Minneapolis Socialist candidate arrested

 Ty Moore is a socialist candidate for Minneapolis city council

Socialist Alternative City Council Candidate Arrested for Civil Disobedience at Housing Justice Rally

Posted by Christopher Gray 55pc on February 27, 2013 · 

Joined by 13 community members, union leaders and clergy, Ward 9 City Council candidate Ty Moore was arrested in a civil disobedience at the Wells Fargo Home Mortgage center, standing up for housing rights for all Minneapolis residents.

Running as a Socialist Alternative candidate and endorsed by the Green Party, Ty Moore said, “Our neighborhoods are being torn apart by unjust foreclosures. Instead of lip service, the Mayor and City Councilors should be here with us today, putting their political careers and their bodies on the line for those most impacted by the economic crisis.”

Ward 9 is among the hardest hit communities by the foreclosure crisis.It is also home to five residents facing eviction who have refused to move, and declared their neighborhoods a “Foreclosure and Eviction Free Zone.” In the Powderhorn and Central neighborhoods alone, 835 families have been foreclosed in the past five years. Ty Moore, a homeowner in Powderhorn, is an organizer with Occupy Homes and is demanding banks forgive the negative equity debt owed by Minneapolis residents to Wall Street and to halt foreclosures until a just negotiation is achieved.

Earlier in the evening, Jessica English, a mother of four experiencing homelessness, moved into one of the numerous bank-owned vacant properties owned by Wells Fargo in Ward 9. English expressed enthusiasm for Ty Moore’s campaign, commenting “I could be arrested at any time at the hands of the police for the simple crime of needing a roof over my children’s heads. Finally, we have a serious candidate to stand with families fighting for justice in the Foreclosure and Eviction Free Zone.”

Socialist Alternative calls for public ownership of the banks to be run democratically in the interests of everyday people. In regard to his action today, Ty said: “When city officials ignore the issues most pressing to their residents, we have a responsibility to join others in collective action to bring attention to injustice. In the City Council, I will fight tooth and nail to achieve a foreclosure moratorium in this city, and to make sure quality housing is treated as a human right for all, not a commodity reserved for those who can afford it."
Please join Ty and Socialist Alternative, for the campaign kick-off next Saturday, March 9th, 7:30-9:30pm at May Day Cafe (3440 Bloomington Ave S).

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Crisis in the Vatican: Is Pope Benedict gay?

Pope Benedict: no more red shoes.

We reprint this piece below by Andrew Sullivan referred to in the media as the leading Catholic Blogger in the US.  Sullivan's Blog is "The Dish"  One can only imagine the conflict that must occur in the mind of a holy many, any holy man, whose job it is to demonize gays and lesbians and argue to the world that they are a threat to world peace if he or she has inner feelings towards people of the same sex that are for them the natural order of things.

This blog is not affiliated with The Dish, we share this for our readers' interest. 

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Two Popes, One Secretary

by Andrew Sullivan 

Feb 27 2013

The damage Benedict XVI has done to the Catholic church and the papacy may be far from over. All I can say about yesterday’s developments is that they seem potentially disastrous and also indicative to me of something truly weird going on underneath all of this.

Benedict XVI has claimed that his almost unprecedented resignation came about simply because of his physical infirmity in the face of what appears to be a growing vortex of sexual and financial scandal inside the Vatican. He said he would quietly disappear to serve the church through prayer and meditation. But we now realize he’s going nowhere. He’s staying in the Vatican’s walls, and retaining the honorific “His Holiness.” He will keep white robes. His full title will be Pope Emeritus. Far from wearing clerical black, returning to the title of Bishop of Rome, and disappearing into a monastery in Bavaria, he’s going to be a shadow Pope in the Vatican. And this, we are told, was his decision:

The Vatican spokesman, the Rev. Federico Lombardi, said Benedict himself had made the decision in consultation with others, settling on “Your Holiness Benedict XVI” and either emeritus pope or emeritus Roman pontiff. Lombardi said he didn’t know why Benedict had decided to drop his other main title: bishop of Rome.

If you were trying to avoid any hint of meddling, of a Deng Xiao Peng-type figure pulling strings behind the scenes, you would not be doing this. The only thing the Pope will give up, apparently, are his red Prada shoes. He has some fabulous brown leather artisanal ones to replace them. But this is what really made me sit up straight, so to speak:

Benedict’s trusted secretary, Monsignor Georg Gänswein, will be serving both pontiffs — living with Benedict at the monastery inside the Vatican and keeping his day job as prefect of the new pope’s household. Asked about the potential conflicts, Lombardi was defensive, saying the decisions had been clearly reasoned and were likely chosen for the sake of simplicity. “I believe it was well thought out,” he said.

So Benedict’s handsome male companion will continue to live with him, while working for the other Pope during the day. Are we supposed to think that’s, well, a normal arrangement? I wrote a while back about Gänswein’s intense relationship with Ratzinger, while noting Colm Toibin’s review of Angelo Quattrochi’s exploration of Benedict, “Is The Pope Gay?”. Here’s Toibin getting to some interesting stuff:

Gänswein is remarkably handsome, a cross between George Clooney and Hugh Grant, but, in a way, more beautiful than either. In a radio interview Gänswein described a day in his life and the life of Ratzinger, now that he is pope:

The pope’s day begins with the seven o’clock Mass, then he says prayers with his breviary, followed by a period of silent contemplation before our Lord. Then we have breakfast together, and so I begin the day’s work by going through the correspondence. Then I exchange ideas with the Holy Father, then I accompany him to the ‘Second Loggia’ for the private midday audiences. Then we have lunch together; after the meal we go for a little walk before taking a nap. In the afternoon I again take care of the correspondence. I take the most important stuff which needs his signature to the Holy Father.

When asked if he felt nervous in the presence of the Holy Father, Gänswein replied that he sometimes did and added: ‘But it is also true that the fact of meeting each other and being together on a daily basis creates a sense of “familiarity”, which makes you feel less nervous. But obviously I know who the Holy Father is and so I know how to behave appropriately. There are always some situations, however, when the heart beats a little stronger than usual.’

This man – clearly in some kind of love with Ratzinger (and vice-versa) will now be working for the new Pope as secretary in the day and spending the nights with the Pope Emeritus. This is not the Vatican. It’s Melrose Place.

(Photo: the Pope’s personal secretary Georg Ganswein adjusts Pope Benedict XVI’s cloak during the weekly audience in St. Peter’s Square on September 26, 2012 in Vatican City, Vatican. By Franco Origlia/Getty Images)

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Austerity USA Begins March 1st:

We reprint this article for the interest of our readers. Facts For Working People is not affiliated with Workers' Action. To read more from Global Research click on Center for Research and Globalization in the "links" list to the right.

 

Bipartisan Project to Impoverish the American People

By Shamus Cooke

Global Research, February 25, 2013

U.S. politicians have cried wolf over austerity long enough for the public to ignore them. A perfect time, then, for politicians to actually unleash the wolves. Barring an unlikely last minute deal, here’s a short list of some of the massive, national bi-partisan-created austerity cuts, according to the New York Times:

-600,000 food stamp recipients will be cut from the program
-Massive education cuts. According to President Obama:
“Once these cuts take effect thousands of teachers and educators will be laid off and tens of thousands of parents will have to scramble to find child care for their kids. ”
-12 billion in Medicare cuts (more to come after 2013)
-Millions receiving unemployment will see their checks cut by 11% (an average of 132 a month)
-Federal funds to state governments will be cut, creating even more deficits for states and municipalities, and thus more localized cuts (the states have already made austerity cuts of $337 billion!)

Also, 700,000 jobs are expected to be lost while 70,000 kids are also expected to be kicked off of Head Start

And this is just for 2013. The current plan for the austerity “sequester” cuts is $100 billion of federal cuts every year for ten years, equaling massive cuts to jobs, Medicare, education, and completely destroying federally funded social programs.
Will it actually happen this time? The New York Times reports: 

“In private, Capitol Hill staff members and members of Congress have admitted that there are no viable plans on the horizon to delay or offset the cuts.”

The finger pointing in Washington, D.C. has already reached a crescendo, with the perverted logic being that, if both parties are to blame, it’s really no one’s fault. In reality Democrats and Republicans created these “sequester” cuts, and they can just as easily undo them with a snap of the finger.Both parties are choosing not to delete the cuts. They just don’t want political responsibility for the fallout, which many economists have predicted will push the U.S. economy over the edge into official recession.

Obama has predictably blamed the Republicans for this mess, even though he personally began this process by creating the “deficit reduction commission” that helped shape the cuts (keep in mind there is zero debt crisis that calls for such drastic measures).

Obama could also just as easily appeal to the American public —over the heads of congressmen — to demand that the cuts be shelved forever. Instead, he’s proposing a “grand bargain” deal that he knows the Republicans won’t go for.
What’s in Obama’s grand bargain deal? According to the White House website:
-$130 billion in “savings” [cuts] to Social Security, by implementing a “superlative CPI.”
-$35 billion in “savings” [cuts] to the retirement of federal employees.
- $400 billion in health care “savings” [cuts], much of it Medicare cuts.

Obama cynically fails to mention the words Social Security or Medicare in the above plan, choosing instead to write in code (“superlative Consumer Price Index”). Obama’s plan to avoid the March 1st cuts still assumes that $500 billion in cuts will be implemented over the next ten years, as opposed to $1trillion.

But his plan is just a distraction. Obama knows his plan has no chance of being passed by March 1st. He’s falsely portraying his plan as the only alternative to the March 1st cuts, even though a far better idea — the one preferred by a vast majority of Americans — is to simply to shelve the sequester cuts forever. To not put forth this option makes Obama complicit in the cuts.

Many pundits have speculated that Congress will allow the cuts to go into effect for three weeks, since March 27th marks a fiscal deadline that will pressure Congress to maneuver anew.  This might trigger a new round of haggling over a new “grand bargain” that again targets “entitlement programs” and re-packages the massive cuts into a prettier box. The party that does the most effective finger pointing after the March 1st cuts will be in the best position to dictate matters post-March 27th, so say the pundits.

Whatever the actual result, the Democrats and Republicans share similar enough visions that massive cuts to cherished social programs appear to be inevitable. Much of the made-for-TV bickering is pure political posturing, meant to fool the working people most affected by these cuts into believing it’s “the other party” that’s responsible.

Politicians have been able to get away with this disgusting behavior because there are very few independent voices telling the truth about what’s happening. Many labor and progressive groups are consciously lying about the dynamic, placing blame squarely on the Republicans, thus allowing the Democrats not to be held accountable for their pandering to the corporate elite’s demand to use austerity to attack the social safety net. In reality both parties are jointly attacking working and poor people via austerity, on a city, state, and national level.

If Labor and community groups united in a demand of ‘No Cuts, Tax the Rich’ and organized massive mobilizations, there would be a very different public debate happening right now. It’s not too late for these groups to tear themselves from the jaws of their attackers.

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action (www.workerscompass.org) He can be reached at shamuscooke@gmail.com

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Italy: Goodbye Monti; hello the three Bs!

by Michael Roberts

So it’s goodbye to Mario Monti, the bankers man who took over as Italy’s ‘technocrat’ PM in a coup engineered by the Euro leaders to oust the Murdoch-type right wing leader Silvio Berlusconi back in 2011, when the euro crisis reached a new level and Berlusconi threatened to oppose further fiscal measures (see my post, http://thenextrecession.wordpress.com/2011/11/10/italy-and-greece-rule-by-the-bankers/).  He had to go and Monti came in to introduce fierce fiscal austerity and attacks on labour rights.  Then when Berlusconi forced an early election, Monti, believing in all the praise heaped on him by the Euro leaders would be reciprocated by the Italian electorate decided to run for parliament.  It’s been a disaster for him.  The bankers’ man has taken a fall, mainly due to the efforts of the two clowns in Italian politics;  Silvio (the unfunny one) and Beppi Grilli (the very funny one).  This just expresses the growing opposition to austerity and the policies of the Euro leaders.

The centre-left party, the Democrats (PD) led by Pier Luigi Bersani (picture), will get the largest vote in the lower house of parliament at about 31%.  But Berlusconi’s right wing People of Freedom (PdL) party has got about 28%, much better than was expected when the campaign began.  And the euro sceptic anti-politician movement of Beppe Grillo’s Five Star party has got an amazingly high 24%, while Monti has polled just 9%.   So the vote against the existing order and policies; against austerity and the Euro leaders; was at least 51%.  Italy’s electorate may still be in favour of staying in the euro but they are very much against austerity and the Euro leaders.  And much of the centre-left voters would also agree.  Italy’s voters have decisively rejected the current pro-capitalist policies.

And scepticism about austerity, corruption and general incompetence on the part of Italy’s political elite has also been expressed in the lowest election turnout since the war.  And it will be the lowest since compulsory voting was abolished in 1994, coming in at 75%.

The low turnout has been the story of other recent elections in the US and Japan (http://thenextrecession.wordpress.com/2012/11/07/us-election-no-gold-at-the-end-of-the-rainbow/ and http://thenextrecession.wordpress.com/2012/12/16/japan-election-lowest-turnout-since-records-began/).  Everywhere, there is disillusionment with the elite and the existing political order.

Financial markets at first reacted positively to the results, because they thought that a ‘stable government’ would be formed that would continue to back fiscal austerity and try to introduce yet more measures to cut real wages, ‘deregulate’ the economy and meet Euro leaders’ fiscal targets.  But that optimism drained away as the results filtered through that the centre-left would not have a majority in the Senate Upper House  and that Monti centrist group may not be able to help out.  The prospect of Berlusconi and Grilli dominating and blocking anything that moves now suggested that Italians could go back to the voting booths again before the summer is out.

Anyway, the tasks of any new government to meet its obligations to the Euro leaders and to get the economy going are immense.  The reality is that Italian capitalism (like other parts of the Eurozone) is in deep trouble.  Italy is entering a second year of real GDP contraction since the ‘recovery’ from the Great Recession.

Italian capital was in the doldrums even before the Great Recession.  Profitability has been falling since 2000 and the rate of profit had fallen back to the level of 1963.

And since the trough of the Great Recession in mid-2009, Italy’s rate of profit has fallen further and is now down nearly 30% since 2005 compared 15% for the Eurozone as a whole.

As night follows day, with profitability falling, net investment by Italy’s capitalists has dried up entirely.

And since the end of the Great Recession, there has been no recovery in investment at all.  Real investment levels are now down 25% from the peak in early 2007.

The policies of austerity at first introduced by Berlusconi back in 2010 and then more vigorously by the bankers’ man Mario Monti have failed, even on their own terms.  The public debt to GDP ratio continues to rise and unit labour costs, which have been cut back sharply by austerity in other countries, continue to rise in Italy, despite falling wages, because productivity is falling.

What will Bersani do?  Well, one good thing is that Monti has been fatally weakened.  So an outright pro-market deregulating, privatising government is now ruled out.  The left within the Democrats are stronger and may well ensure that austerity does not get worse.  But then even the IMF is opposed to any more austerity measures right now.  But the PD has no different policies from Monti really.  Bersani has not even gone as far as Hollande did in the French elections in talking about reducing inequalities or protecting jobs.  But he will do as Hollande has done; backtrack on all his promises to the labour movement in order to meet obligations to the Euro leaders.  Italy will stay where it is, in a depression, with real incomes falling yet further – real average earnings are now 2% below where they were in 2004!

Already there is talk of holding another election in order to force the voters to elect a stable pro-capitalist government, as happened in Greece last summer.  So the three Bs could be pitched against each other again within months.

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Immigration: Obama goes where the imbecile Bush feared to tread

by Richard Mellor

When Clinton signed the North American Free Trade agreement (NAFTA) it had a number of consequences.  It sped up the export of US jobs as US manufacturers shifted production south of the border to take advantage of cheaper labor power.  By 2010, more than 500,000 US jobs were displaced according to the Economic Policy Institute. This also had the effect of lowering wages in the US as NAFTA never contained provisions that protected Mexican workers from super exploitation and US firms demanded concessions to compete.  The threat of moving was used more and more as a form of economic terrorism to force US workers to accept concessions.

NAFTA threw Millions of Mexican subsistence farmers off their land; destroyed their way of life as there was no way these small farmers producing corn could compete with US agribusiness which is highly mechanized by comparison and which by 2002 was subsidized to the tune of 40% of net farm income.

Having no means of subsistence, many of these landless Mexican peasants headed north.  As I have said many times before, the relationship between the global power and its southern neighbor reminds me very much of that between England and Ireland which supplied the colonial power with a steady supply of cheap labor and cheap food.

By 2007 more than 850,000 people were caught trying to cross in to the US illegally through our southern border. You cannot stop people trying to feed themselves and their families. The politics and economic behind it all is hidden.  The role of US imperialism in that part of the world, an area the US capitalist class considers their “back yard” is unknown to most Americans; the invasions, government coups, assassinations of opponents to the US multinational corporations that have plundered the region's resources, poisoned its environment and exploited its workers, we don’t hear too much about that.

As was the case with the Irish in Britain, these southern immigrants come under assault in all sorts of ways.  They are firstly raped, robbed and beaten by those they pay to transport them here. They have been murdered by their guides or US border agents as has been the case on more than one occasion.  If they find work here, their undocumented status makes them most vulnerable to all sorts of exploitation by landlords and employers. They are blamed in the media for the taking of jobs “real” Americans could fill and as a burden on the taxpayer.

In bad economic times they are the perfect scapegoat, they are poor, foreigners, a different nationality and more often than not, although not exclusively, a different color; a perfect part of a divide and rule strategy.

Responding to this xenophobic warfare, Republicans pushed the imbecile Bush to do more.  By 2007 they demanded that he “deploy four drones” along the border, build 105 radar and camera towers and increase the number of border agents to 20,000 while building more fencing.

Where Bush failed though, Obama has not feared to tread.  In his first term the Obama administration spent $73 billion on immigration enforcement. Presently the US has 120 drones scouting the border, has installed 670 miles of fencing, erected 300 towers and beefed up the border agents to 21,394, 18,500 of them on the US Mexican border according to Bloomberg Business Week.  The results have been favorable as immigration agents deported close to 1.5 million undocumented workers in the past four years. The reduction in border crossing most experts agree is also due to the crash as fewer jobs were available and many immigrants returned home.

As I pointed out in a previous blog, for workers it is in our economic and class interests to oppose these measures and the racist and xenophobic attacks on undocumented workers. There was a headline in my local paper a few weeks ago about Latino’s being the most populous ethnic group in the state before too long. “The Latinos are coming, my god, the Latinos are coming.”  But which Latinos? I would argue as a worker it is “our” Latinos, people from the same class background as the vast majority of us, wage earners-----workers.  The 11million or so undocumented workers already in the US pay their dues and have paid them a thousand times over.  They work in the worst jobs for the lowest pay and face savage discrimination at times.  They are the butt of racist jokes and are denied basic human services by politicians who are millionaires ( and billionaires) and who whip up this climate of fear in order to divide us and drive all workers to conditions that prevailed before the rise of the CIO in the 1930’s and the civil rights movement that followed.

I don’t intend to beat a dead horse but to side with the anti-immigrant crowd on this issue is disastrous. We cannot escape the effects of having a 2000 mile border with a low waged economy and super exploited workers. For workers not to have an independent position on this issue means the bosses win all round.  Leaving aside the $73 billion of our money being spent on militarizing US society which will be used against US workers as we resist the destruction of our living standards in the future (drones will be used against us and so will the border guards to break strikes and protests against austerity), having cheaper labor just across the border also weakens us in other ways.  As I wrote some time ago in a piece I distributed at work:

“But even if these workers and peasants don't come here to the US, staying in their home countries will have basically the same effect. It will increase the supply of Labor, further driving down wages (Labor’s price) and increasing the rate at which capital invests since there would be even greater profits to be made there. Obviously this would mean further job losses here in the U.S. Thus, we cannot escape the affects of the conditions of those workers and peasants, no matter if they come here or stay in their home countries. The only real difference is that if they come here, the effects of this forced competition are more visible to us.”

A Mexican farmer doesn’t leave his family, his children and his country without being forced to either by the gun or through economic terrorism. Neither does an African migrant in Europe. While it isn’t realistic to simply call for the opening of all borders when on one side wages and conditions are higher than the other, as it would simply depress the higher in favor of the lower which would be opposed by higher paid workers and divide the class an alternative is to recognize class solidarity, overcome nationalist sentiment and do what we can to build links with workers south of the border or any workers no matter where they may be, and join with them in raising their wages and standard of living. We must join with them in the struggle against global capital launching a global offensive of our own.  We must build an independent political party of our own that will break the monopoly the two Wall Street parties have over the political process and prevent them from moving production by taking over the industry; the Democrats will never do this.

We only have to think of all the money we spend on defense and militarization of our borders and immigration control and what effect that has.  We can’t as Americans travel in half the countries of the world.  Our standard of living is declining; our jails are the most populated in the world, our health care is dismal; the inequality gap is wider than ever before, and our young people will, if they are lucky enough to have a job, will be able to retire at 80.

We need more allies not enemies; we’ve got plenty of them on Wall Street and in Washington.  We call them, "fellow Americans".

Some reading:

The Myth of Free Trade

Tariffs and Tortillas

Lessons of NAFTA

Hey Look, Somehow the Border Got Secured Businessweek Feb 25, 2013

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Global economy: Deleveraging and profitability again

by Michael Roberts

JP Morgan economists have recently made a study of global corporate profitability.  They conclude that what they call ‘profit margins’ have fallen in Europe and in emerging economies over the past two years.   They also conclude that US profitability has stagnated over the last six quarters, on their measure.  JP Morgan’s measure of profitability is not a Marxist one and it is not even a measure of corporate profits against corporate capital.  Instead, JPM take corporate earnings as measured in the annual accounts of corporations in what is called the MSCI world index of stocks.  Corporate earnings are measured before interest, tax and depreciation (EBITDA) and then earnings per share (EPS) are measured after deducting those items.  These two measures of earnings are then divided by corporate sales (not the stock of capital invested, as in Marxist measures).

Even though the JPM measure is not a Marxist one, it does produce a global measure of corporate profitability that shows EPS to sales per share has fallen from near 9% before the Great Recession down to under 4% in the trough of 2009 before recovering to 8% in 2011.  But in 2012, it has now declined again to 7%.   And the EPS measure is now 13% below its peak in February 2008 when the Great Recession began.  This decline in global profitability is driven by Europe and by a fall in emerging economies.  For both regions, the EPS to sales ratio peaked in 2010/2011.  In contrast, profit margins kept rising in the US in both 2010 and the first half of 2011.  It was only in the second half of 2011 and in 2012 that US profit margins started flattening or slightly falling.


This confirms my own research on profitability since the Great Recession taken from EU AMECO and US data and indexed from 2005 (see graph below).

JPM’s economists consider the reasons for the decline in profit margins.  The EBITDA measure is currently at 17%, marginally above the lows seen during 2008/2009. This ratio peaked at 18.5% in 2011 and it is still well below the previous cycle peak of 20.5% seen in 2007.  The EPS measure has done better and that’s because this measure got a boost from lower corporate taxes and lower interest expenses during 2009, 2010 and 2011.  But those gains seem to be over as interest rates have bottomed and corporate tax rates have too.   And there is little sign that sales will pick up much to boost profitability further.  JPM concludes, rightly, that this explains the weak rise in corporate investment and indeed a retrechment through 2012 globally.

The EU Commission has also commented on corporate profitability and investment in Europe in its latest Winter Economic Forecast report (http://ec.europa.eu/economy_finance/eu/forecasts/2013_winter_forecast_en.htm – see Box1.2 on pp 18-21).  It notes that non-residential investment (that excludes households buying houses) as a share of GDP “stands at its lowest level since the mid-1990s”.  And the main reason?  “A reduced level of profitability”.    The report makes the key point that “measures of corporate profits tend to be closely correlated with investment growth” and only companies that don’t need to borrow and are cash-rich can invest – and even they are reluctant.   The EU Commission’s measure of profitability is defined as the ratio of gross operating surplus in corporations to GDP.  Again this is not a Marxist measure of profitability which relates profits to the stock of capital invested, but nevertheless the Commission finds that Europe’s profitability “has stayed below pre-crisis levels”.   My graph above confirms that conclusion.

Interestingly, the Commission report suggests that investment and profitability are being held down because of the need for European corporations to deleverage excessive debt built up before the crisis.  The Commission found a “strong negative correlation between changes in investment since the onset of the crisis and pre-crisis debt accumulation, suggesting that the build-up of deleveraging pressures has been an important factor behind investment weakness”.  The Commission reckons that Eurozone corporations must deleverage further by an amount equivalent to 12% of GDP and that such an adjustment spread over five years would reduce corporate investment by a cumulative 1.6% of GDP.  Given that non-residential investment to GDP is at a low of 12% right now, that’s a sizeable hit to investment growth.

As I argued in a previous post (http://thenextrecession.wordpress.com/2013/02/10/why-is-there-a-long-depression/), the current Long Depression is the product of two factors, the failure of profitability to recover to pre-crisis levels, let alone to the higher peak levels of the mid-1990s in the major economies; and the weight of excessive debt on investment and profit that must be reduced before profitability and investment can recover on a sustained basis.  These two reports by JPM and the EU Commission support that view.

How much deleveraging is necessary?  Well, I have recently looked at global liquidity as measured by the amount of bank loans, securitised debt and derivatives in the world.  Global liquidity as a share of world GDP took off in the great credit bubble that began in the mid-1990s.  After the credit crunch and the Great Recession, liquidating all that fictitious capital (as Marx called it) has been slowly under way.  In my previous post (op cit), I cited various studies that suggest there is still some way to go.  As the graph below shows, that is also the case, using a measure of global liquidity to GDP.  This remains some 11% above the pre credit bubble trend line.  At current rates, to get rid of the remaining fictitious capital will take at least until 2015 – and then it may only be achieved by a new global slump in production.

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Senator Julian Assange?

From The Sydney Morning Herald

Assange electoral boost
February 25, 2013 - 2:58PM

Julian Assange.Julian Assange’s plans to run as a Senate candidate have taken a step forward with his successful enrolment on the federal and state electoral rolls in Victoria.

Contrary to the expectations of a number of political commentators, the Australian Electoral Commission has accepted Mr Assange’s enrollment as an eligible overseas elector in the Victorian federal seat of Isaacs, the seat of Labor Attorney-General Mark Dreyfus.

The WikiLeaks publisher plans to run for the Senate in Victoria as the lead candidate of a newly formed WikiLeaks Party at the September 14 federal election.

The new party, which is not yet registered with the Australian Electoral Commission, has an initial ten member national council comprised of close associates of Mr Assange and pro-WikiLeaks activists.

In addition to Mr Assange, the party’s national council compises Mr Assange’s father, Sydney architect John Shipton; one of the original founders of WikiLeaks, Melbourne mathematician Daniel Mathews; Australian National University physicist Niraj Lal; Maitland lawyer, political activist and former independent candidate Kellie Tranter;

Sydney based digital archivist and freedom of information activist Cassie Findlay; Gold Coast based information technology blogger Gary Lord; Dandenong women’s refuge manager and WikiLeaks Australian Citizens Alliance co-convener Kaz Cochrane; indigenous education consultant and activist Luke Pearson; and Oman Todd, cyber security and social media consultant with the Sea Shepherd anti-whaling group.

It is understood Ms Tranter is likely to be the WikiLeaks Party’s Senate candidate in NSW.

Mr Assange currently resides in the Embassy of Ecuador in London where he has been granted political asylum on the grounds he is at risk of extradition to the United States to face conspiracy or other charges arising from WikiLeaks obtaining thousands of secret US military and diplomatic reports leaked by US Army soldier Bradley Manning.

Swedish prosecutors wish to extradite Mr Assange to have him questioned in Stockholm in relation to sexual assault allegations by two women.  Mr Assange claims that extradition to Sweden would facilitate his eventual extradition  to the United States.

Mr Assange has indicated that if elected and unable to return to Australia to take up a seat in the Senate, a WikiLeaks Party nominee would fill the vacancy.

Read more: http://www.smh.com.au/opinion/political-news/assange-electoral-boost-20130225-2f1dw.html#ixzz2LsmpAgKM

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What the 1% Heard During Obama's State of the Union Speech

Saturday, 23 February 2013 10:09 By Shamus Cooke, Countercurrents Op-Ed

President Barack Obama acknowledges applause before he delivers the State of the Union address at the U.S. Capitol in Washington, D.C., February 12, 2013. (Photo: Pete Souza / White House)When President Obama speaks, most Americans hear what he wants them to hear: lofty rhetoric and a "progressive" vision. But just below the surface the president has a subtly-delivered message for the 1%, whose ears prick up when their buzzwords are mentioned. Obama's State of the Union address was such a speech – a pro-corporate agenda packaged with chocolate covered rhetoric for the masses; easy to swallow, but deadly poisonous.

Much of Obama's speech was pleasant to the ears, but there were key moments where he was speaking exclusively to the 1%. Exposing these hidden agenda points in the speech requires that we ignore the fluff and use English the way the 1% does. Every time Obama says the words "reform" or "savings,” insert the word "cuts.” Here are some of the more nefarious moments of Obama's :

"And those of us who care deeply about programs like Medicare must embrace the need for modest reforms [cuts]..."   

"On Medicare, I'm prepared to enact reforms [cuts] that will achieve the same amount of health care savings [cuts] by the beginning of the next decade as the reforms [cuts] proposed by the bipartisan Simpson-Bowles commission."

This ultra-vague sentence was meant exclusively for the 1%.   What are some of the recommendations from the right-wing Simpson-Bowles commission? Obama doesn't say. Talking Points Memo explains:

Force more low-income individuals into Medicaid managed care.
Increase Medicaid co-pays.
Accelerate already-planned cuts to Medicare Advantage and home health care programs.
Create a cap for Medicaid/Medicare growth that will force Congress and the president to increase premiums or co-pays or raise the Medicare eligibility age (among other options) if the system encounters cost overruns over the course of 5 years.

There were many other subtly-delivered attacks on Medicare in Obama's speech, all ignored by most labor and progressive groups, who clung tightly to the "progressive" smoke Obama blew in their face. Obama's speech also included a frightening vision of a national privatization scheme to previously publicly owned resources. But it was phrased so inspirationally that only the 1% seemed to notice:

"I'm also proposing a Partnership to Rebuild America that attracts private capital [wealthy investors] to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children...we'll reward schools that develop new partnerships with colleges and employers [corporations]..."

Obama's proposal plans to "rebuild America" in the image of the wealthy and corporations, who only put forth their "private capital" when it results in a profitable investment; resources that previously functioned for the public good will now be channeled into the pockets of the rich, to the detriment of everyone else.

Allowing the rich to privatize and profit from public education and publicly owned infrastructure (ports and pipelines, etc.) has been a right-wing dream for years. This will result in massive user fees for the rest of us, while further dismembering public education, which Obama's ill-named "Race to the Top" education reform is already successfully accomplishing. 

Obama's speech also put forth two massive pro-corporate international free trade deals, which would further drive down wages in the United States: 

"We intend to complete negotiations on a Trans-Pacific Partnership [a massive free trade deal focused mainly on Asian nations]. And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership [free trade deal] with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs."

While praising free trade Obama disarmed labor and progressive groups by throwing in the meaningless word "fair.”  

Lastly, Obama's drone assassination policy was further enshrined in his speech. Drone assassinations are obvious war crimes — see the Geneva Convention — while also ignoring that pesky due process clause — innocent until proven guilty — of the constitution.  

But Obama said that these programs will be "legal" and "transparent,” apparently good enough to keep most progressive groups quite on the issue. 

There were plenty of other examples of sugar-coated poison in Obama's speech. It outlined a thoroughly right-wing agenda with no plan to address the jobs crisis — sprinkled with pretty words and "inspiring" catchphrases. 

Some labor leaders and "progressive" groups seem dazzled by the speech. President of the union federation, AFL-CIO, Richard Trumka, praised Obama's anti-worker speech:

"Tonight President Obama sent a clear message to the world that he will stand and fight for working America's values and priorities. And with the foundation he laid, working families will fight by his side to build an economy that works for all."

And here is the real problem; as President Obama follows in the footsteps of President Bush, labor and progressive groups have found their independent voice stifled. The close ties between these groups and the Democratic Party have become heavy chains for working people, who find themselves under assault with no leadership willing to educate them about the truth, let alone organize a national fightback to win a massive jobs-creation program, prevent cuts to social programs, and fully fund public education. Obama's second term will teach millions these lessons via experience.

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How Wall Street Preys on Teacher Pensions

by Jack Gerson

Ten days ago Danny Weil published, on dailycensored.com, a scathing analysis of how the biggest predators on Wall Street have been invited in to plunder teacher pension funds -- especially in California and Texas, but throughout the country. Teacher pension trustees now say that there are vast "unfunded liabilities", and politicians like California Governor Jerry Brown are sharpening their knives while they provide quotes to the media about how funding for public employee pension obligations create budget deficits and force the state to impose harsh austerity cuts to essential public services. This is the prelude to demands for teachers and other public employees to accept cuts to their retirement income. Indeed, such proposals are already echoing in state houses and legislatures.

Investment from employee pension funds helped finance the boom on Wall Street. But when the crisis hit, Wall Street demanded -- and continues to demand -- multi-trillion dollar bailouts from the public by cuts in jobs and services to working and unemployed people. The big banks pretend to be "risk-takers" who deserve fat returns as compensation for their "risk". But as the story of teacher pension funds illustrates, it's our livelihoods-- our savings, our pensions, our essential services -- that are at risk. Not theirs. They demand and get bailed out over and again. And they admonish us for being so careless with how we let our money be invested (invested by them, of course).

One of the important points to take away from this article is the culpability of the state teacher union leadership in standing idly by while over the past five years Wall Street hedge funds swooped in to prey on the pension funds. The story of such financialization isn't unique to teacher pension funds. Big capital is financializing and privatizing whatever can be privatized and financialilzed, commodifying or recommodifying much of what has long been public, in the process, wresting away gains fought for and won by working people over the past century and a half. These austerity attacks won't go away until we make them go away.

But enough from me. Here's Danny's article, as originally published at dailycensored.com:

http://www.dailycensored.com/financial-capitalism-and-the-us-teachers-pension-fund-fraud/

Financial Capitalism and the US teachers’ pension fund fraud

Danny Weil

An “internal study” of the California Teachers’ Retirement System (Cal STRS) indicates that the public school pension fund faces a $64 billion deficit, according to the Sacramento Bee, dated  February 4, 2013 (http://blogs.sacbee.com/capitolalertlatest/2013/02/california-teachers-pension-fund-faces-64-billion-deficit.html#storylink=cpy=).
The California State Teachers Retirement System produced the report in response to a legislative resolution.  The release of the “internal study” followed on the heels of chiding by the Legislature’s budget analyst, Mac Taylor, who indirectly admonished neo-liberal Gov. Jerry Brown for ignoring “huge” unfunded liabilities associated with the teachers’ retirement system and state retiree health benefits” in his new ‘budget’.
Cal STRS receives money from the state, from local school districts and from teachers themselves, but the source of the funds income is also highly dependent on investment earnings.  Like most pension funds throughout through-out the nation, Cal STRS was decimated during the recent Great Depression that continues unabated. And while the California Public Employees Retirement System (PERS) has the power take money directly from the state treasury as it sees fit, STRS cannot; they must receive specific appropriations from the Legislature in order to fund the state teachers’ pensions.
Fully funding the California teachers’ pension fund, we are told, would require $4.5 billion more a year — excluding projected investment earnings.   The system in its report stated that the shortfall would be ‘eased’ by setting lower funding targets and/or stretching out contributions (ibid). This means less money for current and future retirees.  The most important financial move, Cal STRS fund managers said, is to begin closing the deficit, rather than allowing it to widen further.  Sound like calls for austerity?  Sure does, sure is.  But wait, there’s more, and it is truly nauseating, frightening and painfully keeping with the logic of capitalist economics.
Pension funds are now dressed up hedge funds with current and future disastrous consequences

According to a recent article found at Dollarcollapse.com, pension funds are now morphing into hedge funds, a virtual back alley crap game or what Dollarcollapse calls “rolling the dice in exotic investments”, for Wall Street and their minions (http://dollarcollapse.com/investing/pension-funds-become-hedge-funds-roll-the-dice-on-exotic-investments/).

In the report written by author, John Rubino on January 28^th, 2013, he notes that there was a time when running a pension fund used to be one of the more facile jobs in finance.  Money came in steadily and predictably from member contributions and the funds were then invested in AAA grade bonds and blue chip stocks.  The target was to meet a modest, but assured, annual return of 8% interest (ibid). Not anymore. That was before the financialization of capitalism and the economic collapse.
Now, as the author correctly notes, the pension funds in effect have two criminally incompetent overlords trying to serve two contradictory economic demands.  On the one hand, at the national and state level the US borrows too much and lets its banks go on an unregulated ‘wilding’ with dire consequences for working people.  This causes and has caused severe debt crisis’ to which the overseers of capital respond by lowering interest rates to the point where investment grade bonds, once the heart and soul of pension funds, yield next to nothing.
At the state and local level, the corporate owned governors and mayors refuse to raise taxes on their real constituency, the corporations and the rich, which would have the beneficial effect of balancing the funds; they instead pressure funds to continue to make their ‘vig’ of 8%.  This, even though not only is this stupidly optimistic, but it is wildly impossible.  So, what are the pension fund managers doing now?  They are doing what financial capital requires: they are acting like gambling casinos by increasingly turning the whole pension fund investment strategy into a dangerous explosive landmine, twisting them into hedge funds, all to the detriment of working people and to the advantage of Wall Street.
This is how financialization works.  It is a particular phase of capitalism where everything is monetized and commodified.  Take the Texas Teachers’ Retirement system as just one example.
Texas Teachers’ Retirement system
In his article, Rubino goes on to write about the Texas Teacher Retirement System.  According to Rubino:
“On the 13^th floor of a sleek downtown office building here, the trading desks are manned overnight.  The chief investment officer favors cowboy boots made of elephant skin.  And when a bet pays off, even the secretaries can be entitled to bonuses” (ibid).
We are not talking about a high flying private hedge fund but instead, these desks are manned for the Teacher Retirement System of Texas, similar to Cal STRS.  The public pension fund has 1.3 million members that include school teachers, bus drivers and cafeteria workers throughout the state.  They all labor under the assumption they will have retirement benefits they worked their entire lives for.
Yet rather than reduce risk in the wake of declines in interest rates, the pension fund manikins are now getting hostily aggressive, loading up on private equity investments and other non-traditional investments that they say promise to return pension funds to the halcyon days of steady and safe returns.
The Texas Teacher Retirement System fund has $114 billion dollars and now boasts some of the riskiest bets in its history with $30 billion dollars committed to private equity, real estate and other ‘so-called ‘alternative investments’ since early 2008, as the economic crash washed ashore like a Tsunami.  Amongst the ten largest U.S public pensions, this makes it the biggest such investor in Wall Street backed equity investments.  The funds currently have an average alternatives allocation of a whopping 21%!  Don’t let them fool you again.
According to tracker, Wilshire Trust Universe Comparison Service, the Texas Teacher Retirement System brought in an annual return of 3.1% between December 31, 2007 and December 31, 2012.  This was more than the average media return of 2.6% for similar years (ibid).
The argument made by the pension investment officials for their investment in Wall Street is that investment in private equity is necessary to help offset declines in other investments it is embedded in.  So, we are told that investment in Wall Street is necessary to assure adequate pay-outs to current and future retirees.  Sound familiar?  The Chief Investment Officer for the workers’ pension moneys, Britt Harris, says he can perform miracles in light of the deteriorating state of US financial capitalism and “smash” the reality that government pension funds area on the short end of most investments — another one of those economic genies of trading.
So, with this particular shortsightedness and love for free markets, in November 2011 the Texas fund made one of the largest single commitments in the private equity system’s history: they invested $3 billion dollars in KKR and another Wall Street parasite, the Apollo Global management group (APO).  Three months later, unbeknownst to the vast majority of fund members, they bought $250 million dollars of the world’s largest hedge fund firm with member monies – Bridgewater Associates out of Connecticut.  This marked the first time time in history that a U.S public pension fund has purchased such a large stake in private equities, betting member dollars as if they were players in a casino roulette game.
The result was a return for the fiscal year ending on August 31, 2011 that was 7.6%.  Now pension ‘managers’ say they can help the fund reach its goal of 8% annually over the long haul and they are proceeding full speed ahead.  In a ten year period ending in August of 31, 2012 the Texas Teacher Retirement System had an annual return of 7.4% (ibid).
Of course none of the investments had the approval of working people who fund the retirement system.  This is partly due to the enormous task of investing but mainly due to lack of democratic decision making and oversight which is the nasty business that pension fund managers, in cahoots with Wall Street, loathe.  Nothing could be worse than having the wolves of capital in their elephant skin boots subjected to transparency and member oversight.
And just where were the teacher unions and bus driver unions and cafeteria worker unions when all this was happening?  They were nowhere in sight.  Their ‘bosses’ either didn’t know, care or understand the haughty risk the pension weasels were making on behalf of their members.  The fat cat union bosses have shown a penchant for Wall Street and neo-liberalism in general, favoring begging over bargaining and fancy luncheons with powerful paid for politicians and wealth managers over their fiduciary duty of member oversight.  They prefer to be team members rather than looking out for their real members, working people who are drastically declining in numbers as privatization clouds the horizon and economic decimation provides the meat for the noxious roux.
The average teacher, bus driver and cafeteria worker simply wants to do their job and to make a living, feed their children and provide for retirement, a chore that is not possible under the current regime of capital.  Mis-education and a lack of critical thinking skills have left workers prey for the wolves of high-finance while the pension managers ski in Aspen, buy fancy boots and otherwise screw over workers by investing in a system of mendacity and despair that has proven time and time again to be a time bomb.  All this while Wall Street gets fatter, bonuses are given out with impunity and privatization squeezes the life out of civil society.
Leveraging workers’ pension through debt
This grand charade is all about leveraging debt, which is the specialty of Wall Street and their cronies.  “Leverage’ relies on borrowing more and more sums of cash and then using derivatives (phony insurance) to make large investments in Wall Street.  In this way the funds don’t have to put up as much cash – money they don’t have anyway.  It is like borrowing on credit cards to buy stocks and bonds but it is much worse, for it is not an individual problem, it is a socio-economic one that promises to drive the funds right down the same path as the banking crisis and housing “bubble” that brought down whole countries and economies, like Greece.  All of this is great for Wall Street and death for workers.
But never mind:  for the money changers, such as the world’s largest hedge fund firm, Bridgewater Associates and a numerically growing number of hedge fund bosses state, this type of leveraging is not like that which crashed banks, devasted lives, washed worker bodies onto the shoreline of despair and economic ruin and left them in peonage; it, they say, is “different.  Not to worry this time, these deacons of depravity and greed say they are firmly and safely in control of the financialization scheme which of course is tantamount to saying that an alcoholic is in control of his or her own addiction or the military industrial complex has a firm hand on the tiller of cost control.
They have even bent the language to their own self-serving advantage, a sophist’s tool, and they now call this ‘financial strategy’ “risk parity” (ibid).  There are many such criminal firms such as AQR Capital Management and the Clifton Group out of Minneapolis who are greedily sucking their fingers in anticipation of their own bonuses, capital gains and primitive accumulation strategies which promise to make them even more super-rich than they currently are and allow managers and executives to reap heady bonuses.
When questioned, the minions of Wall Street who serve as the real shadow managers of the funds say that they are using a modest amount of leveraging and assure workers and you, the reader, that this is what makes their strategy brilliant and different from those employed by investment banks.  Do not be beguiled, this is the same strategy that created the largest transfer of wealth into the pockets of the one percent in the history of the world.
Of course it is not only a self-serving lie and unthinkable ruse, but it is unsustainable.  The chickens will come home to roost just as they did in the bankster fraud and housing debacle.  Cannibal financial groups like Bridgewater and their founder Ray Dalio, like the matchstick men they are, have pitched the idea to other pension fund ‘trustees’ and have even made a documentary style online video about the Ponzi scheme.
They all employ the same rapacious rap.  According to an interview with Bridgewater con-man, Ray Dalio:
“Ironically, by increasing your risk in the bonds you are going to lower your risk in the overall portfolio” (ibid).
This is the voice of American greed and it resounds well within the halls of depravity that is Wall Street which profits off of economic demolition and looks to take stumbling pensions down the road of economic purgatory.
The California State Teacher Retirement System
And of course this leads us back to Cal STRS.  With a shortfall such as that borne by the California pension fund, one can imagine this Nigerian web scam to be swallowed by the pension bosses here in California and elsewhere, who manage workers’ money for a profit, but do so with disdain for the workers’ themselves and a penchant for tying themselves to the crap game of casino capitalism.  These con artists avoid having to answer questions about such “innovations” such as day trading during the high tech stock bubble and house flipping during the housing boom, practices that are hardly innovative but more about yawing financial appetites and greed.  Remember these hideous practices were also sold under the auspices of ingenuity at the time they were fathomed but soon became to be known as criminal practices and investment ruses that were devastating for working people.
My wife is currently receiving disability retirement benefits from the California State Teacher Retirement System.  In this year, her check payment for February was lower than that paid in January.  She has written Cal STRS to find out why and is awaiting a reply Cal STRS says they will have put in her “in-box” online at their website in 20 days.  But as the clock runs out on her health and her funds quickly deliquesce, one can only view the financialization con with disgust and wonder how many other retired teachers who have devoted their lives to children will be affected.
This is all part of the privatization plot favored by Jerry Brown, enemy of the working class and cozy operator for the ruling class.  To avoid having to raise taxes on corporations and the rich who invest in him, Brown and the pension fund managers have created low hanging fruit for Bridgewater and other such criminal enterprises.  Remember, we are talking about billions of dollars here, even trillions of dollars in public pension funds.
So now you know the sordid tale of pension funds and pension leveraging, a seat at the black jack table for workers and a prime example of rapture capital accumulation for the rich.  If the practices are allowed to continue should you be a public school teacher, much like a worker who pays into Social Security, you will eventually find there is no security, that the system is rigged and the hefty bubble subject to burst.
Meanwhile, Wall Street fat cats get fatter, receive hefty  bonuses for wrangling the funds into Wall Street, and get larger all while more elephants are slayed and workers’ lives for the bootlicking fund managers drown in unpayable debt as worker retirement becomes merely a sultry dream to be replaced by homelessness, financial ruin, suicide, sorrow and decimation.
If you thought such heady political gimmicks like proposition 30 would help stave off economic devastation for underfunded schools or even staunch the bleeding inherent in the mendacious system of financial capitalism, you were wrong.  The only thing that can bring about security and equality for those who work and the public educational sector is class consciousness, education, organization and mobilization.  Anything less is a fool’s game.  It is time working people in conjunction with the students and communities they serve go on the offensive and not be forced to crouch into the corner of defensiveness.  But this will largely have something to do with how we see the world and how our perceptions are managed by a ruling class that understands very well this moment in history; a ruling class that like other monarchies of old, is more class conscious than its labor counterparts.
Meanwhile, my wife waits for an answer in her on-line ‘inbox’ from the unaccountable Cal STRS fund managers who don’t give a damn about how much she contributed to society, her growing physical disability or her future.  We will let you know if and when we get their reply.  In the meantime, organize, educate and mobilize: this is the only hope we have.

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Support the Liverpool 47

This is an appeal to help fund a film about the 47 Liverpool Councillors who led the fight of the city against the Thatcher Government. Arti, the film maker, was a young socialist in Liverpool during the campaign. Its been a couple of years in the making and there has been one screening in Liverpool but they are due to do another one in London, linked to Dave Sinclairs Photo exhibition from the time. His photos are excellent Sunday

12th of May at the Richmix, London as part of a programme of events related to Dave Sinclars month long 'The Thatcher Years' exhibition. We also have an exhibition for the 30th anniversary of the Labour win in Liverpool in 1983 with Tony Benn and Len Mc Clusky speaking, an exhibition in the Unite building and then in the Museum. Felicity

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Helicopter money and the Chicago plan

by Michael Roberts

The world economy crawls along and mainstream economists remain worried that a typical sustained economic recovery i.e led by rising business investment generating more jobs and a reduction in unemployment boosting consumption, is absent.   The answer of the Austerians is that the economy and the people must wait until the overhang of debt in the major capitalist economies is removed and, primarily, this means a reduction in public sector debt and deficit levels and real wage cuts.  The answer of the Keynesians is the opposite: instead we need to keep interest rates low by central bank monetary measures and also expand government spending and borrowing to stimulate investment; or fill the gaps in private sector investment and consumption (aggregate demand) with public investment and consumption.  Don’t worry about debt levels, but spend now and, with growth, the debt will look after itself.

This debate continues because nothing seems to work: austerity or traditional Keynesian monetary easing.  Although central banks have lowered short-term interest rates nearly to zero, so that we have negative real interest rates (after inflation) and central banks have pumped trillions of dollars into the banking system, the banks,  still overloaded with debts and weakened balance sheets, are unable or unwilling to lend.  And anyway, the large corporations are flush with cash and don’t need to borrow.  Yet they are still unwilling to invest at sufficient levels to restore booming economies.

So now some Keynesians are calling for more unconventional measures, closer to the policies advocated by the proponents of modern monetary theory (MMT).  They say, let’s bypass the banking system altogether and get central banks and governments to lend money directly to households and small businesses – in a way, just get a helicopter and drop the cash across the country.  ‘Helicopter money’ is the analogy first hinted at by Ben Bernanke, the current chief of the Federal Reserve, when he argued that the Fed had the power to stimulate the economy by printing money and directly delivering it to the spenders.  He did not advocate doing this, just that it was possible.

Along with the idea of ‘helicopter money’ comes the idea that governments should just increase spending and rather than finance the extra spending by issuing bonds to be purchased by the banks and pension funds at increasingly high rates of interest, just get the central bank to buy them direct by creating more money.  Why should the central bank create money simply to give to the banks, which are not lending anyway?  Why not increase money supply to give to the government to spend or to the people direct?  As Martin Wolf put it in his recent column: “I fail to see any moral force to the idea that fiat money should only promote private spending”.  Adair Turner, the UK’s former head bank regulator, raised the same ideas – bypass the banks and let government spending be financed directly by the central bank.

As Wolf puts it, “When expanding private credit and spending is so hard, if not downright dangerous, the case for using the state’s power to create credit and money in support of public spending is strong. The quantity of extra central bank money required would surely be smaller than under today’s scattergun quantitative easing.”   As Lord Turner notes, “Japan should have done some outright monetary financing over the last 20 years, and if it had done so would now have a higher nominal gross domestic product, some combination of a higher price level and a higher real output level, and a lower debt to gross domestic product ratio”.

These proposals are also linked to what used to be called the Chicago Plan, namely the proposal of a group of economists at the University of Chicago in the 1930s who responded to the Depression by arguing for severing the link between the supply of credit to the private sector and creation of money.   The other leading economist of the time (apart from Keynes), Irving Fisher supported the idea, as did Milton Friedman in “A Monetary and Fiscal Framework for Economic Stability”, published in 1948.  The essence of this plan was full backing of deposits by public debt. This scheme, they argued, would eliminate the instability of private credit and debt, dramatically reduce overt public debt and largely eliminate the many defects of current forms of private debt.    Now some economists at the IMF have resurrected the idea in a recent working paper, “The Chicago Plan Revisited” ( IMF Working Paper WP/12/202).  IMF Working Paper WP/12/202.  

Minskyite Modern Monetary Theory radical economist, Steve Keen, has also got excited about this Chicago Plan as a way round the blockages of the banking system and the dreaded risk of expanding uncontrollable private credit, which Keen sees (ironically rather like the right-wing Austrian school) as the real devil in the capitalist system (http://rwer.wordpress.com/2012/11/12/the-imf-gets-radical/).
The Chicago Plan proposes changing the nature of money and money creation in the economy from a nominally private-sector affair, in which commercial banks serve as the engines of money growth, to an exclusively public sector one.  On the surface, the Chicago plan has some very attractive benefits.  First, there would be a switch from national debt to national surplus, as if by magic. “Because under the Chicago Plan banks have to borrow reserves from the treasury to fully back liabilities, the government acquires a very large asset vis-à-vis banks. Our analysis finds that the government is left with a much lower, in fact negative, net debt burden.”   The IMF paper says total liabilities of the US financial system – including shadow banking – are about 200% of GDP.  The new reserve rule would create a windfall. This would be used for a “potentially a very large, buy-back of private debt”, perhaps 100% of GDP.   In other words, if the central bank provides new money to the government, it can buy bank assets and so reduce the net debt figures for the government – just by creating money out of thin air!

Second, private banks would lose the power to create deposits by making loans, as all deposits would have to be backed by public sector debt or by bank profits.  In effect, lending would be controlled directly by government.  “The control of credit growth would become much more straightforward because banks would no longer be able, as they are today, to generate their own funding, deposits, in the act of lending, an extraordinary privilege that is not enjoyed by any other type of business,” says the IMF paper. “Rather, banks would become what many erroneously believe them to be today, pure intermediaries that depend on obtaining outside funding before being able to lend.”  And that outside funding would be the government.

This all sounds great.  So what is wrong with it?  Well, first, the private banking system would be sent to jail.  Only governments would have the power to expand reserves and thus lending.  Well what’s wrong with that, you might say?  Well, the banks would still be privately owned, but now on the brink of going bust or having to turn into outright speculative investment operations like hedge funds to make a profit.  So, in some way, there would be even more instability in the banking system than before, not less.   The Chicago Plan would only work if the banks were brought into public ownership and made part of an overall funding and investment plan.  But if that happened, there would be no need for a Chicago Plan.

Then there is inflation.  Creating money out of thin air means that money supply can move out of line with growth in the real economy, namely commodity production in the capitalist sector.  Unless production in the capitalist sector expands, more money will start chasing less goods.  Price inflation will ensue and so will financial asset speculation.   Real incomes for the average worker will be hit by rising prices, instead of falling employment.  Keynesians like Turner deny this.  For them, government spending financed by central bank monetisation, or helicopter money, will boost ‘aggregate demand’ , i.e investment and consumption and so economic growth will return to match the expansion in the money supply.

But will it?  Once again, we are back at the heart of the flaw in the Keynesian model (raised many times in this blog – see http://thenextrecession.wordpress.com/2012/04/21/paul-krugman-steve-keen-and-the-mysticism-of-keynesian-economics/ and http://thenextrecession.wordpress.com/2012/06/13/keynes-the-profits-equation-and-the-marxist-multiplier/).  For Keynesians, you can create extra spending through money creation.  This leads to increased employment and then to increased income and growth and thus to more profits.  But the reality of the capitalist system is the other way round.  Only if profitability is sufficient will investment increase and lead to more jobs and then incomes and consumption.  The demand for money will rise accordingly.  Artificial money creation by fiat from the government does not get round this – as the experience of ‘quantitative easing’ has already shown.

Adair Turner reckons that monetisation of Japan’s public debt with some increased inflation would have avoided Japan’s lost decade.  Well, the evidence is against that as my recent posts have argued (see,  http://thenextrecession.wordpress.com/2013/02/14/japans-lost-decades-unpacked-and-repacked/).  The outcome of debt monetisation or a Chicago plan to bypass the banking system will not be a sustained economic recovery, but either a new bout of financial asset speculation or rising prices in the shops, or both.  It is not the banking system that has to be bypassed but the capitalist system of production for profit that has to replaced by planned investment under common ownership.  Indeed, if the banking system is circumvented, the capitalist system of production will be thrown into greater confusion.

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Huge General Strike against austerity in Greece

From Al Jazeera

Tens of thousands of Greeks have taken to the streets of Athens and other cities as part of a nationwide strike against austerity that confined ferries to ports, shut schools and left hospitals with only emergency staff. Beating drums, blowing whistles and chanting "Robbers, robbers!" more than 60,000 people angry at wage cuts and tax rises marched on Wednesday to parliament in the biggest protest for months over austerity policies required by international lenders. In the capital, riot police fired tear gas at hooded youths hurling rocks and bottles during a demonstration, mostly of students and pensioners, which ended peacefully. The two biggest labour unions brought much of crisis-hit

Greece to a standstill with a 24-hour protest strike against policies which they say deepen the hardship of people struggling through the country's worst peacetime downturn. Representing 2.5 million workers, the unions have gone on strike repeatedly since a debt crisis erupted in late 2009, testing the government's will to impose the painful conditions of an international bailout in the face of growing public anger. "Today's strike is a new effort to get rid of the bailout deal and those who take advantage of the people and bring only misery," said Ilias Iliopoulos, secretary general of the ADEDY public sector union, which organised the walkout along with private sector union GSEE. "A social explosion is very near," he told the Reuters news agency from a rally in a central Athens square as police helicopters clattered overhead. 'Virtual euphoria' The eight-month-old coalition of Prime Minister Antonis Samaras has been eager to show it will implement reforms promised to the European Union and International Monetary Fund, which have bailed Athens out twice with over 200 billion euros. The government has cracked down on striking workers, invoking emergency laws twice this year to get seamen and subway workers back to work after week-long walkouts that paralysed public transport in Athens and led to food shortages on islands. Labour unrest has picked up in recent weeks.

A visit by French President Francois Hollande in Athens on Tuesday went largely unreported because Greek journalists were on strike. "The period of virtual euphoria is over," said opposition leader Alexis Tsipras, whose Syriza party has regained a narrow opinion poll lead over the governing conservatives. "Those who thought Samaras would renegotiate the terms of the bailout ... are now faced with the harsh reality of unpaid bills, closed shops and lost jobs," he said. Under pressure Anger at politicians and the wealthy elite has been boiling during the crisis, with many accusing the government of making deep cuts to wages and pensions while doing too little to spread the burden or go after rich tax evaders. "This government needs to look out for us poor people as well because we can't take it any more," said Niki Lambopoulou, a 43-year-old insurance broker and single mother. "I work night and day to make ends meet and the government is killing our children's dreams." Greece secured bailout funds in December, ending months of uncertainty over the country's future in the eurozone, and analysts said this had created expectations among Greeks that things would improve for them personally. "If these expectations are not satisfied by the summer, then whatever is left of the working class will respond with more protests," said Costas Panagopoulos, head of Alco pollsters. Six years of recession and three of austerity have tripled the rate of unemployment to 27 percent. More than 60 percent of young workers are jobless.

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Oakland, CA: FBI foils another fake terror plot

We reprint this piece below from the World Socialist Website for our readers interest.  Facts For Working People and this blog are is not affiliated to the WSWS.

By Karl Eisner
20 February 2013

On February 8, federal authorities arrested a San Jose man for attempting to set off a car bomb outside a bank in Oakland, California. The charges filed against Matthew Llaneza, 28, stem from a months-long operation staged by the FBI’s South Bay Joint Terrorism Task Force. The event is the latest in a long series of bogus terror plots hatched or otherwise encouraged by the federal government.

According to the sparse criminal complaint submitted 10 days ago, the government’s involvement with the Arizona native—a recent Muslim convert—dates back to November of last year, when undercover FBI agent Christopher Monika met with and convinced Llaneza that he was “connected with the Taliban and the mujahedin in Afghanistan.”

How or why Llaneza first became a target of the FBI goes unmentioned in the official narrative, but over the next several months Monika and Llaneza allegedly met several times to organize the bombing of an Oakland Bank of America branch—supposedly chosen because “the name of the bank and Oakland’s location as a center of protests made it an appropriate target.” The operation came to an end on February 8, when Llaneza tried to detonate an inoperable car bomb and was promptly arrested.

At no point did the plot pose a “threat to the public,” notes a press release from the US attorney’s office. Like a number of high-profile, supposed terror operations foiled by the US government over the past decade, every stage of the sham conspiracy had been created and carefully managed by the FBI. Virtually all of the key elements in the plot were in fact supplied by the federal government: a rented storage unit in Hayward, an SUV to deliver the would-be car bomb, the fake explosives and the expertise needed to assemble them.

According to the affidavit, Llaneza’s greatest tangible contribution to the scheme was the purchase of two cellphones and a nine-volt battery (on an outing with his undercover FBI handler, no less) that were later assembled by the authorities into a phony trigger device. Until February 8, when Llaneza took the lead and tried to detonate the inert explosives in Oakland, most of his involvement seems to have consisted of tagging along with his government sponsor.

There have been no allegations that Llaneza, depicted by the government’s criminal complaint as a calculating and committed pro-Taliban terrorist, had any ties to Al Qaeda or the Taliban. Absent any co-conspirators, any evidence of involvement with a terrorist organization, or even any evidence of independently trying to establish that involvement, undercover agent Monika was Llaneza’s sole connection to, and undoubtedly the driving force behind, the entire operation.

By all accounts, Matthew Llaneza is a mentally ill individual. Santa Clara county court documents from 2011 describe the man as psychotic and suffering from bipolar disorder, a record that was almost certainly known to the FBI before it began its sting operation in November of last year. Llaneza was involuntarily hospitalized and placed on a 72-hour psychiatric hold by authorities in April 2011, after acting strangely and becoming combative at his father’s San Jose home. Police records show Llaneza claimed to be suicidal, with a history of substance abuse and mental health problems.

When police later discovered Llaneza’s ownership of an AK-47 assault rifle, brought from Arizona and illegal under California’s gun laws, he was convicted on weapons charges and sentenced to a brief jail term. “You would not have to spend more than a few minutes with him without it being painfully obvious that there were some severe psychological issues,” said Cameron Bowman, Llaneza’s former defense attorney. Legal proceedings against the accused are currently on hold until March 8, pending a possible review of his mental state and legal competency.

In light of the circumstances surrounding past government-manufactured terror plots, the FBI—known for its mass surveillance of and fishing expeditions for “radicals” among the Muslim population—most likely found in Llaneza another easy mark: a mentally unstable, suggestible figure who could be counted on to play his assigned part in a terror farce first created, and then thwarted, by the state security services.

With the help of a servile corporate media, these staged terrorist conspiracies are designed to put flesh on the bones of the Obama administration’s “war on terror” propaganda. When a genuine Al Qaeda plot to blow up a California bank is nowhere to be found, the Obama Justice Department simply invents one—all to keep alive a supposedly ubiquitous terrorist threat, cited for more than a decade to justify a permanent state of war abroad and police-state measures at home.

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