Monday, September 5, 2011

September 5 2011: The US Sues Itself While Europe Crumbles


Dorothea Lange Loafing Fourth of July 1939
"Rural filling stations become community centers and general loafing grounds. Cedargrove Team members about to play in a baseball game, near Chapel Hill, North Carolina"


Ilargi: 'There Has Been a Clear Crisis of Confidence', says IMF head Christine Lagarde. What confidence is she talking about? Turns out, it's not your confidence in her. Neither is it your confidence in your elected politicians. While both may be shaken to the core, Ms. Lagarde addresses another form of confidence, the confidence "in the markets". And she has a solution for it. She says she knows how to restore this confidence.

'There Has Been a Clear Crisis of Confidence'
When we look at the European situation, there has to be fiscal consolidation qualified by growth-intensive measures. In addition, there has to be increased recapitalization of the banks. Clearly, the two go together. The sovereign debt issue weighs on the confidence that market players have in European banks. [..]

The spectrum of policies available to the various governments and central banks is narrower because a lot of the ammunition was used in 2009. But if the various governments, international institutions and central banks work together, we'll avoid the recession.

SPIEGEL: Does the US need a new stimulus package?

Lagarde: We are in a situation of slowed growth and we have a confidence issue that culminated this summer with the downgrading of the US from its AAA status. As long as the US puts in place a credible medium-term adjustment plan, there is probably space at the moment to contain the short-term adjustment and take some of those growth-inducing measures.

SPIEGEL: You suggest fighting the effects of a debt crisis with more debt?

Lagarde: That's not how I see it. In a world that is so economically interwoven, where the actions of industrial countries have direct influence on emerging economies, one can't be stubborn when the situation changes. We didn't change our minds about the dangers of too much debt, but over the current state of the world economy.

Ilargi: Nothing new from Ms. Lagarde, in other words. What we need is growth! Never mind that with high unemployment in many European countries, as well as the United States, and with housing markets either about to burst (Britain, Holland, Denmark, Sweden) or in just the first steps of doing so (United States, Spain, Ireland), substantial economic growth is but a mirage. It's not all that far-fetched to say we haven't seen any real growth for three decades; instead we've done nothing but borrow our way into an increase in spending power.

And the debt we've accumulated while we were borrowing has now reached levels that make growth no longer possible. In the US, each additional dollar of debt doesn't presently have any positive effect on growth anymore. In Greece, government bonds, the favorite debt instrument among politicians, have reached yields that top 70% for 1-year debt and 40% for 2-year paper. Italy needs to roll over €62 billion in debt before the end of September (the most ever in a single month). There are no buyers on the horizon except for the ECB; a scary realization.

Still, Ms. Lagarde pushes head first and full force for even more debt. In the US, where ..there is probably space at the moment to contain the short-term adjustment .., and in Europe, where ..there has to be fiscal consolidation qualified by growth-intensive measures. In addition, there has to be increased recapitalization of the banks..

In both cases, this would mean more money to be transferred from the taxpayer to the financial institutions. One might say that the crisis of confidence Lagarde talk about is one in which banks are starting to get worried about the size of their next bail-out. Nothing more, nothing less.

Over the weekend, German Chancellor Angela Merkel lost another one of her local elections. Question: anyone know where Western Pomerania is? Look it up! It's where Merkel is from, and her own people are fleeing from her, so to speak. And Merkel is like Lagarde: desperate enough for another one of those double or nothings. Where the German president and the Bundesbank have become very vocal in their criticism of Europe and its bail-out plans, Merkel wants more power for Europe, which will lay the ground work for more bail-outs.

On Wednesday, the Verfassungsgericht is set to decide whether the previous bail-outs were legal. They're expected to rule in favor, but to insist parliament gets a final vote in all subsequent bail-out plans. It would be good thing if they just strike down all that's been concocted to date. Good for the German taxpayer, that is. Not necessarily for the Greek ones, and certainly not for the banks and their stockholders.

The main European banks have another challenge to contend with, or so it seems at least: the US mass lawsuits by the Federal Housing Finance Agency (FHFA) on behalf of Fannie Mae and Freddie Mac, which contends that these were cheated by the banks when they purchased their mortgage-based securities.

It's a truly odd case is more than one way. First, what are the chances that Fannie and Freddie had no clue what they were buying. And is that were true, what does that say about a system where the US taxpayer gets to guarantee $5 trillion "worth" of paper through these institutions?

Second, because of these guarantees, as well as the trillions of dollars in bail-outs that have been transferred to the banks since 2008 in an alphabet soup worth of plans, the US government is de facto simply suing itself. Sure, 170 individual bankers were named -though none of the CEO‘s-, but what exactly was their part in it all? Can they be found guilty simply for signing documents? Even if they can -get me a scapegoat!-, the US wouldn’t recover any money, since all it might get already belongs to it anyway.

Yes, there may be some American schadenfreude over the cases against non-American banks, but most are still primary dealers. And if you risk them going down, they may very well take American banks with them.

The cases against Bank of America total some $57 billion, since they include Merrill Lynch and Countrywide ones, and BofA has bought these fine institutions. Even if there follows a verdict, which could take years, BofA will simply call itself too big to fail and find a Fed window where hand-outs are available.

Because it is obvious that these cases will linger for along time, here's thinking they constitute the real start of the 2012 election. Or that at least that is the plan; as Angela Merkel knows all too well, in today's finance world it's impossible to plan that far in advance. It's highly doubtful she’ll still be around in 14 months time. Or Sarkozy. European leaders are losing their constituencies fast, and that process will accelerate. Where Obama will be in November 2012 is harder to say. On his way to losing an election? Quite possible. But Americans are still far more timid than Europeans when it comes to protesting bail-outs.

Still, to come back to Christine Lagarde, these days, when you so clearly state that when you say "confidence", you're talking only about the markets, you're committing an act of blindness, whether it's willful or not. To even try and reinstate that kind of confidence, you will need trillions of additional dollars, euros and pounds. Trillions that belong to the people, not to politicians or banks.

To spend it, you will -increasingly- need the confidence of the people. Without that, going forward, you can kiss the confidence of the markets goodbye. And your career.














The Great Bank Robbery
by Nassim Nicholas Taleb and Mark Spitznagel - Project Syndicate

US Public Will Pay Bankers $5 Trillion Over The Next Decade

For the American economy – and for many other developed economies – the elephant in the room is the amount of money paid to bankers over the last five years. In the United States, the sum stands at an astounding $2.2 trillion for banks that have filings with the US Securities and Exchange Commission. Extrapolating over the coming decade, the numbers would approach $5 trillion, an amount vastly larger than what both President Barack Obama’s administration and his Republican opponents seem willing to cut from further government deficits.

That $5 trillion dollars is not money invested in building roads, schools, and other long-term projects, but is directly transferred from the American economy to the personal accounts of bank executives and employees. Such transfers represent as cunning a tax on everyone else as one can imagine. It feels quite iniquitous that bankers, having helped cause today’s financial and economic troubles, are the only class that is not suffering from them – and in many cases are actually benefiting.

Mainstream megabanks are puzzling in many respects. It is (now) no secret that they have operated so far as large sophisticated compensation schemes, masking probabilities of low-risk, high-impact "Black Swan" events and benefiting from the free backstop of implicit public guarantees. Excessive leverage, rather than skills, can be seen as the source of their resulting profits, which then flow disproportionately to employees, and of their sometimes-massive losses, which are borne by shareholders and taxpayers.

In other words, banks take risks, get paid for the upside, and then transfer the downside to shareholders, taxpayers, and even retirees. In order to rescue the banking system, the Federal Reserve, for example, put interest rates at artificially low levels; as was disclosed recently, it also has provided secret loans of $1.2 trillion to banks. The main effect so far has been to help bankers generate bonuses (rather than attract borrowers) by hiding exposures.

Taxpayers end up paying for these exposures, as do retirees and others who rely on returns from their savings. Moreover, low-interest-rate policies transfer inflation risk to all savers – and to future generations. Perhaps the greatest insult to taxpayers, then, is that bankers’ compensation last year was back at its pre-crisis level.

Of course, before being bailed out by governments, banks had never made any return in their history, assuming that their assets are properly marked to market. Nor should they produce any return in the long run, as their business model remains identical to what it was before, with only cosmetic modifications concerning trading risks.

So the facts are clear. But, as individual taxpayers, we are helpless, because we do not control outcomes, owing to the concerted efforts of lobbyists, or, worse, economic policymakers. Our subsidizing of bank managers and executives is completely involuntary.

But the puzzle represents an even bigger elephant. Why does any investment manager buy the stocks of banks that pay out very large portions of their earnings to their employees? The promise of replicating past returns cannot be the reason, given the inadequacy of those returns. In fact, filtering out stocks in accordance with payouts would have lowered the draw-downs on investment in the financial sector by well over half over the past 20 years, with no loss in returns.

Why do portfolio and pension-fund managers hope to receive impunity from their investors? Isn’t it obvious to investors that they are voluntarily transferring their clients’ funds to the pockets of bankers? Aren’t fund managers violating both fiduciary responsibilities and moral rules? Are they missing the only opportunity we have to discipline the banks and force them to compete for responsible risk-taking?

It is hard to understand why the market mechanism does not eliminate such questions. A well-functioning market would produce outcomes that favor banks with the right exposures, the right compensation schemes, the right risk-sharing, and therefore the right corporate governance.

One may wonder: If investment managers and their clients don’t receive high returns on bank stocks, as they would if they were profiting from bankers’ externalization of risk onto taxpayers, why do they hold them at all?  The answer is the so-called "beta": banks represent a large share of the S&P 500, and managers need to be invested in them.

We don’t believe that regulation is a panacea for this state of affairs. The largest, most sophisticated banks have become expert at remaining one step ahead of regulators – constantly creating complex financial products and derivatives that skirt the letter of  the rules. In these circumstances, more complicated regulations merely mean more billable hours for lawyers, more income for regulators switching sides, and more profits for derivatives traders.

Investment managers have a moral and professional responsibility to play their role in bringing some discipline into the banking system. Their first step should be to separate banks according to their compensation criteria.

Investors have used ethical grounds in the past – excluding, say, tobacco companies or corporations abetting apartheid in South Africa – and have been successful in generating pressure on the underlying stocks. Investing in banks constitutes a double breach – ethical and professional. Investors, and the rest of us, would be much better off if these funds flowed to more productive companies, perhaps with an amount equivalent to what would be transferred to bankers’ bonuses redirected to well-managed charities.




Fed Up With Bank Buybacks?
by David Reilly - Wall Street Journal

Picture this: J.P. Morgan Chase CEO James Dimon walks up to a paper shredder and feeds $100 bills into it while Federal Reserve Chairman Ben Bernanke looks on approvingly. It's a nightmarish image.

Unfortunately for J.P. Morgan shareholders, it isn't wholly divorced from reality. The bank spent $4.3 billion in the first seven months of this year buying back its own stock—with Mr. Bernanke's blessing. Yet, thanks to the recent slide in bank stocks, the purchases are already about $600 million in the red. And the loss would be even greater if stocks hadn't bounced off recent lows.

That highlights once again the dubious benefit to shareholders of buybacks versus capital returns through dividends. Buybacks mean management decides on the best time to buy stock. Dividends, on the other hand, leave that decision with investors, who can choose whether to reinvest or put the cash elsewhere.

And while J.P. Morgan's paper loss could prove fleeting, it is also a reminder of the Fed's questionable decision in the spring to allow some banks to resume capital returns even as the central bank was printing money in an attempt to resuscitate the economy. Now, the Fed has trimmed its growth forecasts and declared it will maintain near-zero interest rates until mid-2013.

If the economy is headed for a double-dip, as some investors fear, banks could need more capital, not less. While the Fed doesn't share in the double-dip fears, it has also signaled it will consider further extraordinary measures to stimulate growth at its coming September meeting.

The Fed's green-lighting of capital returns also ran counter to recent experience. Many banks spent huge amounts buying back stock in the years before the crisis, only to require government bailouts when trouble hit. Citigroup, for example, bought back more than $20 billion between 2004 and 2008, according to Capital IQ, only to require about $50 billion in bailout money during the crisis.

J.P. Morgan maintains that it has more than enough capital to run its business, even under stressed conditions and that it will have no trouble meeting new, more stringent capital requirements in coming years. Also, while its stock is down roughly 12% year-to-date, that is still much better than the KBW Bank Index, which is off 24%. And J.P. Morgan hasn't been the only bank to take a hit on buybacks. Wells Fargo, which also received Fed approval to resume capital returns, is also in the red on recent purchases.

To the Fed's credit, it at least declined a request from Bank of America to resume capital returns. Still, as the Fed in the future weighs further plans from banks to return capital, it should be more cautious. And investors should remember that banks are supposed to be specialists in lending money, not timing stock markets.




The US Taxpayer Suing Itself
by Ken Frankel, KIF Capital Management

The lastest news is that Fannie and Freddie are suing 17 major banks over mortgage deals gone bad. This is the latest in a string of lawsuits where essentially the US Taxpayer is suing himself – the only beneficiaries are the lawyers. AIG is suing Bank of America over mortgage bonds. The NY Fed sued Bank of America over mortgage bonds. BofA is a main target because it acquired Countrywide which was the largest pure player in the mortgage market. The housing and mortgage debacle is so complex and entangled that Wells Fargo was even suing itself.

What is lost in all of this is all these entities mentioned above are part of the government or whose existence depends on the government. We should stop pretending these are indeopendent entities with separate shareholder bases, though in some cases this is technically true – both BofA and AIG would not exist in present form with a huge assist from the American taxpayer -at one point as a result of the federal bailout of AIG, the government owned 80% of AIG. Despite this AIG kept spending millions on lobbyists to lobby the federal government, its 80% owner. Even Fannie and Freddie stopped their lobbying activities when the government formally took them over.

Instead of spending money or loaning money to start new businesses across mutliple industries or even making new mortgages more available, we are spending money on legal fees debating transactions that are five years or more old. If there was actually fraud in some of these mortgage bond securitizations, then the government should prosecute those who committed the fraud. But the aftermath should be limited to criminal prosecutions where warranted – the civil litigation needs to stop and money being used to fight these suits put to more productive uses.  Does anyone think suing lenders over old mortgages is going to encourage them to make new ones?

I should point out that even PIMCO which also sued BofA along with the NY Fed was a beneficiary of federal largess. Had the government not bailed out Fannie and Freddie, something it was not legally required to do as there is no such thing an "implicit guarantee" PIMCO bond business would have been crippled as it owned massive amounts of GSE debt banking on a federal bailout.

The federal government should be putting the pressure on all the direct and indirect beneficiaries of the taxpayer bailouts to not sue each other and that would start with Fannie and Freddie which are now part of the government not suing anyone. Fannie and Freddie are itself as responsible as any entity for the financial meltdown and the housing debacle and should not be casting aspersions to others when they are plenty guilty themselves.  




One Reason Why The Government Will Have A Difficult Time Suing The Banks
by Megan McArdle - Atlantic

The New York Times reports that our government is going to file suit against a bunch of major banks, alleging fraud in the mortgage securitization process.  Apparently, the statute of limitations expires in a few days, so the Federal Housing Finance Agency is expected to slip the suit in just under the wire.
The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers' incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.

Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers. In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope.

The details are rather sketchy, and I am not a securities lawyer, but I expect that this is going to be a fairly difficult case to make.  Fannie and Freddie already have the right to force banks to take back loans with obvious underwriting flaws, or that go bad too quickly, and my understanding is that they've been doing just that.

Securities cases are hard to prove in the best of circumstances--even Eliot Spitzers' famous crusade against Wall Street consisted of getting fairly minor settlements from most of the big fish he went after . . . and losing every case he took to court.  The first mortgage securities case to go to trial, with two Bear Stearns bankers, likewise returned a "not guilty" verdict.  Many of these same banks got themselves in serious financial trouble by gorging on their own toxic mortgage securities, which dims the fraud angle.  Unfortunately, being arrogant idiots with the risk appetite of a coked-up skydiver is not a crime.

On the issuance side, most of the knowing, obviously provable fraud seems to have been at the mortgage broker level, or in mortgage mills that are now out of business.  Proving that someone ought to have known that they were being scammed is harder--especially since they can argue that if they ought to have known, so should the GSEs.

But it's easy to understand why the government wants to preserve its option--if nothing else, the political pressure to bring cases like this is enormous.  It will be interesting to see where this goes, and if they can actually prove malfeasance rather than gross stupidity.




BofA, JPMorgan Among 17 Banks Sued by U.S.
by Bob Van Voris and Patricia Hurtado - Bloomberg

Bank of America Corp. and JPMorgan Chase & Co. were among 17 banks sued by the U.S. to recoup $196 billion spent on mortgage-backed securities bought by Fannie Mae and Freddie Mac.

The Federal Housing Finance Agency, on behalf of Fannie Mae and Freddie Mac, filed 17 lawsuits yesterday in New York state and federal courts and in federal court in Connecticut. The FHFA accuses the banks of misleading Fannie Mae and Freddie Mac about the soundness of the mortgages underlying the securities. "The loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the enterprises for those securities," the FHFA said in a statement. FHFA is seeking to rescind the transactions plus other damages, including civil penalties and punitive damages in cases alleging misconduct.

In addition to JPMorgan and Bank of America, the agency filed complaints in federal court in Manhattan yesterday against Citigroup Inc., Goldman Sachs Group Inc., Merrill Lynch & Co., Barclays Plc, Nomura Holdings Ltd., HSBC Holdings Plc, Societe Generale SA, Credit Suisse Group AG, Deutsche Bank AG and First Horizon National Corp. The FHFA sued Ally Financial Inc., Countrywide Financial Corp., General Electric Co. and Morgan Stanley in state court in Manhattan, according to the agency. It sued Royal Bank of Scotland Group Plc in federal court in Connecticut.

Fannie and Freddie
Fannie Mae and Freddie Mac have operated under U.S. conservatorship since 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency.
The FHFA said in its filings that Fannie Mae and Freddie Mac bought $6 billion in mortgage-backed securities from Bank of America; $24.8 billion from Merrill Lynch, which Bank of America took over in 2008, and $26.6 billion from Countrywide, which Bank of America acquired the same year.

The FHFA claims Fannie Mae and Freddie Mac bought $33 billion in securities from JPMorgan and $30.4 billion from Royal Bank of Scotland. According to the complaints, Fannie Mae and Freddie Mac also bought $14.2 billion from Deutsche Bank, $14.1 billion from Credit Suisse, $11.1 billion from Goldman Sachs, $10.6 billion from Morgan Stanley, $6.2 billion from HSBC, $6 billion from Ally, $4.9 billion from Barclays, $3.5 billion from Citigroup, $2 billion from Nomura, $1.3 billion from Societe Generale, $883 million from First Horizon and $549 million from GE.

UBS Suit
The FHFA sued UBS AG, Switzerland’s biggest bank, in July over $4.5 billion in residential mortgage-backed securities sold to Fannie Mae and Freddie Mac, claiming the bank misstated the risks of the investments. "The claims brought by the FHFA are unfounded," said Frank Kelly, a spokesman for Frankfurt-based Deutsche Bank. "Fannie Mae and Freddie Mac are the epitome of a sophisticated investor."

Ally, based in Detroit, said in a statement that it believes FHFA’s claims are meritless and the company intends to defend its position. Fannie Mae and Freddie Mac "acknowledged that their losses in the mortgaged-backed securities market were due to the unprecedented downturn in housing prices and other economic factors," said Larry DiRita, a spokesman for Charlotte, North Carolina-based Bank of America. Kim Cherry of Memphis, Tennessee-based First Horizon said the company would defend itself.

Knew the Risks
The firms claimed to understand the risks, and continued buying, even after their regulator said they lacked adequate risk-management capabilities to do so, DiRita said. Company representatives who declined to comment on the suits yesterday included Danielle Romero-Apsilos of New York- based Citigroup, Kerrie Cohen of London-based Barclays, Kristin Lemkau of JPMorgan in New York and Russell Wilkerson of Fairfield, Connecticut-based GE.

Edinburgh-based Royal Bank of Scotland Plc will defend the claims. "We believe we have substantial and credible legal and factual defences to these claims and will defend them vigorously," the bank said in an e-mailed statement. Some of the complaints described mortgages that were already performing worse than investors were told at the time securitizations were sold. Disclosures by some firms overstated home values or misrepresented the number of homes occupied by borrowers, according to the FHFA.

'Under Water'
An instrument underwritten by an affiliate of Merrill Lynch was reported to have no loans larger than the value of the house, known as the loan-to-value ratio. In reality, about 20.7 percent of the mortgages had an LTV ratio above 100 percent, meaning they were already under-secured or "under water" from the start, according to the FHFA’s complaint. Some pools packaged by GE or its affiliates were said to have no loans with an LTV over 100 percent, when about 13 percent did, according to another suit.

In the complaint against Goldman Sachs, the FHFA claimed the bank securitized many mortgages that failed to meet underwriting standards even after outside firms it hired reported "high percentages of defective or at least questionable loans." "Goldman simply ignored and did not disclose the red flags," the FHFA claimed.




Fresh Scrutiny of BofA
by Dan Fitzpatrick - Wall Street Journal

Fed Asks Bank to Supply Contingency Plans; Float of Merrill Shares Is Option

U.S. regulators have pushed Bank of America Corp. to show what measures it could take if conditions worsen for the Charlotte, N.C., lender, according to people familiar with the situation.

Executives of the bank recently responded to the unusual request from the Federal Reserve with a list of options that includes the issuance of a separate class of shares tied to the performance of its Merrill Lynch securities unit, these people said. Bank of America purchased Merrill Lynch in 2009, and it has become the bank's most profitable division.

Chief Executive Brian Moynihan isn't expected to pull the trigger soon, if ever, on the creation of a so-called Merrill Lynch tracking stock. Such a move would raise money from investors but could be viewed as counter to Mr. Moynihan's strategy of knitting together the disparate parts of the franchise into a cohesive whole. Its inclusion on the list as a theoretical option shows the bank is considering all possibilities as it wrestles with an array of problems weighing down its shares.

The heightened scrutiny from the Fed is another pressure point for the 51-year-old Mr. Moynihan, who faces mounting investor concerns about the bank's legal costs and its ability to withstand another economic downturn.

The bank's stock-market value fell $16 billion in a single day in early August. Shares rallied following a deal announced on Aug. 25 for Warren Buffett's Berkshire Hathaway Inc. to buy $5 billion of Bank of America's stock. The bank also recently reached an agreement to sell half its shares in China Construction Bank Corp., realizing a $3.3 billion gain on the sale, and has decided to sell a sizable piece of its mortgage business. Still, the stock is down 41% for the year after falling 26 cents to $7.91 Thursday in New York Stock Exchange trading.

Bank of America has posted losses in three of the six quarters since Mr. Moynihan took over as chief executive Jan. 1, 2010. The bank has battled for profits following the financial crash of 2008. It reported a loss of $8.8 billion for the second quarter, as it took a $14.5 billion loss in the consumer real-estate services unit that is dominated by its Countrywide unit.

Bank of America has been operating under strict regulatory oversight since 2008. In May 2009, regulators surprised executives by slapping the bank with a nonpublic memorandum of understanding that required it to improve governance, risk and liquidity-management policies. The action followed a downgrading of the bank's ratings by the Fed and Office of the Comptroller of the Currency and repeated tussles with regulators over the bank's risk controls, capital levels and purchase of Merrill.

Earlier this year, regulators surprised executives again by rejecting the bank's request for a small dividend increase in the second half of 2011. It was an embarrassing turn of events for Mr. Moynihan, who had hinted publicly that a second-half increase was likely. Many of Bank of America's rivals were allowed to raise their payouts for the first time since the crisis. Regulators have pushed Mr. Moynihan this year to put management-team changes in place quickly to deal with the bank's mounting legal and regulatory problems, according to a person familiar with the situation.

Mr. Moynihan recently accelerated the start of Gary Lynch as the bank's top legal officer. A former Morgan Stanley chief legal officer and ex-director of enforcement with the Securities and Exchange Commission, Mr. Lynch was hired in April but couldn't start right away because he had signed a noncompete agreement with Morgan Stanley that locked him up until September.

In early July, Mr. Moynihan placed a call to Morgan Stanley Chief Executive James Gorman and asked if Mr. Lynch could start his new job two months early, according to people familiar with the call. The Morgan Stanley CEO agreed to free Mr. Lynch without any money changing hands. A week later, on July 11, Mr. Lynch started as Bank of America's chief of legal, compliance and regulatory relations.

The Fed's call for more documentation about what the bank might do in more-extreme circumstances was a response to uncertainty about a U.S. economic recovery and a downward swing in Bank of America's share price earlier this year, one of these people said. It was a one-time request, although the Fed has done the same with other firms in the past. Bank of America did the analysis at the Fed's request in late July and early August and then provided the Fed with its menu of options, said people familiar with the situation. Some items, such as the tracking stock, were more theoretical than others.

Mr. Moynihan isn't giving the tracking stock serious consideration at this point, said a person familiar with the situation, but he included it on the list to show the company has multiple levers to pull. Tracking stocks sometimes pay a dividend tied to the performance of a specific portion of the company—in this case, the operations Bank of America inherited with the 2009 purchase of Merrill Lynch.
Holders of the new shares typically don't have the voting rights or protections that owners of the larger parent company have, and they don't own the assets of the division.

Tracking stocks have a mixed record since their introduction in 1984 by General Motors, which developed new shares to follow the performance of its Electronic Data Systems division. The so-called GM class E shares performed well, but that hasn't always been the case. Tracking shares issued by Walt Disney Co. and AT&T during the Internet boom fell sharply and were retired a year or so later.




The Beauty Contest That’s Shaking Wall Street
by Robert J. Shiller - New York Times




The extraordinary surge of stock market volatility during the last month can’t be explained by conventional means. Yes, hundreds of scholarly papers have tried to predict the size of such swings, and whole markets — like those for futures and options — thrive on these movements. Yet we still don’t have a clear, mathematical understanding of volatility’s source.


Last month, market watchers might have thought they were witnessing a gamma ray burst from outer space, with waves of sudden, crazy noise: On Thursday, Aug. 4, the market, as measured by the Standard & Poor’s 500-stock index, fell by almost 5 percent. The next day was quiet, but the following Monday, the index dropped almost 7 percent. In successive days, it rose 4.7 percent, fell 4.4 percent and rose 4.3 percent. Bigger-than normal changes have persisted since, though they haven’t been quite as drastic.

Let’s put this into context. Since 1928, the daily change in the market has usually been no more than half of a percent. The kind of volatility we have just seen comes along only every five years or so, though there was an even more extreme episode at the peak of the financial crisis of 2008.

To be sure, at least some of the latest volatility has been linked to news events. Much of it came after S.& P., unsatisfied with the last-minute budget deal in Congress, downgraded the nation’s long-term debt after the close of the market on Friday, Aug. 5. In effect, this unprecedented move connected the United States to the debt crisis already under way in relatively small European countries. Four days later, in a significant commitment, the Federal Reserve promised to keep short-term interest rates near zero for two more years.

It’s tempting to think that the market has been responding rationally to these developments. But that isn’t an adequate answer. Why did investors react so strongly to the rating change, which, after all, was merely the opinion of a few analysts on a committee? And why did the market swing so much day to day, even when there was no significant news?

John Maynard Keynes supplied the answer in 1936, in "The General Theory of Employment Interest and Money," by comparing the stock market to a beauty contest. He described a newspaper contest in which 100 photographs of faces were displayed. Readers were asked to choose the six prettiest. The winner would be the reader whose list of six came closest to the most popular of the combined lists of all readers.

The best strategy, Keynes noted, isn’t to pick the faces that are your personal favorites. It is to select those that you think others will think prettiest. Better yet, he said, move to the "third degree" and pick the faces you think that others think that still others think are prettiest. Similarly in speculative markets, he said, you win not by picking the soundest investment, but by picking the investment that others, who are playing the same game, will soon bid up higher. Keynes didn’t say where and when he saw this beauty contest.

The New York Times ran one very much like it in 1913. It was called the "Girl of To-Day Contest," and readers were asked to submit a photograph of a young woman that they deemed "most typical of the American girl." A panel of artists was asked to select a winner from these pictures.

The Times reported the "dismay" of the panel at the difficulty of its job. Snippets of the conversation were recorded: "We are not here to select the prettiest girl of the lot," one judge said. "Here’s a face women would like," said another. "They would not consider her dangerous."

We see such dismay among stock market investors today. People are trying to guess whether other investors are thinking that yet others are thinking that the stock market is "dangerous," or whether it is instead a great time to invest. And investors are making that decision with little more information than the "Girl of To-Day" judges had.

When you hear a conversation among professional investors — including those who manage money for big institutions like university endowments and pension funds — it often sounds as if they are engaged in just this kind of guesswork. You wonder how many people are actually basing their decisions on what is taught in business school: calculating an optimal portfolio based on a rational statistical analysis of fundamental economic data. If you believe in efficient markets, you have to conclude that some other investors are doing those calculations today, because they don’t seem the main activity of the people I’m hearing.

In fact, the best explanation for the market’s back-and-forth swings is that each day we are conducting a Keynesian beauty contest, and reassessing what others think that still others are thinking. On days without much news, the market is simply reacting to itself. And because anxiety is running high, investors make quick, sometimes impulsive, responses to relatively minor events.

Alan Greenspan, the former Fed chairman, typified the concerns about other investors on "Meet the Press" on Aug. 7, the Sunday before the market’s big drop of almost 7 percent. "What I think the S.& P. thing did was to hit a nerve that there’s something basically bad going on, and it’s hit the self-esteem of the United States, the psyche," he said. "And it’s having a much profounder effect than I conceived could happen." He was talking about what other investors were thinking, not about the substance of the S.& P. downgrade.

Over that weekend, there was widespread speculation that the downgrade would push interest rates way up. But on Aug. 8, even before the Fed issued its statement, 10-year Treasury yields began to drop, not rise, and many people started to reassess what other people were thinking — and what other people were thinking about other people, and so on.

This process creates uncertainty not only for the stock market, but also for the overall economy. The only thing to fear is fear itself, Franklin D. Roosevelt said of the Great Depression, and he was right. We are constantly trying to reassess the fear of others, and others’ fear that others are also afraid. This may sound like a crazy game, but if others are playing it, we must, too. The outlook for the economy depends on how this convoluted beauty contest plays out.




IMF: global economy faces a 'threatening downward spiral'
by Ambrose Evans-Pritchard - Telegraph

The International Monetary Fund has called on the US and Europe to abandon fiscal austerity and switch to stimulus measures, warning that the global economy faces a "threatening downward spiral".

Christine Lagarde, the IMF's managing-director, said the outlook had darkened suddenly over the summer. "There has been a clear crisis of confidence that has seriously aggravated the situation. Measures need to be taken to ensure that this vicious circle is broken," she said. "The spectrum of policies available is narrower because a lot of ammunition was used in 2009. But if governments, institutions and central banks work together, we'll avoid recession," she told Der Spiegel.

The comments come at the start of a dramatic week for the eurozone as Italy prepares to roll over record sums of debt and Germany's constitutional court issues its long-awaited verdict on the legality of the EU's bail-out machinery. Markets are already tense after the EU-IMF 'Troika' withdrew abruptly from Athens on Friday, accusing the Greek government of failing to comply with rescue terms.

The Italian treasury must redeem €14.6bn of debts this week and €62bn by the end of September, the most ever in a single month. "We are experiencing very demanding times," Jean-Claude Trichet, the European Central Bank's president, said over the weekend. The ECB has stabilised Italy's debt over the last four weeks, capping yields on 10-year bond yields near 5pc through purchases on the secondary market.

It is unclear how much longer the ECB can keep doing this after a string of top officials in Germany described the bank's actions as illegal. "The ECB cannot substitute for governments," said Mr Trichet. He was speaking at the Ambrosetti Workshop at Lake Como, where he held a closed-door meeting to discuss the euro crisis with Bank of England Governor Sir Mervyn King.

The ECB has bought an estimated €35bn of Italian debt under an implicit accord that Rome will deliver on austerity promises. Premier Silvio Berlusconi has come close to breaching the terms by backsliding on a wealth tax and pension reform.

Emma Marcegaglia, head of Italy's Confindustria business lobby, said the austerity measures were "unjust, iniquitous, and inadequate", and undermine the credibility of the country.
Leading Italian economists have begun to question whether EMU itself is workable. "It's clear that the euro has virtually failed over the last ten years, even if you are not supposed to say that. We pretended to be Germans, but it was an illusion," said Professor Giacomo Vaciago from Milan's Catholic University.

Mrs Lagarde said the US has scope to "abandon short-term austerity and introduce some measures to drive growth" provided the country lays out a credible debt strategy over the medium term. She said Europe needs to take its foot off the fiscal brake and shift to "growth-intensive measures" until the danger has passed, insisting that Germany has leeway to "stimulate demand".

The comments are certain to cause fury in Berlin, where the IMF is viewed as an agent of Keynesians and French mischief. Mrs Lagarde was French finance minister until two months ago.

Separately, Germany's constitutional court is expected to rule on Wednesday that Berlin's participation in EU bail-outs is allowable so long as the Bundestag is given a veto over future payments. However, there is an outside risk that it will go further, concluding that the nexus of rescue policies subvert EU Treaty law and German fiscal sovereignty and must therefore be curbed. This would amount to a "sudden stop" for EMU debt markets.

The judges are aware of these risks, yet they ruled two years on the Lisbon Treaty that German democracy is "inviolable" and that Berlin is duty bound "to refuse further participation in the European Union" if the constitutional order is threatened. German patience with Athens is already near exhaustion. Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag's deputy president, said Greece cannot bring its debts under control.

"We must consider whether it would not be better for the currency union and for Greece itself to go for debt restructuring and an exit from the euro," he told the Frankfurter Allgemeine.




'There Has Been a Clear Crisis of Confidence'
by Marc Hujer and Christian Reiermann - Spiegel

SPIEGEL: Ms. Lagarde, the global economy is slowing, markets are volatile and banks have all but ceased lending each other money. Does the situation remind you of 2008 just before the investment bank Lehman Brothers collapsed?
Lagarde: Each moment in history is different from previous situations and it's wrong to try to draw comparisons. At the International Monetary Fund, we see that there has been, particularly over the summer, a clear crisis of confidence that has seriously aggravated the situation. Measures need to be taken to ensure that this vicious circle is broken.

SPIEGEL: What does that circle look like?
Lagarde: It is a combination of slow growth coming out of the financial crisis and heavy sovereign debt. Both fuel serious concerns about the capital and the strength of banks, notably when they hold significant volumes of sovereign bonds. Should banks experience further difficulties, further countries will be stricken. We have to break this cycle.

SPIEGEL: What should be done?
Lagarde: When we look at the European situation, there has to be fiscal consolidation qualified by growth-intensive measures. In addition, there has to be increased recapitalization of the banks. Clearly, the two go together. The sovereign debt issue weighs on the confidence that market players have in European banks.

SPIEGEL: Don't you think that your warning that €200 billion ($285 billion) might be missing in the balance sheets of European banks aggravates the situation of those banks?
Lagarde: In the course of our work on global financial stability, we are looking at the situation in Europe. We will publish the results of this work in a couple of weeks. More generally, we do see a need for recapitalization of European banks so they are strong enough to withstand the risks coming from sovereign borrowers and from weak growth. This is key to cutting the chains of contagion.

SPIEGEL: Is the world on the brink of a renewed recession?
Lagarde: We are in a situation where we can still avoid it. The spectrum of policies available to the various governments and central banks is narrower because a lot of the ammunition was used in 2009. But if the various governments, international institutions and central banks work together, we'll avoid the recession.

SPIEGEL: At the moment, however, exactly the opposite would appear to be happening. Many governments have introduced austerity packages in order to make up for the vast expenditures made during the crisis. Is that wrong?
Lagarde: I wouldn't pass general judgement on that because it's going to be country-specific. For some countries, the path is fine and should continue as is. For others, some of the measures that have been taken are so strong, given the current deficit situation, that they can accommodate some relaxation -- especially if the economy weakens further, and provided there is a clear medium-term consolidation path.

SPIEGEL: Do you consider Germany to be one of those countries which could do more to stimulate the global economy?
Lagarde: In the course of our annual country checks, our experts recently visited Germany. Their conclusion was that, under the circumstances, the fiscal consolidation path adopted by Berlin was perfectly fine.

SPIEGEL: For now.
Lagarde: Of course these things always depend on circumstances. Given Germany's heavy reliance on exports, if demand weakens so much that it really changes the equilibrium, then it would need to be revisited.

SPIEGEL: By, for example, stimulating domestic demand?
Lagarde: Domestic demand is good for both the German economy and for the other economies surrounding Germany. I do think that domestic demand in Germany has improved since the time when I floated this idea as finance minister in France.

SPIEGEL: Given the economic climate, do you not think it dangerous when countries pass laws mandating a balanced budget, as France is considering?
Lagarde: It's clearly a signal to market players. It shows investors the seriousness of the government's commitment to the principle of balanced finances. The general intention behind it is good.

SPIEGEL: Would you like to see the US implement such a "debt brake" rule?
Lagarde: Each country must find the best way to signal to the markets that they are serious about public finances. The IMF has a lot of experience and we would be very happy to give a hand to those countries that actually are in the process of implementing a debt brake.

SPIEGEL: Do you think the austerity measures recently agreed to in the US go far enough?
Lagarde: Which ones do you mean?

SPIEGEL: The commitment, after weeks of disagreement about the debt ceiling, to cut federal expenditures by at least $2.4 trillion over the next 10 years.
Lagarde: Such long-term commitments are a good principle because they credibly signal an intention to reduce the deficit and consolidate public finances on a more stable course, for example in health care spending. It can indicate that a country will reduce the deficit in the medium term and yet still have enough room in the short term to put in place measures that will actually stimulate growth and help create employment.

SPIEGEL: Does the US need a new stimulus package?
Lagarde: We are in a situation of slowed growth and we have a confidence issue that culminated this summer with the downgrading of the US from its AAA status. As long as the US puts in place a credible medium-term adjustment plan, there is probably space at the moment to contain the short-term adjustment and take some of those growth-inducing measures.

'European Leaders Have Made Very Strong Commitments'
SPIEGEL: You suggest fighting the effects of a debt crisis with more debt?
Lagarde: That's not how I see it. In a world that is so economically interwoven, where the actions of industrial countries have direct influence on emerging economies, one can't be stubborn when the situation changes. We didn't change our minds about the dangers of too much debt, but over the current state of the world economy.

SPIEGEL: The effects of too much debt can be seen right now in the euro zone, where the European Central Bank had to buy up billions in government bonds. At the end of September, the European rescue fund, the European Financial Stability Fund (EFSF), will take over this task. Does it have enough money to do so?
Lagarde: The EFSF will now be flexible enough. It has been in a bit of a straitjacket. Now it has the option to buy on the secondary market in certain circumstances, to support the banks and provide guarantees. That is very welcome.

SPIEGEL: Europe's leaders have given EFSF head Klaus Regling a pile of tasks, but not more money. Will the allotted €440 billion be enough?
Lagarde: French President Nicolas Sarkozy and German Chancellor Angela Merkel and other euro leaders have said they will do what it takes. That would include increasing the EFSF if necessary, I suppose.

SPIEGEL: Does that include going as far as supporting Italy? Isn't the country far too big to be bailed out by other EU countries?
Lagarde: The European leaders have made very strong commitments concerning the euro currency and the euro zone. I think markets should appreciate the strength of those statements and the strength of their political commitment. There has also been a significant improvement in terms of fiscal consolidation and structural reforms in Italy.

SPIEGEL: Critics say that Greece has had enough help and should be kicked out of the euro zone. Do you think that's a good idea?
Lagarde: Number one, it's not for me to decide. Number two, I think that all the partners, whether in the European Commission, ECB or IMF or members of the euro zone, are determined to make this work and ensure that the Greek economy regains competitiveness and is properly restructured.

SPIEGEL: There are a growing number of stumbling blocks emerging in the euro zone. Finland has demanded guarantees from Greece before the bailout money flows, inspiring other countries to consider following suit. Doesn't that put the entire rescue mechanism in doubt?
Lagarde: My understanding is that the euro members are working on this and are working on the pattern that would actually respond to all euro-area members' expectations. In other words, not a tailor-made program that would fit Finland and nobody else. I am certain the euro-zone members are aware of their responsibilities and will find a solution.

SPIEGEL: In France, it is possible that there could be legal proceedings against you. You are accused of having abused your position as French finance minister by making sure that businessman Bernard Tapie received compensation from the French state in connection to a deal involving Adidas that went wrong. Will you resign from your job if you have to defend your actions in court?
Lagarde: This issue was actually contemplated at the time of my candidacy for the position. The IMF board concluded that that case was perfectly compatible with me continuing my job and carrying out all my duties.

SPIEGEL: If we may ask one more question on this topic: Is it true that you acted on instructions from President Nicolas Sarkozy?
Lagarde: If I had to answer that question, I think I would answer it in court. I think that would be more appropriate than discussing it with SPIEGEL.

SPIEGEL: There is an unwritten rule that the top job at the IMF is always occupied by a European, and in return the Americans get to appoint the head of the World Bank. Given the world's shifting center of gravity, do you believe that you are perhaps the last European who will hold this position?
Lagarde: I hope not -- that would exclude many talented people from the competition -- but, you know, it's not for me to say. I'm not sitting here as a European, and I've tried to disengage from thinking as a European or thinking as a French national. The moment you walk into this organization, you become a servant of a global institution.




Euro Zone Risks Becoming Spanish Prisoner With Bond Buys
by Richard Barley - Wall Street Journal

A tourniquet can only be an emergency measure. The European Central Bank has stanched the bleeding in markets by buying Spanish and Italian bonds. But in stemming relentless selling, has the ECB simply swapped acute market dysfunction for a more chronic form? Yield distortions may now deter long-term investors. Meanwhile, a lack of clarity around the scale and duration of purchases, and the insistence that intervention is only temporary, add to market uncertainty.

The ECB has spent €41.6 billion ($59.33 billion) buying bonds since reactivating its Securities Markets Programme in early August, halting a destructive downward spiral in Italian and Spanish bond prices. Ten-year yields initially fell by more than one percentage point to around 5%. But artificially lower yields may not tempt investors worried about where prices would go if the ECB stops buying. Demand at Italian and Spanish bond auctions this week was relatively poor: Spain's five-year bond was only 1.76 times covered, versus 2.85 times at a July 7 sale, when it paid higher yields. Market participants say the ECB has stepped up purchases this week, but even that hasn't stopped Italian and Spanish yields from rising.

The ECB's purchases treat a symptom of the euro-zone crisis, not the cause. They can't address investors' concerns about the ability of governments to rein in budget deficits and start to bring debt burdens down. In fact, the ECB's purchases allow risk-averse investors to sell out of Italian and Spanish government bonds and buy safer debt such as German bunds.

That is all in stark contrast to the bond-purchase programs run by the Bank of England and the U.S. Federal Reserve. They also arguably distorted yields but ultimately didn't deter investors. First, markets knew exactly how much and when the BOE and Fed planned to buy. Yields rose during the U.S. and U.K. quantitative-easing programs in anticipation of a stronger economy and higher inflation. The purchases forced cash out of government-bond markets and into riskier assets since investors had no equivalent sterling or dollar safe-haven assets to buy. But because there were no real doubts about the credit-worthiness of these bonds, and yields weren't artificially held low, demand was still assured when purchases stopped.

By contrast, a halt in ECB buying would remove the one source of demand propping up the market. That leaves the ECB in an unenviable position. It can't credibly threaten to withdraw purchases if Italy or Spain fail to live up to budget promises without the market collapse it is seeking to prevent. Nor can it offer investors the long-term reassurance that they might need to return to Italian and Spanish bond markets.

Only improved budget positions, which may take months or years, will do that. In the meantime, the ECB is the buyer of both first and last resort in those markets—an unpleasant position it may have to resign itself to.




EU law "gutted" by bail-outs, growls Bundesbank
by Ambrose Evans-Pritchard - Telegraph

Germany's Bundesbank has issued a thundering denunciation of Europe's rescue policies and actions by the European Central Bank, alleging that EU treaty law has been "completely gutted".

Jens Weidmann, the bank's president, said monetary union risks losing its democratic legitimacy as EU leaders take a "large step" towards a debt union without legal authority, and sever the crucial link between budget policy and elected parliaments. He said mass bond purchases by the European Central Bank had "strained the existing framework of the currency union and blurred the boundaries between monetary policy and fiscal policy. Decisions on further risk-taking should be made by governments and parliaments, as only they have democratic legitimacy."

Mr Weidmanm said that if Europe is unwilling to accept a genuine fiscal union backed by a European tax system, it must strengthen the existing 'no bail-out' clause in the EU Treaties "instead of letting it be completely gutted."

The escalating protest from the Bundesbank leaves the ECB in an invidious situation as it tries to shore up Italy and Spain, holding yields on their 10-year bonds at 5pc by intervening on the secondary market.

Julian Callow said Italy must redeem a record €62bn (£55bn) of debt by the end of September yet the government of Silvio Berlusconi is blacksliding on its austerity package and cavilling over details. "This is a very large sum of money. The situation is extremely serious, and this is no time to be rearranging deck chairs," Mr Callow said, suggesting that ECB chief Jean-Claude Trichet may have to go to Rome to read the riot act.

The government has agreed on tougher measurs to curb tax evasions but a wealth tax was dropped on the insistence of Mr Berlusconi. The deal after three weeks of wrangling is so thin that the ECB may find it hard to justify further purchases of Italian debt. The bank has used intervention as a pressure tool to force states to deliver austerity.

Mr Callow said the eurozone is already in an industrial recession and needs stimulus to head off a possible credit crunch and stabilise the debt crisis. He said the ECB should cut interest rates to cushion the effect of fiscal tightening in a string of EMU states and halt accelerating capital flight from the eurozone.

Holger Schmieding from Berenberg Bank said there is a "significant risk" of recession across Europe and the UK but insisted it would be a mistake for the authorites to relax on either the fiscal or monetary front. "They must tough it out," he said.

Mr Schmieding warned that it was a mistake to give the Bundestag and other eurozone parliaments a veto over the operational decisions of the EU's €440bn bail-out fund. "In a market panic when things start getting really hot, the EFSF has to act fast. It could happen over a weekend." He said the fund has its limits in any case and is too small to handle Italy, leaving the ECB as the eurozone's only viable lender of last resort. The ECB can probably risk ignoring complaints from the Bundesbank and act on the necessary scale so long as the German government is willing to acquiesce.

Europe's sharp downturn will make it even harder for Italy and Spain to meet budget targets and grow their way out of debt traps. It may doom Greece's rescue programme. Barclays Capital said the Greek economy is in the grip of debt-deflation and is likely to contract a further 5.7pc this year. The deficit remains stuck at 8pc of GDP. The parliament's own watchdog said debt dynamics are "out of control".




Talks on Greek Bailout Are Stalled
by Alkman Granitsas, Stelios Bouras and Costas Paris - Wall Street Journal

IMF, Commission and Central Bank Clash With Athens on Budget-Gap Fix

Talks over new bailout funds for Greece were suspended Friday amid disagreements over how to fill a government-deficit gap that once again is veering off track, raising doubts about the country's future access to finance and triggering renewed nervousness in financial markets across Europe. The suspension pushed yields on Greek government debt to levels indicating that investors see a default by Athens soon as a near certainty: Interest rates on one-year paper blew out past 70% and two-year yields rose close to 50%.

More disturbingly for euro-zone governments—given Greek bonds are barely traded and wild swings in yields are therefore likely—financial markets also pushed up borrowing costs for Italy, reflecting anxieties about Italian austerity measures being watered down, and for Spain. The continent's stock markets also retreated, with the French market down 3.6% and the German market down 3.4%.

The suspension of the talks in Athens between the government and a group of officials representing the providers of Greece's bailout cash came, officials said, amid a dispute about how to address new gaps opening up in the government budget deficit.

"The Greek side insisted the missed targets are the result of the recession. The troika said recession played a part, but Greece basically didn't keep up with its commitments, so more measures will be needed to make up for the lost ground," said a person with direct knowledge of the talks. "There is a clear disagreement that can't be bridged today," the person added.

The talks with the so-called troika—representatives of the International Monetary Fund, European Central Bank and European Commission—began earlier this week and were expected to be concluded by Sept. 5. According to a Greek government official, the delegation is now expected to return in about 10 days, after the government has prepared a draft of its 2012 budget.

On the talks hangs a payout of €8 billion ($11.5 billion) of rescue funds under the €110 billion package arranged last year, needed to ensure the government pays its way. Greece has negotiated a further official rescue package of more than €100 billion, meant to tide it through 2014, which has yet to be formally agreed by lenders. "I expect a hard default definitely before March, maybe this year, and it could come with this program review," said a senior IMF economist who is keeping close tabs on the situation. "The chances for a second program are slim."

Failure of Greece to meet its targets, growing reluctance by some euro members to continue lending and the fact that private-sector participation in a second bailout won't significantly alter Greece's debt profile are the primary factors, the IMF official said. Besides projected fiscal deficits widening far beyond the IMF/EU program allows, Greece has failed to reach its targets on raising revenue through privatization of state assets, and even neglected to achieve simple bureaucratic requirements, according to people familiar with the matter.

Finance Minister Evangelos Venizelos told a news conference on Friday that the talks hadn't broken down. But he said Greece must avoid taking further measures that would worsen the country's deepening recession, putting his position at odds with that of the troika. Government officials say there are differences over new forecasts for the size of the budget deficit. The government expects this year's deficit to be about 8.1% to 8.3% of gross domestic product, compared with the official 7.6% target—although it hasn't ruled out a greater deterioration.

The troika, however, is expecting the deficit to reach 8.8% this year, and is seeking additional government spending cuts this year and next to meet the targets. Mr. Venizelos on Friday repeated his position that no further measures will be necessary if an austerity program passed by the Greek Parliament following violent public protests in June are fully implemented. "What is important for us is to restrain the recession, not to overstep and make things worse," he told reporters.

The Greek government is worried about a debt trap. It believes it is missing its budget-deficit targets mainly because the economy is weaker than expected. Mr. Venizelos said the Greek economy will shrink by 5% this year, against a previously forecast 3.9% contraction. More spending cuts, the government fears, will weaken the economy further and thereby increase the burden of paying off debt.




German endgame for EMU draws ever nearer
by Ambrose Evans-Pritchard - Telegraph

For fifty years Germany has invariably stumped up the money required to keep Europe’s Project on track, responding to unreasonable demands with grace and generosity.

It bankrolled French farmers through the Common Agricultural Policy, that disguised tithe for war reparations. It then bankrolled Spanish farmers as well. It funded each new wave of EU expansion, though reeling itself from the €60bn annual cost of its own reunification. It gave up the cherished D-Mark, the anchor of German economic stability.

We are so used to German self-abnegation for the sake of Europe that we can hardly imagine any other state of affairs. But the escalating protest against EMU bail-outs by Germany’s key insistutions go beyond the banalities of money. The fight is over German democracy itself.

Those who talk of a Fourth Reich or believe that EMU is a "German racket to take over the whole of Europe" – as Nicholas Ridley famously put it -- have the matter backwards. Germans allowed their country to be tied down with "silken chords". They are the most reliable defenders of freedom and parliamentary prerogative in Europe, precisely because they know their history.

Finance minister Wolfgang Schäuble could hardly have chosen a more toxic term than "Bevollmächtigung" or general enabling power when he requested blanket authority from the Bundestag for EU rescues, as if Weimar were so soon forgotten. He was roundly rebuffed.

You can feel the storm brewing in Germany. Within days of each other, President Christian Wulff accused the European Central Bank of going "far beyond" its mandate and subverting Article 123 of the Lisbon Treaty by shoring up insolvent states, and Bundesbank chief Jens Weidmann said bail-out policies had "completely gutted" the EU law.

Both believe the EU Project has taken a dangerous turn. Fiscal powers are slipping away to a supra-national body beyond sovereign control. "This strikes at the very core of our democracies. Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," said Mr Wulff.

Otmar Issing, the ECB’s founding guru, fears that the current course must ultimately provoke the "resistance of the people". Instead of evolving into an authentic union with a "European government controlled by a European Parliament" on democratic principles, it has become deformed halfway house. In its rush to save EMU, he said, Europe has forgotten that legislative primacy over tax and spending is the crucible of our democracies. It was monarchical assault on the power of the purse that led to England’s Civil War, and America’s Revolution.

We will find out to what extent Germany’s constitutional court shares these fears when it rules this Wednesday on the legality of the EU rescue machinery, and delivers its verdict of life or death for monetary union.

The opinion will be drafted by Guido di Fabio, a Wilhelmine nostalagic and declared enemy of "libertarian nihilism". The judge has an odd outlook perhaps for the grandson of an impoverished nobleman from the Abruzzi who found work in Duisburg steel mills. He is quintessentially German now. His remarkable 2005 book "The Culture of Freedom" decries the "enfeebled" societies of the West, and judges multiculturalism and the welfare state to have failed miserably. He calls for a "renaissance of marriage and family" and a return to "the nation as common destiny". One awaits his Nieztschean verdict on Europe with curiosity.

The court is a formidable body, the last defender of sovereignty against EU overreach in a Europe of pliant judges. "European integration may not result in the system of democratic rule in Germany being undermined," was its verdict on the Lisbon Treaty.

In a defiant warning to the European Court and the plotters and usurpers of Brussels, it ruled that the nation states are "masters of the Treaties" and not the other way round. Core areas of policy – especially budgets -- "must forever remain German". "The principle of democracy may not be balanced against other legal interests; it is inviolable." "A blanket empowerment for the exercise of public authority may not be granted by the German constitutional bodies."

If democratic legitimacy is violated "in the course of the European integration", Germany must be prepared "in the worst case, even to refuse further participation in the European Union."
Even to refuse. Yet the court – or Verfassungsgericht – did not actually block the Lisbon Treaty. It barked, but did not bite. The assumption this time is that the eight judges will insist on beefed up powers for the Bundestag, but will not disturb the existing nexus of bail-outs and bond purchases. That is the most likely outcome.

Whether they go any further is the existential question for EMU. If they rule that the permanent bail-out fund (ESM) after 2013 breaches treaty law, they will queer the pitch greatly since the viability of the current fund (EFSF) depends on a hand-over. If they rule in any significant way that the EFSF itself breaches Lisbon’s `no bail-out’ clause, or even that Germany cannot participate until the Treaty is changed, market confidence in monetary union will collapse instantly.

Whatever the court does, the simmering revolt in the Bundestag over recent weeks lays bare the salient strategic fact that Germany is not about to embrace fiscal union or quadruple the EFSF to €2 trillion, as deemed necessary by City analysts and EU officials to stabilize Italy and Spain. Nor will it pay for a third Greek rescue.

The implication of this may become clear very soon since the Greek rescue programme is disintegrating. As the Greek parliament’s watchdog admitted, the debt dynamic is "out of control". Public debt will reach 172pc of GDP next year. Draconian austerity has crushed the economy, leaving the budget deficit stuck near 9pc. Barclays expects a 5.7pc contraction of GDP this year.

The EU-IMF Troika left Athens abruptly on Friday, blaming Greece for failure to comply. The equal failure is the scorched-earth austerity policies imposed by the EU itself. Fiscal deflation cannot work in a rigid economy with a large trade deficit and a high debt stock. It ensures a Fisherite debt deflation spiral. The IMF must know from its errors in Argentina a decade ago that Greece needs a 40pc devaluation and 50pc debt forgiveness to claw back to viability. Yet the EU has blocked both, and the Fund has until now acquiesced.

Perhaps there was no choice. Argentina was an isolated case in 2001. Greece is the detonating pin for EMU. Going to the root of Greece’s problem risks trauma and instant contagion to Portugal, and from there a systemic chain reaction through Spain and Italy to France. Yet this is where we no find ourselves as the Bundestag draws its line in the sand. Greece will be pushed into default, with ever larger haircuts for bondholders.

Needless to say, battered banks, insurance companies, and pension fund will not wait for further rounds of punishment. They know that Italy must redeem €14.6bn of debt this week and €62bn by the end of September, the highest ever in a single month. It must roll over €170bn by December. The ECB can in theory hold the line by soaking up the entire public debt of Italy, the world’s third largest at €1.84 trillion. The question is whether it can plausibly act on such a theory when the president of EMU’s dominant power deems this to be illegal.

Germany is not a banana republic. It is a sovereign democracy under the rule of law. Europe is belatedly discovering why this matters.




Berlin Lays Groundwork for a Two-Speed Europe
by -Spiegel

Chancellor Angela Merkel has always rejected a two-track Europe. But with the euro crisis persisting, Berlin is now considering far-reaching new powers for the Euro Group -- to the detriment of the European Commission. Could it work?

Herman Van Rompuy tends to be overlooked whenever European heads of state and government meet for their summits. The Belgian politician, president of the European Council, is an inconspicuous man with a receding hairline and metal-rimmed glasses, someone who doesn't seek the limelight, and who enjoys writing haikus about nature in his free time. He is one of the most powerful politicians in Europe, but he is almost unknown in most EU countries, including Germany.



Van Rompuy has been traveling a lot lately. His current schedule includes meetings with Finnish Prime Minister Jyrki Katainen and French President Nicolas Sarkozy. On Monday, Van Rompuy meets with German Chancellor Angela Merkel in Berlin, where he can look forward to a particularly pleasant conversation. Merkel wants to propose giving the European Council president even more power.

The chancellor is planning her next political policy reversal . Until very recently, she has insisted that she was firmly opposed to creating divisions within Europe. But under the pressure of the euro crisis , Merkel has recently been thinking about abandoning the concept of a unified EU -- and assigning a key role to Van Rompuy in the process. The EU has always been careful to ensure that all members acted in unison, whether it involved moving forward or standing still. But in times in which the common currency threatens to break apart, the 17 nations of the euro zone need a common economic and financial policy. Otherwise, as the crisis has demonstrated, the euro cannot function.

A New Power Center?
Today, it is primarily Great Britain that is preventing the EU from growing closer together. Merkel, though, has had enough -- and is now planning a two-speed Europe. It would mean tightly interlocking the countries of the euro zone, possibly by means of a separate treaty that would apply in parallel to the EU Treaty of Lisbon. This was the concept German Finance Minister Wolfgang Schäuble proposed last week to the leadership of his party, the center-right Christian Democratic Union (CDU). Merkel sees Van Rompuy, who already chairs the council of the 27 EU leaders, as the head of the new power center.

In addition to the club of 27 nations that primarily manages the common domestic market as it has done until now, Merkel envisions a tight alliance of the 17 euro-zone members -- one which would unify their fiscal, budgetary and social policies. This would create a two-class club, raising questions like: What happens to the European Commission? Will it still be responsible for economic matters in the euro zone, or will there be a new organization? The same questions apply to the European Parliament and the European Court of Justice in Luxembourg. Would all of these institutions have to be duplicated, meaning even more bureaucracy, effort and expense?

There are no answers yet to these questions, and there is already plenty of skepticism. The European Commission is just as opposed to Merkel's plans as most members of the European Parliament and many smaller EU countries are. They also have some within Merkel's own ranks raising their eyebrows. "We will not rescue the euro by creating more and more committees and instruments," says Horst Seehofer, the chairman of the CDU's Bavarian sister party, the Christian Social Union (CSU).

That is precisely what Merkel has in mind. She can draw on a concept known as "Core Europe," which was developed in the 1990s by the then-chairman of the CDU/CSU parliamentary group, a certain Wolfgang Schäuble, who now serves under Merkel as finance minister. Both have established various measures to rescue the euro in recent months, some for the EU as a whole and others exclusively for the 17 euro-zone member states.

Taking Things a Step Further
Although the heads of state and government have formally strengthened the Stability Pact for all EU countries, only those countries that have introduced the euro face the threat of harsh penalties. They, in particular, should commit to decreasing their government debt and strict conditions should govern the process. "No one cares whether Great Britain or Poland violate the 3 percent ceiling for the deficit," says a German government official.

A similar situation applies to the so-called Euro-Plus Pact. In it, the countries of the monetary union pledge to increase their competitiveness and fix weaknesses in their social systems, by raising the retirement age, for example. Every country that wants to participate can do so. Poland, for example, has joined the agreement. However, it cannot participate in the decision-making process. The rules were developed within the group of 17.

Labor Minister Ursula von der Leyen is interested in taking things a step further. She would like to see greater integration of social policy in the euro zone countries as well and envisions a Euro Group of labor ministers based on the finance minister model.

But it doesn't stop there. Merkel and Schäuble are seeking further steps toward integration in tax policy. At a meeting of the CDU/CSU parliamentary leadership last week, Schäuble said that because of resistance from countries like Great Britain, it is taking too long to agree on a financial-transaction tax applicable throughout the entire EU. Because of the delay, he said, he could imagine initially launching the project in the euro zone.

Giving Up Sovereignty
The scope of a joint corporate tax proposed by Merkel and Sarkozy at their meeting in mid-August is also likely to be expanded beyond the two largest member states. "This is much more broadly conceived," says a source within the German government. The two leaders envision a largely uniform tax for corporations within the euro zone.

All of these ideas amount to the euro countries gradually giving up parts of their national sovereignty. It wasn't until the crisis came along that a willingness to move in this direction began to emerge. Ironically, it is the countries most deeply affected by the crisis that serve as a model for this new approach. Greece, Ireland and Portugal have already overcome some obstacles when it comes to relinquishing sovereignty. Now the countries whose government finances are still healthy will be expected to give up some of their independence as well.

New bodies are to be formed to expedite the integration of the Euro Group. Germany and France want to make themselves more independent of the existing structures in the EU and no longer be solely dependent on the resources of the European Commission.

As a first step, the European Financial Stability Facility (EFSF), headed by the German economist Klaus Regling , is to develop its own analysis division. The division would monitor the financial markets and make proposals on how the EFSF can avert crises. Only the member states of the euro zone are involved in the EFSF. The Lisbon Treaty, the basis for the EU, has nothing to do with the institution.

The monetary union already had its own bodies that make decisions more or less independently of the European Commission. The important decisions have already been made for some time within the Euro Group, the group of finance ministers from the member states of the monetary union. They meet once a month, or more often, if necessary.

A New Shadow Government for the EU
But that isn't enough for Merkel and Sarkozy. They want the 17 leaders of the euro zone countries to convene for a summit twice a year, with Van Rompuy serving as its permanent chairman. The Belgian would also receive a bureaucratic structure for his new responsibilities, giving the Euro Group its own secretariat. According to initial ideas, the new agency would be appended to an existing European Council secretariat, so that the separation doesn't seem too obvious.

The group of finance ministers of the euro zone, which prepares the groundwork prior to meetings of heads of state and government, may also be strengthened. An idea being considered is to provide it with a full-time chairman, who would serve as a contact for Van Rompuy. Luxembourg Prime Minister Jean-Claude Juncker has taken care of the duties until now. The new chairman would be a former finance minister, making him more acceptable to a group of his peers.

While that is still in the planning stages, it has already been resolved that the working group of finance state secretaries will have a full-time chairman with his own team of employees. The body, with the cumbersome title Eurogroup Working Group, does the detail-oriented heavy lifting ahead of finance minister meetings. In short, a kind of shadow government is currently taking shape in Brussels. But officials in Berlin have begun considering ideas which go even further. Merkel, for example, is thinking about introducing a right to file complaints before the European Court of Justice against euro-zone member states that violate the Stability Pact. Such a move would require an amendment to the Lisbon Treaty.

Integrating Economic Policies
At present, such ideas are still in the development stage -- and it isn't even clear whether the chancellor will be able to prevail with her ideas for a core Europe. Based on experiences to date, it seems highly doubtful that the EU member states can even agree on taking a significant step toward integrating their economic policies.

"Everyone agrees that stronger coordination of economic policy is a good idea," says Polish Finance Minister Jacek Rostowski. But, he adds, as soon as steps in this direction become more concrete, individual states begin to block the initiative. "I have never met a finance minister from another country who has asked me what he can do to help, in terms of economic policy," Rostowski scoffs.

And evidence of a lack of willingness to coordinate is not hard to find. A so-called European Semester, for example, was introduced at the beginning of the year with great fanfare. Although it gives the Commission the right to monitor national budgets to gain more control over the debtor nations, the Commission cannot do more than issue recommendations. If countries do not comply with austerity requirements, as is currently the case with Italy, the Commission has no leverage to correct national fiscal policy.

The self-proclaimed boosters of enhanced integration also hesitate when they are the ones being asked to give up competencies. Sarkozy, for instance, is still blocking an agreement with the European Commission and the European Parliament on reforming the Stability Pact. Germany and France support the so-called intergovernmental method, which involves agreements being made among the member states. This prevents the European Commission and the European Parliament from having too much of a say. But small countries, in particular, fear that they cannot protect their interests against the large countries without the help of the Commission. The concern is that the large countries will end up dominating the smaller countries. "You can push experiments involving greater cooperation at the intergovernmental level, but in the end this policy should become part of the EU agreements," says Belgian Finance Minister Didier Reynders.

'A Few Idiots'
European Commission President José Manuel Barroso is also alarmed. In a "speech on the state of the union" last year, he warned against a division of Europe. He intends to read the member states the riot act before the European Parliament in Strasbourg at the end of the month. Last Thursday, Barroso tested the mood at a lunch with a few members. He argued that because of the principle of unanimity, the intergovernmental method would allow "a few idiots" in one country to "blackmail" the EU.

In addition, the consequences of the decisions are always perceived with some delay. In the most recent example, the German government wants to provide more guarantees for the expanded bailout fund than the current €211 billion. Unnoticed by the public, it is adopting a passage from the current guidelines, under which the fund can be increased by 20 percent if necessary. In an emergency, this could mean that Germany would be responsible for more than €250 billion.

The German-French ideas are also virtually unenforceable among the 17 euro zone members. Many of those countries suffering from bloated deficits are first calling for the introduction of joint euro bonds before they are prepared to relinquish more sovereignty. But that is precisely what Merkel and Sarkozy have rejected until now. "It's a chicken-and-egg problem," says Belgian Finance Minister Reynders. "Some want a fiscal union first, while others want a transfer union."

There is also resistance to Merkel's plans from within her own coalition. CSU Chairman Seehofer, for example, is strictly opposed to relinquishing "national sovereign rights to a European economic and fiscal union." "We don't want a European super-state," he adds.

The Right Approach
The business-friendly Free Democrats (FDP), Merkel's junior coalition partner in Berlin, is also uninterested in the chancellor's plans for a more integrated Europe. It is opposed to both euro bonds and outfitting Europe with additional competencies.

In short, Merkel's two-speed concept is not just creating a rift within Europe, but within German politics, as well. The CDU, SPD and Greens are calling for tighter political integration of the continent, while the CSU and the FDP are generally opposed to the idea.

This Monday, the chancellor is receiving support from a completely unexpected quarter. In recent months, the billionaire Nicolas Berggruen has assembled a "Council for the Future of Europe" under the auspices of his institute. In addition to former German Chancellor Gerhard Schröder, it includes former British Prime Minister Tony Blair, former Spanish Prime Minister Felipe González and former European Commission President Jacques Delors.

The council supports more instead of less of Europe. It advocates the EU expanding its bailout funds, tighter integration and the transfer of more national competencies to Brussels, not just in financial and economic matters. It also proposes a European tax that Brussels would be empowered to levy for the EU in the future, as well as a program for growth and employment in Europe and an overhaul of all labor markets and social welfare systems in the member states. It would be a vast and far-reaching reform.

It's no surprise that council member Schröder almost wholeheartedly supports his successor's plan for more European integration. "Germany and France issued a strong signal with the plan for a European economic government," the former chancellor said in an interview with SPIEGEL. "That's the right approach."




ABN Amro’s Zalm Says Banks Find Funding More Difficult on Loan Reluctance
by Maud van Gaal - Bloomberg

Banks are seeking to retain their liquidity, making interbank lending more difficult, as funding from money and capital markets becomes harder to obtain, ABN Amro Group NV Chief Executive Officer Gerrit Zalm said.

Interbank borrowing for more than six months is also becoming problematic because banks are reluctant to lend to competitors with "big positions in weaker countries’ debt, for instance," he said today on Dutch television program "Buitenhof." ABN Amro is "well-capitalized," he said.

Zalm was Dutch finance minister from 1994 to 2002, during which time he helped oversee the implementation of the euro currency and the associated "stability pact" aimed at ensuring member states adhered to specific budgetary criteria. Germany and France both exceeded those criteria during his later term as finance minister from 2003 to 2006.

He said today the euro region needs an independent authority to ensure budget discipline among national governments. Only when budgetary discipline has been achieved should the region as a whole consider issuing bonds, he said. There’s no need at present to increase the European Financial Stability Facility to calm financial markets as long as government leaders show sufficient willingness to expand the rescue fund should that need arise, he said.

A demise of the euro would have "catastrophic" consequences for the Dutch economy, which sends about three- fourths of its exports to other euro-zone states, and "would cause a recession that would make the 1930s a trifle by comparison," Zalm said.




Former Dutch Finance Minister: 1930s recession if euro zone fails
by Gilbert Kreijger - Reuters

• Recession worse than in the 1930s if euro fails
• Zalm does not want Greece to leave the euro zone
• Former EU Commissioner wants Greece to give up euro


Former Dutch Finance Minister Gerrit Zalm said on Sunday Europe would fall into a recession worse than the one seen in the 1930s if the euro zone fell apart. Asked on Dutch current affairs TV programme Buitenhof what would would happen if the euro zone broke up, Zalm said: "We will have a recession which makes the 1930s look like nothing."

"The whole of Europe will crumble. You will get Switzerland effects. Switzerland has gotten a very strong currency and are being pushed out competitively because of the strong franc," said Zalm, who was Dutch finance minister until 2007. "For the Netherlands it would mean that if the European economy plunges, we would follow. Three quarters of our export goes to Europe," said Zalm, who earned a reputation as a fiscal hawk in Europe as one of the proponents of budget rules.

Zalm, who was the longest serving Dutch finance minister having the job for a total of 12 years, said he disagreed with calls from former European Commissioner and Dutch politician Frits Bolkestein to put Greece out of the euro zone. "I don't think that is the solution. The next remark will be that Italy should leave the euro zone, that Ireland should leave, that Portugal should leave. If that continues long enough you remain with only the Netherlands and Germany. I don't think that is a good development," Zalm said.

European aid to Greece should be given on the condition that Greece left the euro zone and return to the drachma currency because keeping the euro would be worse, Bolkestein told Dutch current affairs TV programme Nieuwsuur on Saturday. By returning to the drachma, Greece could devalue its currency and stimulate exports. To be able to pay its debt with a weaker currency, Greece would have to restructure it, said Bolkestein, who was Internal Markets Commissioner until 2004.




Hidden In The Jobs Report: 15.4 Million Missing Jobs
by Wolf Richter - Testosterone Pit

The long-term problem in the jobs report issued by the Department of Labor today—a problem in every jobs report since April 2000—is the strangely inconspicuous Employment-Population Ratio.



It measures the percentage of people age 16 and older who have jobs. It's not perfect. But it's the purest, least corruptible employment number out there: It's not seasonally adjusted, manipulated by the infamous "Birth Death Adjustment," or mucked up in any other way—unlike the headline numbers that have become a joke. And it hovers at a 30-year low.

After World War II until 1975, it bounced up and down between 55% and 58%. As women entered the workforce in ever greater numbers, the participation rate began to edge up; and after the recession of 1983, it went on a bull run that peaked in April 2000 at 64.7%.

Then it began to decline. Whatever the cited reasons. Outsourcing, innovation, off-shoring, tax laws, technological progress, corporate shortsightedness, cheaper labor elsewhere, whatever. When the housing bubble and related activities unfolded in 2004, it stabilized at around 62.3% and increased a notch to 63.4% in 2006. As the housing bubble deflated, it began to decline again. And then it crashed in an ugly trajectory.

Today, it came in at 58.2% (a rounding error up from last month's 58.1%). These are numbers we haven't seen since August 1983. In other words, 41.8% of the working-age people in the U.S. don't have jobs, as opposed to 35.3% in the year 2000. To convert this percentage into real people: Since the working-age population in the U.S. these days is 238 million people, a decline of 6.5% in participation represents 15.4 million jobs.

There are no green shoots or improvements or recoveries in sight. It's a structural issue. Every time a U.S. company outsources production or services to entities overseas, or buys from foreign suppliers when it used to buy from domestic suppliers, it removes more jobs.

A superb example—not only because of its majestic physical aspect but also because of its economic impact—is the new San Francisco Bay Bridge, the most expensive single structure in the U.S. Incredibly, its most prominent segment was built in China.

These jobs gone offshore will continue to drag down our economy, and no amount of money-printing by the Fed and no amount of hope-mongering by the White House and no amount of deficit-spending by Congress are going to change that. Only one thing will: A collective corporate decision to reverse the trend of off-shoring production and services. Because, mathematically, you can't grow an economy by removing jobs.




Young workers are the losers in pensions politics
by Phillip Inman - Guardian

Over-55s remain a priority for the government and also the focus of union concern

When trade union leaders and delegates meet this weekend ahead of their annual congress, staged unusually in London, much of the discussion will focus on the second stage in the battle over public sector pensions.

Since the first round earlier this year, some of the anger and bitterness at government cuts has dissipated. Negotiators report that discussions entered a more nuanced phase over the summer as the Treasury minister Danny Alexander and Cabinet Office supremo Francis Maude recognised that health service pensions are different to teachers' pensions, which are separate again from the local government scheme.

This was partly tactical on the government side, which needed to prevent five million workers from striking together, and partly a recognition of the realities of public sector pension schemes.

Ministers now appear to accept that the health service has the advantage of lower average pay and a younger workforce, limiting its pension liabilities. Local government workers have a large deficit in their pension scheme, but it is partly funded by an investment pool that sets it apart from the schemes for nurses and teachers, which are paid out of workers' contributions, and when that is not enough, Treasury coffers.

A dispute of titanic proportions is still possible because Alexander and Maude appear to have made few concrete concessions. Their across-the-board attack will see all schemes suffer cuts after a planned switch from pensions based on final salary to ones based on career average salary, and a downgrading of the inflation-proofing of retirement incomes by linking them to the consumer prices index rather than the retail prices index.

These two changes alone would deny workers a significant slice of their retirement income. Some calculations put the figure at 20%, others higher, as the government seeks to save billions of pounds from the public sector pensions bill. Without attempting to determine which side presents a more accurate picture of public sector pension costs, it is obvious that some big winners and losers are likely to emerge from any agreement.

Respected
The first winner is anyone over the age of 55. Ministers have already conceded that all accrued rights will be respected, leaving older workers with all their final salary-linked benefits intact.
A 55-year-old with 30 years' service will lose some of his or her pension, but their accrued rights will limit the impact. Negotiations may also lead to them escaping from the government's third major reform – a blanket move to retirement at 65.

These 55-year-olds are the focus of union concern. At next week's congress there will be talk of supporting young families, of helping them fight benefit cuts and a lack of jobs. Speeches decrying the government's half-hearted and piecemeal proposals to boost the economy will, no doubt, be heartfelt. Yet they will have a hollow feel as the union top brass prepare to expend their intellectual and financial capital in a full-bloodied fight on behalf of their older members.

Who is the government fighting for? Last year it attempted to engage in the battle as champion of the young, who it was claimed were losing out to their greedy parents and grandparents. Some ministers had excellent credentials as sponsors of this war, especially the higher education minister David Willetts, whose book The Pinch examines in fascinating detail the power of the postwar baby boomer generation.

David Cameron and his benefits minister Iain Duncan Smith both defined pension benefits in generational terms as they sought to win the intellectual debate. Their own sectional interest is now obvious, if it wasn't at the time, and it is clearly not younger people.

The people who want public sector pensions cut are older workers in the private sector, who either see the rising bill for their public sector cousins in retirement as a threat to them (triggering, as it might, higher taxes) or who want the public sector to share the same pension cuts that have reduced their retirement income to a fraction of the halcyon final salary payout. So these two sides now face each other on the field of battle, as they do in some many areas of life these days, with young people by and large left unrepresented.

Tricky
For the Liberal Democrats it is an especially tricky area of electoral debate. Much of their policy agenda has been skewed towards richer, older people who, crucially, would pay less tax under previous plans to scrap council tax in favour of a local income tax.

Away from pensions, Lib Dems will consider adopting one of the chief hopes of campaigners for intergenerational justice – a land value tax – at their conference this month, something older people with expensive properties rightly fear. It goes further than the previous mansion tax proposal because it would act as an annual charge on land wealth. Coupled with lower income taxes, especially on lower-income households, it has the potential to encourage more people to work.

How Lib Dem delegates react will give an indication of whom they plan to represent at the next election. Unions and the Tories have made it clear that the older voter remains their focus. As the average age of voters surpasses 55 at the next election, that seems electorally sensible. Lib Dems may ditch the land value tax for fear of limiting their popularity with this group.

Unions have a chance to escape their downward spiral if they embrace policies that appeal to younger workers, but at the moment they remain in the grip of shop stewards and leaders who feel compelled to do what their (largely older, public sector) paymasters want, which is to make sure they maintain as much of their promised standard of living as possible.

Surely, this route will only speed the long-term decline of unions, with the young choosing to fend for themselves rather than pay subs to an organisation that clearly favours a sectional interest – which is not them.




US Postal Service Is Nearing Default as Losses Mount
by Steven Greenhouse - New York Times

The United States Postal Service has long lived on the financial edge, but it has never been as close to the precipice as it is today: the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances. "Our situation is extremely serious," the postmaster general, Patrick R. Donahoe, said in an interview. "If Congress doesn’t act, we will default."

In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers — nearly one-fifth of the agency’s work force — despite a no-layoffs clause in the unions’ contracts. The post office’s problems stem from one hard reality: it is being squeezed on both revenue and costs.

As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail. At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on the agency’s predicament on Tuesday. So far, feuding Democrats and Republicans in Congress, still smarting from the brawl over the federal debt ceiling, have failed to agree on any solutions. It doesn’t help that many of the options for saving the postal service are politically unpalatable.

"The situation is dire," said Thomas R. Carper, the Delaware Democrat who is chairman of the Senate subcommittee that oversees the postal service. "If we do nothing, if we don’t react in a smart, appropriate way, the postal service could literally close later this year. That’s not the kind of development we need to inject into a weak, uneven economic recovery."

Missing the $5.5 billion payment due on Sept. 30, intended to finance retirees’ future health care, won’t cause immediate disaster. But sometime early next year, the agency will run out of money to pay its employees and gas up its trucks, officials warn, forcing it to stop delivering the roughly three billion pieces of mail it handles weekly.

The causes of the crisis are well known and immensely difficult to overcome. Mail volume has plummeted with the rise of e-mail, electronic bill-paying and a Web that makes everything from fashion catalogs to news instantly available. The system will handle an estimated 167 billion pieces of mail this fiscal year, down 22 percent from five years ago. It’s difficult to imagine that trend reversing, and pessimistic projections suggest that volume could plunge to 118 billion pieces by 2020. The law also prevents the post office from raising postage fees faster than inflation.

Meanwhile, the agency has had a tough time cutting its costs to match the revenue drop, with a history of labor contracts offering good health and pension benefits, underused post offices, and laws that restrict its ability to make basic business decisions, like reducing the frequency of deliveries. Congress is considering numerous emergency proposals — most notably, allowing the post office to recover billions of dollars that management says it overpaid to its employees’ pension funds. That fix would help the agency get through the short-term crisis, but would delay the day of reckoning on bigger issues.

The agency’s leaders acknowledge that they must find a way to increase revenue, something that will prove far harder than simply slicing costs. In some countries, post offices double as banks or sell insurance or cellphones. In the United States, the postal service is barred from entering many areas. Still, the agency is considering ideas, like gaining the right to deliver wine and beer, allowing commercial advertisements on postal trucks and in post offices, doing more "last-mile" deliveries for FedEx and U.P.S. and offering special hand-delivery services for correspondence and transactions for which e-mail is not considered secure enough.

Mr. Donahoe’s hope is to cut $20 billion of the $75 billion in annual costs by 2015. To do that, he wants to close many post offices and slash the number of sorting facilities to 200 from 500 and trim the agency’s work force by 220,000 people, from its current 653,000. (A decade ago, the agency employed nearly 900,000.)

The postal service has the legal authority to close facilities, although community opposition can make the process difficult. To placate critics and cut costs, officials say they would seek to run some postal operations out of stores like Wal-Mart or to share space with other government offices. Cutting the work force is more difficult. The agency’s labor contracts have long guaranteed no layoffs to the vast majority of its workers, and management agreed to a new no layoff-clause in a major union contract last May.

But now, faced with what postal officials call "the equivalent of Chapter 11 bankruptcy," the agency is asking Congress to enact legislation that would overturn the job protections and let it lay off 120,000 workers in addition to trimming 100,000 jobs through attrition. The postal service is also asking Congress for permission to end Saturday delivery.
Given the vast range of stakeholders, getting consensus on a rescue plan will be difficult.

Senator Susan Collins of Maine, like many lawmakers from rural states, vigorously opposes ending Saturday delivery, which would trim only 2 percent from the agency’s budget. Ms. Collins, the ranking Republican on the committee overseeing the postal service, said the cutback would be tough on people in small towns who receive prescriptions and newspapers by mail. "The postmaster general has focused on several approaches that I believe will be counterproductive," she said. "They risk producing a death spiral where the postal service reduces service and drives away more customers."

The post office’s powerful unions are angry and alarmed about the planned layoffs. "We’re going to fight this and we’re going to fight it hard," said Cliff Guffey, president of the American Postal Workers Union, which represents 207,000 mail sorters and post office clerks. "It’s illegal for them to abrogate our contract."

Senators Carper and Collins do back several of the postal service’s main ideas to avoid default, including recovering around $60 billion that some actuaries say the agency has overpaid into two pension funds. Although the Obama administration is working closely with the senators to find a solution, it has signaled discomfort with the pension proposals, questioning whether the postal service really overpaid.

Meanwhile, Representative Darrell Issa, the California Republican who is chairman of the House Oversight Committee, says the pension proposals would amount to an unjustifiable bailout that would not solve the agency’s underlying problems. He is pushing a bill that would create an emergency oversight board that could order huge cost-cutting and void the postal service’s contracts — a proposal that not just the unions, but Senators Carper and Collins oppose.

Fredric V. Rolando, president of the National Association of Letter Carriers, warned of disaster if partisanship keeps Congress from acting. "This is about one of America’s oldest institutions," he said. "It survived the telegraph, it survived the telephone, and we have to do everything we can to preserve it and adapt."




The revolution of capitalism
by John Gray - BBC

As a side-effect of the financial crisis, more and more people are starting to think Karl Marx was right. The great 19th Century German philosopher, economist and revolutionary believed that capitalism was radically unstable. It had a built-in tendency to produce ever larger booms and busts, and over the longer term it was bound to destroy itself.



Marx welcomed capitalism's self-destruction. He was confident that a popular revolution would occur and bring a communist system into being that would be more productive and far more humane. Marx was wrong about communism. Where he was prophetically right was in his grasp of the revolution of capitalism. It's not just capitalism's endemic instability that he understood, though in this regard he was far more perceptive than most economists in his day and ours.

More profoundly, Marx understood how capitalism destroys its own social base - the middle-class way of life. The Marxist terminology of bourgeois and proletarian has an archaic ring. But when he argued that capitalism would plunge the middle classes into something like the precarious existence of the hard-pressed workers of his time, Marx anticipated a change in the way we live that we're only now struggling to cope with. He viewed capitalism as the most revolutionary economic system in history, and there can be no doubt that it differs radically from those of previous times.

Hunter-gatherers persisted in their way of life for thousands of years, slave cultures for almost as long and feudal societies for many centuries. In contrast, capitalism transforms everything it touches. It's not just brands that are constantly changing. Companies and industries are created and destroyed in an incessant stream of innovation, while human relationships are dissolved and reinvented in novel forms.

Capitalism has been described as a process of creative destruction, and no-one can deny that it has been prodigiously productive. Practically anyone who is alive in Britain today has a higher real income than they would have had if capitalism had never existed. The trouble is that among the things that have been destroyed in the process is the way of life on which capitalism in the past depended.

Negative return
Defenders of capitalism argue that it offers to everyone the benefits that in Marx's time were enjoyed only by the bourgeoisie, the settled middle class that owned capital and had a reasonable level of security and freedom in their lives.

In 19th Century capitalism most people had nothing. They lived by selling their labour and when markets turned down they faced hard times. But as capitalism evolves, its defenders say, an increasing number of people will be able to benefit from it.

Fulfilling careers will no longer be the prerogative of a few. No more will people struggle from month to month to live on an insecure wage. Protected by savings, a house they own and a decent pension, they will be able to plan their lives without fear. With the growth of democracy and the spread of wealth, no-one need be shut out from the bourgeois life. Everybody can be middle class.

In fact, in Britain, the US and many other developed countries over the past 20 or 30 years, the opposite has been happening. Job security doesn't exist, the trades and professions of the past have largely gone and life-long careers are barely memories. If people have any wealth it's in their houses, but house prices don't always increase. When credit is tight as it is now, they can be stagnant for years. A dwindling minority can count on a pension on which they could comfortably live, and not many have significant savings.

More and more people live from day to day, with little idea of what the future may bring. Middle-class people used to think their lives unfolded in an orderly progression. But it's no longer possible to look at life as a succession of stages in which each is a step up from the last.

In the process of creative destruction the ladder has been kicked away and for increasing numbers of people a middle-class existence is no longer even an aspiration. As capitalism has advanced it has returned most people to a new version of the precarious existence of Marx's proles. Our incomes are far higher and in some degree we're cushioned against shocks by what remains of the post-war welfare state.

But we have very little effective control over the course of our lives, and the uncertainty in which we must live is being worsened by policies devised to deal with the financial crisis. Zero interest rates alongside rising prices means you're getting a negative return on your money and over time your capital is being eroded. The situation of many younger people is even worse. In order to acquire the skills you need, you'll have to go into debt. Since at some point you'll have to retrain you should try to save, but if you're indebted from the start that's the last thing you'll be able to do. Whatever their age, the prospect facing most people today is a lifetime of insecurity.

Risk takers
At the same time as it has stripped people of the security of bourgeois life, capitalism has made the type of person that lived the bourgeois life obsolete. In the 1980s there was much talk of Victorian values, and promoters of the free market used to argue that it would bring us back to the wholesome virtues of the past. For many, women and the poor for example, these Victorian values could be pretty stultifying in their effects. But the larger fact is that the free market works to undermine the virtues that maintain the bourgeois life.

When savings are melting away being thrifty can be the road to ruin. It's the person who borrows heavily and isn't afraid to declare bankruptcy that survives and goes on to prosper. When the labour market is highly mobile it's not those who stick dutifully to their task that succeed, it's people who are always ready to try something new that looks more promising.

In a society that is being continuously transformed by market forces, traditional values are dysfunctional and anyone who tries to live by them risks ending up on the scrapheap. Looking to a future in which the market permeates every corner of life, Marx wrote in The Communist Manifesto: "Everything that is solid melts into air". For someone living in early Victorian England - the Manifesto was published in 1848 - it was an astonishingly far-seeing observation.

At the time nothing seemed more solid than the society on the margins of which Marx lived. A century and a half later we find ourselves in the world he anticipated, where everyone's life is experimental and provisional, and sudden ruin can happen at any time.

A tiny few have accumulated vast wealth but even that has an evanescent, almost ghostly quality. In Victorian times the seriously rich could afford to relax provided they were conservative in how they invested their money. When the heroes of Dickens' novels finally come into their inheritance, they do nothing forever after.

Today there is no haven of security. The gyrations of the market are such that no-one can know what will have value even a few years ahead.

This state of perpetual unrest is the permanent revolution of capitalism and I think it's going to be with us in any future that's realistically imaginable. We're only part of the way through a financial crisis that will turn many more things upside down. Currencies and governments are likely to go under, along with parts of the financial system we believed had been made safe. The risks that threatened to freeze the world economy only three years ago haven't been dealt with. They've simply been shifted to states.

Whatever politicians may tell us about the need to curb the deficit, debts on the scale that have been run up can't be repaid. Almost certainly they will be inflated away - a process that is bound to painful and impoverishing for many. The result can only be further upheaval, on an even bigger scale. But it won't be the end of the world, or even of capitalism. Whatever happens, we're still going to have to learn to live with the mercurial energy that the market has released.

Capitalism has led to a revolution but not the one that Marx expected. The fiery German thinker hated the bourgeois life and looked to communism to destroy it. And just as he predicted, the bourgeois world has been destroyed. But it wasn't communism that did the deed. It's capitalism that has killed off the bourgeoisie.




Nephew of Bootsy Collins Dies of Tooth Infection: Could Not Afford Medicine
by IB Times Staff

The 24-year-old nephew of musician Bootsy Collins has died at the University Hospital in Cincinnati after a tooth infection spread to his brain. Kyle Willis, an unemployed single father of a 6-year-old girl, first went to a hospital complaining of a painful toothache two weeks ago.

Willis had no health insurance and couldn't afford the $27 antibiotic he was prescribed. Left untreated, the infection in his tooth apparently spread to his brain. Willis was violent and delirious when an ambulance brought him to the hospital where he died Tuesday. Bootsy Collins, a member of the Rock and Roll Hall of Fame, is best known for his work with soul superstar James Brown and the '70s funk-soul-rock fusion band Parliament-Funkadelic.

Getting access to dental care is particularly tough for low-income adults and children, and it's getting tougher as the economy worsens. Trips to the dentist aren't the only expenses hard-up Americans are skipping. Even general health checkups are getting expensive. There are a number of free dental clinics in operation around the country, where dentists volunteer to provide care to those without health insurance. But even if Willis had access to a free dental clinic, he still may not have been able to get the care he needed for his infection as one needs to wait for months to get an appointment.


204 comments:

1 – 200 of 204   Newer›   Newest»
Ashvin said...

(from last thread)

The ECB is indeed engaging in QE now, but without targeting any specific increase in its balance sheet. That only adds on to its ineffectiveness, because it is clear that the ECB is haphazardly buying bonds of various PIIGS from week to week without any idea of why it is doing anything, when the credit markets simply do believe it has any credibility. That is also true of the EU in general, as commitments by Northern European politicians are being revealed as completely hollow every other day. After the decision by Germany's Constitutional Court on Wednesday, that fact could be even more true than it is right now, which is really saying something. The pure insanity and fragility of the system is revealing itself in every way imaginable right now, exemplified by the shenanigans in Europe.

Blackbird said...

The German court will allow Eurobonds. Whether or not it requires Parliament approval is irrelevant. If Parliament is needed, then Parliament will approve.

That's what today's DAX plunge is all about. Driving home the point, wouldn't you say? It's Eurobonds or the abyss.

The German people have no representation. To think they'd find it in the courts when they can't find it in Parliament is wishful thinking.

As I pointed out earlier:
Merkel's CDU supports Eurobonds,
and when she loses power,
The SDP will replace her. The SDP explicitly supports Eurobonds and a strengthened EU.

It's exactly the same thing as replacing Fianna Fáil with Fine Gael and getting the same pint of bitter Guinness.

German judges are bought as easily as Irish Parliamentarians.

Blackbird said...

Rick Perry in Iowa -- on Social Security. I love this man. The truth will set you free:

“It is a Ponzi scheme for these young people,” Perry said. “The idea that they’re working and paying into Social Security today, that the current program is going to be there for them, is a lie. It is a monstrous lie on this generation, and we can’t do that to them.”

Blackbird said...

It's President Perry. There won't even be a contest. The man might as well start picking out his curtains.

Ashvin said...

Implementing Eurobonds now would be like building a new roof on your house when the local property market is collapsing. I'm not necessarily saying it won't happen, but if it does, the half life will only be slightly longer than that of an expanded EFSF. What's so great about lending to a Germany + a bunch of dead weight when the German economy is itself in full blown contraction, anyway?

Blackbird said...

@Ash,

As you well know, Eurobonds have nothing to do with saving the situation. It's all about keeping up appearances. Under these circumstances, putting a fresh coat of paint on the rotting wood makes sense.

What's so good about lending to Germany + dead weight when they're all in contraction?

German citizens still have lots of loose change in their pockets.

plotinus said...

I'm reading Treasure Islands by Nicholas Shaxson. It is about tax havens. It seems the financial world is much more corrupt than in my wildest nightmares and I read TAE quite often. Has anyone read it? I'm still at the beginning.

Ashvin said...

CR,

I'm just saying that such blatant attempts at maintaining the wealth extraction ponzi are really losing their shine for the elites. We're rapidly approaching the phase where the last greatest debtor fools, including European sovereigns (taxpayers), simply get fleeced outright in a debt deflationary collapse. The EMU is nothing without the Fed, and the Fed can't backstop the entire Union anymore. Eurobonds may create a bit of a Wile E moment for Europe, but it won't come close to overriding the reality that major European financials cannot survive together, so there is only chance is apart.

Greenpa said...

From previous thread:

John Day: @Greenpa
"I'm evolved for species success, not my own satisfaction?"

I'm not sure, but you may be committing a very basic, and very common, error in comprehending evolution.

You seem to be under the impression that you are important, somehow. But evolution cares not one whit what you are, or do- it only "cares" about whether your children have children.

A koan for evolutionary enlightenment:

"Having children is hereditary. If your parents didn't; you can't."

:-)


CharlieRose said...
"President Rick Perry. The world belongs to beautiful people.

"He's got Hollywood A-lister written all over him. He's rugged like the Marlboro Man, and his voice matches his twinkle. It fits in the way that Bush didn't. Bush looked like a spoiled brat with a Texan Twang. Perry has that million dollar sand-blasted leading man jawline. He looks like he just rustled up some cattle and now he's ready to tan some DC hide."

Ok, now you've scared the shit out of me. Really.

I've been discounting Perry as blatantly an idiot and unelectable- but... that's what I thought about Reagan, too. "This guy is a transparent moron!" I said to myself.

Which he was, of course, all of which goes to show being smart is not at all a guarantee of understanding anything.

Greenpa said...

I ran into this long article on CNN; it's a reprint of a feature from Fortune Magazine; from 1946.

I confess I did not have the time to read it fully; only to skim thoroughly; but as I did I was consistently very very impresse by the writer- his grasp of the facts, the depth of his information, and his ability to synthesize the human, cultural, and economic interaction aspects.

Superficially, it's about making a baseball team a business. I think some of the students of human nature, etc., here might appreciate it:

http://tinyurl.com/44sb6vv

Blackbird said...

@ Ash,

Ash said:
"The EMU is nothing without the Fed, and the Fed can't backstop the entire Union anymore."

You're right. Perhaps that's what Lagarde really meant when she demanded that European governments reacapitalize their banks. She was really saying: Pick which ones live through FED swap lines, and which ones die. The FED can't and won't save them all, and it's time for European politicians to choose the survivors by putting skin in the game. It's the Sophie's choice moment. World Bank president Robert Zoellick alluded to this issue over the weekend as well. He pointed out the European Bank reliance on FED swap lines could get dicey during a charged American political year .

Greenpa said...

Seriously, Charlie Rose's observations about Perry have got me terrified. Now I'm worried- the rethuglies still yearn for the days of Ronnie Raygun; he is their god. They chant, "where is the new Reagan?" in their covens.

And godhelpus, if some conservative pundit anoints Perry as The New Reagan- that could really be game over; because that would indeed unite many of the factions currently disemboweling each other- and pull in the many "independents" desperately longing for a Messiah.

What was it, two years ago? We all had a conversation here which kind of ended up with "a 'biggest' danger in these historical situations is the tendency for charismatic leaders to take power".

Perry is such a total fool I could see him actually starting a war with China, as a good econo/religious enterprise. Let's hope the Chinese are able to subvert our elections adequately, using our billions, to prevent his election.

Anonymous said...

I was talking with an ICU nurse last week. He said that ER docs are going to end up being required to do basic dental surgery as part of an ER visit - if that had been the case now, that young man would not have died. They would have pulled his tooth, given him a shot of penicillin, and he would have been fine.

Too bad for him and his family, and too bad for the rest of us, that his is an all too common cause of death now days. This should not happen in a 'first world' nation. Too bad we're third world in our medical care.

el gallinazo said...

CharlieRose

I think the point of Stoneleigh's comment is not whether the central bankers will **announce** another round of QE. The point is that the collapse is moving at enough speed now that by the time it could be implemented, it would be too late. And it would be pissing into a hurricane in any event. The central bankers are soon to be shown to be the wizards behind the curtain. The Owners are more concerned with a TARP type bailout of the PD's. How they will pull this off will be interesting. They could do it covertly through the Fed with more alphabet soup. They also might use the Politburo to do it to inaugurate the New non-Constitution. As to Rick Perry: He was picked by the Owners at the last two Bilderberg conferences to neutralize any success that Ron Paul might have, trying to steal is thunder. That is his true function. If he is "elected" president, so much the better, but they really don't care. He has enough in his closet, including his "friendship" with male prostitutes, that they can blow him out of the water any time they want. If Romney is elected president, he will tie the Usanistani consumerate to the roof of his car.

I have no interest in presidential politics. Rooting for the Blue Team or the Red Team is so passe. I didn't vote nationally since 1996 when I voted for Nader. Of course you can't vote for president if you are a resident of the USVI, but I would not have in any case, or voted again for Nader. What has O'bumma, that great emancipating, community organizing liberal-progressive done that W would not have done in a third term? Iraq, Afghanistan, Gitmo, Libya, DHS thugs, CIA torture centers, special rendition, the unitary presidency, blah blah blah. It's all George Carlin's American Dream, and we are not members of the Club.

el gallinazo said...

PS

Regarding our new IMF managing director, I guess we all know the truth now about DSK and the African milk maid. As I said, these guys play hardball. A joint venture of the CIA and the dwarf of Paris.

jal said...

A lot of people spent a lot of time/work to prepare articles for LABOR DAY.

Unfortunately, there does not appear to be any labor spent to fix our economic system. As being said on this blog and so many other blogs ... "smoke and mirrors".

The market ticket has painted a pretty bleak picture of what could happen, even if the lawmakers were capable of doing a "fix" to the stop the exponential "repairs". Since there are no "fixes" to be made, the reset will take longer and the fall to a sustainable system will take longer.

@ CharlieRose are you a paid staff member of Rick Perry?

There is no "fix" possible that will return the financial system to where it use to make everyone think that we could all become better off than our parents.

Yesterday is gone.

jal

Draft said...

Stoneleigh - so is this current Eurozone crumbling "it"? Or is it like last year where it looked like Europe had gone to the brink and then everything settled down again and was back to BAU? I remember in your talks last year you were suggesting that that was it for the Eurozone, but they pulled a rabbit out of a hat and kept going. What's to stop them from doing now, and later as well?

el gallinazo said...

Draft

Italy.

Ashvin said...

El G,

I'll see your Italy, and raise you France, Germany and Gravity.

Greenpa said...

jal: my Labor Day presentation:

http://tinyurl.com/3g8fzmy

does Charlie Rose work for Perry? Could be- all the more scary!

Ka said...

@skilo (from last thread)

One effective way, en masse, to fight the system is to systematically defund it. One defunds it (fights it) by removing oneself from the system of funding it.

Yes, we have been at least partially talking past one another. In my original comment I was not criticizing the above (though I will now somewhat, see below). What I was criticizing is that by using sentences that start with "We must..." or "We need to..." one is basically engaged in the age old practice of saying "if you're not part of (my) solution, you're part of the problem", the perennial cant of revolutionaries. And which is often enough a substitute for actually being a revolutionary (that is, it is a lot easier to say "we must resist" than to actually resist). Now it could be that outside of commenting on TAE you are doing something that counts as resistance, in which case, godspeed. I'm not against resistance, just that I don't think it will accomplish much. When you get down to it, it is largely a matter of temperament -- some will react to the crisis by fighting, some by fleeing, most by submitting. Just, please, don't assume that those who choose fleeing or submission are apathetic.

Now as to resistance through defunding. By all means, defund, but not necessarily to resist. (And to expect this to happen "en masse" is unlikely.) What I would add, though, is that even better than moving one's money to the local system (which is also corrupt, but perhaps easier to resist), is to manage to get out of the current money system altogether.

Supergravity said...

When a president tries to suspend habeas corpus, its because said writ is in the way of inhumane policies, it yet functions somewhat to protect civil securities, whereas a president must necessarily be impeached on grounds of mental incapacitation for such an act, as only deranged extremists would attempt to suspend habeas corpus.
If congress fails to impeach on those grounds, court order may force congress to do so under penalty of felonious dereliction.

Publicly advocating the suspension of habeas corpus is not protected speech for agents of government, because it is an expression of autogenic political extremism which may yield criminal offenses as well as being definitive grounds for dismissal from public office.

Constitution sceptics may not object to said suspension if they argue that any codified civil and human rights are only ever there to placate the masses while the elites rob them blind.
Suspension would then be an improvement.
If anyone here now relegates constitutionality to the trash heap of history because its all a scam, yet honestly protested against said suspension when it occurred, you should realise you're wrong.

On the regression of property rights the sceptics are right, the legal system has never changed that Capital is subject to Gravity, never could.
It may have made it worse because legal systems have unsubstitutable utility for preventing violence, thereby insitutionalising state violence to the extent necessary to repress the poor and preventing revolutionary redistribution of property.

On social rights sceptics are more mistaken, there has been remarkable progress in the last century, sustainable or no, which may only have been possible by codifying civil and human rights in the known framework, besides being afforded by anomalously high energy flux densities.

@Ash
As you know, I can ague passionately why constitutionality is an excellent idea in principle, although its been abused and never worked as intended, if it ever was intended to benefit the masses, but I just don't see an alternative for limiting the power of institutions and their civil societies, while maintaining civil rights however possible. If these dominant institutions are not all to collapse and dissappear, along with their clustered sociopaths, something must be in place to prevent their unrestrained abuses. Do you know of such an alternative?

Supergravity said...

Ilargi often says its not just a financial crisis, but a huge political crisis, so this must be a part of that. To never discuss the virtues or vices of constitutionality when in a political crisis of this magnitude seems wrong to me.

Ashvin said...

Supergravity,

"If these dominant institutions are not all to collapse and dissappear, along with their clustered sociopaths, something must be in place to prevent their unrestrained abuses. Do you know of such an alternative?"

I am quite "radical", in so far as I believe that the only alternative that has any significant chance of constraining institutional abuses is re-localization of all economic and political structures to a level of relatively manageable complexity, given our current circumstances. Perhaps some form of decentralized network between autonomous "communes" could exist, as SA suggested, but absolute sovereignty must truly reside within the locales and their populations. That's really the best and only way I see a Constitutional framework of governing and civil rights providing any net benefit to the society that is subject to it. Of course, the governing structures could be organized and rights protected without an explicit Constitution, but I imagine the concepts of "justice" and "equality" would be better served with one. It is all about the scale of resolution for me.

el gallinazo said...

Supergravity

Arguing with the Gestapo thugs, Lubyanka thugs, or the DHS thugs about constitutionality is like going to a gun fight with a pen knife. While I am all for keeping one's ideals, thinking those ideals have power with the Owners is a delusion which can land one in even deeper shit. One's best hope lies in flexibility and local community, and a savvy picture of the power games going down.

Greenpa,

I am really surprised at your reaction to Perry. The cult of personality. If appointed, he will do just as he is told as has every president since JFK, who didn't heed Eisenhower's warning as he left by the back door.

Jack said...

Here in Canada asset striping or wealth extraction is also going.
The funny thing is that most people don't even realize that this is happening to them.
Its like a persons pocket is being picked and they have no clue of it.
Whereas in the PIIGS countries it looks like most of the extraction is already done.
So things are going one step at time.
PIIGS are are extracted

USA half of the population extracted

Poor countries nothing to extract

Countries in better shape still need more time for extraction

Greenpa said...

El. Gal: "I am really surprised at your reaction to Perry"

Ah, well, you know me. Naive as a newborn, over and over. :-)

jal said...

Greenpa said...
“COGS”
---
You know, from experience, that “putting food on the table” is not the romantic images that were portrayed to the generation of “back to the land” movement. Its a lot of hard work with a lot of trial and errors.
( Its not much fun to spend a day preparing the necessary supplies with muscle power that will be needed to accomplish a task of a couple of hours which could have been done using “oil energy”.)
---
Ash said...

“Perhaps some form of decentralized network between autonomous "communes" could exist.

...It is all about the scale of resolution for me.”
---
Few of those “back to the land” experiments have succeeded.

With or without chaos, few will see “the new world order” after the reset.

Social and economic structures will need generations before the “old”, (what we assume to be normal social economic interaction/relationships), to be forgotten and for the new normal sustainable structures to be the “norm”.

Our social structures are filled with “unrecognized and under appreciated” by their “bosses” and those wantobes are eager to prove themselves in all levels of social organizations and end up proving that their “bosses” were right. They turn out to be the worst managers and supervisors.
I would guess that they would be the cause of failure of most autonomous "communes". A few generations will be needed to arrive at stable structures.


Jack said...

“Countries in better shape still need more time for extraction”

Okay! I’ll go along with that thought.
Now ... after they have done the extraction ... what kind of sustainable social and economic society will they set up?

Keep in mind that it is impossible to have everyone in the military. There has to be someone growing food to feed the military. (See N. Korea for a reference and Haiti for an other example of dis-functionality)

Greenpa said...

meanwhile; technology continues to make truly astonishing jumps;

http://tinyurl.com/3kt5t5o

genuine- commercially feasible- "cloaking device" for tanks and armored vehicles. Here, and now, and soon to be improved. Invest now, and rearrange your thinking regarding various types of warfare.

Anonymous said...

@Ka,

It seems you think that "revolutions" imply violence.

I abhor violence and would like to avoid it, hence the peaceful, defunding resistance is what I promote.

>>I'm not against resistance, just that I don't think it will accomplish much.<<

Why won't it accomplish much?

Because people, en masse, don't resist via simple defunding?

I will accept that it isn't apathy (funding the enemy that is destroying your nation simply because it isn't as convenient to avoid doing so) so long as you can provide a better word to describe what is going on.

As for avoiding the monetary system altogether... that sounds good to me, but there are a couple problems...

1. You don't say what that means (in the post I'm responding to, anyway) and it doesn't appear as easy as you seem to imply given I have to pay property tax inside the monetary system, etc...

2. The government that people don't resist take a dim view on people who trying to leave the monetary system and they have essentially butchered the laws in order to throw alternative system adherents in jail or confiscate their "alternative monetary system."

Check out the Liberty Dollar scam the tyrants are running.

http://www.youtube.com/watch?v=yqpN0sRlpSg&feature=youtube_gdata

http://www.prisonplanet.com/feds-may-confiscate-privately-held-gold-and-silver-coins.html

Which brings this all back around - the tyrants will not quit. They will keep coming until they've shoved their criminal, barbaric, murderous world right down our collective throats unless people take action.

They've put on a smiley face during the credit bubble to keep us off guard, but once the collapse comes, I fully expect their tyrant masks to come off and boots will start hitting necks AND NEVER STOP.

I hope I'm wrong, but history doesn't give me much hope there.

http://www.livefreeordiereport.com/bernard-von-nothaus-labeled-a-domestic-terrorist-by-the-fbi-for-minting-gold-silver-coins-12/

SecularAnimist said...

Skilo said"

"So let's keep the good of the Constitution and throw out what is bad.""

Setting aside that the founders believed the white propertied men were superior to all others and therefore should rule and all other humans were inferior, savages or property.

The problem with the constitution is it was made with a 18th century, pre-science world view of the world. One that is still the prevailing ethos of the world and expressed through neoclassical economics.

That all of life is a competition for property(resources) and all progress flows from this competition. Where the earth and it's limitations are of no concern whatsoever.

And those with the most property are the most in gods favor and should be given systemic advantage over those without

Modern governments are set up to be the arbiter of this property battle which we express through market systems with money as the gun in this bloodless battle.


"Whenever there is great property, there is great inequality. For one very rich man, there must be at least five hundred poor, and the affluence of the rich supposes the indigence of the many, who are often driven by want, and prompted by envy, to invade his possessions. ... Civil government, so far as it is instituted for the security of property is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all."

-Adam Smith

Tell me what the constitution is going to do for 100 million or so jobless and propertyless?

This system could not end any other way.

I will say the US constitution was based off of cutting edge science and philosophy of the time.

Though, something like this would be more cutting edge philosophy and scientific understanding of reality

From Bolivia's new constitution

Earth is defined by the legal text as a dynamic and “indivisible community of all living systems and living organisms, interrelated, interdependent and complementary, which share a common destiny.”

“Living Well means adopting forms of consumption, behaviour and conduct that are not degrading to nature. It requires an ethical and spiritual relationship with life. Living Well proposes the complete fulfilment of life and collective happiness."


In the macro, the earth and it's resources need to be declared our common human heritage and we must leave this competition-based Darwinist structure.

Anonymous said...

@CharlieRose,

Rick Perry is to the right what Obama was to the Left.

A two bit "magnetic personality" lying scoundrel.

"In the technotronic society the trend would seem to be towards the aggregation of the individual support of millions of uncoordinated citizens, easily within the reach of magnetic and attractive personalities exploiting the latest communications techniques to manipulate emotions and control reason."
— Zbigniew Brzezinski (Between Two Ages: America's Role in the Technetronic Era)

I mean, BFC minions tell you what they are gonna do, they do it and people continue to fall for it.

How can they respect us?

14 Reasons Perry is a Bad President...

http://endoftheamericandream.com/archives/14-reasons-why-rick-perry-would-be-a-really-really-bad-president

Perry is getting his "anti-establishment" rhetoric straight from the same marketing geniuses that brought you the Obama fraud. No doubt the Fed told Perry to call the Fed almost treasonous to get elected so he could then go to work for the Fed against the American people.

Perry and Dewhurst over turned an other UNANIMOUS VOTE to official criminalize the act of sexually assaulting airline travelers... BUT HE'LL NEVER TELL YOU THAT!

The "magnetic personality" types are simply hired guns.

The Greek PM is selling off his nation to the BFC crooks - and he's a Bilderburg attendee, too.

Perry will do the same in a heart beat - if told to do so.

If you are going to keep kicking field goals when the ball is pulled away, perhaps a change in moniker to "Charlie Brown" is in order.

Ka won't like it, but we have to be more sophisticated and not have our emotions manipulated and our reason controlled so darn easy!

Anonymous said...

@SA,

I agree that the Constitutional writers were deeply flawed, but you originally criticized the document itself. I asked you to highlight where the document itself is currently flawed, not what was in the minds of the creators of the document - they are two distinct issues.

I guess you didn't like that question.

>>In the macro, the earth and it's resources need to be declared our common human heritage and we must leave this competition-based Darwinist structure.<<

I agree 100% with this idea, but ideas ARE NOT implementation.

I agree with the idea of more "communal living" (communism?), however, communism isn't ever able to be implemented because dictators ALWAYS co-opt the effort on the large scale.

While I laud your idea, I think history is clear that you are much more likely to get 10s of millions mass murdered than you are to get "communal living" on the large scale.

The current crisis is as bad as it is because the government has been used, by criminals who have taken over, as a weapon to oppress the people - something that would not be possible under a strict reading of the Constitution.

However, I do agree that a strict Constitution application and free markets aren't the kind of panacea that a guy like Ron Paul espouses, but I do view it as "the least worst" of the options given the selfishness inherent in humanity.

While I agree with this...

>>In the macro, the earth and it's resources need to be declared our common human heritage and we must leave this competition-based Darwinist structure.<<

in principle - and wholeheartedly so, I find the historical record of implementation "ofer."

As in "zero for."

When something so good doesn't ever happen on the large scale, there is a reason.

When attempts to make it happen yield 10s of millions of deaths, on has to pause and really think this through - good platitudes have never stopped the mass murder in the past.

Gravity said...

@Ash
I agree that smaller scales are best, classical libertarianism running a miniature republic of communities may have the same pitfalls with regressive property rights as the larger system has, although taxation wouldn't be nearly as oppressive with a tiny government and less corporatism.
Any form of constitutionalism realises that the rule of law itself is to be made the sovereign property of the citizenry, ideally. If that only works at smaller scales, then so be it.

One problem is that a system of participatory rule needs citizens to be fully informed and enabled, which has never been achieved at larger scales. The Big Lie induction also seems to work more effectively in proportion to the scale of the media system if co-opted by government, another reason to avoid upscaling.

Anonymous said...

SA,

So if we toss the Constitution and proclaim "the land is for the benefit of everyone..."

Will I be able to have land I can work on and live on? How will I get it? Can it be taken away from me when someone decides the "public good" demands it (and happens to be most profitable to the decision maker)?

Will my wife be able to defend herself or will she be at the mercy of a 250 lb man with an agenda?

Will I be able to speak my mind in public without being tossed in jail or killed because my message wasn't deemed "good for the community" when it was about a person in power acting in corrupt ways?

Will I be able to keep the community "green police" from coming inside my property and confiscating anything they want because someone, somewhere deemed it wasn't "community" enough?

The Constitution enshrines the idea that human rights DO NOT EMANATE FROM HUMAN GOVERNMENT. Is this bad? Outdated?

The Constitution enshrines free speech, the right and ability to defend oneself - especially the weakest in society, the right to avoid unreasonable search and seizure, the right to a jury trial, the right to petition government for grievances...

Are all those ideas outdated?

Do you promote a "green dictator" that will benevolently give equally to all for the benefit of humanity?

It is not reasonable to compare a good idea that has never worked in scale in human history and with no implementation details to the actual implementation document.

Again, vague concepts like the "Constitution is out of date," mean absolutely nothing.

If something in the document is out of date, quote the document, explain why it is out of date and then explain what DETAILS should take the place of current details.

PS - It seems to me if the Founding Fathers simply wanted to enshrine themselves as God's and Controllers of America, they would have created a massive Federal government and established a monarchy with themselves enshrined at the top.

They didn't. So the narrative is a bit more complex than you like to let on.

el gallinazo said...

For those who don't watch the markets, the DAX (Germany) was down 5.28% and the Euro is close to flirting with the 1.30's after being as high as 1.45 a week ago. Some feel the DAX plummet was partially responsible today because the American robots had the day off from work. It appears that TSHTF this week. But not to worry. The Teleprompter-in-Charge will address the nation shortly. He will kiss the boo boo and make it better.

Jim R said...
This comment has been removed by the author.
Ashvin said...

I think it is critical to distinguish between the Articles and the BoR when discussing the US Constitution. In the Articles, you have stuff like the following (paraphrased):

'No state can ban the importation of slaves for 30 years.

Congress can implement all laws "necessary & proper" to carry out its designated powers

One of Congress' designated powers is to "regulate interstate commerce" (OK, that's clear...)

The President is designated as the Commander in Chief of the Armed Forces and the state militias, and there is very little guidance on what this gives him (and his appointed officials) the discretion to do.

The Constitution and Treaties (made by President, ratified by only the Senate) are the "supreme law of the land", meaning they trump the decisions of state legislators and judges.

National debts created before the Constitution are, of course, to be honored.

The process to amend the Constitution is nearly impossible (2/3 of both houses and 3/4 of states).'

There are many more examples, but I have to go away from the computer for awhile. The BoR, on the other hand, provides some important protections for the people, but are also worded in vague manner that can be easily twisted to the purposes of those in power. That is not always true, and some critical protections were created by the Warren Court in the 60s and 70s with regards to the 4th, 5th and 6th amendments, but even those have been watered down over time with numerous exceptions. The 8th and 10th amendments may as well have never existed.

SecularAnimist said...

Skilo,

Obviously what I cite is a long term vision. We have a lot of growing up to do as a species and unfortunately, we have to hit rock bottom, like any junky, before we change. Given global macro forces, that, unfortunately could be very ugly. "Reinstating" the constitution - really does nothing to stop this decline.

The west has been in decay for 40 years. Now, we are in the terminal phase.

The market society that governs the world took 400 years to take over the globe. And all institutions are designed to support and propagate this system. It's this world-system that is the driver off bad behavior and global resource waste.

The elites increasing bad behavior is because they are desperately trying to hold on to an old dying system.

Jack said...

SecularAnimist

The elites increasing bad behavior is because they are desperately trying to hold on to an old dying system.

Do you think it is dying or have they conjured up a new system to enslave everyone.

jal said...

SecularAnimist said...

Obviously what I cite is a long term vision.

... The market society that governs the world took 400 years to take over the globe. And all institutions are designed to support and propagate this system. It's this world-system that is the driver off bad behavior and global resource waste. ...
---
Welllll!

At last ... someone who can see that it takes a long time for humans to make/accept substantive change. ... yes ... generations

ITS THE MESSAGE THAT SURVIVES NOT THE INDIVIDUAL IN A DOOMSTEAD.

The small incremental step done by each one of us in our environment will affect the evolution of our social structures until those effect reach a stable configuration around a multiple global ecological/environmental attractor poles.

A balanced complex earthly system that can last until the sun burbps.

(:-

JAL

Jack said...

Their ultimate goal it to collect all the Precious Metals in the world and from all signs they are going to do exactly that.

Jack said...

I could just picture this.
You have a group of 100 wealthy people in the world and they are on their island and they have their army and than you have the world in poverty.
I don't know if I am picturing this right

SecularAnimist said...

""Do you think it is dying or have they conjured up a new system to enslave everyone.""

You mean more than we are enslaved now? In many respects peoples "freedom" is directly proportional to their purchasing power. People are going to become poor and it will feel like enslavement to them. There is nothing that can stop this under the rules of this system, because there is just not that much surplus value to profit from anymore.

I don't think it is either or. Meaning, some are probably very cognizant of the massive structural problems(the confluence of peak energy and debt) and are using this knowledge to game the system to their advantage. I bet they allowed the bubble to happen just to keep people fighting over causal mechanisms - but that is irrelevant. However, them devising a "new" system - like "Hey everybody, now we are all going to be global socialists" probably not. The problem they run into with something like that is they want to keep their position on the peaking order and you cant do that with a radical new system - and they know it

It looks like they are just keeping people confused and divided while they concentrate wealth and conjur up scapegoat after scapegoat.

Sure, they may have some new currency or something - but nothing more than that. Just keep impoverishing the bottom 80% and keep the top 20% happy.

Besides, there are a lot of factions of elite all gaming to overtake the other. I would bet "conspiracy" plans come and go with the rapidly changing alliances.

Gravity said...

The system is a bastard, and highly likely a sociopath. It should be deconstructed and replaced with something less deadly. But any power system would ever be subject to Gravity, making collapse a principal power of the world eternally, periodically.

@SA
"In many respects peoples "freedom" is directly proportional to their purchasing power."

Wealth is inversely proportional to the square of the distance between capital and labor, or some similar function [of distance between laborers and the profits of their produce].

SecularAnimist said...
This comment has been removed by the author.
SecularAnimist said...

""At last ... someone who can see that it takes a long time for humans to make/accept substantive change. ... yes ... generations""

Well speed of information seems into increase rates of change in the world. Meaning epochal change should happen tremendously faster than in the past.

We should all witness the collapse of this global system and the start of a new one within our lifetimes. Well, unless you are over 60.

In other words, it does not matter how stubborn somebody is when the lose their home and job - they will change their views in this darwinian paradigm.

Infants don't want to leave the womb - but they have no choice and it's frightening and painful.

We are starting to experiencing the birth pangs of a new civilization and are about to be plunged unwillingly into a new world, with a quickness. The future is truly in our hands.

Anonymous said...

I believe the euro-banks are currently benefitting a great deal from the ECB purchasing regime. The ECB is effectively buying the euro-bank inventory of PIIGS bonds at above-market prices.

DB, for instance, only has less than a billion euros of Greek bonds; last year, it had 8 billion euros. I'm guessing all that Greek debt is now sitting at the ECB.

Current 1-year Greek rates imply a 70% haircut on outstanding Greek debt. Wow, looks like DB dodged a bullet, isn't that fortunate?

Is it any wonder the can-kicking has gone on for so long? The banks needed time to offload their crappy positions. They are fighting for their lives, and if they can convince the ECB to suck up every last bond in europe, they will do their best to make that happen.

General question: if the ECB ends up taking haircuts that exceed its assets, does it go under? Can it just print money to cover the losses? What happens when a central bank has negative net worth?

Gravity said...
This comment has been removed by the author.
Ka said...

@skilo,

I never said or implied that dropping out of the system would be easy -- in fact, I have said the opposite. If it were easy I would have done it 40 years ago. By the way, I do not mean one tries to do without money altogether. What I mean is to gradually learn how to be poor, then poorer, before poverty is thrust upon you. Avoid property taxes by not owning taxable property. Learn barterable skills, and so on.

As to the boot of the government coming down on one, I have already addressed that -- the gov's resources will be limited, and only expended on stomping on the openly resistant.

Ka won't like it, but we have to be more sophisticated and not have our emotions manipulated and our reason controlled so darn easy!

Care to explain what prompted this calumny?

Nassim said...

I'm reading Treasure Islands by Nicholas Shaxson. It is about tax havens. It seems the financial world is much more corrupt than in my wildest nightmares and I read TAE quite often. Has anyone read it? I'm still at the beginning.

plotinus,

I bought it last May but only finished reading it a couple of weeks ago. Its price has dropped dramatically on Amazon.co.uk

I was aware of a lot of these shenanigans for decades - transfer pricing is hardly a new idea. When I studied Operations Research in 1973, a favourite application for linear programming was in "optimising" inter-group pricing. Companies like Shell did it in a big way. Most of the other applications of linear programming are pretty infantile. I like to think of it as von Neumann's not-so-deadly toy.

However, this book did refine my understanding of how the Caymans, Jersey and so on fit in with the City of London. It was always clear to me that Gordon Brown's rantings about tax-havens were pure and unadulterated hypocritical bullshit - Gordon Brown says world must 'take action' on tax havens. London is, by far, the world's biggest tax-haven. There can be no other explanation for the high price of property in London and the resilience of the British Pound.

Like I said to lautturi, there are two ways to read this book: as a victim of the system, or, as an exploiter of the system. I think if enough people move into the latter category, the system can only collapse.

Anonymous said...

@SA,

>>Obviously what I cite is a long term vision.<<

I guess where we differ is that your vision, while a noble and good one, infers a benevolent large scale government.

This has never happened and it is quite the leap of faith to think that it will anytime soon - or even in 400 years.

So what do we do in the mean time - you know, the reality in which we live at present?

That is what the Bill of Rights and unalienable rights are supposed to exist - reality in the here and now, not some faith based utopian governmental structure and set of governors.

You also make a habit of avoiding detailing the governmental structure of your vision - and I can understand why. It isn't easy stuff and once you start going into details, you open your ideas up to criticism.

I don't fault you failing to be able to articulate details of your faith based system - I personally believe that human selfishness makes responsible government impossible.

If true, and I'm wholly confident it is true, your failed attempts at outlining details of "good government" would have good company - frankly, everyone who ever tried.

The next best thing is to put together the "least worst option."

Would your least worst option include a mega sized and controlling federal government that could (and would eventually - it always does) get taken over by criminals and used to oppress the people (you know, blow criminal credit bubbles, protect the financial criminals, set up Ponzi monetary systems, etc...) or would you keep the government small?

Would you make it so that citizen rights emanate from government (and can be rescinded whenever criminals who took over government decided it was in their best interest to do so) or so that the government was powerless to suppress basic human rights?

I think the Constitution nailed those to principles - and I also think those are the principles that the BFC Club wants to eliminate to further enshrine their own **POWER**.

"The two enemies of the people are criminals and government, so let us tie the second down with the chains of the Constitution so the second will not become the legalized version of the first."
~Thomas Jefferson

Say what you will about Jefferson's failings - he nailed that one dead on... we didn't "chain down" the government with the Constitution, so now we have a genocidal, military and economic war mongering murder and depression machine firing on all cylinders and the criminals running it are essentially anarchists that can bribe judges, bribe county officials, assault women, lie under oath, grow heroin poppies, send guns to drug cartels, allow drug cartels to import drugs into our country and launder $378 billion in drug money and NOBODY GETS CHARGED WITH A CRIME.

And yes, BOTH PARTIES ALLOW THESE CRIMES...

VK said...

This is the big one. DAX chart confirms it.
No FED. No ECB. No IMF. No Obama. They are now powerless. They'll try for sure but it won't work and all boosts will be temporary. Bottom of this bear Market is Mid Feb 2013.

Shit's about to get real.

VK said...

I mean bottom of this wave in the bear Market. It's gonna be a monster. Followed by a rally & a re-re-crash.

Anonymous said...

@Ka,

I think we agree on the core issues. I would like to know how not to pay property taxes, though, as renting land or housing also pays for property taxes in the form of rent to an owner that pays property taxes.

I guess the difference is I'm a bit more emphatic "we must" vs "we should," but I don't see that as a big difference.

Did all 40 million people Stalin killed "stand up in open resistance?"

How about the oppressed in North Korea?

How about the 60-80 million murdered by Mao (much of it through starvation)?

For me, it isn't about individual survival, it is about standing up for what is right and what is decent. They can only oppress a few, so if everyone stands up for what is right and what is decent... they have a problem, don't they? If everyone stands down, though, the people fighting for your freedom will soon disappear... and good luck with that...

I hope they don't go North Korea on you. That place is horrible. Purposeful starvation as a matter of policy? Evil.

I'm not so sure the system will be as broke as you seem to think. Sure, the amount of money out there will be a lot less, but it will be a LOT more concentrated in the hands of criminals whose #1 job is to keep the people from incarcerating them - and a police state is required to do that.

Not to mention they will control the food and water... and lots of people will do evil things to eat for a day - even on the cheap.

But I do hope you are right, though. Hope for the best, prepare for the worst.

As for my comment you wouldn't like it... it was based on my use of the phrase...

>>we have to be<<

...which is similar to one that set off this conversation in the first place. It was meant jokingly, even if it was a bad one.

Supergravity said...

Now I've got it right.

Wealth is inversely proportional to the square of the distance between capital and labor, or some similar function [of distance between laborers and the profits of their produce].

But then, the propensity for capital crisis and revolutionary collapse becomes directly proportional to the square of the distance between capital and labor, or some similar function [of distance between laborers and the profits of their produce].

Maybe I should read Das Capital again for value clarification.

Greenpa said...

Skilo; "I agree with the idea of more "communal living" (communism?), however, communism isn't ever able to be implemented because dictators ALWAYS co-opt the effort on the large scale."

I'm not sure you're correct. In our modern history; certainly, and most of older and ancient history too. But there are inklings of a previous time- where they managed it.

How? Simple, really; but extremely alien to our current thought patterns. They were grown ups- and knew it, and acted on it.

Consequently; when a dictator type started to take power - someone, one of many possibilities- killed him; quite quickly. Just; you know- saw the problem- and shot him, dead. As soon as they saw it.

And society thanked the one who eliminated what they all knew was a threat. Various mythologies and folk traditions from Native American tribes and pre-Christian Celtic Scandinavian, and Germanic tribes speak of such societies- though usually, I grant, it was "in your grandfather's time..." - not in the time of the speaker.

Still; late at night, I find the possibility attractive- particularly compared to the other possibilities we face.

Greenpa said...

JAL - "Keep in mind that it is impossible to have everyone in the military. "

You may be mistaken there; and it's a very interesting possibility to me.

Rudyard Kipling, in his story "The Miracle of Purun Bhagat", part of "The Jungle Books" mentions an "Old Law" I have not been able to track down, but which I assume Kipling found among the Vedic traditions:

"He had been, as the Old Law recommends, twenty years a youth, twenty years a fighter, and twenty years head of a household... Now he would let these things go, as a man drops a cloak he no longer needs."

Several countries have already adopted systems where "everyone" is in the military; for a term. There certainly are advantages to having (nearly) everyone trained in real, serious, self defense.

Any future I can see also seems to require individual competence in defense.

Not that I see hard answers to the problems here- just- worth a thought-

SecularAnimist said...

http://ampedstatus.org/full-blown-civil-war-erupts-on-wall-street-as-reality-finally-hits-the-financial-elite-they-start-turning-on-each-other/
"Finally, after trillions in fraudulent activity, trillions in bailouts, trillions in printed money, billions in political bribing and billions in bonuses, the criminal cartel members on Wall Street are beginning to get what they deserve. As the Eurozone is coming apart at the seams and as the US economy grinds to a halt, the financial elite are starting to turn on each other. The lawsuits are piling up fast. Here’s an extensive roundup:"

Anonymous said...

@Greenpa,

It all depends on one's definition of large scale, doesn't it? ;-)

Of course, it is easier to control people you see and interact with day in and day out on the local level.

I hope you are right, though. I want to be wrong here, but even the Christian tradition says humans can't ever resolve the selfishness issue, hence, all flesh would be destroyed except for the Second Coming.

jal said...

@Greenpa

"Any future I can see also seems to require individual competence in defense."

True.
However, how can the elite have control if everyone has arms and know how to use them in an organized fashion.
---
A little diversion.

S. Palin want to be the king maker and put her support behind the obvious winner.
Then
she wants to be the power behind the throne.
Limboof ... eat your heart out!

Hows that for a prediction?

jal

Greenpa said...

skilo: "It all depends on one's definition of large scale, doesn't it? ;-)

"Of course, it is easier to control people you see and interact with day in and day out on the local level."

Very true, of course. I have to wonder though, about Hitler, in particular. What IF- there had been one, or two or three- actual full-blown grownups in the picture somewhere early on? It really would not have been at all difficult for any of the "top advisors" to just blow him away. Instead they tried to "conspire"- not one of them capable of actually taking full personal responsibility for the decision. Wow. Rooms full of generals and colonels- all sissies.

What if we all actually grew up? :-)

SecularAnimist said...

Most people I know don't behave like ruthless maximizers of their genetic self-interest. Does that mean that culture has sufficiently conditioned most of us(expect the very top and bottom of society) into moral, ethical, socially responsible beings? Or is it the other way around? Is it instead that our true nature is love, community, and creativity, and that culture drills into us a survival anxiety that thwarts the expression of our true nature? As far as I can see, capitalism is a bad behavior, waste and dissatisfaction maker. I don't see much happiness creation just pathological expressions of trying to fulfill perpetual unsatisfaction. Is that 'natural"? Good lord, if this is the best we can do we are pathetic.

Does Skilo's contemporary understanding of human "nature" motivate a war against true human nature?

The deepest sources of the global crisis lie inside our perception of self

Supergravity said...
This comment has been removed by the author.
Supergravity said...

@Greenpa
http://wiki.answers.com/Q/How_many_assassination_attempts
_did_Hitler_have_on_his_life

42 attempts in total it says, but only 17 in Germany itself, likely only a few of those by officers.

http://en.wikipedia.org/wiki/Assassination_attempts_on_Adolf_Hitler

They did try, but the bastard just wouldn't die so soon. Maybe the whole nazi syndicate should have been eliminated in concert to get all the clustered sociopaths who would have replaced him, as depicted in Tarantino's Inglourious Basterds.

Supergravity said...

Most of a dictators intimates and immediate subordinates wouldn't want to kill them, unless to replace them. Clustered sociopathy, its real.

SecularAnimist said...

Psychopaths have played a disproportionate role in the development of civilization, because they are have no problem to lie, kill, cheat, steal, torture, manipulate, and generally inflict great suffering on other humans without feeling any remorse, in order to establish their own sense of security through domination. The first tribal chieftain who successfully brainwashed an army of controlled mass murderers - was almost certainly a psychopath. Since that momentous discovery, psychopaths have enjoyed a significant advantage over non-psychopaths in the struggle for power in civilizational hierarchies.

In a strange round about way - we collectively respect it - or at least have throughout history.

Early Rome would conquer for the "glory" of it. And the people would cheer.

Somewhere along the line, popular consensus changed and demanded a "causa belli" to start war.

And since then propagandists and saboteurs, have had gainful employment.

Of course, if one region, kingdom or country is run by sociopaths then they all have to follow suit - for survival.

So the vast majority is held hostage by psychopaths - when they really have no power. How stupid are we.

Supergravity said...

@Greenpa
"Rooms full of generals and colonels- all sissies."

Many were in total agreement with his policies all the way, the core sociopaths likely outnumbered the moral cowards in most rooms. Charismatic evil attracted other evil to itself quicker than the cowards gained resolve to interdict.
But evil is unsustainable.

Blackbird said...

Front Page Story at Bloomberg:

First Sentence: "The world economy is paying a price for democracy."

This is the actual article title: Economies Show Voters Aren’t Careful About Their Wishes


I think we're getting closer to corn pone Nazi time.

Nassim said...

Libyan oil production will not return to pre-war levels until late next year at the earliest, with many of the country’s oil facilities having suffered heavy damage and looting during the conflict, according to the newly appointed chairman of the country’s National Oil Company
...
“The damage affects the support infrastructure, not the main production facilities,” Mr Berruien said, adding: “This is not Iraq. It will not take us five years to recover [to the pre-war output level].”


War damage to hit return of Libya crude

It will be interesting to see what Sarkozy's Return On Investment is going to be - if any.

Greenpa said...

RE: Perry's future as a Presidential candidate-

http://tinyurl.com/3bhc3en

It would seem God has made a definitive answer to Perry's extensive prayers for rain...

Just maybe, this will stick. It DOES seem pretty authoritative. :-)

Nassim said...

Instead they tried to "conspire"- not one of them capable of actually taking full personal responsibility for the decision. Wow. Rooms full of generals and colonels- all sissies.

Greenpa,

It really is not that simple - not in a ruthless autocracy in any case. The fact is that when they catch you, they will hang you from a meat-hook until you die. Furthermore, they will destroy your closest family and friends - even those who were not that close. It is difficult for a thinking and privileged person to actually carry out such a thing. The person who could easily have destroyed Hitler was the leader of the Brown Shirts, Ernst Röhm - but Hitler killed him first.

FWIW, I met in Washington a long while back Damian von Stauffenberg. He was planning to get into microfinance at that time. I was told his Dad is the guy who planted the bomb that nearly killed Hitler. I checked the Wikipedia but he is not listed as a son. Perhaps he changed his name or whatever. Stauffenberg

Supergravity said...

Criminal or historical sociopathy is not exact science, I haven't seen a clear definition of sociopathy, or whether its more or less anti-social than psychopathy, most use the terms interchangeably.
Its not clear whether Hitler was a psychopath or sociopath or both at once.
These maladies at least involve the absense of moral memory or guilty conscience, which yields a skillset that is highly self-selective for functions and offices of power, or those positions requiring skillfull lying.

Clinical psychopaths as diagnosable comprise about .5 to 2% of the general population in studies on the matter, density within the upper echelons of certain institutions might approach 5% or even 10% if clustered sociopathy is an active mechanism for selection into positions of power.
Maybe congress would be willing to mandate their own periodic psychosocial screening, as well as that of all high offices in all branches, to filter out the detectable sociopaths.
An exact definition of offending maladies would be required to avoid misdiagnoses and discriminatory trajectories.

Much of the general population does engage in parttime sociopathy whenever the need arises, selfishness and all, so improving the common lack of humanity must begin with one's own mentality, as we cannot blame governmental sociopathy for personal lack of empathy, although the system does dehumanise and would eventually turn us all into ruthless bastards out of necessity.

Valkyrie was a good movie about von Stauffenberg's attempt.

SecularAnimist said...

http://www.physorg.com/news204201579.html
Whether the corollary to these modern practices or the result of other forces, research shows the health and well being of American children is worse than it was 50 years ago: there’s an epidemic of anxiety and depression among the young; aggressive behavior and delinquency rates in young children are rising; and empathy, the backbone of compassionate, moral behavior, has been shown to be decreasing among college students.
“All of these issues are of concern to me as a researcher of moral development,” Narvaez says. “Kids who don’t get the emotional nurturing they need in early life tend to be more self-centered. They don’t have available the compassion-related emotions to the same degree as kids who were raised by warm, responsive families.”

Nassim said...

“All of these issues are of concern to me as a researcher of moral development,” Narvaez says. “Kids who don’t get the emotional nurturing they need in early life tend to be more self-centered. They don’t have available the compassion-related emotions to the same degree as kids who were raised by warm, responsive families.”

Why don't they just come out and say that the kids need a parent or a grandparent around almost all the time during their earliest years? Am I being politically incorrect?

Hesperides Organica said...

Ilargi, I have been reading TAE, and you, for a very long time. I just love to hear what you have to write. I could say you are brilliant, but you already know that. But more importantly, you are a pure-truth seeker. Plain and simple. Just the truth folks. Can you handle it?

ben said...

nah, nassim, I agree with you and despite the talk of boots it would be great if the kid was happily unshod, too. :-)

http://www.maplegrovebarefootguy.com/2011/06/mgbg-guide-to-happy-barefoot-children.html?m=1

Ashvin said...

The fact is that "psychopathy" and "sociopathy" are 100% BS terms used by our society to place people within simple categories in a complex system of human relations. The BS comes from the "scientific" connotations that psychopaths and sociopaths are fundamentally different from anyone else. Sorry, not true. You are always a hair short of being a "sociopath", if you are not already. How many gallons of gas do you consume a week/month, and how many people are being murdered every day by your consumption habits? What kind of empathy do you show for it? The fact that these are "diagnosable" conditions in our institutional medical structures should tell us everything we need to know about them. I have no problem calling the financial elites "sociopaths", but let's not place those words in some realm above or below our own personal reality.

SecularAnimist said...

Ash said:
"How many gallons of gas do you consume a week/month, and how many people are being murdered every day by your consumption habits? "

I've had this discussion well over a hundred times in the past 5 years. People are very creative to avoid this uncomfortable truth.

The number one excuse given is


The just-world hypothesis refers to the tendency for people to want to believe that the world is fundamentally just. As a result, when they witness an otherwise inexplicable injustice, they will rationalize it by searching for things that the victim might have done to deserve it. This deflects their anxiety, and lets them continue to believe the world is a just place, but often at the expense of blaming victims for things that were not, objectively, their fault.

This goes back to biblical times and transfered very nicely to feudal then capitalist culture. People don't look at things systemically.

The number two reason is tribalism. People's ability to draw lines with a nation-state, ethnicity, religion and put everybody else as less worthy.

Talk to a white baby boomer about the growing white underclass and it makes them uncomfortable. Then they will revert back to the just world myth for an explanation and talk about societies declining values.

People have literally dozens of a defense mechanisms NOT to look at the world this way and there is non-stop systemic communications to support this.

Among the doomer community the mathusian meme comes in handy to avoid a closer systemic look at resource utilization and distribution. That "well, there is just not enough to go around."

Personally, I find the excuses somewhat comforting because it means people for the most part have to lie to themselves to avoid the fact the the capitalist world system is inherently sociopathic and the world is far from just.

SecularAnimist said...

"The fact is that "psychopathy" and "sociopathy" are 100% BS terms used by our society to place people within simple categories in a complex system of human relations. "

I tend to agree. Actually the system rewards certain behaviors and in a sense creates them.

If you have ever read serious studies on the prison system, relatively non-violent offenders will come out harden criminals much more prone to commit violent crimes. It's actually a criminal factory due to the harsh survival environment. Being in that environment long enough can change brain chemistry. I tend to look at politics the same way, it ruins idealists looking to go and make a difference. They quickly learn to modify their behavior and compromise values to survive. Overtime they become a different person.

Likewise, any serious study on violent crimes show that virtually every criminal has had some serious violence committed against them - usually during childhood.

Ashvin said...

SA said,

"It's actually a criminal factory due to the harsh survival environment. Being in that environment long enough can change brain chemistry. I tend to look at politics the same way, it ruins idealists looking to go and make a difference. They quickly learn to modify their behavior and compromise values to survive. Overtime they become a different person."

A few of my favorite quotes by Michel Foucault:

Is it surprising that prisons resemble factories, schools, barracks, hospitals, which all resemble prisons?

The strategic adversary is fascism... the fascism in us all, in our heads and in our everyday behavior, the fascism that causes us to love power, to desire the very thing that dominates and exploits us.

Power is not an institution, and not a structure; neither is it a certain strength we are endowed with; it is the name that one attributes to a complex strategical situation in a particular society.

On other news...

The Swiss have become desperate to undermine the perception that their country/currency is a "safe haven", by explicitly tying its fate to the that of the Euro. Will it work to suppress the currency? Either we are now officially down to 2 (USD/treasuries and gold, 3 if we include the Yen), or the policy will backfire on the SNB in a major way, forcing them to abandon the peg. Either way, the broader European and US markets didn't really want to hear that another "safe haven" voluntarily bit the dust.

Frank said...

@SA

>>This goes back to biblical times and transfered very nicely to feudal then capitalist culture. People don't look at things systemically.<<

I'm pretty sure that what you mean is that it has been documented since biblical times. FWIW, I think you can find it in The Story of Gilgamesh which is as old as documentation gets.

IOW, it really is in our DNA. Human beings can handle a society of a couple hundred people. We can (barely) handle each few hundred picking someone to go be a member of another few hundred (who all know each other well) who run national affairs. Yes, the local squire having a nailed in ticket to parliament in London counts. A very few groups, Switzerland and the Six Nations (Iroquois) are all I can think of immmediately, have pushed it one more level. After that it's an empire.
Empires, yes even China, multiple times, all end the same way.

Anonymous said...

Ash -

"Either we are now officially down to 2 (USD/treasuries and gold, 3 if we include the Yen), or the policy will backfire on the SNB in a major way, forcing them to abandon the peg..."

I agree.

I've never seen a major currency move 8% in one day - heck, in one hour. But its not like they didn't warn you.

The buck made a nice 1% move of its own and is now tapping up against its 200 day moving average. Clearing that would put it into definite rally mode. Looks like the dollar doomsayers might have been premature. I believe its all in anticipation of what the German Supremes will say tomorrow. My bet is they'll pass the buck. I don't see a bunch of judges deciding to torpedo the eurozone.

The euro is finally threatening a major breakdown. It bounced off its 200 dma. If it doesn't hold there, its a long way to the next support level.

Lots of volatility today in currencies. Big Money is looking for a safe place to hide. Good luck with that.

Ashvin said...

CHS:

"Alas, you can't have it both ways, and that is a key dynamic in the Crisis of Advanced Capitalism: if you want to dump your surplus production on America, then you have to accept its paper money in exchange. If you decline that deal, and cease producing a surplus, your domestic economy will implode and your political stability will unravel."

http://www.oftwominds.com/blogsept11/global-capitalist-crisis9-11.html

Marxian economics and complexity theory go hand in hand. In terms of the latter, the world system has evolved to fundamentally change the nature of monetary systems during its phases of "growth" and "conservation", making them and the imperial order extremely inter-dependent. That is essentially why "free market capitalists" who attempt to employ complexity theory to the advantage of their arguments (usually supporting imminent dollar HI and libertarian ideals), by referencing phrases concepts such as "order out of chaos", are simply wrong. The non-linear dynamics of complex evolutionary systems constantly revolutionize the "rules" by which it operates, and allow it to stray further and further from "equilibrium". Every major component of the system is coerced and incentivized to maintain the system, even when such behavior is against long-term interests, such as sustainable political economy. Yet there are even two sides to that coin, as the system's "periphery" (a large majority of the global population) becomes so fragile (disenfranchised) that is neither able nor willing to support the central structures of the broader system.

The Q said...

Re: Tales from the Green Valley series on Youtube

Someone has uploaded the BBC Tales From the Green Valley series to youtube in the last few weeks. I'm not sure what the copyright status is or how long it will be there.

Anyone interested in agricultural history (or permaculture) should check this out. It may be inspiring or horrifying, depending on ones attitude regarding hard physical labour. Note the amount of effort devoted to washing. There was a good reason that widowed farmfolk didn't remain unattached for long.

This was a fairly serious attempt to recreate a farm c.1620

http://www.youtube.com/watch?v=RNlaG2Tv3zU

Greenpa said...

Nassim: "It really is not that simple - not in a ruthless autocracy in any case..."

Sure. Of course. The fantasy I was indulging in though was that most of society consisted of "grownups" - who would stamp out the destructive sociopaths (yeah, yeah) instantly, always. And be thanked for it. So theoretically then, in this primal eden, there simply wouldn't be any hench-opaths available to retaliate and wipe out your family- the idea is- WE wipe out THEIR families- first.

:-)

Yes, I'm aware of the difficulties with this concept. But- alternatives? So far, are not working.

Frank said...

@Greenpa as near as anyone can tell, your idea worked just fine in a clan society, and as well as anything in tribes of confederated clans.

In anything bigger, the smooth tongued sociopaths seem to win consistently. Things still seem to work as long as the sociopaths see a thriving society as in their own interest. Unfortunately, that seems to stop somewhere under a million people.

lautturi said...

Not sure if this has reached international media but on Monday the Grand Comittee (or something like that) of Finnish Government voted yes to EFSF and all other cra* pushing them forward again - just like I predicted (>_<)

Those still have to be approved by representatives (according to the current procedures) to make participation in EFSF a law - but the way things are sliding those might be established by the degree of Prime Minister (no matter how unlawful that might be). Yep, here the Prime Minister and real deciders are still solidly in the "this-is-just-a-small-speedbump-and-thus-salvagable" -camp.

Other than that the autumn is nice and comes with a hint of colder weather in the wind. Remember to breath my friends!

Ashvin said...

davefairtex,

It does appear that the dollar and t-bonds will be one of the only (il)logical and large beneficiaries of systemic debt deflation and competitive devaluation, asset wise. The "peripheral" economies, which now actually encompass some of the larger economies out there such as China, Russia, Germany, Brazil and Switzerland, must enact massive fiscal and/or monetary interventions to both avoid domestic deflation and maintain exports, while the USG and Fed are financially and politically constrained. Of course, China also has to worry about very high inflation, but it is a risk they will be forced to accept.

Euro periphery area has to worry about HI stemming from implosion of EU, but that is obviously all but guaranteed at this point. I expect the Swiss have gotten in way over their heads with this currency peg, and the system will coerce them to abandon it quite soon. The gains in exports will be marginal at best, and the losses on Euro holdings will be massive. Gold has had some very volatile price action today, whatever that means. As I have stated before, I don't expect the dollar and gold to stick together for very long.

Greenpa said...

Frank: "In anything bigger, the smooth tongued sociopaths seem to win consistently."

yep. I'm wondering though, if part of the problem there is that in larger societies; we've gone the route of "delegating" the police responsibilities; then; the police become subject to subversion and corruption; and no one else is left who is psychologically able to act.

What if- we had a society were ALL adults considered themselves rightfully capable of police responsibilities; when it was necessary... regardless of the size of the society. Golly. Imagine the floor of Congress. :-) You need to imagine past the start-up; which from here would be a bloodbath- and into some future where this was long established practice, and the predator numbers were very very low.

Yes; dreaming- but; we're trying to dream something forward, and not coming up with much...



Lautturi- it has to be painful watching your country- BECAUSE it seems some people are close to action; but it's not happening. Maybe if you keep chanting; loudly- "REMEMBER ICELAND! - REMEMBER ICELAND!" - maybe, it could start to sink in, just a little more...

Anonymous said...

Ash -

"The "peripheral" economies, which now actually encompass some of the larger economies out there such as China, Russia, Germany, Brazil and Switzerland, must enact massive fiscal and/or monetary interventions to both avoid domestic deflation and maintain exports"

Deflation in China/Russia/Brazil? How does that happen? I think I understand how it happens in the eurozone, but how is that transmitted to the exporters? Do you have a previous post on this you could point me at?

"I don't expect the dollar and gold to stick together for very long."

I understand your rationale behind the move in the dollar, but - why do you think gold will stop being a safe haven? All that money in euro bank deposits and euro govt bonds has to go somewhere. Won't gold benefit as much as the buck will from capital flight?

I can understand that margin-related forced selling of gold might cause some serious downdrafts, but - won't that just be seen as a buying opportunity for central banks looking to diversify reserves, and the folks in europe looking for a place (other than dollars) to put their wealth?

Again if you have something you've already written on this, I'm happy to go read it.

Gravity said...

@Ash
"The fact is that "psychopathy" and "sociopathy" are 100% BS terms used by our society to place people within simple categories in a complex system of human relations."

Those complex systems of human relations don't cause people to be herded into gaschambers. These are particularly sick people who do these things, moreover those who decided that genocide would be prudent policy. While some may be coerced and traumatized into such behavior by abuses, the ones who decided on systematic extermination by policy are simply sick in a special way. They're ethically dysfunctional in a way thats clearly measurable by standardising the utility of ethical conduct.
Sociopathy and psychopathy as disorders are essential subsets of criminology and criminal psychology. They explain behaviors and motivations that remain otherwise inexplicable.

I've read psychiatric case-studies of prison inmates and mental patients, some people do consistently exhibit behaviour that strongly indicates a non-transient mental state of diminished ethical discernment in their personal and professional lives. This is well observed, but most studies are done with low-functional subjects with strong anti-social and violent tendencies, the high-functional subjects are seldom imprisoned or institutionalised for long enough to be analysed, often lying their way out of more severe sentencing by emulating guilt on demand.
Some subjects are ethically dysfunctional above and beyond the normal types of apathy in society, seemingly without a functional conscience as commonly experienced, insofar as conscience can be defined and measured.

I believe it's possible to measure enthical discernment or ethical performance within arbitrary moral modalities, so that definitive ethical dysfunction may be clearly defined as a clinical disorder, providing that the psychometric tools to detect such conditions can be calibrated to the utility of ethical conduct, which may not be universally determinable.

Concerns about discrimination against the ethically challenged and political persecution of psychopaths in government may be justified, but if the baseline frequency of the malady in the general population is indeed between 0.5% and 2% as indicated by studies done on the matter, and at least this percentage is active in government, it would be prudent to keep the ethically challenged somewhat in check by psychological screening procedures for particular positions, at least to detect the obvious mass-murderers and keep them out of office.

The prevailing theory on psychopathy could be wrong, the condition may not actually exist or be adequately definable, clustered sociopathy may not be a problem, but such a framework might uniquely explain the organisational capacities of bifurcated evil.

Gravity said...

The problem should resolve itself anyway.
Any existant clustered sociopathy, if it does exist, will largely disappear when the institutional structures they must use to leverage their skillsets all undergo collapse. There's less advantage to organised predatory behavior without the leverage afforded by institutional complexity, the coincidence of sociopathic wants would be vastly diminished.

Gravity said...

@SA
"Actually the system rewards certain behaviors and in a sense creates them".

Thats the other part of dominant sociopathy, people in positions of power might be forced to attenuate their morality according to the requirements of the position, but this may yield permanent changes in individual ethical perception, which allows for a distiction to be made. Any people who already have such changed perception would be predominantly selected into such positions of corruptive power, but the change in behavior might still be definable as a disorder of professional conduct.

SecularAnimist said...

"Those complex systems of human relations don't cause people to be herded into gaschambers."

When Joseph Campbell was a little boy he lived next door to the library in NY, where he was given access to archival material about American Indians, their culture, and the way they were mistreated and violently ethnically cleansed and murdered by Europeans.

At the same time, travelling shows featured cowboys ‘n Indians ‘n recounted lore of buffalo hunts ‘n life taming the prairie of them Injuns.

Young Campbell’s research made it impossible for him to “other” Indians; he understood , at a very young age, their humanity, and struggled to square his understand ing with the popular treatment — the propagandized, dehumanized version of Indians that he saw in the entertaining, mass-appeal traveling shows.

Our mainstream media is certainly entertainment, not information, and is most assured calibrated to dehumanize the “other” du jour; in Campbell’s day, American Indians, as well as blacks. During WWII the Japanese were barbarians according to war propaganda . It should be obvious who is the “other” today

Man is not a killer by nature; he can only kill an “other.”

Campbell’s hours in the library in New Rochelle shaped his life and prodded him to pursue his research into the mythologies of various and numerous cultures.

The American Indian was not an alien “other” whose humiliation and extermination Joseph Campbell was free to cheer, even if all his young mates cheered the lassoing of an Indian Chief as if he were cattle. He had the courage to act in opposition to the masse.

The Nazi's sure did not invent racism and demonizing the other, they were just very successful at it in modern times.

Phlogiston Água de Beber said...

On September 4, 2011
scandia said...
@IMNobody...thinking of you, missing your presence here

scandia,

Being thought of is one of the greater rewards that a person can receive. I am very grateful.

I did not respond earlier as I have not been reading the comments for the past week and a half. Fortunately, Umaperegrina read it and knowing I was not reading them emailed me a copy. It is too bad that I have just finished a move to the other side of the continent. You are one the people here that I would very much like to meet.

I don't plan to be much of a presence here for awhile. I'm working on teasing out a reasonable translation of that handwriting on the wall behind the tapestry that is rapidly unraveling.

Skip Breakfast said...
This comment has been removed by the author.
Nassim said...

But when David Copp came across a fishing trawler moored in Ilfracombe Harbour he took great offence and complained about the “disgusting” smell.

Tourist complains about sight of fish in harbour

Initially, I thought this was a joke, but it seems to be quite serious. I guess he is in for a real shock :)

Skip Breakfast said...

I've never heard the notion of "clustered sociopathy," but it is clearly evident in some circumstances. However I don't really agree with Ash's comment that, since we're all "sociopaths" for driving gas-guzzling cars, then "sociopathy" is a useless term. On the contrary, the term is very useful and the sociopath is very real, as it describes certain characteristics outside the norm--sociopathy describes something different than our admittedly horrible, selfish herding behaviour.

I'm not excusing our collectively destructive "normal" behaviour--it's abhorrent too--but it is a different phenomenon than what we call sociopathy. The sociopath is distinguished by his/her ability to pursue self-interest without empathy even in close proximity to the horror. That is to say, the sociopath will ignore the suffering of immediate neighbours, friends and even family members. That is different from the ordinary citizen who drives a gas-guzzling car despite some abstract notion that doing so results in an unmeasurable contribution to misery for some unkown person, at some unkown locale, and some unknown point in time on the other side of the earth. While the cumulative effects of our collective irresponsibility are real and massively devastating, the human brain is not built to respond to something that abstract, and thus it is very different from the horror willingly inflicted in much less abstract circumstances to the very community in which the sociopath lives. We will change our evil ways, collectively, when we see the implications personally...that is, unless you're a sociopath. The sociopath will see no need to ever change selfish behaviours, no matter how proximate the horrors get. I think ordinary selfish people can realise the error of their ways. The sociopath cannot.

SecularAnimist said...

""That is different from the ordinary citizen who drives a gas-guzzling car despite some abstract notion that doing so results in an unmeasurable contribution to misery for some unkown person, at some unkown locale, and some unknown point in time on the other side of the earth.""

During the 2008 oil price spike food riots broke out around the world. The UN estimated over 100 million were pushed to starvation because of this. The collapse saved lives.

""I think ordinary selfish people can realise the error of their ways.""

Try explaining that dynamic to somebody in America that drives a large vehicle or drives at all. How come the "don't realize the error of their ways". I guarantee they will deny it - and make some excuse up why it isn't true. Or complain about having to many brown babies that use maybe 1/100 the of the energy they do.

It's certainly not abstract

Gravity said...

http://www.zerohedge.com/contributed/when-time-comes-will-we-be-able-forgive
Its about the wasted energy spent on hating sociopaths.

Also, if anyone is interested;
http://en.wikipedia.org/wiki/Budget_Control_Act_of_2011

It establishes the debt supercommittee. I've been reading this thing, its totally unconstitutional and vastly exceeds the specified authority of congress and the POTUS as constitutionally contrained, but especially the POTUS' new authority to force debt-ceiling extensions, in conjuction with supercommittee decree, might qualify as something explicitly bad, it could theoretically result in situations approaching acts of sedition by supercommittee or POTUS against congress, but only if congress has some pronounced dissatisfaction with the procedure at some point, which they would normally be allowed to voice, and the matter is forced against their will somehow.

Gravity said...

I've noticed the media outlets have given up on the signs of recovery shtick, collective sentiment must be gaining pessimistic momentum, nothing but bad news on the economy.

Hey, my disposable income has been dropping 5% a month for the past year or so. A debt collection agency hounding me for student loan repayments has tried to seize the contents of a bank account by court order, but luckily there was nothing on there, although the bank gave themselves a generous fee on my expense for trying. I'm having trouble paying my rent this month, and next. But maybe I should invest in gold, all the cash I desperately need to buy food.

Skip Breakfast said...

@SecularAnimist

It's abstract because it's abstracted in place and time. We can only experience the devastation intellectually because our individual contribution to the horror is tiny, while the collective effect is massive, and it is out of our field of experience (i.e., it's happening on the other side of the world). Abstract does not mean "not real." I just means removed and requiring leaps of critical thinking. That's a lot to ask of ordinary humans, clearly.

I agree, we CANNOT effectively convince the driver of the gas-guzzler of their crime. Because we can't witness or measure the horror suffficiently to change our habits.

My point was the sociopath is real and very different from the ordinarily oblivious, selfish individual. The sociopath doesn't care about the effects of their crimes, even when they can witness it up close. They can drop the pellet right into the gas chamber themselves, or take an old man's last dollar to buy themselves a Ferrari. I don't think most people would do such things once they understood the true effect. But when the effect is abstracted, the imperative to make changes is unseen.

scandia said...

@Umaperagrina, Thanks so much for passing my comment on to IMNobody.
Please tell him whether near or far the connection remains.

Frank said...

@Greenpa, it's that 'grownup' thing.

I simply cannot think of any test more sophisticated than the mere physical ones of "pull your weight" and "stand in the line of battle" (or hunt), which has not actually been a subterfuge for maintaining the bosses as hereditary bosses.

SecularAnimist said...

I hear you, Skip. I was just playing devils advocate.

Is this sociopathic?

I do not want to end without mentioning another externality that is dismissed in market systems: the fate of the species. Systemic risk in the financial system can be remedied by the taxpayer, but no one will come to the rescue if the environment is destroyed. That it must be destroyed is close to an institutional imperative. Business leaders who are conducting propaganda campaigns to convince the population that anthropogenic global warming is a liberal hoax understand full well how grave is the threat, but they must maximize short-term profit and market share. If they don’t, someone else will.

Phlogiston Água de Beber said...

scandia,

I like the idea that we have a connection. Why don't we tie that connection to email addresses? If you would send one to imnobody who has an account at iowatelecom dot net, I will reply with a more permanent one and our connection will be a little more resilient and we can know a bit more about each other.

Ashvin said...

Dave,

"Deflation in China/Russia/Brazil? How does that happen?"

Debt deflation has technically begun occurring in every major economy since 2007, as they have all heavily financed private infrastructure and consumption, albeit not necessarily to the same extent in BRIC as the US and Europe. As major exporters, they have also become very reliant on the financed consumption of the US and Europe for economic growth, which will also be dropping off of a cliff in short order, as the coordinated global interventions from 08-10 are wearing off, especially from the most critical institution (Fed). On top of that, they have become very reliant on high commodity prices to fuel growth, which should also drop off. I think this will be the biggest threat for Russia, since they were somewhat fortunate to have a cleaner financial slate and less foreign capital investment due to the lingering effects of Soviet collapse. What we're really talking about is asset price deflation, i.e. credit instruments, equities, many commodities and RE. It is quite possible and likely that some level of domestic consumer inflation will persist in these countries, as they are forced to pursue aggressive monetary easing and keep rates low to try and maintain liquidity in their financial systems (unsuccessfully). That is part of the reason I say the USD will stand out as a global "safe haven" in a way that no other currency will.

re: gold

I wrote a pretty detailed series of articles on gold called "The Future of Physical Gold", and specifically it was a critique of the Freegold theory. You may want to skip right to Part IV - Deflationary Canyons and Caves, which argues for near-term dollar price collapse in gold. The other thing for me is that it's not so much that people cannot buy both dollars and gold, but that a consistently appreciating dollar is directly anathema to the price health of the current paper gold system, and vice versa. In fact, the paper gold system in its current form was essentially established to suppress the value of gold and dilute its ability to serve as a competing currency or wealth reserve, and I believe there will most likely be another major price collapse before the paper gold system finally breaks down, which will coincide will HI of the dollar. Until then, the "downdrafts" in gold will by seen as an opportunity for major players to accumulate physical, but I don't expect such purchases, most likely conducted in secrecy, to support the spot price set by the leveraged paper exchanges.

Anonymous said...

Skip,

well said. I wonder if sociopathy, now known in the brain shrinking business as Antisocial Personality Disorder, stems from the sociopath automatically seeing others only as abstractions.

In this sense, there is something pathological (sick) in the extent to which we Westerners make others (here and abroad) and the natural world into abstractions. When we understand the world through the lens of our perverse systems of social and economic organization, perverse distortions are of course the result. I like the term alienation for describing this common psychological pattern. Eric Fromm, in his books Man For Himself, and The Sane Society made frequent use of this concept of alienation. He was wonderfully prescient, and I think would have been very sad to see just how alienated we have become; not only from each other, but from Nature and especially from our selves.

Ashvin said...

@Gravity and SkipBreakfast,

If you guys have not already read the excellent Der Spiegel piece about atrocities committed by German soldiers, Rape, Murder and Genocide: Nazi War Crimes as Described by German Soldiers, I highly recommend it. It portrays the way in which imperial institutions coerce even the low-level "foot soldiers" to commit "evils" that may have been previously unimaginable. The problem is not that the underlying concepts of sociopathic behavior do not exist, but quite the opposite. It is essentially an emergent property of complex human society, and when accept it as an objectively measured psychological trait defined by institutional medicine, we are undermining the comprehensive reality that informs its underlying concept. I frequently refer to the financial owners as "sociopaths", but it must be seen as a pervasive aspect of human society. Was Hitler significantly more malicious and less empathic than the German foot soldier? Sure, I think that's quite clear in most comparisons. But was Hitler fundamentally separated from these soldiers by an artificial medical barrier that? I highly doubt it. There is no doubt that sociopathic mentality aids one in rising to positions of wealth/power in our system, but it works both ways. As I have argued in a piece called "Fear & Loathing in the Divided States of America", I believe it's very likely that your average, everyday debt junkie sociopaths in the developed world are quite capable of committing atrocious acts against those around them as the system implodes. Like HST said, "you can turn your back on a person, but you can never turn your back on a drug... especially when it's waving a razor-sharp hunting knife in your eye".

--- said...

Just wow... for those who don't read Spanish, this editorial describes a law up for vote tomorrow, by which anyone who defames a Mexican politician - even a candidate - say, by posting something nasty on Facebook, etc. - can face fines and prison time.

http://www.eluniversal.com.mx/columnas/91502.html

Nassim said...

It portrays the way in which imperial institutions coerce even the low-level "foot soldiers" to commit "evils" that may have been previously unimaginable.

Ash,

Right now, I am reading once more an old favourite, Votaire's Candide which was published in 1759.

Here is an extract:

Never was anything so gallant, so well accoutred, so brilliant, and so finely disposed as the two armies. The trumpets, fifes, hautboys, drums, and cannon made such harmony as never was heard in Hell itself. The entertainment began by a discharge of cannon, which, in the twinkling of an eye, laid flat about 6,000 men on each side. The musket bullets swept away, out of the best of all possible worlds, nine or ten thousand scoundrels that infested its surface. The bayonet was next the sufficient reason of the deaths of several thousands. The whole might amount to thirty thousand souls. Candide trembled like a philosopher, and concealed himself as well as he could during this heroic butchery.

At length, while the two kings were causing Te Deums to be sung in their camps, Candide took a resolution to go and reason somewhere else upon causes and effects. After passing over heaps of dead or dying men, the first place he came to was a neighboring village, in the Abarian territories, which had been burned to the ground by the Bulgarians, agreeably to the laws of war. Here lay a number of old men covered with wounds, who beheld their wives dying with their throats cut, and hugging their children to their breasts, all stained with blood. There several young virgins, whose bodies had been ripped open, after they had satisfied the natural necessities of the Bulgarian heroes, breathed their last; while others, half-burned in the flames, begged to be dispatched out of the world. The ground about them was covered with the brains, arms, and legs of dead men.

Candide made all the haste he could to another village, which belonged to the Bulgarians, and there he found the heroic Abares had enacted the same tragedy. Thence continuing to walk over palpitating limbs, or through ruined buildings, at length he arrived beyond the theater of war, with a little provision in his budget, and Miss Cunegonde's image in his heart. When he arrived in Holland his provision failed him; but having heard that the inhabitants of that country were all rich and Christians, he made himself sure of being treated by them in the same manner as the Baron's castle, before he had been driven thence through the power of Miss Cunegonde's bright eyes.


How Candide Escaped from the Bulgarians and What Befell Him Afterward

I know it seems pretty grim, but it is actually a very funny book.

Nassim said...

Nazi War Crimes as Described by German Soldiers

Anonymous said...

Board,

Question on a practical matter. Should I buy 200-300 gal of kerosene now (to run furnace) or wait a few weeks in the hopes that the price may fall? IOW- should we expect the price of petroleum products to rise or fall in the very short term as the worsening economy seems to be the emerging consensus.

Nassim said...

Ash,

I read your article and it confirms my readings elsewhere.

The bit about planes straffing civilians in the UK was repeated in spades by the Americans later on in Germany. Their long-range bombers were escorted by mustangs which had extra fuel tanks. After the high-altitude bombing, the bombers no longer needed their much faster escorts. These escorts dropped their now empty tanks and went down almost to street-level and straffed literally anything they felt like on their way home. If you think of the number of such raids and the number of escorts, it should give you an idea of the scale of what went on.

Here is an article that glosses over this part of history:

... As well as escorting bombers, the Mustang attacked the Luftwaffe on the ground, destroying many aircraft. As World War Two neared its end, many German fighter planes remained on the ground due to lack of spare parts and fuel. They were an inviting target for Mustang pilots ...

The P51 Mustang

Ashvin said...

PP,

Perhaps one of the best example of an alienated Westerner is Nathaniel Branden, who wrote ironically displayed his alienation when writing a critique of Eric Fromm and the concept of alienation.

"There are men who resent the fact that their life is their responsibility and that the task of their reason is to discover how to maintain it. Large numbers of such men – men who prefer the state of animals – may be found ( or used to be found) sleeping on the benches of any public park; they are called tramps. There are men who find thought abnormal and unnatural. Large numbers of such men may be found in mental institutions; they are called morons. There are men who suffer a chronic preoccupation with death; who bitterly resent the fact that they cannot simultaneously be a concert pianist, a business tycoon, a railroad engineer, a baseball player, and a deep-sea diver; who find their existence as separate, independent entities an unendurable burden. Large numbers of such men may be found in the offices of psychotherapists; they are called neurotics."

Supergravity said...

@pp, Ash
I'll accept the argument that periods of immense historical evil are the emergent property of some sort of collective alienation or social abstractification, expressed at the largest scales of organisation, but I'll still say that clustered sociopathy or dominant sociopathy caused the holocaust as such an emergent property.
Particular antisocial personalities would still gain a prominent place in events, publicly propagating extremist ideas where others wouldn't be so indecent, triggering cascades of antisocial policies and popularising dehumanisation as a marketable product.

I tried reading Candide some time ago, never got far, I'll give it some more effort.

Skip Breakfast said...

@Ash

Ash said... "[Sociopathy] is essentially an emergent property of complex human society, and when accept it as an objectively measured psychological trait defined by institutional medicine, we are undermining the comprehensive reality that informs its underlying concept. I frequently refer to the financial owners as "sociopaths"..."

Ah, well when you put it in this context, I wholeheartedly agree. I certainly agree that putting sociopathic behaviour into a box as some "rare" quantifiable disease is dangerous. As it obfuscates teh predilection towards evil that is present, lying in wait, in every population, in far greater numbers than we expect. And when we assume it is such an sisolated pathology, we become less vigilant. Nevertheless, I do think that it's worth noting that not everyone is sociopathic. Many people (the majority) are perhaps easily swayed to do bad things by sociopathic leaders. But I do believe that there is a difference between some people at opposite ends of the extreme on the spectrum. I mean, are you a sociopath Ash?

Ashvin said...

SB,

"I mean, are you a sociopath Ash?"

Well, there are certainly decisions that I have made that, when looking back on them, have supported institutions of mass oppression and destruction, such as the USG or US banks or other large supranational corporations. I can't really say that I ever felt or exhibited through action remorse for such decisions when they were made, although I can say that I never really felt "comfortable" with them either. It is also difficult to tell what my future actions would be during this ongoing phase of institutional collapse if I had not stumbled across sites like TAE, or Keen's debt deflation blog, or ZH, etc., and all the insightful commenters on their forums. Even then, it is still not perfectly clear what they will be in every dire situation that may manifest itself in upcoming years. I am confident, though, that if I scheduled an appointment with a psychiatrist/psychologist, sat down and had a conversation about various personal or societal issues, he/she would not diagnose me as a "sociopath" or any sort of personality disorder, although I may score some prescription drugs nevertheless to help me forget about my legitimate concerns. So that's the point, isn't it? When it comes to "mental disease", especially, the complex and institutional environmental factors seem to be much more influential than biological ones, either genetic or otherwise. If that's the case, then it's impossible to deny that we are all subjected to the institutional environment to some degree.

Skip Breakfast said...

Precisely, Ash. Your educational awakening has informed your decisions. Those are not the actions of a sociopath. A sociopath does not change self-interested behaviour based on a sudden realisation that her actions are causing tremendous suffering. While it is valuable to point out that sociopathic behaviour is every-present in community systems, I don't think it's useful to dispose of the distinction between certain kinds of people. Certain people's actions revealt hemselves to be inherently anti-social to a very dangerous degree. We're not all like that. We don't all have the capacity to be Hitler. Just as we don't all have the capacity to be Ghandi. I'm prepared to draw a line in the sand though and say they are not one and the same man under different circumstances. They are very different men. And I will pick my allegiance to one over the other on that basis.

scandia said...

I think this conversation about sociopathy/psychopathy is important. Not just to understand others but also to know oneself. Best to be aware of one's dark side so as not to betray oneself when trouble arrives.

Ashvin said...

Gravity,

Let's not forget though, we could find "sedition" in the passage of the 14th Amendment after the Civil War. The Constitution was explicitly violated by Northern politicians who skirted the established and slow-moving Amendment process by shutting down Southern legislatures and dictating that their populations have no representation in considering this Amendment. So I'm just saying, not all manifestations of "sedition" are bad things, especially in an entire economic, social and political system that is corrupted to its very core. Of course, the 14A promised a lot more "due process of law" and "equal protection of the laws" than it actually delivered for at least a century. I suspect there will come a time within the next few years when all of us will be begging for more "seditious" or even "treasonous" acts that undermine the officially cruel policies of the USG, military-industrial complex and the Fed. The debt super-committee does seem to be a "bad" kind of sedition in this system, if such a theory could be legally established and successfully argued. So I probably agree on that specific point, just not with the implication we must crack down hard on anyone who would dare to significantly attack the established order by overriding its governing structures in violation of the US Constitution.

Ashvin said...

SP,

Why don't we just use words like "amateur", "intermediate" or "advanced" when describing the level at which soiopathic behavior has become entrenched within a specific individual. Maybe we could split it up into "active" and "passive" sociopathy as well. The question is, then, what are the fundamental differences between the passive, amateur sociopath and active, advanced one? It is really impossible for the latter to evolve into the former, or vice versa?

Practically, it may be practically impossible for many of the current advanced sociopaths to overwhelm the sheer momentum of the institutional system that has been driving them and devolve the sociopathic mental state, although there are a few signs of hope that at least some will truly give up their current strategies as the institutional collapse trend becomes impossible to ignore, and they will attempt to extract from the broader system, similar to what many of us here have done. Not very likely, but possible.

But the only purpose of filtering, abstracting and commodifying these ideas through the established framework of medical institutions is to validate the approach of such institutions, and to support the groundwork for their own justifications that will be used to drop a label on you or anyone else who is seen to be a threat in the rapidly-arriving future. Whether you end up in Arkum Asylum or Oz, at that point in time it will be clear your tormentors, doctors, nurses, roommates, prison guards and your new cell neighbors or bunk mates are not fundamentally different from yourself, despite the fact that you have been intentionally mislabeled a "terrorist" or a perpetrator of "sedition" or "treason", imprisoned in a cage and forced to deal with others who think of you as litter more than lab rat, a punching bag or a toilet.

Skip Breakfast said...

Can't we say that the current system is an advanced, professional-level sociopath and I'm not? We can then focus our energies towards tackling something destructive and leave harmless-little-old-me-who-still-drives-a-Volkswagon alone...for now. I guess the reason I care is that normative accusations/labels will start flying fast and furious as more scapegoats for collapse are sought. Throwing us all into the same postmodern pot just won't be very useful. I definitely want to be normative about it. This system is really, really bad. The whales told me that directly. You're not bad, Ash. Most of the posters on here aren't bad. We might be midguided, or trapped. We might be lazy or confused. But a lot of people will try to do the right thing if given access to knowledge and new options. Don't you think?

SecularAnimist said...

""But a lot of people will try to do the right thing if given access to knowledge and new options. Don't you think?""

I would say the vast majority.

Alfred said...

Now we rally. The bears are sleepy. It's time for the bulls to rampage.

Buy with both hands. Get hungry. Get greedy.

I'm making you money if you want it. And I know you do. Internet connections don't come free you know.

Baby needs a new pair of shoes and I want to add a porch.

SecularAnimist said...

http://www.villagevoice.com/2011-08-31/news/9-11-the-winners-profiting-from-september-eleventh/
The September 11, 2001 attacks have been a symbol of many things and many causes, but like the lavish, flag-draped rebuilding of the site, it has also been a vehicle for enrichment. From corporations to politicians to government officials to nonprofits to the security industry to publishers to the health industry (not to mention the incidents of outright fraud over the years), many people have found ways to profit from one of the nation's biggest disasters. 9/11 has created an economy all its own.

"The intersection of 9/11 and money is a busy intersection," says retired New York City firefighter Kenny Specht.

Glenn Corbett, a professor of fire science at John Jay College, active in a range of 9/11 issues, puts it this way: "Lots of people have got their hand in the till. A lot of people and a lot of companies have made a lot of money off of 9/11."

Ashvin said...

SP,

"But a lot of people will try to do the right thing if given access to knowledge and new options. Don't you think?"

Sure, there will be some that will do the "right" thing. We are at least partially doing the "right" thing by just being here to discuss. The only problem for me is the separation of "the system" from ourselves, i.e alienation, which let's us say the system of Crony Communism, Fascism, Crony Capiatalism, or whatever, is pure "evil", but billions of people supporting the system are just scared and confused little puppies who will learn to be better as time goes on and they are taught how to structure their lifestyles in a non-genocidal manner.

If there is anything I really and truly hate, its sacrificing the complex underlying truth of a matter for convenience. It is an unpleasant truth, but a truth all the same, and therefore it is required to be presented without any form of deception. IMO, the truth is that you are not fundamentally different from the professional, advanced sociopath, save for some relatively trivial neurological discrepancies. The potentiality exists for both you to come closer to that person's scale of sociopathy, or that person to come closer to your scale. Not always, as when the other person has been subjected to severe familial or organizational abuses, and has never lived without such a mentality. Still, most comparative cases would not rule out the slim chance that a transition could occur as the system rapidly releases its remaining reserves of financial, energy, environmental and social capital.

el gallinazo said...

Regarding Ash's horrendous quotations from Nathaniel Branden, for those who don't know he was a spokesperson for our sociopathic, libertarian trollop, Ayn Rand.

The Rand-Branden business partnership lasted till May 1968. Rand announced in the The Objectivist, Branden would no longer be her intellectual heir and ordered all future printings of Atlas Shrugged not to carry his name in the dedication page. At the time, Rand did not reveal she was having a secret love affair with Branden who was twenty four years her junior and he was leaving her for a younger woman who was also an attractive model whom Branden would eventually marry. However, Branden divulged this information in his book, Judgment Day: my years with Ayn Rand.[2]

Re Sociopathy

Several here choose to define the word so that 99.9% of all people in the developed world fall into this designation. Is this useful, and if yes, should we start canonization proceedings with the other 0.1%?

Anonymous said...

@ Secular Animist

Your opinions on the framers of the U.S. constitution are so one-sided that it is difficult to know where to begin.

May I suggest that for a critical, yet balanced analysis, you read:
Founding Brothers
The Revolutionary Generation
Joseph J. Ellis
Vintage Books, ISBN 0-375-70524-4

He addresses a number of points raised by you, notably the compromise of 1790 on the question of assumption (state debts) and the general issue of slavery.

Obviously, there is a great deal to criticise and the author is certainly critical of the people involved, notably on the question of slavery, but he does a remarkable job of re-establishing the context.

I truly wonder what people here (you, me, etc.) would have done if put in the very difficult context of the 1780s and 1790s when many fundamental decisions were taken (or avoided).

Ciao,
FB

Nassim said...

re: psychopathy

Again, I think Voltaire had some useful things to say on this subject matter. Of course, he used parody to explain it to simple souls (like myself):

One half of the passengers, weakened and half-dead with the inconceivable anxiety and sickness which the rolling of a vessel at sea occasions through the whole human frame, were lost to all sense of the danger that surrounded them. The others made loud outcries, or betook themselves to their prayers; the sails were blown into shreds, and the masts were brought by the board. The vessel was a total wreck. Everyone was busily employed, but nobody could be either heard or obeyed. The Anabaptist, being upon deck, lent a helping hand as well as the rest, when a brutish sailor gave him a blow and laid him speechless; but, not withstanding, with the violence of the blow the tar himself tumbled headforemost overboard, and fell upon a piece of the broken mast, which he immediately grasped.
Honest Jacques, forgetting the injury he had so lately received from him, flew to his assistance, and, with great difficulty, hauled him in again, but, not withstanding, in the attempt, was, by a sudden jerk of the ship, thrown overboard himself, in sight of the very fellow whom he had risked his life to save and who took not the least notice of him in this distress. Candide, who beheld all that passed and saw his benefactor one moment rising above water, and the next swallowed up by the merciless waves, was preparing to jump after him, but was prevented by the philosopher Pangloss, who demonstrated to him that the roadstead of Lisbon had been made on purpose for the Anabaptist to be drowned there. While he was proving his argument a priori, the ship foundered, and the whole crew perished, except Pangloss, Candide, and the sailor who had been the means of drowning the good Anabaptist. The villain swam ashore; but Pangloss and Candide reached the land upon a plank.


Jacques, the Anabaptist, is clearly not a psychopath. The sailor/tar/villain clearly is. Pangloss believed that "everything is for the better" and was a natural optimist who believed in the good nature of people and that events happened for a good reason. Candide was his pupil and believed the same although his multiple experiences should have put him off that way of thinking.

Alfred said...

Germany and Europe Unite.

EFSF and Eurobonds together at once.

Market love. Predictable feeding frenzy. Join the fun.

scandia said...

@Lautturi, Just reading some early responses to the German court decision that the bailouts are legal. Sure doesn't help " our " cause for Finland.
I just don't get it. How can a bailout be legal when the membership rules in the EU have been broken. By this I mean the allowable debt ceiling in the EU charter. If that rule was enforced there would be no need for the bailout crisis. Membership cancelled. Simple.
What parliamentarian will vote no when the courts sanction a bailout? Perhaps the finer points of the law will surface in reportings over the next few days.
What can " the people " do in the face of this betrayal.
It is interesting that we are discussing Nazi crime at this time. I used to wonder how Germany's legal system was able to support Hitler's policies. They even collaborated in those crimes.
Just as the US justice system has been able to legalize torture.
So-o I suppose I shouldn't be surprised that Germany's legal system is again accomplice to abuse,willing to impoverish the populous on behalf of an elite group.

agtefc said...

@ Scandia...

You said: "It is interesting that we are discussing Nazi crime at this time. I used to wonder how Germany's legal system was able to support Hitler's policies. They even collaborated in those crimes.
Just as the US justice system has been able to legalize torture.
So-o I suppose I shouldn't be surprised that Germany's legal system is again accomplice to abuse,willing to impoverish the populous on behalf of an elite group."

Explosive commentary!

A while back Stoneleigh said something along the lines of "law codifying the existing hierarchical structure."

Insightful indeed. :)

Cheers

Ashvin said...

El G,

"Is this useful, and if yes, should we start canonization proceedings with the other 0.1%?"

No, we should leave the tiny fraction percent alone altogether. We may first identify them with alleged intentions of canonization, but then we will soon forget all about it and start eying the precious resources they collectively possess, such as land. Then, we will indirectly or directly support our quasi-governmental institutions in the contracting of Brazilian narco-traffickers to run wild through the Amazon and systemically wipe them out.

There are some who like to constantly separate "me" and "you", "us" and "them", "normal" and "abornal", "sane" and "insane". This objectified alienation and projection is borne out of the market-based economic and political institutions which envelop them. Similarly, there are neurologists who like to explain human consciousness itself as a specific and theoretically measurable biological process, while there are other physicists who view it as being a much more fundamental constituent of reality. I tend to lean towards the latter, but that's irrelevant.

The point is that there exists a well-established scientific foundation for concluding that our current institutional arbiters of "science", whether it be the science of the Universe or the science of the brain (but especially the latter), are operating under an alienated framework that conveniently abstracts to simplicity in a self-reinforcing process of generating and maintaining the alienating imperative of institutions, which supports the broader system of market-driven production and exchange and the politics of power. It does no good to obscure that truth, regardless of the extent of its implications.

Ashvin said...

Nassim,

I forgot to earlier thank you for your links to Candide by Voltaire. He was indeed a prolific thinker and writer. I believe your last excerpt illustrates nicely how some "intermediate" sociopaths use so-called "objective" philosophy and/or science to justify their self-obsessed action or inaction, as the case may be, a la Ayn Rand.

Ashvin said...

re: Germany's CC decision

It should not be seen as some kind of "go ahead" for the Parliament to approve any and all bailout plans, and indeed it may give the Northern European politicians extra incentive to present themselves as truly the last line of defense for their people. Granted, not one I would prefer to be living behind by any stretch of the imagination. And let's not forget that the Greek bailouts are almost irrelevant now, as what is really needed for Spain and Italy is a greatly expanded ESFS or the more extreme step of Eurobonds, and there are still plenty of headwinds, if not insurmountable ones, to those.

jal said...

Re.: A touch of reality will make the medicine go down

If the rules and laws of yesterday, are an impediment, then change the rules and the laws.

Yesterday is gone.

Printing, leverage, forgiveness of debts, by the “CLOUDS”, (virtual entities), will be the new reality.

Expect fluidity.

Expect volatile.

The reaper awaits you! Gamblers place your bets!
jal

Jim R said...

Cheryl,

Dude, give it a rest. Those are some of the skinniest bulls I have seen, and you know Texas has some skinny bulls just now.

scandia said...

@DIYer...Texas, the place i wanted to run away to when I was a child:) Not so much now...the fires are frightening. To show how pathologically cynical I have become I read yesterday that the fires were started by an arsonist. Ya right. Can't have any more of that talk about climate change.

el gallinazo said...

re: Germany's CC decision

Obviously the decision of the court was "political," and not legal. If the most impaired of drooling idiots were forced to render a decision based on LAW, he would have come to the conclusion that this consolidation with the Eurozone was extra legal. A three line logical syllogism would have done the job. But does the decision really throw it back to the Bundestag? My reading is that it only brings it to a committee and not a full vote. Maybe our resident German export, FB, would weigh in on this.

Ash, I would not be so optimistic that Eurobonds are dead in the water. The Owners want them. And Merkel is their tool, though they buy up all the contenders to be safe. She will sacrifice her political career in a heartbeat to further their agenda. Speaking of heartbeats, I read a few months ago that she almost died in a helicopter crash that was averted at the last moment. Might have made our frau doktor quantum chemist superstitious. It is part of the plan of the NWO. In my opinion these guys knew from the start that the Euro could not succeed without a political integration. But setting up the common currency was just the camel getting is nose under the tent since it was politically impossible to strut through the front door at the time. Now the crisis will allow them to finally destroy any remnants of national sovereignty as the populace is pushed into despair. Expect a new Messiah to arise in Europe. If I were a true, red blooded American, I would expect him to have a 666 birthmark on his bald head, discreetly covered by a wig. The Buzzard Gulch Casino is giving 2 to 1 odds in favor of Eurobond implementation within 12 months and 3 to 1 giving 18 months.

Jim R said...

Scandia,
And I fear it's about to become am embarrassment to the entire human species again.
But such is politics, eh?

el gallinazo said...

Scandia

Here I am in Mexico. When I was six years old, my father, a chemist, was offered a partnership job running a plant in Mexico. I was promised my own horse and sixgun after the move. In the end he chickened out and took a desk job in NYC. So here I am 60 years later in Mexico, and I have neither a horse nor a sixgun. Of course at six years of age, I would have learned Spanish in weeks.

el gallinazo said...

The NY Times salon monkey and faux Nobel laureate, Paul Krugman, now ponders the rise of gold pricing. Like the 1000 chimps pumping away on word processing apps, he may have just come up, in part, with the great American novel. But IMO the rise of gold is due mainly to fear of inflation, currency debasement, and hyperinflation. And much of it has to do with purchasing in the BRIC countries, particularly the IC countries, as well as the central banks, as it will probably be a major factor of the NWO global currency. At least in relationship to USD, as Stoneleigh would argue, these fears in the short and mid-term are not rational if one analyzes the context properly, but fear and rigorous reason are not always joined at the hip.

When Krugman finds a rationalization for the price of gold to skyrocket, the collapse cannot be far behind.

http://www.businessinsider.com/paul-krugman-heres-the-real-reason-gold-has-been-on-such-a-tear-2011-9

Ashvin said...

EL G,

I believe you are right about the owners' desire for a Eurobond, as it's their last chance to maintain financial order over there, or at least buy a bit of time before moving on to more openly sinister plans. I guess the question is then whether the resistance of the European people will become so intense that some of the politicians are scared into permanent defection, holding up the entire deal until the financial markets have their way and before they can be replaced with "friendlies". If not, then the other question is how long will the Eurobond "solution" last for the owners as private sector debt deflation continues to rage.

lautturi said...

@ Scandia

Yeah, system is really eating itself up. Time to get something altogether different working - I'm obviously doing something right (or wrong depending on which side of the money machine observer is) as I'm getting invitations to speak about the issues. I've been studing about local currencies etc. in preparation of future and trying to make some kind of info network but I'm not quite sure how all of this will play out in the end. Fingers crossed.

A while ago I found pic saying "those who have the priviledge to know have duty to act". So I'm acting, maybe it carries me somewhere - at least it carried me through those 3 weeks of rowing as my mates sponsered me with free food and drinks (^_^)

Here are some funny notes from foreigners living in Finland, perhaps you can chime in on them: "No small talk, we are Finnish" and "The myth of sisu". I found them refreshing. It's true that outside observers can pinpoint many things that insiders are mostly blind to (goes with those nazi stories, too). I feel pretty much that way about the whole shebang.

SecularAnimist said...

""Your opinions on the framers of the U.S. constitution are so one-sided that it is difficult to know where to begin.""

Well, I will say this; They did the best they could with their understanding of the world. Where propertied white men were superior to all and should have systemic advantage over and exploit everybody else. Of course, in this great new system every white man had a chance to gain property and exploit others.

Now, we can give them a pass because of the time period - that humanity had not come to grips with how inherently "evil" their actions were, that's fine. But, it's still important to understand their mindset. Honestly, much of what they and other enlightenment thinkers thought is considered vile today - and for good reason.

But, to really understand their mindset you need to go back to earlier enlightenment thinkers.

Mainly, the founders of "Liberalism" Thomas Hobbes who re-wrote "natural law" and John Locke's "Two Treatises of Government".

Now, explaining liberalism to people is a thankless and possibly futile task, but it is one that must be attempted for clarity's sake.

Liberalism is a theory of political economy that arose in Great Britain in the 17th and 18th centuries. Its principal inspirations were Thomas Hobbes (1588-1679) and John Locke (1632-1704). It emphasizes Randian individualism, the "virtue" of competition and the "justice" of the marketplace. It opposed feudalism and mercantilism. It sought to replace the traditional landowners with the rising commercial and manufacturing classes.

Then an understanding of the "Physiocrats" mindset is helpful, who were the early libertarian thinkers. The term “Physiocracy” means rule of nature. Essentially, that life should be dictated by "market forces". Well, here we are - how's it working out for us?

Of course, the libertarian will shout that "We have not had capitalism for 100 years, there is no free market!" blah blah blah(the "free market" is like big foot, a mythological beast that people insist once existed, yet can't show proof of) - like going back to the the robber barron days with 9 year olds working in coal mines and corporate brut squads gunning down labor organizing would be ideal. Give me a break.

The creation of the United States was not about "liberating" man per se. It was about liberating capital. "Freedom" could essentially be boiled down to getting rich or accumulating capital.

It should be no surprise that the original iteration of "Life, Liberty and the Pursuit of Happiness" was "Life, Liberty and the Pursuit of Property".

Anyway, the pre-revolutionary elite were not oppressed, except to the extent that the crown was inhibiting maximum capital accumulation. Which if you pay attention to political rhetoric today, is still considered a cardinal sin.

Sure a "liberal" constitutional republic was a step forward from feudalism, but in todays terms, with today's problems - enlightened it's not.

And manifest destiny continues as we, often times forcefully, spread the "good news" of capital accumulation and privatization. If we pull out of this mess and actually grow up avoiding extinction, it will be considered primitive thinking in a century. We will look back at the mind created and "sciencized" by these enlightenment thinkers as barbaric - that leads to bad behavior and social discord. Essentially we will wonder WTF were we thinking.

.

Anonymous said...

@ Greenpa
I would like to confirm (after Nassim) that killing Hitler was not an easy task, particularly after 1933.

Also, his (von Stauffenberg) sons were Berthold (recent article in Spiegel) and Franz-Ludwig. I am not familiar with a Damien von Stauffenberg.


@ Nassim
The bit about the fellow being upset about fish in a harbour was quaint.
As you know, there have been cases in France of people visiting a village and asking that church bells not ring, that cocks not crow and that farms be removed from the vicinity (particularly at spreading time).


@ El G
About the German decision, I have not had much time to study it, but it does look very noncommittal.
Apparently, it is still the budget committee of the Bundestag that must give its approval, but the government is now required to acquire approval in advance (though there appears to be a "wherever feasible" clause thrown in, but I have not actually seen it yet).
Also, the court expressed its scepticism about further integration of the eurozone by mentioning the no-bailout clause and the fact that the ECB may not purchase sovereign debt, but it apparently did not draw any conclusions about those (theoretically) legally binding stipulations. Perhaps because they are European and not German stipulations?
In short, it looks like the court bent over backwards in its efforts not to tie down the government nor to spook the markets.
However, given current sentiment in Germany, the Bundestag may put an end to this whole business on its own. If editorials in local papers are any indication, people are fed up with the bailouts. However, in a recent poll, 65% are convinced that, economically speaking, Germany needs a strong EU and 64% are for "more Europe".
So… my impression is that Greece may find itself outside the eurozone within a few months. The question is where the line (Portugal?, Italy?) is drawn. Stay tuned.

Ciao,
FB

el gallinazo said...

Gold, fiat currencies, flations, the universe, and Deep Thought

I was just listening to a June interview between Chris Martenson and James Turk, the Gold Money guy. Of course Turk was talking his book which is the price of gold is nearly limitless. It got me thinking in the most basic way about the gold / flation question. I think "in the most basic way" because I am not smart enough to think any other way (and this statement is accurate and not false modesty).

The argument for the gold bugs is that the politicians will choose to print money because it is the easiest way to stay in power which will result in either extreme inflation or hyperinflation. They always refer to "history" but the specifics they then mention are the USA over the past 70 years, or a distorted history of the Weimar Republic. Never a reference to John Law, the South Sea, or Dutch Tulips. The only exception is FOFOA who claims that the owners and the politicians will HI, because the Owners can maximize their profits through HI, and then exposits a Rube Goldberg scenario for such. All other gold bugs state that the collapse itself is deflationary, but the central banks of the world will over compensate through extreme inflation because the politicians will order them to. The gold bugs never distinguish between printing actual paper with lots of zeros and expanding the credit supply. To them, printing is printing.

I&S argue that the deflationary collapse (and no one argues in either camp, not even John Williams, that this is not the kick off) will be so huge that the central banks will be powerless to combat it, even if they chose to.

I would also argue, that the entire basis of the gold bug argument is wrong in that they think that the politicians will make the choice to inflate or deflate based on keeping themselves in office. I maintain that they are total puppets of the Owners, and if ordered to shoot themselves in the head, or groin for that matter, , they will do so (knowing that a paradise awaits them with palaces and scores of virgins once they leave office). So even if I&S are wrong about the central banks being **unable** to re-inflate, then the question boils down to the idea of which the Owners prefer - hyperinflation or deflation. I would think the latter. Age old story of buying up the remaining assets for pennies on the dollar.

scrofulous said...

Hello

I have a savings account that gives me some interest that is better than I would get in short term treasuries. I am under the insurance limit in case of a failure of my bank and wonder why I would be any way better off by holding treasuries, as is commonly recommended.

el gallinazo said...

Risk assets up, Euro up, gold plunges into the 1700's for a few nanoseconds. Happy hours are here again. And yes, Cheryl, I will take advantage of the happy hour and have a drink to you and your elegant sombrero. BTW, tell Manuel that I would like to contact him to discuss tomatoes.

Gravity said...

He's from Barcelona.

Gravity said...

http://en.wikipedia.org/wiki/Manuel_%28Fawlty_Towers%29

The swiss franc has been sacrificed unto He who walks behind the Markets, to appease His peerless greed and temper His mighty wrathflation.
But it will not be enough, you must all prostrate yourselves before the altar of equities to gain His favor.
Soylent green shoots are made out of people by His grace alone.

The Q said...

"He's from Barcelona"

I have recently hired his cousin Felipe to manage my plantation.

The Q said...

Book review: In Defense of Flogging by Peter Moskos

http://www.clevelandfreepress.com/content/9745

Anonymous said...

el galanzo-

some of your gold commentary-

But IMO the rise of gold is due mainly to fear of inflation, currency debasement, and hyperinflation.
**********

The argument for the gold bugs is that the politicians will choose to print money because it is the easiest way to stay in power which will result in either extreme inflation or hyperinflation. They always refer to "history" but the specifics they then mention are the USA over the past 70 years, or a distorted history of the Weimar Republic. Never a reference to John Law, the South Sea, or Dutch Tulips. The only exception is FOFOA who claims that the owners and the politicians will HI, because the Owners can maximize their profits through HI, and then exposits a Rube Goldberg scenario for such. All other gold bugs state that the collapse itself is deflationary, but the central banks of the world will over compensate through extreme inflation because the politicians will order them to. The gold bugs never distinguish between printing actual paper with lots of zeros and expanding the credit supply. To them, printing is printing.

*********
Chris Martenson-James Turk and You have it assbackwards-

Gold is rising because of "Deflation" ie:
"Credit Default risk" the same thing that's been driving it since 01-

Central Bank buying is underpinning real Gold-

"People" are driving Miners and GLD etc. the one's "the few" that actually hold PM's that are selling into this downturn are weak hands and the sooner they get flushed the better-

Gold does "not" perform with high Inflation-

Hyper-inflation and Deflation (default risk)and there isn't any Hyper-Inflation or Inflation in the immediate forecast

el gallinazo said...

used

"Hyper-inflation and Deflation (default risk)and there isn't any Hyper-Inflation or Inflation in the immediate forecast"

I never said that there was. But I would say that 90+% of the small time gold bugs are quite sure there is. Including Max, Tyler, Chris M, and a cast of hundreds. As Stoneleigh says, markets are driven by the changing belief systems of the herd.

scandia said...

@Lautturi, Loved those articles on Finnish temperment. I can speak for the immigrant Finns I grew up with in Canada that those characteristics survived the crossing. You may doubt it because I am hardly silent on this board but I,too, don't do small talk.
I can do it but it is draining. Cocktail parties are exhausting. Bliss for me is to be in nature with no people around at all:)
As for " sisu ", perhaps it is only myth to younger generations.
It is hard to translate. All I know is I've got " sisu ". It is an attitude, a deep ,deep committment to yes or to no.
I am pleased to learn that you are invited to speak!!!!Keep us in the loop.

Anonymous said...

Long text. Skip it if you are not interested in U.S. history.

@ Secular Animist
What I meant by "one-sided" is that the revolutionary generation was highly diverse and held strongly opposing opinions on an array of topics. To speak of them simply as "propertied white men" is similar to mentioning "philosophers" when discussing Stoics and Epicureans.

At the time (1780s and 1790s), slavery was already the most divisive issue and the choice boiled down essentially to founding a country by uniting the colonies as they were, with all their strong and weak points, and hoping to survive because they were going up against the major power of the day, or accepting British dominance because any divisions would have played directly into their hands.

Had the framers had solely commercial motives, would they not have been better off remaining British, i.e. part of the commercial power of the day?

The constitution would quite simply never have been signed if the South had not received the assurance that Congress would not regulate the slave trade before 1808. Was a new republic worthwhile if it meant accepting the status quo of slavery? Many of the framers, notably Franklin, thought slavery was a direct contradiction to the principles of the constitution, but is was deemed better to consolidate those principles and build on them to eventually destroy slavery. At the time, there was a wide consensus in the North that slavery was an anachronism that would fail on its own. Even many of the Virginian delegates thought so (indeed, there was a sizable population of freed blacks in Virginia).

When the Quaker petitions came before Congress in 1790, the South, particularly the SC and Georgia delegations, made clear that they would leave the republic before accepting an end to slavery. So what to do? They had the law on their side.

Note also that at the time, there was general consensus (North and South) on two points in the event slavery was abolished.
1. The slave owners would have to receive compensation from the federal government, estimated at over 100 M$, whereas the federal budget in 1790 was less than 7 M$.
2. The former slaves would have to be moved somewhere (Africa, the Caribbean, toward the Mississippi), obviously at great cost and with uncertain results.

Today, we may find that consensus highly debatable, but that is simply the way it was at the time. The Quakers with their excellent principles gained virtually no traction.

So, all in all a terrible dilemma that led directly to the Civil War, but not one in which we may make large generalisations without doing a great injustice to many people of the time. To say nothing of the other hotly debated issues (finance, taxation, commercial policy, international relations, etc.).

Ciao,
FB

Anonymous said...

I never said that there was. But I would say that 90+% of the small time gold bugs are quite sure there is. Including Max, Tyler, Chris M, and a cast of hundreds. As Stoneleigh says, markets are driven by the changing belief systems of the herd

*********
I agree with that-but as i pointed out-they have little effect on the overall price of gold-

Sure-if you read Goldbug blogs-they lean 99% that way-but in the broad scope-they are a tiny influence-
Most buying is from Governments/Central Banks-

I even read here the other day-where you stated that the reasons we're all in Libya is because of Oil/Gold and Central Bank control-
Bingo-
But why Gold if it;s to be near worthless?

Mike Tanis said...

.
Just checking...
.

Nassim said...

his (von Stauffenberg) sons were Berthold (recent article in Spiegel) and Franz-Ludwig. I am not familiar with a Damien von Stauffenberg.

FB,

Probably the World Banker in whose house I was staying wished to impress me. Damian was a nice guy and I am sure he didn't start that story. In retrospect, it is curious how much interest microbanking in the 3rd world generates while there is little interest in the huge sums leaving for the 1st world by the front door.

Capitalism's Achilles Heel: Dirty Money and How to Renew the Free-Market System

Ashvin said...

FB,

Sorry, but your entire last post is eerily reminiscent to me of the title, "Lies My Teacher Told Me". Of course, that book was entirely too timid to go after the Father of all culprits in propgandized US history, the capitalist system of production and exchange. For a bunch of people who believed in the ideals of a free market system and the value of personal responsibility, they sure made a lot of compromises to escape the "repression" of colonial England. While they were busy debating the exact extent of centralizing economic and political authority, the Africans continued to be abducted and transported across the Ocean like animals, while their children were born into a life of cruelty and servitude. The Native Americans continued to be exterminated, and women continued to be treated as socially and politically inept baby factories. If you are willing to make such compromises with Southern states or whoever to form "a more perfect Union", then you have no business calling yourself a Founder of anything "free", "just" or "equal". The only reason slavery was no longer systemically tolerated in the 19th century is because the profits of industrial centers became hampered by the agricultural sectors with zero-cost labor and also the constant threat of slave uprisings. Yes, that's "just the way it was" back then, and that's essentially the way it has continued to be ever since. Why? Because, despite various political concessions gained through riots, wars and bloodshed, the underlying system remained firmly intact, and in fact expanded to encompass every corner of the globe.

el gallinazo said...

used

"But why Gold if it;s to be near worthless?"

Well, you are twisting the "party line :-)" of this blog which states that during the perfect storm of deleveraging, gold will fall a lot in nominal value in USD from is bubble peak, but will be one of the first commodities to rebound. In terms of purchasing power, it will not fall much or at all, but currency will appreciate faster during this period. Not exactly a statement of **worthless**.

Ashvin said...

used,

"But why Gold if it;s to be near worthless?"

It's not. Long-term, it will be quite valuable, especially for the central institutions that are using it as a backing of currency, and the extremely wealthy individuals who have hoarded large amounts and manage to remain in one piece through collapse. A near-term price collapse will certainly help them towards that goal. Spot gold primarily trades on leveraged speculation in paper markets, production flows and the risk of excessive monetary response to credit deflation. There is every reason to think that the first will drop off right along with global credit market deterioration while the second declines at a slower rate than decreases in aggregate demand. That leaves the third as the universal factor underpinning nearly every argument for near-term HI and skyrocketing prices for physical gold. The argument here is that this third factor is, in fact, not guaranteed from the arbiters of debt-dollars, the USG/Fed, and even if it is pursued near-term, it is very unlikely to be successful in reversing monetary credit collapse and undermining confidence in the dollar as a medium of exchange and store of value.

Nassim said...

re: Finns

These articles remind me a lot of the Norwegians - an incredibly boring lot. Must be the weather. :)

Recently, I read Walking Into The Night - an excellent book. The whole story hinges around this Icelandic guy's inability to communicate his feelings, and preferring to run away and hide from his own wife and kids.

scandia,

Please remind me of your address, and I will gladly post it to you. anassim at gmail dot com

SecularAnimist said...

""Of course, that book was entirely too timid to go after the Father of all culprits in propgandized US history, the capitalist system of production and exchange.""

What's interesting is slavery essentially died in Western civilization with the collapse of the Roman empire. During the Dark Ages and the medieval period, if you owned a slave, you owned *one* slave, and that slave would be a houseboy, or a cook or something like that, someone close in to you, taking care of you. It was inconceivable to use slave labor in the production of an agricultural product, until the rise of capitalist competition. The commercial class acquiesced in the bringing back of a practice that had been discredited during the fall of Rome, in order to supply the insatiable need for cheap labor.

Skip Breakfast said...

Re: Gold

I found it interesting that Paul Krugman felt so haunted by gold's incessant rise in price that he had to come up with a "whole new theory" at 4:30 am and then publish it in the New York Times. That is to say, he sees gold's rise as rooted in widespread fear of deflation NOT inflation. But it still doesn't entirely wash with me. Occam's razor might be handy here--things might not be as cryptic as all this flation-hoop-jumping suggests. Because gold is rising for a simple reason. The same reason it has risen for the past 10 years. Speculative greed.

Speculation isn't a new theory for gold's rise either. I&S have essentially said as much. But so many think that some other earth-shattering secret is behind the rise. I see it as simple greed-driven speculation, and all that entails:

1) Gold has been rising for a decade. Long before there was such widespread fears of flation. In other words, gold was rising along with every other asset bubble in the great credit bubble of the 2000s.

2) Gold has gone exponential in the past two years. Because in the great credit bubble, something has to go exponential in order to provide the necessary return on investment to keep the wheels of the credit bubble going. Stocks, check. Real estate, check. Gold, check. Why does everyone insist that gold is so different than the others? What if it's simply the LAST one in the line of asset bubbles based on nothing but speculation.

3) The credit bubble has NOT popped. It is stretched to the point of breaking, and some horrifying weaknesses has shown up. But it hasn't popped, because obviously we've accumulated MORE debt than ever. And as such, it would be foolhardy to assume that debt-driven speculation is over. But the debt machine needs somewhere to put that money, and there is good reason to fear stocks and real estate. They need something else with a "guaranteed" return the way stocks and land provided "guaranteed" returns. Enter gold.

4) How many individuals, banks and countries are buying gold WITHOUT credit over and above other asset values. That is, who owns gold but has NO debt beyond his other assets. If you have SOME debt, in the form of sovereign debt or a mortgage, and your debt is greater than the value of your assets, then when you buy gold, you are essentially buying gold on margin. You have borrowed for your gold purchase (just not directly). So once the credit bubble truly pops, and debts must be truly dealt with, SOME of that gold must be sold, unless your other assets are worth enough to cover your debt.

5) Gold is not an indication of loss of faith in currency until people are actually USING it for currency. To pay rent. To buy groceries and gas. Until then, it is an investment. And I think most money chasing gold is by people who think they can turn that gold profit into cold hard fiat cash to buy things like rent, groceries and a yacht on top of it all.

Why can't the simplest answer be the right one? Why is gold truly so much different than the scrambles to buy land? It sounds the same: get in before it's too late, or you'll be priced out of land/gold forever. It was only a couple years ago that many friends bought over-priced land based on the fear that they would be locked out forever if they didn't buy. It's powerful psychology. Very seductive. But I keep reminding myself that it's not true. Cash will speak very loudly for a long while. And eventually--maybe sooner than later--gold will be revelaed to be nothing more than another bet at the grand casino, and it's all been bought on margin.

Supergravity said...

Gravity is the first element.

scrofulous said...

http://www.caseyresearch.com/gsd/home

"It should be obvious to just about anyone that the intervention in the gold market and the revaluation of the Swiss franc was a co-ordinated move by the central banks of the world. You'll read more about it in a King World News story where Eric interviews Ben Davies .

el gallinazo said...

For those following my ordeal with JP Morgan Chase

Where they closed out my checking account, Master Card, Visa Card, and debit card with $2500 in the account and the account having as much as $15,000 at a point in the last year. I had the cards since 1997. They refused to give me a reason telling me that they had the legal right to do it without any reason. Well, I figured I had some serious problem with identity theft, all with being out of the country for two years and my son doing a piss poor job of checking and forwarding my stuff. Maybe an all points bulletin out for my arrest when I cross the Arizona line. Well it was an ordeal, but I finally managed to pull my Esperian and Equifax credit reports on line just now. I had zero as in goose egg negatives going back twenty years. And Chase reported that they closed out my accounts **at my request.** Unfortunately the last I looked at the ebay auction of the painting Chase Burning it was over ten grand - too rich for my blood.

Anonymous said...

Because gold is rising for a simple reason. The same reason it has risen for the past 10 years. Speculative greed.

***********
Wrong and so is the other 9/10 of your post-
Gold rises on risk fear-it gets passed over when greed (Inflation) comes to town and you must admitt that we had horrendous Inflation (credit expansion) from 2000 on-

What has the long Bond and Gold have in common as price driver?
Risk.
I've put up charts here showing the exact inverse correlation between the 30 yr and gold-no one here has dispelled that--

Where you make your biggest mistake is separating Gold from Currency-
Gold is a Currency-the king currency and always has been-
No-you can't use it at the grocery store and I know this blog is a Deflationist den-so I know you all believe Credit is money and I agree it is-on the other hand if the grocery store only took debit cards and no credit cards-or perhaps not the credit card i had-I could simply walk to the ATM and withdraw cash and pay in cash-
I could also walk to the coin dealer and hand a maple leaf over and walk out with the cash and buy my groceries-
What is the difference?
The price/oz. means nothing in this example-gold is liquid-there is always a buyer-

Gold "acts" like money-people hoard it during deflation-just like they do cash-they see it as a store of value just like cash-

Remember Greenspan's "conundrum" when he was trying to "cool" the markets back in early 2003/04?
17 consecutive rate hikes and the long Bond remained inverted-
It wasn't buying the bullshit and neither was Gold-both responded to abnormal Inflation
Today 30 year Bonds are inverted and Gold is high-
In 2008 Bond yields spiked and Gold crashed-
Coincidence?
Will people run to the Swissy now when they know full well that the Swiss Government might devalue again by 10 or whatever % whenever?
I doubt it-

I'll have more for Ash in a bit-but I wonder Ash-do you believe that the housing bubble was a symptom of greed or fear?
I know everyone says greed instantly-but greed is slow and fear can go around the world 100 times before greed can get its pants on-

Was it instead fear that drove the credit frenzy of the last 10 or so years-where house prices and home equity spending went parabolic?

Fear of being left behind-fear of missing out on what looked like a sure path to riches-fear of being the only neighbor on the block not having a boat and atv or taking a holiday on some tropical island-
I'm not sure-but the more I think about the more I question simple greed-

el gallinazo said...

used

You gotta define your terms. How about:

Greed - wanting more than you already have.

Fear - losing some of what you already have.

Both in real, inflation adjusted terms.

These definitions answer the questions you pose.

el gallinazo said...

scrofulous said...

"I have a savings account that gives me some interest that is better than I would get in short term treasuries. I am under the insurance limit in case of a failure of my bank and wonder why I would be any way better off by holding treasuries, as is commonly recommended."

I was hoping that someone else would deal with your question but it seems not. The short answer is the following:

When TSHTF the TBTF will fail. There will be a point where the Fed and the USG just can't keep up with the bailing. The USG will then have to triage what they are going to defend with the resources they have left, and the highest priority will be Treasuries. If Treasuries are defaulted on then the USD becomes totally worthless which means no crude imports. But the truth is that the FDIC is not the USG, it is an affiliated corporation. The FDIC can go bankrupt. The Treasury can chose to back it or not. And if you read the fine print, they have almost unlimited time to pay off their insurance. So when TSHTF, the politburo and the Fed will probably decide to pay off the bankrupted accounts like 1% a month for the next 8 years, maybe slower. So treasuries are safer - they are a much higher priority. Same goes for CD's and money market as for checking and savings.

el gallinazo said...

Recommend that you might listen to this Jim Puplava interview from today with John Butler. Not because I agree with him because I do not, but because he is smart and well informed and his reasoned arguments are interesting. He thinks commodities are the way to go to preserve wealth. I think the huge hole in his argument is that he totally underestimated the precipitous drop in manufacturing and global trade we are approaching. But a good gray cell exercise.

http://tinyurl.com/3tk6jux

Anonymous said...

These definitions answer the questions you pose.

**********
No they don't-

Greed has one face-
Fear has many faces-

seychelles said...

Good post by SB on gold.

ben said...

a racist blog tackles the usps fiasco:

http://stuffblackpeopledontlike.blogspot.com/2011/09/going-postal-black-people-and-potential.html?m=1

Anonymous said...

SB--

Here's some data-not just theory on Golds performance during the last panic-the last deflation-

***********

http://bit.ly/dJaHAY

There were not many major gold mining companies around in 1929-
This is the only downloadable chart-
I know of two others and the only records available are in a few old books- i've seen the snaps-
Alaska Juno Gold-
Placer Dome-
All had similar price runs-
Keep in mind-this was 1931-the height of "fear"

Use only the left side of this chart where you see the FFR drop to near zero-just like it is today-look at the gold reaction vs CPI (remember gold was dollar locked)so prices vs gold is all we can measure by-other than miners-

http://bit.ly/huHhx1

During inflation-cash is trash-
During inflation-gold is sold-

ben said...

sorry - non-mobile version of SBPDL post:

http://stuffblackpeopledontlike.blogspot.com/2011/09/going-postal-black-people-and-potential.html?m=0

brad said...

El G,

Thanks for that explanation of why Treasuries. Finally makes sense.

Also, you inspired me to purchase a small dual sport motorcycle. What a great vehicle for the age of uncertainty! Cheap, 85 mpg, relatively simple to repair. Knobbies for when the roads go to shite. Plus, riding is tons of fun. Only drawback - I'd rather ride than work on the doomstead.

Ashvin said...

Used,

"I'll have more for Ash in a bit-but I wonder Ash-do you believe that the housing bubble was a symptom of greed or fear?

I know everyone says greed instantly-but greed is slow and fear can go around the world 100 times before greed can get its pants on-"

Our emotions that stem from our sense of alienation from ourselves and others, such as greed to get what others have or fear of being left behind, are symptoms of market structures that, among many other things, promote leveraged, speculative asset investment, not the other way around.

But, I really have no idea what you're getting at here. Perhaps you are saying the fear of credit deflation leads investors to cash and gold, but that's not true. The system promotes a certain form of collective fear on the way and on the way down. At this stage of the game, it's generally the fear that one won't have enough pieces of paper to pay the bills, service the debt, make necessary daily expenditures, etc. This fear does not impute to gold, because it is not a well-established medium of exchange in financial or commercial transactions. Obviously you can sell any hard asset for cash (not always in a heavy sellers' market), but that does not make the hard asset a monetary equivalent of cash.

Gold's real value lies in its ability to maintain purchasing power over long periods of time, and in this function it is meant to sit very still. Many people cannot afford to invest in such a sedentary wealth reserve, because their various obligations run around frantically threatening to consume assets (homes, cars, wages, power, heat, etc.) if they are not met in due course. Other people have enough cash cushion to meet such expenses, little debt and are generally prepared for a severe deflationary episode, which means they can sit still on gold as one of the ultimate long-term wealth reserve assets.

That reserved wealth will be revealed when the prevailing fear has dramatically reversed towards a fear that there are too many unencumbered pieces of paper floating around and not enough real, necessary things for people to get their hands on. The symptoms of greed and fear will certainly be present throughout this entire process, but will also hit extremes at inflection points that mark a dramatic shift in socioeconomic mood.

Anonymous said...

@SA,

>>Does Skilo's contemporary understanding of human "nature" motivate a war against true human nature?<<

It actually isn't contemporary - it has existed for thousands of years. It has probably best in been codified in biblical scripture... sin is transgression of the law to love God and love others EQUAL to oneself.

The problem lies in the fact that vanity doesn't allow us to properly understand our own selfishness.

For example, 20 million children will die of starvation this year... and next year...

How many people lose sleep over this in the wealthy nations?

Out of sight, out of mind?

If they were the one starving to death, would they want others to care more?

Uh, yeah.

On a more general level, I hear people complain about not getting "government freebies" all the time, but I can never engage these same people when it comes to living within the nation's means (ending the exponential debt bomb).

They are interested in what they can get, not so much in what they have to give up to be responsible and not bankrupt other people while getting all the goodies they think they deserve.

And yes, these are everyday people that society considers to be "good."

And in many ways they are - very good.

But they have a blind spot.

We all do.

Anonymous said...

@Greenpa,

While I didn't live durign that time frame, I would bet that the reality of what was going on was withheld from almost everyone. Propaganda reigned as people were told what they wanted to hear, not what was real.

Actions were taken behind the scenes to create fear and provide more government control to alleviate said fear in the minds of the people.

Wars were assuredly waged against evil people that hated Germany's "way of life." Evil communists.

Most people were too busy living day to day and taking care of their families in order to be too involved.

Some saw the evil, spoke out and were ridiculed. People who questioned the "party line" were "conspiracy theorists" and kept out of the newspapers. Radio personalities were paid well not to discuss "unpatriotic themes."

Probably some people disappeared in some kind of "accident."

Not much different than today, I would imagine.

I used to wonder how a guy like Hitler could take over a country the way he did.

No more.

Anonymous said...

Ash-

But, I really have no idea what you're getting at here. Perhaps you are saying the fear of credit deflation leads investors to cash and gold, but that's not true.

**********
No I'm not saying that at all-

My point at least on the credit bubble was-people were driven into easy credit/money by the fear of not participating and missing out on what for 20/30 years was a rapidly appreciating asset (real-estate)and the ATM machine that derived from it-
Sure there was obviously greed involved as their always is during inflation-what i wanted to point out is the fear factor-
Maybe "jealousy or envy or jonesing" are better words and when it's looked at in that context-it is a form of fear-imo-

I don't ever expect the public to get into gold-I don't believe (at least in NA) that very many took part in the gold market-
We had inflation (increasing house/asset prices) until 06 or so-
Gold broke out of a 20 year bear market in 2001-

There's no denying from the price action of the last 10 years that the smart money got in while the price was low-before central banks started buying it back again-

Anonymous said...

@used,

I go with envy - fear and greed mixed up.

>>There's no denying from the price action of the last 10 years that the smart money got in while the price was low-before central banks started buying it back again-<<

Perhaps the insiders used their control over Central Banks to manipulate the price down so they could buy it low... something to ponder.

I think gold could do well so long as the music plays. Once the music stops, though, I would be surprised to see gold doing as well as it is doing now.

Then again, it won't be a ZERO, like so many other things when the music stops.

ben said...

inane numbers article by that great tool leonhardt at nyt. comment by ann s. at 1.42am a good'un.

http://www.nytimes.com/2011/09/08/business/economy/american-economy-on-the-verge-of-a-double-dip-recession.html?_r=1&hpw

Anonymous said...

@ Ash

I think we agree on the basic principles, on the need to eliminate slavery, etc.

My point was that many of us tend to view history in terms of great simplifying blocks of people. All Germans were Nazis, all Russians were communists, etc. Even you group the framers as "a bunch of people".

When in fact, many were painfully aware of what a number of issues (slavery, centralisation, etc.) risked doing to their new republic. But again, they felt that the best way to secure the stated principles lay in the republic, even with its many compromises, rather than remaining a part of Britain which was a certainty if the colonies did not hold together.

Another thing. How much experience did they have with capitalism? Less than us by a long shot. We are at the end of a grand cycle. They were close to the beginning. Judging them by what we know today strikes me as unfair.

A third point has to do with language. I would be careful about assuming that current terms were defined in the same manner over 200 years ago. Even today, would all of us agree on what the terms "free", "just" and "equal" mean? Or should mean? Were they semantically identical over 200 years ago?

In short, many of these people were very aware of the problems you raise, but their options were limited. And they themselves were not perfect. Does that sound familiar?

Again, I am not excusing slavery. I am simply trying to provide some context and avoid overly harsh judgements.

Ciao,
FB

Greenpa said...

Re: gold.

I suggest responses to all future questions regarding Au be restricted to:

"See above."

jeeze-loueeze.

Anonymous said...

We definately have some issues that need to be addressed. Between Jobs, Economy, Banking, Food. We need to really sit down and start to figure out some real long term solutions.

Go Check out: Dailyjobcuts.com

Anonymous said...

Skilo-

Perhaps the insiders used their control over Central Banks to manipulate the price down so they could buy it low... something to ponder.

I think gold could do well so long as the music plays. Once the music stops, though, I would be surprised to see gold doing as well as it is doing now.

************
I don't see it that way-remember central banks were selling gold throughout the 80's-the price sat around 2-300 for years-anyone with some cash could have accumulated all they wanted and remember Greenspan's famous speech-
"We stand ready to sell down gold should the price rise significantly"
They did this constantly as gold started to rise-
(Browns bottom)they were simply overwhelmed and now they are major buyers-

When the music stops?
The music has stopped but like Chuck Prince-they keep dancing until until someone throws them out-

************
Greenpa said...

Re: gold.

I suggest responses to all future questions regarding Au be restricted to:

"See above."

jeeze-loueeze.

**************
Yes of course-"restrictions"

Everyone should only have one sided comments that suit your views-
Whatever happened to-

"I disagree with what you say, but I will defend to the death your right to say it"?

Greenpa said...

Todays nuclear joy from Japan, via NHK:

"Radioactive release into sea estimated triple"

"A group of Japanese researchers say that a total of 15,000 terabecquerels of radioactive substances is estimated to have been released from the crippled Fukushima Daiichi nuclear power plant into the sea.

"Researchers at the Japan Atomic Energy Agency, Kyoto University and other institutes made the calculation of radioactivity released from late March through April.

"The combined amount of iodine-131 and cesium-137 is more than triple the figure of 4,720 terabecquerels earlier estimated by Tokyo Electric Power Company, the plant operator. The utility only calculated the radioactivity from substances released from the plant into the sea in April and May.

"The researchers say the estimated amount of radioactivity includes a large amount that was first released into the air but entered the sea after coming down in the rain.

"They say they need to determine the total amount of radioactivity released from the crippled Fukushima Daiichi plant in order to accurately assess the impact of the disaster on the sea.
Thursday, September 08, 2011 19:33 +0900 (JST)"

http://www3.nhk.or.jp/daily/english/08_25.html

Greenpa said...

used up: "Whatever happened to-

"I disagree with what you say, but I will defend to the death your right to say it"?

fine by me, as long as I also have the right to say "oforgodsakeshutUP!"

- when people drivel on into eternity... twice-

and if you thought I seriously thought anyone would institute a restriction- you haven't been paying attention-

Anonymous said...

Greenpa-


- when people drivel on into eternity... twice-

*************
Well I know one way to shut a driveler up-

Prove them wrong-

If you can't-perhaps it isn't "drivel"

bluebird said...

@Metanis - Just dropped in to see what condition my condition is in

el gallinazo said...

The Norwegian Sovereign Wealth Fund is now suing BoA, Countrywide, their auditor, and even Agent Orange himself (Angelo Mozilo) for mortgage fraud. My theory is that the states' attorneys general are trying to reach a quick slap on the wrist deal for the mortgage fraud with the TBTF banks in order to give them legal immunity under Usanistani law to the rest of the world, and perhaps even the galaxy.

http://tinyurl.com/3lv8s2e

Jack said...

Greenpa
People will always have something to say about gold.
All metals are important to humans and we must not let a few people have hold of them.
We should have an organization that will monitor the inventory that we have in stock and they should be in charge of the way it is used and if anyone wants to use this metal for production they must have a collateral and they must return the metal in a period of time
For example in a computer you have gold and the life span of an computer is about 20 years so after those years the manufacturer must return the gold in the computer.
Monetary systems must not be tied to gold.
If there is fraud then severe punishment for the politicians and people in charge.
I think our problem with our current system is that we let people get away with murder
Judicial system is joke and I think people do not want the same crap as before.


Here is another topic
How To Make Aspirin
http://www.youtube.com/watch?v=ePsvtj2amrM

Also
Chewing sticks instead of using a toothbrush
This might also be used as a floss
http://www.lonelyplanet.com/thorntree/thread.jspa?threadID=1674512

http://news.bbc.co.uk/2/hi/south_asia/4916044.stm

Greenpa said...

useco: "Well I know one way to shut a driveler up-

Prove them wrong-

If you can't-perhaps it isn't "drivel""

LOL!!!! seriously! I'm still cackling. Thanks!! :-)

Ashvin said...

"Again, I am not excusing slavery. I am simply trying to provide some context and avoid overly harsh judgements."

I understand, FB. However, the point I (and SA) was trying to make is that the capitalist system of private property rights, concentrated production and exchange is one of the broadest contexts that we can analyze the Founders' mentality in. It is broader than political contexts such as "federalist" or "anti-federalist" or even sociopolitical ones such as "abolitionist". The institutions of Native American dispossession/extermination, African slavery, female repression, etc. were rooted heavily in the underlying economic order of capitalism, regardless of specific ideals held in the minds of the Founders. It was very clear to them that this institutional oppression existed, and would continue to exist well after the formation of the U.S.

I'm sure you are right that they did not understand the nature of capitalism as well as we do now (hat tip: Marx), and the sacrifices they made to break from explicit colonial oppression were no doubt acts of courage. However, the problem for me is when we associate their mentality with that of those seeking general "freedom" and "equality", simply because they put those words in their writings. It's not really about judging them as individual moral actors, but judging them as a collective group choosing to follow the underlying currents they were subjected to. All of modern history has been a river flowing with incomplete/incorrect information (about the past and present) and therefore extremely tough decisions, up to and including our current situation with political leaders identified as Democrats and Republicans. Yet the currents, rocks and cliffs right in front of us are undeniable, and "compromises" have proven never to really be a virtue in this system. They usually either delay the inevitable and/or make it worse, while providing the illusion of change.

The civil war was not a compromise, the 14th amendment was unilaterally shoved down the throats of Southern legislatures (no compromise), the labor movements were not compromises, the civil rights and anti-war movements were not compromises. Alas, sojme of these were ultimately not very successful in achieving their goals, but nevertheless the only legitimate option was demanding what was "fair" and "just". If the Founders had no choice or clear alternatives back then, then its difficult to say that any of us do right now.

scandia said...

@El G, I haven't checked Fred's site for some time but did this morning and found a new posting about Mexico that speaks to the decisions you are making about where to live- stay on, move on, return to the Homeland?

" An Intrusion of Reality "
http://www.fredoneverything.net/
Downhill.shtml

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