Glocal Econ 10: Vulture Funds and Flying Monkeys

Posted on September 26, 2011 by Tereza Coraggio

Glocal Economics 10: Random Notes and WoD Questions

Definition of Economics: A system of incentives and disincentives through which a community governs itself without resorting to physical force. A community can be a world, a country, a state, a county, a neighborhood, or a family.

In 1933 Rep Louis McFadden quoted the credit manager of the Atlanta Fed as saying, “We are rapidly appraching a situation where the government must issue additional currency. It will very soon be the only move remaining. It should have been the first step in the recovery program.”

In our current situation the imperative is the same but the questions are, “The government or the Fed? And which government – Federal, State, or County?”

History is told from the perspective of the winners. The winners, however, are the ones whose policies have gotten us into this mess. Who we need to study are the losers, whose predictions have come true for what their opponents’ policies would do.

Who are some of the unsung heroes we never hear about? Patrick Henry, John Brown, William Jennings Bryant, Jacob Coxey, Henry Carey…

Telling Palestine that negotiation with Israel is the way to statehood is like telling a slave that negotiation with the master is the way to freedom. Being recognized as a state may not change anything initially for Palestine and may indeed make conditions, as imposed by Israel and the US, much worse. But, like first recognizing slaves as human, it’s the only road to equality.

Web of Debt Questions
Chapter 23: Freeing the Yellow Winkies: The Greenback System Flourishes Abroad

1. What two oppressed groups were the Yellow Winkies? Waterboarding was first initiated in the war against the Philippines. As a research question, what were the Philippines called before a European name was imposed? For further research the radio show History Counts has an excellent episode on The Opium Wars.
2. What stand did William Jennings Bryant take on the Philippine War? To what did Henry Carey attribute their victimization? How did he describe the two opposing systems? How does free trade undermine sovereignty?
3. How did Lincoln prevent the new US from falling into the fate of the Irish, Indians and Chinese? When he was assassinated who did Carey and other nationalists look to form an alliance with for the “American system?”
4. What did the World’s Fair and first Centennial include? In addition to the exhibits, what else happened there? Who adopted the American system after it had been replaced by the British system in the US? How did the Marxist system resemble the British system, where it developed? What did the American system protect against? What is the prejorative term used by politicians for this type of system today?
5. What country backed the Confederacy in the US Civil War? What country backed Lincoln? Who adopted the American system in 1861 and what did they do? How did the nobles undermine the liberation of the peasant class?
6. Describe the February Revolution in Russia, as chronicled by Ed Griffin, author of The Creature From Jekyll Island? Who backed the bloody October Revolution according to Griffin? Who did Lenin and Trotsky overthrow? How did they resemble destabilization experts, as described by John Perkins in Confessions of an Economic Hit Man? What policies of the Tsars did they revive?
7. Using the above definition of economics, discuss whether the dissolution of the People’s Bank of the Russian Republic into a “moneyless economy” was a step towards sovereignty or foreign and elite control?
8. What’s the connection between the Trotskyites and the NeoCons who started the Cold War? What does neo-Con stand for? How does it differ from neo-liberal? What is the goal of the NeoCons? How was their goal accomplished with regard to the Soviet Union in 1989? What happened to the Central Bank of the Russian Federation?
9. What is “shock therapy” and how did it apply to the end of the Cold War? What other terms does it go by and what are the measures it includes? What’s the goal? In 1998 Mark Weisbrot, co-director of the Center for Economic and Policy Research, testified before Congress about the IMF policy results on Russia. What did he say and what statistics did he quote to back up his argument? What was the real culprit, rather than the deficit spending cited by the IMF?
10. How did this discourage the foreign investment it was supposed to incent? What kind of foreign capital was attracted? What was the price in Russia? How did economists blame Marxism for the decline? How did the free market of the Neocons differ from the free market of the American system under Henry Carey and the nationalists? Why have nationalists fallen into disrepute along with protectionists?

Chapter 24: Sneering at Doom: a Bankrupt German Finances a Recovery Without Money

1. What did the Treaty of Versailles impose on Germany? How many times the value of all German property was it? What did speculation do to the German mark? What happened to homes and farms?
2. What did Hitler do that wasn’t possible for a non-dictator? What does this say about Che Guevara’s advice to Fidel Castro, that the only way to assure that social programs wouldn’t be undermined was to institute them under a dictatorship? Why is capitalist democracy especially vulnerable to foreign meddling? Did it surprise you that Hitler, aside from his monstrous actions towards the Jews, did good in terms of economic policy? Do we know what Jewish involvement was in the German banking industry?
3. How did Hitler’s Labor Treasury Certificate plan work? What was its national effect? How did it affect foreign trade and credit? Were these the same thing? What did the view of Gottfried Feder convince Hitler of, according to Stephen Zarlenga’s The Lost Science of Money? Could Hitler have rescued German sovereignty without either the terrible human rights violations against the Jews or the expansionist conquests against Europe?
4. What did the 1938 interrogation of CG Rakovsky allege? What is autarchy? Do you think that there’s a reason that this word, like sovereignty, is not in use today? What are the four ways that Hitler changed the gold-backed German economy? What is “freedom of the exchanges?” Whose side was Winston Churchill on – sovereignty or financial imperialism? What was the effect of Germany’s independent monetary system?
5. For extra research: the Unwelcome Guests episode Patriotism and Militarism. In the second hour Michael Parenti exposes how Churchill could have nipped Nazism in the bud but thwarted efforts to derail it because of a desire for Germany and Russia (two sovereign banking systems) to bleed each other dry.
6. To what does economist Michael Hudson attribute “every hyperinflation in history?” In his 1967 book The Magic of Money what does the currency commissioner for the German Republic Hjalmar Schacht expose about the Weimar inflation and the Reichsbank? Was the Weimar hyperinflation before or after Hitler came to power?
7. What does it mean that Schacht’s refusal to issue the Feder through the Reichsbank may have saved him at the Nuremburg trials? Under what circumstances did he come to agree with Keynes that adding money to the economy did not increase prices? When does it lead to inflation? Which situation are we in?

Chapter 25: Another Look at the Inflation Humbug: Some “Textbook” Hyperinflations Revisited

1. What does John Maynard Keynes say is the surest means of overturning a society? Why? What is the real cause of inflation, if not a sudden flood of new currency? For extra credit listen to History Counts’ episode A Century of War interviewing William Engdahl.
2. In 1992, the IMF demanded a free float of the Russian ruble. How much did consumer prices rise by and how much did wages collapse by? What goal does Engdahl purport the IMF to have? What does he term this strategy? What does he call the elite rulers of this new regime?
3. In Yugoslavia’s hyperinflation of 1993-94, to what was it attributed and what was its real cause? Why did Washington change its support of the Communist leader Tito? For what other reason was Yugoslavia a strategic target? What is the “Tequila Trap?”
4. How many Yugoslavian companies were bankrupted as a result and how high did unemployment go? When Milosevic tried to prevent the breakup of the federated Yugoslav Republic, how long did the civil wars last and how many people died?
5. When the US imposed a total economic embargo in 1992 what did unemployment rise to? What did the US media blame this on? How does this compare to the Ukraine? How did US food aid then destroy Ukraine food self-sufficiency?
6. What was the inflation in Argentina in the late 1980s? What mistake did populist leader Juan Peron make? After Peron’s death what intentional acts caused an inflationary stampede? How did it benefit private firms and exporters?
7. How did “exchange insurance” work? What other policy was enacted, and why was it the opposite of a nationalist or protectionist policy? What were petrodollar loans and how did they combine with skyrocketing interest rates to be disastrous?
8. What was the dollar peg imposed by the IMF and how were pesos backed? What did it lead to? What did Argentina do then, with how much in debt? By the fall of 2004 what had happened as a result?
9. When inflation did become a problem in 2004, why did export bans curb it? President Nestor Kirchner’s 2006 payment in full of the IMF debt is controversial, as voiced by economist Adrian Salbuchi. He sees it as stolen from the people and alleges personal gain. Do you think that it was wise and necessary or fraudulent and futile? Is Argentina now in debt to Venezuela, who’s imposing high interest rates?
10. How were his efforts thwarted to get the central bank’s dollar reserves debt-free? What are vulture funds? When organizations like Jubilee succeed in getting amnesty for third-world debt how do vulture funds negate their efforts? Listen to the Third Paradigm on Clash of the Continents: Climate Debt for more information on vulture funds.
11. What has Zimbabwe’s inflation reached? What does Ellen Brown that Zimbabwe should have done? Would international investors have allowed it, or would the iron fist have replaced the velvet glove? Should the IMF motto be, as John Perkins hints, “Seduce if you can but rape if you must.”

Posted in Global Currencies, Uncategorized, Web of Debt | Comments Off on Glocal Econ 10: Vulture Funds and Flying Monkeys

Glocal Econ 9: Ponzi Schemes and Petrodollars

Posted on September 7, 2011 by Tereza Coraggio

Questions for Chapter 20: Hedge Funds and Derivatives: A Horse of a Different Color

  1. What’s the difference between a hedge fund and a margin account? How do hedge funds make “absolute returns” (like absolute numbers in math) that make a profit whether the change in the market is positive or negative?
  2. Where does the money in hedge funds come from? Who controls them and from where? How does their location benefit them and harm us? What’s the relationship between the modern hedge fund and the “pooling” of the 1920’s? What percentage of daily trading in equity markets are they responsible for?
  3. How many hedge funds are registered in the Cayman Islands out of how many in total? What does the Cayman Island registration give them?
  4. How do derivatives relate to hedge funds? What are they? What is the form called a “put” or a “call”? Are most of these available to ordinary people?
  5. How did Glass-Steagall and the Commodities Futures Trading Commission protect ordinary market participants? How did derivative traders get around the regulators?
  6. John Heofle called the derivatives market “the last gasp of a financial bubble.” Do you agree? Explain how money created by loans on a computer screen can be “borrowed” from the bank even though it’s been lent out.
  7. What is a “notional value?” How many times the US GDP is the notional value of the derivatives market? How many times the global GDP? Is this a harmless thing, since it’s just funny money, or does it have real world consequences?
  8. How many commercial and savings banks are there in the US? How many hold 97% of derivatives?
  9. George Soros is the mentor of Jeffrey Sachs, author of The End of Poverty, who is in turn mentor to Bono. Is he really a benign philanthrope, as he’s portrayed, when he collapsed the currencies of Great Britain and Italy in a single day? Was this to show the danger and destructive power of the system? What about the Asian currency crisis?
  10. If assets (houses) are taken off the books by paying off mortgages through self-directed IRAs, will it bankrupt the banks? How are banks keeping their “underwater” mortgages from defaulting while cashing in on high-equity properties? Are our banks already zombies, the walking dead among us?
  11. When houses default, who has paid more for them, the buyer who put down 10% or the bank that created the loan out of 10% of the other 85% – paying 8.5%? Who should retain ownership in the case of a dispute?
  12. When Wall Street wins, who are the biggest losers? What were the twin weapons used by the British Empire to colonize the world? What has the first one morphed into? What’s the first step of this process?

Section III Enslaved By Debt: The Bankers’ Net Spreads Over the Globe

Chapter 21: Goodbye Yellow Brick Road: From Gold Reserves to Petrodollars

  1. What two US presidents took the dollar off the gold standard and for what reasons? Who was the last president to take a real stand against business and banking interests and how did he do it? What was his foreign policy in Latin America? What other monetary policy might he have been considering, had he lived?
  2. As we commemorate the 10th anniversary of 9-11, how was “Operation Northwoods” a chilling premonition?
  3. How are “floating” currencies vulnerable to devaluation attacks? How did Bretton Woods address this? What is a “peg”? How did the US dollar substitute for gold for awhile? How did France and later Great Britain deplete the US gold supplies?
  4. Describe Professor Antal Fekete’s scathing criticism of taking the dollar off the gold standard. What problems, however, did the gold standard create in international trade? What is gold responsible for historically? What are its environmental and human rights impacts currently?
  5. How were nations resistant to floating exchange rates coerced into it? What suspicious event created the conditions that forced countries into debt, and who engineered it? Describe John Perkins’ account of the event.
  6. What was the US dollar now backed by? How did this affect trade around the world? Did the IMF give good advice to “negative trade balance” countries to “unpeg” their currency from the dollar?
  7. What are the hazards of pegging to the dollar? Define “capital flight” and “vulture capitalists.” Describe the third alternative and how it helped China escape the 1998 Asian crisis.
  8. Discussion Question: Are there alternatives to any of these? Should countries have two separate currencies – one for internal trade and one for international trade? Does there need to be a currency for international trade or should goods be traded directly, ensuring a trade balance?
  9. By what percentage did the price of oil increase in the 1970’s? How do “red elephant projects” in Third World countries relate to petrodollars? How did things change in 1973? What is “stability” a code word for?
  10. Discuss the difference between a country and a corporation in terms of debts, liabilities, accountability and profits.
  11. How much did Fed president Volcker raise interest rates by within a few weeks? To what level did they go? What was this in reaction to? What was the impact globally?
  12. What was the role of the IMF? What happened simultaneously in the US? How did the petrodollar cause the US to become a consumer/debtor nation where “we make dollars and other countries make things that dollars can buy?” By 2006 how much foreign capital did the US need to bring in daily to fund its debt?

Chapter 22 The Tequila Trap: The Real Story Behind the Illegal Alien Invasion

  1. How was Mexico destroyed, first militarily and then economically? What drove the twentieth-century assault on Mexico? Elaborate on the mechanism by which its thriving economy was crippled through raids on its dollar-pegged currency.
  2. What did President Portillo do in response? What did Henry Kissinger’s consulting firm design? Is it well known, do you think, that the similar Versailles reparations process in 1920 propelled Germany into starting WWII?
  3. After NAFTA eliminated all protections against foreign investment why did President Zedillo devalue the peso and allow it to float? What did that lead to? What suspicious activity preceded the collapse and who engineered the Mexican bailout? Where did US taxpayer money go? Sound familiar?
  4. What was the big payoff that had Wall St. popping champagne corks? What are the affects of the austerity measures that David Peterson lists in “Militant Capitalism?” Contrast the debt in 1995 to the previous century and a half.
  5. Discussion question: What can we learn from the Mexican depression about how to protect our businesses and assets when the artificially inflated dollar finally pops? Is the “Tequila Trap,” as Henry C. K. Liu calls it, suicidal for everyone – both countries and corporations? Why weren’t those who sounded the warnings listened to, and is there any way to change that?
  6. What does the media blame currency crises on? Who actually engineers them and for what purpose? What happens to producers when a currency is devalued?
  7. Describe “sovereign credit.” What are the pros and cons of it?
 

 

 

 

Posted in Global Currencies, Uncategorized, Web of Debt | Comments Off on Glocal Econ 9: Ponzi Schemes and Petrodollars

The People’s Bank of Cal-if-ornia

Posted on September 4, 2011 by Tereza Coraggio

There are those who feel that California, with the eighth-largest economy in the world, is still too big to be trusted with a publicly-owned bank. Perhaps it should be split into three. The sunny, showy south, which everyone thinks of anyway as California, could continue to be the State of Cal. Those feisty, independent northerners would become the State of Ornia. And we in the middle might be called the State of If.

I’m certainly an Iffian myself. I’d gladly join our Santa Cruz revenues with San Francisco, Napa Valley, Monterey, San Luis Obispo and San Jose. But until that time a public bank of California would be a step in the right direction.

Ellen Brown has written a new article for Yes! magazine called “North Dakota’s Economic ‘Miracle’ – It’s Not Oil.” In her usual clear and compelling style she shows how the Bank of North Dakota has keep employment high and foreclosures low.

Timothy Canova is Professor of International Economic Law at Chapman University School of Law in Orange, California. In a June 2011 paper called “The Public Option: The Case for Parallel Public Banking Institutions,” he compares North Dakota’s financial situation to California’s.

These are both worth reading. Thanks to Ellen for the second citation, and thanks to Mike for alerting me to Ellen’s article.

Also in this week’s Unwelcome Guests is an interesting episode on Radical Democracies. It begins with a talk by Professor David McNally, author of Global Slump: The Economics and Politics of Crisis and Resistance and Another World is Possible: Globalization and Anti-Capitalism. Pertinent to our economic solutions, he traces the reclaiming of localized government starting with the 2000 Cochabamba ‘Water Wars’, in which people defied police bullets to drive Bechtel out of the country. Then we hear how in 2006 the teachers’ union in Oaxaca, Mexico, went on strike for books, shoes, and doctors for the children. In response people rallied in the hundreds of thousands to protect them from the attacks of local and national police, culminating in an anti-government movement which found people running their own media and policing their own streets. He then speaks about the great popular uprisings in Tunisia and Egypt.

On the topic of food sovereignty I recently read an article in the Indian newsletter Pro-Poor called “Requiem for Sustainable, Subsistence Agriculture” that describes a way of life remembered as “a dreamland where people were always happy.” It reminded me of a favorite book called The Other Game: Lessons from How Life is Played in Mexican Villages. This is the review I posted for it at Amazon:

5.0 out of 5 stars The Game of Life or Monopoly?, June 7, 2008
By
Tereza Coraggio (Santa Cruz, CA) – See all my reviews
This review is from: The Other Game: Lessons from How Life Is Played in Mexican Villages (Paperback)

There’s an implicit question raised by The Other Game, which is relevant to all of us. Which is the game we want to play? Dahl-Bredine and Hicken depict lives that are productive and rich in meaning, wisdom, and sharing. They demonstrate how the unwritten protocols of this Oaxacan village keep the society tending towards a more inclusive distribution of wealth. This is accomplished through festivals of generosity, self-funded and rotating leadership roles, and work projects in which everyone contributes to the community’s well-being.

In an interlude at the center of the book, the authors detail the unwritten assumptions by which we operate. I found this a good common ground for discussion.

This book is particularly useful for those of us trying to figure out how we can be *individually* such good people and *collectively* doing such terrible things. We’re focused on winning a game whose rules benefit the casino owners. It’s time to walk outside and see how the other 80% lives. It will prepare us to walk back inside and change the game.

Posted in Banking, Economic Models | Comments Off on The People’s Bank of Cal-if-ornia

Glocal Econ 9 – How Societies Work

Posted on August 23, 2011 by Tereza Coraggio

Homework Due:

  • Web of Debt Ch. 20, 21 & 22
  • Wizards of Money audio episode 9: Jack and the Sweatshop
  • Read and critique John David’s paper “Austerity for Most or Prosperity for All? (Common Sense for Our Upside-Down World.)
  • Read and critique this report from the New Economy Working Group.

To help with this, I’d like to summarize some of the rules I’ve found to hold true in studying how societies work:

Coraggio’s Rules of Governance

  1. For taking responsibility, smaller is better. (rule of sovereignty)
  2. For taking what isn’t yours, bigger is better. (rule of imperialism)
  3. In a good system, leaders can be chosen by chance. (random ruler rule)
  4. In a bad system, good leaders can’t make a difference. (impotence rule)
  5. There are only two types of direct action: military and economic. If militaries served a just purpose, unjust economies could never be imposed. If economies served a just purpose, militaries would never be needed. (codependence rule)
  6. There’s only one type of indirect action: communication, which includes politics, religion, art, media, education, and parenting. Communication is the leverage point that can move economies and militaries to a new purpose. (fulcrum rule)
  7. If an individual or society can use communications or economics to affect change, violence is counterproductive. If they can but they don’t, they collaborate in violence. (rule of complicity)
  8. Defending the helpless against a vastly superior force isn’t terrorism. Killing for a purpose you’re not willing to die for is terrorism. (rule of ethics)
  9. All purposes boil down to two: giving all people power over themselves (sovereignty) or giving some people power over others (imperialism). Wars are started by those who share the second purpose but dispute who the “some” should be. Wars are fought by those who share the first purpose. (rule of war)
  10. Every dictator wants peace. Peace is meaningless without knowing if it’s a just peace of sovereignty or a Pax Romano of imperialism. (rule of peace)
  11. To test if an action is just, reverse the roles. (law of reflection)
  12. If people are equal, ideas are not. If ideas are equal, then people are not. (law of logic)
  13. There isn’t anything that can’t be done. The question is how bad things have to get first. (law of necessity)
  14. However bad they have to get, they will. (law of inevitability)


Posted in Economic Models | Comments Off on Glocal Econ 9 – How Societies Work

Glocal Econ 8 – Bear Raids and Hedge Fund Hogs

Posted on August 1, 2011 by Tereza Coraggio

Q’s for Chapter 17 – Wright Patman Exposes the Money Machine

  1. Wright Patman saw big business, chain stores, and tax-exempt foundations as complicit with the Fed in opposing farmers and small businesses. Are these considered Main Street? Is there a third option rather than Wall St. vs. Main St?
  2. What percentage of money created has a physical form in coins and bills? How is the rest created? Describe the process by which the Treasury bonds not bought by the public are “monetized” by the Fed. How can the Fed expand or contract the money supply? What limits the amount of money the Fed can create?
  3. If the Fed was forced by Wright Patman to give back most of the interest paid by the US Government, what is the real advantage in making the money that’s loaned out?
  4. What are transaction deposits or demand deposits vs. time deposits? Why do credit unions now offer higher interest on their demand savings deposits (.25%) than on CDs?
  5. When a CDO (collateralized debt obligation) for a $500,000 house is sold to a hedge fund, how much does that allow the bank to loan out? If that loan is paid off early, does the bank buy the loan back from the hedge fund? What does that do to its reserves?
  6. How long does it take $100 million in Treasury bills “bought” by the Fed to double? What percent of its profits are returned to the Treasury? Does this include the interest from loans made from these reserves?
  7. What is off-limits to the annual audit by the GAO arm of Congress? How did Wright Patman and Jerry Voorhis of California propose to nationalize the Fed? What happened to them and who did Voorhis lose to?

Q’s for Ch. 18 – A Look Inside the Fed’s Playbook

  1. How is a loan really a deposit for a bank? How does a bank loan money without affecting its reserves? Explain double-entry bookkeeping.
  2. What is the “banker’s bank”? Where is it located?
  3. How much of a bank’s alloted “reserve balance” is invested rather than loaned? What was the Glass-Steagal Act and how did it affect bank investments? What are “Chinese walls”?
  4. Define proprietary trading. Explain the example of how Goldman Sachs made a killing playing both sides. How do the investment banks compare to hedge funds?
  5. Define private equity and the equity market. How much are some proprietary traders paid in a year? How much did Henry Paulson make?
  6. These equity arms are some of the largest buy-out firms in the world. Give an example of why they would be called “vulture capital.”
  7. Research question: In the first Great Depression, what did the banks do with the “strings of houses” they had from defaulted mortgages? Did they sell them for whatever current US citizens could afford? Did they sell them to foreigners? Did the wealthy buy them up or did the bankers themselves come to own them? Did they board them up and have the police prevent the newly homeless from entering?
  8. Research question: What did the recent audit of the Fed find? (Hint: see John David’s research paper, “Austerity for Most or Prosperity for All?”)

Q’s for Ch 19 – Bear Raids and Short Sales: Devouring Capital Markets

  1. What were the years of the stock market’s decline precipitating the Great Depression? At the end what percent was it of its original value? To what does Roosevelt attribute this decline?
  2. Define a bear raid and a short sale. Give an example of how they work to devalue a company’s share price.
  3. What are stop-loss orders and margin calls? How are margin calls related to the fractional reserve system? Describe how these can be used in a hostile takeover. Why is a short sale a form of counterfeiting?
  4. What is the difference between a mutual fund and a hedge fund? Which one is more likely to profit and which one to take the loss?
  5. Explain how hedge funds can vote their short sales at shareholder meetings. Why would they do this? What happens when too many real owners vote their proxies?
  6. Explain the up-tick rule of the 1933 Securities Act. Before it was repealed in 2007 how did hedge funds get around it?
  7. What is a naked short sale and how does it differ from a short sale? What is a market maker and how much of the naked short sales do they do, along with broker-dealers? How did Richard Simpson demonstrate the amount of phantom shares that are in circulation through naked short sales?
  8. Describe the difference between a primary market and a secondary market. Which one is the stock market? Does any of the money paid for a stock go into expanding the company? What is the stock market REALLY?
  9. The Depository Trust Company was exposed in an article called Stockgate. What did it allege? How much money has been stripped from American investors? How many small-to-medium size companies were shorted out of existence over six years? When the DTC “dematerializes” a stock and “re-hypothecates” it, what does it do? How is the DTC incentivized by its Stock Borrow Program?
  10. How did short sales affect the crashes of 1929-1933? According to “The Faulking Truth” has the SEC changed these destructive practices?
  11. Compare short sales in the stock market to the counterfeiting of the Continental in the currency market. What is a derivative and what does Warren Buffet call them? Describe what this does to Third World countries.
Posted in Banking, Mortgages, Stock Market, Uncategorized, Web of Debt | Comments Off on Glocal Econ 8 – Bear Raids and Hedge Fund Hogs

Glocal Econ 8: Locked Stocks and (Over a) Barrel – How Finance Controls Trade

Posted on July 28, 2011 by Tereza Coraggio

Homework Due:

On Life and Debt, a Bermudian named Christian Dunleavy posted this comment:

Without wanting to provide a review, the main thrust of the 80 minute documentary is the interaction between the IMF and Jamaica, and the impact of IMF policies on a newly independent nation. In light of Bermuda’s latest flirtation with independence I was increasingly interested in any parrallels and lessons that Bermuda could learn from Jamaica’s experience.

A couple of quotes that really hit home for me:

Stephanie Black (Narrator):“When we wished for independence from Great Britain – we had something else in mind. We cannot now remember what that was. So you could imagine how I felt when one day driving on the Queens Highway I asked myself, ‘is the Jamaica that I see before me self-ruled, a worse off place than when dominated by the bad minded English?'”

and

Former Jamaican Prime Minister Michale Manley:“Countries like Jamaica found that when they became free, they soon were in every kind of financial problem, because they didn’t have the economic strength to make it on their own. They needed time to build economies that could then make it in the world.”

Those quotes really struck me hard. Why?

Well, the question before us with independence is at its core whether we as Bermudians will be better off as an independent nation or do we gain more from the relationship with Britain than we have to give away.

While arguments can be made on both sides of the issue I couldn’t help but note the economic advantage that an aspiring independent nation, Jamaica, had when compared to Bermuda. Jamaicans were independent from Great Britain but they became to this day totally dependent on the IMF! They traded one relationship for another much worse one. Jamaica as a small nation with no power on the world stage had no clout. They couldn’t call on Britain’s vast influence to help them. They were on their own and we see the result.

Yes Bermuda currently has a strong economy – but it is 100% service based and heavily reliant on imported expertise. We have no resources, no exports and we import everything!

Jamaica, on the other hand, was self sustaining with agriculture and actually generated exports (bananas) to bring in revenue and create jobs. Bermuda could never be self-sustaining while a country like Jamaica actually could – and look where Jamaica is now.

From his name, I’m guessing that Mr. Dunleavy might be of British origin – maybe that’s why he sees this as one or the other.

For Wizards of Money 8, consider the following questions for discussion:

  1. Smithy talks about money’s power being equal to the confidence we have in this number-shuffling system that determines who has the right to what. Is it the same in countries like Jamaica where there is no circulation of money?
  2. “Managed earnings” are described as a show put on for investors so that a loss over here equals a gain over there. What’s the harm in this? How does money borrowed from anonymous sources relate to off-shore tax havens?
  3. What was Enron’s relationship to the California energy debacle? Was this a manufactured crisis?
  4. Smithy’s closing point is that Enron’s demise was instigated by democratic resistance to water privatization, while the US “democracy” was Enron’s greatest ally. Could this portend a future for companies like Pfizer and Monsanto and whole industries like pharmaceuticals and agriculture? What will it mean to us if the producer nations, often called the third world, simply refuse to play ball when it comes to trade?

Also Karen recommends this report from the New Economy Working Group. We’ll discuss it in more detail next class. Camille points out that Khan Academy has an excellent teaching series on banking and finance. As a former hedge manager, Salman Khan knows his stuff and seems to give the straight scoop. But he does it in the same matter-of-fact way he teaches addition, which is good for getting around nay-sayers.

John Sears recommends Chris Martenson’s Crash Course series and especially the “What Should I do?” link. John David has just completed a 20-page, single-spaced treatise on how the economy works and how to fix it. We’ll be examining both in the future.

Posted in Banking, Stock Market, Uncategorized | Comments Off on Glocal Econ 8: Locked Stocks and (Over a) Barrel – How Finance Controls Trade

Political Theater and the Spell of Money

Posted on July 28, 2011 by Tereza Coraggio

In this very good short article on Common Dreams, Dennis Kucinich writes that Debt Political Theater Diverts Attention While American Wealth is Stolen:

We have to realize what this country’s economy has become. Our monetary policy, through the Federal Reserve Act of 1913, privatized the money supply, gathers the wealth, puts it in the hands of the few while the Federal Reserve can create money out of nothing, give it to banks to park at the Fed while our small businesses are starving for capital.

Mark my words — Wall Street cashes in whether we have a default or not. And the same type of thinking that created billions in bailouts for Wall Street and more than $1 trillion in giveaways by the Federal Reserve today leaves 26 million Americans either underemployed or unemployed. And nine out of ten Americans over the age of 65 are facing cuts in their Social Security in order to pay for a debt which grew from tax cuts for the rich and for endless wars.

There is a massive transfer of wealth from the American people to the hands of a few and it’s going on right now as America’s eyes are misdirected to the political theater of these histrionic debt negotiations, threats to shut down the government, and willingness to make the most Americans pay dearly for debts they did not create.

These are symptoms of a government which has lost its way, and they are a challenge to the legitimacy of the two-party system.

John’s sister recommends this article from Orion magazine on Breaking the Spell of Money:

In spite of the worldwide suffering caused by this casino capitalism, the financial reform bill passed by Congress in the summer of 2010 does little to rein it in. The managers of hedge funds, for example, have kept their operations essentially free of oversight, while preserving the loophole that treats their earnings as capital gains, taxed at 15 percent, rather than as regular income, which would be taxed in the top bracket at 35 percent. In 2009, when the CEOs of the twenty-five largest American hedge funds split over $26 billion, this cozy arrangement cost the Treasury, and therefore the rest of us, several billion dollars in lost tax revenue. When President Obama urged Congress to close this tax loophole, the billionaire chairman of one hedge fund responded by comparing such a move with the Nazi invasion of Poland.

Scott Russell Sanders also writes:

“Saving the economy” is the slogan used to defend every sort of injustice and negligence, from defeating health-care legislation to ignoring the Clean Water Act to shunning the Kyoto Protocol on Climate Change. But should we save an economy in which the finance industry claims over 40 percent of all corporate profits and a single hedge fund manager claims an income equivalent to that of twenty thousand households? Should we save an economy in which the top 1 percent of earners rake in a quarter of all income? Should we embrace an economy in which one in ten households faces foreclosure, 44 million people live in poverty, and 51 million lack health insurance, an economy in which the unemployment rate for African Americans is above 17 percent and for all workers is nearly 10 percent? Should we defend an economy that even in a recession generates a GDP over $14 trillion, a quarter of the world’s total, and yet is supposedly unable to afford to reduce its carbon emissions? Should we serve an economy that represents less than 5 percent of Earth’s population and yet accounts for nearly half of world military spending? A reasonable person might conclude that such an economy is fatally flawed, and that the flaws will not be repaired by those who profit from them the most.

Sanders concludes:

What should we do? Not as any sort of expert, but as a citizen, I say we need to get big money out of politics by publicly financing elections and strictly regulating lobbyists. We need to preserve the estate tax, for its abolition would lead to rule by an aristocracy of inherited wealth, just the sort of tyranny we threw off in our revolt against Britain. We need to defend the natural and cultural goods we share, such as the oceans and the internet, from those who seek to exploit the common wealth for their sole profit. We need to stop private-sector companies from dictating research agendas in our public universities. We need legislation that strips corporations of the legal status of persons. We need to restore the original definition of a corporation as an association granted temporary privileges for the purpose of carrying out some socially useful task, with charters that must be reviewed and renewed periodically by state legislatures. We need to enforce the anti-trust laws, breaking up giant corporations into units small enough to be answerable to democratic control. We need to require that the public airwaves, now used mainly to sell the products of global corporations, serve public interests.

Posted in Uncategorized | Comments Off on Political Theater and the Spell of Money

The 1% Solution – NOT!

Posted on July 16, 2011 by Tereza Coraggio
John writes,

If you want to have something to put the current Federal budget posturing into perspective, I recommend Chapter 17: “Wright Patman Exposes the Money Machine.” I looked at the Wikipedia entry for Patman and it mentions nothing about his long Ron Paul-like opposition to the Fed. Wiki anyone?

Another gem I read was Joseph Stiglitz’s article in a recent Vanity Fair article. I was impressed by it’s concise description of US wealth concentration and it’s distorting effects: a good article to share. It had not occurred to me for example, that the preponderance if not all senators would have to vote against their own interests to impose taxes or close loopholes for the wealthiest 1% because they are themselves in that club.
It’s refreshing that this excellent article doesn’t talk about the right vs. left, Republicans vs. Democrats – implying that we’re divided against each other. Instead, it makes it clear that it’s 99 of us for every one of them. More likely, it’s 99999 of us. It neither excuses nor acts surprised that the government functions like it does, but says that it would expect a government run by the 1% to act exactly this way. John continues:

I still am pondering the Fed having taken toxic debt onto their books from member banks and replacing it with some of that “sleight of hand” money so it would seem that the banks had reserves (on which to make loans). I wonder if they can also by sleight of hand dump the toxic junk on the taxpayer? I haven’t read this yet but Barney Frank mentioned it and I found it. http://finance.fortune.cnn.com/2011/07/08/surprise-the-big-bad-bailout-is-paying-off/

This CNN articles explains why the bailout was a good investment this way, “The Fed now owns almost $2 trillion more of securities than it did before financial problems surfaced in 2007. A normal financial institution would have had to borrow heavily to add $2 trillion of assets, and interest on that borrowed money would have offset most or all of the income from the added assets. The Fed, though, doesn’t have to borrow: It effectively creates money (which has its own problems) to buy the securities. So the Fed’s income on its added securities is pure profit.”
But are the $2 trillion the Fed conjured up just Harry Potter bucks, with no cost? Au contraire. All once and future dollars had the corners snipped off of them to be showered like confetti on the 1%. This devaluation of the dollar translates into austerity measures, more debt, no social services, and thinly-veiled threats for what will happen if the US defaults.

I’m thinking the two main GOP factions are the old guard chaired by Boehner who serve the corporate interests for whom default is a threat akin to having the music stop in a game of musical chairs, and the Tea Partiers who were invented by the Koch contingent who want the music to stop and for the fire sale to begin because they are the 1% fabulously wealthy buried in cash. One group wants the money to keep flowing, the other wants to cause more companies and real estate to go under and come onto the market at fire sale prices so they can “invest.”

While this is an astute description of two halves of the 1%, most Republicans aren’t in that tiny margin. So why are they going along with it?

Meanwhile, Jerry sends this link on Bernal Bucks – a new local currency in SF. Maybe we can do this neighborhood by neighborhood.

Posted in Banking, Economic Models, Local Currencies | Comments Off on The 1% Solution – NOT!

Glocal Econ 7: Water Slipping Through Our Fingers Like Money

Posted on July 7, 2011 by Tereza Coraggio

Homework due:

Q’s for Ch. 14 – Harnessing the Lion: The Federal Income Tax

  1. What does direct taxation mean? What are excise taxes? What was the deal struck in the Federalist Debates? Was Ben Franklin’s statement true about death and taxes?
  2. How many years did the US not have an income tax? When it was needed to support a war, what was the rate and how was it collected? What percent of the population did it apply to? What income bracket would that affect today?
  3. How did the Supreme Court rule concerning income taxes? How did Wall Street get around it? Why didn’t this concern wealthy businessmen?
  4. What does “passing the buck” really mean? How did Roosevelt increase the percentage of taxpayers from 3 to 62? What percent of the average citizen’s income may be going to taxes?
  5. How many States did Bill Benson discover that had ratified the 16th Amendment?
  6. Who was Philander Knox and what did he do for Carnegie, for McKinley, for JP Morgan, and for Rockefeller? How was he rewarded? Is he any relation to Fort Knox?
  7. What was the original purpose of the federal income tax? What percentage is spent on government services, according to the Grace Commission Report? How is the rest spent?

Q’s for Ch. 15 – Reaping the Whirlwind: The Great Depression

  1. What year did the stock market crash? How did the Roaring Twenties set things up for the Great Depression? What did the Robber Barons convince people to do in the stock market? What is “betting the farm?”
  2. What did Strong and Norman determine to do? How did this lead to a crash of the stock market? How did the wealthy insiders avoid the collapse? What was their key gain from the Depression?
  3. What was put into place instead of disbanding the Federal Reserve? Who funded it and who did it serve? What’s the difference between a payoff, a sell off, and a bailout? How does the IMF relate to the FDIC?
  4. What did Congressman McFadden do regarding the Federal Reserve Board? From observing the Board members interviewed in Inside Job and The Fed Under Fire, what do you think of them?
  5. What was The Banker’s Manifesto of 1934 and what did it say? What did it recommend for bankers to do, how would this benefit the bankers, and what was the overarching goal?
  6. Who ran for office 13 times and on what Party ticket? Who won against him? How was his economic plan put into practice? How did it differ? How was he honored at 90?
  7. How did William Hope Harvey, author of Coin’s Financial School, view debt? What was the mechanism by which it worked, and to what would it lead? What was the sleight-of-hand at the heart of it? What was his solution?

Q’s for Ch. 16 – Oiling the Rusted Joints of the Economy: Roosevelt, Keynes and the New Deal

  1. What are some of the programs that the New Deal enacted? What does “parity-pricing” mean? What replaced it and at what cost?
  2. Who suggested borrowing to “prime the pump?” What’s another term for this? What did he suggest for the IMF’s reserve currency? What was chosen instead?
  3. How did it affect unemployment? Inflation? Although it turned classic theory on its head, what was its fatal flaw? In seven years what happened to the federal income tax? How many times over did the federal debt increase from then to 2005, and how much has it risen to today? How did this affect the US family?
  4. Explain Robert Hemphill’s argument for issuing debt-free money. What did Congressman Wright Patman say we needed to get back to? How did Roosevelt sidestep the banking cartel? What did he change about the Federal Reserve?
  5. What controversial step did Roosevelt take? What led him to do this? How did he do this? Is there a clue here to solving our current dilemma?
  6. What happened to private owners of gold? What did McFadden accuse Roosevelt of doing? What did he call the bankruptcy of the Fed?
  7. By 1929 how many companies were in charge of half of all US industry? What important legislation did Roosevelt pass and what did it do? What commission was formed? Who testified before Congress that he’d been commissioned by the Morgans to kill Roosevelt? Do you know anything more about this historical figure?
  8. What did the Thomas Amendment authorize? What happened to McFadden?
Posted in Economic Models, Stock Market, Uncategorized, Web of Debt | Comments Off on Glocal Econ 7: Water Slipping Through Our Fingers Like Money

Greece and the Secrets of the Temple

Posted on June 30, 2011 by Tereza Coraggio

Jon Stewart did a riff on the Greek riots here:

Followed by this explanation of the credit default swaps:

Question for discussion: is the early retirement age for Greeks the reason for the country’s debt, or was Greece’s social security fund the reason that the IMF and Goldman Sachs targeted them? Is it like Ireland where the IMF was looking to raid their retirement account? Would they be better off going off the Euro and back to a decentralized currency? Would they be better off by defaulting on their debt now rather than later, as Mark Weisbrot suggests on Democracy Now.

John Sears sent these referrals from the Daily Bail:

An interview with the Dallas Fed President Richard Fisher :

After watching the interview with this Dallas Fed President and the interview with the Fed Board member on Inside Job, I wonder if they find any patsy who’s flattered to be asked and doesn’t think too deeply to put in these positions.

Posted in Banking, Global Currencies | Comments Off on Greece and the Secrets of the Temple