Predator Banksters

Predator Banksters

There has been outsized brouhaha about Goldman's and other bankster bonuses--made possible by Fed and bailout (taxpayer) money. There has also been some attention paid to the kind of "investments" that have bloated Goldman and JP Morgan profits: huge bets using the Fed's free money.

Now, it turns out that those same kinds of bets are behind a lot of the continuing instability in international financial markets. Greece is an especially egregious example.

It is likely that the Greek government has been feckless, and its public employee unions have been unreasonable. It is also true that Greece is in the exact same position as California, New York, and many other American states: it can't create its own money, so it can't do what the US Federal government can do: issue money to cover shortfalls (and more). Its currency, the Euro, is controlled by the limited government in Brussels, itself steered economically by its two largest players: Germany and France. Both major countries are understandably reluctant to follow even easier money policy than they already have: in Germany's case, its Mark meltdown in the 1920's and '30's makes it doubly wary.

However, there is something else going on, and it has to do with the banks, or rather the banksters. An article from the New York Times, 2/25/10 pinpoints the problem: Credit Default Swaps (CDS).

"As banks and others rush into these swaps, the cost of insuring Greece’s debt rises. Alarmed by that bearish signal, bond investors then shun Greek bonds, making it harder for the country to borrow. That, in turn, adds to the anxiety — and the whole thing starts over again."

That is, CDS's raise interest rates that Greece (and Portugal, Spain, Ireland, etc.) will have to pay to fund their obligations. That will make their budget-balancing task harder, and the misery of the ordinary man/woman in the street that much greater: governments will have to lay off millions in order to pay off their debts, and will have to curtail the public services that have raised their nations' standards of living.

But Wall Street doesn't mind. Why? Because, its traders can make outsized profits on the backs of Greek (and other nations') misery.

Wall Street did the same thing to Lehman and to AIG, and its traders are probably sharpening their knives for Portugal, Spain and so on.

This is only one more reason why financial regulation is imperative: banks will only return to the civilized world, and abandon their rapacity, when deposits and Fed/FDIC guarantees are stripped from their speculative arms, when the wall between depository and speculative institutions set up by Glass-Steagall is re-established and when CDS's (and other "exotic" financial instruments) are regulated.

If the banksters succeed in defeating reform, they will eventually succeed in bringing down the whole financial system, something they almost succeeded in doing in 2007-8.

And then?

Cut The Deficit?

Cut The Deficits?

An overwhelming majority of small businessmen polled in northern New York, said that their greatest concern was the government's growing deficit. They said the government needed to cut expenditures, not increase them. It should also (somehow, not specified) encourage business. Analogies were drawn between a household and the government; one couldn't live beyond one's means as a family; nor could government, they insisted.

It's as if Keynes never existed!

A healthy portion of the deficit is from automatic stabilizers, like payouts for unemployment; the more unemployed, the more payments. Two benefits flow from this: people are not thrown into utter misery, and they still buy things, thereby sustaining some demand for goods and services. Without unemployment insurance, food stamps and other support payments, the Great Recession could easily have become the Second Great Depression.

How do you stimulate business when there is too little demand in the economy for whatever reason--in this case because of financial collapse? Do you cut government expenditures?

How, logically, would this help? If consumers aren't buying and businesses aren't selling--or buying materials, etc., how does cutting government expenditures solve this problem? Doesn't it make more sense that if government bought things (highway paving, bridge materials, labor), it might stimulate business, even if it meant a short-term increase in the government deficit?

Governments are not households; that's a false analogy. Households can't create money, or destroy it; governments can and do. Furthermore, if one household saves money, it is being thrifty, but if everyone saves money, if nobody spends, everyone becomes poorer. This is called 'the paradox of thrift.' It's what happened in Japan for the Lost (two) Decade(s): savings rates were too high. Business floundered.

It could happen in the US, and will, if there is no further stimulus and real jobs bill, or, if the only growth in the national budget is for "Defense." Defense spending is a poor stimulus. Not only does it use large amounts of capital for each job, it spends much of it abroad--"stimulating" Okinawa, for example, or Afghanistan. Also, it doesn't make the nation more productive, except at killing.

And yet, no politician would dare suggest cuts to "defense," the largest discretionary item in the budget.

Obama pretends he's listening: he's cutting discretionary spending in about 1/8 of government--for 2011--and yet he knows that what the nation needs is more stimulus. The government should spend more, not less, until we're in a solid recovery and unemployment is steadily receding. If there were no more stimulus to promote business, or prevent state and local government lay offs, then demand would fall and we'd be right back where we started: it's called a "double-dip" recession. That happened in 1937, and in the Third Century.

In Rome, that double-dip went on for hundreds of years.

The Marjah Model

The Afghan offensive, despite attempts to safeguard civilians, is still an offensive in what we have proclaimed to be a war. In wars, lots of people get hurt, or worse. No matter how 'careful' or not an invader may try to be, he is still an invader. He is still causing local people to be killed, even if they're blown to bits by a mine their own people set.

Obama's Afghan war might end well, but only if Obama uses a temporary success (if there is one) to begin negotiating with the Taliban leadership. The Afghan government has already indicated that there is a way to do this (by calling a loya jirga to which the Taliban are invited). The Karzai government has promoted the idea of negotiations; NATO allies are receptive. There have been "feelers," and "signals" that even Mullah Omar is willing to talk. The Pakistanis have also offered to mediate with the Haqqani network, as long as they're assured of continued (renewed?) influence in Afghanistan. And now the Pakistanis and the CIA captured the "number two" leader, who favors negotiation.

There is only one important player who is still too skeptical to embrace negotiations: the Obama administration, or the American military.

This is shortsighted, especially in political terms. If Obama wants to re-elect Democrats, and gain re-election, tangible movement towards getting out of Afghanistan would be a tremendous boost. Obama should engage in the necessary diplomacy to assure an honorable withdrawal (ignoring the screams from the crazy Right).

At the same time, he and Congress should direct huge resources to stimulating job growth (again, ignoring the idiots shouting "Socialism!"). He should also bring the banks to heel. Obama and the Democrats in Congress must present voters with tangible progress on the economic and military fronts. Then Republicans wouldn't have a case--they offer no real alternative. Saying 'No' to everything does not solve, or even respond to what most people perceive as huge problems--joblessness, unstable, untamed banks, two wars, climate change and manufactured fear.

Marjah models what Obama needs to do domestically: impose as little pain as necessary, but not shrink from the probability that some will oppose whatever he does. Bipartisanship is dead: Republicans won't compromise when obstruction wins them votes. Obama and Democrats, especially Senators, should press on, using the Reconciliation process when necessary. Obama needs to use recess appointments, too, to neutralize Senatorial "holds."

Obama must be flexible, tough and unequivocal. What are the chances from a "centrist," who specialized in "bringing people together?"

Either, a progressive, activist government begins to solve our problems, or we'll be faced with stalemate--Obama will be replaced by a reactionary like Sarah Palin--and the Empire will self-destruct a la 476.

Declare War: Win Elections

KSM, Tea Parties and Iran

Republicans and Tea Partiers are outraged that Khalid Sheik Mohammed would be tried in a civilian court. Saying he would be a danger, and we'd be "giving" him rights we had fought for is ludicrous.

The Bush administration prosecuted about 300 terrorists in civilian courts. Further, courts for over a generation have safeguarded whatever "secrets" the state may have used in order to gain conviction. In addition, the Supreme Court found the military commissions unconstitutional; their reconstitution has been difficult.

Those 300 terrorists were dealt with more harshly in the courts than the terrorists who went through military commissions, from which some were released to places like Yemen!

The tea party conspiracists, at the same time, seem to believe that the Obama administration is setting up machinery to make mass incarcerations of tea partiers. The same rumors went the rounds during Bush II--about concentration camps under construction for leftists--now the right has paranoia, instead, and is paranoid about Northcom, the US command set up in the US for domestic disasters--like hurricanes and earthquakes!

Health care reform, these same crazies say, is a conspiracy for a government takeover, even though Obama, Pelosi and Reid have cut smelly deals with almost, but not all, of the corporate participants in the health care industry (Pharma, the AMA, hospitals). I wish it were a government takeover; instead, it creates a new, subsidized market for health insurance companies!

The right-wing lunacy has a megaphone far outweighing any shouting on the left: corporate media are perfectly happy to help bring down an administration that is even slightly anti-corporate. That's why we've heard a lot more about Tea Party and Republican outrage than about the outrage on the left: on Afghanistan, Guantanamo, health care compromises, Obama's unwillingness to investigate past war crimes, his continued use of extraordinary "wartime" powers.

So, now we have the "41st" vote held by Brown, who closely aligns himself with the lunatics! Krugman in an op-ed in the NY Times, concluded, "We are doomed!"

If the party of No prevails in the 2010 elections, we will be; it offers no real solutions and is not interested in governing, only in posturing in order to win power. On the other hand, the Democrats still have no spine: Schumer caved on the KSM trial, for example.

Sarah Palin, in effect, recommends that Obama "declare war" on Iran, if he wants to win re-election--against her or other Republicans. Perhaps she's suggesting that Republicans use that threat as their campaign theme?

Given the GOP's lack of ideas, and unwillingness to deal with any real problem, this pronouncement of hers may prove prescient: look for it as the Republican meme in 2012.

Is this the Empire's death rattle? It sure looks like it: instability, ungovernability, overreach and bankruptcy.

Iran's Nuclear "Ambitions?"

Nuclear "Ambitions" and Radiation

I'm being treated with radiation (I have an early cancer), and the radiation comes from highly concentrated uranium (about 20%), used to create treatment isotopes.

You have heard of Iran's nuclear "ambitions:" it's been bruited all over the news since Ahmadinejad announced Iran would begin further enriching some uranium--to 19.7%. Iran is a member of the NPT (non-proliferation treaty), is inspected by the IAEA, and openly declared what it was doing.

The announcement does not remotely imply that Iran is determined to develop a bomb. Weapons-grade uranium is enriched to above 95%; medical grade is enriched to 19.7%. To reach 95%, Iran would have to build huge complexes--visible from the air.

Radioactive isotopes are used to treat cancer. Iran buys isotopes from abroad, but why shouldn't it produce its own? Japan and South Korea do, Brazil does, Argentina did; none of these are nuclear powers. It's true that all the nuclear powers (including Israel) also produce radioactive isotopes with enriched uranium, but there is a faulty logic to the assumption that this latest action proves that Iran is bound and determined to produce the Bomb.

It does nothing of the kind: granted that all possessors of nuclear weapons produce radioactive isotopes, but not all producers of radioactive isotopes are nuclear powers.

What is telling, however, is that Clinton and Obama are using this non-issue to jab at Iran's leadership and make them sweat (through "targeted sanctions"). It is also telling that China doesn't want to go along with sanctions: she needs Iranian oil, but she also doesn't see Iran as a threat.

Who does? Israel for years has been trying to drum up support for bombing Iran's nuclear plants. The US, even under Bush, had to restrain her. It's the primary reason why Iran has begun to put its nuclear facilities underground.

Why does Ahmadinejad and his government appear so intransigent?

I would be too, if I were abiding by the rules, wanted to modernize my country and was told 'No, No' by the international community. No nation under IAEA's inspection regime has surreptitiously become a nuclear power. We'd know if Iran were really trying to produce nuclear bombs: it would kick out the inspectors first--before it tried.

The other reason for intransigence is that it plays well domestically in Iran: it's not about an effort to build nuclear bombs. Ahmadinejad is posing for his nationalist constituency.

Why does the US push for sanctions, then? Perhaps the most important reasons are: to restrain Israel (see, we're doing something!) and to appear tough back home: if you can scare people, they'll support you! They'll also support huge defense budgets: no one will talk about cutting those now.

Iran, a poor nation of 70 million, is threatening the American Colossus?

Get real.

Political Instability?

Nations painted "politically unstable," make investors wary; they hire ex-CIA for expert assessments. 'Developing' countries have faced this difficulty repeatedly.

The talk in Davos, at the World Economic Forum, was of political instability--in the US. The movers and shakers may be onto something, although it might better be termed political stalemate.

The United States faces huge economic problems, and those problems, now worldwide, spread from America. China is stimulating its economy and so are European nations. Governments are acting; their people are not stopping them.

In the US they are. First, Obama's stimulus was too small and poorly targeted, because of the compromises and deals he made to move it through Congress. So, unemployment is over 10%, instead of the 8% he promised. A logical response would be a second, better-targeted stimulus, but conservatives are screaming that even the first should be cancelled. If it were, unemployment would surge, probably past 12%, and we'd plunge into a renewed Depression.

Second, the deficit has surged; Republicans and tea partiers say government spending must be cut--across the board, except (of course) for Defense. If it were, we'd be in for a "double-dip" recession, not a limp recovery.

Third, Obama's legislative initiatives (health care, financial reform, cap and trade), aimed at rectifying problems that led to this crisis, appear to be dead in the water.

Yet, Obama was elected by a respectable landslide a little over a year ago, and was wildly popular at his inauguration. Furthermore, he brought with him a huge majority to both houses of Congress.

Scott Brown's upset win in Massachusetts, "the bluest state," has blocked whatever momentum there was for Obama's reforms. In polls, generic Republicans beat Democrats easily--only one year after that landslide. So, Democratic legislators are afraid to act.

If Democrats do nothing, they will lose. What alternatives do Republicans offer? The extensively tried and failed "free market" and tax cut policies (for the rich) that drove the world into this hole.

And then there is the Tea Party movement. People in it blame both parties, but offer about the same Republican stale beer, except that the beer is laced with anti-bank, anti-government populism.

Meanwhile "progressive" Democrats rebel against Obama's compromises, withhold votes on the Senate healthcare bill and cap and trade, while other Democrats mutter about losing Wall Street campaign funding--if they pass financial reform. Exacerbating this, the Supremes just rewrote the political rules: corporations can now dominate even more.

If the Republican 'No' party gains Congressional control--then what? Will Obama compromise to return to reward-the-rich, laissez-faire policy? Or would he block it?

We'll face either stalemate, or the ruinous return to Selfish Class control. Only assertive reform will undo this downward spiral.

We Don't Want Yer Money!

My wife, Elizabeth Cunningham, is trying to sell books (The Passion of Mary Magdalen etc.) and her CD (MaevenSong) across borders as well as nationally. But her local bank, Rhinebeck Savings, can't even handle a Canadian postal money-order in US dollars ! Canada is only 5-hours drive from there.

We go to Canada often, both on business and to visit our daughter. Have you tried to change Canadian Dollars into US in this country? In Canada, you can change either way at the border, and in many banks; in the US, I found one gas station, where they took Canadian, because they had enough Canadian customers from 5 miles across the border. But no banks will change Canadian (Pound Sterling, Euros, whatever), unless you go to a major city, and often only if they have a foreign currency department.

Guess we don't want their money. We spend enough abroad; you'd think we'd welcome imports of foreign cash: foreigners buying American, even if only $l2 dollars at a time.

Ever have trouble changing dollars abroad? I haven't, except 40 years ago in India, when I had to make a special arrangement between an American bank in Delhi and Bank of India in the small city where I was doing research. Back then, BoI still used huge leather ledgers to record each transaction; each had to be cosigned by the clerk, his manager, and the bank president--carried from one to the other by the "peon." It feels as if American banks haven't progressed much further, despite all their computerization.

Other countries want to receive foreign currency; from selling their goods, or services, to a foreign country, bringing in foreign reserves. It seems as if American banks do their level best to discourage money from coming in--unless a huge corporation, like Amazon, controls it.

We are also the surliest nation when it comes to foreign tourists crossing our borders. Everyone from abroad is suspect.

No wonder we have such huge trade deficits! Other countries support exporters, their banks bend over backwards to welcome foreign exchange and tourists; US banks do their best to discourage transactions such as charging $50 for routing a $12 money-order back to Canada to an American bank, then back. Why $50? Why only American banks?

My wife had to forego payments from Canada. At very least it would have been money entering this country: she tore up the money-order in front of the incompetent bankers.

Why are they like this? Imperial hubris makes Americans hidebound: only American banks can transfer dollars? It will turn us into dinosaurs. Or a poor, Third World country.