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Fascism and the Dangers of Economic Concentration

Technocrats marching in support of austerity, ready to slash government spending.

A 1980 broadcast highlights economic concentration and its historical relationship to fascism. The issue of the “1%” versus the “99%” is not new.

After discussion of the American corporate connections to the Third Reich, this program concludes with analysis of the perils of the concentration of economic power.

Several minutes in length, the conclusion of that program can be accessed here: Listen.

Of paramount significance,  is the possibility that concentration of economic power in the United States might eventually produce for Americans what it did for Germans in  the 1930’s.

The fact that many of the most important U.S. companies and individuals were deeply involved with Nazi industry and finance informs us that such a possibility is not as remote a sit  might appear at first.

(These same interests attempted to overthrow Franklin D. Roosevelt in a coup attempt in 1934, seeking to install a government modeled on Mussolini’s “corporate state.” Mussolini and his fascisti are pictured at right.)

With the very able assistance of co-host Mark Ortiz, Dave recorded the first of the archive shows, Uncle Sam and the Swastika (M11), on Memorial Day weekend of 1980 (5/23/80).

The program echoes at the distance of thirty years the warning that James Stewart Martin sounded in his 1950 book All Honorable Men. Noting how attempts at breaking up Hitler’s German economic power base had been foiled by the Germans’ powerful American business partners, Martin detailed the same pattern of concentration of economic power in the United States that had led to the rise of Nazism in Germany.

In 2005, Uncle Sam and the Swastika was distilled into For The Record #511. Since then, the American and global economies have tanked and may well get worse. The significance of an economic collapse for the implementation of a fascist cabal figures significantly in the several minutes of this excerpt.

At more than 30 years’ distance from the original recording of Uncle Sam and the Swastika, the questions raised in this broadcast loom large. Will the “calm judgement of business necessity”–fascism–that Martin foresaw in 1950 come to pass?

We should note that Mussolini termed the fascist system–which he christened–“the corporate state.” Another way of conceptualizing it would be to think of fascism as “capitalism on full auto.”


107 comments for “Fascism and the Dangers of Economic Concentration”

  1. Oh Henry, don’t you know you’re never, EVER, supposed to say this kind of stuff:

    Henry Blodget, a former (and formerly disgraced) Wall Street analyst who has been resurrected as one of the smartest writers on business and politics, agrees that the financial class is strongly attached to its tax breaks. After his Wall Street friends have had a few drinks, he said, ‘‘they are cackling that they have fooled everybody into thinking that there’s some justification for this.’’ ‘‘This’’ is the carried interest tax provision, which allows some private equity and hedge fund managers to pay tax at 15 percent.

    But the cackling may be coming to an end — and the hostility toward the president mounting — following his State of the Union speech on Tuesday. A centerpiece of that address, and most likely a central theme on the campaign trail over the next nine months, was Obama’s insistence that the 1 percent must pay up.

    In case you’re wondering what a cackling gaggle of banksters looks like, this might help.

    Posted by Pterrafractyl | January 27, 2012, 8:57 am
  2. Here’s some more insider tidbits and a look at why the public seems to keep falling back in love with sociopathic parasites:

    The Age of Enron

    by Thomas Frank

    Harper’s Magazine Easy Chair (August 2011)

    This summer will mark ten years since the series of disclosures that led to the sudden bankruptcy of the Enron Corporation of Houston. The collapse of the gas-and-power leviathan, then one of the largest companies in the nation, was the starting gun for the modern age of neoliberal scandal, the corporate crime that set the pattern. It was not the first episode to feature grotesque bonuses for insiders, or a fawning press, or bought politicians, or average people being fleeced by scheming predators. But it was the first in recent memory to bring together all those elements in one glorious fireball of fraud.

    And in the years since, we’ve seen many more fireballs, each following the Enron pattern and all of them culminating in the financial meltdown of 2008, along with the seemingly unending recession it triggered. It is fair to say that in some genuine, dismaying sense, we are living in the Age of Enron.

    I remember Enron’s collapse with a special vividness, because in those days I was fascinated by the company. I first came across the name in 1997. I lived in Chicago at the time, and Enron had been running advertisements there calling for the deregulation of the region’s electric utilities. This was puzzling to me, since Enron wasn’t a local outfit. What did they care about the energy market in Illinois?

    As I soon discovered, Enron was not merely a business – it was also an ideological endeavor. “We believe in the inherent wisdom of open markets”, read the first sentence on their vision-and-values webpage. The second sentence read: “We are convinced that consumer choice and competition lead to lower prices and innovation”. In pursuit of that vision and those values, Enron pushed deregulation across the land. They ran TV commercials deriding the fusty old politicians who regulated things and praising open markets with an almost religious veneration. Early in 2001, Enron CEO Ken Lay actually said, “I believe in God and I believe in free markets”.

    That was an outrageous statement, maybe, but only by a matter of degrees; market-worshipping libertarianism was the order of the day back then, just as it is now. What intrigued me was the way the media always chose to describe the looming deregulation of electricity markets: the change was supposed to be “inevitable”, as though history itself were pushing us to undo what our market-skeptical ancestors had devised, with their old-fashioned concerns about fairness and monopoly and fraud.

    These days, less jovial emotions prevail. We deregulate not because we live in some enlightened “New Economy” where the forces of history love us and want us to prosper; we do it because we are afraid. We do it because the John Gaits who rule us won’t have it any other way. If we want them to create jobs, we must do as they instruct.

    We can also be confident that the next scandal will display the distinctively truculent culture of the trading floor. This, too, we learned from the folks in Houston. As Enron’s mission statement insisted so long ago, financial traders, acting in open markets, would deliver extraordinary benefits to consumers. During California’s electricity crisis, however, Enron’s traders behaved in a notably less altruistic manner, figuring out ways to send the state’s power elsewhere and even to shut down power plants during peak hours.

    Audio recordings of these traders’ conversations later emerged and were included in the 2005 documentary Enron: The Smartest Guys in the Room. The traders can be heard boasting about how a colleague “just steals money from California”, cheering for a wildfire that has ignited under an important power-transmission line, and cackling with delight at the helpless idiocy of the non-trader world. “It weeds out the weak people in the market”, one trader says, presumably referring to high electricity prices. “Get rid of ‘em and you know what? The people who are strong will stick around.” (Several of these Ubermenschen eventually did prison time for their roles in the episode.)

    Since then, we have learned how Washington Mutual schemed to sell option adjustable-rate mortgages – “our most profitable mortgage loan” – even though option ARMs actually sucked for most borrowers. We found out that Angelo Mozilo, CEO of subprime lender Countrywide, described one of his company’s own offerings thusly: “In all my years in the business, I have never seen a more toxic product”. We discovered that Goldman Sachs executives viewed a particular collateralized debt obligation as “one shitty deal” but sold it anyway.

    Ever since Enron, pugnacious trader-talk of this sort has been a constant background noise to American life. But like a kidnap victim with Stockholm syndrome, we love the lout in spite of it all. Though he slays our bank account, yet will we trust in him: aspiring to his lifestyle, emulating his swaggering ways.

    And so, in 2009, as the consequences of the financial crisis were becoming apparent to everyone, America fell in love with the Tea Party – a protest movement launched by a business reporter from the floor of the Chicago Board of Trade. And then we made a towering bestseller of Atlas Shrugged, the 1957 novel whose most famous chapter insists on understanding traders as the most exalted specimens of humanity:

    We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved … The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread – a man of justice.

    The final feature of the next Enron-style scandal – and the most important one – is that we will not get it. For most of us, the politics of it all will remain as foggy as were the complex derivatives and Special Purpose Entities themselves.

    Oh, some people will understand. Certain business-school professors will recant, and politicians in places like Iceland will reconsider runaway bank deregulation. In the immediate aftermath of the disaster, we will enact reforms like Sarbanes- Oxley and Dodd- Frank to replace the reforms we gutted the last time around.

    Yes, we will get mad when we first hear about what’s happened. The financial thieves of tomorrow will put it in our faces, just like the Enron bosses who cashed out as the company sank and the bonus-grabbing AIG execs in 2009. Americans will be infuriated. We will buzz like bees. We will scream for blood.

    Then we will proceed to do exactly what Enron or AIG or Goldman Sachs wanted us to do all along. We will convince ourselves that these terrible things happened to us because markets aren’t free enough – that our only mistake was in not carrying our campaigns for deregulation or tax cuts to their logical conclusions. After Enron collapsed, let’s recall, the nation decided that Enron had been right all along: California had such terrible problems because it was run by tree-hugging liberals who stifled entrepreneurship with their preposterous interfering ways.

    And today, after one of the clearest lessons in deregulatory folly that history is likely to provide, we are once again on a national crusade against regulation. We have filled Congress with clear-eyed believers who know that economic rules are an affront to freedom itself. We have signed up by the millions for Tea Party groups organized by antiregulatory outfits like Freedom Works – which, in its earlier incarnation as Citizens for a Sound Economy, took some $20,000 in funds from none other than Enron.

    Or perhaps I’ve just misunderstood. Maybe what we’re so agitated about is the possibility that some law-and-order killjoy might bring the Age of Enron to a close. Maybe, for all our fond talk of the untainted republic of the Founders, the Texas of Ken Lay is where we really long to be. So let the next scandal ruin our neighbor, let it black out entire regions of the country, let it throw millions out of work – as long as we get a chance for our turn at the trough.

    The whole column is worth a read. While I suspect that a large portion of the populace is no longer entranced by the this generation of free-market/deregulation ideology as we (hopefully) emerge from the “Age of Enron”, it will be interesting to see what difference that awakening might make in “Age of Citizens United”. I guess there’s always hope!

    Posted by Pterrafractyl | January 27, 2012, 12:40 pm
  3. @Pterrafractyl: Yep, and with all the fascist bastards out there, attacking progressives and democracy……..(particularly by making the extremely ridiculous, and quite honestly fascistic, claim that America was a “republic[i.e. South African or C.S.A. style tyrannical state run by wealthy criminals and thugs, that’s what they want], not a democracy”, when in fact, America was wholly intended to be a democratic republic with protections for all citizens, as in the Bill of Rights. Without democratic values, there would be no Bill of Rights. And, frankly, it goes vice versa as well)….and sadly, with a still growing number of idiots supporting this B.S. I do fear terribly for the fate of this country.

    Posted by Steven L. | January 28, 2012, 4:10 am
  4. Again, let me repeat this: America is not JUST a republic(like Rome), or JUST a democracy(like Athens), but BOTH. Anyone who thinks otherwise has been deceived, or is lying to themselves, and has been convinced to do so by an elite who have always hated democratic values and everything they stand for.

    Ladies and gentlemen, these same people demonizing democracy are the same elite who brought us Mussolini and Hitler. Make no mistake.

    And, frankly, if anyone wants to troll this site and engage in anti-democracy propaganda, then are they are absolutely unwelcome, regardless of whether they claim to be on our side or not.
    We must be vigilant of liars and deceivers in our midst, for there are many, as well as idiots & morons who are holding us back and harming our image.

    Dave, I can’t thank you and other good people like Terrafractyl here enough. It is people like you who are the shining beacon of light on a very dark coastline. And I mean that sincerely. =)

    (Webmaster: sorry if I sounded a little paranoid, but I can’t help but feel uneasy due to these terrible times.)

    Posted by Steven L. | January 28, 2012, 4:18 am
  5. (And when I spoke of ‘these same people’ demonizing democracy, I meant folks like Pat Buchanan, David Duke, etc. Just wanted to clarify that.)

    Posted by Steven L. | January 28, 2012, 4:20 am
  6. Just when you thought the mask couldn’t drop a little more, there it goes. The folks at Davos are discussing searching for soltions to the globe’s political and economic problems. Their solution? Make governing the Businessman’s Burden (they don’t want to do it but they feel the social obligations):

    Are Companies More Powerful Than Countries?
    By Rana Foroohar | January 27, 2012

    In 2008, after Lehman Brothers fell and the financial crisis and global recession began, the conventional wisdom was that we were entering an era in which government would take back power from business. In fact, just the opposite has happened.

    The high profile political figures here at Davos disappointed — Merkel was angry and depressed by turns, and Geithner was defensive. Europe remains a mess, the U.S. vulnerable, and emerging markets — the only bright spot in the last three years — are slowing down. Politicians have few solutions to the huge problems of the day — labor bifurcation, debt, and inequality. Markets want answers, but leaders can’t give them — in part because for them, nearly any sort of action poses political risk.

    Meanwhile, the top companies seem to exist in a world apart — they are booming, and their executives are prospering. If there is a meta theme to this year’s World Economic Forum in Davos, it is that the world’s largest companies are moving on and moving ahead of governments and countries that they perceive to be inept and anemic. They are flying above them, operating in a space that is increasingly disconnected from local concerns, and the problems of their home markets. And if the conversations here are any indication, they may soon take over much of what government itself does.

    The problem was nicely captured in this week’s New York Times piece on Apple, looking at why the iPhone is mostly made outside America. As one of the company’s executives put it, “We don’t have an obligation to solve America’s problems.” It’s a sentiment that was echoed on Time’s Board of Economists’ panel, where business leaders blamed for not sharing the $2 trillion in wealth sitting on corporate balance sheets argued that they did create jobs and prosperity — just not in this country.

    Conversely, many firms sending jobs abroad aren’t doing it because it’s cheaper — but because skills are better (at least in relation to wages) in other countries. It’s a scary trend, and one that speaks to the growing bifurcation in Western labor markets. A lot of people here in Davos — people like Nobel laureate Chris Pissarides, and a number of high level investors I spoke with — say that we can’t innovate or educate our way out of this problem. It’s only going to get worse, particularly as a coming automation revolution starts to hollow out white collar jobs in rich countries.

    So, where does that leave us? Do the people running the world’s largest companies, which are growing fast and hold plenty of cash, have any responsibility to their home markets? Should they even take on certain roles that beleaguered and indebted states can’t handle any more — things like education, health care and infrastructure development? Here at Davos, there are unlikely alliances being made over these issues; people ranging from Bangladeshi micro finance founder Mohamed Yunus to financial titans say yes, what we need isn’t less capitalism, but more. Let companies pick up the slack from the state. The ideas being floated are radical — GE and Microsoft should run education in America, making it more efficient and insuring U.S. workers have the skill set they need to get jobs in the future. (Yes, everyone also agreed that such solutions were freighted with social and political problems.)

    America should get serious about industrial policy (traditionally a third rail word) and start subsidizing and pushing strategic industries as hard as China does, as well as slapping tough tariffs on competitors’ goods (the central bankers in attendance are wringing their hands about coming trade and currency wars that might result). Some say we should radically raise minimum wages for the 90 percent of people in rich countries who’ll end up working service jobs catering to a small upper class of global rich. A two-tier class system is inevitable, they say. We just have to make it palatable. Others, including a number of university presidents, believe we need to take a “by any means necessary” approach to keeping high-end jobs, particularly tech oriented ones, at home.

    On that, at least, politicians would agree. In her keynote opening speech at Davos, Angela Merkel said that unless the eurozone crisis was solved, Europe risked becoming “just a nice place to take a vacation.” The same could be said of all rich countries. One thing that’s becoming clear at Davos is that the core idea of the Enlightenment — that capitalism and democracy go hand in hand to create the best society — is under fire. And the struggle to create a new model may well pit nation against nation, corporations against government, poor against rich. The world, it turns out, isn’t flat – and it’s becoming bumpier all the time.

    At least now it’s clear why there’s so little uproar in the international leadership community over the direction the eurozone is going. It’s the plan for the planet. Palatable two-tiered societies for all! Huzzah! It’s New Enlightenment.

    Posted by Pterrafractyl | January 30, 2012, 9:47 am
  7. This article includes a nice description of what’s going on in the eurozone. They’re trying to make Keynesianism illegal:

    EU leaders struggle to reconcile austerity, growth
    By Jan Strupczewski and Luke Baker

    BRUSSELS | Mon Jan 30, 2012 2:31pm EST


    With Britain standing aloof, most of the other 26 EU leaders were set to approve a fiscal pact to write balanced budget rules into their national law, despite economists’ doubts about the wisdom of effectively outlawing deficit spending.

    To write into law a Germanic view of how one should run an economy and that essentially makes Keynesianism illegal is not something we would do,” a British official said.

    Is the eurozone public even aware of what its about to agree to or has reality TV rotted the brains of another continent?

    Posted by Pterrafractyl | January 30, 2012, 12:20 pm
  8. In keeping with the times, not extending expiring tax-cuts is now apparently an impeachable offense:

    Impeach Obama?
    Grover Norquist predicts a rebellion if President Obama wins reelection and doesn’t extend the Bush tax cuts.

    By Nancy Cook
    Updated: January 28, 2012 | 8:34 a.m.
    January 26, 2012 | 2:00 p.m.

    While other Washington insiders are wringing their hands over the lack of action expected on Capitol Hill in this election year, Grover Norquist is studying his color-coded maps. The antitax advocate and president of Americans for Tax Reform is taking the long view on Congress and charting the ways that Republicans could eventually control the House, Senate, and White House, along with statehouses across the country (all while making sure politicians adhere to his antitax pledge).

    “The context for the next 12 months is that 2011 was supposed to be the ‘Year of the Tax Increase’—you know, like the ‘Year of the Woman’ or the ‘Year of the Dragon,’ ” he says with a smirk. But, last year was not marked by tax hikes at all, thanks to congressional gridlock and the failures of various deficit-reduction efforts. For Norquist, that means 2012 could practically be a vacation, or at least a fun year of dreaming about future slashes in marginal rates. He recently spoke to National Journal. Edited excerpts from the interview follow.

    NJ At the end of 2012, a number of major tax provisions, including the Bush-era cuts, are set to expire. Do you have any predictions?

    NORQUIST We’re focused on the fact that there is this Damocles sword hanging over people’s head. What you don’t know is who will be in charge when all of this will happen. I think when we get through this election cycle, we’ll have a Republican majority, [though] not necessarily a strong majority in the Senate, and a majority in the House. The majority in the House will continue to be a Reagan majority, a conservative majority. Boehner never has to talk his delegation going further to the right.

    If the Republicans have the House, Senate, and the presidency, I’m told that they could do an early budget vote—a reconciliation vote where you extend the Bush tax cuts out for a decade or five years. You take all of those issues off the table, and then say, “What do you want to do for tax reform?”

    Then, the question is: “OK, what do we do about repatriation and all of the interesting stuff?” And, if you have a Republican president to go with a Republican House and Senate, then they pass the [Paul] Ryan plan [on Medicare].

    NJ What if the Democrats still have control? What’s your scenario then?

    NORQUIST Obama can sit there and let all the tax [cuts] lapse, and then the Republicans will have enough votes in the Senate in 2014 to impeach. The last year, he’s gone into this huddle where he does everything by executive order. He’s made no effort to work with Congress.

    Posted by Pterrafractyl | January 30, 2012, 2:24 pm
  9. @Pterrafractyl: Thanks, man. It’s just another example of how far some Establishment flunkies will go to B.S. their way out of telling the truth. Obama has tried to work with Congress…..it’s congress that won’t work with him, or more specifically, the Republicans.

    Of course, Norquist isn’t the only Establishment flunky who’s guilty of B.S.ing people on what’s going on in Congress. Oh no, there’s far more liars than that, as we both probably know by now.

    Posted by Steven L. | January 30, 2012, 5:30 pm
  10. @Steven L: Part of what makes Norquist such an interesting critter is that it often seems like the Establishment is his flunky. It’s surprising that the far-right hasn’t found a more telegenic spokesman for their cause, though. The guy always looks like he wants to strangle the world (and not just metaphorically).

    Posted by Pterrafractyl | January 31, 2012, 3:49 pm
  11. The first paragraph of this article includes one of the many unspeakable realities of our time (well, unspeakable for the bulk of media shills) in the Age of Austerity and Deficit hysterics. With someone that’s the walking embodiment of social inequality looking likely to get the nomination of the US robber baron party, let’s hope this issues gets raised more and more while Mr. tax-haven hits the campaign trail:

    Robert Reich
    The great switch by the super rich

    Wealthy Americans used to finance the government through tax payments. Now, they just lend it money.

    By Robert Reich, Guest blogger / May 18, 2011

    Forty years ago, wealthy Americans financed the U.S. government mainly through their tax payments. Today wealthy Americans finance the government mainly by lending it money. While foreigners own most of our national debt, over 40 percent is owned by Americans – mostly the very wealthy.

    This great switch by the super rich – from paying the government taxes to lending the government money — has gone almost unnoticed. But it’s critical for understanding the budget predicament we’re now in. And for getting out of it.

    Over that four decades, tax rates on the very rich have plummeted. Between the end of World War II and 1980, the top tax bracket remained over 70 percent — and even after deductions and credits was well over 50 percent. Now it’s 36 percent. As recently as the late 1980s, the capital gains rate was 35 percent. Now it’s 15 percent.

    Not only are rates lower now, but loopholes are bigger. 18,000 households earning more than a half-million dollars last year paid no income taxes at all. In recent years, according to the IRS, the richest 400 Americans have paid only 18 percent of their total incomes in federal income taxes. Billionaire hedge-fund and private-equity managers are allowed to treat much of their incomes as capital gains (again, at 15 percent).

    Meanwhile, more and more of the nation’s income and wealth have gone to the top. In the late 1970s, the top 1 percent took home 9 percent of total national income. Now the top 1 percent’s take is more than 20 percent. Over the same period, the top one-tenth of one percent has tripled its share.

    Wealth is even more concentrated at the top — more concentrated than at any time since the Gilded Age of the late 19th century.

    Oh no!! He’s using his Jedi mind tricks:

    Romney: Actually, I Kind of Pay 50% Tax

    Josh Marshall January 27, 2012, 7:20 PM

    I’m pretty surprised that Mitt Romney’s team let their guy go down this path. Or maybe it’s just him. Stung by the 13.9% tax rate story and goaded on by some conservative columnists, Mitt Romney is now saying that his actual tax rate is “really closer to 45 or 50 percent.”

    Romney’s claims come pretty much right at the beginning of this interview below but he’s said it twice today. It’s gotten pretty little press even though these were public interviews; and kudos to Huffpo’s Jon Ward for putting together the story. [Video]

    Romney’s argument is that even though he pays only 13.9%, he’s really paying something like 45% to 50% because the investment income he lives on comes from corporations. And those corporates also pay taxes. The nominal corporate tax rate is 35%, though of course many pay much lower. But if you add Romney’s rate together with this completely unrelated corporate tax he doesn’t pay, you get 50%, which Romney is now saying is real tax rate. In other words, he’s claiming he pays both taxes.



    Posted by Pterrafractyl | January 31, 2012, 7:49 pm
  12. i really would not say there is much of a difference between Bush and Obama. As far as the ‘tax cuts’ measure
    its just political posturing during an election cycle

    2012 election cycle
    mitt romney
    Goldman Sachs $235,275
    Citigroup Inc $178,450
    Merrill Lynch $176,125
    Morgan Stanley $170,350
    Lehman Brothers $154,800
    UBS AG $125,150
    JPMorgan Chase & Co $123,800

    barak obama
    University of California $1,648,685
    Goldman Sachs $1,013,091
    Harvard University $878,164
    Microsoft Corp $852,167
    Google Inc $814,540
    JPMorgan Chase & Co $808,799
    Citigroup Inc $736,771

    and for comaprison
    2004 bush
    Morgan Stanley $603,480
    Merrill Lynch $586,254
    PricewaterhouseCoopers $514,250
    UBS AG $474,325
    Goldman Sachs $394,600
    Lehman Brothers $361,525
    MBNA Corp $350,350

    (source http://www.opensecrets.org)

    wow usb ag is one of those elusive swiss banks that dave is going on about

    What I find interesting is that ‘normal’media is starting to get these ideas thankfully. (They never call it fascism or have a historical perspective)
    Mr Moyers interviews the architect of Reaganomics and ‘the revolving door’ two tiered class structure Pterrafractyl cited and countless other references in this thread

    my point being it doesn’t seem to matter who you vote for. As long as these fascist corporations keep pulling the strings, its seems to have been born some time after the US civil war with the industrial era itself and is stuck on repeat. I would highly recommend George Seldes ‘You can’t do that’

    it almost reads like today

    But it continually amazes me how Daves research is right on the money, when you fact check and cross reference.

    Posted by leif | January 31, 2012, 8:24 pm
  13. @Leif: The way I look at the US two-party options, it’s like you’re driving a convertible with no breaks and two godawful passengers. You’ve been alternating between following their directions (which seemed like a bad idea because of them seem rather loopy) and, surprise surprise, you’re lost and heading for a cliff. Passenger #1 appears to have the same brain injury as the guy from Memento. He always thinks its 1999 and deregulation and tax cuts are totally the thing to do, but he’s also covered in tattoos warning him of lessons he’s experienced over the years, even if he can’t quite remember them (“don’t repeal Glass-Steagall!”/”Mortgage-fraud!!!”/”Unregulated derivatives destroyed us!”, etc.). Passenger #1 suggests veering left, no right, no maybe left was the right way to go…nah, go right. He generally seems unsure and confused but at least with all those tattoos he occasionally makes a sound choice.

    Passenger #2 is Darth Vader wearing a jetpack. He has catastrophic insurance coverage on the car thinks pointing it towards the cliff and putting the pedal to the metal sounds like a great plan. Also, Darth is using the Force to keep your seat belt stuck so there’s no jumping out.

    If you keep on listening to both passengers you’ll end up flying off the cliff no matter what, but one passenger’s advice is going to get you there a lot faster and he’s got a jetpack and you don’t. At the end of the day, I’d prefer veering back and forth another time….maybe it’ll jostle the seat belt loose.

    Of course, the optimal solution would be for the metaphorical driver to stop listening to either passenger and just turn the car around but that’s the beauty of our system and the game-theory dynamics it generates: choosing the lesser of two evils often seems like a lesser evil, itself, when compared to the option of voting for the 3rd party candidate you’d actually prefer. That’s why, if you use the phrase “instant runoff voting” in front of either of your passengers, you get the impression they might both blow the car up.

    Posted by Pterrafractyl | February 1, 2012, 11:46 am
  14. @ Pterrafractyl

    I dont quite see it clear and simple like that as such, although i think its more like a bus floating down a river with Mussolini and Darth Vader at the wheel. A lot of other fish are going to join the swarm because there is always strength in masses.
    Money talks no matter what side of the aisle your on.
    Outsourcing was a clear plan to break labors political back.
    Heck i would vote for either party as long as they didn’t stink of corporate fish.

    Posted by leif | February 1, 2012, 8:28 pm
  15. @Leif: Definitely agree with you on the outsourcing issue. Sad thing is, though, the ‘conservatives’ will blame it all on progressives or ‘illegal’ immigrants, etc.

    Posted by Steven L. | February 2, 2012, 10:08 am
  16. @Leif: I’d agree that an informed, uncorrupted individuals from either party could easily find common ground on find awful law that need to be overturned. It would be like shooting fish in a barrel and most of those laws probably had huge support from both parties.

    It’s on the question of “where do we go from here” where I find a pretty big split between the two because I don’t see the “small government/free-market/no-regulation/you’re on your own” paradigm as being even remotely feasible for a modern technologically intensive economy in this day and age unless we revert to a 19th century social contract of just allowing death via poverty. The Dem party’s lack of ideological purity on economic policy, as schizo as it seems, is sort of its saving grace because we need to figure out new ways to government ourselves in a way that maintains real freedom while not running the biosphere into the ground and creating mass unemployment. I’m just guessing that some mix of a market economy, strong (but not stupid) regulation, a social safety net, serious environmental, labor, and voting rights protections, and a general recognition that we’re no longer living in an endless growth situation are just some of features that are going to be required for a future that doesn’t totally suck for 99% of our grandchildren. Unfortunately, I don’t see a paradigm that includes those features emerging from the GOP’s base, although I can only barely imagine it emerging from the Dem’s base, FWIW. And yeah, I’d vote for either party if they had a believable vision for the future that doesn’t seem to continued adherence to the same psychotic policies and ideologies that are turning the planet into a giant poisoned plantation.

    Posted by Pterrafractyl | February 2, 2012, 2:56 pm
  17. And our bankster elites wonder why so many people think they’re reckless parasites:

    S.E.C. Is Avoiding Tough Sanctions for Large Banks

    Published: February 3, 2012

    WASHINGTON — Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.

    By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.

    An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

    JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

    Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

    By granting those waivers, the S.E.C. allowed Wall Street firms to have powerful advantages, securities experts and former regulators say. The institutions remained protected under the Private Securities Litigation Reform Act of 1995, which makes it easier to avoid class-action shareholder lawsuits.

    The commission has frequently turned the other cheek when the companies again settle similar fraud cases. S.E.C. officials have defended that practice by saying they do not have the resources to take cases to court rather than settle. They recently asked Congress to toughen laws and to raise financial penalties for fraud violations.

    ¶ But the repeated granting of waivers suggests that the agency does in fact have tools it often does not use, critics say. Close to half of the waivers went to repeat offenders — Wall Street firms that had settled previous fraud charges by agreeing never again to violate the very laws that the S.E.C. was now saying that they had broken.

    JPMorganChase is among the big Wall Street firms that have been granted multiple waivers with nearly every settlement of S.E.C. fraud charges. Last July, it agreed to pay $228 million to settle civil and criminal charges that it cheated cities and towns by rigging bids with other Wall Street firms to invest the money raised by several municipalities for capital projects.

    JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business.

    “That distinction doesn’t do it for me,” said Richard W. Painter, a corporate law professor at the University of Minnesota and the co-author of a casebook on securities litigation and enforcement. “If a company has trouble telling the truth to investors in one batch of securities it is underwriting, I would not have confidence that it would tell the truth to investors about its own securities.”

    Despite six securities fraud settlements in 13 years, JPMorgan rarely if ever lost any special privileges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the S.E.C. that it should grant a waiver because the company has “a strong record of compliance with the securities laws.” The company declined to comment for this article.

    Posted by Pterrafractyl | February 3, 2012, 8:08 am
  18. I wonder if the SEC can waive this too (it’s a NY state lawsuit) or if the big boys have to some state-specific get-out-of-jail-free card. I guess we’ll find out:

    New York Suing 3 Banks Over Mortgage Database
    Published: February 3, 2012

    Attorney General Eric T. Schneiderman of New York sued three major banks on Friday, accusing them of fraud in their use of an electronic mortgage database that he said resulted in deceptive and illegal practices, including false documents in foreclosure proceedings.

    Mr. Schneiderman, co-chairman of a new mortgage crisis unit under President Obama, filed a lawsuit against Bank of America, Wells Fargo and JPMorgan Chase in New York State Supreme Court in Brooklyn.

    The database, called the Mortgage Electronic Registration System or MERS, was created in the mid-1990s for tracking mortgage ownership. It is a collaboration of top mortgage servicers, mortgage insurers and Fannie Mae and Freddie Mac, the government entities that hold many of the country’s mortgages.

    “The mortgage industry created MERS to allow financial institutions to evade county recording fees, avoid the need to publicly record mortgage transfers and facilitate the rapid sale and securitization of mortgages en masse,” Mr. Schneiderman said.

    “By creating this bizarre and complex end-around of the traditional public recording system,” Mr. Schneiderman’s lawsuit asserts, the banks saved $2 billion in recording fees.

    More than 70 million mortgage loans, including millions of subprime loans, have been registered in the MERS system, rather than in local county clerks’ offices, according to the lawsuit.

    The lawsuit asserts the database is inaccurate and seeks to stop the banks from filing foreclosure actions through MERS and executing false or defective mortgage assignments in New York foreclosure proceedings.

    Mr. Schneiderman also is seeking all profits obtained through fraudulent and deceptive practices and other damages, including $5,000 for each violation of general business law.

    Posted by Pterrafractyl | February 3, 2012, 1:48 pm
  19. So how exactly is the “troika” going to force a 25% wage cut across the private sector in Greece? Is it just a law that gets passed where everyone’s wages/salary must drop by exactly 25%? That should do wonders for the economy:

    Patience with Greek politicians has evaporated among its creditors. During a conference call on Saturday, eurozone finance ministers bluntly told Athens to deliver on its promises and agree to reforms or face default next month.

    Jean-Claude Juncker, head of the eurozone group of finance ministers, told Der Spiegel at the weekend that the possibility of bankruptcy should encourage Athens to “get muscles” when it comes to implementing reforms.

    “If we were to establish that everything has gone wrong in Greece, there would be no new programme and that would mean that in March they have to declare bankruptcy,” he warned.

    Mr Samaras last week threatened to veto the package unless concessions were made on private sector wages, claiming the cuts would prolong a recession already in its fifth year. Mr Karatzaferis also opposes further austerity measures.

    The two sides were still far apart over projected cuts of 25 per cent in private sector wages, 35 per cent in supplementary pensions and the closure of about 100 state-controlled organisations with thousands of job losses.

    These are part of a €4.4bn package of savings the troika has said should be implemented at once.

    Eurozone officials are deliberately refusing to allow Greece to sign off on a €200bn bond restructuring plan because the threat of default is the leverage they have to convince recalcitrant Greek ministers to implement necessary cuts.

    Posted by Pterrafractyl | February 6, 2012, 9:22 am
  20. Posted by Pterrafractyl | February 7, 2012, 2:17 pm
  21. Ok, this is starting to take on an S&M quality, and it doesn’t look like anyone told Greece the safe word:

    Greece deal fails to convince, EU demands more

    By Jan Strupczewski and Renee Maltezou | Reuters


    BRUSSELS/ATHENS (Reuters) – Greek political leaders said they had clinched a deal on economic reforms needed to secure a second EU bailout, but euro zone finance ministers demanded more steps and a parliamentary seal of approval before providing the aid.

    The EU and the International Monetary Fund are exasperated by a string of broken promises by Athens and weeks of disagreement over the terms of a 130 billion euro ($172 billion) bailout, with time running out to avoid a default.

    Finance ministers of the 17-nation euro zone meeting in Brussels warned there would be no immediate approval for the rescue package and said Athens must prove itself first.

    Jean-Claude Juncker, who chairs the Eurogroup, set three conditions, saying the Greek parliament must ratify the package when it meets on Sunday and a further 325 million euros of spending reductions needed to be identified by next Wednesday, after which euro zone finance ministers would meet again.

    “Thirdly, we would need to obtain strong political assurances from the leaders of the coalition parties on the implementation of the program,” Juncker told a news conference after six hours of talks in Brussels. “Those elements needs to be in place before we can take decisions.”

    “In short, no disbursement before implementation.”

    Facing elections as soon as April, Greece’s party leaders have been loath to accept the lenders’ tough conditions, which are certain to be unpopular with increasingly angry voters.


    Greece has fallen deeper into recession since it received a first bailout in May 2010. Latest unemployment figures showed the jobless rate hit a record 20.9 percent in November, with youth unemployment a staggering 48 percent.

    The sharper-than-forecast contraction has opened a funding gap of about 15 billion euros in the bailout package agreed last October to bring Greece’s debt down to about 120 percent of gross domestic product from nearly 160 percent today.

    Two sources said the government would promise spending cuts and tax rises worth 13 billion euros from 2012 to 2015, almost double the seven billion originally pledged.

    This is turning out to be a be brilliant ploy to drive Greece into the ground:
    1. Have endless talks about a bailout to cover a fiscal “gap”.
    2. Tie the bailout to austerity measures that are certain to decimate the economy.
    3. Make obscene demands in “austerity” cuts, targeting the most vulnerable populations (the young and old) that ensure that the talks will take forever because it forces Greece into national suicide to accept the cuts.
    4. Keep threatening to kill the country immediately via threat of withholding funds and defaulting (“default”, BTW, is the S&M safe word).
    5. Once you bludgeon Greece’s “leaders” into accepting your terms, point out that the economy has gotten unexpectedly worse and now even larger cuts are required.
    6. Repeat steps 1-5 as needed.
    7. Apply steps 1-6 as needed to additional eurozone countries.
    8. Eventually roll out the plan you had all along but couldn’t quite admit (even though it was talked about in the international press):

    February 9, 2012 7:44 pm
    Germany and Europe: A very federal formula

    By Quentin Peel

    Angela Merkel’s plans for a shift in power from EU members to Brussels would generate constitutional problems within Germany and worries among allies, writes Quentin Peel

    The 20th anniversary of the signing of the Maastricht treaty passed largely unremarked on Tuesday as the crisis in the eurozone preoccupied governments and the financial markets. Yet even as negotiations in Athens edged towards Thursday’s agreement on rescheduling the Greek debt burden, the pact that laid the foundations for Europe’s single currency was heralded by Chancellor Angela Merkel in a speech to students.

    In an unusually appropriate setting – surrounded by Greek antiquities in the reconstructed Neues Museum in the centre of Berlin – Germany’s normally cautious leader spelt out elements of her vision on how to solve the eurozone crisis long-term.

    Much was familiar. Eurozone countries needed both budget austerity to reduce their debts and structural reforms to boost their competitiveness and employment, she said. They needed to recreate trust in their finances and in each other. Then she turned to the construction of the EU. “Without doubt, we need more and not less Europe,” Ms Merkel declared. “That’s why it’s necessary to create a political union, something that wasn’t done when the euro was launched.”

    She went on to suggest that this political union – “there will still be a lot of argument about it” – would be organised around the existing bodies of the soon to be 28-nation bloc. The European Commission, the Brussels-based executive arm, would – with competences transferred to it by nation states – act as a government reporting to a strong European parliament. The European Council of national heads of state and government would function as a second legislative chamber; the European Court of Justice would be the highest authority. “We believe that we will stand better together if we are ready to transfer competences step by step to Europe,” she said.

    “That is just about as federalist as you can get,” says Henrik Enderlein of the Hertie School of Government in Berlin. “Is she serious? That is the real question. She is very good at the rhetoric. But I do take it seriously that she wants to move towards political union.”

    Close advisers confirm that the chancellor has indeed been thinking long and hard about reforms of the EU that go far beyond the recent “fiscal compact” of budgetary rules agreed as an intergovernmental treaty last month by 25 of the 27 members.

    At a recent meeting with three fellow European leaders at Schloss Meseberg, her baroque government retreat outside Berlin, she urged them to spell out their ideas of how the EU should look in 10 years’ time. To her obvious frustration, they were all much more focused on the present crisis. Yet she gave only hints of her own thinking in a series of statements and speeches. “She is quite clever in not spelling it out,” says Joachim Fritz-Vannahme of the Europe’s Future programme at the Bertelsmann foundation. “She is playing chess. She knows what she has to do. She knows it will take time. And she knows it will be very controversial.”

    It is, he adds, “a vision for the transformation of the EU – or at least the eurozone – in a very short time frame: three to five years. Political union is not a very clear concept. She doesn’t dare speak about a United States of Europe, but she is thinking about what has to be in it.

    Conversations with senior officials and political analysts in Berlin reveal a lot more detailed thinking than Ms Merkel has demonstrated publicly.

    The “fiscal compact” is seen as just a first step to make the rules of budget discipline genuinely binding on all eurozone members: they must put a commitment to balanced budgets into their national constitutions, or equivalent legislation. In exchange, Germany proposed and is the principal financier of the permanent European Stability Mechanism, due to start operating in July. It is in effect a €500bn European monetary fund to deal with debt crises in the 17-member monetary union.

    The rules agreed would set ceilings for national spending and borrowing but would not interfere with tax and spending choices. But the next phase contemplated in Berlin would be more intrusive: co-ordinating or even harmonising taxes, with budgets supervised by the Commission and all eurozone finance ministers. They would be able to insist on certain spending priorities, to ensure competitiveness and growth targets were met and that adequate funds were devoted to areas such as education. It would mean a big transfer of sovereignty away from national capitals and parliaments.

    At that stage, many leading German officials and politicians privately concede, the introduction of jointly guaranteed eurobonds might be possible, even irresistible. The concept would provide cheaper financing for the most indebted eurozone states. It is still fiercely resisted in Ms Merkel’s CDU and by the liberal Free Democrats, junior partner in the coalition. The chancellor herself sounds sceptical. But Wolfgang Schäuble, her passionately pro-European finance minister, has always said “not yet” rather than “never” to the bonds. (Both the main opposition parties, the centre-left Social Democrats and the environmentalist Greens, are in favour.)

    Sooo….is the rest of the eurozone even paying attention to this or does the world have to spend the next 5 years watching the rest of the eurozone blindly stumbled into a giant sovereignty-grab scam that’s not even a public secret? Granted, there should be no shortage of politicians in country more than happy to sell out their nations into some sort of 21st vassal state union, but after seeing what’s being done to Greece it’s stunning that the public in the non-PIIGS countries could really be ready to just submit to the whim of a group of leaders that are behaving like an abusive sugar-daddy.

    And now that we know what Merkel has planned, and know that we know that Merkel knows that her plans are very controversial and can’t be publicly voiced and go much further than the even the balanced budget amendments that she just got 25 EU members to sign up for (good luck with that guys! *snicker*), one really has to wonder what sort of manufactured crisis (or crises) are being planned for the the next stage of the formation of the United States of Europe. One these you can bet on…it’s going to be big!

    Posted by Pterrafractyl | February 9, 2012, 9:05 pm
  22. Given all the media shots of Greek riot police clashing with street protestors today, note that the police are pissed too:

    Greek police union wants to arrest EU/IMF officials

    ATHENS | Fri Feb 10, 2012 8:10am EST

    (Reuters) – Greece’s largest police union has threatened to issue arrest warrants for officials from the country’s European Union and International Monetary Fund lenders for demanding deeply unpopular austerity measures.

    In a letter obtained by Reuters Friday, the Federation of Greek Police accused the officials of “…blackmail, covertly abolishing or eroding democracy and national sovereignty” and said one target of its warrants would be the IMF’s top official for Greece, Poul Thomsen.

    The threat is largely symbolic since legal experts say a judge must first authorize such warrants, but it shows the depth of anger against foreign lenders who have demanded drastic wage and pension cuts in exchange for funds to keep Greece afloat.

    Since you are continuing this destructive policy, we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who protests and demands a change of policy,” said the union, which represents more than two-thirds of Greek policemen.

    “We warn you that as legal representatives of Greek policemen, we will issue arrest warrants for a series of legal violations … such as blackmail, covertly abolishing or eroding democracy and national sovereignty.”

    A police union official said the threat to ‘refuse to stand against’ fellow Greeks was a symbolic expression of solidarity and did not mean police would halt their efforts to stop protests getting out of hand.

    With a wave of cabinet resignations (including the far-right Karatzaferis), the question arises of who is still supporting the Greek government in Greece?

    Posted by Pterrafractyl | February 10, 2012, 1:00 pm
  23. Dave,
    I was going to put this into a private email but, what the hell, everybody could use a little public praise now and again. I’m a parsimonious person with both money and personal accolades but I’m sending you a small donation and saying just what I think of you. If you never do another show you’ve done more than enough to educate us all about ‘how the world really works’. It’s a damned shame that Mae’s work is being used for profit and so is less accessible than it should be. You do what you do and it has cost you money and much else. I can’t imagine the focus and moral commitment it has taken to labor as you have done for these decades and to do it because it was the right thing. Thank you so much, my man.
    To all Dave’s readers and listeners – kick in a bit if you can.

    Posted by Dwight | February 10, 2012, 7:13 pm
  24. interesting interview with Soros over at Der Spiegel

    “Soros: I know it sounds as though we are repeating exactly the same mistake. But let’s compare the situation on the global financial markets to a car that is skidding. When a car is skidding, you must first turn the wheel in the same direction as the skid. And only when you have regained control can you then correct the direction. We went through a 25-year boom in the global economy. Then came the crash in 2008. The financial markets actually collapsed, and they had to be put on artificial life support through massive state intervention. The euro crisis is a direct continuation or consequence of the 2008 crash. This crisis isn’t over yet and we will have to spend more state money in order to stop the skidding. It is only afterward that we can change the direction. Otherwise we will repeat the mistakes that plunged America into the Great Depression in 1929. Angela Merkel simply doesn’t understand that.”

    “Soros: People like Schäuble don’t seem to understand that the heavily indebted countries are now at a severe disadvantage, because they have basically become heavily indebted in a foreign currency, the euro. They do not control it, and so they are in the same position as third world countries in Latin America were in at the beginning of the 1980s, where the countries became indebted in dollars. It was a situation that led to a lost decade there. Europe now faces a lost decade. That is the reason we need euro bonds and a new EU fiscal compact.”

    Posted by leif | February 13, 2012, 8:34 am
  25. Well, I’m not going to complain if folks want to call the collapse of national sovereignty and imposition of “austerity only” economic policies , “Europe’s Supply-Side Revolution”:

    FEBRUARY 17, 2012

    Europe’s Supply-Side Revolution
    Following Germany’s lead, euro-zone nations are pursuing pro-growth reforms that Reagan and Thatcher would admire.


    Looking beyond the latest headlines about Greece’s debt crisis, the long-term question for the European Union is: Can it grow? The conventional answer is that it’s too sclerotic, too socialist, too indebted. Not so.

    Germany is the largest economy in Europe, and it’s been the first to recover and the best-performing developed economy since the start of the Great Recession. Since bottoming in 2009’s first quarter, German output has grown at an annual rate of 2.8%, compared with 2.4% for the U.S. since its bottom in 2009’s second quarter. Germany’s unemployment rate is an astonishingly low 5.5%. German youth unemployment is lower than U.S. overall unemployment.

    Skeptics point to Germany’s success not as proof that Europe can grow, but as a reason why it can’t. They worry about the imbalances of German competitiveness versus the large southern economies of Italy and Spain. They argue that the euro—the common currency of Europe—rules out devaluation by less competitive nations, which they hold out as the surest path to rebalancing.

    But this is the blessing of the euro, not its curse. The common currency prevents politicians from fantasizing that they can devalue—and inflate—their way to prosperity. Instead, as Italy’s new prime minister, Mario Monti, put it, growth “will have to come from structural reforms or supply-side measures.”

    Today’s chancellor, Angela Merkel, who replaced Mr. Schroeder, has praised him for his “courage and determination.” She is now spearheading the effort to repeat his Agenda 2010 template throughout Europe. Surely if Germany could start with the wreckage of a communist slave-state and make itself into the most dynamic developed economy in the world, its template could transform sluggish and over-indebted economies like Italy and Spain.

    Prime Minister Monti in Italy, and Spain’s new prime minister, Mariano Rajoy, are deeply committed to this vision, and they are well on their way to implementing it. It won’t be easy. They’re up against what Mr. Monti calls “the blocking powers of lobbies and special interests.” Read: unions.

    The transformation of Europe is being made possible—as serious reform is everywhere and always—by crisis. For all the strikes and protests and backlash (which Reagan and Mrs. Thatcher faced), Europe seems to know now that its tax-spend-borrow-and-protect social democratic past cannot be its future.

    The discipline of debt is driving Europe to closer political integration, too. And this, in turn, feeds back into Europe’s growth potential. It’s not just that closer integration would realize economies of scale, accelerating those already begun by adopting a common currency. It’s that if Europe’s squabbling nations could only erase their political boundaries, its debt problems would vanish.

    Consider Italy and Spain. Italy has a lot of debt, but the second lowest deficit-to-GDP ratio in Europe, after Germany. Spain has a large deficit, but the lowest debt-to-GDP ratio of the large European economies, even Germany. If Spain and Italy were to become a single country—let’s call it Spitaly—its fiscal profile would be almost identical to that of France. If all the 17 countries that use the euro were to combine into a single nation—call it Europa—its fiscal profile would be better than that of the U.S.

    This is more than a thought experiment. Already Germany and France have bilaterally negotiated the beginning of a fiscal partnership, with harmonized tax rates and joint budgeting. And there are multilateral treaty changes being formalized now, among all 27 European Union members except for the recalcitrant U.K. and Czech Republic, that will enshrine stronger joint fiscal discipline and oversight.

    In the 1970s, conventional wisdom held that the U.S. couldn’t compete against Japan and, yes, Europe. But fear clarified our minds, and the supply-side revolution we dared to undertake in the 1980s restored America’s growth and competitiveness. Conventional wisdom today holds that Europe is doomed. To the contrary. It is, bravely, starting its own supply-side revolution.

    Mr. Luskin is chief investment officer and Mr. Roche Kelly is chief Europe strategist at Trend Macrolytics LLC.

    An interesting aspect of this whole almost-balanced-budget-only eurozone experiment is that it sort of creates a barrier to the euro ever becoming a reserve currency…there just won’t be enough eurobonds out there because they can only grow be 2-3% each year (or whatever Europe’s power elites allow on a given year). That may not enough of a supply of new eurobonds to cover expiring ones and account for growth in a global economy with a still exploding population.

    Somewhat ironically, if the new “austerity-only” model actually works, the euro would be such a hot commodity that the limited supply of eurobonds could have a strengthening effect on the value of the euro, placing pressure on the eurozone’s export-oriented growth strategy. It’s a situation analogous to what Germany seemed like it was trying to avoid by joining a monetary union with economically weaker neighbors except now the currency-valuation issue is taken to the whole eurozone. This whole weird economic experiment is looking more and more like a “damned if you do damned if you don’t” middle class death trap(that will be celebrated as a grand triumph once an economic recovery inevitably gets underway).

    It’s too bad because the idea of a more united Europe some day would is great goal and so many of the hurdles in creating a monetary union have already been overcome by the eurozone. Sadly, it could be that lingering national identities in a united Europe and resentment over “paying for those lazy ” is just too large a hurdle to overcome the need for wealth transfers from the wealthier countries to the weaker ones (e.g. Greece gets subsidized, in part to cover its loss of export power by being on the euro).

    If that transnational camaraderie isn’t politically feasible (indefinitely, although over time that could change), and the the loss of sovereignty and imposition of a “supply-side”-oriented troika is the only other way to cover the wealth transfers, this is looking rather grim. A future Europe where the middle class has been mostly obliterated and it’s just a big sea of craptacular right-wing economic/social policies (through “policy harmonization”) in every country is going to really suck for its public. What an awful tragedy and waste of effort and resources to see the eurozone turned into a continental sovereignty-stripping “supply-side revolution”.

    Posted by Pterrafractyl | February 17, 2012, 11:28 pm
  26. There’s a lot of thought-provoking ideas and valuable memes in this piece. Definitely worth a read…

    Posted by Pterrafractyl | March 8, 2012, 12:27 pm
  27. One more mission accomplished:

    OpenEurope Verdict On Greek PSI – Pyrrhic Victory Sowing Seeds Of A Political And Economic Crisis In Europe
    Submitted by Tyler Durden on 03/09/2012 – 07:35

    Minutes ago we presented Goldman’s twisted and conflicted take on Greece in a post PSI world. Needless to say, virtually everything goldman says is to be faded. Which is why not surprisingly, the next analysis, a far more accurate and realistic one, does precisely that. In a just released report from Europe think tank OpenEurope, the conclusion is far less optimistic: “The deal sets the eurozone up for a political row involving Triple-A countries. At the start of this year, 36% of Greece’s debt was held by taxpayer-backed institutions (ECB, IMF, EFSF). By 2015, following the voluntary restructuring and the second bailout, the share could increase to as much as 85%, meaning that Greece’s debt will be overwhelmingly owned by eurozone taxpayers – putting them at risk of large losses under a future default. This deal may have sown the seeds of a major political and economic crisis at the heart of Europe, which in the medium and long term further threatens the stability of the eurozone.”

    Posted by Pterrafractyl | March 9, 2012, 9:48 am
  28. And the US’s sovereign debt crisis chugs along. Oh look, forced public asset sales by a state-appointed emergency financial czar:

    Buyers showing interest in Harrisburg’s assets
    9:44 PM, Mar. 1, 2012

    HARRISBURG, Pa. (WTW) — The state-appointed financial custodian overseeing Pennsylvania’s deeply indebted capital told a judge Thursday there is broad interest in buying, leasing or managing Harrisburg’s municipal trash incinerator, parking garages and water and sewer system as the city tries to scrape up money to pay creditors who are suing it.

    Custodian David Unkovic said parties have signed five to 10 confidentiality agreements on each of the three sets of city-owned assets, allowing them to get a better look at the facility operations to help them determine if they want to pay for them.

    “This is not going to be a fire sale, and I’m coming back to the court for approval” before signing off on a transaction, he said under questioning by a lawyer working for him. “I don’t think the court would approve a fire sale.”

    The star-crossed renovation of the incinerator left Harrisburg on the hook for about $300 million in debt, about six times the size of the city’s operating budget, and city officials have no plan to pay it off. In addition, the incinerator does not generate enough money to pay off the debt — although that was the premise under which much of the money, if not all, was borrowed.

    It is not the city’s only financial problem, but it is perhaps the largest and it prompted some City Council members to unsuccessfully seek federal bankruptcy court protection last fall.

    Unkovic’s plan to force the city to pay the debt must be approved by a Commonwealth Court judge under an unprecedented, four-month-old state law that allowed Gov. Tom Corbett, with court approval, to take substantial financial control from city officials.

    Unkovic is testing interest in buying or leasing the incinerator and parking garages, and in managing the water and sewer system, which is in need of tremendously expensive improvements to meet environmental standards.

    Still, Unkovic said all the money in Harrisburg is not enough to pay off its obligations, suggesting that he will insist on concessions from creditors, including Dauphin County, which backed part of the debt, and bond insurer Assured Guaranty Municipal Corp.

    The daylong hearing in Commonwealth Court became testy when a lawyer for several city officials cross-examined Unkovic. President Judge Bonnie Brigance Leadbetter had to repeatedly step in to warn the lawyer, Mark Schwartz, or verbally separate Schwartz and Unkovic’s lawyer, Mark Kaufman.

    Schwartz repeatedly sought to question Unkovic about whether he had tried other options to raise money before selling assets.

    At one point, Schwartz asked whether Unkovic had asked Corbett for money in lieu of the property tax payments that the state does not make on the substantial section of downtown Harrisburg that the Capitol and various other state office buildings occupy.

    Unkovic replied that he had spoken with lawmakers, but not Corbett, who appointed Unkovic and signed the law authorizing the state’s takeover of Harrisburg.

    This is a reminder that one man’s austerity is another man’s firesale…at least when state-appointed emergency financial czars demand it.

    Posted by Pterrafractyl | March 9, 2012, 11:48 pm
  29. @Pterrafractyl: Privatization sucks, man. No two ways about it. =(

    Posted by Steven L. | March 10, 2012, 9:26 am
  30. @Steven L.: Yeah, while privatization isn’t an inherently bad concept (there are plenty of possible circumstances where it might make sense to privatize some state assets or service), somehow whenever one learns about privatizations in practice it seems to end up either involving the sale of juicy land at fire sale prices or the sale of a public utility or service provider that will have to be provided one way or another. The latter case is effectively just indefinitely outsourcing the service to private contractors which has worked out so well over the years.

    Posted by Pterrafractyl | March 10, 2012, 9:33 pm
  31. @Pterrafractyl: I see what you’re saying. Too bad much of it here in America hasn’t been of the good kind, though……=(

    Posted by Steven L. | March 11, 2012, 6:04 am
  32. Oh look, Florida’s governor is about to extend his family’s state-wide drug-testing empire: Florida is about to start randomly drug testing all their state employees.

    Well, to be fair, not ALL the state employees…

    Posted by Pterrafractyl | March 11, 2012, 7:33 pm
  33. It’s good to be in the top 1% of the top 1%:

    The richest get richer
    By David Cay Johnston

    March 15, 2012

    The aftermaths of the Great Recession and the Great Depression produced sharply different changes in U.S. incomes that tell us a lot about tax and economic policy.

    The 1934 economic rebound was widely shared, with strong income gains for the vast majority, the bottom 90 percent.

    In 2010, we saw the opposite as the vast majority lost ground.

    National income gained overall in 2010, but all of the gains were among the top 10 percent. Even within those 15.6 million households, the gains were extraordinarily concentrated among the super-rich, the top one percent of the top one percent.

    Just 15,600 super-rich households pocketed an astonishing 37 percent of the entire national gain.

    Saez shows that the top one percent’s share of real income growth is increasing with each economic expansion and it matters not whether the president is a Democrat or Republican. The top one percent enjoyed 45 percent of Clinton-era income growth, 65 percent of Bush-era growth and 93 percent of Obama-era growth, though that is only through 2010.

    While markets are a factor, I think the evidence makes clear that government policy is at the core of the differing fortunes of the vast majority and the super-rich.

    Inaugural addresses of Franklin Roosevelt and Barack Obama bring this into sharp focus. Both spoke of the need for restoring confidence, while denouncing greed and irresponsible conduct. Roosevelt in 1933 specified “callous and selfish wrongdoing” by bankers abusing a “sacred trust.” Obama vaguely referred to the “consequence of greed and irresponsibility on the part of some.”

    Roosevelt said that “our greatest primary task is to put people to work.” Obama, again less specific, spoke of government that “helps families find jobs at a decent wage.”

    Roosevelt brought in trustbusters, reformers and even an expert at Wall Street manipulations to implement policies benefiting the vast majority.


    By contrast, while Obama called Wall Street executives “fat cats,” he surrounded himself with financial insiders with the exception of Elizabeth Warren, the Harvard bankruptcy expert now seeking election to the U.S. Senate. His administration has failed to prosecute the central figures in the frauds that created our economic distress.

    Posted by Pterrafractyl | March 15, 2012, 10:54 am
  34. Posted by Pterrafractyl | March 18, 2012, 3:31 pm
  35. The Iceman cometh..carrying cash:

    Updated March 22, 2012, 7:21 a.m. ET
    Texas Billionaire Doles Out Election’s Biggest Checks


    DALLAS—Few people want to defeat President Barack Obama more than billionaire Harold Clark Simmons, who is willing to spend many millions of dollars in the quest. As it happens, campaign rules now give him the opportunity.

    Watching a TV news report that Republican presidential candidate Rick Santorum was rising in polls last month, Mr. Simmons wondered about the prospects of the former Pennsylvania senator. He called his personal political muse, Republican strategist Karl Rove.

    “Is he worth investing into his super PAC?” Mr. Simmons asked. He rose from his leather recliner in the den and stood at a bay window overlooking swans gliding on a lake encircled by 17,000 tulips. “Does he have a chance?”

    “Yes, I wouldn’t count him out,” Mr. Rove said. Mr. Simmons’s wife, Annette, who was keen on Mr. Santorum, promptly donated $1 million to his super PAC, cash badly needed for an ad blitz ahead of the Super Tuesday primaries.

    The 80-year-old Texan, who heads Contran Corp., a chemicals and metals conglomerate, gave hefty donations to the super PACs supporting other GOP candidates during similar moments in the spotlight: Rick Perry’s optimistic entry into the race last summer, and after the debate-driven surge of Newt Gingrich. Mr. Simmons has so far given $800,000—including $500,000 this week—to super PACs backing former Massachusetts Gov. Mitt Romney, who won the Illinois primary Tuesday and contends no rival can catch him in the GOP delegate race.

    It isn’t particularly important which man wins the nomination, for Mr. Simmons simply wants to defeat the president and reduce the reach of government. “Any of these Republicans would make a better president than that socialist, Obama,” said Mr. Simmons during two days of rare interviews at his Dallas home and office. “Obama is the most dangerous American alive…because he would eliminate free enterprise in this country.”

    The tall, lanky, soft-spoken industrialist has given more than $18 million to conservative super PACs so far, making him the 2012 election’s single largest contributor—ahead of billionaires Sheldon Adelson, Mr. Gingrich’s financial patron, and Foster Friess, Mr. Santorum’s biggest donor.

    Sipping lemonade iced tea made with lemons grown on his California estate east of Santa Barbara—next door to Oprah Winfrey’s place in Montecito—Mr. Simmons said he planned to spend $36 million before the November election.

    Unlike some big donors—including Mr. Adelson—Mr. Simmons isn’t driven by an attraction to a specific candidate or policy. His motivation is broader: to elect Republicans up and down the line in the hopes they will change the overall U.S. tax and regulatory approach.

    He is a longtime political donor; he was fined by the Federal Election Commission for surpassing contribution limits in 1988 and 1989, which he said was inadvertent. When politicians call his office now, his secretary runs an Internet search to ensure they are “pro-business, antigovernment,” he said. He isn’t interested in such conservative social issues as abortion. “I’d probably be pro-choice,” he said. “Let people make decisions on their own bodies.”

    Longtime friend and oil man T. Boone Pickens described Mr. Simmons as a man who backs up his beliefs with his bucks. “Harold isn’t doing this for attention,” the fellow Republican said. To the contrary, while mega-donors Mr. Adelson and Mr. Friess have gone on TV to tout big gifts to their candidates, Mr. Simmons rarely speaks publicly. He agreed nonetheless to talk with The Wall Street Journal on a range of subjects, including money, politics and his appetite for sweet potatoes.

    To remedy that, Mr. Simmons bought his first business in 1960, a drugstore across the street from Southern Methodist University, using $5,000 in savings and a $95,000 loan. He kept buying another and another, eventually getting a pilot’s license to visit them all. In 1973, he sold his 100-store chain for $50 million. Mr. Simmons used the proceeds to buy stock of underperforming public companies, turning into a corporate raider in the 1970s and 1980s with the nickname “Ice Man.”

    Mr. Simmons said his political activism was sparked in 1983, when the Labor Department accused him of mishandling pension fund assets. A federal judge found he invested an excessive portion of the pension in a takeover target, Amalgamated Sugar Co. The judge awarded no cash damages because the fund earned 50% on its investment. Mr. Simmons agreed not to use pension funds in takeover bids for 10 years, according to a consent decree that settled the case.

    “That’s when I started contributing to politicians with free-market and antiregulation agendas,” he said. “If the Labor Department hadn’t sued, that pension would be as rich as me.”

    His corporate empire, under the Contran holding company, includes large stakes in multinational conglomerates NL Industries, Titanium Metals Corp., Valhi Inc., Kronos Worldwide Inc. and Keystone Consolidated Industries Inc. These diverse interests include the heavily regulated waste-control and nuclear-waste disposal businesses, as well as some of the world’s biggest manufacturers of chemicals, components and titanium for military and commercial aircraft.

    Many of these companies bear the weight of government regulatory decisions, making Mr. Simmons’s political interest more than simple patriotism. “We live with a smothering of government,” said Steven Watson, Contran’s No. 2 executive. He listed oversight by the Environmental Protection Agency, banking regulators, the Labor Department and Securities and Exchange Commission, as well as “frivolous lawsuits” brought by state attorneys general.

    Mr. Simmons was a key donor for the Swift Boat veterans’ attack ads against Democratic presidential candidate John Kerry in 2004, as well as the 2008 campaign ads touting ties between Mr. Obama and Bill Ayers, co-founder of the radical Weather Underground. “If we had run more ads,” he said, “we could have killed Obama.”

    Mr. Simmons relishes his chance to give freely in this year’s election, particularly in conjunction with Mr. Rove, the top political adviser to former President George W. Bush. “Karl is the best political mind out there,” he said.

    In early 2010, Mr. Rove gathered a handful of big Texas donors for lunch at a private club in Dallas, including Mr. Pickens, real-estate magnate Harlan Crow and Mr. Simmons. Mr. Rove explained how the fledgling group American Crossroads would work to defeat Mr. Obama and get GOP control of Congress. “All of us are responsible for the kind of country we have,” Mr. Rove recalled saying.

    After Mr. Rove paused, Mr. Simmons spoke first. “I’m in,” he said. Mr. Rove said Mr. Simmons’s early nod helped give the group instant credibility.

    Mr. Simmons said he relies on Mr. Rove’s advice on the prospects and positions of candidates. Aside from his contributions to presidential contenders, Mr. Simmons and his private holding company have, since 2010, donated almost $20 million to American Crossroads, which plans with its sister organization to spend as much as $300 million to defeat Democrats in the November election.

    Posted by Pterrafractyl | March 22, 2012, 11:28 am
  36. Ah, the ol’ democracy-death-panel death-threat double-bind play…just hand over the authority voluntarily or else:

    Michigan Panel Gives Detroit 10 Days to Reach Finance Deal
    By Chris Christoff – Mar 26, 2012 5:11 PM CT

    Detroit has 10 days to agree to a financial recovery plan that would forestall the appointment of an emergency manager by Michigan Governor Rick Snyder, a state review panel decided.

    Snyder said he’s close to a deal with the city that would avoid a manager. He said he had “fruitful” discussions with six of nine City Council members today. A final agreement is possible by March 30, said state Treasurer Andy Dillon, who led the review team.

    Stressed Out

    The 10-member panel declared the city — Michigan’s largest and home of General Motors Co. (GM) — in severe financial stress. That gives Snyder time to negotiate with Bing on a way to give the mayor broader power to reduce costs, and buys time to solve the city’s fiscal crisis, which deepens daily.

    Detroit’s operating deficit might balloon to $270 million by June 30, according to a February City Council report. It will run out of cash by the end of May, according to Dillon.

    Still to be resolved is how much authority an appointed board would have over Detroit’s finances, said Dennis Muchmore, Snyder’s chief of staff.

    An emergency manager would have authority under a 2011 law to cut spending, sell assets and nullify union contracts. Bing and the council rejected Snyder’s plan to control the city’s finances with a nine-member board appointed jointly by Snyder and the city.

    City officials derided Snyder’s plan as a virtual takeover. Snyder and Dillon are considering Bing’s counterproposal, in which he and the council would retain financial authority with state oversight.

    Concessions by city employee unions may not be enough to allay the crisis, said Terry Stanton, spokesman for Dillon.

    Thirty unions representing about 6,000 of the 11,000 municipal employees ratified three-year agreements that include 10 percent pay cuts and reductions in pension and health-care benefits.
    Time to Unwind

    That will save the city $60 million over three years, said Ed McNeil, assistant to the president of AFSCME Council 25, which led bargaining for the unions.

    Yet to be ratified are concessions by the police and firefighters.

    Detroit must cut spending by $360 million through June 2013, Bing has said, and he began firing 1,000 employees in February. He told Bloomberg News last week the city has an estimated $200 million in uncollected income taxes, which he said the state could help collect.

    Bing said he’ll try to negotiate with banks to reduce $350 million in fees the city owes to unwind interest-rate swaps triggered by last week’s downgrade of more than $2.5 billion of debt by Moody’s Investors Service.

    Posted by Pterrafractyl | March 27, 2012, 11:28 am
  37. Oh look, privatization is actually saving a city some money. Santa Clarita cut their library budget from $5.1 million to $3.8 million following their 2010 privatization of their libraries. So what were the innovative solutions that brought about these cost savings…?

    The Atlantic
    Are Privatized Public Libraries So Bad?
    Amanda Erickson
    8:10 AM ET

    I’ll admit, to me, the idea of a privatized public library has a certain dystopian ring to it, the ultimate public space corrupted for a profit. That image was not much aided by my first (and second and third) call to Library System and Services Inc., the only library privatization company in the United States. LSSI now runs at least 15 library systems in California, Oregon, Tennessee, and Texas. This means it is, effectively, the fifth largest library system in the country.

    Time and again, I ran through an automated response system without finding a real person. A week’s worth of emails went unanswered. And then, there’s the message at one of LSSI’s libraries, which directs you press two for “costumer service.”

    Is this the future of the reference desk, I wondered? Not exactly the library system of my childhood, where each call about books on hold was answered by the same librarian I had known since I started attending kid’s corner book readings.

    But then, there’s the example of Santa Clarita, California. In 2010, the city decided to pull their three libraries out of the Los Angeles County Library system. Officials had considered running the system locally, but ultimately, the council voted (4 to 1) to turn the system over to LSSI to run. More than 100 residents protested the change at acrimonious meetings with “keep our libraries public” signs and t-shirts emblazoned with the slogan, “I love L.A. County Libraries.”

    When Santa Clarita began considering privatization, the decision drew national attention. It was, according to the New York Times, the first financially vibrant city to make the switch.

    Deputy City Manager Darren Hernandez is careful to stress that this decision was made because of LSSI’s “expertise” — “we didn’t have experience operating libraries,” he says — though he acknowledges that cost did play a role. The city thought they could run their system for $5.1 million a year; LSSI gets $3.8 million.

    This savings means the city has been able to budget $4.8 million a year for libraries, with the extra $1 million going to buying new books and a new, LEED-certified building.

    The bulk of the lower costs, both for the city and LSSI, comes from cutting the benefits previously afforded to librarians. Santa Clarita’s library staff has been removed from the state’s pension plan, and must instead contribute to a 401K. According to the American Libraries Association, this is the main reason library staffs tend to oppose privatization.

    It also has some unions up in arms. A new California law requires all cities to “clearly demonstrate” that a contract with a private firm will result in “actual overall cost savings,” and it requires cities to hear at least three bids before making a decision, was pushed forward, in a large part, by the SEIU.

    But LSSI says there’s no other way. In a 2010 New York Times article, then-LSSI chief Frank A. Pezzanite argued that public libraries are “all about job security. That’s why the profession is nervous about us. You can go to a library for 35 years and never have to do anything and then have your retirement. We’re not running our company that way.”

    “Pensions crushed General Motors, and it is crushing the governments in California,” he told the Times.

    Then there’s the question of profitability: how much is LSSI really making from these deals?

    No one quite knows the answer. LSSI, which got its start developing software for government use in the 1980s, will not disclose that information. It’s owned by a private equity firm in Boston and has about $35 million in annual revenue and 800 employees.

    “It’s a closely-guarded secret,” says Jane Jerrard, who wrote a book on the issue for the ALA. Jerrard compared privatized libraries with similar publicly run facilities in the same state, looking at how library visits, materials held and circulation changed after LSSI took over.

    Posted by Pterrafractyl | March 28, 2012, 10:28 am
  38. JP Morgan, Credit Suisse, and Deutsche Bank are about to get a big, profitable boost from Moody’s…

    JPMorgan Lead Over Morgan Stanley Widening on Rating Cuts
    By Michael J. Moore on April 02, 2012

    Potential downgrades of banks including Morgan Stanley (MS) (MS) and UBS AG, which could have their credit ratings cut by Moody’s Investors Service to the lowest level ever, threaten to shake up Wall Street’s balance of power.

    Morgan Stanley and UBS may be lowered three grades, Moody’s said Feb. 15, and Citigroup Inc. (C) (C) and Bank of America Corp. (BAC) could join Morgan Stanley at Baa2, two levels above junk. The cuts would raise funding and collateral costs, making the lowest- rated firms less desirable counterparties in over-the-counter derivatives trades, according to analysts and executives.

    That may push more business to JPMorgan Chase & Co. (JPM) (JPM) and Deutsche Bank AG, which would be the highest-rated firms among the top nine global investment banks if Moody’s goes through with its maximum reductions. Those two firms already have the highest market share in fixed-income trading and had the biggest gains in share last year as investors grappled with fears about global contagion from Europe’s debt crisis.

    “The winners are JPMorgan and Goldman Sachs, who relatively will have stronger ratings, and the losers will be Citi, Bank of America and Morgan Stanley,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York and a former treasurer at Morgan Stanley. “Lower ratings hurt the willingness of players to take my name as a derivatives counterparty, and it is in derivatives where I get some of the highest-margin businesses in fixed income.”
    Three Tiers

    If Moody’s cuts each of the 17 banks it placed on review by the most levels cited in February, the separation between the top and bottom tiers of global investment banks would widen. JPMorgan, Frankfurt-based Deutsche Bank and Credit Suisse Group AG would have a rating of A2, five levels above junk. Goldman Sachs Group Inc. (GS) (GS), Barclays Plc and UBS would be one level below them at A3. Morgan Stanley, Citigroup and Bank of America would be three grades below the top group, making the spread between JPMorgan and Morgan Stanley the biggest ever.

    The Moody’s cuts could accelerate the separation between banks with rising market shares and those that are falling. JPMorgan, led by Chief Executive Officer Jamie Dimon, 56, is the only one of the nine banks whose trading revenue last year was greater than in 2006, while Bank of America had the biggest decline, according to figures compiled by Chris Kotowski, an analyst at Oppenheimer & Co. in New York. Kotowski’s 2006 figures included the revenue of firms later acquired by the banks, such as Bear Stearns Cos. and Merrill Lynch & Co.

    JPMorgan gained clients because it was seen as one of the strongest counterparties, Jes Staley, 55, CEO of the New York- based firm’s investment bank, said at a February presentation.

    “We had a significant swing in our client franchise coming out of the financial crisis because we were the safe harbor,” Staley said.

    The bank generates 25 percent of its fixed-income trading in a given quarter from just 0.14 percent of trades, including some long-dated derivatives, Staley said. Those are the trades most likely to be affected by the difference in banks’ credit ratings, analysts including Citigroup’s Keith Horowitz said.

    I’m quite curious to get a clarification about the statement that JP Morgan generates 25% of its fixed-income trading in a given quarter from just 0.14 of trades, especially when those are apparently the trades that get impacted the most from a ratings change. That sounds like some relevant info for understanding our fun new normal.

    Posted by Pterrafractyl | April 2, 2012, 9:42 pm
  39. Here’s one of the fun bonus effects of the recent Moody’s down-grading of nearly all the big banks: a sudden jump in municipal bond rates. This is because the banks had selling their “variable-rate demand bonds” guaranteed counterparty services to municipalities, where the banks agree to purchase the variable-rate demand bonds from current or future bond if no other buyers can be found(the ability to sell the bonds at any point is one of their features). It’s one more example of how the fate of nations can become systemically intertwined with the fate of their elite financial institutions via the increasing use of the very “structured finance” that was supposed to reduce the overall systemic risk…it’s sort of the definition of “too big to fail”:

    Bank-Supported Muni Market Faces ‘Headwinds,’ Moody’s Says
    By Martin Z. Braun and Greg Chang – Apr 4, 2012 4:38 PM CT

    The market for bank-supported municipal debt, including variable-rate demand bonds, may face “headwinds” this year because of possible cuts in bank ratings, Moody’s Investors Service said.

    Top short-term ratings for both Bank of America Corp. and Citigroup Inc. (C) are under review for a downgrade, according to the credit-rating company. Losing the top grade may cause interest rates on $34.7 billion of municipal bonds to spike as money-market funds redeem the debt and dealers can’t resell it, Moody’s said in an e-mailed statement.

    “Issuers whose remarketings fail or who are unable to arrange extensions or replacements for expiring support facilities may face severe cash-flow pressure as they confront higher interest cost and accelerated amortization,” Moody’s said in the report.

    During the credit crisis, interest rates on so-called variable-rate demand bonds, often owned by tax-exempt money- market funds, surged after bond insurers and some banks lost their top-credit ratings. The increase in borrowing costs hit already cash-strapped cities, hospitals and schools.
    Standby Agreement

    Variable-rate demand bonds are long-term securities offering short-term interest rates because investors can demand their money on short notice and turn the bonds in for sale to another buyer. To assure investors there will be money available, governments hire banks to provide standby bond purchase agreements or letters of credit.

    Posted by Pterrafractyl | April 5, 2012, 12:45 pm
  40. Huh, it turns out the ‘invisible hand of the market’ for derivatives that are suppose to track the financial health of North American companies is attached to one of JPMorgan’s proprietary trader’s arms:

    JPMorgan Trader’s Positions Said to Distort Credit Indexes
    By Stephanie Ruhle, Bradley Keoun and Mary Childs – Apr 5, 2012 10:30 PM CT

    A JPMorgan Chase & Co. (JPM) trader of derivatives linked to the financial health of corporations has amassed positions so large that he’s driving price moves in the $10 trillion market, traders outside the firm said.

    The trader is London-based Bruno Iksil, according to five counterparts at hedge funds and rival banks who requested anonymity because they’re not authorized to discuss the transactions. He specializes in credit-derivative indexes, a market that during the past decade has overtaken corporate bonds to become the biggest forum for investors betting on the likelihood of company defaults.

    Investors complain that Iksil’s trades may be distorting prices, affecting bondholders who use the instruments to hedge hundreds of billions of dollars of fixed-income holdings. Analysts and economists also use the indexes to help gauge perceptions of risk in credit markets.

    Though Iksil reveals little to other traders about his own positions, they say they’ve taken the opposite side of transactions and that his orders are the biggest they’ve encountered. Two hedge-fund traders said they have seen unusually large price swings when they were told by dealers that Iksil was in the market.

    Joe Evangelisti, a spokesman for New York-based JPMorgan, declined to comment on Iksil’s specific transactions. Iksil didn’t respond to phone messages and e-mails seeking comment.
    Most-Active Index

    The credit indexes are linked to the default risk on a group of at least 100 companies. The newest and most-active index of investment-grade credit rose the most in almost four months yesterday.

    The Markit CDX North America Investment Grade Index of credit-default swaps Series 18 (IBOXUMAE) climbed 4.4 basis points to a mid-price of 97 basis points at 5:13 p.m. in New York. The price of the index is quoted in yield spreads, which rise along with the perceived likelihood of increased corporate defaults.

    A credit-default swap is a financial instrument that investors use to hedge against losses on corporate debt or to speculate on a company’s creditworthiness.

    Iksil may have “broken” some credit indexes — Wall Street lingo for creating a disparity between the price of the index and the average price of the credit-default swaps on the individual companies, the people said. The persistence of the price differential has frustrated some hedge funds that had bet the gap would close, the people said.

    Iksil probably traded under close supervision at JPMorgan, said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.

    “The issue is how much capital they’re putting at risk,” said Miller, a former examiner for the Federal Reserve Bank of Philadelphia.

    Volcker Rule

    A U.S. curb on proprietary trading at banks, meant to reduce the odds they’ll make risky investments with their own capital, is supposed to take effect in July. Regulators are still determining how the so-called Volcker rule will make exceptions for instances where firms are hedging to curtail risk in their lending and trading businesses.

    Wall Street banks including JPMorgan, Goldman Sachs Group Inc. and Morgan Stanley have submitted comment letters and met with regulators to discuss their complaints about the rule.

    “Several agencies claiming jurisdiction over the Volcker rule have proposed regulations of mind-numbing complexity,” JPMorgan Chief Executive Officer Jamie Dimon said in his annual letter to shareholders released this week. “Even senior regulators now recognize that the current proposed rules are unworkable and will be impossible to implement.”

    I’m sure JP Morgan will use its dominance of a index that’s used as a barometer for the health of North American corporations for purely noble purposes. Too big to fail? Naaahh…there’s just more of them to love.

    Posted by Pterrafractyl | April 6, 2012, 9:34 am
  41. One man’s conspicuous obfuscation of vast wealth and power is another man’s “Ethical exception”. Don’t you just love Newspeak?

    Posted by Pterrafractyl | April 6, 2012, 10:52 am
  42. Go ahead, take the moneyyou earned it.

    Posted by Pterrafractyl | April 8, 2012, 7:50 pm
  43. One more round, now with working links!

    Go ahead, take to moneyyou earned it.

    Posted by Pterrafractyl | April 8, 2012, 8:52 pm
  44. The future is now, only more so. Just walk it off, proles.

    Posted by Pterrafractyl | April 10, 2012, 8:35 pm
  45. I love that we can now sort of calculate the odds of bad government by random chance.

    Lobbying for tax breaks: The gentleman’s investment:

    Sunlight Foundation
    Lobby more, pay less in taxes
    Lee Drutman
    April 16, 2012, 12:01 a.m.

    If you think you wound up paying too much in taxes this year, maybe you ought to hire a lobbyist. Or two. Or 20. After all, it’s a strategy that seems to be working well for some of the nation’s biggest corporations.

    As Americans prepare for tax day 2012, a new Sunlight analysis of lobbying and corporate tax rates finds that among 200 of the largest U.S. companies, the companies that spent the most on lobbying most effectively reduced their reported tax rates between 2007 and 2010.

    On average, companies we examined reported paying a slightly lower overall tax rate in 2010 than in 2007 (average tax rate of 29.3 percent in 2010 as compared to 29.9 percent in 2007), with a decline in the median reported tax rate from 31.8 percent to 31.6 percent. Fifty-five percent of the companies paid a lower rate in 2010 than in 2007.

    But the eight companies that spent the most on federal lobbying between 2007 and 2009 all decreased their overall tax rate between 2007 and 2010. Six of the Big Eight enjoyed a decrease of at least seven percentage points.

    Compared to what their taxes would have been if their 2007 tax rates were applied to their 2010 income, we estimate that these eight companies saved a combined $11.2 billion on $120 billion in reported 2010 profits. If we assume that the entire reduction was due to their lobbying, the return on investment would be 2,069%. Of course, this is probably not the case. Without a detailed analysis of these companies’ taxes, it would be impossible to tell why their rates fell. But we can observe that it is very unlikely that the eight companies that lobbied the most between 2007 and 2009 all would have seen such significant drops in their tax rates by random chance alone.

    Statistically, the likelihood of the eight firms that ran up the biggest lobbying tabs all lowering their reported tax rates by chance alone is just under one percent (assuming we take the overall probability of an individual company lowering its taxes at 55 percent). Moreover, only 19 of the nation’s 200 highest earning companies reduced their tax rate by more than seven percentage points. Within this universe of companies, the likelihood of six of the Big Eight lowering their rates by at least seven percentage points purely by random chance is less than 1 in 100,000.

    At this point it’s worth emphasizing that $$$ = Free Speech. Really really persuasive free speech.

    Posted by Pterrafractyl | April 19, 2012, 8:23 am
  46. There is no escape:

    RNC Spokeswoman: Republican Economic Platform Will Be The Bush Program, ‘Just Updated’

    By Pat Garofalo on Apr 23, 2012 at 10:45 am

    During an interview last week on The Fernando Espuelas Show, Alexandra Franceschi, Specialty Media Press Secretary of the Republican National Committee, said that the Republican party’s economic platform in 2012 is going to be the same as it was during the Bush years, “just updated”:

    ESPUELAS: What do you mean by economic security? Regardless of who the ultimate nominee is, what’s the general idea that the RNC, or the Republican party in general, has in terms of this message?

    FRANCESCHI: Well, it’s a message of being able to attain the American dream. It’s less government spending, which a Tarrance Group poll, came out last week actually, shows that the majority of Hispanics believe that less government spending is the way out of this deficit crisis. It’s lowering taxes so small businesses can grow and they can employ more people, because we understand that the private sector is the engine of the economy. It’s not the government. […]

    ESPUELAS: Now, how different is that concept from what were the policies of the Bush administration? And the reason I ask that is because there’s some analysis now that is being published talking about the Bush years being the slowest period of job creation since those statistics were created. Is this a different program or is this that program just updated?

    FRANCESCHI: I think it’s that program, just updated.

    Posted by Pterrafractyl | April 24, 2012, 10:54 am
  47. When is a $1 billlion fine just the cost of doing business? When it’s a fine over the monopolistics practices of a business that created the richest man in the world:

    Mexico regulators to vote on $1 billion fine vs tycoon Slim

    By Cyntia Barrera

    MEXICO CITY | Sun Apr 29, 2012 3:56pm EDT

    (Reuters) – Regulators are due to vote on Monday on one of Mexico’s biggest antitrust cases, a $1 billion fine for tycoon Carlos Slim, which has been bogged down in court appeals and disputes for a year.

    Federal competition commission Cofeco slapped Telcel, the cash cow of Slim’s giant telecoms company America Movil, with the record sanction in April 2011 after ruling the company charged excessive prices to wireless and wireline competitors to connect to its network.

    Telcel appealed the fine and even managed to ban Cofeco’s President Eduardo Perez Motta from taking part in a second vote, where the agency will decide if it ratifies, drops or modifies the fine against Slim, the world’s richest man.

    Perez Motta got into trouble last year with comments he made about the agency’s crackdown on Telcel.

    The Slim company complained of unfair treatment by Cofeco’s chief regulator, filing a motion that cut Perez Motta out of that second vote, which was originally expected in September.

    Getting Slim to pay such a large sum would be a major victory for Cofeco, whose ability to enforce the rules in a country where many major industries are concentrated in the hands of a few powerful families is seen as weak.

    Cofeco “must ratify last year’s fine to Telcel due to multiple violations to the competition law by engaging in monopolistic practices on interconnection,” IDET, a telecommunications think-tank based in Mexico City, said in a written statement to Reuters on Sunday.

    A loss, or a significantly reduced fine for Telcel, would strengthen the view that regulators in Mexico lack enough muscle to reign in the massive influence of businessmen like Slim.

    “Any possible changes should be based on facts unknown at the time of imposing the fine and Cofeco is required to explain the reasoning,” IDET added.

    In a bizarre twist on Sunday, Cofeco’s website was hacked. Instead of the agency’s home page opening, the image of scowling green pirate skull with a cutlass in its teeth appeared on a black screen beneath the words “Hacked by Nob0dy.”

    America Movil controls some 70 percent of the mobile market in Mexico, where it had 66.7 million subscribers as of March, and is the leading provider of mobile services in Latin America.

    I have to say, that will be pretty impressive if Mexico’s regulators can pull this off.

    Posted by Pterrafractyl | April 30, 2012, 7:09 pm
  48. JPMorgan just dropped a bomb on the markets today although, to their credit, the timing was wonderful. They had to announce an unfortunate $2 billion loss from their mysterious “Chief Investment Office” (CIO), the giant arm of the firm that’s allegedly dedicated to making trades to REDUCE the firms overall risk. Instead we now have billions mystery losses and claims of “egregious” risk taking by the CIO’s managers Hence the wonderful timing. That’s because there’s been a big push by the big banks in the last month against the upcoming ‘Volcker Rule’ and various other new regulations intended to reduce the odds of one of our many too-big-to-fail institutions from, well, failing. Amazingly, the banks were arguing that regulator lacked evidence of the need for the tougher rules. JPMorgan just handed the world that evidence on a silver platter (not that it was actually needed).

    Recall that the Volcker rule is one of parts of the Frank-Dodd 2010 financial reform act that the banks have been pushing back against the most. The Volcker rule places a number of restrictions on the ‘too-big-to-fail’ banks from engaging in ‘proprietary trading’, i.e. trading done with the firm money FOR the firm’s own profits instead of for its clients. Proprietary trading was unleashed in a big way following the 1999 repeal of the Glass-Steagall act and played a big role in the lead of to facilitating the 2008 financial collapse (e.g. the banks lose so much money on their own bets that they can’t cover their clients’ obligations). And starting on July 21, 2012, the Volcker Rule comes into effect for the big banks and all the proprietary-trading fun of the last 13 years finally comes to an end. Except not really because, like certain Mayan-related 2012 predictions, the predictions that the banksters’s worlds will change forever on July 21, 2012, don’t appear to be very convincing. For one thing, according to Bernanke the rules might not even be ready by the July 21, 2012 deadline. But more importantly, the Volcker Rule is poised to be filled with so many exemptions and future amendments that it is unlikely to really close the regulatory wholes left from the repeal of Glass-Steagall.

    Banking on Volcker: Big Crisis, Big Rule
    By Guest Contributor
    October 19, 2011

    By Thomson Reuters Accelus staff

    NEW YORK, Oct. 19 (Business Law Currents) – Banking lawyers should be forgiven if they’re not returning calls right away: they’re busy trying to digest the Volcker Rule (or “the rule”). The proposed rule’s 298-page doorstop represents the collective efforts of the Treasury Department, Fed, FDIC and SEC to implement §619 of the Dodd-Frank Act, which itself added a new §13 to the Bank Holding Company Act of 1956 (the BHC Act). The intent of the Volcker Rule is to “generally prohibit any banking entity from engaging in proprietary trading or from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a hedge fund or private equity fund (“covered fund”), subject to certain exemptions.”

    So does the Volcker Rule satisfy its mandate? To paraphrase ‘The Simpsons’: yes with an “if,” no with an “unless.” The rule carves out significant exemptions from the proscription against proprietary trading, but each of these exceptions has a number of criteria required to take advantage of the exemption. Moreover, a number of the rule’s measures provide for rebuttable presumptions of non-compliance for certain types of trading activity.

    The Volcker Rule carves out significant exemptions in the following areas: underwriting and market-making related activities; risk-mitigating hedging; and “exemptions for trading in certain government obligations, trading on behalf of customers, trading by a regulated insurance company, and trading by certain foreign banking entities outside the United States.” In addition, the rule imposes reporting and record-keeping requirements, and addresses some narrower applications in the context of specific transactions with covered funds.

    Note the Volcker Rule exemption for “risk-mitigating hedging”…that’s exactly the kind of activity that’s at the heart of JPMorgan’s latest “whoopsy!” disclosure:

    JPMorgan Loses $2 Billion as ‘Mistakes’ Trounce Hedges
    By Dawn Kopecki, Michael J. Moore and Christine Harper – May 10, 2012 11:34 PM CT

    JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said the firm suffered a $2 billion trading loss after an “egregious” failure in a unit managing risks, jeopardizing Wall Street banks’ efforts to loosen a federal ban on bets with their own money.

    The firm’s chief investment office, run by Ina Drew, 55, took flawed positions on synthetic credit securities that remain volatile and may cost an additional $1 billion this quarter or next, Dimon told analysts yesterday. Losses mounted as JPMorgan tried to mitigate transactions designed to hedge credit exposure.

    “There were many errors, sloppiness and bad judgment,” Dimon said as the company’s stock fell in extended trading. “These were grievous mistakes, they were self-inflicted.”

    The chief investment office was thrust into the debate over U.S. efforts to ban proprietary trading when Bloomberg News reported last month that the unit had taken bets so big that JPMorgan, the largest and most profitable U.S. bank, probably couldn’t unwind them without losing money or roiling financial markets. Dimon, 56, had transformed the unit in recent years to make bigger and riskier speculative trades with the bank’s money, five former employees said.

    The chief investment office’s push into risk-taking was led by Achilles Macris, 50, according to three former employees, Bloomberg News reported on April 13. He was hired in 2006 as its top executive in London and led an expansion into corporate and mortgage-debt investments with a mandate to generate profits for the New York-based bank, they said. Dimon closely supervised the transition from its previous focus on protecting JPMorgan from risks inherent in its banking business, such as interest-rate and currency movements, they said.
    ‘Wall Street Hubris’

    “I wouldn’t call it ‘more aggressive,’ I would call it ‘better,'” Dimon told analysts yesterday. “We added different types of people, talented people and stuff like that.” Until recently, they were careful and successful, he said.

    “It’s classic Wall Street hubris, which we’ve seen so many times before,” said Simon Johnson, a former chief economist at the International Monetary Fund who now teaches at the Massachusetts Institute of Technology. “What’s particularly ironic here is that Jamie presents himself, and is believed by others to be, the king of risk management.”

    Bloomberg News first reported April 5 that London-based JPMorgan trader Bruno Iksil had amassed positions linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market.

    So the proprietary trading activity that JPMorgan claimed it was using to reduce its overall risk in other banking activity (part of the justification for getting the Volcker Rule expemption) was ACTUALLY being used to aggressively make bets for the banks private profits, implicitely putting client money at risk by risking the health of the firm. That by be why the Volcker Rule proponents view this disclosure as further evidence of the need for the Volcker Rule :

    Volcker Rule Proponents Say JPMorgan Loss Bolsters Case
    By Phil Mattingly and Bradley Keoun – May 10, 2012 9:00 PM CT

    U.S. lawmakers and interest groups favoring tighter restrictions on proprietary trading said JPMorgan Chase & Co. (JPM)’s $2 billion loss on synthetic credit securities bolsters their case.

    Senator Carl Levin, the co-author of the so-called Volcker rule and chairman of the Permanent Subcommittee on Investigations, said the New York-based bank’s disclosure yesterday served as a “stark reminder” to regulators drafting the proprietary-trading ban required by the 2010 Dodd-Frank Act.

    “The enormous loss JPMorgan announced today is just the latest evidence that what banks call ‘hedges’ are often risky bets that so-called ‘too-big-to-fail’ banks have no business making,” Levin, a Michigan Democrat, said in a statement.

    The Federal Reserve, Securities and Exchange Commission and Federal Deposit Insurance Corp. are among regulators drafting the so-called Volcker rule to limit bets banks can make with their own funds. JPMorgan, with other Wall Street banks including Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS), have lobbied regulators to expand exemptions included in a draft proposal released last year.

    Hedging Exemption

    Dimon said on the conference call that the original premise of the trades by the chief investment office was for the firm’s hedging. Synthetic credit products are derivatives that generate gains and losses tied to credit performance without the owner buying or selling actual debt.

    Levin and Merkley, in their February comment letter, pushed regulators to tighten the exemption for hedging, calling some of what may be allowed a “major weakness” in the rule.

    JPMorgan’s disclosure “shows the need for financial reform, especially a strong Volcker rule, to limit such risky betting,” Dennis Kelleher, president of Better Markets, a non- profit group that advocates for tighter financial rules, said in a statement. “Too-big-to-fail banks like JPMorgan, with trillions in assets and trillions more in high-risk investments and trading, require regulation and transparency.”

    Posted by Pterrafractyl | May 10, 2012, 11:36 pm
  49. Beyond the implications for the Volcker Rule, JPMorgan’s disclosure today of $2 billion in ‘mistakes’ could have serious implications for the actual financial markets in coming weeks and months. That’s because the ‘mistakes’ that led to this loss took place in the CIO, and as you may recall, the CIO was the source of much surprise in the financial markets last month when the firm disclosed to the world that JPMorgan had spent the last four years or so turning the CIO into the a $360 billion behemoth (See the April 6th comment above for more on that). $360 billion is so much money that it has apparently allowed the CIO traders to move the prices of the $10 trillion corporate derivatives market. It’s THAT BIG. And THAT is the division of JPMorgan that just lost $2 billion. Or maybe it’s $4 billion. We’re still in the “let’s all guess how big the losses will eventually be” phase of the scandal and, unfortunately, this is massive implications because JPMorgan CAN’T UNWIND its massive positions in these derivatives markets without seriously impacting the prices. And now all of the other participants in those markets know that JPMorgan might be forced to unwind those unwindable positions. Next week should be an interesting one on Wall Street.

    Posted by Pterrafractyl | May 10, 2012, 11:39 pm
  50. Today’s lesson in “How the world works 101”:

    Why Don’t We Know More About the ‘London Whale’?
    By Dashiell Bennett | The Atlantic Wire – 05/11/2012

    Perhaps the most surprising thing about a man who was able to move trillion dollar markets in a single bet, is that we know so little about him. Especially when everyone has known what he was up to for weeks.

    Brunio Iksil’s name first started to show up on newswires almost exactly a month ago, when Bloomberg first reported on April 6 that the JPMorgan trader had established such a massive position in credit derivatives that he was single handedly distorting market prices, a near impossible task in a market of that size. He was so overexposed that hedge funds and other big investors were lining up against him, taking the other side of his bets and waiting for him to inevitably fail. As Business Insider pointed out, those “rivals’ may have been the impetus for the news stories. Drawing more attention to his unstable position certainly wouldn’t have hurt their fortunes.

    Despite all the attention from the media and authorities, no one seemed to figure out much about who Iksil is, and how one trader was able to control such a massive amount of funds in this way. Over $100 billion in a single index, by most estimates. Even now, a month later, no one seems to know anything about him except that he has two cool nicknames – the “London Whale” and “Lord Voldemort” – and that he apparently doesn’t spend a lot of time on the Internet. There appears to be almost no public trace of him before April. A Lexis-search turned up nothing. There are no pictures of him online. Bloomberg couldn’t even find out his exact age. (A co-worker says he’s in his late 30s.)

    So we’re to believe that secret hoards of cash at major institutions are managed by people no one has ever heard of and used to quietly controlled major markets for years? Naaahhh..that’s just impossible.

    Posted by Pterrafractyl | May 11, 2012, 2:22 pm

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