Thursday, July 2, 2015

Criminalizing the unemployed

Inside the lobby of a nondescript building situated in a strip mall along Eight Mile Road, just outside Detroit, a tall man emerges from behind a door. Like a nurse calling for a patient at a doctor's office, he bellows a name.
Attorney David Blanchard stands, picks up his briefcase, and begins to stroll down the hall, past a series of unremarkable offices that double as courtrooms. Beside him is a 50-something woman who works as an information technology specialist. A representative from the woman's employer trails behind.
The woman, who'd prefer to be known as "Sue," is set to meet Administrative Law Judge Raymond Sewell, one of a cast of characters who routinely decides the fate of a parade of people that come through his doors. Sewell and his colleagues take their jobs seriously; they're an affable bunch, which is perhaps surprising, given their line of work: As judges who work for the Michigan Administrative Hearing System, they routinely settle the mundane — tax bills, compensation issues, and disputes over unemployment benefits.
But really, the boring can be earth-shattering for the folks who await their decisions. These administrative law judges dive into hefty problems, giving their cases as much attention as you'd find in the highest courts in the land. They take notes, deliver grand pronouncements, and hand down life-altering decisions.
Sewell's office is decorated with a photo of President Barack Obama and emptiness otherwise. The 78-year-old judge is a former Macomb County prosecutor. He's a lanky gentleman who speaks with a deep, gentle croon.
The reason Sue has taken off work to meet with the judge on an unpleasantly hot and humid day in June is because the state of Michigan believes she's a criminal.
It began like this: In October 2014, Sue filed for unemployment insurance after being laid off from a contracted IT position. Before the economy self-destructed in 2008, she worked at Ford. Today, like many, she relies on contractual employment opportunities. It was the understandable decision to file for unemployment that led her into Sewell's world. According to the state, Sue has misrepresented how much income she earned during periods she claimed to be unemployed.
State records showed she collected a check from the beginning of January 2014 until she was laid off in October.
But that's not the case, according to Sue. It's indisputable when the job began. It was Valentine's Day.
"I remember," she later tells me. "I brought cookies."
Michigan's Unemployment Insurance Agancy is adamant, however, saying its records indicate Sue has received about $2,200 in benefits from the unemployment insurance fund that, according to the agency, she illegally obtained. And because of the alleged fraud, the state says she is required to pay $9,000 in penalties — combined with the $2,200, she's looking at a bill of more than $11,000.
That would freak just about anyone out. And Sue is freaked.
Blanchard, with 10 years of experience handling similar cases, is able to quickly pinpoint an error. For whatever reason, he says, the state's computer system, wrongly, took the lump sum she earned in the first quarter of 2014 (Jan. 1 to March 31), and divided that figure by 13, before spreading the uniform dollar amount across each week.
He hands Sewell a spreadsheet illustrating the error. The representative appearing on behalf of Sue's firm confirms there's no record of her starting work before Feb. 14.
The look on everyone's face in the room presents the same question: What's going on here?
No one from the UIA was present, but Blanchard posits the error is yet another screw-up generated by the UIA's software program used to detect fraud.
Sue appealed the claim, he says, but it fell on deaf ears. Literally.
"[The appeal] was not considered by a human person," says Blanchard.
"You're saying the agency used the computer to determine fraud," Sewell responds.
Yes, without any human oversight, a machine had determined Sue committed fraud. Sewell promptly dismisses the fraud claim, saying Sue was legally entitled to unemployment benefits.
Given those circumstances, some of Sewell's colleagues are baffled by what they've seen lately.
Since 2011, under Republican Gov. Rick Snyder, the state has spent tens of millions of dollars to slowly implement a computer software program that handles applications filed with the UIA. The effort to curb waste is consistent with a vision posed by Snyder of operating government with a business-minded attitude.
The program — called MiDAS — detects possible fraud by claimants.
The problem, says Blanchard, who represents several plaintiffs in a recently filed federal lawsuit that challenges the UIA's alleged "robo-adjudication" system, is that apparent lack of human oversight. MiDAS seeks out discrepancies in claimants' files, according to the lawsuit — and if it finds one, the individuals automatically receive a financial penalty. Then, they're flagged for fraud.
"The system has resulted in countless unemployment insurance claimants being accused of fraud even though they did nothing wrong," the suit says.
The net effect, Blanchard asserts, is that Michigan now has a system in place that criminalizes unemployment. It's a process that, contrary to its stated intention, is creating fraud, rather than eliminating it — a MiDAS touch, if you will, where the state gets the gold: The program has been a windfall for Michigan, collecting over $60 million in just four years.
The state has also gloated about the software's progress in detecting significant amounts of fraudulent claims, but what officials don't seem to grasp is the enormity of the situation, according to administrative judges and attorneys who are routinely involved with fraud cases.
Claimants can be issued a warrant for their arrest, Michigan can garnish their wages and federal and state income taxes, and some succumb to bankruptcy. The number of claimants who have faced those circumstances for being falsely accused of fraud is entirely unknown, but it's clearly an emerging contingent.
That's not to say legitimate claims aren't being brought. But administrative judges, UIA workers, and attorneys say bogus fraud charges are being levied by the state with greater frequency.
So instead of protecting some of the state's most vulnerable residents, they say, the UIA has ushered in a disaster. And those affected by the process, buried in debt, have been pushed to the brink — financially and emotionally. A couple have even attempted suicide in the wake of the "decisions" by MiDAS.
Blanchard says the system is such a mess that he tells people not to apply for unemployment unless their case is a slam dunk.
"People who are clearly eligible are being accused of fraud on a regular basis and it wrecks their lives," he says.
For Sue, the aftershock of being accused of fraud has left an everlasting mark: She never plans to file for unemployment again.
Now, many working-class individuals like her won't either.

'Supports Gov. Snyder's commitment'
The story of Sue and millions across the U.S. should come as no surprise. The economy tanked several years ago and a sharp increase in unemployment applicants followed.
As a result, the Unemployment Insurance Fund — a somewhat complex system that operates off revenue generated by both the state and federal government — began making a significantly higher amount of overpayments to ineligible claimants.
In Michigan, the U.S. Department of Labor found in 2009 that the state's UIA paid an estimated $3.7 billion in unemployment benefits. Of that, the UIA overpaid an estimated 7.2 percent — or $266.4 million, the labor department said.
In 2010, the UIA issued a request to identify technology that could improve the system. Officials said they would tap federal money, generated by the stimulus package approved under Obama for the project, in an attempt to follow suit with the federal government's efforts to curb overpayments.
The ways in which states decided to address unemployment insurance waste varied, according to William Hays Weissman, a shareholder of Littler Mendelson office in Walnut Creek, Calif., who has written extensively on the issue, meaning there wasn't a uniform model to adhere to.
But the desire in Michigan to grapple with UI overpayments attributed to fraud wasn't heightened until Snyder's election in 2010.
In one of his first moves in office, Snyder signed a law that cut Michigan's unemployment benefits from 26 weeks to 20, leading the state to pay "fewer weeks than any other state" at the time, the New York Times observed.
Democrats in the state House and Senate howled, painting the move as an attempt by Republicans to attack the working class and the poor.
But what practically no one realized was that Snyder also greenlighted a bill to purchase software to address unemployment overpayments and fraudulent claims.
A complete overhaul of Michigan's 30-year-old UI system carried a price tag in the tens of millions of dollars.
The Michigan Chamber of Commerce, the largest lobbying group for business in the state, took notice. And it delivered full-fledged support of the endeavor.
Saying the state's UI fund was in a "crisis," a representative from the chamber used the labor department's 2009 figures on overpayment claims — that 7.2 percent of "waste and fraud" — and twisted them to bolster support for the software.
"Based on prior federal data, we know that approximately 30 percent of all overpayments are made to people who were working while fraudulently collecting UI benefits, meaning approximately $143 million was paid to individuals who were working while fraudulently collecting UI benefits in 2009," the chamber executive testified.
That wasn't the truth, however. When the nonpartisan House Fiscal Agency examined the bill, they also addressed the 7.2 percent figure cited by the labor department, and noted only 0.7 percent was attributed to fraud, an estimated $25.9 million.
By implementing new software, "the state may save some unknown portion of those overpayments and fraudulent claims," the HFA concluded in its analysis.
Not exactly inspiring stuff. But with Snyder's signature, the transformation of the Michigan UIA quickly commenced and became a lucrative opportunity for several contractors.
In July 2011, the state awarded Greenwood Village, Colo.-based Fast Enterprises a $47 million contract to begin work on the MiDAS project, a deal officials pegged as a modernization of the state's unemployment insurance infrastructure.
According to the contract, the goals of the MiDAS system were to improve customer service, eliminate manual, labor-intensive process, increase data accuracy, and reduce costs of operations, "specifically in removal of redundant operations, elimination of data errors, detection and elimination of fraud [where possible], and the introduction of streamlined processes."
At the time, the UIA fell under the Department of Licensing and Regulatory Affairs (LARA). (Today, it's part of the newly created Department of Talent and Economic Development.) The unemployment system overhaul was meant to align with Snyder's vision for LARA, according to a National Association of State Chief Information Officers award application for MiDAS filed by the state last year. The vision of LARA procured by Snyder, the application notes, is to reinvent government as "customer driven and business minded."
Meanwhile, the UIA awarded an $18 million bid to Chicago-based CSG Government Solutions to provide a "full-time, onsite project management [team] to oversee a comprehensive and complex rewrite of Michigan's current Unemployment Insurance Systems," according to the contract. By September, Michigan purchased the Waterford-based On-Point Technologies case management product for $2 million as a temporary stopgap to "detect and recoup money owed to agencies" until MiDAS was fully operational.
The state also awarded a $14 million contract to SAS Analytics to implement fraud detection software that would be integrated into MiDAS. The purpose was a simple one, SAS wrote in a press release announcing the contract: It will "fight fraud, waste and abuse in the state's unemployment insurance and food stamps program."
Finally, in October 2013, the MiDAS software became fully operational. Its rollout coincided neatly with a reduction in the UIA's staff by roughly one-third. It was a curious decision, especially given the circumstances of the situation: The agency was still bogged down with a mountain of claims stemming from the economic recession.
"While the rollout had its challenges," Fast Enterprises wrote last year, "all-in-all [it] went smoothly — especially when compared to similar rollouts of benefits systems in other jurisdictions."
Supporters of the move said it was the right choice. For years, they said, the Michigan UI system was outdated, generating a backlog of cases and long lines.
But it hasn't been entirely smooth for everyone. The long lines might have disappeared, but they've been replaced by a cascade of computer glitches.

'Whole point' is to prevent hunger, loss of home
There are a few typical reasons why you'll file for unemployment: You've been discharged, laid off, or you quit.
With the implementation of MiDAS, filing now requires you to sign up for the so-called MiWAM Web portal, essentially a website created for claimants to manage their unemployment benefits.
If MiDAS makes a fraud determination, the process has the effect of a steamroller.
First, you'd lose access to a legal advocate — similar to a defender appointed in criminal cases. Michigan is one of few states in the U.S. that provide such a program.
"With that happening, individuals are faced with either going out into the market trying to obtain legal representation," says Anthony Paris, attorney for the Detroit-based Sugar Law Center, which represents claimants in fraud cases and is also an institutional plaintiff in the pending federal lawsuit. "And usually, we're their first call, as far as that goes."
Paris says calls to Sugar Law over alleged fraud claims increased after MiDAS was implemented — and they've skyrocketed ever since the federal complaint was filed in April. The attorney says his office has a list of about 250 individuals who have received questionable fraud allegations from the state over their unemployment benefits. With such an influx of individuals seeking help, the law center's short staff has been bogged down.
The software also retroactively seeks out discrepancies going back six years, Paris says, potentially dredging up fraud charges for individuals who could be on the job again.
Things only get more stressful from there. After a fraud determination has been made, a questionnaire is sent from the UIA. If you don't fill it out — some claimants have missed the notification in their MiWAM account (more on that later) — the state presumes fraud has undoubtedly been committed.
If you do fill it out, and the state still believes you've committed fraud, you have 30 days to appeal, which then can lead you into the courtroom of an administrative judge.
Meanwhile, the state stops paying you unemployment benefits and can immediately start collecting garnished wages and state and federal income taxes.

Thousands rally in austerity demonstration in Athens

By Robert Stevens and Christoph Dreier
In Athens’ main Syntagma Square, more than 10,000 people gathered Tuesday evening to call for a “Yes” vote in Sunday’s referendum on EU austerity measures in Greece. Many demonstrators carried European Union and Greek flags, as well as pro-EU placards, shouting, “Greece, Europe, Democracy” or “Save Democracy, Yes to Euro”.
Demands for more austerity and the resignation of the government were common among the protesters. Those attending were mainly the more affluent sections of the middle class, including professionals and managerial level public sector employees.
Numerous well-heeled executive and business types also attended, who were politically affiliated to the former governing big business parties, New Democracy (ND) and the social-democratic PASOK. No party officially claimed to have organised the protest, but it was supported by both ND and PASOK. Many big and medium-size companies backed the demonstration.
Denouncing the Syriza government as “liars”, one woman carrying a Greek flag, said, “We need a civilized government again”. Others called for a government of national unity, including the parties of the “left, right and centre.”
Speaking from a public address system, the mayor of Athens, who was previously supported by PASOK, told the demonstration that the government should resign.
The size of the protest was reportedly boosted by workers, who were compelled to attend the demonstration, according to a report in the Guardian. The newspaper published a note from one of its readers who said the Greek ministry of employment and social insurance reported that dozens of complaints were made to it throughout the day by workers.
Those who refused to join delegations were apparently threatened with immediate dismissal. According to the reader, “The ministry mentions shipping companies, companies trading in foodstuffs, German companies trading electric goods and insurance companies explicitly, but adds that the complaints come ‘from everywhere imaginable’”.

Puerto Rico To Increase Sales Tax To 11.5%

(Juli McDonald)  Sales tax in Puerto Rico will increase by 4-and-a-half percent starting Wednesday, from 7 to 11-and-a-half.
It’s one measure being taken to address the U.S. territory’s current economic crisis. Puerto Rico’s governor said this week they cannot repay $72 billion dollars in debt.
Governor Alejandro Garcia Padilla has created a financial task force to restructure public debt.
He said they’ll have to reach an agreement with creditors to postpone debt payments so money can be invested in job creation to accelerate the economy.

Now We Know Why Huge TPP Trade Deal Is Kept Secret From The Public

(Dave Johnson)  A key section of the secret Trans-Pacific Partnership (TPP) trade agreement has been leaked to the public. The New York Times has a major story on the contents of the leaked chapter, and it’s as bad as many of us feared.
Now we know why the corporations and the Obama administration want the TPP, a huge “trade” agreement being negotiated between the United States and 11 other countries, kept secret from the public until it’s too late to stop it.
The section of the TPP that has leaked is the “Investment” chapter that includes investor-state dispute settlement (ISDS) clauses. WikiLeaks has the text and analysis, and the Times has the story, in “Trans-Pacific Partnership Seen as Door for Foreign Suits Against U.S.“:
An ambitious 12-nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document.
The Trans-Pacific Partnership — a cornerstone of Mr. Obama’s remaining economic agenda — would grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations.
The WikiLeaks analysis explains that this lets firms “sue” governments to obtain taxpayer compensation for loss of “expected future profits.”
Let that sink in for a moment: “[C]ompanies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals….” And they can collect not just for lost property or seized assets; they can collect if laws or regulations interfere with these giant companies’ ability to collect what they claim are “expected future profits.”
The Times‘ report explains that this clause also “giv[es] greater priority to protecting corporate interests than promoting free trade and competition that benefits consumers.”
The tribunals that adjudicate these cases will be made up of private-sector (i.e., corporate) attorneys. These attorneys will rotate between serving on the tribunals and representing corporations that bring cases to be heard by the tribunals. This is a conflict of interest because the attorneys serving on the tribunals will have tremendous incentive to rule for the corporations if they want to continue to get lucrative corporate business.
The Corporate Influence Over the TPP
Largely ignored by the media — until now — the TPP has been in a negotiation process for more than five years. The TPP has 29 “chapters” covering various issues, but only five of these chapters cover what would normally be considered “trade.” It is a “docking” agreement, which means that any country in the region (e.g., China) can add themselves to the agreement just by signing on.
These negotiations have been conducted in secret, but more than 500 corporate “trade advisors” have access to the text of the agreement. Many of the negotiators themselves are past (and/or likely expect to be future) corporate attorneys or executives. U.S. Trade Representative Michael Froman, for example, “received over $4 million as part of multiple exit payments when he left Citigroup to join the Obama administration,” according to a report, “Obama Admin’s TPP Trade Officials Received Hefty Bonuses From Big Banks,” by investigative journalist Lee Fang.
This one-sided process has been causing concern among representatives of many of the key “stakeholder” groups that have been excluded from the negotiating process. Labor unions, environmental groups, consumer groups, health groups, and food-safety groups, as well as LGBT, democracy, faith, and other “stakeholders” who have been denied a seat at the TPP negotiating table, have feared that the process would produce an agreement that tilts the democracy/plutocracy power balance even further in the direction of corporations and billionaires than it is now.
ISDS Tilts Playing Field to Corporations
AFL-CIO President Richard Trumka, speaking March 18 at the Peterson Institute for International Economics, compared the extraordinary ability of corporations to sue governments to the lack of redress when labor organizers are murdered to explain how ISDS tilts the playing field to corporations over other stakeholders:
ISDS is just a fancy way to give corporations a special legal system that circumvents democratically accountable laws and courts.
ISDS allows corporations to directly challenge almost any law or regulation based on ill-defined concepts such as “fair and equitable treatment.” In contrast, all provisions for enforcing labor rights in the TPP require action by member governments — neither workers nor unions can enforce the labor rights provisions on their own even by suing in national courts.
I’m not just talking theory here. In the first three years of the Labor Action Plan in Colombia, 73 trade unionists were murdered for trying to organize workers. These are men and women just like you and me who were killed for trying to exercise their rights under the law and speak in a collective voice. That’s terrible, and yet these trade deals have been completely ineffective in addressing this injustice. And the U.S. government has taken no official “trade” action in response. Anyone with a lick of common sense can tell you that not only are these killings a human rights catastrophe, they are driving down wages and workplace standards in Colombia — and in every country that trades with Colombia.
But here’s the thing: unlike the clunky labor provisions, which require workers to wait for government action, these ISDS provisions can be used immediately by multinational firms to challenge efforts by TPP member countries to develop a modern regulatory state in key areas. ISDS tilts the playing field away from democracy, from workers and consumers, and toward big business and multinational investors.
In sum, if corporations feel they have been denied “expected” profits by a government regulation, ISDS lets them circumvent a country’s courts and go to an international corporate tribunal with their grievance. But if labor organizers are murdered, workers and their families have nowhere to go.
This shows the extent to which the playing field gets tilted. The same imbalance exists between corporate interests and the interests represented by environmental groups, consumer groups and all other non-corporate stakeholders: a special channel for corporations, and a brick wall for the interests of the rest of us.
Advantage: Foreign Firms
While ISDS would give American multinational corporations tremendous powers over other governments, it places non-U.S. corporations (and, of course, non-U.S. subsidiaries of American multinational corporations) at a tremendous advantage over U.S. firms by giving only them — not U.S.-based firms — this right to challenge U.S. laws and regulations.
Global Trade Watch explains this advantage:
The TPP would grant foreign investors and firms operating here expansive new substantive and procedural rights and privileges not available to U.S. firms under U.S. law, allowing foreign firms to demand compensation for the costs of complying with U.S. policies, court orders and government actions that apply equally to domestic and foreign firms. … The text allows foreign investors to demand compensation for claims of “indirect expropriation” that apply to much wider categories of property than those to which similar rights apply in U.S. law.
The TPP is the largest trade agreement in history, involving more than 40 percent of the world’s GDP. One way President Obama and the Chamber of Commerce sell the TPP is by saying it will change everything and will rewrite the rules for doing business for the 21st century. This leak shows us that they are right about the TPP changing everything and rewriting the rules. But the leak shows that the people and organizations opposing the TPP were right too, because the changes give corporations vast new powers to overrule democratic governments.
Origins of ISDS
This ISDS mechanism originates from a time when investors in wealthy, developed countries wanted to invest in projects in unstable “third-world,” “banana-republic”-style countries but worried that dictators or revolutionary governments could decide to seize their property — a refinery, railroad or factory — leaving them with no recourse. So before investing, the target country agrees that in the case of disputes, a tribunal is set up outside and beyond the reach of the country’s justice system (courts where the judge is a brother or other crony of the dictator, for example), providing recourse in the event of unjust seizure of property. This would make investment less risky.
However, under agreements like the TPP, these provisions apply to and override the laws of modern, stable, developed countries with democratic governance and fair court systems. The corporate representatives negotiating modern trade agreements see such democratically run governments as “burdensome” and chaotic, introducing “uncertainties” and “interfering” or “meddling” with the corporate order. As onesupporter of these ISDS provisions put it, they protect corporations from “the waves of madness that occasionally flit through the population.”
Secret and Rushed
It is understandable that the giant, multinational corporations want the TPP kept secret and want Congress to pass “fast-track” trade-promotion authority that requires Congress to pass the TPP within 90 “session” days after the agreement is made public. Fast track sets up a rushed process that does not give the public time to read, understand, analyze and consider the ramifications of it — never mind time to effectively organize opposition. This is because, as U.S Sen. Elizabeth Warren (D-Massachusetts) pointed out, “supporters of the deal say to me, ‘They have to be secret, because if the American people knew what was actually in them, they would be opposed.'” Warren continued:
Think about that. Real people, people whose jobs are at stake, small-business owners who don’t want to compete with overseas companies that dump their waste in rivers and hire workers for a dollar a day — those people, people without an army of lobbyists — they would be opposed. I believe if people across this country would be opposed to a particular trade agreement, then maybe that trade agreement should not happen.
Fast track also prevents members of Congress from amending (i.e., fixing) flaws that might be found in the agreement even in the limited time available to comprehend and analyze the agreement. With the expected massive corporate public-relations campaign that will occur as the agreement comes up for a vote, this sets up a rushed process where the Congress becomes more concerned with not “killing the whole agreement” than with getting it right.
Larry Cohen, the president of the Communications Workers of America (CWA), says the leak shows that the TPP is “worse than imagined”:
The 56 pages of the Investor chapter of the Trans-Pacific Partnership are worse than imagined and must be a wake up call for our nation. Amazingly, this chapter is sealed for four years after either adoption or rejection of the TPP. Everything we read and learn makes “Fast Track” authority unimaginable. It’s secrecy on top of secrecy.
The TPP is shaping up to be an exercise in words about citizen rights that are not enforceable versus expanded corporate rights to sue governments for supposed diminishment of corporate profits. Section B of the leaked chapter documents new provisions of Investor State Dispute Settlement (ISDS), the secret tribunal process that is above national law or courts.
U.S. Sen. Sherrod Brown (D-Ohio) released the following statement:
It appears that the investor state provision being considered as part of TPP will still amount to a corporate handout at the expense of consumers despite the assurances of our negotiators. We need strong language to prevent multinational corporations — like Big Tobacco — from using trade agreements to challenge health and safety laws.
It’s telling when Members of Congress and their staff have an easier time accessing national security documents than proposed trade deals, but if I were negotiating this deal I suppose I wouldn’t want people to see it either. Trade agreements should lift American workers and their counterparts abroad, rather than creating a race to the bottom.
From the Wikileaks statement:
Julian Assange, WikiLeaks editor said: “The TPP has developed in secret an unaccountable supranational court for multinationals to sue states. This system is a challenge to parliamentary and judicial sovereignty. Similar tribunals have already been shown to chill the adoption of sane environmental protection, public health and public transport policies.”
Public Citizen’s Global Trade Watch has this analysis of the leaked text:
The leaked text provides stark warnings about the dangers of “trade” negotiations occurring without press, public or policymaker oversight. It reveals that TPP negotiators already have agreed to many radical terms that would give foreign investors expansive new substantive and procedural rights and privileges not available to domestic firms under domestic law.

Global parasitism creates conditions for a new financial meltdown

The way in which financial parasitism, fed by the ultra-cheap money policies of the US Federal Reserve and other central banks, is creating conditions for another crisis is revealed in figures on takeovers and mergers in the first half of this year.
According to a report published in the Financial Times on Tuesday, a “heady cocktail of ultra-low financing costs” lifted US merger and acquisition activity to almost $1 billion in the first six months of the year, an increase of 60 percent over the same period in 2014 and the highest level since records started to be kept in 1980. The price paid to purchase companies has reached new highs, averaging 16 times earnings before interest, taxes, depreciation and amortisation. This compares to 14.3 times in 2007. In one major takeover, the ratio was 20.
The feeding frenzy is now greater than that which preceded the financial crisis of 2008, and it is not confined to the US. Global merger and acquisition activity has risen by 38 percent in the first half of 2015 compared to a year ago, reaching $2.18 billion, its highest level since 2007.
These figures are another expression of the fact that parasitic activity—purchasing a company, often with borrowed money obtained at very low rates, and carving up its assets—is increasingly replacing productive investment as a source of profits.
But there is a sense, even among participants, that this orgy cannot continue indefinitely. One “senior banker” told the Financial Times that this year “feels like the last days of Pompeii: everyone is wondering when will the volcano erupt.”
Warnings of another financial explosion and the incapacity of central banks and financial authorities to deal with it were at the centre of the annual report of the Bank for International Settlements issued on Sunday.
The BIS, which is sometimes called the central bankers’ bank, has been severely critical of the low-interest regime established by the pouring of money into financial markets by central banks. It was one of the few official institutions to warn of the build-up of conditions for a crisis in the years preceding 2008, and has been critical of the policies pursued since then.
According to the BIS, “In some jurisdictions, monetary policy is already testing its outer limits, to the point of stretching the boundaries to the unthinkable.”
Its report points out that the roots of the crisis are to be found in the steady decline in real interest rates starting in the 1980s. The fall in interest rates gave rise to an increase in debt, meaning it was increasingly difficult to increase rates lest this set off a crisis. When a crisis did emerge, the response was to lower interest rates still further.
In his comments on the report, the head of the BIS monetary and economic department, Claudio Borio, said that real interest rates in the major economies had never been so low for so long. “Rather than reflecting the current weakness,” Borio said, “they [low interest rates] may in part have contributed to it by fuelling costly financial booms and busts and delaying adjustments. The result is too much debt, too little growth and too low interest rates.”
Puncturing the myth that central bankers and monetary authorities are somehow in control of the global financial system and have a clear idea about what they are doing, the BIS report notes that “there is great uncertainty about how the economy works.” It says “risk-taking in financial markets has gone for too long,” and the “illusion that markets will remain liquid when under stress has been too pervasive.”
Fear about the “illusion” of liquidity refers to a situation where investors and speculators all want to sell and suddenly there are no buyers to be found.
The BIS warned that the flooding of the markets, giving rise to record low interest rates, is creating the conditions for a crisis which central bankers may not be able to control because of their previous policies. “The more one stretches an elastic band, the more violently it snaps back,” the report said.
Therefore, there should be a move to normalise monetary policy to meet the situation when the next recession comes, “which will no doubt materialise at some point.” Central banks would not be able to meet that situation by lowering rates because they are already at or near zero. “Of what use is a gun with no bullets left?” the report asks.
The basic thrust of the BIS report is that while financial bubbles, fuelling inflated share buybacks and merger and acquisition deals, may provide solutions in the short term, in the long run they simply create the conditions for another crisis.
While it is not spelt out directly, the BIS critique of the present policies is an expression of the fact that, in the final analysis, the source of all forms of profit is the surplus value extracted from the working class. Therefore, the only way for capital to overcome its crisis and restore stability is a massive increase in exploitation.
Thus, the central policy recommendation in the report is for a shift away from reliance on monetary policy and the imposition of “initiatives that are more structural in character.”
The bitter experiences of the past decade have already underscored what this means—the destruction of working conditions and cuts to vital social services and other government funding, coupled with “flexibility” of labour markets. An environment conducive to “innovation and entrepreneurship”—that is, a free rein for business—must be established, according to the BIS.
It also calls for measures aimed at “boosting labour force participation.” This means making available new sources of cheap labour by forcing those on disability or other forms of pensions back into the workforce as their entitlements are slashed.
The report does not spell out how such measures—which are already being implemented in all the major economies—are to be intensified, other than saying that it will be “politically difficult.” The difficulties refer to the fact that their imposition is fundamentally incompatible with the maintenance of any kind of democratic regime.
The BIS chose to keep silent on what its prescriptions meant politically. But a report issued by the American banking and investment giant JPMorgan Chase two years ago spoke out very clearly on what it saw as the major problems in the political systems of a number of countries in Europe, including Greece, Spain, Portugal and Italy.
The constitutions of those countries, it said, had been drawn up after the defeat of fascism and incorporated features inimical to a resolution of the problems for capital created by the financial crisis. These included “weak executives, weak central states relative to regions, constitutional protection of labour rights; consensus-building systems which favour political clientalism, and the right to protest if unwelcome changes are made to the status quo.”
In other words, the kind of political, economic and social conditions that prevailed in fascist regimes, where capital had unrestricted freedom of operation, should be restored.
Two years on, this agenda is being carried out in Greece through the dictates of the European Union, the International Monetary Fund and the European Central Bank, which insist that any expression of the interests of the mass of the people, even within the limited framework of bourgeois democracy, must be overridden and trampled on in the interests of the profit system. But it is not confined to Greece.
The economic and social devastation in Greece does not arise from conditions peculiar to that country, but from the breakdown of the global capitalist system. Greece is the testing ground for the kind of measures to be carried out in every country, which, as the BIS report makes clear, are assuming ever-greater urgency for the financial and corporate elites.
Nick Beams

Top Earners Beware: A Tax Increase to 50% Is on the Cards!

by Harry Dent
There has been one book after the next on the issue of wealth and income inequality.
The latest is Inequality: What Can Be Done by Anthony Atkinson, where he argues this is an issue that cannot be left to the market, but one that requires political debate and action.
Indeed, even Republicans are talking about these issues. And Democratic candidates Bernie Sanders and Hillary Clinton are especially hitting it hard (even though Hillary epitomizes the 1%).
Books like Capital in the Twenty-First Century by Thomas Picketty delivered a number of broad strokes on the topic. Still, they’ve come at the right time and have helped bring the issue into public debate. (Despite its popularity I like his book the least because it had a lot of distortions of history. He suggests inequality is much higher today than even in Medieval or Roman times. We don’t have good statistics for back then, but I can assure you that inequality was worse when most people were slaves or peasants at best.)
The big picture is this: Inequality grows and fades in cycles as does most anything else. We’re at the height of it today, so something’s got to bring it down. And there will be a number of public policy changes in the near future to do just that.
Even beyond that, you can expect several natural shifts as well. When the financial bubble bursts, it will hit the rich much harder than the average person. After all, they own way more financial assets than the average person who owns little.
This is something we’ve been warning about for years.
Income inequality always goes to long-term extremes at the height of the fall bubble season. Think 1929 and 2007. It then falls to the lowest levels in the late spring or early summer seasons like in the mid-1970s.
In 1929, the top 1% received close to one-fifth of the income at just over 19%. One thing that Atkinson comments is that after World War II, inequality tapered off. Indeed, by the early 1970s, the top percent received a mere 8%.
Today, it’s almost back to 1929 levels: The top 1% receives 18% of the income. And in the UK, it’s back to 15.5% after bottoming as low as 5.5%, also in the 1970s.
Let me just share with you the most important graph from Atkinson’s new book:
Tax Cuts and Inequality What this shows is the change in income going to the top 1%, and the change in the top marginal tax rate, between 1960-64 and 2005-09.
Not a single one of those listed countries saw their top 1% pay higher taxes on their income between the early ‘60s and the mid-2000s!
However, a few of them – like France, Germany, and Spain – have seen almost no marginal rate cuts for their top earners. And those countries have either seen just minor increases in income inequality, or even minordeclines.
The countries at the extremes of income inequality – the U.S. and UK – meanwhile saw the largest drops in marginal tax rates, nearly 50%. And surprise, surprise, they have seen massive increases in inequality.
Evidence like this makes it hard to argue not to raise marginal tax rates on the rich – especially in the U.S. and UK.
More importantly, capital gains taxes highly favor the rich. They’re as low as 15%. That percentage is nothingconsidering most of their income comes from those profits on investments!
So let’s be clear on one thing: Inequality will be addressed to an even greater degree in the economic crisis we see ahead. For the U.S., definitely in the next two administrations.
Economists in this area mutually agree that we’ll see higher marginal tax rates on the highest incomes in the coming decade. They see it rising to 50%. It could go even higher since capital gains will likely get raised to ordinary rate levels.
For the lower-income populations, they also predict mandatory raises in minimum wage – up to $10 to $15. They also see major investments in infrastructure that will create middle class jobs and take advantage of historically low long-term interest rates.
What the most affluent people should be worried about is protecting their income from rising taxes. There are many ways to do that, ranging from investing in safer tax-free municipal bonds, to trusts, and to life insurance-based annuities.
As for financial assets, the best way to protect those gains is simply to sell them – both before bubbles burst, and before capital gains rates get increased to ordinary tax rates.
Maybe those financial assets could go a bit higher, but it’s not worth holding out with two major threats bearing their teeth.
Harry Dent Harry


EuroZone Profiteers: How German and French Banks Helped Bankrupt Greece

(Common Dreams) – Alexis Tsipras, the prime minister of Greece, has called a national referendum this Sunday to call the bluff of the European Union and International Monetary Fund who are trying to force his country to accept severe austerity in return for effectively rolling over much of the countries’ debt.
Today Greece owes its creditors €323 billion ($366 billion), some 175 percent of the country’s gross domestic product. How did it end up owing so much money?
“We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there,” Joseph Stiglitz, former chief economist of the World Bank and a Nobel Prize winner in economics, wrote in the Guardian newspaper today. “It has gone to pay out private-sector creditors – including German and French banks.”
A recent CorpWatch report – The EuroZone Profiteers –  can help shed further light on this matter. While it’s true that corrupt Greek politicians borrowed billions for shaky government schemes from these banks, there was a very good reason that the financiers made these rash loans: they were under pressure from European Union bureaucrats to compete in a global marketplace with U.K. and U.S. banks.
Take the German banks. While Anglo-American banking is dominated by many branches of a few major banks, Germany had some 4,000 unique institutions in 1990 that made up a three-pillar system of savings banks, co-operative banks, and private banks. These banks lived modestly on miniscule profits of one percent in comparison to Britain’s four mega-banks, which boasted returns as high as 30 percent on equity. Under pressure from Brussels, the German government agreed to push some of the bigger banks to become more “market oriented” by withdrawing state guarantees known as “anstaltslast” and “gewährträgerhaftung” to back them up in times of failure.
Likewise Prime Minister Jacques Chirac began a process of privatizing French banks in the late 1980s to “shoulder its responsibilities to the business community.” (The banks that had been nationalized over time by General Charles de Gaulle in 1945 and by President Pierre Mauroy in 1982) Like the Germans, the French banks enjoyed state protection, and thus were easily able to raise money to lend out.
The European Union was firmly behind this since they wanted European entities to compete on a global stage. “Sometimes it is said that competition is not to the benefit of all: It can favor larger firms, but hurt smaller businesses. I do not share this view,” Mario Monti, the European competition commissioner, said in October 1997. “Naturally, competition will reward greater efficiency. It will put pressure on less-performing companies and on sectors already suffering from structural problems.”
But French banks knew that they could not make billions by competing in Germany, nor were German banks expecting to vanquish the French. They looked instead to a simpler and easier market to loan out the plentiful supply of cash they had – the poorer, mostly southern European states that had agreed to take part in the launch of a common currency called the Euro in 1999.
The logic was clear: In the mid-1990s, national interest rates in Greece and Spain, for example, hovered around 14 percent, and at a similar level in Ireland during the 1992–1993 currency crisis. So borrowers in these countries were eager to welcome the northern bankers with seemingly unlimited supplies of cheap cash at interest rates as low as one to four percent.
Take the case of Georg Funke, who ran Depfa, a German public mortgage bank. Depfa helped Athens get a star credit rating, raised €265 million for the Greek government railway, helped Portugal borrow €200 million to build up a water supplier, and gave €90 million to Spain to construct a privately operated road in Galicia. For a while, the middle class in Greece like the middle classes in Spain and Ireland, benefited from the infrastructure spending stimulus. When Depfa nearly collapsed in 2008, Funke was fired.
Or take the case of Georges Pauget, the CEO of Crédit Agricole in France, who bought up Emporiki Bank of Greece for €3.1 billion in cash in 2006. Over the next six years, Emporiki lost money year after year, blowing money on one foolish venture after another, until finally, Crédit Agricole sold it for €1 – not €1 billion or even €1 million – but a single euro to Alpha Bank in October 2012. Crédit Agricole’s cumulative loss? €5.3 billion.
Money poured in from other banks like Dexia of Belgium. Via Kommunalkredit, Dexia loaned €25 million to Yiannis Kazakos, the mayor of Zografou, a suburb of Athens, to buy land to build a shopping mall. It made similar loans to other Greek municipal authorities including Acharnon, Melisia, Metamorfosis, Nea Ionia, Serres, and Volos.
“The tsunami of cheap credit that rolled across the planet between 2002 and 2007 … wasn’t just money, it was temptation,” financial writer Michael Lewis wrote in Vanity Fair. “Entire countries were told, “The lights are out, you can do whatever you want to do, and no one will ever know.”
Bloomberg took a look at statistics from the Bank for International Settlements, and worked out that German banks loaned out a staggering $704 billion to Greece, Ireland, Italy, Portugal, and Spain before December 2009. Two of Germany’s largest private banks—Commerzbank and Deutsche Bank—loaned $201 billion to Greece, Ireland, Italy, Portugal, and Spain, according to numbers compiled by BusinessInsider. And BNP Paribas and Crédit Agricole of France loaned $477 billion to Greece, Ireland, Italy, Portugal, and Spain.
There is a very good parallel to this situation of cheap and easy money in the recent sub-prime mortgage crisis in the U.S.
In a recent book, A Dream Foreclosed: Black America and the Fight for a Place to Call Home, author Laura Gottesdiener explains that 30 years ago, African Americans were unable to borrow money to buy houses because of a practice called redlining—where banks drew fictitious red lines around neighborhoods they would not lend to even if the borrowers had good credit and good jobs.
Today, redlining is illegal, but the reverse has happened. In the 1990s, poor people around the U.S. were offered 100 percent loans to buy houses at low rates with virtually no collateral.
“The mortgage market for white Americans was flush. There was no more money to be made from issuing mortgages to white Americans. The banks needed new consumers,” Gottesdiener told Corporate Crime Reporter magazine. “So, they moved into the minority market. But they weren’t selling the conventional loans. They were selling these incredibly exploitative predatory loans.”
We know how the sub-prime crisis ended in 2008 – and it almost brought down the global economy.
What happened after the creation of the Euro was very similar. The Greek government is in debt today to Germany and France not just because they borrowed money for unwise projects, but also because the bankers pushed them to take money that they would never have been able to approved under normal circumstances.
But as Stiglitz has noted, these German and French banks have now been rescued. An ATTAC Austria study showed that 77 percent of the €207 billion provided for the so-called “Greek bail-out” went to the financial sector and not to the people.
How the Greeks will vote on the European Union austerity package this Sunday is hard to predict, but more must be done – it is time to investigate the bankers who created the EuroZone crisis and hold them accountable.
But the bankers are not the only ones. There must be repercussions for the European Union bureaucrats and politicians who promoted the idea that free-market competition in financial services would benefit everyone. And not least of all, there should be a serious debate on how to reverse many of the policies that were used to create the European single market in financial services.
This piece was reprinted by RINF Alternative News with permission or license.

1,400 CPS layoffs after $634M pension payment

Mayor Rahm Emanuel and CPS cut 1,400 jobs and made $200 million in cuts to meet a teachers' pension deadline.

Mayor Emanuel had delayed the $634 million pension payment until the eleventh-hour, waiting to see if state lawmakers in Springfield would act. When no relief came from state funding, the payment was made.

Calling the whole system "intolerable, unacceptable and unconscionable," Mayor Emanuel is targeting state lawmakers after another round of CPS layoffs and cutbacks.

"I want Springfield to get off their duff, start providing the political leadership to make some decisions, to right the decade's worth of political wrongs that got all of us to this point," Mayor Emanuel said.

Interim CPS CEO Jesse Ruiz says very few teachers are part of the 1,400 jobs cut, and most will be in administration and special education programs. The layoff notices went out Wednesday, Ruiz said.

"If that's where they have to cut costs, that's where they have to cut costs to keep educators in their positions," said CPS parent Georgette Johnson.

The district will also cut funding for elementary sports teams, high school will start 45 minutes later, and the facility maintenance budget will be reduced 25 percent. All that after CPS borrowed $634 million dollars Tuesday to pay the Chicago Teachers Pension Fund.

"We have made more pension payments during the last four years than the prior 15 years of my tenure," Mayor Emanuel said.

On Wednesday, the mayor offered two plans to tackle the pension crisis. Option "A" would be for Springfield lawmakers to create one pension system statewide. Right now, Chicago residents are taxed twice. They pay for Chicago teachers' pensions, as well as suburban and downstate teachers. Option "B" is what Emanuel calls an "all in" approach: ask Springfield to boost funding, make teachers contribute more to pension costs, and increase property taxes.

The Chicago Teachers Union is against asking teachers to pay, but would like to see targeted tax increases.

"Let the mayor go to Springfield and ask for a millionaire's tax, let the mayor go to Springfield and ask them to close the corporate loophole taxes," Chicago Teachers Union Vice President Jesse Sharkey said.

Teachers are planning to rally outside City Hall at 10 a.m Thursday.

LTV 137% - In Unprecedented Development, Lenders Now Take Record Losses On Every Used Car Loan

This wasn't supposed to happen.
With the US consumer hunkering down in 2015 and barely spending more than in the comparble period last year, the only silver lining had been auto sales driven almost entirely by access to cheap credit; in fact, as the chart below shows while revolving credit has barely budged from its post-crisis lows with consumers still failing to fall for the "recovery" narrative, Uncle Sam's zero cost loans which are now reaching well over 6 years in average duration have provided a generous support for the US auto industry. In addition to the bubble in student loans, car loans have been the only confirmation that the US consumer - that driver of 70% of the US economy - is still alive.

So in a world in which one can buy cars now and worry about the costs later, much much later, auto sales should have been soaring as they have been in recent years, right?

Well, not for GM, which moments ago reported a surprising drop in June auto sales, which declined 3% M/M to 259,353 from the prior month, driven by an 18.1% plunge in Buick sales, with Chevy and Cadillac also posting declines, despite expectations of a 3% headline increase. This even as GM announced pickup deliveries were up 33% with the Silverado up 18%. Curiously, GM's main domestic competitor, Ford, reported a 9% drop in F-Series sales in June.

What is more surprising is that even as GM posted its first monthly sales miss in a long time, it now appears to be engaging in yet another stealth government bailout, this time not on the balance sheet but the income statement.
As GM reported, even in a month of broader decline in sales, "State and local government sales were up 6 percent in June, with full-size pickup and Tahoe PPV deliveries more than doubling."
The US government is buying GM pickup trucks now?
It gets better: "State and local government sales are up 19 percent calendar year to date."
So just what is the dollar amount of these soaring government purchases from a company that was bailed out by the same government several years ago? That information is not disclosed, as otherwise it may crush the fiction that it is the US consumer that is behind GM's powerful "rebound" and not the entity that has an unlimited balance sheet.
But what is most concerning in light of weak sales not only from GM but virtually all other carmakers, both domestic and foreign, is what was reported in the OCC's semiannual report on "Semiannual risk perspectives" in which we learned something truly stunning: according to the OCC, "60 percent of auto loans originated in the fourth quarter of 2014 had a term of 72 months or more. Extended terms are becoming the norm rather than the exception and need to be carefully managed."
But the real stunner is the following: also according to the OCC, quoting Experian, "average advance rates well above the value of the autos financed. In the fourth quarter of 2014, the average LTV for used vehicle auto loans was 137 percent." In other words banks are assured to take major losses on their loans and they are still lending at a record pace. Or rather, not so much banks because as we have shown before, the primary source of auto loans in recent years has been just one, as shown below.

Believe it or not, it gets worse:
"advance rates for borrowers across the credit spectrum are trending up, with used vehicle LTVs for subprime borrowers (credit score < 620) averaging nearly 150 percent at the end of 2014 (see figure 24)."

For those who are confused, an LTV of over 100% at origination guarantees that the lender will suffer losses on the loan (absent some dramatic price bubble which sends car prices soaring in the coming years).
This explains why the Fed stopped reported LTV data for auto loans altogether and one has to rely on period snippets of updates to get a sense of just how terrifying the real Loan to Value situation currently is.
So what is going on here? Well, for lenders, car loans have become a definitive loss leader. How do they recover the losses on the loans? "Sales of add-on products such as maintenance agreements, extended warranties, and gap insurance are often financed at origination. These add-on products in combination with debt rolled over from existing auto loans contribute to the aggressive advance rates."
In other words, in the US, the car industry has been quietly transformed to a razor-razorblade model, one in which it is not the manufacturers who benefit on the razorblade sales but the lenders!
That this too will result in an epic disaster is not a question of if but when, which is a recurring question considering there is now a bubble virtually anywhere one turns.
Source: OCC

Chicago Schools Pay Pension Obligation; Classroom Cuts Likely

“Asked whether the district would have enough money remaining to keep classrooms open and pay teachers, the Chicago Democrat responded: “I don’t know.””
Also: Chicago Public Schools to Cut 1,400 Jobs Wednesday
The interim CEO of Chicago Public Schools says approximately 1,400 jobs will be impacted after the district had to borrow money to make a $634 million pension payment.
Jesse Ruiz said Tuesday in a statement that the district must make $200 million in cuts. He blamed Illinois lawmakers he said failed to address CPS’ financial crisis.
“Springfield has failed to address Chicago Public Schools’ financial crisis, so today CPS made its 2015 pension payment by borrowing money,” Ruiz said. “As an immediate consequence of driving the district further into debt and our need to address the existing structural deficit – which is also driven by decades of pension neglect – CPS will make $200 million in cuts. As we have said, CPS could not make the payment and keep cuts away from the classroom, so while school will start on time, our classrooms will be impacted.”

Can This Economy be Saved By Injecting Fiat Money Into Banks?

Phil Watt, Contributor
Waking Times
There is increasing dissatisfaction across the globe with the incompetency, corruption and malpractice of the interdependent finance sector, especially after the Global Financial Crisis in 2008 that crippled national economies all over the world and sent millions of people into unemployment. Thousands also lost their homes, as well as huge portions of their superannuation, whilst the commercial banking sector was bailed out of the mess that they created with trillions of dollars of Quantitative Easing (QE) central bank cash injections.
Invoking more anger is that this approach hasn’t even solved the problem; it has only prolonged and amplified it. There have been no real legislative, structural or policy changes, so we are now faced with even greater threats by massive global bubbles in derivatives, real estate and assets, such as stocks. It looks like there is even the potential to have a greater reset then the great depression of 1929.
While governments and corporations remain focused on failing models of perpetual economic growth, millions of people across the world are on food stamps, dependent on government subsidies to stay above the poverty line. Income disparity has never been so vast. Profits for corporations, particularly the multinationals, are near all-time highs, whilst wages have remained stagnant. High unemployment is epidemic and is much more severe than what official figures represent.
Other examples include increasing wealth inequalitysocioeconomic disadvantage and poverty, the slow disappearance of the middle class, and policies that benefit Wall Street, not Main Street.
Clearly, trickledown economics simply does not work, regardless of what the delusional so-called experts would have us believe. Effectively businesses – not society or individuals – are the beneficiaries of the current economic system. There’s simply too much unfounded faith in the current system, especially when the evidence clearly indicates that we need an alternative.
The truth is, there are other models that the mainstream economists and our politicians are not taking seriously.
For example, Steve Keen, Head of the School of Economics History and Politics at Kingston University (London), has developed an alternative economic model called Debt-Deflation, while economists such as Bill Mitchell, who is an Economics Professor at the University of Newcastle (Australia), advocates for Modern Of course their models do differ in some ways (which is representative of the ‘spirit’ of the Redesigning Society series of which this article is a part). This is a discussion of legitimate alternatives which do exist, not a detailed account of the exact approach we should take. Our governments should prioritize this debate so that we can truly develop a model that resolves the problems which plague our economy and that cause widespread suffering as a result.
However, the model’s offered by Keen and Mitchell do align on some key points. For starters, along with 17 other economists, they both signed a letter published at the Financial Times in March 2015 asking that the European Central Bank adopt an alternative policy approach to boost the economy. Instead of QE for the financial sector, they’ve insisted that they inject that money into the bank accounts of citizens in the Eurozone. Steve has coined this ‘QE for the People’. Yes, that means instead of giving away free money to the elite, it’s given to the people. The masses, especially the poor, would have a field day if they knew this was a potential option.
They also both advocate that governments should have a greater role in managing the central banks in their country. That’s right, if you didn’t know already, the central/reserve banks are privately owned and operated by banking families who inherited this responsibility, instead of being elected with it.
In the following quote, Professor Mitchell explains the role of a truly independent government:
“A basic starting point from Modern Monetary Theory is that a government that issues its own currency, that has its own central bank, so it controls monetary policy (and the) setting of interest rates, and doesn’t sell any debt in a foreign currency … can never go broke. The idea (is) that it can never run out of money”. [source]
Basically this proposes that if individual nations took back their power to manage their own money they can create as much money (ie. economic stimulus) as required, whilst still accounting for applicable economic principles and direct it to where it’s needed most. In one fell swoop, there goes the poverty of a nation, so given this is a legitimate option our governments need to step up and action it now. Otherwise, the suffering of the people is on their hands.

The Solution? Regulate Central Banks, Living Wages and Quantitative Easing … for the People

An interview with Professor Steve Keen
Professor Steve Keen is Head of the School of Economics, History and Politics at Kingston University in London. Considering himself as a post-Keynesian economist, he criticizes neoclassical economics as inconsistent, unscientific and empirically unsupported. His highly successful book Debunking Economics is a must read for those who want to get into the details of this issue.
In the interview presented below, we discuss the shortfalls of mainstream economic theory and practice, as well as their potential solutions. The way that we economize our society is an area that is so fundamental to how we organize and interact that it really deserves a better critique than what has been pursued by our politicians, as well as mainstream economists for that matter.
Don’t fear though – we’re not going to get too technical in this topic, it’s more of an honest discussion about the problems that emerge from our current economic model and some out-of-the-box solutions for them.

The Verdict

Essentially, Steve disagrees with mainstream economists. He believes his work with physicists and mathematicians has disproved some of the neoclassical formulas that the orthodox economics community ‘believe’ in.
He emphasizes the lack of focus that his competitors have on ‘private debt’ when crunching their numbers, something that he says strongly indicates why he was able to see the GFC of 2008 coming, and they didn’t. This aspect of the economy deserves to be deeply embedded into economic theory, he says, including how central banks design monetary policy, which should be highly influenced by our governments or elected officials. This is his basis for a modern debt jubilee or QE for the People.
He also goes into why a universal wage is justified – “I see a systemic argument in favor of that as well as an individual argument”. Essentially this means it’s intelligent because it cares for the economy and it’s ethical as it cares for the people. At the minimum, each person in our society should have a living wage that helps them to overcome poverty, increase their education and contribute back to our society in positive ways, including adding to the economy through a greater purchasing power.
Obviously there would need to be complimentary programs to assist those with issues of mental illness and addiction, among other issues; however those are details that could be resolved through time. The point is that fighting just to survive and have our basic needs met can be a thing of the past if we redesign our economy in the right way.
Please note: This article is part of the Redesigning Society series. Over the coming weeks, this series will present a range of expert perspectives on the current state of societal affairs, as well as the collective changes we desperately need both philosophically and practically. Details of upcoming and past guests and topics can be viewed here. You can subscribe to The Conscious Society Youtube Channel to get early access to each interview in the series. 

Exploring the edges of life, Phil is an ‘experience veteran’. His mantra is “Have a Crack at Life”.
Living in Sydney, Australia, Phil is best described as a ‘self-help guide’. He focuses on his own physical, mental, emotional and spiritual health and aims to share that with his clients. His written articles generally focus on ideology, society, adventure and self-help.
Working in the therapeutic sector, Phil assists families and children as a mentor, relationship mediator and health & life teacher. He also provides tailored programs for personal growth which are facilitated face-to-face, via email and over the phone. He also has a degree in Social Science & Philosophy and has been trained extensively in health services.
Connect with Phil on Facebook or visit his website Have a Crack at Life where you can reach him for a personal appointment.

On Greece and Europe: What is Called “Negotiation” is a Demand for Total Surrender

Many readers of the European and American press must be confused about what actually is happening in the negotiations between Greece (Alexis Tsipras and Yannis Varoufakis). The European Troika (the IMF, European Central Bank and European Council now object to the name and want to be called simply “the Institutions”) have stepped up their demands on Syriza.
What is called “negotiation” is in reality a demand for total surrender. The Troika’s demand is to force Syriza to go back on the campaign promises that it made to voters who replaced the old right-wing Pasok (“socialist”) and Conservative New Democracy coalition, or else simply apply the austerity program to which that coalition had agreed:cutbacks in pensions, deeper austerity, more privatization selloffs, and a tax shift off business onto labor. In short, economic suicide.
Last weekend a group of us met in Delphi to discuss and draft the following Declaration of Support for Greece against the neoliberal Institutions. It is now clear that finance is the new mode of warfare. The creditors’ objective is the same as military conquest: they want the land, the natural resource rights and monopolies, and they want tribute (in this case, debt service). And they don’t want sovereign Greece to tax the economic rent from these assets. In short, the negotiation between The Institutions and Greece is a bold exercise in rent extraction.
To read the press, one might think that Tsipras and Varoufakis are simply trying to capitulate, only to be turned down. Even many left observers have criticized them for taking the positionthat “We want to pay.”
What is not recognized is howsuccessful the Syriza negotiating strategy has been. While most voters opposed austerity, they also initially (and still) have a fear from withdrawing from the eurozone. Tsiparas and Varoufakis have walked a fine line and accurately judged unyielding and totalitarian the Institutions’ “hard money” creditor approach would be.
The eurozone’s rejection of what obviously is an attempt at reason has greatly strengthened Syriza’s hand to say “NO” to deeper austerity. It would bring yet more unemployment, yet more emigration, yet more bankruptcy – and deeper distress prices for the public domain that the Institutions are insisting be sold off.
On the surface, Syriza’s non-payment of the debt that earlier coalitions ran up (largely by not taxing the oligarchs who supported them) need not cause a great disturbance in financial markets. After all, the debts to which Greece objects are those run up to the IMF and ECB, not private bondholders.
Yet the eurozone may turn this non-economic crisis into a political crisis by following through on its threat to exclude Greece from the eurozone. Current conditions are such that much larger numbers of Greeks may now support this position than was the case last January.
At stake is much more than Greece itself. What the attendees at Delphi want is to rescue not only the Greek economy, but all Europe — by replacing the euro and the ECB with a less austerity-based monetary ideology. If they are driven out of the eurozone, they will be able to create a real central bank (via the Treasury) to monetize deficit spending to revive the economy.
It is clear that what is needed is to replace the IMF with an institution able to assess the ability to pay debts, and to write down bad debts accordingly. Such an institution would replace Chicago School austerity and fiscal policy with a more progressive monetary and tax policy.
If the European Central Bank follows through on its threat to wreck the Greek banking system, Syriza has put itself in a position to replace the oligarchs’ banks with a public option.
The Institutions evidently hoped that the government will face a no confidence vote if it is excluded from the eurozone. The reality is that it would have suffered a no confidence defeat if it had capitulated. Tsipras is now in a position to explain to voters, “We acted reasonably to do what we could. Nothing will satisfy them except loss of our sovereignty, our land and mineral wealth, and our power to tax. The IMF and ECB won’t admit their 2010 mistake in not writing down the Greek debts, which stemmed largely from the falsified Goldman-Sachs-Papademos ploy that got usinto the eurozone in the first place.”
In sum, followers of recent news reports should bear in mind that despite all the statements of good faith that Greece “wants to pay its debts,” the reality is that there is no money to do so – except to the extent that the IMF may “extend and pretend” the charade by advancing Greece the IMF’s own money to pay. As matters have turned out, Tsipras and Varoufakis have not paid foreign debts with Greek money. They have not balanced the Greek budget by cutting back pensions, nor have they sold off the crown jewels of publicly owned infrastructure that European banks hoped to finance to their clients.
Instead of selling out, Tsipras has given Greeks enough time to pull out their savings from the banks and convert them into euro notes (domestic circulation of which has risen by 13 billion euros), or into “hard” assets such as cars (or even boats) with a resale value.

Greece is Screwed!

10 Ways to Protect Yourself from the Global Economic Crisis


He showed up to collect his wife’s pension...
While waiting in line, this unnamed man from Athens told a reporter that he had worked all his life only to wake up one morning to a disaster like this.
GreekmanThe disaster, as you probably already know, was the crisis into which Greece has now plunged.
By order of Prime Minister Alexis Tsipras, Greek banks have been shut down until July 6 and withdrawals from ATMs limited to no more than 60 euros per day.
Here in the U.S., most folks can’t ever imagine such a thing happening. And in all fairness, I don’t expect such a thing to happen, either. But that’s not to say it never will.
As Athens resident Eygenia Gekou told a reporter, “I can’t believe it. I keep thinking we will wake up tomorrow and everything will be OK. I’m trying hard not to worry.”
While I agree that worrying doesn’t solve anything, the last thing that’ll save Greece now is a good night’s sleep.
Gekou will not wake up tomorrow with everything OK.
The new reality for Greece is not stability. It’s crisis. It’s panic. It’s poverty.
Don’t Worry
Over the years, anytime I speak about the dangers of central planning, fiat currencies, and the need to protect your wealth, I’m often met with blank stares and sarcastic grins.
I’m told that I need to relax and not worry so much. But the thing is, I am relaxed, and I’m definitely not worried.
You see, the bottom line is that I simply don’t have a lot of faith in fiat currencies and central planning. To do so would be to accept the fact that my wealth and very comfortable way of life rests in the hands of a group of people who often get into their positions of authority through hard work, backdoor deals, and lots of bribes.
Therefore, instead of putting my trust in central planners, I put trust in myself.
I know better than any central planner how to secure my wealth and my lifestyle. And so do you. To be honest, I suspect I’m preaching to the choir here, anyway.
But in case you’re new to these pages, let me share with you 10 things you must have in order to protect yourself against the incompetence and questionable motives of central planners.

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10 Necessities
  1. A home: A place to sleep, eat, and protect you and your family from bad weather and bad people. If you don’t currently own your home, make every effort to do so. As long as you own your own home, you always have the safety and security of a home base.
  2. Land: Not to grow a pretty lawn, but to grow food. These days, most folks grow food as a hobby. But before there was a supermarket on every street corner, folks grew food to live. Ensuring that you have enough land to grow food and even raise chickens will insulate you from any disruptions in food supplies. Also learn how to freeze, can, and dehydrate your bounty to ensure you have plenty of calories and nutrition during the winter months.
  3. Seeds: You can’t grow food without seeds. Make sure you have a healthy supply of seeds on hand, and when you harvest your fruits and vegetables, be sure to let a few go to seed so you can collect and store them for future plantings.
  4. Electricity: Although you don’t need electricity to survive, I’m not talking about just “surviving;” I’m talking about living the kind of life you enjoy today. And most would be hard-pressed to enjoy many of the comforts we now take for granted without a steady supply of electricity. Therefore, I suggest ensuring you have one — absent access to the grid. The most secure form of electricity is solar with backup battery storage. Done right, you can generate power during the day while storing excess power that can be used at night. Even in times of economic crisis, there’s no reason you shouldn’t be able to grab a cold beer out of the fridge and sit in front of your computer watching YouTube videos. Of course, that electricity will also help with heat, air conditioning, water pumps, power tools, and anything else you rely on today to say warm, dry, and comfortable.
  5. Firearms: While I’m not the kind of guy that walks around cities and towns with an AK hanging off my shoulder, one thing is certain: In crisis situations, you have to protect yourself. In the United States, you have the right to purchase and utilize a variety of different firearms to protect yourself from those who wish to do you harm. As long as you know how to use it properly, a firearm is your best protection in uncertain times. As well, if there are ever any disruptions in meat supplies, you can also use your firearm to hunt. Vegetables are delicious, but you need your protein!
  6. Water: Without a doubt, it’s more important than anything else. Without water, you die. It’s pretty simple, really. So make sure you have a robust supply of clean water that isn’t reliant upon a public water system. Whether it's well water or the ability to collect, clean, and store rainwater, make sure that you and your family never have to go without some high-quality H20.
  7. A good set of tools: Economic crises can last for months, or they can last for years. If it’s the latter, you may find yourself in a situation where it is simply too cost prohibitive to hire someone to fix things for you. Learn how to do basic home repairs, and make sure you have all the tools you’ll need for even the most unusual repair.
  8. Gold: Yeah, yeah, I know. A lot of folks these days think gold is a terrible investment. But the bottom line is that there’s always a certain amount of safety with gold. I’m not saying run out and trade all your dollars for it. But to have some stored away in a safe place is always a good idea.
  9. Small bills: In the event that banks are shuttered and ATMs stop working, it’s always a good idea to have plenty of small bills around in case you need to buy something. If you go out to by some bread and all you have is a twenty-dollar bill, chances are the cashier is not going to be able to give you change. Small bills and even plenty of coins could serve you well if things get sketchy.
  10. Family and friends: Although these are things you don’t typically buy or store for a rainy day, if a severe economic crisis were to ever hit, the only people you’ll really be able to trust are your friends and family. Keep them close, and work together with them to ensure everyone is safe, well fed, and happy.
This list is something I’ve adhered to for years. And while it certainly can be amended and edited based on your own personal needs and desires, these 10 items really do serve as a basis for protection from economic crisis.
Sure, some folks may look at this list and assume I’m some crazy person who spends his days prepping in the mountains of West Virginia. But the truth is, I’m just a regular guy who simply prefers to adhere to the precautionary principle instead of walking around assuming a group of people with an extraordinary amount of authority can provide for me better than I can provide for myself.
No reason to worry, but no reason to let blind faith control my destiny.
To a new way of life and a new generation of wealth...
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Jeff Siegel