Daily Archive: 02/24/2012

Feb 24 2012

Greece Defaults

I don’t know what else you can call an 87% haircut.

Greece’s bond exchange: it’s official

Felix Salmon, Reuters

Feb 24, 2012 13:32 EST

Firstly, they’re going to receive new Greek bonds, maturing in 2042. It doesn’t matter whether the bonds you’re holding mature on March 20, or whether they mature in 30 years’ time – everybody gets the same new long-dated bonds, according to the face value of what they now own. In other words, the value of Greek bonds right now is wholly a function of what their face value is, and has nothing to do with their coupon or their maturity date.

The new Greek bonds have a step-up coupon: 2% through 2015, then 3% through 2020, then 3.65% in 2021, and then 4.3% from 2022 through 2042. Bondholders will receive new bonds with a face value of €315 for every €1,000 of old bonds they hold. (Again, remember that it’s face value which matters here, not market price.) What’s the market price of the new bonds going to be? Not very much; my guess is that they’ll trade at roughly 40% of face value. Which means that the “NPV haircut”, as far as the new Greek obligations are concerned, is somewhere on the order of 87%.

Mark to market baby.

Feb 24 2012

Everything we thought we knew is wrong!

Sunday the Washington Post put up a piece by Dylan Matthews that gives relatively serious treatment to Modern Monetary Theory.

You know the deficit hawks. Now meet the deficit owls.

Posted by Dylan Matthews, Washington Post

10:10 AM ET, 02/19/2012

In contrast to “deficit hawks” who want spending cuts and revenue increases now in order to temper the deficit, and “deficit doves” who want to hold off on austerity measures until the economy has recovered, Galbraith is a deficit owl. Owls certainly don’t think we need to balance the budget soon. Indeed, they don’t concede we need to balance it at all. Owls see government spending that leads to deficits as integral to economic growth, even in good times.

The term isn’t Galbraith’s. It was coined by Stephanie Kelton, a professor at the University of Missouri at Kansas City, who with Galbraith is part of a small group of economists who have concluded that everyone – members of Congress, think tank denizens, the entire mainstream of the economics profession – has misunderstood how the government interacts with the economy. If their theory – dubbed “Modern Monetary Theory” or MMT – is right, then everything we thought we knew about the budget, taxes and the Federal Reserve is wrong.

‘Relatively’ is the key word and there are some serious flaws in Matthew’s piece that letsgetitdone discusses in a 6 part, 4 part series over at Corrente.

WaPo Covers MMT, But Does Its Usual Bad Job: Part One, Some Basics and Solvency

letsgetitdone, Corrente

Tue, 02/21/2012 – 5:48pm

Deficit owls, believe that there is no structural deficit, and that most of the present US deficit will go away when full employment is reached, but probably not all of it, unless the private savings levels in the economy are balanced by an equal or greater foreign sector deficit (trade surplus). They also believe that in times of unused productive capacity like these, Government deficits are caused by the state of the economic system, and that explicitly managing them by taxing more or spending less will not improve its condition, but only result in a downward economic spiral making conditions still worse.

On the other hand, if real economic problems like unemployment, alternative energy capacity and production, infrastructure renewal, education, and industrial innovations are addressed through Government deficit spending, then aggregate demand spurring private sector business activity and ending U6 unemployment will result. In addition, deficit owls believe that in a fiat money system, where there is no debt in foreign currencies, and no “peg” to such currencies, solvency is never a problem for the Government, and that while inflation partly caused by Government deficit spending can become a problem in such a system, this can only happen when full employment is achieved.



(N)ecessary for currency sovereignty is to have a non-convertible currency, a floating exchange rate, and no debt in a currency not your own. These qualifications are very important because examples (e.g. Weimar, Zimbabwe) that are often given contradicting the claim that there’s no solvency problem for Governments like the US don’t fulfill these conditions.

WaPo Covers MMT, But Does Its Usual Bad Job: Part Two, Inflation/Hyperinflation

letsgetitdone, Corrente

Wed, 02/22/2012 – 1:00am

(I)t’s easy to wave off MMT by saying there is a risk of inflation in using deficit spending to create full employment, but it is entirely another matter to say what the level of risk is, and to provide compelling arguments about why that risk is appreciable, and more costly than the effects of chronic unemployment in a stagnating economy. This Mankiw doesn’t begin to do. I think Dylan should have pointed this out, rather than just mentioning Mankiw’s opinion. Who cares about his opinion? It’s his arguments, his theories, for expecting inflation that we care about. So, why doesn’t Dylan outline what these are and critically evaluate them?

When Mankiw tells us that default might be a better option than risking inflation by printing money, he is going way beyond his claimed area of expertise in economics. The 14th Amendment to the US constitution prohibits even questioning Government debt, much less defaulting on it. Mankiw in his capacity as an economist is unqualified to say whether a violation of the US constitution is a better option than taking the risk of triggering hyperinflation by “printing money.”



What MMT replies is that bond issuance isn’t an inevitability, but a result of choices made by the US Congress and the Executive Branch of Government. The Congress could place the Fed under the authority of the Treasury Secretary in the Executive Branch, and then no debt would have to be issued to deficit spend, since the Fed could just mark up the Treasury General Account (TGA) under orders from the Secretary.

MMT also points out that the Fed controls the Federal Funds Rate which, in turn, heavily influences all bond rates. If the Fed targets a near zero FFR, and the Treasury issues no bonds longer than say, three months in duration, then bond interest rates can be kept near zero no matter how much debt is issued. Japan has proved this is the case since its debt-to-GDP ratio is now in excess of 200% while its interest rates are very near zero on short-term debt instruments.



If the Fed buys bonds with money it prints, this will increase reserves in the private sector, but it won’t increase Net Financial Assets (NFA), because buying the bonds is just an asset swap. So with no new NFA being added to the private sector by the Government, this sort of Fed operation won’t be inflationary, as its massive QE programs have just demonstrated empirically. In fact, by removing the payment of interest on bonds from the private sector, and given that most of the Fed profits are returned to the Treasury, some MMT economists say that the end result of such operations may well be deflationary.

WaPo Covers MMT, But Does Its Usual Bad Job: Part Three, Banking, and Default vs. "Hyperinflation"

letsgetitdone, Corrente

Wed, 02/22/2012 – 4:00pm

(I)ncreasing the amount of reserves does not lead to increased borrowing, because banks don’t need more reserves to make loans. All they need are credit worthy borrowers and access to the Fed discount window to make whatever quantity of loans they want to. This is one of the main points about the banking system MMT makes. Put simply: lending is not reserve constrained! It’s constrained by bank willingness to lend to credit worthy borrowers.



MMT’s Sectoral Financial Balances (SFB) model is exactly right in its explanations, since they are able to run surpluses without disaster, only because, unlike the United States, the foreign sectors of their economies run deficits (that is Canada and Australia run trade surpluses) large enough to accommodate the private sector savings desires of Australians and also the Government’s desire to run a budget surplus. The US however, currently has a need to run Government deficits of 10% to support both our private sector savings desires of 6% of GDP, and our foreign sector’s desires to export 4% of US GDP to US consumers so they can accumulate US dollars in the form of electronic credits.



Governments can voluntarily default if they choose to. MMT economists have always said this and still say it. So why is political stupidity or perfidy counted against the truth of the MMT proposition that Governments sovereign in their currency have no fiscal solvency problems, only voluntary constraints and political problems?

On the contrary, I think the Russian case is one of the primary illustrations of a point that deficit owls have been trying to spread far and wide. Namely, that sometimes default is due to stupidity and perfidy and not to economic forces and that citizens in a democracy need to be aware of that, and of the full capabilities of currency sovereign Governments to always pay debts incurred in their fiat currency and to spend whatever is necessary to enable full employment in their nations. They are never, never, out of money except by choice. So, the real questions are:

  • why are they choosing to default?
  • Who will benefit from this political choice?
  • And who will be asked to pay the price?

And how does the Russian case “prove” that: “Default, while technically always avoidable, is sometimes the best available option”? Is Dylan, through this quote from Gregory Mankiw suggesting that “public purpose” in Russia was better served by its voluntary default than it would have been if the Russians repaid their ruble debts in the rubles they might have created had they wished to? I’m afraid that both Dylan and Mankiw will have to prove that statement to me, since Russian citizens seem to have suffered quite a lot by taking the default choice and accepting austerity when they didn’t have to do so.

WaPo Covers MMT, But Does Its Usual Bad Job: Part Four, The Victory

letsgetitdone, Corrente

Thu, 02/23/2012 – 1:00am

For many years now, MMT economists and others who write in support of them have been trying to make a very important point to the mainstream. And that is that the claim:

The Government is running out of money,

is a myth, a fairy tale, or a deadly innocent fraud.

Dylan doesn’t say that in so many words. But he and the economists he cites, even Greg Mankiw grant this very important MMT/deficit owl point in passing.

If this post is any indication, mainstream economics, and certainly deficit doves, and hawks like Mankiw, now acknowledge that a nation like the US which is sovereign in its own fiat currency can never run out of money, or be prevented by the pure fiscal aspects of any situation from paying its debts or buying whatever goods and/or services it needs that are available for sale in its own sovereign currency.

So, that part of the great debate is now over. It will be very hard from here on, for the deficit hawks to maintain their deficit/insolvency terrorism in the face of the general recognition in economics that the Federal Government is not like a household, because it can never run out of the currency that it has the sole legitimate power to issue.

If they try, they will now be the ones facing ridicule and marginalization. And, increasingly, those politicians who try to claim we are running out of money, will also face ridicule and be viewed as ignoramuses by others.



Every critic of MMT cited in the post raises the objection either implicitly or explicitly that MMT policy proposals will lead to worrisome inflation, or hyperinflation. Now, that’s progress, because unlike the level of one’s national debt, or the size of one’s deficit in the abstract, or the nonsense debt-to-GDP ratio, which means nothing in itself, inflation is a real issue, not an artifact of some economist’s fevered theories.



In other words, let’s get real. Let’s talk about real problems of real people that can be alleviated through fiscal policy and Government programs. Let’s stop taking about fairy tales, myths, and bogeymen. And let’s get on with the job of rebuilding the United States for our children and grandchildren and using every tool we have, including our fiat currency system, to realize the blessings of liberty and equality of opportunity for everyone.

The WaPo MMT Post Explosion: Dean Baker Weighs In on MMT

letsgetitdone, Corrente

Fri, 02/24/2012 – 12:58am

(Th)ere are some differences that are very significant for policy activism between a Keynesian deficit dove approach employed by people like Paul Krugman, Brad DeLong, Robert Reich, and Dean Baker (op.cite, link added), and a Modern Monetary Theory (MMT) approach employed by people like Warren Mosler, L. Randall Wray, Bill Mitchell, Jamie Galbraith, Stephanie Kelton, Marshall Auerback, Scott Fullwiler, and Pavlina Tcherneva. So, here are some contrasts between the two approaches on seven important issues.

The WaPo MMT Post Explosion: Jared Bernstein’s Cool Up To a Point

letsgetitdone, Corrente

Thu, 02/23/2012 – 12:19pm

  • Tax Cuts Hard to Unwind? Not If You Legislate Properly!
  • Default vs. Hyperinflation? A False Choice for the US?
  • Debt Should Grow More Slowly Than GDP? Why?
  • Deficits Must Respond Dynamically To Growth? They Will If They’re the Right Deficits
  • MMT Not Effective in Deficit Reduction Mode; or Congress Ineffective In Its Legislation?
  • Fiscal Sustainability and the Health Care Issue or Mis-allocation of Net Financial Assets to the Health Care Industry at the Cost of Weakening Our Democracy?
  • Does Jared Bernstein Really Understand MMT, Yet?



Finally, I also think that Jared doesn’t fully understand that MMT is not just an approach to economic policy and analysis, but primarily embodies certain Macroeconomic propositions and propositions about how modern money works, and what policies could be followed to achieve public purpose. If he did, then why would he keep making objections to MMT policy proposals based on his ideas about how Congress will act in reply to them?

In the end, it’s not MMT’s responsibility to propose policies that Congress will legislate. It is, instead, up to MMT to propose policies that will achieve full employment with price stability and other favorable social, cultural and political impacts for our democracy.

From that point on, it is up to political advocates to make these policies popular enough to get Congress and the President to pass them. And any failings in passing these policies are not failings of MMT economics, but failngs of the oligarchy which will not pass the policies it recommends.

Feb 24 2012

Foreclosure Fraud: The New York State Solution

In October of 2010, New York State’s Chief Judge Jonathan Lippman became deeply concerned about the big banks lax handling of mortgage documents and several lenders and servicers who had hired staff who did not properly review files or submitted false statements to evict delinquent borrowers. Consequently to curb the illegal practice and preserve the integrity of the court foreclosure laws, Judge Lippman ordered that lawyers handling the foreclosures be held accountable for the paperwork:

Chief Judge Lippman said, “We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs – such as a family home – during this period of economic crisis. This new filing requirement will play a vital role in ensuring that the documents judges rely on will be thoroughly examined, accurate, and error-free before any judge is asked to take the drastic step of foreclosure.”

Under the new requirement, plaintiff’s counsel in foreclosure matters must submit the affirmation at one of several stages. In new cases, the affirmation must accompany the Request for Judicial Intervention. In pending cases, the affirmation must be submitted with either the proposed order of reference or the proposed judgment of foreclosure. In cases where a foreclosure judgment has been entered but the property has not yet been sold at auction, the affirmation must be submitted to the court referee, and a copy filed with the court, five business days before the scheduled auction. Counsel is also obligated to file an amended version of the affidavit if new facts emerge after the initial filing.

Since the announcement of the Foreclosure Fraud “Settlement”, Judge Lippman has once again ordered a solution that may well reduce the number of fraudulent foreclosures, at least in New York State, by setting up a series special courts to handle the cases:

The new program is to start in Queens this spring and then expand around the city and to nearby suburbs, court officials said. The officials said that under the program, judges would take over the running of some settlement conferences from court attorneys, who lack the power to impose punishments. State law requires that bank representatives “be fully authorized to dispose of the case,” but enforcement of that requirement has been sporadic.

The officials said the plan would include court supervision of the collection of required documents to try to avoid delays and would seek to shorten the time some foreclosure cases linger in the courts to several months from up to two years.

Courts would also work to assure that homeowners who cannot afford lawyers are represented, though some lawyers who handle such cases questioned whether that goal was realistic.

There are still some hurdles, such as immediate funding for lawyers to represent homeowners until the funds from the settlement are release. A spokesperson for Gov. Andrew Cuomo said “negotiations with the Legislature were likely to find money for the legal agencies in the meantime.”

It good to see that judiciary is stepping in when prosecutors drop the ball, thanks to commonsense jurist like Jonathan Lippman.

Feb 24 2012

Punting the Pundits

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Paul Krugman: Romney’s Economic Closet

According to Michael Kinsley, a gaffe is when a politician accidently tells the truth. That’s certainly what happened to Mitt Romney on Tuesday, when in a rare moment of candor – and, in his case, such moments are really, really rare – he gave away the game.

Speaking in Michigan, Mr. Romney was asked about deficit reduction, and he absent-mindedly said something completely reasonable: “If you just cut, if all you’re thinking about doing is cutting spending, as you cut spending you’ll slow down the economy.” A-ha. So he believes that cutting government spending hurts growth, other things equal.

The right’s ideology police were, predictably, aghast; the Club for Growth quickly denounced the statement as showing that Mr. Romney is “not a limited-government conservative.” On the contrary, insisted the club, “If we balanced the budget tomorrow on spending cuts alone, it would be fantastic for the economy.” And a Romney spokesman tried to walk back the remark, claiming, “The governor’s point was that simply slashing the budget, with no affirmative pro-growth policies, is insufficient to get the economy turned around.”

New York Times Editorial: Donors With Agendas

The presidential primary season is being brought to you by a handful of multimillionaires and companies who have propped up the candidates with enormous donations to their “super PACs.” Just two dozen or so individuals, couples and companies have given more than 80 percent of the money collected by super PACs, or $54 million, according to disclosure forms released on Monday.

reed of nearly all regulations or good sense by Citizens United and other court decisions, the super PACs are raising money in ludicrously large sums. The $10 million from Sheldon and Miriam Adelson to Winning Our Future, which has sustained Newt Gingrich’s trailing campaign, is the biggest single donation to a candidate. But every candidate now has his own millionaire supporter, and the concentration of wealth in the campaign is growing.

Leslie Savan: GOP Debate: Birth Control = Gun Control… or Something

My expectations were low, but still it seemed odd: During the three-hour GOP debate last night in Mesa, Arizona-117 miles from Tucson, where a year ago Jared Lee Loughner shot six people dead and injured thirteen, including Representative Gabby Giffords-no one raised the issue of gun control. Not that I thought the candidates would touch the subject (even if a day earlier Newt had bully-boyed Chevy’s most energy-efficient car by saying, “You can’t put a gun rack in a Volt.” Watch this dude prove him wrong). After all, NRA-fearing politicians from Obama on down have been as silent on gun control post-Tucson as they were effusive over Giffords’s brief appearance in Congress last month, when she announced her resignation.

Nor did I expect anyone in the auditorium audience to risk life or limb by squeaking out a query on gun violence, banning high-capacity ammunition clips, or doing background checks on customers at gun shows. But I did hold out a sliver of hope that CNN would let either someone over the Net or moderator John King himself venture there. Apparently, though, King’s last run-in at a debate with Gingrich-who blasted him as piece of liberal-media detritus-left him gun shy.

Victoria M. DeFrancesco Soto: Anti-Immigrant Rhetoric Is Anti-Latino

Let’s call a spade a spade. Opposition to immigration is not a concern rooted in personal economic concerns. Neither is it a concern having to do with state’s rights. Anti-immigrant sentiment isn’t even about immigrants as a whole. As rigorous social scientific research shows, opposition to immigration is closely linked to the negative racial animus toward one very specific group, Latinos.

Over the course of the GOP primary season, anti-immigrant rhetoric has been a stump speech staple of the candidates. The focus of Republican candidates is to keep new immigrants out and get those here to leave. The Republican primary has become a quien es más macho contest of who has the biggest anti-immigrant badge. The top anti-immigrant badge of honor goes to Herman Cain and his advocacy for an electrified border fence, while Rick Perry lost out by having aided Texas college students who happened to be undocumented.

John Nichols: How Tuesday’s Primaries Could End It for Romney

On February 28, 1968, a Republican presidential prospect who just months earlier had led in the polls, announced that he was withdrawing from the competition.

George Romney-the governor of Michigan whom many Republicans had seen as the great hope for renewing the party in the aftermath of the sweeping rebuke the party had received after nominating right-winger Barry Goldwater for the presidency in 1964-had suffered a series of self-inflicted wounds to his candidacy and on that late February day he accepted that he was not going to be the Republican nominee or the president of the United States.

Forty-four years to the day after George Romney quit the national stage, his son, Willard Mitt Romney, could face a similar moment.

Ari Berman: The Buying of the President 2012: Meet the Super PAC Mega-Donors

The more we learn about Super PACs, the uglier the picture gets.

A new analysis by USA Today found that just five super-wealthy individuals have contributed 25 percent of the money raised by Super PACs since the beginning of 2011. The New York Times added that “two dozen individuals, couples or corporations have given $1 million or more to Republican super PACs this year…. Collectively, their contributions have totaled more than $50 million this cycle, making them easily the most influential and powerful political donors in politics today.”

The hierarchy is topped by Texas businessman Harold Simmons, a major funder of the Swift Boat Veterans for Truth in 2004, who has donated nearly $15 million to three different GOP candidates (Perry, Gingrich and Romney) and the Karl Rove-founded American Crossroads. He’s followed by Las Vegas casino magnate Sheldon Adelson, who’s given $10 million to Gingrich’s Super PAC and says he may give an additional “$10 or $100 million to Gingrich” before the primary season is over. “Take away Sheldon Adelson and the pro-Gingrich ‘Winning Our Future’ PAC is just a federally registered lemonade stand,” Stephen Colbert joked.

Feb 24 2012

The Price at the Pump: It’s All About Speculators and Profits

The price of gas at the pump has risen sharply since the beginning of the year and is expected to continue to rise through the summer. The demand for oil and refined products has fallen over the last year, there is a surplus of oil on the market and the United States is exporting more gasoline than it’s importing. In the absence of supply and demands, the main factor is speculation on the world market that has been driven by the latest threat of military action in the Middle East and other smaller factors like the growth of emerging countries such as China and India.

Since oil prices are the biggest component in the price of gasoline, pump prices are soaring. AAA said Tuesday that the nationwide average price for a gallon of gasoline stood at $3.57, compared with $3.38 a month ago and $3.17 a year ago. It takes about $6 more to fill up the tank than it did this time last year – and last year’s gasoline-price surge helped take the steam out of the economic recovery.

Defining what percentage of today’s high oil and gasoline prices is due to excessive speculation, driven by Iran fears, is something of a guessing game.

“I put the Iran security premium at about $8 to $10 (a barrel) at this point, which still puts crude at about $90 or $95,” said John Kilduff, a veteran energy analyst at AgainCapital in New York.

The fear premium is the froth above what prices would be absent fears of a supply disruption – somewhere in the $80 to $85 range for a barrel of crude oil. It means that even with the extra cost put on oil from Iran fears, prices are at least another $10 higher than what demand fundamentals would dictate.

Why? Financial speculators.

What should the price of oil be if left to conventional supply and demand market fundamentals? Canada’s the largest supplier of imported oil to the United States, which now actually produces more than half of the oil it consumes. Production and delivery costs for a barrel of oil from Canada are about $75 a barrel. The market-fundamentals cost for a barrel of oil is in that ballpark; above that, speculation sets the prices.

“It’s as simple as that,” said Gheit, who has testified before Congress and called for regulatory limits on speculation in commodities markets.

Historically, financial speculators accounted for about 30 percent of oil trading in commodity markets, while producers and end users made up about 70 percent. Today it’s almost the reverse.

President Obama barely mentioned this in his energy speech this week and his energy policy offered no solutions to controlling the speculators.

One of the possible solutions that has been mentioned is to reduce the amount of refined product that the US is exporting. There are arguments that both support and discredit this as a solution:

Most of the ongoing increases in gas prices can be traced to geopolitical concerns and rampant financial speculation that have run up the cost of crude oil. And yet, if U.S. refiners limited themselves to domestic sales, there would be a glut on the market, and diesel and gasoline prices would inevitably drop.

“The other countries are willing to pay more than we would,” said James Hamilton, an economics professor and blogger at the University of California, San Diego. “And that’s the price we pay, too, what they’re willing to pay.”

Hamilton said that’s how things work in a global market. “If you are a refiner and you’ve got gasoline to sell, you want to sell it where you can get the highest price,” he said. “If Mexico is willing to pay a higher price to Americans, you’re going to want to sell it to them instead of Americans.” [..]

“I do not support an outright ban of exports,” said Tyson Slocum, director of the energy program for the consumer watchdog group Public Citizen. “And I don’t want to see the government regulating retail prices. But I don’t think that it is in our best interests to be exporting at the rate at which we are.”

Slocum suggests that exports of petroleum products “should go through a regulatory barrier to assure that they aren’t resulting in higher prices for Americans, or otherwise hurting the economy.”

That’s what happens now with U.S.-produced crude oil. Oil companies aren’t allowed to export crude without permission from the Department of Commerce, which, by law, checks to make sure “that the proposed export is consistent with the national interest”. [..]

Any attempt to limit exports would, of course, be met by ferocious resistance from the refiners. Their profit margins would drop, and refiners would inevitably warn that with less money to reinvest, there could be shortages in the future.

But the many refineries owned by large, vertically integrated oil companies that own the oil production facilities as well are hardly hurting for money. In fact, when oil prices go up, as they are now, their profits go up as well; it doesn’t cost them any more to get the oil out of the ground — somewhere around $30 a barrel — but they get to charge as much as the market will bear.

No politician, not even the President, wants to stop the flow and profits to these “oil-garchs” and the flow of cash to their campaign coffers. That said, another solution that can be done is to temper the war mongering in the Middle East. Instead of threats of military intervention with Iran which even our military and national security advisers agree would be disastrous, a more reasoned diplomatic approach could go a long way to curbing the speculators. When President Obama meets with Israeli Prime Minister Benjamin Netenyahu at the White house next month, he needs to stress the need to temper the saber rattling.

Feb 24 2012

Whiskers and… Other Whiskers

Feb 24 2012

On This Day In History February 24

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

February 24 is the 55th day of the year in the Gregorian calendar. There are 310 days remaining until the end of the year (311 in leap years).

On this day in 1803, the Supreme Court, led by Chief Justice John Marshall, decides the landmark case of William Marbury versus James Madison, Secretary of State of the United States and confirms the legal principle of judicial review–the ability of the Supreme Court to limit Congressional power by declaring legislation unconstitutional–in the new nation.

Marbury v. Madison is a landmark case in United States law and in the history of law worldwide. It formed the basis for the exercise of judicial review in the United States under Article III of the Constitution. It was also the first time in the world that a court invalidated a law by declaring it “unconstitutional.”

This case resulted from a petition to the Supreme Court by William Marbury, who had been appointed by President John Adams as Justice of the Peace in the District of Columbia but whose commission was not subsequently delivered. Marbury petitioned the Supreme Court to force Secretary of State James Madison to deliver the documents, but the court, with John Marshall as Chief Justice, denied Marbury’s petition, holding that the part of the statute upon which he based his claim, the Judiciary Act of 1789, was unconstitutional.

Marbury v. Madison was the first time the Supreme Court declared something “unconstitutional,” and established the concept of judicial review in the U.S. (the idea that courts may oversee and nullify the actions of another branch of government). The landmark decision helped define the “checks and balances” of the American form of government.

The Issue

There are three ways a case can be heard in the Supreme Court: (1) filing directly in the Supreme Court; (2) filing in a lower federal court, such as a district court, and appealing all the way up to the Supreme Court; (3) filing in a state court, appealing all the way up through the state’s highest courts, and then appealing to the Supreme Court on an issue of federal law. The first is an exercise of the Court’s original jurisdiction; the second and third are exercises of the Supreme Court’s appellate jurisdiction.

Because Marbury filed his petition for the writ of mandamus directly in the Supreme Court, the Court needed to be able to exercise original jurisdiction over the case in order to have the power to hear it.

Marbury’s argument is that in the Judiciary Act of 1789, Congress granted the Supreme Court original jurisdiction over petitions for writs of mandamus. This raises several issues that the Supreme Court had to address:

  • Does Article III of the Constitution create a “floor” for original jurisdiction, which Congress can add to, or does it create an exhaustive list that Congress can’t modify at all?
  • If Article III’s original jurisdiction is an exhaustive list, but Congress tries to modify it anyway, who wins that conflict, Congress or the Constitution?
  • And, more importantly, who is supposed to decide who wins?
  • In its answer to this last question, the Supreme Court formalizes the notion of judicial review. In short, the constitutional issue on which Marbury v. Madison was decided was whether Congress could expand the original jurisdiction of the Supreme Court.

    Feb 24 2012

    This Week In The Dream Antilles: Borodin Edition

       

    Photobucket



    Alexander Borodin (1833-1857)

    Last week, there was no This Week In The Dream Antilles. And no explanation for that. Your Bloguero spent the week in hospital with his Dad, and then on Friday, February 17, his Dad passed away. He would have been 93 on March 10. He did not suffer, and he was not in pain. He had a remarkable, productive life. And your Bloguero, who is filled with gratitude for having such a wonderful father and teacher and friend, deeply grieves his departure.

    So there was no This Week last week. And there’s not going to be much of a This Week this week either. Your Bloguero finds himself feeling untethered, inarticulate. Unable to write an honest sentence. Much less a paragraph. And he’s not sure what might be next.

    There are just two things quickly to tell.  First, your Bloguero’s dad was a life long pianist and music lover. He’d forgotten more classical music than your Bloguero ever learned.  Just before his passing, your Bloguero asked his current top 10 in classical music. His answer: Borodin, firmly in first place for the string quartets; Sibelius in second for his symphonies; and all of Rachmaninoff in third. After that, your Bloguero learned, it gets complicated. Very complicated. Supposedly great composers get dissed for all kinds of failings. Never mind what.

    Your Bloguero suggests that you listen to Borodin, and see whether you can discern how Borodin, rather than the many others whose names start with the same letter, got into first place. Here you go, just a taste of the Second String Quartet:

    Failing to find words to describe precisely what about the Borodin String Quartets makes them so extremely great, for which your Bloguero craves your forgiveness, your Bloguero can offer you only this remarkable poem by Charles Bukowski (1920-1994), “the life of Borodin”:

    the next time you listen to Borodin

    remember he was just a chemist

    who wrote music to relax;

    his house was jammed with people:

    students, artists, drunkards, bums,

    and he never knew how to say: no.

    the next time you listen to Borodin

    remember his wife used his compositions

    to line the cat boxes with

    or to cover jars of sour milk;

    she had asthma and insomnia

    and fed him soft-boiled eggs

    and when he wanted to cover his head

    to shut out the sounds of the house

    she only allowed him to use the sheet;

    besides there was usually somebody

    in his bed

    (they slept separately when they slept

    at all)

    and since all the chairs

    were usually taken

    he often slept on the stairway

    wrapped in an old shawl;

    she told him when to cut his nails,

    not to sing or whistle

    or put too much lemon in his tea

    or press it with a spoon;

    Symphony #2, in B Minor

    Prince Igor

    On the Steppes of Central Asia

    he could sleep only by putting a piece

    of dark cloth over his eyes

    in 1887 he attended a dance

    at the Medical Academy

    dressed in a merrymaking national costume;

    at last he seemed exceptionally gay

    and when he fell to the floor,

    they thought he was clowning.

    the next time you listen to Borodin,

    remember…

    This seems oddly fitting for This Week this week.

    This Week In The Dream Antilles is usually a weekly digest of essays in The Dream Antilles. Usually it appears on Friday. Sometimes, like now, it’s something else entirely. To see what essays were in The Dream Antilles in the past two week you have visit The Dream Antilles.