Saturday, February 28, 2015

UNIVERSE MAY NOT HAVE STARTED WITH A BANG

From Space ... "Big Bang, deflated? The Universe may have had no beginning."


So you know what this means, right? Buzz Lightyear was on sound scientific ground when he said, "To infinity, and beyond" ...


- Mark 

STAN GETZ ON A SATURDAY

Saturday Stan Getz ...


I started listening to Stan Getz regularly in 1993 when I lived in Queretaro, Mexico. I listened while playing chess with one of my colleagues from the state university, the Universidad Autonoma de Queretaro. He helped me tighten up the written Spanish version of an article I wrote on the North American Free Trade Agreement (NAFTA), which appeared in Problemas del Desarrollo in 1994.

Because our offices were in the same building (below), we met regularly and ended up playing chess after we finished our work on weekends.


On a side note, it looks like my colleague and friend is doing well. He's going to run for mayor of Quretaro.

- Mark  

TRICKLE DOWN REALITY ... ANOTHER NAIL IN THE COFFIN



Here's the story on Wisconsin, and the story on Minnesota.

If, you're wondering, yes, I've posted on this topic before ...



- Mark

Hat tip to Cathee for the Wisconsin/Minnesota meme.

WEEKEND READING (2-28-15)


President Obama says goodbye to Leonard Nimoy: 'I loved Spock' (TPM / Daily News).

WMDs: The rhetoric fueling the war on terror and the Arab Spring (Mint Press News).

Paul Krugman destroys the latest lie about why we have rampant inequality (Alternet).

Black History Month: Malcolm X's missing speech (OZY).

Uninsured ex-sheriff who fought Obamacare pleads for help to pay medical bills (TPM).


WHAT'S WRONG WITH THE FEDERAL RESERVE
Janet Yellen is freaking out about "Audit the Fed" - Here are 100 reasons why she should be worried (Zero Hedge).

The myth that this time it's different (Money Morning / Shah Gilani).

The Fed's history of assassination (Money Morning / Shah Gilani).


OUR MARKET STUPIDITY ... A REVIEW
The top 5 films of the financial crisis (Marketplace).

Six films on the financial crisis (Bill Moyers).

The spectacular collapse of Barings Bank, 10 years later ... and, yes, Nick Leeson is doing just fine (OZY).


SIGH ...
Kansas GOP Senator Mary Pilcher-Cook wants to criminalize "harmful" books (Forward Progressive).

After "much prayer", doctor refuses to see 6-year-old baby because she has two moms (Daily Kos).


GOOD NEWS
What happens when you tax the rich and raise minimum wage? Meet one of the USA's best economics (Daily Kos).

The smart thing to do  ... Pediatricians fight back against anti-vaxxers, ban their kids (Think Progress).

Scientists develop telescopic contact lenses that can zoom 3X (IFL Science).


LATIN AMERICA
Another U.S.-led coup attempt, in Venezuela (Mint Press News).

Latin America unites against U.S. attack on Venezuela democracy (COHA).

We need a new direction for U.S. policy towards Mexico (COHA).


STUFF WE NEED TO WORK ON
Nancy J. Altman: Expand Social Security Now (Truth Out).

There's a horrifying amount of plastic in the ocean. This chart shows who's to blame; and it's not the United States (Bill Moyers).

Why we must offend religion more (Alternet).


MEDICINE, PROFITS, AND ETHICS 
The Vatican just called for reforming the biggest health care problem you've never heard of ... intellectual property rights, or patent law (Think Progress).

AARP warns that that Trans Pacific Partnership (TPP) could lock in high drug prices - especially for Medicare - by granting U.S.-sponsored 12 year patents to the 12 nations negotiating TPP (AARP).

Hubris and Stupidity: Obamacare opponent on panel Mansplains health reform, only to be corrected by reporter who wrote the piece cited by opponent (Think Progress).


STUFF CONSERVATIVES SHOULD KNOW MORE ABOUT
What 7 states discovered after spending more than $1 million drug testing welfare recipients (Think Progress).

Net neutrality fast facts (Open Secrets).

7 things Republicans would be shocked to learn about Ronald Reagan ... or Why the Tea Party would have hated Ronald Reagan (Think Progress).


MISCELLANEOUS
Robert Reich: Why work has become a nightmare and how to stop it (Alternet).

Chicago police reportedly used Gitmo-style 'black site' to illegally detain citizens (Mediaite).

How mice turned their private paradise into a terrifying dystopia (io9)

Prominent Russian opposition figure, Boris Nemstov, shot dead (AP).

- Mark

Thursday, February 26, 2015

HOW TO STEAL AN ELECTION ... OR REDISTRICTING IN AMERICA

We all know what happened in the last two presidential elections. President Obama won. During these presidential elections more people voted for congressional Democrats at the district level than they did for Republicans.

However, in spite of the Democratic Party winning well over 1 million more votes in all congressional districts in 2012 (and almost 5 million more votes in the presidential count), the Democrats only won 201 seats in the House of Representatives. The Republicans maintained their dominant position in the House after 2012, and held 232 seats in the House immediately after the election (they currently hold 245 seats).

So how was it that Republicans could control the House of Representatives in Congress after 2012, in spite of getting over 1 million votes less than the Democrats? This is how ...

If you're a Democrat don't be too mad. The redistricting game is played by both sides. This just means that Republicans have been better at redrawing the district lines than Democrats.

So, how do we fix this? 

- Mark 

BEARLY FRIENDS

This was posted by my FB friend Tom ...


I'm posting the meme because it reminds me of a story told about or by former Chicago Bear running back Walter Payton in the 1980s.

Payton was camping with friends/teammates in the woods, and slept with his sneakers on. He was asked why he slept with his shoes on. Payton replied that he was afraid of bears. They told him, "You can't outrun a bear." Payton countered, "I don't need to outrun the bear. I just need to outrun you."

- Mark 

WHY THE ICELAND MODEL WORKS ...


Here's the link for kicking out the FBI ...

And the links (here, here and here) explaining Iceland's arrest and hunting down of the banksters.

- Mark

Wednesday, February 25, 2015

AUDIT THE FED? I HOPE SO ... BUT DON'T HOLD YOUR BREATH ON IT

The central bank of the United States, the Federal Reserve.

"The mandate of any central bank isn't 
tied to specific government programs. 
Her goal isn't economic growth. The 
only goal of a central bank is price 
stability ... there's nothing more."

- Mexican Central Banker, 1993

The above quote was part of a series of interviews I did at the Banco de Mexico in 1993 for a journal article that I co-wrote 20 years ago. The article ("The Bank of Mexico and Monetary Policy: The Struggle for Independence and Monetary Stability") took a look at the financial culture of central banks in Germany and Mexico, and focused on what central banks across the world are supposed to do: Protect the integrity of a nation's currency.

If you know nothing else about central banks, know that protecting the integrity of the currency is supposed to be its #1 priority. 


File:Banco de México & INBA.jpg
Mexico's central bank, the Banco de Mexico, in Mexico City.
I was struck by the comment because Mexico had just emerged from the financial recklessness of the 1970s, which helped shove Mexico in the "lost decade" of the 1980s. It also marked a turning point in Mexico's financial history. Since 1993 the Banco de Mexico has been independent of Mexico's federal government, and now brags that it no longer funds reckless deficit spending in Mexico. And it doesn't.

If only our nation's central bank, the Federal Reserve, could say the same thing. But it can't. 

To date, with the approval and support of the Federal Reserve we have created and spent well over $4 trillion on Wall Street's recklessness, and have committed an estimated $14 trillion in Fed approved (but ultimately taxpayer backed) funds for the next market bailout. 

Yeah, that's right. About $14 trillion is already baked into the next market collapse.



Today, the Federal Reserve is showing the world that it's little more than a financial hammock for America's largest financial institutions. If the past 7 years is any indication - and it is - the Federal Reserve has made it clear that it is not independent, and that it doesn't really have an interest in guarding the integrity of the dollar. 

Their top priority is to keep our largest financial institutions afloat (so they can privatize the profits), which is why we now live in an era of Too Big To Fail (where we get to socialize the losses).

It's also one of the reasons that the Chair of the Federal Reserve, Janet Yellen, expressed her concern recently that the U.S. Congress might act on Kentucky Senator Rand Paul's bill to "Audit the Fed." Courtesy of Zero Hedge, we get the first 10 of 100 reasons why Janet Yellen should be concerned if the U.S. Congress decides to audit the Fed. 


#1 We like to think that we have a government “of the people, by the people, for the people”, but the truth is that an unelected, unaccountable group of central planners has far more power over our economy than anyone else in our society does.

#2 The Federal Reserve is actually “independent” of the government.  In fact, the Federal Reserve has argued vehemently in federal court that it is “not an agency” of the federal government and therefore not subject to the Freedom of Information Act.

#3 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized “much like private corporations“.

#4 The regional Federal Reserve banks issue shares of stock to the “member banks” that own them.

#5 100% of the shareholders of the Federal Reserve areprivate banks.  The U.S. government owns zero shares.

#6 The Federal Reserve is not an agency of the federal government, but it has been given power to regulate our banks and financial institutions.  This should not be happening.

#7 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.  So why is the Federal Reserve doing it?

#8 If you look at a “U.S. dollar”, it actually says “Federal Reserve note” at the top.  In the financial world, a “note” is an instrument of debt.

#9 In 1963, President John F. Kennedy issued Executive Order 11110 which authorized the U.S. Treasury to issue “United States notes” which were created by the U.S. government directly and not by the Federal Reserve.  He was assassinated shortly thereafter.

#10 Many of the debt-free United States notes issued under President Kennedy are still in circulation today.


If you can, read the remaining 90 reasons here from Zero Hedge. They point us towards the right issues and questions that need to be addressed.

Truth be told, if we had a Congress that knew what it was doing Yellen's concerns might be more of a panic. Seriously. 

I personally (1) don't see an audit happening because most members of Congress are pretty much working for the financial institutions already, and (2) I can't see this Congress getting the audit right (Have you ever watched Republicans on C-SPAN ask bankers any questions? They might as well be blowing kisses at them).  

Audit the Fed? I hope so ... but don't hold your breath on it.

- Mark 

COMING SOON ... JESUS LOVES GREED, SMITES THE POOR



*********************


- Mark 

AMERICANS BACK OBAMA'S PLAN TO TAX THE RICH

According to a new AP-Gfk poll 68 percent of Americans believe the wealthy pay too little in federal taxes. With America's wealthiest 1% accumulating the vast majority of the economic gains made over the past 40 years, the AP-Gfk poll makes it clear most Americans "support President Obama's proposal to raise investment taxes" on those making the most money in America.

In effect, Americans are saying: After more than $4 trillion in bailouts - which were orchestrated by the federal government after the Wall Street induced market collapse of 2008 - it's time for America's wealthiest class to quit basking in their state supported riches.

 

For my money, I would add that the poll is telling us Americans intuitively understand that those who benefited most from the 2008 market bailout need to stop pretending they actually earned their taxpayer-backed bailout profits and bonuses.

Specifically, 56 percent of Americans agree with President Obama's proposal to increase the capital gains tax on households making more than $500,000 per year, with only 16 percent opposed. In simple terms, the AP-Gfk poll says Americas wealthiest class needs to start pitching in so we can rebuild the nation-state.

You can read poll questions and results here.

- Mark 

Tuesday, February 24, 2015

FOUR BIG LIES ABOUT JOBS & WAGES ... ROBERT REICH


Once again, Robert Reich nails it ...

* * * * * * * * * * * * * * * * * 

Don’t believe the propaganda put out by big corporations, Wall Street, and the rich about jobs and wages – especially the following four big lies. 
1. The rich and big corporations create jobs. Wrong. The middle class and the poor create jobs when they have enough money to buy. Their purchases get businesses to expand and hire.
2. The rich and big corporations need lower taxes in order to create jobs. Baloney. We tried trickle-down economics under Reagan and George W. and nothing trickled down. Why? See #1 above.
 3. Raising the minimum wage to $15 will cause massive job losses. Rubbish. It will put more money into the pockets of low-wage workers, who will spend it – and thereby create more jobs. See #1 above.
 4. Trade deals like the proposed Trans Pacific Partnership create jobs and raise wages. Wrong. They boost profits but put downward pressure on wages. See NAFTA.
Spread the truth.

* * * * * * * * * * * * * * * * * 

- Mark

EXPECTED LIFETIME EARNINGS, BY MAJOR



According to research from the Hamilton Project, if you graduate from high school or secure a GED, and do nothing else to increased your education or skill levels, you will probably earn around $600,000 through your lifetime. If you finish college in ANY degree, chances are that you will earn about double that amount, or $1.2 million over your lifetime.

Below is a chart that shows how much you can expect to earn over your lifetime if you graduate from college, by major.

- Mark 

Monday, February 23, 2015

NORMAN ROCKWELL'S AMERICA ...YEAH, IT' INCLUDES PEOPLE LIKE BARACK OBAMA


- Mark

IT'S OFFICIAL . . . 2014 WAGE GROWTH IN U.S. STALLED

It's official now. A study from the Economic Policy Institute found we had yet another year of poor wage growth in 2014. Wages essentially stalled or took a step backwards for the vast majority of Americans last year. In an interesting twist, because the biggest decline hit those with advanced degrees hardest - a 2.2 percent drop - falling wages can't simply be blamed on a lack of education or low skill levels.

In what might be considered some good news, workers in the bottom 40th percentile saw their wages increase by 0.3 percent. According to researchers who put the study together, much of this growth can be attributed to regions and states that increased their minimum wage.

Why is any of this important? Here's a meme that helps explain how low wages create a nation of working poor, which contributes to our national dependence on public assistance.


So, we need to ask ourselves, If the richest Americans have seen their share of the income pie grow why haven't ordinary Americans?

This is a fair question because beginning in the early 1980s we were told that reducing taxes on the richest Americans would lead to a booming economy that would make everyone better off.

In spite of a growing economy, this has not been the case ...


Think about the following.

According to David Cooper at the Economic Policy Institute, if minimum wage in America had been tied to an economic index after 1968 - rather than allowed to stagnate and wallow according to government policy and to the whims of the market - America's low wage earners would be far better off today.

Specifically, if we had indexed federal minimum wage in 1968 (then $1.15 / $1.60 an hour) to ...
* Inflation, minimum wage would be $9.25 today.
* Average hourly wages, minimum wage would be $10.59 today.
* Increases in productivity, minimum wage would be $20.16 today.
* Earnings of the top 1 percent, minimum wage would be $28.75 today.
Starting point of  minimum wage reflects purchasing power in 1968 (in 2012 dollars).
Actual minimum in 1968 wage was $1.15 / $1.60 an hour.

So, what's the answer? There are many suggestions, which include taking a look at our broader commercial and financial policies (which I discuss here and here). But there are also many naysayers, and economic illiterates weighing in on the discussion.

One of the challenges we have come from the intellectual midgets who use slippery slopes as their economic model. They like to argue that if we raise minimum wage to $15 an hour that we'll just end up at $25 or $35 per hour within  a week, at which point cute puppies die and economic Armageddon happens. What they ignore is what happened in America throughout the 1960s, and the economic realities of Seattle, San Francisco, and San Jose when they recently raised their minimum wage.

In my view, one thing is clear: More needs to be done to increase middle class wages in general.

How you do this is the tricky part. This is especially the case if minimum wage is going to become the middle class salary battleground. For example, should mom-and-pop stores and summer jobs for high school kids be excluded from minimum wage increases? Generally speaking, I think so.

Still, we need to acknowledge there will be little upward pressure on average wages if minimum wage is not increased. The last 40 years of trickle down economic policies make this clear.


Other issues those who oppose raising minimum wage need to consider include the declining amount of goods that can be bought with an hour of minimum wage work, rising tuition costs, purchasing power parity, the fact that so many minimum wage earners are heads of households, and the amount of public assistance that's required to help sustain someone working 40 hours a week, among other issues.

In the end, history tells us that the increasing wage and wealth gaps we are seeing in America today is not a sustainable path. Something needs to be done.


This is just not just me speaking. This the voice of every civilization through history.

- Mark

Saturday, February 21, 2015

GOP OBSTRUCTIONISM EXPLAINED IN ONE MINUTE


- Mark

ANNOY FOX NEWS FRIENDS WHO ARE OUTRAGED OVER YEMEN ... REMIND THEM HOW REAGAN CUT AND RUN


So, this Fox News piece is making the Facebook rounds among conservatives. In a few words, the "breaking news" segment has Megyn Kelly claiming to be astonished and troubled by the growing "outrage" over the United States withdrawal from Yemen this week. Apart from the hyped urgency, in the usual Fox hit piece style of journalism, the segment focuses on how the U.S. has "abandoned another embassy in the Arab world" - yet can't find the time to report on the departure of all other western nations.

The clip also says nothing about how leaving Yemen just might avert another Benghazi mess, a story Fox News hyped and distorted beyond reason.

In all cases, if one of your FB friends sends you the same Yemen focused Fox News hit piece (or anything similar) do what I did. Annoy them with some real simple facts, and a bit of history.

Specifically, you might want to remind everyone that responsible western media outlets are reporting on the departure of the west from Yemen, while discussing domestic challenges in the country. They're also reporting the development as part of a necessary and preemptive response to growing tension and threats of violence.

Then you can remind everyone of the time Ronald Reagan cut and ran from Lebanon in 1983.

Conservatives don't like to be reminded how President Reagan ordered U.S. military personnel out of Lebanon after 241 U.S. soldiers (mostly Marines) lost their lives in Beirut to a suicide bomber. The suicide bomber, who was driving a car laden with explosives, was able to get close to the U.S. occupied barracks because sentries were ordered not to have ammo in their rifles.


Here's what I wrote on the original FB post ...
You guys need to change the channel. Seriously, what's being portrayed on Fox is not reality ... but while we're at it, let's remind ourselves of what happened. You remember, when sentries with no ammo in their rifles had to watch as an explosive laden vehicle blew up a Marine barrack, which was followed by Reagan cutting and running from Lebanon ...
To make my point I posted this article - "When Reagan Cut and Run: The forgotten history of when America boldly abandoned ship in the Middle East" - from Foreign Policy, one of the more respected journals in the foreign policy field.


To be sure, there were a series of attacks in Lebanon that led to more than 300 U.S. deaths in 1983. But the barracks attack is the one that stands out.

In the FYI category, after I posted this information the original poster deleted the Fox News piece.

- Mark

DOLLAR HEGEMONY ... PAST AND PRESENT

On one level, this isn't far from the truth ...


- Mark

Friday, February 20, 2015

THE BILL O'REILLY DOUBLE STANDARD

Whatever you think of NBC's Brian Williams, most of you who have read Bill O'Reilly's claims about his "wartime" reporting will agree that O'Reilly probably needs to rethink his criticism of Williams, and should reword his self-proclaimed wartime reporting experiences, as Mother Jones has suggested.

After reviewing his wartime assertions, Bill O'Reilly criticizing Brian Williams kind of reminds me of this ...
___________________________________________
Brian Williams                                    Bill O'Reilly
___________________________________________

So, does Bill O'Reilly have a Brian Williams problem? You be the judge. Here's what Mother Jones has pieced together on O'Reilly.


- Mark

READING FOR THE WEEKEND (2-20-15)


Beekeepers and Honeybees failing due to GMO crops (Inquisitr).

Minnesota man in jail for possession since November freed when 'drugs' turn out to be vitamins (Raw Story).

Sad Highlands Park Starbucks called the 'most depressing Starbucks in America' (LAist).

Retreads ... Jeb Bush hires same foreign policy team that lied us into war (Crooks and Liars).


GUNS IN AMERICA
Even Texas cops think Open Carry is a stupid idea, dismiss "Good guy with a gun" claims (Addicting Info)

Darwin Awards Candidate: Michigan Republican official fatally shoots herself in eye while adjusting gun in bra holster (Raw Story).

Cop slaps legal gun owner, gets dose of swift justice (Mr. Conservative).

Toddlers killed more Americans than terrorists did this year (Opposing Views).


SIGH ...
Americans were asked a simple science question, their answer will make you laugh ... or cry (Addicting Info).

Congressman says we don't need education funding because 'Socrates trained Plato on a rock' (Think Progress).

Oklahoma, ranked 48th in education, votes to ban AP history classes (Blue Nation Review).

Mississippi lawmaker says calling blacks violent and lazy isn't racist, it's 'just a way of talking' (Raw Story).

Fox News' Ralph Peters: Under Obama U.S. has 'Islamophilia Problem' (News Max).

Southern secessionist group forming paramilitary unit called the "Indomitables" (Salon).


SOME GOD TALK
God is on the Ropes: The brilliant new science that has creationists and the Christian right terrified (Salon).

Science increasingly makes the case for God (Wall Street Journal).


THIS IS SERIOUSLY MESSED UP ... USS REAGAN
Documents say Navy knew Fukushima dangerously contaminated the USS Reagan (EcoWatch).

Doctor "removed 6 thyroids in recent months" from USS Reagan crew exposed to Fukushima fallout - "Over 500 sailors ill after mission in Japan" (Energy News).

USS Reagan - Fukushima Radiation - News (George Air Force Base).


RANDOM DYSFUNCTIONAL MARKET STUFF
How sleazy restaurants are stealing your tip money (If You Only News).

Greece's request for loan extension (on 240/$273 billion loan) is rejected by Germany (NY Times).

Robert Reich: This very bad deal will make Wall Street richer and bust the rest of America (Alternet).

Citigroup: Corporate "Rap Sheet" (Bank Action Network).


ON THE POSITIVE SIDE OF LIFE (sort of)
NC Senator Jeff Jackson's tweets go viral as he becomes a one-man legislating legend (Inquisitr).

This guy deserves a medal: The artist who took a DIY approach to a confusing 110 freeway sign (LAist).

Obama wins as Republicans refuse to shut down Homeland Security over Executive Orders (Politics USA).


MISCELLANEOUS
The worst Heisman Trophy winners to ever play in the NFL (Worthly).

Haunting portraits of abandoned places (T Magazine).

Top 10 reasons to vote Republican (Daily Kos).

Ginsburg: This 'Congress is not equipped really to do anything' (TPM).

30 arrested for food stamp fraud in New York ... not one person is black (Daily Kos).

- Mark

Thursday, February 19, 2015

READ CHAPTERS OF MY BOOK ONLINE

You won't get them all, but you can read several chapters from my book ...


Click here for the Google site that has selected chapters of my book.

Click here for an interview I did on C-SPAN, where I discuss several stories in my book, and how markets work in the real world.

- Mark

MY GOD, AMERICA'S BECOMING A LAND OF IDIOTS

I would normally put this in my regular "Weekend Reading" post, but this stuff really needs its own space ...


Republican State Senator wants Tennessee Constitution to say that 'our liberties' come from God (TPM). 
Mississippi House passes 'Jesus Take the Wheel Act' (Daily Kos). 
Reagan speeches and Bible study? Oklahoma lawmakers are killing AP history - and replacing it with this (Raw Story).
Religious broadcaster says Scott Walker was right: 'Real experts' have 'disproven' evolution (Raw Story).

- Mark

ONE MORE TIME ... THE DEBT MESS IS ON BUSH


For those who need it in graph form ...



At the end of the day, if you don't find a way to pay for stuff when you spend you have to borrow money.

And, no, cutting taxes is not a revenue generator. It never has been.

It really is that simple.

- Mark

A GOOD READ ... AMERICA'S CONSERVATIVE ROAD TO DESTRUCTION



For those of you interested in the slow decline of American democracy, and the rise of our ignorati, click here. The article pieces a lot of things together that I'm sure many of you have already read or thought about at one time or another.

- Mark 

Tuesday, February 17, 2015

GETTING AHEAD OF THE NEXT MARKET COLLAPSE ... WE NEED TO EMBRACE THE ICELAND MODEL


This is actually a blueprint on how to handle the next market collapse.

And, yes, another economic meltdown is around the corner.

How do I know? Because, as the president of the Federal Reserve's Richmond branch has pointed out, our nation's financial institutions already have the next multi-trillion dollar bailout written into the system.

The problem is that the cooked in bailout isn't an insurance policy; it's a marker in the worst tradition of Las Vegas. It's one of the many (many, many, manymany) reasons I can say there's another market collapse around the corner.

So, yeah, we need to embrace the Iceland Blueprint as our model in the future.

- Mark

Monday, February 16, 2015

DEMOCRACY IN AMERICA ... THEN AND NOW


- Mark 

THE MESS IN GREECE EXPLAINED IN REAL SIMPLE TERMS


The following post is ripped from the headlines of Zero Hedge, but is the work of Charles Hugh-Smith. This is probably the best and easiest to understand presentation of what's going on in Greece I have seen. Seriously, this is good. Enjoy.

*********************

All the gimmicks lenders press on borrowers to maintain the artifice that the loan is being serviced are financial frauds.
Sometimes the best way to summarize a complex situation is with an analogy. The Greek debt crisis, for example, is very much like the subprime mortgage crisis of 2007-08.

As you might recall, service workers earning $25,000 annually got $500,000 mortgages to buy McMansions in subprime's go-go days. The applicant fudged a bit here and there on income and creditworthiness, and lenders reaping huge profits from originating and selling mortgages were delighted to ignore prudent underwriting standards and stamp "low-risk" on the mortgage because it was quickly sold to credulous investors.

The bank made its money in transaction and origination fees, and passed the risk of default on to investors who accepted the fraud that the loan was low-risk.

The loan was fundamentally imprudent and risky because the borrower was not qualified for a loan of such magnitude. But since the risk was distributed to others, the banks ignored the 100% probability of eventual default and skimmed the profits upfront.

Greece was the subprime borrower, and its membership in the euro gave the banks permission to enter the credit rating of Germany on Greece's loan application. Though anyone with the slightest knowledge of Greece's economy knew it did not qualify for loans of such magnitude, lenders were happy to offer the loans at interest rates close to those of Greece's northern neighbors, and then sell them as low-risk sovereign debt investments.

In effect, the banks were free-riding the magical-thinking belief that membership in the euro transformed risky borrowers into creditworthy borrowers.


It's as if the $25,000/year worker wrote in a rich cousin's sterling credit score on his mortgage application. The lender and applicant conspired to fudge the numbers to lower the apparent risk of the loan. In the case of Greece, Greece and the lenders each fudged the numbers; there was no real penalty for doing so, and the rewards for doing so were substantial.

Marginal borrowers eventually default, and sure enough, both the subprime borrower and Greece soon defaulted. Life isn't perfect; people lose their jobs, get divorced, have medical emergencies, etc., and recessions lower GDP and national income.
Prudent lenders make allowances for these risks. But lenders who make big money originating loans and offloading them to others have no incentive to be prudent; rather, they have every incentive to make as many loans as they can, as quickly as they can, to maximize their profits.

Faced with massive writedowns, the lender has two choices: it can loan the defaulting borrower more money, with the explicit guarantee that the borrower will use the money to pay interest on the original mortgage. The total loan amount goes up, but the loan stays on the books at full value.

Or the lender can roll the mortgage into a lower-interest loan, effectively entering partial forbearance: the promised return on the mortgage plummets, but as long as the borrower makes small monthly payments, the loan stays on the books at full value.

Both of these strategies have been deployed in Japan for decades to keep impaired debts on the books at full value.

The last choice is to turn the mortgage into a zombie loan: the loan is neither written off nor listed as being in default: it enters a zombie state, not in good standing but not in default, either. The mortgage can stay in this netherworld for years, as the lender waits for the market to rise enough that the house can be sold without the lender absorbing a huge loss on the mortgage.

Unfortunately for buyers of sovereign debt, there is no house that can be sold to pay down the debt. Lenders can demand the debtor-nation sell off its assets to make good on the loans, but there is little recourse should the debtor-nation refuse.

When the borrower can barely make the monthly payment, he becomes a zombie. The loan principal barely budges, and so the future is unending penury. The borrower can cut expenses--bike to work, only eat beans and rice, only buy thrift-store clothing, etc.,--but this austerity doesn't change anything: he still can't afford the loan.

This is why austerity is a fake solution: no matter what the guy earning $25,000 a year does, he will never be able to pay down the $500,000 mortgage.

Meanwhile, the poorly constructed McMansion is falling apart. The loan didn't boost the borrower's productivity, or create a new income stream; the borrowed money was squandered on something that did nothing for the borrower that something much, much cheaper could have done just as effectively.

What did Greece get for its $300+ billion in debt? Did it transform the lives of all citizens for the better, fix all its dysfunctional systems, and build an economy for the 21st century? No; the borrowed money simply masked the dysfunctional systems and allowed the Status Quo kleptocracy to reap fortunes.

Greece's lenders want to keep the imprudently issued loans on the books at full value.They followed the strategy of loaning Greece more money, but only to make the interest payments. Now there is fevered talk of some version of partial forbearance: rolling the debt into new loans, perhaps writing off a chunk of the debt, etc.

None of this changes the fundamental fact that Greece was unqualified to borrow that much money. No matter what the guy earning $25,000 a year does, he will never be able to service the $500,000 debt in a way that frees him from zombie servitude to the lender.

So the hapless subprime borrower with the crumbling McMansion and Greece both have the same choice: decades of zombie servitude to pay for the crumbling structure, or default and move on with their lives.

All the gimmicks lenders press on borrowers to maintain the artifice that the loan is being serviced are financial frauds. They are simply new frauds piled on the initial fraud of issuing a visibly imprudent loan. The borrower was not creditworthy and the lender should never have offered him loans of that magnitude and at that low interest rate.

The losses belong to the lenders, period.

*********************

- Mark

Sunday, February 15, 2015

THIS IS WHAT CLASS WARFARE LOOKS LIKE ...

Through the Federal Reserve we've handed out well over $4 trillion to our nation's biggest banks and to Wall Street's largest institutions since 2008. We did this because they screwed up the economy, and claimed that everyone would go down with them unless they got their way ...


Incredibly, $4.3 trillion wasn't enough. We've also made an additional $14 trillion available to the same financial institutions. You know, for the next time they screw things up.

So, how do America's biggest financial players want to pay you and me back for backstopping their reckless market bets? The Chief Executive Officers of America's largest financial institutions want to repay the American taxpayer by getting Congress to gut America's safety nets ...


In real simple terms, "I got mine, you're on your own" is the battle cry of America's largest financial institutions.

And, yeah, this is what class warfare looks like.


- Mark 

READING FOR THE WEEK (2-15-15)


The internet takes on ISIS with 'Bloopers Video' and relentless mockery (IJReview).

After billions of dollars in subsidies here's Verizon's broadband coverage; it's not impressive (Daily Kos).

New report examines lynchings and their legacy in the United States (NPR).


The food stamp capital of the United States is WHITE and REPUBLICAN (Political Blind Spot)


IRRATIONAL HYSTERIA OVER OBAMA'S 'CRUSADES' COMMENT

Obama, the National Prayer Breakfast and the tortured truth of Christian history (Truth Out).

Was Obama right about the Crusades and Islamic extremism (Washington Post)?


"The Crusades Were Great, Actually!" (The Daily Beast).



9/11 NOTES
"A complete lie. An absolute lie!": 9/11 terrorist points fingers at Saudis (Salon).

Exclusive: Deported Palestinian scholar Sami Al-Arian on his chilling post-9/11 prosecution (Democracy Now).



WAR & THE PRESS
The New York Times does what it's told: What the media's not telling you about our next likely foreign intervention (Salon).

Brian Williams perhaps 'misremembered' dangers of Katrina, hotel manager says (Washington Post).

Brian Williams suspended for false Iraq tale, but media's real scandal is the war lies spun daily (Truth Out).


THINGS THAT SHOULDN'T BE HAPPENING
Housing Lawsuit: M&T Bank discriminates against African-Americans, Asians, Latinos (Russian Times).

"Fascism is rising in America": The Koch brothers and democracy's dispiriting demise (Salon).


Home schooled and illiterate (Salon).


How bail punishes the poor for their poverty (Washington Post).

Measles outbreak hits Texas church that preached against vaccines (Huffington Post).



WHY THE RIGHT IS WRONG (STILL)

21 truths that prove Republicans have been wrong about everything (Jeff61 Hub Pages).

After Solyndra loss, U.S. Energy loan program turning a profit ... now has a loss rate of just 2.28 percent (NPR).


Obama v. Reagan: Fun Comparison I did to piss off Wingnuts on Reagan's B-day (Daily Kos).

It's time to face the truth that Republicans are traitors (Politics USA).


CONSERVATIVES GONE WILD

KKK supports Alabama Chief Justice Roy Moore's fight against marriage equality (Patheos).

West Virginia legislation would criminalize teaching social problems first (Common Dreams).


Virginia court official tells atheist couple they have no right to get married because they don't believe in God (Addicting Info).


Pat Robertson says non-religious children should be beaten until respect Christian beliefs (Addicting Info).


True stupidity: Rand Paul says ISIS is Hilary Clinton's fault (The Hill).


Another GOP fail: 0.2 percent of Tennessee welfare recipients found to use illegal drugs (Reverb Press).



POLICE STATE WITH IMPUNITY?
U.S. looks to detain more mother, child migrants, sometimes for months (Truth Out).

'Ferguson everywhere'" Hundreds protest cops killing Latino worker in Washington state (RT).

LAPD shoots 15-year-old in back for standing near friend holding a toy gun (Nation of Change).

"Carceral Conglomerate" makes millions from incarcerated, their friends and families (Truth Out).


MISCELLANEOUS
The best kept secret on Wall Street might be ... therapy (Ozy).


'Mostly Civilians': Probe into Gaza home strikes finds 60% of deaths are non-militants, mostly women, children, and elderly (RT).

Karl Rove, lost in a sea of 'make believe' (MSNBC).

Five reasons no Progressive should support Hillary Clinton (Truth Out).

- Mark