Tuesday, December 10, 2013

US rents rise quickly as income stagnate

About 28 percent of all US renters spent more than half their incomes on rent in 2011, according to a new study.
Personal finance experts often advise people to spend no more than 30 percent of their income on housing. But for a growing number of US renters, spending only 30 percent would be a welcome prospect, a new study finds.
Nearly 28 percent of all renters were “severely cost-burdened” in 2011, meaning they spent over half their incomes on rent, according to the study from Harvard University’s Joint Center for Housing Studies.
The study, which analyzed US Census Bureau data, additionally found that more than half of all renting households – 50.8 percent – were either moderately or severely cost-burdened, spending more than 30 percent of their incomes on rent.
That share of renters facing potential affordability problems has grown substantially in recent years, the study says. As recently as 2000, only 38.1 percent of renters spent more than 30 percent of their incomes on rent. As of 1960, only 23.8 percent of renting households did.
A person looking for a rental right now faces an even more daunting affordability challenge. The median asking rent for a new apartment right now is $1,090 per month, compared to the $861 per month in median gross rent for all apartments.
The gap between rents and incomes has growth particularly wide since the turn of the millennium, the study notes. After decades of moderately diverging and converging, gross rents and incomes finally split more decidedly over the last 12 years. Rents grew by an inflation-adjusted 6 percent between 2000 and 2012, the report says, while real median renter incomes fell by 13 percent.
“As a result, the gap between rental costs and renter incomes in 2012 was wider than in any year except 2010,” the study says.
Affordability issues for renters are among the great ironies to come out of the recession, says Shaun Donovan, secretary of Housing and Urban Affairs, as plummeting home prices caused many Americans to worry that housing had become too cheap.
“In the midst of the broader crisis you have a silent crisis in many ways going on among renters, and particularly among the lowest-income renters,” Donovan said at a Monday event releasing the report.
The share of the population renting homes has grown sharply in recent years. In the 2000s, the number of renting households grew by 500,000 annually, but in the last three years, that rate increased to 1.25 million annually.
The increased interest in renting was driven in part by the recession. The downturn pushed some homeowners from their homes and prevented some potential buyers from purchasing houses, but the report also points out that the recession “highlighted the many risks of homeownership,” like the potential for a drop in home value, as well as benefits of renting, such as the ease renting allows in relocating and the fact that it lessens the burdens of home maintenance.
While increased demand may have driven rents up, a dearth of low-income housing has also contributed to a lack of affordability for many renters. The number of low-income renters has grown alongside the number of high-income renters, meaning tougher competition for apartments and homes on the rental market. More than 30 percent of all rentals that “extremely low-income renters,” defined as those with less than 30 percent of area median income, could afford in 2011 were occupied by higher-income households, according to the report.
This is helping to create a “supply gap,” the report says. Between 2001 and 2011, the number of “extremely low-income renters” grew by 3 million, but the number of rentals affordable to them remained unchanged. US News & World Report
With permission
Source: Press TV

US government sells rest of its General Motors stock; loses $10.5 billion on bailout

Source: Detroit News

General Motors is “Government Motors” no more — as the Obama administration ended the government’s historic nearly five-year intervention in the U.S. autosector.
U.S. Treasury Secretary Jack Lew said Monday the government today had sold its final shares in the Detroit automaker, leaving taxpayers with a $10 billion loss on the $49.5 billion bailout. The move means GM is free of government pay restrictions and can again pay dividends on its common stock.
GM chairman and CEO Dan Akerson is set to make a major speech in Washington on Dec. 16 to talk about the automaker’s investments in U.S. factories and job growth.
The Treasury said earlier this month that it was speeding up its GM exit and planned to complete its exit by Dec. 31. It said initially it planned to exit no later than the end of March.

Avoiding The Global Debt Trap By Restoring The Global Currency System

Economic Hitmen and the American Empire with John Perkins

John Perkins, author of Confessions of an Economic Hitman, and much more, discusses the corporate worldwide empire, global debt trap, and how the planet’s economic engine runs on blood and suffering in this Buzzsaw interview. The mega-selling author discusses the truth about financial oppression and conspiracy, and how the world can be rewired to liberate humanity with host Sean Stone in this uncensored interview on TheLipTV.GUEST BIO:
As Chief Economist at a major international consulting firm, John Perkins advised the World Bank, United Nations, IMF, U.S. Treasury Department, Fortune 500 corporations, and countries in Africa, Asia, Latin America, and the Middle East. He worked directly with heads of state and CEOs of major companies. His books on economics and geopolitics have sold more than 1 million copies, spent many months on the New York Times and other bestseller lists, and are published in over 30 languages.ADD’L LINKS:
Buzzsaw Full Episodes:
Buzzsaw Short Clips Playlist:
00:01 Welcome to Buzzsaw.
00:20 Introducing John Perkins.
01:50 Perkins defines the “economic hitman,” and going up against the corporate worldwide empire.
04:30 Avoiding the global debt trap by restoring the global currency system.
08:20 Honoring life and technological progress vs. the military industrial complex and a “death economy.”
11:00 Global terrorism as a belief and terrorists’ common theme of desperation.
13:10 Inciting a revolution of consciousness and recognizing the goal of creating a better world.
19:00 The vulnerability of our leaders and their dependence on corporate money.
23:50 Thanks and goodbye.
Read more at h

40% of US Workers Earn Less Than $20,000 Annually

These people cannot afford to use a credit card, but that doesn't stop Visa from issuing them a card.
Based on data in the table below, about 67.1 percent of wage earners had net compensation less than or equal to the $42,498.21 raw average wage. By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $27,519.10 for 2012.
Load Previous Replies
  • Ra

    Do you all realize what is going to happen when the asset bubble explodes? Massive debts with no incomes to service debt payments. You will lose any property that you still own, including your own bodies. Since birth your body (corpus) serves as collateral for USA, Inc (corporation). If the state has to harvest the organs out of your body to service debt, they will do it. Who's going to stop them?
  • Deep Space

    GO NWO!!!
  • Ra

    60.8 million (40%) US workers earn less than $20,000 annually.
    How many of these people are using credit cards to stay off the street?
    Obama wants to fast track TPP to increase this percentage?
    Obama is a lying scumbag.

ObamaCare's cuts to hospitals will cost seniors their lives

President Obama is wooing seniors with promises to protect Medicare as they've known it. On the defensive because of the $716 billion his health care law takes from Medicare, Obama assures seniors he's cutting payments to hospitals and other providers, not their benefits.
Don't be bamboozled. It's illogical to think that reducing what a hospital is paid to treat seniors won't harm their care. A mountain of scientific evidence proves the cuts will worsen the chance that an elderly patient survives a hospital stay and goes home. It’s reasonable to conclude that tens of thousands of seniors will die needlessly each year.
Under ObamaaCare, hospitals, hospice care, dialysis centers, and nursing homes will be paid less to care for the same number of seniors than if the health law had not been  enacted. Payments to doctors will also be cut.
Scientific evidence published in the Annals of Internal Medicine, a leading scientific journal, suggests that forcing hospitals to spend less on elderly patients will produce deadly results.
Exhaustive data on over two million elderly patients treated at 208 California hospitals from 1999 to 2008  show that elderly patients treated in low spending hospitals (bottom quintile) get less care and have a worse chance of surviving and leaving the hospital than elderly patients with the same diagnosis treated at higher spending hospitals. The research, sponsored by the National Institute on Aging and RAND and published in 2011  found that heart attack patients  were 19% more likely to die at low spending hospitals.
Over a four year period, 13,613 seniors with pneumonia, stroke, heart attacks and other common conditions who died at low spending hospitals would have recovered and gone home had they been treated at a higher spending institution.(Annals of Internal Medicine, February 1, 2011) That’s the death toll in one state with about 10% of the Medicare population.
Ignoring this evidence, the Obama administration is pressuring hospitals in all fifty states to imitate low spending hospitals. In addition to the across the board cuts in future payments to hospitals,very soon, beginning in October, 2012, the Obama administration will reward hospitals that spend the least per senior,and penalize those that spend more.  For several years, the Centers for Medicare and Medicaid have measured hospital quality, including infection rates. But Section 3001 of the Obama health care law adds "Medicare spending per beneficiary" as a measure for the first time. Hospital administrators express alarm that the measure includes not only what is spent on an elderly patient in the hospital but also for thirty days after discharge, when the patient visits a doctor or gets physical therapy for example.
Slashing what hospitals are paid does not eliminate “fraud, waste, and abuse,”contrary to what the law’s defenders claim.  The cuts compel hospitals to operate in an environment of medical scarcity, with fewer nurses and less diagnostic equipment.
When Medicare cut payment rates to hospitals in 1997, the cuts eventually led to more deaths from heart attacks.   Seniorstreated at the hospitals incurring the largest cuts had a 6-8% worse mortality rate from heart attacksthan seniors treated at other hospitals. The reason, researchers concluded, is that hospitals coped with the cuts by reducing nursing care. (National Bureau of Economic Research, March 2011.)
Though this research did not measure harm to younger patients, it is obvious that patients of every age suffer when nurses are spread thinner. Press the call button, and you will wait longer for help.
Medicare is the single largest source of revenue for hospitals. Richard Foster, Chief Actuary of Medicare and Medicaid Services, testified to Congress that the ObamaCare cuts will eventually force 40% of hospitals to operate at a loss, affecting the standard of care. Foster also cautioned that 15% of hospitals may stop accepting Medicare.
There are safer ways to control Medicare costs, including inching up the eligibility age, asking seniors to pay an affordable share of their bills, preventing hospital infections, and empowering patients to be cost-conscious consumers. Of course, politicians will try to claim that the easy answer -- slashing payments to hospitals -- won’t hurt patients,  but the evidence shows that’s untrue.

There are 22,000 homeless children in New York--the most since the Great Depression.

Girl in the Shadows: Dasani’s Homeless Life
 Invisible Child: Dasani’s Homeless Life - The New York Times
Long before Mayor-elect Bill de Blasio rose to power by denouncing the city’s inequality, children like Dasani were being pushed further into the margins, and not just in New York. Cities across the nation have become flash points of polarization, as one population has bounced back from the recession while another continues to struggle. One in five American children is now living in poverty, giving the United States the highest child poverty rate of any developed nation except for Romania.
This bodes poorly for the future. Decades of research have shown the staggering societal costs of children in poverty. They grow up with less education and lower earning power. They are more likely to have drug addiction, psychological trauma and disease, or wind up in prison.
Dasani does not need the proof of abstract research.

Budget Deal May End Shutdown Threat, But Won't Fix Mushrooming Debt

A minimalist U.S. budget deal that congressional negotiators hope to reach in coming days will do almost nothing to tame rising federal debt, but it could usher in a nearly two-year fiscal truce, minimizing the risk of future funding crises and government shutdowns.
If the accord comes together, it would blunt some of the automatic "sequester" spending cuts and set funding levels at around $1 trillion for fiscal 2014 and 2015 for government agencies and programs from the military to national parks.
Such a deal would not address an increase in the federal borrowing limit, which is expected to come up again by the spring, leaving conservatives a pressure point to try to exploit.
However, it might restore some order to the federal budget process, which broke down years ago and has been replaced by stopgap funding measures, accompanied by brinkmanship and shut-down risks.
"If this holds together, it is a very good story," said Greg Valliere, chief political strategist at Potomac Research Group, which advises institutional investors.
"The chances of another Washington budget crisis have diminished greatly, and I think it increases the chances that the economy surprises to the upside," he said.
Two U.S. senators on Sunday expressed optimism that a two-year budget deal could be reached soon. Republican Senator Rob Portman, who sits on the House and Senate negotiating panel, told the ABC program "This Week" that he was hopeful an agreement could be struck "by the end of this week."
Richard Durbin, the second-ranking Senate Democrat, said the talks were "moving in the right direction."
Some argue that the deal, which would trade some of the sequester cuts - perhaps $30 billion to $40 billion a year - for a mix of fee-based revenues and other savings, would mark the death of ambitious efforts to reduce deficits.
"I don't really see a natural way for there to be a grand bargain during the rest of the Obama presidency," which ends in January 2017, said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that urges fiscal responsibility.
The negotiations under way stem from the deal that ended the government shutdown in October, which set up a House-Senate conference committee led by Republican Representative Paul Ryan and Democratic Senator Patty Murray.
They are still struggling to pin down the final details of their modest compromise before the House ends its session for the year on Dec. 13.
Among the proposals under discussion are a doubling of airport security fees levied on airlines to about $5 per ticket, and a plan to require federal workers to contribute a higher percentage of their income towards their pension plans, according to people familiar with the talks. Other items include funds raised by auctioning some government-held telecommunications airwaves or hiking corporate fees for the U.S. agency that protects workers' retirement funds.
Democrats have objected to the hike in federal employee's pension contributions, which they view as a benefit cut.
Republicans backed by the conservative Tea Party movement also are objecting to the idea that a Ryan-Murray deal could push spending levels above the $967 billion cap set by the sequester, sacrificing what they view as essential savings.
If no House Democrats vote for a Ryan-Murray deal, the Tea Party group is large enough to prevent its passage.
After the public relations disaster suffered by Republicans as a result of the October shutdown, few conservatives are showing any interest in a repeat performance.
"I don't think there's any use of government shutdown threats if we can get something out of the conference committee," Representative Blake Farenthold of Texas, a Tea Party supporter, told reporters on Dec. 3. "I think we'll get bipartisan support on something a conference committee comes up with."
Obama and his fellow Democrats in Congress also have warned that they want a one-year extension of federal unemployment benefits that are set to expire the end of this month. A Senate Democratic aide said on Saturday it was still unclear whether such an extension would be included in the deal.
While the savings would be small, the deal would bring some much-needed order to a chaotic budget process in Congress that has broken down over the past few years, leaving Congress lurching from one stopgap funding resolution to another.
House Appropriations Committee Chairman Harold Rogers, a Republican critic of the deep sequester cuts, said he is now willing to live with only modest relief, and is determined that Congress pass annual spending bills for the first time since 2009.
"We need to get the train back on the tracks," said Rogers, who is from Kentucky. "If we get a 2015 number, we can do that."
© 2013 Newsmax. All rights reserved.

New Documents Show How Power Moved to Wall Street, Via the New York Fed

By Pam Martens: December 9, 2013
Occupy Wall Street Protesters Outside the New York Fed, September 17, 2012
The Federal Reserve will celebrate its 100th anniversary on December 23 of this year. But the Federal Reserve did not function as the nation’s central bank until 1922 when it fumbled and stumbled its way into an awareness of the power of a centralized mechanism for buying and selling U.S. government securities as a means of carrying out monetary policy. Thanks to a trove of historic documents recently released by the St. Louis Fed, we are now able to see how the New York Fed, a bastion of Wall Street interests, maneuvered itself into control of that process.
Incredibly, from its legislative creation in 1913 until 1922, the Federal Reserve had 12 separate “central” banks carrying out monetary policy for their region of the country. Each of the 12 regional Federal Reserve banks was allowed to buy and sell government securities and trade acceptances. The tide turned in 1922 when the regional banks, to compensate for a dramatic loss of earnings from loans, began independently buying up hundreds of millions of dollars of U.S. government securities to shore up their earnings in order to pay the mandated 6 percent annual dividend to their member bank shareholders, making a dramatic and noticeable impact on the money markets in New York.
At a conference of the regional Federal Reserve banks on May 6, 1922, the powerful head of the New York Fed, Benjamin Strong Jr., became the first Chairman of the body that is now known as the Federal Open Market Committee. At the time, it was given the name: Committee on Centralized Execution of Purchases and Sales of Government Securities by Federal Reserve Banks. Strong, through force of personality, began to channel all trading of U.S. government securities through the New York Fed.
Denoting where power rested in the Federal Reserve System of 1922, on May 25, 1922, George Harrison, second in command at the New York Fed, wrote to the heads of the other regional Federal Reserve banks, advising them that: “Governor Strong has today suggested that Mr. Matteson of this bank act as the operating secretary of the [open market] committee, and has advised each of the banks by telegram that if there is no objection to that appointment the committee will commence functioning tomorrow.” The letter further notes that “This whole program was reported to the Federal Reserve Board at the luncheon…”
A matter as critical as the first functioning of central bank open market operations is being “reported” to the Federal Reserve Board over lunch, much as someone might whisper gossip between “pass the butter” and “where’s the salt.”
Not all of the regional banks were willing to be dictated to by the New York Fed. Ten months later, while Strong was out on sick leave, the Federal Reserve Board stepped into the fray on March 22, 1923 with a Resolution which read in part:
“Whereas the Federal Reserve Board, under the powers given it in Sections 13 and 14 of the Federal Reserve Act, has authority to limit and otherwise determine the securities and investments purchased by Federal reserve banks; Whereas the Federal Reserve Board has never prescribed any limitation upon open market  purchases by Federal reserve banks; Whereas the amount, time, character, and manner of such purchases may exercise an important influence upon the money market; Whereas an open market investment policy for the twelve banks composing the Federal reserve system is necessary in the interest of the maintenance of a good relationship between the discount and purchase operations of the Federal reserve banks and the general money market; Whereas heavy investments in United States securities, particularly short-dated certificate issues, have occasioned embarrassment to the Treasury in ascertaining the true condition of the money and investment markets from time to time…”
The Resolution ended by disbanding Strong’s Committee and created a new body, the Open Market Investment Committee for the Federal Reserve System, consisting of representatives from five regional Fed banks and “under the general supervision of the Federal Reserve Board.” (Prior to the Banking Act of 1935, the “Governors” of the Federal Reserve were the heads of each of the 12 regional Federal Reserve banks while the title of the individuals serving on the Federal Reserve Board in Washington, D.C. was “members.”
In the early formative years of the Federal Reserve System, Strong functioned much as Ben Bernanke functions today – as the pivotal mover and shaker.  Strong came from Wall Street and headed the New York Fed from its very first Board meeting on October 5, 1914 to his death in October 1928. Strong was one of the attendees of the infamous meeting on Jekyll Island where Wall Street power brokers designed the Federal Reserve system.
During Strong’s 14 years in office, he traveled abroad, hobnobbing with foreign central bankers and holding the reins on open market operations at the New York Fed.
By 1936, the New York Fed was still attempting to write itself into the formalized role as the sole regional Fed bank authorized to carry out open market operations on behalf of the Federal Reserve System. In the March 16, 1936 Proposed Regulations of the Open Market Operations of the Federal Reserve by the staff of the Federal Reserve Board, the Board had deleted the proposed language (see page 6; second paragraph) denoting the New York Fed as the bank authorized to carry out open market operations and inserting corrected wording: “The purchase or sale of obligations for the system open market account shall be executed by a Federal Reserve bank selected by the Committee.”
The final published Regulations dated March 19, 1936 carried this wording: “Transactions for the System Open Market Account shall be executed by a Federal Reserve bank selected by the Committee. Each Federal Reserve bank shall make available to the Federal Reserve bank selected by the Committee such funds as may be necessary to conduct and effectuate such transactions.”
Today, even Benjamin Strong would be shocked at the power concentrated at the New York Fed. The New York Fed is the only one of the 12 regional Federal Reserve Banks to have a Wall Street-syle trading floor with Bloomberg terminals and speed dials to the biggest firms on Wall Street. Since 1935, all open market operations of the entire Federal Reserve system have been carried out by the New York Fed.
On its web site, the New York Fed explains its unique role as the central bank’s central bank: It is the sole manager of the System Open Market Account (SOMA) and sole regional bank engaged in open market operations; it is “responsible for intervening in foreign exchange markets to achieve dollar exchange rate policy objectives.” It stores “monetary gold for foreign central banks, government and international agencies.” Despite being the regulator in charge of the largest Wall Street banks at the time that obscene levels of leverage and corruption collapsed the financial system of the United States in 2008, even while top Wall Street CEOs sat on its Board of Directors, the New York Fed continues to be in charge of placing examiners in these banks and functioning as their regulator.
The New York Fed also “acts as fiscal agent to the U.S. Treasury by providing settlement services in support of government securities auctions.”
The fact that the New York Fed needs the goodwill of the major Wall Street banks to carry out its open market operations and to facilitate the orderly functioning of U.S. Treasury auctions, makes it a highly inappropriate regulator of the same firms, in the opinion of many observers.
On November 12, Senator Elizabeth Warren delivered a speech on the continuing, inherent dangers on Wall Street. She told her audience:
“Who would have thought five years ago, after we witnessed firsthand the dangers of an overly concentrated financial system, that the Too Big to Fail problem would only have gotten worse? There are many who say, ‘Sure, Too Big to Fail isn’t over yet, but Congress should wait to act further because the agencies still have to issue a bunch of Dodd-Frank’s required rules.’ True, there are rules left to be written, but that’s because the agencies have missed more than 60 percent of Dodd-Frank’s rulemaking deadlines. I don’t understand the logic. Since when does Congress set deadlines, watch regulators miss most of them, and then take that failure as a reason not to act? I thought that if the regulators failed, it was time for Congress to step in.  That’s what oversight means.  And that’s certainly a principle that would have served our country well prior to the crisis.”
If Congress ever decides to get serious about preventing the next crash of the financial system, there is no better place to start than the New York Fed.

Big Six Bank Stocks Outperforming Market by Ten Times-Nomi Prins

Obama prepared to drop jobless benefits as part of budget deal

The White House said Friday it would agree to a budget deal with the Republicans that excludes an extension of federal benefits for the long-term unemployed, which are scheduled to expire at the end of the month.
By the administration’s own figures, allowing the federally-funded extended benefit program to expire will end cash assistance for 1.3 million people immediately after the holidays and impact an additional 3.6 million people in the first half of 2014.
With this cruel and callous act, Obama and the Democratic Party are prepared to join with the Republicans in condemning nearly 5 million people and their families to destitution. In prior recessions, emergency unemployment benefits, beyond the standard aid offered by the states, have never been terminated when unemployment remained at such high levels as those prevailing today.
Obama’s own Council of Economic Advisers this week pointed out that long-term unemployment in the US is 2.6 percent, more than double “any other time that we have allowed benefits” to lapse.
White House Press Secretary Jay Carney made clear on Friday that Obama would not make an extension of long-term benefits a precondition for reaching an agreement in current talks between leaders of a House-Senate conference committee tasked with coming up with a budget by December 13.
The conference committee, headed by Republican House Budget Committee Chairman Paul Ryan and Democratic Senate Budget Committee Chairwoman Patty Murray, was set up as part of the agreement that ended the partial government shutdown in October. The temporary federal spending authorization that ended the 16-day shutdown expires on January 15.
Exuding the cynicism that typifies the Obama administration, Carney said in an interview it would be “terrible to tell more than a million families across the country just a few days after Christmas that they’re out of benefits,” while making clear that the White House was prepared to do just that.
Friday’s announcement came just two days after Obama gave a speech in which he called income inequality the “defining challenge of our time” and declared that “over the course of the next year, and for the rest of my presidency,” his administration would “focus all our efforts” on narrowing the gap between rich and poor.
His readiness to end jobless benefits for millions of out-of-work people has already given the lie to his absurd pretense of championing working Americans and opposing concentrated wealth. It reflects the real substance of the policies he has pursued since taking office, which have been devoted to further enriching the ruling elite at the expense of the broad mass of the population.
The announcement came as well the same week that a federal bankruptcy judge ruled in favor of the bankruptcy of Detroit, which the Obama administration has supported, opening the way for the pensions of city workers in Detroit and throughout the country to be gutted.
It also coincided with the Labor Department’s employment report for November, showing moderate job growth and a drop in the official unemployment rate to 7.0 percent. The most significant aspect of the report, however, was its data showing a further growth in the ranks of the long-term unemployed. The government now estimates there are 4.1 million people who have been out of work for a half-year or more—a huge figure that nevertheless understates the actual level of long-term unemployment.
According to the Labor Department, the average duration of unemployment increased by more than a week in November, to 37.2 weeks, while the percentage of the jobless who have been out of work for more than six months hit 37.3 percent, up from 36.1 percent in October.
The official unemployment rate, which excludes laid-off workers who have given up looking for a job and young people who have been unable to land their first position, vastly underestimates the real level of joblessness.
The overriding reason for the decline in the official unemployment rate since 2009 has been the exit of millions of workers from the labor force. According to a survey by the Economic Policy Institute, five million “missing workers” have dropped out of the labor force over the past five years. While the percentage of the population that is employed rose slightly last month, to 58.6 percent, it is still below what it was in July and down 4.4 percentage points since 2006.
According to multiple press reports, Democrats and Republicans on the budget conference committee are close to a deal on a one- or two-year budget agreement. What has been reported makes clear that the White House and congressional Democrats are preparing to accept a reactionary plan that will continue to cut social spending while imposing new taxes on consumers in the form of “user fees.”
The deal will leave in place the framework of automatic cuts in domestic discretionary spending under the so-called “sequester” process that took effect last March. However, certain cuts will be pared back, mainly those affecting the military. Billions of dollars in other, unspecified future cuts will be mandated to offset the increased military spending.
The Democrats are preparing to drop their demand for ending corporate tax loopholes, and instead agree to regressive fees on consumers, including a surcharge for air travel. Some $20 billion in savings are to come from an increase in federal workers’ contributions to their pension plans. The increased pension contributions will come on top of three years of frozen wages for federal workers and income losses from unpaid furloughs resulting from the sequester.
These developments underscore the fact that behind the partisan wrangling, there is complete unanimity between the Democrats and Republicans on intensifying the attack on the working class and expanding the transfer of wealth from the bottom to the very top of American society.

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Obama postures as an opponent of inequality
[5 December 2013]

Consumer Debt Up 22% Over 3 Yrs.

It's back with a vengeance: Private debt
the debt party is back on in the U.S., whether it's in the boardroom or the living room
Amid the financial crisis of 2008, the U.S. went into what economists call a "debt deleveraging cycle"—akin to a credit hangover, where the party has ended and everyone there decides to quit drinking cold turkey

Cost of commuting revealed as some train users spend 25% of entire salary getting to and from work

Lowest-paid workers in Birmingham hit hardest by latest revelations in ‘cost of living crisis’..

People who commute by train in the UK could be spending up to a quarter of their wages just getting to and from work, new research has shown.

Those in lower pay brackets in Birmingham found their salaries under the heaviest strain, spending 23 per cent of their annual income on train fares, closely followed by commuters in London.
The full impact on workers already beset by what Labour calls a “cost of living crisis” could be even greater, as the figures from consultancy firm Hay Group and reported by Metro are derived before any taxes have been deducted from salaries.
RMT union leader Bob Crow told the newspaper: “This shocking research proves that a combination of rip-off fares and the cost of living crisis is hammering those on low to average pay and should serve as a wake-up call to the politicians.
“RMT will work with passenger groups to end the great transport robbery which is turning rail services into a rich man’s toy.”
Hay Group said there was a huge discrepancy across both regions and pay rates in the impact rail fare rises have on customers.
In Cardiff the lowest-paid rail commuters still only spend around 8 per cent of their salaries on travel, while in Leeds and Edinburgh it is somewhere in between, at 19 per cent and 16 per cent respectively.
The proportionate rates drop sharply as workers go up the career ladder, with senior managers in some cities spending only 2 per cent of their wages on long commutes.
Adam Burden, of Hay Group, told Metro workers were “becoming increasingly concerned that the cost of commuting was rising faster than wages”.
George Osborne announced in the Autumn Statement the decision to scrap an extra 1 per cent fare rise above RPI, which at 3.1 per cent is a higher measure of inflation than the official CPI.
Bruce Williamson, of passenger group Rail Future, said: “Twenty per cent of a salary is an enormous price to pay for the privilege of travelling to work.
“It is time the chancellor stopped squeezing rail commuters by using the higher of the two inflation measures.”


The Bankruptcy and Privatization of Detroit Is a Terrifying Preview of What Republicans Want to Do to the Rest of the Country

Hold on tight to your pensions.
Mitt Romney should be proud of what’s happening in Detroit.
That’s because during his time at Bain Capital, he perfected the type of glorified extortion tactics Rick Snyder and Kevin Orr are using right now rob city workers of their hard-earned pension plans.
When Mitt was running Bain during the 1980s and 1990s, the company made its money by forcing companies into debt and then robbing them blind for every last bit of cash they had.
Bain would take out a loan for, say, a billion dollars. It would then use that billion dollar loan – its leverage – to buy a company. But instead of paying back that billion dollar loan itself, Bain would dump it on the company it just bought. In other words, Bain would make the company it just bought pay for its own acquisition.
And where would that company get the billion dollars to do that? Well, good old Mitt would say that it got the money by eliminating fraud and waste. But in reality that money came from stripping the company of its assets and converting them into cash.
It came from taking employee assets – like pensions and decent paychecks – and converting them into cash to pay for the debt, and even converting future assets – the viability of the company itself – into cash to pay for the debt.
It came from gutting retirement funds and firing workers.
In the end, Bain not only ended up with the company, but also got rich off the fees associated with the entire debt repayment process.
And if the company didn’t survive, well, then so be it, because Bain got to make a tidy profit through their fees even if the company died. All that mattered was to strip profitable companies bare and put the money into Mitt’s pocket.
But back to Detroit. Now that Judge Steven Rhodes has OK’ed the city’s bankruptcy plan, massive cuts to Motor City worker pension plans are all but certain.
This is despite the fact that, as a recent Demos study concluded, “Detroit’s bankruptcy was primarily caused by a severe decline in revenue and exacerbated by complicated Wall Street deals that put its ability to pay its expenses at greater risk.”
That’s right, even though they have nothing to do with the city’s financial problems public workers will now have to foot a big chunk of the bankruptcy bill.
Just as Bain Capital trapped companies with massive debt obligations, so too did Wall Street trap Detroit with its risky debt schemes. And now, just as Bain forced everyday employees to pay for the debt forced on their company, so too is Kevyn Orr, Detroit’s Emergency Manager, making public workers pay for the banksters gambling away Detroit’s finances.
Like one of Bain’s acquisitions , Detroit’s will be sold at auction to pay off debts created by banksters.
But It’s not public just workers who will suffer – the whole city is on the chopping block. Kevyn Orr wants the city’s art collection sold off. The water department might be put on the market. And to top it all off, right-wing billionaires are trying to buy Belle Isle Park and turn it into some sort of libertarian-gambling paradise.
The privatization of Detroit is about to begin, and there’s no way the billionaire class is going to miss it.
Mitt Romney grew up in Michigan, so it’s fitting, in a way, that the first attempt to use the Bain strategy on a public institution would be in Detroit.
But make no mistake about it, the fire sale of Detroit is just a preview of what Republicans will do when they force their privatization fantasies on the rest of the country.
With permission
Source: Alternet

Easy Lending to Risky Borrowers Makes a Comeback

Rates are low, credit is easy, underwriting is shoddy, and sales are booming.
There’s your thumbnail sketch of today’s “surging” auto market. It’s a carbon copy of the subprime mortgage fiasco that plunged the economy into recession 5 years ago. Now the same nightmare is unfolding in Cartopia, the emerging credit Shangri-la where anyone who can transport himself onto a carlot in an upright position can drive away in a shiny new vehicle no-strings-attached.
But how can this be happening, you ask? Didn’t the US Congress pass strict new regulations, like Dodd-Frank, to prevent the banks and finance companies from lending billions of dollars to borrowers who don’t have the ability to repay the debt?
Not exactly. The fact is, the powerful auto lobby snuck in a neat little provision that exempted them from those nitpicky rules. Here’s a little background from Slate’s Matthew Yglesias:
“Measures like the CARD Act and the Dodd-Frank bill’s creation of a Consumer Financial Protection Bureau both tilt in the direction of less consumer debt. But the wide dispersal of car dealerships across almost every congressional district in America means that the car dealership lobby is actually stronger than the Wall Street lobby, and it was able to get a special carve-out from Dodd-Frank. Unlike any other form of consumer lending, auto loans are outside the purview of the CFPB. And they’re expanding while other consumer loans are shrinking.” (“The Changing Shape of American Debt“, Matthew Yglesias, Slate)
Gosh. You mean Congress buckled to the power of big money? That’s shocking!
And now it looks like we got trouble on our hands because auto sales are soaring but a lot the loans are never going to be repaid. Isn’t that going to wreak havoc on the financial system again?
Sure, but let’s look on the bright side: Auto sales are up big, really big. In fact, according to the Wall Street Journal “U.S. auto sales in November ran at the strongest pace in more than six years… lifting the annualized sales pace to 16.4 million vehicles.” (WSJ)
Chrysler is up, Ford is up, Malibu is up, Cadillac and Buick are up. Heck, even the pint-sized Volt is up. Everything’s up; autos, trucks, SUVs, the whole kit-n-kabootle. Detroit is this year’s Comeback Kid and it’s all due to creative financing. Isn’t that reason-enough for celebration?
Sure, but doesn’t it seem a tad reckless to lend gobs of money to people with crappy credit scores who can’t even come up with a few hundreds bucks for a down-payment? That sounds like a prescription for disaster to me. Just look at this from Reuters:
“Lenders made 26.04 percent of their loans on new cars to buyers with subprime credit scores…. For loans on used cars, the portion to subprime borrowers rose to 54.95 percent…
As the lenders made bigger loans, they also extended credit further beyond the value of the vehicles. The average loan-to-value on new cars rose to 110.6 percent… On used cars it rose to 133.2 percent…
Auto lenders often provide loans that exceed the value of cars they are financing because borrowers want cash to pay sales taxes and fees.
Extra-long loans are becoming more common. Some 19 percent of new car loans were made for more than six years…
… the average loss on loans gone bad jumped to $7,770 in the third quarter from $7,026 a year earlier and repossessions increased sharply, particularly for subprime borrowers.” (“U.S. car buyers borrow more as rates fall and standards loosen“, David Henry, Reuters)
Car dealers are not only skipping the down payment and extending the loan into the next millennia (more than 6 freaking years, for chrissakes), they’re also forking over MORE money than the value of the car. That’s what that “133.2 percent” LTV means. It means Mr Subprime Autobuyer can stick a wad of cash in his coat pocket after the ink dries and trundle off to Olive Garden with the kids for a night on the town in his brand-spanking new Impala.
Who said Amerika isn’t a great place? Here’s more from Bloomberg:
“A woman came into Alan Helfman’s showroom in Houston in October looking to buy a car for her daily commute. Even though her credit score was below 500, in the bottom eighth percentile, she drove away with a new Dodge Dart. A year ago, “I would’ve told her don’t even bother coming in,” says Helfman, who owns River Oaks Chrysler Jeep Dodge Ram, where sales rose about 20 percent this year. “But she had a good job, so I told her to bring a phone bill, a light bill, your last couple of paycheck stubs, and bring me some down payment.”
… U.S. auto sales, on pace for the best year since 2007, are increasingly being fueled by borrowers with spotty credit. They accounted for more than 27 percent of loans for new vehicles in the first half of the year…
“Perhaps more than any other factor, easing credit has been the key to the U.S. auto recovery,” Adam Jonas, an analyst with Morgan Stanley (MS), wrote in an October note to investors.” (“Subprime Loans Are Boosting Car Sales“, Bloomberg)
Sure, it has, Adam, because easy credit means better sales and bigger profits. We all know that. Just like we know that it’s possible to lend money to people who have “spotty credit” if they show that they’re employed and paying their bills on time, like the woman above. But that’s not what this is all about, is it? This is about stretching the envelope in order to juice short-term profits. It’s also about “securitization”, that is, packaging up the garbage loans into bonds and selling them to suckers looking for a higher yielding investment. That’s what this is really about; scamming people. Take a look at this from Bloomberg:
“The money for subprime loans comes from yield-starved investors who buy bonds backed by them. Issuance of such bonds, which pay higher rates than U.S. government debt, soared to $17.2 billion this year, more than double the amount sold during the same period in 2010, but still below the peak of about $20 billion in 2005, according to Harris Trifon, an analyst at Deutsche Bank ….
Shoddy home loans packaged into bonds by Wall Street banks fueled the financial crisis. Subprime auto loans are a good investment, Helfman says: “A person that has to get from point A to point B, they’re not going to jeopardize their job. They have to pay the car payment before they pay anything else.” (Bloomberg)
How’s that for symmetry: In one breath Bloomberg admits that “Shoddy home loans … fueled the financial crisis”, then they follow up with old Helfman saying there’s nothing to worry about, everything’s under control. We gotcha covered!
What a joke. More than one-quarter of auto loans are going to people with credit scores under 500, which “is the highest share since tracking began in 2007.” That’s a big red flag right there. Then, a sizable portion of those loans are being gift-wrapped into securities and sold to Aunt Mable’s retirement fund, which will undoubtedly get walloped sometime in the not-so-distant future. That’s red flag Number 2. Finally, there’s the dealer mark ups which, according to one analyst add “several percentage points above what they obtain from their financing company, which generates an estimated $25.8 billion in payments from consumers over the lives of their loans.” Red flag number 3.
I suppose we should all be shocked that the finance geniuses are back at it again, back fleecing the sheeple with the same swindle they worked before. But the sad fact is, no one is surprised at all. In fact, the public seems oddly resigned to the idea of being ripped off again.
It’s just business as usual.
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.
With permission
Source: Counterpunch

A firm threatening to foreclose on hundreds of homeowners is a mystery: It has no owners, office, or Web site.

Aeon Financial foreclosed on more than 400 properties in Ohio's biggest county. It threatened more than 1,900 in D.C. and Maryland. To distressed homeowners, it's a debt-collecting machine.
Yet no other tax lien purchaser in the District has been more aggressive in recent years, buying the liens placed on properties when owners fell behind on their taxes, then charging families thousands in fees to save their homes from foreclosure.
Aeon has been accused by the city’s attorney general of predatory and unlawful practices and has been harshly criticized by local judges for overbilling. All along, the firm has remained shrouded in corporate secrecy as it pushed to foreclose on more than 700 houses in every ward of the District.
“Who the heck is Aeon?” said David Chung, a local lawyer who said he wasn’t notified that he owed $575 in back taxes on his Northwest Washington condominium until he received a notice from Aeon. “They said, ‘We bought the right to take over your property. If you want it back — pay us.’ ”
more @http://www.washingtonpost.com/sf/investigative/2013/12/08/debt-collecting-machine/

Why We’re Stuck with a Bubble Economy

Inflating serial asset bubbles is no substitute for rising real incomes.
Why are we stuck with an economy that only generates serial credit/asset bubbles that crash with catastrophic consequences? Ths answer is actually fairly straightforward. Let’s start with the ideal conditions for an economy that depends on consumer spending.
1. Rising real income, i.e. after adjusting for inflation/currency depreciation, wages/salaries have more purchasing power every year.
2. An expanding pool of new households, i.e. young people who move away from home or graduate from college, get a job and start their own household. New households buy homes, vehicles, furniture, appliances, kitchenware, tools, etc., driving consumption far more than established households.
Neither of these conditions apply to today’s economy. Income for the bottom 90% has been stagnant for forty years, and has declined 7% in real terms since 2000.
This stagnation is not the “new normal”: the new normal is much worse, as labor’s share of the national income has fallen off a cliff:
Household formation has also stagnated. That spike circa 2004-07 was caused by the housing bubble, which created new jobs and collateral that could be leveraged into new home purchases.
Since 2008, the Federal Reserve has bought $3.2 trillion in mortgages and Treasury bonds, and the Federal government has borrowed and blown $7 trillion in deficit spending. That $10 trillion in stimulus (not counting $16 trillion in Fed loans to banks and trillions more in other loans/subsidies), household formation has only recovered to the sub-1 million a year level.
In an economy of 316 million people, that isn’t enough to generate “growth” in a $16 trillion economy.
With these organic sources of growth moribund or declining, the Fed and Federal government have resorted to other ways of stimulating more borrowing and spending, the sources of leveraged, high-risk “growth”:
1. Lower interest rates so stagnant income can leverage more debt (and thus more spending)
2. Generate asset bubbles in stocks and housing that boost “the wealth effect,” i.e. the emotional sense of being wealthier as a result of one’s assets rising sharply in value, and the collateral available to support more debt.
If a house rises by $100,000 in value in a few short years, the owner has $100,000 more collateral to support new debt. The gargantuan expansion of home equity lines of credit (HELOCs) as the housing bubble expanded was the goal of the status quo, as asset bubbles create collateral that supports new borrowing and spending.
Now that interest rates are near-zero and mortgage rates are rising from historic lows, there is no more juice to be squeezed from low rates.
As for asset bubbles, they always burst, destroying collateral and rendering borrowers and lenders alike insolvent.
Without organic demand from rising real income and new households with good-paying jobs and low levels of debt, the consumer-debt based economy stagnates.This has left the economy dependent on serial asset bubbles that create phantom collateral that can support new debt, albeit temporarily.
Inflating serial asset bubbles is no substitute for rising real incomes and new households that aren’t burdened with high levels of debt from student loans.

Creator of ‘The Wire’ Says ‘There Are Now Two Americas. My Country Is a Horror Show.’

What do we do if we can’t actually control the representative government that we claim will manifest the popular will?
America is a country that is now utterly divided when it comes to its society, its economy, its politics. There are definitely two Americas. I live in one, on one block in Baltimore that is part of the viable America, the America that is connected to its own economy, where there is a plausible future for the people born into it. About 20 blocks away is another America entirely. It’s astonishing how little we have to do with each other, and yet we are living in such proximity.
There’s no barbed wire around West Baltimore or around East Baltimore, around Pimlico, the areas in my city that have been utterly divorced from the American experience that I know. But there might as well be. We’ve somehow managed to march on to two separate futures and I think you’re seeing this more and more in the west. I don’t think it’s unique to America.
I think we’ve perfected a lot of the tragedy and we’re getting there faster than a lot of other places that may be a little more reasoned, but my dangerous idea kind of involves this fellow who got left by the wayside in the 20th century and seemed to be almost the butt end of the joke of the 20th century; a fellow named Karl Marx.
I’m not a Marxist in the sense that I don’t think Marxism has a very specific clinical answer to what ails us economically. I think Marx was a much better diagnostician than he was a clinician. He was good at figuring out what was wrong or what could be wrong with capitalism if it wasn’t attended to and much less credible when it comes to how you might solve that.
You know if you’ve read Capital or if you’ve got the Cliff Notes, you know that his imaginings of how classical Marxism – of how his logic would work when applied – kind of devolve into such nonsense as the withering away of the state and platitudes like that. But he was really sharp about what goes wrong when capital wins unequivocally, when it gets everything it asks for.
That may be the ultimate tragedy of capitalism in our time, that it has achieved its dominance without regard to a social compact, without being connected to any other metric for human progress.
We understand profit. In my country we measure things by profit. We listen to the Wall Street analysts. They tell us what we’re supposed to do every quarter. The quarterly report is God. Turn to face God. Turn to face Mecca, you know. Did you make your number? Did you not make your number? Do you want your bonus? Do you not want your bonus?
And that notion that capital is the metric, that profit is the metric by which we’re going to measure the health of our society is one of the fundamental mistakes of the last 30 years. I would date it in my country to about 1980 exactly, and it has triumphed.
Capitalism stomped the hell out of Marxism by the end of the 20th century and was predominant in all respects, but the great irony of it is that the only thing that actually works is not ideological, it is impure, has elements of both arguments and never actually achieves any kind of partisan or philosophical perfection.
It’s pragmatic, it includes the best aspects of socialistic thought and of free-market capitalism and it works because we don’t let it work entirely. And that’s a hard idea to think – that there isn’t one single silver bullet that gets us out of the mess we’ve dug for ourselves. But man, we’ve dug a mess.
After the second world war, the west emerged with the American economy coming out of its wartime extravagance, emerging as the best product. It was the best product. It worked the best. It was demonstrating its might not only in terms of what it did during the war but in terms of just how facile it was in creating mass wealth.
Plus, it provided a lot more freedom and was doing the one thing that guaranteed that the 20th century was going to be – and forgive the jingoistic sound of this – the American century.
It took a working class that had no discretionary income at the beginning of the century, which was working on subsistence wages. It turned it into a consumer class that not only had money to buy all the stuff that they needed to live but enough to buy a bunch of shit that they wanted but didn’t need, and that was the engine that drove us.
It wasn’t just that we could supply stuff, or that we had the factories or know-how or capital, it was that we created our own demand and started exporting that demand throughout the west. And the standard of living made it possible to manufacture stuff at an incredible rate and sell it.
And how did we do that? We did that by not giving in to either side. That was the new deal. That was the great society. That was all of that argument about collective bargaining and union wages and it was an argument that meant neither side gets to win.
Labour doesn’t get to win all its arguments, capital doesn’t get to. But it’s in the tension, it’s in the actual fight between the two, that capitalism actually becomes functional, that it becomes something that every stratum in society has a stake in, that they all share.
The unions actually mattered. The unions were part of the equation. It didn’t matter that they won all the time, it didn’t matter that they lost all the time, it just mattered that they had to win some of the time and they had to put up a fight and they had to argue for the demand and the equation and for the idea that workers were not worth less, they were worth more.
Ultimately we abandoned that and believed in the idea of trickle-down and the idea of the market economy and the market knows best, to the point where now libertarianism in my country is actually being taken seriously as an intelligent mode of political thought. It’s astonishing to me. But it is. People are saying I don’t need anything but my own ability to earn a profit. I’m not connected to society. I don’t care how the road got built, I don’t care where the firefighter comes from, I don’t care who educates the kids other than my kids. I am me. It’s the triumph of the self. I am me, hear me roar.
That we’ve gotten to this point is astonishing to me because basically in winning its victory, in seeing that Wall come down and seeing the former Stalinist state’s journey towards our way of thinking in terms of markets or being vulnerable, you would have thought that we would have learned what works. Instead we’ve descended into what can only be described as greed. This is just greed. This is an inability to see that we’re all connected, that the idea of two Americas is implausible, or two Australias, or two Spains or two Frances.
Societies are exactly what they sound like. If everybody is invested and if everyone just believes that they have “some”, it doesn’t mean that everybody’s going to get the same amount. It doesn’t mean there aren’t going to be people who are the venture capitalists who stand to make the most. It’s not each according to their needs or anything that is purely Marxist, but it is that everybody feels as if, if the society succeeds, I succeed, I don’t get left behind. And there isn’t a society in the west now, right now, that is able to sustain that for all of its population.
And so in my country you’re seeing a horror show. You’re seeing a retrenchment in terms of family income, you’re seeing the abandonment of basic services, such as public education, functional public education. You’re seeing the underclass hunted through an alleged war on dangerous drugs that is in fact merely a war on the poor and has turned us into the most incarcerative state in the history of mankind, in terms of the sheer numbers of people we’ve put in American prisons and the percentage of Americans we put into prisons. No other country on the face of the Earth jails people at the number and rate that we are.
We have become something other than what we claim for the American dream and all because of our inability to basically share, to even contemplate a socialist impulse.
Socialism is a dirty word in my country. I have to give that disclaimer at the beginning of every speech, “Oh by the way I’m not a Marxist you know”. I lived through the 20th century. I don’t believe that a state-run economy can be as viable as market capitalism in producing mass wealth. I don’t.
I’m utterly committed to the idea that capitalism has to be the way we generate mass wealth in the coming century. That argument’s over. But the idea that it’s not going to be married to a social compact, that how you distribute the benefits of capitalism isn’t going to include everyone in the society to a reasonable extent, that’s astonishing to me.
And so capitalism is about to seize defeat from the jaws of victory all by its own hand. That’s the astonishing end of this story, unless we reverse course. Unless we take into consideration, if not the remedies of Marx then the diagnosis, because he saw what would happen if capital triumphed unequivocally, if it got everything it wanted.
And one of the things that capital would want unequivocally and for certain is the diminishment of labour. They would want labour to be diminished because labour’s a cost. And if labour is diminished, let’s translate that: in human terms, it means human beings are worth less.
From this moment forward unless we reverse course, the average human being is worth less on planet Earth. Unless we take stock of the fact that maybe socialism and the socialist impulse has to be addressed again; it has to be married as it was married in the 1930s, the 1940s and even into the 1950s, to the engine that is capitalism.
Mistaking capitalism for a blueprint as to how to build a society strikes me as a really dangerous idea in a bad way. Capitalism is a remarkable engine again for producing wealth. It’s a great tool to have in your toolbox if you’re trying to build a society and have that society advance. You wouldn’t want to go forward at this point without it. But it’s not a blueprint for how to build the just society. There are other metrics besides that quarterly profit report.
The idea that the market will solve such things as environmental concerns, as our racial divides, as our class distinctions, our problems with educating and incorporating one generation of workers into the economy after the other when that economy is changing; the idea that the market is going to heed all of the human concerns and still maximise profit is juvenile. It’s a juvenile notion and it’s still being argued in my country passionately and we’re going down the tubes. And it terrifies me because I’m astonished at how comfortable we are in absolving ourselves of what is basically a moral choice. Are we all in this together or are we all not?
If you watched the debacle that was, and is, the fight over something as basic as public health policy in my country over the last couple of years, imagine the ineffectiveness that Americans are going to offer the world when it comes to something really complicated like global warming. We can’t even get healthcare for our citizens on a basic level. And the argument comes down to: “Goddamn this socialist president. Does he think I’m going to pay to keep other people healthy? That’s socialism you know. HMO [health-maintenance organisation] contract. Motherfucker.”
What do you think group health insurance is? You know you ask these guys, “Do you have group health insurance where you …?” “Oh yeah, I get …” you know, “my law firm …” So when you get sick you’re able to afford the treatment.
The treatment comes because you have enough people in your law firm so you’re able to get health insurance enough for them to stay healthy. So the actuarial tables work and all of you, when you do get sick, are able to have the resources there to get better because you’re relying on the idea of the group. Yeah. And they nod their heads, and you go “Brother, that’s socialism. You know it is.”
And … you know when you say, OK, we’re going to do what we’re doing for your law firm but we’re going to do it for 300 million Americans and we’re going to make it affordable for everybody that way. And yes, it means that you’re going to be paying for the other guys in the society, the same way you pay for the other guys in the law firm … Their eyes glaze. You know they don’t want to hear it. It’s too much. Too much to contemplate the idea that the whole country might be actually connected.
So I’m astonished that at this late date I’m standing here and saying we might want to go back for this guy Marx that we were laughing at, if not for his prescriptions, then at least for his depiction of what is possible if you don’t mitigate the authority of capitalism, if you don’t embrace some other values for human endeavour.
And that’s what The Wire was about basically, it was about people who were worth less and who were no longer necessary, as maybe 10 or 15% of my country is no longer necessary to the operation of the economy. It was about them trying to solve, for lack of a better term, an existential crisis. In their irrelevance, their economic irrelevance, they were nonetheless still on the ground occupying this place called Baltimore and they were going to have to endure somehow.
That’s the great horror show. What are we going to do with all these people that we’ve managed to marginalise? It was kind of interesting when it was only race, when you could do this on the basis of people’s racial fears and it was just the black and brown people in American cities who had the higher rates of unemployment and the higher rates of addiction and were marginalised and had the shitty school systems and the lack of opportunity.
And kind of interesting in this last recession to see the economy shrug and start to throw white middle-class people into the same boat, so that they became vulnerable to the drug war, say from methamphetamine, or they became unable to qualify for college loans. And all of a sudden a certain faith in the economic engine and the economic authority of Wall Street and market logic started to fall away from people. And they realised it’s not just about race, it’s about something even more terrifying. It’s about class. Are you at the top of the wave or are you at the bottom?
So how does it get better? In 1932, it got better because they dealt the cards again and there was a communal logic that said nobody’s going to get left behind. We’re going to figure this out. We’re going to get the banks open. From the depths of that depression a social compact was made between worker, between labour and capital that actually allowed people to have some hope.
We’re either going to do that in some practical way when things get bad enough or we’re going to keep going the way we’re going, at which point there’s going to be enough people standing on the outside of this mess that somebody’s going to pick up a brick, because you know when people get to the end there’s always the brick. I hope we go for the first option but I’m losing faith.
The other thing that was there in 1932 that isn’t there now is that some element of the popular will could be expressed through the electoral process in my country.
The last job of capitalism – having won all the battles against labour, having acquired the ultimate authority, almost the ultimate moral authority over what’s a good idea or what’s not, or what’s valued and what’s not – the last journey for capital in my country has been to buy the electoral process, the one venue for reform that remained to Americans.
Right now capital has effectively purchased the government, and you witnessed it again with the healthcare debacle in terms of the $450m that was heaved into Congress, the most broken part of my government, in order that the popular will never actually emerged in any of that legislative process.
So I don’t know what we do if we can’t actually control the representative government that we claim will manifest the popular will. Even if we all start having the same sentiments that I’m arguing for now, I’m not sure we can effect them any more in the same way that we could at the rise of the Great Depression, so maybe it will be the brick. But I hope not.
With permission
Source: Alternet

Here’s an Idea! Let the Fed Drop Money into Your Bank Account Instead of Raining it Down on the Rich

The Fed could be an institution that serves all the people, not just the 1%.
The Federal Reserve is the only central bank with a dual mandate. It is charged not only with maintaining low, stable inflation but with promoting maximum sustainable employment. Yet unemployment remains stubbornly high, despite four years of radical tinkering with interest rates and quantitative easing (creating money on the Fed’s books). After pushing interest rates as low as they can go, the Fed has admitted that it has run out of tools.
At an IMF conference on November 8, 2013, former Treasury Secretary Larry Summers suggested that since near-zero interest rates were not adequately promoting people to borrow and spend, it might now be necessary to set interest at below zero. This idea was lauded and expanded upon by other ivory-tower inside-the-box thinkers, including Paul Krugman.
Negative interest would mean that banks would charge the depositor for holding his deposits rather than paying interest on them. Runs on the banks would no doubt follow, but the pundits have a solution for that: move to a cashless society, in which all money would be electronic. “This would make it impossible to hoard cash outside the bank,” wrote Danny Vinik in Business Insider, “allowing the Fed to cut interest rates to below zero, spurring people to spend more.” He concluded:
. . . Summers’ speech is a reminder to all liberals that he is a brilliant economist who grasps the long-term issues of monetary policy and would likely have made an exemplary Fed chair.
Maybe; but to ordinary mortals living in the less rarefied atmosphere of the real world, the proposal to impose negative interest rates looks either inane or like the next giant step toward the totalitarian New World Order. Business Week quotes Douglas Holtz-Eakin, a former director of the Congressional Budget Office: “We’ve had four years of extraordinarily loose monetary policy without satisfactory results, and the only thing they come up with is we need more?”
Paul Craig Roberts, former Assistant Secretary of the Treasury, calls the idea “harebrained.” He is equally skeptical of quantitative easing, the Fed’s other tool for stimulating the economy. Roberts points to Andrew Huszar’s explosive November 11th Wall Street Journal article titled “Confessions of a Quantitative Easer,” in which Huszar says that QE was always intended to serve Wall Street, not Main Street. Huszar’s assignment at the Fed was to manage the purchase of $1.25 trillion in mortgages with dollars created on a computer screen. He says he resigned when he realized that the real purpose of the policy was to drive up the prices of the banks’ holdings of debt instruments, to provide the banks with trillions of dollars at zero cost with which to lend and speculate, and to provide the banks with “fat commissions from brokering most of the Fed’s QE transactions.”
A Helicopter Drop That Missed Its Target
All this is far from the helicopter drop proposed by Ben Bernanke in 2002 as a quick fix for deflation. He told the Japanese, “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Deflation could be cured, said Professor Friedman, simply by dropping money from helicopters.
But there has been no cloudburst of money raining down on the people. The money has gotten only into the reserve accounts of banks. John Lounsbury, writing in Econintersect, observes that Friedman’s idea of a helicopter drop involved debt-free money printed by the government and landing in people’s bank accounts. “He foresaw the money entering the economy through bank deposits, not through bank reserves which was the pathway available to Bernanke. . . . [W]hen Ben Bernanke fired up his helicopter engines he took the only path available to him.”
Bernanke created debt-free money and bought government debt with it, returning the interest to the Treasury. The result was interest-free credit, a good deal for the government. But the problem, says Lounsbury, is that:
The helicopters dropped all the money into a hole in the ground (excess reserve accounts) and very little made its way into the economy. It was essentially a rearrangement of the balance sheets of the creditor nation with little impact on the debtor nation.
. . . The fatal flaw of QE is that it delivers money to the accounts of the creditors and does nothing for the accounts of the debtors. Bad debts remain unserviced and the debt crisis continues.
Thinking Outside the Box
Bernanke delivered the money to the creditors because that was all the Federal Reserve Act allowed. If the Fed is to fulfill its mandate, it clearly needs more tools; and that means amending the Act. Harvard professor Ken Rogoff, who spoke at the November 2013 IMF conference before Larry Summers, suggested several possibilities; and one was to broaden access to the central bank, allowing anyone to have an ATM at the Fed.
Rajiv Sethi, Barnard/Columbia Professor of Economics, expanded on this idea in a blog titled “The Payments System and Monetary Transmission.” He suggested making the Federal Reserve the repository for all deposit banking. This would make deposit insurance unnecessary; it would eliminate the need to impose higher capital requirements; and it would allow the Fed to implement monetary policy by targeting debtor rather than creditor balance sheets. Instead of returning its profits to the Treasury, the Fed could do a helicopter drop directly into consumer bank accounts, stimulating demand in the consumer economy.
John Lounsbury expanded further on these ideas. He wrote in Econintersect that they would open a pathway for investment banking and depository banking to be separated from each other, analogous to that under Glass-Steagall. Banks would no longer be too big to fail, since they could fail without destroying the general payment system of the economy. Lounsbury said the central bank could operate as a true public bank and repository for all federal banking transactions, and it could operate in the mode of a postal savings system for the general populace.
Earlier Central Banks Ventures into Commercial Lending
That sounds like a radical departure today, but the Fed has ventured into commercial banking before. In 1934, Section 13(b) was added to the Federal Reserve Act, authorizing the Fed to “make credit available for the purpose of supplying working capital to established industrial and commercial businesses.” This long-forgotten section was implemented and remained in effect for 24 years. In a 2002 article on the Minneapolis Fed’s website called “Lender of More Than Last Resort,” David Fettig noted that 13(b) allowed Federal Reserve banks to make loans directly to any established businesses in their districts, and to share in loans with private lending institutions if the latter assumed 20 percent of the risk. No limitation was placed on the amount of a single loan.
Fettig wrote that “the Fed was still less than 20 years old and many likely remembered the arguments put forth during the System’s founding, when some advocated that the discount window should be open to all comers, not just member banks.” In Australia and other countries, the central bank was then assuming commercial as well as central bank functions.
Section 13(b) was eventually repealed, but the Federal Reserve Act retained enough vestiges of it in 2008 to allow the Fed to intervene to save a variety of non-bank entities from bankruptcy. The problem was that the tool was applied selectively. The recipients were major corporate players, not local businesses or local governments. Fettig wrote:
Section 13(b) may be a memory, . . . but Section 13 paragraph 3 . . . is alive and well in the Federal Reserve Act. . . . [T]his amendment allows, “in unusual and exigent circumstances,” a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions.
In 2008, the Fed bailed out investment company Bear Stearns and insurer AIG, neither of which was a bank. Bear Stearns got almost $1 trillion in short-term loans, with interest rates as low as 0.5%. The Fed also made loans to other corporations, including GE, McDonald’s, and Verizon.
In 2010, Section 13(3) was modified by the Dodd-Frank bill, which replaced the phrase “individuals, partnerships and corporations” with the vaguer phrase “any program or facility with broad-based eligibility.” As explained in the notes to the bill:
Only Broad-Based Facilities Permitted. Section 13(3) is modified to remove the authority to extend credit to specific individuals, partnerships and corporations. Instead, the Board may authorize credit under section 13(3) only under a program or facility with “broad-based eligibility.”
What programs have “broad-based eligibility” is not clear from a reading of the Section, but it isn’t individuals or local businesses. It also isn’t state and local governments.
No Others Need Apply
In 2009, President Obama proposed that the Fed extend its largess to the cash-strapped cities and states battered by the banking crisis. “Small businesses and state and local governments are having serious difficulty obtaining necessary financing from debt markets,” Obama said. He proposed that the Fed buy municipal bonds to cut their rising borrowing costs.
The proposed municipal bond facility would have been based on the Fed program to buy commercial paper, which had almost single-handedly propped up the market for short-term corporate borrowing. Investors welcomed the muni bond proposal as a first step toward supporting the market.
But Bernanke rejected the proposal. Why? It could hardly be argued that the Fed didn’t have the money. The collective budget deficit of the states for 2011 was projected at $140 billion, a drop in the bucket compared to the sums the Fed had managed to come up with to bail out the banks. According to data released in 2011, the central bank had provided roughly $3.3 trillion in liquidity and $9 trillion in short-term loans and other financial arrangements to banks, multinational corporations, and foreign financial institutions following the credit crisis of 2008. Later revelations pushed the sum up to $16 trillion or more.
Bernanke’s reasoning in saying no to the muni bond facility was that he lacked the statutory tools.. The Fed is limited by statute to buying municipal government debt with maturities of six months or less that is directly backed by tax or other assured revenue, a form of debt that makes up less than 2% of the overall muni market.
The Federal Reserve Act was drafted by bankers to create a banker’s bank that would serve their interests. It is their own private club, and its legal structure keeps all non-members out. A century after the Fed’s creation, a sober look at its history leads to the conclusion that it is a privately controlled institution whose corporate owners use it to direct our entire economy for their own ends, without democratic influence or accountability. Substantial changes are needed to transform the Fed, and these will only come with massive public pressure.
Congress has the power to amend the Fed – just as it did in 1934, 1958 and 2010. For the central bank to satisfy its mandate to promote full employment and to become an institution that serves all the people, not just the 1%, the Fed needs fundamental reform.
With permission
Source: Alternet