"End of Wall Street Boom" - Must-read history

Moderators: Project Willow, DrVolin, Wombaticus Rex, Jeff

You must view this lecture

Postby JackRiddler » Tue Nov 16, 2010 7:00 pm

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This video is my best find in months and I hope to persuade everyone to watch it.

http://www.iptv.org/video/detail.cfm/31 ... 081220_155 (requires MS Silverlight plug-in download)

Prior to the election in 2008, "recovering trade attorney" Lori Wallach lectured at Iowa State University and outlined what I will coin as the True World Order (The TWO!) of the IMF, WTO, World Bank, NAFTA and other globalization authorities. (No satanic magic required, just capitalism.) Since the crises of the 1970s the transnational corporations and financial capital have commandeered the offices of the powerful states led by the US to impose, through obscure and voluminous "trade agreements" mostly unrelated to trade, a neoliberal policy wish-list on almost all of the world's countries. The system intensifies labor exploitation and suppression, overturns national legal codes, accelerates and practically requires all the familiar economic and ecological disasters, and reduces nations to little more than servile bidders for capital. The point is not only to maximize profit but in effect to require states to guarantee and insure it. In just one hour Wallach reviews the history, structure of the system, global impacts, many typical cases of WTO and NAFTA rulings, and examples of successful resistance. (I was pleased to recall the protests that stopped MAI back in the 1990s.)

The video aired on Iowa PBS in Dec. 2008. I found a transcript in a single block-paragraph, so I edited it to add paragraphs and correct some obvious mistakes. Unfortunately it doesn't contain the slides and I don't feel like capturing them off the video. So watch.

Check out the paragraph I bolded at the start for something that I hadn't known. The Citibank-Travellers merger of 1998, in violation of US law, prompted the Rubin-Summers Brigade to lead the charge for a repeal of the Glass-Steagal Act limits requiring separation of commercial banking from insurance and investment banking. In effect, this was a retroactive legalization of the merger, and made the financial scams and bubbles of the 2000s possible. But WTO rules negotiated not by Congress but by trade envoys had already required a repeal of the limits, so it's possible that this is what prompted Citibank to go ahead with the merger in advance of its actually being legal in the US.


Intelligent Talk #155
Alternatives to Economic Globalization
Original Air Date: December 20, 2008
Iowa Public Television

Funding for this program was provided by Friends of Iowa Public Television, the Iowa Public Television Foundation, generations of families and friends who feel passionate about Iowa Public Television programs.

“The U.S., under one of its commitments under that part of WTO, actually agreed to deregulate our financial service sector, including explicitly committing to getting rid of the Glass-Steagall Act. That was the act that was put in place after the Great Depression to try and limit speculation. It used to forbid banks – bank holding companies from owning other financial services so if one thing went bad the whole sector wouldn’t go down the tubes.”

On October 21, 2008, Iowa State University hosted Lori Wallach, Director of Public Citizens Global Trade Watch, as part of their technology globalization and culture series. Ms. Wallach, an internationally recognized expert on globalization and trade, has been dubbed the trade debate’s guerrilla warrior. This is Intelligent Talk Television.

Lori Wallach:

The subject of my talk is alternatives to corporate-led globalization. The task that I have undertaken as a recovering trade attorney is to try and translate out of gobbledygook, technical language what exactly are the instruments implementing the current set of globalization rules, given globalization really is a phenomenon that’s defined in our time. It’s going to affect and shape every student that’s here. It is affecting the lives of everyone from the food that we eat to our health to our economy and understanding exactly what is this thing globalization, which seems to mean a lot of things to a lot of different people, is important to understanding if the current model is working for most people, what the outcomes are and, if it’s not working, what are alternatives.

And so the place I’m going to start is really the structure of the current system, given there’s no way of escaping, whether you’re here or in Timbuktu, this phenomenon. Then it’s important for everyone to understand what exactly is this thing globalization. Then I’m going to talk about the outcomes under the current model, and then I’m going to talk about alternatives but also some of how the alternatives are being advocated for, not just here but around the world, including a lot of youth movements and student movements around the world.

[shows slide, one of many]

Don’t panic, this is the short part. I am, yes, going to talk about Bretton Woods. Bretton Woods was a meeting that was set up after World War II, and it was to be a progressive international set of rules for global economic governance. Believe it or not, it was the thing that was set up because sometimes you hear the GATT or WTO and you think, oh, must be conservative business interests. It was set up by the global – it was set up by the progressives of their time. And these institutions originally had very narrow specific pieces of business that were appropriate for the time.

The GATT, which was set up in 1947, general agreements on tariffs and trades, it was to set tariffs, the border tax which you charge on a good when it goes across the border, for trading goods. If you could not drop the thing on your foot, it was not covered by GATT – so it didn’t cover services, investment, finance – [only] physical stuff moving across borders. It also set up what are called quotas, which is the amount of stuff you can move. So, for instance, if your country was totally self-sustaining on wheat, you didn’t want to import wheat, you would have a quota of zero for wheat imports, versus if you grew nothing and you had to import all your food, you’d have a hundred percent open quota.

IMF, International Monetary Fund, it was originally set up to run the gold standard. All currencies used to trade for a particular weight in gold. Nixon took us off the gold standard. People that have taken economics classes know about that change in the ‘70s. But up until then the IMF literally had the job of figuring out how much each currency of each country was worth to a fixed gold standard. It also did short-term trade loans. So practically, when you are exporting something, if you ship something overseas in the time it leaves your country, before it goes to your country to actually be received, someone has to finance the float. So after World War II to get trade going again, the IMF took on that role instead of just private banks.

World Bank was originally set up very narrowly to come up with the money to rebuild Europe and Japan after World War II. So that was the original vision of it, and it stayed that way until the ‘70s. In the ‘70s, well, Europe and Japan were reconstructed. What was maybe the mission of the World Bank now? Well, instead of shutting down and saying, alleluia, we fixed it, they had mission creep. It got bigger and different. So did the IMF. They had what we called charter changes, and they got into the business of making long-term loans to developing countries, and they would set conditions on those countries, which are called structural adjustment programs – it’s a contract you sign – and the country was required to restructure its domestic laws, economics but other laws, its budgeting laws, its education laws, construction procurement rules in order to focus on being able to pay back the loan.

Now, if you’re running a poor country and it’s a democracy, you may not decide that the most important thing to organize your country around is paying this organization in Washington, D.C., hard currency on your debt. You might think it’s better to invest in schools or health care, roads, and develop your industry. The IMF and the World Bank started making these loans and requiring countries to adopt a particular package of policies. Sometimes that package of policies is called the Washington Consensus. Other times it’s called the Neoliberal Model. I’m going to outline what the package was, but for developing countries, that model through the IMF and the World Bank was imposed in the ‘70s as a condition to loans.

The GATT was what still covered the rich countries. But the WTO, starting in 1995, replaced the GATT, the World Trade Organization. The GATT became 1 of 17 agreements the WTO would enforce. The World Trade Organization is not a trade agreement, even though it’s called the World Trade Organization. This is sort of the punch line of the whole lesson here, which is, ladies and gentlemen, though you did not elect them, the World Trade Organization is actually a form of global governance that extends way beyond trade, and these rules are rules that affect everything. In a little while I’m going to talk about actually how the WTO sets rules on higher education services, which translates out to your university and whether the state can fund it and who else needs to get the money and what the qualifications for professors and degrees are, which you might wonder what the heck is the so-called trade agency in Geneva talking about that kind of stuff going on in Iowa. I’m going to give you a preview of coming attractions.

So, the WTO enforces 17 agreements and only GATT really is about trade one hundred percent. These other agreements really need to be seen as structures of international governance. And the sad story is that the U.S. played a huge role in negotiating the rules. And in the U.S. there were 500 business interests particularly corporations, some foreign ones who operate in the U.S., who got to actually decide a lot of these rules. And at the time with those 500 corporate advisors – it’s through a system called the Intergovernmental trade advisory system – there were 14 labor union representatives, zero consumers, zero environment, zero faith, zero human rights. So not surprisingly these rules represent a pretty lopsided business interest. And, you know, you want the business interest in there, just not only.

So these agreements, they don’t cover trade, but they often say trade. The general agreement in trade and services, GATS as compared to GATT, that covers every way a service can be delivered or regulated. This is where education comes in. So, under GATS, countries agree that they will treat not only trade and services – so if you go overseas for a semester in Gatsies – that is mode to exchange of students to occupy a service overseas. But also how a foreign service provider here in Iowa can be regulated is constrained by that agreement. So believe it or not, just an example, the U.S. made commitments for retail services with no limitations, which means that for everyone who has ever been in one of the Wal-Marts in downtown big marketing fights about whether or not a huge Super Wal-Mart can set up and wipe out downtown, if it were a foreign company, for instance, any of the foreign chains that are also big megastores, the U.S. gave up the right to have zoning restrictions about a mega retailer if it’s foreign owned. Now again, you would say what’s the trade part of that? That has nothing to do with anything going across borders. That’s a domestic regulatory issue about local land use and development. It’s bound under the GATS. So is a set of rules about privatizing and deregulating various services.

So as I’m going to describe in a second, the U.S. as one of its commitments under that part of WTO actually agreed to deregulate our financial service sector, including explicitly committing to getting rid of the Glass-Steagall Act. That was the act that was put in place after the Great Depression to try and limit speculation. It used to forbid banks – bank holding companies from owning other financial services so if one thing went bad, the whole sector wouldn’t go down the tubes. As a WTO obligation, the U.S. revoked that. It’s actually in our schedule of commitments.

Again, it has nothing to do with trade. It has to do with now services are regulated in the U.S. so that agreement implements an – about deregulation and privatization of services unrelated to trade. The sanitary and phytosanitary agreement, SPS, sets limits on food inspection. Since NAFTA and WTO, the amount of imported food has increased 70%. But under that agreement, we’re limited from inspecting it at the border. We can only inspect imported food at the same rate we inspect, at the final moment, U.S. food. Given the U.S. inspection system has lots of stops along the way, what pesticide you can use, field inspection, water testing, our final checks are a small percentage at the end of a system. But on imports, even if a country has no regulatory system, we can only do that level of inspection, thanks to these rules. So all of these issues about, for instance, most recently melamine in milk products from China, but it’s been issue after issue with imports, is related to that agreement.

TRIPS agreement, trade related intellectual property. It sounds perverse but this agreement actually sets monopolies. It isn’t a free trade agreement. It is a set of rules that sets monopoly patents terms, and it includes patents on drugs, seeds, life forms. It also had copyright. So this is the issue under which trade and textbooks actually is regulated internationally. A lot of countries didn’t have patenting of medicine, seeds, or life forms. The U.S. had 17-year monopoly patents. The TRIPS agreement required that the U.S. extend patents on all drugs to twenty years. That costs a lot of money, as we’re going to see.

When you ever have “trade related” in front of an agreement, it means it has absolutely nothing to do with trade. That’s a WTO clue. So any agreement that starts with trade means this shouldn’t really be in the agreement. Like TRIMS, Trade Related Investment Measures. That is a set of rules about how governments can regulate investment in foreign investors. So if folks remember from a couple years ago the whole Dubai world port issue, the question about whether or not a foreign company could run land side dock activities in a U.S. port, it’s a TRIMS issue.

And then finally just as an example, because I promise I won’t get into the weeds any further, the agreement on government procurements. It actually has WTO rules setting how we can spend our tax dollars. So we are only allowed to set out specifications that have to do with the ability of a company to actually fulfill a contract. That is to say all of the work folks, like I did in school when I was your age during the ‘80s, to try and get divestment of our state where I was in school, Massachusetts, to not do business with companies in South Africa, forbidden by the AGP. Anyone here who works in the Burma campaigns, the Burma human rights campaigns? A lot of states have tried to use that tool. Massachusetts tried to implement a procurement ban just like South Africa and Burma, and the WTO actually had a case about this; you’re not allowed to do this anymore. As well under that rule, you’re not allowed to give preference to local.

So for anyone who is a student in agriculture, you know the recent farm bill actually nationalized something a lot of states do, which is preferences for local farmers to fulfill contracts for education systems, institutions like prisons, et cetera. That’s actually a violation of the agreement in government procurement, and we have a bet going about what country is going to challenge that part of the farm bill first under the WTO. [I don’t know if this has happened since – Ed.]

So you have this comprehensive system that has nothing to do with trade. And then in NAFTA, you have everything that’s in WTO but it’s even more intense. So there are even more investor rights or the service sector privatization rules cover everything unless you argued out an exception for it. Some people call NAFTA “WTO on steroids,” because with the WTO, the U.S. was the main pusher of this. These U.S. companies had a large role in it and the U.S. government. It started, by the way, the WTO negotiations under Reagan and was completed under Daddy Bush, and that whole process then had pushed back because there was a European Union, there were big democracies developed in countries like India. But with NAFTA, it was basically the U.S. more dictating the negotiating because the power dynamic with the NAFTA countries, Mexico and Canada, was not as balanced. So NAFTA is even more of the delivery mechanism of the agenda I was describing in WTO.

And since NAFTA, the U.S. has done free trade agreements based on NAFTA with all of those countries: Australia, Bahrain, Chile, Singapore, Morocco, Oman, The Central America Free Trade Agreement, which is those countries: Guatemala, Costa Rica, Honduras, Nicaragua, El Salvador, and the Dominican Republic and Peru. There are agreements with Jordan and Israel, but are not real NAFTA style agreements. They’re little dinky things.

WTO, NAFTA, and the agreements on the left are all about 900 pages of nontrade rules. The tariff schedules are the big ones, like WTO and NAFTA, are my height when you print them out and put them on the floor and stack up the actual trade part. And it’s just how much do you charge for number 3 undies when they cross the border, but then there’s number 4 undies which have a different tariff rate as compared to number 7 undies, and then they’re totally different if they’re men and women’s. So, those are actual tariff schedules.

The nontariff part is bigger than the New York City phone book and those are rules of global governance. Colombia, Panama and Korea are three agreements that are NAFTA style agreements that the Bush administration negotiated and Congress has said no. To some degree the outcomes of the first set of agreements has had Congress starting to rethink that model.

And then on the right in the red – and this is another preview of coming attractions – those are all the attempts to expand the NAFTA model that actually have been defeated or rejected by countries written by – so the multilateral agreement on investment – and one of the folks here tonight actually just brought me pictures from a protest from 1997 that he happened to have from home, having been in Paris that day when we were doing a protest, against that particular MAI. It was NAFTA, basically, for all the developed countries, and it was defeated through citizen activism around the world, Canadian, French student groups, and some very smart people in the developing world who put us onto it and basically helped organize that.

Free trade agreements with Malaysia, the Southern African Customs Union, which would have been South Africa, Botswana, et cetera, Thailand, Egypt. AFTA was Bolivia, Ecuador, Peru and Columbia. And the FTAA, which was All NAFTA for the entirety of the Americas, all the Caribbeans, all the Americas except for Cuba. So as they used to say, NAFTA, from the Arctic to the Antarctic, totally boxed and buried. People say it’s in a deep coma. I actually think it’s probably worth burial. All of these things have basically been derailed either because certain countries, in the case of FTA, Brazil, but also a lot of activism in the Caribbean, looked at what had happened under NAFTA to Mexico and basically said not sure that actually we want to sign up for that package. Same thing happened with South Africa, et cetera.

And you can think of the practicalities of it. I mean, for instance, in Malaysia and in South Africa, one of the ways that racial tensions are resolved is by procurement policies that explicitly divide government revenues by group. It’s basically an affirmative action procurement program in South Africa. And in Malaysia, it’s to make sure that the population is getting a share of the business, totally forbidden under the procurement agreement of these agreements. Well, those are fundamental governance instruments that have to do with local tax dollar distribution. And when they were all told if they signed up to those agreements, they couldn’t do it, they said no thanks.

The way to think of all of these agreements, NAFTA, WTO, the FTAS is really as a delivery mechanism, a delivery mechanism for a model of neoliberal policies, most of which don’t have a lot to do with trade. The reason why that is particularly sort of relevant to think about, as I’m about to turn to what the outcomes have been, which then begs the question of what you do to fix it. And so what the actual policies are, are worth summarizing after giving you a picture of what the instruments are. So what are those instruments delivering?

Privatizing deregulating services – and I see a typo – financial services, water, healthcare and education; cutting, weakening or harmonizing, which just means globally standardizing regulatory standards for food, environment, worker safety, toxic et cetera; establishing some new property rights, so the new intellectual property right. A lot of countries, for instance, didn’t allow patenting, monopoly patenting of medicines. The U.S. didn’t allow monopoly patents in medicines until the 1950s, just FYI. No developing country has ever been able to develop with monopoly patenting in places as a developing country. And then commodifying commons, turning things that we think of as in the commons, not known by anyone, into tradable commodities. So in some instances that’s in the services agreements where, for instance, something that we would think of as a right, like education or in Canada health care – we probably should think of it as a right here too – is turned into a tradable for-profit commodity. Or biodiversity, the agreement requires countries to set up patenting of life forms. So for countries that have an ethical or other issue with basically setting up patents of species or human cells, it’s required. [Human gene patents have actually been overturned by the Obama admin. – Ed.]

Deregulation on foreign investment. You can’t limit foreign ownership. That was explained with the Dubai ports world issue. But also, you can’t have preapproval. So the U.S., until these agreements, to say nothing of the developing countries, would decide what was in the interest of the U.S. to have for foreign investment. And developing countries always set conditions on what a foreign investor has to do. So if you want to come in and invest in that country and you’re going to create a power plant next to your textile plant, then you also have to have the power plant have enough capacity to also light up the town where the workers are or you have to help build a school next to whatever it is you’re going to do. It’s the conditions to help make sure that investment from a foreign company actually had broad benefit. And in finance liberalization, NAFTA in all those agreements explicitly forbid currency controls. So when there is a financial emergency, you’re not allowed to freeze your currencies.

That is one of the reasons Malaysia wouldn’t sign up. Folks might remember in 1997, the last big global financial crisis was in Asia. And Malaysia is the only country that came out of it relatively unscathed, and it’s because they froze their currency exchange, they froze cashing in certain investments, and they waited for it to blow over for a couple of months. That’s explicitly – those measures are explicitly forbidden. Governments are basically handcuffed from doing it. And then there’s deregulation of the banking sector.

Sort of the key thing about this is that you really have to think of it as a governance system. This is the challenge of globalization. These are agreements that have been packaged as trade. It’s a brand, free trade. And who’s not for free trade, right? It sounds great. But it’s like a Trojan horse, which is under that brand, that whole other agenda I’ve been describing, which is just one version of politics and global governance, has been attached and rode through parliaments all over the world. So the U.S. domestically was experimenting during Reagan and Daddy Bush with this radical deregulation of financial services. It proved to be a bad idea.

But then we used these instruments to export that model to the whole world, so everyone had to sign up. The way it works is the binding rules of WTO are each member shall ensure the conformity of its domestic laws, regulations, and administrative procedures with the attached agreement. What that means is all of your existing laws need to be changed to conform with the WTI, and all of those nontrade rules. NAFTA has a similar clause, as does CAFTA, AFTA, and all the other ones. And then, if you have a new law in the future, it has to stay one of the parameters set.

So actually neighboring Nebraska, a rancher at one point when I was talking about this said to me, so let me just see if I get this straight. Our Congress actually voted to approve a high-voltage electric cattle fence around the capitol, and if they have an idea that’s on the other side of the fence and is called WTO, they get zapped, and they’re told to go back inside the fence, that these guys who elected who are the Congress are told in what parameter they’re allowed to walk around, by – like, who elected them, the WTO?

That’s not an inaccurate description because every country is subject to dispute resolution. Unlike other international agreements like the International Labor Organization conventions or the Multi-Action environmental agreements, these agreements, WTO, NAFTA, et cetera, are actually enforceable. They’re self-enforcing in that they have built in dispute resolution tribunals. So if any one country thinks another country who signed up hasn’t conformed to all of its laws existing in future to these constraints in all of these nontrade areas, then the country is challenged in a built-in tribunal.

The tribunals do not have any of the rules of due process. I used to call them kangaroo courts, until I went to Australia and was told this was an insult to all marsupials. They are worse than kangaroo courts. There are no evidentiary rules. There is no outside appeal once these tribunals at the WTO and NAFTA rule. You just have to comply. And if you don’t change your domestic law that this panel will rule is against the trade agreement rules, you have trade sanctions put up against your country until you conform, so indefinite trade sanctions. So it’s something like every country has numerous choices. Change your law; perpetual trade sanctions. Take your pick.

[SLIDE SHOWS QUOTE]

The problem is that every now and then someone tells honestly what’s going on. That’s the quote of the first head of the WTO, who admitted that what they’re actually up to was writing the Constitution for a single global economy, not a trade agreement, not even a financial agreement, but a governance system. Now, when I first saw that quote, it was kind of – I’d been following the details – I’d been deep in the details of the agreement. When I looked at that, I said now I know why I’m so peeved. I didn’t get to vote for this, but it’s totally changing everything about what my day-to-day life is going to be like and this guy sort of fessed up and made it clear.

Now, this system has been in effect for WTO since 1995, for NAFTA in 1994. The free trade agreements that came after came sequentially. They’re all smaller. NAFTA and WTO are really the biggies. And we now have a record of how that system of global governance has actually performed. It’s worth [considering the] record. I always start by saying there are some upsides to this. Among the upsides of this system is that scholars and activists from around the world have had to work with each other to understand what this is, how it affects each of our countries and our constituencies, and have learned an enormous amount. This is the upside of globalization, not this version of corporate globalization but globalization in the generic sense is there’s a lot of diversity and a lot to be learned and shared.

Unfortunately, what we ended up learning was that that package of policies that were delivered through the IMF and the World Bank on the developing countries in the ‘70s is more or less what NAFTA and WTO did for the rich countries, WTO for the whole world, Canada and the U.S. under NAFTA. So as one of my Malaysian coalition partners famously said at the eve of the WTO being signed – we were all sort of packed into an apartment in Paris trying to figure out what last thing we could do to get them to renegotiate parts of it. He said, well, if this goes through, you’re all going to understand what structural adjustment is and not just by studying what happened in Africa, because it’s the same model and now it’s going to be imposed on you.

So it’s been about fifteen years of that experiment, and there are a lot of economic sets of data that you can look at, but the measure that usually is tossed around is the growth in volume of trade. As I’ve demonstrated, trade is the tiniest little bit of it, the little GAD is it. I mean before even the WTO went into effect, the U.S. average tariff was three percent. So the normal trade stuff, the notion of protectionism, taxes on the border, it was already done. That negotiation had happened from 1947 until the GATT turned into the WTO, which is why in the whole political discourse now, as you listen to the presidential campaign, one candidate is accusing the other candidate of being a protectionist. You scratch your head and say, that era actually more or less ended. These agreements are about nontrade policies. We’ve all sort of agreed that we’re not going to have tariffs, and in most countries there aren’t tariffs. There’s some countries that are exceptions, and we’re going to talk about some of those. But if you measure it by growth and trade, volume and trade, you miss what these agreements are mainly about.

When you look at it as far as human effect, you get a really different data set. I’m going to talk both about the economics, but I’m also going to talk about some of the social indicators, because that is actually what we also need to be looking at, because some of the phenomena that happened besides growing inequality and downward pressure on U.S. wages is that actually huge array of domestic regulatory policies have either gotten sacked in WTO or NAFTA tribunals or the pressure of the threat of a challenge has chilled innovations or just gotten countries to dump things on their way to implementing these agreements.

So in the U.S., this just gives you a snapshot of some of the things that have happened. U.S. drug prices went up over $6 billion because of the WTO requirement we changed from a 17 year to a 20 year monopoly patent. So those were just for the drugs that were under patent when the WTO went into effect, so the number total is much, much bigger. It’s three extra years for every drug that’s been put on patent since 1995. That’s a University of Minnesota pharmacology study.

$65 billion in food is now imported, which is double the value imported before NAFTA and WTO. Now, I put that actual fact in because I was coming to Iowa. When I’m talking some place that doesn’t have farms I don’t typically put that particular data point in, but I sure keep the second one, which is that under WTO, we’re now required to import meat and poultry that doesn’t meet our standards and we’re limited on how we can do border inspection. So literally the implementing act, the thing that created the WTO, the thing that Congress voted on in 1994 in its gazillion pages to ensure conformity of all U.S. laws, revoked the rules on our longstanding meat and poultry inspection rules – laws, the U.S. laws, that said nothing can be imported unless it meets U.S. standards. It didn’t discriminate. It just meant imports had to meet the same standards. And the WTO required that that be waived. That was considered an illegal trade barrier. And anything that the exporting country deems equivalent, a word not defined, must be accepted. And it’s also a violation if we don’t put a USDA grading sticker on it. So you don’t know where it’s from. It gets a USDA stamp. It doesn’t meet USDA standards. And under WTO, we literally changed our laws to conform to that. Bon appétit. Toy recalls soaring.

Now, again, we’ve seen a huge shift in manufacturing. Some of that has to do with investment rules in these agreements. Some of that’s beyond what these agreements do. But the difference is under these agreements, just like the food inspection rule, we’re limited on how much we can inspect imports at the border and we’re explicitly forbidden from discriminating against specific countries that have problems. So, you know, if you’re an inspector and you’ve got limited resources, what you would end up doing is thinking where am I having problems with lead in toys. Turns out mainly it’s been China. Part of that is because a lot of production is there. So then you would say, I’m going to inspect the toys coming from China that have paint on them at a higher rate. It’s more efficient. I don’t really have to worry about playing cards coming from Sweden, say, not painted, coming from a country that hasn’t had a problem. Or Thailand has a really good set of rules on dyes. I don’t know why but that’s true. Don’t have to look at the stuff from Thailand, but this country has a problem. WTO rules forbid you from selecting inspection that way even though it would be the logical, effective way to do it. So as a result, a tiny percentage of both meat and other products gets inspected since WTO and NAFTA. The numbers are actually horrifying. For food in the U.S., it’s now less than three percent. It wasn’t great before NAFTA and WTO – it was only about 25% -- but it’s scary.

And then you have the radical deregulation of financial services. I always put that in the slide because most people won’t believe me that actually it was a WTO commitment that got rid of Glass-Steagall. Most people say, yeah, and I bet you blame ingrown toenails on the WTO too. Well, no, actually, ladies and gentlemen, in the U.S. supplement, three of GATT’s commitments, paper two, actually page four, because I was looking at it last night, there was a specific commitment to dump the major firewall that was put in after the Great Depression to avoid speculation. It was implemented shortly after the WTO in a supplemental bill.

WTO attacks against domestic laws have resulted in a huge array of laws getting sacked. I listed some of the ones that particularly annoy me. The first one is the U.S. Marine Mammal Protection Act. So that dolphin in your tuna fish can, that no longer means that it’s dolphin safe. U.S. Clean Air Act regs on and gasoline cleanliness were sacked by WTO in 1998. We weakened those laws. Those are the Clean Air Act regs that were trying to stop the asthma epidemics in urban areas. We weakened the laws. U.S. Endangered Species Act regulations on sea turtles being caught in shrimp nets, we weakened those laws. That one was challenged in about 2001. Japan, Australia both had invasive species protections. Again, I put that in there because I’m coming here to a place where people know something about invasive species and farms. The U.S. has actually weakened one of our, FIDO sanitary is the technical term for it, anti-critter, anti-bug invasive species rule, because of a threat of WTO action. So anyone who has done any work on the Asian longhorn beetle, the thing that eats U.S. maple trees, that basically all of these farms fringe – maple trees are having to get chipped down and burned, that’s that case.

The U.S. has challenged successfully the European Union system of labeling and segregating GMOs. That’s an ongoing fight. The EU keeps changing the law, and the U.S. keeps saying it’s not enough. The Canadian cultural diversity policies that had to do with a magazine distribution system, that’s a services case, a GATS case.

And then one of my personal favorites, the WTO rule that the U.S. isn’t allowed to ban Internet gambling. Where’s the trade in that, ladies and gentlemen! The trick to it was, in that GATS agreement I mentioned, you list different things that you commit to have to meet the rules, and the U.S., which has the biggest, smartest negotiating team in the world – some African countries have one person in Geneva for all the agencies including WTO. The U.S. accidentally listed a thing called other recreational services, and one of those WTO tribunals of which there is no due process and no outside appeals decided that included gambling. So not only are we not allowed to ban Internet gambling, but all of the state monopoly lotteries that are used for education financing and road building are technical violations, and Europe has just sent papers in two weeks ago, threatened to challenge those, so we have to get rid of those. All of the Indian gaming compacts that states have, which are considered exclusive supplier arrangements in technical terms, totally forbidden. The whole gambling sector is covered.

So again, what do any of those things actually have to do with trade? At WTO the plaintiff always wins. If you bring a case, the rules are so lopsided and the panels are so lopsided that basically every country ends up being forced to conform its law. If you look, I cut it down as developing countries, U.S., et cetera, to show it’s pretty uniform. And ironically, given the U.S. pushed the WTO, the U.S. loses slightly more cases on average than everyone else and is not able to succeed when they’re prosecuted slightly more often than everyone else, which is just an irony given this was the U.S. idea. Because so many of the cases go against the country, at this point you only have to threaten. These are just some of the examples.

The Gerber case is my own personal makes-me-crazy-made pet peeve. The U.S. State Department on behalf of Gerber baby food wrote a letter to Guatemala that said under the WTO’s rules on patents, copyrights, and trademarks, your trademark of the fat baby face, your ban on the fat baby – Guatemala had banned the fat baby face trademark – is a violation of WTO. So why had Guatemala said to Gerber you can’t put the fat baby face on the formula? Because under the so-called UNICEF code – sometimes it’s called the Nestles’ code. This was the U.N. treaty against the false marketing of formula, breast milk substitutes, that was put into place in the ‘80s after an epidemic of child deaths in the developing world, because the formula companies would go into poor countries and try and trick mothers in villages to starting to use the formula to convince them it’s better than breast milk. But of course, number one, once you use formula for a while, your milk dries up, so you can’t nurse. So you’re not hooked on having to buy something you can’t afford. But if you’re in a place where there isn’t safe water and you mix the water with formula, you kill your baby. So there was this horrible, horrible phenomenon. So there was a global push, led by the faith community actually, to get this treaty. And Guatemala, among 80 other developing countries, adopted it. And one of the things it required was plain packaging. You can’t represent, like, by depiction of a fat baby so that an illiterate woman might look at it and go, oh look, they’re going to tell me – this is going to make my baby fat, better than nursing. So plain packaging. Well, Gerber had the trademark on the fat Gerber baby face. It was a trademark but it was also a depiction of a fat baby. And as a result, things were either covered up with a sticker on the shelves in Guatemala. Or at some point there was an injunction where they were told label it plain or don’t sell it either. Every other company [country?] had complied. So the U.S. got a letter off to Guatemala. And I only know about this case – there are a lot more threats than we know about – because the Health Minister of Guatemala called and said, “I understand you’re a free trade attorney who actually knows WTO.” And I had gotten this – he said, “I’ve gotten this outrageous letter saying that we can’t implement the UNICEF treaty to save our most vulnerable citizens’ babies because of the WTO trademark rules.” Why does a trade have a trade market anyway. It’s not about trade. I said to him, “Yeah, it’s actually in there. We can probably do a big public campaign to help you, a guilt campaign, but legally it’s a serious problem.” Well, here’s a guy who’s one of the highest ranking officials in the country had no idea it was there. In the end Guatemala dumped the law. So now Gerber and everyone else is back with this deceptive packaging – or this packaging that could lead people to take choices that are worrisome for their baby’s health, to be more legal and precise about it.

And that was just a threat. There’s a whole set of other threats like that. Some of them are more than threats. The California recycled content rules, Governor Schwarzenegger vetoed a whole bunch of rules saying they violated the WTO agreement’s procurement rules. The human rights tools, I talked a little bit about that. In numerous states there have been attempts to do Burma and Nigeria resolutions, and they’ve been sacked by the State Department in a different preemptive move.

I said I would mention the globalization of education services, because perhaps the most direct implication of all of this, except for what you eat, is the education services proposal by the Bush administration, which is to submit higher education to the jurisdiction of the WTO. Currently the U.S. does not have higher education services covered under those WTO rules. So whereas, everything that is covered, the U.S. has a handcuff, the Congress, the state legislature as far as what they can do policy wise, right now higher education is outside those rules. But the Bush administration already four years ago offered to submit higher education to the WTO’s GATS rules as part of a WTO expansion called the DOHA round that’s on your way. What it would mean practically is that all the subsidies that other payments from the state would have to be available to for-profit private institutions, and particularly foreign incorporated ones, so everyone would get a foreign partner operating in your state. Professional qualifications would be subject to harmonization in a test called the least trade restrictive rule which, instead of thinking what is the most pro education rule, instead of the rule is what is the least affecting of international commerce.

NAFTA has a similar dispute system – by the way, punch line of the education thing, right now the WTO expansion is somewhat jammed and I’m about to turn to what can be done. Part of what can be done obviously is to push to get that and some other crazy things off the agenda and figure out how to fix the existing rules versus adding new sectors to be problematic rules. NAFTA has the same kind of dispute resolution, but then they also have an extra system in NAFTA that lets foreign corporations directly sue the government outside of U.S. courts at the U.N. – at the World Bank, actually. These are called investor state private enforcement. It literally has privatized the enforcement of an international agreement is basically this section. It’s in Chapter 11 of NAFTA. Of these cases so far, there has been about $30 billion in claims laid. So far only about $34.8 million have been paid out. Five times investors have won. And it’s crazy stuff.

So one of these cases – this is a list of a bunch of them. Metalclad versus Mexico, that was a case of a Mexican municipality basically telling a U.S. company that had bought a shut down toxic waste contaminated site from a Mexican firm for almost no money on the condition that they clean it up to get the operating permits back. Metalclad got $14 million out of Mexico in one of these NAFTA cases by saying, “Well, you can do that to a Mexican company. We’re a foreign investor under NAFTA. We have rights and you’re effectively taking our investment so you can either give us the permits and let us run it contaminated or you can pay us for our future lost profit.” And then NAFTA tribunal gave them the money.

Ethyl versus Canada has to do with a ban in a gasoline additive. In that case Canada had banned a gasoline additive that was banned in most U.S. states. It’s called MMT. Ethyl Corporation said – even though they couldn’t do anything in the U.S. about states doing it because it was NAFTA, they could go to Canada and say we’re a foreign investor, we’re a U.S. corporation, you have to pay us. So they got the ban reversed and got four million dollars. Loewen versus U.S. is actually an attack on a civil court judgment. Everything is on the table. Pope and Talbot is timber policy. Glamis Gold is a mining case that actually has to do with native lands protection. There’s an Indian tribe involved. All these issues – the Canada Cattlemen versus U.S. was a challenge which did get dismissed on technical grounds, thank God, but I keep it in there. It was a challenge for almost $2 billion about the temporary ban on import of Canadian cattle during the Mad Cow disease outbreak. Why wouldn’t we be allowed to do that? That was a very important thing to do. That case, thank God they had a mistake in jurisdiction.

Next topic here besides the issue of the laws getting sacked is the actual economics. One of the issues of the actual trade part of these agreements, not the nontrade part that we’ve just been touring is what’s actually happened vis-à-vis agriculture. So there’s been a huge increase in the volume of agriculture trade. And as part of that increase, interesting in the U.S., our exports have increased and that’s the only part you typically hear about in the Bush administration or the newspaper. But the story is that our imports, food coming in to the U.S., has increased much faster under WTO and NAFTA than our exports have increased. So as you can see, we have gone from a balance where we had a $23 billion surplus to less than half of that. And in 2005 we were actually a net food importer. Can you imagine that! We were importing more food, the United States of America, than we were exporting. That had not happened since 1959, and in ’59 it was a weather catastrophe. It was not a trade agreement catastrophe.

At the same time the prices paid farmers have fluctuated wildly. They’ve gone back up recently but we all know they had gone way down. Part of that has to do with the rules in agriculture in these agreements that actually let the trading companies, the grain trading companies game farmers across countries. Just as a little favorite tidbit of mine, a guy who used to be an executive at Cargill actually took off a leave, went to the U.S. trade representatives office, and was the author of the WTO agreement on agriculture. That’s what AOA stands for. That guy then left after about four years and went to something run by Archer Daniels. So revolving door of the industry actually wrote the rules, so it’s not surprising that the industry that trades grain is playing farmers in different countries off each other, thanks to these rules.

Since NAFTA and WTO, 300,000 U.S. family farms have gone under. And farm income – actual farm income minus government payments has declined dramatically. At the same time the export volumes have increased. Now, import volumes have increased more, but export volumes have increased. Now, here’s the thing, everyone who has had sort of the macroeconomics 101, when we get more stuff, so the supply is larger, right, the demand stays the same more or less or it increases, the price should go down. Instead because of some of the service sector retail and distribution rules, actually the price paid by consumers has gone up, as we all know when we go grocery shopping, at the same time that the price went down paid for the actual farmer. The slide I don’t have in there is the profit rates of Archer Daniels, Cargill, and others which, I have to say, their work on the WTO paid off handsomely.

There were a lot of promises made both in the U.S. and in the developing world about the agriculture rules in these agreements. Under WTO, in the years it’s been in place – and this is not my data, this is the U.N. data, I’m not coming up with this on my own – the number of displaced farmers, the rate of displacement has increased extremely, and hunger has increased. Everyone has seen these FAO studies about this. In Mexico under NAFTA alone, 1.3 million Campesinos farmers were displaced because of the NAFTA agriculture rules. Yet at the very same time, the NAFTA service sector rules meant that some of those same companies that were basically dumping grains – some of it not even from the U.S., coming into from third parties, being hoarded, then dumped on Mexico at the right time, those same companies bought up milling, baking distribution. So, for instance, Archer Daniels Midland was basically selling – has been buying and selling to itself three or four times in the process marking up each time. So the price of tortillas went up 50% in the same period during NAFTA, which is basically the year that the actual tariffs on corn went out, which was about between ’95 and ’98 that it actually implemented its way through. The price paid farmers went down 80%. The price paid consumers for tortilla for the corn basically number one product went up 50%.

Now, it is not a shocking outcome, therefore, that after that immigration to the U.S. from Mexico increased 60%. If you displace 1.3 million farm families off their land and then start to starve them with raising food prices, they’re going to go someplace. And so when you think of the outcomes of these agriculture policies, but also the deregulatory policies and other sectors like privatizing services, one of the outcomes that you don’t normally think about is migration. These agreements really can be seen as a supply side to massive migration.

Now, here’s what’s scary. The NAFTA rules are in place, and we saw what happened. The Chinese government’s own data projects up to 500 million peasant farmers could be made redundant if China fully implements the WTO agriculture rules … 500 million! And in India, the WTO requirement to allowing these subsidized imports – and by the way, India has been flooded by Europe. Europe has what are called export subsidies. They’re payments that literally are by the amount you send out the door. It’s not domestic support, although they have that as well. It’s actually if you export, you get cash. And in India it’s been such a catastrophe that there’s been an epidemic of suicides so that literally thousands of people – the New York Times story basically had 17,000; that was 2007. This year it is on track to be almost 30,000. Our farmers are basically drinking pesticides, killing themselves one way or another because they just cannot survive in the climate of the rules of agriculture that have been set up.

I always throw in this slide just because people have a hard time believing this whole immigration link. That’s actually U.S. government data that shows how before NAFTA migration from Mexico was actually declining a little bit and then afterwards went through the ceiling, right there, ’98, ’97, as I mentioned, is exactly when the corn tariff went into effect. This is actually the cleanest – you can see in Africa and some other countries, huge shifts in migration, but this is actually the cleanest line right there that I have ever seen correlating the huge surge in migration to a particular agriculture policy under one of these agreements. It’s because it was so sudden and direct. It went from basically allowing no imported corn to allowing a lot of corn, not just from the U.S. but from other countries through the U.S.

Now, another piece of this that’s worth considering is while we are schlepping around all of this stuff, what is the implication of all this shipping and all this distance on climate. One of the facts I just always want to share is that the U.S. still is the world’s largest agriculture exporter. We’re still the number one. We are also the largest net importer, and we import and export many of the same commodities. My research director, who is an economist, is actually up to his ears in a model right now with the help of climate scientists and others who are actually going through all the tariff lines to figure out exactly what are the top things by volume weight that we’re simultaneously importing and exporting, because that’s redundant trade. And it’s only profitable because this particular set of rules have certain privileges and benefits linked in for the traders, as compared to the producers, or don’t fully take account of the environmental costs. There are sort of hidden subsidies in how the behavior becomes profitable under these rules. That isn’t good news for most of us who are living with the results.

The jump between GDP as compared to the volume of trade that that slide shows I think is an incredibly telling symptom of how these agreements have been basically designed in the trade area to move stuff around as compared to the benefits that trade should deliver, because trade is very important, right? I mean, there are many benefits to trade but the measures of the outcomes are not about the good parts, i.e., more diversity, lower prices, being able to get things we can’t get here, et cetera. No, the outcome here is that you basically have the growth of the volume in schlepping stuff around way outpacing the growth in economic growth. And right now the UN is saying that 5% of all carbon emissions is actually long distance sea shipping. Now, to the extent some of that is redundant, that’s a much better place to cut out carbon emissions than some of the other changes that we’re going to have to make to adopt to a lower carbon footprint, I think.

Economically as well, the outcomes for nonagriculture livelihoods has not been pretty. In the U.S. we have seen one in six manufacturing jobs gone since WTO, one in every four. I know Iowa has lost a bunch of those. That’s stunning. One in six of every manufacturing jobs in less than fifteen years. So you can argue we’re transforming from one kind of economy to another, but in fifteen years, one in every six, that transition is obviously weighted by different factors, including those investment rules that buy us certain conduct like off shoring. As we have sent those jobs out, we’ve seen U.S. median real wages decline. That’s because those jobs were on average higher paying jobs than the same jobs in the service sector for people who don’t have college degrees. So the unemployed, uncollege degreed worker who had been in a manufacturing job and then enters the pool of workers in the service sector and helps drive down those wages in the service sector which already started lower because there was a lower unionization rate than in manufacturing.

We have at the same time gotten a trade balance – imbalance, a deficit, that is now almost 6% of our entire GDP. We have an $800 billion trade deficit. When you look at the U.S. effect, for everyone who hasn’t studied economics, just because Ross Perot messed everyone up on this fact a long time ago, the effect of trade is not on the overall number of jobs in the economy. That is actually fiscal and monetary policy. The effect of trade is on the composition of jobs in the economy, what kind of jobs. So the effect of what is called labor arbitrage – that’s something that Professor Krugman came up with that term, labor arbitrage. That has to do with basically effectively competing across borders with workers who make a lot less for the exact same work. So to the extent that investment is protected under these agreements, so it’s a promotion to offshore investment, U.S. workers are now competing with very smart, hard working capable people in other parts of the world who are making, in some instances, $2, $3 a day to be doing the same work with the same equipment and the same technology that someone in the U.S. was being paid $15, $18 an hour to do.

The way that you measure the net effect, though, is on the consumer side. The benefits of trade are always on the consumer side economically, which is everyone gets cheaper stuff. So the theory is that even if some people lose their jobs, it’s some people, but if we all get cheaper stuff because of the imports, then it’s a net benefit. Well, the thing that is daunting is now when you net out the lower prices versus the lower wages, for the 70% of Americans who don’t have a college degree, the net is now a $2,000 loss, which is to say that theory of free trade, which is the consumer benefit, always outweighs the job loss. We’ve had such a shift of high wage jobs that the wage effect is universal and no longer is that true. Some of the professors who have actually done that study, including Professor Samualson, the professor at Princeton who created modern free trade theory, has now basically said actually the wage decline of off shoring has overtaken the benefits for consumers.

Inequality in the U.S. is now at a rate it hasn’t been since the Robber Baron age as one has seen those statistics before in the newspaper. Part of how that’s happened is that even though U.S. workers have had massive growth in productivity, we have actually seen wages decline and flatten real terms since NAFTA and WTO, basically to 1973 levels. It shows how actually productivity of the U.S. worker has gone through the ceiling – well, has increased nicely, whereas median wages have declined. This is the labor arbitrage effect. Those professors who I cited, by the way, those guys were proponents of NAFTA and WTO, so it’s not a bunch of lefty professors who didn’t like this in the first place saying I told you so. Actually they have measured the outcomes of actually what their theories told them, versus the empirical data. And this gap is something that has not happened in the U.S. and productivity growth has increased. So have wages.

The decline in manufacturing that you can see sort right at that bump is where the WTO admission of China starts. And that slide actually is when it was only three million. That’s actually two years old. We’ve lost another million in the last two years. That decline has meant that in many urban areas and in many rural areas where the off-farm job was at a factory, for instance, all the white goods factories here in Iowa, those jobs are just gone. Why manufacturing matters, obviously we need to be able to make some of our own infrastructure. We no longer can make the beams – we have shut down all the steel mills that make the beans for big span bridges. So just down the road in Minneapolis when the bridge went down, part of the delay in the repair was because we had to actually import from Brazil and China the heavy metal spans that are necessary for that kind of construction project. We just don’t make it here anymore. The Department of Labor shows that when you go from a manufacturing job to a service job, you lose about $7,000 in income. That’s the actual data from the department. So, you know, the tax base in which our schools and hospitals are relying gets clobbered too.

All of that is scary but as students at a university, you think, well, I’m not that 70% of folks who don’t have a college degree. I’m getting a college degree. And we keep hearing education, it’s the answer to everything. Except more proponents of the current system like Alan Blinder, federal reserve vice chair under Clinton, has done a study that shows 28,000 to 42,000 jobs in the service sector which require a college education and which pay on average more than the median wage are highly off shoreable in the foreseeable future. He rated different kind of jobs that are off shoreable. Some of these other studies just replicate that, show some of what service sector jobs – these are jobs that take a college degree are now being shipped out under these rules. And by the way, it’s the service sector and the investment rules of these agreements that actually promote this.

And then we have the trade deficit, which I mentioned, which is to say since NAFTA and WTO we went from a bad trade deficit to a totally unsustainable trade deficit. And it’s not just here. In the developing world, the countries that most faithfully adopted the model are the ones that have seen the greatest slowdown. So the countries that were the weakest against the IMF and the World Bank, for instance Africa and the Middle East, they have had a number of people living on a dollar a day increase, and in the Caribbean in Latin America, the number of people living on $2 a day, but also the percentage, so it’s not just population growth have increased. These are countries that adopted the model. In most parts of the world that signed up to that package of policies I showed, growth has declined. So for instance, in Africa, it – per capita growth was weak before. It was 23% in the twenty years before. In the modern globalization model, there was a decline of – I’m sorry, it was 40% before. There was a decline of 23%. Obviously parts of that is AIDS, et cetera, but it also shows that those are countries that actually, because they had no leverage against these institutions, most religiously adopted the policy. Latin America actually – this shows all the regions, by the way.

China being the outrider didn’t adopt the policies. The dark bar is the former regime, and it basically shows how growth was better in the ‘60s and ‘80s period before all these policies were adopted, with the exception of East Asia, by the way, has Vietnam and India in it, two countries that largely didn’t follow the rules. Latin America is really telling because you always hear about, oh, the lost decades when there was statism and a lack of deregulation. That was the ‘60s to the ‘80s. It wasn’t spectacular but it was 82%. Since those countries signed up for that package of policies, ’80 to 2000 and since, growth has plummeted. When there’s less pie to spread around, obviously more poverty. The exceptions are China and India. Look at their growth rates. China wasn’t even in the WTO until 2002 and didn’t take any loans from the IMF or the World Bank. India was outside the IMF and the World Bank until very, very recently and also, if you look at the chart of challenges, did not comply with the WTO very systematically and ended up getting challenged a lot until recently. Vietnam was not in the WTO until 2005. Basically those countries did all of those kinds of policies that are totally forbidden under the model, and they did incredibly well as a result. It’s the control set. There are down sides to those policies but it does show at least there is another model that gets different outcomes.

The alternatives, now that everyone is totally depressed, here’s the good news. These rules did not come down from Mount Sinai. Moses did not have a third tablet call the WTO. This is just one version. This is one version that was created by one set of interests. And given the predominant role in the United States had in setting these rules, the fact that the U.S. negotiators didn’t have a very balanced set of inputs, as far as the diversity of potential interests in our country, you can see we got some lopsided rules.

The measure are – the outcomes are measurable. You can keep looking at more levels of detail. I actually have a book, “Whose Trade Organization,” the one Mark mentioned, that in 300 pages and about 1400 footnotes goes through in so much more detail all of the cases, all the economic data. It’s sort of like a desk top resource. It’s not really a pleasant easy novel-like read, but it is sort of the encyclopedia of the outcomes. If you look at the outcomes, then the question is: Is it acceptable? And if it’s not, is it sustainable? If it’s not, then what are you going to do about it? We obviously as public citizens have come to the conclusion it’s not acceptable and it’s not sustainable. Then what do you do?

One of the first things is just become educated about it. So a couple of these Web sites, tradewatch.org is our Web site, it basically has everything. And I brought some of the fact sheets, sort of the easy version fact sheet of what we’re for, which I’m going to get to these slides, how to fix the current system, plus the legislation that will be in Congress in 2009 to do it. Or the Columbia Free Trade Agreement, the fact sheet version. At that Web site, you can also have the 60-page footnoted analysis version of what exactly is in the Columbia Free Trade Agreement if you want to get down in the weeds.

We also have resources, like we have a searchable version online of the entire U.S. WTO services commitments. It’s one of the most trafficked parts of our Web sites, because actually we think a lot of corporate lawyers use it to figure out what the hell is in that agreement. We took apart the entire 80 pages of U.S. commitment and translate it from GATTese into English and you can search it. So you can say engineering services (given what building we’re in) and see what U.S. commitments were, retailing, design, architecture, pick your issue, and it actually lays it out in English. It has next to it in GATTese what the actual language is with a guide, a key to what it all means, but there are a lot of services like that.

We have the whole list of all the NAFTA trade adjustments assistance certified NAFTA casualties. You can’t get that data from the U.S. government. We had to sue them to get the tapes, and then we translate it into a searchable form. Eyes On Trade is our blog that sends pithy, short, and frequently sarcastically humorous little blog signals out about twice a week. If you want to sign up for action alerts, we can get your name on one of these forms that will be passed out in a little bit. Pass them around, put your name on and pass them to the sides, and we will add you to action alerts to let you know about what some of these developments are. That’s more of an activist piece than getting to know it. Getting to know it is key.

Another key book is “Alternatives to Corporate Globalization.” And then I recommend for folks who are doing development studies and are interested in the developing country issues, “Kicking Away the Ladder” and “Bad Samaritans.” It’s by a Korean born professor who now teaches at Oxford. These are some of the best books that talk about this model and what’s happened in the developing world.

Once you’re educated, then you get to the question of how – what is the effective methodology to change intergovernmental institutions, right. This is sort of the thing. It’s insulated. You can’t just go to Congress and say would you rewrite that law, we’re now going to protest every single congressperson until we get a majority of them to agree, because it’s the WTO and the WTO is 165 countries where each country gets one vote. So the only way you can campaign successfully is actually a methodology that a lot of citizen activists helped create where you link internationally country-based campaigns. So in the U.S., there’s a country based campaign. That’s the role of students in civil society. So to the extent you have come to the conclusion that the current model is not sustainable, that the current level of integration and deregulation is creating risks like financial contagion, or it’s relying a lot on cheap fuel to move around redundant trade or you think about what the environmental implications are or you think about the social and moral implications, then there are things to be done.

There’s an international movement of country-based civil society groups who are working basically on this three-part agenda. We’re moving the one-size-fits-all neoliberal policy package that doesn’t have to do with trade. So taking out all the other stuff, like trying to decide how this university should operate and be funded out of the so-called trade agreement in Geneva over which you have no control.

Adding the missing stuff, the stuff that would actually make trade fair. For instance, there are lots of multilateral agreements that sovereign nations have signed, environmental agreements, human rights labor agreements. Right now the WTO trumps all of them. They have to get out of the way, if the WTO rules conflict. It’s a choice. What happened if you made the WTO contingent on countries meeting those other rules so that a floor of behavior environmentally, human rights wise, labor rights wise with all those other international agreements, not what the U.S. tells another country to do, but what everyone is already signed up to. So every country that wants the benefits of the trade rules of the WTO has to also meet certain environmental human rights and labor rules. These are choices. And then changes the way these bodies work so that actually is a place for the people who live with the results, all of you, to be able to interact with them.

Unfortunately, at the same time that that seems like a pretty reasonable thing to do, given the data, most recently the big meltdown, the interests who benefitted from the status quo are pushing for more. So there’s a WTO expansion that’s being pushed. Interestingly, civil society campaigning has stopped that, most notably in the U.S. and colorfully in 1999 at the Seattle WTO ministerial, but repeatedly since in other countries when there have been attempts to push it, free trade agreements of NAFTA expansions. And believe it or not, the same week that AIG went down, someone in Congress pushed a WTO conformity bill to get rid of – to preempt all state insurance regulations with a weak federal standard to conform with WTO, the very week AIG went down. They claimed it was required for WTO.

Despite all of that, the fact is actually truth can beat power with a lot of organizing. And “Battle in Seattle” is currently a full-feature Hollywood film that’s about the WTO protests that basically wants to remind people of that historic moment which was largely squashed, the memory of it, by the horrors of 9/11. But it is the case that a citizen movement worldwide has managed against some very powerful governments and corporations to stop WTO expansion and push for a new set of rules successfully for basically a decade. There is no WTO expansion, most recently an attempt was tanked in Geneva this very July.

The movement behind this, the global network is called “Our World is Not for Sale.” It’s another Web site I recommend you go to. It’s an amazing network from 70 countries. It’s civil society coalitions in 70 countries linked internally. So we’re obviously internationalists. We’re pro integration. We work together but the question is what rules are going to actually work for more people. The WTO shrink-or-sink agenda is a punchy 12-step version of what I described in more dry language of what needs to be taken away that’s excessive and what’s missing that needs to be added.

There’s some amazing cross country social movements: fisherfolks, Via Campesino, indigenous people’s organizations, labor unions. We actually have here with us one of the Via Campesino leaders tonight coincidentally. International campaigns in sweat shops, on water issues, these are actually powerful movements that are changing policies internationally. In the U.S. the coalition is called the Citizens Trade Campaign. That protest actually was a protest in Minnesota on a bridge, which I thought was kind of a fun graphic to use. Citizens Trade Campaign has branches around the country. The Iowa Fair Trade Campaign is its Web site. It’s the Iowa branch. It’s organized on the ground in numerous states. It’s staffed in about 15 states.

Citizenstrade.org is the U.S. based coalition. It’s labor, environmental, faith, civil rights, family farm, consumer, et cetera. The Trade Act, of which I have the flyer, is the actual legislation that would implement domestically what I described. It lays out what must and must not be in every trade agreement, sets out renegotiation of yield trade agreements, and comes up with a new system to negotiate new trade agreements.

[cue Obamoptism...]

Given we’re about to have a huge sea change in political leadership, that’s going to be the topic in 2009. Of course, the question is if not now, when. It’s sort of one of those fights you can’t avoid, especially young people, because it’s upon you. Public Citizen didn’t get into trade. We worked on social and consumer justice. We worked on food safety. And then in about 1990, we realized we weren’t going to be effective anymore if we didn’t start working on the very same issues we’ve always cared about in the context of globalization. WTO and NAFTA became delivery mechanisms of undermining the goals and values we always advocated for.

So basically whatever it is that floats your boat, if we don’t get the global rules right, there’s no way around it. It’s actually a fight everyone has to be engaged in, regardless of what issue you care about. We now have a moment in the U.S. where a majority of the public says they don’t want the status quo. We have changes in political leadership, shifts in Congress. And, of course, the financial crisis really does indict the deregulation agenda in the way that prods an opening.

Students today are going to be the folks who decide whether we actually turn and implement the alternatives that can make the better world that we know is possible, given the indictment has been built by a lot of activism in the last fifteen years that the current system isn’t working. Fixing these current globalization rules will fix – is the fix at the root cause of a lot of outcomes and issues that are very damaging, environmental, social, developmental, you name it. And the problem is that the failure to get to the root causes basically undermines progress on all of these other issues we care about and means a set of outcomes that really I don’t think are those a lot of people would choose.

So with that, I challenge you all to get more informed and involved and to make your opinions on what parts that you like and what parts you don’t, to use the resources of the global campaign and the national campaign to actually channel your work, and to know it’s been successful so that there actually is the ability to make the change. All of those agreements that were bad that didn’t happen are the evidence. The push for that trade act I mentioned which, by the way, in six short months is a hundred cosponsors from across the Congress across the country as a new way forward. It’s all evidence that’s totally doable, but it’s going to all largely rely on you. So thank you very much, and I look forward to questions.

Do you think the new president will do anything regarding NAFTA?

The question is will the new president do anything regarding NAFTA. And the answer most easily is depends who’s president. Senator McCain loves NAFTA and he would not change it and has been pounding on Senator Obama for suggesting it should be changed. And Senator McCain actually famously said in Iowa there is no country with whom I would not do a NAFTA style trade agreement, which is a daring thing to say in Iowa, given what’s happened in Iowa after NAFTA. Senator Obama, particularly during the primary period, wrote down through a series of questionnaires, a lot of very explicit commitments of how he would change the current agreements, including NAFTA. So those investor rules I mentioned that have led to all those laws being attacked and that promote off shoring, he explicitly committed to changing those. He talked about adding environmental and labor standards, the floor I had mentioned, so that the trade rules are actually balanced on a particular set of – a floor of conduct. He’s also talked about the agriculture issue and basically allowing particularly developing countries who have a lot of subsistence farmers to be able to protect that rural economy, more as a matter of basically international relations and immigration. So he has talked about it.

But, you know, with all of these things, it will only happen if people organize it. So if there are a bunch of people who are Senator Obama fans – I went to law school with him, he’s a very, very smart guy. It is the case that it’s more of an opportunity to get these negotiations to redo NAFTA and the other agreements if he’s elected, but there will be enormous pressures on him not to do it by the same interests in Washington that got us into these agreements in the first place. So I frequently think about the lesson of Brazil and President Lula. He was the guy who was the head of their labor federation. So it would be like heading – electing the president of the AFL-CIO to be the president. And as soon as he got elected, all the activists and the labor movements, the peasant farmers movement, et cetera, they all just went, ahhh, it’s done. A bunch of them went into government. The other ones stopped pushing. And, of course, all of the corporate interests that had always been there kept pounding on President Lula. So what ended up happening is if he, like, started here sort of left of center, everyone on the right was dragging him this way and all the people that would normally have been pounding on the government the other direction, all of a sudden it’s done, our man is there, we don’t think about it. So where he ended up was way to the right of the previous right wing government on a lot of key issues. So the lesson is no matter which part – once any official is in office, accountability is the key to delivery of the things we care about.

You talk about the big bad republicans. [She didn’t – Ed.] And I’m wondering what president signed WTO and NAFTA?

Well, no, no, it’s been bipartisan. It’s been bipartisan. Right now between McCain and Obama, there’s a difference of opinion, but it was actually Clinton who signed NAFTA and – no that’s not true. Daddy Bush signed NAFTA. Clinton then worked to get it passed, and Daddy Bush did the U.S.-Canada free trade agreement, which is the precursor. Bush now has done CAFTA, but it was Clinton who passed NAFTA and who signed the WTO, so it’s been equal opportunity bipartisan. What’s very interesting is that in Congress, there’s been a shift that’s also fairly bipartisan of blocks of republican and democratic House members more than senators who, based on what happened in their congressional districts, have actually shifted from having been for either Bush’s NAFTA or Clinton’s WTO to actually being opponents now. So it’s been a bipartisan festival of being for it, and there’s been a bipartisan shift. But when it comes to the presidentials, McCain has just been very clear he likes it and Obama has been saying he doesn’t like it, but will end up in the same place unless there’s a lot of pressure, regardless of who gets elected. It’s a campaign issue.

What are the ideal outcomes of renegotiating NAFTA and the WTO?

So what would be the desired outcomes of renegotiating of fixing them. It’s basically the slide that I had towards the end. So the things that shouldn’t have been in there in the first place need to be taken out. So the outrageous investor rules in NAFTA that give treatment to – preferential treatment to foreign investors – for instance, foreign investors in the U.S. have better rights under NAFTA than the U.S. Constitution gives domestic companies. So some of those cases I listed are cases where challenges that wouldn’t be allowed in the U.S. courts, even under our relatively conservative Supreme Court, are allowed under NAFTA. So we have to get rid of the extraordinary and crazy investor rules. We have to get rid of the service sector privatization and deregulation rules. There should be trade in the service rules, because there is actual cross border trade. You need rules but you don’t want to set limits – handcuffs on domestic legislatures about how they can regulate. As long as it doesn’t discriminate, it’s not a trade issue.

The same thing with the regulatory standard limits. As long as domestic and foreign companies and products are treated the same, that’s a domestic values choice. That’s not actually a discrimination or a trade issue, so rolling back the absolute rules that say you simply cannot limit the size of a retail store, but rather the rules should be you have to treat domestic and foreign stores the same, but the local land use rules for the country or the state get to decide.

And then finally the agriculture rules need to be shifted, because right now they basically support gaming by the trading companies against producers. And so some of the kinds of things that need to be done is anti-trust, anti-cartelization rules, as well as some disciplines on the subsidies that help the trading companies as compared to the domestic subsidies for things like, for instance, environmental set asides, et cetera. That’s the short version.

Then stuff that’s missing needs to be added in. So the binding environmental and labor standards – there’s a floor once you get all that other stuff to make the trade itself fair, and then you need to reform the institutions. I suspect the first things Obama will deal with, if he’s elected, are the investment rules and the labor and environmental issues, but it may go further.

And by the way, on WTO, if you go to the “Our World is Not for Sale” Web site, the shrink-or-sink statement basically explains in really good little bullets about exactly what you cut out. One of the things I should mention is the intellectual property rules. You don’t really want monopoly protections in a free trade agreement, but what also is missing. And the thing that’s interesting about that statement on that Web site is it’s endorsed by citizens movements in 72 countries, so it’s not just a U.S. version. It is actually the version of what the civil society in a lot of different countries whose governments are in the WTO say would better suit the populations.


Funding for this program was provided by Friends, the Iowa Public Television Foundation, generations of families and friends who feel passionate about Iowa Public Television programs.

THREE great emotions bowled over him; understanding; a vast philanthropy; and finally as if the result of the others, an irrepressible, exquisite delight; [as if! i wish! thanks Virginia!]

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Re: "End of Wall Street Boom" - Must-read history

Postby JackRiddler » Tue Nov 16, 2010 8:03 pm

,

SLAD on other thread posted latest on the Bloomberg FOIA lawsuit against the Federal Reserve, from Pam Martens.


viewtopic.php?f=8&t=30209

November 16, 2010

The Banksters, the Feds and the Emasculation of FOIA

How the Fed and the Treasury Stonewalled Mark Pittman to His Dying Breath

By PAM MARTENS

On the President’s first day in office on January 21, 2009, he issued an Open Government memo promising the American people a new era of transparency. On March 19, 2009, under the President’s orders, the Attorney General’s office issued detailed guidelines on how Federal agencies were to respond going forward to Freedom of Information Act (FOIA) requests. The guidelines instructed the agencies as follows:

“The key frame of reference for this new mind set is the purpose behind the FOIA. The statute is designed to open agency activity to the light of day. As the Supreme Court has declared: ‘FOIA is often explained as a means for citizens to know what their Government is up to.' NARA v. Favish, 541 U.S. 157, 171 (2004) (quoting U.S. Dep't of Justice v. Reporters Comm. for Freedom of the Press, 489 U.S. 749, 773 (1989)…The President’s FOIA Memoranda directly links transparency with accountability which, in turn, is a requirement of a democracy. The President recognized the FOIA as ‘the most prominent expression of a profound national commitment to ensuring open Government.’ Agency personnel, therefore, should keep the purpose of the FOIA -- ensuring an open Government -- foremost in their mind.”

It pains me to inform you, Mr. President, but the Treasury Department, Board of Governors of the Federal Reserve, and Securities and Exchange Commission (the trio that has been variously distracted minting trillions in currency, trading cash for trash with Wall Street, surfing for porn, or mishandling multiple voluminous tips on Bernie Madoff’s Ponzi scheme) have misplaced your memo or, as many suspect, take their marching orders not from you but from Wall Street -- perhaps because they perceive that this is where you take your orders too.

On October 6, 2010, I filed three FOIA requests with the Securities and Exchange Commission (SEC). I had come by information that the official government report on the stock market’s “Flash Crash” of May 6, 2010 was materially wrong and I wanted to buttress my investigative report to the public with documents the SEC had obtained or compiled in conducting its investigation.

I followed the SEC’s FOIA instructions and emailed the requests to foiapa@sec.gov as instructed by the web site, asking for a small amount of very specific information. (You should know, Mr. President, that you may need a technology overhaul, along with a personnel overhaul at the SEC because, according to their written response, it took six days to receive my email. The SEC emailed me as follows on October 12: “This letter is an acknowledgment of your FOIA Request dated October 06, 2010, and received in this office on October 12, 2010, regarding Flash Crash of May 06…” A cynical person might entertain the idea that this is a standard response to postal requests and the SEC didn’t notice that my request came in via email.)

According to Congress, the SEC was required, under the 1996 amendments to the FOIA,

”to determine within 20 days (excluding Saturdays, Sundays, and legal holidays) after the receipt of a request whether to comply with the request. The actual disclosure of documents is required to follow promptly thereafter. If a request is denied in whole or in part, the agency must tell the requester the reasons for the denial. The agency must also tell the requester that there is a right to appeal any adverse determination to the head of the agency or his or her designee. The FOIA permits an agency to extend the time limits up to 10 days in unusual circumstances. These circumstances include the need to collect records from remote locations, review large numbers of records, and consult with other agencies. The agency is supposed to notify the requester whenever an extension is invoked.”

My response was not answered within 20 business days and I was not informed it would be delayed. On the 24th business day, I was informed by three separate emails that all three of my requests were denied in their entirety. In reviewing the transmission detail on each email, it took seconds for the SEC’s outgoing emails to reach me, whereas the SEC would have me believe that their incoming emails take six days.

One request was denied on the basis of FOIA exemption number 8. Congress defines that exemption as follows: “The eighth exemption protects information that is contained in or related to examination, operating, or condition reports prepared by or for a bank supervisory agency such as the Federal Deposit Insurance Corporation, the Federal Reserve, or similar agencies.” The SEC supervises and regulates broker-dealers and securities trading, not banks. Moreover, I was seeking documents related to a specific stock market event, the Flash Crash of May 6, 2010, not a report or examination of a bank’s condition.

The second request was denied on the basis of FOIA exemption number 5. Congress defines that exemption as applying to internal government documents.

“An example is a letter from one government department to another about a joint decision that has not yet been made. Another example is a memorandum from an agency employee to his supervisor
describing options for conducting the agency’s business. The purpose of the fifth exemption is to safeguard the deliberative policymaking process of government…For example, the exemption protects the policymaking process, but it does not protect purely factual information…Protection for the decision making process is appropriate only for the period while decisions are being made. Thus, the fifth exemption has been held to distinguish between documents that are pre-decisional and therefore may be protected, and those which are post-decisional and therefore not subject to protection.”

My request was for factual information and not policy deliberations. Since the official report on the May 6, 2010 Flash Crash was released on October 1, 2010 and my request was made on October 6, 2010, all documents sought would have been post-decisional and not subject to protection.

My third request was denied on the basis that the SEC did not have the information but their letter referenced only half the information I sought and was silent on the other half.

A brief flash of a movie scene came to mind as I reflected on the government’s maniacal refusals to turn over Wall Street documents since the financial crisis began. In “The Rainmaker,” based on the John Grisham novel, young Donny Ray dies of leukemia because the evil insurance company, Great Benefit, won’t approve a bone marrow transplant. After repeatedly denying the mother’s treatment requests for her dying son, the company sends her a final denial letter calling her “stupid, stupid, stupid” for failing to just go away. As it turns out, wearing the requester down with denials is a formalized practice for corporate benefit; there is no “Great Benefit” ever intended for the public.

The movie flashback reminded me of Mark Pittman’s FOIA battle. Pittman was a revered and trusted Bloomberg News financial reporter who died on November 25, 2009 at age 52 after his government essentially told him they thought he was “stupid, stupid, stupid” for not just going away. The government stonewalled him to his last breath.

Pittman’s legacy is now memorialized in Bloomberg v. Board of Governors of the Federal Reserve System which was decided in Bloomberg’s favor by the Second Circuit Court of Appeals on March 19, 2010. Pittman had asked the Federal Reserve Board, under a FOIA request in April and May of 2008, for details of four lending programs, including the borrowers’ names and the amounts borrowed. The programs were the Discount Window, the Primary Dealer Credit Facility, the Term Securities Lending Facility, and the Term Auction Facility. Pittman’s curiosity was piqued by the astronomical amount of borrowing taking place at the Fed by Wall Street banks during the crisis in 2008. After averaging approximately $250 million a week in prior years, lending at the Fed’s Discount Window spiraled to over $100 billion in October 2008.

By law, the Federal Reserve had 20 business days to make a determination on the FOIA request. Instead, according to the Bloomberg lawsuit: On June 19, 2008, the Fed invoked its right to extend the response time to July 3, 2008. On July 8, 2008, the Fed called Bloomberg News to say it was processing the request. The Fed called Bloomberg again on August 15, 2008, wherein Alison Thro, Senior Counsel and another employee, Pam Wilson, informed the business wire service that their request was going to be denied by the end of September 2008. No further communication came, including the denial.

On November 7, 2008, Bloomberg News filed a lawsuit in the U.S. District Court for the Southern District of New York, charging that: “…the Fed has vastly expanded its lending programs to private financial institutions. To obtain access to this public money and to safeguard the taxpayers’ interests, borrowers are required to post collateral. Despite the manifest public interest in such matters, however, none of the programs themselves make reference to any public disclosure of the posted collateral or of the Fed’s methods in valuing it. Thus, while the taxpayers are the ultimate counterparty for the collateral, they have not been given any information regarding the kind of collateral received, how it was valued, or by whom.”

It’s now two years later, Bloomberg has won at both the U.S. District Court and the Second Circuit Appeals Court and the information is still being withheld. While the Federal Reserve Board is not appealing to the U.S. Supreme Court, many of the same Wall Street banks the taxpayers bailed out, including Bank of America, JPMorganChase, Citigroup and Wells Fargo, are appealing to stop the release of the information through a consortium called The Clearing House Association LLC. At least one person doesn’t believe that appeal presents a solid basis to withhold the information. Matthew Winkler, Editor in Chief at Bloomberg News, wrote in an October 28, 2010 OpEd in the Wall Street Journal: “Now that the Fed is no longer pursuing the case, it may be able to release the information Bloomberg seeks at any time. We call on it to do so.”

Pittman’s battle with the Fed has been widely publicized. Less known is the specious handling of his FOIA request by the U.S. Treasury.

On Jan. 28, 2009, Pittman filed a FOIA with the U.S. Treasury asking it to identify the $301 billion in securities owned by Citigroup that the government had agreed to guarantee to help shore up the troubled bank and to provide details of any contracts the Treasury had with outside firms hired to calculate the assets’ values. Pittman died 10 months later still waiting for a response.

According to a Bloomberg News story reported by Bob Ivry on October 25th of this year, it took the Treasury over 20 months to finally respond, after allowing Citigroup to have input in what was to be disclosed. “Treasury officials responded with 560 pages of printed-out e-mails -- none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as ‘Did you just try to call me?’… None of the documents answers Pittman’s request for ‘records sufficient to show the names of the relevant securities’ or the dates and terms of the guarantees.” The headline of the article read “Treasury Shielding Citigroup With FOIA Deletions.” A subhead might have been “Citigroup Calls the Shots at Treasury.”

What does Winkler (and this writer) think the withheld facts might show? In Winkler’s OpEd of October 28 he noted: “Such disclosure would show whether the central bank may have violated the law by lending to any insolvent banks for extended periods.”

Did Pittman have any particular bank in mind when he filed his FOIAs? Well, he did want to know about that $301 billion guarantee to Citigroup.

I commend Pittman and Winkler for not just going away and I share their concerns. In my CounterPunch column of November 24, 2008, titled “The Rise and Fall of Citigroup,” I noted that

“As of last Friday’s close, Citigroup had $2 trillion in ‘assets’ and $20.5 billion in stock market value, strongly suggesting the term ‘assets’ is a misnomer on Wall Street. Late last night the U.S. government agreed to dump hundreds of billions more into this black hole without any survival plan required of the company as demanded of the auto makers: apparently if you make those four wheel machines that get us to work you’re suspect; if you manufacture losses in unintelligible derivatives, you’re good to go…[Citigroup’s] stock lost 60 per cent last week and 87 per cent this year. The company’s market value has now fallen from more than $250 billion in 2006 to $20.5 billion on Friday, November 21, 2008.”

At that point in time, Citigroup’s market value was $4.5 billion less than the company owed taxpayers from the U.S. Treasury’s bailout program.
THREE great emotions bowled over him; understanding; a vast philanthropy; and finally as if the result of the others, an irrepressible, exquisite delight; [as if! i wish! thanks Virginia!]

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Re: "End of Wall Street Boom" - Must-read history

Postby JackRiddler » Tue Nov 16, 2010 8:13 pm


!!!

"Table 7.11 of the National Income and Product Accounts (NIPA) reports that total monetary interest paid in the U.S. economy amounted to $3,240 billion in 2009."

!!!



http://counterpunch.org/hudson11152010.html
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

November 15, 2010
Obama's Greatest Betrayal
The Coming Sell-Out to the Super Rich and What It Means for the Rest of Us

By MICHAEL HUDSON

Now that President Obama is almost celebrating his bipartisan willingness to renew the tax cuts for the super-rich enacted under George Bush ten years ago, it is time for Democrats to ask themselves how strongly they are willing to oppose an administration that looks like Bush-Cheney III. Is this what they expected by Obama’s promise to rise above partisan politics – by ruling on behalf of Wall Street, now that it is the major campaign backer of both parties?

It is a reflection of how one-sided today’s class war has become that Warren Buffet has quipped that “his” side is winning without a real fight being waged. No gauntlet has been thrown down over the trial balloon that the president and his advisor David Axelrod have sent up over the past two weeks to extend the Bush tax cuts for the wealthiest 2 per cent for “just” two more years. For all practical purposes the euphemism “two years” means forever – at least, long enough to let the super-rich siphon off enough more money to bankroll enough more Republicans to be elected to make the tax cuts permanent.

Obama seems to be campaigning for his own defeat! Thanks largely to the $13 trillion Wall Street bailout – while keeping the debt overhead in place for America’s “bottom 98 per cent” – this happy 2 per cent of the population now receives an estimated three quarters (~75 per cent) of the returns to wealth (interest, dividends, rent and capital gains). This is nearly double what it received a generation ago. The rest of the population is being squeezed, and foreclosures are rising.

Baudelaire quipped that the devil wins at the point where he manages convince the world that he doesn’t exist. Today’s financial elites will win the class war at the point where voters believe it doesn’t exist – and believe that Obama is trying to help them rather than shepherd them into debt peonage as the economy settles into debt deflation.

We are dealing with shameless demagogy. The financial End Time has arrived, but Obama’s happy-talk pretends that “two years” will get us through the current debt-induced depression. The Republican plan is to make more Congressional and Senate gains in 2012 as Obama’s former supporters “vote with their backsides” and stay home, as they did earlier this month. So “two years” means forever in politician-talk. Why vote for a politician who promises “change” but is merely an exclamation mark for the Bush-Cheney policies from Afghanistan and Iraq to Wall Street’s Democratic Leadership Council on the party’s right wing? One of its leaders, after all, was Obama’s Senate mentor, Joe Lieberman.

The second pretense is that cutting taxes for the super-rich is necessary to win Republican support for including the middle class in the tax cuts. It is as if the Democrats never won a plurality in Congress. (One remembers George W. Bush with his mere 50+ per cent, pushing forward his extremist policies on the logic that: “I’ve got capital, and I’m using it.” What he had, of course, was Democratic Leadership Committee support.) It’s all “to create jobs,” headed by employment of shipyard workers building yachts for the nouveau riches and foreclosing on the ten million Americans whose mortgage payments have fallen into arrears. It sounds Keynesian – or at least, reminiscent of Thomas Robert Malthus’s claim (as lobbyist for Britain’s landed aristocracy) that landlords would use their rent income to hire footmen, carriage-makers and butlers to keep the economy going.

It gets worse. Obama’s “Bush” tax cut is only Part I of a one-two punch to shift taxes onto wage earners. Congressional economists estimate that extending the tax cuts to the top 2 per cent will cost $700 to $750 billion over the next decade or so. “How are we going to go out and borrow $700 billion?” Obama asked Steve Kroft in his Sixty Minutes interview on CBS last week.

It was a rhetorical question. The President has appointed a bipartisan commission (right-wingers on both sides of the aisle) to “cure” the federal budget deficit by cutting back social spending – to pay yet more bailouts to the economy’s financial wreckers. The National Commission on Fiscal Responsibility and Reform might better be called the New Class War Commission to Scale Back Social Security and Medicare Payments to Labor in Order to Leave more Tax Revenue Available to Give Away to the Super-Rich. A longer title than the Deficit-Reduction Commission used by media friendlies, but sometimes it takes more words to get to the heart of matters.

The political axiom at work is “Big fish eat little fish.” There’s not enough tax money to continue swelling the fortunes of the super-rich pretending to save enough to pay the pensions and related social support that North American and European employees have been promised. Something must give – and the rich have shown themselves sufficiently foresighted to seize the initiative. For a preview of what’s in line for the United States, watch neoliberal Europe’s fight against the middle and working class in Greece, Ireland and Latvia; or better yet, Pinochet’s Chile, whose privatized Social Security accounts were quickly wiped out in the late 1970s by the kleptocracy advised by the Chicago Boys, to whose monetarist double-think Obama’s appointee Ben Bernanke has just re-pledged his loyalty.

What is needed to put Obama’s sell-out in perspective is the pro-Wall Street advisors he has chosen – not only Larry Summers, Tim Geithner and Ben Bernanke, but by stacking his Deficit Reduction Commission with outspoken advocates of cutting back Social Security, Medicare and other social spending. Their ploy is to frighten the public with a nightmare of $1 trillion deficit to pay retirement income over the next half century – as if the Treasury and Fed have not just given Wall Street $13 trillion in bailouts without blinking an eye. President Obama’s $750 billion tax giveaway to the wealthiest 2 per cent is mere icing on the cake that the rich will be eating when the bread lines get too long.

To put matters in perspective, bear in mind that interest on the public debt (that Reagan-Bush quadrupled and Bush-Obama redoubled) soon will amount to $1 trillion annually. This is tribute levied on labor – increasing the economy’s cost of living and doing business – paid for losing the fight for economic reform and replacing progressive taxation with regressive neoliberal tax policy. As for military spending in the Near East, Asia and other regions responsible for much of the U.S. balance-of-payments deficit, Congress will always rise to the occasion and defer to whatever foreign threat is conjured up requiring new armed force.

It’s all junk economics. Running a budget deficit is how modern governments inject the credit and purchasing power needed by economies to grow. When governments run surpluses, as they did under Bill Clinton (1993-2000), credit must be created by banks. And the problem with bank credit is that most is lent, at interest, against collateral already in place. The effect is to inflate real estate and stock market prices. This creates capital gains – which the “original” 1913 U.S. income tax treated as normal income, but which today are taxed at only 15 per cent (when they are collected at all, which is rarely in the case of commercial real estate). So today’s tax system subsidizes the inflation of debt-leveraged financial and real estate bubbles.

The giveaway: the Commission’s position on tax deductibility for mortgage interest

The Obama “Regressive Tax” commission spills the beans with its proposal to remove the tax subsidy for high housing prices financed by mortgage debt. The proposal moves only against homeowners – “the middle class” – not absentee owners, commercial real estate investors, corporate raiders or other prime bank customers.

The IRS permits mortgage interest to be tax-deductible on the pretense that it is a necessary cost of doing business. In reality it is a subsidy for debt leveraging. This tax bias for debt rather than equity investment (using one’s own money) is largely responsible for loading down the U.S. economy with debt. It encourages corporate raiding with junk bonds, thereby adding interest to the cost of doing business. This subsidy for debt leveraging also is the government’s largest giveaway to the banks, while causing the debt deflation that is locking the economy into depression – violating every precept of the classical drive for “free markets” in the 19th-century. (A “free market” meant freedom from extractive rentier income, leading toward what Keynes gently called “euthanasia of the rentier.” The Obama Commission endows rentiers atop the economy with a tax system to bolster their power, not check it – while shrinking the economy below them.)

Table 7.11 of the National Income and Product Accounts (NIPA) reports that total monetary interest paid in the U.S. economy amounted to $3,240 billion in 2009. Homeowners paid just under a sixth of this amount ($572 billion) on the homes they occupied. Obama’s commission estimates that removing the tax credit on this interest would yield the Treasury $131 billion in 2012.

There is in fact a good logic for stopping this tax credit. The mortgage-interest tax deduction does not really save homeowners money. It is a shortsighted illusion. What the government gives to “the homeowner” on one hand is passed on to the mortgage banker by “the market” process that leads bidders for property to pledge the net available rental value to the banks in order to obtain a loan to buy the home (or an office building, or an entire industrial company, for that matter.) “Equilibrium” is achieved at the point where whatever rental value the tax collector relinquishes becomes available to be capitalized into bank loans.

This means that what appears at first as “helping homeowner” afford to pay mortgages turns out merely to enable them to afford to pay more interest to their bankers. The tax giveaway uses homebuyers as “throughputs” to transfer tax favoritism to the banks.

It gets worse. By removing the traditional tax on real estate, state, local and federal governments need to tax labor and industry more, by transforming the property tax onto income and sales taxes. For banks, this is transmuting tax revenue into gold – into interest. And as for the home-owning middle class, it now has to pay the former property tax to the banker as interest, and also to pay the new taxes on income and sales that are levied to make up for the tax shift.

I support removing the tax favoritism for debt leveraging. The problem with the Deficit Commission is that it does not extend this reform to the rest of the economy – to the commercial real estate sector, and to the corporate sector.

The argument is made that “The rich create jobs.” After all, somebody has to build the yachts. What is missing is the more general principle: Wealth and income inequality destroy job creation. This is because beyond the wealthy soon reach a limit on how much they can consume. They spend their money buying financial securities – mainly bonds, which end up indebting the economy. And the debt overhead is what is pushing today’s economy into deepening depression.

Since the 1980s, corporate raiders have borrowed high-interest “junk bond” credit to take over companies and make money by stripping assets, cutting back long-term investment, research and development, and paying out depreciation credit to their financiers. Financially parasitized companies use corporate income to buy back their stock to support its price – and hence, the value of stock options that financial managers give themselves – and borrow yet more money for stock buybacks or simply to pay out as dividends. When the process has run its course, they threaten their work force with bankruptcy that will wipe out its pension benefits if employees do not agree to “downsize” their claims and replace defined-benefit plans with defined-contribution plans (in which all that employees know is how much they pay in each month, not what they will get in the end). By the time this point has been reached, the financial managers have paid themselves outsized salaries and bonuses, and cashed in their stock options – all subsidized by the government’s favorable tax treatment of debt leveraging.

The attempted raids on McDonalds and other companies in recent years provide object lessons in this destructive financial policy of “shareholder activists.” Yet Obama’s Deficit Reduction Commission is restricting its removal of tax favoritism for debt leveraging only for middle class homeowners, not for the financial sector across the board. What makes this particularly absurd is that two thirds of homeowners do not even itemize their deductions. The fiscal loss resulting from tax deductibility of interest stems mainly from commercial investors.

If the argument is correct (and I think it is) that permitting interest to be tax deductible merely “frees” more revenue to pay interest to banks – to capitalize into yet higher loans – then why isn’t this principle even more applicable to the Donald Trumps and other absentee owners who seek always to use “other peoples’ money” rather than their own? In practice, the “money” turns out to be bank credit whose cost to the banks is now under 1 per cent. The financial-fiscal system is siphoning off rental value from commercial real estate investment, increasing the price of rental properties, commercial real estate, and indeed, industry and agriculture.

Alas, the Obama administration has backed the Geithner-Bernanke policy that “the economy” cannot recover without saving the debt overhead. The reality is that it is the debt overhead that is destroying the economy. So we are dealing with the irreconcilable fact that the Obama position threatens to lower living standards from 10 per cent to 20 per cent over the coming few years – making the United States look more like Greece, Ireland and Latvia than what was promised in the last presidential election.

Something has to give politically if the economy is to change course. More to the point, what has to give is favoritism for Wall Street at the expense of the economy at large. What has made the U.S. economy uncompetitive is primarily the degree to which debt service has been built into the cost of living and doing business. Post-classical “junk economics” treats interest and fees as payment for the “service” for providing credit. But interest (like economic rent and monopoly price extraction) is a transfer payment to bankers with the privilege of credit creation. The beneficiaries of providing tax favoritism for debt are the super-rich at the top of the economic pyramid – the 2 per cent whom Obama’s tax giveaway will benefit by over $700 billion.

If the present direction of tax “reform” is not reversed, Obama will shed crocodile tears for the middle class as he sponsors the Deficit Reduction Commission’s program of cutting back Social Security and revenue sharing to save states and cities from defaulting on their pensions. One third of U.S. real estate already is reported to have sunk into negative equity, squeezing state and local tax collection, forcing a choice to be made between bankruptcy, debt default, or shifting the losses onto the shoulders of labor, off those of the wealthy creditor layer of the economy responsible for loading it down with debt.

Critics of the Obama-Bush agenda recall how America’s Gilded Age of the late 19th century was an era of economic polarization and class war. At that time the Democratic leader William Jennings Bryan accused Wall Street and Eastern creditors of crucifying the American economy on a cross of gold. Restoration of gold at its pre-Civil War price led to a financial war in the form of debt deflation as falling prices and incomes received by farmers and wage labor made the burden of paying their mortgage debts heavier. The Income Tax law of 1913 sought to rectify this by only falling on the wealthiest 1 per cent of the population – the only ones obliged to file tax returns. Capital gains were taxed at normal rates. Most of the tax burden therefore felon finance, insurance and real estate (FIRE) sector

The vested interests have spent a century fighting back. They now see victory within reach, by perpetuating the Bush tax cuts for the wealthiest 2 per cent, phasing out of the estate tax on wealth, the tax shift off property onto labor income and consumer sales, and slashing public spending on anything except more bailouts and subsidies for the emerging financial oligarchy that has become Obama’s “bipartisan” constituency.

What we need is a Futures Commission to forecast just what will the rich do with the victory they have won. As administered by President Obama and his designated appointees Tim Geithner and Ben Bernanke, their policy is financially and fiscally unsustainable. Providing tax incentives for debt leveraging – for most of the population to go into debt to the rich, whose taxes are all but abolished – is shrinking the economy. This will lead to even deeper financial crises, employer defaults and fiscal insolvency at the state, local and federal levels. Future presidents will call for new bailouts, using a strategy much like going to military war. A financial war requires an emergency to rush through Congress, as occurred in 2008-09. Obama’s appointees are turning the U.S. economy into a Permanent Emergency, a Perpetual Ponzi Scheme requiring injections of more and more Quantitative Easing to to rescue “the economy” (Obama’s euphemism for creditors at the top of the economic pyramid) from being pushed into insolvency. Bernanke’s helicopter flies only over Wall Street. It does not drop monetary relief on the population at large.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website, mh@michael-hudson.com
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Re: "End of Wall Street Boom" - Must-read history

Postby seemslikeadream » Wed Nov 17, 2010 12:49 pm

on Sept 12, 2001 the national security state entered the cockpit of (to modernize a phrase) the plane of state, hijacked it, and steered it directly for the Bermuda Triangle — and here was the strangest thing of all: no one even noticed - Tom Engelhardt
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Re: "End of Wall Street Boom" - Must-read history

Postby seemslikeadream » Thu Nov 18, 2010 11:00 am

Knight Research' Stunning Call: "The Game Is Over"
Submitted by Tyler Durden on 11/17/2010 15:52 -0500

From Knight Research. Presented without commentary.

The Game Is Over

The simple story is this: We believe the structural and cyclical terms of global trade have finally reached their tipping point. This will catalyze a wholesale change in sentiment and a historic repositioning of risk assets. The emerging market global growth story is over.

In meetings with clients throughout October, we began emphasizing our growing concerns about the nearly ubiquitous confidence the financial markets—and for that matter, global leaders and their body politic—have in China; and by extension, the rest of the emerging market story, commodities, and the direction of foreign exchange cross-rates.
Not surprisingly, our concerns were met with varying degrees of resistance; but the overall consensus clearly favored a very bullish, asymmetric outcome over both the near and intermediate terms. When pressed as to our own sense of timing and specific catalysts for broad-based trend reversal, candidly we were unclear. Our sense then, was that the higher and faster the commodity markets pushed, the sooner the reversal would occur. But we have now clarified our view.
In just the past several weeks, we believe the data and government actions out of China, the back-up in US interest rates, the Fed’s emphatic commitment to QE2, intensifying pressures across the EU, broadly rising commodity prices, government efforts to control hot money flows, have finally pushed the global terms of trade to their tipping point.
And now, as is evident by the flight to safety, and growing evidence that China will soon try and effect price controls in addition to raising interest rates and significantly changing the rules for their vast network of Local Government Funding Vehicles (LGFVs); the writing is on the wall. The game is over.
The simple story is this: The structural and cyclical terms of global trade have reached their tipping point which will effect a wholesale change in sentiment and a historic repositioning of risk assets.
So what do we consider the “terms of global trade”? Structurally, per our top chart, they are the intersection of Government Policy (viz., rule of law, market systems, trade law, etc.,) Resource and Industry (viz., natural resources, labor/demographic pools, industrial advantages, import dependencies, etc.,) and Economic Security (viz., the sovereign’s competitive standing, the relative power/needs of the citizenry, the mandate/control of the government, etc.) And cyclically, (as represented by the light blue, bold arrows) the terms of trade are defined by the intersection of foreign exchange rates, commodity prices, and the cost and availability of trade finance.
And in our assessment given:
The structural breakdown of the credit and labor markets in the developed world and the anemic outlook for nominal GDP growth
The immaturity of the developing world and their vulnerability to credit shocks and uncontrollable inflation
China’s dependence upon non-economic, and unsustainable credit expansion to maintain growth far beyond natural export and domestic demand, and
Asia’s dependence upon imported energy and agriculture
the game is over. Presently, we believe that the broad-based resurgence of investor confidence in the emerging market and secular bull market in commodities will end badly; proving that the rally which commenced in Q2 2009, was in fact an “echo bubble” facilitated by massive—and unsustainable—stimuli from the Chinese Government

And although such cataclysmic shocks rarely result in rhythmic, straight line fractures, the chain of price adjustments should be relatively clear. Accordingly, we expect a shockingly powerful rally in the dollar, broadbased weakness across the commodity sector, a dramatic widening of emerging market credit spreads, and what could prove to be a stampede of hot fund flows out of the emerging markets.
We appreciate both the gravity and the brevity of this note; but then again, the story is simple.
We believe that the end of the Great Consumer Credit Cycle and the vast structural differences in the terms of trade between the United States, the EU, and China, have finally caught up with the secular bull thesis on Emerging Market and Commodities. Quite ironically, the Fed’s aggressive policies will likely prove to be the catalyst which breaks China’s unbridled expansion of credit and non-economic growth, ushering in a wholesale rebalancing of risk assets.
Image

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Re: "End of Wall Street Boom" - Must-read history

Postby JackRiddler » Thu Nov 18, 2010 2:14 pm

Assimilating a quasi-opposite prediction. This can be fun. Thanks shamus.

anothershamus wrote:Yes it's true, all you have to do is buy a few ounces of physical silver and you put a silver nail in the coffin of JP Morgan's 1.5 TRILLION Dollar exposure in naked shorts on silver. Every penny the price of silver goes up makes the margin call larger for JP Morgan. You can wiki economic terms for more info.

My favorite economist/activist Max Keiser talks about it here:
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Re: You must view this lecture

Postby wintler2 » Thu Nov 18, 2010 6:39 pm

JackRiddler wrote:.. The Citibank-Travellers merger of 1998, in violation of US law, prompted the Rubin-Summers Brigade to lead the charge for a repeal of the Glass-Steagal Act limits requiring separation of commercial banking from insurance and investment banking. In effect, this was a retroactive legalization of the merger, and made the financial scams and bubbles of the 2000s possible. But WTO rules negotiated not by Congress but by trade envoys had already required a repeal of the limits, so it's possible that this is what prompted Citibank to go ahead with the merger in advance of its actually being legal in the US. ..


Thanks much for the text of Iowa Public TV video JR, i'll watch the video when i get a chance. I agree that the WTO/Glass-Steagal connection is very interesting.

If we had something resembling real journalism in the mainstream media, WTO processes would be publicly identified as 'causing' the financial collapse by forcing deregulation, and politicians would have to distance themselves from it and, maybe, even cast a critical eye over its 'achievements' to date.
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Re: You must view this lecture

Postby JackRiddler » Thu Nov 18, 2010 6:54 pm

wintler2 wrote:
JackRiddler wrote:.. The Citibank-Travellers merger of 1998, in violation of US law, prompted the Rubin-Summers Brigade to lead the charge for a repeal of the Glass-Steagal Act limits requiring separation of commercial banking from insurance and investment banking. In effect, this was a retroactive legalization of the merger, and made the financial scams and bubbles of the 2000s possible. But WTO rules negotiated not by Congress but by trade envoys had already required a repeal of the limits, so it's possible that this is what prompted Citibank to go ahead with the merger in advance of its actually being legal in the US. ..


Thanks much for the text of Iowa Public TV video JR, i'll watch the video when i get a chance. I agree that the WTO/Glass-Steagal connection is very interesting.

If we had something resembling real journalism in the mainstream media, WTO processes would be publicly identified as 'causing' the financial collapse by forcing deregulation, and politicians would have to distance themselves from it and, maybe, even cast a critical eye over its 'achievements' to date.


I agree understanding this is essential.

To me, primary blame for the Glass-Steagal repeal still lies with Wall Street and its Clinton admin Rubin-Summers lobbying team, and the "bipartisan" Congress that passed it in the wake of the Citi-Travellers-Solomon mergers. Wall Street and its government appendage were working for it for many years independently of anything the WTO said, and so in fact they got to write the WTO rules, since they've captured the agencies negotiating them and the US negotiators tend to have the greatest weight. So of course once that worked they weren't interested in slowing down "compliance" with WTO-"dictated" deregulation, let alone fighting it. Obviously the latter is an available option to the superpower that need not fear WTO armies or, for that matter, the flight of capital due to keeping the same old banking rules, since the US would have remained the center of world finance, safe haven and world currency either way.

If it were simply a WTO over-reach there were means to fight this, but of course the US gov instead fulfilled what Wall Street wanted all along (which is why bankers got to write it into the WTO rules in the first place).

These globalist institutions provide an important way for capital to get what it wants without the appearance of national states being involved, so that responsibility is rendered amorphous and almost no one even realizes what is happening until much later. It's a dynamic I first noticed many years ago with the EU. The national capital and conservative elements in Germany, France and the economically stronger powers use the EU institutions indirectly to put the squeeze on their own populations (and those of the weaker countries). They get what they've always wanted without anyone quite knowing where it came from. It's a useful device for two old ever-evolving games, class war and imperialism.

.
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Re: You must view this lecture

Postby vanlose kid » Thu Nov 18, 2010 7:20 pm

JackRiddler wrote:.. It's a useful device for two old ever-evolving games, class war and imperialism.

.


Image

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Re: "End of Wall Street Boom" - Must-read history

Postby vanlose kid » Thu Nov 18, 2010 9:15 pm

Fraudclosure...

comment @ ZH by Fraud-Esq
on Thu, 11/18/2010 - 18:08
#739381


...

Maybe you don't get it yet. This isn't it or where it ends. Most of those loans were collateralized with assets. So, the banks are NOW rolling up these private assets. They OWN 65% of the GDP. Do you understand that number? They just started rolling-up assets. This roll-up will go on for years. This isn't a "profit". This is a seizure of assets. There's an enormous difference.

Fiat money loans made against the laws governing regulatory reserve requirements were made against real, productive assets, people, homes and did everyone forget...industry. THAT was the scam. That's it, whatever happens, you win either interest or assets. If you own the gov, you get BOTH. Businesses are going down and their assets are being rolled into the banks, who fund their competition, which is consolidating into a perfect-duo banking-multinational chosen partnership. Both win off fraud and seizure of the competition.

People still don't get this. They think it's a downturn. Show me a time the 6 largest banks owned 70% of a nations assets. 15 years ago, the top six owned 17% of GDP. Now, THEY make markets, not you.

[ http://www.zerohedge.com/article/leavin ... e-his-life ]

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Re: "End of Wall Street Boom" - Must-read history

Postby smiths » Fri Nov 19, 2010 12:29 am

in a nutshell

"Debt is not just a credit instrument, it is an instrument of political and economic control."

Matt Stoller, a blogger-turned Congressional staffer. He was a policy advisor to Rep. Alan Grayson on financial policy issues.)


http://www.nakedcapitalism.com/2010/11/ ... ety-2.html

Debt, Control

best two word explanation of a capitalist "free-market" system
the question is why, who, why, what, why, when, why and why again?
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Re: "End of Wall Street Boom" - Must-read history

Postby JackRiddler » Fri Nov 19, 2010 2:05 am

vanlose kid wrote:Fraudclosure...

comment @ ZH by Fraud-Esq
on Thu, 11/18/2010 - 18:08
#739381


...

Maybe you don't get it yet. This isn't it or where it ends. Most of those loans were collateralized with assets. So, the banks are NOW rolling up these private assets. They OWN 65% of the GDP. Do you understand that number? They just started rolling-up assets. This roll-up will go on for years. This isn't a "profit". This is a seizure of assets. There's an enormous difference.


It is correct that the banks are rolling up assets, and that this is an excellent description for what is called a "recession." Or as Mellon put it way back when, paraphrasing, in an economic crisis assets return to their rightful owners. Class war, fulfilling itself.

People still don't get this. They think it's a downturn. Show me a time the 6 largest banks owned 70% of a nations assets. 15 years ago, the top six owned 17% of GDP. Now, THEY make markets, not you.


This is a misunderstanding. The top 6 do not own 70 percent of all assets. Rather, they hold assets (as measured in the fantasy accounting after the suspension of mark-to-market) equivalent to 70 percent of GDP, which is about 14 trillion if I remember. All assets together are valued at more than 50 trillion, or about four times GDP. (Of course, this is all about asset valuations, which fluctuate, are partly fictional, and should not be confused with money or use-value. An asset at any given moment is only truly worth what you can sell it for in cash at that moment.)

The further question is what their liabilities and debts are compared to the ostensible valuation of the assets they own. All this stuff is totally obscured by off-the-books accounting and insane holding structures. There is no central market in derivatives, just tons of contracts where only the parties know what the deals are. The banks are swallowing everything they can through foreclosure, but can't put it on the market or sell it at high enough prices to pay off the bad bets they're still carrying (which are what the Fed has guaranteed to the tune of however many trillion fail, I lose track). The top 6 are still zombies on a galactic treadmill, and odds are they will be howling for a new injection of blood soon. Basically, everything the government spends on has to go except the wars to cover the losses they're still going to have.

.

Here's what I'm talking about - Exhibit Zombie A.

http://www.bloomberg.com/news/print/201 ... -weil.html
(Article reproduced here under fair-use provisions, with original link given, solely for non-commercial purposes of archiving, education and discussion.)

Bank of America Edges Closer to Tipping Point

By Jonathan Weil - Nov 3, 2010
Bloomberg Opinion

It was only last April that Bank of America Corp. was making fools out of the doomsayers who had called for its nationalization a year earlier. Taxpayers had gotten their bailout cash back. Investors who bought its shares at the bottom were making a killing. Government leaders lauded the company’s rescues, both of them, as a great success.

Now the bank may be on the verge of trouble again. Its stock has fallen 41 percent since April 15. Mortgage-bond investors are demanding untold billions of dollars in refunds. The foreclosure fiasco is metastasizing. A member of the Troubled Asset Relief Program’s oversight panel, AFL-CIO attorney Damon Silvers, openly worried at a hearing last week about the risk that Bank of America might need another bailout.

A few more months like the last one, and we may be wishing Bank of America had never returned its $45 billion of TARP money.

You wouldn’t know there’s anything wrong with Bank of America by an initial look at its balance sheet. The company showed common shareholder equity, or book value, of $212.4 billion as of Sept. 30. And its regulatory capital ratios have risen steadily throughout the year.

Tipping Point

Judging by its shrinking stock price, though, investors are acting as if Bank of America is near a tipping point. Its market capitalization stands at $115.6 billion, or 54 percent of book value. That’s the second-lowest price-to-book ratio among the 24 companies in the KBW Bank Index, and well below the 76 percent ratio the company was at in October 2008 when it landed its first round of TARP dough. Put another way, the market is saying there’s a $96.8 billion hole in Bank of America’s balance sheet.

When I asked Jerry Dubrowski, a Bank of America spokesman, about the disparity, he said: “I’m not going to comment on the book value and the stock price.”

It may be the shares are a bargain at $11.52, if the company’s books are right. Another plausible scenario is that Bank of America’s management, led by Chief Executive Officer Brian Moynihan, has lost so much credibility with investors that the stock’s decline might start feeding on itself.

The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet is that it’s largely impenetrable. Some portions, though, are so delusional that they invite laughter. Consider, for instance, the way the company continues to account for its acquisition of Countrywide Financial, the disastrous subprime lender at the center of the housing bust, which it bought for $4.2 billion in July 2008.

Goodwill Purchase

Here’s how Bank of America allocated the purchase price for that deal. First, it determined that the fair value of the liabilities at Countrywide exceeded the mortgage lender’s assets by $200 million. Then it recorded $4.4 billion of goodwill, a ledger entry representing the difference between Countrywide’s net asset value and the purchase price.

That’s right. Countrywide’s goodwill supposedly was worth more than Countrywide itself. In other words, Bank of America paid $4.2 billion for the company, even though it thought the value there was less than zero.

Since completing that acquisition, Bank of America has dropped the Countrywide brand. The company’s home-loan division has reported $13.5 billion of pretax losses. Yet Bank of America still hasn’t written off any of its Countrywide goodwill.

Dubrowski, the company spokesman, declined to comment when I asked him why not. In its latest quarterly report with the SEC, Bank of America said it had determined the asset wasn’t impaired. It might as well be telling the public not to believe any of the numbers on its financial statements.

No Surprise

Combine that with Bank of America’s reaction to the robo- signer scandal. (Working on it! Wait, halt foreclosure sales! No, restart them! Whoops, still checking records!) Add in the $141.6 billion of home-equity loans on Bank of America’s books, the real value of which is unknown. And it should be no surprise that the company’s stock price has been plunging.

So, does Bank of America need to issue new common stock to raise capital? Its executives say no. They point to the usual regulatory benchmarks, as well as their own calculations of tangible common equity. This is a bare-bones capital gauge, showing a company’s ability to absorb future losses, which excludes preferred stock and most intangible assets.

Using Bank of America’s $129.5 billion figure for tangible common equity, though, that’s still about $14 billion more than the company’s market cap. So the market isn’t just discounting the intangibles, most of which don’t count in regulatory capital. Investors are wary of the company’s other numbers, too.

Artifice of Strength

The tough part for Bank of America executives is that the company’s future may be out of their hands. Writing off more worthless assets or boosting reserves for future losses might help their credibility. (The bank wrote off $10.4 billion of goodwill unrelated to Countrywide last quarter.) Or, the market might perceive such moves as a sign that the artifice of strength is broken. It’s hard to tell.

As for the government’s too-big-to-fail guarantee, it’s probably still there. But who knows? Republicans have won back the House. The answer is up in the air.

The only certainty is there is none, aside from the knowledge that Bank of America’s top executives have no idea what goes on inside the bowels of their company. For all we know the stock could double, or be a donut. The fate of the financial system hangs in the balance. Once again, we’re all on the hook.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net
®2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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Eric Cantona says: Kill the Banks

Postby JackRiddler » Fri Nov 19, 2010 2:17 am

vanlose kid wrote:Man U Player Of The Century Eric Cantona Appeals For Peaceful Revolution Against Banks, Calls For Europeans To Pull Their Money
Submitted by Tyler Durden on 11/18/2010 20:32 -0500


A few weeks ago we noted that December 7 is becoming a grass roots "banker mutiny" day, in which citizens across Europe will pull money from their banks and thus force a pan-European bank run on what is already a bankrupt financial system, which survives each day only at the expense of the continent's increasingly indebted citizens, their life of increasing austerity, and of course, the US Federal Reserve and its final backstop. In some ways we discounted the potential reach of this movement. Enter Eric Cantona - just ask any sport afficionado who the most entertaining, flamboyant and skillful football player of 1990's Manchester United was and 9 out of 10 times you will hear that name. The icon (both in England and France) whose on field antics were only matched by his kung fu skills, and who has a massive popular following, has been recorded agitating viewers (many of them), to enact a bloodless revolution against French banks: "We don't pick up weapons to kill people, to start the revolution... the revolution is really easy to do nowadays. What is the system? The system revolves around the banks. It's based on the power of the banks... so it must be destroyed starting with the banks. This means that the 3 million people with their placards on the street... they go to the bank, withdraw their money from the banks and these ones collapse. 10 million people and the banks collapse and there is not real threat, a real revolution. We must go to the bank. In this case there would be a real revolution. It's not complicated. You simply go to the bank in your country and withdraw your money. If there are enough people withdrawing their money, the system collapses. No weapon, no blood, or anything like that." A peaceful anti-banking revolution, brilliantly explained so that everyone can understand.

But comprehension is only have the battle. The other half is getting of your ass. Which is why this will never work in the US. As for Europe, we will find out in 3 weeks...



[ http://www.zerohedge.com/article/man-u- ... europeans- ]

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vanlose kid wrote:-- think i've posted this before but am not quite sure, so here it is again:

December 7 Is The Unofficial Pan-European Bank Mutiny Day
Submitted by Tyler Durden on 11/01/2010 21:07 -0500


After German blog "All is Smoke and Mirrors" floated an idea of an organized bank run (something attempted previously in the US without much success) in France in response to French austerity protests (which have resulted in no gains), the effort has since expanded to a pan-European organized bank run day on December 7, 2010, and has metastasized to Italy, Germany, the Netherlands, the UK and Greece. We are confident that very soon the rest of Europe, which is currently gripped in a climate of extremely unpopular austerity, will join in this symbolic protest against banking, which unlike the US, may just succeed, considering the European banking system is in total shambles, and in far worse shape than its American counterpart.

Since virtually all actions in 2010 by the global central banking cartel have been geared toward stabilizing the European banking system which continues to wobble on the edge of a complete systemic collapse, perhaps the marginal withdrawal of a few billion in deposits could be just the straw that forces a reset first in Europe, and shortly thereafter in the rest of the globalized developed (and then developing, proving what a joke the whole concept of decoupling is) world. As America has demonstrated so very well, 25 weeks of consistent withdrawals from domestic funds (sorry CNBC, there have not been inflows yet, confirming yet again that fact and propaganda don't mix yet) have resulted in a quarter in which bank earnings were simply said crushed. Had Americans followed through and withdrawn their deposits from banks it would have been the final straw. Luckily, the lack of organization among the US population gave the US banking system a reprieve. In Europe things are different: banks are not as reliant on trading, however, they are far more reliant on a stable deposit base to sustain the Ponzi. Therefore, even a partially successful withdrawal campaign could have far more dire consequences to the continent's banking system, and bring the financial system to its proverbial knees.

And before some accuse the blog's activism of some vile form of megalomaniacal quackery, we should highlight that the action has already been noted by such reputable newspapers as Suddeutsche Zeitung. Furthermore, in just 24 hours 1,500 readers have pledge their support to the action's various Facebook support sites, and another 48,000 are on the waitlist. We hope that more alternative media (the mainstream will unlikely support such a radical venture) catches on, and more Europeans realize they have all to gain and little to lose from forcing the balance of power to shift away from the banks, and into the hands of the people.

As for those who wonder why Europe's banking is much more fragile from a deposit base perspective, we present the graphic below comparing asset bases of American and various European banks: since both Europe and the US have roughly comparable GDPs, one would assume that the two regions' banking systes would have the same asset bases. That, however, is completely wrong. In fact Europe's asset base is roughly ten times, if not more, as great, even as it supports an economy the same size as that of the US. Which is also why it is far more unstable as the marginal utility of every deposit dollar goes that much further via the fractional reserve banking model, and supports that many more assets. In other words, every dollar withdrawn in Europe would have roughly the same impact as 10 in the US.

Image

Which is why this action actually has a chance of success. And even more so that when it comes to political activism, Europeans tend to be far more ready to participate in joint causes, unlike their apathetic US brethren, who are perfectly content to watch the world series and collect their unemployment checks (soon expiring).

Perhaps in a jesture of poetic irony, some two hundred years after America showed the "Old World" what miracles an emancipated and ambitious population can do when it revolts, it will be the Old World's turn to return the favor, and rebel against that most destructive of concepts ultimately created by this splinter experiment from across the Atlantic: Central Banking and a fiat system in which money literally grows on trees.

For our European readers who wish to participate in this experiment, below are the various facebook support pages:

[ http://www.zerohedge.com/article/decemb ... mutiny-day ]

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Re: "End of Wall Street Boom" - Must-read history

Postby JackRiddler » Fri Nov 19, 2010 7:13 pm

.

This is crazy.

Image

http://www.collapsenet.com/index.php?op ... Itemid=130

Mike Ruppert wrote:This is what happened when one homeowner tried to reverse engineer his mortgage to find out who actually owned it. I couldn't stop laughing for five minutes.

Back in 2004-2005 when I was almost screaming about mortgage fraud this is just the kind of situation I was warning about. But even by the time I knew that there were at least three times more mortgages than pieces of actual problem I couldn't have imagined this. Now what would really be helpful would be to see who actually made money out of this, but banking secrecy laws prevent that, except in criminal cases. But this is so complex, and then entities so layered behind corporate shields it would be tough.

Then I realized what a perfect metaphor it was for the complexity and terminal state of human industrial civilization. And then I realized that this is was courts all over the country are forcing through rocket dockets as described in Rolling Stone recently with the homeowner having no real chance of victory. There is only one possible way out of this from an historical perspective. It starts with an "r", ends with an "n" and rhymes with evolution. -- MCR
THREE great emotions bowled over him; understanding; a vast philanthropy; and finally as if the result of the others, an irrepressible, exquisite delight; [as if! i wish! thanks Virginia!]

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Re: "End of Wall Street Boom" - Must-read history

Postby JackRiddler » Fri Nov 19, 2010 7:39 pm

http://counterpunch.org/whitney11182010.html

November 18, 2010
When the Cure is Worse Than the Disease
Ireland's Suicide Pact with the EU


By MIKE WHITNEY

Ireland could be the next Lehman Brothers. That's what has the markets worried. If Irish leaders refuse to accept a bailout from the EU's new European Financial Stability Facility (EFSF), then bondholders will be forced to take haircuts on their investments which will leave banks in Germany and France short of capital. Bonds yields will rise sharply slowing activity in the credit markets. An Irish default will trigger hundreds of billions of dollars in credit default swaps (CDS), which will push weaker counterparties into bankruptcy and domino through the financial system. Contagion will spread to Portugal, Greece, Spain and Italy widening bond yields and forcing governments to increase their borrowing at the ECB. Business activity will sputter, unemployment will rise, and growth will shrink. It will be a second financial meltdown.

But no one believes that will happen. Most people think that Ireland will "take its medicine" and spare bondholders any losses. Irish leaders would rather accept a decade of EU-imposed austerity measures and the loss of sovereignty, then leave the euro and start fresh. It's disappointing. The euro is not designed to meet the needs of the smaller, less industrialized countries like Ireland. They need their own, flexible currency to ease the effects of cyclical downturns. But Irish leaders are still captivated by the idea of a united Europe. So they will cast aside the independence they earned through centuries of struggle for a pipedream and the elusive promise of prosperity.

At present, the Irish government is underwriting the toxic debts of its main banks. Unfortunately, those debts far exceed the revenues of the state. According to BBC's Robert Peston, the liabilities are "equivalent to an oppressive 700% of GDP when banking, public sector and private sector debts are added together." So far, the ECB has helped to keep Irish banks operating by providing 130 billion euros of emergency liquidity. But the wholesale markets no longer accept Irish debt as collateral and bond yields are in nosebleed territory. Irish politicians still maintain they have sufficient funds to get through the middle of next year, but that does not include funding for the banks. In fact, if the ECB stopped lending to the banks today, the system would crash overnight.

So the situation is tense and getting tenser. Even so, everyone expects Ireland's Finance Minister Brian Lenihan to cave in and accept a bailout. That will shift all the losses onto Irish taxpayers.

But what would happen if Lenihan balked and decided to restructure the debt instead of borrowing the money from the EFSF?

Journalist Robert Peston mulls-over that posibility in a recent article for the BBC. Here's an excerpt:

"Anglo Irish Bank and Allied Irish Banks, would probably have to be declared insolvent. And...many billions of euros that Irish taxpayers have already pumped into these banks would have to be written off....

What would then be triggered would be enormous payments by underwriters of credit default swaps (CDSs), the debt insurance contracts taken out by lenders and speculators. These payments would generate enormous losses for the financial institutions, including banks, which provided the CDS cover....

Even without the CDS loss multiplier, the impact of debt haircuts would be painful for British and international banks. According to the Bank for International Settlements, total lending of non-Irish banks to Irish banks is around $170bn, of which British banks provided $42bn, German banks provided $46bn, US banks $25bn and French banks $21bn." ("Ireland: How much punishment for British and international banks?", Robert Peston, BBC)

If Ireland quits the euro, all hell will break loose. The government will have to issue a new currency knowing that their debts will still be denominated in the higher priced euro. That will increase their debt-load. And, they'll be blocked from the raising capital via the bond markets until they've settled old claims. At best, it would take decade or more to dig out and to reestablish their credibility with the markets. On the other hand, they would have shed the euro straitjacket and reestablished their sovereignty. That's got to be worth something, but how much is it really worth?

Journalist Peter Oborne takes a look at the sovereignty issue in a recent article in the Telegraph. Here's an excerpt:

"It cannot be denied that Ireland has lost its status as a sovereign nation. Thanks to its disastrous entanglement with the euro, it has lost any independence in domestic, foreign and above all economic policy. The Irish nation is the creature of Brussels and the European Central Bank. The Irish prime minister has effectively been turned into a pro-consul dispatched to Dublin from Brussels. Brian Lenihan, the finance minister, is like an overseas manager of a Brussels subsidiary. For those of us who love Ireland, this is miserable and demeaning – but it needs to be borne in mind that a similar fate awaits a number of other European countries. Greece already does what it is told by the IMF and the ECB; the same will shortly apply to Portugal and in due course Spain." ("Ireland has lost its sovereignty and is now the creature of Brussels – thanks to the euro", Peter Oborne, Telegraph)

Oborne is not alone in thinking that Ireland is making a mistake by staying in the EU. The Telegraph's Ed West sees things the same way, but describes the EU/Ireland alliance in even darker terms, as a "suicide pact":

"Ireland has a historical attachment to continental Europe, as liberator from British rule, but it perhaps goes even deeper than that, back to its monks’ preservation of Western civilization during the Dark Ages. Ireland, more than most countries, feels itself profoundly European and its Catholicism was always a part of that. It is not entirely a coincidence that as Christianity faded Ireland adopted a replacement ideology – the dream of Brussels. Or the world’s biggest suicide pact, as I think of it....

Why spend 800 years trying to overthrow the Brits just to come under the sway of the EU? Having said that, almost no one in Ireland goes anywhere as far as UKIP or many Tories in opposing the EU altogether....

The European Project was and is a Utopian idea, based not on practical logic but on an idealistic vision, and it has only one aim in mind – total political union. Along the way its architects have consistently lied to the public about its aims, especially so in the creation of a single currency, which logic suggests requires political unification." ("Ireland's smug, Euro-loving elite has led their country to ruins – 'Little Englanders' saved ours", Ed West, Telegraph)

The financial crisis has stripped away much of the pretense surrounding the 16-country EU. No one is blabbing about ending wars and shared prosperity anymore. The focus has shifted to belt tightening for workers and golden parachutes for bankers and bondholders. In other words, elites are waging the same relentless class war they always have, only this time it's behind the facade of European unity. Does Ireland really want to be a part of that charade?

It's time for Ireland to leave the EU and deliver a blow to the ill-conceived Uberstate. In fact, they should have left years ago.

Mike Whitney lives in Washington state, He can be reached at fergiewhitney@msn.com


The euro and the EU are two different things. Ireland can leave the euro and stay in the EU, striking a first blow in liberating European nations from the bankster dictates of the ECB.
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