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.

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June 28 is the 179th day of the year (180th in leap years) in the Gregorian calendar. There are 186 days remaining until the end of the year.

In common years it is always in ISO week 26.

This date is the only date each year where both the month and day are different perfect numbers, June 6 being the only date where the month and day are the same perfect number.

On this day in 1919, Keynes predicts economic chaos

At the Palace of Versailles outside Paris, Germany signs the Treaty of Versailles with the Allies, officially ending World War I. The English economist John Maynard Keynes, who had attended the peace conference but then left in protest of the treaty, was one of the most outspoken critics of the punitive agreement. In his The Economic Consequences of the Peace, published in December 1919, Keynes predicted that the stiff war reparations and other harsh terms imposed on Germany by the treaty would lead to the financial collapse of the country, which in turn would have serious economic and political repercussions on Europe and the world.

snip

A decade later, Hitler would exploit this continuing bitterness among Germans to seize control of the German state. In the 1930s, the Treaty of Versailles was significantly revised and altered in Germany’s favor, but this belated amendment could not stop the rise of German militarism and the subsequent outbreak of World War II.

In the late 1930s, John Maynard Keynes gained a reputation as the world’s foremost economist by advocating large-scale government economic planning to keep unemployment low and markets healthy. Today, all major capitalist nations adhere to the key principles of Keynesian economics. He died in 1946.

Governments ignore Keynes at their own peril.

This is an Open Thread

“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”.

Wednesday is Ladies’ Day

Follow us on Twitter @StarsHollowGzt

Kristina vanden Heuvel: The Robin Hood Tax: A Powerful Antidote to Austerity

Last week, nurses rallied, bank staff marched, conservatives coalesced and finance professionals petitioned-all in support of a global tax on Wall Street speculation. You wouldn’t know it from the headlines (Financial Times: “Push for EU-wide ‘Robin Hood Tax’ ends”), but by week’s end, that elusive goal was closer than ever.

“We don’t just advocate for people when they’re ill, and we don’t just advocate for them when they’re in the hospital,” says Jean Ross, a registered nurse and co-president of National Nurses United, the country’s largest nursing union. “We have to have a society where they can get well and stay well.”

As I’ve written before, the financial transaction tax (FTT) is a good idea whose time has come. By assessing a modest fee on transactions, we can raise revenue from those who can afford it while discouraging the unproductive speculation that puts our economy at risk. And frankly, Wall Street owes us. The tax offers an antidote to austerity and a rallying cry that hard-core occupiers, Democratic senators, and reality-based conservatives can all get behind.

Wenonah Hauter: Secrecy + Haste = Farm Bill Status Quo

Late last week, the Senate passed its version of the Farm Bill – the sprawling legislation that dictates what and how we eat. From the perspective of consumer protection and leveling the playing field for small and midsized family farmers, the Senate bill does little to address the problems of consolidation and anti-competitive business practices that plague our food system.

Although the Senate bill made changes to commodity policy that will be touted as reform, the bill reinforced prior farm policies that favor large industrial-scale agriculture and overproduction of commodity crops like corn and soybeans. Only a few companies sell what farmers need (like seeds, fertilizer and tractors) and only a few firms buy what farmers raise, which means they pay more for supplies and get less for their crops and livestock. The four largest companies in each industry slaughter nearly all the beef, process two-thirds of the pork, sell half the groceries and process about half the milk in the United States.

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.

June 27 is the 178th day of the year (179th in leap years) in the Gregorian calendar. There are 187 days remaining until the end of the year.

On this day in 1950, Truman orders U.S. forces to Korea.

On June 27, 1950, President Harry S. Truman announces that he is ordering U.S. air and naval forces to South Korea to aid the democratic nation in repulsing an invasion by communist North Korea. The United States was undertaking the major military operation, he explained, to enforce a United Nations resolution calling for an end to hostilities, and to stem the spread of communism in Asia. In addition to ordering U.S. forces to Korea, Truman also deployed the U.S. 7th Fleet to Formosa (Taiwan) to guard against invasion by communist China and ordered an acceleration of military aid to French forces fighting communist guerrillas in Vietnam.

Factors in US intervention

The Truman Administration was caught at a crossroads. Before the invasion, Korea was not included in the strategic Asian Defense Perimeter outlined by Secretary of State Acheson. Military strategists were more concerned with the security of Europe against the Soviet Union than East Asia. At the same time, the Administration was worried that a war in Korea could quickly widen into another world war should the Chinese or Soviets decide to get involved as well.

One facet of the changing attitude toward Korea and whether to get involved was Japan. Especially after the fall of China to the Communists, “…Japan itself increasingly appeared as the major East Asian prize to be protected”. US East Asian experts saw Japan as the critical counterweight to the Soviet Union and China in the region. While there was no United States policy that dealt with South Korea directly as a national interest, its proximity to Japan pushed South Korea to the fore. “The recognition that the security of Japan required a non-hostile Korea led directly to President Truman’s decision to intervene… The essential point… is that the American response to the North Korean attack stemmed from considerations of US policy toward Japan.” The United States wanted to shore up Japan to make it a viable counterweight against the Soviet Union and China, and Korea was seen as integral to that end.

The other important part of committing to intervention lay in speculation about Soviet action in the event that the United States intervene. The Truman administration was fretful that a war in Korea was a diversionary assault that would escalate to a general war in Europe once the US committed in Korea. At the same time, “[t]here was no suggestion from anyone that the United Nations or the United States could back away from (the conflict)”. In Truman’s mind, this aggression, if left unchecked, would start a chain reaction that would destroy the United Nations and give the go ahead to further Communist aggression elsewhere. Korea was where a stand had to be made, the difficult part was how. The UN Security council approved the use of force to help the South Koreans and the US immediately began using air and naval forces in the area to that end. The Administration still refrained from committing on the ground because some advisors believed the North Koreans could be stopped by air and naval power alone. Also, it was still uncertain if this was a clever ploy by the Soviet Union to catch the US unawares or just a test of US resolve. The decision to commit ground troops and to intervene eventually became viable when a communiqué was received on June 27 from the Soviet Union that alluded it would not move against US forces in Korea. “This opened the way for the sending of American ground forces, for it now seemed less likely that a general war-with Korea as a preliminary diversion-was imminent”. With the Soviet Union’s tacit agreement that this would not cause an escalation, the United States now could intervene with confidence that other commitments would not be jeopardized.

“Irrational exuberance”, “unrealistic expectations” accurately describe some of the reports about the alleged rebound in the housing market, such as this report on the increase in housing prices:

Home prices rose in nearly all major U.S. cities in April from March, further evidence that the housing market is slowly improving even while the job market slumps.

The Standard & Poor’s/Case-Shiller home price index shows increases in 19 of the 20 cities tracked. That’s the second straight month that prices have risen in a majority of U.S. cities.

And a measure of national prices rose 1.3 per cent in April from March, the first increase in seven months.

San Francisco, Washington and Phoenix posted the biggest increases. Prices fell 3.6 per cent in Detroit, the only city to record a drop.

The month-to-month prices aren’t adjusted for seasonal factors. Still, prices in half of the cities are up over the past 12 months.

Then there was this news in Bloomberg about the increase in demand for new homes:

Demand for new U.S. homes rose more than forecast in May as mortgage rates dropped, bolstering the residential real-estate market while other parts of the world’s largest economy cool.

Purchases climbed to a 369,000 annual rate, the most since April 2010 and up 7.6 percent from the prior month, the Commerce Department reported today in Washington. The median estimate in a Bloomberg News survey of 67 economists was 347,000. The number of houses on the market held near a record low.

The problem with this rise in housing prices and an increase in new home sales is that its a poor indicator of the real “health” of the housing market. Even Yale Prof. Robert Shiller, co-creator of the quoted Case-Shiller house price index, takes a cautious view of these optimistic predictions of a housing recovery:

MUCH hope has been pinned on the recovery in home prices that began about a year ago. A long-lasting housing recovery might provide a balm to households, mortgage lenders and the entire United States economy. But will the recovery be sustained? [..]

The most obvious reason for hope is that, unlike stock prices, home prices tend to show a great deal of momentum. Correcting for seasonal effects, home prices as measured by the S.&P./Case-Shiller 10-City Home Price Index increased each month from June 1995 to April 2006, then decreased almost every month to May 2009. Since then, they have risen through January, the latest month for which data is available.

So, because home prices have been climbing of late, isn’t it plausible that they’ll keep doing so?

If only it were that simple.

Home price booms and busts do end, sometimes quite suddenly, as was the case for the boom of 1995 to 2006 and the bust of 2006 to 2009. Today, we need to worry about strong headwinds, as the government begins to withdraw its support of a still-troubled lending industry and as foreclosures are dumping millions of homes onto the market.

Michael Olenick explains at naked capitalism:

Yale Prof. Robert Shiller, co-creator of the well-known Case-Shiller house price index, takes a more sober approach. Shiller argues in the New York Times until meaningful principal reductions are put in place that house prices are hosed. Pricing may bump up on artificial scarcity caused by the relatively low number of foreclosures after the robo-signing scandal, but in the long run underwater borrowers are likely to drown. Further, because of sky-high loss severities in foreclosures – my own data shows it is not at all uncommon for investors to lose the entire face value of a mortgage in a foreclosure – principal reductions make good business sense.

Shiller embraces an idea being floated about lately; having municipalities use eminent domain to “take” mortgages at fair market value. Databases like the one I’ve been compiling clearly show the loss severity of similar mortgages in similar ZIP codes, allowing municipalities to ascertain fair market value of the mortgages, as opposed to the houses. In bubble-states, where negative equity issues are most pronounced, fair market value of most mortgage would be no more than 20-percent of the face value of the first mortgages – and oftentimes far less; no more than a few cents on the dollar – while second liens would be worthless.

Assuming this approach is only used with the consent of the homeowner, I’d suspect that one last call the servicer before implementation would magically result in an almost immediate modification: no lost paperwork, no transfers to the offshore call center, no capitalized interest.

That’s too rational for anyone to heed.

In his dissenting opinion on the Arizona v. United States, Supreme Court Justice Antonin Scalia went on a politically motivated rant that was directed at President Obama’s directive that would allow 800,000 undocumented immigrants who are under 30 came here as children to legally remain in the US. Not only was Scalia’s partisan political rant an embarrassment for the Court, it was factually wrong and racist.

First the facts that Scalia misrepresented and skewed. The Justice made this statement (pdf):

After this case was argued and while it was under consideration, the Secretary of Homeland Security announced a program exempting from immigration enforcement some 1.4 million illegal immigrants under the age of 30. If an individual unlawfully present in the United States

   “• came to the United States under the age of sixteen;

   “• has continuously resided in the United States for at least five years . . . ,

   “• is currently in school, has graduated from high school, has obtained a general education develop­ment certificate, or is an honorably discharged veteran . . . ,

   “• has not been convicted of a [serious crime]; and

   “• is not above the age of thirty,” . . . .

   The husbanding of scarce enforcement resources can hardly be the justification for this, since the considerable administrative cost of conduct­ing as many as 1.4 million background checks, and ruling on the biennial requests for dispensation that the nonen­forcement program envisions, will necessarily be deducted from immigration enforcement.

Part of the President’s reasoning for this order is the fact that congress has failed to provide the the $285 billion cost of deporting every illegal immigrant currently in the US and decided to use the limited resources available by focusing on undocumented immigrants who commit serious offenses and shifting resources away from college students and veterans. Scalia’s math is a bit off by some 600,000 more immigrants than is estimated to be affected by the President’s new policy.

Now to the really egregious racist spew that relied on racist Post Civil War laws that prohibited freed slaves from moving into Southern States:

Notwithstanding “[t]he myth of an era of unrestricted immigration” in the first 100 years of the Republic, the States enacted numerous laws restricting the immigration of certain classes of aliens, including convicted crimi­nals, indigents, persons with contagious diseases, and (in Southern States) freed blacks. State laws not only provided for the removal of unwanted immigrants but also imposed penalties on unlawfully present aliens and those who aided their immigration

This is comes on the heels of Scalia’s defense of tortute, his dismissal of the execution of innocent people at the hands of the states and his homophobia and his inability to distinguish legal arguments from political talking points

Scalia doesn’t seem to care that in his dotage he is sounding increasingly unhinged and more and more like a right wing talk radio host. Even Chief Justice Roberts should be embarrassed by this racist bile. If Scalia can’t control himself, he should be removed from the Court, if he doesn’t have the good sense to remove himself into retirement.  

“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”.

Follow us on Twitter @StarsHollowGzt

New York Times Editorial: Citizens United

The Supreme Court examined the Arizona immigration law in minute detail, but when it came to revisiting the damage caused by its own handiwork in the 2010 Citizens United case, it couldn’t be bothered. In a single dismissive paragraph on Monday, the court’s conservative majority refused to allow Montana or any other state to impose limits on corporate election spending and wouldn’t even entertain arguments on the subject. [..]

Congress can – and should – require disclosure of secret donations. The Internal Revenue Service should crack down on political organizations that pose as tax-exempt “social welfare” organizations to avoid current disclosure rules.

But, for now, the nation’s highest court has chosen to turn its back as elections are bought by the biggest check writers.

Simon Johnson: U.S. Banks Aren’t Nearly Ready for Coming European Crisis

The euro area faces a major economic crisis, most likely a series of rolling, country-specific problems involving some combination of failing banks and sovereigns that can’t pay their debts in full.

This will culminate in systemwide stress, emergency liquidity loans from the European Central Bank and politicians from all the countries involved increasingly at one another’s throats.

Even the optimists now say openly that Europe will only solve its problems when the alternatives look sufficiently bleak and time has run out. Less optimistic people increasingly think that the euro area will break up because all the proposed solutions are pie-in-the-sky. If the latter view is right — or even if concern about dissolution grows in coming months — markets, investors, regulators and governments need to worry not just about interest-rate risk and credit risk, but also dissolution risk.

The latest session of the US Supreme Court is coming to a close with several decisions handed down since last Thursday, that peaked today with several rulings handed down. The “grand finale” will be this Thursday when the court announces its decision on the constitutionality of the Affordable Care Act. The media has been focused mostly on today’s ruling that gutted three quarters of Arizona’s controversial immigration law, S.B. 1070. The overturn of a 100-year-old Montana state law that banned corporations in that state from spending any of their corporate cash to support or oppose a candidate or a political party and the ruling that struck out any requirement that life without parole be the mandatory penalty for murder by a minor got second and third billing.

What the media chose to ignore was last Thursday’s 5 -4 decision in Knox v. Service Employees International Union (SEIU) that dealt a blow against public sector labor unions and in favor of employees who are represented by a union but are not members:

The case has three holdings: (1) When a public-sector union imposes a special assessment or dues increase, the union must provide a fresh Hudson notice (the Court’s vote on this issue was seven to two); (2) the union cannot require nonmembers to pay the increased amount unless they opt in by affirmatively consenting (vote of five to four); and (3) the case was not rendered moot by the union’s post-certiorari offer of a full refund (unanimous).

So what you say? Why is this an important ruling? It’s important because it requires Unions to do something that corporations aren’t. It requires unions to get permission from their non-members, who pay fees so they are covered by SEIU-negotiated contracts, before that money can be used for political spending. Instead of the traditional “opt-out”, the now have to “opt-in.” Corporations are not required to get share holders permission to spend millions on a political campaign. This could significantly impact on labor’s ability to fight back against corporations in the political arena. It restricts the union’s First Amendment rights to spend unlimited amounts under the 2010 Citizens United ruling:

“The court’s opinion makes clear its displeasure with 60 years of precedent on the dues issue, which have placed the burden on employees who object (to political spending) to opt out,” said William Gould, who from 1994 to 1998 chaired the National Labor Relations Board, the federal agency that governs labor relations in the private sector. “This decision is an invitation to litigate this issue.”

Although the Knox case involved special assessments on non-union members, Gould said, the Supreme Court’s reasoning suggests that it could be applied to all union dues that fund political spending paid by non-members. The next time that a union goes through the standard process of notifying non-members they have the ability to opt out, the union may well be met with a legal challenge, warned Gould. “(This decision) indicates that if these five (justices) are there when these cases come back to the Court, that the Court will decide these cases adversely to unions,” he said.

That thought has the National Right to Work Legal Defense Foundation, which represented the plaintiffs in the case, and similar groups celebrating — and labor advocates fearing the worst.

Patrick Semmens, vice president of the foundation, said via email that while some justices have used similar language in the past, the Knox decision confirms that now a majority believe “compulsory unionism” is a violation of First Amendment rights.

SEIU Secretary-Treasurer Eliseo Medina pointed out that while this complicates matters for unions it is “doable”. But he also noted that this decision was one sided in that “There is nothing in this [Knox] decision that even speaks to the question of shareholders, or corporations having to tell shareholders about any of the contributions they make, [..] “The language, to me, signals what has been the rightward drift of the Supreme Court … Now they’ve come up with a decision to make it more difficult for workers to be able to effectively participate in the [political] process.”

MSNBC host Rachel Maddow and her guest, legal correspondent and senior editor for Slate Dahlia Litwick discussed all of these rulings with emphasis on the Knox ruling.

As was expressed in it opinion on June 23, the New York Times rightly noted:

The conservative majority strode into the center of the bitter debate about right-to-work laws preventing unions in 23 states from requiring nonmembers to pay any union expenses, including those supporting collective bargaining that benefits nonmembers. It used this narrow case to insert itself into that political controversy when there was no reason to do so.

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.

June 26 is the 177th day of the year (178th in leap years) in the Gregorian calendar. There are 188 days remaining until the end of the year.

On this day in 1959, St. Lawrence Seaway opened.

In a ceremony presided over by U.S. President Dwight D. Eisenhower and Queen Elizabeth II, the St. Lawrence Seaway is officially opened, creating a navigational channel from the Atlantic Ocean to all the Great Lakes. The seaway, made up of a system of canals, locks, and dredged waterways, extends a distance of nearly 2,500 miles, from the Atlantic Ocean through the Gulf of St. Lawrence to Duluth, Minnesota, on Lake Superior.

History

The Saint Lawrence Seaway was preceded by a number of other canals. In 1871, locks on the Saint Lawrence allowed transit of vessels 186 ft (57 m) long, 44 ft 6 in (13.56 m) wide, and 9 ft (2.7 m) deep. The Welland Canal at that time allowed transit of vessels 142 ft (43 m) long, 26 ft (7.9 m) wide, and 10 ft (3.0 m) deep, but was generally too small to allow passage of larger ocean-going ships.

The first proposals for a binational comprehensive deep waterway along the St. Lawrence came in the 1890s. In the following decades the idea of a power project became inseparable from the seaway – in fact, the various governments involved believed that the deeper water created by the hydro project were necessary to make the seaway channels feasible. American proposals for development up to and including the First World War met with little interest from the Canadian federal government. But the two national government submitted St. Lawrence plans, and the Wooten-Bowden Report and the International Joint Commission both recommended the project in the early 1920s. Although the Liberal Mackenzkie King was reluctant to proceed, in part of because of opposition to the project in Quebec, in 1932 the two countries inked a treaty. This failed to receive the assent of Congress. Subsequent attempts to forge an agreement in the 1930s came to naught as the Ontario government of Mitchell Hepburn, along with Quebec, got in the way. By 1941, President Roosevelt and Prime Minister King made an executive agreement to build the joint hydro and navigation works, but this too failed to receive the assent of Congress. Proposals for the seaway were met with resistance from railway and port lobbyists in the United States.

In the post-1945 years, proposals to introduce tolls still could not induce the U.S. Congress to approve the project. Growing impatient, and with Ontario desperate for hydro-electricity, Canada began to consider “going it alone.” This seized the imagination of Canadians, engendering a groundswell of St. Lawrence nationalism. Fueled by this support, the Canadian Louis St. Laurent government decided over the course of 1951 and 1952 to construct the waterway alone, combined with a hydro project (which would prove to be the joint responsibility of Ontario and New York – as a power dam would change the water levels, it required bilateral cooperation). However, the Truman and Eisenhower administrations considered it a national security threat for Canada to alone control the deep waterway, and used various means – such as delaying and stalling the Federal Power Commission license for the power aspect – until Congress in early 1954 approved an American seaway role via the Wiley act. Canada, out of concern for the ramifications of the bilateral relationship, reluctantly acquiesced.

In the United States, Dr. N.R. Danelian (who was the Director of the 13 volume St. Lawrence Seaway Survey in the U.S. Department of Navigation (1932-1963)), worked with the U.S. Secretary of State on Canadian-United States issues regarding the Seaway and worked for over 15 years on passage of the Seaway Act. He later became President of the Great Lakes St. Lawrence Association to further the interests of the Seaway development to benefit the American Heartland.

The seaway opened in 1959 and cost $638 million in Canadian dollars, $336.2 million of which was paid by the U.S. government.[1] Queen Elizabeth II and President Dwight D. Eisenhower formally opened the Seaway with a short cruise aboard Royal Yacht Britannia after addressing the crowds in St. Lambert, Quebec.

The seaway’s opening is often credited with making the Erie Canal obsolete, thus setting off the severe economic decline of several cities in Upstate New York.

“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”.

Follow us on Twitter @StarsHollowGzt

Jimmy Carter: A Cruel and Unusual Record

THE United States is abandoning its role as the global champion of human rights.

Revelations that top officials are targeting people to be assassinated abroad, including American citizens, are only the most recent, disturbing proof of how far our nation’s violation of human rights has extended. This development began after the terrorist attacks of Sept. 11, 2001, and has been sanctioned and escalated by bipartisan executive and legislative actions, without dissent from the general public. As a result, our country can no longer speak with moral authority on these critical issues. [..]

At a time when popular revolutions are sweeping the globe, the United States should be strengthening, not weakening, basic rules of law and principles of justice enumerated in the Universal Declaration of Human Rights. But instead of making the world safer, America’s violation of international human rights abets our enemies and alienates our friends.

Paul Krugman: The Great Abdication

Among economists who know their history, the mere mention of certain years evokes shivers. For example, three years ago Christina Romer, then the head of President Obama’s Council of Economic Advisers, warned politicians not to re-enact 1937 – the year F.D.R. shifted, far too soon, from fiscal stimulus to austerity, plunging the recovering economy back into recession. Unfortunately, this advice was ignored.

But now I’m hearing more and more about an even more fateful year. Suddenly normally calm economists are talking about 1931, the year everything fell apart. [..]

The really crucial lesson of 1931, however, was about the dangers of policy abdication. Stronger European governments could have helped Austria manage its problems. Central banks, notably the Bank of France and the Federal Reserve, could have done much more to limit the damage. But nobody with the power to contain the crisis stepped up to the plate; everyone who could and should have acted declared that it was someone else’s responsibility.

And it’s happening again, both in Europe and in America.