Thursday, July 25, 2013

German bank executives go on trial for breach of fiduciary trust

Former directors of bailed-out lender HSH Nordbank due in court

Former directors of bailed-out German lender HSH Nordbank will appear in court today in the first case of the entire executive board of a European bank facing trial for actions in the build-up to the financial crisis.
Hamburg prosecutors are charging the six men, who include former chief executive Dirk Jens Nonnenmacher and his predecessor Hans Berger, with breach of fiduciary trust.
Mr Nonnenmacher and former capital markets head Jochen Friedrich face additional charges of accounting fraud. The defendants have previously said they are not guilty, although in Germany an official plea is only presented at the final stage of a trial.
If found guilty, the former directors could face up to 10 years behind bars, although judges have often handed defendants in similar cases fines rather than jail sentences.
HSH, along with other regional state-owned German lenders known as landesbanks, lost billions of euros on risky investments in the financial crisis, forcing its owners to prop it up with a €3 billion capital injection and an additional €10 billion in loan guarantees.
While policy makers have responded to the financial crisis with rafts of new banking rules to prevent taxpayers from having to foot billions of euros in bailout bills, relatively few bank executives have so far been tried.
In Germany, where the second biggest lender Commerzbank and four landesbanks were among those taking state aid - so far only the former CEO of corporate lender IKB has been convicted.
He received a 10-month suspended sentence, after being found guilty of market manipulation. IKB received a €10 billion bailout in the crisis.
In Spain, close to 100 former bankers are being investigated following a property market collapse that nearly felled several lenders. One banker, the former CEO of Caja Madrid, now Bankia , spent time in custody although the case against him has now been partially dismissed.
In Britain, several former executives - from failed HBOS and bailed-out RBS - have been banned from taking senior financial positions but they have not faced criminal charges. Belgium, Austria and Portugal have also seen a few bank executives on trial and Iceland has made some headway dealing with past banking scandals.

Collateral Damage: QE3 and the Shadow Banking System

Rather than expanding the money supply, quantitative easing (QE) has actually caused it to shrink by sucking up the collateral needed by the shadow banking system to create credit. The “failure” of QE has prompted the Bank for International Settlements to urge the Fed to shirk its mandate to pursue full employment, but the sort of QE that could fulfill that mandate has not yet been tried.

Ben Bernanke’s May 29th speech signaling the beginning of the end of QE3 provoked a “taper tantrum” that wiped about $3 trillion from global equity markets – this from the mere suggestion that the Fed would moderate its pace of asset purchases, and that if the economy continues to improve, it might stop QE3 altogether by mid-2014. The Fed is currently buying $85 billion in US Treasuries and mortgage-backed securities per month.

The Fed Chairman then went into damage control mode, assuring investors that the central bank would “continue to implement highly accommodative monetary policy” (meaning interest rates would not change) and that tapering was contingent on conditions that look unlikely this year. The only thing now likely to be tapered in 2013is the Fed’s growth forecast.

It is a neoliberal maxim that “the market is always right,” but as former World Bank chief economist Joseph Stiglitz demonstrated, the maxim only holds when the market has perfect information. The market may be misinformed about QE, what it achieves, and what harm it can do. Getting more purchasing power into the economy could work; but QE as currently practiced may be having the opposite effect.

Unintended Consequences

The popular perception is that QE stimulates the economy by increasing bank reserves, which increase the money supply through a multiplier effect.  But as shown earlier here, QE is just an asset swap – assets for cash reserves that never leave bank balance sheets. As University of Chicago Professor John Cochrane put it in a May 23rd blog:

QE is just a huge open market operation. The Fed buys Treasury securities and issues bank reserves instead. Why does this do anything? Why isn’t this like trading some red M&Ms for some green M&Ms and expecting it to affect your weight? . . .

We have $3 trillion or so in bank reserves. Bank reserves can only be used by banks, so they don’t do much good for the rest of us. While the reserves may not do much for the economy, the Treasuries they remove from it are in high demand.

Cochrane discusses a May 23rd Wall Street Journal article by Andy Kessler titled “The Fed Squeezes the Shadow-Banking System,” in which Kessler argued that QE3 has backfired. Rather than stimulating the economy by expanding the money supply, it has contracted the money supply by removing the collateral needed by the shadow banking system. The shadow system creates about half the credit available to the economy but remains unregulated because it does not involve traditional bank deposits. It includes hedge funds, money market funds, structured investment vehicles, investment banks, and even commercial banks, to the extent that they engage in non-deposit-based credit creation. Kessler wrote:

The Federal Reserve’s policy—to stimulate lending and the economy by buying Treasurys—is creating a shortage of safe collateral, the very thing needed to create credit in the shadow banking system for the private economy. The quantitative easing policy appears self-defeating, perversely keeping economic growth slower and jobs scarcer.

That explains what he calls the great economic paradox of our time:

Despite the Federal Reserve’s vast, 4½-year program of quantitative easing, the economy is still weak, with unemployment still high and labor-force participation down. And with all the money pumped into the economy, why is there no runaway inflation? . . . The explanation lies in the distortion that Federal Reserve policy has inflicted on something most Americans have never heard of: “repos,” or repurchase agreements, which are part of the equally mysterious but vital “shadow banking system.” The way money and credit are created in the economy has changed over the past 30 years. Throw away your textbook.

Fractional Reserve Lending Without the Reserves

The post-textbook form of money creation to which Kessler refers was explained in a July 2012 article by IMF researcher Manmohan Singh titled “The (Other) Deleveraging: What Economists Need to Know About the Modern Money Creation Process.” He wrote:

In the simple textbook view, savers deposit their money with banks and banks make loans to investors . . . . The textbook view, however, is no longer a sufficient description of the credit creation process. A great deal of credit is created through so-called “collateral chains.” We start from two principles: credit creation is money creation, and short-term credit is generally extended by private agents against collateral. Money creation and collateral are thus joined at the hip, so to speak. In the traditional money creation process, collateral consists of central bank reserves; in the modern private money creation process, collateral is in the eye of the beholder.

Like the reserves in conventional fractional reserve lending, collateral can be re-used (or rehypothecated) several times over. Singh gives the example of a US Treasury bond used by a hedge fund to get financing from Goldman Sachs. The same collateral is used by Goldman to pay Credit Suisse on a derivative position. Then Credit Suisse passes the US Treasury bond to a money market fund that will hold it for a short time or until maturity. Singh states that at the end of 2007, about $3.4 trillion in “primary source” collateral was turned into about $10 trillion in pledged collateral – a multiplier of about three. By comparison, the US M2 money supply (the credit-money created by banks via fractional reserve lending) was only about $7 trillion in 2007.  Thus credit-creation-via-collateral-chains is a major source of credit in today’s financial system.

Exiting Without Panicking the Markets

The shadow banking system is controversial. It funds derivatives and other speculative ventures that may harm the real, producing economy or put it at greater risk. But the shadow system is also a source of credit for many businesses that would otherwise be priced out of the credit market, and for such things as credit cards that we have come to rely on. And whether we approve of the shadow system or not, depriving it of collateral could create mayhem in the markets. According to the Treasury Borrowing Advisory Committee of the Securities and Financial Markets Association, the shadow system could be short as much as $11.2 trillion in collateralunder stressed market conditions. That means that if every collateral claimant tried to grab its collateral in a Lehman-like run, the whole fragile Ponzi scheme could collapse. That alone is reason for the Fed to prevent “taper tantrums” and keep the market pacified. But the Fed is under pressure from the Swiss-based Bank for International Settlements, which has been admonishing central banks to back off from their asset-buying ventures.

An Excuse to Abandon the Fed’s Mandate of Full Employment?

The BIS said in its annual report in June:

Six years have passed since the eruption of the global financial crisis, yet robust, self-sustaining, well balanced growth still eludes the global economy. . . . Central banks cannot do more without compounding the risks they have already created. . . . {They must} encourage needed adjustments rather than retard them with near-zero interest rates and purchases of ever-larger quantities of government securities. . . . Delivering further extraordinary monetary stimulus is becoming increasingly perilous, as the balance between its benefits and costs is shifting. Monetary stimulus alone cannot provide the answer because the roots of the problem are not monetary. Hence, central banks must manage a return to their stabilization role, allowing others to do the hard but essential work of adjustment.

For “adjustment,” read “structural adjustment” – imposing austerity measures on the people in order to balance federal budgets and pay off national debts. The Fed has a dual mandate to achieve full employment and price stability. QE was supposed to encourage employment by getting money into the economy, stimulating demand and productivity. But that approach is now to be abandoned, because “the roots of the problem are not monetary.” So concludes the BIS, but the failure may not be in the theory but the execution of QE. Businesses still need demand before they can hire, which means they need customers with money to spend. QE has not gotten new money into the real economy but has trapped it on bank balance sheets. A true Bernanke-style helicopter drop, raining money down on the people, has not yet been tried.

Judge stops lawsuits against Detroit bankruptcy
DETROIT (AP) — A federal judge agreed with Detroit on Wednesday and stopped any lawsuits challenging the city’s bankruptcy, declaring his courtroom the exclusive venue for legal action in the largest filing by a local government in U.S. history.
The decision by U.S. Bankruptcy Judge Steven Rhodes was a major victory for Detroit, especially after an Ingham County judge last week said Gov. Rick Snyder ignored the Michigan Constitution and acted illegally in approving the Chapter 9 filing. That ruling and others had threatened to derail the case.  
Retirees had sued, claiming the bankruptcy threatened their pensions that are protected by the constitution. “If these actions are not stopped, the city would be irreparably harmed. … These litigants will have due process. They will have their day in court,” Detroit attorney Heather Lennox said during two hours of arguments by the city, pension funds and unions.
Rhodes said there’s nothing in federal law or the U.S. Constitution that gives a state court a shared role in a bankruptcy. Questions about Detroit’s eligibility to overhaul itself through bankruptcy “are within this court’s exclusive jurisdiction,” he said.
The courtroom was jammed with lawyers representing some of the thousands of creditors as well as rank-and-file city employees and retirees eager to know the outcome. Some wore T-shirts that said, “Detroit vs. Everybody.”
Detroit emergency manager Kevyn Orr, who recommended bankruptcy, sat in the front row. Outside the courthouse, protesters held a banner with a message for Wall Street: “Cancel Detroit’s debt. The banks owe us.”
Detroit has about 21,000 retired workers who are owed benefits — including former officer workers at city hall, police, paramedics, sanitation crews, firefighters and bus drivers — with underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage.
There are three lawsuits in state courts challenging the bankruptcy. They mostly focus on a provision in the Michigan Constitution that says public pensions “shall not be diminished or impaired.” Pensions have not been frozen or reduced in the bankruptcy so far, but officials say there are shortfalls in the funds and that payouts could be at risk.
Sharon Levine, an attorney for a union that represents city workers, urged Rhodes to let those lawsuits run their course. She said there’s no federal insurance for public pensions once they’re broken, unlike pensions at private employers.
“Our members who participate at most are at or below $19,000 a year. There is no safety net,” Levine said. Snyder signed off on Detroit’s bankruptcy, calling it the only “feasible path” for a city whose population has plummeted to 700,000 from 1.8 million decades ago. Detroit’s $18 billion in long-term debt has become an urban millstone.
In March, the governor appointed Orr, a bankruptcy expert, as Detroit’s emergency manager. Orr had sweeping powers to reshape city finances but recommended bankruptcy after failing to reach any significant deals with creditors, including Wall Street bankers and Detroit pension funds. Many of those creditors, however, accused him of being inflexible and believe bankruptcy always was the plan.
Detroit has more than double the population of Stockton, Calif., which had been the largest U.S. city to file for bankruptcy before Detroit trumped it last week. Retirees and city employees are concerned. Lt. James Edwards, who has worked 18 years at the fire department, attended the court hearing Wednesday.
“It seems as though we’re going to end up being the patsy for a lot of bad decisions that have been made over the years,” he said. “You base your life decisions on promises made to you when you came on the job.”
Follow Ed White at

Debt Levels Are Skyrocketing To Extremely Dangerous Levels – How Long Can This Possibly Keep Going?

by Michael Snyder
Never before has the world faced such a serious debt crisis.  Yes, in the past there have certainly been nations that have gotten into trouble with debt, but we have never had a situation where virtually all of the major powers around the globe were all drowning in debt at the same time.  And what makes this crisis even more unprecedented is that everyone on the planet is using fiat currency that is backed up by nothing.  It is all just a bunch of paper and data points that people have faith in.  Right now, confidence in this system is being shaken as debt levels skyrocket to extremely dangerous levels.  Many are openly wondering how much longer this can possibly go on.
Just consider what is going on over in Europe right now.  Even the countries that have supposedly “tried austerity” continue to rack up debt at a mind blowing pace.  New numbers that have just been released show that government debt to GDP ratios for some of the most financially troubled nations in Europe are absolutely soaring
  • Euroarea: 92.2%, up from 88.2% a year ago
  • Greece: 160.5%, up from 136.5% a year ago
  • Italy: 130.3%; up from 123.8% a year ago
  • Portugal: 127.2%, up from 112.3% a year ago
  • Ireland: 125.1%, up from 106.8% a year ago
  • Spain: 88.2%, up from 73.0% a year ago
  • Netherlands: 72.0%, up from 66.7% a year ago
Meanwhile, the debt to GDP ratio in Japan is now well past the 200% mark and continues to march upward with no apparent end in sight.  The following is from a recent MSN article
In Japan, the good news is that the nation’s budget for the fiscal year, which started on April 1, will see the government raise a higher percentage of spending from tax revenue than at any other time in the past four years. The bad news is that the government will still cover 46.3% of its spending from borrowing. The Organisation for Economic Cooperation and Development estimates that Japan’s budget deficit for 2013 amounted to 10.3% of gross domestic product.
In China, the big problem is the absolutely stunning growth of private domestic debt.  According to a recent World Bank report, the total amount of credit in China has risen from 9 trillion dollars in 2008 to 23 trillion dollars today.
That increase is roughly equivalent to the entire U.S. commercial banking system.
According to financial journalist Ambrose Evans-Pritchard, the ratio of private domestic debt to GDP in China is now wildly out of control…
The 160pc debt ratio for China is based on a conservative measure of credit. Fitch says it is 200pc if you count all offshore vehicles, trusts, letters of credit etc.
This morning China Securities Journal – an arm of the regulators – said it may really be 221pc.
Well, what about the United States?
As I noted the other day, our ratio of federal government debt to GDP has shot up like a rocket since 2008…
National Debt As A Percentage Of GDP

At this point, the U.S. already has more government debt per capitathan Greece, Portugal, Italy, Ireland or Spain.  It is a giant mess, and yet our politicians continue to recklessly spend more money.
And of course state and local governments all over the nation are drowning in debt too.  The bankruptcy of Detroit is forcing people to come to grips with how bad things really are.  Sadly, as Meredith Whitney explained the other day, there are going to be a lot more municipal bankruptcies coming down the pipeline…
As jarring as the reality may be to accept, Detroit’s decision last week to declare bankruptcy should not be regarded as a one-off in the US municipal market – which is what the bond-peddlers are now telling their clients. The aftershocks of the largest municipal bankruptcy in US history will be staggering, and Detroit will set important precedents.
Municipal bankruptcies have historically been rare for a number of reasons – including the states’ determination to preserve their credit ratings, their access to cheap funding and the stigma of bankruptcy. But, these days, things are very different in the world of municipal finance.
At the root of the problem is the incentive system that elected officials used to face. For decades, across the US, local leaders ran up tabs for future taxpayers; they promised pensions and other benefits for public employees that have strong legal protection. That has been a great source of patronage for elected officials: they can promise all sorts of future perks to loyal supporters (state and local workers) with very little accountability on the delivery of those promises.
And of course the overall debt level in the United States continues to grow much, much faster than our overall economy is growing.
The greatest debt bubble in the history of the planet is still expanding.
How long will it be before it bursts?
That is a very good question.  For now, our “leaders” appear to just be trying to keep the party going for as long as possible.  They know that if they suddenly change course hard times will hit almost immediately.  For example, just check out what Federal Reserve Chairman Ben Bernanke told Congress last week
With the economy still facing risks, especially from government spending cuts, Bernanke told a congressional panel on Wednesday the Fed is still planning to trim its quantitative easing stimulus, if growth continues at a steady pace.
But expectations that the Fed was poised to start tightening monetary policy, which have sent interest rates jumping and sparked turmoil in global markets, were unwarranted, he stressed.
“I don’t think the Fed can get interest rates up very much, because the economy is weak, inflation rates are low,” Bernanke told the House Financial Services Committee.
“If we were to tighten policy, the economy would tank.”
Nobody wants the economy to “tank”, but the truth is that the more debt that we run up, the larger our long-term economic problems become.
And a growing percentage of Americans realize that something has seriously gone wrong.  According to a recent Pew Research survey, 44% of all Americans believe that an economic recovery is still “a long way off“.
Unfortunately, the reality of the matter is that we are already living in the “economic recovery”.
This is about as good as it is going to get.
The truth is that the real storm has not even hit yet.  When the debt bubble finally bursts, we are going to see economic chaos in this country unlike anything that we have ever experienced before.
I hope that you are getting ready.

How Does America’s Middle Class Rank Globally? #27

Submitted by Michael Krieger of Liberty Blitzkrieg blog,
We are number 1 right? USA! USA! No one can beat our wealth creation machine, our economic dynamism, our level playing field and our bastions of higher education. We have a middle class that is the envy of the world, right?
Well, like so much of the “American dream” we have been force fed for a generation or more, this perception is not based in reality whatsoever. Sure it may have been the case for a couple of decades immediately after World War 2. Before the military-industrial-Wall Street complex fully took over the political process, but it certainly isn’t true any longer. Myths die hard and this one is particularly pernicious because it prevents people from changing things. As James Baldwin said:
Not everything that is faced can be changed, but nothing can be changed until it is faced.
From the Huffington Post:
America is the richest country on Earth. We have the most millionaires, the most billionaires and our wealthiest citizens have garnered more of the planet’s riches than any other group in the world. We even have hedge fund managers who make in one hour as much as the average family makes in 21 years!

This opulence is supposed to trickle down to the rest of us, improving the lives of everyday Americans. At least that’s what free-market cheerleaders repeatedly promise us.

Unfortunately, it’s a lie, one of the biggest ever perpetrated on the American people.

Our middle class is falling further and further behind in comparison to the rest of the world. We keep hearing that America is number one. Well, when it comes to middle-class wealth, we’re number 27.

The most telling comparative measurement is median wealth (per adult). It describes the amount of wealth accumulated by the person precisely in the middle of the wealth distribution — fifty percent of the adult population has more wealth, while fifty percent has less. You can’t get more middle than that.

American Middle Class
* Side note: May want to cross Cyprus off the above list…
The Huffington Post also provides a list as to why this is the case. While I don’t agree with all of them, I agree with most. Here are a few:
  • Wall Street is out of control.
  • Higher education puts our kids into debt.
  • It’s hard to improve your station in life if you’re in prison.
  • Our tax structures favor the rich.
  • The wealthy dominate politics and the media.
They go on to correctly note:
Is there one cause of the middle-class collapse that rises above all others?

Yes. The International Labor organization produced a remarkable study, (Global Wage Report 2012-13) that sorts out the causes of why wages have remained stagnant while elite incomes have soared. The report compares key causal explanations like declining bargaining power of unions, porous social safety nets, globalization, new technologies and financialization.

Guess which one had the biggest impact on the growing split between the one percent and the 99 percent?

Ding ding ding.
Full article here.

[ZH: because it never gets old...]

Mass defaults bring Obama housing rescue under scrutiny

Nearly half of the mortgages modified in 2009 under the Obama administration's signature homeowner rescue effort are in default again, according to a report on Wednesday that raised concerns about the program's effectiveness.
The report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the watchdog for the aid effort, said 46 percent of the struggling homeowners who received loan modifications in 2009 under the Home Affordable Modification Program had redefaulted.
The Obama administration launched HAMP in 2009 to aid struggling homeowners impacted by the housing boom and bust. The program, extended in May by two years to help more struggling borrowers keep their homes, draws from the Treasury Department's financial bailout fund and pays lenders and servicers to rewrite loan terms for borrowers who can't make their current mortgage payments.
(Read more: Homes of top-paid governors)
"This is a program where there's not enough people being helped," Christy Romero, special inspector general for SIGTARP, told Reuters. "Ultimately, the Treasury needs to make good on its promise that TARP is not just a bailout for the largest financial institutions but it will also help bailout homeowners."
First-time home buyers priced out
Home buyers face competition as investors want to rent the homes out, with CNBC's Diana Olick; Mike Aubrey, HGTV host of "Power Broker"; and Jared Jones, Horizon Realty Group. "In the next year, buyers may get a baton pass from investors," says Jones.
While HAMP has helped about 865,100 homeowners avoid foreclosure over the lifetime of the program through permanent loan modifications, more than 306,000 homeowners had redefaulted on their modified mortgages as of the end of April, the report stated.
According to the inspector general, of the 865,100 homeowners in an active permanent HAMP modification, about 10 percent have missed one to two monthly mortgage payments and are at risk of continuing the default trend.
The administration has refined the HAMP program since its inception to broaden its reach, including by expanding eligibility and increasing payments to mortgage companies that lower borrowers' monthly payments.
(Read more: America's most expensive states to live)
When it was unveiled, the administration estimated that the foreclosure prevention program would offer a lifeline to as many as 4 million homeowners.
The inspector general urged the Treasury to try to determine why borrowers were going off track and said it should require mortgage servicers to look for early warning signals.
"Exactly why people are falling out of HAMP isn't well understood by Treasury," said Romero. "If redefaults are happening at an alarming rate, then you've got to stop that and change the program somehow where you stop the trend."
A Treasury official, who requested anonymity, told reporters that redefault rates were moving lower.
"There will always be an inherent risk of homeowner redefault rate in a program like this given the very difficult circumstances that people who need modifications face," the official said. "The longer they are in there, the less likely they are to redefault."
The Treasury has set aside $38.5 billion of its TARP funds to pay for the program, but of that amount it has only spent $8.6 billion, or 22 percent.

The U.S. ‘Recovery’ Is Coming To An End?

Nearly half of modified mortgages are in default

Nearly half of the mortgages modified in 2009 under the Obama administration’s signature homeowner rescue effort are in default again, according to a report on Wednesday that raised concerns about the program’s effectiveness.

The report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the watchdog for the aid effort, said 46 percent of the struggling homeowners who received loan modifications in 2009 under the Home Affordable Modification Program had redefaulted.

Most Americans say nation is headed off track: NBC-WSJ poll
Some 61 percent of Americans polled say the nation is headed off on the wrong track compared to 29 percent who say it’s headed in the right direction; that compares to the 53 percent and 41 percent, respectively, findings last December in the wake of President Obama’s re-election.
Mr. Obama’s own job approval has declined to 45 percent, with 50 percent disapproving; that’s down from 53-43 percent in December. Congress drew its worst approval score in the quarter-century history, with just 12 percent approving and 83 percent percent disapproving. Americans rate House Speaker John Boehner negatively by a two to one margin, with 36 percent expressing negative views and 18 percent positive.
Up In ARMs: Adjustable Rate Mortgage Applications Soar To 2008 Pre-Lehman Mania Levels
 While homebuilder confidence has been coming in strong, we’ve had some disappointing housing data more recently
The FHFA home price index climbed 0.7% month-over-month in May.

This was just shy of expectations for a 0.8% rise.
Meanwhile, April’s reading was revised down to show a 0.5% rise in the HPI, down from an initial estimate of 0.7%.
While homebuilder confidence has been coming in strong, we’ve had some disappointing housing data more recently.
Housing starts fell in June and the previous month’s numbers were revised down as well. Existing home sales missed expectations as well. Experts are also worried about the impact that higher mortgage rates could have on the housing recovery.
Read more:
Farewell “Housing Recovery” – Housing Starts Miss Most Since January 2007, Permits Have Biggest Miss In History

In all the noise surrounding Bernanke’s rehash of statements made countless times before, today’s only relevant data point – June housing starts and permits – was largely ignored. And one can see why: printing at 836K, the starts number was the lowest since August 2012, the second largest sequential drop (down from 928K in May) since 2011 and the biggest miss to expectations of 957K since January 2007!
Barclays cuts Q2 GDP forecast to 0.6% from 1.0% following wholesale inventories!!!
It was only a matter of time before Wall Street, overoptimistically hockeysticking everything as always, slammed its wrong Q2 GDP forecasts following the earlier miss in Wholesale Inventories, which printed at -0.5% on expectations of a +0.3% increase, and down from a downward revised -0.1% (was +0.2%). That time has arrived, with Barclays the first to slash its already stall speed 1.0% Q2 GDP forecast by a whopping 40% to 0.4%. Looking forward to the imminent revisions from Goldman and, of course, Joe “Almost as good as Groundhog Phil, almost” Lavorgna.
From Barclays:
US Q2 GDP tracking: Down four-tenths to 0.6% on decline in wholesale inventories
Wholesale inventories declined by 0.5% m/m in May, significantly weaker than our forecast (+0.2%) and the consensus (+0.3%). In addition, growth in April was revised down to -0.1% from +0.2%. This subtracted 0.4pp from our Q2 GDP tracking estimate, which now stands at just 0.6% q/q (saar).
Caterpillar Just Downgraded The Whole World
Who could have possibly foreseen this? Perhaps anyone who saw our chart from yesterday showing the recession implied in CAT sales…
Global Business Confidence Slips to Multi-Year Low
Mismeasuring Our Economy: Why the GDP is Not Useful

We Are Going To See More Detroits - Ron Paul On Gold, Detroit Bankruptcy, And Rand 2016 - CNBC 7/23/13

Obama touts economic “recovery,” steps up assault on workers

One day before President Barack Obama kicked off a speaking tour aimed at presenting himself as the champion of a “thriving middle class,” White House Press Secretary Jay Carney made clear that the administration would provide no federal funds for the city of Detroit.
The city’s emergency manager, Kevyn Orr, threw the city into bankruptcy last week in order to shred city workers’ pensions and health benefits and dismantle basic public services. In reply to questions from the press, Carney on Tuesday declared that the administration “is absolutely not” planning to provide financial assistance to the city, adding that the question of Detroit’s debt obligations would have to be decided by “local leaders and creditors.”
Detroit’s “local leaders”—including Orr, Detroit Mayor David Bing and Michigan Governor Rick Snyder—have been in continual contact with the Obama administration to coordinate their offensive against the working class. The bankruptcy of the former auto capital of the world will be used as a precedent to mount similar attacks, using unelected officials such as Orr and the bankruptcy courts, against workers’ pensions and health benefits in cities across the country.
Carney’s statement underscores the duplicitous character of Obama’s “jobs” speaking tour, which begins Wednesday with an appearance in Galesburg, Illinois. The White House will use the tour to posture as a defender of the “middle class,” even as it carries out sweeping attacks on social programs and the pensions and health benefits of public-sector workers, and hundreds of thousands of federal workers begin to lose one day’s pay a week as a result of furloughs imposed as part of “sequester” spending cuts.
Obama’s renewed public focus on economic issues, like virtually every move the administration makes, is largely dictated by political calculations of the most cynical sort. The aim is to divert attention from the revelations of massive illegal spying by the government on the American people and the unpopular international manhunt and persecution of whistle-blower Edward Snowden.
Obama has adopted the catchphrase of “growing the economy from the middle out,” as opposed to the “winner-take-all approach” approach of the Republicans, as White House spokesman Jay Carney put it. With characteristic contempt for the intelligence of the public, Obama and his political handlers are seeking to conjure up vast differences in economic policy between the Democrats and Republicans, even as the two parties work hand in glove to impoverish the working class.
The administration’s insistence that it will not provide financial assistance to Detroit and its approval of Emergency Manager Kevyn Orr’s plans to slash the pensions and health benefits of Detroit city workers represent a continuation and escalation of a policy dictated by the corporate and financial elite.
The White House has already made clear that Obama will not advance any significant proposals to address mass unemployment and worsening poverty in his speech in Galesburg Wednesday. Instead, he will take the opportunity to praise his administration’s track record on the economy.
Any so-called “jobs” measures he does propose will be tailored to the interests of big business, including tax cuts and subsidies for corporations.
During Tuesday’s press conference, Carney bragged about the Obama administration having created 7 million jobs since the start of the economic “recovery.” This ignores the fact that the working age population has grown by 9.4 million during this time. The labor force participation rate has fallen every year of the Obama’s administration.
The Obama “recovery” has in four years failed to recoup the jobs lost since 2008 by some 2 million. The National Employment Law Project reported last year that while the majority of the jobs lost during the 2008 crash were middle-income, 58 percent of new jobs created during the “recovery” were low-wage, paying between $7.69 and $13.83.
But while the economic situation for millions of people remains disastrous, life has never been better for the social layer Obama really represents. The speculators, swindlers and Wall Street mafia are, thanks to Obama’s economic policies, enjoying record stock values and record profits. CEO pay is higher than ever, as is the chasm separating the rich and super-rich from everyone else. The incomes of the top 1 percent grew more than 11 percent between 2009 and 2011—the first two years of the Obama “recovery”—while the incomes of the bottom 99 percent actually shrank.
Meanwhile, Obama is pressing forward with his proposal, outlined in his budget for the next fiscal year, to slash $400 billion from Medicare and $130 billion from Social Security.
The goal of the Obama administration, working with the Republicans and local governments, is to roll back the living conditions of the vast majority of the population to levels not seen since the 19th century, prior to the advent of the eight-hour day, child labor laws, comprehensive public education, pensions, health benefits, workplace health and safety regulations, etc.
In response to the ruthless assault of the financial oligarchy, spearheaded by Obama, the working class must advance, no less ruthlessly, its own policy. We call on workers and young people to join the Socialist Equality Party and take up the struggle to break the power of the corporate and financial elite and reorganize society on the basis of social need, not private profit.
Andre Damon
Republished from: World Socialist Web Site

US to create two major economic unions without Russia and China

US to create two major economic unions without Russia and China. 50672.jpeg
By early 2013 a long-term strategic goal of the U.S. foreign policy became clear. The goal is to create two economic unions to confront the growing power of the BRICS member countries and form two large markets under the control of the United States in the Atlantic and Pacific areas without the participation of China and Russia.
The Trans-Atlantic and Trans-Pacific Partnership aim at creating an "economic" NATO, Transatlantic Free Trade Area (TAFTA) between the United States and the European Union. The defense budget of its member countries amounts to approximately 58 percent of global military spending.
According to the British Prime Minister David Cameron, the effect of the new union will be expressed in the growth of the EU's GDP by $157 billion, the U.S. - $130 billion and the rest of the world - $138 billion. The abolition of the transatlantic tariffs within five years will ensure revenue growth between the U.S. and the EU of over $120 billion. In addition, joining of the U.S. and European markets will determine the need to introduce a new transatlantic currency, which will allow restructuring or eliminating all debts denominated in dollars and euros and moving onto a new stage of economic and monetary expansion.
The outline of the economic agreement in the Pacific version with the participation of traditionally inflexible Japan is not clearly defined, but given the enormous influence of the U.S. in the largest countries of the region and surrounding areas such as Australia, Indonesia, Malaysia, the Philippines and others, it is safe to assume that the degree of integration will be at least as high as TAFTA.
As a result, the World Trade Organization where liberal economists dragged the Russian government, threatening the collapse of many domestic industries and agriculture, will lose the ability to influence and regulate the global financial community.

The U.S. and its formal and informal allies will gain a tangible profit. The fading U.S. economy will get a boost for the development, opening up new markets in Europe and Asia. In the event of adoption of the new currency the U.S. has a real chance to get rid of heavy debts whose value exceeds the annual GDP. Those not satisfied with this order will face convincing explanations from the Navy, Air Force and the U.S. Army as well as the allies.
China and the BRICS locked in the system of their own markets will lose. In the end, Obama will provide stability to the faltering U.S. global domination structure, and with the military and economic potential of the Atlantic and Pacific allies will build, at least by 22nd century, a new geopolitical world model, in which, figuratively speaking, the movement of the sun will be controlled by Washington.
Everything was going fine. The concept of trans-Atlantic space was supported by British Prime Minister Cameron, German Chancellor Merkel, European Commission President Barroso, and French President Hollande.
Everything was fine until idealist Snowden, who, explaining what prompted him to make public the facts of the crimes committed by the U.S. authorities, said that since childhood he was raised to be fair, just and respectful of people's rights. This classic set frequently used in the description of the U.S. government, turns out, delivered a serious blow to this country. 
It turned out, for example, that the level of espionage intelligence on the territory of West Germany, the largest European power and ally of the United States, is only slightly inferior to the scale of spying on Iran, Pakistan or Afghanistan. A representation of the European Union in New York and its embassy in Washington are also entangled in a dense network of espionage.
All European countries are covered by wiretaps of the National Security Agency, the largest of the classified U.S. intelligence services. Japan also requested clarification on the fact of wiretapping of its embassy in Washington. The presidents and leaders of the European Union who a couple of months ago applauded the prospects for transatlantic integration (excluding the UK premiere) harshly condemned the U.S. and demanded an explanation from the Obama administration. 
It is unlikely that these leaders and common voters in Europe were satisfied with the excuses of the fight against terrorism offered by a high-ranking CIA official Vincent Cannistraro.  Diplomats and leaders of the European Union, with all due respect to their ability and moral integrity, do not look like fans or supporters of terrorism. Despite this, no other explanation was provided by the Americans. Secretary of State Kerri frankly stated that the search of the U.S. secret services (i.e., espionage) for data on other countries is normal, and this practice is not unusual.
The Americans are dragging out time, and it is certainly a winning tactic, but only in case that the flow of revelations from Snowden who confirmed that he had thousands of incriminating documents can be stopped. This is why the Sheremetyevo airport area is infested by security, and not only Russian.
In any case, Snowden's revelations led to the fact that the plan to create a Trans-Atlantic area, not to mention the Pacific, is under a threat of a total collapse, of at least suspension. It is unlikely that even pro-American politicians in Europe will take a risk to be proactive in this area. An indefinite delay in the creation of a new economic zone under the control of the United States provides an opportunity to increase economic and military potential of the BRICS countries, primarily China and Russia. While Russia so far is quite sluggish in realizing its potential outside for various reasons, Beijing, no doubt, will be able to take advantage of the situation.
Yuri Skidanov

The State of the Union

Dave Hodges
Activist Post

The illusion of normalcy is almost in the rear view mirror with regard to our previous way of life in the United States. Even those who have the most virulent cases of normalcy bias, will soon be beyond their self-deluded ability to deny what has happened to our once great country.

Congratulations to those that have awakened, see the hopelessness of our collective situation, and I want to extend my best wishes to the smart ones who are leaving our lawless country in record numbers.

If you are thinking about leaving the country, you should know that the new immigration bill even has an “Iron Curtain” provision which tries to make it very difficult for the disenfranchised, the exploited middle class and the liberty lovers from exiting the country. Even my friends in foreign countries cannot believe that we have not already revolted against this tyrannical and out-of-control government.

The fact is, we will never revolt against the tyranny which permeates our nation until life-threatening hunger and thirst force the issue. Hollywood, instead of making movies about Zombies should focus on the real zombies: the 90% of the American people who are dead from the neck up. However, Hollywood does get it right with movies such as the Hunger Games, Elysium and World War Z to condition the public on how life is going to be.

There is no justice in our country, only judicial power and corruption. Our judges don’t follow the Constitution and our police are increasingly corrupt.

Gangster organizations such as the Jon Corzine-led MF Global, can steal billions from investors and nobody goes to jail.

Many child protective services, Dyncorp and Goldman Sachs can get caught running child sex slavery rings and nobody goes to jail.

The five megabanks continue to launder gangster drug cartel money, get busted and nobody goes to jail.

We have the five megabanks continuing to commit mortgage fraud and theft of personal property through MERS, and nobody goes to jail.

Our leaders have murdered millions of innocent people in the Middle East, and nobody goes to jail.

Goldman Sachs shorted stocks on 9/11, did so on the eve of the housing bubble, did so again on the eve of the Gulf oil explosion and nobody goes to jail.

Nancy Pelosi admits on 60 Minutes that Congress can engage in insider trading and nobody goes to jail.

A sitting ambassador and his security team can be murdered and rescue teams can be blocked from saving them and nobody goes to jail.

Our government terrorizes a Florida nurse with a SWAT team who goes to the wrong house and nobody goes to jail.

The Pentagon has announced that they illegally take orders from NATO and the UN and nobody goes to jail.

A President can illegally spy on journalists, use the IRS to harass his enemies, expand the unconstitutional spy programs against the American people, have DHS declare war against Christians, veterans and constitutional supporters, begin to commit deliberate acts of treason by hosting and training foreign troops on American soil to confiscate guns, send guns to our enemies in al-Qaeda to foment the murder of a head of state in Libya and attempt to do the same in Syria, commit fraud through the use of a faked birth certificate, ship guns to gangsters in Mexico to undermine the Second Amendment resulting in the death of three Border Patrol personnel, assert the power to kill American citizens and then proceed to do so with drones and much more, and he does not go to jail.

The police send jaywalkers in Portland, Oregon to jail, while law enforcement all across the country walk all over our constitutional rights on a regular basis and nobody goes to jail.

Our citizens are increasingly jailed for filming the police, yet our government can film us anywhere, anytime for any purpose and nobody from the government goes to jail.

In the land of the free and the home of the brave, we have over 25% of the world’s prison population because our prisons are being turned into for-profit-criminal enterprise organizations. In Kelo v. New London, the Supreme Court now allows the government to steal your property and give your property to their rich developer friends in violation of the Fifth Amendment. The 7th Circuit Court ruled last spring that the banks can legally steal your money after you deposit it. Federal pensions are being stolen by Jack Lew and the Treasury Department. Starting January 1, 2014, you will have money stolen from you by the IRS for not having healthcare insurance. We have a science adviser that wants to perform post-term delivery abortions (murder) up until the age of three. And we are being conditioned that this is the way that it is supposed to be.

When a government kills its citizens with drones, permanently detains its citizens without due process. ships guns to foreign narco-terrorists and will bail out Goldman Sachs but not Detroit who declared bankruptcy and is now stealing pensions, we have a totally lawless government. When the government forces the country into unaffordable healthcare complete with death panels (IPAB) designed to prematurely kill off the old and the handicapped young, rigs its elections with electronic voting machines, the TSA molests the flying public without probable cause, kills its dissenting journalists, steals from the people to give to Wall Street; and when the price of food, oil, home utilities and prescription medication soars out of reach of the average person, the globalists will be well on their way to their agenda to deindustrialize, depopulate, and destroy the cultural and moral fabric of the country.

America is on the verge of tax protests, the prevalence of ghost malls, protests over having our bank accounts ravaged, food shortages, food riots, the dramatic rise of homeless villages which will be called Obamavilles, uprisings from the unemployed, greatly increased organized gang activities with kidnappings and mass shootings. This is no longer America, it is Beirut and Baghdad.

Our school system is a travesty. Over 30% of our children don’t graduate from high school; in some places like Detroit, 60% don’t graduate. We take what is supposed to be a state-run education system, federalize it and continue to destroy the system with flawed programs such as No Child Left Behind and the current program of Common Core without one shred of research that demonstrates that the programs work. Under a decade-plus of No Child Left Behind, SAT scores fell almost 30% in reading comprehension. The US has the most expensive education system in the world and the average student has a $25,000 predatory student loan debt.

There are secret no-fly lists and political enemies' lists constructed and enforced in the same manner as the KGB, the Stasi and the SS. Information continues to indicate that when martial law comes, over a million Americans, who have been branded a dissenter, will be rounded up.

The government doesn’t want violence to break out. However, they have prepared for massive civil unrest as DHS has accumulated 2700 armored personnel carriers and two billion rounds of ammunition. The President has all the martial law powers he needs in the NDAA, Executive Order 13603, the Patriot Act, the Civilian Inmate Labor Program, REX 84 and on and on it goes. Clearly, the globalists want the people to just lay down and take their beating by surrendering their guns and their civil liberties. Foreign troops are being trained to take our guns and when the shooting starts in the streets, there will be nowhere that is safe.

I am just getting started on America’s State of the Union……

Amazingly, nobody does anything about it. Nobody gets mad and protests. We protest the death of Trayvon Martin with the goal of setting back our previously improved race relations by 60 years, but nobody protests our Wall Street gutted economy.

We get the government we deserve. Our apathy, lack of moral integrity, lack of courage, our laziness, and our collective national ignorance are why this country is probably done. I seriously doubt if the 10% can successfully resuscitate the 90%. Facts mean nothing to the 90%. And when you confront them with the truth regarding the takeover of this country by the banksters, their eyes glaze over and they revert back to their programmed response and call you a conspiracy theorist.

The truth about the present State of the Union is that there is no union and we live in a police state.

America is defeated but all is not lost. I am reminded of the saying which says that “Freedom is the space between the bars.” Americans better get used to that idea and learn to operate in a different paradigm ... and learn to do so very quickly.

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.

10 Reasons the U.S. Economy Is Stuck

More than five years after the great recession hit, the  US economy is still sputtering. The government  revised GDP growth figures down last month to a meager 1.8% for the first quarter of this year. It doesn’t take a PhD in economics to understand why: we have a demand problem. And we have a demand problem because the vast majority of consumers – aka workers – are not earning enough to pay for healthcare, education and retirement, let alone all the other stuff stores and service providers have to sell.
The reality is that we’re hollowing out the middle class by wiping out well-paid jobs with benefits and replacing them with low-wage ones that often lack them. That’s damaging not only to people who are living on smaller paychecks – or who are indeed unemployed – but also to the health and viability of the overall economy.
No matter what New York Times columnist Thomas Friedman and his followers say, we are not living in a  “sharing economy”. We are living in a zero-sum economy – in which a handful of investors and owners win at everyone else’s expense.
But ultimately, it will catch up with investors, too. The US economy is engaged in a vicious cycle in which low-wage jobs and under-employment stimulate little demand, giving companies little reason to hire workers. Would-be workers then get discouraged and drop out of the workforce. They lack money to buy things, so consumer spending sags and companies don’t hire or offer raises to workers they know they can keep. Repeat.
So, sorry Friedman et al: you can strain your brains for as many offbeat ideas and back-of-taxicab discoveries as you like, but the only way to break the cycle is to ensure everyone can work – and that those workers get more of the fruits of their labor. Until we address the following 10 problems head-on, the idea that the economy is truly recovering will remain a fantasy.
Problem 1: Wages are falling
The recession caused a giant drop in consumer demand, but the culprit wasn’t just a loss of housing wealth. Wages for most workers are either stagnating or declining. In fact, real median wages fell by about 2.8% between 2009 and 2012. That’s bad for workers and bad for the economy. It’s also insulting  because the drop happened even as productivity increased 4.5%. So much for the sharing economy.
What’s worse, lower-wage workers – who are already struggling to keep up – saw bigger declines than those in the middle and higher end. Those earning between $10.61 and $14.21 per hour saw real wages drop by 4.1% on average.
As Reuters’ Felix Salmon points out in his  crafty analysis of the data, hairstylists and cosmetologists earned $12 an hour on average in 2009. But by 2012, they earned just $10.91 an hour – a drop of more than 9%. Restaurant cooks lost 7.1% over the same period.
Problem 2: the middle class is losing ground and getting hollowed out
The most recent census data shows that while a small group of rich people are getting richer, the middle class is taking a serious beating. U.S. median income fell to $50,054 in 2011, the most recent full year in which data is available. That’s down 8.1% since 2007, just before the great recession started. Overall, median income has fallen 8.9% from its peak in 1999. Meanwhile, the middle class is shrinking, as many Americans slide down the economic ladder — the very inverse of the American dream of economic mobility.
Republished from: AlterNet

McDonald’s CEO to BTV: Wish I Had A Financial Plan Like We Have; Blame Parents For Obesity Problems

McDonald’s Corp. President and CEO, Donald Thompson sat down with Bloomberg Television’s Betty Liu live from McDonald’s headquarters in Oak Brook, IL this morning to discuss earnings, expansion struggles in China and Europe, whether management is out of touch with minimum wage workers, on whether McDonald’s after midnight will expand nationally, and what he really things about parents who are pointing their fingers at McDonald’s as the cause of America’s obesity problems.

 China is a growth market:

 More Customers counting calories:

Don Thompson grades President Obama:
On claims that McDonald’s is out of touch with the minimum wage worker:
“I will be kind I will say I find a lot of the comments interesting. The website [that posted McDonald’s financial planning documents] has been out there about five years. It was intended to do something very simple, to have someone who might be entering the work force for the first time, for someone who has not had management training to be able to manage finances. You can go online now and there are thousands of these kind of websites out there. Five years ago to provide something like that internally I thought it was very innovative idea. When I was at that age, I did not know about financial planning or management. It really took my wife to help me out. I would have loved to have something to help guide me through.”

On whether the minimum wage in the U.S. should be raised:
“I think we have legislators and many people that will determine whether or not it should be raised. We have always been an above minimum wage employer. We are about providing opportunity. A lot of people can debate the entry-level point. We will continue to provide entry-level jobs. There was a time when one over every 10 people has worked at McDonald’s. We can provide the number of jobs we can and when we can help to have a viable income, we will provide that opportunity so the person can rise to the system and gain greater and greater wealth.”
On whether the payroll tax and the implications of consumers turns out as bad as he expected:
“We never did a warning. We said we did not know how we would play out. Thus far we have not seen a tremendous impact from petrol tax alone. What we see is the informal evening out category is contracting. So we are seeing that play out. We are gaining market share. We feel really good about that. Nonetheless, it is fairly tepid in terms of information meeting category.”

On YUM! Brands outdoing McDonald’s sales in China:

“We have been gaining shares back again in China. It has been a troublesome relative to what happened with Chicken. There was an antibiotics scare, which was not part of our supply chain, but nonetheless, it impacts consumers. That was followed by Avian Influenza. We have seen that Avian influenza impact has dissipated. That is great for the marketplace. We’re seeing consumers starting to come back relative to chicken purchases. China will be a positive market for us. We are not gauging our success in China based on someone else.

On McDonald’s earnings:
“Everyone needs to keep in mind, we grew revenues. Not everyone is growing revenues. We grew income. We grew earnings per share and we have taken the market share. We have outperformed the competitive set. There are a few players doing well. We’re going well in the U.S. relative to our own positioning. To continue to grow we have to continue to appeal to customers…We have to make sure we have a good image. A new look.

On whether he has a bigger responsibility to make sure there is a pathway to higher level jobs for all employees:
“When I started with McDonald’s 23 years ago I came here as an electrical engineer. I had no idea what McDonald’s meant or what had happened. Over the past 23 years I have seen amazing things. 40-percent of our executives started as hourly employees. Over 50-percent of the franchisees’, those that own and operate restaurants started as hourly employees. There is no other institution that can boast of those kinds of opportunities and success stories across the system. What we’re really about is making sure of regardless of where you came from in life – some of those people have high-school diplomas only. Some of them have their MBA’s, but every last one of them has the opportunity to show what they can do. We stand for opportunity, always have. Also a very diverse system. We represent those who walk through the doors.”

On McDonald’s using fresh ingredients:
“Health will be determined by the person who decides to buy it. I will tell you, yes, more fruits and vegetables is part of our plan. I would say to you a Big Mac, two all beef patties, lettuce, cheese, pickles, onions on a sesame seed bun, is all real food. It is all very fresh food. Because of the number of people we serve, it does not get fresher… if you get an egg from us it is one of the freshest you’ll ever have.”

On McDonald’s being seen as encouraging obesity problems in America:
“There are a lot of questions that we will keep getting. We are a lightning rod because of our size. We will keep answering the questions…I would offer to any of our customers and consumers in general, get to know McDonald’s and your own research, your own data. Don’t listen to what someone says and don’t listen to just what I say. Do your own research. I think what you will find you’ll understand this is a broader issue in the world, broader than McDonald’s”
“There is a responsibility we  have a socially responsible business to be able to help people – our customers realize they have opportunities to get whatever they like to get. We can help change. We have done that. We have added more fruits and vegetables. We  have changed our Milk and try to make containers more appealing for children. We have done a lot of things. We will continue to try to do more.”

On parents claim that McDonald’s is marketing fatty foods to kids:
“I saw when was the last time you saw Ronald [McDonald] eating food marketing to your children? You have not seem him do that. That was a big thing. People attack Ronald McDonald… He is a clown. He represents our charity. The average person eats at McDonald’s 3-4 times a month. Here is question. I am parent of two children. I know what my kids eat. I would bring my kids to McDonald’s then and I will bring them now because the food it high-quality, safe, and they have choices. If my kids want to have fries, I will let my kids have fires if they are active and if they are moving. There is nothing wrong with having some fries. Burges and fries are an American staple. By the same token, my kids eat vegetables and they have no choice but to eat them. I would just offer to us all, get to know what we have. We have great side salads. They don’t represent a lot of our sales but we have great salads. We have a snack wraps and smaller sizes. We have apples and smoothies.”

On whether McDonald’s after Midnight will expand nationally:
“The U.S. leadership team will make a determination as to what happens with McDonald’s after midnight. We have similar initiatives in other parts of the world, and I think there is data that says this is a positive things. I think a franchisee and leadership teams will decide how aggressively we will move into something like that.”

Millions of dollars that were supposed to be spent protecting American troops from deadly improvised explosive blasts on Afghan roads were squandered by government contractors whose inaction may have cost lives, according to a new inspector general report

Millions of dollars that were supposed to be spent protecting American troops from deadly improvised explosive device (IED) blasts on Afghan roads were squandered by government contractors whose inaction may have cost lives, according to a new inspector general report.
Roughly $32 million was supposed to pay for so-called “culvert denial systems,” which are essentially steel grates installed to block access to the drainage culverts that run beneath Afghan roadways. Insurgents had been using the culverts to hide explosives.
“Contractors either had failed to properly install culvert denial systems, rendering those systems ineffective and susceptible to compromise by insurgents, or did not install them at all,” according to the report by Special Inspector General for Afghanistan Reconstruction, which was made public Tuesday morning.
“Our preliminary investigation found that at least two Afghan contractors—with a total contract amount of nearly $1 million—in one Afghanistan province have committed fraud by billing the U.S. government for the installation of 250 culvert denial systems that were either never installed or incorrectly installed,” the report says. 
The report says the inspector general’s office is continuing its investigation, and that one goal is to determine whether the failure by any contractors to perform the work may have been a factor in the death or injury of American troops.
Already, the report says, one Afghan contractor and his sub-contractor have been arrested and charged with fraud and negligent homicide.
Investigators appear to have had a great deal of difficulty determine just how many of the drainage covers were supposed to be installed, and of those, how many actually were put in place. In part, the report says, that is because the contracts were handed out by a variety of different military commands inside Afghanistan. The inspectors were able to find contacts for at least 2,500 installations, but found hundreds of those were never actually completed.
Col. Jane Crichton, a military spokeswoman in Afghanistan, told The New York Times that military commanders in Afghanistan have introduced quality assurance experts and policy guidelines to better oversee projects. She told the paper, which first reported on the inspector general’s findings, that commanders were also trying to locate the grates and ensure they were working.

Leaked emails reveal conspiracy to throw Detroit into bankruptcy

Bryan Dyne
24 July 2013
Leaked emails show that as far back as January, there were backroom discussions being held between Detroit and Lansing public officials and corporate law firm Jones Day suggesting that the best course for Detroit would be to send it through Chapter 9 bankruptcy.
The revelations expose the charade by Emergency Manager Kevyn Orr who claimed he only made the“tough decision to file bankruptcy reluctantly after thorough negotiations with creditors, pension trustees and public sector unions. In fact, all along Orr, Republican Governor Snyder, Detroit’s Democratic mayor and the powerful financial interests behind them, were determined to use federal bankruptcy laws to circumvent legal obstacles, including the state constitution and the city charter, for the gutting of city worker pensions and sale of public assets.
The emails were obtained by Robert Davis, a figure in the local political establishment tied closely to the American Federation of State, County and Municipal Employees (AFSCME) Council 25. The Detroit unions have complained that Orr’s bankruptcy filing halted their efforts to reach a “good faith” deal with the emergency manager to impose his demands on their members.
Davis is involved in an ongoing lawsuit over whether Michigan Governor Rick Snyder violated Michigan’s open meeting laws by ultimately appointing Orr not by the interview process through the Emergency Financial Assistance Loan Board (ELB), but through closed door discussions.
One of the emails dated January 31, from Dan Moss, an associate at Jones Day who worked with Orr on the Chrysler bankruptcy and restructuring, told Orr the “ideal scenario” would be for Detroit Mayor Dave Bing and Snyder to “go through an orderly Chapter 9.” Moss then stated his own reservations about whether an emergency manager would be useful in a city where his powers would be questioned at every turn, versus bankruptcy, where a federal judge simply dictates to the city what to sacrifice. Others involved in the discussions include Jones Day Managing Partner Stephen Brogan, Jones Day Partner Corinne Ball and Rick Snyder’s Transformation Manager Richard Baird.
As last week’s events showed an emergency manager can declare bankruptcy anyway. As Orr himself once said, “I have a very powerful statute. I have a more powerful Chapter 9.” From the perspective of the local and national ruling elites—who consider Detroit a test case for cities around the country—they got the best of both worlds: an emergency manager essentially unchallenged from the Detroit establishment and a Chapter 9 bankruptcy to expedite the gutting of the city.
Davis previously revealed secret correspondence between Governor Snyder and Mayor Bing over the selection of Orr as emergency manager long before any public vetting process began. Orr was part of a Jones Day team, which pitched its services to the governor last January. The governor selected Orr because of his role as a bankruptcy attorney for Chrysler during the 2009 restructuring, where he shut down hundreds of dealerships, wiping out thousands of jobs. Moreover, as an African American and Democrat, Orr, would give the Republican governor some political cover in an overwhelmingly black population, officials thought.
The emails expose the anti-democratic nature of the emergency manager law itself. Voters last year rejected Public Act 4 overturning the emergency manager law passed in 2011. In response, Governor Snyder declared that an old law, Public Act 72, was back in force, allowing the state to appoint an “emergency financial manager.” Then, against the will of the public, the governor essentially changed the name of Public Act 4 to Public Act 436—the current EM law—and forced it through with bipartisan support in a lame duck Congress. PA 436, which gives even greater dictatorial powers to an “emergency manager” than PA 72, went into effect just after Orr was installed under the old law, and then was automatically upgraded three days later.
In his emails to his law partners at Jones Day, Orr expressed concern over the voter’s defeat of the previous law, noting, “So although the new law provides the thin veneer of a revision it is essentially a redo of the prior rejected law and appears to merely adopt the conditions necessary for a chapter 9 filing. The news reports state that opponents of the prior law are already lining up to challenge this law.”
Corinne Ball from Jones Day seems to have been a sounding board for Orr as to whether he would accept the position. An email sent by Orr from January 31 thanks her for showing him “alternative ways to skin this cat.” Such comments also show that Orr was being scouted by Snyder well before his appointment was officially announced or he was even interviewed, illegal under even PA 436, much less other Michigan laws.
It should come as little surprise that the decision to bankrupt Detroit was made long before the imposition of the emergency manager. The Obama administration used the same cynical ploy during the restructuring of GM and Chrysler in 2009, first claiming it wanted to avoid bankruptcy and then using the courts and the collaboration of the UAW to carry out a “managed bankruptcy.” The result was the shutdown of a dozen plants, the destruction of tens of thousands of jobs and the halving of wages for new workers.
Last year’s consent agreement with Detroit, where city workers had their wages and benefits cut by 10 percent, was the first step in this process. Emergency management and bankruptcy were the next logical steps, providing Wall Street free access to loot not just workers’ wages and benefits, but legally protected pensions and public assets. The latter includes the city’s lighting and water systems and even the masterpieces of the Detroit Institute of Art.
All the talk about the tragic, “tough choice” to declare bankruptcy was a lie. There was even discussion of how to present it, so that local politicians would take as little heat as possible. One email from Jones Day lawyer Dan Moss to Orr notes, “Making this [bankruptcy] a national issue is not a bad idea. It provides political cover for the state politicians.” The same email also notes that a successful Detroit bankruptcy, and the requisite destruction of living standards, will open up further patronage jobs for Snyder and Bing—“Cabinet, Senate or Corporate”—once their terms are ended.
Jones Day was involved in the discussions on Detroit’s bankruptcy, and knew it was the end goal. As such, they positioned themselves to be hired by the city as its “restructuring consultant” to a tune of millions of dollars, and now stand to make even more. One estimate placed the legal costs for Detroit’s bankruptcy at around $100 million, of which Jones Day now will most likely make a significant fraction.
Even the late July 18 filing was carried out on a conspiratorial basis. Orr and Snyder rushed the bankruptcy filing to preempt lawsuits filed by pension trustees and public-sector unions seeking to block bankruptcy on the grounds that it would lead to unconstitutional pension cuts. Attorneys for Snyder reportedly asked the lawyers representing the pension funds for a five-minute delay before they sought a temporary restraining order to block the bankruptcy filing. During those five minutes, Orr’s attorneys filed the bankruptcy petition in Detroit.
The destruction of basic democratic forms in Detroit is part of the broader assault on democracy nationally and internationally. The financial aristocracy realizes it cannot impose deeply unpopular measures on the population through democratic means and is therefore increasingly adopting authoritarian methods.
Republished from: World Socialist Web Site

The Great Edifice of the “Recovery” Is Crumbling

by Phoenix Capital Research
The corrupt edifice that has propped up the US big banks and financial system is beginning to crumble before our very eyes. I’ve warned subscribers of Private Wealth Advisory that this would happen. Now it is.
First and foremost, the former head of the Bureau of Labor Statistics (the group in charge of calculating the “official” unemployment numbers and inflation measures) has stepped forward and stated, point blank, that the unemployment numbers in the US are a joke.
Keith Hall believes the US economy is a lot sicker than the 7.6 percent unemployment rate would lead you to believe.
And he should know.
Hall was, from 2008 until last year, the guy in charge of Washington’s Bureau of Labor Statistics, the agency that compiles that rate.
“Right now [it’s] misleadingly low,” says Hall,who believes a truer reading of those now wanting a job but without one to be more than 10 percent.
Source: NY Post

The Government claims we’re in recovery because the unemployment rate is falling. But we have the former head of the BLS stating that real unemployment is greater than 10%.
The revelations continue with the inflation measure used by the Feds/ Federal Reserve. I’ve written about the various gimmicks the Feds use to downplay inflation many times before, but now the former head of the BLS has openly admitted the Fed’s methodology is incredibly outdated.
So how do the Feds measure inflation? They perform hundreds of thousands of surveys to see what consumers are buying. Then the BLS sends people into stores to determine how much these items cost.
So the Feds are relying on people:
1)   Remembering what they bought last month for groceries
2)   Remembering the price they paid
I don’t remember either these things in any great detail. I doubt 99% of people do either. And yet this is the basis for our inflation metrics!
The phony unemployment data and unbelievably low inflation measure are two of the biggest reasons that the Fed has to continue with its futile QE efforts. And the media is finally catching on that both are a joke.

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Best Regards
Graham Summers