Saturday, July 30, 2011

Moody's about to Downgrade 177 U.S. Public Finance Issuers Due To Review Of U.S. Government's AAA Rating...

Moody's about to Downgrade 177 U.S. Public Finance Issuers Due To Review Of U.S. Government's AAA Rating....

Moody's announced today:

Moody's Investors Service has placed under review for possible downgrade the Aaa ratings of 177 public finance credits, affecting a combined $69 billion of outstanding debt. The credits include 162 local governments in 31 states, 14 housing finance programs and one university. A complete list of affected securities and additional analysis is available at

These actions relate to Moody's July 13 decision to place the Aaa government bond rating of the United States under review for downgrade, and reflect the rating agency's assessment that some Aaa public finance ratings would likely be indirectly affected by potential credit deterioration of the sovereign.


In a previous action on July 19, Moody's placed the ratings of five Aaa U.S. state governments under review for possible downgrade, affecting approximately $24 billion of general obligation and related debt. Those states are Maryland, New Mexico, South Carolina and Tennessee and the Commonwealth of Virginia.

The entities on down grade watch include:

  • The Colorado Housing and Finance Authority's Single Family Mortgage Bonds and the Single Family Program Bonds, 2009 Class I
  • Idaho Housing and Finance Association's Single Family Mortgage Senior Bonds, Series 1996B, Series 1996C, Series 1998D, Series 1999F, Series 1999-I*, Series 2000A, Series 2000C, and Series 2000D
  • Kentucky Housing Corporation's Housing Revenue Bonds
  • Utah Housing Corporation's Single Family Mortgage Senior Bonds, Series 1998G, Series 2000A and NIBP
  • The University of Washington
  • The Smithsonian Institution
Given that Moody's and Standard & Poor both say that they'll likely downgrade U.S. credit even if a debt ceiling deal is reached, it's looking dire for the above-described entities and bond issues.

I think that there are arguments for doing away with all taxes. However, if we're going to have taxes, the top 1% should pay their fair share.

Of course, if we prosecuted fraud and clawed back ill-gotten gains we wouldn't be in such a deep hole.

Reagan's domestic policy advisor (Bruce Bartlett) said Wednesday that it was a myth that tax cuts are the key to prosperity, that higher taxes may actually help the economy, and reminded people that Reagan raised the capital gains rate:

**(Reagan actually raised taxes 11 times).

Bartlett also recently pointed out:

Taxes were cut in 2001, 2002, 2003, 2004 and 2006.

It would have been one thing if the Bush tax cuts had at least bought the country a higher rate of economic growth, even temporarily. They did not. Real G.D.P. growth peaked at just 3.6 percent in 2004 before fading rapidly. Even before the crisis hit, real G.D.P. was growing less than 2 percent a year...

According to a recent C.B.O. report, they reduced revenue by at least $2.9 trillion below what it otherwise would have been between 2001 and 2011. Slower-than-expected growth reduced revenue by another $3.5 trillion.

Spending was $5.6 trillion higher than the C.B.O. anticipated for a total fiscal turnaround of $12 trillion. That is how a $6 trillion projected surplus turned into a cumulative deficit of $6 trillion.

Ronald Reagan's budget director David Stockman called the Bush tax cuts the "worst fiscal mistake in history", and said that extending them will not boost the economy.

And even Reagan's Assistant Secretary of Treasury with impeccable conservative credentials, who is widely credited with being the "father of supply-side economics" (Paul Craig Roberts) maintains that the Bush tax cuts made no economic sense ... even from a supply-side point of view.

As Roberts wrote in 2006:

The George W. Bush regime was faced with no stagflation and no worsening trade-offs between employment and inflation. The Bush administration did not use changes in the marginal rate of taxation to correct a mistaken policy mix or an oversight in economic policy. Moreover, global labor arbitrage is causing American jobs to be outsourced abroad. As Americans are experiencing declining opportunities to work, the response of labor supply to better incentives is small. Similarly, US companies are locating their investments in plant and equipment abroad. The substitution of foreign for American labor and the relocation abroad of US plant and equipment prevent reductions in marginal tax rates from having any appreciable effect on aggregate supply in the US.

I am not a partisan of Dubya’s tax cuts. Income distribution is a legitimate issue. This is especially the case when offshore production and jobs outsourcing are destroying the American middle class.

Just as Dubya hides behind "freedom and democracy" to wage wars of naked aggression, he hides behind supply-side economics in order to reward his cronies.
It's not just Bush. Roberts laments that the current debt ceiling shenanigans may be:
A perfectly orchestrated scenario for getting rid of the New Deal and the Great Society that use up money that could be spent on wars and bailouts and tax cuts for the rich.

The Bank for International Settlements (BIS) is owned by the world's central banks, which are in turn owned by the big banks.

It turns out there may be a very interesting wrinkle to the private ownership issue.

By way of background, BIS is often called the "central banks' central bank", as it coordinates transactions between central banks, and which is the entity determining the level of reserves banks are required to keep worldwide.

As Spiegel reported in 2009:

The BIS is a closed organization owned by the 55 central banks. The heads of these central banks travel to the Basel headquarters once every two months, and the General Meeting, the BIS's supreme executive body, takes place once a year.
But as the New York Federal Reserve Bank currently states on its website:
As of March 2006, the BIS had 55 shareholding central banks from around the world. As of March 2006, the Bank’s assets were approximately $221 billion, including $5.8 billion of its own funds.

When the BIS initially raised capital, participating banks were given the option to buy BIS shares or arrange for those shares to be bought by the public. Currently, 86 percent of the shares of the BIS are registered in the names of central banks, and 14 percent are held by private shareholders. The shares owned by private shareholders consist of part of the French and Belgian issues and all of the shares that were in the original U.S. issue in 1930.

So the private banks own the Fed (and most other central banks), and the central banks - and private shareholders - in turn own BIS, the global bank regulator.

It would obviously be very interesting to find out who these private shareholders are.

And to find out if the shareholders enjoy any special benefits. As Spiegel notes:
Formally registered as a stock corporation, it is recognized as an international organization and, therefore, is not subject to any jurisdiction other than international law.

It does not need to pay tax, and its members and employees enjoy extensive immunity. No other institution regulates the BIS, despite the fact that it manages about 4 percent of the world's total currency reserves, or €217 trillion ($304 trillion), as well as 120 tons of gold...

Central bankers are not elected by the people but are appointed by their governments. Nevertheless, they wield power that exceeds that of many political leaders. Their decisions affect entire economies, and a single word from their lips is capable of moving financial markets. They set interest rates, thereby determining the cost of borrowing and the speed of global financial currents.

Could that mean that the private shareholders owning 14% of the world's central bank have somehow been "grandfathered in", and are immune from taxes and other national rules? Wouldn't it be interesting to find out?

The New York Fed claims that the private BIS shareholders don't have voting rights:
All shareholders receive theLink Bank’s dividends. However, private shareholders do not have voting rights or representation at the BIS annual meetings. Only a country's central bank or its nominee may exercise the rights of representation and voting.
This may or may not be true. It is common for powerful and wealthy people informally influence agency decisions. Just look at every captured financial regulator in the United States.

But whether or not the shareholders get special treatment or influence the decisions of the world's most powerful banking institution, it is still newsworthy that there are private parties with not insignificant ownership interests.

Update: Apparently, the information on the New York Fed's website is out of date. BIS' website
says that the private shares were repurchases in 2003, so that now only central banks own shares...

Friday's news on GDP shows the double dip has arrived — an expansion of only 1.3 percent and consumer spending up 0.1 percent in the second quarter. Astonishingly low by any account. The debt ceiling trouble and lack of a longer term resolution to the deficit will make it worse.

The U.S. has entered a second recession. It may not be as bad as the first. Economists say that the Great Recession began in December 2007 and lasted until July 2009. That may be the way that the economy was seen through the eyes of experts, but many Americans do not believe that the 2008-2009 downturn ever ended. A Gallup poll released in April found that 29 percent of those queried thought the economy was in a “depression” and 26 percent said that the original recession had persisted into 2011.

It is any wonder that many Americans believe that the economic downturn is still in progress? Home prices have fallen to 2002 levels. Values have dropped nearly 50 percent in parts of Florida, California, Nevada and Arizona. Property values are also down that much in parts of troubled big cities like Detroit. Estimates are that as many as 11 million homes have underwater mortgages. Banks have inventories of as many as 2 million foreclosed homes which have not even been released to the market. Home prices could fall another 10 percent if current trends persist.

Perhaps the most powerful argument that the recession never ended or that a new one has begun is the persistence of unemployment. Fourteen million people are out of work. A third of those have been jobless for more than a year. May employment data showed the jobless rate rose unexpectedly and that the economy added only 58,000 jobs. Experts believe that the unemployment rate will not improve significantly until the monthly gain in jobs is consistently 300,000 jobs or more. And, at that rate the gains would have to go one for more than two years to bring the economy back to what is traditionally considered a reasonable unemployment figure.

There are several signs that a recession is firmly in place again and that the downturn could last for several quarters. Most are already easy for the average American to see.

1. Inflation
There is almost nothing that damages consumer confidence as badly as a rapid rise in prices. Starbucks recently increased the price of a bag of coffee by 17 percent because wholesale prices have risen by almost twice that rate in the last year. Cotton prices nearly doubled in 2010 but have fallen this year. But, apparel is made months in advance of when they reach store shelves. Summer clothing prices are up as much as 20 percent. That may change in the fall, but for the time being, the consumer’s ability to buy even the most basic clothing has been undermined. Consumers today pay more for sugar, meat, and corn-based products as well.

2. Investments have begun to yield less
Part of the recovery was driven by the stock market surge which began when the DJIA bottomed below 7,000 in March 2009. The index has risen above 12,000 and the prices of many stocks have doubled from their lows. As result, American household nest eggs that were decimated by the collapse of the market have rebounded and enabled people to splurge on themselves. However, the market has stumbled in the last quarter. The DJIA is up only 1 percent during the last three months and the S&P 500 is down slightly.

Americans, though, have few other places to put their money. Ten-year Treasuries yield about 3 percent. Gold was a good investment over the last year, but it has begun to falter as well. The market may not be a friend to investors for quite some time.

3. The auto industry
The auto industry has staged an impressive comeback, although its profitability is based as much on the layoffs it has made over the last five years as generating new sales. GM and Chrysler have emerged from bankruptcy. Year-over-year monthly sales improved late last year and through April. May sales stalled. GM’s revenue dropped by 1 percent compared to May of 2010. Ford’s sales were down about as much. There are many reasons for this trend including high gas prices and the constrained manufacturing capacity of the Japanese automakers because of the earthquake. Consumers also may be deferring big purchases because they are worried about their economic prospects. Slow car sales are not just a sign of lagging consumer confidence. They also may be a harbinger of tougher times ahead. These companies shed several hundreds thousand jobs before and during the last recession. Car firms have only just begun to hire again, but that trend will die with a plateau in sales.

4. Oil prices
Oil prices are supposed to drop as the economy slows as they did in 2008 and early 2009 when crude fell from over $140 to under $50. That drop at least allowed consumers and businesses like airlines to more easily afford fuel. Recently, crude has moved back above $100 and appears to be stuck there regardless of the economic situation. American budgets have been hurt by the rising cost of gas. Americans of more modest means have been particularly affected. A slowdown in driving usually also leads to a decline in the retail sector as consumers reduce unnecessary travel to stores. The impact on other businesses is just as great. Airlines suffer and so do firms which rely on petrochemicals. OPEC, for now, has signaled it will not increase production.

5. The federal budget
The federal budget deficit has decimated any chance for another economic stimulus package which many prominent economists like Nobel Prize-winner Paul Krugman say is essential to create a full recovery. His theory has become more of an issue as GDP growth slows to a rate of 2 percent. The first $787 billion Obama stimulus package may have saved some American jobs, but it is long over and did not work if a drop in unemployment and a sharp improvement in GDP were its primary goals. The deficit has caused a call for severe austerity measures which have already become part of the economics policies of countries from Greece to the U.K. to Japan. Job cuts in the U.S. will not be restricted to the federal level. A recent UBS Investment Research analysis predicted that state and local governments will cut 450,000 jobs this year and next. That process is already well underway. States like California and New York currently run massive deficits and the rates they must pay on bonds has risen accordingly. Newspaper headlines almost daily report on battles between state unions and governors over employment and benefits.

6. China economy slows
A slowdown in the Chinese economy is usually seen as a cause of global commodity price inflation, but the effects cut two ways. China’s appetite for energy and raw materials may fall. But, the demand for goods and services by its very large and growing middle class drops as well. Chinese purchaser manufacturing and export numbers have fallen as the central government has tightened the ability to borrow money. US exports to China are key to the health of many American businesses. John Frisbie, the president of The US-China Business Council, recently said, "Over the last decade we have seen exports to China rise from $16.2 billion to $91.9 billion — a 468 percent increase.” As that rate slows, it has a profound effect on tens of thousands of American companies and their employees. U.S. firms with large operations in China are also effected. GM is one of the two largest car firms in China along with VW. Large U.S. corporations like Wal-mart and Yum! Brands rely significantly on China to boost global sales. Without vibrant consumer spending in China, American companies will suffer.

7. Unemployment
Unemployment creates two immediate problems. People without jobs drastically curtail their spending, which will ultimately affect GDP growth. The second is the need for tens of billions of dollars every year in government aid to keep the unemployed from becoming destitute. That support has increased deficits and the domino effect is that cash-strapped governments need to make more spending cuts. It may be the biggest challenge the economy faces.

Unemployment has worsened because people over 65 to continue to work because the values of their homes — which they once counted on as the financial basis of their retirements — have dropped so sharply. Older Americans also fear that cuts in Medicare and perhaps Social Security are inevitable which increases the cost of their golden years. The jobs that older Americans have taken are often ones that younger Americans might have. People in their 20s must accept low wages to enter the workforce. This has delayed their prime consuming years well into their 30s which will damage GDP recovery now and for another decade.

The worst of the unemployment problem is the roughly 5 million Americans who have been unemployed for over a year. Their unemployment benefits have run out in many cases. The burden of their care falls to their families, friends, community organizations and non-profits. A family which has to support an unemployed person may be a family which cannot spend beyond its basic needs. To the extent that the federal or state governments can support the unemployed, the cost to run support programs increases.

8. Debt ceiling
The United States debt ceiling, currently at $14.294 trillion, will probably be raised before the government has to cut back essential services on Aug. 2. It might seem that the economic and employment effects of the debt cap are the same as the deficit, but they are actually more insidious and longer term. The first by-product of debt reduction, or at least a slowdown in its growth, is a combination of higher taxes and a lower level of government services. Higher taxes usually slow economic improvements, particularly when they are not coupled with stimulus measures.

A number of economists have pointed out the expense reduction alone will not sharply improve the United States balance sheet. The increase in Medicare and Social Securities costs, brought on by an aging population, are also likely to trigger a need for higher taxes. Tax increases could keep the economic growth of the US on hold for years. The taxation of companies decreases and often eliminates profits, particularly during an already troubled economic period. Profits which disappear usually cause cuts in purchasing and jobs. Taxes on wages and inheritance undermines consumer spending. And, a growth in national debt from already all-time highs will increase the borrowing costs of the U.S. That, in turn, drives up interest rates for everything from mortgages to credit cards.

9. Access To credit
The lack of access to credit has hurt the economic activity or both individuals and small businesses. Many very large companies can borrow money at rates as low as 2 percent because of their strong cash flows and balance sheets. Banks have been much less willing to loan money to companies with under 100 workers because these firms often rely on a few customers for revenue and usually have very little money on hand.

Early in June, the House Small Business Committee held hearings and among its findings were that concerns about risk and a slow economy has made financial institutions reluctant to lend to small businesses, the main driver of economic growth. Committee Chairman Sam Graves (R-Mo.) said Congress will need to “bridge the gap” between the two sides. There is no plan to accomplish that. Individual borrowers find themselves in a similar position. The cost of credit cards debt is still above 20 percent in many cases although the Federal Reserve loans money to large financial firms for interest rates close to zero.

Potential home buyers, who might help break the gridlock of slow house sales, often find that banks want down payments as high as 20 percent. The median down payment in nine major U.S. cities rose to 22 percent last year on properties purchased through conventional mortgages, according to an analysis done for The Wall Street Journal by real-estate portal That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997. Homes which are not sold often put such great burdens on owners that they are barely consumers of the goods and services that drive GDP. Home builders have continued to struggle. Construction jobs, which were a huge amount of the employment base in states like Florida, have not returned.

10. Housing
Housing is considered by many economists to be the single largest drag on the American economy, and the housing market has gotten much worse in the last two months. A report from The New York Federal Reserve published early this year said: “When home prices began to fall in 2007, owners’ equity in household real estate began to fall rapidly from almost $13.5 trillion in 1Q 2006 to a little under $5.3 trillion in 1Q 2009, a decline in total home equity of over 60 percent.”

Real estate research firm Zillow reported on more recent developments. “Negative equity in the first quarter reached new highs with 28.4 percent of all single-family homes with mortgages underwater, from 27 percent in Q4.” Many homeowners who want to sell their homes cannot do so because they cannot afford to pay their banks at closing. Whether for good or ill, the American home was the primary source for money used for retirements, college educations and the purchases of many expensive items such as cars.

Economists point out the this leverage helped contribute to the credit crisis as people could not cover the costs of home equity loans as real estate values collapsed. This may be true, but the drop in value happened so quickly that the balance sheets of millions of Americans were destroyed. Their ability to consume was severely damaged, further harming GDP. High mortgage payments bankrupted or nearly bankrupted people who have lost jobs or have found that their incomes had stagnated. The building industry became a shambles overnight. And, whatever the effects have been over the last three years, they are getting progressively worse as home values drop to decade lows. There is no relief in sight because potential buyers worry that price erosion has not ended.


Friday, July 29, 2011

Azerbaijan's Socar interested in buying stake in Greece's gas supplier Depa...

Azerbaijan's Socar interested in buying stake in Greece's gas supplier Depa...

Greek economy implodes as it begins to build pipeline from Caspian and this leads to privatization of Greek gas company assets. As with Ireland who just discovered massive oil fields, it's the same banks.....

Azerbaijan's Socar interested in buying into Greek Depa
London (Platts)--25Jul2011

Azerbaijan's state-owned Socar is interested in buying a stake in Greece's state natural gas supplier Depa when the latter is privatized later this year, Socar President Rovnag Abdullayev said Friday, with a deal likely to have implications for one of the three proposed gas pipeline projects to bring Caspian gas to Europe....

Ties between Baku and Athens have strengthened this year after the two sides agreed that Azerbaijan would supply gas directly to Greece through Turkey's gas transportation network.

Previously, Greece bought up to 750 million cubic meters/year of Azeri gas that was re-exported to Greece by Turkey's Botas under an agreement signed in 2002.

Greece, as part of its efforts to raise funds for its struggling economy, has said it wants to sell off stakes in a number of state companies, including refiner Hellenic Petroleum and Depa.

..."If it is profitable both economically and commercially, we can take part in Depa's privatization," Abdullayev was quoted as saying by Azeri news agency

"Yesterday, I met the president of Depa where he said that the Greek company is open to privatization," Abdullayev said.

Under its privatization plan, approved last month by the Greek Parliament as a condition for receiving fresh financial bailouts from the EU and IMF, Athens committed to selling a 55% stake in Depa.

It also said it would sell the remaining 35.5% stake it owns in Hellenic Petroleum and a 31% share in the Greek gas transmission company DEFSA.

Depa is a shareholder in one of the pipeline projects to bring more Azeri gas to Europe through the so-called southern corridor, so having Socar as a major shareholder could be beneficial to that project.....

Wednesday, July 27, 2011

China hand seen behind vast targeted buy-up of Japanese shares....

China hand seen behind vast targeted buy-up of Japanese shares....
By Hussain Khan

TOKYO - China, which over the past months has emerged as a top shareholder in leading Japanese companies, is not buying such large stakes aimlessly. Its targets are Japan's biggest trading and financial groups and leaders in specific technological fields, in line with Beijing's own long-term plans.

China's style of development, though it has become more open to capitalism over the past three decades, is different from that of capitalist countries. It has allowed free enterprise, but it has maintained its socialist pattern of controlling and developing its economy through five-year plans. During the past 60 years, it has attained the goals set in each of its five-year plans and now aims

to achieve the goals set out in the 12th, which runs from 2011 to 2015.

Beijing aims to develop "strategic emerging industries" in a wide variety of fields, including biotechnology, information and environmental technologies, machinery, energy, materials and autos, according to a Nikkei report. Under its 12th five-year plan, Chinese investors favor Japanese companies for their technologies in such fields, according to Naoki Tashiro, president of TS China Research, while investments by China's sovereign wealth fund are "closely linked" to the plan.

The Nikkei report highlights the close relationship between Chinese adaptation of foreign technologies and their original developers, pointing to China applying in the US and other countries for patents on high-speed bullet trains it has developed based on Kawasaki Heavy Industries Ltd's technology for shinkansen bullet trains, claiming the technology as its own.

While China considers it more efficient to introduce cutting-edge technologies from foreign companies than to develop them by itself, Japanese companies have such technologies but are often unable to profit from them. As a result, given their low stock prices, Japanese companies "may appear undervalued" to China, Tashiro said in the Nikkei report.

Mitsubishi Corp, in which an investor in the name of OD05 Omnibus is the sixth-largest shareholder, has operations in water purification and desalination, wind power and rare earth elements. The same investment fund is the sixth-largest shareholder in Nippon Telegraph and Telephone Corp, which has developed technology in telemedicine. [1] Toray Industries Inc, in which OD05 Omnibus is the seventh-largest shareholder, possesses carbon fiber technology used in midsize passenger jets.

OD05 Omnibus is the fifth-largest shareholder of Sony Corp and the pioneering Takeda Pharmaceutical Co. Sony had been always a leader in developing electronic products, while Takeda is considered the top developer of new medicines in the country, as well as the biggest. It is reported that Takeda is employing 500 PHDs for research on developing new medicines.

Less clear is the reason for OD05 Omnibus becoming the third-largest shareholder of Mitsubishi UFJ Financial Group Inc, Sumitomo Mitsui Financial Group Inc and Mizuho Financial Group Inc - Japan's top banking groups. The scale of such stakes in such big banks is a very significant, and the Japanese are wondering as to what may be the Chinese motive behind it.

Of similar concern is that the same entity is the fourth-largest shareholder of Mitsui & Co and sixth-largest shareholder of Mitsubishi Corp - the biggest trading groups in Japan for over 100 years. It is the seventh-largest shareholder of Softbank Corp, a world-leading innovator in mobile phone development including mobile reception of TV, and motion control sensing.

Omnibus stands out among the otherwise predictable list of names, such as custodian Japan Trustee Services Bank Ltd, that make up the biggest investors in Japan Inc.

OD05 Omnibus has its head office in Sydney, Australia, but such huge investments in Japan and other countries by this investor indicate that such a job can be done only by a big sovereign fund. Tatsuya Imade, managing executive officer at Japan Shareholder Services Ltd, says that OD05 Omnibus is "very likely a Chinese sovereign fund".

Several factors lie behind that assumption, including its full name - the SSBT OD05 Omnibus China Treaty fund - and that a Chinese investor has business ties with one custodian's Sydney office. The Nikkei Veritas has found evidence supporting this view from a shareholder research service provider.

Eiichi Sekine, chief representative of the Beijing office of the Nomura Institute of Capital Markets Research, also endorses the hypothesis. "[Omnibus] seems to be managing assets of China Investment Corp [CIC], among others," said Sekine referring to China's main sovereign wealth fund.

CIC added $35.7 billion in new investment in 2010, and made a net profit of $51.5 billion, China Daily reported on July 27, citing the fund's annual report released this week. The fund ended the year with a net asset value of $374 billion.

In the six months to the end of September 2010, OD05 Omnibus bought an estimated 1 trillion yen (US$12.8 billion) in Japanese shares.

During that period it concentrated on banking shares, increasing its holdings in Mizuho Financial Group Inc by as much as 90% from six months earlier to about 330 million shares at the end of September, equivalent to 1.47% of the megabank's outstanding stock.

The fund also became a major shareholder of Canon Inc at the end of September. It is the ninth-largest shareholder of Canon, noted for its innovations in fields such as medical imaging and optics.

The SSBT OD05 Omnibus China Treaty fund owns the 11th-largest aggregate stake by value in 90 listed Japanese firms, at nearly 1.8 trillion yen, according to a survey based on securities reports filed by listed firms and other disclosure documents.

The Nikkei report says that at the end of March 2011, OD05 Omnibus held shares worth a total of 2.5 trillion yen, nearly 2% of the firms' combined market value. It is also believed to have bought shares in companies that are not subject to disclosure requirements. Assuming a similar stake of 2% in those firms, that would increase the size of the fund's holdings by several times.

There was a time in the past during the bubble economy of Japan in the 1980s, when the world was afraid of Japan for its buying binge of assets in America and Europe. The entire Rockefeller Center of New York was bought by Mitsubishi Estate in 1989.

On November 8, 1989, Sony Corp acquired the American film and television production company Columbia Pictures Entertainment, Inc (its stable included Columbia Pictures, Tri-Star Pictures and others) from The Coca-Cola Co for $3.4 billion. Sony also acquired the Guber-Peters Entertainment Co for $200 million (formerly Barris Industries, Inc), and hired Peter Guber and Jon Peters to head its Columbia Pictures Entertainment acquisition.

The company was renamed Sony Pictures Entertainment on August 7, 1991. Sony's financial position has now deteriorated so much it is facing losses in its balance sheet, but in the 1980s it helped to created a Japanophobia in the West.

Bill Emmot, editor of The Economist in Great Britain at that time, wrote a book with that title - Japanophobia. Replying to a question by C-Span founder and chief executive Brian Lamb, "Why do you say there's the 'myth of the invincible Japanese'?", Emmot said,
Because I think in the 1980s, in particular, perceptions of Japan, particularly in the United States, but also in Europe, too, came to be characterized by the idea that Japanese companies had, I don't know, found the elixir of eternal strength. They were going to beat the world; they were going to take over the world; Japanese hegemony was predicted and feared by a lot of people.

There was an idea that Japan and Japanese companies had discovered something that Americans haven't discovered, and that this was going to lead them on and on and on, and beat off American competition, make Americans more impoverished, make Europeans even more backward than they actually are, and so on.
Now China is replacing Japan and someone may start writing a book on China-ophobia on similar lines.

Wednesday, July 20, 2011

NSA, DOD, DIA, JCS, FBI, DHS, FEMA, FCC, and CIA are The ‘Enron’ Of Intelligence....

NSA, DOD, DIA, JCS, FBI, DHS, FEMA, FCC, etc... and CIA are The ‘Enron’ Of Intelligence....

Former National Security Agency whistleblower Thomas A. Drake says continuing mismanagement and malfeasance have turned the nation's premier electronic spy agency into "the Enron of the U.S. intelligence community."

Mr. Drake, whose federal criminal case concluded last week, said in an interview with The Washington Times that he thinks management failures at NSA related to electronic surveillance and other issues that he protested — first through internal channels and then by sharing unclassified data with a Baltimore Sun reporter — are continuing.

"The agency never even accepted the basis for the [Pentagon inspector general's] investigation in the first place," he said, referring to the internal audit launched after he and others at NSA's Fort Meade headquarters in Maryland complained about contract fraud and mismanagement.

He compared the agency to the Texas-based energy trading giant Enron Corp., which went bankrupt in 2001 and became a symbol of corporate fraud and corruption.

Mr. Drake was sentenced to one year's probation and community service last week after the government's 10 felony counts against him were withdrawn. He instead pleaded guilty to a misdemeanor offense of exceeding authorized access to a government computer.

The judge called the prosecutors' handling of the case "unconscionable" because it took 2½ years to charge Mr. Drake and another 14 months to bring him to trial before all the major charges were dropped at the last minute.

The Justice Department said this week that it will continue pursuing other cases against intelligence officials accused of leaking classified information.

"The guilty plea of the Drake case has no affect on other pending matters," Justice spokeswoman Laura Sweeney told The Times. "Each case is unique, based on its fact and circumstances, and the department is proceeding in the pending cases."

They include the prosecutions of former CIA officer Jeffrey Sterling and State Department contractor Stephen Jin-Woo Kim, both involving accusations of leaks to reporters.

Another major case is that of Army Pvt. Bradley Manning, who is facing military charges related to hundreds of thousands of classified documents obtained in Iraq and passed to the anti-secrecy site WikiLeaks.

Mr. Drake's whistleblowing is related to NSA's multibillion-dollar plan to develop a digital eavesdropping and data storage system called Trailblazer, which would index and analyze large amounts of electronic data that the agency gathers from monitoring computers and telephones around the world.

Even though the public version of the inspector general's report is heavily censored, Mr. Drake said: "It is clear that NSA disputes the findings. ... They have never accepted they did anything wrong."

"There was a cover-up," Mr. Drake said. "The truth is Trailblazer was an even more abysmal failure than they let on in public."

In 2005, NSA Director Michael Hayden told Congress that Trailblazer was "a couple to several hundred million" dollars over budget and months behind schedule. The program was abandoned in 2006.

"In the end, they delivered nothing," Mr. Drake said of contractor SAIC, which was paid $280 million for the demonstration phase of the program. Mr. Drake said executives at NSA, including the deputy director at the time, William B. Black, were former SAIC employees and the contract was "hard-wired for SAIC."

Mr. Black returned to work at SAIC after his retirement from the NSA in 2006.

Through a spokesman, SAIC said the company and its executives declined to comment.

Mr. Drake, who held a senior position at NSA from 2001 until 2008, said the agency had planned to spend more than $4 billion on the program with SAIC and dozens of other contractors, and that fraud and abuse were widespread in Trailblazer and related programs.

"It really became a feeding frenzy as contractor after contractor bellied up to the Trailblazer bar," he said.

Mr. Drake said NSA's accounts — like most other Defense Department bookkeeping systems — were "unauditable."

The agency's budget is classified, but even for those inside the agency, "It was very difficult to determine where most of the money was going except at a very general level," he said.

The government "fought very hard" to keep any reference to the inspector general's report, or his other whistleblowing activities, for instance to Congress, out of the court case.

"Why were they so afraid of that getting into court?" he asked. "It's the continuing cover-up."

The NSA press office referred a request for comment to the Justice Department.

Ms. Sweeney, the Justice spokeswoman, said: "The department has long valued the legitimate exposure of waste, fraud and abuse if it occurs while at the same time protecting the rule of law.

"There are laws prohibiting government employees who are entrusted with the nation's most sensitive information from disclosing classified information to anyone not authorized to receive it."

Despite the administration's pursuit of leaks, some observers say, such cases often are difficult to prosecute without exposing secrets that the government wants to protect.

A former U.S. official familiar with the Drake case called leak cases challenging.

"You have to make absolutely sure that the victim agency understands very clearly who will be called as a witness and what they might be asked about," the former official said. "They have to be OK with that. ... If that is not adequately or sufficiently discussed, problems can come up."

This is always the problem with huge bureaucratic and costly organizations .... doubly so if they are secretive .... accountability and being responsible for mismanagement/incompetence is not the standard operating procedure. And while it is Congress that must provide oversight ..... LOL .... if recent years are any indication, they have completely failed in their responsibility to do any proper oversight of any sort over most (if not all) departments of government....

The approach of the default "Day of Doom" makes the question pressing....

This now seems a valid question. A solution to the deficit problem is clearly available:

1- Return income tax rates to what they were when that paragon of presidential virtue, Bill C. was in office. (irony alert) I hear people "going on" about the stultifying effect of income tax rate increases on small businesses. I don't get it. The US economy was booming under those tax rates. "People are afraid because the S Corporations will be hurt by higher taxes." "S corporations," "mumble, mumble," "double taxation," "mumble, mumble," "class warfare," "mumble, mumble." I used to be one of the owners of an S Corporation. The principal benefit of such a corporation is that distributions (not salary) to the owners IS NOT taxed as corporate income. The same thing is true of partnerships. So, basically, the truth is that well off people just don't want their taxes raised. They succeeded in having their Republican friends lower their taxes in the Bush years and they are fighting to keep them low using their ability to "bribe" members of Congress with campaign fund money.

2- Get rid of the Part D medicare pharmacy benefit. It is welfare for big pharma and it is not funded in any realistic way. You want a pharmacy benefit? Go around the world and ask people who have such benefits how they do it. Start by asking the French.

3 - Abandon the "Wars of Revolution" philosophy that now dominates our foreign policy. Let there be no more large commitments of ground and air assets to campaigns intended to change the civilizations of others. Think sneaky, not oafishly big. COIN is a bad joke. It always was... Michael Brenner wrote to tell me a new version of the light bulb joke. "How many COINistas does it take to change a light bulb? The answer is five, one to hold the bulb and the other four to rotate the table the first is standing on." Think small, THINK!

Collectively, these three things would bring the budget into balance. Can we do these things? Evidently not. The theological wars under way in the Congress seem to prevent such solutions. If that is true, then the country is ungovernable. we may be able to put a "bandaid" on the 2 August problem but the underlying conflict may be fatal.....

Eliminate all current wars: Afghanistan, Iraq, Somalia, Yemen, Lybia, War on Terror, etc WELL over 2 trillion in ten years.

Eliminate 60% of DoD budget 4 trillion dollar saving in 10 years.

Eliminate overblown international spying, do not need 16 competing bureaucracies, saving probably 500 millon over 10 years.

Eliminate Israel's support 30 billion over ten years

Eliminate tax deduction for foreign support donations [e.g. Israel's settlements] fairly large amount over 10 years

Eliminate 70% of DoE's budget for nuclrear arms 100 billion over ten years

Set marginal rates for all types of income to be equal in a progressive manner [e.g. 40 % above $500 000].

Write a new simple tax code -- billions saved on accounting for citizens, and billions saved by IRS in assuring enforcement per year.

Install single pay medical insurance a la France, sans insurance companies [except for extras as in Europe] 10 trillion dollars in ten years.

Increase Social Security contribution to all personal income, install mean testing for claw back a la Canada for instance.

US has become ungovernable, COL Lang lays out several really easy fixes (in policy, if not in the institutional politics) to right America's financial ship of state. Below you'll find a number of charts, as far as I know based on OMB or CBO data, that show were our current debt comes from and what some of the things we could fund if our elected officials were to follow COL Lang's recommendations. The first three are all from the Center on Budget Policies and Priorities, the last one is uncredited, but is simply another way of presenting the data in chart 3. I've seen these all over the Internet in the past year from economics blogs and sites to news and commentary sites, so I don't even know who to give the original hat tips too, but if you're looking for consistently good economic analysis I recommend Brad Delong's Grasping Reality with Both Hands, Barry Ritholtz's The Big Picture, Yves Smith's Naked Capitalism, Andrew Leonard's How the World Works, Felix Salmon's blog at Reuters, David Cay Johnston's columns at, and Bruce Bartlett's columns at Capital Gains and Games. Also, though he's often shrill and is definitely partisan, Paul Krugman's NY Times blog. I'm sure I've left a ton out, and I apologize, but I spend several hours a week staying up on the macroeconomics stuff from across the spectrum, so I'm sure I've slighted somebody.

To apply the brakes to the runaway financial train, re-institute the Glass-Stegall Act.

To apply the brakes to the runaway healthcare costs, re-institute the Hill-Burton Act.

By past Congresses doing away with both of the previous legislation, has led us to the financial debacle the USA and the World..... are currently in.

"Wall Street Greed and Endless Wars Are To Blame For Our Budget Crisis" .... "Congress Takes Money From The American People and Gives It To War Profiteers and Wall Street!"

Two new speeches from Congressman Kucinich and Congresswoman Kaptur:

Poland brokers EU deal on Nabucco gas pipeline....

Poland brokers EU deal on Nabucco gas pipeline....

[It seems that the Empire builders believe that Nabucco is still on schedule, albeit a schedule set-back by one-year because of American difficulties securing real estate. If some kind of pacification of just Northern Afghanistan can be arranged through hook or crook, then the machinery of Empire can move deeper into Central Asia. It's all about money, power and energy security .....]

Warsaw. Poland, holding the EU presidency, has brokered a deal on talks with Azerbaijan and Turkmenistan on the Nabucco pipeline, a key project to bring Caspian gas to Europe, a newspaper reported .

Quoting an anonymous Warsaw government source, the Polish daily Gazeta Wyborcza said that the accord drafted by Poland would empower the bloc’s executive European Commission to start negotiations in September.

Poland is at the helm of the 27-nation EU until the end of the year, and energy ministers from its fellow member states must still approve the plan.
The Nabucco pipeline would run from the Caspian Sea via Turkey, thereby avoiding Russia and Ukraine.
The pipeline is meant to help diversify gas sources for the European Union and reduce its dependency on energy giant Russia, as well as on Ukraine as a transit country.

Politically-charged gas transit disputes between Moscow and Kiev have hit supplies to Europe over recent years.
The initial plan was for the pipeline to begin pumping gas by 2015, but that target has since been pushed back to 2017.

The Nabucco project is in competition with the South Stream plan pushed by Russian gas powerhouse Gazprom and Italy’s ENI, which also aims to pump Caspian supplies to Europe....
[Very long article, but it seems to touch on all the baggage that Hillary is carrying with her.]

The Economy Can Only Recover If ALL countries Repudiate the Debt, failing that a never ending depression is at hand....

The Economy Can Only Recover If ALL countries Repudiate the Debt, failing that a never ending depression is at hand....

Economists: The Economy Can Only Recover If We Repudiate the Debt.

Leading Austrian-school economist Murray Rothbard - an American - wrote in 1992:

I propose ... out-right debt repudiation. Consider this question: why should the poor, battered citizens of Russia or Poland or the other ex-Communist countries be bound by the debts contracted by their former Communist masters? In the Communist situation, the injustice is clear: that citizens struggling for freedom and for a free-market economy should be taxed to pay for debts contracted by the monstrous former ruling class. But this injustice only differs by degree from "normal" public debt. For, conversely, why should the Communist government of the Soviet Union have been bound by debts contracted by the Czarist government they hated and overthrew? And why should we, struggling American citizens of today, be bound by debts created by a ... ruling elite who contracted these debts at our expense?
Although largely forgotten by historians and by the public, repudiation of public debt is a solid part of the American tradition. The first wave of repudiation of state debt came during the 1840's, after the panics of 1837 and 1839. Those panics were the consequence of a massive inflationary boom fueled by the Whig-run Second Bank of the United States. Riding the wave of inflationary credit, numerous state governments, largely those run by the Whigs, floated an enormous amount of debt, most of which went into wasteful public works (euphemistically called "internal improvements"), and into the creation of inflationary banks. Outstanding public debt by state governments rose from $26 million to $170 million during the decade of the 1830's. Most of these securities were financed by British and Dutch investors.

During the deflationary 1840's succeeding the panics, state governments faced repayment of their debt in dollars that were now more valuable than the ones they had borrowed. Many states, now largely in Democratic hands, met the crisis by repudiating these debts, either totally or partially by scaling down the amount in "readjustments." Specifically, of the 28 American states in the 1840's, nine were in the glorious position of having no public debt, and one (Missouri's) was negligible; of the 18 remaining, nine paid the interest on their public debt without interruption, while another nine (Maryland, Pennsylvania, Indiana, Illinois, Michigan, Arkansas, Louisiana, Mississippi, and Florida) repudiated part or all of their liabilities. Of these states, four defaulted for several years in their interest payments, whereas the other five (Michigan, Mississippi, Arkansas, Louisiana, and Florida) totally and permanently repudiated their entire outstanding public debt. As in every debt repudiation, the result was to lift a great burden from the backs of the taxpayers in the defaulting and repudiating states.

The next great wave of state debt repudiation came in the South after the blight of Northern occupation and Reconstruction had been lifted from them. Eight Southern states (Alabama, Arkansas, Florida, Louisiana, North Carolina, South Carolina, Tennessee, and Virginia) proceeded, during the late 1870's and early 1880's under Democratic regimes, to repudiate the debt foisted upon their taxpayers by the corrupt and wasteful carpetbag Radical Republican governments under Reconstruction.

Economics professor Steve Keen is also calling for a debt jubilee, stating:
We should write the debt off, bankrupt the banks, nationalize the financial system, and start all over again.

We need a twenty-first century jubilee.

[We’re going into] a never-ending depression unless we repudiate the debt, which never should have been extended in the first place.

If we keep the parasitic banking sector alive, the economy dies. We have to kill the parasites and give a chance to the real economy to thrive once more and stop the financial [crooks] doing what they did this time around ever again.

Economics professor Michael Hudson - who also calls for a debt jubilee - writes:

The only way to resolve the [European debt crisis] is to negotiate a debt write-off.
As I've noted for years, the entire strategy of the Bush and Obama economics teams have been to prevent the big banks, bondholders and other creditors from having to take haircuts by writing down the bad loans, phony instruments and bad debt. They have suspended any objective accounting requirements, allowed endless shell games to hide the debt and pretend all of the insolvent creditors are solvent, done everything under the sun to artificially prop up asset prices, turned a blind eye to the underlying fraud which caused the bubble, the toxic investment instruments and false representations, and then helped cover up the mess.

America - like most nations around the world - decided to bail out their big banks instead of taking the necessary steps to stabilize their economies. As such, they all transferred massive debts (from fraudulent and stupid gambling activities) from the balance sheets of the banks to the balance sheets of the country.

Failing to acknowledge the bad debt is dooming the world economy. As leading independent banking analyst Chris Whalen points out:

The invidious cowards who inhabit Washington are unwilling to restructure the largest banks and GSEs [government sponsored enterprises, like Fannie and Freddie]. The reluctance comes partly from what truths restructuring will reveal. As a result, these same large zombie banks and the U.S. economy will continue to shrink under the weight of bad debt, public and private. Remember that the Dodd-Frank legislation was not so much about financial reform as protecting the housing GSEs.

Because President Barack Obama and the leaders of both political parties are unwilling to address the housing crisis and the wasting effects on the largest banks, there will be no growth and no net job creation in the U.S. for the next several years. And because the Obama White House is content to ignore the crisis facing millions of American homeowners, who are deep underwater and will eventually default on their loans, the efforts by the Fed to reflate the U.S. economy and particularly consumer spending will be futile. As Alan Meltzer noted to Tom Keene on Bloomberg Radio earlier this year: "This is not a monetary problem."

The policy of the Fed and Treasury with respect to the large banks is state socialism writ large, without even the pretense of a greater public good.

The fraud and obfuscation now underway in Washington to protect the TBTF banks and GSEs totals into the trillions of dollars and rises to the level of treason.

And in the case of the zombie banks, the GSEs and the MIs, the fraud is being actively concealed by Congress, the White House and agencies of the U.S. government led by the Federal Reserve Board. Is this not tyranny?
And Paul Mason - economics editor for BBC Newsnight - told Democracy Now on July 1:

[Interviewer]: Is there a qualitative difference in our era where you have essentially financial institutions that are far more powerful than any governments? Where you had a situation where during the 2008 crisis the United States government was bailing out banks in Europe that had been involved in investments here as well as its own banks, that this concept of too-big-to-fail for banks, but not for countries, or not for populations that end up having to suffer?


[Paul Mason]: You’re absolutely right that the situation we are in is unprecedented..... And we are entering a situation where the entire system seems incapable of recognizing bad debt. The bad debt has been flowing around the system since Lehman.
Repudiating Debt is MORAL.....

Religions were founded on the concept of debt forgiveness.

For example, Matthew 6:12 says:

And forgive us our debts, as we forgive our debtors.
As periodic times of debt forgiveness - or debt "jubilees" - were a normal part ancient Jewish and Christian religions.

David Graeber, author of "Debt: The First 5,000 Years" told Democracy Now recently:

Most revolutions, more revolts in human history have been about debt. It’s the most perennial tool that’s been used by people who are powerful to make the victims of structural inequalities feel that it’s somehow their fault. So I wanted to unveil that and show that we’re actually part of a very very long history. There’s also a lot of hope in it. Because the other thing I realized is that much of the world religions grew out of social movements, which were exactly about “problematizing” debt. Basically saying, who owes what to who?
That made me think that we’re actually at a very strange historical moment because they’ve managed to convince people around the world that debt is somehow something sacred. I mean, a debt is just a promise, right? It has no greater moral standard than any other promise that you would make. Yet, here we have people accepting that it’s perfectly reasonable to say well, we can’t possibly keep our promise to the public, politicians say, to give you health care because it’s absolutely unthinkable we could break our sacred promises to bankers to give them a certain percentage of interest every year. How did that become a convincing argument? It’s utterly odd if you think about in terms of any kind of principle of democracy. As I say, if you look at the history of world religions, of social movements what you find is for much of world history what is sacred is not debt, but the ability to make debt disappear to forgive it and that’s where concepts of redemption originally come from.


[Interviewer] David Graeber in this long history is there a qualitative difference in our era where you have essentially financial institutions that are far more powerful than any governments? Where you had a situation where during the 2008 crisis the United States government was bailing out banks in Europe that had been involved in investments here as well as its own banks, that this concept of too-big-to-fail for banks, but not for countries, or not for populations that end up having to suffer?

[Graeber]:I think that marks a significant break in world history. I think when we look back at this, we’re gonna think of 2008. 1972 when the U.S. went off the gold standard was the first moment we sort of moved toward a system of virtual money where we realize that money is not a thing, it’s an arrangement between people. In 2008, where it became clear that the old global financial system is something that’s created politically and has to be periodically recreated, it doesn’t maintain itself, like they want us to believe. I mean, that really marks a break. The question is now that we understand that money is a political construct, that they really do just print it, it is a promise that people make to each other. Well who has control over that process of making promises? Who gets to make them and to whom?

Ambrose Evans-Pritchard wrote in 2009:

In the end, the only way out of all this global debt may prove to be a Biblical debt Jubilee.

Repudiating Debt is "Odious" Debt LEGAL....

Former Managing Director and board member of Wall Street investment bank Dillon Read, president of Hamilton Securities Group, Inc., an investment bank, and former government servant Catherine Austin Fitts wrote:

Look up “fraudulent inducement.” My position as the former Assistant Secretary of Housing-Federal Housing Commissioner and then as lead financial adviser to the U.S. Department of Housing and Urban Development is that the majority of the mortgages originated in the United States after 1996 were fraudulently induced.

The way to deal with criminals is to treat our contracts with them in a manner reciprocal to how they have treated their contracts with us.

Congresswoman Kaptur advises her constituents facing foreclosure to demand that the original mortgage papers be produced. She says that - if the bank can't produce the mortgage papers - then the homeowner can stay in the house.

As of last year:
There is an established legal principle that people should not have to repay their government's debt to the extent that it is incurred to launch aggressive wars or to oppress the people.

These "odious debts" are considered to be the personal debts of the tyrants who incurred them, rather than the country's debt.

Wikipedia gives a good overview of the principle:

In international law, odious debt is a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, such as wars of aggression, should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

The doctrine was formalized in a 1927 treatise by Alexander Nahum Sack, a Russian émigré legal theorist, based upon 19th Century precedents including Mexico's repudiation of debts incurred by Emperor Maximilien's regime, and the denial by the United States of Cuban liability for debts incurred by the Spanish colonial regime. According to Sack:

When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime. The reason why these odious debts cannot attach to the territory of the state is that they do not fulfill one of the conditions determining the lawfulness of State debts, namely that State debts must be incurred, and the proceeds used, for the needs and in the interests of the State. Odious debts, contracted and utilized for purposes which, to the lenders' knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation – when it succeeds in overthrowing the government that contracted them – unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed a hostile act against the people, they cannot expect a nation which has freed itself of a despotic regime to assume these odious debts, which are the personal debts of the ruler.
Patricia Adams, executive director of Probe International (an environmental and public policy advocacy organization in Canada), and author of Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy, has stated that:

by giving creditors an incentive to lend only for purposes that are transparent and of public benefit, future tyrants will lose their ability to finance their armies, and thus the war on terror and the cause of world peace will be better served.

A recent article by economists Seema Jayachandran and Michael Kremer has renewed interest in this topic. They propose that the idea can be used to create a new type of economic sanction to block further borrowing by dictators.

Jubilee USA notes that creditors may lose their rights to repayment of odious debts:

Odious debt is an established legal principle. Legally, debt is to be considered odious if the government used the money for personal purposes or to oppress the people. Moreover, in cases where borrowed money was used in ways contrary to the people’s interest, with the knowledge of the creditors, the creditors may be said to have committed a hostile act against the people. Creditors cannot legitimately expect repayment of such debts.

The United States set the first precedent of odious debt when it seized control of Cuba from Spain. Spain insisted that Cuba repay the loans made to them by Spain. The U.S. repudiated (refused to pay) that debt, arguing that the debt was imposed on Cuba by force of arms and served Spain’s interest rather than Cuba’s, and that the debt therefore ought not be repaid. This precedent was upheld by international law in Great Britain v. Costa Rica (1923) when money was put to use for illegitimate purposes with full knowledge of the lending institution; the resulting debt was annulled.

The launch of the Iraq war was an unlawful war of aggression. It was based on false premises (weapons of mass destruction and a connection between Iraq and 9/11; see this, this, this, this, ). Therefore, the trillions in debts incurred in fighting that war are odious debts which the people might lawfully refuse to pay for.

The Bush and Obama administrations have also oppressed the American people through spying on us - even before 9/11 (confirmed here and here) - harassment of innocent grandmothers and other patriotic Americans criticizing government action, and other assaults on liberty and the rule of law. . The monies borrowed to finance these oppressive activities are also odious debts.

The government has also given trillions in bailouts, loans, guarantees and other perks to the too big to fails. These funds have not helped the American people. For example, the giant banks are still not loaning. They have solely gone into speculative investments and to line the pockets of the muckety-mucks in the form of bonuses. PhD economist Dean Baker said that the true purpose of the bank rescues is "a massive redistribution of wealth to the bank shareholders and their top executives". Two leading IMF officials, the former Vice President of the Dallas Federal Reserve, and the the head of the Federal Reserve Bank of Kansas City have all said that the United States is controlled by an oligarchy. PhD economist Michael Hudson says that the financial “parasites” have killed the American economy, and they are "sucking as much money out" as they can before "jumping ship". These are odious debts.

[Bush and Obama officials] who ordered that these debts be incurred must be held personally liable for them. We the American people are not responsible to creditors - such as China, Saudi Arabia - who have knowingly financed these illegal and oppressive activities which have not benefited the American people, but solely the handful of corrupt politicians who authorized them.
Repudiating Debt Is Politically EMPOWERING

Matt Taibbi wrote last year:

As powerful as these Wall Street banks may seem, they are also exquisitely vulnerable. Right now virtually all of them are dependent upon the government keeping accounting standards lax enough for all of them to claim to be functional businesses. It is generally accepted that if the major banks on Wall Street were forced to mark all of their assets to market tomorrow, they would all be either insolvent or close to it.

Thus their “healthy” financial status is already illusory. So imagine what would happen if large numbers of those dubious loans on their balance sheets that they have marked down as “performing” were suddenly pushed ahead of time into the default column. What if Greece, and the Pennsylvania school system, and Jefferson County, Alabama, and the countless other municipalities and states that are wrapped up in these corrupt deals just decided to declare their debts illegitimate and back out?

I think it’s an interesting question and would like to hear what knowledgeable people in the field have to say about it. But the big picture, to me, is that these companies are almost totally dependent not only upon the continued good faith of aggrieved debtors, but upon the government recognizing the (sometimes fraudulent) loans made to those debtors as fully performing.

Similarly, Gregor MacDonald argued in February 2009:

The private sector debt in the United States exerts the same power over the banking system as the public debt of the United States exerts over our international creditors. Collectively, the debtors are in control. Not the creditors. This is why the the Creditors, not the Debtors, will be making most of the concessions in the years ahead. Whether the US public debt is inflated away, rescheduled, or repudiated–or some combination of all three–it doesn’t matter much. The process is already underway.

The most cynical (but not necessarily inaccurate) view of debt I've seen is that banks loan out imaginary money they don't really have, which money is "collateralized" by capital they do not really have, which is, in turn, based upon central bank printing presses which create money out of thin air which the central banks don't really have. But then when debtors have trouble repaying onerous loans, the bankers seize real assets. .

In other words, according to the most cynical view, the entire debt-money system is a scam ... and should be repudiated.
Repudiating Debt is POPULAR

Walking away from home mortgages has actually become mainstream, being trumpeted by:


The New York Times (and New York Times Magazine)

The Wall Street Journal


The Arizona Republic
Even popular personal finance adviser Suze Orman is highlighting the debtors revolt phenomenon on her national tv show

And Max Keiser predicts that the revolts in Greece, Spain and elsewhere will play out in the U.S. in the form of mass defaults on mortgages later this year....

Tuesday, July 19, 2011

Rating agency decisions, usury..., greed, utter Fraud and Raging Inequality, May Cause Unrest and Violence In America and the Rest of Western World...

Rating agency decisions, usury..., greed, utter Fraud and Raging Inequality, May Cause Unrest and Violence In America and the Rest of the Western World...and way beyond.!

Raging inequality was largely responsible for the Great Depression and for the current financial crisis.


Egyptian, Tunisian and Yemeni protesters all say that inequality is one of the main reasons they're protesting.

However, the U.S. actually has much greater inequality than in any of those countries.

Is there any way that the growing inequality could cause unrest in America or the rest of the Western world?

Initially, the Greek and Spanish riots have grown out of bailouts and other windfalls for the big banks and hedge funds (see this, and this), and austerity for the working stiff. So in a sense, they are about inequality.

Moreover, in February:

Agence France-Press reports today:
The International Monetary Fund stands ready to help riot-torn Egypt rebuild its economy, the IMF chief said Tuesday as he warned governments to tackle unemployment and income inequality or risk war.

Forbes reported in February:

Harvard economist Kenneth Rogoff, co-author of a best-selling book on financial crises, “This Time It’s Different,” told Forbes today in an exclusive interview, that the high unemployment rate and high levels of debt in the U.S. will sooner or later trigger serious “social unrest from the income disparities in the U.S.”

The Obama administration has “no clue,” he told me what do about this terrible disparity in the economy that is bound to erupt sooner or later, he feels.

“I don’t understand why people don’t wake up to the crisis they are creating,” he said to me just minutes after appearing at a Council on Foreign Relations round-table on “Currency Wars.”

And in June:

CNN's Jack Cafferty notes that a number of voices are saying that - if our economy continues to deteriorate (which it very well might) - we are likely headed for violence, and civil unrest is a growing certainty.

Watch the must-see CNN viewer comments on this issue:

Newsweek wrote two weeks ago:

Reality is beginning to break through. Gas and grocery prices are on the rise, home values are down, and vast majorities think the country is on the wrong track. The result is sadness and frustration, but also an inchoate rage more profound than the sign-waving political fury documented during the elections last fall.


In search of the earthly toll of this outrage, NEWSWEEK conducted a poll of 600 people, finding vastly more unquiet minds than not. Three out of four people believe the economy is stagnant or getting worse. One in three is uneasy about getting married, starting a family, or being able to buy a home. Most say their relationships have been damaged by economic woes or, perhaps more accurately, the dread and nervousness that accompany them.

Could these emotions escalate into revolt?

Why Are People So Angry?

Well, as the Newsweek article points out:
Corporate earnings have soared to an all-time high. Wall Street is gaudy and confident again. But the heyday hasn’t come for millions of Americans. Unemployment hovers near 9 percent, and the only jobs that truly abound, according to Labor Department data, come with name tags, hairnets, and funny hats (rather than high wages, great benefits, and long-term security). The American Dream is about having the means to build a better life for the next generation. But as President Obama acknowledged at a town-hall meeting in May, “a lot of folks aren’t feeling that [possibility] anymore.”
By way of background, America - like most nations around the world - decided to bail out their big banks instead of taking the necessary steps to stabilize their economies . As such, they all transferred massive debts (from fraudulent and stupid gambling activities) from the balance sheets of the banks to the balance sheets of the country.

The nations have then run their printing presses nonstop in an effort to inflate their way out of their debt crises, even though that effort is doomed to failure from the get-go.

Quantitative easing by the Federal Reserve is obviously causing food prices to skyrocket worldwide (and see
this, this and this).

But the fact is that every country in the world that can print money - i.e. which is not locked into a multi-country currency agreement like the Euro - has been printing massive quantities of money. .

Moreover, the austerity measures which governments worldwide are imposing to try to plug their gaping deficits (created by throwing trillions at their banks) are causing people world-wide to push back.

As 2009 and again in December of that year:

Numerous high-level officials and experts warn that the economic crisis could lead to unrest world-wide - even in developed countries:

  • Today, Moody's warned that future tax rises and spending cuts could trigger social unrest in a range of countries from the developing to the developed world, that in the coming years, evidence of social unrest and public tension may become just as important signs of whether a country will be able to adapt as traditional economic metrics, that a fiscal crisis remains a possibility for a leading economy, and that 2010 would be a “tumultuous year for sovereign debt issuers”.
  • The U.S. Army War College warned in 2008 November warned in a monograph [click on Policypointers’ pdf link to see the report] titled “Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development” of crash-induced unrest:
    The military must be prepared, the document warned, for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” The “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.” “An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home,” it went on. “Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance,” the document read.
  • Director of National Intelligence Dennis C. Blair said:
    "The global economic crisis ... already looms as the most serious one in decades, if not in centuries ... Economic crises increase the risk of regime-threatening instability if they are prolonged for a one- or two-year period," said Blair. "And instability can loosen the fragile hold that many developing countries have on law and order, which can spill out in dangerous ways into the international community."***

    "Statistical modeling shows that economic crises increase the risk of regime-threatening instability if they persist over a one-to-two-year period."***

    “The crisis has been ongoing for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism.”

    Blair made it clear that - while unrest was currently only happening in Europe - he was worried this could happen within the United States.

    [See also
  • Former national security director Zbigniew Brzezinski warned "there’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots."
  • The chairman of the Joint Chiefs of Staff warned the financial crisis is the highest national security concern for the U.S., and warned that the fallout from the crisis could lead to of "greater instability".
Others warning of crash-induced unrest include:
Unemployment is soaring globally - especially among youth.

And the sense of outrage at the injustice of the rich getting richer while the poor get poorer is also a growing global trend.

Countries worldwide told their people that bailout out the giant banks was necessary to save the economy. But they haven't delivered, and the "Main Streets" of the world have suffered.

As former American senator (and consummate insider) Chris Dodd said in 2008:
If it turns out that [the banks] are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.
Of course, the big banks are hoarding, and refusing to lend to Main Street. In fact, they admitted back in 2008 that they would. And the same is playing out globally.

As in February:

No wonder former U.S. National Security Adviser Zbigniew Brzezinski ... warned the Council on Foreign Relations that:

For the first time in human history almost all of humanity is politically activated, politically conscious and politically interactive. There are only a few pockets of humanity left in the remotest corners of the world that are not politically alert and engaged with the political turmoil and stirrings that are so widespread today around the world.


America needs to face squarely a centrally important new global reality: that the world's population is experiencing a political awakening unprecedented in scope and intensity, with the result that the politics of populism are transforming the politics of power. The need to respond to that massive phenomenon poses to the uniquely sovereign America an historic dilemma: What should be the central definition of America's global role?
[T]he central challenge of our time is posed not by global terrorism, but rather by the intensifying turbulence caused by the phenomenon of global political awakening. That awakening is socially massive and politically radicalizing.
It is no overstatement to assert that now in the 21st century the population of much of the developing world is politically stirring and in many places seething with unrest. It is a population acutely conscious of social injustice to an unprecedented degree, and often resentful of its perceived lack of political dignity. The nearly universal access to radio, television and increasingly the Internet is creating a community of shared perceptions and envy that can be galvanized and channeled by demagogic political or religious passions. These energies transcend sovereign borders and pose a challenge both to existing states as well as to the existing global hierarchy, on top of which America still perches.

That turmoil is the product of the political awakening, the fact that today vast masses of the world are not politically neutered, as they have been throughout history. They have political consciousness.


Politically awakened mankind craves political dignity, which democracy can enhance, but political dignity also encompasses ethnic or national self-determination, religious self-definition, and human and social rights, all in a world now acutely aware of economic, racial and ethnic inequities. The quest for political dignity, especially through national self-determination and social transformation, is part of the pulse of self-assertion by the world's underprivileged


We live in an age in which mankind writ large is becoming politically conscious and politically activated to an unprecedented degree, and it is this condition which is producing a great deal of international turmoil.

That turmoil is the product of the political awakening, the fact that today vast masses of the world are not politically neutered, as they have been throughout history. They have political consciousness.
Watch an excerpt:

Powerful words from Ron Paul:

"Every Time the Federal Reserve Engages In More Quantitative Easing and Devalues the Dollar, It Is Defaulting on the American People by Eroding their Purchasing Power and Inflating their Savings Away. The Dollar Has Lost Nearly 50% of Its Value Against Gold Since 2008 ... This Is a Default. Just Because It Is a Default On The People and Not The Banks and Foreign Holders of Our Debt Does Not Mean It Doesn't Count".

Politicians need to understand that without real change default is inevitable. In fact, default happens every day through monetary policy tricks. Every time the Federal Reserve engages in more quantitative easing and devalues the dollar, it is defaulting on the American people by eroding their purchasing power and inflating their savings away. The dollar has lost nearly 50% of its value against gold since 2008. The Fed claims inflation is 2% or less over the past few years; however economists who compile alternate data show a 9% inflation rate if calculated more traditionally. Alarmingly, the administration is talking about changing the methodology of the CPI calculation yet again to hide the damage of the government's policies. Changing the CPI will also enable the government to avoid giving seniors a COLA (cost of living adjustment) on their social security checks, and raise taxes via the hidden means of "bracket creep." This is a default. Just because it is a default on the people and not the banks and foreign holders of our debt does not mean it doesn't count.


Perhaps the most abhorrent bit of chicanery has been the threat that if a deal is not reached to increase the debt by August 2nd, social security checks may not go out. In reality, the Chief Actuary of Social Security confirmed last week that current Social Security tax receipts are more than enough to cover current outlays. The only reason those checks would not go out would be if the administration decided to spend those designated funds elsewhere. It is very telling that the administration would rather frighten seniors dependent on social security checks than alarm their big banking friends, who have already received $5.3 trillion in bailouts, stimulus and quantitative easing. This instance of trying to blackmail Congress ....


We need to stop expensive bombing campaigns against people on the other side of the globe and bring our troops home. We need to stop allowing secretive banking cartels to endlessly enslave us through monetary policy trickery. And we need to drastically rethink government's role in our lives so we can get it out of the way and get back to work.

Remember, quantitative easing doesn't help anyone but the biggest Wall Street companies (and see this, this and this).

And while "the dollar has lost nearly 50% of its value against gold since 2008", it got creamed by Federal Reserve policies before then as well. As of last year:

Here's a chart of the trade weighted US Dollar from 1973-2009.


And here's a bonus chart showing the decline in the dollar's purchasing power from 1913 to 2005:


Indeed, Ben Bernanke has previously admitted that inflation is a tax on the American people:

While money printing creates inflation, so does war. Paul's anti-war comments are thus relevant to the economy as well....
Paul Krugman: "So When Officials Tell You that We Must Rush to Settle with the Banks for the Sake of the Economy, Don’t Believe Them. We Should Do This Right, And Hold Bankers Accountable for Their Actions" .

Paul Krugman writes today in the New York Times.

Ever since the current economic crisis began, it has seemed that five words sum up the central principle of United States financial policy: go easy on the bankers.


Officials are pushing for a settlement with mortgage companies that, reports Shahien Nasiripour of The Huffington Post, “would broadly absolve the firms of wrongdoing in exchange for penalties reaching $30 billion and assurances that the firms will adhere to better practices.”

Why the rush to settle? As far as I can tell, there are two principal arguments being made for letting the banks off easy. The first is the claim that resolving the mortgage mess quickly is the key to getting the housing market back on its feet. The second, less explicitly stated, is the claim that getting tough with the banks would undermine broader prospects for recovery.

Neither of these arguments makes much sense.

The claim that removing the legal cloud over foreclosure would help the housing market — in particular, that it would help support housing prices — leaves me scratching my head. It would just accelerate foreclosures, and if more families were evicted from their homes, that would mean more homes offered for sale — an increase in supply. An increase in the supply of a good usually pushes that good’s price down, not up. Why should the effect on housing go the opposite way?

You might point to the mortgage relief that would supposedly be extracted as part of the settlement. But if mortgage relief is that crucial, why isn’t the administration making a major push to reinvigorate its own Home Affordable Modification Program, which has spent only a small fraction of its money? Or if making that program actually work is hard, why should we believe that any program instituted as part of a mortgage-abuse settlement would work any better?

Sorry, but the case that letting banks off the hook would help the housing market just doesn’t hold together.

What about the argument that getting tough with the banks would threaten the overall economy? Here the question is: What’s holding the economy back?

It’s not the state of the banks. It’s true that fears about bank solvency disrupted financial markets in late 2008 and early 2009. But those markets have long since returned to normal, in large part because everyone now knows that banks will be bailed out if they get in trouble.

The big drag on the economy now is the overhang of household debt, largely created by the $5.6 trillion in mortgage debt that households took on during the bubble years. Serious mortgage relief could make a dent in that problem; a $30 billion settlement from the banks, even if it proved more effective than the government’s modification program, would not.

So when officials tell you that we must rush to settle with the banks for the sake of the economy, don’t believe them. We should do this right, and hold bankers accountable for their actions.

American Government-Endorsed Rating Agency, Downgrades U.S. Credit...

Moody's and Standard & Poors are the largest, best known rating agencies which are endorsed by the U.S. government (technically known as Nationally Recognized Statistical Rating Organization (NRSRO). Fitch is another well-known NRSRO.

But there are actually 10 NRSRO's:

  • Kroll Bond Rating Agency
  • Moody's Investor Service
  • Standard & Poor's
  • Fitch Ratings
  • A. M. Best Company
  • Dominion Bond Rating Service, Ltd
  • Japan Credit Rating Agency, Ltd.
  • R&I Inc. (Rating and Investment Information, Inc.)
  • Egan-Jones Rating Company
  • Realpoint LLC

Egan-Jones Downgrades U.S.

Standard & Poors has recently threatened to downgrade U.S. credit even if there is no debt default....

As Zero Hedge notes, Egan-Jones has just downgraded U.S. credit, for reasons other than the debt ceiling debate:

The one truly independent and capable NRSRO, Egan-Jones, downgraded the US from AAA to AA+ over the weekend.

From the release:

Real GDP increased at an annualized rate of 4.0% in Q1 2011, following an increase of 3.5% rise in the prior quarter. Personal consumption expenditures, exports, and nonresidential fixed investment contributed positively to growth during the quarter. Meanwhile, imports rose sharply. In the March 2011 quarter, trade in goods and services resulted in a deficit of $562B, many because of the high price of petroleum. However, the major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending. We are taking a negative action not based on the delay in raising the debt ceiling but rather our concern about the high level of debt to GDP in excess of 100% compared to Canada's 35%. Nonetheless, since the US's debt is denominated in dollars, a hard default is unlikely.

And while there is much more in the full report (mind you nothing of it is surprising to anyone), the post script is spot on:

Nota Bene [Latin for "Note Well"]

History has proven that defaults on domestic public debt do occur. In fact, seventy out of three hundred twenty defaults since 1800 have been on domestic public debt (1). Egan-Jones does not view a country's ability to print its own currency as a guarantee against default. Additionally, Egan-Jones generally views cases of excessive currency devaluation as a de facto default.

While the mainstream media will not pay much attention to Egan-Jones, the downgrade is another indication that the debt ceiling debate is a melodrama distracting from the deeper issues.
Hopefully a nationalized banking system will eliminate the vulnerabilities to chicanery and 'back door' investing in endeavors based in British protectorates. The surreptitious acts of slipping 'fine print' theft permits into non-associated legislation have helped create a tapeline on the flow of real cash/equity in the U.S. which empties out in banking's British protectorates. The mewlers in congress ignoring the attacks on the U.S. through financial and weather manipulation (Yes, kids. Weather wars IS here.)as well as violent episodes ( the inside job of 9-11, the DH oil well blowout) of armed warfare, have earned the right to a place in the unemployment line....

Andrew Gavin Marshall is an independent researcher and writer, who has authored dozens of articles, essays, and reports online and for various magazines and other publications, and is regularly interviewed by radio and television programs on a number of different issues. He recently co-edited a book with Professor Michel Chossudovsky entitled, “The Global Economic Crisis: The Great Depression of the XXI Century,” a collection of essays by a number of authors and researchers presenting a more critical and nuanced examination of the economic crisis that began in 2008.

The Great Global Debt Depression: It’s All Greek To Me
By Andrew Gavin Marshall


In late June of 2011, the Greek government passed another round of austerity measures, ostensibly aimed at getting Greece “back on track” to economic progress, but in reality, implementing a systematic program of ‘social genocide’ in the name of servicing an endless and illegitimate debt to foreign banks. Right on cue, protests and riots broke out in Athens against the draconian measures, and the state moved in to do what states do best: oppress the people with riot police, tear gas and bashing batons, leaving roughly 300 people injured.

Is Greece simply a case of a country full of lazy people who spent beyond their means and are now paying for their own decadence? Or, is there something much larger at stake – and at play – here? Greece is, in fact, a microcosm of the global economy: mired in excessive debt, economically ruined, increasingly politically repressive and socially explosive. This report takes a look at the case of the Greek debt crisis specifically, and places it within a wider global context. The conclusion is clear: what happens in Greece will happen here.

This report examines the Greek crisis, as well as the larger global economic crisis, including the origins of the housing bubble, the bailouts, the banks, and the major actors and institutions which will come to dominate the stage over the next decade in what will play out as ‘The Great Global Debt Depression.’.