Finance and Economy

Are Public Banks Unconstitutional? No. Are Private Banks? Maybe.

May 21, 2014 Ellen Brown, www.ellenbrown.com Educate! Finance and Economy, Public Banking, Wall Street

The movement to break away from Wall Street and form publicly-owned banks continues to gain momentum. But enthusiasts are deterred by claims that a state-owned bank would violate constitutional prohibitions against “lending the credit of the state.” California’s constitution is typical. It states in Section 17: “The State shall not in any manner loan its credit, nor shall it subscribe to, or be interested in the stock of any company, association, or corporation . . . .” The language sounds prohibitive, but what does it mean? Hundreds of state and local government entities extend the credit of the state. State agencies make student loans, small business loans, and farm loans. State infrastructure banks explicitly leverage the credit of the state. Legally, state and local governments are extending their credit to private banks every time they deposit their revenues in those banks. When money is deposited, it becomes the property of the bank by law. The depositor becomes a creditor with an IOU or promise to be repaid. The state or local government has thus lent its money to the bank. How can these blatant extensions of the state’s credit be reconciled with the constitutional prohibitions against the practice?

Latest Jobs And Housing Reports Show Americans Are Struggling More Than Ever

May 21, 2014 Steven Rosenfeld, www.alternet.org Educate! Finance and Economy, Inequality, Recession

The latest nationwide jobs and housing statistics released this week suggest that America is no longer a country where—for most people—the future is going to be better than the past. The percentage of people in most age and education levels in jobs compared to 2008 is down. The number of people holding multiple jobs is up. Average hourly wages have barely grown, compared to 2008. The number of people who are willing to leave their job for a new one is down. All of those trends are in the latest report from the U.S. Bureau of Labor Statistics (BLS)—and there are even more depressing economic signs. More than one-third of Americans who bought homes are trapped by that debt, according to the real estate data website Zillow.com. Some 9.7 million homes, which is 18.8 percent of U.S. homeowners, owe more than their homes are worth. In another 10 million homes, the buyer’s equity is below 20 percent, which means they can’t sell and buy another home unless they find another way to cover all the transaction costs. Taken together, the BLS report on the working class and the Zillow report on the middle class suggest that the country, despite virtually every politican’s assertion to the contrary, does not have its best days ahead. It may be that America’s best days—when the promise of hard work and playing by the rules led to economic security—is a thing of the past.

Students Call For Economics To Break From Free Market Theory

May 6, 2014 Phillip Inman, www.theguardian.com Resist! Finance and Economy, Student Activism

Economics students from 19 countries have joined forces to call for an overhaul of the way their subject is taught, saying the dominance of narrow free-market theories at top universities harms the world's ability to confront challenges such as financial stability and climate change. In the first global protest against mainstream economic teaching, the International Student Initiative for Pluralist Economics (ISIPE) argues in a letter to the Guardian that economics courses are failing wider society when they ignore evidence from other disciplines. The students, who have formed 41 protest groups in universities from Britain and the US to Brazil and Russia, say research and teaching in economics departments is too narrowly focused and more effort should be made to broaden the curriculum. They want courses to include analysis of the financial crash that so many economists failed to see coming, and say the discipline has become divorced from the real world. "The lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability to food security and climate change," they say in their manifesto.

Enron-style Price Gouging Is Making A Comeback

May 3, 2014 David Cay Johnston, www.america.aljazeera.com Educate! Corruption, Energy, Finance and Economy

The price of electricity would soar under the latest scheme by Wall Street financial engineers to game the electricity markets. If regulators side with Wall Street — and indications are that they will — expect the cost of electricity to rise from Maine to California as others duplicate this scheme to manipulate the markets, as Enron did on the West Coast 14 years ago, before the electricity-trading company collapsed under allegations of accounting fraud and corruption. The test case is playing out in New England. Energy Capital Partners, an investment group that uses tax-avoiding offshore investing techniques and has deep ties to Goldman Sachs, paid $650 million last year to acquire three generating plant complexes, including the second largest electric power plant in New England, Brayton Point in Massachusetts. Five weeks after the deal closed, Energy partners moved to shutter Brayton Point. Why would anyone spend hundreds of millions of dollars to buy the second largest electric power plant in New England and then quickly take steps to shut it down?

Economics, Values and Our Collective Fate

April 30, 2014 Daniel Schmachtenberger, www.feature.waveofaction.org Create! Corporatism, Finance and Economy, Worldwide Wave of Action

Underneath and driving all of the major problems in our world is the fact that people are more financially incentivized to perpetuate them than to solve them. As long as killing a whale confers a million dollars of advantage to a fishing company, while leaving it alive confers none, we will continue to hunt whales towards extinction. As long as a millennia old redwood tree is worth no specific amount to us alive, but worth $100k as timber, we will continue destroying the tiny percentage of old growth forests we have left. Based on a very old, primitive and barbaric dominator worldview, our economic system doesn’t ask if they are ours to take, and doesn’t factor whose balance sheet the costs show up on. How different is this in its fundamental rationale, than taking Africans as slaves for the economic value their “free” labor conferred? That was not that long ago. If you look at the conditions of the labor force in the third world responsible for manufacturing almost all our goods, you will realize that this still hasn’t changed as much as we’d like to think. Our goods economy was built upon and requires the continuance of cheap labor resulting from extreme economic disparity. Get that: our current economic system could not function with anything near economic equality for all.

Occupy The SEC Advocates in D.C. For Financial Reform

April 30, 2014 Charles Reinhardt, www.animalnewyork.com Resist! Finance and Economy, Occupy

On March 29th, 2014, the Federal Reserve Board of Governors in Washington D.C. received an aggressively written, pointed letter detailing weaknesses in the current regulations governing the largest banks’ commodities business. Ten days earlier, the Federal Deposit Insurance Corporation had received a similar one arguing to strengthen the government’s ability to break up too-big-to-fail banks, a topic made even more relevant by the American megabank Citigroup’s failure to pass the Federal Reserve’s financial stability “stress test” on March 26th. Though both letters were written in dense technical detail, grounded in deep knowledge of their subjects, neither was written by a private organization or lobby group. Instead they were penned by an informal group of unpaid volunteers of various ages and professional backgrounds called “Occupy the SEC” — a diverse assortment of amateur and professional financial reform advocates who meet once a week online or occasionally in person on scrounged plastic chairs in the lobby of 60 Wall Street.

Wall Street Greed: Not Too Big For A California Jury

April 26, 2014 Ellen Brown, www.ellenbrown.com Resist! Bankers, California, Finance and Economy

Sixteen of the world’s largest banks have been caught colluding to rig global interest rates. Why are we doing business with a corrupt global banking cartel? United States Attorney General Eric Holder has declared that the too-big-to-fail Wall Street banks are too big to prosecute. But an outraged California jury might have different ideas. As noted in the California legal newspaper The Daily Journal: California juries are not bashful – they have been known to render massive punitive damages awards that dwarf the award of compensatory (actual) damages.For example, in one securities fraud case jurors awarded $5.7 million in compensatory damages and $165 million in punitive damages. . . . And in a tobacco case with $5.5 million in compensatory damages, the jury awarded $3 billion in punitive damages . . . . The question, then, is how to get Wall Street banks before a California jury. How about charging them with common law fraud and breach of contract?

Wall Street’s Looting Of Pension Funds

April 23, 2014 Matt Taibbi, www.rollingstone.com Educate! Corruption, Finance and Economy, Pensions

Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn't just about money. Crucially, in ways invisible to most Americans, it's also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America's states and cities. Not only did these middle-class workers already lose huge chunks of retirement money to huckster financiers in the crash, and not only are they now being asked to take the long-term hit for those years of greed and speculative excess, but in many cases they're also being forced to sit by and watch helplessly as Gordon Gekko wanna-be's like Loeb or scorched-earth takeover artists like Bain Capital are put in charge of their retirement savings. It's a scam of almost unmatchable balls and cruelty, accomplished with the aid of some singularly spineless politicians. And it hasn't happened overnight. This has been in the works for decades, and the fighting has been dirty all the way.

Bitcoin For Activists

April 19, 2014 Nathan Schneider, www.wagingnonviolence.org Create! Finance and Economy

Among activists one often finds an aversion to even thinking about money. Associating it with the opponent — who has lots of it — they try to do without money themselves. Often, for as long as they can, they try to organize and resist without it, until burning out, quitting and getting into a different line of work just to keep up on rent. But, as the 19th-century U.S. populist movement recognized, money is also a battleground. Today, as a new wave of sophisticated digital currencies are beginning to arise, this is perhaps more true than ever before. Bitcoin (the open-source software and peer-to-peer network) and bitcoin (the currency) first appeared in early 2009 — just after the housing bubble burst. It was heavily promoted by a tech-savvy, anti-establishment, libertarian community concerned with the power of big banks and government regulation. Critics have dismissed Bitcoin as being “by the privileged, for the privileged,” while defenders have claimed with an equal lack of subtlety that it is somehow “post-privilege” altogether. Regardless of the label, however, Bitcoin and other cryptocurrency platforms like it aren’t going away, and they are poised to become increasingly disruptive.

The Global Banking Game Is Rigged And The FDIC Is Suing

April 16, 2014 Ellen Brown, www.nationofchange.org Educate! Finance and Economy

Taxpayers are paying billions of dollars for a swindle pulled off by the world’s biggest banks, using a form of derivative called interest-rate swaps; and the Federal Deposit Insurance Corporation has now joined a chorus of litigants suing over it. According to an SEIU report: Derivatives . . . have turned into a windfall for banks and a nightmare for taxpayers. . . . While banks are still collecting fixed rates of 3 to 6 percent, they are now regularly paying public entities as little as a tenth of one percent on the outstanding bonds, with rates expected to remain low in the future. Over the life of the deals, banks are now projected to collect billions more than they pay state and local governments – an outcome which amounts to a second bailout for banks, this one paid directly out of state and local budgets.

How America’s Downward Decline Affects You

April 15, 2014 Jason Linkins, www.huffingtonpost.com Educate! Finance and Economy

Is the United States a strong nation? There's a notion that it is, of course -- based mainly on the disruptive philosophical underpinnings upon which this country was established. But these are all really the fumes of nostalgia. What else is there? Well, we have the best fleet of aerial drone death-dealers in the world (for now). Certainly our fast-food accomplishments are second to none. And our Reality Teevee Industry remains one of the more successful and innovative welfare programs in the world, lifting individuals with no evident utility to the human race -- and who would quite likely be pushed into ditches to die in lesser nations -- into the warm embrace of the Fame Economy. So we've got that stuff going for us, which is nice. Less nice, perhaps, are our ongoing struggles with the post-crash economy. Yes, there has been some good news to cheer. In April, we added approximately 192,000 jobs to the economy, bringing America back to where we were at before everything went to hell in 2008. This was probably an immense achievement for our beleaguered economy,

Corporate Profits Highest, Wages Lowest

April 9, 2014 Floyd Norris, www.nytimes.com Educate! Finance and Economy

CORPORATE profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years. The Commerce Department last week estimated that corporations earned $2.1 trillion during 2013, and paid $419 billion in corporate taxes. The after-tax profit of $1.7 trillion amounted to 10 percent of gross domestic product during the year, the first full year it has been that high. In 2012, it was 9.7 percent, itself a record. Until 2010, the highest level of after-tax profits ever recorded was 9.1 percent, in 1929, the first year that the government began calculating the number. Before taxes, corporate profits accounted for 12.5 percent of the total economy, tying the previous record that was set in 1942, when World War II pushed up profits for many companies. But in 1942, most of those profits were taxed away. The effective corporate tax rate was nearly 55 percent, in sharp contrast to last year’s figure of under 20 percent.

Global Ranking Shows US In Rapid Decline

April 9, 2014 CJ Werleman, www.alternet.org Educate! Corporatism, Finance and Economy

If America needed a reminder that it is fast becoming a second-rate nation, and that every economic policy of the Republican Party is wrongheaded, it got one this week with the release of the Social Progress Index (SPI). Harvard business professor Michael E. Porter, who earlier developed the Global Competitiveness Report, designed the SPI. A new way to look at the success of countries, the SPI studies 132 nations and evaluates 54 social and environmental indicators for each country that matter to real people. Rather than measuring a country’s success by its per capita GDP, the index is based on an array of data reflecting suicide, ecosystem sustainability, property rights, access to healthcare and education, gender equality, attitudes toward immigrants and minorities, religious freedom, nutrition, infrastructure and more.

Reducing Inequality And A Strong Economy Go Hand-In-Hand

April 3, 2014 Joseph Stiglitz, www.nextnewdeal.net Educate! Finance and Economy, Inequality, Politics

It is a great pleasure for me to discuss with you one of the critical issues facing our country, its growing inequality, the effect it is having on our economy, and the policies that we might undertake to alleviate it. America has achieved the distinction of becoming the country with the highest level of income inequality among the advanced countries. While there is no single number that can depict all aspects of society’s inequality, matters have become worse in every dimension: more money goes to the top (more than a fifth of all income goes to the top 1%), more people are in poverty at the bottom, and the middle class—long the core strength of our society—has seen its income stagnate. Median household income, adjusted for inflation, today is lower than it was in 1989, a quarter century ago.[1] An economy in which most citizens see no progress, year after year, is an economy that is failing to perform in the way it should. Indeed, there is a vicious circle: our high inequality is one of the major contributing factors to our weak economy and our low growth.

In Each Other We Trust: Coining Alternatives To Capitalism

April 1, 2014 Jerome Roos, www.roarmag.org Create! Alternatives, Finance and Economy

Interestingly, Deleuze tied these two observations together with the chains of debt, which he considered to be the “universal condition” of capitalist control. In his widely-cited Postscript of 1992, he wrote that “man is no longer man confined, but man in debt.” I was reminded of these prescient words when I attended the fascinating MoneyLab conference in Amsterdam last weekend. The central aim of the groundbreaking interdisciplinary gathering was to explore “experiments with revenue models, payment systems and currencies against the backdrop of ongoing global economic decline.” With panel discussions on “the monetization of everything”, “dismantling global finance”, “beyond Bitcoin”, “a critique of crowdfunding” and “designing alternatives”, the organizers of the conference set the tone right: in a world dominated by finance, a thoroughly indebted world in which money has effectively assumed the function of a universal signifier under which all aspects of social and natural life are rapidly becoming subsumed, we desperately need to start exploring radical alternatives to the capitalist money-form — not because alternative currencies are somehow a panacea, but because the state and the banks clearly aren’t going to do it for us.

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