Saturday, January 5, 2019

NBC JOURNALIST WILLIAM ARKIN RESIGNS AFTER BLASTING MEDIA FOR BEING A 'DEFENDER OF WASHINGTON AND THE CORRUPT SYSTEM DESTROYING AMERICA"

NBC journalist resigns, blasting media as “defender of Washington and the system”

By Bill Van Auken 
5 January 2019
William Arkin, a veteran reporter and security consultant for NBC News, resigned last week with a scathing and lengthy email exposing the role of the network and the broader corporate media as a stenographer and apologist for Washington’s vast military and intelligence apparatus under conditions of endless war.
Describing himself as “completely out of sync with the network, being neither a day-to-day reporter nor interested in the Trump circus,” Akin said, “I also found myself the lone voice that was anti-nuclear and anti-military.”
He clarified that anti-military for him meant “opinionated but also highly knowledgeable, somewhat akin to a movie critic, loving my subject but also not shy about making judgements regarding the flops and the losers.”
Arkin recounts that he had “argued endlessly with MSNBC about all things national security for years.” He is a military veteran who served in US Army intelligence in the 1970s and went on to become a military consultant for both Greenpeace International and Human Rights Watch. He also worked as a lecturer at the School of Advanced Air and Space Studies for US Air Force officers and advised the Office of the Secretary of Defense, the CIA, the Defense Intelligence Agency and other military and intelligence agencies.
In the early 1980s he authored a book titled Nuclear Battlefields revealing the locations where US and Soviet missiles were deployed, leading the Reagan administration to seek its suppression on secrecy grounds.
In 2003, working for NBC and the Los Angeles Times, Arkin exposed the bigoted anti-Muslim remarks made by a top military intelligence commander, General William “Jerry” Boykin, who publicly cast the “war on terrorism” as a religious war between Christianity and a “Satanic” Islam.
In 2012, he co-authored with Dana Priest of the Washington Post a series titled “Top Secret America,” an investigative report into the massive growth of a police-state domestic intelligence apparatus in the wake of the 9/11 attacks.
In his resignation letter, Arkin says that at NBC he found himself in the “peculiar position of being a mere civilian among THE GENERALS,” the ex-military commanders that it and all of the broadcast and cable networks hired as their talking heads to spout out the official position on multiple US wars. He may well have added that the other prominent “civilian” employed as an expert commentator by NBC was the former director of the CIA, John Brennan.
Expressing barely concealed contempt for the military command and the generals venerated as indisputable experts and heroes on national television, he wrote:
“Despite being at ‘war,’ no great wartime leaders or visionaries are emerging. There is not a soul in Washington who can say that they have won or stopped any conflict. And though there might be the beloved perfumed princes in the form of the Petraeus’ and Wes Clarks’, or the so-called warrior monks like Mattis and McMaster, we’ve had more than a generation of national security leaders who sadly and fraudulently [have] done little of consequence. And yet we (and others) embrace them, even the highly partisan formers who masquerade as ‘analysts.’ We do so ignoring the empirical truth of what they have wrought: There is not one country in the Middle East that is safer today than it was 18 years ago. Indeed the world becomes ever more polarized and dangerous.”
He continued: “I find it disheartening that we do not report the failures of the generals and national security leaders. I find it shocking that we essentially condone continued American bumbling in the Middle East and now Africa through our ho-hum reporting.”
Reflecting on his years at NBC, “poking at the conventional wisdom,” Arkin acknowledged, “I feel like I’ve failed to convey this larger truth about the hopelessness of our way of doing things, especially disheartened to watch NBC and much of the rest of the news media somehow become a defender of Washington and the system.”
Particularly incisive in the email is Arkin’s critique of the role played by NBC and the rest of the corporate media after the election of Donald Trump: expressing outrage at the semi-criminal real estate speculator turned president’s outrageous tweets, while either ignoring or justifying the real crimes of American imperialism.
Instead of conducting independent reporting and investigations, he writes, it “got sucked into the tweeting vortex, increasingly lost in a directionless adrenaline rush, the national security and political version of leading the broadcast with every snow storm. And I would assert that in many ways NBC just began emulating the national security state itself—busy and profitable. No wars won but the ball is kept in play.”
While no admirer of Trump, whom he describes as “an ignorant and incompetent imposter,” Arkin makes the case that the criticism of the president—like the supposed opposition of the Democratic Party—has been that of a “defender of the government against Trump.” As a result, he argues, “the national security establishment not only hasn’t missed a beat but indeed has gained dangerous strength. Now it is ever more autonomous and practically impervious to criticism.”
Arkin pointed to the media’s denunciations of “Trump’s various bumbling intuitions: his desire to improve relations with Russia, to denuclearize North Korea, to get out of the Middle East, to question why we are fighting in Africa, even in his attacks on the intelligence community and the FBI.”
The reaction of NBC, he charged, was to “mechanically argue the contrary, to be in favor of policies that just spell more conflict and more war.”
“Really?” he continued. “We shouldn’t get out of Syria? We shouldn’t go for the bold move of denuclearizing the Korean peninsula? Even on Russia, though we should be concerned about the brittleness of our democracy that it is so vulnerable to manipulation, do we really [y]earn for the Cold War? And don’t even get me started with the FBI: What? We now lionize this historically destructive institution?”
Arkin’s resignation is one more milestone in the transformation of the media into a more-or-less open propaganda arm of the US military and intelligence complex. This is a process that has been accelerating over the past quarter century of uninterrupted US wars of aggression, which has seen corporate media’s driving out of journalists whose reporting has cut across the interests of the military and intelligence establishment.
These have included Peter Arnett, fired for a 1998 report exposing the US use of nerve gas during the Vietnam War; Dan Rather, driven off the air after 44 years at CBS for a report exposing George W. Bush’s privileged treatment by the Texas Air National Guard assuring his evasion of combat in Vietnam; and Phil Donohue, who was fired by MSNBC for opposing the invasion of Iraq. The “embedding” of journalists with the US military in the US war against Iraq set the standard for subsequent reporting, in which the corporate media is relied upon to function as an arm of the Pentagon and the CIA.

Arkin’s email provides a damning indictment of the present state of the US media, straight from the “horse’s mouth.” His anger and disgust over the practices of his employers no doubt express the sentiments of wider layers of journalists, artists and intellectuals, alienated by the lies and criminality that pervade American capitalist society.

"The Federal Reserve is a key mechanism for perpetuating this whole filthy system, in which "Wall Street rules."


WHO CAUSED THE GREAT RECESSION OF 2008?

"It was caused by reckless lending practices, Wall Street greed, outright fraud, lax government oversight in the George W. Bush years, and deregulation of the financial sector in the Bill Clinton years. The deepest source, going back decades, was rising inequality. In good times and bad, no matter which party held power, the squeezed middle class sank ever further into debt...


Banks don’t control interest rates today as they did in the past. That’s the Federal Reserve’s job. The Fed generally reduces interest rates or expands the money supply through “quantitative easing,” or buying bonds from banks, in order to force an economy in the ditch to climb out. The recovery from the Great Recession remained on its feet for so long because the Fed’s policy of paying interest on reserves at banks soaked up much of the new money it created out of thin air. Also, much of the money went overseas to buy imports or as investments. 

Wall Street rules... but then you knew this!


5 January 2019
The Federal Reserve sent a clear message to Wall Street on Friday: It will not allow the longest bull market in American history to end. The message was received loud and clear, and the Dow rose by more than 700 points.
Hundreds of thousands of federal workers remain furloughed or forced to work without pay as the partial government shutdown enters its third week, but the US central bank is making clear that all of the resources of the state are at the disposal of the financial oligarchy.
Responding to Thursday’s market selloff following a dismal report from Apple and signs of a manufacturing slowdown in both China and the US, the Fed declared it was “listening” to the markets and would scrap its plans to raise interest rates.
Speaking at a conference in Atlanta, where he was flanked by his predecessors Ben Bernanke and Janet Yellen, both of whom had worked to reflate the stock market bubble after the 2008 financial crash, Chairman Jerome Powell signaled that the Fed would back off from its two projected rate increases for 2019.
“We’re listening sensitively to the messages markets are sending,” he said, adding that the central bank would be “patient” in imposing further rate increases. To underline the point, he declared, “If we ever came to the conclusion that any aspect of our plans” was causing a problem, “we wouldn’t hesitate to change it.”
This extraordinary pledge to Wall Street followed the 660 point plunge in the Dow Jones Industrial Average on Thursday, capping off the worst two-day start for a new trading year since the collapse of the dot.com bubble.
William McChesney Martin, the Fed chairman from 1951 to 1970, famously said that his job was “to take away the punch bowl just as the party gets going.” Now the task of the Fed chairman is to ply the wealthy revelers with tequila shots as soon as they start to sober up.
Powell’s remarks were particularly striking given that they followed the release Friday of the most upbeat jobs report in over a year, with figures, including the highest year-on-year wage growth since the 2008 crisis, universally lauded as “stellar.”
While US financial markets have endured the 
worst December since the Great Depression, 
amid mounting fears of a looming recession 
and a new financial crisis, analysts have been
quick to point out that there are no “hard” 
signs of a recession in the United States.
Both the Dow and the S&P 500 indexes have fallen more than 15 percent from their recent highs, while the tech-heavy NASDAQ has entered bear market territory, usually defined as a drop of 20 percent from recent highs.
The markets, Powell admitted, are “well ahead of the data.” But it is the markets, not the “data,” that Powell is listening to.
Since World War II, bear markets have occurred, on average, every five-and-a-half years. But if the present trend continues, the Dow will reach 10 years without a bear market in March, despite the recent losses.
Now the Fed has stepped in effectively to pledge that it will 
allocate whatever resources are needed to ensure that no 
substantial market correction takes place. But this means 
only that when the correction does come, as it inevitably 
must, it will be all the more severe and the Fed will have 
all the less power to stop it.
From the standpoint of the history of the institution, the Fed’s current more or less explicit role as backstop for the stock market is a relatively new development. Founded in 1913, the Federal Reserve legally has had the “dual mandate” of ensuring both maximum employment and price stability since the late 1970s. Fed officials have traditionally denied being influenced in policy decisions by a desire to drive up the stock market.
Federal Reserve Chairman Paul Volcker, appointed by Democratic President Jimmy Carter in 1979, deliberately engineered an economic recession by driving the benchmark federal funds interest rate above 20 percent. His highly conscious aim, in the name of combating inflation, was to quash a wages movement of US workers by triggering plant closures and driving up unemployment.
The actions of the Fed under Volcker set the stage for a vast upward redistribution of wealth, facilitated on one hand by the trade unions’ suppression of the class struggle and on the other by a relentless and dizzying rise on the stock market.
Volcker’s recession, together with the Reagan administration’s crushing of the 1981 PATCO air traffic controllers’ strike, ushered in decades of mass layoffs, deindustrialization and wage and benefit concessions, leading labor’s share of total national income to fall year after year.
These were also decades of financial deregulation, leading to the savings and loan crisis of the late 1980s, the dot.com bubble of 1999-2000, and, worst of all, the 2008 financial crisis.
In each of these crises, the Federal Reserve carried out what became known as the “Greenspan put,” (later the “Bernanke put”)—an implicit guarantee to backstop the financial markets, prompting investors to take ever greater risks.
In 2008, this resulted in the most sweeping and systemic financial crisis since the Great Depression, prompting Fed Chairman Bernanke, New York Fed President Tim Geithner and Treasury Secretary Henry Paulson (the former CEO of Goldman Sachs) to orchestrate the largest bank bailout in human history.
Since that time, the Federal Reserve has carried out its most accommodative monetary policy ever, keeping interest rates at or near zero percent for six years. It supplemented this boondoggle for the financial elite with its multi-trillion-dollar “quantitative easing” money-printing program.
The effect can be seen in the ever more staggering wealth of the financial oligarchy, which has consistently enjoyed investment returns of between 10 and 20 percent every year since the financial crisis, even as the incomes of workers have stagnated or fallen.
American capitalist society is hooked on the toxic growth of social inequality created by the stock market bubble. This, in turn, fosters the political framework not just for the decadent lifestyles of the financial oligarchs, each of whom owns, on average, a half-dozen mansions around the world, a private jet and a super-yacht, but also for the broader periphery of the affluent upper-middle class, which provides the oligarchs with political legitimacy and support. These elite social layers determine American political life, from which the broad mass of working people is effectively excluded.
The Federal Reserve is a key mechanism for 
perpetuating this whole filthy system, in 
which “Wall Street rules.” But its services in behalf of 
the rich and the super-rich only compound the fundamental and 
insoluble contradictions of capitalism, plunging the system into 
ever deeper debt and ensuring that the next crisis will be that 
much more violent and explosive.
In this intensifying crisis, the working class must assert its independent interests with the same determination and ruthlessness as evinced by the ruling class. It must answer the bourgeoisie’s social counterrevolution with the program of socialist revolution.


the depression is already here for most of us below the super-rich!


Trump and the GOP created a fake economic boom on our collective credit card: The equivalent of maxing out your credit cards and saying look how good I'm doing right now.

Trump criticized Dimon in 2013 for supposedly contributing to the country’s economic downturn. “I’m not Jamie Dimon, who pays $13 billion to settle a case and then pays $11 billion to settle a case and who I think is the worst banker in the United States,” he told reporters.

"One of the premier institutions of big business, JP Morgan Chase, issued an internal report on the eve of the 10th anniversary of the 2008 crash, which warned that another “great liquidity crisis” was possible, and that a government bailout on the scale of that effected by Bush and Obama will produce social unrest, “in light of the potential impact of central bank actions in driving inequality between asset owners and labor."  

"Overall, the reaction to the decision points to the underlying fragility of financial markets, which have become a house of cards as a result of the massive inflows of money from the Fed and other central banks, and are now extremely susceptible to even a small tightening in financial conditions."


"It is significant that what the Financial Times described as a “tsunami of money”—estimated to reach $1 trillion for the year—has failed to prevent what could be the worst year for stock markets since the global financial crisis."

"A decade ago, as the financial crisis raged, America’s banks were in ruins. Lehman Brothers, the storied 158-year-old investment house, collapsed into bankruptcy in mid-September 2008. Six months earlier, Bear Stearns, its competitor, had required a government-engineered rescue to avert the same outcome. By October, two of the nation’s largest commercial banks, Citigroup and Bank of America, needed their own government-tailored bailouts to escape failure. Smaller but still-sizable banks, such as Washington Mutual and IndyMac, died."

The GOP said the "Tax Cuts and Jobs Act"

would reduce deficits and supercharge the

economy (and stocks and wages). The 

White House says things are working as 

planned, but one year on--the numbers 

mostly suggest otherwise. 


Economy, finance, and budgets

CITY JOURNAL
A decade ago, as the financial crisis raged, America’s banks were in ruins. Lehman Brothers, the storied 158-year-old investment house, collapsed into bankruptcy in mid-September 2008. Six months earlier, Bear Stearns, its competitor, had required a government-engineered rescue to avert the same outcome. By October, two of the nation’s largest commercial banks, Citigroup and Bank of America, needed their own government-tailored bailouts to escape failure. Smaller but still-sizable banks, such as Washington Mutual and IndyMac, died.
After the crisis, the goal was to make banks safer. The 2010 Dodd-Frank law, coupled with independent regulatory initiatives led by the Federal Reserve and other bank overseers, severely tightened banks’ ability to engage in speculative ventures, such as investing directly in hedge funds or buying and selling securities for short-term gain. The new regime made them hold more reserves, too, to backstop lending.
Yet the financial system isn’t just banks. Over the last ten years, a plethora of “nonbank” lenders, or “shadow banks”—ranging from publicly traded investment funds that purchase debt to private-equity firms loaning to companies for mergers or expansions—have expanded their presence in the financial system, and thus in the U.S. and global economies. Banks may have tighter lending standards today, but many of these other entities loosened them up. One consequence: despite a supposed crackdown on risky finance, American and global debt has climbed to an all-time high.
Banks remain hugely important, of course, but the potential for a sudden, 2008-like seizure in global credit markets increasingly lies beyond traditional banking. In 2008, government officials at least knew which institutions to rescue to avoid global economic paralysis. Next time, they may be chasing shadows.
The 2008 financial crisis vaporized 8.8 million American jobs, triggered 8 million house foreclosures, and still roils global politics. Many commentators blamed a proliferation of complex financial instruments as the primary reason for the meltdown. Notoriously, financiers had taken subprime “teaser”-rate mortgages and other low-quality loans and bundled them into opaque financial securities, such as “collateralized debt obligations,” which proved exceedingly hard for even sophisticated investors, such as the overseas banks that purchased many of them, to understand. When it turned out that some of the securities contained lots of defaulting loans—as Americans who never were financially secure enough to purchase homes struggled to pay housing debt—no one could figure out where, exactly, the bad debt was buried (many places, it turned out). Global panic ensued.

The “shadow-financing” industry played a role in the crisis, too. Many nonbank mortgage lenders had sold these bundled loans to banks, so as to make yet more bundled loans. But the locus of the 2008 crisis was traditional banks. Firms such as Citibank and Lehman had kept tens of billions of dollars of such debt and related derivative instruments on their books, and investors feared (correctly, in Lehman’s case) that future losses from these soured loans would force the institutions themselves into default, wiping out shareholders and costing bondholders money.

The ultimate cause of the crisis, however, wasn’t complex at all: a massive increase in debt, with too little capital behind it. Recall how a bank works. Like people, banks have assets and liabilities. For a person, a house or retirement account is an asset and the money he owes is a liability. A bank’s assets include the loans that it has made to customers—whether directly, in a mortgage, or indirectly, in purchasing a mortgage-backed bond. Loans and bonds are bank assets because, when all goes well, the bank collects money from them: the interest and principal that borrowers pay monthly on their mortgage, for example. A bank’s liabilities, by contrast, include the money it has borrowed from outside investors and depositors. When a customer keeps his money in the bank for safekeeping, he effectively lends it money; global investors who purchase a bank’s bonds are also lending to it. The goal, for firms as well as people, is for the worth of assets to exceed liabilities. A bank charges higher interest rates on the loans that it makes than the rates it pays to depositors and investors, so that it can turn a profit—again, when all goes well.

When the economy tanks, this system runs into two problems. First, a bank’s asset values start to fall as more people find themselves unable to pay off their mortgage or credit-card debt. Yet the bank still must repay its own debt. If the value of a bank’s assets sinks below its liabilities, the bank is effectively insolvent. To lessen this risk, regulators demand that banks hold some money in reserve: capital. Theoretically, a bank with capital equal to 10 percent of its assets could watch those assets decline in value by 10 percent without insolvency looming.
Yet investors would frown on such a thin margin, and that highlights the second problem: illiquidity. A bank might have sufficient capital to cover its losses, but if depositors and other lenders don’t agree, they may rush to take their money out—money that the bank can’t immediately provide because it has locked up the funds in long-term loans, including mortgages. During a liquidity “run,” solvent banks can turn to the Federal Reserve for emergency funding.

By 2008, bank capital levels had sunk to an all-time low; bank managers and their regulators, believing that risk could be perfectly monitored and controlled, were comfortable with the trend. By 2007, banks’ “leverage ratio”—the percentage of quality capital relative to their assets—was just 6 percent, well below the nearly 8 percent of a decade earlier. Since then, thanks to tougher rules, the leverage ratio has risen above 9 percent. Global capital ratios have risen, as well. Many analysts believe that capital requirements should be higher still, but the shift has made banks somewhat safer.

The government doesn’t mandate capital levels with the goal of keeping any particular bank safe. After all, private companies go out of business all the time, and investors in any private venture should be prepared to take that risk. The capital requirements are about keeping the economy safe. Banks tend to hold similar assets—various types of loans to people, businesses, or government. So when one bank gets into trouble, chances are that many others are suffering as well. A higher capital reserve lessens the chance of several banks veering toward insolvency simultaneously, which would drain the economy of credit. It was that threat—an abrupt shutdown of markets for all lending, to good borrowers and bad—that led Washington to bail out the financial industry (mostly the banks) in 2008.
But what if the financial industry, in creating credit, bypasses the banks? According to the global central banks and regulators who make up the international Financial Stability Board, this type of lending constitutes “shadow banking.” That’s an imprecise, overly ominous term, evoking Mafia dons writing loans to gamblers on betting slips and then kneecapping debtors who don’t pay the money back on time, but the practice is nothing so Tony Soprano-ish. The accountancy and consultancy firm Deloitte defines shadow banking, wonkily, as “a market-funded credit intermediation system involving maturity and/or liquidity transformation through securitization and secured-funding mechanisms. It exists at least partly outside of the traditional banking system and does not have government guarantees in the form of insurance or access to the central bank.”
“Shadow banking is nothing new, encompassing everything from corporate bond markets to payday lending.”
In plain English, “maturity and/or liquidity transformation” is exactly what a bank does: making a long-term loan, such as a mortgage, but funding it with short-term deposits or short-term bonds. Outside of a bank, the activity involves taking a mortgage or other kind of longer-term loan, bundling it with other loans, and selling it to investors—including pension funds, insurers, or corporations with large amounts of idle cash, like Apple—as securities that mature far more quickly than the loans they contain. The risks here are the same as at the banks, but with a twist: if people and companies can’t pay off the loans on the schedule that the lenders anticipated, all the investors risk losing money. Unlike small depositors at banks, shadow banks don’t have recourse to government deposit insurance. Nor can shadow-financing participants go to the Federal Reserve for emergency funding during a crisis—though, in many cases, they wouldn’t have to: pensioners and insurance policyholders generally don’t have the right to remove their money from pension funds and insurers overnight, as many bank investors do.

Understood broadly, shadow banking is nothing new, encompassing everything from corporate bond markets to payday lending. And much of it isn’t very shadowy; as a recent U.S. Treasury report noted, the government “prefers to transition to a different term, ‘market-based finance,’ ” because applying the term “shadow banking” to entities like insurance companies could “imply insufficient regulatory oversight,” when some such sectors (though not all) are highly regulated. It isn’t always easy to separate real banks from shadow banks, moreover. 
Just as before the financial crisis, banks continue to offer shadow investments, such as mortgage-backed securities or bundled corporate loans, and, conversely, banks also lend money to private-equity funds and other shadow lenders, so that they, in turn, can lend to companies.
Such market-based finance has its merits; sound reasons exist for why a pension-fund administrator doesn’t just deposit tens of billions of dollars at the bank, withdrawing the money over time to meet retirees’ needs. For people and institutions willing, and able, to take on more risk, market-based finance can offer higher interest rates—an especially important consideration when the government keeps official interest rates close to zero, as it did from 2008 to 2016. Shadow finance also offers competition for companies, people, and governments unable to borrow from banks cheaply, or whose needs—say, a multi-hundred-billion-dollar bond to buy another company—would be beyond the prudent coverage capacity of a single bank or even a group of banks.

Theoretically, bond markets and other market-based finance instruments make the financial system safer by diversifying risk. A bank holding a large concentration of loans to one company faces a major default risk. Dispersing that risk to dozens or hundreds of buyers in the global marketplace means—again, in theory—that in a default, lots of people and institutions will suffer a little pain, rather than one bank suffering a lot of pain.
But too much of a good thing is sometimes not so good, and, in this case, the extension of shadow banking threatens to reintroduce the risks that innovation was supposed to reduce. Recent growth in shadow banking isn’t serving to disperse risk or to tailor innovative products to meet borrowers’ needs. Two less promising reasons explain its expansion. One is to enable borrowers and lenders to skirt the rules—capital cushions—that constrain lending at banks. The other—after a decade of record-low, near-zero interest rates as Federal Reserve policy—is to allow borrowers and lenders to find investments that pay higher returns.

The world of market-based finance has indeed grown. Between 2002 and 2007, the eve of the financial crisis, the world’s nonbank financial assets increased from $30 trillion to $60 trillion, or 124 percent of GDP. Now these assets, at $160 trillion, constitute 148 percent of GDP. Back then, such assets made up about a quarter of the world’s financial assets; today, they account for nearly half (48 percent), reports the Financial Stability Board (FSB).

Within this pool of nonbank assets, the FSB has devised a “narrower” measure of shadow banking that identifies the types of companies likely to pose the most systemic risk to the economy—those most susceptible, that is, to sudden, bank-like liquidity or solvency panics. The FSB believes that pension funds and insurance companies could largely withstand short-term market downturns, so it doesn’t include them in this riskier category. That leaves $45 trillion in narrow shadow institutions and investments, a full 72 percent of it held in instruments “with features that make them susceptible to runs.” That’s up from $28 trillion in 2010—or from 66 percent to 73 percent of GDP.

Of that $45 trillion market, the U.S. has the largest portion: $14 trillion. (Though, as the FSB explains, separation by jurisdiction may be misleading; Chinese investment vehicles, for example, have sold hundreds of billions of dollars in credit products to local investors to spend on property abroad, affecting Western asset prices.) Compared with this $14 trillion figure, American commercial banks’ assets are worth just shy of $17 trillion, up from about $12 trillion right before the financial crisis. Banks as well as nonbank lenders have grown, in other words, but the banks have done so under far stricter oversight.
An analysis of one particular area of shadow financing shows the potential for a new type of chaos. A decade ago, an “exchange-traded fund,” or ETF, was mostly a vehicle to help people and institutions invest in stocks. An investor wanting to invest in a stock portfolio but without enough resources to buy, say, 100 shares apiece in several different companies, could purchase shares in an ETF that made such investments. These stock-backed ETFs carried risk, of course: if the stock market went down, the value of the ETF tracking the stocks would go down, too. But an investor likely could sell the fund quickly; the ETF was liquid because the underlying stocks were liquid.
Over the past decade, though, a new creature has emerged: bond-based ETFs. A bond ETF works the same way as a stock ETF: an investor interested in purchasing debt securities but without the financial resources to buy individual bonds—usually requiring several thousand dollars of outlay at once—can purchase shares in a fund that invests in these bonds. Since 2005, bond ETFs have grown from negligible to a market just shy of $800 billion—nearly 10 percent of the value of the U.S. corporate bond market.

These bond ETFs are riskier, in at least one way, than stock ETFs. Some bond ETFs, of course, invest solely in high-quality federal, municipal, and corporate debt—bonds highly unlikely to default in droves. Default, though, isn’t the only risk: suddenly higher global interest rates could cause bond funds to lose value (as new bonds, with the higher interest rates, would be more attractive). And with the exception of federal-government debt, even the highest-quality bonds aren’t as liquid as stocks; they have maturities ranging anywhere from hours remaining to 100 years.

Investors in bond-based ETFs, then, face a much bigger “liquidity” and “maturity” mismatch risk. If the investors want to sell their ETF shares in a hurry, the fund managers might not be able to sell the underlying bonds quickly to repay them, particularly in a tense market. That’s especially true, since bond markets are even less liquid than they were pre–financial crisis. Because of new regulations on “market making,” banks will be highly unlikely to buy bonds in a declining market to make a buck later, after the panic subsides.
(ALBERTO MENA)
Alook at a related type of debt-based ETF raises even bigger mismatch concerns. “In 2017, investors poured $11.5 billion into U.S. mutual funds and exchange-traded funds that invest in high-yield bank loans,” notes Douglas J. Peebles, chief investment officer of fixed-income—bonds—at the AllianceBernstein investment outfit. A high-yield bank loan is one that carries particular risk, such as a loan to a company with a poor credit rating or to a company borrowing money to merge with another firm or to expand; the “yield” refers to the higher interest rate required to compensate for this risk. Rather than keep this loan on its books, the bank is selling it, in these cases, to the exchange-traded funds that are a rising component of shadow banking.
This new demand has induced lending that otherwise wouldn’t exist—in many cases, for good reason. “The quality of today’s bank loans has declined,” Peebles observes, because “strong demand has been promoting lax lending and sketchy supply. . . . Companies know that high demand means they can borrow at favorable rates.” Further, says Peebles, “first-time, lower-rated issuers”—companies without a good track record of repaying debt—are responsible for the recent boom in loan borrowers, from fewer than 300 institutions in 2007 to closer to 900 today. The number of bank-loan ETFs (and similar “open-ended” funds) expanded from just two in 1992 to 250 in June 2018.

Peebles worries as well about the extra risk that this financing mechanism poses to investors. “In the past, banks viewed the loans as investments that would stay on their balance sheets,” he explains, but now that banks sell them to ETFs, “most investors today own high-yield bank loans through mutual funds or ETFs, highly liquid instruments. . . . But the underlying bank loan market is less liquid than the high-yield bond market,” with trades “tak[ing] weeks to settle.” He warns: “When the tide turns, strategies like these are bound to run into trouble.”

The peril to the economy isn’t just that current investors could lose money in a crisis, though big drops in asset markets typically lead people to curtail consumer spending, deepening a recession. The bigger danger is a repeat of 2008: fear of losses on existing investments might lead shadow-market lenders to cut off credit to all potential new borrowers, even worthy ones. Banks, because they’re dependent on shadow banks to buy their loans, would be unlikely to fill the vacuum. “Although non-bank credit can act as a substitute for bank credit when banks curtail the extension of credit, non-bank and bank credit can also move in lockstep, potentially amplifying credit booms and busts,” says the FSB. The porous borders between the supposedly riskier parts of the nonbank financial markets—ETFs—and the less risky ones also could work against a fast recovery in a crisis. Thanks to recent regulatory changes, insurance companies, for example, are set to become big purchasers of bond ETF shares.

Worsening this hazard, just as with the collateralized debt securities of the financial meltdown, many bond-based ETFs contain similar securities. Such duplication could eradicate the diversification benefit that the economy supposedly gets from dispersing risk. Contagion would be accelerated by the fact that debt-based ETFs, like stock-based ETFs, must “price” themselves continuously during the day, according to perceived future losses; this, in effect, introduces the risk of stock-market-style volatility into long-term bond markets. (Bond-based mutual funds, of course, have existed for decades, but they did not trade like stocks and thus did not feature this particular risk.) Via the plunging price of collateralized debt obligations, we saw, in 2008, what happened to the availability of long-term credit when exposed to the pricing signals of an equity-style crash, but those collateralized debt obligations traded far less frequently than bond ETFs do today. Bond ETFs may be more efficient, yes, in reflecting any given day’s value; that supposed benefit could also allow a panic to spread more rapidly.
During the last global panic, the answer to getting credit flowing again—so that companies could perform critical tasks, such as meeting payrolls, before revenue from sales came in—was to provide extraordinary government support to the large banks. But even if one believes that such bailouts are a sensible approach to financial crises—a highly tenuous position—how would the government provide longer-term support to hundreds of individual funds, to ensure that the broader market keeps functioning for credit-card and longer-term corporate debt? This would greatly expand the government safety net over supposedly risk-embracing financial markets—by even more than it was expanded a decade ago.

“When both regular banks and shadow banks are tapped out, we may need shadow-shadow finance to take up the slack.”
Unwise lending also harms borrowers. Private-equity firms, too, are increasingly lending companies money, instead of just buying those firms outright, their older model. As the Financial Times recently reported, private-equity funds—or, more accurately, their related private-credit funds—have more than $150 billion in money available for investment. They make loans that banks won’t, or can’t, make, though this is leading banks to take greater risks to compete. “It’s been great for borrowers,” says Richard Farley, chair of law firm Kramer Levin’s leveraged-finance group, as “there are deals that would not be financed,” or would not be financed on such favorable terms.

Competition is usually healthy, and risky finance can spark innovation that otherwise wouldn’t have happened. But easy lending can also make economic cycles more violent. Even in boom years, excess debt can plunge firms that otherwise might muddle through a recession deep into crisis, or even cause them to fail, adding to layoffs and consumer-spending cutbacks. We can see this happening already, as the Financial Times reports, with bankrupt firms like Charming Charlie, an accessories store that expanded too fast; Six Month Smiles, an orthodontic concern; and Southern Technical Institute, a for-profit technical college.

The numbers are troubling. The expansion of shadow banking has unquestionably brought a pileup of debt. The Securities Industry and Financial Markets Association, a trade group, estimates that U.S. bond markets, overall, have swollen from $31 trillion to nearly $42 trillion since 2008. Federal government borrowing accounts for a lot of that, but not close to all of it. The corporate-bond market, for example, went from $5.5 trillion to $9.1 trillion over the same decade. Corporations, in other words, owe almost twice as much today in bond obligations as they did a decade ago. That’s sure to make it harder for some, at least, to recover from any future downturn.
There are policy approaches to resolving these debt issues. An unpopular idea would be to treat markets that act like banks, as banks—requiring ETFs, say, to hold the same capital cushions and adhere to the same prudence standards as banks. In the end, though, the bigger problem is cultural and political. What we’re seeing, more than a decade after the financial crisis, results from the government’s mixed signals about financial markets. On the one hand, the U.S. 

government, along with its global counterparts, realized in 2008 that debt had reached unsustainable levels; that’s partly why it sharply raised bank capital requirements. On the other hand, the government recognized that the economy is critically dependent on debt. Absent large increases in workers’ pay, consumer and corporate debt slowdowns would stall the economy’s until-recently modest growth. That’s why the U.S. and other Western governments have kept interest rates so low, for so long.

Thus, we find ourselves with safer banks but scarier shadows. Global debt levels are now $247 trillion, or 318 percent, of world GDP, according to the Institute of International Finance, up from $142 trillion owed in 2007, or 269 percent of GDP. When both regular banks and shadow banks are tapped out, we may have to invent shadow-shadow finance to take up the slack.

Nicole Gelinas is a City Journal contributing editor, a senior fellow at the Manhattan Institute, and the author of After the Fall: Saving Capitalism from Wall Street—and Washington.

 


BANKS ABOVE THE LAW

You should be able to file class-action suits against banks, watchdog group says

MAY 04, 2016 | 7:35 PM
  
Richard Cordray, director of the Consumer Financial Protection Bureau, testifies at a Senate hearing last month. Class-action bans deny “consumers the right to seek justice and relief for wrongdoing,” he says. (Alex Wong / Getty Images)
Contracts that prevent consumers from filing class-action lawsuits against banks could soon be illegal under new rules to be proposed Thursday by the Consumer Financial Protection Bureau.

The centerpiece of the proposal — more than a year in the making and fiercely opposed by the finance industry — would prevent banks, credit card companies and other financial-service firms from including class-action bans within contracts that consumers sign when they open accounts.

Those bans have become a common part of contract language that also requires consumers to go to private arbitration rather than to court to settle disputes with banks and other companies. The proposed rules could end up also discouraging banks from including those arbitration clauses in their contracts.

Although industry groups argue consumers are better served by arbitration than by class-action lawsuits that can pay individual account holders little, consumer advocates and consumer bureau Director Richard Cordray say class-action bans prevent consumers from keeping banks accountable.

"Signing up for a credit card or opening a bank account can often mean signing away your right to take the company to court if things go wrong," Cordray said in a statement, calling the practice a "contract gotcha that effectively denies groups of consumers the right to seek justice and relief for wrongdoing."

The rules, an initial draft of which were first disclosed in October, are being released before a public hearing in Albuquerque.

The bureau is asking for public comments on the rules, which could take effect in about a year, though banks and industry groups will probably try to block the rules in court.

The bureau's proposal would not specifically ban arbitration clauses, which have become common in consumer contracts. Rather, it would prevent those arbitration clauses from including language that bans consumers from joining class-action cases.

Such bans are common, and they've become more widely enforced after a 2011 Supreme Court ruling that said federal law requires state courts to honor bans, even if state laws prohibit them.

Arbitration clauses and related class-action bans have since become a hot topic among consumer advocates, who argue consumers are prevented from joining together to take on big companies in lawsuits that can result in millions of dollars in damages — payouts large enough to prompt changes in practices harmful to consumers.

For instance, a Santa Barbara attorney last year filed a class-action case against Wells Fargo on behalf of customers who say the bank created fake accounts in their names. But a federal judge ruled that arbitration clauses signed by customers prohibited the case from moving forward.

Alan Kaplinsky, a partner at the law firm Ballard Spahr who will testify at Thursday's hearing on the industry's behalf, acknowledged the main attraction of arbitration clauses was that they prevented class actions and their potentially multimillion-dollar judgments.

"What made arbitration clauses attractive was their impact on class-action litigation," he said. "Most banks and companies using it now will conclude it's no longer worth it."

That will mean, he said, consumers have no option but to take banks to court if they believe they've been wronged. And in court, Kaplinsky said, consumers can easily be outgunned.

"Companies, in general, believe they have an advantage over consumers in court," he said. "If a consumer wants to go to court, they have to take time out from work. Cases last longer [than in arbitration]. That's good. Companies like to drag things out."

Travis Norton, executive director of the U.S. 

Chamber of Commerce's Center for Capital 

Markets Competitiveness, called the proposed

rules "a backdoor ban" on arbitration clauses, 

which he said can provide individual 

consumers the chance for more financial 

relief than a class-action suit.

Thaddeus King, an officer with the nonprofit Pew Charitable Trusts' consumer banking project, said it's probably true that banks will ditch arbitration clauses if the CFPB's rules take effect. But he said consumers will probably be just fine.
"That wouldn't mean a consumer and a bank can't go to arbitration. They're always free to choose that option," he said, noting that some banks and credit unions without arbitration clauses still resolve consumer disputes through arbitration.

King added that some consumers who might have preferred arbitration could be forced into court instead and might opt against the hassle and expense of filing a case. But he said more consumers will be helped by being able to participate in class-action cases.

Class actions allow many consumers, all with relatively small claims, to band together and file cases that it would otherwise make no sense to pursue.
Mark Greenstone, a partner at L.A. class-action law firm Glancy Prongay & Murray, said that if a bank charged an illegal fee of $10 a month, no individual consumer would hire a lawyer to sue the bank — nor would any lawyer handle the case.

"The consumer's cost of hiring an attorney and litigating that is going to quickly exceed the value of the claim," he said. "Only a zealot doing it for a moral purpose would do that."

But if the bank has charged the same fee to hundreds or thousands of consumers, a class action can make sense.

"Class actions are able to be brought by large numbers of consumers who have been harmed a very small amount individually," King said.

Kaplinsky said in cases where bank practices cause small amounts of harm to many consumers, the Consumer Financial Protection Bureau, federal prosecutors and state regulators should intervene rather than letting class-action cases set the agenda.

"That's where the CFPB and the government steps in. They're very good at dealing with that kind of wrongdoing," he said.

 


Decade after financial crisis 


JPMorgan predicts next one’s 


coming soon


Published time: 13 Sep, 2018 14:00

·          
With the 10th anniversary approaching of the catalyst for the last major global stock market crash – the Lehman Brothers’ collapse – strategists from JPMorgan are predicting the next financial crisis to strike in 2020.
Wall Street’s largest investment bank analyzed the causes of the crash and measures taken by governments and central banks across the world to stop the crisis in 2008, and found that the economy remains propped up by those extraordinary steps.
According to the bank’s analysis, the next crisis will probably be less painful, however, diminished financial market liquidity since the 2008 implosion is a “wildcard” that’s tough to game out.

“The main attribute of the next crisis will be severe liquidity disruptions resulting from these market developments since the last crisis,” the reports says.
Changes to central bank policy are seen by JPMorgan analysts as a risk to stocks, which by one measure have been in the longest bull market in history since the bottom of the crisis.
JPMorgan’s Marko Kolanovic has previously concluded that the big shift away from actively managed investing has escalated the danger of market disruptions.
“The shift from active to passive asset management, and specifically the decline of active value investors, reduces the ability of the market to prevent and recover from large drawdowns,” said JPMorgan’s Joyce Chang and Jan Loeys.

The bank estimates that actively managed accounts make up only about one-third of equity assets under management, with active single-name trading responsible for just 10 percent or so of trading volume.
JPMorgan referred to its hypothetical scenario as the “great liquidity crisis,” claiming that the timing of when it could occur “will largely be determined by the pace of central bank normalization, business cycle dynamics, and various idiosyncratic events such as escalation of trade war waged by the current US administration.”

For more stories on economy & finance visit RT's business section

World’s top 5 ‘most evil’ corporations


Published time: 3 Mar, 2018 05:55Edited time: 3 Mar, 2018 13:04
Jeff Bezos, founder and chief executive officer of Amazon, poses as he stands atop a supply truck during a photo opportunity at the premises of a shopping mall in the southern Indian city of Bangalore © Abhishek N. Chinnappa / Reuters


Most companies become successful thanks to their stellar reputations. But not always. RT Business scraped the bottom of the barrel to find the most hated companies trending on the internet.


Monsanto

The company that needs no introduction, creator of DDT and Agent Orange, Monsanto is one the world’s largest pesticide and GMO seed manufacturers. It is known for being the first company to genetically modify a seed to make it resistant to pesticides and herbicides. Monsanto’s herbicides have been blamed for killing millions of crop acres, while its chemicals were added to blacklists of products causing cancer and many other health problems.

EU to approve ‘marriage made in hell’ between #Bayer & #Monsanto https://on.rt.com/903s 
·        
·        

Apple

Once the darling of Microsoft-hating gadget lovers, Apple more recently has been accused of mistreating or underpaying their employees, hiding money offshore, and not paying taxes. It has also been accused of violating health or environmental legislation, and misusing its position where they have a monopoly in the market. And, oh yes, deliberately slowing older iPhones and overcharging for its products to boot.

'No consent': #Apple sued for deliberately slowing down older iPhones https://on.rt.com/8ven 

Apple sued for deliberately slowing down older iPhones — RT Business News


·        
·        

Nestle

The world's largest food and beverage company Nestle says it is committed to enhancing quality of life and contributing to a healthier future. However, it has been dragged through numerous scandals involving slave labor. The multinational is one of the most boycotted corporations in the world, as violations of labor rights have been reported at its factories in different countries.
Nestlé admits possibility of slave labor in its coffee #supplychain http://hubs.ly/H02j9Hs0 
·        

·        

Philip Morris

The products of the American multinational cigarette and tobacco manufacturing company are sold in over 180 countries outside the United States. Philip Morris owns Marlboro, one of the world's biggest brands. Back in 1999, Philip Morris courted officials of the Czech Republic by explaining how smoking would in fact help their economy, due to the reduced healthcare costs from its citizens dying early.

McDonald's

American fast-food company McDonald's was founded in 1940. The company serves more customers each day than the entire population of Great Britain, but has a long history of terrible labor practices. It has been constantly under fire for serving unhealthy junk food, which contributes health problems. Researchers have found that McDonald’s burgers cannot decompose on their own.

McDonald’s becomes weed users’ highest-ranking fast food joint. https://on.rt.com/8ofp 

McDonald’s becomes weed users’ highest-ranking fast food joint — RT US News


·        
·        
Notable mentions of corporations not quite evil enough to make the top list:

Goldman Sachs TRUMP CRONIESJPMorgan Chase OBAMA CRONIES
ExxonMobil
Halliburton
British American Tobacco
Dow Chemical
DuPont
Bayer
Microsoft
Google
Facebook
Amazon
Walmart
For more stories on economy & finance visit RT's business section

Ten years since the collapse of Lehman Brothers

15 September 2018
Ten years ago on this day, the global capitalist system entered its most far-reaching and devastating crisis since the Great Depression of the 1930s. A decade later none of the contradictions which produced the financial crisis has been alleviated, much less overcome. Moreover, the very policies carried out to prevent a total meltdown of the financial system, involving the outlay of trillions of dollars by the US Federal Reserve and other major central banks, have only created the conditions for an even bigger disaster.
The immediate trigger for the onset of the crisis was the decision by US financial authorities not to bail out the 158-year-old investment bank Lehman Brothers and prevent its bankruptcy. There is considerable evidence to suggest that this was a deliberate decision by the Federal Reserve to create the necessary conditions for what they knew would have to be a massive bailout, not just of a series of banks but the entire financial system.
The previous March, the Fed had organised a $30 billion rescue of Bear Stearns when it was taken over by JP Morgan. But as the Fed’s own minutes from that time make clear the Bear Stearns crisis was just the tip of a huge financial iceberg. The Fed noted that “given the fragile conditions of the financial markets at the time” and the “expected contagion” that would result from its demise it was necessary to organise a bailout. As Fed chairman Ben Bernanke later testified, a sudden failure would have led to a “chaotic unwinding” of positions in financial markets. The bailout of Bear Stearns was not a solution but a holding operation to try to buy time and prepare for what was coming.
While the demise of Lehman was the initial trigger, the most significant event was the impending bankruptcy, revealed just two days later, of the American insurance firm AIG, which was at the centre of a system of complex financial products running into trillions of dollars.
Due to the interconnections of the global financial system, the crisis rapidly extended to financial markets around the world, above all across the Atlantic to Europe where the banks had been major investors in the arcane financial instruments that had been developed around the US sub-prime home mortgage market, the collapse of which provided the immediate trigger for the crisis.
The value of every crisis, it has been rightly said, is that it reveals and starkly lays bare the underlying socio-economic and political relations that are concealed in “normal” times. The collapse of 2008 is no exception.
In the twenty years and more preceding the crisis, particularly in the aftermath of the liquidation of the Soviet Union in 1991, the bourgeoisie and its ideologists had proclaimed not only the superiority of the capitalist “free market” but that it was the only possible socio-economic form of organisation. Basing themselves on the false identification of the Stalinist regime with socialism, they maintained that its liquidation signified that Marxism was forever dead and buried. In particular, Marx’s analysis of the fundamental and irresolvable contradictions of the capitalist mode of production had proved to be false. According to the central foundation for what passed for theoretical analysis, the so-called “efficient markets hypothesis,” a financial meltdown was impossible because with the development of advanced technologies all information had been priced into decision making and so a financial collapse was impossible.
Rarely have the nostrums of the bourgeoisie and its ideologists been so graphically exposed.
Two days after the crisis erupted, President George W. Bush declared “this sucker’s going down.” Later, the high priest of capitalism and its “free market,” the now bewildered former head of the US Federal Reserve Alan Greenspan, testified to the US Congress that he had been completely confounded because markets had failed to behave according to his “model” and its assumptions.
The crisis also exposed in full glare another of the central myths of the capitalist order—that the state is somehow a neutral or independent organisation committed to regulating social and economic affairs in the interests of society as a whole.
It confirmed another central tenet of Marxism, expounded more than 170 years ago, that “the executive of the modern state is but a committee for managing the common affairs of the bourgeoisie.”
This was exemplified in the naked class response to the financial meltdown. The plans, already developed by the Fed and other authorities to cover the losses of the financial elite, whose speculative and in many cases outright criminal activities had sparked the crisis, were put into operation.
In the lead-up to the presidential election of November 4, Wall Street swung its support behind Obama—with the media promoting him as the candidate of “hope” and “change you can believe in”—over McCain. The Democrats had committed themselves to the bailout, securing the passage of the $700 billion TARP asset-purchasing program through Congress. This massive increase in the national debt of the United States was authorised with virtually no debate.
Of course, a new political fiction was immediately advanced. It was necessary to bail out Wall Street first, the public was told, in order to assist Main Street. However, this lie was rapidly exposed. The crisis was the starting point for a massive assault on the working class. While bankers and financial speculators continued to receive their bonuses, millions of American families lost their homes. Tens of millions were made unemployed.
In the following year, the rescue operation organised by the Obama administration of Chrysler and General Motors, with the active and full collaboration of the United Auto Workers union, resulted in the development of new forms of exploitation, above all through the two-tier wages system, paving the way for even more brutal systems such as those pioneered by Amazon.
This was the other side of a Wall Street bailout—a massive restructuring of class relations in line with the edict of Obama’s one-time chief of staff Rahm Emanuel to “never let a serious crisis go to waste” because it provides “an opportunity to do things you think you could not do before.”
The same class response was in evidence elsewhere. After the initial effects of the crisis had been overcome, the European bourgeoisie initiated an austerity drive forcing up youth unemployment to record levels. In Britain workers have endured a sustained decline in real wages not seen in more than a century.
The most egregious expression of this class logic has been seen in Greece with the imposition of poverty levels last seen in the Great Depression of the 1930s. The numerous bailout operations were never aimed at “rescuing” the Greek economy and its population but directed to extracting the resources to repay the major banks and financial institutions.
The crisis revealed the real nature of bourgeois democracy. The euro zone and the European Union were exposed as nothing more than a mechanism for the dictatorship of European finance capital. As one of the chief enforcers of its diktats, the former German finance minister Wolfgang Schäuble, declared, in the face of popular opposition, “elections cannot be allowed to change economic policy.”
As the working class in every country confronts stagnant and declining wages, falling living standards, the scrapping of secure employment and attacks on social services, leading to mounting health and other problems, innumerable reports and data chart the development of a global system in which wealth is siphoned up the income scale.
According to the latest Wealth-X World Ultra Wealth Report some 255,810 “ultra-high net worth” individuals, with a minimum of $30 million in wealth, now collectively own $31.5 trillion, more than the bottom 80 percent of the world’s population—comprising 5.6 billion people. Overall the wealth of this cohort increased by 16.3 percent in 2016–17, rising by 13.1 percent in North America, 13.5 percent in Europe and 26.7 percent in Asia.
The full significance of the bailouts of the financial system and the subsequent provision of trillions of dollars is clear. It has brought about the institutionalisation of a process, developing over the preceding decades, where the financial system, with the stock market at its centre, functions as a mechanism for the transfer of wealth to the heights of society.
In its analysis of the financial crisis, the World Socialist Web Site insisted from the outset that this was not a conjunctural development, from which there would be a “recovery,” but a breakdown of the entire capitalist mode of production.
That analysis has been completely confirmed. While a total financial meltdown was prevented, the diseases of the profit system that gave rise to the crisis have not been overcome. Rather, they have metastasised and mutated into new and even more malignant forms.
The actions of the US Federal Reserve and other major central banks in pumping trillions of dollars into the financial system in order to “rescue” it, and to enable the continuation of the very forms of speculation that led to the crisis, have only created the conditions for a new disaster in which the central banks themselves will be directly involved.
This fact of economic and financial life can even be seen in the comments by bourgeois analysts and pundits on the occasion of the upcoming anniversary. While they generally maintain that the financial system has been “strengthened” since 2008—a completely worthless assertion given that it was held to be strong in the lead up to the crash and any warnings of growing risks were dismissed as “Luddite” by such luminaries as former US Treasury Secretary Lawrence Summers—no one dares to proclaim that the underlying problems have been resolved.
Rather, taking heed from the warning of JP Morgan chief Jamie Dimon that while the trigger for the next crisis will not be the same as the last but “there will be another crisis”, they nervously scan the horizon for signs of where it might strike.
Some analysts point to the rise in global debt, which is now running at 217 percent of gross domestic product, an increase of 40 percentage points since 2007, contrary to all expectations that, since debt was a major cause of the 2008 crisis, some deleveraging would have occurred.
Others single out the mounting problems in so-called emerging markets facing repayments on dollar-denominated loans, a source of speculation when interest rates were at record lows but which now present major refinancing problems as interest rates have started to rise.
The seemingly unstoppable rise of stock markets, fuelled by the provision of ultra-cheap money by the Fed and other central banks, is also an issue of concern. The increased use of passive investment funds tied to global indexes via computer trading systems tends to reinforce downswings as has been seen in a series of “flash crashes” such as that of last February when Wall Street fell by as much as 1,600 points in intraday trading.
The greatest source of anxiety, although it is not mentioned so much publicly, is the resurgence of the working class and the push for increased wages. To the extent it is discussed publicly, this fear, manifested in stock market falls generated by news of relatively small wage increases, is generally couched in terms of “political tensions” caused by increased social inequality.
A further expression of the ongoing and deepening breakdown of the capitalist order is the disintegration of all the geo-political structures and relationships that have constituted the framework within which the movements of capitalist economy and finance have flowed throughout the post-war period.
In the wake of the 2008 crisis, the leaders of the G20 gathered in April 2009, in the midst of a collapse in world trade taking place at a faster rate than in 1930. They pledged to never again go down the road of the protectionist tariff policies that had played such a disastrous role in the Great Depression and had worked to create the conditions for the outbreak of World War II, just ten years after the Wall Street crash of October 1929.
That commitment lies in tatters as the Trump administration, seeking to counter the economic decline of the US so graphically revealed in the 2008 collapse, embarks on ever widening trade war measures.
The principal target, at least to this point, is China. But the Trump administration has designated the European Union as an economic “foe,” and has already implemented trade war measures against it, with more in the pipeline.
The G7, the grouping of major capitalist powers set up in the wake of the world recession of 1974–75 and the end of the post-war boom to try to regulate the affairs of world capitalism, exists in name only following the acrimonious split at its meeting last June with the US decision to impose tariffs against its nominal “strategic allies.”
World war has not yet broken out. But there are innumerable flashpoints—in the Middle East, in Eastern Europe, in North East Asia and in the South China Sea to cite just some examples—where a conflict could erupt between nuclear-armed powers. The impetus for a new global conflagration is the drive by US imperialism to counter its economic decline by asserting its dominance over the Eurasian landmass at the expense of its enemies and allies alike.
It is of enormous significance that the civil war that has erupted in the American state apparatus between the state and military-intelligence apparatus, whose mouthpiece is the Democratic Party, and the Trump administration is over how this objective should be accomplished; that is, whether the American drive should be directed in the first instance against Russia or China. At the same time, all the major powers are boosting their military budgets in preparation for the escalation of military conflicts.
The political system in every country is beset by deep crisis. The very rapidity of the crisis is accentuating the contradictions between the objective dangers and the level of class consciousness. The chief obstacle to achieving the necessary alignment of working class consciousness with the objective reality of capitalist crisis on a world scale remains the reactionary political role of the old bureaucratised labour and trade union organisations, abetted by the various pseudo-left tendencies, in suppressing the class struggle. But the conditions are developing for these shackles to be broken.
In the founding program of the Fourth International, Leon Trotsky wrote: “The orientation of the mass is determined first by the objective conditions of decaying capitalism, and second, by the treacherous policies of the old workers’ organisations. Of these factors, the first, of course, is the decisive one: the laws of history are stronger than the bureaucratic apparatus.”
That perspective is now being confirmed in the resurgence of the class struggle internationally, above all in the centre of world capitalism, the United States.
Conscious of their profound weakness in the face of such a movement, and fully aware of its revolutionary implications, the ruling classes in every country have been developing ever-more authoritarian forms of rule.
Their greatest fear is the development of political consciousness, that is, the understanding in wider sections of the working class, and above all the youth, of its real situation, that its enemy is the entire capitalist system. Above all, the ruling elites fear the development of a revolutionary socialist movement, based on the principles and program of the Fourth International. This is why the World Socialist Web Site is the central target of internet censorship. It is also the reason for the escalation of attacks by the German coalition government on the Sozialistische Gleichheitspartei, the German section of the International Committee of the Fourth International (ICFI).
But the efforts to suppress the work of the International Committee will fail. The renewal of class struggle will provide new forces for the development of the working of the ICFI throughout the world.
The meltdown of 2008 demonstrated above all that the working class confronts a global crisis. The crisis can therefore be resolved only on a global scale through the unification of the working class across national borders and barriers on the basis of an international socialist program for the reconstruction of society to meet human need and not profit.
Nick Beams

Who Can We Blame For The Great Recession?


|
This year marks the tenth anniversary of the “Great Recession” and the media are trying to determine if we have learned anything from it. The Queen visited the London School of Economics after the “Great Recession” to ask her chief economists why they hadn’t seen this disaster coming. They told her they would get back to her with an answer.  Later, they wrote her a letter saying that the best economic theory asserts that recessions are random events and they had successfully predicted that no one can predict recessions.  
Still, George Packer, a staff writer at the New Yorker magazine since 2003, thinks he knows more than the LSE academics. He wrote the following in the August 27 print issue:
"It was caused by reckless lending practices, Wall Street greed, outright fraud, lax government oversight in the George W. Bush years, and deregulation of the financial sector in the Bill Clinton years. The deepest source, going back decades, was rising inequality. In good times and bad, no matter which party held power, the squeezed middle class sank ever further into debt...
"In February, 2009, with the economy losing seven hundred thousand jobs a month, Congress passed a stimulus bill—a nearly trillion-dollar package of tax cuts, aid to states, and infrastructure spending, considered essential by economists of every persuasion—with the support of just three Republican senators and not a single Republican member of the House."
Typically, journalists will defer to an expert on matters in which they aren’t trained, which is most subjects. But Packer didn’t bother to ask an economist as the Queen did. Had he done so, he would have received the same answer from mainstream economists – recessions are random events and can’t be predicted. If economists knew the causes of recessions they could predict them when they see the causes present. 
So where did Packer get his “causes” for the latest recession? In the classic movie Casablanca, the corrupt and lazy policeman Renault is “shocked” to find gambling going on at Rick’s place and orders the others to round up the “usual suspects.” That’s what Packer does. People have blamed greedy businessmen and bankers for crises for centuries. Since the rise of socialism they added capitalism and the politicians who support it. The only new suspect in the socialist line up is inequality, even though inequality has varied little since 1900 and is near its record low since then.
Had Packer consulted the University of Chicago Booth School of Business, he wouldn’t have received much help. Keep in mind that mainstream economists think recessions are random events. After the storm subsides, they can identify likely contributors for the latest disaster, but those differ with each recession. Recently Chicago Booth queried experts for the top contributing factors of the latest recession. The top answer was flawed 

regulations, followed by underestimating risk 

and mortgage fraud. 
The “flawed regulations” excuse assumes that bitter bureaucrats who write the regulations are wiser than the actual bankers and ignores the fact that banking is one of the most regulated industries. One analyst described the recent recession as the perfect storm of regulations so massive no one group could understand them all and many of them working against other regulations. 
Blaming “underestimated risk” is good Monday morning quarterbacking. Everyone has 20/20 hindsight, or 50/50 as quarterback Cam Newton said. The same economists don’t explain why banks that took similar risks didn’t fail or why what seems risky now didn’t seem so risky in 2007. As for fraud, the amount was negligible and is always there; why did it contribute to a recession this time? Sadly, the correct answer to what caused the Great Recession– “Loose monetary policy” – came in next to last among Chicago Booth’s experts. 
Perspective is vital. A magnifying glass can make a lady bug look terrifying. Let’s pull back and put the latest recession in a broader context. There have been 47 recessions/depressions since the birth of the nation. Before the Great Depression economists called crises “depressions” and since then they are “recessions.” They’re the same thing; economists thought “recession” was less scary. 
Recessions before the Great Depression were mild compared to it. It took the Federal Reserve and the US government working together trying to “rescue” us to plunge the country into history’s worst economic disaster. Journalists like Packer have convinced people that the Great Recession of 2008 was second only to the Great Depression, but if we combine the recessions of 1981 and 1982, separated only by a technicality and six months, that recession would have been worse. The Fed did not reduce interest rates after that recession because it was still battling the inflation it has caused in the 1970s, yet the economy bounced back and recovery lasted almost a decade. 
I want to drive home the fact that the three worst recessions in our history assaulted us after the creation of the Federal Reserve in 1913. 
The best explanation of the causes of recessions, because it enjoys the greatest empirical support, is the Austrian business-cycle theory, or ABCT. Ludwig von Mises and Friedrich Hayek are most famous for refining and expounding it, but the English economists of the Manchester school were the first to write about it. They discovered that expansions of the money supply through low interest rates motivated businesses to borrow and invest at a rapid rate. That launches an unsustainable boom because businesses are trying to deploy more capital goods than exist. Banks raise rates to rein in galloping inflation and the boom turns to dust. 
Banks don’t control interest rates today as they did in the past. That’s the Federal Reserve’s job. The Fed generally reduces interest rates or expands the money supply through “quantitative easing,” or buying bonds from banks, in order to force an economy in the ditch to climb out. The recovery from the Great Recession remained on its feet for so long because the Fed’s policy of paying interest on reserves at banks soaked up much of the new money it created out of thin air. Also, much of the money went overseas to buy imports or as investments. 
The lesson – don’t ask medical advice from your plumber or economics from a journalist. And if you ask an economist, make sure he follows the Austrian school. 
NO PRESIDENT IN HISTORY SUCKED IN MORE BRIBES FROM CRIMINAL BANKSTERS THAN BARACK OBAMA!

“Records show that four out of Obama's top 

five contributors are employees of financial 

industry giants - Goldman Sachs ($571,330), 

UBS AG ($364,806), JPMorgan Chase 

($362,207) and Citigroup ($358,054).”

OBAMA and HIS BANKS: THEIR PROFITS, CRIMES and LOOTING SOAR
This was not because of difficulties in securing indictments or convictions. On the contrary, Attorney General Eric Holder told a Senate committee in March of 2013 that the Obama administration chose not to prosecute the big banks or their CEOs because to do so might “have a negative impact on the national economy.”

 

BANKSTERS’ RENT BOY FORMER ATTORNEY GEN ERIC HOLDER POSES WITH HITLER PRAISING LEADER OF RACIST, HOMOPHOBIC, ANTI-SEMITIC HATE MONGER LOUIS Farrakhan.
“Attorney General Eric Holder's tenure was a low point even within the disgraceful scandal-ridden Obama years.” DANIEL GREENFIELD / FRONTPAGE MAG
Why the swamp has little to fear


The midterm elections will either halt or hasten the current soft coup whose aim is to overthrow a legally elected President now being conducted by the swamp.   And if the history of Washington, D.C. corruption is any indication of what will happen after the midterms, the swamp will survive regardless of its coup's success or failure.  But the efforts to expose the treasonous plot will fade away into the dustbin of political history after being seen as just another waste of time and taxpayer money.  The seemingly endless parade of corruption scandals and mind-numbing criminal activity will go on unabated and continue to escalate to unimaginable heights because of an inescapable fact of human nature. 
In a Forbes 2015 article entitled "The Big Bank Bailout," author Mike Collins mentions several ways to prevent another housing bubble crisis from destroying the world economy when he writes, "But perhaps the best solution is to make the CEOs and top managers of the banks criminally liable for breaking these rules so that they fear going to jail.  These people are not afraid to do it again so if you can’t put some real fear in their heads, they will do it again."
What Collins has honed in on is accountability and punishment, the very things lacking in today's dealings with the swamp.  Just as the major banking institutions will soon, if not already, re-enter into risky, corrupt, and illegal lending practices because there was not a "smidgen" of accountability for the trillions of dollars they lost in the housing bubble catastrophe, so too will the past and presently unknown criminals within the IRS, FBI, and DOJ continue to thumb their noses at the law.
What the American people have been subjected to over the past 18 months since President Trump took office is a series of crimes that have been painstakingly unearthed but little else.  "Earth-shattering," "bombshell," and "constitutional crisis" are just some of the words and phrases used by media outlets to describe the newest update regarding the many ongoing investigations.  These words are meant to shock the audience but no longer have the impact they once did because of their overuse and because of the likely lack of any substantive outcome.  What Americans have seen are trials without consequences, clear proof of guilt with no punishment.  Draining the swamp without any repercussions to the swamp creatures inside is like going on a diet but eating the same foods.  
Americans witnessed no accountability regarding exhaustive investigations into the deadly circumstances surrounding the swamp's gun-walking campaign named Fast and Furious, a program where U.S. Border Patrol agent Brian Terry and hundreds of innocent Mexican citizens were killed with guns the government sold to criminals.  The swamp continued on its power mission and attempted the deceitful confiscation of America's health care with Obamacare, whose real aim was a redistribution of the nation's wealth.  After little pushback and the passage of Obamacare,  Americans witnessed Benghazi in 2012, and when nothing was accomplished over the investigations of that tragedy, the swamp trampled on the rights of conservatives in what became known as the IRS scandal of 2013.  Nothing was done about that.  And on and on, with the swamp committing one bigger and bolder crime after the next with impunity. 
So we have arrived at the doorstep of the Russian collusion investigation farce by first traveling through the swamp of unsolved crimes perpetrated inside the Obama administration.  With the passage of time, swamp-dwellers like Eric Holder and Lois Lerner, knee-deep in the mud with congressional contempt charges, continue to be financially enriched and will slowly be forgotten, while more recognizable swamp royalty like Hillary Clinton get to run for president. 
Until Americans see guilty members within the United States government wearing orange jumpsuits and serving time, the investigations and congressional hearings are mere sideshow spectacles to appease the masses.

No comments: