“When in any country the small-farmer class is being squeezed off the land; when its labourers are slaves or serfs; when huge tracts are kept waste to minister to pleasure; when the shibboleth of art is on every man’s lips, but ideas of true beauty in very few men’s souls; when the business-sharper is the greatest man in the city, and lords it even in the law courts; when class-magistrates, bidding for high office, deal out justice according to the rank of the criminal; when exchanges are turned into great gambling-houses, and senators and men of title are the chief gamblers; when, in short, ‘corruption is universal, when there is increasing audacity, increasing greed, increasing fraud, increasing impurity, and these are fed by increasing indulgence and ostentation; when a considerable number of trials in the courts of law bring out the fact that the country in general is now regarded as a prey, upon which any number of vultures, scenting it from afar, may safely light and securely gorge themselves; when the foul tribe is amply replenished by its congeners at home, and foreign invaders find any number of men, bearing good names, ready to assist them in robberies far more cruel and sweeping than those of the footpad or burglar’–when such is the tone of society, and such the idols before which it bends, a nation must be fast going down hill.

A more repulsive picture can hardly be imagined. A mob, a moneyed class, and an aristocracy almost equally worthless, hating each other, and hated by the rest of the world; Italians bitterly jealous of Romans, and only in better plight than the provinces beyond the sea;  more miserable than either, swarms of slaves beginning to brood over revenge as a solace to their sufferings; the land going out of cultivation; native industry swamped by slave-grown imports; the population decreasing; the army degenerating; http://ws.affiliately.com/goto?aaID=nejecf-20&aaMarketplace=com&url=http://jessescrossroadscafe.blogspot.com/wars waged as a speculation, but only against the weak; provinces subjected to organized pillage; in the metropolis childish superstition, whole sale luxury, and monstrous vice.

The hour for reform was surely come. Who was to be the man?”

A.H. Beesley, The Gracchi Marius and Sulla, 1921

The mouthpieces in the media are maintaining a steady drumbeat against gold and silver.  The real economy wallows in official and financial corruption.

From discussion with friends in Japan, it seems that a version of a striking financial recovery in the US is being painted by the government and the media there, that seems to be at odds with the reality which the common American is facing. I am informed that a similar situation exists in the UK,  but with much less effect.   Who dares to question the sanctification of such success, and the power of an Empire?

http://ws.affiliately.com/goto?aaID=nejecf-20&aaMarketplace=com&url=http://jessescrossroadscafe.blogspot.com/

As is par for the course, the financial media is telling a story about a major US company from the perspective of the investing classes, rather than the broader public.

The poster child is the New York Times’ Dealbook, in a story titled “To Satisfy Its Investors, Cash-Rich Apple Borrows Money.” It third paragraph reads:

Apple’s return to the debt markets raises a riddle: Why would a company with so much cash even bother to issue debt?

A full seven paragraphs later, the article gets around to the last, and arguably the most important reason:

By raising cheap debt for the shareholder payout, Apple also avoids a potentially big tax hit. About two-thirds of Apple’s cash — about $102 billion — sits overseas in lower-tax jurisdictions. If it returned some of that cash to the United States to reward its investors, it could have significant tax consequences for the company. In some ways, the bond issue is a response to that tax situation.

“In some ways” is an understatement. A simple Google search shows stories going back several years of how Apple has been pushing for a tax holiday so it can repatriate its overseas stash. One example is a February 2011 report from electronista, Demands come despite federal budgetary crisis:

A variety of technology corporations are among those pressuring the US government to give them a preferential tax break, sources tell Fortune. Apple, Cisco, Pfizer and Duke Energy are specifically named as lobbying politicians for a tax “holiday” in regards to repatriated cash. Whereas the companies would normally be obligated to pay 35 percent, their goal is allegedly to pay just 5 percent.

• Financial Media Celebrates Apple’s Tax Evasion Bond Deal by Yves Smith

 

The deal was announced quietly, just before the holidays, almost like the government was hoping people were too busy hanging stockings by the fireplace to notice. Flooring politicians, lawyers and investigators all over the world, the U.S. Justice Department granted a total walk to executives of the British-based bank HSBC for the largest drug-and-terrorism money-laundering case ever. Yes, they issued a fine – $1.9 billion, or about five weeks’ profit – but they didn’t extract so much as one dollar or one day in jail from any individual, despite a decade of stupefying abuses.

People may have outrage fatigue about Wall Street, and more stories about billionaire greedheads getting away with more stealing often cease to amaze. But the HSBC case went miles beyond the usual paper-pushing, keypad-punching­ sort-of crime, committed by geeks in ties, normally associated­ with Wall Street. In this case, the bank literally got away with murder – well, aiding and abetting it, anyway.

Higher payroll taxes “go against our customers’ wallet,” Family Dollar Chief Executive Officer Howard Levine said on a Jan. 3 conference call. “Clearly, they do not have as much for discretionary purchases than they did.”

Wal-Mart’s Geiger in his e-mail urged employees to improve business by “fixing something that could really make a difference to our performance.” He quoted Tim Yatsko, the company’s executive vice president of global sourcing, saying: “We need to ‘stop the stupid.’”

Wal-Mart U.S. CEO Bill Simon said during a Feb. 1 officers meeting, the minutes of which were attached to Geiger’s e-mail, that the troubled economy leaves little room for internal errors.

“In an environment like this, we can’t afford to hurt ourselves,” Simon said, according to the minutes. “Self- inflicted wounds are our biggest risk and our toughest enemy.”

Walmart Execs Sweat Slow February Sales

Fireside Chat 6: On Government and Capitalism (September 30, 1934)

Franklin Delano Roosevelt

Three months have passed since I talked with you shortly after the adjournment of the Congress. Tonight I continue that report, though, because of the shortness of time, I must defer a number of subjects to a later date.

Recently the most notable public questions that have concerned us all have had to do with industry and labor and with respect to these, certain developments have taken place which I consider of importance. I am happy to report that after years of uncertainty, culminating in the collapse of the spring of 1933, we are bringing order out of the old chaos with a greater certainty of the employment of labor at a reasonable wage and of more business at a fair profit. These governmental and industrial developments hold promise of new achievements for the nation.

Men may differ as to the particular form of governmental activity with respect to industry and business, but nearly all are agreed that private enterprise in times such as these cannot be left without assistance and without reasonable safeguards lest it destroy not only itself but also our processes of civilization. The underlying necessity for such activity is indeed as strong now as it was years ago when Elihu Root said the following very significant words:

“Instead of the give and take of free individual contract, the tremendous power of organization has combined great aggregations of capital in enormous industrial establishments working through vast agencies of commerce and employing great masses of men in movements of production and transportation and trade, so great in the mass that each individual concerned in them is quite helpless by himself. The relations between the employer and the employed, between the owners of aggregated capital and the units of organized labor, between the small producer, the small trader, the consumer, and the great transporting and manufacturing and distributing agencies, all present new questions for the solution of which the old reliance upon the free action of individual wills appear quite inadequate. And in many directions, the intervention of that organized control which we call government seems necessary to produce the same result of justice and right conduct which obtained through the attrition of individuals before the new conditions arose.”

It was in this spirit thus described by Secretary Root that we approached our task of reviving private enterprise in March, 1933. Our first problem was, of course, the banking situation because, as you know, the banks had collapsed. Some banks could not be saved but the great majority of them, either through their own resources or with government aid, have been restored to complete public confidence. This has given safety to millions of depositors in these banks. Closely following this great constructive effort we have, through various Federal agencies, saved debtors and creditors alike in many other fields of enterprise, such as loans on farm mortgages and home mortgages; loans to the railroads and insurance companies and, finally, help for home owners and industry itself.

In all of these efforts the government has come to the assistance of business and with the full expectation that the money used to assist these enterprises will eventually be repaid. I believe it will be.

The second step we have taken in the restoration of normal business enterprise has been to clean up thoroughly unwholesome conditions in the field of investment. In this we have had assistance from many bankers and businessmen, most of whom recognize the past evils in the banking system, in the sale of securities, in the deliberate encouragement of stock gambling, in the sale of unsound mortgages and in many other ways in which the public lost billions of dollars. They saw that without changes in the policies and methods of investment there could be no recovery of public confidence in the security of savings. The country now enjoys the safety of bank savings under the new banking laws, the careful checking of new securities under the Securities Act and the curtailment of rank stock speculation through the Securities Exchange Act. I sincerely hope that as a result people will be discouraged in unhappy efforts to get rich quick by speculating in securities. The average person almost always loses. Only a very small minority of the people of this country believe in gambling as a substitute for the old philosophy of Benjamin Franklin that the way to wealth is through work.

In meeting the problems of industrial recovery the chief agency of the government has been the National Recovery Administration. Under its guidance, trades and industries covering over ninety percent of all industrial employees have adopted codes of fair competition, which have been approved by the President. Under these codes, in the industries covered, child labor has been eliminated. The work day and the work week have been shortened. Minimum wages have been established and other wages adjusted toward a rising standard of living. The emergency purpose of the N. R. A. was to put men to work and since its creation more than four million persons have been re-employed, in great part through the cooperation of American business brought about under the codes.

Benefits of the Industrial Recovery Program have come, not only to labor in the form of new jobs, in relief from over-work and in relief from under-pay, but also to the owners and managers of industry because, together with a great increase in the payrolls, there has come a substantial rise in the total of industrial profits – a rise from a deficit figure in the first quarter of 1933 to a level of sustained profits within one year from the inauguration of N. R. A.

Now it should not be expected that even employed labor and capital would be completely satisfied with present conditions. Employed workers have not by any means all enjoyed a return to the earnings of prosperous times; although millions of hitherto under- privileged workers are today far better paid than ever before. Also, billions of dollars of invested capital have today a greater security of present and future earning power than before. This is because of the establishment of fair, competitive standards and because of relief from unfair competition in wage cutting which depresses markets and destroys purchasing power. But it is an undeniable fact that the restoration of other billions of sound investments to a reasonable earning power could not be brought about in one year. There is no magic formula, no economic panacea, which could simply revive over-night the heavy industries and the trades dependent upon them.

Nevertheless the gains of trade and industry, as a whole, have been substantial. In these gains and in the policies of the Administration there are assurances that hearten all forward-looking men and women with the confidence that we are definitely rebuilding our political and economic system on the lines laid down by the New Deal – lines which as I have so often made clear, are in complete accord with the underlying principles of orderly popular government which Americans have demanded since the white man first came to these shores. We count, in the future as in the past, on the driving power of individual initiative and the incentive of fair private profit, strengthened with the acceptance of those obligations to the public interest which rest upon us all. We have the right to expect that this driving power will be given patriotically and whole-heartedly to our nation.

We have passed through the formative period of code making in the National Recovery Administration and have effected a reorganization of the N. R. A. suited to the needs of the next phase, which is, in turn, a period of preparation for legislation which will determine its permanent form.

In this recent reorganization we have recognized three distinct functions. First, the legislative or policy making function. Second, the administrative function of code making and revision and, third, the judicial function, which includes enforcement, consumer complaints and the settlement of disputes between employers and employees and between one employer and another.

We are now prepared to move into this second phase, on the basis of our experience in the first phase under the able and energetic leadership of General Johnson.

We shall watch carefully the working of this new machinery for the second phase of N. R. A., modifying it where it needs modification and finally making recommendations to the Congress, in order that the functions of N. R. A. which have proved their worth may be made a part of the permanent machinery of government.

Let me call your attention to the fact that the National Industrial Recovery Act gave businessmen the opportunity they had sought for years to improve business conditions through what has been called self-government in industry. If the codes which have been written have been too complicated, if they have gone too far in such matters as price fixing and limitation of production, let it be remembered that so far as possible, consistent with the immediate public interest of this past year and the vital necessity of improving labor conditions, the representatives of trade and industry were permitted to write their ideas into the codes. It is now time to review these actions as a whole to determine through deliberative means in the light of experience, from the standpoint of the good of the industries themselves, as well as the general public interest, whether the methods and policies adopted in the emergency have been best calculated to promote industrial recovery and a permanent improvement of business and labor conditions. There may be a serious question as to the wisdom of many of those devices to control production, or to prevent destructive price cutting which many business organizations have insisted were necessary, or whether their effect may have been to prevent that volume of production which would make possible lower prices and increased employment. Another question arises as to whether in fixing minimum wages on the basis of an hourly or weekly wage we have reached into the heart of the problem which is to provide such annual earnings for the lowest paid worker as will meet his minimum needs. We also question the wisdom of extending code requirements suited to the great industrial centers and to large employers, to the great number of small employers in the smaller communities.

During the last twelve months our industrial recovery has been to some extent retarded by strikes, including a few of major importance. I would not minimize the inevitable losses to employers and employees and to the general public through such conflicts. But I would point out that the extent and severity of labor disputes during this period has been far less than in any previous, comparable period.

When the businessmen of the country were demanding the right to organize themselves adequately to promote their legitimate interests; when the farmers were demanding legislation which would give them opportunities and incentives to organize themselves for a common advance, it was natural that the workers should seek and obtain a statutory declaration of their constitutional right to organize themselves for collective bargaining as embodied in Section 7 (a) of the National Industrial Recovery Act.

Machinery set up by the Federal government has provided some new methods of adjustment. Both employers and employees mast share the blame of not using them as fully as they should. The employer who turns away from impartial agencies of peace, who denies freedom of organization to his employees, or fails to make every reasonable effort at a peaceful solution of their differences, is not fully supporting the recovery effort of his government. The workers who turn away from these same impartial agencies and decline to use their good offices to gain their ends are likewise not fully cooperating with their government.

It is time that we made a clean-cut effort to bring about that united action of management and labor, which is one of the high purposes of the Recovery Act. We have passed through more than a year of education. Step by step we have created all the government agencies necessary to insure, as a general rule, industrial peace, with justice for all those willing to use these agencies whenever their voluntary bargaining fails to produce a necessary agreement.

There should be at least a full and fair trial given to these means of ending industrial warfare; and in such an effort we should be able to secure for employers and employees and consumers the benefits that all derive from the continuous, peaceful operation of our essential enterprises.

Accordingly, I propose to confer within the coming month with small groups of those truly representative of large employers of labor and of large groups of organized labor, in order to seek their cooperation in establishing what I may describe as a specific trial period of industrial peace.

From those willing to join in establishing this hoped-for period of peace, I shall seek assurances of the making and maintenance of agreements, which can be mutually relied upon, under which wages, hours and working conditions may be determined and any later adjustments shall be made either by agreement or, in case of disagreement, through the mediation or arbitration of state or federal agencies. I shall not ask either employers or employees permanently to lay aside the weapons common to industrial war. But I shall ask both groups to give a fair trial to peaceful methods of adjusting their conflicts of opinion and interest, and to experiment for a reasonable time with measures suitable to civilize our industrial civilization.

Closely allied to the N. R. A. is the program of Public Works provided for in the same Act and designed to put more men back to work, both directly on the public works themselves, and indirectly in the industries supplying the materials for these public works. To those who say that our expenditures for Public Works and other means for recovery are a waste that we cannot afford, I answer that no country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance. Morally, it is the greatest menace to our social order. Some people try to tell me that we must make up our minds that for the future we shall permanently have millions of unemployed just as other countries have had them for over a decade. What may be necessary for those countries is not my responsibility to determine. But as for this country, I stand or fall by my refusal to accept as a necessary condition of our future a permanent army of unemployed. On the contrary, we must make it a national principle that we will not tolerate a large army of unemployed and that we will arrange our national economy to end our present unemployment as soon as we can and then to take wise measures against its return. I do not want to think that it is the destiny of any American to remain permanently on relief rolls.

Those, fortunately few in number, who are frightened by boldness and cowed by the necessity for making decisions, complain that all we have done is unnecessary and subject to great risks. Now that these people are coming out of their storm cellars, they forget that there ever was a storm. They point to England. They would have you believe that England has made progress out of her depression by a do-nothing policy, by letting nature take her course. England has her peculiarities and we have ours but I do not believe any intelligent observer can accuse England of undue orthodoxy in the present emergency.

Did England let nature take her course? No. Did England hold to the gold standard when her reserves were threatened? No. Has England gone back to the gold standard today? No. Did England hesitate to call in ten billion dollars of her war bonds bearing 5 percent interest, to issue new bonds therefore bearing only 3 1/2 percent interest, thereby saving the British Treasury one hundred and fifty million dollars a year in interest alone? No. And let it be recorded that the British bankers helped. Is it not a fact that ever since the year 1909, Great Britain in many ways has advanced further along lines of social security than the United States? Is it not a fact that relations between capital and labor on the basis of collective bargaining are much further advanced in Great Britain than in the United States? It is perhaps not strange that the conservative British press has told us with pardonable irony that much of our New Deal program is only an attempt to catch up with English reforms that go back ten years or more.

Nearly all Americans are sensible and calm people. We do not get greatly excited nor is our peace of mind disturbed, whether we be businessmen or workers or farmers, by awesome pronouncements concerning the unconstitutionality of some of our measures of recovery and relief and reform. We are not frightened by reactionary lawyers or political editors. All of these cries have been heard before. More than twenty years ago, when Theodore Roosevelt and Woodrow Wilson were attempting to correct abuses in our national life, the great Chief Justice White said:

“There is great danger it seems to me to arise from the constant habit which prevails where anything is opposed or objected to, of referring without rhyme or reason to the Constitution as a means of preventing its accomplishment, thus creating the general impression that the Constitution is but a barrier to progress instead of being the broad highway through which alone true progress may be enjoyed.”

In our efforts for recovery we have avoided on the one hand the theory that business should and must be taken over into an all-embracing Government. We have avoided on the other hand the equally untenable theory that it is an interference with liberty to offer reasonable help when private enterprise is in need of help. The course we have followed fits the American practice of Government – a practice of taking action step by step, of regulating only to meet concrete needs – a practice of courageous recognition of change. I believe with Abraham Lincoln, that “The legitimate object of Government is to do for a community of people whatever they need to have done but cannot do at all or cannot do so well for themselves in their separate and individual capacities.”

I still believe in ideals. I am not for a return to that definition of Liberty under which for many years a free people were being gradually regimented into the service of the privileged few. I prefer and I am sure you prefer that broader definition of Liberty under which we are moving forward to greater freedom, to greater security for the average man than he has ever known before in the history of America.

RELATED:

FDR saved capitalism in eight days – Slate Magazine

…many investors have been hesitant about entering the market because of the slow recovery of the economy. Now, a number of recent data points suggests that the recovery may be gaining traction. This week, new claims for unemployment benefits fell to the lowest level in five years.

Even many optimistic strategists say that a short-term break from the market rally is likely until there are more indications that the economy is growing. And given that January is historically a strong month for stocks, more bearish analysts have said the recent rally is likely to fade. One drag on growth could come from the recent increase in payroll taxes.

There is also a sizable contingent of investors who think that the European debt crisis and United States fiscal position still represent significant threats.

But Russ Koesterich, the chief investment strategist at BlackRock, said that the current threats were “mundane” in comparison to what investors faced the last few years. “We’re not talking about big crises anymore,” he said.

Uh-Oh: Small Investors Propel Stocks

RFK Triumphant

In the last four decades, there have been only a handful of central bank and Treasury papers that I thought genuinely added to human knowledge. The economic-oriented departments within governments have in general been even more dominated by neoclassical orthodoxy than academic departments – and for good, bureaucratic reasons.

I once again had the chance to speak with the legendary Don Coxe, Chairman of Coxe Advisors LLP, which collaborates with and advises BMO Global Asset Management—a $105 billion arm of the $540 billion BMO Financial Group.

It was an incredibly powerful interview, covering topics from his 20th anniversary and final edition of “Basic Points”, entitled, “The Final Problem”.

These topics included: the sustained delivery of “financial heroin” into global markets, the “rigged” environment of government growth, and the utility of gold as a weapon during dark financial times.

Starting out with, Don spoke to the growing symptoms which one could interpret as the death of capitalism, in saying, “When you’ve got a situation of governments that are running monstrous deficits, are able to borrow at zero…the basic bloodstream mechanisms of capitalism are seriously at risk.” He further added, “The basic system is being rigged in favor of expanding [the] size of government. If you expand the size of government at a time when the economy is not growing, what that means is, that the socialist forces are gaining strength. There’s something that’s got to happen to change that.”

Don recounted a fascinating story from his father’s service during WW II and it’s relevance to today’s financial environment. He said, “[My father] was cited for doing more battlefield anesthetics than any other Canadian doctor during WW II… he said the skill was…you had to decide who needed heroin [which was the only thing that worked for those desperately wounded and screaming in pain], rather than morphine…So you put them on heroin knowing it was a high-risk thing…and the other thing that was the skill, was knowing when enough healing had been done that you took them off the heroin and put them on morphine.”

“If you kept them on the heroin too long, they would not be able to go back and be risk-taking soldiers[and their lives would be destroyed].”

In connecting his father’s story to today’s financial environment, Don said, “I was on a platform with David Dodge, shortly after he ceased to be governor of the Bank of Canada, we were speaking to an audience in Denver. He was talking about the necessity to get off the zero interest rates very fast, because of the long-term damage [it] could do. So when I got up to speak, I told the story about my father and said, ‘Zero interest rates are financial heroin.’ [Dodge's] head just jerked, and he turned and said to me, ‘That is a wonderful analogy!’”

“My fear,” Don continued, “is that year after year…we’re going to have a whole situation where everybody has become used to these zero interest rates, and what happens when you try to restore normal interest rates? Will the economy have been so undermined…that it wont be able to deliver and function, when you’re actually pricing money the way you’ll eventually have too, which is in relation to risk?”

Concluding with his thoughts on gold, Don said,“There’s no [historical] precedent for this…When what lies ahead of you is ‘no-mans land’…you probably want to go in with a gun. If we’re going into economic no-mans land, what you say is, ‘What’s the only asset out there which for as long as we have recorded history has been used as a medium for buying goods and services, and investments? That’s gold.”

“No matter how this story turns out, I don’t believe it can turn out in a way that is going to be disadvantageous to those that have gold…[in fact] The next time people make serious money on gold, it will come a midst a major kind of shock.”

Once again, this was a powerful interview with one of the legendary investors of our time, and it is required listening for serious investors and market students.

To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to to your desktop:

>>Interview with Don Coxe (MP3)

President Francois Hollande’s 75 percent millionaire-tax is unconstitutional because it fails to guarantee taxpayer equality, France’s top court ruled today.

The tax, one of Hollande’s campaign promises, had become a focal point of discontent among entrepreneurs and other wealth creators, some of whom have quit French shores as a result. The ruling comes as the president seeks to cut France’s public deficit to 3 percent of gross domestic product next year from a projected 4.5 percent this year.

“Politically, this has an impact because it was a symbol for French public opinion, and was considered abroad as the emblem of French tax excess, of French tax hell,” said Dominique Barbet, senior economist at BNP Paribas SA in Paris. “In deficit terms, it’s truly negligible.”

The court said Hollande’s plan would have added extra levies of 18 percent on individuals’ incomes of more than 1 million euros ($1.32 million), while regular income taxes and a 4 percent exceptional contribution for high earners would have been based on household income, an e-mailed statement shows.

As a result, two households with the same total revenue could end up paying different rates depending on how earnings are divided among members of those households. That runs counter to a rule of equal tax treatment, the Paris-based court said.

Prime Minister Jean-Marc Ayrault said in an e-mailed statement that the government “takes note” of the court decision on the 75 percent tax band and “will present a new proposal in line with the principles laid down by the Constitutional Court.” The ruling doesn’t call into question deficit targets or the path set out to get there, Ayrault said.

The court’s decision will lower tax revenue by less than 500 million euros in 2013, according to a spokeswoman for the prime minister’s office who declined to provide her name.

French billionaire Bernard Arnault, chief executive officer of LVMH Moet Hennessy Louis Vuitton SA (MC), filed an application for Belgian nationality in September. While he promised to continue paying taxes in France, the action prompted fierce criticism from Hollande and his supporters.

Movie star Gerard Depardieu, 64, said he was leaving France “because you consider success, creativity, talent, anything different are grounds for sanction.”

The decision could be positive for France’s bond market because it shows there is a limit to the government’s ability to raise taxes on the wealthy and may decrease the flight risk of more rich French citizens, Barbet said.

http://www.bloomberg.com/news/2012-12-29/french-court-says-75-tax-rate-on-wealthy-is-unconstitutional.html

Between 1870 and 1914, there was a global fixed exchange rate. Currencies were linked to gold, meaning that the value of a local currency was fixed at a set exchange rate to gold ounces. This was known as the gold standard. This allowed for unrestricted capital mobility as well as global stability in currencies and trade; however, with the start of World War I, the gold standard was abandoned.

At the end of World War II, the conference at Bretton Woods, an effort to generate global economic stability and increase global trade, established the basic rules and regulations governing international exchange. As such, an international monetary system, embodied in the International Monetary Fund (IMF), was established to promote foreign trade and to maintain the monetary stability of countries and therefore that of the global economy.

It was agreed that currencies would once again be fixed, or pegged, but this time to the U.S. dollar, which in turn was pegged to gold at US$35 per ounce. What this meant was that the value of a currency was directly linked with the value of the U.S. dollar. So, if you needed to buy Japanese yen, the value of the yen would be expressed in U.S. dollars, whose value in turn was determined in the value of gold. If a country needed to readjust the value of its currency, it could approach the IMF to adjust the pegged value of its currency. The peg was maintained until 1971, when the U.S. dollar could no longer hold the value of the pegged rate of US$35 per ounce of gold.

From this point in, governments used fiat currency as the basis of the monetary system.  This system had two defining characteristics: (a) non-convertibility; and (b) flexible exchange rates. You need to recognise this major shift in history before you can understand why the economic policy ideas that prevailed in the previous monetary systems (based on convertibility) are no longer applicable. You cannot assume that the logic that applied in the fixed exchange rate-convertibility days translates over into the fiat currency era. The fact is that it doesn’t.

Investopedia

The Vice Presidential debate last night unfortunately pitted two Catholics against each other. Some things were left discouragingly unclear: Frustration with Ryan and Biden. Given that the Catholic Faith is under assault in a great many countries around the world, including the United States under the policies of our current President, perhaps it is time to revisit the story of Catholic oppression in Elizabethan England.

Joe Biden obviously knows nothing about his Baptized Catholism. This Jesuit did:

It is difficult to over-estimate the importance of the Elizabethan period in English history to the problems of our own times. In the sixteenth century, the English crown was determined to assert the authority of the State over the minds and hearts of all those within its borders. This was the essence of the war on the “old religion”, which insisted on the indissolubility of marriage, on the authority of the Pope in spiritual matters, and on the necessity of the Church for salvation.

This situation closely mirrors our own, as the various Western powers, in the name of a secular relativism controlled by the modern State, gradually restrict the rights of Catholics and other non-compromising Christians to express and live their Faith. With each passing year, there are more statements that Catholics are not allowed to say, more actions they are not allowed to perform, and more immoral policies they are forced to support.

For this reason, it is also difficult to overrate the decision of Ignatius Press to bring out a new edition of The Autobiography of a Hunted Priest, written by John Gerard, SJ to describe the secret work of the Jesuits in England in the 16th and early 17th centuries. A generation ago, this account might have been read mainly out of historical interest; now it reads like a prophecy.

John Gerard was born in 1564. He was the son of devout Catholic parents who had to pay many fines and even suffer imprisonment for their fidelity to Rome and their failure to attend the required Anglican services. John himself was taken from them at age five, while his father was in prison, in order to be raised by Protestant relatives, but three years later his father paid to be released from prison and got him back. After studying at Oxford and in France, young John felt the first call to be a priest, and in particular to be a Jesuit, at age 15. His first imprisonment came while still a student, after spies informed on him when he returned home to dispose of his property.

Obtaining his release after about a year at Easter of 1584, John settled his affairs, returned to the Continent, completed his studies at the English College in Rome, and was ordained in 1588—the year of the ill-fated Spanish armada. Later that year, he slipped secretly into England and began an eighteen-year mission which did not end until he was so well-known and so consistently sought by the Crown that he had to move on to other duties in order to avoid jeopardizing the work.

Fr. Gerard’s account of the mission, written on orders of his superior, makes a genuinely thrilling story. He had to operate in secret, posing mostly as an inoffensive English gentleman while he carefully established himself with various wealthy Catholic families who were willing to undergo considerable risk to serve as centers for Mass, confession and spiritual direction. Frequently betrayed, he sometimes hid for long periods in hard-to-find “priest’s holes” which were cleverly designed into unlikely spaces within these great houses, and were not always discovered even after days of searching by the authorities, though they poked holes in walls, destroyed woodwork, and tore down plaster. (A bill was presented to the homeowner for the costs of the search!)

Sometimes he was questioned, but without his interrogators knowing he was a priest. When he was finally imprisoned in the Spring of 1594, he was moved progressively to places of higher security and was cruelly tortured, especially by being hung by manacles from his wrists for long periods of time. Whenever he was left alone, he worked out arrangements with his jailers to minister as best he could to other Catholics in the prisons. He communicated with prisoners elsewhere and with the outside world by writing with the invisible juice of oranges, which could be read by applying either water or heat. In this way he was able to engineer a daring escape, using a rope drawn up to the roof over the cell of a friend, above the moat surrounding the Tower of London, in the dead of night.

The Autobiography of a Hunted Priest recounts not only Fr. Gerard’s own adventures but the similar adventures, courage, and even martyrdoms of many other priests and laity. It also recounts the many conversations Fr. Gerard and other priests were able to have with family members, friends and servants in the various households, through which they brought a great many souls back to the Catholic Faith, as well as strengthening those who were wavering. In addition, of course, the Church in hiding depended on the administration of the sacraments by these secret priests, who worked under a continual sentence of death.

The Ignatius edition was originally translated from the Latin by Philip Caraman, SJ around 1950; it includes extensive (and frequently illuminating) notes. It also boasts a new introduction by Fr. James Schall, and nine appendices which provide additional information on such things as Fr. Gerard’s residences, the Catholic defense of equivocation in the work of the Mission, and the Gunpowder Plot, which put several priests, including Fr. Gerard, in grave danger and resulted in more martyrs.

This a wonderful offering for the new Year of Faith, which begins on October 11th. It serves as a fascinating history, a story of saintly heroism, a tale of high adventure, a spiritual preparation for the work of the New Evangelization—and perhaps a warning of things to come.

http://www.catholicculture.org/commentary/otc.cfm?id=1017

Obama’s most striking betrayal of his base and his mandate to reform is in his kid gloves treatment of one of the worst financial crimes in American history. And of course he is not alone. The Congress is a disgrace, falling to historic lows in their public approval. The Republicans are shameless in their obstructionism, and there is not a leader worthy of the name amongst the Democrats.

I struggle quite a bit with his motives, constantly arriving at the conclusion that he is held captive by the system that rewarded and elevated him.   Ignorance does not suffice, and moral cowardice does not seem appropriate.   More likely is the expedient amorality of the modern managerial mind.   The deal is what is important.  

And sadly enough, there is no real alternative in Romney, who as the modern predatory financial manager will say or do anything to make the deal happen.   And the pigmen are licking their lips at the thought that their man might take the reins.

This is the weakness of the two party system, and a Presidency that, excepting for the occasional impeachment, allows a President to reign for four years once he (or hopefully some day she) manages to persuade the electorate to accede in their ascendancy to power.

“The debate revealed that Obama does not stand for anything positive when it comes to the banksters or distressed homeowners. Geithner is not a banker or a technocrat. He is an American apparatchik who rose by attaching himself to powerful political patrons and telling them what they want to hear. That reflects badly on Obama.

Geithner gave Obama the answers Obama wanted to hear – we must not act against our largest donors (and Geithner’s most likely future employer), the banksters, by holding them accountable for their frauds because if we were to do so the economy would collapse. Geithner’s answer, which became administration policy, was to lie about the banksters’ role in causing the crisis and the financial condition of the banks.

Obama should hold Romney accountable for his endemic lies during the campaign and debate, but he would be in a better position to do so if he fired Geithner and Holder, ended his administration’s lies about the banksters, and reversed the administration’s unjust and destructive financial policies.

Obama needs to stand for something – he should stand for the American people against the banksters and the SDIs. The irony is that by following Geithner’s advice Obama acted dishonorably and foamed the runway for Romney’s lies about the financial crisis.”

Read the entire essay by William K. Black here.

A Chinese depiction of Jesus and the rich man

Based on highly sophisticated computer program results, calculations are favorable that the current communist government of China will be overturned by internal insurrection within five years. The model demonstrates that the rapid attempt to create a middle class and consequent an internal consumption economy by the communists has been a total disaster. By artificially creating demand in the people which outran supply and establishing umsustainable leverage, the people’s anger at the government  cannot be sustained beyond 2017 and social unrest is inevitable.

Further details are fothcoming.

The U.S. manufacturing sector has contracted, consumers are watching their wallets and lawmakers in the nation’s capital are twiddling their thumbs.

Not a recipe for a stronger economy.

The latest batch of economic data is expected to show the U.S. muddling along. Consumers are spending too much on necessities such as gas and big-ticket manufactured goods are no longer flying off the shelves. A modestly improved housing market is not expanding fast enough to offset downward pressures on the nation’s growth, either.

Economists expect those trends to persist to the end of the year. The hope in 2013 is that lackluster global growth will gain more of a shine and that Washington won’t fall off a so-called fiscal cliff by letting big tax increases and spending cuts take effect in January as scheduled.

“Once we get over that at the end of the year, we are clearly expecting some confidence to come back to consumers and

Going, going……

I thought that Clinton’s speech at the Democratic Convention was disgustingly dishonest, even for him. The simple fact is that both Parties are owned by the Oligarchs and nothing is going to change until the system is reformed. If Romney is so concerned about the “47%” eating and getting medical care, why isn’t he equally worried that government intrusion into private capitalism, orchestrated by a former CEO of Goldman’s, pretending simultaneously to represent the interests of all the Republic was bailing out banksters who weren’t allowed to lose. Hypocrites all.

When it collapsed, due in part to bank-friendly policies that Rubin advocated, he made more than $100 million while others lost everything. “You have to view people in a fair light,” says Phil Angelides, co-chair of the Financial Crisis Inquiry Commission, who credits Rubin for much of the Clinton-era prosperity. “But on the other side of the ledger are key acts, such as the deregulation of derivatives, or stopping the Commodities Futures Trading Commission from regulating derivatives, that in the end weakened our financial system and exposed us to the risk of financial disaster.”

“Nobody on this planet represents more vividly the scam of the banking industry,” says Nassim Nicholas Taleb, author of The Black Swan. “He made $120 million from Citibank, which was technically insolvent. And now we, the taxpayers, are paying for it.”

Rethinking Robert Ruben

Political Union must precede economic union, justly and democratically created, not enforced by fiat from Brussels.

Printing fiat Euros won’t solve Europe’s malignant problems.-J.B. Schuettler

ECB President Draghi Reaches for the Bazooka

By Stefan Kaiser in Frankfurt

AFP

A sculpture of the euro symbol stands in front of the European Central Bank headquarters in Frankfurt: The ECB is pulling out the bazooka to save the common currency.

——————————————————–

European Central Bank President Mario Draghi has taken a bold step this week to contain the euro crisis. The ECB is now planning unlimited bond purchases in order to prevent an escalation of the euro’s woes. The step marks a fundamental shift in efforts to save the common currency — and comes with plenty of risks.

No Limits

ECB President Draghi Reaches for the Bazooka

European Central Bank President Mario Draghi has taken a bold step this week to contain the euro crisis. The ECB is now planning unlimited bond purchases in order to prevent an escalation of the euro’s woes. The step marks a fundamental shift in efforts to save the common currency — and comes with plenty of risks.

Have we heeded Simon Johnson’s warning? Has he proven to be prescient? Is crony capitalism and the kleptocracy becoming bolder, more aggressive, ever more demanding?

“I think I’m signaling something a little bit shocking to Americans, and to myself, actually. Which is the situation we find ourselves in at this moment, this week, is very strongly reminiscent of the situations we’ve seen many times in other places.

But they’re places we don’t like to think of ourselves as being similar to. They’re emerging markets. It’s Russia or Indonesia or a Thailand type situation, or Korea. That’s not comfortable. America is different. America is special. America is rich. And, yet, we’ve somehow find ourselves in the grip of the same sort of crisis and the same sort of oligarchs…

But, exactly what you said, it’s a small group with a lot of power. A lot of wealth. They don’t necessarily – they’re not necessarily always the names, the household names that spring to mind, in this kind of context. But they are the people who could pull the strings. Who have the influence. Who call the shots…

…the signs that I see this week, the body language, the words, the op-eds, the testimony, the way they’re treated by certain Congressional committees, it makes me feel very worried.

I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there’s a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful. And you know you need to come in and break that power. And you can’t. You’re stuck….

The powerful people are the insiders. They’re the CEOs of these banks. They’re the people who run these banks. They’re the people who pay themselves the massive bonuses at the end of the last year. Now, those bonuses are not the essence of the problem, but they are a symptom of an arrogance, and a feeling of invincibility, that tells you a lot about the culture of those organizations, and the attitudes of the people who lead them…

But it really shows you the arrogance, and I think these people think that they’ve won. They think it’s over. They think it’s won. They think that we’re going to pay out ten or 20 percent of GDP to basically make them whole. It’s astonishing….

…these people are throughout the system of government. They are very much at the forefront of the Treasury. The Treasury is apparently calling the shots on their economic policies.

This is a decisive moment. Either you break the power or we’re stuck for a long time with this arrangement.”

Bill Moyer’s Journal – Interview with Simon Johnson, February, 2009.

Johnson also wrote a piece in the Atlantic Magazine titled The Quiet Coup. It may be worth re-reading.
Here is the introduction to this in The Fall of the American Republic: The Quiet Coup d’Etat in August 2010.

“Now, I say to you today my friends, even though we face the difficulties of today and tomorrow, I still have a dream. It is a dream deeply rooted in the American dream. I have a dream that one day this nation will rise up and live out the true meaning of its creed: – ‘We hold these truths to be self-evident, that all men are created equal.’” Martin Luther King Jr., August 28, 1963

New Audit Standard Encourages More Talking

The new standard could level the playing field between CFOs and other less-informed members of corporate audit committees, an audit regulator says.

A question that has been asked, but not nearly often enough, is why did the complex risk defrayal methods fail so completely during the global financial crisis? The GFC proved that risk measures based on INTERNAL measures, i.e. measures within the system, will fail. At the time of the GFC many participants thought they had defrayed their risk only to find out that they had not.

What is needed is a measure of risk that is EXTERNAL to the system. This is a logical necessity. The financial system works of the assumption that risk can be shifted from individual exposures. But risk cannot be eliminated, it can only be moved, something that was obvious to many outside observers but not to financial practitioners. What happens is that the risk is moved on to the system, which exposes all participants in ways they cannot anticipate. That defeats risk management. This is particularly evident with the proliferation of high frequency trading, where we are seeing stop loss orders fail because of system melt down.

RISK IS ALWAYS WITH US

Paul Ryan on Taxes and Growth

Paul Ryan, recently announced as the Republican candidate for vice president, delivered a keynote address at the Bush Institute’s April tax conferencein New York City. In that speech, Ryan explained that strong economic growth is still possible in America. But to reclaim its prosperous economy, our country needs a new tax code that encourages entrepreneurs and job creators. Watch Ryan’s entire speech (below) to hear more about how tax reform, and other policy changes, can unleash the economic growth we need.

“Hold me accountable.”

Those were the words of Former Gov. Jon Corzine during his 2006 inaugural address, when he called on the citizens of New Jersey to make sure he lived up to his promise of restoring the Garden State to better days.

Four lackluster years later he was out, and U.S. Attorney Chris Christie swept in on a backlog of corruption prosecutions and promises to rid the state of the patronage jobs that most New Jerseyans had simply become accustomed to.

Unfortunately, Christie isn’t saying “hold me accountable” these days when it comes to the assembly line of patronage positions leading from his office to the The Port Authority of New York and New Jersey. His new mantra seems to come straight from the desk of Alfred E. Neuman: “What, me worry?”

Oversight? No thanks.

Christie vetoed legislation that would have required open meetings with the public prior to voting on toll hikes. It would have also required the agency to submit to independent audits and publish its board of commissioners’ meeting minutes.

Under Christie, the Port Authority has become (or a better term would be remained) a high-priced patronage mill for the well connected. He has directed more new hires at the Port Authority than any governor from either state in more than a decade, including 50 people, dozens with ties to his administration, last January.

The most recent to receive posh positions have been Richard Bagger, Christie’s former chief of staff, and Phillip Kwon, Christie’s failed Supreme Court nominee. I guess one man’s patronage is another man’s reform. Christie denies that any of this is patronage, but here are just a few examples of politically connected people getting posh posts.

Like Fox News, I’ll report, you decide:

• Laurie Michel: Federal affairs director, $172,016. Previous job experience — the wife of South Jersey Republican leader David Norcross. Michel was a Washington lobbyist who donated to Deputy Executive Director Bill Baroni’s Senate campaign.

• Dominick Fiorilli: Assistant director of new port initiatives, $95,004. Previous job experience — was the former chief of staff for Republican state Sen. Kevin J. O’Toole and regional campaign manager for McCain ’08.

• Rick Vander Wende: Contract administration manager, $94,822. Previous job experience — The former GOP mayor of Waldwick, Vander Wende both endorsed and donated to Christie’s gubernatorial campaign. He was director of customer service at a jewelry retailer.

• Robert Cressen: Senior project manager, $105,014. Previous job experience — was the former executive director of New Jersey Republican State Committee and a political consultant.

• Francis Hannan: Senior financial analyst, $85,124. Previous job experience — a former gourmet food broker, he is a Christie campaign donor and was vice chairman of the Passaic County GOP committee.

The list goes on and on (full list here, courtesy of The Record).  

I have a hunch this vast list of patronage posts and the nearly 50 percent toll increase Christie helped push through won’t be making it into his keynote address at this year’s Republican Convention in Tampa.

Of course, Christie is doing nothing that former governors haven’t done before him. But Christie was supposed to be different. He was supposed to rid the state of political corruption and clean up the mess in Trenton. He was Superman, taking on Lex Luthor.

His kryptonite, however, is green and comes bundled by the thousand, just like previous governors.

Remember when then-U.S. Attorney Christie testified before Congress about the $52 million no-bid monitoring contract he gave to his old mentor, former Attorney General John Ashcroft? Or how about the monitoring contract he gave to David Kelley, who had investigated Christie’s brother previously in a stock fraud case in 2005? You guessed it, Christie’s brother got off while 15 others were indicted.

Christie was even forced to admit to a Congressional panel that one of the law firms he had given a no-bid contract to has since made substantial donations to his campaign for governor. 

Christie likes to announce loudly and often how he’s taking on the special interests, that he alone is fighting the corruption and greed that the combination of money and politics creates.

Unfortunately, it’s followed by the “oinks” and “snorts” of a trail of money and patronage he’s left behind him, all paid for by you.

Rob Tornoe is a political cartoonist and a WHYY contributor. See more of his work at RobTornoe.com, and follow him on twitter @RobTornoe

“The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true.

It really happened. These suspicions are valid.”

Neil Barofsky, TARP Inspector General

The Fed is not the solution; the Fed is a creature of the biggest banks, and very much a part of the problem.

Once again we hear a lone voice of common sense, and reason for reform, in this case Sarah Bloom Raskin, speak out forcefully for reform.

You may recall ‘The Warning’ which featured Brooksley Born, who sounded the alarm about the growing dangers of the unregulated derivatives market during the Clinton Administration. And who was thwarted and bullied by team Greenspan-Summers-Geithner.

And you might remember how the Wall Street Banks used the NY Fed and the Treasury’s Tim Geithner to block the reforms proposed by the FDIC’s Sheila Bair.

I do not think that these men who block reform and serious change are evil. Rather, I think they are just dead wood, who know nothing more than the system of privilege that has elevated them, and rewarded them, and which they are loathe to see change.

But the times are getting difficult, and so it is time for a change, which is necessary for there to be a sustainable economic recovery.

And in the election of the President this year the people are being given a choice, as someone so aptly put it, between an ineffective and compromised gamekeeper and one of the worst and greediest of the poachers. Obama was marketed as an independent outsider, but he is not. They are both owned by the system, each in their own way.

And that means change is not going to come from the top. But it will come nonethless.

If this continues the capitalists will eventually destroy themselves, because none of them will want to be the first that calls a stop. And that will be a tragedy.

Baseline Scenario
Fed Governor Speaks Out For Stronger Rules
By Simon Johnson
July 28, 2012

By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil

During the Great Depression and the war years monetary policy in Britain had proved largely ineffective. In the meantime it was shown that government spending could cure economic depressions and return the economy to full or even super-full employment. After the war most political parties in Britain were thus interested in using fiscal policy to generate full employment rather than rely on the vagaries of monetary policy. (This, it should be said, is the polar opposite of our rather more desperate situation today).

Wily conservatives, however, recognised that such policies would mean the expansion of government – which they didn’t like at all. So they tried to resurrect monetary policy as the government’s tool of choice.

Read the Rest…