Wednesday, February 29, 2012

Death By Debt

Channel Six TV in Oklahoma interviewed the state's junior US Senator about debt and the fiscal crisis.



Subtlety has never been tom Coburn's style. In his 14 years in congress, Coburn's earned a reputation as a maverick who's willing to fight any bill he thinks is wasting taxpayer dollars.

The list includes everything from the infamous "bridge to nowhere" to funding for breast cancer research.

"The difference is they're seeing what they see in their life, and I'm seeing how do we best do research in our country," he said.

And Medicare?

"Any politicians that stands up and says ‘we're not going to touch your Medicare' is a liar," he said.

On Capitol Hill, they call him "Dr. No."

"I'm pretty blunt, and I tend to see things in black and white," Coburn

And what Tom Coburn sees now, is nothing short of disaster.

"In the next two years our country is going to be consumed. Absolutely consumed with debt. We're bankrupt. We're getting ready to have a debt crisis and nobody is working on it. We're two years away from being Greece," Coburn said.

Coburn's calling card has always been his willingness to offend both Democrats and Republicans. But with the nation's skyrocketing debt and the failure of the Super committee, Congress, or the president to hammer out a solution, his frustration may be at an all-time high.

"We have all the capabilities to solve every problem we have. We have none of the leadership in any key office in this country to do that," he said.

2011 was a pivotal year for Oklahoma's junior senator. Last summer, as the debt crisis threatened to shut down the federal government, Tom Coburn of Muskogee, Oklahoma emerged as an unlikely hero.

"This plan offers the American people 9 trillion reasons to stop making excuses," Coburn said on the floor of the senate.

His "Back in Black" proposal--slashing $8 trillion from the deficit while also raising a trillion dollars in new revenue--was hailed by many as a step toward responsible government.

Newsweek called him the "Man of the Hour." The New York Times gushed that he was the "Lady Gaga of Fiscal Conservatives." And the President frequently drops his name.

"My friend Tom Coburn is right, we shouldn't be giving tax breaks to millionaires," President Obama said during the State of the Union Address.

But on the other side of the aisle, Coburn's willingness to raise taxes as well as cut spending, outraged some of his most ardent fans.

Coburn says compromise is simply a fact of life in Washington. At the time of this interview, last October, he was still optimistic the tide would turn.

"If I think if we can get through the next two or three years, I think we can fix this," he said.

Today, those hopes may have dimmed, but Tom Coburn's determination has not.

While the rest of Washington is caught up in presidential politics, Coburn is renewing his focus on the issue he believes will make or break this country: the deficit.

The huge debt clock that hangs in his front office used to sit in the hallway, the senate ethics commission made him move it inside.

But no one can make Oklahoma's Junior Senator stop sounding the warning bell. Tom Coburn has four years left in Washington. He has no intention of going quietly.

"I don't want to be civil if our country is going to crash on the rocks. I want to have a vigorous and cantankerous debate about the issues and the facts, and I want to be too out there," Coburn said.

Certainly Senator Coburn's latest decision on funding for the 9/11 memorial is generating vigorous debate.

But he's doing more than just blocking bills.

While Coburn wouldn't give any specifics, he said his "Gang of 6" is back at work. He's hoping Congress will not wait until the end of the year to make the budget cuts they agreed to last summer.

Tuesday, February 28, 2012

Closely Observed Citizens

From the http://rt.com/usa/news/ website this story about FBI surveillance which seems so 1970s but is very much uo to date.






The Federal Bureau of Investigation employs upwards of 15,000 undercover agents today, ten times what they had on the roster back in 1975.
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If you think that’s a few spies too many — spies earning as much as $100,000 per assignment — one doesn’t have to go too deep into their track record to see their accomplishments. Those agents are responsible for an overwhelming amount of terrorist stings that have stopped major domestic catastrophes in the vein of 9/11 from happening on American soil.


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Another thing those agents are responsible for, however, is plotting those very schemes.
The FBI has in recent years used trained informants not just to snitch on suspected terrorists, but to set them up from the get-go. A recent report put together by Mother Jones and the Investigative Reporting Program at the University of California-Berkley analyses some striking statistics about the role of FBI informants in terrorism cases that the Bureau has targeted in the decade since the September 11 attacks.


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The report reveals that the FBI regularly infiltrates communities where they suspect terrorist-minded individuals to be engaging with others. Regardless of their intentions, agents are sent in to converse within the community, find suspects that could potentially carry out “lone wolf” attacks and then, more or less, encourage them to do so. By providing weaponry, funds and a plan, FBI-directed agents will encourage otherwise-unwilling participants to plot out terrorist attacks, only to bust them before any events fully materialize.


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Additionally, one former high-level FBI officials speaking to Mother Jones says that, for every informant officially employed by the bureau, up to three unofficial agents are working undercover.


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The FBI has used those informants to set-up and thus shut-down several of the more high profile would-be attacks in recent years. The report reveals that the Washington DC Metro bombing plot, the New York City subway plot, the attempt to blow up Chicago’s Sears Tower and dozens more were all orchestrated by FBI agents. In fact, reads the report, only three of the more well-known terror plots of the last decade weren’t orchestrated by FBI-involved agents.


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The report reveals that in many of the stings, important meetings between informants and the unknowing participants are left purposely unrecorded, as to avoid any entrapment charges that could cause the case to be dismissed. Perhaps the most high-profile of the FBI-proposed plots was the case of the Newburgh 4. Around an hour outside of New York City, an informant infiltrated a Muslim community and engaged four local men to carry out a series of attacks. Those men may have never actually carried out an attack, but once the informant offered them a plot and a pair of missiles, they agreed. Defense attorneys cried “entrapment,” but the men still were sentenced to 25 years apiece.


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"The problem with the cases we're talking about is that defendants would not have done anything if not kicked in the ass by government agents," Martin Stolar tells Mother Jones. Stolar represented the suspect involved in a New York City bombing plot that was set-up by FBI agents. "They're creating crimes to solve crimes so they can claim a victory in the war on terror." For their part, the FBI says this method is a plan for "preemption," "prevention" and "disruption."
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The report also reveals that, of the 500-plus prosecutions of terrorism-related cases they analyzed, nearly half of them involved the use of informants, many of whom worked for the FBI in exchange for money or to work off criminal charges. Of the 158 prosecutions carried out, 49 defendants participated in plots that agent provocateurs arranged on behalf of the FBI.
Experts note that the chance of winning a terrorism-related trial, entrapment or not, is near impossible. "The plots people are accused of being part of — attacking subway systems or trying to bomb a building — are so frightening that they can overwhelm a jury," David Cole, a Georgetown University law professor, tells Mother Jones. Since 9/11, almost two-thirds of the cases linked to terrorism have ended with guilty pleas. “They don't say, 'I've been entrapped,' or, 'I was immature,’” a retired FBI official remarks.
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All of this and those guilty pleas often stem for just being in the right place at the wrong time. Farhana Khera of the group Muslim Advocate notes that agents go into mosques on “fishing expeditions” just to see where they can get interest in the community. "The FBI is now telling agents they can go into houses of worship without probable cause," says Khera. "That raises serious constitutional issues."
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From the set-up to the big finish, the whole sting operation is ripe with constitutional issues such as that. A decade since 9/11, however, the FBI is reaching through whatever means it can pull together to keep terrorists — or whom they think could someday become one — from ever hurting America.

Monday, February 27, 2012

China In Europe

From zero hedge a look at how China is spreading investment money around Europe, bringing the Old World into the dominion of the very newest world. A portent of the life facing anyone who imagines China won't have something to do with their lives:


When it comes to labor-wage parity, nowhere has this topic been more debated than in the context of China and the US. Specifically, with US wages declining consistently for the past 3 years despite commodity price inflation spiking with a 2-3 month lag following every coordinated central bank printing episode (such as the one we are experiencing now), many have proffered their predictions as to when Chinese secular inflation would make wage pay equivalent on both sides of the Pacific, and stop the exporting of jobs from the US to China (a good discussion on the topic can be found in "With China Forecast To Reach Wage Parity With The US In Five Years, Is A New Manufacturing Golden Age Coming To The US?"). And while labor equivalency between China and the US likely still has a ways to go, we have now crossed a critical Rubicon, as Chinese and European wages, at least in one part of European Union, have caught up. Net result, as Spiegel reports, carmaker "Great Wall this week became the first Chinese automobile manufacturer to open an automobile assembly plant inside the European Union in the latest move suggesting the country's carmakers are seeking to establish a beachhead into the European market." Yes, that's right: it is now cheaper for China to make cars in the European Union: "It used to be that European carmakers opened plants to assemble their cars in China. Now the Chinese have turned the tables with the opening of their first factory in Bulgaria, an EU country with low labor costs and taxes. Increasingly, Chinese carmakers are setting their sights on the European and American automobile markets." The ramifications of this landmark development are massive for virtually every aspect of the economy: for domestic labor migration, for inflation, for the trade balance, and certainly for US workers.



From Spiegel:

Bulgarian Prime Minister Boyko Borisov on Tuesday attended the opening of Great Wall's new factory in the northern Bulgarian village of Bahovitsa. The plant is to be operated jointly by Great Wall and the Bulgarian firm Litex Motors.



For years, European carmakers like Volkswagen have established large joint ventures in order to gain footholds in the Chinese market, but now the tables appear to be turning.



"Stepping on the European market is our strategy," Great Wall CEO Wang Fengying said at the opening festivities.



Within three to five years, the company plans to produce an entire line of models in Bahovitsa to be sold in Europe, she said. Test assembly of the Voleex C10 and the Steed 5 pick-up truck, which sell for 16,000 to 25,000 leva (€8,200 to €12,800), began already in November.



In the midterm, Great Wall plans to assemble around 50,000 automobiles per year at the 500,000 square meter plant. The number of workers is expected to grow from the current total of 120 to 2,000. Initially, the company plans to sell its vehicles primarily in Bulgaria and neighboring Eastern European countries like Serbia and Macedonia, but it later plans to expand into other EU countries.

...

Great Wall is China's largest manufacturer of sports-utility vehicles and operates plants in around a dozen countries, including Russia, Indonesia, Egypt and Ukraine.

Yesterday Bulgaria, a poor EU member, but an EU member nonetheless...

Bulgaria, the EU's poorest country, is attractive as a labor market because it is an oasis of cheap wages and low taxes. Workers are considered well educated and the country is ideal as the site for a company like Great Wall to launch. Given that wages for factory workers have risen considerably in China in recent years, assembly sites abroad have become increasingly attractive for some manufacturers.

...today Greece

...And tomorrow all of Europe, and then America?

So the real question is if Chinese wages can no longer compete with those in a poor EU member, just how high are they? And how long before China, for so many years a happy mercantilist importer of Bernanke's monetary inflation courtesy of its currency peg, is no longer competitive with ever growing parts of the EU, and then America? Does this mean that China's cheap labor force has pleateaued and the labor migration of peasants moving from the periphery to the cities no longer provides cheap labor? This was the topic of an extended analysis by SocGen from early January (posted here), of which the salient chart is presented below. Today's news will certainly force everyone to have a second long, hard look at the chart in the top left as it means that the Chinese labor force may indeed have topped out.



Aside from demographics, the macroeconomic implications on foreign trade and capital flows are monumental: most immediately for the US, it puts today's Wal Mart miss in a very different perspective, as it means that China is no longer the source of cheap commoditized produce, which in turn means that the entire discount retail vertical may have entered the secular sunsetting phase. It also means that Chinese producer margins are about to turn negative, and China is about to replay all the same EPS boosting gimmicks that America has gone through in the past 3 years, only in China, where there is no safety net, no jobless insurance claims, no EUCs, and no extended benefits (not to mention anything else), a wave of terminations will lead to far more unpleasant consequences than a bunch of unemployed people sitting on their coaches playing Xbox and watching GOP presidential debates. Most importantly, it means that going forward China will have zero tolerance for Fed monetary expansion as any hot money will immediately set off an inflationary forest fire as China suddenly finds itself with absolutely no output gap slack (unlike America which allegedly has more than enough, even though it is really just a secular regression to the mean shift).

In short, the implications, both good and bad, are huge.

And while this may be merely the proverbial canary in the Bulgarian coalmine for now, it will soon be followed by a murder of crows and then a kettle of vultures. Because the Pandora's box has just been opened.

Sunday, February 26, 2012

Greece fails

From http://www.theAtlantic.com/ a surprisingly negative view of the bailout heralded last week as the way to save Greek from default and total economic meltdown. The numbers don't add if you read the article. Is anyone surprised?


Greece has finally secured a new $170 billion loan from its European landlords, and the terms are just as unrealistic and doomed-to-fail as you expected. The fact that the country requires a second bailout that's practically the size of its economy -- now crashing through $270 billion and still falling* -- tells you what you need to know about the hopelessness of Greece.


The bailout plan offers financial assistance to Greece at sweetheart terms and asks bondholders to accept a 50 percent scalping. But the object of all this pain -- stabilizing Greece's debt at 120 percent of GDP by 2020 -- relies on fairy-tale growth figures that assume the Greek Depression will stop accelerating some time starting ... yesterday

It's as if somebody took a ruler and drew a random sharp angle between negative-7% growth and positive-3% growth. (When all else fails, break out the hope and protractors!) Meanwhile, on planet Earth, Greece's recession is getting worse with each passing quarter. The most highly titrated doses of austerity haven't set in, yet. The honest prognosis is for the Greek Depression to deepen, not mitigate, in the next year. For the economy to stabilize within two years would require the services of the Holy Trinity, not the troika.


This plan won't work for the same reason that no austerity and loan plan can work for Athens. Greece's private sector is in a free fall. Unemployment is cresting over 20 percent. Ideally, the government should act as the stabilizer of last resort, and the central bank should flood the country with money to avoid deflation and make exports more competitive. Instead, the opposite is happening. Government spending is down a whopping 34%, and Athens doesn't own the keys to the money-flood machine. The result is turning into one of the worst recessions for a developed country in modern history.

"Greece is totally gone," Desmond Lachman of the American Enterprise Institute once put it to me. "It's just a matter of time until they have a disorderly default." So why this foot-dragging, can-kicking exercise in futility?


Kicking the can down the road is normally considered idle procrastination. This is different. This is deliberate procrastination. If Greece falls today, nobody knows what kind of economic domino effect it will have on other debtors like Portugal, Italy, and Spain, or the rest of the Europe. Europe has selected the muddle-through and draw-random-recovery-lines option. The honest and inevitable choice -- a wild default or even Greece's departure from the EU -- is impossible for euro ministers to imagine suffering through, for today. Meanwhile, Greece suffers.


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As always, don't forget this: Greece has the worst unemployment rate for under-25-year-olds of any developed country, along with Spain. It is an utter disaster.

Failing Infrastructure

From Minnesota Public Radio a discussion about the failure of government to keep up with the needed maintenance of our roads and bridges. J H Kunstler, the culture critic, has a bee in his bonnet about creating a sensible passenger rail network to offset the expected increases in the costs of fuel as Peak Oil cuts supply and raises prices. The mainstream though, isn't ready to embrace the notion of wholesale changes in how we live to accommodate reality. reality will bite sooner or later, meanwhile our roads and bridges crumble.






It's hard to claim that America's transportation system is in great shape. The American Society of Civil Engineers says the United States has a $3 trillion backlog on transportation projects and it costs drivers in traffic jam time, wear on cars and damage to the environment.

But how are we going to pay to improve it?

Emil Frankel, visiting scholar at the Bipartisan Policy Center, joined Kerri Miller on The Daily Circuit Wednesday.

"We have an aging, congested, deteriorated system," he said.

But one thing politicians can't seem to agree on: How to pay for upgrades.

Richard Geddes, associate professor in the Department of Policy Analysis and Management at Cornell University, also joined The Daily Circuit discussion.

"We have not always underfunded road repair in the country," Geddes said.

Taxes on gasoline have always been a strong source of funding for transportation infrastructure projects as long as there were more drivers using more gasoline, thus paying more taxes. That isn't the case anymore, Geddes said.

"The main [reason] in my view is the increasing fuel efficiency of vehicles, which means that people can drive more vehicle miles, but don't pay proportionately more in fuel taxes," he said.

So should we increase the gas tax? Geddes said it's a "political bomb to go out and advocate for an increase from the federal gas tax."

"At least part of the reason for that is people's lack of faith that the revenue from an increase from a gas tax would be spent wisely by Congress," he said.

Geddes referred to the 2005 highway bill, which included 6,371 earmarks and the notorious "bridge to nowhere" in Alaska.

Steve in St. Paul called into the show in support of paying more for his road usage.

"I'm actually a general contractor here in the Twin Cities, so I use the roads fairly regularly, much more than probably some people," he said. "Unfortunately I'm not able to create any commuting or sharing of vehicles because of the type of job that I do, but I'd be more than willing to pay for the cost of what I use."

Linda in Bemidji also called into the show and expressed concern about the extra cost to people in rural communities.

"An increase in the gas tax is kind of a disproportionate hit to rural people especially in little communities such as ours where we have very little investment in transportation," she said. "I think you drive further and you don't have the option of having a bus or any other type of public options there."

On Facebook, Marty Walsh suggested a better toll system.

"Highways inside cities should be flexible toll toll roads," Walsh wrote. "They serve no purpose other than to get people where they are going as fast as possible, and so having a price to make that happen is the best way to do it."

Saturday, February 25, 2012

Urban Prairies

Two cities with the same problem: urban decay. Detroit has taken the headlines with it's precipitous decline into urban awfulness, but Chicago and Buffalo have their own problems. With jobs disappearing and no effort made to replace them, witness the cuts up to 35,000 people by the Post Office, urban decay is bound to spread. Tax cuts have not produced work and protectionism is still a dirty word. Despair out to be the dirtiest word of all.



Chicago:


It’s leap year 2012, a time to take a leap forward to look at the challenge Chicago faces in the future of developing its vast supply of vacant land.



One of the great questions Mayor Rahm Emanuel faces is what to do with the ever-growing real estate wilderness — Chicago’s vacant lots.


The city of Chicago estimates there are currently about 10,000 vacant lots on the South Side — most of them stretching from McCormick Place around 22nd Street to Hyde Park and from Lake Michigan deep into Englewood. Thousands more vacant parcels can be found on the city’s West Side.


However, William Lavicka, a master preservationist who heads Historic Boulevard Services, believes the city’s land bank may contain more than 50,000 lots when both city-owned and privately owned vacant property on the South and West sides are taken into account.


Lavicka says city blocks ravaged by teardowns look like “a mouth with missing teeth.” If these properties could somehow be resurrected from the deep, dark fiscal hole of delinquency and put back on the active real estate tax rolls, then tens of millions of dollars in new revenue could be injected into the city budget.


Urban pioneer Lavicka, a tough, innovative guy who served in the Seabees during the Vietnam War, is still telling war stories about his adventures renovating abandoned properties on the Near West Side for the past 35 years.


In 2010, while renovating the Gut Heil Haus, a turn-of-the-century fortress-like building that formerly was a German Social and Athletic Club at 2431 W. Roosevelt Rd., Lavicka slept in the property at night armed with a baseball bat and a shotgun to guard its beautiful interior appointments.


The renovation of the old West Side German beer hall is just one of dozens of vintage properties Lavicka personally saved from the wrecking ball while serving as an urban commando.


His swashbuckling victories against the urban pirates range from helping save a row of mansions along the 1500 block of West Jackson Boulevard and obtaining landmark designation and listing on the National Register of Historic Places, to the spirited renovation of a dozen churches, including the Church of the Epiphany on Ashland and Adams.


These works of renovation and art are just a few of dozens lovingly outlined in “Urban Structure,” a self-published book authored by Lavicka to remember his life’s work in words and pictures accomplished over the past four decades. The book, completed while Lavicka struggled to recover from illness, is an amazing record of accomplishments by a creative and tenacious man.


Meanwhile, hundreds of properties are being deposited every month into the city’s land bank by foreclosure-minded mortgage companies and banks who are seeking to rid their books of delinquent homes and apartments.


The process typically starts with abandonment, boarding up, and then foreclosure. But the blight and foreclosed properties are far from forgotten by the neighbors and the community.


With no hope for a resale to recoup the investment, the banker’s neglect results in abandonment of the property. The weeds grow, the windows are smashed, and the building becomes an unsafe place for homeless people to squat, a drug house, or the site of a fire.


Eventually, this scenario forces the city to raze the property and reduce the bank’s real estate tax classification from improved property to vacant land, which is taxed at a much lower level. Often the land is just donated to the city for back taxes, or picked up in the tax scavenger sale.


Typically, the abandoned building also becomes a resource for Chicago’s underground economy and is stripped of its valuable appliances, furnaces, light fixtures, copper pipe and electrical wire. Often, the urban pirates even take the hardwood floors, fireplace mantels and doors.


Even if an investor buys the abandoned building, secures it with guard dogs to protect the building’s improvements and begins to renovate the property, it sometimes isn’t a happy ending. It is not uncommon for the dogs to be poisoned and killed by the urban pirates to scavenge the profits within.


Maybe Mayor Emanuel should put Lavicka, a champion of preservation, in charge of policing the city’s junkyard of abandoned buildings.

Buffalo:


Following 60 years of economic decline and the loss of nearly 319,00 residents the City of Buffalo is now in the unenviable position of owning thousands of vacant residential and commercial properties. The City's housing vacancy rate has climbed from 4.4 percent in 1970 to 17.2 percent by 2010. Much of the urban landscape is now in decay and once vibrant neighborhoods are approaching extinction and others are at risk to follow suit.


The likelihood over the next couple decades of Buffalo regaining its population level of 580,000 residents in 1950 is remote. Under that premise what is the best strategy to proceed with the goal of fostering economic and population growth by reclaiming Buffalo's distressed neighborhoods? The political solution seems to favor mass demolition. This approach is well documented in other U.S. cities where massive demolitions have failed to yield substantial private reinvestment and community revitalization. Mass demolitions result in the loss of valuable housing stock, create voids in a neighborhood's urban fabric, further depress property values and promote continued population exodus and urban sprawl.


Buffalo's demolition plan is aimed at razing 5,000 structures in five years. At a reported cost of $100 million the demolition plan will average $20,000 per structure. These funds could be used to rebuild rather than destroy. With the demolition of each structure the city losses a bit of its history and a link with the past is forever erased. In an era of generic urban landscapes, Buffalo possesses such remarkable assets as unique architecture, history, art and culture. These community assets create a true sense of place and if properly nurtured could serve as the building block for the stabilization and future revitalization of distressed neighborhoods. Buffalo's architectural treasures have already yielded notable revitalization efforts in the CBD.
Alone, the City's demolition of 5,000 structures will only further perpetuate community disinvestment, urban sprawl, population loss and neighborhood decline. Under this program as building after building has been razed the political justification has focused on alleged progress and the need for derelict buildings to come down for new ones to take their place. The flaw in this logic is that property values and rents in the impacted neighborhoods are far too low to warrant financially feasible private investment. Attracting private investment to redevelop the large inventory of vacant lots left behind will require substantial public incentives beyond the cost of demolition. Reinvestment in a significant portion of the City-owned property inventory could come at a far lower cost and yield much greater results.


What is required to resurrect Buffalo's distressed neighborhoods is a multi-prong revitalization strategy. Demolition can be a component of the revitalization process, but by no means the cornerstone.

Promoting home ownership should be a primary goal in stabilizing and revitalizing distressed neighborhoods. Many City-owned homes are structurally sound and are worth saving. The smaller homes are ideal for first-time buyers. Investing in the existing housing stock would be far less costly that funding demolition and financial incentives necessary to spur private investment. Demolition funds could be reallocated to bring homes to inhabitable standards by funding such structural improvements as a new roof, windows and utilities. The revitalized homes would then be sold to first-time home buyers, strengthening neighborhoods, creating home owner equity, improving quality of life and enhancing the City's tax base. Not for profit organizations have proven the worth of saving and rehabilitating homes slated for demolition.


Public sector investment is critical. Demolition should be selective and accompanied by public investment in neighborhood parks and the reconstruction of streets, sideways and public utilities. The City could team with local banks and mortgage lenders to offer mortgage financing or establish a revolving fund for City-owned properties slated for sale. These efforts would assist in stabilizing the surrounding housing stock and the rehabilitation of other City-owned properties.


The City must stem demolition through neglect by aggressively prosecuting those property owners who refuse to maintain and invest in their properties. Emergency demolitions should be avoidable and must be a last resort.


New construction should be urban in scale and design. Too much new construction has taken a suburban-style form which deflates the City's unique urban character.


Shovel ready sites should only be created when actual market demand dictates. The demolition of properties anywhere in the City should not be permitted without a concrete redevelopment plan that includes architectural drawings, City review and approval, and financing and tenant commitments.


The depopulation of distressed neighborhoods has resulted in the deterioration of the local business community. Fostering small business will require both population and income growth. Concentrated efforts in targeted neighborhoods to rehab the housing stock, invest in public infrastructure and selected demolition are necessary steps in the eventual rebirth of both residential neighborhoods and business districts. Mass demolitions, on the other hand, will result in portions of Buffalo being transformed into urban prairies that will likely remain so for many years to come.

Friday, February 24, 2012

Fukushima Update

We don't get to hear this sort of news in the US press too much as the nuclear melt down in Japan has long since cycled out of public consciousness but there is news still coming out of the broken reactors, and none of it seems too good. From Mainichi Dail News:


FUKUSHIMA (Kyodo) -- The Fukushima Prefecture government said Monday that the residents of three municipalities located near the crippled Fukushima Daiichi nuclear power plant are estimated to have been exposed to up to 23 millisieverts of radiation in the four months after the accident triggered by the March 11 earthquake and tsunami.

"As annual radiation exposure of up to 100 millisieverts poses no specific cancer risks, the estimated radiation is unlikely to cause any adverse health effects," Fukushima Medical University Vice President Shunichi Yamashita told a press conference. "It is important to reduce future radiation exposure as much as possible."

While the allowable radiation exposure limit is ordinarily set at 1 millisievert per year, the International Commission on Radiological Protection has recommended an emergency limit of 20 to 100 millisieverts.

Of 9,474 residents, excluding nuclear plant workers, in Namie, Kawamata and Iitate, 5,636 people, or 57.8 percent, were exposed to radiation of less than 1 millisievert during the four months, the local government said.

Those exposed to radiation of 1 to less than 10 millisieverts totaled 4,040 people, or 41.4 percent.

Around 71 people were exposed to 10 millisieverts or more, including two people exposed to over 20 millisieverts. The maximum exposure was 23 millisieverts.

Radiation of 20 millisieverts was adopted as the standard for designating the so-called emergency evacuation preparation zone -- outside the no-go zone around the Fukushima Daiichi plant.

Including nuclear plant workers, the number of residents of the three municipalities exposed to 10 millisieverts or more of radiation totaled 95 people. The maximum exposure among that larger group was estimated at 47.2 millisieverts.

The prefectural government is now conducting a health survey of all its approximately 2 million residents. They were sent questionnaires asking where they were after the nuclear crisis began and about their activity since.

However, only 52.1 percent of the questionnaires sent to the residents of the three municipalities, and 21 percent of all the questionnaires sent throughout the prefecture, had been collected as of the end of January, according to the local government.

In another development on Monday, a civic group said it had detected radioactive cesium of up to 1.08 million becquerels per kilogram in soil from a car park in Minamisoma located in the evacuation preparation zone set after the nuclear plant crisis. The designation of the location for evacuation was lifted in September.


In this March 24, 2011 file photo, a young evacuee is screened at a shelter for leaked radiation from the damaged Fukushima nuclear plant in Fukushima, Fukushima Prefecture, Japan. (AP Photo/Wally Santana)"The high-level radioactive contamination indicates that humans should not be allowed to live near the car park," said Kobe University Professor Tomoya Yamauchi, who conducted a radiation test on the soil.

The crisis at the Fukushima Daiichi plant has resulted in heavy concentrations of radioactive substances at various locations in Minamisoma.

The civic group said its discovery indicates that a fact-finding survey is urgently required throughout the city.

Minamisoma municipal officials said they have detected radioactive cesium of around 710,000 becquerels per kilogram in the soil at the car park. But the soil is thin and limited in volume and area, presenting little health hazard, they said.

(Mainichi Japan) February 20, 2012

Thursday, February 23, 2012

OIl Production Drops

Oil prices quoted on Bloomberg are rising, production appears to be dropping even in Saudi Arabia exactly as predicted by the outcasts who have been warning us about peak Oil issues and the mainstream press, in this case CNBC have "no explanation" why this might be the case. Read the numbers and hope this is just a temporary fluctuation.



The world’s top oil exporter, Saudi Arabia, appears to have cut both its oil production and export in December, according to the latest update by the Joint Organizations Data Initiative (JODI), an official source of oil production, consumption and export data.

The OPEC heavyweight saw production decline by 237,000 barrels per day (bpd) from three-decade highs of 10.047 million bpd in November, the JODI data showed on Sunday.

The draw-down was sharper for the actual amount exported, declining by 440,000 bpd, or 5.6 percent, to come in at 7.364 million bpd, the data also showed. The level would still be similar to exports after a steep ramp-up last June.

In its monthly report on February 10, the IEA put Saudi Arabia’s production number for December slightly lower at 9.55 million bpd, a disparity of 260,000 bpd versus the JODI data.

Iran appeared not to have filed data in time for the latest release, providing no additional clues about how many export barrels were already lost in December, as some reports have suggested.

JODI, an initiative coordinated by the International Energy Forum (IEF), depends on participating member states for data collection. The IEA estimated Iran’s oil supply in December to have been 3.45 million bpd, marking a drop of 100,000 bpd.

For the third month in a row, no details were available for the United Arab Emirates (UAE) and Libya, the immediate reasons for which are unclear.

Together with other Gulf oil exporters, the UAE has been in focus as a possible source of alternative supply for at least some of Iran’s crude. Widening sanctions have seen several Asian clients of Iran’s oil, including top importer China, send high-level delegations to the region in the last few weeks.

Iraq, another frequently-cited supplier to make up for part of the Iranian oil shortfall following European Union sanctions, reported no major changes to its supply and export regime. Authorities there are pursuing an ambitious production expansion plan with the aim of reaching 12 million bpd by 2016.

Wednesday, February 22, 2012

Internet Censorship Fight

From the Sydney Morning Herald http://news.smh.com.au/ a look at the fight for Internet freedom in the countries that struggled to be free for decades behind the iron Curtain. ironic? Maybe but this report in an Australian newspaper ironically enough, points out that there is a long history, that we might do well to emulate, in opposing censorship. This time our Eastern European friends are fighting for Internet freedom and they seem to be the only ones fighting the fight to any effect.






Eastern Europe's tradition of political revolt has met the digital age. This time it's not communists or food shortages fueling fury, but an international copyright treaty that opponents say threatens freedom on the Internet.

A grassroots protest movement erupted last month in Poland and spread quickly across the former Eastern Bloc and beyond. The growing opposition against the Anti-Counterfeiting Trade Agreement, or ACTA, has raised questions about the fate of the treaty, which is important to the governments of the United States and other industrialized economies.

There have been street protests across Eastern Europe, attacks on government websites in the Czech Republic and Poland, even a heartfelt apology from a Slovenian ambassador who signed it and then decried her act as "civic carelessness."

In a region where people remember being spied upon and controlled by oppressive communist regimes, the treaty has provoked fears of a new surveillance regime.

The pact aims to fight intellectual property theft _ like fake Gucci handbags and violations of pharmaceutical patents. But it also targets online piracy _ illegal downloads of music, films and software _ and calls for measures that critics say would bring surveillance of Internet users.

"Most of the people who have gone to the streets are young and don't remember communism themselves, but Polish society as an entity remembers," said Jaroslaw Lipszyc, the president of the Modern Poland Foundation, an organization devoted to education and developing an information society.

"In Poland freedom of speech is of special value, and there is a history of fighting for it."

Lipszyc, a prominent ACTA opponent, sees his work today as a natural extension of the same struggle for free expression that prompted his own family to illegally print anti-communist essays in their basement during the 1980s.

Eastern European countries, even those now in the European Union, are still much poorer than the West, and among critics are people who fear losing access to free _ sometimes illegal _ entertainment. With joblessness in Poland at 12.5 percent and the monthly minimum wage at just 1,500 zlotys ($465) pre-tax and average wages at 3,605 zlotys ($1,130), many say they can't afford 20 zlotys ($6.30) or more for a movie ticket.

"People became furious," said Katarzyna Szymielewicz, director of Poland's Panoptykon Foundation, which campaigns for privacy rights in a context of modern surveillance and opposes ACTA. "We have a history of rising up against injustice."

ACTA went from being an obscure international agreement to a household term in Poland in mid-January when the government said it would sign it within days. Civil rights organizations like Panoptykon were outraged because the government failed to consult with them first.

Szymielewicz said they got word out on Twitter and other social forums, and soon Internet activists in Poland and abroad _ some with the group "Anonymous" _ waged attacks on government websites, including those of the prime minister and parliament, leaving some unreachable for days.

The anger drew on a broader frustration in society, especially among youth, over a lack of jobs and a sense of alienation from the political process.

"This was the last drop that made it a flood," Szymielewicz said. "The Internet is a space of freedom _ something people feel really belongs to them _ and suddenly the government interferes with this space."

Poles and others were also primed to act because many had been following the opposition in the United States to two similar initiatives, the Stop Online Piracy Act and Protect Intellectual Property Act _ known popularly as SOPA and PIPA. American lawmakers shelved those bills after massive pressure that included a one-day blackout by Wikipedia and other Web giants.

Days later, Poles took to the streets across the country against ACTA _ activism that spread to Berlin, Sofia, Bucharest and many other cities where thousands rallied last Saturday. More rallies are planned for Feb. 25.

Opponents are also angry that the treaty was negotiated for almost four years in secret without input from civic rights groups, giving them the impression that it is a backroom deal made on behalf of powerful industries.

The United States and other proponents of ACTA deny that it will be invasive. They argue that protecting intellectual property rights is needed to preserve jobs in innovative and creative industries. The online piracy of movies and music costs U.S. companies billions of dollars every year.

Washington also vows that individuals would not be monitored online and that ACTA would instead target companies that profit from using pirated products like software.

"Civil liberties would not be curtailed," says the Office of the U.S. Trade Representative, which signed ACTA in October.

But opponents say the agreement is worded so vaguely that it is unclear what would be legal and what not. Some people fear they could be prosecuted for, say, mixing home video footage with a Lady Gaga song and putting it on YouTube to share with friends.

"Because it's unclear what is allowed, people will limit their creativity," said Anna Mazgal, a 32-year-old Polish civil rights activist. "People could censor themselves out of fear because it's so vague."

Many opponents also fault ACTA for putting commercial values like profit above rights like freedom of expression.

"It's not surprising that European citizens are taking to the streets in the thousands to protest against an agreement that puts rightsholders' private economic interests ahead of their fundamental rights," said Gwen Hinze, the international intellectual property director with the Electronic Frontier Foundation, a San Francisco-based group that defends civil liberties on the Internet.

All the uproar has put ACTA's supporters on the defensive, at least for now.

The agreement has already been signed by the United States, Japan, South Korea and about 20 other countries.

But some governments which have signed it now say they won't ratify it, including Poland, Slovenia and Bulgaria. The Czech Republic says it needs to analyze the matter before deciding. A key test will come in the summer when the European Parliament will vote on it.

Germany says it supports ACTA as a way of defending intellectual property rights, but has promised to clarify doubts about it before signing it. Thousands protested last Saturday against ACTA across Germany, where data protection has long been a widespread concern and officials have clashed with Internet giants such as Google and Facebook over privacy issues.

The Slovenian ambassador to Japan, who signed it in Tokyo last month on behalf of her nation, later apologized, saying she had not understood at the time how it could limit freedom "on the most significant network in human history."

"I signed ACTA out of civic carelessness," Helena Drnovsek Zorko wrote on her blog.

Tuesday, February 21, 2012

Another Gay Republican Candidate

I am sick to death of the whole gay debate currently plaguing this country. I would very much like the gay fake issues that deflect public opinion from serious issues to just go away and make room for discussion about the economy, jobs and the federal Reserve, instead we have cretins in the Republican party telling us that being gay is a choice and it's unnatural etc etc.. until they get caught in acts of gross indecency like this hypocrite of a Republican candidate in Arizona who, having been found out as a sodomite now wants us to think of him as just another great American. Not exactly, when Republicans are busy telling us that to be a faggot is a choice. I don't this this idiot would have chosen to be gay if he could have made the choice to be straight. read the article and ask yourself why he would "choose" such a lifestyle?




Sheriff Paul Babeu of Pinal County, Ariz., stepped down as a co-chairman of Mitt Romney’s campaign in the state on Saturday after a newspaper published accusations that he threatened to deport a former boyfriend, who was from Mexico, when the man refused to keep quiet about their relationship.

Mr. Babeu made national headlines for his tough stance on illegal immigration. He endorsed Mr. Romney in October and is running for Congress in Arizona’s Fourth District.

The news of Mr. Babeu’s decision to step down from the Romney campaign was first reported by The Arizona Republic.

On Thursday, The Phoenix New Times reported the allegations of a 34-year-old Mexican man whom they identified only as “Jose.” He said that when he refused to sign an agreement that he would never mention his relationship with Mr. Babeu, which he said lasted for years, the sheriff and his lawyer tried to intimidate him with threats of deportation.

In a press conference on Saturday, Mr. Babeu said that he had had a personal relationship with Jose, but denied that he had threatened to deport him. The accusations, he said, “are absolutely, completely false — except for the issues that refer to me as being gay. Because that’s the truth. I am gay.”

Even though Mr. Babeu was a minor figure in the Romney campaign, the accusations came at a less than ideal time. With Arizona and Michigan holding primaries at the end of the month, Mr. Romney is struggling to shore up social conservatives’ support and to fend off Rick Santorum, who is surging after winning contests in Colorado, Missouri and Minnesota.

“Sheriff Babeu has stepped down from his volunteer position with the campaign so he can focus on the allegations against him,” Andrea Saul, a campaign spokeswoman, said in an e-mail statement. “We support his decision.”

The press conference that Mr. Babeu held on Saturday largely turned into a call to look beyond his sexual orientation.

He defined himself as an American, and appealed for voters and the public to view him through the lens of his military service and time in law enforcement.

“I want to be judged on my service: 20 years in the military, two deployments — including one in Iraq — a police officer who has responded to thousands of calls for help, and a sheriff who has cut response times while reducing my own budget,” he said in a statement.

Jose also told The Phoenix New Times that Mr. Babeu e-mailed explicit photographs of himself to an anonymous man whom he met on a Web site called Adam4Adam.

Monday, February 20, 2012

Drachma Returns Maybe

I am no great fan of Mish Shedlock http://globaleconomicanalysis.blogspot.com/ and his anti union blog which promotes increased share prices at any cost and damn unemployment numbers, but in this report from his site he seems to be joining the tin foil hat brigade promoting dissolution in Europe. I guess he's finally seen the gorilla holding the flashlight at the end of the tunnel of social dissolution that has been obviosu to anyone with any wit at all for some considerable time. Considering his pro-anyone in power stance this is devastating stuff to anyone who hopes for the best and is oblivious to the worst.






It's been crystal clear for weeks, if not much longer, that Germany has been actively seeking to persuade Greece to abandon the Euro.

Confirmation came on February 7 with Merkel's Official Denial "I will have no part in forcing Greece out of the euro"; Schäuble Starts Salami Tactics on German Participation, Calls for Vote .

Note carefully how the "I"s are being dotted and the "T"s crossed. The ECB refuses to take a haircut on its Greek bond holding so now we have this last-minute debt swap to bail out the ECB right before the rug is pulled.

My friend Pater Tenebrarum had an excellent writeup on the debt swap in Credit Market Watch – ECB To Participate in Greek Debt Exchange.

1.Greek CDS contracts are down to a mere $2.8 billion
2.Merkel's "Official Denial"
3.German Finance minister places numerous roadblocks on Greece accepting the next bailout
4.A Debt Sawp will enable the ECB to be made whole (at the expense of German and French taxpayers of course)
5.Dress Rehearsal

The Financial Times discusses the dress rehearsal in Athens rehearses the nightmare of default

On Friday afternoon, Constantine Michalos, president of the Athens chamber of commerce, sat in his office – around the corner from where protesters were hurling chunks of marble at riot police – and contemplated what was once unthinkable: that Greece would default on its debt and then be forced into a messy exit from the euro.

“All hell would break loose,” Mr Michalos said, sketching a society that would quickly run short of fuel, food, medicine and necessities. “You would have social upheaval.”

On Monday, eurozone finance ministers gather in Brussels to consider a €130bn bail-out that Greece counts on to avoid such a scenario.
What's likely early next week is a debt swap in which the ECB gets new bonds guaranteed in Euros, then immediately transferred to the EFSF making the ECB whole. Some relatively short time later, the Troika will refuse to lend more money to Greece forcing Greece to go back on the Drachma.

Germany Draws Up Plans for Greece to Leave Euro

Let's now get to the heart of the matter. The Telegraph reports Germany Draws Up Plans for Greece to Leave Euro

The German finance ministry is actively pushing for Greece to declare itself bankrupt and to agree a "haircut" on the bulk of its debts held by banks, a move that would be classed as a default by financial markets.

Eurozone finance ministers meet on Monday to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government puts the country's finances in order.

But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that Wolfgang Schäuble, the German finance minister, does not believe that any government would be able to implement them.

His pessimism has been tipped into despair with a secret European Commission, Central and IMF report that even if Greece made good on its promises, it would not be enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.

"The idea instead is that the Greek government should officially declare itself bankrupt and begin negotiating an even bigger cut with its creditors. For Schäuble, it is more a question of when, not if."

The German finance minister's comments are certain to plunge the authorities in Athens into even deeper gloom. On Saturday they tried to sound optimistic, with a cabinet meeting to thrash out the final details of an austerity package.

With Greek morale at rock bottom, the national mood darkened yet further after armed thieves looted a museum on Friday in Olympia, birthplace of the Olympic Games, and stole bronze and pottery artifacts - just weeks after the country's National Gallery was burgled.

One Greek newspaper suggested the state could no longer properly look after the nation's immense cultural heritage. "The Greek state has gone bankrupt, let's face it," the conservative daily Kathimerini said in an editorial.

Mr Schäuble maintains that since Greece is already regarded by the financial world as bankrupt, a formal bankruptcy would have no negative consequences for other euro members.
Merkel's Denial Rings Hollow

I side with Schäuble. Moreover, I do not believe Merkel is sincere when she says "Greece going bust could cause a shock wave that buries other countries - with Spain and Italy among them".

Rather, Merkel simply does not want to be the scapegoat, preferring to make it look like this was Greece's choice, not hers. She will be a hero in Germany when Greece leaves the Euro, in spite of her façade, pretending she does not want that to happen.

The irony is shock waves will indeed come later when Portugal and Spain exit the Euro, given that all the bureaucrats still think "Greece is unique". In reality, the Euro is a failed idea with too many structural flaws to paper over

Sunday, February 19, 2012

Greece In Debt Without End

From www.etfdailynews.com/ we get this report on Greece's limited options in the face of spiraling debts that may drive the country into true bankruptcy next month. yesterday Greek ministers announced another debt agreement to cut even more money from the national budget to feed the bankers but it seems unlikely to do much good, not if you beleive the numbers and not the noise form the politicians.



British investigative reporter John Ward of The Slog may have shed some light on to the matter of Greece and the strategically planned hard default of the beleaguered nation’s financial obligations at the close of business March 23.

According to Ward, that following Monday, the 25th, Greek banks will close, then presumably usher in the drachma in addition to the shock, confusion and panic expected in markets to the surprise outcome of the two-year long display of alleged unity between France (NYSEArca:EWQ), Germany (NYSEArca:EWG) and other monied parties to solving Greece is revealed to be just a ruse, a delay tactic for a preparation of the event. Get my next ALERT 100% FREE

“A written document giving firm dates and detailed actions for a planned Greek default has been in the possession of two top Wall Street bank currency trading bosses since the second week in January,” Ward begins his blog post of the morning of Feb. 16. “The Slog has separate but corroborative sources affirming the existence of the document, and a conviction among senior bank staff that – at least at the time – the plan represented ‘a timetable, not a contingency’. The plan gives a firm date of March 23rd for default to be announced after the close of business.”

Ward makes a compelling case for a backdoor arrangement made between Germany, IMF and the U.S. to take matters into their own hands for saving the global banking system has been the plan all along.

One of Ward’s ‘protected’ sources was quoted as saying, “I have strongly suggested to Greek business friends and clients that they sell up fast, do a sale and leaseback on property, empty bank accounts, and change to a hard currency.”

If Ward’s information is indeed accurate, others closer to the decision makers than Ward surely must have known far earlier.

One premier currency heavyweight, John Taylor of FX Concepts, smelled blood (or had knowledge) back in July of last year of the eventual amputation of Greece from the euro. His seemingly radical call for gold (NYSEArca:GLD) to reach $1,900 during that unusual summer rally of 2011 in the precious metals, coupled with his brazen prediction of gold $1,000 in April-May of 2012 as well as the euro (NYSEArca:FXE) trading below parity against the dollar, turned many heads.

“I would be surprised to see the euro hold above $1 through this crisis,” Taylor reiterated his summer call to Bloomberg Television’s Michael McKee on Oct. 11 “It’s not over. The banks are going to be in trouble when Europe goes into a recession next year.”

Moreover, Taylor has once again reminded investors of his sentiments regarding the Eurozone (NYSEArca:VGK) and the implications of an imminent Lehman 2.0—but this time, a Lehman-like meltdown of industrial strength.

Thursday, zerohedge.com posted Taylor’s latest missive, which reads, in part:

The market has not opened its eyes to the impact this Greek unraveling will have. The Eurozone will be mortally wounded and the world will suffer a significant recession – maybe as deep as 2008. European banks will lose much of their capital base and many should be bankrupt, but just as in the Lehman aftermath, the governments will try to save the banks and the banks’ bondholders, solvent or not. As the bank appetite for Eurozone sovereign paper will be decimated, austerity will probably follow shortly, followed by deflation and uncontrollable money creation. The European recession should be one for the record books. Supposedly, evidences by market action to every news flash of a Greek ‘deal’ has calmed markets, putting the risk-on trade into full swing. But, according to Taylor—who makes no mention of the specifics to the politics—a disaster is in the offing, not a smooth juiced up trade in equities, bond spreads and gold as a result of a job-well-done in ameliorating bank stresses.

In the meantime, evidence of ever-increasing violence in Greece has been the response. The latest clash with police got noticeably worse this week.

“Before the vote took place there were 80,000 people on the streets, outside the Greek Parliament, basically attempting to storm the Parliament,” UK Independence Party Leader Nigel Farage told King World News. “There were 5,000 Greek police there using tear gas and there were 10 major buildings that were set on fire. It really was a very dramatic scene that took place in Athens on Sunday.

Further insistence by Brussels and Germany to subjugate Greeks appears more likely to threaten the lives of those hired to represent the nation of 11.5 million Greeks. Letting the country exit the euro appears to be the most rational political move before a full-blown Arab Spring sparks in Europe. Therefore, dropping Greece and ‘ring fencing’ European and American banks could be the most logical solution to Greece—but the plan for a trap must be sprung into action overnight to prevent a run on the banks of a more unpredictable nature.

Capital controls are easy to institute, but where to get the cash?

That solution can only come from the only central bank that can and has been largely getting away with money printing (also, for the most part, legally unencumbered) without much tears for more than 40 years—the Fed.

In late November, the Fed announced a rate deduction of 50 basis points to its currency swap lines with the BOJ, BOE, ECB, SNB and BOC, in a coordinated effort to grease the global banking system (or preparation for the big day on March 23). The operation is headed by the NY Fed and its mostly unmentionable Exchange Stabilization Fund (ESF).

When asked in December by a House Oversight and Government Reform Subcommittee about the Fed’s move to open the money spigots to five of the world’s most influential central banks, NY Fed president William Dudley said, he “can’t imagine” the Fed ever undertaking unprecedented and politically charged action such as bailing out the Western world triggered by a European meltdown.

“The bar to doing that would be extraordinarily high,” Dudley, the successor to Timothy Geithner. “We have never gone out and bought large portions of sovereign debt in the history of the Fed that I’m aware of.”

“This is about ensuring the flow of credit to U.S. households and businesses,” Dudley added. “It is in the U.S. national interest to make sure that non-U.S. banks that are judged to be sound by their central bank are able to access the U.S. dollar funding they need in order to be able to continue to finance their U.S. dollar assets.”

Of course, bailing out, or more euphemistically speaking—ring fencing, Europe is in the national interest of the U.S. because, if Europe melts down the U.S. melts down, and it truly will be financial Armageddon. And that scenario will not be left in the hands of a bunch of bumbling European bureaucrats, who have for a millennium never gotten along when push comes to shove, and most likely never will.

Wasn’t it Gerald Celente of Trends Research Institute who predicted a financial meltdown and bank holidays by the end of the first quarter? The world will soon find out.

By Dominique de Kevelioc de Bailleul From Beacon Equity Research

Saturday, February 18, 2012

Settlements Galore!

The Chilean curmudgeon Gonzalo Lira http://gonzalolira.blogspot.com/ says settlements announced in the US and Europe are more smoke and mirrors in a world economy about to be raped by high inflation rates. He makes an interesting case but I remain in the deflation not in flation camp when it comes to contemplating the future.




So this week there were two big settlements: Greece, and the Mortgage Mess.


Completely independent of each other, both settlements not only happened on the same day, they happen to highlight two issues which ought to be bugging us all like cockroaches crawling through our underwear.

Issue One is how in both cases, the Too Big To Fail banksters won—and they won big. Again. Insofar as the mortgage settlement goes, they got what amounted to a speeding ticket, while getting a Get-Out-of-Jail-Free card on the worst of the robo-signing and illegal foreclosures scandal. And insofar as the Greek situation goes, the banksters have gotten the IMF, the ECB and the EC to essentially put the Greek people’s collective nuts in a vise and squeeze until they scream “θείος!” (“Uncle!”)

Issue Two is the mainstream media’s spin on these two settlements: How the completely cheerleadery, near-sycophancy of the MSM serves to both obscure how big the banksters won in both settlements, and to give us all a false sense of security. From the MSM, we hear that Greece has been “bailed out” and the Mortgage Mess has been “fixed”, and that the banksters are “getting their comeuppance”—so we get the false sense that the world is right as rain, and everything can slowly go back to normal.

But the world is not right. We will not be going back to normal any time soon. The banksters are not getting righteous justice.

Rather, the two settlements go to show how crony-corrupt our particular epoch’s Global Capitalism really is: The banksters rape the people of two countries, and the mainstream media cheers.

Let’s go over each of the two settlements, and pick apart their implications.



The Mortgage “Settlement”

The ballyhooed “Mortgage Settlement” is a big ol’ pile of crap—plain and simple. President Obama called the $25 billion deal the biggest settlement since the one with Big Tobacco—but that settlement, at $350 billion, was over ten times the size of this one. Actually, 14 times bigger, to be precise. And when you look at actual out-of-pocket costs (which I will below), you realize the Big Tobacco settlement was sixty times bigger.

And of course, the mortgage mess is a helluva lot bigger than the suits involving Big Tobacco.

To understand why the settlement is a steaming pile of shit, we have to understand two things: What the problem is, and what the settlement brings to the table to solve the problem.

This is the problem: About 20% of all homeowners are underwater, adding up to about $700 billion in negative equity in the U.S. housing market today. That is, if you add up the difference between what underwater homeowners owe on their mortgages and what they could realistically get in the current housing market, it totals $700 billion. On average, that’s about $50,000 per house.

Additionally, 750,000 people lost their homes to foreclosure between 2008 and 2011—of which many (most?) were processed improperly. Processed illegally, in many (most?) cases.

As to whether “many”, “most” or “all” of those foreclosures were processed merely improperly or in fact criminally, we’ll now never know: The settlement releases the banks from prosecution for these 750,000 foreclosures.

That was one part of the settlement: No Federal prosecutions.

The other part of the settlement was how much the banks had to pay. And that dollar figure is pathetic when you look at the headline number—but even worse when you look at the actual number.

The mortgage settlement totals just shy of $25 billion. But of that figure, only $5.8 billion is “fresh money”—that is, money that the banks have to put up out of pocket.

The rest is loan modifications—that is, changing one loan for another. Essentially an accounting move, not a cash-bleeding penalty.

So the banks are paying out—in total—a mere $5.8 billion, while they are getting bullet-proofed from Federal prosecution for all the mortgage shenanigans they were carrying out.

That is what the ballyhooed “Mortgage Settlement” comes down to: The Obama administration plea-bargained a serial killer down to a speeding ticket.

And insofar as the rest of the settlement money goes—the refinancing of about $19 billion—the refinancing marginally lowers the payments for some of the 14,000,000 homeowners who are underwater. Less than half actually, as the settlement does not cover mortgages held by Fannie Mae and Freddie Mac. But it guarantees that the banks have first dibs to recover their money, if and when some of these 14,000,000 homeowners begin to default.

(Yves Smith at naked capitalism has a much more detailed discussion of the financial implications of the settlement here. Her reporting and analysis have been the best in the business, insofar as the Mortgage Mess and this execrable settlement is concerned.)

In other words, the banksters won—again.

The most despicable part is how much the banksters will have to pay to those families whose homes were improperly—illegally—fraudulently—foreclosed upon:

The princely sum of between $1,500 and $2,000.

Now, I’m not saying that someone who didn’t keep up with their mortgage payments and lost their home to foreclosure should get their house back for free just because of faulty paperwork—I’m not saying that at all. Nor am I saying they should get a gazillion dollars from the bank for screwing up the paperwork in a foreclosure that was justified.

The problem is, a non-trivial number of those 750,000 lost their homes even though they were up to date on their payments. Hell, there were even cases where people who were foreclosed upon and had their homes taken away from them who did not owe a mortgage loan on their property. (Example here.)

All of this happened because of the foreclosure mills and the famed robo-signing. Banks declared a loan in default, fobbed off the property to a specialty law firm—a “foreclosure mill”—which then in turn hired minimum wage workers to illegally sign the documentation to carry out the foreclosures. That was “robo-signing”.

The robo-signing was forgery—plain and simple. It was fraud. The fact that many—perhaps even most—of these foreclosures were justified does not excuse the use of fraud to carry out the foreclosures. And the fact that a non-trivial number of those foreclosures were completely unjustified—and in some cases amounted to the bank stealing people’s homes—makes this settlement unconscionable.

With this settlement, there will be no more criminal prosecution—even for cases where the bank literally stole people’s houses!

All the bank has to do is pay between $1,500 and $2,000. For stealing your house.

Prosecuting the robo-signers would have led to prosecutions of the foreclosure mills—which would have led to prosecutions of the banks which pressured the foreclosure mills to hire the robo-signers—which would have meant jail-time for the bank executives who ordered this criminal activity.

That’s how prosecutors work: They go after the small-fry, then get ‘em to flip on the big-fry.

However, with this settlement, the banks are released from further investigation of robo-signing—and therefore, of the improperly foreclosed houses—and therefore, the executives who ordered these illegalities and ordered this fraud are bullet-proofed from prosecution—and thus shielded from their richly deserved jail-time.

Sure, New York’s Attorney General can still proceed with his suit of MERS, the mortgage service provider—but MERS doesn’t have deep pockets, and isn’t even really the instigator of this whole mess.

It was the Too Big To Fail banks, and the criminal banksters who lead them. They were the ones who should be prosecuted, tried, convicted, and jailed.

But the banksters got off scot free: Serial killers, who plea-bargained their way down to a speeding ticket.

The Greek “Bailout”

On March 20, Greece has to pay out roughly €15 billion, to cover maturing bonds. Of course, they don’t have €15 billion. So they need a bailout. Again.

Greece is broke—there’s no other way to put it. It has debts which total 160% of GDP. So they’ve been negotiating with the International Monetary Fund (IMF), the European Central Bank (ECB), and the European Commission (EC), trying to get more money to avoid bankruptcy.

The Greeks want to avoid bankruptcy—while the Troika of the IMF, the ECB and the EC want to avoid a default. If there is a default, all sorts of events are triggered involving derivatives and other nasty pieces of financial weaponry, which will send the eurozone’s banking system into a tailspin.

Will the European financial system go bankrupt in the event of a Greek default? No one really knows—and no one really wants to find out.

So both sides have an incentive to sit at the table and reach an agreement.

However, because of the ongoing crisis, there is one inescapable problem that both parties are facing:

Greece’s economy is shrinking—fast. Year-over-year, tax revenue has fallen close to 20%. Businesses are shutting down—and the businesses that are opening up are mostly unemployed professionals trying to set up one-man shops. Unemployment is steadily rising, especially youth unemployment, which inevitably leads to streets protests and social unrest.

So when a country’s economy begins to shrink—and its tax revenue falls—and it begins to teeter on the edge of social instability—it begins to lose the ability to meet its financial obligations.

This is what is happening in Greece, because of the four months it has taken to finally find some kind of deal to save Greece.

Now, the deal on the table is for Greek bondholders to take a €100 billion haircut on €350 billion of outstanding debt—which is actually not that much, considering Greek yields are in the 32% range, but whatever.

What’s key is, the European financie ministers are insisting that the Greek levels of indebtedness shrink from 160% of GDP to 120% of GDP by 2020—

—even as the austerity measures the Troika is imposing severely cuts the public sector, reduces the minimum wage by 22% to €8,200 a year, and overall forcibly shrinks the Greek GDP on top of the natural shrinkage taking place because of the Greek depression.

I’m no Keynesian, as Paul Krugman can tell you. But the fact is, if you fire big chunks of your public sector, reduce the minimum wage, and squeeze higher taxes from the population, the GDP is gonna shrink.

So if the GDP starts to shrink, no way can you reduce debt levels from 160% of current GDP to 120% of 2020’s GDP.

In fact, if you’re hell-bent-for-leather on squeezing a country and insisting it pay down the debt, you are essentially setting the country up to ask for yet another bailout in the near-term future.

This is what the Troika is doing—all so that it can keep the European financial sector from realizing the losses on its stupid Greek loans.

So Greece and the Greek citizenry suffer, so that European banks don’t take a giant crap on top of Angela Merkel, Nicolas Sarkozy, Mario Draghi and Jean-Claude Juncker.

Ironically, had Greece been allowed to default and/or go broke back in May of 2010, when this mess first reared its ugly head, the Greeks and the eurozone would have been in much better shape today: Greece would have suffered Iceland’s short term fate—a crash—but then recovered, albeit slowly and painfully, but on a much sounder financial footing.

But in the European banker’s efforts to save their Greek investments, they have prolonged the Greek agony, while killing the Greek economy worse than an outright default and bankruptcy.

In fact, it is still possible to allow Greece to fail and let the chips fall where they may. But the eurozone leaders are so adamant about saving their banking sector, that they refuse to consider the possibility.

So rather than cutting off the gangrenous limb, they’re letting the gangrene spread, and get a lot worse—all in order to save the fucking banks. Again.

The MSM Cheerleading

This is what the New York Times had to say about the mortgage “settlement” when the news came out:

Advocates for homeowners facing foreclosure expressed cautious optimism after the settlement was announced Thursday morning in Washington. “We’re hopeful,” said Joseph Sant, a lawyer at Staten Island Legal Services’ homeowner defense project. “But we had a lot of programs that are good on paper. What will make the difference is that it’s vigorously enforced.”
President Obama declared the deal the largest federal-state settlement in the nation’s history.
“No compensation, no amount of money, no measure of justice is enough to make it right for a family who’s had their piece of the American dream wrongly taken from them,” he said. “And no action, no matter how meaningful, is going to by itself entirely heal the housing market. But this settlement is a start.”
Of course, the Times fails to point out that this settlement is not “a start”—rather, it is the end: The end of prosecutions against the banksters for their fraudulent foreclosures, the end of meaningful reform.

The mortgage settlement is a speeding ticket for a serial killer.

Yet the Times has the gall to add:

More than just an attempt to aid consumers and stabilize the housing market, government officials cast the settlement as an effort to finally hold banks accountable for their misdeeds, more than three years after the mortgage collapse brought on a full-scale financial crisis.
“Accountable”. Right. At $2,000 a pop for in many cases outright stealing a home, that’s the New American Accountability.

And talk about burying the lead! The Times piece waits four paragraphs to mention that fraudulently foreclosed homeowners are getting $1,500 to $2,000 as settlement for the illegal foreclosures. And then it waits another twenty paragraphs before acknowledging that it’s pretty paltry, the amount that will be paid to illegally foreclosed homeowners.

But then, the Times gets worse: Almost as if to add insult to injury, this morning—the day after the mortgage “settlement” announcement—it ran an editorial about—get this—how the mortgage settlement highlights the crappy architecture that the housing boom created in America! And how this crappy architecture ought to be fixed somehow! As part of the mortgage settlement!

Other MSM outlets had similar milquetoast coverage.

Over at Salon, Obama apologist Andrew Leonard can’t really spin the agreement as anything other than a complete disaster—so I guess kudos for having at least a shred of honesty for giving the true facts and meaning of the settlement in the first few paragraphs of his piece.

But then Leonard goes and writes:

A more interesting question to consider, however, is how the housing relief contained in this settlement fits into other administration housing policy efforts currently in the works.
First off, government negotiators are still working on roping another nine mortgage providers into the deal, which could raise the overall settlement total from $26 billion to around $40 billion. [Whoopie: All of $14 billion, thrown up at a $700 billion problem.] In March, the rejiggered HARP refinance program will kick in, presumably allowing hundreds of thousands of homeowners to refinance at currently rock bottom mortgage rates. There is also strong pressure coming from the Federal Reserve and the White House to convert currently unoccupied foreclosed homes owned by the Fannie Mae and Freddie Mac into rental properties, a step that would remove excess inventory from the housing market. [And of course, create excess rental inventory.]
Each individual nibble here is unlikely to make a profound difference, but taken together, all these initiatives add up to the most concerted effort the Obama administration has taken to date to bring relief to the housing sector. It’s also worth noting that it’s all happening without any help whatsoever from Congress. The approach does not address the desire for punishment that so many would like to see meted out upon the banks, but it will likely help spur additional economic growth. At a point when the economy already seems to have solid momentum toward recovery, every extra bit of help is gravy.


[Bracketed text and boldface by yours truly.]

I said that Leonard has at least some honesty left in him—but Felix Salmon at Reuters has absolutely none.

His lead sentence:

The long-awaited mortgage settlement is here! And it looks like a good one.
I’m fucking not kidding.

Then Felix Salmon—or rather, Felix Shill—goes on:

If you’re a bank shareholder breathing a sigh of relief, then, don’t. The only thing you’re protected against, now, is lawsuits over robosigning. [But then robosigning and fraudulent foreclosures were the biggest potential criminal and civil litigation issues.] Were those likely to cost $25 billion if they had gone to court? It seems unlikely to me that they could have raised that much. Other big-money lawsuits over securitization can and almost certainly will still be brought — which means that the big banks all still have significant litigation risk hanging over their heads.
So why did they do this deal? Well, for one thing, it’s not nearly as expensive as it might look at first glance. It’s not like they’re paying out $25 billion and getting nothing but a bit of immunity in return. A huge chunk of the money will go towards principal reductions on underwater mortgages — which means that it’s not really a cash outlay at all.
Notice how he starts off saying that bank shareholders shouldn’t breathe a sigh of relief—then deceptively says how the banks are shelling out $25 billion, when in fact it’s only $5.8 billion in fresh cash. But then at the end of the quoted passage, he admits how “a huge chunk of the money” is “not really a cash outlay at all”—as if this is a good thing.

Well, actually, it is a good thing—for the banksters and the bank shareholders. Which is Felix Shill’s—I mean, Felix Salmon’s real audience.

In Geneva recently, I had lunch with FT Alphaville’s Izabella Kaminska, in a restaurant in the old section of town. Izabella is a very smart woman: She was of the opinion that mainstream financial journalists aren’t deliberately dense, or beholden to vested interests—rather, she thought that they were simply sloppy: Pressed for time, not entirely familiar with the matters at hand, Izabella thought that they tended to take the easy way out, by simply regurgitating what they were told by bankers and authorities, and not applying critical thinking.

I wish I could agree with her—but I can’t. The Times piece might be excusable: Though it doesn’t highlight the real issues, and it buries some of the outrageousness of the settlement, there is an underlying tone of not-quite-buying it with regards to the mortgage “settlement”.

That very tone points to how the Times writers and editors realize that the settlement was a bunch of bullshit—a pass on the banksters.

Yet they didn’t follow through. They didn’t slice-and-dice the settlement, and report how pathetic it really is.

Someone like Andrew Leonard—an essentially partisan journalist who nevertheless tries to be somewhat fair—made a try at honesty with regards the mortgage settlement. But then spent a big chunk of his piece saying, basically, “Though it’s just crumbs off the banksters table, we ought to be thankful, because enough crumbs almost make a slice of bread!”

The most despicable is Felix Salmon: He is rah-rah-banksters-hurrah!, insofar as the settlement is concerned—which proves that he is nothing but a shill for the banksters, trying to get in good with them, at the cost of his intellectual honesty, not to mention his moral soul.

That’s the state of the financial MSM: Yeay us.

Friday, February 17, 2012

Bank Lobbying

From the Charlotte Observer this dissection of banks and their leverage with politicians. Whoever pays the piper plays the tune is the old, old saying. Never more true than today.


Commercial banks spent nearly $62 million last year on lobbying, another record total for an industry that has become one of the most active voices in the political arena.
While their return on that investment is difficult to quantify, this much is clear: The financial industry's spending helped slow down the pace of new regulation and gained it at least a few partial victories in a year filled with anti-bank rhetoric.
Last year's lobbying expenditures by the commercial banking industry were up 9 percent from the year before, marking the sixth straight year of increased spending, according to data from the Center for Responsive Politics.
The financial sector as a whole spent more than $472 million.
That made the sector the third-biggest lobbying spender, behind the health care industry and general business associations like the U.S. Chamber of Commerce.
Among the six biggest banking spenders - including Bank of America Corp. and Wells Fargo & Co. - the increase was 6 percent, to $36 million, according to data from the U.S. Senate-run disclosure database, where all lobbying activity must be recorded.
Bank organizations say they are committed to making sure new regulations help the consumer, businesses and the economy.
And despite the spending, banks didn't have a great year politically.
Banks drew fire from the populist Occupy Wall Street movement that spread around the country.
And Democratic leaders, including President Barack Obama, piled on criticism as banks briefly toyed with the idea of monthly debit-card fees.
"It's wrong to say they did exactly what we wanted," said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, one of the industry's chief advocates. "The goal of the industry, as well as the regulators, as well as any interested parties, should be the best public policy."
'A remarkable job'
But consumer advocates contend the banking industry's lobbying is making a significant impact.
They point to missed deadlines for crafting regulations, proposed rules with numerous exemptions, and a protracted political battle over the Consumer Financial Protection Bureau.
"They've done a remarkable job," said John Dunbar of the nonpartisan Center for Public Integrity. "They've earned every penny."
San Francisco-based Wells Fargo finished the year as the most dominant bank in the Washington lobbying arena.
Once a small presence on K Street, the bank spent more than its peers, increasing 46 percent to $7.8 million.
Wells declined to comment on its lobbying strategy.
Bank of America spent less on lobbying in 2011 than it had the year before, and far less than it did during the height of the 2008 financial crisis.
The bank arguably took the biggest hit to its image and its political standing.
"The focus of our lobbying was and will continue to be on being constructive to help ensure that regulatory reform is thoughtfully done and fosters sound, competitive banking that benefits our customers," Bank of America spokeswoman Shirley Norton wrote in a statement.
The bank declined to comment further.
Winning through attrition
When the Dodd-Frank financial reform law was passed in summer 2010, it left federal agencies with more than 400 rules to craft.
Progress has been slow.
More than 70 percent of the 225 rules scheduled to go into effect so far have missed their deadlines, according to the corporate law firm Davis Polk, which issues closely watched reports on Dodd-Frank's progress.
Part of the reason: scores of meetings between banks and regulators, and the time-consuming cycle of proposed rules and public comment periods.
Bank of America lobbyists or executives had more than 50 meetings with federal agencies in 2011, according to data from the Washington-based Sunlight Foundation.
Wells Fargo held 34.
And with many proposed rules, banks flood regulators with hundreds of pages of commentary.
The Financial Services Roundtable said in June that it had filed its 100th comment letter related to Dodd-Frank, compared with an average of 12 to 14 comment letters per year on financial topics before the law was passed.
"One of the ways they win the battle is by attrition, by ensuring that there's so much activity that things get delayed," said Nancy Watzman, a consultant with the Sunlight Foundation, a Washington-based nonprofit.
She pointed to the Volcker Rule as a prime example.
The rule is meant to prevent banks from taking risky bets with their own money, a practice known as proprietary trading.
What former Federal Reserve Chairman Paul Volcker called a simple idea morphed into a complex proposal hundreds of pages long.
"That's something they've worked on more than anything else," Dunbar said. "They have plenty of time and plenty of money. They will wear you down."
Talbott said the banks' goal is not to slow down the process but to make sure the final rules represent sound public policy.
"We're talking about new, uncharted topics. It's important for the regulators to do it quickly, but if it takes a little extra time to get it right, that's time well spent," he said. "Those legislative deadlines are aggressive, and sometimes difficult if not impossible to meet."
Consumer protection clash
Further evidence of the bank lobby's power came amid the political battle over who would lead the Consumer Financial Protection Bureau, a new regulatory agency prescribed in Dodd-Frank, Dunbar said.
Republicans argued the director would wield too much power, and vowed to block any nominee until changes were made to the agency's structure.
They were backed by industry groups such as the American Bankers Association.
Obama ended up using a controversial recess appointment to install Richard Cordray as director.
Republicans bashed the move as unconstitutional and an overreach.
Experts, pointing to possible legal challenges, said the move ultimately could weaken the agency's influence.
"The banking lobby is enormous and powerful and smart," Dunbar said. "They'll keep chipping away at anything they think will be harmful to them."
Organizations like the Financial Services Roundtable and the American Bankers Association have promoted their involvement in the implementation of Dodd-Frank.
They argue that some Dodd-Frank provisions, such as capital requirements, could hurt the economy by keeping banks from lending as much to businesses that create jobs, the Financial Services Roundtable said in October.
"It's incorrect to say we are opposed to Dodd-Frank. We actually support a lot of Dodd-Frank," Talbott said. "We are working to provide our input, our thoughts, on the best way or most effective way to implement it."