Tuesday, November 12, 2013

616 Ellen Brown & Paul Krugman solution to Default: the Trillion Dollar coin

Ellen Brown & Paul Krugman solution to Default: the Trillion Dollar coin

Newsletter published on 9 October 2013

(1) Background to the Tea Party: JBS and the Nanny State - Peter Myers,
October 9, 2013
(2) Ellen Brown solution to Default: the Trillion Dollar coin
(3) Paul Krugman solution to Default: the Trillion Dollar coin
(4) Peter Schiff favors Default: We're Broke, we can't Pay
(5) Krugman: Default would devastate Financial markets because $ Bonds
have been the ultimate safe asset
(6) Krugman: Obama won’t, can’t negotiate over the debt ceiling
(7) Krugman: Obama won’t give ground on health reform, won’t let himself
be extorted again
(8) Niall Ferguson: Default can only be averted by Tax hikes & welfare cuts
(9) Don't raise the Debt Ceiling; Tax the $21 trillion in Tax Haven
offshore accounts
(10) We could balance the Budget if we taxed the Rich
(11) Economic Apocalypse approaches - Reagan budget director David Stockman
(12) David Stockman blames Tax Cuts for wrecking the economy
(13) Offshoring of US jobs has permanently lowered US tax revenues -
Paul Craig Roberts
(14) To restore Manufacturing, we have to take on the Corporate 1% who
benefit by outsourcing - Ralph Gomory
(15) Ellen Brown: two options for fixing the Banking system
(16) Ron Paul wrong about a Return to Gold - Brother Nathanael
(17) Bove: US Debt Default Would Spark 'Devastating' Depression
(18) Homeland Security preparing Military Dictatorship in case of Collapse

(1) Background to the Tea Party: JBS and the Nanny State - Peter Myers,
October 9, 2013


Many Economists and Finance Gurus remain relaxed about the threatened
Default. Some say that it will be averted (eg Julian Robertson). Some
say that there is no crisis, because the Fed can print Dollars at will.

Other commentators fear a financial Armageddon. Paul Krugman does, on
the Democrat side, and Niall Ferguson does, on the Republican side. He
blames the Tea Party, yet still claims that this is "an
entitlement-driven disaster".

David Stockman, Reagan's Budget Director, who later blamed Reaganomics
for the Financial Crisis, has long feared this moment. Yet he's solidly
against Obamacare.

Peter Schiff says that Treasurys are really "junk bonds"; the debt
ceiling shouldn't be raised because "There's no way we can pay any of
this money back."

So, each side's experts remain in their camp (Jews are prominent in
both, but there is no "Jewish line" per se). It's high drama, and not
scripted by Big Business or One Worlders. The Tea Party are grassroots
mavericks in the McCarthy tradition; that's what makes it so fascinating
but also so dangerous.

I will argue that each side has some merit.

The Tea Party, it seems, was founded by David and Charles Koch of the
John Birch Society. The JBS is focused on creeping World Government via
the UN, one of my own research interests, so I did check them out some
years ago.

They're not wrong, that the UN has been infiltrated by One World
activists, the kind promoting Open Borders (eg for Asylum Seekers and
Migrant Workers), Feminism, Gay Rights, Indigenous Rights, and "Human
Rights" generally. These people have a "Communist" core as the JBS
maintains, but they are Green Communists not Red ones. They are the
anti-Stalin kind associated with the Trotskyist and Anarchist movements,
and with Chomsky's own "Marlenite" version of Marxism, which he imbibed
at a critical stage in his thinking.

The Soviet Union fell because Gorbachev is a Green Communist, not a Red
one, his goal being not maintaining the Soviet system but Convergence
towards One World. The Green Left has maintained the "One World Or None"
slogan from the 1946 Baruch Plan to this day. Stalin rejected that 1946
plan for World Government; Gorbachev tried to achieve it via the
Copenhagen Earth summit. But the McCarthyist Right has never
comprehended the splits in Communism; they always saw it as monolithic.

I have three major differences with the the JBS. Firstly, I maintain
that we need the UN, not as a World Government but as a forum to resolve
differences. Second, I maintain that the solution to Communism, whether
the Red or the Green kind, is Socialism, meaning Market Socialism ie the
mixed economy, the kind that Australia and many countries in Europe had
in the postwar years. The JBS, in contrast, has promoted Tax Cuts,
Privatization and Deregulation. Thirdly, I maintain that the One World
movement is particularly Jewish, whereas the JBS disavows any Jewish
connection whatever. My statement applies to secular Jews, in the camps
of George Soros and David Ben Gurion amongst others, and I concede that
other Jewish factions (eg Barry Chamish, and most Orthodox) oppose this
movement. JBS reaches out to them and welcomes them in its ranks. Tzipi
Livni is on record opposing "International Law" as an interference in
what Israel does to the Palestinians.

Thus by way of background. The Tea Party has hijacked the Republican
Party, and Big Business is powerless in this drama.

Their focus is entirely "internal", on domestic issues; yet the Default
they threaten would have a momentous impact internationally.

If their case has some merit, it is that the Welfare State goes too far.
It is hard to argue with Old Age pensions and Unemployment Benefit, but
there has been a proliferation of categories and handouts that stymy the
independence we once had, the culture of standing on our own two feet.
The Nanny State's cradle-to-grave interventionism is not only an
intrusion, but a great expense as well.

Trotsky berated Stalin for "betraying" the Bolshevik Revolution, by
restoring the Church and restoring the Family. The Feminist founders of
the 1960s and 70s also looked to the early (pre-Stalin) Soviet Union for
inspiration - e.g. to Alexandra Kollontai and her attempt to institute
communal childcare  (by paid carers rather than parents) and communal
kitchens, abolishing the domestic hearth. They, too, mixed in "Left
Communist" (Trotskyist/Anarchist) circles. And they, too, branded the
Family "the source of our oppression".

The Soviet Union discovered that abolishing the Family is an expensive
business; because for most parents, childcare is a labour of love,
unpaid and 24/7. So during the 1930s Stalin instituted measures to
strengthen it, eg by making divorce more difficult (he also made
homosexuality a crime). Grandparents shared the parenting role and
transmitted the culture to their grandchildren. Thus Trotsky's book "The
Revolution Betrayed", published in 1937; it was a rallying cry to
intellectuals, to overthrow Stalin and restore "the Prophet" (as Isaac
Deutcher called him) to power.

But the excesses of the Welfare State, promoted by Trotsky's heirs, do
not justify the Tea Party's attack on Government spending per se.

There is no need to raise the Debt ceiling. Neither Peter Schiff nor
Paul Krugman want it raised.

Paul Krugman and Ellen Brown offer a simple solution to avert Default:
the Treasury should mint one or more $trillion coins, and use them to
pay the Federal Government's debt; Ellen says that they could also fund
infrastructure.

The US Constitution gives Congress the power to create money. That power
has been usurped by the privately-owned FED.

Ellen offers two longer-term solutions:

(a) publicly-owned banks operating alongside the private ones

(b) return to government-issued money, as per the American colonies, and
Lincoln during the Civil War.

Ellen herself has long promoted (a), whereas (b) has been promoted by
Stephen Zarlenga and the American Monetary Institute. In their scheme,
private banks would be able to lend deposits but not create new money
(this is what the public THINK banks do).

Now Ellen concedes that the rot in the present system may be too deep
for (a) to work.

Ellen never says anything about Tax-Cuts for the rich, Tax avoidance and
Tax Havens - a major reason for the budget deficit. Nor does she talk
about Free Trade - which destroyed our manufacturing industries - or
Outsourcing, which reduces American incomes and the tax take
proportionately.

Paul Craig Roberts writes about Trade policy and Outsourcing, but not
Money creation.

Other writers deal with the Tax Haven and Transfer Pricing issue. Wall
Street needs to realize that if rich Americans do not pay tax - and
plenty of it - the Dollar will lose its supremacy, and the US military
will have to withdraw from its overseas bases, as the Soviet Union did.

Combining the three - Money, Trade and Tax - one gets a more complete
scenario.

Government Debt is a worldwide problem, and a worldwide solution is
available, by getting rid of Tax Havens and Transfer Pricing, and making
the rich pay up or forfeit their assets.

The Tax Haven network is a form of theft, and it should be treated as
such. I am offering remedies that seem outlandish today, because we have
been conditioned to accept selfishness as a virtue, but one day, to save
the world economy, they will seem sensible.

Assets in national economies, but whose ownership is located in Tax
Havens, should be forfeited - declared public property of the national
economy involved. Debts of national economies to lenders based in Tax
Havens should be declared null.

Treasury debt to the Fed could be eliminated by nationalizing the Fed
(which is what the public THINKS it is) and making it a branch of the
Treasury.

Some foolish people on the Republican Right, eg Ron Paul, advocate
returning to the Gold Standard. But Barry Eichengreen showed that the
Gold Standard caused the Great Depression, by curtailing the ability of
governments to spend money (which was needed to create jobs and
infrastructure). For example see
http://en.wikipedia.org/wiki/Barry_Eichengreen

Many other economists agree, e.g. Brad DeLong:
http://econ161.berkeley.edu/Politics/whynotthegoldstandard.html

(2) Ellen Brown solution to Default: the Trillion Dollar coin

http://www.globalresearch.ca/martial-law-and-the-economy-is-homeland-security-preparing-for-the-next-wall-street-collapse/5353267

Martial Law and the Economy: Is Homeland Security Preparing for the Next
Wall Street Collapse?

By Ellen Brown

Global Research, October 07, 2013

[...] Today our government could avoid the debt ceiling crisis by doing
something similar: it could simply mint some trillion dollar coins and
deposit them in an account. That alternative could be pursued by the
Administration immediately, without going to Congress or changing the
law, as discussed in my earlier article here. It need not be
inflationary, since Congress could still spend only what it passed in
its budget. And if Congress did expand its budget for infrastructure and
job creation, that would actually be good for the economy, since
hoarding cash and paying down loans have significantly shrunk the
circulating money supply. ...

(3) Paul Krugman solution to Default: the Trillion Dollar coin

http://krugman.blogs.nytimes.com/2013/01/07/be-ready-to-mint-that-coin/?_r=0

Be Ready To Mint That Coin

NYT January 7, 2013, 9:05 am

Should President Obama be willing to print a $1 trillion platinum coin
if Republicans try to force America into default? Yes, absolutely. He
will, after all, be faced with a choice between two alternatives: one
that’s silly but benign, the other that’s equally silly but both vile
and disastrous. The decision should be obvious.

For those new to this, here’s the story. First of all, we have the weird
and destructive institution of the debt ceiling; this lets Congress
approve tax and spending bills that imply a large budget deficit — tax
and spending bills the president is legally required to implement — and
then lets Congress refuse to grant the president authority to borrow,
preventing him from carrying out his legal duties and provoking a
possibly catastrophic default.

And Republicans are openly threatening to use that potential for
catastrophe to blackmail the president into implementing policies they
can’t pass through normal constitutional processes.

Enter the platinum coin. There’s a legal loophole allowing the Treasury
to mint platinum coins in any denomination the secretary chooses. Yes,
it was intended to allow commemorative collector’s items — but that’s
not what the letter of the law says. And by minting a $1 trillion coin,
then depositing it at the Fed, the Treasury could acquire enough cash to
sidestep the debt ceiling — while doing no economic harm at all.

So why not?

It’s easy to make sententious remarks to the effect that we shouldn’t
look for gimmicks, we should sit down like serious people and deal with
our problems realistically. That may sound reasonable — if you’ve been
living in a cave for the past four years.Given the realities of our
political situation, and in particular the mixture of ruthlessness and
craziness that now characterizes House Republicans, it’s just ridiculous
— far more ridiculous than the notion of the coin.

So if the 14th amendment solution — simply declaring that the debt
ceiling is unconstitutional — isn’t workable, go with the coin.

This still leaves the question of whose face goes on the coin — but
that’s easy: John Boehner. Because without him and his colleagues, this
wouldn’t be necessary.

(4) Peter Schiff favors Default: We're Broke, we can't Pay

http://www.moneynews.com/Markets/Schiff-Treasurys-junk-debt/2013/09/27/id/528016

Peter Schiff: Treasurys Are 'Junk Bonds'; Debt Ceiling Shouldn't Be Raised

Friday, 27 Sep 2013 08:45 AM

By Dan Weil

The nation's finances are in such tatters that Treasurys are really
"junk bonds," says Peter Schiff, CEO of Euro Pacific Capital.

And the debt ceiling shouldn't be raised because it just perpetuates our
problems, he tells Yahoo.

"There's no way we can pay any of this money back," Schiff explains.
"We're either going to default or inflate. Either way bondholders are
going to lose, so don’t buy any Treasurys."

All that raising the debt ceiling over the years has done is to make us
"broke," he notes.

"The reason we have to raise our debt ceiling is because we can't pay
our bills," Schiff adds. "If we could pay our bills, we wouldn't have to
borrow more money. But because we're broke, and we can't pay for
anything, we have to keep going deeper and deeper into debt."

That will keep happening "until the world wakes up and realizes how
broke we are, that we're never going to pay anybody back," Schiff says.

At that point, "everyone stops lending us money, so the only buyer of
Treasury debt will be the Federal Reserve. And that's when the game
ends," he argues.

(5) Krugman: Default would devastate Financial markets because $ Bonds
have been the ultimate safe asset



http://www.nytimes.com/2013/09/30/opinion/krugman-rebels-without-a-clue.html

Rebels Without a Clue

By PAUL KRUGMAN

Published: September 29, 2013

This may be the way the world ends — not with a bang but with a temper
tantrum.

O.K., a temporary government shutdown — which became almost inevitable
after Sunday’s House vote to provide government funding only on
unacceptable conditions — wouldn’t be the end of the world. But a U.S.
government default, which will happen unless Congress raises the debt
ceiling soon, might cause financial catastrophe. Unfortunately, many
Republicans either don’t understand this or don’t care. ...

Still, a government shutdown looks benign compared with the possibility
that Congress might refuse to raise the debt ceiling.

First of all, hitting the ceiling would force a huge, immediate spending
cut, almost surely pushing America back into recession. Beyond that,
failure to raise the ceiling would mean missed payments on existing U.S.
government debt. And that might have terrifying consequences.

Why? Financial markets have long treated U.S. bonds as the ultimate safe
asset; the assumption that America will always honor its debts is the
bedrock on which the world financial system rests. In particular,
Treasury bills — short-term U.S. bonds — are what investors demand when
they want absolutely solid collateral against loans. Treasury bills are
so essential for this role that in times of severe stress they sometimes
pay slightly negative interest rates — that is, they’re treated as being
better than cash.

Now suppose it became clear that U.S. bonds weren’t safe, that America
couldn’t be counted on to honor its debts after all. Suddenly, the whole
system would be disrupted. Maybe, if we were lucky, financial
institutions would quickly cobble together alternative arrangements. But
it looks quite possible that default would create a huge financial
crisis, dwarfing the crisis set off by the failure of Lehman Brothers
five years ago.

No sane political system would run this kind of risk. But we don’t have
a sane political system; we have a system in which a substantial number
of Republicans believe that they can force President Obama to cancel
health reform by threatening a government shutdown, a debt default, or
both, and in which Republican leaders who know better are afraid to
level with the party’s delusional wing. For they are delusional, about
both the economics and the politics. ...

So how does this end? The votes to fund the government and raise the
debt ceiling are there, and always have been: every Democrat in the
House would vote for the necessary measures, and so would enough
Republicans. The problem is that G.O.P. leaders, fearing the wrath of
the radicals, haven’t been willing to allow such votes. What would
change their minds?

Ironically, considering who got us into our economic mess, the most
plausible answer is that Wall Street will come to the rescue — that the
big money will tell Republican leaders that they have to put an end to
the nonsense.

But what if even the plutocrats lack the power to rein in the radicals?
In that case, Mr. Obama will either let default happen or find some way
of defying the blackmailers, trading a financial crisis for a
constitutional crisis.

This all sounds crazy, because it is. But the craziness, ultimately,
resides not in the situation but in the minds of our politicians and the
people who vote for them. Default is not in our stars, but in ourselves.

A version of this op-ed appears in print on September 30, 2013, on page
A25 of the New York edition with the headline: Rebels Without A Clue.

(6) Krugman: Obama won’t, can’t negotiate over the debt ceiling

http://krugman.blogs.nytimes.com/2013/10/06/hitting-the-ceiling-disastrous-or-utterly-disastrous/

October 6, 2013, 2:47 pm

Hitting the Ceiling: Disastrous or Utterly Disastrous?

Obama won’t, can’t negotiate over the debt ceiling, and Republicans
still haven’t figured that out. So you have to say that it’s pretty
likely that we will indeed hit the ceiling. Suppose that Obama’s lawyers
tell him that extraordinary measures like just ignoring the ceiling or
minting the coin are out. Then what?

[...] Lots of people have been focusing on the possibility of a
mega-Lehman event, but even if we somehow avoid that, this will be a
catastrophe.

(7) Krugman: Obama won’t give ground on health reform, won’t let himself
be extorted again


http://krugman.blogs.nytimes.com/2013/10/04/hapless-and-hopeless/

October 4, 2013, 1:50 pm

Hapless and Hopeless

During the Bush years, I would often run into people mocking W for being
stupid. I never thought he was — incurious, anti-intellectual, but not
stupid. And the people around him certainly weren’t stupid — cynical,
dishonest, but not stupid, especially regarding matters political.

The current situation is different. These guys are cynical and dishonest
— but they’re also very, very stupid.

If one thing has been clear for months, it is that Obama (a) won’t give
ground on health reform (b) won’t let himself be extorted again over the
debt ceiling; he knows that his cave in 2011 was the worst thing he’s
done in office, and is determined to set things right by establishing,
once and for all, the precedent that you don’t get to pull that trick.

Yet here we are, with Republicans bleeding politically — and knowing
that they’re bleeding — and what do we have? Boehner repeating that
Obama must concede on rolling back health reform, and Cantor assuring
his colleagues that Obama’s going to cave.

It’s true that they’re in a box. Given everything they’ve told the base,
facing reality is going to cost them a lot. But they put themselves into
this box.

Unfortunately, the whole country and maybe the world is going to pay
part of the price of their stupidity.

(8) Niall Ferguson: Default can only be averted by Tax hikes & welfare cuts

http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-346791/

WSJ, Oct 4, 2013

The Shutdown Is a Sideshow. Debt Is the Threat

An entitlement-driven disaster looms for America, yet Washington
persists with its game of Russian roulette.

By Niall Ferguson

In the words of a veteran investor, watching the U.S. bond market today
is like sitting in a packed theater and smelling smoke. You look around
for signs of other nervous sniffers. But everyone else seems oblivious.

Yes, the federal government shut down this week. Yes, we are just two
weeks away from the point when the Treasury secretary says he will run
out of cash if the debt ceiling isn’t raised. Yes, bond king Bill Gross
has been on TV warning that a default by the government would be
“catastrophic.” Yet the yield on a 10-year Treasury note has fallen
slightly over the past month (though short-term T-bill rates ticked up
this week).

Part of the reason people aren’t rushing for the exits is that the
comedy they are watching is so horribly fascinating. In his vain attempt
to stop the Senate striking out the defunding of ObamaCare from the last
version of the continuing resolution, freshman Sen. Ted Cruz managed to
quote Doctor Seuss while re-enacting a scene from the classic movie “Mr.
Smith Goes to Washington.”

Meanwhile, President Obama has become the Hamlet of the West Wing: One
minute he’s for bombing Syria, the next he’s not; one minute Larry
Summers will succeed Ben Bernanke as chairman of the Federal Reserve,
the next he won’t; one minute the president is jetting off to Asia, the
next he’s not. To be in charge, or not to be in charge: that is indeed
the question.

According to conventional wisdom, the key to what is going on is a
Republican Party increasingly at the mercy of the tea party. I agree
that it was politically inept to seek to block ObamaCare by these means.
This is not the way to win back the White House and Senate. But
responsibility also lies with the president, who has consistently failed
to understand that a key function of the head of the executive branch is
to twist the arms of legislators on both sides. It was not the tea party
that shot down Mr. Summers’s nomination as Fed chairman; it was
Democrats like Sen. Elizabeth Warren, the new face of the American left.

Yet, entertaining as all this political drama may seem, the theater
itself is indeed burning. For the fiscal position of the federal
government is in fact much worse today than is commonly realized. As
anyone can see who reads the most recent long-term budget
outlook—published last month by the Congressional Budget Office, and
almost entirely ignored by the media—the question is not if the United
States will default but when and on which of its rapidly spiraling
liabilities.

True, the federal deficit has fallen to about 4% of GDP this year from
its 10% peak in 2009. The bad news is that, even as discretionary
expenditure has been slashed, spending on entitlements has continued to
rise—and will rise inexorably in the coming years, driving the deficit
back up above 6% by 2038.

A very striking feature of the latest CBO report is how much worse it is
than last year’s. A year ago, the CBO’s extended baseline series for the
federal debt in public hands projected a figure of 52% of GDP by 2038.
That figure has very nearly doubled to 100%. A year ago the debt was
supposed to glide down to zero by the 2070s. This year’s long-run
projection for 2076 is above 200%. In this devastating reassessment, a
crucial role is played here by the more realistic growth assumptions
used this year.

As the CBO noted last month in its 2013 “Long-Term Budget Outlook,”
echoing the work of Harvard economists Carmen Reinhart and Ken Rogoff:
“The increase in debt relative to the size of the economy, combined with
an increase in marginal tax rates (the rates that would apply to an
additional dollar of income), would reduce output and raise interest
rates relative to the benchmark economic projections that CBO used in
producing the extended baseline. Those economic differences would lead
to lower federal revenues and higher interest payments. ...

“At some point, investors would begin to doubt the government’s
willingness or ability to pay U.S. debt obligations, making it more
difficult or more expensive for the government to borrow money.
Moreover, even before that point was reached, the high and rising amount
of debt that CBO projects under the extended baseline would have
significant negative consequences for both the economy and the federal
budget.”

Just how negative becomes clear when one considers the full range of
scenarios offered by CBO for the period from now until 2038. Only in
three of 13 scenarios—two of which imagine politically highly unlikely
spending cuts or tax hikes—does the debt shrink from its current level
of 73% of GDP. In all the others it increases to between 77% and 190% of
GDP. It should be noted that this last figure can reasonably be
considered among the more likely of the scenarios, since it combines the
alternative fiscal scenario, in which politicians in Washington behave
as they have done in the past, raising spending more than taxation.

Only a fantasist can seriously believe “this is not a crisis.” The
fiscal arithmetic of excessive federal borrowing is nasty even when
relatively optimistic assumptions are made about growth and interest
rates. Currently, net interest payments on the federal debt are around
8% of GDP. But under the CBO’s extended baseline scenario, that share
could rise to 20% by 2026, 30% by 2049, and 40% by 2072. By 2088, the
last date for which the CBO now offers projections, interest payments
would—absent any changes in current policy—absorb just under half of all
tax revenues. That is another way of saying that policy is unsustainable.

The question is what on earth can be done to prevent the debt explosion.
The CBO has a clear answer: “[B]ringing debt back down to 39 percent of
GDP in 2038—as it was at the end of 2008—would require a combination of
increases in revenues and cuts in noninterest spending (relative to
current law) totaling 2 percent of GDP for the next 25 years. . . .

“If those changes came entirely from revenues, they would represent an
increase of 11 percent relative to the amount of revenues projected for
the 2014-2038 period; if the changes came entirely from spending, they
would represent a cut of 10œ percent in noninterest spending from the
amount projected for that period.”

Anyone watching this week’s political shenanigans in Washington will
grasp at once the tiny probability of tax hikes or spending cuts on this
scale.

It should now be clear that what we are watching in Washington is not a
comedy but a game of Russian roulette with the federal government’s
creditworthiness. So long as the Federal Reserve continues with the
policies of near-zero interest rates and quantitative easing, the gun
will likely continue to fire blanks. After all, Fed purchases of
Treasurys, if continued at their current level until the end of the
year, will account for three quarters of new government borrowing.

But the mere prospect of a taper, beginning in late May, was already
enough to raise long-term interest rates by more than 100 basis points.
Fact (according to data in the latest “Economic Report of the
President”): More than half the federal debt in public hands is held by
foreigners. Fact: Just under a third of the debt has a maturity of less
than a year.

Hey, does anyone else smell something burning?

(9) Don't raise the Debt Ceiling; Tax the $21 trillion in Tax Haven
offshore accounts


http://www.zerohedge.com/contributed/2013-10-07/where-washington-should-go-money-havens

Where Washington Should Go for Money: Havens

Submitted by Pivotfarm on 10/07/2013 12:46 -0400

As the US government shutdown enters its 7th day today it looks as if we
shouldn’t be holding our breath unless we want to go blue in the face in
the hope that there might be a compromise or somebody might actually
cave in. ...

Alternatively, if Washington is looking for money, then they could start
looking where the real greenbacks are going, apart from being thrown out
of the helicopter to the people down below at the banks, it should be
added with haste.

The real money is in the havens, but none of the lawmakers or the
politicians would ever dare mention that word for fear of alienating the
few bucks that are left here in the USA.

The top 20 US companies listed in Fortune 50 have set aside some $743
billion in profits in accounts located in offshore tax havens. According
to Nerdwallet Taxes that would bring in about $119 billion extra for the
Treasury if the money were in the US in accounts.

Tax-haven talk only gets little more than a few Twitter comments that
fall into oblivion or a televised debate at 3 a.m. in the morning that
nobody watches. The companies with the offshore accounts have the
politicians tied to them, since they are the ones that will make and
break their political careers. Hardly going to bite the hand that feeds
you, are you?

The US budget deficit stands at $642 billion. That could be reduced if
the guys in Washington had the gumption to stand up and be counted and
get the companies to pay taxes here in the US.

   88% of the companies listed on the Fortune-50 list use tax havens to
avoid paying taxes in their home country.

   68% of offshore profits are generated by the top 10 companies on
Fortune 50.

   General Electric for example has $108 billion in foreign earnings.

   Coming back to the US would bring in at least $3 billion in income
tax for the US.

   Microsoft earns $76.4 offshore.

   Estimates show that it might pay anything around $24 billion in
income tax to the Internal Revenue Service in the USA.

   Pfizer would end up paying $14.1 billion in tax to the IRS on its $73
billion in offshore profits.

   IBM pays $3 billion to foreign governments in taxation.

   It earns $44 billion in offshore profits and would end up paying an
estimated $5 billion in the US.

Only 6 of the companies that were contacted out of the 20 in the ranking
(in the analysis carried out by Nerdwallet Taxes) actually bothered to
reply to the information regarding how much tax they would have paid in
the USA, had they decided to bring their accounts back to the country.
Needless to point out that the other companies in the top 20 stated that
it was impracticable to suggest such a figure.

That money is offshore today and not in the USA. It is of no benefit to
the country whatsoever being overseas, improving just the financial
status of the companies and not the US economy. Certainly, the US budget
deficit is far from their worries. But it amounts to 10% of Gross
Domestic Product of the USA that is sitting somewhere in offshore
profits for companies. That’s more than there should be at a time like
this. In economic times of prosperity maybe it’s acceptable to do this
sort of thing (but even that’s debatable).

   It’s not just the companies either; it’s private individuals and the
world’s rich that have an estimated stash of $21 trillion hidden away in
offshore accounts.

   By comparison, this is by far the greatest worry concerning the
flight of capital from our home economies towards tax havens.

   That’s the conservative figure, since some estimate that it could be
worth up to $32 trillion.

   That’s obviously more than the GDP of the USA and Japan added together.

   It’s only some 10 million people that have that money hidden away too.

   It’s not the shady banks and the wheeler-dealers of the finance world
that have that money in their accounts either.

   It’s the bone fide banks of the world.

   The top banks such as Crédit Suisse and Goldman Sachs.

But, then what would Washington end up doing with that extra money?
Would it put it to good use, or would it do as Washington seems to do
all too often these days and hoard or hand it over to the banks to play
gin-rummy with on the stock markets rather than getting it where it
should be needed in the economy creating jobs and bringing down
unemployment? Getting companies to hand over the dough is hardly going
to be easy, but at the moment both the companies and the politicians are
just weaseling out of it all for fear of losing their privileged places,
while it’s the people that are suffering from their convoluted
agreements that seem to be renewed tacitly for successive periods so
long as the CEOs stay in power and the politicians keep their seats.

How long will those in Washington allow companies to sit on their stash
of greenbacks while the country is running a deficit thus is in the
trillions and they act as if it’s just a few bucks?

(10) We could balance the Budget if we taxed the Rich

http://billmoyers.com/2013/10/03/the-us-has-low-taxes-so-why-do-people-feel-ripped-off/

The US Has Low Taxes — So Why Do People Feel Ripped Off?

October 3, 2013

by Joshua Holland

Today is the 100th anniversary of the federal income tax, which was
signed into law by President Woodrow Wilson on October 3, 1913.

To mark the occasion, Moyers & Company caught up with David Cay
Johnston, who has probably forgotten more about our tax code than most
economic experts ever knew. Johnston won a Pulitzer Prize in 2001 for
his comprehensive reporting on taxes and tax avoidance in The New York
Times, and then authored a best-selling book on the subject, Perfectly
Legal: The Covert Campaign to Rig Our Tax System to Benefit the
Super-Rich – and Cheat Everybody Else.

Below is a lightly edited transcript of our discussion.

Joshua Holland: When we got into World War II, individuals and families
paid 38 percent of federal income taxes and corporations picked up the
other 62 percent. Last year, individuals and families paid 82 percent of
federal income taxes and corporations paid just 18 percent. How did this
happen?

David Cay Johnston: All modern societies require a large public sector
to provide the goods and services on which the private sector depends.
So you need commonwealth services – education, basic research,
statistical gathering and civil law enforcement – a whole host of
activity than can only be provided through the public sector.

Now, corporations have a concentrated interest in the taxes they pay and
the capacity to lobby for changes and make campaign donations to rent,
or in some cases buy politicians’ votes. Over a long period of time,
they saw to it that we change these tax laws and shifted this burden.

We also dramatically increased the size of the federal government during
the period from before World War II until now and some of the additional
money you’re seeing is the result of increased Social Security taxes and
Medicare taxes — some programs that benefit people generally, and that I
think we should look at as efficient buying at the wholesale level,
rather than retail.

Holland: Unpack that for me, David.

Johnston: Sure. Corporations in the days before World War II were
essentially domestic operations, with a few exceptions. And we now have
a global economy. And in the global economy, corporations all around the
world are going to push to get the lowest tax — or no tax at all in some
places — and then use that to pressure the US government to ease their
tax burdens.

They’ve also, by the way, put in place innumerable little rules changes
involving accounting and depreciation — that is writing down the value
of equipment as it’s being used up — and other things, to reduce their
bills. ...

Holland: Let’s go back to taxes. In your book, Perfectly Legal, which
everybody should read, you showed that it’s not just the top one percent
that are taking in so much more income than they did a generation ago,
and paying less taxes on that income, but you really have to look at the
top tenth of a percent or even the top one hundredth of one percent.
Tell us about that.

Johnston: Well, the plutocrat class — that’s the top 16,000 households
in this country — are where all the gains have been going since the end
of the recession. Thirty-seven cents out of every dollar of increased
income between 2009 and 2012 went to these 16,000 households — in a
country of 314 million people.

So here’s what the newest data show based on tax returns: The average
income of the bottom 90 percent of us has fallen 20 percent below where
it was in the year 2000 — it fell from about $36,000 to $30,000. It has
fallen back to the level of 1966, when Mustangs were new, Lyndon Johnson
was president and we were prosecuting a war in Vietnam. 1966.

And what happened to the 1 percent of the 1 percent? Well, their income
was about $5 million dollars a year back then on average and now it’s
$23 million dollars a year on average.

Now it’s important to add a point: This is how it’s measured by the tax
system. Very, very wealthy people — Warren Buffett, hedge fund managers,
Mitt Romney when he ran a private equity fund — are not required to
report most of their economic gains and legally they can literally live
tax-free or nearly tax-free by borrowing against their assets. You can
borrow these days, if you’re very wealthy, against your assets for less
than 2 percent interest and the lowest tax rate you could pay is 15
percent. So no wealthy person with any sense of good economics will pay
taxes if they can borrow against their assets. ...

Johnston: Well, because the anti-tax crowd for a hundred years has been
trying to get rid of progressive income taxes and they have distorted
and lied and we have what is politely called a low-information voter
named Mitt Romney who made it demonstratively clear during the campaign
that he had no idea what’s actually going on in the country. [...]

Johnston: The bottom line: we are not serious about high-end tax
cheating in America. That’s one of the major problems. If you’re an
ordinary worker, we take your taxes out of your paycheck before you get
the money, which means that Congress doesn’t trust you. But if you’re a
business owner, an investor, a landlord, then Congress trusts you to
report your income, subject to audit, which is highly unlikely. And if
you’re smart, your books are so complicated and the audit budgets are so
small that unless you were blatant and stupid, you won’t get caught.

We could solve our budget problems with the two things that I mentioned:
getting a health care system that’s modern and efficient and reduces
cost by about six percentage points of the economy while covering
everybody; and two, just scaling back a little bit on the military that
we operate as if we were going to go to war with Russia, the old Soviet
Union, which we’re not.

And if we then made it a priority to make sure that the tax laws apply
equally to everybody — we could probably cut everybody’s tax rates if we
did that. But there’s no stomach on Capitol Hill for going after rich
tax cheats who are sophisticated and smart, and so they get away with it.


(11) Economic Apocalypse approaches - Reagan budget director David Stockman

http://www.nytimes.com/2010/08/01/opinion/01stockman.html?_r=1

Four Deformations of the Apocalypse

By DAVID STOCKMAN

Published: July 31, 2010

IF there were such a thing as Chapter 11 for politicians, the Republican
push to extend the unaffordable Bush tax cuts would amount to a
bankruptcy filing. The nation's public debt — if honestly reckoned to
include municipal bonds and the $7 trillion of new deficits baked into
the cake through 2015 — will soon reach $18 trillion. That's a
Greece-scale 120 percent of gross domestic product, and fairly screams
out for austerity and sacrifice. It is therefore unseemly for the Senate
minority leader, Mitch McConnell, to insist that the nation's wealthiest
taxpayers be spared even a three-percentage-point rate increase.

More fundamentally, Mr. McConnell's stand puts the lie to the Republican
pretense that its new monetarist and supply-side doctrines are rooted in
its traditional financial philosophy. Republicans used to believe that
prosperity depended upon the regular balancing of accounts — in
government, in international trade, on the ledgers of central banks and
in the financial affairs of private households and businesses, too. But
the new catechism, as practiced by Republican policymakers for decades
now, has amounted to little more than money printing and deficit finance
— vulgar Keynesianism robed in the ideological vestments of the
prosperous classes.

This approach has not simply made a mockery of traditional party ideals.
It has also led to the serial financial bubbles and Wall Street
depredations that have crippled our economy. More specifically, the new
policy doctrines have caused four great deformations of the national
economy, and modern Republicans have turned a blind eye to each one.

The first of these started when the Nixon administration defaulted on
American obligations under the 1944 Bretton Woods agreement to balance
our accounts with the world. Now, since we have lived beyond our means
as a nation for nearly 40 years, our cumulative current-account deficit
— the combined shortfall on our trade in goods, services and income —
has reached nearly $8 trillion. That's borrowed prosperity on an epic
scale.

It is also an outcome that Milton Friedman said could never happen when,
in 1971, he persuaded President Nixon to unleash on the world paper
dollars no longer redeemable in gold or other fixed monetary reserves.
Just let the free market set currency exchange rates, he said, and trade
deficits will self-correct.

It may be true that governments, because they intervene in foreign
exchange markets, have never completely allowed their currencies to
float freely. But that does not absolve Friedman's $8 trillion error.
Once relieved of the discipline of defending a fixed value for their
currencies, politicians the world over were free to cheapen their money
and disregard their neighbors.

In fact, since chronic current-account deficits result from a nation
spending more than it earns, stringent domestic belt-tightening is the
only cure. When the dollar was tied to fixed exchange rates, politicians
were willing to administer the needed castor oil, because the
alternative was to make up for the trade shortfall by paying out
reserves, and this would cause immediate economic pain — from high
interest rates, for example. But now there is no discipline, only global
monetary chaos as foreign central banks run their own printing presses
at ever faster speeds to sop up the tidal wave of dollars coming from
the Federal Reserve.

The second unhappy change in the American economy has been the
extraordinary growth of our public debt. In 1970 it was just 40 percent
of gross domestic product, or about $425 billion. When it reaches $18
trillion, it will be 40 times greater than in 1970. This debt explosion
has resulted not from big spending by the Democrats, but instead the
Republican Party's embrace, about three decades ago, of the insidious
doctrine that deficits don't matter if they result from tax cuts.

(12) David Stockman blames Tax Cuts for wrecking the economy

http://www.cbsnews.com/8301-505125_162-57389481/why-david-stockman-isnt-buying-it/

AP /  March 2, 2012, 12:38 PM

Why David Stockman isn't buying it

NEW YORK - He was an architect of one of the biggest tax cuts in U.S.
history. He spent much of his career after politics using borrowed money
to take over companies. He targeted the riskiest ones that most
investors shunned - car-parts makers, textile mills.

That is one image of David Stockman, the former White House budget
director who, after resigning in protest over deficit spending, made a
fortune in corporate buyouts.

But spend time with him and you discover this former wunderkind of the
Reagan revolution is many other things now - an advocate for higher
taxes, a critic of the work that made him rich and a scared investor who
doesn't own a single stock for fear of another financial crisis.

Stockman suggests you'd be a fool to hold anything but cash now, and
maybe a few bars of gold. He thinks the Federal Reserve's efforts to
ease the pain from the collapse of our "national leveraged buyout" - his
term for decades of reckless, debt-fueled spending by government,
families and companies - is pumping stock and bond markets to dangerous
heights.

Known for his grasp of budgetary minutiae, first as a Michigan
congressman and then as Reagan's budget director, Stockman still dazzles
with his command of numbers. Ask him about jobs, and he'll spit out
government estimates for non-farm payrolls down to the tenth of a
decimal point. Prod him again and, as from a grim pinata, more figures
spill out: personal consumption expenditures, credit market debt and the
clunky sounding but all-important non-residential fixed investment.

Stockman may seem as exciting as an insurance actuary, but he knows how
to tell a good story. And the punch line to this one is gripping. He
says the numbers for the U.S. don't add up to anything but a painful,
slow-growing future.

Now 65 and gray, but still wearing his trademark owlish glasses,
Stockman took time from writing his book about the financial collapse,
"The Triumph of Crony Capitalism," to talk to The Associated Press at
his book-lined home in Greenwich, Conn.

[...] Condon: You sound as if we're facing a financial crisis like the
one that followed the collapse of Lehman Brothers in 2008.

Stockman: Oh, far worse than Lehman. When the real margin call in the
great beyond arrives, the carnage will be unimaginable.

[...] Condon: Give me your prescription to fix the economy.

Stockman: We have to eat our broccoli for a good period of time. And
that means our taxes are going to go up on everybody, not just the rich.
It means that we have to stop subsidizing debt by getting a sane set of
people back in charge of the Fed, getting interest rates back to some
kind of level that reflects the risk of holding debt over time. I think
the federal funds rate ought to be 3 percent or 4 percent. (It is zero
to 0.25 percent.) I mean, that's normal in an economy with inflation at
2 percent or 3 percent.

Condon: Social Security?

Stockman: It has to be means-tested. And Medicare needs to be
means-tested. If you're a more affluent retiree, you should have your
benefits cut back, pay a higher premium for Medicare. [...]

(13) Offshoring of US jobs has permanently lowered US tax revenues -
Paul Craig Roberts


http://www.opednews.com/articles/The-Real-Crisis-Is-Not-The-by-Paul-Craig-Roberts-Economy_Government-Accountability_Government-Corruption_Government-Shut-down-131002-339.html

The Real Crisis Is Not The Government Shutdown

by Paul Craig Roberts

October 2, 2013

http://www.paulcraigroberts.org/2013/10/02/real-crisis-government-shutdown-paul-craig-roberts/

The inability of the media and politicians to focus on the real issues
never ceases to amaze.

The real crisis is not the "debt ceiling crisis." The government
shutdown is merely a result of the Republicans using the debt limit
ceiling to attempt to block the implementation of Obamacare. If the
shutdown persists and becomes a problem, Obama has enough power under
the various "war on terror" rulings to declare a national emergency and
raise the debt ceiling by executive order. An executive branch that has
the power to inter citizens indefinitely and to murder them without due
process of law, can certainly set aside a ceiling on debt that
jeopardizes the government.

The real crisis is that jobs offshoring by US corporations has
permanently lowered US tax revenues by shifting what would have been
consumer income, US GDP, and tax base to China, India, and other
countries where wages and the cost of living are relatively low. On the
spending side, 12 years of wars have inflated annual expenditures. The
consequence is a wide deficit gap between revenues and expenditures.

Under the present circumstances, the deficit is too large to be closed.
The Federal Reserve covers the deficit by printing $1,000 billion
annually with which to purchase Treasury debt and mortgage-backed
financial instruments. The use of the printing press on such a large
scale undermines the US dollar's role as reserve currency, the basis for
US power. Raising the debt limit simply allows the real crisis to
continue. More money will be printed with which to purchase more new
debt issues needed to close the gap between revenues and expenditures.

The supply of dollars or dollar denominated assets in foreign hands is
vast. (The Social Security system's large surplus accumulated over a
quarter century was borrowed by the Treasury and spent. In its place are
non-marketable Treasury IOUs. Consequently, Social Security is one of
the largest creditors to the US government.)

If foreigners lose confidence in the dollar, the drop in the dollar's
exchange value would mean high inflation and the Federal Reserve's loss
of control over interest rates. It is possible that a drop in the
dollar's exchange value could initiate hyperinflation in the US.

The real crisis is the absence of intelligence among economists and
policymakers who told us for 20 years not to worry about the offshoring
of US jobs, because we were going to have a "New Economy" with better jobs.

As I report each month, not a single one of these "New Economy" jobs has
appeared in the payroll jobs statistics or in the Labor Department's
projections of future jobs. Economists and policymakers simply gave away
a good chunk of the US economy in order to enhance corporate profits.
One result has been to create in the US the worst distribution of income
of all developed countries and of many undeveloped ones.

In the scheme of things, the enhanced profits are a short-run thing,
because by halting the growth in consumer income, jobs offshoring has
destroyed the US consumer market. As I noted in a recent column, on
September 19 the New York Times reported what I have reported for years:
that US median family income has not increased for a quarter of a
century. The lack of consumer income growth is why five years of massive
monetary and fiscal stimulus have not brought economic recovery.

The real crisis cannot be addressed unless the jobs are brought back
home and the wars are stopped.

(14) To restore Manufacturing, we have to take on the Corporate 1% who
benefit by outsourcing - Ralph Gomory


Mercantilism, Manufacturing, and a Political Problem

Ralph Gomory

Huffington Post

22 May 2012

http://www.huffingtonpost.com/ralph-gomory/mercantilism-manufacturin_b_1537502.html

[...] The modern Chinese government wisely exploits the fact that our
great American companies take as their main mission in life to make as
much money as possible for their shareholders. Companies can maximize
profits by taking their technology and know how to China where they
receive subsidies, in the form of tax breaks, shared investment, and
undervalued currency. These are the factors that in high-tech
manufacturing are far more important than lower wages. So our companies
manufacture overseas and import the goods they once made in America back
into the United States. Our companies do not regard it as part of their
mission to take care of the American economy. ...

Almost ten years ago Warren Buffet proposed in Fortune magazine a very
good and straightforward way to balance trade he called import
certificates. Basically if you export you get certificates for the value
of goods you export and these you can sell on an open market. And no-one
can import into the U.S. without buying certificates whose face value
equals that of the planned import. This automatically balances trade.

[..] We, meaning most of the country, would benefit from taking such
actions, but there is another "we" that would lose from such a change;
the global corporations. But the political power in Washington of the
two "we"s is measured more by money and influence than by the number of
people who would benefit, and the edge in money and influence is
overwhelmingly with the global corporations.

Given the real world we live in, and the current motivation of our great
global corporations, it is time to apply to our own situation the
immortal words of Pogo: "we have met the enemy and he is us". To solve
our manufacturing problem we will first have to face up to our political
one.

(15) Ellen Brown: two options for fixing the Banking system
The Armageddon Looting Machine: The Looming Mass Destruction from
Derivatives

by Ellen Brown

Posted on September 17, 2013

http://ellenbrown.com/2013/09/17/the-the-armageddon-looting-machine-the-looming-mass-destruction-from-derivatives/

[...] Today, virtually the entire circulating money supply (M1, M2 and
M3) consists of privately-created “bank credit” – money created on the
books of banks in the form of loans. If this private credit system
implodes, we will be without a money supply. One option would be to
return to the system of government-issued money that was devised by the
American colonists, revived by Abraham Lincoln during the Civil War, and
used by other countries at various times and places around the world.
Another option would be a system of publicly-owned state banks on the
model of the Bank of North Dakota, leveraging the capital of the state
backed by the revenues of the into public bank credit for the use of the
local economy.

Change happens historically in times of crisis, and we may be there
again today.

(16) Ron Paul wrong about a Return to Gold - Brother Nathanael

    Brother Nathanael <bronathanael@yahoo.com> 3 October 2013 14:00

A Plan To Replace The Fed

  Brother Nathanael Kapner

October 2, 2013

http://www.realjewnews.com/?p=856

Everybody’s talking about ‘Ending the Fed’ but very few have a plan to
replace it.

First of all, our present monetary system centered around the Federal
Reserve Bank is rotten to the core … creating money by book entries,
‘lending’ it to the government, and gouging us with interest.

And did you know that the Fed is a privately-owned bank? Greenspan said
it himself:

[Clip: “What is the proper relationship, what should be the proper
relationship between the chairman of the Fed and the President of the
United States?”

“Well, first of all the Federal Reserve is an independent agency and
that means basically that there is no other agency of government which
can overrule actions that we take.”]

That’s right. The Fed is a private Jewish bank whose principal
shareholders are the Rothschilds and Goldman Sachs.

And because money creation is in the hands of the Jewish-owned Fed, they
got the bucks to buy the courts, the legislature, and all presidential
nominees.

Monetary reform is the mother of all reforms. Any other ‘reform’ is a
waste of time because it will fail without it.

It’s time to replace the Fed.

Now, Ron Paul wants to “End the Fed.” He even wrote a book about it.

But, did you know that Ron Paul and the Fed both work for the private
bankers?

You see, private bankers don’t really need the Fed. They got along just
fine without it for most of US history.

What they want is the license to create US dollars.

Ron Paul secretly wants this too … he wants money issued by private banks.

So, let’s pose a question to Mr Paul: “Will the money that the private
banks issue be US dollars?

The answer is “Yes” … but Ron Paul has never admitted this publicly.

Because if he did his Libertarian base would revolt against him.

Now, there are two choices in money creation. Fiat money or commodity
money like the “gold standard.”

The money we use today is all fiat money. The main reason is because
world commerce requires trillions of dollars every day to operate.

If we went on a “gold standard” as Ron Paul wants, we would we
immediately plunge into a world depression that would make the Great
Depression look like a stock market rally. Millions would die quickly.

Yet, the Austrian School—which Ron Paul represents—sees this as a
‘cleansing period,’ which is heartless.

Their real aim is to throw the government—forced to borrow under
“gold-based” money—into deeper debt to themselves, the private Jewish
bankers.

The right solution is to create our own US Treasury-issued “fiat” money,
of which, the Austrian School has given a bad name because it has no
‘intrinsic value.’

But go to Las Vegas and ask any gambler to hand over his “fiat”
chips—because they have “no value”—and he’ll tell you where you can go.

And dollar bills, although without “intrinsic value,” are STILL coveted
as a means of exchange…in spite of what Ron Paul says:

[Clip: “If this is sunk on a boat on a ship, now or it was 500 years
ago, you dig it up, it has tremendous value, there would be numismatic
value plus the real value of gold. This sinks, you put it at the bottom,
who cares?”]

No way! Nine out of ten seeing a $100 bill sinking into the ocean would
dive right for it!

There’s nothing wrong with “fiat” money … provided that its volume is
controlled for the public…as Japan and Canada once did prior to them
bending to the Jewish-run World Bank.

Let’s put our money BACK into the hands of the US Treasury as
constitutionally mandated and out of the hands of the enemies of Christ.

(17) Bove: US Debt Default Would Spark 'Devastating' Depression
http://www.moneynews.com/Economy/Bove-debt-default-depression/2013/10/04/id/529289

Friday, 04 Oct 2013 09:18 AM

By Dan Weil

If Congress fails to approve an increase in the debt ceiling and a
government default ensues, we'll be in for some seriously tough times,
says Dick Bove, vice president of equity research at Rafferty Capital
Markets.

"The devastation to the United States would be so severe that it would
take decades to recover from the depression caused by a default and the
attendant dumping of trillions of dollars of U.S. Treasury securities on
the global financial markets," he writes in a commentary obtained by CNBC.

Banks wouldn't be able to lend, thanks to the declining value of their
bond holdings, and Social Security recipients and participants in other
retirement plans would see a cut in their benefits because of the plunge
in value of the Treasurys that the plans own, he says.

Also, returns for money market funds would turn negative, Bove predicts.

The Federal Reserve would suffer too, as Treasurys now account for 55
percent of its $3.8 trillion balance sheet, Bove notes.

"This would raise the question of what is behind the value of the
dollar," he said. "It could wipe out the equity at the Fed."

But David Stockman, former director of the Office of Management and
Budget, argues that a refusal by Congress to increase the debt limit
won't cause a default. That's because the government has revenue of $250
billion a month, he tells Yahoo.

"It is a complete red herring to say there will be a default," Stockman
explains. "There will never be a time in which there is not enough cash
to pay the interest."

(18) Homeland Security preparing Military Dictatorship in case of Collapse

From: Paul de Burgh-Day <pdeburgh@harboursat.com.au>
Date: Wed, 9 Oct 2013 08:57:27 +1100

http://www.globalresearch.ca/martial-law-and-the-economy-is-homeland-security-preparing-for-the-next-wall-street-collapse/5353267

Martial Law and the Economy: Is Homeland Security Preparing for the Next
Wall Street Collapse?

By Ellen Brown

Global Research, October 07, 2013

Reports are that the Department of Homeland Security (DHS) is engaged in
a massive, covert military buildup. An article in the Associated Press
in February confirmed an open purchase order by DHS for 1.6 billion
rounds of ammunition. According to an op-ed in Forbes, that’s enough to
sustain an Iraq-sized war for over twenty years. DHS has also acquired
heavily armored tanks, which have been seen roaming the streets.
Evidently somebody in government is expecting some serious civil unrest.
The question is, why?

Recently revealed statements by former UK Prime Minister Gordon Brown at
the height of the banking crisis in October 2008 could give some
insights into that question. An article on BBC News on September 21,
2013, drew from an explosive autobiography called Power Trip by Brown’s
spin doctor Damian McBride, who said the prime minister was worried that
law and order could collapse during the financial crisis. McBride quoted
Brown as saying:

If the banks are shutting their doors, and the cash points aren’t
working, and people go to Tesco [a grocery chain] and their cards aren’t
being accepted, the whole thing will just explode.

If you can’t buy food or petrol or medicine for your kids, people will
just start breaking the windows and helping themselves.

And as soon as people see that on TV, that’s the end, because everyone
will think that’s OK now, that’s just what we all have to do. It’ll be
anarchy. That’s what could happen tomorrow.

How to deal with that threat? Brown said, “We’d have to think: do we
have curfews, do we put the Army on the streets, how do we get order back?”

McBride wrote in his book Power Trip, “It was extraordinary to see
Gordon so totally gripped by the danger of what he was about to do, but
equally convinced that decisive action had to be taken immediately.” He
compared the threat to the Cuban Missile Crisis.

Fear of this threat was echoed in September 2008 by US Treasury
Secretary Hank Paulson, who reportedly warned that the US government
might have to resort to martial law if Wall Street were not bailed out
from the credit collapse.

In both countries, martial law was avoided when their legislatures
succumbed to pressure and bailed out the banks. But many pundits are
saying that another collapse is imminent; and this time, governments may
not be so willing to step up to the plate.

The Next Time WILL Be Different

What triggered the 2008 crisis was a run, not in the conventional
banking system, but in the “shadow” banking system, a collection of
non-bank financial intermediaries that provide services similar to
traditional commercial banks but are unregulated.  They include hedge
funds, money market funds, credit investment funds, exchange-traded
funds, private equity funds, securities broker dealers, securitization
and finance companies. Investment banks and commercial banks may also
conduct much of their business in the shadows of this unregulated system.

The shadow financial casino has only grown larger since 2008; and in the
next Lehman-style collapse, government bailouts may not be available.
According to President Obama in his remarks on the Dodd-Frank Act on
July 15, 2010, “Because of this reform, . . . there will be no more
taxpayer funded bailouts – period.”

Governments in Europe are also shying away from further bailouts. The
Financial Stability Board (FSB) in Switzerland has therefore required
the systemically risky banks to devise “living wills” setting forth what
they will do in the event of insolvency. The template established by the
FSB requires them to “bail in” their creditors; and depositors, it turns
out, are the largest class of bank creditor. (For fuller discussion, see
my earlier article here.)

When depositors cannot access their bank accounts to get money for food
for the kids, they could well start breaking store windows and helping
themselves. Worse, they might plot to overthrow the financier-controlled
government. Witness Greece, where increasing disillusionment with the
ability of the government to rescue the citizens from the worst
depression since 1929 has precipitated riots and threats of violent
overthrow.

Fear of that result could explain the massive, government-authorized
spying on American citizens, the domestic use of drones, and the
elimination of due process and of “posse comitatus” (the federal law
prohibiting the military from enforcing “law and order” on non-federal
property). Constitutional protections are being thrown out the window in
favor of protecting the elite class in power.

  The Looming Debt Ceiling Crisis

  The next crisis on the agenda appears to be the October 17th deadline
for agreeing on a federal budget or risking default on the government’s
loans. It may only be a coincidence, but two large-scale drills are
scheduled to take place the same day, the “Great ShakeOut Earthquake
Drill” and the “Quantum Dawn 2 Cyber Attack Bank Drill.” According to a
Bloomberg news clip on the bank drill, the attacks being prepared for
are from hackers, state-sponsored espionage, and organized crime
(financial fraud). One interviewee stated, “You might experience that
your online banking is down . . . . You might experience that you can’t
log in.” It sounds like a dress rehearsal for the Great American Bail-in.

Ominous as all this is, it has a bright side. Bail-ins and martial law
can be seen as the last desperate thrashings of a dinosaur. The
exploitative financial scheme responsible for turning millions out of
their jobs and their homes has reached the end of the line. Crisis in
the current scheme means opportunity for those more sustainable
solutions waiting in the wings.

Other countries faced with a collapse in their debt-based borrowed
currencies have survived and thrived by issuing their own. When the
dollar-pegged currency collapsed in Argentina in 2001, the national
government returned to issuing its own pesos; municipal governments paid
with “debt-canceling bonds” that circulated as currency; and
neighborhoods traded with community currencies. After the German
currency collapsed in the 1920s, the government turned the economy
around in the 1930s by issuing “MEFO” bills that circulated as currency.
When England ran out of gold in 1914, the government issued “Bradbury
pounds” similar to the Greenbacks issued by Abraham Lincoln during the
US Civil War.

Today our government could avoid the debt ceiling crisis by doing
something similar: it could simply mint some trillion dollar coins and
deposit them in an account. That alternative could be pursued by the
Administration immediately, without going to Congress or changing the
law, as discussed in my earlier article here. It need not be
inflationary, since Congress could still spend only what it passed in
its budget. And if Congress did expand its budget for infrastructure and
job creation, that would actually be good for the economy, since
hoarding cash and paying down loans have significantly shrunk the
circulating money supply.

  Peer-to-peer Trading and Public Banks

  At the local level, we need to set up an alternative system that
provides safety for depositors, funds small and medium-sized businesses,
and serves the needs of the community.

Much progress has already been made on that front in the peer-to-peer
economy.  In a September 27th article titled “Peer-to-Peer Economy
Thrives as Activists Vacate the System,” Eric Blair reports that the
Occupy Movement is engaged in a peaceful revolution in which people are
abandoning the established system in favor of a “sharing economy.”
Trading occurs between individuals, without taxes, regulations or
licenses, and in some cases without government-issued currency.

Peer-to-peer trading happens largely on the Internet, where customer
reviews rather than regulation keep sellers honest. It started with eBay
and Craigslist and has grown exponentially since. Bitcoin is a private
currency outside the prying eyes of regulators. Software is being
devised that circumvents NSA spying. Bank loans are being shunned in
favor of crowdfunding. Local food co-ops are also a form of opting out
of the corporate-government system.

Peer-to-peer trading works for local exchange, but we also need a way to
protect our dollars, both public and private. We need dollars to pay at
least some of our bills, and businesses need them to acquire raw
materials. We also need a way to protect our public revenues, which are
currently deposited and invested in Wall Street banks that have heavy
derivatives exposure.

To meet those needs, we can set up publicly-owned banks on the model of
the Bank of North Dakota, currently our only state-owned depository
bank. The BND is mandated by law to receive all the state’s deposits and
to serve the public interest. Ideally, every state would have one of
these “mini-Feds.” Counties and cities could have them as well. For more
information, see http://PublicBankingInstitute.org.

Preparations for martial law have been reported for decades, and it
hasn’t happened yet. Hopefully, we can sidestep that danger by moving
into a saner, more sustainable system that makes military action against
American citizens unnecessary.

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