Struggling Caribbean islands selling citizenship

KINGSTON, JAMAICA: Hadi Mezawi has never set foot on the Caribbean island of Dominica, has never seen its rainforests or black-sand beaches. But he's one of its newest citizens.
Without leaving his home in the United Arab Emirates, the Palestinian man recently received a brand new Dominican passport after sending a roughly $100,000 contribution to the tropical nation half a world away.

``At the start I was a little worried that it might be a fraud, but the process turned out to be quite smooth and simple. Now, I am a Dominican,'' said Mezawi, who like many Palestinians had not been recognized as a citizen of any country. That passport will help with travel for his job with a Brazilian food processing company, he said by telephone from Dubai.
Turmoil in the Middle East and North Africa has led to a surge of interest in programs that let investors buy citizenship or residence in countries around the world in return for a healthy contribution or investment. Most are seeking a second passport for hassle-free travel or a ready escape hatch in case things get worse at home.
Nowhere is it easier or faster than in the minuscule Eastern Caribbean nations of Dominica and St. Kitts & Nevis.
It's such a booming business that a Dubai-based company is building a 4-square-mile (10-square-kilometer) community in St. Kitts where investors can buy property and citizenship at the same time. In its first phase, some 375 shareholders will get citizenship by investing $400,000 each in the project, which is expected to include a 200-room hotel and a mega-yacht marina. Others will get passports for buying one of 50 condominium units.
``The more they fight over there, the more political problems there are, the more applications we get here,'' said Victor Doche, managing director of another company that offers four condominium projects where approved buyers are granted citizenship in St. Kitts, which is less than twice the size of Washington D.C.
It's impossible to say how many people have used the cash for citizenship programs. Officials in both countries declined to respond when asked by The Associated Press.
``Why do I have to speak on that?'' said Levi Peter, Dominica's attorney general. ``I have no explanation to give to AP.''
But Bernard Wiltshire, a former Dominica attorney general, said there were already around 3,000 economic citizens when he left government about a decade ago. The country now has roughly 73,000 inhabitants in all.
``Investor visa'' or citizenship programs are offered by many nations, including the United States, Canada, Britain and Austria. But the Caribbean countries offer a fast path to citizenship at a very low cost. The whole process, including background checks, can take as little as 90 days in St. Kitts. And there's no need to ever live on the islands, or even visit.
A foreigner can qualify for citizenship in St. Kitts with a $250,000 donation to a fund for retired sugar workers or with a minimum real estate investment of $400,000. The minimum contribution in Dominica is $100,000.
By contrast, a U.S. program allows visas for a $1 million investment in a U.S. business employing at least 10 people or $500,000 in designated economically depressed areas. The investor can apply for permanent residence in two years, and seek citizenship after five more. Demand in Canada is so great that the country stopped accepting new applications in July.

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A Dominica passport holder can travel without a visa to more than 50 countries, while a St. Kitts passport provides visa-free travel to 139 countries, including all of the European Union. That's a big deal to people in countries from which travel is restricted or whose passports are treated with suspicion.
Critics say the programs undermine the integrity of national passports and have security risks. While there are no known cases of terrorists using the programs, experts say that's a possibility with many visa arrangements anywhere.
``No level of scrutiny can completely guarantee that terrorists will not make use of these programs, just as background checks cannot eliminate the risk that dangerous individuals will not enter the country (the U.S.) on tourist visas, as students or as refugees,'' said Madeleine Sumption, a senior policy analyst at the Washington-based Migration Policy Institute.
Canada imposed visa requirements on Dominica citizens a decade ago after complaining that suspected criminals had used island passports. And in 2010, Britain said it was considering visa requirements for Dominicans, prompting the island to review its 20-year-old economic citizenship program. Dominica never publicly released the results of its review and Britain took no action.
St. Kitts closed its program to Iranians in December 2011, shortly after Iranian students stormed the British Embassy in Tehran. Iranians had earlier been a major source of applicants, according to Doche.
Some locals worry the programs could get out of hand if conditions worsen abroad.

The Real Reason the Economy Is Broken (and Will Stay That Way)

Submitted by Chris Martenson of Peak Prosperity,
We are far enough and deep enough into the most heroic monetary and fiscal efforts ever undertaken to finally ask, why aren't these measures working?
Or at least we should be.  Oddly, many in DC, on Wall Street, and the Federal Reserve continue to steadfastly refuse to include anything in their approaches and frameworks other than "more of the same."
So we are treated to an endless parade of news items that seek to convince us that a bottom is in and that we've 'turned the corner' – often on the flimsy basis that in the past things have always gotten better by now.
The framework we operate from around here is simply encapsulated in the observation that there has never been global economic recovery with oil prices above $100 over barrel.  That is shorthand for the idea that oil is the primary lubricant of economic growth and that it is not just the amount of oil one has to burn but also the quality, or net energy, of the oil that matters.
If we want to understand why all of the tried-and-true monetary and fiscal efforts have failed, we have to appreciate the headwinds that are offered by both a condition of too-much-debt and expensive energy.  Neither alone can account for the economic malaise that stalks the world.

Getting a Little for a Lot

Trillions have been printed and injected into the world's economies, and yet things seem to be barely limping along, requiring constant attention and interventions from both fiscal and monetary authorities.
The broadest measure of money in the U.S. is Money of Zero Maturity, or MZM.  Note that it has increased by an astonishing 44% since the start of the crisis:

We could similarly look at the Federal Reserve balance sheet, or excess reserves, or a dozen other indicators that all say the same thing: The money supply has been expanded enormously.
And what do we have to show for it?
Not much.
Since 2005 real – that is, inflation-adjusted – GDP has only expanded by 0.9% on an annualized basis.  On a nominal basis (not inflation-adjusted), the number is only 2.9%, far below the 5%-6% required to sustain a banking system dependent on exponential growth in that range.
In a very nice piece of work entitled Our Investment Sinkhole Problem, Gail Tverberg put up this handy and extremely important chart:

Oil and GDP are highly correlated and always have been.  The general observation is that growth in GDP is usually higher than growth in oil consumption - as growth in oil consumption powers economic growth.  Without growth in oil consumption, GDP growth doesn't advance.
Back in 2009, in a piece entitled Oil - The Coming Supply Crunch (Part I), I calculated that every 1% increase in global GDP was associated with a 0.25% increase in oil consumption – in other words, a roughly 4:1 ratio.
Since 2007, something quite remarkable has happened in the world of oil, and that has been a decline in the consumption of oil in the U.S. and Europe -- with China and India pretty much making up the difference for everything that the West didn't consume.
That, plus a dramatic increase in the price of oil were the only ways to balance out the fact that since 2005 oil production has been essentially dead flat:

If the view that oil consumption and economic growth are linked is correct, then we might easily imagine that simply making money cheaper and more widely available would do little to boost the real economy.
Sure all that funny money will boost asset prices, but in this story, the tail does not and cannot wag the dog.  Stock prices may rise, but unemployment will not budge.  Bonds will become more expensive, but GDP will stall.

Hollowed Out

Now the Fed is finally showing signs of saying hey, what gives? as its policies do little to improve the things it publicly admits to wanting to improve.
In this recent speech by Janet Yellen, Vice Chair of the Fed, you can see her nibbling all around the edges of the mystery:

In the three years after the Great Recession ended, growth in real gross domestic product (GDP) averaged only 2.2 percent per year. In the same span of time following the previous 10 U.S. recessions, real GDP grew, on average, more than twice as fast--at a 4.6 percent annual rate.  So, why has the economy's recovery from the Great Recession been so weak?

(...)

[T]he unprecedented level and persistence of long-term unemployment in this recovery have prompted some to ask whether a significant share of unemployment since the recession is due to structural problems in labor markets and not simply a cyclical shortfall in aggregate demand. This question is important for anyone committed to the goal of maximum employment, because it implicitly asks whether the best we can hope for, even in a healthy economy, is an unemployment rate significantly higher than what has been achieved in the past.

For the Federal Reserve, the answer to this question has important implications for monetary policy. If the current, elevated rate of unemployment is largely cyclical, then the straightforward solution is to take action to raise aggregate demand.
If unemployment is instead substantially structural, some worry that attempts to raise aggregate demand will have little effect on unemployment and serve only to stoke inflation.
(Source)

As I said, the Fed is nibbling, but it is not yet even close to the center of the conundrum.  Yes, there are structural issues at play, but they have as much to do with expensive oil as they do with any great shifts in labor market trends.
The main part to consider here is contained in the last two bolded parts in the above quote.  If the Fed is just chucking more and more money into an economy that has fundamentally shifted into a lower gear, then all they are doing is laying the tinder for future inflation.
Given the amounts involved, the potential for a very punishing period of inflation is quite high, for reasons often discussed here, such as in the recent article QE For Dummies.

Economic Sinkholes

This leads us back to Gail Tverberg's piece on economic sinkholes.  Her main point in that piece was that in times past, higher investment led to higher output.  That is, spending led to economic growth, especially investment spending.
Carefully buried within higher oil prices are higher prices for every single economic activity that uses them.  Along with diminishing ore yields come incrementally higher costs to simply, extract, and refine those ores, let alone fashion them into something useful.
Gail writes:

All types of mineral extraction, but particularly oil, eventually reach the situation where it takes an increasing amount of investment (money, energy products, and often water) to extract a given amount of resource. This situation arises because companies extract the cheapest to extract resources first, and move on to the more expensive to extract resources later.

As consumers, we recognize the situation through rising commodity prices. There is generally a real issue behind the rising prices -- not enough resource available in readily accessible locations -- so we need to dig deeper, or apply more “high tech” solutions. These high tech solutions indirectly require more investment and more energy, as well.

While we don’t stop to think about what is happening, the reality is that increasingly less oil (or other product such as natural gas, coal, gold, or copper) is being produced, for the same investment dollar. As long as the price of the product keeps rising sufficiently to cover the higher cost of extraction, the investor is happy, even if the cost of the resource is becoming unbearably high for consumers.
(Source)

The summary here is that it takes more and more to achieve less and less.  The old form of economic growth is no longer with us, but the Fed still doesn't get it.  It still has its eyes firmly trained on economic indicators and equations, having not yet raised its gaze into the real world where limits are being reached.
As Gail nicely encapsulates, many of those limits are carefully hidden from view as a slightly but steadily reducing net energy for oil seeps into every nook and cranny of our complex economy.
The sinkholes that we are facing now are extraordinary.  Some of them are quite literal, and numerous, as Harrisburg, Pennsylvania is demonstrating:

Bottom Falls Out of Debt-Ridden City

Jan 31, 2013
HARRISBURG, Pa.—With midnight approaching on New Year's Eve, Sherri Lewis and her two children knelt to pray for a better year ahead.

A few minutes later, she heard a rumbling that sounded like fireworks. The ground outside her apartment had opened up, revealing a municipal disaster that shows how far this city's finances have sunk.

A sinkhole, measuring about 50 feet long and eight feet deep, had swallowed Ms. Lewis's street, damaging water and gas pipes and forcing more than a dozen residents to evacuate one of the city's poorest neighborhoods. "I thought the world was ending,'' says Ms. Lewis, 42 years old.

Harrisburg officials have identified at least 40 other sinkholes around the 50,000-person city. The combination of particularly sandy soil and leaky pipes under Harrisburg's streets make it susceptible to sinkholes, city officials say. But Harrisburg has a bigger problem: The Pennsylvania capital can't afford to replace many of the aging pipes, some of which date back to the 19th century.

The metaphor perfectly offered by Harrisburg is that once you run out economy, your current infrastructure alone may be well beyond your means to maintain.
The embodied energy in just our existing property, plant, and equipment is enormous.  Nearly every high-tech dream – of a kinder, gentler future where 9 billion people somehow enjoy higher average standards of living than the current 7 billion – requires an extraordinary investment of energy.
Left out of this dream is a crisp articulation of exactly where that energy will come from and when we will begin to transition to prioritizing its use towards building and maintaining all of that new infrastructure.  It's not enough to merely buy electric cars, should they ever be manufactured in sufficient quantities, because we also need new grid components, electrical storage, generation, and a thousand other components to pull it off.
I note that with every passing year, more and more internal combustion engine (ICE) vehicles are manufactured and sold, not fewer and fewer.  The past 7 years has seen the number of new ICE vehicles sold grow at a compounded rate of 3.7% per annum, and at that rate, 2013 should see more than 80,000,000 sold.  That's up from just over 50,000,000 only ten years ago.
Every one of those represents the investment of energy and capital that will consume our remaining oil at the expense of anything else we might choose to do with that oil, such as maintain our current infrastructure as we build out the next one.

Conclusion

As we dump more and more money into the economy, hoping with all our collective might that it will once again sputter back to life and lift all fortunes and boats, too few are asking what happens if it does not.
If there are other factors at work here besides a simple case of too much debt, then the Fed is not only barking up the wrong tree, but is unaware that a very dangerous animal with a bad attitude is resting up there.
These are truly extraordinary times.  I am in awe of the number of otherwise professional investors who believe that the Fed has things safely in hand.  The amount of market insanity and complete disconnect from reality has me thankful that I already lived through a similar time and can keep things in perspective now.
That time was 2005 to 2007, when I was trading quite actively and thought the world had gone mad.  Nothing made sense, because I was trying make sense of things that could not be made sense of.   In times of extraordinarily abundant liquidity and loose monetary policies, all that has to be understood is that financial assets tend to run up in price during such moments.
The fact that this all ended quite badly then does little to make me think this time is going to end any better.  Thin-air money, attempting to print one's way to prosperity, and spending more than you have are proven losers in the history books.
Yet here we are, doubling down – we're all in and I guess there's no turning back now.  The Fed is going to keep with the program until forced to change by circumstances.
As I see it, the economy is broken and it will stay that way.  Our only hope for an alternative would be to immediately cut our losses in those enterprises that do not make sense in a world of increasingly expensive liquid fuels, and invest heavily in those things that will help us transition to a future without fossil fuels.
I am quite aware that many decades’ worth of fossil fuels remain, but equally aware that all energy transitions require four to six decades under ideal conditions where one is transitioning to a higher quality fuel source and capital is expanding.
And under less-than-ideal conditions, where we are transitioning to a lower density energy source (as all alternative energy sources are) and capital is shrinking?  There we might imagine it could take longer than usual; a 100-year transition period is not out of the question.
In the meantime, the best I can tell you is that the markets are reflecting liquidity, not reality, and that until and unless the world suddenly starts to produce a lot more crude oil and the U.S. and Europe increase their consumption of it, I will remain quite skeptical of all pronouncements of recovery in the West.

Top Economic Advisers Forecast War and Unrest : Kyle Bass, Larry Edelson, Charles Nenner, James Dines, Nouriel Roubini, Jim Rogers, Marc Faber and Jim Rickards Warn or War… The End of The Current Fiat Monetary System Is Coming!!!

In this MUST WATCH video, Jim Rickards discusses ‘currency war games’ and how the in progress currency war between the US/West and China/Russia is likely to be played out. Not surprisingly, GOLD plays a pivotal role in the currency war games.
The end of the current fiat monetary system is coming, and a GOLD BACKED CURRENCY will replace the fiat petro-dollar.

Top Economic Advisers Forecast War and Unrest

Kyle Bass, Larry Edelson, Charles Nenner, James Dines, Nouriel Roubini, Jim Rogers, Marc Faber and Jim Rickards Warn or War

We’re already at war in numerous countries all over the world.
But top economic advisers warn that economic factors could lead to a new world war.
Kyle Bass writes:

Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation.

Larry Edelson wrote an email to subscribers entitled “What the “Cycles of War” are saying for 2013?, which states:

Since the 1980s, I’ve been studying the so-called “cycles of war” — the natural rhythms that predispose societies to descend into chaos, into hatred, into civil and even international war.
I’m certainly not the first person to examine these very distinctive patterns in history. There have been many before me, notably, Raymond Wheeler, who published the most authoritative chronicle of war ever, covering a period of 2,600 years of data.
However, there are very few people who are willing to even discuss the issue right now. And based on what I’m seeing, the implications could be absolutely huge in 2013.

Former Goldman Sachs technical analyst Charles Nenner – who has made some big accurate calls, and counts major hedge funds, banks, brokerage houses, and high net worth individuals as clients – saysthere will be “a major war starting at the end of 2012 to 2013”, which will drive the Dow to 5,000.
Veteran investor adviser James Dines forecast a war is epochal as World Wars I and II, starting in the Middle East.
Nouriel Roubini has warned of war with Iran.   And when Roubini was asked:

Where does this all lead us? The risk in your view is of another Great Depression. But even respectable European politicians are talking not just an economic depression but possibly even worse consequences over the next decade or so. Bearing European history in mind, where does this take us?

He responded:

In the 1930s, because we made a major policy mistake, we went through financial instability, defaults, currency devaluations, printing money, capital controls, trade wars, populism, a bunch of radical, populist, aggressive regimes coming to power from Germany to Italy to Spain to Japan, and then we ended up with World War II.
Now I’m not predicting World War III but seriously, if there was a global financial crisis after the first one, then we go into depression: the political and social instability in Europe and other advanced economies is going to become extremely severe. And that’s something we have to worry about.

Billionaire investor Jim Rogers notes:

A continuation of bailouts in Europe could ultimately spark another world war, says international investor Jim Rogers.
***
“Add debt, the situation gets worse, and eventually it just collapses. Then everybody is looking for scapegoats. Politicians blame foreigners, and we’re in World War II or World War whatever.”

Marc Faber says that the American government will start new wars in response to the economic crisis:

• “The next thing the government will do to distract the attention of the people on bad economic conditions is they’ll start a war somewhere.”

• “If the global economy doesn’t recover, usually people go to war.”

We’re in the middle of a global currency war – i.e. a situation where nations all compete to devalue their currencies the most in order to boost exports.  And Brazilian president-elect Rousseff said in 2010:

The last time there was a series of competitive devaluations … it ended in world war two.

Jim Rickards agrees:

Currency wars lead to trade wars, which often lead to hot wars. In 2009, Rickards participated in the Pentagon’s first-ever “financial” war games. While expressing confidence in America’s ability to defeat any other nation-state in battle, Rickards says the U.S. could get dragged into “asymmetric warfare,” if currency wars lead to rising inflation and global economic uncertainty.

As does Jim Rogers:

Trade wars always lead to wars.

And given that many influential economists wrongly believe that war is good for the economy … many are overtly or quietly pushing for war.
Moreover, former Federal Reserve chairman Alan Greenspan said that the Iraq war was really about oil , and former Treasury Secretary Paul O’Neill says that Bush planned the Iraq war before 9/11.    And seethis and this.   If that war was for petroleum, other oil-rich countries might be invaded as well.
And the American policy of using the military to contain China’s growing economic influence – and of considering economic rivalry to be a basis for war – are creating a tinderbox.
Finally, multi-billionaire investor Hugo Salinas Price says:

What happened to [Libya's] Mr. Gaddafi, many speculate the real reason he was ousted was that he was planning an all-African currency for conducting trade. The same thing happened to him that happened to Saddam because the US doesn’t want any solid competing currency out there vs the dollar. You know Gaddafi was talking about a golddinar.

Indeed, senior CNBC editor John Carney noted:

Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power? It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.
Robert Wenzel of Economic Policy Journal thinks the central banking initiative reveals that foreign powers may have a strong influence over the rebels.
This suggests we have a bit more than a ragtag bunch of rebels running around and that there are some pretty sophisticated influences. “I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising,” Wenzel writes.

Indeed, some say that recent wars have really been about bringing all countries into the fold of Western central banking.

Many Warn of Unrest

Numerous economic organizations and economists also warn of crash-induced unrest, including:

• The head of the World Trade Organization

• The head of the International Monetary Fund

• The head of the World Bank

• Leading economic historian Niall Ferguson

• Leading economist John Williams

Fiscal Cliff: Time to Call Their Bluff

The “fiscal cliff” has all the earmarks of a false flag operation, full of sound and fury, intended to extort concessions from opponents.  Neil Irwin of the Washington Post calls it “a self-induced austerity crisis.”  David Weidner in the Wall Street Journal calls it simply theater, designed to pressure politicians into a budget deal:

The cliff is really just a trumped-up annual budget discussion. . . . The most likely outcome is a combination of tax increases, spending cuts and  kicking the can down the road.

Yet the media coverage has been “panic-inducing, falling somewhere between that given to an approaching hurricane and an alien invasion.”  In the summer of 2011, this sort of media hype succeeded in causing the Dow Jones Industrial Average to plunge nearly 2000 points.  But this time the market is generally ignoring the cliff, either confident a deal will be reached or not caring.
The goal of the exercise seems to be to dismantle Social Security and Medicare, something a radical group of conservatives has worked for decades to achieve.  But with the recent Democratic victories, demands for “fiscal responsibility” may just result in higher taxes for the rich, without gutting the entitlements.
The problem is that no deal is going to be satisfactory.  If we go over the cliff, taxes will be raised on everyone, and GDP is predicted to drop by 3%.  If a deal is reached, taxes will be raised on some people, and some services will be cut.  But the underlying problems – high unemployment and a languishing economy – will remain.  More effective solutions are needed. 

Be Careful What You Wish for: Fiscal Hostage-Taking Could Backfire

Taxpayers and governments that are pushed too far have been known to resort to more radical measures, and there are some on the table that could fix the problem at its core.  Here are a few that are receiving media attention:
1.  A financial transactions tax.  While children’s shoes and lunchboxes are taxed at nearly 10%, financial sales have so far gotten off scot-free.  The idea of a financial transactions tax, or Tobin tax, has been kicked around for decades; but it is now gaining real teeth.  The European Commission has backed plans from 10 countries — including France, Germany, Italy and Spain — to launch a financial transactions tax to help raise funds to tackle the debt crisis.  Sarah van Gelder of Yes! Magazine observes that the tax would not only help reduce deficits but would hit the highest income earners, and it would cool the speculative fever of Wall Street.
Simon Thorpe, a financial blogger in France, cites figures from the Bank for International Settlements, showing total U.S. financial transactions of nearly $3 QUADRILLION in  2011.  Including other sources, he derives a figure of $4.44 QUADRILLION.  Even using the more “conservative” $3 quadrillion figure, a tax of a mere 0.05% (1/20^th of 1%) would be sufficient to raise $1.5 trillion yearly, enough to replace personal income taxes with money to spare.
2.  The trillion dollar coin trick.  If Republicans insist on the letter of the law, Democrats could respond with a law of their own.  The Constitution says that Congress shall have the power to “coin money” and “regulate the value thereof,” and no limit is put on the value of the coins Congress creates, as was pointed out by a chairman of the House Coinage Subcommittee in the 1980s.
I actually suggested this solution in Web of Debt in 2007, when it was just a “wacky idea.”  But after the 2008 banking crisis, it started getting the attention of scholars.  In a December 7^th article in the Washington Post titled “Could Two Platinum Coins Solve the Debt-ceiling Crisis?,” Brad Plumer wrote that if Congress doesn’t raise the debt ceiling as part of the fiscal cliff negotiations, “then some of these wacky ideas may get more attention.”
Ed Harrison summarized the proposal at Credit Writedowns like this:

• The Treasury mints a $1 trillion coin, or whatever amount is desired.
• The Treasury deposits the coin into the Treasury’s account at the Fed.
• The Treasury buys back bonds.
• The retirement of bonds is an asset swap, no different from QE2.
• The increase in reserve balances is not inflationary, as Credit Easing 1.0, QE 1.0, and QE 2.0 already have shown.
• These operations by the Treasury create no new net financial assets for the non-government sector.
• The debt ceiling crisis is averted.

Plumer cites Yale Law School Professor Jack Balkin, confirming the ploy is legal.  He also cites Joseph Gagnon of the Peterson Institute for International Economics, stating, “I like it.  There’s nothing that’s obviously economically problematic about it.”
To the objection that it is a legal trick that makes a mockery of the law, Paul Krugman responded, “These things sound ridiculous — but so is the behavior of Congressional Republicans.  So why not fight back using legal tricks?”
3.  Declare the debt ceiling unconstitutional.  The 14^th Amendment to the Constitution mandates that Congress shall pay its debts on time and in full, and Congress does not know how much it will collect in taxes until after the bills have been incurred.  The debt ceiling was imposed by a statute first passed in 1917 and revised multiple times since.   The Constitution trumps it and should rule.
4.  Borrow interest-free from the government’s own central bank.  If the government refinanced its entire debt through the Federal Reserve, it could save nearly half a trillion dollars annually in interest, since the Fed rebates its profits to the government.  The Fed’s newly-announced QE4 adds $45 billion monthly in government securities purchases to the $40 billion for mortgaged-backed securities declared in QE3, and no time limit has been designated for ending the program.  Forty-five billion dollars monthly is over half a trillion yearly.  Added to the federal debt already held by the Fed, the whole $16 trillion federal debt could be bought back in 28 years.
This is not a wild, untested idea.  Borrowing interest-free from its central bank was done by Canada from 1939 to 1974, by France from 1946 to 1973, and by Australia and New Zealand in the first half of the 20^th century, to excellent effect and without creating price inflation.
5.  Decommission some portion of the military.  When past costs are factored in, nearly half the federal budget goes to the military.  The data speaks for itself.
6.  Debt forgiveness.  Economists Michael Hudson and Steve Keen maintain that the only way out of debt deflation is debt forgiveness.  That could be achieved by the Fed by buying up $2 trillion in student debt and other asset-back securities and either ripping them up or refinancing the debts interest-free or at very low interest.  If the banks can borrow at 0.25%, why not the people?
7.  Publicly-owned state and local banks.  Municipal governments are facing cliffs of their own.  Ann Larson, writing in Dissent Magazine, blames predatory Wall Street lending practices.  Debt financing of U.S. cities and towns by Wall Street, she says, has inflicted deep and growing suffering on communities across the country.
Predatory Wall Street practices can be avoided by establishing publicly-owned state and local banks, which leverage the public’s funds for the benefit of the public.  The profits are returned as dividends to the local government.  German researcher Margrit Kennedy calculates that a whopping 40% of the cost of public projects, on average, goes to interest.  Publicly-owned banks slash borrowing costs by returning this interest to the government, along with many other advantages, detailed here.

Unshackle the Hostages and Let the Good Times Roll

The fiscal cliff has been said to be holding Congress hostage to conservative demands, but the real hostages are the debt slaves of our financial system.  The demand for “fiscal responsibility” has been used as an excuse to impose radical austerity measures on the people, measures that benefit the 1% while locking the 99% in debt.
The government did not demand fiscal responsibility of the failed financial sector.  Rather, Congress lavished hundreds of billions of dollars on it, and the Fed lavished trillions more.  No evident harm from these measures befell the economy, which has fared better than the austerity-strapped EU countries.  Another couple of trillion dollars poured directly into the real, productive economy could give it a serious boost.
According to the Fed’s figures, as of July 2010, the money supply was actually $4 trillion LESS than in 2008.  (The shrinkage was in the shadow banking system formerly reported as M3.)  That means $4 trillion could be added back into the money supply before general price inflation would be a problem.
The self-induced austerity crisis is a diversion from the real crises, including unemployment, the housing crisis, a bloated military, and unrepayable debt.  Slashing services, selling off public assets, and raising taxes won’t cure these ills.  To maintain a sustainable and productive economy requires a visionary leap into the new.  A new economy needs new methods of public financing.

ART CASHIN: A Dormant US Inflation Indicator Just Spiked, And It's Got Me Thinking Of Weimar And Zimbabwe

Veteran trader Art Cashin has been more concerned about the threat of inflation in the U.S. than most.
In a recent interview with Eric King of King World News, he notes that the once dormant threat of inflation could be waking up.
From King World News:

...That having been said, the Federal Reserve Bank of St. Louis puts out what is called the ‘Monetary Stock.’  It is the ‘raw material’ of the money supply, and it has been dormant throughout the year.

The report for the first part of this year suddenly spiked higher, and it’s something that I’m going to keep a very close look at.  It may be, and there is some seasonality, but I think people need to begin watching the money supply, particularly the M2, and see if that starts to accelerate...

If the velocity of money begins to accelerate and M2 begins to move up, then you will begin to hear people talking about or at least worrying about inflation again..." 

Cashin notes that this isn't just theory.  Indeed, we've seen it before in history.  Most people know of the most notorious experiences: Weimar Germany and Zimbabwe.

Somebody once asked a famous literary character (who lived through the Weimar hyperinflation) how did he go broke?  He said, ‘Slowly and then suddenly.’  The Weimar Republic saw inflation develop very slowly, and then suddenly.  Once it developed it was almost like Zimbabwe except it was in a major nation, and destroyed the moral values of a whole civilization and basically led to the underpinnings of World War II.”

Read more: http://www.businessinsider.com/art-cashin-on-money-stock-and-inflation-2013-2#ixzz2KrKe1hKd

Bob's Barclays bonanza of £120m... and, despite this, he's battling for a further £18m

Ousted CEO took home the sum over the past 5 years

Faces fight with bank for £18m in shares & bonuses

Bob Diamond has scooped around £120million from Barclays since the credit crunch began in 2007 and could be in line for tens of millions more, it emerged last night.

The bank’s fallen chief executive has taken home that extraordinary figure over the past five years in salary, bonuses, complicated incentive plans and share options.

But – as Mr Diamond negotiates his pay-off – it emerged last night that he faces a bitter battle to claim another £18million waiting in the wings from the bank. This is money ‘promised’ to him by Barclays in the form of share options and long-term incentive plans.

Golden goodbye: Bob Diamond is facing a battle with Barclays for an extra £18 million in share options and long-term incentive plans

The bank is expected to ‘fight tooth and nail’ to stop Mr Diamond receiving the £18million. But even if it wins that particular battle, he still owns around 13.2million shares in the bank. Last night, these shares were worth £22million.

He will also be automatically entitled to one year’s basic salary of £1.35million, meaning that, at the very least, he will walk away with more than £23million.

Mr Diamond’s pension entitlement is negligible because he has chosen to take cash instead.

The £120million figure was compiled by the influential Pensions and Investment Research Consultants. It is based on publicly available data submitted since 2007 which shows that the former chief executive regularly took home more than £20million a year. His most lucrative year was 2008 when he received £25.1million.

If he fights to keep the additional bonus money, it clears the way for another bloody battle, similar to that fought by Fred Goodwin, the former boss of Royal Bank of Scotland.

Mr Goodwin was due to receive a pension of £703,000 a year, but eventually volunteered to cut it to £342,500 after it brought such fury that he was forced to leave his home in Edinburgh.

Lib Dem peer Lord Oakeshott urged Barclays to tell Diamond 'Not a penny more, we will see you in court.'

Lord Oakeshott, the leading Lib Dem peer, said: ‘Barclays’ Quaker founders would be amazed at the level of cash pay outs over the past few years. Bob Diamond backed up his bonus truck to Barclays’ cash machines time after time while shareholders suffered. Now the board must show some fight at last and tell him, “Not a penny more – we will see you in court”.

‘He has had to resign in disgrace, trashed the Barclays brand, destroyed billions of shareholder value and done terrible reputational damage to the City of London as the world’s financial capital.’ Small shareholders have seen the value of their investment collapse during Mr Diamond’s short time as chief executive.

He became the overall boss of the bank on January 1 last year after being promoted from running its ‘casino’ investment banking division Barclays Capital.

In the past 18 months more than £12billion has been wiped off the value of the company.

Last night the UK Shareholders’ Association said the events at Barclays were ‘disturbing’.
Deborah Hargreaves, who runs the High Pay Centre, which campaigns for fair pay in the boardroom, said: ‘There are good grounds for clawing back his bonuses from previous years. He certainly does not deserve a payout for going given that he has presided over one of the biggest disasters in banking history.’

Barclays chairman Marcus Agius – who quit on Monday but will stay on until a successor to Mr Diamond is found – was questioned yesterday about Mr Diamond’s severance pay and £18million ‘promises’ but said nothing had been agreed.

The Treasury yesterday revealed a major crackdown on bank bosses, which could see them go to jail or be banned for life from working in top City jobs if they are ‘negligent’ in the future.

Rand Paul: The Path We Are On Is Not Sustainable

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