Article 43

 

Bad Moon Rising

Tuesday, October 08, 2013

Bad Moon Rising Part 62 - Breaking Bad

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“What is the chief end of man?--to get rich. In what way?--dishonestly if we can; honestly if we must.”
- Mark Twain, 1871

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

By Ellen Brown
Global Research
October 7, 2013

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

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

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

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

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

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

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

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

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

The Next Time WILL Be Different

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

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

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

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

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

The Looming Debt Ceiling Crisis

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

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

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

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

Peer-to-peer Trading and Public Banks

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

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

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

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

To meet those needs, we can set up publicly-owned banks on the model of the BANK OF NORTH DAKOTA, currently our only state-owned depository bank. The BND is mandated by law to receive all the states deposits and to serve the PUBLIC INTEREST. Ideally, every state would have one of these “mini-Feds.” Counties and cities could have them as well. For more information.

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

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America Has Become a “Cheater-Take-All” Nation
Why do people like Tyler Cowen still equate wealth with merit? Many rich people are just crooks.

By William Black
Alternet
October 4, 2013

Tyler Cowens new book Average is Over: Powering America Beyond the Age of the Great Stagnation warns that inequality will only get worse as a “hyper-meritocracy” of smart, energetic people at the top commanding machines and data speed ahead and the lazy, not-very-bright folks at the bottom fall further behind.

One thing seems to be left out of the discussion: those hyper-meritocrats are led by criminal morons.

Cowen’s embrace of Social Darwinism assumes that the winners have a selective advantage that arises from merit - which Cowen conflates with the ability to create wealth.  This is passing strange as we are still suffering from an orgy of wealth destruction led by the winners.  The people who grew wealthiest were often the people most responsible for the largest destruction of wealth in history.  That it is an anti-meritocratic system.  We do not live in a “winner-take-all” nation.  We increasingly live in a “cheater-take-all” system.

What Cowen has missed is the famous (but nearly famous enough) warning sounded by George Akerlof and Paul Romer in 1993 in their classic article “Looting: The Economic Underworld of BANKRUPTCY FOR PROFIT.”

“[M]any economists still [do] not understand that a combination of circumstances in the 1980s made it very easy to loot a [bank] with little risk of prosecution. Once this is clear, it becomes obvious that high-risk strategies that would pay off only in some states of the world were only for the timid. Why abuse the system to pursue a gamble that might pay off when you can exploit a sure thing with little risk of prosecution? (Akerlof & Romer 1993: 4-5).”
The result of these perverse incentives is the epidemics of accounting control fraud that drive our recurrent, intensifying financial crises.  In the savings and loan debacle, for example:

“The typical large failure [grew] at an extremely rapid rate, achieving high concentrations of assets in risky ventures. [E]very accounting trick available was used… Evidence of fraud was invariably present as was the ability of the operators to milk the organization (NCFIRRE 1993).”

The large Enron-era frauds were all accounting control frauds.

“Worse, when cheaters prosper, market forces become perverse because of the “Gresham’s dynamic” in which bad ethics drives good ethics out of the markets and professions.” George Akerlof explained this in his most famous article on “Lemons” in 1970.

“[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.”

Akerlof was not the first expert to understand the dynamic.

“The Lilliputians look upon fraud as a greater crime than theft.  For, they allege, care and vigilance, with a very common understanding, can protect a man’s goods from thieves, but honesty hath no fence against superior cunning. . . where fraud is permitted or connived at, or hath no law to punish it, the honest dealer is always undone, and the knave gets the advantage” (Swift, J. Gullivers Travels: 1726).

The mortgage fraud crisis occurred because the fraudulent CEOs whose banks created the twin epidemics of mortgage origination fraud deliberately generated a series of Gresham’s dynamics that produced an unethical race to the bottom in the professions that aided and abetted the loan origination fraud.  The earliest warnings of this were made by honest appraisers in 2000.

From 2000 to 2007, a coalition of appraisal organizations delivered to Washington officials a public petition; signed by 11,000 appraisers. [I]t charged that lenders were pressuring appraisers to place artificially high prices on properties [and] blacklisting honest appraisers and instead assigning business only to appraisers who would hit the desired price targets ( FCIC 2011: 18).

A national survey of appraisers conducted in early 2004 found that 75 percent of appraisers had been urged within the prior 12 months to inflate an appraisal.  A 2007 survey found that the percentage of appraisers reporting that they had been urged to inflate an appraisal within the past 12 months had risen to 90 percent, and honest appraisers were forced to pay a high price for refusing to give in to the coercion: 68 percent reported losing a client and 45 percent did not get paid for their work.  Note that a Greshams dynamic does not have to drive all the honest professionals out of the field to produce epidemic levels of fraud. Even if only a small percentage of the appraisers are suborned they can inflate all the appraisals required.

New York Attorney General (now, governor) Cuomo’s investigation of Washington Mutual (WaMu) found that it had blacklisted honest appraisers. Cuomo described WaMu as typical of nonprime lenders.

Similar Gresham’ dynamics have been documented in many crises and professions.

“[A]busive operators of S&L[s] sought out compliant and cooperative accountants.  The result was a sort of “Gresham’s Law” in which the bad professionals forced out the good.” (NCFIRRE 1993).

Modern executive compensation is also a superb device for enlisting the aid of hundreds or even thousands of employees and officers and suborning internal controls.  It also reduces whistleblowing.

Don’t just say: ”If you hit this revenue number, your bonus is going to be this. It sets up an incentive that’s overwhelming. You wave enough money in front of people, and good people will do bad things,” Franklin Raines:  CEO, Fannie Mae.

Raines’ analysis was correct, which explains why the bonus system he put in place was so successful in turning Fannie Mae into one of the world’s largest and most destructive accounting control frauds.

“By now every one of you must have 6.46 [earnings per share (EPS)] branded in your brains.  You must be able to say it in your sleep, you must be able to recite it forwards and backwards, you must have a raging fire in your belly that burns away all doubts, you must live, breath and dream 6.46, you must be obsessed on 6.46 After all, thanks to Frank, we all have a lot of money riding on it.  We must do this with a fiery determination, not on some days, not on most days but day in and day out, give it your best, not 50%, not 75%, not 100%, but 150%.”

“Remember, Frank has given us an opportunity to earn not just our salaries, benefits, raises, ESPP, but substantially over and above if we make 6.46.  So it is our moral obligation to give well above our 100% and if we do this, we would have made tangible contributions to Frank’s goals.” (Mr. Rajappa, head of Fannie’s internal audit, emphasis in original.)

The second epidemic of loan fraud by lenders created the epidemic of fraudulent liar’s loans.  The liar’s loan epidemic interacted with the appraisal fraud epidemic to hyper-inflate the real estate bubble and created a financial catastrophe. The fraudulent leaders of nonprime lenders deliberately created a Greshams dynamic among their loan officers and their loan brokers.  Loan brokers did most of the dirty work (giving the lenders deniability) of inflating appraisals and putting the lies in liar’s loans.

“More loan sales meant higher profits for everyone in the chain. Business boomed for Christopher Cruise, a Maryland-based corporate educator who trained loan officers for companies that were expanding mortgage originations. He crisscrossed the nation, coaching about 10,000 loan originators a year.” (FCIC 2011: 7)

‘His clients included many of the largest lenders, Countrywide, Ameriquest, and Ditech among them. Most of their new hires were young, with no mortgage experience, fresh out of school and with previous jobs ‘flipping burgers,’ he told the FCIC.  Given the right training, however, the best of them could easily earn millions.” (FCIC 2011: 8)

“He taught them the new playbook: You had no incentive whatsoever to be concerned about the quality of the loan, whether it was suitable for the borrower or whether the loan performed.” He added, “I knew that the risk was being shunted off. I knew that we could be writing crap. But in the end it was like a game of musical chairs. Volume might go down but we were not going to be hurt.” (FCIC 2011: 8)

“I knew that we could be writing crap.  Under the incentive structures deliberately created by the officers controlling the lenders the loan officers had no incentive whatsoever to be concerned about the quality of the loan, whether it was suitable for the borrower or whether the loan performed.” To ensure that their new loan officers understood and responded to the perverse incentives the fraudulent lenders hired people like Christopher Cruise to train them to understand and act in accordance with those incentives.

The general reader may be confused as to why the CEOs leading the fraudulent lenders were deliberately creating incentives to make enormous numbers of bad loans.  The fraud Ӕrecipe for an accounting control fraud optimizing fraudulent income by making (buying) bad loans has four ingredients.

1.Grow extremely quickly by
2.Making (buying) bad loans at premium yield
3.While employing extreme leverage, and
4.Providing grossly inadequate allowances for loan and lease losses (ALLL)

This is the recipe that produces what Akerlof and Romer aptly described as a “sure thing” and that hyper-inflated the bubble and drove the crisis.  The recipe produces three sure things: the lender (purchaser) of crap[py] loans will immediately report record income, the controlling officers will promptly be made wealthy through modern executive compensation, and the firm will suffer severe losses.

It is simple to follow the recipe.  No skill is required.  The fact that the recipe can be employed simultaneously by the originator/seller and the buyer of the fraudulent loans explains why the secondary market followed the financial version of “dont ask; don’t tell.”

Even the former head of the professional association of mortgage brokers, while trying to minimize the success of the Gresham’s dynamic, actually conceded its critical importance.

Marc S. Savitt, a past president of the National Association of Mortgage Brokers, told the Commission that “while most mortgage brokers looked out for borrowers’ best interests and steered them away from risky loans, about 50,000 of the newcomers to the field nationwide were willing to do whatever it took to maximize the number of loans they made.” He added that some loan origination firms, such as Ameriquest, were “absolutely corrupt” (FCIC 2011: 14).

Ameriquest was not some random lender.  It was the fraudulent lender that first developed liar’s loans and it was for many years the largest originator and seller of fraudulent loans.  Its CEO, Roland Arnall, was made wealthy by the fraud wealthy enough to make the large political contributions that got him appointed our Ambassador to the Netherlands after the fourth time Ameriquest was subject to government sanctions.  It was Ameriquest that WaMu and Citicorp rushed to acquire even though Ameriquest was the most notorious lender in America.

Sadly, Savitt’s estimate of fraudulent loan brokers was far too low.  When entry is easy and becoming a mortgage broker was simple - and the financial incentives to commit fraud are powerful the result is horrific.

According to an investigative news report published in 2008, between 2000 and 2007, “at least 10,500 people with criminal records entered the field in Florida, for example, including 4,065 who had previously been convicted of such crimes as fraud, bank robbery, racketeering, and extortion.” (FCIC 2011: 14).

A loan broker could make $2,000 to $20,000 by getting a single bad loan approved.  But he got nothing if the loan was not approved.  The brokers knew that that if they put the borrower into a liars loan the broker would receive a higher fee because such loans had a higher interest rate (which increased the broker’s compensation).  The brokers knew that the lender would not verify the borrowers reported income on a liar’s loan.  If the broker inflated the borrowers income the lender was far more likely to approve the loan.  The broker, but not the borrower, knew how much to inflate the borrower’s stated income.

[Many originators invent] non-existent occupations or income sources, or simply inflat[e] income totals to support loan applications. Importantly, our investigations have found that “most stated income fraud occurs at the suggestion and direction of the loan originator, not the consumer.” Tom Miller, AG, Iowa, 2007 testimony to Fed.

It was the lenders and their agents that put the lies in liar’s loans and that used coercion to inflate appraisals.  No honest lender would create the perverse incentives sure to lead to fraudulent epidemics of liar’s loans and inflated appraisals.

The constants present in each of our three modern financial crises (the S&L debacle, the Enron-era scandals, and the mortgage fraud crisis) were that the crises were driven by epidemics of accounting control fraud and that during the expansion phase of each crisis neo-classical economists praised the worst frauds as brilliant innovators who understood the importance of technological advances.  The economists assured us that the massive compensation that the fraudulent CEOs awarded themselves was the just result of an emerging meritocracy.  The reality was the opposite.

“Neither the public nor economists foresaw that [S&L deregulation was] bound to produce looting.  Nor, unaware of the concept, could they have known how serious it would be.  Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better.  “If we learn from experience, history need not repeat itself.” (George Akerlof & Paul Romer.1993: 60).

Cowen does not discuss financial fraud, Akerlof and Romers findings, or the Gresham’s dynamic in his book even though they are central to his purported thesis.  He simply assumes that the financial frauds were made wealthy because they were “more productive.” They were the opposite of productive.  Cowen has adopted, implicitly, the label that Christopher Cruise, the lead training official that the fraudulent lenders chose to train their loan officers, used.

Most of their new hires were young, with no mortgage experience, fresh out of school and with previous jobs “lipping burgers,” he told the FCIC.  Given the right training, however, the best of them could “easily earn millions.” (FCIC 2011: 8)

Cruise and Cowen simply assume that whoever can earn millions represents the bes of Americans.  It can, but it can also represent the worst of us.  Finance has become dominated by the worst of us, which is why we have recurrent, intensifying financial crises driven by their fraud epidemics.  Cowen looks at the results of our hyper-anti-meritocracy system of finance, a gaudy whorehouse bedecked with red neon lights.  Cowen concedes in his book (though it does lead to any analytical inquiry) that finance executives are currently the largest winners in gaining wealth despite causing the massive loss of societal wealth in the ongoing crisis.  Without even discussing fraud or why the people who are the leading destroyers of wealth were the largest beneficiaries and experienced the greatest growth in wealth since 2009 Cowen describes finance as if it were a temple of meritocracy.  Cowen has demonstrated that when Akerlof and Romer said of economists twenty years ago - that now we know better - about fraud and financial crises they were far too optimistic about their profession.

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Why Breaking Bad’s Walter White Is the Epitomal Greedy American CEO
Walter White has a lot in common with the Masters of the Universe.

By RJ Escow
Alternet
October 1, 2013

Before the post-finale Breaking Bad chatter dies down for good, lets not overlook one of the show’s most instructive features: In many ways, Walter White is a quintessentially modern American CEO. While White spouted a lot of figures and formulas in five seasons of television, but theres one number his character embodied more than any other: the 1 percent, and his insatiable drive to be part of it.

It’s all there: the ego, the entitlement, the testosterone-fueled drive to come out on top, and the sense that money, not character or relationships, defines a persons worth. Above all else, there’s the sense that even the most venal and criminal of enterprises becomes ennobling when you earn lots of money for it.

I’m not saying that every chief executive officer is like Walter White. The ones who invent a product, create jobs, build wealth for themselves and others, are a different breed. They’re also increasingly rare, as more and more CEOs earn their livings by manipulating politicians, deceiving shareholders, and playing a better game of corporate politics than their competitors.

If you don’t think Walter White was brilliant at corporate politics, as brilliant as Jamie Dimon or any other real-life CEO, think again: His relationship to Gus Fring alternated between braggadocio and utter servility, and ultimately ended with murderous treachery. What corporate executive hasn’t seen that drama played out over and over (if not with the last part enacted so literally)?

Walt’s is a story of sublimated drives released by unforeseen events. Consider his character arc: Brilliant chemist once owned one-third of a company that’s now worth billions, but was cheated out of his share somehow (possibly by himself). He became a mild-mannered, lower-middle-income chemistry teacher in Albuquerque, where he might have been content to remain until terminal cancer forced him into an existential crisis. Then, confronted with a lifetimes worth of resentment, Walt’s drive to become a master of that universe kicks in.

Soon after that, Walter White joins the 1 percent then ascends to the 0.1 percent, the 0.01 percent, and beyond. What does he say to his wife in his shattering telephone tirade during the episode - Ozymandias:

“You, you have no right to discuss anything about what I do. Oh, what the hell do you know about it anyway? Nothing. I built this. Me. Me alone. Nobody else!”

This speech mixes cunning and fury, guile and animal rage, as Walt calculatingly exonerates Skyler while at the same time breaking down with genuine emotion.

White can make more of a case for having built something than most American CEOs, many of whom depend on implicit or direct government support for their wealth. (Think Jamie Dimon at JPMorgan Chase, David Cote at defense contractor Honeywell, or Jeffrey Immelt at GE and GE Capital.)

Walt, on the other hand, actually did build his own empire. But he had a lot of help, from line employees like Badger and Skinny Pete, from organizational predecessors like Gus Fring, and most of all from loyal lieutenant Jesse Pinkman, whom Walt sometimes treated like a son but never like a business equal. Walt displayed CEO characteristics from the start, snarling at his underling and demanding near-impossible accomplishments from him. Arrogant and entitled, Walt took on Jesse’s successes as his own. He couldnt bring himself to praise an underling, even when it would serve his business interests. Only after Jesse rejects a partnership offer and points out that Walt consistently criticized the quality of his work is White able to say “Your meth is good, Jesse. As good as mine.”

In the beginning, Jesse only became his partner because White threatened to turn him in to the authorities. But their tense partnership works, thanks to Walt’s insatiable drive. They gradually take over the distribution networks for their product, a project mainly achieved through murder, a technique which distinguishes Walt from his more mainstream peers.

Like many CEOs, Walt was a perfectionist, a taskmaster with decidedly anal-retentive tendencies. This is not always a bad thing in an executive, by any means, and Walt’s obsessive traits help build his enterprise into a success. In fact, Walt’s emphasis on customer satisfaction puts him ahead of many other American CEOs. There’s no room for error with these people, Walt says of their clients.  Too bad more executives don’t think that way about their customers.

But Walt was always a cheater, on matters large and small. Early on, when he and Jesse flip a coin to decide who must kill their captive Krazy-8, Walt loses and promptly asks: “Best two out of three?”

He was a con artist, too, and the person he conned most successfully was himself. That may be the most distinctive trait he shares with so many of his fellow CEOs: the ability to believe hes a self-made man, a ‘job creator’, indispensable.

Consider the quote at the beginning of this piece. Contrary to WaltӔs self-important ravings, he didnt Ғcreate an $80 billion business. He took over a business that was already thriving when Gus Fring ran it. And it didnӔt go “belly up, Ҕdisappear, or otherwise Ӕcease to exist when Walt left for the snow-covered wilds of New Hampshire. It continued to thrive, with distribution in LydiaӔs capable hands and manufacturing WaltҖs specialty adequately being handled by a gang of neo-Nazis and Jesse as a captive worker.

Walt was always able to convince himself he was a good person, a wise person, even an enlightened being. He purloins a quote from no less a sage than the Buddha when, early on, Jesse asks why he wants to go into the meth business.

“I am awake,” Walt answers.

When the Buddha achieved enlightenment and his peers saw the spiritual transformation in him, they asked if he was a god, a human being, or something else. “I am awake,” replied the Buddha.

As we quickly learn, Walter White is no Buddha.

It’s no mistake that Walt says his business is “big enough to be listed on NASDAQ.” Thats where technology businesses, presumably including his old company Gray Matter, list their stocks. Walt doesn’t see himself as a drug dealer; he’s a tech entrepreneur.

Walter also had a habit of deluding himself into thinking he was on the side of justice. Like his peers in Fix the Debt, it was easy for him to confuse his own well-being and that of his heirs with the best interests of the world as a whole. After he terrorizes and threatens his wealthy ex-partners into passing drug money to his unknowing son (an act that would morally horrify the boy), he assumes the moral high ground. “Cheer up, beautiful people,” he tells them. “This is where you get to make it right.”

The law was never an impediment for Walter White. In fact, he derived a physical pleasure from breaking it. “Why was that so good?” Skyler asks him after they have sex in the car. “Because it was illegal,” says Walt.

Like many a CEO, Walt saw everything in terms of winning and losing. He poisoned a child and bombed a nursing home to defeat Gus Fring, and when Fring was dead and Skyler asked what happened, Walts answer said it all: “I won.” It was reminiscent of the way Wall Street traders would cheat their own customers, then get off the phone and exult, “I ripped his face off.”

Like many other CEOs, Walt claimed all his misdeeds were done for the sake of his family. That places a moral burden on his wife that isn’t lifted until the final episode, when he admits: “I did it for me.” That moment of honesty places Walter White on a higher moral plane, at least in that respect, from many of his more legitimate peers.

In the end, it’s all about male competition, a drive that leads to arguably the best soliloquy of the series:

Who are you talking to right now? Who is it you think you see? Do you know how much I make a year? I mean, even if I told you, you wouldn’t believe it Ԓ No, you clearly don’t know who you’re talking to, so let me clue you in. I am not in danger, Skyler. I am the danger. A guy opens his door and gets shot and you think that of me? No. I am the one who knocks!

Fans of this powerful speech may have forgotten that when it was delivered, Walt had just escaped a long stretch of degrading servitude and yes, danger Ŗ at the hands of Gus Fring.

“Say my name,” White says to a meth distributor, completing the process of ending his seemingly endless period of humiliation and near enslavement. Walt’s denial of this humiliation - his refusal to admit it even happened - leads to his final run of hubris and his inability to leave the meth business behind. As with his real-life contemporaries, there is never enough money, enough power, enough ego gratification, to satisfy Walter White.

Viewers who watched the final episode of Breaking Bad didnחt realize they had already seen Walt die. Walter White didnt die from a gunshot wound, lovingly caressing a piece of equipment in the meth lab. He died the day he left for New Hampshire, because thatҒs the day his business continued to exist without him.

The title of the last episode was Felina (an anagram of finale). Its also the name of the woman in Marty Robbins’ song “El Paso,” in which a fugitive cowboy returns to see the love of his life one last time, even though he knows hell die in the attempt: “One final kiss and Felina, goodbye.”

The cowboy couldn’t live without Felina, his love. But Walter White, American CEO, couldnt fully love a human being. In a flashback to his romance with fellow chemist and future billionaire Gretchen Schwartz, a dialog about the chemical components of a human being ends this way:

Gretchen: What about the soul? 
Walt: The soul? There’s nothing but chemistry here. 

Walt’s true love was his business and his product. His days in that snowbound cabin were a kind of hellish afterlife, because without his business Walt is no longer alive.

Walter White tied up the loose ends in his life before dying as he wanted to die. That, more than anything else, separates him from his CEO peers in the real world. As some of them are starting to learn, in real life its not always that easy to close the door on the misdeeds of the past.

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Posted by Elvis on 10/08/13 •
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Sunday, July 28, 2013

Bad Moon Rising Part 61 - War Pigs

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In 1961, President Kennedy refused to concede to the insistence of his top generals to give them permission to use nuclear weapons in Berlin and Southeast Asia. Walking out of a meeting with top military advisors, KENNEDY threw his hands in the air and said, “These people are crazy.”

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The Two Faux Democracies Threaten Life On Earth

By Paul Craig Roberts
July 24, 2013

Amitai Etzioni has raised an important question: WHO AUTHORIZED PREPERATIONS for WAR WITH CHINA? Etzioni says that the war plan is not the sort of contingency plan that might be on hand for an improbable event. Etzioni also reports that the Pentagons war plan was not ordered by, and has not been reviewed by, US civilian authorities. We are confronted with a neoconized US military out of control endangering Americans and the rest of the world.

Etzioni is correct that this is a momentous decision made by a neoconized military. China is obviously aware that Washington is preparing for war with China. If the Yale Journal knows it, China knows it. If the Chinese government is realistic, the government is aware that Washington is planning a pre-emptive nuclear attack against China. No other kind of war makes any sense from Washingtons standpoint. The superpower was never able to occupy Baghdad, and after 11 years of war has been defeated in Afghanistan by a few thousand lightly armed Taliban. It would be curtains for Washington to get into a conventional war with China.

When China was a primitive third world country, it fought the US military to a stalemate in Korea. Today China has the world’s second largest economy and is rapidly overtaking the failing US economy destroyed by jobs offshoring, bankster fraud, and corporate and congressional treason.

The Pentagon’s war plan for China is called “AirSea Battle.” The plan describes itself as interoperable air and naval forces that can execute networked, integrated attacks-in-depth to disrupt, destroy, and defeat enemy anti-access area denial capabilities.

Yes, what does that mean? It means many billions of dollars of more profits for the military/security complex while the 99 percent are ground under the boot. It is also clear that this nonsensical jargon cannot defeat a Chinese army. But this kind of saber-rattling can lead to war, and if the Washington morons get a war going, the only way Washington can prevail is with nuclear weapons. The radiation, of course, will kill Americans as well.

Nuclear war is on Washington’s AGENDA. The rise of the Neocon Nazis has negated the nuclear disarmament agreements that Reagan and Gorbachev made. The extraordinary, mainly truthful 2012 book, The Untold History of the United States by Oliver Stone and Peter Kuznick, describes the post-Reagan breakout of preemptive nuclear attack as Washingtons first option.

During the COLD WAR nuclear weapons had a defensive purpose. The purpose was to prevent nuclear war by the US and USSR each having sufficient retaliatory power to ensure “mutually assured destruction.” MAD, as it was known, meant that nuclear weapons had no offensive advantage for either side.

The Soviet collapse and China’s focus on its economy instead of its military have resulted in Washingtons advantage in nuclear weaponry that, according to two US Dr. Strangeglove characters, Keir Lieber and Daryl Press, gives Washington first-strike capability. Lieber and Press writethat the “precipitous decline of Russias arsenal, and the glacial pace of modernization of China’s nuclear forces, have created a situation in which neither Russia nor China could retaliate to Washington’s first strike. “

The Pentagons “AirSea Battle” and “Lieber and Press” article in Foreign Affairs have informed China and Russia that Washington is contemplating pre-emptive nuclear attack on both countries. To ensure Russias inability to retaliate, Washington is placing anti-ballistic missiles on Russia’s borders in violation of the US-USSR agreement.

Because the American press is a corrupt government propaganda ministry, the American people have no idea that neoconized Washington is planning nuclear war. Americans are no more aware of this than they are of former President Jimmy Carters recent statement, reported only in Germany, that the United States no longer has a functioning democracy.

The possibility that the United States would initiate nuclear war was given reality eleven years ago when President George W. Bush, at the urging of Dick Cheney and the neocons that dominated his regime, signed off on the 2002 Nuclear Posture Review.

This neocon document, signed off on by America’s most moronic president, resulted in consternation and condemnation from the rest of the world and launched a new arms race. Russian President Putin immediately announced that Russia would spend all necessary sums to maintain Russias retaliatory nuclear capability. The Chinese displayed their prowess by knocking a satellite out of space with a missile. The mayor of Hiroshima, recipient city of a vast American war crime, stated: “The nuclear Non-Proliferation Treaty, the central international agreement guiding the elimination of nuclear weapons, is on the verge of collapse. The chief cause is US nuclear policy that, by openly declaring the possibility of a pre-emptive nuclear first strike and calling for resumed research into mini-nukes and other so-called useable nuclear weapons, appears to worship nuclear weapons as God.”

Polls from all over the world consistently show that Israel and the US are regarded as the two greatest threats to peace and to life on earth. Yet, these two utterly lawless governments prance around pretending to be the “worlds’ greatest democracies.” Neither government accepts any accountability whatsoever to international law, to human rights, to the Geneva Conventions, or to their own statutory law. The US and Israel are rogue governments, throwbacks to the Hitler and Stalin era.

The post World War II wars originate in Washington and Israel. No other country has imperial expansionary ambitions. The Chinese government has not seized Taiwan, which China could do at will. The Russian government has not seized former constituent parts of Russia, such as Georgia, which, provoked by Washington to launch an attack, was instantly overwhelmed by the Russian Army. Putin could have hung Washingtons Georgian puppet and reincorporated Georgia into Russia, where it resided for several centuries and where many believe it belongs.

For the past 68 years, most military aggression can be sourced to the US and Israel. Yet, these two originators of wars pretend to be the victims of aggression. It is Israel that has a nuclear arsenal that is illegal, unacknowledged, and unaccountable. It is Washington that has drafted a war plan based on nuclear first strike. The rest of the world is correct to view these two rogue unaccountable governments as direct threats to life on earth.

SOURCE

Posted by Elvis on 07/28/13 •
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Tuesday, March 26, 2013

Bad Moon Rising Part 60 - The Bank Account Tax

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Today Cyprus. Tommorrow it could be everybopdy else.
When are we going to do something as a collective?

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Euro Group Head: Looting of Bank Accounts a Template For EU
More deposits to be plundered across continent

Paul Joseph Watson
Infowars
March 25, 2013

The looting of private bank accounts to cover the gambling losses of big banks is a new template for the euro zone, according to Dutch Finance Minister and President of the Eurogroup of euro zone finance ministers Jeroen Dijsselbloem

With savers in Cyprus set to have 40% of their wealth plundered in order to fund an EU bailout package, Dijsselbloem indicated that this new model of bank “restructuring” was set to be replicated across the continent.

"If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?. If the bank can’t do it, then well talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” Dijsselbloem TOLD REUTERS.

“Uninsured deposit holders means anyone unfortunate enough to have squirreled away more than 100,000 euros under the delusion that it wouldn’t be swiped from under their noses by EU technocrats.”

His remarks helped send the euro single currency plummeting, before a spokeswoman for Dijsselbloem LUDICROUSLY ATTEMPTED TO REWRITE HISTORY and claim that he didn’t say Cyprus was a template for bank restructurings.

In reality, the minister is merely echoing what other banking chiefs have already admitted in the wake of the Cyprus crisis - that no one in Europe is safe from having their savings looted.

Hours after the announcement that Cypriot savers were set to see their deposits plundered, Joerg Kraemer, chief economist of the German Commerzbank, called for private savings accounts IN ITALY to be similarly plundered. “A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product,” he told Handelsblatt.

As Zero Hedge REPORTS, by calling the Cyprus looting a bank restructuring and not a tax, technocrats were able to bypass the democratic process.

What Cyprus allowed was the effective usurpation of democracy - the only reason the Cypriot bailout passed (at least so far) is because it was structured as a bank restructuring, a financial system resolution, not a tax, and thus not in need of a parliamentary, democratic vote. Because as Cyprus also showed, votes to deprive depositors of cash, whether insured or uninsured, simply wont fly.

SOURCE

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A Word Out Of Place Sends Europe Tumbling

By Tyler Durden
ZeroHedge
March 25, 2013

Perhaps the best example of a “word out of place” comes from the new Eurogroup head, Dijsselbloem, also phonetically known as Diesel-BOOM, who just may have ushered in the next, next wave of the Eurozone crisis:

Cyprus a Template For EU

Er… wasn’t it a special case, inside a unique case, wrapped in a one-time case? We will ignore the rather hilarious Freudian slip, and focus on what he was explicitly talking about with REUTERS, which is the resolution model which was just put in place in Cyprus:

A rescue programme agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors, the head of the region’s finance ministers said.

“What we’ve done last night is what I call pushing back the risks,” Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times hours after the Cyprus deal was struck.

“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” he said.

After 12 hours of talks with the EU and IMF, Cyprus agreed to shut down its second largest bank, with insured deposits - those below 100,000 euros - moved to the Bank of Cyprus, the country’s largest lender. Uninsured deposits, those accounts with more than 100,000 euros, face losses of 4.2 billion euros.

Uninsured depositors in the Bank of Cyprus will have their accounts frozen while the bank is restructured and recapitalised. Any capital that is needed to strengthen the bank will be drawn from accounts above 100,000 euros.

The agreement is what is known as a “bail-in”, with shareholders and bondholders in banks forced to bear the costs of the restructuring first, followed by uninsured depositors. Under EU rules, deposits up to 100,000 euros are guaranteed.

The punchline:

The approach marks a radical departure for euro zone policy after three years of crisis in which taxpayers across the region have effectively been on the hook for resolving problem banks and indebted governments via multiple rescue programmes.

That process, with governments and taxpayers bearing the costs and providing the back stop, had to stop, Dijsselbloem said. Recent financial market calm meant now was the time to make the change, although he conceded there was some concern that it could unsettle markets again.

If adopted by the euro zone, Dijsselbloem’s template could also sound a death knell for a plan hatched nine months ago when the euro zone debt crisis was threatening to blow the currency area apart.

Then, euro zone leaders agreed that the bloc’s future rescue fund should be allowed to recapitalise banks directly, thereby breaking the debilitating link between teetering banks and weak governments forced to bail them out. That may now never happen.

Asked what the new approach meant for euro zone countries with highly leveraged banking sectors, such as Luxembourg and Malta, and for other countries with banking problems such as Slovenia, Dijsselbloem said they would have to shrink banks down.

“It means deal with it before you get in trouble. Strengthen your banks, fix your balance sheets and realise that if a bank gets in trouble, the response will no longer automatically be that we’ll come and take away your problem. We’re going to push them back. That’s the first response we need. Push them back. You deal with them.”

Translation: it now officially sucks to be an unsecured creditor in Europe. In other words: an uninsured depositor.

Why this ad hoc dramatic shift in the European approach to bank solvency, which if anything makes the link between bank and sovereign closer than ever, and crushes all that Draghi achieved in the summer of 2012?

Simple: because what Cyprus allowed was the effective usurpation of democracy - the only reason the Cypriot bailout “passed” (at least so far) is because it was structured as a bank restructuring, a financial system “resolution”, not a tax, and thus not in need of a parliamentary, democratic vote. Because as Cyprus also showed, votes to deprive depositors of cash, whether insured or uninsured, simply won’t fly.

Hence the shift.

However, there is a problem: it means that depositors are now fair game everywhere, and that the ESM or EFSF, with their unlimited scope but “democratic” impleention pathway, are on the backburner.

And now, the scramble to pull uninsured deposits out of banks everywhere begins. Thanks to the new Eurogroup head.

“You ask for miracles, Theo. I give you Diesel-BOOM”

And now, every European depositor is going to their local financial dictionary to look up the definition of General Unsecured Claims, only to see a picture of… themselves.

SOURCE

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Cyprus loan deal is like planting a bomb in the financial system

RT News
March 26, 2013

Cyprus new deal isn’t a bailout at all it’s an overnight assassination, Chrysostomos Adamides from the Wake up Cyprus’ group told RT.

He added that the governments plan is like planting a bomb in the structure of the financial system itself.

Adamides’ thoughts were echoed by thousands of high school and university students on Tuesday, as they marched to the presidential palace in the Cypriot capital of Nicosia. The demonstrators chanted slogans and said their future had been stolen.

Cyprus bailout plan has angered the island nation, as the government threatens to take a 40 per cent tax from accounts held in the country’s two largest banks.

Financial institutions across the country are shut down until Thursday to prevent a massive run on accounts.

RT: You’re in the Cypriot capital - how are people responding to the financial turbulence? And how much patience do you think they have left?

Chrysostomos Adamides: The people are shocked because at the end of the day they did not expect these decisions from the Eurogroup. I dont think it’s correct to speak for a bailout. This is not a bailout. It can be best described as an overnight assassination.

Because with the decision that the Eurogroup has taken, they have pretty much destroyed 40% of the economy and now they will also add on top of the debt problem that we already have, another loan, and you have to understand that the math will not work.

RT: You talk about 40% of what they call taxes, 40% being taken out of certain various bank accounts with more than 100,000 euros. Not just the big players, the little average people are also being hurt by this. The banks are closed until Thursday - how are people expected to survive?

CA: Obviously were facing a new paradigm in the EU. This is the first time that this has been done but obviously you do understand it’s like planting a bomb in the structure of the financial system itself. Therefore I cant see how any investor or people can keep their money in the banks when now that we will have a debt problem twice or more as bad as it was before. Obviously they will be afraid for a new levy on bank deposits so how are they expected to keep their deposits in the bank and if they are not, how do the banks expect to continue?

RT: The head of the largest Cypriot bank resigned after it was announced that the Bank of Cyprus will inherit billions of toxic assets from Laiki bank. Do you believe that the country’s banking system will withstand such a challenge?

CA: This has been done elsewhere, we all know the example of Greece. And the head of the bank of Cyprus has resigned for a very good reason because he obviously acknowledges that they cannot go on with these terms and conditions demanded by the Troika. Therefore, there is no other solution. They should have said no to these demands from the beginning and if they would like us to continue as partners in the EU, then obviously we need to remain partners and not just be pushed around because of our political position and because of the problems we’ve been facing since 1974 and the illegal occupation of Turkey.

RT: A lot of the bankers on Cyprus have been pressured from Brussels by the EU politicians there. However, at the end of the day, do you trust the bankers now?

CA: That is a very funny question. Who can trust the bankers? Dont forget that this whole debacle started from the banks themselves. Now we are being asked to trust the banks. This is a joke. It cannot be asked of the people to do that. What the regulators should have done is have the mechanisms in place since obviously they cannot control the market, to actually have a face save mechanism when things go wrong, to be able to control it somehow. Instead, in the EU they are still discussing about the mechanisms and every single bailout has new terms and conditions. We have seen this five times. No two bailouts are exactly the same in the Eurozone. And obviously this is not something that has started now. It’s been going on since the 70s.

SOURCE

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The Confiscation of Bank Savings to Save the Banks: The Diabolical Bank “Bail-In” Proposal

By Prof Michel Chossudovsky
Global Research
April 2, 2013

Is the Cyprus’ “Bank Bail-in” a “dress rehearsal” for things to come?

Is a “Savings Heist” in the European Union and North America envisaged which could result in the outright confiscation of bank deposits?

In Cyprus, the entire payments system has been disrupted leading to the demise of the real economy.

Pensions and wages are no longer paid. Purchasing power has collapsed.

The population is impoverished.

Small and medium sized enterprises are spearheaded into bankruptcy.

Cyprus is a country with a population of one million.

What would happen if similar “hair cut” procedures were to be applied in the U.S. or the European Union?

According to the Washington based INSTITUTE OF INTERNATIONAL FINANCE (IIF) (right) which represents the consensus of the global financial establishment,” the Cyprus approach of hitting depositors and creditors when banks fail, would likely become a model for dealing with collapses elsewhere in Europe. (ECONOMIC TIMES, March 27, 2013).

It should be understood that prior to the Cyprus onslaught, the confiscation of bank deposits had been contemplated in several countries. Moreover, the powerful financial actors who triggered the bank crisis in Cyprus, are also the architects of the socially devastating austerity measures imposed in the European Union and North America.

Does Cyprus constitute a model or scenario?

Are there “lessons to be learned” by these powerful financial actors, to be applied elsewhere, at some later stage, in the Eurozones banking landscape?

According to the Institute of International Finance (IIF), “hitting depositors” could become the “new normal” of this diabolical project, serving the interests of the global financial conglomerates.

This new normal is endorsed by the IMF and the European Central Bank.  According to the IIF which constitutes the banking elites mouthpiece, “Investors would be well advised to see the outcome of Cyprus as a reflection of how future stresses will be handled.” (quoted in ECONOMIC TIMES, March 27, 2013)

“Financial Cleansing.” Bail-ins in the US and Britain

What is at stake is a process of “financial cleansing” whereby the too big to fail banks in Europe and North America (e.g. Citi, JPMorgan Chase, Goldman Sachs, et al ) displace and destroy lesser financial institutions, with a view to eventually taking over the entire banking landscape.”

The underlying tendency at the national and global levels is towards the centralization and concentration of bank power, while leading to the dramatic slump of the real economy.

Bail ins have been envisaged in numerous countries. IN NEW ZEALAND - A HAIRCUT PLAN was envisaged as early as 1997 coinciding with Asian financial crisis.

There are provisions in both the UK and the US pertaining to the confiscation of bank deposits.  In a joint documentof the Federal Deposit Insurance Corporation (FDIC) and the Bank of England, entitled Resolving Globally Active, Systemically Important, Financial Institutions, explicit procedures were put forth whereby the original creditors of the failed company, meaning the depositors of a failed bank, would be converted into equity. (See Ellen Brown, IT CAN HAPPEN HERE: The Bank Confiscation Scheme for US and UK Depositors,Global Research, March 2013)

What this means is that the money confiscated from bank accounts would be used to meet the failed banks financial obligations. In return, the holders of the confiscated bank deposits would become stockholders in a failed financial institution on the verge of bankruptcy.

Bank savings would be transformed overnight into an illusive concept of capital ownership. The confiscation of savings would be adopted under the disguise of a bogus compensation in terms of equity.

What is envisaged is the application of a selective process of confiscation of bank deposits, with a view to collecting debt while also triggering the demise of weaker financial institutions. In the US, the procedure would bypass the provisions of the Federal Deposit Insurance Corporation (FDIC) which insures deposit holders against bank failures:

No exception is indicated for insured deposits in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. The FDIC is an insurance company funded by premiums paid by private banks.  The directive is called a resolution process, DEFENED ELSEWHERE as a plan that would be triggered in the event of the failure of an insurer . . . . The only mention of insured deposits is in connection with existing UK legislation, which the FDIC-BOE directive goes on to say is inadequate, implying that it needs to be modified or overridden. (Ibid)

Because depositors are provided with a bogus compensation, they are not eligible to the FDIC deposit insurance.

Canada’s Deposit Confiscation Proposal

The most candid statement of confiscation of bank deposits as a means to saving the banksӔ is formulated in a recently released documentof the Canadian government entitled Jobs, Growth and Long Term Prosperity: Economic Action Plan 2013″.

The latter was submitted to the House of Commons by CanadaӒs Minister of Finance Jim Flaherty on March 21 as part of a so-called pre-budgetӔ proposal.

A short section of the 400 report entitled Risk Management Framework for Domestic Systemically Important BanksӔ identifies bail-in procedure for Canadas chartered banks. The word confiscation is not mentioned. Financial jargon serves to obfuscate the real intent which essentially consists in stealing peopleҒs savings.

Under the Canadian Risk Management project:

The Government proposes to implement a bail-inђ regime for systemically important banks.

This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.

This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.

What this signifies is that if one or more banks (or credit unions) were obliged to systemically deplete their capital to meet the demands of their creditors, the banks would be recapitalized through the conversion of certain bank liabilities into regulatory capital.

The certain bank liabilities pertains (in technical jargon) to the money they owe their customers, namely to their depositors, whose bank accounts would be confiscated in exchange for shares (equity) in a failing banking institution.

This will reduce risks for taxpayers is a nonsensical statement. What this really means is that the government will not provide funding to compensate depositors who are victims of a failed banking institution, nor will it come to rescue of the failed institution.

Instead the depositors will be obliged to give up their savings. The money confiscated will then be used by the bank to meet their liabilities contracted with major financial creditor institutions. In other words, this entire scheme is “a safety net” for too big to fail banks, a mechanism which enables them as creditors to overshadow lesser banking institutions including credit unions, while precipitating either their collapse or their takeover.

Canada’s Financial Landscape

The Risk Management Bail in initiative is of crucial significance for Canadians across the land: once it is adopted by the House of Commons as part of the budget package, the Bail-in procedures could be applied.

The Conservative government has a parliamentary majority. There is a good likelihood that the Economic Action Plan 2013″ which includes the Bail-in procedure will be adopted.

While Canadas Risk Management Framework intimates that Canada’s banks are at risk, particularly those which have accumulated large debts (as a result of derivative losses), a generalised across the board application of the “Bail in is not contemplated.

The likely scenario in the foreseeable future is that Canadas “big five” banks, Royal Bank of Canada, TD Canada Trust, Scotiabank, Bank of Montreal and CIBC (all of which have powerful affiliates operating in the US financial landscape) will consolidate their position at the expense of lesser (provincial level) banks and financial institutions.

The Government documentintimates that the Bail-in could be used selectively in the unlikely event that one [bank] becomes non-viable. What this suggests is that at least one or more of Canada’s lesser banks could be the object of a bail-in. Such a procedure would inevitably lead to a greater concentration of bank capital in Canada, to the benefit of the larger financial conglomerates.

Displacement of Provincial Level Credit Unions and Cooperative Banks

There is an important network of over 300 provincial level credit unions and cooperative banks including the powerful Desjardins network in Quebec, the Vancouver City Savings Credit Union (Vancity) and the Coastal Capital Savings in British Columbia, Servus in Alberta, Meridian in Ontario, the caisses populaires in Ontario (affiliated to Desjardins), among many others, which could be the target of selective Bail-in operations.

In this context, what is likely to occur is a significant weakening of provincial level cooperative financial institutions, which have a governance relationship to their members (including representative councils) and which, in the present context, offer an alternative to the Big Five chartered banks. According to recent data, there are more than 300 credit unions and caisses populaires in Canada which are members of the Credit Union Central of Canada.

New Normal: International Standards Governing the Confiscation of Bank Deposits

Canada’s Economic Action Plan 2013 acknowledges that the proposed Bail-in framework “will be consistent with reforms in other countries and key international standards.” Namely, the proposed pattern of confiscating bank deposits as described in the Canadian government documentis consistent with the model contemplated in the US and the European Union.  This model is currently a “talking point” (behind closed doors) at various international venues regrouping central bank governors and finance ministers.

The regulatory agency involved in these multilateral consultations is the Financial Stability Board (FSB) based in Basel, Switzerland and hosted by the Bank for International Settlements (BIS) (image right). The FSB happens to be chaired by the governor of the Bank of Canada, Mark Carney, who was recently appointed by the British government to head the Bank of England starting in June 2013.

Mark Carney, as Governor of the Bank of Canada, was instrumental in shaping the provisions of the Bail-in for Canada’s chartered banks. Before his career in central banking, he was a senior executive at Goldman Sachs, which has played a behind the scenes role in the implementation of the bank bailouts and austerity measures in the EU.

The FSBs mandate would be to coordinate the bail-in procedures, in liaison with the national financial authorities and international standard setting bodies which include the IMF and the BIS. It should come as no surprise: the deposit confiscation procedures in the UK, the US and Canada examined above are remarkably similar.

Bank “Bail-ins” vs. Bank “Bail-outs”

The bailouts are rescue packages whereby the government allocates a significant portion of State revenues in favor of failed financial institutions. The money is channeled from the coffers of the State to the banking conglomerates.

In the US in 2008-2009, a total of $1.45 trillion was channeled to Wall Street financial institutions as part of the Bush and Obama rescue packages.

These bailouts were considered as a De facto government expenditure category. They required the implementation of austerity measures. Together with massive hikes in military expenditure, the bailouts were financed through drastic cuts in social programs including Medicare, Medicaid and Social Security.

In contrast to the Bailout, which is funded from the public purse, the Bail-in requires the (in-house) confiscation of bank deposits. The bail-ins are implemented without the use of public funds. The regulatory mechanism is established by the central bank.

At the outset of Obama’s first term in January 2009, a bank bailout of the order of $750 billion was announced by Obama, which was added on to the 700 billion dollar bailout money allocated by the outgoing Bush administration under the Troubled Assets Relief Program (TARP).

The total of both programs was a staggering 1.45 trillion dollars to be financed by the US Treasury. (It should be understood that the actual amount of cash financial aid to the banks was significantly larger than $1.45 trillion. In addition to this amount defence allocations to fund Obama’s war economy (FY 2010) was a staggering $739 billion. Namely the bank bailouts plus defence combined ($2189 billion) eat up almost the totality of the federal revenues which in FY 2010 amounted to $2381 billion.

Concluding remarks

What is occurring is that the bank bailouts are no longer functional. At the outset of Obama’s Second term, the coffers of the state are empty. The austerity measures have reached a deadlock.

The bank “bail-ins” are now being contemplated instead of the “bank bailouts.”

The lower and middle income groups which are invariably indebted will not be the main target. The appropriation of bank deposits would essentially target the upper middle and upper income groups which have significant bank deposits. The second target will be the bank accounts of small and medium sized firms.

This transition is part of the evolution of the global economic crisis and the impasse underlying the application of the austerity measures.

The purpose of the global financial actors is to wipe out competitors, consolidate and centralize bank power and exert an overriding control over the real economy, the institutions of government and the military.

Even if the bail-ins were to be regulated and applied selectively to a limited number of failing financial institutions, credit unions, etc, the announcement of a program of confiscation of deposits could potentially lead to a generalized run on the banks. In this context, no banking institution would be regarded as safe.

The application of Bail-in procedures involving deposit confiscation (even when applied locally or selectively) would create financial havoc. It would interrupt the payments process. Wages would no longer be paid. Purchasing power would collapse. Money for investment in plant and equipment would no longer be forthcoming. Small and medium sized businesses would be precipitated into bankruptcy.

The application of a Bail-In in the EU or North America would initiate a new phase of the global financial crisis, a deepening of the economic depression, a greater centralization of banking and finance, increased concentration of corporate power in the real economy to the detriment of regional and local level enterprises.

In turn, an entire global banking network characterized by electronic transactions (which govern deposits, withdrawals, etc), not to mention money transactions on the stock and commodity markets - could potentially be the object of significant disruptions of a systemic nature.

The social consequences would be devastating. The real economy would plummet as a result of the collapse in the payments system.

The potential disruptions in the functioning of an integrated global monetary system could result in a a renewed global economic meltdown as well as a drop off in international commodity trade.

It is important that people across the land, in the European Union and North America, nationally and internationally, forcefully act against the diabolical ploys of their governments - acting on behalf of dominant financial interests - to implement a selective process of bank deposit confiscation.

SOURCE

Posted by Elvis on 03/26/13 •
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Thursday, March 21, 2013

Bad Moon Rising Part 59 - The China Dream

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Xi Jinping calls for a Chinese Dream
In his inaugural address as president, and with a few rhetorical flourishes that Barack Obama would be proud of, Xi Jinping grandly laid out his vision of the “Chinese Dream.”

By Malcolm Moore. Additional reporting by Valentina Luo
The Telegraph
March 17, 2013

Broadcast live on almost every major television channel, Mr Xi called for a “great renaissance of the Chinese nation”, returning China to its former position at the centre of the world.

After ten years of interminable and largely incomprehensible speeches from Hu Jintao, the 59-year-old Mr Xi struck a far more confident, relaxed and reflective tone.

Mr Xi’s daughter studies at Harvard, his ex-wife lives in Britain and he has sisters in both Canada and Australia.

His father, meanwhile, once memorably flew over Manhattan in a helicopter, taking notes on how China should build its cities, shopped at Bloomingdales and danced the hula in a grass skirt.

Not only is Mr Xi more familiar with the outside world than Mr Hu, but he also has the confidence to present himself as such. Of all the senior leaders of the Communist party, he has perhaps the most illustrious pedigree. 

Again and again he invoked the Chinese Dream”, a call to arms that he hopes will bring the country’s increasingly fragmented society together.

UNLIKE the AMERICAN DREAM, however, which exalts the opportunity for each individual to achieve success through hard work, the Chinese Dream as told by Mr Xi owes much to collectivism.

“The Chinese spirit brings us together and builds our country together,” said Mr Xi. To create the Chinese Dream we must unite all Chinese power.

“As long as we stay united, we will share the opportunity to make our dreams come true”.

The dream, according to commentators, is to return China to the position it held in the middle ages: the world’s most advanced and civilised nation.

Recognising the spiritual vacuum at the heart of China’s economic miracle, Mr Xi seems keen to fill it with a sense that the country could recreate its glorious history.

As China’s middle class expands, and the publics aspirations grow, it is a narrative that Mr Xi hopes will continue to gel its 1.3 billion citizens together.

“The Chinese Dream is well on its way to becoming a popular political term for the coming decade,” wrote Wang Yiwei in the Global Times newspaper. “It goes beyond economic development, to focus on what path China will choose after it becomes developed,” he added.

After Mr Xi, Li Keqiang, the new Chinese prime minister, took staged questions from the media for over an hour-and-a-half, spelling out some concrete proposals for combatting bureaucracy and government waste.

Perhaps in a reference to his predecessor, Wen Jiabao, whose family has reportedly amassed a L1.8 billion fortune, Mr Li said: Clean government should start with oneself. Only when one is upright himself can he or her ask others to be upright.

“Since we have chosen public office we should give up all thought of making money. We will accept the supervision of the whole public and the media.”

He promised that, during his ten years of office, no new government buildings would be commissioned, the number of bureaucrats on the payroll will decrease, and that spending on hospitality and overseas travel will fall.

SOURCE

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China on the move first steps

Eidard
April 9, 2013

There are few Americans offering the insight and experience of Stephen Roach when facing questions of China, growth and change, means and methods. Fortunately, since he retired from the world of commerce and finance he hasn’t departed the arena of education. I may not be able to sneak into Yale classrooms anymore since I live over 2000 miles away. But, online - through sources like Project Syndicate - and courtesy of his appearances on Bloomberg TV, especially with Tom Keene, I manage to keep my knowledge bump thumped often enough to have a fighting chance to keep up with China realities - realities otherwise avoided by pundits and politicians.

Wander through the article. His insight about urbanization goals are particularly provoking. Its all useful stuff.

There were no surprises in the basic thrust of the strategy a structural shift in China’s investment- and export-led growth model toward a more balanced consumer-based and services-led economy. The transformation reflects both necessity and design.

It is necessary because persistently weak global growth is unlikely to provide the solid external demand for Chinese exports that it once did. But it is also essential, because Chinas new leadership seems determined to come to grips with a vast array of internal imbalances that threaten the environment, promote destabilizing income inequality, and exacerbate regional disparities.

The strategic shift is also a deliberate effort by Chinese policymakers to avoid the dreaded “middle-income” trap - a mid-stage slowdown that has ensnared most emerging economies when per capita income nears the $17,000 threshold (in constant international prices). Developing economies that maintain their old growth models for too long fall into it, and China probably will hit the threshold in 3-5 years

What is new today is the focus on urbanization’s negative externalities especially the thorny issues of land confiscation and environmental degradation. A well-developed ֓eco-city framework was presented at this year’s forum to counter both concerns, and features incentives promoting a new urbanization model that stresses compact land usage, mixed modes of local transportation, lighter building materials, and non-carbon energy sources.

The second insight from the 2013 China Development Forum is the new governments focus on strengthening the social safety net as a pillar of a modern consumer society. In particular, owing to the hukou (China’s antiquated household registration system), access to public services and benefits is not portable. As a result, migrant workers an underclass numbering roughly 160 million - remain shut out of government-supported health care, education, and social security

The final - and possibly most important - insight that I took away from the Forum concerned the quality of China’s new leaders. From President Xi Jinping and Premier Li Keqiang on down, Chinas new leadership team is quite sophisticated in terms of analytics, risk assessment, scenario modeling, and devising innovative solutions to tough problems. Moreover, under the organizational umbrella of the National Development and Reform Commission (NDRC) Җ the latter-day version of the old central planning apparatus China has marshaled considerable resources into the formulation of a comprehensive and well-thought-out economic strategy…

VISION AND STRATEGY ARE VITAL FOR THE CHINA DREAM as the country’s new leaders are now calling it. But it will take courage and sheer determination to tackle what is perhaps the biggest obstacle of all resistance from deeply entrenched local and provincial power blocs. On this critical front, strong words must be accompanied by bold action.

SOURCE

Bad Moon Rising
Part 1 - Part 2 - Part 3 - Part 4 - Part 5
Part 6 - Part 7 - Part 8 - Part 9 - Part 10
Part 11 - Part 12 - Part 13 - Part 14 - Part 15
Part 16 - Part 17 - Part 18 - Part 19 - Part 20
Part 21 - Part 22 - Part 23 - Part 24 - Part 25
Part 26 - Part 27 - Part 28 - Part 29 - Part 30
Part 31 - Part 32 - Part 33 - Part 34 - Part 35
Part 36 - Part 37 - Part 38 - Part 39 - Part 40
Part 41 - Part 42 - Part 43 - Part 44 - Part 45
Part 46 - Part 47 - Part 48 - Part 49 - Part 50
Part 51 - Part 52 - Part 53 - Part 54 - Part 55
Part 56 - Part 57 - Part 58 - Part 59

Posted by Elvis on 03/21/13 •
Section Bad Moon Rising
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Saturday, March 02, 2013

Bad Moon Rising Part 58 - Brazil Gets Defense Contracts

bmr1.jpg

TODAY is a big day. AUSTERITY has officially hit America. Although a big part of THE PROBLEM is the economy - specifically JOBS, and America’s TECHNOLOGICAL leadership in the world - the powers that be seem MORE THAN INTENT in driving the country I love - INTO a GRAVE.

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Obama Sends 1,400 Manufacturing Jobs & Sensitive Technology to Brazil

By Jim Hoft
The Gateway Pundit
February 28, 2013

Yesterday, after a conflict-fraught deliberation process, the Obama Administration awarded the Light Air Support (LAS) contract to Brazilian-based Embraer over Beechcraft; a Wichita Kansas based company with a long history of supplying the U.S. military with aircraft.  Had Beechcraft been granted the contract, the company expected to add or sustain 1,400 JOBS in the U.S.  The Embraer plane, on the other hand, will be primarily built in Brazil, with ONLY ABOUT 50 ASSEMBLY JOBS IN THE US.

After a long-drawn-out contracting process that has been marred in controversy and questionable conduct by government officials, the Pentagon and the Obama Administration have again decided to put taxpayers at risk and ship jobs overseas by allowing a foreign company to produce important components of our national security.

On Thursday February 27th, Department of Defense (DOD) officials awarded the Light Air Support (LAS) contract to the Brazilian aircraft maker, Embraer. Interestingly and without explanation, the cost of the contract to taxpayers somehow ballooned from $355 million to $427.5 million, a 20 percent increase. With sequestration and billions of dollars in defense cuts set to take place, taxpayers should be outraged at this cost increase.

“By awarding the contract to the Brazilians, the Administration has once again failed to give Beechcraft, the American-made aircraft manufacturer vying for the contract, the full and fair consideration that was required during the procurement process.”

“Now, the Administration is doubling-down on their prior mistakes by putting a critical defense project in the hands of a foreign sovereign. The extent of the carnage this decision causes is not just limited to the millions that will be sent overseas for these 20 LAS aircraft in the near-term. There are broader implications and untold billions of taxpayer dollars at stake by the Pentagon’s decision to grant the U.S. Air Forces seal of approval to a foreign entity - backed financially and politically by Brazil. The Brazilian government has a golden share in Embraer, which essentially translates into operational control of the company. Not only does this put tax dollars at risk with the Brazilian company, but also could threaten US national security. The Administrations unjustifiable endorsement of this Brazilian company could be exploited by them to gain unfair and unwarranted advantages in the U.S. and around the world. Meanwhile, domestic manufacturers are forced to cut jobs and highly skilled workers remain unemployed here at home.”

Beechcraft just EMERGED from Chapter 11 bankruptcy.

SOURCE

Bad Moon Rising
Part 1 - Part 2 - Part 3 - Part 4 - Part 5
Part 6 - Part 7 - Part 8 - Part 9 - Part 10
Part 11 - Part 12 - Part 13 - Part 14 - Part 15
Part 16 - Part 17 - Part 18 - Part 19 - Part 20
Part 21 - Part 22 - Part 23 - Part 24 - Part 25
Part 26 - Part 27 - Part 28 - Part 29 - Part 30
Part 31 - Part 32 - Part 33 - Part 34 - Part 35
Part 36 - Part 37 - Part 38 - Part 39 - Part 40
Part 41 - Part 42 - Part 43 - Part 44 - Part 45
Part 46 - Part 47 - Part 48 - Part 49 - Part 50
Part 51 - Part 52 - Part 53 - Part 54 - Part 55
Part 56 - Part 57 - Part 58 - Part 59

Posted by Elvis on 03/02/13 •
Section Bad Moon Rising
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