Tuesday, December 28, 2010

Pace on Earth, American Style

While once fairly regular in church attendance, President Obama now has little occasion to join others at church services. He prefers to worship in private, it is said in large part to spare others the “disruption” of his attendance.

I should think so.

First of course, the church would have to be searched and swept from top to bottom, and the priest or pastor and lay leaders vetted by the FBI.

Then there is the problem of the other worshipers. Who knows who might be lurking in the congregation? It might be tough to spot an Islamic terrorist in a crowd of American Southern Baptists or Roman Catholics.

The terrorists are very clever. It is reported that there are training camps in Afghanistan where, at this moment, Islam fanatics are being taught to sing Amazing Grace, sign themselves with the cross and genuflect.

And as you or I, ordinary citizens are at daily risk from the terrorists swarming America, imagine the threat to the president.

Homeland Security would insist that worshipers arrive to the church parking lot at least two hours prior to the service, and then proceed to the church door no less than forty- five minutes prior to the service, with documents in hand.

“Please remove your shoes and have your baptismal certificates out and ready for inspection.”

Again, it would be unthinkable that parishioners, choir members and all the other possible threats not be subject to the full body scan, pat down and – if necessary – strip search, although like airline pilots, pastors would probably get an expedited clearance.

I mean, what kind of signal would it send to the American people if the president were seen not to fully appreciate the dangers and set the proper example?

“What’s that your wearing ma’m? It looks kind of foreign.”

“It’s a choir robe.”

“Right. Step over here.”

Then there is the problem of the Host, should there be a communion or mass. Exceptions are dangerous. We can’t let our guard down one moment. It would almost certainly be necessary to national security that the wine and wafer or bread be brought into the church clearly visible in plastic bags, 500 ml of liquid to the plastic bottle.

“What’s this, padre?”

“Communion wine.”

“Right. And that?”

“It’s a chalice.”

“It’s metal.”

“Yes, it is.”

“Sorry, we’ll have to confiscate that. Could be used as a weapon.”

And of course a cross for the procession would be absolutely out of the question. I mean, talk about a weapon.

Now, you may think I’m being facetious. Not a bit. If aircraft are targets for Islamic fanatics, it’s only a matter of time until they start to target Christian churches. It’s only logical.

And by that same logic, it has already been proposed that these security measures and the body scanners and staff and budget that go with them be introduced in railway, bus terminals and subway stations.

The scanners are sold at about $500,000 each by a company represented by the former head of Homeland Security.

A few days ago, it took really bad weather to bring the northeast to a standstill. But with constant vigilance and an absolute determination to crush the ever expanding network of terrorists in the United States now infiltrating our cub scouts, senior citizens and churches that welcome anybody (for God’s sake !!), we can do that every day, and all do our part to keep Americans safe in the homeland, while we keep blasting apart villages of mud huts in Afghanistan.

Peace on earth, American style.

Tuesday, December 14, 2010

Democracy on the ropes

Patsies in power, democracy on the ropes

Bucks County Courier Times

Political power follows money. The wealth of America is now concentrated in the hands of the few as never before. Those few govern. Democracy in America is on the ropes.

So powerful is this concentration of wealth in America, that the only way to ensure that millions of the unemployed are not abandoned to despair at Christmas was for the Congress to agree not to raise the taxes on the income of wealthy Americans, and further reduce taxes on the estates their low taxes help create.

You can see the logic. I mean, having funneled trillions of dollars to Wall Street, American corporations and even foreign banks to rescue the global club of parasites in pinstripes, what sense does it make to take some of that back in taxes? Duh!

And I do mean trillions of dollars.

As reported only days ago after a year of concealment by the Federal Reserve, the hundreds of billions of dollars the U.S. Congress funneled to the barons is "chump change," compared to the many trillions of dollars it provided, all to the account of the American people.

As reported in this newspaper, "Newly released documents show that the most (Fed) loan money over time went to Citigroup ($2.2 trillion), followed by Merrill Lynch ($2.1 trillion), Morgan Stanley ($2 trillion), Bank of America ($1.1 trillion), Bear Stearns ($960 billion), Goldman Sachs ($620 billion), JPMorgan Chase ($260 billion) and Wells Fargo ($150 billion)."

The banks which got these fantastic sums argue that much of it has been "paid back." How, exactly?

One strategy was to take this no-interest and low-interest money and loan it out at higher rates. The banks biggest customer? The U.S. Treasury.

Another was to trade it for assets the banks held. Which assets? According to the Financial Times of London, their junk.

"More than 36 percent of the cumulative collateral pledged ... in return for overnight funding under the Primary Dealer Credit Facility was equities or bonds ranked below investment grade. A further 17 percent was unrated credit or loans, according to a Financial Times analysis of Fed data released this week. Only 1 percent of the collateral was Treasury bonds, which are normally used in transactions between banks and the monetary authorities."

As the president observed, the barons are indeed "savvy" businessmen. Of course, it helps to have patsies in positions of political power.

Independent U.S. Sen. Bernie Sanders of Vermont was instrumental in forcing the release of the Fed records. He has raised some "issues."

"At a time when big banks have nearly a trillion dollars in excess reserves parked at the Fed, the Fed did not require these institutions to increase lending to small and medium-sized businesses as a condition of the bailout.

"At a time when large corporations are more profitable than ever, the Fed did not demand that corporations that received this backdoor bailout create jobs and expand the economy once they returned to profitability.

"...these secret Fed loans in some cases turned out to be direct corporate welfare to big banks that used these loans not to reinvest in the economy but rather to lend back to the federal government at a higher rate of interest...

"At a time when millions of Americans are paying outrageously high credit card interest rates, why didn't the Fed require credit card issuers to lower interest rates as a condition of the bailout?

"The four largest banks in this country (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) issue half of all mortgages in this country... How many Americans could have remained in their homes, if the Fed required these bailed-out banks to reduce mortgage payments as a condition of receiving these secret loans?"

The senator is of course being rhetorical. He knows the answer to the questions he has posed.

There are now about 14,000 federal lobbyists. In the decade 1998 to 2008 the finance industry alone provided its lobbyists more than $3.2 billion to buy influence in the halls of Congress, the offices of regulators and the White House. This does not include campaign contributions.

How much did you spend?

In the last election, the Supreme Court let loose in the elections a wave of direct corporate spending and anonymous contributions that will grow to tidal wave proportions for 2012.

It is already producing results. The barons, hedge fund managers and corporate execs who live like kings on the stolen prosperity of the American people will not have their taxes raised.

It is often observed that diversity is the enduring strength of the United States. But that is true only so long as that diversity is enabled, given means and opportunity to express itself.

Democracy is the enabler. Today, democracy in the United States is on the ropes.

For the sake of America, the American people must democratize the economy, bypass the Fed and Wall Street and assume control of the supply of money and credit by the creation of public banks at the state and local level.

For the sake of America, the American people must democratize their politics and government, and build a majority in Congress to serve their interests by writing and enforcing the rules for campaigns for Congress which Congress will not.

Mike Krauss, an international logistics executive and writer, is a former officer of county and state government and former director of the Pennsylvania Republican Party. E-mail: mike@mikekrausscomments.com

December 09, 2010 02:30

Saturday, December 4, 2010

The Federal Reserve

This three column series was first published in November in the Bucks County Courier Times, and on line in a three newspaper edition, www.phillyburbs.com.

The Federal Reserve
Part I: A dagger to the heart of democracy.

Voter turnout in many congressional districts was far greater than in many years. It is the enduring myth of American democracy - the people speaking out in free and fair elections to make known and enforce their will on their elected representatives.

But it is a myth. Federal elections in the United States are no longer either free or fair, and the results will have little impact on the economic policies that will determine the future well being or, alternatively, misfortune of the American people.

For several decades, the reforms of the political parties, election and campaign finance laws meant to empower ordinary Americans (“open up” the political process) have had the opposite effect.

Vast sums of money now flow not through the political parties accountable to the American people, but instead through a maze of pseudo-political organizations, accountable to no public constituency, donors increasingly anonymous or untraceable, to select the candidates for federal office, buy their votes and keep them bought.

And no one spends more money in U.S. politics than the people who have it.

This is the reality of America almost never discussed, much less taught in American schools: there are only two classes of Americans, those who have money and those who do not, and they have always been at war. And those Americans who have no money – the great majority of the American people - are getting clobbered.

While it has always been the case that the great majority of Americans have no money, it has not always been the case that their economic circumstances were so dire, or their chances to move up to the ranks of the “moneyed” class were so limited.

To understand how this is so requires an understanding of what “money” is in the language of American politics and economics.

Money is not the bills in your wallet or purse, or the coins in your pocket or the balance in your checking or savings account, which is all the money most Americans have. Money in political and economic terms is accumulated wealth, the surplus beyond the costs of living that an individual or family can invest and bequeath.

This distinction has always been the one important divide that defines the two classes of Americans. And today, the money in America, accumulated wealth, is concentrated as never before in the hands of a few, managed by their agents in the finance industry and protected by the Federal Reserve.

The Federal Reserve was created in 1913 by act of Congress after a series of banking crisis from the 1800s through 1907 wiped out farms, businesses and banks and at one time left one in six Americans unemployed. At a time when 6 in 10 Americans lived on farms, the liquidation of those farms had the same effect as the current wave of foreclosures in the suburbs and cities – a lot of Americans lost their homes and moved down the ladder.

These were crisis of “liquidity” – there was not enough money in circulation or reserve to meet the needs of large portions of the economy. The legislation to address this ongoing problem was supported by an unlikely combination of the Wall Street barons and populists. The latter were ardent democrats.

The barons realized that the U.S. economy had grown so large that the capital formation required to support it meant taking risks that they could no longer cover if they failed. They wanted an agency to be available to cover their bets when they crapped out.

The populists – mostly from the predominantly agricultural south and west – realized that without available and affordable credit, the cycle that every farmer knows is a part of the inherent risk of agriculture would keep on wiping them out: in the bad years of crop failure, or the hopeful years when they acquired expensive debt to increase production, or years of overproduction, accompanied by depressed crop prices and predatory pricing from banks, grain storage facility and railroad operators.

Both preached the same solution: federal regulation of the supply of money and its cost. But the solution of President Wilson and the experts who had come to power in America in a wave of “progressive” thinking that sought to lessen the “corrupt” practices of elected American politicians, was to take the regulation out of the hands of politicians elected by and accountable to the people – the Congress and president - and give it to a newly created, autonomous and independent central bank, the Federal Reserve.

It was a dagger to the heart of democratic government in the United States.

The Federal Reserve
Part II: The rich get richer

The legislation that created the Federal Reserve is intentionally vague as to its purposes. But from the beginning, bankers and a few astute politicians understood the enormous power conferred in the authority to control the nation’s supply of money and its cost.

This control impacts on every decision made by the American people to loan, borrow, invest, buy or sell. It determines winners and losers.

The Federal Reserve creates money with a data entry, adding debt to the American people, and provides this money to the banks at low interest or no interest. These banks then loan it to their customers at higher interest rates. One of their biggest “customers” is the Federal government. What a racket!

Yet the Fed operates apart from the elected government of the people and is accountable to no one. Unlike the central banks of most developed nations, no one from the elected government of the United States has a voice in its deliberations or a vote among its governors.

The Fed raises its own revenue and neither its budget nor its multi-billion dollar transactions are reviewed by the Congress or audited by any other agency of the elected federal government.

The Fed operates in great secrecy. Minutes of many important meetings are released only years after the fact. For some of the most important, no minutes of any kind are kept!

And its public pronouncements are made in the deliberately obfuscating language of the pseudo-science of modern economics that most Americans do not speak or understand

I say pseudo-science because, pretend as modern economic experts will that their profession is a science, the hallmark of science is the ability to predict according to fixed laws, and the Fed consistently fails this test, doing damage control after the economy crashes.

But while the Fed may be accountable to no one, it nevertheless has a constituency.

This was made brutally clear by former Fed Chairman Paul Volcker, when in the midst of the crushing recession brought on by the Fed’s anti-inflation campaign of the early Reagan presidency, a group of state legislators from some of the most distressed farm states came to plead for relief.

Volcker heard them out and turned them down saying, “Look. Your constituents are unhappy, mine aren’t.”

Critics often charge that the Fed is owned by the banks and point to the fact that local banks are all shareholders in the regional Federal Reserve Banks. This ownership of shares is not about control, it is about cover.

The power in the Fed is held by the seven governors in Washington appointed by the president to fourteen year terms. And the five other governors selected on a rotating basis from among the presidents of the fifteen regional reserve banks, while sometimes willing to pull in different directions, do not have the votes, and in fact are excluded from voting on crucial matters.

But, when the Fed is sometimes attacked by critics in the Congress of one party or the other, the governors can rally the “shareholder” banks and local bankers to apply pressure – and campaign cash – directly to the complaining member of Congress.

Nevertheless, the characterization of the Fed as “owned” by the banks is apt, and it works to protect the accumulated wealth which they represent. The Fed’s never ceasing fight against inflation is but one example.

Americans are taught that inflation is a bad thing. This is always true for accumulated wealth. It is not always true for those hoping to acquire wealth.
Home ownership, until recently one of the few opportunities of the vast majority of Americans to acquire wealth is an example.

If you buy a home with a thirty year fixed mortgage and there is any significant inflation, over time that fixed monthly payment of say $1,000 becomes worth progressively less each month in constant dollars, and you may be making that $1,000 payment with only $800 worth of dollars – for years. Conversely, if you are the lender, with inflation your monthly $1,000 income from the loan becomes worth only $800.

So the Fed can use its power as it did in the 1980s to restrict the money supply or drive up interest rates, which protects the value and income earning potential of existing wealth, but restricts the ability to prosper for the vast majority of Americans who have no accumulated wealth to invest.

Sometimes the contractions induced by the Fed are severe, and millions lose their jobs or homes, as businesses throughout the real economy cut back or fold in manufacturing, mining, agriculture, retail and virtually every sector of the real economy.

The Fed defends these hurtful decisions in the impenetrable language of their pseudo-science, but the message is always the same: “Don’t blame us. This disaster for millions is the result of ‘market forces’ over which we have no control.”

It is a complete sophistry. Human beings, the governors of the Fed and each with a vote make the call, and in fact unleash those forces. And they have historically sided with accumulated wealth, which is the past.

The Fed is like the dead hand of the past laying on the future of most Americans, snuffing out hope and opportunity as it insures that the rich get richer.

The Federal Reserve
Part III – Reverse the flow

It was the era of “trickle down” economics. Congress and the administration “devised tax credits, refunds and abatements to benefit private corporations, and they enacted four major reductions in income tax rates, skewed to benefit the upper income brackets.”

Inflation was defeated and the stock market roared. But there were signs of trouble.

Families “were working longer hours for the same wages and borrowing more heavily to keep up… the struggling labor movement was decimated; unions lost nearly 30 percent of their membership.”

It reads like recent history, but is in fact a description of the 1920s, when the term trickle down was coined, the decade before the First Great Depression.

Then as now, the Fed failed.

Prior to each failure, money was flowing up in the U.S. to its richest citizens. With the New Deal, FDR and his newly appointed Fed Chairman, a Republican banker from Utah, reversed the flow and the nation began to recover.

They understood that the spending of the rich few cannot sustain a great economy. The sale of thousands of $500 a pair sneakers and $300,000 cars cannot generate the same volume and velocity of money moving through the economy – economic activity - as the sale of millions of less expensive shoes or cars.

That flow of money to the many was the foundation of the remarkable prosperity of post World War II America . It lasted until Ronald Reagan, with the support of a Democratic Congress and the Fed combined to shut it down.

Reagan and Congress revived regressive tax cuts for the wealthy and trickle down economics, allowed the combinations that led to “too-big-to-fail” banks and legalized usurious interest rates on consumer credit.

The Fed crushed inflation with interest rates that devastated the real economy but protected accumulated wealth, and bailed out Wall Street when their bubble of bad loans to the third world burst.

Historically, when the Fed thinks the wealthy will not be unduly burdened and decides to expand the economy or overcome an economic contraction, one of its tools is to “flood the street with money;” that is, to pump a lot of cash into the system where it is loaned, used, circulated and exchanged in the many millions of transactions that add up to a recovery.

With the crash of 2008, the Congress and the Fed did indeed “flood the street.” But the money never got past Wall Street to your street. This was intentional.

As the Fed pumped trillions into the banks and finance companies, it risked massive inflation in the U.S. (remember that inflation destroys accumulated wealth). The remedy to this threat was to simultaneously keep interest rates low. But much of the rest of the world’s major and developing economies have higher interest rates.

The money that flows through the world’s financial system has a property similar to liquid, and like water money seeks its own level. And the level money seeks is the highest interest and rate of return

So the money of America has been flowing in a massive flight of capital into the rest of the world, protecting accumulated wealth while beggaring the future of most Americans.

The Ford Motor Company is about to open its newest and most modern plant – in China, where the government is raising wages and pumping billions into infrastructure; while across America workers are forced to accept wages cuts to keep their jobs and infrastructure begins to resemble the third world.

What to do? Reverse the flow.

Interest rates in the U.S. must rise from their historic lows to attract capital and investment in the U.S. Funds must flow massively into jobs creating, taxpayer creating, revenue creating U.S. infrastructure. The first stimulus was unfocused and insufficient. The president’s proposal for a $50 billion transportation infrastructure initiative is inadequate.

A fair share of the accumulated wealth of America must be made to flow down into many more hands. Income, capital gains and inheritance must be taxed at higher rates. The argument that this will choke investment is a patent fraud. That wealth has been protected from meaningful taxation for decades, but do you see a new washing machine or tractor plant going up nearby?

The out-of-control U.S. military must be disciplined. Wars and by some reports as many as a thousand U.S. military bases in 152 foreign nations are a huge flow of dollars and tax revenue out of the U.S.

Federal taxes on gasoline must be increased. There will be an immediate reduction in the import of foreign oil and the massive out-flow of dollars to buy it. But exempt, subsidize and invest in all mass transit systems (including school bus fleets), and rebate the mostly suburban, auto dependent middle class.

But above all, the Federal Reserve must be brought inside the American democracy and Constitution and made part of the Treasury Department, its accounts audited, so that the elected government of the United States may assume the authority and responsibility for the decisions about money that determine the future well being of every American man, woman and child.

This is what must be done, but will not soon be done. The new Congress will be as bought as the current Congress; because there is one other flow that must be halted - the tidal wave of lobbying and campaign cash that buys and sells U.S. federal elections for America ’s established, accumulated wealth.