Monday, March 12, 2012

367 Japan renews QE as Yen rises as investors repatriate money for safety

(1) Mullen: National Debt is a Security Threat
(2) Australian Bank profits a sign of economic sickness, not health - Steve Keen
(3) Depression, Not Recession - David Rosenberg
(4) Billionaire philanthropy a PR diversion as Middle Class resentment at Elite grows
(5) Japan renews QE as Yen rises as investors repatriate money for safety
(6) Global Tobin Tax distributed in proportion to each country's financial transactions
(7) Congress targets foreign companies importing IT workers
(8) U.S. Green Party policy to Nationalize the 12 Federal Reserve Banks
(9) Is the Madoff Scandal Paradigmatic? - Kevin MacDonald
(10) Brother Nathanael On Video - Who Owns The Federal Reserve?

(1) Mullen: National Debt is a Security Threat

Written by Michael Cheek

Latest News, National Security

Aug 27, 2010

The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff.

Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.

“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.

“We’re going to have to do that if it’s going to survive at all,” Mullen said, “and do it in a way that is predictable.”

He also called on the defense industry to hire veterans and become more robust in the future.

“I need the defense industry, in particular, to be robust,” he said. “My procurement budget is over $100 billion, [and] I need to be able to leverage that as much as possible with those [companies] who reach out [to veterans].”

Mullen highlighted the unity of purpose between the government and industry as well, in working to solve national security issues.

“I have found that universally, [private-sector workers] care every bit as much about our country, are every bit as patriotic and wanting to make a difference … as those who wear the uniform and are in harm’s way,” he said.

(2) Australian Bank profits a sign of economic sickness, not health - Steve Keen

From: ERA <> Date: 28.08.2010 06:33 AM

Bank Profits a sign of economic sickness, not health

by Steve Keen

Published on August 11th, 2010

{visit the link to see the graphs}

The record $6 billion profit that the Commonwealth Bank is expected to announce today is a sign of an economy that has been taken over by Ponzi finance. Fundamentally, banks make money by creating debt, and the amount of debt we’ve been enticed into taking on is the sign of a sick economy rather than a healthy one. The level of private debt that is actually needed to support business and maintain home ownership at historic levels (ownership levels have fallen over recent years!) is possibly as little as one sixth the current level.

Because of that debt level, bank profits have gone through the roof as a share of GDP. Back before we had a financial crisis when debt levels were far lower than today so too were bank profits as a share of GDP. A sustainable level of bank profits appears to be about 1% of GDP. The blowout from this level to virtually six times as much began when bank deregulation began under Hawke and Keating, and then took off as Howard and Costello encouraged everyone to become “Mum and Dad Investors”, which meant borrowing money from the bank and gambling on share and house prices.

As readers of this blog know, I build models of financial instability, and in my models, one symptom of an economy that is headed for a Depression is a rise in bankers share of income at the expense of workers and capitalists. The model below has yet to be calibrated to the data, but the similarities with the actual data are still ominous.

One empirical reality illustrated by the model as well is that even if firms are the ones taking on the debt (as they are in this modelit does not include household borrowing), workers are the ones that pay for this in terms of a declining share of national income: rising debt is associated with a constant profit share of GDP but a falling workers share.

When the crisis really hits, both workers and capitalists suffer as bank income goes through the roofleading to a Depression. The only way out of this is to abolish large slabs of the debt, and coincidentally to drive bankers share of income back down to levels that reflect is supportive role as a provider of working capital for firmsrather than a parasitic role as the financier of Ponzi schemes.

This is the real debt story of our economy right now. As the first chart above indicates, private debt is far higher than Government debt, even after the increase last year due to Rudd’s stimulus package. Government debt is currently 5.5% of GDP, whereas private debt even though it has fallen slightly due to business deleveraging is over 150% of GDP: 27 times the size of Government debt. The so-called debate that the major parties are having over the size of Government debt is an embarrassment.

(3) Depression, Not Recession - David Rosenberg

News & Analysis

Is It an Elite Depression?

Wednesday, August 25, 2010 – by Staff Report

Economy Caught in Depression, Not Recession ... Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday. Writing in his daily briefing to investors, Rosenberg said the Great Depression also had its high points, with a series of positive GDP reports and sharp stock market gains. But then as now, those signs of recovery were unsustainable and only provided a false sense of stability, said Rosenberg. Rosenberg calls current economic conditions "a depression, and not just some garden-variety recession," and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered "euphoric response." – CNBC ...

In the CNBC article excerpted above, we can see questions continue to percolate about what really is happening during this Great Recession. In fact, in America especially, unemployment is estimated at 20 percent or more. (We think it is even higher.) In Europe, the economic crisis has not abated and frustrations are building over "austerity" measures in Greece and elsewhere. Countries like Spain are taking desperate measures to prop up bond markets. Here is what the UK Telegraph had to say on the matter just yesterday:

Spain uses social security fund to prop up the bond market ... Spain is putting all its eggs into one basket, and if it carries on like this, we may start to see a lot of Basques and Catalans crowding into one exit. The state pension fund – the ?64bn Fondo de Reserva, known as the 'hucha de las pensiones' – is buying Spanish sovereign debt at a vertiginous pace. The financial daily Cinco Dias reports that the share of the Fondo's total portfolio invested in Spanish government bonds rose from below 50pc in 2007 to 76pc in 2009. ... Evidently, Spanish savers are underpinning Madrid's Treasury auctions, whether they like or not. It is they who are mopping up the debt along with the European Central Bank as foreign creditors stay away. The Bank of New York Mellon said that its iFlow data on bonds reveal that foreign demand for Spanish debt has "dried up" again after a brief recovery in July. There has also been some "net selling" of French bonds. ... We will hear more of that Gallic sub-plot over the next year. ...

(4) Billionaire philanthropy a PR diversion as Middle Class resentment at Elite grows

From: IHR News <> Date: 03.09.2010 08:00 AM

On the Way Down: The Erosion of America's Middle Class
Der Spiegel (Germany),1518,712496,00.html


On the Way Down: The Erosion of America's Middle Class

By Thomas Schulz

While America's super-rich congratulate themselves on donating billions to charity, the rest of the country is worse off than ever. Long-term unemployment is rising and millions of Americans are struggling to survive. The gap between rich and poor is wider than ever and the middle class is disappearing.

Ventura is a small city on the Pacific coast, about an hour's drive north of Los Angeles. Luxury homes with a view of the ocean dot the hillsides, and the beaches are popular with surfers. Ventura is storybook California. "It's a well-off place," says Captain William Finley. "But about 20 percent of the city is what we call at risk of homelessness." Finley heads the local branch of the Salvation Army.

Last summer Ventura launched a pilot program, managed by Finley, that allows people to sleep in their cars within city limits. This is normally illegal, both in Ventura and in the rest of the country, where local officials and residents are worried about seeing run-down vans full of Mexican migrant workers parked on residential streets.

But sometime at the beginning of last year, people in Ventura realized that the cars parked in front of their driveways at night weren't old wrecks, but well-tended station wagons and hatchbacks. And the people sleeping in them weren't fruit pickers or the homeless, but their former neighbors.

Finley also noticed a change. Suddenly twice as many people were taking advantage of his social service organization's free meals program, and some were even driving up in BMWs -- apparently reluctant to give up the expensive cars that reminded them of better times. ...

Two weeks ago, Microsoft founder Bill Gates and 40 other billionaires pledged to donate at least half of their fortunes to philanthropy, either while still alive or after death. Is America a country so blessed with affluence that it can afford to give away billions, just like that?

Growing Resentment

Gates' move could also be interpreted as a PR campaign, in a country where the super-rich sense that although they are profiting from the crisis, as was to be expected, the number of people adversely affected has grown enormously. They also sense that there is growing resentment in American society against those at the top. ...

(5) Japan renews QE as Yen rises as investors repatriate money for safety

Japan renews QE as recovery falters

Japan has launched a fresh monetary and fiscal boost to shore up its faltering recovery and stem the slide into deflation, becoming the first major country to inject further stimulus since the Great Recession ended.

By Ambrose Evans-Pritchard, International Business Editor

Published: 8:20PM BST 30 Aug 2010

The Bank of Japan agreed at an emergency meeting to boost its special loan facility by ¥10 trillion to ¥30 trillion (£220.7bn). "We need to watch out more carefully for downside risks to Japan's economy," said Governor Masaaki Shirakawa, who cut off his trip to the Jackson Hole forum in the US.

"Several weak US figures came out, while the yen rose and stock prices fell. When we saw this, we decided that we need to take more precautions."

Premier Naoto Kan said Tokyo would tap into its reserve fund for a ¥920bn spending package on jobs and investment. "We want to take swift measures as the second pillar of stimulus to support easing by the bank," he said.

The sums are tiny, a sign of Mr Kan's limited room for manoeuvre as public debt reaches 225pc of GDP. Rating agencies are already circling ominously.

The economy stalled in the second quarter, growing just 0.1pc. Prices have fallen for the past 17 months. Core deflation is running at -1.1pc.

The Bank of Japan's move was too timid to stabilise exchange markets. The yen appreciated sharply to ¥84.6 against the dollar. It is once again closing in on a 15-year high.

Julian Jessop, from Capital Economics, said the bank was responding "without enthusiasm" to political pressure to do something about the over-mighty yen.

Mr Kan has been calling for "decisive action" to stem the yen's rise, now causing heartburn for exporters such as Toyota and Sony.

While the yen has at times been stronger against the dollar in real terms, it is the rate against China's yuan that worries Tokyo. This cross-rate is wildly out of kilter.

Japan's curse is that the yen strengthens in times of crisis as investors repatriate money for safety. Life insurers and pension funds rotate from US bonds back into Japanese bonds as the yield gap narrows, which compounds Japan's deflation woes.

BNP Paribas said Japan may have more luck than Switzerland in driving down the currency if it chooses to intervene, since both monetary and fiscal policy are aligned in the same direction. Japan's authorities launched a huge purchase of US Treasuries during the deflation scare from 2003 to 2004 in order to weaken the yen.

Mr Kan would like to see a repeat of such "shock and awe" action but has failed to convince Mr Shirakawa that the risks are worth it. Bank officials fear that a monetary blast might disturb a fragile equilibrium, bringing unwelcome attention on Japan's debts. Haunted by memories of Japan's hyperinflation, the bank is moving gingerly.

Even so, it is the first central bank to start loosening again.

While the Bank of England has hinted at more quantitative easing, and the Fed is taking steps to avoid "passive tightening", neither has yet launched fresh QE.

(6) Global Tobin Tax distributed in proportion to each country's financial transactions

The Robin Hood tax

31 March 2010
James Tobin lives, explains John Langmore.

Before Christmas the European Council joined Gordon Brown in encouraging the International Monetary Fund to include a "global financial transaction levy" among the options it is examining to raise revenue from banks and the rest of the finance industry.

This followed the request from the G20 meeting in September that the IMF evaluate "how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system."

To be imposed almost universally, a currency transaction tax would need only the active co-operation of the authorities that oversee the principal reserve currencies, the US dollar, the euro, the pound and the yen.

Because the tax's small direct costs would be concentrated in financial sectors, its impact would be redistributive in a progressive way across nations.

It would also be a source of funds for "global provenance," which means that all or a substantial proportion of the revenue should be allocated under global authority. The national authorities collecting the tax would keep a share, but the revenue would have to be distributed globally in proportion to each country's financial transactions.

The global financial crisis has transformed this debate. The Bush and Obama administrations and many European governments were compelled to launch massive rescue strategies for financial institutions, so electorates are demanding ways of making financial institutions pay the cost.

"It would be timely for the government to take a serious look at the proposal and participate in international discussions."

Chancellor Merkel, President Sarkozy and Prime Minister Brown have all spoken in favour of looking seriously at a financial transaction tax.

On its own, a tax of this type would not resolve the crisis, of course. But it could play an important role in raising funds to pay for the bail-outs. Unlike a currency transaction tax or a Tobin tax, which just covers currency transactions, a financial transaction tax would cover all kinds of financial assets such as shares, bonds, securities and derivatives, both domestically and for cross-border transactions.

Technically a financial transaction tax could be levied easily and at very low cost since all such transactions occur through electronic platforms. A simple electronic tag would automatically collect the tax, and such taxes already exist in a number of countries. ...

The proposal does generate opposition from many bankers, though not all. When I asked Marshall Carter, CEO of Boston's enormous State Street Bank, in 1995 what he thought of the idea he was unfazed, saying "Oh, we would just pass it on to our customers'. But there is strong support and it is growing. Adair Turner, Britain's top financial regulator, called last August for a tax on financial transactions as a way to discourage 'socially useless activities'.

American Nobel economics laureate Paul Krugman argues that a financial transaction tax "would be a trivial expense for people engaged in foreign trade or long term investment; but it would be a major disincentive for people trying to make a fast buck (or euro, or yen) by outguessing the markets over the course of a few days or weeks."

(7) Congress targets foreign companies importing IT workers
 From: Sandhya Jain <> Date: 18.08.2010 09:41 AM

US visa fee hike: arrogant and reckless

Virendra Parekh

18 August 2010

The alacrity with which both houses of the American Congress passed the border security bill speaks volumes about the arrogance, recklessness, insensitivity and opportunism of the US establishment in its dealings with India. If President Barack Obama signs it into a law, as he is likely to, it will be a retrograde step for Indo-US relationship.

The bill, styled as Emergency Border Security Supplemental Appropriations Act, seeks to raise $600 million for sending extra men to the United States’ border with Mexico, where politically sensitive illegal immigration has proved difficult to control. That extra expenditure was supposed to be funded from the country’s federal stimulus spending programme. Instead, the money will come from raising the cost of work visa (H-1B and L-1) applications originating from a handful of foreign corporations by $2000 per visa.

More than securing the Mexican border, the idea is to punish foreign companies which “exploit US visa programmes to import workers from abroad.” Indeed, the bill itself specifically names four Indian companies (Wipro, Infosys, Tata, and Satyam) in this respect. The bill’s sponsors claim that these companies basically “domestically outsource” jobs in information technology to temporary workers from India. Rough estimates suggest that Indian companies may end up shelling out $200-250 million a year, which will affect their margins.

One can understand the compulsions of the American legislators. The move is inspired by Senators with an eye to the mid-term elections in November, when the incumbent Senators will face the wrath of the jobless. They must be seen to be doing something to protect American jobs. That is why support for the bill cut across party lines. Democrats expected Republicans to filibuster and stop the passage of the bill. But Republicans also gave in to this potent mix of protectionism and populism, because they too are vulnerable at the hustings. Giving Indian IT companies a hard time costs little to US politicians, especially in an election year.

As a matter of fact, Indian IT majors have created tens of thousands of jobs in the US. Infosys alone has 12,000 employees in the US, including about 1,300 US citizens and permanent residents. In one year, the company intends to hire another 1,000. Similarly, about 5 per cent of MindTree’s strength is in the US, of which 30 per cent are locals or green card holders. India’s largest IT services firm, TCS, has grown the headcount of its Cincinnati centre to 350, and is hiring locals from campuses. Since 2004, TCS America, the subsidiary of TCS, has invested around $135 million in Ohio, Michigan, California and New York. ...

(8) U.S. Green Party policy to Nationalize the 12 Federal Reserve Banks
The author is Executive Editor, Corporate India, and lives in Mumba
From: AMI <> Date: 04.09.2010 02:50 AM
Subject: U.S. Green Party takes historic monetary step!

Dear Friends of the American Monetary Institute,
(Please excuse multiple mailings)

Some exciting and historic news from the U.S. Green Party!

This past week (end of August 2010) the Green Party's National Committee working on monetary and economic policy matters have approved an historic, comprehensive Monetary Reform Plank in their 2010 Platform which actually does the job, as it includes all three of the necessary elements to achieve real reform.  We're happy to report this mirrors the proposed American Monetary Act.

Here below and linked at is what the U.S. Green Party approved, please read it carefully.
Stephen Zarlenga
American Monetary Institute

Monetary Reform (Greening the dollar)

"While the banking reforms outlined in the above 12 points are very important to ameliorate the present crisis in our banking system, to affect long term, transformative change, it is imperative that we restructure our poorly conceived monetary system.  The present mis-structured system of privatized control has resulted in the misdirection of our resources to speculation, toxic loans, and phony financial instruments that create huge profits for the few but no real wealth or jobs.   It is both possible and necessary for our government to take back its special money creation privilege and spend this money into circulation through a carefully controlled policy of directing funds, through community banks and interest-free loans, to local and state government entities to be used for infrastructure, health, education, and the arts This would add millions of good jobs, enrich our communities, and go a long ways toward ending the current deep recession.

To reverse the privatization of control over the money issuing process of our nation’s monetary system; to reverse its resulting obscene and undeserved concentration of wealth and income; to place it within a more equitable public system of governmental checks and balances; and to end the regular recurrence of severe and disruptive banking crises such as the ongoing financial crisis which threatens the livelihood of millions; the Green Party supports the following interconnected,

Green Solutions:

1. Nationalize the 12 Federal Reserve Banks, reconstituting them and the Federal Reserve Systems Washington Board of Governors under a new Monetary Authority Board within the U.S. Treasury. The private creation of money or credit which substitutes for money, will cease and with it the reckless and fraudulent practices that have led to the present financial and economic crisis.

2. Create a Monetary Authority, which will, with assistance from the FDIC, the SEC, the U.S. Treasury, the Congressional Budget Office, and others, redefine bank lending rules and procedures to end the privilege banks now have to create money when they extend their credit, by ending what is known as the fractional reserve system in an elegant, non disruptive manner. Banks will be encouraged to continue as profit making companies, extending loans of real money at interest; acting as intermediaries between those clients seeking a return on their savings and those clients ready and able to pay for borrowing the money; but banks will no longer be creators of what we are using for money. Many new forms of banks will be encouraged such as community banks, credit unions, etc., see 11 and 12 above) 

3. The new money that must be regularly added to an improving system as population and commerce grow will be created and spent into circulation by the U. S. Government for infrastructure, including the human infrastructure of education and health care. This begins with the $2.2 trillion the American Society of Civil Engineers warns us is needed to bring existing infrastructure to safe levels over the next 5 years. Per capita guidelines will assure a fair distribution of such expenditures across the United States, creating good jobs, re-invigorating the local economies and re-funding government at all levels. As this money is paid out to various contractors, they in turn pay their suppliers and laborers who in turn pay for their living expenses and ultimately this money gets deposited into banks, which are then in a position to make loans of this money, according to the new regulations."


(9) Is the Madoff Scandal Paradigmatic? - Kevin MacDonald
From: Michael <> Date: 17.08.2010 10:56 AM

Is the Madoff Scandal Paradigmatic?

Kevin MacDonald: The current TOO article by John Graham and me, “Is the Madoff Scandal Paradigmatic?,” reviews 8 books on the Bernie Madoff scandal. From the beginning, there was a pronounced Jewish angle to the media coverage of the scandal—mainly emphasizing that Madoff was a Jew who stole from other Jews. However, this review (for which the lion’s share of the credit goes to Mr. Graham), explores the far greater depth of Jewishness apparent in the incident. Here I review several important themes.

Contrary to the image in the media, the scandal in fact was a large scale transfer of wealth from non-Jews to Jews. The big money that entered the fund beginning in the 1990s was predominantly from non-Jews, and especially from Europe. In the end, according to whistle blower Henry Markopolos,the European losses were “substantially more than losses in the United States.” We suggest that the attraction of wealthy, aristocratic Europeans may have been an example of the “court Jew” phenomenon: “For centuries it was customary for aristocratic landowners, particularly in Eastern Europe, to delegate the task of managing the businesses operations on their estates to Jews, sometimes using the same families for generations.”

Madoff succeeded for so long because he had become a classic Jewish rabbi/guru who was idolized as God-like by the Jewish community. The Jewish community “regarded Bernie like a messiah. He was spoken of as if godlike.” This is a common feature of Jewish social structure generally—and much emphasized in The Culture of Critique. Just as people who questioned the Oedipal Complex were expelled from psychoanalytic societies and labeled as having various character flaws, an Israeli woman who questioned Madoff’s genius was called an “anti-Semite.”

Interestingly, quite a few of Madoff’s Jewish clients seem to have believed that it was a fraud or at least based on illegal activity such as “front-running” (trading ahead of client orders). “Many Madoff accounts thought they were safely benefitting from illegal activity — and did not care.” They seem to have thought of themselves as benefiting from Jewish ethnic networking where there has been a long tradition of failing to report illegal activities of other Jews— an offence known as Mesirah (informing).

Perhaps most explosively, we suggest that Madoff was protected because of the power of the Jewish community:

{q} The Bernard Madoff matter was one about which a significant segment of Jewish America cared very much — some for financial reasons, others, perhaps, because of community pride and loyalty. Challenging this group was well known to be extremely dangerous. As in other matters, they awarded themselves a veto, and they used it — as it happened in this case, to their cost. All in all, the Madoff affair and the cover-up is another indication of Jewish power in America. {q}

For example, Henry Markopolos, in his aptly titled No One Would Listen, comments

{q} In my mind, at least, I was convinced that someone high up at the [Wall Street] Journal had decided it was too dangerous to go after Bernie Madoff. … I was finally beginning to consider the possibility that Bernie Madoff was untouchable — that he was simply too powerful to be brought down.{q}

Madoff was investigated eight times by the SEC, but each investigation was inexplicably stopped. Sen. Charles Schumer seems to have been part of the power structure protecting Madoff. Madoff and his sons maxed out their contributions to Schumer. Schumer phoned the SEC on Madoff’s behalf, and he treated Markopolos with incredible rudeness during Senate hearings — not exactly the expected treatment toward someone who was right all along.

What has been portrayed as SEC incompetence now looks quite a bit like corruption. “We submit that the SEC failed to stop Madoff not because it was incompetent, but because it was afraid — of the Jewish Establishment.” It seems likely that even greater corruption was involved in the financial collapse that has been such an ongoing disaster for the country. The fact that Goldman Sachs managed to settle its involvement in one particular deal with a slap on the wrist.

Consistent with the corruption thesis, it appears that Madoff’s accomplices will get off easy. Amazingly, an article that appeared too late to include in the print version questioned whether anyone will be criminally charged with being an accomplice to the fraud. Bernie is taking the fall all by himself, but it wouldn’t be too surprising if there’s lots of money stashed for his family members.

{q} Perhaps in the back of Madoff’s mind was the idea — possibly the instinct — that after a few years, perhaps in a different country, maybe speaking a different language, his family would live on, possibly with a new name (surname changes are under way among the Madoff kin) and perhaps with some portion of the loot. {q}

(10) Brother Nathanael On Video - Who Owns The Federal Reserve?

From: Brother Nathanael <> Date: 22.08.2010 07:55 PM
Subject: Who Owns The Federal Reserve Bank? - Bro N On Video!

Brother Nathanael On Video! @

Who Owns The Federal Reserve Bank?

Pt 2

Part 3

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