July 2014 archive

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.

Click on images to enlarge.

July 1 is the 182nd day of the year (183rd in leap years) in the Gregorian calendar. There are 183 days remaining until the end of the year. The end of this day marks the halfway point of a leap year. It also falls on the same day of the week as New Year’s Day in a leap year.

On this day in 1997, Hong Kong returned to China.

At midnight on July 1, 1997, Hong Kong reverts back to Chinese rule in a ceremony attended by British Prime Minister Tony Blair, Prince Charles of Wales, Chinese President Jiang Zemin, and U.S. Secretary of State Madeleine Albright. A few thousand Hong Kongers protested the turnover, which was otherwise celebratory and peaceful.

Hong Kong is one of two special administrative regions (SARs) of the People’s Republic of China (PRC), the other being Macau. A city-state situated on China’s south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour. With a land mass of 1,104 km2 (426 sq mi) and a population of seven million people, Hong Kong is one of the most densely populated areas in the world. Hong Kong’s population is 95 percent ethnic Chinese and 5 percent from other groups. Hong Kong’s Han Chinese majority originate mainly from the cities of Guangzhou and Taishan in the neighbouring Guangdong province.

Hong Kong became a colony of the British Empire after the First Opium War (1839-42). Originally confined to Hong Kong Island, the colony’s boundaries were extended in stages to the Kowloon Peninsula and the New Territories by 1898. It was occupied by Japan during the Pacific War, after which the British resumed control until 1997, when the PRC acquired sovereignty. The region espoused minimum government intervention under the ethos of positive non-interventionism during the colonial era. The time period greatly influenced the current culture of Hong Kong, often described as “East meets West”, and the educational system, which used to loosely follow the system in England until reforms implemented in 2009.

Under the principle of “one country, two systems”, Hong Kong has a different political system from mainland China. Hong Kong’s independent judiciary functions under the common law framework. The Basic Law of Hong Kong, its constitutional document, which stipulates that Hong Kong shall have a “high degree of autonomy” in all matters except foreign relations and military defence, governs its political system. Although it has a burgeoning multi-party system, a small-circle electorate controls half of its legislature. An 800-person Election Committee selects the Chief Executive of Hong Kong, the head of government.

As one of the world’s leading international financial centres, Hong Kong has a major capitalist service economy characterised by low taxation and free trade, and the currency, Hong Kong dollar, is the ninth most traded currency in the world. The lack of space caused demand for denser constructions, which developed the city to a centre for modern architecture and the world’s most vertical city. The dense space also led to a highly developed transportation network with public transport travelling rate exceeding 90 percent, the highest in the world. Hong Kong has numerous high international rankings in various aspects. For instance, its economic freedom, financial and economic competitiveness, quality of life, corruption perception, Human Development Index, etc., are all ranked highly.

Crossposted from DocuDharma

Obama’s Latest Betrayal of America and Americans in Favor of the Big Banks: TISA

By William K. Black, New Economic Perspectives

Posted on June 24, 2014

The three “de’s” – deregulation, desupervision, and de facto decriminalization – has been critical to the three modern U.S. financial crises. The combination is intensely criminogenic and produces the fraud epidemics that drive our crises. The second, and vastly more destructive, phase of the Savings and Loan (S&L) debacle is a classic example. The criminogenic environment was the product of each of the three “de’s” and modern executive and professional compensation.

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TISA is designed to replicate, indeed, optimize the criminogenic environment that made fraudulent financial CEOs wealthy by “looting” “their” banks. The (effective) “regulators in the field” figured this out by 1983 – over 30 years ago. We wrote up our findings in great detail. Top economists and top white-collar criminologists studying those findings a decade later (1993) agreed with the findings. Since the original findings in 1983, we have the (prevented) “liar’s” loans crisis of 1991 when federal S&L regulators based in California drove what were then a brand new product called “low doc” loans out of the regulated industry. That “second front” – while the S&L regulators were containing the S&L debacle – was dealt with so effectively that there was no resultant financial crisis. Indeed, it is only with the benefit of the current crisis that we can understand that the containment of the overall S&L debacle (driven primarily by fraudulent commercial real estate loans and investments) and the incipient crisis is liar’s loans prevented a crisis that would have become similar in scope to the current crisis. The S&L debacle was contained before it caused even a minor national recession.

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The TISA draft (Article X.16) is very clear about the second great paradox: bankers must be told everything that regulators are thinking about adopting and have ample opportunity to influence the regulators’ drafting of the rule. But TISA is an international secret that will remain an international secret for five years after it is adopted. Like the Trans-Pacific Partnership, the drafts are kept secret even from Congress. Indeed, TISA is “classified” so that those who might blow the whistle on the travesty may be prosecuted.

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TISA’s drafting consists of a meeting of banking thieves who are successfully demanding a return to what Gramlich correctly described as “no cops on the beat.” If the street robbers of the world demanded that we remove the cops on the beat we would be enraged. Bankers and their neoclassical economist allies, however, regularly lobby for just such a boon to elite white-collar criminals. We have millennia of experience with what happens when we give the elites the power to loot with impunity.

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TISA is awful for honest bankers. Effective financial regulators are the essential “cops on the beat.” Only we have shown the ability to break the “Gresham’s” dynamic (bad ethics drives good ethics out of the markets and professions) that fraudulent CEOs create. When we break that dynamic we make it possible for honest bankers to prevail. TISA is good for only one group – dishonest bank executives.

That brings us back to the reason the bank CEOs have demanded that TISA be “classified” and kept from the public and even Congress. Indeed, the plan is to classify its provisions for five years after TISA is adopted. That delay is meant to make it politically possible for TISA to be adopted and then continue to protect heads of state from being thrown out of office by their enraged constituents.

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Ask yourself this question: why would the bankers and heads of state have demanded, and received, “classified” treatment of a document that did not have any confidential information (there are no state secrets, no privacy issues, and nothing of proprietary value in the leaked TISA draft) and made no meaningful restriction on regulation and supervision due to the “nowithstanding” clause of Article 17? The demand for classified treatment makes it inescapable that the bankers and government officials involved in drafting TISA are trying to hide something they believe would outrage the public. The paradox is that the bankers’ and politicians’ rabid fear of disclosure to the public and Congress of TISA’s assault on regulation confirms beyond any reasonable doubt that subparagraph 2 of Article 17 and Article 20 combine to make TISA a grave threat to the global economy, workers, and honest bankers by making the financial world even more criminogenic.

I lived in Florida for five years. Because I donated to and volunteered for Democrats in Florida, I find myself on about a billion different fundraising “activist” email lists. So it was no surprise to me that every Democrat running for something in Florida contacted me today to let me know that if I would just chip in $5 or $10 to help candidate X win election Y, they will “fight” to overturn today’s SCOTUS verdicts.