Judge orders Snyder to withdraw bankruptcy filing, saying it's unconstitutional

A Michigan judge declared that Detroit's Chapter 9 bankruptcy filing violated the state's constitution and ordered Gov. Rick Snyder to withdraw it, and the state countered, asking the Michigan Court of Appeals to set aside the ruling.
In Lansing today, Ingham County Circuit Court Judge Rosemarie E. Aquilina criticized Snyder for rushing the filing into court Thursday before she could rule on a bid by city workers and their pension funds to consider an emergency request to block the filing.
"I'm finding the actions that were taken in filing bankruptcy as overreaching and unconstitutional," she said.
She ordered the governor to direct Detroit Emergency Manager Kevyn Orr to immediately withdraw the bankruptcy petition. She also said he cannot authorize further filings that would impair or diminish public pension benefits.
Attorney General Bill Schuette applied for permission to appeal the decisions. He also filed a motion to suspend Aquilina’s rulings pending appeal, Joy Yearout, a spokeswoman for the attorney general, said in an emailed statement.
Kenneth Klee, the bankruptcy lawyer who spearheaded the bankruptcy restructuring of Jefferson County, Ala., said a state judge can’t force Detroit out of federal bankruptcy, even if Snyder agrees to try to withdraw the petition.
Once Detroit city filed the bankruptcy petition, it came under federal jurisdiction and the case cannot be withdrawn, even by Snyder, said Klee, of Klee Tuchin Bogdanoff & Stern LLP in Los Angeles. A federal judge would have to agree to dismiss the case, according to Klee.
“If the governor changes his mind, it doesn’t matter,” he said. “Not only can’t she do that, but her order may be in contempt of a federal court, and a federal judge can put her in jail.”
Current and retired city workers had asked the Ingham court to issue a temporary restraining order to keep the city of Detroit from filing for bankruptcy. The bankruptcy petition was filed minutes before Aquilina was able to rule.
"The plaintiffs should not have been blindsided in this court," said William Wertheimer, a lawyer representing some of the plaintiffs.
Brian Devlin, a Michigan assistant attorney general, argued that no harm has been done to the plaintiffs.
Aquilina said harm was "imminent."
"You understand bankruptcy court," she said. "That's why you ran there yesterday, not slowly, but in your running shoes."
Devlin and Thomas Quasarano, also a Michigan assistant attorney general, declined to comment following the hearing, referring questions to the media office. A media representative for the Michigan attorney general's office wasn't immediately available to comment.
City pension plans sued Snyder and Orr on Thursday, contending a bankruptcy filing would conflict with a provision of the Michigan Constitution that bars any government in the state from reducing pension benefits. Two similar lawsuits were filed in the same state court earlier this month on behalf of individual retirees and current workers.
The retirement systems sought an emergency restraining order Thursday to stop the bankruptcy. The city filed for bankruptcy moments before Aquilina could rule. Aquilina said she otherwise would have issued an order temporarily blocking the bankruptcy, said attorney John Canzano, a lawyer for one current Detroit employee and one retiree.
Wertheimer, of Bingham Farms-based Law Office of William A. Wertheimer, representing five pension participants, said he expects the state will appeal Aquilina's ruling to the Michigan Court of Appeals, and that the unions will likely challenge Orr's authority to file a petition under the provisions of Chapter 9 – but that will likely proceed through a different attorney.
"The governor is on notice now about what the judge has done, and we're hoping he will do the right thing and reconsider the authorization in light of the order," Wertheimer said.
The retirees and workers will seek a declaration on whether the constitution can be applied to block reductions in pension benefits, Canzano said in an interview with Bloomberg. They may also seek to get the bankruptcy filing withdrawn, he said.
Federal bankruptcy petitions normally freeze any litigation affecting assets of the petitioner. The federal judge in charge of the case will have to decide whether to honor the limits of the state constitution or the county court ruling.
The city employee pension plans said in a joint statement that they were "dismayed" by the bankruptcy.
"We are surprised and disappointed that the emergency manager would file a Chapter 9 petition before he has had substantial negotiations with the retirement systems and other significant creditor constituencies," Robert Gordon, an attorney for the plans, said in the statement.
Orr said Thursday that he "bent over backward" in talks with creditors.
Crain's Detroit Business reporter Chad Halcom contributed to this report.

Protesters attack Greek health minister during hospital visit

Adonis Georgiadis

Photo: EPA

Greece's Health Minister Adonis Georgiadis was shoved and hit by protesters Friday during an official visit to a hospital, just as the government is preparing radical changes to the health sector.

During a scheduled visit to Athens' public Attiko hospital, Georgiadis was assaulted by disgruntled hospital staff and other protesters, the state-run Athens News Agency reported.

"I was pushed and hit across the face," the minister told To Vima radio. He was not hurt in the incident.

Following the intervention of the police, Georgiadis was able to complete the tour and talk to doctors and hospital staff as planned.

Prior to the visit, hospital employees had issued a statement calling the minister a "persona non grata," according to the agency.

Georgiadis was appointed health minister in June, following a cabinet reshuffle.

A former member of extreme right party Laos, he joined conservative Prime Minister Antonis Samaras's New Democracy last year.

Some of the attackers reportedly shouted slogans targeting his extreme right political background.

"We condemn this unacceptable attack," government spokesman Simos Kedikoglou told parliament.

Earlier this week, Georgiadis told journalists the government intends to turn at least five small Athens public hospitals into health centres that will focus on chronic illnesses.

The change will result in the transfer of many employees to bigger hospitals, which according to the ministry suffer from staff shortages.

The government also intends to carry out mergers, as part of a broader restructuring of the health sector.

Greece is about to implement a wider redeployment scheme for civil servants, after lawmakers narrowly approved a bill of sweeping reforms on Thursday, changes necessary for the indebted country to receive the next tranche of its EU-IMF rescue loans.

The scheme gives thousands of civil servants - including teachers and municipal police - eight months on reduced salaries to find new posts elsewhere or accept those offered to them.

Otherwise, they will lose their jobs.

Public sector employees have protested against the redeployment plans all week.

Voice of Russia, AFP

The Insider’s Economic Dictionary: The Antidote to Euphemism

The fallacies that lurk in words are the quicksands of theory; and as the conduct of nations is built on theory, the correction of word-fallacies is the never-ending labor of Science. … the party in this country, one of whose great aims was, at one time, the perpetuation of slavery, owed much of its popular vote to the name Democracy. – S. Dana Horton, Silver and Gold (1895)
Now, it is clear that the decline of a language must ultimately have political and economic causes . . . It becomes ugly and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier for us to have foolish thoughts. The point is that the process is reversible. . . . If one gets rid of these habits one can think more clearly, and to think clearly is a necessary first step toward political regeneration. – George Orwell, “Politics and the English Language” (1946)
You can fool some of the people all of the time. Those are the ones you should concentrate on.  – George W. Bush, talking about The People.
Unlike psychological terminology, which consists mainly of terms of invective (try to think of a desirable personality complex), today’s economic vocabulary is euphemistic. One rarely hears the terms rentier or usury that played so central a role in the debates of past centuries.
Classical economists defined rent as unearned income, a property claim that did not reflect a corresponding expenditure of labor, which was the sole source of value. But as our postindustrial society has evolved into a “service economy,” the national income and product accounts count interest and rent as a product – an output of services. Landlords thus are depicted as providing a useful service, not merely charging access fees for sites created by nature and given value by the community’s overall prosperity. The classical value judgment that deemed some business activities unproductive – or even “sterile,” as France’s Physiocrats put it – has been rejected by today’s value-free economics.

As advertisers well know, naming a product shapes how it is perceived. And as Voltaire noted in Candide, optimism “is the mania of insisting that all is well when one is in a terrible state.” Nowhere is this more a political act than in the realm of selling economic policy. What Orwell wrote about the ideological coloration of language in his day applies especially to the vocabulary with which economics students are indoctrinated and formal reports written. Instead of reflecting reality, their jargon often dulls the mind’s critical faculties by diverting attention away from the actual dynamics at work. Depicting debt as wealth, today’s doublethink calls higher access prices for homebuyers “wealth creation.” The economy’s lapse into a rent-and-usury system is welcomed as progress into a post-industrial service society.
Just as history is written by the victors, so politicians, journalists and academic ideologues coin the economic vocabulary with an eye to molding popular opinion on behalf of their constituencies. Thirteenth-century Churchmen replaced the unpleasant word “usury” by “interest,” a term bearing less negative connotations. More recently, predatory policies have been called “reforms” and regressive tax policies called progressive even when their objective is to reverse centuries of true reform.
Denis Diderot (1713-1784), a member of the French Enlightenment, organized the writing of the Encyclopédie as a revolutionary project. It contained a map of human knowledge and included an entry defining the Enlightenment’s political program: “The good of the people must be the great purpose of government. By the laws of nature and of reason, the governors are invested with power to that end. And the greatest good of the people is liberty. It is to the state what health is to the individual.”
But what is “liberty”? America’s Liberty Bell is inscribed with a verse from Leviticus 25: “Proclaim liberty throughout all the land, and to the inhabitants thereof.” The biblical Hebrew term was d’r’r (deror), cognate to Babylonian andurarum used by rulers to annul the population’s personal and agrarian debts, liberate bond-servants and restore self-support lands to citizens who had forfeited them to foreclosing creditors or sold them under distress conditions. These royal Babylonian proclamations evolved into the Jubilee Year that Judaism placed at the center of its religion in an epoch when rulers had come to protect rather than check the power of creditors and absentee landlords.
Liberty in today’s world has come to connote freedom for predators to exploit the economy at large, in contrast to the Enlightenment’s idea of freedom from the rentiers. A free market is said to be one in which government regulation is dismantled, “free” of public protection of consumers. Such protection has been re-christened “interference” and characterized as the Road to Serfdom. Diderot’s “greatest good of the people” has come to be defined as wealth and output that accrues mainly to the rentiers whom France’s Physiocrats and fellow reformers set out to tax. Today, the taxation of landed property and finance is deemed an encroachment on the liberty of wealth.
The Enlightenment and classical political economy advocated freedom from taxation by debt-burdened governments, and sought to protect populations from having to pay prices that included a non-labor rent element. The vested interests railed against public regulation along these lines, and against public ownership of natural monopolies and banking systems.
Confucius wrote that social disorder begins with the failure to call things by their appropriate names. The first step to reform a world that had become malstructured hence was “rectification of the names.” To Confucius, this meant restoring the original meaning of words and concepts. Today, a similar restoration hardly could do better than reviving the vocabulary of classical political economy, because our economic terminology is in obvious need of such renovation. Its vocabulary has diverged from reality in proportion to the extent to which the phenomena being described affect special interests. The term “free trade,” for instance, was countered by “protectionism” and more recently by “fair trade.” The upshot is that a different language exists between critics and defenders of wealth, imperialism and finance.
Realizing that naming a phenomenon tends to define it in the public mind, rhetoricians and demagogues seek to co-opt the vocabulary on behalf of their constituencies. The result is that economic terminology consists largely of the residuum of euphemisms generated during the course of economic debates of which most of today’s students are only taught one side. The vocabulary of rentiers depicts them as productive and useful rather than dispensable, and their income – in fact, all income indiscriminately – as reflecting, by definition, the value of the property and credit services they provide. By contrast, John Stuart Mill defined economic rent as the “unearned income” that property owners are able to make “in their sleep.” Depicting this revenue as “service income” implies that it reflects real output which society needs rather than being an economically unnecessary cost.
As Ivan Illich wryly observed, “School is the advertising agency which makes you believe that you need the society as it is.” H. G. Wells voiced much a similar idea in quipping that “Human history becomes more and more a race between education and catastrophe.” Universities have followed “free-market” economists in taking refuge in a mathematical mode of expression, aping the natural sciences’ use of higher calculus as a means to conceal the over-simplifications of their assumptions. One might say that the more complex the math, the more simplistic and banal the relationships being drawn tend to be. The aim is to imbue mathematical symbolism with the sanctifying role that Orwell observed was once afforded by Latin. The economic curriculum effectively has been turned into an advertisement for the rentier claims – the economic overhead of rent and interest payments – almost as a “law of nature” as Diderot and his contemporaries had put it. The law of nature thus turns out to be as prone to economic self-interest as are the laws of modern courts and similar forums.
If your aim is to exploit the working class, it is smart public relations to call your program “labor capitalism” as General Pinochet did in Chile, or “popular capitalism” as Margaret Thatcher did in Britain to describe their policies of breaking labor unions, withholding wages and turning them over to the financial grupos (in Chile) or money managers (in Britain) to use for financial speculation rather than new investment. The euphemistic terminology used to popularize these policies helped buy time by confusing and co-opting some of the injured parties.
The economic vocabulary shapes the semantics of how reality is perceived, and conversely, as Orwell noted, “the decline of a language must ultimately have political and economic causes.” “Protecting savings” and “making savers whole” have become euphemisms for downsizing the economy and sacrificing new direct investment in order to preserve the fortunes of rentiers. While psychologists speak of well-adjusted individuals, economists may ask whether the economy’s debts should be adjusted to the ability to pay, or whether growth and living standards should be “adjusted” (that is, sacrificed) to preserve the value of creditor claims. One may ask similar questions regarding the terms “democracy,” “value,” and “efficiency,” and reality itself.
Ultimately at issue is whether what economic jargon calls the “real” economy of production and consumption more real than the claims of finance and property. How a society defines economic terms and relationships will determine who controls it. Terminology serves to “frame” the way in which people perceive economic relationships. What is unsaid or intellectually bypassed therefore is often as important as what is said. Economic theories that focus only on the exchange of goods and services already produced, without discussing the distribution and control over wealth and its income independently of production, will be diverted from examining what really is most important in determining the economic present and future.
Adam Smith (1723-90): Campaigner against public debts and the wars that gave birth to the taxes to carry their interest charges. In a typical if bitter irony of history, Smith’s opposition to war taxes has led neoliberal economists to appropriate him as the patron saint of free markets. Yet he accused landlords of reaping where they had not sown, and business men of forming predatory schemes wherever they were able. The moral is that if one is to select a patron saint, it is wise to co-opt a well-known icon so as to forestall opponents from citing his authority. (He criticized Dutch finance and applied the term Invisible Hand to the workings of laissez faire.)
Addictive demand: Neoclassical price theory is based on the assumption of diminishing marginal utility: The more food, clothes or other consumption goods one has, the less pleasure each additional unit gives. But as the ancients knew, this principle is not true of wealth, especially of money. The more property one has, the more one wants. Wealth is addictive, sucking its possessors into a compulsive drive to accumulate. (See Hubris.)
Agio: Medieval Europe banned usury, but legalistic-minded Churchmen rationalized the practice of charging it in the form of a foreign-exchange fee. Money was borrowed in one country or currency, to be paid back in another at an exchange-rate which incorporated the usury charge in the guise of a money-changing fee (agio). The most egregious example was the “dry” exchange in which no goods actually were imported or exported. This agio loophole helped channel European banking along the lines of short-term trade financing and discounting bills of exchange.
Asset-price inflation: A policy in which the banking system recycles savings and extends new credit to finance the purchase of real estate, stocks and bonds so as to create windfall gains (euphemized as capital gains). The financial boom that resulted from steering pension-plan reserves into the stock market has inspired proposals to privatize Social Security’s wage withholding in a similar way (see Forced Saving, Labor Capitalism and Pension-Fund Capitalism). Meanwhile, property prices are inflated by steering mortgage credit into real estate, lowering interest rates so that higher mortgage debts can be carried, and loosening the terms of mortgage lending, reducing the down payments needed yet minimizing the repayment of principle by stretching out the loan maturity. Fiscal policy contributes to this phenomenon by shifting taxes off of finance and property onto labor (see Tax Shift).
Higher asset prices often are welcomed as increasing net worth (and hence the balance sheet of wealth), as long as the rise in market prices outpaces the growth of debt. But rising property prices increase living costs by panicking home buyers to buy now in order to avoid seeing the rise in property prices outstrip wage gains.
Asset-price inflation goes hand in hand with debt deflation and aggravates polarization as higher prices for homes oblige families to go further into debt. This diverts more income to the financial sector to channel into real estate, as well as into the stock and bond markets.
An inner contradiction of this process occurs as higher price/earnings ratios reduce the income yields on financial securities, while higher price/rent ratios for real estate reduces the ability of rental income to carry the interest and related financial charges. This leads to pressure to reduce property taxes in order to alleviate the financial squeeze.

Asset stripping: Corporate raiders take over companies, cut back research and development spending and other lines of business that do not produce short-term returns, and downsize their labor force in order to make the remaining employees work harder to pick up the slack. This practice is euphemized as wealth creation when its effect is to improve reported earnings. This raises stock prices over the short term, but undercuts long-term growth in production and competitiveness. (See Free Market.)
International asset stripping occurs as the IMF and World Bank oblige governments to sell off the “crown jewels” of the public domain – mineral rights, public land and buildings, and enterprises long held in the public sector as natural monopolies – as a precondition for obtaining the credit needed to service their foreign debts and avoid currency destabilization. (See Conditionalities, Privatization and Washington Consensus.)
Upcoming – ‘B’ is for Bailout
Republished with permission from: Global Research

In Detroit Bankruptcy, It's the Poor Who Lose

A third of all square mileage in Detroit sits empty in a city beset with poverty (Photo: Flickr Creative Commons/Chris Tobins)The Detroit emergency manager’s filing of city bankruptcy Thursday sparked fears that the impoverished municipality will suffer an accelerated race down the path towards privatization and the erosion of public services that have already devastated its poor communities.
In the largest Chapter 9 bankruptcy case in US history, the move will allow the city to decimate benefits and pensions for city workers and retirees—the city’s ‘unsecured’ lenders— while gutting public services and diverting public dollars to pay off the big banks who own much of the city’s debt.
Unions charge that emergency manager Kevyn Orr—with the support of Michigan Governor Rick Snyder—rushed into bankruptcy to subvert democratic process and avoid the Michigan constitutional mandate requiring municipal governments to keep their word on pension contracts with retirees. American Federation of State, County and Municipal Employees president Lee Saunders declared in a statement released immediately after the decision:

Governor Snyder’s plan to suspend democracy, drive one of America’s largest cities into bankruptcy and deprive workers of their hard-earned retirement security, moved dangerously closer to reality today when without a single negotiation with unions, workers or retirees, Snyder authorized Detroit’s financial manager to file for bankruptcy.

The city’s emergency manager Kevyn Orr—appointed by Governor Rick Snyder last March—has already been blasted for advancing a Republican-led state takeover of city government and pushing a corporate agenda of privatization that further devastates Detroit’s poor.

The New Yorker reports that Michigan voters signaled their disapproval of bankruptcy filings for Detroit:

Last November, Michigan voters, fearing the possibility that Snyder would force bankruptcy upon Detroit, voted in a referendum to repeal the law that gave him the power to appoint an emergency manager such as Orr. Snyder subsequently used a lame-duck session of the G.O.P.-controlled state legislature to force through a new law giving him similar powers to those in the law that the voters had just struck down.

The unelected manager, who is a former corporate bankruptcy lawyer, wielded his near absolute ‘emergency’ powers since taking up his position to push forward plans to cut off poor neighborhoods from essential services and privatize transportation, streetlights, and even garbage pickup throughout the city. Nothing has been safe from his plan for rapid privatization: he was even considering selling off the city’s esteemed art museum.
Nearly 60 percent of Detroit children live in poverty and 33 percent of all land sits vacant in a city where more than 80 percent of all residents are black. Half of all streetlights are non-functional, and a majority of public parks have shut down.

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Report: 'Global Tax Chaos' Looms As Corporations Pillage the Globe

(Photo via Flickr / Dandelion Salad / Creative Commons License)The world is on the brink of “global tax chaos” says a report released by the OECD Friday, which warns that global corporations have become nearly stateless entities, avoiding taxation in rich and poor countries alike.
As the OECD states:

Inaction in this area would likely result in some governments losing corporate tax revenue, the emergence of competing sets of international standards and the replacement of the current consensus-based framework by unilateral measures which could lead to global tax chaos.

The OECD, who was asked by the G20 to take on the project of analyzing the current tax climate, says the “current weaknesses in the rules and the interaction of different tax rules leads to double non-taxation or less than single taxation.”
The report, Action Plan on Base Erosion and Profit Shifting, also notes that the “rise of the digital economy” has confused the issue of tax jurisdiction—as to where corporations should be taxed for virtual profiteering.

However, although the report makes several suggestions for reform including the construction of an international and “multilateral” framework for corporate taxation that ensures “taxable profits cannot be artificially shifted through the transfer of intangibles (eg patents or copyrights), risks or capital, away from countries where the value is created,” global tax watchdogs say the OECD’s suggestions are still far from adequate.
“The OECD has done little to dispel its reputation as the ‘rich men’s club’ by effectively ruling out the active participation of developing countries in shaping the tax reform agenda,” said the Financial Transparency Coalition (FTC), an umbrella group including charities such as Christian Aid, Global Witness, Global Financial Integrity, Tax Justice Network and Transparency International.
The group maintains that developing countries’ “communication channels” with the OECD’s processes are restricted in comparison to more wealthy nations and therefore any reform processes going forward may not benefit poorer nations as greatly as richer ones.
“Restricting developing country participation…should not be confused for equal participation in the OECD’s decision-making process,” the FTC stated. “The UN Tax Committee in particular needs to be strengthened to participate more fully as representative of a broader group of countries.”
Likewise, as the OECD’s recommendations work to “patch holes” within current international tax code, the Tax Justice Network said the plan is not legally binding, fails to provide a more drastic tax-code overhaul and will be “fraught with political obstacles.”
Professor Sol Picciotto, Senior Adviser to the Tax Justice Network, said:

The OECD has missed this big opportunity to crack open the door to the big reform that the world’s citizens need. It is still open to countries to adopt their own versions of worldwide taxation of multinationals, and for other organizations such as the United Nations to take a lead in developing an effective worldwide system.

“In poor nations we are largely failing to capture tax revenue from major international corporations which should be harnessed to ensure better social and economic opportunities for citizens,” said Alvin Mosioma, director of Tax Justice Network Africa. “This is why the current OECD reform process needs to include at its heart serious representation from developing nations rather than keeping them to the margins. That developing countries are kept out of this key process runs the real risk of further entrenching global inequality.”

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Republished with permission from: Common Dreams

Is America's Social Contract Broken?

As Voltaire observed, "No snowflake in an avalanche ever feels responsible." This is precisely how empires collapse.

Correspondent Kenneth D. recently made the case that the Social Contract in America is broken. Kenneth offered two links for context: Social Contract (Wikipedia) and OECD calls time on trickle down theory.

Here is Kenneth's commentary:

Society has been structured for a few centuries now such that we are expected to voluntarily give up some of our wealth to governing bodies, and in return they will “ honestly and prudently” govern for the betterment and cohesiveness of society, so that we can collectively live in peace with each other. That is the theory of the Social Contract. 

As I talk with friends and clients, there is rising anger at how the resources we all “voluntarily” turn over to governments are being squandered, wasted, fraudulently re-allocated, and that a ruling, governing, elitist class is rapidly emerging (Hunger Games) that subsists extravagantly on these taxes, not to mention the entitlement class that also has come to depend on the largesse of the working class. 

The anger rises daily, and I am now constantly hearing from people about how they plan on “beating the system” i.e. dodging taxes, legally or illegally. People are rebelling in rising numbers, and it manifests itself in so many ways--working less or not at all, going to a cash economy, making up deductions that don’t exist, giving less to charity, cashing in on the entitlement culture, etc. etc. 

The trust in government to do the right thing is rapidly being eroded, so the Social Contract unravels more and more. How much longer can a society survive, living side by side, collectively, under such circumstances? I have started to study the concept of the Social Contract, to better understand the theory behind it, and why more and more people feel it is broken.

Thank you, Kenneth, for addressing a critical topic. I do not claim any expertise in social contract theory, but in broad brush we can delineate two implicit contracts: one between the citizenry and the state (government) and another between citizens.

We can distinguish between the two by considering a rural county fair. Most of the labor to stage the fair is volunteered by the citizenry for the good of their community and fellow citizens; they are not coerced to do so by the government, nor does the government levy taxes to pay its employees or contractors to stage the fair.

The social contract between citizens implicitly binds people to obeying traffic laws as a public good all benefit from, not because a police officer is on every street corner enforcing the letter of the law.

The social contract between the citizens and the state binds the government to maintaining civil liberties, social peace, defending the nation, and in the 20th century, providing social welfare for the disadvantaged, disabled and low-income elderly.

The focus of the above article on "trickle down economics" focuses on income inequality as a key metric of the Social Contract: rising income inequality is de facto evidence that the Social Contract is fraying or broken.

I think this misses the key distinction in the Social Contract between citizens and the state, which is the legitimacy of the process of wealth creation and the fairness of the playing field and the referees, i.e. that no one is above the law.

Few people begrudge legitimately earned wealth, for example, the top athlete, the pop star, the tech innovator, the canny entrepreneur, the best-selling author, etc. The source of these individual's wealth is transparent, and any citizen can decline to support this wealth creation by not paying money to see the athlete, not buying the author's books, not shopping at the entrepreneur's shops, etc.

The Social Contract is broken not by wealth inequality per se but by the illegitimate process of wealth acquisition, i.e. the state has tipped the scales in favor of the few behind closed doors and routinely ignores or bypasses the intent of the law even as the state claims to be following the narrower letter of the law.

By this definition, the Social Contract in America has been completely smashed.One sector after another is dominated by cartel-state partnerships that are forged and enforced in obscure legislation written by lobbyists. Once the laws have been riddled with loopholes and the regulators have been corrupted, "no one is above the law" has lost all meaning.

Those who violate the intent of the law while managing to conjure an apparent compliance with the letter of the law are shysters, scammers and thieves who exploit the intricate loopholes of the system, all the while parading their compliance as evidence the system is fair and just. In this way, the judicial system becomes part of the illegitimate process of wealth accumulation.

In America, political and financial Elites are above the intent of the law. Is bribery of politicos illegal? Supposedly it is, but in practice it is entirely and openly legal.

This is the norm in banana republics, whose ledgers are loaded with thousands of codes and regulations that are routinely ignored by those in power. In the Banana Republic of America, financial crimes go uninvestigated, unindicted and unpunished: banks and their management are essentially immune to prosecution because the crimes are complex (tsk, tsk, it's really too much trouble to investigate) and they're "too big to prosecute."

The rot has seeped from the financial-political Aristocracy to the lower reaches of the social order. The fury of those still working legitimate jobs and paying their taxes is grounded in a simple, obvious truth: America is now dominated by scammers, cheaters, grifters and those gaming the system, large and small, to increase their share of the swag.

Formidable armies of scammers and their enablers (attorneys and doctors) are pillaging workers compensation, temporary disability, insurance and Social Security Disability (the lifetime kind, your claim and condition are never monitored after your claim is approved), not to mention Medicare fraud and those gaming the wide array of welfare programs.

The honest taxpayer is a chump, a mark who foolishly ponies up the swag that's looted by the smart operators. Everyone knows that the vast majority of wealth accumulation in America flows not from transparent effort on a level playing field, but from persuading the Central State (the Federal government and the Federal Reserve) to enforce cartels and grant monopolistic favors such as tax shelters designed for a handful of firms and unlimited credit to private banks.

When scammers large and small live better than those creating value in the real economy, the Social Contract has ceased to exist. When the illegitimate process of wealth acquisition--a rigged playing field, a bought-off referee, and an Elite that's above the law by every practical measure--dominates the economy and the political structure, the Social Contract has been shattered, regardless of how much welfare largesse is distributed to buy the complicity of state dependents.

Once the chumps and marks realize there is no way they can ever escape their exploited banana-republic status as neofeudal debt-serfs, the scammers, cheats and grifters large and small will be at risk of losing their perquisites. The fantasy in America is that legitimate wealth creation is still possible despite the visible dominance of a corrupt, venal, self-absorbed, parasitic, predatory Aristocracy. Once that fantasy dies, so will the marks' support of the Aristocracy.

As Voltaire observed, "No snowflake in an avalanche ever feels responsible": every claim, every game of the system, every political favor purchased is "fair and legal," of course. This is precisely how empires collapse.

Kenneth D. also suggested that we are experiencing a Hegelian dialectic, an era where the wheel turns and opposing forces generate a new synthesis.

In broad brush, we can trace the dialectic from feudalism to capitalism to the present financialized cartel-state neofeudalism and next, to a synthesis built on the opposite of neofeudalism, which is decentralization, transparency, accountability, legitimacy and liberty. 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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Now banks face £1billion bill for mis-selling credit card fraud insurance

• Millions of customers will be paid compensation from a £1billion fund
• HSBC, Barclays, Santander, NatWest and Nationwide customers will be paid
• Follows an investigation into a company which sold so-called card and identity theft cover via banks between 2005 and 2011

Millions of bank customers mis-sold useless credit card theft insurance are set for payouts from a £1billion compensation fund.
Customers of HSBC, Barclays, Santander, NatWest and Nationwide will be paid compensations over the next few months.
It follows an investigation last year by the Financial Conduct Authority into CPP, a company which sold so-called card and identity theft cover via banks between 2005 and 2011.

Customers of HSBC, Barclays, Santander, NatWest and Nationwide will be paid compensations over the next few months

The City watchdog found many debit and credit card customers were duped into buying these policies which offered unnecessary cover if you lost your credit card or were victim to identity fraud.
These policies, which together cost £120 a year, promised cover of up to £100,000 if crooks went on a wild spending spree with a stolen card. But banks already cover customers for this for free.

 

And customers who thought they would be covered for up to £60,000 in losses suffered through identity theft later found out this was for legal or administration expenses – not the fraudulent debts run up.
But the cost of meeting such debts is usually met by the bank itself, triggering doubts about why customers even had to pay for such a policy. After months of talks, the banks, CPP and City regulator are now close to a final compensation deal.
The banks will shortly begin sending out letters to affected customers with details of how to claim.
The compensation will leave the banks with an estimated £1billion bill but there are fears that it could be higher.

Justin Modray said that it is thoroughly depressing to see another case of dreadful bank behaviour ripping off innocent customers

This will add more financial strain to banks on top of the £10billion recompense already racked up for mis-selling payment protection insurance.
Justin Modray, founder of consumer finance website CandidMoney.com, said: ‘Although the payouts will be a welcome and long overdue boost to those households duped out of the money, it’s thoroughly depressing to see another case of dreadful bank behaviour ripping off innocent customers. 
‘By asking loyal customers to pay more than £100 a year for policies that were essentially worthless,  it’s no wonder levels of trust in the high street banks is at absolute rock bottom.’ 
Some 4.4million card protection and identity fraud protection policies were sold between January 2005 and March 2011.
Not all banks sold these policies. While many high-street operators did, Lloyds and Halifax chose not to. Roughly nine in ten were sold via banks and the rest bought directly from CPP. 
Many policies were also sold as part of a paid-for packaged bank account. The CPP card protection policy cost £35 a year, and identity protection £84 a year – a total  of £119. 
However, the report by the Financial Conduct Authority found CPP sold or renewed as many as 23million policies over a six-year period.

It follows an investigation last year by the Financial Conduct Authority into CPP, a company which sold so-called card and identity theft cover via banks between 2005 and 2011

The insurance was routinely sold whenever a customer sent a new bank credit or debit card had to call a CPP telephone number to activate the account.
Staff then used high-pressure sales techniques to convince customers to take the policies out.
On card protection, staff told customers the policy would cover them for between £50,000 and £100,000 of unauthorised transactions after you tell them your card has been taken. But this was unnecessary, as banks automatically cover you for this. And with identity theft protection, CPP staff would regularly overstate its importance or the threat of being defrauded.
The City regulator report found some staff would wrongly tell customers that they would be liable for some of the debts if defrauded.
Last year, CPP was fined £10.5million by the FCA and ordered to stop selling policies to new customers. 
A CPP spokesman said: ‘Our priority is to achieve the best outcome for those customers affected, and we’re helping many in difficult situations every day.’

Who Killed Detroit City and Why?

Dave Hodges
Activist Post

Cities don’t die because of happenstance. The city of Detroit has been murdered by the same forces that are slowly killing cities all across the United States.

Detroit Becomes the Largest US City to Declare Bankruptcy

On July 18, 2013, Detroit declared Chapter 9 bankruptcy to squelch most of their $18 billion in debts. The Chapter 9 filing occurred only four months after the appointment of an emergency financial manager. ‘Let me be blunt: Detroit’s broke,’ says Michigan’s governor, Rick Snyder. Snyder went on to say that Detroit is the heart of Michigan and if Detroit is in trouble, Michigan is in trouble.

Detroit is the largest American city to declare bankruptcy, officially succumbing to job losses in the auto industry, decades of population flight, and the collapse of revenue to cover everything from policing to street lighting.

By the end of this article, the reader will come to see the prophetic wisdom of Governor Snyder’s words as the bankruptcy of Detroit is a portend of what is to come to most American cities.

Detroit Was Once the Pride of America

At the height of Detroit’s success as a city, the city was a representation of the American middle class dominance. It was the greatest manufacturing city ever seen on the planet. Detroit made cars that were the envy of the world.

At its peak, Detroit was the America’s fourth-largest city, with more than 1.8 million people. Detroit’s population losses began in the 1960s with migration to the suburbs. Then in the 1990s Detroit fell victim to global politics and, literally, the roof caved in.


How It All Went Wrong

Today, almost 30% of Detroit’s 140 square miles are either vacant or deserted. Detroit used to be the fourth-largest city in the US, with a population of nearly 2 million people. Today, Detroit has less than 700,000 residents. There are more than 33,500 vacant houses and over 90,000 vacant lots in Detroit. The city government is razing entire city blocks of business buildings and residential homes. If you are the only one left on your block, you are forced to move; and if you are lucky you will receive $10,000 for your home.

The median price of a home in Detroit is only $9,000! In some areas in Detroit, you can buy a house for just $100. There are approximately 85,000 streetlights in Detroit, but copper thieves have stripped so much wiring that many of the lights are not working. The Mayor of Detroit previously announced that he will reduce the number of streetlights to almost half the existing total down to 46,000.

Today, sixty percent of Detroit’s children live in poverty, when less than 45 years ago, Detroit boasted the highest per capita income in the United States. Today, Detroit does not have one chain supermarket left in the city.

It has one of the highest murder rates in the country. Its infrastructure has been gutted. Real unemployment may be as high 20% in some parts of the city. This is a real bad city to not be able to find a cop; and with the new cutbacks, it is really hard to find a cop because most police stations in Detroit are now only open to the public for 8 hours per day. So, if you have to defend yourself, you better be prepared to get through the night on your own. You can call the police on your Obama phone; however, you better only call between 8am and 5pm. Just how dangerous is it? Justifiable homicide in Detroit rose by an amazing 79% during 2011.

The Globalists Murdered Detroit City

The globalists murdered Detroit through the various free trade agreements. Through NAFTA, GATT, and CAFTA, American auto manufacturing became free to ship their factories overseas in search of near slave labor markets. The passage of these free trade agreements made it possible to hire foreign slave laborers; and without the now prohibited tariffs on imports, the globalist-controlled corporations could ship slave labor manufactured products back into the United States. Our government failed to protect manufacturers, and the net effect is that we are beginning to see third world conditions inside of the United States in cities such as Detroit . . .  and it is spreading like wildfire. Since the 1970s, America has lost 86% of its manufacturing jobs. Actually, the globalists have been trying to get rid of American tariffs for 100 years in the name of free trade. Look up the Payne-Aldrich Tariff, it is part of our history. A year later, we got the Federal Reserve Act of 1913 and then the real fun began in earnest.

Tariffs used to pay our national debt. This is no longer; we replaced tariffs with the Income Tax Amendment. If you are reading this historical fact for the first time, you have to be getting angry. And who could blame you for getting angry? You and I should not be paying income tax; tariffs should be paying for the national debt. We are paying income tax because the globalists wanted free trade and it is our “duty to pay” so they can maximize their profits. The third leg of this scheme was to introduce fiat currency where bankers could invent money out of thin air, which caused our money to now be worth less than 4 cents for what used to be a dollar.

Now, back to Detroit which helps us to understand where we are headed. You may not live in an area of the country in which the jobs are headed overseas. However, you have been targeted for de-industrialization through Obama’s Cap-and-Trade policies which he has declared he will initiate through Executive Order as this president continues to carry out his Agenda 21 goals.

If you ever let Agenda 21 get a grip on your city, the result will be like Detroit and will result in abject poverty as a result of green zones, Wildlands, promises of Smart Growth, saving the planet from global warming and economic growth inhibitors, etc. By the way, the globalists have the guts to build a $25 million dollar light rail in Detroit, right in the middle of this rotting corpse.

What Happens When a City Goes Into Default?

Look for an organization such at the World Bank to loan Detroit the $18 billion dollars it needs in order to regain temporary financial solvency. However, without a viable industry to maintain the economic foundation of the city, the city will predictably default on its future loan obligations. What follows is a glimpse into the future of all American cities as an increasing number of cities default on their “rescue” loans.

When a political entity defaults on its loans, the lending agency takes possession of the collateral which was pledged to cover the loan. Most often, the infrastructure is the collateral most sought after by the banks. When banksters typically take control over a political entity, like they did in Bolivia, they will quadruple the cost of water, astronomically hike the price of utilities, and seize control of public transportation in order to jack up the rates to its ridership (i.e. poor people who cannot afford a car and need public transportation to get to work.). This is Detroit’s future and it will soon be all of our futures.

Detroit has failed as a viable entity because of the loss of manufacturing and subsequent population flight out of the city. The rest of our cities will all experience an economic collapse but for different reasons.

When, not if, Obama ushers in his industry killing Cap-and-Trade Executive orders, every American city will effectively be de-industrialized and we will have nation full of Detroits.

Do you know that Obama has stated that his Cap-and-Trade plan will eliminate the use of of 80% of the energy that we presently use? Can you drive 80% less miles to work? On a sub-freezing day, can you run your thermostat 80% lower? Can you use your lights 80% less with a major impact on your lives? Can you get by on 20% of the gasoline that you presently use? And what business will survive these draconian caps placed upon our energy use? And then, where will you find work? Who will pay for your mortgage? Oh by the way, does it make sense now to about why the Federal Reserve is buying up $40 billion dollars worth of mortgage backed securities every month? Hmm, and some people wonder how the powers that be will force the rest of us into stack-and-pack cities. America, you have just seen your collective future.

Does it makes sense to you that DHS has purchased 2.2 billion rounds of ammo and 2,700 armored personnel carriers? The globalist forces know what is coming. It is time for this country to wake up and smell the coffee. You have been conquered America, and many of you will not survive. And if you doubt the words that I have posted here, let's have Obama tell you so in his own words.

Dave is an award winning psychology, statistics and research professor, a college basketball coach, a mental health counselor, a political activist and writer who has published dozens of editorials and articles in several publications such as Freedoms Phoenix, News With Views and The Arizona Republic.

The Common Sense Show features a wide variety of important topics that range from the loss of constitutional liberties, to the subsequent implementation of a police state under world governance, to exploring the limits of human potential. The primary purpose of The Common Sense Show is to provide Americans with the tools necessary to reclaim both our individual and national sovereignty.

OECD unveils plan to end 'golden era' of tax avoidance

David Cameron has called on the world’s leaders to get behind a global crackdown on tax avoidance and “break down the walls of corporate secrecy”.

 
George Osborne said in Moscow that the OECD plan represented 'a major step forward' in the battle against tax avoidance.

The Prime Minister was throwing his support behind proposals to stamp out sophisticated tax dodging strategies unveiled by the Organisation for Economic Co-operation and Development (OECD) at the G20 in Moscow yesterday.

The Paris-based think-tank has drawn up a 15-point action plan to stop multi-nationals moving profits from one country to another to reduce their tax bill. In future, the OECD pledged, tax will be largely paid where the original economic activity takes place.

The crackdown follows public outrage in the UK, the US and across Europe about the minimal amounts of tax paid by big businesses. In Britain, Google, Amazon and Starbucks have been accused by politicians of being “immoral” for not paying their “fair share”.

In response, companies have argued they are simply playing by the rules and that politicians should change the tax laws if they don’t approve.

Britain has been at the forefront of efforts to overhaul the antiquated global tax system. Tax reform has been a key feature of the UK’s G8 presidency this year and it followed up its commitment by pledging to contribute €400,000, alongside France and Germany, to help the OECD turn its proposals into concrete policies.

Mr Cameron said he would highlight the OECD plan at the G20 summit in St Petersburg in September: “I will call on fellow leaders to get behind this action plan to ensure that we break down the walls of corporate secrecy, once and for all, and that all companies pay their fair share.”
George Osborne described the action plan as “a major step forward, saying: “Our message is clear – everyone must pay their fair share of tax.”
Political and public outrage about aggressive tax avoidance has created a “once in a century” opportunity to overhaul the international rules, which date back to the League of Nations in the 1930s, the OECD said. Pascal Saint-Amans, director of the OECD’s centre for tax policy and administration, added: “The golden era of 'we don’t pay taxes anywhere’ is over.”
Its 15 point action plan includes measures to force companies to pay tax in countries where sales are made, to make them more open about their tax affairs, to prevent governments breaking global tax treaties to gain competitive advantage, and to create a tax regime that is fit for purpose for the digital economy.
The driving principle in the proposals was to put more emphasis on economic substance, such as where sales are made and staff are based. “Existing domestic and international tax rules should be modified in order to more closely align the allocation of income with the economic activity that generates that income,” the report said.
Formal proposals to prevent what the OECD described as “artificial shifting of income” through “base erosion and profit shifting” will not be in place for two years, but will only work if they win universal support, lawyers and accountants warned.
Sandy Bhogal, head of tax at law firm Mayer Brown, said: “The aim of linking the revenues of multinational businesses to particular territories and requiring reporting on a multilateral basis will be extremely complex to agree and implement.
“Not withstanding the fact that the G20 leaders are far from united on how to proceed, any global reforms will have to be brought in through changes between countries on a bilateral basis and also amend existing domestic laws.
“This process will take a considerable amount of time, even with the cooperation of all the relevant parties.”
Frank Haskew, head of tax at the ICAEW accounting body, added: “This plan isn’t without its challenges, not least because to secure a truly international approach some countries will at some point need to make some compromises on their approach to tax policies.”
Business groups such as the CBI have disputed that there is a broad problem with tax avoidance and claim measures to address it could hit job creation, trade and innovation.
Others welcomed the proposals, though. Steve Radley, director of policy at EEF, the manufacturers association, said: “EEF welcomes today’s report and urges the UK and the G20 generally to respond positively to its central recommendations.”
Q&A
Q What is base erosion and profit shifting?
A The term refers to tax strategies big business uses to exploit gaps in the international framework either to make profits disappear for tax purposes or to move them from the country of activity to a low-tax jurisdiction. Strategies can include inter-company loans so interest payments are used to offset tax, or citing intellectual property in tax havens and charging subsidiaries for its use.
Q Is it illegal?
A In most cases, no. Usually, multi-nationals simply take advantage of rules that were designed for a “bricks and mortar” economic world rather than a digital one with vast value tied up in intellectual property. Companies argue that they are not at fault, the rules need changing.
Q Why is it under scrutiny now?
A Tax avoidance has long been the bane of governments but, in the current austere times, it has come to be seen as totally unacceptable. Politicians in many leading countries – including the UK, US, France and Germany – want to tighten up the loopholes. As the problem is the international tax arrangement, changing it needs universal support. The current co-operative global mood on the issue has provided a rare opportunity for reform.
Q What is the main reform planned?
A At the moment, the economic activity of a business can be in one country but the tax paid in another. In essence, the principle of the new rules will be that tax should be paid where the economic activity takes place. In practice that will probably mean where a sale occurs and where staff are employed.
Q Will the plan affect tax havens?
A Inevitably. Tax havens are used to create shell companies. One single building in the Cayman Islands, Ugland House, is the registered address for almost 19,000 companies, for example. The planned rule changes will mean companies do not benefit by using those shell companies to move profits overseas.

George Carlin - Death Penalty

Chris Hedges: “America is a Tinderbox”

On Reality Asserts Itself, Paul Jay asks Chris Hedges if the American Left bears responsibility for the weakness of the mass movement; Hedges says the gravest mistake of the left is not articulating a viable vision of socialism – Pt. 4 of 7

Bernanke “The Only Game in Town”: Really?

by Charles Hugh-Smith of OfTwoMinds blog,
Of the three games in town, only one isn’t doomed: the real economy.
Last year, Senator Schumer (Democrat, N.Y.) famously told Fed chairman Ben Bernanke “You are the only game in town.” Really, Senator? What about the real economy? Bernanke and the Fed’s machinations are indeed the only game in town for the parasitic financiers, but unnoticed by the Senator, America’s real economy is innovating away from the dead hand of the Fed and its toxic spew of free money to the predatory class.
There’s actually three games in town: the financier game the Fed is playing that will end in collapse, the Federal government’s borrow-and-blow trillions of dollars game that will also end badly, and the real economy, where millions of people don’t give a rat’s rear-end about Bernanke’s latest attempt to placate the financial Monster Id he has created.
Bernanke is irrelevant to millions of people who are building the next economy beneath the rotting soggy mess of the financialized one Bernanke is attempting to resuscitate.
Here is Bernanke’s game: Bernanke has managed to stretch Phase II into five years; Phase III will finally begin in 2014-15 as the unintended consequences of Bernanke’s save-the-financial-parasites game take the financial markets by the throat:



Serial asset bubbles blown by the Fed that always pop:

Here is the Federal government’s game: Rapidly rising debt:

Diminishing returns on centralization and deficit spending:

Bernanke, Schumer, et al. are trying to revive the Financialization machine, but it’s disintegrating as a result of its own toxic output.Meanwhile, the parts of the economy that view Bernanke, Schumer et al. as either impediments or as irrelevant are innovating and evolving.

Jeffrey Tucker: The Hidden Tax of Inflation

Is China Preparing To Back The Yuan With Gold?

China is the #1 producer of gold and has recently become the #1 importer of gold. They have also encouraged their own citizens to buy both gold and silver. Though it is speculative, we believe that China is indeed preparing for the future, either to have the first gold backed currency or to follow up with a gold back currency after Russia, the U.S., or another major nation announces one.
Recently it was reported that a Chinese Diplomat told Stephen Leeb that China is accumulating gold to back the Yuan, so this is certainly being talked about in some very high circles of influence.

The S&P 500 is More Overstretched Than At Anytime in 30 Years

by Phoenix Capital Research
The markets are running out of steam as there is no longer a Bernanke talk to look forward to (he won’t be at the Fed’s Jackson Hole meeting in August) and options expiration is ending.
Bernanke has a thing for options. For some reason, over the last five years, he had a tendency to expand the Fed’s balance sheet on weeks when options were expiring. He even did this on weeks when the Fed technically was not engaged in a QE program.
In simple terms, whenever it’s time for options to expire, a time when Wall Street wants to manipulate the markets so it can shred options traders, Bernanke will juice the markets EVEN if there is no formal Fed program in place.
So it’s a little hard to stomach that Bernanke just happened to say that QE would continue for some time the week before options expiration week… especially given that the Fed is so divided on QE with half of Fed members wanting QE completely stopped by the end of 2013.
Bottomline: the Chairman went rogue and did it at the precise time when stocks were in need of a major boost. This is not coincidence. And now that this is over we have to wonder what’s next.
Well among other things we see that IBM, Intel, eBay, Google, Microsoft, Blackberry have all missed revenue estimates. US GDP is turning sharply south again with the second quarter currently posting 1.2% growth.

Stocks are diverging from everything under the sun: earnings, US GDP, the Nikkei, the list goes on and on.
And we are clearly in a bubble. Arguably the biggest stock bubble for the S&P 500 in the last 30 years. Below is a weekly chart of the S&P 500 relative to its 200-week moving average.

Stocks may hit new highs, but this rally has all the hallmarks of a blow off top, coming at the final stage of a bubble. Indeed, stocks have not been this overextended in over 20 years… that includesthe 2007 peak. Soon after we reached that point… we then plunged into one of the worst market Crashes of all time.
By today’s metrics, this would mean the S&P 500 falling to 1,300 then eventually plummeting to new lows.
This is not doom and gloom. This is a fact. The Fed has created an even bigger bubble than the 2007 one.
The time to prepare for this is not once the collapse begins, but NOW, while stocks are still rallying. Stocks take their time moving up, but when they crash it happens VERY quickly.

For more market insights and commentary, visit us at:
www.gainspainscapital.com
Best Regards
Graham Summers

THE COMING ECONOMIC PERFECT STORM. 3 Major Bubbles about to Burst: Oil, China, & Wall St

BEIJING (AP) — China has ended controls on bank interest rates in a move toward making its financial system more market-oriented.
The change announced Friday by the central bank comes amid promises by the ruling Communist Party to make the economy more efficient and productive.
Analysts say one of the most important changes will be to overhaul China’s banking industry that subsidizes state industry and lends little to entrepreneurs.
http://www.usatoday.com/story/money/business/2013/07/19/china-bank-lending-rates/2567583/?utm_source=dlvr.it&utm_medium=twitter&dlvrit=110940
Krugman: “China is in big trouble. … Not some minor setback along the way, but something more fundamental.”
http://www.nytimes.com/2013/07/19/opinion/krugman-hitting-chinas-wall.html?_r=1&
Key point Krugman misses: China isn’t so much hitting a wall as bringing itself to an emergency stop. It’s deliberate
https://twitter.com/Max_Fisher
$ES_F $19.7bn was invested in global equity funds in the past week, the most for six months $$
$ES_F $700m was pulled from bond funds.The amount put in US equity funds was the most since June 2008
https://twitter.com/MrTopStep
People’s Bank of China decided to further promote market-oriented interest rate reform
Approved by the State Council, People’s Bank of China, from July 20, 2013 from the full liberalization of financial institutions lending rate controls.
First, the cancellation of financial institutions lending rate 0.7 times the lower limit, by a financial institution lending on commercial principles independently determine the level of interest rates.
Second, cancel bills discounted interest rate controls, changing the discount rate at the rediscount rate plus points in a manner determined by the financial institution determined independently.
Third, the establishment of rural credit cooperatives are no longer lending rate caps.
Fourth, to continue to strictly implement differentiated housing credit policies to promote the healthy development of the real estate market, individual housing loan interest rate floating range temporarily adjusted.
Full liberalization of lending interest rate controls, the financial institutions in consultation with the customer pricing will be further expanded space, and promoting financial institutions to take differentiated pricing strategy, and reduce financing costs; favor of financial institutions to continuously improve the ability of independent pricing, changing the operating mode , improve service levels, increase business, residents financial support; help to optimize the allocation of financial resources, better play the role of financial support for the real economy, but also strong support for economic restructuring and transformation and upgrading.
http://www.zerohedge.com/news/2013-07-19/pboc-scraps-lending-rate-floor-full-liberalization-interest-rate-controls

“Economists and investors around the world are finally getting used to the idea that China’s years of blazing hot growth are a thing of the past.”
http://www.businessinsider.com/scary-china-charts-2013-7
The True Chinese Credit Bubble: 240% Of GDP And Soaring
http://www.zerohedge.com/news/2013-04-11/true-chinese-credit-bubble-240-gdp-and-soaring


Crude Oil
In yesterday’s Crude report: “Short term, watch LVNs at 106.77 and 105.02 as resistance and support, respectively. A break through either of these levels could start the initial party for a breakout.”
Crude finally got a breakout from the tightly-coiled 6-day range, as price rallied through the 106.77 LVN before topping out at 108.43. Each key bull target was taken out except the 125% target at 108.68, which I was actually shooting for on my last scale late in the day.
Again, Crude Oil is rallying in pre-market trading, and new highs are being seen. The 109.04 level has is a Fib extension from Thursday’s trading, so that level may offer resistance. Additionally, program trading algorithms are beginning to see a high number of Fib matches at these levels, which means we could see some selling in Crude at some point off these highs. Also, keep in mind my 109.51 weekly bull target is still above and could be reached today.
Continue to buy pullbacks in Crude until 109.51 is reached. Selling is not advised until support at 107.70 is taken out.
http://pivotboss.com/2013/07/19/goog-hits-nq-on-the-close/
Crude Oil’s Fast & Furious Rise Will Hit Consumers Hard, Warns Kilburg
While most of the trading universe was preoccupied with other things the price of crude oil has been ripping higher in an almost straight line. KKM Financial CEO and founder Jeff Kilburg says Americans aren’t going to be able to ignore the spike for long.
In early trading Friday WTI crude oil tacked on another dollar, topping $109 a barrel, and racing to break $110 for the first time in multiple years.
A close here would mark the second straight week of multiple percentage point gains.
“We’re seeing oil prices unfortunately rise and that’s going to mean pain at the pump,” Kilburg told Breakout from the floor of the CME.
“On July 1st crude was trading $96, now we interject some Egyptian turmoil and people are really scared.”
Traders are frightened not just because many of them missed the move but they’ve been shorting crude during the rally.
As WTI rallies those same traders are taking off the short position by purchasing upside calls or get long in other ways, all of which adds fuel to the rally.
http://finance.yahoo.com/blogs/breakout/crude-oil-fast-furious-rise-hit-consumers-hard-123644491.html?l=1

I Can’t Find A Job: The Effects of A Large Unemployed Class & The Rise of Automation

China Finds a Gap in Japan’s Maritime Chokepoints

Source: Time
A flotilla of Chinese warships transited an important ocean strait off Japan’s northernmost island for the first time this week, passing within clear sight of observers onshore.
The PLA Navy vessels had just completed a major training exercise with Russian warships nearby and were using the Soya Strait to head into the far Pacific. It was just the latest Chinese excursion through narrow and potentially-strategic transit points in and around Japan’s home islands, and another example of China’s growing assertiveness in the region.
But here’s the thing: they couldn’t have done it had Japan not decided, some 40 years ago, to claim territorial waters that extend only three miles out to sea, far less than allowed under international law. And if you guessed that this has something to do with allowing America’s nuclear-armed warships to use those same narrow straits – well, you’re right.
Call it an unintended consequence of the Cold War.
The five PLAN warships – two destroyers, two frigates and a supply ship — were spotted Sunday in the Soya Strait, a narrow gap between the northern tip of Hokkaido and the southern tip of Russia’s Sakhalin Island.  It was the first time that ships from China’s growing navy have ventured into that waterway. The Soya Strait is one of just two passages from the Sea of Japan to the Pacific Ocean, and was considered a key chokepoint by Cold War naval planners.

The Japan Maritime Self Defense Force still patrols the area regularly by air and sea, and operates surveillance facilities ashore.

Google

By sticking to the southern, non-Russian half of the strait, the PLAN ships remained within international waters. Although they reportedly made a quick passage into the Pacific, they were under no obligation to do so. Under international law, they could have conducted surveillance or research activities, carried out training or live-fire exercises, or just taken a fishing break. All within peering distance of Japanese farmland.
It wasn’t supposed to be this way.
As Tetsuo Kotani, a maritime security specialist at the Japan Institute of International Affairs, in Tokyo, explains it, the Japanese government was searching for a way to allow the U.S. Navy to transport nuclear weapons through Japanese waters without violating Japan’s post-war “Three Non-Nuclear Principles.” Those principles, still in effect, forbid Japan from making or possessing nuclear weapons, or allowing them to be brought into Japanese territory.
By claiming just a three-mile limit instead of the maximum 12 miles, the Japanese were able to maintain a strip of international water through the Soya Strait, also known as the La Perouse Strait, and three other key transit points: the Tsuruga, Tsukishima and Osumi straits.
By sticking to those narrow channels, American aircraft carriers and submarines could steam back and forth at will, laden with nuclear warheads and maintaining America’s nuclear deterrence, without violating Japanese policy. A technicality, sure, but it worked. (The Navy, by the way, never confirms or denies that its ships carry nuclear weapons.)
(Technical digression: Under international law, ships – including warships – are allowed “innocent passage” through another country’s territorial waters. Essentially, that means they can sail from Point A to Point B, but cannot conduct any other activities along on the way; submarines are required to sail on the surface, flying their country’s national flag.)

(Technical digression II: Most nations, including Japan, also claim a 200-mile Exclusive Economic Zone. It is generally accepted that ships cannot conduct economic-related activity in another country’s EEZ, but that all other activities, including military, are allowed. China generally has argued that foreign military activity is not permitted in territory it claims as its EEZ, but there has been some evidence lately that it may be easing off on this interpretation.)
Chinese military or research ships have passed through the Tsuruga, Tsukishima and Osumi straits in recent years – legally, mind you — in what Japanese authorities say have been thinly veiled reconnaissance missions.
Alessio Patalano, a lecturer in War Studies at King’s College, London, and an authority on Japanese naval strategy and history, says it’s not surprising that the Chinese have finally ventured into the Soya Strait.
“Over the past half a decade the PLAN has been investing in building up its material and professional skills and, therefore, it is only natural that we’re seeing more of the fleet at sea conducting exercises and training. This is a trend that is unlikely to change,” says Patalano, who is currently lecturing in Beijing.
Kotani agrees, but says it’s not a major problem, yet. The JMSDF has been patrolling its narrow straits – and training to keep them open or closed, as necessary – since the 1980s.
“The PLAN will continue to increase its naval activities near Japan, but as long as we maintain monitoring capabilities, we don’t  have to worry too much,” says Kotani.
Unless, of course, the Chinese decide to carry nukes through those narrow channels.

Microsoft's $900 million Surface RT write-down: How did this happen?

Microsoft announced a $900 million "inventory adjustment" charge for its Surface RTs, parts and accessories on July 18. That write-down completely overshadowed the performance of the rest of the products and services that contributed to the company's Q4 2013 earnings.

(Among those overshadowed was Office 365 -- the Microsoft subscription service via which it provides Office client and hosted Office server apps. Office 365 is now on a $1.5 billion run rate, up from the $1 billion run rate it hit in Q3 FY2013. Another that got eclipsed: Windows Phone -- plus Android patent licensing -- increased $222 million for the quarter.)
The biggest question, to my mind, about today's unexpected Surface RT write-down is how did Microsoft find itself in this predicament in the first place? How did officials seemingly misestimate the number of Surface RTs they should have made and how much they should have charged for them?
I had a chance to ask Brian Hall, the General Manager of Surface Marketing, that very question. Unsurprisingly, he wouldn't address this. But he did say that Microsoft is 100 percent committed to Surface RT and Windows RT going forward and has no plans to drop work on either product.
At the now-reduced $350 price (plus another $100-plus per keyboard), Microsoft believes it is righly positioned for success with the product, its officials said today. Hall elaborated, by saying that Microsoft officials believe that by getting more Surface RTs into more users' hands, demand will accelerate for the product.
"We know we need a lot of Surface users to start the fly wheel of people recommending it," Hall said.
In addition to cutting the price, Microsoft also has slowly expanded Surface RT's distribution, most recently adding a handful of resellers to the mix.
But many of the factors beyond price that have contributed to the lackluster demand for the Surface RT haven't changed all that much.
There are still few, if any, "killer" Windows Store apps that might push someone to choose a Surface RT over an iPad or an Android tablet. In fact, the total number of Surface RT apps is still quite low (around 100,000), nine months after the product launched.
The performance of the Surface RT still feels sluggish, thanks to the Tegra ARM processor powering the device -- though it's somewhat better after putting Windows 8.1 preview on the device.
There are still relatively few physical stores where potential Surface RT customers can try out a device to see if they're interested in buying one. Microsoft's Surface ads are nothing to write home about, though they have started to get better -- especially the Siri-centric ones.
But again, why did Microsoft make so many Surface RTs? If some back-of-the-napkin calculations are right, Microsoft may be sitting on an inventory of 6 million unsold Surface RTs. (Microsoft won't say how many devices they made or sold.)
Isn't this a company whose officials have prided themselves on telemetry data and visibility? Yes, it was the first time Microsoft was making its own PCs, but the company has made its own gaming console, mice and keyboards in the past, so there were people at the company who knew a considerable amount about supply chains.
Would a different operating system have made much, if any difference in the success of the Surface RT? Microsoft spent years porting Windows to ARM and finally launched it in the form of Windows RT. Would acceptance of the Surface RT have been better if Microsoft had just used the Windows Phone OS to power Surface RT instead? (I recall hearing that the relative newness of the Windows Phone OS was at least one of the reasons Microsoft decided against using it.) I asked Hall if Microsoft is or might consider putting the Windows Phone OS on a future Surface RT model and was told no comment.
Would opting to wait for a more powerful ARM chip have boosted Surface RT sales, even if it meant Microsoft missed holiday 2012 with the devices? Would launching the Surface Pro ahead of the Surface RT have primed the market any better for a device that couldn't run almost any Win32 apps?
I saw a couple of folks tweet that they now fear that Microsoft will end up discontinuing Surface RT, the same way the company dropped the Zune after finally getting it relatively right with the Zune HD. The damage to the brand and lack of a true competitive product was done by the time Microsoft finally got the mix right. I'd expect the old "we can't hear you" Microsoft to persist with the Surface RT's successors regardless of what the market said/did. The new Microsoft may be less likely to do so, I'd think.
But Hall reiterated that Microsoft has no plans to stop work on Windows RT or Surface RT. He wouldn't drop any hints about what's next for Surface RT, but recently officials said to expect new Surface accessories and a Surface RT update of some unspecified kind to arrive in fiscal 2014, which ends on June 30, 2014. When I asked if a 4G LTE-enabled Surfce RT device was in the pipeline, Hall would only say "we see lots of tablets sold with LTE."
Microsoft plans to push the Surface RT as an iPad competitor, emphasizing its role as a "productivity tablet" running Office -- plus its relatively lower price -- as its main differentiators, Hall said.

Topics: Microsoft Surface, Microsoft, Tablets, ARM, PCs, Windows 8