Thursday, March 11, 2010

Municipal leaders ask state for more revenue sources Read more:

HARRISBURG -- City and municipal officials from around the state came here today to urge the Legislature to grant them new revenue-raising options to pay for municipal services, such as reimbursing them for tax-exempt property within their borders.

"We are not asking for a handout," said Reading Mayor Tom McMahon, whose city, like 18 others in the state, including Pittsburgh, is now under Act 47 protection from the state because of its financial problems.

The Pennsylvania League of Cities and Municipalities suggested four new ways that could be used for raising revenue, some of which already apply to larger counties such as Philadelphia and Allegheny.

They include:

• enabling legislation to permit counties to adopt a 1 percent "county option" sales tax, which would be in addition to the 6 percent state sales tax. Philadelphia now has an extra 2 percent sales tax and Allegheny has an extra 1 percent tax.

Mr. McMahon said that for the other 65 counties, the extra tax revenue would be split between easing school property taxes and helping county government and municipalities pay their expenses.

• if the sales tax base is expanded, as Gov. Ed Rendell is calling for, some of the additional revenue should go to local governments rather than have it all go to the state. Mr. Rendell has proposed lifting the sales tax exemptions for 74 different products and services.

• giving the other 65 counties a 10 percent tax on the price of poured alcoholic drinks, such as Allegheny and Philadelphia now have. Allegheny's was at 10 percent but now is cut to 7 percent.

• giving counties some revenue to reimburse them for the taxes they lose by not being able to apply the property tax to tax-exempt institutions like as universities and hospitals. Some cities, such as Pittsburgh, have more than one-third of their property as tax exempt.

Two other options, increasing the local services tax on workers employed in a city from $52 a year to $144 a year, and extending the payroll-preparation tax to nonprofit groups, weren't discussed by the cities group.

Mr. McMahon admitted it could be difficult to persuade legislators to take tax-raising steps in an election year like 2010, but he said many municipalities are having trouble paying for police, fire, garbage collection and other services, so the Legislature needs to help them.

State revenue has another $108 million shortfall

This continues to be a stagnant U-shaped versus V-shaped recession which rebounds after reaching rock bottom.

What causes an economy to rebound? It is a cascading effect that occurs when businesses regain optimism and start rehiring, people get back to work and consumer confidence improves. We’re not there. Businesses are more apprehensive than optimistic.

Advocates of Keynesian economics believe if the government can take enough money out of the private sector through fees, taxes and borrowing and spend the money for us, it can stimulate the economy to grow. Yet, every dollar government spends first is taken out of the economy or borrowed to be paid back with interest.

Rather than increasing capital, it redistributes it. Rather than many individuals deciding how money is best used — saved, spent, given to nonprofits, invested — it transfers decision making to a few in government; and there’s nothing about redistribution that makes businesses optimistic.

In Kansas, we have to close the gap between spending and revenue. The governor has proposed a three-year sales tax increase from 5.3 to 6.3 cents per dollar or an 18.87 percent increase — not a one percent increase, as some describe it. Before you ask, here’s the math: Percent of increase is calculated by taking the difference (.063 - .053 = .01) and dividing it by the original amount (.01/.053 = .1887 or 18.87 percent).

He has also proposed a 55-cent tax increase on cigarettes.

The Department of Labor has increased unemployment taxes and has a plan to borrow another $700 million from the federal government with businesses required to pay back the interest through even higher unemployment taxes.

The Department of Revenue would like to increase taxes on utility bills. See why the private sector isn’t optimistic?

According to the Legislative Research Department, in the last two years Kansas lost 157,400 private sector jobs and added 7500 government jobs, mostly in education and local government.

The public sector is not an economic driver; it is funded by economic drivers. If a household has $20,000 and distributes some to its members and they give back a portion to the household, they have not grown the $20,000. Capital was not added; it was redistributed. Economic growth must come from an outside source, i.e. the private sector.

As far as tax increases: Sales taxes are the most regressive. As a percentage of income, they hit lower incomes hardest. If tax increases pass — and the votes may be there, without mine, I might add — there is no guarantee we’ll realize the much-needed revenue. Using a tax-analysis model factoring in ripple effects of tax increases, Dr. Art Hall from KU’s Center for Applied Economics foresees them depressing Kansas private employment (jobs) and holding down personal income growth.

With cigarette taxes, revenue just goes over the line to Missouri, for example. Not only buyers, but some businesses on the Kansas borders have begun the inevitable exodus.

California, New York and New Jersey are examples of what happens to budgets when states try to increase revenue through higher taxes. They reduce the amount of revenue collected, because producers adapt.

Recently, New Jersey voters rejected that state’s tax-and-spend approach, electing a governor whose goal is: “To reduce and reform New Jersey’s habit of excessive government spending, to reduce taxes, to encourage job creation, to shrink our bloated government and to fund our responsibilities on a pay-as-you-go basis.” It will be interesting to watch New Jersey’s revenue collection over the next few years.

This is the genius of Federalism (states retaining autonomy) over Statism (the federal government growing beyond its constitutional role). Federalism gives us 50 separate case studies on what works and what doesn’t.

The Kansas tax committee is revisiting tax exemptions. Some should go, but eliminating all exemptions — which is unrealistic — would save (on paper, not real life) $500 million. The $4 billion number some have used assumes an elimination of the “ingredient” or “component-part” exemption which would instead add a new tax on every chain in the sales process link — from pasture to cow to steak. It is easier to say “cut exemptions” than it is to do, i.e. non-profits, historic preservation, adoptions, alternative fuel, franchise phase out, education savings, agriculture loan privilege tax credit, etc.

Another way to raise revenue is to expand the tax base. A bill to attract new businesses to Kansas passed the House. PEAK (Promoting Employment Across Kansas) offers temporary incentives once a new business is employing workers. The tax break lasts five years.

Despite a misunderstanding by some, PEAK is not for existing work; it does not constitute a loss of revenue. It incents new jobs and new revenue. We have been losing businesses to other states and PEAK seeks to offset some of that loss.

Aviation has accounted for more than 20 percent of revenue to the State General Fund. Now there’s pressure for aviation companies to set up shop elsewhere. What tax increase advocates fail to factor is that any percent of zero is still zero.

PEAK is a win-win for new businesses, for people who need jobs, for the State General Fund and for agencies which depend on a robust SGF.

Not surprisingly, some legislators promoting tax increases aren’t willing to vote yes without cover. As a colleague was told when she asked a tax increase proponent from across the aisle: “So you’re going to vote for a tax increase?” “No,” he said. “We’re going to make you guys do it.”

In contrast, I have respect for a legislator from the other side of the aisle who told me he let his constituents know he would be voting to raise taxes. On principle, I cannot vote that way, but I consider his transparency principled, as well.

Marc Rhoades represents District 72 in the Kansas House of Representatives.

League of cities working to stop state from taking local government funds

The state of California has a $20 billion problem. But if the League of California Cities has its way, the state will have to look elsewhere when it comes to rummage through local governments' pockets and sofa cushions looking for loose change.

The league, an organization of city officials, is sponsoring the Local Taxpayer, Public Safety and Transportation Protection Act of 2010. Proponents of the statewide measure say that, if passed in November, the initiative would stop the state from shifting, borrowing or outright taking money from cities to cover its own budget shortfalls.

It's been a give-and-take relationship with the state and local governments for years, city officials say: The state takes and the cities give.

Just this past year, the state borrowed close to $5 billion from local cities, says the website for Californians to Protect Local Taxpayers and Vital Services, an offshoot of the league. That money is taken from property and gas tax revenue and redevelopment funds, it reports.

All of those funds are essential in keeping a city's infrastructure intact and running properly, said Saratoga City Councilman Chuck Page, a league committee member. That could be everything from repaving roads to public safety, he said.

Page said that the state has taken $9 million from Saratoga over the past decade to help with its budget deficits. Just this year the state pulled $674,777 from Saratoga after the state legislature

voted to suspend Proposition 1A, a proposition passed in 2004 to protect local governments' revenues from being transferred away by the state.

The state has found loopholes, Page said, which this new measure will close.

"The state has to stop coming to the cities and taking our tax revenue, our gas tax money. If they take it away, then we can't take care of our infrastructure," he said.

Page added, "You can only borrow so much for so long. Eventually you have to fix your problem. And what we're doing is telling the state to fix its problem."

"We believe this could be the first step toward state reform," said Rebecca Elliot, regional public affairs manager for the Peninsula division of the league. She added that the measure could be the key that finally locks the "revolving door of finance."

This should be the "once-and-for-all" answer to the issue of state takeaways, said Campbell City Councilman Dan Furtado, who represents his city in the League of California Cities. Proposition 1A was expected to protect the cities, but a portion of the measure allowed states to take money in emergency situations.

"Everything now has become an emergency, which allows them to circumvent that," Furtado said, adding that the state has raided Campbell's general and redevelopment funds for a combined total of $21.4 million since 1993.

All of this comes at a time when cities are trying to meet the needs of their citizens will less money, Furtado said.

"We're already hurting from sales tax being flat ... and more recently property values have declined, which means less property tax," he said.

The league is well on its way to receiving a million signatures by mid-April to put the measure on the November ballot, Elliot said. And it isn't just elected officials pushing the proposition along, she added. Citizens have joined up and are also getting friends involved in the effort.

Los Gatos Town Councilman Joe Pirzynski is one local official who has been covering the area looking for residents to sign the petition. When people learn about what the measure is intended to do, he said, they are eager to sign the petition.

"It sells itself," said Pirzynski, a board member on the Peninsula division of the league.

Pirzynski said that Los Gatos has 250 signatures, the most of any city in Santa Clara County.

"Right now, this is extremely important," he said. "This may be the most important thing any of the cities in the league are involved with."

The measure, if passed, would keep local governments from being "enablers" and stop "the inappropriate behavior by the state," he said.

In addition to concerns about state takeaways, Santa Clara County is now eyeing some city funds.

Page said that the county is expected to take Saratoga's portion of the Community Development Block Grant. Those funds go to help support local programs like the Saratoga Senior Center and West Valley Community Services, which provides a food pantry and emergency housing for 611 people a year, 67 of them from Saratoga.

The Saratoga councilman added that if the county pulls the money from Saratoga, those funds will most likely be diverted to other things, such as homeless and parolee services.

Page said he has no problem with helping those groups, but wondered how it will affect local services.

"If they do that, then what happens to the food banks? What happens to our senior center and adult day care that we give money to each year? All of a sudden, if that dries up," he said, "we'll lose the ability to do these programs."

Budget squeeze sours jobs picture

NEW YORK (Fortune) -- Another big employer is hanging out the "Not Hiring" sign.

State and local governments are collectively the nation's biggest source of jobs, together employing almost 15 times as many Americans as Wal-Mart (WMT, Fortune 500).

They added 2 million jobs over the past decade and helped to cushion the shock of the Great Recession by holding employment steady since the end of 2007, a time when the private sector was hemorrhaging 8.5 million jobs.

But another ugly state budget season is coming up, which will mean more belt-tightening for local governments -- and another source of pressure for an already anemic jobs market recovery.

State tax revenue dropped a record 11% in the year ended in September, the Center for Budget and Policy Priorities estimated this week. New taxes and fees will raise less than half that amount.

Estimates of state budget gaps over the next two years, both open and already filled, reach into the hundreds of billions of dollars.

The squeeze will prompt more municipalities to freeze hiring, cut benefits and in some cases resort to layoffs.

"We're at the point where elected officials and budget forecasters are fully aware of how bad things are," said Chris Dixon of Input, a Reston, Va., government-market research company. "Right now they're buying time for revenue growth to resume."

Layoffs aren't the first choice of governments seeking to balance their budgets. A survey conducted late last year by the Center for State and Local Government Excellence found two-thirds of respondents had stopped hiring and almost as many had put a freeze on raises. Less than half had resorted to job cuts, however.

But the size of budget shortfalls is making cuts inevitable. A thousand state workers in South Carolina could lose their jobs if the legislature enacts a pending budget proposal, the Columbia State reported. Cutbacks are pending in Virginia, Georgia and many other states.

Some of the cuts will be averted as lawmakers shift funding priorities and paper over some budget shortfalls with one-time maneuvers. Some officials will defer the most painful decisions until after November's elections.

"The politics of an election year probably mean we're looking at another year of kicking the can down the road," Dixon said.

But revenue in most regions isn't expected to recover to its pre-recession level until mid-decade. Municipal officials will also face numerous challenges in the next few months.

End of big spending in Washington?

First, there's the timing of federal stimulus funding. As hard as state and local government budgets have been hit by the downturn of 2008 and 2009, that pain has been eased by federal funding for unemployment insurance, Medicaid and other programs. Some of these programs are set to end later this year.

The federal government will also soon pull back on its massive support for the housing market, which has aided municipalities by slowing the decline in house prices and pulling the economy out of free fall. The Federal Reserve is due to end its purchase of mortgage-related bonds this month. That could cause interest rates to rise.

And officials around the country are still struggling to get a handle on their pension problems, which may pressure finances for years to come.

Municipal job cuts alone won't likely make much of an impact on the headline unemployment number. But they could dampen the recovery in consumer spending that is crucial for the growth of small businesses, which are typically responsible for much of the nation's jobs growth.

A pullback would be especially damaging now because a third of small business owners say their biggest problem is weak sales, according to February data from the National Federation of Independent Business. That's the highest reading on record.

"Profits trends are terrible, undermining owners' ability to finance any aspect of growth," the NFIB said in its monthly report.

Cuts Alone Not Enough: Need More Revenue

ATLANTA — Budget cuts alone will not solve the state’s financial problems.

House Majority Leader Jerry Keen says the legislature is considering several measures to help shore up the state’s revenues. (photo courtsey Georgia General Assembly)
House Majority Leader Jerry Keen told GPB’s Lawmakers about several measures the legislature is considering to help shore up the state’s revenues. February revenue figures released yesterday show the state’s revenue collections continue on a downward spiral and it is now estimated that the state will have more than a $1.1 billion shortfall.

Among the revenue generating measures the legislature is considering:

1. Increasing fees. For example, requiring grocery stores to pay for required inspections by the Department of Agriculture and/or requiring a fee for identification badges created for lobbyists by the State Ethics Commission. Keen hopes that fee increases could generate as much as $100 million in new revenues.

2. Imposing a Cigarette Tax. Keen does not support the current proposal of a dollar per pack, but thinks that a lesser tax, imposed by Constitutional Amendment, should be considered. He also believes that the State should dedicate those revenues generated by the tax to paying for tobacco-related illness.

3. Rolling back tax exemptions for not-for-profit hospitals. Although Keen says that several measures are being considered involving Medicaid funding- including Governor Sonny Perdue’s 1.6 percent hospital “bed tax” or decreasing Medicaid reimbursements to doctors; he feels that the best solution may be rolling back tax exemptions for over 120 no-for-profit hospitals in Georgia.

4. Eliminating the back-to-school sales tax holiday. Since 2002, the legislature has voted to create a sales tax holiday during the “back-to-school” season for clothing, school supplies and certain electronics. Rolling back this sales tax exemption and others- including the exemption for energy efficient products- could generate as much as $35 million.

At this time, the legislature is also looking to use monies from the FY 2011 budget to balance a shortfall of $200-300 million in the FY 2010 budget. It seems clear that the Georgia General Assembly will continue their work to find new revenues, budget cuts and more efficiency in state government.

Legislative briefs: Tax receipts fell again in February

Tax collections continued to drop last month, led by another decline in sales tax receipts, falling $47.1 million short of estimates.

The state of Tennessee collected $638.9 million in February, 4.4 percent less than in the same month a year ago. Tax receipts have fallen in 21 out of the last 24 months.

Much of the decline could be attributed to sales taxes, which fell for the 21st month in a row. The $434 million that the state brought in was nearly 7 percent less than a year ago.

Businesses pay February taxes based on sales made in January, and Finance Commissioner Dave Goetz said poor weather that month might have been a factor. "It was an unusually cold January," Goetz told lawmakers Tuesday. "Perhaps that had something to do with it. But we can't really say for certain."


Mattea speaks to lawmakers

Opponents of mountaintop removal coal mining are drawing on some star power to make their case for banning the practice in Tennessee.

Country singer Kathy Mattea spoke before the Senate Environment and Conservation Committee on Tuesday. The West Virginia native told the panel, "mountaintop removal makes people sick, and makes them die sooner."

The committee heard testimony from scientists about the environmental impact of the mining method that involves blasting away mountaintops to expose coal seams and often filling nearby valleys and intermittent streams with mining waste. The panel adjourned without taking action on the bill sponsored by Democratic Sen. Doug Jackson of Dickson that seeks to curb mountaintop removal mining in Tennessee.


J.P. Morgan: Foreclosure Sales Could Be Higher in Three Years

Efforts to modify loans and delay foreclosures may have helped hold down the stock of foreclosures for sale in the second half of 2009, fostering home-price stabilization. But that cure could require different medicine: an elevated level of foreclosures for sale over the next three years.

Analysts from J.P. Morgan Chase & Co. are forecasting that bank-owned sales as a share of total home sales will remain at current or even higher levels three years from now in more than half of the nation’s 10 largest housing markets, according to a recent investor presentation. (The slides for the presentation are available as a PDF.)

Bank-owned sales–or “REO,” real-estate owned, in industry parlance—are expected to account for between 39% and 50% of home sales in Phoenix in the fourth quarter of 2012, up from 37% at the end of last year. The REO share of sales in San Diego, where one-quarter of sales at the end of last year were REO, is projected between 24% and 31% three years out.

2Q 2009 4Q 2009 4Q 2012
Los Angeles 52% 39% 22-28%
New York 11% 12% 12-16%
Santa Ana, Calif. 30% 16% 18-23%
Long Island, N.Y. 8% 8% 5-7%
Chicago 33% 28% 21-28%
San Diego 38% 25% 24-31%
San Francisco 14% 10% 9-12%
Oakland, Calif. 47% 20% 18-23%
Phoenix 57% 37% 39-50%
San Jose, Calif. 43% 22% 14-18%

Source: J.P. Morgan Chase & Co.

New York City could also see a slight increase in the REO share of sales, with a projection that 12% -16% of sales coming from foreclosures at the end of 2012, compared to a 12% REO share at the end of last year. Foreclosures could stay the same or rise in Santa Ana, Calif.; San Francisco and Oakland, while they’re projected to be lower in three years in Los Angeles, Chicago, Long Island, N.Y., and San Jose, Calif.

With the exception of New York, foreclosures began to heavily flood housing markets in the first and second quarters of 2009. Because foreclosures sell at a discount, that generated big price declines that have since moderated as the REO share of the market has eased.

J.P. Morgan says that spring 2009 will likely mark the peak of foreclosure sales as a share of total home sales, but that REO sales will grow and remain high in most markets through 2012. Even if REO sales account for 50% of all home sales three years from now in Phoenix, for example, that will still be below the 57% foreclosure share from last spring.

Follow me for more housing and mortgage news on Twitter at: @NickTimiraos

Sales tax receipts again paint dismal picture for Springfield city budget

SPRINGFIELD, Mo. – There’s more rough news for the City of Springfield’s budget. Last month's step forward in sales tax revenues just took three steps back.

The city receives its checks from the state about two months after they’re collected at cash registers. For November sales, January's receipts were 3.53 percent below the year before. City staff hoped February's increase of 1.35 percent from the previous year was a sign that they'd turn the corner. However, March numbers came in 17.9 percent below March 2009.

""I was very surprised after last month and being up more than one percent, I had hoped we'd seen a slow recovery," said City Manager Greg Burris. "I was very shocked."

The city manager says he'll recommend specific cuts to City Council in the next two weeks.

Bank sued for seizing Pa. woman's home and parrot

Bank of America has apologized to a Pittsburgh-area woman after one of its contractors allegedly trashed her house and took her parrot while wrongly repossessing her home.

Forty-six-year-old Angela Iannelli sued the bank Monday. She claims her mortgage was up-to-date when one of the banking giant's contractors damaged furniture, took her pet parrot, Luke, and padlocked her Allison Park door in October.

In a statement, the bank says it "sincerely apologizes" and has tried for months to resolve the issue.

The bank says it has "zero tolerance for this kind of error" and says it will quickly review the lawsuit's allegations and consider any hardship that resulted.

The woman says she eventually got her bird back after repeated calls to the bank.

Economist Lewis Black Tells It Like It Is

March 08, 2010 "Information Clearing House" -- ADULT CONTENT WARNING: If you're not familiar with Lewis Black, I'd turn back if I were you.

Lewis Black is funny. Dangerously funny. That he has such a large audience and still packs plenty of politics in his shtick gives one hope for the fate of our sorry species. So I figured it's time I learned something from him.

What I've learned is that since a million more of you pricks out there watch him than will ever read my stuff, I'm done with all the painstaking research and putting in links to original sources so you can see that I'm not making it all up. I don't have time any more. We're killing people in more countries than I can count and YOU want me to be fair and balanced and plus show you where all this shit comes from. Well, I'm sorry...if you don't believe me, LOOK THIS SHIT UP FOR YOURSELF!!

Here's a perfectly good example.

My favorite Lewis Black show is a Broadway HBO special from probably 10 years ago that I have on perfectly good VHS - YES, VHS - not one of those goddamnUSELESS DVDs that get stuck over and over and over and break up into crazy little squares whenever they want and some day will be more of a goddamn JOKE than 8-Track cassette tapes - he talks about what it would take to get the economy going after those greedy little shits from Enron and Global Crossing and Tyco made off with billions and threw thousands upon thousands out of work.

Then Lewis made a very courageous statement: "The economy goes up. The economy goes down. The economy goes up. The economy goes down...up...down...up...and NOBODY KNOWS WHY THE FUCK IT DOES!"

"THAT is really FUNNY," I thought! And that's what I've believed. Until last week. I was listening to NPR and a reporter was talking with the economist de jour about how to get the economy going after those greedy little shits from AIG and Citicorp and Goldman-Sachs made off with trillions and threw MILLIONS out of work...and there...right THERE on NationalPetroleumfuckingRadio the economist says, "Well, you know, Linda, nobody really knows what makes the economy do what it does..."

WHAT THE FUCK?!?!! So in other words, those greedy bastards in the Republican Party and those spineless bastards in the Democratic Party really have NO IDEA if tax cuts and bailouts will stimulate the economy! For all we know, we should be doing what Lewis said 10 years ago - enact a big, massive jobs program, put millions of people to work building transit systems or health clinics or parks or any fucking thing. As long as it's BIG and it's a fuckingTHING...and THAT would STIMULATE THE ECONOMY, TOOOO!!!

You may think that's just a broad, sweeping generalization made by some smartass comedian trying to sound like an economist. But it's true. Just like Lewis said, think of all the BIGFUCKING THINGS you've seen built over the years and ask yourself if pretty soon there wasn't a BIGFUCKING RESTAURANT and a BIGFUCKING MOTEL and a BIGFUCKING CASINO and BIGFUCKING SPA. You KNOW it works like that!

And here's another one. Lewis didn't say it, I did. Or rather, some economist, who's name I can't remember, said it a meeting in Pittsburgh last year. If you add up all the college tuition costs in the entire country, you'd find they equal less than 5% of what we've spent on the Iraq and Afghanistan war so far. Five percent!!!

FIVEgoddamnperCENT!! of what we've pissed away in the sand, killing millions of people, ruining the environment, making a good part of the world's population HATE OUR GUTS...five percent of that would pay every single college tuition in the United States!! HowffffuckingSTUPID is THAT!?!??

OK, so I can't remember if that was all college tuitions or just tuition for public colleges. If you don't believe me, go look it up for yourself - there's only so much research I can do out of one bloodshot eye - and DON'T expect me to put in any links to the Dept. of Goddamn Education for you to just click and forget.

And here's another one! Every so often you'll hear of some politician - usually one who's got a death wish or is never going to run for office again - suggesting that just MAYBE we might just CONSIDER some kind of new tax so we can start PAYING for all these FUCKING WARS!! If Lewis wants to use that one he can have it and I promise I won't sue as long as he keeps his flying monkeys off me.

The reason I like the war tax idea is because it saves a lot of time...I mean a LOT of time. Why, the other day, I had just BEGUN thinking about it and within MINUTES I had graphs and tables and links upon links spinning before my eyes...coming at me from every direction. And I said ENOUGH!! ENOUGH!!! Let those little bastards look it up On. Their. Own!!! Here's how.

Pick up your local newspaper if you've still got one. Or one of those national ones always sitting around in airports and freeway rest stops - god knows we don't have an TRAIN stations worth mentioning - but don't get me started!!

If it's your local paper - and maybe you'll have to wait till next Wednesday when it makes its weekly appearance - I'll give you FIVE TO ONE odds on any...ANY!...amount of money you want to bet, that somewhere in that paper will be a story of a library near you, or school system or mental health agency or fire department or transit system that's going broke and will probably be asking for a tax increase any day now. If it's a national paper it'll have the exact same story in it, only the numbers will be bigger.

If you want to do some really FANCY research, here's what you do: you pick up the phone and call your city government. If there's still anybody there to answer the phone, ask them this simple question. "Did we used to get federal money for things like water plants or sewer plants or housing programs or health departments, say 20" or - make it easy on them - "10 years ago that we don't get now?"

You'll probably hear a couple minutes of silence. Don't worry. They're just in the bathroom changing their pants because they LAUGHED so fucking hard they couldn't control their BLADDER! And they'll say: "ARE YOU CRAZY?? ARE YOU FUCKINGCRAZYORSOMETHING??!!?? IS YOUR HEAD FAR ENOUGH UP YOUR ASS YOU CAN TASTE BRYLCREEM YET?! EXACTLY WHAT DO YOU THINK HAS BEEN GOING ON IN THIS COUNTRY??!!

After their aneurism passes, they'll maybe apologize and say something a little more subdued like, "Well, OK. I guess I can understand. It's not as if you've had much of a chance to hear about where all the money's been going. What with BigFootDopplerRadar weather reports, commercials, sports and murders committed halfway across the country, there's only about two minutes for hometown fires and stabbings on the local news. But take my word. We don't get JACK from the feds any more."

And you'll have to take their word for it because you are probably talking with the last human being still working for your city and they're getting laid off next week. So if you don't believe them, guess what? YOU'LL HAVE TO LOOK IT UP YOURSELF!!!

But it's true. Every bit of it. I can tell you firsthand from my own gloriously brief career as an elected official 20 years ago when bullshit like Trickle Down Economics started rolling downhill BIG time. Here's just one example.

We had a huge problem, just like every other city in this part of the country, because every time it rained our sewage plant would burp millions of gallons of...well, crap...into Lake Erie.

Fixing it cost MILLIONS. The EPA paid for the first phase, even though it sucked up almost all the money for that kind of work in Ohio. For Phase II, we split the cost between the city and the feds. The latest and biggest phase, required a public vote for a 15-YEAR, 450 MILLION DOLLAR RATE HIKE! ALL of it...every goddamn DOLLAR, comes out of our pockets! So WHY didn't local officials add a little line to sewer bills, right there, just above the Total Amount Due, called "PLUS THIS MUCH MORE SO WE CAN INVADE ANOTHER GODDAMN COUNTRY!!" with a big fucking EXCLAMATION POINT - TWO OF 'EM - to let people know who's been SHOVING IT UP THEIR ASS??!!

No, instead, it gets piled on top of a little more tax for schools and a little more library tax and a little higher bus fare and a little more...YOU know what I I have to paint you a GODDAMNPICTURE? Then when everything's really going down the shitter your city lays off police and firefighters! And I'd make a joke about THAT, except Lewis does it so much better when he says, "Cops? Nah...who needs 'em?! And firefighters? Hell...we ALL know it's a lot more fun to just sit back and watch shit burn down!"

It's all true. I swear. Go look it up for yourself.

Mike Ferner claims to be a writer from Ohio. You can look it up here.

U.S. Taxpayers on Hook for $5 Trillion of Fannie, Freddie Debt ... No Matter What Barney Frank Says

House Financial Services Chairman Barney Frank caused a bit of an uproar Friday when he suggested the U.S. government does not guarantee the debts of Fannie Mae and Freddie Mac.

Rep. Frank later recanted and backed a Treasury Department statement reassuring investors that, yes, Fannie and Freddie Mae debt is guaranteed by the U.S. government. "Going forward," he said in a statement, we "will make sure that there are no implicit guarantees, hints, suggestions, or winks and nods...we will be explicit about what is and is not an obligation of the federal government."

But after years of winks and nods, there's no doubt that Fannie and Freddie now enjoy an explicit guarantee, according to most observers. The U.S. government placed Fannie Mae and Freddie Mac in conservatorship in September 2008: "This means that the U.S. Taxpayer now stands behind $5 trillion of GSE debt," according to the Congressional Research Service.

The problem is that $5 trillion of so-called agency paper is not treated as if it is a debt of Uncle Sam for accounting purposes, says Richard Suttmeier, chief market strategist at Niagara International Capital and

"Get it on the balance sheet - that's where it belongs," Suttmeier says. "Add it to the $14.2 trillion in [federal] debt and let's move on."

Another Time Bomb Ticking But $5 trillion is a lot of money - even by government standards -- and moving on may be the problem because of ongoing problems in the housing market, Suttmeier says. "There's a general concern on Main Street U.S.A. that ‘my neighbors are throwing in their keys, there's more for sale signs in my I want to buy a new home, risking there's still downside risk to housing?' "

Noting the Case-Shiller 20-City Home Price Index is still 50% above 1999 levels and mortgage delinquencies are still rising despite the rebound in GDP, Suttmeier says "victory is nowhere in sight, particularly when the drain we're going to see from Fannie and Freddie is unlimited losses between now and the end of 2012 -- on top of the $400 billion that's already been allocated."

Coincidentally (or not), the FDIC is allowing U.S. banks until 2012 before forcing them to fully write-down bad or toxic loans, which is "another time bomb ticking," Suttmeier says. "They're hoping the public market comes back into the mortgage arena, which is going to be hard to do."

Unlimited losses from Fannie and Freddie? Keeping zombie banks alive on the backs of the taxpayer? Suttmeier's right: There's no accounting for that.

Hungary makes Holocaust denial a crime

BUDAPEST, Hungary — Hungarian President Laszlo Solyom has signed a law making Holocaust denial punishable by three years in prison.

The law was approved last month by Hungarian lawmakers, after more wide-ranging versions of the law had been rejected by courts for limiting free speech.

Spokesman Ferenc Kumin says President Solyom signed the bill because in his opinion the law is not unconstitutional.

Parliament had rejected an amendment put forward by the center-right opposition adding to the bill crimes by Hungary's pro-Nazi and communist regimes.

The governing Socialist Party and Hungary's growing Jewish community welcomed the news Wednesday.

Some 550,000 Hungarian Jews and 50,000 Gypsies were killed in the Holocaust.

Riots in Athens as thousands protest against cutbacks

Masked youths stoned police outside Greece's parliament today in protest at cutbacks proposed to try to end the country's debt crisis.

Riot police responded with tear gas and baton charges as more than 7,000 demonstrators gathered in the centre of Athens. They arrested six demonstrators, while onlookers said two officers were badly beaten.

Protesters attacked the leader of Greece's biggest trade union and chased guards away from the country's tomb of the unknown soldier. Youths also fought with police inside the Council of State and tried to break into the labour ministry.

Inside parliament, politicians were debating the €4.8 billion (£4.33 billion) austerity bill, which is expected to pass despite strong opposition. It will raise consumer taxes and slash public sector workers' pay by up to 8%.

The GSEE and the ADEDY unions held strikes against the measures, while hospitals, schools and public transport were closed. GSEE head Yiannis Panagopoulos fought with rioters before being led away bloodied and with torn clothes.

Prime minister George Papandreou was in Luxembourg today holding talks with Jean-Claude Juncker, head of the eurozone finance ministers group. He was also to meet German chancellor Angela Merkel in Berlin as he seeks EU leaders' support.

Mrs Merkel said she expected “interesting” talks with Mr Papandreou, saying Greece's successful bond issue this week “gives us optimism”.

Greece's centre-Left government says it is seeking €16 billion (£14.45 billion) in savings this yea, to reduce a bloated budget deficit of €30 billion (£27.1 billion) that is over four times the EU limit as a percentage of annual output.

VIDEO: No Bailouts in Iceland

Icelandic people refuse to repay Internet bank’s multi-billion debt

People in Iceland have rejected their government's pledge to repay a debt of more than US$5 billion left by the collapse of Icesave Internet bank. 93 per cent of people voted “no” in a referendum.

Less than two per cent supported the repayment of the debt, which is due to be paid to the UK and Dutch governments, which had compensated the investors who had lost money.

Andrew Gavin Marshall from the Center for Research on Globalization says the public should not have to shoulder the burden of mistakes made by banks.

“The bailout would be for roughly US$5.4 billion, which would go to the Dutch and the British depositors in Icesave, which was the largest online bank that went under,” Marshall says. “And this is basically asking the Icelandic people to pay for the bad debts of their bankers and the bad regulations of their government. And it’s sort of endemic of this corporatist economic undertaking that is going on around the world, where the private debt has become a public obligation. So you privatize profit and you socialize the risk.”

People protest outside the Icelandic Parliament
in Reykjavik on March 6, 2010:

Andrew Gavin Marshall is a frequent contributor to Global Research. Global Research Articles by Andrew Gavin Marshall

The 9/11 hijackers are alive

Click this link .......

Bad loans, losses mount at banks with more expected

The results are in, and it was officially another ugly year for St. Louis banks, with bad loans and losses piling up again in the fourth quarter.

Bad loans at the 78 St. Louis area commercial banks headquartered in and around St. Louis totaled more than $1.27 billion for the year ended Dec. 31, up from $1.22 billion through the third quarter, and $736 million in the fourth quarter of 2008, according to figures compiled by the Federal Reserve Bank of St. Louis.

Losses for the same banks totaled $412.7 million for 2009, far worse than the $162.7 million lost in 2008.

“The losses continue, and while they are disappointing, they are not unexpected,” said Julie Stackhouse, senior vice president of the Bank Supervision & Regulation Division of the St. Louis Fed. “Expect to see continuing disappointing results through 2010.”

UK banks see surge in bad debts

The level of debts written off because defaulting borrowers will never repay them shot up in 2009, Bank of England figures have shown.

In 2009, financial institutions wrote off £4.12bn in credit card loans, up from the previous record amount in 2008 of £3.2bn.

The value of mortgages written off more than doubled, but from a lower level, from £408m in 2008 to £984m in 2009.

The figures reflect the effect of the recession on personal debts.


Other loans written off jumped from £3.2bn to £4.2bn - pushing up the total write-offs by UK lenders to people from £6.9bn to £9.3bn.

In addition to this, financial institutions wrote-off £5.9bn that was lent to non-financial businesses, as well as £154m lent to other financial corporations.

Banks have been revealing their own specific write-off levels during the current reporting season.

These institutions set aside millions of pounds to cover potential losses on their loans, but only when the loss is confirmed as unrecoverable is the money finally written off.

The effect of the increased losses has been felt by those people who borrow but make repayments on time.

It became more difficult during the recession for first-time buyers to get on the property ladder as lenders were making their criteria more stringent.

Last month, financial information service Moneyfacts said that credit card rates had risen to their highest level for 12 years - at 18.8%.

Bank of England figures suggested the rise was not so acute. It said the average interest rate on credit cards offered by banks and building societies has risen to its highest level since June 2006. At the end of January, the rate was 16.4%.

Welcome to the United States of Iceland
People protested outside the Icelandic Parliament on Saturday as Icelanders headed to the polls to vote on a referendum to repay British and Dutch citizens for bailing out Icesave.

NEW YORK (Fortune) -- It's time to start paying attention to the financial sinkhole that Iceland is trying to climb out of -- the view from inside of it is eerily similar to our own.

An Icelandic savings bank, Icesave, had attracted billions in deposits from hundreds of thousands of British and Dutch citizens, due to the phenomenally high interest rates it offered. Icesave collapsed in 2008, for much the same reason Lehman Brothers, WaMu, and hundreds of local savings banks did: its bankers used their cash to make complicated, bad, leveraged investments, mostly on real estate.

The British and Dutch have made their citizens whole, bailing out Icesave after it became clear the Icelandic government didn't have the resources to do the same.

Now, they expect to be repaid. But in a referendum there this past weekend,only 1.8% of voters favored a plan to pay back the $5.3 billion Iceland owes. It would have worked like this: the International Monetary Fund would loan Iceland the cash to pay back the British and Dutch. Iceland, then, would repay the IMF.

To call the rejected terms loan-sharking would be a disservice to usury. They called for every Icelandic family to essentially throw a quarter of its income towards servicing the loan for the next eight years. But this isn't the end: one way or another, the bill will come due, and Iceland's 320,000 citizens will be paying for the hubris of a few hundred of their own, who dubbed themselves "investment bankers."

The amount owed -- $5.3 billion -- sounds like a rounding error to Americans, but, per capita, it would be the equivalent of the United States taking on a $5 trillion debt. Sounds impossible, until you consider that our real bailout tab, as calculated by the New York Times, is already $2 trillion. Moreover, the government has obligated itself to pay out $12.5 trillion if things get worse. In Vanity Fair last April, Michael Lewis wrote, "Iceland instantly became the only nation on earth that Americans could point to and say, 'Well, at least we didn't do that.'"

Yet in a pretty real way, we did do "that." We have a more sophisticated central banking system, and there are more countries, like China, in whose interest it is to protect the value of the American dollar, thanks to their ownership of our national debt. In that crucial way, we've dodged Iceland's true peril: watching the value of its currency, the króna, crash against the debt it owes in foreign currencies like the sterling and euro. It's looking more and more like our craftiest bankers factored the inimitable strength and guarantee of the U.S. dollar into their reckless gambles.

But the rest of us are really just lucky that the dollar can survive these hurricane-level economic forces without blowing apart. One way or another, the bill is coming due, and America's 300 million citizens will be paying for the hubris of a few thousand of their own, who dubbed themselves "investment bankers."

While Lewis summons a gentle humor to chronicle a tiny nation's transformation from European fishing capital to destroyer of capital markets, it's worth remembering America's Rube Goldberg financial machinery sprung from a society that was once far more concerned with agriculture (and later, manufacturing) than with inventing complicated and opaque ways to manufacture wealth.

It's too easy and wrong to look at Iceland as being somehow dumber than we were. Their problems aren't just an outgrowth of our financial handiwork; their problems are our financial handiwork. And Icelanders have thoroughly rejected being placed in hock to exonerate the tiny segment of the population that threw their country into chaos.

In our democracy, we didn't have that choice. From Treasury Secretary Hank Paulson's ramming of TARP through Congress, to Treasury Secretary Tim Geithner's decision to abandon subtlety and mainline dollars into bank balance sheets, even our presidential election had little impact on our government's deployment of huge amounts of capital to save our obese banking system.

Icelandic journalist Iris Erlingsdottir wrote in the Huffington Post, "While we have been endlessly debating IceSave, our unemployment rate has continued to climb, the number of insolvencies has continued to increase, and the number of public services has continued to decrease. Other scandals of comparable magnitude and abuse of taxpayer money -- but involving only Icelanders -- are being ignored by the Icelandic media." Change a few nouns -- health care, Citigroup (C, Fortune 500) -- and Erlingsdottir is writing about Washington as Reykjavik.

Just because the crisis has been "managed" doesn't mean it's over. As economist Simon Johnson writes, "The true fiscal cost arising from our recent financial excesses is the increase in net government debt held by the private sector. This will likely amount to around 40 percentage points of GDP." Servicing that debt will likely affect our promise as a nation, not for years, but decades.

Whatever settlement Icelanders finally swallow, their financial system, at its peak just a minor moon in the constellation, is already as barren as the island's volcanic bedrock. But precious little has changed about Wall Street's massive gravitational pull in the U.S. and the world.

Our banks are still too big to fail, their boards are still poorly composed, we have no Consumer Financial Protection Agency, no systemic regulator, no resolution authority, and no reform of mortgage securitization or ratings agencies, two of the institutions that most enabled the crisis to occur. We've been distracted from the task of preventing another crisis from happening by the task of minimizing the current one, and as a result, we've done neither, while allowing our other domestic problems to snowball.

In Iceland, it's expected the ruling political party could be forced to step down if it can't come up with a loan plan the public approves of. The closes thing the U.S. gets to a bailout referendum is the 2010 midterm election. It's still unclear what happens to Iceland next, as it grapples with recovering from its terrible financial fever. But it might be time to stop treating Icelanders' predicament as a sad footnote to the global crisis, and start searching for lessons on what, save massive structural reforms, is still in store for us.

Another Obama Tax Hike

The Senate health-care bill would raise effective marginal tax rates on lower and middle-income singles and families up to 41%.

The stunning victory of Scott Brown in Massachusetts may prove to be a game-changer for the President's health-care "reform" agenda. This is good news for the ability of lower-income families lacking insurance to climb up the ladder of American prosperity. His associated rhetoric notwithstanding, the President's policies in the stimulus bill and health-care debate increase current barriers to the American dream. These legislative efforts (we use the Senate health-care bill for illustration) raise to shocking levels the effective marginal tax rates (EMTR) on lower and middle-income singles and families--with the government taking up to 41% of each additional dollar.

The mechanics are simple. The effective marginal tax rate is the answer to the question: "If I earn $1 more, how much less than $1 do I get to save or spend?" If you can keep that full dollar for your disposal, the effective marginal tax rate is zero. If earning another dollar does not raise your disposable income by even a penny, the effective marginal tax rate is 100 percent.

Obviously, neither extreme is realistic. But exactly where federal policies come down in between has dramatic implications for the ability of families to rise from the ranks of the poor, or to ascend toward the upper end of the middle class. This mobility is the heart of the American dream that has made the United States a beacon of economic light for centuries. Equal opportunity to achieve that dream – not equal paychecks or equal government handouts – is the real-world litmus test for fairness in government policy.

Consider, then, the figure below constructed for a two-earner family with two school-age children, one of whom is in college. The solid line shows the EMTR based on income tax law prior to the health-care bill (it excludes the impact of the payroll taxes). The dashed line displays the damaging increases in the EMTR assuming the health insurance premium subsidies contained in the Senate health-care bill and insurance cost estimates provided by the Kaiser Family Foundation. As a family's income rises above 133% of poverty, Medicaid eligibility will be eliminated but a family that does not receive health insurance from their employer will receive a subsidy to purchase health insurance in the "exchange." In turn, however, as their efforts yield higher income, subsidies are clawed back or effectively taxed away. The current law policies show that there are already some lower income families facing EMTRs above those in the middle class. But the barrier to success imposed by health-care reform is even more striking. According to the Congressional Budget Office, about 20 million people would receive a subsidy to purchase insurance through an exchange and thus face a higher EMTR.


How can a family be expected to get ahead when taking an extra shift, finding a way for a second parent to work, or investing in night school courses to qualify for a raise means handing the government as much as 41% of the additional income earned? Parents already juggle the tough trade-off between working more to build their family's future and spending time at home with their children. The bigger the EMTR, the tougher that tradeoff becomes.

How could this happen? In part, it may reveal ignorance about the long-term impacts of class warfare-based programs. For decades, both parties have employed refundable tax credits (i.e., disguised spending programs) as a way of providing benefits to low-income families while appearing to favor low taxes and small government. The class-conscious left has insisted that these benefits be "targeted" – i.e., that they disproportionately help those lower-income families that pay no taxes and be phased-out for the tax-paying middle class. The result fit their agenda of wealth redistribution. The right, eager to achieve any tax cuts they could muster, accepted the income limitations as the price of getting any tax relief. With progressives' hell-bent effort to soak the rich, the outlook for the poor and middle class quietly and steadily deteriorated to the condition we find it today.

Every "phase-out" of a tax credit or subsidy program is an EMTR in disguise. The cumulative impact is a cruel twist on "targeting," as families are anchored near the bottom of the income distribution by layers of fiscal cement. Ignorance is a dangerous animal in the hands of tax policymakers.

A second possibility is subtle paternalism toward the poor. Unlike the rich who are presumed to know what they want (which progressives are dead set on thwarting), it may be that poorer Americans are presumed to need guidance on how to live their lives (or a "nudge" in the parlance of the faddish behavioralists in the Obama Administration). They need to be told that it is a good idea to work, take care of your children, go to college and have health insurance, hence a tax credit for every virtue.

In the end it does not matter how we got here. Taxes interfere with the basic rewards for work, thrift, and saving. Excessive EMTRs damage these incentives, discourage the taxed, and threaten to rob America of a vitality that is its signature.

This year marks a crucial time in the future of tax policy. The tax laws enacted in 2001 and 2003 will sunset, along with the recent tax credits included in the so-called stimulus bill. As Congress thinks about the future, we hope it puts full weight on the importance of a tax code that supports the ability of the poor and middle-class to achieve their dreams.

The Massachusetts special election sends the strong message that voters want Washington to scale back its interference in their lives. Re-thinking the policies that get in the way of their pursuit of success is a good place to start.

The Icelandic People Scored a Victory in the Struggle for Democracy

But there is still a long way to go.
The referendum for or against taking over the Ice-save debts unconditionally by the Icelandic tax-payer has brought a clear “No” vote with 93.2% of those who voted, while participation of voters in the referendum was at 62,7%.
Publicly both the British government, as well as the IMF, seem to have mellowed in their rhetoric and ready for a compromise in their demands.

However, after everything that has gone on before, I wouldn´t even trust them to tell us the correct time.
The British as well as the banking elites have in the past always followed two tactics at the same time. They smile and shake hands above board, and then kick those they deem weak and still not submissive enough below the table with spiked boots, while denying any responsibility for the harm they inflict. (Their spikes constitute either economic attacks or black-op intelligence operations)

As for the home-front, there had been a relentless campaign against the referendum from the very day Icelandic president refused to sign the law for the debt-take-over.
In the most widely viewed comedy program on the main publicly owned TV-station the president was portrayed as an idiot responsible for the country to burn down, while his wife was portrayed as an imbecile, and the Icelandic people, who had signed the petition for a referendum, as too stupid to know their own mind.

In time there eventually were a few other voices to be heard on Icelandic media, but the government itself didn´t budge.
No matter what reasonable and respected voices had to say on the matter. The government opposed the idea of a direct democratic decision.
Until the last minute the government had tried to discourage the voters from voting. The Prime Minister and the Minister of Finance both said they would not participate in the referendum. They saw it as a “waste of money” and a “farce”.
This disregard for the very people who had put them into office angered just about everybody who is the slightest bit interested in politics here.

Personally I really do not understand why those two government officials did this kind of a stunt. Quite obviously they were hurting themselves and their political parties in this way.
The only explanation, I could think of, is that they were threatened with dire consequences to the nation, if the referendum went ahead.

The Icelandic referendum, the voice of the people against the blackmailing power of the international financial elites might now have become precedent for other countries in similar situations.
What the bankers seem to fear above all things is a direct democracy in financial matters.

And no doubt that´s quite a reasonable fear, for such a democracy would lead to more and more people getting informed about financial matters and the money-creation process itself.
The knowledge about this process coupled with the instruments of a direct democracy would lead eventually and without any doubt to a monetary reform and a loss of power for the international bankers.

The Icelandic government officials were doubtless under great pressure not to support this kind of a direct democracy here, but they were also surely under the very same pressure not to tell the Icelandic people the truth. And that´s why few outside the government could understand their attitude.

If there were early elections the opposition parties would most likely win now, although the largest opposition party, the Independence Party, was the one which is actually responsible for the whole mess of the Icelandic financial collapse. Their government first privatized the banks and then did not regulate those private banks in a sufficient manner,which would have prevented the bank´s limitless expansion abroad and by doing so taking enormous risks for the Icelandic economy.

Before 2003 the Icelandic banks had been in public hands(either belonging to the national state, or local communities or public organizations like the public pension funds). No needless risks were taken this way. The banks´activities stayed inside the country and in this way all revenues from interests were recycled back into the Icelandic economy. And with this revenue the whole of the Icelandic public infrastructure was financed, propelling the country from one of the most under-developed countries in Europe before 1944 to one of the most developed ones, enjoying one of the highest living-standards for the general population (not just for the rich)

But then the Icelandic government was persuaded by British “advisers”(mainly from the ultra-large British investment-bank HSBC) to privatize the banks and allow them to grow beyond Icelandic borders. This, according to the “advisers”, would bring foreign investment money into the country by which Iceland could then expand its hydro-electric energy market and create jobs in the more remote areas of the country.
In the last few decades more and more people had moved from there to Reykjavik and the surrounding population centers for lack of working opportunities elsewhere.

The Icelandic government-members like most other Icelanders were very trusting and naive people, and so they trusted their foreign “advisers”.

John Perkins called “advisers” like this “economic hitmen” – and he must know, since he used to be one of them.
I doubt that even a single Icelander (besides this blogger) had ever read the book before the banking collapse. And even, if anybody actually had read it, like me for instance, she wouldn´t see any connection between what Perkins described and the situation here. After all, we weren´t a developing country. “They” wouldn´t do this to us, would they?

Many have read the book in the mean-time.
Perkins actually came to Iceland telling us, that what had hit the country looked to him suspiciously like just such “economic hitmen”. And finally we realized that we all, the people of the developed as well as of the developing countries are basically sitting in the same boat, a boat that´s sinking because it has been torpedoed.

Well, to make a long story short, the government privatized the banks, foreign “investors” poured money into the banks allowing them to expand. And then, although the domestic economy was still booming and expanding, including export the growing industries, the “investors” pulled the plug and speculated against the Icelandic Krona in the beginning of 2008.

With the loss of value of the Krona the Icelandic banks became under-funded. Until September 2008 the Icelandic bankers tried to mend the holes with crooked and not so crooked methods. The director of the central bank ran around all of Europe and America begging and pleading to get some loans from other central banks. No luck there.
And when then in September Lehman Brothers went under, the Icelandic bankers could no longer refinance their old loans from other banks.

To ward off total financial collapse the government had no choice but to re-nationalize the banks, split off the domestic from the foreign parts and put the foreign parts of the banks through bankruptcy procedure.

This lead to Iceland being put on the list of “terrorism supporting countries” and brought on a near total international boycott of all financial transactions with the country.
When Icelandic retailers announced that they were about to run out of food, the Icelandic government, which then was still under leadership of the Independence Party, caved in and signed an agreement that the Icelandic state, the Icelandic taxpayer would “honor the obligations” of the private banks.
And, if Iceland could not make the payments in time, all of Iceland´s resources and infrastructure would then be liable to foreclosure, being taken over by the international bankers.
It was blackmail short and simple.

Since then, due to the collapse of the Krona, many companies have buckled under the burden of foreign debts and already have been sold to foreigners. Other companies went under altogether.

Of the three banks the government had renationalized in 2008 two have been re-privatized already.
While this move was propagated by the media as “good for Iceland”, since now foreign money would be streaming back into the country, the reality is that those banks have just been handed over to the foreign creditors of the old banks to pacify “the international community” (code-word for the international bankers, the IMF, the World Bank and the BIS).
Landsbanki is the only bank still in state-ownership, since it is settled with the Ice-save debts.

Iceland as a nation has lost most of it´s economic independence already. Many Icelanders are up to their necks in debts (debts which had once been reasonably low and easily payable before the attack on the Krona and it´s collapse).
Taxes have been raised by nearly 30% while spending for health and education services have been cut severely as well as for infra-structure projects.

For weeks now, the government has been in new negotiations with the British and Dutch government over new payment conditions mainly in an attempt to preempt the referendum and make it obsolete.
No agreement has been reached so far.
Legally seen, however, according to European law the Icelandic nation does not even owe those Ice-save debts at all. If we could find an European court that wasn´t acting as a kangaroo of the international bankers, Iceland would most likely win the case against the British and Dutch governments.

Alain Liepitz, French member of the European Parliament, member of the International Trade Commission and expert on the European banking laws wrote in an article (and stated on Icelandic TV):


….To open branches in the European Union the Icelandic banks had to meet the requirements of European directive 94/19 which requires each country to set up a “Deposit Guarantee System” (DGS). This is a national insurance fund which is financed by levies taken off deposits and designed to guarantee deposits of up to a maximum of 20,000 euro per person. The Icelandic DGS only covered some of the banks’ liabilities but it was considered that all of the banks could not lose all of their assets all at the same time.

Was the Icelandic DGS particularly weak? Was it, perhaps, especially poorly supervised? This was not the view of Richard Portes, head of the Royal Economic Society. In an official report dating from 2007 he wrote:

« The institutional and regulatory framework appears highly advanced and stable. Iceland fully implements the directives of the European Union’s Financial Services Action Plan (unlike some EU member states) »

Such was the “well informed wisdom” of the financial community, an assessment offered to the public by one of its most prestigious representatives, Nobel-worthy and British.

We know today that this international community, its representatives and its 3 rating agencies got it completely wrong. In September 2008 the world economy of debt collapsed. The refusal of the US government to bail out the Lehman Brothers bank made the situation worse. If the State didn’t intervene all of the banks would go under. And so every State in the world rushed to the rescue of their big banks, and to avoid the onset of panic, extended the deposit guarantee with sovereign power at home, that is, both to nationals and to residents.

The Bank may well be a collection of private institutions but it is also a “Service of General Economic Interest” which means that if it doesn’t work then currency, a public good par excellence, won’t circulate.

Iceland followed suit and was one of the first to do so. Was its DGS too insignificant to genuinely guarantee deposits? The Icelandic government extended its guarantee to home depositors but it didn’t have the means to rescue its banks with massive loans like the big countries. The British government then took two major steps: it seized Icelandic financial assets and offered its guarantee to Icesave’s British depositors. The Dutch government did likewise.

First question: Were these three governments legally obliged to extend their guarantee over and above what the DGS could pay to cover the deposits in the Icesave accounts? On this point the European directive governing the issue (94/19/EC) is perfectly clear: no!

« This Directive may not result in the Member States’ or their competent authorities’ being made liable in respect of depositors if they have ensured that one DGS (…) have been introduced and officially recognized. »

And it is easy to understand why. A DGS is an insurance scheme between banks which protects debts into which banks contract with their depositors and which is funded by contributions from these contracts themselves. To say in advance that public authorities would “cover” incidents like a free open-ended insurance policy would first of all reward banks for their careless behavior (a paradox called “moral hazard”).
It would also reward the bigger countries who are better able to cover their banks with taxpayers’ money (not just depositors’ money). That would be contrary to European norm of competitive “level playing field”.
Finally and above all, using taxpayers’ money to pay a private debt to which taxpayers themselves are not a party constitutes a serious attack on private property: the revolutions of Modern Times (English, Dutch and French) sought to put such serious decisions strictly within the control of the citizens.

I was shadow reporter for the Greens in the European Parliament at the time of the two amending directives to 94/19/EC. At no time was there ever any question of going back on the fundamental principle of public non responsibility for private debts.

The Icelandic, British and Dutch governments were obviously exercising their right when supplementing the insufficiencies of local DGSs. Once the crisis had started, it was indeed their duty to do so for reasons of public order and social and economic stability. But it was a sovereign decision, subject to their rules of internal democracy…..

….the British and Dutch – had had their doubts about Icesave and had considered that the deposits of their residents were more effectively guaranteed at home than in Iceland, what did they have the right to do as Icesave’s “host countries” ?

The answer is set out in directive 94/19 and is specifically dealt with in the guidelines in its Annex II.

”Host Member State schemes will be entitled to charge branches for supplementary cover on an appropriate basis which takes into account the guarantee funded by the home Member State scheme. To facilitate charging, the host Member State scheme will be entitled to assume that its liability will in all circumstances be limited to the excess of the guarantee it has offered over the guarantee offered by the home Member State.”

In short, the host country can offer supplementary cover to the guarantee and to do this is entitled to require a local branch to make contributions in the host country in addition to the payments made in the country of the bank’s headquarters. In reality the British and Dutch authorities never wished to limit Icesave’s capacity to offer particularly high rates of interest to their depositors but by taking more risks. These authorities, therefore, had a duty to warn these depositors and bore the civil responsibility of not having imposed the complementary measures envisaged by the directive (an excellent way of limiting the off-shore perverse risks!)

As rapporteur in 2001-2002 for the directive on “Prudential supervision of financial conglomerates,” I had the European Parliament adopt a generalisation of this “principle of main host country” by stating that the authorities responsible for monitoring a transnational group were automatically those of the host country of the main activity within EU. In the case of Icesave: Great Britain, which was right to reimburse its depositors but wrong to subsequently turn against Iceland….

But I suspect in the naive “availability to repay” of many Icelanders and their representatives, a sort of guilt: like a divine punishment after years of the delusion of easy money. I say calmly to this strong and courageous people: You are neither legally responsible nor morally guilty for the base acts of internationalised finance.

China is being threatened by the United States says Michel Chossudovsky

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United States-China relations are on the rocks recently, China says that they have been seriously disrupted. Essentially, China feels that it is being threatened by the United States and this has been mounting since 1999. The threats are coming in the form of diplomacy, however Michel Chossudovsky says that the United States also has missiles pointed at Chinese cities.

Canadian dollar likely to trump US greenback: experts

OTTAWA (AFP) – The Canadian dollar, or loonie as it is affectionately called here, is likely to soar above parity with the US greenback this year, experts at a Canadian bank said Wednesday.

Canadian Imperial Bank of Canada (CIBC) chief economist Avery Shenfeld said the Canadian dollar had already gained several cents in recent weeks as the market firms up expectations of an interest rate hike in July.

If as expected, the central bank "is out in front of the US Federal Reserve by a couple of quarters" in raising interest rates, the Canadian dollar could reach 1.02 dollars versus the US dollar by September, before dipping back to 0.97 dollars by year end," Shenfeld said.

The Bank of Canada has maintained its key lending rate at a historic low of 0.25 percent since April 2009 to help bolster a fragile economic recovery, but is widely expected to review its position mid-year.

CIBC said other factors were also aligning to push up the value of Canada's currency such as increased demand for oil, minerals and fertilizers; resurgent capital markets; and global debt fears.

"If the capital markets finally get an appetite for M&A (mergers and acquisitions) then Canada could be one of the first places to see the benefit of foreign inflows," said CIBC analyst Zafar Bhatti.

Or "if the investing world starts looking for a place to park capital in the wake of deteriorating sovereign credits then Canada would look very attractive," Bhatti said in a report.

Since the beginning of the year, the Canadian dollar has appreciated 2.5 percent against the US dollar and more than seven percent against the euro.

The loonie last achieved parity with the US greenback in 2008, and previously hit a record 1.10 dollars in 2007.

Budget deficit sets record in February

WASHINGTON — The government ran up the largest monthly deficit in history in February, keeping the flood of red ink on track to top last year's record for the full year.

The Treasury Department said Wednesday that the February deficit totaled $220.9 billion, 14 percent higher than the previous record set in February of last year.

The deficit through the first five months of this budget year totals $651.6 billion, 10.5 percent higher than a year ago.

The Obama administration is projecting that the deficit for the 2010 budget year will hit an all-time high of $1.56 trillion, surpassing last year's $1.4 trillion total. The administration is forecasting that the deficit will remain above $1 trillion in 2011, giving the country thrree straight years of $1 trillion-plus deficits.

The administration says the huge deficits are necessary to get the country out of the deepest recession since the 1930s. But Republicans have attacked the stimulus spending as wasteful and a failure at the primary objective of lowering unemployment.

The administration defends the economic stimulus bill that Congress passed in February 2009 with a pricetag at the time of $787 billion as the right medicine to get the economy back on its feet. President Barack Obama has said even more is needed to battle an unemployment rate that remained stuck in February at 9.7 percent.

The White House says that job creation will remain a top priority, hoping to convince voters that Obama did not spend too much time during his first year in office trying to get Congress to pass health care reform.

The government's monthly budget report showed the record $220.9 billion deficit for February reflected outlays of $328.4 billion and revenues of $107.5 billion. The February receipts marked the first time that revenues are up compared with the same month a year ago since April 2008. Revenues had fallen for 21 straight months as the recession cut into both individual and corporate income tax payments.

Deficits normally shoot up in February because it is a month when the government makes large refund payments to individuals and corporations as part of the tax filing process. Those payments were boosted this year by various tax credits that were expanded or added as part of the government's stimulus efforts including the "Making Work Pay" tax credit and the first-time home buyers tax credit.

Through the first five months of the budget year, government revenues totaled $800.5 billion, down 7 percent from a year ago, while outlays totaled $1.45 trillion, up a slight 0.1 percent from a year ago.

The deficit of $651.6 billion through February is up by 10.5 percent from the $589.8 billion deficit run up during the first five months of the 2009 budget year. The government's budget year begins on Oct. 1.

The budget that Obama sent to Congress in February projects that the deficits over the next decade will total $8.53 trillion. But the Congressional Budget Office last week put the 10-year total even higher at $9.8 trillion. Part of the reason for the $1.2 trillion difference is that the CBO is projecting slower economic growth and thus less tax revenues than the administration over the next decade.

The administration has maintained that the country must run large budget deficits until the economy has begun to grow at a sustainable pace that is bringing the unemployment rate down. Only then, the administration says, should the government focus on getting control of the deficits.

Obama has created by executive order an 18-member fiscal reform commission that has been charged with coming up with a plan to shrink the deficit to 3 percent of the economy within five years. The plan is scheduled to be unveiled in December, after the midterm congressional elections.

With the economy so weak, the interest rates that the government has to finance the flood of red ink have remained low. However, economists are worried that the favorable outlook on interest rates could change quickly if investors, including foreign investors, start to worry about the government's commitment to restraining future deficits. China is the largest foreign holder of U.S. Treasury securities.

Through the first five months of this budget year, net interest payments totaled $86.5 billion, up 15.3 percent from a year ago.

In its report last week, the CBO predicted that the government debt held by investors would climb from $7.5 trillion at the end of last year to $20.3 trillion in 2020. CBO forecast that interest payments would more than quadruple from a projected $209 billion this year to $916 billion annually by the end of the decade.

Big Miami-Dade hospital system nears insolvency

MIAMI (AP) -- The city's major hospital network, which runs Miami's only round-the-clock trauma center and is a safety net for the poor and uninsured, is running out of money and could close, a predicament that illustrates the precarious financial state of many hospitals around the country.

The Jackson Health System will have little cash on hand by the end of March if it does not receive a $67 million advance from the county, said Marcos Lapciuc, treasurer of the Public Health Trust, the institution's governing board.

"We are very close, if not already in, a health care death spiral," Chief Operating Officer David Small said.

Jackson could run out of cash and shut by May or sooner, Lapciuc said, and the county mayor said officials were preparing to advance the hospital some money.

"Sadly, it's not all that unique," Larry S. Gage, president of the National Association of Public Hospitals & Health System, said of financial difficulties like the one Jackson is facing.

Millions of people across the country have lost jobs and the insurance that goes with them over the last two years. Hospitals, including in the Jackson network, are dealing with more uninsured patients, at the same time they are facing cuts in state and county funding. That has translated into cuts in staff, services and administrative costs at many hospitals across the nation. The financial woes come as President Barack Obama continues to push for a stalled health care overhaul.

Gage pointed to other examples of extreme financial problems. He said the New York City Health and Hospitals Corporation which, depending on state legislation, is looking at anywhere from half-billion to a billion dollars in deficits soon.

Several major California county systems could have deficits in the hundreds of millions, Gage said.

"Obviously the net effect for some patients will be if a facility or services closes down at a particular location you will have to go somewhere else," Gage said.

Jackson Health system is considering cutting 4,500 jobs and closing two hospitals, which have about 500 beds combined. Lapciuc said supplies are currently adequate but, "vendors sooner or later are going to start being very wary." Besides the county, Jackson is looking to state and federal sources for help.

Jackson Memorial is the only Level One trauma center, capable of handling the most severe medical emergencies, set up to provide 24-hour emergency care in Miami-Dade, the most populous county in Florida and the 8th largest in the nation.

Jackson sought to reassure patients.

"Although Jackson is in the midst of a financial crisis, we want to assure all patients -- past, current and future -- that our hospitals, emergency rooms and clinics throughout Miami-Dade County are open for business," a hospital statement said.

Miami-Dade Mayor Carlos Alvarez wrote in a letter to the hospital and board executives that he has "always been willing to discuss possible advances of funds" and that the county manager is preparing such an advance.

Lapciuc said a flood in indigent care as a result of the recession and not enough public revenues to cover the costs helped lead to the crisis at Jackson.

He said the institution is providing approximately $600 million in charity care this year, while receiving about $400 million in public funds -- a $200 million charity health care shortfall.

Caroline Steinberg, vice president for trends analysis with the American Hospital Association, said that nationwide the proportion of emergency department patients with no insurance is on the rise.

"And many hospitals are seeing more patients covered by Medicaid and other public programs," she said. "And that's concerning because those programs tend to pay significantly less than the cost of care."

Steinberg said nine out of 10 hospitals nationwide have cut back, with more than half reducing staff; eight in 10 have cut administrative expenses; and one in five is reducing services.

"The economy is really taking its toll on hospitals," Steinberg said.

Ellen Kugler, executive director of the National Association of Urban Hospitals, said that when a large safety net hospital closes it can have a domino effect -- putting increased pressure on surrounding medical centers.

"Those patients aren't going to have better insurance or more money that they'll bring with them to a new hospital instead," she said.

Kugler said Obama's health care proposal would help in insuring more individuals, but expressed concern that programs aimed at safety net hospitals will be cut in the long term.