Weekend Economists All Shook Up July 17-19, 2015

[Demeter]

Well, that was a week that was!

Sorry of the late thread, I worked over to make up for skipping Wednesday. It's hot, it's humid, it's Art Fair. They moved Art Fair up a week, but the typical Art Fair weather moved up a week, too. They really ought to schedule it for March. Maybe we'd have a Spring, then.

In honor of the madness, we will feature pop music that refers to changing times and unexpected surprises and so forth. This should give our audiophiles great scope to pull stuff out of the back of the closet to delight, amaze and confuse us...

as compared to recent events, which were prone to baffle, enrage and alarm.

Greece occupies everyone's minds, with China looming behind like a nightmare. Mosquitoes are eating us alive. Puts a lie to Gershwin...

[Demeter]

1. Why the ECB should not insist on repayment of its Greek bonds Paul De Grauwe, Yuemei Ji

http://www.voxeu.org/article/why-ecb-should-not-insist-repayment-its-greek-bonds

When the ECB buys a Eurozone member’s bonds, the government pays interest to the ECB but the ECB rebates it to the government. If Greece repays its ECB-held bonds, it loses this ‘free borrowing’. This column argues that repayment is like ‘reverse QE’. To maintain its QE targets, more bonds from other EZ members must be bought – thus shifting the free borrowing from Greece to other EZ members. To avoid this perverse outcome, the ECB could extend the maturity of the Greek bonds.

At the end of 2014, the ECB’s holdings of Greek government bonds amounted to approximately €20 billion (Table 1). These bonds had an average remaining maturity of 3.5 years. On 20 July 2015, €3.5 billion of Greek government bonds are coming to maturity. The Greek government is supposed to repay these bonds to the ECB. As more of these bonds will come to maturity during the next three years, the Greek government will have to make repayments to the ECB until the Greek bonds disappear from the ECB’s balance sheet.

Does it make sense to insist that Greece repays the bonds held by the ECB now?

Table 1: Eurosystem SMP holdings (31 Dec 2014)
Issuer country Nominal (€ billions)
Ireland 9.7
Greece 19.8
Spain 28.9
Italy 76.2
Portugal 14.9
Total 149.4

Source: ECB, https://www.ecb.europa.eu/press/pr/date/2015/html/pr150219_1.en.html

In order to answer this question, we have to go to the basics of central banking so as to understand what the implications are of government bond purchases and sales by the central bank. A good starting point is Pâris and Wyplosz (2014) and De Grauwe and Ji (2015).

The basics

Let us first consider the case of a standalone country. When a central bank buys government bonds, it substitutes one type of liability of the public sector with another one. Government bonds that promise a fixed interest rate are replaced by a monetary liability without interest but carrying an inflation risk. At the moment of the purchase, the government bonds cease to exist from an economic point of view. All that is left of the bonds is a monetary liability of the central bank (which is one branch of the public sector).

It is important to stress that there are fiscal implications of this bond buying by the central bank. These arise at the moment of the purchase of the bonds by the central bank. Prior to the purchase, the government paid interest to private investors. After the purchase, the government pays interest to the central bank. But the central bank is part of the public sector and returns the interest to the government.

As long as the bonds are on the balance sheet of the central bank, a circular flow of interest payments is organised from the government to the central bank and back to the government.

This effectively means the government is relieved from paying interest on the bonds held by the central bank. The interest relief, therefore, allows the government to reduce taxation or increase spending. Another way to put this is that when the government bonds are on the balance sheet of the central bank, there is effectively debt relief, i.e. interest payments are waived. This is in fact the seigniorage that the central bank creates by issuing money. This is distributed every year to the government as long as the central bank holds these bonds on its balance sheet. The price the taxpayers pay is that there might be more inflation. But if ‘monetary dominance’ prevails – i.e. if the central bank targets an inflation rate at, say, 2% and creates each year an amount of money base that is consistent with this target – there is no risk of inflation.

It is important to understand that the value of the bonds purchased under monetary dominance and kept on the central bank’s balance sheet has no bearing for the taxpayer. These bonds could be given a value of zero, or any other value, without any taxpayer suffering or gaining from this. Suppose for example that the central bank were to write off these bonds (give it a value of 0). This would mean that the circular flow of interest payments would stop. But that would lead to the same economic outcome for the central bank and for the government. The central bank would not record a profit (interest inflow) and would not record a payment to the government (interest outflow).

All that counts is that the central bank that promises an inflation rate of 2% per year keeps its liabilities (money base) under control. What the central bank has on the asset side of its balance sheet is of no economic significance. In the limit, these assets could be written down to zero. Following standard accounting convention, this would then show up as negative equity. But for a central bank equity is of no importance. A modern central bank can easily live with negative equity as it cannot default, i.e. its liabilities (money base) are not a claim on its assets.[1] For example, a holder of a bank note has no claim on any of the central bank’s assets. A banknote is a claim on goods and services in the market place, no more no less.

Bond buying in a monetary union

Does this analysis also hold in a monetary union like the Eurozone? The answer is yes, provided we structure the bond-buying programme carefully. Suppose the ECB buys an amount of government bonds of Greece. This leads to interest payments from the Greek government to the ECB, which then distributes the profit it makes to the member countries according to the equity share of each country in the ECB (Germany 27%, France 20%, etc.).

Such a bond purchase therefore implies fiscal transfers from Greece to the other member countries. However, there has been an agreement within the ECB to return the Greek interest payments to the Greek government. Thus we reach the situation obtained in a standalone country discussed in the previous paragraphs. That is, the Greek bonds held by the ECB lead to a circular flow from Greece to the ECB and back to Greece. The ECB could easily stop this circular flow by writing off the bonds. This would have no effect on the other member countries.

Note that this is also the rule under the QE programme. The government bonds (80%) bought by the ECB are put on the national banks’ balance sheets. As a result, a circular movement of interest payments is organised from the government to the ECB and back to the same government.

Should the Greek government repay bonds held by the ECB?

Let us now use these insights to evaluate the question of whether the ECB should insist that the Greek government repays the Greek bonds held by the ECB. The Greek government bonds were bought by the ECB in the context of the SMP programme, which intended to stabilise the financial system in 2011. It is often forgotten, but the Treaty explicitly states that the ECB shall contribute to financial stability (Article 3 of Protocol to the Treaty). What are the implications of a Greek repayment? When Greece repays the bonds held by the ECB two things happen.[uk]

First, Greece loses the seigniorage gain (in the form of the waiver on interest payments) it enjoyed while the bonds were on the ECB’s balance sheet.

Greece will have to start paying interest again. Thus, its effective debt burden increases.

Second, at the moment Greece repays the bonds the money base in the Eurozone declines.

Put differently, the repayment is equivalent to a reverse QE.

One could call this ‘quantitative shrinking’ (QS). The ECB, however, is pursuing QE. In the framework of this QE programme, it has set a target path for the money base. The ECB will have to compensate the decline in the money base produced by the Greek repayment by additional purchases of government bonds of other member countries. As a result, the governments of the other member states will enjoy extra seigniorage gains (in the form of a waiver of interest payments on the bonds purchased by the ECB). In other words, the other countries will enjoy a debt relief that is the counterpart of the increase in the debt burden of Greece.

This is where the absurdity of the repayment by Greece comes in. Such a repayment implies that the seigniorage enjoyed by Greece is taken away and redistributed to the other member countries. Or, put differently, the Greek effective debt burden is increased, while the debt burden of the other member countries is reduced. One can ask the question whether this is the right thing to do when so many today agree that the Greek debt burden has become unsustainable.

What should the ECB do?

It would be easy for the ECB to solve this problem. The easiest way would be to write off the Geek bonds. As we have argued earlier such a write-off has no fiscal implications. It means that the circular flow of interest from Greece to the ECB and back is discontinued. In contrast, the repayment of the bonds by Greece has fiscal implications and leads to transfers from Greece to the other member countries. This is quite a perverse transfer given the sorry state of the Greek public finances.

The easy solution is hard

There is a lot of resistance against the easy solution. First there is resistance in the ECB. Like many central banks, it is concerned to show profits and a positive equity. These concerns, however, are misplaced and these profits and losses only have a life in the mind of accountants. Similarly, the equity position of the ECB has no real consequences and should not influence the ECB’s decision. The latter should be guided by concerns about price stability and financial stability.

Second, there is also resistance against a write-off outside the ECB because such a write-off is associated with a loss that the taxpayers, especially the hard-working German taxpayer, will have to bear.

As we have shown, this loss is purely of an accounting nature. It does not affect the other member countries. It does not imply that German taxpayers will bear a higher tax bill.
Concluding remarks

Fears, when held strongly, become a reality. One has to take these into account. Therefore it is worth considering another solution. This would consist of the ECB extending the maturity of the Greek bonds. This would lead to exactly the same economic effects (although the accounting would be different). The Greek government would continue to pay interest to the ECB, which would then dutifully return these to the Greek government. Other countries would not be affected.

Both these solutions would prevent the perverse redistribution of seigniorage from Greece to the other member states.


-----------------------------------------------------------------------------------
References

Buiter, W. (2008), “Can Central Banks Go Broke?”, CEPR Policy Insight 24, 16 May.

Corsetti, G. and L. Dedola (2013), “Is the euro a foreign currency to member states?”, VoxEU.org, 5 June.

De Grauwe, P. and Y. Ji (2015), “Quantitative Easing in the Eurozone: It is possible without fiscal transfers”, VoxEU, 15 January.

Pâris, P. C. and Wyplosz (2014), “The PADRE Plan: Politcally Acceptable Debt Restructuring in the Eurozone”, VoxEU, 28 January.
Endnotes

[1] See Buiter (2008) and Corsetti and Dedola (2013).

[Demeter]

6. When Will Greek Looting and Austerity End? IAN WELSH

http://www.ianwelsh.net/when-will-greek-looting-and-austerity-end/

Back in 2010 a friend predicted it would end when Greeks stormed parliament and beat or hung members of parliament.

It seems that, while that may or may not be literally the case, in general terms it is one of three possible end states. Since there are always enough MPs willing to sign any deal, no matter how bad, because they personally do not suffer the consequences of said deals, bringing the consequences home will be necessary.

The second possibility is the Schauble plan. It is odd that Schauble, though extraordinarily punitive, is willing to offer a pretty good deal for Grexit. He’s worked hard for it, and maybe he’ll be able to force it through yet. So far he has been stymied primarily by the fact that the Greeks will accept any deal, no matter how bad. You can imagine Schauble thinking:

“I want the Greeks out, so I’ll offer bad deals, surely they’ll leave.”

“Hmmm, that didn’t work, I’ll offer a worse deal!”

“No!? A terrible deal, then?”

“Ah, ha, finally, a NO vote in the referendum.” (Rubs hands together with glee.)

“Now, an apocalyptically catastrophic deal on one hand, countered with a reasonably generous plan for support if they leave!”

“No? No!?”

So, Schauble, having realized that Greece will not leave no matter how terrible the deal inflicted on them, must now convince not Greeks, but other key European decision makers.

The third possibility is that a truly radical government takes over in Greece: Likely Fascists or Communists. Someone who actually says what they mean about austerity and will do whatever it takes to end it.

Remember, Hitler did turn the German economy around. So did Mussolini.

One can hope it will be a slightly nicer set of people, but we are definitely in a period where the “decent” people mostly don’t have the necessary courage to stand up for anything that matters; certainly not the courage to actually face down neo-liberalism. This isn’t a joke post, though I wish it was. I want everyone to remember the rule of prosperity and rights.

You have exactly and only the rights and prosperity which are useful to your lords and masters or those you are able to secure from them with force or the credible threat of force.

Any rights or prosperity you have beyond that will always be taken away from you.

Always.

[Demeter]

7. Lose-Lose: Greece Leaving Euro Seen Costlier Than Write-Off

http://www.bloomberg.com/news/articles/2015-07-16/lose-lose-pushing-greece-out-of-euro-is-costlier-than-write-off

The hardliners who reject a Greek debt writedown to keep it in the euro are willing to pay much more to drive it out.

A “Grexit” would cost creditors almost 100 billion euros ($110 billion) more than keeping Greece in the currency union, reckons Alberto Gallo, head of macro credit research at Royal Bank of Scotland Group Plc. Zsolt Darvas at the Bruegel institute estimates that about 75 percent of the debt would not be paid to creditors following the return of the drachma.

“What this tells you is that policy makers are following politics instead of rational economics,” Gallo said.

The fate of Greece’s 313 billion-euro debt load -- most owed to other European governments -- has emerged as the threshold question in returning the beleaguered country to financial health. The International Monetary Fund says it needs relief “far beyond” what creditors have considered. Euro-area leaders reject any cut in the face value of the obligations.

For German Finance Minister Wolfgang Schaeuble, the cost is secondary. He and his euro-area counterparts floated a proposal to their bosses at a July 12 summit to suspend Greece from the euro along with the prospect of a debt restructuring.

“I don’t know, nobody knows, at the moment how this is supposed to work without a haircut,” Schaeuble said Thursday on Deutschlandfunk German radio, “And everybody knows that a haircut is incompatible with euro membership. That’s the situation.”

MORE BLOVIATING

[Demeter]

10. Greece’s National Pastime: Tax-Dodging

http://www.thedailybeast.com/articles/2015/07/15/greece-s-national-pastime-tax-dodging.html


If the Greek parliament approves the EU bailout, many Greeks fear an already draconian tax regime will become even worse.

“It’s like cops and robbers,” says Vassilis, “the more taxes the government impose the more we try to find ways around them.”

Vassilis, who has his own IT firm with several employees, is just one of the hundreds of thousands of Greeks who fear that the new bailout deal set to pass through the Greek parliament tomorrow will make life even harder than it already is. The bailout package, if approved, will both slash public spending and, more importantly (to Vassilis) raise taxes. The deal includes yet more increases on the Value Added Tax among other measures that will further strain the already threadbare pockets of Greece’s beleaguered citizens.

“The new deal is going to increase the tax burden, I am sure of it,” says Vassilis. “And the people are not going to pay, because they simply cannot afford to pay.”

Since the crisis began (technically in 2008, but it was 2009-2010 when Greeks really started to feel its effects on a national scale), the Greek government has sought to claw back money in almost any way it can from its people to service its huge debts.

Greeks pay taxes on almost everything now—and in vastly increased amounts. Since the crisis hit, VAT has risen to 23 percent and in so doing almost single-handedly destroyed the construction industry—one of the three pillars on which the country’s economy rests. (The other two are tourism and agriculture.)

As with so many of the EU-imposed austerity measures, the effect has been counterproductive. The more taxes people pay, the less money they have. But with unemployment soaring, the tax base is shrinking. The government is in a bind and has been forced to get creative—taxing those who do have incomes or assets all the harder. The most egregious example of this is ENFEA—the real-estate tax (officially the Consolidated Tax on Property Ownership). No tax is more widely loathed in Crisis Greece. The country taxes properties in multiple ways—from inheritance to transfer—but what makes the ENFEA so hated is that it is a tax for mere ownership of property. And that it has worked. Since it was passed in its present form two years ago, it has taken government revenues on property from €500 million ($674 million) to about €3.5 billion ($4.7 billion) up to the beginning of last year. What makes the tax even more egregious is that it was reverse engineered. A prominent lawyer recently explained it to me: The government, she said, needed €2.6 billion, so it set up a target of €3.4 billion of receipts. Every homeowner was de facto taxed and those able to pay were taxed 30 percent more than they should have been. Her own taxes went from €650 to €2,400. Little surprise that many Greeks feel the country’s tax regime has become licensed larceny.

And as with so many of the EU-imposed austerity measures, the effect has been counterproductive. When U.S. President Franklin Roosevelt created Fannie Mae in 1938 as part of the New Deal during the Great Depression, he did so to create a class of landowners—people with a stake in society; people who had something to lose. Now in Greece, friends and family who have money tell me that they either prefer to rent or are stuck with properties that they can’t sell. Those that are on lower incomes are now essentially precluded from ever buying a property because even if they can afford it they can’t afford the taxes that now come with it. This class of people—without property, without jobs, and, inevitably, without hope—are those that voted in Greece’s hard-left governing party Syriza and that voted No in the country’s recent referendum. Greece’s creditors—to a certain degree—have pushed its people into doing the opposite of what they want at almost every stage since Syriza came to power in January.

But, as Vassilis explains, the government had to do something: “The thing with the ENFEA is this: For years in Greece there was a lot of ‘black’ money floating around, which people would use to buy property, so the government thought ‘We’ll tax just owning property to get that money back.’”

I ask Vassilis where this culture of national tax evasion comes from? “Well it’s a chicken and egg situation,” he replies. “But you have to understand the dynamic between the state and the individual in Greece. If, like me, you’re not a public servant but a freelancer, the state assumes you’re a thief, and because they think that they’ll find a way to steal from you.”

“For example, say I’m an honest businessman that makes €20,000 per year. I’ll report those earnings to the tax office. But they may very well say: You have this car, you live in that area of Athens, you must be making €30,000 per year, so that’s what we will tax you at. There’s a special term for it: tekmirio, presumption. So have a good doctor who declares all his earnings and a bad doctor who only declares 10 percent, but both get taxed the same. So you may as well be a thief, because they’ll tax you more anyway. In the end, you are presumed to be a thief so you act like one.”

It’s a direct fight between the state and individual; between cat and mouse. And before the new measures have even been signed into law people are getting ready to dodge them. “It’s going to be a battle,” says Vassilis. “They [the government] said they’re going to target shipping companies and right now as we speak I know that shipping companies already have plans in place to get out of Greece.”

“Look, if you catch someone by the neck and he’s desperate, he’s going to take desperate measures. I feel desperate and know that many of my friends do, too. So I’m going to try to move my business abroad. I’ll make sure I get paid abroad, move my money out of the country—create a cash pile outside of Greece. I can do that because it’s the nature of my business—obviously a fisherman can’t do that. But you know, we Greeks are very good at these things. It is the culture here. We’ve been raised like this. It’s a battle that has been going on for many years and we’re well trained—like guerrillas.”

“The new memorandum will make everything worse, including tax evasion. Of that there is no doubt,” he says with total certainty. But surely, I ask, the external monitoring of reforms comes with the new deal will make tax evasion hugely difficult now. He laughs: “No one can seriously think that this crackdown will work because someone wrote it on a piece of paper. Greece doesn’t work like that.”

[snot]

12. ha ha ha (wheez)!

[Demeter]

19. What Mr Tsipras learned about bargaining power in the EU

http://europeonthestrand.ideasoneurope.eu/2015/07/15/mr-tsipras-learned-bargaining-power-eu/

Shortly after SYRIZA’s electoral victory last January, I wrote on this blog that SYRIZA’s positions showed that they did not understand European Union (EU) politics. They were proposing changes to Greece’s bailout programme, which they did not have the bargaining power to negotiate successfully.

Shortly before the Euro Summit on Greece (the summit of the Heads of State or Government of Eurozone member-states), Greek Prime Minister Alexis Tsirpas conceded that his government had ‘made mistakes’ during the five-month long negotiations with Greece’s creditors. Indeed, the seemingly never-ending negotiations and especially the Greek government’s decision to abandon them in order to hold a referendum caused a dramatic deterioration of the situation in Greece.

As the Greek economy has reached the point, where men in their 70s are sitting on the pavement outside closed banks crying because they cannot access their money, one might have thought that Mr Tsipras would have realised the implications of his government’s ‘mistakes’. Greece’s need for an agreement became desperate. As all students of EU politics know, when one is in such desperate need of an agreement, one will have to make whatever concessions are required of them in order to get it.

In the same breath, however, Mr Tsipras claimed that his government was negotiating ‘as an equal among equals’ and that it was restoring ‘the lost political parity between Greece and the other Eurozone countries’. The 17-hour long Euro Summit must have come as a rude awakening. The agreement to which Mr Tsipras consented requires more of Greece than its creditors’ previous offer, which the Greek people rejected in the referendum. It has been referred to as ‘the most intrusive economic supervision programme ever mounted in the EU’. Surely, this is not the outcome of bargaining among ‘equals’...

[Demeter]

20. Grexit or Jubilee? How Greek Debt Can Be Annulled By Ellen Brown

http://www.truth-out.org/news/item/31912-grexit-or-jubilee-how-greek-debt-can-be-annulled

The crushing Greek debt could be canceled the way it was made - by sleight of hand. But saving the Greek people and their economy is evidently not in the game plan of the Eurocrats.

Greece's creditors have finally brought the country to its knees, forcing President Alexis Tsipras to agree to austerity and privatization measures more severe than those overwhelmingly rejected by popular vote a week earlier. No write-down of Greece's debt was included in the deal, although the IMF has warned that the current debt is unsustainable.

Former Greek finance minister Yanis Varoufakis calls the deal "a new Versailles Treaty" and "the politics of humiliation." Greek defense minister Panos Kammenos calls it a "coup d'état" done by "blackmailing the Greek prime minister with collapse of the banks and a complete haircut on deposits."

"Blackmail" is not too strong a word. The European Central Bank has turned off its liquidity tap for Greece's banks, something all banks need, as explained earlier here. All banks are technically insolvent, lending money they don't have. They don't lend their deposits but create deposits when they make loans, as the Bank of England recently confirmed. When the depositors and borrowers come for their money at the same time, the bank must borrow from other banks; and if that liquidity runs dry, the bank turns to the central bank, the lender of last resort empowered to create money at will. Without the central bank's backstop, banks must steal from their depositors with "haircuts" or they will collapse.

What did Greece do to deserve this coup d'état? According to former World Bank economist Peter Koenig:

The Greek people, the citizens of a sovereign country . . . have had the audacity to democratically elect a socialist government. Now they have to suffer. They do not conform to the self-imposed rules of the neoliberal empire of unrestricted globalized privatization of public services and public properties from which the elite is maximizing profits - for themselves, of course. It is outright theft of public property.

According to a July 5th article titled "Greece - The One Biggest Lie You're Being Told By The Media," the country did not fail on its own. It was made to fail:

The banks wrecked the Greek government, and then deliberately pushed it into unsustainable debt . . . while revenue-generating public assets were sold off to oligarchs and international corporations.

A Truth Committee convened by the Greek parliament reported in June that a major portion of the country's €320 billion debt is "illegal, illegitimate and odious" and should not be paid...It is quite possible to grant debt relief, however, without hurting the bondholders. US banks were bailed out by the US Federal Reserve to the tune of more than $16 trillion in virtually interest-free loans, without drawing on taxes. Central banks have a printing press that allows them to create money at will.

The ECB has already embarked on this sort of debt purchasing program. In January, it announced it would purchase 60 billion euros of debt assets per month beginning in March, continuing to at least September 2016, for a total of €1.14 trillion of asset purchases. These assets are being purchased through "quantitative easing" - expanding the monetary base simply with accounting entries on the ECB's books.

The IMF estimates that Greece needs debt relief of €60 billion - a mere one month of the ECB's quantitative easing program. The ECB could solve Greece's problem with a few computer keystrokes. Moreover, in today's deflationary environment, the effect would actually be to stimulate the European economy...The Eurocrats could end the economic crisis by writing off odious unrepayable debt either through quantitative easing or by changing bank accounting rules. But ending the crisis is evidently not what they are up to.

MORE

[Ghost Dog]

25. To understand Schäuble’s demands look at what he inflicted on his own country when it reunified

... But the reality of what the Treuhand did is different from the popular perception – and that should be a warning for both Schäuble and the rest of Europe. Selling East Germany’s assets for maximum profit turned out to be more difficult than imagined. Almost all assets of real value – the banks, the energy sector – had already been snapped up by West German companies. Within days of the introduction of the West German mark, the economy in the east completely broke down. Like Greece, it required a massive bailout programme organised by Schäuble’s government, but in secret: they set aside 100bn marks (£35bn) to keep the old East German economy afloat, a figure that became public only years later.

With prices for labour and supplies going through the roof, the already stressed East Germany economy went into freefall and the Treuhand had no chance to sell many of its businesses. After a couple of months it started to close down entire companies, firing thousands of workers. In the end the Treuhand didn’t make any money for the German government at all: it took in a mere €34bn for all the companies in the east combined, losing €105bn.

In reality, the Treuhand became not just a tool for privatisation but a quasi-socialist holding company. It lost billions of marks because it went on paying the wages of many workers in the east and kept some unviable factories alive – a positive aspect usually drowned out in the vilifications of the agency. Because Kohl and, during the summer of 1990, Schäuble weren’t Chicago economists keen on radical experiments but politicians who wanted to be re-elected, they pumped millions into a failing economy. This is where parallels with Greece end: there were political limits to the austerity a government could impose on its own people.

The lesson Schäuble learned – and which is likely to influence his decision-making now – is that if you act the pure-hearted neoliberal you can still get away with decisions that don’t make perfect economic sense. If Schäuble is acting tough with Greece right now, it is because his electorate wants him to act that way; it’s not just that he doesn’t care about the Greek people, he wants people to believe he doesn’t care, because he sees the political advantage in it.

But Schäuble should have learned from history that the Treuhand gamble had catastrophic psychological consequences. Even though the agency was run by Germans, who spoke German, still it was seen by many in the east as an occupying force...

/... http://www.theguardian.com/commentisfree/2015/jul/17/germany-greece-wolfgang-schauble-bailout

nb. I would say, 'socio-psychological consequences', which is the bedrock of politics, as well as of nationalisms, tribalisms, ideologies etc.

[Demeter]

27. That Article is Dynamite! No Wonder!

He really is a bastard, isn't he?

And it's still a f***** country, Germany.


Thanks for the post.

[Ghost Dog]

30. Thanks for reading.

[Demeter]

2. ELVIS!

[Demeter]

3. The 3 Most Asinine Corporate Arguments Against CEO-Worker Pay Disclosure

http://www.alternet.org/labor/3-most-asinine-corporate-arguments-against-ceo-worker-pay-disclosure

Regulators of the Great Depression era could teach their modern-day counterparts a few lessons in how to get things done. Consider, for example, how fast the Securities and Exchange Commission of that era was able to implement the first executive pay disclosure rules, compared to today’s bureaucratic foot-dragging...When Congress required U.S. corporations to start reporting their exec comp figures in 1934, it provoked a huge corporate backlash. One firm wrote, for example, that the public’s interest in this information amounted to “criminal curiosity.” Another suggested it would do nothing but make the “rank and file seethe with discontent.” But those 1930s regulators ignored the pushback and put the law into force in less than a year.

Fast forward to 2010, when the Dodd-Frank financial reform law mandated expansion of pay disclosure to include median worker pay and the ratio between that and CEO pay. The big corporate lobby groups, predictably, threw another fit. Despite research showing that narrower pay gaps are good for business because they lower worker turnover and boost morale, these groups set out to kill the ratio in the rule-making phase... Unfortunately, in today’s Washington, SEC officials appear much less capable of ignoring that kind of corporate pressure than they were 80 years ago. When Dodd-Frank turns five years old on July 21, this simple rule will still not be in force. It may be the law of the land, but the SEC has not finalized the regulations to put it into practice. So what are the brilliant corporate arguments that have stopped SEC officials in their tracks? Here are a few of the most common – and asinine—claims.

1. The CEO-worker pay ratio is too costly and difficult to calculate.

The U.S. Chamber of Commerce put out a study last year claiming that for large companies, it would take an average of 1,825 hours, at a cost per company of $311,800, to produce this one number. What a joke. This wage information should already be in company files. But to make it even easier, the SEC’s proposed regulation would allow companies to use statistical sampling so they wouldn’t even have to enter every single employee’s wage into the calculation. If the claims are not exaggerated, investors should be very concerned about why these companies have so much difficulty figuring out what they’re paying their own workers.

2. The worker pay part of the calculation should be limited to just U.S.-based full-time workers because that would “provide more useful disclosure.”

This is simply not the intent of the law. Section 953(b) of Dodd-Frank explicitly references “all employees.” And this is for good reason. Investors have an interest in knowing whether companies are outsourcing to low-wage areas where routine violations of basic worker rights can contribute to political and economic instability. And corporations that turn good jobs into bad ones should have to pay more in compliance costs than companies that maintain a commitment to good jobs.

3. This new disclosure requirement will harm poorer states and cities.

This one is a real doozy. The National Investor Relations Institute, which represents 1,600 U.S. companies, argues that their members will feel so much pressure to have a low CEO-worker pay ratio that they might not expand into low-income areas. Get real. Corporations that refuse to pay decent wages and force their workers to rely on taxpayer-funded social programs are the real threat to poorer communities.

The AFL-CIO, which has fought to narrow the gap between workers and top executives, has pretty much had it with the SEC on this one. Recently, they submitted a Freedom of Information Act request for SEC records pertaining to this rule. They also organized a letter in support of this request signed by 19 organizations that represent investors and the public. In a separate petition to the SEC, more than 165,000 Americans demanded that the commission finally take action.

For five years, corporate lobbyists have succeeded in stalling this simple, commonsense regulation. There are rumors that the SEC may finally take action on August 5. If they do, I predict the corporations that are currently fighting this new pay reporting requirement will eventually accept it as routine—just as they did in the 1930s – and will likely even benefit from it.

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is a co-author of the Institute's 20th anniversary Executive Excess report, "Bailed Out, Booted, and Busted."

[Demeter]

4. Why America's workforce is shrinking and Europe's isn't

http://money.cnn.com/2015/07/15/news/economy/europe-america-workforce/index.html



Americans are dropping out of the labor market in droves while residents of Europe and other developed nations, many of which are economically troubled, are jumping in. Since 2000, America's labor force has shrunk more than any other advanced nation's, even though the U.S. economy has fared better. The labor force participation rate -- which measures both the employed and those actively looking for work -- has fallen 4.5 percentage points in the U.S. to 72.7% for those age 15 thru 64, according to a recent OECD report that looked at 38 developed countries. And the U.S. is one of only three nations on the list that's contracting.

This trend is emerging despite Europe's economic woes, which have returned to the spotlight amid Greece's troubles. Unemployment and economic malaise is widespread on the continent, with unemployment rates in the double digits in several countries, including France, Spain and Italy. While the unemployment rate in the United States is on the decline, it's in part for the wrong reasons -- that people are dropping out of the labor market because they've given up on looking for work. Republican presidential candidate Jeb Bush noted last week that the U.S. labor force participation rate is at its lowest in nearly 40 years. "Many who have stopped actively searching for new jobs may never return to work," the report said.

So why is the U.S. moving in the wrong direction? Part of it is that America's workforce is aging and the Baby Boomers are retiring, said Paul Swaim, principal economist at the OECD. But the U.S. rate is also declining because women are leaving the workforce to care for their children. In most of Europe, women's participation in the labor market is on the rise. Not only do mothers have paid leave in Europe, but many fathers do too, Swaim said. Also, childcare is more affordable there. "Mothers in the U.S. have a harder time combining career and family, especially when the children are young," Swain said. Also, the U.S. has a sizable number of working-age citizens out on disability with chronic health conditions. Few of them return to the workforce. Europe, on the other hand, is doing more to get the disabled employed again.

The OECD isn't the only organization to find the U.S. falling behind its peers. The Federal Reserve Bank of St. Louis last month found the U.S. to be the only country among eight developed nations to be slipping backward. It noted that America once had one of the highest participation rates among women age 25 to 54, but now has one of the lowest. Also, American men in that age group have the lowest rate of participation, hovering just above 88%. The other nations are in the 90% range. Men in the U.S. have also experienced a steep decline in participation since the Great Recession began in 2007. Looking at younger workers, the U.S. had the greatest decline -- 11.2 percentage points -- between 1995 and 2013. But this is in large part because these youth are in school.

While more Americans nearing retirement are staying in the workforce, the U.S. had the second smallest increase in participation in this age group ahead of Japan.

[Demeter]

5. Behind the Slow Pace of Wage Growth

Last edited Sat Jul 18, 2015, 03:16 PM - Edit history (1)

http://www.ritholtz.com/blog/2015/07/behind-the-slow-pace-of-wage-growth-2/

Despite continued progress in the labor market, wages have been rising slowly. In 2014, total nonfarm payroll employment rose by 3.1 million and the unemployment rate declined by 1.1 percentage points to 5.6 percent, indicating that the labor market was improving. Meanwhile, average hourly earnings and compensation per hour rose only by 1.8 percent and by 2.5 percent, respectively, a smaller increase than one might expect after 5 years of economic recovery. In this article, we look at some factors behind the slow pace of wage growth, including slow productivity growth and labor’s declining share of income.

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One reason wages have been rising slowly is that prices have been rising slowly. Low inflation, however, does not explain the trend in wages completely. Even after subtracting the effect of inflation, wages have been rising slowly. In 2014, real average hourly earnings and real compensation per hour rose, respectively, by only 1.2 percent and 1.3 percent.

TOTALLY BACKWARDS---PRICES AREN'T RISING BECAUSE PEOPLE CAN'T AFFORD TO PAY FOR NECESSITIES ALREADY. THEY SURE AREN'T GOING TO BE PAYING MORE WITH LESS MONEY!

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In fact, real wages have been rising slowly for several years. Measuring from the end of the Great Recession, real wages have barely risen—real compensation per hour has risen only by 0.5 percent, much less than at this point in past recoveries. The lack of strong wage growth has been one factor that has held down the growth of income, consumer spending, and the recovery.

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Some temporary factors may explain, in part, weak real wage growth during the recovery. For instance, Daly and Hobijn (2015) suggest that many firms were not able to reduce wages during the Great Recession, so they compensated by not raising wages as fast during the recovery. This factor, however, became less and less important over time as the recovery continued to progress.

Another factor that may have held down wage growth during the recovery is a change in the composition of jobs and hours—a relative increase in lower-paid jobs and hours may have depressed the average wage. Data, however, suggests that a change in the composition of occupations did not have a strong effect on the average wage: The employment cost index for total compensation—an index that tracks the cost of labor for a fixed composition of occupations—has risen by 11.5 percent during the recovery, which is similar to the growth in average hourly earnings and compensation per hour, which have risen, respectively, by 11.3 percent and by 11.5 percent. Also, Elvery and Vecchio (2015 , Table 2) find that the effect of the change in the mix of occupations on the change in the average wage between 2010 and 2013 was small (and actually positive). Similarly, Mancuso (2015) finds that shifts in industry composition do not explain much of the weakness in wage growth during the recovery.

Some longer-term changes in the economy have likely played a larger role in depressing real wage growth. The first is the slowdown of labor productivity in the last decade. Productivity growth in the nonfarm business sector has averaged only 1.46 percent since 2004 and 0.85 percent since 2010. As the growth of labor productivity is a key determinant of real wage growth in the long run, the slowdown of productivity has probably helped to depress wage growth.

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MORE DRIVEL AT LINK. THERE ARE NONE SO BLIND AS THOSE THAT CANNOT WILL NOT SEE.

[Demeter]

14. Health Insurance Prices Take Off: Worker Pay Stagnant

http://peureport.blogspot.com/2015/07/health-insurance-prices-takeoff-worker.html



PPACA is not bending the health care cost curve downward as promised. It is sending premiums into the orbit. NYT reported:

Health insurance companies around the country are seeking rate increases of 20 percent to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected.

Blue Cross and Blue Shield plans — market leaders in many states — are seeking rate increases that average 23 percent in Illinois, 25 percent in North Carolina, 31 percent in Oklahoma, 36 percent in Tennessee and 54 percent in Minnesota.

The government projected a less than one percent increase for national health expenditures under PPACA.

We estimate that overall national health expenditures under the health reform act would increase by a total of $311 billion (0.9 percent) during calendar years 2010-2019, principally reflecting the net impact of (i) greater utilization of health care services by individuals becoming newly covered (or having more complete coverage), (ii) lower prices paid to health providers for the subset of those individuals who become covered by Medicaid, (but with net Medicaid costs from provisions other than the coverage expansion), and (iii) lower payments and payment updates for Medicare services. Although several provisions would help to reduce health care cost growth, their impact would be more than offset through 2019 by the higher health expenditures resulting from the coverage expansions.

Now that coverage is soaring once again, the government remains on the hook:

The PPACA establishes the Exchange premium subsidies during 2014-2018 in such a way that the reduced premiums payable by those with incomes below 400 percent of FPL would maintain the same share of total premiums over time. As a result, the Federal premium subsidies for a qualifying individual would grow at the same pace as per capita health care costs during this period.

Annual premium growth of 20 to 50% will blow a monster hole in PPACA's financial footing. PPACA was a predictable debacle. People are paying more to be underinsured and face hurdle after hurdle accessing health care services.

What are health insurers doing with their extra cash? Buying one another. Forbes stated:

The big are getting bigger: Aetna and Humana, the nation’s number three and number four health insurers by revenue, are merging. Aetna will pay about $230 per share for Humana, in a $37 billion cash and stock deal, the largest-ever deal in the health insurance industry.

It’s also the latest major merger in an increasingly frantic health care marketplace. On Thursday, Centene announced that it was buying HealthNet for nearly $7 billion, and CVS last week bought the Target pharmacy business for $2 billion. (And the other two big health insurers, Anthem and Cigna have also talked about merging.)

PPACA "appears to have only helped major insurers, by driving millions of new customers into the market. Aetna and Humana have seen their stock valuations triple in the past five years, since PPACA was signed into law, and the other three major insurers also have seen huge gains."

If you like America's consolidated airline industry service which in my experience has consistently provided less for more money, you'll love PPACA. Just as the private plane set no longer flies commercial, the people reforming the system, executives, board members, lawmakers and lobbyists/consultants, will have no trouble accessing concierge level healthcare. Most of us will pay an unconscionable amount to be underinsured and still face financial obliteration from one major health care episode.

Pay raises for five years, zero to miniscule. One year increase in health insurance premiums, 25 to 50%. That's bending the cost curve in a way to make PPACA an instant failure.

[Demeter]

8. Google's Co-Founders Each Just Made $4 Billion In One Day

http://www.bloomberg.com/news/articles/2015-07-17/google-surge-leaves-co-founders-page-brin-8-billion-wealthier

Google Inc. co-founders Larry Page and Sergey Brin have added more than $4 billion to their individual fortunes today as shares of the Internet search giant surged 16 percent.

Ruth Porat, who joined Google in May, yesterday signaled plans to bring more restraint to spending as the Mountain View, California-based company reported profit that exceeded analyst estimates. Shares closed at $672.93 today, a one-day rise of more than $93.

The fortunes of Page and Brin are up 24 percent this year, an increase of about $7 billion each, according to the Bloomberg Billionaires Index. Chairman Eric Schmidt, who owns 1.3 percent of Google, has increased his fortune 22 percent this year, rising $1.8 billion to $10.1 billion...

[antigop]

9. Unexpected surprises

[Demeter]

11. Chew on that for a while...I'm going to find some ice cream

Last edited Fri Jul 17, 2015, 10:05 PM - Edit history (1)

[Hotler]

32. I saw a simple ice cream recipe on the interubes.

1-pint heavy whipping cream whipped to soft peaks.
1-14oz. can condensed milk
stir together add your favorite stuff/flavor and freeze for six hours. Then enjoy.

I have not tried it, but I may this weekend.

[Demeter]

33. I've made snow ice cream

only one problem...

[DemReadingDU]

35. Get some Haagen Dazs vanilla

Yum, yum, yum

[Fuddnik]

36. I got some Dogsters for Rosco and Sara.

It's the same as Frosty Paws (ice cream like-treat for dogs), but cheaper.

You can't open the freezer anymore without 2 noses peering in. Otherwise, they start nagging you and trying to lead you to the freezer.

[Hotler]

38. I had a couple of cats long ago.......

I fed canned food to and they only showed up when they heard the can opener. I'd run the can opener just to mess with them. They would come running into the kitchen and there would be nothing there for them. They'd give me stink-eye. Messing with cats fun.

[Hotler]

37. .......

yellow snow?

[Fuddnik]

40. That would be Haagen-Zappa.

[MattSh]

13. The ten most repressive points of Spain's gag law - The Local

So it seems Spain is joining the long list of countries that are declaring war on their own people.

Published: 01 Jul 2015 12:54 GMT+02:00

Its many detractors complain that the new "gag law" introduced today harks back to the repressive days of the Franco regime. Here are a list of its most controversial points.

Spain brought in its new public security law on Wednesday limiting freedom of speech and curbing the right to peacefully protest with the introduction of fines ranging between €100 ($111) and €600,000.

The Local takes a look at some of the more repressive points of the controversial law dubbed the Ley Mordaza or "gag law".

1) Fines for protesting

Under the new law, anyone who organizes or takes part in an "unauthorized protest" could be fined between €30,000 and €600,000 if the protest takes part near institutions such as the Spanish parliament.

2) Disrupting public events

Disrupting events such as public speeches, sports events or religious ceremonies could face fines of between €600 and €300,000.

3) Botellón

The Spanish tradition of getting together with mates for outdoor drinking sessions looks to be officially over – drinking in public will be hit with fines of €600 under the new law. And teenagers won’t escape – Parents will be held responsible for the payment of their offsprings' fines.

4) Social media activism

Using Twitter, Facebook or Instagram to call on people to protest will be fined under the new law, an attempt to put paid to the spontaneous protests that have proved very powerful in building the indignado movement.

5) Photographing police

People will be fined for taking unauthorized photographs of the police, a measure introduced with the argument that being publically identified could put officers and their families in danger.

6) Smoking weed

It puts an end to the laissez faire attitude that has seen Spain become a nation with one of the largest potsmoking populations in Europe. But from now on lighting up a joint in bars or on public transport could result in a fine of between €600 and €30,000.

7) Leaving furniture in the street

It is a tradition that has existed in Spain long before the current upcycling trend but from now on dumping unwanted furniture in the street could come with a penalty. Those caught obstructing streets with old furniture, cars or other unwanted items will be fined.

8) Trying to stop an eviction

People trying to stop an eviction from taking place could be fined between €600 and €300,000. The number of evictions in Spain has skyrocketed since the beginning of the economic crisis. New Barcelona mayor, Ada Colau (pictured above) has been a famous anti-eviction activist.

9) Not having your ID

Spaniards who are asked to show their ID card and do not have it on their person could be in trouble under the new law. If they cannot immediately locate it at home and have failed to report it missing, they are liable to be fined.

10) Disrepecting a police officer

Showing a "lack of respect" to those in uniform or failing to assist security forces in the prevention of public disturbances could result in an individual fine of between €600 and €30,000.

For more stories about Spain, join us on Facebook and Twitter

Complete story at - http://www.thelocal.es/20150701/the-ten-most-repressive-aspects-of-spains-new-gag-law

[Demeter]

28. Why? Why are they doing this? It's NUTS.

[MattSh]

15. European Commission Wants to Repress Internet Freedom | Wolf Street

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

Unbeknownst to most EU citizens, their ability to use and enjoy the Internet freely and unmolested by penny-pinching, power-hungry authorities may soon be coming to an end.

The European Commission is preparing to launch new sweeping copyright legislation this fall. As part of that process the rather Orwellian-titled EU Commissioner for Digital Economy and Society, Günther Oettinger, is mulling the possibility of adopting a new ancillary copyright law that would essentially force websites to pay a special fee for linking to other websites.

To wit, from Euractiv:

Oettinger has praised ancillary copyright laws several times in recent months, as the European Commission gets ready to propose EU copyright legislation this fall. He was speaking yesterday at a meeting of the European Parliament’s culture committee.

Asked about the prospect of a European ancillary copyright law, Oettinger replied: “I’m open to it.” Ancillary copyright laws essentially force internet search engines (DQ: and potentially other websites, including blogs and social media) to pay fees to news publishers when they post snippets from articles in search results.

“In Spain, the development and the awareness process seem to be further along than in Germany. We’re assessing that and will integrate it into our copyright proposal,” Oettinger said.

Oettinger is hardly a stranger to hare-brained schemes. A few years ago, as Commission Vice-President, he suggested that heavily indebted European countries should be forced to fly their flag at half-mast over EU buildings, at least until they sorted out their debt problems. In other words, countries should be shamed into rectifying their finances. Needless to say, the proposal did not go down well with some countries. Several MEPs wrote a letter of protest to EU Commission President Jose Manuel Barroso demanding Oettinger’s apology or resignation.

After a swift apology-cum-denial, Oettinger moved on to greener pastures. Now, as EU Digital Commissioner, his ideas have the potential to impact the lives of hundreds of millions of Europeans. His latest brainwave – the continental-wide application of a new copyright system that would make linking to other European websites taxable – is based on a plan that has already been tried and road-tested in both Germany and Spain, with predictably dire consequences.

Complete story at - http://wolfstreet.com/2015/07/15/european-commission-mulls-taxing-internet-links/

[Demeter]

29. What is he? The Meldrim Thomson of Europe?

Are they all nuts?

[Demeter]

16. Obama Administration Finds New Way to Let Criminal Banks Avoid Consequences

CRONY CAPITALISM...WHAT'S NOT TO LIKE?

https://firstlook.org/theintercept/2015/07/15/obama-administration-finds-new-way-let-criminal-banks-avoid-consequences/

Three top Democrats are accusing the Department of Housing and Urban Development of quietly removing a key clause in its requirements for taxpayer-guaranteed mortgage insurance in order to spare two banks recently convicted of federal crimes from being frozen out of the lucrative market. HUD’s action is the latest in a series of steps by federal agencies to eliminate real-world consequences for serial financial felons, even as the Obama administration has touted its efforts to hold banks accountable.

In this sense, the guilty plea has become as meaningless to banks as their other ways of resolving criminal charges: out-of-court settlements, or deferred prosecution agreements. “Too Big to Fail” has morphed into “Too Big to Jail” — and then again, into “Bank Lives Matter.”

Sens. Sherrod Brown and Elizabeth Warren and Rep. Maxine Waters fired off a letter to HUD on Tuesday, saying they believe that the timing of the change was designed to clear the way for two banks recently convicted of federal crimes — JPMorgan Chase and Citigroup — to continue to make Federal Housing Administration-insured loans. Last year, JPMorgan Chase wrote $1.67 billion in FHA loans, and Citi wrote $342 million, according to data from the Congressional Research Service. On May 20 of this year, JPMorgan Chase and Citigroup both entered a guilty plea on one felony count of conspiring to rig foreign currency exchange trades, the largest market on the globe.

Five days earlier, on May 15, HUD slipped a notice into the Federal Register, seeking to alter its standard loan-level certification form, known as HUD-92900-A. This form must be filled out for lenders to receive FHA insurance, which reimburses them if the homeowner falls into foreclosure. On the current HUD-92900-A form, lenders must certify that their firm and its principals “have not, within a three-year period … been convicted of or had a civil judgment rendered against them” for a variety of crimes, including “commission of fraud … violation of Federal or State antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements or receiving stolen property.” JPMorgan and Citi’s guilty plea would fall under the antitrust statute, and according to Brown, Warren and Waters’ reading of the certification, that would make them ineligible to obtain FHA insurance on their loans. On the updated form, this language has been excised. The notice in the Federal Register did not even mention the removal, making it impossible to discover without comparing the old form and the proposed form side by side. The Wall Street Journal ran a story about the certification changes in May, but failed to notice that the new language would let law-breaking banks off scot-free.

The day before HUD released the notice in the Federal Register, the New York Times reported that the Justice Department sought to lessen the consequences of the guilty pleas in the foreign exchange rigging case, ensuring that federal regulators would not use the pleas to bar banks from certain business lines. The Securities and Exchange Commission then granted waivers from disqualification to JPMorgan Chase, Citi, and the other guilty banks in the case, over the objections of one SEC Commissioner that the big banks had effectively become “Too Big to Bar.”

The HUD changes would similarly take away an automatic penalty for bank misbehavior. Per Brown, Warren and Waters, they “allow HUD to turn a blind eye to criminal violations — putting homebuyers and taxpayers at additional risk.” HUD spokesperson Cameron French said the agency was not providing comment on the Democratic letter. He said HUD would review it and respond accordingly. HUD solicited public comment for two other alterations to the form. Under the Paperwork Reduction Act, only administrative changes that potentially raise burdens on private businesses must go through the public comment process. Anything that reduces paperwork burdens has no such requirement....MORE


The Democratic lawmakers believe removing the certification language results in a change in policy rather than simply a change to the form. They requested that HUD withdraw the notice and issue it again under the Administrative Procedures Act, giving an explicit rationale for the change, and how it would affect JPMorgan and Citigroup’s FHA loan status. The public would then have an additional 60-day comment period.

BUT NO MORE CONTROL OVER THE ROGUE BANKS THAN BEFORE, OF COURSE

[Demeter]

18. Judge Kozinski: There's Very Little Justice In Our So-Called 'Justice System'

https://www.techdirt.com/articles/20150715/11374931651/judge-kozinski-theres-very-little-justice-our-so-called-justice-system.shtml

Judge Alex Kozinski has long been one of the few judges willing to speak up against our nation's thoroughly corrupted justice system. It's not the normal form of corruption, where juries and judges are openly bought and sold. It's corrupted, as in bastardized. Or debased. What was set up to provide citizens with a fighting chance against accusations brought by those with vastly more power has instead become exactly the sort of system these checks and balances were meant to prevent. In many cases, prosecutions more resemble railroading than actual due process.

A few years back, Kozinski pointed out one of these contributing factors to this corruption: the deliberate withholding of exonerating evidence from defense lawyers.

There is an epidemic of Brady violations abroad in the land. Only judges can put a stop to it.

This is the damning opening sentence of his dissent in a case where the government pursued a "thought crime" prosecution. At the center of it were Google searches the government claimed supported its accusations that the accused had intended to use the ricin he'd developed in his lab as a biological weapon. Along the way, actual physical evidence was mishandled by investigators, leading to an investigation of the police lab -- an investigation that was never disclosed to the defense team. But the panel let the prosecution walk away from its misdeeds and Kozinski called them out for it.

The panel’s ruling is not just wrong, it is dangerously broad, carrying far-reaching implications for the administration of criminal justice. It effectively announces that the prosecution need not produce exculpatory or impeaching evidence so long as it’s possible the defendant would’ve been convicted anyway. This will send a clear signal to prosecutors that, when a case is close, it’s best to hide evidence helpful to the defense, as there will be a fair chance reviewing courts will look the other way, as happened here. A robust and rigorously enforced Brady rule is imperative because all the incentives prosecutors confront encourage them not to discover or disclose exculpatory evidence.

Due to the nature of a Brady violation, it’s highly unlikely wrongdoing will ever come to light in the first place. This creates a serious moral hazard for those prosecutors who are more interested in winning a conviction than serving justice. In the rare event that the suppressed evidence does surface, the consequences usually leave the prosecution no worse than had it complied with Brady from the outset.

Professional discipline is rare, and violations seldom give rise to liability for money damages. Criminal liability for causing an innocent man to lose decades of his life behind bars is practically unheard of. If the violation is found to be material (a standard that will almost never be met under the panel’s construction), the prosecution gets a do-over, making it no worse off than if it had disclosed the evidence in the first place.

He has now published a new paper that attacks the weaknesses of the system, point-by-point, starting off with a harrowing opening paragraph:

Though we pretend otherwise, much of what we do in the law is guesswork. For example, we like to boast that our criminal justice system is heavily tilted in favor of criminal defendants because we’d rather that ten guilty men go free than an innocent man be convicted. There is reason to doubt it, because very few criminal defendants actually go free after trial. Does this mean that many guilty men are never charged because the prosecution is daunted by its heavy burden of proof? Or is it because jurors almost always start with a strong presumption that someone wouldn’t be charged with a crime unless the police and the prosecutor were firmly convinced of his guilt? We tell ourselves and the public that it’s the former and not the latter, but we have no way of knowing. They say that any prosecutor worth his salt can get a grand jury to indict a ham sandwich. It may be that a decent prosecutor could get a petit jury to convict a eunuch of rape.

Kozinski points to several false assumptions jurors (and judges) make -- unfounded beliefs that have been encouraged over the years by law enforcement and prosecutors.

The government tells us that eyewitnesses (at least, its eyewitnesses) are reliable. Any person with two eyes who can "corroborate" the prosecution's narrative is treated as somewhere between George Washington and Jesus Christ in terms of reliability and honesty. (This deference suddenly disappears when the defense introduces its eyewitnesses. This hypocrisy extends to confidential informants -- criminals whose honesty is always questioned by law enforcement unless their statements help them advance their investigations, in which case they're suddenly upstanding citizens wholly unmotivated by the desire to remain unincarcerated.)

This belief is so much part of our culture that one often hears talk of a “mere” circumstantial case as contrasted to a solid case based on eyewitness testimony. In fact, research shows that eyewitness identifications are highly unreliable, especially where the witness and the perpetrator are of different races… In fact, mistaken eyewitness testimony was a factor in more than a third of wrongful conviction cases… Few, if any, courts instruct juries on the pitfalls of eyewitness identification or caution them to be skeptical of eyewitness testimony.

Other long-held assumptions are equally questionable. Every juror who has ever watched a TV crime procedural is having his or her head filled with questionable assertions about the trustworthiness of certain forms of evidence. This would be fine if it were limited to fictional representations of police work. But it isn't. Prosecutors and courts remain equally credulous of this evidence, even after multiple issues with both have proven them more fallible than they're portrayed.

Identifying fingerprints taken in controlled situations (i.e., bookings) can provide fairly decent ID matches. But those recovered in the field -- latent prints found at crime scenes -- are far less accurate. The same goes for DNA. While it can provide very close matches in controlled situations, most DNA evidence is recovered in less-than-ideal circumstances, and is far too often subject to speculative conclusions that are often guided by what investigators want to find, rather than what they've actually found. Just because a method is "scientific" doesn't mean it isn't subject to bias.

DNA comparison, when properly conducted by an honest, trained professional will invariably reach the correct result. But the integrity of the result depends on a variety of factors that are, unfortunately, not nearly so foolproof: the evidence must be gathered and preserved so as to avoid contamination; the testing itself must be conducted so that the two samples being compared do not contaminate each other; the examiner must be competent and honest. As numerous scandals involving DNA testing labs have shown, these conditions cannot be taken for granted, and DNA evidence is only as good as the weakest link in the chain.

The same goes for almost every piece of forensic evidence the public and the courts have long accepted as being near-infallible.

Spectrographic voice identification error rates are as high as 63%, depending on the type of voice sample tested. Handwriting error rates average around 40% and sometimes approach 100%. False-positive error rates for bite marks run as high as 64%. Those for microscopic hair comparisons are about 12% (using results of mitochondrial DNA testing as the criterion).

Far too often, these forensic methods are treated as incorruptible science when they're actually far from it.

Some fields of forensic expertise are built on nothing but guesswork and false common sense. Many defendants have been convicted and spent countless years in prison based on evidence by arson experts who were later shown to be little better than witch doctors. Cameron Todd Willingham may have lost his life over it.

And so it goes. A calamity of errors. A full-blown catastrophe masquerading as an equitable system. Human memories are particularly fallible but human testimony under oath is considered sacrosanct. Judges act as though juries are decent human beings who will follow specific instructions, rather than act like ordinary human beings and act on their preconceptions and biases instead. Prosecutors will supposedly follow the rules, even though they're working from a supposed disadvantage (the presumption of innocence), rather than do whatever they can to rack up another "win." And the "presumption of innocence" is a joke. Far too many people still believe an indictment is an indicator of guilt. Defense lawyers are actually the ones working uphill, because the presumption of innocence is the ideal, rather than the baseline. "Beyond a reasonable doubt" isn't much of a hurdle when jurors (and even some judges) view the accused as guilty before anyone even starts presenting evidence.

Human minds are terrible things and yet the justice system continues to operate on the fallacy that they're efficient machines capable of determining innocence or guilt. Kozinski points out that something as far removed from the verdict as the opening statement can influence the entire trial.

Even more troubling are doubts raised by psychological research showing that “whoever makes the first assertion about something has a large advantage over everyone who denies it later.” The tendency is more pronounced for older people than for younger ones, and increases the longer the time-lapse between assertion and denial. So is it better to stand mute rather than deny an accusation? Apparently not, because “when accusations or assertions are met with silence, they are more likely to feel true.”

To the extent this psychological research is applicable to trials, it tends to refute the notion that the prosecution pulls the heavy oar in criminal cases. We believe that it does because we assume juries go about deciding cases by accurately remembering all the testimony and weighing each piece of evidence in a linear fashion, selecting which to believe based on assessment of its credibility or plausibility. The reality may be quite different. It may be that jurors start forming a mental picture of the events in question as soon as they first hear about them from the prosecution witnesses. Later-introduced evidence, even if pointing in the opposite direction, may not be capable of fundamentally altering that picture and may, in fact, reinforce it. And the effect may be worse the longer the prosecution’s case lasts and, thus, the longer it takes to bring the contrary evidence before the jury.

Trials in general, and longer trials in particular, may be heavily loaded in favor of whichever party gets to present its case first—the prosecution in a criminal case and the plaintiff in a civil case. If this is so, it substantially undermines the notion that we seldom convict an innocent man because guilt must be proven to a sufficient certainty.

So, the system is broken. And there is no easy remedy. The problem can only be made worse, if the system continues to operate as it has been. And every "tough on crime" initiative only adds to the flaws. Take mandatory sentencing, for example. What is meant to curb future criminal activity has really only insured that the government can wrongfully imprison innocent people for longer periods of time. Every exoneration stemming from these multiple systemic flaws is treated dismissively as some sort of fluke. Even as more evidence mounts that the system is openly abused, the level of credulity granted the abusers has remained relatively steady. And if you're wrongfully imprisoned, you're pretty much screwed. The logistical and legal obstacles standing between you and a reexamination of your case are close to insurmountable.

To begin with, they are in prison and thus unable to pursue leads the police might have missed; they have to rely on someone on the outside to do it, and that’s often difficult or impossible to accomplish. A prisoner’s access even to his counsel is severely restricted once he’s incarcerated. A loyal friend or relative might do it, but friends and even relatives often abandon defendants who are convicted, no matter how much they may protest their innocence. A few prisoners may obtain the help of an innocence project, but the work is labor-intensive, resources are scarce and manpower is limited, so innocence projects engage in triage, focusing on the most promising cases. Of course, it’s often difficult to tell whether a case is promising until you look closely at it, so a promising case can easily be overlooked.

But the biggest problem is that new evidence is hard—and often impossible—to find. If it’s a physical crime, police secure the crime scene and seize anything that looks like it could be relevant. The chance of going back years later and picking up new clues is vanishingly small. The trick then is to get whatever evidence the police have, assuming they didn’t destroy it or release it once it was clear that it wouldn’t be used at trial. If the crime is non-physical, such as fraud, child pornography or computer hacking, the police seize all the relevant computers, hard drives and paper records (including any exculpatory evidence the suspect may have there) and may well discard them after the conviction becomes final…

I think it’s fair to assume—though there is no way of knowing—that the number of exculpations in recent years understates the actual number of innocent prisoners by an order, and probably two orders, of magnitude.

Kozinski doesn't just offer up problems, though. He has a long list of suggested solutions...

SEE LINK FOR THE SOLUTIONS

[MattSh]

17. New Global Taxman to Wage War on Informal Economy | Wolf Street

Meet the Global Taxman

But desperate times call for desperate measures – at least according to Wolfgang Schäuble. Last autumn Germany’s Finance Minister wrote an article ominously titled “Why We Need a Global Taxman.” In it he outlined how technological advances and global cooperation between more than 100 national governments were making it possible for tax authorities to keep ever closer tabs on the people’s money.

Under the Common Reporting Standard, tax authorities receive information from banks and other financial service providers and automatically share it with tax authorities in other countries. In the future, virtually all of the information connected to a bank account will be reported to the tax authorities of the account holder’s country, including the account holder’s name, balance, interest and dividend income, and capital gains.

Various measures are in place to ensure that banks can identify the beneficial owner and notify the relevant tax authorities accordingly. The CRS thus expands the scope of global, cross-border cooperation among national tax authorities. In this way, we can establish a regulatory framework for the age of globalization.

The ultimate goal is clear: through incremental steps, to create uniform global tax standards and rules to allow governments to track and tax every penny we earn, spend or save. This should be comforting news, for if there’s one thing we’ve learnt in the wake of the Global Financial Crisis, it is that banks and governments can always be trusted to look after the people’s money.

Indeed, according to Turkey’s finance minister Mehmet Şimşek, global tax authorities should be given even more power:

The G-20 has launched efforts to encourage all jurisdictions to sign the Multilateral Convention on Mutual Assistance in Tax Matters, developed jointly by the Council of Europe and the OECD. But more must be done to combat the informal economy. I can easily imagine bilateral agreements – and then a multilateral agreement – that establishes a unique global tax ID for all taxpayers.

A tax ID for each and every global citizen! That way we can be taxed wherever we are. Registration will no doubt be quick and painless, and once you’re in the system, escape will be next to impossible – a little like trying to leave the euro zone. And the ultimate target, as Şimşek is not shy to admit, is the informal economy.

Killing System D

In the developing world the informal economy (or what is increasingly being called “System D”) can account for as much as 45% of total economic activity, providing critical economic opportunities for millions of people living on the edge of subsistence. While the informal economy is often equated with the criminal economy, genuine criminal activity (burglaries, extortion, kidnappings, drug trafficking…) accounts for a relatively small part, as Robert Neuwerth writes in Foreign Policy magazine:

Kids selling lemonade from the sidewalk in front of their houses are part of System D. So are many of the vendors at stoop sales, flea markets, and swap meets. So are the workers who look for employment in the parking lots of Home Depot and Lowe’s throughout the United States. And it’s not only cash-in-hand labor… System D is multinational, moving all sorts of products — machinery, mobile phones, computers, and more — around the globe and creating international industries that help billions of people find jobs and services.

System D is by now the second largest economy in the world – and it’s growing at a startling rate. In 2009, the OECD concluded that half the world’s workers (almost 1.8 billion people) were employed in the informal economy. By 2020, the OECD predicts it will employ two-thirds of the world’s workers.

Huh. No surprise I say. When major corporations hire as few people as possible and outsource as much work as possible, what would you expect to happen?

In other words, the fastest growing part of the world economy is that which lies beyond the reach of central government measurement or control. Unsurprisingly, governments are not happy about this and now have their sights firmly set on the informal economy. Through a combination of carrots (lower taxes and social security payments, access to bank credit) and sticks (repressive policies such as the threat of criminal sanctions or even the use of state violence) governments around the world, from Mexico to Egypt and Nigeria to Argentina, are trying to chip away at the shadow economy.

Naturally, much less attention is being paid to the taxes not being paid by the global super rich. Take Mexico, for example, where the nation’s four richest individuals now own a staggering 9% of the country’s total wealth, up from 2% just 12 years ago. Yet instead of trying to get these four men to cough up their share for the general good, the Peña Neito government has its sights set on the millions of workers scratching out a subsistence existence in the informal economy. By Don Quijones, Raging Bull-Shit.


Complete story at - http://wolfstreet.com/2015/07/12/new-global-taxman-to-wage-war-on-informal-economy/

[Demeter]

34. Schauble can kiss my...fist

[MattSh]

21. Greece Is Now A Full-Blown Humanitarian Crisis - In 9 Charts | Zero Hedge

The people of Greece are facing further years of economic hardship following a Eurozone agreement over the terms of a third bailout. The deal included more tax rises and spending cuts, despite the Syriza government coming to power promising to end what it described as the "humiliation and pain" of austerity. With the country having already endured years of economic contraction since the global downturn, The BBC asks, just how does Greece's ordeal compare with other recessions and how have the lives of the country's people been affected?

The long recession

It is now generally agreed that Greece has experienced an economic crisis on the scale of the US Great Depression of the 1930s.

According to the Greek government's own figures, the economy first contracted in the final quarter of 2008 and - apart from some weak growth in 2014 - has been shrinking ever since. The recession has cut the size of the Greek economy by around a quarter, the largest contraction of an advanced economy since the 1950s.



Although the Greek recession has not been quite as deep as the Great Depression from peak to trough, it has gone on longer and many observers now believe Greek GDP will drop further in 2015.

Dwindling jobs

Jobs are increasingly difficult to come by in Greece - especially for the young. While a quarter of the population are out of work, youth unemployment is running much higher.

Half of those under 25 are out of work. In some regions of western Greece, the youth unemployment rate is well above 60%.



To make matters worse, long-term unemployment is at particularly high levels in Greece.

Being out of work for significant periods of time has severe consequences, according to a report by the European Parliament. The longer a person is unemployed, the less employable they become. Re-entering the workforce also becomes more difficult and more expensive.



Young people have been particularly affected by long-term unemployment: one out of three has been jobless for more than a year.

After two years out of work, the unemployed also lose their health insurance.

This persistent unemployment also means pension funds receive fewer contributions from the working population. As more Greeks are without jobs, more pensioners are having to sustain families on a reduced income.

According to the latest figures from the Greek government, 45% of pensioners receive monthly payments below the poverty line of €665.

Complete story at - http://www.zerohedge.com/news/2015-07-17/greece-now-full-blown-humanitarian-crisis-9-charts

[MattSh]

22. Peru Sued By Illinois Firm For Unpaid Birdshit Bonds | Zero Hedge

If you’ve followed the recent evolution of fixed income products, you’re well aware that when it comes to pooling assets and securitizing cash flows, pretty much anything goes. From subprime auto loans, to credit card receivables, to P2P debt, to PE home flipper loans, you name it and there’s a fixed income security for it.

Given the above, we were fairly certain that when it comes to bonds, nothing would surprise us in terms of debtors, creditors, and the underlying assets.

We were wrong.

As Bloomberg reports, Illinois-based MMA Consultants 1 Inc has filed suit in U.S. District Court in connection with money the firm says it is owed by The Republic of Peru for bonds issued in 1875. Here’s more:

Fourteen bonds the country issued in 1875 .. are now held by an Illinois firm that says it’s having a hard time redeeming them.

MMA said it sent three letters to Peru’s Minister of Economics and Finance requesting payment to no avail. The company is suing for breach of contract. It didn’t reveal in the lawsuit how it came by the bonds.

If that were the whole story, it wouldn’t be all that interesting. Fortunately, there’s more:

[The] bonds were issued to pay off debt to a U.S. guano consignment company.

Each bond promised a payoff of $1,000 "United States Gold coin" plus 7 percent interest a year, according to the complaint filed Thursday by MMA Consultants 1 Inc. in federal court in New York.

The bonds bear the signature of Don Manuel Freyre, who is described as the "Envoy Extraordinaire and Minister Plenipotentiary of Peru," according to the complaint.

Complete story at - http://www.zerohedge.com/news/2015-07-17/peru-sued-illinois-firm-unpaid-guano-bonds

[MattSh]

23. Musical Interlude: Waiting for the End - Linkin Park

[MattSh]

24. Hmmmm...

Guess the Humanitarian Crisis one was my post number 3,000

Greece Is Now A Full-Blown Humanitarian Crisis - In 9 Charts | Zero Hedge

Sort of wish it would have been the birdshit one. Somehow that would have been weirdly poetic. Or poetically weird. Or something.

[MattSh]

26. ¡No! Why Argentina Refuses to Pay Its Debts - Bloomberg Business

Argentina’s fight with foreign banks and bondholders is more than just business. It’s part of the national psyche, enshrined in a special museum at the business school at the University of Buenos Aires. The Museum of Foreign Debt is nothing fancy. There are a few flimsy panels plastered with grainy photos, dates, text, and graphs.

Oh, but the saga portrayed on those panels! Banks, bond investors, and the International Monetary Fund flood crooked regimes with overpriced credit. The Argentine economy collapses, and the people suffer. International markets are roiled. It happens time and time again. The story has all the emotions of a good tango.

Argentina has reneged on foreign debt obligations at least seven times, starting in 1827. The latest was in July 2014, when Argentina defaulted rather than give in to pressure from Paul Singer of Elliott Management. The fight with Singer has been going on for a dozen years, and the term vulture investor—rather esoteric in much of the world—is now pretty much universally known in Argentina. It’s so much on people’s minds that Buenos Aires toy stores carry a homegrown board game called Vultures, packaged in a box depicting a pair of the birds picking at a pile of dollars. “We planted the anti-vulture flag in the world,” President Cristina Fernández de Kirchner said in a speech in mid-May. “We gave a name to international usury and despotism.”

One May morning at the debt museum, guide Antonella Fagnano, a 21-year-old business major, describes Argentines’ attitude toward default. She pauses by a black-and-white photo of the late General Jorge Videla, who led a 1976 coup that ushered in a seven-year dictatorship. Successive presidents in that period loaded up on foreign debt to finance, among other things, the 1982 Falklands War with the U.K.

Complete story at - http://www.bloomberg.com/news/features/2015-07-17/-no-why-argentina-refuses-to-pay-its-debts

[MattSh]

31. Greece: Sound and Fury Signifying Much -- Paul Craig Roberts

Paul Craig Roberts

All of Europe, and insouciant Americans and Canadians as well, are put on notice by Syriza’s surrender to the agents of the One Percent. The message from the collapse of Syriza is that the social welfare system throughout the West will be dismantled.

The Greek prime minister Alexis Tsipras has agreed to the One Percent’s looting of the Greek people of the advances in social welfare that the Greeks achieved in the post-World War II 20th century. Pensions and health care for the elderly are on the way out. The One Percent needs the money.

The protected Greek islands, ports, water companies, airports, the entire panoply of national patrimony, is to be sold to the One Percent. At bargain prices, of course, but the subsequent water bills will not be bargains.

This is the third round of austerity imposed on Greece, austerity that has required the complicity of the Greeks’ own governments. The austerity agreements serve as a cover for the looting of the Greek people literally of everything. The IMF is one member of the Troika that is imposing the austerity, despite the fact that the IMF’s economists have said that the austerity measures have proven to be a mistake. The Greek economy has been driven down by the austerity. Therefore, Greece’s indebtedness has increased as a burden. Each round of austerity makes the debt less payable.

But when the One Percent is looting, facts are of no interest. The austerity, that is the looting, has gone forward despite the fact that the IMF’s economists cannot justify it.

Greek democracy has proven itself to be impotent. The looting is going forward despite the vote one week ago by the Greek people rejecting it. So what we observe in Alexis Tsipras is an elected prime minister representing not the Greek people but the One Percent.

The One Percent’s sigh of relief has been heard around the world. The last European leftist party, or what passes as leftist, has been brought to heel, just like Britain’s Labour Party, the French Socialist Party, and all the rest.

Without an ideology to sustain it, the European left is dead, just as is the Democratic Party in the US. With the death of these political parties, the people no longer have any voice. A government in which the people have no voice is not a democracy. We can see this clearly in Greece. One week after the Greek people express themselves decisively in a referendum, their government ignores them and accommodates the One Percent.

The American Democratic Party died with jobs offshoring, which destroyed the party’s financial base in the manufacturing unions. The European left died with the Soviet Union.

Complete story at - http://www.paulcraigroberts.org/2015/07/15/greece-sound-fury-signifying-much-paul-craig-roberts/

[bread_and_roses]

49. But don't you know the Greek people have to pay for their sins!

At least that's what I was told when I made the mistake of wandering out of here to GD or somewhere - I let my ire at the good little serfs echoing the MSM's line on Greece and it's sins tempt me out of our enclave. I was told I didn't understand "the arithmetic" LOL.

[MattSh]

53. Sort of like Sisyphus...

They must pay over and over again...

[bread_and_roses]

56. Good one! (n/t)

[Hotler]

39. Donald Trump attack on John McCain war record is 'new low in US politics'

Donald Trump attacked the Arizona senator John McCain on Saturday, for being shot down while a navy pilot during the Vietnam war.

Trump, who has been in a war of words with the 2008 Republican nominee, jibed of McCain: “He’s not a war hero. He’s a war hero because he was captured? I like people who weren’t captured.”

His words prompted a strong response from Republican candidates for president in 2016 – more immediate and forceful, indeed, than such reactions to Trump’s recent comments on Mexico and immigration.

The former Texas governor Rick Perry said the remarks represented “a new low in American politics” and demanded that Trump “immediately withdraw from the race for president.”

In-fighting amoung the family is fun to warch.


http://www.msn.com/en-us/news/politics/donald-trump-attack-on-john-mccain-war-record-is-new-low-in-us-politics/ar-AAdbgjc

[MattSh]

41. A new low in US politics?

While we've certainly become accustomed to new lows in US politics, this ain't one of them.

There's been a lot worse.

[Demeter]

42. I have a small personal victory to report

I hung the curtain rod, drapes and shades that have been waiting for years!

This is sweet not only because now the room is habitable in the summer glare, but also because I managed to get a "friend" who is a major user to provide actual, complete help, which is a start to balancing the book of Favors between us.

I could see her, as the last step was taken, wondering how she had not been able to turn this into an event all about her and her needs...the gears were audibly grinding, if not the teeth. She's gotten many a service from me in the past, and will again.

Normally I don't mind, because I'm pretty self-sufficient, but this was a two person project, and I really needed the help. It's the first shaky step to a complete renovation project.

And it's so gorgeous!

[bread_and_roses]

51. Sincere congrats!

I know how important these small victories are.

[Demeter]

52. One small step for womankind

in a 10,000 mile journey

I may be mixing metaphors there.

[Demeter]

43. The Real Reasons For the Iran Agreement — Paul Craig Roberts

In my last column I wrote that the agreement with Iran does not mean much, because Washington can renew the sanctions at any time merely by making false charges against Iran...So what is the reason for the accommodation with Iran after many years of rabid demonization of a country for no other reason than the country insisted on its rights to nuclear energy granted by the Nuclear Non-Proliferation Treaty?

If you can free yourself from the brainwashing from the presstitute media, three BIG reasons jump out at you.

One is that the neoconservatives’ perception of the threat has shifted from “Muslim terrorists” to Russia and China. Unlike Muslim terrorists, both Russia and China are constraints on Washington’s unilateralism. Since the collapse of the Soviet Union, Washington has grown accustomed to being the Uni-Power, able to exercise its will unchallenged in the world. The rise of Russian strength under Putin and Chinese strength under the new policy has destroyed Washington’s Uni-Power privilege. Washington wants the privilege back...Washington is not in good shape, economically or militarily. According to Nobel Economist Joseph Stieglitz and Harvard University budget expert Linda Bilmes, Washington has wasted at least $6 trillion dollars in its 14-year old wars in the Middle East. Despite the extraordinary cost, Washington has been defeated, and is now faced with the Islamic State, a new entity arising out of Washington’s mistakes that is creating a new country partly out of Iraq and partly out of Syria. Despite its gigantic hubris, Washington has figured out that the US cannot simultaneously take on Russia, China, Iran, and the Islamic State. This realization is one reason for the nuclear agreement with Iran. It removes Iran from the mix.

A second reason for the agreement is that Iran is opposed to the Islamic State and can be employed as an American proxy against the Islamic State, thus freeing Washington for conflict with Russia and China. SOMEHOW, I DON'T THINK IT'S GONNA HAPPEN THAT WAY, BUT REALITY IS THIN ON THE GROUND IN DC.--DEMETER

A third reason for Washington’s agreement with Iran is Washington’s concern with Europe’s energy dependence on Russia. This dependence is inconsistent with the EU going along with Washington’s sanctions against Russia and with NATO’s military moves against Russia. Washington wants to end this dependence and has hopes that money can bring Iran into becoming a supplier of natural gas and oil to Europe. The explanation I have provided is realism, not cynicism. All that the agreement with Iran means is that Washington has belatedly realized that the concocted Iranian and Muslim threats are using up time, energy, and resources that Washington needs to apply to Russia and China. Moreover, there were too many threats for the American people to know which was paramount.

One of the reasons that Greece has to be destroyed is to block the entry of Russian natural gas into Europe from the Russian pipeline into Turkey... MORE

http://www.paulcraigroberts.org/2015/07/18/real-reasons-iran-agreement-paul-craig-roberts/

IT SEEMS MUCH MORE SENSIBLE FOR THAT IRANIAN ENERGY TO GO TO THE MIDDLE EAST OR EVEN CHINA AND INDIA, THAN TO EUROPE. SHORTER ROUTES, PAYING CUSTOMERS, ETC....THE US IS SUCH A BULLY, THOUGH...

[Demeter]

44. Greece’s Lesson For Russia — Paul Craig Roberts

Greece’s lesson for Russia, and for China and Iran, is to avoid all financial relationships with the West. The West simply cannot be trusted. Washington is committed to economic and political hegemony over every other country and uses the Western financial system for asset freezes, confiscations, and sanctions. Countries that have independent foreign policies and also have assets in the West cannot expect Washington to respect their property rights or their ownership. Washington freezes or steals countries’ assets, or in the case of France imposes multi-billion dollar fines, in order to force compliance with Washington’s policies. Iran, for example, lost the use of $100 billion, approximately one-fourth of the Iranian GDP, for years simply because Iran insisted on its rights under the Non-Proliferation Treaty.

http://www.paulcraigroberts.org/2015/07/17/greeces-lesson-russia-paul-craig-roberts/

AFTER ALL, LOOK HOW THE US TREATS ITS CITIZENS AND THEIR ASSETS AND INCOMES...MASS EMIGRATION IS DUE TO HAPPEN, AT THE SLIGHTEST OPPORTUNITY. AND REGIME CHANGE!

Russia and China, having emerged from a poorly functioning communist economic system, naturally regard the West as a model. It seems China has fallen for Western capitalism head over heels. Russia perhaps less so, but the economists in these two countries are the same as the West’s neoliberal economists, which means that they are unwitting servants of Western financial imperialism. Thinking mistakenly that they are being true to economics, they are being true to Washington’s hegemony.

With the deregulation that began in the Clinton regime, Western capitalism has become socially dysfunctional. In the US and throughout the West capitalism no longer serves the people. Capitalism serves the owners and managers of capital and no one else. This is why US income inequality is now as bad or worse than during the “robber baron” era of the 1920s. The 1930s regulation that made capitalism a functioning economic system has been repealed. Today in the Western world capitalism is a looting mechanism. Capitalism not only loots labor, capitalism loots entire countries, such as Greece which is being forced by the EU to sell of Greece’s national assets to foreign purchasers.

Before Putin and Lavrov again refer to their “American partners,” they should reflect on the EU’s lack of good will toward Greece. When a member of the EU itself is being looted and driven into the ground by its compatriots, how can Russia, China, and Iran expect better treatment? If the West has no good will toward Greece, where is the West’s good will toward Russia? The Greek government was forced to capitulate to the EU, despite the support it received from the referendum, because the Greeks relied on the good will of their European partners and underestimated the mendacity of the One Percent. The Greek government did not expect the merciless attitude of its fellow EU member governments. The Greek government actually thought that its expert analysis of the Greek debt situation and economy would carry weight in the negotiations. This expectation left the Greek government without a backup plan. The Greek government gave no thought to how to go about leaving the euro and putting in place a monetary and banking system independent of the euro. The lack of preparation for exit left the government with no alternative to the EU’s demands. The termination of Greece’s fiscal sovereignty is what is in store for Italy, Spain, and Portugal, and eventually for France and Germany. As Jean-Claude Trichet, the former head of the European Central Bank said, the sovereign debt crisis signaled that it is time to bring Europe beyond a “strict concept of nationhood.” The next step in the centralization of Europe is political centralization. The Greek debt crisis is being used to establish the principle that being a member of the EU means that the country has lost its sovereignty. ...

China seems unaware of the risk of investing in the US. China’s new rich are buying up residential communities in California, forgetting the experience of Japanese-Americans who were herded into detention camps during Washington’s war with Japan. Chinese companies are buying US companies and ore deposits in the US. These acquisitions make China susceptible to blackmail over foreign policy differences.

The “globalism” that is hyped in the West is inconsistent with Washington’s unilateralism. No country with assets inside the Western system can afford to have policy differences with Washington. The French bank paid the $9 billion fine for disobeying Washington’s dictate of its lending practices, because the alternative was the close down of its operations in the United States. The French government was unable to protect the French bank from being looted by Washington. It is testimony to the insouciance of our time that the stark inconsistency of globalism with American unilateralism has passed unnoticed.

[Demeter]

47. Ukraine Wants the EU to Lend It Money for Russian Gas

MAYBE THEY SHOULD ASK FOR IRANIAN GAS....

http://russia-insider.com/en/ukraine-wants-eu-lend-it-money-russian-gas/ri8793

Naftogaz of Ukraine expects to receive a $300 mln loan from the European Bank for Reconstruction and Development (EBRD) in September — October 2015 against government guarantees to purchase natural gas, Deputy CEO of the company Sergei Konovets said on Thursday.

“We plan to receive the loan in September-October and expect a positive response of EBRD management,” Ukraine’s UNIAN news agency cited Konovets.

Western financial institutions may provide $1 bln to purchase natural gas for the heating season, Ukraine’s minister of energy and coal industry Volodymyr Demchyshyn said earlier on Thursday.


“When we visited the United States, we held a series of meetings in this regard with representatives of the US government, the International Finance Corporation [IFC] and the World Bank. The decision to provide financing to purchase natural gas for the heating season will be reached in the nearest future,” the minister said.

Ukraine expects to receive $1 bln in total, the minister said. “$300 mln from the World Bank, $300 mln from IFC, and the remaining amount from other donors,” he added.

“IFC is considering an option of extending a loan to a trader, which will include everything into its asset list, will store and sell gas, for example to Ukraine’s gas operator Naftogaz."

SOUNDS LIKE A DONE DEAL. MATT?

[MattSh]

54. Nothing's ever a done deal over here...

until all the palms are greased and all the bribes are paid.

[Demeter]

45. Austerity will wreck Europe: Greece and the scary new European ultra-nationalism

I THINK THE HEADLINE IS OUT-OF-DATE. EUROPE IS ALREADY WRECKED, AND THE EUROZONE IS THE CAUSE OF THE WRECK AND THE AUSTERITY

http://www.salon.com/2015/07/16/austerity_will_wreck_europe_greece_and_the_scary_new_european_ultra_nationalism/

...sensitivity, once pervasive among the German governing elite, has now faded. The fact that Germany’s war debt was written off by the victorious Allies in 1948 has vanished from the national memory. There is no compassion for the fact that Europe suffered an economic drag before the collapse in part because of Germany’s lavish subsidies of its own eastern states. Nor is there any comprehension of the double standard reflected in the €2 trillion forgiven the former East Germany but the massive resistance against aid to fellow EU members. Germany, having tightened its own belt to help fellow Germans, is feeling self-righteous and willing to run roughshod over its neighbors.

German characterizations of Greece, in the press and in political speeches, range from patronizing to vicious—and they do not sound pretty in a German accent. One cosmopolitan German whom I know well, a man who has long lived in the United States, told me in 2012: “They should just dig a big hole, toss the Greeks in, and cover it over.”

Given the widespread German attitudes, there is no serious opposition to Merkel’s policies... The fact that if Europe collapses, Germany collapses too, seems lost on most German voters...without the broad consent or understanding of the European public, a huge amount of sovereignty has been transferred from nation-states to EU officials, who are beyond direct democratic accountability—and that authority is being used to enforce a perverse economic strategy...

Excerpted from “Debtors’ Prison: The Politics of Austerity Versus Possibility” by Robert Kuttner. Published by Vintage Books. Copyright 2014 by Robert Kuttner.
Robert Kuttner is the co-editor of The American Prospect and a senior fellow at Demos

[Demeter]

48. Greece: ministry, banks will not open on Monday after all

CUE GOMER PYLE...

http://www.ansamed.info/ansamed/en/news/sections/economics/2015/07/17/greece-ministry-banks-will-not-open-on-monday-after-all_c665d7d4-9688-4325-8c1c-3aaeeebd9b8b.html

"The Greek Finance Ministry and the Bank of Greece examine all possibilities and technical details so that banks can open as soon as possible," says a finance ministry announcement, thereby negating previous reports that Greek banks will open on Monday. As Greekreporter website writes, only the branches that now service pensioners without ATM cash cards and offer limited services such as deposits and issuing cash cards. There are about 1,000 such branches all over the country. According to bank officials, there is a number of technical difficulties that prevent the opening of all branches for the limited services that are allowed now and with capital controls still in place.

If these technical issues are resolved, then banks might open on Tuesday or Wednesday. The Deputy Finance Minister said he is preparing a new legislative act regarding bank operation from Tuesday on. The new act will be announced during the weekend.

Meanwhile, Greek banks received a small cash injection from the European Central Bank that poured 900 million euros to Bank of Greece through the emergency liquidity assistance (ELA) scheme.

[Demeter]

50. Greece's Tsipras Culls Rebel Ministers

Greek Prime Minister Alexis Tsipras sacked a group of dissident ministers Friday from his government, following divisions within the party over economic reforms over a new bailout deal. A total of 10 high ranking Syriza figures have been dumped, including some of Greece's most prominent politicians.

The energy ministry will change hands from the staunch anti-austerity Panagiotis Lafazanis to former labor minister Panos Skourletis. In other moves, the labor ministry will be handed to former Administrative Reforms Minister George Katrougalos and a high profile member of Greece's tax experts' union Tryfon Alexiadis will take over as deputy finance minister. Finance minister Euclid Tsakalotos has retained his position.

The reshuffle removes rebel Syriza members from key ministries, after Prime Minister Alexis Tsipras was faced with stiff resistance from within Syriza to a proposed bailout package. Tsipras himself has derided the bailout conditions as “irrational,” but says Greece has no other options left on the table. Earlier in the week the leftist leader argued Syriza must accept the unpopular measures in order to prevent an economic disaster in the debt-ridden country and also to avert what he says could have been an imminent collapse of Greek banks.

A quarter of Syriza lawmakers voted against Tsipras' bailout measures Thursday, forcing the prime minister to rely on the support of opposition parties to lock in the deal. The vote was an essential step towards a formal restart of talks between Greece and its creditors. The final hurdle ahead of talks was passed Friday, when the German parliament backed new negotiations.

Talks on the next bailout are expected to take at least a month, with lingering disagreements between Greece and European leaders persisting. Austerity hardliners led by Germany's finance minister Wolfgang Schauble have demanded Greece be forced to submit to steeper public spending cuts than previously demanded by creditors. Earlier Friday Italian economy minister Pier Carlo Padoan said upcoming negotiations are likely to be “delicate.”

“The program must be balanced, containing measures that put it on a path toward a sustainable budget while also helping growth and creating jobs,” Padoan said.

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[Demeter]

46. Paul Krugman: Liberals and Wages

http://www.nytimes.com/2015/07/17/opinion/paul-krugman-liberals-and-wages.html?action=click&pgtype=Homepage&module=opinion-c-col-right-region&region=opinion-c-col-right-region&WT.nav=opinion-c-col-right-region&_r=1

Hillary Clinton gave her first big economic speech on Monday, and progressives were by and large gratified. For Mrs. Clinton’s core message was that the federal government can and should use its influence to push for higher wages... Mrs. Clinton’s speech reflected major changes, deeply grounded in evidence, in our understanding of what determines wages. And a key implication of that new understanding is that public policy can do a lot to help workers without bringing down the wrath of the invisible hand. Many economists used to think of the labor market as being pretty much like the market for anything else, with the prices of different kinds of labor — that is, wage rates — fully determined by supply and demand. So if wages for many workers have stagnated or declined, it must be because demand for their services is falling. In particular, the conventional wisdom attributed rising inequality to technological change, which was raising the demand for highly educated workers while devaluing blue-collar work. And there was nothing much policy could do to change the trend, other than aiding low-wage workers via subsidies like the earned-income tax credit.

You still see commentators who haven’t kept up invoking this story as if it were obviously true. But the case for “skill-biased technological change” as the main driver of wage stagnation has largely fallen apart. Most notably, high levels of education have offered no guarantee of rising incomes — for example, wages of recent college graduates, adjusted for inflation, have been flat for 15 years.

Meanwhile, our understanding of wage determination has been transformed by an intellectual revolution — that’s not too strong a word — brought on by a series of remarkable studies of what happens when governments change the minimum wage...Until the Card-Krueger study, most economists, myself included, assumed that raising the minimum wage would have a clear negative effect on employment. But they found, if anything, a positive effect. Their result has since been confirmed using data from many episodes. There’s just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America.

How can this be? There are several answers, but the most important is probably that the market for labor isn’t like the market for, say, wheat, because workers are people. And because they’re people, there are important benefits, even to the employer, from paying them more: better morale, lower turnover, increased productivity. These benefits largely offset the direct effect of higher labor costs, so that raising the minimum wage needn’t cost jobs after all. The direct takeaway from this intellectual revolution is, of course, that we should raise minimum wages. But there are broader implications, too: Once you take what we’ve learned from minimum-wage studies seriously, you realize that they’re not relevant just to the lowest-paid workers...

KRUGMAN WANTS A RAISE?

[Demeter]

55. I did housework, and it did for me

I'm going to call it quits for the day, and rest up for Monday's SMW.

When you are coming out of the Great Depression, it takes a while to build up momentum. When the heat index is 100F, it's not going to happen, anyway.