How the Economy was Lost
Paul Craig Roberts
Infowars
February 24, 2009
The American economy has gone away. It is not coming back until free trade myths are buried six feet under.
America’s 20th century economic success was based on two things. Free trade was not one of them. America’s economic success was based on protectionism, which was ensured by the union victory in the Civil War, and on British indebtedness, which destroyed the British pound as world reserve currency. Following World War II, the US dollar took the role as reserve currency, a privilege that allows the US to pay its international bills in its own currency.
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| Obama’s cabinet and National Economic Council are filled with representatives of the interest groups that caused the problem. | |
World War II and socialism together ensured that the US economy dominated the world at the mid 20th century. The economies of the rest of the world had been destroyed by war or were stifled by socialism [in terms of the priorities of the capitalist growth model. Editors.]
The ascendant position of the US economy caused the US government to be relaxed about giving away American industries, such as textiles, as bribes to other countries for cooperating with America’s cold war and foreign policies. For example, Turkey’s US textile quotas were increased in exchange for over-flight rights in the Gulf War, making lost US textile jobs an off-budget war expense.
In contrast, countries such as Japan and Germany used industrial policy to plot their comebacks. By the late 1970s, Japanese auto makers had the once dominant American auto industry on the ropes. The first economic act of the “free market” Reagan administration in 1981 was to put quotas on the import of Japanese cars in order to protect Detroit and the United Auto Workers.
Eamonn Fingleton, Pat Choate, and others have described how negligence in Washington DC aided and abetted the erosion of America’s economic position. What we didn’t give away, the United States let be taken away while preaching a “free trade” doctrine at which the rest of the world scoffed.
Fortunately, the U.S.’s adversaries at the time, the Soviet Union and China, had unworkable economic systems that posed no threat to America’s diminishing economic prowess.
This furlough from reality ended when Soviet, Chinese, and Indian socialism surrendered around 1990, to be followed shortly thereafter by the rise of the high speed Internet. Suddenly, American and other first world corporations discovered that a massive supply of foreign labor was available at practically free wages.
To get Wall Street analysts and shareholder advocacy groups off their backs, and to boost shareholder returns and management bonuses, American corporations began moving their production for American markets offshore. Products that were made in Peoria are now made in China.
As offshoring spread, American cities and states lost tax base, and families and communities lost jobs. The replacement jobs, such as selling the offshored products at Wal-Mart, brought home less pay.
“Free market economists” covered up the damage done to the US economy by preaching a New Economy based on services and innovation. But it wasn’t long before corporations discovered that the high speed Internet let them offshore a wide range of professional service jobs. In America, the hardest hit have been software engineers and information technology (IT) workers.
The American corporations quickly learned that by declaring “shortages” of skilled Americans, they could get from Congress H-1b work visas for lower paid foreigners with whom to replace their American work force. Many US corporations are known for forcing their US employees to train their foreign replacements in exchange for severance pay.
Chasing after shareholder return and “performance bonuses,” US corporations deserted their American workforce. The consequences can be seen everywhere. The loss of tax base has threatened the municipal bonds of cities and states and reduced the wealth of individuals who purchased the bonds. The lost jobs with good pay resulted in the expansion of consumer debt in order to maintain consumption. As the offshored goods and services are brought back to America to sell, the US trade deficit has exploded to unimaginable heights, calling into question the US dollar as reserve currency and America’s ability to finance its trade deficit.
As the American economy eroded away bit by bit, “free market” ideologues produced endless reassurances that America had pulled a fast one on China, sending China dirty and grimy manufacturing jobs. Free of these “old economy” jobs, Americans were lulled with promises of riches. In place of dirty fingernails, American efforts would flow into innovation and entrepreneurship. In the meantime, the “service economy” of software and communications would provide a leg up for the work force.
Education was the answer to all challenges. This appeased the academics, and they produced no studies that would contradict the propaganda and, thus, curtail the flow of federal government and corporate grants.
The “free market” economists, who provided the propaganda and disinformation to hide the act of destroying the US economy, were well paid. And as Business Week noted, “outsourcing’s inner circle has deep roots in GE (General Electric) and McKinsey,” a consulting firm. Indeed, one of McKinsey’s main apologists for offshoring of US jobs, Diana Farrell, is now a member of Obama’s White House National Economic Council.
The pressure of jobs offshoring, together with vast imports, has destroyed the economic prospects for all Americans, except the CEOs who receive “performance” bonuses for moving American jobs offshore or giving them to H-1b work visa holders. Lowly paid offshored employees, together with H-1b visas, have curtailed employment for older and more experienced American workers. Older workers traditionally receive higher pay. However, when the determining factor is minimizing labor costs for the sake of shareholder returns and management bonuses, older workers are unaffordable. Doing a good job, providing a good service, is no longer the corporation’s function. Instead, the goal is to minimize labor costs at all cost.
Thus, “free trade” has also destroyed the employment prospects of older workers. Forced out of their careers, they seek employment as shelf stockers for Wal-Mart.
I have read endless tributes to Wal-Mart from “libertarian economists,” who sing Wal-Mart’s praises for bringing low price goods, 70 per cent of which are made in China, to the American consumer. What these “economists” do not factor into their analysis is the diminution of American family incomes and government tax base from the loss of the goods producing jobs to China. Ladders of upward mobility are being dismantled by offshoring, while California issues IOUs to pay its bills. The shift of production offshore reduces US GDP. When the goods and services are brought back to America to be sold, they increase the trade deficit. As the trade deficit is financed by foreigners acquiring ownership of US assets, this means that profits, dividends, capital gains, interest, rents, and tolls leave American pockets for foreign ones.
The demise of America’s productive economy left the US economy dependent on finance, in which the US remained dominant because the dollar is the reserve currency. With the departure of factories, finance went in new directions. Mortgages, which were once held in the portfolios of the issuer, were securitized. Individual mortgage debts were combined into a “security.” The next step was to strip out the interest payments to the mortgages and sell them as derivatives, thus creating a third debt instrument based on the original mortgages.
In pursuit of ever more profits, financial institutions began betting on the success and failure of various debt instruments and by implication on firms. They bought and sold collateral debt swaps. A buyer pays a premium to a seller for a swap to guarantee an asset’s value. If an asset “insured” by a swap falls in value, the seller of the swap is supposed to make the owner of the swap whole. The purchaser of a swap is not required to own the asset in order to contract for a guarantee of its value. Therefore, as many people could purchase as many swaps as they wished on the same asset. Thus, the total value of the swaps greatly exceeds the value of the assets.*
The next step is for holders of the swaps to short the asset in order to drive down its value and collect the guarantee. As the issuers of swaps were not required to reserve against them, and as there is no limit to the number of swaps, the payouts could easily exceed the net worth of the issuer.
This was the most shameful and most mindless form of speculation. Gamblers were betting hands that they could not cover. The US regulators fled their posts. The American financial institutions abandoned all integrity. As a consequence, American financial institutions and rating agencies are trusted nowhere on earth.
The US government should never have used billions of taxpayers’ dollars to pay off swap bets as it did when it bailed out the insurance company AIG. This was a stunning waste of a vast sum of money. The federal government should declare all swap agreements to be fraudulent contracts, except for a single swap held by the owner of the asset. Simply wiping out these fraudulent contracts would remove the bulk of the vast overhang of “troubled” assets that threaten financial markets.
The billions of taxpayers’ dollars spent buying up subprime derivatives were also wasted. The government did not need to spend one dime. All government needed to do was to suspend the mark-to-market rule. This simple act would have removed the solvency threat to financial institutions by allowing them to keep the derivatives at book value until financial institutions could ascertain their true values and write them down over time.
Taxpayers, equity owners, and the credit standing of the US government are being ruined by financial shysters who are manipulating to their own advantage the government’s commitment to mark-to-market and to the “sanctity of contracts.” Multi-trillion dollar “bailouts” and bank nationalization are the result of the government’s inability to respond intelligently.
Two more simple acts would have completed the rescue without costing the taxpayers one dollar: an announcement from the Federal Reserve that it will be lender of last resort to all depository institutions including money market funds, and an announcement reinstating the uptick rule.
The uptick rule was suspended or repealed a couple of years ago in order to permit hedge funds and shyster speculators to rip-off American equity owners. The rule prevented short-selling any stock that did not move up in price during the previous day. In other words, speculators could not make money at others’ expense by ganging up on a stock and short-selling it day after day.
As a former Treasury official, I am amazed that the US government, in the midst of the worst financial crises ever, is content for short-selling to drive down the asset prices that the government is trying to support. No bailout or stimulus plan has any hope until the uptick rule is reinstated.
The bald fact is that the combination of ignorance, negligence, and ideology that permitted the crisis to happen still prevails and is blocking any remedy. Either the people in power in Washington and the financial community are total dimwits or they are manipulating an opportunity to redistribute wealth from taxpayers, equity owners and pension funds to the financial sector.
The Bush and Obama plans total 1.6 trillion dollars, every one of which will have to be borrowed, and no one knows from where. This huge sum will compromise the value of the US dollar, its role as reserve currency, the ability of the US government to service its debt, and the price level. These staggering costs are pointless and are to no avail, as not one step has been taken that would alleviate the crisis.
If we add to my simple menu of remedies a ban, punishable by instant death, for short selling any national currency, the world can be rescued from the current crisis without years of suffering, violent upheavals and, perhaps, wars.
According to its hopeful but economically ignorant proponents, globalism was supposed to balance risks across national economies and to offset downturns in one part of the world with upturns in other parts. A global portfolio was a protection against loss, claimed globalism’s purveyors. In fact, globalism has concentrated the risks, resulting in Wall Street’s greed endangering all the economies of the world. The greed of Wall Street and the negligence of the US government have wrecked the prospects of many nations. Street riots are already occurring in parts of the world. On Sunday February 22, the right-wing TV station, Fox “News,” presented a program that predicted riots and disarray in the United States by 2014.
How long will Americans permit “their” government to rip them off for the sake of the financial interests that caused the problem? Obama’s cabinet and National Economic Council are filled with representatives of the interest groups that caused the problem. The Obama administration is not a government capable of preventing a catastrophe.
If truth be known, the “banking problem” is the least of our worries. Our economy faces two much more serious problems. One is that offshoring and H-1b visas have stopped the growth of family incomes, except, of course, for the super rich. To keep the economy going, consumers have gone deeper into debt, maxing out their credit cards and refinancing their homes and spending the equity. Consumers are now so indebted that they cannot increase their spending by taking on more debt. Thus, whether or not the banks resume lending is beside the point.
The other serious problem is the status of the US dollar as reserve currency. This status has allowed the US, now a country heavily dependent on imports just like a third world or lesser-developed country, to pay its international bills in its own currency. We are able to import $800 billion annually more than we produce, because the foreign countries from whom we import are willing to accept paper for their goods and services.
If the dollar loses its reserve currency role, foreigners will not accept dollars in exchange for real things. This event would be immensely disruptive to an economy dependent on imports for its energy, its clothes, its shoes, its manufactured products, and its advanced technology products.
If incompetence in Washington, the type of incompetence that produced the current economic crisis, destroys the dollar as reserve currency, the “unipower” will overnight become a third world country, unable to pay for its imports or to sustain its standard of living.
How long can the US government protect the dollar’s value by leasing its gold to bullion dealers who sell it, thereby holding down the gold price? Given the incompetence in Washington and on Wall Street, our best hope is that the rest of the world is even less competent and even in deeper trouble. In this event, the US dollar might survive as the least valueless of the world’s fiat currencies.
*(An excellent explanation of swaps can be found here.)
Ship of Fools
Information Clearing House | February 9, 2009
By Paul Craig Roberts
February 09, 2009 “Information Clearinghouse” — -Is there intelligent life in Washington, DC? Not a speck of it.
The US economy is imploding, and Obama is being led by his government of neconservatives and Israeli agents into a quagmire in Afghanistan that will bring the US into confrontation with Russia, and possibly China, American’s largest creditor.
The January payroll job figures reveal that last month 20,000 Americans lost their jobs every day.
In addition, December’s job losses were revised up by 53,000 jobs from 524,000 to 577,000. The revision brings the two-month job loss to 1,175,000. If this keeps up, Obama’s promised three million new jobs will be wiped out by job losses.
Statistician John Williams (shadowstats.com) reports that this huge number is an understatement. Williams notes that built-in biases in seasonal adjustment factors caused a 118,000 understatement of January job losses, bringing the actual January job loss to 716,000 jobs.
The payroll survey counts the number of jobs, not the number of employed as some people have more than one job. The Household Survey counts the number of people who have jobs. The Household Survey shows that 832,000 people lost their jobs in January and 806,000 in December, for a two month reduction of Americans with jobs of 1,638,000.
The unemployment rate reported in the US media is a fabrication. Williams reports that “during the Clinton Administration, ‘discouraged workers’ those who had given up looking for a job because there were no jobs to be had–were redefined so as to be counted only if they had been ‘discouraged’ for less than a year. This time qualification defined away the bulk of the discouraged workers. Adding them back into the total unemployed, actual unemployment, [according to the unemployment rate methodology used in 1980] rose to 18% in January, from 17.5% in December.”
In other words, without all the manipulations of the data from a government that lies to us every time it opens its mouth, the US unemployment rate is already at depression levels.
How could it be otherwise given the enormous job loss from offshored jobs. It is impossible for a country to create jobs when its corporations are moving production for the American consumer market offshore. When they move the production offshore, they
shift US GDP to other countries. The US trade deficit over the past decade has reduced US GDP by $1.5 trillion dollars. That is a lot of jobs.
I have been reporting for years that American university graduates have had to take jobs as waitresses and bartenders. As over-indebted American consumers lose their jobs, they will visit restaurants and bars less frequently. Consequently, Americans with university degrees will not even have jobs waiting on tables and mixing drinks.
US policymakers have ignored the fact that consumer demand in the 21st century has been driven, not by increases in real income, but by increased consumer indebtedness. This fact makes it pointless to try to stimulate the economy by bailing out banks so that they can lend more to consumers. The American consumers have no more capacity to borrow.
With the decline in the values of their principal assets–their homes–with the destruction of half of their pension assets, and with joblessness facing them, Americans cannot and will not spend.
Why bail out GM and Citibank when the firms are moving as many operations offshore as they possibly can?
Much of US infrastructure is in poor shape and needs renewing. However, infrastructure jobs do not produce goods and services that can be sold abroad. The massive commitment to infrastructure does nothing to help the US reduce its massive trade deficit, the financing of which is becoming a major problem. Moreover, when the infrastructure projects are completed, so are the jobs.
At best, assuming Mexicans do not get most of the construction jobs, all Obama’s stimulus program can do is to reduce the number of unemployed temporarily.
Unless US corporations can be required to use American labor to produce the goods and services that they sell in American markets, there is no hope for the US economy. No one in the Obama administration has the wits to address this problem. Thus, the economy will continue to implode.
Adding to the brewing disaster, Obama has been deceived by his military and neoconservative advisers into expanding the war in Afghanistan, a large mountainous country. Obama intends to use the draw-down of US soldiers in Iraq to send 30,000 more American troops to Afghanistan. This would bring the US forces to 60,000–600,000 fewer than US Marine Corps and US Army counterinsurgency guidelines define as the minimum number of soldiers necessary to bring success in Afghanistan–and less than half as many as the army that was unable to occupy Iraq.
The Iranians had to bail out the Bush regime by restraining its Shi’ite allies and encouraging them to use the ballot box to attain power and push out the Americans. In Iraq the US troops only had to fight a small Sunni insurgency drawn from a minority of the population. Even so, the US “prevailed” by putting the insurgents on the US payroll and paying them not to fight. The withdrawal agreement was dictated by the Shi’ites. It was not what the Bush regime wanted.
One would think that the experience with the “cakewalk” in Iraq would make the US hesitant to attempt to occupy Afghanistan, an undertaking that would require the US to occupy parts of Pakistan. The US was hard pressed to maintain 150,000 troops in Iraq. Where is Obama going to get another half million soldiers to add to the 150,000 to pacify Afghanistan?
One answer is the rapidly growing massive US unemployment. Americans will sign up to go kill abroad rather than be homeless and hungry at home.
But this solves only half of the problem. Where does the money come from to support an army in the field of 650,000, an army 4.3 times larger than US forces in Iraq, a war that has cost us $3 trillion in out-of-pocket and already incurred future costs. This money would have to be raised in addition to the $3 trillion US budget deficit that is the result of Bush’s financial sector bailout, Obama’s stimulus package, and the rapidly failing economy. When economies tank, as the American one is doing, tax revenues collapse. The millions of unemployed Americans are not paying Social Security, Medicare, and income taxes. The stores and businesses that are closing are not paying federal and state income taxes. Consumers with no money or credit to spend are not paying sales taxes.
The Washington Morons, and morons they are, have given no thought as to how they are going to finance a fiscal year 2009 budget deficit of some two to three trillion dollars.
The practically nonexistent US saving rate cannot finance it.
The trade surpluses of our trading partners, such as China, Japan, and Saudi Arabia, cannot finance it.
The US government really has only two possibilities for financing its budget deficit. One is a second collapse in the stock market, which would drive the surviving investors with what they have left into “safe” US Treasury bonds. The other is for the Federal Reserve to monetize the Treasury debt.
Monetizing the debt means that when no one is willing or able to purchase the Treasury’s bonds, the Federal Reserve buys them by creating bank deposits for the Treasury’s account.
In other words, the Fed “prints money” with which to buy the Treasury’s bonds.
Once this happens, the US dollar will cease to be the reserve currency.
In addition, China, Japan and Saudi Arabia, countries that hold enormous quantities of US Treasury debt in addition to other US dollar assets, will sell, hoping to get out before others.
The US dollar will become worthless, the currency of a banana republic.
The US will not be able to pay for its imports, a serious problem for a country dependent on imports for its energy, manufactured goods, and advanced technology products.
Obama’s Keynesian advisers have learned with a vengeance Milton Friedman’s lesson that the Great Depression resulted from the Federal Reserve permitting a contraction of the supply of money and credit. In the Great Depression good debts were destroyed by monetary contraction. Today bad debts are being preserved by the expansion of money and credit, and the US Treasury is jeopardizing its credit standing and the dollar’s reserve currency status with enormous quarterly bond auctions as far as the eye can see.
Meanwhile, the Russians, overflowing with energy and mineral resources, and not in debt, have learned that the US government is not to be trusted. Russia has watched Reagan’s successors attempt to turn former constituent parts of the Soviet Union into US puppet states with US military bases. The US is trying to ring Russia with missiles that neutralize Russia’s strategic deterrent.
Putin has caught on to “comrade wolf.” He has succeeded in having the president of Kyrgyzstan, a former part of the Soviet Union, evict the US from its military base. This base is essential to America’s ability to supply its soldiers in Afghanistan.
To stop America’s meddling in Russia’s sphere of influence, the Russian government has created a collective security treaty organization comprised of Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan. Uzbekistan is a partial participant.
In other words, Russia has organized central Asia against US penetration.
To whose agenda is President Obama being hitched? Writing in the English language version of the Swiss newspaper, Zeit-Fragen, Stephen J. Sniegoski reports that leading figures of the neocon conspiracy–Richard Perle, Max Boot, David Brooks, and Mona Charen–are ecstatic over Obama’s appointments. They don’t see any difference between Obama and Bush/Cheney.
Not only are Obama’s appointments moving him into an expanded war in Afghanistan, but the powerful Israel Lobby is pushing Obama toward a war with Iran.
The unreality in which he US government operates is beyond belief. A bankrupt government that cannot pay its bills without printing money is rushing headlong into wars in Afghanistan, Pakistan, and Iran. According to the Center for Strategic and Budgetary Analysis, the cost to the US taxpayers of sending a single soldier to fight in Afghanistan or Iraq is $775,000 per year!
The world has never seen such total mindlessness. Napoleon’s and Hitler’s march into Russia were rational acts compared to the mindless idiocy of the United States government.
Obama’s war in Afghanistan is the Mad Hatter’s Tea Party. After seven years of conflict, there is still no defined mission or endgame scenario for US forces in Afghanistan. When asked about the mission, a US military official told NBC News, “Frankly, we don’t have one.” NBC reports: “they’re working on it.”
Speaking to House Democrats on February 5, President Obama admitted that the US government does not know what its mission is in Afghanistan and that to avoid “mission creep without clear parameters,” the US “needs a clear mission.”
How would you like to be sent to a war, the point of which no one knows, including the commander-in-chief who sent you to kill or be killed? How, fellow taxpayers, do you like paying the enormous cost of sending soldiers on an undefined mission while the economy collapses?
Savings lost to Madoff, elderly forced back to work
Reuters | February 6, 2009
By Jason Szep
BOSTON (Reuters) – After losing his entire life’s savings to disgraced fund manager Bernard Madoff, 90-year-old Ian Thiermann abandoned retirement and now works the aisles of a grocery store to make ends meet.
Handing out fliers hawking avocados and pork ribs at a supermarket in Ben Lomond, California, Thiermann is one of many facing dramatic lifestyle changes after losing their savings in Madoff’s suspected $50 billion Ponzi scheme.
Thiermann wasn’t even aware he had invested with Madoff until December 15, when a friend who managed his investments called him on the telephone. “He said, ‘I’ve lost everything and you have lost everything.'” For Thiermann, that meant $750,000.
Days after the release of a list of thousands of Madoff customers — from Hall of Fame baseball pitcher Sandy Koufax to actor John Malkovich — a picture is emerging of a scandal that has reverberated far beyond America’s still-wealthy to those who have lost nearly everything.
And swept up in the pain are many who should be savoring the twilight of their lives in peaceful retirement rather than scrambling for a living.
Thiermann, owner of a pest-control company in Los Angeles before retiring 25 years ago, enjoyed returns of 10 to 12 percent each year on his savings for about 15 years regardless of whether markets rose or fell. He lived on those returns, devoting much time to nonprofit work.
“We don’t have any cash reserves now. And we still owe money on our houses,” he said in a telephone interview. He learned of his losses while shopping in a local grocery store with his wife, Terry.
“The store manager who we know very well said, ‘What’s wrong?’ We said, ‘Have you heard about this Madoff?’ And he said, ‘Oh my god!” Thiermann explained. “I now work there as a beginner and I deeply appreciate it.”
About 2,490 miles to the east in West Chester, Pennsylvania, Maureen Ebel has also surrendered a comfortable retirement, and works as a cleaner after losing her family savings of $7.3 million to Madoff.
On December 17, six days after learning of her losses, the 60-year-old widow found work cleaning the home of a friend and caring for a 93-year-old woman. Ebel’s husband, a doctor, died in 2000 at age 53. The former nurse is also selling her luxury Lexus SUV and a winter home in Florida.
“I HELD ONTO MY DOG AND I CRIED”
“On the first day I went to work, after pushing that vacuum cleaner around, I came home and said to myself ‘this is what my life has come to,’ and I held onto my dog and I cried,” Ebel said in a telephone interview.
In Pompano Beach, Florida, 73-year-old Irwin Salbe also expects to return to work after losing about 75 percent of his investment portfolio to Madoff, who according to court documents confessed to his sons on December 10 that the firm’s investment-advisory business was “basically a giant Ponzi scheme.”
Such schemes use money from new investors to pay distributions and redemptions to existing investors.
Salbe said his family investments with Madoff date back to the 1960s, although he declined to say exactly how much.
“We were pretty heavily in it with my children and my grandchildren. They all had accounts with mine. We’re all in it and it’s substantial,” he said.
“Now we’re downsizing. I had two cars. We’ve gotten rid of one. I’ve canceled some trips. I’ve reduced my expenses with every opportunity. We don’t eat out like we did. If we go out, we got to a neighborhood place like for a pizza,” he said.
“I used to get my income from there. Now, there’s no more expensive dinners. I don’t hug my kids anymore like I used to,” he said. “The image of Madoff’s main clientele is of rich people. That’s not true. A lot of people have been devastated like me,” said Salbe, who had met Madoff several times.
Salbe, a general manager for a newspaper and magazine distribution company in New York before retiring in 1991, inherited the Madoff investments when his father died in 1984. Over the years, he poured in his own money and eventually parked his entire retirement savings with Madoff.
“I’m going to definitely have to go back to a part-time job,” he said.
EVAPORATED SAVINGS
In Wisconsin, Abby Frucht ponders the fate of her parents, whose $1 million in life’s savings seemingly evaporated with the collapse of Bernard L. Madoff Investment Securities LLC, Madoff’s investment-advisory business. Her parents lived off the money in a retirement home in Sante Fe, New Mexico.
“My dad is 85 and my mom is 79. We don’t know how long they can stay there. We’re working that out now,” she said.
Her father suffers from Alzheimer’s disease and may not fully comprehend what’s happening, she said in a telephone interview. “They are very elderly and can’t possibly go back to work. They are very comfortable and happy where they are.”
Her parents have enough savings to stay in New Mexico another two months. After that, they may have no choice but to move in with her in Wisconsin. “My sisters and I have power of attorney over them so we have been putting our heads together to try and find a way to keep our parents comfortable.”
Some want industry regulators or the government to pay.
After losing money to Madoff, Lawrence Velvel, dean of the Massachusetts School of Law, said both the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority could be held liable for investors’ losses.
“The brokerage industry is responsible for this because these are the people that caused all of this,” he said.
http://uk.reuters.com/article/burningIssues/idUKTRE5156FB20090206
House Financial Services Hearing on Madoff Investigation
Former investment manager Harry Markopolos, who investigated investment adviser Bernard Madoff in the 90’s, testified before the House Financial Services Subcmte. on his experiences with the Securities and Exchange Commission. This is the second in a series of hearings on the alleged Madoff investment scheme.
Washington, DC : 4 hr. 39 min.
Public Revolt Builds Against Rip-off Rescue Plans for the Economy
By Naomi Klein, The Nation
Posted on February 6, 2009, Printed on February 6, 2009
http://www.alternet.org/story/125566/
Watching the crowds in Iceland banging pots and pans until their government fell reminded me of a chant popular in anti-capitalist circles in 2002: “You are Enron. We are Argentina.”
Its message was simple enough. You–politicians and CEOs huddled at some trade summit–are like the reckless scamming execs at Enron (of course, we didn’t know the half of it). We–the rabble outside–are like the people of Argentina, who, in the midst of an economic crisis eerily similar to our own, took to the street banging pots and pans. They shouted, “¡Que se vayan todos!” (“All of them must go!”) and forced out a procession of four presidents in less than three weeks. What made Argentina’s 2001-02 uprising unique was that it wasn’t directed at a particular political party or even at corruption in the abstract. The target was the dominant economic model–this was the first national revolt against contemporary deregulated capitalism.
It’s taken a while, but from Iceland to Latvia, South Korea to Greece, the rest of the world is finally having its ¡Que se vayan todos! moment.
The stoic Icelandic matriarchs beating their pots flat even as their kids ransack the fridge for projectiles (eggs, sure, but yogurt?) echo the tactics made famous in Buenos Aires. So does the collective rage at elites who trashed a once thriving country and thought they could get away with it. As Gudrun Jonsdottir, a 36-year-old Icelandic office worker, put it: “I’ve just had enough of this whole thing. I don’t trust the government, I don’t trust the banks, I don’t trust the political parties and I don’t trust the IMF. We had a good country, and they ruined it.”
Another echo: in Reykjavik, the protesters clearly won’t be bought off by a mere change of face at the top (even if the new PM is a lesbian). They want aid for people, not just banks; criminal investigations into the debacle; and deep electoral reform.
Similar demands can be heard these days in Latvia, whose economy has contracted more sharply than any country in the EU, and where the government is teetering on the brink. For weeks the capital has been rocked by protests, including a full-blown, cobblestone-hurling riot on January 13. As in Iceland, Latvians are appalled by their leaders’ refusal to take any responsibility for the mess. Asked by Bloomberg TV what caused the crisis, Latvia’s finance minister shrugged: “Nothing special.”
But Latvia’s troubles are indeed special: the very policies that allowed the “Baltic Tiger” to grow at a rate of 12 percent in 2006 are also causing it to contract violently by a projected 10 percent this year: money, freed of all barriers, flows out as quickly as it flows in, with plenty being diverted to political pockets. (It is no coincidence that many of today’s basket cases are yesterday’s “miracles”: Ireland, Estonia, Iceland, Latvia.)
Something else Argentina-esque is in the air. In 2001 Argentina’s leaders responded to the crisis with a brutal International Monetary Fund-prescribed austerity package: $9 billion in spending cuts, much of it hitting health and education. This proved to be a fatal mistake. Unions staged a general strike, teachers moved their classes to the streets and the protests never stopped.
This same bottom-up refusal to bear the brunt of the crisis unites many of today’s protests. In Latvia, much of the popular rage has focused on government austerity measures–mass layoffs, reduced social services and slashed public sector salaries–all to qualify for an IMF emergency loan (no, nothing has changed). In Greece, December’s riots followed a police shooting of a 15-year-old. But what’s kept them going, with farmers taking the lead from students, is widespread rage at the government’s crisis response: banks got a $36 billion bailout while workers got their pensions cut and farmers received next to nothing. Despite the inconvenience caused by tractors blocking roads, 78 percent of Greeks say the farmers’ demands are reasonable. Similarly, in France the recent general strike–triggered in part by President Sarkozy’s plans to reduce the number of teachers dramatically–inspired the support of 70 percent of the population.
Perhaps the sturdiest thread connecting this global backlash is a rejection of the logic of “extraordinary politics”–the phrase coined by Polish politician Leszek Balcerowicz to describe how, in a crisis, politicians can ignore legislative rules and rush through unpopular “reforms.” That trick is getting tired, as South Korea’s government recently discovered. In December, the ruling party tried to use the crisis to ram through a highly controversial free trade agreement with the United States. Taking closed-door politics to new extremes, legislators locked themselves in the chamber so they could vote in private, barricading the door with desks, chairs and couches.
Opposition politicians were having none of it: with sledgehammers and an electric saw, they broke in and staged a twelve-day sit-in of Parliament. The vote was delayed, allowing for more debate–a victory for a new kind of “extraordinary politics.”
Here in Canada, politics is markedly less YouTube-friendly–but it has still been surprisingly eventful. In October the Conservative Party won national elections on an unambitious platform. Six weeks later, our Tory prime minister found his inner ideologue, presenting a budget bill that stripped public sector workers of the right to strike, canceled public funding for political parties and contained no economic stimulus. Opposition parties responded by forming a historic coalition that was only prevented from taking power by an abrupt suspension of Parliament. The Tories have just come back with a revised budget: the pet right-wing policies have disappeared, and it is packed with economic stimulus.
The pattern is clear: governments that respond to a crisis created by free-market ideology with an acceleration of that same discredited agenda will not survive to tell the tale. As Italy’s students have taken to shouting in the streets: “We won’t pay for your crisis!”
Naomi Klein is an award-winning journalist and syndicated columnist and the author of the international and New York Times bestseller The Shock Doctrine: The Rise of Disaster Capitalism (September 2007); an earlier international best-seller, No Logo: Taking Aim at the Brand Bullies; and the collection Fences and Windows: Dispatches from the Front Lines of the Globalization Debate (2002).
© 2009 The Nation All rights reserved.
View this story online at: http://www.alternet.org/story/125566/
Naomi Klein: Bailout is ‘multi-trillion-dollar crime scene’
http://www.radiodujour.com/people/klein_naomi
The Political Suspicions of 9/11
Daniel Sunjata
February 1, 2009
A coming episode of the acclaimed FX drama “Rescue Me” will tackle what may sound like a far-fetched plot line: that the attacks of Sept. 11 were an “inside job.” The actor who espouses the theories on camera, it turns out, also subscribes to them in real life.
Claims that Al Qaeda terrorists were not solely responsible for the attacks have a lively following on the Internet, including on YouTube, but the second episode of “Rescue Me’s” fifth season, starting in April, may represent the first fictional presentation of 9/11 conspiracy theories by a mainstream media company (FX is operated by the News Corporation).
“They’re not discussed a lot in the press,” Daniel Sunjata, the actor who plays Franco Rivera on “Rescue Me,” told reporters at a television press tour last month. He predicted that the episode would be “socio-politically provocative.”
In the episode, Mr. Sunjata’s character delivers a two-minute monologue for a French journalist describing a “neoconservative government effort” to control the world’s oil, drastically increase military spending and “change the definition of pre-emptive attack.” To put it into action, he continues, “what you need is a new Pearl Harbor. That’s what they said they needed.”
Mr. Sunjata surprised some of the TV reporters when he said that he “absolutely, 100 percent” supports the assertion that “9/11 was an inside job.”
The alternative theories “seem to me to make a lot more sense than the ones that are popularly espoused,” he said, calling it admirable that the conversation was allowed within “Rescue Me.”
Peter Tolan, an executive producer, said Mr. Sunjata is “well read” and has “done a lot of research.”
“Look, obviously not all of us buy in,” he told reporters. “But we went: ‘Wow, that’s interesting, and he’s passionate about it. Let’s use that.’”
Sept. 11 has been a touchstone for the series, which is set in a New York City firehouse. Denis Leary, who plays the lead character, said Mr. Sunjata’s character creates a rift among the fictional firefighters. Similar scenes have played out in actual firehouses in New York, he said, “where some of the younger members don’t even have to completely buy into the theory of 9/11 being an inside job, but want to discuss it.” BRIAN STELTER
http://www.nytimes.com/2009/02/02/business/media/02fx.html?_r=1&ref=business
Zero: an investigation into 9/11
An Investigation into 9/11, has one central thesis – that the official version of the events surrounding the attacks on 9/11 can not be true.
Loose Change 9/11: An American Coup
Dramatically narrated by Daniel Sunjata of FX s Rescue Me, and an outspoken advocate for the First Responders, Loose Change 9/11: An American Coup first examines mysterious and infamous events that reshaped world history from the Reichstag Fire in 1933 that catapulted Hitler to dictatorship – to the Gulf of Tonkin Incident in 1964 that led to the Vietnam War, and then takes viewers on a turbulent journey through several pivotal moments in history before delving into the most significant catastrophe in recent memory, 9/11.
9/11: Press For Truth
Out of the grieving thousands left behind on September 11th, a small group of activist families emerged to demand answers.
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