Tuesday, March 13, 2012

469 Roubini & Soros: US Already In Double Dip Recession, Warn Of Uprising

Roubini & Soros: US Already In Double Dip Recession, Warn Of Uprising

(1) Roubini & Soros: US Already In Double Dip Recession, Warn Of Uprising
(2) Vast majority of Australia's resources assets are foreign owned
(3) Reserve Bank of Australia outsources its role to foreign private bankers
(4) Germany’s opposition to debt forgiveness is thus bad economics and
bad history - Robert Skidelsky
(5) Why Hayek lost his great battle with Keynes in the 1930s - Robert
(6) California’s legislature votes for feasibility study on state-owned
bank - Ellen Brown
(7) Professor Kaoru Yamaguchi tells Congress, "the Monetary system
itself is broken"
(8) How Wall Street FLEECES America - new book by Stephen Lendman

(1) Roubini & Soros: US Already In Double Dip Recession, Warn Of Uprising

From: Paul de Burgh-Day <pdeburgh@harboursat.com.au> Date: Mon, 26 Sep
2011 11:55:14 +1000

By EconMatters

September 25th, 2011


Dr. Doom Roubini has grown even more pessimistic since he put a 60%
probability of a U.S. double dip in 2012 just about three weeks ago.
Business Day reported that speaking at a press conference in
Johannesburg on Sep. 20, Roubini now says, ”The US is already in a
recession although it will not admit it.” and that the rest of the world
would not be insulated from the effects of another global meltdown.
(Clip Below)

Regarding Greece and Euro Zone, Roubini thinks Greece would do best to
default on its debt and leave the euro zone, and that Europe needs to
step up austerity measures: .

Eerily, George Soros also said almost exactly the same in a CNBC
interview (Clip Below). Soros believes the U.S. is already in a double
dip recession, and that “a number of smaller euro zone nations could
default and leave the single currency area.” Soros also sees Europe
could be “more dangerous” to the global financial system than the Lehman
Brothers in 2008, due to “Euro zone policymakers repeatedly following
the wrong policy shifts.”

But there’s a reason Boubini earned his “Dr. Doom” reputation as he made
an even more ominous prediction that there would be protests as well in
the world’s largest economy.

“There is growing inequality all over the world. We have already seen
middle-class unrest in Israel. Germans have smashed fat cats’ cars…..As
we go into another recession, there will be unrest in the US.”

Interestingly, Business Day quoted Roubini that he was not averse to
state involvement in the economy and held up Singapore — which had state
ownership of firms and joint regulation and free markets — as an economy
that might be shielded from global shocks.

EconMatters Commentary

While we are a bit surprised that Roubini seems to have lost total faith
in capitalism by embracing a somewhat socialistic structure of the
Singapore Model, we have to admit, on first blush, we (along with the
markets) are sufficiently freaked out by both Roubini and Soros
asserting the double dip status of the United States.

However, that feeling quickly dissipated as we think about the
definition of recession – two down quarters of GDP, or when National
Bureau of Economic Research (NBER) declares one, and realized the U.S.
so far has not met these conditions yet.

We do believe Europe now holds the key as there’s a distinct risk that
the U.S. could be pushed over the recession edge by the Euro Zone debt
crisis due to the interlinkage of the global financial system.

On the other hand, the current euro zone debt crisis is quite similar to
the debt ceiling fiasco in the U.S. a while back. The bloc has an
inherent structural weakness – central currency without a central
political governing body. But eventually there will be resolution, be
there a Greek default and leaving the currency union, or a
super-roid-charged bailout package as the stakes are too high for a Euro

Meanwhile, the U.S. economy could be facing a tough patch in the next
two years or so, but the odds are still in favor that backed by its
tremendous natural and human resources, the country could pull through
and resume growth.

Roubini has been consistent with his double dip recession gloom and doom
for the past three years; however, Soros’ track recordsuggests that his
recession talk could be nothing more than a reflection of his current
trading position, knowing his influence over the markets, rather than an
objective economic assessment.

Further Reading - Maps Du Jour: Food Inflation Riots and The Libyan Politics

(2) Vast majority of Australia's resources assets are foreign owned

Date: Fri, 23 Sep 2011 15:50:28 +1000 From: Stephen Mayne

The Mayne Report - Friday, September 23, 2011, 3:47pm

Foreign ownership of Australia


Welcome to this special edition on Australia's foreign ownership
problems in light of the Foster's takeover, plus some others item on
News Corp, the RACV contested elections, pokies, Manningham, female
directors, Woolies, pokies and snake catchers.

Some home truths about foreign ownership and Australia's corporate

The proposed $12.3 billion takeover of Foster's by SAB-Miller has
sparked a flood of media discussion which may yet turn into a game
changer in the broader political debate.

Wearing an Australian Shareholders' Association hat, I was quoted as
follows in <http://www.abc.net.au/7.30/content/2011/s3323940.htm> this
story on 7.30 last night:

Sad day for Australia. Our foreign ownership record gets even worse from
a very bad level already.

There aren't even 70 Australian companies that generate more than $200
million a year in revenue offshore, and now there's one less with
Foster's disappearing and there just aren't enough successful Australian
international companies.

A magnificent beer business in Australia, well-managed in Australia,
great cash flows, great distribution, great brands, and for years the
management have used that cash to stuff things up in wine, starting a
finance company, going offshore. They've lost between $5 and $10
billion, squandering the magnificent cash thrown off by a majority
position in the Australian beer market.

Coopers and the other micro-breweries will be a beneficiary from this
perceived concern about foreign domination of beer in a country like
Australia. But because the big brewers dominate distribution, it is
still quite difficult logistically to break into the market, and you've
also got the problem of the absolute dominance of Woolworths in liquor
like no other country in the world, and even SAB Miller will find that
difficult, because Foster's and Woolies have been at war for the last
few months.

An even sadder day for Melbourne

Way back in 1992 at the peak of Paul Keating's recession we had to have
and with Victoria copping "bleak city" sledges from up north, I attended
a breakfast with then Victorian Labor Treasurer Tony Sheehan and then
NAB CEO Don Argus.

Argus was trying to be upbeat and stressed that Melbourne was home to 8
of Australia's 10 most valuable listed companies. Fast forward 19 years
and this is how the top 30 will look once you strip out Foster's and
Coal & Allied assuming both takeovers go through.

1. BHP-Billiton, resources, Melbourne
2. Commonwealth Bank, financial services, Sydney
3. Westpac, financial services, Sydney
4. ANZ, financial services, Mebourne
5. NAB, financial services, Melbourne
6. News Corp, media, New York
7. Telstra, communications, Melbourne
8. Wesfamers, retail and diversified, Perth
9. Rio Tinto, resources, London
10. Woolworths, retailing, Sydney
11. Newcrest, mining, Melbourne
12. Woodside, petroleum, Perth
13. Fortescue Metals, iron-ore, Perth
14. Westfield, shopping centres, Sydney
15. Origin Energy, energy utility, Sydney
16. CSL, pharmaceuticals, Melbourne
17. QBE, insurance, Sydney
18. AMP, financial services, Sydney
19. Suncorp, financial services, Brisbane
20. Santos, energy, Adelaide
21. Brambles, industrial services, Sydney
22. Orica, chemicals, Melbourne
23. Coca Cola Amatil, beverages, Sydney
24. Amcor, packaging, Melbourne
25. QR National, rail, Brisbane
26. Macquarie Group, financial services, Sydney
27. Transurban, tollroads, Melbourne
28. Stockland, property, Sydney
29. AGL, energy utility, Sydney
30. Insurance Australia Group, insurance, Sydney

 From 8 of the top 10, Melbourne has declined to just 9 of the top 30.
The departing players over the past 20 years have included Pacific
Dunlop, BTR Nylex, North, Coles Myer, CRA, Woodside, Colonial and even
Mayne Nickless. To now lose Foster's is a big blow.

Where are all the mining stocks?

The above list tells a range of other stories above and behind
Melbourne's relative decline as a corporate centre in Australia.

Firstly, why aren't there more resources stocks in the country with the
best dowry on earth? It's simple: the vast majority of our $1
trillion-plus worth of resources assets are foreign owned, which denies
Australians a large direct exposure to the biggest mining boom in
history through their compulsory superannuation.

Why so many financial services giants?

The second startling fact is the dominance of financial services
companies. No other country has banks as 4 of its 5 most most valuable
listed companies. This reflects the cartel like dominance of the Big
Four who deliver the world's most expensive banking service to
long-suffering Australians. No wonder the Bendigo Community Bank model
continues to go from strength to strength.

It also reflects the enormous churning gravy train created by compulsory
superannuation whereby Australian's have happily tripled their
collective home loan exposure to more than $1 trillion over the past
decade because they believe compulsory superannuation will look after
their retirement. Alas, the Baby Boomers have lived decadent lives with
insufficient overall savings and have a rude shock ahead of them when
they consider the aged care services they will be able to purchase. It
will be magnified if Australia's housing bubble ever really bursts,
especially given those large mortgages carried by middle Australia.

Australia is the only country in the world which allows the same
financial conglomerates to dominate the field in allocating debt and
equity through the economy, even though their are obvious conflicts
involved, especially in workout situations. Who can forget the
Commonwealth Bank simultaneously having a $1 billion-plus debt exposure
to Centro whilst its superannuation clients dropped more than $500
million as the largest investor on the equity side.

It is not healthy for the econony to have so many financial giants
dominating the ASX and it certainly hasn't helped create a culture of
shareholder pressure because banking conglomerates rarely vote against
poorly performing directors as they fear losing business from the
company involved.

Updating the comprehensive foreign ownership lists

The Mayne Report has long produced lists which track foreign ownership
in Australia and we've spent some time updating them today.

Our main contention is that Australia does not nurture or celebrate
enough international success stories in business. Whilst there is
nothing wrong with foreign investment, our business leaders have
squandered the world's best dowry or natural assets and we are now one
of the most foreign-owned first world economies on earth.

The key lists are as follows:

Australian companies which stuffed up expanding offshore

<http://www.maynereport.com/articles/2008/02/04-1045-248.html> The 300
foreign companies which dominate Australian business

<http://www.maynereport.com/articles/2007/07/17-2219-6572.html> The
miserable 70 Australian companies who generate $200m-plus offshore ...

(3) Reserve Bank of Australia outsources its role to foreign private bankers

From: ERA <hermann@picknowl.com.au> Date: Mon, 26 Sep 2011 21:23:55 +0930

Economic Reform Australia
Information Network

How the RBA outsources its role to foreign private bankers

by Ann Pettifor

22 September 2011


The tectonic plates of Australia's economy are shifting, as the mining
boom generates the kind of ebullience common to all booms.

But cracks are appearing that could quickly overwhelm the gains made by
the boom. These expose the Reserve Bank of Australia's flawed management
of Australia's financial system.

It is worth reminding ourselves that the RBA's role (according to the
1959 Reserve Bank Act) is "to ensure that the monetary and banking
policy of the Bank is directed to the greatest advantage of the people
of Australia ? to the maintenance of full employment ? and the economic
prosperity and welfare of the people..."

We need to bear that in mind in light of the RBA's recent policy stance.
First the policy to set the highest official interest rate in the
developed world. Second, the policy that permits the Australian dollar
to rise to unsustainable levels. Third, the policy that allows
Australia's banks to go abroad to raise funding in international capital

The RBA should fulfil its mandate by providing Australia's banks with
finance - just as the US Fed and the Bank of England do. The process is
a virtually costless way of injecting finance into the system, at very
low rates of interest. However the RBA has chosen not to.

The cost of borrowing in foreign markets has risen recently because of
the crisis in the eurozone. Australian banks' credit costs in
international money markets have increased by more than 1.00 per cent in
less than three months.1 In addition these banks face exchange rate
risks - risks that could be avoided if the RBA was fulfilling its role.

But these are not the only risks posed by this policy. Foreign bankers
lend to Australian banks by borrowing from their own central banks ˆ at
rates of 1 per cent or less. When they collect the prize of lending at
4.5 per cent, they do so by raiding the coffers of the RBA for hard
currency. In other words, foreign private bankers are leaning on their
taxpayer-backed central banks to make a quick and lucrative buck at the
expense of Australians. The RBA turns a blind eye to this form of
daylight robbery.

It gets worse. By borrowing in global capital markets, banks attract
funds into Australia - $100 billion this year. These, added to inward
investment flows into mining sectors, force up the exchange rate, the
cost of Australian labour, products and services. Indeed there is a
direct causal line between a very high rate of interest; banks borrowing
abroad, the rise in the dollar, and the collapse of Bluescope Steel.

The ability of central banks to create cheap, but carefully regulated
finance is intended to encourage and support sound private and public
investment to guarantee the prosperity and welfare of Australians. The
RBA has outsourced this role to foreign private banks.

Some might say that the big four Australian banks are very profitable
indeed; that they survived the tsunami of the GFC ˆ and that there is
little to worry about.

Except that one small 'crack' has appeared in the system. International
market players have taken out insurance against Australia's big four
banks defaulting on their foreign loans ˆ Credit Default Swaps (or
CDSs). CDs's are 'premiums' taken out by speculators that do not own the
underlying asset insured. (Something forbidden by regulators on normal
insurance, because if we were allowed to take out insurance on another's
asset e.g. property ˆ the incentive to burn it down would be very great.
But hey, this is the global financial system where anything goes.)

The 'premium' on the likelihood of the four Australian banks' defaulting
has climbed by 50 per cent over August ˆ indicating that speculators are
losing confidence in these banks.

The noise around the mining boom means that this 'crack' appearing in
the Australian economy is not audible to most. Nevertheless it poses a
grave threat to Australians: one that the RBA would be wise to address
before the onset of Credit Crunch 2.0.

1. Satjayit Das, author of Traders, Guns and Money in The Big Picture:
 From Green to Red - is Credit Crunch 2.0 imminent?

Ann Pettifor is a British Economist who co-founded the global Jubilee
2000 Campaign. She visited Australia last week on a speaking tour.

(4) Germany’s opposition to debt forgiveness is thus bad economics and
bad history - Robert Skidelsky

The Consequences of Angela Merkel

Robert Skidelsky

Posted: 26 Sep 2011 12:39 AM PDT


Germany has been leading the opposition in the European Union to any
write-down of troubled eurozone members’ sovereign debt. Instead, it has
agreed to establish bailout mechanisms such as the European Financial
Stability Facility and the European Financial Stabilization Mechanism,
which can lend up to €500 billion ($680 billion) combined, with the
International Monetary Fund providing an additional €250 billion.

These are essentially refinancing mechanisms. Heavily indebted eurozone
members can apply to borrow from them at less than the commercial rate,
conditional on their committing to ever more drastic fiscal austerity.
Principal and interest on outstanding debt have been left intact. Thus,
creditors – mainly German and French banks – are not expected to suffer
losses on their existing loans, while borrowers gain more time to “put
their houses in order.” That, at least, is the theory.

So far, three countries – Greece, Ireland, and Portugal – have availed
themselves of this facility. In mid-July 2011, Greece’s sovereign debt
stood at €350 billion (160% of GDP). The Greek government currently must
pay 25% for its ten-year bonds, which are trading at a 50% discount in
the secondary market.

In other words, investors are expecting to receive only about half of
what they are owed. The hope is that the reduction in borrowing costs on
new loans, plus the austerity programs promised by governments, will
enable bond prices to recover to par without the need for the creditor
banks to take a hit.

This is pie in the sky. Unless a large part of its debt is forgiven,
Greece will not regain creditworthiness. (Indeed, by most accounts, it
is about to default.) And the same is true, albeit to a lesser degree,
for other heavily indebted sovereigns.

Any credible bailout plan must require creditor banks to accept that
they will lose at least half of their money. In the United States’
successful Brady Bond plan in 1989, the debtors – Mexico, Argentina, and
Brazil – agreed to pay what they could. The banks that had loaned them
the money replaced the old debt with new bonds at par value, which
averaged 50% of the old bonds, and the US government provided some

It was write-offs and devaluations, not austerity programs, that allowed
bond prices to recover. In the Greek case, creditors have yet to accept
the need for write-offs, and European governments have provided them
with no incentives to do so.

Germany’s opposition to debt forgiveness is thus bad economics, bad
politics (except at home), and bad history. The Germans should remember
the reparations fiasco of the 1920’s. In the Treaty of Versailles, the
victorious Allies insisted that Germany should pay for “the cost of the
war.” They added up the figures, and in 1921 they presented the bill:
Germany “owed” the victors £6.6 billion (85% of its GDP), payable in 30
annual installments. This amounted to transferring annually 8-10% of
Germany’s national income, or 65-76% of its exports.

Within a year, Germany had asked for, and obtained, a moratorium. New
bond issues, following a big debt write-down in 1924 (the Dawes Plan),
enabled Germany to borrow the money to resume payments. There then
followed a crazy system: Germany borrowed money from the US in order to
repay Britain, France, and Belgium, while France and Belgium used a bit
of it to pay back Britain, and Britain used more of it to pay back the US.

This whole tangle of debts was finally de facto written off in 1932 in
the middle of the global slump. But, until 1980, Germany continued
repaying the loans that it had incurred to pay the reparations.
 From the start, the economist John Maynard Keynes had been a fierce
critic of the reparations policy imposed on Germany. He made three main
points: Germany didn’t have the capacity to pay were it to regain
anything like a normal standard of living; any attempt to force it to
reduce its standard of living would produce revolution; and to the
extent that Germany was able to increase its exports to pay reparations,
this would be at the expense of the recipients’ exports. What was needed
was cancelation of reparations and inter-Allied war debts as a whole,
together with a big reconstruction loan to put the shattered European
economies back on their feet.

In 1919, Keynes produced a grand plan for comprehensive debt
cancellation, plus a new bond issue, guaranteed by the Allied powers,
whose proceeds would go to victors and vanquished alike. The Americans,
who would have had to provide most of the money, vetoed the plan.

The point to which Keynes kept returning was that the attempt to extract
debt payments over many years would have disastrous social consequences.
“The policy of reducing Germany to servitude for a generation, of
degrading the lives of millions of human beings, and of depriving a
whole nation of happiness should be abhorrent and detestable,” he wrote,
“even if it does not sow the decay of the whole civilized life of Europe.”

History never repeats itself exactly, but there are lessons to be
learned from that episode. Germans today would say that, unlike
reparations, the Greek and Mediterranean debts were voluntarily
incurred, not coerced. This raises the question of justice, but not the
economic consequences of insisting on payment. Moreover, there is a
fallacy of composition: if there are too many debt collectors, they will
impoverish the very people on whom their own prosperity depends.

In the 1920’s, Germany ended up having to pay only a small fraction of
its reparation bill, but the long time it took to get to that point
prevented the full recovery of Europe, made Germany itself the most
conspicuous victim of the Great Depression, and bred widespread
resentment, with dire political consequences. German Chancellor Angela
Merkel would do well to ponder that history.

(5) Why Hayek lost his great battle with Keynes in the 1930s - Robert

The Keynes-Hayek Rematch

Robert Skidelsky

Posted: 01 Sep 2011 12:37 AM PDT


The Austrian economist Friedrich von Hayek, who died in 1992 at the age
of 93, once remarked that to have the last word requires only outliving
your opponents. His great good fortune was to outlive Keynes by almost
50 years, and thus to claim a posthumous victory over a rival who had
savaged him intellectually while he was alive.

Hayek’s apotheosis came in the 1980’s, when British Prime Minister
Margaret Thatcher took to quoting from The Road to Serfdom (1944), his
classic attack on central planning. But in economics there are never any
final verdicts. While Hayek’s defense of the market system against the
gross inefficiency of central planning won increasing assent, Keynes’s
view that market systems require continuous stabilization lingered on in
finance ministries and central banks.

Both traditions, though, were eclipsed by the Chicago school of
“rational expectations,” which has dominated mainstream economics for
the last twenty-five years. With economic agents supposedly possessing
perfect information about all possible contingencies, systemic crises
could never happen except as a result of accidents and surprises beyond
the reach of economic theory.

The global economic collapse of 2007-2008 discredited “rational
expectations” economics (though its high priests have yet to recognize
this) and brought both Keynes and Hayek back into posthumous contention.
The issues have not changed much since their argument began in the Great
Depression of the 1930’s. What causes market economies to collapse? What
is the right response to a collapse? What is the best way to prevent
future collapses?

For Hayek in the early 1930’s, and for Hayek’s followers today, the
“crisis” results from over-investment relative to the supply of savings,
made possible by excessive credit expansion. Banks lend at lower
interest rates than genuine savers would have demanded, making all kinds
of investment projects temporarily profitable.

But, because these investments do not reflect the real preferences of
agents for future over current consumption, the savings necessary to
complete them are not available. They can be kept going for a time by
monetary injections from the central bank. But market participants
eventually realize that there are not enough savings to complete all the
investment projects. At that point, boom turns to bust.
Every artificial boom thus carries the seeds of its own destruction.
Recovery consists of liquidating the misallocations, reducing
consumption, and increasing saving.

Keynes (and Keynesians today) would think of the crisis as resulting
from the opposite cause: under-investment relative to the supply of
saving – that is, too little consumption or aggregate demand to maintain
a full-employment level of investment – which is bound to lead to a
collapse of profit expectations.

Again, the situation can be kept going for a time by resorting to
consumer-debt finance, but eventually consumers become over-leveraged
and curtail their purchases. Indeed, the Keynesian and Hayekian
explanations of the origins of the crisis are actually not very
different, with over-indebtedness playing the key role in both accounts.
But the conclusions to which the two theories point are very different.
Whereas for Hayek recovery requires the liquidation of excessive
investments and an increase in consumer saving, for Keynes it consists
in reducing the propensity to save and increasing consumption in order
to sustain companies’ profit expectations. Hayek demands more austerity,
Keynes more spending.

We have here a clue as to why Hayek lost his great battle with Keynes in
the 1930’s. It was not just that the policy of liquidating excesses was
politically catastrophic: in Germany, it brought Hitler to power. As
Keynes pointed out, if everyone – households, firms, and governments –
all started trying to increase their saving simultaneously, there would
be no way to stop the economy from running down until people became too
poor to save.

It was this flaw in Hayek’s reasoning that caused most economists to
desert the Hayekian camp and embrace Keynesian “stimulus” policies. As
the economist Lionel Robbins recalled: “Confronted with the freezing
deflation of those days, the idea that the prime essential was the
writing down of mistaken investments and…fostering the disposition to
save was…as unsuitable as denying blankets and stimulus to a drunk who
has fallen into an icy pond, on the ground that his original trouble was

Except to Hayekian fanatics, it seems obvious that the coordinated
global stimulus of 2009 stopped the slide into another Great Depression.
To be sure, the cost to many governments of rescuing their banks and
keeping their economies afloat in the face of business collapse damaged
or destroyed their creditworthiness. But it is increasingly recognized
that public-sector austerity at a time of weak private-sector spending
guarantees years of stagnation, if not further collapse.

So policy will have to change. Little can be hoped for in Europe; the
real question is whether President Barack Obama has it in him to don the
mantle of President Franklin Roosevelt.
To prevent further crises of equal severity in the future, Keynesians
would argue for strengthening the tools of macroeconomic management.
Hayekians have nothing sensible to contribute. It is far too late for
one of their favorite remedies – abolition of central banks, supposedly
the source of excessive credit creation. Even an economy without central
banks will be subject to errors of optimism and pessimism. And an
attitude of indifference to the fallout of these mistakes is bad
politics and bad morals.

So, for all his distinction as a philosopher of freedom, Hayek deserved
to lose his battle with Keynes in the 1930’s. He deserves to lose
today’s rematch as well.

(6) California’s legislature votes for feasibility study on state-owned
bank - Ellen Brown

Banking for California’s Future

Wall Street’s not cutting it: California’s legislature voted to do a
feasibility study on establishing a state-owned bank.

by Ellen Brown

posted Sep 14, 2011

Published on Thursday, September 15, 2011 by YES! Magazine


AB 750, California’s bill to study the feasibility of establishing a
state-owned bank that would receive deposits of state funds, has passed
both houses of the legislature and is now on the desk of Governor Jerry
Brown awaiting his signature.

It could be the governor’s chance to restore the state to its former
glory. As noted in TIME Magazine:

[I]n the 1950s and ‘60s, California was a liberal showcase. Governors
Earl Warren and Pat Brown responded to the population growth of the
postwar boom with a massive program of public infrastructure the
nation’s finest public college system, the freeway system and the state
aqueduct that carries water from the well-watered north to the parched

But that was before Proposition 13, a California constitutional
amendment enacted by voter initiative in 1978. Prop 13 limited real
property taxes to one percent of the full cash value of the property and
required a two-thirds majority in both legislative houses for future
increases of any state tax rates.

Prop 13 radically reduced the tax base, and as economist Michael Hudson
observes, it is too late to raise property taxes now. The tax savings
simply drove property prices up, getting capitalized into additional
debt service to the banks. Today, he says, “so much urban property is
sinking into negative equity territory that a rise in property taxes
will lead to even more foreclosures and abandonments, and hence even
lower fiscal returns.”

Meanwhile, the state is struggling to meet its budget with a vastly
shrunken tax base. What it needs is a new source of revenue, something
that won’t squeeze consumers, homeowners, or local business.
The BND is not a business competitor of the local banks but partners
with them, helping with capital and liquidity requirements.

A state-owned bank can provide that opportunity. North Dakota, the one
state that currently has its own bank, is the only state to be in
continuous budget surplus since the banking crisis began. North Dakota’s
balance sheet is so strong that it recently reduced individual income
taxes and property taxes by a combined $400 million and is debating
further cuts. It also has the lowest unemployment rate, lowest
foreclosure rate and lowest credit card default rate in the country, and
it hasn’t had a bank failure in at least the last decade.

Revenues from the Bank of North Dakota (BND) have been a major boost to
the state budget. The bank has contributed over $300 million in revenues
over the last decade to state coffers, a substantial sum for a state
with a population less than one-tenth the size of Los Angeles County.
North Dakota is an oil state, but according to a study by the Center for
State Innovation, from 2007 to 2009 the BND added nearly as much money
to the state’s general fund as oil and gas tax revenues did. Over a
15-year period, according to other data, the BND has contributed more to
the state budget than oil taxes have.

North Dakota is a conservative red state, not the sort you would expect
to be engaging in government enterprise. But the conservative
justification for a state-owned bank is that it preserves state
sovereignty, allowing the state to be independent of Wall Street and the
Feds. The BND is not a business competitor of the local banks but
partners with them, helping with capital and liquidity requirements. It
participates in loans, provides guarantees, and acts as a sort of
mini-Fed for the state.

According to the annual BND report for 2010:

Financially, 2010 was our strongest year ever. Profits increased by
nearly $4 million to $61.9 million during our seventh consecutive year
of record profits. . . . We ended the year with the highest capital
level in our history at just over $325 million. The Bank returned a
healthy 19 percent ROE, which represents the state’s return on its

A 19 percent return on equity beats the 170 billion dollars LOST by
CalPERS and CalSTRS, California’s two public pension funds, by the time
the stock market hit bottom in March 2009. The BND was making record
profits all through that period.

The BND augments state revenues in other ways besides just returning its
profits to the general fund. It helps build the tax base by providing
the funding needed by local businesses, and by financing the
infrastructure that attracts them. Among other resources, it has a loan
program called Flex PACE that allows a local community to provide
assistance to borrowers in areas of jobs retention, technology creation,
retail, small business, and essential community services.

North Dakota: Banking on the Locals

The BND also furnishes a credit line to the state itself, one that is
effectively interest-free, since the state owns the bank. Credit lines
are extended in times of emergency or whenever state departments or
municipalities face unforeseen circumstances, such as the recent
flooding in the state. Having a credit line to the state’s own bank
allows state and local governments to avoid extortionate interest rates
from Wall Street and pressure to privatize and reduce services in order
to avoid downgrades from rating agencies.

Timothy Canova is Professor of International Economic Law at Chapman
University School of Law in Orange, California. In a June 2011 paper
called “The Public Option: The Case for Parallel Public Banking
Institutions,” he compared North Dakota’s comfortable financial
situation to California’s:

. . . California is the largest state economy in the nation, yet without
a state-owned bank, is unable to steer hundreds of billions of dollars
in state revenues into productive investment within the state. Instead,
California deposits its many billions in tax revenues in large private
banks which often lend the funds out-of-state, invest them in
speculative trading strategies (including derivative bets against the
state’s own bonds), and do not remit any of their earnings back to the
state treasury. Meanwhile, California suffers from constrained private
credit conditions, high unemployment levels well above the national
average, and the stagnation of state and local tax receipts.

California was once the nation’s leader in technology, industry,
entertainment and public education. Under Governor Pat Brown, tuition at
UC campuses was free, making higher education available to all. Today
tuition is about $13,000 a year, and the state has an unemployment rate
hovering at 12%.

California, like North Dakota, is resource-rich. A state-owned bank will
allow it to capitalize on its resources to full advantage by providing
the credit needed to realize its potential. As the bank was described by
Assembly Member Ben Hueso of San Diego, who authored AB 750, "It's not
the fad of the moment, a pair of tight fitting jeans; it's a pair of
construction boots."
      Ellen Brown wrote this article for YES! Magazine, a national,
nonprofit media organization that fuses powerful ideas with practical
actions. Ellen is an attorney, president of the Public Banking
Institute, and the  author of eleven books, including Web of Debt: The
Shocking Truth About Our Money System and How We Can Break Free. Her
websites are WebofDebt.com and PublicBankingInstitute.org.

(7) Professor Kaoru Yamaguchi tells Congress, "the Monetary system
itself is broken"


Stephen Zarlenga

Congressman Dennis Kucinich's Briefing to Solve the Debt Crisis
Posted: 8/11/11 12:00 PM ET

(The video and transcript of the briefing will be added here as they
become available)

On Tuesday, July 26th, a day Washington DC was consumed by turmoil and
posturing over "solving" a phony budget and debt crisis; in one place in
the Capitol there was common sense -- the best America can offer.
Congressman Dennis Kucinich hosted Professor Kaoru Yamaguchi (Berkeley &
Doshisha universities) for a Monetary Briefing to present to members of
Congress the real solution to the real problem. The problem is that the
monetary system itself is broken. It is controlled not by our government
but by corrupt financial interests. The solution is genuine monetary reform!

The room was filled to capacity - more people than the number that
showed up for the Subcommittee on Domestic Monetary Policy Hearing, the
following day, to which we brought Dr. Yamaguchi so he could meet
Congressman Ron Paul.

While the phony government austerity debates resulted by attacking
normal Americans and protecting wealthy corrupt interests (Please stop
calling them "special" interests!), Kucinich's and Yamaguchi's
prescription protected all Americans except the wealthy bankers'
privileges to control and misdirect America's money system!

Dr. Yamaguchi explained how real structural reform of our monetary
system would solve the most intractable of America's national and local
problems, including the budget and debt problems.

Using accounting system dynamics, he builds a dynamic model of the
economy which identifies distinct economic actors, including the Federal
Reserve System, households and government, and then computes the
outcomes and cash flows between them over time. He then can see the
effect of two different money systems: debt money issued at interest by
banks when they make loans; and money issued by the government as money.
He can see how the systems affect government's ability to pay off the
national debt.

Dr. Yamaguchi's conclusions are astonishing. Regarding the present
Keynesian debt-based money system where banks create money when they
make loans of ten or more times the amount of money they have on hand:
This money system requires government and private debt to grow
exponentially and indefinitely. Dr. Yamaguchi finds that it inevitably
leads to either a Financial Meltdown, a Debt Default, or
Hyper-Inflation. If the government attempts to reduce this problem by
raising taxes and cutting services, then economic growth is paralyzed
and unemployment skyrockets. The downturn further reduces government
revenue, requiring even more cuts. The economy may remain in a recession
for decades, assuming government debt reduction remains the goal, as the
recent "compromise" between the nitwits indicates.

Furthermore, such a recession is contagious; foreign economies are
dragged into recessions of their own. Dr. Yamaguchi says, "This
indicates that the debt money system combined with the traditional
Keynesian fiscal policy becomes a dead end as a macroeconomic monetary
Translation: it won't work.

The real surprise comes when he examines what would happen with a
government money system, where government creates the money as money,
not debt, and spends it into circulation for things the country (i.e.
the people) really need, like infrastructure.

The government money system Dr. Yamaguchi examines is based upon the
American Monetary Act. The American Monetary Act fundamentally
rearranges the nation's financial architecture in three simultaneous
First: It incorporates the Federal Reserve into the Treasury Department.
A nine-member board appointed by the President to conduct monetary
policy is instructed to prevent inflation and deflation, yet maintain
enough money to facilitate trade. New money is spent into circulation by
the government.

Second: The privilege banks now have to create what we use for money and
loan it into circulation ceases completely. "Fractional Reserve Banking"
ends once and for all!

Third: New money is spent into circulation by the government on a $2.2
trillion national infrastructure program, ending unemployment.

Dr. Yamaguchi describes the three main effects of reforming a debt money
system into a government money system:

A It will pay off the government debt in full, as it comes due, without
further borrowing!
No recession is triggered.

B It will provide the necessary funding for infrastructure creation and
repair, which then solves the unemployment problem. Foreign economies
are unblemished.

C It does these things without causing inflation!

Dr. Yamaguchi sets himself apart from mainstream economists by also
questioning the morality of the present system. He writes, "it continues
to create unfair income distribution in favor of creditors... [and the]
obligatory payment of interest forces the indebted producers to continue
incessant economic growth to the limit of environmental carrying
capacity...In short, a debt money system is unsustainable as a
macroeconomic system."

What can a government money system do for all of us? Both the American
Monetary Institute's American Monetary Act (AMA) and Congressman Dennis
Kucinich's National Emergency Employment Defense (NEED, HR 6550) Act
outline the opportunities. It could pay for what the American Society of
Civil Engineers describes as the $2.2 trillion in needed national
infrastructure repairs over the next five years. That ends unemployment!

States, counties, and municipalities could receive grants from the
Treasury Department, solving the many state budget crises, keeping our
word on pensions and paying for unfunded Federal mandates.

Universal pre-school and undergraduate education could be provided
without indebting our youth. Medicare could provide universal coverage.
All of this without adding neither a dime to the national debt nor a tic
to inflation!

Congressman Dennis Kucinich will soon reintroduce his bill into the
House. Please see to it that your Congresspersons read all 14 pages of
it and encourage them to co-sponsor it! You are a person, not a
mushroom! Act now so that your Congresspersons act! Tell us which
Congressman you urged to support this bill. We'll work together to make
this non-partisan solution happen.

Edited by Jules Brouillet.

Zarlenga is co-founder and Director of the American Monetary Institute
and author of
The Lost Science of Money. Meet him at The 7th Annual AMI Monetary
Reform Conference!
Brouillet is a researcher for the American Monetary Institute.

(8) How Wall Street FLEECES America - new book by Stephen Lendman

From: "Clarity Press, Inc." <clarity@islandnet.com> Date: 28 Sep 2011
09:26:06 -0700


How Wall Street FLEECES America
Privatized Banking, Government Collusion and Class War
by Stephen Lendman

ISBN: 978-0-9833539-4-2   192 pp.
$16.95   2011


"Stephen Lendman has been tireless in exposing the hidden forces behind
the news, on everything from political economy and human rights to
social justice and workers’ rights. His writings draw from a wealth of
knowledge and deep conviction. I’m delighted to see him tackle the
problem of private banking and government collusion and what I believe
is the key to the solution—public banking."

ELLEN BROWN,  Web of Debt

"Steve Lendman is one of America’s leading critics,whether it involves
exposing collusion between Wall Street and Washington, the Obama
regime’s support of the Israeli occupation of Palestine, or the frame-up
of Muslim citizens by the attorney general. Fearless,thoroughly
documented and judicious in his judgement, Lendman’s essays are a major
contribution to the struggle for social justice in America."


  "I think this text is terrific, just what is needed, very clear,
informative beyond most people’s ken, easy to read, and of ultimate
importance to steering economic and political recovery. The Capitalism
and Freedom chapter is right in biopsy. The book just keeps on going
with brilliant full exposure."

JOHN McMURTRY Unequal Freedoms: The Global Market as an Ethical System

"A comprehensive understanding of Wall Street's manipulations of
markets, money and power to the detriment of working people everywhere
is badly needed. Stephen Lendman's new book "How Wall Street Fleeces
America, is the answer."


President Media Freedom Foundation/Project Censored

"Stephen Lendman has written a brilliant, passionate, and humane
analysis of the current economic disarray in which we now live. Picking
up where Thorstein Veblen left off, Lendman links our catastrophic
economic situation to the robber- baron mentality in corporations and
the failure of government to act as the enforcer of morality. His
analysis is full of concrete illustrations of this latter-day barbarism,
and is accessible to the everyday person, as well as intellectuals. This
book should be required reading in business schools as well as Congress."

STJEPAN G. MESTROVIC Professor of Sociology, Texas A&M University

"Stephen Lendman’s latest work covers a great many interconnected
subjects that affect not only the United States but everyone in the
world. The aspect of investment in America today is shown to be nothing
less then the robbing of the American people by a criminal syndicate,
known as Wall Street, banking and the Federal Reserve. A good deal of
this is based upon the Federal Reserve Act and the ability of major
private banks to control American society. The players have turned the
financial world into one vast casino and when the players lose large
amounts of money the public is allowed to bail them out. This book digs
deeply into many of the contributing parts of what is wrong with the
financial system of America and the world today. Stephen Lendman has a
great gift for writing and research and all his readers are the

BOB CHAPMAN Editor of the International Forecaster

"Stephen Lendman has a breadth and depth of understanding of world and
national affairs virtually unmatched among other public intellectuals
today.  With this exceptional collection of reflections upon our
financial and budgetary crises, he clarifies and illuminates the dark
and obscure recesses of policies and programs that, although ostensibly
intended to promote the interests of the people, all too often have the
opposite effect, enriching and strengthening the wealthy at the
taxpayer's expense.  Let us hope this book will be followed by many more!"

JAMES H. FETZER McKnight Professor Emeritus, University of Minnesota Duluth

  ""Stephen Lendman is a true citizen journalist and scholar.  After a
long and successful business career, Lendman took it upon himself to use
his retirement as a springboard for a new career as an analyst of
political economy.  With great acumen, Lendman calls out economic
charlatans and cuts straight through the core of so-called bull markets
to tell the truth about how the powerful fleece the public on a daily
basis. Lendman not only traces the history of the current financial
calamity, he offers common sense advice on what we can do about it.  A
solid, fact-based read for anyone trying to make heads or tails of
what's happening in today's economy."

MICKEY HUFF Associate Professor of History, Diablo Valley College
  Director, Project Censored

"There are many descriptive, narrative accounts about Wall St. and the
current economic crisis available to readers today. But Stephen
Lendman's new book takes the analysis far deeper than a simple
narrative. Lendman emphasizes and focuses on the connections between
Wall St. actions and the political system in Washington.  How money
operates on both sides of the street -- the banking and the
political--is described in detail. The reader is left with a broader,
deeper understanding of why the recent crisis happened and where it may
well be headed. Most importantly, the author does not shirk from calling
the outcomes of the Wall St.-Washington alliance for what it represents:
the emergence of a new kind of class war in America. Readers will find
of special interest his innovative views on banking and public banking.
Lendman's book is definitely one not to be missed."

DR. JACK RASMUS Professor of Economics, Santa Clara University
Author: Epic Recession: Prelude to Global Depression


The 1913 Federal Reserve Act let powerful bankers usurp money creation
authority in violation of the Constitution's Article I, Section 8,
giving only Congress the power to "coin Money (and) regulate the Value
thereof...." Thereafter, powerful bankers used their control over money,
credit and debt for private self-enrichment, bankrolling and colluding
with Congress and administrations to implement laws favoring them.

As a result, decades of deregulation, outsourcing, economic
financialization, and casino capitalism followed, producing asset
bubbles, record budget and national debt levels, and depression-sized
unemployment far higher than reported numbers, albeit manipulated to
look better.

After the financial crisis erupted in late 2007, even harder times have
left Main Street in the early stages of a depression, with recovery pure
illusion. Today's contagion has spread out of control, globally. Wall
Street got trillions of dollars in a desperate attempt to socialize
losses, privatize profits, and pump life back into the corpses by
blowing public wealth into a moribund financial sector, failing
corporate favorites, and America's aristocracy.

While Wall Street boasts it has recovered, industrial America keeps
imploding. High-paying jobs are exported. Economic prospects are
eroding. Austerity is being imposed, with no one sure how to revive
stable, sustainable long-term growth.

This book provides a powerful tool for showing angry Americans how
they've been fleeced, and includes a plan for constructive change.

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