal and Financial Times have forgotten such things. It reminds me of the novelist Milan Kundera’s famous line, “Man’s struggle against power is the struggle of memory against forgetfulness.”

Without a coherent, big-picture history of what I call “commons law,” it is hard for commoners to argue in courts and legislatures for what is theirs. The law frequently ignores or rejects commons-based approaches. That is why I am currently working with a noted international law and human rights professor, Burns Weston of the University of Iowa College of Law, to try to recover and refurbish this history. We want to go back to Roman times, the Magna Carta, the Charter of the Forest, the public trust doctrine, and points in between, to regenerate a body of “commons law” that can provide new legal justifications for the commons. We call this the Commons Law Project, a multi-year effort to explore ecological governance in partnership with One Earth Future, a Colorado-based foundation.

I’m convinced that recovering the history of the commons can help us develop a new grand narrative for the commons. It can help us understand how the dynamics of enclosure in the past are repeating themselves today. It can help us recognize who are the victims of enclosure: chiefly women, the poor, the elderly and others who depend on the commons for subsistence.

The history of the commons is also a source of inspiration. It can validate the creativity of commoners of the past who struggled to protect their shared wealth and self-determination. I only recently learned about the medieval tradition of “beating the bounds” – an annual community perambulation around the perimeter of the commons – compete with good food and drink. The event celebrated the community’s identity as commoners while providing a way to tear down any fences, hedges or other enclosures. I was astonished by this revelation – commoners once had the affirmative legal right to knock down enclosures of their shared resources! We need to recover and remember the history of the commons as a way to help understand some challenges facing us today.

I see great potential in the commons because it goes beyond political ideology to propose a paradigm shift, a different worldview. It knits together the economic, political, cultural and humanistic into one coherent discourse. It empowers individuals to help themselves. It helps reconnect people with each other, and with the earth. It helps regenerate personal meaning and social tradition. It helps foster sustainable management of ecological resources.

For me, it is the ethic of the commons that may be most valuable. Alain Lipietz, a French political figure and student of the commons, traces the word “commons” to William the Conqueror and the Normans. I love the etymology of the word. It comes from the Norman word commun, which comes from the word munus, which means both “gift” and “counter-gift,” as a duty. Munus is related to what the economist Karl Polanyi called “reciprocity.”

I think we need to recover a world in which we all receive gifts and we all have duties. This is a very important way of being human. Tragically, the expansion of centralized political and economic structures tends to eclipse our need for gifts and duties. We rely on money or the state for everything. And so we forget what Ivan Illich called the “vernacular domain” – the spaces in our everyday life in which we create and shape and negotiate our sense of how things should be: the commons.

The basic problem is that we need to rediscover “commoning” – the commons as a verb, the commons as a set of social practices. “The allure of commoning,” Peter Linebaugh has written, “arises from the mutualism of shared resources. Everything is used, nothing is wasted. Reciprocity, sense of self, willingness to argue, long memory, collective celebration and mutual aid are traits of the commoner.”

Now, the really great thing about commoning is that it is not just a figment of history. It’s alive and growing! In fact, today we see the rise of countless self-styled commoners – people who see the commons as a way of dramatically reframing how they might conduct politics, conceptualize economics and revitalize democracy.

In November 2010, in Berlin, I helped co-organize a major international commons conference with the Heinrich Böll Foundation and the Commons Strategy Group. The conference brought together 200 activists from 34 countries – ranging from agricultural activists from the Philippines to computer hackers from Amsterdam to free culture advocates from Brazil.

There are some amazingly large and robust trans-national communities of commoners who are making serious progress in taking charge of the common wealth. These include a vast network of free software programmers who created GNU Linux and thousands of other shareable software programs; the Wikipedians in dozens of countries who edit the largest encyclopedia in history; the millions of digital artists and authors in more than fifty countries who use Creative Commons licenses; the growing world of open access scholarly publishing, which has bypassed expensive commercial journals to make their work freely available in perpetuity; the Open Educational Resources movement, which creates and shares open textbooks and curricula and learning materials.

Beyond this exploding universe of digital commoners, there are self-identified commoners who are recovering urban spaces and community gardens; commoners who are fighting to keep genetic knowledge free and open; commoners who are building solar energy panels on public rights-of-way; commoners who are building open-source hardware and agricultural equipment; commoners who are ingeniously using Internet technologies to improve ecosystem protection. The list goes on and on. The emergence of this activism is already pushing the commons into the mainstream. And I haven’t even mentioned the scores of commons represented here.

Let me strike a “be careful what you wish for” note, however. Some other people are discovering the commons as well, and I’m not too sure they have the same ideas as we might. NATO held a conference last year on “the Global Commons,” by which NATO apparently meant NATO dominance over the oceans, space and the Internet. Companies that used to “greenwash” their regressive environmental policies will surely start to “commons-wash” their activities if the term gains broader currency.

My point is that “the commons” as a concept is in play, and there is a great risk that its meaning could be watered down, co-opted or used as a cheap moral posture. I advise that we get there first and escape any marginalization by advancing the commons on our terms. We should step away from the fringe, and toward each other, to reach the center.

This is a long-term proposition, obviously. It means we need to open some new conversations and build some new alliances. We ourselves need to entertain new ways of doing things and new ways of thinking. I won’t presume to say how this might happen, but let me immodestly make a few provisional suggestions.
Let us recover and remember the history of the commons so that we can appreciate its role in different historical and political contexts.
Let us develop a grand narrative about the commons that can be popularly understood, so that we can communicate the value proposition of the commons better.
We should try to bridge the cultural divide between digital commoners and natural resource commoners, because there truly are important synergies between the two.
We should try to formulate how the commons can work with existing state institutions and policy structures, while inventing new forms that are more appropriate to the commons.
We must try to reframe mainstream political and economic discourse with a commons perspective, so that some bright, alternative futures can be seen.
And finally, we must strengthen the linkages between commons scholars, practitioners and activists, so that we can learn from each other and support each other’s work.

I realize this is a ridiculously big wish list, but on the other hand, we have every reason to dream big. Our problems are daunting and our energies are growing. It’s time to take the commons to the next level.

###

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[JackRiddler]

The Politics of the Foreclosure Mess: Another Big Bank Bailout?

by: Mike Lux

Thu Jan 13, 2011 at 19:00



Everything I am reading these days on financial issues points to some serious reckoning soon to come, especially because of - as the folks at Third Way are calling it - foreclosure-gate. The Massachusetts Supreme Court ruling in the Ibanez case, along with a growing body of cases where the banks and/or their servicers have been ruled against in foreclosure cases, and even the banks' lawyers are being castigated in court by judges for bringing in made-up paperwork, is causing a growing sense of panic among the biggest banks that hold the most mortgages. Spokespeople for the banks are talking bravely, trying to dismiss the situation as some minor paperwork errors, but everyone who has been paying attention to the situation fears that there are really big consequences afoot. The plain fact is that over the last decade, in their overwhelming rush to make bigger and bigger profits from trading in the bubble-driven real estate securities market, the banks ran roughshod over the home mortgage and title system that had served this country (and England and many others) quite well for hundreds of years - and they made a serious mess of it. Because of the way these mortgages have been sliced and diced and sold into complicated securities, homeowners, judges, and the banks themselves are having quite a bit of trouble figuring out who actually owns the note in more cases than is easy to believe. The "paperwork" - figuring out who owns the note - is not just a little messed up, it is a disaster area.

This wouldn't be as big a deal except that the combination of the housing bubble itself plus the worst recession since the Great Depression (caused in great part by that bubble) has created a foreclosure crisis of gargantuan proportions. Millions of homeowners are in foreclosure proceedings, millions more underwater because of the collapse of housing prices. And because the banks have cooked their books, not wanting all these toxic assets to wreak havoc with their official valuation and their stock prices, they have no interest in helping homeowners stay in their homes by writing down these mortgages to current market levels. So banks are moving to foreclose these millions of homes, but they can't prove to judges that they even own the notes that would allow them to foreclose. Thus you have robo-signers, falsified affidavits, and all kinds of strange things being presented to judges in courts. The judges who are not bought and paid for by the banks are raising big red flags about all this, and thus you have cases like Ibanez going against the banks.

This is a mess not just for the housing market but for the entire economy, as the numbers on all this are staggering, and the housing market really does have the potential to just completely freeze up, which would be an economic nightmare. Our economy has no chance of getting dramatically better until the housing market starts moving again. So the banks are now going to their political allies, just like they did in 2008, and telling them: unless you save us from the mess that we've created (oh, wait, they don't use those last four words, instead it's the unforeseeable "perfect storm", "black swan" thing), we will go under and take the entire economy down with us. The good news for the banks is they are not necessarily looking for a cash handout this time - although it may come to that - but just some legal "tweaking" of this "minor paperwork problem."

If you have the stomach for it and want to learn more about the gory details about the policy side of all this, there are a bunch of good writers you can turn to, including Yves Smith, David Dayen, and Marcy Wheeler, all of whom have put up great pieces worth looking at in the last couple of days. Numerian has a great post I have already linked to a couple times in past pieces this week on the truly scary implications of what is going down. But my focus, as usual, is on the politics of all this, because the drumbeat is beginning in a big way to bail out the bankers from their own mess once again. Third Way's piece, which Yves, David, and Marcy do a good job deconstructing, is the opening shot in what will be a very focused legislative push to once again bail out the bankers from their own mess. The banks and their allies will try to do this as quickly and quietly as they can, portraying it as a simple legal fix for minor paperwork problems. However, the consequences of this kind of legal bailout are actually far greater in some ways than the TARP bailout, as costly as that was. The TARP bailout was just dollars though. This one, as Yves writes, undermines fundamental property law that our entire economic system is based on:

This proposal guts state control of their own real estate law when the Supreme Court has repeatedly found that "dirt law" is not a Federal matter. It strips homeowners of their right to their day in court to preserve their contractual rights, namely, that only the proven mortgagee, and not a gangster, or in this case, bankster, can take possession of their home.

This sort of protection is fundamental to the operation of capitalism, so it's astonishing to see neoliberals so willing to throw it under the bus to preserve the balance sheets of the TBTF banks. Readers may recall how we came to have this sort of legal protection in the first place. England learned the hard way in the 17th century what happens with low documentation requirements: abuse of court procedures, perjury and corruption become the norm. Parliament enacted the 1677 Statute of Frauds to establish higher standards for contracts, such as witnessing by a third party, to stop the widespread theft of property that was underway.

The memo completely ignores the harm to investors from the bank mistakes and lacks any provisions for damage to investors to be remedied. Moreover, denying borrower rights removes their leverage to obtain deep principal mortgage modifications, which for viable borrowers produces lower losses than costly foreclosures and sales of distressed property. Thus this shredding of contractual protections in mortgages not only hurts borrowers but also harms investors.

So to save the banks from their own, colossal abuses of contracts that they devised, the Third Way document advocates Congressional intervention into well established, well functioning state law. This is a case where these matters can and should be left to the courts and ultimately state AGs to coordinate the template of a more broadbased solution.

To once again bail out the bankers, this time by changing real estate law in a way that hasn't been done since the 1670s, would be a far bigger deal than even the trillions in bailout dollars the TARP and Fed gave these banks in 2008/9. But the bankers and their allies like Third Way will try to present this as a simple fix to some minor paperwork problems. Look, if these paperwork problems were so minor, we wouldn't need the fix they are proposing: the banks would get nicked a little in a few cases where they screwed up a little bit of paperwork, and everyone would go on their way. But they have made a Texas-sized mess of the entire mortgage title system in their haste to make money, and it is time to pay the piper.

What's the solution? We should start with a foreclosure freeze while the government sorts through the mess and the state attorney generals finish their negotiations with the big banks. Clearly, a massive amount of mortgage write-downs to underwater homeowners to reflect current housing prices makes a ton of sense, and would dramatically cut the need for foreclosures, taking some of the pressure off the system. Once those two steps are taken, hopefully the AGs can cut a good deal for the American people to make things work better going forward.

The problem with sensible pro-middle class solutions like this is the incredible political power of these big banks. Here's the deal, though: politicians hate the idea of having to bail these guys out again. If progressives can make clear that any legal changes the bankers are trying to push through on mortgage and title law are just one more big bailout of the big banks, we can win this fight. Let's hope we do, because the stakes are pretty damn high.

[JackRiddler]

.

A column in Business Insider syncs for the most part with my own thinking, and also provides a clear explanation of why the United States is in deflation even though some prices are rising.


http://www.businessinsider.com/zombie-m ... thru_m=h2n

The Zombie Speculation Bubble Is Ready To Burst

The Automatic Earth | Jan. 16, 2011, 2:34 PM

By Ilargi on The Automatic Earth.

There are a number of fallacies - or delusions, if you will- concerning our economies that are set to inflict enormous - in many cases lethal- damage in both our own rich lives and those of people elsewhere in the world who are far less well-off than we still are - for now. These fallacies are closely connected, which adds greatly to their insidiousness as well as the perverse influence they have both on ourselves, and on our awareness of what's happening around us. And whatever there may be that we can't change overnight, we can at least try to comprehend some issues, file them, and move on. Let’s do these first:

Recovery
Inflation
Food prices


1: Recovery

There is no economic recovery, there hasn't been one in the past five years, and there won't be one for a very long time to come. Claiming that we are seeing a recovery today equals claiming that a society can borrow its way into recovery. I'm not going there, and I strongly advise you to not do it either.

There will be a Keynesian faction which clings to the theory that says it is indeed possible to borrow your way up, but that's a mere mirage, since it would require a surge in real productivity, i.e. outside of the service industry. Where and how have we increased production since the crisis started? Where have we created the great deal of additional value required to dig ourselves out of the hole? Obviously, nowhere.

I’m anti-capitalist but, given a capitalist economy, quite inclined to believe in the effectiveness of Keynesian stimulus if intelligently applied. I must agree fully here with Illargi that the opportunity of 2008 has been squandered. There was a way forward, and that would have been to invest the deficit spending and money-printing in the urgently needed infrastructural conversion, alternative energies and transport, and in creating a new financial system of banking as public utility. Instead the Obama team conducted a half-hearted Keynesianism without imagination, pitched entirely to survival for the failed big banksters and political appeasement of the right wing tax-haters. It’s untrue that having workers dig big holes and fill them up again is a sufficient stimulus in a global economy with industrial competitors; but Paulson-Bernanke-Geithner did not even do that much. A hole-digging and hole-filling program would have at least created millions of jobs. Instead they doled out tax cuts, stop-gap spending bridges for the states, and trillions in bailouts and guarantees for banksters. This was without vision, without direction, and without respect for by far the greatest and most dire crisis that all humanity faces, which is the ecological crisis. Therefore: without brains, even if in the short run the rich who sponsor the political show get to pile up higher numbers than ever.

The vast majority of "jobs created" is in the service sector, while manufacturing today counts for less than 10% of US jobs. And no, flipping burgers does not create value.

For the US economy to recover for real, we would need to see hundreds of thousands of jobs created every month, on top of the 150-250,000 needed to just keep up with population growth. Not happening. It doesn't matter if the BLS says the unemployment rate went from 9.8% to 9.4% on 103,000 jobs created. If and when it issues numbers like that, the BLS itself ceases to matter. To wit, Zero Hedge reports: "Initial Claims Surge To 445K, Not Seasonally Adjusted Claims Surge By 191,686 To 770,413 In One Week".

What has happened that fools people into believing in a recovery are two things:

First, the US government and the Federal Reserve have injected more trillions of dollars into the system than anyone can keep track of. Moreover, they have done so only in those sectors that remain beyond the grasp of the average American. Which means that we see relative highs in the markets, as well as record or near record amounts paid out in bonuses on Wall Street, and at the same time there are record numbers of foreclosures and record or near record unemployment numbers.

While it's true that stock markets have been rising lately, how anyone can see that as proof of a recovery is beyond me. The idea that if you just make the rich richer, the rest will follow, is not even something I want to discuss anymore.

Second, any attempt to maintain what could be considered accounting standards, such as those that would apply to you and me, was given up long ago. The reason for this is that the trillions upon trillions of dollars that were taken away from you and your offspring, and handed to the main banks, would still not have been enough by any stretch of the imagination to keep up even the slightest appearance of solvency for these banks. It's important to let that sink in.

Oh, yes. The fantasy accounting. No mark to market, no rules even about what to keep on the balance sheets.

The untold trillions have been only sufficient to pay down the first "level" of debt the banks had accumulated, that part of the debt that could no longer be hidden from view. The rest of the debt, which is far greater than all the trillions handed out so far, remains in dark vaults, treated like some sort of state secrets that can’t be divulged for the next 50 or 100 years. The result is that hardly anyone realizes how big the debt is, and the losses are, and that bank stocks have actually been going up. This is how zombie money is created.

You, too, if you’re a gambling addict, could live for a while pretending you're rich, even after you’ve lost all you have and ten times more, provided you’re capable of hiding your lost wagers. Charles Ponzi and Bernie Madoff did it on their own for years; JPMorgan Chase and Bank of America do it with the full aiding and abetting from Washington, which uses your money to comply with whatever it is Dimon, Blankfein and Moynihan say is needed to stave off a collapse.

In other words, the economy may seem to be recovering, and the banking system may seem to have recovered, but the illusion has come at a gigantic price to the American (and European) societies, and in the end it will not make one iota of difference for the outcome. Then again, let's correct that: it will make a difference, but not - at all- in your favor: the multi-trillion dollar illusion will greatly enhance the misery and destitution on Main Street. All that money could have been used to mitigate and minimize the suffering of the herd; instead, it’s all gone to wolf packs and vampire squids. We’ll yet come to deeply regret this.

As I was saying wrt Keynesian stimulus.

Nordic, please pay attention to this next part!

2: Inflation

The fact that there’s all that zombie money around (or zombie credit, to be precise) leads many to believe the US witnesses inflation. Not true. First off, inflation is not the same as rising prices. Prices can rise because of different causes: scarcity, speculation and (real) inflation. And it’s important to be able to identify which of these causes is in play. If you call all price rises inflation, you lose the ability to distinguish between the causes, which means you lose a crucial analytical tool. There may be those who would like nothing better than for us to lose that tool, but it’s not smart to give in.

I know the media has force-fed the incorrect definition of inflation to the masses, and I know there are plenty of people who say rising prices is all they care about, not monetary theory. However, a clear view of causation is essential when it comes to defining your reaction to rising or falling prices, and prices that rise because of scarcity demand a totally different set of actions than those that do because of a rise in total supply of money and credit, combined with velocity of money, which is what inflation truly is.

The present, incorrect and force-fed "meaning" of inflation as all price rises no matter what their cause is, is relatively new. Rising prices used to be referred to as "(currency) devaluation". Not perfect, but way better than what we have now, where terms like “monetary inflation", "price inflation", "consumer inflation", "energy inflation" all the way down to "cookie inflation" fill the media.

Why is the distinction between the definitions important? Because today in the US both the money/credit supply and the velocity of money are falling (deflation), while some prices are rising, in particular those of food and energy. And no, you can't have deflation in one sector and inflation in the other. That really turns the whole debate into obscure nonsense. It's important that we can determine that if prices rise in times of deflation, the cause for those price rises must be something other than inflation.

In today's world, that something else is speculation. But not of the ordinary kind. What we have right now is zombie money speculation. The same unrecognized losses in the financial system that our governments cover up with criminally negligent accounting non-standards cause prices of oil and food to rise, since that's where the zombie money -inevitably- ends up. And it's not just the banks that invest zombie money, it's all of us.

If banks would have been forced to reveal their losses, the hammering of home prices would have been huge. Since this did not happen, a lot of people are still sitting pretty in their homes, which are way more overvalued -in free market terms- than just about anyone is ready to recognize. Also, if banks had revealed their losses, unemployment rates would have been far higher than they are today.

I know what many are thinking: maybe it's not such a bad idea to cover up those losses. But you're not seeing the whole picture. First, the cover-up has enabled the banks to access your money in order to pay down their debts. And second, zombie money is not the same as real money, as something that has been earned by adding real value. Zombie money is not real.

I read a piece at Zero Hedge the other day by a group that calls themselves the NIA, for National Inflation Association. But they don’t even know what inflation means. Hence their slogan: "Preparing Americans for Hyperinflation". Hey, if you can't define inflation, chances are you’ll miss the truth on hyperinflation too. Look, the US depends for its money and credit supply on international bond markets. Whenever Bernanke turns on his so-called "printing press", which in actual fact is an "additional credit" press, it's not as if free money is created. There‘s interest to be paid on all of it. And while interest rates may be low right now, it's not Bernanke who sets those rates, try as he might to make you think so.

If and when the bond markets decide that the risk on US debt rises enough -or too much-, they will decide what the interest rate is, not Bernanke, and not Geithner. Obviously, with every dollar printed, risk assessments will rise, and the outcome is inevitable: less appetite for US debt (don’t forget that there's plenty zombie money in the bond markets too), and higher rates. And only if and when the US no longer has access to international markets does the option of hyperinflation come into play. Now, I may be quite negative on the prospects for the US economy, but a full separation from global debt markets is a while away yet, and that means the prospect of hyperinflation is as well.

Preparing for hyperinflation is not just useless at this point in time, it's also damaging in that it makes people blind to the real problem: deflation. And before we get to hyperinflation, if we ever do, deflation will cause so much pain and grief and unrest and death, that the very thought of hyperinflation will come to be seen as a highly delusional non-issue.

I’ve swung a bit on this but currently this is my thinking too. The tidal-wave metaphor of Kunstler (first the water goes back, which is the initial deflation-depression, then the wave comes in, which is hyper-inflation) suits an apocalyptic mindset that expects what is very likely inevitable to also be immediate. However, the real determining players on the bond markets are central banks and sovereign funds, and they don’t like the inevitable to be apocalyptic. They want to take it slow, to disengage cautiously, to avoid too much chaos in the inevitable replacement of the dollar as world reserve currency.

So how long will the zombie money last? Can it last as long as Bernanke and Geithner and Obama and Dimon want it to? No, in fact, they're fighting a lost battle against time itself.

The zombie money has to disappear, and it will. It all starts and ends with US and European real estate, the one biggest investment of those of us living on Main Street, by far. US home prices have now fallen for 53 consecutive months, despite the fact that Fannie Mae and Freddie Mac buy up and guarantee near 100% of all mortgages, and despite the fact that the Fed has purchased huge swaths of the securities allegedly backed by these mortgages.

All those trillions "worth" of your money haven't been able to prevent that. And no amount of additional trillions will. Foreclosures are setting brand new records across the country, even as banks are ever more nervous about their paperwork, and their balance sheets. It doesn't matter how much money Washington throws at the issue, other than it’ll make you a whole lot poorer, for you’ll never see it back.

A further deterioration in home prices can't be prevented. Fannie and Freddie can’t buy 101% of mortgages; they're buying close to a 100% right now and prices still fall. Wal-Mart greeters, burger flippers and the rest of the great unwashed will not be allowed back into the housing market. There are over 10 million homes on the market, and perhaps twice that if you count all foreclosed properties that banks sit on (and the millions they won’t foreclose on), plus all those that people would like to sell but can't lest they go underwater. And the pool of potential buyers has shrunk with a vengeance since the 2005-6 "heydays". Huge increase in supply, huge decrease in demand; we all know where this will go.

Now, take Fannie and Freddie out of this picture. What do you see? They’ll be taken out in some way, and at some time, and it won’t take years. I know what I see: the housing and mortgage situation in the US has turned into what I've always called the “Bulgaria model”, where you guarantee the mortgage on your neighbor's home, and he guarantees yours; anything goes as long as it's not the free market your politicians and media tell you about. And we know what happened to Bulgaria in the end, don't we?

I’m all for a society, a government, that takes care of the weakest in its midst. I’m all against a government that props up the strongest in its midst, in this case the bankers with bonuses larger in one year than the weaker among us can make in a lifetime, the same bankers who lost more money in bad wagers than the entire country can cough up, and still be economically viable. We’re fast becoming zombie societies.

But first we'll have to live through this:

3: Food prices

Let’s start with the news that the Tunisian president has fled his country, and the military's taken over, according to Al Jazeera. Mass protests are ongoing in Morocco and Algeria. The riots in Tunisia are not all about food prices, but they were certainly a substantial factor. And more, much more, of the same is on the horizon, in many different places. But food prices this time around are not rising because of widespread dramatic shortages, at least not so far. And Lester Brown, much as I like the man, has it completely wrong:

The Great Food Crisis of 2011

...whereas in years past, it's been weather that has caused a spike in commodities prices, now it's trends on both sides of the food supply/demand equation that are driving up prices. On the demand side, the culprits are population growth, rising affluence, and the use of grain to fuel cars. On the supply side: soil erosion, aquifer depletion, the loss of cropland to nonfarm uses, the diversion of irrigation water to cities, the plateauing of crop yields in agriculturally advanced countries, and -- due to climate change -- crop-withering heat waves and melting mountain glaciers and ice sheets.

In the same vein, the peak oil crowd fails to see what drives up oil prices today. Yes, long term trends affect prices to some extent. But no, Lester, you can't provide an accurate assessment of what’s happening if you don’t include the very obvious contribution of speculation, especially that which originates with zombie money. Ditto for oil prices.

As one of the Peak Oil crowd, here too I agree. Peak Oil will assert itself on its own schedule; meanwhile the plunderers will take all they can regardless.

Food prices are rising partly because, let’s not forget, China, unlike the US, does have inflation, with its money supply going through the roof. But much more than that they're rising because we have elected to kill off the principles of our own western economic systems, which were once supposed to be based on free market ideas, that dictate that success is rewarded and failure punished.

They have since come to resemble some kind of sophomore notion of Darwinianism, where the upper alpha rhino gets all the girls and the rest get none at all. And that in turn is supposed to pose as justice in human societies, whereas in reality it’s nothing but what happened in Bulgaria for decades.

The consequence is that the zombie money is now allowed to drive up food prices to levels which make sure that millions of people around the world will go hungry, and will revolt as a result of that. Blankfein, Dimon et al have long since realized that they can't maintain their velvet “God's work" thrones just by robbing Americans of all they're worth. Their losses are far too great. They need to have access to everyone's wealth all over the world.

And since oil and food are traded on international commodity markets, and they have gotten hold of all the money America is worth, and then some, they can play these markets as much as they want, whether it’s wheat or natural gas or gold. People like to claim that gold will rise as the US dollar becomes worth less, but they forget that it’s zombie money that has been buying gold, and that has thus lifted gold prices. Once daylight comes and the zombies are gone, there's only one way left to go for gold prices too.

So, once again, when will the zombie money see daylight?

This could be caused by any of a myriad of choices. We could force all banks to put foreclosed homes on the market, all at once. Or tell the same banks they have no right to foreclose on homes they have no perfect(ly legal) paper trail on. We could force all derivatives contracts out into the open. Or just the mortgage backed securities; that would do it. Provided we fold Fannie and Freddie, and not let the FHA or any of those guys take over.

As I wrote eons ago, even just closing down Fannie and Freddie for business one or two months would probably do the trick. China could wreck the US economy in 5 minutes simply by demanding to know what their purchases of Fannie and Freddie debt are worth (they have a lot of it). Or it could be a small country, maybe not Iceland, but surely Vietnam, or Belgium, or Denmark, insisting on knowing what that paper their banks and pension funds have so heavily invested in is really worth. MBS, or any other species of derivatives, the whole shebang only has a value attached to it by the grace of nobody trying to figure what that value is.

Is US housing debt, and the securities and derivatives based on that debt, a zombie, or a person? It may certainly seem confusing late at night. But then again, you can't have meaningful relationships with zombies, they're sort of one-dimensional. Funny how that resembles the person-rights US companies enjoy,

And frankly, does it really matter? What we know for sure is that the zombie money we elected to have flow through our financial systems is going to kill a lot of people this year. Want to plead innocence? How long do you think that excuse will be accepted?

Cue Tunisia.

Where our zombie money kills real people. Today.

Tags: Wall Street, Inflation, Deflation, Hyperinflation, Commodities, Quantitative Easing

.

[vanlose kid]

good p. 50 rundown Jack.

think it's time you put it out in a book?

cheers.

*

[JackRiddler]

.

Thanks for the kind words vanlose!

One item I forgot in the highlights rundown was Frank Biancherri of the Global Europe newsletter with the insight that when everyone's looking to sell their bonds...

it may not matter what lousy risks Greece, or Dubai, or Ireland, or other small countries are, because they are small countries. Despite a high debt-to-GDP ratio, Greece has a low GDP and correspondingly low absolute debt. There is enough capital circulating around the world to easily cover Greece’s borrowing needs. By comparison, the far larger British and US economies have enormous borrowing needs, now in the trillions annually. Even if they are considered better risks, the capital may simply not be available for them to borrow, and they will be forced to print money. As Biancheri notes, now that even China is running a trade deficit (as part of a strategy to move off the dollar) it won’t be significantly raising its holdings in other countries’ sovereign debt.

[Worth listening to Biancherri on...]

Guns and Butter radio program for May 5, 2010 - 1:00pm
http://kpfa.org/archive/id/60817

MORE
viewtopic.php?f=8&t=21495&hilit=biancherri&start=435#p338011

Also, from last May:

Let us reject the anti-Greek mythology...

You know that politicians, the corporate media and talk radio lie when they make scapegoats of workers and the poor in the United States. Therefore you should at least suspect that they are doing the same in their daily characterization of Greeks as a spoiled, lazy, riotous people whose irresponsibility will wreck the euro and sink the world economy -- and when they call for punitive austerity measures and, if necessary, a political crackdown as the solutions for the "Greek problem." ...

viewtopic.php?f=8&t=21495&hilit=biancherri&start=450#p338253

That page goes on with a big Greek crisis grab-bag. Last May already feels like ancient history.

.

.

Meanwhile, on the theme of the Big Lie after the crash -- that "no one could have imagined" the coming crash everyone could have seen being engineered in plain sight -- we have the unsurprising news that the Federal Reserve in 2005 was given a report on the housing bubble and how it was unsustainable. Naturally they kept pumping it...

http://www.businessinsider.com/federal- ... -of-wack-2

BUSTED: Unsealed Docs Show The Fed Was Fully Warned Of A Housing Crisis

Gregory White | Jan. 15, 2011, 11:22 AM

New minutes released today show Fed members were fully aware of the growing housing bubble in the U.S. in June of 2005.
[See http://www.federalreserve.gov/monetaryp ... al2005.htm]

The materials include several presentations made on the subject of the emerging housing bubble in the U.S. economy. They have titles like "Is Housing Overvalued?" by Joshua Gallin and "Monetary Policy Implications of a House Price Bubble" by John C. Williams of the San Francisco Fed.

In October of 2005, future Federal Reserve Chairman Ben Bernanke told Congress he didn't think we were in a housing bubble. Bernanke was not at the June 2005 meeting, having recently become Chairman of President George W. Bush's Council of Economic Advisers.

A couple of graphics from the 2005 report are indicative:





In the comments to the Business Insider story, someone pointed this out:

http://www.nytimes.com/2005/05/21/busin ... .html?_r=1

May 21, 2005
Greenspan Is Concerned About 'Froth' in Housing
By EDMUND L. ANDREWS

WASHINGTON, May 20 - Alan Greenspan, chairman of the Federal Reserve, suggested on Friday that the red-hot housing market is becoming a little too exuberant for its own good.

"Without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern," Mr. Greenspan told the Economic Club of New York at the Hilton New York hotel in Midtown.

Mr. Greenspan emphasized that he sees no sign of a nationwide housing bubble, but he acknowledged concerns over "froth" in the market and pointed to a big increase in speculation in homes - particularly in second homes. As a result, he said, there are "a lot of local bubbles" around the country.

The comments of the Fed chairman were the closest he has come to acknowledging the possibility that housing prices may be poised for a fall in some parts of the country.

The issue is sensitive for the Federal Reserve, because its policy of keeping interest rates low has helped propel housing prices upward even when the rest of the economy was dragging.

But the housing issue highlights an unusual quandary for the central bank: even though it has raised short-term interest rates eight times since last June, long-term interest rates and mortgage rates are actually lower than they were one year ago.

The unexpected persistence of low mortgage rates has kept alive the housing boom - in new-home construction as well as in prices of existing homes - much longer than most analysts had expected.

Mr. Greenspan has tried to avoid second-guessing the markets. In 1996, he suggested that the stock prices had been pumped up by "irrational exuberance."

But after a brief spasm of anxiety, investors drove prices higher for three more years. Mr. Greenspan has been criticized by some for failing to pre-emptively puncture the stock market bubble, which burst in March 2000, and some analysts criticize the Federal Reserve now for creating a housing bubble.

Fed officials contend that their primary job is not to influence the price of assets, whether stocks or real estate, but rather to focus on inflation and growth. Trying to puncture a bubble, they say, would cause more problems than it would prevent.

Mr. Greenspan repeated many of his past reassurances about the housing market: that any bubbles were local, not national; and that people do not speculate as much on houses as they do on stocks, because they generally live in the houses they buy.

Residential real estate prices have jumped at double-digit rates for the last several years in many cities, especially along the East and West Coasts.

Prices for existing homes on the West Coast jumped 18.9 percent for the 12 months through March and 14.7 percent on the East Coast, according to the National Association of Realtors.

Nationwide, prices of existing homes have risen by 20 percent over the last two years and 29 percent for the last three years, according to Gus Faucher, a senior economist at Economy.com, a research group.

"We do not see a nationwide housing bubble," Mr. Faucher said, "but there are certainly instances where prices are way ahead of fundamentals."

Many analysts have argued for months that evidence of speculative activity has increased over the last year. Much of the evidence is anecdotal, including people buying and reselling houses at developments before construction is even completed.

But there has been solid data as well pointing to rapid price increases in second-home markets, reports of many more individuals buying houses and condominiums as investments rather than as places to live, and to the heavy use of interest-only loans and adjustable-rate mortgages that allow purchasers to buy considerably more expensive properties than would otherwise be possible.

Mr. Greenspan acknowledged on Friday that many people were "reaching" to finance their purchases.

But he predicted that housing prices were unlikely to decline much, if at all.

"Even if there are declines in prices," he said, "the significant run-up to date has so increased equity in homes that only those who have purchased very recently, purchased before prices actually literally go down, are going to have problems."

[Canadian_watcher]

I agree with Van..
you really oughta write a book, Jack.

That so called 'third-way' proposal is scaring me.

[JackRiddler]

Thanks, Canadian_watcher. I oughta, it's true.

vanlose went and started one on

UN: record food prices put world in "danger territory"
viewtopic.php?f=8&t=30774

From which we'll steal this one:

Goldman Acknowledges Higher US Food Prices, Says Not A Concern If They Stabilize Soon
Submitted by Tyler Durden on 01/18/2011 21:42 -0500

We were wondering how long the Goldman economic koolaid team would continue living in a pretend "priced to perfection" reality. The answer is just 2 under months. After ignoring the topic of surging food prices, head economist Andrew Tilton finally decides to discuss the issue (following 5 countries with violent riots demanding to learn much more about the issue). Not surprisingly the conclusion is one that will not make any dent on the firm's Goldilocks outlook for a QE-inspired, pretend economy. While Tilton attempts to preserve some credibility by noting that yes, it could get very bad, his conclusion is one of keeping to the party line, i.e., that everything will be ok and that much time has to pass before things get bad, even if they were to get bac. To wit: "the recent surge in food commodity prices poses upside risk to both our core and headline CPI forecasts, particularly the latter. The rise in food costs should push up headline CPI inflation by roughly ½ point even without meaningful pass-through effects into the core index, reducing household real income growth accordingly. While clearly undesirable from the standpoint of households, these results suggests that as long as commodity prices stabilize relatively soon, the burst of food inflation would not have a major impact on the broader economic outlook." And what happens if commodity prices do not stabilize "relatively soon", which they won't as long as Ben Bernanke continues to step in for the increasingly sparser foreign Treasury purchasing interest (also known as the Frost-Sack Top Secret "Dow 36,000 Project").

Full Andrew Tilton note:

Prices for food commodities have surged in recent months, with our Goldman Sachs Commodity Agriculture & Livestock index up 60% since its recent trough in mid-June 2010.

Higher food costs have yet to reach the retail level. Our analysis suggests an average lag of seven months from commodity price changes to retail food price changes. Typically, retail food prices move about one-tenth as much as commodity prices. Of course, there is significant variation in both the time lag and the degree of pass-through in individual episodes.

If commodity prices held steady at current levels, we would expect to see consumer food inflation accelerate from roughly 1% over the past year to about 5% in mid-2011, contributing about ½ point to the headline Consumer Price Index. Pass-through into core could also be a few tenths of a percentage point, although there is considerable variation around this outcome. These results suggest that the burst of food inflation seen thus far poses modest upside risk to our current inflation forecasts, but not a major threat to the broader economic outlook.

Prices for food commodities have surged in recent months. Cash prices of grains such as corn and wheat have nearly doubled over the past half-year. Our Goldman Sachs Agriculture & Livestock index, a component of the overall GS Commodity Index, is up 60% since its recent trough in mid-June 2010.

Despite the sharp increases in farm prices, higher food costs have yet to reach the retail level. The food component of the Consumer Price Index is up just 0.8% since mid-2010 and 1.5% year-over-year. Commodity prices and consumer prices for food diverge for two main reasons:

1. Other costs dilute the effects of raw commodity price changes. Commodity food costs are only a small portion of the final consumer prices of food. Even raw vegetables at the grocery store incorporate some labor and transportation costs associated with getting the product from the farm to the store shelf. Much of the food that consumers purchase has been processed considerably and packaged, adding further layers of cost. And the food CPI includes food served at restaurants, which incorporates further costs of service. All of these other costs generally move much less than commodity food prices, diluting the effect at the consumer level. As a rough rule of thumb, we find retail food prices move a bit less than one-tenth as much as our GSCI Agriculture & Livestock index.

2. Time lags from farm to store. It takes time for commodity price changes to be reflected at each stage of the food production chain. On average, we find the highest correlation between commodity and retail food price changes at a seven-month lag.

Illustrative Food Price Pass-Through and Lag Times



To estimate the likely impact of the sharp rise in food commodity prices on the Consumer Price Index, we constructed a model linking the food CPI to 1) the GSCI Ag/Livestock index and lags, 2) lagged core CPI inflation (as a proxy for the underlying inflation trend), and 3) capacity pressures, specifically the capacity utilization rate in the food manufacturing sector and the unemployment rate. Using quarterly data from 1985 through 2010, the model suggests that if food commodity prices stayed at current levels, the 60% increase in food commodity prices to date would push food CPI inflation to around 5% (annualized) in Q2 and Q3 2011. On a year-over-year basis, the food CPI would probably peak in the 4%-4½% range.



What does this mean for the more commonly followed headline and core CPI measures? The total effect on the CPI includes both direct and indirect effects. Food has a relative importance weight of 13.7% in the overall CPI, so the sort of acceleration we envision would make a direct contribution of approximately ½ percentage point to headline CPI inflation in mid-to-late 2011.

Food inflation also could have indirect effects on the CPI by pushing up prices of specific items within the core index. This could occur because companies in other sectors provide food to their employees or to customers as part of their business, and are able to pass the incremental food input cost on in their final prices. Or it could conceivably occur if higher food price inflation nudged up inflation expectations, which then affected wages and/or prices more broadly. In any event, we do find some evidence that food prices push up core inflation slightly (specifically, core goods and some core services, but not rents). Food price inflation in the CPI along the lines of the scenario above might push up core inflation a few tenths of a percentage point over the subsequent year; though as with pass-through from commodity to CPI food inflation, results can vary significantly from one episode to the next.

In summary, the recent surge in food commodity prices poses upside risk to both our core and headline CPI forecasts, particularly the latter. The rise in food costs should push up headline CPI inflation by roughly ½ point even without meaningful pass-through effects into the core index, reducing household real income growth accordingly. While clearly undesirable from the standpoint of households, these results suggests that as long as commodity prices stabilize relatively soon, the burst of food inflation would not have a major impact on the broader economic outlook.

http://www.zerohedge.com/article/goldma ... ilize-soon

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The majority in the US and around the world are being robbed on both ends: by a deflation leaving them without income and taking away what wealth they have and concentrating wealth in ever-fewer hands; and by price rises in essential needs due to a combination of actual as well as fixed shortages and pure paper speculation (but not currently due to inflation, properly defined).

The price-rise measures in the US, to the extent that they are even accurate, are nevertheless used in a fraudulent way. A serious look at prices cannot be had by any of the available indicators by itself. If the mass media outlets were interested in anything other than rah-rah propaganda for the system, each time they reported on this issue they would never just tell you core CPI since last month (and then project that, idiotically) but they would emphasize each of the following:

- Core annual CPI, i.e., without food and fuel – and without any bullshit adjustments like the hedonic deflator, just the straight nominal dollar changes.

- Annual food-fuel CPI – while it’s bullshit simply to leave it out unmentioned, it makes sense to separate this category because these prices really do fluctuate dramatically for acute as well as chronic causes, and they do sometimes go down. An honest approach would never mention core CPI without equal emphasis to food-fuel CPI.

- Comparison of both to 2, 5 and 10 years ago; and to the median wage or household earnings of each of those times.

Only that combination would begin to tell you how the cost of living has developed.

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I do not believe "inflationary experiment" is an accurate description of QE2. For reasons that were foreseeable a year ago, the Fed is resorting to buying up half the T-bill market because no one else will -- perhaps no one else can, there may not be enough capital looking for investment vehicles to cover the current needs of governments regardless of what is thought about their ability ultimately to pay back.

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[JackRiddler]

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From 2 years ago, still relevant, missed a nice one from vigilant of all people (whose output included some good rants with the unbearable stuff). The blue quotes are apparently from a Bloomberg article. In a typical vigilant style he just seems to start in the middle...

Freddie n Fannie Scam Hidden In Broad Daylight
http://www.rigorousintuition.ca/board2/ ... =8&t=20216

This is about the biggest "limited hangout" piece of trash commentary a person could write. Of course its coming from Bloomberg, one of the mouth pieces of the wall street crew, so what else would you expect it to be?

As Joe Public, when I read this, it is obvious that I am supposed to walk away with a few key points stuck in my head. These points don't address the crime at all. These points don't solve the equation in any manner. It steers us away from looking at the thieves in the banking and government sectors, and steers us into these few points, which are about as valuable as garbage rotting in the sunshine...




1. Garbage dump number one:

Don't cry for investors who lost money on the companies' stocks either. If they didn't do any research or didn't understand what they owned, the people they should blame are themselves.
The reality is that investors should withhold their faith in the government officials who regulate our financial markets. That's not cynicism. In the parlance of securities law, it's a risk-factor disclosure.

Read as: If the bankers and government officials you trust not to break the law, and steal and rob you blind, break the laws in the process, and violate every covenant of human decency in the process...well just look the other way because they are "supposed" to do that. Didn't you know that you dumb dumb? No matter what we do to you, when we lie to you, and steal you blind, it will still be your own damn fault. Never forget it. Us stealing from you, and ruining your life, is always your fault...

(But you, you schmuck, you better pay every nickel of your damn taxes, and what you owe to the bank, cause if ya don't, that thin air we loaned ya and called money, that you must pay back with hard cash, or lose all your hard assets, will vanish like smoke my friend, into our pockets...one more time. Which is what separates us from you...we know you'll take this bit of mind programming, you always do, and we are always pleased, but amazed by it....(crooked grin)





2. Garbage dump number two:

When the history is written on the collapse of Fannie Mae and Freddie Mac, it will go down in the annals of corporate scandals as one of the greatest accounting scams committed in broad daylight.

Ya don't say? So this is just an accounting scam huh? Well i'll be jiggered. I was under the impression one of the biggest "crimes" in history is being committed as we speak. But now you tell me "its over" and it was just a company, who "somehow" got into trouble, and didn't want to admit it yet. That was neat and tidy. End of story...into the memory hole the truth will go...

Its amazing how they continually redefine the terms of our world so that we don't recognize what we see. Now the definition of of making millions homeless, broke, starved, financially ruined for life, psychologically broken, spiritually broken, lifetimes work ruined beyond repair, suicidal, in some cases probably literally dead as a result, by fraud, deception, rackateering, outright theft, coercion....is reduced to "accounting scam". Nice and neat isn't it?





3. Garbage dump number three:

All anyone had to do to know the government-guaranteed mortgage financiers were insolvent was read their financial statements. You didn't need a trained professional eye to discern this open secret, only a skeptical one.

Oh really? Another affirmation and hypnotic lesson on how its all our own fault. Really driving that point home aren't ya doc? Well next you're gonna tell us the books were cooked anyway, so which is it?
You're one of people that doesn't have to live behind the veil, so easy for you to say.
"See Joe Public, once again, you and your stupidity, led you over the cliff and you fell into the abyss. Do not attempt to blame the thieves, this is all your fault, just like always, never forget that when we lie to you, and then rob you blind. Repeat after me: "it will always be my own fault".....

Just last month, Fannie and Freddie said their regulatory capital was $47 billion and $37.1 billion, respectively, as of June 30. The Treasury Department now says it may have to inject as much as $200 billion of capital into the two companies. Nothing much changed at the companies in that span. They just couldn't get the government to keep up the ruse any longer.

Sounds like you are saying you knew it all along. I'd like to see the transaction records of your personal portfolio ok? I bet you did ok didn't ya bud?






4. Garbage dump number four:

Gatekeepers Doze
There were lots of gatekeepers who could have stopped this sooner and chose not to. Freddie and Fannie had boards with outside directors and audit committees, though the evidence that they did their jobs is scant.
Freddie's auditor, PricewaterhouseCoopers LLP, could have stopped it, and didn't. The same is true of Fannie's auditor, Deloitte & Touche LLP.
The Securities and Exchange Commission's chairman, Christopher Cox, had other priorities. He was too busy this summer trying to prop up the companies' stock prices by chasing short sellers away from their shares.
James Lockhart, the director of the Federal Housing Finance Agency, kept telling the public this summer that Fannie and Freddie were adequately capitalized. He must have known this was a joke, assuming he had bothered to read their quarterly reports.
All the while, Ben Bernanke at the Federal Reserve and Hank Paulson at Treasury offered the same warm assurances about the companies' capital. They surely knew better, too.

What we should infer: While most of the people that should have been looking out for your best interest were being lazy, inept, playing golf, stupid, fooled, or whatever, a few hard working public servants obviously noticed a crisis could be looming and were working to shore up the dams to protect you while they desperately sought a solution. They kept quiet so as not to start a panic while they desperately looked for a solution. But since these sorts of things "just happen somehow" and obviously nobody knew this was coming, they were caught off guard and by the time they noticed it, it was just too late for them to save your ass, but they tried....

The truth: This was purposely engineered years ago with a known outcome. While the theives were stuffing their armored vans with as much cash as possible, they lied their asses off to stall for time. When they had stolen every available nickel, they knew it was time to get out from under the awning before it came crashing down on them, so it could fall onto your head.

Numbers will head in the same damn direction every time, just like water will, if you arrange the landscape and parameters in a certain way. Due to a few variables it might meander a bit on its way, but the basic contours will steer it in a known direction. Since 2 + 2 always equals 4, the outcome was predictable and certain. These people deal in, and fight over, fractions of a percent everyday because its the difference in millions and billions of dollars in profit. But they somehow by golly, for the life of them, just had no idea where this would go??? Amazing selective foresight isn't it?

If 2 + 2 sometimes equaled -36, we might be able to believe nobody saw this coming, but it doesn't work that way. What was certain was that this was a rigged pyramid scheme, the thieves knew it would collapse, they knew the people on the bottom would go broke, while the profits flow to the top of the "narrow" part of the pyramid. There at the top they waited with open pockets. Along with the fact that our money is being stolen not only once in the scam itself, but twice from taxpayers to "bailout" the country, which in reality is incorporated into the scheme from the beginning, because its an integral part of how the thievery works.

Without knowing a bailout was going to be used, the scheme would have been potentially useless to rig up in the first place, because some of "them" might have actually been open to risk themselves.....and for people that play on this level, risking their marbles to steal yours isn't something they like to do unless they have to.

They would rather risk your marbles, to take your marbles, and take your marbles again when you pay for the damage done, from the marbles already taken from you in the first place...

So Johnathan, great piece of work (trash) there bud...because you didn't tell wall street readers anything. They know this is all garbage, and you certainly didn't do anything but lead the public astray with this garbage.....just how big is that vacation home, and the yacht parked in front of it again???

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I'm not sure that "pyramid" is the best metaphor in this fraud.

This one is all about passing-off of bad paper as good. Passing-off CDOs as AAA bonds.

The equivalent archetype is counterfeiting.

Passing out as gold coins that are in fact 50 percent gold and 50 percent silver.

You will have heard of Gresham's Law:

Bad money drives out good.

That's what has happened in the mortgage securities market. It has frozen up because NOBODY knows which securities are pure gold, and which securities are only 50 percent gold.

So they have stopped buying. The "bad" money has driven the "good" money out of the marketplace.


And Freddie and Fannie are NOT the victims of a pyramid. What happened with these two is that they positively GORGED themselves on fake coins. They morphed into the two largest hedge funds in the world.

Look at their balance sheets.
They are stuffed full with COMMERCIAL mortgage backed securities, with ALT A backed securities and with SUBPRIME backed securities.

ALL OF WHICH LIE OUTSIDE OF THEIR CHARTERED MISSION.



* That's why I'm backing Putin.

[Joe Hillshoist]

"ought to write a book"

Mister you had better write one!!!!

(or else we'll start hassling you to )

[Canadian_watcher]

On the grounds that it will undermine the point, I flat out refuse to say where this seed of an idea first got planted in my head. But something really
scary occurred to me: What if China nationalizes all the industry that has offshored there?

I mean shit.. that'd suck, right? But at least it'd only suck for greedy asshats, wouldn't it? I can't see how it would trickle down in a bad way to
John Q. Public, but then I've only just started to think about this today. Maybe it'll come to me..

[vanlose kid]

The More Americans That Go On Food Stamps The More Money JP Morgan Makes

JP Morgan is the largest processor of food stamp benefits in the United States. JP Morgan has contracted to provide food stamp debit cards in 26 U.S. states and the District of Columbia. JP Morgan is paid for each case that it handles, so that means that the more Americans that go on food stamps, the more profits JP Morgan makes. Yes, you read that correctly. When the number of Americans on food stamps goes up, JP Morgan makes more money. In the video posted below, JP Morgan executive Christopher Paton admits that this is "a very important business to JP Morgan" and that it is doing very well. Considering the fact that the number of Americans on food stamps has exploded from 26 million in 2007 to 43 million today, one can only imagine how much JP Morgan's profits in this area have soared. But doesn't this give JP Morgan an incentive to keep the number of Americans enrolled in the food stamp program as high as possible?


There are just some things that are a little too "creepy" to be "outsourced" to private corporations. The JP Morgan executive in the interview below does his best to put a positive spin on all this, but it just seems really unsavory for a big Wall Street bank to be making so much money off of the suffering of tens of millions of Americans....



So if unemployment goes down will this ruin JP Morgan's food stamp business?

Well, apparently not. In the interview Paton says that 40% of food stamp recipients are currently working, and he seems convinced that there could be further "growth" in that segment.

So is this what America is turning into?

A place where tens of millions of the unemployed and the working poor crawl over to Wal-Mart and the dollar store every month to use the food stamp debit cards provided to them by JP Morgan?

It turns out that JP Morgan also provides child support debit cards in 15 U.S. states and they also provide unemployment insurance benefit debit cards in seven states.

Apparently states have found that they can save millions of dollars by "outsourcing" the provision of these benefits to big financial firms like JP Morgan.

So what happens if you have a problem with your food stamp debit card?

Well, you call up a JP Morgan service center. When you do this, there is a very good chance that you are going to be helped by a JP Morgan call center employee in India.

That's right - it turns out that JP Morgan is saving money by "outsourcing" food stamp customer service calls to India.

When ABC News asked JP Morgan about this, the company would not tell ABC News which states have customer service calls sent to India and which states have them handled inside the United States....

JP Morgan is the only one today still operating public-assistance call centers overseas. The company refused to say which states had calls routed to India and which ones had calls stay domestically. That decision, the company said, was often left up to the individual states.

JP Morgan has been moving some of these call center jobs back inside the United States due to political pressure, but this whole situation is a really good example of what the "global economy" is doing to middle class Americans.

Just try to imagine the irony - a formerly middle class American that has lost a job to outsourcing calls up to get help with food stamp benefits only to be answered by a call center employee in India.

Welcome to the global economy, eh?

But wait, there is more.

It has just been announced that JP Morgan has admitted that they wrongly foreclosed on over a dozen military families and that they have been overcharging "thousands" of other military families on their mortgages.

Ouch.

It is a really bad public relations move to mess with military families.

Is anyone over at JP Morgan even paying attention?

JP Morgan has also been one of the primary financial institutions involved in the foreclosure "robo-signing" scandal.

They just seem to be having all kinds of problems lately. But they are not alone.

The truth is that we have gotten to the point where big Wall Street banks such as JP Morgan, Goldman Sachs, Citibank and Morgan Stanley just have way, way too much power.

The biggest Wall Street financial institutions had no trouble begging for bailouts from the U.S. government during the financial crisis, but when the American people have needed a little grace and mercy from them they have been less than helpful.

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http://theeconomiccollapseblog.com/arch ... rgan-makes

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edit: added video and formatting.

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[anothershamus]