Tag: ek Politics

Reading the (weak) tea leaves it appears Obama has said all he intends to say about the illegal NSA spying in last Friday’s hectoring (and boring) lecture.

So what will Obama talk about in the State of the Union address next week.  The smart money says there will be two main themes he will attempt to conflate to confuse the country which has turned sharply against his Administration and the Democratic Party.

One theme is income inequality.  Well good for him except that it’s highly unlikely after 6 years of policy specifically designed to increase it he has any meaningful remedies to suggest (to say nothing of their political viability).

The other theme is the Trans-Pacific Strategic Economic Partnership and that dear readers is a stone cold loser, not simply because it’s bad economic policy and a naked power grab by the Executive at the expense of Congress and the Courts, but the more voters learn about it the more they hate it and justifiably so.

And it’s not just here in the US.  The reason we don’t have an agreement today is that the vast majority of our proposed partners can see that it’s a terrible deal for them and the United States Trade Representative is arrogantly refusing to negotiate compromise, prefering instead threats, intimidation, and blackmail.

Obama: Give me fast track trade

By Amie Parnes, The Hill

01/21/14 06:00 AM EST

No House Democrats are co-sponsoring the bill, however, and Rep. Sandy Levin (D-Mich.), the Ways and Means Committee ranking member, and Rep. Charles Rangel (D-N.Y.), the panel’s former chairman, have both criticized it. They said the legislation doesn’t give enough leverage and power to Congress during trade negotiations.

…

The Democratic opposition makes it highly unlikely the trade promotion authority bill, in its current form at least, will go anywhere.

…

Senior congressional aides expect trade to be a part of Obama’s upcoming State of the Union address, since the White House has made clear that the trade bill is a priority and the TPP trade pact is a core part of the administration’s overall jobs agenda, in terms of increasing exports and opening markets.

“This is a priority of the president’s,” White House press secretary Jay Carney told reporters last week. “It’s part of a broad approach to expanding exports and, you know, creating more opportunities for our businesses to grow. And we’re going to continue to push for it.”

People Pressure Is Making Fast Tracking the TPP Politically Toxic

By Kevin Zeese and Margaret Flowers, Truthout

Tuesday, 21 January 2014 10:36

Leaks are sinking the TPP like the Titanic on its way to the bottom of the ocean. Ron Kirk, the former US Trade Rep said they were keeping it secret because the more people knew, the less they would like the TPP and it would become so unpopular it could never become law.

…

This week, Wikileaks released the Environmental Chapter.  The bottom line – there is no enforcement to protect the environment. The TPP is worse than President George W. Bush’s trade deals.  Environmental groups are saying the TPP is unacceptable.

…

When Fast Track was introduced there was a backlash, according to public reports, of angry Democrats. Rep. Earl Blumenauer (D-OR) told Huffington Post: “I’m a little disappointed that something’s dropped that was never discussed with Democrats in the House. As I understand it, it wasn’t actually discussed with Democrats in the Senate.”

Five members of the Senate Finance Committee told US Trade Representative Mike Froman they will not support the Baucus Fast Track bill because Congress needs to be involved throughout the process not just in an up or down vote after it is completed.

…

Baucus says he will not be holding a mark-up of the bill because of the divisions on the Finance Committee. Sen Ron Wyden (D-OR) who will be taking Baucus’ place told Politico there was “broad frustration” with the lack of transparency. And. Majority Leader Reid said that he may not even bring the bill to the Senate Floor if it passes out of committee.

As bad as the senate sounds for the administration, the House is even worse.  Opposition has been building in recent months with Democrats and Republicans writing President Obama opposing Fast Track.

They could not find a Democratic co-sponsor and now Politico reports, that Speaker Boehner says he will not bring the bill to the floor for a vote unless 50 Democrats support it.

…

The president’s TPA month is off to a bad start, so he has to make a big pitch in his upcoming State of the Union on January 28.  If he doesn’t, it is a sign he has given up and is distancing himself from defeat. He’s not only going to have to persuade almost every Republican to support him (that would be a first for his presidency), he’s going to have to convince every Democrat who has not taken a position, and change the minds of many who have already publicly said they oppose Fast Track.

The problem is Members of Congress know that if they get on the wrong side of corporate trade agreements, it will hurt them politically.

…

Members of Congress have seen the research that shows 90% of Americans will see their income go down from the TPP while the wealthiest get wealthier.  Why would any Member of Congress want to sign on to something like that – especially in an election year.

…

Under the Baucus-Camp Fast Track the president is also able to draft extensive implementing legislation to bring US law into compliance with the agreement. It is up to the president to decide what changes in laws or new laws are needed to comply with the TPP. Congress is not able to mark-up or amend the language of these bills.  And, these can be very significant laws.  For example, provisions like “Buy American” or “Buy Local” can be repealed as a restraint on trade. In all of these cases under Fast Track the president becomes the Congress and drafts legislation, totally destroying the checks and balances of the three branches of government.

Over at Naked Capialism a regular poster named Clive has done a translation from the original Japanese of a report by Fisco, “a financial analyst services provider” based in Japan.

It’s no longer publically available on their website but Clive thinks it’s merely been put behind a subscriber paywall.  There is a screen capture available from Excite if you happen to read Japanese, which I do not.

While I’ll not vouch for Clive’s translating abilities I think his analysis is spot on and I’m not the only one.  Joe Firestone (letsgetitdone from New Economic Perspectives) was also quite impressed and calls it a “very good post.”

Japan to US: You Can’t Railroad the Trans-Pacific Partnership

by Clive, Naked Capitalism

Posted on January 20, 2014

I would argue that Japan is ground-zero for TPP. Japan was a latecomer to the TPP party, the invitation being extended because without Japan, which is still after countless lost decades the world’s third biggest economy with a GDP almost 10 times the size of, for example, Malaysia. Without Japan, any resultant TPP would be a doughnut with a Japan-shaped hole in the middle.

…

(W)hen, a fortnight after the official releases from the Singapore TPP negotiation round, off the record briefings started to appear I planned to translate these after the holiday season. Fisco is a financial analyst services provider in Japan and on the 24th December 2013 they put out a toughly worded assessment of where TPP was likely to go next in terms of Japan’s participation. The article didn’t cite official sources directly, but from my experience with the Japanese media, it was pretty obviously drawing on officials speaking off the record. In the US you typically get such articles prefaced by “Washington insiders say…”, “Obama aides report…” or “One source added that the president has…”. Here in the UK, the line “Sources close to the Prime Minister…” has become such a cliché for the Prime Minister’s press office that one wonders why journalists bother with the subterfuge. In Japan, readers don’t get their intelligence insulted with such banter. If a source is on the record, they are named. If it’s off the record, information simply is reported source-less.

…

Diplomacy is just a nice word for cross-border politicking. And that is the nub of why, certainly as far as Japan is concerned and I’d venture too the other countries involved, the TPP talks are stalling. The deal is being worked on by politicians. These politicians have constituencies and need their constituents’ votes. Now, politicians the world over – and certainly Japan is no exception to this rule – can and do throw one set of voters under the bus if it means that another, larger, group of voters might provide support in return. TPP requires (or at least, the current US position requires) that Japanese agriculture takes a hit because the subsidies it receives are to be removed. To the LDP (Prime Minister Shinzo Abe’s party) in Tokyo, rural votes lost in Chiba prefecture because rice growers’ incomes drop might be made up for in Okinawa if the move of the resented US base there is expedited. Or at least if the crash-prone Osprey aircraft are removed. But who is Tokyo talking to at the TPP negotiations? The Office of the United States Trade Representative. What can Michael Froman bring to the table? Signed copies of Timothy Geithner’s memoirs?

This highlights a deeper malaise for the US. Due to its mismanagement of the South East Asia geopolitical arena, it doesn’t have much to offer either Japan or the other TPP countries. Japan would certainly appreciate some US muscle directed towards China over the Senkaku Islands territorial dispute. A bit of US help in dealing with North Korea wouldn’t go amiss either. Yet the US can deliver on none of these things. It certainly wouldn’t want to risk the overspill from any goading of China. And even lower impact offerings like the Okinawa base aren’t in the USTR’s gift.

…

Even if the US had better goodies to offer Japan to sweeten the TPP pill it is asking it to swallow (and it’s a little short on tempting morsels in this regard) U.S. Trade Representative Froman is not in a position to offer them without State Department assistance.

All of which shows that the TPP is nothing more than a grubby political gambit. Economists like to dress up their theories in scientific costume, presenting them as somehow evidence-based and provable in a measurable, repeatable way. Yves has – literally and figuratively – written the book on this subject as it is covered in ECONNED.

Economists promoting the provisions of the TPP are caught in a bind. If the economic theory underpinning the TPP is self-evidently valid beyond all doubt, it doesn’t need to be “sold” to any of the participating countries. They’d only have to look at the unequivocal evidence of the merit and validity of the theory before making the logical decision to enact the TPP.

If the TPP is on the other hand merely the US government doing the bidding of one of its main vested interests and biggest group of political donors (the multinational corporations) and asking the respondent TPP countries in the Pacific Rim to go against their own vested interests (such as subsidised agricultural producers or State Owned Enterprises) then the US will have to buy off the politicians in those countries with some political favours. Only the State Department can really wheel and deal in those areas. The Office of the United States Trade Representative will need to call in the State Department to lubricate the negotiations – and in doing so dispel any notion this is anything to do with strategic economics.

The mask will slip and the true nature of the TPP will be revealed – which for me will always be that the TPP is only crass political payback by Obama for services rendered. Chief amongst those are the services supplied by the multinationals: significant campaign donations.

You may well ask: “Why direct action? Why sit ins, marches and so forth? Isn’t negotiation a better path?” You are quite right in calling for negotiation. Indeed, this is the very purpose of direct action. Nonviolent direct action seeks to create such a crisis and foster such a tension that a community which has constantly refused to negotiate is forced to confront the issue. It seeks so to dramatize the issue that it can no longer be ignored. My citing the creation of tension as part of the work of the nonviolent resister may sound rather shocking. But I must confess that I am not afraid of the word “tension.” I have earnestly opposed violent tension, but there is a type of constructive, nonviolent tension which is necessary for growth. Just as Socrates felt that it was necessary to create a tension in the mind so that individuals could rise from the bondage of myths and half truths to the unfettered realm of creative analysis and objective appraisal, so must we see the need for nonviolent gadflies to create the kind of tension in society that will help men rise from the dark depths of prejudice and racism to the majestic heights of understanding and brotherhood. The purpose of our direct action program is to create a situation so crisis packed that it will inevitably open the door to negotiation. I therefore concur with you in your call for negotiation. Too long has our beloved Southland been bogged down in a tragic effort to live in monologue rather than dialogue.

…

We know through painful experience that freedom is never voluntarily given by the oppressor; it must be demanded by the oppressed. Frankly, I have yet to engage in a direct action campaign that was “well timed” in the view of those who have not suffered unduly from the disease of segregation. For years now I have heard the word “Wait!” It rings in the ear of every Negro with piercing familiarity. This “Wait” has almost always meant “Never.” We must come to see, with one of our distinguished jurists, that “justice too long delayed is justice denied.”

…

We should never forget that everything Adolf Hitler did in Germany was “legal” and everything the Hungarian freedom fighters did in Hungary was “illegal.” It was “illegal” to aid and comfort a Jew in Hitler’s Germany. Even so, I am sure that, had I lived in Germany at the time, I would have aided and comforted my Jewish brothers. If today I lived in a Communist country where certain principles dear to the Christian faith are suppressed, I would openly advocate disobeying that country’s antireligious laws.

I must make two honest confessions to you, my Christian and Jewish brothers. First, I must confess that over the past few years I have been gravely disappointed with the white moderate. I have almost reached the regrettable conclusion that the Negro’s great stumbling block in his stride toward freedom is not the White Citizen’s Counciler or the Ku Klux Klanner, but the white moderate, who is more devoted to “order” than to justice; who prefers a negative peace which is the absence of tension to a positive peace which is the presence of justice; who constantly says: “I agree with you in the goal you seek, but I cannot agree with your methods of direct action”; who paternalistically believes he can set the timetable for another man’s freedom; who lives by a mythical concept of time and who constantly advises the Negro to wait for a “more convenient season.” Shallow understanding from people of good will is more frustrating than absolute misunderstanding from people of ill will. Lukewarm acceptance is much more bewildering than outright rejection.

I had hoped that the white moderate would understand that law and order exist for the purpose of establishing justice and that when they fail in this purpose they become the dangerously structured dams that block the flow of social progress. I had hoped that the white moderate would understand that the present tension in the South is a necessary phase of the transition from an obnoxious negative peace, in which the Negro passively accepted his unjust plight, to a substantive and positive peace, in which all men will respect the dignity and worth of human personality. Actually, we who engage in nonviolent direct action are not the creators of tension. We merely bring to the surface the hidden tension that is already alive. We bring it out in the open, where it can be seen and dealt with. Like a boil that can never be cured so long as it is covered up but must be opened with all its ugliness to the natural medicines of air and light, injustice must be exposed, with all the tension its exposure creates, to the light of human conscience and the air of national opinion before it can be cured.

At the dawn of our Republic, a small, secret surveillance committee borne out of the “The Sons of Liberty” was established in Boston. The group’s members included Paul Revere, and at night they would patrol the streets, reporting back any signs that the British were preparing raids against America’s early Patriots.

First Impressions, Obama’s Speech

By: emptywheel

Friday January 17, 2014 12:16 pm

Obama used the example of Paul Revere as an example of the importance of intelligence over the life of “our country.” Of course, Paul Revere is actually a better example that, if the Brits had done metadata analysis akin to what he preserved today, we would still be eating Kidney pies under British rule.

Obama made no mention, at all, of NSA’s weakening encryption and hoarding zero days. None.

With the sole exception of consulting with Congress on how to resolve the Section 215 dragnet (something that will happen during next year’s PATRIOT Act Reauthorization if not before) these changes are all Executive Branch self-limitations. Even the role of a FISC advocate fell by the wayside. In other words, while Obama did call for some useful changes (limiting the gag order on NSLs, adding limits on the way back door searches can be used for criminal investigations), they’re all self-limitations that can’t be enforced or overseen.

At one point, Obama justified our dragnet by saying we have special responsibilities as the only Superpower. Now, China is getting big enough they might object to that whole claim. More importantly, it demonstrates the degree to which a presumption of exceptionalism underlies our entire approach to spying.

ps. Should you not get the admittedly obscure reference, Fall Out is the title of the last episode of The Prisoner.

White House Panel Refutes NSA Claims

Democracy Now

January 15, 2014

Members of the White House panel reviewing government surveillance have publicly rejected some of the National Security Agency’s key claims in justifying warrantless, mass spying. Appearing before a Senate hearing, former CIA Deputy Director Michael Morell and former national security aide Richard Clarke refuted assertions the bulk collection of phone data could have prevented 9/11.

“No Spy” Agreement Nears Collapse over U.S. Refusal to End Spying on Germany

The latest news about National Security Agency spying comes amidst reports talks between the United States and Germany on a no-spying agreement are near collapse. Tensions peaked between the two countries last year after documents leaked by Edward Snowden showed U.S. surveillance of German citizens and officials, including Chancellor Angela Merkel. A German newspaper reports the negotiations are at a dead-end over a U.S. refusal to guarantee an end to spying on German politicians. Germany denies the claim and says the talks are ongoing.

Oh, yes.  This works

TSA Granting Expedited Security Checks To Entire Lines Of Travelers Undercuts Everything About Its Security Theater

by Tim Cushing, Tech Dirt

Wed, Jan 15th 2014 7:46am

The TSA finally appears to be doing something to trim down the runtime of security theater performances. The PreCheck program, which sold travelers’ rights back to them for a smallish fee is now being applied randomly to people waiting in line. And not just certain somebodies as the TSA did randomly over the holiday season in an effort to appear slightly less annoying. A whole lot of somebodies, according to this report from The Consumerist.

…

While the TSA would probably prefer this random largesse to be greeted with relief and gratitude, its normal day-to-day enforcement of petty, illogical policies ensures that this sort of thing is only greeted with suspicion.

Chris Morran was naturally perplexed by the TSA’s implicit admission that its security theater was, in fact, security theater. After all, if whole lines can be declared “not terrorists,” then why all the shoeless jumping through hoops the other 99.99% of the time?

…

Morran has a good reason to be suspicious of this move. Not only does it undercut the TSA’s arguments for pretty much everything else that it does, it also contorts itself to give itself a pat on the back for being so damn good at detecting terrorists. This allows the TSA to give its Threat Assessment Program a veneer of legitimacy it hasn’t earned. Morran points out that he didn’t see a single “screening dog” anywhere and nothing indicating the decision was being made with any sort of “assessment” being involved. It was just business as usual and then, suddenly, everyone swept through the security process with shoes and laptops intact.

While I’m sure the travelers appreciated the expedited process, the real danger here is that the TSA — which is supposed to be ensuring our airplanes are terrorist-free — is now arbitrarily deciding to drop 90% of the process on a whim. Even if the infamous BDOs (and their pet friends) are performing some sort of en masse “assessment,” that process has been deemed no more likely to net a terrorist than the randomly dragging every other person off for extra screening. Either the TSA needs to drop the many pretenses that “support” its procedures or it needs to stand by the very things it has claimed for years are essential to preventing terrorist activity. What if this had nothing to do with assessment and had everything to do with agents feeling less than motivated? It would look exactly the same and would have the same amount of “threat detection” behind it.

Study: Analysis of 225 Terrorism Cases Finds NSA Phone Record Collection Didn’t Prevent Attacks

By: Kevin Gosztola, Firedog Lake

Monday January 13, 2014 10:28 am

According to the analysis by the New America Foundation, “An in-depth analysis of 225 individuals recruited by al-Qaeda or a like-minded group or inspired by al-Qaeda’s ideology, and charged in the United States with an act of terrorism since 9/11, demonstrates that traditional investigative methods, such as the use of informants, tips from local communities, and targeted intelligence operations, provided the initial impetus for investigations in the majority of cases, while the contribution of NSA’s bulk surveillance programs to these cases was minimal.”

Telephone metadata collection “played an identifiable role in initiating, at most, 1.8 percent of these cases.”

Initially, when revelations from disclosures from former NSA contractor Edward Snowden began to be published, US intelligence agency officials responded by claiming the program collecting the phone records of hundreds of millions of Americans had helped thwart 54 terrorist plots. That fabricated statistic gradually unraveled, especially after Senator Patrick Leahy confronted NSA director Gen. Keith Alexander during a Senate Judiciary Committee hearing.

…

Gen. Alexander has claimed, prior to 9/11, the NSA could not connect the dots because it did not have the dots. This is why it needs the bulk metadata program. But the government did not fail to stop hijacker Khalid al-Mihdhar because it did not have this program. “The government missed multiple opportunities to catch Mihdhar.”

In effect, the NSA is exploiting a major policy failure that led to a terrorist attack in order to justify mass surveillance. Had information been shared and had agencies responded to warnings of impending attacks, it is possible Mihdhar could have been stopped.

“The overall problem for US counterterrorism officials is not that they need the information from the bulk collection of phone data, but that they don’t sufficiently understand or widely share the information they already possess that is derived from conventional law enforcement and intelligence techniques, the study concludes. It cites a number of recent terrorism attacks where this has been the case: Headley, Maj. Nidal Hasan, Umar Farouq Abdulmutallab, Carlos Bledsoe.

This deconstruction of false statements has had an impact. Now, intelligence officials, like former NSA deputy director John Inglis (who retired on Friday), fall back on the argument that the program is an “insurance policy.”

…

More than six months later, officials have retreated to we must have the phone records of all Americans in a database because it helps us sleep at night. Which proves there is no actual legitimate security justification for collecting and storing the phone records of all Americans.

The only argument for continuing this program is built on an unflinching belief in subjecting a population to mass surveillance. And, when Obama says he will continue it in some form on Friday, he will be arguing for the preservation of a clearly authoritarian program.

Citizens of the USA are the most craven, cowardly people I’ve ever met.

I frequently read (and hear) a question that goes something like this-

ek, it’s all very well that you are here documenting the atrocities and I understand the the goals of your sites and writing are modest indeed, simply to provide a platform for others and encourage revolution in the small things, but I’m at my wits end!  What do I do?

To which my answer is invariably- stop rewarding bad behavior.

As your Mother said, this hurts me more than it does you.  The path of least resistance is appeasement and compliance, but spoiling pets, children, and politicians is the coward’s course.

The problem of resistance to the oligarchy

Ian Welsh

2014 January 12

You can also get change through making the lives of the rich unpleasant, or making them fear for their very lives.  Social peace has often been bought by treating ordinary people better, when the rich genuinely feared the army and police couldn’t protect them.

But if the elites think that their security forces can protect them, and especially if they live in a bubble where they never have to face people whose lives they have made miserable, as is the case for most of our rich, who fly by private jet, travel about the city in helicopters or chauffered limos and live in gated enclaves; and if you can’t cost them any real money, why should they let you have any of the surplus of society beyond the bare minimum you need to remain useful to them? (Not to survive: as the cutting of food stamps in the US indicates, that’s not a priority for the oligarchy.)

Be clear that distribution of goods and money in an economy is almost entirely unrelated to any ethical idea of merit or deservedness.  The bankers, amongst the best paid people in the world economy, destroyed far more money than they earned in the 00s, and yet are still paid billions of dollars in bonuses every year.  They receive the money they do because they had the power to make the government make them whole after they lost everything, then the power to make the government make them even richer than before.  They control a bundle of valuable rights from the state: the right to borrow at prime, the right to value assets to model (fantasy); the right to huge leverage; and the right lend, which is how money is actually created in our economy (aka. they can print money.)

This is why they’re rich: not because they produce net value: they destroy value; but because they have the power to make the government do what they want it to do and to make it not prosecute them when they break the laws, and even to change the laws so they can take even more money.

Distribution in an economy is based, virtually entirely, on power. A group receives goods and money because it can force others to give it to them.  The libertarian fantasy of free markets and free choice is exactly that. They don’t exist today, they have rarely existed in the past, and to the extent they have existed they owe their existence entirely to government making sure they exist.  As soon as any group gains enough power to take over government, they do, and free markets cease to exist because they make the government give them special rights,whether those are rights to print money, borrow low and lend high, or so-called intellectual property rights that let them continue to profit from ideas created 80 years ago.

Power, power is all that matters.  Even distribution, or something close to it, happens only when there is relatively equality between groups in society or there is an existential threat to society which requires the willing participation of all parts of society.

If you ever want to see raises for ordinary people again, you must figure out how they will become powerful: and power means “what can they do to hurt people who cross them, hurt them really, really badly.”

The Power Parable

Ian Welsh

January 9, 2014

Imagine that you have crawled out of the desert. You have not drunk in days, and if you do not have water soon you will die. Only one man has water, but he will not give it to you for free, he wants to be paid.

What is that water worth? To put it another way, what is your life worth?

One answer is that your life is worth everything you will ever earn, minus the cost of subsistence. The water-seller might say “if you die, you will never earn anything again. Therefore everything you earn is because I gave you water. So this water is worth your life’s income.”

Now you might not find life worth living under these circumstances, which amount to slavery. If the water-seller had many possible customers crawling out of the desert, he might find that too many people would rather die than pay, and might reduce his price somewhat to maximize his profit. If one quarter of people would rather die than pay, he might reduce the price to two-thirds of his customers life earnings, and see if most of them were willing to pay that.

Over time he might find that, knowing he’d take two-thirds, once saved his customers wouldn’t work very hard: just enough for subsistence and some alcohol, perhaps. So he might continue to experiment-how much could he take to maximize his profits?

But there is another possibility, back at the original bargain “your earnings, or your life?” What if you decide to take the water whether the water-seller wants you to have it or not? What if you’re willing to use violence? You’re weak, you might not win and if you lose you’re dead, but you might win and if you do you don’t have to pay anything. And if you win, you could start selling water yourself.

The water-seller has to take this into account. Which means he either has to reduce the price he charges so it’s not worth people trying to kill him, or he has to spend some of his profits on security. Thugs, pretty much.

But why pay for his own thugs? Why not pay government, and use its thugs? Everybody chips in some money, the government creates police and an army, and they make sure that customers don’t just take the water. They also solve another problem we hadn’t mentioned, making sure that people keep paying up later once they are no longer dying for thirst. The government enforces the water-seller’s contracts.

It should be pointed out that the water-payer is getting a lot more out of the governments thugs than most ordinary people are. Even if we assume the new police enforce all contracts and stop violence against everyone (as best they can), this guy has a lot more enforcement needs and a lot more people who want to kill him than an ordinary person. So even if everyone pays, say, 10% of income for the police, our water-seller is doing well out of this.

But why should the water-seller pay 10%? If the government has politicians whose money is separate from the government’s money, who can’t just use it as their purse, why not give them personally, say, 2% in gifts. That’s enough money to make them, personally, filthy rich. And they can lower water-seller taxes (after all, he saves lives and is a lynchpin of the economy) and raise them on other people. With a bit of work he might not pay any direct taxes, only gifts, and the rest of the population will pay for the enforcement of his contract rights. Yes, that reduces the post-subsistence money he gets from the people whose lives he saved, but for every dollar spent on enforcement he would have only gotten two-thirds anyway.

JP Morgan Will Not Be Criminally Prosecuted for Its Role in Madoff’s Ponzi Scheme

Transcript

Elizabeth Warren, Tom Coburn Introduce “Naked Capitalism Was Right About the Corruption of Financial Regulators Act” (Not Actually Called That)

by David Dayen, Naked Capitalism

Posted on January 9, 2014

I’ve been going out of my mind the past few days seeing the easily duped traditional media uncritically printing statistical analysis from JPMorgan Chase’s roundelay of get-out-of-jail-almost-free settlements. The gist of it, and this must have been in a Department of Justice release somewhere, is that JPM has “paid” $20 billion over the last calendar year to resolve a variety of disputes, the most recent being their admission that they knew the bogus nature of Bernie Madoff’s business and never generated any suspicious activity reports or raised red flags for regulators (the fact that they took their money out of Madoff feeder funds right before he was arrested being a smoking gun).

Peter Eavis at the New York Times scratches his head and wonders how the bank has “taken in stride” all this hemorrhaging of cash in fraud settlements. Well first of all, considering that shareholders effectively pay the fines and nobody in the executive suites has to go to jail, I’d say taking it in stride is a pretty proper reaction. But just as important is that $20 billion is a FAKE NUMBER.

…

That’s just one piece of the puzzle. Most of the aforementioned MBS settlement was tax-deductible. The big National Mortgage Settlement and others allowed JPM to write off their penalty with investors’ money. They’re suing the FDIC to stick them with the bill for WaMu losses even though they assumed them in the acquisition. The games are notable and legendary. JPMorgan Chase isn’t worried about paying $20 billion because there is no such number. That the media reports this speaks to their incurious nature, and allows the Justice Department and people like Eric Schneiderman to get away with claiming a “get tough” approach when the settlements look more like back-door bailouts.

Along comes Elizabeth Warren with a bill to attack this corruption directly. Warren and Tom Coburn introduced the Truth in Settlements Act, which uses disclosure to force these little games into the open.

Under the law, any settlement with federal agencies over $1 million would have to be completely disclosed to the public, with all relevant details out there, including how the topline number gets applied in reality.

…

Regulators are basically getting a free ride from the press for their inadequacy in enforcing the law, and this bipartisan bill puts a big red target on their back. Maybe they’ll think twice about the largesse given to banks in the form of a fake penalty; I’m skeptical, but at least they’ll feel the eyes on them. I am happy to see a Senator basically calling the regulatory agencies liars (on the call, she said “They shouldn’t be able to advertise a high sticker price that they know is untrue”), and moving to produce legislation to stop them from lying. Who knows where it will go – Congress doesn’t pass many laws anymore – but this is a case where the mere potential for embarrassment could spur better behavior.

Over at Naked Capitalism our old pal dday has a couple of thought provoking pieces I’d like to draw your attention to.

The first one is a reprint of an article by Chris Mayer that has also appeared at New Economic Perspectives.  Chris is no deficit dove, in fact he used to be an Austrian which is the school of Weber, Mises, and Hayek and heavily influnced the thinking of the ‘Freshwater’ University of Chicago style of economics with its theories of perfect markets and concerns about inflation.

In it he describes a simple thought experiment proposed by Warren Mosler (considered the father of neo-Chartalism or as we know it more familiarly now- Modern Monetary Theory) to describe how fiat currency, which is to say sovereign currency unbacked by any fixed convertibility into commodities or currency other than that of the state that issues it, works.

Chris Mayer: How Fiat Money Works

by David Dayen, Naked Capitalism

Posted on January 9, 2014

Imagine parents create coupons they use to pay their kids for doing chores around the house. They “tax” the kids 10 coupons per week. If the kids don’t have 10 coupons, the parents punish them. “This closely replicates taxation in the real economy, where we have to pay our taxes or face penalties,” Mosler writes.

So now our household has its own currency. This is much like the U.S. government, which issues dollars, a fiat currency. (Meaning Uncle Sam doesn’t have to give you something else for it. Say, like a certain weight in gold.) If you think through this simple analogy, all kinds of interesting insights emerge.

For example, do the parents have to get coupons from their kids before they can pay them to do any chores? Obviously not. In fact, the parents have to spend their coupons first by paying their children to do chores before they can collect the tax. “How else can the children get the coupons they owe to the parents?” Mosler writes.

“Likewise,” he continues, “in the real economy, the federal government, just like this household with its own coupons, doesn’t have to get the dollars it spends from taxing or borrowing or anywhere else to be able to spend them.”

The government creates dollars. It doesn’t even have to print them. The vast majority of spending is simply done by adding electronic dollars to bank accounts. Therefore, the U.S. government can’t go bankrupt. It pays all its bills in U.S. dollars, of which it is the sole issuer.

This sounds really obvious, but it is amazing how many people – even very smart people – forget this simple fact. They get hysterical about the fiscal deficit or the national debt. (This is not to say there aren’t bad consequences from issuing too many coupons, or from government spending in general.) The only way the U.S. government can default is if it chooses to do so.

Going back to Mosler’s example, let’s ask another question: How can the kids “save” coupons in excess of the weekly tax? Well, they can only do that if the parents spend more than they tax. There is no other way to hoard coupons. In the real economy, the same is true. The private sector can save dollars only if the government spends more than it taxes. Spending pours fiat money into an economy; tax payments drain it away.

Another question: Do the parents have fewer coupons if they spend more than they tax? No. The parents make the coupons. They don’t even need physical coupons. They can simply track them on a piece of paper or in a spreadsheet. Likewise, the U.S. government doesn’t have any fewer dollars after running deficits. It can’t run out. (There are real-world restraints on how much government spends.) To borrow from another Mosler analogy, the U.S. government can no more run out of dollars than a scorekeeper can run out of points.

You don’t have to like this. (I don’t.) It’s merely a description of how a fiat currency system works. That’s the world we live in.

…

One great story Mosler tells in both books is how he cleaned up on another free lunch in lira-denominated bonds in the early ’90s. This was before the euro and back when there was worry over a default by Italy’s government. Italy’s national debt was 110% of GDP and interest rates were high on its bonds.

But Mosler knew that it was the sole issuer of lira. Italy could not default unless it wanted to. Mosler actually met with senior officials in Rome to let them in on the “secret.” Long story short, Italy didn’t default. Mosler’s fund made over $100 million.

For an investor, macroeconomics has limited uses most of the time. Mosler’s career shows this can be otherwise. But then again, you have to study economics that actually describe the real world. And Mosler’s economics, or MMT, does that rather well.

I think I might tell you some more about this research company that I have in the past and my brother currently works for, but what’s relevant today is that one of his most frequent pieces of field work is observing cars to collect statistics on how many people are texting while driving.

Yup.  I expect they’ll turn themselves in now and serve their time.

Just like Ed Snowden.